India Strategy & Top Ideasbreport.myiris.com/PRALILLA/KIRCUMMI_20151113.pdf · NIIT Technologies 61...

India Strategy & Top Ideas

Fed Rate hike , a certainty. How it will affect India?

R Sreesankar [email protected]

+91-22-66322214

Click to edit Master title style LilladherPrabhudas November 2015

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

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

LilladherPrabhudas Contents

11/13/2015 2

Page No.

Large Caps

HDFC Bank 24

Infosys 26

Coal India 28

State Bank of India 30

ICICI Bank 32

Maruti Suzuki 34

Tata Motors 36

Indian Oil Corporation 38

Aurobindo Pharma 40

IndusInd Bank 42

Cummins India 44

Glenmark Pharmaceuticals 46

GlaxoSmithKline Consumer Healthcare 48

Mid-Caps

Hexaware Technologies 51

Jubilant Life Sciences 53

Sadbhav Engineering 55

Allcargo Logistics 57

JK Lakshmi Cement 59

NIIT Technologies 61

Va Tech Wabag 63

Ashoka Buildcon 65

Page No.

Bihar elections, will it decide the fiscal decion making 3-4

Performance of BSE 200 (180 companies) for Q2FY16 5

Global Growth – US to lead the Growth 6

Low oil price saves CAD despite increase in Non oil imports 7

Direct and Indirect Tax collections up 8

Increase in plan expenditure 9

CPI Inflation up in October 2015 10

Markets

Equity markets under pressure across the globe 11

Automobiles leads the way 12

Small and Midcaps outperform 13

Global Currencies – Recoveries seen where pain was severe 14

Domestics sellers in October 2015 15

Global Agri commodities - Sugar continue to gain 16

Global Industrial Commodities continues to decline 17

Fed rate hike on the cards in December 2015 18

Indian Market – Earnings revised downwards further 19

Nifty Valuations: Historic Trends 20

Nifty Valuation 21

Top Pick Summary 22

(Prices as on November 11, 2015)

LilladherPrabhudas Bihar elections, will it decide the fiscal decion

making • Bihar elections, a drubbing for the NDA in terms of seats : The Bihar assembly election results have acted as a dampener for the stock market.

Though a tough fight was expected, the drubbing the NDA got in terms of seats was far from what was anticipated. This comes to prove the point as when the opposition unites, it is curtains for the ruling party and a divided opposition is the best chance for winning for the ruling party. The markets have already corrected over 2% in the opening post the results.

• Metal index recovers, but still the biggest loser over the last 12 months: CNX Metal index has turned out the worst performance having lost over 40% in the last twelve months, reflecting the 16 year low in steel prices. The outlook for the global commodities continue to remain negative despite the large losses and underperformance of the sector. Not withstanding the protective domestic duties, the sector continues to languish, with the last months performance more of a dead cat bounce back.

• Infrastructure, outlay higher and Orders for new projects on the rise: The allocation for the road sector has been higher, with the ministry allotting over 5000km of roads for construction. Though we would have been happy with a speedier implementation on awarding of road projects from the government side to speed up the government spending as well as the economic recovery. In the first six months alone, 5000km worth Rs500bn has been awarded.

• Politics, Is Bihar election results an eye opener: For sometime, the attention had shifted from GST and land bills to the to the Bihar assembly elections and the results were not what the equity markets wanted. With the string performance of the JDU-RJD-Congress combine, the attention now shifts to centre and when the GST and the land bills will get implemented. More importantly, the stage is set for the implementation of the OROP(One Rank One Pension) for the defense services and with the ante up from the para military forces for the implementation of the OROP to them as well, the Union government is going to face touch challenges in the near term. The big worry is the whether the fiscal reforms will take a back seat, while the government try to address the concerns of an electorate as well as juggle the reform process bandwagon.

• Interest rates, RBI does the monetary part, left the fiscal to the centre: The repo rates under the Liquidity Adjustment Factor (LAF) was reduced by 50bps from 7.25% to 6.75% in the bi-monthly monetary policy on September 29, 2015. The WPI based inflation has remained negative, while the CPI too has corrected to 4.5%, much below the RBIS comfort zone of 6%. The banks have reduced the deposit rates and we strongly believe further reductions in interest rates may happen through transition.

• Q2FY16 results all over the place, Recovery still not fully visible: We had maintained our neutral stance on the IT sector ahead of the 2QFY16 results, while the sector outlook of the street was negative. With Infosys reporting results better than expected and with a guidance beating the street expectations, the IT sector have seen an improved demand and the sector has seen a sharp out performance over the last two months. While Infosys, Hexaware, NIIT Tech etc reported better results , with the general slowdown in second half, the guidance form the sector have been more muted. In case of the FMCG companies, while the lower commodity prices have helped see an expansion in margins, the slowing growth in the rural sector is resulting in demand headwinds. For the Nifty companies, the revenues are down 5%, EBITDA is up 2%, Interest outgo up 12%, Depreciation up 9%, Tax outgo down 3% and the Profit After Tax down 2% YoY.

11/13/2015 3

LilladherPrabhudas Contd…

• Ujwal Discom Assuarance Yojana(UDYA): The Adminstrartive reforms are getting implemented in a strong manner. The latest is the implementation of UDYA, wherein the loss making SEBs and Discoms are being directed to a path of profitability. The salient feature of the scheme is from now on the state will have to fund the working capital losses of the SEBs and not the banks. The state also will have to take this into their fiscal deficit, so enough i8ncentive for the state to control losses. Why this should succeed this time, is only because of taking the states into confidence and partnering them in implementing the scheme rather than unilaterally imposing it on states. We think this is a sea change in the approach, which should bore fruits later.

• HDFC bank, Indusind, Kotak Mahindra above estimates, ICICI and Axis below estimates: The private sector banks space continue to see increased interest from investors. While HDFC Bank, Indusind bank, Kotak Mahindra bank etc have continued to deliver a performance above expectations, ICICI bank and Axis Bank has missed the estimates. The PSU banks continue with the volatile performance and has seen a sharp correction. The large private sector banks continue to deliver strong growth with lower stressed assets. Though the pace of the economic recovery is slower than anticipated, we expect to see lower NPA additions and hence lower credit costs and higher profits. Even the smaller private sector banks have been reporting a varied performance without a consistency and we believe that the consistent performance will be rewarded by the market and hence the higher valuations for the large private sector banks. We continue to recommend an overweight position in the financials with a heavy leaning towards the private sector banks.

• PCs and CVs preferred over two wheelers: The outlook for automobiles especially for passenger cars looks good. Though Our top picks in the sector continues to be Maruti Suzuki and Tata Motors, in the domestic market we like Maruti Suzuki, while the string product flow from JLR should benefit Tata Motors. Though TAMO took a hit in Q2FY16 due to one offs, we expect the same to b recovered in 2HFY16 performance.

• Indian Oil Corporation, a big beneficiary of falling oil prices: The benign crude oil prices benefit the down stream companies much better than the upstream companies and within the downstream companies, (i) IOC is cheaper in terms of valuation, (ii) the Rs100bn OFS overhang is over as they are done with the sale and (iii) unlike HPCL and BPCL which are pure marketing margin stories, IOC will also benefit from a surge in petrochemical margins. While all these continue to hold good, one off inventory loss in Q2FY16 resulted in IOCL reporting in a loss. We expect the same to be over come in 2HFY16.

• Market trading range revised downwards: The equity market is trading at a one year forward multiple of 17.7x, still at a marginal premium to the 10 year average. This is mainly on account of downward revision of FY16 earnings. We have revised our estimate for the market trading range to 7500-8200 in the near term.

• Our preferred picks continue to be HDFC Bank, SBI, IndusInd and ICICI bank among the financials, Sadbhav Engineering and Ashoka Buildcon among Engineering & Capital Goods and Infosys, Hexaware and NIIT Tech among IT, JK Lakshmi Cement among Basic materials and Tata Motors, and Maruti Suzuki among Automobiles with Glenmark, Jubilant Life and Aurobindo Pharma among Pharmaceuticals and Glaxo Smithkline Beechem among FMCG.

11/13/2015 4

LilladherPrabhudas Performance of BSE 200 (180 companies) for

Q2FY16 • The Net sales were down by 6% YoY

• EBITDA up 6% YoY

• Interest Costs up 9% YoY

• Depreciation up 8% YoY

• Tax outgo down 3% YoY

• Profit After Tax up 2% YoY

11/13/2015 5

LilladherPrabhudas Global Growth – US to lead the Growth

• US expected to lead the Global growth, Non farm pay roll improves and un employment levels to a new 90 months low : US economy is expected to drive global growth in both 2015 and 2016. US economy shrug off the global economic anxiety in the second quarter with a 3.9%( revised) and 1.5% in 3QCY15. US is expected to lead the world growth for the next few years and the new normal for the US is estimated at less than 3.0%.The world growth for CY2015 is expected at 2.4%. The non farm payroll additions were at 271,000 in October 2015, thereby keeping the un employment levels to 5.0%, a new low in the last seven and half years.

• Crude oil, agricultural commodities continue to struggle, Super El Nino could alter the trend: It is expected that a Super El Nino is expected to strike this year. This could create huge change in the way the agricultural commodities are priced today. The agri commodities have been facing a bearish scenario for the last 18 months. This could reverse quite sharply. In addition, this is also expected to bring in extreme weather changes as well. Forest fires in tinder-dry Indonesia, a disappointing monsoon in India and even the unusually warm, wet and windy weather this weekend in Britain with a forecast for the worst storm are all being blamed on a record El Niño developing in the South Pacific which meteorologists believe could become the biggest in living memory. It has been strengthening and it is expected to beat the big El Nino of 1997-98.

• Global Volatility and Indian Volatility muted: The CBOE VIX volatility index, a measure of the cost of equity portfolio protection has have seen higher volatility and trades at 15.94, with the Indian VIX at 17.04 at relatively low levels.

• Tough time to continue for emerging Markets, India better off: India for once will be a relative bright spot among emerging markets. India’s relative position as a energy importer and its relative isolation from global supply chains should see India in a better position. As capital flows back to the USA in expectations of higher interest rates, some emerging markets, especially those with the twin deficits of government and external deficit will particularly be vulnerable with renewed pressures on their currency. The “ fragile five” in this category are Brazil, India, Indonesia, Turkey and South Africa. Of this, India continues to have a stable government and the central bank is more proactive by following a different management. In addition to the countries with fiscal and CADs, countries with weak institutions, exposure to low commodity prices and high political risk could also be vulnerable, as is the case with Malaysia and Indonesia. Many economies in Asia will also face the threat of rising input costs due to weakening currencies, and the need to adjust to the slower growth in China as China focus more on the consumption driven growth model. Cheaper oil has boosted the energy importers by boosting their spending power. This will start to reverse once China focus to grow more through internal consumption rather then relying on Imports from trade partners impacting their domestic economy. With these economy already having increased their spending power will face the heat and India one of the large energy importer will relatively be isolated from the turmoil.

• Fed Rate hike, will it happen in December 2015? With strong job additions and lower un employment rates, the stage is set for a monetary tightening cycle for the first time since 2004. With un employment levels at 5.0% at a new low in 90 months, price pressures will rise as a tight labor market forces wage inflation. However, it needs to be wait and seen how the ECB will continue with the easing.

11/13/2015 6

LilladherPrabhudas Low oil price saves CAD despite increase in Non

oil imports

11/13/2015 7

• The slowing CAD has been under control, thanks to the low oil prices. The exports continue to face challenges over the slow growth.

Over the last six months, the ,trade deficit have been hovering around US$10bn a month.

External debt break-up between ST and LT

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

Trade Deficit

Source: RBI, PL Research

US $ Mn Nov'14 Dec'14 Jan'15 Feb’15 Mar’15 Apr’15 May’15 Jun’15 Jul’15 Aug’15 Sep’15 YTD YTD YoY

Exports 25,961 25,398 23,883 21,545 23,951 22,055 22,347 22,289 23,137 21,266 21,845 132,939 161,576

Imports 42,822 34,833 32,206 28,392 35,745 33,047 32,753 33,117 35,950 33,744 32,324 200,934 234,079

- Oil 11,716 9,942 8,248 6,101 7,413 7,443 8,539 8,676 9,487 7,357 6,627 48,129 82,748

- Gold 5,610 1,340 1,550 1,980 4,980 3,131 2,420 1,967 2,965 4,958 2,057 17,498 15,060

- Non Oil Non Gold 25,496 23,551 22,408 20,311 23,351 25,604 21,794 22,473 23,498 21,429 23,640 135,307 136,156

Trade Deficit (16,861) (9,435) (8,323) (6,847) (11,794) (10,992) (10,406) (10,827) (12,812) (12,478) (10,479) (67,995) (72,503)

3.6 2.8 4.7 4.4 17.7 19.5 28.1 45.8 43.3 52.4 64.9 78.2 96.6 91.5 84.9 84.5

97.7 96.0 100.2 108.2 116.3 119.6

144.3 178.6 181.2

208.5 241.0

267.6 312.8 354.8 389.5 398.4

0

100

200

300

400

500

600

20

00

-01

20

01

-02

2002

-03

2003

-04

20

04

-05

20

05

-06

2006

-07

2007

-08

20

08

-09

20

09

-10

2010

-11

2011

-12

20

12

-13

20

13

-14

2014

-15

Jun

-15

(US$

bn

)

Short Term Debt Long Term Debt

LilladherPrabhudas Direct and Indirect Tax collections up

Source: Controller General of Accounts – Ministry of Finance, PL Research

Trends in Government’s Fiscal Deficit • Non tax revenues were up 52% , mainly on account of income from auction of telecom licenses.

• Excise duties are up sharply by 70% due to increase in excise on petroleum products earlier in the year. On a higher base, there is a strong month on month increase in Excise duties.

• The service tax has been hiked w.e.f. 15 November, 2015 and we expect this to reflect from November 2015 onwards in increased revenues.

• The Capital account Plan Expenditure is up 61%, while the fiscal deficit is down 14% YoY and revenue deficit down 22% YoY.


Trends in Tax Receipts

11/13/2015 8

(Rs bn) Upto

Sep'14

Upto

Sep'15 YoY %

Budget

Est

% to total

Budget Est.

Revenue Receipts 4,179 5,134 23% 11,416 45%

Tax Revenue (Net) 3,232 3,697 14% 9,198 40%

Non-Tax Revenue 947 1,436 52% 2,217 65%

Non-Debt Capital Receipts 53 186 249% 803 23%

Recovery of Loans 52 58 12% 108 54%

Other Receipts 1 128 NA 695 18%

Total Receipts 4,232 5,320 26% 12,218 44%

Non-Plan Expenditure 6,158 6,567 7% 13,122 50%

On Revenue Account 5,682 6,114 8% 12,060 51%

(i) of which Interest Payments 1,857 1,977 6% 4,561 43%

On Capital Account 476 454 -5% 1,062 43%

(i) of which Loans disbursed 98 100 3% 10

Plan Expenditure 2,463 2,538 3% 4,653 55%

On Revenue Account 1,947 1,710 -12% 3,300 52%

On Capital Account 515 828 61% 1,353 61%

(i) of which Loans disbursed 124 141 14% 231

Total Expenditure 8,621 9,105 6% 17,775 51%

Fiscal Deficit 4,388 3,786 -14% 5,556 68%

Revenue Deficit 3,451 2,690 -22% 3,945 68%

Primary Deficit 2,532 1,809 -29% 995 182%

Tax Revenue (in Rs.Bn) Upto

Sep'14

Upto

Sep'15 YoY %

Budget

Est

% to total

Budget Est.

Corporate Tax 1,623 1,826 13% 4,706 39%

Income Tax 1,094 1,224 12% 3,274 37%

Customs 874 1,036 19% 2,083 50%

Union Excise Duties 605 1,030 70% 2,298 45%

Service Tax 652 787 21% 2,098 38%

Other Tax 58 65 12% 36 181%

Gross Tax Revenue 4,906 5,969 22% 14,495 41%

Surcharges 20 26 29% 57 46%

Assignment to states 1,654 2,246 36% 5,240 43%

Net Tax Revenue 3,232 3,697 14% 9,198 40%

LilladherPrabhudas Increase in plan expenditure

11/13/2015 9

• The plan expenditure has seen an increase in the first six months of FY16 with both the ministry of Surface transport and Highways seeing the increased spend.

• The current low oil prices have resulted in the lower outgo of planned subsidies in the petroleum sector, down 76% YoY.


Plan Expenditure and Non-plan expenditure

In Rs Bn Upto

Sep'14

Upto

Sep'15 YoY %

Budget

Est

% to total

Budget Est.

Non-Plan Expenditure 6,158 6,567 7% 13,122 50%

-Dept. of Fertil izers 487 546 12% 730 75%

-Dept. of Food & PDS 745 820 10% 1250 66%

-Dept. of Petroleum & Gas 488 118 -76% 301 39%

Plan Expenditure 2,463 2,538 3% 4,653 55%

-Min. of Road Transport & Highway 191 300 57% 429 70%

-Min. of Rural Development 431 482 12% 733 66%

-Min. of Urban Development 54 70 29% 161 44%

-Min. of Agriculture 144 108 -25% 218 50%

-Min. of Railways 151 156 3% 400 39%

-Min. of Drinking Water & Sanitation 45 54 21% 62 87%

-Min. of Health & Family Welfare 145 150 4% 267 56%

-Min. of Human Resource 281 298 6% 549 54%

LilladherPrabhudas CPI Inflation up in October 2015

• The whole sale inflation still continues to be in the negative territory, while the CPI has inched up to 4.4% from 3.7% in August 2015.

• 10yr G-Sec Yield is trading at 7.72%, and has been in a range of 7.52% to 7.72% in the last one month.

• The August 2015 IIP data improved to 6.8%, better than the previous month, have shown a sharp improvement.

