sainathinvestment.comsainathinvestment.com/wp-content/uploads/2015/02/... · REVIEW | February 2015...

A quarter of muted growth 3QFY15 MOSL Aggregate: PAT

declined 6%; disappointment across sectors

Sensex EPS: FY16 EPS lower by 3% to INR1,703; downgrade of 9% since Nov

Valuations: Sensex trades at PE of 17x FY16 EPS; growth rebound is key

February 2015

Research Team ([email protected]) India Strategy

3QFY15 earnings a big miss!

REVIEW | February 2015 2

Discussion points

Macro Overview Growth challenges comes to the fore

Aggregate 3QFY15 Review Earnings declined 6%; commodities and domestic cyclicals lead the disappointment

Top Picks Stocks to watch

Markets & Valuation FY16 Sensex EPS growth at 20%; risk of downgrades; PE of 17x

Sector Snapshot 3QFY15 review and outlook

Annexure MOSL Universe – Annual Performance & Valuations


INDIA STRATEGY: Dec-14 Results Review MOSL Universe aggregate sales growth at 1%; PAT decline 6% Aggregate sales Ex. RMs grew 1% (est of 3%), EBITDA grew 1% (est of 7%), PAT decline 6%

(est of 6% growth).

Sensex earnings decline 7%, cyclicals disappoint. Sensex aggregate Sales declined 1.6% (v/s est of 0.5% growth), EBIDTA declined 0.6% (v/s est of 5.4% growth) and PAT declined 7% (v/s est of 3.8% growth).

Large-caps which delivered earnings above estimates are Ashok Leyland, BPCL, Bharat Forge, Cipla, Bajaj Finance, HCL Tech, Nestle, Britannia, Yes Bank, Emami and Dr Reddy’s.

Major disappointments in earnings were from Bank of Baroda, ONGC, ACC, BHEL, Coal India, Larsen & Toubro, Hero Moto, Sun Pharma, Ultratech Cement, HUL and Asian Paints.

Sensex EPS for FY16 reduced by 3%; we expect FY16 EPS to grow 20% to 1,703. Current trends raise the risk of downgrades. Expect FY15 EPS growth of 6% to 1,418.

Refer our Dec-14 Quarter Preview

Sensex EPS Trend (INR)

216 236 272 361 446 540

720 833 820 834

1,024 1,118 1,180

1,335 1,418

1,703

2,065

FY01

FY02

FY03

FY04

FY05

FY06

FY07

FY08

FY09

FY10

FY11

FY12

FY13

FY14

FY15

E

FY16

E

FY17

E

FY01-08: 21% CAGR

FY08-15: 8% CAGR

FY15-17E: 21% CAGR

FY93-15: 14% CAGR

6% 20%

21%

http://institution.motilaloswal.com/emailer/Research/INDIA STRATEGY-3QFY15 -20141231-MOSL-RP-PG321.pdf�


MACRO: Growth challenges comes to the fore The new GDP series has upgraded the growth estimates; we still believe the old series data

Corporate results show stress (MOSL universe)

Growth worries have been renewed both globally and not domestically too.

The GDP new series, showing a significant uptick in growth.

CSO however, clarified that this is indicative more of ‘value add’ rather than a pick up of volume of production and rise in employment.

Meanwhile a variety of volume and value based indicators continue to display weaknesses.

IIP (volume based) remained weak and showed rather rapid deceleration in FY15.

Corporate sales and profits are at multi-qtr low with a decline in earnings in 3QFY15.

Even bank credit growth barely recovered after falling to single digit levels.

Bank credit growth has plummeted

Volume indicators like IIP continued to show weakness with no growth indicators

5.1

6.9 7.4

8.0

4.5 4.7 5.6

FY13 FY14 FY15E FY16E

New series Old Series

-1.0

1.9

-0.8 -0.4

4.5

1.3

0.5

1Q

2Q

3Q

4Q

1Q

2Q

3Q

IIP growth (YoY %)

9

12

15

18

Apr-

13

Jun-

13

Aug-

13

Oct

-13

Dec

-13

Feb-

14

Apr-

14

Jun-

14

Aug-

14

Oct

-14

Dec

-14

Bank credit (YoY %)

3.6

12.9 12.9 11.1

13.5

4.8 0.8

-3.0

7.9

13.2

9.9

15.7

6.5

-6.4 1Q 2Q 3Q 4Q 1Q 2Q 3Q

FY14 FY15

Sales growth YoY (%) PAT growth YoY (%)


MACRO: Monetary policy on easing mode

Rates would need to be lower by ~150bp

Lowest CPI inflation in three decades The same is the case for WPI

Expect 150bp rate cut by RBI in total

3.3 3.4 0.5

0

2

4

6

8

10

12

14

FY84

FY86

FY88

FY90

FY92

FY94

FY96

FY98

FY00

FY02

FY04

FY06

FY08

FY10

FY12

FY14

FY16

E

WPI Inflation (YoY %)

Lowest WPI inflation in 3 decades

3.4 3.9 3.9 2

4

6

8

10

12

14

FY84

FY86

FY88

FY90

FY92

FY94

FY96

FY98

FY00

FY02

FY04

FY06

FY08

FY10

FY12

FY14

FY16

E

CPI Inflation (YoY %) Third lowest CPI inflation in 3 decades

1.5

0.6

3.1

2.1

RBI's Indicative real rate

Real rate - Long period avg

Real rate with 150bp cut

Real rate with 250bp cut

Real rate (%)

8.00

7.75

7.25

7.00

6.75

6.50

6.00

6.25

6.50

6.75

7.00

7.25

7.50

7.75

8.00

8.25 Ap

r-13

Ju

n-13

Au

g-13

O

ct-1

3 D

ec-1

3 Fe

b-14

Ap

r-14

Ju

n-14

Au

g-14

O

ct-1

4 D

ec-1

4 Fe

b-15

Ap

r-15

Ju

n-15

Au

g-15

O

ct-1

5 D

ec-1

5

Inflation has however, crashed in FY15 after slowing down for the last two years.

During FY16, CPI inflation is likely to stay low at 3.9% while WPI inflation is expected near zero at 0.5%.

Global commodity prices and government measures for food inflation are the two reasons for rapid slowdown in inflation.

While RBI has initiated the rate cut cycle by a 25bp cut in mid-January, its yet to align to new inflation reality.

This has resulted in real rates to rise way ahead of RBI’s indicative rate or historical benchmarks.

We expect a cumulative 150bp rate cut in 2015 to to align real rate and reduce arbitrage gap for foreign flows..


MACRO: Fiscal policy: focus on growth and reform Budget to broadly adhere to fiscal deficit plan Fall in oil subsidy enables the deficit correction

5.7

4.8 4.6

4.1

3.8

FY12 FY13 FY14 RE FY15 BE FY16 E

Fiscal deficit to GDP (%)

856

635

632

304

349

1,17

5

1,31

6

1,31

6

1,85

3

2,00

5

0.75

0.49 0.50

0.22 0.22

FY14 FY15 BE FY15 E FY16 E FY17E

Petroleum subsidy (INRb) Tax & Royalty (excl corporate tax and dividends) (INRb) Petroleum subsidy (as % of GDP) (RHS)

Note: Upstream burden assumed a@85% of incremental oil

Restraining expenditure to tax collection To reverse the declining share of plan expenditure

7.0 7.3 7.4 6.9 6.9

14.5 13.9 14.0

13.4 13.1

FY12 FY13 FY14 RE FY15 E FY16 E

Net tax revenue (% of GDP) Expenditure (As % of GDP)

32

29 30

28

29

FY12 FY13 FY14 RE FY15 E FY16 E

Plan expenditure (as % of total expenditure)

The FY16 Budget would provide an watershed for the new government in broadly adhereing to fiscal goals and at the same time supporting growth and ushering in reform.

The oil price decline presented a unique opportunity to correct fiscal deficit with subsidy now far less than the tax collected.

At the same time this is expected to provide some headroom to increase plan expenditure to boost growth.

The quality of expenditure is expected to improve giving higher credibility to government accounts. Defence likely to receive higher allocation.

Reform measures expected included big changes in taxation (including transfer pricing, GST and personal taxation). Inverted duty structure and plethora of exemptions may go in the area of indirect taxes.


Dec-14 Results Review: A quarter where everything went wrong

Commodity collapse led to a 30% decline in earnings No INR gains led to a muted earnings growth for exporters

Domestic cyclicals still reeling from a economic downcycle Consumer volume growth trends weak; no big benefits on RM yet

11

1

-19

3 7 7

10

-7

-30

Dec-12 Mar-13 June-13 Sep-13 Dec-13 Mar-14 June-14 Sep-14 Dec-14

Commodities (Energy, Metals and Coal India) PAT Growth YoY (%)

17 17 21

30

36 34

22

14 10


Technology and Healthcare Sector PAT Growth YoY (%)

-6

-14 -15

-30

-22

-10

0

13

-11


Domestic Cyclicals (PSU Banks, Capital Goods and Cement) PAT Growth YoY (%)

23

18

13

17

12 10 11 12 11


Consumer PAT Growth YoY (%)


Dec-14 Results Review: PAT decline by 6%, sales growth flat Aggregate sales growth at 1%; PAT decline 6% Aggregate sales Ex. RMs grew 1% (est of 3%), EBITDA grew 1% (est of 7%), PAT decline 6% (est of 6% growth).

Aggregate EBITDA margin (ex financials & RMs) declined 60bp YoY to 18.7% (v/s est of 19.8%). PAT margins declined 100bp YoY at 9.3% (vs est of 10.5%).

41 companies reported PAT higher than estimates, 69 companies below and 46 in-line. On EBITDA front, 35 companies exceeded estimates and 64 companies were below estimates.

Post this quarter, our Sensex EPS for FY16 has seen an downgrade of 3% to INR1,703 (growth of 20%), while FY15 EPS stood at INR1,418 (3% downgrade), growth of 6%.

Sector performance: Private Banks and Telecom led aggregate PAT growth; Oil & Gas and Metals drags

Sensex performance: PAT decline of 7% below est of 4% growth; 9 companies saw upgrades in FY16 EPS

Sales growth was led by Private Banks (19%), NBFCs (17%), Automobiles (10%)Telcom (8%) and Consumer (8%). Oil & Gas Ex RMs (-17%) and Capital Goods (-4%) reported negative sales growth.

EBITDA growth was led by Private Banks (21%), NBFCs (16%), PSU Banks (12%), Telecom (13%) and Consumer (10%). Oil & gas (Ex RMs) (-29%), Cap Goods (-16%) and Cement (-13%) contributed negatively.

PAT growth was led by Telecom (80%) and Private Banks (19%). Oil & Gas (Ex RMs) (-46%), Cap Goods (-16%), Utilities (-13%), Cement (-12%), PSU Banks (-8%), Automobiles (-8%) and Metals (-3%) were the major draggers.

PAT growth excluding Oil & Gas (ex. RMs) and Metals was 4%.

Sensex aggregate Sales declined 1.6% (v/s est of 0.5% growth), EBIDTA declined 0.6% (v/s est of 5.4% growth) and PAT declined 7% (v/s est of 3.8% growth).

5 companies in Sensex reported PAT above estimates; 14 companies below est; 11 reported in-line.

Fastest PAT growth companies are Bharti Airtel (136%), SBI (30%), Hindalco (20%), HDFC Bank (20%), Axis Bank (18%), Maruti Suzuki (18%) and Cipla (15%). Top PAT de-growth companies are BHEL (-69%), Tata Steel (-69%), GAIL (-58%), ONGC (-48%), Tata Power (-45%) and NTPC (-23%).


MOSL Universe: Private Banks and Telecom led aggregate PAT growth

REVIEW | February 2015

Sector 2015Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec MarE

Auto 44 47 50 49 52 50 52 63 80 56 50 47 76 50 71 81 78 89 74 75 89Capital Goods 46 22 28 33 50 23 28 34 65 26 27 28 60 17 22 26 55 15 20 22 46Cement 18 19 7 11 20 20 11 16 23 24 19 16 20 18 11 11 18 17 13 9 23Consumer 25 28 30 32 31 32 36 37 37 40 41 46 44 45 48 52 49 50 54 58 57Financials 116 129 129 145 123 130 152 164 194 180 181 191 206 201 181 193 213 221 211 207 239 Private Banks 32 32 36 42 45 42 46 53 58 55 58 68 72 69 72 80 85 82 85 94 99 PSU Banks 53 65 59 67 40 51 65 71 91 80 74 71 73 75 52 52 64 78 63 48 70 NBFC 31 31 33 36 38 36 41 40 45 45 49 51 60 56 57 61 64 61 64 65 71Healthcare 16 18 20 17 21 20 22 24 24 24 28 26 30 32 36 37 35 36 42 39 45Media 4 4 4 4 5 5 4 4 4 4 5 5 4 6 5 6 5 5 5 8 6Metals 90 79 71 71 95 90 72 63 72 78 57 45 78 62 61 61 76 67 73 62 71Oil & Gas 178 35 238 177 188 56 38 284 367 -251 342 217 403 95 203 137 346 187 152 72 257 Oil & Gas Ex RMs 108 105 143 156 128 150 178 139 139 154 173 166 133 139 174 175 165 149 149 95 176Real Estate 7 6 7 9 7 6 6 5 6 5 4 6 4 5 4 4 5 5 4 5 5Retail 1 2 2 2 2 2 2 2 2 2 2 3 2 2 2 2 3 2 3 2 4Technology 43 41 47 51 51 52 54 65 67 74 76 79 79 88 99 107 109 109 113 119 118Telecom 34 22 23 21 18 16 15 15 16 12 11 6 6 13 12 12 18 20 24 24 29Util ities 42 39 38 38 49 42 41 42 50 50 47 50 48 50 51 52 50 51 52 48 53Others 8 6 8 8 11 8 7 7 10 8 7 7 8 7 7 7 11 8 7 3 9MOSL Univ Excl RMs 604 566 608 646 663 645 682 682 788 738 728 721 799 735 785 828 889 846 844 777 969

2014201320122010 2011

10

Sectoral quarterly PAT trend MOSL Universe quarterly PAT trend (INR b)

Note: Comparable Universe, excludes Coal India, Just Dial, Prestige Estates, Bharti Infratel, Alembic Pharma, Sesa Sterlite (due to merger), Wipro (due to demerger), Rattan India Power and Hathway.


3QFY15: PAT Margins make a new low; much below long

Dec-14 EBITDA margin (ex RMs and Financial) at 18.7%

Dec-14 PAT margin (ex RMs and Financial) at new low of 9.3%

23.1

20.6

18.5 19.0

22.1

21.3 22.1 22.2 22.1

21.6 21.9

20.5 20.3 19.8

18.8 19.1 19.4 18.9

18.6

19.5 18.9 19.1 19.3 19.1

19.5 19.0

18.7

1Q

2Q

3Q

4Q

1Q

2Q

3Q

4Q

1Q

2Q

3Q

4Q

1Q

2Q

3Q

4Q

1Q

2Q

3Q

4Q

1Q

2Q

3Q

4Q

1Q

2Q

3Q

FY09 FY10 FY11 FY12 FY13 FY14 FY15

MOSL Universe EBITDA Margin LPA: 20.1%

14.6

13.2

10.8 10.9

12.2

11.7 11.6

12.9 12.4 12.1 12.4

12.0 11.7 11.1

10.6 11.3 11.0

10.2 10.0 10.5

9.9 10.0 10.3 10.6 10.3 10.0 9.3

1Q

2Q

3Q

4Q

1Q

2Q

3Q

4Q

1Q

2Q

3Q

4Q

1Q

2Q

3Q

4Q

1Q

2Q

3Q

4Q

1Q

2Q

3Q

4Q

1Q

2Q

3Q

FY09 FY10 FY11 FY12 FY13 FY14 FY15

MOSL Universe PAT Margin LPA: 11.2%


Sensex: Sales/EBITDA decline after 20 quarters of growth Trend in Sensex Sales Growth (YoY %): Sensex sales de-growth of 2%

Trend in Sensex EBITDA Growth (YoY %): EBITDA de-growth at 1%

20 27

34

23 21 20 16

22

33 30 32

22

37 36 38 44

31 30

6

-5 -11

-6

19

32 28

22 18

23 26 23 25

19 17 11 8 6

2

13 14 12 15

3

-2 -1

1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q

FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15

LPA:19%

17 24

37

24 26

10 11 18

25 31

37

22 27 29

20 23 28

18

-5 -13 -12

-4

31

50

26 27 20

9 15 13

6

17

8 1

8 5 2

14 17 12

18

6

-1

6



LPA:16%


Trend in Sensex PAT Growth (YoY %)

Sensex Performance: PAT decline 7% v/s estimate of 4% growth

3QFY15 PAT GROWTH (YOY, %): Bharti Airtel, SBI, Hindalco, HDFC Bank, Axis Bank and Maruti among key growth leaders; BHEL, Tata Steel, GAIL, ONGC and Tata Power among negative contributors

25 28

39 42

33

24

12 6

31 30

43

33 30 26

17 19 25 23

-7 -15

-25 -21

20

44

26 27 22

-2

12 15

6

29

14

4 7

0

-4

11 19

11

19

6

-7

10



LPA:16%

135

30 20 20 18 18 15 14 13 12 11 10 9 5 3 1 0

-5 -7 -7 -8 -16 -19 -21 -22 -23

-45 -48 -58 -69 -69

Bhar

ti A

irte

l

SBI

Hin

dalc

o

HD

FC B

ank

Axi

s Ba

nk

Mar

uti S

uzuk

i

Cipl

a

ICIC

I Ban

k

Info

sys

HD

FC

Her

o M

oto

ITC

Wip

ro

TCS

Sun

Phar

ma

Dr R

eddy

’s

HU

L

Baja

j Aut

o

L&T

Sens

ex

Relia

nce

Inds

.

Coal

Indi

a

Sesa

Ste

rlite

Tata

Mot

ors

M&

M

NTP

C

Tata

Pow

er

ON

GC

GA

IL

Tata

Ste

el

BHEL


Less than 1/4th of the Sensex companies grew PAT >15%


Key sectoral trends Capital Goods: Revenue growth remains in red; BTB inches higher Auto: JLR contributes 87% PAT share for 3QFY15; a new high

Cement: Volume growth moderates, weakness in pricing dents margins

Consumer: Sales growth at multi qtr low

45 49 49 54 47 46 59 95 50 47 44 76 45 66 77 72 85 70 68

38 34 41 39 34

28

53 40 41

52 59

42

58

76 81

65

82

66

87

1QFY

11

2QFY

11

3QFY

11

4QFY

11

1QFY

12

2QFY

12

3QFY

12

4QFY

12

1QFY

13

2QFY

13

3QFY

13

4QFY

13

1QFY

14

2QFY

14

3QFY

14

4QFY

14

1QFY

15

2QFY

15

3QFY

15

Auto Universe PAT (INR b) Share of JLR PAT (%)

21.7

28.8

16.4

16.8

19.6

18.2

20.9

15.6

6.6 -5.2

-3.5

-14.

