india strategy - motilal oswal group...2016/04/13 · sobha developers 226 11. retail 227-232...

April 2016

India Strategy

Research Team ([email protected])

Healing on, growth ahead

Contents

1. Automobiles 55-70Amara Raja Batteries 59Ashok Leyland 60Bajaj Auto 61Bharat Forge 62Bosch 63Eicher Motors 64Exide Industries 65Hero MotoCorp 66Mahindra & Mahindra 67Maruti Suzuki India 68Tata Motors 69TVS Motor 70

2. Capital Goods 71-86ABB 75Alstom T&D Power 76BHEL 77Bharat Electronics 78Crompton Greaves 79Cummins India 80Havells India 81Inox Wind 82Larsen & Toubro 83Siemens 84Thermax 85Voltas 86

3. Cement 87-97ACC 91Ambuja Cement 92Grasim Industries 93India Cements 94Ramco Cement 95Shree Cement 96UltraTech Cement 97

4. Consumer 98-116Asian Paints 101Britannia Industries 102Colgate Palmolive 103Dabur India 104Emami 105Godrej Consumer Products 106GSK Consumer 107Hindustan Unilever 108ITC 109Jyothy Labs 110Marico 111Nestle India 112Page Industries 113Pidilite Industries 114Radico Khaitan 115United Spirits 116

5a. Financials - Banks 117-136Axis Bank 121Bank of Baroda 122Bank of India 123Canara Bank 124DCB Bank 125Federal Bank 126HDFC Bank 127ICICI Bank 128Indian Bank 129IndusInd Bank 130Kotak Mahindra Bank 131Oriental Bank of Commerce 132

Punjab National Bank 133State Bank of India 134Union Bank 135Yes Bank 136

5b. Financials - NBFC 137-151Bajaj Finance 139Dewan Housing 140HDFC 141Gruh Finance 142Indiabulls Housing 143LIC Housing Finance 144M & M Financial Services 145Muthoot Finance 146Power Finance Corporation 147Repco 148Rural Electricfication 149Shriram Transport 150SKS Micro Finance 151

6. Healthcare 152-170Alkem Labs 156Alembic Pharma 157Aurobindo Pharma 158Biocon 159Cadila Healthcare 160Cipla 161Divi’s Laboratories 162Dr Reddy’s Labs. 163Glenmark Pharma 164GSK Pharma 165IPCA Laboratories 166Lupin 167Sanofi India 168Sun Pharmaceuticals 169Torrent Pharma 170

7. Media 171-183D B Corp 175Dish TV 176Hathway Cable 177HT Media 178Jagran Prakashan 179PVR 180Siti Cable 181Sun TV Network 182Zee Entertainment 183

8. Metals 184-197Hindalco 189Hindustan Z inc 190Jindal Steel & Power 191JSW Steel 192Nalco 193NMDC 194SAIL 195Tata Steel 196Vedanta 197

9. Oil & Gas 198-214BPCL 203Cairn India 204GAIL 205Gujarat State Petronet 206HPCL 207IOC 208Indraprastha Gas 209MRPL 210

O il India 211ONGC 212Petronet LNG 213Reliance Industries 214

10. Real Estate 215-226DLF 219Godrej Properties 220Indiabulls Real Estate 221Mahindra Lifespaces 222Oberoi Realty 223Phoenix Mills 224Prestige Estate Projects 225Sobha Developers 226

11. Retail 227-232Jubilant Food 230Shoppers Stop 231Titan Company 232

12. Technology 233-251Cyient 240HCL Technologies 241Hexaware Technologies 242Infosys 243KPIT Technologies 244Mindtree 245MphasiS 246NIIT Technologies 247Persistent Systems 248TCS 249Tech Mahindra 250Wipro 251

13. Telecom 252-260Bharti Airtel 257Bharti Infratel 258Idea Cellular 259Reliance Communication 260

14. Utilities 261-270Coal India 267NTPC 268Power Grid Corp. 269Tata Power 270

15. Others 271-292Allcargo 271Arvind 272Bata India 273Castrol India 274Concor 275Coromandel International 276Dynamatic Tech 277Gateway Distripark 278Indo Count Industries 279Info Edge 280Inox Leisure 281Interglobe Aviation 281Jain Irrigation 283Just Dial 284Kaveri Seeds 285MCX 286Monsanto India 287PI Industries 288SRF 289Tata Elxsi 290TTK Prestige 291UPL 292

Note: All stock prices and indices for companies as on 5 April 2016, unless otherwise stated

India Strategy - Healing on, recovery ahead ................................................................................ 1-39

4QFY16 Highlights & Ready Reckoner ...................................................................................... 40-53

Sectors & Companies ............................................................................................................... 54-292

Investors are advised to refer through important disclosures made at the last page of the Research Report.

India Strategy | Healing on, growth ahead

April 2016 1

Healing on, growth ahead

FY16 marks another challenging year for Indian equities FY16 was a year of multiple challenges for Indian equities. India faced its second consecutive year of drought, headwinds from global commodities, clean-up of banks’ books and stagnation in investment cycle. This led to earnings downgrades throughout FY16. What looked like a year of double-digit earnings growth at the beginning of FY16 is eventually ending with flattish EPS performance. This also led to a 4th consecutive quarters of negative returns for BSE Sensex in FY16.

FY16 - 5th incidence of 4 consecutive quarters of negative returns (Sensex returns, % QoQ)

Source: Bloomberg, MOSL

4QFY16 earnings preview: Losses from Metals & PSU Banks impact growth 4QFY16/2HFY16 has been confluence of massive NPA provisioning with multi-decade low commodity prices, resulting in the seventh consecutive quarter of muted earnings growth. MOSL Universe (ex OMC) revenue is expected to grow at 3% YoY, while PAT is

expected to decline 5% YoY. While EBITDA margins are expected to improve80bp YoY to ~25.3% (v/s 10-year average of 25.2%), PAT margins are estimatedto decline 80bp YoY to 11.1% (v/s 10-year average of 13.9%).

Metals and PSU Banks would report losses, impacting the aggregates. MOSLUniverse (ex Metals and PSU Banks) earnings will grow 7.3% YoY in 4QFY16. PATcontribution of Metals and PSU Banks is expected at -1.2% v/s 5-year average of16.4% (-6.5% in 3QFY16).

Nifty (ex-BPCL) sales would grow 3% in 4QFY16, while PAT is likely to grow 3%YoY, after five consecutive quarters of decline. The muted PAT growth for Nifty(ex-BPCL) is influenced by cyclicals. 8 out of 17 PAT de-growth companies arelocal cyclicals, whereas 4 are global cyclicals. Auto and Healthcare lead growth,with 9 out of 17 high PAT growth companies (>15%).

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of 2%


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India Strategy BSE Sensex: 24,884 S&P CNX: 7,603


April 2016 2

4QFY16 - Another quarter of muted PAT growth (7th consecutive)

(INR B) Sales EBITDA PAT PAT EBITDA Margins

PAT Margins

(No of companies) Mar-16 Var % YoY

Var % QoQ Mar-16 Var %

YoY Var % QoQ Mar-16 Var %

YoY Var % QoQ Sh. % Chg bp

YoY Chg bp

YoY High growth sectors 1664 9 0 281 25 1 156 47 7 18 214 240 Media (9) 56 13 -6 17 35 -11 8 54 -10 1 488 369 Auto (12) 1270 8 0 177 14 1 91 47 10 11 75 191 Healthcare (15) 339 15 3 87 55 5 57 46 6 7 651 359 Med/Low growth sectors 2576 8 3 890 15 7 525 7 4 61 210 -22Private Banks (8) 226 17 5 216 24 7 108 10 2 13 571 -288Cement (7) 182 9 8 33 11 17 16 10 31 2 32 8 Consumer (16) 396 7 1 88 12 -2 61 9 -4 7 102 28 Technology (12) 828 18 5 202 17 6 152 8 0 18 -21 -159Retail (3) 46 19 -8 4 21 2 3 8 -3 0 14 -60Utilities (4) 497 -6 -2 178 12 12 91 6 18 11 569 205 Others (22) 257 4 7 43 7 5 24 3 8 3 46 -13NBFC (13) 144 14 5 126 12 6 71 3 2 8 -203 -555PAT de-growth sectors 3525 -4 8 796 -8 13 180 -42 48 21 -84 -328Telecom (4) 426 6 3 150 4 2 21 -23 -19 2 -70 -188Real Estate (8) 48 -6 -19 16 11 -26 5 -15 -26 1 497 -110Capital Goods (12) 626 5 36 70 -8 185 40 -12 355 5 -153 -128Oil Excl. OMCs (9) 1040 -11 -3 216 -5 -5 119 -11 -9 14 112 -2Metals (9) 1077 -7 13 113 -24 38 -4 PL PL 0 -234 -374PSU Banks (8) 307 -3 3 231 -8 15 -2 PL Loss 0 -469 -1872MOSL (171)* 7765 2 5 1967 6 9 861 -5 11 100 82 -84MOSL Ex Metals & PSU Bnks* 6381 4 3 1623 11 6 867 7 5 157 35 Sensex (30) 4603 2 3 1167 7 8 584 2 6 109 2 Nifty Ex BPCL (49) 5647 3 3 1453 8 8 694 3 12 121 -3

FY17 outlook looks positive on monsoons, rates and cyclicals As we enter FY17, things are looking up. India is likely to get its best monsoon in two decades. We expect effective transmission of monetary easing in FY17 post the cumulative 150bp rate cut by RBI in the past 15 months. Early recovery in commodity prices also provides support for earnings from some of the commodity sectors, which faced tremendous headwinds in 2HFY15 and FY16. More importantly, the performance ahead would be on a low base of corporate earnings. The combination of aforementioned factors provides a good backdrop for earnings recovery in FY17.

Sensex EPS: Expect rebound in FY16-18, with 19% CAGR versus 6% CAGR witnessed during FY08-16

81 129 181 250 266 291 278 280 216 236 272 361 446 540720 833 820 834 1,024

1,120 1,182

1,338 1,355 1,321 1,554

1,880

FY93

FY94

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FY02

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FY07

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E

FY17

E

FY18

E

FY93-96: 45% CAGR

FY96-03: 1% CAGR

FY03-08: 25% CAGR

FY08-16: 6% CAGR

FY16-18E: 19% CAGR

FY93-FY16: 13% CAGR

* Excl OMCs


April 2016 3

We estimate 18% EPS growth for Sensex in FY17. FY17E earnings growth is also a reflection of select companies moving from loss to profit and domestic recovery for some businesses. As the earnings trend gets cemented, we expect markets to track that, given the long term average valuations (Sensex at 16x FY17E EPS). Our model portfolio is a combination of ‘Quality’ orientation (derived from our QARP framework – Quality growth At Reasonable Price) and domestic recovery, as we expect several companies to show a better earnings performance in FY17.

QARP – second edition; new entry in portfolio We had launched our QARP [Quality growth At Reasonable Price] framework for portfolio construction in our January 2016 India Strategy. The idea was to identify quality names with good track record of delivered growth and expectation of robust earnings growth over FY16-18, with healthy balance sheet characteristics and reasonable valuations. We continue to believe that stocks with a combination of Quality and Growth will outperform markets. Our 10-stock QARP portfolio has delivered 6.4% absolute returns and 4.5% relative returns v/s BSE 100 in its first quarter. As we run the same filters on updated financials, we see several new entries in the QARP universe. We are making a minor change in our portfolio. Post strong returns of ~15% in three months, we are replacing Persistent Systems with Britannia, which after the correction of 22% from peak, now satisfies our QARP quantitative filters.

QARP portfolio (April 2016) – second edition 18% ROE -

FY11-15 PAT

CAGR (%) Net

D/E (x) 5 Year Avg FY17E

P/E Discount/ Premium

Price correction

Companies 4 out of 5 times

FY10-15 FY16-18E FY15 PE (x) PE (x) FY17/Five year avg From FY16 highs

Amara Raja Batt. 5 20.0 25.0 -0.10 16.2 22.7 40.2 -22.3Bosch 4 18.1 34.9 -0.64 33.9 37.4 10.4 -22.3Eicher Motors 4 49.1 29.6 -0.45 21.7 32.4 49.0 -11.5Britannia 5 33.8 15.7 -0.46 24.5 31.3 27.8 -22.1Emami 5 22.0 20.2 -0.65 27.6 31.0 12.1 -32.0Page Industries 5 37.7 28.1 0.40 36.9 45.5 23.2 -28.4Sun Pharma 5 28.5 40.1 -0.23 28.4 27.7 -2.7 -29.4Axis Bank 4 24.0 14.2 - 11.1 11.1 0.5 -27.5M & M Financial 4 19.3 30.5 - 16.3 17.9 9.4 -17.5Muthoot Finance 4 24.1 30.8 - 8.0 7.2 -9.8 -24.7

Sources of exhibits in this section include RBI, CMIE, Bloomberg, IMF, Industry, Companies, and MOSL database


April 2016 4

Indian equities end FY16 with a decline of 9% 2016: Sensex delivered four quarters of negative returns

FY16 has turned out to be at best a forgettable year for Indian equities. Besides global headwinds, almost everything that could have gone wrong domestically

has gone wrong. The year ended on a disappointing note due to tepid corporateprofitability, inability of the government to pass crucial legislative reforms, secondconsecutive year of below average monsoon, and lack of buying by FIIs.

The Sensex ended FY16 with 9% negative return. Also, the Sensex returns in eachquarter of FY16 were negative, indicating a build-up of headwinds.

This is only the fifth such incidence of four consecutive quarters of negative Sensexreturns in the last four decades.

Media and Cement are the only sectors to give positive returns in FY16. Several macro headwinds have impacted both industrial and infrastructure capex. As a

result, Real Estate and Capital Goods are among the worst performing sectors, withnegative returns of 26%. All businesses with high gearing have severelyunderperformed due to rising interest rates and increased concerns on refinancing.

Global cyclicals among the top losers in FY16. Reliance Industries (+27%), Bajaj Auto (+19%), Zee (+13%), UltraTech (+12%) and Hero

Moto (+11%) were the top positive performers in FY16. Vedanta (-53%), BHEL (-52%), PNB (-41%), Idea (-40%) and Hindalco (-32%) were the

worst performers for the year.

Exhibit 1: FY16 returns have been negative 9%, post a big gain of 25% in FY15


Exhibit 2: FY16 - 5th incidence of 4 consecutive quarters of negative returns (Sensex returns, % QoQ)


29 35 26

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Sensex annual return YoY (%)

CAGR of 16%

3 years of negative return in 1980s cycle

4 year of negative return in 2000s cycle

4 years of negative return in 1990s cycle

2 year of negative return in 2011

cycle

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MARKETS & FLOWS


April 2016 5

Markets: Indian equities v/s global markets A year of weak returns, led by growth concerns.

Exhibit 3: World equity indices (FY16) - local currency (%) Exhibit 4: World equity indices (FY16) – USD (%)

Sectoral/Stock performance: Media and Cement exceptions, with positive returns Media and Cement are the only sectors to give positive returns in FY16. Several macro headwinds have impacted both industrial and infrastructure

capex. As a result, Real Estate and Capital Goods are among the worstperforming sectors, with negative returns of 26%. All businesses with highgearing have severely underperformed due to rising interest rates and increasedconcerns on refinancing.

In FY16, midcaps continued to outperform large caps by delivering 2% negativereturn against the Sensex’s 9% negative return.

Exhibit 5: Sectoral performance for FY16 (% return)


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MSCI EM

Japan

India - Sensex

UK

Taiwan

South Korea

Brazil

S&P 500

Russia MICEX

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MSCI EM

Brazil

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-12 -17-19 -20 -23 -26 -26 -26

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Real Estate, Capital Goods and Financials worst performers for the year


April 2016 6

Global cyclicals among the top losers in FY16 Reliance Industries (+27%), Bajaj Auto (+19%), Zee (+13%), UltraTech (+12%)

and Hero Moto (+11%) were the top positive performers in FY16. Vedanta (-53%), BHEL (-52%), PNB (-41%), Idea (-40%) and Hindalco (-32%) were

the worst performers for the year. 21 stocks outperformed the benchmark in FY16.

Exhibit 6: Best and worst Nifty performers for FY16 (%) — 17 companies gave positive return

Domestic MFs recorded highest ever inflows Flows FIIs recorded outflows USD1.5b in FY16 after six years of consecutive inflows. Domestic MFs recorded inflows of USD10.1b for FY16 —the highest ever annual

flows. This is also more than the aggregate of last 10 years. DII (ex-MFs) saw inflows after four years to USD2b in FY16 against USD10.3b

outflow in FY15.

Exhibit 7: Yearly FII flows (USD b) – Outflows after six years Exhibit 8: Quarterly FII flows (USD b) – inflows in March quarter after two quarters of outflows

27 19 13 12 11 11 10 10 7 6 6 5 4 2 1 1 1

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April 2016 7

Exhibit 9: Yearly domestic MF flows (USD b) – highest ever annual flows

Exhibit 10: Quarterly domestic MF flows (USD b) – 8 quarters of inflows

Exhibit 11: Yearly DII ex-MF flows (USD b) – see positive flows after 4 years Exhibit 12: Quarterly DII ex-MF flows (USD b)

Sensex sectoral weights— Metals, Capital Goods at new lows In terms of sectoral weights in the Sensex, Metals is now at an all-time low of

0.9%, while Autos is at a high of 10.8%. Capital Goods weight is at a new low of4.8%. Banking weight has also slipped to 28.9%.

Infrastructure was a new sector entry, with the inclusion of Adani Ports, with 1%weight.

Exhibit 13: Sensex sectoral weights (%) Weight in Sensex (%) Avg Weight Chg Curr vs

Sector FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY06-16 Avg Weight (pp)

Auto 5.5 4.0 3.8 3.4 6.4 8.8 9.9 9.4 10.6 10.9 10.8 7.6 3.2 Banking 20.9 21.1 21.1 19.6 23.0 24.8 24.6 26.2 27.5 32.0 28.9 24.5 4.4 Capital Goods 7.1 7.3 10.7 8.8 9.7 8.1 6.4 5.6 6.3 6.8 4.8 7.4 -2.6Cement 5.3 4.2 3.5 2.4 2.2 3.5 -3.5Consumer 11.8 7.5 7.4 10.8 7.2 8.3 11.5 13.8 12.4 10.2 12.5 10.3 2.2 Health Care 4.4 3.6 2.1 1.7 1.1 1.1 2.7 4.7 5.1 6.6 8.3 3.8 4.5 Infrastructure 1.5 0.8 1.3 0.7 1.0 1.1 -0.1Metals 5.5 3.6 4.6 3.8 7.2 8.1 6.1 3.9 3.6 2.5 0.9 4.5 -3.6Oil & Gas 12.9 16.0 19.3 22.0 16.8 15.3 14.5 13.7 12.9 8.8 10.0 14.7 -4.8Real Estate 1.5 0.6 1.0 0.7 0.6 0.9 -0.9Technology 18.1 19.9 11.8 12.2 14.6 16.5 16.1 16.2 16.6 16.1 17.9 16.0 1.9 Telecom 4.0 9.7 8.6 7.8 4.1 3.6 3.1 2.4 2.0 2.3 2.1 4.5 -2.4Utilities 4.5 3.3 4.2 6.0 5.4 4.1 4.5 4.0 3.0 3.8 2.8 4.1 -1.4Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Private 87.4 88.1 86.3 83.9 86.4 87.4 85.9 87.4 89.2 89.4 91.6 87.5 4.1 PSU 12.6 11.9 13.7 16.1 13.7 12.6 14.2 12.6 10.8 10.6 8.4 12.5 -4.1

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April 2016 8

Valuations near long-term averages; at 6% discount Market valuations are at long-term averages Valuations of Indian equities remain attractive. The Sensex trades at 15.7x one-

year forward earnings, slightly below its long-period average of 16.8x. SensexP/B is at 2.5x, near its 10-year average of 2.7x.

Market-cap-to-GDP ratio of 70% (FY16E GDP) is below the long-period averageof 76%.

Exhibit 14: 12-month forward Sensex P/E (x) Exhibit 15: 12-month forward Sensex P/B (x)

Exhibit 16: 12-month forward Sensex RoE (%) Exhibit 17: India’s market cap to GDP (%)

Sector valuations: Premium for growth expands Premium for growth expands State-owned banks trade at 44% discount to historical average P/B. The sector

saw significant outperformance in March (+20% return) after hugeunderperformance in the preceding three months. Key drivers were continuednews flows around large corporate deleveraging and favorable capital guidelinesissued by RBI – reducing near-term concerns on capital.

Consumer sector P/E remains above its historical average (16% premium).Demand scenario remains challenging. Consumer companies continue to becautious on demand outlook for FY17 and expect raw material prices to bebenign for the next couple of quarters.

The Healthcare sector trades at a one-year forward P/E of 22.8x – 10% premiumto historical average. Companies like Lupin, Natco and Alembic remain affected

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Apr-

12

Apr-

13

Apr-

14

Apr-

15

Apr-

16

10 Year Avg: 2.7x

23.7

15.8 15.6

14.5

17.0

19.5

22.0

24.5

Apr-

06

Apr-

07

Apr-

08

Apr-

09

Apr-

10

Apr-

11

Apr-

12

Apr-

13

Apr-

14

Apr-

15

Apr-

16

10 Year Avg: 17.4% 52

82 83

103

55

95 88

71 64 66

81 70

FY05

FY06

FY07

FY08

FY09

FY10

FY11

FY12

FY13

FY14

FY15

FY16

E

Average of 76% for the period


April 2016 9

by recent plant inspections. Dr Reddy’s and Sun Pharma have expanded their presence in the branded market by tying up with Essai and by acquiring Novartis portfolio, respectively. Long-term outlook for the sector remains strong due to differentiated US pipeline and high growth in the domestic market.

Exhibit 18: Cyclicals remain at discount

Sector PE (x) Relative to

Sensex P/E (%) PB (x) Relative to Sensex P/B (%)

Current 10 Yr Avg Prem/Disc (%) Current 10 Yr Avg Current 10 Yr Avg Prem/Disc

(%) Current 10 Yr Avg

Auto 15.5 14.2 9.6 -1 -17 3.1 3.1 -0.8 26 14 Banks - Private 14.4 15.8 -8.6 -8 -7 2.2 2.1 3.3 -10 -22Banks - PSU 6.6 9.1 -27.1 -58 -48 0.6 1.1 -43.8 -75 -60NBFC 13.1 12.4 5.4 -17 -26 2.0 2.2 -7.9 -18 -19Capital Goods 25.0 26.0 -3.8 60 51 2.5 4.3 -41.8 2 53 Cement 22.7 16.1 41.2 45 -5 2.8 2.4 14.9 13 -12Consumer 32.0 27.6 15.9 104 67 11.0 9.5 15.9 346 255 Healthcare 22.8 20.8 9.7 45 24 4.6 4.2 9.8 87 55 Media 19.2 23.0 -16.5 23 37 4.3 4.3 -0.3 75 57 Metals 32.2 14.4 123.5 105 -17 0.9 1.6 -44.2 -63 -41Oil & Gas 9.6 11.8 -18.5 -39 -29 1.1 1.6 -31.9 -55 -40Real Estate 17.4 25.3 -31.2 11 52 0.7 1.5 -49.9 -70 -49Retail 36.1 33.5 7.8 130 99 6.9 8.1 -14.4 182 199 Technology 16.5 16.9 -2.0 5 1 4.1 4.8 -14.5 65 72 Telecom 26.6 25.8 2.9 70 58 1.4 2.4 -40.3 -42 -13Utilities 10.4 15.0 -31.0 -34 -9 1.1 1.8 -35.3 -54 -35


April 2016 10

Another (7th consecutive) quarter of muted PAT growth Impacted by markdown of two sectors – Metals and PSU Banks

4QFY16 – another quarter of muted earnings: 4QFY16/2HFY16 has been a confluenceof massive NPA provisioning with multi-decade low commodity prices, resulting in the7th consecutive quarter of muted earnings growth. MOSL (ex OMC) revenues grew~3% YoY, while PAT declined ~5% YoY. While EBITDA margins are expected to improve~80bp YoY to ~25.3% (v/s 10-year average of 25.2%), PAT margins are estimated todecline ~80bp YoY to 11.1% (v/s 10-year average of 13.9%).

Peak PAT for MOSL Universe (ex Metals, OMCs and PSU banks): MOSL Universe(excluding Metals, OMCs and PSU Banks) earnings are at peak levels, growing ~7.3%YoY in 4QFY16. PAT contribution of Metals and PSU Banks stood at -1.2% v/s 5-yearaverage of 16.4% (-6.5% in 3QFY16).

Nifty (ex-BPCL) sales would grow 3% in 4QFY16. PAT is likely to grow 3% YoY, after fiveconsecutive quarters of decline. Nifty PAT, ex Metals and Oil, is expected to grow by5% YoY and sales by 7% YoY in 4QFY16.

Muted PAT growth for Nifty (ex-BPCL) influenced by cyclicals: 8 out of 17 PAT de-growth companies are local cyclicals, whereas 4 are global cyclicals. Auto andHealthcare lead growth, with 9 out of 17 high PAT growth companies (>15%).

Exhibit 19: 4QFY16 - Another (7th consecutive) quarter of muted PAT growth

(INR B) Sales EBITDA PAT PAT EBITDA Margins

PAT Margins

(No of companies) Mar-16 Var % YoY



YoY Var % QoQ Sh. % Chg bp

YoY Chg bp

YoY High growth sectors 1664 9 0 281 25 1 156 47 7 18 214 240 Media (9) 56 13 -6 17 35 -11 8 54 -10 1 488 369 Auto (12) 1270 8 0 177 14 1 91 47 10 11 75 191 Healthcare (15) 339 15 3 87 55 5 57 46 6 7 651 359 Med/Low growth sectors 2576 8 3 890 15 7 525 7 4 61 210 -22Private Banks (8) 226 17 5 216 24 7 108 10 2 13 571 -288Cement (7) 182 9 8 33 11 17 16 10 31 2 32 8 Consumer (16) 396 7 1 88 12 -2 61 9 -4 7 102 28 Technology (12) 828 18 5 202 17 6 152 8 0 18 -21 -159Retail (3) 46 19 -8 4 21 2 3 8 -3 0 14 -60Utilities (4) 497 -6 -2 178 12 12 91 6 18 11 569 205 Others (22) 257 4 7 43 7 5 24 3 8 3 46 -13NBFC (13) 144 14 5 126 12 6 71 3 2 8 -203 -555PAT de-growth sectors 3525 -4 8 796 -8 13 180 -42 48 21 -84 -328Telecom (4) 426 6 3 150 4 2 21 -23 -19 2 -70 -188Real Estate (8) 48 -6 -19 16 11 -26 5 -15 -26 1 497 -110Capital Goods (12) 626 5 36 70 -8 185 40 -12 355 5 -153 -128Oil Excl. OMCs (9) 1040 -11 -3 216 -5 -5 119 -11 -9 14 112 -2Metals (9) 1077 -7 13 113 -24 38 -4 PL PL 0 -234 -374PSU Banks (8) 307 -3 3 231 -8 15 -2 PL Loss 0 -469 -1872MOSL (171)* 7765 2 5 1967 6 9 861 -5 11 100 82 -84MOSL Ex Metals & PSU Bnks* 6381 4 3 1623 11 6 867 7 5 157 35 Sensex (30) 4603 2 3 1167 7 8 584 2 6 109 2 Nifty Ex BPCL (49) 5647 3 3 1453 8 8 694 3 12 121 -3

4QFY16 PREVIEW

* Excl OMCs


April 2016 11

Exhibit 20: Key assumptions – Commodities bottoming out in 4QFY16 FY15 1QFY16 2QFY16 3QFY16 4QFY16E FY16E FY17E FY18E

Macro GDP Growth (%) 7.1 7.2 7.5 7.1 7.3 7.3 7.5 8.0 IIP Growth (%) 2.8 3.3 4.8 1.6 2.3 3.0 5.0 6.0 Inflation CPI-RU (%) 5.9 5.1 4.0 5.3 5.2 4.9 4.0 4.0 Currency: USD/INR 61.2 63.5 64.9 65.9 67.6 65.5 68.0 70.0 Oil: Brent (US$/bbl) 85.5 62.1 50.2 43.3 34.2 47.4 45.0 50.0 Repo Rate (%) 7.9 7.4 7.2 6.75 6.75 6.9 5.9 5.0 Interest Rate (%): 1Year CP Rate (Avg) 9.25 8.8 8.5 8.2 8.9 8.6 7.75 7.25

10Year G Sec (Avg) 8.3 7.8 7.8 7.7 7.7 7.75 7.25 6.75 Sectoral Banking: Loan Growth (%) 12.6 9.3 9.7 9.8 11.5 11.5 13.5 15.0 Auto: CV Volume growth (%) -2.9 7.7 8.2 5.10 20.0 10.6 28.5 19.0 Car Volume growth (%) 4.0 13.8 9.8 15.50 3.6 10.5 14.2 17.3 Cement: Volume growth (%) 4.0 1.2 3.0 6.0 8.0 4.0 6.9 8.9 Capital Goods: L&T order Intake (% YoY) 22.2 -21.0 -28.1 11.4 -2.3 -9.9 15.6 5.8 Metal: Steel (USD/Tonne) 639 554 520 480 480 504 505 505 Aluminium (USD/Tonne) 1,889 1,765 1,591 1,593 1,494 1,597 1,557 1,603 Zinc (USD/Tonne) 2,173 2,190 1,892 1,616 1,546 1,813 1,573 1,605 Oil & Gas: Under Recoveries (INRb) 723 39 31 28.7 19.6 115.6 107.4 121.9

Singapore GRM (USD/bbl) 6.4 8.0 6.3 8.0 7.5 7.3 7.3 7.3 Technology: $Revenue growth (%) 10.7 3.2 3.1 0.30 2.7 7.2 12.7 12.0 * CV volume for Tata Motors and Ashok Leyland; PV Volume for Maruti suzuki

4QFY16 – Another quarter of muted earnings… 4QFY16/2HFY16 has witnessed confluence of massive NPA provisioning with

multi-decade low commodity prices, resulting in the 7th consecutive quarter ofmuted earnings growth.

MOSL (ex OMC) revenues grew ~3% YoY, while PAT declined ~5% YoY. While EBITDA margins are expected to improve ~80bp YoY to 25.3% (v/s 10-year

average of 25.2%), PAT margins are estimated to decline ~80bp YoY to 11.1%(v/s 10-year average of 13.9%).

Exhibit 21: Sales ex OMCs to remain flat for 7th consecutive quarter

Exhibit 22: PAT ex OMCs would decline for 6th straight quarter

30 26 25

28 25

21 2219

17 1310

7 6

15 15 13 14

6 1

-4 -3 -4 -3

3

Jun-

10

Dec-

10

June

-11

Dec-

11

June

-12

Dec-

12

June

-13

Dec-

13

June

-14

Dec-

14

June

-15

Dec-

15

MOSL Universe (Ex OMCs) sales growth YoY (%) LPA: 13%

31 28 32

17 1510

4

19

14 9 8

1

-1

9 13 12

17

7

-6-9

-4 -5-9

-5

Jun-

10

Dec-

10

June

-11

Dec-

11

June

-12

Dec-

12

June

-13

Dec-

13

June

-14

Dec-

14

June

-15

Dec-

15

MOSL Universe (Ex OMCs) PAT growth YoY (%) LPA: 9%


April 2016 12

Exhibit 23: 4QFY16 EBITDA margin (ex-Financials & RMs) at 19.7% (+70bp YoY) is one of the highest in last 4 years, inching towards LPA

Exhibit 24: However, 4QFY16 PAT margin (ex-Financials & RMs) would contract 10bp to 9.7%, led by IT and Metals

…impacted by markdown of two sectors – Metals and PSU Banks While multi-year low commodity prices would result in the Metals sector

reporting its 2nd consecutive quarter of losses, peak NPA provisioning wouldreflect in the 2nd conscecutive quarter of losses for PSU Banks.

PAT contribution of Metals and PSU Banks would be -1.2% v/s 5-year average of16.4% (-6.5% in 3QFY16).

Excluding the impact of these sectors, MOSL Universe earnings would be closerto its high, growing 7.3% YoY in 4QFY16.

The share of defensives in MOSL Universe PAT at ~39% is still at a multi-yearhigh, despite declining from peak. The share of domestic cyclicals would recoverto ~38% from recent lows of ~32% witnessed in 3QFY16.

Exhibit 25: Sales growth ex Metals, PSU Banks and OMCs Exhibit 26: EBITDA growth ex Metals, PSU Banks and OMCs

23.2

20.7

18.6 19.0

22.2

21.3

21.9 22.0

22.2

21.6

21.9

20.6

20.3 19.8

18.8

19.1 19.3

18.9 18.519.5

18.7

19.0 19.2 19.3 19.4

18.8 18.6

19.0 20.1

19.0 19.0 19.7

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16

MOSL Universe EBITDA Margin LPA: 20%

14.6

13.2

10.8

11.4 12.3

11.7 11.7

13.1

12.5 12.2 12.612.1 11.8

11.0 10.5

11.4

10.9 10.2

10.0 10.5

9.7 9.9 10.3 10.5 10.3

9.9 9.2

9.8 10.2

9.6 9.4

9.7

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16

MOSL Universe PAT Margin LPA: 11%

32 27 26

30 26

22 2522

19 1512

8 7

16 15 12 14

5 1

-4 -2 -2-1

4

Jun-

10

Dec-

10

June

-11

Dec-

11

June

-12

Dec-

12

June

-13

Dec-

13

June

-14

Dec-

14

June

-15

Dec-

15

MOSL Universe (Ex Metals, PSU Banks & OMC) Sales growth YoY (%) LPA: 14%

19 23

27 22

17

13 9

17

13 10 11 10 9

17 18

14

18

6

1 3

7 7 11 11

Jun-

10

Dec-

10

June

-11

Dec-

11

June

-12

Dec-

12

June

-13

Dec-

13

June

-14

Dec-

14

June

-15

Dec-

15

MOSL Universe (Ex Metals, PSU Banks & OMC) EBIDTA growth YoY (%) LPA: 13%


April 2016 13

Exhibit 27: PAT growth ex Metals, PSU Banks and OMCs Exhibit 28: Metals and PSU Bank share in MOSL PAT (%)

Note: Comparable Universe, excludes Just Dial, Alembic Pharma, Vedanta due to merger, Hathway and Repco Home Fin., MCX, Inox Wind, Alkem Lab and Interglobe Aviation.

Exhibit 29: PAT share of global cyclicals at multi-year low, but domestic cyclicals recover from recent lows

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

18 22

36

24 22

13 8

20 15 12 13

4 2

14 17 16

20

5

-7-4

2 0

12 7

Jun-

10

Dec-

10

June

-11

Dec-

11

June

-12

Dec-

12

June

-13

Dec-

13

June

-14

Dec-

14

June

-15

Dec-

15

MOSL Universe (Ex Metals, PSU Banks & OMC) PAT growth YoY (%) LPA: 12%

25.9

22.5

21.7

20.3

21.5

20.0

19.0

20.0

20.9

17.9

15.7

18.1

18.6

14.0 12.9

14.7

16.7

16.0

13.7

10.0

11.1

11.5

-6.5

-1.2

Jun-

10

Dec-

10

June

-11

Dec-

11

June

-12

Dec-

12

June

-13

Dec-

13

June

-14

Dec-

14

June

-15

Dec-

15

Average: 16.4%

37 41 39 37 33 37 38 36 35 38 38 3238

37 25 26 39 43 37 36

35 32 28 24 25 24

26 24 24 24 29 33 34 37

44 39

0%

25%

50%

75%

100%

Mar

-08

June

-08

Sep-

08

Dec-

08

Mar

-09

June

-09

Sep-

09

Dec-

09

Mar

-10

June

-10

Sep-

10

Dec-

10

Mar

-11

June

-11

Sep-

11

Dec-

11

Mar

-12

June

-12

Sep-

12

Dec-

12

Mar

-13

June

-13

Sep-

13

Dec-

13

Mar

-14

June

-14

Sep-

14

Dec-

14

Mar

-15

June

-15

Sep-

15

Dec-

15

Mar

-16E

Defensives

Global cyclicals

Domestic cyclicals


April 2016 14

Exhibit 30: Sectoral quarterly PAT trend (INR b) - 4QFY16 PAT (ex global cyclicals) near high, despite PSU bank losses Sector FY11 FY12 FY13 FY14 FY15 FY16

Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec MarE Auto 49 52 51 55 53 54 66 83 59 52 49 78 52 73 82 81 92 77 77 62 79 59 83 91 Capital Goods 22 29 33 50 23 29 34 65 26 27 28 60 14 21 22 52 17 19 19 45 14 14 8 39 Cement 19 7 11 20 19 12 16 23 25 19 16 20 19 11 11 18 17 14 9 15 14 13 12 16 Consumer 28 31 33 31 33 36 38 38 41 42 47 44 46 49 52 49 51 55 58 56 56 58 63 61 Financials 140 141 158 133 137 154 170 200 189 186 198 213 210 189 198 223 232 220 214 224 227 224 137 177 Private Banks 32 35 41 44 42 45 52 57 54 57 67 71 70 72 80 85 82 85 95 98 91 98 106 108 PSU Banks 79 73 82 53 62 75 84 102 92 83 82 83 87 61 59 73 90 72 54 57 71 54 -39 -2 NBFC 30 32 35 37 33 34 35 41 44 45 50 58 54 56 59 64 60 63 64 68 65 72 69 70 Healthcare 17 21 20 21 20 22 21 23 22 28 28 31 34 41 45 43 46 51 33 37 49 51 50 54 Media 4 4 4 5 4 4 4 3 4 5 5 4 5 5 6 5 5 5 8 6 7 8 9 8 Metals 79 71 70 95 89 67 55 72 75 54 42 76 60 57 57 71 66 72 61 32 28 45 -10 -8Oil & Gas 35 238 177 188 56 38 284 367 - 342 217 403 94 203 137 346 187 153 71 247 251 131 187 198 Oil & Gas Ex OMCs 105 143 156 128 150 178 139 139 154 173 166 133 138 174 175 165 149 149 95 134 147 128 131 119 Real Estate 6 8 9 7 6 7 6 6 6 5 7 5 6 5 5 6 7 5 6 6 6 6 7 5 Retail 1 2 2 1 2 2 2 2 2 2 3 2 2 2 2 3 2 3 2 3 2 2 3 3 Technology 55 60 64 66 66 68 80 83 89 92 96 96 104 119 128 132 131 135 143 141 140 150 152 152 Telecom 22 23 21 18 16 15 16 18 14 13 9 9 17 15 16 22 25 28 29 28 28 23 26 21 Utilities 52 41 57 81 72 49 71 98 81 63 86 95 72 67 82 95 74 54 69 86 76 65 77 91 Others 11 13 12 14 14 11 11 13 13 11 11 12 13 12 14 15 16 13 16 17 16 13 15 18 MOSL Univ Excl OMCs 610 645 701 725 703 708 730 865 799 771 791 878 792 839 896 979 930 900 840 888 890 859 761 846 MOSL Univ Ex Metals & Oil 426 430 475 502 464 463 536 654 570 544 582 669 594 608 664 744 714 679 684 723 715 686 641 735


Exhibit 31: Sectoral quarterly PAT growth trend (%) - PAT growth for MOSL (ex global cyclicals) lowest in 5 years Sector FY11 FY12 FY13 FY14 FY15 FY16

Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec MarE Auto 330 87 46 21 8 5 30 51 11 -4 -26 -5 -11 40 68 3 77 5 -7 -23 -14 -24 8 47 Capital Goods 25 24 22 9 3 0 2 30 12 -5 -18 -7 -47 -25 -20 -13 26 -7 -13 -13 -19 -27 -60 -14Cement -20 -70 -31 16 5 73 53 15 28 63 -2 -14 -26 -44 -33 -11 -10 26 -12 -16 -19 -2 32 10 Consumer 15 16 16 22 16 19 17 22 24 15 23 18 13 17 13 11 11 12 12 13 11 6 8 9 Financials 34 22 27 9 -3 10 8 50 38 20 16 6 11 2 0 5 11 17 8 0 -2 1 -36 -21 Private Banks 31 33 36 39 31 28 27 29 30 27 28 25 29 26 20 20 18 19 19 15 10 14 12 10 PSU Banks 31 14 17 -14 -22 2 2 92 48 11 -2 -18 -5 -27 -28 -12 3 18 -7 -23 -21 -25 PL PL NBFC 46 32 47 24 13 7 -1 13 31 31 44 40 23 25 19 11 12 13 9 7 9 14 7 3 Health Care 24 21 93 27 15 4 8 8 9 27 35 34 57 50 58 42 35 23 -25 -14 8 0 48 46 Media 69 42 46 70 14 8 -8 -34 -2 8 22 25 26 12 18 13 -5 3 33 17 37 47 16 45 Metals 247 144 16 5 13 -6 -22 -24 -15 -19 -23 6 -20 5 36 -6 10 27 7 -55 -57 -37 PL PL Oil & Gas -78 117 68 5 60 -84 61 96 PL 812 -24 10 LP -41 -37 -14 99 -25 -48 -29 34 -14 162 -20 Oil & Gas Ex OMCs -2 30 66 18 43 25 -11 9 3 -3 19 -4 -10 1 6 24 8 -14 -46 -19 -1 -14 37 -11Real Estate 27 8 32 6 -2 -13 -38 -12 -3 -27 22 -19 0 -2 -31 18 10 2 17 -6 -10 24 17 -15Retail 273 68 87 12 68 17 13 52 6 14 22 24 15 5 -12 12 -6 24 5 -2 -11 -36 19 8 Technology 12 16 19 18 20 13 24 26 36 35 20 15 17 30 34 39 25 13 11 6 7 11 7 8 Telecom -52 -30 -42 -48 -26 -38 -20 -1 -13 -8 -47 -47 19 13 86 138 48 87 80 24 13 -18 -10 -23Utilities 68 55 93 132 37 19 23 21 14 27 21 -3 -11 6 -4 1 3 -18 -16 -10 2 19 12 6 Others 14 39 48 28 31 -12 -8 -9 -9 -2 5 -9 4 9 24 28 22 8 13 14 3 4 -6 6 MOSL Univ Excl OMCs 31 28 32 17 15 10 4 19 14 9 8 1 -1 9 13 12 17 7 -6 -9 -4 -5 -9 -5MOSL Univ Ex Metals & Oil 26 18 25 20 9 8 13 30 23 17 9 2 4 12 14 11 20 12 3 -3 0 1 -6 2


April 2016 15

Nifty sales and PAT growth at 3/2% Nifty PAT, ex-BPCL, is likely to grow 3% YoY after five consecutive quarters of

decline. Sales would grow 3% YoY in 4QFY16. Nifty PAT, ex Metals and Oil, is expected to grow 5% YoY and sales to grow 7%

YoY in 4QFY16. 8 out of 17 PAT de-growth companies are local cyclicals, whereas 4 are global

cyclicals. Auto and Healthcare lead growth, with 9 out of 17 high PAT growth companies

(>15%).

Exhibit 32: 4Q Nifty (ex BPCL) PAT to grow 3% YoY, after five consecutive quarters of de-growth

Exhibit 33: Nifty (ex BPCL) sales to grow 3% YoY in 4QFY16, after five consecutive quarters of de-growth

Exhibit 34: Nifty sectoral 4QFY16 PAT change (YoY %)

36 37 45

51

29 20

7

-6

23 26

44

30 30 23

13 14 24 21

-10-14

-24 -20

21

38

23 28 25

3 12 11

7

24 16

7 8

-3 -5

9 14 11

18

5

-9 -12-5 -3

-8

3

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16

LPA: 14%

22 26

30 24

19 19 14

19

32 30 31

22 31 31 31

37 31 31

8

-2-8 -6

17

27 25 21 19 22 25

21 23 19 16

12 8 5 4

15 16 14 15 4

0 -6 -4 -4 -3

3

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16

LPA: 17%

52 51

24 8 8 6 4 3

-2 -3 -10 -23 -23

Loss

Heal

thca

re

Auto

mob

iles

Med

ia

Cons

umer

Tech

nolo

gy

Util

ities

Cem

ent

Nift

y Ex

BPC

L

Infr

astr

uctu

re

Oil

Ex B

PCL

Fina

ncia

ls

Capi

tal G

oods

Tele

com

Met

als

Auto, Healthcare and Media to report strong PAT growth in

4QFY16


April 2016 16

Exhibit 35: Nifty companies 4QFY16 performance (INR b) Company Sales EBITDA PAT PAT Contbn EBITDA margin

Mar-16 Var % YoY Mar-16 Var % YoY Mar-16 Var % YoY (%) Grw. (%) Mar-16 Var (bp) High PAT Growth (17) 1,481 10 312 27 168 52 24 279 21 292 Grasim Industries 23 32 4 352 3 477 0 11 20 1385 Tata Motors 705 4 91 8 39 117 6 104 13 50 Sun Pharma 78 26 25 181 18 98 3 42 32 1789 Eicher Motors 41 58 7 79 3 78 0 7 16 196 Tata Power 85 5 23 21 4 73 1 7 27 370 Tech Mahindra 69 13 11 21 7 55 1 13 16 112 Lupin 38 23 11 40 8 42 1 11 29 356 Hero MotoCorp 75 10 12 41 8 33 1 10 16 357 Aurobindo Pharma 36 14 9 31 5 33 1 6 24 293 Asian Paints 38 10 7 26 4 29 1 5 17 217 Cipla 33 7 6 18 3 29 0 4 18 178 Bajaj Auto 52 10 11 28 8 27 1 8 21 294 IndusInd Bank 12 30 12 41 6 27 1 6 100 766 Yes Bank 12 25 12 27 7 27 1 7 97 141 Zee Entertainment 15 8 4 30 3 24 0 3 24 419 Mahindra & Mahindra 99 8 12 21 7 21 1 6 12 128 HDFC Bank 72 20 56 20 34 20 5 27 78 -14Med/Low PAT Growth (17) 1,929 6 610 18 384 9 55 157 32 317 Power Grid Corp. 56 20 50 24 17 17 2 12 89 256 GAIL 124 -13 11 80 6 15 1 4 9 453 Coal India 213 2 57 5 48 14 7 28 27 73 Reliance Inds. 552 -1 106 23 71 14 10 42 19 386 Kotak Mahindra Bank 25 39 12 35 6 13 1 3 47 -150Infosys 166 24 45 22 35 12 5 19 27 -38HCL Technologies 109 17 24 17 19 11 3 9 23 -1Bharti Infratel 31 6 14 6 6 11 1 3 46 22 Hind. Unilever 81 5 13 7 9 9 1 4 17 38 Bosch 27 14 5 3 3 9 0 1 18 -179Dr Reddy’ s Labs 39 1 9 15 6 9 1 2 24 301 Axis Bank 42 11 44 9 24 9 3 10 104 -163TCS 285 17 81 15 62 5 9 14 29 -58ITC 99 7 35 7 25 5 4 6 36 4 ICICI Bank 55 8 76 38 29 0 4 0 137 2959 HDFC 26 9 27 0 19 0 3 0 106 -905Negative PAT Growth (17) 2,731 -3 564 -9 163 -32 24 -371 21 -148Adani Ports 14 -18 12 11 6 -2 1 -1 90 2370 Wipro 137 13 29 6 22 -3 3 -3 21 -137Ambuja Cements 25 3 4 -5 3 -4 0 -1 18 -140Maruti Suzuki 145 7 22 2 12 -6 2 -4 15 -72Larsen & Toubro 320 14 38 6 18 -7 3 -7 12 -94Hindalco 258 -3 24 14 4 -11 1 -2 9 142 ACC 30 3 4 -12 2 -14 0 -2 12 -221NTPC 143 -26 48 5 23 -17 3 -23 34 1000 Ultratech Cement 64 4 11 -13 5 -19 1 -6 17 -335Bharti Airtel 248 8 85 6 10 -21 1 -13 34 -58BPCL 495 -4 33 -25 21 -26 3 -36 7 -191ONGC 160 -25 69 -30 27 -33 4 -63 43 -326Idea Cellular 95 12 33 9 5 -46 1 -21 35 -110BHEL 113 -11 7 -59 4 -56 1 -26 6 -720State Bank 137 -7 107 -14 14 -62 2 -113 78 -611Bank of Baroda 32 1 25 -8 2 -73 0 -21 78 -742Tata Steel 317 -6 11 -26 -15 Loss -2 -31 4 -95Nifty (50) 6,141 3 1,487 7 715 2 103 64 24 104 Nifty Ex BPCL (49) 5,647 3 1,453 8 694 3 100 100 26 121

Note: Adani Ports are bloomberg estimates


April 2016 17

Distribution of PAT growth is showing some improvement 40% of the companies would grow at >15% YoY. Almost one-fourth (24%) of the

companies would report >30% PAT growth. Companies reporting >15% growth would increase to 16% from 14% in 3QFY16. Nearly 40% of the companies would report PAT de-growth.

Exhibit 36: PAT growth distribution

Interesting sectoral trends Key PAT growth sectors All Auto companies except Maruti, Bharat Forge and Exide would report PAT

growth TTMT expected to deliver ~117% YoY growth on low base AL and Eicher stand out with consistently high growth

While all Consumer companies (except Emami and Nestle) would report PATgrowth, this would be the weakest TTM PAT growth for the sector in a decade. Britannia shines, with ~42% YoY growth – 12th quarter of strong growth. Other high growth companies are Pidilite (+54% YoY), Asian Paints (+30%

YoY) and Marico (+25% YoY). Healthcare sector would report PAT growth of ~46% YoY – highest quarterly

PAT. Only IPCA and Lupin would report decline. Private Sector Banks’ PAT would scale new highs, though PAT growth would

moderate to ~10%. Federal Bank and DCB would report decline. NBFC sector PAT growth would moderate to the weakest level in five years,

impacted by PAT decline for MMFSL, SHTF and POWF. However, BAF, LICHF andDEWH would report strong growth.

Key PAT de-growth sectors The Oil & Gas sector would report PAT decline of ~11%. However, RIL is likely to

report healthy PAT growth of 14% YoY. PSU Banks would report marginal loss, with losses narrowing on QoQ basis. BOB

is expected to become profitable in 4Q.

60 54 52 48 44 4535 30 26 27 32

41 43 5138 32 39 35

21 21 24 25 25 28 26 24 20 25 24 20 20 2618 20 20 20 24 24

19 19 23 23

21 1118

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22 1017

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24 25 18 22 18 1719 16 18

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23 16 18 24 1416

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14 149 9 10 20 18 18

24 19 16 13 27 17 16 18 21 21 24 17

22 28

25 25 22

21 25 22

11 17 14 14 21 24 23 2642 41

32 35 31 27 30 27 25 24 31 34 42 4031 38 39 42 40 37 38 45

36 26

34 40 40 36 37 39

55 36 34 25 15 24 26 20 -8 -15 -15 -11 23 42 26 22 24 9 13 11 4 18 11 9 5 -1 -3 8 12 9 17 7 -7 -9 -5 -5 -10 -5

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April 2016 18

Metals sector would report its second consecutive quarter of losses.

Exhibit 37: 4QFY16 sectoral sales growth (%)

Exhibit 38: 4QFY16 sectoral PAT growth (%)

Exhibit 39: 4QFY16 sectoral EBITDA margin (%)

19 18 15 13 9 8 7 7 6 5 2

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19April 2016


Intra-sector 4QFY16 earnings divergence (%)

Sectors Sector +30% Growth 15-30% growth 0-15% growth -ve earnings Earnings

Growth (%) growth (%) momentum

High growth sectors

Media 54 DITV: 118, JAGP: 29, SUNTV: 13 HTML: -10, DBCL: -11,

SCNL: LP Z: 24 HATH & PVR: Loss

Autos 47 TTMT: 117, EIM: 78, BJAUT: 27, AMRJ: 22, BOS: 9 EXID: -6, MSIL: -6,

AL: 73, HMCL: 33 MM: 21, TVSL: 21 BHFC: -14

Healthcare 46 GNP: 1,493, ALPM: 154, ALKEM: -4,

TRP: 145, SUNP: 98, CIPLA: 29 DIVI: 15, DRRD: 9, GLXO: -11,

LPC: 42, ARBP: 33, CDH: 2 BIOS: -48

SANL: 31, IPCA: LP

Medium/Low growth sectors

Banks - Private 10 IIB: 27, YES: 27, KMB: 13, AXSB: 9, FB: -31,

HDFCB: 20 ICICIBC: 0 DCBB: -34

Cement 10 GRASIM: 477, TRCL: 21 ACEM: -4, ACC: -14,

SRCM: 94 UTCEM: -19, ICEM: PL

Consumer 9 RDCK: 63, PIDI: 55, APNT: 29, MRCO: 25, UNSP: 14, HUVR: 9, HMN: -4,

BRIT: 42, JYL: 32 PAG:21, SKB: 17, DABUR: 7, CLGT: 7, NEST: -27

GCPL: 16 ITC: 5

Technology 8 KPIT: 61, TECHM: 55, MTCL: 15, INFO: 12,

TELX: 32 HEXW: 23 HCLT: 11, CYL: 8, TCS: 5, WPRO: -3

PSYS: 3, MPHL: 1

Retai l 8 SHOP: 59 TTAN: 8 JUBI: -8

Uti l i t ies 6 TPWR: 73 PWGR: 17 COAL: 14 NTPC: -17

NBFC 3 SKSM: 126, REPCO: 29, LICHF: 27, RECL: 2, POWF: -12,

BAF: 47 DEWH: 25, IHFL: 19, HDFC: 0 SHTF: -12,

MUTH: 19, GRHF: 16 MMFS: -23

PAT degrowth sectors

Oil & Gas -11 GUJS: 55, GAIL: 15, RIL: 14, MRPL: -11, BPCL: -26,

(Ex Rms) PLNG: 46 IGL: 6 IOCL: -31, ONGC: -33,

HPCL: 35, OINL: -78,

CAIR: PL

Capital Goods -12 INXW: 90, ATD:40, HAVL: 15, BHE: 10, KKC: -1, SIEM: -6, LT: -7,

ABB: 40 VOLT: 8 TMX: -23, BHEL: -56,

CRG: PL

Real Estate -15 GPL: -8, MLIFE: -8,

PHNX: LP SOBHA: 9 OBER: -17, IBREl; -34,

DLFU: -36, PEPL: -51

Telecom -23 RCOM: 196 BHIN: 11 BHARTI: -21,

IDEA: -46

Banks - PSU PL INBK: -35, UNBK: -49,

SBIN: -62, BOB: -73,

CBK: -85, PNB: PL,

BOI & OBC: Loss

Metals PL HNDL: -11, HZ: -34,

NACL/NMDC/VEDL:-42,

JSP & TATA: Loss,

JSTL/SAIL: PL

Earnings momentum: Represents number of companies in each of the growth brackets; PL: Profit to Loss; LP: Loss to Profit

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April 2016 20

Key Sectoral Highlights - 4QFY16 4QFY16E YoY (%)

SECTOR Key highlights Sales EBIDTA PAT Margin Chg YoY

(pp) Key stock to watch

Auto The Auto industry witnessed mixed performance.While CVs continued on recovery path (+24% in 4QFY16E, with M&HCV growing over 45%), 2Wswitnessed good growth (+8% YoY, albeit on a lowbase) whereas PV sales grew just ~4% YoY despite slew of new products.

EBITDA margins for our Auto OEM (ex JLR)coverage universe are likely to expand +210bp YoY (+40bp QoQ), 5th consecutive quarter of YoYimprovement, driven by favorable commodityprices and operating leverage. We expect sharp improvement in margins for TTMT S/A (+550bbp YoY), HMCL (+370bp), BJAUT (+290bp) and EIM-RE (+290bp).

Auto aggregate PAT grew 47% due to low base ofTTMT 4QFY15. Ex Tata Motors, Auto sector PAThas grown by ~21%.

7.9 14.0 47.1 0.8 HMCL (+ve, strong earnings growth to continue with 33% growth).

Ashok Leyland (+ve, the onlystock to see earnings upgrade;consensus well below ourestimate).

MSIL (-ve, 1st quarter of muted earnings, after 12 qtrs of strongearnings growth).

Capital Goods Order intake by most companies is expected to be flattish or declining in 4QFY16 based on announced orders during the quarter. Industrial capex continues to remain sluggish while roads and rail remain the only bright spot on the infra side.

Execution to remain subdued on a weak openingbacklog and continued challenges in execution on account of clearances, funding and land acquisition issues.

Margins to remain depressed on negativeoperating leverage and continued pricingpressures in shrinking market.

4.9 -7.8 -12.4 -1.5 Larsen likely to report anotherweak quarter as both the Hydrocarbon and Heavy Engineeirng segments are likely to report losses. L&T’s order intake announcements stood at INR172b in 4QFY16, as against INR278b in 4QFY15 down 38% YoY

Voltas likely to report strongrevenue growth of 14% YoY in the room air conditionerssegment given 4th quarterbeing the seasonally strongquarter and primary channelfilling done by the company

BEL's provisional numbersindicatestrong revenue growth of 16.6% YoY for 4QFY16 led byexecution of the large orderslike Akash missile, low level light weight radar etc. Order inflowfor FY16 to witness stronggrowth of 212% YoY to INR160b led by finalization of key orderslike IACCS, weapon locatingradar etc

Cement Cement demand witnessed strong recovery in 4QFY16 on the back of (a) boost in infrastructure spending in the north and central regions, (b)stabilization of rural demand, and (c) a favorablebase. We expect MOSL coverage universe torecord 12% YoY/QoQ (v/s likely industry growth of 9-9.5%. )

Despite sharp recovery in north-central prices in Feb/Mar-16, we estimate ASP to deliver 1-2%QoQ (6-7% YoY) dip on the back of (a) lowstarting base at 4QFY16, and (b) decline in AP and east prices. We expect benefit of sharp price recovery to percolate in 1QFY17 as PAN Indiaspot prices are 2-3% higher than 4Q-average ASP

8.9 10.9 9.9 0.3 SRCM to deliver 30% YoY growth. JKLC/JKCE to deliver 17-18% growth

Southern players to deliver 8-10% growth.


April 2016 21




(north-central spots are 6-8% higher). Sequentially flattish ASP would be offset by (a)

positive operating leverage from better volume,and (b) continuation of energy price benefits aspet coke average price down 15% QoQ.

Consumer Overall demand environment remains subdued with no incremental demand sequentially. Rawmaterial prices remain benign YoY but have started witnessing some uptick QoQ. Competitive intensity has been under control overall but some consumer segments have been witnessing pressure from the disruptor Patanjali.

6.7 11.9 8.7 1.0 Double-digit volume growth in APNT (12%). Britannia might witness another quarter of double digit volume growth. ITC volume growth decline should moderate to ~3%. UNSP could see double-digit margins during the quarter.

Financials Overall earnings tragectory to be better than aquarter ago although to remain muted.

6.7 6.4 -21.0 -0.2

Private Banks Mixed picture expected with earnings pressure at corporate lenders like ICICIBC and AXSB and sustained growth trajectory at retail lenders like HDFCB and IIB. We expect most private banks to report 20%+ loan growth.

-2.6 -8.3 PL -4.7 Prefer ICICIBC (attractivevaluations) and YES as beta plays and retail lenders like HDFCB and IIB

PSU Banks Sharp fall in the yields, sale in strategicinvestments and high focus on recoveries fromwritten off accounts to provide some respite in aquarter marred by the high provisions (led by RBIAQR exercise) and muted loan growth

16.8 24.2 10.2 5.7 PNB, CBK and OBC, which have relatively high proportion of restructured loans, would be the key stocks to watch.

NBFC Housing finance companies (HFCs) would have astable quarter in terms of loan growth. However,margins would be keenly watched, as nearly allHFCs reduced their lending rates in 4Q. HDFCwould report 46% PAT growth, led by gains fromstake sale in life insurance business.

BAF to report 47% earnings growth, led by strong growth momentum and stable asset quality. SHTF is likely to witness over 20% decline in profits, asit would be migrating to 150dpd NPL recognition norms; its construction equipment subsidiarywould also be merged with the parent. Thiswould lead to higher provisions and interest rate reversal, impacting earnings.

SKSM is likely to report strong 66% AUM growth and 126% profit growth on continuous strongcredit demand from the target segment, coupled with increase in ticket sizes, which is helpinggrowth further

-2.6 -8.3 PL -4.7 LICHF’s (+ve) margin is expectd to expand 30bp as 60% of the loan book is on fixed rate.

BAF (+ve): 42% AUM growth and 47% earnings growth, led by bouancy in consumer and SME businesses and stable asset quality

SKSM (+ve) is expected toreport strong AUM growth (67% YoY) on robust creditdemand and +125% earningsgrowth.

Healthcare Boosted by gGleevec and Glumetza sales, and afavorable base, our Healthcare universe is likelyto witness significant YoY jump in sales, EBITDA and PAT for the quarter ended March 2016.

We expect our Healthcare universe to report15.4% sales growth, 54.6% EBITDA growth and 46% PAT growth."

In the domestic market, despite FDC ban and newNLEM list, Indian companies are likely to reportgood organic growth in 4Q."

15.4 54.6 46.4 6.5 SUNP (+ve; 98% PAT growth due to gGleevec launch in US)

LPC (+ve, 42% PAT growth on account of gGlumetza launch in US)

CDH (-ve; weak traction in US tohurt both topline and margins)


April 2016 22




Media Large broadcasters such as Zee expected to seethird consecutive quarter of strong ad performance. Domestic Subscription is expected to remain subdued due to lack of triggers. Weexpect domestic subscription to pick up in 1HFY17.

While DTH companies continue to be aggressivein seeding STBs, cable companies have onlystepped up STB deployment in 2HFY16. Phase IIImonetization remains a key concern for allstakeholders. Monetization expected to improvein 1HFY17.

Unlike broadcasters, ad recovery eluded Printpeers in 9MFY16. We expect 4Q ad growth toremain subdued as well. (Ex-HMVL). Newsprintprices are expected to be benign and continue aiding margins.

13.0 35.1 54.2 4.9 Zee Ent: 23%/24% ad/domestic subscription CAGR.

&TV and Zee Anmol performingwell.

27% EPS CAGR over FY15-18.

Metals Substantial jump in QoQ EBITDA of ~50% toINR100b for our coverage universe on highervolumes, lower raw material cost and operatingleverage gains.

Steel sector is benefiting from MIP/BIS measuresthat have restricted incremental import booking.Expect 1QFY17 realization to be up ~8% QoQ.

Non-ferrous commodity prices were stable (up 1-4% QoQ), while raw material cost were lower.Higher output also helped lower operating costs.

-7.0 -24.0 PL -2.3 Hindalco will gain from sharp jump in aluminum volumes as it ramps-up Aditya to 100% CU. Lower coal cost will add to cost savings.

JSW Steel, coming off theexpansion phase, is expected topost volume growth of ~7% YoYand gains from increase in steelprices and lower RM cost.

Vedanta's guidance on ramp-up of its idle aluminum smeltersand stabilization of TSPLregulated power plant.

Oil & Gas *OMCs demonstrated stronger pricing power byincreasing marketing margins and only partlypassing off the benefit of falling crude prices toconsumers. Estimate petrol/diesel margins at~INR2.1/2.0/ltr.

OMCs earnings should be boosted by stable sequential GRMs coupled with adventitiousinventory gains (est. ~INR6,000m for OMCs).

-13.2 -12.3 -19.7 0.1 BPCL, HPCL and IOCL (+ve; this was the second quarter where marketing margins increased and we expect the same to continue).

Excl. OMCs Realizations down YoY by ~USD21/bbl due tolower oil prices and nil subsidy sharing in 4QFY15(~USD32.5/34.9/bbl for OIL/ONGC). Cess dutywas switched to ad-valorem basis.

RIL's QoQ petchem profitability to slightlyincrease due to positive headline spreadmovements

RasGas contract renegotiation lowered long-term LNG prices, thus increasing transmission volumes; however, the uptick was subdued due tocompetitive liquid fuel prices.

-10.5 -5.4 -10.7 1.1 RIL (+ve; stable GRMs and petchem profitability due to Brent decline will be a key positive).

Real Estate Weak presales to continue, expect flattish tomarginal uptick QoQ.

-6.0 10.6 -15.1 5.0 Prestige presales on the back of weak 9MFY16.


April 2016 23




Retail Tough market conditions affected jewellerydemand in the quarter. Footfalls in QSR remain tepid, Jubi's SSSG likely to again outperformother QSR players.

18.9 20.7 8.2 0.1 JUBI (QSR trends of low single digit will prevent operating leverage).

Technology Over the last three years, 4Q has seen an average 180bp decline over 3Q. However, 4QFY16 will see QoQ growth of 2.2% in USD terms because of an exceptionally weak 3Q (led by Chennai floods and furloughs).

Cross currency fluctuations (mainly depreciation of GBP against the USD) should shave off up to40bp from constant currency revenue growth.

Margins could see expansion across companiesbecause of INR depreciation, revival of revenuegrowth and absence of one-time costs associated with the Chennai floods.

17.6 16.6 8.2 -0.2 TCS (Although Latin America has turned the corner, the company continues to deal with other pain points including Telecom, Energy, Insurance and Japan. Outlook on these areas would be the focus in determining FY17 performance).

INFO (+ve; 2% QoQ CC growth would be the highest INFO hasseen in 4Q in the last six years.This would imply 15% YoY CCgrowth, which could lead to ahealthy guidance for FY17).

HCLT (+ve; Ramp up in multiple transformational deals in IMS could lead to industry-leading revenue growth in the quarter).

Telecom Pricing continues to be under pressure for voiceand data led by increased competitive intensity.

Voice volume growth decelerating because oflow-quality subscriber addition.

Earnings to be impacted by increased spectrumamortization.

6.3 4.3 -22.6 -0.7

Utilities PAT growth will be led by PWGR as ~40% YoYjump in capitalization in FY16. NTPC is alsoexpected to report ~13% YoY jump in regulated equity, PAT is estimated to decline YoY on lowerefficiency gains and lower other income.

Coal India EBITDA (ex-OBR) is estimated to bebroadly flat YoY as higher volumes (+7% YoY) isoffset by sharp decline in e-auction realization(-6% QoQ).

-6.0 11.9 5.9 5.7 Coal India e-auction and ASQ realization.


April 2016 24

FY17 earnings to get boost from low base and cyclicals Cyclicals drive ~75% of FY17E EPS growth; recovery in commodity prices reduces risk of further EPS cut

Our bottom-up estimates suggest that MOSL Universe (ex OMCs) PAT would declineby ~8% in FY16. However, we estimate ~25% PAT growth in FY17 and ~24% CAGR overFY16-18. While Cyclicals drive ~75% of FY17E EPS growth, recovery in commodityprices reduces risk of further EPS cut.

Sensex EPS for FY16 declined 2.6% to ~INR1,321. However, we expect Sensex EPSCAGR of 19% (FY16-18), significantly higher than the 4% CAGR witnessed during FY12-16E. We estimate FY17/18 EPS at INR1,554 (18% growth)/INR1,880 (21% growth).

FY16 earnings decline was heavily influenced by headwinds from (a) multi-year lowcommodity (metals and crude oil) prices, (b) significant NPA provisioning for Banks, (c)two consecutive years of poor monsoon impacting Consumer sector growth, and (d)lack of material transmission of rate cuts.

However, for FY17, most of these headwinds are turning into tailwinds along withfavorable base (just ~1.5% PAT CAGR over FY12-16E). Key drivers for FY17-18Eearnings are (a) Large part of BFSI’s NPA being provided in FY16, giving favorable basefor FY17, (b) Likelihood of normal monsoon, government’s rural focus, and 7th PayCommission would provide strong impetus to consumption, (c) Recovery of metalprices from bottom driving Metals sector earnings, and (d) Transmission of RBI’sFY16/17 rate cuts will benefit corporate earnings.

Exhibit 40: FY17 Earnings to get boost from low base and cyclicals - Domestic cyclicals drive ~60% of FY17E incremental EPS

Sector Sales Gr. / CAGR (%)

EBIDTA Margin (%)

EBIDTA CAGR (%)

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

Share (%) (No of Companies) (FY16-18) FY16E (FY16-18) FY16-18 FY16E FY16E FY17E FY18E (FY16-18) FY16-18 High PAT CAGR (>25%) 13 29.3 18 292 1,395 -21 39 27 33 57 Cement (13) 14 15.9 32 552 70 -5 58 48 53 5 Capital Goods (15) 11 8.4 33 357 83 -22 65 18 40 4 Metals (9) 10 11.7 25 350 72 -76 0 91 38 4 Media (11) 19 28.5 28 459 32 52 40 36 38 2 Financials (35) 14 78.7 14 7 812 -17 42 21 31 32 PSU Banks (12) 12 69.3 13 115 107 -68 247 26 110 20 Private Banks (10) 17 88.9 16 -206 428 12 16 21 19 9 NBFC (13) 11 90.7 10 -63 277 8 3 16 9 3 Real Estate (10) 10 33.9 13 215 28 5 32 24 28 1 Others (31) 17 16.0 21 117 94 8 31 25 28 3 Healthcare (16) 16 25.2 20 185 202 16 26 28 27 7 Medium PAT CAGR (20-

13 17.1 16 91 840 -1 20 23 22 22

Auto (12) 13 14.3 15 71 330 8 22 27 24 10 Retail (3) 15 8.6 21 85 9 -5 23 21 22 0 Oil & Gas (12) 10 12.4 16 135 721 12 19 20 19 17 Excl. OMCs (9) 13 20.3 16 112 501 -6 19 21 20 12 Low PAT CAGR (up to 20%) 14 27.8 15 55 1,229 6 12 18 15 21 Telecom (4) 10 35.5 11 39 97 -12 -1 41 18 2 Technology (12) 17 24.3 16 -37 577 5 16 14 15 10 Consumer (16) 13 22.3 13 6 241 11 14 15 15 4 Utilities (4) 14 31.2 20 340 314 10 6 21 13 5 MOSL Excl. OMCs (200) 13 24.9 16.8 166.5 3,463 -8 25 23 24 100 MOSL (203) 12 21.7 16.7 180.5 3,683 -5 24 23 23 NA Sensex (30) 13 24.5 16.6 168.2 1,196 3 18 21 19 NA Nifty (50) 13 23.4 17.2 194.4 1,422 -1 21 21 21 NA

FY16-18 ESTIMATES

Domestic cyclicals drive ~60% of FY17E incremental earnings. We estimate PAT contribution of PSU Banks to increase over 2x from

FY16 levels to ~8% (but well below historical average of

~13%). Metals sector contribution is estimated to decline to 1.6% (v/s average of 7.6%) as PAT is estimated

to remain flat in FY17.


April 2016 25

Headwinds of FY16 can potentially turn into tailwinds for FY17, driving ~18% growth in Sensex EPS Most of the headwinds witnessed in FY16 are turning into tailwinds along with

favorable base (just ~1.5% PAT CAGR over FY12-16E). Key drivers for FY17-18E earnings are: Large part of BFSI’s NPA being provided in FY16, giving favorable base for

FY17. Likelihood of normal monsoon, government’s rural focus, and 7th Pay

Commission would provide strong impetus to consumption. Recovery of metal prices from bottom driving Metals sector earnings. Transmission of RBI’s FY16/17 rate cuts will benefit corporate earnings.

We are witnessing initial signs of pick-up in consumption (reflected in Auto andFMCG sales) and infrastructure activities (reflected in cement demand pick-up).

Exhibit 41: Prediction of best monsoon in over 25 years augurs well for agri GDP and rural markets Exhibit 42: CPI to remain benign at ~5% level in FY17

Exhibit 43: RBI rate cuts of FY16/17 would see transmission in FY17

Exhibit 44: Commodity prices recovering from multi-year lows

-8.0

-3.0

2.0

7.0

12.0

-30.0

-20.0

-10.0

0.0

10.0

FY19

90

FY19

93

FY19

96

FY19

99

FY20

02

FY20

05

FY20

08

FY20

11

FY20

14

FY20

17E

SW monsoon % deviation from LPA Agri GDP (%) - RHS

10.0

10.5 10.8

11.5

9.5 8.1

7.3 7.6

7.9 7.7

6.8 7.4

7.0 5.6

4.6 3.3

4.3 5.2

5.4 5.3

4.9 5.0

5.4

3.7

3.7 4.4

5.0 5.4

5.6 5.7

5.3

4.8 5.0

Aug-

13

Oct

-13

Dec-

13

Feb-

14

Apr-

14

Jun-

14

Aug-

14

Oct

-14

Dec-

14

Feb-

15

Apr-

15

Jun-

15

Aug-

15

Oct

-15

Dec-

15

Feb-

16

FY17

E

6.5

7.4

6.0

6.8

7.5

8.3

9.0

Jan-

14

Apr-

14

Jul-1

4

Oct

-14

Jan-

15

Apr-

15

Jul-1

5

Oct

-15

Jan-

16

Apr-

16

Repo rate (%) 10-yr G-Sec yield (%)

30

53

76

20

40

60

80

100

120

Apr-

11Au

g-11

Dec-

11Ap

r-12

Aug-

12De

c-12

Apr-

13Au

g-13

Dec-

13Ap

r-14

Aug-

14De

c-14

Apr-

15Au

g-15

Dec-

15Ap

r-16

Crude Steel Zinc


April 2016 26

Exhibit 45: Auto (ex JLR) sector witnessing good recovery in demand, driven by strong growth in CVs

Exhibit 46: Petroleum product consumption has witnessed sharp recovery over last 3 quarters

Exhibit 47: Consumer revenue growth recovering from recent lows Exhibit 48: Cement volume growth picking momentum

Exhibit 49: PAT contribution of PSU Banks to increase over 2x from FY16 levels, but to be well below historical average of ~13%

Exhibit 50: Metals sector contribution to FY17 MOSL PAT to decline

27

19

12 11 16

9 7 7

-3 -1-4 -4 -6

7

16 1310 12

9 14 16

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

-16E

Revenue growth YoY (%)

(2)

3 5

7

(1)

5 2 1

5 4 3

6 46

9

5 5 1

(0)

1 1 4 5 4 5

11 11 16

Mar

-09

Dec-

09

Sep-

10

Jun-

11

Mar

-12

Dec-

12

Sep-

13

Jun-

14

Mar

-15

Mar

-16

Qtrly petro products consumption growth YoY (%)

11.0 10.8 11.3 11.4

14.3 12.5

7.6 6.9

2.6 1.1

4.4 6.7

Jun-

13

Sep-

13

Dec-

13

Mar

-14

June

-14

Sep-

14

Dec-

14

Mar

-15

June

-15

Sep-

15

Dec-

15

Mar

-16

FMCG Sales Growth (%)

0.4 3.2

1.2

6.3 9.3

5.5 5.1

(5.0)

1.6 3.7

5.7

12.0 Ju

n-13

Sep-

13

Dec-

13

Mar

-14

Jun-

14

Sep-

14

Dec-

14

Mar

-15

Jun-

15

Sep-

15

Dec-

15

Mar

-16

Cement Volume Growth (%)

133 158 217 281 320 361 416 432339 337

107

370 467

10.8 9.4 10.1

12.7 12.5 11.8 12.0 12.0

8.8 8.7

2.9

8.1 8.3

FY06

FY07

FY08

FY09

FY10

FY11

FY12

FY13

FY14

FY15

FY16

E

FY17

E

FY18

E

PSU Banks PAT (INR B) % of MOSL Universe PAT

160 251 303 325 226 365 364 322 298 297

72 72 138

13.0 14.9 14.1 14.7

8.8 11.9

10.5 8.9 7.8 7.7

2.0 1.6 2.5

FY06

FY07

FY08

FY09

FY10

FY11

FY12

FY13

FY14

FY15

FY16

E

FY17

E

FY18

EMetals PAT (INR B) % of MOSL Universe PAT



April 2016 27

Exhibit 51: OMCs has emerged as a new sector, with promise of more stability in earningsn

Exhibit 52: ~45% of FY17E incremental PAT contributed by PSU Banks and Oil & Gas

FY17 earnings growth: Identifying companies driving growth We identify two sets of companies that are expected to drive strong earnings

growth in FY17, either driven by structural drivers or by cyclical recovery. Companies exhibiting continuous strong earnings growth in FY17 are largely

from Auto, FMCG and Financials. Also, Financials names like (BoB, MMFSL and Shriram Transport) would see

sharp recovery in FY17, on the back of significant NPA provisioning in FY16resulting in very low/no PAT.

Commodity companies like UltraTech (recovery in cement volumes driven byinvestment cycle recovery) and JSW Steel (recovery in steel prices coupled withstrong volume growth) would also witness sharp profit growth.

Exhibit 53: Companies with strong growth in last 4 quarters, which would continue in FY17

Company PAT Growth (%) PE FY17E 1QFY16 2QFY16 3QFY16 4QFY16E FY16E FY17E

Amara Raja 15.2 22.2 33.0 21.7 23.0 30.7 22.7 Ashok Leyland LP 2,406.6 539.2 73.4 359.3 76.4 16.3 Eicher Motors 40.9 54.8 76.1 77.8 109.7 21.7 32.4 Page Ind 16.4 20.9 26.3 21.5 21.0 25.0 45.5 IndusInd Bank 24.7 30.2 29.9 26.8 27.9 30.6 18.7 Yes Bank 27.7 26.5 25.1 26.7 26.4 23.9 11.1 Bajaj Finance 30.4 41.7 58.1 47.3 45.2 23.8 22.6 Dewan Housing 17.8 18.5 16.5 24.6 19.4 26.1 5.9 LIC Housing 18.6 20.6 21.7 27.5 24.3 25.9 11.2 SKS Micro 24.0 37.2 93.6 126.5 65.4 39.5 15.4 Aurobindo Pharma 8.8 22.7 32.3 32.7 23.5 30.0 17.3 Bharti Infratel 24.4 24.5 11.5 11.2 17.5 21.3 25.0

Exhibit 54: Companies reporting strong growth on low base of FY16 Company PAT Gr. (%) PE FY17E

1QFY16 2QFY16 3QFY16 4QFY16E FY16E FY17E Tata Motors -46.7 -83.3 -10.2 117.1 -13.7 16.3 8.9 UltraTech -5.6 -3.9 39.6 -7.0 2.7 42.1 29.6 BoB -22.7 -88.7 PL -72.8 PL LP 8.8 MMFSL -42.6 -29.4 -50.8 -22.7 -32.7 34.0 17.9 Shriram Transport Fin 4.8 11.9 20.1 -11.7 5.3 27.2 12.6 ITC 3.6 0.3 0.7 4.9 2.7 13.1 23.4 Jubilant Food 6.3 -17.7 3.6 -8.1 6.8 48.0 45.7 JSW Steel PL -85.2 PL PL PL LP 10.8

4.4

5.7 4.9

1.7

5.3

3.6 3.9

2.0 2.9 2.8

6.0 5.7 5.5

FY06

FY07

FY08

FY09

FY10

FY11

FY12

FY13

FY14

FY15

FY16

E

FY17

E

FY18

E

Average of 3.7% 29

15 10

8 8

6

6 5 4 9

Banks-PSU

Oil & Gas

Technology

Automobiles

Banks-Private

Capital Goods

Healthcare

OMC’s PAT share % to MOSL Universe


April 2016 28

FY16/17 estimates: Sectoral earnings change YoY

Exhibit 55: MOSL Universe absolute YoY change in FY16E PAT (INR b)

Exhibit 56: MOSL Universe absolute YoY change in FY17E PAT (INR b)

FY16/17 estimates: Contributors to sectoral earnings change in last 12 months

Exhibit 57: FY16E PAT estimate change contributors in last 12 months (INR b)

Exhibit 58: FY17E PAT estimate change contributors in last 12 months (INR b)

3,589 3,797

79 46 28 27 26 24 24 21 11 1

-0 -4 -13 -23 -225-230

MO

SL F

Y15

PAT

(IN

Rb)

Oil

& G

as

Bank

s-Pv

t

Heal

thca

re

Util

ities

Tech

nolo

gy

Auto

Cons

umer

NBF

C

Med

ia

Real

Est

ate

Reta

il

Cem

ent

Tele

com

Cap.

Goo

ds

Met

als

Bank

s-PS

U

MO

SL F

Y16

PAT

(IN

Rb)

4,455 3,589

264 135 92 71 70 54 53 41 34 19 13 9 9 2 0 -1

MO

SL F

Y16E

PAT

(IN

Rb)

Bank

s-PS

U

Oil

& G

as

Tech

nolo

gy

Auto

Bank

s-Pv

t

Cap.

Goo

ds

Heal

thca

re

Cem

ent

Cons

umer

Util

ities

Med

ia

NBF

C

Real

Est

ate

Reta

il

Met

als

Tele

com

MO

SL F

Y17E

PAT

(IN

Rb)

3,548

4,565

60 5 3 1 6 9 4 15 26 26 27 28 29 30 32 49 54 115 142 143

344

FY16

PAT

in M

ar

OM

Cs

Auto

Ex

JLR

Util

ities

(Ex

Coal

)

Med

ia

Real

Est

ate

Heal

thc.

(Ex

Sun)

Reta

il

Oth

ers

Sun

Phar

ma

Cons

umer

Coal

Indi

a

Bank

s-Pv

t

Tele

com

NBF

C

Cem

ent

Tech

nolo

gy

Cap.

Goo

ds JLR

Oil

(Ex

OM

Cs)

Met

als

Bank

s-PS

U

FY16

Cur

. PA

T

4,639 4,417 5,576

38 1 5 6 14 18 19 19 22 23 39 40 46 52 53 66 77 122 216 218 223

FY17

PAT

in M

ar

OM

Cs

Med

ia

Tele

com

Reta

il

Real

Est

ate

Heal

thc.

(Ex

Sun)

Oth

ers

Util

ities

(Ex

Coal

)

Sun

Phar

ma

Auto

Ex

JLR

Coal

Indi

a

Cons

umer

Cap.

Goo

ds

Bank

s-Pv

t

Cem

ent

Tech

nolo

gy

NBF

C

JLR

Oil

(Ex

OM

Cs)

Met

als

Bank

s-PS

U

FY17

Cur

r. PA

T


April 2016 29

FY16 estimates: Top earnings upgrades and downgrades

Exhibit 59: Top earnings upgrades in last 12 months: FY16E PAT (INRb) % Upgrade in last 12mths FY16 Price

FY16E FY17E FY16E FY17E Chg (%) PVR 1.2 1.5 128.9 53.2 10.2 HPCL 37.1 37.9 73.7 53.1 20.8 BPCL 72.9 73.5 58.5 38.4 11.3 Dish TV 2.9 5.1 52.1 -3.1 6.3 Ramco Cements 4.7 5.5 38.0 0.4 31.6 Britannia 8.6 10.1 29.0 21.4 24.0 Alembic Pharma 4.9 5.6 24.4 10.5 32.5 Zee Entertainment 10.9 15.0 23.0 16.3 13.1 Torrent Pharma 10.3 12.1 21.0 13.2 15.4 Bajaj Finance 13.0 16.1 19.6 21.7 69.2 Hindustan Zinc 74.9 62.9 19.2 -9.4 13.4 IOC 110.1 150.7 18.5 48.8 6.8 Eicher Motors 12.9 15.7 15.7 -16.3 20.5 Reliance Inds. 271.9 339.7 10.9 10.1 26.7 Ashok Leyland 10.7 19.0 3.5 8.1 47.6

Exhibit 60: Top earnings downgrades in last 12 months: FY16E PAT (INRb) % Downgrade in last 12mths FY16 Price

FY16E FY17E FY16E FY17E Chg (%) JSW Steel -1.5 28.2 -112.6 87.8 41.1 Hindalco -2.7 15.9 -111.3 -59.7 -31.9J K Cements 0.2 1.7 -86.5 -61.6 0.6 Dena Bank 0.8 5.6 -84.3 -23.5 -43.4Punjab National Bank 9.2 33.0 -81.0 -49.6 -41.3Orient Cement 0.3 1.4 -77.9 -57.3 -14.4Cairn India 8.6 7.4 -71.4 -79.1 -27.8Dalmia Bharat 0.9 3.3 -69.8 -42.7 88.3 IPCA Labs. 1.4 3.3 -69.0 -42.6 -9.2India Cements 0.9 1.7 -64.5 -59.4 -0.3Nalco 6.3 5.4 -56.7 -67.8 -15.0Kaveri Seed 1.8 2.2 -53.9 -54.8 -61.8Monsanto India 0.8 1.2 -51.4 -43.1 -42.0Ambuja Cements 8.5 12.9 -50.5 -47.2 -9.0Tata Motors 121.2 140.9 -43.9 -43.3 -29.0

Exhibit 61: FY16E earnings revisions since March 2015 (%)

37

3

-2 -3 -6 -7 -8 -10 -10 -16 -18 -22 -23 -24 -31 -31 -35 -42 -45-67

-78

OM

Cs

Auto

Ex

JLR

Util

ities

(Ex

Coal

)

Med

ia

Bank

s-Pv

t

Heal

thc.

(Ex

Sun)

Tech

nolo

gy

Cons

umer

NBF

C

Coal

Indi

a

Real

Est

ate

Oil

(Ex

OM

Cs)

Tele

com

MO

SL E

x O

MCs

Reta

il

Cem

ent

Sun

Phar

ma

Cap.

Goo

ds JLR

Met

als

Bank

s-PS

U


April 2016 30


Exhibit 63: Nifty stock absolute YoY change in FY16E PAT (INR b)

Exhibit 64: Nifty stock absolute YoY change in FY17E PAT (INR b)


46

1

-5 -9 -9 -10 -10 -11 -13 -20 -22 -24 -24 -27 -27 -29 -32 -34 -40 -44-75

OM

Cs

Med

ia

Tele

com

Tech

nolo

gy

Auto

Ex

JLR

Bank

s-Pv

t

Util

ities

(Ex

Coal

)

Heal

thc.

(Ex

Sun)

Cons

umer

Coal

Indi

a

NBF

C

MO

SL E

x O

MCs

Sun

Phar

ma

Oil

(Ex

OM

Cs)

Cap.

Goo

ds

Real

Est

ate

Cem

ent

Reta

il

Bank

s-PS

U

JLR

Met

als

2,97

3

2,75

6

2764

45 25 24 21 11 10 10 9 9 8 7 7 6 6 6 5 5 5 4 4 4 4 3 3 3 3 3 2 2 2 1 0

-0 -2 -2 -2 -3 -3 -3 -5 -7 -9 -12 -16 -19 -23 -31 -33 -43 -54

NIF

TY F

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nce

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ank

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6E

3,192 3,32

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2,756

68 60 58 29 29 25 25 24 22 20 19 13 12 12 12 11 11 9 9 9 9 8 8 8 7 7 6 6 6 6 5 5 5 4 4 4 3 3 3 3 3 2 2 2 1

-2 -3 -4 -14

NIF

TY F

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Relia

nce

Ind. SB

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HDFC

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23 16 11 5 2 2 1 1 0 0 0

0 0 -1 -3 -4 -4 -4 -5 -6 -8 -9 -10 -10 -12 -13 -14 -15 -16 -17 -19 -19 -22 -25 -34 -35 -35 -37 -41 -41 -41 -42 -44 -45 -50 PL PL PL PL

BPCL

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nce

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er G

ridCi

pla

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Yes B

ank

Hero

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dy’s

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ah B

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April 2016 31

Exhibit 66: FY16E PAT change YoY (%)

FY17 estimates: Nifty earnings revision and YoY Change


Exhibit 68: FY17E PAT change (YoY; %)

Nifty FY16-18 PAT CAGR at 21%; sales CAGR at 13% Over 70% of the Nifty companies would post >15% PAT CAGR during FY16-18

and about 56% of companies would post >20% PAT CAGR. Only one company islikely to register negative PAT CAGR – Idea Cellular.

About 45% of the delta in PAT during FY16-18 would be contributed by domesticcyclicals, whereas ~35% of the delta in PAT would be driven by defensives.Global cyclicals would contribute ~20% of the delta in PAT.

67 56 52 43

28 27 27 26 26 24 24 20 20 20 19 19 17 15 14 12 11 11 9 9 7 7 6 5 5 3 3 1

0 0 -6 -7 -7 -8 -13 -14 -18 -23 -24 -25 -30 -30 -36PL PL PL PL

Eich

er M

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ta P

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n Pa

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buja

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Tata

Ste

el

38 16 10 6 4 3 3 0

-1 -2 -5 -5 -8-9

-9-10

-10-11

-11-12

-12 -12-13

-15-15

-15-15

-16-16

-16 -18-18

-20 -20-23

-23-24

-25-26

-31-35

-42-43

-43

-43

-47-56

-60-63

PL

BPCL

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Ent.

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nce

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Cairn

Indi

aIn

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kPo

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ti Ai

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LP LP LP55 52 52 51 51 47 46 43 40 40 40 38 35 31 30 30 25 24 23 21 21 20 20 19 19 18 18 17 16 15 13 13 12 11 11 10 10 10 9 8 5 5 4 1

-2 -2

-47

Loss

Hind

alco

BHEL

BOB

GAIL

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ja C

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ank

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ti In

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April 2016 32

Exhibit 69: Nifty performance - Expect FY16-18 PAT CAGR at 21%, driven by ~190bp margin expansion

Sales (INR b) Sales EBIDTA Margin (%) EBITDA PAT (INR b) PAT YoY (%) PAT Contbn to

Company FY16 FY17 FY18 CAGR % FY16 FY17 FY18 CAGR % FY16 FY17 FY18 FY16 FY17 FY18 CAGR

% Delta %

High Gr. (20%+) 12,557 14,214 16,027 13 21 22 23 20 881 1,266 1,629 -15 44 29 36 58 Bank of Baroda 126 133 157 11 69 79 76 17 -20 38 48 PL LP 26 LP 5 BHEL 269 320 356 15 -6 6 7 LP -9 16 17 PL LP 3 LP 2 Hindalco 1,018 1,065 1,130 5 9 10 10 12 -3 16 20 PL LP 25 LP 2 Tata Steel 1,193 1,330 1,432 10 5 9 12 62 -4 -8 28 PL Loss LP LP 2 ACC 114 124 142 11 10 13 17 43 6 9 15 -30 51 67 59 1 Ambuja Cements 94 104 119 13 15 19 23 39 8 13 19 -36 52 45 48 1 Ultratech Cement 238 268 315 15 18 20 24 35 20 29 44 0 43 54 48 2 Sun Pharma 283 336 362 13 29 33 36 25 48 70 94 1 46 35 40 4 GAIL 505 590 745 21 8 10 9 29 21 33 40 -30 55 22 38 1 Zee Entert. 58 70 85 21 25 28 32 36 11 15 20 11 38 34 36 1 Bosch 106 131 157 22 17 18 18 28 12 17 22 -13 40 30 35 1 State Bank 768 864 970 12 68 69 69 13 127 187 223 -25 47 19 32 7 Grasim Industries 364 404 454 12 16 19 21 25 22 31 38 27 40 23 31 1 HCL Technologies 313 496 579 36 22 22 22 34 56 85 96 -23 51 14 31 3 Kotak Mah. Bk 68 77 93 16 59 67 70 28 34 45 57 -8 35 27 31 2 Bharti Airtel 964 1,063 1,159 10 35 34 35 9 40 47 67 -24 19 41 30 2 Eicher Motors 157 171 210 15 16 17 18 23 13 16 22 110 22 38 30 1 Lupin 133 163 188 19 22 27 27 30 22 31 37 -7 40 18 28 1 Aurobindo Phar. 138 162 191 18 23 24 25 23 19 25 32 24 30 26 28 1 IndusInd Bank 45 55 68 23 94 94 94 23 23 30 37 28 31 24 27 1 Tata Motors 2,653 2,915 3,246 11 14 14 15 14 121 141 188 -14 16 34 25 5 Yes Bank 45 55 67 22 94 95 96 23 25 31 39 26 24 25 24 1 Bharti Infratel 123 137 157 13 44 45 47 17 23 28 36 17 21 27 24 1 Maruti Suzuki 577 669 792 17 15 15 15 16 48 59 74 24 23 26 24 2 High Gr. (20%+) 12,557 14,214 16,027 13 21 22 23 20 881 1,266 1,629 -15 44 29 36 58 Larsen & Toubro 1,014 1,156 1,303 13 11 13 13 23 42 54 64 -7 30 18 24 2 Cipla 137 164 195 19 21 22 23 24 18 19 26 56 10 35 22 1 HDFC Bank 273 332 401 21 78 77 77 21 123 148 178 20 20 20 20 4 Mahindra & Mah. 781 861 955 11 12 13 13 14 34 41 49 19 20 20 20 1 Med.Gr.(10-20%) 9,217 10,279 11,804 13 30 30 30 14 1,677 1,879 2,207 8 12 17 15 41 Reliance Inds. 2,384 2,630 3,032 13 17 19 19 21 272 340 388 20 25 14 19 9 Hero MotoCorp 285 319 362 13 16 16 16 14 32 36 44 26 15 21 18 1 Power Grid Corp. 211 260 304 20 88 88 89 21 61 72 83 20 18 16 17 2 Tata Power 88 93 97 5 35 27 24 -14 12 14 16 43 19 15 17 0 ONGC 1,240 1,282 1,523 11 37 35 35 9 151 148 204 -18 -2 38 16 4 Infosys 625 732 853 17 27 28 27 17 134 158 176 9 18 12 15 3 Bajaj Auto 225 246 279 12 21 21 20 10 36 43 48 19 17 12 15 1 Coal India 762 880 997 14 22 21 24 20 147 155 192 7 5 25 15 4 Axis Bank 165 186 220 16 98 99 99 16 84 92 110 15 9 19 14 2 ITC 366 398 440 10 38 39 40 11 99 112 127 3 13 14 14 2 ICICI Bank 213 241 276 14 114 102 103 8 120 129 154 7 8 20 14 3 TCS 1,087 1,240 1,417 14 28 28 28 12 241 269 306 11 12 14 13 5 Hind. Unilever 321 358 397 11 17 17 17 11 40 44 50 5 11 14 12 1 HDFC 88 100 112 13 106 109 110 15 63 70 79 6 10 14 12 1 Dr Reddy’ s Labs 156 172 198 13 26 24 25 10 25 26 31 12 5 19 12 0 Tech Mahindra 265 296 336 13 16 17 16 13 30 33 37 14 10 12 11 1 Asian Paints 153 173 202 15 17 17 16 12 18 20 22 27 13 9 11 0 Adani Ports 70 77 88 12 65 65 65 12 25 28 31 9 11 10 11 0 Wipro 513 596 672 14 21 21 21 14 89 92 107 3 4 17 10 1 Low Gr. (<10%) 3,097 3,196 3,795 11 14 16 16 18 198 182 219 16 -8 20 5 2 NTPC 736 816 948 13 24 27 30 25 95 93 111 5 -2 20 8 1 BPCL 2,001 1,969 2,381 9 6 7 7 11 73 73 84 52 1 14 7 1 Idea Cellular 360 412 467 14 35 34 35 13 30 16 24 -6 -47 53 -10 0 Nifty (free float) 24,872 27,689 31,627 13 23 24 25 17 1,422 1,723 2,093 2 21 21 21 100


April 2016 33

FY16-18 estimates: Sensex EPS CAGR at 19% We expect Sensex EPS CAGR of 19% during FY16-18, significantly higher than the

6% CAGR witnessed during FY08-16. Expect Sensex EPS at INR1,321 (down 2.6%) in FY16, at INR1,554 (growth of

18%) in FY17, and INR1,880 (growth of 21%) in FY18. Key contributors to the FY17 expansion would be RIL, SBI, Infosys and HDFC

Bank.

Exhibit 70: Sensex EPS - Expect rebound in FY16-18, with 19% CAGR versus 6% CAGR witnessed during FY08-16

Exhibit 71: Nifty EPS - Expect rebound in FY16-18, with 21% CAGR versus 4% CAGR witnessed during FY08-16

81 129 181 250 266 291 278 280 216 236 272 361 446 540720 833 820 834 1,024

1,120 1,182

1,338 1,355 1,321 1,554

1,880

FY93

FY94

FY95

FY96

FY97

FY98

FY99

FY00

FY01

FY02

FY03

FY04

FY05

FY06

FY07

FY08

FY09

FY10

FY11

FY12

FY13

FY14

FY15

FY16

E

FY17

E

FY18

E

FY93-96: 45% CAGR

FY96-03: 1% CAGR

FY03-08: 25% CAGR

FY08-16: 6% CAGR

FY16-18E: 19% CAGR

FY93-FY16: 13% CAGR

75 84 71 75 73 78 92 131 169 184

236 281 251 247

315 347 365 401 410 390

473 574

FY97

FY98

FY99

FY00

FY01

FY02

FY03

FY04

FY05

FY06

FY07

FY08

FY09

FY10

FY11

FY12

FY13

FY14

FY15

FY16

E

FY17

E

FY18

E

FY08-16: 4% CAGR

FY16-18E: 21%

-5% 21%

21%

FY03-08: 25% CAGR

FY97-03: 3.5% CAGR

FY97-FY15: 9% CAGR


April 2016 34

Quality Growth At Reasonable PriceNew edition; New entry

This is the second edition of MOSL QARP. We had launched the QARP [Quality at Reasonable Price] framework for portfolio construction in our January 2016 India Strategy. In this 2nd edition, we update on the last QARP portfolio performance and the possible new candidates. We have added Britannia to our list of 10 preferred picks in this edition

Sectoral/Stock performance: Media and Cement exceptions, with positive returns Media and Cement are the only sectors to give positive returns in FY16. Several macro headwinds have impacted both industrial and infrastructure

capex. As a result, Real Estate and Capital Goods are among the worstperforming sectors, with negative returns of 26%. All businesses with highgearing have severely underperformed due to rising interest rates and increasedconcerns on refinancing.

In FY16, midcaps continued to outperform large caps by delivering 2% negativereturn against the Sensex’s 9% negative return.

To recap, we had defined quality and QARP framework as below:

What is Quality? We had defined quality as the composite of three factors: Capital efficiency: Consistent threshold Return on Equity Balance sheet stress: Leverage – Net Debt/Equity Growth: Consistent delivery of earnings growth over long periods of time

We had then embedded quality and growth with valuation parameters to decide on reasonable price so as to arrive at a framework for QARP.

Below, we discuss the criteria for each parameter of quality: 1. Capital efficiency: For capital efficiency, we used Return on Equity (RoE) as a

benchmark. We used 18% as a filter for threshold RoE, 20% premium to theaverage 15% RoE of our coverage universe. To test the consistency of capitalefficiency, we applied a further filter – RoE should be greater than or equal to18% in at least four out of past five years (FY11-15).

2. Growth – trailing as well as forward: The threshold for profit growth that weused to filter is 15% CAGR over FY10-15 – 1.5x Sensex profit growth. Toestablish the consistency of this profit growth, we used five-year PAT CAGR of15% as a benchmark. However, future growth is equally critical, if not more, foroutperformance. Therefore, we applied a further filter – minimum 15% EPSCAGR over FY16-18E. We consciously avoided FY16, as the year saw bulk of thedisruption owing to commodity deflation and asset quality clean-up post theAQR mandated by the RBI.

3. Balance sheet stress: In a challenging macro backdrop, higher leverage onbalance sheet acts as a quality dampener, in our view. Hence, we looked forfranchises that have delivered threshold 18%+ RoE in four out of five years and15%+ PAT CAGR over FY10-15, but without burdening the balance sheet with

THE QARP FRAMEWORK


April 2016 35

too much debt. We used maximum 0.5x Net Debt/Equity in FY14 and FY15 as a threshold to filter our coverage universe.

4. Reasonable price: We used two parameters to focus on reasonable valuation ofthe businesses we want to own in today’s challenged growth environment. Weselected stocks where one-year forward Price to Earnings ratio (FY17E P/E) isnot at a premium of >15% to last five-year average P/E. The second filter weused is stock correction of at-least 20% from its CY15 peak (we had undertakenthis exercise as on December 31, 2015).

After applying the aforementioned framework, we narrowed down the QARP portfolio to ten stocks as below:

Exhibit 72: Our QARP portfolio (January 2016) – First edition 18% ROE -

FY11-15 PAT CAGR Net D/E 5 Year

Avg FY17E P/E Discount/Premium Price correction

Sector / Companies 4 out of 5

times FY10-15 FY16-18E FY14 FY15 PE (x) PE (x) FY17/Five year avg From CY15 highs

Amara Raja Batt. 5 20.0 30.3 -0.17 -0.10 19.3 21.4 10.5 -20.1

Bosch 4 18.1 34.2 -0.55 -0.64 35.8 34.9 -2.3 -32.3

Eicher Motors 4 49.1 49.4 -0.56 -0.46 40.1 32.2 -19.6 -21.0

Emami 5 22.0 19.6 -0.55 -0.65 31.4 32.0 2.1 -24.8

Page Industries 5 37.7 29.5 0.55 0.40 49.1 50.2 2.3 -20.9

Sun Pharma 5 28.5 41.8 -0.43 -0.23 28.9 27.7 -4.2 -29.8

Persistent Systems 5 20.4 18.4 -0.48 -0.58 13.2 15.0 14.1 -31.8

Axis Bank 4 24.0 19.7 - - 14.3 10.6 -26.4 -30.6

M & M Financial 4 19.3 18.7 - - 14.6 15.5 6.6 -27.1

Muthoot Finance 4 24.1 28.3 - - 6.4 7.4 15.8 -24.5

Source: Company, MOSL

How did the portfolio perform? Since its launch three months ago, this portfolio has delivered an absolute return of 6.4% and relative return of 4.5% v/s BSE 100.

Exhibit 73: Performance of QARP portfolio QARP PORTFOLIO Weights Prices (INR) Index Absolute Relative to Index Chg (%) Companies (%) 12-Jan-16 12-Apr-16 Performance Chg (%) Sensex BSE100 BSE200 BSE500 NiftyAmara Raja Batt. 10.0 836 895 10.7 7.1 5.2 5.2 5.6 6.2 4.4 Bosch 10.0 18,103 19,967 11.0 10.3 8.4 8.4 8.8 9.4 7.7 Eicher Motors 10.0 17,049 19,529 11.5 14.5 12.7 12.7 13.1 13.7 11.9 Emami 10.0 958 970 10.1 1.2 -0.7 -0.7 -0.3 0.4 -1.4Page Industries 10.0 13,052 12,852 9.8 -1.5 -3.4 -3.4 -3.0 -2.4 -4.2Sun Pharma.Inds. 10.0 788 827 10.5 4.9 3.0 3.0 3.4 4.0 2.2 Persistent Sys 10.0 628 719 11.4 14.5 12.6 12.6 13.0 13.6 11.8 Axis Bank 10.0 406 433 10.7 6.7 4.9 4.8 5.3 5.9 4.1 Mahindra Finance 10.0 231 260 11.3 12.6 10.8 10.7 11.2 11.8 10.0 Muthoot Finance 10.0 190 177 9.3 -6.7 -8.6 -8.6 -8.2 -7.6 -9.4Sensex 24,682 25,146 1.9 BSE100 7,675 7,820 1.9 QARP PORTFOLIO 100.0 106.4 6.4 4.5 4.5 4.9 5.5 3.7



April 2016 36

What next? Given the several changes in estimates over the last three months, we run the filter again. We use the same criteria: (a) Delivered RoE of minimum 18% in four out of five years, (b) Minimum 15% EPS CAGR over FY10-15 and expectation of minimum 15% EPS CAGR over FY16-18, (c) Net leverage of <0.5x, and (d) Minimum 20% stock correction from FY16 highs [Sensex has corrected 12% from the FY16 top].

After applying the filter, we get following shortlist from our coverage universe:

Exhibit 74: Updated shortlisted stocks after applying QARP filter to our coverage universe

18% ROE PAT CAGR (%) Net

Debt/Equity (x) FY17E Price Change 5 Year Avg (1 Yr Fwd)

Sector / Companies Atleast 4 out of 5

times over FY11-15 FY10-15 FY16-18 FY15 PE (x) PB (x) From FY16 high PE (x) PB (x) Amara Raja Batt. 5 20.0 25.0 -0.10 22.7 4.9 -22.3 16.2 3.9 Bosch 4 18.1 34.9 -0.64 37.4 6.5 -22.3 33.9 5.4 Britannia 5 33.8 15.7 -0.46 31.3 13.5 -22.1 24.5 11.6 Emami 5 22.0 20.2 -0.65 31.0 11.2 -32.0 27.6 10.7 Page Industries 5 37.7 28.1 0.40 45.5 20.6 -28.4 36.9 18.3 Alembic Pharma 5 68.7 16.5 0.24 19.9 5.5 -24.1 11.8 4.3 Cadila Health 5 18.6 17.3 0.36 21.9 5.1 -30.2 21.8 5.4 Divis Labs 5 20.1 21.1 -0.22 21.6 5.6 -20.7 20.6 5.2 Lupin 5 28.4 28.5 0.00 21.0 4.9 -30.4 22.4 5.3 Sun Pharma 5 28.5 40.1 -0.23 27.7 5.5 -29.4 28.4 5.8 Jubilant Foodworks 4 27.2 44.6 -0.15 45.7 9.3 -35.8 63.6 13.7 HCL Technologies 5 43.9 31.1 -0.46 14.1 3.5 -22.3 13.9 3.5 Hexaware Tech. 4 19.9 16.4 -0.36 16.7 5.0 -20.2 12.3 3.5 Tata Elxsi 4 15.9 32.3 -0.47 29.1 12.8 -21.5 18.2 6.0 Just Dial 5 42.0 15.2 -1.21 42.9 7.0 -45.3 60.3 12.4 Kaveri Seed 5 59.6 22.9 -0.40 11.6 2.7 -64.5 13.4 4.0 Kitex Garments 5 39.7 31.9 -0.16 14.2 4.4 -59.2 12.3 3.8 P I Industries 5 42.5 27.7 0.09 20.8 5.4 -27.8 17.1 4.3 Symphony 5 25.6 42.0 -0.76 43.4 22.7 -27.3 28.4 10.6 V-Guard Inds 5 22.6 26.1 0.19 21.6 5.0 -22.0 20.4 4.4 Indiabulls Housing 4 44.5 22.6 0.00 9.1 2.0 -21.1 6.9 1.6 Muthoot Finance 4 24.1 30.8 0.00 7.2 1.1 -24.7 8.0 1.4

What changes are we making to our portfolio? Given the sharp run up in Persistent Technologies, we are replacing it with Britannia Industries. Britannia: Britannia has been amongst our long-standing top ideas, given excellent execution on margins, sharp outperformance v/s industry volume growth, and continued underlying premiumization trend in the core Biscuits category. We see strong earnings visibility, going forward, backed by opportunity in central geographies, portfolio premiumization and scale-up of non-Biscuits portfolio.

The updated QARP portfolio is as below:


April 2016 37

Exhibit 75: QARP portfolio (April 2016) – edition two 18% RoE -FY11-15

PAT CAGR

Net D/E

5 Year Avg

FY17E P/E Discount/Premium

Price correction

Remarks

Sector / Companies

4 out of 5 times

FY10 -15

FY16-18E

FY15 PE (x) PE (x) FY17/Five yr avg From FY16 highs

Automobiles Amara Raja Batt.

5 20.0 25.0 -0.10 16.2 22.7 40.2 -22.3 AMRJ is best prepared to benefitfrom demand recovery in OEM, Replacement and Industrial segments, given its timely capacity expansion.

Proactive management, strongparentage (Johnson Control) and differentiated business modelwould drive continuousoutperformance vis-a-vis Exide.

Bosch 4 18.1 34.9 -0.64 33.9 37.4 10.4 -22.3 While Bosch would be the biggestbeneficiary of BS-IV implementation, it would drive and be the biggest beneficiary of continuous technological evolution of the Indian Auto industry. There are several levers to drive 18-20% revenue CAGR over the next 5-7 years.

Eicher Motors 4 49.1 29.6 -0.45 21.7 32.4 49.0 -11.5 We expect RE volumes to grow at ~22% CAGR over the next five years, driven by expansion of management bandwidth and improving product quality and portfolio, and in turn expand its addressable market in India and globally. We believe it has significant headroom to grow in India, and develop and own the nascent middle-weight biking market globally.

Consumer Britannia 5 33.8 15.7 -0.46 24.5 31.3 27.8 -22.1 Britannia is consistently

outperforming industry growth by 2x-3x. White spaces in central geographies, robust premiumization trends and scale-up in non-Biscuits portfolio will provide strong medium term earnings growth visibility.

Emami 5 22.0 20.2 -0.65 27.6 31.0 12.1 -32.0 Niche play on evolving PersonalCare consumption. Foraying into multiple new categories with enhanced focus on Healthcare and a professional management. FY17 is likely to to be better than FY16, given the heavy relaunch calender and addition of 100k outlets, expanding direct distribution reach.

Page Industries 5 37.7 28.1 0.40 36.9 45.5 23.2 -28.4 Page offers a high quality play ondiscretionary consumption, with a capital-efficient business model. Leadership position coupled with expansion of addressable market makes it a multi-year consumption play.


April 2016 38

18% RoE -FY11-15

PAT CAGR

Net D/E

5 Year Avg

FY17E P/E Discount/Premium

Price correction

Remarks

Sector / Companies

4 out of 5 times

FY10 -15

FY16-18E

FY15 PE (x) PE (x) FY17/Five yr avg From FY16 highs

Healthcare Sun Pharma 5 28.5 40.1 -0.23 28.4 27.7 -2.7 -29.4 Investment in branded business

portfolio, net cash balance sheet of USD1.2b, annual FCF generation of USD1b and track record of developing complex generics makes SUNP the best play on specialty pharma business in India. SUNP is one of our top picks in the Indian Pharma space, with a TP of INR975.

Banks-Private Axis Bank 4 24.0 14.2 - 11.1 11.1 0.5 -27.5 Strong retail franchise with

significant thrust on digitation and healthy operating performance. The bank is geared to ride the next growth cycle with (1) strong capitalization (12.4% CET I), healthy RoA (1.7%), and expanding liability franchise.

NBFC M & M Financial

4 19.3 30.5 - 16.3 17.9 9.4 -17.5 MMFS is the largest rural lender. Itis a proxy play on revival of the rural economy. MMFS should significantly benefit from reduction of stress levels in the rural economy. Strong franchise and deep penetration would help it to capture the upturn.

Muthoot Finance

4 24.1 30.8 - 8.0 7.2 -9.8 -24.7 Regulatory environment hasturned favorable, competition has eased out, and business momentum is picking up. Muthoot, the largest incumbent, is poised to gain from growth revival.

April 2016 39


Sector / Portfolio Picks BSE-100 MOSL Wt Wt relative to BSE-100 Sector Stance Financials 27.8 28.0 0.2 Neutral Private 17.5 16.0 -1.5 Overweight

HDFC Bank 6.5 6.0 -0.5 Buy IndusInd Bank 1.4 4.0 2.6 Buy ICICI Bank 4.1 6.0 1.9 Buy

NBFCs 7.6 7.0 -0.6 Underweight LIC Housing 0.4 3.0 2.6 Buy SKS Micro 0.0 2.0 2.0 Buy MMFS 0.2 2.0 1.8 Buy

PSU 2.8 5.0 2.2 Overweight SBI 1.8 3.0 1.2 Buy BoB 0.4 2.0 1.6 Buy

Consumption / Retail 12.9 14.0 1.1 Overweight ITC 5.7 4.0 -1.7 Buy Britannia 0.5 3.0 2.5 Buy Indigo 0.0 3.0 3.0 Buy Emami 0.0 2.0 2.0 Buy Voltas 0.0 2.0 2.0 Buy

Auto 10.6 14.0 3.4 Overweight Tata Motors 2.2 4.0 1.8 Buy Maruti 1.5 3.0 1.5 Buy Ashok Leyland 0.5 3.0 2.5 Buy Hero Motocorp 1.1 2.0 0.9 Buy Eicher Motors 0.7 2.0 1.3 Buy

Technology 14.9 11.0 -3.9 Underweight Infosys 7.6 7.0 -0.6 Buy TCS 3.9 4.0 0.1 Neutral

Energy 8.9 8.0 -0.9 Neutral Reliance 5.3 3.0 -2.3 Neutral HPCL 0.4 3.0 2.6 Buy BPCL 0.7 2.0 1.3 Buy

Cap Goods, Infra & Cement 7.9 7.0 -0.9 Underweight Larsen & Toubro 3.0 3.0 0.0 Buy Ultra Tech 1.0 2.0 1.0 Buy Shree Cement 0.0 2.0 2.0 Buy

Healthcare 7.4 5.0 -2.4 Underweight Sun Pharma 2.7 3.0 0.3 Buy Aurobindo 0.6 2.0 1.4 Buy

Utilities / Metals 5.8 4.0 -1.8 Underweight Coal India 1.1 2.0 0.9 Buy Hindalco Inds. 0.3 2.0 1.7 Buy

Others 3.9 9.0 5.1 Overweight Amara Raja 0.0 1.0 1.0 Buy Alkem Lab 0.0 1.0 1.0 Buy Cyient 0.0 1.0 1.0 Buy JK Lakshmi Cement 0.0 1.0 1.0 Buy Max Financial 0.0 1.0 1.0 Buy Jubilant Food 0.0 1.0 1.0 Buy Muthoot Finance 0.0 1.0 1.0 Buy Page Inds 0.0 1.0 1.0 Buy PI Inds 0.0 1.0 1.0 Buy

Cash 0.0 0.0 0.00 TOTAL 100.0 100.0

MOSL model portfolio

MOSL UNIVERSE

April 2016 40

MOSL Universe: 4QFY16 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 5 April 2016, unless otherwise stated.

Sectors & Companies BSE Sensex: 24,884 S&P CNX: 7,603 April 2016

MOSL UNIVERSE

April 2016 41

MOSL Universe: 4QFY16 aggregate performance highlights (Ex RMs)

Quarter-wise sales growth (% YoY)

Quarter-wise net profit growth (% YoY)

Sectoral sales growth - quarter ended March 2016 (%)

Sectoral EBITDA growth - quarter ended March 2016 (%)

Sectoral net profit growth - quarter ended March 2016 (%)

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

-1.8%

-3.2% -3.3%

2.4%

Jun-15 Sep-15 Dec-15 Mar-16E

-3.9% -4.8%

-10.7%

-4.8%

Jun-15 Sep-15 Dec-15 Mar-16E

19 18 15 13 9 8 7 7 6 5 2

-6 -6 -7 -11

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MOSL UNIVERSE

April 2016 42

Corporate Scoreboard (quarter ended March 2016)

Top 10 by sales growth (%)

Worst 10 by sales growth (%)

Top 10 by EBITDA growth (%)

Worst 10 by EBITDA growth (%)

Top 10 by net profit growth (%)

Worst 10 by net profit growth (%)

Source: MOSL

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MOSL UNIVERSE

April 2016 43

Annual performance - MOSL universe (INR Billion)

SECTOR Sales Change YoY (%) EBITDA Change YoY (%) PAT Change YoY (%) FY16E FY17E FY18E FY16E FY17E FY18E FY16E FY17E FY18E FY16E FY17E FY18E FY16E FY17E FY18E FY16E FY17E FY18E

Auto (12) 5,279 5,914 6,703 6.1 12.0 13.3 757 865 1,009 3.5 14.2 16.7 330 401 507 7.9 21.6 26.6 Capital Goods (15) 2,082 2,324 2,583 2.3 11.6 11.1 175 263 309 -14.9 50.1 17.7 83 138 163 -21.7 65.3 18.3 Cement (13) 1,189 1,332 1,535 7.8 12.0 15.3 190 247 329 15.1 30.4 33.3 70 111 164 -5.3 57.5 47.9 Consumer (16) 1,556 1,746 1,979 3.9 12.2 13.4 347 393 443 10.9 13.0 12.8 241 275 316 10.9 14.3 14.8 Financials (35) 3,059 3,424 3,947 9.0 11.9 15.3 2,406 2,690 3,108 9.3 11.8 15.5 812 1,154 1,401 -16.7 42.2 21.4

Pvt Banks (10) 884 1,028 1,220 16.9 16.2 18.7 786 890 1,060 19.9 13.2 19.1 428 498 603 12.2 16.2 21.1 PSU Banks (12) 1,650 1,832 2,084 2.6 11.1 13.7 1,144 1,292 1,469 0.7 12.9 13.7 107 370 467 -68.4 247.5 26.3 NBFC (13) 525 564 644 19.1 7.3 14.2 476 509 580 16.6 6.7 14.0 277 286 331 8.4 3.4 15.7

Healthcare (16) 1,327 1,542 1,782 11.0 16.2 15.5 334 400 482 21.8 19.6 20.4 202 255 327 16.2 26.0 28.1 Media (11) 254 303 357 14.5 19.5 17.9 72 92 118 25.6 27.7 28.2 32 45 61 51.6 39.6 35.7 Metals (9) 4,144 4,597 4,992 -12.3 10.9 8.6 486 636 760 -39.6 30.8 19.6 72 72 138 -75.7 0.4 90.9 Oil & Gas (12) 11,767 12,048 14,216 -25.0 2.4 18.0 1,459 1,675 1,955 12.7 14.8 16.7 721 856 1,028 12.3 18.7 20.1

Excl. OMCs (9) 5,026 5,419 6,402 -25.2 7.8 18.1 1,019 1,168 1,369 -3.1 14.6 17.2 501 594 721 -6.3 18.5 21.4 Real Estate (10) 299 318 362 14.0 6.6 13.6 101 110 130 13.8 8.4 18.8 28 37 46 4.7 31.7 24.2 Retail (3) 176 203 235 3.5 15.0 16.0 15 18 22 -5.3 22.0 20.1 9 11 14 -4.8 22.9 20.8 Technology (12) 3,038 3,635 4,176 10.5 19.6 14.9 738 870 999 7.2 17.9 14.8 577 669 760 4.7 16.0 13.6 Telecom (4) 1,660 1,836 2,019 5.5 10.6 10.0 589 645 724 7.8 9.6 12.2 97 96 136 -11.6 -0.7 41.0 Utilities (4) 1,798 2,048 2,345 0.5 13.9 14.5 561 655 811 12.8 16.9 23.8 314 333 403 9.5 6.1 20.9 Others (31) 1,117 1,314 1,524 5.0 17.6 16.0 179 220 262 10.9 23.1 18.9 94 123 154 7.9 31.1 24.6 MOSL (203) 38,746 42,584 48,756 -7.4 9.9 14.5 8,411 9,780 11,463 4.5 16.3 17.2 3,683 4,577 5,618 -5.2 24.3 22.7 Excl. OMCs (200) 32,006 35,955 40,942 -2.7 12.3 13.9 7,970 9,273 10,877 2.1 16.3 17.3 3,463 4,315 5,311 -8.3 24.6 23.1 Sensex (30) 9,787 10,982 12,447 -9.8 12.2 13.3 2,395 2,788 3,255 1.2 16.4 16.7 1,196 1,408 1,703 2.5 17.7 21.0 Nifty (50) 12,591 14,051 15,971 -3.6 11.6 13.7 2,946 3,452 4,047 2.5 17.2 17.2 1,422 1,723 2,093 -0.9 21.2 21.5

For Banks : Sales = Net Interest Income, EBIDTA = Operating Profits; Note: Sensex & Nifty Numbers are Free Float.

Valuations - MOSL universe PE (x) EV / EBITDA (x) P/BV (x) RoE (%) Div Yield (%) EARN. CAGR Sector FY16E FY17E FY18E FY16E FY17E FY18E FY16E FY17E FY18E FY16E FY17E FY18E FY16E (FY16-FY18) Auto (12) 19.5 16.0 12.6 8.0 6.8 5.6 3.7 3.2 2.7 18.9 19.8 21.1 1.1 24.1 Capital Goods (15) 39.2 23.7 20.1 22.1 14.7 12.4 2.8 2.6 2.4 7.2 11.0 11.9 0.7 39.8 Cement (13) 37.0 23.5 15.9 14.6 11.0 8.0 3.0 2.8 2.4 8.1 11.7 15.4 0.6 52.7 Consumer (16) 37.2 32.6 28.4 25.2 22.1 19.4 12.7 11.1 9.7 34.1 34.2 34.3 1.6 14.5 Financials (35) 16.5 11.6 9.5 NM NM NM 1.6 1.5 1.3 9.8 12.7 13.9 1.7 31.4

Private Banks (10) 17.0 14.6 12.1 NM NM NM 2.5 2.2 2.0 14.9 15.3 16.2 1.2 18.6 PSU Banks (12) 23.0 6.6 5.2 NM NM NM 0.6 0.6 0.6 2.8 9.1 10.6 1.4 109.5 NBFC (13) 13.1 12.7 11.0 NM NM NM 2.3 2.0 1.8 17.4 16.1 16.6 2.9 9.4

Healthcare (16) 29.0 23.0 17.9 17.5 14.3 11.5 5.6 4.6 3.8 19.2 20.2 21.3 0.7 27.0 Media (11) 26.5 19.0 14.0 11.6 8.9 6.6 4.7 4.0 3.3 17.8 21.1 23.6 1.2 37.6 Metals (9) 35.2 35.1 18.4 10.7 8.6 7.0 0.9 0.9 0.9 2.5 2.6 4.9 3.7 38.5 Oil & Gas (12) 11.5 9.7 8.1 6.8 5.8 4.7 1.2 1.1 1.0 10.5 11.4 12.5 2.1 19.4

Excl. OMCs (9) 12.9 10.8 8.9 6.9 5.8 4.7 1.1 1.1 1.0 8.9 9.8 10.9 1.6 20.0 Real Estate (10) 19.4 14.7 11.9 10.6 9.6 8.0 0.9 0.8 0.8 4.5 5.7 6.8 1.6 27.9 Retail (3) 44.9 36.6 30.3 27.4 22.3 18.4 8.1 7.0 6.0 18.1 19.2 19.9 0.6 21.8 Technology (12) 19.3 16.6 14.7 13.9 11.5 9.8 4.8 4.1 3.5 24.7 24.5 24.0 1.9 14.8 Telecom (4) 26.2 26.4 18.7 7.3 6.6 5.7 1.8 1.7 1.6 7.0 6.6 8.8 1.2 18.3 Utilities (4) 11.8 11.1 9.2 9.7 8.7 7.2 2.1 1.9 1.8 17.6 17.5 19.7 6.4 13.2 Others (31) 22.0 16.8 13.5 12.1 9.6 7.8 3.9 3.4 2.9 17.6 20.1 21.5 1.4 27.8 MOSL (203) 19.7 15.9 12.9 N.M N.M N.M 2.4 2.2 2.0 12.1 13.8 15.2 1.8 23.5 Excl. OMCs (200) 20.4 16.4 13.3 N.M N.M N.M 2.4 2.2 2.0 11.8 13.5 15.0 1.8 23.8 Sensex (30) 18.8 16.0 13.2 N.M N.M N.M 2.8 2.5 2.2 14.7 15.5 16.7 1.7 19.3 Nifty (50) 19.5 16.1 13.2 N.M N.M N.M 2.7 2.5 2.2 14.1 15.3 16.5 1.6 21.3 N.M. : Not Meaningful.