Source: Bloomberg, PL Research


CPI Inflation

GDP Growth YoY (Quarterly)


10yr. G-Sec Yield & Liquidity

11/13/2015 10

-

2.0

4.0

6.0

8.0

10.0 (2,500)

(2,000)

(1,500)

(1,000)

(500)

-

500

1,000

1,500

No

v-1

0

Mar

-11

Jul-

11

No

v-1

1

Mar

-12

Jul-

12

Nov

-12

Ma

r-1

3

Jul-

13

Nov

-13

Ma

r-1

4

Jul-

14

Nov

-14

Ma

r-1

5

Jul-

15

Nov

-15

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

0

2

4

6

8

10

12

Sep

-05

Dec

-05

Mar

-06

Jun

-06

Sep

-06

Dec

-06

Mar

-07

Jun

-07

Sep

-07

Dec

-07

Ma

r-0

8Ju

n-0

8S

ep

-08

De

c-0

8M

ar-0

9Ju

n-0

9Se

p-0

9D

ec-0

9M

ar-1

0Ju

n-1

0Se

p-1

0D

ec-1

0M

ar-1

1Ju

n-1

1Se

p-1

1D

ec-

11

Ma

r-1

2Ju

n-1

2S

ep

-12

Dec

-12

Mar

-13

Jun

-13

Sep

-13

Dec

-13

Mar

-14

Jun

-14

Sep

-14

Dec

-14

Mar

-15

Jun

-15

Se

p-1

5

(%)

8.6

7.98.2 8.5 8.3

6.87.4

7.0

5.6

4.6

3.3

4.3

5.2 5.4 5.34.9 5.0

5.4

3.7 3.74.4

3.0

4.0

5.0

6.0

7.0

8.0

9.0

Jan

-14

Feb

-14

Mar

-14

Apr

-14

May

-14

Jun-

14

Jul-

14

Au

g-1

4

Sep

-14

Oct

-14

No

v-1

4

Dec

-14

Jan

-15

Feb

-15

Mar

-15

Ap

r-1

5

May

-15

Jun-

15

Jul-

15

Aug

-15

Sep

-15

Consumer Price Index (CPI)

LilladherPrabhudas Equity markets under pressure across the globe

• MoM: The Equity markets across the board recovered after the losses of the earlier months. India has specifically been under pressure pending Bihar assembly election.

• YoY and YTD: On a y-o-y basis, China, Germany, Japan, Russia and South Korea are the markets on the positive side, with China the biggest gainer. While on a YTD basis, Russia, Japan, China and Germany are on the positive side, with Russia the biggest gainer at 26.7% YTD.



Month-on-Month

Year-on-Year


Calendar Year-to-date

11/13/2015 11

17.6

9.7

6.4 6.1 5.9 5.9 4.7

2.7 2.5 0.9 0.7 0.5

(2.5)(5.0)

-

5.0

10.0

15.0

20.0

Ch

ina

Ger

man

y

USA

S&P

Japa

n

Rus

sia

Hon

g Ko

ng

Indo

nesi

a

S.K

ore

a

Aus

tral

ia

Bra

zil

FTSE

Indi

a

(%)

11.0 10.8

0.2 2.0

10.4

26.7

(3.1)

(12.6)

6.6

(3.6) (3.9) (3.1) (4.5)

(15.0)

(10.0)

(5.0)

-

5.0

10.0

15.0

20.0

25.0

30.0

Ch

ina

Ger

man

y

USA

S&P

Jap

an

Rus

sia

Hon

g Ko

ng

Indo

nesi

a

S.K

ore

a

Aus

tral

ia

Bra

zil

FTSE

Indi

a

(%)

48.0

15.8

1.8 3.4

14.7 18.1

(3.3)(9.3)

5.4

(5.3)(8.7)

(2.9) (5.9)(20.0)

(10.0)

-

10.0

20.0

30.0

40.0

50.0

60.0

Ch

ina

Ger

man

y

USA

S&P

Jap

an

Rus

sia

Hon

g Ko

ng

Indo

nesi

a

S.K

ore

a

Aus

tral

ia

Bra

zil

FTSE

Indi

a

(%)

LilladherPrabhudas Automobiles leads the way

• MoM: Automobile sector led by Maruti anmd Tata Motors have been the strong performer of the month, while poor guidance and performance led to Capital goods correcting sharply, poor performances from some of the leading pharma companies led to pharma sector correcting sharply .

• YTD and YoY: On a YTD and YoY basis, Health care, IT and FMCG continue to have a strong performance, while Metals and Realty continue to languish.



Month-on-Month

Year-on-Year



11/13/2015 12

2.7 1.5 0.9 0.3 0.1

(1.9) (2.4) (3.1)(3.8)

(7.2) (7.6)(10.0)

(8.0)

(6.0)

(4.0)

(2.0)

-

2.0

4.0

(%)

(0.9)

21.2

(17.7)(12.5)

(37.7)

5.3 4.0

(1.9)

(16.1)

17.2

(9.5)

(50.0)(40.0)(30.0)(20.0)(10.0)

-10.0 20.0 30.0

(%)

(2.0)

21.6

(7.9) (10.2)

(33.5)

2.2 6.3

(9.1)(13.5)

15.8

(5.9)

(40.0)

(30.0)

(20.0)

(10.0)

-

10.0

20.0

30.0

(%)

LilladherPrabhudas Small and Midcaps outperform

• MoM: Small caps and Mid caps have out performed in the last one month.

• YoY: The Mid cap and Small cap index continue to out perform over the last twelve months, while the mid cap index has out performed over the last six months as well.



Month-on-Month

Year-on-Year



11/13/2015 13

(2.0)(2.2)

(2.4) (2.5)

(3.0)

(2.5)

(2.0)

(1.5)

(1.0)

(0.5)

-

BSEMDCAP Index BSESMCAP Index BSE500 Index BSE100 Index

(%)

13.6

1.7

(1.2)

(3.8)(6.0)

(4.0)

(2.0)

-

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0


(%)

6.8

(0.9)

(2.0)

(3.5)(4.0)

(2.0)

-

2.0

4.0

6.0

8.0


(%)

LilladherPrabhudas Global Currencies – Recoveries seen where pain

was severe • MoM: Emerging market currencies which were under

pressure and had lost significantly staged a strong bounce back in the last one month. Indonesia was the biggest gainer with 4.8%.

• CYTD and YoY: On a CYTD basis, Brazil is the worst performer(42.6%) followed by Turkey(23.1%) and Malaysia (23.3%). On a y-o-y basis, Brazil(47.5%), Russia(36.8%), Turkey(27.0%), Malaysia(29.2%) and South Africa (23.8%) were the biggest losers.



Month-on-Month

Year-on-Year



11/13/2015 14

4.8

3.5 2.8

2.1 1.8 1.6 1.4 0.8 0.7

0.2 0.0

(0.5)(0.5)(1.0)(1.2)(1.4)

(3.0)(3.1)(4.0)(3.0)(2.0)(1.0)

-1.0 2.0 3.0 4.0 5.0 6.0

(%)

(9.5)

10.1

(23.1)

(4.7)(8.1)

(42.6)

(23.3)

(2.9)

2.9

12.5

(2.4)(5.0)(4.3)(4.9)

(13.5)

(1.8)(0.1)

(20.5)

(50.0)

(40.0)

(30.0)

(20.0)

(10.0)

-

10.0

20.0

(%)

(11.6)

12.1

(27.0)

(5.4)(8.3)

(47.5)

(29.2)

(6.6)

4.4

16.4

(3.9)

(36.8)

(7.1)(4.3)

(15.5)

(5.8)(2.3)

(23.8)

(60.0)

(50.0)

(40.0)

(30.0)

(20.0)

(10.0)

-

10.0

20.0

(%)

LilladherPrabhudas Domestics sellers in October 2015

• FIIs were net buyers in September 2015 to the extent of Rs50.64bn(US$780mn) , while the DIIs were net sellers to the extent of Rs14.17bn(US$205mn). It was for the first time in 9 months that the domestic flows were negative. CYTD FII flows at stand at Rs257.79bn(US$3.97bn) as against an inflow of Rs527.28bn(US$8.11bn) in case of domestic institutions.

11/13/2015 15

(200.00)(150.00)(100.00)

(50.00)-

50.00 100.00 150.00 200.00 250.00

Jan

-13

Feb

-13

Ma

r-1

3A

pr-1

3M

ay-1

3Ju

n-1

3Ju

l-13

Au

g-1

3Se

p-1

3O

ct-1

3N

ov-1

3D

ec-1

3Ja

n-1

4Fe

b-1

4M

ar-1

4A

pr-1

4M

ay-

14

Jun-

14

Jul-

14A

ug-1

4Se

p-1

4O

ct-1

4N

ov-

14

Dec

-14

Jan

-15

Feb

-15

Ma

r-1

5A

pr-1

5M

ay-1

5Ju

n-1

5Ju

l-15

Au

g-1

5Se

p-1

5O

ct-1

5

DII Net Cash Market FII Net Cash Market

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

selling at Rs-734.64bn

CY14FII Rs973.50bnDII Rs-303.21bn

CY15FII Rs257.79bnDII Rs527.28bn

LilladherPrabhudas Global Agri commodities - Sugar continue to gain

• Wheat, corn, palm oil and soya and Rice all continue to have a weak performance in the last one month. On a 12 month performance, all these commodities continue to remain under pressure with sugar and wheat being the largest losers at over 14% each with Rice the only gainer.

• Sugar recovered for the second month after the Brazilian currency got hammered.

• Despite the expected effects of El Nino leading to shortages in agricultural commodities, the agricultural commodities continue to remain under pressure.


Source: Bloomberg, PL Research *Price in US$

Performance of Global Agricultural Commodities

Year-on-Year Performance


Month-on-Month Performance

11/13/2015 16

50

60

70

80

90

100

110

120

Nov

-14

De

c-1

4

Jan

-15

Feb

-15

Mar

-15

Ap

r-1

5

May

-15

Jun

-15

Jul-

15

Au

g-1

5

Sep

-15

Oct

-15

Nov

-15

Rice Wheat Corn Soya Plam Oil Sugar

9.2

(0.6)

(2.7)

(5.2) (5.8)

(9.0)(10.0)

(5.0)

-

5.0

10.0

15.0

Sugar Wheat Soya Palm Oil Corn Rice

(%)

(14.9)

(8.0)

(14.3)

(3.2)

(10.0)

3.8

(20.0)

(15.0)

(10.0)

(5.0)

-

5.0

Sugar Wheat Soya Palm Oil Corn Rice

(%)

LilladherPrabhudas Global Industrial Commodities continues to

decline • The global commodities continue to remain under

pressure during the last one month. The performance of both the BSE Metal index as well as the NSE Metal index reflect this trend. While crude was down 0.1% in the last one month, Zinc was the biggest loser at 6.8%. On a YoY basis, all the global commodities, Thermal Coal, Lead, Aluminum, inc, Copper, Nickel and Brent Crude, all have lost over 20% with Brent being the biggest loser having lost over 47.2% during the period.



Month-on-Month

Year-on-Year



11/13/2015 17

1.1

(0.1) (0.2)(0.6)

(2.3) (2.5)

(6.8)(8.0)

(7.0)

(6.0)

(5.0)

(4.0)

(3.0)

(2.0)

(1.0)

-

1.0

2.0

Copper Brent crude

Nickel Thermal Coal

Aluminium Lead Zinc

(%)

(22.3)

(47.2)

(39.9)

(25.4)

(17.7)

(22.2)

(26.6)

(50.0)

(45.0)

(40.0)

(35.0)

(30.0)

(25.0)

(20.0)

(15.0)

(10.0)

(5.0)

-

Copper Brent

crude

Nickel Thermal

Coal

Aluminium Lead Zinc

(%)

(18.5)

(12.8)

(34.3)

(2.0)

(15.0)(12.7)

(23.7)

(40.0)

(35.0)

(30.0)

(25.0)

(20.0)

(15.0)

(10.0)

(5.0)

-

Copper Brent

crude

Nickel Thermal

Coal

Aluminium Lead Zinc

(%)

LilladherPrabhudas Fed rate hike on the cards in December 2015

Sources : Bloomberg

• The US economy grew by 1.5% for the quarter ended September 2015 against the 3.9% growth for the quarter ended June 2015, below the market expectations. However, the job additions in October 2015 were strong at 271,000 as against the expected 185,000 bringing down the job less rate to a seven and half year low of 5%. With the strong job additions and falling un employment arte, we feel the stage is now set for an increase in interest rates in the Feds meeting in December 2015.

• Though Europe benefitted from the low commodity prices, the growth continue to remain a challenge. The Euro zone grew by 0.5% in 1QCY15 and 0.4% in 2QCY15. The fall in energy prices and the continued easing by ECB resulting to create the money to buy the financial assets keeping the Euro lower. The benefits from a weak oil price, weak euro, easy monetary policies and a more prudent fiscal policy is being offset by the weak investment demand in Germany and France.

• The Chinese government in early August adjusted the exchange rate in a way that allowed the Renminbi to depreciate against the Dollar by 4%. This devaluation pushed down commodity prices as well as emerging market currencies which was already under pressure ahead of a possible US Fed rate increase. In the medium term, the Asian economies face a challenging scenario, where they face the tightening monetary policy in the USA and a weaker currencies as China shifts to a more consumption growth model.

• Nifty after touching a high of 8,996 had corrected, but with the Bihar elections giving a shock treatment to the ruling NDA, we expect to see the administrative reforms becoming stronger and faster while the fiscal policy measures may continue to get delayed. However, with the commodities remaining where they are, we expect to see CAD under control and with a 6-6.5% growth in GDP.

World Equity Indices:

11/13/2015 18

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

Dow Jones USA 17,748 (0.42) (0.45) 3.88 2.15

S&P 500 USA 2,087 1.36 (0.82) 3.57 0.45

Nasdaq USA 5,107 7.83 (0.40) 5.72 1.25

FTSE 100 LONDON 6,348 (3.31) (0.21) (1.05) (5.51)

DAX GERMANY 10,932 11.49 (0.17) 8.28 (4.86)

CAC 40 FRANCE 4,955 15.97 0.79 5.39 (3.88)

Nikkei JAPAN 19,643 12.56 2.93 6.53 (5.22)

TSX CANADA 13,515 (7.64) (0.79) (3.22) (5.51)

MICEX RUSSIA 1,743 24.82 1.86 0.86 3.13

JSE SA 47,864 8.86 (1.00) 0.11 3.08

SGX SA 7,915 (4.44) (1.68) (3.35) (7.58)

TING TURKEY 101,422 (4.45) (2.10) 3.99 5.46

IBOV BRAZIL 46,696 (6.62) 1.80 (5.36) (3.87)

Jakarta Comp INDONESIA 4,500 (13.92) 0.77 (1.96) (5.68)

PSEI Phillipine PHILIPPINES 7,070 (2.22) (1.79) (0.96) (6.14)

SE THAI 50 THAILAND 904 (9.70) (1.27) (1.87) (3.37)

Euro Stoxx EUROZONE 3,452 9.73 0.52 6.22 (5.10)

IBEX 35 SPAIN 10,430 1.46 0.11 1.17 (6.69)

Hang Seng HONG KONG 22,727 (3.72) 1.59 1.19 (7.44)

AS30 AUSTRALIA 5,180 (3.87) (0.79) (2.43) (5.34)

Shanghai CHINA 3,647 12.74 9.68 14.57 (2.60)

Taiwan TAIWAN 8,642 (7.14) 0.32 2.33 2.37

Kospi KOREA 2,026 5.75 (0.47) 0.31 0.77

CNX Nifty INDIA 7,825 (4.44) (1.68) (3.35) (7.58)

BSE Sensex INDIA 25,867 (5.01) (1.65) (3.54) (7.49)

KLCI MALAYSIA 1,686 (4.27) 1.32 (1.20) 0.21

NZX 50 NEWZEALAND 6,048 8.61 1.07 7.26 3.05

MEXBOL MEXICO 45,085 4.49 1.22 1.60 0.50

LilladherPrabhudas Indian Market – Earnings revised downwards

further • NIFTY earnings estimates for FY16 revised downwards further: With economies apart from USA continuing to struggle resulting in the global

recovery anaemic and with the domestic activity being subdued, we have seen the FY16 EPS estimate revised downwards to Rs414.2 from the earlier estimates of Rs429.8 and the FY17 estimates to Rs.501.6 from 515.6. There has been a slew of downward revisions in earnings estimates especially from the large infrastructure companies. While IT companies in general came out with a better performance during the quarter, they were cautious in their guidance for second half. FMCG companies have seen volumes slow down, the rural growth rates have slowed down to the levels of urban growth and pharma companies have come out with performances below the estimates as well. All in all, Q2FY16 performances were definitely below expectations. With the global commodity prices continuing to remain under pressure, the EBITDA margins of auto ancillaries and FMCG companies saw an expansion. With the possibility of an interest rate hike by the FED and pressure from weaker currencies, we believe that the period of low interest rates in Asian emerging markets is coming to an end. We believe that India is on a relatively better positioning. Reflecting the sentiments, we are revising our near term trading range for the market to 7500-8200 levels. NIFTY at 7825 is trading at 18.9 FY16E and at 15.6 FY17E estimated free-float earnings. The last ten-year average for NIFTY’s one-year forward PE is at 17.6x, implying the NIFTY at 17.7x (12 month forward multiple for Oct 16 EPS of Rs459.9) is continuing to trade at a marginal premium to its last 10-years average of one-year forward multiple of 17.6x. We have already seen a 15% reduction in EPS estimates for FY16 since April 2015.

• The earnings growth is expected to be led by sectors namely financials, Automobiles, Oil& Gas, FMCG, Pharma and IT. Private sector banks have continued to deliver as per expectations, while the PSU banks have been seeing the asset quality coming under pressure. Going forward, we expect the slippages to be lower than what we saw in FY15 and hence the provisioning is expected to be lower leading to higher net earnings . However, the PSU banks continue to see slippages. With the seventh pay commission expected, PCs is expected to see good demand though Tractors and Motor cycles face headwinds.

• The chart on Page 20 indicates MSCI India’s premium to MSCI Asia (excluding Japan) over the last ten years. The average of the last 10-year’s premium was at 29% and the current premium is at 30%. With the premia being at the 10 year average, we expect the FII interest to remain as India despite all the sluggishness in the domestic economy, still continues to do well. We also expect India to have a superior earnings as well as relatively stabile currency.