6 -8.4

-0.1

-6.0

-3.9

-6.4

-4.4

3.1 2.9 3.0 2.9 2.8

2.7 2.4 2.3 2.3 2.2 2.2 2.3 2.4 2.4 2.4

2.6 2.9

3.0

2QFY

11

3QFY

11

4QFY

11

1QFY

12

2QFY

12

3QFY

12

4QFY

12

1QFY

13

2QFY

13

3QFY

13

4QFY

13

1QFY

14

2QFY

14

3QFY

14

4QFY

14

1QFY

15

2QFY

15

3QFY

15

Eng Sector (revenue growth %) BTB (x)

0.2 2.6 3.3

0.4 0.1

6.2

-2.2 -4.1

-6.4 -8.6

-3.9 -2.1 -1.1

2.4

0.0

4.0

9.4

10.4

13.8

8.4

2.7

1.9

-2.0

0.4 3.

3

1.5

6.1 9.

1

5.3

5.0

1QFY

12

2QFY

12

3QFY

12

4QFY

12

1QFY

13

2QFY

13

3QFY

13

4QFY

13

1QFY

14

2QFY

14

3QFY

14

4QFY

14

1QFY

15

2QFY

15

3QFY

15

Margin Chg (pp) Volume growth (%)

19.3 20.3 15.0 16.7 16.4 13.6 10.6 10.3 11.0 11.0 14.6 12.3 7.8

20.2 19.8

20.5 20.5

21.1

20.2

21.0 21.2 21.2

20.3 20.5

21.3 21.6

3QFY

12

4QFY

12

1QFY

13

2QFY

13

3QFY

13

4QFY

13

1QFY

14

2QFY

14

3QFY

14

4QFY

14

1QFY

15

2QFY

15

3QFY

15

Sales Growth (%) EBITDA margins (%)


Key sectoral trends Banks PSU: Asset quality stress takes credit cost to a new high (% to avg assets)

Banks PSU: Higher credit costs leads to weak RoA’s

Banks Private: PAT growth driven by strong trading gains

Technology: Growth revised down due to cross currency impact

2.0 2.1

2.2 2.2 2.0

1.8 1.8 1.6

1.5 1.5 1.5 1.7 1.6 1.6 1.6

0.6 0.7 0.6 0.8 0.7 0.7 0.7

0.8

0.6 0.6 0.7

1.0

0.7 0.9

1.0

1Q

FY12

2Q

FY12

3Q

FY12

4QFY

12

1QFY

13

2QFY

13

3QFY

13

4QFY

13

1QFY

14

2QFY

14

3QFY

14

4QFY

14

1QFY

15

2QFY

15

3QFY

15

Core PPP Provisions

0.8

0.9 1.0

1.2

1.0

0.9 0.9 0.8 0.8

0.6 0.5 0.6

0.7

0.6 0.5

1Q

FY12

2Q

FY12

3Q

FY12

4QFY

12

1QFY

13

2QFY

13

3QFY

13

4QFY

13

1QFY

14

2QFY

14

3QFY

14

4QFY

14

1QFY

15

2QFY

15

3QFY

15

RoA

37,525 37,633 37,071 37,965 38,693 38,934 38,759 38,556 38,066 37,499

9.7

11.5 11.5

13.1

14.4 15.2 15.1

14.5

13.1

11.4

2QFY

13

3QFY

13

4QFY

13

1QFY

14

2QFY

14

3QFY

14

4QFY

14

1QFY

15

2QFY

15

3QFY

15

Top-tier companies FY15 USD revenue (M) YoY (%)

25.0

26.9

22.4

20.2

18.6

17.3

17.8

23.8

28.0

27.0

24.5

23.6

23.9

20.4

17.8

15.6

15.8

18.9

18.9

29 32

35

39

31

28

27

29

30

27

28

25

26

22

17

17

18

19

19

0.9 0.8 0.7 0.6 0.6 0.5 0.5 0.4 0.4 0.5 0.5 0.5 0.5 0.5 0.6 0.5 0.6 0.7 0.7

1QFY

11

2QFY

11

3QFY

11

4QFY

11

1QFY

12

2QFY

12

3QFY

12

4QFY

12

1QFY

13

2QFY

13

3QFY

13

4QFY

13

1QFY

14

2QFY

14

3QFY

14

4QFY

14

1QFY

15

2QFY

15

3QFY

15

NII YoY Growth (%) PAT Growth YoY (%)

NNPA (%)


Number of companies with >15% PAT growth shrinks

For 3QFY15, 41% of the companies in MOSL Universe reported earnings growth of over 15% (v/s 47% companies in

2QFY15). Less than one-fifth of MOSL Universe saw growth of over 30%, which is almost the lowest in many quarters.

34% of companies of MOSL universe reported negative earnings growth, much higher than Sept qtr.

Distribution of PAT Growth

60 54 52 48 44 45

35 30 26 27 32 41 43

51 38 32

39 35 21 21 24 25 25 27 26 24 20 24 24 20 18

26 19

26

19 19 23

23 21

11 18

18

10 14

22 10

17 13

22 21

18 23

24 25 18 22 18 16 19

16 18

18 15 19 23

21 22

25

11 11 11 15

14 19 24

26

22 18

14 14 9

9 10 20 18 18

24 19 16

13 27

17 16 18 21

22 24 17 23

27

25

25

11 17 14 14

21 24 23 26

42 41 32 35 31 27 30 27 25 24

31 34 42 40

30 39 39 42 40 36 38

44 37

26 34

25

55 36 34 25 15 24 26 20 -8 -15 -15 -11 23 42 26 22 24 9 13 11 4 18 11 8 5 0 -3 7 12 9 15 7 -6 9

Dec

06

Mar

07

June

07

Sep

07

Dec

07

Mar

08

June

08

Sep

08

Dec

08

Mar

09

June

09

Sep

09

Dec

09

Mar

10

June

10

Sep

10

Dec

10

Mar

11

June

11

Sep

11

Dec

11

Mar

12

June

12

Sep

12

Dec

12

Mar

13

June

13

Sep

13

Dec

13

Mar

14

June

14

Sep

14

Dec

14

Mar

15E

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

% o

f MO

SL U

nive

rse

com

pani

es

Earnings Growth

PAT Growth Ex RMs (%)


FY16 Sensex EPS cut by 3%; Downgrade risk to FY16 estimates rises Post 3QFY15 earnings, FY16 Sensex EPS was cut by 3% to INR1,703 (20% YoY growth). FY15 Sensex EPS also cut

by 3% at INR1,418 (6% YoY growth).

FY15 EPS upgrade was led by NTPC (9%), Sun Pharma (5%), Bharti Airtel (5%) and Dr. Reddy’s (2%). Downgrades were Tata Power (-41%), Tata Steel (24%), GAIL (-16%), ONGC (-13%), Hindalco (-11%) and Tata Motors (-9%).

FY16 EPS upgrade was led by Cipla (8%), NTPC (5%), Sun Pharma (3%), HDFC (2%) and Bajaj Auto (2%).

Downgrades were Bharti Airtel (-27%), Tata Steel (21%), Hindalco (-9%), GAIL (-8%), ONGC (-7%), Tata Motors (-6%) and L&T (-6%)

We have upgraded FY15 and FY16 EPS estimates for 9 Sensex companies, while 21 companies saw downgrades in

estimates for each year.

Given the recent weak trends in domestic volumes and headwinds for global commodities, the risk to further downgrades for FY16 estimates have also risen.


Sensex/Nifty EPS: Muted growth in FY15 at 6%

Nifty Earnings growth to be muted in FY15 at 6%, to rebound to 19.5% in FY16

Sensex Earnings growth to be muted in FY15 at 6%, to rebound to 20% in FY16

216 236 272 361 446 540

720 833 820 834

1,024 1,118 1,180

1,335 1,418

1,703

2,065

FY01

FY02

FY03

FY04

FY05

FY06

FY07

FY08

FY09

FY10

FY11

FY12

FY13

FY14

FY15

E

FY16

E

FY17

E

FY01-08: 21% CAGR

FY08-15: 8% CAGR

FY15-17E: 21% CAGR

FY93-15: 14% CAGR

6% 20%

21%

73 78 92 131 169 184

236 281 251 247

315 350 368 404 430

514

625

FY01

FY02

FY03

FY04

FY05

FY06

FY07

FY08

FY09

FY10

FY11

FY12

FY13

FY14

FY15

E

FY16

E

FY17

E

FY01-08: 21% CAGR

FY08-15: 6% CAGR

FY15-17E: 21% CAGR

6%

19% 22%

1,573 1,586

1,536

1,476 1,518

1,525 1,524 1,532 1,545

1,529 1,469

1,418

13.2

15.9 15.8 14.5

15.3 14.6

13.8 14.3 15.2

14.2

10.0

6.2

Dec

12

Mar

13

June

13

Sep

13

Dec

13

Mar

14

June

14

Aug

14

Sep

14

Nov

14

Dec

14

Feb

15

FY15 EPS (INR) FY15 EPS Growth YoY (%)

1,766 1,793

1,836 1,854 1,875 1,866

1,761

1,703

16.3 17.5

20.5 21.0 21.4 22.1 19.9

20.1

Dec

13

Mar

14

June

14

Aug

14

Sep

14

Nov

14

Dec

14

Feb

15

FY16 EPS (INR) FY16 EPS Growth YoY (%)

FY15E Sensex EPS Growth estimates reduced considerably in last two quarters

FY16 EPS Growth to see recovery led by cyclicals


Upgrades/downgrades since Sep-14 Sensex revision since Sep-14 Sector revision since Sep-14

(INR)FY15E FY16E FY15E FY16E FY15E FY16E FY15E FY16E

Hindalco 12.2 13.8 -5.5 8.5 -2.2 13.4 -0.7 0.7Bajaj Auto 118.9 151.8 -4.2 3.6 6.2 27.6 -0.7 0.5Axis Bank 31.3 36.7 1.6 3.5 18.1 17.5 0.6 1.0Infosys 108.7 120.1 2.6 2.1 16.6 10.5 1.5 0.9Hind. Unilever 17.8 21.1 -3.8 2.1 6.0 18.3 -0.7 0.3Sun Pharma 28.0 32.8 4.0 2.0 19.5 17.0 1.1 0.4HDFC 38.1 45.3 -1.9 -2.2 9.2 18.9 -0.5 -0.5ICICI Bank 19.3 23.0 -0.6 -2.2 13.8 19.2 -0.3 -1.0Dr Reddy’ s Labs 130.0 146.7 0.3 -3.1 4.5 12.8 0.0 -0.3Tata Power 2.6 6.6 -54.0 -3.2 5.4 156.5 -3.9 -0.2Cipla 15.1 22.2 -7.3 -4.8 -12.5 47.1 -0.5 -0.3Coal India 24.5 27.4 -5.8 -5.2 -3.1 11.7 -4.6 -3.1HDFC Bank 41.2 51.3 -5.5 -5.5 16.6 24.4 -1.1 -0.9ITC 12.3 14.1 -4.3 -5.6 11.5 14.4 -1.3 -1.5NTPC 10.7 11.4 3.6 -6.3 -11.4 7.0 1.4 -2.0Wipro 35.0 37.8 -2.9 -6.3 10.5 8.2 -1.1 -2.0Reliance Inds. 79.3 84.6 -1.9 -6.3 5.5 6.7 -2.1 -5.4Maruti Suzuki 118.1 172.7 -8.5 -6.8 25.0 46.3 -1.6 -1.2Hero MotoCorp 129.8 171.2 -10.2 -7.7 38.6 31.9 -1.4 -0.9TCS 108.4 125.8 -5.8 -7.9 11.1 16.0 -6.3 -6.9State Bank 23.5 29.3 -5.2 -8.9 23.6 24.7 -4.6 -6.9GAIL 25.3 29.3 -15.9 -10.2 -26.5 15.7 -2.9 -1.4BHEL 7.3 12.2 -27.9 -16.4 -50.0 66.1 -3.3 -1.9Tata Motors 53.4 70.4 -15.3 -16.4 21.0 31.9 -14.9 -14.5Larsen & Toubro 41.4 53.9 -10.4 -16.6 -4.5 30.1 -2.1 -3.2Tata Steel 19.7 44.4 -48.0 -19.4 -44.5 125.4 -8.4 -3.4M&M 59.8 76.2 -24.4 -22.9 -17.7 27.6 -5.5 -4.4Sesa Sterlite 19.6 18.6 -17.3 -23.2 14.2 -5.4 -5.8 -5.4ONGC 27.3 32.4 -23.1 -25.3 -10.8 18.7 -33.7 -30.5Bharti Airtel 14.6 12.9 14.7 -26.4 108.2 -11.7 3.6 -6.0Sensex (30) 1,418 1,703 -8.2 -9.2 6.2 20.1 -100 -100

Current EPS EPS Growth (%)% RevisionCont. to

up\downgrade (%)Sector FY15E FY16E FY15E FY16E FY15E FY16E FY15E FY16EAutomobiles 332 453 -13.1 -11.7 18.5 36.5 -11.4 -11.4Capital Goods 95 130 -9.9 -11.3 -12.1 37.7 -2.4 -3.2Cement 77 108 -9.1 -15.6 12.8 39.8 -1.8 -3.8Consumer 219 268 -2.9 1.2 13.3 22.3 -1.5 0.6Financials 936 1,158 -6.5 -5.1 13.0 23.8 -14.7 -11.8 Banks - Private 371 449 -0.3 -0.5 17.7 21.0 -0.3 -0.5 Banks - PSU 300 397 -16.1 -11.1 8.5 32.3 -13.1 -9.4 NBFC 265 313 -2.2 -3.1 12.0 18.0 -1.4 -1.9Healthcare 167 212 1.1 1.0 15.1 26.4 0.4 0.4Media 25 31 -5.7 -12.0 11.8 27.6 -0.3 -0.8Metals 328 313 -16.1 -23.5 9.9 -4.3 -14.3 -18.3Oil & Gas 686 826 -21.3 -17.3 -15.4 20.5 -42.2 -32.7 Excl. RMs 602 676 -18.4 -20.3 -14.2 12.4 -31.0 -32.7Real Estate 23 30 -13.0 -23.2 8.7 30.6 -0.8 -1.7Retail 10 14 -6.5 -0.4 14.3 32.1 -0.2 0.0Technology 549 623 -1.9 -4.0 11.8 13.4 -2.4 -5.0Telecom 117 111 -0.6 -24.3 66.3 -5.1 -0.2 -6.7Util ities 356 413 -6.1 -4.6 -4.4 16.0 -5.2 -3.7Others 28 49 -32.8 -17.3 -10.3 76.0 -3.1 -1.9MOSL Universe 3,947 4,739 -10.0 -10.0 5.3 20.1 -100.0 -100.0MOSL Univ Ex RMs 3,863 4,589 -9.2 -10.3 6.2 18.8

PAT (INR B) % Revision Growth (%)Cont. to

up\downgrade (%)


9923

3222

3061218

6-24

6310

13

12612

727

10-1

-1733

-237

15756

-25-29

-33

Bharti AirtelHero Moto

MarutiHDFC Bank

SBITata MotorsSesa Sterlite

Axis BankInfosys

HindalcoTata Power

ICICI BankWipro

TCSITC

HDFCHUL

Dr Reddy’sSun Pharma

SensexReliance Ind.

L&TBajaj Auto

M&MCoal India

NTPCCipla

ONGCGAIL

Tata SteelBHEL

4QFY15E117

232220191919181716151515141411

7775

10

-2-5

-11-16-18-18-19

-47-70

Bharti AirtelHero Moto

MarutiHDFC Bank

SBITata MotorsSesa Sterlite

Axis BankInfosys

HindalcoTata Power

ICICI BankWipro

TCSITC

HDFCHUL

Dr Reddy’sSun Pharma

SensexReliance Ind.

L&TBajaj Auto

M&MCoal India

NTPCCipla

ONGCGAIL

Tata SteelBHEL

9MFY15

54

16

14

7

17

28

-3

-4

23

11

48

8

9

27

5-16

6

Telecom

Private Banks

Auto

Technology

Consumer

Healthcare

Real Estate

Metals

Media

NBFC

Retail

PSU Banks

MOSL Ex RMS

Cement

Utilities

Cap. Goods

Oil Ex RMs

4QFY15E71

18

18

16

11

11

11

11

10

9

6

5

5

-1

-7

-12

-19

Telecom

Private Banks

Auto

Technology

Consumer

Healthcare

Real Estate

Metals

Media

NBFC

Retail

PSU Banks

MOSL Ex RMS

Cement

Utilities

Cap. Goods

Oil Ex RMs

9MFY15

21

Sensex 4QFY15 growth estimate at 10% Sensex companies 9MFY15 and 4QFY15 estimate PAT growth (%) Sector-wise 9MFY15 and 4QFY15 estimate PAT growth MOSL

Universe (%)


Financials, Auto, Cement and Cap Goods hold key to sector aggregates


Sensex FY15/16 estimates: Domestic recovery key to earnings growth Sales CAGR EBITDA CAGR PAT CAGR

Company FY15 FY16 FY17 (FY15-17) % FY15 FY16 FY17 (FY15-17) % FY15 FY16 FY17 FY15 FY16 FY17 (FY15-17) % Delta %

High PAT Growth (20%+) 9,171 10,315 11,806 13 20 21 22 19 759 1,003 1,269 9 32 26 29 49Tata Steel 1,421 1,396 1,496 3 11 12 15 24 19 43 77 -45 125 79 101 6Tata Power 83 87 91 5 21 28 28 20 7 18 21 20 157 18 74 1BHEL 293 304 346 9 9 12 14 37 18 30 43 -50 66 45 55 2Maruti Suzuki 509 619 740 21 13 14 15 32 36 52 70 25 46 33 40 3Cipla 112 135 157 19 20 22 23 28 12 18 23 -12 47 32 39 1Larsen & Toubro 608 697 825 16 11 11 11 17 38 50 67 -5 30 34 32 3M&M 746 866 996 16 12 13 13 19 36 46 58 -18 28 27 27 2Hindalco 1,045 1,084 1,151 5 10 11 11 13 25 29 40 -2 13 40 26 1State Bank 742 844 995 16 67 68 70 18 175 218 273 24 25 25 25 9Hero MotoCorp 277 319 368 15 12 14 14 26 26 34 40 39 32 18 25 1Tata Motors 2,699 3,208 3,739 18 17 17 17 16 172 227 264 21 32 17 24 9HDFC Bank 225 276 340 23 77 78 77 23 102 127 155 21 24 22 23 5Baja j Auto 231 268 308 15 20 21 21 19 34 44 51 6 28 17 22 2Sun Pharma 180 212 252 18 47 46 46 17 58 68 86 19 17 26 21 3

