Fundamentaldiwalipicksoct2017.pdf

DIWALI PICKS OCT 2017

Diwali Picks

October 2017

DIWALI PICKS – SAMVAT 2074 Samvat 2073 is ending with gains of about ~13.4% on the benchmarks. This year saw the markets notching all-time highs, fuelled by sustained buying support from the domestic investors and robust global market sentiment. The BSE mid-cap and small-cap indices have outperformed during this period and have returned about 17% and 26%, respectively. Several stocks performed even better than the mid and small cap indices. We had written in last year's Diwali Note - "All-in-all, we expect returns in Samvat 2073 to be better than Samvat 2072, notwithstanding the intermittent bouts of corrections / profit-booking" We are happy that, our optimism came true. On the global front, the US economy expanded at a solid pace in Q2CY17 after a weak performance in the prior quarter. Buoyant labour market conditions, upbeat consumer confidence, softer than expected inflation and a robust housing market supported consumer spending. Industrial production also showed an upswing. However, recent hurricanes could temporarily weigh on economic activity. Although, recent tensions between North korea and the US threatened to disrupt the market momentum, financial markets have remained largely resilient to such geo-political events and more recently to the US Fed’s decision to reduce the size of its balance sheet. Equity markets rallied in most advanced equity markets, while some correction has been witnessed in a few emerging market economies. Sensex, BSE, Smallcap-Midcap performance 130

BSE Midcap

BSE Smallcap

Sensex

120 110 100 90

80

Source: Bloomberg

On the domestic front, one concern which came early in Samvat 2073 was the election of Mr Trump as the President of the US and announcement of Demonetisation, incidentally both these events happened almost at the same time. Especially, the sudden implementation of demonetization saw a sharp dip in sales of discretionary items like Auto, Consumer durables, Real Estate and Building Products, Travel and Jewellery. While there were fears of an extended impact on the economic growth, such fears were largely belied and even the markets bounced back from their lows. Market sentiment was further buoyed by the strong election outcome in UP for the ruling NDA government. Abolishing the earlier system of excise and sales tax, the government implemented the GST tax from July 1, 2017. However, prior to the scheduled rollout, there was significant uncertainty among wholesalers/retailers related to the availability of input tax credit (under GST) on existing inventory. Most traders resorted to curtailing fresh purchases of finished goods. Some of the consumer durables retailers also offered significant discounts with a view to destock the existing inventory. The impact of this was reflected in the Q1FY18 earnings numbers. Profits of Nifty companies declined 8.4% in Q1FY18. Some moderation in GDP growth was also observed in Q1FY18 which was atleast partly attributed to rollout of GST.

Kotak Securities – Private Client Research

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Diwali Picks

October 2017

Nifty - Top 5 Stocks (20th Oct 16 – 10th Oct 17) Company Name Bajaj Finance Hindalco Industries Tata Steel RIL Industries Vedanta

Price on 10/10/17

Price on 20/10/16

% Chg

1,951 252 691 843 321

1,121 155 429 544 208

74.0% 62.4% 61.2% 55.1% 54.6%

Price on 10/10/17

Price on 20/10/16

% Chg

735 2,411 424 527 1,062

826 3,079 547 746 1,506

-11.0% -21.7% -22.5% -29.3% -29.5%

Source: Bloomberg

Nifty - Bottom 5 Stocks (20th Oct 16 – 10th Oct 17) Company Name Aurobindo Pharma Dr Reddy’s Lab Tata Motors Sun Pharma Lupin Source: Bloomberg

The banking sector continues to face an environment of slow growth. Recent sectoral composition of credit shows growth at less than 10% yoy with corporate loans flat yoy. Only retail continues to drive growth. Our study of private capex does not suggest an improvement in corporate loan growth as fresh capex is still elusive with the focus still on deleveraging the balance sheet at this point in time. This implies weak revenue growth for the sector, especially public sector banks. Crude prices have been pretty volatile with the oil producing countries trying to restrict supplies to match the weakening demand. In the past four quarters, Brent crude has remained largely stable ~ $50-56 / barrel. One needs to watch this closely as it does have an impact on the fiscal position of the Government and also on inflation. Brent Crude (US$/bl) 120 95 70

45 20

Source: Bloomberg

Announcements of new industrial & infrastructural projects remained muted in the second quarter of 2017-18. Only Rs 845 bn projects were proposed during the quarter. This is the lowest level of “intentions to invest” seen in a quarter during the tenure of the current government. Private sector investment proposals fell to their lowest level in 15 quarters during the quarter ended September 2017. FII flows were largely negative FYTD, with August / July seeing outflows of USD 3.4 bn. On the other hand, domestic institutions and MFs have invested USD.22.1 bn in equity markets on a FYTD basis. Foreign flows have been a driving force for our markets over the years. But in 2017, domestic institutions, especially the MFs have emerged as the major force in the equities market. And they are adding depth to the market. It is clear that, savings are consistently moving to financial assets v/s physical assets earlier.

Kotak Securities – Private Client Research

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Diwali Picks

October 2017

FII & Mutual Fund investment (Rs cr) 40,000 30,000

FII

MF

20,000 10,000 0 -10,000 -20,000 -30,000

Source: Bloomberg

Rainfall was 5% below the long-period average this year. This is likely to impact Kharif output to a minor extent. With two successive years of average monsoons, several sectors like agrochemicals, farm equipment, consumer goods, automobiles, etc are poised for improved growth. Sectoral performance 160

Sensex FMCG Capital Goods Banks Oil & Gas Auto Metals Healthcare IT

110

60

Source: Bloomberg

All-in-all, we expect returns in Samvat 2074 to moderate in view of weak near term earnings growth and higher than average valuations. Going ahead, in Samvat 2074, we expect the Government to focus on effective measures to accelerate economic growth. Post the implementation of the GST, there are signs that the business is coming back on track. Signs of recovery are visible in Auto sales and exports in the economy. Services sector activity in India expanded for the first time in three months in September, providing another set of data that showed the economy was recovering from the disruptions due to the goods and services tax. However, the pace of recovery is gradual. Given this backdrop, we maintain our positive bias towards domestic infrastructure and cyclical sectors over the medium-to-long term. We are also positive on the consumption theme. We recommend sticking to quality and advise selectively investing in stocks having strong balance sheets and ethical managements. Select exportoriented stocks will do well as US economy continues strengthening. Key risks are geo-political concerns globally, decline in foreign inflows, sharp currency movements and spike in oil prices. All-in-all, we expect returns in Samvat 2074 to moderate in view of weak near term earnings growth and higher than average valuations. The upmove in Indian equities have been supported by strong macro-economic factors (GDP growth, reducing Current account deficit and benign inflation etc). However, there has be some deterioration on these counts in recent times. Inflation concerns have resurfaced as reflected by the RBI guv’s take on monetary policy stance. Plus, earnings growth in FY18 is likely to be subdued. In our view, further upsides from the current levels would be contingent on revival of earnings growth and resolution of stressed banking assets. Having said that, we believe, there would be continued investor interest in mid and small caps. Kotak Securities – Private Client Research