MOSL UNIVERSE

April 2016 44

Ready reckoner: Quarterly performance Sector Sales (INR m) EBDITA (INR m) Net Profit (INR m)

CMP (INR) Reco Mar-16 Var %



YoY Var % QoQ

Automobiles Amara Raja Batt. 887 Buy 12,160 13.7 -0.7 2,213 17.9 -3.2 1,306 21.7 -4.1 Ashok Leyland 109 Buy 59,841 32.8 46.5 7,508 64.3 74.7 4,127 73.4 101.2 Bajaj Auto 2,396 Buy 51,902 9.5 -6.7 10,703 27.8 -8.6 7,915 27.3 -12.2 Bharat Forge 829 Buy 10,913 -10.8 3.7 3,263 -9.3 2.9 1,736 -14.4 2.7 Bosch 19,802 Buy 27,217 13.9 0.9 4,838 3.5 39.3 3,134 9.0 41.9 Eicher Motors 18,747 Buy 40,516 57.8 22.2 6,567 79.4 27.0 3,471 77.8 28.2 Exide Inds. 135 Buy 15,461 -6.0 1.6 2,227 -6.5 -4.9 1,295 -5.9 -3.3 Hero Motocorp 2,956 Buy 74,573 9.8 2.2 11,863 41.5 4.1 8,396 32.9 5.5 Mahindra & Mahindra 1,216 Neutral 98,783 8.3 -5.6 12,132 20.8 -14.2 6,768 21.1 -17.5 Maruti Suzuki 3,546 Buy 145,297 6.6 -3.7 22,041 1.8 1.6 12,074 -6.0 18.5 Tata Motors 371 Buy 704,568 4.3 -2.5 91,482 8.4 -2.5 39,468 117.1 13.8 TVS Motor 315 Buy 28,359 15.4 -3.5 1,984 32.1 -5.4 1,092 20.7 -9.6 Sector Aggregate 1,269,589 7.9 -0.4 176,821 14.0 0.7 90,780 47.1 9.9 Capital Goods ABB 1,282 Neutral 18,800 3.6 -22.5 1,780 24.0 -34.0 760 40.0 -44.1 Alstom T&D India 423 Buy 13,934 2.4 87.4 1,306 25.2 LP 759 40.4 LP BHEL 113 Neutral 113,129 -10.8 112.4 6,847 -59.3 LP 4,210 -55.9 LP Bharat Electronics 1,180 Buy 34,132 16.6 125.0 9,093 14.7 210.8 7,933 9.7 168.3 Crompton Greaves 49 Buy 24,583 -35.4 18.9 267 -81.8 211.2 -344 PL Loss Cummins India 839 Neutral 12,696 12.0 10.7 2,128 21.0 24.5 1,879 -1.3 5.4 Havells India 316 Buy 14,869 10.2 10.6 2,170 9.8 19.6 1,523 14.9 27.8 Inox Wind 246 Buy 15,467 66.6 64.7 2,491 75.1 59.2 1,735 89.9 61.6 Larsen & Toubro 1,195 Buy 319,559 14.0 23.7 38,166 5.8 44.0 18,279 -7.4 76.6 Siemens 1,105 Neutral 27,438 3.4 18.6 2,423 -3.1 24.9 1,445 -6.4 26.7 Thermax 751 Neutral 14,856 -2.3 43.0 1,431 -8.9 44.8 1,021 -22.8 50.5 Voltas 274 Buy 16,977 13.9 29.8 1,485 3.8 154.6 1,262 8.0 142.7 Sector Aggregate 626,438 4.9 36.2 69,587 -7.8 185.1 40,461 -12.4 355.3 Cement ACC 1,390 Neutral 29,850 3.5 4.9 3,621 -12.5 67.5 2,139 -14.3 108.5 Ambuja Cements 226 Buy 24,853 2.5 5.5 4,486 -4.9 47.5 3,035 -4.5 108.8 Grasim Industries 3,837 Buy 22,534 32.4 -2.5 4,413 352.4 2.9 2,622 477.1 0.7 India Cements 84 Neutral 10,354 1.0 11.4 1,534 -15.8 4.9 -19 PL PL Ramco Cements 407 Buy 9,833 2.3 21.1 2,795 17.1 14.3 1,133 21.3 -3.8 Shree Cement 12,077 Buy 20,641 31.2 13.0 5,426 60.8 28.0 2,411 93.5 134.2 Ultratech Cement 3,101 Buy 63,988 4.2 11.2 11,768 -4.5 12.7 5,720 -7.0 12.4 Sector Aggregate 181,995 8.9 8.1 32,964 10.9 17.4 16,287 9.9 31.0 Consumer Asian Paints 869 Neutral 38,446 10.1 -6.3 6,501 26.3 -12.6 4,415 29.5 -14.4 Britannia 2,636 Buy 22,782 12.1 2.5 3,119 41.1 2.2 2,379 42.2 10.9 Colgate 832 Neutral 10,502 2.8 4.4 2,746 11.0 18.7 1,744 6.6 23.8 Dabur 246 Neutral 21,036 8.2 -0.9 3,874 13.7 3.7 3,050 7.1 -4.3 Emami 935 Buy 6,453 16.5 -18.2 1,790 27.6 -28.3 1,325 -4.0 -32.1 Godrej Consumer 1,354 Neutral 22,280 7.0 -5.3 4,469 18.4 -1.9 3,079 16.0 -4.8 GSK Consumer 6,034 Buy 12,785 5.2 24.2 3,018 14.4 88.9 2,308 17.3 75.0 Hind. Unilever 868 Neutral 80,540 4.9 0.9 13,389 7.4 -6.4 9,415 9.1 -8.0 ITC 327 Buy 99,172 6.7 8.1 35,272 6.8 -2.2 25,188 4.9 -5.1 Jyothy Labs 298 Buy 4,318 9.0 12.2 510 23.6 0.1 384 32.2 -1.5 Marico 245 Neutral 13,317 8.9 -14.3 2,131 26.9 -27.0 1,373 24.8 -30.6 Nestle 5,724 Neutral 22,561 -10.0 15.9 4,741 -21.2 35.8 2,729 -26.7 30.8

MOSL UNIVERSE

April 2016 45





YoY Var % QoQ

Consumer (Contd.) Page Industries 12,096 Buy 4,412 16.2 0.3 905 18.0 1.2 572 21.5 1.3 Pidilite Inds. 590 Buy 10,665 10.2 -9.4 2,291 64.5 -20.1 1,427 54.5 -23.5 Radico Khaitan 96 Buy 3,713 8.1 -7.4 423 33.1 -29.8 140 63.0 -48.4 United Spirits 2,451 Buy 23,334 15.5 -11.5 2,559 94.4 -0.3 1,063 14.1 27.9 Sector Aggregate 396,317 6.7 0.8 87,741 11.9 -1.9 60,591 8.7 -4.1 Healthcare Alembic Pharma 589 Neutral 8,062 60.7 -12.5 2,606 167.2 -32.1 1,787 154.0 -33.6 Alkem Lab 1,337 Buy 12,142 33.2 -4.7 1,997 51.0 -15.2 1,243 -4.3 -34.2 Aurobindo Pharma 751 Buy 36,184 14.4 3.5 8,570 30.6 4.1 5,340 32.7 1.7 Biocon 527 Sell 8,708 4.9 5.1 1,968 10.7 9.4 1,055 -47.6 2.4 Cadila Health 318 Buy 25,154 9.9 3.6 5,719 7.6 -1.2 3,921 2.2 2.3 Cipla 504 Neutral 32,961 6.6 6.1 5,997 18.1 32.2 3,356 29.2 -2.2 Divis Labs 1,010 Neutral 9,162 12.5 7.6 3,441 10.0 7.1 2,641 15.4 7.1 Dr Reddy’ s Labs 2,996 Neutral 39,050 0.9 -1.6 9,476 15.2 -5.6 5,656 9.0 -2.4 Glenmark Pharma 787 Neutral 17,860 1.8 3.6 3,426 10.4 1.4 1,691 1493.0 -0.5 GSK Pharma 3,699 Neutral 6,871 12.0 -5.7 1,031 -13.3 0.4 969 -10.9 16.4 IPCA Labs. 557 Neutral 7,240 15.3 5.8 1,110 229.6 24.3 477 LP 98.3 Lupin 1,463 Buy 37,829 22.9 6.4 11,049 40.0 26.0 7,785 42.3 46.9 Sanofi India 4,198 Buy 5,500 12.5 -3.3 1,122 35.4 -0.6 632 30.6 -10.2 Sun Pharma 801 Buy 77,553 26.0 9.5 25,113 181.4 15.8 17,572 97.9 24.0 Torrent Pharma 1,395 Buy 14,388 24.7 -6.5 4,386 170.7 -28.5 3,182 144.7 -34.1 Sector Aggregate 338,664 15.4 3.4 87,009 54.6 5.1 57,305 46.4 5.8 Media D B Corp 305 Buy 5,057 4.1 -13.7 1,100 -7.9 -41.1 573 -10.5 -46.4 Dish TV 84 Buy 8,093 7.2 4.9 2,914 31.4 9.8 763 118.2 11.3 HT Media 76 Neutral 6,209 7.6 -8.8 824 70.6 -30.6 352 -10.4 -48.8 Hathway Cable 38 Buy 3,267 21.0 8.7 675 117.9 35.7 -278 Loss Loss Jagran Prakashan 158 Buy 5,222 23.5 -9.4 1,325 26.5 -23.0 635 29.0 -31.9 PVR 740 Buy 3,714 24.0 -25.8 336 212.4 -60.6 -123 Loss PL Siti Cable 35 Buy 3,910 52.7 5.7 1,325 1309.3 5.9 652 LP 67.0 Sun TV 359 Not Rated 6,085 10.9 6.0 4,722 11.6 7.2 2,297 13.1 6.5 Zee Entertainment 384 Buy 14,504 7.7 -9.1 3,523 30.1 -18.1 2,871 24.4 4.4 Sector Aggregate 56,062 13.0 -5.9 16,744 35.1 -10.6 7,741 54.2 -10.4 Metals Hindalco 85 Buy 258,336 -3.4 9.2 23,637 14.3 6.8 3,693 -10.7 329.9 Hindustan Zinc 187 Buy 28,035 -32.0 -18.3 12,213 -38.6 -17.4 13,269 -33.9 -26.7 JSPL 60 Neutral 47,591 1.1 3.6 7,377 -6.6 34.0 -6,841 Loss Loss JSW Steel 1,257 Buy 114,542 -9.1 31.7 17,205 2.3 92.9 -644 PL Loss Nalco 38 Buy 17,823 -1.1 9.0 2,137 -50.1 56.8 1,592 -41.6 60.2 NMDC 98 Sell 16,865 -40.4 11.2 8,040 -43.4 24.8 8,163 -41.8 24.2 SAIL 42 Sell 120,600 4.1 34.9 -3,213 PL Loss -12,516 PL Loss Vedanta 86 Neutral 156,799 -11.9 5.4 34,233 -14.9 17.8 4,223 -42.2 LP Tata Steel 312 Sell 316,645 -5.9 12.9 11,491 -25.5 48.1 -15,005 Loss Loss Sector Aggregate 1,077,235 -7.0 12.9 113,123 -24.0 37.7 -4,065 PL Loss Oil & Gas BPCL 891 Buy 494,507 -3.6 6.1 33,475 -24.8 41.7 21,227 -25.6 42.6 Cairn India 147 Neutral 16,895 -36.9 -17.2 4,949 -63.1 -33.0 -399 PL PL GAIL 340 Neutral 124,466 -12.6 -7.0 10,960 80.2 1.0 5,864 14.8 -11.7

MOSL UNIVERSE

April 2016 46





YoY Var % QoQ

Oil & Gas (Contd.) Gujarat State Petronet 136 Neutral 2,634 11.5 6.4 2,286 15.8 9.5 1,147 54.8 -7.1 HPCL 798 Buy 348,313 -21.8 -19.8 26,847 -22.2 23.7 14,005 -35.2 34.4 IOC 402 Buy 770,857 -17.5 -7.3 71,586 -20.0 44.4 43,565 -30.7 42.5 Indraprastha Gas 560 Neutral 9,345 2.4 0.8 1,837 6.9 -0.7 1,018 6.1 -3.2 MRPL 66 Buy 89,166 -19.6 1.1 14,442 34.1 137.7 10,451 -10.6 249.6 Oil India 315 Buy 17,499 -32.0 -21.1 1,461 -78.6 -76.8 1,191 -78.4 -71.0 ONGC 206 Buy 160,024 -24.9 -13.0 69,355 -30.1 -19.7 26,528 -32.6 -35.0 Petronet LNG 245 Neutral 67,510 -5.7 31.2 4,473 102.1 41.6 2,460 46.1 37.9 Reliance Inds. 1,028 Neutral 552,290 -1.5 -2.4 106,341 23.2 3.5 70,972 13.7 -1.7 Sector Aggregate 2,653,505 -13.2 -5.6 348,013 -12.3 8.2 198,029 -19.7 6.0 Excl. OMCs 1,039,828 -10.5 -3.5 216,105 -5.4 -4.7 119,232 -10.7 -8.9 Real Estate DLF 113 Buy 20,887 6.9 -26.1 8,258 18.7 -32.6 1,098 -36.0 -36.1 Godrej Properties 303 Neutral 3,691 -47.1 -12.6 768 -16.7 -4.1 475 -7.6 -8.6 Indiabulls Real Estate 53 Buy 6,400 7.7 -3.7 1,774 100.7 -13.7 614 -34.1 -23.7 Mahindra Lifespace 434 Neutral 2,301 -11.2 4.4 481 -3.9 27.7 282 -8.0 264.7 Oberoi Realty 238 Buy 2,794 -19.0 -64.3 1,374 -23.0 -58.1 857 -16.8 -59.1 Phoenix Mills 301 Buy 917 13.5 0.6 563 9.4 -6.9 350 LP -22.8 Prestige Estates 178 Buy 5,358 -20.8 -0.7 1,204 -16.9 8.1 558 -51.0 -14.0 Sobha 268 Buy 5,735 13.3 43.7 1,538 8.3 39.9 673 8.5 109.6 Sector Aggregate 48,082 -6.0 -19.1 15,959 10.6 -26.1 4,906 -15.1 -26.1 Retail Jubilant Foodworks 1,224 Buy 6,390 17.9 0.8 745 6.4 -9.6 290 -8.1 -20.1 Shopper's Stop 361 Neutral 9,344 14.4 2.5 645 31.4 -9.4 163 58.6 -30.8 Titan Company 346 Neutral 29,830 20.6 -12.2 3,044 22.6 7.9 2,326 8.1 3.2 Sector Aggregate 45,564 18.9 -7.8 4,434 20.7 1.7 2,779 8.2 -2.5 Technology Cyient 456 Buy 8,198 12.3 4.9 1,263 40.6 14.6 1,010 7.6 16.3 HCL Technologies 844 Buy 108,544 17.1 5.0 24,480 17.1 10.0 18,728 11.2 -2.4 Hexaware Tech. 252 Neutral 8,748 22.6 6.8 1,481 16.6 13.8 1,029 23.4 3.6 Infosys 1,219 Buy 165,750 23.6 4.2 45,492 21.9 5.1 34,844 12.5 0.6 KPIT Tech. 149 Neutral 8,424 10.4 3.6 1,295 287.3 9.7 811 61.2 10.3 Mindtree 659 Neutral 13,001 41.6 7.0 2,212 23.8 3.0 1,474 14.5 -2.3 MphasiS 456 Neutral 15,434 8.0 1.8 2,323 15.3 7.3 1,803 1.5 3.9 Persistent Systems 744 Neutral 6,436 29.4 8.7 1,188 18.2 6.9 786 3.3 1.4 Tata Elxsi 1,889 Buy 2,891 25.0 5.5 672 41.8 1.3 393 31.8 -1.5 TCS 2,463 Neutral 284,566 17.5 4.0 81,351 15.1 5.0 61,963 4.9 1.4 Tech Mahindra 462 Neutral 68,956 12.7 2.9 11,333 21.0 -0.2 7,327 55.2 -3.5 Wipro 560 Neutral 137,354 13.1 6.8 29,266 6.3 9.5 22,153 -2.6 -0.8 Sector Aggregate 828,303 17.6 4.6 202,357 16.6 6.1 152,322 8.2 0.3 Telecom Bharti Airtel 330 Buy 247,958 7.7 3.0 85,301 6.0 0.7 9,856 -21.5 -11.8 Bharti Infratel 374 Buy 31,203 5.9 0.9 14,227 6.4 5.9 6,199 11.2 9.6 Idea Cellular 109 Neutral 94,698 12.4 5.1 33,414 9.0 6.8 5,071 -46.2 -33.6 Reliance Comm 49 Sell 52,436 -8.1 -1.0 17,501 -11.4 -3.0 267 196.4 -86.5 Sector Aggregate 426,295 6.3 2.8 150,443 4.3 2.0 21,392 -22.6 -19.1

MOSL UNIVERSE

April 2016 47





YoY Var % QoQ

Utilities Coal India 276 Buy 212,872 2.5 12.2 56,888 5.4 35.7 48,103 13.8 30.6 NTPC 127 Buy 142,666 -25.8 -17.6 48,243 5.3 6.6 22,557 -17.4 9.0 Power Grid Corp. 139 Buy 55,969 20.0 4.4 49,664 23.6 4.6 16,598 17.5 2.9 Tata Power 67 Neutral 85,369 4.5 -7.5 22,903 21.2 -3.5 3,611 73.1 2.2 Sector Aggregate 496,877 -6.0 -2.3 177,699 11.9 12.2 90,869 5.9 17.7 Others Allcargo Logistics 154 Buy 11,278 -20.3 -15.6 1,061 -1.0 -10.4 550 -2.4 -14.9 Arvind 261 Buy 22,038 8.0 2.1 2,711 4.4 -3.4 921 22.7 -11.6 Bata India 511 Buy 5,601 14.0 -9.3 577 23.1 -27.7 284 12.8 -36.1 Castrol India 375 Neutral 8,001 0.5 1.5 2,231 19.1 6.6 1,553 22.6 10.3 Concor 1,252 Buy 14,257 -4.8 1.5 2,842 -10.7 1.5 2,074 -29.2 0.6 Coromandel International 192 Buy 28,627 -4.5 3.9 1,889 18.3 14.3 901 31.3 40.0 Dynamatic Tech. 1,711 Buy 4,004 3.1 10.4 400 21.0 33.3 114 125.1 361.6 Gateway Distriparks 275 Buy 2,656 0.2 -0.6 617 -22.2 -0.4 308 -36.8 -0.5 Indo Count Inds. 989 Buy 5,480 20.0 9.0 1,149 31.9 6.0 652 42.8 2.8 Info Edge 770 Buy 1,859 7.4 7.2 474 -12.4 23.3 457 -44.8 110.2 Inox Leisure 197 Buy 2,439 12.0 -28.6 168 60.1 -68.1 -69 Loss PL Interglobe Aviation 973 Buy 41,315 8.1 -3.9 7,763 -2.9 -21.4 5,137 0.2 -21.9 Jain Irrigation 58 Buy 22,059 8.0 60.0 3,132 11.6 105.2 1,080 5.0 LP Just Dial 735 Buy 1,828 17.0 6.7 457 7.9 22.2 323 -31.4 19.9 Kaveri Seed 376 Neutral 360 -10.0 -60.9 36 -57.4 -72.1 7 8.9 -92.6 MCX 824 Buy 566 5.4 13.6 176 -37.4 31.3 302 -38.7 28.0 Monsanto India 1,617 Buy 688 2.0 -55.3 34 LP -92.6 33 LP -92.9 P I Industries 561 Buy 5,907 10.0 15.6 1,164 22.1 11.0 759 33.3 7.8 Sintex Inds. 78 Buy 24,393 12.1 19.0 4,210 3.1 22.4 2,130 4.5 18.3 SRF 1,231 Buy 11,084 2.5 1.0 2,350 48.1 0.6 1,002 73.4 -5.1 TTK Prestige 4,320 Buy 3,263 14.0 -27.1 268 45.6 -54.0 162 73.3 -56.4 UPL 459 Buy 39,624 9.3 28.0 8,819 12.3 41.2 5,105 13.0 66.9 Sector Aggregate 257,325 4.5 7.0 42,527 7.5 5.2 23,784 3.1 8.2

MOSL UNIVERSE

April 2016 48

Ready reckoner: Quarterly performance

Sector

Net Interest Income Operating Profit Net Profit

(INR Million) CMP (INR) Reco. Mar-16 Var %



YoY Var % QoQ

Financials Private Banks Axis Bank 432 Buy 42,122 10.9 1.2 43,806 9.2 9.9 23,767 9.0 9.3

DCB Bank 81 UR 1,615 24.5 0.6 828 21.8 -1.7 415 -34.1 0.6 Federal Bank 44 Neutral 5,964 -4.3 -1.4 3,951 -15.8 21.4 1,934 -31.1 18.9 HDFC Bank 1,058 Buy 72,055 19.8 1.9 56,481 19.6 -1.5 33,700 20.1 0.4 ICICI Bank 226 Buy 55,037 8.4 0.9 75,539 38.1 15.2 29,265 0.2 -3.0 IndusInd Bank 950 Buy 12,027 30.0 2.5 11,978 40.8 12.9 6,282 26.8 8.1 Kotak Mahindra Bank 669 Neutral 24,908 39.0 41.0 11,595 34.7 -3.8 5,954 13.0 -6.2 Yes Bank 829 Buy 12,188 24.7 5.3 11,866 26.6 3.2 6,982 26.7 3.3 Pvt Bkg Aggregate 225,916 16.8 4.9 216,045 24.2 7.5 108,299 10.2 1.7 PSU Banks Bank of Baroda 144 Buy 31,880 0.5 17.8 24,708 -8.3 45.0 1,629 -72.8 LP Bank of India 94 Neutral 28,887 1.5 6.7 14,177 -0.6 0.6 -16,606 Loss Loss Canara Bank 187 Neutral 24,789 -0.3 11.3 18,732 8.1 20.7 908 -85.2 6.9 Indian Bank 102 Buy 11,637 5.0 4.8 8,226 0.7 8.2 1,343 -34.9 217.4 Oriental Bank 90 Neutral 13,180 1.6 0.7 9,633 -20.8 25.7 -1,345 Loss Loss Punjab National Bank 83 Neutral 39,314 3.7 -4.6 32,405 1.2 11.1 -4,693 PL PL State Bank 185 Buy 136,529 -7.2 0.3 106,815 -13.9 11.3 14,301 -61.8 28.2 Union Bank 129 Buy 21,053 -0.7 5.4 15,939 -3.5 19.5 2,247 -49.4 186.1 PSU Bkg. Aggregate 307,268 -2.6 3.2 230,637 -8.3 15.1 -2,216 PL Loss NBFC Bajaj Finance 6,833 Buy 11,713 43.3 -10.7 6,785 48.0 -12.0 3,403 47.3 -16.7 Dewan Housing 190 Buy 4,271 16.9 0.2 3,413 19.3 3.9 2,021 24.6 8.7 GRUH Finance 251 Buy 1,566 28.1 30.3 1,364 28.0 36.9 857 15.7 59.5 HDFC 1,103 Buy 25,582 8.6 17.2 27,049 0.1 19.8 18,635 0.1 22.6 Indiabulls Housing 613 Buy 8,793 9.0 3.5 8,663 15.6 7.6 6,577 19.4 8.8 LIC Housing Fin 468 Buy 8,779 35.1 17.5 7,943 37.8 16.7 4,820 27.5 15.1 M & M Financial 238 Buy 9,362 6.0 28.1 6,338 -1.4 42.6 2,577 -22.7 283.7 Muthoot Finance 178 Buy 6,269 13.2 11.6 3,266 17.1 9.9 1,965 19.0 5.3 Power Finance Corp 166 Neutral 26,895 5.7 -6.3 25,314 2.2 -10.2 14,063 -11.5 -11.8 Repco Home Fin 626 Buy 845 27.7 8.4 741 27.3 8.6 450 29.2 16.6 Rural Electric. Corp. 160 Neutral 24,143 9.7 5.9 23,614 12.6 7.0 11,425 2.0 -17.9 Shriram Transport Fin. 924 Buy 13,645 25.7 4.9 10,466 30.5 5.6 2,796 -11.7 -25.5 SKS Microfinance 526 Buy 1,638 79.4 10.9 1,356 137.3 21.3 918 126.5 15.5 NBFC Bkg. Aggregate 143,501 14.4 5.5 126,313 11.8 6.3 70,508 2.8 1.8 Sector Aggregate 676,685 6.7 4.2 572,995 6.4 10.1 176,591 -21.0 29.2

UR: Under Review; NR: Not Rated

MOSL UNIVERSE

April 2016 49

Ready reckoner: Valuations

Sector / Companies CMP Reco. EPS (INR) PE (x) EV/EBIDTA (x) RoE (%) (INR) FY16E FY17E FY18E FY16E FY17E FY18E FY16E FY17E FY18E FY16E FY17E FY18E

Automobiles Amara Raja Batt. 887 Buy 29.9 39.1 46.8 29.6 22.7 19.0 17.5 14.0 11.3 25.6 24.8 22.4 Ashok Leyland 109 Buy 3.8 6.7 8.5 28.8 16.3 12.8 14.3 9.0 7.4 19.5 28.7 29.4 Bajaj Auto 2,396 Buy 125.8 147.1 165.4 19.0 16.3 14.5 12.2 10.8 9.3 32.0 33.0 32.6 Bharat Forge 829 Buy 33.2 40.5 53.7 25.0 20.5 15.4 12.8 11.3 9.0 20.9 22.1 24.9 Bosch 19,802 Buy 376.8 529.2 685.6 52.5 37.4 28.9 32.1 23.3 19.0 15.2 18.7 20.8 Eicher Motors 18,747 Buy 475.3 578.6 797.9 39.4 32.4 23.5 20.3 16.8 12.4 34.6 42.9 44.6 Exide Inds. 135 Buy 6.6 8.0 9.3 20.3 17.0 14.6 9.9 8.6 7.2 12.8 13.9 14.4 Hero Motocorp 2,956 Buy 158.1 182.1 220.5 18.7 16.2 13.4 12.1 10.5 8.7 43.4 41.0 40.6 Mahindra & Mahindra 1,216 Neutral 57.1 68.5 82.0 21.3 17.8 14.8 5.5 4.6 4.0 14.5 14.4 14.7 Maruti Suzuki 3,546 Buy 158.6 194.7 244.8 22.4 18.2 14.5 10.3 8.7 6.8 17.3 18.7 20.5 Tata Motors 371 Buy 35.7 41.5 55.4 10.4 8.9 6.7 4.1 3.7 3.1 18.4 17.1 19.3 TVS Motor 315 Buy 9.2 14.9 17.8 34.2 21.1 17.7 20.2 13.3 11.2 24.3 31.7 29.6 Sector Aggregate 19.5 16.0 12.6 8.0 6.8 5.6 18.9 19.8 21.1 Capital Goods ABB 1,282 Neutral 15.8 21.4 25.8 81.4 60.0 49.7 36.5 28.9 24.7 11.1 13.1 13.6 Alstom T&D India 423 Buy 4.8 9.9 13.2 87.7 42.6 31.9 39.5 23.7 18.3 9.2 17.6 21.1 BHEL 113 Neutral -3.5 6.6 6.8 -32.4 17.2 16.6 -8.2 8.8 6.2 -2.5 4.7 4.7 Bharat Electronics 1,180 Buy 56.5 61.0 70.3 20.9 19.4 16.8 16.9 14.7 12.5 15.2 14.3 14.7 Crompton Greaves 49 Buy -3.7 1.9 5.0 -13.4 25.4 9.9 39.7 7.1 4.1 -5.8 3.2 7.9 Cummins India 839 Neutral 28.2 33.3 37.5 29.7 25.2 22.4 28.3 22.8 18.8 25.6 26.8 26.7 Havells India 316 Buy 7.5 10.8 12.7 42.0 29.2 24.8 22.8 19.2 15.7 20.4 25.9 26.8 Inox Wind 246 Buy 19.6 30.0 30.7 12.6 8.2 8.0 9.2 6.3 5.5 27.9 33.6 27.3 K E C International 124 Buy 7.6 9.4 11.0 16.4 13.2 11.2 7.9 6.1 5.6 13.8 15.1 15.6 Larsen & Toubro 1,195 Buy 44.4 57.6 67.9 26.9 20.8 17.6 17.0 13.5 11.5 9.8 11.7 12.7 Siemens 1,105 Neutral 16.9 21.4 27.5 65.2 51.7 40.2 38.0 29.3 25.6 11.8 11.6 13.6 Solar Inds. 3,466 Buy 88.5 102.1 120.3 39.2 33.9 28.8 22.4 18.8 16.3 19.1 18.9 19.1 Thermax 751 Neutral 24.0 28.9 33.9 31.3 26.0 22.2 16.7 14.0 11.7 12.8 14.1 15.0 Va Tech Wabag 520 Buy 23.0 34.5 37.3 22.6 15.1 13.9 11.2 8.2 7.3 13.2 17.5 16.6 Voltas 274 Buy 9.9 12.0 15.1 27.7 22.8 18.1 19.2 15.7 12.1 14.7 16.0 17.7 Sector Aggregate 39.2 23.7 20.1 22.1 14.7 12.4 7.2 11.0 11.9 Cement ACC 1,390 Neutral 32.0 48.2 80.5 43.5 28.9 17.3 21.0 15.0 9.8 7.2 10.5 16.7 Ambuja Cements 226 Buy 5.5 8.3 12.0 41.4 27.2 18.8 20.9 14.8 10.2 8.3 11.9 16.6 Birla Corporation 372 Buy 12.8 20.0 36.7 29.0 18.6 10.1 11.0 7.8 4.6 3.8 5.7 9.8 Dalmia Bharat 799 Buy 10.5 37.1 63.9 76.2 21.5 12.5 10.1 7.8 6.0 2.7 8.4 13.0 Grasim Industries 3,837 Buy 241.2 337.9 414.9 15.9 11.4 9.2 6.5 5.1 4.0 8.8 11.1 12.1 India Cements 84 Neutral 4.1 5.9 9.4 20.6 14.3 9.0 8.4 7.8 6.7 2.6 4.4 6.1 J K Cements 648 Buy 3.5 24.1 51.0 183.7 26.9 12.7 14.4 10.7 7.6 1.9 10.1 18.7 JK Lakshmi Cem. 328 Buy -2.6 8.3 26.0 -127.6 39.6 12.6 20.1 12.2 7.4 -2.3 7.5 21.6 Orient Cement 148 Buy 1.6 6.7 12.2 94.9 22.0 12.2 29.4 11.2 7.5 3.3 13.9 21.7 Prism Cement 81 Buy -0.3 3.1 6.8 -252.6 26.0 11.9 17.7 10.5 7.0 -1.6 14.5 26.1 Ramco Cements 407 Buy 19.6 22.9 28.4 20.7 17.8 14.3 11.7 10.0 8.1 16.4 16.6 17.8 Shree Cement 12,077 Buy 172.7 333.2 507.5 69.9 36.2 23.8 23.6 18.0 12.3 11.0 18.9 23.7 Ultratech Cement 3,101 Buy 73.3 104.8 161.4 42.3 29.6 19.2 20.7 15.6 10.9 10.2 13.2 17.8 Sector Aggregate 37.0 23.5 15.9 14.6 11.0 8.0 8.1 11.7 15.4 Consumer Asian Paints 869 Neutral 18.9 21.3 23.3 46.0 40.7 37.2 31.6 27.5 24.9 35.3 34.1 32.3 Britannia 2,636 Buy 71.8 84.3 96.1 36.7 31.3 27.4 25.5 21.1 18.0 57.8 49.7 43.0 Colgate 832 Neutral 21.9 24.4 27.7 38.1 34.1 30.0 23.3 21.2 19.0 72.1 70.5 70.4 Dabur 246 Neutral 7.0 8.1 9.1 35.2 30.3 26.9 28.1 24.0 21.2 33.0 31.7 29.7

MOSL UNIVERSE

April 2016 50



Consumer (Contd.) Emami 935 Buy 24.4 30.2 35.3 38.3 31.0 26.5 31.5 25.5 21.6 40.3 40.0 37.4 Godrej Consumer 1,354 Neutral 33.2 39.8 45.6 40.8 34.0 29.7 29.3 24.4 21.4 23.2 23.6 22.8 GSK Consumer 6,034 Buy 166.6 188.2 208.3 36.2 32.1 29.0 25.7 22.5 19.6 30.5 29.4 27.9 Hind. Unilever 868 Neutral 18.4 20.4 23.3 47.2 42.6 37.3 32.7 29.9 26.4 110.3 134.2 167.4 ITC 327 Buy 12.3 13.9 15.9 26.5 23.4 20.6 17.6 15.7 13.9 30.4 30.8 31.4 Jyothy Labs 298 Buy 8.9 8.1 9.1 33.5 36.7 32.6 27.6 23.3 20.6 19.6 16.4 17.0 Marico 245 Neutral 5.5 6.4 7.2 44.1 38.1 33.9 29.6 25.3 22.3 35.2 33.4 31.1 Nestle 5,724 Neutral 101.8 105.0 122.0 56.2 54.5 46.9 33.7 30.8 27.1 34.2 35.4 42.9 Page Industries 12,096 Buy 212.6 265.8 349.1 56.9 45.5 34.7 35.5 28.8 22.3 46.9 45.4 45.9 Pidilite Inds. 590 Buy 14.9 16.4 18.9 39.7 36.0 31.3 24.8 21.8 18.8 29.8 26.9 26.0 Radico Khaitan 96 Buy 6.4 8.5 10.9 14.9 11.3 8.8 9.6 7.9 6.5 9.5 11.3 13.2 United Spirits 2,451 Buy 28.7 50.8 74.5 85.3 48.2 32.9 39.8 28.8 21.5 48.1 51.1 37.9 Sector Aggregate 37.2 32.6 28.4 25.2 22.1 19.4 34.1 34.2 34.3 Healthcare Alembic Pharma 589 Neutral 42.7 29.5 35.6 13.8 19.9 16.6 10.0 13.8 11.0 40.0 31.1 29.5 Alkem Lab 1,337 Buy 62.3 70.7 87.5 21.5 18.9 15.3 17.7 14.9 11.5 22.4 21.2 22.1 Aurobindo Pharma 751 Buy 33.3 43.3 54.8 22.5 17.3 13.7 14.7 11.9 9.4 32.1 30.9 29.4 Biocon 527 Sell 22.0 26.2 30.2 24.0 20.1 17.4 12.8 10.7 9.0 11.8 12.8 13.4 Cadila Health 318 Buy 15.3 14.6 21.1 20.8 21.9 15.1 14.8 14.1 10.0 31.4 25.2 29.5 Cipla 504 Neutral 21.9 24.2 32.5 23.0 20.9 15.5 14.8 12.0 9.2 14.3 13.9 16.0 Divis Labs 1,010 Neutral 39.1 46.8 57.3 25.8 21.6 17.6 19.4 15.6 12.6 27.4 28.2 29.4 Dr Reddy’ s Labs 2,996 Neutral 146.3 154.3 183.3 20.5 19.4 16.3 12.4 12.0 9.8 18.8 17.1 17.3 Glenmark Pharma 787 Neutral 29.9 38.9 47.7 26.3 20.2 16.5 15.5 10.0 8.6 18.0 18.2 17.7 Granules India 118 Buy 5.4 6.9 9.8 21.6 17.2 12.0 10.4 8.3 6.4 22.8 21.3 23.3 GSK Pharma 3,699 Neutral 44.7 62.1 77.4 82.8 59.6 47.8 70.4 45.9 35.9 24.2 37.4 47.6 IPCA Labs. 557 Neutral 10.9 26.0 40.1 51.0 21.4 13.9 20.9 12.2 8.8 6.1 13.5 18.1 Lupin 1,463 Buy 49.7 69.5 82.0 29.5 21.0 17.8 23.2 15.4 12.9 22.8 25.9 24.6 Sanofi India 4,198 Buy 103.2 143.6 174.0 40.7 29.2 24.1 19.8 16.4 13.5 14.2 18.0 19.5 Sun Pharma 801 Buy 19.9 28.9 39.0 40.3 27.7 20.5 22.1 15.7 12.9 17.5 21.7 24.0 Torrent Pharma 1,395 Buy 60.7 71.5 89.8 23.0 19.5 15.5 9.2 14.2 11.5 32.4 28.5 29.7 Sector Aggregate 29.0 23.0 17.9 17.5 14.3 11.5 19.2 20.2 21.3 Media D B Corp 305 Buy 15.7 18.9 21.5 19.5 16.1 14.2 10.2 8.5 7.5 21.3 23.3 23.8 Den Networks 90 Neutral -3.4 -1.5 9.0 -26.6 -59.4 10.0 11.2 8.6 3.4 -3.3 -1.5 8.4 Dish TV 84 Buy 2.7 4.8 5.8 31.4 17.7 14.6 9.1 6.9 5.1 NA NA 77.9 Hathway Cable 38 Buy -0.7 1.8 4.7 -57.2 21.6 8.0 9.8 5.8 3.6 -3.9 10.0 21.7 Hindustan Media 247 Buy 23.6 26.1 29.2 10.4 9.5 8.5 5.3 4.0 2.9 21.0 19.0 17.7 HT Media 76 Neutral 7.2 6.2 7.6 10.7 12.4 10.1 2.9 2.1 1.1 7.5 6.0 6.8 Jagran Prakashan 158 Buy 9.7 11.0 12.2 16.4 14.4 13.0 9.2 8.0 7.1 23.9 22.7 21.7 PVR 740 Buy 25.2 32.0 45.1 29.4 23.1 16.4 12.9 9.5 7.7 18.4 16.0 19.1 Siti Cable 35 Buy 0.5 2.0 3.9 64.3 17.3 8.9 8.6 5.9 3.5 7.7 16.6 25.0 Sun TV 359 NR 21.8 25.7 30.2 16.5 14.0 11.9 7.3 6.1 5.2 23.6 25.5 27.4 Zee Entertainment 384 Buy 11.3 15.6 20.8 34.0 24.7 18.5 23.7 16.9 12.4 28.0 31.5 32.9 Sector Aggregate 26.5 19.0 14.0 11.6 8.9 6.6 17.8 21.1 23.6 Metals Hindalco 85 Buy -1.3 7.7 9.6 -66.1 11.1 8.9 8.4 7.1 6.1 -1.3 7.5 8.8 Hindustan Zinc 187 Buy 17.7 14.9 14.9 10.6 12.6 12.5 6.4 7.7 6.9 16.2 13.9 14.5 JSPL 60 Neutral -20.4 -21.2 -16.0 -2.9 -2.8 -3.8 15.9 12.6 11.7 -9.4 -11.0 -9.3 JSW Steel 1,257 Buy -6.4 116.7 148.4 -196.8 10.8 8.5 13.1 6.6 5.5 -0.7 12.8 14.4 Nalco 38 Buy 2.4 2.1 3.0 15.6 18.2 12.8 4.3 5.4 3.1 4.9 4.2 5.8

MOSL UNIVERSE

April 2016 51



Metals (Contd.) NMDC 98 Sell 8.4 6.7 6.2 11.6 14.6 15.8 6.7 9.6 9.9 15.6 9.5 7.9 SAIL 42 Sell -9.0 -15.6 -14.7 -4.7 -2.7 -2.9 - -37.9 -815.8 -8.9 -18.0 -21.3 Tata Steel 312 Sell -4.1 -8.1 29.1 -76.0 -38.3 10.7 16.5 8.8 6.2 -2.2 -4.6 16.4 Vedanta 86 Neutral 7.3 8.5 11.7 11.8 10.1 7.3 5.5 5.0 4.2 6.1 7.6 10.5 Sector Aggregate 35.2 35.1 18.4 10.7 8.6 7.0 2.5 2.6 4.9 Oil & Gas BPCL 891 Buy 100.8 101.6 116.2 8.8 8.8 7.7 6.7 6.4 5.3 29.3 24.9 24.3 Cairn India 147 Neutral 7.9 4.0 6.5 18.6 36.9 22.7 3.7 3.0 1.9 2.5 1.2 2.0 GAIL 340 Neutral 16.6 25.8 31.5 20.5 13.2 10.8 13.3 8.7 7.2 7.0 10.3 11.6 Gujarat State Petronet 136 Neutral 8.2 9.7 10.9 16.7 14.1 12.4 9.7 8.3 7.1 12.0 12.8 13.0 HPCL 798 Buy 109.4 111.9 124.4 7.3 7.1 6.4 6.3 6.5 5.8 21.6 19.3 19.0 Indraprastha Gas 560 Neutral 29.3 34.9 38.7 19.1 16.0 14.5 10.1 8.5 7.6 18.2 18.8 18.1 IOC 402 Buy 45.4 62.1 74.4 8.9 6.5 5.4 6.8 5.4 4.5 15.0 18.3 19.4 MRPL 66 Buy 5.6 13.2 13.9 11.9 5.0 4.8 6.5 4.8 4.0 15.0 34.0 28.2 Oil India 315 Buy 32.9 36.0 42.9 9.6 8.7 7.3 7.4 7.5 6.4 8.8 9.1 10.3 ONGC 206 Buy 17.6 17.2 23.8 11.7 11.9 8.6 4.3 4.1 3.4 8.1 7.5 9.8 Petronet LNG 245 Neutral 11.3 15.0 19.8 21.6 16.3 12.3 12.7 10.0 7.6 14.1 16.7 19.1 Reliance Inds. 1,028 Neutral 92.8 114.5 130.9 11.1 9.0 7.9 9.2 7.0 5.6 11.9 13.4 13.6 Sector Aggregate 11.5 9.7 8.1 6.8 5.8 4.7 10.5 11.4 12.5 Ex OMCs 12.9 10.8 8.9 6.9 5.8 4.7 8.9 9.8 10.9 Real Estate DLF 113 Buy 3.0 3.8 4.4 37.8 29.9 25.6 11.1 13.0 12.0 1.8 2.3 2.7 Brigade Enterprises 139 Buy 11.3 13.9 19.2 12.3 10.0 7.3 6.5 5.5 4.6 9.1 10.3 12.9 Godrej Properties 303 Neutral 13.1 16.1 21.2 23.1 18.8 14.3 22.2 15.9 11.2 13.3 14.6 16.9 Indiabulls Real Estate 53 Buy 7.3 8.2 10.0 7.3 6.5 5.3 10.1 9.1 7.5 4.0 4.4 5.1 Jaypee Infratech 8 Neutral 2.9 2.6 3.2 2.9 3.2 2.6 6.3 5.9 6.1 6.3 5.4 6.6 Mahindra Lifespace 434 Neutral 17.7 33.1 40.9 24.5 13.1 10.6 19.7 11.0 8.6 4.8 8.1 9.0 Oberoi Realty 238 Buy 13.6 25.6 29.8 17.5 9.3 8.0 12.0 5.7 3.5 9.0 14.8 15.1 Phoenix Mills 301 Buy 7.7 19.0 26.5 39.2 15.8 11.3 10.5 7.6 5.8 5.8 12.8 15.6 Prestige Estates 178 Buy 9.4 9.0 11.1 18.9 19.8 16.1 11.0 11.0 9.4 8.9 7.9 9.1 Sobha 268 Buy 18.8 21.1 29.9 14.3 12.7 9.0 9.3 7.8 6.3 7.4 8.0 11.0 Sector Aggregate 19.4 14.7 11.9 10.6 9.6 8.0 4.5 5.7 6.8 Retail Jubilant Foodworks 1,224 Buy 18.1 26.8 37.8 67.7 45.7 32.4 27.3 19.6 14.5 16.1 20.3 23.6 Shopper's Stop 361 Neutral 6.6 9.3 12.9 54.5 38.9 28.1 13.4 11.3 9.3 6.9 9.0 11.4 Titan Company 346 Neutral 8.5 10.0 11.5 40.7 34.6 30.0 30.6 25.8 22.2 21.0 21.1 20.8 Sector Aggregate 44.9 36.6 30.3 27.4 22.3 18.4 18.1 19.2 19.9 Technology Cyient 456 Buy 32.2 36.6 42.5 14.2 12.5 10.7 10.3 8.4 6.4 17.2 17.2 17.5 HCL Technologies 844 Buy 39.8 59.7 67.4 21.2 14.1 12.5 15.6 9.7 8.0 21.2 27.4 26.2 Hexaware Tech. 252 Neutral 12.9 15.1 17.5 19.5 16.7 14.4 13.4 11.3 9.5 28.9 31.0 33.8 Infosys 1,219 Buy 58.5 69.0 77.1 20.8 17.7 15.8 14.4 11.7 9.9 24.5 25.4 25.0 KPIT Tech. 149 Neutral 13.7 15.4 17.9 10.9 9.7 8.4 5.5 4.4 3.2 19.0 17.6 17.2 Mindtree 659 Neutral 35.4 42.5 50.5 18.6 15.5 13.1 13.4 10.3 8.3 27.1 27.4 26.9 MphasiS 456 Neutral 34.2 36.5 40.7 13.3 12.5 11.2 9.9 9.5 7.9 12.7 12.9 13.8 Persistent Systems 744 Neutral 36.9 45.3 54.9 20.2 16.4 13.6 12.1 9.4 7.6 19.7 21.1 23.1 TCS 2,463 Neutral 122.2 136.7 155.3 20.2 18.0 15.9 15.0 13.3 11.4 38.4 35.6 33.2 Tata Elxsi 1,889 Buy 48.6 64.9 85.0 38.9 29.1 22.2 22.9 17.2 13.0 47.0 49.2 50.1 Tech Mahindra 462 Neutral 33.2 36.7 41.1 13.9 12.6 11.2 9.9 8.4 7.3 22.0 20.7 17.6

MOSL UNIVERSE

April 2016 52



Technology (Contd.) Wipro 560 Neutral 36.0 37.4 43.5 15.5 15.0 12.8 11.4 9.8 8.2 20.5 19.0 19.7 Sector Aggregate 19.3 16.6 14.7 13.9 11.5 9.8 24.7 24.5 24.0 Telecom Bharti Airtel 330 Buy 9.9 11.8 16.7 33.3 28.0 19.8 6.6 6.1 5.3 5.9 6.7 8.9 Bharti Infratel 374 Buy 12.4 15.0 19.1 30.3 25.0 19.6 13.3 11.4 9.5 13.6 15.9 19.5 Idea Cellular 109 Neutral 8.3 4.4 6.7 13.1 24.9 16.3 6.3 5.7 4.7 12.3 6.0 8.5 Reliance Comm 49 Sell 1.6 2.1 3.6 30.4 24.1 13.7 7.4 7.0 6.2 1.2 1.6 2.7 Sector Aggregate 26.2 26.4 18.7 7.3 6.6 5.7 7.0 6.6 8.8 Utilities Coal India 276 Buy 23.2 24.5 30.5 11.9 11.3 9.1 8.0 7.3 5.7 42.8 43.2 51.0 NTPC 127 Buy 11.5 11.2 13.5 11.0 11.3 9.4 11.5 10.2 8.4 11.4 10.8 12.3 Power Grid Corp. 139 Buy 11.7 13.8 15.9 11.9 10.1 8.7 9.6 8.3 7.1 14.9 15.5 15.8 Tata Power 67 Neutral 4.3 5.1 5.8 15.6 13.2 11.5 8.7 10.7 11.3 9.0 6.1 6.3 Sector Aggregate 11.8 11.1 9.2 9.7 8.7 7.2 17.6 17.5 19.7 Others Arvind 261 Buy 13.3 15.6 20.4 19.6 16.7 12.8 9.9 8.7 7.4 12.1 12.9 15.2 Allcargo Logistics 154 Buy 10.7 14.3 17.4 14.4 10.8 8.9 7.8 5.6 4.3 13.4 15.7 16.5 Bajaj Electrical 208 Buy 10.5 15.4 18.4 19.8 13.5 11.3 9.1 6.9 6.0 14.6 18.8 19.2 Bata India 511 Buy 11.3 14.3 17.7 45.1 35.7 28.9 22.9 18.7 15.6 13.4 15.5 17.7 Castrol India 375 Neutral 12.0 13.4 14.3 31.2 27.9 26.2 20.3 18.6 17.3 76.6 109.2 104.3 Century Plyboards 169 Buy 7.9 8.3 9.7 21.5 20.3 17.4 14.2 12.7 10.8 38.2 31.0 28.9 Concor 1,252 Buy 44.4 54.1 63.7 28.2 23.1 19.7 18.1 14.5 12.2 11.1 12.4 13.4 Coromandel Internatl. 192 Buy 11.7 20.0 25.7 16.3 9.6 7.5 8.9 5.9 4.8 15.0 23.1 25.4 Cox & Kings 178 Buy 13.8 21.2 29.0 13.0 8.4 6.1 6.2 5.1 3.9 8.5 11.7 14.2 Dynamatic Tech. 1,711 Buy 8.7 67.7 117.3 197.3 25.3 14.6 12.7 9.1 7.3 2.1 14.9 21.4 Eveready Inds. 224 Buy 8.9 14.4 19.2 25.1 15.5 11.6 13.6 9.9 7.6 10.1 15.1 18.1 Gateway Distriparks 275 Buy 11.8 15.1 23.0 23.4 18.3 12.0 11.3 9.1 6.8 10.2 12.3 17.4 Indo Count Inds. 989 Buy 66.6 89.9 111.6 14.8 11.0 8.9 8.8 6.7 5.1 47.0 40.3 34.0 Info Edge 770 Buy 12.0 17.4 21.9 63.9 44.3 35.1 59.2 36.4 27.6 8.6 11.7 13.6 Inox Leisure 197 Buy 6.0 12.0 15.3 32.7 16.4 12.9 10.8 7.6 6.2 8.3 14.0 15.4 Insecticides India 331 Buy 32.2 44.7 57.4 10.3 7.4 5.8 6.5 5.1 4.1 19.0 21.8 22.9 Interglobe Aviation 973 Buy 53.4 69.5 84.7 18.2 14.0 11.5 12.0 9.1 7.2 150.7 95.2 81.5 Jain Irrigation 58 Buy 2.7 5.4 7.1 21.6 10.9 8.1 6.4 5.1 4.5 4.9 8.8 10.8 Just Dial 735 Buy 19.9 17.2 26.4 37.0 42.9 27.8 25.8 28.5 16.6 21.2 17.5 22.5 Kaveri Seed 376 Neutral 26.4 32.5 39.9 14.2 11.6 9.4 10.6 8.3 6.4 22.6 24.4 26.1 Kitex Garments 449 Buy 23.6 31.5 41.1 19.0 14.2 10.9 10.6 8.0 5.9 35.5 35.2 34.7 MCX 824 Buy 20.5 35.2 56.1 40.2 23.4 14.7 64.7 24.6 12.6 3.7 14.4 20.9 Monsanto India 1,617 Buy 47.1 72.0 90.3 34.4 22.5 17.9 27.2 18.0 14.5 22.4 35.3 42.4 P I Industries 561 Buy 21.0 26.9 34.3 26.6 20.8 16.3 17.5 13.5 10.6 28.4 28.9 29.2 Sintex Inds. 78 Buy 13.7 16.8 22.2 5.6 4.6 3.5 5.7 4.2 3.4 12.1 13.0 15.0 SRF 1,231 Buy 74.2 90.0 107.2 16.6 13.7 11.5 9.2 8.0 6.8 17.3 18.3 19.1 Symphony 2,432 Sell 36.6 56.0 73.8 66.4 43.4 32.9 54.6 33.9 25.5 38.4 54.9 60.9 TTK Prestige 4,320 Buy 97.3 135.5 171.6 44.4 31.9 25.2 28.0 20.9 16.4 16.6 20.5 22.5 UPL 459 Buy 30.2 35.7 42.7 15.2 12.8 10.8 7.1 6.0 5.1 20.2 20.1 20.1 V-Guard Inds 896 Neutral 31.8 41.6 50.6 28.2 21.6 17.7 17.0 14.5 12.0 23.1 25.3 25.5 Wonderla Holiday 380 Buy 9.9 13.0 16.5 38.6 29.2 23.0 24.1 16.5 12.6 14.7 17.2 18.9 Sector Aggregate 22.0 16.8 13.5 12.1 9.6 7.8 17.6 20.1 21.5

MOSL UNIVERSE

April 2016 53

Ready reckoner: valuations

Sector / Companies CMP EPS (INR) PE (x) PB (x) RoE (%) (INR) Reco FY16E FY17E FY18E FY16E FY17E FY18E FY16E FY17E FY18E FY16E FY17E FY18E

Banks-Private Axis Bank 432 Buy

35.6 38.9 46.5

12.1 11.1 9.3

2.0 1.7 1.5

17.5 16.6 17.3

DCB Bank 81 UR

5.9 6.9 7.7

13.8 11.8 10.5

1.3 1.2 1.1

10.2 10.8 10.8 Federal Bank 44 Neutral

3.8 4.5 5.5

11.4 9.6 7.9

0.9 0.9 0.8

8.3 9.1 10.3

HDFC Bank 1,058 Buy

48.7 58.5 70.4

21.7 18.1 15.0

3.7 3.2 2.8

18.4 19.2 19.8 ICICI Bank 226 Buy

20.6 22.2 26.6

10.9 10.2 8.5

1.7 1.5 1.4

14.3 13.4 14.3

IndusInd Bank 950 Buy

38.9 50.8 63.3

24.4 18.7 15.0

3.2 2.8 2.4

16.6 16.1 17.4 J&K Bank 61 Neutral

16.2 18.0 21.6

3.7 3.4 2.8

0.4 0.4 0.4

12.3 12.4 13.5

Kotak Mahindra Bank 669 Neutral

18.4 24.7 31.3

36.5 27.1 21.4

3.7 3.2 2.8

10.6 12.7 14.1 South Indian Bank 18 Buy

2.5 3.1 3.7

6.9 5.7 4.8

0.6 0.6 0.5

9.4 10.3 11.4

Yes Bank 829 Buy

60.4 74.9 93.5

13.7 11.1 8.9

2.5 2.1 1.8

20.0 21.0 22.1 Pvt. Bank Aggregate

17.0 14.6 12.1

2.5 2.2 2.0

14.9 15.3 16.2

Banks-PSU Andhra Bank 52 Buy

17.8 22.8 27.9

2.9 2.3 1.9

0.3 0.3 0.2

10.3 12.2 13.6

Bank of Baroda 144 Buy

-8.7 16.4 20.7

-16.6 8.8 7.0

0.9 0.8 0.8

-5.4 9.9 11.5 Bank of India 94 Neutral

-52.5 4.0 18.7

-1.8 23.4 5.0

0.3 0.3 0.3

-16.2 1.3 5.7

Canara Bank 187 Neutral

21.8 47.3 55.2

8.6 3.9 3.4

0.3 0.3 0.3

4.2 8.4 9.1 Corporation Bank 39 Neutral

12.6 18.7 21.6

3.1 2.1 1.8

0.3 0.3 0.2

9.5 12.9 13.4

Dena Bank 29 Neutral

1.5 10.0 15.6

20.0 2.9 1.9

0.2 0.2 0.2

1.2 8.0 11.6 IDBI Bank 68 Neutral

-13.0 5.7 8.7

-5.3 11.9 7.8

0.6 0.5 0.5

-10.8 4.7 6.8

Indian Bank 102 Buy

15.8 21.1 27.4

6.5 4.8 3.7

0.4 0.4 0.3

5.9 7.5 9.1 Oriental Bank 90 Neutral

0.0 25.0 32.2

3.6 2.8

0.2 0.2 0.2

0.0 5.6 6.8

Punjab National Bank 83 Neutral

4.7 16.8 21.6

17.6 4.9 3.8

0.4 0.4 0.3

2.4 7.9 9.4 State Bank 185 Buy

16.4 24.1 28.7

11.3 7.6 6.4

0.8 0.8 0.7

8.1 10.7 11.7

Union Bank 129 Buy

21.5 28.2 38.4

6.0 4.6 3.4

0.4 0.4 0.4

7.6 9.1 11.3 PSU Bank Aggregate

23.0 6.6 5.2

0.6 0.6 0.6

2.8 9.1 10.6

NBFC Bajaj Finance 6,833 Buy

244.7 302.9 366.4

27.9 22.6 18.7

5.0 4.2 3.5

21.6 20.3 20.6

Dewan Housing 190 Buy

25.5 32.1 40.0

7.5 5.9 4.7

1.1 0.9 0.8

15.1 16.9 18.3 GRUH Finance 251 Buy

6.6 8.3 10.5

37.7 30.2 23.9

10.7 8.9 7.2

28.3 27.8 33.2

HDFC 1,103 Buy

45.8 44.3 50.4

24.1 24.9 21.9

5.0 4.6 4.2

23.1 24.2 19.8 Indiabulls Housing 613 Buy

54.5 67.6 82.0

11.2 9.1 7.5

2.2 2.0 1.8

25.4 23.4 25.7

LIC Housing Fin 468 Buy

33.1 41.7 49.5

14.1 11.2 9.4

2.6 2.2 1.8

19.7 21.1 21.1 M & M Financial 238 Buy

9.9 13.3 16.9

23.9 17.9 14.1

2.2 2.0 1.8

9.5 11.8 13.7

Muthoot Finance 178 Buy

18.6 24.8 31.8

9.6 7.2 5.6

1.3 1.1 1.0

13.9 16.8 19.2 Power Finance Corp 166 Neutral

48.3 41.6 43.0

3.4 4.0 3.8

0.6 0.5 0.5

18.4 14.1 13.2

Repco Home Fin 626 Buy

24.5 32.7 41.9

25.6 19.2 14.9

4.1 3.5 2.9

17.4 19.7 21.0 Rural Electric. Corp. 160 Neutral

57.9 44.1 50.5

2.8 3.6 3.2

0.5 0.5 0.4

21.1 14.0 14.4

Shriram Transport Fin. 924 Buy

58.9 73.5 91.9

15.7 12.6 10.1

2.0 1.8 1.6

13.4 15.2 16.6 SKS Microfinance 526 Buy

24.6 34.3 45.8

21.4 15.4 11.5

4.9 3.7 3.0

25.8 27.5 28.8

NBFC Aggregate 13.1 12.7 11.0 2.3 2.0 1.8 17.4 16.1 16.6 Sector Aggregate 16.5 11.6 9.5 1.6 1.5 1.3 9.8 12.7 13.9

UR: Under Review; NR: Not Rated

MOSL UNIVERSE

April 2016 54

Sectors & Companies BSE Sensex: 24,884 S&P CNX: 7,603 April 2016

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 5 April 2016, unless otherwise stated.

April 2016 55

March 2016 Results Preview | Sector: Automobiles

Jinesh Gandhi ([email protected]); +91 22 3982 5416

Margin improvement to continue in 4QFY16 Recovery in commodity prices drives EPS cut across companies

The automobile industry witnessed mixed performance. While commercial vehiclescontinued on the recovery path (+24% in 4QFY16E, with M&HCV growing over 45%),two-wheelers registered significant growth (+8% YoY, albeit on a low base), whereasPV sales rose a mere ~4% YoY, despite a slew of new products.

EBITDA margins for our Auto OEM (ex-JLR) coverage universe are likely to expand+210bp YoY (+40bp QoQ), driven by sharp margin improvement for players, barringMSIL (-70bp YoY). We expect margins to expand for TTMT S/A (+550bbp YoY), HMCL(+370bp), BJAUT (+290bp) and EIM-RE (+290bp).

We have lowered our FY17 EPS estimates for M&M (-6%), BJAUT (-4%) and EXID (-12%)and upgraded the same for Bosch (+9%) and EIM (+7% due to Y/E change).

Our top picks are TTMT and BOS among large caps, and AL and BHFC among midcaps.

Demand recovery not broad-based; CVs firmly on recovery path Demand recovery has been patchy so far, with inconsistent growth across segments, except commercial vehicles. While M&HCV volumes posted robust growth of over ~45%, light commercial vehicles expanded ~10% (second consecutive month of recovery). Two-wheelers grew considerably (+8% YoY, albeit on a low base, driven by marriages and festive season), whereas PV sales increased just ~4% YoY, despite the launch of new products.

Favorable commodity prices, operating leverage to aid fifth straight quarter of YoY margin expansion EBITDA margins for our Auto OEM (ex-JLR) coverage universe are likely to expand +210bp YoY (+40bp QoQ), the fifth consecutive quarter of YoY improvement, drivenby favorable commodity prices and operating leverage. We expect considerablemargin expansion for TTMT S/A (+550bbp YoY, led by operating leverage), HMCL(+370bp, sales tax incentive at Neemrana plant and cost-cutting initiatives), BJAUT(+290bp, low base due to one-offs) and EIM-RE (+290bp, operating leverage).

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




YoY Var % QoQ

Automobiles Amara Raja Batt. 887 Buy 12,160 13.7 -0.7 2,213 17.9 -3.2 1,306 21.7 -4.1 Ashok Leyland 109 Buy 59,841 32.8 46.5 7,508 64.3 74.7 4,127 73.4 101.2 Bajaj Auto 2,396 Buy 51,902 9.5 -6.7 10,703 27.8 -8.6 7,915 27.3 -12.2 Bharat Forge 829 Buy 10,913 -10.8 3.7 3,263 -9.3 2.9 1,736 -14.4 2.7 Bosch 19,802 Buy 27,217 13.9 0.9 4,838 3.5 39.3 3,134 9.0 41.9 Eicher Motors 18,747 Buy 40,516 57.8 22.2 6,567 79.4 27.0 3,471 77.8 28.2 Exide Inds. 135 Buy 15,461 -6.0 1.6 2,227 -6.5 -4.9 1,295 -5.9 -3.3 Hero Motocorp 2,956 Buy 74,573 9.8 2.2 11,863 41.5 4.1 8,396 32.9 5.5 Mahindra & Mahindra 1,216 Neutral 98,783 8.3 -5.6 12,132 20.8 -14.2 6,768 21.1 -17.5 Maruti Suzuki 3,546 Buy 145,297 6.6 -3.7 22,041 1.8 1.6 12,074 -6.0 18.5 Tata Motors 371 Buy 704,568 4.3 -2.5 91,482 8.4 -2.5 39,468 117.1 13.8 TVS Motor 315 Buy 28,359 15.4 -3.5 1,984 32.1 -5.4 1,092 20.7 -9.6 Sector Aggregate 1,269,589 7.9 -0.4 176,821 14.0 0.7 90,780 47.1 9.9

Company name

Amara Raja Batteries

Ashok Leyland

Bajaj Auto

Bharat Forge

BOSCH

Eicher Motors

Exide Industries

Hero MotoCorp

Mahindra & Mahindra

Maruti Suzuki

Tata Motors

TVS Motor Company

Automobiles March 2016 Results Preview | April 2016

April 2016 56


Acceleration in economic activity key catalyst for demand recovery While there have been initial signs of a recovery in infrastructure, an improvement in economic outlook, normal monsoon, government’s rural push and the 7th Pay Commission benefits would be key catalysts for demand recovery and, in turn, re-rating. Favorable fuel prices would support faster recovery and lower interest rates would boost consumer sentiment.

Valuation and view We are lowering our FY17 EPS estimates for M&M (-6%), BJAUT (-4%) and EXID (-12%). We upgrade the same for Bosch (+9%) and EIM (+7% due to Y/E change). Demand environment and changing competitive landscape in the auto sector would be key determinants of stock performance. Our top picks are TTMT and BOS among large caps, and AL and BHFC among midcaps.

Exhibit 2: Volume snapshot for 4QFY16 ('000 units) 4QFY16 4QFY15 YoY (%) 3QFY16 QoQ (%) FY16YTD FY15YTD YoY (%)

Two wheelers 4,780 4,403 8.5 4,738 0.9 14,276 14,058 1.5 Three wheelers 190 185 2.9 230 -17.5 731 727 0.6 Passenger cars 640 635 0.8 678 -5.6 1,920 1,786 7.5 UVs & MPVs 235 199 18.4 232 1.5 651 600 8.6 Total PVs 875 833 5.0 909 -3.8 2,572 2,386 7.8

M&HCV 110 83 32.2 74 48.3 230 183 25.9 LCV 128 115 11.5 115 12.0 313 317 -1.1

Total CVs 238 198 20.2 189 26.2 543 499 8.8 Total 6,083 5,620 8.2 6,066 0.3 18,122 17,670 2.6

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


Exhibit 4: Commodity prices recover from lows (index)


14.5

12.

0

(3.0

)

13.1

13.

9

4.9

15.6

15.

5

6.3

16.6

15.

1

8.4

16.1

14.

0

7.1

16.1

14.

0

9.6

2W Cars CVs

4QFY14 4QFY15 1QFY162QFY16 3QFY16 4QFY16

100

100

100

100

78 93

108

80

75 92

103

82

64

91 101

65

54

97

97

58 79

96

95

72

Steel (HRC) Lead Aluminium Rubber

4QFY14 4QFY15 1QFY162QFY16 3QFY16 4QFY16

April 2016 57


Exhibit 5: Trend in key currencies v/s INR


Exhibit 6: Continued improvement in EBITDA margins (%)


Exhibit 7: Revised estimates EPS (INR) FY17E FY18E

Rev Old Chg (%) Rev Old Chg (%)

Bajaj Auto 147.1 153.9 -4.4 165.4 172.8 -4.3

Hero MotoCorp 182.1 183.6 -0.8 220.5 218.0 1.1

TVS Motor 14.9 15.3 -2.2 17.8 18.2 -2.3

Maruti * 194.7 200.2 -2.7 244.8 251.3 -2.6

M&M * 68.5 72.8 -5.8 82.0 86.8 -5.5

Tata Motors * # 41.5 42.6 -2.7 55.4 58.6 -5.3

Ashok Leyland 6.7 6.7 -0.9 8.5 8.6 -1.1

Eicher Motors * 578.6 540.8 7.0 797.9 772.8 3.3

Amara Raja 39.1 40.3 -3.0 46.8 48.9 -4.4

Bharat Forge 40.5 40.6 -0.1 53.7 53.6 0.2

Exide Industries 8.0 9.1 -12.4 9.3 10.5 -11.5

BOSCH 529.2 486.9 8.7 685.6 660.9 3.7

* Consolidated Source: Company, MOSL

Exhibit 8: Trend in key financials Volumes ('000 units) EBITDA Margins (%) Adj.PAT (INR m) 4Q

FY16 YoY (%)

QoQ (%)

4Q FY16

YoY (bp)

QoQ (bp)

4Q FY16

YoY (%)

QoQ (%)

BJAUT 872 11 -8 20.6 290 -40 7,915 27 -12HMCL 1,721 9 2 15.9 360 30 8,396 33 6 TVS Motor 653 8 -7 7.0 90 -10 1,092 21 -10MSIL 360 4 -4 15.2 -70 80 12,074 -6 18 MM 184 14 -5 12.3 130 -120 6,767 21 -18TTMT (S/A) 147 5 20 8.3 550 260 617 -106 -256TTMT (JLR) 156 21 4 14.2 -330 -30 368 22 -11TTMT (Cons) 13.0 50 0 39,468 117 14 Ashok Leyland 44 29 42 12.5 240 200 4,127 73 101 Eicher (RE) 148 61 18 29.0 290 40 3,303 55 35 Eicher (VECV) 16 41 23 8.5 140 110 1,158 166 76 Eicher (Consol) 16 200 60 3,471 78 28 Agg. (ex-JLR) 3,981 9 -2 13.3 210 30 44,458 75 9 *Normalized; ** Aggregate includes Tata Motor’s standalone performance only

80

110

140

170

Mar

-11

Jun-

11Se

p-11

Dec-

11M

ar-1

2Ju

n-12

Sep-

12De

c-12

Mar

-13

Jun-

13Se

p-13

Dec-

13M

ar-1

4Ju

n-14

Sep-

14De

c-14

Mar

-15

Jun-

15Se

p-15

Dec-

15M

ar-1

6

USD Euro GBP JPY

6

9

12

15

18

1QFY

112Q

FY11

3QFY

114Q

FY11

1QFY

122Q

FY12

3QFY

124Q

FY12

1QFY

132Q

FY13

3QFY

134Q

FY13

1QFY

142Q

FY14

3QFY

144Q

FY14

1QFY

152Q

FY15

3QFY

154Q

FY15

1QFY

162Q

FY16

3QFY

164Q

FY16

Aggregate (excld JLR) Aggregate (incl JLR)

April 2016 58


Exhibit 9: Relative performance – Three months (%)


Exhibit 10: Relative performance – One year (%)


Exhibit 11: Comparative valuation Sector / Companies CMP Reco. EPS (INR) PE (x) EV/EBIDTA (x) RoE (%)

(INR) FY16E FY17E FY18E FY16E FY17E FY18E FY16E FY17E FY18E FY16E FY17E FY18E Automobiles Amara Raja Batt. 887 Buy 29.9 39.1 46.8 29.6 22.7 19.0 17.5 14.0 11.3 25.6 24.8 22.4 Ashok Leyland 109 Buy 3.8 6.7 8.5 28.8 16.3 12.8 14.3 9.0 7.4 19.5 28.7 29.4 Bajaj Auto 2,396 Buy 125.8 147.1 165.4 19.0 16.3 14.5 12.2 10.8 9.3 32.0 33.0 32.6 Bharat Forge 829 Buy 33.2 40.5 53.7 25.0 20.5 15.4 12.8 11.3 9.0 20.9 22.1 24.9 Bosch 19,802 Buy 376.8 529.2 685.6 52.5 37.4 28.9 32.1 23.3 19.0 15.2 18.7 20.8 Eicher Motors 18,747 Buy 475.3 578.6 797.9 39.4 32.4 23.5 20.3 16.8 12.4 34.6 42.9 44.6 Exide Inds. 135 Buy 6.6 8.0 9.3 20.3 17.0 14.6 9.9 8.6 7.2 12.8 13.9 14.4 Hero Motocorp 2,956 Buy 158.1 182.1 220.5 18.7 16.2 13.4 12.1 10.5 8.7 43.4 41.0 40.6 Mahindra & Mahindra 1,216 Neutral 57.1 68.5 82.0 21.3 17.8 14.8 5.5 4.6 4.0 14.5 14.4 14.7 Maruti Suzuki 3,546 Buy 158.6 194.7 244.8 22.4 18.2 14.5 10.3 8.7 6.8 17.3 18.7 20.5 Tata Motors 371 Buy 35.7 41.5 55.4 10.4 8.9 6.7 4.1 3.7 3.1 18.4 17.1 19.3 TVS Motor 315 Buy 9.2 14.9 17.8 34.2 21.1 17.7 20.2 13.3 11.2 24.3 31.7 29.6 Sector Aggregate 19.5 16.0 12.6 8.0 6.8 5.6 18.9 19.8 21.1

80

86

92

98

104

Dec-

15

Jan-

16

Feb-

16

Mar

-16

Sensex Index MOSL Automobiles Index

70

82

94

106

118

Mar

-15

Apr-

15

May

-15

Jun-

15

Jul-1

5

Aug-

15

Sep-

15

Oct

-15

Nov

-15

Dec-

15

Jan-

16

Feb-

16

Mar

-16

Sensex Index MOSL Automobiles Index

April 2016 59


Quarterly performance (INR Million) Y/E March (INR m) FY15 FY16 FY15 FY16E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Sales 10,290 10,602 10,665 10,698 11,376 11,583 12,251 12,160 42,113 47,370 YoY Change (%) 15.1 31.4 23.6 20.5 10.5 9.2 14.9 13.7 22.0 12.5 RM Cost 66.8 66.3 65.2 64.5 64.6 64.0 61.6 62.3 65.9 63.1 Employee Expenses 4.6 4.5 4.6 4.7 4.9 5.0 5.0 5.2 4.5 4.6 Other Expenses 11.6 12.2 13.3 13.2 13.0 13.8 14.7 14.2 12.2 13.3 EBITDA 1,755 1,800 1,801 1,878 1,988 1,987 2,286 2,213 7,091 8,475 Margins (%) 17.1 17.0 16.9 17.5 17.5 17.2 18.7 18.2 16.8 17.9 Depreciation 310 366 288 376 328 343 355 396 1,340 1,422 Interest 0 0 0 1 1 0 3 5 2 9 Other Income 59 109 47 66 130 116 113 141 236 500 PBT 1,504 1,542 1,559 1,493 1,789 1,760 2,041 1,953 5,911 7,543 Rate (%) 29.6 35.0 34.3 31.5 31.8 30.4 33.3 33.2 33.7 32.2 Reported PAT 1,060 1,003 1,024 1,023 1,221 1,226 1,362 1,306 3,921 5,114 Adj PAT 1,060 1,003 1,024 1,072 1,221 1,226 1,362 1,306 3,970 5,114 YoY Change (%) 8.3 6.0 7.7 29.8 15.2 22.2 33.0 21.7 7.3 28.8 E: MOSL Estimates

Amara Raja Batteries

CMP: INR887 TP:INR1,052 Buy We expect AMRJ’s revenue to rise 13.7% YoY (-1% QoQ) to

INR12.25b. New capacities in two-wheelers, four-wheelers and tubular battery

would aid growth in 4QFY16 and beyond. Spot lead prices at LME increased 6.5% QoQ in 3QFY16—the

impact is expected to be reflected in the current quarter. EBITDA margin is likely to decline by ~50bp QoQ (+70bp YoY) to

18.2%. We expect PAT to increase 22% YoY to INR1.3b. We are lowering the EPS estimate for FY17–18 by 3–4% to factor in

an increase in lead prices. The stock trades at 22.7x FY17E and 19x FY18E EPS; maintain Buy.

Key issues to watch: Update on demand environment for OEMs, auto replacement and

industrial battery segments Outlook for raw material cost trend, recent pricing action and

currency hedges (if any) Update on capacity expansion plans across product segments

Bloomberg AMRJ IN Equity Shares (m) 170.8

M. Cap. (INR b)/(USD b) 152/2 52-Week Range (INR) 1,132/773 1,6,12 Rel Perf. (%) 2/-7/17

Financial Snapshot (INR b) Y/E March 2015 2016E 2017E 2018E

Sales 42.1 47.4 56.0 65.7 EBITDA 7.1 8.5 10.2 12.1 NP 4.2 5.1 6.7 8.0

EPS (INR) 24.3 29.9 39.1 46.8 EPS Gr. (%) 12.3 23.0 30.7 19.4 BV/Sh. (INR) 99.5 134.8 181.0 236.2

RoE (%) 27.2 25.6 24.8 22.4 RoCE (%) 37.6 35.7 32.8 30.0 Valuations

P/E (x) 36.4 29.6 22.7 19.0 P/BV (x) 8.9 6.6 4.9 3.8 EV/EBITDA (x) 21.2 17.5 14.0 11.3

EV/Sales (x) 3.6 3.1 2.6 2.1

April 2016 60


Quarterly Performance (INR Million) FY15 FY16 FY15 FY16E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Total Volumes (nos) 19,940 25,371 25,397 34,155 28,190 37,337 30,984 43,991 104,916 140,457

Growth % -8.2 9.8 38.1 31.1 41.4 47.2 22.0 28.8 17.4 33.9 Realizations ('000) 1,243 1,268 1,323 1,319 1,363 1,323 1,319 1,360 1,293 1,342

% change 14.2 15.0 24.6 11.7 9.7 4.3 -0.4 3.1 16.1 3.8 Net Sales 24,778 32,176 33,610 45,057 38,412 49,397 40,853 59,841 135,622 188,503 Change (%) 4.8 26.2 72.1 46.4 55.0 53.5 21.6 32.8 36.4 39.0

RM/Sales % 73.3 73.6 74.5 72.8 69.4 70.4 70.8 71.2 73.5 70.5 Staff / sales % 11.4 9.1 8.2 7.4 8.6 7.7 8.5 6.8 8.7 7.8 Oth. Exp./ Sales % 11.2 10.1 10.2 9.7 11.8 9.9 10.1 9.5 10.2 10.2

EBITDA 1,005 2,343 2,381 4,571 3,887 5,945 4,297 7,508 10,266 21,688 EBITDA Margins (%) 4.1 7.3 7.1 10.1 10.1 12.0 10.5 12.5 7.6 11.5

Other Income 387 257 193 372 271 265 259 336 1,245 1,130 Interest 1,063 1,007 982 882 766 702 666 716 3,935 2,850 Depreciation 1,033 1,031 999 1,101 1,043 1,129 1,087 1,141 4,163 4,400 PBT before EO Exp -704 562 594 2,961 2,349 4,378 2,803 5,987 3,413 15,568 EO Exp/(Inc) 0 -1,090 0 80 0 52 65 -743 -1,009 -624PBT -704 1,652 594 2,880 2,349 4,326 2,738 6,730 4,422 16,192 Effective Tax Rate (%) 31.9 27.0 46.0 20.2 32.2 33.7 27.5 27.6 24.3 29.8 Rep. PAT -479 1,206 321 2,300 1,593 2,868 1,986 4,869 3,348 11,366 Adj. PAT -479 116 321 2,380 1,593 2,920 2,051 4,127 2,339 10,742 Change (%) -65 -117 -112 -1,974 -432 2,407 539 73 -149.1 359.3 E: MOSL Estimates

Ashok Leyland

CMP: INR109 TP:INR121 Buy Volumes grew 29% YoY (+42% QoQ), led by the 34% YoY (52%

QoQ) increase in demand for M&HCVs. We expect realizations to improve 3.1% YoY (3.2% QoQ) on a price

increase of ~1% from January 2016 and higher contribution fromthe Defense business.

Net revenues are expected to rise ~33% YoY (46% QoQ), led bygrowth in volume and realizations.

EBITDA margin is estimated to expand 240bp YoY (+200 bp QoQ),driven by price increases and operating leverage.

EBITDA is projected to grow 64% YoY (+75% QoQ) to ~INR7.5b. Adj PAT is forecast to accelerate 73% YoY (+101% QoQ) to INR4.1b.

We expect the company to incur a profit of ~INR2.74b on the saleof IndusInd Bank shares that would be utilized for JVs/Subs(assumed write-off of ~INR2b).

The stock trades at an EV/EBITDA of 9.8x FY17E and 8x FY18E.Maintain Buy.

Key issues to watch: Performance of JVs/Subs in FY16, based on consolidated results Current demand environment and discounting trend as well as

plant and channel inventory for MHCVs Industry growth and market share guidance for FY17–18 Raw material cost outlook and margin guidance for FY16–17 Capex and investment guidance for FY17

Bloomberg AL IN Equity Shares (m) 2,845.8

M. Cap. (INR b)/(USD b) 310/5 52-Week Range (INR) 111/64 1,6,12 Rel Perf. (%) 16/22/60

Financial Snapshot (INR b)

Y/E March 2015 2016E 2017E 2018E

Sales 135.6 188.5 242.5 290.3 EBITDA 10.3 21.7 32.6 38.1 NP 2.3 10.7 19.0 24.2

Adj. EPS (INR) 0.8 3.8 6.7 8.5 EPS Gr. (%) NA 359.3 76.4 27.8 BV/Sh. (INR) 18.0 20.8 25.6 32.3

RoE (%) 4.9 19.5 28.7 29.4 RoCE (%) 8.0 20.0 30.0 31.7 Payout (%) 54.8 26.5 22.5 17.6

Valuations P/E (x) 132.4 28.8 16.3 12.8 P/BV (x) 6.0 5.2 4.2 3.4

EV/EBITDA (x) 32.4 15.3 9.8 8.0 Div. Yield (%) 0.4 0.9 1.4 1.4

April 2016 61


Quarterly Performance (INR Million) FY15 FY16 FY15 FY16E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Volumes ('000 units) 988.4 1,055.6 984.5 782.7 1,013.0 1,056.6 951.5 872.5 3,811 3,894 Growth YoY (%) 0.9 9.8 -0.9 -16.4 2.5 0.1 -3.4 11.5 (1.5) 2.2 Realization (INR/unit) 53,139 56,491 57,461 60,554 55,413 57,712 58,486 59,489 56,707 57,701 Growth YoY (%) 6.0 4.9 11.3 14.9 4.3 2.2 1.8 -1.8 8.9 1.8 Net Sales 52,524 59,631 56,572 47,393 56,135 60,978 55,649 51,902 216,120 224,663 Change (%) 6.9 15.2 10.2 -3.9 6.9 2.3 -1.6 9.5 7.3 4.0 RM/Sales % 70.1 68.9 68.3 67.5 67.2 66.5 66.4 66.0 68.6 66.5 Staff cost/Sales % 4.1 3.5 3.8 5.5 4.3 4.0 4.1 4.8 4.2 4.3 Oth. Exp./Sales % 8.5 8.9 6.5 9.8 8.2 8.0 8.5 9.0 8.4 8.4 EBITDA 9,251 11,268 12,268 8,378 11,397 13,171 11,713 10,703 41,343 47,020

EBITDA Margins (%) 17.6 18.9 21.7 17.7 20.3 21.6 21.0 20.6 19.1 20.9 Other Income 2,193 1,136 953 1,543 4,368 1,526 1,997 1,709 5,824 9,600 Interest 1 1 1 63 1 3 3 44 65 50 Depreciation 692 686 658 638 784 780 746 763 2,674 3,073 PBT 10,751 8,314 12,563 9,220 14,980 13,915 12,961 11,605 44,428 53,497 Effective Tax Rate (%) 31.2 28.9 31.4 32.6 32.3 32.9 30.5 31.8 28.6 31.9 Rep. PAT 7,400 5,909 8,612 6,216 10,148 9,331 9,013 7,915 31,718 36,443 Adj. PAT 7,400 8,327 8,612 6,216 10,148 9,331 9,013 7,915 30,481 36,406 Change (%) 0.3 (0.5) (4.8) (18.5) 37.1 12.0 4.7 27.3 -6.0 19.4 E: MOSL Estimates

Bajaj Auto

CMP: INR2,396 TP:INR2,759 Buy Overall volumes increased 11.5% YoY (-8.3% QoQ) to 872.5k units,

driven by the ~26% YoY growth in domestic volumes and ~6% YoYdecline in exports. While overall motorcycle volumes expanded~12%, three- wheelers rose ~9%.

We expect realizations to decline 2% YoY (+2% QoQ). Nevertheless,revenues are projected to grow ~9.5% YoY (-7% QoQ).

EBITDA margin is estimated to expand 290bp YoY (-40 bp QoQ) to20.6% on lower raw material costs and operating leverage benefits.

We expect PAT to grow ~27.3% YoY (-12% QoQ) to INR7.9b. We have lowered volume estimates for motorcycles (domestic and

exports) and three-wheelers (exports) that, in turn, has resulted inan EPS reduction of ~4–4.5% to ~INR147/165 for FY17–18E.

The stock trades at 16.3x FY17E and 14.5x FY18E EPS; maintain Buy.

Key issues to watch: Update on demand environment at the retail level, channel

inventory; outlook for FY17 Response to the recently launched ‘V’ Outlook for export demand, especially the Nigerian market (sharp

currency depreciation); outlook for FY17 Details on new launches and update on forex hedges on exports

for FY17 Update on RE60 launch in export markets

Bloomberg BJAUT IN Equity Shares (m) 289.4

M. Cap. (INR b)/(USD b) 693/10 52-Week Range (INR) 2,655/1,914 1,6,12 Rel Perf. (%) 3/8/31


Y/E MAR 2015 2016E 2017E 2018E Sales 216.1 224.7 245.7 279.4 EBITDA 41.2 47.0 50.8 56.9 NP 30.5 36.4 42.6 47.9 Adj. EPS (INR) 105.3 125.8 147.1 165.4 EPS Gr. (%) (6.0) 19.4 16.9 12.5 BV/Sh. (INR) 369.5 417.2 474.1 540.3 RoE (%) 30.0 32.0 33.0 32.6 RoCE (%) 42.7 45.6 44.2 43.4 Payout (%) 56.9 62.1 61.3 60.0 Valuations P/E (x) 22.8 19.0 16.3 14.5 P/BV (x) 6.5 5.7 5.1 4.4 EV/EBITDA (x) 14.5 12.2 10.8 9.3 Div. Yield (%) 2.1 2.7 3.1 3.6

April 2016 62


Quarterly Performance (INR Million) Y/E March FY15 FY16 FY15 FY16E (Standalone) 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Tonnage 49,123 52,560 53,306 56,679 51,984 54,559 50,741 54,384 211,668 211,668 Change (%) 19.0 22.8 24.8 18.0 5.8 3.8 -4.8 -4.0 0.0 0.0 Realization (INR '000/ton) 201.2 216.6 224.7 215.9 217.1 204.7 207.3 200.7 214.9 207.3 Change (%) 4.9 9.7 15.3 11.4 7.9 -5.5 -7.7 -7.1 3.6 -3.5 Net Op Income 9,881 11,383 11,978 12,239 11,285 11,168 10,520 10,913 45,480 43,887 Change (%) 24.8 34.7 43.9 31.5 14.2 -1.9 -12.2 -10.8 33.8 -3.5

RM/Sales (%) 36.3 40.1 37.3 39.0 35.3 36.5 34.2 35.0 38.3 35.3 Staff Cost (% of Sales) 8.0 7.1 6.9 7.3 8.2 8.2 9.0 9.1 7.3 8.6 Other Exp. (% of Sales) 26.9 24.3 25.6 24.3 25.9 26.5 26.6 26.0 25.2 26.3


Non-Operating Income 242 300 191 200 288 255 231 242 933 1,016 Interest 316 314 264 224 213 222 226 231 1,118 892 Depreciation 658 664 687 497 643 653 674 682 2,505 2,652 PBT 2,101 2,529 2,863 3,081 2,894 2,594 2,461 2,592 10,573 10,583 Effective Tax Rate (%) 31.0 31.0 31.4 34.1 32.5 32.5 32.5 33.0 32.0 32.5 Rep. PAT 1,450 1,745 1,964 2,032 1,953 1,751 1,662 1,736 7,190 7,144 Adj. PAT 1,450 1,773 1,964 2,029 1,953 1,751 1,690 1,736 7,214 7,144 Change (%) 60.0 84.1 109.0 83.0 34.7 -1.3 -14.0 -14.4 84.2 -1.0 E: MOSL Estimates

Bharat Forge

CMP: INR829 TP:INR967 Buy We expect BHFC’s shipment tonnage to decline 4% YoY to 54,384

tons, impacted by weakness in US Class 8 trucks and the Energy segment. As a result, net realization is also likely to dip ~7% YoY to ~INR201k/ton.

Net revenue is projected to decrease ~10.8% YoY (+3.7% QoQ) to ~INR10.9b.

EBITDA margin is forecast to expand 50bp YoY (-30bp QoQ) to 29.9%, driven by lower commodity prices.

PAT is likely to decline ~14% YoY (+4.5% QoQ) to INR1.7b. The stock trades at 20.5x FY17E and 15.4x FY18E EPS; maintain

Buy.

Key issues to watch: Outlook for US Class 8 Trucks for CY16–17 Outlook oil & gas, and mining segments, primarily with regard to

price recovery Update on ramp-up of new orders under commercial vehicles,

PVs, aerospace and rail Update on Alstom JV plant and execution timeline for existing

and new orders

Bloomberg BHFC IN

Equity Shares (m) 232.8 M. Cap. (INR b)/(USD b) 193/3 52-Week Range (INR) 1,363/721

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

Financial Snapshot (INR b) Y/E Mar 2015 2016E 2017E 2018E

Sales 76.2 79.5 88.4 102.4 EBITDA 14.4 15.6 17.1 20.5

NP 7.4 7.7 9.4 12.5 EPS (INR) 31.7 33.2 40.5 53.7 EPS Gr. (%) 64.4 4.9 22.0 32.6

BV/Sh. (INR) 147.9 170.3 196.4 235.7 RoE (%) 24.1 20.9 22.1 24.9 RoCE (%) 22.0 21.9 23.7 27.2 Valuations

P/E (x) 26.2 25.0 20.5 15.4 P/BV (x) 5.6 4.9 4.2 3.5

EV/EBITDA (x) 14.6 13.1 11.5 9.2 EV/Sales (x) 2.8 2.6 2.2 1.8

Consolidated

April 2016 63


Quarterly Performance (INR Million) Y/E March FY15 FY16 FY15 FY16E (Standalone) 1Q 2Q 3Q 4Q 5Q 1Q 2Q 3Q 4QE 15M Net Sales 24,440 23,775 25,558 23,816 23,889 25,579 26,184 26,979 27,217 121,477 105,960 YoY Change (%) 10.7 3.1 19.0 10.2 -2.3 7.6 2.5 13.3 13.9 24.5 -12.8

RM Cost (% of sales) 55.1 52.5 51.6 54.2 52.4 54.0 52.8 53.4 53.3 53.2 53.4 Staff Cost (% of sales) 13.4 13.5 13.4 15.0 13.4 12.1 13.7 12.9 14.5 13.7 13.3 Other Expenses (% of sales) 15.2 15.2 17.8 21.3 14.7 14.9 16.2 20.8 14.4 16.8 16.6

EBITDA 3,984 4,474 4,383 2,280 4,675 4,860 4,522 3,474 4,838 19,795 17,693 Margins (%) 16.3 18.8 17.2 9.6 19.6 19.0 17.3 12.9 17.8 16.3 16.7 Depreciation 881 902 1,015 1,257 1,429 759 837 1,115 1,535 5,484 4,247 Interest 5 12 1 0 143 0 18 28 15 160 62 Other Income 1,424 828 1,207 903 1,328 1,066 932 882 1,396 5,689 4,275 PBT before EO expense 4,522 4,387 4,574 1,925 4,431 5,167 4,599 3,213 4,683 19,839 17,660

Tax Rate (%) 27.8 30.1 33.0 32.6 35.1 33.5 33.6 31.3 33.1 31.6 33.0 Reported PAT 3,263 3,067 3,064 1,109 2,875 3,437 3,054 2,208 3,134 13,377 11,833 Adj PAT 3,263 3,067 3,064 1,298 2,875 3,437 3,054 2,208 3,134 13,568 11,833 YoY Change (%) 25.6 21.9 30.8 -6.6 -11.9

12.1 -0.3 70.1 9.0 26.8 -12.8

Margins (%) 13.4 12.9 12.0 5.4 12.0 13.4 11.7 8.2 11.5 11.2 11.2 E: MOSL Estimates

Bosch

CMP: INR19,802 TP:INR23,996 Buy Net revenue is estimated to increase ~14% YoY (+1% QoQ) to

INR27.2b on strong growth in commercial vehicles and recovery in tractors.

EBITDA margin is expected to contract 180bp YoY (expand 490bp QoQ) to 17.8% on higher raw material cost and employee expenses.

EBITDA is projected to grow just 3.5% YoY (+39% QoQ) to ~INR4.8b. This coupled with higher depreciation would restrict PAT growth at ~9% YoY (+42% QoQ) to INR3.1b.


Key issues to watch: Roll out of BS-IV emission norms and its implication on BOSCH’s

revenues Preponement of BS-VI implementation and its impact on BOSCH Capex plans for FY17

Bloomberg BOS IN

Equity Shares (m) 31.4 M. Cap. (INR b)/(USD b) 622/9 52-Week Range (INR) 26,740/15,753

1,6,12 Rel Perf. (%) 14/5/-9


Y/E Mar FY15 (15m) 2016E 2017E 2018E

Sales 120.9 106.0 130.9 157.2

EBITDA 19.8 17.7 24.1 29.1 NP 13.6 11.8 16.6 21.5 EPS (INR) 432.1 376.8 529.2 685.6

EPS Gr. (%) 65.2 -12.8 40.4 29.5 BV/Sh. (INR) 2,340 2,630 3,037 3,565 RoE (%) 19.9 15.2 18.7 20.8

RoCE (%) 28.7 22.4 26.4 27.5 Valuations P/E (x) 45.8 52.5 37.4 28.9

P/BV (x) 8.5 7.5 6.5 5.6 EV/EBITDA ( )

30.5 33.7 24.5 20.0 EV/Sales (x) 5.0 5.6 4.5 3.7

Consolidated

April 2016 64


Quarterly Performance (INR Million) (Consolidated) CY14 FY16 (15m) CY14 FY16E Y/E December 1Q 2Q 3Q 4Q

1Q 2Q 3Q 4Q 5QE (15m)

Net Op Income 19,242 22,454 22,750 22,938

25,680 29,167 31,225 33,166 40,516 87,383 159,754 Growth (%) 11.6 34.5 35.1 36.6 33.5 29.9 37.3 44.6 57.8 451.3 46.3 EBITDA Margins (%) 11.5 12.7 13.4 13.2

14.3 14.8 15.8 15.6 16.2 36.8 40.0

Effective tax rate (%) 30.2 27.3 30.4 29.4 32.8 28.2 31.1 30.4 31.6 29.3 30.9 Recurring PAT 1,391 1,574 1,650 1,538

1,953 2,218 2,555 2,708 3,471 6,154 12,904

Growth (%) 42.0 70.5 92.5 59.8 40.3 40.9 54.8 76.1 77.8 56.2 67.8 Standalone (Royal Enfield) Royal Enfield (units) 63,745 74,132 81,977 82,215

92,021 106,613 127,611 125,744 148,186 302,591 600,175

Growth (%) 83.5 85.1 69.9 49.2 44.4 43.8 55.7 52.9 61.0 69.9 58.7 Net Op Income 6,357 7,462 8,212 8,282

9,612 10,968 13,012 12,839 15,234 30,312 61,665

Growth (%) 90.5 95.4 78.9 56.9 51.2 47.0 58.5 55.0 58.5 76.9 62.7 EBITDA Margins (%) 23.1 24.9 25.0 23.6

26.1 26.4 27.7 28.6 29.0 24.2 27.7

Recurring PAT 1,606 1,332 1,410 1,241

2,135 1,836 2,285 2,450 3,303 5,589 12,008 Growth (%) 65.2 153.2 128.2 85.2 32.9 37.8 62.1 97.5 54.7 92.8 71.9

VECV (derived) Total CV Volumes 9,981 11,495 9,815 4,278

11,020 12,128 11,657 12,692 15,553 40,783 63,050

Growth (%) -20.3 4.2 4.1 -50.9 10.4 5.5 18.8 196.7 41.1 -1.8 23.7 Net Op Income 12,885 14,992 14,538 14,656

16,069 18,199 18,213 20,327 25,283 57,581 98,090

Growth (%) -7.3 16.4 18.7 27.3

24.7 21.4 25.3 38.7 57.3 12.3 36.3 EBITDA Margins (%) 5.8 6.6 6.9 7.3

7.1 7.8 7.3 7.4 8.5 6.7 7.7

Recurring PAT 363 453 451 569

436 731 573 657 1,158 1,894 3,555 Growth (%) -52.4 -38.1 6.2 5.0 20.0 61.4 27.1 15.4 165.7 -38.9 50.1

E: MOSL Estimates

Eicher Motors

CMP: INR18,747 TP:INR21,544 Buy Royal Enfield’s volumes grew 61% YoY (+17.8% QoQ) to 148,000.

Net realizations improved 0.7% QoQ (-1.6% YoY), driven by the price increase of ~1% in January 2016. EBITDA margins are expected to expand 290bp YoY to 29% (+40bp QoQ), driven by lower commodity prices.

VECV’s volumes grew 41.1% YoY (22.2% QoQ). Net realizations are expected to improve by 11.5% YoY (+1.5% QoQ), driven by a better mix. Margins are expected to reach 8.5%, up 140bp YoY (+110bp QoQ).

Consolidated revenue is expected to increase ~58% YoY (~22% QoQ) to INR40.5b. Consolidated margins are projected to expand 190bp YoY (+60bp QoQ) to 16.2%. Consolidated PAT is estimated to rise 78% YoY (+28% QoQ) to INR3.5b.

We are changing our estimates to FY from CY, and hence upgraded the current estimates by 3–7% for FY17–18.

Key issues to watch: Update on demand and waiting period for Royal Enfield New launches and timelines under Royal Enfield business Update on current demand trends for commercial vehicles,

discount levels and channel inventory

Bloomberg EIM IN Equity Shares (m) 27.2

M. Cap. (INR b)/(USD b) 509/8 52-Week Range (INR) 21,618/13,930 1,6,12 Rel Perf. (%) -4/7/32


Y/E Dec 2014 2015 2016E 2017E Net Income 87.4 159.8 174.1 213.1 EBITDA 11.1 24.6 29.0 37.6 Net Profit 6.2 12.9 15.7 21.7 Adj. EPS (INR) 227 475 579 798 EPS Gr. (%) 55.6 109.3 21.7 37.9 BV/Sh. (INR) 928 1,273 1,427 2,147 RoE (%) 26.9 34.6 42.9 44.6 RoCE (%) 27.6 38.2 48.4 50.6 Payout (%) 0.3 0.2 0.2 0.3 Valuations P/E (x) 82.6 39.4 32.4 23.5 P/BV (x) 20.2 14.7 13.1 8.7 EV/EBITDA (x) 52.7 23.6 19.8 14.9 Div. Yield (%) 0.2 0.2 0.2 0.3

April 2016 65


S/A Quarterly Performance (INR Million) Y/E March FY15 FY16 FY15 FY16E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Sales 19,096 17,598 15,559 16,454

17,954 17,364 15,211 15,461 68,742 65,990

Growth YoY (%) 17.4 23.2 19.6 2.3 -6.0 -1.3 -2.2 -6.0 15.3 -4.0 RM (%) 66.3 67.2 67.1 64.0

65.8 64.5 62.2 62.6 66.1 64.0

Employee Cost (%) 5.2 6.1 6.5 6.4

6.2 6.7 7.9 8.4 6.1 7.3 Other Exp. (%) 13.3 14.9 14.7 15.1 13.2 13.9 14.5 14.6 14.5 14.1 EBITDA 2,911 2,077 1,802 2,382

2,660 2,574 2,343 2,227 9,172 9,700

EBITDA Margin (%) 15.2 11.8 11.6 14.4

14.8 14.8 15.4 14.4 13.3 14.7 Change (%) 10.9 3.2 26.4 8.8 -8.6 23.9 30.0 -6.5 11.7 5.8 Non-Operating Income 87 69 12 57

31 84 75 65 225 255

Interest 2 4 8 3

2 0 1 3 17 6 Depreciation 323 329 352 391 368 383 406 419 1,395 1,576 PBT after EO Exp 2,673 1,813 1,455 2,045

2,321 2,275 2,011 1,870 7,985 8,374

Effective Tax Rate (%) 30.7 30.6 33.2 32.7 33.1 31.4 33.4 30.7 31.6 32.6 Adj. PAT 1,853 1,258 972 1,376

1,552 1,561 1,339 1,295 5,459 5,644

Change (%) 16.7 6.2 25.4 4.1 -16.2 24.1 37.8 -5.9 12.1 3.4 E: MOSL Estimates

Exide Industries

CMP: INR135 TP:INR162 Buy We expect net revenues to decline 6% YoY (+1.6% QoQ) to INR16.5b

on weak growth in four-wheeler OEMs.

EBITDA margin is likely to remain flat YoY (decline 100bp QoQ) at 14.4%, due to the 6% QoQ increase in lead prices.

EBITDA is estimated to decline 6.5% YoY (-5% QoQ) to ~INR2.2b.

Growth in PAT is likely to decelerate 6% YoY (-3% QoQ) to INR1.3b.

We have lowered our EPS estimates for FY17 and FY18 by ~12% (~INR8) and 11% (~INR9.3), respectively, due to higher lead prices.

The stock trades at 17x FY17E and 14.6x FY18E EPS; maintain Buy.

Key issues to watch: Update on demand environment for OEMs, auto replacement and

industrial battery segments Update on market share in autos and non-autos Outlook for raw material cost trend, recent pricing action and

currency hedges, if any Update on capacity expansion plans across product segments

Bloomberg EXID IN Equity Shares (m) 850.0

M. Cap. (INR b)/(USD b) 115/2 52-Week Range (INR) 193/116 1,6,12 Rel Perf. (%) 1/-5/-11


Y/E MARCH 2015 2016E 2017E 2018E Net Sales 68.7 66.0 75.2 85.9 EBITDA 9.2 9.7 10.9 12.6 Adj. PAT 5.5 5.6 6.8 7.9 Adj. EPS (INR) 6.4 6.6 8.0 9.3 EPS Gr. (%) 12.1 3.4 19.8 16.3 BV/Sh. (INR) 47.7 52.0 57.4 64.1 RoE (%) 13.5 12.8 13.9 14.4 RoCE (%) 19.1 17.5 17.9 18.7 Payout (%) 34.3 30.1 27.7 23.8 Valuations P/E (x) 21.0 20.3 17.0 14.6 P/BV (x) 2.8 2.6 2.4 2.1 EV/EBITDA (x) 10.4 9.9 8.6 7.2 Div. Yield (%) 1.6 1.5 1.6 1.6

April 2016 66


Quarterly Performance (INR Million) Y/E March FY15 FY16 FY15 FY16E 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Total Volumes ('000 nos) 1,715 1,693 1,649 1,576 1,646 1,575 1,690 1,721 6,632 6,631 Growth YoY (%) 10.0 19.5 -1.9 -0.9 -4.1 -7.0 2.5 9.2 6.2 0.0 Net Realization 41,028 40,858 41,486 43,122 42,267 43,414 43,159 43,334 41,596 43,044 Growth YoY (%) 3.9 1.1 1.4 5.2 3.0 6.3 4.0 0.5 2.8 3.5 Net Revenues (incl Op OI) 70,368 69,153 68,393 67,939 69,553 68,371 72,948 74,573 275,853 285,444 Change (%) 14.2 20.8 -0.5 4.3 -1.2 -1.1 6.7 9.8 9.1 3.5

RM Cost (% sales) 72.6 71.9 71.7 70.2 69.2 68.2 66.9 66.9 71.6 67.8 Staff Cost (% sales) 3.8 4.1 4.6 4.5 4.5 4.5 4.7 4.6 4.3 4.6 Other Exp (% sales) 10.1 10.5 11.7 13.0 11.3 11.4 12.7 12.6 11.3 12.0


Other Income 1,128 1,935 936 929 1,019 1,026 842 1,144 4,927 4,031 Interest 30 49 24 8 5 5 6 9 111 25 Depreciation 2,915 750 838 897 1,030 1,091 1,139 1,156 5,400 4,416 PBT 7,655 10,484 8,292 6,857 10,463 10,764 11,096 11,842 33,288 44,166 Effective Tax Rate (%) 26.5 27.2 29.7 30.5 28.3 28.3 28.3 29.1 28.3 28.5 PAT 5,628 7,634 5,830 4,765 7,503 7,721 7,958 8,396 23,856 31,578 Adj. PAT 5,628 7,634 5,830 6,316 7,503 7,721 7,958 8,396 25,407 31,578 Growth (%) 2.6 58.6 11.1 13.9 33.3 1.1 36.5 32.9 20.5 24.3 E: MOSL Estimates

Hero MotoCorp

CMP: INR2,956 TP:INR3,418 Buy Volumes grew 9.2% YoY (+2% QoQ) to 1.72m units.

Realizations should improve by a marginal 0.5% YoY (flat QoQ) to INR43,334 per unit.

Net revenue is likely to grow 10% YoY (~2% QoQ) to INR74.6b.

EBITDA margin is expected to expand 360bp YoY (+30bp QoQ) to 15.9% on lower commodity prices and other expenses.

EBITDA is estimated to grow ~41% YoY (+4% QoQ) to ~INR11.9b.

We expect PAT to increase 33% YoY (+6% QoQ) to INR8.4b.


Key issues to watch: Update on demand environment at the retail level, channel

inventory Efforts to increase market share in the scooter segment with new

launches Guidance on export plans and new launches along with timelines Update on cost saving initiatives

Bloomberg HMCL IN Equity Shares (m) 199.7



Y/E March 2015 2016E 2017E 2018E

Sales 275.9 285.4 319.2 361.6 EBITDA 35.4 44.6 50.4 58.2 NP 25.0 31.6 36.4 44.0

Adj. EPS (INR) 125.0 158.1 182.1 220.5 EPS Gr. (%) 18.4 26.5 15.1 21.1 BV/Sh. (INR) 327.6 401.3 487.0 599.1

RoE (%) 41.1 43.4 41.0 40.6 RoCE (%) 57.3 60.5 56.3 54.4 Payout (%) 57.8 50.9 50.5 46.9



April 2016 67


Quarterly Performance (INR Million) Y/E March FY15

FY16 FY15 FY16E

(incl MVML) 1Q* 2Q 3Q 4Q 1Q 2Q 3Q 4QE Total Volumes (nos) 187,164 176,805 173,114 161,688 171,925 158,380 193,554 183,830 698,789 707,689

Growth YoY (%) -5.3 -0.4 -17.0 -15.7 -8.1 -10.4 11.8 13.7 -10.2 1.3 Net Realization 524,573 511,560 534,923 564,229

548,910 555,227 540,708 537,361 536,189 545,080

Growth YoY (%) 5.5 4.5 8.8 7.7

4.6 8.5 1.1 -4.8 7.4 1.7 Net Op. Income 98,181 90,446 92,603 91,229

94,371 87,937 104,656 98,783 374,683 385,747

Growth YoY (%) 0.0 4.0 -9.7 -9.2 -3.9 -2.8 13.0 8.3 -3.5 3.0 RM Cost (% of sales) 69.2 69.7 69.1 68.3

68.1 67.6 68.4 69.0 68.7 68.3

Staff (% of sales) 6.4 6.7 7.0 6.7

7.0 7.3 6.7 7.1 6.7 7.0 Oth. Exp. (% of Sales) 10.0 11.4 12.2 14.1 10.6 11.9 11.4 11.0 12.4 11.4


Other income 1,447 4,906 897 950 1,161 4,885 929 1,262 8,201 8,236 Interest 816 727 663 833 561 577 554 540 3,039 2,232 Depreciation 2,802 2,783 2,638 2,757 2,641 2,830 3,328 3,595 10,980 12,394 EO Income/(Expense) 0 0 2,993 364 0 0 0 3 3,357 0 PBT 12,021 12,401 11,386 7,764

11,488 13,104 11,185 9,262 43,572 45,037

Effective Tax Rate (%) 25.4 21.5 15.1 24.5 27.7 25.4 26.6 26.9 21.4 26.6 Reported PAT 8,964 9,740 9,668 5,861

8,311 9,781 8,205 6,769 34,233 33,064

Adj PAT 8,964 9,740 7,126 5,586 8,311 9,781 8,205 6,768 31,595 33,064 Change (%) 4.3 1.7 -22.1 -33.6 -7.3 0.4 15.1 21.1 -18.2 4.6

E: MOSL Estimates

Mahindra & Mahindra

CMP: INR1,216 TP:INR1,295 Neutral Overall volumes are projected to grow ~13.7% YoY (-5% QoQ),

driven by new launches in UVs (+16% YoY, +10% QoQ) and recovery in tractors on low base (+12% YoY, -31% QoQ).

M&M (including MVML)’s realizations are estimated to decline ~5% YoY (-1% QoQ) due to higher discounts and an adverse mix.

Revenue is estimated to increase ~8% YoY (-6% QoQ) to ~INR98.8b. EBITDA margin is forecast to expand 130bp YoY (-120bp QoQ) to

12.3%, driven by operating leverage. Benefits of higher other income and lower interest cost is likely to

be diluted by an increase in depreciation. PAT is projected to grow 21% YoY (-18 % QoQ) to INR 6.8b. We are lowering our FY17–18 consolidated EPS estimate by ~6% to

~INR68.5/82, reflecting impact of aggressive pricing for new launches and an increase in commodity prices.

The stock trades at 19.7x FY17E and 17.3x FY18E EPS; maintain Neutral.

Key issues to watch: Outlook for UV and tractor businesses Volume expectation from recently launched vehicles Product pipeline for FY17 Update on smaller businesses like two-wheelers, commercial

vehicles, Ssangyong etc

Bloomberg MM IN Equity Shares (m) 621.1



Y/E March 2015 2016E 2017E 2018E

Sales 389.5 405.2 457.1 514.8 EBITDA 41.7 45.5 50.9 58.0

NP (incl. MVML) 31.6 33.1 36.9 42.1 Adj. EPS (INR) * 52.8 55.2 61.6 70.3 EPS Gr. (%) -18.2 4.6 11.6 14.0

Cons. EPS (INR) 47.8 57.1 68.5 82.0 BV/Share (INR) 325.6 363.0 406.8 459.1 RoE (%) 15.9 14.5 14.4 14.7

RoCE (%) 16.3 15.9 16.1 16.7 Payout (%) 25.5 33.0 29.7 25.9 Valuations

P/E (x) 23.0 22.0 19.7 17.3 Cons. P/E (x) 25.4 21.3 17.8 14.8 P/BV (x) 3.7 3.3 3.0 2.6


* incl. MVML

April 2016 68


Quarterly Performance (INR Million) Y/E March FY15 FY16 FY15 FY16E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Total Volumes (nos) 299,894 321,898 323,911 346,700

341,329 353,335 374,182 360,402 1,292,403 1,429,248

Change (%) 12.6 16.8 12.4 6.7 13.8 9.8 15.5 4.0 11.9 10.6 Realizations (INR/car) 381,071 382,577 389,077 392,986

393,313 394,348 403,063 403,152 386,649 398,603

Change (%) -0.8 0.7 2.9 5.5 3.2 3.1 3.6 2.6 2.0 3.1 Net Op. Revenues 114,281 123,151 126,026 136,248

134,249 139,337 150,819 145,297 499,706 569,702

Change (%) 11.6 17.6 15.7 12.6 17.5 13.1 19.7 6.6 14.1 14.0 RM Cost (% of Sales) 71.6 71.3 70.0 67.7

67.4 66.8 68.5 67.5 70.2 67.6

Staff Cost (% of Sales) 3.1 3.0 3.0 3.7

3.4 3.0 3.3 3.4 3.2 3.3 Other exp. (% of Sales) 13.2 13.3 14.1 12.7 12.9 13.9 13.8 14.0 13.2 13.6

EBITDA 13,867 15,321 16,195 21,643

21,891 22,694 21,701 22,041 67,130 88,326 EBITDA Margins (%) 12.1 12.4 12.9 15.9

16.3 16.3 14.4 15.2 13.4 15.5

Non-Operating Income 2,381 1,820 1,290 3,199 1,720 1,371 315 2,062 8,316 5,469 Interest 386 348 300 1,027

190 178 244 238 2,060 850

Depreciation 5,836 5,989 6,278 6,600 6,716 6,694 7,221 7,346 24,703 27,977 PBT 10,025 10,805 10,905 17,215

16,705 17,193 14,551 16,519 48,682 64,968

Tax 2,403 2,179 2,615 4,373

4,776 4,937 4,358 4,445 11,570 18,516 Effective Tax Rate (%) 24.0 20.2 24.0 25.4 28.6 28.7 29.9 26.9 23.8 28.5 PAT 7,623 8,625 8,290 12,842 11,929 12,256 10,193 12,074 37,112 46,452 Adjusted PAT 7,623 8,625 8,290 12,842

11,929 12,256 10,193 12,074 37,112 46,452

Change (%) 20.7 28.7 21.7 60.5 56.5 42.1 23.0 -6.0 33.4 25.2 E:MOSL Estimates

Maruti Suzuki

CMP: INR3,546 TP:INR4,407 Buy Volumes grew ~4% YoY (-3.7% QoQ) to ~360,402 units, led by new

model launches. Net realizations are expected to improve 2.6% YoY (flat QoQ) to

INR403,152 per unit, boosting net sales by 6.6% YoY (-4.1% QoQ) to INR145.3b.Growth in realizations is likely to be driven by Baleno.

We expect margins to contract 70bp YoY (+80bp QoQ) to 15.2% on higher discount and an adverse FX.

EBITDA is estimated to grow ~2% YoY/QoQ to ~INR21.7b. We expect PAT to decline 6% YoY (+18.5% QoQ) to INR12b. We are lowering our FY17 and FY18 EPS estimate by ~3% (~INR195)

and 2.6% (~INR245), respectively, to factor in the adverse Fx. The stock trades at 18.2x FY17E and 14.5x FY18E EPS. Maintain Buy.

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

trends and new launches (Brezza) Focus on network expansion (rural areas) Guidance on FY17 volume growth, margins, forex hedges, and

localization efforts Update on Gujarat plant

Bloomberg MSIL IN Equity Shares (m) 302.1

M. Cap. (INR b)/(USD b) 1071/16 52-Week Range (INR) 4,789/3,202 1,6,12 Rel Perf. (%) -1/-13/10


Y/E MARCH 2015 2016E 2017E 2018E

Sales 499.7 569.7 661.5 784.1 EBITDA 67.1 88.3 99.0 118.4

Adj. PAT 37.1 46.5 57.3 72.3 EPS (INR)* 127.5 158.6 194.7 244.8 EPS Gr. (%) 35.0 24.4 22.8 25.7

BV/Sh. (INR) 785 890 1,014 1,169 RoE (%) 15.7 17.3 18.7 20.5 RoCE (%) 20.8 23.9 25.0 27.3

Payout (%) 24.5 31.3 34.9 35.2 Valuations P/E (x) 27.8 22.4 18.2 14.5

P/CE (x) 16.9 14.1 12.0 10.1 EV/EBITDA (x) 14.1 10.4 8.8 6.9 Div. Yield (%) 0.7 1.1 1.6 2.0 *Consol. & adjusted

April 2016 69


Quarterly Performance

INR Million) Y/E March FY15 FY16 FY15 FY16E (Consolidated) 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q JLR vols. (incl JV) 115,156 103,975 122,467 129,205

114,452 116,745 150,461 155,847 474,567 537,505

JLR Realizations (GBP/unit) 46,485 46,242 48,005 46,548 45,206 43,460 42,004 42,060 46,472 43,056 JLR EBITDA (%) 20.3 19.4 18.6 17.4

16.4 12.2 14.4 14.2 18.9 14.3

JLR PAT (GBP m) 693 450 593 302

492 52 414 368 2,044 1329 S/A vol. (units) 109,974 126,621 126,273 139,270 116,510 126,059 122,377 146,766 502,154 511,712 S/A Realizations (INR/unit) 700,598 691,203 717,183 774,343 798,071 833,029 817,198 864,756 722,781 2

S/A EBITDA (%) -2.8 -1.6 -5.1 2.8

4.7 6.8 5.7 8.3 -2.2 6.5 S/A PAT (INR m) 3,937 -18,454 -18,238 -10,806 2,660 -1,870 -395 617 -45,838 1,025 Net Op Income 646,828 606,408 699,733 675,760 613,021 613,182 722,564 704,568 2,627,963 2,653,335

Growth (%) 38.3 6.6 9.6 3.5 -5.2 1.1 3.3 4.3 12.9 1.0 EBITDA 111,463 95,689 103,635 84,383 91,088 68,804 93,800 91,482 392,387 345,172

EBITDA Margins (%) 17.2 15.8 14.8 12.5 14.9 11.2 13.0 13.0 14.9 13.0 Depreciation 29,796 32,134 33,389 38,568 38,232 44,279 43,391 41,232 133,886 167,135 Other Income 2,132 2,184 2,220 2,452 3,072 2,452 1,806 3,561 8,987 10,891 Interest Expenses 9,455 9,296 10,604 18,946 11,174 11,594 10,915 10,561 48,615 44,243 PBT before EO Exp 74,344 56,443 61,862 29,322 44,754 15,383 41,300 43,249 218,873 144,686 EO Exp/(Inc) -940 -264 4,539 1,612 1,167 26,529 -457 -20,816 1,847 6,423 Tax rate (%) 28.1 41.7 37.3 36.9 36.0 63.1 15.6 19.3 35.2 19.9 Reported PAT 53,982 32,909 35,807 17,165 27,689 -4,298 35,075 56,267 139,863 114,734 Adj PAT 53,306 32,755 38,651 18,181 28,436 5,486 34,690 39,468 141,060 119,878

Growth (%) 190.7 -12.6 -21.2 (57.1) (46.7) (83.3) (10.2) 117.1 -4.2 -15.0 E: MOSL Estimates

Tata Motors

CMP: INR371 TP:INR498 Buy JLR (incl. JV)’s volumes are expected to grow 21% YoY (4% QoQ).

Net realizations are estimated to remain stable QoQ (-10% YoY) with a stabilization in mix. EBITDA margin is projected to decline 20bp QoQ (-320bp YoY) to 14.2%. Adj. PAT is forecast to grow ~22% YoY (-11% QoQ) to £368m.

Standalone volumes grew 5.4% YoY (20% QoQ), led by the 19.3% YoY (+27.8% QoQ) increase in commercial vehicles. PV volumes declined 26% YoY (+12.9% QoQ). Margins are estimated to rise 260bp QoQ (+550bp YoY) to 8.3%, driven by operating leverage. Adj. PAT is expected to reach ~INR617m (vis-à-vis loss on YoY/QoQ basis).

Consolidated PAT could rise 117% YoY (+14% QoQ) to INR39b. We lowered our consolidated EPS estimate by 3–5% to factor in a

weak GBP. The stock trades at 8.9x FY17E and 6.7x FY18E EPS (Buy).

Key issues to watch: Current demand trends for JLR and outlook, particularly in China

and the US Update on Chery JV operations Update on forex hedges, particularly for JLR operations FY17 volume guidance for M&HCVs and PVs, channel inventory,

discount trends

Bloomberg TTMT IN Equity Shares (m) 3,395.9

M. Cap. (INR b)/(USD b) 1258/19 52-Week Range (INR) 573/266 1,6,12 Rel Perf. (%) 7/25/-22


Y/E March 2015 2016E 2017E 2018E

Net Sales 2,628 2,653 2,915 3,246 EBITDA 421 375.0 417.7 486.9

NP 140 121.2 140.9 188.3 Adj. EPS (INR) 43.6 35.7 41.5 55.4 EPS Gr. (%) -1.1 -18.2 16.3 33.7

BV/Sh. (INR) 174.8 222.2 261.6 313.8 RoE (%) 23.1 18.4 17.1 19.3 RoCE (%) 24.2 16.3 15.6 17.0

Payout (%) 0.0 3.4 8.7 8.7 Valuations

P/E (x) 8.5 10.4 8.9 6.7

P/BV (x) 2.1 1.7 1.4 1.2 EV/EBITDA (x) 3.3 3.8 3.4 2.8 Div. Yield (%) 0.0 0.3 0.8 1.1

April 2016 70


S/A Quarterly Performance INR Million) Y/E March (INR m) FY15 FY16 FY15 FY16E 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Volumes (units) 584,113 676,139 655,571 602,926 638,115 678,749 702,109 652,973 2,518,749 2,679,452

Growth (%) 22.8 34.7 23.0 6.7 9.2 0.4 7.1 8.3 21.4 6.4

Realization (INR/unit) 39,468 39,682 40,467 40,749 41,078 42,442 41,868 43,431 40,092 42,089 Growth (%) 6.7 0.2 4.8 6.6 4.1 7.0 3.5 6.6 4.5 5.0

Net Sales 23,054 26,831 26,529 24,569 26,212 28,807 29,396 28,359 100,982 112,775 Growth (%) 31.0 34.9 28.9 13.8 13.7 7.4 10.8 15.4 26.8 11.7

Total Expenditure 21,742 25,204 24,927 23,066 24,575 26,688 27,299 26,375 94,939 104,937 EBITDA 1,312 1,627 1,602 1,502 1,637 2,119 2,098 1,984 6,043 7,838

EBITDA margin (%) 5.7 6.1 6.0 6.1 6.2 7.4 7.1 7.0 6.0 7.0 Interest 60 35 53 127 130 102 100 93 274 425 Depreciation 336 366 371 461 422 466 493 521 1,533 1,902 Other Income 89 86 59 92 96 57 117 121 326 391 PBT before EO Exp 1,005 1,313 1,237 1,007 1,181 1,609 1,622 1,491 4,562 5,903 EO Exp 0 0 0 0 0 0 132 0 0 0 PBT after EO Exp 1,005 1,313 1,237 1,007 1,181 1,609 1,490 1,491 4,562 5,903 Tax 282 365 335 101 278 445 413 399 1,083 1,535 Total Tax 282 365 335 101 278 445 413 399 1,083 1,535

Tax rate (%) 28.0 27.8 27.1 10.1 23.5 27.7 25.5 26.7 23.7 26.0 Reported PAT 723 948 902 905 903 1,164 1,077 1,092 3,478 4,368 Adjusted PAT 723 948 902 905 903 1,164 1,209 1,092 3,478 4,368

Growth (%) 39.4 61.9 31.1 6.2 24.8 22.8 34.0 20.7 26.8 25.6 E: MOSL Estimates

TVS Motor Company

CMP: INR315 TP:INR365 Buy Total volumes grew 8.3% YoY (-7% QoQ) to 652,973 units. Scooter and motorcycle volumes rose 15% YoY (-17.3% QoQ) and

12% YoY (-5.2% QoQ), respectively, while moped volumes remained flat YoY (+3.4% QoQ).

Net realizations are projected to improve 6.6% YoY (+3.7% QoQ) to INR43,431 per unit. Net sales are expected to grow 15% YoY to ~INR28.3b.

Margins are forecast to expand 80bp YoY (-10bp QoQ) to 7%, driven by operating leverage.

We expect PAT to increase ~21% YoY (-9.6% QoQ) to INR1.1b. The stock trades at 21.1x FY17E and 17.7x FY18E EPS; maintain Buy.

Key issues to watch: Response to newly launched TVS Victor and roll-out initiatives Regional demand scenario, particularly in the southern region

(given its high exposure) Guidance on capex and margins Update on BMW tie-up Update on Indonesian business

Bloomberg TVSL IN Equity Shares (m) 475.1 M. Cap. (INR b)/(USD b) 149/2

52-Week Range (INR) 330/201 1,6,12 Rel Perf. (%) 8/44/37


Sales 101.0 112.8 140.1 157.4

EBITDA 6.0 7.8 11.7 13.5

Adj. PAT 3.5 4.4 7.1 8.4

EPS (INR) 7.3 9.2 14.9 17.8

EPS Gr. (%) 33.4 25.6 62.3 19.2

BV/Sh (INR) 34.6 41.1 53.0 67.2

RoE (%) 22.7 24.3 31.7 29.6

RoCE (%) 21.9 23.1 31.0 30.1

Payout (%) 30.5 29.4 20.1 20.3

Valuations

P/E (x) 43.0 34.2 21.1 17.7

P/BV (x) 9.1 7.6 5.9 4.7

EV/EBITDA (x) 26.2 20.2 13.3 11.2

Div. Yield (%) 0.6 0.7 0.8 1.0

April 2016 71

Guarded optimism Need for additional structural reforms to commence investment cycle

Domestic investment cycle: guarded optimism, exports hamstrung by weak global demand Economic activity in India has gathered momentum and an improved business confidence led to the creation of congenial conditions to restart the investment cycle. However, there near-term outlook remains cautious. Near-term challenges in overcoming the gridlock have proved to be formidable. Policy initiatives and efforts are underway for: i) expediting government approvals; and ii) establishing monetary conditions conducive to industrial revival in the medium term. We believe a revival in the initial round of investments would be triggered by: i)

sustained recovery in consumption demand, thereby boosting capacity utilization; and ii) investment push by the public sector, leading to a virtuous cycle of cash flow generation in the system. Simultaneously, sustained progress in reviving stalled projects is imperative for attracting new investments and providing the much-needed stimulus to aggregate demand.

With the initiation of GST, labor and energy sector reforms, the government haspartly addressed concerns related to the pace and extent of reforms. Successfulimplementation of substantive reforms is essential for structured growth ininvestments.

Since February 2015, Indian machinery exports have decelerated significantly,posting a decline of 6.3% (3mma, December 2015) v/s 1.9% (12mma, December2015). This could be ascribed to a multitude of factors such as weak globaldemand, geopolitical concerns and sharp currency volatility across severalmarkets. Also, the decrease in crude prices had an adverse impact on globaltrade, leading to a sharp drop in investment demand. Project awards in theMiddle East have been muted—in fact, revenue estimates for global industrialplayers suggest the sluggishness has continued for around nine quarters.

Make in India: a serious initiative; equipment manufacturers to be key beneficiaries Make in India is the central government’s new initiative to improve the manufacturing sector’s contribution through import substitution and increased exports. Few electrical equipment manufacturers stated the Prime Minister aims to ensure customers in the public and private sectors increasingly procure equipment manufactured locally. Power Grid also announced its full commitment to this initiative and has mandated T&D players to manufacture certain components in India for orders tendered out in key high-end technology products such as SVC/STATCOM, GIS, 765KV transformers and reactors, HTLS conductors, OPGW and HVDC.

Company name

ABB

Alstom T&D

Bharat Electronics

BHEL

Crompton Greaves

Cummins India

Havells India

Larsen & Toubro

Siemens

Thermax

Voltas

Technology

Ankur Sharma ([email protected]); +91 22 3982 5449 Amit Shah ([email protected]); +91 22 3029 5126

March 2016 Results Preview | April 2016

Capital Goods

mailto:[email protected]

April 2016 72

In our opinion, successful implementation along with import substitution and higher exports will be key drivers for capital goods players. Increased imports, particularly from China/South Korea, over the last five to six years has been a critical area of concern across several product segments, even where domestic manufacturing capabilities and competitiveness exist. Key beneficiaries include BHEL (railways, solar cells, power T&D, defense etc.), L&T (defense), ABB/Alstom/CRG (power T&D etc.), and TMX (industrial products/power BTG) etc.


CMP (INR) Reco Mar-16 Var %YoY



YoY Var % QoQ

Capital Goods ABB 1,282 Neutral 18,800 3.6 -22.5 1,780 24.0 -34.0 760 40.0 -44.1Alstom T&D India 423 Buy 13,934 2.4 87.4 1,306 25.2 LP 759 40.4 LP BHEL 113 Neutral 113,129 -10.8 112.4 6,847 -59.3 LP 4,210 -55.9 LP Bharat Electronics 1,180 Buy 34,132 16.6 125.0 9,093 14.7 210.8 7,933 9.7 168.3 Crompton Greaves 49 Buy 24,583 -35.4 18.9 267 -81.8 211.2 -344 PL Loss Cummins India 839 Neutral 12,696 12.0 10.7 2,128 21.0 24.5 1,879 -1.3 5.4 Havells India 316 Buy 14,869 10.2 10.6 2,170 9.8 19.6 1,523 14.9 27.8 Inox Wind 246 Buy 15,467 66.6 64.7 2,491 75.1 59.2 1,735 89.9 61.6 Larsen & Toubro 1,195 Buy 319,559 14.0 23.7 38,166 5.8 44.0 18,279 -7.4 76.6 Siemens 1,105 Neutral 27,438 3.4 18.6 2,423 -3.1 24.9 1,445 -6.4 26.7 Thermax 751 Neutral 14,856 -2.3 43.0 1,431 -8.9 44.8 1,021 -22.8 50.5Voltas 274 Buy 16,977 13.9 29.8 1,485 3.8 154.6 1,262 8.0 142.7 Sector Aggregate 626,438 4.9 36.2 69,587 -7.8 185.1 40,461 -12.4 355.3

Source: MOSL

Ordering activity supported by finalization of base orders; slight pick-up in domestic tendering activity Local ordering activity has been supported by finalization of base orders across railways, and power generation, among others. Tendering activity, which has been on a declining trend since April 2014, has witnessed an initial uptick. Ordering activity has been impacted by the delay in finalization of large orders (>INR15b). Nevertheless, the activity improved to INR2.4t (+27.4% YoY), mainly supported by finalization of base orders (<INR15b). Growth in large orders is expected to further boost ordering activity.

Tendering activity recovered from February 2015, after witnessing deceleration since February 2014. Sector-wise, roads, railways and power T&D registered strong tendering activity. Tendering activity is supported by the central government activity and state government activity continues to remain muted. Business confidence has improved since FY15. Fiscal allocations for roads/railways have been increased and successful attempts are underway to address contentious issues (in segments such as mining, gas-based plants, fertilizers, etc).

Overseas project awards, particularly in the Middle East, were relatively muted in Q3FY16 due to a sharp decline in crude oil prices. Aggregate project awards in the region dipped 3% YoY to USD121b (12-month moving average).