Medium PAT Growth (10-20%) 10,314 10,538 11,533 6 23 26 28 16 1,567 1,780 2,101 3 14 18 16 52ONGC 1,671 1,784 1,954 8 32 34 36 15 234 278 332 -11 19 20 19 10HDFC 81 97 114 18 108 107 108 18 59 71 83 9 19 18 19 2Hind. Uni lever 311 350 403 14 16 18 19 22 39 46 54 6 18 19 18 2ICICI Bank 190 220 262 18 102 102 100 17 112 133 157 14 19 18 18 4Rel iance Inds . 3,444 3,151 3,319 -2 9 11 15 23 232 248 322 6 7 30 18 9Axis Bank 141 164 190 16 93 94 95 17 73 86 100 18 18 16 17 3TCS 953 1,089 1,248 14 29 28 29 14 212 246 288 11 16 17 17 7Dr Reddy’s Labs 147 161 183 12 23 24 25 16 22 25 30 4 13 20 16 1ITC 370 418 476 14 37 37 38 15 98 112 130 12 14 16 15 3GAIL 556 649 670 10 9 10 11 19 32 37 42 -27 16 13 14 1Infosys 539 604 689 13 28 28 28 12 124 137 157 14 11 15 13 3Coal India 721 768 825 7 24 25 27 15 155 173 192 -3 12 11 11 4Wipro 470 525 588 12 22 23 23 15 86 93 106 11 8 14 11 2NTPC 720 557 609 -8 22 31 33 14 88 94 107 -11 7 13 10 2

Low PAT Growth (<10%) 1,678 1,830 1,983 9 33 31 31 5 117 107 108 48 -9 1 -4 -1Bharti Ai rtel 931 1,022 1,111 9 34 33 34 9 58 52 60 111 -12 17 2 0Sesa Sterl i te 747 808 872 8 32 28 27 -1 58 55 47 14 -5 -14 -10 -1

Sensex (PAT free float) 21,163 22,682 25,322 9 23 24 26 16 1,204 1,446 1,753 9 20 21 21 100

Contbn toSales (INR b) PAT (INR b) PAT YoY (%)EBIDTA Margin (%)


Growth contributors: Macro revival key to widespread growth

Stock-wise contribution to growth in FY15E Sensex EPS (INR)

Stock-wise contribution to growth in FY16E Sensex EPS (INR)

1,418

1,335

17 12 12 12 11 9 7 6 6 5 4 4 3 3 2 2 1 1 1 1 0 0 -1 -1 -2 -4 -5 -5 -6 -9

FY14

EPS

Ta

ta M

otor

s H

DFC

Ban

k SB

I IC

ICI B

ank

Info

sys

Bhar

ti Ax

is B

ank

ITC

Relia

nce

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TC

S H

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H

ero

Mot

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arm

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Baja

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ower

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Dr R

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dalc

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dia

Cipl

a L&

T N

TPC

GAI

L M

&M

O

NG

C BH

EL

Tata

Ste

el

FY15

E EP

S

1,703

1,418

43 25 23 21 20 13 13 12 12 11 11 10 9 9 9 9 6 5 5 4 4 3 3 2 2 2 2 2 -1 -3

FY15

E EP

S Ta

ta M

otor

s IC

ICI B

ank

HD

FC B

ank

SBI

Tata

Ste

el

HD

FC

Info

sys

L&T

ITC

ON

GC

Axis

Ban

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S Re

lianc

e In

d.

M&

M

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Pow

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Mar

uti

Her

o M

oto

BHEL

Ba

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uto

Cipl

a Su

n Ph

arm

a H

UL

Dr R

eddy

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Hin

dalc

o W

ipro

G

AIL

Coal

Indi

a N

TPC

Sesa

Ste

rlite

Bh

arti

FY16

E EP

S

9 5 5 2 1 1 1 1 0

0 0 -1 -1 -1 -2 -3 -3 -3 -4 -4 -5 -7 -8 -8 -9 -11 -13 -16 -24

-41

NTP

C Su

n Ph

arm

a Bh

arti

Dr R

eddy

’s

Cipl

a W

ipro

Re

lianc

e In

d.

Axis

Ban

k In

fosy

s H

DFC

M

arut

i Ba

jaj A

uto

Coal

Indi

a IC

ICI B

ank

TCS

SBI

HU

L IT

C H

DFC

Ban

k M

&M

Se

sa S

terl

ite

Her

o M

oto

BHEL

L&

T Ta

ta M

otor

s H

inda

lco

ON

GC

GAI

L Ta

ta S

teel

Ta

ta P

ower

FY15E EPS Upgrade/Downgrade

8 5 3 2 2 2 1 1 1

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

-21

-27 Ci

pla

NTP

C Su

n Ph

arm

a H

DFC

Ba

jaj A

uto

Tata

Pow

er

ICIC

I Ban

k Co

al In

dia

Axis

Ban

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r Red

dy’s

Re

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d.

Mar

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Info

sys

HD

FC B

ank

SBI

M&

M

Her

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oto

HU

L TC

S W

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BH

EL

Sesa

Ste

rlite

IT

C L&

T Ta

ta M

otor

s O

NG

C G

AIL

Hin

dalc

o Ta

ta S

teel

Bh

arti

FY16E EPS Upgrade/Downgrade

Stock Wise FY15 EPS Revision from Preview (%)

Stock Wise FY16 EPS Revision from Preview (%)


Dec-14 Quarter Results: The Best & The Worst (>$3B Mkt cap) TOP POSITIVE SURPRISESCompany

Actual QoQ Est. YoY YoY Var. Over Actual QoQ Est. YoY YoY Var. Over (INR b) Chg (%) Chg (%) Chg (%) Exp. (%) (INR b) Chg (%) Chg (%) Chg (%) Exp. (%)

Ashok Leyland 2.4 2 LP LP 23 0.3 -22 LP LP 362BPCL 11.3 5 LP LP 22 5.5 19 LP LP 78Bharat Forge 3.6 12 38 69 22 2.0 11 69 109 24Cipla 5.5 -1 7 19 10 3.3 10 -2 15 18Britannia 1.8 -2 24 31 5 1.3 0 18 34 14Dr Reddy’ s Labs 8.9 9 -16 -13 3 5.7 0 -8 1 10Emami 2.1 87 15 20 4 1.8 98 11 22 9Bajaj Finance 5.0 32 22 34 9 2.6 31 22 33 9Nestle 5.5 4 11 18 7 3.4 3 8 17 8HCL Technologies 23.2 6 2 9 7 19.2 12 20 29 7Yes Bank 8.6 6 34 40 5 5.4 12 25 30 4Note: LP: Loss to ProfitTOP NEGATIVE SURPRISESCompany


Bank of Baroda 23.4 -3 23 7 -13 3.3 -70 26 -68 -75ONGC 94.0 -13 11 -23 -31 35.7 -34 7 -48 -51ACC 1.8 -42 23 -32 -45 1.2 -41 8 -43 -47BHEL 2.9 1 -54 -70 -35 2.1 70 -50 -69 -39Coal India 34.8 68 3 -15 -18 32.8 50 1 -16 -17Larsen & Toubro 15.7 17 1 -7 -8 10.6 2 9 -7 -14Hero Motocorp 7.8 -12 32 18 -10 5.8 -24 29 11 -14Sun Pharma 17.2 -12 27 7 -15 12.9 -10 18 3 -13Ultratech Cement 8.5 2 30 11 -15 3.6 -11 11 -1 -12Hind. Unilever 13.3 7 15 9 -6 9.6 0 11 0 -10Asian Paints 5.3 9 22 7 -12 3.7 6 21 12 -7

EBIDTA PAT

EBIDTA PAT


Dec-14 Quarter Results: The Best & The Worst (<$3B Mkt cap)

Note: LP: Loss to Profit

TOP POSITIVE SURPRISESCompany


PVR 0.8 42 37 69 23 0.3 244 -10 132 159Sintex Inds. 3.1 7 21 25 4 1.7 50 32 90 43Oberoi Realty 1.3 13 15 41 22 0.8 12 -6 16 23Mahindra Lifespace 0.7 45 23 54 25 0.3 40 -5 12 18Arvind 2.9 19 6 13 7 1.1 17 -8 7 16PTC India 0.5 -44 -66 -60 16 0.4 -59 -58 -55 8Havells India 1.8 -1 3 9 6 1.2 -2 -8 -2 6Sun TV 4.3 8 11 15 4 2.1 39 9 15 6

TOP NEGATIVE SURPRISESCompany


Crompton Greaves 1.5 -10 17 -9 -23 0.1 -90 45 -89 -93Bank of India 18.7 -13 18 -13 -26 1.7 -78 24 -70 -76IPCA Labs. 1.2 -10 -22 -44 -28 0.4 -32 -28 -70 -59Bata India 0.6 -3 8 -38 -43 0.3 -10 20 -41 -51Petronet LNG 3.4 -34 42 -3 -31 1.6 -38 84 20 -35CESC 3.0 -29 16 2 -12 1.1 -42 40 4 -26M & M Financial 4.8 -5 17 11 -5 1.4 -34 12 -17 -26Gujarat Pipavav 1.0 5 55 20 -22 0.9 0 93 47 -24Info Edge 0.4 -14 21 -14 -29 0.4 16 57 20 -23Exide Inds. 1.8 -13 36 26 -7 1.0 -23 48 25 -15Voltas 0.6 -26 17 -16 -28 0.6 26 23 9 -12Sobha Developers 1.5 -17 15 3 -10 0.6 -22 16 3 -11

EBIDTA PAT

EBIDTA PAT


Highest Earnings Upgrade / Downgrade (>$3B Mkt cap) TOP EARNINGS UPGRADESCompany

FY15E FY16E FY15E FY16E FY15E FY16EAshok Leyland 0.7 3.5 LP 398.8 81.0 34.0Bharat Electronics 151.8 179.7 30.5 18.3 26.0 25.2Britannia 41.9 55.6 28.9 32.8 6.1 18.0Emami 20.9 26.9 18.1 28.5 4.6 15.0Cadila Health 54.0 72.8 34.8 34.6 0.3 11.3UPL 28.4 36.2 17.4 27.2 4.9 7.5Bharat Forge 30.0 42.2 57.1 40.5 5.3 6.0NTPC 10.7 11.4 -11.4 7.0 9.4 5.0Bharti Infratel 10.5 12.9 30.3 23.6 1.6 3.8

TOP EARNINGS DOWNGRADESCompany

FY15E FY16E FY15E FY16E FY15E FY16EBharti Airtel 14.6 12.9 108.2 -11.7 5.4 -26.8Tata Steel 19.7 44.4 -44.5 125.4 -24.2 -21.2Bank of Baroda 16.5 25.2 -21.9 52.9 -32.8 -11.3ACC 45.9 67.3 -5.3 46.7 -12.8 -11.2Hindalco 12.2 13.8 -2.2 13.4 -11.3 -8.6ONGC 27.3 32.4 -10.8 18.7 -13.2 -7.3Zee Entertainment 10.2 11.4 9.5 12.6 -3.1 -7.1Tata Motors 53.4 70.4 21.0 31.9 -8.6 -6.2Larsen & Toubro 41.4 53.9 -4.5 30.1 -7.8 -5.8Idea Cellular 8.9 8.3 49.9 -6.7 -4.9 -5.3TCS 108.4 125.8 11.1 16.0 -2.2 -3.2Hero Motocorp 129.8 171.2 38.6 31.9 -6.6 -3.1

% Upgrade

% Downgrade

EPS Growth (%)EPS - Post-3QFY15 (INR)

EPS Growth (%)EPS - Post-3QFY15 (INR)


Highest Earnings Upgrade / Downgrade (<$3B Mkt cap) TOP EARNINGS UPGRADESCompany

FY15E FY16E FY15E FY16E FY15E FY16EAmara Raja Batt. 24.2 32.1 11.6 32.7 2.1 6.5Oberoi Realty 8.8 11.9 -6.9 34.5 11.6 5.4PTC India 11.0 12.4 -9.6 12.7 2.1 3.1Reliance Infrastructure 53.7 63.4 -11.2 18.1 4.8 2.9PVR 8.8 19.1 -41.5 117.2 33.8 2.6Prestige Estates 11.7 14.1 30.5 20.1 7.4 2.6

TOP EARNINGS DOWNGRADESCompany

FY15E FY16E FY15E FY16E FY15E FY16EJSPL 13.1 3.8 -37.2 -70.7 -9.1 -65.9Info Edge 12.5 14.7 6.6 17.4 -16.1 -29.5Just Dial 18.5 19.6 7.5 6.2 -4.5 -28.1Crompton Greaves 3.9 9.1 -1.0 137.1 -27.5 -11.5Biocon 20.4 23.2 -1.5 13.8 -4.6 -11.1TVS Motor 7.2 13.3 32.1 83.2 -10.9 -8.3Bank of India 35.9 56.5 -15.3 57.3 -24.0 -7.6Sun TV 18.4 21.6 3.0 17.2 -2.9 -7.4Voltas 10.4 12.9 40.3 23.8 -35.0 -4.9M & M Financial 14.5 17.2 -8.2 19.2 -8.3 -4.7

% Upgrade

% Downgrade

EPS - Post-3QFY15 (INR)

EPS - Post-3QFY15 (INR)

EPS Growth (%)

EPS Growth (%)


Sensex Companies’ EPS Upgrade / Downgrade from preview (INR)

FY15E FY16E FY17E FY15E FY16E FY17E FY15E FY16E FY17ECipla 15.1 22.2 29.3 1.5 7.6 6.8 -12.5 47.1 31.6NTPC 10.7 11.4 12.9 9.4 5.0 4.2 -11.4 7.0 13.2Sun Pharma 28.0 32.8 41.3 5.4 2.6 10.1 19.5 17.0 26.2HDFC 38.1 45.3 53.4 -0.5 2.4 3.9 9.2 18.9 18.1Bajaj Auto 118.9 151.8 177.0 -0.5 2.4 2.8 6.2 27.6 16.6Tata Power 2.6 6.6 7.8 -41.0 1.7 1.0 5.4 156.5 18.0ICICI Bank 19.3 23.0 27.1 -1.4 1.0 0.6 13.8 19.2 17.7Coal India 24.5 27.4 30.4 -1.1 1.0 1.0 -3.1 11.7 10.9Axis Bank 31.3 36.7 42.4 0.6 0.8 -0.9 18.1 17.5 15.5Dr Reddy’ s Labs 130.0 146.7 175.8 2.4 -0.1 3.1 4.5 12.8 19.8Reliance Inds. 79.3 84.6 108.6 0.8 -0.7 -0.8 5.5 6.7 28.3Maruti Suzuki 118.1 172.7 230.5 -0.5 -2.2 0.6 25.0 46.3 33.5Infosys 108.7 120.1 137.8 0.4 -2.3 -1.3 16.6 10.5 14.8HDFC Bank 41.2 51.3 62.5 -3.8 -2.3 -2.0 16.6 24.4 22.0State Bank 23.5 29.3 36.5 -2.6 -2.3 -1.7 23.6 24.7 24.9Mahindra & Mahindra 59.8 76.2 96.5 -3.9 -2.7 -1.7 -17.7 27.6 26.6Hero MotoCorp 129.8 171.2 201.4 -6.6 -3.1 -4.5 38.6 31.9 17.6Hind. Unilever 17.8 21.1 25.0 -2.7 -3.1 -1.3 6.0 18.3 18.7TCS 108.4 125.8 147.2 -2.2 -3.2 -2.7 11.1 16.0 17.0Wipro 35.0 37.8 43.0 1.4 -3.4 -3.3 10.5 8.2 13.7BHEL 7.3 12.2 17.7 -7.7 -4.1 -1.7 -50.0 66.1 45.0Sesa Sterlite 19.6 18.6 15.9 -4.7 -4.8 -10.9 14.2 -5.4 -14.3ITC 12.3 14.1 16.4 -3.2 -5.0 -4.3 11.5 14.4 16.0Larsen & Toubro 41.4 53.9 72.2 -7.8 -5.8 -9.9 -4.5 30.1 33.8Tata Motors 53.4 70.4 82.2 -8.6 -6.2 -6.8 21.0 31.9 16.6ONGC 27.3 32.4 38.8 -13.2 -7.3 -0.1 -10.8 18.7 19.7GAIL 25.3 29.3 33.1 -16.2 -8.3 -3.9 -26.5 15.7 13.0Hindalco 12.2 13.8 19.3 -11.3 -8.6 0.1 -2.2 13.4 40.0Tata Steel 19.7 44.4 79.5 -24.2 -21.2 2.8 -44.5 125.4 79.1Bharti Airtel 14.6 12.9 15.1 5.4 -26.8 -30.8 108.2 -11.7 17.1Sensex (30) 1,418 1,703 2,065 -3.4 -3.3 -2.2 6.2 20.1 21.3

EPS UPGRADE / DOWNGRADE (%)POST-3QFY15 EPS EPS GROWTH (%)


MOSL Universe’ EPS Upgrade / Downgrade



FY15E FY16E FY17E FY15E FY16E FY17E FY15E FY16E FY17E

MOSL Universe 3,947 4,742 5,727 -3.7 -3.6 -2.5 5.3 20.1 20.8

MOSL Univ Ex RMs 3,863 4,591 5,556 -3.7 -3.6 -2.6 6.1 18.9 21.0

SENSEX EPS (INR) 1,418 1,703 2,065 -3.4 -3.3 -2.2 6.2 20.1 21.3

PAT (INR B) % Revision Growth YoY (%)

Note: For sector and MOSL Universe aggregate numbers for revision and growth are of PAT.


Top Picks

LARGE CAPS

Axis Bank

Maruti Suzuki

BPCL

SBI

United Spirits

MID CAPS

Ashok Leyland

Arvind

Voltas

Prestige Estate

LIC Housing Finance


AXIS BANK (Well expanded, capitalized to leverage growth) AXSB is geared up to ride the next growth cycle with (1) strong

capitalization (12.4% Tier I), healthy ROA (1.7%) and expanding liability franchise (2,558 branches – 18% CAGR over FY12-15).

Leveraging on the strong distribution network AXSB increased the share of retail deposits (incl. CASA) to 78% (59% in FY11) and retail loans to 38% of loans (v/s 19% in FY11). Increased share of retail loans and strong SME business has increased the granularity of the balance sheet and would help reduce revenue volatility.

Benefit of structural improvement in liability profile/ benefit of FCNR (B) deposit raised and incremental growth in high yielding retail segment is expected to keep NIMs strong. We factor it to decline by 20bp over FY15-17 even as growth in corporate loans to pick up. Better than expected growth in unsecured loans would provide upside to NIMs.

While high exposure to Infra remains a risk, steps taken by government to clear stalled projects and RBI (flexible repayment period, 5/25 structure) could ease risk in infra lending. Further, AXSB has significantly moderated growth (incl off balance sheet exposure) in high risk areas over the last three years. Contingency provisions of INR 7.8b (~30bp of loans), PCR of 78% and 75bp of credit cost factored in the estimates over FY15E/17E would provide a cushion to earnings. We expect PAT CAGR of ~17% over FY14/17.