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Diwali Picks

October 2017

We have selected some stocks which look attractive to us from an investment perspective. These stocks have to be ACCUMULATED from the CMP. This is to protect ourselves against the volatile nature of the markets. Diwali picks – Samvat 2074 CMP as on 11/10/2017 (Rs)

Target Price (Rs)

Expected Upside (%)

FY19 PE (x)

Asian Granito

485

603

24%

18.5

Cochin Shipyard

563

740

31%

19.1

Engineers India

151

182

21%

18.7

60

75

26%

16.8

Genus FIEM Industries Maruti MRPL TV 18 broadcast Shree Cement VIP

896

1254

40%

12.9

7,830

9,061

16%

21.6

127

155

22%

7.9

40

47

17%

18.6

18,500

22,716

22%

29.9

264

325

23%

24.7

Source: Kotak Securities – Private Client Research

Performance of our Diwali picks of last year v/s Nifty and CNX 500 Index Reco given at

Price on 11/10/2017

% change

Nifty Index

8,680

10,012

15.3%

NSE 500 Index

7,528

8,829

17.3%

Indices

Stocks – Samvat 2073 Allcargo

181

168

-7.2%

Dish TV

95

73.5

-22.6%

Engineers India

133

150

12.8%

Finolex Industries

458

669

46.1%

L&T

1,003

1,144

14.1%

M&M

1,327

1,305

-1.7%

216

305

41.2%

82

89

8.5%

Natco Pharma

588

989

68.2%

PNC Infratech

125

149

19.2%

44

41

-6.8%

Mold-Tek Nagarjuna Construction

TV 18 Broadcast Source: Kotak Securities – Private Client Research

WISH YOU ALL A VERY HAPPY AND PROSPEROUS DIWALI! HAPPY INVESTING!

Kotak Securities – Private Client Research

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5

Diwali Picks

October 2017

Asian Granito India Ltd (AGL) - Buy

Analyst: [email protected] Last report at Rs.439 on 31 August 2017

Current Market Price (Rs)

Target Price (Rs)

Potential Upside (%)

52 Week H/L (Rs)

Mkt Cap (Rs m n)

485

603

24.4%

518 / 175

14589

Investment Argument  Fourth largest player in tile industry and set to benefit from demand growth: Asian Granito has a capacity of 33 mn sq meter spread across 8 plants in Gujarat.  Continuous innovations to aid margins: AGL is continuously innovating to add new products in the market and has the first mover advantage in introducing large format tiles with much higher margins  Shift towards B2C going forward: Company would now be focusing more on increasing B2C mix as compared to higher proportion being sold in B2B category earlier. AGIL is continuously putting efforts to increase the B2C sales from the current level 35% in FY17 to 50% in next 2-3 years  Strong distribution network and international presence: AGL has an extensive marketing and distribution network comprising of 180+ exclusive showrooms, 16 display centres and 5500+ touch points  Excellent growth in quartz business: Revenues from quartz division are likely to improve sharply going forward owing to new product addition as well as higher branding.  Lower power cost as compared to other players: The company acquired Artistique Ceramic Pvt. Ltd with a 70% shareholding in Crystal Ceramics and the acquired company enjoys a gas supply arrangement with ONGC significantly lower than the prevailing market price.

1 Year Perform ance Asian Granito India Ltd (AGL)

2000 1500

1000 500 0

Source: Bloomberg Share Holding Pattern (%) Promoter 32%

Risks & Concerns  Slower than expected ramp up in dealer network.  Lower than expected volume uptick  Sharp rise in gas prices Others 58%

Company Background Asian Granito, promoted by Mr Kamlesh Patel and Mr Mukesh Patel in year 2000, is engaged in the manufacture and sale of ceramic wall and floor tiles, vitrified tiles, digital polished glazed vitrified tiles, digital wall tiles, marble and quartz Sector Background Government initiatives such as Swachch Bharat Abhiyan, Affordable housing, Development of smart cities to be positive for organized players

Nifty

MFs 5%

FII 5%

Source: Capitaline Revenue m ix (Rs m n)

Financials (Rs m n) Net sales Growth (%)

FY17

FY18E

FY19E

10,660

12,159

14,476

7%

14%

19%

EBITDA

1,235

1,520

1,954

EBITDA margin (%)

11.6%

12.5%

13.5%

532

804

1,225

PBT Net profit

391

534

789

EPS (Rs)

13.0

17.8

26.2

Growth (%)

21%

37%

48%

CEPS (Rs)

24.5

30.1

39.5

133.3

149.5

174.1

BV (Rs/share) DPS(Rs)

1.3

1.3

1.3

ROE (%)

10.2

12.6

16.2

ROCE (%)

11.9

14.3

18.0

Net cash (debt)

3,150

2,955

3,033

NWC (Days)

123.6

123.6

123.6

Valuation Param eters

FY17

FY18E

FY19E

37.3

27.3

18.5

P/BV (x)

3.6

3.2

2.8

EV/Sales (x)

1.7

1.4

1.2

14.4

11.5

9.0

1M

3M

6M

8.3

7.0

25.7

P/E (x)

EV/EBITDA (x) Price Perform ance (%)

Source: Bloomberg, Company, Kotak Securities - Private Client Research

Kotak Securities – Private Client Research

16,000 Quartz and marble

Tiles

12,000

8,000

4,000

0

FY15

FY16

FY17

FY18E

FY19E

Source: Company; Kotak Securities - Private Client Research Business m ix (%) Double charged

Ceramics

PVT

GVT

100% 75% 50% 25% 0% FY15

FY16

FY17

Q1FY18

Source: Company; Kotak Securities - Private Client Research

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6

Diwali Picks

October 2017

Cochin Shipyard Ltd (COSH) - Buy

Analyst: [email protected] Last report at Rs.570 on 11 October 2017

Current Market Price (Rs)

Target Price (Rs)

Potential Upside (%)

52 Week H/L (Rs)

Mkt Cap (Rs m n)

563

740

31.3%

592 / 435

76593

Investment Argument 

1 Year Performance

COSH has a diversified order book at Rs 83 bn which we expect to grow at 20% CAGR with orders coming from Navy, Coast guard and commercial segment.



COSH is one of the yards empanelled with the Indian Navy and the coast guard for orders.



With improvement in commercial shipping segment, we can expect regular flow of orders from the commercial segment. Company is building a third dry-dock and an international ship-repair center which would cater to the future shipbuilding and ship-repair demand

 



110

Cochin Shipyard Ltd

108

Nifty

106 104

102 100

98 96

94 92

With healthy operational cash flow generation and negative working capital for the company, we estimate the BS of the company to remain strong in near term.

90 Aug-17

Sep-17

Oct-17

The stock trades at an attractive valuation of 19x FY19E earnings which is at Source: Bloomberg steep discount to bigger international yards having weak earnings profile.