March 2015 Results Preview | Sector: Capital Goods March 2016 Results Preview | Sector: Capital Goods

April 2016 73

Near-term operating pressure to continue

Exhibit 2: Constrained growth in revenue

Source: MOSL, Company

Exhibit 3: EBITDA margins under pressure on slower project execution


Exhibit 4: Book-to-bill inched up to 3.3x


Exhibit 5: Decline in order intake led by delay in order finalization


Exhibit 6: Relative performance – Three-month (%)


Exhibit 7: Relative performance – One-year (%)


30.8

16

.9

31.8

29

.0

20.5

27

.5

9.2

7.5

3.7

22.0

12

.8

21.7

28

.8

16.4

16

.8

19.6

18

.2

20.9

15

.6

6.6

-5.2

-3.5

16

.615

.3

26.3

11

.7

1.3

-1.0

-0.8

-1.4

2.7

2.8

3.1

14.2

14

.5

11.7

12

.2

13.8

15

.6

11.6

13

.5

16.3

16

.9

13.5

14

.5

15.5

16

.1

12.0

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

7.3

3.8

3QFY

08

1QFY

09

3QFY

09

1QFY

10

3QFY

10

1QFY

11

3QFY

11

1QFY

12

3QFY

12

1QFY

13

3QFY

13

1QFY

14

3QFY

14

1QFY

15

3QFY

15

1QFY

16

3QFY

16

Engg Sector (revenue growth %) EBITDA Margin (%)

14.2

14

.5

11.7

12

.2

13.8

15

.6

11.6

13

.5 16

.3

16.9

13

.5

14.5

15

.5

16.1

12

.0

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

7.3

3.8

3QFY

08

1QFY

09

3QFY

09

1QFY

10

3QFY

10

1QFY

11

3QFY

11

1QFY

12

3QFY

12

1QFY

13

3QFY

13

1QFY

14

3QFY

14

1QFY

15

3QFY

15

1QFY

16

3QFY

16

EBITDA Margin (%)

3,07

3 3,

280

3,29

5 3,

367

3,26

3 3,

112

3,16

8 3,

127

2,96

4 2,

893

2,95

8 2,

989

3,02

8 2,

943

3,23

0 3,

482

3,59

4 3,

605

3,80

9 3,

729

3,91

2

2.9

3

.0

2.9

2

.8

2.6

2

.3

2.3

2

.2

2.2

2

.1

2.3

2

.3

2.4

2

.4

2.6

2

.9

3.0

3

.1

3.2

3

.2

3.3

3QFY

114Q

FY11

1QFY

122Q

FY12

3QFY

124Q

FY12

1QFY

132Q

FY13

3QFY

134Q

FY13

1QFY

142Q

FY14

3QFY

144Q

FY14

1QFY

152Q

FY15

3QFY

154Q

FY15

1QFY

162Q

FY16

3QFY

16

Order book (INR b) BTB (x)

-16

20

-23 -1

2-3

4-4

739

-2

415

58

17

56

52

-2 -131

14

22

-18

-31

6

3QFY

11

1QFY

12

3QFY

12

1QFY

13

3QFY

13

1QFY

14

3QFY

14

1QFY

15

3QFY

15

1QFY

16

3QFY

16

Order intake YoY %

72

80

88

96

104

Dec-

15

Jan-

16

Feb-

16

Mar

-16

Sensex Index MOSL Capital Goods Index

60

73

86

99

112

Mar

-15

Apr-

15

May

-15

Jun-

15

Jul-1

5

Aug-

15

Sep-

15

Oct

-15

Nov

-15

Dec-

15

Jan-

16

Feb-

16

Mar

-16

Sensex Index MOSL Capital Goods Index

March 2016 Results Preview | Sector: Capital Goods

April 2016 74


(INR) FY16E FY17E FY18E FY16E FY17E FY18E FY16E FY17E FY18E FY16E FY17E FY18E Capital Goods ABB 1,282 Neutral 15.8 21.4 25.8 81.4 60.0 49.7 36.5 28.9 24.7 11.1 13.1 13.6 Alstom T&D India 423 Buy 4.8 9.9 13.2 87.7 42.6 31.9 39.5 23.7 18.3 9.2 17.6 21.1 BHEL 113 Neutral -3.5 6.6 6.8 -32.4 17.2 16.6 -8.2 8.8 6.2 -2.5 4.7 4.7Bharat Electronics 1,180 Buy 56.5 61.0 70.3 20.9 19.4 16.8 16.9 14.7 12.5 15.2 14.3 14.7 Crompton Greaves 49 Buy -3.7 1.9 5.0 -13.4 25.4 9.9 39.7 7.1 4.1 -5.8 3.2 7.9Cummins India 839 Neutral 28.2 33.3 37.5 29.7 25.2 22.4 28.3 22.8 18.8 25.6 26.8 26.7 Havells India 316 Buy 7.5 10.8 12.7 42.0 29.2 24.8 22.8 19.2 15.7 20.4 25.9 26.8 Inox Wind 246 Buy 19.6 30.0 30.7 12.6 8.2 8.0 9.2 6.3 5.5 27.9 33.6 27.3 K E C International 124 Buy 7.6 9.4 11.0 16.4 13.2 11.2 7.9 6.1 5.6 13.8 15.1 15.6 Larsen & Toubro 1,195 Buy 44.4 57.6 67.9 26.9 20.8 17.6 17.0 13.5 11.5 9.8 11.7 12.7 Siemens 1,105 Neutral 16.9 21.4 27.5 65.2 51.7 40.2 38.0 29.3 25.6 11.8 11.6 13.6 Solar Inds. 3,466 Buy 88.5 102.1 120.3 39.2 33.9 28.8 22.4 18.8 16.3 19.1 18.9 19.1 Thermax 751 Neutral 24.0 28.9 33.9 31.3 26.0 22.2 16.7 14.0 11.7 12.8 14.1 15.0 Va Tech Wabag 520 Buy 23.0 34.5 37.3 22.6 15.1 13.9 11.2 8.2 7.3 13.2 17.5 16.6 Voltas 274 Buy 9.9 12.0 15.1 27.7 22.8 18.1 19.2 15.7 12.1 14.7 16.0 17.7 Sector Aggregate 39.2 23.7 20.1 22.1 14.7 12.4 7.2 11.0 11.9



April 2016 75

Quarterly Performance (INR m) Y/E December CY15 CY16E CY15 CY16E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q Sales 18,146 19,316 19,690 24,252 18,800 20,763 21,352 24,584 80,152 84,209 Change (%) (0.7) 6.0 6.7 8.3 3.6 7.5 8.4 1.4 5.0 5.1 EBITDA 1,436 1,610 1,557 2,698 1,780 2,162 2,228 3,181 7,465 9,351 Change (%) 5.0 15.2 15.3 41.2 24.0 34.3 43.1 17.9 24.6 25.3 As % of Sales 7.9 8.3 7.9 11.1 9.5 10.4 10.4 12.9 9.3 11.1 Depreciation 422 375 359 442 450 500 550 138 1598 1638 Interest 208 246 250 207 210 350 400 419 912 1,379 Other Income 7 10 5 108 10 10 20 10 130 130 PBT 813 999 954 2,156 1,130 1,322 1,298 2,634 5,086 6,464 Tax 270 315 366 796 370 400 386 783 1,747 1,939 Effective Tax Rate (%) 33.2 31.5 38.4 36.9 32.7 30.2 29.8 29.7 34.4 30.0 Reported PAT 543 575 587 1,295 760 932 902 1,931 2,999 4,525 Adj. PAT 543 685 587 1,360 760 932 902 1,931 3,339 4,525 Change (%) -13.4 12.8 4.9 42.9 40.0 36.2 53.5 42.0 22.8 35.5 Order Intake 18,560 18,950 22,920 20,580 20,973 21,793 27,046 24,900 81,000 94,710 Order Book 79,730 79,560 82,750 79,460 81,933 80,790 87,926 81,495 79,460 88,394 BTB (x) 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 E: MOSL Estimates,*: As reported by ABB


ABB

CMP: INR1,282 TP: INR1,380 Neutral ABB continues to focus on increased localization and cost

optimization, whereby direct raw material costs declined to 64.3%of revenue from a peak of 81% in 4QCY10. This aided margins,despite a negative operating leverage. The company has set aninternal target to reduce the share to 65% over the next few years.

ABB launched an intelligent home automation system to combinethe controls of lighting, temperature, blinds and security of theentire household on a single interface. Rapid urbanization has led to30% YoY growth in the residential market. The company rolled-outa cumulative solar inverter capacity (1GW) and commenced themanufacturing of wind converters. With the Indian government’sfocus on reaching 160GW generation capacity by 2020, therenewable energy segment could be one of the key business driversfor ABB, going forward; maintain Neutral.

Key issues to watch: Management commentary suggests cautious optimism; continued

focus on exports and services to be an important driver, with projection of strong double-digit growth

Continued preference for cash generation vis-à-vis profits

Bloomberg ABB IN

Equity Shares (m) 211.9


Financial Snapshot (INR b) Y/E Dec 2015 2016E 2017E 2018E

Net Sales 77.3 81.4 85.5 97.5 EBITDA 6.0 7.5 9.4 10.9 Adj PAT 2.3 3.0 4.5 5.5

Adj EPS (INR) 12.8 15.8 21.4 25.8 EPS Gr (%) 35.0 22.8 35.5 20.7 BV/Sh (INR) 132.7 142.0 163.3 189.1

RoE (%) 9.7 11.1 13.1 13.6 RoCE (%) 9.2 10.5 14.0 14.5 Payout (%) 28.8 23.5 34.3 34.3 Valuations

P/E (x) 99.8 81.3 60.0 49.7 P/BV (x) 9.7 9.0 7.8 6.8


April 2016 76

Quarterly Performance (INR m) FY15 FY16 FY15 FY16E

Y/E March 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Sales 6,711 9,076 7,629 13,613 7,952 9,031 7,436 13,934 84,678 92,963 Change (%) 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2 7.2 9.8 EBITDA 744 877 374 1,043 462 1,025 -14 1,306 5,118 6,898 Change (%) 70.3 70.3 70.3 70.3 70.3 70.3 70.3 70.3 0.0 0.0 As % of Sales 7.0 7.0 7.0 7.0 7.0 7.0 7.0 7.0 6.0 7.4 Depreciation 194 191 220 214 212 215 215 232 881 875 Interest 143 211 149 205 117 143 168 162 3,089 2,856 Other Income 23 62 35 70 165 23 117 122 116 127 Extra-ordinary Items -27 0 0 0 0 0 0 0 -1,351 0 PBT 458 538 39 694 299 691 -280 1,034 1,264 3,294 Tax 146 183 14 153 104 228 -98 275 1,001 1,307 Effective Tax Rate (%) 31.8 34.0 34.3 22.1 34.6 33.0 35.1 26.6 79.2 39.7 Reported PAT 313 355 26 541 195 463 -182 759 1,610 1,960 Change (%) -346.7 -346.7 -346.7 -346.7 -346.7 -346.7 -346.7 -346.7 0.0 0.0 Adj PAT 285 355 26 541 195 463 -182 759 260 1,960 Change (%) - 24.4 -92.7 1,988.0 - 136.8 -139.3 -516.9 -37.6 270.0

E: MOSL Estimates


Alstom T&D

CMP: INR423 TP: INR470 Buy We expect Alstom T&D’s revenue to grow just 2% YoY to INR13.9b

in 4QFY16 due to a delay in the execution of Champa-KurukshetraPhase I project.

We expect operating profit to increase 25% YoY to INR1.3b in4QFY16, primarily on the 235bps improvement in gross margins to28.2% (25.9% in 4QFY15).

Net profit is projected to rise 40% YoY to INR759m.

During the quarter, Alstom T&D bagged circuit breaker andsubstation orders worth INR1.4b from PGCIL. The substation orderentails construction of 400/220KV pooling station for an ultra-megasolar power station (INR1.3b) at Rewa, Madhya Pradesh, whereasthe circuit breaker package contract is for a green energy corridorat the Ajmer and Chittorgarh sub-stations; maintain Buy.

Key issues to watch: Progress in the Champa-Kurukshetra Phase I project

Bloomberg ATD IN Equity Shares (m) 256.1




Adj EPS (INR) 4.7 4.8 9.9 13.2 EPS Gr (%) 5.6 2.5 105.9 33.4 BV/Sh. (INR) 51.2 53.8 59.1 66.3

RoE (%) 9.4 9.2 17.6 21.1 RoCE (%) 10.8 10.1 16.6 19.3 Payout (%) 38.5 38.5 38.5 38.5 Valuations

P/E (x) 89.9 87.7 42.6 31.9 P/BV (x) 8.3 7.9 7.2 6.4


April 2016 77

Quarterly Performance (INR m) Y/E March FY15 FY16 FY15 FY16E

1Q 2Q 3Q 4Q 1Q 2QE 3Q 4QE Sales 10122 12940 16082 29282 10953 14677 15172 34132 68427 74934 Change (%) 12.7 23.9 33.9 -6.5 8.2 13.4 -5.7 16.6 9.0 9.5 EBITDA -455 1189 2781 7926 -54 1754 2926 9093 11441 13719 Change (%) -19 6812 56 3 -88 48 5 15 28 20 As % of Sales -4.5 9.2 17.3 27.1 -0.5 12.0 19.3 26.6 16.7 18.3 Depreciation 364 375 374 426 404 403 414 584 1540 1806 Interest 0 3 0 11 0 3 1 -4 14 0 Other Income 1152 1106 1135 1386 1255 1375 1355 1165 4780 5150 PBT 333 1917 3542 8874 798 2724 3865 9677 14667 17063 Tax 77 448 824 1645 191 656 908 1744 2994 3498 Effective Tax Rate (%) 23.2 23.3 23.3 18.5 23.9 24.1 23.5 18.0 20.4 20.5 Reported PAT 256 1470 2718 7229 607 2068 2957 7933 11672 13565 Change (%) 49.0 147.2 41.8 9.0 137.1 40.7 8.8 9.7 25.3 16.2 Adj PAT 256 1470 2718 7229 607 2068 2957 7933 11672 13565 Change (%) 49.0 147.2 41.8 9.0 137.1 40.7 8.8 9.7 25.3 16.2 E: MOSL Estimates


Bharat Electronics

CMP: INR1,180 TP: INR1,470 Buy Bharat Electronics signed a MoU with Rosoboronexport for the joint

development of various sub-systems for major defense projectsunder the offset clause of DPP 2106. The tie-up will cater to therequirements of all three arms of the defense forces and the civiliansector.

For 9M FY16, BHE’s order inflow totaled INR152b, well ahead of itsinitial guidance of INR100b for FY16.

The company plans to focus on missile system orders, such asAakash and other long range/medium range surface to air missiles,and become a system integrator rather than a product developer.

BHE plans to explore opportunities in critical infrastructureprotection, air traffic management radars, intelligent trafficmanagement systems, solar power plants and smart city elements.

The company has planned capex of INR15b over the next threeyears for the modernization and expansion of existing facilities tosupport the government’s Make in India initiative. Of this, asignificant amount has been earmarked for developing BMS testbed, TCS test bed, test bed for missile system, etc; maintain Buy.

Key issues to watch: Revenue growth, as key orders (Akash Missile, intake INR67b in

FY11–12) currently under execution for Army and Air Force Operating at 60% capacity utilization; possibility of a strong

operating leverage

Bloomberg BHE IN Equity Shares (m) 240.0



Net Sales 68.4 74.9 84.7 97.5 EBITDA 11.4 13.7 15.3 17.3 NP 11.7 13.6 14.6 16.9

EPS (INR) 48.6 56.5 61.0 70.3 EPS Gr. (%) 25.3 16.3 7.9 15.3 BV/Sh (INR) 329 372 426 480



EV/ Sales (x) 1.9 3.2 2.7 2.3

April 2016 78

Quarterly Performance (INR m) Y/E March FY15 FY16 FY15 FY16E 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Sales (Net) 51,550 61,440 61,980 126,860 43,617 59,380 53,256 113,129 301,830 269,381 Change (%) -20.2 -31.7 -28.2 -16.0 -15.0 -3.4 -14.1 -10.8 -23.0 -10.8 EBITDA 2,179 2,915 2,938 16,818 -2,093 -4,742 -16,387 6,847 20,992 -16,376 Change (%) -43.9 -29.2 -70.2 -38.5 -196.1 -262.6 -657.8 -59.3 -54.0 -178.0 As % of Sales 4.3 4.8 4.7 13.3 -4.9 -8.0 -30.8 6.1 7.0 -6.1 Interest 473 126 52 265 33 44 52 71 917 200 Depreciation 2,725 2,662 2,564 2,821 2,425 2,249 2,255 2,816 10,773 9,745 Other Income 3,478 1,961 2,741 160 4,924 3,733 1,706 1,758 8,340 12,120 PBT 2,459 2,088 3,062 13,892 373 -3,302 -16,989 5,717 21,501 -14,201 Tax 524 840 936 4,907 34 -1,253 -5,969 1,507 7,207 -5,680 Effective Tax Rate (%) 21.3 40.2 30.6 35.3 9.1 37.9 35.1 26.4 33.5 40.0 Reported PAT 1,935 1,248 2,126 8,884 339 -2,049 -11,020 4,210 14,193 -8,521 Change (%) -58.4 -72.6 -69.4 -51.8 -82.5 -264.1 -618.3 -52.6 -59.0 -160.0 Adj. PAT 1,935 1,248 2,126 9,542 339 -2,049 -11,020 4,210 14,297 -8,521 Change (%) -58.4 -78.8 -69.4 -49.3 -82.5 -264.1 -618.3 -55.9 -59.1 -159.6 Order intake 11,290 129,490 66,410 100,950 196,880 19,350 57,771 162,539 308,140 436,540 Order book (INRb) 974 1,037 1,040 1,040 1,162 1,123 1,118 1,084 1,018 1,084 BTB (x) 2.6 3.0 3.3 3.5 4.0 4.0 4.0 3.9 3.4 3.9 E: MOSL Estimates

CMP: INR113 TP: INR140 Neutral BHEL’s reported performance is expected to remain constrained on

muted trends in execution. We estimate revenues to decline 10.8% YoY, EBIDTA margins at 6.1% (vs 13.3% YoY) and PAT to dip 53% YoY, mainly due to the execution of JDU clause orders, where raw material cost is significantly greater than others. Margins are likely to contract on higher raw material cost.

During the quarter, BHEL secured orders for setting up supercritical thermal power projects totaling 4000MW (2x800MW, 2x800MW, 1x800MW) in capacity and worth INR118.6b. TANGEDCO awarded a 2400MW order for setting up the 1600MW Ramanathpuram super critical thermal power plant and 800MW North Chennai supercritical TPS stage III. BHEL has also received an 800MW supercritical boiler contract from Ramagundam Power Station in Karimnagar, Telangana.

BHEL is L1 in 7.5GW of projects including: i) 2,640MW Barethi (BTG); ii) 4,000MW Pudimadka turbine generator project; iii) 660MW Mahagenco Bhusawal (EPC); iv) 1000MW Pakaldul hydro project; and v) 1320MW Maitree project, among others. Railways, defense and solar energy are expected to be significant growth drivers; maintain Neutral.

Key issues to watch: Continued constraint on execution due to operational issues Trends in provisions, particularly for liquidated damages on

project completion Employee retirements (2,200 in FY15) to total 700+ in 4QFY16

Bloomberg BHEL IN

Equity Shares (m) 2,447.6



Net Sales 301.8 269.4 318.9 354.7 EBITDA 21.0 -16.4 18.9 23.1 Adj PAT 14.3 -8.5 15.8 16.4 EPS (INR) 5.8 -3.5 6.5 6.7 EPS Gr. (%) -58.8 -159.6 -285.4 3.7 BV/Sh. (INR) 139.3 136.6 141.6 146.7 RoE (%) 4.3 -2.5 4.6 4.6 RoCE (%) 4.3 -2.5 4.6 4.6 Payout (%) 19.9 20.0 20.0 20.0 Valuations

P/E (x) 19.3 -32.5 17.5 16.9 P/BV (x) 0.8 0.8 0.8 0.8 EV/EBITDA (x) 8.5 -8.5 9.2 6.6 Div Yield (%) 1.0 -0.6 1.1 1.2 * Consolidated


BHEL

April 2016 79

Quarterly performance (Consolidated) (INR m) Y/E March FY15 FY16 FY15 FY16E 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Sales (Net) 34,415 34,303 24,093 38,081

31,658 22,689 20,678 24,583 140,131 88,287

Change (%) 7.7 5.8 -28.9 0.1

-8.0 -33.9 -14.2 -35.4 2.8 -37.0 EBITDA 1,728 1,684 627 1,469

791 878 86 267 6,424 901

Change (%) 19.4 4.4 -62.5 -21.9

-54.2 -47.9 -86.3 -81.8 5.0 -86.0 Adjusted EBITDA 1,728 1,684 627 1,469

791 878 86 267 6,424 901

As % of Sales (Adj) 5.0 4.9 2.6 3.9

2.5 3.9 0.4 1.1 4.6 1.0 Depreciation 671 661 603 623

680 618 642 650 2,620 2,531

Interest 245 225 311 298

280 174 147 117 1,047 588 Other Income 386 455 271 189

456 176 197 207 1,274 1,000

EO Income/(Exp) 0 0 2,671 -2,397

517 317 -108 0 -727 1,571 PBT 1,198 1,252 -2,687 3,135

804 578 -614 -293 4,758 475

Tax 550 570 489 336

653 357 459 46 2,220 1,116 Effective Tax Rate (%) 45.9 45.5 -18.2 10.7

81.2 61.8 -74.8 -15.7 46.7 234.9

Minority interest 8.6 -13.6 -15.1 -9.8

-9.2 -22.8 -3.2 5.3 -29.9 -29.9 Reported PAT 640 696 -3,161 2,809

160 243 -1,070 -344 2,568 -611

Adjusted PAT 640 696 -490 412

-357 -73 -962 -344 1,841 -2,303 Change (%) 6.6 19.1 (178.9) (35.5)

(155.8) (110.5) 96.5 (183.6) 21.2 (225.1)

Order book 95,860 91,090 86,660 75,790

79,050 84,280 79,540 83,745 75,790 75,790 Order Intake 28,990 25,060 24,020 25,910

25,060 28,860 21,040 21,709 103,980 96,669

BTB (x) 0.7 0.6 0.7 0.6

0.8 0.9 1.1 0.8 0.5 0.9 E: MOSL Estimates


Crompton Greaves

CMP: INR49 TP:INR70 Buy The board of Crompton Greaves accepted the revised sale offer for

the overseas T&D business from First Reserve international, a US-based private equity firm, for an enterprise value of EUR115m on a debt-free, cash-free basis. With this sale, management plans to progress on the Indian power and industrial businesses.

The company divested the Canadian power transformer business to PTI Holdings Ltd for an enterprise value of CAD20m. Also, Crompton sold CG Lucy (a JV) for INR402.6m to a British company, W Lucy and Company Ltd.

Management intends to monetize non-core assets worth ~INR10b, including additional land at Kanjurmarg, to lower the standalone business debt; maintain Buy.

Key issues to watch: Lowering debt in the demerged business through asset sale Plans to sell ZIV during Q1FY17

Bloomberg CRG IN

Equity Shares (m) 626.8 M. Cap. (INR b)/(USD b) 31/0

52-Week Range (INR) 69/39 1,6,12 Rel Perf. (%) 1/-10/-1


Net Sales 140.1 88.3 79.4 63.4 EBITDA 6.4 0.9 3.4 4.7 Adj PAT 1.8 -2.3 1.2 3.1

EPS(INR) 2.9 -3.7 1.9 5.0 EPS Gr. (%) 21.2 -225.1 -152.6 157.5 BV/Sh. (INR) 60.9 60.0 61.4 65.0

RoE (%) 4.9 -5.8 3.2 7.9 RoCE (%) 4.0 -0.5 3.4 7.9 Payout (%) 24.0 24.0 24.0 24.0 Valuation

P/E (x) 16.0 -12.8 24.3 9.4 P/BV (x) 0.8 0.8 0.8 0.7

EV/EBITDA (x) 7.8 38.2 6.7 3.8 Div Yield (%) 1.6 -0.6 0.9 2.4 * Consolidated

April 2016 80

Quarterly Performance (Standalone) (INR m) Y/E March FY15 FY16 FY15 FY16E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Sales 10,451 11,440 10,831 11,335 13,143 11,977 11,469 12,696 44,058 49,355 Change (%) 1.6 25.2 5.9 18.6 25.8 4.7 5.9 12.0 13.0 12.0 EBITDA 1,799 1,899 1,894 1,759 2,180 2,007 1,710 2,128 7,351 8,094 Change (%) 2.4 24.4 -4.2 2.9 21.2 5.7 -9.7 21.0 26.8 6.9 As % of Sales 17.2 16.6 17.5 15.5 16.6 16.8 14.9 16.8 16.7 16.4 Depreciation 186 204 217 191 203 200 201 280 797 884 Interest 13 10 13 10 2 2 2 39 45 45 Other Income 1,067 726 411 661 601 600 566 499 2,866 2,264 PBT 2,667 2,412 2,075 2,220 2,575 2,405 2,072 2,308 9,374 9,429 Tax 547 388 265 315 467 419 288 429 1,515 1,603 Effective Tax Rate (%) 20.5 16.1 12.8 14.2 18.1 17.4 13.9 18.6 16.2 17.0 Adjusted PAT 2,120 2,024 1,810 1,904 2,107 1,986 1,784 1,879 7,859 7,826 Change (%) 27.6 39.8 23.0 34.3 (0.6) (1.9) (1.5) (1) 31.0 (0.4) Reported PAT 2,120 2,024 1,810 1,904 2,107 1,986 1,784 1,879 7,859 7,826 Change (%) 27.6 39.8 23.0 34.3 (0.6) (1.9) (1.5) (1) 31.0 (0.4) E: MOSL Estimates


Cummins India

CMP: INR839 TP: INR1,013 Neutral We expect revenue to improve 12% YoY, led by strong growth in

the domestic power generation (19%) and automotive (19%) segments. Under power generation, demand would be supported by an improvement in overall construction activity. Domestic revenues are projected to increase 15% YoY in 4QFY16 aided by the strong domestic demand environment and KKC’s various pricing actions to regain lost market share (post CPCB-2 compliance).

Export revenue is expected to rise 5% YoY to INR4.8b in 4QFY16. Exports declined 6% in 3QFY16 on lower LHP exports due to weak demand in LatAm, Europe and China. We expect LHP exports to register 15% YoY growth.

Margins are expected to improve 130bps YoY, aided by operating leverage, favorable currency movement (KKC retains 100% of gains up to 3% from a base rate view) and a decline in pig iron prices (down 14% in the last one year); maintain Neutral.

Key issues to watch: Cost optimization possibilities in power gen business, given

increased localization, due to significant increase in imports post CPCB-2 implementation

Growth in exports as Exports declined 6% YoY in 3QFY16 on weak demand in LatAm, Europe and China

Bloomberg KKC IN


M. Cap. (INR b)/(USD b) 233/3 52-Week Range (INR) 1247/790 1,6,12 Rel Perf. (%) -5/-17/9


Net Sales 44.1 49.4 56.6 66.6

EBITDA 7.4 8.1 10.0 12.1 Adj PAT 7.9 7.8 9.2 10.4 EPS (INR) 28.3 28.2 33.3 37.5

EPS Gr. (%) 31.0 (0.4) 18.0 12.4 BV/Sh. (INR) 104.1 116.9 131.9 148.8 RoE (%) 28.8 25.6 26.8 26.7

RoCE (%) 29.0 25.7 26.9 26.8 Payout (%) 49.4 47.2 47.2 47.2 Valuation


Div Yield (%) 1.6 1.5 1.8 2.1

April 2016 81

Quarterly Performance (INR m) Y/E March FY15 FY16 FY15 FY16E (Standalone) 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Sales 12,769 13,651 12,474 13,493 12,671 13,498 13,445 14,869 52,387 54,483 Change (%) 21.5 16.3 5.3 3.0 -0.8 -1.1 7.8 10.2 11.0 4.0 Adj EBITDA 1,643 1,837 1,815 1,976 1,606 1,876 1,815 2,170 7,271 7,456 Change (%) 16.5 8.7 11.2 -6.1 -2.3 2.2 0.0 9.8 6.4 2.5 Adj EBITDA margin (%) 12.9 13.5 14.5 14.6 12.9 14.0 13.5 14.6 13.9 13.7 Depreciation 208 225 230 213 225 229 232 308 875 993 Interest 33 59 72 12 30 29 19 -3 176 75 Other Income 115 115 89 124 168 96 132 279 443 675 PBT 1,496 1,664 1,591 1,713 1,496 1,702 1,712 2,144 6,463 7,044 Tax 423 468 428 494 423 494 505 621 1,813 2,043 Effective Tax Rate (%) 28.3 28.1 26.9 28.9 28.2 29.1 29.5 29.0 28.1 29.0 Reported PAT 1,073 1,196 1,162 1,219 1,074 1,207 1,208 1,523 4,649 5,001 Change (%) 13.3 -4.9 -4.3 -11.0 0.1 0.9 3.9 25.0 -2.9 7.6 Adj PAT 1,089 1,216 1,188 1,325 1,090 1,216 1,191 1,523 4,818 5,020 Change (%) 5.8 -4.6 0.2 -19.9 0.1 0.0 0.3 14.9 -6.3 4.2 E: MOSL Estimates


Havells India

CMP: INR316 TP: INR360 Buy Standalone revenue growth is expected to rebound and reach

10.2%, supported by a low base effect (revenue growth at 3.0% in4QFY15).

We expect sales growth across all of the business segments.Operating margins are estimated to remain stable at 14.6% YoY in4QFY16.

Net profit is projected to grow 25% YoY, led by an improvement innon-operating income. We have considered an incremental cashinfusion due to Sylvannia’s sale to Sanghai Fielo for EUR149m;maintain Buy.

Key issues to watch: Performance of Reo and Standard brands; commentary on new

product launches Guidance on deployment of cash received from the sale of

Sylvannia to Sanghai Feilo

Bloomberg HAVL IN




Net Sales 85.7 76.1 64.0 75.3 EBITDA 7.2 7.9 9.2 11.0 Adj PAT 5.2 4.7 6.8 7.9 Adj EPS (INR) 8.3 7.5 10.8 12.7 EPS Gr. (%) -4.7 -9.0 44.0 17.4BV/Sh(INR) 29.1 36.8 41.8 47.5 RoE (%) 28.4 20.4 25.9 26.8 RoCE (%) 27.7 31.0 35.5 37.3 Payout (%) 57.6 62.3 54.0 55.2 Valuations

P/E (x) 38.2 42.0 29.2 24.9 P/BV (x) 10.9 8.6 7.6 6.7 EV/EBITDA (x) 21.6 22.9 19.3 15.7 Div Yield (%) 0.9 1.3 1.6 1.9 * Consolidated

April 2016 82

Quarterly Performance (INR m) (Consolidated) FY15 FY16 FY15 FY16E Y/E March 1Q 2Q 3Q 4Q

1Q 2Q 3Q 4QE

Sales 3,031 5,409 9,302 9,285

6,338 10,059 9,392 15,467 27,027 41,254 Change (%)

109.1 86.0 1.0 66.6 52.6

EBITDA 417 809 1,547 1,423

925 1,402 1,565 2,491 4,187 6,383 Change (%)

121.8 73 1 75 1.4 52.5

As of % Sales 13.8 15.0 16.6 15.3

14.6 13.9 16.7 16.1 15.5 15.5 Depreciation 43 49 56 56

63 79 85 88 204 315

Interest 157 146 162 158

221 284 201 281 623 986 Other Income 28 83 49 54

128 230 173 179 215 710

Extra-ordinary Items -40.8 -38.4 28.8 (265)

82 55.5 42.4 0.0 (316) 180 PBT 286 736 1,350 1,528

687 1,214 1,410 2,302 3,891 5,613

Tax 52 191 336 349

182 323 378 567 927 1,450 Effective Tax Rate (%) 18.0 26.0 24.9 22.8

26.5 26.6 26.8 24.6 23.8 25.8

Reported PAT 235 545 1,014 1,179

505 891 1,031 1,735 2,964 4,163 Change (%)

115.1 63.6 1.7 47.2 125.5 40.4

Adj PAT 194 506 1,043 914

587 947 1,074 1,735 2,648 4,342 Change (%)

202.5 87.0 3.0 89.9 124.1 64.0

E: MOSL Estimates


Inox Wind

CMP: INR246 TP: INR380 Buy During the quarter, Inox Wind Infrastructure Services Limited

(subsidiary of Inox Wind) acquired Vinirmaa Energy Generation Private Limited and Sarayu Wind Power Private Limited to enhance presence in the southern region.

During the quarter, Inox Wind won a 24MW wind turbine order from Continuum Wind Energy.

Inox Wind bagged a 100 MW wind power project at Rojmal, Gujarat, from Tata Power Renewable Energy Limited. The former would supply and install 50 units of 2MW DFIG100 rotor dia wind turbine generators.

The company commissioned common power evacuation systems at its Lahori site in Madhya Pradesh. The systems comprise a 220KV sub-station and a 220KV transmission line required for the evacuation of 200MW wind power.

Inox Wind won a 20MW turnkey wind power project, to be set up at Nipanniya, Madhya Pradesh, from PTC Energy Ltd.

The company received a 52MW order from IOC and GIPCL (26MW each) in Mahidad, Gujarat.

We expect Inox Wind’s revenue to increase 67% YoY to INR15.5b on strong project execution and net profit growth of 90% YoY. In our opinion, the company would book wind turbine supplies of 800MW and commission 600MW of these turbines in FY16; maintain Buy.

Key issues to watch: Total order book of 1,228MW to be executed over the next 15

months; estimates factor in execution of 302MW during 4QFY16 Working capital cycle stands elongated at 168 days, led by high

debtor days; management expects the cycle to improve to 120 days by the end of FY16

Bloomberg INXW IN Equity Shares (m) 221.9

M. Cap. (INR b)/(USD b) 55/1 52-Week Range (INR) 495/217 1,6,12 Rel Perf. (%) -

Financial Snapshot (INR b) Y/E Sept 2015 2016E 2017E 2018E



RoE (%) 32.7 27.9 33.6 27.3 RoCE (%) 21.8 19.5 23.4 20.8 Payout (%) 0.0 20.0 20.0 20.0 Valuation

P/E (x) 20.6 12.6 8.2 8.0 P/BV (x) 3.9 3.2 2.4 2.0


April 2016 83

Quarterly Performance (Consolidated)

(INR m) Y/E March FY15 FY16 FY15 FY16E 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Sales 189,748 211,593 238,479 280,226 202,522 233,932 258,293 319,559 920,046 1,014,399 Change (%) 9.8 10.4 9.6 3.8 7.0 10.6 8.3 14.0 8% 10% EBITDA 25,153 23,341 28,900 36,090 22,902 25,917 26,499 38,166 113,356 113,484 Change (%) 34.3 -6.8 9.8 -3.5 -8.9 8.6 -8.3 5.8 5.4 0.1 Margin (%) 13.3 11.0 12.1 12.9 11.3 11.1 10.3 11.9 12.3 11% Depreciation 8,073 5,486 6,791 5,876 6,222 6,936 6,198 6,547 26,225 25,903 Interest 7,787 6,904 9,204 4,739 7,067 8,278 7,446 7,285 28,507 30,076 Other Income 2,770 2,145 2,347 2,808 2,574 2,191 4,517 2,479 10,072 11,760 Extraordinary Inc/(Exp) 2,493 0 0 984 0 3,096 0 0 3,477 3,096 Reported PBT 14,556 13,096 15,252 29,267 12,186 15,990 17,371 26,813 72,173 72,360 Tax 4,490 4,692 5,693 7,961 5,458 4,936 5,555 7,601 22,836 23,782 Effective Tax Rate (%) 30.8 35.8 37.3 27.2 44.8 30.9 32.0 28.3 31.6 34.0 Reported PAT 9,669 8,616 8,665 20,732 6,062 9,959 10,348 18,279 47,648 44,647 Change (%) 110.8 6.9 8.8 -27.1 -37.3 15.6 19.4 -11.8 -2.9 3.8 Adjusted PAT 7,176 8,616 8,665 19,748 6,062 6,863 10,348 18,279 44,171 41,552 Change (%) 67.4 6.9 16.6 5.6 -21.0 -20.3 7.8 8.7 5.2 7.9 E: MOSL Estimates


Larsen & Toubro

CMP: INR1,195 TP: INR1,440 Buy L&T’s order intake stood at INR172b in 4QFY16 compared to

INR278b in 4QFY15. Order announcements for FY16 stood at INR515b as against INR886b in FY15. Domestic order wins is supported by a large water infrastructure project, construction of a residential project in Mumbai (for INR201b), and a turnkey order for the construction of a convention center, business center and two hotel towers (INR150b).

Overseas wins have been muted, particularly impacted by the sharp decline in crude prices; the three-month moving average order awards in the Middle East are down 50% YoY.

During the quarter, L&T Hydrocarbon Engineering Ltd signed an agreement with McDermott to focus on subsea projects in the deep-water segment on the East coast of India. The consortium has also received an order worth INR24.5b for the Vashishta deep-water greenfield development; maintain Buy.

Key issues to watch: Hydrocarbons: Pick-up in execution (given project specific

challenges) and provisions (FY15 EBITDA loss at INR11.3b) – key trend

Profitability of Heavy Engineering segment that booked losses of INR1.4b in 2QFY16 on under recovery of cost and provisions for foreseeable losses

Net working capital (excluding financial services) at 24% of revenue in 3QFY16 remains at a high, given tight liquidity conditions

E&C execution to report strong growth in 4QFY16 as large-sized orders awarded in 2HFY15 to enter execution phase

Bloomberg LT IN


52-Week Range (INR) 1886/1017 1,6,12 Rel Perf. (%) -1/-16/-19


Sales 920 1,014 1,156 1,303 EBITDA 113 113.5 144.9 171.0 Adj PAT * 44 41.6 53.8 63.5

EPS (INR)* 47 44.4 57.6 67.9 EPS Gr. (%) -4.2 -5.9 29.6 18.0 RoE (%) 437.3 470.2 511.8 561.2

RoCE (%) 11.2 9.8 11.7 12.7 Payout (%) 6.5 5.7 6.7 7.5 Sales 27.5 22.3 23.9 23.8 Valuation

P/E (x)* 25.3 26.9 20.8 17.6 P/BV (x) 2.9 2.7 2.5 2.3

EV/EBITDA (x) 17.3 17.9 14.1 12.1 Div Yield (%) 1.1 0.8 1.2 1.4 * Consolidated

April 2016 84

Quarterly Performance (Standalone) (INR m) Y/E September FY15 FY16 FY15 FY16E 1Q 2Q 3Q 4Q 1Q 2QE 3QE 4QE Total Revenues 21,860 26,530 23,760 32,995 23,142 27,438 25,243 33,929 105,124 109,752 Change (%) -1.9 5.2 0.1 3.5 5.9 3.4 6.2 2.8 -1.4 2.9 EBITDA 1,890 2,502 2,531 2,817 1,940 2,423 2,098 5,534 9,761 12,145 As % of Revenues 8.6 9.4 10.7 8.5 8.4 8.8 8.3 16.3 9.2 11.1 Depreciation 564 553 564 475 586 574 570 541 2,156 2,271 Interest 19 13 18 23 19 21 22 31 73 93 Other Income 303 360 555 407 411 395 585 349 1,604 1,740 Extra-ordinary Items 5,280 74 0 469 0 0 0 0 5,798 0 PBT 6,890 2,371 2,503 3,195 1,746 2,223 2,091 5,310 15,080 11,706 Tax 549 752 821 1,004 606 778 732 1,795 3,102 3,911 Effective Tax Rate (%) 8.0 31.7 32.8 31.4 34.7 35.0 35.0 33.8 20.6 33.4 Reported PAT 6,341 1,619 1,683 2,191 1,140 1,445 1,359 3,515 11,978 7,795 Adjusted PAT 1,061 1,544 1,683 1,722 1,140 1,445 1,359 3,515 6,034 7,609 Change (%) 117.4 74.9 2.6 12.9 7.5 -6.4 -19.2 104.1 33.0 67.8 Order Intake (INR b) 21 27 22 31 34 28 25 26 101 113 Order book (INR b) 121 102 101 96 108 102 102 107 96 107 BTB (x) 1.2 1.0 1.0 1.3 1.0 0.9 0.9 1.0 0.9 1.0 E: MOSL Estimates, Adj EBITDA: Adjusted for change in project revenues and cost estimates; Year ending September


Siemens

CMP: INR1,105 TP: INR970 Neutral Siemens Ltd received an order worth INR1.1b from Rajasthan Rajya

Vidyut Prasaran Nigam Limited for the supply of air insulated substation. The scope of work involves engineering, supply, installation, testing and commissioning of 400/220KV AIS.

The company’s contract from PSI International totaled INR1.6b for the supply of 420KV GIS.

During the quarter, Siemens sold its healthcare business on a slump sale basis for a consideration of INR30.5b to Siemens Health Care Private Limited (subsidiary of Siemens AG Germany); maintain Neutral.

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

Siemens AG’s network comprises 82% of imports; Euro appreciating 6% vs. INR since March 2015 could dent product competitiveness and margin profile

Bloomberg SIEM IN



Financial Snapshot (INR b) Y/E Sep 2015 2016E 2017E 2018E



RoE (%) 10.1 11.8 11.6 13.6 RoCE (%) 14.5 25.0 54.8 14.3 Payout (%) 35.4 35.4 30.1 30.1 Valuation

P/E (x) 88.8 65.2 51.7 40.2 P/BV (x) 9.0 7.7 6.0 5.5


April 2016 85

Quarterly Performance (Standalone)

(INR m) FY15 FY16 FY15 FY16E Y/E March 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Sales 8,394 11,908 11,466 15,206 10,012 10,565 10,390 14,856 46,974 45,823 Change (%) -2.7 14.1 13.1 10.0 19.3 -11.3 -9.4 -2.3 9.2 -2.5 EBITDA 577 1,223 1,314 1,572 910 996 988 1,431 4,700 4,400 Change (%) -29.1 30.5 44.6 17.4 57.7 -18.5 -24.8 -8.9 14.9 -6.4 As % of Sales 6.9 10.3 11.5 10.3 9.1 9.4 9.5 9.6 10.0 9.6 Depreciation 150 182 156 153 158 157 160 168 641 642 Interest 30 24 19 124 1 2 2 15 197 20 Other Income 191 232 71 629 168 131 131 236 1,108 666 Extra-ordinary Items PBT 589 1,248 1,210 1,924 919 968 957 1,485 4,970 4,404 Tax 175 388 447 601 303 320 279 464 1,611 1,365 Effective Tax Rate (%) 29.7 31.1 37.0 31.2 32.9 33.1 29.1 31.3 32.4 31.0 Reported PAT 414 860 763 1,323 617 648 678 1,021 3,359 3,039 Change (%) (17.6) 45.4 14.4 24.9 49.0 (24.7) (11.1) (22.8) 32.8 (9.5) Adj PAT 414 860 763 1,323 617 648 678 1,021 3,359 3,039 Change (%) (17.6) 185.2 14.4 24.9 49.0 (24.7) (11.1) (22.8) 19.1 (9.5) Order Book 52,060 50,160 50,974 43,960 42,750 40,060 38,350 35,087 43,960 35,087 Order Intake 6,620 10,890 12,280 9,730 8,770 8,100 8,680 11,592 39,520 37,142 BTB (x) 1.2 1.1 1.1 0.9 0.9 0.8 0.8 0.8 0.9 0.8 E: MOSL Estimates


Thermax CMP: INR751 TP: INR862 Neutral Growth in revenue is expected to decelerate to 8% YoY due to

constrained execution in the energy segment. Margins are expected to contract 100bps YoY to 9.1% led by negative operating leverage.

During the quarter, Thermax received an order worth INR3.5b for the supply of 2x25MW gas turbines and 2x100TPH waste heat recovery boilers for installation at RCF’s gas-based co-generation power plant.

Ordering activity continues to remain muted on a weak macro environment. We believe domestic orders have remained at the base level (~INR5–7b per quarter).

Increased internationalization of the business is a vital part of Thermax’s ongoing strategy. The company also announced plans to partly localize operations in SE Asia by setting up subsidiaries; maintain Neutral.

Key issues to watch: Demand environment in domestic and overseas markets Sustainability of margins in energy (11.2% in 4QFY15) and

environment (8.3% in 4QFY15) segments

Bloomberg TMX IN




Net Sales 54.0 56.9 57.1 63.6


EPS Gr. (%) -6.0 10.5 20.3 17.1 BV/Sh. (INR) 180.1 195.1 214.1 237.1 RoE (%) 12.4 12.8 14.1 15.0



Div Yield (%) 0.9 1.0 1.1 1.2

April 2016 86

Quarterly performance (Consolidated) (INR m) FY15 FY16 FY15 FY16E Y/E March 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Sales 17,573 9,847 9,511 14,900 15,983 10,626 13,077 16,977 51,831 56,663 Change (%) 9.6 -8.9 -15.0 1.9 -9.1 7.9 37.5 13.9 -1.6 9.3 EBITDA 1,319 777 574 1,430 1,310 623 583 1,485 4,100 4,001 Change (%) 161.3 79.8 -16.0 35.7 -0.7 -19.9 1.6 3.8 54.4 -2.4 As % of Sales 7.5 7.9 6.0 9.6 8.2 5.9 4.5 8.7 7.9 7.1 Depreciation 61 69 70 81 62 68 69 84 280 282 Interest 87 44 44 58 25 36 33 68 162 162 Other Income 292 188 304 303 213 302 183 386 1,065 1,083 Extra-ordinary Items -5 0 -445 -12 -106 0 -22 462 106 PBT 1,468 853 1,210 1,606 1,542 821 687 1,718 5,184 4,746 Tax 365 351 147 413 435 376 126 456 1,276 1,392 Effective Tax Rate (%) 24.9 41.2 12.1 25.7 28.2 45.7 18.3 26.5 24.6 29.3 Reported PAT 1,103 502 1,074 1,193 1,108 446 542 1,262 3,908 3,354 Change (%) 167.5 18.1 73.7 17.0 1.4 -11.1 -49.5 5.7 56.6 -14.2 Adj PAT 1,085 499 629 1,168 1,000 446 520 1,262 3,381 3,248 Change (%) 165.8 18.1 9.2 39.9 -7.9 -10.7 -17.3 8.0 51.1 -3.9 Order Book 37,890 36,790 39,490 38,930 40,390 35,990 35,140 38,000 38,930 35,714 Order Intake 6,940 3,950 6,800 4,690 5,940 2,010 4,960 9,470 22,380 22,380 BTB - TTM basis (x) 1.4 1.5 1.7 1.8 1.8 1.6 1.6 1.4 1.4 1.4 E: MOSL Estimates


Voltas

CMP: INR274 TP: INR289 Buy Unitary cooling division (UCP) is likely to report strong revenue

growth on robust demand and primary channel filling. Demand for ACs was impacted in the first two quarters due to: i) weak summer; ii) sluggish consumer spend; and iii) a high base effect. We have modeled in UCP’s revenue growth at 14% YoY.

We expect revenue growth of 10% YoY in the MEP segment led by a low base effect (negative growth of 13% YoY in 4QFY15) and improvement in the pace of project execution. However, the primary focus is on the segment’s margins. Voltas incurred a loss of INR86m in 2QFY16 owing to cost overrun on the UAE project, while the acceleration claim is yet to be booked.

The sharp decline in crude prices has raised concerns over the pace of order awards as well as execution in the Middle East. Also, in the domestic market, new project awards have been constrained; maintain Buy.

Key issues to watch: FY17 guidance for the UCP business and expectation from the Air

Cooler business following the pan India launch Progress on legacy projects and capital employed in MEP business

Bloomberg VOLT IN

Equity Shares (m) 330.7 M. Cap. (INR b)/(USD b) 91/1 52-Week Range (INR) 360/211

1,6,12 Rel Perf. (%) 10/8/9

Financial Snapshot (INR b) Y/E March 2015 2016E 2017E 2018E Net Sales 51.8 56.7 62.0 72.2 EBITDA 4.1 4.0 4.8 6.1 Adj PAT 3.4 3.3 4.0 5.0 EPS(INR) 10.2 9.9 12.0 15.1 EPS Gr. (%) 37.5 -3.4 21.9 25.7 BV/Sh. (INR) 63.6 70.9 79.9 91.1 RoE (%) 16.1 14.7 16.0 17.7 RoCE (%) 21.9 14.3 15.3 16.8 Payout (%) 23.3 25.6 25.6 25.6 Valuation P/E (x) 22.6 28.2 22.9 18.3 P/BV (x) 3.6 3.9 3.5 3.0 EV/EBITDA (x) 18.3 22.3 18.1 14.0 Div Yield (%) 1.0 0.8 1.0 1.2

April 2016 87

March 2016 Results Preview | Sector: Cement

Sandipan Pal ([email protected]); +91 22 3982 5436 Aashumi Mehta ([email protected]); +91 22 3010 2397

Strong volume show in 4QFY16 Await profit boost in 1QFY17, as spot ASP higher than 4Q average Strong recovery to aid 4-years’ best growth: Cement demand recovered

strongly in 4QFY16, on (a) boost in infrastructure spending in North and Central India, (b) stabilization of rural demand, and (c) favorable base. Core industry data indicates 9%/13.5% YoY volume growth in January/February 2016, followed by mid-single-digit growth in March 2016. We expect our coverage universe to record 12% YoY/QoQ growth (v/s likely industry growth of 9-9.5%). At the industry level, 4QFY16 exit utilization was 75-78%. We expect (a) pan-India players to post 6-11% YoY volume growth (UTCEM > ACC, ACEM), (b) North-based players with better capacity headroom (SRCM, JKLC, JKCE) to deliver 10-30% YoY growth, and (c) South-based companies to turn positive after two years (positive mid-single-digit growth). Higher budget allocation to cement-intensive sectors and rural economy, expectation of better monsoon, and low base effect aid strong growth visibility in 1HFY17.

ASP to dip QoQ, but spot price > 4Q-average: Despite sharp recovery in North-Central prices in February/March 2016, we expect 1-2% QoQ (6-7% YoY) dip in ASP due to (a) low starting base in 4QFY16, and (b) price decline in Andhra Pradesh and East India. We estimate price changes of (a) +1.5% QoQ (+0.4% YoY) in North India, (b) +1% QoQ (-2.5% YoY) in Central India, (c) flat QoQ (-8.7% YoY) in West India, (d) -1% QoQ (-6.5% YoY) in East India, and (e) -2.5% QoQ (-7% YoY) in South India in 4QFY16. Amidst early signs of positive growth, southern companies could see 2% QoQ (7% YoY) deterioration in ASP. We expect benefits of sharp price recovery to percolate in 1QFY17, as pan-India spot prices are 2-3% higher than 4Q-average ASP (North-Central spot prices are 6-8% higher).

Profitability to inch up sequentially: Sequentially flattish ASP would be offset by (a) positive operating leverage from higher volume, and (b) continuation of energy price benefits, as pet coke average price was down 15% QoQ. MOSL coverage universe EBITDA/ton stands at INR775 (+8% QoQ, -10% YoY). We estimate EBITDA/ton at INR935/1,156 for FY17/FY18 v/s INR770 in FY16. At the spot price, pet coke would remain 25-30% cheaper than 1HFY16 average.

Stick to cost and growth leaders to benefit from favorable dynamics: Demand recovery is visible and prices are picking up, driving strong visibility of earnings growth over 1HFY17. Energy cost would continue to support in the near term. Sectoral dynamics (uptick in demand, moderating supply and cost push) are moving in positive direction. Valuations are back in the premium zone, with rising credentials on (a) earnings inflection, and (b) upswing in FCFE and return ratios. In this scenario, we stick to companies with better growth headroom, cost competence and balance sheet strength. Ultratech and Shree Cement are our top picks among large caps; we like JK Lakshmi and JK Cements among midcaps. Ramco, though expensive, is the best play for southern recovery.

Cement Company name

ACC

Ambuja Cements

Grasim Industries

India Cements

Ramco Cement

Shree Cement

Ultratech Cement


April 2016 88






YoY Var % QoQ

Cement ACC 1,390 Neutral 29,850 3.5 4.9 3,621 -12.5 67.5 2,139 -14.3 108.5Ambuja Cements 226 Buy 24,853 2.5 5.5 4,486 -4.9 47.5 3,035 -4.5 108.8Grasim Industries 3,837 Buy 22,534 32.4 -2.5 4,413 352.4 2.9 2,622 477.1 0.7 India Cements 84 Neutral 10,354 1.0 11.4 1,534 -15.8 4.9 -19 PL PL Ramco Cements 407 Buy 9,833 2.3 21.1 2,795 17.1 14.3 1,133 21.3 -3.8Shree Cement 12,077 Buy 20,641 31.2 13.0 5,426 60.8 28.0 2,411 93.5 134.2 Ultratech Cement 3,101 Buy 63,988 4.2 11.2 11,768 -4.5 12.7 5,720 -7.0 12.4 Sector Aggregate 181,995 8.9 8.1 32,964 10.9 17.4 16,287 9.9 31.0

Source: MOSL

Exhibit 2: Industry growth at 9% in 4QFY16 (%) Exhibit 3: MOSL universe volume to grow 9.6% YoY

Exhibit 4: Uptick in utilization (%) led by demand recovery in the north and central regions

Exhibit 5: Pan-India average cement prices (INR/bag) remained down QoQ in 4QFY16, led by South and East

-10

-5

0

5

10

15

3QFY

124Q

FY12

1QFY

132Q

FY13

3QFY

134Q

FY13

1QFY

142Q

FY14

3QFY

144Q

FY14

1QFY

152Q

FY15

3QFY

154Q

FY15

1QFY

162Q

FY16

3QFY

164Q

FY16

EIIP Data MOSL Universe

36 35 37 42 39 36 38 42 39 37 38 44 43 39 40 42 43 40 42 47

4.3

9.3 10.3 12.5

8.3

2.5 1.8 (1.3) 0.4

3.2 1.2

6.3 9.3

5.5 5.1

(5.0)

1.6 3.7

5.7

12.0

1QFY

122Q

FY12

3QFY

124Q

FY12

1QFY

132Q

FY13

3QFY

134Q

FY13

1QFY

142Q

FY14

3QFY

144Q

FY14

1QFY

152Q

FY15

3QFY

154Q

FY15

1QFY

162Q

FY16

3QFY

164Q

FY16

E

Aggregate Vol (m ton) Volume growth (%)

77

68

70

78

72

65

71

80

73

65

68

78

70

65

67

76

73

67

65

71

71

66

65

75

1QFY

112Q

FY11

3QFY

114Q

FY11

1QFY

122Q

FY12

3QFY

124Q

FY12

1QFY

132Q

FY13

3QFY

134Q

FY13

1QFY

142Q

FY14

3QFY

144Q

FY14

1QFY

152Q

FY15

3QFY

154Q

FY15

1QFY

162Q

FY16

3QFY

164Q

FY16

E

250 31

4

302 36

1

285 30

7

246 29

7

274

344

273 29

4

251 29

4

276 33

6

278

290

North East West South Central NationalAverage

4QFY15 3QFY16 4QFY16E

April 2016 89


Exhibit 6: MOSL coverage to post QoQ decline in average realizations in 4Q due to late recovery in North and dip in AP


Exhibit 7: Profitability to improve QoQ with benefits of operating leverage


Exhibit 8: Relative performance—3m (%)


Exhibit 9: Relative performance—1 year (%)


Exhibit 10: 4QFY16 estimates for MOSL coverage Volume (M ton) Realization (INR/ton) EBITDA (INR/ton)

4QFY16E YoY (%) QoQ (%) 4QFY16E YoY (INR/T) QoQ (INR/T) 4QFY16E YoY (INR/T) QoQ (INR/T) ACC 6.3 7.7 4.7 4,329 -206 -10 543 -168 182 Ambuja Cement 5.7 5.7 4.8 4,330 -135 30 712 -157 156 UltraTech 13.0 10.3 13.6 4,845 -276 -93 892 -136 -5India Cement 2.2 5.4 14.0 4,643 -178 -103 695 -175 -60Shree Cement 5.4 30.6 14.7 3,545 8 45 923 135 127 Dalmia Bharat 3.5 9.6 17.0 4,801 -696 -94 1,051 77 -78J K Cements 2.2 15.3 9.1 4,497 -269 28 684 -148 61 JK Lakshmi Cem. 1.9 25.1 9.6 3,702 -27 39 427 -34 49 Madras Cement 2.0 7.8 24.7 4,947 -363 -104 1,391 90 -134Orient Paper 1.3 30.5 23.0 3,265 -649 -75 298 -644 99 Prism Cement 1.6 8.1 33.0 3,869 122 51 534 105 58 Sector Aggre. 47.2 12.0 11.9 4,372 -244 -24 775 -79 67

Source: MOSL

3,38

9 3,

781

3,94

4 3,

745

4,03

1 4,

144

4,36

9 4,

401

4,23

0 4,

193

4,20

5 4,

081

4,15

4 4,

205

4,33

3 4,

445

4,31

5 4,

508

4,43

1 4,

503

4,39

6 4,

371

3QFY

114Q

FY11

1QFY

122Q

FY12

3QFY

124Q

FY12

1QFY

132Q

FY13

3QFY

134Q

FY13

1QFY

142Q

FY14

3QFY

144Q

FY14

1QFY

152Q

FY15

3QFY

154Q

FY15

1QFY

162Q

FY16

3QFY

164Q

FY16

E

Realization (INR/ton)

580 90

5 1,

010

602 83

6 991

1,13

3 96

9 78

3 81

8 79

0 49

2 56

7 717

761

684

573 83

5 71

5 71

4 70

8 77

5

3QFY

114Q

FY11

1QFY

122Q

FY12

3QFY

124Q

FY12

1QFY

132Q

FY13

3QFY

134Q

FY13

1QFY

142Q

FY14

3QFY

144Q

FY14

1QFY

152Q

FY15

3QFY

154Q

FY15

1QFY

162Q

FY16

3QFY

164Q

FY16

E

EBITDA (INR/ton)

85

93

101

109

117

Dec-

15

Jan-

16

Feb-

16

Mar

-16

Sensex Index MOSL Cement Index

80

85

90

95

100

105

Mar

-15

Apr-

15

May

-15

Jun-

15

Jul-1

5

Aug-

15

Sep-

15

Oct

-15

Nov

-15

Dec-

15

Jan-

16

Feb-

16

Mar

-16

Sensex Index MOSL Cement Index

April 2016 90



(INR) FY16E FY17E FY18E FY16E FY17E FY18E FY16E FY17E FY18E FY16E FY17E FY18E Cement ACC 1,390 Neutral 32.0 48.2 80.5 43.5 28.9 17.3 21.0 15.0 9.8 7.2 10.5 16.7 Ambuja Cements 226 Buy 5.5 8.3 12.0 41.4 27.2 18.8 20.9 14.8 10.2 8.3 11.9 16.6 Birla Corporation 372 Buy 12.8 20.0 36.7 29.0 18.6 10.1 11.0 7.8 4.6 3.8 5.7 9.8 Dalmia Bharat 799 Buy 10.5 37.1 63.9 76.2 21.5 12.5 10.1 7.8 6.0 2.7 8.4 13.0 Grasim Industries 3,837 Buy 241.2 337.9 414.9 15.9 11.4 9.2 6.5 5.1 4.0 8.8 11.1 12.1 India Cements 84 Neutral 4.1 5.9 9.4 20.6 14.3 9.0 8.4 7.8 6.7 2.6 4.4 6.1 J K Cements 648 Buy 3.5 24.1 51.0 183.7 26.9 12.7 14.4 10.7 7.6 1.9 10.1 18.7 JK Lakshmi Cem. 328 Buy -2.6 8.3 26.0 -127.6 39.6 12.6 20.1 12.2 7.4 -2.3 7.5 21.6 Orient Cement 148 Buy 1.6 6.7 12.2 94.9 22.0 12.2 29.4 11.2 7.5 3.3 13.9 21.7 Prism Cement 81 Buy -0.3 3.1 6.8 -252.6 26.0 11.9 17.7 10.5 7.0 -1.6 14.5 26.1 Ramco Cements 407 Buy 19.6 22.9 28.4 20.7 17.8 14.3 11.7 10.0 8.1 16.4 16.6 17.8 Shree Cement 12,077 Buy 172.7 333.2 507.5 69.9 36.2 23.8 23.6 18.0 12.3 11.0 18.9 23.7 Ultratech Cement 3,101 Buy 73.3 104.8 161.4 42.3 29.6 19.2 20.7 15.6 10.9 10.2 13.2 17.8 Sector Aggregate 37.0 23.5 15.9 14.6 11.0 8.0 8.1 11.7 15.4

Source: MOSL

April 2016 91


Quarterly Performance (INR Million)

Y/E December

CY15 CY16E CY15 CY16E 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q

Cement Sales (m ton) 5.82 6.20 5.61 5.99 6.27 6.58 5.90 6.29 23.62 25.04 YoY Change (%) -10.2 -2.4 -0.2 4.0 7.7 6.1 5.2 5.0 -2.4 6.0 Cement Realization 4,535 4,385 4,438 4,339 4,319 4,559 4,529 4,623 4,423 4,508 YoY Change (%) 5.5 -1.2 -1.8 -2.3 -4.8 4.0 2.0 6.6 0.0 1.9

QoQ Change (%) 2.1 -3.3 1.2 -2.2 -0.5 5.6 -0.7 2.1 Net Sales 28,854 29,612 27,400 28,461 29,787 32,663 29,471 32,212 114,328 124,134 YoY Change (%) -2.8 -1.6 -0.1 3.0 3.2 10.3 7.6 13.2 -0.4 8.6 EBITDA 4,137 2,795 2,638 2,162 3,402 4,935 3,753 4,062 11,731 16,152 Margins (%) 14.3 9.4 9.6 7.6 11.4 15.1 12.7 12.6 10.3 13.0 Depreciation 1,698 1,657 1,607 1,559 1,600 1,900 1,900 1,998 6,521 7,398 Interest 226 143 150 154 150 150 150 150 673 600 Other Income 1,141 775 678 844 1,200 900 900 1,000 3,437 4,000 PBT after EO Item 3,230 1,771 1,559 1,292 2,852 3,785 2,603 2,914 7,852 12,154 Tax 824 456 389 267 727 965 664 743 1,936 3,099 Rate (%) 25.5 25.8 24.9 20.6 25.5 25.5 25.5 25.5 24.7 25.5 Reported PAT 2,406 1,314 1,170 1,026 2,124 2,820 1,939 2,171 5,916 9,055 Adjusted PAT 2,497 1,314 1,170 1,026 2,124 2,820 1,939 2,171 6,008 9,055 Margins (%) 8.7 4.4 4.3 3.6 7.1 8.6 6.6 6.7 5.3 7.3 YoY Change (%) -5.2 -45.5 -42.9 -15.5 -14.9 114.6 65.7 111.7 -30.3 50.7 E: MOSL Estimates

ACC

CMP: INR1,390 TP: INR1,500 Neutral We estimate 1QCY16 dispatches at 6.27mt (+4.7% QoQ). Average

realizations would decline 4.8% YoY (0.5% QoQ) to INR4,361/ton.

Revenue is expected to grow 3.2% YoY to INR29.7b. We expect EBITDA margin at 11.4% (+3.8pp QoQ; -2.9pp YoY).

EBITDA/ton is estimated at INR543 (-INR168 YoY, +INR182 QoQ). Pure cement EBITDA/ton is estimated at INR521 (+INR171 QoQ) due to volume boost. PAT is likely to de-grow 15% YoY to INR2.1b. We believe subsiding headwinds in East operations would improve cost structure and volume growth.

The stock trades at 17.3x CY17E EPS, and at an EV of 9.6x CY17E EBITDA and USD107/ton. Maintain Neutral.

Key issues to watch for Cement pricing recovery Volume growth and demand revival Status of Jamul expansion of 2.5mt Update on cost saving measures Visibility on seamless operation of plants in the East

Bloomberg ACC IN


1,6,12 Rel Perf. (%) 11/8/-1

Financial Snapshot (INR Billion)

Y/E Dec 2014 2015E 2016E 2017E

Sales 114.8 114.3 124.1 141.7

EBITDA 12.5 11.7 16.2 24.0 NP 8.6 6.0 9.1 15.1 Adj. EPS ( )

45.9 32.0 48.2 80.5

EPS Gr. (%) -5.6 -30.3 50.7 67.0 BV/Sh (INR) 438 449 467 494 RoE (%) 10.7 7.2 10.5 16.7

RoCE (%) 13.4 9.8 14.0 22.0 Payout (%) 63.6 65.1 62.5 67.4 Valuations P/E (x) 30.3 43.5 28.9 17.3 P/BV (x) 3.2 3.1 3.0 2.8 EV/EBITDA

17.9 19.9 14.8 9.6

EV/Ton (x) 112 117 111 107

April 2016 92


Quarterly Performance (INR Million) Y/E December CY15 CY16E CY15 CY16E 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q Sales Volume (m ton)* 5.43 5.95 4.90 5.48 5.74 6.25 5.15 5.86 21.76 23.00

YoY Change (%) -10.4 1.8 1.9 0.8 5.7 5.0 5.1 6.9 -1.8 5.7 Realization (INR/ton) 4,465 4,190 4,277 4,300 4,330 4,570 4,520 4,656 4,306 4,521

YoY Change (%) 2.6 -9.5 -6.0 -1.8 -3.0 9.1 5.7 8.3 -3.8 5.0 QoQ Change (%) 2.0 -6.2 2.1 0.5 0.7 5.5 -1.1 3.0

Net Sales 24,246 24,928 20,952 23,558 24,853 28,561 23,276 27,278 93,683 103,968 YoY Change (%) -8.1 -7.9 -4.2 -1.0 2.5 14.6 11.1 15.8 26.8 22.3

EBITDA 4,715 3,661 2,944 3,042 4,084 6,329 3,676 5,809 14,362 19,898 Margins (%) 19.4 14.7 14.1 12.9 16.4 22.2 15.8 21.3 15.3 19.1

Depreciation 1,578 1,485 1,553 1,641 1,500 1,550 1,530 1,555 6,257 6,135 Interest 214 316 207 181 170 170 170 217 918 727 Other Income 1,336 1,234 898 1,067 1,400 1,300 1,000 1,200 4,535 4,900 PBT before EO Item 4,259 3,094 2,082 2,287 3,814 5,909 2,976 5,237 11,722 17,936

Rate (%) 25.4 26.8 26.2 36.4 28.0 29.0 27.0 27.4 27.7 28.0 Reported Profit 3,177 2,264 1,536 1,100 2,746 4,196 2,172 3,800 8,076 12,914 Adj PAT 3,177 2,264 1,536 1,454 2,746 4,196 2,172 3,800 8,478 12,914

YoY Change (%) -29.0 -44.6 -35.8 -43.2 -13.6 85.4 41.5 161.4 -35.8 52.3 E: MOSL Estimates

Ambuja Cements

CMP: INR226 TP: INR268 Buy We expect 1QCY16 dispatches to grow 5.7% YoY (5% QoQ) to

5.7mt. Average realizations would decline 3% YoY (grow 0.7% QoQ) to INR4,330/ton. Revenue is likely to grow 2% YoY (5% QoQ) to INR24.7b.

We estimate EBITDA margin at 16.4% (+3.5pp QoQ; -3pp YoY) and EBITDA/ton at ~INR712 (-INR157/ton YoY; +INR156/ton QoQ).

Adjusted PAT is likely to grow 1.9x QoQ (decline 13.6% YoY) to INR2.7b.

The stock trades at 20.8x CY17E EPS, and at an EV of 10.6x CY17E EBITDA and USD133/ton.

Key issues to watch for Volume growth recovery and outlook Cement pricing outlook and sustainability Update on ACC-ACEM restructuring timeline

Bloomberg ACEM IN Equity Shares (m) 1,551.9


Financial Snapshot (INR Billion) Y/E Dec 2014 2015 2016E 2017E

Sales 99.1 93.7 229.6 263.4 EBITDA 18.6 14.4 34.7 49.2 NP 13.6 8.5 14.6 22.4 Adj. EPS ( )

8.8 5.5 7.4 11.3 EPS Gr. (%) 29.9 -37.8 34.9 53.0 BV/Sh. (INR)

65.0 67.8 97.8 103.9

RoE (%) 13.9 8.2 7.5 11.2 RoCE (%) 18.9 12.3 13.7 20.9 Payout (%) 61.8 57.6 66.3 55.3

Valuations P/E (x) 26.7 43.0 31.8 20.8 P/BV (x) 3.6 3.5 2.4 2.3 EV/EBITDA ( )

17.3 21.4 15.5 10.6 EV/Ton ( )

168 160 138 133

April 2016 93


Quarterly Performance (INR Million) Y/E March FY15 FY16 FY15 FY16E (Standalone) 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE VSF Volume (ton) 86,389 100,927 97,001 118,486 102,737 113,756 120,700 126,030 402,803 463,223 YoY Change (%) 11.4 8.5 0.0 19.2 18.9 12.7 24.4 6.4 9.8 15.0 VSF Realization (INR/ton) 119,000 118,400 116,750 110,809 113,309 116,708 126,090 122,220 115,898 119,898 YoY Change (%) 2.1 -2.6 -4.0 -7.0 -4.8 -1.4 8.0 10.3 -3.3 3.5 QoQ Change (%) -0.1 -0.5 -1.4 -5.1 2.3 3.0 8.0 -3.1 Net Sales 14,236 15,823 15,448 17,016 19,234 21,224 23,120 22,534 62,523 86,112 YoY Change (%) 23.9 12.6 6.1 11.3 35.1 34.1 49.7 32.4 12.9 37.7 EBITDA 1,257 1,964 1,651 976 2,676 3,350 4,289 4,413 5,847 14,729 Margins (%) 8.8 12.4 10.7 5.7 13.9 15.8 18.6 19.6 9.4 17.1 Depreciation 529 624 629 843 948 1,005 1,231 1,241 2,626 4,426 Interest 56 90 116 131 409 401 396 389 393 1,595 Other Income 703 2,290 468 823 484 2,323 550 844 4,283 4,200 PBT after EO Items 1,374 3,541 1,396 562 1,802 4,266 3,213 3,627 6,634 12,908 Tax 316 547 459 252 541 684 609 1,006 1,574 2,840 Rate (%) 23.0 15.4 32.9 44.9 30.0 16.0 19.0 27.7 23.7 22.0 Reported PAT 1,058 2,994 937 310 1,261 3,582 2,604 2,622 5,060 10,068 Adj. PAT 1,058 2,993 922 454 1,261 3,582 2,604 2,622 5,424 10,068 Margins (%) 7.4 18.9 6.0 2.7 6.6 16.9 11.3 11.6 8.7 11.7 YoY Change (%) -53.0 -24.5 -25.8 -63.4 19.2 19.7 182.4 477.1 -37.7 85.6 E: MOSL Estimates

-0.21793

Grasim Industries

CMP: INR3,837 TP: INR5,000 Buy We expect VSF volume to grow 6.4% YoY (4.4% QoQ) to 126,030

tons, while realizations are expected to improve 10.3% YoY (decline 3.1% QoQ) to INR135/kg.

Standalone EBITDA margin is likely to improve 13.9pp YoY (1pp QoQ) to 19.6%.

EBITDA is estimated to grow 2.9% QoQ (4.5x YoY) to INR4.4b, translating into PAT of INR2.6b—growth of 5.7x YoY.

The stock trades at 9.2x FY18E consolidated EPS, 5.8x FY17E EV/EBITDA, and implied cement EV/ton of USD19/ton. Buy.

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

capacities globally

Bloomberg GRASIM IN Equity Shares (m) 91.9


Financial Snapshot (INR Billion) Y/E March 2015 2016E 2017E 2018E Sales 324.4 363.5 403.9 454.0

EBITDA 47.3 59.3 75.2 93.4 Adj. PAT 17.5 22.2 31.0 38.1 Adj. EPS. INR 190.5 241.2 337.9 414.9

EPS Gr. (%) -11.4 26.6 40.1 22.8 BV/Sh. (INR) 2,519 2,734 3,047 3,438 RoE (%) 7.6 8.8 11.1 12.1



EV/Ton (x) 147 119 110 109

April 2016 94


Quarterly Performance (Standalone) (INR Million) Y/E March FY15 FY16 FY15 FY16E 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Sales Dispatches (m ton) 2.56 2.35 2.11 2.09 2.10 2.17 1.94 2.2 9.11 8.41 YoY Change (%) -3.4 -3.6 -8.2 -21.1 -18 -8 -8 5.4 -9.2 -7.7 Realization (INR/ton) 4,244 4,655 4,777 4,821 5,032 4,892 4,746 4,643 4,606 4,828

YoY Change (%) 1.4 13.1 7.9 20.3 18.5 5.1 -0.6 -3.7 10.2 4.8 QoQ Change (%) 5.9 9.7 2.6 0.9 4.4 -2.8 -3.0 -2.2

Net Sales 12,262 11,317 10,359 10,250 10,710 10,791 9,296 10,354 44,236 41,151 YoY Change (%) -1.0 4.2 -0.1 -5.1 -12.7 -4.6 -10.3 1.0 -0.4 -7.0 EBITDA 1,578 1,791 1,587 1,822 1,950 2,286 1,462 1,534 6,826 7,231 Margins (%) 12.9 15.8 15.3 17.8 18.2 21.2 15.7 14.8 15.4 17.6 Depreciation 662 663 664 590 554 552 552 551 2,579 2,209 Interest 967 1,095 1,087 1,047 932 954 906 945 4,260 3,736 Other Income 22 42 47 181 44 33 74 99 308 250 PBT before EO expense -30 75 -117 366 508 813 79 136 295 1,536 Extra-Ord expense 0 0 0 0 107 40 0 3 0 150 PBT -30 75 -117 366 401 773 79 133 295 1,386 Tax 0 0 0 0 0 363 24 151 0 539 Rate (%) 0.0 0.0 0.0 0.0 0.0 46.9 30.9 113.8 0.0 38.9 Reported PAT -30 75 -117 366 401 410 55 -18 295 848 Adj PAT -30 75 -117 366 508 431 55 -19 295 939 YoY Change (%) -117.6 NA NA NA 0.0 NA NA NA NA 219.0 E: MOSL Estimates

India Cements

CMP: INR84 TP: INR90 Neutral We expect volumes to grow 5.4% YoY (14% QoQ) to 2.2mt and

realizations to decline 3.7% YoY (2.2% QoQ) to INR4,643/ton. We estimate revenue at INR10.3b (-1% YoY; +11% QoQ).

We estimate EBITDA at INR1.5b. EBITDA margin is likely to decline 0.9pp QoQ to 14.8%, translating into blended EBITDA/ton of INR695 (-INR175/ton YoY). At the PAT level, the company would post a loss of INR8m (v/s a profit of INR55m in 3QFY16).

The stock trades at 9x FY18E EPS and at an EV of 6x FY18E EBITDA. Maintain Neutral.

Key issues to watch for Visibility on AP demand recovery Demand and pricing outlook, especially in South India Timeline and capex plan over TN expansion of 2.6mt

Bloomberg ICEM IN


1,6,12 Rel Perf. (%) 10/6/5

Financial Snapshot (INR Billion) Y/E March 2015 2016E 2017E 2018E Sales 44.2 41.2 43.1 47.6 EBITDA 6.8 7.2 7.8 9 NP 0.3 0.9 1.7 2.4

Adj. EPS .INR 0 4.1 5.9 9.4 EPS Gr. (%) -100 -10,631 44.5 58.7 BV/Sh (INR) 117 119.7 125.2 133.1

RoE (%) 0.8 2.6 4.4 6.1 RoCE (%) 6.5 7.4 8 9.4 Valuations P/E (x) -2170 20.6 14.3 9.0 P/BV (x) 0.7 0.7 0.7 0.6 EV/EBITDA(x) 8.2 8.1 7.2 6.0

EV/Ton(USD) 62 60 60 59

April 2016 95



(INR Million)

Y/E March FY15 FY16 FY15 FY16E 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Sales Dispatches (m ton) 2.13 1.94 1.72 1.88 1.81 1.71 1.63 2.03 7.67 7.18 YoY Change (%) -3.9 -11.4 -11.6 -16.3 -14.8 -11.9 -5.4 7.8 -10.8 -6.4 Realization (INR/ton) 4,401 4,739 4,744 5,311 5,178 5,028 5,051 4,947 4,786 5,048

YoY Change (%) 2.2 16.2 6.5 21.8 17.7 6.1 6.5 -6.8 11.4 5.5 QoQ Change (%) 0.9 7.7 0.1 12.0 -2.5 -2.9 0.5 -2.1

Net Sales 9,243 9,221 7,861 9,614 9,225 8,740 8,119 9,833 35,939 35,917 YoY Change (%) -3.7 1.9 -6.7 4.0 -0.2 -5.2 3.3 2.3 -1.1 -0.1 EBITDA 1,365 1,870 1,001 2,386 2,230 2,736 2,446 2,795 6,622 10,206 Margins (%) 14.8 20.3 12.7 24.8 24.2 31.3 30.1 28.4 18.4 28.4 Depreciation 627 624 626 622 668 671 679 669 2,499 2,687 Interest 500 480 485 473 488 453 418 438 1,938 1,796 Other Income 367 318 317 378 302 199 109 156 1,379 767 PBT 605 1,084 206 1,669 1,377 1,811 1,458 1,845 3,564 6,490 Tax 243 187 -24 735 402 423 280 712 1,141 1,817 Rate (%) 40.1 17.2 -11.4 44.0 29.2 23.4 19.2 38.6 32.0 28.0 Adj PAT 363 897 230 934 975 1,387 1,177 1,133 2,423 4,673 YoY Change (%) -47.3 391.0 -10.3 474.8

168.9 54.6 412.8 -221.3 111.3 92.8

Margins (%) 3.9 9.7 2.9 9.7 10.6 15.9 14.5 11.5 6.7 13.0 E: MOSL Estimates

Ramco Cements

CMP: INR407 TP: INR470 Buy We expect 4QFY16 volumes to grow 7.8% YoY (25% QoQ) to

2.03mt. Average realizations are likely to decline 7% YoY (2% QoQ) to 4,947/ton.

EBITDA margin is expected to decline 1.7pp QoQ to 28.4%. EBITDA/ton (ex-windmill) is likely to decline by ~INR134/ton QoQ (increase by ~INR91/ton YoY) to INR1,391.

We expect PAT to decline 4% QoQ to INR1.1b.

The stock trades at 14.3x FY18E EPS, and at an EV of 7.9x FY18E EBITDA and USD98/ton. Buy.

Key issues to watch for Volume growth recovery and outlook Cement pricing outlook and demand sustainability in the South

(AP and Tamil Nadu)

Bloomberg TRCL IN Equity Shares (m) 238.0 M. Cap. (INR b)/(USD b) 92/1


Financial Snapshot (INR Billion) Y/E Mar 2015 2016E 2017E 2018E

Sales 35.9 35.9 39.1 43.9 EBITDA 6.6 10.2 11.3 13.1

NP 2.4 4.7 5.5 6.8 Adj EPS (INR) 10.2 19.6 22.9 28.4 EPS Gr. (%) 106.8 92.8 16.8 23.8

BV/Sh. (INR) 111.1 128.5 147.9 171.7 RoE (%) 9.5 16.4 16.6 17.8 RoCE (%) 10.2 15.3 17.1 20

Payout (%) 17.1 11.8 15.2 16.4 Valuations P/E (x) 40.O 20.7 17.8 14.3

P/BV (x) 3.7 3.2 2.8 2.4 EV/EBITDAx) 18.3 11.6 9.8 7.9 EV/Ton (USD) 126 115 105 98

April 2016 96


Shree Cement (S/A)

(INR Million) Y/E June FY15 FY16 9MFY16 FY15 FY16E 1Q 2Q 3Q 4Q 1Q 2Q 3Q Sales Dispat. (m ton) 3.88 3.81 4.13 4.35 4.19 4.70 5.39 14.28 16.16 18.62 YoY Change (%) 18.9 10.9 7.6 17.0 7.9 23.3 30.6 13.4 15.2 Realization (INR/Ton) 3,648 3,540 3,537 3,475 3,646 3,500 3,545 3,560 3,548 3,540

YoY Change (%) 9.4 3.2 -8.4 -13.0 0.0 -1.1 0.2 2.4 -3.4 -0.2 QoQ Change (%) -8.7 -3.0 -0.1 -1.8 4.9 -4.0 1.3 0.4

Net Sales 16,053 15,419 15,733 17,194 17,235 18,268 20,641 56,144 64,399 73,338 YoY Change (%) 28.7 17.1 -5.2 4.1 7.4 18.5 31.2 9.6 13.9 EBITDA 3,376 3,035 3,375 3,516 3,885 4,240 5,426 13,550 13,302 17,067 Margins (%) 21.0 19.7 21.5 20.4 22.5 23.2 26.3 24.1 20.7 23.3 Depreciation 2,227 2,009 2,629 2,383 2,704 3,042 2,950 8,696 9,248 11,079 Interest 320 323 270 264 232 233 230 695 1,206 959 Other Income 309 227 535 444 238 236 375 849 1,515 1,293 PBT 1,071 922 971 1,074 1,166 1,199 2,621 4,985 4,008 6,059 Tax -47 -15 -226 33 -122 170 210 258 -255 291

Rate (%) -4.4 -1.6 -23.3 3.1 -10.4 14.2 8.0 5.2 -6.4 4.8 Reported PAT 1,118 937 1,197 1,041 1,287 1,029 2,411 4,727 4,263 5,768 Adj PAT 1,188 945 1,246 1,274 1,310 1,030 2,411 4,748 4,640 6,017 YoY Change (%) -31.4 -20.1 -45.2 -50.2 10.3 9.0 93.5 -40.0 29.7 E:MOSL Estimates ** FY16 is March ending 12 months

Shree Cement

CMP: INR12,076 TP: INR14,435 Buy We expect 3QFY16 cement volumes to grow 30.6% YoY (15% QoQ)

to 5.39mt (including clinker) and realizations to grow 0.2% YoY (1.3% QoQ) to INR3,545/ton.

Merchant power sale is estimated to be 450m units (v/s 539m units in 2QFY16) at INR3.40/unit (v/s INR3.37 in 2QFY16). Power EBITDA is estimated at INR450m (v/s INR500m in 2QFY16).

We estimate revenue at INR20.6b (up 31.2% YoY) and EBITDA at INR5.4b, translating into margin of 26.3% (+3.1pp QoQ, +4.8pp YoY). Adjusted PAT is likely to be INR2.4b (v/s INR1b in 2QFY16).

The stock trades at 24.2x FY18E EPS, and at an EV of 12.6x FY18E EBITDA and USD193/ton. Maintain Buy.

Key issues to watch for Volume and pricing recovery for North India Update on scale-up in recently commissioned Chhattisgarh units New expansion plan

Bloomberg SRCM IN


1,6,12 Rel Perf. (%) 8/3/23

Financial Snapshot (INR Billion) Y/E March 2015 2016E 2017E 2018E Sales 64.4 73.3 85.8 104.9 EBITDA 13.3 17.1 21.8 30.4 NP 4.6 6 11.6 17.7

Adj EPS.INR 133.2 172.7 333.2 507.5 EPS Gr. (%) -40 29.7 92.9 52.3 BV/Sh. (INR) 1,515 1,615 1,908 2,369

RoE (%) 9.3 11 18.9 23.7 RoCE (%) 9.4 11.6 19.2 28.2 Payout (%) 22.8 21.1 12.2 9.2


EV/EBITDA (x) 31.3 24.1 18.3 12.6 EV/Ton (USD) 261 239 216 193

April 2016 97


Quarterly Performance (INR Million) Y/E March FY15 FY16 FY15 FY16E 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Sales (m ton) 11.70 10.35 10.99 11.81 12.14 10.80 11.47 13.03 44.9 47.4 YoY Change (%) 16.0 12.0 10.1 -3.0 3.8 4.3 4.4 10.3 8.1 5.8 Grey Cement Realn.(INR/ton) * 4,094 4,313 4,144 4,357 4,220 4,279 4,139 4,119 4,226 4,186 YoY Change (%) -0.7 8.6 5.3 9.6 3.1 -0.8 -0.1 -5.5 5.6 -0.9 QoQ Change (%) 3.0 5.4 -3.9 5.1 -3.1 1.4 -3.3 -0.5 Net Sales 56,495 53,790 54,898 61,382 60,382 56,209 57,473 63,988 226,565 238,051 YoY Change (%) 14.0 19.4 14.7 5.3 6.9 4.5 4.7 4.2 12.8 5.1 EBITDA 10,079 8,295 8,457 12,323 10,926 9,283 10,439 11,768 39,153 42,416 Margins (%) 17.8 15.4 15.4 20.1 18.1 16.5 18.2 18.4 17.3 17.8 Depreciation 2,645 3,024 2,783 2,879 2,827 3,333 3,238 3,461 11,331 12,858 Interest 1,002 1,434 1,540 1,499 1,383 1,303 1,257 1,312 5,475 5,255 Other Income 2,557 1,217 1,445 1,296 1,592 1,050 1,318 1,240 6,515 5,200 PBT after EO Expense 8,989 5,055 5,578 9,241 8,309 5,697 7,262 8,235 28,863 29,503 Tax 2,733 954 1,935 3,093 2,401 1,759 2,177 2,515 8,715 8,851 Rate (%) 30.4 18.9 34.7 33.5 28.9 30.9 30.0 30.5 30.2 30.0 Adj PAT 6,256 4,101 3,644 6,147 5,908 3,939 5,086 5,720 20,147 20,652 YoY Change (%) -7.0 55.3 -1.5 -19.5 -5.6 -3.9 39.6 -7.0 -2.8 2.5 E: MOSL Estimates; * Grey cement realization is our estimate

Ultratech Cement

CMP: INR3,101 TP: INR3,800 Buy We expect cement volumes to grow 10% YoY (14% QoQ) to

13.03mt. Realizations are likely to decline 5.5% YoY (0.5% YoY) to INR4,119/ton.

We estimate grey cement EBITDA/ton at INR785 (flat QoQ). EBITDA margin is likely to decline 0.2pp QoQ (1.7pp YoY) to 18.4%.

EBITDA is estimated to grow 13% QoQ (decline 5% YoY) to INR11.7b, translating into PAT growth of 12% QoQ (to INR5.7b).

The stock trades at 19.5x FY18E EPS, and at an EV of 10.5x FY18E EBITDA and USD183/ton. Maintain Buy.

Key issues to watch for Volume growth recovery and outlook Cement pricing outlook and sustainability Update on scale-up of newly commenced Rajasthan plant Update on financial performance of Star Cement, UAE Acquisition of JPA assets

Bloomberg UTCEM IN Equity Shares (m) 274.4 M. Cap. (INR b)/(USD b) 851/13

52-Week Range (INR) 3,370/2,531 1,6,12 Rel Perf. (%) 6/17/20


Y/E March 2015 2016E 2017E 2018E Sales 226.6 238.1 267.9 315.4 EBITDA 39.2 42.7 55.5 76.8 NP 20.1 20.7 29.4 45.0 Adj EPS(INR) 73.4 75.4 107.1 164.0 EPS Gr. (%) -2.8 2.7 42.1 53.1 BV/Sh (INR) 687.3 749.4 839.1 982.7 RoE (%) 11.2 10.5 13.5 18.0 RoCE (%) 14.1 13.1 16.9 22.5 Payout (%) 14.2 17.0 16.3 12.4 Valuations

P/E (x) 43.6 42.5 29.9 19.5 P/BV (x) 4.7 4.3 3.8 3.3 EV/EBITDA (x) 22.4 20.6 15.3 10.5 EV/Ton (USD) 213 199 192 183

April 2016 98

March 2016 Results Preview | Consumer

The wait for volume growth pickup continues Rural continues to remain Achilles’ heel; input prices inching up QoQ

Volumes not yet out of woods; margin expansion to taper We expect our consumer universe’s revenue and PAT to increase 6.7% and 8.7%, respectively, in 4QFY16. Demand across staples universe remain steady with no meaningful pick-up. Rural demand remains under stress with newfound hope now emerging post government’s budget announcements. MOSL Consumer universe EBITDA is estimated to grow 11.9%, with 100bp margin expansion. We expect ITC’s sales to rise 6.7% (3% decline in cigarette volumes) and PAT to grow 4.9%. HUVR’s sales growth is estimated at 4.9% (volume growth of ~6%), with 40bp EBITDA margin expansion. We expect Asian Paints, Pidilite, Britannia and United Spirits to register robust performance.

YoY RM trends still benign; sequential inflation seen in some commodities Crude and crude derivatives (PFAD, TiO2, LLP and HDPE) have corrected 3.3%, 4.9%, 28% and 8% YoY, respectively) continue to remain benign on YoY basis, but there is a sequential inflation seen in some of the key RM’s. Pricing has been broadly flattish across segments, with companies (selectively in our coverage) continuing to incur price offs/volume offers to boost the incipient volume growth. Going forward we expect, pricing/realization component of revenue growth to recover.

Preference for quality and longevity of growth Consumer sector is characterized by rich near term valuations given market’s continued preference for quality with healthy growth. Our framework for earnings visibility, longevity of growth and quality management drives our choices in the sector universe. Thus, our long standing preference for United Spirits, Britannia and Emami continues notwithstanding any near term challenges. We also like Pidilite and Page in the discretionary pack. Recently, post the budget, we turned more constructive on ITC and upgraded the rating from Neutral to Buy.





YoY Var % QoQ

Consumer Asian Paints 869 Neutral 38,446 10.1 -6.3 6,501 26.3 -12.6 4,415 29.5 -14.4Britannia 2,636 Buy 22,782 12.1 2.5 3,119 41.1 2.2 2,379 42.2 10.9 Colgate 832 Neutral 10,502 2.8 4.4 2,746 11.0 18.7 1,744 6.6 23.8 Dabur 246 Neutral 21,036 8.2 -0.9 3,874 13.7 3.7 3,050 7.1 -4.3Emami 935 Buy 6,453 16.5 -18.2 1,790 27.6 -28.3 1,325 -4.0 -32.1Godrej Consumer 1,354 Neutral 22,280 7.0 -5.3 4,469 18.4 -1.9 3,079 16.0 -4.8GSK Consumer 6,034 Buy 12,785 5.2 24.2 3,018 14.4 88.9 2,308 17.3 75.0 Hind. Unilever 868 Neutral 80,540 4.9 0.9 13,389 7.4 -6.4 9,415 9.1 -8.0ITC 327 Buy 99,172 6.7 8.1 35,272 6.8 -2.2 25,188 4.9 -5.1Jyothy Labs 298 Buy 4,318 9.0 12.2 510 23.6 0.1 384 32.2 -1.5Marico 245 Neutral 13,317 8.9 -14.3 2,131 26.9 -27.0 1,373 24.8 -30.6Nestle 5,724 Neutral 22,561 -10.0 15.9 4,741 -21.2 35.8 2,729 -26.7 30.8Page Industries 12,096 Buy 4,412 16.2 0.3 905 18.0 1.2 572 21.5 1.3 Pidilite Inds. 590 Buy 10,665 10.2 -9.4 2,291 64.5 -20.1 1,427 54.5 -23.5Radico Khaitan 96 Buy 3,713 8.1 -7.4 423 33.1 -29.8 140 63.0 -48.4United Spirits 2,451 Buy 23,334 15.5 -11.5 2,559 94.4 -0.3 1,063 14.1 27.9 Sector Aggregate 396,317 6.7 0.8 87,741 11.9 -1.9 60,591 8.7 -4.1

Company name

Asian Paints

Britannia Industries

Colgate

Dabur

Emami

Godrej Consumer

GSK Consumer

Hindustan Unilever

ITC

Jyothy Labs

Marico

Nestle India

Page Industries

Pidilite Industries

Radico Khaitan

United Spirits

Consumer March 2016 Results Preview | Sector: Consumer

Gautam Duggad ([email protected])/Vishal Punmiya ([email protected])

April 2016 99


Exhibit 2: 4QFY16 volume growth expectations (%) Quarter Ending 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16E Asian Paints 2.0 10.0 12.0 7.0 12.0 11.0 10.0 3.0 4.0 12.0 5.0 15.0 12.0 Colgate (Toothpaste) 11.0 11.0 9.0 11.0 7.0 5.0 7.0 5.0 5.0 2.0 3.0 1.0 1.5 Dabur 12.0 9.0 10.7 9.0 9.2 8.3 8.7 7.4 8.1 8.1 5.5 -2.5 6.0 Emami 13.0 6.0 6.0 1.5 -10.0 12.5 11.5 11.0 12.0 15.0 13.5 9.3 13.0 Godrej Consumer Soaps 4.0 7.0 4.0 6.0 -4.0 MSD LSD LSD 5.0 DD MSD MSD MSD GSK Consumer 8.0 7.0 10.0 11.0 8.0 3.0 2.0 5.0 2.0 2.0 2.0 0.0 2.0 Hindustan Unilever 6.0 4.0 5.0 4.0 3.0 5.0 5.0 3.0 6.0 6.0 7.0 6.0 6.0 ITC (cigarette) 2.5 -2.0 -4.0 -2.0 -3.0 -2.5 -4.0 -13.0 -12.0 -17.0 -15.0 -5.0 -3.0Marico Parachute 5.0 4.0 1.0 2.0 10.0 6.0 7.0 8.0 5.0 8.0 11.0 4.0 7.0 Hair Oil 24.0 16.0 15.0 8.0 5.0 11.0 13.0 10.0 5.0 14.0 8.0 21.0 15.0 Saffola 5.0 10.0 7.0 9.0 11.0 10.0 9.0 3.0 -1.0 4.0 4.0 17.0 10.0 Pidilite 11.0 7.5 15.0 11.0 12.0 13.0 10.0 7.0 5.5 5.0 3.0 11.0 12.0 Radico Khaitan 7.2 7.6 7.2 7.6 3.5 -3.5 -3.9 2.0 -4.2 -10.3 -7.2 -3.8 2.0


Exhibit 3: New launches during 4QFY16 Company Brand Category Colgate Colgate Pain Out Dental Gel Dabur Dabur Baby Baby Care - Massage Oil Dabur Fem Diamond Crème Bleach Skin care Marico Set Wet Cool Avatar Deodorant Deodorant Nestle Kit Kat Duo Chocolate United Breweries Kingfisher Buzz Malt-based beverage Titan Company JUXT Smartwatch Watches HUL Darbar-e-Taj Tea HUL Magnum Brownie Ice creams HUL Knorr Chefs Masala Noodles masala HUL Lakme Mousse Foundation Skin care Britannia Pure Magic Deuce Biscuits GCPL Godrej Aer - Rich Irish variant Car fragrance Jubilant Foodworks Dunkin Donuts : Double Mutton Burger Jubilant Foodworks DD : Double Smoked Chicken, Spicy Grilled Chicken Burger


Exhibit 4: PFAD prices down 3.3% YoY; up 42% QoQ


Exhibit 5: Palm oil prices rise 6.6% YoY


49,207

22,900

40,350

15,000

24,000

33,000

42,000

51,000

60,000

Mar

-13

Jul-1

3

Nov

-13

Mar

-14

Jul-1

4

Nov

-14

Mar

-15

Jul-1

5

Nov

-15

Mar

-16

Palm Fatty Acid price (INR/MT)

2,922

1,843

2,670

1,500

1,900

2,300

2,700

3,100

Mar

-13

Jul-1

3

Nov

-13

Mar

-14

Jul-1

4

Nov

-14

Mar

-15

Jul-1

5

Nov

-15

Mar

-16

Mal

aysia

n Ri

nggi

t\M

T

Palm Oil (Malaysian Ringgit Per Metric Tonne)

April 2016 100


Exhibit 6: Mentha prices up 18% YoY


Exhibit 7: TiO2 prices down 5% YoY


Exhibit 8: Relative performance – 3m (%) Exhibit 9: Relative performance – 1Yr (%)


(INR) FY16E FY17E FY18E FY16E FY17E FY18E FY16E FY17E FY18E FY16E FY17E FY18E Consumer Asian Paints 869 Neutral 18.9 21.3 23.3 46.0 40.7 37.2 31.6 27.5 24.9 35.3 34.1 32.3 Britannia 2,636 Buy 71.8 84.3 96.1 36.7 31.3 27.4 25.5 21.1 18.0 57.8 49.7 43.0 Colgate 832 Neutral 21.9 24.4 27.7 38.1 34.1 30.0 23.3 21.2 19.0 72.1 70.5 70.4 Dabur 246 Neutral 7.0 8.1 9.1 35.2 30.3 26.9 28.1 24.0 21.2 33.0 31.7 29.7 Emami 935 Buy 24.4 30.2 35.3 38.3 31.0 26.5 31.5 25.5 21.6 40.3 40.0 37.4 Godrej Consumer 1,354 Neutral 33.2 39.8 45.6 40.8 34.0 29.7 29.3 24.4 21.4 23.2 23.6 22.8 GSK Consumer 6,034 Buy 166.6 188.2 208.3 36.2 32.1 29.0 25.7 22.5 19.6 30.5 29.4 27.9 Hind. Unilever 868 Neutral 18.4 20.4 23.3 47.2 42.6 37.3 32.7 29.9 26.4 110.3 134.2 167.4 ITC 327 Buy 12.3 13.9 15.9 26.5 23.4 20.6 17.6 15.7 13.9 30.4 30.8 31.4 Jyothy Labs 298 Buy 8.9 8.1 9.1 33.5 36.7 32.6 27.6 23.3 20.6 19.6 16.4 17.0 Marico 245 Neutral 5.5 6.4 7.2 44.1 38.1 33.9 29.6 25.3 22.3 35.2 33.4 31.1 Nestle 5,724 Neutral 101.8 105.0 122.0 56.2 54.5 46.9 33.7 30.8 27.1 34.2 35.4 42.9 Page Industries 12,096 Buy 212.6 265.8 349.1 56.9 45.5 34.7 35.5 28.8 22.3 46.9 45.4 45.9 Pidilite Inds. 590 Buy 14.9 16.4 18.9 39.7 36.0 31.3 24.8 21.8 18.8 29.8 26.9 26.0 Radico Khaitan 96 Buy 6.4 8.5 10.9 14.9 11.3 8.8 9.6 7.9 6.5 9.5 11.3 13.2 United Spirits 2,451 Buy 28.7 50.8 74.5 85.3 48.2 32.9 39.8 28.8 21.5 48.1 51.1 37.9 Sector Aggregate 37.2 32.6 28.4 25.2 22.1 19.4 34.1 34.2 34.3

1300

670

920

500

750

1,000

1,250

1,500

Mar

-13

Jun-

13

Sep-

13

Dec-

13

Mar

-14

Jun-

14

Sep-

14

Dec-

14

Mar

-15

Jun-

15

Sep-

15

Dec-

15

Mar

-16

Mentha Oil prices INR / kg

240

255 238

215 210

150

190

230

270

310

Mar

-13

Jul-1

3

Nov

-13

Mar

-14

Jul-1

4

Nov

-14

Mar

-15

Jul-1

5

Nov

-15

Mar

-16

TiO2 price (INR/kg)

80

86

92

98

104

Dec-

15

Jan-

16

Feb-

16

Mar

-16

Sensex Index MOSL Consumer Index

73

83

93

103

113

Mar

-15

Apr-

15

May

-15

Jun-

15

Jul-1

5

Aug-

15

Sep-

15

Oct

-15

Nov

-15

Dec-

15

Jan-

16

Feb-

16

Mar

-16

Sensex Index MOSL Consumer Index

April 2016 101


Quarterly Performance (Consolidated) (INR Million) Y/E March FY15 FY16 FY15 FY16E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Volume Growth % * 11.0 10.0 3.0 4.0 12.0 7.0 15.0 12.0 7.0 11.5 Net Sales 33,254 35,868 36,028 34,904 35,780 37,306 41,030 38,446 140,054 152,561 Change (%) 18.0 16.3 5.6 6.9 7.6 4.0 13.9 10.1 11.3 8.9 Gross Profit 13,945 15,399 15,511 15,485 16,319 16,984 19,026 17,997 60,339 70,326 Gross Margin (%) 41.9 42.9 43.1 44.4 45.6 45.5 46.4 46.8 43.1 46.1 Operating Expenses 8,799 10,473 10,158 10,339 9,939 11,263 11,591 11,496 39,770 44,289 % of Sales 26.5 29.2 28.2 29.6 27.8 30.2 28.3 29.9 28.4 29.0 EBITDA 5,146 4,925 5,353 5,146 6,380 5,720 7,435 6,501 20,569 26,036 Margin (%) 15.5 13.7 14.9 14.7 17.8 15.3 18.1 16.9 14.7 17.1 Change (%) 16.4 2.6 7.5 15.8 24.0 16.1 38.9 26.3 10.3 26.6 Interest 78 70 98 102 89 92 76 118 348 376 Depreciation 646 669 673 672 693 709 725 719 2,659 2,846 Other Income 893 917 803 870 1,190 1,063 929 1,016 3,482 4,198 PBT 5,315 5,103 5,384 5,242 6,788 5,982 7,563 6,680 21,044 27,012 Tax 1,590 1,541 1,667 1,698 2,113 1,836 2,288 2,136 6,495 8,374 Effective Tax Rate (%) 29.9 30.2 31.0 32.4 31.1 30.7 30.3 32.0 30.9 31.0 PAT before Minority 3,725 3,563 3,717 3,544 4,674 4,146 5,274 4,544 14,549 18,638 Minority Interest 87 90 35 110 122 156 117 129 322 510 Adjusted PAT 3,387 3,473 3,682 3,410 4,552 3,990 5,157 4,415 13,952 18,129 Change (%) 23.1 6.3 11.8 14.7 34.4 14.9 40.1 29.5 13.5 29.9 E: MOSL Estimates

Asian Paints

CMP: INR869 TP: INR850 Neutral We expect Asian Paints’ (APNT) revenue to grow 10.1% to INR38.4b

(on a base of 6.9% YoY growth) in 4QFY16, with a ~12% rise indomestic decorative volumes.

The company has initiated a weighted average price cut of 2%, witheffect from March 19, 2016. The cut is broad based on a slightlyhigher magnitude in Enamels (solvent-based paints) vs. Emulsions(water-based paints). The industry did not react to Kansai Nerolac’sprice cut earlier.

We note crude prices corrected 31% YoY (up 8% QoQ). Themagnitude of price movement in crude derivatives is lower vis-à-viscrude prices. Operating margin should expand 220bp to 16.9% in4QFY16. We estimate 29.5% PAT growth for 4QFY16.

The stock trades at 37.2x FY18E EPS of INR23.3; maintain Neutral

Key issues to watch out: Volume growth trends and demand scenario in urban and rural

geographies Demand outlook for industrial paints Outlook for raw materials/pricing actions

Bloomberg APNT IN Equity Shares (m) 959.2

M. Cap. (INR b)/(USD b) 834/13 52-Week Range (INR) 925/693 1,6,12 Rel Perf. (%) -1/9/18


Sales 140.1 152.6 172.9 202.0 EBITDA 20.6 26.0 29.8 32.5 Adj. PAT 14.2 18.1 20.5 22.4

Adj. EPS.INR 14.8 18.9 21.3 23.3 EPS Gr. (%) 15.8 27.4 13.0 9.3 BV/Sh.(INR) 49.4 57.7 67.4 77.2

RoE (%) 32.4 35.3 34.1 32.3 RoCE (%) 34.6 38.4 38.1 36.4 Payout (%) 41.1 45.0 46.8 49.3



April 2016 102



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Sales 17,726 19,555 20,152 20,318 20,025 21,911 22,236 22,782 77,751 86,954 YoY Change (%) 15.1 12.4 13.7 14.3 13.0 12.0 10.3 12.1 13.8 11.8 COGS 10,929 11,915 12,190 11,883 11,583 12,672 12,924 13,082 46,918 50,261 Gross Profit 6,797 7,639 7,961 8,435 8,443 9,239 9,312 9,701 30,833 36,694 Margins (%) 38.3 39.1 39.5 41.5 42.2 42.2 41.9 42.6 39.7 42.2 Other Exp 5,245 5,629 5,947 6,224 5,719 6,165 6,259 6,581 23,027 24,723 % of Sales 29.6 28.8 29.5 30.6 28.6 28.1 28.1 28.9 29.6 28.4 Total Exp 16,174 17,544 18,138 18,107 17,302 18,837 19,183 19,663 69,945 74,984 EBITDA 1,552 2,011 2,014 2,211 2,723 3,074 3,053 3,119 7,806 11,970 Margins (%) 8.8 10.3 10.0 10.9 13.6 14.0 13.7 13.7 10.0 13.8

YoY Growth (%) 23.4 38.1 45.1 65.9 75.4 52.9 51.6 41.1 26.2 37.1 Depreciation 318 308 325 494 274 272 281 488 1,445 1,314 Interest 10 11 10 8 7 15 12 10 39 44 Other Income 360 375 378 601 341 477 441 603 1,713 1,862 PBT 1,584 2,067 2,056 2,311 2,784 3,265 3,202 3,224 8,035 12,474 Tax 447 605 599 637 888 1,078 1,056 845 2,293 3,867 Rate (%) 28.2 29.3 29.1 27.6 31.9 33.0 33.0 26.2 28.5 31.0 Adjusted PAT 1,137 1,462 1,457 1,674 1,896 2,186 2,146 2,379 5,743 8,607 YoY Change (%) 27.0 49.6 45.2 54.8 66.7 49.5 47.3 42.2 45.1 49.9 E: MOSL Estimates

Britannia Industries

CMP: INR2,636 TP: INR3,500 Buy We estimate Britannia (BRIT)’s sales to increase 12% YoY to

INR22.8b, with another quarter of double-digit volume growth.

Continued distribution and portfolio gains, especially in identifiedcentral geographies will aid BRIT’s volume outperformance in ourview.

EBITDA margin is expected to expand 280bp YoY to 13.7%, drivenby benign raw material prices, an improved mix, and lower adspends and other expenses. We project EBITDA and PAT to grow41.1% and 42.2%, respectively.

The stock trades at 27.4x FY18E EPS; maintain Buy. Britannia is oneof our top picks in the Tier II consumer space along with Emami.

Key issues to watch out: Volume growth in biscuits Outlook for raw materials Performance of subsidiaries

Bloomberg BRIT IN Equity Shares (m) 120.0



Y/E March 2015 2016E 2017E 2018E


Adj. EPS. INR 47.9 71.8 84.3 96.1 EPS Gr. (%) 47.3 49.9 17.5 13.9 BV/Sh.(INR) 103.5 144.7 194.8 251.8

RoE (%) 56.4 57.8 49.7 43.0 RoCE (%) 54.3 65.0 58.1 51.6 Payout (%) 33.4 35.0 35.0 35.0



April 2016 103



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Toothpaste Volume Gr % 5.0 7.0 5.0 5.0 2.0 3.0 1.0 1.5 5.5 1.9 Net Sales 9,506 9,936 9,886 10,220 10,029 10,318 10,064 10,502 39,548 40,913 YoY Change (%) 12.6 10.9 11.8 11.0 5.5 3.8 1.8 2.8 11.6 3.5 COGS 3,572 3,730 3,637 3,738 3,684 3,730 3,584 3,725 14,677 14,722 Gross Profit 5,934 6,206 6,248 6,482 6,345 6,588 6,480 6,777 24,871 26,190

Gross Margin (%) 62.4 62.5 63.2 63.4 63.3 63.9 64.4 64.5 62.9 64.0 Other operating Expenses 4,060 4,410 4,377 4,073 4,400 4,106 4,250 3,807 16,920 16,563 % to sales 42.7 44.4 44.3 39.9 43.9 39.8 42.2 36.2 42.8 40.5 Other operating Income 63 70 75 65 72 67 85 72 272 351 EBITDA 1,937 1,865 1,946 2,475 2,018 2,549 2,314 2,746 8,222 9,628

Margins (%) 20.2 18.6 19.5 24.1 20.0 24.5 22.8 26.0 20.6 23.3 YoY Growth (%) 17.2 27.5 29.3 22.6 4.2 36.7 18.9 11.0 23.8 17.1

Depreciation 166 177 203 205 253 269 295 306 750 1,123 Interest 0 0 0 0 0 0 0 0 0 0 Financial other Income 65 99 97 71 88 108 106 73 332 375 PBT 1,836 1,787 1,840 2,342 1,853 2,388 2,126 2,514 7,804 8,880 Tax 487 491 531 705 626 818 717 769 2,214 2,930 Rate (%) 26.5 27.5 28.9 30.1 33.8 34.3 33.7 30.6 28.4 33.0 Adj PAT 1,349 1,296 1,309 1,636 1,227 1,569 1,409 1,744 5,590 5,950 YoY Change (%) 4.0 18.3 15.9 18.2 -9.0 21.1 7.6 6.6 13.9 6.4 E: MOSL Estimates

Colgate

CMP: INR832 TP: INR940 Neutral We expect Colgate (CLGT)’s sales to grow 2.8% YoY to INR10.5b.

Toothpaste volume growth will remain flattish at ~1.5%, in ourview.

Sharp increase in competitive intensity, especially from Patanjali,coupled with slowdown in rural consumption is impacting Colgate’svolume growth, we believe.

We estimate EBITDA margin expansion of 190bp to 26%, driven bylower input costs and an improved mix. Hence, we have modeledan EBITDA growth of 11% YoY and adj. PAT growth of 6.6% YoY in4QFY16.

The stock trades at 30x FY18E EPS; maintain Neutral

Key issues to watch out: Volume growth in toothpaste and market share movement Ad spends and competitive intensity in toothpaste, especially

from Patanjali

Bloomberg CLGT IN Equity Shares (m) 272.0

M. Cap. (INR b)/(USD b) 226/3 52-Week Range (INR) 1099/791 1,6,12 Rel Perf. (%) -3/-6/-6


Y/E March 2015 2016E 2017E 2018E


Adj. EPS (INR) 20.6 21.9 24.4 27.7 EPS Gr. (%) 13.9 6.4 11.6 13.6 BV/Sh.(INR) 28.3 32.3 36.8 41.9

RoE (%) 81.6 72.1 70.5 70.4 RoCE (%) 111.3 103.6 100.1 97.5 Payout (%) 60.6 70.0 70.0 70.0

Valuation P/E (x) 40.5 38.1 34.1 30.0 P/BV (x) 29.4 25.7 22.6 19.9


April 2016 104


Quarterly Performance (Consolidated) 41,562 50% 0% (INR Million) Y/E March FY15 FY16 FY15 FY16 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Domestic Vol Growth (%) 8.3 8.7 7.4 8.1 8.1 5.5 -2.5 6.0 8.1 4.3 Net Sales 18,639 19,241 20,736 19,448

20,641 20,921 21,224 21,036 78,064 83,823

YoY Change (%) 13.2 10.4 9.2 10.2

10.7 8.7 2.4 8.2 10.7 7.4 Total Exp 16,008 15,787 17,271 16,041 17,477 16,917 17,488 17,162 65,108 69,045 EBITDA 2,631 3,454 3,464 3,407

3,164 4,004 3,736 3,874 12,956 14,778

Margins (%) 14.1 17.9 16.7 17.5

15.3 19.1 17.6 18.4 16.6 17.6 YoY Growth (%) 13.3 6.6 18.4 17.5

20.3 15.9 7.8 13.7 13.8 14.1

Depreciation 267 292 309 282 326 329 323 330 1,150 1,308 Interest 101 102 95 103

117 124 109 116 401 466

Other Income 409 444 440 496 532 588 649 572 1,789 2,342 PBT 2,672 3,502 3,500 3,519 3,253 4,140 3,954 4,000 13,193 15,346 Tax 560 616 663 670

632 728 766 944 2,509 3,069

Rate (%) 21.0 17.6 18.9 19.0 19.4 17.6 19.4 23.6 19.0 20.0 Minority Interest 3 13 10 1

10 0 3 7 26 20

Adjusted PAT 2,108 2,875 2,828 2,848 2,611 3,411 3,185 3,050 10,658 12,257 YoY Change (%) 13.3 15.1 16.2 21.0 23.9 18.7 12.6 7.1 16.5 15.0 E: MOSL Estimates 22% 13% 5% 17%

Dabur

CMP: INR246 TP: INR280 Neutral We expect sales to rise 8.2% YoY to INR21b, led by ~6% domestic

organic volume growth. During the concall for 3QFY16 results, management indicated volume growth would be in mid-single digit, with stabilization in the Foods business.

The commodity cycle remains benign and we expect Dabur’s EBITDA margin to expand 90bp, with ad spends in the range of 13–14%.

Hence, we have modeled EBITDA and PAT growth of 13.7% and 7.1%, respectively, in 4QFY16.

The stock trades at 26.9x FY18E EPS of INR9.1; maintain Neutral

Key issues to watch out: Domestic volume growth and outlook for rural demand Update on project CORE Margin performance in international business Competitive intensity, especially from Patanjali

Bloomberg DABUR IN Equity Shares (m) 1,759.1



Y/E March 2015 2016E 2017E 2018E



RoE (%) 35.5 33.0 31.7 29.7 RoCE (%) 29.7 28.6 28.7 27.8 Payout (%) 37.0 35.0 35.0 35.0



April 2016 105



(INR Million)

Y/E MARCH FY15 FY16 FY15 FY16E 1Q 2Q 3Q 4Q

1Q 2Q 3Q 4QE

Domestic volume Growth (%) 12.5 11.5 11.0 12.0

15.0 13.5 9.3 13.0 11.8 12.7 Net Sales 4,817 4,896 6,923 5,537 5,899 5,746 7,885 6,453 22,173 25,983 YoY Change (%) 25.6 20.4 18.4 24.2

22.4 17.4 13.9 16.5 21.8 17.2

COGS 1,858 1,655 2,267 1,973 2,016 1,690 2,305 2,071 7,752 8,082 Gross Profit 2,959 3,241 4,656 3,563 3,883 4,056 5,581 4,382 14,420 17,901

Gross margin (%) 61.4 66.2 67.3 64.4 65.8 70.6 70.8 67.9 65.0 68.9 Other Expenditure 2,209 2,109 2,541 2,161 2,886 2,533 3,086 2,592 9,020 11,097

% to sales 45.9 43.1 36.7 39.0 48.9 44.1 39.1 40.2 40.7 42.7 EBITDA 750 1,132 2,115 1,403 997 1,523 2,495 1,790 5,400 6,805 Margins (%) 15.6 23.1 30.6 25.3

16.9 26.5 31.6 27.7 24.4 26.2

YoY Change 26.7 29.6 19.7 18.9

32.9 34.5 18.0 27.6 22.4 26.0 Depreciation 44 102 99 110 99 103 99 105 356 407 Interest 8 13 20 73

43 191 171 181 114 587

Other Income 223 149 313 297 185 129 50 90 981 494 PBT 921 1,165 2,309 1,516

1,039 1,358 2,275 1,594 5,912 6,305

Tax 213 250 472 135

39 139 320 269 1,070 766 Rate (%) 23.1 21.5 20.4 8.9 3.8 10.2 14.1 16.9 18.1 12.2 PAT 708 915 1,837 1,381

997 1,217 1,952 1,325 4,841 5,538

YoY Change (%) 16.7 14.5 21.9 21.5 40.7 32.9 6.2 -4.0 20.5 14.4 Amortization 0 0 0 0

126 609 617 625 0 2,000

Reported PAT 708 915 1,837 1,381 877 638 1,365 698 4,841 3,538 E: MOSL Estimates

Emami

CMP: INR935 TP: INR1,300 Buy We project Emami (HMN)’s sales to grow 16.5% YoY to INR6.5b, led

by the ~13% volume expansion. Excluding Kesh King, like to like organic volume growth should come in at 3-4% in our view.

As per management, issues pertaining to Kesh King inventory are now behind. Management had guided for INR 3 bn Kesh King turnover in FY17 vs. expected INR 1.9b in FY16.

We estimate gross margins to expand 350bp to 67.9%, due to benign raw material prices, and 240bp EBITDA margin expansion to 27.7%. Thus, EBITDA is expected to increase 27.6% YoY to INR1.8b.

PAT is expected to decline 4% YoY to INR1.3b due to higher interest costs, lower other income and higher tax rates.

The stock trades at 26.5x FY18E EPS of INR35.3; maintain Buy. Emami remains one of our preferred ideas.

Key issues to watch out: Volume growth and broad consumer demand across categories Outlook for mentha oil prices Update on Kesh King integration Competitive intensity, especially from Patanjali

Bloomberg HMN IN Equity Shares (m) 227.0



Y/E March 2015 2016E 2017E 2018E

Sales 22.2 26.0 30.8 36.2 EBITDA 5.4 6.8 8.2 9.4 NP 4.9 5.5 6.8 8.0


RoE (%) 44.9 40.3 40.0 37.4 RoCE (%) 44.0 33.9 31.5 34.6 Payout (%) 32.7 44.1 36.5 34.0


EV/EBITDA (x) 38.1 31.5 25.5 21.6 Div. Yld (%) 0.8 1.2 1.2 1.3

April 2016 106


Quarterly Performance (INR Million) Y/E March FY15 FY16 FY15 FY16E 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Sales 18,863 20,475 22,258 20,826 20,952 22,424 23,535 22,280 82,422 89,191 YoY Change (%) 9.5 4.6 12.5 8.2 11.1 9.5 5.7 7.0 8.7 8.2 EBITDA 2,400 3,289 3,885 3,775 3,128 4,047 4,554 4,469 13,349 16,198 Margins (%) 12.7 16.1 17.5 18.1

14.9 18.0 19.4 20.1 16.2 18.2

YoY Growth (%) 6.9 11.3 26.5 13.0 30.3 23.0 17.2 18.4 15.0 21.3 Depreciation 221 227 230 229 236 241 264 254 908 995 Interest 259 254 253 241

265 250 242 257 1,007 1,014

Other Income 118 272 220 269

193 216 193 240 879 843 PBT 2,004 3,049 3,636 3,593 2,834 3,771 4,323 4,198 12,313 15,032 Tax 490 718 738 823

563 742 910 918 2,769 3,133

Rate (%) 24.4 23.5 20.3 22.9 19.9 19.7 21.0 21.9 22.5 20.8 Minority Int 139 178 261 115

131 91 178 201 693 600

Adj PAT 1,376 2,152 2,637 2,654 2,141 2,938 3,236 3,079 8,819 11,299 YoY Change (%) 2.5 10.4 34.8 14.0 55.6 36.5 22.7 16.0 16.4 28.1 E: MOSL Estimates

Godrej Consumer

CMP: INR1,354 TP: INR1,300 Neutral We expect Godrej Consumer’s revenue to rise 7% to INR22.3b.

There has been no sequential recovery in market demand, with inflation in key raw material prices on QoQ basis.

We forecast soaps revenues to expand 3%, while hair color and home insecticides businesses are projected to grow 10% each.

Demand trends in international business remain weak on sequential basis, primarily driven by macroeconomic trends.

We estimate operating margin to expand 190bp YoY to 20.1%.

We have modeled EBITDA and PAT growth of 18.4% and 16%, respectively.

The stock trades at 29.7x FY18E EPS of INR45.6. Maintain Neutral.

Key issues to watch out: Growth trend in soap volume; comments on growth outlook for

household insecticide portfolio Competitive intensity across categories Outlook for international business—margin guidance for LatAm,

timelines of stake increase in Darling

Bloomberg GCPL IN Equity Shares (m) 340.5



Y/E March 2015 2016E 2017E 2018E Sales 82.8 89.2 103.2 118.4

EBITDA 13.7 16.2 19.3 21.7 Adj. PAT 9.1 11.3 13.6 15.5 Adj. EPS (INR) 26.7 33.2 39.8 45.6

EPS Gr. (%) 22.0 24.5 20.0 14.4 BV/Sh.(INR) 131.4 154.8 182.9 216.7 RoE (%) 21.4 23.2 23.6 22.8


P/E (x) 50.8 40.8 34.0 29.7 P/BV (x) 10.3 8.7 7.4 6.2 EV/EBITDA (x) 35.1 29.4 24.4 21.4 Div. Yield (%) 0.5 0.7 0.9 0.9

April 2016 107



(INR Million)

Y/E Mar FY15 FY16 FY15 FY16E 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE MFD Volume Growth (%) 3.0 2.0 5.0 2.0 2.0 0.0 0.0 2.0 3.0 1.0 Net Sales 9,660 11,136 10,125 12,155

10,450 11,257 10,295 12,785 43,076 44,787

YoY Change (%) 8.5 9.8 16.5 8.5 8.2 1.1 1.7 5.2 -12.1 4.0 Total Exp 8,013 9,179 9,066 9,517 8,461 8,880 8,697 9,767 35,775 35,805 EBITDA 1,646 1,957 1,059 2,638

1,989 2,377 1,598 3,018 7,301 8,982

Margins (%) 17.0 17.6 10.5 21.7

19.0 21.1 15.5 23.6 16.9 20.1 YoY Change (%) 5.5 1.9 19.8 14.7 20.8 21.4 50.9 14.4 -19.4 23.0 Depreciation 119 121 131 249

154 137 138 248 621 677

Interest 2 2 2 2

2 2 2 2 7 8 Other Income 458 619 548 595 549 574 569 631 2,219 2,322 PBT 1,983 2,453 1,474 2,982

2,383 2,812 2,026 3,400 8,891 10,620

Tax 682 850 510 1,015

832 983 708 1,092 3,055 3,615 Rate (%) 34.4 34.6 34.6 34.0 34.9 35.0 34.9 32.1 34.4 34.0 Adj PAT 1,301 1,603 964 1,968

1,550 1,829 1,319 2,308 5,836 7,005

YoY Change (%) 8.5 9.1 20.9 14.6 19.1 14.1 36.8 17.3 -13.5 20.0 E: MOSL Estimates

GSK Consumer

CMP: INR6,034 TP: INR7,000 Buy We expect GSK to report net sales of INR12.8b, up 5.2% YoY, led by

muted 2% volume growth. In our view, discretionary demand in the core MFD category is yet to witness an uptrend.

We estimate EBITDA margin to expand 190bp YoY to 23.6%, and PAT growth of 17.3% YoY.

The stock trades at 29x FY18E EPS; maintain Buy

Key issues to watch out: Growth in MFD volume Outlook for market growth and raw materials Performance of non-MFD portfolio Competitive intensity, especially from Patanjali

Bloomberg SKB IN Equity Shares (m) 42.1



Y/E December 2015 2016E 2017E 2018E


Adj. EPS (INR) 138.8 166.6 188.2 208.3 EPS Gr. (%) -13.5 20.0 13.0 10.7 BV/Sh. (INR) 502.4 591.1 691.2 802.0

RoE (%) 29.7 30.5 29.4 27.9 RoCE (%) 36.4 36.1 34.2 32.9 Payout (%) 32.4 40.0 40.0 40.0



April 2016 108


Quarterly performance (INR Million) Y/E March FY15 FY16 FY15 FY16E 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Volume Growth (%) 5.0 5.0 3.0 6.0 6.0 7.0 6.0 6.0 4.8 6.3 Net Sales (incl service inc) 77,163 76,393 77,743 76,756 81,051 79,554 79,810 80,540 308,056 320,955 YoY Change (%) 13.3 10.8 7.6 8.2 5.0 4.1 2.7 4.9 9.9 4.2 COGS 39,896 39,590 38,480 38,985 39,020 38,995 37,421 39,722 156,951 155,158 Gross Profit 37,267 36,804 39,263 37,772

42,031 40,559 42,389 40,817 151,106 165,796

Margin % 48.3 48.2 50.5 49.2

51.9 51.0 53.1 50.7 49.1 51.7 Operating Exp 24,426 24,383 25,948 25,305 26,967 27,475 28,080 27,428 100,063 109,951 % to sales 31.7 31.9 33.4 33.0 33.3 34.5 35.2 34.1 32.5 34.3 EBITDA 12,841 12,420 13,315 12,467

15,064 13,084 14,308 13,389 51,043 55,845

YoY Change (%) 18.3 14.4 8.5 15.7

17.3 5.3 7.5 7.4 14.1 9.4 Margins (%) 16.6 16.3 17.1 16.2

18.6 16.4 17.9 16.6 16.6 17.4

Depreciation 667 764 731 705 749 761 822 760 2,867 3,092 Interest 63 63 42 0

1 0 1 0 168 1

Other Income 2,021 1,978 1,201 984 1,086 1,702 1,396 1,117 6,184 5,300 PBT 14,132 13,571 13,743 12,746

15,400 14,024 14,882 13,746 54,192 58,053

Tax 4,026 4,001 4,189 4,116

4,873 4,440 4,644 4,331 16,333 18,287 Rate (%) 28.5 29.5 30.5 32.3

31.6 31.7 31.2 31.5 30.1 31.5

Adjusted PAT 10,106 9,570 9,553 8,630 10,528 9,584 10,239 9,415 37,859 39,766 YoY Change (%) 14.2 8.4 0.1 3.7 4.2 0.1 7.2 9.1 6.5 5.0 E: MOSL Estimates

Hindustan Unilever

CMP: INR868 TP: INR830 Neutral We expect Hindustan Unilever’s revenue to increase 4.9%, with an

underlying ~6% volume growth. HUVR’s volume growth pick up will be contingent on recovery in rural consumption demand, in our view.

PFAD prices have corrected 3.3% YoY (up 42% QoQ) and LAB prices are down 3% YoY (1% QoQ).

We forecast operating margin to expand 40bp YoY to 16.6% in 4QFY16. HUVR has seen selective price hikes in Personal Care portfolio.

We estimate EBITDA and PAT growth at 7.4% YoY and 9.1% YoY, respectively. The stock trades at 37.3x FY18E EPS of INR23.3; maintain Neutral

Key issues to watch out: Comments on volume growth and consumer demand

environment Competitive intensity in S&D and Shampoos

Bloomberg HUVR IN Equity Shares (m) 2,163.5



Y/E March 2015 2016E 2017E 2018E



RoE (%) 108.1 110.3 134.2 167.4 RoCE (%) 137.6 146.3 175.9 218.1 Payout (%) 85.7 90.9 93.2 88.1



April 2016 109



(INR Million) Y/E March FY15 FY16 FY15 FY16E 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Cigarette Vol Gr (%) -2.5 -4.0 -13.0 -13.0 -17.0 -14.0 -5.0 -3.0 -8.1 -9.8 Net Sales 92,483 90,237 89,426 92,928

85,877 89,042 91,767 99,172 365,074 365,858

YoY Change (%) 24.8 14.8 2.5 0.6 -7.1 -1.3 2.6 6.7 9.8 0.2 Total Exp 59,707 55,351 54,784 59,917 52,018 53,441 55,715 63,899 229,759 225,075 EBITDA 32,776 34,887 34,642 33,011

33,859 35,601 36,052 35,272 135,316 140,784

Growth (%) 17.4 15.6 5.5 3.1

3.3 2.0 4.1 6.8 10.0 4.0 Margins (%) 35.4 38.7 38.7 35.5 39.4 40.0 39.3 35.6 37.1 38.5 Depreciation 2,313 2,432 2,376 2,496

2,582 2,588 2,625 2,775 9,617 10,571

Interest 152 184 84 155

105 103 161 121 574 489 Other Income 2,346 3,562 5,820 3,704 3,150 3,992 6,779 3,643 15,431 17,565 PBT 32,657 35,833 38,002 34,064

34,322 36,902 40,045 36,020 140,555 147,288

Tax 10,793 11,581 11,652 10,046

11,668 12,589 13,517 10,832 44,072 48,605 Rate (%) 33.0 32.3 30.7 29.5 34.0 34.1 33.8 30.1 31.4 33.0 Adj PAT 21,864 24,252 26,350 24,018

22,654 24,313 26,528 25,188 96,483 98,683

YoY Change (%) 15.6 15.6 10.5 5.4 3.6 0.3 0.7 4.9 11.5 2.3 E: MOSL Estimates

ITC

CMP: INR327 TP: INR370 Buy We estimate net sales to grow 6.7% YoY to INR99b, with cigarettes

volume declining 3% YoY, relatively better QoQ. This has been ascribed to inventory stocking ahead of expectation of a price hike post budget and a production push by the company in anticipation of a halt from April 1, 2016 (uncertainty on the size of pictorial warnings on cigarette packs).

We expect Cig EBIT to come in at 8%. We have factored in EBITDA growth of 6.8% YoY to INR35.3b.

We expect other FMCG segment to post revenue growth of ~8%. We project PAT to increase muted 4.9% YoY to INR25.2b. The stock trades at 20.6x FY18E EPS of INR15.9; maintain Buy. We

recently upgraded the rating to BUY post budget. With most of state government budgets out of way without any material increase in VAT rates, we believe near term overhangs are behind.