We believe all vectors like well diversified loan book, low dependence on bulk borrowing , improved ALM, strong capitalisation and control over core PPP are in place. Improvement in economic loan growth will not only lead to higher corporate loan growth but also lower credit cost and high ROE. Buy

Stable margins and fees pick up to drive profitability

Financial & Valuation (INR b)

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RoA Fees NIM

Y/E March 2014 2015E 2016E 2017E NII 119.5 141.0 164.0 190.3 OP 114.6 131.4 154.0 180.4 NP 62.2 73.4 86.3 99.7 NIM (%) 3.6 3.7 3.6 3.4 EPS (INR) 26.5 31.3 36.7 42.4 EPS Gr. (%) 19.6 18.1 17.5 15.5 BV/Sh. (INR) 161.8 188.4 219.6 255.7 ABV/Sh. (INR) 158.9 184.3 215.2 251.7 RoE (%) 17.4 17.8 17.9 17.8 RoA (%) 1.7 1.8 1.8 1.7 Payout (%) 17.7 17.6 17.6 17.6 Valuations P/E(X) 19.5 16.5 14.0 12.1 P/BV (X) 3.2 2.7 2.3 2.0 P/ABV (X) 3.2 2.8 2.4 2.0 Div. Yield (%) 0.8 0.9 1.1 1.2


Maruti Suzuki – All start aligning!


Demand environment turning favorable: Domestic PV demand grew just 1% over FY11-15E, impacted by over 11% CAGR inflation in fuel prices. The worst impacted segment was entry level cars, forte of MSIL, which de-grew 14% CAGR. With fuel prices correcting by upto 14%, impending economic recovery, interest rate cuts and improving consumer sentiments, we estimate domestic PV industry to grow 16% CAGR over FY15-18E.

MSIL would be key beneficiary driven by strong product pipeline, resulting in market share gain and premiumization: MSIL has an aggressive product pipeline, with ~14 launches in five years. It is moving from being defensive to a challenger, by launching premium products (Ciaz, premium hatchback, compact SUVs etc) thereby expanding addressable market. It has emerged stronger during the current downturn, with a market share recovery of ~380bp to 42% over FY12-14. We estimate MSIL to further gain and sustain market share to ~48-50%, as it enters several new segments. More importantly, a reasonable success in new segments would add upto ~200bp to revenue growth.

Several levers to margins – Can margins be ~18%?: Despite bottom of the cycle volumes, increased competitive intensity and negative operating leverage, MSIL’s margins witnessed improvement of ~450bp to ~11.7% in FY14 driven by localization and other cost cutting initiatives. Going forward, it would benefit from a) discount moderation (+250bps), b) weak commodity prices (~100bp), c) weak energy cost (40bp) and d) operating leverage (150bps), taking total margins to ~18%. We estimate MSIL’s margins to improve ~270bp over FY15-17E, to ~15.3% - highest ever margins, but has further upside scope.

Earnings to enter new trajectory, valuations to re-rate further: MSIL should trade at a premium to 5 yr average PE (16x) driven by a) improved competitive positioning of MSIL than the previous cycle, b) early cycle earnings, with strong ~35% EPS CAGR, c) lower capital intensity, due to Gujarat plant arrangement, to drive an improvement in RoIC to ~40% by FY17E (v/s average of ~30% in last 10 years), and d) increase in dividend payout. Buy with TP of ~INR4,616 (~20x FY17 EPS). Savings due to Gujarat plant arrangement is estimated at NPV of ~INR385/sh.

EBITDA Margins can go upto 18% v/s est of 15.3%

Y/E MARCH 2014 2015E 2016E 2017E

Sales 437.1 501.4 611.1 731.6

EBITDA 51.0 63.3 87.8 111.8

Adj. PAT 26.6 34.9 51.4 68.8

Consol adj. EPS (INR) 94.4 118.1 172.7 230.5

EPS Gr. (%) 15.5 25.0 46.3 33.5

BV/Sh. (INR) 694.5 786.6 921.8 1,106.0

RoE (%) 12.7 14.7 18.5 20.6

RoCE (%) 16.5 18.1 23.2 26.1

Payout (%) 16.0 20.1 20.5 19.1

Valuations

P/E (x) 37.7 30.2 20.6 15.4

P/CE (x) 21.8 17.9 13.5 10.7

EV/EBITDA (x) 19.3 15.4 10.7 7.9

Div. Yield (%) 0.3 0.6 0.8 1.1


BPCL (Direct play on diesel de-regulation, E&P option value promising) Key Investment Argument

Reforms to boost near term earnings: Expect earnings boost in the near term from (a) Lower interest cost led by lower working capital due to diesel deregulation and oil price decline and (b) higher auto fuel marketing margins. India’s current marketing margins are ~60% below global averages and a mere INR0.5/ltr increase in diesel marketing margin would increase BPCL’s earnings by ~18%.

Expect upsides from BPCL’s E&P portfolio: BPCL has successfully established substantial reserves in its Mozambique (10% stake in 50-70+ tcf of gross reserves) and Brazil portfolio (Wahoo discovery - 200mmbbl). We expect further upsides and meaningful reserve addition from Petrobras operated SEAL basin in Brazil. We currently value BPCL’s E&P portfolio at INR171/sh and would watch out for FID and execution timelines at Mozambique block.

Balance sheet strong; core capex to benefit in integration: BPCL is set to increase its refining capacity to 47.5mmt by FY18 from 30.5mmt led by Kochi and NRL expansion and Bina debottlenecking. BPCL is well funded for its capex plans with gross debt of INR140b, government receivable of INR11b, bonds on the balance sheet at INR52b and treasury shares of INR40b (~9% of equity).

Valuation and Vuew:

Our fair value stands at INR900/share – an average of 2x P/B, 6x EV/EBITDA and 12x P/E. We value BPCL’s investments at INR262/share, which include INR171/sh of E&P, INR 43/sh of listed investments (post 25% discount), and treasury shares of INR49/share

The stock trades at 10.8x FY17E EPS of INR67.2 and 1.5x FY17E BV (adjusted for investments). Buy.

Higher Marketing margins could significantly boost BPCL earnings (Base case: INR0.5/ltr of addl mktg margin)


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EPS (INR) RoE (%)BPCL

Addl. mktg margin (INR/ltr)

Y/E March 2014 2015E 2016E 2017E

Sales 2,644 2,357 1,905 2,263

EBITDA 93.6 66.1 83.7 94.8

Adj. PAT 39.1 27.7 41.5 48.6

Adj. EPS (INR) 54.1 38.4 57.4 67.3

EPS Gr. (%) 107.9 -29.0 49.6 17.1

BV/Sh.(INR) 269 293 331 374

RoE (%) 21.6 13.7 18.4 19.1

RoCE (%) 15.2 10.2 14.6 16.2

Payout* (%) 35.4 35.1 34.6 34.8

Valuation

P/E (x) 13.4 18.9 12.6 10.8

P/BV (x) 2.7 2.5 2.2 1.9

EV/EBITDA (x) 9.0 10.3 8.1 7.2

Div. Yield (%) 2.3 1.7 2.3 2.8 *Based on standalone


SBI (Early signs of stability; benefit from macro recovery)


Key Investment Argument SBIN has emerged stronger from the downturn. It (a) has protected

CASA ratio at 40%+, with SA market share largely stable at ~28%, (b) remains one of the best capitalized state-owned banks, with CET1 of ~10%, (c) has expanded branch network by ~60% since 2008, and (d) has established strong presence across technological platforms like RTGS (16% MS), NEFT (9% MS), mobile/internet banking, and payment solutions (Debit card spends/Point of Sale machines 25%/15% MS).

Declining trend in quarterly fresh stress additions is encouraging (8.2% of loans (annualized) in 1QFY14 to ~4% in FYTD15). As economic growth picks up and interest rates moderate, there could be upside to earnings estimates, led by lower credit cost. A 10bp decline in credit cost would lead to RoA benefit of ~5bp.

Strong control over opex (~13% CAGR FY10-15), early signs of pickup in fees (~13% YoY vs 3% CAGR FY11-14) and largely stable margins at 3.2% are encouraging. Structural changes effected top management will help to drive fee income growth and keep control over opex which in turn should lead to healthy core PPP CAGR of 20% over FY14-17.

Led by core operating performance ROA is expected to improve from ~0.6% in FY14 to 0.8/0.9% by FY17. Core PPP (as a percentage of assets) is likely to improve 25bp+. SBIN’s 10-year average P/BV multiple is 1.3x. During the last up-cycle, the multiple got re-rated from ~0.7x in 2004 to 2x in 2008. The stock trades at 1.1x/8x FY17E consolidated BV/EPS. Our target price is INR400 (1.5x FY17E consolidated+INR13/share for Insurance).

Focus on core income and absence of one-off opex to drive RoA to 90bp by FY17E; RoE to improve to 15% from low of ~10% in FY14

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Strong operating leverage

Y/E March 2014 2015E 2016E 2017E

NII 492.8 542 617 727

OP 321.1 376 437 527

NP 108.9 133 166 208

NIM (%) 3.2 3.1 3.1 3.2

EPS (INR) 19 23.5 29.3 36.5

EPS Gr. (%) -27.5 23.6 24.7 24.9

Cons. BV (INR) 188 207 231 261

Cons. ABV (INR) 149 162 187 220

RoE (%) 10.5 11.3 12.9 14.6

RoA (%) 0.6 0.7 0.8 0.8

Div. Payout (%) 18.5 18.4 18.4 18.4

Valuations

Cons. P/E (x) 15.5 12.7 10.2 8.1

Cons. P/BV (x) 1.6 1.4 1.3 1.1

Cons P/ABV (x) 2.0 1.8 1.6 1.4

Div. Yield (%) 1.0 1.2 1.5 1.9


UNITED SPIRITS (Multi-year Consumer story with many legs)


Key Investment Argument Transition from “volume focus” to “value focus” is underway:

Under the Diageo umbrella, UNSP has shifted focus from “volume” to “value”. It is exiting direct operations in unprofitable markets (TN, AP, Kerala).

Premiumisation trend to accelerate; mid-teen operating margins possible: Salience of Prestige+ increased from 21% of volumes in FY11 to 31% in MFY15. Premiumisation coupled with lower working capital should improve profitability. From current 9%, we expect UNSP to move towards 12.7% EBITDA margins by FY17E, mid-teens EBITDA margins in next five years and towards 20% in ten years.

What has Diageo done already? 1. Balance Sheet Clean up – written off over INR 50 Bn of loans, only INR 10 Bn to go. 2. Constitution of independent board 3. Roping in of professional CEO – Anand Kripalu 4. Stopped direct sales into TN due to price controls. 5. Focus on 14 Power Brands. 6) It has paid off INR 37bn debt post W&M divestment.

Multi-year consumer story in the making; BUY: Solid long term IMFL opportunity, dominant market share and now a credible management should help UNSP emerge as a multi-year consumer story in India, in our view. BUY with a DCF based TP of INR 4250, 27% upside.

Enough scope for improvement vs. peers on all metrics

Sales FY08 FY09 FY10 FY11 FY12 FY13 FY14

United Spiri ts 430 466 491 567 628 672 698 Radico 633 550 573 588 646 662 713 Ti laknagar 346 453 481 430 415 534 500 Pernod Ricard 1,773 2,197 2,475 2,488

EBITDA FY08 FY09 FY10 FY11 FY12 FY13 FY14United Spiri ts 81 71 77 86 79 84 63 Radico 70 70 93 93 97 101 104 Ti laknagar 64 78 100 101 107 113 95 Pernod Ricard 255 370 347

Working Capital FY08 FY09 FY10 FY11 FY12 FY13 FY14United Spiri ts 61 133 159 118 143 126 200 Radico 251 306 341 344 370 363 452 Ti laknagar 136 187 352 385 376 454 449 Pernod Ricard (125) (9) (86) (18)

Per Case (INR)

Y/E March 2014 2015E 2016E 2017E Sales 99.1 80.7 92.0 106.4 EBITDA 8.7 7.9 11.4 14.5 PAT -1.3 2.5 6.3 9.1 EPS (INR) -9.0 17.3 43.6 62.6 EPS Gr. (%) 21.3 -293.4 151.7 43.5 BV/Sh.(INR) 208.7 226.0 269.6 332.2 RoE (%) -3.3 8.0 17.6 20.8 RoCE (%) 12.8 12.5 17.1 20.5 Payout (%) -27.9 0.0 0.0 0.0 Valuations P/E (x) -374.5 193.6 76.9 53.6 P/BV (x) 16.1 14.8 12.4 10.1 EV/EBITDA (x) 59.4 60.4 41.4 32.1 Div. Yield (%) 0.1 0.0 0.0 0.0


Ashok Leyland: Best Play on CV cycle Recovery


AL’s margins are highly levered to volumes MHCV demand bottomed-out; sharp recovery expected in 1HFY16 onwards: MHCV demand has bottomed-out with growth witnessed in 2Q/3QFY15 post 2 years of sharp decline of over 40%. Freight utilization levels and consequent freight rates (net of fuel prices) have moved up over last 2-3 quarters, reflecting improving transporters’ cashflows. AL’s M&HCV volumes out grew industry (~23% FY15YTD growth, market share increase of 390bp to 26.6%) given its higher exposure to South & West, distribution expansion in North & East, and higher exports.

Focus on diversification into exports to reduce India business cyclicality: The management is focusing on export markets, with objective of reducing India business cyclicality, and is targeting ~33% of revenues from exports (from current <10%) in 3-5 years. While it is targeting new markets of Africa, SE Asia and Russia, deeper penetration into existing markets of Middle East, SriLanka, Bangladesh, Nepal etc would also drive growth.

Expect sharp improvement in operating performance: Rebound in industry demand should drive down discounts significantly from all time high levels of ~INR180k (v/s <INR60k in FY12). With recovery in demand coupled with cost reduction measures, we expect fixed cost (as percentage of sales) to reduce meaningfully, driving margins higher. We estimate EBITDA margins to improve by ~10.5pp over FY14-17E, to 12.2%.

Aggressive focus on curtailing debt and generating cash: To emerge leaner & stronger from the downturn, AL has focused on generating cash & curtailing debt through working capital reduction, controlled capex & monetizing non-core assets. Further, capex for FY15 is expected to be significantly lower than guidance of INR 5b (v/s ~INR900m in 9MFY15 v/s INR5.5b in FY14 v/s 15.4b in FY13).

Rerating to continue driven by increasing confidence in its strategy and prudent capital allocation: Management’s focused approach is paying-off in a) market share gains, b) rising ASPs, c) controlled cost, d) reducing working capital, e) significant control on capex and f) debt reduction. Strong volume recovery and weak commodity prices would drive significant margin expansion and EPS growth. The stock trades at 11.6x FY17 EPS & EV/EBITDA of 7.2x. Buy with TP of ~INR87 (9x FY17 EV/EBITDA).

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Y/E March 2014 2015E 2016E 2017E Sales 99.4 135.5 188.1 246.3 EBITDA 1.7 10.3 20.6 29.9 NP (4.8) 2.0 10.1 17.0 Adj. EPS (INR) (1.8) 0.7 3.5 6.0 EPS Gr. (%) NA NA NA NA BV/Sh. (INR) 16.7 18.5 20.8 25.0 RoE (%) (10.7) 4.2 18.0 26.0 RoCE (%) (1.5) 7.4 17.9 26.9 Payout (%) - 70.4 28.2 25.2 Valuations P/E (x) (38.7) 97.5 19.5 11.6 P/BV (x) 4.1 3.7 3.3 2.8 EV/EBITDA (x) 134.3 22.6 11.1 7.2 Div. Yield (%) - 0.7 1.4 2.2


ARVIND (Transforming into a brands power-house)


Brands and retail revenue proportion to rise to 38% in FY17E Key Investment Argument

India’s best brand portfolios’, preferred partner for foreign brands: ARVND has evolved into a brand power house with a portfolio of ~30 brands with 13 owned (Flying Machine, Excalibur and Ruggers etc) and 17 licensed brands (Arrow, US Polo, Gant and Hanes etc), Tommy Hilfiger, Calvin Klein (JV), The Children’s Place and GAP. Having a large portfolio of brands, against running a single brand, has numerous advantages, key amongst those being higher bargaining power in securing prime real estate space at attractive prices.

Focus shifts from B2B to B2C; brands and retail to form 38% of revenues: As against earlier focus on denims, currently management is committed to shifting business focus from B2B to B2C. Thus, we expect share of brands and retail to improve from 28% in FY14 to 38% in FY17E. Gauging its portfolio of brands and presence across all segments (value, premium and luxury), a thrust on B2C will benefit ARVND from the rising disposable incomes in India.

Multi-pronged strategy to exploit e-commerce opportunities: ARVND has incorporated a separate entity, Arvind Internet Limited, which will operate its e-commerce business. The management believes that branded garments is the only category where e-commerce players are EBITDA-positive. With backward integration into fabric, ARVND will be in a uniquely advantageous position. Mr. Kulin Lalbhai is spearheading the e-commerce initiative.

Return ratios at decade high: With the right focus on more value-accretive brands and retail business, we believe capex intensity in the business will reduce going forward, thus improving return ratios. We expect revenue/PAT to post 16.6%/23.4% CAGR over FY15E-17E. We value ARVND at 9x FY17E EV/EBITDA, with a price target of INR360.

INR b 2014 2015E 2016E 2017E

Sales 68.6 78.9 91.7 106.4 EBITDA 9.3 10.3 12.4 14.5 NP 3.8 3.8 4.5 5.7 EPS (Rs) 14.9 14.7 17.5 22.1 EPS Gr. (%) 54.5 -0.9 18.5 26.7 BV/Sh. (INR) 100.0 111.8 125.9 144.0 RoE (%) 15.9 13.9 14.7 16.4 RoCE (%) 15.1 15.0 16.1 17.3 Div Payout (%) 18.4 19.8 20.0 18.5 Valuations P/E (x) 19.4 19.5 16.5 13.0 P/BV (x) 2.9 2.6 2.3 2.0 EV/EBITDA (x) 11.2 10.4 8.8 7.6 Div Yield (%) 0.8 0.9 1.0 1.2 EV/Sales (x) 1.5 1.4 1.2 1.0


VOLTAS (Cooling products at an inflexion point)


Key Investment Argument

Unitary Cooling division could witness accelerated growth: VOLT is the market leader in Room ACs with share of 22% (up from 16.9% in 2012). The business is highly leveraged to discretionary consumer spend, with AC volumes reporting volume growth of ~20% during FY05-10, and stagnating thereafter. The volume growth in 9mFY15 has again improved to ~12-15%, and there exists possibilities for an accelerated growth going forward. Over a longer term, entry into other related products will be watched.

UCP margins have improved and now expected to sustain at ~13% (vs earlier expectations of 8-9% in 2012), and expansion is being supported by several structural factors, including scale economies. Business has strong ROCE of ~100%+.