• Attention to move from South West Monsoon to North East Monsoon: Five meteorological sub divisions of South India namely Tamil Nadu, Coastal Andhra, Rayalaseema, Kerala and Sothern Interior Karnataka receives about 30% of their rainfall from the North East Monsoon( October to December). TN in particular receives 48% of their rainfall during this season. The meteorological forecast for the NE Monsoon is 11% and for TN it is 12% over LPA.

• The near term trading range for the Nifty seems to be between 7500-8200 levels, given the current headwinds in terms of politics and the probable FED rate hike. We are maintaining our 12 month Nifty target down to 8800-9000 levels. We continue to remain overweight in Financial services, while remaining neutral in IT, Automobiles, FMCG, Healthcare and Engineering &Capital Goods and underweight Metals.

11/13/2015 19

LilladherPrabhudas Nifty Valuations: Historic Trends


Nifty 1-year forward P/E


MSCI India Premium to MSCI Asia (Ex‐Japan)

11/13/2015 20

30%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

70%

No

v-0

5

Feb-

06

Ma

y-0

6

Aug

-06

No

v-0

6

Feb-

07

May

-07

Au

g-0

7

Nov

-07

Fe

b-0

8

May

-08

Au

g-0

8

No

v-0

8

Fe

b-0

9

Ma

y-0

9

Aug

-09

No

v-0

9

Feb-

10

May

-10

Au

g-1

0

Nov

-10

Fe

b-1

1

May

-11

Au

g-1

1

No

v-1

1

Fe

b-1

2

Ma

y-1

2

Aug

-12

No

v-1

2

Feb-

13

Ma

y-1

3

Au

g-1

3

Nov

-13

Fe

b-1

4

May

-14

Au

g-1

4

No

v-1

4

Fe

b-1

5

Ma

y-1

5

Aug

-15

No

v-1

5

10 year Avg.

29%

17.7

-

5.0

10.0

15.0

20.0

25.0

30.0

Nov

-05

Feb-

06

Ma

y-0

6

Aug

-06

No

v-0

6

Fe

b-0

7

May

-07

Aug

-07

No

v-0

7

Fe

b-0

8

May

-08

Aug

-08

Nov

-08

Fe

b-0

9

Ma

y-0

9

Aug

-09

Nov

-09

Feb-

10

Ma

y-1

0

Aug

-10

No

v-1

0

Feb-

11

Ma

y-1

1

Aug

-11

No

v-1

1

Fe

b-1

2

May

-12

Aug

-12

No

v-1

2

Fe

b-1

3

Ma

y-1

3

Aug

-13

Nov

-13

Feb-

14

Ma

y-1

4

Aug

-14

No

v-1

4

Feb-

15

Ma

y-1

5

Aug

-15

No

v-1

5

10 year Avg.17.6x

LilladherPrabhudas Nifty Valuation

11/13/2015 21

Note: Telecom Nos. are Bloomberg Consensus / Sector Weightages are updated as on November 11, 2015

Weight-

age (%)FY14 FY15 FY16E FY17E

Weight-

age (%)FY14 FY15 FY16E FY17E

Banking & Fin. 30.8% Cement 2.9%

PER (x) 21.8 19.3 16.6 13.7 PER (x) 27.3 25.7 27.4 19.3

PAT Growth (%) 2.4 12.6 16.8 20.7 PAT Growth (%) (25.3) 6.4 (6.4) 42.2

Technology 16.7% Telecom 2.2%

PER (x) 23.8 21.3 18.6 16.5 PER (x) 38.3 21.7 20.1 19.0

PAT Growth (%) 28.9 11.3 14.4 13.1 PAT Growth (%) 44.2 76.7 7.9 5.8

FMCG 10.0% Media 0.8%

PER (x) 38.5 35.8 33.3 29.7 PER (x) 42.0 38.4 35.7 28.3

PAT Growth (%) 13.4 7.8 7.4 12.1 PAT Growth (%) 24.0 9.6 7.4 26.1

Auto 9.8% Nifty as on Nov 11 7,825

PER (x) 19.7 18.1 18.4 14.0

PAT Growth (%) 22.0 8.4 (1.3) 31.7 EPS (Rs) - Free Float 354.9 373.5 414.2 501.6

Growth (%) 4.8 5.2 10.9 21.1

Oil & Gas 8.7% PER (x) 22.0 21.0 18.9 15.6

PER (x) 9.2 11.9 10.3 9.9

PAT Growth (%) 10.6 (22.5) 15.0 4.0 EPS (Rs) - Free Float

Nifty Cons. 354.9 373.5 433.4 524.8

Pharma 7.5% Var. (PLe v/s Cons.) (%) - - (4.4) (4.4)

PER (x) 34.2 35.6 32.3 26.3

PAT Growth (%) 36.8 (4.0) 10.4 22.9 Sensex as on Nov 11 25,867

Eng. & Power 7.0% EPS (Rs) - Free Float 1,184.9 1,238.0 1,374.5 1,669.3

PER (x) 15.7 17.5 15.8 13.4 Growth (%) 11.5 4.5 11.0 21.5

PAT Growth (%) (17.4) (10.5) 11.1 17.2 PER (x) 21.8 20.9 18.8 15.5

Metals 2.8%

PER (x) 9.9 NA 15.1 10.2 Sensex Cons. 1,184.9 1,238.0 1,437.2 1,741.1

PAT Growth (%) 13.8 NA NA 48.1 Var. (PLe v/s Cons.) (%) - - (4.4) (4.1)

LilladherPrabhudas Top Pick Summary

11/13/2015 22

2016E 2017E 2016E 2017E 2016E 2017E 2016E 2017E 2016E 2017E 2016E 2017E

Large Cap

HDFC Bank 1,054 1,200 13.8% 2,642.8 20.8 21.8 20.1 24.2 18.7 20.0 1.9 2.0 21.1 17.0 3.9 3.3

Infosys 1,108 1,440 30.0% 2,534.2 16.2 13.0 8.5 16.4 23.1 23.9 23.0 23.9 18.9 16.3 4.1 3.7

Coal India 328 405 23.3% 2,073.3 6.7 13.4 (1.7) 15.0 19.2 20.2 18.1 19.0 15.0 13.1 2.8 2.5

State Bank of India 243 350 43.9% 1,815.5 9.4 12.8 21.4 14.0 11.7 12.0 0.7 0.8 11.4 10.0 1.7 1.5

ICICI Bank 264 360 36.5% 1,529.3 12.2 13.9 9.8 14.4 14.4 14.9 1.8 1.7 12.4 10.9 2.2 2.0

Maruti Suzuki 4,747 4,977 4.8% 1,433.9 16.2 20.6 42.3 35.6 20.5 23.2 20.3 23.0 27.2 20.0 5.1 4.3

Tata Motors 411 515 25.2% 1,323.9 2.3 12.1 (29.7) 40.0 18.4 20.6 11.1 13.1 11.8 8.4 1.9 1.6

Indian Oil Corporation 408 548 34.3% 990.8 (9.4) 5.4 167.5 0.5 17.7 15.9 10.9 10.6 7.7 7.6 1.3 1.1

Aurobindo Pharma 838 943 12.5% 489.3 15.5 14.7 22.6 24.8 34.1 32.6 21.3 22.9 24.4 19.6 7.4 5.6

IndusInd Bank 897 1,070 19.3% 474.9 22.3 26.1 25.1 26.2 16.4 15.9 1.9 1.9 21.1 16.7 3.0 2.6

Cummins India 1,033 1,175 13.7% 286.4 12.7 18.2 15.0 25.6 26.1 28.4 26.0 28.2 35.4 28.2 8.7 7.4

Glenmark Pharmaceuticals 950 1,186 24.8% 257.7 25.8 37.4 130.0 89.8 27.2 33.8 15.5 23.7 23.6 12.4 5.0 3.6

GlaxoSmithKline Consumer Healthcare 5,961 6,617 11.0% 250.7 3.3 12.3 16.0 15.7 29.8 30.0 29.7 29.9 37.0 32.0 10.3 9.0

Mid Caps

Hexaware Technologies 264 300 13.8% 79.3 23.9 15.4 28.2 16.6 30.9 33.1 30.2 32.4 19.0 16.3 5.6 5.2

Jubilant Life Sciences 406 578 42.5% 64.6 13.3 12.4 NA 39.0 19.0 21.0 11.6 14.3 11.9 8.6 2.0 1.6

Sadbhav Engineering 306 361 18.0% 51.9 20.1 26.4 39.7 34.4 11.1 13.3 9.4 11.2 32.6 24.3 3.4 3.0

Allcargo Logistics 347 386 11.2% 43.8 8.2 10.2 22.7 18.0 14.5 15.0 15.7 17.1 14.9 12.6 2.0 1.8

JK Lakshmi Cement 362 450 24.4% 42.6 18.2 23.2 (110.2) (1,212.2) (1.2) 12.4 3.4 8.7 (279.6) 25.1 3.2 3.0

NIIT Technologies 579 625 8.0% 35.3 15.6 9.4 42.9 7.9 19.1 18.1 18.9 18.0 12.7 11.8 2.3 2.0

Va Tech Wabag 669 1,000 49.4% 36.3 12.5 12.5 14.7 38.3 13.3 16.3 11.7 12.5 28.8 20.8 3.6 3.2

Ashoka Buildcon 165 208 25.7% 26.1 22.0 20.7 (21.6) 43.0 4.8 5.7 4.9 5.5 40.9 28.6 1.7 1.6

* For Banks P/ABV

PER (x) P/BV (x)*RoE (%)Upside

Mcap

(Rs bn)

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

Revenue Growth (%) Earnings Growth (%)

LilladherPrabhudas

LARGE CAP

11/13/2015 23

LilladherPrabhudas HDFC Bank

CMP: Rs1,054 TP: Rs1,200 Rating: BUY MCap: Rs2,642.8bn

Revenue growth retains momentum: In Q2FY16, HDFCB delivered ~22% YoY growth in total revenues at Rs92.3 bn led by steady 21% YoY growth in NII and 25% YoY growth in other income boosted by strong treasury gains. Core other income grew 22% YoY led by robust 44% growth in exchange income and 22% YoY growth in core fees. NII growth could have been even stronger but for the corporate advances growth which happened towards the end of the quarter. Margins, however, compressed by 10bps QoQ even as CASA mix remained stable. HDFCB opened 126 branches and added 4,016 employees during the quarter.

Loan growth particularly sharp; wholesale – retail mix remains stable: Overall loan growth stood at ~28% YoY (9.6% QoQ) led by healthy growth in both wholesale and retail portfolio. Within wholesale, growth was largely on account of short-term lending, given the reduction in lending rates. Growth in the retail portfolio has been led by strong traction in CV loans, personal loans, business banking and other retail segment. The mix of retail loans has remained stable at ~49%. HDFCB has indicated healthy loan growth prospects on underlying improvement in product segments where it is gaining market share and benefitting from increased distribution presence.

Asset quality remains strong; coverage ratio improves to 73%: Asset quality remains impeccable with Net NPL ratio at 0.25%, while coverage ratio increasing to 73%. Outstanding restructured assets remain tiny at 0.1% of total loans. HDFCB made floating provisions of Rs500m in Q2FY16, thus, taking the total stock of floating provisions to Rs16.4bn. We maintain our earnings estimates and ‘BUY’ rating with a PT of Rs1,200.

11/13/2015 24

Key Financials (Rs m)

Y/e March FY13 FY14 FY15 FY16E FY17E

Net interest income 158,111 184,826 223,957 270,554 329,540

Growth (%) 22.7 16.9 21.2 20.8 21.8

Operating profit 114,276 143,601 174,045 214,436 266,674

PAT 67,263 84,784 102,159 125,431 155,802

EPS (Rs) 28.5 35.5 41.7 50.0 62.2

Growth (%) 28.7 24.7 17.4 20.1 24.2

Net DPS (Rs) 5.5 6.8 8.0 9.0 10.5

Source: Company Data, PL Research

Profitability & valuation


NIM (%) 4.6 4.4 4.3 4.4 4.4

RoAE (%) 20.3 21.3 19.4 18.7 20.0

RoAA (%) 1.8 1.9 1.9 1.9 2.0

P / BV (x) 6.9 5.8 4.3 3.7 3.1

P / ABV (x) 7.2 6.2 4.5 3.9 3.3

PE (x) 37.0 29.7 25.3 21.1 17.0

Net dividend yield (%) 0.5 0.6 0.8 0.9 1.0


Stock Performance

(%) 1M 6M 12M

Absolute (2.9) 7.4 16.6

Relative to Sensex 2.0 12.4 24.2

LilladherPrabhudas Financials

HDFC Bank

11/13/2015 25

Income Statement (Rs m)


Int. Earned from Adv. 268,224 316,869 371,808 447,892 545,893

Int. Earned from Invt. 78,203 90,368 107,056 131,397 146,055

Others - - - - -

Total Interest Income 350,649 411,355 484,699 584,947 699,287

Interest expense 192,538 226,529 260,742 314,393 369,747

NII 158,111 184,826 223,957 270,554 329,540

Growth (%) 22.7 16.9 21.2 20.8 21.8

Treasury Income 349 65 5,260 - -

NTNII 68,178 79,131 84,704 103,458 122,080

Non Interest Income 68,526 79,196 89,964 103,458 122,080

Total Income 419,175 490,552 574,663 688,405 821,367

Growth (%) 24.5 17.0 17.1 19.8 19.3

Operating Expense 112,361 120,422 139,875 159,576 184,947

Operating Profit 114,276 143,601 174,045 214,436 266,674

Growth (%) 21.7 25.7 21.2 23.2 24.4

NPA Provisions 12,342 16,326 17,236 24,210 29,776

Investment Provisions 522 (41) (38) (34) (31)

Total Provisions 16,770 15,873 20,758 27,225 34,134

PBT 97,506 127,728 153,287 187,211 232,540

Tax Provisions 30,243 42,944 51,128 61,780 76,738

Effective Tax Rate (%) 31.0 33.6 33.4 33.0 33.0

PAT 67,263 84,784 102,159 125,431 155,802

Growth (%) 30.2 26.0 20.5 22.8 24.2


Balance Sheet (Rs m)


Par Value 2 2 2 2 2

No. of equity shares 2,379 2,399 2,506 2,506 2,506

Equity 4,759 4,798 5,013 5,013 5,013

Networth 362,141 434,786 620,094 718,375 842,500

Adj. Networth 357,452 426,586 611,131 709,347 830,737

Deposits 2,962,470 3,673,375 4,507,956 5,346,436 6,656,313

Growth (%) 20.1 24.0 22.7 18.6 24.5

Low Cost deposits 1,405,215 1,646,214 1,984,921 2,448,668 3,101,842

% of total deposits 47.4 44.8 44.0 45.8 46.6

Total Liabilities 4,003,318 4,915,995 5,905,031 6,999,423 8,619,824

Net Advances 2,397,206 3,030,003 3,654,950 4,415,180 5,510,145

Growth (%) 22.7 26.4 20.6 20.8 24.8

Investments 1,116,136 1,209,511 1,664,599 1,764,551 2,096,647

Total Assets 4,003,318 4,915,995 5,905,031 6,999,423 8,619,824


LilladherPrabhudas Infosys


Infosys’ initiatives in automation/innovation etc. are showing signs of early success. Healthy deal win (Q2FY16: US$ 980mn), new client additions and improvement in client matrix indicate improvement in overall performance. However, despite a solid Q2, company maintained its FY16 CC guidance (10‐12% YoY) and lowered USD guidance (6.4‐8.4%). Cautious 2HFY16 outlook was attributed to lower number of working days and furloughs. Based on the underlying business momentum and past impact of seasonality, we believe that Infosys has been conservative in guidance and we expect company to beat FY16 revenue guidance. We view the weakness in stock price as a BUYing opportunity.

Q2FY16 result overview – Strong beat to expectation and healthy deal wins: Revenue (US$) grew by 6% (6.9%@cc) QoQ, driven by 3.7% volume growth and 3.4% pricing improvement. This was the best ever growth since Q2FY11. Growth was led by top clients with top‐25 client’s growth at 7.9% QoQ. EBIT margins at 25.5% also came ahead of expectations. Company signed 5 large deals with a total contract value of US$983mn, which was the best ever. Company has started to realize benefits from strategic initiatives such as “Zero Distance”, “Zero Bench” and efficiency benefits in sales and delivery. We believe, the benefits from these initiatives will gain further momentum in 2HFY16 and FY17.

Flat revenue growth required to achieve top end of guidance: Infosys has been conservative in its guidance as they have assumed much higher impact of furloughs and seasonality in Q3FY16 when compared to recent past. We note that the maximum impact of furloughs has been 3% over FY12‐15 while company has assumed 6% impact in FY16. We believe that ramp-up of large deal wins in 1HFY16 and the benefits from new initiatives will also partly offset the impact of the traditional 2H seasonality. In our view, Infosys is on track to beat FY16 guidance and exit 4QFY16 with industry growth.

Valuation & Recommendation – Retain ‘BUY’, with TP of Rs1,440: We expect Infosys to return to industry growth by FY17.