Key issues to watch out: Trends in cigarette volume Demand outlook for FMCG categories and segmental profitability

Bloomberg ITC IN Equity Shares (m) 8,036.7



Y/E March 2015 2016E 2017E 2018E



RoE (%) 33.7 30.4 30.8 31.4 RoCE (%) 41.8 38.4 38.8 39.3 Payout (%) 62.8 64.4 64.4 64.4



April 2016 110



(INR Million)

Y/E March FY15 FY16 FY15 FY16E 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Sales 3,851 3,677 3,564 3,961

4,140 4,007 3,848 4,318 15,053 16,314

YoY Change (%) 15.8 16.2 13.7 11.3 7.5 9.0 8.0 9.0 14.2 8.4 Other Operating Income 3.4 2.1 41.5 48.4 3.4 6.6 6.4 2.7 95.4 19.1 Total Sales 3,855 3,679 3,605 4,010

4,143 4,014 3,854 4,321 15,148 16,333

COGS 2,012 1,918 1,787 2,058 1,991 1,943 1,831 2,122 7,775 7,887 Gross Profit 1,843 1,761 1,819 1,951

2,152 2,071 2,023 2,200 7,374 8,446

Margins (%) 47.8 47.9 50.4 48.7 51.9 51.6 52.5 50.9 49.0 51.8 Total Exp 1,323 1,427 1,456 1,538 1,581 1,579 1,513 1,689 5,744 6,362 EBITDA 520 334 363 413

572 492 510 510 1,630 2,084

EBITDA Growth % 8.7 -12.8 -12.0 38.8

10.0 47.2 40.4 23.6 3.7 27.8 Margins (%) 13.5 9.1 10.1 10.3 13.8 12.3 13.2 11.8 10.8 12.8 Depreciation 81 87 76 81

69 72 74 87 325 301

Interest 34 35 37 32

31 16 8 14 138 69 Other Income 20 39 15 25 50 46 25 28 99 148.8 PBT 425 252 264 326

522 450 453 438 1,266 1,863

Tax 1 0 0 35

76 63 63 53 35 255 Rate (%) 0.1 0.0 0.0 10.7 14.6 14.0 13.8 12.2 2.8 13.7 Adjusted PAT 424 252 264 291

446 387 390 384 1,231 1,608


Jyothy Labs

CMP: INR298 TP: INR350 Buy We expect Jyothy Labs’ net sales to grow 9% to INR4.3b, driven

entirely by volume growth.

We estimate EBITDA margins to expand 150bp YoY to 11.8%, led by benign input costs.

We expect PAT to rise 32.2% YoY to INR384m.

The stock trades at 32.6x FY18E EPS of INR9.1; maintain Buy. Speculation around Henkel deal will overshadow fundamentals in FY17, in our view.

Key issues to watch out: Update on new launches and innovation Update on Henkel call option Pick up in Henkel brands’ performance

Bloomberg JYL IN Equity Shares (m) 181.0



Y/E March 2015 2016E 2017E 2018E


Adj PAT for NCD 1.3 1.2 1.0 1.2 Adj.EPS (INR) 7.0 8.9 8.1 9.1 EPS Gr. (%) 26.4 -8.7 12.6

BV/Sh (INR) 43.1 47.7 51.4 56.0 RoE (%) 16.8 19.6 16.4 17.0 RoCE (%) 9.6 13.3 17.5 21.8

P/E (x) 42.4 33.5 36.7 32.6 P/BV (x) 6.9 6.2 5.8 5.3 EV/EBITDA 35.9 27.7 23.3 20.6

Dividend Yield (%) 1.3 1.3 1.3 1.3

April 2016 111


Quarterly Performance (INR Million) Y/E March FY15 FY16 FY15 FY16E 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Domestic organic vol gr (%) 6.5 8.0 5.0 3.0 6.0 5.5 10.5 10.0 5.6 8.0 Net Sales 16,192 14,291 14,489 12,230 17,815 14,835 15,546 13,317 57,203 61,513 YoY Change (%) 17.4 28.1 20.9 14.3 10.0 3.8 7.3 8.9 20.1 7.5 COGS 8,911 7,976 7,923 6,381 9,595 7,537 7,504 6,396 31,190 31,032 Gross Profit 7,281 6,316 6,567 5,849 8,220 7,298 8,042 6,922 26,012 30,481

Gross margin (%) 45.0 44.2 45.3 47.8 46.1 49.2 51.7 52.0 45.5 49.6 Other Expenditure 4,654 4,383 4,233 4,169 4,984 5,020 5,122 4,790 17,439 19,916

% to Sales 28.7 30.7 29.2 34.1 28.0 33.8 32.9 36.0 30.5 32.4 EBITDA 2,628 1,932 2,334 1,680 3,236 2,278 2,920 2,131 8,574 10,565 Margins (%) 16.2 13.5 16.1 13.7 18.2 15.4 18.8 16.0 15.0 17.2

YoY Change (%) 15.8 16.6 17.0 10.7 23.1 17.9 25.1 26.9 15.2 23.2 Depreciation 204 205 235 200 206 239 247 209 844 901 Interest 70 51 52 56 44 36 56 54 229 189 Other Income 222 137 136 220 238 161 188 194 716 781 PBT 2,576 1,813 2,184 1,644 3,224 2,164 2,805 2,063 8,217 10,256 Tax 678 599 562 528 889 624 800 662 2,368 2,974 Rate (%) 26.3 33.0 25.7 32.1 27.6 28.8 28.5 32.1 28.8 29.0 Minority Interest 44 31 23 16 37 33 27 28 114 126 Adjusted PAT 1,853 1,183 1,599 1,100 2,297 1,507 1,978 1,373 5,735 7,156 YoY Change (%) 19.3 11.7 18.1 1.9 24.0 27.4 23.7 24.8 10.3 24.8 E: MOSL Estimates

Marico

CMP: INR245 TP: INR220 Neutral We expect sales to increase 8.9% YoY to INR13.3b, with ~10%

domestic volume growth. In our opinion, Parachute, Saffola and VAHO volumes would expand 7%, 10% and 15%, respectively.

We observe copra prices have corrected 40% YoY, while Kardi Oil prices are up 6% YoY. We are modeling 410bp YoY gross margin expansion and 230bp EBITDA margin expansion for 4Q16.

PAT is projected to grow robust 24.8% YoY.

The stock trades at 33.9x FY18E EPS of INR7.2; maintain Neutral. We like the franchise, portfolio strength, management quality and its multiple growth driver model. However, expensive valuations underscore our Neutral stance.

Key issues to watch out: Comments on volume growth trends across key categories Outlook for raw materials Margin expansion and guidance for the international business

Bloomberg MRCO IN Equity Shares (m) 1,289.6



Y/E March 2015 2016E 2017E 2018E



RoE (%) 36.0 35.2 33.4 31.1 RoCE (%) 35.6 38.8 37.8 35.8 Payout (%) 28.1 36.1 35.8 34.6



April 2016 112


Quarterly performance

(INR Million) Y/E December CY15 CY16E CY15 CY16E 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q Net Sales 25,068 19,338 17,362 19,464 22,561 23,206 22,571 23,183 81,233 91,521 YoY Change (%) 8.4 -20.1 -32.1 -22.6 -10.0 20.0 30.0 19.1 -17.2 12.7 COGS 10,626 8,553 7,429 8,082 9,902 10,334 10,108 10,497 34,689 40,841 Gross Profit 14,442 10,785 9,934 11,383

12,660 12,872 12,462 12,686 46,544 50,680

Margin (%) 57.6 55.8 57.2 58.5

56.1 55.5 55.2 54.7 57.3 55.4 Operating Exp 8,422 7,183 7,059 7,892 7,918 8,434 8,500 8,462 30,556 33,315 EBITDA 6,020 3,602 2,874 3,491

4,741 4,438 3,962 4,224 15,987 17,365

Margins (%) 24.0 18.6 16.6 17.9

21.0 19.1 17.6 18.2 19.7 19.0 YoY Growth (%) 24.0 -26.1 -46.2 -36.0

-21.2 23.2 37.9 21.0 -22.1 8.6

Depreciation 950 720 906 897 1,017 936 996 985 3,473 3,934 Interest 34 1 0 -2

15 15 15 16 33 61

Other income 352 533 334 403 394 586 367 508 1,621 1,855 PBT 5,387 3,414 2,302 2,999

4,103 4,073 3,318 3,731 14,103 15,226

Tax 1,663 1,093 637 913

1,375 1,324 1,078 1,324 4,305 5,101 Rate (%) 30.9 32.0 27.7 30.4

33.5 32.5 32.5 35.5 30.5 33.5

Adjusted PAT 3,725 2,322 1,666 2,086 2,729 2,750 2,240 2,407 9,798 10,125 YoY Change (%) 27.1 -21.9 -49.1 -36.7 -26.7 18.4 34.5 15.4 -21.4 3.3 E: MOSL Estimates

Nestle India

CMP: INR5,724 TP: INR6,000 Neutral We expect Nestle India’s net sales to decline 10% YoY to INR22.6b

largely owing to Maggi. While Maggi has been relaunched and has seen good initial acceptance, we note that full portfolio is yet to be unveiled in market. We also expect non-Maggi portfolio to remain muted and post flattish sales.

We estimate EBITDA margin to contract 300bp YoY to 21%, largely due to higher ad spends and lack of operating leverage. EBITDA and PAT are projected to decline 21.2% YoY (to INR4.7b) and 26.7% YoY (to INR2.7b), respectively.

The stock trades at 47.4x CY17E EPS; maintain Neutral.

Key issues to watch out: Volume trends and management commentary on demand

environment Recovery in sales and market share of Maggi

Bloomberg NEST IN Equity Shares (m) 96.4



Y/E December 2014 2015 2016E 2017E


Adj. EPS (INR) 129.4 101.8 105.0 122.0 EPS Gr. (%) 6.1 -21.3 3.1 16.2 BV/Sh.(INR) 294.3 300.8 292.2 276.5

RoE (%) 47.9 34.2 35.4 42.9 RoCE (%) 53.6 43.1 46.1 55.6 Payout (%) 48.7 73.7 85.7 90.1



April 2016 113



(INR Million) Y/E MARCH FY15 FY16 FY15 FY16E

1Q 2Q 3Q 4Q

1Q 2Q 3Q 4QE

Net Sales 3,837 3,965 3,830 3,797 4,465 4,614 4,399 4,412 15,429 17,890 YoY Change (%) 24.4 36.5 25.4 33.8 16.4 16.4 14.9 16.2 29.9 15.9 COGS 1,823 1,871 1,725 1,737

2,098 2,120 1,945 1,977 7,156 8,140

Gross Profit 2,014 2,094 2,105 2,060 2,367 2,493 2,454 2,435 8,273 9,750 Gross margin (%) 52.5 52.8 55.0 54.2 53.0 54.0 55.8 55.2 53.6 54.5

Other Expenditure 1,118 1,349 1,326 1,293

1,353 1,480 1,560 1,529 5,085 5,922 % to sales 29.1 34.0 34.6 34.0 30.3 32.1 35.5 34.7 33.0 33.1

EBITDA 897 746 778 767

1,014 1,014 894 905 3,188 3,828 Margins (%) 23.4 18.8 20.3 20.2

22.7 22.0 20.3 20.5 20.7 21.4

YoY Change 31.7 14.9 34.3 24.4


48 35 34 46 167 163

Other Income 13 67 2 7 52 5 2 13 88 72 PBT 810 745 696 683

962 927 805 820 2,933 3,514

Tax 267 246 249 212

330 324 241 248 973 1,142 Rate (%) 32.9 33.0 35.7 31.0

34.3 34.9 29.9 30.2 33.2 32.5

PAT 543 499 447 471 632 603 565 572 1,960 2,372 YoY Change (%) 26.0 21.9 29.1 34.2 16.4 20.9 26.3 21.5 27.5 21.0 Reported PAT 543 499 447 471 632 603 519 572 E: MOSL Estimates

Page Industries

CMP: INR12,096 TP: INR14,000 Buy We expect Page to report net sales of INR4.4b, up 16.2% YoY, led by

9–10% volume growth. In our view, discretionary demand is yet to witness any material pick up.

During 4Q16, Page introduced Towels and has seen rapid offtake for the same. In our recent interaction

We estimate EBITDA margin to expand 30bp YoY to 20.5% and PAT to post 21.5% YoY growth.

The stock trades at 34.7x FY18E EPS; maintain Buy.

Key issues to watch out: Volume trends and management commentary on demand

environment Update on foray into kids’ wear segment GST impact

Bloomberg NEST IN Equity Shares (m) 11.2 M. Cap. (INR b)/(USD b) 135/2



Y/E March 2015 2016E 2017E 2018E

Sales 15.4 17.9 22.3 28.0 Sales Gr. % 29.9 15.9 24.4 25.8 EBITDA 3.2 3.8 4.7 6.1

EBITDA Gr. % 25.1 20.0 22.9 29.5 Adj. PAT 2.0 2.4 3.0 3.9 Adj. EPS (INR) 175.7 212.6 265.8 349.1

EPS Gr. % 27.5 21.0 25.0 31.3 FCF to PAT 0.6 0.7 0.6 0.5 BV/Sh.INR 346.8 453.1 586.0 760.5

RoE (%) 50.7 46.9 45.4 45.9 RoCE (%) 41.6 41.5 42.5 45.1 Payout (%) 48.9 50.0 50.0 50.0

Valuations P/E (x) 68.8 56.9 45.5 34.7 EV/EBITDA (x) 42.8 35.5 28.8 22.3

April 2016 114


Quarterly Performance (INR Million) Y/E March FY15 FY16 FY15 FY16E 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Sales 12,129 11,355 10,816 9,681

13,057 11,652 11,767 10,665 43,981 47,141

Change (%) 19.5 14.6 12.1 6.7 7.6 2.6 8.8 10.2 13.4 7.2 Gross Profit 5,323 4,948 4,814 4,615

6,441 5,996 6,150 5,601 19,699 24,188

Gross Margin % 43.9 43.6 44.5 47.7 49.3 51.5 52.3 52.5 44.8 51.3 Operating Expenses 2,993 2,923 2,932 3,222

3,163 3,191 3,282 3,310 12,069 12,945

% of sales 24.7 25.7 27.1 33.3 24.2 27.4 27.9 31.0 27.4 27.5 EBITDA 2,331 2,025 1,882 1,393

3,278 2,806 2,868 2,291 7,631 11,243

EBITDA Margin % 19.2 17.8 17.4 14.4

25.1 24.1 24.4 21.5 17.3 23.9 Change (%) 4.4 10.2 22.2 19.2 40.7 38.5 52.4 64.5 12.5 47.3 Depreciation 228 288 278 283

280 287 285 299 1,077 1,152


14 15 14 16 95 59 Other Income 174 135 41 78 94 120 82 119 428 415 PBT 2,264 1,858 1,610 1,154

3,078 2,623 2,651 2,095 6,886 10,447

Tax 576 491 370 231

886 792 788 668 1,667 3,134 Effective Tax Rate (%) 25.4 26.4 22.9 20.0 28.8 30.2 29.7 31.9 24.2 30.0 Adj PAT 1,689 1,367 1,241 923

2,192 1,831 1,864 1,427 5,219 7,313

Change (%) 9.2 8.7 15.4 -0.1 29.8 33.9 50.2 54.5 8.7 40.1 E: MOSL Estimates

Pidilite Industries

CMP: INR590 TP: INR660 Buy We expect Pidilite (PIDI)’s revenues to expand 10.2%, led by double

digit volume growth in Consumer and Bazaar segment. We model gross margin expansion of 490bp YoY to 52.5%, driven by

benign raw material cost (vinyl acetate monomer) and strong pricing. EBITDA margin is expected to expand 710bp YoY to 21.5%.

We expect EBITDA and PAT to grow 64.5% and 54.5% YoY, respectively.

The stock trades at 31.3x FY18E EPS of INR18.9; maintain Buy. Pidilite is one of our preferred ideas. Dominant leadership position in core Adhesives segment imparts strong pricing power (reflected in the highest grows margin expansion in coverage universe). This coupled with its strategy of building adjacencies in portfolio and potential gains from distribution outreach drives our long term preference for Pidilite.

Key issues to watch out: Volume growth in Fevicol Outlook for VAM prices Outlook for industrial and construction chemical segments Progress on Elastomer project (if any)

Bloomberg PIDI IN Equity Shares (m) 512.7



Y/E March 2015 2016E 2017E 2018E



RoE (%) 24.3 29.8 26.9 26.0 RoCE (%) 30.9 39.4 36.7 35.8 Payout (%) 28.7 28.1 29.4 30.0



April 2016 115


Quarterly Performance (INR Million) Y/E March FY15 FY16 FY15 FY16E 1Q 2Q 3Q 4Q

1Q 2Q 3Q 4QE

Net sales 3,699 3,626 4,125 3,434 3,947 3,698 4,009 3,713 14,884 15,368 YoY Change (%) 3.5 3.0 5.5 -2.3 6.7 2.0 -2.8 8.1 2.5 3.3 Total Expenses 3,198 3,151 3,612 3,116 3,435 3,161 3,406 3,290 13,076 13,292 EBITDA 501 475 513 318

512 538 603 423 1,808 2,076

Margins (%) 13.6 13.1 12.4 9.3

13.0 14.5 15.0 11.4 12.1 13.5 YoY Change (%) -17.9 -15.8 -6.8 -20.5 2.1 13.2 17.5 33.1 -15.0 14.9 Depreciation 105 105 90 83

100 100 100 100 383 400

Interest 226 227 230 217

213 208 197 205 899 823 Other Income 93 104 103 149

95 70 68 86 450 320

PBT 264 248 296 167 295 300 374 204 975 1,173 Tax 80 53 30 81

73 78 103 64 195 317

Rate (%) 30.3 21.2 10.1 48.7 24.8 25.8 27.4 31.3 20.0 27.0 Adjusted PAT 184 195 266 86 222 222 272 140 731 856 YoY Change (%) -39.9 -30.4 17.5 -5.6 20.6 14.0 2.3 63.0 -19.1 17.2 E: MOSL Estimates

Radico Khaitan

CMP: INR96 TP: INR150 Buy We expect Radico’s (RDCK)’s revenue to increase 8.1% to INR3.7b,

primarily led by 2% volume growth.

The premium segment should continue to accelerate at a faster pace, aided by uptrading (premiumization) and RDCK’s strategy to defocus on regular brands (given the harsh taxation environment and unfavorable raw material scenario).

We expect operating margin to expand 210bp YoY to 11.4%.

PAT is estimated to grow 63% YoY to INR140m largely driven by low base.

The stock trades at 8.8x FY18E EPS of INR10.9; maintain Buy

Key issues to watch out: Price hikes, if any, during the quarter Price trend and outlook for ENA

Bloomberg RDCK IN Equity Shares (m) 132.6



Y/E March 2015 2016E 2017E 2018E


Adj. EPS (INR) 6.6 6.4 8.5 10.9 EPS Gr. (%) 4.2 -3.0 31.5 28.9 BV/Sh.(INR) 64.7 71.4 78.4 87.4

RoE (%) 10.5 9.5 11.3 13.2 RoCE (%) 8.6 9.2 10.8 12.5 Payout (%) 11.5 15.0 15.0 15.0



April 2016 116


Quarterly Performance (INR Million) Y/E March FY15 FY16 FY15 FY16E (Standalone) 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Volume Growth % -13.0 5.8 -1.8 -0.6 0.4 -2.3 1.6 5.0 -2.8 1.2 Net Sales 17,798 21,565 21,470 20,204

19,884 21,222 26,381 23,334 81,038 90,821

YoY Change (%) -17.1 5.8 -4.0 5.4

11.7 -1.6 22.9 15.5 -2.8 12.1 Total Exp 16,568 19,453 19,442 18,887 18,036 18,278 23,814 20,775 74,350 80,902 EBITDA 1,231 2,113 2,028 1,316

1,848 2,944 2,567 2,559 6,688 9,919

Margins (%) 6.9 9.8 9.4 6.5 9.3 13.9 9.7 11.0 8.3 10.9 EBITDA growth (%) -55.8 2.9 -1.4 45.9

50.2 39.4 26.6 94.4

47.1

Depreciation 243 253 240 370

250 242 256 276 1,106 1,024 Interest 1,549 1,553 1,485 1,342 1,284 1,100 1,077 1,062 5,928 4,522 PBT From operations -562 307 304 -395

314 1,602 1,235 1,221 -346 4,372

Other income 457 540 528 1,053 317 15 82 86 2,578 499 PBT -105 846 833 658

631 1,616 1,317 1,307 2,232 4,871

Tax 86 386 85 -273

432 494 486 244 283 1,656 Rate (%) -82.2 45.6 10.2 -41.5 68.4 30.5 36.9 18.7 12.7 34.0 PAT -190 461 747 931

199 1,123 831 1,063 1,949 3,215

YoY Change (%) -116.1 -51.1 -5.2 -303.7 -204.6 143.6 11.2 14.1 -20.6 65.0 E: MOSL Estimates

United Spirits

CMP: INR2,451 TP: INR4,000 Buy We expect United Spirits (UNSP)’s revenue to increase 15.5% YoY to

INR23.3b and have built-in 5% YoY volume growth. In addition, we forecast Prestige+ portfolio to grow in double digits. Addition of Diageo portfolio does aid revenue performance.

We build in EBITDA margin expansion of 450bp YoY to 11%. This is primarily on account of low base of 4Q15 wherein several one off costs elements impacted operating margins. However, this quarter will also include advertising expenses pertaining to McDowell re-launch.

We estimate 14% PAT growth in 4Q16. Maintain Buy. UNSP is our long standing top idea in the large cap

consumer space. We expect the benefits of premiumization and cost cutting, driven by the new management, to bolster margins in the medium term.

Key issues to watch out: Trends in volume growth, premiumization and margins Price trend and outlook for ENA Ban on alcohol in certain states

Bloomberg UNSP IN Equity Shares (m) 145.3



Y/E March 2015 2016E 2017E 2018E

Sales 85.8 93.5 104.2 118.4 EBITDA 6.8 9.9 13.5 17.8 PAT -0.2 4.2 7.4 10.8

EPS (INR) -1.6 28.7 50.8 74.5 EPS Gr. (%) NA LP 76.9 46.6 BV/Sh.(INR) 45.4 74.1 124.9 196.5

RoE (%) -1.2 48.1 51.1 37.9 RoCE (%) 12.1 20.1 27.2 32.0 Payout (%) 0.0 0.0 0.0 3.4

Valuations P/E (x) -1,569.5 85.3 48.2 32.9 P/BV (x) 53.9 33.1 19.6 12.5


April 2016 117

Company name

Axis Bank

Bank of Baroda

Bank of India

Canara Bank

DCB Bank

Federal Bank

HDFC Bank

ICICI Bank

Indian Bank

IndusInd Bank

Kotak Mahindra Bank

Oriental Bank of Commerce

Punjab National Bank

State Bank of India

Union Bank of India

Yes Bank

Alpesh Mehta ([email protected]); +9122 39825415/Sunesh Khanna ([email protected]); +912239825521 AS Venkata Krishnan ([email protected]); +9122 30102603 / Dhaval Gada ([email protected]); +9122 39825505

Some respite after washout in 3QFY16 Non-core income and stable NIMs to support earnings despite high provisions

We expect 4QFY16 earnings to be muted, but better than 3QFY16 (one of the weakest quarters in a decade). Sharp fall in bond yields (30bp+ QoQ), sale of strategic investments and high focus on recoveries from written-off accounts would provide some respite in a quarter marred by high provisions (led by RBI AQR exercise) and moderate loan growth.

NIMs would be stable to improving QoQ, as (a) banks have refrained from cutting base rate in 4Q (against 25-30bp cut in 3QFY16), which would support loan yields, (b) cost of deposits has continued to fall, and (c) base has been reset in 3Q, led by high slippages from RBI AQR. While there are positive factors at play for NIMs, significant competition in the refinancing business and in retail loans would keep incremental lending yields under pressure.

Asset quality stress is likely to remain elevated, led by continued fallout of the RBI AQR exercise. Banks have significantly increased efforts on the recovery front, which could provide some respite on headline GNPAs. While the quarter would be muted for asset quality, specific developments like (a) MIP in steel, (b) conversion of SEB loans to state government bonds, (c) increased pressure from banks to highly levered corporates to deleverage augurs well.

RBI’s accommodative stance, GoI’s focus on fiscal discipline and addressing policy roadblocks, banks’ intense efforts on recoveries and deleveraging of corporate balance sheets augur well for Financials. Improving auto/CV sales, higher cement dispatches, RBI consumer confidence survey, and higher activity in stalled projects point towards gradual recovery. Our key picks are ICICIBC, YES, HDFCB and IIB among private sector banks. We like SBIN, BOB and INBK among state-owned banks.

Key things to watch out for: (a) release of capital, led by regulatory leeway on revaluation reserves, FCTR and DTA, (b) guidance on expected 2nd level impact of RBI AQR on asset quality and (c) conversion of loans under ‘UDAY’ scheme.

Exhibit 1: Expected quarterly performance (INR m) INR m Net Interest Income Operating Profit Net Profit

CMP

Reco Mar-16 YoY %

QoQ %

Mar-16 YoY %

QoQ %

Mar-16 YoY %

QoQ % Axis Bank 432 Buy 42,122 10.9 1.2 43,806 9.2 9.9 23,767 9.0 9.3

DCB Bank 81 UR 1,615 24.5 0.6 828 21.8 -1.7 415 -34.1 0.6 Federal Bank 44 Neutral 5,964 -4.3 -1.4 3,951 -15.8 21.4 1,934 -31.1 18.9 HDFC Bank 1,058 Buy 72,055 19.8 1.9 56,481 19.6 -1.5 33,700 20.1 0.4 ICICI Bank 226 Buy 55,037 8.4 0.9 75,539 38.1 15.2 29,265 0.2 -3.0 IndusInd Bank 950 Buy 12,027 30.0 2.5 11,978 40.8 12.9 6,282 26.8 8.1 Kotak Mahindra Bank 669 Neutral 18,035 60.6 2.1 11,595 34.7 -3.8 5,954 13.0 -6.2 Yes Bank 829 Buy 12,188 24.7 5.3 11,866 26.6 3.2 6,982 26.7 3.3 Pvt Bkg. Aggregate 219,043 17.3 1.7 216,045 24.2 7.5 108,299 10.2 1.7 PSU Banks Bank of Baroda 144 Buy 31,880 0.5 17.8 24,708 -8.3 45.0 1,629 -72.8 LP Bank of India 94 Neutral 28,887 1.5 6.7 14,177 -0.6 0.6 -16,606 Loss Loss Canara Bank 187 Neutral 24,789 -0.3 11.3 18,732 8.1 20.7 908 -85.2 6.9 Indian Bank 102 Buy 11,637 5.0 4.8 8,226 0.7 8.2 1,343 -34.9 217.4 Oriental Bank 90 Neutral 13,180 1.6 0.7 9,633 -20.8 25.7 -1,345 Loss Loss Punjab National Bank 83 Neutral 39,314 3.7 -4.6 32,405 1.2 11.1 -4,693 PL PL State Bank 185 Buy 136,529 -7.2 0.3 106,815 -13.9 11.3 14,301 -61.8 28.2 Union Bank 129 Buy 21,053 -0.7 5.4 15,939 -3.5 19.5 2,247 -49.4 186.1 PSU Bkg. Aggregate 307,268 -2.6 3.2 230,637 -8.3 15.1 -2,216 PL Loss *Note: Data for Private Sector Aggregate is excluding KMB due to VYSB acquisition. Source: Company, MOSL

Technology

Financials - Banks


April 2016 118

Expect stable to marginally higher NIMs QoQ, despite muted loan growth We expect NII decline of -3% YoY for state-owned banks and growth of 17% YoY for private sector banks. Yields on funds would be stable QoQ, led by (a) no cut in base rate in 4QFY16 (banks had cut rates by ~20bp/35bp in 3QFY16/2HCY15), (b) high interest reversals in 3Q (4Q rate reversals expected to be high, though base is in favor). Strong competition in the refinancing market and in retail loans would put some pressure on blended yields. Banks have cut deposit rates by 50-175bp over the last one year; this would lower cost of deposits and (in turn) support margins. Pick-up in unsecured loans (PL and CC) and high auto loan disbursements should also help.

Yields to decline QoQ; profit on sale of investments to support earnings GoI’s focus on fiscal discipline and RBI’s accommodative stance, especially on liquidity, led to a sharp 30bp fall in bond yields across tenures in 4QFY16. This should drive MTM gains on the bond portfolio. Further, high volatility during the quarter should drive higher trading gains. To provide for balance sheet stress, banks are likely to monetize strategic investments, repatriate profit on foreign operations and book trading gains on sale of HTM security in OMO. MTM/realized losses on equity exposure (taken via SDRs) would marginally negate gains on investment portfolio.

Asset quality stress to be elevated, but ambiguity to be less than in 3QFY16 RBI’s tough stance on cleanup of balance sheets by March 2017 would weigh on banks’ asset quality. In 3QFY16 results, banks have largely spelled out details on the expected RBI AQR-led stress in 4Q; hence, uncertainty has reduced significantly. With high stress recognition and RBI’s though stance on errant borrowers, banks have significantly increased efforts to ensure deleveraging of highly levered corporates. Our industry interactions also suggest strong recoveries, led by RBI action, especially in the small enterprises and retail segments. For FY17, two factors requiring close monitoring are (a) 2nd level impact of RBI AQR, and (b) harmonization of account status (which in our view is not required due to differences in structure and security for specific exposure).

Business growth remains muted The moderate demand environment is likely to result in 10-11% YoY deposit/loan growth in 4QFY16. Saddled with NPAs, state-owned banks’ growth is likely to be lower than the industry average (led by capital conservation effort and weak corporate loan growth of ~5% YoY as of February 2016). Private banks’ growth should remain healthy at ~18% (helped by strong retail growth, especially auto/CV loans and refinancing).

Opex to drive earnings growth for PSBs; corporate fees muted For state-owned banks, employee expenses would be a key enabler for earnings growth (led by absence of amortization of 2nd pension option-related liability and settlement of wage negotiation). No new sanctions, moderate corporate loan growth and incremental corporate growth (largely by refinancing) continue to impact corporate fees. Retail fees are likely to be healthy, led by higher disbursement of vehicle loans and unsecured loans, and momentum (although moderating) in housing loan growth.

Trading gains would be a key driver of profits in

the quarter

Remaining part of the RBI AQR would weigh on the

asset quality performance

Weak corporate loan growth (6% YoY as of

February 2016) leading to overall loan growth

moderation, especially for state-owned banks

March 2016 Results Preview | Sector: Financials

April 2016 119

Core operating profits under pressure; provisions a key to profitability Core revenue growth is likely to remain muted YoY, led by moderate balance sheet growth, stable to declining margins YoY, and moderate fee income growth. Non-core revenue and contained opex would support core PPoP growth. Private banks would continue to outshine state-owned banks. Apart from continued asset quality stress, weak expectations and focus on balance sheet health would drive banks to make high provisions, which could impact earnings. Over the last year, Indian banks—mainly state owned—have sold assets worth ~INR600b to ARCs. We believe write-downs and the resultant MTM provisioning for the same (as per RBI guidelines) would begin over the next 1-2 quarters. Overall, we expect loss of INR2.2b for state-owned banks and growth of +10% YoY for private sector banks.

Exhibit 2: Financials - Valuations Sector / Companies CMP EPS (INR) PE (x) PB (x) RoE (%)

(INR) Reco FY16E FY17E FY18E FY16E FY17E FY18E FY16E FY17E FY18E FY16E FY17E FY18E Banks-Private Axis Bank 432 Buy 35.6 38.9 46.5 12.1 11.1 9.3 2.0 1.7 1.5 17.5 16.6 17.3 DCB Bank 81 UR 5.9 6.9 7.7 13.8 11.8 10.5 1.3 1.2 1.1 10.2 10.8 10.8 Federal Bank 44 Neutral 3.8 4.5 5.5 11.4 9.6 7.9 0.9 0.9 0.8 8.3 9.1 10.3 HDFC Bank 1,058 Buy 48.7 58.5 70.4 21.7 18.1 15.0 3.7 3.2 2.8 18.4 19.2 19.8 ICICI Bank 226 Buy 20.6 22.2 26.6 10.9 10.2 8.5 1.7 1.5 1.4 14.3 13.4 14.3 IndusInd Bank 950 Buy 38.9 50.8 63.3 24.4 18.7 15.0 3.2 2.8 2.4 16.6 16.1 17.4 J&K Bank 61 Neutral 16.2 18.0 21.6 3.7 3.4 2.8 0.4 0.4 0.4 12.3 12.4 13.5 Kotak Mahindra Bank 669 Neutral 18.4 24.7 31.3 36.5 27.1 21.4 3.7 3.2 2.8 10.6 12.7 14.1 South Indian Bank 18 Buy 2.5 3.1 3.7 6.9 5.7 4.8 0.6 0.6 0.5 9.4 10.3 11.4 Yes Bank 829 Buy 60.4 74.9 93.5 13.7 11.1 8.9 2.5 2.1 1.8 20.0 21.0 22.1 Pvt. Bank Aggregate 17.0 14.6 12.1 2.5 2.2 2.0 14.9 15.3 16.2 Banks-PSU Andhra Bank 52 Buy 17.8 22.8 27.9 2.9 2.3 1.9 0.3 0.3 0.2 10.3 12.2 13.6 Bank of Baroda 144 Buy -8.7 16.4 20.7 -16.6 8.8 7.0 0.9 0.8 0.8 -5.4 9.9 11.5 Bank of India 94 Neutral -52.5 4.0 18.7 -1.8 23.4 5.0 0.3 0.3 0.3 -16.2 1.3 5.7 Canara Bank 187 Neutral 21.8 47.3 55.2 8.6 3.9 3.4 0.3 0.3 0.3 4.2 8.4 9.1 Corporation Bank 39 Neutral 12.6 18.7 21.6 3.1 2.1 1.8 0.3 0.3 0.2 9.5 12.9 13.4 Dena Bank 29 Neutral 1.5 10.0 15.6 20.0 2.9 1.9 0.2 0.2 0.2 1.2 8.0 11.6 IDBI Bank 68 Neutral -13.0 5.7 8.7 -5.3 11.9 7.8 0.6 0.5 0.5 -10.8 4.7 6.8 Indian Bank 102 Buy 15.8 21.1 27.4 6.5 4.8 3.7 0.4 0.4 0.3 5.9 7.5 9.1 Oriental Bank 90 Neutral 0.0 25.0 32.2 3.6 2.8 0.2 0.2 0.2 0.0 5.6 6.8 Punjab National Bank 83 Neutral 4.7 16.8 21.6 17.6 4.9 3.8 0.4 0.4 0.3 2.4 7.9 9.4 State Bank 185 Buy 16.4 24.1 28.7 11.3 7.6 6.4 0.8 0.8 0.7 8.1 10.7 11.7 Union Bank 129 Buy 21.5 28.2 38.4 6.0 4.6 3.4 0.4 0.4 0.4 7.6 9.1 11.3 PSU Bank Aggregate 23.0 6.6 5.2 0.6 0.6 0.6 2.8 9.1 10.6 UR: Under Review

State-owned banks’ PPP/PAT growth expected

to be disappointing


April 2016 120

Exhibit 3: State-owned banks—one-year forward P/BV Exhibit 4: Private banks—one-year forward P/BV

Exhibit 5: Loan growth remains moderate at ~11% Exhibit 6: Deposit growth at multi-decade lows

Exhibit 7: 10yr Gsec yields decline 30bp+ in 4QFY16 (%) Exhibit 8: NIMs expected to remain largely stable (%)

Exhibit 9: PSBs net slippages ratio expected to decline QoQ yet remain elevated (%, annualized)


Exhibit 10: Provisions to PPoP (%) to remain elevated in case of PSBs


1.8

0.5

0.6

1.1

0.2

0.8

1.4

2.0

Apr-

06

Jul-0

7

Oct

-08

Jan-

10

Apr-

11

Jul-1

2

Oct

-13

Jan-

15

Apr-

16

PSU Banks Sector PB (x) LPA (x)3.3

0.9

2.2 2.1

0.5

1.5

2.5

3.5

Apr-

06

Jul-0

7

Oct

-08

Jan-

10

Apr-

11

Jul-1

2

Oct

-13

Jan-

15

Apr-

16

Pvt Banks Sector PB (x) LPA (x)

46.

9 4

7.6

48.

1 5

0.3

53.

5 5

4.0

56.

5 5

7.6

60.

1 6

1.2

62.

7 6

3.2

65.

4 6

6.5

68.

3 6

9.7

70.

2 7

2.8

18.

7 1

6.5

15.

9 1

5.1

14.

0

13.

5 1

7.5

14.

5 1

4.3

13.

3 1

1.0

10.

1 9

.0

9.8

9

.5

11.

0 1

1.1

11.

3

4QFY

121Q

FY13

2QFY

133Q

FY13

4QFY

131Q

FY14

2QFY

143Q

FY14

4QFY

141Q

FY15

2QFY

153Q

FY15

4QFY

151Q

FY16

2QFY

163Q

FY16

3QFY

164Q

FY16

Loans (INR t) Chg YoY (%)

61.0

62

.3

64.1

64

.7

69.0

70

.7

73.3

75

.0

77.4

79

.5

82.9

82

.8

85.3

87

.7

91.6

91

.8

91.8

93.8

14.4

13

.5

13.9

11

.0

13.1

13

.5

14.4

15

.9

14.6

12

.4

13.1

10

.8

10.7

11

.7

11.3

11

.5

10.9

9.

9

4QFY

121Q

FY13

2QFY

133Q

FY13

4QFY

131Q

FY14

2QFY

143Q

FY14

4QFY

141Q

FY15

2QFY

153Q

FY15

4QFY

151Q

FY16

2QFY

163Q

FY16

3QFY

164Q

FY16

Deposits (INR t) Chg YoY (%)

7.2

8.9

7.5

5

6

7

8

9

10

Jan-

05Au

g-05

Mar

-06

Oct

-06

May

-07

Dec-

07Ju

l-08

Feb-

09Se

p-09

Apr-

10N

ov-1

0Ju

n-11

Jan-

12Au

g-12

Mar

-13

Oct

-13

May

-14

Dec-

14Ju

l-15

Feb-

16

10yr Gsec (%)

3.1 3.3

3.4

3.3

3.0

3.0

3.0

2.9

2.8

2.8

2.8

2.7

2.7

2.7

2.7

2.6

2.6

2.6

2.4

2.4

3.4 3.5

3.5 3.6

3.5 3.6

3.7 3.7

3.7 3.8

3.8

3.8 3.9 4.1

4.0

4.0

4.0

4.0

4.0

3.9

1QFY

122Q

FY12

3QFY

124Q

FY12

1QFY

132Q

FY13

3QFY

134Q

FY13

1QFY

142Q

FY14

3QFY

144Q

FY14

1QFY

152Q

FY15

3QFY

154Q

FY15

1QFY

162Q

FY16

3QFY

164Q

FY16

PSU Private

1.7 3.1

2.0 1.1

2.7 2.7 2.01.1

3.3 1.9 2.1

1.1 1.9 2.1 2.6 1.9 2.0 2.6

8.3

4.4

1QFY

122Q

FY12

3QFY

124Q

FY12

1QFY

132Q

FY13

3QFY

134Q

FY13

1QFY

142Q

FY14

3QFY

144Q

FY14

1QFY

152Q

FY15

3QFY

154Q

FY15

1QFY

162Q

FY16

3QFY

164Q

FY16

E

Net Slippage Ratio (%)

40 55 55 61

38 52 59

73 51 62

128

94

20 17 11 13 13 16 15 18 20 17 25 25

1QFY

14

2QFY

14

3QFY

14

4QFY

14

1QFY

15

2QFY

15

3QFY

15

4QFY

15

1QFY

16

2QFY

16

3QFY

16

4QFY

16E

PSBs PBs


April 2016 121

Quarterly Performance (INR Million) FY15 FY16E FY15 FY16E 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q Net Interest Income 33,105 35,249 35,896 37,992

40,562 40,621 41,621 42,122 142,241 164,926

% Change (Y-o-Y) 15.5 20.0 20.3 20.0 22.5 15.2 15.9 10.9 19.0 15.9 Other Income 16,911 19,476 20,391 26,873 22,983 20,414 23,378 28,394 83,650 95,168 Net Income 50,015 54,725 56,286 64,866 63,545 61,035 64,998 70,516 225,892 260,094 Operating Expenses 21,059 23,102 23,140 24,737 22,624 24,755 25,148 26,710 92,037 99,238 Operating Profit 28,957 31,623 33,146 40,129

40,921 36,280 39,851 43,806 133,854 160,857

% Change (Y-o-Y) 1.8 15.0 26.8 23.6 41.3 14.7 20.2 9.2 16.8 20.2 Other Provisions 3,866 7,250 5,072 7,098 11,218 7,072 7,126 8,433 23,286 33,848 Profit before Tax 25,091 24,373 28,075 33,031

29,703 29,208 32,725 35,373 110,568 127,009

Tax Provisions 8,423 8,266 9,077 11,225 9,919 10,051 10,972 11,606 36,991 42,548 Net Profit 16,668 16,107 18,998 21,806

19,784 19,156 21,753 23,767 73,577 84,461

% Change (Y-o-Y) 18.3 18.2 18.4 18.4 18.7 18.9 14.5 9.0 18.3 14.8 Operating Parameters NIM (Reported,%) 3.9 4.0 3.9 3.8 3.8 3.9 3.8 3.9 NIM (Cal, %) 3.7 4.0 3.9 3.8 3.9 3.9 3.8 3.7 3.6 3.7 Deposit Growth (%) 14.1 11.1 11.0 14.8 13.2 14.2 16.2 10.0 14.8 10.0 Loan Growth (%) 16.3 20.3 23.2 22.2 23.5 23.1 21.0 18.0 22.2 18.0 CD Ratio (%) 84.8 85.4 89.5 87.2 92.5 92.0 93.2 93.5 87.2 93.5 Core CASA ratio (%) 40.0 40.0 40.0 40.0 40.0 40.0 40.0 40.0 Asset Quality OSRL (INR b) 62.9 66.9 68.1 81.7

85.2 84.3 77.5 81.7

OSRL (%) 2.7 2.8 2.6 2.9 3.0 2.8 2.5 2.9 Gross NPA (INR b) 34.6 36.1 39.0 41.1 42.5 44.5 57.2 61.3 41.1 61.3 Gross NPA (on customer assets, %) 1.3 1.3 1.34 1.3 1.4 1.4 1.68 1.8 1.3 1.8 E: MOSL Estimates

December 2015 Results Preview | Sector: Financials

Axis Bank

CMP: INR432 TP: INR525 Buy We expect loan growth to be healthy at ~18% YoY. Deposit growth

is likely to be lower at ~10% YoY – AXSB is utilizing infra bonds and the refinancing window, effectively. CASA growth – moderated to less than 15% over the last five quarters –a key monitorable.

NIM is likely to come off by ~10bp QoQ to 3.7%, impacted by high share of high quality incremental corporate growth (refinancing). Strong unsecured loan growth would provide yield cushion.

In 4QFY15, AXSB had booked INR1.55b of repatriation gains, against which it booked contingency provision of INR2.22b.

Including the RBI AQR-related slippages, in the 3Q earnings call, the management had guided QoQ decline in slippages for 4Q (in 3Q, the slippages were INR20.8b).

AXSB trades at 1.7x FY17E BV and 10.8x FY17E EPS. Maintain Buy.

Key issues to watch for Guidance for stress addition and credit cost for FY17. Outlook on loan and fees growth. View on the existing infrastructure exposure of the bank. Quantum of loans rescheduled under the 5:25 scheme and any

further large asset sale to ARCs.

Bloomberg AXSB IN




2015 2016E 2017E 2018E

NII 142.2 164.9 186.5 220.2 OP 133.9 160.9 184.2 218.0 NP 73.6 84.5 92.2 110.1

NIM (%) 3.6 3.7 3.7 3.6 EPS (INR) 31.0 35.6 38.9 46.5 EPS Gr. (%) 17.3 14.8 9.2 19.4

BV/Sh. (INR) 188 217 249 288 ABV/Sh. (INR) 184 209 240 280 RoE (%) 17.8 17.5 16.6 17.3

RoA (%) 1.7 1.7 1.6 1.6 Payout (%) 17.8 17.6 17.6 17.6 Valuations

P/E(X) 13.6 11.8 10.8 9.1 P/BV (X) 2.2 1.9 1.7 1.5 P/ABV (X) 2.3 2.0 1.8 1.5

Div. Yield (%) 1.1 1.3 1.4 1.7


April 2016 122

Quarterly Performance (INR Million) FY15 FY16 FY15 FY16E 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Interest Income 33,283 34,011 32,861 31,717

34,596 32,445 27,053 31,880 131,872 125,974

% Change (YoY) 15.2 17.5 7.5 1.5 3.9 -4.6 -17.7 0.5 10.2 -4.5 Other Income 10,245 9,917 10,904 12,955 9,672 11,440 11,129 14,371 44,020 46,612 Net Income 43,529 43,928 43,765 44,671

44,269 43,885 38,183 46,251 175,892 172,587

Operating Expenses 18,733 19,898 20,375 17,736 22,249 20,515 21,141 21,543 76,741 85,448 Operating Profit 24,796 24,029 23,390 26,935

22,020 23,370 17,041 24,708 99,151 87,139

% Change (YoY) 1.8 13.9 7.2 5.1 -11.2 -2.7 -27.1 -8.3 6.7 -12.1 Other Provisions 5,267 8,880 12,623 18,175 5,997 18,917 61,646 21,605 44,945 108,165 Profit before Tax 19,529 15,149 10,768 8,760 16,022 4,453 -44,604 3,103 54,206 -21,025 Tax Provisions 5,910 4,107 7,428 2,777 5,501 3,208 -11,184 1,475 20,222 -1,000 Net Profit 13,619 11,042 3,340 5,983

10,522 1,245 -33,420 1,629 33,984 -20,025

% Change (YoY) 16.6 -5.5 -68.1 -48.3 -22.7 -88.7 -1,100.7 -72.8 -25.2 -158.9 Operating Parameters NIM (Reported, %) 2.4 2.4 2.2 2.2 2.3 2.1 1.7 2.3 NIM (Calculated, %) 2.1 2.2 2.1 2.0

2.1 2.0 1.7 2.0 2.1 1.9

Deposit Growth (%) 18.1 16.9 12.1 8.6

7.5 8.0 4.4 1.0 8.6 1.0 Loan Growth (%) 18.8 13.5 11.7 7.8

7.0 7.6 -2.4 -5.0 7.8 -5.0

CD Ratio (%) 69.2 68.0 69.7 69.3

68.9 67.7 65.2 65.2 69.3 68.9 CASA Ratio (%) 31.3 31.9 32.4 33.0

31.9 32.0 30.0 26.4 26.6

Tax Rate (%) 30.3 27.1 69.0 31.7

34.3 72.0 25.1 47.5 37.3 4.8 Asset Quality OSRL (INR B) 228 224 231 259 255 229 171 259 OSRL (%) 6.0 5.8 5.9 6.1

6.3 5.5 4.5 6.1

Gross NPA (INR B) 121 131 155 163

173 237 389 386 163 386 Gross NPA (%) 3.1 3.3 3.9 3.7 4.1 5.6 9.7 9.1 3.7 9.1 E: MOSL Estimates

March 2016 Results Preview | Sector: Financials Bank of Baroda

CMP: INR144 TP: INR175 Buy We expect balance sheet consolidation to continue, with YoY

decline in loans/deposits in absolute terms. BOB’s focus would remain on profitable growth and incremental growth would be driven by granular Retail, Agri and SME credit.

Post the sharp interest reversals of INR7b (led by high slippages) in 3Q, we expect margins to expand on a QoQ basis, as net stress addition is likely to recede sharply.

Fee income would remain muted. However, strategic stake sale and higher share of non-core income would boost profitability.

One-off income is expected to be utilized for strengthening the balance sheet. Hence, we expect PAT to remain muted.

Bulk of the asset quality stress has been taken in 3Q; we expect stable to marginally lower GNPAs during the quarter.

The stock trades at 8.7x FY17E EPS of INR16.4 and 0.8x FY17E BV of INR171. Reiterate Buy.

Key issues to watch for Stress addition, mainly from international book. Guidance on loan growth, margins and operating expenses. New management strategy and guidance. Outlook on stake sale.

Bloomberg BOB IN




Y/E March 2015 2016E 2017E 2018E

NII 131.9 126.0 132.6 156.5 OP 99.2 87.1 105.2 119.7 NP 34.0 -20.0 37.9 47.7

NIM (%) 2.0 1.9 1.9 2.0 EPS (INR) 15.3 -8.7 16.4 20.7 EPS Gr. (%) -27.3 NM NM 25.9

BV/Sh. (INR) 166 159 171 187 ABV/Sh. (INR) 143 101 126 153 RoE (%) 9.7 -5.4 9.9 11.5

RoA (%) 0.5 -0.3 0.5 0.6 Div. Payout (%) 29.1 0.0 23.2 23.2 Valuations

P/E(X) 9.3 -16.5 8.7 6.9 P/BV (X) 0.9 0.9 0.8 0.8 P/ABV (X) 1.0 1.4 1.1 0.9

Div. Yield (%) 2.2 0.0 2.3 2.9

April 2016 123

Quarterly Performance (INR Million) FY15 FY16 FY15 FY16E 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Interest Income 103,043 110,931 108,678 111,648 108,186 105,399 100,397 105,446 434,299 419,428 Interest Expense 76,178 80,623 80,876 83,185 79,059 75,201 73,316 76,560 320,860 304,137 Net Interest Income 26,865 30,307 27,802 28,463 29,127 30,197 27,080 28,887 113,439 115,291 % Change (Y-o-Y) 5.9 19.9 2.2 -6.6 8.4 -0.4 -2.6 1.5 4.7 1.6 Other Income 10,245 10,064 10,797 11,222 8,406 7,781 10,473 12,482 42,327 39,141 Net Income 37,110 40,371 38,599 39,684 37,533 37,978 37,553 41,368 155,766 154,432 Operating Expenses 16,507 19,016 19,945 25,419 20,490 23,396 23,463 27,191 80,886 94,541 Operating Profit 20,603 21,355 18,654 14,266 17,042 14,583 14,090 14,177 74,880 59,892 % Change (Y-o-Y) -5.5 1.6 -13.0 -28.5 -17.3 -31.7 -24.5 -0.6 -11.1 -20.0 Other Provisions 8,931 9,634 15,807 22,555 15,147 32,374 36,039 34,147 56,927 117,708 Profit before Tax 11,672 11,721 2,847 -8,289 1,895 -17,791 -21,950 -19,970 17,953 -57,816 Tax Provisions 3,615 3,861 1,113 -7,728 598 -6,529 -6,894 -3,364 861 -16,189 Net Profit 8,057 7,860 1,734 -561 1,297 -11,262 -15,056 -16,606 17,092 -41,628 % Change (Y-o-Y) -16.4 26.4 -70.4 -110.1 -83.9 -243.3 -968.4 NM -37.4 -343.6 Operating Parameters NIM (Reported, %) 2.2 2.3 2.1 1.9 2.1 2.3 2.0 2.1 NIM (Cal, %) 2.0 2.2 2.0 2.0 2.1 2.2 1.9 2.0 2.0 2.0 Deposit Growth (%) 20.7 19.9 16.8 11.5 1.5 1.3 -0.3 4.0 11.5 4.0 Loan Growth (%) 23.3 18.5 15.1 9.2 3.5 -1.1 -3.2 2.3 9.2 2.3 CD Ratio (%) 76.2 77.0 77.4 77.2 77.7 75.2 75.1 75.9 77.2 75.9 Tax Rate (%) 31.0 32.9 39.1 NM 31.5 36.7 31.4 16.8 4.8 28.0 Asset Quality OSRL (INR b) 210.0 219.5 218.4 218.3 193.9 193.1 172.7 218.3 OSRL (%) 5.5 5.5 5.3 5.3 4.9 4.9 4.3 5.3 Gross NPA (INR b) 125.3 141.3 166.9 221.9 268.9 298.9 365.2 417.2 221.9 417.2 Gross NPA (%) 3.3 3.5 4.1 5.4 6.8 7.6 9.2 9.9 5.4 9.9 E: MOSL Estimates


Bank of India

CMP: INR94 TP: INR135 Neutral Continued asset quality strain and capital conservation effort would

keep loan/deposit growth below the industry average—flat to marginally lower YoY in 4QFY16. We expect NIM to be stable/marginally higher QoQ at ~2%.

Non-interest income is likely to grow ~10% YoY, led by higher non-core income. Fee income is expected to decline YoY. In 9MFY16, fee income had fallen 20% YoY.

While we expect operating profits to be flat YoY, continued deterioration in asset quality would keep provisioning elevated. We expect PBT loss of INR20b (flat QoQ) against INR8.3b in 4QFY15.

BOI trades at 0.3x FY17E BV and 22.6x FY17E EPS. Maintain Neutral.

Key issues to watch for Outlook on asset quality for FY17. Release of capital due to regulatory changes. Quantum of loans rescheduled under the 5:25 scheme. Outlook on balance sheet growth and further capital infusion. Update on asset monetization plan to increase Tier I ratio.

Bloomberg BOI IN



Financial Snapshot (INR b) Y/E March 2015 2016E 2017E 2018E NII 113.4 115.3 124.6 148.4 OP 74.9 59.9 66.9 83.2 NP 17.1 -41.6 3.2 14.8 NIM (%) 2.1 2.0 2.0 2.1 EPS (INR) 25.7 -52.5 4.0 18.7 EPS Gr. (%) -39.5 -304.5 -107.7 364.8 ROE (%) 7 -16 1 6 ROA (%) 0 -1 0 0 BV/Sh. (INR) 398.0 314.0 318.4 334.0 ABV/Sh. (INR) 266.0 119.4 179.3 232.1 Div. Payout (%) 26.9 0.0 23.2 23.2 Valuations P/E(X) 3.5 -1.7 22.6 4.9 P/BV (X) 0.2 0.3 0.3 0.3 P/ABV (X) 0.3 0.8 0.5 0.4 Div. Yield (%) 5.5 0.0 0.9 4.1

April 2016 124

Quarterly Performance (INR Million) FY15 FY16 FY15 FY16E 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Interest Income 107,011 108,939 110,517 111,034 111,397 112,675 108,821 110,229 437,500 443,121 Interest Expense 82,719 85,261 86,712 86,173 86,232 86,210 86,555 85,440 340,864 344,436 Net Interest Income 24,293 23,678 23,805 24,861 25,165 26,465 22,266 24,789 96,637 98,685 % Change (Y-o-Y) 22.0 8.1 6.9 -1.9 3.6 11.8 -6.5 -0.3 8.0 2.1 Other Income 10,269 10,213 11,762 13,258 11,130 12,105 11,686 15,228 45,503 50,148 Net Income 34,562 33,891 35,567 38,120 36,295 38,570 33,952 40,017 142,139 148,833 Operating Expenses 16,612 17,636 17,594 20,794 16,259 19,129 18,427 21,284 72,636 75,099 Operating Profit 17,950 16,255 17,973 17,325 20,036 19,441 15,524 18,732 69,504 73,733 % Change (Y-o-Y) -5.4 14.1 13.0 -7.9 11.6 19.6 -13.6 8.1 2.3 6.1 Other Provisions 7,881 8,137 8,413 10,096 13,597 12,123 14,289 17,457 34,527 57,466 Profit before Tax 10,069 8,118 9,560 7,230 6,438 7,318 1,236 1,275 34,976 16,268 Tax Provisions 2,000 1,850 3,000 1,100 1,650 2,029 386 367 7,950 4,433 Net Profit 8,069 6,268 6,560 6,130 4,788 5,289 850 908 27,026 11,835 % Change (Y-o-Y) 1.9 0.1 60.2 0.3 -40.7 -15.6 -87.0 -85.2 10.9 -56.2 Operating Parameters NIM (Rep, %) 2.3 2.2 2.2 2.3 2.2 2.2 2.2 2.2 NIM (Cal, %) 2.1 2.0 2.0 2.0 2.0 2.1 1.7 1.9 2.0 1.9 Deposit Growth (%) 12.3 17.8 13.1 12.6 10.0 5.2 6.1 8.0 12.6 8.0 Loan Growth (%) 21.2 10.6 8.5 9.6 7.0 3.9 6.3 2.5 9.6 2.5 CD Ratio (%) 70.6 67.4 67.5 69.7 68.7 66.6 67.7 66.1 69.7 66.1 Tax Rate (%) 19.9 22.8 31.4 15.2 25.6 27.7 31.2 28.8 22.7 27.3 Asset Quality OSRL (INR b) 209.0 203.9 206.8 226.2 230.4 228.9 206.1 226.2 OSRL (%) 6.9 6.6 6.6 6.9 7.1 7.1 6.2 6.9 Gross NPA (INR b) 81.6 91.6 105.7 130.4 130.8 140.2 198.1 224.6 130.4 224.6 Gross NPA (%) 2.7 2.9 3.4 3.9 4.0 4.3 5.8 6.5 3.9 6.5 E: MOSL Estimates


Canara Bank

CMP: INR187 TP: INR190 Neutral Asset quality stress would remain elevated, as the bank has taken

only 50% of the stress identified in the RBI AQR. High slippages would mar earnings, led by lower margins and high credit cost.

Loan/deposit growth is expected to be below the industry average at 3%/8% YoY. Among our coverage banks, CBK has the highest exposure (8% of loans) to SEBs. The UDAY scheme would have a meaningful impact on the reported loan growth.

Continued fall in proportion of bulk deposits would lead to a decline in cost of funds, and hence, an improvement in margins.

Like other PSBs, we expect CBK’s fee income growth to be muted. However, non-core income could surprise positively. Overall non-interest income is likely to grow ~10%.

Asset quality deterioration would keep credit cost elevated. Despite 8% PPoP growth, we expect PBT to decline 82% YoY.

The stock trades at 0.3x FY17E BV and 3.9x FY17E EPS. Maintain Neutral. Key issues to watch for

Release of capital due to regulatory relaxation. Impact of UDAY scheme. Outlook on balance sheet growth and further capital infusion. New management strategy and guidance.

Bloomberg CBK IN




NII 96.6 98.7 112.7 129.9

OP 69.5 73.7 84.7 98.1 NP 27.0 11.8 25.7 29.9 NIM (%) 2.0 1.9 2.0 2.0

EPS (INR) 56.9 21.8 47.3 55.2 EPS Gr. (%) 7.6 -61.7 117.1 16.6 BV/Sh. (INR) 553 548 584 626

ABV/Sh. (INR) 433 370 396 458 RoE (%) 10.8 4.2 8.4 9.1 RoA (%) 0.5 0.2 0.4 0.4

Div. Payout (%) 23.2 23.2 23.2 23.2 Valuations P/E (x) 3.2 8.4 3.9 3.3

P/BV (x) 0.3 0.3 0.3 0.3 P/ABV (x) 0.4 0.5 0.5 0.4 Div. Yield (%) 5.7 2.4 5.2 6.0

April 2016 125

Quarterly Performance (INR Million) FY15 FY16 FY15 FY16E 1Q 2Q 3Q 4Q

1Q 2Q 3Q 4QE

Net Interest Income 1,390 1,177 1,219 1,297

1,404 1,500 1,605 1,615 5,082 6,123 % Change (Y-o-Y) 67.2 28.9 29.7 29.6

1.0 27.4 31.6 24.5 38.0 20.5

Other Income 345 370 480 463

631 487 472 572 1,657 2,162 Net Income 1,735 1,546 1,699 1,759

2,035 1,987 2,077 2,186 6,739 8,285

Operating Expenses 922 948 1,015 1,079

1,138 1,206 1,234 1,358 3,965 4,936 Operating Profit 812 598 684 680

897 781 843 828 2,774 3,348

% Change (Y-o-Y) 58.3 49.2 47.5 35.6

10.4 30.5 23.3 21.8 47.6 20.7 Other Provisions 229 137 184 143

180 217 210 197 694 803

Profit before Tax 583 461 499 537

716 564 633 632 2,080 2,545 Tax Provisions 137 50 74 -93

248 195 221 217 168 881

Net Profit 446 411 425 629

469 369 412 415 1,912 1,665 % Change (Y-o-Y) 4.2 24.2 16.9 60.9 5.0 -10.1 -3.1 -34.1 26.3 -12.9 Operating Parameters NIM (Reported,%) 3.7 3.7 3.7 3.8

3.8 3.8 4.0 3.7

NIM (Cal, %) 4.5 3.8 3.7 3.6

3.6 3.8 3.9 3.7 3.9 3.8 Deposit Growth (%) 26.8 24.0 23.5 22.1

25.8 24.4 18.9 21.0 22.1 21.0

Loan Growth (%) 28.1 31.7 28.9 28.6

25.7 27.2 23.7 20.0 28.6 20.0 CD Ratio (%) 78.6 80.7 80.1 83.0

78.6 82.5 83.3 82.3 83.0 82.3

CASA Ratio (%) 25.4 25.5 23.8 23.4

23.0 24.1 24.1 23.4 22.2 Tax Rate (%) 23.4 10.9 14.9 -17.2

34.6 34.6 34.9 34.4 8.1 34.6

Asset Quality Gross NPA (INR B) 1.5 1.7 1.8 1.9

2.1 2.2 2.3 2.6 1.9 2.6

Gross NPA (%) 1.8 1.9 1.9 1.8 2.0 2.0 2.0 2.0 1.8 2.0 E: MOSL Estimates


DCB Bank

CMP: INR81 Under Review Loan growth (20% YoY) and deposit growth (21% YoY) would be

significantly above the industry average. We expect NII to grow 25% YoY, led by strong loan growth and

largely stable margins YoY. We expect margins to decline 10-15bp QoQ, led by higher competition in mortgages, cut in base rate towards the end of December 2015 and seasonality. Decline in cost of funds would lead to positive surprise on margins.

We expect revenue growth to remain healthy at 25% YoY and PPP growth to be 20% YoY. We model opex growth of 26% YoY, led by revised branch expansion strategy. We expect PBT to grow 18% YoY. PAT is likely to decline 34% YoY due to high tax rate.

Focus on granular SME and retail loans along with working capital corporate loans has led to stable asset quality; we expect this trend to continue.

DCBB trades at 1.2x FY17E BV and 11.4x FY17E EPS. Under Review.

Key issues to watch for Commentary on revised branch expansion strategy. CASA ratio and traction on NIM.

Bloomberg DCBB IN


1,6,12 Rel Perf. (%) 3/-35/-16


Y/E MARCH 2015 2016E 2017E 2018E NII 5.1 6.1 7.3 9.0

OP 2.8 3.3 3.8 4.2 NP 1.9 1.7 2.0 2.2 NIM (%) 3.9 3.9 3.8 3.9


ABV/Sh. (INR) 52 57 63 71 RoE (%) 14.4 10.2 10.8 10.8 RoA (%) 1.3 1.0 0.9 0.8


P/BV (x) 1.4 1.3 1.2 1.0 P/ABV (X) 1.5 1.4 1.2 1.1 Div. Yield (%) 0.0 0.0 0.0 0.0

April 2016 126

Quarterly Performance (INR Million) FY15 FY16 FY15 FY16E 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Interest Income 17,715 18,696 18,701 19,083 19,132 19,023 19,028 19,754 74,195 76,935 Interest Expense 12,073 12,638 12,829 12,851 13,084 12,939 12,976 13,789 50,391 52,788 Net Interest Income 5,642 6,058 5,872 6,232 6,048 6,083 6,052 5,964 23,804 24,147 % Change (YoY) 10.7 10.5 7.6 -0.3 7.2 0.4 3.1 -4.3 6.8 1.4 Other Income 1,565 1,959 2,199 3,060 1,939 1,823 1,833 2,887 8,783 8,490 Net Income 7,208 8,017 8,071 9,292 7,987 7,906 7,885 8,852 32,587 32,638 Operating Expenses 3,692 3,919 4,097 4,601 4,315 4,540 4,630 4,901 16,309 18,386 Operating Profit 3,515 4,098 3,974 4,692 3,672 3,366 3,255 3,951 16,278 14,252 % Change (YoY) -10.0 20.9 20.1 11.7 4.5 -17.9 -18.1 -15.8 10.0 -12.4 Other Provisions 221 457 -8 398 1,531 873 751 949 1,067 4,104 Profit before Tax 3,295 3,641 3,982 4,294 2,141 2,493 2,504 3,002 15,210 10,147 Tax Provisions 1,092 1,238 1,335 1,488 727 880 877 1,068 5,153 3,552 Net Profit 2,202 2,403 2,647 2,805 1,414 1,613 1,627 1,934 10,057 6,596 % Change (YoY) 108.4 6.4 15.0 1.2 -35.8 -32.9 -38.5 -31.1 19.9 -34.4 Operating Parameters NIM (Reported,%) 3.3 3.4 3.2 3.3 3.1 3.1

3.3

NIM (Cal, %) 3.2 3.5 3.4 3.5 3.2 3.1 3.1 3.0 3.4 3.1 Deposit Growth (%) 8.5 13.7 13.5 18.6 16.7 14.3 14.1 10.0 18.6 10.0 Loan Growth (%) 9.1 14.8 15.3 18.1 10.1 5.0 9.8 9.0 18.1 9.0 CD Ratio (%) 72.8 75.1 73.3 72.4 68.7 68.9 70.5 71.8 72.4 71.8 CASA Ratio (%) 30.8 30.6 30.5 30.4 31.3 31.9

30.4 32.7

Asset Quality Gross NPA (INR b) 10.2 10.3 10.7 10.6 13.0 15.0 16.8 18.4 10.6 18.4 Gross NPA (%) 2.2 2.1 2.2 2.0 2.6 2.9 3.2 3.3 2.0 3.3 E: MOSL Estimates


Federal Bank

CMP: INR44 TP: INR52 Neutral We expect 10% YoY (5% QoQ) loan growth, aided by increased

focus on corporate credit growth. Traction in SME, agri and retail loans would be maintained. Improvement in CD ratio (71% as of 2Q) would help margins. We expect NIM to decline 15bp QoQ.

Non-interest income would be flat YoY, led by flat fee income. Operating expenses are expected to grow 7% YoY (v/s 5% YoY total

income de-growth), leading to 16% decline in operating profits. On a conservative basis, we factor higher credit cost of 90bp (35bp

in 3Q). PAT is likely to decline 31% YoY in 4QFY16. FB trades at 0.8x FY17E BV and 9.5x FY17E EPS. Neutral.

Key issues to watch for Outlook on asset quality in the SME segment. Guidance on second level impact of RBI AQR. Strategy on balance sheet growth, with consolidation in corporate

segment now largely over. Capital raising plans.

Bloomberg FB IN

Equity Shares (m) 1,720.0 M. Cap. (INR b)/(USD b) 75/1


Financial Snapshot (INR b) Y/E Mar 2015 2016E 2017E 2018E NII 23.8 24.1 27.6 31.9 OP 16.3 14.3 16.3 19.2 NP 10.1 6.6 7.8 9.5 NIM (%) 3.3 3.1 3.1 3.1 EPS (INR) 5.9 3.8 4.5 5.5 EPS Gr. (%) 19.7 -34.7 18.4 21.4 BV/Sh. (INR) 45.2 48 51 56 ABV/Sh. (INR) 43.7 44 48 53 ROE (%) 13.7 8.3 9.1 10.3 ROA (%) 1.3 0.8 0.8 0.8 Payout (%) 21.7 23.2 23.2 23.2 Valuations P/E(X) 7.4 11.3 9.5 7.8 P/BV (X) 1.0 0.9 0.8 0.8 P/ABV (X) 1.0 1.0 0.9 0.8 Div. Yield (%) 2.5 1.8 2.1 2.6

April 2016 127

Quarterly Performance (INR Million) FY15 FY16 FY15 FY16E 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Interest Income 112,201 118,476 123,958 130,064

140,411 147,725 154,111 160,650 484,699 602,897

Interest Expense 60,485 63,366 66,959 69,932 76,523 80,916 83,426 88,595 260,742 329,460 Net Interest Income 51,716 55,110 56,999 60,132

63,888 66,809 70,685 72,055 223,957 273,437

% Change (Y-o-Y) 17.0 23.1 23.0 21.4 23.5 21.2 24.0 19.8 21.2 22.1 Other Income 18,506 20,471 25,349 25,638 24,619 25,518 28,722 30,197 89,964 109,055 Net Income 70,222 75,581 82,348 85,769

88,507 92,327 99,407 102,252 313,920 382,492

Operating Expenses 31,784 34,979 34,563 38,550 40,008 41,898 42,048 45,770 139,875 169,724 Operating Profit 38,438 40,602 47,786 47,220

48,499 50,429 57,359 56,481 174,045 212,768

% Change (Y-o-Y) 16.3 19.9 22.9 24.9 26.2 24.2 20.0 19.6 21.2 22.2 Other Provisions 4,828 4,559 5,604 5,767 7,280 6,813 6,539 5,327 20,758 25,958 Profit before Tax 33,610 36,043 42,181 41,453

41,219 43,616 50,820 51,155 153,287 186,809


26,957 28,695 33,568 33,700 102,159 122,921

% Change (Y-o-Y) 21.1 20.1 20.2 20.6 20.7 20.5 20.1 20.1 20.5 20.3 Operating Parameters NIM (Reported,%)* 4.4 4.5 4.4 4.4

4.3 4.2 4.3 4.4

NIM (Cal, %)# 4.8 5.0 4.9 4.8

4.7 4.6 4.6 4.5 4.9 4.6 Deposit Growth (%) 22.7 24.8 18.6 22.7

30.1 29.7 26.5 20.0 22.7 20.0

Loan Growth (%) 20.7 21.8 17.0 20.6

22.4 27.9 25.7 22.0 20.6 22.0 CD Ratio (%) 83.9 83.8 83.8 81.1

78.9 82.6 83.3 82.4 81.1 82.4

CASA Ratio (%) 43.0 43.2 40.9 44.0

39.6 39.7 40.0 44.0 Tax Rate (%) 33.6 33.9 33.8 32.3

34.6 34.2 33.9 34.1 33.4 34.2

Asset Quality OSRL (INR B) 6.2 3.3 3.5 3.7

3.8 4.2 4.4 3.7

OSRL (%) 0.2 0.1 0.1 0.1

0.1 0.1 0.1 0.1 Gross NPA (INR B) 33.6 33.6 34.7 34.4

38.5 38.3 42.6 45.5 34.4 45.5

Gross NPA (%) 1.1 1.0 1.0 0.9 1.0 0.9 1.0 1.0 0.9 1.0 E: MOSL Estimates; * Reported on total assets; # Cal. on interest earning assets


HDFC Bank

CMP: INR1,058 TP: INR1,350 Buy We expect healthy loan growth of ~22% YoY, aided by higher

growth in retail products and continued momentum in corporate loans.

Fee income growth would continue to lag loan growth in the near term; however, it is expected to remain healthy at ~19% YoY, led by continued traction in retail fees.

Computed NIM is likely to decline ~10bp QoQ. Despite strong expansion, opex growth is expected to be 19% YoY, as the benefit of digitalization is reflected in lower sourcing cost.

Strong operating performance (20%+ PPP growth) and healthy asset quality (GNPA to remain stable QoQ at 0.9%) would lead to 20%+ YoY earnings growth in 4QFY16.

HDFCB trades at 3.2x FY17E BV and 18x FY17E EPS. Comfort on earnings (~20% CAGR over FY15-18) remains high. Maintain Buy. Key issues to watch for

Performance in retail loan portfolio—especially in segments like CV/CE, where commentary from industry experts is positive.

Trends in digital banking/payment industry and various initiatives by the bank.

Overall B/S growth outlook with anticipated economic recovery.

Bloomberg HDFCB IN




Y/E MARCH 2015 2016E 2017E 2018E

NII 224.0 273.4 331.7 400.8 OP 174.0 212.8 256.9 309.0 NP 102.2 122.9 147.8 177.8

NIM (%) 4.6 4.7 4.6 4.6 EPS (INR) 40.8 48.7 58.5 70.4 EPS Gr. (%) 15.3 19.4 20.2 20.3

BV/Sh. (INR) 247.4 282.9 327.8 381.8 ABV/Sh. (INR) 244.9 279.1 323.3 374.7 RoE (%) 19.4 18.4 19.2 19.8


P/E(X) 26.0 21.7 18.1 15.0 P/BV (X) 4.3 3.7 3.2 2.8 P/ABV (X) 4.3 3.8 3.3 2.8

Div. Yield (%) 0.8 0.9 1.1 1.3

April 2016 128

Quarterly Performance (INR Million) FY15 FY16 FY15 FY16E 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Interest Income 44,919 46,566 48,117 50,794 51,151 52,515 54,530 55,037 190,396 213,232 % Change (YoY) 17.6 15.2 13.1 16.6 13.9 12.8 13.3 8.4 15.6 12.0 Other Income 28,498 27,384 30,917 34,963 29,899 30,074 42,169 55,534 121,761 157,675 Net Income 73,417 73,950 79,033 85,757 81,050 82,588 96,698 110,571 312,157 370,907 Operating Expenses 28,250 26,971 28,663 31,074 30,672 31,004 31,100 35,032 114,958 127,808 Operating Profit 45,167 46,979 50,370 54,683 50,378 51,584 65,598 75,539 197,199 243,099 % Change (YoY) 18.4 20.8 13.5 22.8 11.5 9.8 30.2 38.1 18.8 23.3 Other Provisions 7,261 8,495 9,797 13,447 9,554 9,422 28,441 34,185 39,000 81,601 Profit before Tax 37,906 38,484 40,573 41,236 40,824 42,163 37,158 41,354 158,199 161,498 Tax Provisions 11,353 11,394 11,683 12,016 11,063 11,862 6,976 12,089 46,446 41,989 Net Profit 26,553 27,090 28,890 29,220 29,762 30,301 30,181 29,265 111,754 119,509 % Change (YoY) 16.8 15.2 14.1 10.2 12.1 11.9 4.5 0.2 13.9 6.9 Operating Parameters NIM (Reported,%) 3.4 3.4 3.5 3.6 3.5 3.5 3.5 3.5 NIM (Cal, %) 3.4 3.5 3.6 3.7 3.7 3.7 3.7 3.5 3.6 3.6 Deposit Growth (%) 15.3 13.9 12.1 8.9 9.6 9.2 14.6 18.0 8.9 18.0 Loan Growth (%) 15.2 13.8 12.8 14.4 15.2 13.3 15.8 16.2 14.4 16.2 Domestic CD Ratio (%) 80.5 79.5 81.2 83.8 85.1 84.3 84.8 83.8 Asset Quality OSRL (INR b) 112.7 110.2 120.5 110.2 126.0 118.7 112.9 110.2 OSRL (%) 3.2 3.0 3.2 2.8 3.2 2.9 2.6 2.8 Gross NPA (INR b) 108.4 115.5 130.8 150.9 151.4 158.6 211.5 270.7 150.9 270.7 Gross NPA (%) 3.1 3.1 3.4 3.8 3.7 3.8 4.7 5.8 3.8 5.8 E: MOSL Estimates


ICICI Bank

CMP: INR226 TP: INR320 Buy We expect moderate loan growth of ~16% YoY (similar to the last

quarter). Retail loan growth has picked up over the last year and is expected to remain a key driver of loan growth.

Computed margin is likely to decline ~15bp QoQ to 3.4%, led by continued high slippages expected in 4QFY16 (impact of RBI AQR). Overall, we expect NII to grow 8% YoY.

Stake sale gains in life insurance and general insurance would boost profit on sale of investments by INR21b and drive non-interest income growth of 59% YoY. Fee income growth would be muted at ~7% YoY.

Gross slippages would remain high in 4QFY16 as well. Large part of the slippages from RBI AQR would be relapse from restructured loans; hence, provisioning and NIM impact would be high. We expect one-off stake sale gains to be utilized for provisions. Overall, we expect earnings to be flat YoY.

ICICIBC trades at 1.1x FY17E BV and 7.2x FY17E EPS. We expect 11% earnings CAGR v/s 15% balance sheet CAGR over FY15-18. Buy. Key issues to watch for

Outlook on asset quality and trend on further relapse from restructured loan book.

Quantum of loans rescheduled under the 5/25 scheme. Commentary on release of capital due to regulatory relaxations.

Bloomberg ICICIBC IN

Equity Shares (m) 5,813.3 M. Cap. (INR b)/(USD b) 1311/20 52-Week Range (INR) 337/181

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


Y/E March 2015E 2016E 2017E 2018E NII 190.4 213.2 240.7 276.4

OP 197.2 243.1 245.2 284.0 NP 111.8 119.5 128.7 154.0 NIM (%) 3.5 3.6 3.5 3.5

EPS (INR) 19.3 20.6 22.2 26.6 EPS Gr (%) 13.5 6.9 7.7 19.7 BV/Sh (INR)* 116.1 130.8 146.7 165.6

ABV/Sh (INR)* 108.5 114.3 133.2 156.2 RoE (%) 15.2 14.3 13.4 14.3 RoA (%) 1.8 1.7 1.6 1.7

Div. Payout (%) 30.1 30.2 30.2 30.2 Valuations AP/E (x) 9.5 8.3 7.2 5.4

AP/BV (x) 1.6 1.3 1.1 0.9 AP/ABV (x) 1.7 1.5 1.2 0.9 Div. Yield (%) 2.1 2.2 2.4 2.9 * BV adj for invt in susbdiaries

April 2016 129


(INR Million) FY15 FY16 FY15 FY16E 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Interest Income 10,720 11,764 11,050 11,079 11,203 10,804 11,108 11,637 44,613 44,753 % Change (Y-o-Y) -2.3 7.6 1.3 2.8 4.5 -8.2 0.5 5.0 2.3 0.3 Other Income 2,152 3,363 3,578 4,541 3,756 4,375 4,390 5,050 13,634 17,571 Net Income 12,872 15,126 14,628 15,620 14,959 15,179 15,498 16,687 58,246 62,323 Operating Expenses 6,502 7,477 6,682 7,448 7,873 7,824 7,893 8,461 28,109 32,050 Operating Profit 6,370 7,649 7,945 8,172 7,086 7,355 7,605 8,226 30,137 30,273 % Change (Y-o-Y) -25.9 8.4 25.7 16.2 11.2 -3.8 -4.3 0.7 1.6 7.0 Other Provisions 3,256 2,866 3,703 5,626 4,081 1,371 7,181 6,195 15,451 18,827 Profit before Tax 3,114 4,783 4,243 2,547 3,006 5,984 425 2,031 14,686 11,446 Tax Provisions 1,042 1,640 1,467 485 853 2,291 2 689 4,635 3,834 Net Profit 2,072 3,144 2,775 2,062 2,153 3,693 423 1,343 10,052 7,612 % Change (Y-o-Y) -34.7 2.8 4.9 -24.0 3.9 17.5 -84.8 -34.9 -13.3 -24.3 Operating Parameters NIM (Cal, %) 2.5 2.8 2.6 2.6 2.5 2.4 2.5 2.5 2.6 2.5 Deposit Growth (%) 3.8 8.1 2.5 4.3 12.9 4.7 8.1 10.0 4.3 10.0 Loan Growth (%) 7.2 6.7 6.8 3.0 5.7 5.0 6.4 10.0 3.0 10.0 CD Ratio (%) 75.7 72.2 74.7 76.1 71.2 72.4 74.0 76.2 76.1 76.1 CASA Ratio (%) 29.2 28.8 29.7 29.7 29.5 29.8 30.7 29.7 Tax Rate (%) 33.5 34.3 34.6 19.1 28.4 38.3 0.4 33.9 31.6 33.5 Asset Quality OSRL (INR b) 93.1 97.3 97.6 99.4 101.1 100.6 88.6 99.4 OSRL (%) 8.0 8.3 8.2 7.9 8.3 8.2 7.0 7.9 Gross NPA (INR b) 47.2 50.0 54.6 56.7 58.2 57.7 70.7 79.9 56.7 79.9 Gross NPA (%) 4.0 4.2 4.6 4.4 4.7 4.6 5.6 5.6 4.4 5.6 E: MOSL Estimates


Indian Bank

CMP: INR102 TP: INR115 Buy On a lower base, we expect uptick in loan growth to 10% v/s 5-6%

YoY over the last three quarters. Deposits are also expected to grow at ~10% YoY. Decline in cost of funds would keep margins stable to improving at 2.3%.

Fee income would be subdued on lower corporate loan growth. Trading gains could surprise positively on a lower base. Overall, we expect 10% YoY growth in non-interest income. 4QFY15 had a lumpy recovery from written-off account of INR1.1b.

Asset quality stress would continue, as INBK accounted only 50% of the RBI AQR-related slippages in 3Q. We build credit cost of 1.7% (lower than 2.5% in 3Q; this included 75bp on account of RBI AQR).

INBK trades at 0.3x FY17E BV and 4.7x FY17E EPS. Maintain Buy.

Key issues to watch for Outlook on business growth and asset quality remains the key

monitorable. Impact of SEB UDAY scheme on loan growth. Quantum of loans rescheduled under the 5/25 scheme. View on margins with an improvement in liquidity and lower

interest rates.

Bloomberg INBK IN




Y/E March 2015 2016E 2017E 2018E

NII 44.6 44.8 50.9 58.5 OP 30.1 30.3 34.7 40.1 NP 10.1 7.6 10.1 13.1

NIM (%) 2.6 2.4 2.5 2.5 EPS (INR) 20.9 15.8 21.1 27.4 EPS Gr. (%) -16.1 -24.3 33.1 29.8

BV/Sh. (INR) 261.5 274 290 311 ABV/Sh (INR) 215.6 207 230 258 RoE (%) 8.3 5.9 7.5 9.1

RoA (%) 0.5 0.4 0.4 0.5 Div. Payout (%) 23.3 23.2 23.2 23.2 Valuations

P/E (x) 4.7 6.2 4.7 3.6 P/ BV (x) 0.4 0.36 0.34 0.32 P/ABV (x) 0.5 0.48 0.43 0.38

Div. Yield (%) 4.2 3.2 4.3 5.5

April 2016 130

Quarterly Performance (INR Million) FY15 FY16 FY15 FY16E 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Interest Income 8,007 8,331 8,614 9,251 9,807 10,943 11,734 12,027 34,203 44,511 % Change (YoY) 17.8 19.0 18.0 18.4 22.5 31.3 36.2 30.0 18.3 30.1 Other Income 6,059 5,940 6,490 6,585 7,616 7,835 8,390 9,785 25,480 33,627 Net Income 14,066 14,271 15,104 15,836 17,423 18,778 20,124 21,812 59,683 78,138 Operating Expenses 6,574 7,024 7,366 7,331 8,196 8,713 9,514 9,834 28,701 36,257 Operating Profit 7,492 7,247 7,738 8,505 9,227 10,065 10,610 11,978 30,982 41,880 % Change (YoY) 16.8 23.3 19.5 18.3 23.2 38.9 37.1 40.8 19.3 35.2 Other Provisions 1,104 732 980 1,074 1,233 1,581 1,771 2,533 3,891 7,118 Profit before Tax 6,388 6,515 6,758 7,431 7,994 8,484 8,839 9,445 27,092 34,762 Tax Provisions 2,177 2,213 2,286 2,478 2,744 2,884 3,029 3,163 9,155 11,819 Net Profit 4,211 4,302 4,471 4,953 5,250 5,600 5,810 6,282 17,937 22,943 % Change (YoY) 25.8 30.3 28.9 25.1 24.7 30.2 29.9 26.8 27.4 27.9 Operating Parameters NIM (Reported,%) 3.7 3.6 3.7 3.7 3.7 3.9 3.9 3.7 NIM (Cal, %) 3.6 3.6 3.6 3.5 3.5 3.7 3.7 3.7 3.6 3.7 Deposit Growth (%) 14.8 24.4 23.3 22.5 21.6 22.5 24.6 20.0 22.5 20.0 Loan Growth (%) 23.7 22.4 21.7 24.8 23.1 30.6 28.7 25.0 24.8 25.0 CD Ratio (%) 91.8 90.8 92.0 92.8 93.0 96.8 95.1 96.7 92.8 96.7 CASA Ratio (%) 33.3 33.9 34.1 34.1 34.7 34.7 35.0 34.1 36.0 Tax Rate (%) 34.1 34.0 33.8 33.3 34.3 34.0 34.3 33.5 33.8 34.0 Asset Quality OSRL (INR b) 2.3 3.1 3.5 3.6 4.6 4.9 5.2 3.6 OSRL (%) 0.4 0.5 0.6 0.5 0.6 0.6 0.6 0.5 Gross NPA (INR b) 6.5 6.5 6.7 5.6 5.7 6.0 6.8 7.5 5.6 7.5 Gross NPA (%) 1.1 1.1 1.1 0.8 0.8 0.8 0.8 0.9 0.8 0.9 E: MOSL Estimates; Quarterly calculated margins based on total assets, yearly on interest earning assets


IndusInd Bank

CMP: INR950 TP: INR1,150 Buy We expect strong loan/deposit growth of ~25%/20% YoY in 4QFY16.

Continuation of positive growth trend in CV/CFD segment would remain a key monitorable. Overall, NIM is likely to remain largely stable QoQ, led by lower cost of funds.

Non-interest income would remain a key driver of revenue growth. Within fees, we expect forex, third-party fees and investment banking to be the key drivers.

Opex growth would remain high at 34%, led by continued investment in branches, people and technology.

Strong PPP growth (+40% YoY) would keep earnings growth strong at ~26% YoY, despite factoring in 2.5x increase in provisions.

IIB trades at 2.7x FY17E BV and 18.1x FY17E EPS, with best-in-class RoA of ~2% and RoE of 17-18%. Delay in CV cycle revival and sharp moderation in fees remain the key risks to our estimates. Buy

Key issues to watch for Uptick in CV/CE demand would be the key for CFD growth Corporate asset quality a key monitorable Capital consumption Traction in non-vehicle consumer lending portfolio

Bloomberg IIB IN



Financial Snapshot (INR Billion) Y/E MARCH 2015 2016E 2017E 2018E NII 34.2 44.5 54.6 67.7 OP 31.0 41.9 51.3 63.5 NP 17.9 22.9 30.0 37.3 NIM (%) 3.9 4.1 4.1 4.1 EPS (INR) 33.9 38.9 50.8 63.3 EPS Gr. (%) 26.5 14.9 30.6 24.4 BV/Sh. (INR) 193.7 294 337 392 ABV/Sh. (INR) 191.1 290 333 387 RoE (%) 19.0 16.6 16.1 17.4 RoA (%) 1.8 1.9 2.0 2.0 Payout (%) 17.1 14.0 14.0 14.0 Valuations P/E (X) 27.2 23.7 18.1 14.6 P/BV (X) 4.8 3.1 2.7 2.4 P/ABV (X) 4.8 3.2 2.8 2.4 Div. Yield (%) 0.4 0.5 0.7 0.8

April 2016 131


1Q 2Q 3Q 4QE

Kotak Bank (standalone) Net Interest Income 10,022 10,389 10,594 11,232

15,982 16,787 17,662 18,035 42,237 68,466

% Change (Y-o-Y) 9.3 12.4 16.1 16.2

59.5 61.6 66.7 60.6 13.5 62.1 Operating Profit 6,655 7,336 7,376 8,607

5,970 10,448 12,052 11,595 29,975 40,065

% Change (Y-o-Y) -14.5 21.0 26.1 41.8

-10.3 42.4 63.4 34.7 16.3 33.7 Net Profit 4,298 4,445 4,645 5,271

1,898 5,695 6,347 5,954 18,660 19,894

% Change (Y-o-Y) 6.7 26.1 36.6 29.5

-55.8 28.1 36.6 13.0 24.2 6.6 Other Businesses Kotak Prime 1,200 1,250 1,200 1,427

1,190 1,270 1,260 1,306 5,077 5,026

Kotak Mah. Investments 170 250 240 400

300 360 390 380 1,060 1,430 Kotak Mah. Capital Co -40 -70 -60 300

30 70 60 48 130 208

Kotak Securities 680 660 600 960

670 780 550 650 2,900 2,650 International subs 70 130 140 180

250 320 260 320 520 1,150

KMB AMC & Trustee Co. 0 -10 -100 -180

200 230 40 130 -290 600 Kotak Invest. Advisors 80 40 20 110

0 0 -10 10 250 0

Kotak OM Life Insurance 490 520 510 760

660 480 600 654 2,280 2,394 Con.adj and MI 30 -40 -30 -100 -30 230 -40 -10 -140 150 Conso. PAT 6,978 7,175 7,165 9,128

5,168 9,435 9,457 9,444 30,447 33,504

% Change (Y-o-Y) 11.2 23.1 21.2 37.6 -25.9 31.5 32.0 3.5 -2.5 10.0 E: MOSL Estimates, Quarterly numbers vary from full year number due to difference in reporting


Kotak Mahindra Bank

CMP: INR669 TP: INR720 Neutral Lending business Considering eIVBL did not report earnings for 4QFY15/FY15 (due to

merger), YoY numbers are not strictly comparable. We expect the standalone bank (KMB+eIVBL) to report 15%+ loan

growth and 12%+ deposit growth in 4QFY16. Margins are expected to be stable/declining QoQ. Overall, we

expect 2% QoQ growth in NII. In 4QFY15, KMB (pre merged) booked one-off lumpy recoveries. Also, the base for trading gains is high. With strong customer acquisition and merger synergies from eIVBL, fee growth should remain healthy at 20%+.

KMPL should witness continued traction in vehicle financing portfolio. Spreads could improve marginally. On a higher base, PAT is likely to be flat to marginally lower in absolute terms.

Capital market and asset management business On a higher base, PAT for capital market related business is likely to

decline 45% YoY. The asset management business is expected to report a profit of

INR460m in 4QFY16 v/s INR290m in 3QFY16. Maintain Neutral. Key issues to watch for Update on KMB-VYSB integration. Performance of non-banking subsidiaries and their contribution to

overall profit.

Bloomberg KMB IN



Financial Snapshot (INR b) Y/E MARCH 2015 2016E 2017E 2018E

NII 61.5 68.5 77.1 92.8 OP 41.1 40.1 51.5 65.2 NP 24.2 19.9 28.7 38.0 Cons. NP 36.6 33.5 45.1 57.1 NIM (%) 4.1 4.1 4.1 4.2 Cons. EPS,INR 18.4 24.7 31.3 EPS Gr. (%) 34.6 26.6 Cons. BV.(INR) 165 182 206 237 Cons. RoE (%) 13.0 10.6 12.7 14.1 RoA (%) 1.5 1.1 1.4 1.5 Payout (%) 3.5 3.5 3.5 3.5 Valuations P/E(x) (Cons.) 36.5 27.1 21.4 P/BV (x) (C )

3.7 3.2 2.8 Div. Yield (%) 0.0 0.0 0.0

April 2016 132

Quarterly Performance (INR Million) Y/E March FY15 FY16 FY15 FY16E 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Interest Income 12,428 12,463 12,975 12,977 13,285 13,831 13,093 13,180 50,842 53,389 % Change (YoY) -4.9 -2.7 5.4 -0.8 6.9 11.0 0.9 1.6 -0.8 5.0 Other Income 5,882 3,927 5,120 6,285 4,539 4,246 3,945 4,849 21,214 17,579 Net Income 18,310 16,389 18,095 19,262 17,824 18,076 17,038 18,029 72,056 70,968 Operating Expenses 6,892 7,841 7,947 7,106 7,380 8,151 9,375 8,396 29,785 33,301 Operating Profit 11,417 8,549 10,148 12,157 10,445 9,925 7,664 9,633 42,271 37,667 % Change (YoY) 4.9 3.6 18.2 -12.1 -8.5 16.1 -24.5 -20.8 1.7 -10.9 Other Provisions 5,416 6,412 10,225 13,870 5,777 5,694 11,831 11,910 35,923 35,211 Profit before Tax 6,001 2,137 -77 -1,713 4,668 4,231 -4,167 -2,277 6,348 2,455 Tax Provisions 2,356 -778 -273 71 2,090 1,218 80 -932 1,377 2,455 Net Profit 3,645 2,914 196 -1,784 2,578 3,013 -4,247 -1,345 4,971 0 % Change (YoY) 3.2 15.9 -91.3 -157.5 -29.3 3.4 -2,271.2 -24.6 -56.4 -100.0 Operating Parameters NIM (Rep, %) 2.6 2.6 2.7 2.6 2.7 2.8 2.6 2.6 NIM (Cal,%) 2.5 2.6 2.6 2.5 2.5 2.7 2.5 2.4 2.5 2.5 Deposit Growth (%) 5.8 6.4 8.4 5.4 5.0 6.9 4.4 7.5 5.4 7.5 Loan Growth (%) 8.1 8.1 5.5 5.2 8.3 7.0 7.9 9.3 5.2 9.3 CASA Ratio (%) 24.1 24.9 23.7 24.2 24.2 25.0 24.7 24.2 Tax Rate (%) 39.3 -36.4 NM NM 44.8 28.8 -1.9 40.9 21.7 100.0 Asset Quality OSRL (INR b) 107.4 108.0 124.7 141.0 147.9 140.6 133.0 141.0 OSRL (%) 7.8 7.7 8.8 9.5 9.9 9.4 8.7 9.5 Gross NPA (INR b) 59.8 66.4 76.7 76.7 85.8 85.6 118.2 133.1 76.7 133.1 Gross NPA (%) 4.3 4.7 5.4 5.2 5.9 5.7 7.8 8.2 5.2 8.2 E: MOSL Estimates


Oriental Bank of Commerce

CMP: INR90 TP: INR90 Neutral Loan/deposit growth would remain moderate at ~8% YoY. NII is likely to remain subdued (~2% YoY), led by moderate growth.

NIM would decline ~10bp QoQ to 2.5%. Given the subdued economic environment, fee income growth is

likely to remain in low single digit. Overall, non-interest income is expected to decline 22% YoY, as the base included lumpy recoveries and trading gains.

On a lower base, opex is expected to accelerate to 18% YoY. Overall PPP is expected to de-grow 21% YoY.

OBC has already recognized 80% of RBI AQR-related stress. However, the clean-up exercise taken up by the new management might throw more negative surprises in 4QFY16. Hence, we remain cautious on asset quality.

The stock trades at 0.2x FY17E BV and 3.5x FY17E EPS. Maintain Neutral.

Key issues to watch for Outlook on asset quality, as net stressed loans remain one of the

highest in the industry. Quantum of loans rescheduled under the 5:25 scheme. Balance sheet growth and traction in focus loan segments

Bloomberg OBC IN




Y/E March 2015 2016E 2017E 2018E

NII 51 53.4 56.5 62.3 OP 42 37.7 39.0 42.3 NP 5 0.0 7.5 9.6

NIM (%) 2.4 2.4 2.4 2.3 EPS (INR) 17 0.0 25.0 32.2 EPS Gr. (%) -56.4 0.0 0.0 28.7

BV/Sh. (INR) 439 438.8 458.0 482.7 ABV/Sh. (INR) 326 244 271 310 RoE (%) 3.8 0.0 5.6 6.8

RoA (%) 0.2 0.0 0.3 0.3 D. Payout (%) 23.2 23.2 23.2 23.2 Valuations

P/E (x) 5.2 0.0 3.5 2.7 P/BV (x) 0.2 0.20 0.19 0.18 P/ABV (x) 0.3 0.36 0.32 0.28

Div. Yield (%) 3.8 0.0 5.8 7.4

April 2016 133

Quarterly Performance (INR Million) Y/E March FY15 FY16 FY15 FY16E 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Interest Income 43,797 41,512 42,331 37,916

41,025 43,220 41,196 39,314 165,556 164,755

% Change (YoY) 12.1 3.4 0.3 -5.3 -6.3 4.1 -2.7 3.7 2.5 -0.5 Other Income 12,364 15,584 12,908 18,051 13,974 13,569 16,706 21,036 58,907 65,284 Net Income 56,161 57,096 55,239 55,967 54,998 56,789 57,902 60,350 224,463 230,039 Operating Expenses 24,908 28,335 27,732 23,940 23,677 27,404 28,724 27,944 104,915 107,748 Operating Profit 31,253 28,760 27,507 32,027

31,321 29,385 29,179 32,405 119,548 122,290

% Change (YoY) 5.1 13.5 1.8 0.9 0.2 2.2 6.1 1.2 5.0 2.3 Other Provisions 9,276 17,679 14,678 38,342 18,114 18,821 37,755 35,685 79,975 110,375 Profit before Tax 21,977 11,081 12,830 -6,315

13,207 10,564 -8,577 -3,280 39,573 11,915

Tax Provisions 7,926 5,328 5,084 -9,381 6,000 4,354 -9,087 1,413 8,957 2,681 Net Profit 14,051 5,753 7,746 3,066

7,207 6,210 510 -4,693 30,616 9,234

% Change (YoY) 10.2 13.8 2.5 -62.0 -48.7 7.9 -93.4 -253.1 -8.4 -69.8 Operating Parameters NIM (Rep, %) 3.4 3.2 3.2 2.8

2.9 3.0 2.8 3.2

NIM (Cal, %) 3.4 3.2 3.2 2.8

2.9 3.0 2.8 2.6 3.1 2.8 Deposit Growth (%) 12.1 16.7 15.1 11.1

16.4 14.0 13.3 10.0 11.1 10.0

Loan Growth (%) 13.9 13.8 11.1 9.0

9.6 6.7 8.4 8.0 9.0 8.0 CD Ratio (%) 78.1 75.4 74.9 75.9

73.6 70.6 71.6 74.5 75.9 74.5

Tax Rate (%) 36.1 48.1 39.6 148.5 45.4 41.2 105.9 -43.1 22.6 22.5 Asset Quality OSRL (INR B) 340.1 367.9 343.3 383.2

399.7 382.6 350.0

OSRL (%) 9.8 10.3 9.5 10.1

10.5 10.0 8.9 Gross NPA (INR B) 196 208 222 257

254 249 343 400 257 400



Punjab National Bank

CMP: INR83 TP: INR90 Neutral We expect PNB’s loans and deposits to grow 8-10% YoY in 4QFY16,

partially driven by higher risk aversion. NII is likely to be muted (flat YoY), led by higher interest reversals and growth in safer assets.

Fee income growth is likely to be flat YoY and overall non-interest income is expected to grow 15% YoY, led by higher growth in non-core income.

The bank has recognized only half of the RBI AQR-related slippages in 3Q and is likely to recognize the rest in 4Q. Further, the management’s asset cleanup exercise would drive NPA higher. Recoveries could surprise positively, with intense efforts.

The stock trades at 0.4x FY17E BV and 4.9x FY17E EPS. Maintain Neutral.

Key issues to watch for Outlook on asset quality, as net stressed loans remain one of the

highest in the industry. Quantum of loans rescheduled under the 5:25 scheme. Balance sheet growth and traction in focus loan segments. Capital release and capital raising plans.

Bloomberg PNB IN




Y/E March 2015 2016E 2017E 2018E

NII 166 164.8 177.7 201.6 OP 120 122.3 130.0 148.0 NP 31 9.2 33.0 42.4

NIM (%) 3.1 2.8 2.8 2.8 EPS (INR) 17 4.7 16.8 21.6 EPS Gr. (%) -10.6 -71.5 257.2 28.7

BV/Sh. (INR) 203 205 220 239 ABV/Sh. (INR) 145 110 122 139 RoE (%) 8.5 2.4 7.9 9.4


P/E(X) 4.9 17.3 4.9 3.8 P/BV (X) 0.4 0.40 0.37 0.34 P/ABV (X) 0.6 0.74 0.67 0.59

Div. Yield (%) 4.0 0.6 2.1 2.7

April 2016 134

Quarterly performance (INR Million) Y/E March FY15 FY16 FY15 FY16E 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Interest Income 132,522 132,746 137,766 147,118

137,320 142,526 136,065 136,529 550,152 552,439

% Change (YoY) 15.1 8.4 9.2 14.0 3.6 7.4 -1.2 -7.2 11.6 0.4 Other Income 42,521 45,708 52,378 85,153 50,880 61,973 61,775 89,824 225,759 264,452 Net Income 175,043 178,454 190,144 232,270 188,200 204,498 197,840 226,353 775,911 816,891 Operating Expenses 87,166 94,234 97,200 108,177 96,179 101,839 101,861 119,538 386,776 419,416 Operating Profit 87,877 84,219 92,945 124,094

92,021 102,659 95,979 106,815 389,135 397,474

% Change (YoY) 16.4 33.4 22.0 16.8 4.7 21.9 3.3 -13.9 21.2 2.1 Other Provisions 34,967 42,750 52,349 65,929 39,997 43,606 79,494 83,378 195,995 246,475 Profit before Tax 52,910 41,469 40,596 58,165

52,024 59,053 16,485 23,437 193,140 150,999


36,924 38,791 11,153 14,301 131,016 101,170

% Change (YoY) 3.3 30.5 30.2 23.1 10.3 25.1 -61.7 -61.8 20.3 -22.8 Operating Parameters NIM (Reported, %) 3.1 3.1 3.2 3.3

3.0 3.0 2.8 3.2

NIM (Cal, %) 3.3 3.2 3.2 3.4

3.0 3.0 2.8 2.8 3.3 2.9 Deposit Growth (%) 12.8 14.0 11.9 13.1

13.7 10.9 10.7 12.0 13.1 12.0

Loan Growth (%) 13.0 9.7 7.3 7.5

6.8 10.5 12.9 12.0 7.5 12.0 CASA Ratio (%) 43.5 42.8 42.6 42.9

41.7 42.2 42.7 42.9

Tax Rate (%) 36.7 25.2 28.3 35.7 34.3 32.3 32.3 39.0 32.2 33.0 Asset Quality OSRL (INR B) 422 440 465 558

560 535 486 558

OSRL (%) 3.5 3.6 3.8 4.3

4.4 4.0 3.5 4.3 Gross NPA (INR B) 604 607 620 567

564 568 728 813 567 813



State Bank of India

CMP: INR185 TP: INR215 Buy We expect loan/deposit growth of 11-12%, near the industry

average. Incremental loan growth would be driven by relatively low yielding low risk corporate loans and healthy retail loan growth.

Computed NIM is likely to decline ~10bp QoQ to 2.7% on the expectation of higher slippages and growth in low yielding loans. SBIN has recognized only half of the RBI AQR in 3Q and would be recognizing the rest in 4Q. Along with this, we expect some more clean up by the management. Hence, slippages would remain elevated. Recoveries would also remain high (seasonal).

We expect non-interest income growth of 5% YoY, led by higher trading gains and fee income growth of 6% YoY. Trading gains could surprise positively. Cost (+10% YoY) containment would continue. Overall PPoP growth is expected to decline 14% YoY.

On a higher base, provisions would remain high at 25% YoY. Overall, we expect 60% YoY decline in PAT.

The stock trades at 0.7x FY17E BV and 7.2x FY17E EPS. Buy. Key issues to watch for

Performance on asset quality—slippage from restructured loans, going forward.

Growth outlook and key focus segments for growth. Capital raising plans and capital release due to RBI actions.

Bloomberg SBIN IN




NII 550 552 625 702 OP 389 397 452 512

NP 131 101 147 177 NIM (%) 3.2 2.8 2.8 2.8 EPS (INR) 22.8 16.4 24.1 28.7

EPS Gr. (%) 19.9 -28.0 47.3 19.1 Cons. BV (INR) 207 223 243 266 Cons. ABV (INR) 172 168 193 226

RoE (%) 11.2 7.8 10.2 11.3 RoA (%) 0.7 0.5 0.6 0.6 Div. Payout (%) 17.6 18.9 18.7 18.7

Valuations Cons. P/E (x) 7.6 10.6 7.2 6.0 Cons. P/BV (x) 0.8 0.77 0.71 0.64

Cons P/ABV (x) 1.0 1.03 0.90 0.77 Div. Yield (%) 1.9 1.5 2.1 2.5

April 2016 135

Quarterly Performance (INR Million) FY15 FY16 FY15 FY16E 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Interest Income 78,562 79,434 80,438 82,406 82,599 81,415 79,094 78,945 320,840 322,053 Interest Expense 57,390 58,589 59,225 61,196 61,298 60,398 59,129 57,893 236,401 238,716 Net Interest Income 21,172 20,844 21,212 21,211 21,302 21,017 19,965 21,053 84,439 83,337 % Change (YoY) 10.9 6.6 8.0 3.4 0.6 0.8 -5.9 -0.7 7.2 -1.3 Other Income 6,914 8,113 8,772 11,431 7,832 9,595 8,927 12,027 35,230 38,381 Net Income 28,086 28,958 29,985 32,641 29,134 30,612 28,892 33,080 119,669 121,718 Operating Expenses 14,366 15,618 15,331 16,118 14,252 16,505 15,551 17,140 61,434 63,448 Operating Profit 13,719 13,339 14,653 16,523 14,882 14,107 13,342 15,939 58,235 58,270 % Change (YoY) -2.8 8.9 16.1 25.2 8.5 5.8 -9.0 -3.5 11.6 0.1 Other Provisions 3,928 7,854 8,519 10,099 6,424 4,325 12,377 12,371 30,401 35,497 Profit before Tax 9,791 5,485 6,134 6,423 8,458 9,782 965 3,568 27,834 22,773 Tax Provisions 3,150 1,772 3,110 1,986 3,270 3,200 180 1,321 10,017 7,971 Net Profit 6,641 3,713 3,024 4,438 5,188 6,582 785 2,247 17,816 14,803 % Change (YoY) 18.5 78.4 -13.3 -23.4 -21.9 77.3 -74.0 -49.4 5.0 -16.9 Operating Parameters NIM (Reported,%) 2.6 2.5 2.5 2.4 2.4 2.3 2.2 2.5 NIM (Cal, %) 2.6 2.5 2.5 2.5 2.4 2.3 2.2 2.3 2.5 2.3 Deposit Growth (%) 9.5 4.6 9.7 6.4 10.0 10.2 4.6 7.0 6.4 7.0 Loan Growth (%) 17.8 9.7 8.3 11.6 6.0 3.3 5.0 5.0 11.6 5.0 Tax Rate (%) 32.2 32.3 50.7 30.9 38.7 32.7 18.6 37.0 36.0 35.0 Asset Quality OSRL (INR b) 119.7 126.0 123.5 136.6 141.3 139.1 136.2 136.6 OSRL (%) 5.0 5.2 5.0 5.2 5.5 5.5 5.2 5.2 Gross NPA (INR b) 102.3 114.6 126.0 130.3 141.4 155.4 185.0 202.6 130.3 202.6 Gross NPA (%) 4.3 4.7 5.1 5.0 5.5 6.1 7.1 7.3 5.0 7.3 E: MOSL Estimates


Union Bank of India

CMP: INR129 TP: INR160 Buy Capital conservation efforts continue. We expect modest

deposit/loan growth of ~3% YoY. Retail, agri and SME segments are likely to be the key growth drivers.

We expect NIM to remain stable to improving QoQ and NII to be flat YoY, led by largely flattish loan growth.

Non-interest income is likely to grow 5% YoY on a higher base (led by trading gains). Fees are expected to grow at ~10% YoY. Trading gains could provide positive surprise.

UNBK has recognized ~55% of the RBI AQR-related stress in 3Q and is likely to recognize the rest in 4Q. Hence, stress addition is likely to be elevated, impacting credit cost. On a lower base and lower cost of funds, we expect margins to be largely stable.

The stock trades at 0.4x FY17E BV and 4.4x FY17E EPS. Buy.

Key issues to watch for Capital raising plan and release on account of regulatory actions. Performance on asset quality—slippage from restructured loans,

going forward. Quantum of loans rescheduled under the 5:25 scheme. Trends and efforts to improve CASA ratio and NIM.

Bloomberg UNBK IN




NII 84 83 94 105

OP 58.2 58.3 67.6 76.2 NP 17.8 14.8 19.4 26.4 NIM (%) 2.5 2.3 2.4 2.4


ABV/Sh. (INR) 211 184 209 240 RoE (%) 10.1 7.6 9.1 11.3 RoA (%) 0.5 0.4 0.5 0.5 Div. Payout (%) 24.9 17.4 17.4 17.4

Valuations P/E(X) 4.5 5.8 4.4 3.3 P/BV (X) 0.4 0.42 0.39 0.35

P/ABV (X) 0.6 0.68 0.60 0.52 Div. Yield (%) 4.8 2.6 3.4 4.6

April 2016 136

Quarterly Performance (INR Million) FY15 FY16 FY15 FY16E 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Interest Income 7,453 8,564 9,090 9,771 10,598 11,085 11,569 12,188 34,878 45,440 % Change (Y-o-Y) 13.1 27.4 36.6 35.8 42.2 29.4 27.3 24.7 28.4 30.3 Other Income 4,136 5,056 5,368 5,904 5,452 6,181 7,461 7,788 20,465 26,882 Net Income 11,589 13,620 14,458 15,675 16,050 17,266 19,030 19,976 55,343 72,321 Operating Expenses 5,267 5,449 5,831 6,300 6,967 7,074 7,534 8,109 22,847 29,685 Operating Profit 6,322 8,171 8,627 9,375 9,083 10,191 11,496 11,866 32,496 42,636 % Change (Y-o-Y) -7.0 14.6 40.3 37.8 43.7 24.7 33.2 26.6 20.9 31.2 Other Provisions 237 1,195 699 1,264 980 1,039 1,479 1,575 3,395 5,073 Profit before Tax 6,085 6,976 7,929 8,111 8,103 9,152 10,016 10,292 29,101 37,563 Tax Provisions 1,769 2,151 2,526 2,602 2,591 3,048 3,260 3,309 9,047 12,208 Net Profit 4,315 4,825 5,403 5,510 5,512 6,104 6,757 6,982 20,054 25,355 % Change (Y-o-Y) 7.7 30.0 30.0 28.1 27.7 26.5 25.1 26.7 24.0 26.4 Operating Parameters NIM (Cal, %) 3.1 3.4 3.4 3.4 3.5 3.6 3.6 3.7 3.3 3.6 Deposit Growth (%) 16.6 18.6 21.0 22.9 25.2 24.0 23.1 18.0 22.9 18.0 Loan Growth (%) 23.2 30.0 32.4 35.8 35.1 29.0 26.7 18.0 35.8 18.0 Customer assets growth (%) 16.4 17.2 23.0 25.1 26.3 23.6 19.5 25.1 CD Ratio (%) 77.5 77.4 80.9 82.9 83.6 80.5 83.2 82.9 82.9 82.9 CASA Ratio (%) 22.3 22.5 22.6 23.1 23.4 25.5 26.6 23.1 26.1 Asset Quality Gross NPA (INR B) 2.0 2.2 2.8 3.1 3.7 4.9 5.6 6.3 3.1 6.3 Gross NPA (%) 0.3 0.4 0.4 0.4 0.5 0.6 0.7 0.7 0.4 0.7 E: MOSL Estimates


Yes Bank

CMP: INR829 TP: INR1,015 Buy Despite a high base, we expect loan growth to be significantly

above the industry average at ~18% YoY on the back of refinancing and strong growth in retail banking.

Computed NIM is likely to be stable to improving at ~3.6% on the back of lower cost of funds and sticky lending rates. NII growth is expected to be healthy at 25% YoY.

Non-interest income growth is likely to be 27% YoY, led by strong growth from third-party distribution, continued momentum in financial advisory and higher trading gains.

YES has already classified 75% of the RBI AQR-related stress as at December 2015 and would be taking care of the rest in 4Q. Asset quality performance so far has been significantly better than industry; we expect this trend to continue.

YES trades at 2.2x FY17E BV and 11.4x FY17E EPS. Return ratios also remain strong (RoA of 1.7% and RoE of 20%+). Maintain Buy. Key issues to watch for

Implementation of retail strategy on assets and liabilities sides. Performance on asset quality and quantum of loans rescheduled

under 5:25 scheme/sale to ARCs. Digital banking initiatives.

Bloomberg YES IN




NII 34.9 45.4 54.6 67.2

OP 32.5 42.6 51.8 64.2 NP 20.1 25.4 31.4 39.2 NIM (%) 3.2 3.5 3.5 3.5

EPS (INR) 48.0 60.4 74.9 93.5 EPS Gr. (%) 7.0 25.9 23.9 24.9 BV/Sh. (INR) 279.6 327 386 461

ABV/Sh. (INR) 278.2 324 382 456 RoE (%) 21.3 20.0 21.0 22.1 RoA (%) 1.6 1.7 1.8 1.8

Div. Payout (%) 21.8 20.3 20.3 20.3 Valuations P/E(X) 17.8 14.2 11.4 9.1

P/BV (X) 3.1 2.6 2.2 1.9 P/ABV (X) 3.1 2.6 2.2 1.9 Div. Yield (%) 1.1 1.2 1.5 1.9

April 2016 137

Divergent performance of NBFCs to continue Margins and asset quality remain key monitorables

We expect NBFCs under our coverage to report 3% PAT growth. Performance during the quarter is likely to be divergent. BAF and SKSM are likely to post robust numbers, with earnings growth of 47% and 126%, respectively. SHTF and MMFS would be impacted by a weak rural economy and migration to accelerated provisioning norms. Whereas, housing finance companies (HFCs) would have a stable quarter in terms of loan growth. However, margins would be keenly watched, as nearly all HFCs reduced their lending rates in 4Q. HDFC would report 46% PAT growth, led by gains from stake sale in life insurance business. LICHF would also deliver 27%+ profit growth, led by margin expansion.

Housing finance companies: HFCs under our coverage should deliver 9% PAT growth on back strong demand for loans in the individual segment. HDFC is likely to post 46% earnings growth, led by INR15b gain from stake sale in insurance venture; excluding this, earnings growth would be largely flat due to lower growth and margin pressure. LICHF should report strong earnings growth, led by 35bp YoY margin improvement to 2.8%. Mid-size/small NBFCs under our coverage (like DEWH, IHFL, REPCO and GRUH), which are largely dependent on bank loans and offer fixed rate loans to segments in which they don’t compete with banks, are likely to report over 20% earnings growth during the quarter.

Asset finance companies: Among the AFCs under our coverage, we expect BAF to report 47% earnings growth, led by strong growth momentum and stable asset quality. SHTF is likely to witness over 20% decline in profits, as it would be migrating to 150dpd NPL recognition norms; its construction equipment subsidiary would also be merged with the parent. This would lead to higher provisions and interest rate reversal, impacting earnings. MMFS is likely to report a timid quarter, with 22% YoY decline in earnings, given the weak rural economy and higher provisioning due to movement towards 120dpd provisioning norms.

Gold financing: Specialized gold financing company, MUTH is likely to have a good quarter, with 19% YoY PAT growth. While sequential AUM growth would be flattish, higher auctions in 4Q (at higher gold prices) would boost margins.

Microfinance: SKSM is likely to report strong 66% AUM growth and 126% profit growth on continuous strong credit demand from the target segment, coupled with increase in ticket sizes, which is helping growth further. Reduction in lending rates on the back of declining cost of funds, consistent spreads and increase in one-year loan size by the RBI should boost demand for microcredit.

Financials - NBFCs Company name

Bajaj Finance

Dewan Housing

GRUH Finance

HDFC

Indiabulls Housing

LIC Housing Fin

M & M Financial

Muthoot Finance

Power Finance Corp

Repco Home Fin

Rural Electric. Corp.

Shriram Transport Fin.

SKS Microfinance


April 2016 138

Exhibit 1: Expected quarterly performance summary (INR m) Sector Net Interest Income Operating Profit Net Profit




YoY Var % QoQ

NBFC Bajaj Finance 6,833 Buy 11,713 43.3 -10.7 6,785 48.0 -12.0 3,403 47.3 -16.7Dewan Housing 190 Buy 4,271 16.9 0.2 3,413 19.3 3.9 2,021 24.6 8.7 GRUH Finance 251 Buy 1,566 28.1 30.3 1,364 28.0 36.9 857 15.7 59.5 HDFC 1,103 Buy 25,582 8.6 17.2 27,049 0.1 19.8 18,635 0.1 22.6 Indiabulls Housing 613 Buy 8,793 9.0 3.5 8,663 15.6 7.6 6,577 19.4 8.8 LIC Housing Fin 468 Buy 8,779 35.1 17.5 7,943 37.8 16.7 4,820 27.5 15.1 M & M Financial 238 Buy 9,362 6.0 28.1 6,338 -1.4 42.6 2,577 -22.7 283.7Muthoot Finance 178 Buy 6,269 13.2 11.6 3,266 17.1 9.9 1,965 19.0 5.3 Power Finance Corp 166 Neutral 26,895 5.7 -6.3 25,314 2.2 -10.2 14,063 -11.5 -11.8Repco Home Fin 626 Buy 845 27.7 8.4 741 27.3 8.6 450 29.2 16.6 Rural Electric. Corp. 160 Neutral 24,143 9.7 5.9 23,614 12.6 7.0 11,425 2.0 -17.9Shriram Transport Fin. 924 Buy 13,645 25.7 4.9 10,466 30.5 5.6 2,796 -11.7 -25.5SKS Microfinance 526 Buy 1,638 79.4 10.9 1,356 137.3 21.3 918 126.5 15.5 NBFC Aggregate 143,501 14.4 5.5 126,313 11.8 6.3 70,508 2.8 1.8

Source: MOSL

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 FY16E FY17E FY18E FY16E FY17E FY18E FY16E FY17E FY18E FY16E FY17E FY18E NBFC Bajaj Finance 6,833 Buy 244.7 302.9 366.4 27.9 22.6 18.7 5.0 4.2 3.5 21.6 20.3 20.6 Dewan Housing 190 Buy 25.5 32.1 40.0 7.5 5.9 4.7 1.1 0.9 0.8 15.1 16.9 18.3 GRUH Finance 251 Buy 6.6 8.3 10.5 37.7 30.2 23.9 10.7 8.9 7.2 28.3 27.8 33.2 HDFC 1,103 Buy 45.8 44.3 50.4 24.1 24.9 21.9 5.0 4.6 4.2 23.1 24.2 19.8 Indiabulls Housing 613 Buy 54.5 67.6 82.0 11.2 9.1 7.5 2.2 2.0 1.8 25.4 23.4 25.7 LIC Housing Fin 468 Buy 33.1 41.7 49.5 14.1 11.2 9.4 2.6 2.2 1.8 19.7 21.1 21.1 M & M Financial 238 Buy 9.9 13.3 16.9 23.9 17.9 14.1 2.2 2.0 1.8 9.5 11.8 13.7 Muthoot Finance 178 Buy 18.6 24.8 31.8 9.6 7.2 5.6 1.3 1.1 1.0 13.9 16.8 19.2 Power Finance Corp 166 Neutral 48.3 41.6 43.0 3.4 4.0 3.8 0.6 0.5 0.5 18.4 14.1 13.2 Repco Home Fin 626 Buy 24.5 32.7 41.9 25.6 19.2 14.9 4.1 3.5 2.9 17.4 19.7 21.0 Rural Electric. Corp. 160 Neutral 57.9 44.1 50.5 2.8 3.6 3.2 0.5 0.5 0.4 21.1 14.0 14.4 Shriram Transport Fin. 924 Buy 58.9 73.5 91.9 15.7 12.6 10.1 2.0 1.8 1.6 13.4 15.2 16.6 SKS Microfinance 526 Buy 24.6 34.3 45.8 21.4 15.4 11.5 4.9 3.7 3.0 25.8 27.5 28.8 NBFC Aggregate 13.1 12.7 11.0 2.3 2.0 1.8 17.4 16.1 16.6

Source: MOSL

80

86

92

98

104

Dec-

15

Jan-

16

Feb-

16

Mar

-16

Sensex Index MOSL Financials Index

75

83

91

99

107

Mar

-15

Apr-

15

May

-15

Jun-

15

Jul-1

5

Aug-

15

Sep-

15

Oct

-15

Nov

-15

Dec-

15

Jan-

16

Feb-

16

Mar

-16

Sensex Index MOSL Financials Index


April 2016 139


1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Income from operations 11,801 11,703 14,164 13,532 15,716 15,921 19,717 19,108 51,200 70,462 Other Operating Income 635 620 601 762 746 878 897 1,014 2,618 3,535

Operating Income 12,436 12,322 14,766 14,294 16,462 16,799 20,614 20,122 53,818 73,997 YoY Growth (%) 34.0 28.1 38.0 33.5 32.4 36.3 39.6 40.8 33.5 37.5

Interest expenses 4,996 5,445 5,924 6,118 6,771 6,947 7,493 8,409 22,483 29,619 Net Income 7,440 6,878 8,842 8,176 9,692 9,853 13,121 11,713 31,335 44,378

YoY Growth (%) 24.6 18.7 33.8 31.6 30.3 43.3 48.4 43.3 27.4 41.6 Other income 24 96 88 156 96 206 83 416 364 801 Total Income 7,463 6,974 8,930 8,332 9,788 10,059 13,203 12,129 31,699 45,179 Operating Expenses 3,428 3,186 3,921 3,749 4,531 4,411 5,490 5,344 14,284 19,775 Operating Profit 4,035 3,788 5,009 4,583 5,257 5,648 7,714 6,785 17,051 24,603

YoY Growth (%) 22.0 24.2 33.8 35.2 30.3 49.1 54.0 48.0 30.3 44.3 Provisions and Cont. 829 800 1,079 1,138 1,033 1,368 1,462 1,757 3,846 5,621 Profit before Tax 3,206 2,987 3,931 3,446 4,224 4,280 6,252 5,028 13,205 18,982 Tax Provisions 1,092 1,016 1,347 1,136 1,468 1,486 2,167 1,625 4,591 6,746 Net Profit 2,114 1,972 2,584 2,310 2,756 2,794 4,085 3,403 8,979 13,037

YoY Growth (%) 20.3 18.0 33.1 26.8 30.4 41.7 58.1 47.3 24.9 45.2 Loan Growth (%) 38.6 40.9 37.2 35.8 33.0 36.5 41.4 42.0 35.8 42.0 Borrowings Growth (%) 38.6 40.9 37.2 35.8 33.0 36.5 41.4 42.0 35.1 36.1 Cost to Income Ratio (%) 46.1 46.3 44.3 45.9 46.7 44.8 41.8 45.6 45.6 44.6 Tax Rate (%) 34.1 34.0 34.3 33.0 34.8 34.7 34.7 32.3 34.1 34.1 E: MOSL Estimates


Bajaj Finance

CMP: INR6,883 TP: INR7,536 Buy We expect AUM to grow at a healthy 42% YoY in 4QFY16. While 4Q

is a seasonally weak quarter for consumer businesses, we expectoverall buoyancy across products.

NII should grow 43% YoY; however, margins would moderate, as 4Qis a seasonally weak quarter for high yielding consumer businesses.

Asset quality is likely to remain stable. As of December 2015, GNPAswere 1.29% and NNPAs 0.26%.

We expect provisions of INR1.7b against INR1.1b in 4QFY15 andINR1.42b in 3QFY16.

Net profit is likely to grow 47% YoY to INR3.4b. The stock trades at 4.2x FY17E and 3.6x FY18E BV. Maintain Buy.

Key issues to watch for Business growth momentum, as AUM is growing at 30%+ for the

last 20+ quarters. Margin trends, as the changing product mix is exerting some

pressure on margins. Asset quality trends in consumer electronics and two-wheeler

businesses. Performance of businesses such as rural SME lending, lifestyle

financing and e-commerce financing.

Bloomberg BAF IN




Y/E March 2015 2016E 2017E 2018E

NII 28.7 40.8 53.2 65.6 PPP 17.4 25.4 33.8 41.3 PAT 9.0 13.0 16.1 19.5

EPS (INR) 180 245 303 366 EPS Gr. (%) 24 36 24 21 BV/Share (INR) 960 1,368 1,622 1,928

RoA on AUM (%) 3.1 3.4 3.0 2.8 RoE (%) 20.4 21.6 20.3 20.6 Payout (%) 10.1 14.0 14.0 14.0


Div. Yield (%) 0.3 0.5 0.6 0.7

April 2016 140

Quarterly Performance (INR Million) Y/E March FY15 FY16 FY15 FY16E 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Interest Income 13,985 14,120 14,884 15,406 16,331 17,640 18,461 18,818 58,394 71,250 Interest Expenses 10,706 10,801 11,336 11,754 12,343 13,575 14,197 14,547 44,596 54,662 Net Interest Income 3,279 3,319 3,548 3,652 3,988 4,065 4,264 4,271 13,798 16,588

YoY Growth (%) 45.0 45.2 37.1 30.5

21.6 22.5 20.2 16.9

38.9 20.2 Fees and other income 281 387 381 419 201 477 392 604 1,468 1,674 Net Income 3,560 3,706 3,929 4,071 4,189 4,542 4,656 4,875 15,266 18,262

YoY Growth (%) 32.1 28.5 25.3 20.1

17.7 22.5 18.5 19.7

26.1 19.6 Operating Expenses 1,086 1,226 1,264 1,210

1,256 1,318 1,372 1,462

4,786 5,407

YoY Growth (%) 27.2 15.6 37.9 -1.0 15.6 7.6 8.5 20.8 18.1 13.0

Operating Profits 2,474 2,480 2,665 2,861

2,934 3,223 3,285 3,413

10,480 12,855 YoY Growth (%) 34.4 35.9 20.1 32.0

18.6 30.0 23.3 19.3

30.2 22.7

Provisions 250 200 250 350

320 450 480 350

1,050 1,600 Profit before Tax 2,224 2,280 2,415 2,511 2,614 2,773 2,805 3,063 9,430 11,255 Tax Provisions 753 758 819 888 881 970 946 1,042 3,217 3,838 Profit after tax 1,471 1,523 1,596 1,623 1,733 1,804 1,859 2,021 6,212 7,417

YoY Growth (%) 22.3 17.9 15.3 15.0 17.8 18.5 16.5 24.6 17.4 19.4 Loan growth (%) 21.8 24.9 26.2 26.0 25.7 25.9 23.5 22.0 26.0 24.0 Cost to Income Ratio (%) 30.5 33.1 32.2 29.7

30.0 29.0 29.5 30.0

31.4 29.6

Tax Rate (%) 33.9 33.2 33.9 35.4 33.7 35.0 33.7 34.0 34.1 34.1 E: MOSL Estimates


Dewan Housing Finance

CMP: INR190 TP: INR302 Buy AUM is likely to grow at a healthy 28% YoY, led by strong

momentum in the affordable housing space. NII growth is likely to remain at 17% and margins are likely to come

under pressure, as incremental growth is coming from the low-yielding salaried segment product.

Cost-income ratio is likely to remain stable at 30%. Asset quality is likely to remain stable. As of December 2015, GNPAs

were 0.8% and NNPAs nil. We factor in provisions of INR350m for 4QFY16.

Net profit is likely to grow 24% YoY to INR2.02b. The stock trades at 0.9x FY17E and 0.8x FY18E BV. Maintain Buy.

Key issues to watch for Business growth trends and momentum, and management

commentary on the same. Management views on margins, as incremental growth is coming

from low-yielding salaried segment. Movement in borrowing costs following rate cuts and outlook on

lending rates. Loan growth and asset quality trends in non-retail segment.