Risks & Concerns 

Delay in execution of large orders Slower than expected recovery of the commercial shipping segment



Reduced allocation to navy from the defence pie



Share Holding Pattern (%) Others 13.0% DII 10.0%

Company Background 

Cochin Shipyard (COSH) is a Government promoted Miniratna company, incorporated on March 29,1972



The company caters to clients engaged in the defence sector in India and clients engaged in the commercial sector worldwide

FII 2.0%

Sector Background 

There are three main segments of shipbuilding including defence, commercial and ship-repair.



Shipbuilding companies primarily operate from countries like China, Japan and Korea Source: Capitaline

Promoter 75.0%

Estimated order book for COSH (Rs mn) FINANCIALS (RS MN) Sales Growth (%)

FY17

FY18E

FY19E

20,594

23,200

28,072

3.5

12.7

21.0

3,801

4,106

5,226

18.5

17.7

18.6

PBT

4,801

5,148

6,044

Net profit

3,121

3,418

4,013

27.5

25.1

29.5

7.0

9.5

17.4

30.9

28.5

35.3

179.3

238.2

260.6

EBITDA EBITDA margin (%)

EPS (Rs) Growth (%) CEPS (Rs) Book value (Rs/share) Dividend per share (Rs) ROE (%) ROCE (%) Net cash (debt) Net Working Capital (Days) VALUATION PARAMETERS P/E (x) P/BV (x) EV/Sales (x) EV/EBITDA (x) PRICE PERFORMANCE (%)

9.0

6.0

6.0

15.4

10.6

11.3

15.7

10.8

12.0

20,032

27,109

26,342

(114)

(97)

(94)

FY17

FY18E

FY19E

20.5

22.4

19.1

3.1

2.4

2.2

2.7

2.1

1.8

14.9

12.1

9.6

1M

3M

6M

0.2

NA

NA

Source: Bloomberg, Company, Kotak Securities - Private Client Research

Kotak Securities – Private Client Research

250,000 200,000

150,000 100,000 50,000 0 FY17

FY18E

FY19E

FY20E

FY21E

FY22E

Source: Company, Kotak Securities - Private Client Research

EBIDTA margin trend for COSH 20

15

10

5

0

FY15

FY16

FY17

FY18E

FY19E

FY20E

Source: Company

Please see the Disclosure/Disclaimer on the last page

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7

Diwali Picks

October 2017

Engineers India Ltd (EIL) - Buy

Analyst: [email protected] Last report at Rs.149 on 10 October 2017

Current Market Price (Rs)

Target Price (Rs)

Potential Upside (%)

52 Week H/L (Rs)

Mkt Cap (Rs m n)

151

182

20.8%

176 / 118

101538

Investment Argument  Engineers India enjoys healthy market share in the Hydrocarbon consultancy segment. It enjoys prolific relationship major oil & gas companies like HPCL, BPCL, ONGC and IOC.  Company is well poised to benefit from recovery in the infrastructure spending in the hydrocarbon sector.  We believe that in future, company shall inevitably benefit from MoPNG huge target of over Rs 2 trillion envisaged for various projects in next five years.  Company has been observing pick up in order inflows/revenue booking in consultancy business space which enjoys healthy margins. Risks & Concerns  Slowdown in domestic Hydrocarbon industry.

1 Year Performance Engineers India Ltd

250

Nifty

190

130

70

Source: Bloomberg

Company Background  A Public sector undertaking.  Leading player in domestic market

Share Holding Pattern (%) Others 13.5%

Sector Background  Hydrocarbon consulting business is a direct leverage on Hydrocarbon sector. MPoNG has envisaged investment of over Rs 2 trillion for various projects over next few years.  Indian Hydrocarbon sector has witnessed substantial capacity addition over the last decade. Refining capacity currently stands at 215 MMT against 62 MMT in 1998. Demand is expected to surpass current capacity in FY18.

DII 20.6% Promoter 59.3% FII 6.6%

Source: Bloomberg

Segment Sales (Rs bn) Financials (Rs m n)

FY17E

FY18E

FY19E

Sales

14,486

19,815

26,378

Growth (%)

(4.1)

36.8

33.1

3,022

3,567

5,945

20.9

18.0

22.5

PBT

5,002

5,620

7,990

Net profit

3,250

3,822

5,433

EBITDA EBITDA margin (%)

EPS (Rs) Growth (%) CEPS (Rs) BV (Rs/share)

4.8

5.7

8.1

10.0

17.6

42.2

5.2

6.0

8.4

41.1

42.9

46.6

DPS (Rs)

2.8

3.3

3.7

ROE (%)

12.0

13.5

18.0

ROCE (%)

12.0

13.5

18.0

Net cash (debt)

26,400

28,580

32,184

NW Capital (Days)

(111.3)

(101.3)

(93.4)

FY17E

FY18E

FY19E

31.2

26.6

18.7

P/BV (x)

3.7

3.5

3.2

EV/Sales (x)

5.2

3.7

2.6

24.7

20.3

11.6

Valuation param eters P/E (x)

EV/EBITDA (x)

Price Perform ance (%)

1M

3M

6M

(5.2)

(4.1)

(2.4)

Source: Bloomberg, Company, Kotak Securities - Private Client Research

Kotak Securities – Private Client Research

25

20 15 10 5

0 FY14

FY15

FY16

FY17E

FY18

FY19

Source: Company, Kotak Securities - Private Client Research

Revenue Mix (%) Storage Terminals 29%

Refineries 14%

Petrochemical s 32% Pipelines 19%

Fertilizers 6%

Source: Company

Please see the Disclosure/Disclaimer on the last page

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8

Diwali Picks

October 2017

FIEM Industries Ltd (FIEM) - Buy

Analyst: [email protected] Last report at Rs.928 on 6 September 2017

Current Market Price (Rs)

Target Price (Rs)

Potential Upside (%)

52 Week H/L (Rs)

Mkt Cap (Rs mn)

896

1254

39.9%

1510 / 821

11828

Investment Argument  

 

1 Year Performance

FIEM generates almost 95% of its automobile business revenues from the 2W segment and hence recovery in this segment will be positive for the company. Production at FIEM’s top customers is growing at robust pace and FIEM will be a direct beneficiary of the same. Honda Motorcycle and Scooters India Limited (HMSI) and TVS Motors (TVSM) are the top clients – accounting for ~70% of FIEM’s automotive business revenues. LED luminaries segment has been under pressure. FIEM is looking at various options to improve its performance in this segment but the same are expected to yield result over the longer run. EBITDA margin performance is expected to improve gradually for the company

Risks & Concerns   

600

FIEM Industries Ltd (FIEM)

400 300

200 100 0

Source: Bloomberg

Lower than expected growth in two wheeler demand High dependence on few clients Further significant fall in LED prices

Share Holding Pattern (%) Others 12.0%

Company Background 

FIEM is one of the leading manufacturers of automotive lighting and signaling equipment for the two wheeler segment in India. Apart from automotive lighting, FIEM’s product portfolio comprises of rear view mirrors, sheet metal parts and plastic components for two /four wheeler segment. Recently, FIEM ventured into the LED lighting business.