11/13/2015 26



Revenue (Rs m) 403,520 501,330 533,190 619,437 699,777

Growth (%) 19.6 24.2 6.4 16.2 13.0

EBITDA (Rs m) 115,580 134,150 149,010 168,806 194,081

PAT (Rs m) 94,210 106,480 123,290 133,740 155,688

EPS (Rs) 41.2 46.5 53.9 58.5 68.0

Growth (%) (71.7) 13.0 15.8 8.5 16.4

Net DPS (Rs) 10.5 15.7 22.2 30.0 35.0




EBITDA margin (%) 28.6 26.8 27.9 27.3 27.7

RoE (%) 25.7 24.4 24.1 23.1 23.9

RoCE (%) 25.6 24.3 24.0 23.0 23.9

EV / sales (x) 5.7 4.5 4.2 3.6 3.1

EV / EBITDA (x) 20.0 17.0 15.0 13.0 11.1

PER (x) 26.9 23.8 20.6 18.9 16.3

P / BV (x) 6.4 5.3 4.6 4.1 3.7



Stock Performance

(%) 1M 6M 12M

Absolute (5.4) 12.8 6.0

Relative to Sensex (0.5) 17.8 13.6


Infosys

11/13/2015 27



Net Revenue 403,520 501,330 533,190 619,437 699,777

Direct Expenses 241,510 307,670 318,140 374,827 420,820

% of Net Sales 59.9 61.4 59.7 60.5 60.1

Employee Cost - - - - -

% of Net Sales 0.0 0.0 0.0 0.0 0.0

SG&A Expenses 46,430 59,510 66,040 75,804 84,876

% of Net Sales 11.5 11.9 12.4 12.2 12.1

Other Expenses - - - - -

% of Net Sales 0.0 0.0 0.0 0.0 0.0

EBITDA 115,580 134,150 149,010 168,806 194,081

Margin (%) 28.6 26.8 27.9 27.3 27.7

Depreciation 11,290 13,740 10,690 12,661 13,621

PBIT 104,290 120,410 138,320 156,145 180,460

Interest Expenses - - - - -

PBT 127,880 147,100 172,590 187,706 219,279

Total tax 33,670 40,620 49,290 53,965 63,591

Effective Tax rate (%) 26.3 27.6 28.6 28.8 29.0

PAT 94,210 106,480 123,290 133,740 155,688

Extraordinary Gain/(Loss) - - - - -

Adjusted PAT 94,210 106,480 123,290 133,740 155,688




Share Capital 11,440 11,440 11,440 11,440 11,440

Reserves & Surplus 355,630 432,960 508,130 573,302 648,994

Shareholder's Fund 397,970 475,300 547,630 612,802 688,494

Preference Share Capital - - - - -

Total Debt - - - - -

Other Liabilities(net) 1,490 3,230 460 460 460

Deferred Tax Liability 1,190 640 1,600 1,600 1,600

Total Liabilities 400,650 479,170 549,690 614,862 690,554

Gross Block 106,760 134,120 155,470 180,867 209,558

Less: Depreciation 42,080 55,250 64,220 76,881 90,502

Net Block 64,680 78,870 91,250 103,986 119,056

Capital Work in Progress - - - - -

Cash & Cash Equivalent 235,710 292,210 313,420 342,819 389,574

Total Current Assets 335,740 397,480 462,210 506,172 575,379

Total Current Liabilities 62,860 91,380 113,830 105,356 113,941

Net Current Assets 272,880 306,100 348,380 400,816 461,438

Other Assets 45,700 61,490 100,310 100,310 100,310

Total Assets 400,650 479,170 549,690 614,862 690,554


LilladherPrabhudas Coal India

CMP: Rs328 TP: Rs405 Rating: BUY MCap: Rs2,073.3bn

Coal India Ltd (COAL) stock price fell by ~25% from its peak and has underperformed the indices. Though the stake dilution would remain as an overhang in the immediate period, we do not think that GOI would divest the stake at the current depressed valuations, especially when significant improvements are seen in the company’s operational performance and efforts are in place to achieve ~900m tonnes offtake target by 2020. On the E-auction front, while the realizations have been lower on account of fall in global prices, company is offering higher quantities to offset the impact of lower realizations due to fall in global prices. Govt’s recent move to allow additional quantity of 14m tonnes to power sector as well non-power sector through E-auction window would further enable COAL to prop up supplies in high margin E-auction route. We have ‘BUY’ rating on the stock with TP of Rs405, EV/EBITDA of 8x FY17E.

Strong operational performance to sustain: Thanks to smart rail logistics management, improved turnaround time (aided by addition of sidings at key coal fields) and gradual addition of rakes by railways, COAL’s volumes grew 10% YoY in Apr-Oct’15 growth in off take on a high base. We believe that growth trajectory would be sustained in the range of 9%+ for next couple of years on the back of lower congestion and improved availability of rakes. The trajectory would ascend to ~10%, driven by commissioning of Eastern DFC, 3rd line between Howrah-Wardha and Talcher-Cuttack, Jharsuguda-Barpali Rail link, Bhupdeopur-Korba rail link and the high loading capacity wagons sourced by Coal India.

Conservative estimates for FY17: We expect 15% YoY growth in FY17 EPS, largely driven by 8% volume growth and scale benefit. Given the underlying objective of Govt to keep the power tariffs low, we don’t factor any price hike for the power FSA. While, for non-power FSA, we expect an additional revenue of Rs35bn through auction. This will offset the 15% hike in wages assumed for non-executive workers, due in July-16.

11/13/2015 28



Revenue (Rs m) 698,513 706,075 741,201 790,810 897,058

Growth (%) 9.4 1.1 5.0 6.7 13.4

EBITDA (Rs m) 228,339 214,566 214,602 216,827 254,033

PAT (Rs m) 189,003 155,201 140,214 137,900 158,652

EPS (Rs) 29.9 24.6 22.2 21.8 25.1

Growth (%) 28.4 (17.9) (9.7) (1.7) 15.0

Net DPS (Rs) 14.0 29.0 20.7 16.5 16.8




EBITDA margin (%) 32.7 30.4 29.0 27.4 28.3

RoE (%) 29.4 22.6 20.6 19.2 20.2

RoCE (%) 27.5 21.4 19.4 18.1 19.0

EV / sales (x) 2.1 2.2 2.1 1.9 1.6

EV / EBITDA (x) 6.4 7.1 7.1 7.0 5.7

PER (x) 11.0 13.4 14.8 15.0 13.1

P / BV (x) 3.0 3.1 3.0 2.8 2.5



Stock Performance

(%) 1M 6M 12M

Absolute (2.9) (10.4) (6.6)

Relative to Sensex 2.0 (5.3) 1.0


Coal India

11/13/2015 29



Net Revenue 698,513 706,075 741,201 790,810 897,058

Direct Expenses 88,895 93,969 90,732 96,634 107,501

% of Net Sales 12.7 13.3 12.2 12.2 12.0

Employee Cost 273,208 279,144 298,741 310,363 350,046

% of Net Sales 39.1 39.5 40.3 39.2 39.0

SG&A Expenses - - - - -

% of Net Sales 0.0 0.0 0.0 0.0 0.0

Other Expenses 108,071 118,396 137,125 166,986 185,478

% of Net Sales 15.5 16.8 18.5 21.1 20.7

EBITDA 228,339 214,566 214,602 216,827 254,033

Margin (%) 32.7 30.4 29.0 27.4 28.3

Depreciation 50,147 52,830 61,465 66,769 75,660

PBIT 178,192 161,736 153,137 150,058 178,373

Interest Expenses 452 580 73 78 89

PBT 265,276 232,889 218,820 209,078 240,571

Total tax 76,227 77,679 78,573 71,178 81,919


PAT 189,049 155,210 140,247 137,900 158,652

Extraordinary Gain/(Loss) 46 9 33 - -

Adjusted PAT 189,003 155,201 140,214 137,900 158,652




Share Capital 63,164 63,164 63,164 63,164 63,164




Total Debt 13,053 1,781 4,083 - -

Other Liabilities(net) 32,008 35,925 40,653 44,531 48,861

Deferred Tax Liability - - - - -


Gross Block 390,107 408,971 441,957 504,079 566,371


Net Block 134,658 145,949 159,015 197,501 233,049

Capital Work in Progress 34,960 45,053 53,729 53,729 53,729





Other Assets 22,550 19,717 19,596 19,596 19,596

Total Assets 745,063 709,899 734,681 788,984 871,071


LilladherPrabhudas State Bank of India


SBIN has been reporting declining trend in slippages for few quarters. Margins have been under pressure as cost of deposits remain sticky while lending yield declined due to recent cut in base rate. However, we expect trends to improve as deposit portfolio re-prices gradually. SBIN is well capitalized and has a very strong liability franchise which the bank will be able to leverage as credit growth revives, meanwhile push into retail will remain the focus area in FY16.

Revenue growth on track: SBIN reported 15% YoY growth in total income, led by 7% YoY growth in NII and strong 36% YoY growth in other income. Other income growth was driven by healthy bond/repatriation gains and pick-up in recovery from written-off accounts. NII growth also was aided by pick-up in advances growth, buoyant CASA mix and moderation in deposit cost. SBI has guided for ~13% loan growth during FY16 led by continued focus on retail and large corporate segments.

Slippages subsided on sequential basis; Agri/SME/Mid-corporate remains the vulnerable segments: Asset quality remained stable as fresh slippages stood at Rs58.75 bn (24% YoY decline; 1.8% annualized), while SBIN restructured assets worth Rs25bn during the quarter. GNPL and NNPL ratio has thus eased by 14bp/10bp QoQ respectively while coverage ratio has increased to 70.5% including technical write-offs. Management explained that within SME segment it is mostly the small-ticket loans (<Rs100mn) where the NPL formation rate remains higher else the bank is seeing some signs of recovery.

Margins to sustain at current levels; retain ‘BUY’: SBIN has aggressively cut base rate recently however we expect margins to sustain at around current levels as deposit portfolio continue to reprice lower on account of earlier cut in deposit rates. Moreover bank has increased the spreads in select products to which will help limit damage to lending yields. We have fine-tuned our earnings as we build in the recent capital infusion and maintain BUY rating with PT of Rs350.

11/13/2015 30




Growth (%) 2.4 11.2 11.6 9.4 12.8


PAT 141,050 108,912 131,016 162,177 188,473

EPS (Rs) 20.8 15.2 17.5 21.3 24.3

Growth (%) 16.1 -26.9 15.3 21.4 14.0

Net DPS (Rs) 4.1 1.5 3.5 3.7 3.8




NIM (%) 3.2 3.0 3.0 2.9 2.9

RoAE (%) 15.4 10.0 10.6 11.7 12.0

RoAA (%) 1.0 0.6 0.7 0.7 0.8

P / BV (x) 1.7 1.5 1.4 1.3 1.1

P / ABV (x) 2.4 2.3 2.0 1.7 1.5

PE (x) 11.7 16.0 13.9 11.4 10.0



Stock Performance

(%) 1M 6M 12M

Absolute (0.9) (7.9) (12.0)

Relative to Sensex 4.0 (2.9) (4.3)


State Bank of India

11/13/2015 31



Int. Earned from Adv. 905,371 1,024,841 1,123,439 1,192,124 1,308,677


Others - - - - -

Total Interest Income 1,196,571 1,363,508 1,523,971 1,653,088 1,828,211

Interest expense 753,258 870,686 973,818 1,050,967 1,149,082

NII 443,313 492,822 550,153 602,121 679,129

Growth (%) 2.4 11.2 11.6 9.4 12.8

Treasury Income 10,981 20,767 36,180 57,889 92,622

NTNII 149,367 164,762 189,578 190,672 187,009


Total Income 1,356,919 1,549,037 1,749,730 1,901,649 2,107,841

Growth (%) 12.3 14.2 13.0 8.7 10.8



Growth (%) (1.6) 3.3 21.2 9.5 15.1

NPA Provisions 106,570 144,785 168,636 177,116 190,215

Investment Provisions (9,670) 5,633 (5,901) (3,540) 2,124


PBT 199,509 161,739 193,140 245,723 285,565

Tax Provisions 58,459 52,827 62,124 83,546 97,092


PAT 141,050 108,912 131,016 162,177 188,473

Growth (%) 20.5 (22.8) 20.3 23.8 16.2




Par Value 1 1 1 1 1


Equity 6,840 7,466 7,467 7,764 7,764

Networth 988,837 1,182,822 1,284,383 1,495,691 1,650,326

Adj. Networth 769,272 871,862 1,008,477 1,228,858 1,394,691

Deposits 12,027,396 13,944,085 15,767,932 17,470,869 19,951,733

Growth (%) 15.2 15.9 13.1 10.8 14.2




Net Advances 10,456,165 12,098,287 13,000,264 14,248,289 16,186,057

Growth (%) 20.5 15.7 7.5 9.6 13.6

Investments 3,509,273 3,983,082 4,950,274 5,981,627 6,989,915

Total Assets 15,662,609 17,922,346 20,480,798 28,198,553 32,812,368


LilladherPrabhudas ICICI Bank


ICICI Bank (ICICIBC) has been reporting relatively stable operating performance even as macro-environment remains challenging. Declining trend in NPL formation, granular residual restructured book, coupled with positive management guidance and reasonable valuations makes us retain our ‘BUY’ rating with TP of Rs390 based on Mar-17 ABV.

NII growth on track; other income remains sluggish on weak corporate fees: ICICIBC’s NII growth of 13% YoY led by steady CASA mix at 45% (~41% on daily average basis). NIMs declined by tiny 2bp QoQ led by 6bp QoQ decline in domestic margins while overseas NIMs expanded to 2% on cheaper refinancing opportunities. Fee income growth at 6% YoY remains low mainly on weak corporate loan demand while the proportion of retail in total fees has now increased to 65%.

Retail loans continue to show steady growth: Advances grew by 13% YoY led by strong growth of 25% YoY in retail with contribution from all segments, especially housing & un-secured. Retail portfolio now accounts for ~44% of the total loan mix vs ~40% last year. Management’s loan growth guidance was at 18-20% with 25% growth in retail for FY16 and stable margins at ~3.5%.

Asset quality stable; guidance on stressed asset formation remains intact: In Q2FY16, GNPLs increased 5% QoQ led by slippages of Rs22.4bn (of which Rs9.3bn was from restructured assets) while the o/s restr. assets declined to 2.9% of total loans at Rs118.7 bn. The bank did fresh refinancing of Rs20bn under 5/25 scheme. Management has re-affirmed its guidance of stressed accretion to be lower in FY16 than FY15. We maintain BUY rating with PT of Rs360 corresponding to 2.1x FY17E ABV for the standalone bank.

11/13/2015 32




Growth (%) 29.2 18.8 15.6 12.2 13.9


PAT 83,255 98,105 111,753 122,973 140,624

EPS (Rs) 14.4 17.0 19.3 21.2 24.3

Growth (%) 28.7 17.7 13.6 9.8 14.4

Net DPS (Rs) 4.0 4.5 5.0 6.4 7.0




NIM (%) 2.9 3.1 3.2 3.2 3.1

RoAE (%) 13.1 14.0 14.5 14.4 14.9

RoAA (%) 1.6 1.7 1.8 1.8 1.7

P / BV (x) 2.3 2.1 1.9 1.7 1.5

P / ABV (x) 2.9 2.7 2.4 2.2 2.0

PE (x) 18.3 15.5 13.7 12.4 10.9



Stock Performance

(%) 1M 6M 12M

Absolute (8.1) (17.1) (21.2)

Relative to Sensex (3.2) (12.1) (13.5)


ICICI Bank

11/13/2015 33





Others - - - - -



NII 138,664 164,756 190,396 213,668 243,293

Growth (%) 29.2 18.8 15.6 12.2 13.9

Treasury Income 4,364 7,654 15,485 - -

NTNII 79,093 96,625 106,277 136,373 156,965


Total Income 484,213 546,060 612,673 681,752 787,518

Growth (%) 18.0 12.8 12.2 11.3 15.5



Growth (%) 27.1 25.7 18.8 9.5 13.9

NPA Provisions 13,948 22,523 31,410 37,772 42,325

Investment Provisions 1,262 711 2,980 - -


PBT 113,967 139,682 158,203 175,675 200,891

Tax Provisions 30,712 41,577 46,450 52,703 60,267


PAT 83,255 98,105 111,753 122,973 140,624

Growth (%) 28.8 17.8 13.9 10.0 14.4




Par Value 2 2 2 2 2


Equity 11,536 11,550 11,597 11,597 11,597

Networth 667,015 732,068 804,219 897,972 994,216

Adj. Networth 644,708 699,087 741,663 819,424 900,703

Deposits 2,926,135 3,319,137 3,615,627 4,208,590 5,004,014

Growth (%) 14.5 13.4 8.9 16.4 18.9




Net Advances 2,902,494 3,387,026 3,875,221 4,518,507 5,440,283

Growth (%) 14.4 16.7 14.4 16.6 20.4

Investments 1,713,936 1,770,218 1,865,800 2,110,775 2,406,435

Total Assets 5,367,946 5,946,416 6,461,293 7,534,260 8,917,102


LilladherPrabhudas Maruti Suzuki


With sustained performance from existing models, good acceptance of new models driving market share gains, MSIL’s performance would remain healthy. Even after being a market leader, Maruti Suzuki has been able to gain market share. Benefits of operating leverage and favourable currency movement have been additional positives.

Market share gains driven by newer model: MSIL would be launching five new vehicles over FY16-17, (1) the just launched S-Cross, (2) a light commercial vehicle powered by 800cc diesel engine, (3) diesel Celerio (launched in June 2015), (4) the premium hatchback Baleno (launched in Oct ’15) and (5) a compact SUV. The trend has been that the newer models have been able to garner a good response (eg Celerio, Ertiga, Amaze, EcoSport, Mobilio etc). We expect these newer models to drive market share gain for MSIL over FY15-17E.

Exports to provide an additional edge: Even as global majors are committing resources to India to gain a share of the domestic market and have a low-cost export base, Maruti has already achieved the same, and would be in a position to service export requirements both under its own brand and that of Suzuki’s.

Operating leverage benefits: A highly favourable exchange rate, better operating leverage, steps to control costs would help improve margins ~350bps over FY15-17e, controlled lowering of discounts and higher sales promotion expenses would also help. We believe that positives from a better operating performance—favourable currency rates, a better product mix and more export revenues—would continue to benefit the company, despite competitive pressures.

Our TP is Rs4977 We value MSIL at 21x FY17E EPS to arrive at a target price of Rs4977/share (based upon a target cash PE of 15x FY17e). Our earnings CAGR over FY15-17e is 38.9%. At our TP, MSIL would trade at an EV/EBITDA of ~11.3x FY17e. At CMP, its trades at a PE of 19.5x and EV/E of 10.3x. We rate MSIL a BUY.

