Strategy - Motilal Oswal.pdf

January 2017

India Strategy | Get on track please !

India Strategy

Happy 2017

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Growth Guru

m on Re et iza tio n

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New Year, New Cards Research Team ([email protected])

Contents India Strategy - New Year, New Cards........................................................................................................................... 3-41 3QFY17 Highlights & Ready Reckoner ....................................................................................................................... 42-54 Sectors & Companies ...............................................................................................................................................55-290 Automobiles ......................................... 56-72 Amara Raja Batt .......................................... 60 Ashok Leyland ............................................. 61 Bajaj Auto ................................................. 62 Bharat Forge ............................................... 63 Bosch .......................................................... 64 Eicher Motors.............................................. 65 Escorts ........................................................ 66 Exide Inds.................................................... 67 Hero Motocorp............................................ 68 Mahindra & Mahindra ............................... 69 Maruti Suzuki .............................................. 70 Tata Motors .............................................. 71 TVS Motor ................................................... 72 Capital Goods......................................... 73-87 ABB .......................................................... 76 Bharat Electronics........................................ 77 BHEL ......................................................... 78 CG Consumer Elect. ..................................... 79 Crompton Greaves .................................... 80 Cummins India .......................................... 81 GE T&D India ............................................... 82 Havells India................................................ 83 Larsen & Toubro ....................................... 84 Siemens ...................................................... 85 Thermax ................................................... 86 Voltas.......................................................... 87 Cement .................................................. 88-98 ACC .......................................................... 92 Ambuja Cements ......................................... 93 Grasim Industries ...................................... 94 India Cements ............................................. 95 Ramco Cements .......................................... 96 Shree Cement.............................................. 97 Ultratech Cement ........................................ 98 Consumer ............................................ 99-120 Asian Paints............................................... 102 Britannia ................................................... 103 Colgate...................................................... 104 Dabur ........................................................ 105 Emami....................................................... 106 Godrej Consumer ...................................... 107 GSK Consumer........................................... 108 Hind. Unilever ........................................... 109 ITC ............................................................ 110 Jyothy Labs................................................ 111 Marico ...................................................... 112 Nestle ....................................................... 113 P&G Hygiene ............................................. 114 Page Industries.......................................... 115 Parag Milk Foods ....................................... 116 Pidilite Inds................................................ 117 Radico Khaitan .......................................... 118 United Breweries....................................... 119 United Spirits............................................. 120 Financials ............................................121-145 Axis Bank................................................... 127 Bank of Baroda .......................................... 128 Bank of India ............................................. 129 Canara Bank ............................................ 130 DCB Bank .................................................. 131 Equitas Holdings........................................ 132 Federal Bank ............................................. 133 HDFC Bank .............................................. 134

ICICI Bank ................................................ 135 IDFC Bank ................................................. 136 Indian Bank ............................................... 137 IndusInd Bank ........................................... 138 Kotak Mahindra Bank................................. 139 Oriental Bank of Commerce ...................... 140 Punjab National Bank ................................ 141 RBL Bank ................................................... 142 State Bank ................................................ 143 Union Bank ............................................... 144 Yes Bank .................................................... 145 Financials – NBFC ............................... 146-158 Bajaj Finance ............................................ 148 Bharat Financial ........................................ 149 Dewan Housing ......................................... 150 GRUH Finance............................................ 151 HDFC ...................................................... 152 Indiabulls Housing...................................... 153 LIC Housing Fin ......................................... 154 M & M Financial ........................................ 155 Muthoot Finance ...................................... 156 Repco Home Fin ........................................ 157 Shriram Transport Fin. ............................... 158 Healthcare ......................................... 159-176 Alembic Pharma ........................................ 161 Alkem Lab.................................................. 162 Aurobindo Pharma..................................... 163 Biocon ...................................................... 164 Cadila Healthcare ...................................... 165 Cipla ......................................................... 166 Divis Labs .................................................. 167 Dr Reddy’ s Labs ........................................ 168 Glenmark Pharma ...................................... 169 Granules India ........................................... 170 GSK Pharma............................................... 171 IPCA Labs................................................... 172 Lupin ......................................................... 173 Sanofi India................................................ 174 Sun Pharma ............................................... 175 Torrent Pharma ......................................... 176 Logistics ............................................. 177-181 Allcargo Logistics ....................................... 179 Concor....................................................... 180 Gateway Distriparks................................... 181 Media ................................................ 182-194 D B Corp .................................................... 186 Dish TV ...................................................... 187 Hathway Cable........................................... 188 HT Media................................................... 189 Jagran Prakashan ....................................... 190 PVR ........................................................... 191 Siti Networks ............................................. 192 Sun TV ....................................................... 193 Zee Entertainment..................................... 194 Metals................................................ 195-208 Hindalco ................................................... 201 Hindustan Zinc........................................... 202 JSW Steel................................................... 203 Nalco......................................................... 204 NMDC ....................................................... 205 SAIL ........................................................... 206 Tata Steel ................................................. 207 Vedanta..................................................... 208