Bloomberg DEWH IN




Y/E March 2015 2016E 2017E 2018E NII 12.6 16.6 20.7 25.4

PPP 10.5 12.9 16.2 20.2 Adj. PAT 6.2 7.4 9.4 11.7 EPS (INR) 21.3 25.5 32.1 40.0

EPS Gr. (%) 3.5 19.4 26.1 24.7 BV (INR) 159 178.0 202.6 234.2 RoAA (%) 1.3 1.2 1.3 1.3

RoE (%) 15.1 15.1 16.9 18.3 Payout (%) 18.4 17.4 17.4 17.4 Valuations

P/E (x) 8.9 7.5 5.9 4.7 P/BV (x) 1.2 1.1 0.9 0.8 P/ABV (x) 1.2 1.1 0.9 0.8 Div. Yield (%) 1.8 2.0 2.5 3.2

April 2016 141

Quarterly performance (INR Million)

Y/E MARCH FY15 FY16 FY15 FY16E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Operating Income 2,416 2,577 2,711 3,050 2,944 3,118 3,236 3,938 10,599 13,231 Total income 2,416 2,577 2,711 3,050 2,944 3,118 3,236 3,938 10,603 13,235

Y-o-Y Growth (%) 31.9 22.4 24.7 19.9 21.8 21.0 19.3 29.1 25.3 24.8

Interest expenses 1,549 1,665 1,736 1,827 1,902 1,987 2,034 2,416 6,777 8,339

Net Income 867 913 975 1,223 1,042 1,131 1,202 1,522 3,826 4,896 Operating Expenses 134 200 157 156 176 257 205 202 640 839

Operating Profit 733 713 818 1,066 867 874 997 1,320 3,186 4,057 Y-o-Y Growth (%) 34.2 29.4 30.9 13.5 18.2 22.7 21.8 23.8 29.0 27.4

Provisions and Cont. 118 41 146 17 118 72 178 75 177 443

Profit before Tax 615 672 672 1,049 749 803 818 1,245 3,008 3,614 Tax Provisions 196 241 225 308 245 285 281 435 970 1,247

Net Profit 419 431 447 741 503 517 537 810 2,038 2,367 Y-o-Y Growth (%) 24.1 25.4 27.0 0.6 20.0 20.0 20.1 9.3 15.2 16.2

Int Exp/ Int Earned (%) 64.1 64.6 64.0 59.9 64.6 63.7 62.9 61.4 63.9 63.0 Cost to Income Ratio (%) 15.5 21.9 16.1 12.8 16.9 22.7 17.1 13.3 16.7 17.1 Tax Rate (%) 31.9 35.9 33.5 29.4 32.8 35.6 34.3 35.0 32.3 34.5

E: MOSL Estimates


Gruh Finance

CMP: INR251 TP: INR278 Buy We expect loan growth to remain strong at 27% YoY on the back of

strong demand for housing in the self-employed segment.

NII growth is likely to remain healthy at 25%. Margins are likely to show marginal improvement on a YoY basis,

led by decline in overall cost of funds. Total income is likely to grow 24% YoY to INR1.5b and cost-to-

income ratio is expected to be at 13%. Asset quality should remain stable. In 3QFY16, GNPAs were 0.62%

and NNPAs were 0.14%. We expect provisions of INR75m for the quarter.

Net profit is likely to grow 10% YoY to INR810m. The stock trades at 9x FY17E and 7.3x FY18E BV. Maintain Buy.

Key issues to watch for Business outlook, loan growth, asset quality trends, and

management commentary on the same. Movement in borrowing costs and margins, as the impact of RBI’s

rate cut would be seen during the quarter.

Bloomberg GRHF IN




Y/E March 2015 2016E 2017E 2018E NII 3.4 4.4 5.4 6.7

PPP 3.2 4.1 5.0 6.3 PAT 2.0 2.4 2.9 3.7 EPS (INR) 5.6 6.5 8.0 10.2

EPS Gr. (%) 14.2 16.2 23.1 26.7 BV/Sh. (INR) 19.6 23.4 27.9 34.5 ABV/Sh. (INR) 19.6 23.4 27.9 34.5

RoA (%) 2.5 2.1 1.9 2.2 RoE (%) 30.9 27.7 26.9 32.5 Payout (%) 35.7 30.0 30.0 30.0


Div. Yield (%) 0.8 0.7 0.8 1.2

April 2016 142

HDFC: Quarterly Performance (INR Million) Y/E March FY15 FY16 FY15 FY16E 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Interest Income 17,449 18,785 20,166 23,553 20,385 20,055 21,821 25,582 79,952 87,844

YoY Change (%) 14.7 19.0 14.4 10.0 16.8 6.8 8.2 8.6 14.2 9.9 Profit on Sale of Inv. 9 1,027 1,126 2,251

230 480 569 15,202 4,413 16,482

Other operating income 3,705 1,804 1,540 2,847 1,325 4,955 2,079 2,874 9,896 11,233 Net Operating Income 21,163 21,616 22,832 28,650 21,940 25,490 24,469 43,659 94,261 115,558

YoY Change (%) 18.0 13.8 17.7 15.5

3.7 17.9 7.2 52.4 16.2 22.6 Other Income 144 352 116 85 108 137 117 265 697 627 Total Income 21,307 21,968 22,947 28,735 22,049 25,627 24,586 43,924 94,958 116,186 Operating Expenses 1,711 1,803 1,853 1,701 2,029 1,872 2,001 1,874 7,066 7,776 Pre Provisioning Profit 19,597 20,166 21,095 27,034

20,020 23,756 22,585 42,049 87,891 108,410

YoY Change (%) 19.6 16.1 18.3 13.4

2.2 17.8 7.1 55.5 16.6 23.3 Provisions 350 350 450 500 500 520 680 5,100 1,650 6,800 PBT 19,247 19,816 20,645 26,534 19,520 23,236 21,905 36,949 86,241 101,610

YoY Change (%) 19.7 15.1 17.5 12.8

1.4 17.3 6.1 39.3 15.9 17.8 Provision for Tax 5,800 6,240 6,390 7,910 5,910 7,193 6,700 9,664 26,340 29,467 PAT 13,447 13,576 14,255 18,624 13,610 16,043 15,205 27,285 59,901 72,143



HDFC

CMP: INR1,103 TP: INR1,409 Buy We expect strong earnings growth of over 46% YoY, led by INR12b

gains from stake sale in life insurance business. Excluding one-off gains, earnings would be largely muted.

We estimate AUM growth at 14.4% whereas loan book (net of sell-downs) is expected to grow 13.1% YoY and 4% QoQ.

Spreads are likely to remain largely stable at 2.3%. However, margins would be the key monitorable.

NII is likely to grow 8.6% YoY to INR25.5b. Non-interest income would be strong at INR18b, led by INR15b of

insurance sales and INR1.9b of dividends. Asset quality has remained healthy over the past several quarters

and the trend is likely to continue. However, asset quality in the corporate loan book would be a key monitorable, as HDFC would make additional provisions of INR4.5b for unexpected future losses.

We estimate provisions of INR5.1b against INR500m in 4QFY15. The stock trades at 3.5x FY17E AP/ABV and 3.1x FY18E AP/ABV (price

adjusted for value of other businesses and book value adjusted for investments made in those businesses). Buy. Key issues to watch for

Loan growth and uptick in corporate loans. Movement in spreads and margins (on individual loans) and asset

quality trends. Dividend income from subsidiaries.

Bloomberg HDFC IN




Y/E March 2015 2016E 2017E 2018E

NII 80.0 87.8 99.6 112.0 PAT 59.9 72.1 69.7 79.3 Adj. EPS (INR) 31.2 37.8 35.2 39.8

BV/Sh. (INR) 197.9 219.3 239.9 262.4 ABV/Sh. (INR) 145.6 167.0 187.6 212.0 RoAA (%) 2.5 2.7 2.3 2.3

Core RoE (%) 25.1 23.1 24.2 19.8 Payout (%) 39.8 46.4 46.4 46.4 Valuation

AP/E (x) 23.3 17.4 18.6 16.5 P/BV (x) 5.6 5.0 4.6 4.2 AP/ABV (x) 5.0 3.9 3.5 3.1

Div. Yield (%) 1.4 1.7 1.6 1.8

April 2016 143

Quarterly Performance (INR Million) Y/E March FY15 FY16 FY15 FY16E 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Income from operations 13,641 15,186 17,011 18,777 18,290 19,850 20,751 21,131 64,615 80,022 Other Income 2,249 1,872 1,577 2,449 1,960 2,607 2,326 2,876 8,147 9,770 Total income 15,890 17,058 18,588 21,226 20,249 22,457 23,077 24,008 72,762 89,792

Y-o-Y Growth (%) 18.2 15.7 18.1 35.3 27.4 31.7 24.2 13.1 22.1 23.4 Interest expenses 8,894 9,553 10,281 10,713 11,390 12,450 12,258 12,338 39,442 48,436 Net Income 6,996 7,504 8,307 10,513 8,859 10,007 10,820 11,669 33,320 41,355

Y-o-Y Growth (%) 11.0 13.0 24.4 46.7 26.6 33.4 30.2 11.0 24.4 24.1 Operating Expenses 1,640 1,851 2,085 3,020 1,937 2,594 2,765 3,006 8,595 10,301 Profit before tax 5,356 5,654 6,222 7,494 6,922 7,413 8,055 8,663 24,725 31,054

Y-o-Y Growth (%) 13.7 11.9 16.0 59.7 29.2 31.1 29.5 15.6 24.8 25.6 Tax Provisions 1,119 1,171 1,441 1,983 1,810 1,858 2,010 2,086 5,713 7,763 Net Profit 4,238 4,483 4,781 5,511 5,113 5,555 6,045 6,577 19,012 23,290 Minority Int 0 0 0 0 0 0 0 0 1 0 Net Profit after MI 4,237 4,483 4,781 5,510 5,113 5,555 6,045 6,577 19,011 23,290

Y-o-Y Growth (%) 21.6 21.4 21.0 22.1 20.7 23.9 26.4 19.4 21.5 22.5 AUM Growth (%) 13.9 18.0 23.1 26.9 28.6 29.3 29.5 30.4 26.9 30.4 Cost to Income Ratio (%) 23.4 24.7 25.1 29 21.9 25.9 25.6 26 16.6 14.6 Tax Rate (%) 20.9 20.7 23.2 26 26.1 25.1 25.0 24 23.1 25.0

E: MOSL Estimates


Indiabulls Housing

CMP: INR613 TP: INR907 Buy We expect AUM to grow 30% YoY and 9.4% QoQ, driven by robust

demand in the mortgage business.

Spreads are likely to contract (but remain over 300bp) due to reduction in lending rates by the company. However, margins should improve, as borrowings are expected to be lower on the back of recent capital raising activity.

Cost-Income ratio is likely to remain stable at 16%.

Asset quality is expected to remain stable. In 3QFY16, GNPAs were 0.84% and NNPAs were 0.35%.

PAT is likely to grow 20% YoY to INR6.57b during the quarter.

The stock trades at 2x FY17E and 1.8x FY18E BV. Maintain Buy.

Key issues to watch for AUM growth trend and growth guidance, as competition from

banks is increasing. Movement in margins and guidance in the wake of recent capital

raising. Asset quality trends in the corporate segment. Updates on acquisition of retail bank, NorthOak Bank, in the UK.

Bloomberg IHFL IN




Y/E March 2015 2016E 2017E 2018E

Net Fin inc 21.8 31.6 40.0 47.9 PPP 27.7 35.3 44.5 53.2 EPS (INR) 53.5 54.5 67.6 82.0

EPS Gr. (%) 14.2 2.0 24.0 21.3 BV/Sh. (INR) 187 274 302 336 RoA on AUM (%) 3.6 3.4 3.3 3.2


P/E (x) 11.5 11.2 9.1 7.5 P/BV (x) 3.3 2.2 2.0 1.8 P/ABV (x) 3.3 2.2 2.0 1.8

Div. Yield (%) 4.2 5.1 5.5 6.7

April 2016 144

LICHF: Quarterly Performance (INR Million) Y/E March FY15 FY16 FY15 FY16E 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Interest Income 24,826 25,961 26,678 28,002

29,174 30,260 31,018 33,391 105,467 123,843

Interest Expenses 19,764 20,643 21,192 21,504 22,585 23,091 23,549 24,612 83,102 93,837 Net Interest Income 5,062 5,318 5,486 6,498 6,589 7,169 7,469 8,779 22,364 30,006

YoY Growth (%) 11.3 17.3 19.9 21.9

30.2 34.8 36.2 35.1 17.8 34.2 Fees and other income 610 626 680 604 481 634 549 632 2,520 2,296 Net Income 5,672 5,944 6,166 7,102

7,069 7,803 8,018 9,411 24,884 32,302

YoY Growth (%) 12.9 11.7 18.1 17.7

24.6 31.3 30.0 32.5 15.2 29.8 Operating Expenses 699 965 882 1,339

835 1,060 1,214 1,468 3,885 4,578

Operating Profit 4,973 4,980 5,283 5,763 6,234 6,743 6,804 7,943 20,999 27,724 YoY Growth (%) 12.7 8.8 17.7 15.4

25.3 35.4 28.8 37.8 13.7 32.0

Provisions and Cont. 92 -190 68 10 443 301 344 562 -20 1,650 Profit before Tax 4,882 5,170 5,215 5,753 5,790 6,442 6,460 7,381 21,019 26,074 Tax Provisions 1,659 1,756 1,772 1,971 1,969 2,325 2,271 2,561 7,158 9,126 Net Profit 3,223 3,414 3,443 3,782 3,821 4,117 4,189 4,820 13,862 16,948

YoY Growth (%) 3.8 10.1 5.4 2.2 18.6 20.6 21.7 27.5 5.2 22.3 Loan Growth (%) 16.8 17.2 18.0 18.6 17.9 17.0 15.2 18.5 18.6 18.5 Borrowings Growth (%) 16.4 17.4 16.4 17.7

17.8 15.2 14.6 19.7 17.7 19.7

Cost to Income Ratio (%) 12.3 16.2 14.3 18.9

11.8 13.6 15.1 15.6 15.6 14.2 Tax Rate (%) 34.0 34.0 34.0 34.3 34.0 36.1 35.2 34.7 34.1 35.0 E: MOSL Estimates


LIC Housing Finance

CMP: INR468 TP: INR538 Buy LICHF is likely to report strong earnings growth of 27.5% YoY, led by

margin expansion. We expect loan growth of 18% YoY on healthy growth in the retail

segment and likely pick-up in the developer segment. The individual loan segment is likely to grow 19% YoY and 9% QoQ,

while the developer segment is expected to grow 35% YoY. However, the share of builder loans is likely to remain below 3% of the overall book.

Margins are likely to improve 40bp YoY, led by higher incremental lending towards high-yielding loans against property. Besides, 60% of loan book at fixed rates is beneficial in a falling rate environment.

Asset quality is likely to remain stable. We model provisions of INR562m against INR344m in 3QFY15.

The stock trades at 2.2x FY17E and 1.8x FY18E BV. Maintain Buy.

Key issues to watch for Outlook on performance in the developer portfolio and overall

asset quality. Performance of corporate loan book and loans against property. Management commentary on margin trends, especially after

reducing lending rates.

Bloomberg LICHF IN




Y/E March 2015 2016E 2017E 2018E

NII 22.4 30.0 36.1 42.2 PPP 20.9 27.7 33.5 39.1 Adj. PAT 13.5 16.7 21.1 25.0

Adj. EPS (INR) 26.7 33.1 41.7 49.5 EPS Gr. (%) 12.1 24.3 25.9 18.6 BV/Sh (INR) 154.8 181.5 215.1 254.9

RoAA (%) 1.4 1.5 1.5 1.5 RoE (%) 17.5 19.7 21.1 20.2 Payout (%) 21.1 20.3 20.3 20.3


Div. Yield (%) 1.1 1.3 1.6 1.9

April 2016 145


(INR Million) Y/E March FY15 FY16 FY15 FY16E 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Operating Income 12,751 13,537 13,866 15,207 13,608 14,200 14,002 16,166 55,361 57,976 Other Income 79 152 90 166 76 183 85 208 486 551 Total income 12,830 13,689 13,955 15,373 13,684 14,383 14,087 16,374 55,847 58,528

YoY Growth (%) 16.8 12.9 9.8 12.2 6.7 5.1 0.9 6.5 12.8 4.8 Interest Expenses 5,949 6,168 6,478 6,373 6,445 6,542 6,696 6,804 24,967 26,486 Net Income 6,881 7,521 7,477 9,001 7,239 7,841 7,391 9,570 30,880 32,041 Operating Expenses 2,269 2,521 2,706 2,571 2,635 2,808 2,946 3,232 10,068 11,622 Operating Profit 4,611 5,000 4,771 6,429 4,604 5,033 4,445 6,338 20,811 20,419

YoY Growth (%) 10.9 8.1 11.2 18.2 -0.2 0.7 -6.8 -1.4 12.4 -1.9 Provisions 2,250 1,842 2,691 1,493 3,228 2,772 3,406 2,463 8,275 11,869 Profit before Tax 2,362 3,158 2,080 4,936 1,376 2,261 1,039 3,875 12,537 8,551 Tax Provisions 813 1,087 716 1,602 486 799 367 1,297 4,219 2,950 Net Profit 1,549 2,071 1,364 3,334 890 1,462 672 2,577 8,319 5,601

YoY Growth (%) -19.0 -6.4 -16.9 7.3 -42.6 -29.4 -50.8 -22.7 -6.2 -32.7 AUM growth (%) 15.4 13.7 10.2 8.3 9.0 6.6 9.7 8.5 8.3 0.0 Cost to Income Ratio (%) 33.0 33.5 36.2 28.6 36.4 35.8 39.9 33.8 32.6 36.3 Provisions/Operating Profits (%) 48.8 36.8 56.4 23.2 70.1 55.1 76.6 38.9 39.8 58.1 Tax Rate (%) 34.4 34.4 34.4 32.5 35.3 35.3 35.3 33.5 33.6 34.5 E: MOSL Estimates


Mahindra Financial Services

CMP: INR238 TP: INR293 Buy MMFS’ AUM growth would continue to moderate, as the rural

economy is yet to revive – we estimate 10% YoY growth. However, disbursements are likely to grow 14% YoY on the back of low base and uptick in demand in CVs/UVs in select pockets.

Net income is likely to grow 6% YoY to INR7.8b. Margins are likely to remain stable, as interest reversals due to shift towards 120dpd provisioning norms would take away the benefits of reduction in borrowing rates.

Asset quality is expected to remain under pressure, as the overall rural economy continues to show weak trends. As of December 2015, NPLs stood at 10.1% (multi-year high).

We expect provisions of INR2.46b v/s INR1.5b in 4QFY15 and INR3.4b in 3QFY16.

Net profit is expected to de-grow 22.7% YoY to INR2.57b on the back of lower net income and higher provisions.

The stock trades at 2x FY17E and 1.8x FY18E BV. Maintain Buy.

Key issues to watch for Management commentary on portfolio impact due to weak

monsoon and shift to 120dpd reporting norms. Asset quality trend in the wake of below-normal monsoon. Margin and growth trends. Performance of subsidiaries.

Bloomberg MMFS IN




Y/E March 2015 2016E 2017E 2018E NII 30.4 31.5 35.4 39.1

PPP 20.8 20.4 22.6 24.2 PAT 8.3 5.6 7.5 9.5 EPS (INR) 14.7 9.9 13.3 16.9

EPS Gr. (%) -6.3 -32.7 34.0 27.0 BV/Sh. (INR) 100.5 107.7 117.3 129.4 ABV/Sh.(INR) 91.1 99.7 111.3 125.2

RoA on AUM (%) 2.6 1.6 1.9 2.2 RoE (%) 15.5 9.5 11.8 13.7 Payout (%) 32.0 28.1 28.1 28.1


P/ABV (x) 2.6 2.4 2.1 1.9 Div. Yield (%) 1.7 1.0 1.3 1.7

April 2016 146

Quarterly Performance (INR Million) Y/E March FY15 FY16 FY15 FY1E 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Income from operations 10,762 10,468 10,522 10,870 11,256 11,226 11,235 12,007 42,623 45,723 Other operating income 114 115 154 133 145 136 148 167 515 595 Total Operating income 10,876 10,583 10,676 11,003 11,401 11,361 11,383 12,174 43,138 46,319

YoY Growth (%) -15.3 -18.3 -10.7 -4.5 4.8 7.4 6.6 10.6 -12.5 7.4 Other income 45 32 16 15 26 38 29 36 108 128 Total Income 10,920 10,615 10,692 11,018 11,426 11,400 11,412 12,210 43,246 46,447

YoY Growth (%) -15.1 -18.5 -11.0 -4.9 4.6 7.4 6.7 10.8 -12.6 7.4 Interest Expenses 5,354 5,084 5,292 5,332 5,670 5,652 5,616 5,739 21,064 22,677 Net Income 5,566 5,531 5,400 5,686 5,756 5,747 5,796 6,471 22,183 23,770 Operating Expenses 2,756 2,891 2,989 2,897 2,816 2,918 2,823 3,205 11,533 11,762 Operating Profit 2,810 2,640 2,411 2,789 2,940 2,830 2,972 3,266 10,650 12,009

YoY Growth (%) -6.9 -20.4 -21.5 -5.9 4.6 7.2 23.3 17.1 -13.9 12.8 Provisions 80 41 35 216 106 146 74 197 371 523 Profit before Tax 2,730 2,600 2,376 2,573 2,835 2,684 2,898 3,069 10,280 11,487 Tax Provisions 928 892 832 921 1,003 939 1,032 1,104 3,573 4,078 Net Profit 1,802 1,707 1,544 1,652 1,832 1,745 1,867 1,965 6,706 7,410

YoY Growth (%) -7.1 -19.1 -20.5 -8.7 1.7 2.2 20.9 19.0 -14.0 10.5 E: MOSL Estimates


Muthoot Finance

CMP: INR178 TP: INR234 Buy Total AUM for the company is expected to grow 14.4% YoY and

remain flattish QoQ to INR260b. While there is no meaningful uptick in demand, MUTH has focused

on increasing gold auctions to take advantage high gold prices. Calculated margins are likely to improve YoY to 9.8% on higher

auctions and declining cost of funds. NII would grow 11% YoY. Asset quality is likely to improve slightly, as the spike last quarter

was due to delay in gold auction. We estimate provisions of INR197m v/s INR74m in 3QFY16 and

INR216m in 4QFY15. The stock trades at 1.1x FY17E and 1x FY18E BV. Maintain Buy.

Key issues to watch for Management commentary on business growth and steps taken to

revive AUM growth. Movement in yields and margins, with declining cost of funds. Asset quality trends during the quarter, as NPAs had spiked last

quarter, as the company delayed gold auction.

Bloomberg MUTH IN Equity Shares (m) 398.0 M. Cap. (INR b)/(USD b) 71/1



Y/E March 2015 2016E 2017E 2018E

NII 21.6 23.0 27.8 33.5

PPP 10.7 12.0 15.6 20.0 PAT 6.7 7.4 9.9 12.7 EPS (INR) 16.8 18.6 24.8 31.8

BV/Sh.(INR) 127.7 139.8 155.9 176.6 RoA on AUM 3.0 2.9 3.4 3.6 RoE (%) 14.3 13.9 16.8 19.2

Div. Yld. (%) 3.1 4.2 5.4 Valuations P/E (x) 10.6 9.6 7.2 5.6

P/BV (x) 1.3 1.1 1.0

April 2016 147


(INR Million) Y/E March FY15 FY16 FY15 FY16E 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Interest Income 22,900 24,920 25,450 25,450 27,920 29,410 28,700 26,895 98,720 112,925

YoY Gr % 17.4 17.6 17.3 13.5 21.9 18.0 12.8 5.7 14.5 15.2 Other Income 60 100 40 -40 40 140 30 90 160 300 Net Operational Income 22,960 25,020 25,490 25,410 27,960 29,550 28,730 26,985 94,394 110,525

YoY Gr % 17.6 17.3 17.1 12.8 21.8 18.1 12.7 6.2 10.9 17.1 Exchange gain/(loss) -1,090 -1,370 -1,620 -390 -730 -730 -190 -1,050 -4,470 -2,700 Total Net Income 21,870 23,650 23,870 25,020 27,230 28,820 28,540 25,935 89,924 107,825

YoY Gr % 18.5 18.4 11.2 10.3 24.5 21.9 19.6 3.7 8.9 19.9 Operating Expenses 542 594 795 241 1,809 390 363 621 2,172 3,184 Operating Profit 21,328 23,056 23,075 24,779 25,421 28,430 28,177 25,314 92,222 107,342

YoY Gr % 17.6 19.7 9.5 13.6 19.2 23.3 22.1 2.2 14.9 16.4 Adjusted PPP (For Forex) 22,418 24,426 24,695 25,169 26,151 29,160 28,367 26,364 96,708 110,042

YoY Gr % 16.8 18.5 15.6 16.2 16.6 19.4 14.9 4.7 16.8 13.8 Provisions 1,290 2,840 1,540 2,770 2,480 3,810 4,830 5,186 8,440 16,306 PBT 20,038 20,216 21,535 22,009 22,941 24,620 23,347 20,128 83,782 91,036 Tax 5,560 6,130 6,112 6,390 7,170 7,671 7,529 6,762 24,189 29,131

Tax Rate % 27.7 30.3 28.4 29.0 31.3 31.2 32.2 33.6 28.9 32.0 PAT 14,478 14,086 15,423 15,619 15,771 16,949 15,818 13,366 59,594 61,904

YoY Gr % 20.7 10.7 0.5 10.8 8.9 20.3 2.6 -14.4 12.1 1.5 Adjusted PAT (For Forex) 15,266 15,041 16,584 15,896 16,272 17,452 15,947 14,063 62,773 63,740

YoY Gr % 19.9 9.9 6.5 13.6 6.6 16.0 -3.8 -11.5 12.1 1.5 E: MOSL Estimates; Quarterly and annual numbers may vary due to differences in classification


Power Finance Corp

CMP: INR166 TP: INR186 Neutral POWF is likely to report loan growth of 12% YoY. On a QoQ basis,

loans and borrowings are likely to grow 3.5% and 5.6%, respectively. We expect NII growth to be muted at 5% YoY and calculated margin

to decline 60bp QoQ on conversion of some of the loans to bonds under UDAY scheme. However, there is a lack of clarity on the quantum of loans to be converted to bonds.

Barring a couple of accounts, asset quality has largely remained healthy. However, asset quality would remain a key monitorable, given the issues related to fuel linkages.

The stock trades at 0.5x FY17E and 0.5x FY18E BV.

Key issues to watch for Management commentary on impact of UDAY scheme on loan

growth and future prospects. Growth trends and asset quality performance in the backdrop of

challenging fuel linkage issues impacting power generation companies.

Overall disbursement trends and disbursements to SEBs for transnational finance.

Bloomberg POWF IN




Y/E March 2015 2016E 2017E 2018E

NII 89.6 103.3 92.6 92.1 PPP 92.2 107.3 97.2 97.3 Adj. PAT 62.8 63.7 54.9 56.8

Adj. EPS (INR) 47.6 48.3 41.6 43.0 EPS Gr. (%) 12.1 1.5 -13.8 3.4 BV/Sh. (INR) 245.5 280.4 310.3 341.3

Adj. RoAA (%) 3.1 2.7 2.1 1.9 RoE (%) 20.7 18.4 14.1 13.2 Payout (%) 23.4 25.5 25.5 25.5


Div. Yld (%) 5.5 6.2 5.3 5.5

April 2016 148

REPCO: Quarterly performance

(INR Million) Y/E March FY15 FY16 FY15 FY16E 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Interest Income 1,506 1,647 1,708 1,830 1,935 2,084 2,191 2,382 6,691 8,591 Interest Expenses 976 1,054 1,120 1,168 1,271 1,344 1,411 1,537 4,318 5,563 Net Interest Income 530 593 588 662 664 740 780 845 2,373 3,028

YoY Growth (%) 25.1 25.4 24.6 22.8 25.2 24.7 32.6 27.7 24.4 27.6 Other income 55 45 49 85 66 80 64 93 234 303 Total Income 585 638 637 747 730 820 843 939 2,608 3,332

YoY Growth (%) 23.8 20.7 24.0 26.5 24.7 28.4 32.4 25.6 23.8 27.8 Operating Expenses 113 128 142 165 154 175 160 197 547 687

YoY Growth (%) 45.0 61.5 28.5 36.6 37.0 36.8 13.0 19.7 41.1 25.5 Operating Profits 473 510 495 582 576 644 683 741 2,060 2,644

YoY Growth (%) 19.6 13.5 22.8 23.9 21.8 26.3 37.9 27.3 19.9 28.4 Provisions 98 17 26 62 113 47 92 59 203 311 Profit before Tax 375 493 469 520 463 597 591 683 1,857 2,333 Tax Provisions 94 136 128 131 161 207 205 233 489 805 Profit after tax 248 322 307 348 302 391 386 450 1,226 1,528

YoY Growth (%) 11.4 10.5 13.3 10.5 21.8 21.2 25.5 29.2 11.4 24.7 Borrowings growth (%) 33.5 32.2 28.4 30.8 32.4 33.4 31.9 36.9 30.8 36.9 Cost to Income Ratio (%) 19.2 20.1 22.3 22.1 21.1 21.4 19.0 21.0 21.0 20.6 Tax Rate (%) 25.2 27.5 27.4 25.1 34.7 34.6 34.7 34.1 26.3 34.5 E: MOSL Estimates


Repco Home Finance

CMP: INR626 TP: INR814 Buy We expect loan growth of 30% YoY, led by healthy demand for

housing in the self-employed segment. Calculated margins are likely to contract by 10bp YoY due to

competitive pressures and declining share of low-cost NHB funding. Asset quality is expected to improve in line with seasonal trends, as

4Q is the strongest quarter for asset quality performance. In 3QFY16, GNPAs were 2.29% and NNPAs were 1.36%. We don’t see any material impact of Chennai floods on asset quality.

Cost-to-income would decline to ~19% due to nil ESOP amortization charges.

PAT is expected to grow 29% YoY to INR450m. The stock trades at 3.5x FY17E and 2.9x FY18E BV. Maintain Buy.

Key issues to watch for Impact of torrential rains in Chennai (constitutes 10% of

company’s loan book) and management commentary on the same.

Business outlook, loan growth and share of home loans and LAP. Movement in borrowing costs and margins, given RBI rate cuts. Asset quality trends in the LAP segment.

Bloomberg REPCO IN


52-Week Range (INR) 785/552 1,6,12 Rel Perf. (%) 6/-7/8


Y/E MARCH 2015 2016E 2017E 2018E

NII 2.4 3.0 4.1 5.3 PPP 2.1 2.6 3.5 4.5 PAT 1.2 1.5 2.0 2.6

EPS (INR) 19.7 24.5 32.7 41.9 BV/Sh. (INR) 130.2 151.9 180.8 217.9 RoAA (%) 2.3 2.2 2.2 2.1


P/E (x) 31.8 25.5 19.1 14.9 P/BV (x) 4.8 4.1 3.5 2.9 Div. Yield (%) 0.2 0.4 0.5 0.7

April 2016 149

Quarterly Performance (INR Million) Y/E March FY15 FY16 FY15 FY16E 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Interest Income 46,481 49,862 51,445 52,933

56,410 58,271 59,873 58,698

200,721 233,250

Interest Expenses 27,523 29,545 30,449 30,930

33,064 35,166 37,066 34,554

118,446 139,850 Net Interest Income 18,958 20,317 20,997 22,003 23,346 23,104 22,806 24,143 82,275 93,400

YoY Gr (%) 17.6 23.3 21.0 24.1

23.1 13.7 8.6 9.7

21.6 13.5 Other Operational Income 190 375 608 401

219 663 307 511

1,575 1,700

Net Operational Income 19,148 20,692 21,604 22,404 23,565 23,768 23,113 24,654 83,849 95,101 YoY Gr (%) 14.0 22.4 21.2 23.2

23.1 14.9 7.0 10.0

20.1 13.4

Other Income 396 426 390 374

467 314 195 736

1,585 1,712 Total Net Income 19,544 21,118 21,995 22,778 24,033 24,081 23,308 25,390 85,434 96,813

YoY Gr (%) 15.5 23.9 21.4 22.1 23.0 14.0 6.0 11.5 20.6 13.3 Operating Expenses 583 582 512 1,457 826 836 941 1,426 3,134 4,029

YoY Gr (%) 3.4 13.3 -14.5 103.7

41.5 43.6 83.7 -2.1

31.0 28.5 % to Income 3.0 2.8 2.3 6.4 3.4 3.5 4.0 5.6 3.7 4.2

Operating Profit 18,961 20,536 21,482 21,321

23,207 23,246 22,367 23,964

82,300 92,784 YoY Gr % 15.9 24.2 22.6 18.8

22.4 13.2 4.1 12.4

20.3 12.7

Provisions 1,212 180 1,907 4,731 1,965 558 3,572 6,670 8,030 12,764 PBT 17,749 20,356 19,575 16,590 21,242 22,688 18,795 17,295 74,270 80,020

YoY Gr (%) 12.3 25.7 16.8 0.7

19.7 11.5 -4.0 4.2

13.7 7.7 Tax 4,921 5,349 5,777 5,625 6,456 6,496 5,097 6,096 21,672 23,606

Tax Rate (%) 27.7 26.3 29.5 33.9

30.4 28.6 27.1 35.3

29.2 29.5 PAT 12,828 15,008 13,798 10,965 14,786 16,192 13,699 11,198 52,599 56,414

YoY Gr (%) 11.9 35.1 12.4 -8.0 15.3 7.9 -0.7 2.1 12.3 7.3 E:MOSL Estimates; Quarterly and annual numbers would not match due to differences in classification


Rural Electrification CMP: INR160 TP: INR182 Neutral RECL is likely to report loan growth of 12% YoY. On a QoQ basis,

loans and borrowings are likely to grow 3.5% and 5.6%, respectively.

NII growth is likely to be muted at 9% YoY and calculated margin would decline 40bp QoQ on conversion of some loans to bonds under UDAY scheme. However, there is a lack of clarity on the quantum of loans to be converted to bonds.

Barring a couple of accounts, asset quality has largely remained healthy. However, asset quality would remain a key monitorable, given the issues related to fuel linkages.

The stock trades at 0.5x FY17E and 0.4x FY18E BV.

Key issues to watch for Management commentary on business outlook, asset quality and

impact of UDAY scheme. Movement in spreads and yields on assets. Overall disbursement trends and disbursements to SEBs for

transnational finance.

Bloomberg RECL IN


1,6,12 Rel Perf. (%) -8/-38/-40

Financial Snapshot (INR b) Y/E MARCH 2015 2016E 2017E 2018E NII 82.3 93.4 79.2 90.7

PPP 82.3 92.8 78.3 89.6 PAT 52.6 56.4 43.0 49.2 EPS (INR) 52.6 57.9 44.1 50.5

EPS Gr. (%) 7.6 10.1 -23.8 14.4 BV/Sh. (INR) 253 297 332 370 RoAA (%) 3.2 2.9 1.9 1.9

RoE (%) 22.7 21.1 14.0 14.4 Payout (%) 23.2 23.2 23.2 23.2 Valuation

P/E (x) 3.0 2.8 3.6 3.2 P/BV (x) 0.6 0.5 0.5 0.4 Div. Yield (%) 6.7 7.1 5.4 6.2

April 2016 150

SHTF: Quarterly Performance (INR Million) Y/E March FY15 FY16 FY15 FY16E 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Interest Income 17,080 18,798 20,538 21,364 22,015 22,402 23,675 24,592 77,779 92,684 Interest expenses 9,871 10,921 11,351 11,886 11,972 12,059 12,239 12,832 44,029 49,102 Net Interest Income 7,209 7,877 9,187 9,478 10,043 10,343 11,436 11,760 33,750 43,582

YoY Growth (%) 39.9 36.7 43.6 47.0 39.3 31.3 24.5 24.1 42.5 29.1 Securitisation income 2,467 2,196 1,341 1,376 1,313 1,586 1,567 1,347 7,379 5,813 Net Income (Incl. Securitization) 9,676 10,072 10,528 10,854 11,356 11,929 13,002 13,107 41,129 49,395

YoY Growth (%) 7.4 11.6 13.0 17.9 17.4 18.4 23.5 20.8 12.7 20.1 Fees and Other Income 236 163 147 160 162 211 193 239 707 777 Net Operating Income 9,912 10,236 10,675 11,014 11,519 12,140 13,195 13,346 41,836 50,172

YoY Growth (%) 0.8 8.4 12.5 17.6 16.2 18.6 23.6 21.2 9.7 19.9 Operating Expenses 2,515 2,575 2,702 2,991 2,905 3,001 3,287 3,418 10,783 12,691 Operating Profit 7,398 7,661 7,973 8,023 8,613 9,139 9,909 9,929 31,054 37,482

YoY Growth (%) 0.7 5.5 12.8 16.3 16.4 19.3 24.3 23.8 8.7 20.7 Provisions 2,966 3,154 3,269 3,241 3,823 3,997 4,199 6,105 12,630 18,124 Profit before Tax 4,432 4,506 4,704 4,782 4,790 5,142 5,710 3,823 18,424 19,358 Tax Provisions 1,368 1,484 1,580 1,615 1,579 1,761 1,959 1,379 6,046 6,678 Net Profit 3,064 3,022 3,124 3,167 3,211 3,381 3,751 2,444 12,378 12,679 YoY Growth (%) -10.2 -7.5 3.7 7.4 4.8 11.9 20.1 -22.8 -2.1 2.4 AUM Growth (%) 3.6 3.3 6.9 11.3 11.3 13.8 16.6 12.6 11.3 14.6 Securitization Inc. / Net Inc. (%) 24.9 21.5 12.6 12.5 11.4 13.1 11.9 10.1 17.6 11.6 Cost to Income Ratio (%) 25.4 25.2 25.3 27.2 25.2 24.7 24.9 25.6 25.8 25.3 Tax Rate (%) 30.9 32.9 33.6 33.8 33.0 34.3 34.3 36.1 32.8 34.5 E: MOSL Estimates; * Quaterly nos and full year nos will not tally due to different way of reporting financial nos


Shriram Transport Finance

CMP: INR924 TP: INR1,154 Buy SHTF would start reporting NPLs on 150dpd against the existing

180dpd. Construction equipment subsidiary would be merged with parent. As a result, GNPLs would increase from 4.3% to 6.3%.

Resulting interest de-recognition and higher provisions on the same would lead to 22% YoY decline in profits during the quarter.

Key thing to watch would be whether SHTF continues to maintain provision coverage ratio of 80%. This would play a crucial role in determining the earnings trajectory.

SHTF’s AUM is expected to grow 15.6% YoY to INR677b. NPLs in construction equipment subsidiary also remain a key

monitorable. We factor in provisions of INR6b against INR4.2b in 3QFY16.

The stock trades at 1.8x FY17E and 1.6x FY18E consolidated BV. Maintain Buy.

Key issues to watch for Business growth and momentum, and management commentary

on the same. Movement in borrowing costs and margins. Asset quality trends in the wake of merger of CE subsidiary and

NPL migration to 150dpd. Performance of equipment financing subsidiary.

Bloomberg SHTF IN


52-Week Range (INR) 1206/737 1,6,12 Rel Perf. (%) 0/5/-8


Y/E MARCH 2015 2016E 2017E 2018E

Net Inc. 41.1 49.4 57.8 68.2 PPP 31.1 37.5 44.1 52.4 PAT 12.4 12.7 16.6 20.5

Cons.PAT 10.3 13.0 16.7 20.9 EPS (INR) 54.6 55.9 73.1 90.5 Cons.EPS(INR) 45.3 57.3 73.5 91.9

BV/Sh (INR) 407.1 451.0 508.5 579.6 Conso. BV (INR) 408.4 453.7 511.6 584.1 RoA on AUM (%) 2.0 1.9 2.2 2.4


P/Cons.EPS (x) 20.4 16.1 12.6 10.0 P/Cons. BV (x) 2.3 2.0 1.8 1.6 Div. Yield (%) 1.1 1.1 1.4 1.8

April 2016 151

Quarterly Performance (INR Million) Y/E March FY15 FY16 FY15 FY16E 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Income from operations 1,272 1,658 1,635 1,767 2,173 2,664 2,805 3,103 6,332 10,745 Other Income 246 243 209 209 236 249 268 301 907 1,054 Total income 1,518 1,901 1,844 1,976 2,409 2,913 3,073 3,405 7,240 11,798

Y-o-Y Growth (%) 29.3 46.3 38.3 42.9 58.6 53.2 66.6 72.3 39.5 63.0 Interest expenses 478 671 787 854 1,008 1,169 1,327 1,466 2,790 4,970 Other income 171 109 225 286 418 330 362 431 791 1,541 Net Income 1,211 1,339 1,282 1,408 1,819 2,073 2,107 2,370 5,240 8,369

Y-o-Y Growth (%) 59.9 66.6 56.1 52.4 50.1 54.8 64.3 68.4 58.5 59.7 Operating Expenses 737 780 852 836 952 974 989 1,014 3,204 3,929 Provisions -19 -8 20 107 72 88 87 163 100 410 Profit before tax 493 568 411 464 795 1,012 1,031 1,193 1,936 4,030

Y-o-Y Growth (%) 891.5 247.3 91.6 71.3 61.2 78.2 151.1 156.9 177.1 108.2 Tax Provisions 0 0 0 59 183 233 236 275 59 927 Net Profit 493 568 411 405 611 779 795 918 1,877 3,103

Y-o-Y Growth (%) 891.5 247.3 91.6 49.5 24.0 37.2 93.6 126.5 168.6 65.4 E: MOSL Estimates


SKS Microfinance

CMP: INR526 TP: INR619 Buy SKSM’s GLP is likely to grow 66% YoY to INR68b. Growth in average

ticket size would be keenly watched, as increase in ticket size is driving growth since RBI increased the limit to INR30,000.

Net income is likely to grow 70% YoY to INR3.4b. NIM would be a key monitorable, as SKSM has reduced lending

rates to be the lowest cost MFI. Asset quality is expected to remain stable; in 3QFY16, GNPAs were

0.1% and NNPAs were at 0.1%. We factor in provisions of INR163m against INR87m in 3QFY16. Net profit is likely to grow 126% YoY to INR918m. The stock trades at 3.7x FY17E and 3x FY18E BV. Maintain Buy.

Key issues to watch for Management commentary on growth trends, impact of RBI’s

move of increasing ticket size for borrowers and growth guidance. Disbursement growth and movement in CI ratio. Movement in borrowing costs and margins. Asset quality trends.

Bloomberg SKSM IN Equity Shares (m) 126.3 M. Cap. (INR b)/(USD b) 66/1

52-Week Range (INR) 590/369 1,6,12 Rel Perf. (%) -2/31/24


Y/E MARCH 2015 2016E 2017E 2018E

NII 3,542 5,774 7,629 10,445 PPP 2,036 4,440 5,912 8,071

PAT 1,877 3,103 4,329 5,786 EPS (INR) 14.9 24.6 34.3 45.8 BV/Sh (INR) 82.9 107.4 141.7 176.8 RoAon AUM

5.2 5.1 5.2 5.5

RoE (%) 24.9 25.8 27.5 28.8 Valuations

P/E (x) 35.4 21.4 15.3 11.5 P/BV (x) 6.3 4.9 3.7 3.0

April 2016 152

March 2016 Results Preview | Sector: Healthcare

Key product launches to boost profits Sun Pharma, Aurobindo and Alkem remain our top picks

Boosted by gGleevec and Glumetza sales, and a favorable base, our Healthcareuniverse is likely to witness significant YoY jump in sales, EBITDA and PAT for thequarter ended March 2016. We expect our Healthcare universe to report 15.4%sales growth, 54.6% EBITDA growth and 46% PAT growth.

With the help of FTF launches, Sun Pharma and Lupin would report one oflargest quarterly PAT in 4QFY16. Aurobindo is also likely to continue its growthstory in the US, with number of product launches over the last 12 months.However, other large cap players – Cipla and Dr Reddy’s might see a mutedquarter due to delayed approvals for the US market. In midcaps, Glenmark islikely to be impacted by currency issues in emerging markets, whereas Cadila isstill combating the warning letter to one of its biggest plants. However, Torrentand Alembic would benefit from gAbilify sales though on smaller scalecompared previous quarters. Alkem would report seasonally weak numbers.

Among MNCs, Sanofi is likely to report better numbers whereas GSK wouldreport subdued numbers due to ongoing supply issues.

Overall, though the pace of approvals has picked up at the US FDA end, severallarge cap Indian pharma companies were confronted with warning letters duringthe quarter. Few companies that have not faced regulatory issues have beenreceiving good number of product approvals from US FDA (like Aurobindo,Glenmark and Alkem). In the domestic market, despite FDC ban and new NLEMlist, Indian companies are likely to report good organic growth in 4Q.

We maintain our top picks – Sun Pharma, Aurobindo and Alkem.

Exhibit 1: Expected quarterly performance summary Sector CMP Sales (INR m) EBDITA (INR m) Net Profit (INR m)

(INR) Reco Mar-16 Var %YoY



YoY Var % QoQ

Healthcare Alembic Pharma 589 Neutral 8,062 60.7 -12.5 2,606 167.2 -32.1 1,787 154.0 -33.6 Alkem Lab 1,337 Buy 12,142 33.2 -4.7 1,997 51.0 -15.2 1,243 -4.3 -34.2 Aurobindo Pharma 751 Buy 36,184 14.4 3.5 8,570 30.6 4.1 5,340 32.7 1.7 Biocon 527 Sell 8,708 4.9 5.1 1,968 10.7 9.4 1,055 -47.6 2.4 Cadila Health 318 Buy 25,154 9.9 3.6 5,719 7.6 -1.2 3,921 2.2 2.3 Cipla 504 Neutral 32,961 6.6 6.1 5,997 18.1 32.2 3,356 29.2 -2.2 Divis Labs 1,010 Neutral 9,162 12.5 7.6 3,441 10.0 7.1 2,641 15.4 7.1 Dr Reddy’ s Labs 2,996 Neutral 39,050 0.9 -1.6 9,476 15.2 -5.6 5,656 9.0 -2.4 Glenmark Pharma 787 Neutral 17,860 1.8 3.6 3,426 10.4 1.4 1,691 1493.0 -0.5 GSK Pharma 3,699 Neutral 6,871 12.0 -5.7 1,031 -13.3 0.4 969 -10.9 16.4 IPCA Labs. 557 Neutral 7,240 15.3 5.8 1,110 229.6 24.3 477 LP 98.3 Lupin 1,463 Buy 37,829 22.9 6.4 11,049 40.0 26.0 7,785 42.3 46.9 Sanofi India 4,198 Buy 5,500 12.5 -3.3 1,122 35.4 -0.6 632 30.6 -10.2 Sun Pharma 801 Buy 77,553 26.0 9.5 25,113 181.4 15.8 17,572 97.9 24.0 Torrent Pharma 1,395 Buy 14,388 24.7 -6.5 4,386 170.7 -28.5 3,182 144.7 -34.1 Sector Aggregate 338,664 15.4 3.4 87,009 54.6 5.1 57,305 46.4 5.8

Company Name

Alembic Pharmaceuticals

Aurobindo Pharma

Biocon

Cadila Healthcare

Cipla

Divi's Laboratories

Dr Reddy’ s Labs

Glenmark Pharma

GSK Pharma

Ipca Laboratories

Lupin

Ranbaxy Labs

Sanofi India

Sun Pharma

Torrent Pharmaceuticals

Healthcare

Kumar Saurabh ([email protected]); +91 22 3982 5584 Amey Chalke ([email protected]); +91 22 3982 5423

April 2016 153


Exhibit 1: 4QFY16 aggregates Healthcare Universe YoY Growth (%) EBITDA Margin (%) PAT margin (%)

Sales EBITDA Adj PAT Mar-16 Mar-15 Chg. (BPS) Mar-16 Mar-15 Chg. (BPS)

MNC Pharma 12.2 6.7 1.9 16.6 14.3 228 11.8 10.1 171 Big 5 Generics 15.7 71.4 55.3 25.4 26.9 -146 16.2 11.4 483

CRAMS 12.5 10.0 15.4 37.7 36.0 167 28.9 28.0 96 Second Tier generics 15.5 41.7 42.3 25.1 19.7 548 16.6 11.9 473 Sector Aggregate 15.4 54.6 46.4 25.3 23.9 135 16.5 12.0 457

Key developments

1. Sun Pharma launched generic Gleevec in US On February 1, 2016, Sun Pharma launched generic Gleevec under 180 day’s

exclusivity in the US. Gleevec was a USD3b market for the innovator beforegeneric entry. Sun Pharma has already captured 50%+ market share in gGleevec,which should add USD150m to the quarter’s sales. We believe Gleevec is likelyto be a big drug for the company post exclusivity period due to limited filers.

Earlier, Sun Pharma had transferred this product from Halol to US-based facilityto avoid delay in getting approval due to warning letter.

2. Lupin launched generic Glumetza in US In February 2016, Lupin launched generic Glumetza in the US under 180 days

exclusivity. At present, Lupin is the sole generic player in the market. In July2015, the innovator had taken 7-8x price hike, taking overall market size to~USD1b. However, we believe, substantial part of price hike would go in rebatesand discounts, reducing the overall market to USD450m-500m.

Lupin has acquired close to 45% market share in Glumetza and is likely togenerate USD30m-35m sales during the quarter.

3. Lupin witnessed surprise inspection at Goa facility In March 2016, US FDA had made a surprise visit to Lupin’s Goa plant. This was

its second visit to Lupin’s Goa plant during the last 12 months. During this visit,US FDA issued nine 483 observations and there were two repeated observationsfrom the earlier inspection.

Goa is an important plant for Lupin and contributes close to 50% of US sales.Many of its future products are also filed from the same facility. Successfulresolution of this facility is essential for Lupin, going ahead.

In February 2016, another facility based in Mandideep had gone through US FDAinspection. It received four 483 observations (two for formulations plant andtwo for API plant). The company has clarified that these observations are minorin nature and should be resolved within the stipulated time.

April 2016 154


INR depreciation to benefit export oriented companies On an average, the INR has depreciated by 8% from INR62/USD in 4QFY15 to

INR67/USD in 4QFY16. Yet, on a sequential quarter basis, INR/USD has been flat. So, there is unlikely to

be significant MTM impact for companies with large forex debt and derivativesexposure.

However, the emerging market currency crisis would affect companies like DrReddy’s, Torrent Pharma and Glenmark. Similarly, negative impact of EURdepreciation would be visible in companies like Aurobindo, Torrent Pharma andCipla, which have higher proportion of EUR-denominated sales.

Exhibit 2: Currency movement (USD/INR)


Exhibit 3: Currency movement (EUR/INR)




Exhibit 5: Relative performance—1Yr (%)


64

67

60

62

64

66

68

70

Jul-1

5

Jul-1

5

Aug-

15

Sep-

15

Sep-

15

Oct

-15

Nov

-15

Nov

-15

Dec-

15

Jan-

16

Jan-

16

Feb-

16

Mar

-16

Mar

-16

USD/INR

71

76

64 66 68 70 72 74 76 78

Jul-1

5

Jul-1

5

Aug-

15

Sep-

15

Sep-

15

Oct

-15

Nov

-15

Nov

-15

Dec-

15

Jan-

16

Jan-

16

Feb-

16

Mar

-16

Mar

-16

EUR/INR

86

90

94

98

102

Dec-

15

Jan-

16

Feb-

16

Mar

-16

Sensex Index MOSL Healthcare Index

80

90

100

110

120

Mar

-15

Apr-

15

May

-15

Jun-

15

Jul-1

5

Aug-

15

Sep-

15

Oct

-15

Nov

-15

Dec-

15

Jan-

16

Feb-

16

Mar

-16

Sensex Index MOSL Healthcare Index

April 2016 155



(INR) FY16E FY17E FY18E FY16E FY17E FY18E FY16E FY17E FY18E FY16E FY17E FY18E Healthcare Alembic Pharma 589 Neutral 42.7 29.5 35.6 13.8 19.9 16.6 10.0 13.8 11.0 40.0 31.1 29.5 Alkem Lab 1,337 Buy 62.3 70.7 87.5 21.5 18.9 15.3 17.7 14.9 11.5 22.4 21.2 22.1 Aurobindo Pharma 751 Buy 33.3 43.3 54.8 22.5 17.3 13.7 14.7 11.9 9.4 32.1 30.9 29.4 Biocon 527 Sell 22.0 26.2 30.2 24.0 20.1 17.4 12.8 10.7 9.0 11.8 12.8 13.4 Cadila Health 318 Buy 15.3 14.6 21.1 20.8 21.9 15.1 14.8 14.1 10.0 31.4 25.2 29.5 Cipla 504 Neutral 21.9 24.2 32.5 23.0 20.9 15.5 14.8 12.0 9.2 14.3 13.9 16.0 Divis Labs 1,010 Neutral 39.1 46.8 57.3 25.8 21.6 17.6 19.4 15.6 12.6 27.4 28.2 29.4 Dr Reddy’ s Labs 2,996 Neutral 146.3 154.3 183.3 20.5 19.4 16.3 12.4 12.0 9.8 18.8 17.1 17.3 Glenmark Pharma 787 Neutral 29.9 38.9 47.7 26.3 20.2 16.5 15.5 10.0 8.6 18.0 18.2 17.7 Granules India 118 Buy 5.4 6.9 9.8 21.6 17.2 12.0 10.4 8.3 6.4 22.8 21.3 23.3 GSK Pharma 3,699 Neutral 44.7 62.1 77.4 82.8 59.6 47.8 70.4 45.9 35.9 24.2 37.4 47.6 IPCA Labs. 557 Neutral 10.9 26.0 40.1 51.0 21.4 13.9 20.9 12.2 8.8 6.1 13.5 18.1 Lupin 1,463 Buy 49.7 69.5 82.0 29.5 21.0 17.8 23.2 15.4 12.9 22.8 25.9 24.6 Sanofi India 4,198 Buy 103.2 143.6 174.0 40.7 29.2 24.1 19.8 16.4 13.5 14.2 18.0 19.5 Sun Pharma 801 Buy 19.9 28.9 39.0 40.3 27.7 20.5 22.1 15.7 12.9 17.5 21.7 24.0 Torrent Pharma 1,395 Buy 60.7 71.5 89.8 23.0 19.5 15.5 9.2 14.2 11.5 32.4 28.5 29.7 Sector Aggregate 29.0 23.0 17.9 17.5 14.3 11.5 19.2 20.2 21.3


April 2016 156


Quarterly performance (INR million) Y/E March FY15 FY16 FY15 FY16E (Consolidated) 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Sales 4,943 5,463 5,110 5,018 5,833 10,088 9,210 8,066 20,527 33,178 YoY Change (%) 15.7 12.3 5.2 8.1 18.0 84.7 80.3 60.7 10.2 61.6 Total Expenditure 3,983 4,388 4,093 4,043 4,813 6,327 5,371 5,459 16,500 21,971 EBITDA 960 1,074 1,017 975 1,021 3,760 3,839 2,607 4,026 11,208 Margins (%) 19.4 19.7 19.9 19.4 17.5 37.3 41.7 32.3 19.6 33.8 Depreciation 107 108 119 110 129 133 217 189 444 667 Interest 6 10 -2 4 6 7 10 10 18 34 Other Income 2 1 1 23 0 1 28 4 26 33 PBT 849 957 900 885 886 3,621 3,640 2,412 3,591 10,540 Tax 203 184 193 183 188 735 951 624 764 2,498 Rate (%) 23.9 19.3 21.5 20.7 21.2 20.3 26.1 25.9 21.3 23.7 Min. Int. / Profit & Loss 0 0 0 -2 1 4 -1 1 -2 6 Reported PAT 647 773 707 702 698 2,882 2,690 1,787 2,829 8,036 Adj PAT 647 773 707 703 698 2,882 2,690 1,787 2,829 8,036 YoY Change (%) 38.7 25.3 7.2 14.7 7.9 273.0 280.7 154.2 20.1 184.1 Margins (%) 13.1 14.1 13.8 14.0 12.0 28.6 29.2 22.2 13.8 24.2

E: MOSL Estimates

Alembic Pharmaceuticals

CMP: INR589 TP: INR680 Neutral Alembic Pharma (ALPM) is likely to report 61% YoY growth in

overall sales, primarily driven by gAbilify launch in the US market. We expect USD30m sales from gAbilify in 4Q, resulting in 165% YoY growth in International Generics. Domestic Branded business is likely to report 11% YoY growth and API business is expected to grow 37% YoY.

Driven by gAbilify launch, EBITDA margins are likely to increase to 32% and EBITDA should grow 167% YoY.

We expect PAT to more than double to INR1.8b, assuming normalized tax of 21% (against 25% in 3QFY16).

We believe ALPM has a focused management team in place and has stepped into its next phase of high growth. The strong improvement in operational performance over the last few quarters, we believe, is an undertone of this transformation.

The business mix at ALPM is likely to improve further, with higher contribution from US generics and specialty therapies in India, while acute therapies would start recovering from this quarter.

The stock trades at 20.5x FY17E and 17x FY18E earnings. Maintain Buy.

Key issues to watch for Updates on newly filed products for US. Outlook for domestic formulations business.

Bloomberg ALPM IN



Financial snapshot (INR billion)

Y/E MARCH 2015 2016 2017E 2018E

Sales 20.5 33.2 32.8 39.4 EBITDA 4.0 11.2 7.9 9.7

NP 2.8 4.9 5.6 6.7 EPS (INR) 15.0 42.7 29.5 35.6 EPS Gr. (%) 20.0 184.4 -30.8 20.4


P/E (x) 40.3 14.2 20.5 17.0 P/BV (x) 12.9 7.2 5.7 4.5

EV/EBITDA (x) 28.8 10.2 14.2 11.3

April 2016 157



FY16 FY15 FY16E

(Consolidated) 1H 3Q 4Q 1Q 2Q 3Q 4QE Net Revenues 18,890 9,878 9,119

12,141 13,560 12,747 12,142 37,887 50,591

YoY Change (%) 29.0 33.0 33.5 EBITDA 1,838 1,711 1,322

2,033 2,545 2,354 1,997 5,445 8,955

Margins (%) 9.7 17.3 14.5 16.7 18.8 18.5 16.4 14.4 17.7 Depreciation 310 212 181

224 277 244 279 703 1,025

Net Other Income 480 181 339 162 334 161 138 999 794 PBT before EO Exp 2,008 1,679 1,480

1,971 2,602 2,270 1,856 5,741 8,724

EO Exp/(Inc) 0 0 0 0 0 0 574 0 PBT 2,008 1,679 1,480

1,971 2,602 2,270 1,856 5,167 8,724

Tax 297 64 181

122 91 345 576 542 1,134 Rate (%) 14.8 3.8 12.2 6.2 3.5 15.2 31.0 9.4 13.0 PAT (pre Minority Interest) 1,712 1,615 1,299

1,849 2,511 1,925 1,280 4,625 7,590

Minority Interest 0 0 0 28 45 35 37 0 145 Reported PAT 1,712 1,615 1,299

1,821 2,466 1,889 1,243 4,625 7,445

YoY Change (%) 17.0 61.0 E: MOSL Estimates

Alkem Labs

CMP: INR1,337 TP: 1,750 Neutral Revenues are likely to grow 33% YoY driven by acquisition of

Indchemie and catchet. However, last quarter is seasonally weak quarter for Alkem due to heavy dependence of acute business and early closure of books leading to 5% sequential decline in top line.

EBITDA is also likely to increase to 51% with margin improvement of 190bps during this quarter.

We expect PAT to remain flat due to higher taxes in 4QFY16 versus 12% in 4QFY15.

ALKEM's US business is likely to more than double from ~USD106m in FY15 to ~USD225m by FY18, driven by a strong pipeline of ~45 pending ANDAs. Lower base effect will continue to have a positive impact as US will still contribute ~22% to sales- much lower than peers at ~40% and above.

We argue for a multiple re-rating given the leadership position in domestic market, superior earnings growth profile (>30% EPS CAGR over FY15-18E), improving return ratios (ROICs to improve to ~22% by FY18E from 16% in FY15) and net cash balance sheet.

The stock trades at 19x FY17E and 15x FY18E earnings. Maintain Buy.

Key issues to watch out Updates on ramp up in US sales Pick up in chronic business

Bloomberg ALKEM IN


M. Cap. (INR b)/(USD b) 160/2 52-Week Range (INR) 1,589/1,232 1,6,12 Rel Perf. (%) 1 /-/-


Y/E MARCH 2015 2016 2017E 2018E

Sales 37.9 50.6 60.1 71.7 EBITDA 5.4 9.0 10.4 13.1

NP 5.1 7.4 8.4 10.5 EPS (INR) 38.7 62.3 70.7 87.5 EPS Gr. (%) 6.2 61.0 13.5 23.9


P/E (x) 34.6 21.5 18.9 15.3 P/BV (x) 5.3 4.4 3.7 3.1

EV/EBITDA (x) 30.3 18.2 15.4 11.8

April 2016 158


Quarterly performance (INR million) Y/E March FY15

FY16 FY15 FY16E

(Consolidated) 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Sales 29,111 28,812 31,662 31,621

33,204 33,335 34,955 36,184 120,432 136,828

YoY Change (%) 69.7 50.5 47.9 35.7 14.1 15.7 10.4 14.4 49.6 13.6 Total Expenditure 22,529 22,440 25,540 25,060 25,957 25,579 26,725 27,614 95,569 105,875 EBITDA 6,582 6,372 6,122 6,561

7,247 7,756 8,230 8,570 24,863 30,953

Margins (%) 22.6 22.1 19.3 20.7 21.8 23.3 23.5 23.7 20.6 22.6 Depreciation 908 899 673 847

891 928 995 1,049 3,326 3,862

Interest 189 210 219 226

209 241 227 251 843 927 Other Income 108 273 359 67 291 117 69 124 1,581 1,450 PBT before EO expense 5,593 5,537 5,590 5,556

6,438 6,704 7,077 7,393 22,275 27,614

Extra-Ord expense -14 420 202 -12 256 579 -129 129 596 835 PBT 5,607 5,117 5,388 5,568

6,182 6,125 7,206 7,264 21,679 26,779

Tax 1,464 1,404 1,563 1,534

1,865 1,622 1,860 2,017 5,966 7,364 Rate (%) 26.1 27.4 29.0 27.6 30.2 26.5 25.8 27.8 27.5 27.5 Minority Interest -12 -10 -20 -5 -8 -10 -3 -28 -45 -48 Reported PAT 4,154 3,722 3,844 4,038 4,324 4,513 5,350 5,274 15,758 19,463 Adj PAT 4,132 4,017 3,968 4,025 4,496 4,929 5,251 5,340 16,194 20,068 YoY Change (%) 362.8 37.5 -4.3 -15.2

8.8 22.7 32.3 32.7 8.9 23.9

E: MOSL Estimates

Aurobindo Pharma

CMP: INR751 TP: INR1,100 Buy We expect Aurobindo (ARBP) to post 14% YoY growth in sales for

4QFY16 to INR34.9b, aided by sustained traction in the US. US business (accounts for 58% of formulations sales) should grow

26% YoY on the back of 30+ ANDA launches in the US over the last 12 months. However, Europe and RoW region sales would remain flat due to currency depreciation and low growth Europe business. API sales would continue to grow at ~5% YoY.

EBITDA margin is likely to expand 300bp YoY to 23.7%. EBITDA should grow 31% YoY to INR8.6b. We estimate reported PAT at INR5.3b against INR4b in 4QFY15.

We expect EU acquisition (23% of FY15 sales) to turn profitable by FY16-end (v/s breakeven now), driven by (a) backward integration (India manufacturing), (b) new launches from ARBP’s portfolio (high margin injectables, hospitals). Foray into US nutraceuticals (USD55b market by 2020) through Natrol acquisition (USD132m) broadens ARBP’s product offerings, with scope for margin expansion.

The stock trades at 15.4x FY17E and 12.2x FY18E EPS. Buy.

Key issues to watch for Clarity on fund raising plans. Outlook on US business (175+ pending approvals). Profitability of Actavis business in Europe.

Bloomberg ARBP IN




Y/E MARCH 2015 2016E 2017E 2018E

Sales 121.2 137.7 162.4 191.5 EBITDA 25.6 31.8 39.0 48.4

NP 15.8 19.5 25.3 32.0 EPS (INR) 27.0 33.3 43.3 54.8 EPS Gr. (%) 18.9 23.5 30.0 26.5


P/E (x) 24.7 20.0 15.4 12.2 P/BV (x) 7.5 5.6 4.2 3.1

EV/EBITDA (x) 16.5 13.2 10.6 8.3

April 2016 159



FY16 FY15 FY16E

(Consolidated) 1Q 2Q 3Q 4Q

1Q 2Q 3Q 4QE Net Sales 7,186 7,495 7,610 8,302 8,250 8,282 8,282 8,708 30,592 33,541 YoY Change (%) 3.4 2.1 8.7 14.8 14.8 10.5 8.8 4.9 7.3 9.6 Total Expenditure 5,513 5,847 6,093 6,525

6,210 6,396 6,483 6,740 23,917 25,829

EBITDA 1,673 1,648 1,517 1,778 2,040 1,886 1,799 1,968 6,675 7,712 Margins (%) 23.3 22.0 19.9 21.4 24.7 22.8 21.7 22.6 21.8 23.0 Depreciation 519 542 563 585

580 596 621 735 2,210 2,532

Interest 6 50 48 0

50 29 15 10 89 104 Other Income 234 231 179 1,292

320 3,406 289 345 1,887 4,360

PBT 1,382 1,287 1,085 2,484 1,730 4,667 1,452 1,568 6,263 9,436 Tax 309 218 112 318

370 1,378 241 325 957 2,314

Rate (%) 22.4 16.9 10.3 12.8 21.4 29.5 16.6 20.7 15.3 24.5 Minority Interest 43 49 66 153

100 230 181 189 310 700

PAT 1,030 1,020 908 2,014 1,260 3,059 1,030 1,055 4,996 6,422 YoY Change (%) 10.2 -0.3 -13.5 78.2

22.3 199.9 13.4 -47.6 21.9 28.5

Margins (%) 14.3 13.6 11.9 24.3 15.3 36.9 12.4 12.1 16.3 19.1 E: MOSL Estimates; Note - Quarterly nos will not add up to full-year nos due to restatements

Biocon

CMP: INR527 TP: INR460 Sell Biocon’s revenue is likely to grow 5% YoY to INR8.8b, driven by 19%

growth in CRO division, -4% decline in Biopharma sales and licensing income at INR30m.

EBITDA is expected to grow 11% YoY to INR2b, with EBITDA margin at 22.6%. Biocon has been facing issues on two fronts, which would continue to affect its performance: (1) capacity constraints in insulins, and (2) adverse business environment in the Middle East.

We expect PAT to decline to INR1.1b on higher base of 4QFY15 (includes extraordinary income of INR1b).

Key growth drivers for FY16/17 would be (1) commercialization and ramp-up of the insulin plant in Malaysia, (2) ramp-up in CRO division, (3) contribution from API/immunosuppressant supplies to partners, and (4) branded formulations in India. However, capex for long term initiatives is likely to exert pressure on profitability and return ratios in the near term.

The stock trades at 17.1x FY17E and 14.8x FY17E EPS. Maintain Sell.

Key issues to watch for Update on Middle East problems. Progress on product registration for Rh-Insulin/Glargine in

Europe/US and other out-licensing opportunities.

Bloomberg BIOS IN




Y/E MARCH 2015 2016E 2017E 2018E

Sales 30.6 33.5 39.5 46.3 EBITDA 6.7 7.7 9.5 11.3

Net Profit 4.0 4.4 5.2 6.0 Adj. EPS (INR) 20.1 22.0 26.2 30.2 EPS Gr. (%) -2.8 9.2 19.2 15.5

BV/Sh. (INR) 163.5 186.2 204.7 226.1 RoE (%) 12.3 11.8 12.8 13.4 RoCE (%) 12.5 16.6 12.7 14.0


P/E (x) 22.3 20.4 17.1 14.8


April 2016 160



(INR million) Y/E March FY15 FY16 FY15 FY16E (Consolidated) 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Revenues 20,501 21,080 21,895 22,882

24,340 24,394 24,284 25,154 86,514 98,077


5,217 5,847 5,787 5,719 17,841 22,474


737 733 770 723 2,873 2,962

Interest 194 161 137 121

112 106 109 126 613 452 Other Income 83 164 103 203 804 311 148 456 554 1,719 PBT after EO Income 2,996 3,453 3,749 4,280

5,332 5,588 5,137 5,326 14,477 21,288

Tax 524 571 791 708

1,723 1,580 1,149 1,276 2,594 5,728 Rate (%) 17.5 16.5 21.1 16.5 32.3 28.3 22.4 24.0 17.9 26.9 Min. Int/Adj on Consol 69 101 139 68 75 99 92 129 377 395 Reported PAT 2,402 2,781 2,819 3,504

3,534 3,909 3,896 3,921 11,506 15,165

Adj PAT 2,363 2,791 2,817 3,838

3,426 3,716 3,833 3,921 11,793 15,165 YoY Change (%) 19.8 93.6 39.7 53.4

45.0 33.2 36.1 2.2 54.8 28.6


Cadila Healthcare

CMP: INR318 TP: INR380 Buy Cadila Healthcare's (CDH) 4QFY16 revenue is likely to grow 10% YoY

to INR25.1b, driven by 7% YoY growth in the US formulations business. While the export formulations business should grow 8% YoY to INR13.2b, the domestic formulations business is likely to grow 11% YoY to INR7.5b.

We expect EBITDA to grow 8% YoY to INR5.7b and EBITDA margin to decline 50bp due to adverse business mix. Adjusted PAT is likely to remain flat at INR5.7b despite higher other income of INR456m.

Post IPCA’s withdrawal, CDH had also undertaken substantial price hike in HCQ tablets in the US and has captured 30% market share in the product. Though IPCA has re-launched HCQ tablets in the US, it has been unsuccessful in regaining its market share. We expect CDH to maintain 3Q numbers in 4Q as well for the US.

We believe CDH has made investments in the right areas and would start benefiting over the next few years. We expect ramp-up in the US to continue in FY16, with more launches. We estimate 22% EPS CAGR for FY15-18, with better return ratios over the next two years.

The stock trades at 21.4x FY17E and 14.8x FY18E EPS. Maintain Buy.

Key issues to watch for US FDA resolution for Moraiya facility. Outlook for recovery in domestic formulations. Progress on improvement in balance sheet.

Bloomberg CDH IN




Y/E MARCH 2015 2016E 2017E 2018E

Sales 86.5 98.1 111.7 133.7 EBITDA 17.8 22.5 23.5 32.2

Net Profit 11.9 15.7 14.9 21.6 Adj. EPS (INR) 11.7 15.3 14.6 21.1 EPS Gr. (%) 45.4 31.3 -4.9 44.7

BV/Sh. (INR) 41.5 52.7 63.0 79.7 RoE (%) 30.8 31.4 25.2 29.5 RoCE (%) 24.9 29.8 26.7 33.3


P/E (x) 26.7 20.3 21.4 14.8


April 2016 161



(INR million)

Y/E March FY15

FY16 FY15 FY16E 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Revenues 27,200 27,673 27,655 30,927

38,528 34,524 31,066 32,961 113,454 137,038

YoY Change (%) 10.4 10.1 7.2 22.7 41.6 24.8 12.3 6.6 12.3 20.8 EBITDA 5,418 5,584 5,538 5,077

10,390 7,894 4,537 5,997 21,617 28,778

Margins (%) 19.9 20.2 20.0 16.4 27.0 22.9 14.6 18.2 19.1 21.0 Depreciation 1,254 1,220 1,216 1,357

1,288 1,340 1,375 1,374 5,047 5,376

Interest 333 469 447 434

514 503 230 435 1,683 1,681 Other Income 404 233 407 612 489 259 793 459 1,656 2,000 PBT after EO expense 4,235 4,128 4,282 3,898

9,078 6,311 3,726 4,646 16,543 23,721

Tax 1,019 1,007 944 1,030

2,503 1,812 120 1,140 4,000 5,574 Rate (%) 24.1 24.4 22.1 26.4 27.6 28.7 3.2 24.5 24.2 23.5 Minority Interest 269.9 134.4 58.9 271.3

68.8 186.1 174.2 150.9 734.5 580.0

Reported PAT 2,946 2,987 3,279 2,597 6,506 4,312 3,432 3,356 11,808 17,567 YoY Change (%) -38.0 -16.6 15.3 -0.4

120.9 44.4 4.7 29.2 -16.6 48.8

Margins (%) 10.8 10.8 11.9 8.4 16.9 12.5 11.0 10.2 10.4 12.8 E: MOSL Estimates; Note: Quarterly numbers 2QFY14 onwards and annual numbers are consolidated

Cipla

CMP: INR504 TP: INR600 Neutral We expect Cipla’s sales to grow 7% YoY to INR32.9b on higher base

of 4QFY15 (includes Nexium).

The export formulations business is expected to grow 0.9% YoY to INR17.1b. The domestic business should grow 14% YoY to INR12.4b, driven by traction in Respiratory business. Export API sales would grow 0.9% to INR2.1b.

EBITDA is likely to increase 18% YoY to INR6b, with margin expanding 180bp YoY to 18.2% over a low base of last year. We expect reported PAT to grow 29% YoY to INR3.4b.

We believe earnings acceleration and potential upgrades on successful EU inhaler portfolio monetization would help Cipla sustain its current multiples (24x one-year forward earnings).

The stock trades at 20.9x FY17E and 15.5x FY18E earnings. Maintain Neutral.

Key issues to watch for Launch of combination inhaler in the UK market (USD450m

market size). Margin improvement in Medpro operations (acquired in July

2014). Sustained strong growth in domestic formulations (42% of sales).

Bloomberg CIPLA IN




Y/E MARCH 2015 2016E 2017E 2018E

Sales 113.5 137.0 163.5 195.2 EBITDA 21.6 28.8 35.3 44.3


BV/Sh. (INR) 134.3 153.0 174.2 203.8 RoE (%) 10.5 14.3 13.9 16.0 RoCE (%) 13.7 15.1 15.5 18.3


P/E (x) 35.9 23.0 20.9 15.5


April 2016 162


Quarterly performance (INR million)

Y/E March FY15 FY16 FY15 FY16E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Op Revenue 6,398 8,298 7,881 8,147

8,069 9,619 8,518 9,162 31,032 35,367


2,980 3,736 3,212 3,441 11,535 13,369


289 301 299 341 1,360 1,229

Interest 4 4 5 6

2 3 2 3 19 11 Other Income 156 189 230 149 358 321 163 282 545 1,124 PBT 2,142 2,927 2,777 2,825

3,047 3,752 3,074 3,379 10,702 13,252

Tax 463 630 572 536

615 795 608 738 2,206 2,757 Rate (%) 21.6 21.5 20.6 19.0 20.2 21.2 19.8 21.8 20.6 21.0 Reported PAT 1,679 2,296 2,206 2,289

2,432 2,957 2,466 2,641 8,497 10,475

Adj PAT 1,679 2,296 2,206 2,289

2,432 2,957 2,466 2,641 8,497 10,475 YoY Change (%) -3.9 12.1 0.7 18.6

44.8 28.8 11.8 15.4 15.4 23.3

Margins (%) 26.2 27.7 28.0 28.1 30.1 30.7 28.9 28.8 27.4 29.6

E: MOSL Estimates

Divi's Laboratories

CMP: INR1,010 TP: INR1,175 Neutral Divi's Laboratories (DIVI) is likely to register 13% YoY growth in

4QFY16 revenue to INR9.2b, primarily on increased capacity utilization at new DSN SEZ units. Growth would be driven by generic business.

EBITDA is likely to grow 10% YoY to INR3.4b, with margins at 38% due to favorable business mix.

We expect PAT to increase 15% YoY to INR2.6b, in line with EBITDA growth during the quarter.

Management expects FY16 revenue to grow 15-20%, with EBITDA margin sustaining at 37-38%. Revenue growth would be aided by increase in capacity utilization at DSN SEZ (from 75% to 80%).

We estimate 19-21% revenue, EBITDA and PAT CAGR over FY15-18, with EBITDA margin at 38-38.5%. We expect the balance sheet to continue to strengthen further and expect dividend payout to increase from 37% in FY15 to 45% in FY16.


Key issues to watch for Ramp-up at Vizag SEZ. Outlook for growth beyond FY16.

Bloomberg DIVI IN


M. Cap. (INR b)/(USD b) 268/4 52-Week Range (INR) 1,242/838 1,6,12 Rel Perf. (%) -1/-4/20


Y/E MARCH 2015 2016E 2017E 2018E

Sales 31.0 35.4 43.3 53.2 EBITDA 11.5 13.4 16.6 20.5

Net Profit 8.5 10.4 12.4 15.2 Adj. EPS (INR) 32.1 39.1 46.8 57.3 EPS Gr. (%) 10.1 21.9 19.8 22.3

BV/Sh. (INR) 131.7 153.2 178.9 210.4 RoE (%) 26.3 27.4 28.2 29.4 RoCE (%) 32.9 34.8 36.1 38.2


P/E (x) 30.2 24.8 20.7 16.9


April 2016 163


Quarterly performance - IFRS (INR million) Y/E March FY15 FY16 FY15 FY16E 1Q 2Q 3Q 4Q

1Q 2Q 3Q 4QE

Gross Sales 35,175 35,879 38,431 38,704 37,578 39,890 39,679 39,050 148,189 156,196 YoY Change (%) 23.6 6.9 8.8 11.2 6.8 11.2 3.2 0.9 12.1 5.4 Total Expenditure 27,013 27,722 29,504 30,478

27,723 28,486 29,646 29,574 114,717 115,429

EBITDA 8,162 8,157 8,927 8,226 9,855 11,404 10,033 9,476 33,472 40,767 Margins (%) 23.2 22.7 23.2 21.3 26.2 28.6 25.3 24.3 22.6 26.1 Amortization 1,872 1,957 2,041 2,232

2,268 2,466 2,577 2,529 8,103 9,840

Other Income 719 737 1,401 -64

390 160 124 -54 2,793 620 Profit before Tax 7,009 6,937 8,286 5,930 7,977 9,098 7,580 6,893 28,163 31,546 Tax 1,505 1,196 2,541 742

1,721 1,879 1,788 1,237 5,984 6,625

Rate (%) 21.5 17.2 30.7 12.5 21.6 20.7 23.6 18.0 21.2 21.0 Reported PAT 5,504 5,741 5,745 5,188

6,256 7,219 5,792 5,656 22,179 24,921

Adjusted PAT 5,504 5,741 5,745 5,188

6,256 7,219 5,792 5,656 22,179 24,921 YoY Change (%) 68.2 -16.8 1.0 7.4

13.7 25.7 0.8 9.0 4.7 12.4

Margins (%) 15.6 16.0 14.9 13.4 16.6 18.1 14.6 14.5 15.0 16.0 E - MOSL Estimates

Dr Reddy’s Labs

CMP: INR2,996 TP:INR3,300 Neutral We expect Dr Reddy’s (DRRD) to report subdued numbers in

4QFY16, with flat revenue and 9% YoY growth in PAT to INR5.7b. US business is likely to grow 11% YoY to INR19b. Russia and CIS

region sales would be flat due to currency devolution. However, India business would report decent growth at 14% YoY.

EBITDA is expected to grow 15% YoY to INR9.4b and EBITDA margin should improve 300bp YoY to 24.3% with better business mix.

PAT is likely to grow 9% YoY, with taxes at 18% in 4QFY16. Though near-term earnings growth is muted due to recent warning

letters, we believe DRRD is focusing on the right areas for growth in the US.


Key issues to watch for Successful resolution of warning letters for Srikakulam, Duvvada

and Miryarguda API plants. Potential competition in key US products like Vidaza, Dacogen,

etc. FY16 outlook for both generics and PSAI businesses.

Bloomberg DRRD IN


M. Cap. (INR b)/(USD b) 511/8 52-Week Range (INR) 4,383/2,750 1,6,12 Rel Perf. (%) -9/-21/-6


Y/E MARCH 2015 2016E 2017E 2018E

Sales 148.2 156.2 172.2 198.3 EBITDA 33.5 40.8 41.0 49.2


BV/Sh. (INR) 653 776 905 1,061 RoE (%) 19.9 18.8 17.1 17.3 RoCE (%) 16.9 19.0 16.8 18.3


P/E (x) 22.0 19.6 18.5 15.6


April 2016 164



Y/E March FY15

FY16 FY15 FY16E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Revenues (Core) 14,778 16,715 16,921 17,538

16,258 18,440 17,245 18,653 65,953 72,087

YoY Change (%) 19.4 14.3 5.7 4.3 10.0 10.3 1.9 6.4 10.2 9.3 EBITDA 3,332 3,260 3,625 3,104

3,377 3,713 3,379 3,674 13,321 15,488


697 634 559 595 2,600 2,485

Interest 481 510 513 397

419 426 469 452 1,902 1,765 Other Income 126 101 -947 -287 273 314 340 223 564 1,150 PBT before EO Expense 2,326 2,202 2,570 1,776

2,533 2,967 2,692 2,850 8,874 12,387

Extra-Ord Expense 0 0 1,060 1,871 0 0 0 0 1,871 0 PBT after EO Expense 2,326 2,202 1,510 -95

2,533 2,967 2,692 2,850 5,943 12,387

Tax 477 552 363 -201

751 962 992 1,054 1,190 3,759 Rate (%) 20.5 25.1 24.0 211.5 29.6 32.4 36.9 37.0 20.0 30.3 Reported PAT (incl one-offs) 1,849 1,650 1,148 106

1,782 2,004 1,699 1,796 4,753 8,628

Minority Interest 1 -1 0 0 0 0 0 0 -1 0 Reported PAT (excl MI) 1,848 1,651 1,148 106

1,782 2,004 1,699 1,796 4,753 8,628

YoY Change (%) 43.7 7.0 -46.9 -75.4

-3.6 21.4 48.1 1,591.9 -12.3 81.5 Margins (%) 12.5 9.9 6.8 0.6 11.0 10.9 9.9 9.6 7.2 12.0

E: MOSL Estimates

Glenmark Pharma

CMP: INR787 TP:INR880 Neutral We expect Glenmark Pharmaceuticals (GNP) to report flat revenue

at INR17.9b, impacted by poor performance in Latin markets. The India branded business is likely to grow 14% YoY, while the US

generic segment is expected to grow 16-17% YoY, aided by 10% INR depreciation. However, LatAm business should see 43% sales decline, driven by dwindling currencies in this region. We do not factor any out-licensing income in our 4Q assumptions.

EBITDA is likely to grow 10% YoY to INR3.4b, with margin expansion of 150bp to 19.2%. Adjusted PAT is expected to decline 14% YoY to INR1.7b.

We expect GNP to gradually reduce its net debt over FY16-18, resulting in an improvement in D/E from 1.1x in FY14 to 0.4x by FY17. We also expect gradual improvement in return ratios.

The stock trades at 18.1x FY17E and 14.8x FY18E EPS. Maintain Neutral.

Key issues to watch for New ANDA filings in complex category. Update on free cash generation and debt repayment schedule. Progress of NCE/NBE pipeline and out-licensing prospects.

Bloomberg GNP IN


M. Cap. (INR b)/(USD b) 214/3 52-Week Range (INR) 1,262/672 1,6,12 Rel Perf. (%) -4/-18/6


Y/E MAR 2015 2016E 2017E 2018E

Sales 66.0 72.1 87.8 103.7 EBITDA 11.8 15.6 23.3 26.2


BV/Sh. (INR) 110.6 167.6 215.7 272.6 RoE (%) 15.8 18.5 18.5 17.9 RoCE (%) 14.4 19.1 26.5 25.8


P/E (x) 41.1 23.2 18.1 14.8


April 2016 165



(INR million)


(Standalone) 1Q 2Q 3Q 4Q 5Q

1Q 2Q 3Q 4QE Net Sales 5,999 6,550 7,390 6,462 6,135

6,219 6,919 7,287 6,871 32,725 27,296

YoY Change (%) -5.1 2.8 19.1 2.5 2.3

-5.1 -6.4 12.8 12.0 N/A N/A Total Expenditure 5,023 5,456 5,818 5,362 4,945

5,183 5,712 6,260 5,840 26,715 22,983

EBITDA 977 1,094 1,572 1,100 1,189

1,036 1,207 1,027 1,031 6,009 4,312 Margins (%) 16.3 16.7 21.3 17.0 19.4

16.7 17.4 14.1 15.0 18.4 15.8

Depreciation 43 50 55 59 48

49 53 78 60 254 242 Other Income 549 447 435 425 473

463 395 334 475 2,320 1,646

PBT before EO Expense 1,483 1,490 1,952 1,466 1,615

1,450 1,549 1,282 1,446 8,076 5,716 Tax 517 508 665 552 528

493 510 450 477 2,793 1,932

Rate (%) 34.9 34.1 34.1 37.7 32.7

34.0 32.9 35.1 33.0 34.6 33.8 Adjusted PAT 966 983 1,287 914 1,087

957 1,039 832 969 5,283 3,784

YoY Change (%) -43.4 3.4 26.5 -15.8 12.5

-2.7 -19.3 -8.9 -10.9 0.9 -28.4 Margins (%) 16.1 15.0 17.4 14.1 17.7

15.4 15.0 11.4 14.1 16.1 13.9

Extra-Ord Expense 0 0 0 461 0

24 78 33 0 -519 135 Reported PAT 966 983 1,287 453 1,087

933 961 799 969 5,802 3,648

E: MOSL Estimates

GSK Pharma

CMP: INR3,699 TP: INR3,130 Neutral In 4QFY16, we expect GlaxoSmithKline Pharmaceuticals (GLXO) to

report 12% YoY increase in revenue to INR6.8b. EBITDA is likely to decline 13% YoY to INR1b, with EBITDA margin

contracting 440bp YoY to 15%. Growth and profitability is expected to get better, with price

increase and volume ramp-up in key NLEM products. We expect adjusted PAT to decline 10% YoY at INR1b, supported by

higher other income. GLXO deserves premium valuations due to strong parentage (giving

access to large product pipeline), brand-building ability and likely positioning in post patent era. It is one of the few companies with the ability to drive reasonable growth without any major capital requirement, leading to high RoCE of 45-50%.

However, the current valuations of 50.9x FY17E and 40.8x FY18E EPS adequately reflect the recovery, in our view. Maintain Neutral.

Key issues to watch for New product introduction in FY17. Market performance of products impacted by DPCO 2013.

Bloomberg GLXO IN




Y/E MAR 2015* 2016E 2017E 2018E

Sales 32.7 27.3 31.0 35.5 EBITDA 6.0 4.3 6.7 8.6

Net Profit 5.3 3.8 5.3 6.6 Adj. EPS (INR) 62.4 44.7 62.1 77.4 EPS Gr. (%) 11.1 -28.4 38.9 24.7

BV/Sh. (INR) 215.9 184.3 165.8 162.7 RoE (%) 23.1 24.2 37.4 47.6 RoCE (%) 35.3 36.6 54.9 69.8


P/E (x) 50.7 70.7 50.9 40.8


*15 months

April 2016 166



FY16 FY15 FY16E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Revenues (Core) 9,360 7,806 7,407 6,279

7,580 7,492 6,841 7,240 31,418 29,153

YoY Change (%) 16.2 -7.8 -11.1 -16.2 -19.0 -4.0 -7.6 15.3 -4.3 -7.2 EBITDA 2,309 1,348 1,211 337

822 892 892 1,110 5,291 3,716


421 437 448 474 1,796 1,779


55 70 91 83 284 299 Other Income 86 -7 64 143 41 53 50 56 358 200 PBT before EO Expense 1,958 888 797 -179

388 438 403 610 3,569 1,838

PBT after EO Expense 1,958 888 686 46

271 199 394 610 3,569 1,722 Tax 504 275 270 -32

82 82 162 133 1,019 460

Rate (%) 25.7 30.9 33.9 18.0 21.3 18.8 40.3 21.8 28.6 25.0 Reported PAT 1,455 613 415 78

189 117 232 477 2,550 1,262

Adj PAT 1,455 613 527 -147

305 356 241 477 2,550 1,379 YoY Change (%) 102.7 -52.6 -62.1 N/A

-79.0 -42.0 -54.3 N/A -46.7 -45.9

Margins (%) 15.5 7.9 7.1 -2.3 4.0 4.7 3.5 6.6 8.1 4.7

E: MOSL Estimates

Ipca Laboratories

CMP: INR557 TP: INR680 Neutral We expect Ipca Laboratories' (IPCA) to witness 15% YoY growth in

overall revenue on resumption of US supplies. Domestic formulations would grow 14% YoY, while total API sales would witness 18-19% YoY growth.

EBITDA is likely to triple on small base of last year, with margin improving 10pp to 15.3% in 4QFY16. However, profitability would still be lower due to negative operating leverage (US import alerts and weak traction in institutional business).

We expect reported PAT to improve to INR477m, with taxes at 22% in 4QFY16.

Import alert on all of its US FDA approved facilities and stoppage of US sales has led to a sharp stock correction in the last nine months. While we believe that the regulatory overhang would weigh on valuation multiples, growth in other businesses remains healthy. We expect IPCA to clock FY15-18E EPS CAGR of 27%, on the back of 11% revenue CAGR, improving EBITDA margin to 21%.

The stock trades at 23.1x FY17E and 15x FY18E EPS. Maintain Neutral.

Key issues to watch for Early resolution of FDA regulatory issues in the US. Outlook for institutional tender business after FY15. Impact of emerging market currency weakness.

Bloomberg IPCA IN




Y/E MARCH 2015 2016E 2017E 2018E

Sales 31.4 29.2 35.4 43.0 EBITDA 5.3 3.7 6.5 9.0

Net Profit 2.5 1.4 3.3 5.1 Adj. EPS (INR) 19.8 10.9 26.0 40.1 EPS Gr. (%) -47.7 -44.9 137.7 54.4

BV/Sh. (INR) 175.0 181.8 203.9 238.0 RoE (%) 12.0 6.1 13.5 18.1 RoCE (%) 14.2 6.9 13.7 18.4


P/E (x) 30.3 54.9 23.1 15.0


April 2016 167


Quarterly performance (INR million) Y/E March FY15 FY16 FY15 FY16E


31,502 33,213 35,558 37,829 127,700 138,228

YoY Change (%) 38.0 20.6 6.5 0.9 -5.7 4.7 11.9 22.9 15.2 8.2 EBITDA 11,148 8,325 8,829 7,894

8,166 6,721 8,772 11,049 36,196 34,833


1,007 1,068 1,114 1,494 4,347 4,683


24 102 92 184 98 401 Other Income 289 255 834 172 756 415 653 676 2,398 2,500 PBT 10,325 7,473 8,534 6,970

7,891 5,967 8,219 10,046 34,148 32,249

Tax 4,029 1,926 2,387 1,362

2,644 1,851 2,909 1,948 9,704 9,352 Rate (%) 39.0 25.8 28.0 19.5

33.5 31.0 35.4 19.4 28.4 29.0

EO Exp/(Inc) 0 -847 0 0

0 0 0 0 0 0 Minority Interest 49 94 133 137 -3 27 13 314 412 350 Recurring PAT 6,247 5,453 6,015 5,470

5,250 4,088 5,298 7,785 24,032 22,546

YoY Change (%) 107.5 34.3 26.3 -1.1

-16.0 -35.1 -11.9 42.3 38.4 -6.2 Margins (%) 18.7 19.9 18.9 17.8 16.7 12.3 14.9 20.6 18.8 16.3

E: MOSL estimates; Quarterly nos will not add up to full year nos due to restatement of past quarters

Lupin

CMP: INR1,463 TP: INR1,800 Buy We expect Lupin's (LPC) 4QFY16 revenue to grow 23% YoY to

INR37.9b, aided by buoyant performance in US generic segment (gGlumetza and gFortamet sales). India business would grow 22% YoY to INR8.1b, sustaining growth momentum of last year. Japan sales are expected to improve 18% YoY to INR3.4b.

EBITDA is estimated to improve 40% YoY to INR11b, with EBITDA margin at 29.2%.

Reported PAT would jump 42% YoY to INR7.7b, in line with EBITDA growth, with moderate tax rates (19% v/s 19.5% in 4QFY15).

Key growth drivers for FY16/17 would be strong product pipeline for the US, including higher contribution from oral contraceptives and launches in niche areas of ophthalmics and derma.

The stock trades at 25.9x FY17E and 22x FY18E EPS. Maintain Buy.

Key issues to watch for Outlook on future ANDA launches and Gavis integration. Revival in constant currency sales growth in I’rom. Outlook on inorganic growth initiatives.

Bloomberg LPC IN


52-Week Range (INR) 2,127/1,294 1,6,12 Rel Perf. (%) -19/-23/-17


Y/E MARCH 2015 2016E 2017E 2018E

Sales 123.9 132.9 163.0 187.9 EBITDA 32.4 29.5 43.4 49.8 Rep. PAT 24.0 22.5 31.6 36.9

Rep.EPS (INR) 53.7 50.4 70.6 82.3 Adj. PAT 24.0 22.3 31.2 36.9 Adj. EPS (INR) 53.5 49.7 69.5 82.0

EPS Gr. (%) 38.1 -7.1 40.0 18.0 BV/Sh. (INR) 197.4 238.2 298.0 369.5 RoE (%) 30.4 22.8 25.9 24.6



Div. Yield (%) 0.4 0.4 0.5 0.5

April 2016 168


Quarterly performance (INR million) Y/E December CY14

FY16 CY14 FY16E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 5QE Net Sales 4,449 5,058 5,149 5,119

4,889 5,497 5,858 5,687

5,500 19,775 27,431

YoY Change (%) 14.6 16.2 3.5 4.8 9.9 8.7 13.8 11.1 12.5 9.3 38.7 Total Expenditure 3,639 4,079 4,110 4,558 4,060 4,283 4,439 4,558 4,377 16,386 21,717 EBITDA 810 979 1,039 561

829 1,214 1,419 1,129

1,122 3,389 5,713

Margins (%) 18.2 19.4 20.2 11.0 17.0 22.1 24.2 19.9 20.4 17.1 20.8 Depreciation 240 240 240 246

259 284 290 296

295 966 1,424

Interest 2 2 0 1

1 1 1 1

1 5 5 Other Income 215 135 141 152 194 99 94 126 110 643 623 PBT before EO Items 783 872 940 466

763 1,028 1,222 958

936 3,061 4,907

Extra-Ord Expense 0 0 0 -666 -161 0 0 -677 0 -666 -838 PBT after EO Items 783 872 940 1,132

924 1,028 1,222 1,635

936 3,727 5,745

Tax 266 297 320 207

279 386 497 433

304 1,090 1,899 Effective tax Rate (%) 34.0 34.1 34.0 18.3 30.2 37.5 40.7 26.5 32.5 29.2 33.1

Reported PAT 517 575 620 925

645 642 725 1,202

632 2,637 3,846 Adj PAT 517 575 620 259

484 642 725 704

632 1,971 3,008

YoY Change (%) 16.4 12.3 -19.4 -68.7

-6.4 11.7 16.9 171.9

30.6 -22.8 52.6 Margins (%) 11.6 11.4 12.0 5.1 9.9 11.7 12.4 12.4 11.5 10.0 11.0 E: MOSL Estimates

Sanofi India

CMP: INR4,198 TP: INR4,700 Buy We expect Sanofi India's (SANL) revenue to grow 12.5% YoY in

5QFY16 to INR5.5b, affected by the performance of NLEM listed drugs.

EBITDA is likely to grow 35% YoY to INR1.1b. We expect PAT to increase by 31% YoY to INR632m, lower than EBITDA growth due to higher taxes at 32.5%.

SANL has reversed the price cut taken on the para 19 drugs and should see the impact of price hike going ahead.

We expect the earnings growth momentum to sustain over the next few years, led by strong revenue CAGR of 30% over CY15-17 and ~190bp margin expansion from the current levels.

The stock trades at 28.5x CY16E and 23.6x CY17E EPS. Maintain Buy.

Key issues to watch for Amortization of goodwill and brands acquired from Universal

Medicare. Clarity on nature of reversal of the recently-withdrawn NPPA

guidelines.

Bloomberg SANL IN




Y/E DEC 2014 2015 2016E 2017E

Sales 19.8 21.9 24.5 27.9 EBITDA 3.4 4.6 5.4 6.4


BV/Sh. (INR) 643.7 725.2 799.3 892.1 RoE (%) 13.3 14.2 18.0 19.5 RoCE (%) 19.9 22.6 25.2 27.5


P/E (x) 47.9 39.7 28.5 23.6


April 2016 169



(INR million)

Y/E March FY15

FY16 FY15 FY16E

(Consolidated) 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Revenues 63,412 80,394 69,295 61,571

67,576 68,376 70,821 77,553 274,334 285,453

YoY Change (%) 82.1 91.8 61.7 52.3 6.6 -14.9 2.2 26.0 70.6 4.1 Total Expenditure 44,031 49,732 47,649 52,647 49,079 49,040 49,131 52,440 195,667 200,498 EBITDA 19,381 30,662 21,646 8,924

18,497 19,337 21,690 25,113 78,667 84,954


2,401 2,711 2,508 3,130 11,947 10,750

Net Other Income 330 -1,926 -2,262 2,589 -176 430 1,022 1,224 -313 2,500 PBT before EO Exp 17,357 26,045 17,100 5,894

15,920 17,055 20,205 23,207 66,407 76,704

EO Exp/(Inc) 2,378 0 0 0 6,852 0 0 0 2,378 6,852 PBT 14,979 26,045 17,100 5,894

9,068 17,055 20,205 23,207 64,029 69,853

Tax 2,063 2,794 10,290 -5,999

2,268 3,355 2,020 4,246 9,147 11,889 Rate (%) 11.9 10.7 60.2 -101.8 14.2 19.7 10.0 18.3 13.8 15.5 PAT (pre Minority Interest) 12,916 23,252 6,810 11,893

6,800 13,700 18,185 18,961 54,882 57,964

Minority Interest 871 2,749 2,856 3,012 2,007 2,633 4,019 1,389 9,488 10,049 Reported PAT 12,046 20,502 3,954 8,881

4,793 11,067 14,166 17,572 45,394 47,915

YoY Change (%) -194.4 50.5 -74.2 -44.0

-60.2 -46.0 258.3 97.9 44.5 5.6 Margins (%) 19.0 25.5 5.7 14.4 7.1 16.2 20.0 22.7 16.5 16.8

E: MOSL Estimates

Sun Pharma

CMP: INR801 TP: INR975 Buy Sun Pharmaceuticals (SUNP) is likely to register 26% YoY growth in

revenue on the back of gGleevec sales under 180 days exclusivity. India business is likely to grow 14% YoY to INR17.9b and US

business is likely to report 37% jump in revenue, with USD150m of gGleevc sales during the quarter.

We expect margins to improve to 32.5% in 4QFY16 from 15% in 4QFY15 (which included one-off cost related to Ranbaxy merger). Overall EBITDA would double to INR25.1b over a low base.

We expect total reported PAT at INR17.6b, compared to INR8.9b in 4QFY15 and INR14b in 3QFY16.

We believe that the combined entity’s operational outperformance in the near term would be EPS dilutive. However, we expect to see synergy of USD300m from FY18. Prospects of consolidating Ranbaxy’s business and subsequent turnaround remain appealing and would remain important growth drivers in the longer run.


Key issues to watch for Early resolution of Halol warning letter. Turnaround of Ranbaxy’s business. Outlook on competitive landscape for Taro’s products.

Bloomberg SUNP IN


M. Cap. (INR b)/(USD b) 1,926/29 52-Week Range (INR) 1,201/706 1,6,12 Rel Perf. (%) -8/-4/-19


Y/E MARCH 2015 2016E 2017E 2018E

Sales 272.9 283.0 336.0 361.6

EBITDA 77.2 82.5 111.8 128.9 Rep. PAT 47.4 47.8 79.5 93.8 Rep.EPS (INR) 19.7 19.9 33.1 39.0

Adj. PAT 47.4 47.8 69.6 93.8 Core EPS (INR) 19.7 19.9 28.9 39.0 EPS Gr. (%) 50.8 0.9 66.3 18.0

BV/Sh. (INR) 106.5 120.3 146.3 178.3 RoE (%) 21.5 17.5 21.7 24.0 RoCE (%) 25.7 21.8 30.0 30.8


P/E (x) 44.2 43.8 30.1 22.3


April 2016 170



Y/E March FY15

FY16 FY15 FY16E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Net Revenues 11,140 12,170 11,680 11,540

19,470 16,910 15,390 14,388 46,530 66,143

YoY Change (%) 14.6 25.2 15.1 -5.8 74.8 38.9 31.8 24.7 11.2 42.2

EBITDA 3,450 2,730 2,400 1,620

9,090 7,140 6,130 4,386 10,202 26,730

Margins (%) 31.0 22.4 20.5 14.0 46.7 42.2 39.8 30.5 21.9 40.4


590 610 610 613 1,907 2,423

Interest 240 540 500 470

580 480 420 482 1,752 1,962

Other Income 490 720 650 1,000 670 740 510 790 2,856 2,710

PBT before EO Expense 3,490 2,350 2,010 1,550

8,590 6,790 5,610 4,082 9,398 25,056

Extra-Ord Expense 0 0 0 0 0 -530 0 0 0 -530

PBT after EO Expense 3,490 2,350 2,010 1,550

8,590 7,320 5,610 4,082 9,398 25,586

Tax 930 370 340 250

4,100 1,640 780 900 1,888 7,420

Rate (%) 26.6 15.7 16.9 16.1 47.7 24.2 13.9 22.1 20.1 29.6

Reported PAT 2,560 1,980 1,670 1,300

4,490 5,680 4,830 3,182 7,510 18,166

YoY Change (%) 71.8 75.2 26.1 20.2

75.4 186.9 189.2 144.7 49.5 141.9

Margins (%) 23.0 16.3 14.3 11.3 23.1 33.6 31.4 22.1 16.1 27.5

E: MOSL Estimates;

Torrent Pharmaceuticals

CMP: INR1,395 TP: INR1,800 Buy We expect Torrent Pharmaceuticals (TRP) to post 25% increase in

4QFY16 reported sales to INR14.4b. Contribution from gAbilify is likely to come down to USD25-27m sales, while India business is expected to witness 17% YoY, growth with successful integration of Elder’s portfolio.

Reported EBITDA is likely to double to INR4.4b, with EBITDA margin expanding 16pp YoY, primarily on account of inclusion of gAbilify sales in 4QFY16 numbers.

We expect reported PAT to increase 144% YoY to INR3.2b, in line with operational performance.

We expect 39% CAGR in core earnings over FY15-18, among the highest in the industry. The stock trades at 18.6x FY17E and 14.8x FY18E EPS, which is at 20% premium over its last five-year average valuations. Maintain Buy.

Key issues to watch for Sales from gAbilify launch in US. Contribution of Elder Pharma portfolio and growth strategy. Performance of Brazilian operations amid market pressure.

Bloomberg TRP IN


M. Cap. (INR b)/(USD b) 236/4 52-Week Range (INR) 1,720/11,33 1,6,12 Rel Perf. (%) 4/-4/25


Y/E MARCH 2015 2016E 2017E 2018E

Sales 46.5 66.1 62.2 73.2 EBITDA 10.2 26.7 16.8 20.1


BV/Sh. (INR) 147.2 227.5 274.0 332.2 RoE (%) 25.7 32.4 28.5 29.7 RoCE (%) 27.7 50.3 28.8 32.2


P/E (x) 39.8 21.9 18.6 14.8


April 2016 171

Jay Gandhi (Jay. [email protected]); +91 22 3089 6693

Ad growth recovering; expect pick-up in 1HFY17 Earnings/profitability to improve for broadcasters/pay TV operators; mixed for print Expect 11% ad revenue growth: We expect ad revenue for our Media universe to grow ~11% YoY v/s 7-14% in the preceding four quarters. ZEE is likely to continue its strong ad performance for the third consecutive quarter and would be the only media company to report more than 20%+ ad growth on the back of strong performance by recent channel launches – &TV and Zindagi – along with its flagship Zee TV. Continued strong ad spends by FMCG and e-commerce, and renewed spending by sectors such as Auto and Telecom (including mobile handsets) would aid ad growth. Our industry interactions indicate that ad growth, which was in recovery mode for most of FY16, should see a pick-up in 1HFY17. Expect aggregate Media universe earnings to improve significantly YoY: Aggregate Media sector earnings are likely to grow significantly (up 30% YoY), primarily led by broadcasters – ZEE and Sun TV – and DTH player, Dish TV, which turned around last fiscal. Among the print companies, DB Corp’s continued focus on yields should translate into an earnings decline of ~6%, while Jagran’s earnings are likely to grow ~29% YoY. HMVL’s earnings are likely to remain largely flat YoY. HT Media’s profitability would be affected by higher interest outgo related to new radio licenses. We expect ZEE’s earnings to grow 24% YoY. Sun TV’s earnings are likely to grow 13% YoY. Pay TV operators (HATH and SCNL) would report improved profitability QoQ, driven by operating leverage and higher activation revenue. Expect monetization to improve for Pay TV operators, increased activity toward Phase III seeding: We expect continued improvement in monetization for Pay TV operators, driven by increased MSO share in digital cable revenue—the key to improve economics of MSOs as well as pricing for broadcasters and DTH operators. However, with phase I/II monetization remaining sub-par, we expect MSOs to be more cautious in phase III markets. Phase III digitization should gain steam by 1QFY17. We expect DTH subscriber additions to improve QoQ for Dish TV. We model 0.76m gross additions for Dish TV against an estimated 0.7m in 3QFY16. Digitization upside, ad growth revival key themes: Subscriber-level ARPU increases in phase I/II markets and phase III digitization are key growth triggers. MSOs are likely to witness profitability improvement, as they continue to drive monetization efforts in phase I/II. With expected improvement in GDP growth and raw material price declines leading to gross margin expansion for advertisers (FMCG, Autos, etc) and renewed ad spends by Telecom, we expect ad growth acceleration to continue. Broadcasters and print companies would be the beneficiaries.

Company name

D B Corp

Dish TV India

Hathway Cable & Datacom

HT Media

Jagran Prakashan

PVR

Sun TV

Zee Entertainment


Media

April 2016 172

Exhibit 1: Media: Quarterly financials

4QFY14 1QFY15 2QFY15 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16E YoY (%) QoQ (%) Advertisement Revenue (INR b) 20.5 21.6 21.2 24.2 22.0 23.9 24.2 27.2 24.5 11 -10 ZEEL 5.8 6.2 6.3 7.4 6.7 7.8 8.4 9.4 8.3 23 -12 Sun TV 3.1 3.1 2.9 3.2 3.3 3.5 3.3 3.3 3.5 5 7 Dish TV NM NM NM NM NM NM NM NM NM NM NM DB Corp 3.2 3.5 3.3 3.9 3.2 3.1 3.1 3.91 3.2 -1 -19 Jagran Prakashan 2.9 3.1 3.1 3.4 2.9 3.3 3.2 3.7 3.2 9 -13 Hathway cable and Datacom NM NM NM NM NM NM NM NM NM NM NM HT Media 4.2 4.2 4.2 4.7 4.4 4.4 4.5 5.1 4.7 7 -8 HMVL 1.3 1.6 1.4 1.5 1.5 1.7 1.7 1.8 1.7 13 -8 Subscription Revenue (INR b) ZEEL 4.6 4.4 4.2 4.5 5.1 4.6 4.8 5.2 5.1 -1 -3 Sun TV 2.0 2.1 2.1 2.3 2.3 2.3 2.3 2.4 2.5 12 4 Dish TV 5.6 5.9 6.2 6.6 6.8 6.8 6.9 7.1 7.5 10 5 DB Corp 0.8 0.9 0.9 1.0 1.0 1.0 1.1 1.1 1.1 15 -1 Jagran Prakashan 0.9 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 5 1 Hathway Cable and Datacom 1.1 1.1 1.1 1.0 1.2 1.1 1.1 1.1 1.2 -4 7 HT Media 0.7 0.7 0.7 0.7 0.7 0.7 0.8 0.8 0.8 6 -2 HMVL 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 7 0 Total Revenue (INR b) ZEEL 11.6 10.9 11.2 13.6 13.5 13.4 13.8 16.0 14.5 8 -9 Sun TV 5.2 6.3 5.1 5.5 5.5 6.9 5.7 5.7 6.1 10.9 6 Dish TV 6.4 6.4 6.7 7.1 7.5 7.4 7.5 7.7 8.1 7 5 DB Corp 4.5 4.9 4.8 5.5 4.9 4.7 4.8 5.9 5.1 4 -14 Jagran Prakashan 4.2 4.4 4.4 4.7 4.2 4.8 5.1 5.8 5.2 24 -9 Hathway cable and Datacom 2.9 2.5 2.6 2.4 2.7 2.6 2.7 3.0 3.3 21 9 HT Media 5.4 5.5 5.6 6.1 5.8 5.9 6.0 6.8 6.2 8 -9 HMVL 1.8 2.1 2.0 2.1 2.0 2.2 2.3 2.4 2.3 11 -6 EBITDA (INR b) ZEEL 3.1 3.1 3.2 3.5 2.7 3.1 3.5 4.3 3.5 30 -18 Sun TV 4.0 3.7 4.0 4.3 4.2 4.1 4.3 4.4 4.7 12 7 Dish TV 1.3 1.6 1.6 1.9 2.2 2.4 2.6 2.7 2.9 31 10 DB Corp 1.0 1.3 1.2 1.8 1.2 1.2 1.1 1.87 1.1 -4 -39 Jagran Prakashan 0.8 1.1 1.1 1.3 1.0 1.3 1.4 1.7 1.3 26 -23 Hathway cable and Datacom 0.4 0.4 0.4 0.2 0.3 0.3 0.3 0.5 0.7 118 36 HT Media 0.8 0.6 0.7 0.9 0.5 0.6 0.6 1.2 0.8 71 -31 HMVL 0.3 0.4 0.4 0.4 0.4 0.5 0.5 0.6 0.5 8 -20 EBITDA Margin (%) ZEEL 26.9 28.5 28.7 25.9 20.1 23.2 25.6 27.0 24.3 419bps -268bps Sun TV 76.9 58.0 77.8 77.5 77.2 59.2 76.1 76.7 77.6 44bps 89bps Dish TV 20.2 24.5 24.1 26.8 29.4 32.1 33.9 34.4 36.0 661bps 159bps DB Corp 23.0 27.5 25.7 33.3 24.6 25.7 23.6 31.9 22.6 -201bps -929bps Jagran Prakashan 18.8 24.3 24.4 28.2 24.8 28.0 28.0 29.9 25.4 59bps -448bps Hathway cable and Datacom 13.9 17.5 15.2 10.3 11.5 12.4 12.5 16.6 20.7 919bps 410bps HT Media 13.9 11.3 12.8 14.2 8.4 9.7 10.4 17.4 13.3 490bps -415bps HMVL 18.2 20.4 19.5 19.4 22.0 24.4 22.9 25.0 21.3 -72bps -369bps Adj. PAT (INR b) ZEEL 2.18 2.11 2.28 3.09 2.31 2.44 2.81 2.75 2.87 24 4 Sun TV 1.98 1.66 1.54 2.14 2.03 1.97 2.18 2.16 2.30 13 7 Dish TV -0.33 -0.16 -0.15 -0.03 0.35 0.54 0.87 0.68 0.76 118 11 DB Corp 0.61 0.79 0.68 1.05 0.64 0.66 0.60 1.07 0.60 -6 -44 Jagran Prakashan 0.30 0.55 0.57 0.66 0.49 0.78 0.71 0.93 0.64 29 -32 Hathway cable and Datacom -0.49 -0.01 -0.39 -0.58 -0.77 -0.44 -0.49 -0.33 -0.28 NM NM HT Media 0.35 0.33 0.44 0.67 0.39 0.25 0.36 0.69 0.35 -10 -49 HMVL 0.27 0.34 0.31 0.37 0.39 0.42 0.45 0.47 0.40 2 -15


March 2016 Results Preview | Sector: Media

April 2016 173

Exhibit 2: 4QFY16 ad revenue growth (YoY, %)

Exhibit 3: 4QFY16 subscription/circulation growth (YoY, %)

Exhibit 4: Media universe quarterly PAT (INR b)

Exhibit 5: Newsprint prices moderating


23

13

9 7

5

-1

ZEEL HMVL Jagran HT Media Sun TV DB Corp

15 12

10

6 5

-1

DB Corp Sun TV Dish TV HT Media JagranPrakashan

ZEEL

4.6 5.8

5.0 5.9

4.9 5.6 5.3

7.4

5.8 6.6

7.5 8.4 7.6

4QFY

13

1QFY

14

2QFY

14

3QFY

14

4QFY

14

1QFY

15

2QFY

15

3QFY

15

4QFY

15

1QFY

16

2QFY

16

3QFY

16

4QFY

16E

200

350

500

650

800

15,000

22,000

29,000

36,000

43,000

Mar

-08

Jun-

08Se

p-08

Dec-

08M

ar-0

9Ju

n-09

Sep-

09De

c-09

Mar

-10

Jun-

10Se

p-10

Dec-

10M

ar-1

1Ju

n-11

Sep-

11De

c-11

Mar

-12

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

Newsprint price - INR (RHS) Newsprint price - USD


April 2016 174

Exhibit 2: Expected quarterly performance summary (INR m) Sector Sales (INR m) EBDITA (INR m) Net Profit (INR m)




YoY Var % QoQ

Media D B Corp 305 Buy 5,057 4.1 -13.7 1,100 -7.9 -41.1 573 -10.5 -46.4Dish TV 84 Buy 8,093 7.2 4.9 2,914 31.4 9.8 763 118.2 11.3 HT Media 76 Neutral 6,209 7.6 -8.8 824 70.6 -30.6 352 -10.4 -48.8Hathway Cable 38 Buy 3,267 21.0 8.7 675 117.9 35.7 -278 Loss Loss Jagran Prakashan 158 Buy 5,222 23.5 -9.4 1,325 26.5 -23.0 635 29.0 -31.9PVR 740 Buy 3,714 24.0 -25.8 336 212.4 -60.6 -123 Loss PL Siti Cable 35 Buy 3,910 52.7 5.7 1,325 1309.3 5.9 652 LP 67.0 Sun TV 359 Not Rated 6,085 10.9 6.0 4,722 11.6 7.2 2,297 13.1 6.5 Zee Entertainment 384 Buy 14,504 7.7 -9.1 3,523 30.1 -18.1 2,871 24.4 4.4 Sector Aggregate 56,062 13.0 -5.9 16,744 35.1 -10.6 7,741 54.2 -10.4

Source: MOSL

Exhibit 3: Relative performance-3m (%)


Exhibit 4: Relative performance-1Yr (%)


Exhibit 5: Comparative valuations Sector / Companies CMP Reco. EPS (INR) PE (x) EV/EBIDTA (x) RoE (%)

(INR) FY16E FY17E FY18E FY16E FY17E FY18E FY16E FY17E FY18E FY16E FY17E FY18E Media D B Corp 305 Buy 15.7 18.9 21.5 19.5 16.1 14.2 10.2 8.5 7.5 21.3 23.3 23.8 Den Networks 90 Neutral -3.4 -1.5 9.0 -26.6 -59.4 10.0 11.2 8.6 3.4 -3.3 -1.5 8.4Dish TV 84 Buy 2.7 4.8 5.8 31.4 17.7 14.6 9.1 6.9 5.1 NA NA 77.9 Hathway Cable 38 Buy -0.7 1.8 4.7 -57.2 21.6 8.0 9.8 5.8 3.6 -3.9 10.0 21.7Hindustan Media 247 Buy 23.6 26.1 29.2 10.4 9.5 8.5 5.3 4.0 2.9 21.0 19.0 17.7 HT Media 76 Neutral 7.2 6.2 7.6 10.7 12.4 10.1 2.9 2.1 1.1 7.5 6.0 6.8 Jagran Prakashan 158 Buy 9.7 11.0 12.2 16.4 14.4 13.0 9.2 8.0 7.1 23.9 22.7 21.7 PVR 740 Buy 25.2 32.0 45.1 29.4 23.1 16.4 12.9 9.5 7.7 18.4 16.0 19.1 Siti Cable 35 Buy 0.5 2.0 3.9 64.3 17.3 8.9 8.6 5.9 3.5 7.7 16.6 25.0 Sun TV 359 Not Rated 21.8 25.7 30.2 16.5 14.0 11.9 7.3 6.1 5.2 23.6 25.5 27.4 Zee Entertainment 384 Buy 11.3 15.6 20.8 34.0 24.7 18.5 23.7 16.9 12.4 28.0 31.5 32.9 Sector Aggregate 26.5 19.0 14.0 11.6 8.9 6.6 17.8 21.1 23.6

Source: MOSL

72

80

88

96

104

Dec-

15

Jan-

16

Feb-

16

Mar

-16

Sensex Index MOSL Media Index

70

82

94

106

118M

ar-1

5

Apr-

15

May

-15

Jun-

15

Jul-1

5

Aug-

15

Sep-

15

Oct

-15

Nov

-15

Dec-

15

Jan-

16

Feb-

16

Mar

-16

Sensex Index MOSL Media Index


April 2016 175

Quarterly Performance (Consolidated) (INR million) Y/E March FY15 FY16 FY15 FY16E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Sales 4,892 4,802 5,546 4,856 4,734 4,780 5,859 5,060 20,133 20,433 YoY (%) 8.9 9.6 7.0 6.9 -3.2 -0.5 5.6 4.2 8.3 1.5 Operating Expenses 3,546 3,567 3,699 3,661 3,515 3,654 3,991 3,917 14,474 15,077 EBITDA 1,346 1,235 1,847 1,195 1,218 1,127 1,868 1,143 5,659 5,357 YoY (%) 1.3 14.7 19.1 14.2 -9.5 -8.7 1.2 -4.3 13.1 -5.3 EBITDA margin (%) 27.5 25.7 33.3 24.6 25.7 23.6 31.9 22.6 28.1 26.2Depreciation 204 208 223 246 208 215 233 264 881 920 Interest 16 15 32 14 21 27 19 20 76 88 Other Income 95 36 29 97 68 53 37 70 257 228 PBT 1,221 1,048 1,621 1,032 1,057 938 1,654 929 4,959 4,578 Tax 430 367 569 392 393 337 585 328 1,759 1,644 Effective Tax Rate (%) 35.2 35.0 35.1 38.0 37.2 35.9 35.4 35.4 35.5 35.9 PAT 791 681 1,051 640 665 601 1,068 600 3,200 2,933 Minority Interest 0 0 0 0 0 0 0 0 0 0 Adj PAT 791 681 1,051 640 665 601 1,068 600 3,200 2,933 YoY (%) 4.0 13.2 11.3 4.9 -16.0 -11.8 1.6 -6.2 9.7 -8.3Revenue break-up Ad revenue (print) 3,465 3,319 3,934 3,191 3,107 3,079 3,912 3,162 13,909 13,260 Circulation revenue 885 915 969 985 1022 1057 1141 1134 3,754 4,354 Radio 207 228 257 268 215 240 323 302 960 1,080 Others 335 323 377 396 375 387 461 449 1,454 1,672 Total revenue 4,892 4,802 5,546 4,856 4,734 4,780 5,859 5,060 20,133 20,433

E: MOSL Estimates


D B Corp

CMP: INR305 TP: INR370 Buy We expect another dismal quarter of ad performance, as ad

volumes remain depressed. The impact on business due to recentpricing renegotiations is likely to be behind by 1HFY17.

We expect print ad revenue to decline 1% YoY to INR3.16b. Circulation revenue would grow 15% YoY to INR1.13b. Aggregate revenue is likely to grow 4% YoY to INR5.06b. Despite benign raw material costs, EBITDA margin is likely to

contract, as ad growth remains subdued. We expect EBITDA marginto decline 200bp YoY to 22.6%.

Start-up loss related to the Bihar footprint expansion is likely tocontinue; we expect this to be at 3Q levels.

Net profit is likely to decline 6% YoY to INR0.6b. The stock trades at 15.8x FY17E and 13.9x FY18E earnings. Buy.

Key things to watch for YoY ad growth (we expect -1%). EBITDA margin (we expect 21%).

Bloomberg DBCL IN


M. Cap. (INR b)/(USD b) 56/1 52-Week Range (INR) 394/287 1,6,12 Rel Perf. (%) -5/1/-5


Y/E MARCH 2015 2016E 2017E 2018E

Net Sales 20.1 20.4 23.2 25.9 EBITDA 5.7 5.4 6.2 6.9 Adj. Net Profit 3.2 2.9 3.5 4.0 Adj. EPS (INR) 17.4 16.0 19.3 21.9 Adj. EPS Gr. (%) 9.6 -8.4 20.7 13.6 BV/Sh (INR) 70.2 77.3 86.0 95.9 RoE (%) 26.3 21.7 23.6 24.1 RoCE (%) 22.6 19.2 21.2 21.8 Div. Payout (%) 53.9 55.0 55.0 55.0 Valuations P/E (x) 17.5 19.1 15.8 13.9 P/BV (x) 4.3 3.9 3.5 3.2 EV/EBITDA (x) 9.8 10.1 8.4 7.4 Div. Yield (%) 2.6 2.4 2.9 3.3

April 2016 176


1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Sales 6,407 6,724 7,139 7,547 7,367 7,524 7,715 8,093 27,816 30,699 YoY Change (%) 10.8 13.5 14.4 18.5 15.0 11.9 8.1 7.2 14.7 10.4 Operating expenses 4,836 5,101 5,227 5,328 4,998 4,974 5,060 5,179 20,462 20,211 EBITDA 1,571 1,623 1,912 2,219 2,368 2,550 2,655 2,914 7,354 10,488 YoY Change (%) 29.1 9.7 31.6 72.1 50.8 57.1 38.8 31.4 33.4 42.6 EBITDA margin (%) 24.5 24.1 26.8 29.4 32.1 33.9 34.4 36.0 26.4 34.2 Depreciation 1,453 1,519 1,616 1,550 1,598 1,330 1,463 1,801 6,138 6,192 Interest 395 425 479 455 480 548 549 437 1,754 2,013 Other Income 116 170 154 137 252 197 42 86 547 578 Adjusted net profit -160 -151 -29 350 542 870 686 763 10 2,861 Net Subs (m) 11.7 12.1 12.5 12.9 13.3 13.7 14.0 14.5 12.9 14.4 ARPU (INR/month) 170 172 177 179 173 171 172 174 174 173 E: MOSL Estimates


Dish TV India

CMP: INR84 TP: INR120 Buy We expect DITV’s revenue to grow 7% YoY and 5% QoQ to

INR8.09b.

Subscription revenue is likely to grow 5% QoQ to INR7.49b.

We expect gross additions of 0.76m and net additions of 0.5m.

EBITDA margin is expected to expand ~160bp QoQ to 36%.

We expect net profit of INR763m in 4QFY16.

The stock trades at an EV of 6.8x FY17E and 5.1x FY18E EBITDA.Buy.

Key things to watch for Quarterly gross additions (we expect 0.76m). ARPU (we expect INR174). EBITDA margin (we expect 36%).

Bloomberg DITV IN


M. Cap. (INR b)/(USD b) 90/1 52-Week Range (INR) 122/65 1,6,12 Rel Perf. (%) 11/-15/11


Y/E March 2015 2016E 2017E 2018E

Net Sales 27.8 30.7 35.8 41.2 EBITDA 7.4 10.5 13.4 16.9 Adj. NP 0.0 2.9 5.1 6.2 Adj. EPS (INR) 0.0 2.7 4.8 5.8 Adj. EPS Gr.(%) NA NA 77.7 21.1 BV/Sh (INR) -2.9 -0.2 4.5 10.3 RoE (%) NA NA NA NA RoCE (%) 9.9 37.6 52.1 46.0 Div. Payout(%) NA NA NA NA Valuations P/E (x) NA 31 18 15 P/BV (x) NA NA NA NA EV/EBITDA (x) 13.5 9.1 6.8 5.1 EV/Sub (INR) 7,675 6,620 5,710 4,979

April 2016 177

Quarterly Performance (Standalone) (INR million)

Y/E March FY15 FY16 FY15 FY16E 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Sales 2,502 2,635 2,391 2,700 2,644 2,740 3,004 3,267 10,229 11,656 YoY Change (%) 7.6 19.6 1.9 -7.8 5.7 4.0 25.6 21.0 4.3 13.9 Operating expenses 2,064 2,234 2,146 2,391 2,317 2,399 2,507 2,592 8,834 9,815 EBITDA 439 401 246 310 327 342 498 675 1,395 1,841 YoY Change (%) -42.3 4.4 -33.1 -23.9 -25.5 -14.8 102.5 117.9 -27.3 31.9 EBITDA margin (%) 17.5 15.2 10.3 11.5 12.4 12.5 16.6 20.7 13.6 15.8 Depreciation 478 508 598 686 592 615 637 732 2,270 2,576 Interest 292 304 269 193 217 235 225 248 1,058 926 Other Income 21 22 51 46 40 26 28 26 139 120 PBT -310 -389 -570 -524 -443 -483 -336 -278 -1,793 -1,540Adjusted net profit -310 -389 -570 -524 -443 -483 -336 -278 -1,793 -1,540 YoY Change (%) NA NA NA NA NA NA NA NA 73.7 -14.1Forex and exceptional items -301 4 11 246 -4 6 -10 0 -40 -8Reported PAT -9 -393 -580 -770 -439 -489 -326 -278 -1,753 -1,533

E: MOSL Estimates


Hathway Cable

CMP: INR38 TP: INR65 Buy We expect standalone revenue to grow 9% QoQ to INR3.27b.

Cable subscription revenue is likely to grow 7% QoQ to INR1.16b.

EBITDA should grow 36% QoQ on overall basis to INR0.67b;however, on ex-activation basis, it would be flat QoQ at INR0.27b.EBITDA margin would expand 400bp QoQ to ~21%. On ex-activationbasis, EBITDA margin would be largely flat QoQ at 8%.

We expect net loss to reduce from INR0.33b in 3QFY16 to INR0.28bin 4QFY16.

The stock trades at attributable EV/EBITDA (ex-activation) of 10.8xFY17E and 5x FY18E. Maintain Buy.

Key things to watch for Cable subscription revenue growth (we expect 7% QoQ). EBITDA margin (we expect 21%). EBITDA margin ex-activation (we expect 8%).