11/17/2014 34



Revenue (Rs m) 435,879 438,437 498,254 578,758 698,090

Growth (%) 22.5 0.6 13.6 16.2 20.6

EBITDA (Rs m) 41,356 52,046 64,986 93,482 115,532

PAT (Rs m) 23,213 28,917 37,112 52,800 71,589

EPS (Rs) 76.8 95.7 122.9 174.8 237.0

Growth (%) 37.8 24.6 28.3 42.3 35.6

Net DPS (Rs) 8.0 12.0 25.0 35.0 45.0




EBITDA margin (%) 9.5 11.9 13.0 16.2 16.5

RoE (%) 13.7 14.6 16.6 20.5 23.2

RoCE (%) 13.4 14.0 16.3 20.3 23.0

EV / sales (x) 3.3 3.3 2.9 2.5 2.1

EV / EBITDA (x) 34.8 27.8 22.1 15.3 12.4

PER (x) 61.8 49.6 38.6 27.2 20.0

P / BV (x) 7.7 6.8 6.0 5.1 4.3



Stock Performance

(%) 1M 6M 12M

Absolute 10.2 30.5 42.5



Maruti Suzuki

11/17/2014 35



Net Revenue 435,879 438,437 498,254 578,758 698,090

Direct Expenses 325,590 313,488 350,771 387,768 471,211

% of Net Sales 74.7 71.5 70.4 67.0 67.5

Employee Cost 10,696 13,681 16,066 18,797 21,992

% of Net Sales 2.5 3.1 3.2 3.2 3.2

SG&A Expenses 33,700 34,360 39,857 46,301 50,961

% of Net Sales 7.7 7.8 8.0 8.0 7.3

Other Expenses 24,538 24,861 26,574 32,410 38,395

% of Net Sales 5.6 5.7 5.3 5.6 5.5

EBITDA 41,356 52,046 64,986 93,482 115,532

Margin (%) 9.5 11.9 13.0 16.2 16.5

Depreciation 18,612 20,844 24,703 27,169 28,768

PBIT 22,744 31,202 40,283 66,313 86,764

Interest Expenses 1,460 1,416 1,369 36 19

PBT 28,978 36,585 48,681 73,334 95,452

Total tax 5,988 8,755 11,570 20,534 23,863


PAT 23,920 27,830 37,112 52,800 71,589


Adjusted PAT 23,213 28,917 37,112 52,800 71,589




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




Total Debt 13,892 18,239 1,802 2,802 2,752

Other Liabilities(net) - - - - -

Deferred Tax Liability 4,087 5,866 4,810 4,810 4,810


Gross Block 198,007 227,018 264,617 313,445 363,445


Net Block 97,992 107,904 122,593 144,252 165,484





Net Current Assets 15,572 (1,412) (22,553) (25,510) (33,797)

Other Assets - - - - -

Total Assets 203,768 233,885 247,008 286,882 344,828


LilladherPrabhudas Tata Motors


Expectation of improved JLR sales in China in CY16, ramp-up of new models like XE and Discovery Sport in global markets, improved CV demand in India, and attractive valuations render Tata Motors a compelling Buy.

JLR faces a short-term negative outlook due to weakness in China: We are positive on TTMT, given the strong product portfolio at JLR. With the earlier launches like the New Range Rover, New Range Rover Sport and Jaguar F‐Type doing well, volume is expected to be strong. New launches like the XE, the new Discovery Sport and the F‐Pace (likely in Q4FY16) should be able to sustain the momentum. China retails, which had suffered in H1FY16, have nevertheless recorded a month on month improvement for the past 3 months, while Oct’15 retails across regions have been healthy. For JLR, FY16 margins to be lower YoY, as lower China sales and higher marketing spend get factored in. In FY17 however, most of these constraints would be removed and would result in a positive outlook from a medium‐to-long-term perspective.

India PV recovery: New launches in the India PV space can rejuvenate it from the lows of FY14. An improved performance in the standalone operations is likely in FY16. This would arrest the bleeding on the standalone operations.

CV recovery: With the M&HCV volumes already on the move, and a recovery expected in LCVs by 4QFY16, Tata Motors, as the largest CV manufacturer would be a beneficiary of the cyclical upmove. This would help the turnaround in the India operations to get completed in FY17.

Our TP is Rs515: We value JLR to 9x Mar’17E PE at Rs437/share. With M&HCV segment bottoming out, we built in a strong recovery. We maintain “BUY” with a target price of Rs515. At the current market price, the stock is trading at 11.3x FY16e and 8.1x FY17e earnings.

11/17/2014 36



Revenue (Rs m) 1,888,176 2,328,337 2,627,963 2,689,591 3,015,644

Growth (%) 14.0 23.3 12.9 2.3 12.1

EBITDA (Rs m) 265,689 374,029 439,237 386,139 468,448

PAT (Rs m) 104,953 149,764 159,809 118,613 166,066

EPS (Rs) 32.9 46.5 49.6 34.9 48.9

Growth (%) (16.8) 41.4 6.7 (29.7) 40.0

Net DPS (Rs) 2.0 2.0 0.0 0.0 2.0




EBITDA margin (%) 14.1 16.1 16.7 14.4 15.5

RoE (%) 29.7 29.0 26.2 18.4 20.6

RoCE (%) 16.8 18.0 15.7 11.1 13.1

EV / sales (x) 0.8 0.7 0.6 0.6 0.5

EV / EBITDA (x) 5.8 4.2 3.9 3.9 3.3

PER (x) 12.5 8.8 8.3 11.8 8.4

P / BV (x) 3.5 2.0 2.4 1.9 1.6



Stock Performance

(%) 1M 6M 12M

Absolute 14.3 (20.7) (21.2)



Tata Motors

11/17/2014 37



Net Revenue 1,888,176 2,328,337 2,627,963 2,689,591 3,015,644

Direct Expenses 1,383,635 1,668,698 1,861,996 1,967,096 2,236,942

% of Net Sales 73.3 71.7 70.9 73.1 74.2

Employee Cost 165,841 215,564 255,490 282,407 278,947

% of Net Sales 8.8 9.3 9.7 10.5 9.3

SG&A Expenses 73,012 70,046 71,240 53,949 31,307

% of Net Sales 3.9 3.0 2.7 2.0 1.0


% of Net Sales 0.0 0.0 0.0 0.0 0.0

EBITDA 265,689 374,029 439,237 386,139 468,448

Margin (%) 14.1 16.1 16.7 14.4 15.5

Depreciation 75,693 110,782 133,886 174,052 191,457

PBIT 169,780 237,595 276,599 179,022 235,660

Interest Expenses 35,533 47,338 48,615 43,753 42,660

PBT 136,335 188,690 217,026 117,908 203,853

Total tax 37,710 47,648 76,429 26,191 36,915


PAT 98,926 139,910 139,863 90,917 166,066

Extraordinary Gain/(Loss) (6,027) (9,854) (19,946) (27,696) -

Adjusted PAT 104,953 149,764 159,809 118,613 166,066




Share Capital 6,381 6,438 6,438 6,792 6,792




Total Debt 437,755 549,545 692,115 697,115 677,115


Deferred Tax Liability (23,807) (7,748) (13,900) (13,900) (13,900)

Total Liabilities 794,026 1,202,038 1,245,167 1,416,064 1,554,264

Gross Block 1,031,320 1,329,282 1,582,066 1,932,066 2,257,066

Less: Depreciation 517,227 688,154 744,241 918,293 1,109,750

Net Block 514,094 641,128 837,825 1,013,773 1,147,315

Capital Work in Progress 184,536 332,626 286,401 - -


Total Current Assets 832,193 1,046,103 1,034,685 1,331,957 1,390,859

Total Current Liabilities 865,468 917,596 1,070,091 1,137,003 1,198,248

Net Current Assets (33,274) 128,507 (35,407) 194,954 192,611

Other Assets 41,024 49,788 46,970 46,970 46,970

Total Assets 794,026 1,258,916 1,289,157 1,416,064 1,554,264


LilladherPrabhudas Indian Oil Corporation

CMP: Rs408 TP: Rs548 Rating: BUY MCap: Rs990.8bn

Strong earnings recovery after a washout FY15: IOCL’s earnings are likely to grow at 61% CAGR over FY15-17E led by 1) higher petrochem earnings 2) healthy marketing margins 3) improved refining profitability and 4) zero subsidy losses. Continued strength in refining margins (YTD GRM ~US$7 v/s FY15 US$6.3/bbl), stable crude prices, coupled with firm marketing and petrochemicals earnings, are likely to support H2FY16 earnings of the company.

Petrochemicals recovery gaining traction: Profitability of IOCL’s petrochemicals segment has improved sharply due to falling naphtha prices, in line with crude prices. Falling feedstock prices and firm product prices has meant that integrated Asian crackers’ profitability has improved sharply. IOCL’s H1FY16 petchem EBIT was at Rs26bn (Rs24.7bn in FY15); we expect operating profits to expand to Rs68.8bn/Rs71.4bn in FY16/17E against Rs38.4bn in FY15.

Marketing profits to remain firm; benign crude price outlook to cut inventory losses: IOCL, with India’s largest retail outlet network of ~25,000 units, will benefit from expanding marketing margins. We have factored in diesel and petrol margins of Rs2/litre and Rs2.25/litre, respectively, lower than recent margin trends. Also, benign crude price outlook will mean no inventory losses.

Refining margins aided by lower fuel & oil loss to stay healthy: We expect refining margins to stay healthy aided by lower fuel & losses for the domestic refiners. Sharp fall in crude oil prices will help cut F&O losses; OMC refinery F&O stands at 5-9%.Despite 1HFY16 GRMs of US$5.8/bbl, we have conservatively factored in US$4/bbl for FY16/17E.

Valuation & Recommendation: IOCL with a well-diversified business portfolio is attractively valued at current prices. We have a BUY rating with a price target of Rs 548, valued at PER of 10x FY16E. At our price target, it implies core PBV of 1.6xFY16E, with ROE of 16-18%.

11/17/2014 38



Revenue (Rs m) 4,617,797 4,883,449 4,495,087 4,072,664 4,294,556

Growth (%) 12.9 5.8 (8.0) (9.4) 5.4

EBITDA (Rs m) 137,676 170,565 105,359 268,236 271,397

PAT (Rs m) 44,490 68,475 48,315 129,253 129,905

EPS (Rs) 18.3 28.2 19.9 53.2 53.5

Growth (%) 5.3 53.9 (29.4) 167.5 0.5

Net DPS (Rs) 6.3 8.7 6.6 15.4 15.8




EBITDA margin (%) 3.0 3.5 2.3 6.6 6.3

RoE (%) 7.2 10.5 7.1 17.7 15.9

RoCE (%) 5.8 6.8 4.9 10.9 10.6

EV / sales (x) 0.4 0.4 0.4 0.4 0.4

EV / EBITDA (x) 13.4 11.6 16.3 6.5 6.1

PER (x) 22.3 14.5 20.5 7.7 7.6

P / BV (x) 1.6 1.5 1.4 1.3 1.1



Stock Performance

(%) 1M 6M 12M

Absolute 0.0 11.1 10.0



Indian Oil Corporation

11/17/2014 39



Net Revenue 4,617,797 4,883,449 4,495,087 4,072,664 4,294,556

Direct Expenses 4,480,121 4,712,884 4,389,727 3,804,428 4,023,159

% of Net Sales 97.0 96.5 97.7 93.4 93.7


% of Net Sales 0.0 0.0 0.0 0.0 0.0


% of Net Sales 0.0 0.0 0.0 0.0 0.0


% of Net Sales 0.0 0.0 0.0 0.0 0.0

EBITDA 137,676 170,565 105,359 268,236 271,397

Margin (%) 3.0 3.5 2.3 6.6 6.3

Depreciation 56,915 63,600 52,190 63,623 66,676

PBIT 80,761 106,965 53,169 204,613 204,721


PBT 45,042 99,778 70,144 182,722 184,835

Total tax 8,770 30,113 21,426 55,305 55,854


PAT 44,490 68,475 48,315 129,253 129,905


Adjusted PAT 44,490 68,475 48,315 129,253 129,905




Share Capital 24,280 24,280 24,280 24,280 24,280




Total Debt 867,142 1,026,241 736,084 751,778 678,631




Gross Block 1,071,600 1,263,476 1,401,010 1,725,006 1,827,522


Net Block 660,818 725,005 803,704 1,176,261 1,219,052



Total Current Assets 1,343,798 1,401,345 1,004,678 1,001,205 1,009,274



Other Assets 8,959 878 705 - -

Total Assets 1,573,454 1,781,644 1,503,495 1,626,068 1,658,777


LilladherPrabhudas Aurobindo Pharma

CMP: Rs838 TP: Rs943 Rating: Accumulate MCap: Rs489.3bn

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

US remains mainstay for growth: Formulation growth will be driven by injectables and orals. It has filed 66 products from Unit IV (NPNC injectable/ophthalmic) and expects strong array of approvals in FY16-18E. It is targeting 50% YoY growth in revenues from US injectables in FY16E-18EU vs US$63m in FY15. The company’s filed ANDAs address brand size of US$40bn and hopes to achieve sales of US$200-300m in 2-3 years. High value para-IV opportunities especially in injectables would provide boost for growth, margin and operating cash flow in FY16E-18E.

Maintainable margins revised: Management revised maintainable operating margins to 22-24% in FY16E-18E. Core EU formulation sales of US$520m are from six key markets – UK, Netherlands, Italy, Spain, Germany and Portugal. It expects to turn profitable in EU in FY16E. The company’s EU acquisition include additional sales of US$430m in FY15, while we expect improvement in EBITDA margin in FY16E.

Strong candidate for valuation re-rating: The stock currently trades at PER of 24.4x and 19.6x of FY16E and FY17E, which is at a significant (20%) discount to peers. Better cash flow from launches of high margin and limited competition drugs to further reduce gearing ratio and narrow valuation differential with peers in the industry. Our PE 22x of FY17E earnings valuation of the company set Aurobindo’s price target at Rs943. We maintain ‘ACCUMULATE’.

11/13/2015 40



Revenue (Rs m) 58,553 80,998 120,432 139,067 159,481

Growth (%) 26.5 38.3 48.7 15.5 14.7

EBITDA (Rs m) 8,891 21,328 24,863 30,595 38,275

PAT (Rs m) 4,573 13,759 16,354 20,057 25,024

EPS (Rs) 7.8 23.6 28.0 34.3 42.9

Growth (%) 8.6 200.9 18.9 22.6 24.8

Net DPS (Rs) 0.7 1.5 2.3 4.5 4.5




EBITDA margin (%) 15.2 26.3 20.6 22.0 24.0

RoE (%) 18.5 43.3 36.7 34.1 32.6

RoCE (%) 9.4 21.2 20.3 21.3 22.9

EV / sales (x) 8.9 6.5 4.3 3.7 3.2

EV / EBITDA (x) 58.7 24.6 21.1 16.9 13.3

PER (x) 107.0 35.6 29.9 24.4 19.6

P / BV (x) 18.8 13.0 9.5 7.4 5.6



Stock Performance

(%) 1M 6M 12M

Absolute 5.6 29.4 62.8



Aurobindo Pharma

11/13/2015 41



Net Revenue 58,553 80,998 120,432 139,067 159,481

Direct Expenses 36,242 43,234 64,691 74,401 82,133

% of Net Sales 61.9 53.4 53.7 53.5 51.5

Employee Cost 6,633 8,319 13,023 15,993 18,340

% of Net Sales 11.3 10.3 10.8 11.5 11.5

SG&A Expenses 6,788 8,117 17,856 18,079 20,733

% of Net Sales 11.6 10.0 14.8 13.0 13.0


% of Net Sales 0.0 0.0 0.0 0.0 0.0

EBITDA 8,891 21,328 24,863 30,595 38,275

Margin (%) 15.2 26.3 20.6 22.0 24.0

Depreciation 2,487 3,125 3,326 4,693 4,820

PBIT 6,403 18,203 21,537 25,902 33,456

Interest Expenses 1,313 1,079 843 862 897

PBT 5,376 17,356 22,275 26,683 34,218

Total tax 827 3,635 5,966 6,671 9,239


PAT 2,939 11,729 15,758 20,057 25,024

Extraordinary Gain/(Loss) (1,634) (2,031) (596) - -

Adjusted PAT 4,573 13,759 16,354 20,057 25,024




Share Capital 584 584 584 584 584




Total Debt 34,445 37,783 38,879 36,240 33,616

Other Liabilities(net) 110 257 258 213 168

Deferred Tax Liability 680 2,054 2,058 1,257 573


Gross Block 37,635 41,830 56,367 64,867 73,367


Net Block 26,389 27,217 38,428 42,235 45,915






Other Assets 2,565 8,074 4,855 5,796 6,922

Total Assets 61,292 77,595 92,754 103,791 121,587


LilladherPrabhudas IndusInd Bank

CMP: Rs897 TP: Rs1,070 Rating: Accumulate MCap: Rs474.9bn

Revenue growth remains strong; margins expand by 20bp QoQ: IIB delivered 32% YoY growth in core revenues led by uniform growth in core fees and NII. Margins expanded by 20bp QoQ to 3.88% aided by recent capital-raising, revival in consumer business loan growth and steady growth in savings account deposits. The bank aspires to achieve ~40% CASA mix and ~4% NIM over the medium term as it increases its branch network to 1,200 (from 854 currently), benefits from the revival in high-yielding CV loans and maintain its SA growth momentum.

IIB amalgamates the Gems & Jewellery portfolio; Consumer loan share declines slightly to ~41%: IIB amalgamated the gems and jewellery portfolio that it acquired earlier and this helped pull total loan growth to 31% YoY (24% YoY excluding this portfolio). Share of consumer loan portfolio thus decreased slightly to 41% and this was aided by strong revival in commercial vehicle segment. IIB reported strong growth in non fund based exposure as well mainly due to demand from PSUs in the corporate segment.

Asset quality broadly stable: IIB has relatively stable trend in NPL ratios though corporate/restructured portfolio witnessed slightly higher slippages in Q2FY16. IIB also sold Rs410mn to ARC, while also recovered Rs200mn from ARC and now has total outstanding SR book of Rs2.29bn. Credit cost was high due to standard asset provisioning on integration of gems & jewellery portfolio while restructured p/f remain stable at 0.63%. We retain “Accumulate” with PT of Rs1,070.