Oil & Gas ............................................ 209-224 BPCL .........................................................214 GAIL ..........................................................215 Gujarat State Petronet ..............................216 HPCL .........................................................217 IOC ...........................................................218 Indraprastha Gas .......................................219 MRPL ........................................................220 Oil India ....................................................221 ONGC ........................................................222 Petronet LNG ............................................223 Reliance Inds. ............................................224 Retail.................................................. 225-230 Jubilant Foodworks ...................................228 Shopper's Stop ..........................................229 Titan Company ..........................................230 Technology ......................................... 231-251 Cyient .......................................................238 HCL Technologies ......................................239 Hexaware Tech. ........................................240 Infosys ......................................................241 KPIT Tech. .................................................242 L&T Infotech .............................................243 Mindtree ..................................................244 MphasiS ....................................................245 NIIT Tech. ..................................................246 Persistent Systems ....................................247 TCS ...........................................................248 Tech Mahindra ..........................................249 Wipro ......................................................250 Zensar Tech .............................................. 251 Telecom ............................................. 252-260 Bharti Airtel ...............................................258 Bharti Infratel ............................................259 Idea Cellular...............................................260 Utilities............................................... 261-270 CESC ..........................................................266 Coal India...................................................267 JSW Energy ................................................268 NTPC .........................................................269 Power Grid Corp. .......................................270 Others ................................................ 271-290 Arvind........................................................271 Bata India ..................................................272 Castrol India...............................................273 Coromandel International ..........................274 Dynamatic Tech. ........................................275 Indo Count Inds..........................................276 Info Edge ...................................................277 Inox Leisure ...............................................278 Interglobe Aviation ....................................279 Jain Irrigation.............................................280 Just Dial .....................................................281 Kaveri Seed................................................282 MCX ..........................................................283 Manpasand Beverages ...............................284 Monsanto India..........................................285 P I Industries..............................................286 SRF ............................................................287 S H Kelkar ..................................................288 Tata Elxsi ...................................................289 TTK Prestige ...............................................290

Note: All stock prices and indices for companies as on 4 January 2017, unless otherwise stated Investors are advised to refer through important disclosures made at the last page of the Research Report.

India Strategy | New Year, New Cards

India Strategy BSE Sensex: 26,633

S&P CNX: 8,191

New Year, New Cards

Earnings growth returns, but quality of growth weak Earnings growth optically high; driven by low base of Cyclicals 

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The earnings performance for 3QFY17 would be significantly impacted by demonetization. Given the unprecedented nature of the event, prediction of earnings for 3QFY17 is challenging. That said, we expect 3QFY17 earnings performance to benefit from the low base of several cyclical sectors like PSU Banks and Metals. MOSL Universe PAT is likely to grow 30% YoY, the highest since 1QFY15; also, 3QFY17 would be the second consecutive quarter of doubledigit PAT growth. Excluding PSU Banks and Metals, MOSL Universe PAT growth is estimated at 8.1%. The entire YoY earnings growth of INR240b for MOSL Universe in 3QFY17 would be led by PSU Banks, Metals and Oil & Gas. We expect the contribution of Cyclicals to increase further. Cyclicals would account for the entire growth in 2HFY17 MOSL Universe earnings; Defensives would post a 4% YoY decline. We have cut our Sensex EPS estimates by 1% to INR1,360 for FY17 and by 2% to INR1,668 for FY18. We now expect 3% EPS growth for Sensex in FY17, followed by 23% growth in FY18 on a low base of 2HFY17, particularly in demonetizationhit sectors like Consumer, Autos, Cement and Private Banks.