DII 9.0%

FII 15.0%

Sector Background 

Nifty

500

Promoter 64.0%

Auto ancillary sector will be the key beneficiary of expected revival in the domestic automobile demand. Source: Bloomberg

Revenues (Rs mn) Financials (Rs m n) Sales Growth (%)

FY17

FY18E

FY19E

10,174

12,539

14,573

3.1

23.2

16.2

1,174

1,468

1,799

EBITDA margin (%)

11.5

11.7

12.3

PBT

455

938

1,310

EBITDA

Net profit

471

657

917

Adjusted EPS (Rs)

35.8

49.9

69.7

Growth (%)

(25.2)

39.5

39.6

CEPS (Rs)

54.8

81.9

103.4

321.7

361.9

421.9

BV (Rs/share) Dividend / share (Rs) ROE (%) ROCE (%) Net cash (debt) NW Capital (Days) Valuation Param eters P/E (x) P/BV (x) EV/Sales (x) EV/EBITDA (x) Price Perform ance (%)

8.0

8.0

8.0

13.5

14.6

17.8

14.7

16.6

21.1

(2,021)

(436)

68

18.8

16.5

13.5

FY17

FY18E

FY19E

25.0

18.0

12.9

2.8

2.5

2.1

1.3

1.0

0.8

11.1

8.4

6.5

1M

3M

6M

(5.5)

(1.6)

(10.3)

Source: Bloomberg, Company, Kotak Securities - Private Client Research

Kotak Securities – Private Client Research

16,000

12,000

8,000

4,000

0 FY12

FY13

FY14

FY15

FY16

FY17E FY18E

FY19E

Source: Company, Kotak Securities - Private Client Research

EBITDA margin (%) 13.0

12.5

12.0

11.5

11.0

FY12

FY13

FY14

FY15

FY16

FY17E

FY18E

FY19E

Source: Company, Kotak Securities - Private Client Research

Please see the Disclosure/Disclaimer on the last page

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9

Diwali Picks

October 2017

Genus Power Infrastructures Ltd - Buy

Analyst: [email protected] Last report at Rs.53 on 29 August 2017

Current Market Price (Rs)

Target Price (Rs)

Potential Upside (%)

52 Week H/L (Rs)

Mkt Cap (Rs m n)

60

75

25.8%

65 / 33

15331

Investment Argument  The market for electric meters declined from Rs 28-32 bn in FY16 to Rs1820 bn in FY17 due to uncertainty related to mode of procurement of meters. This situation is improving and we understand from the company that the volume of tendering has increased by 20%.  India has 200 million legacy meters and there are plans to install up to 130 million smart meters by 2021. Immediate opportunity for smart meters can come from the new power distribution franchisee licenses being allotted in various cities (Bharatpur, Kota). GPIL plans to ramp-up its exports of meters from the current level of ~ Rs 120 mn in FY17 to Rs 1250 mn by end of FY19.  As of FY17, the company’s net debt to equity stands reduced to 0.15x as compared to 0.64x at the end of FY15. The company scores over its peers like KEC, Kalpataru Transmission and HPL Electric on this count. Risks & Concerns  Execution risk in project business.  Increasing working capital requirement  Loans and Advances to related parties.

1 Year Perform ance Genus Power Infrastructures Ltd (GPIL)

470

Nifty

400

330 260 190 120

50

Source: Bloomberg Share Holding Pattern (%)

Company Background  Genus is the flagship company of the USD 400 million Kailash group. The company primarily manufactures and distributes Electronic Energy Meters (EEMs) and hybrid microcircuits as well as executes power distribution management projects in India and across the world.  Mr Ishwar Chand Agarwal, aged 66 years, is the founder of Kailash Group and the executive chairperson of the Company. Sector Background The market for meters in India was estimated to be Rs 32 bn in fiscal 2016 but declined appreciably in FY17 due to uncertainty in the mode of procurement of meters by the utilities. The market is dominated by organised players contributing to over 80% of the total market. There has been a continued and visible shift from demand for traditional meters to demand for metering solutions, which helps in energy management as compared to mere monitoring and billing functionalities.

Others 42%

Promoter 50%

FII 1%

MFs 7%

Source: Capitaline Meter sales (m n)

Financials (Rs m n)

FY17

FY18E

FY19E

Net sales

6,424

8,380

9,680

Growth (%)

(25.1)

30.5

15.5

EBITDA

866

1,136

1,375

EBITDA margin (%)

13.5

13.6

14.2

4

PBT

704

996

1,235

3

Net profit

579

760

914

2

EPS (Rs)

2.3

3.0

3.6

(23.8)

31.2

20.3

2.9

3.6

4.3

26.5

28.9

31.8

Growth (%) CEPS (Rs) BV (Rs/share) DPS(Rs)

0.4

0.5

0.5

ROE (%)

8.5

10.3

11.4

ROCE (%)

7 6

5

1 0 FY12

15.2

17.5

(2,064)

(1,999)

NWC (Days)

197.1

177.4

177.3

Valuation Param eters

FY17

FY18E

FY19E

25

20.2

16.8

20

2.2

2.1

1.9

15

EV/Sales (x)

2.5

1.9

1.6

18.3

14.0

11.5

1M

3M

6M

20.2

18.3

41.7

Kotak Securities – Private Client Research

FY17

30

26.4

Source: Bloomberg, Company, Kotak Securities - Private Client Research

FY16

35

P/BV (x)

Price Perform ance (%)

FY15

Meters m arket (Rs bn)

11.9 (2,040)

EV/EBITDA (x)

FY14

Source: Company

Net cash (debt)

P/E (x)

FY13

10 5 0 FY15

FY16

FY17

Source: Company

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10

Diwali Picks

October 2017

Maruti Suzuki India Ltd - Buy

Analyst: [email protected] Last report at Rs.8068 on 25 September 2017

Current Market Price (Rs)

Target Price (Rs)

Potential Upside (%)

52 Week H/L (Rs)

Mkt Cap (Rs mn)

7830

9061

15.7%

8200 / 4765

2365287

Investment Argument  We expect MSIL's volumes to grow at a strong pace aided by expected, recovery in rural areas, continued robust demand for recently launched products (Baleno, Brezza, Ignis), expansion of Nexa network and demand in favor of petrol run vehicle. Furthermore facelifts, upgrades and variants of existing models will also drive sales for the company.  MSIL’s market share in the domestic passenger car market stands increased from 47.4% in FY17 to 50.4% in FY18 (April-September).  With strong presence in rural areas and dominance in the entry level car segment, MSIL will be the key beneficiary of rural demand recovery.  In recent years, the company made substantial strides in the premium car segment. MSIL has big opportunity to gain market share in the premium segment. Focus on premium products and scaling-up of distribution network will translate into share of premium products in MSIL's product mix increase in a meaningful way  We expect MSIL's EBITDA margin to stay healthy.