11/17/2014 42


Y/e March FY13 FY14 FY15E FY16E FY17E


Growth (%) 31.0 29.5 18.3 22.3 26.1


PAT 10,612 14,080 17,937 23,152 30,029

EPS (Rs) 21.4 26.9 34.0 42.5 53.7

Growth (%) 24.6 25.4 26.6 25.1 26.2

Net DPS (Rs) 3.0 3.5 4.0 5.4 6.5




NIM (%) 3.5 3.7 3.6 3.5 3.5

RoAE (%) 17.2 16.9 18.2 16.4 15.9

RoAA (%) 1.6 1.8 1.8 1.9 1.9

P / BV (x) 6.3 5.5 4.6 2.9 2.5

P / ABV (x) 6.4 5.6 4.7 3.0 2.6

PE (x) 41.9 33.4 26.4 21.1 16.7



Stock Performance

(%) 1M 6M 12M

Absolute 9.6 (0.4) 50.1



IndusInd Bank

11/17/2014 43





Others - - - - -



NII 22,329 28,907 34,203 41,835 52,771

Growth (%) 31.0 29.5 18.3 22.3 26.1

Treasury Income 644 1,283 1,158 750 750

NTNII 12,985 17,622 22,881 29,539 38,020


Total Income 83,462 101,441 120,958 149,182 184,749

Growth (%) 31.0 21.5 19.2 23.3 23.8



Growth (%) 34.0 41.1 19.3 27.9 29.3

NPA Provisions 2,196 3,137 3,389 4,779 5,585

Investment Provisions 13 876 (664) (598) (538)


PBT 15,764 21,283 27,092 34,658 44,954

Tax Provisions 5,152 7,203 9,155 11,507 14,925


PAT 10,612 14,080 17,937 23,152 30,029

Growth (%) 32.2 32.7 27.4 29.1 29.7




Par Value 10 10 10 10 11

No. of equity shares 523 526 529 559 509

Equity 5,229 5,256 5,295 5,595 5,595

Networth 76,195 90,319 106,305 176,035 201,688

Adj. Networth 74,828 88,479 104,201 173,159 198,200

Deposits 541,167 605,023 741,344 911,853 1,152,582

Growth (%) 27.7 11.8 22.5 23.0 26.4

Low Cost deposits 158,674 196,909 252,996 318,237 411,472


Total Liabilities 733,065 870,259 1,091,159 1,382,603 1,718,348

Net Advances 443,206 551,018 687,882 853,662 1,072,199

Growth (%) 26.4 24.3 24.8 24.1 25.6

Investments 196,542 215,630 248,594 353,240 428,356

Total Assets 733,065 870,259 1,091,159 1,382,603 1,718,348


LilladherPrabhudas Cummins India

CMP: Rs1,033 TP: Rs1,175 Rating: BUY MCap: Rs286.4bn

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

Expecting strong bounce back in domestic markets: KKC highlighted that the traction in domestic market continues to be healthy and expect the same to continue. Segments like manufacturing, infrastructure, rail segment, Construction marines and mining segments are showing improving trend. KKC is focusing on increasing market share further in domestic market. Management has guided for domestic sales growth to be between 10-15% and export sales growth to be 0-5% for FY16. The company is working on improving cost structure and aggressively pursuing localization of new engines, benefits of which will be visible over next few quarters. In the longer term, KKC expects domestic market to grow in high teens and export market to grow in mid teens. The company remains confident about its long-term growth prospects, with our strong leadership in products, technologies, customer relationships and leadership talent

Outlook and Valuation: The stock is trading at 28.2x FY17E earnings. Cummins continues to be the best franchise in the Capital goods space. Outlook for Cummins continues to be positive, given the strong ramp-up in exports and likely improvement in market position, post changes in emission norms. Low capitalization utilization of 50-60% also leaves upside surprise on margin once volumes improve.

11/13/2015 44


Y/e March FY17E FY14 FY15 FY16E FY17E

Revenue (Rs m) 45,894 39,786 44,058 49,636 58,667

Growth (%) 11.5 (13.3) 10.7 12.7 18.2

EBITDA (Rs m) 8,349 6,986 7,351 8,438 10,560

PAT (Rs m) 6,846 5,676 7,044 8,098 10,169

EPS (Rs) 24.7 20.5 25.4 29.2 36.7

Growth (%) 26.8 (17.1) 24.1 15.0 25.6

Net DPS (Rs) 13.0 13.0 14.0 13.6 13.6




EBITDA margin (%) 18.2 17.6 16.7 17.0 18.0

RoE (%) 30.9 22.9 25.7 26.1 28.4

RoCE (%) 30.8 23.0 25.8 26.0 28.2

EV / sales (x) 6.2 7.2 6.5 5.8 4.8

EV / EBITDA (x) 34.0 40.9 38.9 33.9 26.9

PER (x) 41.8 50.5 40.7 35.4 28.2

P / BV (x) 12.0 11.2 9.8 8.7 7.4



Stock Performance

(%) 1M 6M 12M

Absolute (4.7) 18.1 23.2



Cummins India

11/13/2015 45



Net Revenue 45,894 39,786 44,058 49,636 58,667

Direct Expenses 28,874 24,241 27,225 31,023 36,315

% of Net Sales 62.9 60.9 61.8 62.5 61.9

Employee Cost 3,386 3,396 3,936 4,219 4,987

% of Net Sales 7.4 8.5 8.9 8.5 8.5


% of Net Sales 0.0 0.0 0.0 0.0 0.0

Other Expenses 5,285 5,162 5,547 5,956 6,805

% of Net Sales 11.5 13.0 12.6 12.0 11.6

EBITDA 8,349 6,986 7,351 8,438 10,560

Margin (%) 18.2 17.6 16.7 17.0 18.0

Depreciation 473 528 797 806 934

PBIT 7,876 6,459 6,553 7,632 9,626

Interest Expenses 46 42 45 - -

PBT 10,492 8,194 9,374 9,875 12,402

Total tax 2,872 2,175 1,515 1,778 2,232


PAT 6,846 6,019 7,859 8,098 10,169

Extraordinary Gain/(Loss) - 343 815 - -

Adjusted PAT 6,846 5,676 7,044 8,098 10,169




Share Capital 554 554 554 554 554




Total Debt 150 - - 200 400




Gross Block 11,703 16,203 21,203 25,203 29,203


Net Block 6,177 10,149 14,352 17,545 20,611

Capital Work in Progress 1,208 - - - -





Other Assets (328) (465) (631) (631) (631)

Total Assets 24,017 25,652 29,172 33,093 39,133


LilladherPrabhudas Glenmark Pharmaceuticals

CMP: Rs950 TP: Rs1,186 Rating: BUY MCap: Rs268.1bn

US generics: Past delays from regulators to bulk-up approvals in FY16E-17E: US revenues are expected to gain 33% CAGR in FY14-17E on the back of annual approvals of 12-15 products. Glenmark currently has a pipeline of 25 & 20 ANDAs which have been pending for more than 36 months & 24 months.

Zetia to lead revenues from key Para-IV drugs: Glenmark’s US pipeline for approvals in FY16E-18E comprises of limited competition drugs, FTF opportunities and branded generics. Zetia, however, will provide best opportunity with US$240m revenue potential in FY17E. Other key drugs are Welchol, Finacea, DDAVP, Zyvox, Ortho Tri-cyclen Lo and Nitroglycerin.

Investment in high-end drugs to provide sustainable growth : We believe that current rise in investments is mainly due to inclusion of high end drugs such as inhalers, oncology injectables and dermatology. We expect the company to venture into biosim opportunities, given the high commercial benefits and available expertise of R&D in biologics. With focus on key markets, clinical trials for MDI inhalers is expected in the near term for markets which allow generic inhalers as automatic substitute.

India sales continue to outperform industry: With support from the strong brands and expansion of market share by 100bps (3.2%) in FY10-14, we expect domestic sales growth to outperform industry growth and achieve 18% CAGR in FY15-18E. The company’s core therapy contributes 85% of domestic revenues in FY15.

Peer disparity in valuing R&D potentials: Compared to its peers (SPARC, Dr Reddy’s) for their investments in R&D of NDDS/NDA products with potential of much lower revenues, we find value of Glenmarks’ annual investments of US$45-50m for NCE/biologics remains non-existent in the company’s current valuation. To derive comparable EPS of Glenmark with peers, we add back US$50m R&D costs of NCE/NBE research, post adjustment of tax benefits/shields to core earnings. We forecast adj. EPS of Rs36.4, Rs50, Rs66.7 in FY15E, FY16E and FY17E, respectively. We maintain ‘BUY’

11/13/2015 46



Revenue (Rs m) 49,935 60,052 65,953 82,953 113,977

Growth (%) 24.2 20.3 9.8 25.8 37.4

EBITDA (Rs m) 10,296 13,179 11,751 19,660 33,623

PAT (Rs m) 6,012 5,423 4,753 11,369 21,574

EPS (Rs) 22.2 20.0 17.5 40.3 76.5

Growth (%) 30.4 (9.9) (12.4) 130.0 89.8

Net DPS (Rs) 2.0 2.0 2.0 2.0 2.0




EBITDA margin (%) 20.6 21.9 17.8 23.7 29.5

RoE (%) 23.3 18.9 15.9 27.2 33.8

RoCE (%) 13.6 11.2 8.8 15.5 23.7

EV / sales (x) 5.6 4.7 4.4 3.5 2.5

EV / EBITDA (x) 27.1 21.4 24.9 14.9 8.5

PER (x) 42.8 47.5 54.2 23.6 12.4

P / BV (x) 9.3 8.6 8.6 5.0 3.6



Stock Performance

(%) 1M 6M 12M

Absolute (6.7) 13.5 23.0



Glenmark Pharmaceuticals

11/13/2015 47



Net Revenue 49,935 60,052 65,953 82,953 113,977

Direct Expenses 19,563 22,240 23,199 29,034 36,473

% of Net Sales 39.2 37.0 35.2 35.0 32.0

Employee Cost 7,829 10,261 12,024 15,180 18,236

% of Net Sales 15.7 17.1 18.2 18.3 16.0

SG&A Expenses 12,246 14,371 18,978 19,079 25,645

% of Net Sales 24.5 23.9 28.8 23.0 22.5


% of Net Sales 0.0 0.0 0.0 0.0 0.0

EBITDA 10,296 13,179 11,751 19,660 33,623

Margin (%) 20.6 21.9 17.8 23.7 29.5

Depreciation 1,270 2,168 2,600 3,168 3,782

PBIT 9,026 11,011 9,151 16,492 29,841


PBT 7,534 9,240 7,814 14,889 28,230

Total tax 1,107 1,513 1,190 3,534 6,493


PAT 6,012 5,423 4,753 11,369 21,574


Adjusted PAT 6,012 5,423 4,753 11,369 21,574




Share Capital 271 271 271 282 282




Total Debt 27,649 32,670 42,849 35,272 28,062

Other Liabilities(net) 1,095 654 1,217 1,319 1,360

Deferred Tax Liability (3,803) (5,142) (2,750) (3,048) (3,613)


Gross Block 32,968 37,786 42,734 48,004 53,274


Net Block 27,682 30,357 32,704 34,806 36,294






Other Assets 604 602 580 638 701

Total Assets 52,571 58,015 71,320 87,172 99,918


LilladherPrabhudas GlaxoSmtihKline Consumer Healthcare

CMP: Rs5,961 TP: Rs6,617 Rating: BUY MCap: Rs250.7bn

We are cutting FY16 and FY17 EPS estimates by 2-5% following 1.5% volume decline in MFD business (exports and sachets) despite share gain in both Horlicks and Boost. Input scenario remains favourable as SMP prices are down 43% YoY. Volume growth should start recovering as the anniversary of sachets price increase gets over in 3Q. GSK can gain from new OTC launches like Otrivine and Voltaren and is looking at sustaining above 20% sales CGAR, although we would watch out for new marketing agreement with GSK Asia and GSK in 3QFY16. GSK remains a compelling play on recovery in discretionary spend and sustained growth in OTC marketing business. Retain Buy with a target price of Rs6617 (Rs7015 earlier).

Revenues up 1.1%, Adj.PAT up 1.9%: Revenues increased 1.1%, 5% adjusted for excise duty benefits phase out led by 31% growth in OTC income. Gross margins increased 390bps to 66.8% due to benign raw material prices. 220bps lower other expenditure was neutralised by 180bps higher staff cost and 80 bps higher ad spends. EBIDTA increased 21% as margins expanded by 354bps to 21.1%. PBT grew by 15% due to 12% higher depreciation and 7% decline in financial other income. Adj. PAT grew by 1.9 % at Rs1.63bn

Concall Takeaways: 1) MFD Volumes declined 1.5%, (flattish in 1Q). MFD market share increased 120bps led by 40bps gain in base Horlicks (BSLX), 50bps in extensions and 40bps in Boost 2) Rural slowdown and 20% increase in small pack price impacted volumes 3) Cost rationalisation in freight, supply chain and suppliers post Baddi phase out will enable lower other expenses on sustained basis 4) GSK has increased MFD prices by 7% in FY16 5) GSK is expanding distribution and has added 77000 outlets in 2QFY16 taking the total reach to 3.2mn 6) GSK is likely to negotiating the OTC marketing agreement post Novartis deal by 3QFY16 7) GSK is looking at launch of Otrivine Nasal Spray and Voltaren Analgesic from Novartis brands in coming quarters 8) GSK is likely to undertake a capex of Rs10b over the coming 3-4 years .

11/13/2015 48


Y/e Mar FY13 FY14 FY15 FY16E FY17E

Revenue (Rs m) 31,882 48,686 43,076 44,502 49,956

Growth (%) 15.3 52.7 (11.5) 3.3 12.3

EBITDA (Rs m) 5,741 8,728 7,301 8,674 10,015

PAT (Rs m) 4,367 6,747 5,836 6,772 7,835

EPS (Rs) 103.8 160.4 138.8 161.0 186.3

Growth (%) 25.3 54.5 (13.5) 16.0 15.7

Net DPS (Rs) 45.0 45.0 55.0 70.0 85.0




EBITDA margin (%) 18.0 17.9 16.9 19.5 20.0

RoE (%) 34.9 42.5 29.7 29.8 30.0

RoCE (%) 34.7 42.3 29.6 29.7 29.9

EV / sales (x) 7.9 5.1 5.8 5.6 5.0

EV / EBITDA (x) 43.7 28.7 34.3 28.8 24.9

PER (x) 57.4 37.2 43.0 37.0 32.0

P / BV (x) 18.4 13.8 11.9 10.3 9.0



Stock Performance

(%) 1M 6M 12M

Absolute (1.8) (7.2) 3.5

Relative to Sensex 3.1 (2.1) 11.1


GlaxoSmithKline Consumer Healthcare

11/13/2015 49



Net Revenue 31,882 48,686 43,076 44,502 49,956

Direct Expenses 13,619 20,501 17,926 17,448 19,459

% of Net Sales 42.7 42.1 41.6 39.2 39.0

Employee Cost 3,011 4,701 4,313 4,895 5,495

% of Net Sales 9.4 9.7 10.0 11.0 11.0

SG&A Expenses 8,772 13,634 12,212 12,327 13,738

% of Net Sales 27.5 28.0 28.3 27.7 27.5

Other Expenses 738 1,123 1,324 1,157 1,249

% of Net Sales 2.3 2.3 3.1 2.6 2.5

EBITDA 5,741 8,728 7,301 8,674 10,015

Margin (%) 18.0 17.9 16.9 19.5 20.0

Depreciation 361 625 621 610 665

PBIT 5,381 8,102 6,680 8,064 9,350


PBT 6,487 10,161 8,891 10,448 11,911

Total tax 2,120 3,413 3,055 3,676 4,076


PAT 4,367 6,747 5,836 6,772 7,835


Adjusted PAT 4,367 6,747 5,836 6,772 7,835




Share Capital 421 421 421 421 421






Deferred Tax Liability (616) (903) (1,043) (1,181) (1,333)


Gross Block 6,562 8,546 10,593 12,257 13,257


Net Block 1,938 3,399 4,917 5,971 6,306

Capital Work in Progress 1,972 385 423 500 1,500




Net Current Assets (5,412) (4,702) (7,760) (7,699) (8,711)

Other Assets (0) - - - -

Total Assets 13,108 17,318 20,186 23,288 26,680


LilladherPrabhudas

MID-CAP

11/13/2015 50

LilladherPrabhudas Hexaware Technologies


Hexaware Technologies’ (HEXW) maintained its revenue momentum in Q3CY15 with CC revenue growth of 3.5% (QoQ)/16.4% (YoY). Investment in new services over the last few quarters has helped the company increase wallet share and drive revenue growth. Company has been able to improve win rate in large deals and as a consequence has an order‐book of US$100mn from new clients. This will be an incremental boost to CY16 revenue growth. Management is confident about growth going forward which we believe will accelerate in H1CY16 after seasonality led pause in Q4CY15. Company is on track to achieve industry leading revenue growth in CY16/CY17 along with stable margins. Steady growth trajectory, reasonable valuations and attractive dividend yield (~4%) make Hexaware a compelling BUY.

Q3CY15 result overview – Decent operational performance: Q3CY15 revenues grew by 3.5% in CC terms and 3.1% QoQ in USD terms to US$125.1m (PLe: US$126.2m, Cons: US$127m). EBITDA margins for the quarter expanded by 71bps QoQ to 17.8% driven by currency depreciation and lack of certain one‐time charges. EPS for the quarter grew by 12.7% QoQ to Rs3.7 (PLe: Rs3.6, Cons: Rs3.7).

Improved deal win and client additions should translate into better revenue momentum: Company added 9 new clients during Q3CY15, which were well spread across verticals, geography and service lines. Moreover, the order booking from new clients in CY15 has crossed US$100m which will translate into revenue going ahead. Company is focusing on building a steady annuity stream of revenues and hence there is some revenue loss in APAC business.