Key sectoral trends/highlights 

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Oil & Gas would report another strong quarter, led by OMCs. This quarter, it accounts for ~27% of MOSL Universe earnings (v/s ~24% in 3QFY16). Metals and PSU Banks would benefit from favorable base; both sectors reported losses in 3QFY16. PSU Banks profits are over 40% below their peak profits. Technology is expected to report another quarter of muted performance, with 0.3% YoY PAT growth. This sector continues to see weaker PAT growth. 3QFY17 would be the first ever quarter of PAT decline for our Consumer universe. Demonetization-led revenue moderation and consequent operating deleverage is likely to impact earnings. Telecom, Media, Retail and Utilities would have a lackluster quarter, with YoY earnings decline. In BFSI, Private Banks are expected to post 12% YoY PAT decline, led by Axis Bank and ICICI Bank. NBFCs are likely to have a healthy quarter, with 16% earnings growth despite demonetization (RBI dispensation should prevent any disproportionate impact on P&L).

Three key trends to watch out for 1. Demonetization impacting revenues for key B2C sectors like Autos (-1.6% YoY), Consumer (flat), NBFCs, and Cement (-1%). 2. Global commodity prices recovering, in turn driving recovery for Cyclicals like Oil & Gas ex OMCs (revenue growth of 15.3% YoY; one of the highest in five years) and Metals (+22.3% YoY; highest in four years). Sources of exhibits in this report include RBI, CMIE, Bloomberg, IMF, Industry, Companies, and MOSL database January 2017

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India Strategy | New Year, New Cards

3. No respite for Healthcare (11.7% YoY revenue growth in 3QFY17 v/s 18.4% CAGR in 10 years) and Technology (8.6% YoY revenue growth in 3QFY17; one of the weakest in 10 years).

Model portfolio changes The 2 important events that are driving changes in our Model portfolio are Impact of Demonetisation (both on earnings and valuations) and recovery in global cyclicals. Our stance reflects our belief that earnings growth for Defensives will decelerate in 2HFY17. We have reduced our weights for Autos, Consumer, Technology and NBFCs. We partake in the anticipated cyclical earnings recovery by upgrading our stance on Private Banks, Capital Goods and Metals. Summary of the changes in our model portfolio:  We have increased weightage in Private Banks and added Axis Bank to the model portfolio. Valuations for Axis at P/B of 1.7x FY18 does factor the near term asset quality concerns; our earnings growth estimate for FY18 is fairly strong at 78%. Ratnakar Bank is a new addition; we initiated coverage recently with a Buy. In PSU Banks, we replace Union Bank with PNB as the subsidiary valuations and CASA growth makes PNB very attractive. We are further magnifying our Underweight stance on NBFC. In Housing finance, we replace LIC Housing with Repco as the latter has seen significant correction in valuations with a strong positioning to benefit from affordable housing boom.  We have reduced our Overweight in Autos, and removed TVS from the model portfolio. We have increased weightage in Tata Motors and also added Bharat Forge in the model portfolio.  Consumer will continue to see challenges on volumes and margins, and hence sees a lower weight. Britannia and Jubilant are the two stocks, where valuations have become reasonable now.  Within Energy, we remain positive on OMCs. However, we replace HPCL with IOC, as the former has an aggressive capex plans, which will lead to higher debt to equity ratio. IOC is exiting its capex plans, which will driver higher cash flows and can lead to strong dividend payouts.  In Capital Goods, we have increased weights in L&T.  We have also upgraded our stance on Metals from Underweight to Neutral, and further magnified our Overweight position on Hindalco. We have also introduced NMDC in our model portfolio.  We continue with our Underweight stance on Technology and replace HCL Tech with Tech Mahindra.  In midcaps, we have introduced SH Kelkar, Endurance, Alkem Labs, Dewan Housing, Dish TV and Muthoot Finance in our model portfolio.