1 Year Performance 550

Maruti Suzuki India Ltd

350 250 150 50

Source: Bloomberg

Risks & Concerns  Lower than anticipated growth will jeopardize our revenue and profit estimates.  MSIL benefits from yen depreciation. Any unfavorable movement of yen can have significant impact on the company's profitability.

Share Holding Pattern (%) Others 6.7%

DII 15.0%

Company Background  MSIL, India's largest passenger car company, is a subsidiary of Suzuki Motor Corporation of Japan. Formed as a government owned company (Maruti Udyog Limited), it entered into a JV with Suzuki Motor Corporation. Over the years the company has been one the most successful player in the Indian car market. Sector Background  India’s passenger vehicle industry sold ~3.8mn vehicles in FY17. While 80% of sales happened in the domestic market, balance 20% were exported. Top five players account for ~82% of domestic industry sales volumes.

Nifty

450

Promoter 56.2%

FII 22.1%

Source: Bloomberg

Sales Volumes (Units) Financials (Rs Mn)

FY17

FY18E

FY19E

1,800,000

680,348

814,502

950,911

1,600,000

17.8

19.7

16.7

103,530

117,332

148,704

1,200,000

15.2

14.4

15.6

1,000,000

PBT

99,413

117,404

151,019

800,000

Net profit

73,377

85,705

109,489

600,000

242.9

283.7

362.4

400,000

60.5

16.8

27.8

200,000

329.0

371.4

455.8

1,197.4

1,421.2

1,718.0

Dividend / share (Rs)

75.0

75.0

75.0

ROE (%)

23.2

23.3

26.3

Sales Growth (%) EBITDA EBITDA margin (%)

EPS (Rs) Growth (%) CEPS (Rs) BV (Rs/share)

ROCE (%) Net cash (debt) NW Capital (Days) Valuation Param eters P/E (x) P/BV (x) EV/Sales (x) EV/EBITDA (x) Price Perform ance (%)

30.9

31.4

35.9

224,432

285,123

375,583

(21.3)

(22.2)

(21.8)

FY17

FY18E

FY19E

32.2

27.6

21.6

6.5

5.5

4.6

36.1

30.2

25.7

237.4

209.4

164.6

1M

3M

6M

(3.8)

5.0

25.3

Source: Bloomberg, Company, Kotak Securities - Private Client Research Kotak Securities – Private Client Research

1,400,000

0 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17

Source: Company

Market Share (%) 50 47.4 45.9

45

46.5

46.8

44.7

45.3

45.0 42.1 40.1

40

38.4 35 FY08

FY09

FY10

FY11

FY12

FY13

FY14

FY15

FY16

FY17

Source: Company

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11

Diwali Picks

October 2017

MRPL - Buy

Analyst: [email protected] Last report at Rs.122 on 29 September 2017

Current Market Price (Rs)

Target Price (Rs)

Potential Upside (%)

52 Week H/L (Rs)

Mkt Cap (Rs m n)

127

155

22.2%

144 / 78

222230

Investment Argument  New expansion plans in place: MRPL has set-up the next milestone and is planning to enhance its refining capacity to 25 mmtpa as against current capacity of 15 mmtpa. Additionally, the company is planning to scale up its petrochemical capacity with an investment of Rs.110 bn, resulting in higher revenue and margins. We like the sharpened focus of the company on the growth strategy. The expansion is seen as a major margin driver as it will help the company to process cheaper, heavier crudes into high-value products like diesel, liquefied petroleum gas and propylene. 

The possibility of MRPL being merged with HPCL cannot be rulled out. We believe this will be signifacntly positive for MRPL.



We expect financial performance to improve further on account of strong margins in the short term, improvement in operational performance in the medium term and ongoing improvement in financial metrics.



Going ahead, we expect MRPL’s profitability to improve on account of i). Improved product mix, ii). Better refining margins iii). Economies of scale, iv). Forward integration - Polypropylene plant and v). Various tax benefits.

1 Year Performance 350

MRPL

Nifty

290 230 170 110 50

Source: Bloomberg

Share Holding Pattern (%) DII 3.3% FII 1.7%

Others 6.4%

Risks & Concerns  Wide fluctuations in crude, forex and product prices can impact margins.  If global supply exceeds demand then margins can be under pressure. Background MRPL (Mini-Ratna status) is a pure play crude oil refiner with strong promoter backing of ONGC. MRPL has transformed itself into a large and complex refinery with phase-III capacity expansion and has emerged into a much stronger player in the industry. MRPL's improved flexibility will enable it to process light to heavy and sweet to sour crude of various API.

Promoter 88.6%

Source: Bloomberg

Sales volume (mmtpa) Financials (Rs mn)

FY17

FY18E

FY19E

437,548

461,680

491,981

10.1

5.5

6.6

49,877

43,606

58,606

11.4

9.4

11.9

PBT

50,538

26,618

41,459

8

Net profit

16,959

18,101

28,010

6

9.7

10.3

16.0

4

139.0

6.7

54.7

2

CEPS (Rs)

24.4

15.5

21.3

0

Book value (Rs/share)

54.2

57.5

66.5

Sales Growth (%) EBITDA EBITDA margin (%)

EPS (Rs) Growth (%)

Dividend per share (Rs) ROE (%) ROCE (%)

6.0

6.0

6.0

20.4

17.4

24.4

19.7

12.3

17.3

(111,158)

(94,201)

(79,776)

8.2

7.8

9.2

FY17

FY18E

FY19E

13.1

12.3

7.9

P/BV (x)

2.3

2.2

1.9

EV/Sales (x)

0.8

0.7

0.6

EV/EBITDA (x)

6.7

7.3

5.2

1M

3M

6M

(6.9)

3.3

12.1

Net cash (debt) Net working Capital (days)

Valuation parameters P/E (x)

Price Performance (%)

Source: Bloomberg, Company, Kotak Securities - Private Client Research

Kotak Securities – Private Client Research

18

16 14 12 10

FY14

FY15

FY16

FY17

FY18E

Source: Company, Kotak Securities - Private Client Research

Reported GRMs (US$/bbl) 9 8 7 6 5 4 3 2 1 0 -1 -2 FY14

FY15

FY16

FY17

FY18E

Source: Company

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12

Diwali Picks

October 2017

Shree Cement Ltd - Buy

Analyst: [email protected] Last report at Rs.19944 on 17 May 2017

Current Market Price (Rs)

Target Price (Rs)

Potential Upside (%)

52 Week H/L (Rs)

Mkt Cap (Rs m n)

18500

22716

22.8%

20560 / 12477

644540

Investment Argument  

 

Shree Cement has a current capacity of 27.2MT and company is expanding its capacity by nearly 11.6 MT over FY17-19 to 39MT. Cement prices and demand are likely to start recovering in northern and central region post festive season in its key markets. This is likely to aid revenue growth going forward. Costs are likely to move up going forward but company expects to improve EBITDA per tonne owing to expected price hikes. We expect company to benefit from volume expansion as well as pricing improvement going forward and hence we remain positive on the company.