Bloomberg HATH IN


M. Cap. (INR b)/(USD b) 32/0

52-Week Range (INR) 59/30

1,6,12 Rel Perf. (%) 4/10/-13


Y/E March 2015 2016 2017E 2018E

Net Sales 18.3 21.3 27.7 34.3 EBITDA 2.6 4.7 8.2 11.7 EBITDA # 1.7 2.5 5.3 10.6 Adj. NP -2.3 -0.6 1.5 3.9 Adj. EPS (INR) -2.9 -0.7 1.8 4.7 Adj. EPS Gr. (%) NA NA NA NA BV/Sh (INR) 18.3 16.7 18.9 24.8 RoE (%) -17.4 -3.9 10.0 21.7 RoCE (%) -3.4 1.3 11.5 21.9 Valuations P/E (x) -13.2 -57.2 21.6 8.0 EV/EBITDA (x)* 20.9 12.0 7.0 4.5 EV/EBITDA (x)*# 32.0 23.1 10.8 5.0 EV/Sub (INR)* 4,578 4,541 4,147 3,680

* Based on attributable EBITDA and subs post

minority stake; # (ex-activation)

April 2016 178


1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Revenue 5,464 5,609 6,055 5,769 5,872 6,016 6,811 6,209 22,897 24,907 YoY (%) 1.0 4.9 4.2 6.1 7.5 7.2 12.5 7.6 4.0 8.8 Operating expenses 4,844 4,888 5,193 5,286 5,303 5,389 5,625 5,385 20,212 21,702 EBITDA 620 721 862 483 568 627 1,186 824 2,685 3,205 YoY (%) -20.4 12.0 -9.1 -36.0 -8.3 -13.0 37.7 70.6 -14.1 19.4 EBITDA margin (%) 11.3 12.8 14.2 8.4 9.7 10.4 17.4 13.3 11.7 12.9 Depreciation 273 250 248 231 228 272 247 267 1,003 1,015 Interest 148 125 107 87 94 125 209 222 467 650 Other Income 395 339 444 498 281 456 271 272 1,676 1,280 Extra-ordinary exps 0 0 139 0 0 0 0 0 139 0 PBT 593 685 811 663 527 686 1,001 606 2,752 2,820 Tax 173 159 72 170 171 206 193 164 573 733 Effective Tax Rate (%) 29.1 23.2 8.9 25.6 32.4 30.0 19.2 27.1 20.8 26.0 PAT 421 526 739 493 356 480 809 442 2,178 2,087 Minority Interest 94 87 100 100 107 116 121 90 381 433 Reported PAT 327 439 640 393 249 364 688 352 1,798 1,653 Adj PAT 327 439 779 393 249 364 688 352 1,798 1,653 YoY (%) -31.2 111.5 15.7 12.9 -23.8 -17.0 -11.7 -10.4 5.5 -8.0Ad revenue growth (%) 3 9 4 5 5 6 8 7 3 9 -English -4 7 1 3 4 0 3 4 -1 6 -Hindi 17 12 11 10 7 18 19 13 13 14 Circulation revenue growth (%) 13 12 10 9 6 5 5 6 10 7 -English 3 13 9 1 1 0 1 2 7 1 -Hindi 17 11 11 12 8 8 6 7 11 9

E: MOSL Estimates


HT Media

CMP: INR76 TP: INR90 Neutral We expect HT Media to post revenue of INR6.21b, up 8% YoY.

Print ad revenue would grow 7% YoY to INR4.69b, primarily led by13% YoY growth in Hindi ad revenue (INR1.66b). English ad revenueis likely to grow 4% YoY to INR3.04b.

Radio ad revenue is likely to grow 20% YoY to INR302m.

We expect circulation revenue to increase 6% YoY to INR0.75b.

EBITDA margin is expected to improve by 490bp YoY to 13.3%.

Adjusted net profit would decline to INR0.35b, primarily led byhigher interest outgo related to new radio licenses.

The stock trades at 12.4x FY17E and 10.1x FY18E EPS. Neutral.

Key things to watch for YoY English ad growth (we expect 4% YoY growth). Hindi ad growth (we expect 13% YoY growth). EBITDA margin (we expect 13.3%).

Bloomberg HTML IN Equity Shares (m) 232.8



Y/E MARCH 2015 2016E 2017E 2018E

Net Sales 22.9 24.9 27.4 30.3 EBITDA 2.8 3.2 3.3 3.6 Adj. NP 1.8 1.7 1.4 1.7 Adj. EPS (INR) 8.7 7.2 6.2 7.6 Adj. EPS Gr. (%) 17.4 -17.4 -14.1 23.1BV/Sh (INR) 90.0 99.6 107.5 117.0 RoE (%) 10.1 7.5 6.0 6.8 RoCE (%) 10.7 8.7 7.7 8.6 Div. Payout (%) 4.9 4.3 4.3 4.3 Valuations P/E (x) 8.8 10.7 12.4 10.1 P/BV (x) 0.8 0.8 0.7 0.7 EV/EBITDA (x)* 3.3 4.1 3.4 2.2 Div. Yield (%) 0.5 0.4 0.3 0.4

* Proportionate

April 2016 179

Quarterly Performance (Consolidated) (INR million) Y/E March FY15 FY16 FY15 FY16E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Sales 4,403 4,363 4,705 4,227 4,812 5,064 5,764 5,222 17,698 20,862 YoY (%) 6.6 5.4 3.4 0.5 9.3 16.1 22.5 23.5 Operating expenses 3,333 3,300 3,380 3,179 3,463 3,649 4,043 3,897 13,192 15,051 EBITDA 1,070 1,062 1,325 1,048 1,349 1,416 1,721 1,325 4,506 5,811 YoY (%) 5.0 15.7 20.6 32.7 26.0 33.2 29.9 26.5 29.0 EBITDA margin (%) 24.3 24.4 28.2 24.8 28.0 28.0 29.9 25.4 25.5 27.9 Depreciation 238 245 266 287 231 287 284 309 1,035 1,111 Interest 84 73 84 133 127 81 172 239 374 618 Other Income 69 71 10 129 140 -6 64 156 279 353 Exceptional item -803 -1,018 -145 0 0 -803 -1,163PBT 818 815 986 1,560 2,149 1,186 1,329 934 4,178 5,598 Tax 267 249 323 263 348 327 396 299 1,102 1,370 Effective Tax Rate (%) 32.6 30.6 32.8 16.9 16.2 27.6 29.8 32.0 24.5 Reported net profit 551 566 662 1,297 1,800 859 933 635 3,076 4,228 Adjusted net profit 551 566 662 493 782 714 933 635 2,273 3,065 YoY (%) -4.7 24.1 -2.1 62.0 42.0 26.1 40.8 29.0 12.8 34.8

E: MOSL Estimates


Jagran Prakashan

CMP: INR158 TP: INR195 Buy We expect advertising revenue to grow 31% YoY to INR3.84b led by

the third full quarter of radio business performance.

Advertising revenue (ex-Radio) is likely to grow 10% YoY to INR3.2b.We expect circulation revenue to grow 5% YoY to INR1.03b.

Radio revenue would be INR0.64b and EBITDA would be INR0.24b.Aggregate revenue on a like-to-like basis (excluding the impact ofRadio City’s inclusion) would grow ~9% YoY to INR4.58b.

We estimate EBITDA at INR1.33b and EBITDA margin at 25.4% for4QFY16.

Adjusted earnings would grow 29% YoY to INR0.64b.

The stock trades at 14.4x FY17E and 13x FY18E EPS. Buy.

Key things to watch for YoY ad growth (we expect 31%). YoY ad growth ex-Radio City (we expect ~10%). EBITDA margin (we expect 25.4%).

Bloomberg JAGP IN Equity Shares (m) 326.9



Y/E March 2015 2016E 2017E 2018E

Net Sales 17.7 20.9 23.0 25.2 EBITDA 4.5 5.8 6.5 7.1 Adj. NP 2.3 3.1 3.5 3.9

Adj. EPS (INR) 7.2 9.7 11.0 12.2 Adj.EPS Gr (%) 12.8 33.3 14.0 10.5 BV/Sh (INR) 36.1 45.0 51.9 60.0

RoE (%) 21.7 23.9 22.7 21.7 RoCE (%) 20.3 22.4 15.5 15.5 Div. Payout (%)

57.0 42.4 37.2 33.6



April 2016 180

Niket Shah ([email protected]) Chintan Modi ([email protected]) / Kaustubh Kale ([email protected])



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Sales 3,623 4,002 4,203 2,996 4,860 4,746 5,005 3,714 14,771 18,324 YoY Change (%) 8.1 9.4 24.6 -4.7 34.2 18.6 19.1 24.0 9.6 24.1 Total Expenditure 3,075 3,416 3,372 2,888 3,736 3,841 4,152 3,379 12,763 15,099 EBITDA 547 586 831 108 1,125 905 853 336 2,008 3,225 Margins (%) 15.1 14.7 19.8 3.6 23.1 19.1 17.0 9.0 13.6 17.6 Depreciation 291 311 323 253 292 298 304 320 1,168 1,205 Interest 192 201 198 203 218 206 192 220 783 855 Other Income 12 6 9 20 8 95 67 50 89 220 PBT before EO expense 75 81 319 -329 623 496 424 -154 146 1,385 PBT 75 81 319 -351 590 496 420 -154 168 1,348 Tax 1 0 3 (5) 6 85 119 (31) 8 175.2 Rate (%) 0.8 -0.4 1.0 1.3 1.0 17.1 28.4 20.0 4.8 13.0 Reported PAT 77 92 316 -346 585 411 299 -123 149 1,173 Adj PAT 77 92 316 -325 617 411 305 -123 148 1,205 YoY Change (%) -46.5 -66.6 122.8 NM 663.1 347.1 -5.3 -64.4 -72.1 714.6 Margins (%) 2.1 2.3 7.5 -11.6 12.0 8.7 6.0 -3.3 1.0 6.4

E: MOSL Estimates


PVR

CMP: INR740 TP: INR980 Buy We expect revenue to grow 24% YoY to INR5b in 4QFY16, largely

driven by higher box office collections and low base impact.

Footfalls in 4QFY15 were impacted by World Cup. 4QFY16witnessed stronger content-led higher footfalls.

Margins are likely to expand 540bp to 9%. EBITDA is expected togrow 212% YoY to INR336m.

We expect loss of INR123m against INR325m in 4QFY15.

Effectively, our estimates for FY16 stand upgraded – revenue by 2%,EBITDA by 5% and PAT by 13%.

Key issues to watch for Footfall growth during the quarter driven by stronger content and

lower base. SPH growth, given the new initiatives by the company to drive

F&B.

Bloomberg PVRL IN Equity Shares (m) 46.5


Financial Snapshot (INR Billion) Y/E March 2015 2016E 2017E 2018E

Sales 14.8 18.3 23.5 26.6 EBITDA 2.0 3.2 4.2 4.9 NP 0.1 1.2 1.5 2.1

EPS (INR) 3.3 25.2 32.0 45.1 EPS Gr (%) -77.7 654.0 27.0 40.8 BV/Sh (INR) 98.5 186.0 215.1 256.2

RoE (%) 3.4 18.4 16.0 19.1 RoCE (%) 8.6 16.2 17.2 21.1 Payout (%) 39.5 9.2 9.1 9.0


EV/EBITDA (x) 20.7 12.9 9.5 7.8 Div Yield (%) 0.2 0.5 0.6 0.8

April 2016 181


1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Sales 2,090 2,192 2,217 2,560 2,281 2,342 3,699 3,910 9,059 12,233 YoY (%) 47.5 36.7 34.2 9.7 9.1 6.8 66.9 52.7 Operating Expenses 1,748 1,780 1,734 2,466 1,924 1,914 2,449 2,585 7685 8,872 EBITDA 342 412 483 94 357 428 1,251 1,325 1,374 3,361 YoY (%) 19.6 35.7 110.6 -56.1 4.4 4.0 159.2 1,309.3 EBITDA margin (%) 16.4 18.8 21.8 3.7 15.7 18.3 33.8 33.9 15.2 27.5 Depreciation 290 309 387 339 358 367 391 538 1,328 1,655 Interest 304 296 299 311 339 343 346 282 1,209 1,309 Other Income 20 45 18 227 24 87 48 58 311 217 PBT -231 -147 -185 -328 -316 -195 562 563 -852 614 Tax 70 -3 -26 125 5 35 2 25 167 67 Effective Tax Rate (%) -30.4 1.9 13.9 -38.1 -1.7 -17.8 0.4 4.4 -19.6 10.9 PAT -301 -144 -160 -454 -322 -229 560 538 -1,019 547 Minority Interest 16 85 84 -112 28 48 170 -114 72 131 Adj PAT -317 -229 -243 -342 -349 -277 390 652 -1,091 416 Reported net profit -317 -229 -204 -342 -371 -277 390 652 -1,091 416

E: MOSL Estimates

CMP: INR35 TP: INR48 Buy We expect revenue to grow 6% QoQ to INR3.91b, primarily led by

an uptick in subscription and activation revenue. Activation revenue is expected to grow 36% QoQ from INR1.05b in

3QFY16 to INR1.43b, as phase-III seeding is stepped up. We havefactored in set-top box seeding of ~1.5m for the quarter.

Cable subscription revenue is likely to grow 9% QoQ to ~INR1.58b.Carriage revenue should grow ~8% QoQ to INR0.65b in 4Q.

EBITDA should increase 6% QoQ to INR1.33b, primarily led byincrease in activation revenue, as SCNL steps up deployment of set-top boxes. However, on an ex-activation basis, EBITDA is expectedto be in the negative territory, as subscription growth takes arounda quarter to catch up post initial seeding.

Net profit after minority interest is likely to increase significantlyfrom INR0.39b in 3QFY16 to INR0.65b in 4QFY16.

The stock trades at attributable EV/EBITDA (ex-activation) of 10.9xFY17E and 4.3x FY18E. Maintain Buy.

Key things to watch for Cable subscription revenue growth (we expect 9% QoQ). Activation revenue growth (we expect INR1.43b). EBITDA margin (we expect 33.9%).

Bloomberg SCNL IN



52-Week Range (INR) 42/28

1,6,12 Rel Perf. (%) -2/16/7


Y/E March 2015E 2016E 2017E 2018E

Net Sales 9.1 12.2 15.8 20.1 EBITDA 1.4 3.4 4.6 6.8 EBITDA# 0.8 0.6 2.7 6.1

Adj. NP -1.1 0.4 1.7 3.4 Adj. EPS (INR) -1.6 0.5 2.0 3.9 Adj. EPS Gr. (%) NM NM NM NM

BV/Sh (INR) 3.7 10.9 14.3 18.0 RoE (%) -55.9 7.7 16.6 25.0 RoCE (%) -2.0 10.7 16.2 24.3

Valuation P/E (x) NM 64.3 17.3 8.9

EV/EBITDA (x)* 25.8 9.4 6.5 3.9

EV/ EBITDA (x)* 46.0 54.0 10.9 4.3 EV/Sub (INR)* 3,397 2,584 2,780 2,400 * Based on attributable EBITDA and subs post

minority stake; # (ex-activation)


SITI Cable

April 2016 182

Quarterly Performance (Standalone) * (INR Million) Y/E March FY15 FY16 FY15 FY16E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Revenue 6,336 5,090 5,524 5,486 6,911 5,681 5,741 6,085 22,435 24,418 YoY (%) 5.3 9.1 8.7 5.5 9.1 11.6 3.9 10.9 7.0 8.8 EBITDA 3,677 3,958 4,281 4,233 4,092 4,322 4,404 4,722 16,148 17,540 YoY (%) 4.0 17.2 15.1 5.8 11.3 9.2 2.9 11.6 10.3 8.6 As of % Sales 58.0 77.8 77.5 77.2 59.2 76.1 76.7 77.6 72.0 71.8 Depreciation and Amortization 1,390 1,850 1,254 1,384 1,302 1,176 1,348 1,482 5,878 5,307 Interest 8 5 12 5 8 1 5 6 30 20 Other Income 197 222 226 234 222 204 246 249 879 919 PBT 2,476 2,325 3,240 3,078 3,003 3,349 3,298 3,483 11,119 13,132 Tax 820 781 1,099 1,048 1,031 1,166 1,142 1,186 3,747 4,524 Effective Tax Rate (%) 33.1 33.6 33.9 34.1 34.3 34.8 34.6 34.1 33.7 34.5 Reported PAT 1,656 1,545 2,141 2,030 1,973 2,184 2,156 2,297 7,372 8,608 Adj PAT 1,656 1,545 2,141 2,030 1,973 2,184 2,156 2,297 7,372 8,609 YoY (%) 0.7 -1.0 15.3 2.8 19.1 41.4 0.7 13.1 4.8 16.8 *Incl IPL rev/EBITDA loss; E: MOSL Estimates


Sun TV

CMP: INR359 Not Rated We expect Sun TV’s revenue to grow 11% YoY to INR6.09b.

Advertising and broadcasting revenue is likely to grow 5% YoY toINR3.49b. Ad growth would be better than 3Q (1% YoY), as thecompany is showing signs of recovery from the business impactcaused by the Chennai floods last quarter.

We expect domestic subscription revenue to grow 13% YoY toINR2.17b.

Sun TV’s EBITDA is estimated to grow ~12% YoY to INR4.72b. PAT isexpected to grow 13% YoY to INR2.3b.

The stock trades at 14x FY17E and 11.9x FY18E EPS. Not Rated.

Key things to watch for YoY ad growth (we expect 5%). QoQ domestic subscription growth (we expect 13% growth).

Bloomberg SUNTV IN Equity Shares (m) 394.1



Y/E March 2015 2016E 2017E 2018E

Net Sales 22.4 24.4 28.3 32.1 EBITDA 16.1 17.5 20.5 23.4 Adj. Net Profit 7.4 8.6 10.1 11.9

Adj. EPS (INR) 18.7 21.8 25.7 30.2 Adj. EPS Gr. (%) 4.7 16.8 17.8 17.5 BV/Sh (INR) 85.8 92.6 101.0 110.4

RoE (%) 21.8 23.6 25.5 27.4 RoCE (%) 32.8 35.8 38.8 41.6 Div. Payout (%) 60.1 59.5 58.3 59.5



April 2016 183


1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Advertsing Revenue 6,221 6,259 7,426 6,697 7,799 8,433 9,419 8,259 26,603 33,911 Subscription Revenue 4,428 4,245 4,461 5,108 4,625 4,791 5,218 5,074 17,944 19,708 Other Sales and Services 208 674 1,750 1,666 974 625 1,314 1,171 4,299 4,084 Net Sales 10,857 11,178 13,637 13,471 13,399 13,849 15,951 14,504 48,846 57,703 Change (%) 11.6 1.5 14.8 16.2 23.4 23.9 17.0 7.7 10.5 18.1 Prog, Transmission & Direct Exp 4,340 4,703 6,456 6,201 6,108 6,036 7,023 6,543 21,700 25,710 Staff Cost 1,117 1,080 1,093 1,209 1,380 1,267 1,288 1,301 4,498 5,237 Selling and Other Exp 2,308 2,191 2,556 3,353 2,799 3,000 3,337 3,138 10,408 12,273 EBITDA 3,092 3,205 3,533 2,708 3,112 3,546 4,302 3,523 12,240 14,483 Change (%) 6.1 3.2 21.5 -13.1 0.7 10.6 21.8 30.1 1.6 18.3 EBITDA margin (%) 28.5 28.7 25.9 20.1 23.2 25.6 27.0 24.3 25.1 25.1 Depreciation 196 134 170 174 168 198 201 202 673 769 Finance cost 22 23 28 30 15 21 45 32 103 113 Other Income 390 522 802 564 680 589 290 745 2,278 2,304 Extraordinary items -331 -331PBT 3,264 3,570 4,137 3,068 3,609 3,585 4,346 4,034 13,742 15,574 Tax 1,164 1,300 1,072 748 1,185 1,123 1,602 1,151 4,284 5,062 Effective Tax Rate (%) 35.6 36.4 25.9 24.4 32.8 31.3 36.9 28.9 31.2 32.5 PAT 2,100 2,270 3,065 2,320 2,423 2,463 2,744 2,882 9,458 10,513 Minority Interest/Associates -5 -6 -21 12 -15 -11 -6 11 -38 -20Adj PAT after Minority Interest 2,106 2,276 3,086 2,308 2,438 2,805 2,750 2,871 9,775 10,864 Change (%) -6.3 -3.7 44.5 6.1 15.8 23.3 -10.9 24.4 9.6 11.1 E: MOSL Estimates


Zee Entertainment

CMP:INR384 TP:INR530 Buy We expect advertising revenue to grow 23% YoY to INR9.50b,

supported by strong operational performance of flagship Zee TV,Zee Anmol and &TV.

Subscription revenue is likely to decline 1% YoY to INR5.07b.

Total revenue should increase 8% YoY to INR14.5b.

We expect EBITDA margin to remain largely flat, both YoY and QoQ,despite continued &TV losses.

Sports losses are likely to be ~INR200m.

Adjusted PAT is likely to grow ~24% YoY to INR2.87b.


Key things to watch for YoY ad growth (we expect 23%). Sports loss (we expect INR200m).

Bloomberg Z IN


1,6,12 Rel Perf. (%) -4/3/26


Y/E MARCH 2015 2016E 2017E 2018E Net Sales 48.8 57.7 70.1 84.6

EBITDA 12.5 14.5 20.0 26.7 Adj. NP 9.8 10.9 15.0 20.0 Adj. EPS (INR) 10.2 11.3 15.6 20.8

Adj. EPS Gr. (%) 9.7 11.0 37.6 33.7 EPS ex-&TV (INR) 10.8 12.4 15.5 19.6 RoE (%) 31.2 28.0 31.5 32.9

RoCE (%) 27.3 27.1 32.7 37.5 Div. Payout (%) 22.1 19.1 14.5 12.0 Valuations

P/E (x) 37.7 34.0 24.7 18.5 P/E ex-&TV (x) 35.5 30.9 24.7 19.6 EV/EBITDA (x) 29.4 25.1 17.9 13.0

Div. Yield (%) 0.6 0.5 0.6 0.7

March 2016 Results Preview | Sector: Metals

April 2016 184

To remain in red, but losses to halve QoQ MIP, restocking and cost decline provide some relief for steel

Quarter of bumper steel sales on price-triggered restocking cycle Commodity prices stabilized during the quarter after declining consecutively for last few quarters. Base metals (aluminum, zinc and lead) were up 1-4% QoQ. Domestic steel prices benefited from MIP (minimum import price) and recovery in Chinese steel prices. Domestic HRC prices gained ~2.5% QoQ (or ~INR650/ton) and long product prices gained ~5% QoQ (or ~INR1,400/ton). EBITDA for our Metals coverage would grow 50% QoQ to INR100b, the first substantial increase in many quarters. Besides 4Q being a seasonally better quarter, underlying improvement also aids profit growth. Costs are declining on lower raw material prices and operating leverage gains from higher volumes. At the net level, our Metals coverage universe would still be in the red, but losses would be about half the 3Q level at ~INR17b.

MIP and China led steel price increase led to a sharp jump in restocking-led domestic steel demand. For the four steel stocks under our coverage, we expect sales volume in 4Q to increase 13% YoY / 25% QoQ to 10.7mt. SAIL, after tepid volume growth over the past many quarters, would see its volume jump ~19% YoY to 3.8mt. JSPL has reported 28% YoY increase in volumes to 1mt. JSW, coming off its capacity expansion phase, is likely to report ~9% YoY increase in volumes to 3.3mt. Domestic steel prices have increased by ~INR4,000-5,000/ton since MIP was announced in early February. This should drive further realization increase of ~8% (or INR2,400/ton) in 1QFY17 if current spot domestic HRC steel prices were to sustain. For the quarter, amongst our ferrous names, we expect JSW to outperform, with broadly flat EBITDA YoY, as against decline for others. Tata Steel would see ~USD35/ton loss at Europe eating away gains from India business. NMDC’s EBITDA is likely to decline ~43% YoY to INR8b on lower realization and stable volumes.

In non-ferrous, Hindalco should outperform, with EBITDA up ~14% YoY to INR23b. Aluminum segment is benefiting from higher volumes (100% utilization at Aditya), lower costs and improving margins at Novelis (USD315/ton v/s USD309/ton in 3Q). Nalco would deliver gains from higher capacity utilization (104kt aluminum, up 22% YoY) but not enough to offset YoY LME and alumina price decline. Vedanta’s EBITDA would be INR34b, up 18% QoQ (down 15% YoY) on higher profitability in aluminum (on lower cost), iron ore (on volumes) and power (on better utilization).

Revise base metal estimates; JSW and Hindalco top picks We have revised our per ton price estimates for base metals on forward curves. Aluminum – USD1,491/1,530 for FY17/18 from USD1,557/1,530 earlier. Zinc – USD1,800/1,798 for FY17/18 from USD1,573/1,605 earlier. Lead – USD1,736/1,749 for FY17/18 from USD1,749/1,768 earlier. Our ratings remain unchanged. JSW Steel and Hindalco are our top picks.

Company name

Hindalco

Hindustan Zinc

Jindal Steel & Power

JSW Steel

Nalco

NMDC

SAIL

Tata Steel

Vedanta

Metals

Sanjay Jain ([email protected]); +91 22 3982 5412 Dhruv Muchhal ([email protected]); +91 22 3027 8033



April 2016 185

Exhibit 1: Expected quarterly performance summary Sector Sales (INR m) EBDITA (INR m) Net Profit (INR m)

CMP Reco Mar-16 Var %

Var %

Mar-16 Var %

Var %

Mar-16 Var %

Var % Metals

Hindalco 85 Buy 258,336 -3.4 9.2 23,637 14.3 6.8 3,693 -10.7 329.9Hindustan Zinc 187 Buy 28,035 -32.0 -18.3 12,213 -38.6 -17.4 13,269 -33.9 -26.7JSPL 60 Neutral 47,591 1.1 3.6 7,377 -6.6 34.0 -6,841 Loss Loss JSW Steel 1,257 Buy 114,542 -9.1 31.7 17,205 2.3 92.9 -644 PL Loss Nalco 38 Buy 17,823 -1.1 9.0 2,137 -50.1 56.8 1,592 -41.6 60.2NMDC 98 Sell 16,865 -40.4 11.2 8,040 -43.4 24.8 8,163 -41.8 24.2SAIL 42 Sell 120,600 4.1 34.9 -3,213 PL Loss -12,516 PL Loss Vedanta 86 Neutral 156,799 -11.9 5.4 34,233 -14.9 17.8 4,223 -42.2 LP Tata Steel 312 Sell 316,645 -5.9 12.9 11,491 -25.5 48.1 -15,005 Loss Loss Sector Aggregate 1,077,235 -7.0 12.9 113,123 -24.0 37.7 -4,065 PL Loss


Exhibit 2: Comparative valuation Sector / Companies CMP RECO EPS (INR) PE (x) PB (x) EV/EBIDTA (x) ROE (%)

(INR) FY16E FY17E FY18E FY16E FY17E FY18E FY16E FY17E FY18E FY16E FY17E FY18E FY16E FY17E FY18E Metals Hindalco 85 Buy -1.3 7.7 9.6 -66.1 11.1 8.9 0.8 0.8 0.8 8.4 7.1 6.1 -1.3 7.5 8.8Hindustan Zinc 187 Buy 17.7 14.9 14.9 10.6 12.6 12.5 1.6 1.9 1.7 6.4 7.7 6.9 16.2 13.9 14.5 JSPL 60 Neutral -20.4 -21.2 -16.0 -2.9 -2.8 -3.8 0.3 0.3 0.4 15.9 12.6 11.7 -9.4 -11.0 -9.3JSW Steel 1,257 Buy -6.4 116.7 148.4 -196.8 10.8 8.5 1.4 1.3 1.1 13.1 6.6 5.5 -0.7 12.8 14.4Nalco 38 Buy 2.4 2.1 3.0 15.6 18.2 12.8 0.8 0.8 0.7 4.3 5.4 3.1 4.9 4.2 5.8 NMDC 98 Sell 8.4 6.7 6.2 11.6 14.6 15.8 1.2 1.2 1.2 6.7 9.6 9.9 15.6 9.5 7.9 SAIL 42 Sell -9.0 -15.6 -14.7 -4.7 -2.7 -2.9 0.4 0.5 0.7 - -37.9 -815.8 -8.9 -18.0 -21.3Tata Steel 312 Sell -4.1 -8.1 29.1 -76.0 -38.3 10.7 1.7 1.9 1.7 16.5 8.8 6.2 -2.2 -4.6 16.4Vedanta 86 Neutral 7.3 8.5 11.7 11.8 10.1 7.3 0.7 0.8 0.7 5.5 5.0 4.2 6.1 7.6 10.5 Sector Aggregate 9 35.2 35.1 18.4 0.9 0.9 0.9 10.7 8.6 7.0 2.5 2.6 4.9

Source: MOSL

Exhibit 3: India import parity HRC prices


Exhibit 4: China steel spreads with raw material


24,000

27,000

30,000

33,000

36,000

Mar

-15

Apr-

15

May

-15

Jun-

15

Jul-1

5

Aug-

15

Sep-

15

Oct

-15

Nov

-15

Dec-

15

Jan-

16

Feb-

16

Mar

-16HR

C M

umba

i (IN

R/t)

Spot Quaterly average

Avg. is up INR2346 QoQ

90135180225270315

Dec-

11

Mar

-12

Jun-

12

Sep-

12

Dec-

12

Mar

-13

Jun-

13

Sep-

13

Dec-

13

Mar

-14

Jun-

14

Sep-

14

Dec-

14

Mar

-15

Jun-

15

Sep-

15

Dec-

15

Mar

-16

HRC Rebar

India import parity HRC steel prices were up by

~INR600/ton QoQ in 4Q; will be ~INR2,300/ton

higher in 1QFY17 at current spot prices.

Chinese steel mills product spreads have recovered

sharply on increase in steel prices.


April 2016 186

Exhibit 5: Domestic steel demand growth – trailing 12-month (YoY %)


Exhibit 6: India steel - sales volumes (mt)


Exhibit 7: India steel – EBITDA/ton (INR)


Exhibit 8: India steel – realization (INR/ton)


5.6 6.

9 6.

1 5.

7 6.7

5.9

5.9

5.1 6.

5 6.

3 6.

3 6.9

5.1

6.9

6.7

6.2 6.7

5.9 6.

6 5.

4 6.6 6.7

6.5

6.6

5.5

7.4

7.1

6.3 6.5

6.2 7.

1 5.

9 6.8 7.0

7.1

1.6 2.6

4.2

-2.0

0.0

2.0

4.0

6.0

8.0

Apr-

13

Jun-

13

Aug-

13

Oct

-13

Dec-

13

Feb-

14

Apr-

14

Jun-

14

Aug-

14

Oct

-14

Dec-

14

Feb-

15

Apr-

15

Jun-

15

Aug-

15

Oct

-15

Dec-

15

Feb-

16

Cons. (mt) Trailing 12m Growth (%)

2.1 2.4 2.1 2.1 2.1 2.4 2.1 2.3 2.3 2.6 3.0 3.5 2.8 2.9 2.9 3.2 2.7 2.7 2.9 3.8 3.1 3.1

2.9 3.1 3.0 3.1 3.1 3.1 2.6 3.3

8.9 9.7 8.5 8.8 8.7 9.4 8.8 9.0 8.5

10.7

3QFY

14

4QFY

14

1QFY

15

2QFY

15

3QFY

15

4QFY

15

1QFY

16

2QFY

16

3QFY

16

4QFY

16

Tata Steel SAIL JSW Steel JSPL

-10,000-5,000

05,000

10,00015,00020,000

3QFY

11

4QFY

11

1QFY

12

2QFY

12

3QFY

12

4QFY

12

1QFY

13

2QFY

13

3QFY

13

4QFY

13

1QFY

14

2QFY

14

3QFY

14

4QFY

14

1QFY

15

2QFY

15

3QFY

15

4QFY

15

1QFY

16

2QFY

16

3QFY

16

4QFY

16

Average Tata Steel SAIL JSW Steel JSPL

25303540455055

3QFY

12

4QFY

12

1QFY

13

2QFY

13

3QFY

13

4QFY

13

1QFY

14

2QFY

14

3QFY

14

4QFY

14

1QFY

15

2QFY

15

3QFY

15

4QFY

15

1QFY

16

2QFY

16

3QFY

16

4QFY

16

Real

izatio

n (0

00' I

NR/

T) Average Tata Steel SAIL JSW Steel JSPL

Domestic steel demand is recovering – was up 4.2% for the 12 months ended

February 2016.


April 2016 187

Exhibit 9: 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 4QFY16 1,517 1% -16% 78 -2% -75% 1,595 1% -25% 218 -6% -36%3QFY16 1,495 -6% -24% 79 -7% -75% 1,574 -6% -31% 233 -20% -34%2QFY16 1,591 -10% -20% 86 -48% -73% 1,677 -13% -27% 293 -13% -9%1QFY16 1,765 -2% -2% 165 -48% -43% 1,930 -9% -8% 336 -2% 6%4QFY15 1,800 -8% 5% 315 -1% 43% 2,115 -7% 10% 343 -3% 4%3QFY15 1,966 -1% 11% 318 2% 72% 2,285 -1% 17% 355 11% 10% 2QFY15 1,987 11% 12% 311 8% 67% 2,298 10% 17% 322 2% 1% 1QFY15 1,798 5% -2% 289 31% 61% 2,088 8% 4% 317 -3% -3%4QFY14 1,708 -3% -15% 221 19% 23% 1,929 -1% -12% 328 2% -4%3QFY14 1,768 -1% -11% 185 0% 6% 1,953 -1% -10% 323 1% -1%2QFY14 1,780 -3% -7% 186 3% 4% 1,966 -2% -6% 318 -3% 1%1QFY14 1,834 -8% -7% 180 1% 28% 2,014 -8% -5% 327 -4% 3%4QFY13 2,002 0% -8% 179 3% 80% 2,181 0% -4% 341 5% 8% 3QFY13 1,997 4% -4% 174 -3% 99% 2,171 4% 0% 326 3% -1%2QFY13 1,918 -3% -20% 179 27% 105% 2,097 -1% -16% 316 0% -15% 1QFY13 1,978 -9% -24% 141 42% 62% 2,119 -7% -21% 317 0% -22%


Exhibit 10: Global aluminum production trend

Source: MOSL, Company, Bloomberg

Exhibit 11: China aluminum production trend

Source: MOSL, Company, Bloomberg

Exhibit 12: LME aluminum and inventories

Source: MOSL, Bloomberg

-2.0

3.0

8.0

13.0

18.0

23.0

3,000

3,600

4,200

4,800

5,400

Jan-

14

Apr-

14

Jul-1

4

Oct

-14

Jan-

15

Apr-

15

Jul-1

5

Oct

-15

Jan-

16

YoY

grow

th (%

)

'000

tons

Production YoY

-

10

20

30

40

50

1.41.61.82.02.22.42.62.83.0

Oct

-13

Jan-

14

Apr-

14

Jul-1

4

Oct

-14

Jan-

15

Apr-

15

Jul-1

5

Oct

-15

Jan-

16

YoY

grow

th (%

)

m to

ns

Production YoY

2.5

3.1

3.7

4.3

1,400

1,600

1,800

2,000

Apr-

15

May

-15

Jun-

15

Jul-1

5

Aug-

15

Aug-

15

Sep-

15

Oct

-15

Nov

-15

Dec-

15

Jan-

16

Feb-

16

Mar

-16

m to

ns

USD

/t

Inventories (RHS) Spot


April 2016 188

Exhibit 13: 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 4QFY16 1,680 4% -19% 4,664 -5% -20% 1,744 4% -3% 35,559 2% -4% 3QFY16 1,616 -15% -28% 4,892 -7% -26% 1,681 -2% -16% 34,804 0% -5% 2QFY16 1,892 -13% -18% 5,259 -13% -25% 1,714 -12% -21% 34,651 -7% -19%1QFY16 2,183 5% 5% 6,043 4% -11% 1,942 8% -7% 37,194 0% -11% 4QFY15 2,083 -7% 3% 5,818 -12% -17% 1,806 -10% -14% 37,167 1% -17% 3QFY15 2,235 -3% 17% 6,624 -5% -7% 2,000 -8% -5% 36,694 -14% -20% 2QFY15 2,311 11% 24% 6,995 3% -1% 2,181 4% 4% 42,691 2% -7% 1QFY15 2,073 2% 13% 6,787 -4% -5% 2,095 0% 2% 41,862 -7% -7%4QFY14 2,029 6% 0% 7,040 -2% -11% 2,105 0% -8% 44,935 -3% -20%3QFY14 1,906 3% -2% 7,153 1% -10% 2,111 0% -4% 46,099 0% -23% 2QFY14 1,859 1% -1% 7,073 -1% -8% 2,101 2% 6% 46,077 3% -17% 1QFY14 1,840 -9% -5% 7,147 -10% -9% 2,053 -11% 4% 44,837 -20% -18% 4QFY13 2,032 4% 0% 7,931 0% -5% 2,301 5% 10% 55,927 -7% 1%3QFY13 1,946 3% 3% 7,908 3% 6% 2,198 11% 11% 59,949 8% 11% 2QFY13 1,885 -2% -15% 7,705 -2% -14% 1,974 0% -20% 55,755 2% -5% 1QFY13 1,927 -5% -14% 7,869 -5% -14% 1,973 -6% -23% 54,406 -2% -5%


Exhibit 14: Relative performance – three-month (%)


Exhibit 15: Relative performance – one-year (%)


80

89

98

107

116

Dec-

15

Jan-

16

Feb-

16

Mar

-16

Sensex Index MOSL Metals Index

60

75

90

105

120

Mar

-15

Apr-

15

May

-15

Jun-

15

Jul-1

5

Aug-

15

Sep-

15

Oct

-15

Nov

-15

Dec-

15

Jan-

16

Feb-

16

Mar

-16

Sensex Index MOSL Metals Index


April 2016 189

Quarterly Performance (INR Million) Y/E March FY15 FY16 FY15 FY16E (Standalone) 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Alumina (Production, kt) 498 531 593 636 660 628 704 695 2,258 2,627 Aluminium (sales, kt) 177 184 202 246 248 277 292 320 809 1,137 Copper (sales, kt) 94 96 95 102 102 104 87 100 387 393 Exchange USD/INR 59.8 60.6 61.7 62.3 63.7 65.0 65.9 67.6 61.1 65.5 Avg LME Aluminium (USD/T) 1,805 1,987 1,966 1,799 1,765 1,593 1,495 1,517 1,889 1,592 Net Sales 79,961 85,543 86,030 93,716 85,753 89,246 81,503 83,906 345,250 340,408 Change (YoY %) 37.0 35.7 18.3 11.1 7.2 4.3 -5.3 -10.5 24.0 -1.4EBITDA 7,484 8,970 9,233 8,478 8,773 6,028 6,716 7,076 34,165 28,593 Change (YoY %) 56.4 66.2 46.7 0.4 17.2 -32.8 -27.3 -16.5 37.1 -16.3EBITDA - Aluminium 4,066 4,583 5,023 4,332 5,088 2,275 2,988 3,271 18,005 13,622 EBITDA-Copper 3,418 4,387 4,211 4,145 3,686 3,753 3,728 3,804 16,160 14,971 Interest 3,376 3,857 4,475 4,663 6,017 6,160 5,824 6,016 16,371 24,017 Depreciation 1,871 1,960 2,163 2,377 3,320 2,958 3,080 3,172 8,370 12,530 Other Income 2,163 2,234 2,125 2,301 1,944 4,175 2,501 1,973 8,822 10,594 PBT (before EO item) 4,401 5,386 4,721 3,739 1,381 1,086 313 -139 18,246 2,640 Extra-ordinary Income -4,312 -1,465 -5,777PBT (after EO item) 4,401 1,074 4,721 2,274 1,381 1,086 313 -139 12,469 2,640 Total Tax 1,126 286 1,127 678 309 53 -92 3,218 270

% Tax 25.6 5.3 23.9 18.1 22.4 4.9 -29.3 25.8 10.2 Reported PAT 3,275 788 3,594 1,595 1,072 1,033 405 -139 9,252 2,370 Adjusted PAT 3,265 3,996 3,503 2,774 1,025 806 232 -103 13,538 2,370 Novelis Shipments (kt) 770 765 757 758 768 788 779 790 3,050 3,125 Novelis adj. EBITDA (USDm) 233 221 228 201 213 236 238 249 883 936 Consolidated adj. PAT 6,049 6,377 6,349 4,137 -3,831 430 859 3,693 27,943 -2,651E: MOSL Estimates

Hindalco

CMP:INR85 TP:INR97 Buy Standalone EBITDA to decline 17% YoY on lower aluminum prices:

We expect standalone EBITDA to decline 17% YoY to INR7.1b onlower aluminum prices. LME is down 16% YoY but up 1% QoQ toUSD1,517/tom. Aluminum volumes are expected to increase 30%YoY to 320kt, as HNDL achieves full utilization at Aditya. Coppervolumes are likely to grow 15% QoQ to 100kt, as the base wasimpacted by maintenance shutdown.

Novelis EBITDA to improve on stabilizing spot premiums: Weexpect Novelis to report adjusted EBITDA of USD249, up 24% YoY /5% QoQ. Spot premiums have stabilized; hence mark to marketloss seen in the last couple of quarters is unlikely. We expectEBITDA/ton of USD315 as against USD306 in 3Q. Novelis is alsoexpected to report significant de-leveraging during the quarter.

Key issues to watch for Cost of production of primary aluminum. Free cash flow generation at Novelis.

Bloomberg HNDL IN Equity Shares (m) 2,065.2



Y/E March 2015 2016E 2017E 2018E Sales 1,042.8 1,017.5 1,064.7 1,129.6

EBITDA 89.4 90.6 103.5 114.5 NP 27.9 -2.7 15.9 19.8 Adj. EPS (INR) 13.5 -1.3 7.7 9.6

EPS Gr(%) 8.7 -109.5 -698.2 24.9BV/Sh. (INR) 105.4 100.0 105.4 112.8 RoE (%) 12.3 -1.3 7.5 8.8

RoCE (%) 4.9 4.5 5.6 6.7 Payout (%) 12.1 -127.6 21.3 17.1Valuations

P/E (x) 6.6 -69.3 11.6 9.3 P/BV 0.8 0.9 0.8 0.8 EV/EBITDA (x) 8.4 8.5 7.2 6.2

Div. Yield (%) 1.6 1.6 1.6 1.6


April 2016 190

Quarterly Performance Y/E March FY15 FY16 FY15 FY16E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Production (integrated only) Zn refined (000 tons) 139 174 192 217 187 211 206 153 722 757 Pb refined (000 tons) 27 26 25 33 27 39 35 34 111 135 Silver (tons) 65 76 83 91 86 110 116 111 314 423 Zinc LME (USD/t) 2,065 2,311 2,235 2,080 2,190 1,898 1,616 1,680 2,173 1,846 Net Sales 30,072 38,024 38,531 41,257 36,302 40,333 34,306 28,035 147,884 138,975 Change (YoY %) 0.8 6.8 11.7 13.3 20.7 34.1 -9.8 -27.2 8.5 -6.0EBITDA 13,524 19,996 20,892 19,891 19,655 20,245 14,783 12,213 74,303 66,895

As % of Net Sales 45.0 52.6 54.2 48.2 54.1 50.2 43.1 43.6 50.2 48.1 Interest 76 13 8 138 16 12 51 51 235 130 Depreciation 2,023 2,061 2,090 268 1,729 1,750 1,716 1,730 6,442 6,920 Other Income 7,174 6,967 8,122 5,949 5,637 8,689 5,547 6,365 28,211 26,237 PBT (before EO item) 18,599 24,888 26,916 25,434 23,546 27,171 18,562 16,796 95,836 86,082 Extra-ordinary Income 0 -28 0 0 -1,761 0 0 0 0 -1,761PBT (after EO item) 18,599 24,860 26,916 25,434 21,785 27,171 18,562 16,796 95,836 84,321 Total Tax 2,422 3,025 3,122 5,353 1,287 5,715 449 3,527 13,921 10,978

% Tax 13.0 12.2 11.6 21.0 5.9 21.0 2.4 21.0 14.5 13.0 Reported PAT 16,177 21,835 23,794 20,081 20,498 21,456 18,114 13,269 81,915 73,343 Adjusted PAT 16,177 21,860 23,794 20,081 22,155 21,456 18,114 13,269 81,915 74,875 Change (YoY %) 1.6 29.1 38.1 6.7 37.0 32.6 -17.1 -44.2 18.9 -8.6

Hindustan Zinc

CMP:INR187 TP:INR168 Buy Higher LME offset by lower volumes: We expect HZL’s EBITDA to

decline 17% QoQ / 39% YoY to INR12.2b. Although LME is 4% higherQoQ at USD1,680/ton, zinc metal production would decline by 26%QoQ to 153kt. Mined metal production is expected to be down 17%QoQ to 190kt. Cost of production per unit is expected to be higherQoQ on lower production volumes and mine developmentexpenses, partly offset by lower diesel prices.

Our revised LME zinc estimate is USD1,800/ton for FY17 andUSD1,798/ton for FY18 based on prevailing forward curves. Forlead, our forecast is USD1,736/ton for FY17 and USD1,749/ton forFY18.

Key issues to watch for Production ramp-up; management of cost of production.

Bloomberg HZ IN Equity Shares (m) 4,225.3



Y/E March 2015 2016E 2017E 2018E

Sales 147.9 139.0 143.6 151.9 EBITDA 74.3 66.9 66.4 70.0 NP 81.9 74.9 62.9 63.1

Adj. EPS (INR) 19.4 17.7 14.9 14.9 EPS Gr(%) 18.9 -8.6 -16.0 0.3 BV/Sh. (INR) 102.6 115.9 98.3 108.1

RoE (%) 20.3 16.2 13.9 14.5 RoCE (%) 22.6 17.7 16.3 17.2 Payout (%) 26.6 25.0 218.4 34.5




April 2016 191

Quarterly Performance (Consolidated) Y/E March FY15 FY16 FY15 FY16E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Sales 49,784 53,738 51,643 47,082 47,527 50,402 45,949 47,591 202,247 191,468 Change (YoY %) 9.6 7.8 -4.0 -7.7 -4.5 -6.2 -11.0 1.1 1.1 -5.3Total Expenditure 33,494 37,337 37,395 39,186 37,350 40,636 40,445 40,214 147,412 158,645 EBITDA 16,290 16,400 14,248 7,896 10,176 9,765 5,504 7,377 54,835 32,823 Change (YoY %) 24.8 12.6 -16.2 -39.9 -37.5 -40.5 -61.4 -6.6 -5.1 -40.1

As % of Net Sales 32.7 30.5 27.6 16.8 21.4 19.4 12.0 15.5 27.1 17.1 Interest 5,355 5,986 7,024 7,709 8,516 7,647 8,061 8,156 26,073 32,380 Depreciation 6,671 6,503 7,147 7,007 7,466 5,005 6,378 6,386 27,328 25,235 Other Income 904 401 343 608 750 354 50 44 2,256 1,197 PBT (before EO item) 5,168 4,312 420 -6,211 -5,055 -2,532 -8,885 -7,121 3,689 -23,594Extra-ordinary Income 0 0 -18,552 -565 0 -4,394 910 0 -19,116 -3,484PBT (after EO item) 5,168 4,312 -18,131 -6,776 -5,055 -6,927 -7,976 -7,121 -15,427 -27,079Total Tax 1,152 311 -1,380 -964 -1,501 19 -2,120 84 -882 -3,518

% Tax 22.3 7.2 7.6 14.2 29.7 -0.3 26.6 -1.2 5.7 13.0 Reported PAT 4,016 4,001 -16,751 -5,812 -3,555 -6,945 -5,855 -7,205 -14,545 -23,560MI - Loss/(Profit) -133 -428 -603 -575 -137 -832 -105 -364 -1,738 -1,438Associate 33 -11 -40 44 26 -66 16 0 26 -25Adjusted PAT 4,181 4,419 2,364 -4,628 -3,393 -1,785 -6,645 -6,841 6,336 -18,663 Change (YoY %) -15.4 -2.3 -57.9 -215.0 -181.1 -140.4 -381.1 47.8 -66.8 -394.6E: MOSL Estimates

Jindal Steel & Power

CMP: INR60 TP: INR75 Neutral Standalone EBITDA to increase 37% QoQ: We expect standalone

EBITDA to increase 37% QoQ to INR5.8b on higher steel prices andsharp jump in volumes. Steel sales volume stood at 1.01mt v/s740kt in 3Q.

Jindal Power EBITDA to decline 8% QoQ: We expect Jindal PowerEBITDA to decline 8% QoQ to INR1.7b on lower realization.Realization is estimated at INR2.86/kWh as against INR3.45/kWh in3Q.

Asset utilization remains key: Post the de-allocation of the captivecoal blocks, improving asset utilization remains the key for JSPL. Itspower plants are operating at 35-40% utilization level, and anyimprovement in electricity scenario in India (amid the SEBrestructuring) is positive for JSPL. We maintain Neutral.

Key issues to watch for Progress on restructuring of SEBs. Chinese steel imports.

Bloomberg JSP IN Equity Shares (m) 914.9

M. Cap. (INR b)/(USD b) 141 / 2 52-Week Range (INR) 350 / 125 1,6,12 Rel Perf. (%) -26 / -60 / -64


Y/E March 2015 2016E 2017E 2018E

Sales 201.6 191.5 206.5 212.6 EBITDA 54.6 32.8 42.6 46.6 Adj. PAT 6.3 -18.7 -19.4 -14.6

Adj. EPS (INR) 6.9 -20.4 -21.2 -16.0EPS Gr(%) -66.8 -394.6 4.0 -24.6BV/Sh. (INR) 230.0 203.9 180.4 162.1

RoE (%) 2.9 -9.4 -11.0 -9.3RoCE (%) 4.5 1.3 2.2 2.8Payout (%) 27.0 -9.2 -8.8 -11.7

Valuations P/E (x) 9.0 -3.0 -2.9 -3.9P/BV 0.3 0.3 0.3 0.4



April 2016 192

Quarterly Performance (Consolidated) Y/E March FY15 FY16E FY15 FY16E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Sales 132,541 138,948 132,230 125,997 115,762 109,069 86,983 114,542 529,715 426,356 Change (YoY %) 29.0 7.0 -2.9 -12.2 -12.7 -21.5 -34.2 -9.1 3.4 -19.5EBITDA 26,116 28,124 22,957 16,825 16,273 17,293 8,918 17,205 94,023 59,689 Change (YoY %) 39.0 19.8 -4.7 -33.5 -37.7 -38.5 -61.2 2.3 2.6 -36.5EBITDA (INR per ton) 9,068 9,161 7,577 5,498 5,232 5,507 3,497 5,173 7,809 4,922 EBITDA (USD per ton) 152 151 123 88 82 85 53 77 128 75 Interest 8,435 8,550 9,366 8,579 8,222 8,363 8,107 9,209 34,930 33,901 Depreciation 7,954 8,509 8,900 8,982 9,385 6,822 7,734 8,642 34,345 32,583 Other Income 537 265 130 183 258 390 226 260 1,114 1,135 PBT (before EO Item) 10,264 11,330 4,821 -553 -1,077 2,498 -6,696 -385 25,862 -5,660EO Items 0 -212 0 -259 -7 -14 -21,221 0 -471 -21,243PBT (after EO Item) 10,264 11,118 4,821 -812 -1,084 2,483 -27,917 -385 25,391 -26,903Total Tax 3,828 3,737 1,753 -1,123 166 1,424 -18,100 299 8,194 -16,211

% Tax 37.3 33.6 36.4 138.3 -15.3 57.3 64.8 -77.7 32.3 60.3 Reported PAT 6,437 7,381 3,068 311 -1,250 1,060 -9,817 -684 17,197 -10,692Minority interest (Profit)/Loss 92 127 216 313 199 132 610 132 748 1,073 Share of P/(L) of Associates 36 -20 5 0 -17 -22 -26 -22 21 -87Pref. Dividend 70 70 70 70 70 70 70 70 279 279 Adjusted PAT (+asso-MI-EO) 6,495 7,481 3,220 631 -1,135 1,105 -870 -644 18,006 -1,543 Change (YoY %) 370.3 191.5 28.6 -78.0 -117.5 -85.2 -127.0 -202.1 93.2 -108.6E: MOSL Estimates

JSW Steel

CMP: INR1,257 TP: INR1,403 Buy EBITDA to double QoQ: We expect JSW Steel to post an EBITDA of INR17.2b as against INR8.9b in 3Q on higher volumes post successful ramp-up to 18mt capacity and increase in steel prices post MIP. Volumes are expected to increase by 30% QoQ to 3.3mt. Steel realization is expected to increase by 2% QoQ to INR29,198/ton. Standalone EBITDA is expected to increase to ~INR4,850/ton from normalized ~INR4,600/ton in 3Q.

Import substitution and domestic demand recovery to drive volume growth: With ~18mt capacity achieved, we expect sales volumes to jump to ~15mt in FY17, supported by import substitution (3-4mt of demand) and domestic steel demand growth (4-6mt). Realization would improve on the back of MIP/BIS standards and increase in global steel prices in the recent past. We expect standalone EBITDA/ton to improve to ~INR7,415 in FY17 from ~INR4,586 in FY16. We value the stock at INR1,403/share.

Key issues to watch for Domestic iron ore supply and prices. Chinese domestic steel demand and exports.

Bloomberg JSTL IN Equity Shares (m) 241.7



Y/E March 2014 2015E 2016E 2017E

Sales 529.7 426.4 549.3 588.8 EBITDA 94.0 59.7 116.3 131.3 Adj. PAT 18.0 -1.5 28.2 35.9

Adj. EPS (INR) 74.5 -6.4 116.7 148.4 EPS Gr(%) 93.2 -108.6 -1,927.9 27.2 BV/Sh. (INR) 922 867 961 1,094

RoE (%) 8.3 -0.7 12.8 14.4 RoCE (%) 8.5 3.6 10.6 11.7 Payout (%) 18.1 -29.1 12.1 9.5

Valuation P/E (x) 17.3 -202.4 11.1 8.7 P/BV 1.4 1.5 1.3 1.2



April 2016 193

Quarterly performance Y/E March FY15 FY16 FY15 FY16E (Consolidated) 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Aluminium Prod. ('000 tons) 79 82 83 83 85 94 96 97 327 372 Alumina Sales ('000 tons) 315 341 286 283 220 315 285 372 1,225 1,192 Avg LME Aluminium (USD/ton) 1,805 1,987 1,966 1,799 1,769 1,593 1,495 1,517 1,889 1,593 NSR premiums (USD/ton) 518 545 547 485 349 300 261 258 524 292 Alumina NSR (USD/ton) 308 342 342 321 306 308 263 247 328 299 Net Sales 16,800 19,955 19,060 18,013 14,913 18,151 16,353 17,823 73,828 67,239 Change (YoY %) 7.7 14.8 15.9 -2.0 -11.2 -9.0 -14.2 -1.1 8.9 -8.9Total Expenditure 14,036 15,212 13,788 13,732 12,675 14,758 14,989 15,686 56,768 58,108 EBITDA 2,765 4,743 5,272 4,280 2,237 3,393 1,363 2,137 17,060 9,131 Change (YoY %) 80.7 77.2 158.0 38.4 -19.1 -28.5 -74.1 -50.1 82.6 -46.5

As % of Net Sales 16.5 23.8 27.7 23.8 15.0 18.7 8.3 12.0 23.1 13.6 Depreciation 955 1,038 1,165 979 990 1,073 1,046 1,051 4,137 4,160 Other Income 1,904 1,686 1,516 1,621 1,308 1,260 1,240 1,277 6,726 5,085 PBT (before EO Item) 3,713 5,392 5,623 4,922 2,543 3,581 1,558 2,364 19,650 10,044 Extra-ordinary Income 0 0 0 1,484 0 0 535 0 0 535 PBT (after EO Item) 3,713 5,392 5,623 6,406 2,543 3,581 2,092 2,364 19,650 10,579 Total Tax 1,004 1,976 2,079 2,857 908 1,319 757 771 7,916 3,756

% Tax 27.0 36.7 37.0 44.6 35.7 36.8 36.2 32.6 40.3 35.5 Reported PAT 2,710 3,415 3,545 3,549 1,634 2,261 1,335 1,592 11,734 6,823 Adjusted PAT 2,710 3,415 3,545 2,727 1,634 2,261 994 1,592 11,734 6,478 E: MOSL Esitmates

Nalco

CMP: INR38 TP: INR41 Buy EBIDTA up 57% QoQ: We expect EBITDA to grow 57% QoQ (decline

50% YoY) to INR2.1b on higher volumes of both alumina andaluminum, and marginal increase in LME.

Aluminum volumes are expected to be up 22% YoY / 7% QoQ to104kt.

Alumina volumes are expected to increase by 32% YoY / 31% QoQto 372kt.

Aluminum realization is likely to average USD1,775/ton as againstUSD1,756/ton in 3Q.

Key issues to watch for Availability of coal for captive power plant. LME price trend, utilization of smelter.

Bloomberg NACL IN Equity Shares (m) 2,577.2



Y/E March 2014 2015E 2016E 2017E

Sales 73.8 67.2 66.1 73.4 EBITDA 17.1 9.1 6.6 10.0 NP 12.3 6.3 5.4 7.7

Adj. EPS (INR) 4.8 2.4 2.1 3.0 EPS Gr(%) 81.6 -48.7 -14.2 41.9BV/Sh. (INR) 49.7 50.3 50.7 51.9

RoE (%) 9.9 4.9 4.2 5.8 RoCE (%) 14.6 7.2 5.7 8.0 Payout (%) 34.2 71.8 83.6 58.9

Valuations P/E (x) 8.0 15.7 18.2 12.9 P/BV 0.8 0.8 0.8 0.7



April 2016 194


1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Production (m tons) 7.9 6.4 8.1 7.9 5.9 6.4 7.7 7.6 30.4 28.5 Sales (m tons) 8.6 7.3 7.0 7.7 6.7 6.5 7.2 8.2 30.5 28.5 Avg Dom. NSR (USD/t) 64 67 67 58 45 39 31 29 64 35 Avg Dom. NSR (INR/t) 3,825 4,086 4,155 3,573 2,791 2,407 2,057 1,934 3,902 2,284 Lumps % (production) 34 34 36 38 36 36 36 36 36 36 Net Sales 34,767 31,051 29,461 28,286 18,557 15,528 15,172 16,865 123,564 66,122 EBITDA 24,021 20,060 19,482 14,213 11,027 9,395 6,441 8,040 77,777 34,902

As % of Net Sales 69.1 64.6 66.1 50.2 59.4 60.5 42.5 47.7 62.9 52.8 EBITDA per ton (USD) 47 46 45 30 27 23 14 15 42 19 EBITDA per ton (INR/t) 2,796 2,760 2,796 1,848 1,658 1,457 893 981 2,549 1,224 Interest 0 0 0 0 0 0 0 0 19 Depreciation 400 409 533 280 401 506 523 536 1,622 1,966 Other Income 5,418 5,268 5,251 7,262 4,887 4,264 4,212 4,501 23,200 17,865 PBT (before EO Item) 29,039 24,920 24,201 21,195 15,513 13,153 10,130 12,005 99,336 50,801 Total Tax 9,889 8,130 8,271 7,170 5,412 4,525 3,557 3,842 33,460 17,336

% Tax 34.1 34.2 34.2 33.8 34.9 34.8 35.1 32.0 34.1 34.2 Reported PAT 19,150 15,668 15,930 14,025 10,101 8,474 6,573 8,163 64,754 33,311 Adjusted PAT 19,150 16,406 15,930 14,025 10,101 8,574 6,573 8,163 65,494 33,412 E: MOSL Estimates

NMDC

CMP: INR98 TP: INR77 Sell We expect EBITDA to grow 25% QoQ (decline 43% YoY) to INR8b on

higher volumes and operating leverage. Realization is likely todecline 6% QoQ to INR1,934/ton but would improve hereon on therecently announced price hike.

Volumes would grow 14% QoQ / 7% YoY to 8.2mt. Exports would be~0.7mt, almost double QoQ, driving higher overall volumes. Weestimate EBITDA/ton at INR981 in 4Q against INR893 in 3Q.

Realizations for NMDC are expected to increase in the comingquarters amid the announced price hikes on stronger global ironore prices and recovery in domestic steel prices/production drivingdemand for iron ore. However, significant domestic supply wouldkeep the supply-demand equation unfavorable for iron ore andkeep prices under pressure.

Key issues to watch for Increase in global iron ore prices. Quicker-than-expected production ramp-up.

Bloomberg NMDC IN Equity Shares (m) 3,964.7



Y/E March 2015 2016E 2017E 2018E


Adj. EPS (INR) 16.6 8.4 6.7 6.2 EPS Gr(%) 3.1 -49.2 -20.6 -7.9BV/Sh. (INR) 81.5 78.9 80.9 82.4

RoE (%) 20.8 15.6 9.5 7.9 RoCE (%) 20.8 15.6 9.5 7.9 Payout (%) 60.2 131.7 69.8 75.8

Valuation P/E (x) 6.1 12.1 15.2 16.5 P/BV 1.3 1.3 1.3 1.2



April 2016 195

Quarterly Performance (INR Million) Y/E March FY15 FY16 FY16E (Standalone) 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Production (m tons) 3.0 3.3 3.2 3.4 3.1 2.7 3.0 3.6 12.4

Change (YoY %) -7.7 0.3 1.1 4.8 4.5 -18.3 -4.6 4.7 -3.5Sales (m tons) 2.8 2.9 2.9 3.2 2.7 2.7 2.9 3.8 12.1

Change (YoY %) 5.2 -2.7 -3.5 -8.9 -2.3 -6.7 1.4 18.7 3.2 Realization (INR per ton) 41,166 39,791 38,837 36,662 35,313 33,797 30,825 32,160 32,913

Change (YoY %) 5.0 4.0 0.5 -5.8 -14.2 -15.1 -20.6 -12.3 -15.7Net Sales 113,412 116,787 111,073 115,851 95,028 92,569 89,391 120,600 397,589 Change (%) 10.5 1.2 -3.1 -14.2 -16.2 -20.7 -19.5 4.1 -13.0Total Expenditure 102,114 103,423 98,992 106,553 95,845 100,254 103,206 123,813 423,117 EBITDA 11,298 13,364 12,081 9,298 -817 -7,685 -13,815 -3,213 -25,529

Change (YoY %) 16.8 54.2 6.7 -23.8 -107.2 -157.5 -214.4 -134.6 -155.4EBITDA per ton (INR) 4,101 4,553 4,224 2,943 -303 -2,806 -4,764 -857 -2,113EBITDA per ton (USD) 69 75 68 47 -5 -43 -72 -13 -32Interest 3,050 3,558 3,666 4,269 4,430 4,674 5,242 5,473 19,820 Depreciation 4,080 3,917 4,667 5,070 4,261 4,358 4,591 4,962 18,171 Other Income 1,958 1,620 1,454 2,793 1,743 1,306 1,046 745 4,840 PBT (after EO Inc.) 6,127 7,509 7,201 2,752 -7,765 -15,410 -22,603 -12,903 -58,681Total Tax 828 1,015 1,410 -590 -4,549 -7,651 -7,315 -387 -19,902

% Tax 13.5 13.5 19.6 -21.5 58.6 49.6 32.4 3.0 33.9 Reported PAT 5,299 6,495 5,791 3,342 -3,216 -7,760 -15,287 -12,516 -38,779Adjusted PAT 5,299 6,495 4,184 3,342 -3,216 -7,760 -15,287 -12,516 -38,779

Change (YoY %) 0.5 89.5 -19.2 -21.1 -160.7 -219.5 -465.4 -474.5 -302.5E: MOSL Estimates

SAIL

CMP: INR42 TP: INR31 Sell Operating loss to continue: Volumes are expected to see a sharp

jump of 29% QoQ / 19% YoY to 3.8mt on price recovery drivingrestocking.

Realization is expected to increase by 4% QoQ (or INR1,335/ton) toINR32,160/ton driven by import restrictive measures like MIP andBIS standards.

EBITDA/ton is, however, likely to remain negative at INR857/tonbut significantly lower than negative INR4,764/ton in 3Q.

PAT loss is estimated at INR12.5b against loss of INR15.2b in 3Q.

Key issues to watch for Commissioning of ISP and Bhilai capacity expansion.

Bloomberg SAIL IN Equity Shares (m) 4,130.4



Y/E March 2015 2016E 2017E 2018E

Sales 459.5 401.9 479.8 562.9

EBITDA 49.0 -20.6 -16.9 -0.9

NP 21.6 -37.2 -64.4 -60.8

Adj. EPS (INR) 5.2 -9.0 -15.6 -14.7

EPS Gr(%) 13.9 -272.4 73.2 -5.6

BV/Sh. (INR) 107.0 95.6 77.7 60.6

RoE (%) 4.9 -8.9 -18.0 -21.3

RoCE (%) 5.4 -4.7 -5.2 -4.1

Payout (%) 45.2 -26.2 -15.2 -16.0

Valuation P/E (x) 8.2 -4.8 -2.8 -2.9 P/BV 0.4 0.4 0.6 0.7

EV/EBITDA (x) 9.3 -26.0 -38.1 -818.5 Div. Yield (%) 4.7 4.7 4.7 4.7


April 2016 196

Quarterly Performance (INR Million) Y/E March FY15 FY16 FY15 FY16E (Consolidated) 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Sales (k tons) 6,460 6,500 6,300 7,060 6,330 6,290 6,370 7,183 26,320 26,173

Change (YoY %) 6.3 0.3 -1.3 -7.3 -2.0 -3.2 1.1 1.7 -0.9 -0.6 Avg Realization (INR/tss) 56,389 55,042 53,386 47,686 47,868 46,589 44,017 44,084 53,003 45,585 Net Sales 364,272 357,771 336,332 336,662 303,003 293,047 280,390 316,645 1,395,037 1,193,086

Change (YoY %) 11.0 -2.4 -8.4 -20.7 -16.8 -18.1 -16.6 -5.9 -6.1 -14.5 EBITDA 42,726 38,828 30,774 15,430 27,742 18,305 7,757 11,491 127,758 65,296

(% of Net Sales) 11.7 10.9 9.1 4.6 9.2 6.2 2.8 3.6 9.2 5.5 Steel EBITDA(USD/tss) 111 99 79 35 69 45 18 24 79 38 Interest 12,524 12,328 11,674 11,952 10,980 10,487 9,641 10,559 48,478 41,668 Depreciation 15,503 14,295 14,511 15,127 13,465 13,708 11,327 14,472 59,436 52,972 Other Income 2,161 3,215 1,191 1,394 7,622 29,382 962 1,259 7,962 39,225 PBT (before EO Inc.) 16,861 15,421 5,780 -10,255 10,919 23,491 -12,249 -12,281 27,806 9,880 EO Income(exp) -2,625 6,756 -48,112 1,584 -5,637 -7,118 16,615 -11,171 PBT (after EO Inc.) 14,236 22,177 5,780 -58,367 12,503 17,854 -19,367 -12,281 44,421 -1,290 Total Tax 10,804 9,454 4,467 -1,345 5,154 2,402 2,434 3,166 23,380 13,155

% Tax 64.1 61.3 77.3 13.1 47.2 10.2 -19.9 -25.8 84.1 133.1 Reported PAT 3,432 12,723 1,313 -57,023 7,349 15,452 -21,801 -15,447 21,040 -14,446 Adj. PAT (after MI & asso) 5,998 5,787 1,571 -8,631 6,045 20,925 -14,155 -15,005 4,575 -2,190 E: MOSL Estimates; tss=ton of steel sales;

Tata Steel

CMP: INR312 TP: INR168 Sell Tata Steel India: We expect India business EBITDA to increase 33%

QoQ / 19% YoY to INR20b. Volumes are estimated be up 10% QoQ /7% YoY to 2.6mt. Realization is estimated to increase by ~INR884/tto INR37,144/t. EBITDA/t is estimated improve to INR7,327/t fromINR6,172/t in 3Q on higher steel prices and lower costs.

TSE and others: We expect TSE to report EBITDA/t loss of USD35/ton lower volumes and sharply compressed steel product spreads atEurope. UK operations will remain under stress amid weak demandand negative currency impact, while margins at Europe willcompress. Other business will remain broadly unchanged QoQ asscrap product spreads were better offset by normalization inEBITDA at other Indian businesses.

Key issues to watch out Imports from China and global iron ore prices.

Bloomberg TATA IN


1,6,12 Rel Perf. (%) 7/46/11


Y/E March 2015 2016E 2017E 2018E

Sales 1,395 1,193 1,330 1,432

EBITDA 128 65 125 171 Adj. PAT 3 -4 -8 28 Adj. EPS (INR) 2.9 -4.1 -8.1 29.1

EPS Gr(%) -91.9 -243.7 98.3 -457.4 BV/Sh. (INR) 185 187 168 187 RoE (%) 1.3 -2.2 -4.6 16.4

RoCE (%) 6.1 4.3 4.8 8.1 Payout (%) 43.2 -57.4 -120.5 31.6 Valuation

P/E (x) 114.8 -79.9 -40.3 11.3 P/BV 1.8 1.8 1.9 1.8 EV/EBITDA (x) 8.2 16.7 8.9 6.3

Div. Yield (%) 2.4 2.4 2.4 2.4


April 2016 197

Quarterly Performance (VEDL) Y/E March FY15 FY16 FY15 FY16E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Sales 171,866 195,494 192,189 178,046 170,169 165,609 148,766 156,799 736,288 641,341 Change (YoY %) 18.8 8.5 -1.0 -14.3 -0.2 -15.3 -22.6 -11.9 1.4 -12.9 Total Expenditure 115,132 132,225 130,723 137,799 124,816 127,008 119,708 122,565 514,574 494,097 EBITDA 56,734 63,269 61,466 40,247 45,353 38,601 29,057 34,233 221,715 147,244 Change (YoY %) -5.3 -40.5 -20.1 -39.0 -52.7 -14.9 -13.6 -33.6

As % of Net Sales 33.0 32.4 32.0 22.6 26.7 23.3 19.5 21.8 30.1 23.0 Interest 15,371 14,716 13,293 13,208 13,578 14,181 13,906 14,779 56,588 56,444 Depreciation 20,644 20,033 23,279 7,635 17,175 16,602 17,704 17,220 71,592 68,700 Other Income 12,803 9,461 8,221 -1,428 11,480 12,152 7,154 10,488 29,057 41,274 PBT (before EO item) 33,522 37,981 33,114 17,976 26,080 19,969 4,602 12,723 122,593 63,374 Extra-ordinary Income -16,274 -902 0 -199,557 -4,143 0 2,000 0 -216,733 -2,143 PBT (after EO item) 17,248 37,078 33,114 -181,581 21,937 19,969 6,602 12,723 -94,140 61,231 Total Tax 3,616 5,601 4,776 5,494 3,525 2,040 1,606 3,858 19,488 11,029

% Tax 21.0 15.1 14.4 -3.0 16.1 10.2 24.3 30.3 -20.7 18.0 Reported PAT 13,631 31,477 28,338 -187,074 18,412 17,929 4,996 8,865 -113,628 50,202 Less: Minority Interest 16,404 15,284 12,463 5,177 11,807 12,285 4,853 4,487 42,805 33,432 Adjusted PAT 13,504 17,095 15,875 7,306 6,605 5,644 142 4,378 60,300 18,912 Change (YoY %) 233.7 21.9 -10.5 -44.6 -29.6 -51.2 -111.5 -42.2 18.4 -58.8 E: MOSL Estimates; C: Company's adjusted proforma reporting

Vedanta

CMP:INR86 TP:INR85 Neutral Aluminum and power to drive EBITDA increase: We expect VEDL to

post 18% QoQ increase (44% YoY decline) in EBITDA to INR34.2b,aided by lower cost in aluminum and commissioning of newcapacities in power.

Lower crude oil prices and zinc business profit is expected to offsetpart of the increase.

We expect aluminum volumes to be flat QoQ at 234kt. Copper volumes are likely to increase to 97kt, recovering from

maintenance shutdown. Jharsuguda power volumes are estimated to remain low at

1,656MU on weak demand; realization would also suffer. Hindustan Zinc’s mine metal production is likely to decline 17%

QoQ. Capitalization of TSPL would drive higher regulated returns. Iron ore segment is expected to report strong turnaround on

significantly higher margins in pig iron and iron ore mining.

Key issues to watch for Progress on TSPL project and commissioning of 1.25mtpa smelter. Recovery in base metal prices.

Bloomberg VEDL IN Equity Shares (m) 2,964.8

M. Cap. (INR b)/(USD b) 255/4 52-Week Range (INR) 233/58 1,6,12 Rel Perf. (%) -3/9/-42


Y/E March 2015 2016E 2017E 2018E

Sales 749.2 641.3 702.8 783.5 EBITDA * 159.4 110.3 124.9 143.4 NP 60.5 21.6 25.3 34.7

Adj. EPS (INR) 20.4 7.3 8.5 11.7 EPS Gr (%) -19.9 -57.6 -58.2 60.4BV/Sh. (INR) 121.7 117.6 108.0 115.5

RoE (%) 17.3 6.1 7.6 10.5 RoCE (%) 9.9 6.9 7.4 8.6 Payout (%) 20.1 72.3 61.8 45.0

Valuation P/E (x) 4.3 12.0 10.3 7.5 P/BV 0.5 0.5 0.5 0.5

EV/EBITDA, x* 4.8 7.4 6.7 5.6 Div. Yield (%) 4.0 5.1 5.1 5.1

Note: Sesa-Sterlite merged entity basis

April 2016 198

March 2016 Results Preview | Sector: Oil & Gas

Crude continues to fall; marketing margins recover OMCs’ marketing margins higher QoQ; inventory gains to further boost profits

OMCs’ auto fuel marketing margins would be higher QoQ. Refining and marketingbusinesses would be impacted by inventory gains, led by higher closing crude prices.

Due to an average USD20/bbl YoY Brent decline, upstream PSU players’ gross and netrealizations would decline ~USD21/bbl YoY, with nil subsidy sharing.

Refining margins would decline USD0.9/0.3/bbl YoY/QoQ, led by sequentially lowermiddle distillate cracks.

RIL’s standalone PAT is likely to stay flat QoQ at ~INR71b due to flat GRM.

Brent average down 21% QoQ; model marginal upstream subsidy in 4QFY16 Crude prices declined to below USD30/bbl after almost 12 years following the

global supply gluts and sustained production by producers. However, closingprice for 4QFY16 was actually higher than 3QFY16, led by late recovery followingreports that oil producers will meet to decide on possible production freezes.Expect inventory gains for refiners.

We estimate 4QFY16 Kerosene under-recoveries at INR20b (down 62% YoY).With the government fully financing LPG subsidy by DBTL, only kerosene subsidyneeds to be shared.

Of the INR20b kerosene under-recoveries, we model nil sharing by upstreamand OMCs; the entire amount would be borne by the government.

GRM at USD7.7/bbl (-10% YoY/ -3% QoQ); polymer and polyster spreads largely up QoQ and YoY The regional benchmark Reuters Singapore GRM was down 10% YoY/3% QoQ to

average USD7.7/bbl, led by lower cracks across all products ex gasoline. In petchem, polymer and polyster spreads increased QoQ; spreads were largely

up YoY.





YoY Var % QoQ

Oil & Gas BPCL 891 Buy 494,507 -3.6 6.1 33,475 -24.8 41.7 21,227 -25.6 42.6Cairn India 147 Neutral 16,895 -36.9 -17.2 4,949 -63.1 -33.0 -399 PL PL GAIL 340 Neutral 124,466 -12.6 -7.0 10,960 80.2 1.0 5,864 14.8 -11.7Gujarat State Petronet 136 Neutral 2,634 11.5 6.4 2,286 15.8 9.5 1,147 54.8 -7.1HPCL 798 Buy 348,313 -21.8 -19.8 26,847 -22.2 23.7 14,005 -35.2 34.4IOC 402 Buy 770,857 -17.5 -7.3 71,586 -20.0 44.4 43,565 -30.7 42.5Indraprastha Gas 560 Neutral 9,345 2.4 0.8 1,837 6.9 -0.7 1,018 6.1 -3.2MRPL 66 Buy 89,166 -19.6 1.1 14,442 34.1 137.7 10,451 -10.6 249.6Oil India 315 Buy 17,499 -32.0 -21.1 1,461 -78.6 -76.8 1,191 -78.4 -71.0ONGC 206 Buy 160,024 -24.9 -13.0 69,355 -30.1 -19.7 26,528 -32.6 -35.0Petronet LNG 245 Neutral 67,510 -5.7 31.2 4,473 102.1 41.6 2,460 46.1 37.9 Reliance Inds. 1,028 Neutral 552,290 -1.5 -2.4 106,341 23.2 3.5 70,972 13.7 -1.7Sector Aggregate 2,653,505 -13.2 -5.6 348,013 -12.3 8.2 198,029 -19.7 6.0 Excl. OMCs 1,039,828 -10.5 -3.5 216,105 -5.4 -4.7 119,232 -10.7 -8.9

Source: MOSL

Oil & Gas March 2016 Results Preview | April 2016

Company name

BPCL

Cairn India

GAIL

Gujarat State Petronet

HPCL

Indraprastha Gas

IOC

MRPL

Oil India

ONGC

Petronet LNG

Reliance Industries

Harshad Borawake ([email protected]); +91 22 3982 5432 Rajat Agarwal ([email protected]); +91 22 3982 5558

April 2016 199


Auto fuel marketing margins increase QoQ Post the diesel deregulation on October 18, 2014, OMCs have demonstrated

pricing power by tweaking marketing margins. OMCs benefitted from falling crude prices by capturing increased marketing

margins on auto fuels, though the increase was subdued as the governmentsuccessively increased excise on auto fuels to reduce its budgetary deficits.

We estimate gross margins of INR2.1/liter on petrol (up 41% QoQ) and averagediesel marketing EBITDA at INR1.9-2/liter (up ~100% QoQ; INR0.7/liter in theregulated era). We believe that marketing margins would remain high over thenext one year.

For subsidy sharing in FY16/FY17/FY18, we model OMCs’ share at nil andupstream sharing at 17%/17%/31% (with the government bearing the rest); anyvariation in this would impact our estimates for oil PSUs.

Valuation and view Against the backdrop of lower oil price regime, auto fuel pricing freedom and

stable marketing margins, we retain OMCs (HPCL/BPCL/IOCL) as our top picks.With royalty being switched to ad-valorem rates, ONGC and OINL’s earningsrevival is more closely linked to crude price and contingent on its increase.

Favorable gas economics vs liquid fuel will be critical for increase in domesticgas consumption. This could revive volumes for GAIL, GSPL and PLNG whilefocus on pollution in Delhi will benefit IGL.

RIL’s capex cycle is set to end and project commissioning from 2016 willsignificantly boost cash flows. With the end of capex cycle, and progress ofgroundwork for full telecom launch, impressive Telecom updates, we believethat the risk-reward is turning favorable.

Exhibit 2: Comparative valuations Sector / Companies CMP Reco. EPS (INR) PE (x) EV/EBIDTA (x) RoE (%)

(INR) FY16E FY17E FY18E FY16E FY17E FY18E FY16E FY17E FY18E FY16E FY17E FY18E Oil & Gas BPCL 891 Buy 100.8 101.6 116.2 8.8 8.8 7.7 6.7 6.4 5.3 29.3 24.9 24.3 Cairn India 147 Neutral 7.9 4.0 6.5 18.6 36.9 22.7 3.7 3.0 1.9 2.5 1.2 2.0 GAIL 340 Neutral 16.6 25.8 31.5 20.5 13.2 10.8 13.3 8.7 7.2 7.0 10.3 11.6 Gujarat State Petronet 136 Neutral 8.2 9.7 10.9 16.7 14.1 12.4 9.7 8.3 7.1 12.0 12.8 13.0 HPCL 798 Buy 109.4 111.9 124.4 7.3 7.1 6.4 6.3 6.5 5.8 21.6 19.3 19.0 Indraprastha Gas 560 Neutral 29.3 34.9 38.7 19.1 16.0 14.5 10.1 8.5 7.6 18.2 18.8 18.1 IOC 402 Buy 45.4 62.1 74.4 8.9 6.5 5.4 6.8 5.4 4.5 15.0 18.3 19.4 MRPL 66 Buy 5.6 13.2 13.9 11.9 5.0 4.8 6.5 4.8 4.0 15.0 34.0 28.2 Oil India 315 Buy 32.9 36.0 42.9 9.6 8.7 7.3 7.4 7.5 6.4 8.8 9.1 10.3 ONGC 206 Buy 17.6 17.2 23.8 11.7 11.9 8.6 4.3 4.1 3.4 8.1 7.5 9.8 Petronet LNG 245 Neutral 11.3 15.0 19.8 21.6 16.3 12.3 12.7 10.0 7.6 14.1 16.7 19.1 Reliance Inds. 1,028 Neutral 92.8 114.5 130.9 11.1 9.0 7.9 9.2 7.0 5.6 11.9 13.4 13.6 Sector Aggregate 11.5 9.7 8.1 6.8 5.8 4.7 10.5 11.4 12.5 Ex OMCs 12.9 10.8 8.9 6.9 5.8 4.7 8.9 9.8 10.9

Source: MOSL

Relative performance - 3m (%)

Relative performance - 1Yr (%)

April 2016 200


On QoQ basis, GRM down 3%, Brent down 21%, light/heavy spreads rise

Exhibit 3: Brent crude price down 21% QoQ and 36% YoY to average of USD34.4/bbl in 4QFY16


Exhibit 4: Premium of Brent over WTI down QoQ to USD1.1/bbl in 4QFY16


Exhibit 5: Reuters Singapore GRM down 3% QoQ/ 10% YoY to average of USD7.7/bbl


Exhibit 6: Diesel cracks down 28% QoQ in 4QFY16, while gasoline cracks flat (USD/bbl)


Exhibit 7: Crude differentials increased in 4QFY16 (USD/bbl)


0

40

80

120

160

4QFY04 4QFY06 4QFY08 4QFY10 4QFY12 4QFY14 4QFY16

Brent Crude Price (USD/bbl)

(4)

4

12

20

28


Brent less WTI (USD/bbl)

0

3

5

8

10


Reuters Singapore GRM (USD/bbl)

-28

-16

-4

8

20

Gaso

line

Nap

htha LP

G

Dies

el

Jet/

Kero

Fuel

Oil

4QFY15 1QFY16 2QFY16 3QFY16 4QFY16

(3)

0

3

6

9

12


Brent - Dubai Arab L-HIn USD/bbl

Our key assumptions Our crude price assumptions are USD45/bbl for

FY17 and USD50/bbl over long term. We expect the regional benchmark Singapore

Reuters GRM to remain in the USD6-8/bbl rangefor the near term, with downward bias.

April 2016 201


Exhibit 8: Polymer and polyester spreads rise QoQ due to improved outlook (INR/kg) RIL Basic prices Simple Spreads Int. Spreads

PE PP PVC POY PSF Naphtha PE PP PVC POY PSF 2QFY14 104.4 109.7 72.8 107.2 107.9 57.8 46.6 51.9 15.0 61.4 62.1 3QFY14 107.6 109.8 72.3 103.4 106.0 59.3 48.4 50.6 13.1 56.3 58.9 4QFY14 112.3 113.0 74.3 97.9 100.9 58.4 53.9 54.6 15.9 51.4 54.4 1QFY15 109.0 107.7 77.0 97.7 97.6 57.6 51.4 50.1 19.5 51.8 51.7 2QFY15 113.0 110.3 79.4 102.9 103.6 55.9 57.1 54.4 23.5 58.5 59.2 3QFY15 109.3 107.0 70.0 92.7 92.4 40.2 69.1 66.8 29.8 61.0 60.7 4QFY15 90.7 84.3 63.7 80.6 79.8 30.5 60.1 53.8 33.2 56.6 55.8 1QFY16 102.3 100.3 70.1 84.8 84.0 35.6 66.7 64.7 34.5 56.8 56.0 2QFY16 95.8 85.8 65.5 79.0 80.5 29.4 66.4 56.4 36.1 56.1 57.5 3QFY16 88.8 76.7 65.0 73.0 77.5 29.2 59.6 47.6 35.8 50.2 54.7 4QFY16 85.6 70.4 62.3 71.5 74.0 22.8 62.8 47.6 39.5 53.8 56.3 QoQ (%) -3.6% -8.2% -4.2% -2.1% -4.5% -3.6% 5.3% 0.0% 10.1% 7.2% 3.1% YoY (%) -5.6% -16.5% -2.3% -11.4% -7.3% -5.6% 4.4% -11.5% 18.8% -5.0% 0.9%


Exhibit 9: PE , PVC spreads rise 5.3%/10.1% QoQ; PP spreads flat (INR/kg)

Source: Bloomberg, Company, MOSL

Exhibit 10: Int. POY/PSF spreads rise 7.2%/3.1% QoQ (INR/kg)

Source: Bloomberg, Company

Exhibit 11: We model nil subsidy for OMCs in FY17 and FY18 (INR b) FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16E FY17E FY18E Fx Rate (INR/USD) 40.3 46.0 47.5 45.6 47.9 54.5 60.6 61.1 65.5 68.0 70.0 Brent (USD/bbl) 82 85 70 86 114 111 108 86 48 45 50 Product-wise Gross Under recoveries (INR b) Petrol 73 52 52 27 0 0 0 0 0 0 0 Diesel 353 523 93 348 819 915 628 109 0 0 0 Kerosene 191 282 174 200 278 296 306 248 120 111 125 LPG 156 176 143 205 284 399 465 366 Part of DBTL now Total 773 1,033 461 780 1,385 1,610 1,399 723 120 111 125 Sharing of Gross Under recoveries (INR b) Government 353 713 260 410 829 1,000 707 273 97 92 86 Upstream 257 329 145 303 552 600 671 428 20 18 39 OMC's 163 (9) 56 67 0 10 21 22 3 0 0 Total 773 1033 461 780 1,385 1,610 1,399 723 120 111 125 Sharing of Gross Under recoveries (%)

Government 46 69 56 53 60 62 51 38 81 84 69 Upstream 33 32 31 39 40 37 48 59 17 16 31 OMC's 21 (1) 12 9 0 1 2 3 3 0 0

Total 100 100 100 100 100 100 100 100 100 100 100 *LPG includes DBTL component Source: Company, MOSL

0

20

40

60

80


PE PP PVC

0

20

40

60

80


POY PSF

April 2016 202


Exhibit 12: Petrol and diesel price difference (INR/liter)

Source: PPAC, MoPNG, MOSL

Exhibit 13: Diesel in over-recovery zone post deregulation

Source: PPAC, MoPNG, MOSL

Exhibit 14: With almost nil subsidy, model ONGC’s net realization for 4QFY16 at USD34.9/bbl


Exhibit 15: Expect higher LNG volumes in 4QFY16 (mmscmd) led by GAIL


Exhibit 16: Expect RIL’s GRM at USD11.0/bbl (USD/bbl)


Exhibit 17: Cairn’s Rajasthan production likely to remain flat at 169kbpd


0

10

20

30

40

Apr-10 Apr-11 Apr-12 Apr-13 Apr-14 Apr-15 Apr-16

Petr

ol -

Dies

el p

rice

diff

eren

ce (I

NR/

ltr)

-15

-10

-5

0

5

Apr-13 Oct-13 Apr-14 Sep-14 Apr-15 Oct-15 Mar-16

Diesel (under)/over recovery (INR/ltr)

48

83

45

44

47

47

48

51

40

45

46

33

47

41

36

56

59

49

44

35

73 33

67

77

63

63

62

63

63

64

62

74 62

61

40

0 5

2 0

121

116

111 12

2 11

0 11

0 11

0 11

4 10

3 10

9 10

8 10

7 10

9 10

2 76

56

64

51

44

35

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q

FY12 FY13 FY14 FY15 FY16

Net Realization Subsidy Burden Gross Realization

19 15 14 12 14 13 12 12 11 11 11 11 10

38 40 38 38 36 43 44 44

29

41 48

48

47

22 22 21 20 21 22 24 23 23

24 24 26 26

99 99 95 96 95 97 91 94

86 87 90 97

100

4QFY13 4QFY14 4QFY15 4QFY16

RIL KG-D6 PLNG GSPL GAIL India

7.5 6.7 9.1 6.5 8.7 6.6 5.4 4.3 6.2 5.8 4.8 6.3 8.6 8.0 6.3 8.0 7.7

0.1 0.9 0.4

3.1 1.4

1.8 2.3 3.3

3.1 2.9 3.5 1.0

1.5 2.4 4.33.5 3.3 7.6 7.6

9.5 9.6 10.18.4 7.7 7.6

9.3 8.7 8.37.3

10.1 10.4

10.6 11.5

11.0

4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q

FY12 FY13 FY14 FY15 FY16

Singapore GRM Premium / (Disc) RIL GRM

138 16

7 17

2 17

0 16

9 17

3 17

5 186

191

183

163 18

0 17

4 17

2 16

8 17

0 16

9

4QFY

121Q

FY13

2QFY

133Q

FY13

4QFY

131Q

FY14

2QFY

143Q

FY14

4QFY

141Q

FY15

2QFY

153Q

FY15

4QFY

151Q

FY16

2QFY

163Q

FY16

4QFY

16

Rajasthan gross Oil Production (kbpd)

April 2016 203


Quarterly performance (Standalone) (INR Million) Y/E March FY15 FY16 FY15 FY16E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Sales 667,497 619,785 578,728 513,043 519,167 464,227 466,131 494,507 2,379,053 1,944,033 Change (%) 13.7 0.4 -10.6 -31.4 -22.2 -25.1 -19.5 -3.6 -8.5 191.2 Raw Material Consumed 272,377 277,136 255,766 184,099 183,791 167,155 151,636 237,122 989,377 739,704 Staff Cost 7,903 5,783 2,305 4,866 6,958 6,146 7,087 7,130 20,856 27,321 Finished Goods Purchase 347,302 297,378 280,808 245,029 261,679 248,274 253,638 205,053 1,170,517 968,644 Other Exp 25,119 28,779 28,567 34,507 29,053 29,840 30,140 11,727 116,972 100,759 EBITDA 14,796 10,709 11,283 44,542 37,686 12,813 23,631 33,475 81,330 107,605 % of Sales 2.2 1.7 1.9 8.7 7.3 2.8 5.1 6.8 3.4 5.5 Depreciation 5,572 6,333 6,265 6,991 5,372 4,172 4,564 4,838 25,160 18,946 Interest 1,948 1,292 1,201 1,391 1,147 1,074 975 1,043 5,831 4,239 Other Income 10,638 3,018 3,922 6,238 3,794 7,373 3,545 3,621 23,816 18,334 PBT 17,914 6,102 7,740 42,399 34,962 14,940 21,637 31,215 74,155 102,754 Tax 5,751 1,460 2,228 13,870 11,200 4,760 6,751 9,989 23,310 32,700 Tax rate (%) 32.1 23.9 28.8 32.7 32.0 31.9 31.2 32.0 31.4 31.8 PAT 12,163 4,642 5,512 28,529 23,762 10,180 14,886 21,227 50,845 70,055 Change (%) 709.1 -50.1 nm -29.9 95.4 119.3 170.1 -25.6 25.2 37.8 EPS (INR) 16.8 6.4 7.6 39.5 32.9 14.1 20.6 29.4 70.3 96.9 E: MOSL Estimates

BPCL

CMP: INR891 TP: INR1,149 Buy We expect OMCs’ earnings (IOCL, BPCL, HPCL) to be supported by

increased GRMs and higher marketing margins. We expect furtherearnings support to be provided through inventory gains.

We model nil subsidy sharing for OMCs; the subsidy would be sharedby upstream players and the government.

4QFY16 gross under-recoveries (including LPG DBTL component)have declined 69% YoY, led by lower crude oil/petroleum productprices and diesel deregulation.

We peg BPCL’s refinery throughput at 6mmt for 4QFY16 v/s 6.1mmtin 4QFY15 and 5.9mmt in 3QFY16.

We expect BPCL to report PAT of INR21.2b in 4QFY16 (+43% QoQ, -26% YoY). YoY decline would be due to the high INR3.1/litermarketing margins in 4QFY15.

BPCL trades at 8.8x/7.7 FY17E/FY18E EPS and 2x/1.7x FY17E/FY18EBV (adjusted for investments). E&P upsides from Mozambique andBrazil are the key medium-term triggers. Buy.

Key issues to watch for (a) Inventory and forex change impact, (b) GRM, (c) Kochi refinery

expansion, and (d) update on Mozambique/Brazil E&P blocks.

Bloomberg BPCL IN



Financial snapshot (INR b) Y/E March 2015 2016E 2017E 2018E

Sales 2,424 2,001 1,970 2,381 EBITDA 96.0 127.3 136.8 157.1 Adj. PAT 48.1 72.8 73.5 84.0

Adj. EPS, INR 66.5 100.7 101.7 116.1 EPS Gr. (%) 22.9 51.5 0.9 14.2 BV/Sh.(INR) 311.8 375.1 439.4 515.7

RoE (%) 22.9 29.3 25.0 24.3 RoCE (%) 11.6 15.5 13.7 14.5 Payout* (%) 37.8 38.6 39.2 38.6


EV/EBITDA. x 8.7 6.7 6.4 5.3 Div. Yield (%) 2.5 3.6 3.6 3.8 *Based on standalone

April 2016 204


Quarterly performance (Consolidated)

(INR Million) Y/E March FY15 FY16 FY15 FY16E 1Q 2Q 3Q 4Q

1Q 2Q 3Q 4QE

Net Sales 44,829 39,821 35,041 26,772

26,271 22,421 20,395 16,895 146,462 85,982 Change (%) 10.3 -14.4 -29.9 -47.0

-41.4 -43.7 -41.8 -36.9 -21.9 -41.3

EBITDA 33,070 27,896 21,841 13,400

13,728 9,789 7,386 4,949 96,207 35,851 % of Net Sales 73.8 70.1 62.3 50.1

52.3 43.7 36.2 29.3 65.7 41.7

% Change 9.9 -21.0 -40.8 -65.1

-58.5 -64.9 -66.2 -63.1 -31.7 -62.7 Exploration w/off 2,546 1,341 1,572 5,522

824 682 725 166 10,980 2,398

D,D&A 7,198 7,028 8,909 2,560

8,766 8,644 8,930 8,052 25,695 34,391 Interest 17 51 84 51

16 58 45 15 204 133

Other Income (Net) 4,184 3,460 1,629 3,576

3,816 1,204 1,419 2,803 12,849 9,243 PBT before exceptionals 27,493 22,937 12,904 8,843 7,938 1,609 -895 -481 72,177 8,172 Forex Fluctuations 989 2,403 3,536 -1,683

1,820 3,807 488 0 5,244 6,115

Exceptional items -16,274 -5,052

0 0 -21,326 0 PBT 12,208 25,340 16,440 2,107 9,758 5,417 -407 -481 56,095 14,286 Tax 1,279 2,561 2,944 4,516

1,408 -1,310 -494 -82 11,299 -478

Tax rate* (%) 11.4 11.2 22.8 119.1

17.7 -81.4 n.a. n.a. 22.2 -5.8 PAT 10,929 22,779 13,496 -2,408

8,350 6,727 87 -399 44,796 14,764

Adj. PAT 27,203 22,779 13,496 6,053

8,350 6,727 87 -399 69,531 14,764 YoY Change (%) -13.0 -32.7 -53.2 -80.1

-69.3 -70.5 -99.4 -106.6 -44.1 -78.8

Adj. EPS 14.5 12.1 7.2 3.2

4.5 3.6 0.0 -0.2 37.1 7.9 Key Assumptions and Cain's share in production (kboepd) Exchange rate (INR/USD) 59.8 60.5 61.8 62.2

63.7 65.0 66.0 67.0 61.1 65.4

Brent Price (USD/bbl) 109.7 102.0 76.0 55.2

61.9 50.5 43.7 34.5 85.7 47.7 Ravva & Cambay Prodn 9.7 8.9 10.7 11.0

10.0 10.3 9.1 9.1 10.1 9.6

Rajasthan Prodn 128.2 114.3 126.0 121.8

120.5 117.7 119.3 118.2 122.6 118.9 Total 137.9 123.2 136.7 132.8

130.5 128.0 128.4 127.3 132.6 128.6

Cairn India

CMP: INR147 Neutral We expect CAIR to report consolidated net sales of INR16.9b in

4QFY16 (v/s INR26.8b in 4QFY15 and INR20.4b in 3QFY16). Net sales are likely to decline due to fall in crude price—Brent average price is down 36% YoY (up 21% QoQ).

We estimate consolidated EBITDA at INR5b v/s INR13.4b in 4QFY15 and INR7.4b in 3QFY16.

We expect CAIR’s 4QFY16 Rajasthan production to decrease 3% YoY and stay flat QoQ.

We model Brent crude price of USD47.5/45bbl for FY16/FY17 and USD50/bbl for the long term, and take a quality discount of 12% for CAIR.

The stock trades at 36.9x/22.7x FY17E/FY18E EPS of INR4/INR6.5. Maintain Neutral.

Key issues to watch for In the medium term: (a) Update on PSC extension, (b) production

ramp-up, (c) reserve updates, and (d) clarity on cash utilization. During the quarter: (a) Net realization, (b) forex fluctuations, and

(c) guidance or production ramp-up and reserve upgrade.

Bloomberg CAIR IN



Financial snapshot (INR b) Y/E March 2015 2016E 2017E 2018E Sales 146.5 86.0 90.1 110.3


EPS Gr. (%) -63.3 -67.0 -49.6 62.8 BV/Sh.(INR) 314.0 316.2 318.8 323.9 RoE (%) 12.0 2.5 1.2 2.0

RoCE (%) 9.8 1.4 1.2 2.0 Payout (%) 28.4 24.6 24.6 24.6 Valuations P/E (x) 4.1 18.6 36.9 22.7 P/BV (x) 0.5 0.5 0.5 0.5 EV/EBITDA (x) 1.4 3.7 3.0 1.9

Div. Yield (%) 5.9 1.2 0.5 1.0

April 2016 205



(INR Million)

Y/E March FY15

FY16 FY15 FY16E 1Q 2Q 3Q 4Q

1Q 2Q 3Q 4QE

Net Sales 133,371 140,632 149,338 142,354

125,191 140,880 133,801 124,466 565,694 524,337 Change (%) 3.7 0.9 -6.6 -1.6

-6.1 0.2 -10.4 -12.6 -1.2 -7.3

Finished Gds Purchase 106,646 93,819 113,964 89,054

99,500 102,487 99,470 95,000 403,483 396,456 Raw Materials Cons 10,555 13,056 13,245 11,275

7,512 8,250 9,001 7,094 48,132 31,857

Employee Costs 2,274 2,326 2,442 2,022

2,482 2,578 2,630 2,281 9,064 9,970 Other Exp (incl Stock Adj) 3,799 11,873 10,186 33,921

5,720 19,891 11,853 9,131 59,779 46,595

EBITDA 10,097 19,557 9,501 6,082

9,976 7,675 10,847 10,960 45,237 39,458 % of Net Sales 7.6 13.9 6.4 4.3

8.0 5.4 8.1 8.8 8.0 7.5

Depreciation 2,337 2,368 2,510 2,528

3,077 3,227 3,330 3,302 9,743 12,937 Interest 932 916 851 914

1,636 1,635 1,583 1,554 3,613 6,408

Other Income 2,076 3,554 1,760 2,945

1,248 3,787 3,284 1,752 10,334 10,072 Extraordinary item* 0 0 629 0

0 0 0 0 629 0

PBT 8,904 19,827 8,528 5,585

6,511 6,599 9,218 7,856 42,844 30,185 Tax 2,690 6,798 2,487 477

2,270 2,194 2,576 1,992 12,452 9,032

Rate (%) 30.2 34.3 29.2 8.5

34.9 33.2 27.9 25.4 29.1 29.9 PAT 6,214 13,029 6,041 5,107

4,241 4,405 6,643 5,864 30,392 21,153

Change (%) -23.1 42.3 -64.0 -47.5

-31.7 -66.2 10.0 14.8 -30.5 -30.4 Adj PAT 6,214 13,029 5,596 5,107

4,241 4,405 6,643 5,864 29,947 21,153

Change (%) -23.1 42.3 -58.1 -47.5 -31.7 -66.2 18.7 14.8 -25.7 -29.4 EPS (INR) 4.9 10.3 4.4 4.0

3.3 3.5 5.2 4.6 23.6 16.7

Key Assumptions

Gas Trans. volume (mmsmd) 97 91 94 86

87 90 97 100 92 93

Petchem sales ('000MT) 87 110 112 132

50 84 84 85 441 303 Segmental EBIT Breakup (INR m) Gas Transmission 2,234 2,620 5,080 3,221

3,937 5,755 4,277 4,249 13,156 18,218

LPG Transmission 690 477 542 671

822 580 543 553 2,380 2,499 Natural Gas Trading -355 4,517 511 934

3,424 1,925 4,834 2,414 5,608 12,597

Petrochemicals 1,249 1,552 48 -1,543

-3,002 -2,369 -1,606 -399 1,306 -7,376 LPG & Liq.HC (pre-subsidy) 9,956 9,011 7,424 2,827

2,768 721 2,328 2,153 29,217 7,970

Unallocated; GAILTEL 613 989 -95 743

681 1,101 -121 684 2,250 2,345 Total 14,388 19,165 13,511 6,853

8,630 7,714 10,255 9,654 53,917 36,253

Less: Subsidy -5,000 0 -5,000 0

0 0 0 0 -10,000 0 Total 9,388 19,165 8,511 6,853

8,630 7,714 10,255 9,654 43,917 36,253

GAIL

CMP: INR340 TP: INR376 Neutral We expect GAIL to report a PAT of INR5.9b (up 14.8% YoY and down

11.7% QoQ). We model nil subsidy sharing for GAIL in 3QFY16 (v/s nil in 3QFY16 and 4QFY15).

Segmental EBIT (pre-subsidy) is expected to be INR9.7b, up 40.9% YoY and down 5.9% QoQ. While the YoY increase would be driven by improved profitability in gas transmission segment, profitability in gas trading and petchem can significantly swing the 4Q reported results.

GAIL trades at 13.2x/10.8x FY17E/FY18E EPS of INR25.8/INR31.5. Maintain Neutral.

Key issues to watch for (a) Subsidy sharing—expect it to be nil, (b) profitability in gas

trading business, (c) progress of pipeline projects worth USD4b, (d) pending tariff revisions for key pipelines, and (e) increase in transmission volumes post RasGas contract renegotiation.

Bloomberg GAIL IN


52-Week Range (INR) 418/260 1,6,12 Rel Perf. (%) -1/21/-2

Financial snapshot (INR b) Y/E March 2015 2016E 2017E 2018E Sales 565.7 505.4 590.5 745.4 EBITDA 45.2 39.4 57.5 65.5 Adj. PAT 29.9 21.1 32.7 39.9 Adj. EPS (INR) 23.6 16.6 25.8 31.5 EPS Gr. (%) -31.6 -29.6 55.1 22.1 BV/Sh.(INR) 230.3 242.0 260.0 282.1 RoE (%) 10.8 7.0 10.3 11.6 RoCE (%) 11.1 6.0 8.4 9.5 Payout (%) 29.5 29.9 29.9 29.9 Valuations P/E (x) 15.8 20.5 13.2 10.8 P/BV (x) 1.6 1.4 1.3 1.2 EV/EBITDA (x) 10.3 10.6 7.4 6.1 Div. Yield (%) 1.6 1.2 2.1 2.4

April 2016 206


Quarterly performance (INR Million) Y/E March FY15

FY16 FY15 FY16E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Net Sales 2,304 3,510 2,428 2,363

2,557 2,526 2,475 2,634 10,606 10,191

Change (%) -22.2 26.7 -0.4 2.5 11.0 -28.0 1.9 11.5 1.3 -3.9 Employee Costs 76 70 139 70

74 113 89 108 356 384

Operating expenses 180 141 208 193

193 121 243 184 722 741 Other Expenditure 49 68 51 126

53 52 57 55 294 217

EBITDA 1,999 3,231 2,031 1,973

2,237 2,240 2,086 2,286 9,234 8,848 % of Net Sales 86.8 92.0 83.6 83.5

87.5 88.7 84.3 86.8 87.1 86.8

% Change -25.7 28.8 -1.3 -1.3 11.9 -30.7 2.7 15.8 -0.2 -4.2 Depreciation 469 466 478 480

434 464 472 482 1,892 1,852

Interest 321 307 288 262

207 213 184 199 1,178 804 Other Income 135 152 134 140

143 122 288 133 560 686

Prior period adjustment

-121

-121 PBT 1,343 2,610 1,397 1,251

1,738 1,685 1,718 1,738 6,603 6,878

Tax 494 915 510 580

610 600 483 591 2,500 2,284 Rate (%) 36.8 35.1 36.5 46.4 35.1 35.6 28.1 34.0 37.9 33.2 PAT 849 1,695 887 671

1,128 1,085 1,235 1,147 4,104 4,595

Adj. PAT 850 1,110 888 741

1,128 1,085 1,235 1,147 3,588 4,595 Change (%) -33 -3 2 -19 33 -2 39 55 -14 28 EPS (INR) 1.5 3.0 1.6 1.2 2.0 1.9 2.2 2.0 7.3 8.2 Transmission Vol. (mmscmd) 22.2 24.2 22.9 22.6

24.2 24.3 25.1 25.6 23.0 24.8

Implied adj. tariff (INR/mscm) 1,077 1,099 1,136 1,143 1,126 1,068 1,054 1,072 1,114 1,080 E: MOSL Estimates

Gujarat State Petronet

CMP: INR136 TP: INR145 Neutral We expect GUJS to report net sales of INR2.6b and PAT of INR1.1b

(up 55% YoY and down 7.1% QoQ). We model transmission volume at 25.6mmscmd (+13.3% YoY,

+2.2% QoQ) and transmission tariff at INR1,072/mscm (-6.2% YoY, +1.7% QoQ).

GUJS won the bids for three cross-country pipelines (Mehsana-Bhatinda, Bhatinda-Srinagar, Mallavaram-Bhilwara) and is awaiting environmental clearances and other approvals. We await clarity on the current status, timelines and other details regarding these pipelines.

We build gas transmission volumes of 24.8/27.5/30mmscmd in FY16/17/18 and model tariff at INR1,080/1,200/1,200mscm. The stock trades at 14.1x/12.4x FY17E/FY18E EPS of INR9.7/10.9. Maintain Neutral.

Key issues to watch for Transmission volumes Implementation of zonal tariff order

Bloomberg GUJS IN





Adj. EPS (INR) 6.4 8.2 9.7 10.9 EPS Gr. (%) -14.4 28.0 18.3 13.4 BV/Sh.(INR) 64.8 71.6 79.6 88.7

RoE (%) 12.5 12.0 12.8 13.0 RoCE (%) 13.5 12.3 13.4 13.7 Payout (%) 15.7 18.2 17.2 17.0



April 2016 207


Quarterly performance (Standalone) (INR Million) Y/E March FY15

FY16 FY15 FY16E

1Q 2Q 3Q 4Q

1Q 2Q 3Q 4QE

Net Sales 591,517 516,332 510,452 445,503 517,204 420,036 434,311 348,313 2,063,804 1,719,864 Change (%) 14.3 -0.4 -7.9 -30.5 -12.6 -18.7 -14.9 -21.8 -7.5 -16.7 EBITDA 5,258 15,445 -1,015 34,489 29,802 -1,265 21,711 26,847 54,176 77,095 % of Net Sales 0.9 3.0 -0.2 7.7 5.8 -0.3 5.0 7.7 2.6 4.5 Depreciation 5,897 3,880 4,386 5,549

7,508 5,428 6,978 7,163 19,712 27,077

Interest 1,295 1,869 2,370 1,532

1,227 1,650 1,610 1,598 7,066 6,086 Other income 2,620 3,308 2,783 5,431

3,138 3,640 2,732 2,776 14,142 12,286

PBT 685 13,004 -4,987 32,839 24,204 -4,704 15,855 20,861 41,541 56,217 Tax 225 4,502 -1,733 11,215

8,324 -1,499 5,433 6,856 14,209 19,114

Rate (%) 32.8 34.6 34.8 34.2 34.4 31.9 34.3 32.9 34.2 34.0 PAT 460 8,502 -3,254 21,624

15,880 -3,205 10,423 14,005 27,333 37,103

Change (%) nm 166.6 nm -53.1

3,349.3 nm nm -35.2 57.6 35.7 Adj. EPS 1.4 25.1 -9.6 63.8

46.8 -9.5 30.7 41.3 80.6 109.4

E: MOSL Estimates

HPCL

CMP: INR798 TP: INR1,299 Buy We expect OMCs’ earnings (IOCL, BPCL, HPCL) to be supported by

increased GRMs and higher marketing margins. We expect further earnings support to be provided through inventory gains.

We model nil subsidy sharing for OMCs; the subsidy would be shared by upstream players and the government.

4QFY16 gross under-recoveries (including LPG DBTL component) have declined 69% YoY, led by lower crude oil/petroleum product prices and diesel deregulation.

We peg refinery throughput at 4.6mmt for 4QFY16 (flat QoQ and 4.4mmt in 4QFY15).

We expect HPCL to report PAT of INR14b in 4QFY16 (+34% QoQ, -35% YoY). YoY decline would be due to the high INR3.1/liter marketing margins in 4QFY15.

HPCL trades at 7.1x/6.4x FY17E/FY18E EPS and at 1.3x/1.1x FY17E/FY18E BV. Buy.

Key issues to watch for (a) GRM and (b) impact of forex and inventory change.

Bloomberg HPCL IN



Financial snapshot (INR b) Y/E MARCH 2015 2016E 2017E 2018E Sales 2,064 1,720 1,639 1,844


EPS Gr. (%) 57.6 35.7 2.3 11.2 BV/Sh.(INR) 473 543 616 696 RoE (%) 17.6 21.6 19.3 19.0


Div. Yield (%) 3.1 4.2 4.2 4.7

April 2016 208



FY16 FY15 FY16E

1Q 2Q 3Q 4Q

1Q 2Q 3Q 4QE

Net Sales 8,672 9,489 9,410 9,129

8,994 9,658 9,269 9,345 36,699 37,267

Change (%) -3.8 -6.0 -9.6 -5.5

3.7 1.8 -1.5 2.4 -6.3 1.5 EBITDA 2,068 2,147 1,886 1,720

1,938 1,880 1,850 1,837 7,820 7,505

EBITDA (Rs/scm) 6.1 5.9 5.3 5.0

5.6 5.0 5.0 5.0 5.6 5.1 % of Net Sales 23.8 22.6 20.0 18.8

21.5 19.5 20.0 19.7 21.3 20.1

% Change 7.5 7.3 -2.9 -9.8 -6.3 -12.4 -1.9 6.9 0.6 -4.0 Depreciation 368 370 376 374

386 395 399 402 1,487 1,581

Interest 91 104 63 40

36 27 18 18 298 98 Other Income 93 107 148 107 79 99 135 101 456 415 PBT 1,702 1,781 1,595 1,413

1,596 1,557 1,569 1,518 6,490 6,240

Tax 561 584 513 454

577 542 517 501 2,113 2,137 Rate (%) 33.0 32.8 32.2 32.2 36.2 34.8 33.0 33.0 32.6 34.2 PAT 1,140 1,196 1,082 959

1,018 1,016 1,051 1,018 4,377 4,103

PAT (Rs/scm) 3.3 3.3 3.1 2.8

2.9 2.7 2.8 2.7 3.1 3.0 Change (%) 30.6 29.0 20.9 6.0 -10.7 -15.1 -2.8 6.1 21.6 -6.3 EPS (INR) 8.1 8.5 7.7 6.8 7.3 7.3 7.5 7.3 31.3 29.3 Gas Volumes (mmscmd)

CNG 2.84 3.01 2.95 2.94 2.97 3.10 3.07 3.09 2.94 3.06 PNG 0.91 0.93 0.90 0.88 0.87 0.98 0.94 0.98 0.91 0.94

Total 3.75 3.95 3.85 3.82 3.84 4.08 4.01 4.07 3.84 4.00 YoY Change (%)

CNG 2.4 5.0 5.6 4.0 4.7 2.9 4.1 4.9 4.2 4.1 PNG (3.5) (3.9) (7.6) (13.4) (4.8) 4.7 5.1 12.1 (7.2) 4.2

Total 0.9 2.7 2.2 (0.6) 2.3 3.3 4.3 6.6 1.3 4.1 E: MOSL Estimates

Indraprastha Gas

CMP: INR560 TP: INR537 Neutral We expect IGL to report volumes of 4.1mmscmd and PAT of INR1b

(up 6% YoY and down 3.2% QoQ) for 4QFY16. IGL's CNG volume growth has seen some uptick in the last two

quarters; PNG segment volumes have also increased. We model total volumes of 4/4.2/4.5mmscmd in FY16/FY17/FY18. We expect 4QFY16 CNG volumes at 3.1mmscmd (+5% YoY, flat

QoQ). The recent anti-pollution drive in Delhi, along with the Supreme

Court directive to set up ~100 CNG stations in Delhi, should increase earnings. Also, the recent reduction in domestic gas price has helped improve the competitiveness of CNG v/s diesel/petrol; we expect this to translate into higher volumes.

The stock trades at 16x/14.5x FY17E/FY18E EPS of INR34.9/38.7. Neutral.

Key issues to watch for (a) Likely increase in volumes following lower gas prices, and (b)

EBITDA margin.

Bloomberg IGL IN Equity Shares (m) 140.0


Financial Snapshot (INR b) Y/E MARCH 2015 2016E 2017E 2018E Sales 36.7 37.3 38.4 40.7 EBITDA 7.8 7.5 8.5 9.1

Adj. PAT 4.4 4.1 4.9 5.4 Adj. EPS (INR) 31.3 29.3 34.9 38.7 EPS Gr. (%) 21.6 -6.3 19.1 10.8

BV/Sh.(INR) 150.2 172.5 199.2 228.5 RoE (%) 22.6 18.2 18.8 18.1 RoCE (%) 30.0 16.9 17.8 17.2



April 2016 209



FY16 FY15 FY16E

1Q 2Q 3Q 4Q

1Q 2Q 3Q 4QE

Net Sales 1,246,662 1,113,049 1,069,273 934,916 1,010,089 851,148 831,788 770,857 4,363,900 3,463,882 Change (%) 13.1 1.3 -8.9 -30.6 -19.0 -23.5 -22.2 -17.5 -7.6 -20.6 EBITDA 34,061 -7,150 -26,232 89,431 98,026 4,249 49,590 71,586 90,110 223,451 % of Net Sales 2.7 -0.6 -2.5 9.6 9.7 0.5 6.0 9.3 2.1 6.5 Depreciation 14,949 7,301 12,112 10,826

11,435 11,286 11,693 13,276 45,187 47,689

Interest 9,139 10,395 9,390 5,529

5,922 7,293 6,104 6,386 34,453 25,705 Other Income 25,533 12,062 14,888 16,999

11,329 12,726 14,062 13,615 69,483 51,733

PBT 35,506 -12,783 -32,846 90,076 91,999 -1,604 45,854 65,540 79,953 201,789 Tax 10,277 -3,798 -6,478 27,223

27,642 1,688 15,286 21,975 27,223 66,591

Rate (%) 28.9 nm nm 30.2 30.0 nm 33.3 33.5 34.0 33.0 PAT 25,230 -8,985 -26,368 62,853

64,357 -3,292 30,569 43,565 52,730 135,199

Change (%) nm nm nm -33.1

155.1 nm nm -30.7 -24.9 156.4 Extraordinary Items 0 0 0 0

0 0 0 0 0 0

Adj. EPS 10.4 -3.7 -10.9 25.9 26.5 -1.4 12.6 17.9 21.7 55.7 E: MOSL Estimates

IOC

CMP: INR402 TP: INR615 Buy We expect OMCs’ earnings (IOCL, BPCL, HPCL) to be supported by

increased GRMs and higher marketing margins. We expect further earnings support to be provided through inventory gains.

We model nil subsidy sharing for OMCs; the subsidy would be shared by upstream players and the government.

4QFY16 gross under-recoveries (including LPG DBTL component) have declined 69% YoY, led by lower crude oil/petroleum product prices and diesel deregulation.

We peg refinery throughput at 14.3mmt for 4QFY16 v/s 13.5mmt in 4QFY15 and 14.4mmt in 3QFY16.

We expect IOCL to report net profit of INR43.6b in 4QFY16 (+42.5% QoQ, -30.7% YoY). The YoY decline would be due to high marketing margins of INR3.1/liter in 4QFY15.

IOCL trades at 6.5x/5.4x FY17E/FY18E EPS and at 1.1x/1x FY17E/FY18E BV. Buy.

Key issues to watch for (a) Update on commercial dispatches from Paradeep refinery

project, (b) GRM, (c) capex plans, and (d) forex/inventory changes.

Bloomberg IOCL IN


1,6,12 Rel Perf. (%) 2/7/20

Financial snapshot (INR b) Y/E MARCH 2015 2016E 2017E 2018E Sales 4,483 3,020 3,021 3,589


EPS Gr. (%) -39.2 239.6 36.8 19.9 BV/Sh.(INR) 283.5 320.1 359.9 407.4 RoE (%) 4.7 15.0 18.3 19.4


Div. Yield (%) 1.7 3.5 4.7 5.7

April 2016 210



(INR Million) Y/E MARCH FY15

FY16 FY15 FY16E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Net Sales 157,414 159,113 147,119 110,928

113,131 102,176 88,166 89,166 574,574 392,638

Change (%) 3.1 -15.2 -21.1 -42.0 -28.1 -35.8 -40.1 -19.6 -20.0 -31.7 Raw Material (incl. inv chg) 156,829 165,619 158,240 97,788

98,002 102,427 76,547 71,375 578,476 348,350

Staff Cost 580 547 585 695

623 656 688 682 2,407 2,648 Other Expenditure 1,241 1,951 2,930 1,671

4,224 1,244 4,855 2,667 7,793 12,990

EBITDA -1,237 -9,003 -14,637 10,774

10,283 -2,151 6,075 14,442 -14,103 28,649 % of Net Sales -0.8 -5.7 -9.9 9.7

9.1 -2.1 6.9 16.2 -2.5 7.3

% Change -173 -223 nm 197 nm nm nm 34 -240.6 n.a. Depreciation -946 -1,123 -1,429 -1,489

-1,486 -1,593 -1,596 -1,686 -4,986 -6,361

Interest -531 -1,123 -1,279 -1,138

-1,218 -1,588 -1,515 -1,567 -4,071 -5,888 Other Income 2,232 1,901 1,835 2,136 2,157 2,437 1,657 1,635 8,105 7,886 PBT b/f forex/exceptional -481 -9,348 -15,510 10,283

9,736 -2,896 4,621 12,824 -15,055 24,286

Forex gain/(loss) -260 -4,825 -3,434 1,680

-3,103 -7,026 -1,631 0 -6,838 -11,760 Exceptional items 0 334 0 0 -1,542 -205 -6 0 335 -1,753 PBT -741 -13,838 -18,944 11,963

5,092 -10,127 2,984 12,824 -21,559 10,773

Tax 380 4,323 0 -266

-1,032 1,032 0 -2,372 4,437 -2,372 Rate (%) na na 0.0 2.2 20.3 10.2 - 18.5 20.6 22.0 PAT -361 -9,515 -18,944 11,697

4,060 -9,095 2,984 10,451 -17,122 8,401

Adj. PAT* -361 -9,749 -18,944 11,697

5,278 -8,933 2,989 10,451 -17,356 9,785 Change (%) nm -503.6 nm 9.6 nm nm nm -10.6 -384.8 EPS (INR) -0.2 -5.4 -10.8 6.7 2.3 -5.2 1.7 6.0 -9.8 4.8 GRM (USD/bbl) 0.7 -4.0 -6.7 7.0

6.6 0.3 4.8 8.5 -0.6 5.3

Throughput (mmt) 3.2 3.5 3.9 4.1 3.9 3.5 3.8 4.2 14.7 15.4 E: MOSL Estimates

CMP: INR66 TP: INR79 Buy We expect MRPL to report EBITDA of INR14.4b (v/s INR6.1b in

3QFY16 and INR10.8b in 4QFY15). We estimate PAT of INR10.5b (v/s INR11.7b in 4QFY15 and INR3b in 3QFY16).

Regional benchmark Reuters Singapore GRM is down 10% YoY / 3% QoQ to USD7.7/bbl. We model MRPL’s GRM at USD8.5/bbl v/s a USD7/bbl in 4QFY15 and USD4.8/bbl in 3QFY16.

We expect refinery throughput at 4.2mmt (+10.7% QoQ and +2.7% YoY).

For MRPL, we model GRM of USD5.1/7/7/bbl for FY16/FY17/FY18. The stock trades at 5.2x/5x FY17E/FY18E EPS, and at an EV/EBITDA of 4.8x/4x FY17E/FY18E EBITDA. Buy.

Key issues to watch for (a) GRM, (b) forex fluctuations, and (c) inventory changes. Foray into petrol and diesel marketing with opening of retail

outlets.

MRPL

Bloomberg MRPL IN


1,6,12 Rel Perf. (%) 8/30/5

Financial snapshot (INR b) Y/E MARCH 2015 2016E 2017E 2018E Sales 574.6 393.1 419.7 490.7

EBITDA -14.1 28.6 43.9 46.9 Adj. PAT -17.4 9.8 23.2 24.3 Adj. EPS (INR) -9.9 5.6 13.2 13.9

EPS Gr. (%) -430.5 -156.4 136.6 5.1 BV/Sh.(INR) 30.3 33.8 43.9 54.5 RoE (%) -27.7 15.0 34.0 28.2

RoCE (%) -16.9 17.8 17.6 15.4 Payout (%) 0.0 26.9 23.0 23.6 Valuation

P/E (x) -7.0 12.4 5.2 5.0 P/BV (x) 2.3 2.0 1.6 1.3 EV/EBITDA (x) -6.9 6.7 4.8 4.0

Div. Yield (%) 0.0 1.6 3.8 4.0

April 2016 211


Quarterly performance (INR Billion) Y/E March FY15

FY16 FY15 FY16E

1Q 2Q 3Q 4Q

1Q 2Q 3Q 4QE

Net Sales 25.1 20.8 20.6 25.7 27.5 24.0 22.2 17.5 92.3 91.2 Change (%) 27.0 -23.3 -20.9 41.0 9.4 15.2 7.6 -32.0 1.1 -1.2 EBITDA 11.1 7.0 5.2 6.8

10.8 7.7 6.3 1.5 30.1 26.3

% of Net Sales 44.3 33.5 25.2 26.6

39.4 32.1 28.4 8.4 32.7 28.9 Change (%) 59.9 -47.5 -55.6 92.8

-2.7 10.4 21.3 -78.6 -15.0 -12.7

D,D&A 1.6 1.9 1.8 2.1 1.9 2.2 2.5 2.5 7.4 9.1 Interest 0.9 0.8 0.8 1.0

0.8 0.9 0.9 0.9 3.4 3.5

OI (incl. Oper. other inc) 4.2 5.4 4.3 4.1 4.1 5.6 3.7 3.7 18.0 17.1 PBT 12.9 9.7 6.9 7.9

12.2 10.2 6.6 1.8 37.3 30.8

Tax 4.3 3.6 1.9 2.3

4.5 3.4 2.5 0.6 12.2 11.0 Rate (%) 33.8 37.1 27.8 29.8

36.7 33.8 37.6 32.3 32.7 35.7

PAT 8.5 6.1 5.0 5.5 7.8 6.7 4.1 1.2 25.1 19.8 Change (%) 39.9 -32.7 -44.8 -2.5 -9.0 10.9 -17.6 -78.4 -15.8 -21.1 % of Net Sales

Adj. PAT 8.5 6.1 5.0 5.5 7.8 6.7 4.1 1.2 25.1 19.8 Adj. EPS (INR) 14.2 10.1 8.3 9.2

12.9 11.2 6.8 2.0 41.8 32.9

Key Assumptions (USD/bbl) Exchange rate (INR/USD) 59.8 60.5 61.9 62.2

63.7 65.0 66.0 67.3 61.1 65.5

Gas Price (USD/bbl) 4.2 4.2 5.1 5.6

4.7 4.7 4.2 4.2 4.8 4.4 Gross Oil Realization 108.4 101.3 74.9 53.6

61.9 48.7 42.0 32.5 84.5 46.3

Subsidy 56.0 56.0 37.5 0.0

4.4 2.3 - 0.0 37.4 1.7 Net Oil Realization 52.4 45.3 37.4 53.6 57.4 46.4 42.0 32.5 47.2 44.6 Subsidy (INR b) 18.5 22.4 14.4 0.0 1.7 0.8 - 0.0 55.2 2.5 *Standalone; E: MOSL Estimates

Oil India

CMP: INR315 TP: INR421 Buy We expect OINL to report PAT of INR1.2b (v/s INR5.5b in 4QFY15 and

INR4.1b in 3QFY16). We estimate EBITDA at INR1.5b (down 78.6% YoY and down 76.8%

QoQ). We estimate gross and net realization at USD32.5/bbl, with nil subsidy assumption.

We model upstream subsidy if under-recovery is above government support of INR12/liter in kerosene and INR18/kg in LPG.

Our Brent price assumption is USD47.5/45/bbl for FY16/17 and USD50/bbl for long term.

Play on crude price: Post the diesel de-regulation, and switching of cess to ad-valorem basis, OINL’s earnings now have direct correlation with crude price.

The stock trades at 8.7x/7.3 FY17E/FY18E EPS of INR36/INR42.9. We remain positive on OINL due to attractive valuations and high dividend yields. Buy.

Key issues to watch for (a) Subsidy sharing, (b) DD&A charges, and (c) oil & gas production

volumes.