Valuation & Recommendation – Retain “BUY” with a TP of Rs300 based on 16x CY17 EPS: Industry leading revenue growth, attractive dividend yield of ~4% and valuation discount to some of the mid‐cap peers make Hexaware a compelling BUY. Our target price of Rs300 (Earlier: Rs290), is based on 16x CY17 EPS of Rs18.7.

11/13/2015 51


Y/e Dec CY12 CY13 CY14 CY15E CY16E

Revenue (Rs m) 19,482 22,854 25,817 32,000 36,927

Growth (%) 34.3 17.3 13.0 23.9 15.4

EBITDA (Rs m) 4,074 5,124 4,776 5,715 6,590

PAT (Rs m) 3,276 3,792 3,251 4,166 4,859

EPS (Rs) 11.0 12.6 10.8 13.8 16.1

Growth (%) 21.4 14.5 (14.6) 28.2 16.6

Net DPS (Rs) 5.4 11.1 9.4 10.0 12.0




EBITDA margin (%) 20.9 22.4 18.5 17.9 17.8

RoE (%) 29.5 31.6 26.1 30.9 33.1

RoCE (%) 29.1 30.8 25.6 30.2 32.4

EV / sales (x) 3.9 3.3 3.0 2.4 2.1

EV / EBITDA (x) 18.7 14.8 16.0 13.3 11.7

PER (x) 23.9 20.9 24.4 19.0 16.3

P / BV (x) 6.5 6.6 6.1 5.6 5.2



Stock Performance

(%) 1M 6M 12M

Absolute 5.0 3.3 25.1



Hexaware Technologies

11/13/2015 52



Net Revenue 19,482 22,854 25,817 32,000 36,927

Direct Expenses 11,846 13,826 16,278 20,385 23,589

% of Net Sales 60.8 60.5 63.1 63.7 63.9


% of Net Sales 0.0 0.0 0.0 0.0 0.0

SG&A Expenses 3,562 3,904 4,763 5,899 6,748

% of Net Sales 18.3 17.1 18.4 18.4 18.3


% of Net Sales 0.0 0.0 0.0 0.0 0.0

EBITDA 4,074 5,124 4,776 5,715 6,590

Margin (%) 20.9 22.4 18.5 17.9 17.8

Depreciation 324 386 440 478 548

PBIT 3,750 4,738 4,336 5,237 6,043


PBT 4,040 4,796 4,246 5,411 6,310

Total tax 764 1,004 980 1,245 1,451


PAT 3,276 3,792 3,200 4,166 4,859

Extraordinary Gain/(Loss) - - (51) - -

Adjusted PAT 3,276 3,792 3,251 4,166 4,859




Share Capital 593 600 602 602 602






Deferred Tax Liability 130 276 119 119 119


Gross Block 6,435 7,337 7,730 8,850 10,142


Net Block 4,443 5,150 5,138 5,780 6,525

Capital Work in Progress 757 220 350 350 350





Other Assets 1,462 1,695 2,021 2,021 2,021

Total Assets 12,512 12,482 13,344 14,495 15,735


LilladherPrabhudas Jubilant Life Sciences


Overcoming strong headwinds across business verticals in Pharma and Chemical segments, Jubilant Life (JOL) is set to achieve turnaround on the back of CMO, Radiopharma and Symtet. The company’s Nutritional products and Radiopharma sales are expected to gain further momentum with price rise and approvals in Rubi-Fill and Magnevist in FY16E-18E. With price rise in value-added products of Pyridine, JOL invests in pyridine consuming front-end products which will benefit in better realizations in global markets including China.

While JOL’s revenues are likely to improve at 13% CAGR, we estimate EBITDA to grow at 60% CAGR in FY15-18E due to a) rise in CMO profitability, b) break-even in Symtet, c) higher realisation in Radio Pharma and d) no further recurrence of remediation costs (as it was Rs1.05bn in FY15). With achievement of milestones in key business verticals, we believe the high discount of JOL valuation vis-a-vis peers will be narrowed down and gradually re-rated to its normalised 1-yr forward PE 12x-14x by FY17 from the current PE 6x-8x. JOL trades at PE 11.9x and 8.6x of FY16E and FY17E, respectively.

We estimate EBITDA margin of 21% and 22.2% in FY16E and FY17E, respectively, though the company’s average EBITDA margin is at 20-23% with its normalised business in Pharma and Chemical (LSI) business.

Normalised PAT to grow at 53% CAGR in FY15-17E, respectively, with assumptions of 25% effective tax rate. Higher probability of profit in subsidiary with previous operating losses to provide upside potentials to our estimates.

Maintain JOL’s guidance of annual capex of Rs4-4.5bn in FY16E-17E. ROE and ROCE to grow to 22% and 15% in FY17 from (0.4)% and 3.5% in FY15, respectively.

11/13/2015 53



Revenue (Rs m) 51,128 57,216 57,761 65,443 73,547

Growth (%) 20.2 11.9 1.0 13.3 12.4

EBITDA (Rs m) 10,028 9,259 6,392 13,743 16,327

PAT (Rs m) 3,449 3,235 (97) 5,417 7,532

EPS (Rs) 21.6 20.9 (0.6) 34.0 47.3

Growth (%) (5.1) (3.2) NA NA 39.0

Net DPS (Rs) 3.0 3.0 3.0 3.0 3.0




EBITDA margin (%) 19.6 16.2 11.1 21.0 22.2

RoE (%) 14.6 12.7 (0.4) 19.0 21.0

RoCE (%) 9.0 8.1 3.4 11.6 14.3

EV / sales (x) 2.0 1.8 1.9 1.5 1.2

EV / EBITDA (x) 10.3 11.0 17.0 7.0 5.5

PER (x) 18.7 19.4 NA 11.9 8.6

P / BV (x) 2.6 2.4 2.6 2.0 1.6



Stock Performance

(%) 1M 6M 12M

Absolute 7.4 136.2 189.3



Jubilant Life Sciences

11/13/2015 54



Net Revenue 51,128 57,216 57,761 65,443 73,547

Direct Expenses 27,451 32,107 34,653 33,965 37,656

% of Net Sales 53.7 56.1 60.0 51.9 51.2

Employee Cost 9,626 11,052 10,903 12,041 13,238

% of Net Sales 18.8 19.3 18.9 18.4 18.0

SG&A Expenses 4,024 4,798 5,814 5,694 6,325

% of Net Sales 7.9 8.4 10.1 8.7 8.6


% of Net Sales 0.0 0.0 0.0 0.0 0.0

EBITDA 10,028 9,259 6,392 13,743 16,327

Margin (%) 19.6 16.2 11.1 21.0 22.2

Depreciation 2,538 2,812 2,880 3,277 3,527

PBIT 7,490 6,447 3,512 10,466 12,801


PBT 5,333 4,218 884 7,222 10,042

Total tax 1,524 696 805 1,806 2,511


PAT 1,527 1,090 (578) 5,417 7,532

Extraordinary Gain/(Loss) (1,922) (2,145) (481) - -

Adjusted PAT 3,449 3,235 (97) 5,417 7,532




Share Capital 159 154 159 159 159




Total Debt 42,452 43,953 47,931 37,336 31,389




Gross Block 68,701 73,306 73,621 78,121 82,621


Net Block 49,675 50,988 49,113 50,336 51,310






Other Assets 3,798 3,274 3,569 3,604 3,532

Total Assets 73,689 76,478 75,915 73,604 75,172


LilladherPrabhudas Sadbhav Engineering


Strong bidding momentum: Outlook on inflows continues to be strong: Order book at the end of Q2FY16 stood at Rs93bn, up 12% YoY. Order inflow in the quarter stood at Rs17.6bn (up 187% YoY). SEL has received orders worth Rs26bn in H1FY16 and expect further orders worth Rs25bn in H2FY16 largely from the Road sector. SEL continues to show healthy traction in the Road sector; it highlighted that bid for 27 tenders worth Rs180bn are likely to be submitted in the next three months. In mining segment, SEL expects two large MDO orders (Karnataka Power corporation/Neyveli Lignite corporation) to be finalized in the next six months..

BOT projects: Healthy traffic growth/improved financing should aid cash flow: SEL saw average traffic growth of ~8-10% across projects. They believe that traffic has bottomed out and expect steady recovery in traffic growth, going ahead. At SPV level SEL has been able to refinance debt in few projects (Aurangabad- Jalna/ Hyderabad- Yadgiri/ Bijapur-Hungud/ Dhule) and reduce interest cost by ~100-120bps, it expect benefit of ~ Rs 400-450mn crs in a 12 month period due to re-financing . They have also been able to renegotiate payment tenure for this project (more back ended payment) and been able to tie-up funds for the first major maintenance due between FY16-FY19 in the above 4 projects at various times. This measure should help improve cash flow of the projects in medium term.

Outlook and valuation: The stock is trading at Core PE of 12.5x FY17E earnings. We believe healthy order book (Rs82bn, 2.8x FY15 sales) provides strong visibility and an improving outlook in its key segments of Roads/mining/Irrigation augur well for future growth. Limited commitment on the current BOT portfolio and well-funded balance sheet makes it well-placed to benefit from improved ordering in the Road sector

11/17/2014 55



Revenue (Rs m) 18,110 23,581 29,702 35,669 45,087

Growth (%) (32.2) 30.2 26.0 20.1 26.4

EBITDA (Rs m) 1,557 2,494 3,006 3,974 5,201

PAT (Rs m) 741 1,064 1,141 1,594 2,142

EPS (Rs) 4.9 7.0 6.7 9.4 12.6

Growth (%) (47.5) 42.9 (4.1) 39.7 34.4

Net DPS (Rs) 0.5 0.7 0.7 0.7 0.7




EBITDA margin (%) 8.6 10.6 10.1 11.1 11.5

RoE (%) 9.3 11.9 9.8 11.1 13.3

RoCE (%) 9.6 10.3 8.4 9.4 11.2

EV / sales (x) 2.9 2.3 2.1 1.7 1.4

EV / EBITDA (x) 33.9 21.8 20.3 15.3 11.8

PER (x) 62.4 43.7 45.5 32.6 24.3

P / BV (x) 5.6 4.9 3.8 3.4 3.0



Stock Performance

(%) 1M 6M 12M

Absolute 1.2 6.2 22.7



Sadbhav Engineering

11/17/2014 56



Net Revenue 18,110 23,581 29,702 35,669 45,087

Direct Expenses 15,197 19,450 24,362 29,450 37,199

% of Net Sales 83.9 82.5 82.0 82.6 82.5

Employee Cost 428 602 974 891 1,110

% of Net Sales 2.4 2.6 3.3 2.5 2.5

SG&A Expenses 928 1,035 1,360 1,355 1,578

% of Net Sales 5.1 4.4 4.6 3.8 3.5


% of Net Sales 0.0 0.0 0.0 0.0 0.0

EBITDA 1,557 2,494 3,006 3,974 5,201

Margin (%) 8.6 10.6 10.1 11.1 11.5

Depreciation 318 474 817 1,070 1,217

PBIT 1,239 2,020 2,189 2,903 3,984

Interest Expenses 844 958 891 954 1,116

PBT 1,108 1,205 1,462 2,125 3,060

Total tax 368 (242) 321 531 918

Effective Tax rate (%) 33.2 (20.1) 22.0 25.0 30.0

PAT 741 1,064 1,141 1,594 2,142


Adjusted PAT 741 1,064 1,141 1,594 2,142




Share Capital 151 152 170 170 170




Total Debt 6,731 8,633 9,383 9,433 9,983




Gross Block 5,148 7,301 8,601 9,901 11,201


Net Block 3,303 4,982 5,465 5,695 5,777







Total Assets 15,373 18,562 23,255 24,761 27,314


LilladherPrabhudas Allcargo Logistics


Allcargo logistics (AGL) is expected to generate a cash profit of Rs9.8bn over FY15-FY17E period against the current Net Debt of Rs3.1bn. These cash generations is expected from, (i) a steady 7-9% growth in the global NVOCC business, (ii) a 8-10% growth in the domestic NVOCC businesss, (iii) a steady 10% growth in the domestic CFS business and, (iv) sharp increase in the capacity utilisation of the Project and Engineering Services business catapulting AGLL into a net cash company by FY17. The stock at Rs322 trades at a one year forward multiple of 12.2x Sept 16 earnings, a significant discount to the market multiple of 16.4x one year forward multiple, offering ample scope for a re-rating. Performance in NVOCC segment has been robust with a 22% CAGR volume growth over FY13-FY15 period despite weak global growth, as AGL primarily operates in LCL segment which is lesser impacted compared to the FCL trade. Strong domestic presence across CFS and Project Engineering space is expected to bode well for AGL as it benefits from the domestic capex cycle recovery, with the current capacity utilisation at 95% against the FY15 average of 79%. AGL trades at 11.7xFY17E earnings, P/BV of 1.7x, D/E ratio of 0.11x and EV/EBITDA of 5.7x which we feel is reasonable entry point considering 20.4% CAGR PAT over FY15-FY17E period, improving return ratios and strong management bandwidth. We initiate coverage on AGL with a ‘BUY’ and a Target Price of Rs386, valuing the company on PER of 14x FY17E.

Strong turnaround in the Project Engineering and Crane Rental business: AGL is experiencing high equipment utilization (95% in Q1FY16) and improving pricing in its crane rental business, which in our opinion, can double the EBIT from 0.7bn to 1.35bn over FY15-FY17E period.

CFS Business continues to remain a cash cow: With a capacity to handle 0.5m TEUs per annum, AGL’s CFS division has delivered strong operating cash flows over FY10-FY15 period (average EBIT of ~Rs1.1bn for the last five years).

11/17/2014 57



Revenue (Rs m) 39,263 48,594 56,288 60,930 67,141

Growth (%) (8.3) 23.8 15.8 8.2 10.2

EBITDA (Rs m) 3,562 3,913 4,754 5,737 6,301

PAT (Rs m) 1,697 1,493 2,399 2,945 3,476

EPS (Rs) 13.5 11.8 19.0 23.3 27.5

Growth (%) (38.3) (12.0) 60.6 22.7 18.0

Net DPS (Rs) 1.5 1.5 2.0 2.5 3.0




EBITDA margin (%) 9.1 8.1 8.4 9.4 9.4

RoE (%) 11.0 8.8 13.0 14.5 15.0

RoCE (%) 11.5 9.4 13.3 15.7 17.1

EV / sales (x) 1.3 1.1 0.9 0.7 0.6

EV / EBITDA (x) 13.9 13.3 10.1 7.5 6.3

PER (x) 25.8 29.3 18.2 14.9 12.6

P / BV (x) 2.8 2.4 2.3 2.0 1.8



Stock Performance

(%) 1M 6M 12M

Absolute 12.4 11.8 20.1



Allcargo Logistics

11/13/2015 58



Net Revenue 39,263 48,594 56,288 60,930 67,141

Direct Expenses 26,995 34,039 39,381 41,931 46,622

% of Net Sales 68.8 70.0 70.0 68.8 69.4

Employee Cost 5,634 7,276 8,566 9,423 9,988

% of Net Sales 14.3 15.0 15.2 15.5 14.9


% of Net Sales 0.0 0.0 0.0 0.0 0.0

Other Expenses 3,073 3,366 3,587 3,839 4,230

% of Net Sales 7.8 6.9 6.4 6.3 6.3

EBITDA 3,562 3,913 4,754 5,737 6,301

Margin (%) 9.1 8.1 8.4 9.4 9.4

Depreciation 1,474 1,755 1,574 1,621 1,740

PBIT 2,088 2,158 3,180 4,116 4,562


PBT 2,335 1,960 3,171 3,976 4,741

Total tax 512 416 700 954 1,185


PAT 1,697 1,493 2,399 2,945 3,476


Adjusted PAT 1,697 1,493 2,399 2,945 3,476




Share Capital 252 252 252 252 252




Total Debt 7,234 9,875 6,095 3,233 2,681


Deferred Tax Liability 943 1,045 1,101 1,211 1,332


Gross Block 18,850 20,869 20,585 21,585 23,085


Net Block 13,687 13,775 12,302 11,681 11,442

Capital Work in Progress 139 236 302 302 302





Other Assets 4,602 8,710 8,314 7,898 7,503

Total Assets 24,483 29,653 26,735 26,622 29,225


LilladherPrabhudas JK Lakshmi Cement


JK Lakshmi cement (JKLC) is the 5th largest cement producer in North India with a ~7% market share in the region with a capacity of 9mtpa. This backed by 1) one of the most efficient operations, 2) entry into the most profitable eastern region with a capacity of 1.7mtpa, and 3) increasing consolidation in Gujarat (~40% of its total volumes) ranks JKLC as one of our top pick in the sector with a PT of Rs450 at EV/T of US$100 FY17E capacity of 12m tonnes.

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

Greenfield expansion in Durg to drive the next round of volume growth: JKLC has commissioned a 1.7mtpa cement plant in Durg, Chhattisgarh at a cost of Rs17.5bn. Thanks to better market dynamics of the region on the front of consolidation and demand outlook, the addition would improve the earnings profile of JKLC.

Concerns on over-leveraged balance sheet overstated: Our interaction suggest that investors are concerned on the company due to steep increase in interest cost and high gearing. On the contrary, we believe that growth in EBITDA (on the back of capacity expansion) would more than off-set the increase in interest and depreciation cost. We expect 27% CAGR (FY15-17) in PAT even after 37%/30% increase in interest and depreciation cost. On the leverage, company is comfortably placed with D/E and Net debt/EBITDA at 0.9x and 2.1x FY17.