1 Year Performance Shree Cement Ltd

575

Nifty

475

375 275

175 75

Risks & Concerns  

Decline in cement prices may put downward risk to our estimates Decline in merchant power rates may also impact revenues from the power division.

Source: Bloomberg

Company Background 



Share Holding Pattern (%)

Shree Cements is one of the most efficient cement producers in India and is best placed to capitalize on the growing cement demand in northern India. Shree Cement's capacity is expected to be enhanced to 39 MT by FY19 post the undergoing expansion.

DII 4.6%

Sector Background 



Owing to demonetization, demand is likely to remain weak from housing while rural demand has revived with normalization of cash circulation in the system. Continued focus of government on low cost housing, infrastructure development and lower interest rates should augur well for demand in long term. Cement prices have also recovered across regions in line with demand improvement. Costs are likely to move up but with improved demand, it is likely to be passed on.

Others 5.9%

FII 24.7%

Promoter 64.8%

Source: Bloomberg

Volume growth of Shree Cements (MT) Financials (Rs m n)

FY17

FY18E

FY19E

24

84,292

102,000

121,600

20

51.4

21.0

19.2

23,672

29,900

36,900

28.1

29.3

30.3

PBT

15,308

20,992

26,287

8

Netprofit

13,391

17,213

21,555

4

EPS (Rs)

384.4

494.1

618.7

0

Growth (%)

194.4

28.5

25.2

Sales Growth (%) EBITDA EBITDA margin (%)

CEPS (Rs)

733.0

858.8

1,032.4

1,917.4

2,387.5

2,982.2

Dividend /share(Rs)

24.0

24.0

24.0

ROE (%)

22.1

23.0

23.0

BV (Rs/share)

ROCE (%) Netcash(debt) NW Capital(Days)

22.9

25.5

26.0

29,605

43,262

60,814

47.0

47.0

47.0

FY17

FY18E

FY19E

48.1

37.4

29.9

9.6

7.7

6.2

16

12

Source: Company, Kotak Securities - Private Client Research

Cement EBITDA per tonne trend(Rs/tonne) 1600

1200

Valuation param eters P/E (x) P/BV (x) EV/Sales (x) EV/EBITDA (x)

7.3

5.9

4.8

26.0

20.1

15.8

1M

3M

6M

(1.6)

0.5

4.7

800

400

0

Price Perform ance (%)

Source: Bloomberg, Company, Kotak Securities - Private Client Research

Kotak Securities – Private Client Research

FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 (15M)

Source: Company

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13

Diwali Picks

October 2017

TV18 Broadcast Ltd - Buy

Analyst: [email protected] Last report at Rs.39 on 20 July 2017

Current Market Price (Rs)

Target Price (Rs)

Potential Upside (%)

52 Week H/L (Rs)

Mkt Cap (Rs m n)

40

47

16.5%

50 / 33

68999

Investment Argument 

1 Year Performance

TV18 owns one of the most attractive bouquets in the Indian TV Broadcasting industry (news operations, 50% ownership in entertainment/ infotainment operations via JVs), and valuation (mkt. cap ~Rs 70Bn) versus peers (Zee Entertainment ~Rs 520 Bn, Sun TV ~Rs 300 Bn) indicates significant scope for appreciation.



Strong performance in entertainment channels’ ratings points to strong earnings ahead: Colors, the flagship channel of Viacom18, has emerged as the #1 Hindi GEC in several weeks of 2016/17; regional channels too bringing in strong performance. IPO pipeline being strong is a positive signal for business news performance. Additionally, near-term earnings of news channels shall benefit from election advertising. We expect strong earnings growth ahead, with EBITDA rising 7X through FY17-FY19E.



Valuations are attractive, at 19X FY19E PER (>30% discount to Zee Entertainment). Our price target implies PER of 21.5X FY18E.

270 250 230 210 190 170 150 130 110 90 70

TV18 Broadcast Ltd

Source: Bloomberg

Risks & Concerns 

Share Holding Pattern (%)

Ratings performance of key channels is the key risk.

Others 23.5%

Company Background  

TV18 Broadcast is amongst the largest TV broadcasting companies in India, with presence in news as well as entertainment. The company has a 50:50 JV with Viacom ("Viacom18) which operates, among others, Hindi GEC Colors. TV18 has bought a 50% stake in ETV entertainment channels (other than Telugu) and 100% stake in ETV News channels.

DII 7.3% Promoter 60.3%

FII 8.9%

Sector Background 

Nifty

Indian TV Broadcasting is a Rs 540 Bn industry, with Rs 175 Bn in advertising revenues. The sector is positively exposed to digital addressability, which should bring benefits to broadcasters/ platform providers.

Source: Bloomberg

Top 10 Hindi GEC (Urban) Week 5, 2017(Imp., mn) Financials (Rs mn)

FY17

FY18E

FY19E

Sales

9,794

10,923

12,601

Growth (%)

5.9

11.5

15.4

EBITDA

313

1,307

2,221

EBITDA margin (%)

3.2

12.0

17.6

PBT

315

2,267

3,877

Net profit

191

2,265

3,721

EPS (Rs)

0.1

1.3

2.2

Growth (%)

(90)

1,088

64

CEPS (Rs)

0.4

1.7

2.5

Book value (Rs/share)

19

21

-

-

-

ROE (%)

0.5

6.6

9.9

0.6

6.6

10.0

(2,612)

(1,024)

2,178

Net Working Capital (Days)

60

133

140

Valuation Parameters

FY17

FY18E

FY19E

P/E (x)

362.2

30.5

18.6

P/BV (x)

2.1

1.9

1.8

EV/Sales (x)

NM

NM

NM

EV/EBITDA (x)

NM

NM

NM

Price Performance (%)

1M

3M

6M

(3.0)

8.0

(9.1)

Net cash (debt)

300

200 100 -

23

Dividend per share (Rs) ROCE (%)

400

Source: BARC, Note: Imp. Stands for impressions in the headline above

CNBC TV-18 Budget Week Viewership 1400 1200

CY2016

1000 800 600 400 200

0 CNBC TV18

Source: Bloomberg, Company, Kotak Securities - Private Client Research

Kotak Securities – Private Client Research

CY2017

ET Now

NDTV Profit

Bloomberg TV

Source: Kotak Securities - Private Client Researh

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14

Diwali Picks

October 2017

VIP Industries Ltd - Buy

Analyst: [email protected] Last report at Rs.248 on 21 September 2017

Current Market Price (Rs)

Target Price (Rs)

Potential Upside (%)

52 Week H/L (Rs)

Mkt Cap (Rs m n)

264

325

23.3%

276 / 112

37251

Investment Argument

1 Year Perform ance



We estimate the penetration of luggage to increase within the country with growing income levels and growing leisure and business travel.