Bloomberg OINL IN



Financial snapshot (INR b) Y/E MARCH 2015 2016E 2017E 2018E Sales 92.3 91.6 89.5 100.0 EBITDA 29.8 27.3 27.6 33.1

Adj. PAT 24.7 20.8 21.6 25.8 Adj. EPS (INR) 41.8 32.9 36.0 42.9 EPS Gr. (%) -17.1 -16.0 4.3 19.3

BV/Sh.(INR) 367.2 385.1 404.7 428.0 RoE (%) 11.7 8.8 9.1 10.3 RoCE (%) 12.8 6.8 7.2 8.1



April 2016 212


Quarterly performance (Standalone)

(INR Billion) Y/E March FY15

FY16 FY15 FY16E

1Q 2Q 3Q 4Q

1Q 2Q 3Q 4QE

Net Sales 217.5 203.6 187.1 213.0

227.0 205.6 184.0 160.0 821.3 776.6

Change (%) 13.2 -8.7 -9.8 2.0

4.4 1.0 -1.7 -24.9 -1.2 -5.4 Raw Material and Purchases -0.7 3.6 2.5 -0.3

0.2 4.3 4.4 3.5 5.2 12.3

Statutory Levies 58.3 54.5 53.1 62.9

56.6 52.8 48.0 46.4 228.7 203.8 Employee Costs 4.1 4.6 4.0 4.3

4.8 4.5 4.7 4.3 17.0 18.3

Other Exp (incl Stock Adj) 30.0 32.4 33.5 46.9

45.4 40.1 40.5 36.5 142.8 162.4 EBITDA 125.9 108.5 94.0 99.3

120.0 103.9 86.4 69.4 427.6 379.7

% of Net Sales 57.9 53.3 50.2 46.6

52.9 50.5 47.0 43.3 52.1 48.9 Change (%) 49.9 -9.6 -23.1 -10.9

-4.7 -4.3 -8.0 -30.1 -2.3 -11.2

D,D & A 63.9 43.7 58.1 57.5

45.8 46.1 39.5 43.5 223.2 174.9 Interest 0.0 0.0 0.0 0.0

0.0 0.0 0.0 0.0 0.0 0.1

Other Income 10.0 14.5 15.9 20.8

9.4 12.5 9.6 12.0 61.1 43.5 Impairment

39.9 39.9

PBT 72.0 79.4 51.7 62.6

83.5 70.4 16.6 37.8 265.6 208.2 Tax 24.2 24.9 16.0 23.2

28.9 22.0 3.7 11.3 88.2 65.8

Rate (%) 33.6 31.4 30.9 37.1

34.6 31.2 22.3 29.8 33.2 31.6 PAT 47.8 54.4 35.7 39.4

54.6 48.4 12.9 26.5 177.3 142.4

Change (%) 19.1 -10.2 -49.9 -19.5

14.2 -11.1 -64.0 -32.6 -19.7 -19.7 Adjusted PAT 47.8 54.4 35.7 39.4

54.6 48.4 40.8 26.5 177.3 170.4

Adj. EPS 5.6 6.4 4.2 4.6

6.4 5.7 4.8 3.1 20.7 19.9 Key Assumptions (USD/bbl)

Fx rate (INR/USD) 59.8 60.5 61.9 62.2

63.7 65.0 66.0 67.3 61.1 65.5 Gross Oil Realization 109.5 102.1 76.0 55.6

63.8 51.2 44.3 34.9 85.8 48.6

Subsidy 62.3 60.8 40.4 0.0

4.9 2.4 0.0 0.0 40.9 1.8 Net Oil Realization 47.2 41.4 35.6 55.6

58.9 48.8 44.3 34.9 44.9 46.8

Subsidy (INR b) 132.0 136.4 94.6 0.0

11.3 6.0 0.0 0.0 363.0 17.3 E: MOSL Estimates

ONGC

CMP: INR206 TP:INR265 Buy We expect ONGC to report adjusted PAT of INR26.5b in 4QFY16 (v/s

INR39.4b in 4QFY15 and INR12.9b in 3QFY16). We estimate EBITDA at INR69.4b (v/s INR99.3b in 4QFY15 and

INR86.4b in 3QFY16). We estimate gross and net realization at USD34.9/bbl, as we model nil subsidy in 4QFY16.

We model upstream subsidy if under-recovery is above government support of INR12/liter in kerosene and INR18/kg in LPG.

Play on crude price: Post the diesel deregulation, and switching of cess to ad-valorem basis, ONGC’s earnings now have direct correlation with crude price.

The stock trades at 11.9x/8.6x FY17E/FY18E consolidated EPS of INR17.2/INR23.8. Valuations are attractive, with implied dividend yield of ~3%. Buy.

Key issues to watch for (a) Subsidy sharing, (b) DD&A charges, (c) oil & gas production

volumes, and (d) new investments in KG Basin following new deepwater gas pricing policy.

Bloomberg ONGC IN



Financial snapshot (INR b) Y/E March 2015 2016E 2017E 2018E Sales 1,609 1,240 1,282 1,523 EBITDA 547 455 455 540

Adj. PAT 177 150 150 211 Adj. EPS (INR) 21.1 17.6 17.2 23.8 EPS Gr. (%) -33.0 -14.9 0.0 40.1

BV/Sh.(INR) 211 223 234 250 RoE (%) 10.4 8.1 7.5 9.8 RoCE (%) 9.2 6.0 6.1 8.1

Payout (%) 51.8 33.2 33.9 34.3 Valuation P/E (x) 9.7 11.7 11.9 8.6


April 2016 213


Quarterly performance (INR Million) Y/E March FY15 FY16 FY15 FY16E 1Q 2Q 3Q 4Q

1Q 2Q 3Q 4QE

Net Sales 101,608 109,800 111,985 71,617

83,772 75,450 51,460 67,510 395,010 278,404 Change (%) 20.3 15.7 19.4 -31.3

-17.6 -31.3 -54.0 -5.7 4.6 -29.5

Raw Material (incl. inv chg) 96,995 103,486 107,272 68,356

79,080 69,585 47,165 61,848 376,109 257,677 Staff Cost 122 110 122 218

150 144 229 163 571 686

Other Expenditure 913 1,014 1,184 829

931 1,053 908 1,025 3,940 3,706 EBITDA 3,578 5,190 3,408 2,214

3,611 4,668 3,158 4,473 14,390 16,335

% of Net Sales 3.5 4.7 3.0 3.1

4.3 6.2 6.1 6.6 3.6 5.9 Change (%) -10.1 42.6 -2.6 -42.8

0.9 -10.1 -7.3 102.1 -4.0 13.5


801 808 807 808 3,154 3,224 Interest 784 799 685 667

612 612 588 598 2,935 2,433

Other Income 353 351 268 576

333 360 584 447 1,548 1,624 PBT 2,376 3,968 2,199 1,306

2,531 3,608 2,348 3,515 9,849 12,302

Tax 810 1,340 575 -378

780 1,120 564 1,054 2,347 3,914 Rate (%) 34.1 33.8 26.2 -29.0

30.8 31.0 24.0 30.0 23.8 31.8

Adj. PAT 1,566 2,628 1,624 1,684

1,751 2,488 1,784 2,460 7,502 8,388 Change (%) -30.5 44.6 19.8 -0.5

11.8 -5.3 9.9 46.1 5.4 11.8

Tax write-back

1,323

724

1,323 724 PAT 1,566 2,628 1,624 3,007

2,475 2,488 1,784 2,460 8,825 9,112

Adj. EPS (INR) 2.1 3.5 2.2 2.2

2.3 3.3 2.4 3.3 10.0 11.2 Dahej Gas Volume (TBTU) 138.0 149.2 140.4 93.2

125.4 153.9 138.2 138.3 520.8 555.9

Dahej Gas Volumes (mmt) 2.7 3.0 2.8 1.9

2.6 3.1 2.7 2.7 10.4 11.1 Kochi Gas Volumes (mmt) 0.0 0.0 0.0 0.0

0.0 0.1 0.1 0.1 0.1 0.3

Avg. Dahej Regas (INR/mmbtu) 36.3 47.1 36.3 34.9

38.3 39.1 21.8 42.7 38.7 35.2 E: MOSL Estimates

Petronet LNG

CMP: INR245 TP: INR280 Neutral We expect PLNG to report PAT of INR2.5b (down 46.1% YoY, up

37.9% QoQ) and EBITDA of INR4.5b (up 102.1% YoY and 41.6% QoQ) for 4QFY16.

We model Dahej LNG volumes at 2.7mmt (up 48.5% YoY, flat QoQ) in 4QFY16.

Following RasGas contract renegotiation, we have changed our Dahej long-term volumes assumption to 8.5mmt v/s 7.5mmt earlier.

The stock trades at 16.3x/12.3x FY17E/FY18E consolidated EPS of INR15/INR19.8. Maintain Neutral.

Key issues to watch for (a) Ramp-up at Kochi terminal, (b) spot volumes, and (c) marketing

margin on spot volumes. Petronet LNG’s earnings are largely protected due to take-or-pay

contracts with off-takers. Early completion of the Kochi-Mangalore-Bangalore pipeline and continued lower spot prices would provide earnings upside.

Bloomberg PLNG IN


1,6,12 Rel Perf. (%) -1/44/50

Financial snapshot (INR b) Y/E March 2015 2016E 2017E 2018E Sales 395.0 278.2 267.0 346.8 EBITDA 14.4 15.9 20.8 25.7

Adj. PAT 8.8 9.2 11.3 14.9 Adj. EPS (INR) 10.0 11.3 15.0 19.8 EPS Gr. (%) 5.4 11.1 30.4 31.9

BV/Sh.(INR) 75.8 84.5 96.0 111.2 RoE (%) 16.5 14.1 16.7 19.1 RoCE (%) 10.6 10.0 12.1 15.2



April 2016 214


Quarterly performance (Standalone)

(INR Billion) Y/E March FY15 FY16 FY15 FY16E 1Q 2Q 3Q 4Q

1Q 2Q 3Q 4QE

Net Sales 963.5 964.9 802.0 560.4

658.2 608.2 565.7 552.3 3,290.8 2,384.3 Change (%) 9.9 -7.0 -22.5 -41.1

-31.7 -37.0 -29.5 -1.5 -15.6 -27.5

EBITDA 75.3 82.4 72.1 86.3 93.1 98.3 102.7 106.3 316.0 400.5 % of Net Sales 7.8 8.5 9.0 15.4

14.1 16.2 18.2 19.3 9.6 16.8

Change (%) 6.4 4.9 -5.4 3.6 23.6 19.4 42.5 23.2 2.4 26.7 Depreciation 20.2 22.3 21.1 21.3

22.7 23.7 24.1 24.3 84.9 94.7

Interest 3.2 7.6 8.8 4.0

6.0 6.9 6.1 7.0 23.7 26.0 Other Income 20.5 21.4 24.0 21.3

18.2 16.2 22.9 18.8 87.2 76.1

PBT 72.3 73.9 66.2 82.3 82.6 83.8 95.5 93.9 294.7 355.8 Tax 15.8 16.5 15.4 19.8

19.5 18.2 23.3 22.9 67.5 83.9

Rate (%) 21.8 22.3 23.2 24.1 23.5 21.7 24.4 24.4 22.9 23.6 Adj. PAT 56.5 57.4 50.9 62.4

63.2 65.6 72.2 71.0 227.2 271.9

Change (%) 5.5 4.6 -7.7 10.9

11.8 14.2 41.9 13.7 3.4 19.7 Adj. EPS (INR) 19.3 19.7 17.4 21.4

21.6 22.4 24.7 24.3 77.7 93.0

Key Assumptions (USD/bbl) Fx Rate (INR/USD) 59.8 60.6 62.0 62.2

63.5 65.0 66.0 67.0 61.2 65.4

RIL GRM 8.7 8.3 7.3 10.1

10.4 10.6 11.5 11.0 8.6 10.9 Singapore GRM 5.8 4.8 6.3 8.6

8.0 6.3 8.0 7.7 6.4 7.5

Premium/(disc) to Singapore 2.9 3.5 1.0 1.5

2.4 4.3 3.5 3.3 2.2 3.4 KGD6 Prodn (mmscmd) 13.1 12.5 11.8 11.5 11.3 11.4 10.6 10.4 12.2 11.0 Segmental EBIT Breakup (INR b)

Refining 37.7 37.9 32.0 47.3

51.4 54.1 63.3 59.4 154.9 228.3 Petrochemicals 18.9 24.0 22.0 21.2

24.6 25.2 25.9 26.8 86.1 102.5

E&P 4.9 3.3 2.7 1.6

0.8 0.6 0.4 0.4 12.5 2.2 Others 0.5 0.7 0.7 1.2

0.6 0.6 0.9 0.5 3.2 2.6

Total 62.0 65.9 57.4 71.4

77.5 80.5 90.5 87.1 256.6 335.5 Segmental EBIT includes non-interest other income

Reliance Industries

CMP: INR1,028 TP: INR1,092 Neutral We expect RIL to report GRM of USD11/bbl (v/s USD10.1/bbl in

4QFY15 and USD11.5/bbl in 3QFY16.

RIL’s refining segment profit is likely to decline QoQ due to largely lower cracks. Petchem profitability is expected to increase QoQ and YoY, led by overall improved polymer and polyster margins.

We expect RIL to report standalone PAT of INR71.0b (+13.7% YoY, -1.7% QoQ). Reported consolidated numbers would include shale gas business, but with a one-quarter lag.

RIL trades at 9.9x/8.7x FY17E/FY18E adjusted EPS of INR114.5/INR130.9. RIL's new refining/petchem projects are likely to add to earnings from end-FY18, but Telecom business would be a drag on profitability and lead to RoE of sub-13%. Maintain Neutral.

Key issues to watch for GRM Petchem margins KG-D6 production Update on Telecom venture

Bloomberg RIL IN

Equity Shares (m) 3,238.4 M. Cap. (INR b)/(USD b) 3329/50 52-Week Range (INR) 1,090/819

1,6,12 Rel Perf. (%) 1/23/37

Financial snapshot (INR b) Y/E March 2015 2016E 2017E 2018E Sales 3,291 2,384 2,630 3,032


EPS Gr. (%) 3.3 19.7 24.9 14.3 BV/Sh.(INR) 738.5 817.7 906.8 1,018.5 RoE (%) 11.0 11.9 13.4 13.6


Div. Yield (%) 1.0 1.2 1.4 1.6

April 2016 215

March 2016 Results Preview | Real Estate

Sluggishness to continue amidst signs of slow revival Reputed brands gaining success with focus on project execution and delivery

Torpidity to continue in 4Q, as recovery to set in gradually Developers adopted a defensive approach on 4Q being weak. New launches remained subdued, with developers focusing on clearing existing inventory rather than launching new projects at a time when demand is sluggish. Some launches during the quarter were Godrej’s 2nd phase of The Trees (Mumbai), Mahindra Lifespaces’ Vivante, and Sobha’s International City (Gurgaon). While weakness prevails in real estate markets across the country, the NCR is the worst affected.

Commercial segment continues to grow, PE interest healthy The commercial real estate market continues to show traction, indicating positive outlook for the sector, owing to rising demand amidst shrinking inventory in key regions of Bangalore and NCR. Despite the ongoing slowdown, private equity (PE) players remain buoyant on Indian realty, as the government has simplified the foreign direct investment (FDI) norms for the sector.

Slow recovery to be seen in coming quarters In 4QFY16, the union budget was declared. It focused on various initiatives such as ‘housing for all’ by 2022, smart cities, and real estate investment trusts (REITs) that could give an impetus to the real estate sector. With the government easing FDI norms in the construction sector, more offshore investors are likely to invest in real estate. The government has also passed the real estate bill, which would instill greater confidence in home buyers and should boost demand, although it could lead to delay in project launches. Also, the benefits of RBI cutting policy rate by 25bp will percolate in the coming quarters.

Valuation and view The Real Estate sector is set to emerge from fundamental concerns of lack of affordability, liquidity stress, and lack of transparency. With the real estate bill passed, the government focusing on affordable housing, and favorable interest rates, the sector is set for a slow and gradual recovery. Bangalore, followed by Mumbai, remains a preferred play amidst slow signs of recovery. The commercial segment is well poised to witness growth. Preferred picks: Prestige, Brigade (valuation discount and Bangalore proxy), and Oberoi (Mumbai recovery play). For longer-term growth, we like Godrej Properties’ business model and positioning, though we have a Neutral rating currently due to at-par valuation.

Sandipan Pal ([email protected]); +91 22 3982 54367 Aashumi Mehta ([email protected]); +91 22 3010 239

Company name

DLF

Godrej Properties

Indiabulls Real Estate

Mahindra Lifespaces

Oberoi Realty

Phoenix Mills

Prestige Estate Projects

Sobha Developers

Real Estate March 2016 Results Preview | April 2016

April 2016 216






YoY Var % QoQ

Real Estate DLF 113 Buy 20,887 6.9 -26.1 8,258 18.7 -32.6 1,098 -36.0 -36.1Godrej Properties 303 Neutral 3,691 -47.1 -12.6 768 -16.7 -4.1 475 -7.6 -8.6Indiabulls Real Estate 53 Buy 6,400 7.7 -3.7 1,774 100.7 -13.7 614 -34.1 -23.7Mahindra Lifespace 434 Neutral 2,301 -11.2 4.4 481 -3.9 27.7 282 -8.0 264.7Oberoi Realty 238 Buy 2,794 -19.0 -64.3 1,374 -23.0 -58.1 857 -16.8 -59.1Phoenix Mills 301 Buy 917 13.5 0.6 563 9.4 -6.9 350 LP -22.8Prestige Estates 178 Buy 5,358 -20.8 -0.7 1,204 -16.9 8.1 558 -51.0 -14.0Sobha 268 Buy 5,735 13.3 43.7 1,538 8.3 39.9 673 8.5 109.6 Sector Aggregate 48,082 -6.0 -19.1 15,959 10.6 -26.1 4,906 -15.1 -26.1


(INR) FY16E FY17E FY18E FY16E FY17E FY18E FY16E FY17E FY18E FY16E FY17E FY18E Real Estate DLF 113 Buy 3.0 3.8 4.4 37.8 29.9 25.6 11.1 13.0 12.0 1.8 2.3 2.7 Brigade Enterprises 139 Buy 11.3 13.9 19.2 12.3 10.0 7.3 6.5 5.5 4.6 9.1 10.3 12.9 Godrej Properties 303 Neutral 13.1 16.1 21.2 23.1 18.8 14.3 22.2 15.9 11.2 13.3 14.6 16.9 Indiabulls Real Estate 53 Buy 7.3 8.2 10.0 7.3 6.5 5.3 10.1 9.1 7.5 4.0 4.4 5.1 Jaypee Infratech 8 Neutral 2.9 2.6 3.2 2.9 3.2 2.6 6.3 5.9 6.1 6.3 5.4 6.6 Mahindra Lifespace 434 Neutral 17.7 33.1 40.9 24.5 13.1 10.6 19.7 11.0 8.6 4.8 8.1 9.0 Oberoi Realty 238 Buy 13.6 25.6 29.8 17.5 9.3 8.0 12.0 5.7 3.5 9.0 14.8 15.1 Phoenix Mills 301 Buy 7.7 19.0 26.5 39.2 15.8 11.3 10.5 7.6 5.8 5.8 12.8 15.6 Prestige Estates 178 Buy 9.4 9.0 11.1 18.9 19.8 16.1 11.0 11.0 9.4 8.9 7.9 9.1 Sobha 268 Buy 18.8 21.1 29.9 14.3 12.7 9.0 9.3 7.8 6.3 7.4 8.0 11.0 Sector Aggregate 19.4 14.7 11.9 10.6 9.6 8.0 4.5 5.7 6.8

Source: MOSL

Exhibit 3: Launch velocity (msf)

Launch Mumbai NCR Bangalore Pune Hyderabad Chennai India 1QCY11 16 50 11 7 9 5 89 2QCY11 11 48 8 12 6 6 84 3QCY11 12 19 31 5 3 4 71 4QCY11 9 34 4 15 11 7 70

2011 48 151 54 38 11 22 314 1QCY12 17 32 11 13 12 6 79 2QCY12 11 17 1 14 5 5 48 3QCY12 14 40 9 8 13 7 79 4QCY12 18 40 21 12 18 5 97

2012 61 129 43 46 48 23 303 1QCY13 15 26 14 8 10 7 70 2QCY13 16 37 39 15 5 6 113 3QCY13 12 31 33 8 15 8 92 4QCY13 11 19 8 11 13 8 57

2013 55 112 94 42 13 29 332 1QCY14 25 21 24 15 4 9 94 2QCY14 15 38 19 11 2 7 91 3QCY14 12 28 38 11 6 4 93 4QCY14 23 13 24 12 6 4 77

2014 75 100 105 50 18 24 355 1QCY15 21 20 19 13 5 5 78 2QCY15 21 20 39 9 2 18 108

Source: MOSL, Liases Foras

Launch velocity deteriorates in Bangalore and Mumbai.

NCR witnesses considerable improvement in new

launches.

April 2016 217


Exhibit 4: Sales volume trends—Residential

Volume (msf) Mumbai NCR Bangalore Pune Chennai India 1QCY11 9 27 9 7 5 57 2QCY11 8 22 7 10 6 52 3QCY11 9 18 9 8 4 48 4QCY11 8 23 14 10 7 62 2011 34 90 39 35 22 219 1QCY12 9 31 11 9 6 67 2QCY12 10 21 16 9 5 62 3QCY12 10 26 16 11 7 69 4QCY12 10 20 12 9 5 57 2012 39 99 55 39 23 255 1QCY13 10 25 10 9 7 62 2QCY13 9 22 13 7 6 58 3QCY13 8 21 11 5 8 53 4QCY13 10 22 17 8 8 65 2013 37 90 51 29 29 238 1QCY14 12 22 16 10 9 68 2QCY14 11 17 18 9 7 62 3QCY14 10 12 10 9 4 45 4QCY14 10 18 13 12 4 58 2014 43 69 57 40 24 233 1QCY15 12 14 17 12 5 60 2QCY15 12 15 16 9 6 58

Source: MOSL, Liases Foras

Exhibit 5: Commercial supply (msf)—Commercial sector on the cusp of revival; gradual economic push to further improve growth

Source: DTZ

Exhibit 6: Commercial absorption (msf)—E-commerce and start-ups comprise a huge chunk of commercial space take-up

Source: DTZ

Exhibit 7: Relative performance—three months (%)


Exhibit 8: Relative performance—one year (%)


0.0

1.4

2.8

4.2

5.6

1QCY

112Q

CY11

3QCY

114Q

CY11

1QCY

122Q

CY12

3QCY

124Q

CY12

1QCY

132Q

CY13

3QCY

134Q

CY13

1QCY

142Q

CY14

3QCY

144Q

CY14

1QCY

152Q

CY15

NCR Mumbai Bangalore

0.0

1.3

2.5

3.8

5.0

1QCY

112Q

CY11

3QCY

114Q

CY11

1QCY

122Q

CY12

3QCY

124Q

CY12

1QCY

132Q

CY13

3QCY

134Q

CY13

1QCY

142Q

CY14

3QCY

144Q

CY14

1QCY

152Q

CY15

NCR Mumbai Bangalore

74

82

90

98

106

Dec-

15

Jan-

16

Feb-

16

Mar

-16

Sensex Index MOSL Real Estate Index

65

75

85

95

105

Mar

-…

Apr-

15

May

-…

Jun-

15

Jul-1

5

Aug-

…

Sep-

15

Oct

-15

Nov

-…

Dec-

15

Jan-

16

Feb-

16

Mar

-…

Sensex Index MOSL Real Estate Index

NCR—the most underperforming market— expected to show traction

in 2QCY15. Chennai and Mumbai likely to be

subdued.

April 2016 218


Exhibit 9: Recent private equity deals in Indian real estate Entry/ Exit Date Investor Investee Asset City Micro

Market Deal Size (INR M)

Entry Mar-16 Blackstone Salarpuria Sattva Group

Commercial project Bangalore 470

Entry Feb-16 KKR Sunteck Realty Signia Isle and Signia Pearls Mumbai BKC 150

Entry Jan-16 IIFL Ariisto Realtors Kandivali Mumbai Kandivali 500

exit Jan-16 Apollo Global Ahuja Constrution Ahuja towers Mumbai Worli 460 Exit ICICI Kolte Entry Dec-15 KKR SARE Homes Gurgaon Gurgaon 200

Entry Mar-16 Blackstone Salarpuria Sattva Group

Commercial project Bangalore 470

Entry Dec-15 Ask group Rajesh life spaces Vikhroli Mumbai 11 3,650

Entry Sep-15 GIC DLF Two upcoming projects in Moti Nagar NCR Delhi 19,900

Entry Aug-15 ICICI Prudential Asset Management Company Ltd,

ATS Infrastructure

Residential project near sector 150, Yamuna Expressway

NCR Noida 1,300

Entry Aug-15 Standard Chartered Private Equity

Tata Realty & Infrastructure

Commercial Asset Investment Platform of INR3,000Cr

- - 20,000

Entry Aug-15 Goldman Sachs Piramal Realty - - - 9,000 9,000

Entry Aug-15 Blackstone Group and Panchshil Realty NA IT SEZ Pune Kharadi 7,500

Entry Jul-15 Standard Chartered Private Equity and Asia Development Bank

Shapoorji Pallopnji Group

Pan India Affordable Housing - - 12,800

Entry Jul-15 Edelweiss Group Saya Group Saya Gold Avenue NCR Ghaziabad 2,000 Entry Jul-15 Warburg Pincus Piramal Realty - - - 18,000

Exhibit 10: Recent land deals in India

Date Buyer Seller Micro Market City Land Area (Acres)

Transaction Value

(INR m)

Mar-16 Essar SNN Hebbal Bangalore 8 3,000 Oct-15 Runwal Crompton Greaves Kanjurmarg Mumbai 13 4,960 Sep-15 ATS Infrastructure NA Noida NCR 25 13,000 Jul-15 Wadhwa Group HDFC Thane Mumbai 7 2,080

Jul-15 Godrej Properties Purvankara Projects

Kanakpura Road

Bangalore 40 1,400

Jun-15 Brigade Enterprises (with GIC)

Kansai Nerolac Paints

Perungudi, OMR Chennai 15 5,500

May-15 Shree Sawan Builders CIDCO Nerul Mumbai 0.4 452

Apr-15 Casa Grande (Local Developer)

Rane Group GST Road Chennai 6 775

Source: MOSL

April 2016 219


Quarterly Performance 0.14202 (INR Million)

Y/E March FY15 FY16 FY15 FY16E 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Sales 17,252 20,132 19,567 19,537 22,312 18,655 28,277 20,887 76,487 90,130 Change (%) -25.4 2.9 -4.9 -0.8 29.3 -7.3 44.5 6.9 -7.8 17.8 EBITDA 7,369 7,961 7,951 6,957 8,275 9,391 12,255 7,843 30,237 37,763 Change (%) -19.5 33.8 29.9 91.7 12.3 18.0 54.1 12.7 21.7 24.9 As % of Sales 42.7 39.5 40.6 35.6 37.1 50.3 43.3 37.6 39.5 41.9 Depreciation 1,345 1,394 1,407 1,302 1,363 1,447 3,451 1,584 5,448 7,844 Interest 5,581 6,031 6,483 4,944 6,043 7,056 6,724 6,554 23,039 26,377 Other Income 1,264 1,224 1,231 1,475 1,145 1,315 1,531 1,509 5,194 5,500 PBT 1,413 1,379 1,293 2,182 1,538 2,049 3,461 1,595 6,679 8,642 Tax 302 431 76 767 312 776 2,107 522 1,576 3,716 Effective Tax Rate (%) 21.4 31.2 5.9 35.2 20 38 61 33 25.1 41.1 Reported PAT Pre MI 1,111 948 1,217 1,415 1,226 1,273 1,354 1,073 4,691 4,926 Change (%) (44.3) 14.9 (10.0) (24.4) 10.4 34.3 11.2 (24.2) -22.4 5.0 Reported PAT 1,278 1,091 1,318 1,716 1,216 1,315 1,717 918 5,402 5,166 Adj. PAT 1,278 1,091 1,318 1,716 1,216 1,315 1,717 918 5,402 5,166 Change (%) (29.5) 9.0 (9.3) (21.9) (4.9) 20.6 30.3 (46.5) (16.4) (4.4) Presales (msf) 0.4 0.6 0.4 0.9 0.3 0.2 0.2 0.4 2.3 1.2 Presales (INR b) 3.1 9.2 6.5 19.8 10.4 5.8 4.1 8.9 38.5 29.1 Realization (INR/sf) 8,105 15,082 18,056 21,944 31,394 23,958 19,286 21,284 17,124 24,249 Leasing (msf) 0.7 0.3 0.4 0.1 0.2 -0.1 0.5 0.3 1.5 0.9 E: MOSL Estimates

DLF

CMP: INR113 TP: INR163 Buy We expect quarterly revenue at INR20.8b (+7% YoY), EBITDA at

INR7.8b (margin of 12.7%) and PAT at INR918m.

DLF Phase-V super premium product is expected to remain the main contributor to presales in 4QFY16.

The stock trades at 25.6x FY18E EPS and 0.7x FY18E BV, and at a 25% discount to our NAV estimate of INR163. Maintain Buy.

Key issues to watch for Approach toward an REIT listing Movement in gearing levels Outcome of legal and regulatory proceedings Strategy to improve core DevCo operations

Bloomberg DLFU IN




Y/E March 2015 2016E 2017E 2018E Net Sales 76.5 90.1 84.3 87.6


EPS Gr. (%) -16.5 -1.1 26.5 16.8 BV/Sh. (INR) 157.0 158.4 159.9 162.1 RoE (%) 1.9 1.8 2.3 2.7



Div. Yield (%) 1.8 1.8 1.8 1.8

April 2016 220


Quarterly Performance (INR Million) FY15

FY16 FY15 FY16E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Total Revenue 3,318 2,940 5,193 6,980

2,376 14,585 4,223 3,691 18,431 24,875

Change (%) 64.6 -4.1 114.6 62.6

-28.4 396.1 -18.7 -47.1 56.3 35.0 Total Expenditure 2,875 2,372 4,553 6,058 1,823 12,934 3,421 2,923 15,859 21,101 EBITDA 443 567 640 922 552 1,652 802 768 2,572 3,774 Change (%) 9.2 -29.8 -25.1 21.6

24.7 191.1 25.2 -16.7 -9.0 46.7

As of % Sales 13.3 19.3 12.3 13.2


21 23 27 19 47 90

Other Income 311 129 193 201 257 229 280 233 835 1,000 PBT 721 666 801 1,071 756 1,823 1,016 958 3,260 4,554 Tax 194 114 236 359

200 588 300 279 904 1,366

Effective Tax Rate (%) 26.9 17.2 29.5 33.6

26.5 32.2 29.5 29.1 27.7 30.0 PAT before MI 527 552 565 711 556 1,236 717 679 2,356 3,188 Minority -71 -86 -93 -197

-5 -174 -197 -204 -447 -581

Reported PAT 456 466 472 514 550 1,062 520 475 1,909 2,607 Change (%) 15.6 36.1 26.4 6.4 20.6 127.8 10.1 -7.6 19.7 36.6 Presales (msf) 0.5 0.5 0.29 0.29 0.6 0.5 0.4 0.8 2.1 2.3 Presales (INR b) 3.6 3.0 2.3 1.7 5.3 9.3 6.1 7.5 10.7 28.2 Realizations (INR/sf) 7,279 5,948 8,132 3,072

9,521 17,095 13,799 9,693 5,000 12,166

E: MOSL Estimates

Godrej Properties

CMP: INR303 TP: INR329 Neutral We estimate revenue at INR3.7b, EBITDA at INR768m (margin at

21%) and PAT at INR475m. We expect presales of INR7. 5b on the back of launch of second

phase of project, Trees (Mumabi), which sold a record 300 apartments within a week of launch of phase I, phase II of Anandam, Garden City, and Palm Grove. Godrej Avenues in Bangalore is a new project to be launched in FY16.

The stock trades at 14.2x FY18E EPS and 2.2x FY18E BV, and close to its SOTP value of INR329. Maintain Neutral.

Key issues to watch for Debt movement Execution timeline of ongoing projects Launch of recently acquired projects

Bloomberg GPL IN





EBITDA 2.6 3.8 5.1 6.8 NP 1.9 2.6 3.2 4.2 EPS (INR) 9.6 13.1 16.1 21.2

EPS Gr. (%) 19.1 36.6 23.0 31.9 BV/Sh (INR) 92.6 103.4 117.1 134.8 RoE (%) 10.5 13.3 14.6 16.9

RoCE (%) 6.5 6.3 10.5 12.6 Payout (%) 24.4 17.9 14.5 16.7 Valuations 0 0 0 0


Div. Yield (%) 0.7 0.7 0.7 1.0

April 2016 221


Quarterly Performance (Consolidated) (INR Million) Y/E March FY15 FY16 FY15 FY16E 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Sales 6,101 7,448 6,521 5,942 7,382 6,057 6,644 6,400 26,012 26,483 Change (%) 20.0 65.3 45.0 81.4 21.0 -18.7 1.9 7.7 49.8 1.8 EBITDA 1,436 1,852 1,556 884 2,362 1,325 2,055 1,774 5,727 7,515 Change (%) -2.2 9.8 39.0 -21.8 64.5 -28.5 32.1 100.7 6.0 31.2 As % of Sales 23.5 24.9 23.9 14.9 32.0 21.9 30.9 27.7 22.0 28.4 Depreciation 62 61 57 17 26 26 23 36 197 110 Interest 734 1,105 1,110 412 980 876 814 821 3,361 3,491 Other Income 134 88 767 365 131 627 171 121 1,354 1,050 PBT 774 774 1,156 821 1,487 1,050 1,389 1,038 3,524 4,964 Tax 230 253 219 93 458 256 476 348 795 1,539 Effective Tax Rate (%) 30 33 19 11 31 24.4 34 34 22.6 31.0 Reported PAT (Pre Minority and associates) 543 520 937 728 1,029 794 539 913 690 2,728 Change (%) -23 -40 210 67.1 52.5 -43 -2.6 -5.2 21.9 25.5 Reported PAT 389 373 788 931 907 750 804 614 2,481 3,075 Change (%) -46 -54 178 123 133 101 2 -34 11 24 Presales (INR b) 5.6 4.0 5.2 5.5 8.0 7.6 7.3 7.3 20.4 30.2

Indiabulls Real Estate

CMP: INR53 TP: INR84 Buy IBREL is likely to post revenue of INR6.4b, EBITDA of INR1.7b

(margin of 28%) and PAT of INR614m.

We expect Indiabulls Blu to continue driving revenue in 4QFY16, along with Silverlake Villas in Alibaug and One Indiabulls in Gurgaon. However, there could be a dip on account of overall market slowdown. We estimate presales at ~INR7.3b in 4Q.

2HFY16 is perceived to be sluggish for IBREAL due to market slowdown in Mumbai and NCR regions.

The stock trades at a 56% discount to our NAV estimate of INR120, and at 5.2x FY18E EPS and 0.3x FY18E BV. Maintain Buy.

Key issues to watch for Progress in launch plan of projects in portfolio Overall debt movement Status of unsold inventory and pending collections

Bloomberg IBREL IN





EBITDA 5.7 7.5 7.5 8.6 NP 2.5 3.1 3.5 4.2 EPS (INR) 6.5 7.3 8.2 10.0

EPS Gr. (%) 10.5 13.1 12.3 21.7 BV/Sh. (INR) 168.7 165.2 169.5 175.3 RoE (%) 3.5 4.0 4.4 5.1



Div Yield (%) 0.0 3.8 3.8 3.8

April 2016 222


Consolidated Quarterly Performance (INR Million) Y/E March FY15 FY16 FY15 FY16E 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Sales 4,066 1,816 2,388 2,591 1,750 1,646 2,203 2,301 10,861 7,900 Change (%) 131.0 -7.5 66.3 36.8 -57.0 -9.4 -7.7 -11.2 54.0 -27.3 Total Expenditure 1,457 1,353 1,718 2,091 1,331 1,348 1,827 2,091 6,619 6,326 EBITDA 2,609 463 670 500 419 298 377 481 4,242 1,574 As % of Sales 64.2 25.5 28.0 19.3 23.9 18.1 17.1 20.9 39.1 19.9

Change (%) 405.1 -6.0 54.2 93.0 -83.9 -36 -44 -3.9 149.2 -62.9 Depreciation 32 32 35 33 42 46 50 52 132 190 Interest 146 88 130 150 120 119 143 161 514 544 Other Income 299 112 110 94 126 126 104 124 615 480 PBT 2,730 455 614 411 383 257 288 392 4,210 1,320 Tax 891 209 196 81 129 111 194 121 1,378 555 Effective Tax Rate (%) 32.6 45.9 32.0 19.7 33.7 43.0 67.5 30.7 32.7 42.0 PAT before minority 1,839 246 418 330 254 147 93 272 2,833 766 Change (%) 600.5 10.1 37.9 6.0 -86.2 -40.4 -77.6 -17.6 157.5 -73.0 Minority Interest 46 11 90 24 38 -4 16 -9 171 40 Reported PAT 1,793 235 328 307 216 151 77 282 2,662 726 Change (%) 723 21 12 1 -88 -35.7 -76 -8 Sales volume (msf) 0.1 0.2 0.6 0.4 0.3 0.3 0.2 0.3 1.4 1.1 Sales value (INR b) 0.5 0.9 3.1 2.5 1.9 2.2 1.3 3.7 7.1 9.1 Realizations (INR/sf) 4,500 4,043 5,254 5,682 7,115 6,576 5,826 13,602 5,123 8,299

Mahindra Lifespaces

CMP: INR434 TP: INR490 Neutral For 3QFY16, we estimate consolidated revenue at INR2.3b (-11.2%

YoY), margins at ~21%, EBITDA at INR481m (28% QoQ) and PAT at INR282m. We estimate 4Q presales at INR3.7b.

Presales are expected to be driven by Vivante in Mumbai, Windchimes in Bangalore, Luminaire in NCR, and Bloomdale in Nagpur.

The stock trades at 10.6x FY18E EPS and 1x FY18E BV. Maintain Neutral.

Key issues to watch for Regulatory issues and overall market scenario critical for Mumbai

launches Affordable housing key to future success

Bloomberg MLIFE IN



Financial Snapshot (INR Billion) Y/E March 2015 2016E 2017E 2018E Net Sales 10.9 7.9 11.6 13.3

EBITDA 4.2 1.6 2.7 3.2 Adj PAT 2.7 0.7 1.4 1.7 Adj EPS (INR) 64.9 17.7 33.1 40.9

EPS Gr (%) 163.6 -72.7 87.0 23.6 BV/Sh (INR) 359.7 371.4 406.7 455.6 RoE (%) 18.0 4.8 8.1 9.0



Div. Yield (%) 1.2 1.2 1.2 1.2

April 2016 223


Consolidated quarterly performance (INR Million) Y/E March FY15 FY16 FY15 FY16E 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Total Revenue 1,754 1,855 2,171 3,447 2,103 1,892 7,819 2,045 9,227 13,859 Change (%) -19.7 -1.8 27.3 56.3 19.9 2.0 260.2 -40.7 15.6 50.2 EBITDA 969 1,118 1,266 1,785 1,274 1,090 3,278 1,110 5,138 6,753 Change (%) -27.4 29.9 40.9 42.3 31.5 -2.5 159 -37.8 18.2 31.4 As of % Sales 55 60 58 52 61 58 42 54 56 49 Depreciation 100 99 99 106 122 122 124 122 403 490 Interest 0 16 1 0 0 1 0 0 18 1 Other Income 65 39 25 46 55 116 84 44 175 300 PBT 934 1,042 1,192 1,725 1,207 1,084 3,239 1,032 4,892 6,562 Tax 291 336 400 695 411 359 1,145 348 1,721 2,264 Effective Tax Rate(%) 31.1 32.2 33.5 40.3 34.1 33.2 35.4 33.7 35.2 34.5 Reported PAT 643 706 792 1,030 796 725 2,094 684 3,171 4,298 Change (%) -36.8 10.0 16.4 33.8 23.7 2.7 164.2 -33.6 1.9 35.5 Presales (msf) 0.07 0.04 0.15 0.78 0.08 0.06 1.0 0.3 1.0 1.5 Presales (INR b) 1.4 1.0 3.0 12.3 1.7 1.4 17.7 6.1 17.6 26.9 Realization (INR/sf) 20,058 23,947 19,952 15,868 21,178 22,478 17,328 18,043 17,050 17,909

Oberoi Realty

CMP: INR238 TP: INR344 Buy We expect a stable quarter, with revenue at INR2.04b (-41% YoY),

EBITDA at INR1.1b (margins of 54%) and PAT at INR684m (-34% YoY). Esquire is likely to cross threshold in 4QFY16.

We expect 4QFY16 presales at INR6.1b, with the launch of Sky City in Borivali. Exquisite and Eternia are expected to see flattish to lower momentum.

The stock trades at 8x FY18E EPS and 1.2x FY18E BV, and at 46% discount to our NAV estimate of INR344. Maintain Buy.

Key issues to watch for Launch of Borivali project (Tata Steel Land) and the luxury Worli

project, and the response they generate Leasing activity in Commerz II Incremental presales in launched projects during the current

market slowdown and regulatory overhang in Mumbai

Bloomberg OBER IN



Financial Snapshot (INR Billion) Y/E March 2015 2016E 2017E 2018E Net Sales 9.2 14.6 23.7 33.9 EBITDA 5.1 7.0 13.3 20.1

Adj PAT 3.2 4.5 8.4 9.8 Adj EPS (INR) 9.7 13.6 25.6 29.8 EPS Growth (%) 1.9 41.0 88.2 16.1

BV/Share (INR) 141.2 157.0 178.3 202.4 RoE (%) 7.0 9.0 14.8 15.1 RoCE (%) 9.8 11.8 21.0 28.7



April 2016 224


Quarterly performance (INR Million) Y/E March FY15 FY16 FY15 FY16E 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Consol Consol Sales 3,506 4,433 4,608 3,986 3,960 4,223 4,936 4,964 16,533 18,083 Change (%) 107 -7 1 14 13 -5 7 25 14.1 9 EBITDA 1,823 2,084 2,130 1,583 1,841 1,859 2,135 1,898 7,620 7,734 Change (%) 101 0 -144 -12 1 -11 0 20 12.3 1 As % of Sales 52 47 46 40 46 44 43 38 46.1 43 Depreciation 396 430 419 436 415 416 465 463 1,681 1,759 Interest 898 1,059 1,018 981 1,011 1,049 1,077 1,079 3,956 4,216 Other Income 54 105 55 99 61 103 27 109 312 300 PBT 582 701 707 -632 477 498 552 532 1,357 2,059 Tax 198 292 110 -107 125 198 205 90 493 618 Effective Tax Rate (%) 34 42 16 17 26 40 37 17 21.5 30 Reported PAT Pre MI 383 409 597 -525 352 300 347 442 1,802 1,441 Change (%) 167 (58) 129 -236 -8 -27 -42 -184 2.4 -20 Minority 125 193 188 47 100 59 22 105 553 287 Associate -5 -7 21 34 4 5 2 8 43 20 Adj. PAT 253 209 430 -538 256 246 328 345 354 1,174 Change (%) 120 (72) 78 (382) 1 17 (24) (164) -72.4 231 E: MOSL Estimates

Phoenix Mills

CMP: INR301 TP: INR354 Buy We estimate consolidated revenue at INR4.9b (flat YoY), EBITDA at

INR1.9b (margin of 38%) and PAT at INR345m (1.6x YoY).

We expect consumption growth of 15-25% across malls. No major adverse impact due to online sales is yet visible.

One Bangalore and Kessaku are seeing good sales momentum. However, the Pune project has been slow due to market conditions.

The stock trades at 11.3x FY18E EPS and 1.8x FY18E BV, and at 18% discount to our NAV estimate of INR354. Maintain Buy.

Key issues to watch for Pick-up in monetization velocity Debt movement Acquisition of turnkey projects Rental growth

Bloomberg PHNX IN



Financial Snapshot (INR Billion) Y/E March 2015 2016E 2017E 2018E Net Sales 16.5 18.1 23.8 27.8 EBITDA 7.6 7.7 10.6 13.6

Adj PAT 1.3 1.2 2.9 4.1 EPS (INR) 2.4 7.7 19.0 26.5 EPS Growth (%) -72.4 214.0 147.6 39.4

BV/Share (INR) 115.5 132.8 148.3 170.1 RoE (%) 2.1 5.8 12.8 15.6 RoCE (%) 11.5 11.0 14.7 19.2



April 2016 225


Quarterly performance (Standalone) (INR Million) FY15 FY16 FY15 FY16E 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Consol Consol Total Revenue 5,631 5,403 6,094 6,762 6,959 6,444 5,397 5,905 34,198 47,006 Change (%) 13 14 42 12 23.6 19.3 -11 -13 34.2 37.5 Total Expenditure 4,261 3,882 4,211 5,313 6,064 4,946 4,284 5,313 24,259 36,141 EBITDA 1,370 1,522 1,882 1,449 895 1,499 1,113 1,311 9,939 10,864 Change (%) 6.3 28.2 42.8 17.8 -34.7 -1.5 -40.8 -9.6 38.0 9.3 As of % Sales 24.3 28.2 30.9 21.4 12.9 23.3 20.6 22.2 29.1 23.1 Depreciation 92 95 114 122 120 127 127 126 1,397 1,579 Interest 380 468 510 524 539 548 553 660 3,214 3,889 Other Income 525 440 359 664 1,223 344 323 310 986 800 PBT 1,423 1,399 1,617 1,466 1,459 1,168 756 835 6,314 6,196 Tax 382 430 622 329 178 79 107 184 2,647 2,231 Effective Tax Rate (%) 26.9 30.7 38.5 22.4 12.2 6.8 20.0 22.1 41.9 36.0 Reported PAT 1,040 969 995 1,138 1,282 1,089 649 650 3,324 3,565 Adj PAT 1,040 969 995 1,138 1,282 1,089 649 650 3,324 3,565 Change (%) 20.1 2.2 23.6 19.6 23.2 2.2 -34.8 -42.8 5.8 7.3 Presales (msf) 2.1 2.2 1.1 1.3 0.8 1.0 0.9 1.3 6.7 4.0 Presales (INR b) 13.1 12.9 7.6 10.1 5.3 6.1 5.1 10.5 43.6 26.9 Realization (INR/sf) 6,285 5,997 6,720 7,567 6,583 5,932 5,667 8,163 6,521 6,719 E: MOSL Estimates

Prestige Estate Projects

CMP: INR178 TP: INR225 Buy We estimate standalone revenue at INR5.9b (-13% YoY), EBITDA at

INR1.3b (margin of 22%) and PAT at INR650m (-43% YoY).

We estimate presales at ~INR10.5b in 4Q, led by Hillside Gateway in Cochin and Kew Garden launch.

Tech Vista and Bagmane Temple Bell may cross the revenue threshold in 4QFY16.

The stock trades at 16.1x FY18E EPS and 1.4x FY18E BV, and at a 55% discount to our NAV estimate of INR275. Maintain Buy.

Key issues to watch for Execution as per promised delivery timeline Pick-up in market dynamics Debt movement

Bloomberg PEPL IN




Y/E March 2015 2016E 2017E 2018E Net Sales 34.2 46.5 46.5 51.2 EBITDA 9.9 10.8 11.3 13.1

Adj PAT 3.3 3.5 3.4 4.1 Adj EPS (INR) 8.9 9.4 9.0 11.1 EPS Gr (%) -1.3 6.0 -4.5 23.1

BV/Sh(INR) 101.9 109.5 116.7 126.0 RoE (%) 9.8 8.9 7.9 9.1 RoCE (%) 13.2 11.0 10.0 11.2



April 2016 226


Quarterly performance (INR million) FY15

FY16 FY15 FY16E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Sales 5,777 6,722 6,844 5,063 4,615 4,519 3,990 5,735 24,406 18,859 Change (%) 25 24 26 -19 -20 -33 -42 13 12 -23 EBITDA 1,534 1,679 1,541 1,420 1,294 1,168 1,099 1,538 6,174 5,099

Margin % 26.6 25.0 22.5 28.0 28.0 25.8 27.5 26.8 25.3 27.0 Depreciation 181 178 186 178 145 136 155 159 723 595 Interest 499 598 468 318 441 454 446 473 1,883 1,814 Other Income 49 46 24 30 14 42 19 75 149 150 PBT 903 949 911 954 722 620 517 981 3,717 2,840 Tax 332 354 257 334 284 232 203 332 1,277 1,051 Effective Tax Rate (%) 37 37 28 35 39 37 34 34 34 37 Net PAT 571 595 654 620 438 388 314 649 2,440 1,789 Minority 53 -12 -13 -7 -24

-56

Reported PAT 571 595 601 620 450 401 321 673 2,496 1,845 Change (%) 14 5 3 -10 -21 -33 -47 9 6 -26 Presales (msf) 0.8 0.8 0.7 1.0 0.8 0.9 0.8 0.9 3.3 3.4 Presales (INR b) 4.8 5.6 4.3 6.3 5.0 5.0 4.8 5.3 20.9 20.1 Realization (INR/sf) 6,389 6,703 6,456 6,092 5,989 5,821 5,932 6,023 6,389 5,907 E: MOSL Estimates

Sobha Developers

CMP: INR269 TP: INR360 Buy We estimate revenue at INR5.7b (+13% YoY), EBITDA at INR1.5b

(margin of 27%) and PAT at INR673 (flat YoY). Presales in 4Q stood at INR5.3b (0.9 msf). Dependency on

Bangalore continues (volume share at 76% in 4Q). Mysore market contribution was up due to launch of Sobha Retreat. The company has soft launched group housing project in NCR-Gurgaon(3.23msf) – a formal launch is scheduled in 1QFY17.

The stock trades at 9x FY18E EPS and 1x FY18E BV, and at a 53% discount to our NAV estimate of INR502. Maintain Buy.

Key issues to watch for FY16 guidance fulfillment contingent on approvals and launch of

projects in NCR and Kochi Timeline and ticket pricing are expected to remain the key

Bloomberg SOBHA IN




Y/E March 2015 2016E 2017E 2018E


EPS (INR) 25.5 22.1 27.3 29.9 EPS Gr. (%) 6.2 -13.2 23.5 41.8 BV/Sh (INR) 248.0 261.9 281.0 271.5

RoE (%) 10.6 8.7 10.1 11.0 RoCE (%) 13.3 10.4 12.1 13.1 Payout (%) 27.5 31.7 25.7 23.4



April 2016 227

March 2016 Results Preview | Sector: Retail

Muted footfalls; no revival yet Jewelry walk-ins impacted by PAN card rule

Wedding demand to aid growth We expect our retail coverage universe’s revenues and PAT to grow 18.9% and 8.2%, respectively, in 4QFY16. EBITDA is expected to rise 20.7%. During the quarter, Titan’s Jewelry division was adversely impacted by enforcement of the PAN card rule, indefinite strike by jewelers against the 1% excise duty and advancement of studded jewelry activation to the last week of December. Under Watches, there were several launches during the quarter, while the Eyewear segment gathered good momentum. We expect Jubilant Foodworks’ sales to pick up with 5% SSSG. However, positive consumer sentiment has not been converted into significant spends for companies. Shoppers Stop’s LTL growth is likely to come in at high single digit. Brick and mortar retail companies continue to face the onslaught of online retailers. Recent government regulations for Online marketplaces may level the playing field somewhat, in our view.

Continued store expansion initiatives The companies in our coverage continue to strengthen retail footprint. Titan added seven Tanishq stores (28ksf) and shut down one Gold Plus store; the total space now encompasses 803ksqft. Jubilant has likely added 36 stores during the quarter (in line with the annual guidance of 150 openings). Shoppers Stop added one store during 4Q16. Sustained expansion plans would be a key parameter, as the recovery in footfalls and conversion would result in higher operating leverage.

JUBI – Our preferred pick We expect Jubilant Foodworks to capitalize on the anticipated revival in urban demand and report pick-up in SSSG, ahead of other QSR players. We note that the PAN card implementation has dented demand for jewelry in the near term; this coupled with sluggish discretionary demand and a deflationary gold price regime is negatively impacting Jewelry P&L. Thus, while we like TTAN’s franchise and management quality given the massive long term opportunity in branded jewelry space, in the near term we expect the aforementioned headwinds to impact its P&L.





YoY Var % QoQ

Retail Jubilant Foodworks 1,224 Buy 6,390 17.9 0.8 745 6.4 -9.6 290 -8.1 -20.1Shopper's Stop 361 Neutral 9,344 14.4 2.5 645 31.4 -9.4 163 58.6 -30.8Titan Company 346 Neutral 29,830 20.6 -12.2 3,044 22.6 7.9 2,326 8.1 3.2 Sector Aggregate 45,564 18.9 -7.8 4,434 20.7 1.7 2,779 8.2 -2.5


Company name

Jubilant Foodworks

Shoppers Stop

Titan Company

Retail March 2016 Results Preview | April 2016

Gautam Duggad ([email protected])/Vishal Punmiya ([email protected])

April 2016 228


Exhibit 2: SHOP to post LTL sales of 9% in 4QFY16


Exhibit 3: Jubilant Foodworks’s SSSG to stand at 5% in 4Q16


Exhibit 4: Gold prices rose 3.5% YoY in 4QFY16; positive price growth after six quarters


Exhibit 5: Shoppers Stop has 76 stores as of date


Exhibit 6: Dominos’s stores crossed 1000 count in Feb’16


(1.3)

10.0

1.0

5.0

12.5

10.0 12.0

15.5

5.5

8.4

3.7

11.0

0.8 4.0

12.7

0.1

17.4

Dec-

11M

ar-1

2Ju

n-12

Sep-

12De

c-12

Mar

-13

Jun-

13Se

p-13

Dec-

13M

ar-1

4Ju

n-14

Sep-

14De

c-14

Mar

-15

Jun-

15Se

p-15

Dec-

15

LTL Sales growth (%)

30.1

26.2

22.3

19.8

16.1

7.7

6.3

6.6

-2.6

-3.4

-2.4

-5.3

1.9

6.6

4.6

3.2

2.0

3QFY

12

4QFY

12

1QFY

13

2QFY

13

3QFY

13

4QFY

13

1QFY

14

2QFY

14

3QFY

14

4QFY

14

1QFY

15

2QFY

15

3QFY

15

4QFY

15

1QFY

16

2QFY

16

3QFY

16

SSS Growth (%)

28.2% 32.3%

20.0% 12.2%

8.0%

-6.3% -4.1% -2.1% -0.1%

4.3%

-4.9%-12.8% -10.2%

-5.7% -6.8%-2.9%

3.5%

4QFY

12

1QFY

13

2QFY

13

3QFY

13

4QFY

13

1QFY

14

2QFY

14

3QFY

14

4QFY

14

1QFY

15

2QFY

15

3QFY

15

4QFY

15

1QFY

16

2QFY

16

3QFY

16

4QFY

16

Gold price YoY (%)

49 51 52 54 55 5560 61 65 67 69 72 73 72 73 74 76

12 12 12 12 12 12 13 14 15 15 15 15 15 16 17 17 17

Dec-

11

Mar

-12

Jun-

12

Sep-

12

Dec-

12

Mar

-13

Jun-

13

Sep-

13

Dec-

13

Mar

-14

Jun-

14

Sep-

14

Dec-

14

Mar

-15

Jun-

15

Sep-

15

Dec-

15

Shoppers Stop Hypercity

439

465

489

515

552

576

602

632 67

9 726

761

797 838

876

911 950 990

100

105

110

112

118

123

128

132

142

152

154

167

185

196

208

216

225

3QFY

12

4QFY

12

1QFY

13

2QFY

13

3QFY

13

4QFY

13

1QFY

14

2QFY

14

3QFY

14

4QFY

14

1QFY

15

2QFY

15

3QFY

15

4QFY

15

1QFY

16

2QFY

16

3QFY

16

Dominos stores Cities

April 2016 229


Exhibit 7: Relative performance – Three months (%)


Exhibit 8: Relative performance – One year (%)



(INR) FY16E FY17E FY18E FY16E FY17E FY18E FY16E FY17E FY18E FY16E FY17E FY18E Retail Jubilant Foodworks 1,224 Buy 18.1 26.8 37.8 67.7 45.7 32.4 27.3 19.6 14.5 16.1 20.3 23.6 Shopper's Stop 361 Neutral 6.6 9.3 12.9 54.5 38.9 28.1 13.4 11.3 9.3 6.9 9.0 11.4 Titan Company 346 Neutral 8.5 10.0 11.5 40.7 34.6 30.0 30.6 25.8 22.2 21.0 21.1 20.8 Sector Aggregate 44.9 36.6 30.3 27.4 22.3 18.4 18.1 19.2 19.9

80

86

92

98

104

Dec-

15

Jan-

16

Feb-

16

Mar

-16

Sensex Index MOSL Retail Index

70

80

90

100

110

Mar

-15

Apr-

15

May

-15

Jun-

15

Jul-1

5

Aug-

15

Sep-

15

Oct

-15

Nov

-15

Dec-

15

Jan-

16

Feb-

16

Mar

-16

Sensex Index MOSL Retail Index

April 2016 230



(INR Million) Y/E March FY15 FY16 FY15 FY16 1Q 2Q 3Q 4Q

1Q 2Q 3Q 4QE

No of Stores 761 797 838 876 911 950 990 1026 876 1026 LTL Growth (%) -2.4 -5.3 1.9 6.6 4.6 3.2 2.0 5.0 0.2 3.7 Net Sales 4,768 5,012 5,544 5,421

5,707 5,875 6,339 6,390 20,745 24,311

YoY Change (%) 20.3 14.8 21.4 25.0 19.7 17.2 14.4 17.9 20.4 17.2 Gross Profit 3,558 3,742 4,147 4,085

4,320 4,474 4,880 4,891 15,533 18,564

Gross Margin (%) 74.6 74.7 74.8 75.3 75.7 76.1 77.0 76.5 74.9 76.4 Other Expenses 2,968 3,132 3,420 3,384 3,615 3,837 4,056 4,146 12,905 15,653 EBITDA 590 610 727 701

705 637 824 745 2,628 2,911

EBITDA Growth % -11.6 -6.5 7.9 25.9

19.5 4.3 13.3 6.4 3.0 10.8 Margins (%) 12.4 12.2 13.1 12.9 12.4 10.8 13.0 11.7 12.7 12.0 Depreciation 223 236 254 268

292 307 316 337 982 1,252

Other Income 17 21 15 21 17 16 12 16 74 60 PBT 384 396 488 453

430 346 520 424 1,721 1,719

Tax 106 106 138 138

135 107 157 134 488 533 Rate (%) 27.7 26.7 28.3 30.4 31.4 31.0 30.2 31.6 28.4 31.0 Adjusted PAT 277 290 350 315

295 239 363 290 1,233 1,186

YoY Change (%) -18.5 -12.7 4.2 26.4 6.3 -17.7 3.6 -8.1 -2.0 -3.8 E: MOSL Estimates

Jubilant Foodworks

CMP: INR1,224 TP: INR1,500 Buy We expect JUBI’s revenue to grow 17.9%, led by the 5% SSSG. And

store expansion. Dominos resorted to a weighted average price hike of 3.8% in September 2015 and 3% in November 2015. However, pick-up in demand for QSR remains muted as per our channel checks.

We expect EBITDA margin to contract 130bp to 11.7%, largely due to one-offs in staff cost by 30bp (differential bonus cost impact) and the Dunkin business impact.

We estimate PAT to decline 8.1% to INR290m.

The stock trades at 32.4x FY18E EPS of INR37.8; maintain Buy

Key issues to watch: Demand outlook for QSR and Pizza space, as well as competition Performance of Dunkin Donuts and margin guidance Changes in expansion and capex strategy (if any)

Bloomberg JUBI IN Equity Shares (m) 65.6



Y/E March 2015 2016E 2017E 2018E


Adj. EPS (INR) 16.9 18.1 26.8 37.8 EPS Gr. (%) -6.2 6.8 48.0 41.2 BV/Sh.(INR) 98.6 112.1 131.9 160.3

RoE (%) 17.2 16.1 20.3 23.6 RoCE (%) 23.5 22.3 28.4 33.1 Payout (%) 14.8 22.1 22.4 21.2



April 2016 231


Quarterly performance (INR Million) Y/E March FY15 FY16 FY15 FY16E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

LTL Sales Gr % 3.7 11.0 0.8 4.0 12.7 0.1 17.4 9.0 4.9 9.8 Deptt Stores 69 72 73 72 73 74 76 77 72 77 Net Sales 6,121 8,553 7,658 8,168

7,112 8,943 9,118 9,344 30,500 34,517

YoY Change (%) 14.5 18.3 7.9 9.4

16.2 4.6 19.1 14.4 12.4 13.2 Total Exp 5,813 7,998 7,122 7,677 6,784 8,333 8,405 8,699 28,610 32,221 EBITDA 308 555 536 491

327 611 712 645 1,889 2,295

Growth % 31.9 39.6 1.8 4.4

6.3 10.0 33.0 31.4 16.1 21.5 Margins (%) 5.0 6.5 7.0 6.0

4.6 6.8 7.8 6.9 6.2 6.6

Depreciation 199 196 198 266 199 309 211 308 858 1,026 Interest 131 124 137 121

139 135 158 138 512 570

Other Income 34 43 39 61 51 53 58 58 177 221 PBT 13 278 240 165

40 220 402 258 696 920

Tax 5 118 102 62

17 91 166 94 288 368 Rate (%) 40.6 42.7 42.6 37.7

41.3 41.5 41.2 36.6 41.4 40.0

Adjusted PAT 8 159 138 103 24 129 236 163 407 552 YoY Change (%) -67.6 60.4 -20.5 -40.0 216.0 -19.1 71.3 58.6 -12.9 35.5 E: MOSL Estimates

Shoppers Stop

CMP: INR361 TP: INR410 Neutral We expect SHOP’s revenue to grow 14.4% to INR9.3b.

Growth in same-store sales (SSS) is estimated at 9%.

EBITDA margin is projected to expand by 90bp YoY to 6.9%; we have factored in a PAT growth of 58.6% to INR163m.

SHOP opened one store in 4QFY16 (total store count at 77).

The stock trades at 28.1x FY18E EPS; maintain Neutral

Key issues to watch: Comments on same-store performance; margin outlook Update on Omni-channel strategy Guidance on HyperCITY’s breakeven

Bloomberg SHOP IN Equity Shares (m) 82.2



Y/E March 2015 2016E 2017E 2018E



RoE (%) 5.3 6.9 9.0 11.4 RoCE (%) 8.0 9.3 11.0 13.3 Payout (%) 15.3 20.0 20.0 20.0



April 2016 232


Quarterly Performance (INR Million) Y/E March FY15 FY16 FY15 FY16E 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Sales 28,914 35,647 28,983 24,744

27,086 26,547 33,984 29,830 118,288 117,446

YoY Change (%) -7.0 53.1 9.4 -11.2 -6.3 -25.5 17.3 20.6 8.8 -0.7 Total Exp 26,171 32,600 26,467 22,261 24,859 24,707 31,162 26,786 107,499 107,515 EBITDA 2,744 3,047 2,516 2,484

2,227 1,840 2,822 3,044 10,790 9,932

EBITDA Growth % 12.0 16.4 6.2 -11.3

-18.8 -39.6 12.2 22.6 5.4 -8.0 Margins (%) 9.5 8.5 8.7 10.0 8.2 6.9 8.3 10.2 9.1 8.5 Depreciation 243 199 232 200

228 240 248 229 874 945

Interest 350 109 211 137

118 87 114 94 807 413 Other Income 254 462 358 376 155 302 415 349 1,450 1,222 PBT 2,405 3,201 2,431 2,523

2,036 1,815 2,875 3,070 10,559 9,797

Tax 632 801 523 372

526 361 622 745 2,328 2,253 Rate (%) 26.3 25.0 21.5 14.7 25.8 19.9 21.6 24.2 22.0 23.0 Adjusted PAT 1,773 2,400 1,907 2,151

1,511 1,454 2,253 2,326 8,231 7,543

YoY Change (%) -2.9 28.6 7.2 -2.0 -14.8 -39.4 18.1 8.1 7.4 -8.4 E: MOSL Estimates

Titan Company

CMP: INR346 TP: INR350 Neutral We expect TTAN’s revenue to increase 20.6% to INR29.8b (GHS

impact for 4QFY16 calculated at ~INR3.5b).

4Q16 will see the benefit of INR 3-3.5b of Golden Harvest Scheme revenues, in our view.

During 4QFY16, the Jewelry division’s sales were adversely impacted by the enforcement of the INR0.2m PAN card rule, indefinite strike by the jewelry association (in opposition of the 1% excise duty levied on manufacturing) and advancement of studded jewelry activation to the last week of December.

During the quarter, TTAN added seven Tanishq stores (28k sqft) and closed one Gold Plus store; the total space now stands at 803ksqft.

We factored in an EBITDA growth of 22.6% in 4QFY16, with an underlying margin expansion of 20bp to 10.2% and a subsequent 8.1% PAT growth.

Key issues to watch: Comments on consumer demand for Jewelry and Watches Expansion initiatives Update on the new Gold Harvest scheme

Bloomberg TTAN IN


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


Y/E March 2015 2016E 2017E 2018E Sales 119.0 117.4 132.8 150.9 EBITDA 11.5 9.9 11.7 13.4

Adj. PAT 8.2 7.5 8.9 10.2 Adj. EPS (INR) 9.3 8.5 10.0 11.5 EPS Gr. (%) 11.1 -8.4 17.6 15.2

BV/Sh.(INR) 34.8 40.4 47.4 55.5 RoE (%) 26.6 21.0 21.1 20.8 RoCE (%) 38.0 26.9 27.2 26.7



April 2016 233

So which way is demand headed in FY17? CTSH’s red flag was partly alleviated by ACN’s performance; Indian IT is up next

Ever since CTSH flagged concerns around spending in BFSI in CY16, we have had: ACN citing normal budget activity across industries on the back of strong results, INFO reiterating its confidence around industry leading growth irrespective of

the macro, and TCS holding on to its commentary of healthy traction in BFS.

Notably, even CTSH has more than recovered from the fall post the guidance – up 20% and outperforming NASDAQ.

The message heading into FY17 appears anything but bleak. Prevailing macro remains a potential overhang for industry at large, and is currently reflecting in problems at least at select large enterprises, affecting select IT vendors. This could gradually snowball into a more secular scenario, were macro weakness to persist or worsen. The performance for the March 2016 quarter, and guidance and commentary by Indian IT will offer more cues towards that end.

Our take: We see the industry moving away from secular set of services with limited scope for differentiation towards a wide array of offerings with significant room to stand out. Such a scenario will warrant relatively stronger growth expectations for companies with strong leadership in new areas, investing ahead of the curve. We believe INFO continues to take strides towards that end, and TCS’ early investments can potentially help it ward off the effects of high base. MTCL and PSYS in tier-II come across as stronger players on the Digital scale.





YoY Var % QoQ

Cyient 458 Buy 8,198 12.3 4.9 1,263 40.6 14.6 1,010 7.6 16.3 HCL Technologies 821 Buy 108,544 17.1 5.0 24,480 17.1 10.0 18,728 11.2 -2.4Hexaware Tech. 271 Neutral 8,748 22.6 6.8 1,481 16.6 13.8 1,029 23.4 3.6 Infosys 1,206 Buy 165,750 23.6 4.2 45,492 21.9 5.1 34,844 12.5 0.6 KPIT Tech. 151 Neutral 8,424 10.4 3.6 1,295 287.3 9.7 811 61.2 10.3 Mindtree 668 Neutral 13,001 41.6 7.0 2,212 23.8 3.0 1,474 14.5 -2.3MphasiS 467 Neutral 15,434 8.0 1.8 2,323 15.3 7.3 1,803 1.5 3.9 Persistent Systems 741 Neutral 6,436 29.4 8.7 1,188 18.2 6.9 786 3.3 1.4 TCS 2,455 Neutral 284,566 17.5 4.0 81,351 15.1 5.0 61,963 4.9 1.4 Tata Elxsi 1,904 Buy 2,891 25.0 5.5 672 41.8 1.3 393 31.8 -1.5Tech Mahindra 463 Neutral 68,956 12.7 2.9 11,333 21.0 -0.2 7,327 55.2 -3.5Wipro 562 Neutral 137,354 13.1 6.8 29,266 6.3 9.5 22,153 -2.6 -0.8Sector Aggregate 828,303 17.6 4.6 202,357 16.6 6.1 152,322 8.2 0.3

Companies covered Cyient

HCL Technologies

Hexaware Technologies

Infosys

KPIT Technologies

MindTree Consulting

Mphasis

NIIT Technologies

Persistent Systems

TCS

Tech Mahindra

Wipro


Technology

Ashish Chopra ([email protected]); +91 22 3982 5424 Sagar Lele ([email protected]); +91 22 3982 5585

April 2016 234

4QFY16: Seasonally weak, partly cushioned by favorable base due to Chennai floods While 4Q seasonality is an expected headwind, sequential performance in

4QFY16 is cushioned by weakened base from one-time impact of Chennai floodslast quarter – at least for the costs if not for revenues.

Constant currency (CC) growth has decelerated sequentially every year in 4Qthrough FY12-15 (~180bp on average). However, we expect 4QFY16 to be betterthan 3Q by an average of 150bp, given the favorable base.

YoY CC growth rates continue to deteriorate – YoY CC revenue growth for Tier-IIT is expected to be 11% in 4QFY16 compared to 13% in 4QFY15. Growth rateshave declined for all companies other than INFO.

We expect +1.3% to +3% QoQ CC revenue growth across the top-tier in 4QFY16.We model 2.1% QoQ CC growth at INFO v/s implied guidance of 1-2.4% QoQ CCfor 4Q. We model 2% QoQ CC growth at TCS and 4.3% at WPRO (including ~1ppimpact from one-month HPS integration, 1.3pp from the full quarter Cellentintegration and 1.9pp organic growth v/s 0.5-2.5% organic growth guidance).CTSH’s guidance implied a subdued 1QCY16 (-0.3% QoQ), holding liable thelower discretionary spend in BFSI on account of weak macros.

Owing to TECHM’s continued softness in Telecom, consolidation in LCC andseasonality in Enterprise, we expect 1% QoQ CC growth for the company.

We expect the quarter to be relatively better for HCLT (3% QoQ CC), given theramp up in some of its infrastructure deals that caused a momentary slowdownin the previous two quarters.

Among tier-II IT, we expect PSYS to lead growth, as the quarter marks thebeginning of revenue from the IBM Watson deal; others (KPIT, MTCL, MPHL,KPIT, NITEC) should be below 2% QoQ CC.

We expect cross-currency movement to negatively impact USD revenue by 10-40bp, mainly on account of depreciation of GBP against the USD.

Exhibit 2: Expect higher growth rates than in 3QFY16 and 4QFY15 (CC, % QoQ)


1.6

-0.4

1.2 2.7

9.7

0.5 1.1 1.4 2.1 1.2 2 2.1

4.3 3.0

1.0

-4.0

0.0

4.0

8.0

12.0

TCS INFO WPRO HCLT TECHM

4QFY15 1QFY16 2QFY16 3QFY16 4QFY16E

March 2016 Results Preview | Sector: Technology

April 2016 235

Exhibit 3: INFO - only one to see improvement over the year (CC revenue growth, % YoY)


Currency tailwind to give some respite to margins INR depreciated by ~2.3% QoQ in 4QFY16. The depreciation should, along with

the absence of one-time costs associated with flow-through of seasonal revenuedecline of 3Q and relief initiatives associated with the Chennai floods, add tomargin tailwinds.

However, headwinds of pricing pressure and increased investments in capabilitybuilding and augmenting sales and marketing would continue.

With the above factors at play, we expect EBITDA margin to expand across thetop-4 players by 20-100bp QoQ.

TECHM would see a decline in margins, led by wage hike pressures, whichshould be partly cushioned by seasonal flow-through revenue from Comviva,LCC rationalization and continued operational efficiency improvements.

Watch for comments on client budgets and consequent impact on FY17 We expect INFO to guide 11-13% CC revenue growth for FY17, higher than

NASSCOM’s 10-11% estimate. INFO’s implied 4Q guidance of 1-2.4% QoQ CCentails 14-15.5% YoY CC growth. If INFO were to maintain its FY16 CQGR of 3.3%in FY17, it would translate into 13.2% reported USD and 13.6% YoY CC growth.

At TCS, watch for performance in problem areas— Telecom, E&U, Insurance andJapan; an uptick in these will be crucial for growth acceleration – we are building11.1% YoY CC growth in FY17, compared to 10.7% YoY CC organic growth inFY16.

We expect WPRO to post a CC growth guidance of 3-5% for 1QFY17, including2pp from HPS (2 months) and Viteos, and 1-3% QoQ CC organic growth.

ACN delivered yet another impressive quarter in February 2016, suggesting thatits Digital readiness is leading to sustained momentum. ACN has increased itsannual guidance for the second consecutive quarter, which now stands at 8-10%, compared to 5-8% at the end of the previous year.

Bottom-up approach drives our preference for INFO, HCLT At 15.4x, the sector is currently trading 9% below its 10-year average of 16.9x.

Moreover, the sector is trading at par with Sensex. Within tier-I, our top picks are INFO (on gradual recovery in growth) and HCLT.

We see INFO on course to industry average growth by FY17, with the remnant

20.7

8.6

9.3

18.6

31.4

15.8

10.8

8.3

15.8

22.6

12.0

14.0

8.4

13.6

18.9

9.8

12.4

6.0

9.2

14.7

10.2

15.2

9.3

9.5

5.6


4QFY15 1QFY16 2QFY16 3QFY16 4QFY16


April 2016 236

concern of top accounts mining addressed to good effect thus far. HCLT corrected recently after two quarters of disappointment. Its leadership in Engineering and strong demand in IMS could drive above-industry growth over the near to medium term. We expect 1HCY16 to be materially better than 2HCY15.

With Energy woes easing, WPRO’s performance may finally revive. At ~14x one-year forward earnings, WPRO could see some near-term upside if itdemonstrates stable performance in the Energy segment. However, the jury willbe out on the recent leadership change as potential flux in senior managementcould cause further delay in growth recovery.

While TECHM has corrected significantly, concerns in the Telecom vertical keepvisibility on growth recovery low; growth recovery remains critical for re-rating.In tier-II, we have a Buy on CYL for its differentiated positioning, well definedniche and long-term strategy. We also prefer the business models of MTCL andPSYS.

Exhibit 4: HCLT to outperform peers organically in 4Q (USD revenue growth, % QoQ)


Exhibit 5: Incremental revenue to revive at HCLT; but cross-currency movements and volatility driving choppiness in trend


1.7 2.0

3.9

2.6

0.6

-1

1

3

5

7

9

1QFY

15

2QFY

15

3QFY

15

4QFY

15

1QFY

16

2QFY

16

3QFY

16

4QFY

16

TCS Infosys Wipro HCL Tech Tech Mahindra

-100

0

100

200

300

1QFY

15

2QFY

15

3QFY

15

4QFY

15

1QFY

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2QFY

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3QFY

16

4QFY

16

TCS Infosys Wipro HCL Tech Tech Mahindra

30

10

40 40 40


Cross-currency impact on on QoQ revenue growth (bp)

March 2016 Results Preview | Sector: Technology (U

SD m

)

April 2016 237

Exhibit 6: PSYS to benefit from IBM deal; HEXW from reversal of Chennai impact in 3Q


Exhibit 7: Expect margin uptick across the board, except in TECHM (%)


Exhibit 8: Quarterly summary for tier-I companies Revenue (USD m) Revenue (INR b)

Company 4QFY16E 4QFY15 YoY (%) 3QFY16 QoQ (%) 4QFY16E 4QFY15 YoY (%) 3QFY16 QoQ (%) TCS 4,214 3,900 8.0 4,145 1.7 285 242 17.5 274 4.0 Infosys 2,454 2,159 13.7 2,407 2.0 166 134 23.6 159 4.2 Wipro 1,910 1,775 7.6 1,838 3.9 137 121 12.8 129 6.8 HCLT 1,607 1,491 7.8 1,566 2.6 109 93 17.1 103 5.0 TECHM 1,021 984 3.8 1,015 0.6 69 61 12.7 67 2.9 Aggregate 11,207 10,308 8.7 10,971 2.2 765 652 17.4 732 4.5

EBITDA Margin (%) PAT (INR b) Company 4QFY16E 4QFY15 YoY (%) 3QFY16 QoQ (%) 4QFY16E 4QFY15 YoY (%) 3QFY16 QoQ (%) TCS 28.6 29.2 (60) 28.3 30 62 39 60.6 61 1.4 Infosys 27.4 27.8 (40) 27.2 20 35 31 12.5 35 0.6 Wipro 21.3 22.7 (140) 20.8 50 22 23 (2.6) 22 (0.8) HCLT 22.6 22.6 - 21.5 100 19 17 11.2 19 (2.4) TECHM 16.4 15.3 110 16.9 (51) 7 5 55.2 8 (3.5) Aggregate 25.1 25.4 (36) 24.7 33 145 114 27.4 145 0.1


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6

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KPIT

Tec

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Min

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Mph

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Cyie

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1QFY16 2QFY16 3QFY16 4QFY16

14

18

22

26

30

1QFY

15

2QFY

15

3QFY

15

4QFY

15

1QFY

16

2QFY

16

3QFY

16

4QFY

16

TCS Infosys HCL Tech Wipro Tech Mahindra


USD revenue growth, % QoQ

Among the top-tier IT companies under our coverage, we expect HCLT to grow the fastest in organic terms

April 2016 238

Exhibit 9: Quarterly summary for tier-II companies Revenue (USD m) Revenue (INR b)

Company 4QFY16E 4QFY15 YoY (%) 3QFY16 QoQ (%) 4QFY16E 4QFY15 YoY (%) 3QFY16 QoQ (%) Persistent Systems 95 80 19.1 90 6.3 6.4 5.0 29.4 5.9 8.7 Hexaware 130 115 12.7 124 4.4 8.7 7.1 22.6 8.2 6.8 KPIT Tech. 125 122 2.0 123 1.2 8.4 7.6 10.4 8.1 3.6 Mindtree 193 148 30.3 184 4.4 13.0 9.2 41.6 12.1 7.0 Mphasis 227 230 (1.3) 229 (0.8) 15.4 14.3 8.0 15.2 1.8 Cyient 121 117 3.4 118 2.5 8.2 7.3 12.3 7.8 4.9 NIIT Tech 101 96 5.6 103 (1.5) 6.9 6.1 12.1 6.8 0.9 Aggregate 992 909 9.2 972 2.1 67.1 56.6 18.5 64.2 4.6

EBITDA margin (%) PAT (INR b) Company 4QFY16E 4QFY15 YoY (%) 3QFY16 QoQ (%) 4QFY16E 4QFY15 YoY (%) 3QFY16 QoQ (%) Persistent Systems 18.5 20.2 (170) 19 (30) 0.8 0.8 3.3 0.8 1.4 Hexaware 16.9 17.8 (90) 16 100 1.0 0.8 23.4 1.0 3.6

KPIT Tech. 15.4 4.5 1,090 15 90 0.8 0.5 61.0 0.7 10.3

Mindtree 17.0 19.5 (240) 18 (70) 1.5 1.3 14.5 1.5 (2.3) Mphasis 15.1 14.1 100 14 80 1.8 1.8 1.5 1.7 3.9 Cyient 15.4 12.3 310 14 130 1.0 0.9 7.6 0.9 16.3 NIIT Tech 17.6 16.3 130 18 (60) 0.7 (0.2) (486.4) 0.7 (8.2) Aggregate 16.3 14.7 170 16 40 7.6 5.9 28.2 7.4 3.2


Exhibit 10: 4QFY16 currency highlights Rates (INR) Change (QoQ)

USD EUR GBP AUD USD EUR GBP AUD Average 67.5 74.4 96.6 48.7 2.4% 3.0% -3.4% 2.4% Closing 66.5 74.4 94.7 50.2 0.6% 3.2% -3.4% 3.8%


Exhibit 11: 4QFY16 currency highlights Rates (USD) Change (QoQ)

EUR GBP AUD EUR GBP AUD Average 1.10 1.43 0.72 0.7% -5.6% 0.1% Closing 1.12 1.42 0.76 3.0% -3.4% 3.6%


Exhibit 12: Cross currencies - Assumed rates v/s actual Guided at USD/EUR USD/GBP AUD/USD INR/USD Infosys 1.09 1.48 0.73 66.15 Wipro 1.07 1.50 0.72 66.13 Actual (Average) 1.10 1.43 0.72 67.53

Change (%) USD/EUR USD/GBP AUD/USD INR/USD Infosys 1.1% -3.3% -1.2% 2.1% Wipro 3.0% -4.6% 0.2% 2.1%



Expect only PSYS and HEXW to report sanguine growth

April 2016 239





Exhibit 15: Comparative valuation Company Mcap Rating TP Upside EPS (INR) P/E (x) RoE (%) FY16-18E CAGR (%)

(USD b) (INR) (%) FY17E FY18E FY17E FY18E FY17E FY18E USD rev. EPS

TCS 74.7 Neutral 2,615 3.8 136.7 155.3 18.4 16.2 35.6 33.2 10.6 12.7 Infosys 41.9 Buy 1,350 10.8 69.0 77.1 17.7 15.8 25.4 25.0 13.2 14.8 Wipro 20.9 Neutral 630 11.7 37.4 43.5 15.1 13.0 19.0 19.7 10.1 9.9 HCL Tech 17.3 Buy 1,000 22.9 59.7 67.4 13.6 12.1 27.4 26.2 14.7 12.7 TechM 6.9 Neutral 550 15.8 36.7 41.1 13.0 11.5 20.7 17.6 9.0 11.3 Cognizant 34.9 Not Rated 3.0 3.4 19.2 16.8 17.8 17.2 12.5 13.3 Tier-I Agg 196.5 16.2 14.2 24.3 23.1 Mphasis 1.6 Neutral 520 5.7 36.5 40.7 13.5 12.1 12.9 13.8 7.2 9.2 Mindtree 0.8 Neutral 775 18.7 42.5 50.5 15.3 12.9 27.4 26.9 16.6 19.4 KPIT Tech 0.4 Neutral 165 11.5 15.4 17.9 9.6 8.3 17.6 17.2 6.6 14.0 Cyient 0.7 Buy 550 28.8 36.6 42.5 11.7 10.1 17.2 17.5 11.8 14.9 Hexaware 1.2 Neutral 250 -7.1 15.1 17.5 17.8 15.4 31.0 33.8 14.8 16.4 NIIT Tech 0.5 Neutral 610 22.7 50.3 56.2 9.9 8.8 18.2 17.8 7.8 13.0 Persistent Sys. 0.9 Neutral 820 7.6 45.3 54.9 16.8 13.9 21.1 23.1 23.9 22.0 Tier-II Agg 6.1 13.5 11.6 20.8 21.4

Source: MOSL

85

90

95

100

105

Dec-

15

Jan-

16

Feb-

16

Mar

-16

Sensex Index MOSL Technology Index

80

85

90

95

100

105

Mar

-15

Apr-

15

May

-15

Jun-

15

Jul-1

5

Aug-

15

Sep-

15

Oct

-15

Nov

-15

Dec-

15

Jan-

16

Feb-

16

Mar

-16

Sensex Index MOSL Technology Index


April 2016 240

Quarterly performance (INR m) Y/E March FY15 FY16 FY15 FY16E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Revenue (USD m) 104 111 115 117 114 118 118 121 447 473 QoQ (%) 7.8 6.6 3.5 2.4 -2.6 3.6 0.0 2.5 23.0 5.7 Revenue (INR m) 6,217 6,724 7,118 7,300 7,263 7,717 7,818 8,198 27,359 30,996 YoY (%) 28.5 22.4 23.1 22.7 16.8 14.8 9.8 12.3 24.0 13.3 GPM (%) 37.5 38.1 38.8 35.3 35.4 36.6 34.4 36.6 37.4 35.8 SGA (%) 23.4 22.1 22.5 22.9 22.7 21.6 20.3 21.2 22.7 21.4 EBITDA Margin (%) 14.1 16.1 16.3 12.3 12.6 15.1 14.1 15.4 14.7 14.3 EBIT Margin (%) 11.3 13.4 13.8 9.8 10.1 12.6 11.3 13.1 12.1 11.8 Other income 132 340 366 399 298 299 246 298 1,236 1,141 ETR (%) 22.6 29.6 28.0 16.1 28.7 23.5 20.8 25.0 24.6 24.4 PAT before EOI 685 902 1,008 938 748 985 869 1,010 3,511 3,614 QoQ (%) 5.8 31.6 11.8 -6.9 -20.3 31.7 -11.8 16.3 YoY (%) 26.3 24.3 76.1 45.0 9.2 9.2 -13.9 7.6 32.0 2.9 EPS 6.1 8.0 9.0 8.4 6.7 8.8 7.7 9.0 31.3 32.2 Headcount 11,715 11,927 11,916 11,529 11,507 11,311 11,481 11,781 11,529 11,781 Util excl. trainees (%) 74.4 74.7 76.0 73.8 75.4 76.1 76.7 77.5 Attrition (%) 15.3 12.7 13.3 17.2 18.8 21.6 20.6 Fixed Price (%) 48.2 48.8 46.5 44.8 44.7 44.6 43.3 44.0 E: MOSL Estimates


Cyient

CMP: INR458 TP: INR550 Buy We expect CYL’s USD revenue to grow 2.5% QoQ in 4QFY16. Rangsons is expected to clock revenue of USD38m-40m in FY16,

implying USD11m revenue in 4Q – up 3% QoQ. In the core services business, CYL’s revenue is expected to increase

by 2.5% QoQ. After declining 220bp over the last four quarters to 14.1%, we

believe EBITDA margin has bottomed out. We expect margins toexpand by 130bp to 15.4% in 4Q, driven by INR depreciation, revivalof revenue growth in core services and improved profitability inRangsons.

PAT estimate for the quarter is INR1,010m, +16.3% QoQ, on theback of improved margins. Moreover, the company will continue toreport hedge gains as its average hedge rate is INR68.7/USD.


Key issues to watch for Update on problem verticals like Semiconductor, Energy and GIS. Outlook for Rangsons for FY17. Margin trajectory going ahead.

Bloomberg CYL IN


M. Cap. (INR b)/(USD b) 51/1 52-Week Range (INR) 641/371 1,6,12 Rel Perf. (%) 1 /-13 /0

Financial snapshot (INR b) Y/E JUNE 2015 2016E 2017E 2018E

Sales 27.4 31.0 35.6 41.3

EBITDA 4.0 4.4 5.3 6.5 PAT 3.5 3.6 4.1 4.8 EPS (INR) 31.3 32.2 36.6 42.5


RoCE (%) 16.8 16.2 17.7 19.6 Payout (%) 25.6 30.0 30.0 30.0 Valuation P/E (x) 13.9 13.5 11.9 10.2

P/BV (x) 2.6 2.3 2.0 1.8 EV/EBITDA (x) 11.0 9.8 7.9 6.1

Div yld (%) 1.8 2.2 2.5 2.9

April 2016 241

Quarterly performance (US GAAP)

(INR m) Y/E June FY15 FY16 (9M) FY17 FY15 FY16E

1Q 2Q 3Q 4Q 1Q 2Q 3QE 1QE Revenue (USD m) 1,434 1,491 1,491 1,538 1,545 1,566 1,607 1,729 5,952 4,718 QoQ (%) 1.9 4.0 0.0 3.2 0.5 1.4 2.6 7.5 11.1 -20.7 Revenue (INR m) 87,350 92,830 92,670 97,770 100,970 103,410 108,544 117,545 370,620 312,924 YoY (%) 9.7 13.4 11.0 16.1 15.6 11.4 17.1 20.2 12.6 -15.6 GPM (%) 36.8 37.0 35.3 34.2 34.4 34.6 35.2 34.8 35.8 34.7 SGA (%) 11.7 12.0 12.7 12.8 12.5 13.0 12.7 12.8 12.3 12.7 EBITDA Margin (%) 25.1 25.0 22.6 21.5 21.9 21.5 22.6 22.1 23.5 22.0 EBIT Margin (%) 23.9 23.9 21.3 20.2 20.6 20.0 21.2 20.8 22.3 20.6 Other income 1,489 2,160 1,790 2,120 2,410 3,550 843 2,459 7,559 6,803 ETR (%) 23.2 21.0 21.9 18.6 21.3 20.9 21.5 21.5 21.2 21.2 PAT before EOI 17,179 19,219 16,838 17,820 18,230 19,190 18,728 21,093 71,057 56,148 QoQ (%) -6.4 11.9 -12.4 5.8 2.3 5.3 -2.4 12.6

YoY (%) 21.3 28.6 3.7 -2.9 6.1 -0.2 11.2 18.4 11.5 -21.0 EPS 12.2 13.6 11.9 12.6 12.9 13.6 13.3 14.9 50.4 39.8 Headcount 95,522 100,240 104,184 106,107 105,571 103,696 108,696 118,546 106,107 108,696 Util excl. trainees (%) 82.7 82.9 81.9 83.5 83.6 84.7 84.0 84.4 79.7 81.2 Attrition (%) 16.6 16.4 16.2 16.5 16.3 16.7

Fixed Price (%) 56.3 55.8 56.3 56.1 56.2 57.0 E: MOSL Estimates


HCL Technologies

CMP: INR821 TP: INR1,000 Buy We expect HCLT’s USD revenue to grow 2.6% QoQ in 3QFY16 and

3% QoQ on a constant currency basis. Impact from cross currencies should shave off ~40bp from revenue growth.

Growth is expected to be driven by ramp-up in multiple transformational deals in IMS. Delays in ramp-up resulted in momentary slowdown in revenue growth for the first two quarters of the year. This trend is expected to reverse over the next two.

After declining 390bp over the last four quarters to 20%, we expect EBIT margin to expand by 120bp to 21.2% in 3Q, driven by INR depreciation, the absence of one-time costs associated with the Chennai floods, and more importantly, because of a revival in revenue growth.

PAT estimate for the quarter is INR18.7b, -2.4% QoQ, on the back of lower other income, led by hedge losses and translation losses.


Key issues to watch for Commentary on margin band for FY17. TCV of deals signed during the quarter. Growth in IMS and Engineering segments.

Bloomberg HCLT IN


M. Cap. (INR b)/(USD b) 1,160 / 18 52-Week Range (INR) 1,048/786 1,6,12 Rel Perf. (%) -8 / -1 /-2

Financial snapshot (INR b) Y/E June 2015 2016E* 2017E 2018E

Sales 370.6 312.9 496.0 578.8 EBITDA 87.0 68.8 107.6 124.5 PAT 72.6 56.1 84.9 96.5 EPS (INR) 50.4 39.8 59.7 67.4

EPS Gr. (%) 11.7 -21.0 50.2 12.8 BV/Sh. (INR) 177.0 201.6 240.3 285.8 RoE (%) 31.7 21.2 27.4 26.2


P/BV (x) 4.8 4.2 3.5 2.9 EV/EBITDA ( )

12.2 15.4 9.5 7.9

Div yld (%) 1.9 1.8 2.1 2.3

9M ending March 2016

April 2016 242

Quarterly performance (Indian GAAP)

(INR m) Y/E Dec CY14 CY15 CY15 CY16E

2Q 3Q 4Q 1Q 2Q 3Q 4Q 1QE Revenue (USD m) 102 110 115 114.9 121.3 125.1 124.1 129.5 485 557 QoQ (%) 6.5 7.8 4.1 0.3 5.6 3.1 -0.8 4.4 14.9 14.8 Revenue (INR m) 6,104 6,706 7,118 7,134 7,722 8,184 8,195 8,748 31,235 37,816 YoY (%) 13.8 8.0 14.8 21.1 26.5 22.0 15.1 22.6 21.0 21.1 GPM (%) 36.2 37.3 37.4 35.7 35.0 35.3 34.7 35.7 35.1 35.8 SGA (%) 19.6 19.3 17.5 17.9 17.8 17.4 18.8 18.8 18.0 18.5 EBITDA Margin (%) 16.7 18.0 19.9 17.8 17.1 17.8 15.9 16.9 17.1 17.3 EBIT Margin (%) 14.9 16.4 18.3 16.2 15.6 16.4 14.3 15.4 15.6 15.8 Other income 83 -11 -112 -96 84 97 88 0 173 20 ETR (%) 22.9 20.9 21.3 21.2 23.5 22.4 21.0 23.5 22.1 23.5 PAT 765 860 939 834 989 1,115 994 1,029 3,932 4,582 QoQ (%) 8.8 12.4 9.2 -11.2 18.6 12.7 -10.9 3.6 YoY (%) -21.9 -13.0 -9.0 18.6 29.3 29.7 5.9 23.4 20.4 16.5 EPS (INR) 2.5 2.9 2.9 2.8 3.3 3.7 3.3 3.4 12.9 15.1 Headcount 9,287 9,697 10,016 10,100 11,009 11,341 11,375 11,754 11,375 13,371 Utilization (%) 70.8 70.3 73.0 73.6 72.1 70.4 69.7 71.0 72.3 73.2 Attrition (%) 12.7 13.0 14.1 16.6 17.1 17.4 16.9 Offshore rev. (%) 45.2 43.8 42.4 41.1 38.8 39.2 37.7 38.3 39.2 38.7 E: MOSL Estimates


Hexaware Technologies

CMP: INR271 TP: INR250 Neutral We expect USD revenue to grow 4.4% QoQ to USD129.5m. In 4Q,

HEXW was adversely hit by the Chennai floods – 33% of its delivery is based out of here. We expect some amount of spillover from the previous quarter in 1Q.

We model EBITDA margin expansion of 100bp QoQ to 16.9%. The previous quarter had one-offs to the extent of 100bp (Chennai floods, furloughs, acceleration in CSR spend, consultancy costs); recouping this shouldn’t be difficult.

Our PAT estimate for the quarter is INR1,029m, up 3.6% from the previous quarter, on the back of higher margins and forex loss.

Dividend payout has remained healthy thus far, though the management has refrained from citing any clear policy. We expect a dividend of INR2.2/share, maintaining a payout ratio (65% of net profit) similar to the previous year.

The stock trades at 17.8x CY16E and 15.4x CY17E earnings. Neutral.

Key issues to watch for Large deal pipeline and traction post the increased S&M spend. Commentary on sustenance of revenue growth and margins. Dividend payout during the quarter.

Bloomberg HEXW IN


M. Cap. (INR b)/(USD b) 82 / 1 52-Week Range (INR) 335 /203 1,6,12 Rel Perf. (%) 5/ 11 / -2

Financial snapshot (INR b) Y/E Dec 2014 2015 2016E 2017E

Sales 25.8 31.2 37.8 44.5


EPS Gr. (%) -15.9 22.1 16.5 16.2 BV/Sh. (INR) 42.9 47.4 50.2 53.6 RoE (%) 25.7 28.9 31.0 33.8


P/BV (x) 6.3 5.7 5.4 5.0 EV/EBITDA (x) 15.5 14.0 11.7 9.9

Div yld (%) 3.1 3.2 3.6 4.2

April 2016 243

Quarterly performance (IFRS)

(INR m) Y/E March FY15 FY16 FY15 FY16E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Revenue (USD m) 2,133 2,201 2,218 2,159 2,256 2,392 2,407 2,454 8,711 9,509 QoQ (%) 2.0 3.2 0.8 -2.7 4.5 6.0 0.6 2.0 5.6 9.2 Revenue 127,700 133,420 137,960 134,110 143,540 156,350 159,020 165,750 533,190 624,660 YoY (%) 13.3 2.9 5.9 4.2 12.4 17.2 15.3 23.6 6.4 17.2 GPM (%) 38.8 40.7 40.6 41.2 38.6 40.1 39.5 39.6 40.3 39.5 SGA (%) 11.8 12.4 11.9 13.3 12.4 12.3 12.3 12.2 12.4 12.3 EBITDA Margin

26.9 28.3 28.7 27.8 26.2 27.8 27.2 27.4 27.9 27.2

EBIT Margin (%) 25.1 26.1 26.7 25.7 24.0 25.5 24.9 25.3 25.9 25.0 Other income 8,290 8,770 8,400 8,810 7,580 7,930 8,020 6,451 34,270 29,981 ETR (%) 28.6 29.0 28.2 28.5 27.9 29.0 27.2 28.0 28.6 28.0 PAT 28,860 30,960 32,500 30,980 30,300 33,980 34,650 34,844 123,310 133,784 QoQ (%) -3.5 7.3 5.0 -4.7 -2.2 12.1 2.0 0.6

YoY (%) 21.6 17.9 13.0 3.5 5.0 9.8 6.6 12.5 15.8 8.5 EPS (INR) 12.6 13.5 14.2 13.5 13.3 14.9 15.2 15.2 53.9 58.5 Headcount 161,284 165,411 169,638 176,187 179,523 187,976 193,383 197,568 176,187 197,568 Util excl. trainees

80.1 82.3 82.7 79.3 80.9 82.0 81.4 82.1 82.0 81.9

Attrition (%) 19.5 20.1 20.4 18.9 19.2 19.9 18.1

Offshore rev. (%)

45.5 45.4 45.2 44.8 43.9 43.9 43.5

Fixed Price (%) 40.1 41.4 42.9 43.8 42.4 44.0 44.6 E: MOSL Estimates


Infosys

CMP: INR1,206 TP: INR1,350 Buy INFO raised its FY16 guidance in the previous quarter to 12.8-13.2%

YoY CC, from 10-12% earlier. This implies 4Q guidance of 1-2.4% QoQ CC. We expect revenue to grow 2.1% QoQ CC, which would represent the strongest 4Q for INFO in the last six years.

In INR terms, our revenue growth estimate is 4.2% QoQ on the back of ~2.3% sequential depreciation in INR v/s USD.

We also expect deals wins to improve compared to 3Q, given delays in signing of some deals in the previous quarter.

We expect EBITDA margin to expand 20bp QoQ to 27.4%. The factors that we expect to play on margins are INR depreciation, improved utilization, and pricing pressure.

Our PAT estimate is INR34.8b, up 0.6% QoQ due to the impact of forex losses on other income.

The stock trades at 17.7x FY17E and 15.8x FY18E earnings. Buy.

Key issues to watch for Revenue growth guidance for FY17. TCV of deal wins during the quarter. Commentary around contribution of newly launched services. Commentary around macro, margins and pricing.

Bloomberg INFO IN


M. Cap. (INR b)/(USD b) 2,756 / 42 52-Week Range (INR) 1,250 / 933 1,6,12 Rel Perf. (%) 1 / 6 / 22

Financial snapshot (INR b) Y/E Mar 2015 2016E 2017E 2018E Sales 533.2 624.7 732.2 853.1 EBITDA 149.0 169.9 202.4 233.2 PAT 123.3 133.8 157.7 176.1

EPS (INR) 53.9 58.5 69.0 77.1 EPS Gr. (%) 15.8 8.5 17.9 11.7 BV/Sh. (INR) 240 269 308 349

RoE (%) 26.0 24.5 25.4 25.0 RoCE (%) 27.0 26.8 28.5 29.1 Payout (%) 34.3 42.7 43.5 38.9

Valuations P/E (x) 22.6 20.8 17.7 15.8

P/BV (x) 5.1 4.5 4.0 3.5


April 2016 244

Quarterly performance (Indian GAAP)


1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Revenue (USD

115 125 126 122 118 125 123 125 489 491

QoQ (%) 1.4 8.5 1.2 -3.2 -3.3 5.3 -1.0 1.2 10.1 0.4 Revenue (INR

6,897 7,574 7,798 7,630 7,583 8,123 8,130 8,424 29,899 32,260

YoY (%) 12.5 7.8 15.0 9.0 9.9 7.2 4.3 10.4 11.0 7.9 GPM (%) 26.5 29.7 31.1 25.2 28.1 32.1 32.9 33.2 28.2 31.6 SGA (%) 14.4 16.4 17.2 20.7 18.5 18.1 18.3 17.9 17.2 18.2 EBITDA Margin

12.1 13.3 13.9 4.5 9.6 14.0 14.6 15.4 10.9 13.4

EBIT Margin (%) 9.7 10.1 11.1 1.6 7.3 11.9 12.3 13.1 8.1 11.2 Other income 101 42 25 177 106 86 36 9 345 237 Interest 40 39 51 150 47 44 35 27 279 154 ETR (%) 30.4 8.1 22.3 -245.3 27.9 25.4 26.5 25.5 4.6 26.2 PAT 508 706 653 504 444 751 735 811 2,371 2,741 QoQ (%) -1.3 39.1 -7.5 -22.9 -11.8 69.1 -2.1 10.3

YoY (%) -15.5 5.8 7.5 -2.2 -12.6 6.3 12.5 61.0 -0.8 15.6 EPS (INR) 2.5 3.5 3.3 2.5 2.2 3.8 3.7 4.1 11.8 13.7 Headcount 9,490 9,933 10,291 10,980 10,839 10,659 10,559 10,618 10,980 10,618 Util excl.

70.2 71.6 70.2 65.6 66.4 69.7 69.1 71.0 69.3 69.0

Offshore rev.

42.8 48.9 46.5 47.6 44.7 44.9 41.2 42.3 46.5 43.3 Fixed Price (%) 28.4 29.6 33.8 31.3 26.2 27.1 29.1 E: MOSL


KPIT Technologies

CMP: INR151 TP: INR165 Neutral 3Q marked the shift of KPIT’s focus from resurrecting profitability to

boosting revenue growth, which is expected to reflect in financials starting 2HFY17. Till then, revenue growth is expected to remain muted.

In USD terms, our revenue growth estimate is 1.2% QoQ, led by softness in ITS and IES, and continued growth in SAP.

In 4Q, we expect EBITDA margin of 15.4%, up 80bp from 3Q. Margins would be negatively impacted by increased investments, but offset by INR depreciation, improved utilization and better margins in SAP.

Our PAT estimate is INR811m, 10.3% above the previous quarter because of better margins.

KPIT trades at 9.6x FY17E and 8.3x FY18E earnings. Maintain Neutral.

Key issues to watch for Growth in IES and Engineering services. Outlook on growth in products and platforms. Margin performance and guidance. Commentary on deal wins across segments.

Bloomberg KPIT IN Equity Shares (m) 200.4 M.Cap. (INR b) /(USD b) 30/0.5

52-Week Range (INR) 194/85 1, 6, 12 Rel. Per (%) 4/46/-10

Financial snapshot (INR b) Y/E Mar 2015 2016E 2017E 2018E

Sales 29.9 32.3 34.9 39.0


EPS Gr. (%) -7.9 16.1 11.8 16.4 BV/Sh. ( )

64.9 79.8 95.2 113.1 RoE (%) 18.4 19.0 17.6 17.2

RoCE (%) 16.8 23.6 22.7 22.7 Payout (%) 10.1 10.9 13.0 11.2 Valuations P/E (x) 12.5 10.8 9.6 8.3

P/BV (x) 2.3 1.9 1.6 1.3 EV/EBITDA ( )

7.8 5.6 4.5 3.3

Div yld (%) 0.8 1.0 1.4 1.4

April 2016 245


(INR m)


Revenue (USD m) 141 147 148 148 155 180 184 193 584 712 QoQ (%) 6.4 4.0 0.5 0.1 4.8 16.4 2.3 4.4 16.4 22.0 Revenue (INR m) 8,435 8,886 9,117 9,181 9,816 11,693 12,145 13,001 35,619 46,655 YoY (%) 30.2 15.5 15.3 11.5 16.4 31.6 33.2 41.6 17.5 31.0 GPM (%) 42.2 41.5 42.3 41.1 41.8 41.3 40.3 40.0 41.8 40.8 SGA (%) 22.2 21.8 21.8 21.7 24.2 22.8 22.6 23.0 21.9 23.1 EBITDA Margin (%) 20.0 19.8 20.5 19.5 17.6 18.5 17.7 17.0 19.9 17.7 EBIT Margin (%) 17.3 17.1 17.6 16.2 14.3 15.8 14.8 14.1 17.0 14.8 Other income 210 241 210 174 374 195 147 71 835 787 ETR (%) 22.4 22.0 22.4 22.7 22.4 22.5 22.5 22.5 22.4 22.5 PAT 1,294 1,374 1,408 1,287 1,382 1,582 1,509 1,474 5,363 5,947 QoQ (%) 31.5 6.2 2.5 -8.6 7.4 14.5 -4.6 -2.3

YoY (%) -4.4 6.8 59.1 30.8 6.8 15.1 7.2 14.5 18.9 10.9 EPS (INR) 7.7 8.2 8.4 7.7 8.2 9.4 9.0 8.8 31.9 35.4 Headcount 12,845 13,018 13,323 14,202 14,427 15,582 16,243 16,578 14,202 16,578 Util incl. trainees (%) 72.1 73.5 71.8 70.2 70.3 71.4 68.5 67.5 71.9 69.4 Attrition (%) 14.2 15.7 18.1 18.2 18.4 17.1 16.0

Offshore rev. (%) 55.8 54.4 54.2 52.9 51.9 47.6 45.5 43.5 54.3 46.9 Fixed Price (%) 43.8 43.6 46.5 46.5 48.9 49.7 50.0

E: MOSL Estimates


MindTree

CMP: INR668 TP: INR775 Neutral We model 4QFY16 revenue at USD193m, +4.4% QoQ. MTCL had

updated its outlook for 4Q – it expects marginal QoQ organic growth compared to the earlier expectation of bettering the 2.3% QoQ growth in 3Q.

We are factoring in 1pp organic growth and 3.3pp contribution from the acquisition of Magnet360.

We expect the trend of robust deal wins to continue. The company won deals with TCV of USD605m in 9MFY16.

Our estimate for EBITDA margin is 17%, -70bp QoQ, mainly on account of weak revenue growth and the integration of lower-margin Magnet360.

Our PAT estimate for the quarter is INR1.47b, which implies a 2.3% QoQ decline—primarily on account of lower margins and forex loss.

The stock trades at 15.3x FY17E and 12.9x FY18E earnings. Neutral.

Key issues to watch for Guidance for growth in 1Q and likely impact, if any, from a couple

of sluggish accounts. Margin trajectory, going forward, given the increased

investments. Deal wins during the quarter and growth in Digital.

Bloomberg MTCL IN


M. Cap. (INR b)/(USD b) 112 / 2 52-Week Range (INR) 804/ 577 1,6,12 Rel Perf. (%) 1 / 27 / 24


Sales 35.6 46.7 57.8 67.8




P/BV (x) 5.5 4.6 3.9 3.2 EV/EBITDA ( )

14.1 12.9 9.9 8.0

Div Yld (%) 1.3 1.8 1.8 1.8

April 2016 246



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Revenue (USD m) 249 240 227 230 234 237 229 227.3 946 928 QoQ (%) -2.1 -3.4 -5.6 1.4 1.9 1.1 -3.4 -0.8 -6.2 -2.0 Revenue (INR m) 14,902 14,649 14,108 14,290 14,964 15,575 15,167 15,434 57,949 61,140 YoY (%) -3.2 -8.1 -9.8 -7.5 0.4 6.3 7.5 8.0 -6.9 5.5 GPM (%) 27.8 26.7 24.9 26.8 26.1 26.9 25.6 26.5 26.6 26.3 SGA (%) 10.9 12.1 10.2 11.6 11.8 11.9 11.3 11.4 11.2 11.6 EBITDA Margin (%) 16.6 14.6 14.6 14.1 14.1 15.1 14.3 15.1 15.0 14.6 EBIT Margin (%) 14.8 13.0 13.0 12.5 12.7 13.9 13.2 13.5 13.3 13.3 Other income 356 439 497 675 564 492 456 435 1,967 1,947 ETR (%) 29.8 28.7 27.1 26.2 27.3 26.4 27.7 27.7 28.0 27.3 PAT 1,748 1,602 1,651 1,777 1,742 1,900 1,736 1,803 6,778 7,181 QoQ (%) -4.6 -8.4 3.1 7.6 -2.0 9.1 -8.6 3.9

YoY (%) -9.2 -15.8 -11.7 -3.0 -0.3 18.6 5.1 -32.4 119.3 5.9 EPS (INR) 8.3 7.6 7.9 8.5 8.3 9.0 8.3 8.6 32.3 34.2 Headcount 35,497 36,015 35,208 34,059 34,159 24,169 23,563 22,062 34,059 22,062 Net Additions -166 518 -807 -1149 100 -9990 -606 -1501 -1604 -11997 HP Channel rev. (%) 36.0 35.8 34.6 31.3 28.8 26.5 24.2

Fixed Price (%) 13.3 13.8 16.7 14.4 12.3 14.0 19.2

E: MOSL Estimates


Mphasis

CMP: INR467 TP: INR520 Neutral MPHL’s HP channel is likely to continue its rate of decline, as the

company has little visibility on a sustained trend in the business. Direct Channel should witness growth.

Digital Risk has seen strong growth over the last three quarters, led by ramp up in orders won in the past. However, the management expects the quarterly run-rate for Digital Risk to fall over 4Q/1Q.

We model a revenue decline of 0.8% QoQ to USD227m, primarily on account of decline in the HP channel and Digital Risk.

EBITDA margin is likely to expand 80bp QoQ to 15.1% because of the reversal of 3Q’s wage hike, absence of Chennai impact and furloughs, and INR depreciation. Moreover, Digital Risk had shifted to a variable cost model to absorb the impact of the decline witnessed in FY15. This ensures minimal impact on profitability of a decline in revenue.

We expect PAT of INR1.8b (+3.9% QoQ). The stock trades at 12.4x FY17E and 11.1x FY18E EPS. Neutral.

Key issues to watch for Outlook for Digital Risk and HP channel. Deal TCV during the quarter in Direct Channel (organic business),

and focus areas.

Bloomberg MPHL IN

Equity Shares (m) 210.2 M. Cap. (INR b)/(USD b) 98 / 1.5

52-Week Range (INR) 534 / 363 1,6,12 Rel Perf. (%) 0 / 18 / 30

Financial snapshot (INR b) Y/E Mar 2015 2016E 2017E 2018E Sales 57.9 61.1 63.5 73.1 EBITDA 8.7 8.9 9.7 11.4 PAT 6.8 7.2 7.7 8.6 EPS (INR) 32.3 34.2 36.5 40.7 EPS Gr. (%) -8.6 5.9 7.0 11.5 BV/Sh. (INR) 260.8 276.6 288.0 301.1 RoE (%) 12.8 12.7 12.9 13.8 RoCE (%) 13.1 13.2 14.1 16.1 Payout (%) 49.6 54.9 57.5 56.4 Valuations P/E (x) 14.1 13.3 12.4 11.1 P/BV (x) 1.7 1.6 1.6 1.5 EV/EBITDA(x) 8.5 7.9 7.6 6.3 Div yld (%) 3.5 4.1 4.6 5.1

April 2016 247

Quarterly performance (IFRS) Y/E March FY15 FY16 FY15 FY16E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Revenue (USD m) Ex. forex & bought outs 93 95 94 92 98 104 103 102 374 406 QoQ (%) 0.7 1.6 -1.2 -1.4 5.9 6.2 -0.9 -0.7 5.6 8.7 Revenue (INR m) 5,776 5,883 5,953 6,112 6,411 6,779 6,787 6,851 23,724 26,828 YoY (%) 6.6 0.2 1.4 3.9 11.0 15.2 14.0 12.1 298.5 338.9 GPM (%) 32.9 33.4 34.1 35.7 36.4 37.2 37.3 37.1 34.0 37.0 SGA (%) 19.5 19.4 19.6 19.3 20.1 19.6 19.1 19.5 19.9 19.7 EBITDA Margin (%) 13.4 14.0 14.5 16.3 16.3 17.6 18.2 17.6 14.6 17.4 EBIT Margin (%) 10.1 9.7 10.6 12.4 12.0 13.7 14.2 12.7 10.7 13.2 Other income 36 -4 53 -66 79 13 52 49 19 193 ETR (%) 26.0 27.3 26.0 6.8 25.9 22.9 20.9 21.0 21.1 22.6 Minority Interest 27.0 10.0 24.0 18.0 40.0 43.0 48.0 48.0 79.0 179.0 PAT 433 400 482 -176 587 683 741 680 1,139 2,691 QoQ (%) -30.2 -7.6 20.5 -136.5 -433.5 16.4 8.5 -8.2 -51.8 136.3 YoY (%) -18.6 -35.9 -9.2 -128.4 35.6 70.8 53.7 -486.4 EPS (INR) 7.1 6.6 7.9 -2.9 9.6 11.2 12.1 11.1 18.7 44.0 Headcount 8,282 8,288 8,059 8,494 9,228 9,592 9,517 9,367 8,494 9,367 Util excl. trainees (%) 78.0 78.6 78.8 79.0 79.5 79.7 78.7 80.0 80.5 79.5 Attrition (%) 15.4 15.8 15.8 15.8 14.3 13.7 13.6

Offshore rev. (%) 37.0 35.0 37.0 38.0 39.0 41.0 41.0 36.7 40.7 Fixed Price (%) 43.0 45.0 46.0 46.0 42.0 41.0 43.0


NIIT Technologies

CMP: INR498 TP: INR610 Neutral We expect revenue for NITEC to decline by 0.3% QoQ CC. Although

deal wins have been strong for NITEC in recent quarters, the company witnessed couple of sizeable project completions in the last quarter. This is expected to contain any revenue growth in 4Q.

In 4Q, we estimate NITEC’s USD revenue to decline by 0.7%, and INR revenue to increase by 1.3% QoQ. We expect 40bp to be shaved off revenue growth because of GBP depreciation.

Traction in deal signings is expected to continue on the same lines as in recent quarters.

Consequent to the revenue decline, EBITDA margin is likely to decline 60bp.

Our PAT estimate is INR680m, down 8.2% QoQ—driven by the confluence of revenue de-growth, margin decline and forex losses.


Key issues to watch for Traction in the international business. Deal wins. Commentary on margin targets, going ahead.

Bloomberg NITEC IN


M. Cap. (INR b)/(USD b) 30/0.5 52-Week Range (INR) 632/338 1,6,12 Rel Perf. (%) 1/8/46

Financial snapshot (INR b) Y/E March FY15 FY16E FY17E FY18E Sales 23.7 26.8 29.6 32.9 EBITDA 3.5 4.7 5.2 5.6 PAT 1.9 2.7 3.1 3.4 EPS (INR) 18.8 43.9 50.3 56.2 EPS Gr. (%) -51.7 134.1 14.4 11.8 BV/Sh. (INR) 223.7 256.9 294.0 337.0 RoE (%) 8.5 18.4 18.2 17.8 RoCE (%) 18.6 23.5 22.4 21.6 Payout (%) 50.6 22.8 21.9 19.6 Valuations P/E (x) 26.5 11.3 9.9 8.8 P/BV (x) 2.2 1.9 1.7 1.5 EV/EBITDA (x) 7.8 6.1 5.1 4.4 Div Yld (%) 1.9 2.0 2.2 2.2

April 2016 248



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Revenue (USD m) 72.7 76.3 79.5 80.0 78.6 83.0 89.7 95.3 309 347 QoQ (%) 0.0 5.0 4.2 0.6 -1.8 5.5 8.1 6.3 12.6 12.3 Revenue (INR m) 4,350 4,642 4,946 4,975 5,004 5,427 5,921 6,436 18,913 22,789 QoQ (%) -2.6 6.7 6.6 0.6 0.6 8.5 9.1 8.7

YoY (%) 21.7 7.4 14.3 11.4 15.0 16.9 19.7 29.4 13.3 20.5 GPM (%) 40.1 40.2 40.2 40.2 39.7 38.9 38.8 38.6 40.2 39.0 SGA (%) 18.3 19.6 20.0 20.0 20.4 20.2 20.1 19.8 19.5 20.2 EBITDA Margin (%) 21.8 20.6 20.1 20.2 19.4 18.7 18.8 18.5 20.7 18.8 EBIT Margin (%) 16.6 15.5 15.1 15.6 14.8 14.4 14.6 15.0 15.7 14.7 Other income 233 274 245 181 198 182 160 91 932 631 ETR (%) 27.9 28.2 25.1 20.6 28.5 25.5 24.4 25.5 25.5 25.9 PAT 688 713 745 761 672 718 775 786 2,906 2,951 QoQ (%) 2.4 3.6 4.4 2.1 -11.6 6.9 7.8 1.4

YoY (%) 20.5 17.3 16.0 13.2 -2.3 0.7 4.1 3.3 16.6 1.6 EPS (INR) 8.6 8.9 9.3 9.5 8.4 9.0 9.7 9.8 36.3 36.9 Headcount 7,876 8,067 8,296 8,506 8,454 8,545 8,966 9,477 8,506 9,477 Util excl. trainees (%) 67.7 70.3 74.3 74.7 72.9 76.1 74.5 75.5 71.7 74.1 Attrition (%) 14.0 14.1 14.7 15.5 16.4 17.1 17.1

IP rev. proportion (%) 20.0 19.6 19.0 18.1 18.4 16.2 20.1 21.1 19.2 19.0

E: MOSL Estimates


Persistent Systems

CMP: INR741 TP: INR820 Neutral We expect strong growth in PSYS in 4Q, led by the Enterprise

segment and addition of revenue from the recently announced IBM Watson deal.

While the deal is revenue-accretive (15-20% of the company’s FY16 revenue base in FY17), it is expected to be margin dilutive to the extent of 200-250bp.

Aided by these factors, we expect 4QFY16 revenue to grow 6.3% QoQ to USD95m.

EBITDA margin is likely to be weighed down by the integration of the deal. We expect EBITDA margin to shrink 30bp to 18.5%.

Our PAT estimate for the quarter is INR786m, up 1.4% QoQ owing to lower margins and forex losses.


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. Outlook on sustainable profit margins in the near to medium

term.

Bloomberg PSYS IN


M. Cap. (INR b)/(USD b) 59 / 1 52-Week Range (INR) 817 / 563 1,6,12 Rel Perf. (%) 14/ 18 / 9

Financial snapshot (INR b) Y/E March 2015 2016E 2017E 2018E Sales 18.9 22.8 31.8 37.2 EBITDA 3.9 4.3 5.4 6.6 Adj. PAT 2.9 3.0 3.6 4.4 Adj. EPS (INR) 36.3 36.9 45.3 54.9 EPS Gr. (%) 16.6 1.5 22.8 21.1 RoE (%) 22.1 19.7 21.1 23.1 RoCE (%) 24.4 19.6 19.3 23.2 Payout (%) 27.5 29.8 26.5 21.9 Valuations P/E (x) 21.0 20.7 16.8 13.9 P/BV (x) 4.2 3.7 3.2 3.0 EV/EBITDA (x) 13.1 12.0 9.3 7.5 Div. Yield (%) 1.3 1.4 1.6 1.6

April 2016 249



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Revenue (USD m) 3,694 3,929 3,931 3,900 4,036 4,156 4,145 4,214 15,454 16,551 QoQ (%) 5.5 6.4 0.1 -0.8 3.5 3.0 -0.3 1.7 15.0 7.1 Revenue (INR m) 221,110 238,165 245,011 242,198 256,681 271,655 273,640 284,566 946,484 1,086,542 YoY (%) 22.9 13.5 15.1 12.4 16.1 14.1 11.7 17.5 15.7 14.8 GPM (%) 46.3 45.6 46.1 45.5 44.9 45.5 45.6 45.9 45.8 45.5 SGA (%) 17.5 17.0 17.3 16.3 16.8 16.7 17.3 17.3 17.0 17.0 EBITDA Margin (%) 28.8 28.6 28.8 29.2 28.1 28.8 28.3 28.6 28.8 28.4 EBIT Margin (%) 26.3 26.8 27.0 27.2 26.3 27.1 26.6 26.9 26.9 26.7 Other income 8,151 5,659 6,295 11,288 7,707 6,751 6,990 4,184 31,393 25,632 ETR (%) 23.1 23.1 24.1 23.0 23.2 24.1 23.2 23.0 23.3 23.4 PAT 50,578 52,883 54,442 59,055 57,086 60,553 61,095 61,963 216,958 240,696 QoQ (%) -4.5 4.6 2.9 8.5 -3.3 6.1 0.9 1.4

YoY (%) 26.7 13.8 5.1 11.5 12.9 14.5 12.2 4.9 13.5 10.9 EPS (INR) 25.8 27.0 27.8 30.1 29.1 30.8 31.0 31.4 110.8 122.2 Headcount 305,431 313,757 318,625 319,656 324,935 335,620 344,691 350,390 319,656 350,390 Util excl. trainees (%) 85.3 86.2 86.7 85.4 86.3 86.0 84.9 85.7 85.9 85.7 Attrition (%) 12.0 12.8 13.4 14.9 15.9 16.2 15.9

Offshore rev. (%) 47.2 45.7 46.0 46.0 46.0 46.0 46.0 46.3 46.2 46.1 Fixed Price (%) 52.5 51.3 51.7 52.6 52.6 52.6 52.6

E: MOSL Estimates


TCS

CMP: INR2,455 TP: INR2,615 Neutral 3Q was weak for TCS – driven down by an exceptional downturn in

the India business, and the impact of furlough and floods in Chennai, which is among the company’s largest delivery locations (over 65,000 employees).

Aided by the absence of these one-time factors, we expect CC revenue growth of 2% QoQ in 4Q. The impact of GBP and INR depreciation is expected to lead to USD revenue growth of 1.7% QoQ.

In INR terms, our revenue estimate of INR285.5b implies growth of 4.3% QoQ on the back of ~2.3% QoQ depreciation in realized INR.

We expect EBITDA margin to expand by 30bp QoQ to 28.6% on the back of absence of one-time costs, improved revenue growth and INR depreciation.

However, on the back of forex losses, our PAT growth estimate stands at 1.4% QoQ.

The stock trades at 18.4x FY17E and 16.2x FY18E earnings. Neutral. Key issues to watch for Growth in troubled segments—Energy, Telecom, Insurance. Outlook on revenue from TCS Japan. Traction in new Digital initiatives (automation/solutions).

Bloomberg TCS IN


M. Cap. (INR b)/(USD b) 4,823 / 73 52-Week Range (INR) 2,769 / 2,119 1,6,12 Rel Perf. (%) 2 / -3 /7

Financial snapshot (INR b) Y/E Mar 2015 2016E 2017E 2018E Sales 946.5 1,086.5 1,239.8 1,416.8



RoCE (%) 43.2 44.4 41.4 38.8 Payout (%) 71.3 34.8 35.1 35.9 Valuation

P/E (x) 22.8 20.6 18.4 16.2

P/BV (x) 8.6 7.3 6.0 4.9

EV/EBITDA (x) 17.4 15.4 13.6 11.7

Div. yield (%) 3.1 1.7 1.9 2.2

April 2016 250


(INR m) FY15 FY16 FY15 FY16E

Y/E March 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Revenue (USD m) 855 900 924 984 989 1,011 1,015 1,021 3,664 4,036 QoQ (%) 3.7 5.2 2.7 6.5 0.5 2.2 0.4 0.6 18.2 10.2 Revenue (INR m) 51,215 54,879 57,517 61,168 62,938 66,155 67,011 68,956 224,779 265,060 YoY (%) 24.8 15.0 17.4 20.9 22.9 20.5 16.5 12.7 19.4 17.9 GPM (%) 33.0 34.3 34.7 30.6 29.4 32.0 31.3 30.6 33.1 30.9 SGA (%) 14.7 14.1 14.4 15.3 14.4 15.4 14.3 14.2 14.6 14.6 EBITDA Margin (%) 18.3 20.2 20.3 15.3 15.0 16.6 16.9 16.4 18.5 16.3 EBIT Margin (%) 15.4 17.6 17.8 12.5 12.3 13.7 14.4 13.9 15.8 13.6 Other income 893 576 190 -653 1,366 1,658 639 563 1,006 4,226 Interest expense 142 152 137 258 214 173 244 210 689 841 ETR (%) 26.7 27.8 24.4 27.4 23.7 24.8 23.2 25.5 26.5 24.3 PAT excl. BT amort

6,307 7,196 7,769 4,720 6,762 7,855 7,592 7,327 25,992 29,536

QoQ (%) 4.6 14.1 8.0 -39.2 43.3 16.2 -3.3 -3.5

YoY (%) -3.4 5.1 21.0 -21.7 7.2 9.2 -2.3 55.2 0.6 13.6 EPS (INR) 6.7 7.6 8.8 5.3 7.6 8.8 8.5 8.2 29.6 33.2 Headcount 92,729 95,309 98,009 103,281 103,673 105,235 107,137 107,935 103,281 103,673 Util excl. trainees

72.0 73.0 74.0 71.0 74.0 77.0 77.0 77.3 72.5 76.3

Attrition (%) 16.0 18.0 19.0 19.0 19.0 20.0 20.0

Offshore rev. (%) 46.3 44.8 44.7 38.9 39.0 38.3 37.3 37.3 43.5 38.0 E: MOSL Estimates


Tech Mahindra

CMP: INR463 TP: INR550 Neutral We expect 1% QoQ CC growth in TECHM’s revenue. In USD terms,

we expect TECHM’s revenue to grow by 0.6% QoQ – 40bp negative impact of cross-currency movement.

In Telecom, while 4Q is a seasonally strong quarter for TECHM, we expect the consolidation of non-core/long-tail business of LCC to offset it, thus leading to flat growth.

In Enterprise, growth would be softer, as 3Q had exceptionally higher BPO revenue.

We expect EBITDA margin to decline by 50bp to 16.4%. We expect the wage hike impact to be partly absorbed by tailwinds in INR depreciation, flow-through of Comviva’s revenue and consolidation of the low profitability business of LCC.

We expect PAT to decline 3.5% QoQ, led by the margin decline and forex losses.

The stock trades at 13x FY17E and 11.5x FY18E earnings. Neutral.

Key issues to watch for Performance of the Telecom segment. Comments on profitability including LCC. TCV of deal wins in the Enterprise segment.

Bloomberg TECHM IN


M. Cap. (INR b)/(USD b) 445/ 7 52-Week Range (INR) 681 / 408 1,6,12 Rel Perf. (%) 1 /-14 / -16

Financial snapshot (INR b) Y/E Mar 2015 2016E 2017E 2018E

Sales 224.8 265.1 296.3 335.6 EBITDA 41.5 43.1 49.4 55.1 Adj. PAT 26.3 29.5 32.6 36.6 Adj. EPS ( )

29.6 33.2 36.7 41.1 EPS Gr. (%) 3.0 12.2 10.4 12.2 BV/Sh.(INR) 142.2 168.5 194.7 219.8 RoE (%) 24.5 22.0 20.7 17.6 RoCE (%) 27.1 22.5 23.2 23.6 Payout (%) 20.5 22.6 23.9 21.3 Valuation P/E (x) 16.0 14.3 13.0 11.5

P/BV (x) 3.3 2.8 2.4 2.2 EV/EBITDA ( )

9.2 9.1 7.7 6.6 Div. Yield (%)

1.3 1.6 1.8 1.8

April 2016 251



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Revenue (USD m) 1,740 1,772 1,795 1,775 1,794 1,832 1,838 1,910 7,082 7,374 QoQ (%) 1.2 1.8 1.3 -1.2 1.1 2.1 0.3 3.9 7.0 4.1 Revenue (INR m) 111,358 116,838 119,929 121,420 122,376 125,135 128,605 137,354 469,545 513,470 QoQ (%) -4.4 4.9 2.6 1.2 0.8 2.3 2.8 6.8

YoY (%) 14.5 8.5 6.4 4.2 9.9 7.1 7.2 13.1 8.1 9.4 GPM (%) 32.7 30.8 30.9 32.0 30.7 31.4 29.8 30.2 31.6 30.5 SGA (%) 12.3 12.2 11.6 12.0 12.2 12.4 12.0 11.8 12.0 12.1 EBITDA Margin (%) 22.9 21.2 22.3 22.7 21.3 21.8 20.8 21.3 22.3 21.3 IT Serv. EBIT (%) 22.8 21.4 21.8 22.0 21.0 20.7 20.2 19.9 22.0 20.4 EBIT Margin (%) 20.4 18.6 19.3 20.0 18.5 19.0 17.9 18.4 19.5 18.4 Other income 4,449 5,443 5,147 4,858 5,286 5,138 5,715 3,158 19,897 19,297 ETR (%) 21.9 22.8 22.0 21.4 21.2 22.4 21.8 21.8 22.0 21.8 PAT 21,032 20,848 21,928 22,750 21,877 22,354 22,341 22,153 86,558 88,725 QoQ (%) -5.5 -0.9 5.2 3.7 -3.8 2.2 -0.1 -0.8

YoY (%) 29.6 7.9 8.8 2.2 4.0 7.2 1.9 -2.6 11.0 2.5 EPS (INR) 8.5 8.5 8.9 9.2 8.9 9.1 9.1 9.0 35.1 36.0 Headcount 147,452 154,297 156,866 158,217 161,789 168,396 170,664 175,709 158,217 175,709 Util excl. trainees

77.9 79.4 78.8 80.5 81.9 82.3 78.0 80.0 74.2 74.2

Attrition (%) 16.1 16.5 16.5 16.5 16.4 16.4 16.3

Offshore rev. (%) 45.7 46.3 45.7 46.3 45.4 46.1 46.2 45.0 46.0 45.7 Rev Guidance

1715-1755 1770-1810 1808-1842 1814-1850 1821-1857 1841-1878 1875-1912

Fixed Price (%) 52.1 53.1 55.1 55.5 54.5 53.4 55.9

E: MOSL Estimates


Wipro

CMP: INR562 TP: INR562 Neutral We expect revenue growth of 4.3% in constant currency terms (2pp

organic and 2.3pp from acquisitions), and a negative impact of ~40bp on account of depreciation of GBP against the USD.