January 2017

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India Strategy | New Year, New Cards

3QFY17 PREVIEW

Earnings growth returns, but quality of growth weak Cyclicals drive growth; demonetization, cost inflation hurt Defensives 3QFY17 earnings growth to be led by low base of Cyclicals 3QFY17 earnings performance would be supported by the low base of cyclical sectors like PSU Banks and Metals. We expect MOSL Universe revenue to grow 7.2% YoY – a 10-quarter high (revenue had declined 7% YoY in the base quarter). EBITDA growth would be 19.7% YoY, the highest in 10 quarters. PAT is likely to grow 30.2% YoY, the highest since 1QFY15; also, 3QFY17 would be the second consecutive quarter of double-digit PAT growth. However, excluding PSU Banks and Metals, we estimate 5.4% YoY sales growth, 10.8% YoY EBITDA growth, and 8.1% YoY PAT growth for MOSL Universe. While EBITDA margin is likely to expand 240bp YoY to 22.7%, PAT margin would expand 200bp YoY to 10.9%. This would be driven by 400bp expansion in EBITDA margin and 250bp expansion in PAT margin of Global Cyclicals. Defensives would report the first margin decline in seven quarters, a reflection of demonetization and rising commodity costs in Consumer and Autos.

Three key trends coming to the fore 

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Demonetization impacting revenues of key sectors like Autos (-1.6% YoY), Consumer (flat), NBFCs, and Cement (-1%) Global commodity price recovery driving recovery for Cyclicals like Oil & Gas ex OMCs (revenue growth of 15.3% YoY, one of the highest in five years) and Metals (+22.3% YoY; highest in four years) No respite for Healthcare (11.7% YoY revenue growth in 3QFY17 v/s 10-year CAGR of 18.4%) and Technology (8.6% YoY revenue growth in 3QFY17, one of the weakest in 10 years)

Earnings growth momentum back, but quality of growth weak 3QFY17 earnings growth would be driven by Cyclicals – Cement, Capital Goods and Oil & Gas are expected to post 24%, 59% and 42% growth, respectively. PSU Banks and Metals, which reported losses of INR39b and INR10b in the base quarter, are expected to post a PAT of INR52b and INR73b, respectively. PAT growth would be 50% YoY (-24% YoY in 3QFY16) for Domestic Cyclicals and 59% YoY (13% YoY in 3QFY16) for Global Cyclicals – multi-quarter high for both. However, Defensives would report 3% YoY decline in PAT to the lowest in 20 quarters. MOSL Universe (ex Metals, Oil and PSBs) PAT is likely to decline 1.4% YoY in 3QFY17, the first decline in eight years.

Expect earnings to decline for consumer-facing sectors 

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January 2017

Demonetization would impact the Auto and Consumer sectors, which are likely to witness sharp moderation in PAT growth. We expect Consumer sector PAT to decline 1% YoY, the first decline in 11 years. For Autos, we expect just 3% YoY earnings growth. PAT growth for the Technology sector would continue to moderate. We expect YoY flat PAT – no growth for the first time in last 12 years. Private Banks (-12%), Media (-5%), Retail (-10%) and Utilities (-6%) are the other sectors that would report YoY PAT decline.

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India Strategy | New Year, New Cards

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NBFCs should post a healthy 16% YoY PAT growth – the impact of demonetization on asset quality could come with a quarter’s lag. Defensives’ share in MOSL earnings would continue to decline to 35% (recent high was 47% in 4QFY16); the share of Global Cyclicals would be 31% in 3QFY17, up from 26% in 3QFY16 and 24% in 2QFY17. Nifty sales would grow 4% YoY, the highest in nine quarters. PAT is likely to grow 13% YoY, the highest in 10 quarters. EBITDA is likely to post robust 10% YoY growth. Nifty aggregates would be influenced by Cyclicals – excluding PSU Banks and Metals, Nifty sales would grow 4% YoY, EBITDA would grow 5% YoY, and PAT would grow 1% YoY. Post demonetization, we have cut our 2HFY17E earnings for MOSL Universe by 3%, driven by cuts in Cement (22.5%), Autos (12%), Consumer (11%), NBFCs (6%) and Capital Goods (~8%). Also, Telecom sectors’ 2HFY17E PAT has seen sharp cut of ~75%, reflecting tectonic shift in competitive intensity.