Diversified product portfolio enables VIP to cater to consumer of every age and every income group VIP has been constantly working on improving its brand visibility and product reach for the entire range of products across various VIP brands and across price points. We estimate volumes for VIP to grow at 12% CAGR over FY17 to FY20E.



 

We expect the sourcing of soft luggage from China to fall to 50% with share of Bangladesh increasing to 40%, which would aid margins going forward.

490

VIP Industries Ltd

420

Nifty

350

280 210 140 70 0

Risks & Concerns 

Continued competition from unorganized sector.

 

Depreciation of rupee Increase in prices of raw material like polypropylene and polycarbonate

Source: Bloomberg Share Holding Pattern (%) Others 26.0%

Company Background 

VIP Industries is a leading luggage maker in India offering a wide range of products in hard luggage and soft luggage



The company has manufacturing facilities located at Haridwar in Uttarakhand, Jalgaon, Nagpur and Nashik in Maharashtra The company has set up a subsidiary in Bangladesh to manufacture and market luggage and bags



Promoter 52.0% DII 17.0%

Sector Background  The Indian luggage industry is currently valued at Rs 80 bn and is partially dominated by the unorganized sector

FII 5.0%

Source: Bloomberg Financials (Rs mn)

EBIDTA Margin profile of VIP (%)

FY17

FY18E

FY19E

12,752

15,581

17,734

4.8

22.2

13.8

1,319

1,957

2,264

12.0

10.3

12.6

12.8

10.0

1,244

1,874

2,177

8.0

Net profit

849

1,302

1,512

EPS (Rs)

6.0

9.2

10.7

25.2

53.3

16.2

Sales Growth (%) EBITDA EBITDA margin (%) PBT

Growth (%)

14.0

6.0 4.0

6.9

10.2

11.7

2.0

Book Value (Rs / Share)

28.6

34.2

40.6

0.0

Dividend per Share (Rs)

2.2

3.0

3.5

ROE (%)

21.0

26.9

26.3

ROCE (%)

29.3

37.5

36.8

CEPS

Net cash (debt) Net working capital (Days) Valuat io n Paramet ers P/E (x)

60

128

582

77.2

71.2

74.4

FY17

FY18E

FY19E

43.9

28.7

24.7

P/BV (x)

9.2

7.7

6.5

EV/Sales (x)

2.9

2.4

2.1

28.2

19.0

16.2

1M

3M

6M

15.5

41.7

33.0

EV/EBITDA (x) Price Perfo rmance (%)

Source: Bloomberg, Company, Equinomics Research & Advisory Private Ltd

Kotak Securities – Private Client Research

FY15

FY16

FY17

FY18E

FY19E

FY20E

Source: Company, Kotak Securities - Private Client Research Ad spends by VIP (Rs m n) 1,200 1,000

800 600 400 200 0 FY15

FY16

FY17

FY18E

FY19E

FY20E

Source: Company, Kotak Securities - Private Client Research

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15

Diwali Picks

October 2017

RATING SCALE Definitions of ratings BUY – ACCUMULATE – REDUCE – SELL – NR – RS

–

NA NM NOTE

– – –

We expect the stock to deliver more than 12% returns over the next 9 months We expect the stock to deliver 5% - 12% returns over the next 9 months We expect the stock to deliver 0% - 5% returns over the next 9 months We expect the stock to deliver negative returns over the next 9 months Not Rated. Kotak Securities is not assigning any rating or price target to the stock. The report has been prepared for information purposes only. Rating Suspended. Kotak Securities has suspended the investment rating and price target for this stock, either because there is not a Sufficient fundamental basis for determining, or there are legal, regulatory or policy constraints around publishing, an investment rating or target. The previous investment rating and price target, if any, are no longer in effect for this stock and should not be relied upon. Not Available or Not Applicable. The information is not available for display or is not applicable Not Meaningful. The information is not meaningful and is therefore excluded. Our target prices are with a 9-month perspective. Returns stated in the rating scale are our internal benchmark.

FUNDAMENTAL RESEARCH TEAM Sanjeev Zarbade Capital Goods, Engineering [email protected] +91 22 6218 6424

Ruchir Khare Capital Goods, Engineering [email protected] +91 22 6218 6431

Amit Agarwal Logistics, Paints, Transportation [email protected] +91 22 6218 6439