11/13/2015 59



Revenue (Rs m) 20,550 20,566 23,071 27,266 33,603

Growth (%) 19.6 0.1 12.2 18.2 23.2

EBITDA (Rs m) 4,287 3,020 3,495 3,142 5,367

PAT (Rs m) 1,879 1,073 1,497 (152) 1,695

EPS (Rs) 16.0 9.1 12.7 (1.3) 14.4

Growth (%) 40.9 (42.9) 39.5 (110.2) (1,212.2)

Net DPS (Rs) 2.5 2.0 2.0 (0.3) 3.6




EBITDA margin (%) 20.9 14.7 15.1 11.5 16.0

RoE (%) 15.4 8.4 11.4 (1.2) 12.4

RoCE (%) 9.9 5.7 6.7 3.4 8.7

EV / sales (x) 2.5 2.7 2.6 2.2 1.8

EV / EBITDA (x) 12.2 18.3 16.9 19.1 11.0

PER (x) 22.7 39.7 28.5 (279.6) 25.1

P / BV (x) 3.4 3.3 3.2 3.2 3.0

Net dividend yield (%) 0.7 0.6 0.6 (0.1) 1.0


Stock Performance

(%) 1M 6M 12M

Absolute (3.1) 1.9 (1.5)



JK Lakshmi Cements

11/13/2015 60



Net Revenue 20,550 20,566 23,071 27,266 33,603

Direct Expenses 8,926 9,732 10,798 12,841 14,843

% of Net Sales 43.4 47.3 46.8 47.1 44.2

Employee Cost 1,132 1,230 1,461 1,826 2,100

% of Net Sales 5.5 6.0 6.3 6.7 6.3

SG&A Expenses 4,215 4,568 5,162 6,565 7,671

% of Net Sales 20.5 22.2 22.4 24.1 22.8

Other Expenses 1,989 2,016 2,155 2,892 3,622

% of Net Sales 9.7 9.8 9.3 10.6 10.8

EBITDA 4,287 3,020 3,495 3,142 5,367

Margin (%) 20.9 14.7 15.1 11.5 16.0

Depreciation 1,489 1,352 1,119 1,670 1,751

PBIT 2,798 1,668 2,376 1,472 3,616

Interest Expenses 835 772 907 1,903 1,792

PBT 2,354 1,154 1,118 (328) 2,103

Total tax 596 229 162 (102) 408


PAT 1,757 925 956 (226) 1,695

Extraordinary Gain/(Loss) (122) (148) (541) (74) -

Adjusted PAT 1,879 1,073 1,497 (152) 1,695




Share Capital 589 589 589 589 589




Total Debt 13,370 16,313 18,992 19,492 18,692




Gross Block 26,782 29,305 40,946 41,346 44,506


Net Block 14,346 15,715 25,825 24,555 25,964







Total Assets 27,466 30,990 34,245 34,268 35,003


LilladherPrabhudas NIIT Technologies


After a great Q2 performance, NIIT Tech expects further margin improvement in H2FY16, which should support earnings upgrade. Beat on revenue in Q2FY16 was despite lower hardware sale, a result of the company strategy to de‐focus on it’s Government business. Margins were the strongest in last 3 years. However, a soft order intake of $80m (‐18% QoQ) was one negative. NIIT Tech, after a tepid performance in FY15, is coming back on track. Retain our “BUY” rating.

Q2FY16 Result overview – Strong beat on revenue and margin: NIIT Tech reported an overall revenue growth of 3.5% QoQ in USD terms to US$104.7m (PLe: US$104.2m, Cons.: US$104.1m), and 5.7% QoQ in INR terms to Rs6,779m (PLe: Rs6,774m, Cons: Rs6,769m). Excluding hardware drop, core services revenues grew 6.1% QoQ in CC terms. Organic CC core services revenue growth was 4.3% QoQ. EBITDA margins expanded by 134bps QoQ at 17.6% (PLe: 16.7%, Cons: 16.7%) due to the increased focused on International business. This is the highest margin the company has reported in the last 14 Quarters.

Soft order book was the one negative in last quarter: Fresh Order intake for NIIT Tech was $80m (5yr avg.: $117m) driven by 36% win from the US and 42% from Europe, that includes higher component of new engagements from new logos. The order executable over the next 12 months was stable QoQ at $300m.

Valuation & Recommendation – Retain “BUY”, with a TP of Rs625 based on 12x Sep‐17 EPS: Client specific issues are behind and run down in Govt. business is almost over. Core markets (US and Europe) have done well in H1FY16. We expect further margin improvement in FY16 and revenue recovery in FY17.

11/13/2015 61



Revenue (Rs m) 20,213 23,050 23,724 27,437 30,017

Growth (%) 28.2 14.0 2.9 15.6 9.4

EBITDA (Rs m) 3,296 3,516 3,456 4,711 5,163

PAT (Rs m) 2,133 2,307 1,939 2,772 2,990

EPS (Rs) 35.4 38.0 31.8 45.4 49.0

Growth (%) 7.1 7.3 (16.4) 42.9 7.9

Net DPS (Rs) 8.5 9.0 12.0 15.0 18.0




EBITDA margin (%) 16.3 15.3 14.6 17.2 17.2

RoE (%) 21.3 19.1 14.5 19.1 18.1

RoCE (%) 20.6 18.9 14.4 18.9 18.0

EV / sales (x) 1.6 1.4 1.4 1.2 1.1

EV / EBITDA (x) 9.9 9.4 9.5 7.0 6.1

PER (x) 16.3 15.2 18.2 12.7 11.8

P / BV (x) 3.2 2.7 2.6 2.3 2.0



Stock Performance

(%) 1M 6M 12M

Absolute 29.1 53.3 48.8



NIIT Technologies

11/13/2015 62



Net Revenue 20,213 23,050 23,724 27,437 30,017

Direct Expenses 13,159 15,166 15,656 17,304 18,965

% of Net Sales 65.1 65.8 66.0 63.1 63.2


% of Net Sales 0.0 0.0 0.0 0.0 0.0

SG&A Expenses 3,758 4,368 4,612 5,422 5,889

% of Net Sales 18.6 19.0 19.4 19.8 19.6


% of Net Sales 0.0 0.0 0.0 0.0 0.0

EBITDA 3,296 3,516 3,456 4,711 5,163

Margin (%) 16.3 15.3 14.6 17.2 17.2

Depreciation 567 619 916 1,114 1,245

PBIT 2,729 2,897 2,540 3,597 3,918


PBT 2,936 3,185 2,559 3,776 4,119

Total tax 751 803 541 925 1,050


PAT 2,133 2,307 1,139 2,772 2,990

Extraordinary Gain/(Loss) - - (800) - -

Adjusted PAT 2,133 2,307 1,939 2,772 2,990




Share Capital 602 607 610 610 610




Total Debt 60 53 49 49 49




Gross Block 7,020 7,508 9,336 10,708 12,209


Net Block 4,383 4,534 5,579 5,837 6,093

Capital Work in Progress 277 1,286 1,203 1,203 1,203





Other Assets 491 778 1,134 1,134 1,134

Total Assets 11,453 13,790 14,149 16,084 18,054


LilladherPrabhudas Va Tech Wabag

CMP: Rs669 TP: Rs1,000 Rating: BUY MCap: Rs36.3bn

Va Tech Wabag (VATW) is amongst the key beneficiaries of the strong capex of various government and funding agencies on providing improved water sources both domestically and globally. The water opportunity is huge with Rs13.5trn estimated to be invested in urban water supply and sewerage in India alone over the next 20 years. VATW also benefits from a strong presence in fast growing water markets of Philippines, Turkey, Romania and the MENA region. Strong book-to-bill ratio of 2.24x and growing visibility of new orders makes us believe that VATW is best placed to capture this multi-year growth opportunity and achieve its Euro1bn turnover vision over the next 8 years (at a CAGR 15%). VATW trades at 20.1x FY17E earnings and 11.2x EV/EBITDA FY17E, which are at a premium to its average valuations, post listing in 2010. VATW has been consolidating over the last 15 months primarily on account of the losses built in Oman desalination project. With Oman losses factored in by the management on conservative accounting policy, we feel VATW can deliver a 26% earnings growth over FY15-FY17E period. Further, VATW is an attractive proposition due to continuous flow of new orders, excellent project execution track record, marquee client reference list, asset-light business model, cash rich balance sheet and limited options available in water space. All these factors makes VATW a long-term portfolio stock. Maintain “BUY”

Key catalysts include: 1) Desalination projects worth Rs50bn to be awarded in Tamil-Nadu, 2) Multiple domestic opportunities through the Ganga Rejuvenation plan (Rs510bn), Swachh Bharat Mission (Sewage and Solid waste management - Rs500bn) and creation of 100 smart cities (Rs480bn). Assuming even if 25-30% of announcements materializes, incremental opportunity would provide significant business traction.

Strong past performance, order-book of Rs 71bn and cash of Rs2.1bn offers comfort: With Rs71bn order book spread evenly across segments and geographies, VATW provides strong visibility. Further, cash of Rs2.1bn provides strength to operations and cash-in on emerging opportunities as and when they arise.

11/13/2015 63



Revenue (Rs m) 16,019 22,301 24,284 27,312 30,733

Growth (%) 11.4 39.2 8.9 12.5 12.5

EBITDA (Rs m) 1,371 2,005 2,044 2,520 3,056

PAT (Rs m) 885 1,133 1,101 1,263 1,747

EPS (Rs) 16.7 21.3 20.3 23.3 32.2

Growth (%) 17.1 27.8 (4.8) 14.7 38.3

Net DPS (Rs) 3.5 4.0 4.0 4.5 5.5




EBITDA margin (%) 8.6 9.0 8.4 9.2 9.9

RoE (%) 13.0 14.6 12.6 13.3 16.3

RoCE (%) 11.7 12.5 11.0 11.7 12.5

EV / sales (x) 2.1 1.5 1.4 1.3 1.1

EV / EBITDA (x) 24.4 16.7 17.1 13.7 11.2

PER (x) 40.2 31.4 33.0 28.8 20.8

P / BV (x) 5.0 4.2 4.0 3.6 3.2



Stock Performance

(%) 1M 6M 12M

Absolute 0.4 (6.9) (16.6)



Va Tech Wabag

11/13/2015 64



Net Revenue 16,019 22,301 24,284 27,312 30,733

Direct Expenses 11,766 16,979 18,328 20,452 23,000

% of Net Sales 73.5 76.1 75.5 74.9 74.8

Employee Cost 2,058 2,217 2,777 3,012 3,268

% of Net Sales 12.8 9.9 11.4 11.0 10.6


% of Net Sales 0.0 0.0 0.0 0.0 0.0

Other Expenses 824 1,099 1,136 1,329 1,410

% of Net Sales 5.1 4.9 4.7 4.9 4.6

EBITDA 1,371 2,005 2,044 2,520 3,056

Margin (%) 8.6 9.0 8.4 9.2 9.9

Depreciation 109 150 109 157 169

PBIT 1,262 1,855 1,935 2,363 2,887


PBT 1,333 1,662 1,671 1,922 2,667

Total tax 456 526 566 654 907


PAT 885 1,133 1,101 1,263 1,747


Adjusted PAT 885 1,133 1,101 1,263 1,747




Share Capital 53 53 109 109 109

Reserves & Surplus - - - - -



Total Debt 822 1,583 1,806 2,448 2,766




Gross Block 987 1,752 2,521 2,721 2,921

Less: Depreciation 477 560 607 764 934

Net Block 511 1,192 1,913 1,956 1,987

Capital Work in Progress 324 7 6 - -





Other Assets 268 792 229 250 280

Total Assets 9,115 11,847 13,305 15,317 17,287


LilladherPrabhudas Ashoka Buildcon


Order book visibility improves: Outstanding order book in the EPC segment for the quarter stood at Rs44.4bn (up 20% YoY) and inflow for H1 stood at ~Rs22bn (5 EPC and 2 BOT projects); further it is L1 in projects worth ~Rs4bn. ABL is targeting further inflow of Rs15-20bn in H2FY16. The company highlighted that tending activity continues to be good with tenders worth ~Rs4000-5000km likely to be awarded in the next six months. Management commented that the competitive intensity in domestic market has reduced in the recent bids. ABL entered international markets by bagging a Road EPC order in Maldives worth Rs2.3bn. The company is further targeting Africa and Mauritius in International markets. With improved order book and good outlook on ordering company, we expect the EPC revenue to grow by 10-25% over the next two years.

Favorable policy framework for private-public partnerships: After a long lull, we expect increased tendering under the BOT route. The government is planning ~15000km of road project awards through FY17, with an approximate EPC:BOT mix of 60:40. Our sense is that land acquisition and funding hurdles are getting sorted, and the government is acting on stuck projects . Recent data points to traffic growth of 5-6%, the highest in the last 3-4 years. We expect this momentum to continue in the medium term on account of a GDP uptick, higher industrial & mining activity

The stock is trading at 9x FY17 core earnings. We expect the EPC segment to deliver Sales and PAT CAGR of 17% and 28%, respectively, over FY15-17E and expect toll collection to grow at a CAGR of 114% over FY15-17E. We believe limited equity commitment in the current portfolio, funding from SBI Macquarie and a well-funded balance sheet makes it one of the beneficiaries of upcoming opportunities in the Road sector

11/13/2015 65



Revenue (Rs m) 18,527 17,949 23,197 28,293 34,159

Growth (%) 23.5 (3.1) 29.2 22.0 20.7

EBITDA (Rs m) 3,719 3,945 5,110 7,491 8,733

PAT (Rs m) 1,107 1,132 815 754 1,078

EPS (Rs) 7.0 7.2 5.2 4.0 5.8

Growth (%) (5.6) 1.8 (28.0) (21.6) 43.0

Net DPS (Rs) 1.5 1.8 1.8 1.8 1.8




EBITDA margin (%) 20.1 22.0 22.0 26.5 25.6

RoE (%) 10.6 9.8 6.3 4.8 5.7

RoCE (%) 5.0 3.9 3.9 4.9 5.5

EV / sales (x) 2.7 3.1 2.9 2.4 2.0

EV / EBITDA (x) 13.4 14.2 13.1 8.9 7.9

PER (x) 23.5 23.1 32.1 40.9 28.6

P / BV (x) 2.5 2.1 2.0 1.7 1.6



Stock Performance

(%) 1M 6M 12M

Absolute (1.5) 3.0 18.3



Ashoka Buildcon

11/13/2015 66



Net Revenue 18,527 17,949 23,197 28,293 34,159

Direct Expenses 13,824 12,988 16,712 19,317 23,634

% of Net Sales 74.6 72.4 72.0 68.3 69.2


% of Net Sales 0.0 0.0 0.0 0.0 0.0


% of Net Sales 0.0 0.0 0.0 0.0 0.0

Other Expenses 983 1,015 1,375 1,485 1,792

% of Net Sales 5.3 5.7 5.9 5.2 5.2

EBITDA 3,719 3,945 5,110 7,491 8,733

Margin (%) 20.1 22.0 22.0 26.5 25.6

Depreciation 1,324 1,389 1,517 2,468 2,725

PBIT 2,395 2,556 3,593 5,023 6,007


PBT 1,294 1,467 1,070 1,159 1,593

Total tax 577 688 796 993 1,114


PAT 1,107 1,132 815 754 1,078


Adjusted PAT 1,107 1,132 815 754 1,078




Share Capital 527 790 790 932 932




Total Debt 24,535 31,032 41,519 41,811 44,663




Gross Block 20,275 21,163 136,467 140,958 148,224


Net Block 15,000 14,499 128,286 130,309 134,850





Net Current Assets (76,101) (74,433) (93,691) (96,445) (119,291)

Other Assets 7 21 21 21 21

Total Assets 37,829 48,306 59,863 66,132 70,327


LilladherPrabhudas Disclaimer

11/13/2015 67

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

Accumulate : Outperformance to Sensex over 12-months

Reduce : Underperformance to Sensex over 12-months

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

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

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

Not Rated (NR) : No specific call on the stock

Under Review (UR) : Rating likely to change shortly

Prabhudas Lilladher Pvt. Ltd.

3rd Floor, Sadhana House, 570, P. B. Marg, Worli, Mumbai 400 018, India.

Tel: (91 22) 6632 2222 Fax: (91 22) 6632 2209

Rating Distribution of Research Coverage PL’s Recommendation Nomenclature

44.7% 42.7%

12.6%

0.0%0%

10%

20%

30%

40%

50%

BUY Accumulate Reduce Sell

% o

f To

tal C

ove

rage

DISCLAIMER/DISCLOSURES ANALYST CERTIFICATION We/I, Mr. R Sreesankar (B.Sc), Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. Terms & conditions and other disclosures: Prabhudas Lilladher Pvt. Ltd, Mumbai, India (hereinafter referred to as “PL”) is engaged in the business of Stock Broking, Portfolio Manager, Depository Participant and distribution for third party financial products. 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Neither PL nor any of its affiliates, its directors or its employees accepts any responsibility of whatsoever nature for the information, statements and opinion given, made available or expressed herein or for any omission therein. Recipients of this report should be aware that past performance is not necessarily a guide to future performance and value of investments can go down as well. The suitability or otherwise of any investments will depend upon the recipient's particular circumstances and, in case of doubt, advice should be sought from an independent expert/advisor. Either PL or its affiliates or its directors or its employees or its representatives or its clients or their relatives may have position(s), make market, act as principal or engage in transactions of securities of companies referred to in this report and they may have used the research material prior to publication. PL may from time to time solicit or perform investment banking or other services for any company mentioned in this document. PL is in the process of applying for certificate of registration as Research Analyst under Securities and Exchange Board of India (Research Analysts) Regulations, 2014 PL submits that no material disciplinary action has been taken on us by any Regulatory Authority impacting Equity Research Analysis activities. PL or its research analysts or its associates or his relatives do not have any financial interest in the subject company. PL or its research analysts or its associates or his relatives do not have actual/beneficial ownership of one per cent or more securities of the subject company at the end of the month immediately preceding the date of publication of the research report. PL or its research analysts or its associates or his relatives do not have any material conflict of interest at the time of publication of the research report. PL or its associates might have received compensation from the subject company in the past twelve months. PL or its associates might have managed or co-managed public offering of securities for the subject company in the past twelve months or mandated by the subject company for any other assignment in the past twelve months. PL or its associates might have received any compensation for investment banking or merchant banking or brokerage services from the subject company in the past twelve months. PL or its associates might have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company in the past twelve months PL or its associates might have received any compensation or other benefits from the subject company or third party in connection with the research report. PL encourages independence in research report preparation and strives to minimize conflict in preparation of research report. 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