MEP business has taken strategic initiatives: VOLT has over the last 4-5 years undertaken several initiatives in the MEP business in terms of restructuring overseas operations (with order book nearly halving from peak levels of INR34b in FY11 to INR18b), expanding scope to include electrical contracts, segment diversification in terms of infrastructure / industrial projects in India, etc. MEP margins improved to 2% in 3QFY15 (highest levels since 10 quarters) and sustenance will be important trigger. For MEP, 5%+ target EBIT margin translates into 25-28% ROCE at 5x asset turn.

Expect 23% PAT CAGR over FY15-17; maintain Buy: We model PAT CAGR of 23% over FY15-17, largely led by profitability improvement in MEP and 23% EBIT CAGR in UCP. VOLT has net cash balance sheet (INR6.4b) and is strongly positioned to capitalize on the recovery. Negotiations with customers on the time / cost overruns will be important monitorables for the projects business.

AC business reported strong 20%+ volume CAGR during FY05-10; with penetration levels of 4%, business at inflexion point

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Y/E March 2014 2015E 2016E 2017E Net Sales 52.7 51.3 60.4 69.5 EBITDA 1.6 4.2 5.0 6.3 Adj PAT 1.8 3.9 4.2 5.2 EPS (INR) 6.8 10.4 12.8 15.8 EPS Gr. (%) 14.5 54.1 22.9 22.9 BV/Sh. (INR) 55.0 63.2 72.2 83.2 RoE (%) 12.3 16.5 17.8 18.9 RoCE (%) 11.6 16.7 18.0 19.8 Payout (%) 29.2 30.0 30.0 30.0 Valuations P/E (x) 23.8 24.3 19.7 16.1 P/BV (x) 2.9 4.0 3.5 3.0 EV/EBITDA (x) 20.0 19.1 15.4 11.9 Div Yield (%) 1.1 1.2 1.3 1.6


Prestige Estate (Drivers in place to sustain outperformance)



Market stability to sustain, company’s strategy to ourperform: Bangalore market remains the most resilient with demand drivers in place like better affordability, lower inventory month and consistently robust leasing momentum in office space over past 3-4 years which creates steady demand pool for medium term. Prestige’s wide product mix along with mid-income focus and smart pricing strategy offer strong base to outperform competitions.

Dev Co growing at healthy; preparedness in place for 3-4 years: Prestige’s development business has been growing robust with 26%/33% CAGR in presales/collections in FY12-15. We expect the company to witness mid-teen CAGR in presales and cash flows over medium term on the back of a) robust launch plan of 12-14msf annually, b) support from land bank inventory in place (led by consistent aggregation) and c) steady diversification to lesser rapped markets in Bangalore and other southern regions (Hyderabad).

Re-rating scope in healthy annuity stream: Prestige is slated to reach ~INR7b of annuity income by FY18 (v/s ~INR4b in FY15-exit), which offers a strong re-rating scope on the back of healthy office market dynamics in Bangalore (scope of faster contraction of cap-rate) and REIT-listing.

Expects to achieve cash flow critical mass by FY17-18: Capex in ongoing annuity assets and land acquisitions resulted into rise in gearing in over FY12-15. We expect Prestige to reach positive FCFE by FY17-18 led by scale-up in operations in both the verticals.

Valuation and views: We calculate Prestige NAV at INR320/share. 2-years’ forward with 1% contraction in cap rate and WACC is ~INR400/share, upside of 45-50%. It remains our resilient pick with strong earning growth visibility.

Scale-up in operations aiding strong growth in cash flow

INR b FY12 FY13 FY14 FY15E FY16E FY17E Total collections 13.5 19.7 24.8 31.5 35.7 40.8 Total Annuity 1.6 2.2 2.7 3.3 4.4 5.8 Total cash inflow 16.3 23.3 29.8 37.9 43.4 51.0 Construction cost 7.1 10.7 16.0 22.6 24.6 27.1

Qtrly run-rate 1.8 2.7 4.0 5.7 6.2 6.8 Annuity capex 4.2 4.9 5.0 4.7 4.3 4.1

Qtrly run-rate 1.1 1.2 1.3 1.2 1.1 1.0 Hotel Capex 0.7 1.0 1.0 1.0 1.3 1.4

Operating cost 1.6 2.2 3.9 4.2 4.7 5.4 Tax expense 1.0 1.1 1.8 2.6 3.2 4.6 Land Payment 2.0 4.2 5.0 10.0 2.0 2.0

FCF -1.8 1.2 -2.8 -1.1 3.2 6.4 Interest and Dividend 2.5 3.2 4.4 4.9 5.6 5.8

Net surplus -4.3 -2.0 -7.2 -6.1 -2.4 0.6 Cash EBITDA 2.4 3.9 3.0 4.3 7.5 11.9

Y/E March 2014E 2015E 2016E 2017E Net Sales 25.5 31.1 37.4 48.9 EBITDA 7.2 10.2 12.3 16.6 Adj PAT 3.1 4.6 5.7 8.3 Adj EPS (INR) 9.0 12.3 15.3 22.2 EPS Gr (%) 17.7 36.5 24.7 45.3 BV/Sh(INR) 85.1 106.3 119.5 139.5 RoE (%) 10.5 11.5 12.8 15.9 RoCE (%) 12.2 14.0 14.4 17.8 Payout (%) 19.5 14.3 13.2 10.4 Valuations P/E (x) 30.3 22.2 17.8 12.3 P/BV (x) 3.2 2.6 2.3 2.0 EV/EBITDA (x) 17.0 13.2 11.2 8.3 Div. Yield (%) 0.6 0.6 0.6 0.7

Particulars INR m NAV/share Residential 79,391 212 Commercial-sale 9,780 26 Commercial-lease 61,555 164 Retail 28,647 76 Hotel 10,409 28 Project Management 2,268 6 Land bank 4,656 12 Gross Asset Value 196,705 525 Less: Debt 29,038 77 Less: Other Op Exp 8,285 22 Less:Tax 47,445 127 Add: Land advances 8,000 21 Net Asset Value 119,936 320 Target price 119,936 320 EV 148,974 FY17 Cash EBITDA 11,870 Multiple (x) 12.6


LIC HF -Growth and margins expansion to drive earnings



Multiple levers for margin expansion: Benign liquidity conditions over the past few months, have led to a +80bp decline in wholesale rates. LICHF has raised money via three- to five-year bonds at 9.25% to 9.4% – this is a decline of ~50bps over the past six months. Also LICHF is replacing high cost bank borrowings with low cost bonds which is cheaper by 100-120bp. On the asset side, yields are likely to improve with increasing the share of loan against property (LAP), which yields 200 to 250bps higher yields as compared to regular mortgages, coupled with increase in developer loans. Combination of lower funding costs and higher asset yields should lead to NIM improvement through the course of FY16

Strategy of focusing on Tier II & Tier III cities paying off: LICHF expected to grow advances by CAGR of 18% over FY14-17E, rising competition unlikely to be a threat given LICHF’s strong brand identity, large network ,agency force, better processes.

No concerns on asset quality: One of the best-placed entities from asset quality perspective (97% advances in the retail category). Overall GNPA ratio is at 0.6% and NNPA ratio is at 0.3% in Q3FY15. Higher recoveries are expected in the developer loan segment Moreover LICHF has written of INR 500m since inception, that translates credit loss of 3bps.

Valuation & view: Visibility of +18% CAGR growth over next 3 years; comfort on asset quality (+97% Retail loans) and multiple levers of margins expansion will drive earnings growth. We expect RoA of 1.4% and RoE of +18% by FY17, the stock is trading at 2x FY17 P/B and 11.8x FY17 P/E is relatively cheaper than peer group. Margin expansion could drive multiple expansion and stock can deliver +25% return over next 2 years

Replacing high cost bank funding with low cost bonds

Y/E March 2014 2015E 2016E 2017E NII 19.0 22.1 26.8 32.4 PPP 18.5 21.0 25.3 30.6 Adj. PAT 12.0 13.4 16.4 19.8 Adj. EPS (INR) 23.8 26.6 32.4 39.1 EPS Gr. (%) 17.4 11.6 22.2 20.7 BV/Sh (INR) 149.2 170.9 197.1 228.6 RoAA (%) 1.5 1.4 1.4 1.4 RoE (%) 17.2 16.6 17.6 18.4 Payout (%) 20.0 20.3 20.3 20.3 Valuations P/E (x) 19.7 17.7 14.5 12.0 P/BV (x) 3.2 2.7 2.4 2.1 Div. Yield (%) 1.0 1.0 1.2 1.5


Markets and Valuations


Markets Performance: India among top performer

World Indices Performance CY15 YTD (%) – Local Currency

2015 YTD: India is among top performing markets, with Sensex delivering 7% return in CY15YTD.

World Indices Performance CY15 YTD (%) – USD

1

2

2

2

3

3

4

5

7

32

China

S&P 500

Taiwan

South Korea

Brazil

MSCI EM

Japan

UK

India - Sensex

Russia MICEX

-4

1

1

2

3

3

4

4

8

20

Brazil

China (HSCEI)

South Korea

S&P 500

MSCI EM

Taiwan

UK

Japan

India - Sensex

Russia MICEX


57 56 53 49 4944 43

36 36 32 3129 24 24

18

84

2

Hea

lth C

are

Pvt -

Bank

s

BSE

Mid

-Cap

Aut

o

NBF

C

PSU

-Ba

nks

Capi

tal G

oods

Tech

nolo

gy

Cem

ent

Nift

y

Sens

ex

Util

ities

Med

ia

Cons

umer

Real

Est

ate

Tele

com Oil

Met

al

79

6155 52 50 49 47

3731 30 27 23 18 17 12 8 8

1

PSU

-Ba

nks

Pvt -

Bank

s

BSE

Mid

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Aut

o

Capi

tal G

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NBF

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Hea

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Cem

ent

Nift

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Sens

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Med

ia

Util

ities

Cons

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Tech

nolo

gy Oil

Real

Est

ate

Met

al

Tele

com

46

Sectoral Performance: Healthcare, Private Banks & Auto top performer Sectoral Performance for FY15 YTD (%): Healthcare, Private Banks, Auto, NBFC led the outperformance

Sectoral Performance for CY14 (%): Financials, Auto and Capital Goods led the outperformance


Nifty Performance: 24 companies outperformed Nifty Nifty Best and Worst Stock Performance FY15 YTD (%)

Nifty Best and Worst Performance CY14 (%) 93 91 89 86

77 75 73 6861 57 56 53 51 50 50 46 44 43 43 41 40 39 38 33 32 32 31 31 30 29 28 28 26 26 25 25 18 18 15 13 7 6 5 2

0 -1 -6 -7-18

-26-42

Axi

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Indu

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Bk

Mar

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BPC

LSB

IPN

BKo

tak

Mah

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BoB

ICIC

I Ban

kLu

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Cipl

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Ult

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HEL

Her

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Sun

Phar

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L&T

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Am

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9581 80 76 73 68 61 60 59 58 51 51 50 47 46 46 44 42 41 40 37 34 34 32 32 32 31 31 31 27 25 24 23 22 19 17 13 11 10 9 9 8 7 4 2 0

-3 -7-15-22

-47

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LH

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Pow

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HCL

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Ban

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Info

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BH

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Fund Flows: FIIs remain buyers; DII selling continues though MFs turn big buyers

Fund flow into Indian markets Fund flows

FIIs continued to repose faith in Indian equities and invested USD2.5b in CY15YTD. DIIs witnessed outflows of USD0.9b.

Domestic MFs continued buying for ten consecutive months.

DIIs ex-MFs remained net sellers. This was 12th consecutive month of outflows.

Monthly Domestic MFs Flows (USD b) Monthly DII ex-MFs Flows (USD b)

8.117.8

-12.2

17.629.3

-0.5

24.5 20.0 16.2

2.53.7

5.4

16.9

5.3

-4.75.9

-10.9 -13.0 -4.9 -0.9

CY06 CY07 CY08 CY09 CY10 CY11 CY12 CY13 CY14 CY15 YTD

Net FII Flows (USD b) Net DII Flows (USD b)

-0.4-0.3

-0.1-0.1

0.1

-0.4-0.3

-0.6-0.5

-0.4

-0.5

-1.0

-0.2-0.3

-0.3

-0.6

0.0-0.4

0.3

-0.4-0.7

-0.1-0.1

-0.4-0.2

-0.6-0.4

0.0

0.6

0.8

1.1

0.71.0

0.3

1.1

0.10.4

Feb-

12

May

-12

Aug

-12

Nov

-12

Feb-

13

May

-13

Aug

-13

Nov

-13

Feb -

14

May

-14

Aug

-14

Nov

-14

Feb-

15

-2.0

-0.4

0.3 0.20.2

-0.6-0.5

-1.1

-0.4-0.5

-1.1

-2.3

-1.5-1.2

-0.2

-1.6

1.5

0.1

0.7

-1.0

-1.4-1.4-1.2

0.20.5

-1.5

-0.7-0.8-1.3 -1.4

-0.8-0.9

-0.3

-1.5

-0.3

-1.4

-0.1

Feb-

12

May

-12

Aug

-12

Nov

-12

Feb-

13

May

-13

Aug

-13

Nov

-13

Feb-

14

May

-14

Aug

-14

Nov

-14

Feb-

15


Markets valuations inches above long period average

12-month forward Sensex P/E (x) 12-month forward Sensex P/B (x)

Trend in India’s market cap to GDP (%) 12-month forward Sensex RoE (%)

4.2

1.6

2.8

1.5

2.2

2.9

3.6

4.3

Feb-

05

Feb-

06

Feb-

07

Feb-

08

Feb-

09

Feb-

10

Feb-

11

Feb-

12

Feb-

13

Feb-

14

Feb-

15

10 Year Avg: 2.7x

24.2

15.815.9

15.0

17.5

20.0

22.5

25.0

Feb-

05

Feb-

06

Feb-

07

Feb-

08

Feb-

09

Feb-

10

Feb-

11

Feb-

12

Feb-

13

Feb-

14

Feb-

15

10 Year Avg: 18.4%

4252

82 83

103

55

9588

69

63 65

81

FY04

FY05

FY06

FY07

FY08

FY09

FY10

FY11

FY12

FY13

FY14

FY15

E

Average of 72% for the period

BSE Sensex trades at a PE of 17.5x which is above its historic averages and at 10% premium; PB is marginally above its historic average and trades at 2.8x. Sensex RoE at 15.9% is below the long period average of 18.4%.

24.6

10.7

17.5

9

13

17

21

25

Feb-

05

Feb-

06

Feb-

07

Feb-

08

Feb-

09

Feb-

10

Feb-

11

Feb-

12

Feb-

13

Feb-

14

Feb-

15

10 Year Avg: 15.9x


Sector valuations: Cyclicals remain at a discount to P/B PSU Banks under performed during CY15 YTD to give a 8% negative return. The sector now trades at 15% discount to its

historic average on PB.

Metals trade at 0.9x PB which is 45% discount to its historical PB average. EV/EBIDTA valuations is at 6x, which is 1% discount to its historical average.

Capital Goods trades at 19% discount to its historical PB average, however it trades at 45% premium to its historical PE average.

Current 10 Yr Avg Prem/Disc (%) Current 10 Yr Avg Current 10 Yr Avg Prem/Disc (%) Current 10 Yr AvgAuto 13.8 12.7 9.3 -20 -21 3.1 2.9 6.9 13 8Banks - Private 18.0 15.6 15.4 4 -3 3.1 2.4 31.6 12 -12Banks - PSU 7.8 7.2 7.9 -55 -54 1.0 1.1 -15.5 -65 -58NBFC 13.8 11.9 15.4 -21 -26 2.7 2.3 18.1 -3 -15Capital Goods 32.3 22.3 45.3 86 38 3.7 4.5 -19.2 32 62Cement 22.7 14.7 53.7 31 -6 2.4 2.3 1.8 -14 -14Consumer 35.8 25.6 39.6 106 64 13.7 8.9 52.9 392 240Healthcare 26.7 22.0 21.5 54 40 5.7 4.2 34.1 104 59Media 24.8 22.3 11.2 43 39 5.5 4.0 36.0 97 49Metals 11.0 10.0 9.4 -37 -38 0.9 1.7 -45.0 -66 -38Oil & Gas 11.1 11.5 -3.2 -36 -28 1.3 1.7 -24.5 -53 -37Real Estate 23.9 23.1 3.2 38 44 1.0 1.4 -30.4 -64 -49Retail 31.2 32.7 -4.7 80 104 9.3 4.6 102.7 236 70Technology 19.2 17.0 12.7 11 8 5.0 5.0 -1.0 79 85Telecom 22.9 23.1 -0.8 32 48 1.7 2.4 -29.0 -38 -11Util ities 12.5 15.1 -17.6 -28 -5 1.4 1.8 -22.9 -51 -34

PB (x)Sector

Relative to Sensex P/E (%)

Relative to Sensex P/B (%)

PE (x)


Sector valuations Auto Sector EV/EBIDTA (x)

Capital Goods Sector P/B (x)

PSU Banks P/B (x)

Private Banks P/B relative to Sensex P/B (%)

10.0

3.1

6.1

6.1

2.0

5.0

8.0

11.0Fe

b-05

May

-06

Aug

-07

Nov

-08

Feb-

10

May

-11

Aug

-12

Nov

-13

Feb-

15

Auto Sector EV/EBDITA (x) LPA (x)

1.9

0.5

1.01.1

0.3

0.8

1.3

1.8

2.3

Feb-

05

May

-06

Aug

-07

Nov

-08

Feb-

10

May

-11

Aug

-12

Nov

-13

Feb-

15

PSU Banks Sector PB (x) LPA (x)

-37.9

10.6 12.2

-12.5

-60

-40

-20

0

20

Feb-

05

May

-06

Aug

-07

Nov

-08

Feb-

10

May

-11

Aug

-12

Nov

-13

Feb-

15

Pvt Banks PB Relative to Sensex PB (%)

11.2

2.9

3.74.5

1.0

5.0

9.0

13.0

Feb-

05

May

-06

Aug

-07

Nov

-08

Feb-

10

May

-11

Aug

-12

Nov

-13

Feb-

15

Capital Goods Sector PB (x) LPA (x)


Sector valuations Consumer Sector P/E relative to Sensex P/E

Metals Sector P/B relative to Sensex P/B (%)

Technology Sector P/E (x)

Media Sector P/E (x)

-0.4

136.7106.2

64.0

-15

35

85

135

185Fe

b-05

May

-06

Aug

-07

Nov

-08

Feb-

10

May

-11

Aug

-12

Nov

-13

Feb-

15

Consumer PE Relative to Sensex PE (%)

25.5

7.7

19.217.0

6

12

18

24

30

Feb-

05

May

-06

Aug

-07

Nov

-08

Feb-

10

May

-11

Aug

-12

Nov

-13

Feb-

15

Technology Sector PE (x) LPA (x)

8.8

-74.1 -66.0

-38.3

-90

-60

-30

0

30

Feb-

05

May

-06

Aug

-07

Nov

-08

Feb-

10

May

-11

Aug

-12

Nov

-13

Feb-

15

Metals PB Relative to Sensex PB (%)43.0

10.6

24.822.3

1

13

25

37

49

Feb-

05

May

-06

Aug

-07

Nov

-08

Feb-

10

May

-11

Aug

-12

Nov

-13

Feb-

15

Media Sector PE (x) LPA (x)


Sector valuations Oil & Gas Sector P/B relative to Sensex P/B (%)

Telecom Sector EV/EBIDTA (x)

Health Care Sector P/E(x)

Utilities Sector P/B (x)

-43.9

-17.6

-53.3

-36.5

-70

-50

-30

-10Fe

b-05

May

-06

Aug

-07

Nov

-08

Feb-

10

May

-11

Aug

-12

Nov

-13

Feb-

15

Oil & Gas PB Relative to Sensex PB (%)28.7

16.0

26.7

22.0

15

20

25

30

Feb-

05

May

-06

Aug

-07

Nov

-08

Feb-

10

May

-11

Aug

-12

Nov

-13

Feb-

15

Healthcare Sector PE (x) LPA (x)

5.5

16.5

6.2

8.6

3.0

8.0

13.0

18.0

Feb-

05

May

-06

Aug

-07

Nov

-08

Feb-

10

May

-11

Aug

-12

Nov

-13

Feb-

15

Telecom Sector EV/EBDITA (x) LPA (x)

1.5

3.7

1.41.8

0.0

1.0

2.0

3.0

4.0

Mar

-05

Jun-

06

Sep-

07

Dec

-08

Mar

-10

May

-11

Aug

-12

Nov

-13

Feb-

15

Utilities Sector PB (x) LPA (x)


Sector Snapshots


AUTO Positive / Negative surprises M&M: Below estimate. Pressure on margins in both businesses due to higher discounts/marketing cost and negative operating leverage. Hero MotoCorp: Below estimate; EBITDA margin of 11.4% impacted by higher publicity cost TATA Motors: Below est; JLR impacted by transitory issues, S/A by one-offs. Maruti Suzuki: Above estimate, best margins in 18 qtrs; Best is ahead with 40% EPS CAGR. Bajaj Auto: Operating performance above estimate; Highest-ever EBITDA; lower other income restrict PAT Eicher Motors: Consolidated Operating performance above est. driven by VECV; RE below est. on account of higher other expense Ashok Leyland: Recovery continues in 3QFY15 for AL, with second consecutive quarter of positive PAT, driven by fourth consecutive quarter

of QoQ increase in ASP (despite rising discounts) and operating leverage. Balance sheet continues to improve.