Nipun Gupta Information Technology [email protected] +91 22 6218 6433

Teena Virmani Construction, Cement [email protected] +91 22 6218 6432

Ritwik Rai FMCG, Media [email protected] +91 22 6218 6426

Jatin Damania Metals & Mining [email protected] +91 22 6218 6440

Ashini Shah Midcap [email protected] +91 22 6218 5438

Arun Agarwal Auto & Auto Ancillary [email protected] +91 22 6218 6443

Sumit Pokharna Oil and Gas [email protected] +91 22 6218 6438

Pankaj Kumar Midcap [email protected] +91 22 6218 6434

K. Kathirvelu Production [email protected] +91 22 6218 6427

Prashanth Lalu [email protected] +91 22 6218 5497

Prasenjit Biswas [email protected] +91 33 6625 9810

TECHNICAL RESEARCH TEAM Shrikant Chouhan [email protected] 91 22 6218 5408

Amol Athawale [email protected] +91 20 6620 3350

DERIVATIVES RESEARCH TEAM Sahaj Agrawal [email protected] +91 79 6607 2231

Malay Gandhi [email protected] +91 22 6218 6420

Kotak Securities – Private Client Research

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Diwali Picks

October 2017

Disclosure/Disclaimer

Kotak Securities Limited established in 1994, is a subsidiary of Kotak Mahindra Bank Limited. Kotak Securities is one of India's largest brokerage and distribution house. Kotak Securities Limited is a corporate trading and clearing member of Bombay Stock Exchange Limited (BSE), National Stock Exchange of India Limited (NSE), Metropolitan Stock Exchange of India Limited (MSE). Our businesses include stock broking, services rendered in connection with distribution of primary market issues and financial products like mutual funds and fixed deposits, depository services and Portfolio Management. Kotak Securities Limited is also a depository participant with National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL). Kotak Securities Limited is also registered with Insurance Regulatory and Development Authority as Corporate Agent for Kotak Mahindra Old Mutual Life Insurance Limited and is also a Mutual Fund Advisor registered with Association of Mutual Funds in India (AMFI). We are registered as a Research Analyst under SEBI (Research Analyst) Regulations, 2014. We hereby declare that our activities were neither suspended nor we have defaulted with any stock exchange authority with whom we are registered in last five years. However SEBI, Exchanges and Depositories have conducted the routine inspection and based on their observations have issued advise/warning/deficiency letters/ or levied minor penalty on KSL for certain operational deviations. We have not been debarred from doing business by any Stock Exchange / SEBI or any other authorities; nor has our certificate of registration been cancelled by SEBI at any point of time. We offer our research services to clients as well as our prospects. This document is not for public distribution and has been furnished to you solely for your information and must not be reproduced or redistributed to any other person. Persons into whose possession this document may come are required to observe these restrictions. This material is for the personal information of the authorized recipient, and we are not soliciting any action based upon it. This report is not to be construed as an offer to sell or the solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. It is for the general information of clients of Kotak Securities Ltd. It does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. We have reviewed the report, and in so far as it includes current or historical information, it is believed to be reliable though its accuracy or completeness cannot be guaranteed. Neither Kotak Securities Limited, nor any person connected with it, accepts any liability arising from the use of this document. The recipients of this material should rely on their own investigations and take their own professional advice. Price and value of the investments referred to in this material may go up or down. Past performance is not a guide for future performance. Certain transactions -including those involving futures, options and other derivatives as well as non-investment grade securities - involve substantial risk and are not suitable for all investors. Reports based on technical analysis centers on studying charts of a stock's price movement and trading volume, as opposed to focusing on a company's fundamentals and as such, may not match with a report on a company's fundamentals. Opinions expressed are our current opinions as of the date appearing on this material only. While we endeavor to update on a reasonable basis the information discussed in this material, there may be regulatory, compliance or other reasons that prevent us from doing so. Prospective investors and others are cautioned that any forward-looking statements are not predictions and may be subject to change without notice. Our proprietary trading and investment businesses may make investment decisions that are inconsistent with the recommendations expressed herein. Kotak Securities Limited has two independent equity research groups: Institutional Equities and Private Client Group. This report has been prepared by the Private Client Group. The views and opinions expressed in this document may or may not match or may be contrary with the views, estimates, rating, target price of the Institutional Equities Research Group of Kotak Securities Limited. We and our affiliates/associates, officers, directors, and employees, Research Analyst(including relatives) worldwide may: (a) from time to time, have long or short positions in, and buy or sell the securities thereof, of company (ies) mentioned herein or (b) be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the subject company/company (ies) discussed herein or act as advisor or lender / borrower to such company (ies) or have other potential/material conflict of interest with respect to any recommendation and related information and opinions at the time of publication of Research Report or at the time of public appearance. Kotak Securities Limited (KSL) may have proprietary long/short position in the above mentioned scrip(s) and therefore may be considered as interested. The views provided herein are general in nature and does not consider risk appetite or investment objective of particular investor; readers are requested to take independent professional advice before investing. This should not be construed as invitation or solicitation to do business with KSL. Kotak Securities Limited is also a Portfolio Manager. Portfolio Management Team (PMS) takes its investment decisions independent of the PCG research and accordingly PMS may have positions contrary to the PCG research recommendation. Kotak Securities Limited does not provide any promise or assurance of favourable view for a particular industry or sector or business group in any manner. The investor is requested to take into consideration all the risk factors including their financial condition, suitability to risk return profile and take professional advice before investing. The analyst for this report certifies that all of the views expressed in this report accurately reflect his or her personal views about the subject company or companies and its or their securities, and no part of his or her compensation was, is or will be, directly or indirectly related to specific recommendations or views expressed in this report. No part of this material may be duplicated in any form and/or redistributed without Kotak Securities' prior written consent. Details of Associates are available on our website ie www.kotak.com Research Analyst has served as an officer, director or employee of subject company(ies): No We or our associates may have received compensation from the subject company(ies) in the past 12 months. We or our associates have managed or co-managed public offering of securities for the subject company(ies) in the past 12 months: No We or our associates may have received compensation for investment banking or merchant banking or brokerage services from the subject company(ies) in the past 12 months. We or our associates may have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company(ies) in the past 12 months. We or our associates may have received compensation or other benefits from the subject company(ies) or third party in connection with the research report. Our associates may have financial interest in the subject company(ies). Research Analyst or his/her relative's financial interest in the subject company(ies): No Kotak Securities Limited has financial interest in the subject company(ies) at the end of the month immediately preceding the date of publication of Research Report: Maruti Suzuki, VIP Industries - Yes Our associates may have actual/beneficial ownership of 1% or more securities of the subject company(ies) at the end of the month immediately preceding the date of publication of Research Report. Research Analyst or his/her relatives has actual/beneficial ownership of 1% or more securities of the subject company(ies) at the end of the month immediately preceding the date of publication of Research Report: No. Kotak Securities Limited has actual/beneficial ownership of 1% or more securities of the subject company(ies) at the end of the month immediately preceding the date of publication of Research Report: No Subject company(ies) may have been client during twelve months preceding the date of distribution of the research report. "A graph of daily closing prices of securities is available at www.nseindia.com and http://economictimes.indiatimes.com/markets/stocks/stock-quotes. (Choose a company from the list on the browser and select the "three years" icon in the price chart)." Kotak Securities Limited. Registered Office: 27 BKC, C 27, G Block, Bandra Kurla Complex, Bandra (E), Mumbai 400051. CIN: U99999MH1994PLC134051, Telephone No.: +22 43360000, Fax No.: +22 67132430. Website: www.kotak.com/www.kotaksecurities.com. Correspondence Address: Infinity IT Park, Bldg. No 21, Opp. Film City Road, A K Vaidya Marg, Malad (East), Mumbai 400097. Telephone No: 42856825. SEBI Registration No: NSE INB/INF/INE 230808130, BSE INB 010808153/INF 011133230, MSE INE 260808130/INB 260808135/INF 260808135, AMFI ARN 0164, PMS INP000000258 and Research Analyst INH000000586. NSDL/CDSL: IN-DP-NSDL-23-97. Our research should not be considered as an advertisement or advice, professional or otherwise. The investor is requested to take into consideration all the risk factors including their financial condition, suitability to risk return profile and the like and take professional advice before investing. Investments in securities market are subject to market risks, read all the related documents carefully before investing. Derivatives are a sophisticated investment device. The investor is requested to take into consideration all the risk factors before actually trading in derivative contracts. Compliance Officer Details: Mr. Manoj Agarwal. Call: 022 - 4285 8484, or Email: [email protected].  Level 1: For Trading related queries, contact our customer service at '[email protected]' and for demat account related queries contact us at [email protected] or call us on: Online Customers - 30305757 (by using your city STD code as a prefix) or Toll free numbers 18002099191 / 1800222299, Offline Customers - 18002099292  Level 2: If you do not receive a satisfactory response at Level 1 within 3 working days, you may write to us at [email protected] or call us on 022-42858445 and if you feel you are still unheard, write to our customer service HOD at [email protected] or call us on 022-42858208.  Level 3: If you still have not received a satisfactory response at Level 2 within 3 working days, you may contact our Compliance Officer (Mr. Manoj Agarwal ) at [email protected] or call on 91- (022) 4285 8484.  Level 4: If you have not received a satisfactory response at Level 3 within 7 working days, you may also approach CEO (Mr. Kamlesh Rao) at [email protected] or call on 91(022) 4285 8301.

Kotak Securities – Private Client Research

Please see the Disclosure/Disclaimer on the last page

For Private Circulation

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