In 3Q, WPRO had guided for 2-4% QoQ growth in 4Q, which included the integration of Cellent and Viteos, which implied 0.5-2.5% QoQ organic growth. However, due to delays in the integration of Viteos and early closing of the HPS acquisition, there would be no revenue from the former and one month integration of HPS (USD19m).

We expect EBIT margin in IT Services to decline by 30bp because of the impact of the integration of HPS.

We expect overall margins to expand by 50bp because of improved profitability in the Products business.

Our PAT estimate is INR22.2b, -0.8% QoQ on account of forex losses.


Key issues to watch for Revenue growth guidance for 1QFY17. Stabilization of the Energy vertical. Commentary on large deal wins and ramp-up schedule.

Bloomberg WPRO IN


M. Cap. (INR b)/(USD b) 1,381 / 21 52-Week Range (INR) 629 / 509 1,6,12 Rel Perf. (%) -1 /-3 /0

Financial snapshot (INR b)

Y/E Mar 2015 2016E 2017E 2018E Sales 469.5 512.0 597.0 672.8 EBITDA 104.6 109.2 121.6 140.2 PAT 86.6 88.6 91.4 105.7 EPS (INR) 35.1 36.0 37.1 42.9 EPS Gr. (%)

10.9 2.6 3.1 15.7 BV/Sh. (INR)

166.1 186.3 207.8 235.1 RoE (%) 23.0 20.5 18.9 19.4 RoCE (%) 20.2 17.6 17.7 19.0 Payout (%) 34.2 33.3 35.0 30.3 Valuations P/E (x) 16.1 15.7 15.2 13.1 P/BV (x) 3.4 3.0 2.7 2.4 EV/EBITDA ( )

11.9 11.4 9.9 8.4 Div Yld (%) 2.1 2.1 2.3 2.3

March 2016 Results Preview | Sector: Telecom

April 2016 252

Jay Gandhi (Jay. [email protected]); +91 22 3089 6693

Voice/data traffic to remain stable Regulatory developments, Reliance JIO launch key events to watch out for

Wireless traffic growth to remain stable QoQ: During 4QFY16, we expect average wireless traffic (Bharti/Idea/RCom/Vodafone) to grow 3% QoQ (v/s 2% QoQ in 3QFY16 and 5% in 4QFY15). We estimate traffic growth at ~7% YoY v/s 8-9% in the previous four quarters. Idea would lead, with ~11% YoY growth in wireless traffic, led by higher subscriber additions, especially in rural markets.

RPM uptick to be muted, led by continued competitive intensity: We expect RPM for GSM incumbents to remain largely flat QoQ despite support from continued strong data growth. Voice RPM continues to be impacted by increased competition from smaller operators and has been flat to declining over the past 3-4 quarters. In contrast to earlier expectations of a secular medium-term growth in voice RPM, operators now expect voice RPM to remain largely stable going forward.

India mobile margin to remain largely flat-to-marginally-declining QoQ: We expect India mobile EBITDA margin to remain largely flat QoQ for Bharti (-40bp), expand 60bp QoQ for Idea, and shrink 60bp QoQ for RCom. However, on a YoY basis, margins for Bharti are likely to remain flat. For Idea, EBITDA margin would decline ~100bp YoY. RCom’s margin is expected to decline 130bp YoY.

Bharti Africa – another muted quarter; currency impact to be minimal: Like previous quarters, currency fluctuations are expected to dog African performance. We expect 3% currency impact in 4Q. We also expect some revenue/EBITDA impact on 4QFY16 performance due to third-party tenancy revenue no longer being booked post execution of certain tower deals. We expect Bharti Africa to report 8% EBITDA decline QoQ in USD terms.

Subscriber additions muted: Subscriber additions declined 10% QoQ in 3QFY16. However, GSM additions data for January 2016 point towards a pickup in subscriber additions (~7m). As of January 2016, the VLR subscriber base stood at ~917, implying an active subscriber penetration of ~73%.





YoY Var % QoQ

Telecom Bharti Airtel 330 Buy 247,958 7.7 3.0 85,301 6.0 0.7 9,856 -21.5 -11.8Bharti Infratel 374 Buy 31,203 5.9 0.9 14,227 6.4 5.9 6,199 11.2 9.6 Idea Cellular 109 Neutral 94,698 12.4 5.1 33,414 9.0 6.8 5,071 -46.2 -33.6Reliance Comm 49 Sell 52,436 -8.1 -1.0 17,501 -11.4 -3.0 267 196.4 -86.5Sector Aggregate 426,295 6.3 2.8 150,443 4.3 2.0 21,392 -22.6 -19.1

Company name

Bharti Airtel

Bharti Infratel

Idea Cellular

Reliance Communications

Telecom March 2016 Results Preview | April 2016


April 2016 253

Watch out for regulatory developments, data rollout plans With spectrum sharing and trading policy already cleared by the government, the key regulatory decisions still awaited pertain to (1) M&A policy, and (2) net neutrality. Data network rollout plans of various operators are key to watch out for, given the expected 4G launch of Reliance JIO in FY17. Our industry interactions indicate that incumbents are planning aggressive 3G network rollout as well as select 4G launches to fortify their data offering to withstand competition and participate better in the data market growth, which now accounts for most of the incremental telecom revenue.

Exhibit 1: Wireless subscriber net additions (m)

Source: TRAI, MOSL

Exhibit 2: QoQ wireless traffic growth (%)


Exhibit 3: Trend in wireless RPM (INR)


-2 -1

6

-1

3 3 2 2

-6

5 6 5 7

10

1 3 3 5 4 6 6 52

7 8 8 9

3 2 5

2 5

8 7 61

7

Jan-

13Fe

b-13

Mar

-13

Apr-

13M

ay-1

3Ju

n-13

Jul-1

3Au

g-13

Sep-

13O

ct-1

3N

ov-1

3De

c-13

Jan-

14Fe

b-14

Mar

-14

Apr-

14M

ay-1

4Ju

n-14

Jul-1

4Au

g-14

Sep-

14O

ct-1

4N

ov-1

4De

c-14

Jan-

15Fe

b-15

Mar

-15

Apr-

15M

ay-1

5Ju

n-15

Jul-1

5Au

g-15

Sep-

15O

ct-1

5N

ov-1

5De

c-15

Jan-

16

4

-2

3

5

2

-3

1 4

2

-3

1 4 4

-3

3 3 5

-4

5

8

3

-6

4

9

5

-2

5

8

6

-4

4 5 2

-3

1 2 1

-5

0 0 1

-1

1 4

-3 -2 -2 -3

4

-3

3 5

3

-3

2 4 3

-2

2 3 4

-2

2 5

1QFY

13

2QFY

13

3QFY

13

4QFY

13

1QFY

14

2QFY

14

3QFY

14

4QFY

14

1QFY

15

2QFY

15

3QFY

15

4QFY

15

1QFY

16

2QFY

16

3QFY

16

4QFY

16E

Bharti (India & SA) Idea RCOM Vodafone-India

39

41

43

45

47

49

51

1QFY

13

2QFY

13

3QFY

13

4QFY

13

1QFY

14

2QFY

14

3QFY

14

4QFY

14

1QFY

15

2QFY

15

3QFY

15

4QFY

15

1QFY

16

2QFY

16

3QFY

16

4QFY

16E

Bharti Idea Vodafone-India RCOM


April 2016 254

Exhibit 4: Aggregate traffic growth and RPM trend for wireless majors


Exhibit 5: Aggregate India wireless revenue growth (YoY, %)


Exhibit 6: Relative Performance-3m (%)


Exhibit 7: Relative Performance-1 Yr (%)


4

-3

3

5 2

-4

2

4 3

-2

2

5 4

-3

2 3

-2

0 0 0 3 1 1

-1

2 1

2

-3-1

1

-1

1

1QFY

13

2QFY

13

3QFY

13

4QFY

13

1QFY

14

2QFY

14

3QFY

14

4QFY

14

1QFY

15

2QFY

15

3QFY

15

4QFY

15

1QFY

16

2QFY

16

3QFY

16

4QFY

16E

QoQ traffic growth (%) Avg. RPM QoQ (%)

11

8 6

7

12 12 12 10 9

11 13

11

8 7

4

7

1QFY

13

2QFY

13

3QFY

13

4QFY

13

1QFY

14

2QFY

14

3QFY

14

4QFY

14

1QFY

15

2QFY

15

3QFY

15

4QFY

15

1QFY

16

2QFY

16

3QFY

16

4QFY

16E

80

86

92

98

104

Dec-

15

Jan-

16

Feb-

16

Mar

-16

Sensex Index MOSL Telecom Index

75

85

95

105

115

Mar

-15

Apr-

15

May

-15

Jun-

15

Jul-1

5

Aug-

15

Sep-

15

Oct

-15

Nov

-15

Dec-

15

Jan-

16

Feb-

16

Mar

-16

Sensex Index MOSL Telecom Index


April 2016 255

Exhibit 8: Wireless KPIs

FY14 FY15 FY16

YoY) QoQ 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q (% (%)%

EOP Wireless SUBS (m) Bharti (India) 191 193 198 206 209 212 217 226 231 235 243 249 10.3 2.5 Idea 125 127 129 136 139 144 151 158 162 167 172 177 12.1 2.9 RCOM 127 116 118 112 110 111 107 111 111 112 102 104 -6.4 1.5Vodafone - India 155 156 160 167 170 174 179 184 185 188 194 198 7.5 2.1 AV. Wireless Subs (m) Bharti (India) 190 192 196 202 207 211 214 222 228 233 239 246 11.1 2.9 Idea 123 126 128 132 137 141 147 154 160 164 169 174 13.1 3.0 RCOM 125 122 117 115 111 111 109 109 111 111 107 103 -5.7 -3.7Vodafone - India 154 155 158 163 168 172 176 181 185 187 191 196 7.9 2.5 ARPU (INR/month) Bharti (India) 200 192 195 196 202 198 202 198 198 193 192 195 -3.0 0.2Idea 174 164 169 173 181 176 179 179 182 173 174 178 -0.5 2.0RCOM 119 121 125 128 135 136 141 144 140 134 138 141 -2.2 2.5Vodafone - India 196 191 193 192 193 187 189 184 184 178 175 179 -2.4 2.6MOU/Sub Bharti (India) 455 437 434 437 435 418 416 418 424 404 405 407 -2.7 0.5Idea 398 368 376 397 401 384 388 400 408 383 387 394 -1.4 1.9RCOM 282 277 288 296 311 307 315 330 316 307 313 316 -4.2 1.0Vodafone India (reported) 346 334 334 335 336 321 319 321 327 316 316 323 0.7 2.0 Vodafone India (adj) 461 445 446 447 448 429 425 427 435 421 422 430 0.7 2.0 Revenue per min (p) Bharti (India) 44.0 44.0 44.8 44.9 46.5 47.2 48.6 47.5 46.8 47.6 47.5 47.3 -0.3 -0.3Idea 43.7 44.7 44.9 43.6 45.1 45.8 46.0 44.7 44.6 45.2 45.1 45.1 0.9 0.1 RCOM 42.0 43.5 43.5 43.1 43.5 44.2 44.7 43.7 44.3 43.7 44.0 44.6 2.1 1.5 Vodafone India (reported) 56.6 57.2 57.7 57.3 57.4 58.2 59.3 57.4 56.2 56.2 55.3 55.6 -3.1 0.6Vodafone India (adj) 42.5 42.9 43.3 43.0 43.1 43.6 44.5 43.0 42.2 42.2 41.5 41.7 -3.1 0.6Wireless traffic (B min) Bharti (India) 258 251 255 265 271 264 267 278 290 282 290 300 8.1 3.4 Idea 147 139 145 157 165 162 171 185 196 189 196 206 11.5 5.0 RCOM 106 102 102 102 103 102 103 108 105 103 100 98 -9.7 -2.8Vodafone India (reported) 160 156 158 164 170 166 169 174 181 177 181 189 8.6 4.5 Vodafone India (adj) 213 207 211 219 226 221 225 232 241 236 242 252 8.6 4.5


April 2016 256

Exhibit 9: Quarterly financials (proforma)

FY14 FY15 FY16 YoY QoQ 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE (%) (%)

Revenue (INR b)

Bharti (ex Africa) 141 141 144 149 162 162 166 170 177 178 181 186 9.4 3

Bharti (consolidated) 203 213 219 222 230 228 232 230 237 238 241 248 7.7 3 Idea 65 63 66 70 76 76 80 84 88 87 90 95 12.4 5.1 RCOM 54 54 54 57 55 54 55 57 55 54 53 52 -8.1 -1Vodafone - India (implied) 90 89 91 94 97 96 100 100 102 100 100 105 5.3 5.1 EBITDA (INR b) Bharti (ex Africa) 49.3 49.1 52 54.9 60.2 60.8 62.9 67.6 69.9 70 72 73 7.4 1.5 Bharti (consolidated) 65.4 68.3 70.9 73.1 77.2 77.1 77.9 80.5 82.6 83 85 85 6 0.7 Idea 21 19.7 20.6 22.3 25 24.9 27.5 30.6 32.3 31 31 33 9 6.8 RCOM 17 18.9 18.5 18.5 18.6 18.3 18.5 19.8 18.8 18 18 18 -11.4 -3EBITDA Margin (%) Bharti (ex Africa) 34.9 34.8 36 36.8 37.2 37.5 37.9 39.7 39.4 39 40 39 -73bp -54bpBharti (consolidated) 32.3 32 32.3 32.9 33.6 33.7 33.5 35 34.9 35 35 34 -58bp -81bpIdea 32.1 31.2 31.1 31.7 33.1 32.9 34.3 36.4 36.7 35 35 35 -110bp 56bp RCOM 31.4 35 34.2 32.7 33.7 33.8 33.8 34.6 33.8 33 34 33 -127bp -66bpPAT (INR b) Bharti (ex Africa) 14.8 14 19.4 23.8 21.8 23 25.6 25.5 20.3 16 19 15 -40.6 -20.7Bharti (consolidated) 6.9 5.1 6.1 9.6 11.1 13.8 14.4 12.6 11 7.7 11 9.9 -21.5 -11.8Idea 4.9 4.5 4.7 5.9 7.3 7.6 7.7 9.4 9.3 8.1 7.6 5.1 -46.2 -33.6RCOM 1.3 2.7 1.5 2 1.6 2.1 2.3 0.1 1.9 1.6 2 0.3 196.4 -86.5EPS (INR) Bharti 1.8 1.3 1.5 2.4 2.8 3.5 3.6 3.1 2.7 1.9 2.8 2.5 -21.5 -11.8Idea 1.4 1.3 1.4 1.8 2.1 2.1 2.2 2.6 2.6 2.2 2.1 1.4 -46.2 -33.6RCOM 0.6 1.3 0.7 1 0.8 0.9 1 0 0.8 0.7 0.8 0.1 191.6 -86.5Capex (INR b) Bharti (ex Africa) 12.6 10.4 17.8 20.3 30.3 21.3 27.5 42.3 30 40 43 40 -4.7 -6.3Idea 4.3 8.8 10.2 12.9 3.9 10.1 9.5 17 13.7 17 23 20 17.6 -13.4RCOM 2.1 3.6 3.3 4.7 4.1 3 3.5 5 5.8 3.6 9.6 16 207.9 62.8


Exhibit 10: Comparative valuation Sector / Companies CMP Reco EPS (INR) PE (x) EV/EBIDTA (x) RoE (%)

(INR) FY16E FY17E FY18E FY16E FY17E FY18E FY16E FY17E FY18E FY16E FY17E FY18E Telecom Bharti Airtel 330 Buy 9.9 11.8 16.7 33.3 28.0 19.8 6.6 6.1 5.3 5.9 6.7 8.9Bharti Infratel 374 Buy 12.4 15.0 19.1 30.3 25.0 19.6 13.3 11.4 9.5 13.6 15.9 19.5 Idea Cellular 109 Neutral 8.3 4.4 6.7 13.1 24.9 16.3 6.3 5.7 4.7 12.3 6.0 8.5 Reliance Comm 49 Sell 1.6 2.1 3.6 30.4 24.1 13.7 7.4 7.0 6.2 1.2 1.6 2.7 Sector Aggregate 26.2 26.4 18.7 7.3 6.6 5.7 7.0 6.6 8.8



April 2016 257

Quarterly Performance (INR Million) Y/E March FY15 FY16 FY15 FY16E (Consolidated) 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Revenue 229,616 228,452 232,171 230,155 236,709 238,357 240,659 247,958 920,394 963,684 YoY Growth (%) 13.3 7.1 5.8 3.6 3.1 4.3 3.7 7.7 7.3 4.7 EBITDA 77,200 77,053 77,857 80,505 82,617 82,653 84,748 85,301 312,614 335,319 YoY Growth (%) 18.0 12.8 9.8 10.2 7.0 7.3 8.9 6.0 12.5 7.3 Margin (%) 33.6 33.7 33.5 35.0 34.9 34.7 35.2 34.4 34.0 34.8 Net Finance Costs 9,565 9,058 10,450 19,390 19,191 18,626 13,910 16,595 48,464 68,322 Share of JV/associate/others -242 -1,246 -1,175 1,825 2,041 1,547 -1,329 1,600 -838 3,859 Depreciation & Amortization 40,365 38,530 38,033 37,785 40,460 42,539 43,451 46,006 154,713 172,456 Profit before Tax 27,028 28,218 28,198 25,155 25,007 23,035 26,058 24,300 108,599 98,400 Income Tax Expense / (Income) 15,326 14,765 13,145 10,668 13,481 14,386 13,498 13,613 53,904 54,978 Profit after Tax 11,702 13,453 15,053 14,487 11,526 8,649 12,559 10,687 54,695 43,421 Minority interest -617 379 -688 -1,934 -565 -984 -1,390 -831 -2,860 -3,770Net profit after Minority interest 11,085 13,832 14,364 12,553 10,961 7,665 11,169 9,856 51,835 39,651 YoY Growth (%) 60.9 170.1 135.5 30.5 -1.1 -44.6 -22.2 -21.5 86.9 -23.5E: MOSL Estimates

Bharti Airtel

CMP: INR330 TP: INR380 Buy We expect consolidated revenue to grow 8% YoY and 3% QoQ to

INR248b. We expect India (including South Asia) revenue to grow9% YoY on a like-to-like basis to INR186.17b and Africa businessrevenue to largely be flat at ~USD0.94b.

Consolidated EBITDA margin is likely to decline 80bp QoQ to34.4%, as Mobile margins normalize post the seasonally strong 3Q.Enterprise segment, Passive Infrastructure and Africa margins tooare expected to decline. India mobile revenue would grow 7% YoYto INR144.07b, driven by 8% YoY traffic growth (3% QoQ). WirelessRPM is expected to remain flat YoY/QoQ. We estimate EBITDAmargin for Mobile business at 38.5%, largely flat QoQ.

Currency impact is likely to be ~3% for the quarter. We expectAfrica EBITDA to decline 8% QoQ.

Consolidated net profit is likely to decline 21% YoY to INR9.85b. Bharti trades at proportionate EV/EBITDA of 6.3x FY17E and 5.4x

FY18E. Maintain Buy.

Key things to watch for RPM growth (we expect RPM to be flat YoY/QoQ), mobile traffic

in India business (we expect 3% QoQ growth), and Africa businessfinancials (we expect USD EBITDA to decline 8% QoQ).

Bloomberg BHARTI IN




Y/E March 2015 2016 2017E 2018E

Net Sales 920 964 1,063 1,159 EBITDA 312.6 335.3 363.9 402.0 Adj. NP 51.8 39.7 47.2 66.8

AdjEPS(INR) 13.0 9.9 11.8 16.7 AdjEPS r(%) 84.9 -23.5 19.0 41.5 BV/Sh (INR) 167.1 171.1 181.3 195.0

RoE (%) 7.9 5.9 6.7 8.9 RoCE (%) 6.6 5.7 5.0 5.9 Payout (%) 20.0 26.2 13.7 12.2


EV/EBITDA x 6.6 6.8 6.3 5.4 Div. Yld (%) 0.8 0.8 0.5 0.6


April 2016 258


1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Sales 28,427 29,301 29,488 29,467 30,157 30,378 30,930 31,203 116,683 122,668 YoY Change (%) 8.4 9.2 8.0 5.6 6.1 3.7 4.9 5.9 7.8 5.1 Operating expenses 16,637 17,150 16,757 16,098 17,186 17,366 17,500 16,976 66,642 69,028 EBITDA 11,790 12,151 12,731 13,369 12,971 13,012 13,430 14,227 50,041 53,640 YoY Change (%) 12.7 13.3 12.8 16.0 10.0 7.1 5.5 6.4 13.7 7.2 EBITDA margin (%) 41.5 41.5 43.2 45.4 43.0 42.8 43.4 45.6 42.9 43.7 Depreciation 5,253 5,420 5,566 5,608 5,571 5,675 5,639 5,652 21,847 22,537 Interest 784 764 696 658 665 574 502 513 2,902 2,254 Other Income 1,172 1,137 1,216 1,698 2,158 2,157 1,329 1,538 5,223 7,182 PBT 6,925 7,104 7,685 8,801 8,893 8,920 8,618 9,600 30,515 36,031 Tax 2,297 2,452 2,616 3,226 3,136 3,128 2,964 3,401 10,592 12,629 Effective Tax Rate (%) 33.2 34.5 34.0 36.7 35.3 35.1 34.4 35.4 34.7 35.1 Adjusted net profit 4,628 4,652 5,069 5,575 5,757 5,792 5,654 6,199 19,924 23,402 YoY Change (%) 29.4 67.7 23.5 18.0 24.4 24.5 11.5 11.2 31.3 17.5 E: MOSL Estimates

Bharti Infratel

CMP: INR374 TP: INR485 Buy We expect revenue to grow 6% YoY and 1% QoQ to INR31.2b.

Revenue from rent is expected to grow 3% QoQ while energy andother reimbursements are expected to decline 2.5% QoQ.

We expect EBITDA to grow by 6% QoQ to INR14.23b. EBITDAmargin is expected to improve 220bp QoQ.

We expect ~8% YoY increase in PAT to INR6.19b, primarily led by6% YoY EBITDA growth.

Bharti Infratel trades at an EV/EBITDA of 10.4x FY17E and 8.5xFY18E. Buy.

Key things to watch for Consolidated co-location additions (we expect ~3,000 in 4Q), trend

in consolidated sharing revenue per sharing operator (we expect1% QoQ increase).

Bloomberg BHIN IN




Y/E March 2015 2016E 2017E 2018E


AdjEPS INR 10.5 12.4 15.0 19.1 Gr. (%) 31.1 17.3 21.3 27.3 BV/Sh (INR) 90.0 92.5 95.6 99.8

RoE (%) 11.4 13.6 15.9 19.5 RoCE (%) 9.3 11.0 12.8 15.5 Payout (%) 124.3 79.1 78.7 78.2


EV/EBITDAx 13.2 12.1 10.4 8.5 Div. Yld (%) 3.5 2.6 3.1 4.0


April 2016 259

Quarterly Performance (Consolidated) (INR Million) Y/E March FY15 FY16 FY15 FY16E 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Gross Revenue 75,609 75,699 80,175 84,225

87,983 86,891 90,097 94,698 315,708 359,669

YoY Growth (%) 15.6 19.7 21.2 19.6

16.4 14.8 12.4 12.4 19 13.9 QoQ Growth (%) 7.3 0.1 5.9 5.1 4.5 -1.2 3.7 5.1 EBITDA 25,038 24,907 27,527 30,645

32,284 30,570 31,285 33,414 108,116 127,553

YoY Growth (%) 19.2 26.3 33.9 37.4

28.9 22.7 13.7 9 29.7 18 QoQ Growth (%) 12.3 -0.5 10.5 11.3

5.3 -5.3 2.3 6.8

Margin (%) 33.1 32.9 34.3 36.4 36.7 35.2 34.7 35.3 34.2 35.5 Net Finance Costs 2,274 1,445 983 1,052

2,792 2,726 3,349 6,216 5,754 15,083

Depreciation & Amortization 11,545 11,788 14,826 14,877 15,159 15,380 16,231 19,385 53,036 66,155 Profit before Tax 11,219 11,675 11,718 14,716

14,333 12,464 11,705 7,813 49,327 46,315

Income Tax Exp. / (Income) 3,937 4,116 4,047 5,298

5,024 4,371 4,063 2,742 17,398 16,253 Adj Net Profit / (Loss) 7,282 7,559 7,671 9,418 9,309 8,093 7,642 5,071 31,929 30,061 YoY Growth (%) 49.3 68.9 64 59.7

27.8 7.1 -0.4 -46.2 62.3 -5.9

QoQ Growth (%) 23.5 3.8 1.5 22.8 -1.2 -13.1 -5.6 -33.6 Margin (%) 9.6 10 9.6 11.2 10.6 9.3 8.5 5.4 10.1 8.4 Mobile ARPU (INR/month) 181 176 179 179

182 173 174 178 175 175

QoQ Growth (%) 4.6 -2.8 1.5 0.2 1.7 -4.9 0.8 2 4.5 0 Mobile MOU/sub/month 401 384 388 400

408 383 387 394 388 393

QoQ Growth (%) 1 -4.2 1 3.1 2 -6.1 1 1.9 -5.7 1.2 Mobile Traffic (B Min) 165 162 171 185

196 188.9 196.5 206 683 788

QoQ Growth (%) 5.2 -1.7 5.1 8.4

5.8 -3.5 4 5 16.3 15.4 Mobile RPM (INR) 0.45 0.46 0.46 0.45

0.45 0.452 0.451 0.45 0.45 0.44

QoQ Growth (%) 3.6 1.5 0.4 -2.7 -0.3 1.3 -0.2 0.1 2.5 -1.2 E: MOSL Estimates

Idea Cellular

CMP: INR109 TP: INR125 Neutral Idea’s consolidated revenue is expected to grow 12.4% YoY to

INR94.69b (~5% QoQ growth).

We expect Idea to report mobile traffic growth of 5% QoQ. We estimate RPM to largely remain flat QoQ at INR0.45; our estimate factors in 2% QoQ growth each in mobile ARPU and Minutes of Usage per subscriber per month.

EBITDA margin is expected to improve ~60bp QoQ/decline ~100bp YoY to 35.3%. EBITDA loss in new circles is estimated at INR1.82b.

Net profit is expected to decline ~46% QoQ in 4QFY16 primarily on account of higher interest outgo pertaining to spectrum payments.

Idea trades at an EV/EBITDA of 5.7x FY17E and 4.7x FY18E.

Key things to watch for RPM trajectory (we expect RPM to largely remain flat QoQ),

mobile traffic (we expect 5% QoQ growth), and EBITDA loss in new circles (we expect INR1.82b).

Bloomberg IDEA IN



Financial Snapshot (INR Million)

Y/E March 2015 2016E 2017E 2018E


AdjEPS (INR) 8.9 8.3 4.4 6.7 Adj.EPSGr(%) 49.7 -5.9 -47.4 52.6 BV/Sh(INR) 64.0 71.6 75.7 81.8

RoE (%) 16.1 12.3 6.0 8.5 RoCE (%) 7.8 6.5 5.0 6.0 Payout (%) 8.1 8.1 8.1 8.1


EV/EBITDA(x) 4.9 6.3 5.7 4.7 Div. Yield (%) 0.7 0.6 0.3 0.5


April 2016 260


FY16 FY15 FY16E

(Consolidated) 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Gross Revenue 55,231 54,030 54,690 57,030

55,413 53,553 52,983 52,436 217,700 214,385

YoY Growth (%) 2.1 0.2 1.2 0.6

0.3 -0.9 -3.1 -8.1 -0.5 -1.5 QoQ Growth (%) -2.6 -2.2 1.2 4.3 -2.8 -3.4 -1.1 -1.0 EBITDA 18,629 18,270 18,505 19,760

18,752 17,819 18,033 17,501 71,900 72,103

YoY Growth (%) 9.5 -3.1 0.3 6.7

0.7 -2.5 -2.5 -11.4 -1.3 0.3 QoQ Growth (%) 0.6 -1.9 1.3 6.8

-5.1 -5.0 1.2 -3.0

Margin (%) 33.7 33.8 33.8 34.6 33.8 33.3 34.0 33.4 33.0 33.6 Net Finance Costs 7,674 6,700 6,522 6,660

7,042 7,114 6,813 6,930 24,270 27,899

Depreciation & Amortization 9,310 9,430 9,477 9,950 9,731 9,240 8,897 10,167 38,170 38,035 Profit before Tax 1,645 2,140 2,506 3,150

1,979 1,465 2,323 404 9,460 6,169

Income Tax Expense / (Income) 10 20 165 3,060 89 -153 344 137 3,260 2,127 Adjusted Net Profit / (Loss) 1,635 2,120 2,341 90

1,890 1,618 1,979 267 6,200 4,042

YoY Growth (%) 25.6 -22.1 61.0 -95.6

15.6 -23.7 -15.4 196.4 -17.6 -34.8 QoQ Growth (%) -19.8 29.7 10.4 -96.2

NA -14.4 22.3 -86.5

Margin (%) 3.0 3.9 4.3 0.2 3.4 3.0 3.7 0.5 2.8 1.9 Extraordinary Exp/Minority Interest 319 590 330 -2,190 124 59 271 271 -940 -1,421 Reported Net Profit / (Loss) 1,316 1,530 2,011 2,280 1,766 1,559 1,708 -4 7,140 5,463

E: MOSL Estimates

CMP: INR49 TP: INR40 Sell We expect revenue to decline 1% QoQ to INR52.43b.

We expect RPM to grow 1.5% QoQ to INR0.45.

Wireless traffic is estimated to decline 3% QoQ to 98b minutes.

Consolidated EBITDA is expected to decline 3% QoQ to INR17.5b.

We expect RCom to report proforma net loss of INR0.27b.

RCom trades at an EV/EBITDA of 7x FY17E and 6.2x FY18E. Sell.

Key things to watch for RPM (expected to grow 1.5% QoQ), traffic growth (we expect -3%

QoQ).

Bloomberg RCOM IN




Y/E March 2015 2016E 2017E 2018E


AdjEPS INR) 2.5 1.6 2.1 3.6 Adj.EPSGr % -31.8 -34.7 26.2 75.9 BV/Sh (INR) 132.7 130.7 132.8 136.4


P/E (x) 19.9 30.4 24.1 13.7 P/BV (x) 0.4 0.4 0.4 0.4 EV/EBITDA x 6.5 7.4 7.0 6.2

Reliance Communications

March 2016 Results Preview | Utilities

April 2016 261

Generation up 9.2% YoY, ST prices down ~10% QoQ Strong capitalization to drive earnings growth for Power Grid

We expect Power Grid’s (PWGL) 4QFY16 PAT to grow 17.5% YoY, outperforming our Utilities coverage pack, on ~40% YoY increase in capitalization to ~INR303b in FY16. For the quarter, we expect capitalization of INR35b as against capex of INR65b. Regulated equity base for PWGL is estimated to increase 22% YoY to INR373b.

NTPC’s regulated equity base is likely to grow ~13% YoY to ~INR418b, but with lower efficiency gains and other income, adjusted PAT would decline 17% YoY. We expect commercialized capacity for NTPC to increase 660MW QoQ to 45.1GW. Commissioned capacity is likely to increase by 1,105MW QoQ to 46.6GW.

Coal India’s EBITDA (ex-OBR) would be broadly flat YoY. While dispatches are up 7% YoY (8.8% YoY for FY16), we expect realization to decline on lower e-auction prices. Lower cost (down 3% YoY) would offset part of the decline in realization, though. E-auction realization could decline 6% QoQ to INR1,750/ton in 4Q.

Power generation jumps 9.2% YoY in 4Q: Power generation was up 9.2% YoY in 4Q, the highest quarterly rate in the last five quarters. The increase was led by coal-based generation, which grew 11.5% YoY in 4Q. For FY16, India’s power generation was up 5.6%. Coal-based generation for the year grew 7.4% YoY and nuclear generation grew 3.5%; hydro generation declined ~7% amid lower water levels. PLF for thermal coal plants was 62.3% in FY16 compared to 64.2% in FY15.

ST prices down ~10% QoQ in 4Q; weather conditions driving recent gains: Short-term (ST) prices for 4QFY16 declined to INR2.5/unit from INR2.7/unit in 3QFY16. ST prices have remained sub-INR4/unit for 17 straight quarters and more towards ~INR3/unit or lower. Exchange volumes in 4Q were up ~33% YoY.





YoY Var % QoQ

Coal India 276 Buy 212,872 2.5 12.2 56,888 5.4 35.7 48,103 13.8 30.6 NTPC 127 Buy 142,666 -25.8 -17.6 48,243 5.3 6.6 22,557 -17.4 9.0 Power Grid Corp. 139 Buy 55,969 20.0 4.4 49,664 23.6 4.6 16,598 17.5 2.9 Tata Power 67 Neutral 85,369 4.5 -7.5 22,903 21.2 -3.5 3,611 73.1 2.2 Sector Aggregate 496,877 -6.0 -2.3 177,699 11.9 12.2 90,869 5.9 17.7

Company name

Coal India

NTPC

Power Grid Corporation

Tata Power

Utilities

Sanjay Jain ([email protected]); +91 22 3982 5412 Dhruv Muchhal ([email protected]); +91 22 3027 8033



April 2016 262

Exhibit 2: Power generation - BU

Source: MOSL, CEA

Exhibit 3: NTPC coal-based power plants monthly PLF (%)

Source: MOSL, CEA

Exhibit 4: NTPC commercialized and commissioned capacity (MW)

Source: MOSL, Company Data

71 69 69 65 63 72 71 73 73 68 71 70 75 70 70 70 75 82 72 76 79 76 81

18 19 20 24 22 17 14 14 13 13 16 16 19 20 21 24 19 1614 13 13 13 15

89 88 89 89 85 90 85 87 86 81 86 86 95 89 92 94 95 98

86 90 92 89 96

May

-14

Jun-

14

Jul-1

4

Aug-

14

Sep-

14

Oct

-14

Nov

-14

Dec-

14

Jan-

15

Feb-

15

Mar

-15

Apr-

15

May

-15

Jun-

15

Jul-1

5

Aug-

15

Sep-

15

Oct

-15

Nov

-15

Dec-

15

Jan-

16

Feb-

16

Mar

-16

Coal based - BU Other than coal - BU

77.7

81

.2

78.3

77

.3

72.3

78

.1

74.2

84

.5

88.4

88

.9

89.6

87

.4

87.2

83

.9

81.6

75

.7

69.8

74

.0

79.4

81

.7

81.5

82

.5

85.3

80

.4

77.1

81

.5

73.6

76

.2

76.5

78

.2

79.4

76

.7

77.8

78

.5

82.2

83

.1

Apr-

13

Jun-

13

Aug-

13

Oct

-13

Dec-

13

Feb-

14

Apr-

14

Jun-

14

Aug-

14

Oct

-14

Dec-

14

Feb-

15

Apr-

15

Jun-

15

Aug-

15

Oct

-15

Dec-

15

Feb-

16

1565

20

675 800

500 660

99 110

1,160

565

20 15

1,255

650 500

1,105

1Q14

2Q14

3Q14

4Q14

1Q15

2Q15

3Q15

4Q15

1Q16

2Q16

3Q16

4Q16

Commercialized Commissioned

Power generation in 4Q grew 9.2% YoY. For FY16,

generation was up 5.6% YoY. Coal-based generation

gained share in total generation.

NTPC’s generation in 4Q was up just 1.1% YoY.


April 2016 263

Exhibit 5: NTPC regulated equity (INR b)


Exhibit 6: Power Grid capex and capitalization (INR b)


Exhibit 7: Power Grid regulated equity base (INR b)


326 326 326 352 352 352 366 369 369 389 394 418

1Q14

2Q14

3Q14

4Q14

1Q15

2Q15

3Q15

4Q15

1Q16

2Q16

3Q16

4Q16

Regulated Equity

49 47 71

51 45 51

172

35 58 49 50

68 64 51 45

65

1Q15

2Q15

3Q15

4Q15

1Q16

2Q16

3Q16

4Q16

Capitalized Capex

265 276 293 305 316 327 366 374

1Q15

2Q15

3Q15

4Q15

1Q16

2Q16

3Q16

4Q16

Regulated equity

Regulated equity base is up 23% YoY.


April 2016 264

Coal India’s volumes – March 2016 Exhibit 8: Production grew 3.4% YoY in March

Source: MOSL, Company Exhibit 9: Dispatches grew by 3.5% YoY in March

Source: MOSL, Company Exhibit 10: Inventory at mines increased MoM in March

Source: MOSL, Company Exhibit 11: Rake availability improving

Source: MOSL, Coal India, ICMW

Exhibit 12: Share of dispatches to power sector

Source: MOSL, Coal India, ICMW

39

43

46

43

54

36

35

33

33

32

33

35

39

44

47

43

53

38

36

35

33

35

35

40

44

47

47

48

57

42

41

39

35

36

37

44

47

52

53

51

59

2 -2

4

-7

0 5

-2 -23

11 16

-21

5 2

0 -2

5 5 6

1

9 5

15 13

6

-2

13

7 11

13 12

5 5 710

7 10.7

13.5

6.3 3.4

Nov

-12

Jan-

13

Mar

-13

May

-13

Jul-1

3

Sep-

13

Nov

-13

Jan-

14

Mar

-14

May

-14

Jul-1

4

Sep-

14

Nov

-14

Jan-

15

Mar

-15

May

-15

Jul-1

5

Sep-

15

Nov

-15

Jan-

16

Mar

-16

Production (mt) YoY (%) Poly. (YoY (%))

39

42

44

40

46

40

38

37

38

35

36

36

39

43

44

40

45

41

41

38

38

37

35

39

42

44

44

43

48

44

44

42

41

41

40

44

45

48

48

46

49

11

2

9

0 5

-12

6 7 10

-9

-1 1 1 2-2

1 2 6

3 0

6

-2

10 7

2 -1

7 6 7 710

7 9

15 149 9.6

5.5 3.5

Nov

-12

Jan-

13

Mar

-13

May

-13

Jul-1

3

Sep-

13

Nov

-13

Jan-

14

Mar

-14

May

-14

Jul-1

4

Sep-

14

Nov

-14

Jan-

15

Mar

-15

May

-15

Jul-1

5

Sep-

15

Nov

-15

Jan-

16

Mar

-16

Dispatches (mt) YoY (%) Poly. (YoY (%))

46 40 37

32 32 29 31 33 37 3944

54 52 49 4539 35 32 32 34 38

4248

58

Apr-

14

May

-14

Jun-

14

Jul-1

4

Aug-

14

Sep-

14

Oct

-14

Nov

-14

Dec-

14

Jan-

15

Feb-

15

Mar

-15

Apr-

15

May

-15

Jun-

15

Jul-1

5

Aug-

15

Sep-

15

Oct

-15

Nov

-15

Dec-

15

Jan-

16

Feb-

16

Mar

-16

COAL inventory - mt

205 218 217 216 206 198 196 195 198 211 224 225 226 227

-1.4

4.8 5.3

9.6 11.4 11.9 12.6

9.6 10.6 10.58.2 8.7

10.2

4.1

Jan-

15

Feb-

15

Mar

-15

Apr-

15

May

-15

Jun-

15

Jul-1

5

Aug-

15

Sep-

15

Oct

-15

Nov

-15

Dec-

15

Jan-

16

Feb-

16

Rakes/day YoY (%)

76% 74%

76% 74% 74%

76% 76%

83%

86% 84%

79%

74% 75% 74%77%

76% 78%

76%

75%

Oct

-13

Dec-

13

Feb-

14

Apr-

14

Jun-

14

Aug-

14

Oct

-14

Dec-

14

Feb-

15

Apr-

15

Jun-

15

Aug-

15

Oct

-15

Dec-

15

Feb-

16

Share of dispatch to power (%)


April 2016 265

E-auction monthly monitor – February 2016Exhibit 13: Monthly e-auction allocated quantity

Source: ICMW

Exhibit 14: Monthly e-auction offered quantity

Source: ICMW Exhibit 15: Average e-auction realization – INR/ton

Source: ICMW

Exhibit 16: Realization trend – Coal India v/s exchanges

Source: ICMW Exhibit 17: Average realization (G1-G8 grade)

Source: ICMW

Exhibit 18: Average realization (G9-G17 grade)

Source: ICMW Exhibit 19: Share (%) of high grade in allotted mix

Source: ICMW

Exhibit 20: Realized premium over reserve price & RB Index

Source: ICMW

3.9

4.8

4.9

4.4

4.6

5.6

5.6

6.0

6.5

6.6

5.5

5.9

5.4

4.2

2.0

1.0

1.4

1.6

2.9

6.6

6.3

6.3

6.0

6.1

4.5

4.7

5.5

3.2

4.4

6.7

8.9

4.8

5.4

5.0

May

-13

Jul-1

3Se

p-13

Nov

-13

Jan-

14M

ar-1

4M

ay-1

4Ju

l-14

Sep-

14N

ov-1

4Ja

n-15

Mar

-15

May

-15

Jul-1

5Se

p-15

Nov

-15

Jan-

16

Allocated (mt)

4.7

5.9

5.5

5.8

5.2

6.6

7.0

7.5

7.8

7.9

6.5

6.4

5.8

4.7

2.2

1.1

1.7

1.8

3.2

8.1

7.9

7.5

7.0

7.6

5.8

6.2

8.1

6.9

11.9

12

.1

14.6

8.

3 9.

6 10

.7

May

-13

Jul-1

3Se

p-13

Nov

-13

Jan-

14M

ar-1

4M

ay-1

4Ju

l-14

Sep-

14N

ov-1

4Ja

n-15

Mar

-15

May

-15

Jul-1

5Se

p-15

Nov

-15

Jan-

16

Offered (mt)

2,20

4 2,

214

2,16

4 2,

349

2,29

1 2,

118

2,11

8 2,

137

2,16

4 2,

183

2,25

6 2,

316

2,54

7 2,

986

3,26

7 3,

330

3,54

9 3,

090

2,07

5 2,

216

2,30

5 2,

220

2,01

1 1,

879

1,87

9 1,

605

1,93

5 1,

803

1,71

8 1,

388

1,71

1 1,

723

1,77

3

Jun-

13

Aug-

13

Oct

-13

Dec-

13

Feb-

14

Apr-

14

Jun-

14

Aug-

14

Oct

-14

Dec-

14

Feb-

15

Apr-

15

Jun-

15

Aug-

15

Oct

-15

Dec-

15

Feb-

16Avg. realization - INR/t

1,500

1,900

2,300

2,700

3,100

1Q14

2Q14

3Q14

4Q14

1Q15

2Q15

3Q15

4Q15

1Q16

2Q16

3Q16

E-auction real. - CIL - INR/tE-auction real. - exchanges - INR/t

4,32

9 4,

231

3,75

2 3,

929

4,05

9 4,

286

3,03

4 3,

137

3,29

6 3,

343

3,36

9 3,

303

3,30

4 3,

631

3,72

3 4,

106

4,33

9 4,

411

4,24

5 3,

532

3,79

1 4,

146

3,86

6 3,

405

3,15

4 3,

038

2,94

2 2,

742

2,68

2 2,

657

2,93

7 3,

162

3,18

9 3,

060

May

-13

Jul-1

3Se

p-13

Nov

-13

Jan-

14M

ar-1

4M

ay-1

4Ju

l-14

Sep-

14N

ov-1

4Ja

n-15

Mar

-15

May

-15

Jul-1

5Se

p-15

Nov

-15

Jan-

16

Act. Real. (G1-G8) - INR/t at reserve price - INR/t

1,68

2 1,

586

1,53

2 1,

506

1,41

0 1,

406

1,46

2 1,

527

1,51

4 1,

522

1,60

4 1,

708

1,83

4 1,

954

2,18

9 2,

291

2,35

1 2,

392

2,71

6 2,

333

1,45

5 1,

611

1,66

4 1,

577

1,44

8 1,

501

1,50

0 1,

275

1,38

7 1,

519

1,36

6 1,

132

1,25

1 1,

215

1,29

9

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-

16

Act. Real. (G9-G17) - INR/t at reserve price - INR/t

41

49

47

50

45

52

52

41

38

37

36

32

32

31

31

47

55

52

55

45

32

29

28

30

29

24

26

21

40

23

26

15

27

28

31

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-

16

Allocated (higher grade) as % of total qty. allocated

576

421

312

345

382

428

341

404

377

529

450

543

609

835

1,04

2 1,

191

1,16

1 1,

543

1,20

1 46

3 53

2 65

1 58

5 38

1 33

2 30

0 15

4 15

9 32

5 28

6 14

2 10

4 13

9 98

82.9

61.5 53.0

May

-13

Jul-1

3Se

p-13

Nov

-13

Jan-

14M

ar-1

4M

ay-1

4Ju

l-14

Sep-

14N

ov-1

4Ja

n-15

Mar

-15

May

-15

Jul-1

5Se

p-15

Nov

-15

Jan-

16

Realn. premium - INR/t Richards Bay - USD/t


April 2016 266






(INR) FY16E FY17E FY18E FY16E FY17E FY18E FY16E FY17E FY18E FY16E FY17E FY18E Utilities Coal India 276 Buy 23.2 24.5 30.5 11.9 11.3 9.1 8.0 7.3 5.7 42.8 43.2 51.0 NTPC 127 Buy 11.5 11.2 13.5 11.0 11.3 9.4 11.5 10.2 8.4 11.4 10.8 12.3 Power Grid Corp. 139 Buy 11.7 13.8 15.9 11.9 10.1 8.7 9.6 8.3 7.1 14.9 15.5 15.8 Tata Power 67 Neutral 4.3 5.1 5.8 15.6 13.2 11.5 8.7 10.7 11.3 9.0 6.1 6.3 Sector Aggregate 11.8 11.1 9.2 9.7 8.7 7.2 17.6 17.5 19.7

84

89

94

99

104De

c-15

Jan-

16

Feb-

16

Mar

-16

Sensex Index MOSL Utilities Index

75

85

95

105

115

Mar

-15

Apr-

15

May

-15

Jun-

15

Jul-1

5

Aug-

15

Sep-

15

Oct

-15

Nov

-15

Dec-

15

Jan-

16

Feb-

16

Mar

-16

Sensex Index MOSL Utilities Index


April 2016 267


1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Sales 177,995 156,780 177,629 207,742 189,558 169,576 189,715 212,872 720,146 761,720 Change (%) 8.1 1.7 4.9 3.9 6.5 8.2 6.8 2.5 4.7 5.8 Cash EBITDA (OBR adj.) 49,611 26,231 44,978 69,746 50,911 25,171 49,337 69,990 190,567 195,409 As of % Sales 27.9 16.7 25.3 33.6 26.9 14.8 26.0 32.9 26.5 25.7 Depreciation 5,183 5,363 5,672 6,980 5,575 5,864 6,279 6,680 23,198 24,398 OBR 6,801 5,536 10,179 15,752 7,091 410 7,419 13,102 38,267 28,021 Interest 11 11 22 29 40 15 30 20 73 105 Other Income 21,805 20,221 21,820 22,914 20,095 19,636 19,819 22,695 86,761 82,245 EO Income/(Expense) 158 -48 -170 110 -226 248 337 0 50 359 PBT 59,578 35,495 50,756 70,011 58,072 38,766 55,766 72,883 215,839 225,488 Tax 19,246 13,668 18,131 27,529 20,429 13,328 18,584 24,780 78,573 77,121 Effective Tax Rate (%) 32.4 38.5 35.6 39.4 35.0 34.6 33.5 34.0 36.4 34.2 Reported PAT 40,332 21,827 32,625 42,482 37,643 25,438 37,182 48,103 137,266 148,367 Adjusted PAT 40,175 21,876 32,795 42,275 37,869 25,190 36,845 48,103 137,216 148,008 Change (%) 7.5 -28.5 -16.0 -20.0 -5.7 15.2 12.4 13.8 -14.2 7.9 E: MOSL Estimates

Coal India

CMP: INR276 TP: INR448 Buy

We expect Coal India’s 4QFY16 EBITDA (ex-OBR) to be broadly flatYoY at INR69.9b, as higher volumes would be offset by decline in e-auction realization. Dispatches are up 7% YoY to 143mt. Regulateddispatches are up 4% YoY to 120mt, while e-auction volumes areestimated be up ~26% YoY to 17.5mt. We estimate 27% YoY (6%QoQ) decline in e-auction realization to ~INR1,750/ton in 4Q.

Reported PAT is likely to grow 13% YoY to INR48.1b on lower OBRprovision, which can be volatile.

Coal India is considering price rationalization across grades tobetter reflect the cost on GCV-adjusted basis. The exercise isexpected to bring down prices of higher grade coal while low gradecoal price would move up.

The stock trades at 11.4x FY17E earnings.

Key issues to watch for E-auction volumes and realization. News flows on coal linkage auction.

Bloomberg COAL IN


M. Cap. (INR b)/(USD b) 1,744/26 52-Week Range (INR) 447/275 1,6,12 Rel Perf. (%) -16/-9/-11

Financial Snapshot (INR Billion) Y/E MARCH 2015 2016E 2017E 2018E Net Sales 720.1 761.7 879.6 996.5 EBITDA 152.3 164.3 182.5 236.5 NP 137.3 146.6 154.5 192.5 Adj.EPS (INR) 21.7 23.2 24.5 30.5 EPS Gr. (%) -14.1 6.8 5.4 24.5 BV/Sh. (INR) 63.9 54.2 56.7 59.7 RoE (%) 34.0 42.8 43.2 51.0 RoCE (%) 54.3 62.0 68.8 80.3 Payout (%) 112.9 141.7 90.0 90.0 VALUATION

P/E (x) 12.9 12.1 11.4 9.2 P/BV (x) 4.4 5.2 4.9 4.7 EV/EBITDA (x) 5.9 6.2 5.4 4.4 Div. Yield (%) 7.4 9.8 6.6 8.2


April 2016 268

Quarterly Performance (INR Million) Y/E March FY15 FY16 FY15 FY16E 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Sales 180,865 165,824 187,390 192,299

170,187 177,229 173,175 142,666 726,378 663,257

Change (%) 15.8 1.9 -0.2 -8.2

-5.9 6.9 -7.6 -25.8

EBITDA 32,684 30,881 45,406 45,803

33,718 38,550 45,277 48,243 154,773 165,788

PBT 22,836 19,540 31,868 31,222

17,076 21,686 26,113 30,369 105,467 95,243 PAT 22,012 20,716 30,740 29,440

21,354 28,983 24,929 22,557 102,909 97,822

Change (%) -12.9 -16.9 7.4 -4.8 -3.0 39.9 -18.9 -23.4 Adj. PAT 19,470 17,844 23,016 27,314

21,330 22,165 20,691 22,557 87,644 86,743

Change (%) -15.0 -22.6 -25.5 -8.6

9.6 24.2 -10.1 -17.4

A. Generation 14,410 14,274 18,882 21,056

18,742 19,364 18,197 18,340 68,622 74,643

a. Base RoE - 15.5% 13,634 13,643 13,916 14,666

14,305 14,690 15,168 16,818 55,859 60,981 b. PAT/PLF incentive 1,300 399 -843 1,154

780 890 -17 356 2,010 2,010

c. Others -524 233 5,809 5,236

3,657 3,784 3,046 1,166 10,754 11,653 A. Other income 5,060 3,570 4,134 6,258 2,588 2,801 2,493 4,216 19,022 12,100

Key metrics

Regulated Equity 352,085 352,075 366,177 369,160

369,160 389,020 393,853 417,686 369,160 417,686

Commer. capacity (MW) 41,968 41,968 42,643 43,143

43,143 43,943 44,443 45,103 43,143 45,103 Coal-based PLF (%) 84.3 73.2 80.8 82.7 77.6 77.3 78.2

E: MOSL Estimates

NTPC


We expect adjusted PAT to decline 17% YoY to INR22.5b on lower efficiency gains and other income. Generation business PAT is likely to decline 13% YoY to INR18.3b while other income is expected to be down 33% YoY to INR4.2b.

We expect commercialized capacity to increase by 660MW in the quarter to 45GW on commercialization of Barh-II in February. Regulated equity base is likely to increase to ~INR418b, 13% higher YoY and 6% QoQ. Commissioned capacity would rise to 46.6GW by the end of the quarter, up 1.1GW QoQ on commissioning of Mauda (660MW), Kanti (195MW) and Nabinagar (250MW).

The stock trades at 11.4x FY17E earnings.

Key issues to watch for PLF for coal-based projects and generation loss. Core RoE and incentives.

Bloomberg NTPC IN

Equity Shares (m) 8,245.5 M. Cap. (INR b)/(USD b) 1,047/16 52-Week Range (INR) 160/107

1,6,12 Rel Perf. (%) 0/7/-4


Y/E MARCH 2015 2016E 2017E 2018E Net Sales 806.2 736.5 815.6 948.2 EBITDA 171.9 179.7 218.8 281.6 NP 99.9 94.8 92.7 111.1 Adj.EPS (INR) 12.1 11.5 11.2 13.5 EPS Gr. (%) -12.4 -5.1 -2.2 19.8 BV/Sh. (INR) 99.6 102.5 106.4 112.5 RoE (%) 11.8 11.4 10.8 12.3 RoCE (%) 8.0 7.1 8.0 9.3 Payout (%) 123.8 52.2 53.3 44.5 Valuations P/E (x) 12.2 12.3 11.4 10.0 P/BV (x) 1.3 1.3 1.2 1.2 EV/EBITDA (x) 12.2 12.2 10.6 9.1 Div. Yield (%) 4.7 4.7 4.7 5.8


April 2016 269


1Q 2Q 3Q 4QE

Sales 39,384 41,533 43,524 46,622 47,170 49,046 53,596 55,969 171,064 205,781 Change (%) 10.7 4.3 18.2 18.5 19.8 18.1 23.1 20.0 12.9 20.3 EBITDA 33,694 35,546 37,389 40,174

41,369 43,051 47,486 49,664 146,804 181,571

Change (%) 10.3 5.5 20.5 20.6

22.8 21.1 27.0 23.6 14.2 23.7 As of % Sales 85.6 85.6 85.9 86.2

87.7 87.8 88.6 88.7 85.8 88.2

Depreciation 11,550 12,116 13,007 14,181 13,695 14,481 15,805 16,533 50,854 60,513 Interest 9,279 9,891 10,247 10,376

11,091 11,490 12,875 13,584 39,793 49,040

Other Income 1,367 1,560 1,337 2,474

710 1,224 1,452 1,653 6,737 5,038 Extraordinary Inc / (Exp) 0 0 0 0 0 0 0 0 0 0 PBT 14,232 15,099 15,473 18,091

17,293 18,304 20,259 21,201 62,894 77,056

Tax 2,866 3,086 3,188 3,961

3,628 3,823 4,127 4,603 13,102 16,182 Effective Tax Rate (%) 20.1 20.4 20.6 21.9

21.0 20.9 20.4 21.7 20.8 21.0

Reported PAT 11,365 12,013 12,284 14,130 13,665 14,480 16,131 16,598 49,792 60,874 Adj PAT (Pre Exceptional) 11,909 12,096 12,520 14,130

13,665 14,480 16,131 16,598 50,655 60,874

Change (%) 12.7 15.9 18.6 18.8 14.7 19.7 28.8 17.5 16.6 20.2 E: MOSL Estimates

Power Grid Corporation


PWGL reported capitalization of INR303b for FY16, implying 4Q capitalization at INR35b. Regulated equity base is likely to grow 17.3% YoY to INR373b by the end of FY16. We estimate capex of INR65b in the quarter, driving full year capex to INR225b as against INR224b in FY15.

We estimate PAT growth of 17.5% YoY to INR16.6b on higher regulated equity base.

The company’s board approved investments of ~INR37b in 4Q, as compared to nil in 3Q and ~INR27b in 2Q. In FY16, the board gave investment approvals for ~INR120b worth of projects.

The stock trades at 10.1x FY17E EPS.

Key issues to watch for Capitalization/capex guidance for FY17. Details on competitively bid projects. Development on green energy projects, state JVs, etc.

Bloomberg PWGR IN


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


Y/E MARCH 2015 2016E 2017E 2018E

Sales 176.6 211.5 259.9 303.8 EBITDA 151.3 185.6 229.0 269.8 NP 50.9 61.1 72.1 83.4

EPS (INR) 9.7 11.7 13.8 15.9 EPS Gr. (%) 10.9 20.0 18.0 15.7 BV/Sh. (INR ) 73.5 83.0 94.6 107.6

RoE (%) 13.9 14.9 15.5 15.8 RoCE (%) 7.9 8.5 9.2 9.9 Payout (%) 24.7 18.5 15.9 19.1 VALUATION

P/E (x) 14.3 11.9 10.1 8.7 P/BV (x) 1.9 1.7 1.5 1.3



April 2016 270

Quarterly Performance (INR Million) Y/E March FY15 FY16 FY15 FY16E (Consolidated) 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q Total Operating Income 87,389 83,643 87,541 81,671 91,115 94,629 92,305 85,369 341,851 363,418 Change (%) -6.4 -4.6 0.6 -7.7 4.3 13.1 5.4 4.5 -4.1 6.3 EBITDA 17,480 16,620 14,596 18,892 20,581 23,832 23,733 22,903 67,587 91,050 Change (%) -15.4 -18.2 -18.3 3.7 17.7 43.4 62.6 21.2 -12.3 34.7 As of % Sales 20.0 19.9 16.7 23.1 22.6 25.2 25.7 26.8 19.8 25.1 Depreciation 5,425 5,359 5,421 5,537 5,794 5,950 6,183 6,325 21,742 24,251 Exceptional Items -1,696 -4,995 -7,884 -14,575 Interest 9,345 9,798 8,830 9,020 9,049 8,811 8,558 8,750 36,993 35,168 Other Income -240 -49 5,673 600 2,285 948 827 825 5,985 4,886 PBT 2,471 1,415 6,018 4,935 6,328 5,025 1,936 8,653 14,837 21,942 Tax 3,138 1,738 3,021 2,853 3,105 2,135 2,085 5,192 10,749 12,518 Effective Tax Rate (%) 127.0 122.9 50.2 57.8 49.1 42.5 107.7 60.0 72.4 57.0 Reported PAT -667 -323 2,997 2,082 3,223 2,890 -149 3,461 4,088 9,425 Minority interest -583 -622 -1,022 -667 -835 -639 -98 -100 -2,894 -1,672 Share of profit & loss from Assoc. 138 168 2 177 25 222 492 250 484 990 Net profit after minority -1,113 -777 1,977 1,591 2,413 2,473 245 3,611 1,678 8,742 Adjusted PAT 2,495 2,631 887 2,087 2,875 2,924 3,534 3,611 8,099 12,945 Change (%) 130.7 4.2 -44.6 263.5 15.3 11.2 298.3 73.1 40.1 59.8 E: MOSL Estimates

Tata Power

CMP: INR67 TP: INR69 Neutral We expect TPWR to report standalone PAT of INR3.1b (up ~50% YoY)

and consolidated PAT of INR3.6b (up ~3x YoY), including past arrears/benefit from compensatory tariff.

Soft global prices would impact realization of coal mining companies; thus, it remains a key monitorable.

We expect standalone generation at 2.7Bus, up 6.5% YoY.

We expect TPWR to report consolidated PAT of INR11.5b in FY16 (up 42% YoY) and INR13.7b in FY17 (up 18% YoY).

The stock trades at 13.2x FY17E EPS.

Key issues to watch for Contribution of Maithon/Mundra UMPP project Update on Mundra UMPP tariff revision case Sales/realization for KPC/Arutmin mines

Bloomberg TPWR IN Equity Shares (m) 2,704.8 M. Cap. (INR b)/(USD b) 181/3


Financial Snapshot (INR Billion) Y/E MARCH 2015 2016E 2017E 2018E

Sales 86.8 88.5 92.6 96.9 EBITDA 21.6 31.0 24.9 22.9 NP 8.1 11.5 13.7 15.8

Adj. EPS (INR) 2.7 4.3 5.1 5.8 EPS Gr. (%) 82.8 55.4 18.8 14.9 BV/Sh. (INR) 55.8 59.7 62.2 64.9

RoE (%) 7.4 9.0 6.1 6.3 RoCE (%) 6.2 8.8 6.6 5.8 Payout (%) 38.1 34.5 25.0 35.0


EV/EBITDA (x) 13.1 8.7 10.7 11.3 Div. yield (%) 1.9 1.9 1.9 1.9

April 2016 271


Y/E March FY15 FY16

FY15 FY16E

(Consolidated) 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Sales 13,206 14,625 14,317 14,152 14,764 14,652 13,365 11,278

56,299 54,058

YoY Change (%) 34.7 36.4 -5.6 10.3 11.8 0.2 -6.7 -20.3 16.1 -4.0 Total Expenditure 11,992 13,400 12,958 13,080 13,353 13,281 12,182 10,218 51,430 49,033 EBITDA 1,214 1,225 1,359 1,071 1,411 1,371 1,183 1,061

4,870 5,025

Margins (%) 9.2 8.4 9.5 7.6 9.6 9.4 8.9 9.4 8.6 9.3 Depreciation 427 391 372 384 362 422 386 387

1,574 1,558

Interest 164 141 140 89 106 108 115 110

535 439 Other Income 83 147 116 191 67 73 125 180 537 444 PBT before EO expense 706 841 962 789 1,009 913 807 743

3,298 3,473

Extra-Ord expense 34 48 34 12 49 -10 39 0 127 78 PBT 673 793 928 777 960 923 769 743

3,171 3,395

Tax 159 132 187 222 190 178 162 149

700 679 Rate (%) 23.6 16.6 20.1 28.6 19.8 19.3 21.1 20.0

22.1 20.0

Min. Int. & P/L of Asso. Cos. 24 25 24 0 19 19 -9 45 73 74 Reported PAT 490 636 718 555 751 725 615 550

2,399 2,641

Adj PAT 515 676 745 563 790 717 646 550

2,497 2,704 YoY Change (%) 39.0 52.3 45.7 6.8

53.4 6.1 -13.3 -2.4

46.9 8.3

Margins (%) 3.9 4.6 5.2 4.0 5.4 4.9 4.8 4.9 4.4 5.0

E: MOSL Estimates

March 2016 Results Preview | Sector: Logistics

Allcargo Logistics

CMP: INR154 TP: INR243 Buy We expect AGLL to report EBITDA of INR1.1b (flat YoY, -10.4% QoQ)

and PAT at INR550m (flat YoY, -10.6% QoQ) led by lower total volumes.

Expect MTO volumes at 107,252TEUs (-8% QoQ, +3% YoY) and CFS volumes at 52,874TEUs (-20% QoQ, +3% YoY), the decline in volumes led by by subdued macro trade.

We estimate EBITDA/PAT CAGR of 15%/22% through FY15-18E and return ratios are expected to improve from ~13% to 17%-19% driven by improvement in margins and reduction in capex intensity in the business.

The stock trades at 10.8x/8.9x FY17E/FY18E EPS of INR14.3 / INR17.4. Maintain buy.

Key issues to watch out (a) Volume data, (b) completion of CCI infrastructure’s acquisition

and (c) setup of logistics park in Jhajjar

Bloomberg AGLL IN Equity Shares (m) 252.1


52-Week Range (INR) 218/128 1,6,12 Rel Perf. (%) -3/9/6


Sales 56.3 54.1 68.9 75.5

EBITDA 4.8 5.0 6.4 7.2 NP 2.4 2.7 3.6 4.4 EPS (INR) 9.5 10.7 14.3 17.4




Div. Yield (%) 0.5 0.5 0.6 0.7

Harshad Borawake ([email protected])/ Rajat Agarwal ([email protected])

April 2016 272



(INR Million)


(Consolidated) 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Sales 17,726 19,646 20,737 20,405 18,769 20,964 21,575 22,038 78,514 83,169 YoY Change (%) 18.9 14.3 16.9 8.6 5.9 6.7 4.0 8.0 14.4 5.9 Total Expenditure 15,496 17,225 17,855 17,809 16,504 18,351 18,770 19,327 68,386 72,806 EBITDA 2,230 2,421 2,882 2,596 2,266 2,614 2,805 2,711 10,129 10,363 Margins (%) 12.6 12.3 13.9 12.7 12.1 12.5 13.0 12.3 12.9 12.5 Depreciation 489 516 558 560 628 614 654 680 2,124 2,570 Interest 962 1,011 1,018 956 1,025 947 895 900 3,946 3,755 Other Income 249 303 150 230 248 320 188 150 932 893 PBT before EO expense 1,028 1,197 1,456 1,310 861 1,373 1,445 1,281 4,991 4,931 Extra-Ord expense -2 -33 -25 -484 -29 -38 -13 0 543 0 PBT 1,026 1,165 1,432 825 832 1,335 1,432 1,281 4,448 4,931 Tax 125 242 350 360 268 406 386 384 1,072 1,529 Rate (%) 12.1 20.8 24.4 43.6 32.2 30.4 26.9 30.0 24.1 31.0 MI & Profit/Loss of Asso. Cos. -3 -10 -9 -13 -16 19 13 -25 35 35 Reported PAT 905 933 1,091 478 580 910 1,033 921 3,411 3,437 Adj PAT 907 959 1,110 751 600 937 1,042 921 3,823 3,437 YoY Change (%) 16.4 2.9 8.4 -20.0 -33.8 -2.3 -6.1 22.7 4.1 -10.1 Margins (%) 5.1 4.7 5.3 2.3 3.1 4.3 4.8 4.2 4.3 4.1

E: MOSL Estimates

March 2016 Results Preview | Sector: Textiles

Arvind

CMP: INR261 TP: INR350 Buy We expect ARVND’s revenue to grow 8% YoY (2% QoQ) to INR22b in

4QFY16, driven by the brand and retail segments.

We expect EBITDA margin to contract 40bp YoY (decline of 70bp QoQ) to 12.3%, and estimate EBITDA at INR2.7b.

Consequently, we expect adjusted PAT to grow 22.7% to INR0.9b.

Key things to watch for Growth and margin expansion in the brand and retail segments. Performance of newly acquired brands and newer formats. Realizations in textiles.

Bloomberg ARVND IN Equity Shares (m) 258.2



Y/E March 2015 2016E 2017E 2018E

Sales 78.5 83.2 93.9 109.1

EBITDA 10.1 10.4 12.0 14.2

NP 3.4 3.4 4.0 5.3

EPS (INR) 13.2 13.3 15.6 20.4

EPS Gr. (%) -3.6 0.8 17.0 31.2

BV/Sh. (INR) 105.5 115.3 126.8 142.5

RoE (%) 12.9 12.1 12.9 15.2

RoCE (%) 15.3 13.7 14.8 16.5

Div Payout (%) 23.4 26.6 26.5 23.1

Valuations P/E (x) 19.7 19.6 16.7 12.8

P/BV (x) 2.5 2.3 2.1 1.8

EV/EBITDA (x) 9.9 9.9 8.7 7.5

Div Yield (%) 1.0 1.2 1.3 1.5

April 2016 273



Y/E March FY15* FY16 FY15 FY16E

(Consolidated) 1Q 2Q 3Q 4Q 5Q* 1Q 2Q 3Q 4QE Net Sales 4,954 6,221 5,480 5,372 4,913

6,805 5,754 6,176 5,601 26,940 24,338

YoY Change (%) 9.2 8.7 13.1 -3.1 -0.8 9.4 5.0 15.0 14.0 NM NM Total Expenditure 4,297 5,246 4,844 4,758 4,444 5,941 5,263 5,378 5,024 23,590 21,612 EBITDA 657 975 636 614 469

864 491 798 577 3,350 2,726

Margins (%) 13.3 15.7 11.6 11.4 9.5 12.7 8.5 12.9 10.3 12.4 11.2 Depreciation 136 154 155 185 161

159 192 195 200 793 763

Interest 3 3 3 6 3

5 4 4 3 18 14 Other Income 74 85 106 75 93 44 82 71 90 434 304 PBT before EO expense 592 903 584 499 397

743 376 669 464 2,974 2,253

Extra-Ord expense 0 -17 0 0 332 430 318 0 0 315 -747 PBT 592 886 584 499 729

1,173 694 669 464 2,659 3,000

Tax 198 289 194 149 145

251 153 224 153 976 766 Rate (%) 33.5 32.6 33.2 29.9 36.4

33.8 40.6 33.5 33.0 36.7 34.0

Reported PAT 394 597 390 349 584 922 541 445 311 1,683 2,234 Adj PAT 394 608 390 349 252

492 224 445 311 1,882 1,487

YoY Change (%) 2.6 -1.8 3.8 -40.9 -36.0

-19.0 -42.7 27.4 23.4 NM NM Margins (%) 7.9 9.8 7.1 6.5 5.1 7.2 3.9 7.2 5.6 7.0 6.1

E: MOSL Estimates; * 15months ending FY15

March 2016 Results Preview | Sector: Consumer

Bata India

CMP: INR511 TP: INR576 Buy We expect revenue to grow 14% YoY (-9.3% QoQ) to INR5.6b in

4QFY16.

EBITDA is likely to increase 23% YoY to INR577m, with a margin expansion of 80bp to 10.3%.

Adjusted PAT is expected to grow 23% YoY to INR311m. Buy.

Key things to watch for SSS growth during the quarter. Share of accessories in total revenue. Impact on margins due to promotional campaigns. New store additions.

Bloomberg BATA IN Equity Shares (m) 128.5 M. Cap. (INR b)/(USD b) 66/1



Y/E March 2015* 2016E 2017E 2018E Sales 26.9 24.3 28.0 32.0

EBITDA 3.4 2.7 3.4 4.2 NP 1.9 1.5 2.0 2.5 EPS (INR) 14.6 11.6 15.2 19.2

EPS Gr. (%) -4.8 -21.0 31.2 26.5 BV/Sh.(INR) 79.5 89.9 96.3 106.8 RoE (%) 20.2 13.7 16.3 18.9



Dividend yield 0.6 1.2 1.5 1.5

*15 months

April 2016 274


(INR Million) Y/E December CY15 CY16E

CY15 CY16E

1Q 2Q 3Q 4Q

1Q 2Q 3Q 4Q Volumes (m litres) 46.0 53.7 45.3 46.1

47.1 54.2 45.8 50.7

191.1 197.8

Realizations (INR/ ltr) 173 171 172 171 170 171 174 176 171.9 172.8 Net Sales 7,958 9,202 7,811 7,882

8,001 9,268 7,968 8,936

32,853 34,173

YoY Change (%) -2.4 1.1 -2.3 -7.9 0.5 0.7 2.0 13.4 -2.8 4.0 EBITDA 1,873 2,728 2,127 2,093

2,231 2,648 2,173 2,524

8,821 9,575

YoY Change (%) 29.9 45.1 22.7 2.8

19.1 -2.9 2.2 20.6

24.4 8.6 Margins (%) 23.5 29.6 27.2 27.8 27.9 28.6 27.3 28.2 26.8 28.0


106 106 106 106

390 423 Interest 3 2 1 2

2 2 2 2

8 8

Other Income 164 186 181 250 229 229 229 229 781 917 PBT before EO Item 1,923 2,818 2,213 2,250

2,352 2,769 2,295 2,645

9,204 10,061

Extraordinary Inc/(Exp) 306 306 0 PBT 2,229 2,818 2,213 2,250

2,352 2,769 2,295 2,645

9,510 10,061

Tax 761 973 781 842

800 942 780 899

3,357 3,421 Rate* (%) 34.1 34.5 35.3 37.4 34.0 34.0 34.0 34.0 35.3 34.0

Reported PAT 1,468 1,845 1,432 1,408

1,553 1,828 1,515 1,746

6,153 6,641 Adj. PAT 1,266 1,845 1,432 1,408

1,553 1,828 1,515 1,746

5,951 6,641

YoY Change (%) 26.3 79.2 22.1 6.7

22.6 -0.9 5.8 24.0

24.5 11.6 Margins (%) 15.9 20.0 18.3 17.9 19.4 19.7 19.0 19.5 18.1 19.4 Adj. EPS 2.6 3.7 2.9 2.8 3.1 3.7 3.1 3.5 12.0 13.4 E: MOSL Estimates; *Adjusted for exceptional item


Castrol (India)

CMP: INR375 TP: INR474 Neutral We expect revenue to stay flat YoY at INR8b due to the combined

effect of flat realizations at INR170/liter (flat YoY and QoQ) and flat volumes at 47.1m liters (flat YoY and QoQ).

We estimate EBITDA at INR2.2b (+19.1% YoY; +6.6% QoQ). EBITDA margin is likely to be 27.9% (v/s 27.8% in 4QCY15 and 23.5% in 1QCY15).

Net profit is likely to grow 5.8% YoY and 10.3% QoQ to INR1.6b.

The stock trades at 27.9x CY16E and 26.2x CY17E EPS. Neutral.

Key issues to watch for (a) Volume growth, (b) operating margin expansion.

Bloomberg CSTRL IN




Y/E December 2015 2016E 2017E 2018E Sales 32.9 34.2 36.4 38.4


EPS Gr. (%) 24.5 11.6 6.6 4.1 BV/Sh.(INR) 12.0 13.8 15.3 17.3 RoE (%) 76.6 109.2 104.3 98.7



Div. Yield (%) 2.4 2.7 2.9 2.9


April 2016 275

Quarterly Performance (INR Million) Y/E March FY15 FY16 FY15 FY16E 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Sales 12,697 13,548 14,518 14,975 14,209 15,019 14,046 14,257 55,737 57,531 YoY Change (%) 6.3 8.0 17.2 15.5 11.9 10.9 -3.3 -4.8 11.8 3.2 Total Expenditure 9,712 10,421 10,849 11,790 11,330 11,859 11,245 11,415 42,773 45,849 EBITDA 2,984 3,127 3,669 3,184 2,878 3,161 2,800 2,842 12,964 11,681 Margins (%) 23.5 23.1 25.3 21.3 20.3 21.0 19.9 19.9 23.3 20.3 YoY Change (%) 10.0 12.3 28.4 19.5 -3.6 1.1 -23.7 -10.7 Depreciation 493 1,486 937 810 907 876 876 886 3,727 3,544 Interest 0 0 0 0 0 0 0 0 0 0 Other Income 829 920 852 1,106 798 858 813 825 3,707 3,294 PBT before EO expense 3,320 2,561 3,583 3,480 2,770 3,143 2,737 2,782 12,944 11,432 Extra-Ord expense 0 0 0 1 0 6 0 0 1 6 PBT 3,320 2,561 3,583 3,479 2,770 3,137 2,737 2,782 12,943 11,426 Tax 701 643 573 552 701 808 676 709 2,469 2,894 Rate (%) 21.1 25.1 16.0 15.9 25.3 25.8 24.7 25.5 19.1 25.3 Adj PAT 2,618 1,919 3,011 2,928 2,069 2,335 2,061 2,074 10,475 8,537 YoY Change (%) 6.2 -20.9 20.6 19.0

-21.0 21.7 -31.5 -29.2 6.4 -18.5




Concor

CMP: INR1,252 TP: INR1,605 Buy We estimate net sales of INR14.3b (-4.8% YoY, +1.5% QoQ), led by

(a) realization growth of 3.8% YoY (flat QoQ), and (b) volume decline of 7% YoY (flat QoQ).

We expect EXIM volumes to decline 7% YoY; domestic volumes would decline 6% YoY, led by lower port volumes.

We estimate EBITDA at INR2.8b (-10.7% YoY, flat QoQ) and adj. PAT at INR2.1b (-29.2% YoY, flat QoQ).

The stock currently trades at an EV of 14.8x FY17E and 12.4x FY18E EBITDA. CCRI remains a direct play on the upcoming dedicated freight corridor project, which will multiply its asset turnover and significantly improve profitability. Buy.

Key issues to watch for EXIM and domestic volumes, and realizations.

Bloomberg CCRI IN Equity Shares (m) 195.0

M. Cap. (INR b)/(USD b) 244/4 52-Week Range (INR) 1,944/1,051 1,6,12 Rel Perf. (%) 1/-12/-10


Y/E March 2015 2016E 2017E 2018E

Sales 61.5 57.5 62.9 70.5 EBITDA 14.0 11.7 14.4 16.8 NP 10.5 8.7 10.6 12.4


RoE (%) 14.7 11.1 12.4 13.4 RoCE (%) 13.9 10.6 11.9 12.9 Payout (%) 30.2 30.2 30.2 30.2



April 2016 276



Y/E March FY15

FY16 FY15 FY16E


21,812 35,644 27,555 28,627 113,064 113,628

YoY Change (%) -0.9 7.8 7.5 37.3 16.0 2.8 -7.0 -4.5 12.5 0.5 Total Expenditure 17,588 31,194 27,369 28,379 20,888 32,508 25,902 26,738 104,530 106,015 EBITDA 1,220 3,467 2,252 1,597

924 3,137 1,653 1,889 8,535 7,613


262 282 247 245 1,046 1,033

Interest 609 601 446 439

598 497 542 510 2,096 2,150 Other Income 165 139 128 133 154 245 142 135 566 675 PBT before EO expense 518 2,741 1,677 1,023

217 2,603 1,006 1,269 5,959 5,105

Extra-Ord expense 0 0 39 0 -250 0 -250 0 39 250 PBT 518 2,741 1,638 1,023

467 2,603 1,256 1,269 5,920 4,855

Tax 169 911 486 336

73 868 453 368 1,902 1,767 Rate (%) 32.6 33.2 29.7 32.9 15.5 33.4 36.0 29.0 32.1 36.4 Reported PAT 326 1,799 1,207 687 395 1,735 804 901 4,018 3,088 Adj PAT 326 1,799 1,235 687

184 1,735 644 901 4,045 3,247

YoY Change (%) 52.0 12.4 31.0 -15.1

-43.6 -3.6 -47.9 31.3 10.7 -19.7 Margins (%) 1.7 5.2 4.2 2.3 0.8 4.9 2.3 3.1 3.6 2.9

E: MOSL Estimates

March 2016 Results Preview | Sector: Fertilizers

Coromandel International

CMP: INR192 TP: INR200 Buy We expect revenue to decline 4.5% YoY (grow 3.9% QoQ) to

INR28.6b in 4QFY16.

Margins are likely to expand 130bp YoY (60bp QoQ) to 6.6%. EBITDA should grow 18.3% YoY (14.3% QoQ) to INR1.9b.

We expect adjusted PAT to grow 31% YoY (40% QoQ) to INR900m.

Key issues to watch for Performance of exports in the non-subsidy business

Bloomberg CRIN IN Equity Shares (m) 291.3 M. Cap. (INR b)/(USD b) 56/1




EBITDA 8.5 7.6 10.5 12.4

NP 4.0 3.4 5.8 7.5

EPS (INR) 13.9 11.7 20.0 25.7

EPS Gr. (%) 7.6 -15.4 70.3 28.4

BV/Sh. (INR) 75.6 80.7 92.3 109.6

RoE (%) 18.0 15.0 23.1 25.4

RoCE (%) 18.7 16.8 25.4 31.1

Valuations P/E (x) 13.8 16.3 9.6 7.5

P/BV (x) 2.5 2.4 2.1 1.7

EV/EBITDA (x) 8.7 9.2 6.2 5.0

EV/Sales (x) 0.7 0.6 0.5 0.4

April 2016 277




(Consolidated) 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Sales 4,250 4,319 3,835 3,885 3,728 3,704 3,628 4,004 16,288 15,057 YoY Change (%) 19.8 7.3 -4.1 -9.7 -12.3 -14.2 -5.4 3.1 2.6 -7.6 Total Expenditure 3,787 3,945 3,492 3,554 3,483 3,366 3,327 3,604 14,778 13,778 EBITDA 463 374 343 331 245 338 300 400 1,511 1,280 Margins (%) 10.9 8.7 8.9 8.5 6.6 9.1 8.3 10.0 9.3 8.5 Depreciation 122 127 126 134 129 130 127 130 509 521 Interest 214 213 188 186 193 182 175 185 800 741 Other Income 11 11 20 64 11 6 4 40 106 64 PBT before EO expense 139 44 49 76 -66 32 2 125 308 82 Extra-Ord expense 226 -416 0 0 0 0 0 0 -191 0 PBT -87 461 49 76 -66 32 2 125 499 82 Tax 23 120 44 25 31 29 -22 12 213 27 Rate (%) -26.8 26.1 88.6 33.6 -46.1 90.1 -973.8 9.5 42.6 33.0 Reported PAT -110 340 6 50 -97 3 25 114 287 55 Adj PAT 176 33 6 50 -97 3 25 114 177 55 YoY Change (%) NM NM NM -61.8 NM -90.4 339.1 125.1 28.4 -68.9 Margins (%) 4.1 0.8 0.1 1.3 -2.6 0.1 0.7 2.8 1.1 0.4

E: MOSL Estimates

March 2016 Results Preview | Sector: Aerospace

Dynamatic Tech

CMP: INR1,711 TP: INR2,350 Buy We expect revenue to grow 3% YoY (10% QoQ) to INR4b in 4QFY16,

led by weak performance in the Hydraulics and Automotive divisions, which are expected to post flat growth YoY. However, we expect Aerospace to post 19% growth in the quarter.

Margins are likely to expand 150bp YoY to 10%. EBITDA is expected to grow 21% YoY to INR400m.

We estimate adjusted PAT at INR114m against INR50m in 4QFY15.

Key issues to watch for Execution outlook and ramp-up for Aerospace division

Bloomberg DYTC IN Equity Shares (m) 6.3 M. Cap. (INR b)/(USD b) 11/0

52-Week Range (INR) 4,000/1,482 1,6,12 Rel Perf. (%) 3/-25/-44



EBITDA 1.5 1.3 1.8 2.3 NP 0.2 0.1 0.4 0.7 EPS (INR) 27.9 8.7 67.7 117.3

EPS Gr. (%) 12.3 -68.9 680.8 73.2 BV/Sh(INR) 412.6 421.3 489.0 606.3 RoE (%) 8.5 2.1 14.9 21.4


P/BV (x) 4.1 4.1 3.5 2.8 EV/EBITDA (x) 10.1 12.7 9.1 7.3 EV/Sales (x) 0.9 1.1 1.0 0.9

April 2016 278

Quarterly Performance (INR Million) Y/E March FY15 FY16 FY15 FY16E (Consolidated) 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Sales 2,799 2,927 2,737 2,651 2,642 2,595 2,671 2,656 11,113 10,564 YoY Change (%) 13.5 16.5 10.3 -0.7 -5.6 -11.3 -2.4 0.2 9.7 -4.9 Total Expenditure 2,045 2,069 1,873 1,858 1,938 1,954 2,053 2,039 7,846 7,984 EBITDA 754 857 864 793 704 641 619 617 3,267 2,580 Margins (%) 26.9 29.3 31.6 29.9 26.6 24.7 23.2 23.2 29.4 24.4 YoY Change (%) 22.2 29.9 35.2 20.8 -6.6 -25.2 -28.4 -22.2 27.0 -21.0 Depreciation 249 241 200 200 201 202 202 206 889 811 Interest 83 69 43 45 51 50 46 45 240 192 Other Income 28 29 32 39 43 48 47 48 128 186 PBT 450 578 652 587 495 437 418 413 2,266 1,763 Tax 67 99 126 148 296 141 126 123 441 686 Rate (%) 14.8 17.2 19.4 25.3 59.8 32.2 30.1 29.8 19.4 38.9 Less: Minority/Add: Profit of Asso. 14 1 -17 -49 -18 -10 -18 -18 -52 -63 Reported PAT 369 477 543 487 216 306 309 308 1,878 1,138 Adj PAT 369 477 543 487 356 306 309 308 1,878 1,280 YoY Change (%) 23.0 41.8 70.3 21.1

-3.5 -35.9 -43.1 -36.8 38.2 -31.8

Margins (%) 13.2 16.3 19.9 18.4 13.5 11.8 11.6 11.6 16.9 12.1 E:MOSL Estimates


Gateway Distriparks

CMP: INR275 TP: INR453 Buy We estimate net sales at INR2.7b (flat YoY and QoQ), led by lower

volumes in CFS businesses. Volumes were impacted by overall slowing trade and lower volumes at Punjab Conware CFS in 4QFY16.

We expect EBITDA at INR617m (-22.2% YoY and flat QoQ) and EBITDA margin at 23.2%. We estimate adjusted PAT at INR308m (-36.8% YoY and +flat QoQ).

The stock trades at adjusted EV/EBITDA of 13.9x FY17E / 10.5x FY18E. GDPL remains a direct play on the upcoming dedicated freight corridor project, which will multiply its asset turnover and significantly improve profitability. Buy.

Key issues to watch for Volume growth, realization and per TEU profitability.

Bloomberg GDPL IN


1,6,12 Rel Perf. (%) 3/-13/-20



EBITDA 3.3 2.6 3.2 4.1 NP 1.9 1.3 1.6 2.5 EPS (INR) 17.3 11.8 15.1 23.0

Adj. EPS (INR) 12.6 9.0 11.3 16.5 Adj. EPS Gr.h (%) 25.0 -28.9 25.5 46.7 BV/Sh(INR) 112.1 117.9 126.1 138.3

RoE (%) 16.0 10.2 12.3 17.4 RoCE (%) 12.9 8.1 10.7 15.2 Payout (%) 47.9 45.5 46.0 46.7

Valuations P/E (x) 15.9 23.4 18.3 12.0 Adj. P/E (x) 21.8 30.7 24.4 16.7

P/BV (x) 2.5 2.3 2.2 2.0 EV/EBITDA (x) 9.4 12.2 9.8 7.4 AdjEV/EBITDA(x) 12.6 17.1 13.9 10.5

Div. Yield (%) 2.5 1.5 2.1 3.3


April 2016 279




(Standalone) 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Sales 3,161 4,788 4,284 4,567

4,610 5,821 5,026 5,480 17,818 22,068

YoY Change (%) 6.8 11.6 14.5 29.7 45.8 21.6 17.3 20.0 22.8 23.9 Total Expenditure 2,641 3,990 3,460 3,696 3,572 4,577 3,942 4,331 14,681 17,433 EBITDA 520 799 823 871

1,038 1,245 1,084 1,149 3,136 4,634


42 44 45 45 160 182

Interest 139 179 141 166

149 155 93 130 650 529 Other Income 0 0 0 0 0 0 0 0 0 0 PBT before EO expense 345 583 639 667

847 1,046 946 973 2,327 3,924

Extra-Ord expense 0 0 0 257 0 0 0 0 257 0 PBT 345 583 639 409 847 1,046 946 973 2,069 3,924 Tax 96 158 203 129

294 387 311 321 611 1,295

Rate (%) 27.8 27.1 31.7 31.5

34.6 37.0 32.9 33.0 29.5 33.0 Reported PAT 249 425 436 280

554 659 634 652 1,457 2,629

Adj PAT 249 425 436 457

554 659 634 652 1,638 2,629 YoY Change (%) 80.2 67.5 19.2 56.6

122.2 55.1 45.4 42.8 56.1 60.5

Margins (%) 7.9 8.9 10.2 10.0 12.0 11.3 12.6 11.9 9.2 11.9

E: MOSL Estimates

March 2016 Results Preview | Sector: Textiles

Indo Count Industries

CMP: INR989 TP: INR1,340 Buy We expect revenue to grow 20% YoY (9% QoQ) to INR5.5b in

4QFY16.

We estimate 190bp margin expansion to 21% and 32% YoY EBITDA growth to INR1.1b.

PAT would grow 43% YoY to INR652m from INR457m in 4QFY15.

Key things to watch for Any addition of clients and geographies, and ramp-up there. Foreign exchange gains and losses.

Bloomberg ICNT IN Equity Shares (m) 39.5

M. Cap. (INR b)/(USD b) 39/1 52-Week Range (INR) 1,248/385 1,6,12 Rel Perf. (%) 5/14/158


Y/E March 2015 2016E 2017E 2018E

Sales 17.8 22.1 27.4 32.9 EBITDA 3.1 4.6 6.0 7.3 NP 1.6 2.6 3.5 4.4




EV/Sales (x) 2.4 1.8 1.5 1.1

April 2016 280

Ashish Chopra ([email protected])/ Sagar Lele ([email protected])

Quarterly Performance (INR Million) Y/E March FY15 FY16 FY15 FY16E 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Revenues 1,449 1,476 1,457 1,731

1,718 1,741 1,734 1,859 6,113 7,052

YoY (%) 20.0 19.4 18.1 25.4 18.5 18.0 19.0 7.4 20.9 15.4 Salary costs 589 603 642 687

759 753 804 824 2,520 3,139

Ad and Promotion costs 168 223 231 219

461 375 271 288 842 1,395 Other Expenses 199 227 221 284 259 280 274 273 931 1,087 Operating Profit 493 422 363 542

238 334 385 474 1,820 1,431

Margins (%) 34.0 28.6 24.9 31.3 13.9 19.2 22.2 25.5 29.8 20.3 Other Income 129 110 256 269

213 195 216 227 764 850


45 50 54 57 173 207 PBT bef. Extra-ordinary 578 486 572 776 406 478 546 644 2,411 2,074 Provision for Tax 173 147 178 239

119 138 169 187 736 613

ETR (%) 29.9 30.2 31.1 30.8 29.2 29.0 31.0 29.0 30.5 29.5 PAT bef. Minority 405 339 394 536

288 339 377 457 1,675 1,461

EOI 0 0 0 292 0 0 -160 0 292 -160 Adjusted PAT 405 339 394 828

288 339 218 457 1,966 1,302

YoY (%) 24.4 0.2 20.0 142.6 -29.0 0.0 -44.8 -44.8 47.4 -33.8 EPS (INR) 3.6 2.9 3.2 6.8 2.4 2.8 1.8 3.8 16.5 10.7

E: MOSL Estimates


Info Edge

CMP: INR770 TP: INR1,060 Buy We expect standalone revenue to grow 7.2% YoY to INR1.9b. LTM

standalone revenue has grown 18% YoY. The deceleration stems from higher base of 4QFY15 because of faster collections on account of sales tax changes effective April 1, 2015.

Recruitment segment (~75% of business) is likely to grow 12% YoY to INR1.4b. We estimate revenue at INR269m (down 9.9% YoY) for the real estate portal, 99acres.com, and at INR121m (up 14.2% YoY) for the matrimonial portal, Jeevansathi.com.

Our EBITDA margin estimate for the quarter is 25.5% against 22.2% in 3QFY16 and 31.3% in 4QFY15. Margin improvement should continue, as rationalization of advertisement expenses continues.

We expect adjusted PAT of INR457m (+21% QoQ, -45% YoY).

Key things to watch for Impact of consolidation in the real estate segment, and outlook on

ad spends given the competitive dynamics. Traction in the recruitment business from segments other than IT. Commentary around monetization in Zomato.com.

Bloomberg INFOE IN Equity Shares (m) 121.1


Financial Snapshot (INR b) Y/E March 2015 2016E 2017E 2018E Sales 6.1 7.1 8.3 9.8 EBITDA 1.8 1.4 2.3 2.9 PAT 1.9 1.3 2.1 2.7 EPS (INR) 13.7 12.0 17.4 21.9 EPS Gr. (%) 16.4 -12.1 44.4 26.2 BV/Sh. (INR) 138.3 143.0 153.7 169.0 RoE (%) 13.6 8.6 11.7 13.6 RoCE (%) 13.6 7.2 11.3 13.6 Payout (%) 26.4 39.9 38.0 30.1 Valuations P/E (x) 56.7 64.5 44.7 35.4 EV/EBITDA (x) 46.5 53.6 32.9 24.9 EV/Sales (x) 13.9 10.9 9.1 7.4

April 2016 281




1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Sales 2,324 2,659 3,008 2,178

3,487 3,554 3,417 2,439 10,168 12,877


656 565 528 168 1,228 1,906


198 197 201 220 758 827

Interest 65 114 125 83

62 62 61 64 386 255 Other Income 8 7 41 26 4 14 9 10 83 50 PBT before EO expense 52 68 175 -133

401 320 275 -106 166 874

Extra-Ord expense 0 0 0 0 0 0 -50 0 -6 0 PBT 52 68 175 -133

401 320 226 -106 160 874

Tax 6 15 32 -93

148 115 70 -37 -40 272 Rate (%) 11.1 22.0 18.2 70.1

36.9 35.9 30.9 35.0 -25.3 31.1

Reported PAT 46 53 143 -40 253 205 156 -69 200 602 Adj PAT 46 53 143 -40

253 205 190 -69 208 602

YoY Change (%) -67.8 -64.1 121.0 NM

451.5 288.4 33.1 73.1 -44.2 189.7 Margins (%) 2.0 2.0 4.8 -1.8 7.2 5.8 5.6 -2.8 2.0 4.7

E: MOSL Estimates


Inox Leisure

CMP: INR197 TP: INR275 Buy We expect revenue to grow 12% YoY (decline 29% QoQ) to INR2.4b

in 4QFY16 on the back of box office collections.

Margins are likely to expand 210bp to 6.9%. We expect EBITDA to grow 60% YoY to INR168m.

We expect a loss of INR69m against a loss of INR40m in 4QFY15.

Key things to watch for Footfall growth during the quarter due to lower base and stronger

content. Number of screen additions.

Bloomberg INOL IN Equity Shares (m) 96.2



Y/E March 2015 2016E 2017E 2018E

Sales 10.2 12.9 16.5 18.9 EBITDA 1.2 1.9 2.6 3.1 NP 0.2 0.6 1.1 1.4

EPS (INR) 2.2 6.0 12.0 15.3 EPS Gr. (%) -42.8 173.5 98.9 27.8 BV/Sh. (INR) 70.3 76.1 87.5 102.1



April 2016 282

Quarterly Performance (INR Million) Y/E March FY15 FY16 FY15 FY16E (Standalone) 1HFY15 3Q 4Q 1Q 2Q 3Q 4QE Net Sales 62,447 38,574 38,233 42,115 35,399 42,978 41,315 139,253 161,807 YoY Change (%) NA NA NA NA NA NA 8.1 51.3 16.2 Total Expenditure 50,656 25,615 24,762 26,374 26,673 26,318 26,276 101,034 105,641 EBITDAR 11,791 12,958 13,470 15,741 8,726 16,660 15,039 38,219 56,166 Margins (%) 18.9 33.6 35.2 37.4 24.7 38.8 36.4 27 34.7 Rentals 9,122 4,925 5,476 6,017 6,324 6,782 7,276 19,522 26,398 EBITDA 2,669 8,034 7,994 9,724 2,403 9,878 7,763 18,697 29,768 Margins (%) 4.3 20.8 20.9 23.1 6.8 23.0 18.8 13.4 18.4 Depreciation 1,396 807 819 1,200 1,283 1,307 1,312 3,022 5,101 Interest 602 309 244 328 411 340 334 1,155 1,413 Other Income 1,854 814 1,170 1,057 891 1,097 1,221 3,838 4,266 PBT 2,525 7,732 8,101 9,253 1,599 9,329 7,338 18,357 27,519 Tax 218 2,210 2,973 2,848 473 2,756 2,201 5,402 8,278 Rate (%) 8.6 28.6 36.7 30.8 29.5 29.5 30.0 29.4 30.1 Reported PAT 2,307 5,521 5,128 6,404 1,127 6,573 5,137 12,956 19,241 EPS 6.4 15.3 14.2

17.8 3.1 18.2 14 36 53

YoY Change (%) 19.0 0.2 173.1 48.5 Operational Data

ASK (m) 16,845 8,955 9,527 10,156 10,551 10,750 11,369 35,327 42,825 RPK (m) 13,016 7,274 7,887 8,931 8,276 9,090 9,607 28,177 35,904 E: MOSL Estimates

March 2016 Results Preview | Sector: Aviation

InterGlobe Aviation

CMP: INR973 TP: INR1,404 Buy We expect InterGlobe Aviation to report revenue of INR41.3b

(+8.1% YoY, -3.9% QoQ) and EBITDAR of INR15.0b (+11.6% YoY, -9.7% QoQ) in 4QFY16.

We expect net profit of INR5.1b in 4QFY16 (flat YoY, -21.9% QoQ).

We model ASK at INR42.8b in FY16 and INR53.7b in FY17 v/s INR35.3b in FY15, and RPK at INR35.9b in FY16 and INR44.9b in FY17 v/s INR28.2b in FY15, driven by increase in fleet size.

Decline in Brent prices would be a medium-term earnings trigger.

The stock trades at 14.0x FY17E EPS of INR69.5 and 11.5x FY18E EPS of INR84.7, and at an adjusted EV/EBITDAR of 8.2x FY17E and 7.2x FY18E. Maintain Buy.

Key things to watch for Induction of new aircraft in the fleet. Fuel costs and their pass-through to customers.

Bloomberg INDIGO IN Equity Shares (m) 360.4 M. Cap. (INR b)/(USD b) 350/5

52-Week Range (INR) 1,396/702 1,6,12 Rel Perf. (%) 11 / NA / NA

Financial Snapshot (INR Billion) Y/E March 2015 2016E 2017E 2018E

Sales 139.3 161.8 205.4 256.7

EBITDA 18.7 29.8 37.7 46.1 NP 13.0 19.2 25.0 30.5 EPS (INR) 36.0 53.4 69.5 84.7



P/E (x) 27.1 18.2 14.0 11.5 P/BV (x) 82.3 16.5 11.2 8.0 AdjEV/EBITDAR (x) 13.3 9.7 8.2 7.2

Div. Yield (%) 3.1 3.6 3.6 4.4


April 2016 283



(INR Million)

Y/E March FY15

FY16 FY15 FY16E


15,874 13,157 13,785 22,059 61,527 64,864

YoY Change (%) 10.2 4.4 -6.0 11.4 2.2 3.6 6.7 8.0 5.5 5.4 Total Expenditure 13,528 11,129 11,427 17,620 13,700 11,569 12,258 18,927 53,729 56,432 EBITDA 2,006 1,572 1,492 2,806

2,175 1,588 1,527 3,132 7,797 8,432


613 635 673 670 2,441 2,599

Interest 1,180 1,152 1,205 1,156

1,195 1,151 1,199 1,190 4,693 4,735 Other Income 23 97 56 156 102 75 56 95 410 324 PBT before EO expense 235 -95 -263 1,196

468 -123 -289 1,367 1,074 1,423

Extra-Ord expense 0 -254 -458 -51 -247 -360 384 0 -759 -224 PBT 235 -349 -721 1,145

221 -483 94 1,367 315 1,199

Tax 32 -113 -326 168

40 -183 7 287 -239 152 Rate (%) 13.5 32.5 45.2 14.7 18.2 37.8 6.9 21.0 NM NM MI& Profit/Loss of Asso. Cos 0 0 1 -9 -7 -6 -4 0 -8 -13 Reported PAT 203 -235 -396 985

188 -295 92 1,080 562 1,060

Adj PAT 203 -64 -145 1,029

390 -70 -265 1,080 859 1,242 YoY Change (%) NM NM NM 38.6

91.8 NM NM 5.0 NM 44.6

Margins (%) 1.3 -0.5 -1.1 5.0 2.5 -0.5 -1.9 4.9 1.4 1.9

E: MOSL Estimates

March 2016 Results Preview | Sector: Agri

Jain Irrigation

CMP: INR58 TP: INR64 Buy We expect revenue to grow 8% YoY to INR22b in 4QFY16.

EBITDA is likely to increase 12% YoY to INR3.1b. We expect margins to expand 50bp YoY to 14.2%.

We expect adjusted PAT at INR1,080m as against INR1,029m in 4QFY15.

Key things to watch for Receivable days in the MIS business. Execution of solar pump orders and new tenders. Debt reduction.

Bloomberg JI IN Equity Shares (m) 443.1



Y/E March 2015 2016E 2017E 2018E

Sales 61.5 64.9 72.4 81.4 EBITDA 7.8 8.4 9.8 11.0 NP 0.9 1.3 2.8 3.7

EPS (INR) 1.9 2.7 5.4 7.1 EPS Gr. (%) 28.8 44.6 99.5 33.3 BV/Sh (INR) 46.3 65.1 63.5 69.8



EV/Sales (x) 1.1 0.9 0.8 0.7

April 2016 284



Y/E March FY15

FY16 FY15 FY16E


1,686 1,713 1,713 1,828 5,898 6,959


484 397 374 457 1,657 1,705


67 81 81 95 241 324

Interest 0 0 0 0


488 578 389 462 1,904 1,919

Extra-Ord expense 0 0 0 33 0 0 0 0 33 0 PBT 380 448 475 603

488 578 389 462 1,871 1,919

Tax 99 133 153 131

156 118 119 139 516 537 Rate (%) 26 30 32 22 32 20 31 30 27.6 28 Reported PAT 281 315 321 472

332 460 270 323 1,355 1,381

Adj PAT 281 315 321 472

332 460 270 323 1,379 1,381 YoY Adj PAT Change (%) 0.2 9.9 8.0 38.1

18.0 46.2 -16.0 -31.4 14.4 0.2

Margins (%) 20.8 21.4 20.8 30.2 19.7 26.9 15.8 17.7 23.4 19.9

E: MOSL Estimates


Just Dial

CMP: INR735 TP: INR850 Buy We expect revenue to grow 17% YoY (6.7% QoQ) to INR1.8b in

4QFY16.

We expect EBITDA margin to contract 210bp YoY to 25%. Consequently, we estimate 8% YoY EBITDA growth to INR457m.

PAT would be INR323m as against INR472m in 4QFY15.

Key things to watch for Performance of Search Plus and traction from JD Omni. Addition of paid campaigns. Promotional campaigns.

Bloomberg JUST IN Equity Shares (m) 70.2

M. Cap. (INR b)/(USD b) 52/1 52-Week Range (INR) 1,385/378 1,6,12 Rel Perf. (%) -4/-18/-32


Y/E March 2015 2016E 2017E 2018E

Sales 5.9 7.0 8.5 10.5 EBITDA 1.7 1.7 1.5 2.4 NP 1.4 1.4 1.2 1.8

EPS (INR) 19.7 19.9 17.2 26.4 EPS Growth (%) 14.6 1.0 -13.8 53.9 BV/Sh (INR) 95.5 90.9 105.7 129.2

RoE (%) 23.0 21.2 17.5 22.5 RoCE (%) 31.5 29.4 24.9 32.1 Payout (%) 12.2 11.7 13.5 11.0



April 2016 285



Y/E March FY15

FY16 FY15 FY16E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Sales 8,269 2,037 907 399

6,641 934 919 360 11,612 8,813

YoY Change (%) 12.3 97.3 -31.6 1.9 -19.7 -54.1 1.3 -10.0 14.8 -24.1 Total Expenditure 5,945 1,709 546 315 4,383 1,387 790 324 8,516 6,848 EBITDA 2,324 328 361 84

2,258 -453 129 36 3,097 1,965

Margins (%) 28.1 16.1 39.8 21.1 34.0 -48.4 14.0 10.0 26.7 22.3 Depreciation 22 22 22 84

59 59 81 80 149 260

Interest 0 0 1 0

0 1 1 0 2 1 Other Income 37 46 25 49 20 54 42 52 157 173 PBT 2,339 352 363 46

2,219 -458 89 8 3,107 1,877

Tax 33 18 5 37

33 17 -1 1 92 56 Rate (%) 1.4 5.1 1.4 80.2 1.5 -3.7 -0.7 10.0 3.0 3.0 Reported PAT 2,304 335 358 13

2,184 -475 92 7 3,014 1,821

Adj PAT 2,309 335 358 6

2,189 -475 92 7 3,011 1,821 YoY Change (%) 42.5 311.3 -1.6 -28.9

-5.2 NM -74.2 8.9 44.3 -39.5

Margins (%) 27.9 16.4 39.5 1.6 33.0 -50.9 10.0 1.9 25.9 20.7

E: MOSL Estimates


Kaveri Seed

CMP: INR376 TP: INR400 Neutral We expect revenue to decline 10% YoY to INR360m.

4Q is generally the smallest quarter, as KSCL earns more than 96% of its revenue in the first nine months of a financial year.

We expect EBITDA at INR36m with margins at 10% (21.1% in 4QFY15).

We expect adjusted PAT to post 9% growth YoY to INR7m..

Key things to watch for Updates on FY17. Any further write-offs. Regulatory updates on price control.

Bloomberg KSCL IN Equity Shares (m) 68.9



Y/E March 2015 2016E 2017E 2018E

Sales 11.6 8.8 10.6 12.5 EBITDA 3.1 2.0 2.4 3.0 NP 3.0 1.8 2.2 2.8


RoE (%) 47.4 22.6 24.4 26.1 RoCE (%) 48.8 23.3 25.4 27.1 Payout (%) 20.6 43.9 46.4 43.6



April 2016 286

Ashish Chopra ([email protected])/ Sagar Lele ([email protected])

Quarterly Performance (Indian GAAP)

(INR Million)


Sales 474 500 527 537 518 563 498 566 2,038 2,145 Q-o-Q Gr. (%) -15.2 5.6 5.3 1.9 -1.8 8.8 -11.6 13.6 -36.3 5.3 Staff Costs 83 92 86 87 90 109 100 100 349 399 Other expenses 318 276 237 169 282 318 264 290 956 994 Depreciation 68 64 64 63 63 65 64 62 259 253 EBIT 5 68 139 218 83 71 70 114 473 499 Margins (%) 1.0 13.6 26.4 40.5 16.1 12.7 14.0 20.1 23.2 23.3 Other Income 285 315 244 441 300 338 276 289 1,285 1,202 PBT bef. Exceptional

290 369 382 660 382 409 346 403 1,744 1,701

Tax 56 75 152 167 131 99 110 101 450 441 Rate (%) 19.2 20.4 39.8 25.3 34.3 24.2 31.8 25.0 25.8 25.9 PAT 234 294 230 493 251 310 236 302 1,294 1,260 Q-o-Q Gr. (%) -9.3 25.5 -21.8 114.7 -49.0 23.5 -24.0 28.0 -15.3 0.8 EPS (INR) 4.6 5.8 4.5 9.7 4.9 6.1 3.5 5.9 24.6 24.8 Total volumes (INR t) 11.8 12.5 13.5 14.1 13.6 14.8 13.0 14.9 51.8 56.3 Q-o-Q Gr. (%) -10.1 6.3 7.8 4.4 -3.5 9.2 -12.0 14.3 Y-o-Y Gr. (%) -68.6 -39.5 3.0 -5.2 15.4 18.5 -3.3 5.9 -39.8 8.7 E: MOSL Estimates

March 2016 Results Preview | Sector: Others

MCX

CMP: INR824 TP: INR1,300 Buy Total volumes traded at MCX during the quarter were INR15t, up

14.3% QoQ and 5.9% YoY. This drives our revenue estimate for the quarter to INR566m, up

13.6% QoQ and 5.4% YoY. Our EBIT margin estimate for the quarter is 20.1%, up 600bp QoQ

from 14% in 3QFY16 - mainly because of the strong sequential revenue growth.

We don’t expect much change in costs, including in advertisement expenses, which pared down last quarter, as volume commitments for 2015 got fulfilled.

Our PAT estimate is INR302m, up 28% QoQ and down 39% YoY. The YoY decline is on account of exceptionally lower other expenses (31% of revenue) in 4QFY15 versus 51% in 4QFY16. We are modeling an ETR of 25% for 4QFY16.

Key things to watch for Any move to enter the commodities space by potential

competitors like NSE. Cost base and impact on margins. Pace of reforms under SEBI.

Bloomberg MCX IN Equity Shares (m) 51.0


Financial Snapshot (INR b) Y/E MAR 2015 2016E 2017E 2018E

Sales 2.0 2.1 3.2 4.7 EBITDA 0.7 0.6 1.5 2.8 PAT 1.3 0.4 1.9 3.0

EPS (INR) 24.6 20.5 35.2 56.1 EPS Gr. (%)

-18.1 -16.6 71.6 59.4 BV/Sh. ( )

235.8 235.6 253.5 282.0

RoE (%) 10.7 3.7 14.4 20.9 RoCE (%) 10.4 8.9 14.0 20.5 Payout (%) 6.9 191.7 68.7 64.7

Valuation P/E (x) 33.4 40.0 23.3 14.6 P/BV (x) 3.5 3.5 3.2 2.9 EV/EBITDA ( )

38.6 46.1 18.7 9.2 Div yld (%) 0.2 2.1 2.9 4.4

April 2016 287



(INR Million)

Y/E March FY15

FY16 FY15 FY16E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Sales 2,648 904 1,339 674

2,633 378 1,537 688 5,564 5,233

YoY Change (%) 16.3 -7.7 -26.6 -10.2 -0.6 -58.2 14.8 2.0 -4.6 -5.9 Total Expenditure 1,820 925 881 778 1,921 634 1,071 653 4,404 4,292 EBITDA 828 -21 458 -104

712 -256 466 34 1,160 942

Margins (%) 31.3 -2.4 34.2 -15.4 27.0 -67.7 30.3 5.0 20.9 18.0 Depreciation 28 30 22 0

21 22 29 30 79 108

Interest 1 1 1 1

3 1 1 0 4 0 Other Income 18 112 49 40 27 22 28 30 213 110 PBT before EO expense 818 60 484 -65

716 -257 464 34 1,290 944

Extra-Ord expense 0 0 0 0 0 0 56 0 0 0 PBT 818 60 484 -65

716 -257 408 34 1,290 944

Tax 107 108 1 11

88 6 1 2 227 132 Rate (%) 13.1 180.0 0.1 -16.5 12.3 -2.5 0.2 5.0 17.6 14.0 Reported PAT 710 -48 483 -75

628 -264 407 33 1,063 812

Adj PAT 710 -48 483 -75

628 -264 463 33 1,063 812 YoY Change (%) 26.3 NM -25.8 NM

-11.6 NM -4.3 NM -17.7 -23.6

Margins (%) 26.8 -5.3 36.1 -11.2 23.8 -69.8 30.1 4.8 19.1 15.5

E: MOSL Estimates


Monsanto India

CMP: INR1,617 TP: INR2,350 Buy We expect revenue to grow 2% YoY to INR688m in 4QFY16.

4Q is generally the smallest quarter, as Monsanto earns more than 86% of its revenues in the first nine months of a financial year.

We expect EBITDA margins at 5% and EBITDA at INR34m as against a negative EBITDA of INR104m in 4QFY15.

We expect PAT at INR33m as against loss of INR75m in 4QFY15.

Key things to watch for Any trends in shift of crop to corn due to increasing corn prices. Age profile of corn seeds sold. Realizations in glyphosate.

Bloomberg MCHM IN Equity Shares (m) 17.3

M. Cap. (INR b)/(USD b) 28/0 52-Week Range (INR) 3,377/1,526 1,6,12 Rel Perf. (%) 0/-32/-31



NP 1.1 0.8 1.2 1.6 EPS (INR) 61.6 47.1 72.0 90.3 EPS Gr. (%) -17.6 -23.6 53.1 25.4

BV/Sh (INR) 216.9 203.8 203.8 222.0 RoE (%) 29.6 22.4 35.3 42.4 RoCE (%) 36.0 26.0 41.1 49.3


P/BV (x) 7.5 7.9 7.9 7.3 EV/EBITDA (x) 24.0 29.2 19.3 15.6 Div Yield (%) 2.2 3.1 3.7 3.7

April 2016 288




(Standalone) 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Sales 4,712 4,266 5,049 5,370 5,548 4,461 5,110 5,907 19,397 21,201 YoY Change (%) 16.0 -7.8 38.9 48.0 17.7 4.6 1.2 10.0 21.6 9.3 Total Expenditure 3,633 3,539 4,108 4,417 4,190 3,613 4,062 4,743 15,697 16,770 EBITDA 1,080 726 941 953 1,358 848 1,048 1,164 3,700 4,431 Margins (%) 22.9 17.0 18.6 17.7 24.5 19.0 20.5 19.7 19.1 20.9 Depreciation 98 96 97 201 115 117 137 220 492 633 Interest 18 19 36 25 27 15 27 24 97 91 Other Income 36 55 59 81 45 45 51 92 232 256 PBT before EO expense 1,000 667 868 808 1,261 760 935 1,012 3,342 3,963 Extra-Ord expense -39 -51 -46 -48 -41 -44 -29 0 -184 -85 PBT 1,039 717 914 856 1,302 805 964 1,012 3,526 4,048 Tax 322 228 292 253 429 223 239 253 1,094 1,174 Rate (%) 31.0 31.7 31.9 29.5 33.0 27.7 24.7 25.0 31.0 29.0 Reported PAT 717 490 622 603 873 582 725 759 2,433 2,874 Adj PAT 690 455 591 569 846 550 704 759 2,306 2,814 YoY Change (%) 42.2 -17.7 70.2 23.8

22.5 20.8 19.1 33.3 25.1 22.0

Margins (%) 14.7 10.7 11.7 10.6 15.2 12.3 13.8 12.8 11.9 13.3

E: MOSL Estimates


PI IndustriesCMP: INR561 TP: INR750 Buy We expect revenue to grow 10% YoY (15.6% QoQ) to INR5.9b. We

expect revenue growth of 13% in CSM and 4% in agri business.

We estimate 200bp margin expansion to 19.7% and expect EBITDA to grow 22% YoY to INR1.2b.

We estimate adjusted PAT at INR759m as against INR569m in 4QFY15.

Key things to watch for CSM growth and order book. Agrochemical business updates for FY17.

Bloomberg ICNT IN Equity Shares (m) 136.1



Y/E March 2015 2016E 2017E 2018E

Sales 19.4 21.2 26.1 31.6 EBITDA 3.7 4.4 5.6 7.0 NP 2.5 2.9 3.7 4.7




EV/Sales (x) 4.0 3.6 2.9 2.3

April 2016 289



(INR Million)


(Consolidated) 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Sales 11,559 11,895 11,131 10,814 12,231 11,646 10,974 11,084 45,398 45,930 YoY Change (%) 40.1 41.0 29.2 21.9 5.8 -2 -1 2 13.0 1.2 Total Expenditure 9,744 9,903 9,350 9,227 9,565 9,167 8,637 8,734 38,224 36,101 EBITDA 1,815 1,992 1,781 1,587 2,666 2,480 2,337 2,350 7,175 9,829 Margins (%) 15.7 16.7 16.0 14.7 21.8 21.3 21.3 21.2 15.8 21.4 Depreciation 578 616 608 648 723 732 713 714 2,450 2,878 Interest 328 375 369 304 336 327 305 355 1,376 1,331 Other Income 293 255 46 51 36 39 92 120 646 294 PBT before EO expense 1,202 1,256 851 685 1,643 1,460 1,411 1,401 3,994 5,914 Extra-Ord expense 2 56 -27 -32 -7 104 65 0 0 163 PBT 1,200 1,200 878 717 1,650 1,355 1,346 1,401 3,994 5,751 Tax 275 415 164 113 518 353 339 399 966 1,610 Rate (%) 22.9 34.6 18.6 15.7 31.4 26.0 25.2 28.5 24.2 28.0 Reported PAT 925 785 714 604 1,132 1,003 1,007 1,002 3,028 4,141 Adj PAT 927 822 692 578 1,127 1,080 1,056 1,002 3,028 4,258 YoY Change (%) 111.5 72.0 -4.0 9.2

21.7 31 53 73 86.4 40.6

Margins (%) 8.0 6.9 6.2 5.3 9.2 9.3 9.6 9.0 6.7 9.3

E: MOSL Estimates

March 2016 Results Preview | Sector: Diversified

SRF

CMP: INR1,231 TP: INR1,500 Buy We expect SRF’s revenue to grow 2% YoY to INR11.1b. Its technical

textile and packaging segments are crude-driven and are expected to see a decline in realizations.

We expect EBITDA margin at 21.2% (up 650bp YoY) and EBITDA at INR2.35b. We believe margins will be largely driven by the packaging segment.

Led by expansion in EBITDA margin, we expect PAT to grow 73% YoY to INR1b.

Key things to watch for Growth in the chemicals segment (particularly specialty

chemicals). Client additions and capex plans in specialty chemicals. Margins in the packaging segment.

Bloomberg SRF IN


52-Week Range (INR) 1,496/899 1,6,12 Rel Perf. (%) 1/11/35



EBITDA 7.2 9.8 11.1 12.6 NP 3.0 4.3 5.2 6.3 EPS (INR) 52.7 74.2 90.0 107.2



P/BV (x) 3.1 2.7 2.4 2.0 EV/EBITDA (x) 13.3 9.3 8.1 6.9 EV/Sales (x) 2.1 2.0 1.7 1.4

April 2016 290




(Consolidated) 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Sales 1,908 2,059 2,215 2,313 2,435 2,637 2,741 2,891 8,494 10,743 YoY Change (%) 10.2 8.4 10.7 9.3 27.7 28.1 23.7 25.0 9.6 26.5 Total Expenditure 1,531 1,641 1,710 1,839 1,875 2,024 2,077 2,219 6,721 8,272 EBITDA 377 418 504 474 560 613 663 672 1,773 2,471 Margins (%) 19.8 20.3 22.8 20.5 23.0 23.2 24.2 23.2 20.9 23.0 Depreciation 90 79 73 14 90 57 57 80 255 297 Interest 0 0 0 0 0 0 0 0 0 0 Other Income 22 13 3 -5 76 27 10 4 33 117 PBT 309 352 435 455 546 583 616 596 1,551 2,291 Tax 101 116 157 156 189 202 217 203 531 779 Rate (%) 32.8 32.9 36.2 34.4 34.6 34.7 35.2 34.0 34.2 34.0 Reported PAT 208 236 278 298 357 381 399 393 1,020 1,512 Adj PAT 208 236 278 298 357 381 399 393 1,020 1,512 YoY Change (%) 132.9 18.6 28.7 36.6 71.8 61.2 43.8 31.8 109.0 48.2 Margins (%) 10.9 11.5 12.5 12.9 14.7 14.5 14.6 13.6 12.0 14.1

E: MOSL Estimates


Tata Elxsi

CMP: INR1,889 TP: INR2,040 Buy We expect revenue to grow 25% YoY (5.5% QoQ) to INR2.8b in

4QFY16, driven by automotive and broadcast divisions.

Margins are likely to expand 270bp to 23.2%. EBITDA is expected to grow 42% YoY to INR672m.

We estimate PAT at INR393m as against INR298m in 4QFY15.

Key things to watch for Impact of Euro depreciation.

Bloomberg TELX IN Equity Shares (m) 31.1 M. Cap. (INR b)/(USD b) 59/1

52-Week Range (INR) 2,396/978 1,6,12 Rel Perf. (%) 0/4/59


Y/E March 2015 2016E 2017E 2018E

Sales 8.5 10.7 13.5 17.0 EBITDA 1.8 2.5 3.2 4.2 PAT 1.0 1.5 2.0 2.6


RoE (%) 39.3 47.0 49.2 50.1 RoCE (%) 59.8 71.2 74.5 76.0 Payout (%) 40.2 49.4 49.9 49.4



April 2016 291




(Standalone) 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Sales 3,364 3,820 3,837 2,862

3,486 4,210 4,478 3,263 13,883 15,417


382 526 581 268 1,492 1,758


47 49 52 54 190 203

Interest 6 11 18 11


354 492 544 234 1,309 1,634

Extra-Ord expense 0 0 0 -6 37 0 0 0 -24 37 PBT 371 414 407 141

317 492 544 234 1,333 1,596

Tax 106 135 126 43

97 152 172 71 410 489 Rate (%) 28.5 32.5 31.1 30.6

30.6 30.8 31.7 30.6 30.7 30.6

Reported PAT 265 280 281 98 220 340 372 162 923 1,108 Adj PAT 265 280 281 94

246 340 372 162 906 1,134

YoY Change (%) 2.8 -7.7 -4.8 -64.3

-7.4 21.7 32.6 73.3 -18.9 25.1 Margins (%) 7.9 7.3 7.3 3.3 7.0 8.1 8.3 5.0 6.5 7.4

E: MOSL Estimates

March 2016 Results Preview | Sector: Consumer

TTK Prestige

CMP: INR4,320 TP: INR5,150 Buy We expect revenue to grow 14% YoY to INR3.3b in 4QFY16.

We expect EBITDA margin to expand 180bp YoY to 8.2%. Consequently, we expect EBITDA to grow 46% YoY to INR268m.

PAT should grow 73% YoY to INR162m.

Key things to watch for Performance of the appliances division. Outlook on exports.

Bloomberg TTKPT IN Equity Shares (m) 11.7




NP 0.9 1.1 1.6 2.0 EPS (Rs) 77.8 97.3 135.5 171.6 EPS Gr. (%) -15.0 25.1 39.3 26.7

Sales 554.2 616.5 705.2 818.4 RoE (%) 14.7 16.6 20.5 22.5 RoCE (%) 21.5 24.3 29.5 32.5


EV/EBITDA (x) 33.5 28.1 20.9 16.5 EV/Sales (x) 3.6 3.2 2.7 2.3

April 2016 292

Jinesh Gandhi ([email protected])


(INR Million) Y/E March FY15 FY16 FY15 FY16E (Consolidated) 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Net Revenues 27,567 26,623 30,472 36,243 30,640 28,015 30,963 39,624 120,905 129,242 YoY Change (%) 12.3 14.3 15.1 8.6 11.1 5.2 1.6 9.3 12.3 6.9 EBITDA 5,226 4,805 5,746 7,849 5,872 5,232 6,247 8,819 23,626 26,169 Margins (%) 19.0 18.0 18.9 21.7 19.2 18.7 20.2 22.3 19.5 20.2 Depreciation 1,034 1,092 1,086 1,035 1,082 1,113 1,231 1,255 4,245 4,682 Interest 1,162 1,401 1,381 1,226 1,018 1,354 1,816 1,326 5,170 5,514 Other Income 159 171 136 -494 -252 -216 856 -204 -28 185 PBT before EO Expense 3,189 2,484 3,415 5,095 3,519 2,549 4,055 6,034 14,182 16,157 Extra-Ord Expense -359 168 184 129 149 76 237 125 -123 586 PBT after EO Expense 3,547 2,315 3,231 4,967 3,371 2,473 3,819 5,909 14,305 15,572 Rate (%) 24.9 19.9 18.5 10.0 20.5 31.1 19.0 15.7 17.1 20.0 Reported PAT 2,664 1,853 2,632 4,469 2,679 1,703 3,093 4,982 11,865 12,457 Income from Associate Co 222 -193 -140 -69 69 149 -226 17 -179 10 Adjusted PAT 2,617 1,795 2,643 4,516 2,867 1,904 3,059 5,105 11,584 12,936 YoY Change (%) 23.1 2.9 0.9 11.6 9.5 6.1 15.7 13.0 11.6 11.7 E: MOSL Estimates

March 2016 Results Preview | Sector: Agrochemicals

UPL

CMP: INR459 TP: INR554 Buy We expect ~9% YoY growth in consolidated revenue to INR39.6b.

We estimate 7.5% growth in domestic revenue and ~10% growth in international revenue, driven by ~13% growth in RoW markets including LatAm.

EBITDA margin is likely to expand 60bp YoY to 22.3%, translating into EBITDA growth of 12% YoY to INR8.8b.

We expect PAT to grow 6% YoY to INR3b, restricted by higher tax rate.

Our estimates are yet to factor in for merger of Advanta.

Current valuations of 13.1x FY17E EPS of INR35.7 and 11.5x FY18E EPS of ~INR42.7 are attractive. Maintain Buy, with a target price of INR554 (13x FY18E EPS).

Key issues to watch for Update on season in US and EU, and Rabi crop in India. Trend in working capital movement and net debt. Outlook for FY17.

Bloomberg UPLL IN Equity Shares (m) 428.6




NP 11.5 12.9 15.3 18.3 Adj EPS (INR) 26.9 30.2 35.7 42.7 EPS Gr. (%) 11.2 12.1 18.4 19.3

BV/Sh. (INR) 136.7 161.7 193.4 231.9 RoE (%) 20.8 20.2 20.1 20.1 RoCE (%) 21.7 21.9 22.6 22.8

Payout (%) 15.1 14.1 11.6 9.8

Valuations P/E (x) 17.0 15.2 12.8 10.8


Motilal Oswal India Strategy Gallery

Coal India

12 April 2016 6

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To enhance transparency, MOSt 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. Motilal Oswal Securities Limited is registered as a Research Analyst under SEBI (Research Analyst) Regulations, 2014. SEBI Reg. No. INH000000412 Pending Regulatory inspections against Motilal Oswal Securities Limited: SEBI pursuant to a complaint from client Shri C.R. Mohanraj alleging unauthorized trading, issued a letter dated 29th April 2014 to MOSL notifying appointment of an Adjudicating Officer as per SEBI regulations to hold inquiry and adjudge violation of SEBI Regulations; MOSL replied to the Show Cause Notice whereby SEBI granted us an opportunity of Inspection of Documents. Since all the documents requested by us were not covered we have requested to SEBI vide our letter dated June 23, 2015 to provide pending list of documents for inspection. 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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. The research analysts, strategists, or research associates principally responsible for preparation of MOSt research receive compensation based upon various factors, including quality of research, investor client feedback, stock picking, competitive factors and firm revenues

Disclosure of Interest Statement Companies where there is interest Analyst ownership of the stock No Served as an officer, director or employee No

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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.

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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 Kong 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 Singapore Motilal Oswal Capital Markets Singapore Pte Limited is acting as an exempt financial advisor under section 23(1)(f) of the Financial Advisers Act(FAA) read with regulation 17(1)(d) of the Financial Advisors Regulations and is a subsidiary of Motilal Oswal Securities Limited in India. This research is distributed in Singapore by Motilal Oswal Capital Markets Singapore Pte Limited and it is only directed in Singapore to accredited investors, as defined in the Financial Advisers Regulations and the Securities and Futures Act (Chapter 289), as amended from time to time. In respect of any matter arising from or in connection with the research you could contact the following representatives of Motilal Oswal Capital Markets Singapore Pte Limited:

Kadambari Balachandran Email : [email protected] Contact : (+65) 68189233 / 65249115 Office Address : 21 (Suite 31),16 Collyer Quay,Singapore 04931

Motilal Oswal Securities Ltd Motilal Oswal Tower, Level 9, Sayani Road, Prabhadevi, Mumbai 400 025

Phone: +91 22 3982 5500 E-mail: [email protected]