Guidance highlights M&M: Tractor volumes to see recovery only from 3QFY16. 2 compact SUVs and 1 SCV launch in CY15.on track. MSIL: Guides 10% growth in FY15 (implying flat volumes for 4QFY15). Bajaj Auto: Exports there could be some headwinds. 2 new pulsar products each in Feb and March 2015. Hero Moto: 1 new scooter (Dash, 110cc) to be launched in Jun-Jul'15, with another scooter (Dare, 125cc) to be launched later. Eicher Motors: Expects producible capacity to ~ 450,000 in CY15 (largely from old plant + phase-1 of Oragadam plant), although ramp-up

wouldn’t be linear. Oragadam Phase-2 capacity to start operations from 3QCY15, and on full ramp-up will increase production to ~60,000/month by mid-CY16.

Tata Motors: JLR’s FY16 EBITDA margins to be lower than FY15 (v/s our est of ~70bp decline in FY16), due to several launches (plants & products) and hedge loss, c) cuts capex guidance for FY15 (GBP3.2b v/s GBP3.7b earlier) & FY16 (GBP3.8b v/s our earlier est of GBP3.9), implying FCF positive for FY15 (est GBP503m FCF).

TVS Motors: To gain market share of 1% by 4QFY15 to 14.5%; Target of 18% market share in scooters (current 14%) and 20% market share in domestic 3Ws (in addressed segment) from current 11%.

Ashok Leyland: Targeting EBITDA margin of 12% in medium term, driven by demand recovery pricing power/discount moderation and operating leverage..

55

Positive/Negative surprises and Guidance highlights by sector


CAPITAL GOODS Positive / Negative surprises BHEL reported below estimate numbers for 3QFY15. Revenue decline by 34% YoY in power segment, EBIT margins at 9.4% were down by

690bps. Performance has been impacted by poor execution, as impasse surrounding coal block de-allocation impacted 15GW of projects (23% of BHEL’s order book).

L&T’s Hydrocarbon reported EBITDA margin of -4.8% vs EBIDTA breakeven in 2QFY15. NWC continues to remain at elevated levels of 26% (vs ~21% YoY). L&T’s order intake from domestic market stood at INR234b and contributed 86% of the project cost, supported by large projects (~INR15b+) of INR96b (vs INR67b for FY14). E&C overseas revenues in 3QFY15 improved by 4% YoY to INR151b, however EBIDTA margins declined 140bps YoY to 9%.

VOLT made provisions of INR1.8b towards losses on Sidra project; cumulative provisions stand at INR6.3b. The project is nearly 95% complete.

CRG’s overseas business reported EBIDTA loss of INR107m, despite EUR revenues up 8.4% YoY. Execution of legacy order of 17m Euro led to a one time loss of INR640m. Additional legacy project worth 20m Euro remains un executed.

Guidance highlights L&T has scaled down its FY15 order intake guidance from 20%+ to 15-20%. EBIDTA margin guidance has been revised to 200bps decline vs

earlier guidance of 150bps. ABB’s focus preference continues to be on cash over revenues and the focus continues to be on cash generation. KKC has maintained guidance: Revenues to increase by 10-15% in FY15 (domestic at flat to 5%, and exports +70%); margins are likely to be

down 100bps. BHEL expects FY15 industry project awards at 13-14% and similar quantum expected in FY16 (compares with FY14 awards at 6GW).


CEMENT Positive / Negative surprises Volume growth disappoints for most especially for southern companies Variable cost savings benefits were lower and lagged till 4Q. Guidance highlights Most companies have shared optimism for medium term, while guiding for a gradual recovery from 2HCY15 Southern players expect benefits of AP recovery to percolate by FY15-end.


CONSUMER Positive / Negative surprises HUL & ITC reported numbers below expectations. HUL posted volume growth of 3% (est. 6%), while ITC cig volume collapsed 13% (est. -

6%). We have cut our earnings estimates by 3-4% for FY15-17 and model 7.5% cig. volume decline for FY15. APNT posted volume growth of c.4% in domestic decorative paints (est. 10%). Gross margin expanded 280bp YoY led by a sharp correction

in RM prices and carry-over benefits of earlier price hikes. Emami’s numbers were ahead of estimates with overall volume growth of 11% (est.10%). All the power brands witnessed solid market

share gains. Gross margin expanded 220bp YoY to 67.3% (highest ever) led by benign RM prices and price hikes. We raise our estimates by 15% to factor in 3QFY15 beat and also incorporate the commodity cost correction.

Marico posted in line performance with 21% consol revenue growth led by strong value growth in Parachute (48%) on account of price hikes. Gross margins contracted significantly led by RM inflation in copra. We upgrade our estimates by 4-8% to incorporate lower RM costs.

Britannia posted 13.6% revenue growth with 9% volume growth. EBITDA margin expanded 120bp led by savings in RM (down 20bp), ad spends (down 50bp), employee costs (down 20bp) and conversion cost (down 20bp). Consequently EBITDA grew 30.5% YoY. Other income doubled YoY, which aided 34% YoY recurring PAT growth. We upgrade our EPS estimates for FY16/17 by 17/18% to factor in 3QFY15 beat and benign RM costs.

Nestle’s results were above estimates with sales in-line and domestic sales growth in double digit after 9 quarters, primarily on account of low base (3.6% growth in 4QCY13). We estimate domestic volume growth at 2-3%.

Colgate posted volume growth of 5% (est. 9%), though market share expanded across categories (toothpaste: +70bp YoY to 56.7%; toothbrush: +90bp YoY to 42.4%). Gross and EBITDA margin expanded 230bp and 260bp respectively. EBITDA posted 29% YoY growth (6% ahead of expectation).

GCPL’s results were ahead of expectations with Sales, EBITDA and Adj. PAT YoY growth of 12.5%, 26.5% and 34.8% resp. The performance was led by broad based improvement in International division.



CONSUMER (contd) Positive / Negative surprises Dabur posted 9.2% consol sales growth with volumes up 7.4% (est. 9%). We have cut the sales estimates by 3-4% to factor 3QFY15 volume

miss as well as revision in volume guidance ahead. However we raise the EBITDA/PAT estimates by 7-8% to factor the lower commodity costs.

Pidilite results were below expectation with 8% volume growth for the Consumer & Bazaar segment. Gross margin contracted by 70bp, however lower other expenses (down280bp) led to a sharp 140bp EBITDA margin expansion . We raise our estimates by 10-15% to incorporate lower input cost assumptions.

GSK Consumer performance was in line with expectation with net sales growth of 16.5% YoY and underlying volume growth of 5%, higher sequentially (2QFY15 volumes were up 2%). Gross margin expands 180bp YoY to 66.5% led by input cost correction and pricing actions.

Guidance highlights HUL indicated market environment being soft, but incrementally getting better. Unlike in FY09, the company is focussed on maintaining its

competitiveness and hence has initiated price cuts proactively (5% price cuts in S&D portfolio so far). APNT could witness significant benefit from correction in input costs (crude and crude derivatives) in 4QFY15 and 1QFY16. The company

has not planned any price cuts yet but historically has taken price cuts during deflationary RM environment. Dabur volume growth to remain in the 6-10% band for next two quarters v/s earlier guidance of 8-10%. Urban growth was lower than rural

and continues to remain soft in 4QFY15 as well. Emami’s expects revenue to grow at least 16-17% for FY16 and should be able to maintain its gross margin given softening in input costs.



FINANCIALS Positive surprises

AXSB: Asset quality performance was a positive surprise, with fresh stress additions declining to 12-quarter low of INR8.4b (1.6% TTM loans) versus INR14.8b (2.9%) as of 2QFY15. Across core operating parameters, AXSB reported strong trends (a) NIM largely flat QoQ at 3.93% (b) loan growth picked up (+8% QoQ and +23% YoY) led by strong growth in retail (+10% QoQ and +24% YoY) and Mid/Large corporate segment (+10% QoQ and 25% YoY), (c) fees growth accelerated to 16% YoY (1H-10%) led by retail fees (+50% YoY, 30% in 1H). AXSB maintained its guidance of INR65b gross stress addition. In 9MFY15 it added INR34.3b,implying 4QFY15 guidance of INR30.7b.

SBIN: Bank reported flattish impairment ratio (4.4% in 3Q vs 4.6% in 1H) vs significant rise for peers – a key positive. NSL at 6.6% of the loans (one of the lowest ) and PCR at 64% remains the best in the state owned banks. Despite high impairment ratio, performance on NIMs (+6bp QoQ to 3.15%) was impressive. Strong opex control (+6% YoY) and higher trading gains (INR9.2b, 22% of PBT) were the key drivers of the PAT growth. On a conservative basis, managment guided for restructuring pipeline of INR55b

HDFCB: Retail loan growth bounced back to double digits (+12% YoY) post 3 quarters of single digit growth. Growth was strong in some key retail products like unsecured retail (+26% YoY), Auto loans (+19% YoY), Home loans (+24% YoY) and Kissan gold cards (+58% YoY). These segments form ~33% of the loan book and ~70% of retail loans. Momentum in fee income (+15% YoY) continued to improve (+9% YoY in 1Q and +13% YoY in 2QFY15). NSL remains lowest at 36bp. Opex growth (+19% YoY) continue to lag/grow inline revenue growth (+21% YoY)

YES: Robust customer assets growth (+9% QoQ and +23% YoY), 30bp YoY improvement in NIM (flat QoQ at 3.2%) and strong fees growth (+38% YoY) led to a healthy revenue growth of 37% YoY. Controlled C/I ratio (~40%) and stable asset quality led to 30% YoY growth in PAT. Loan growth remains strong at 32% YoY (+7% QoQ).

IIB: Healthy loan growth (+7% QoQ and +22% YoY), stable NIMs (3.67%) QoQ, pick-up in CV loans (+4% QoQ v/s declining /flat QoQ in last two years), strong SA deposits accretion (+7% QoQ and +32% YoY) and stable asset quality (GNPAs 1.05%, PCR 70%) QoQ were the key positives.

BAF: Strong growth in high yielding consumer finance business (+15% QoQ and +63% YoY) led to 200bp QoQ margin improvement to 12% (100bp beat vs expectation). Better than expected festival demand, cross selling to existing customer and market share gains led highest ever quarterly customer acquisition of 1.5m.



FINANCIALS (contd) Negative surprises

ICICIBC: High impairment of INR40.4b (slippages of INR22.8b and fresh RL of INR17.6b) – 4.3% of loans and guidance of muted asset quality performance in 4Q as well was the key disappointment. NSL increased to 4.5% v/s 4.1% in 2Q and PCR declined to 63.5% (65.9% in 2Q and 70% in 3QFY14). PAT was inline with estimates. Performance in retail business remains healthy with (a) loan growth of 26% YoY (+7% QoQ) – share increased 425bp YoY to 41%, (b) SA growth of 15% YoY (+5% QoQ); stable average daily CASA ratio of 40%.

BOB: Asset quality was one of the biggest negative, with the new stress formation of INR43.8b (4.5% of annualized loans) v/s INR27.8b a quarter ago (2.9%). BOB’s reported PBT declined 24% YoY to INR10.8b (miss of 42%), led by higher credit cost (120bp v/s 70bp in 1H) and lower NIM (down 20bp QoQ). PAT decline of 68% YoY (miss of 75%) due to higher tax rate of 69% (led by one off tax demand of INR3.5b from Dubai tax authorities). Management guided for QoQ increase in stress addition in 4QFY15.

PNB: PAT (+3% YoY) missed estimates by 13%, despite high contribution of net trading gains (INR6.6b - 50% of PBT), due to elevated credit costs and higher tax rate of 40% (est. of 32%). Net slippages in 3QFY15 came in at INR38.8b (4.8%) v/s INR22.6b (2.9%) in 2QFY15. Gross slippages increased to INR55.5b (annualized slippage ratio of 6.8%) from INR39.7b (5.1%) in 2QFY15.

JKBK: Continued weakness in asset quality led to higher credit cost (1.24% in 3QFY15), moderate balance sheet growth (+4% YoY) and high opex (+22% YoY ) impacted earnings. PAT declined 67% YoY. Gross stress additions increased to INR10.8b (annualized 10% of loans) from INR5.1b (5%) a quarter ago. NIM declined 35bp QoQ to 3.7%. On back of higher asset quality stress we cut estimates by 25-30% and downgrade it to Neutral.

BOI: PAT of INR1.7b significantly missed (76%) our estimates, led by continued weakness in asset quality (slippage ratio of 3.8% and credit costs of 1.3%) and wage cost (+30%/23% YoY in 3Q/9MFY15). Significant stress additions also led to a sharp decline in NIM (-24bp QoQ) and impacted NII (+2% YoY, 15% miss).

MMFS: Significant increase in GNPAs of 65% YoY and 17% QoQ in absolute terms was a negative surprise. In percentage terms, GNPA stood at 7.1% v/s 6.3% a quarter ago and 4.8% a year ago. NNPAs are at a four-year high at 3.4% v/s 3.1% a quarter ago and 2.2% 3QFY14. Credit cost for the quarter stood at 3.15% - at a 5-year high. Continued weakness in asset quality led to significantly higher provisions of INR 2.7b, (22% above est.) resulting 26% miss on PAT (de-grew 17% YoY & 34% QoQ to INR1.36b). We have downgraded earnings estimate by 8% for FY15 and 5/3% for FY16/17 to factor in higher asset quality strain.

LICHF: 3QFY15 net profit stood at INR3.44b (6% below est. of INR3.66b). While growth and asset quality remained healthy, lower-than-estimated spreads of 1.22% (est. 1.32%) led to below estimate PAT growth. While corporate loan disbursements picked up at INR4.5b, higher repayments led to flat YoY growth and 7.5% sequential growth. Corporate loans share in overall loans declined to 2.53% v/s 3% a year ago.



Positive/Negative surprises and Guidance highlights by sector HEALTHCARE

Positive / Negative surprises Lupin misses top line, but low competition launches and cost rationalization efforts led to 50bp improvement in margins Dr Reddy’s Lab surprised positively with 3% beat on sales and 10% beat on bottom line, aided by lower than expected weakness in EM

business • Cadila Healthcare and Cipla reported in line quarterly performance Sun Pharma’s results were below estimates due to supply constraints faced in Halol facility (remediation measures underway) Ranbaxy saw weak performance across the markets, led to 52% miss on bottom line IPCA Labs result were below estimates due to (1) negligible US sales, (2) weak Institutional business and (3) Currency impact GSK Pharma missed PAT estimates by 68%, due to continued supply chain issues. Guidance highlights - Strong guidance & aspirations Sun Pharma maintained FY15 guidance of 13-15% revenue growth in constant currency terms (vs 8% in 9MFY15) Divi’s remained confident of achieving 18-20% revenue growth for FY16 on the back of healthy order book. Lupin aims to achieve USD 5b sales by FY18 of which USD 1b driven by acquisitions Cipla has guided for a mid-teen revenue growth in FY15E, but reiterated its sales guidance of USD5b by 2020 Cadila Healthcare aspires for a topline of INR100b by FY16 with 80-100bp margin improvement over current levels.

MEDIA Positive / Negative surprises Dish TV surprised with better-than-expected EBITDA growth, primarily driven by opex control Zee surprised negatively with significant miss on non-sports EBITDA Guidance highlights Zee expects to keep outperforming the industry in terms of advertising revenue growth Hathway expects net ARPU to normalize post recent deals with Zee and Star


Positive/Negative surprises and Guidance highlights by sector METALS Positive / Negative surprises Tata Steel/SAIL/JSW surprised negatively on realization. Volumes were broadly in-line. TSI impact of 3rd party iron ore sourcing was higher

than expected. JSW Steel disappointed on higher interest cost on working capital and imported iron ore acceptance cost. Hindalco/Nalco Nalco surprise on better margins on back of lower production cost. Hindalco, costs were higher than expected, ramp-up of

new capacities was better-than-expected. SSLT: Impacted by lower crude oil price. Aluminum/copper were better-than-expected on lower production cost and better Tc/Rc.

Guidance highlights Tata Steel/SAIL/JSW Steel: have guided for further INR1,500-2000/t QoQ decline in realization. JSW Steel: Lowered capex guidance on account of increase in working capital, amid tepid demand. Sesa-Sterlite: Reviewing capex plans amid depressed commodity price environment, at Cairn India and Zinc International. Hindalco: Novelis guided for strong EBIDA in 2H and positive FCF on full year basis in FY15.

OIL & GAS Positive / Negative surprises • Government attempt to stick to its FY15 budgeted subsidy resulted in high upstream subsidy for ONGC/OINL in 3QFY15. • OMC’s shared nil subsidy, however profitability was impacted by crude inventory losses. BPCL reported positive PAT led by superios GRM at

USD1.5/bbl v/s negative GRMs reported by HPCL and IOCL. • RIL reported in-line EBITDA and PAT. GRM stood at USD7.3/bbl (-4% YoY, -12% QoQ) impacted by crude inventory loss (Brent down 40%). • PLNG’s 3QFY15 EBITDA was significantly below estimate due to loss on marketing margins on spot LNG sales. Kochi terminal utilization

remains low at ~1% led by delays in Kochi-Bangalore-Mangalore pipeline continues. • For 3QFY15, of the gross under recoveries stood at INR159b (-60% YoY, -29% QoQ), of which upstream shared INR109b (68%) and rest

INR51b (32%) by govt. leading to nil sharing by OMC’s.

Guidance highlights ONGC’s FY15/FY16 standalone oil production guidance is at 22.9/24mmt (v/s 22.3 in FY14) and for gas at 23/25 bcm (v/s 23.3 in FY14). CAIR has guided flat YoY Rajasthan production in FY15, but 7-10% CAGR over 3 year period. FY15 subsidy sharing still unclear, but expect OMC’s sharing to be minimal (model 2%) and upstream sharing to be nil in 4QFY15.



REAL ESTATE

Negative surprises Sobha: Weak presales continues longer, cost over run DLF: Dev Co operations remain weak; Godrej Properties: Continuation of negative operating cash flow with sharp rise in debt again Positive surprises HDIL, Oberoi: Uptick in presales and cash flows

OIL & GAS (contd…)

Key Actionable Diesel de-regulation likely to boost OMC’s marketing margin in FY16/FY17, buy BPCL/HPCL/IOCL. LPG reforms to further lower under recoveries, maintain positive stance on NGC/OINL led by likely favourable subsidy sharing.

RETAIL Positive / Negative surprises Titan‘s performance was below estimates due to weak performance of watch division. Sales were at INR29b, up 9.4% YoY (est. INR29.7b),

EBITDA grew 6.2% YoY to INR2.52b, with 20bp margin contraction to 8.7% (est. 9.5%). PAT growth of 7.2% YoY to INR1.9b (est. INR2.1b) was impacted by delayed benefits of hedging gains.

Jubilant Food works posted positive SSS after four quarters (est. 0%) while EBITDA margin contracted 160bp. However, QoQ margin improved 90bp as employee and rental costs softened 50bp and 30bp, respectively.

Shoppers Stop posted muted LTL sales growth of 0.8% (est. 10%), with LTL volumes down 1.1%. Weak festive season sales coupled with enhanced competition from online channel (especially during festive period) dragged their performance. We have lowered the estimates by 20-25% to incorporate the 3Q miss and underlying sluggish demand.

Outlook Despite removal of 80:20 import restrictions, customs authorities are not allowing shipments for domestic consumption on credit as of

now. However, TTAN has been procuring gold on credit from other sources. As per management, 75% of hedging gains will be accrued in 4QFY15.

No change in SSS guidance, expected to reach high single digit in five to six quarters. Shoppers Stop expect 4QFY15 LTL growth of 6-7%. GST will aid in 90-100bp positive impact on account of input credit on service tax on

rentals.



TECHNOLOGY Positive / Negative surprises

HCLT’s 6.2% QoQ CC revenue growth in a seasonally weak quarter in the absence of any one-offs stole the show. On the back of 8.1% CC growth in 1QFY15, Engineering services grew 12.6% QoQ CC in 2Q, substantiating industry-wide comments of momentum in the segment.

INFO’s 3QFY15 volume growth of 4.2% QoQ (v/s estimate of 2.6% QoQ) in a seasonally weak quarter was a key positive.

Broad-based nature of WPRO’s 3.7% CC revenue growth after many quarters of lopsided performance was a positive indicator of potentially turning tides for the company. Significant pressure in the Energy segment raises concerns on sustainability of the same.

CTSH organic revenue grew 4.2% QoQ in constant currency and 3.1% after 110bp impact from cross currency, bettering the guidance of 1.1-2.3% QoQ

TCS’ services revenue growth of 1.6% (ex-equipment sales) was disappointing, and came below peers.

TELECOM Positive / Negative surprises Strong wireless traffic and EBITDA growth reported by Idea

Voice RPM decline for Idea

Disappointing revenue/EBITDA performance for Bharti Africa

Disappointing results reported by RCom Guidance highlights

Bharti Airtel increased FY15 capex guidance from USD2.2-2.4b to USD2.6-2.8b. Bulk of the capex is to support data growth.

Operators are now relatively cautious about voice RPM improvement in near-term given flattish to declining trend in past one year



UTILITIES Positive / Negative surprises NTPC’s reported PAT was higher than estimate led by higher core business earnings. Sustainability of PAT key monitorable. Powergrid’s capitalization stood healthy at INR71b (up 133% YoY), higher than estimate of ~INR60b. Coal India E-auction realisation stood at INR3,100+/ton, up for second quarter in row despite slump in global coal prices. Tata Power did not account for compensatory tariff despite tariff order from CERC as matter is sub-judice. Awaiting order from Appellate

tribunal

Guidance highlights JSW energy: JSW maintained its merchant realisation guidance at INR4.25-4.50/unit for rest of FY15E. NHPC: TLDP IV project problem with civil contractor is resolved and work has commenced on project

TECHNOLOGY (contd) Guidance highlights CTSH guided for CY15 revenue growth of ‘at least’ 19%. However, adjusting for mid-single digit growth of the acquired entity TriZetto,

organic growth guidance translates to ~12.5%. This embeds ~2pp adverse impact from depreciation of global currencies. That implies organic constant currency revenue growth guidance for CY15 of at least ~14.5%.

INFO retained its guidance of 7-9% YoY growth in FY15 at currency rates prevailing as on September 30, 2014. This implies that the guidance does not factor the significant depreciation of global currencies v/s the US dollar. Factoring the same, the restated guidance on prevailing currency rates is growth of 5.9-7.9%. Our current estimate is 6.8% growth, at the midpoint of this guidance (USD8.8b).

WPRO guided for constant currency revenue growth of 1.0-3.0% QoQ in 4Q, to USD1814-1850m. This is on the softer side considering that 4Q is a seasonally strong quarter for the company due to India & Middle East business. The drag comes from the Energy segment, which should remain under stress at least in the near term.


AUTO: PVs and CVs continue on recovery path; 2Ws showing signs of fatigue

66

Summary

Recovery across segments, san LCVs: Auto volumes grew 4.7% YoY (-4.4% QoQ) driven by continued recovery in 2Ws (+17.6% YoY, -5.2% QoQ) and PVs (+10.7% YoY, 0.4% QoQ). M&HCV volumes recovered with ~6% YoY growth (+4% QoQ). However, LCV volumes continues to decline with ~13% YoY de-growth (+1.4% QoQ) – 7th consecutive quarter of decline.

EBITDA margins for Auto universe (ex JLR) decline flat YoY (down 60bp QoQ) : Margins improved for HMCL (180bp YoY/-150bp QoQ), Eicher (+330bp YoY/ -20bp QoQ) and AL (+1210bp YoY/ -20bp QoQ). Margins were under pressure for Bajaj (-40bp YoY/+280bp QoQ), M&M (-230bp YoY/-30bp QoQ) and TTMT S/A (-80bp YoY, -340bp QoQ) largely due to higher RM cost and other expense.

Major FY15E/16E EPS upgrade for Bharat Forge & AL, downgrade for TVS and Tata Motors : We upgrade our FY15E/16E EPS for Bharat Forge by 5.3%/6% and Ashok Leyland by 81%/34%. Downgrade TVS and Tata Motors EPS by 11%/8.3% and 8.6%/6.2% respectively.

Expect recovery to continue for 2Ws, PVs and M&HCVs: Driven by economic recovery, we expect sharp rebound in CVs as well as recovery in PV demand. Recovery in 2Ws to gather pace driven by demand revival in urban regions. Expect LCVs to turnaround in FY16.

Top picks: Prefer Maruti Suzuki (Strong earnings growth on industry demand recovery, new launches) and Tata Motors (Structural upturn in JLR & cyclical recovery in CVs). Within mid-caps, we prefer Eicher Motor (continued traction in Royal Enfield, and scale-up in CVs) and Ashok Leyland (pure play on CV, with focus on B/S deleveraging).


CAPITAL GOODS: Constrained Execution, order inflow (Ex L&T) remains weak

67

Summary For 3QFY15, performance for the capital goods sector continued to

remain constrained led by macro headwinds, coal block re-allocation, poor pace of project execution, etc.

3QFY15 revenues under MOSL coverage universe were down 1.8% YoY basis, EBITDA margins declined 40bps while PAT declined 5% YoY. Decline in margins is led by poor execution, impacting fixed cost absorption.

In terms of order inflows, there was a sense of cautious optimism. Few segments witnessed increase in inquiry levels. Ordering activity in domestic market remained constrained, with several companies stating that the next round of project awards in core sectors to pick up with a time lag of ~2-4 quarters.

ABB’s direct RM cost (as % of revenues) declined to 68.9% of revenues (down 200 bps YoY), and compares with peak levels of 75% in CY10. Intent is to lower the same to 65% given the localization and various efforts. Operational EBIDTA margins at 8.6% have been a positive surprise.

Bharat Electronics operating performance was above estimates with revenue growth of 56.5% YoY led by execution of Akash missile order, EBIDTA margins improved by 250 bps YoY to 17.3% on account of better operating leverage.

VOLT’s EMP business registered highest EBIT margin in last 10 quarters at 2%. VOLT reported 15% YoY decline in revenue impacted by EMP segment’s revenue decline of 28% YoY. Unitary cooling products division, registered a revenue growth of 11% YoY (v/s 29% in 1HFY15).

CRG’s 3QFY15 performance continues to be a mixed bag: Standalone results have been stable (EBIDTA margins at 8.7% and EPS of INR2/sh), while disappointment continues to be the overseas business (EBIDTA level loss, despite EUR revenues up 8.4% YoY; resulting in continued PAT loss of INR1.24b).

Operating performance a mixed bag

Order inflow ex-L&T remains constrained; Book to bill ratio stands at 3.04x

Engineering sector (Ex Havells) Revenues report de-growth


CEMENT: Volumes disappoint; higher cost leads lower profitability

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Dispatches growth weaker than expected at 5% YoY: MOSL Cement Universe volumes disappoint with 5% YoY v/s est of 8.4% YoY) in 3QFY15. Slippage in volume growth was led by unusual seasonal de-growth (YoY/QoQ) in southern players, along with growth moderation in rest of India. Recent capacity addition benefitted select companies viz. Ultratech (10%YoY), JK cement (21% YoY), Shree (11% YoY).

Realizations dip of INR5/bag QoQ was in line: MOSL coverage’s blended cement realizations was down ~INR105/ton QoQ (-INR110/ton YoY), led by weakness in October and November – which was partially offset in sharp price rise in December. Southern players (Ramco and India cement) posted better trends with INR0-5/bag QoQ uptick, while northern players posted INR5-11/bag QoQ decline.

Profitability dip higher (v/s est) with lower cost benefits: EBITDA/ton stood at INR598/ton (v/s est of INR682/ton) – down by INR98/ton QoQ (+INR22/ton YoY). Unusual dip in profitability was expected with lower realizations, but magnitude of decline was higher on account of lower cost moderation (as expected from sharp correction in coal and diesel price) and negative operating leverage (lower volume). Most of the managements expect cost savings to percolate in 4QFY15.

Expansions largely on track, demand sustainability key: Various management commentary suggests for a demand growth range of 6-7% YoY in 9MFY15 (v/s MOSL coverage universe growing 6.5%). Players with ongoing expansions viz. Ultratech, JK Lakshmi, Orient are largely on track for FY15/CY15 commencement/completion. Further improvement in pricing hinges on sustainability of demand acceleration especially in south. We estimate realization improvement of INR13/16/19 per bag in FY15/16/17 and EBITDA improvement of INR5/13/13 per bag.

Top picks: Ultratech whereas in mid-caps JK cement, Dalmia Bharat

Volume growth of 5% for MOSL Cement Universe

Profitability moved in line with realizations led by moderate cost savings


CONSUMER: Below expectations; expect demand recovery to be gradual

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Summary

Headline numbers in-line with estimates: Consumer coverage universe reported 7.8% YoY revenue growth (est. 13.3%), 10.3% YoY EBITDA growth (est. 16.1%) and 11.4% YoY Adjusted PAT growth (est. 15.9%). BRIT, Emami and GCPL surprised positively while Asian Paints, ITC, GSK Consumer & Radico’s performance were below expectation.

Volume growth continues to be soft: Consumer sector continued to witness subdued volume growth (below estimates). Emami, Britannia and GSK delivered better than expected volume growth while ITC, HUL and APNT witnessed further moderation.

EBITDA growth healthy: 9 out of 14 companies in our universe met/beat our EBITDA estimates (in 2Q15, 10 out of 14 had beaten/met our expectations). EBITDA posted growth of 10.3% YoY. Savings on account of softening in input costs (primarily crude related) should reflect in 4qFy15 and 1QFy16, in our view.

EBITDA margins up 40bp YoY: EBITDA margins for our coverage was slightly below expectation, up 40bps YoY of 21.6% (est. 21.7%)

Top picks: United Spirits, Britannia, Emami and ITC are our top picks in the sector. a) In the large-caps, our preference stays with ITC given the earnings visibility and lack of headwinds faced by other consumer companies. b) With new management and better controls in place, we believe UNSP offers a unique multi-year play on the IMFL growth story. We expect margin recovery efforts to gain momentum in FY16 on the back of cost containment and premiumization. c) We continue to like Britannia as it delivers on margins expansion backed by premiumization focus. d) Sharp recovery in domestic volume growth coupled with aggressive new launch pipeline underscores our preference for Emami.

3QFY15 Performance Snapshot

Volume growth trends


FINANCIALS: Private: Steady quarter; PSBs: Stress increases

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Summary Private Banks (PBs) maintain guidance; Weak quarter for ICICIBC: Barring

ICICIBC, PB’s asset quality was largely on expected lines. For our coverage universe, GNPA increased 11% QoQ and NNPA increased 17% QoQ. PCR declined 170bp QoQ at 64.4%. Retail lending banks continue to be in a sweet spot. Banks are focusing on cross sell and growth in high profit making unsecured segments, like personal loans and credit cards, remains strong.

PSBs: Stress increases – recovery expectation delayed further: Net stressed loans for most PSBs increased QoQ with PNB, BOB and BOI witnessing sharp rise in net slippages. Also, higher relapse from restructured portfolio is concerning. With regulatory forbearance window for restructuring coming to end by March 2015, most PSBs have guided for higher restructuring in 4QFY15.

PBs: Opex control and trading gains led to inline earnings; NIMs stable QoQ: PBs continue to report healthy quarterly performance, led by stable NIMs QoQ, focus on cost to core income ratio (opex growth 17% YoY, in line with core income growth), and strong asset quality (NSL stable QoQ). Moderate corporate loan growth continues to impact fee income.

Higher stress additions and tax rate mars earnings growth for PSBs: PSBs earnings growth plummeted to ~5% YoY (v/s 16% YoY in 2QFY15) mainly on account of lower NII (higher slippages leading to interest income reversals), increase in credit costs and higher taxes. However, with a significant decline in benchmark yields, PSBs booked strong trading gains leading to healthy PPP growth in 3QFY15.

View: Growth revival and near term asset quality pressures are the two main challenges for the banking sector. However, on anticipation multiple reform announcements in the upcoming budget, investment cycle and in turn bank credit growth expected to revive. Also, with pick up in the economy, there would be lower stress addition and higher recoveries/upgradations going forward. With capital and strong branch expansion, PBs are best paced to leverage on improving macro-economic environment to drive re-rating. Top picks: Private Banks: HDFCB, AXSB and YES. PSBs: SBIN, UNBK and ANDB. NBFCs: LICHF and SHTF

*Nets Stress loans = outstanding standard restructured loan (OSRL) + Net NPA


FINANCIALS: Private: Steady quarter; PSBs: Stress increases PSBs continue to consolidate; PBs growth backed by retail loans (Loans % YoY) NIMs remained stable across the board QoQ (%)

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4.8

3.4

3.2 3.

7

SBIN

PNB

CBK

BOB

BOI

UN

BK

OBC

INBK

AND

B

AXS

B FB

HD

FCB

ICIC

IBC IIB

KMB

VYS

B

YES

JKBK

2QFY15 3QFY15

2.4

5.5 7.

3

7.5 8.5

8.9 9.7

11.1

11.7

12.8

15.3

15.7

16.3

17.0

17.5

19.1

21.1

21.7

23.2

32.4

JKBK

OBC

SBIN

INBK

CBK

UN

BK

PSBs

PNB

BOB

ICIC

IBC FB

AND

B

BOI

HD

FCB

PBs

VYS

B

KMB IIB

AXS

B

YES

Most banks reported increase in Net Stressed Loans QoQ Net Slippage ratio: PNB, BOB, BOI, OBC witnessed sharp rise QoQ (%)

% of loans GNPA NNPA OSRL

2QFY15 3QFY15 2QFY15 3QFY15 2QFY15 3QFY15

SBIN 4.9 4.9 2.7 2.8 3.6 3.8

PNB 5.7 6.0 3.3 3.8 10.3 9.5

CBK 2.9 3.4 2.3 2.4 6.8 6.9

BOB 3.3 3.9 1.7 2.1 5.8 5.9

BOI 3.5 3.6 2.3 2.2 5.5 5.3

UNBK 4.7 5.1 2.7 3.0 5.2 5.0

OBC 4.7 5.4 3.3 3.7 7.7 8.8

INBK 4.2 4.6 2.6 2.7 8.2 8.1

ANDB 6.0 6.0 3.9 3.7 9.8 9.4

FY13 FY14 FY15

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

SBIN 3.9 2.0 2.5 0.1 4.7 2.0 3.5 (0.2) 2.0 1.8 2.2

PNB 2.1 6.5 0.0 0.5 3.3 2.0 0.6 3.1 2.6 2.9 4.8

CBK 1.6 2.3 2.0 1.0 2.4 1.2 1.9 (0.2) 2.2 2.9 2.0

BOB 1.8 1.9 2.8 2.6 2.5 2.1 1.4 0.5 0.9 1.6 2.8

BOI 2.2 4.1 0.9 2.3 1.9 0.9 0.9 3.1 2.0 2.0 3.0

UNBK 3.2 0.4 0.6 1.0 2.4 2.8 1.9 1.9 1.9 2.5 2.4

OBC 1.1 1.5 2.0 2.8 1.3 2.8 2.2 2.5 2.5 2.3 3.2

INBK (0.6) 2.6 5.6 2.4 1.8 2.1 (1.0) 3.0 0.9 1.6 2.1

ANDB 3.7 3.6 1.9 2.6 5.0 2.2 2.3 1.4 5.4 1.9 1.7

Overall 0.6 0.6 0.4 0.2 0.7 0.4 0.4 0.2 0.4 0.5 0.6


HEALTHCARE: Operational performance below expectations

72

Summary

Operating performance below expectations: Overall sector sales were 5% below our estimates while Aggregated margins miss was ~30bp primarily on account of negative operating leverage. US formulations growth was muted due to fewer ANDA approvals in 3Q. Emerging markets growth was hit by currency crisis which registered lower than expected growth. However, India formulations sales sustained growth recovery and 12-18% growth in this segment was witnessed for most of the companies. PAT for the sector missed estimates by 8% with higher depreciation in 3Q. Overall, 3QFY15 was below our estimates.

In-line EBITDA: Cadila Health, Dr. Reddy’s, Cipla, Glenmark, Lupin, Torrent

EBITDA disappointment: Biocon, Alembic, Divis, GSK, IPCA, Sun pharma

Strong guidance & aspirations: Sun Pharma FY15 revenue growth guidance is maintained at 13-15% in constant currency terms, despite 3Q miss implying strong 4Q. Divi’s maintained its sales guidance of 18% for FY16; EBITDA margin guided at 37-38% for FY1-165. Glenmark is confident of growing its revenue by 16-18% in FY16E. Lupin targets USD5b revenue by FY18 with implied CAGR of more than 25%. Cipla has guided for a mid-teen revenue growth in FY15E, but reiterated its sales guidance of USD5b by 2020. Cadila guided for sales of INR100b by FY16 with ~100bps margin improvement annually over current levels.

Top picks: Lupin, Torrent Pharma, Cadila Healthcare.


MEDIA: Soft operating performance; ad rebound awaited

73

Summary Media sector revenue up 9% YoY: Aggregate revenue for our

media sector universe increased 9% YoY. EBITDA/PAT growth was much higher at 16%/24% led by sharp opex control and one-offs such as high sports loss base in case of ZEE. All companies except SUNTV and DITV missed EBITDA estimates.

Advertising growth muted: Ad growth was relatively muted with 4 out of 6 companies reporting mid single growth on a YoY basis. As GDP growth improves and consumer companies benefit from lower commodity prices, we expect advertising growth to bounce-back.

Healthy subscription/circulation growth ex Hathway/Jagran: Zee reported a 4% YoY subscription revenue increase but underlying domestic revenue grew in low double digits. SunTV/DITV also reported strong subscription revenue growth at 14-16%. Hathway disappointed with decline in cable subscription revenue, impacted by one-offs. Print universe reported divergent trend in circulation revenue growth ranging from 7-17%.

Margin improvement across universe excluding HATH/HT : Most of the universe companies reported EBITDA margin improvement largely led by tight cost control. HATH/HTMEDIA were the only companies to report a meaningful YoY decline.

Ad growth rebound awaited; digitization phase III in focus: Ad growth is expected to benefit from economic recovery. Dwith phase III deadline in December 2015, digitization remains a strong theme in broadcasting despite on-going in monetization/addressability.

Top-picks: Dish TV, DB Corp

EBITDA margin trend (%)

3QFY15: YoY revenue growth (%)

3QFY15: Actual v/s estimates


METALS: Steel margins weak; aluminum better on lower cost/vols.

74

Summary India steel producers performance was weak impacted by demand

pressure, lower realization amid Chinese import and raw material availability issues. Aluminum producers reported QoQ volume growth with lower cost benefit for SSLT/Nalco. Hindalco saw ramp-up of new capacities. Copper Tc/Rc remained strong. NMDC while saw lower net realization, benefited from lower production cost and lower loss making export sales.

NMDC posted better than expected numbers on higher volumes and lower than expected production cost.

Tata Steel: TSI weak; TSE better: TSI was weak on lower realization and impact of 3rd party iron ore sourcing. TSE was better QoQ but adjusted for one-off, was broadly in-line.

JSW Steel: Volumes de-grew 1% QoQ while realization declined ~INR1,500/t QoQ.

SAIL: Weak realization (-2.9% QoQ) and lower volumes (-3% QoQ) further impacted by increase in interest/depreciation led to PAT decline.

JSPL: Standalone EBITDA decline on lower realization and iron ore availability issues. Power was weak on lower realization/volumes.

Sesa-Sterlite: EBITDA was down 10% QoQ on lower crude oil price offset by better copper Tc/Rc, lower cost in aluminum and lower cost at HZL.

Hindalco: S/A EBITDA was up 3% QoQ. Copper was down 4% but still strong. Ali volumes grew 10% QoQ, ahead of our estimate. New capacities are ramping-up well.

Nalco: Nalco posted strong performance, with EBITDA up 11% QoQ. Volumes were marginally higher while lower cost aided margins.

Metal companies results were weak

STEEL EBTIDA (INR/T): lower on decline in realization and lower vols.

INR MillionCompany Dec-14 YoY Chg (%) Dec-14 YoY Chg (%) Dec-14 YoY Chg (%)Hindalco 268,281 19.7 25,550 29.3 5,623 20.3Hindustan Zinc 38,531 11.7 20,892 14.6 23,794 38.1JSPL 51,643 -4.0 14,248 -16.2 2,364 -57.9JSW Steel 115,052 -3.8 21,173 -8.1 4,771 -26.0Nalco 19,060 15.9 5,272 158.0 3,545 170.5NMDC 29,461 4.4 19,482 2.4 15,930 1.6SAIL 111,073 -3.1 12,081 6.7 4,184 -19.2Sesa Sterl i te 192,189 -1.0 61,466 -6.4 14,381 -18.9Tata Steel 336,332 -8.4 30,774 -23.2 1,571 -68.8Metals 1,161,622 0.8 210,938 -2.4 76,162 -3.4

Sales EBITDA PAT


METALS: strong aluminum & copper volumes

75

Steel sales (mt) were down 1% QoQ

Aluminum sales (kt) were up 5% QoQ /1% YoY; broad based

Steel realization (INR/T) was down 4% QoQ; with the decline broad based

Copper volumes were up 7% YoY


OIL & GAS: OMC’s marketing profitability improves; debt reduction continues Summary

USD42/bbl crude price decline in 3Q impact OMC’s despite nil subsidy: Gross under recoveries were down 29% QoQ to INR159b of which upstream shared INR109b (68%) and rest INR51b (32%) by govt. leading to nil sharing by OMC’s. While OMC’s debt reduction continued, Marketing division profits were benefited from INR1/ltr additional marketing margins in auto fuels.

Upstream – Rajasthan back to 180kbpd, KG-D6 decline on: RIL’s KG-D6 volume averaged 11.8mmscmd (12.5 in 2QFY15), while Cairn’s Rajasthan production averaged 180kbpd (163kbpd in 1QFY15 impacted by shutdown). New gas price benefited ONGC/OINL; RIL applicability contingent on arbitration verdict and can delay new field development.

Gas – Competitive liquid fuel prevents LNG volume uptick: Lower spot LNG prices failed to improve volumes due to sharp fall in competivie liquid fuel prices. Further, Gail and PLNG were impacted due tol inventory and marketing losses. GSPL volumes were lower due to lower off-take from refiners who would have shifted back to liquid fuels.

Refining – Benchmark GRM up QoQ, inventory losses impact OMC GRM: RIL GRM (USD7.3/bbl) premium at USD1/bbl (-2.5/bbl QoQ), impacted by lower Light-Heavy crude price differentials and higher FO cracks production of which is nil in RIL. OMC’s GRM were negative except for BPCL impacted by huge crude inventory losses.

Petchem margins up, but sharp price fall impacts volumes: Despite high headline margins, overall profitability was impacted by lower volumes (inventory drawdown) and discounts given to clear the inventory. GAIL’s petchem profitability was impacted by higher cost led by higher high cost LNG consumption.

Valuation and view:

Prefer OMC’s with likely higher marketing margins and positive stance on ONGC/OINL is drive by likely favourable subsidy sharing formula.

Neutral on RIL as non-core capex to keep RoEs subdued. Neutral on Gail due to gas volume headwinds and likely impact of higher gas cost.

Singapore GRM at USD6.3/bbl; +47% YoY, -+31% QoQ

3QFY15: Earnings snapshot and Actual v/s Estimate


OIL & GAS: Higher D,D& strikes back in ONGC; await subsidy formula ONGC: D,D&A up QoQ led by lower dry well write-offs (INRb)

KG-D6 volumes decline QoQ; Headwinds for gas volume continues (mmscmd)

CAIRN: Rajasthan production up QoQ and 2Q was impacted by maintenance shutdown

Model downstream sharing at ~3% in FY15/FY16/FY17

OMC’s debt decline helped by reduction in under-recoveries (INRb)

OMC’s: Nil subsidy sharing, but profitability impacted by crude inventory lowwes (INRb)


REAL ESTATE: Mumbai recovering from low base, weakness prevails in NCR

78

Mumbai suburbs recovering from low base, NCR weak: During 3QFY15, Mumbai based developers witnessed recovery in presales from low base. Improvement was more visible for projects in suburbs, while demand in central Mumbai remains flattish. Conversely, NCR region worsened further with key NCR players (MOSL coverage) showing 45% YoY drop in presales in 9MFY15. In Gurgaon, while phase V (DLF) remains a resilient market, suburban regions continue to see torpidity.

Otherwise, operations remain contingent to launches: Among Bangalore and regionally diversified players trend has been mixed bag and contingent on launch (especially in mid-income segment). Sobha expects with launch in affordable housing segment in 4Q.

Commercial demand picking up: Most developers shared improvement in commercial demand. Oberoi recorded its first transaction in Commerz II. DLF and Prestige (albeit incremental leasing low on lower availability of space) too hinted for stronger pet-up demand.

Cash flow mixed bag, uptick in gearing in most cases: Customer collections improved for companies with uptick presales in recent times (HDIL, Oberoi). However overall gearing increased with negative FCFE due to either business development/capex (Prestige, GPL. Brigade) or interest outgo (DLF). Input cost inflation moderates barring select case of cost overrun for Sobha.

Management commentaries: Managements’ commentary capture the rising optimism on demand cycle pick up, REIT framework, relaxation of FDI limit and easing off of approval hurdles. While focus remains on progressively getting prepared to maximize the benefits of up-cycle, the ability to do so are widely varied.

Prefer Mumbai play (Oberoi, IBREL), Bangalore-cum-commercial play (Prestige, Brigade).

Presales (INR b): Uptick for Mumbai players

Trend in EBITDA margins – margin pressure stabilizing


RETAIL: SSS stays weak; improved sentiments yet to reflect in numbers

79

Summary

Headline numbers in line with estimates: Our coverage universe sales were below estimates with revenue growth of 11.9% YoY (est. 12.7% growth), EBITDA growth of 17.6% YoY and Adjusted PAT posted growth of 11.4% YoY (est. 13.6% growth). Titan results were below estimates due to weak performance of watch division. However JUBI results were in-line with expectation with sequential improvement in margins.

SSS continues to remain soft; managements guided for gradual improvement: JUBI posted 1.9% SSS growth (est. 0%) while Shoppers posted a flat 0.8% SSS growth (est. 10%). Titan’s Tanishq saw SSS decline of 8% while Gold Plus posted 30% SSS growth.

Margins mixed: Operating margin performance was mixed with JUBI posting contraction in operating margins (down 160bp) due to lack of operating leverage. However for Titan, jewellery margins were up 10bps to 9.6% despite mix deterioration as Goldplus outperformed Tanishq and b) Lack of hedging gains.

Expansion plans on track: Expansion plans remained on track– Titan added 40k sqft of space during 3Q while JUBI opened 41 stores and maintained its FY15 guidance of 150 new stores.

Titan, JUBI are our top picks: Expected improvement in consumer sentiments, backed by macro recovery, could drive discretionary consumption in our view. Both Titan and JUBI are good plays on revival in consumer sentiment driven SSS recovery due to operating leverage sitting in the P&L. Aggressive expansion of past three years in both Titan and JUBI could drive profitability with the recovery in SSS, we believe.

3QFY15 performance snapshot

Store network for Retail universe

Margin contraction across our Retail universe

SSS remains muted


TECHNOLOGY: Sanguine revenue growth beat muted expectations

80

Summary

Positive growth surprise; commentary on outlook alleviated concerns: In a seasonally weak quarter marred further by cross currency headwinds, revenue growth surprised positively across multiple companies, amid muted expectations. WPRO (+3.7% QoQ CC), HCLT (+6.2% QoQ CC), CTSH (+3.2% QoQ CC organic), TECHM (+3.6% QoQ CC organic) and HEXW (+5.2% QoQ CC) all saw healthy constant currency organic growth.

12-14% CC NASSCOM guidance: NASSCOM cited that industry exports are expected to grow 13.1% CC in FY15 to USD98.2b, at the lower end of its guided band of 13-15%. In FY16, the growth in exports is likely to be similar – NASSCOM’s guided band is 12-14%. This was also reflected in CTSH’s organic CC growth outlook of at least 14.5%, comparable to that in CY14

Steady margins across the board: Action on the profitability front was muted across tier-I IT, with 86bp beat at HCLT being the maximum, aided by strong revenue growth.

Tier-II – revenue surprise at HEXW: Revenue surprise was the maximum at HEXW among tier-II IT , which grew 4.1% QoQ v/s estimate of 1.1%. PSYS growth was sanguine at 4.2% (in line), while seasonality played on other companies.

Prefer INFO, HCLT and TECHM in tier-I; Neutral on tier-II: TECHM large deal win prowess continues to improve, traction in Telecom also alleviate any concerns emanating from the high vertical concentration. Growth visibility remains maximum at HCLT. Better capital allocation and strategy layout drives our liking for INFO. We are neutral on Tier-II IT, but our preferred business models are PSYS and MTCL.

USD revenue - m EBIT margin (%) PAT - INR b Act. Est. % beat Act. Est. bp beat Act. Est. % beat TCS 3,931 3,971 -1.0 27.0 27.3 -31 54.4 56.2 -3.0 Infosys 2,218 2,228 -0.5 26.7 26.2 58 32.5 31.5 3.2 Wipro 1,795 1,788 0.4 21.8 21.5 30 21.9 20.4 7.5 HCL Tech 1,491 1,451 2.7 23.9 23.0 86 19.2 17.9 7.5 TECHM 924 919 0.6 17.7 17.7 -10 7.8 8.0 -2.5

3QFY15 Performance Snapshot

HCLT grew the fastest in tier-I IT

Change in Estimates

USD revenue (%) EBIT margin (bp) EPS (%) FY16 FY17 FY16 FY17 FY16 FY17

TCS -2.9 -3.1 -47 -3 -3.2 -2.7 Infosys -0.9 -0.9 -37 -29 -2.3 -1.2 Wipro --0.1 -1.3 -82 -63 -3.7 -3.7 HCL Tech -0.1 0.5 26 64 2.3 4.4 TECHM 0.1 0.0 -45 -37 -2.6 -1.7

0.1

1.3

4.0

2.1 2.1

-1

2

5

8

1QFY

14

2QFY

14

3QFY

14

4QFY

14

1QFY

15

2QFY

15

3QFY

15

TCS Infosys Wipro HCL Tech Cognizant Tech Mahindra

Only HCLT saw upgrades during the quarter, despite more currency headwinds


TELECOM: Divergent trends in voice business; spectrum auction in focus

81

Summary

Strong wireless EBITDA performance for Bharti/Idea: Bharti/Idea reported strong wireless EBITDA growth led by significant margin expansion on YoY basis and seasonal increase in traffic on a QoQ basis. Bharti Airtel/Idea delivered a 1%/2% EBITDA beat on India wireless business. Infratel EBITDA was also 2% above estimates. RCom disappointed with EBITDA miss for India as well as global business.

Divergent trends in voice RPM; data growth remains strong: Voice RPM 6%/2% YoY/QoQ for Idea but remained flat for Bharti, indicating divergent trends and strategy for the two operators. Wireless traffic growth was strong for Idea (17% YoY/4% QoQ) but much softer for Bharti (5% YoY/1% QoQ) and RCom (1% YoY and QoQ). Data growth remained strong for all operators with traffic up 14-17% QoQ.

Bharti Africa performance remains disappointing: Bharti Africa revenue/ EBITDA declined 3%/11% QoQ, impacted by 5.2% revenue-weighted currency depreciation though subscriber additions remained strong for second consecutive quarter. Africa capex continued to remain elevated, at highest level in past three years.

Wireless margins up QoQ for Bharti/Idea: India wireless margins increased 50/140bp QoQ for Bharti/Idea, aided by seasonal strength in voice volumes and strong data revenue growth.

Reliance JIO launch, spectrum auction to be in focus: With Reliance JIO launch expected in 2015, the focus is likely to shift towards potential disruption for incumbents and their data strategy. While TRAI had recommended various measures to increase spectrum supply and prevent overbidding, government imperatives pertaining to fiscal targets etc seem to have taken precedence resulting in a backdrop for a very aggressive spectrum auction.

Top-pick: Bharti Infratel

QoQ wireless traffic and blended RPM growth (%)


UTILITIES: CPSUs lead performance, JSWEL better off amongst IPPs

82

Summary

3QFY15 performance highlight was sound operating performance of CPSUs like NTPC and Powergrid. Coal India’s performance was marred by higher costs. Amongst IPPs, JSWEL’s performance was driven by core business.

NTPC NTPC’s operating performance was significantly better led by improved fixed charge recovery for its projects. Management remains confident of attaining 1.5GW of project commissioning in FY15E.

PGCIL 3QFY15 capitalization was robust at INR71b, up 133% YoY and higher than estimate of INR60b. Reported PAT was in-line with our estimate, but indicated mis-match in capitalisation vs growth in core earnings. Capex was flat QoQ at INR50b.

Tata Power Standalone PAT was higher than estimate, boosted by other income. Despite this, consolidated PAT was below estimate led by poor contribution from mining SPVs.

CESC’s 3QFY15 performance was poor led by lower volumes. Management highlighted that demand was impacted owing to winter season. Spencer reported strong performance with same stores sales growth of 12% and same store EBIDTA of INR86/sq.ft/month.

JSW Energy consolidated PAT was in-line with estimate. ST realisation guidance maintained at INR4.25-4.50/unit for rest of FY15.

Coal India EBIDTA was significantly lower than estimate led by higher staff cost, contractual expenses and higher OBR provision. E-auction realisation however surprised positively and was up for second quarter in row.

PTC India reported PAT was boosted by surcharge, rebate income. Volume growth was impacted by transmission bottleneck. PTC impaired its investment in Teesta Urja project.

NTPC reported strong performance

Actual v/s Estimate (INR m)

Key Operational Metrics


MOSL Universe: Annual Performance (INR b)

83


MOSL Universe: Valuations

84

N.M. - Not Meaningful


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