Exhibit 1: Growth bounces back on low base Sales (NO OF COMPANIES)

Dec-16

% YoY

High growth sectors PSU Banks (8) Metals (9) Capital Goods (12) Oil & Gas (12) Others (19) Cement (7) NBFC (11) Med/Low growth sectors Healthcare (17) Auto (13) Technology (15) PAT de-growth sectors Consumer (19) Logistics (3) Media (9) Utilities (5) Retail (3) Private Banks (11) Telecom (3) MOSL (176)

5,430 310 1,163 478 3,034 183 167 96 2,537 381 1,264 891 1,631 405 31 61 476 53 243 361 9,598 5,091 4,686 6,176

10 4 22 6 8 13 -1 14 4 12 -2 9 3 0 4 3 4 8 10 0 7.2 4.0 4.7 4.3

MOSL Ex Metals, Oil & PSU Banks (147)

Sensex (30) Nifty (50)

EBITDA % Dec-16 QoQ 8 -2 13 3 9 6 0 4 1 1 1 1 1 -2 1 5 5 26 0 -3 4.8 1.3 3.5 3.3

1,106 254 222 35 450 40 29 76 470 92 174 204 603 89 5 19 154 4 208 125 2,179 1,253 1,243 1,508

PAT

PAT

% YoY

% Dec-16 QoQ

% YoY

% QoQ

46 27 168 42 40 20 3 14 3 10 -2 4 0 -5 1 0 3 -1 1 -3 19.7 3.2 8.2 9.8

18 -1 26 -12 36 43 -14 3 2 -1 7 -1 3 -5 13 8 23 18 1 -9 9.6 2.5 5.8 5.6

126 LP LP 59 42 30 24 16 2 8 3 0 -12 -1 -3 -5 -6 -10 -12 -67 30.2 -1.4 5.5 13.3

19 6 73 -35 25 64 -27 -2 -1 -6 6 -2 1 -3 18 15 39 17 -2 -64 8.3 -0.9 3.0 1.2

484 52 73 15 265 19 15 46 303 57 89 157 255 63 3 8 73 3 97 8 1,042 653 614 728

EBITDA* PAT*

Delta

Sh. %

Chg bp Chg bp YoY YoY

270 91 82 6 78 4 3 6 7 4 2 1 -36 -1 0 0 -5 0 -13 -17

52 5 8 2 28 2 2 5 32 6 9 17 27 7 0 1 8 0 10 1

497 1,449 1,038 183 338 138 71 12 -13 -47 0 -96 -123 -107 -31 -106 -24 -73 -783 -115 238 -20 86 123

458 2,973 725 105 209 136 189 97 -15 -45 29 -146 -272 -21 -67 -117 -161 -92 -980 -465 192 -70 9 94

*Margins

January 2017

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India Strategy | New Year, New Cards

MOSL Universe headline performance at multi-quarter high Exhibit 1: Sales growth for MOSL Universe to come in at 10 quarter high…

Exhibit 2: …but sales growth of Defensives to moderate sharply 24.8 22.7

18.6 15.9

14.4 11.8 9.9 12.3 7.7 11.3 6.6 4.5

19.1 18.6 17.7 17.7 14.9 13.2 11.9 11.9 12.6 11.2 10.8 9.6 8.5 9.0 9.1 8.0

11.4 7.2 2.9

0.2 -2.3

Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16E Mar-17E

-6.7 -7.1 -8.4 -11.3

Source: MOSL

Exhibit 4: PAT growth for MOSL Universe will be boosted by low base in cyclicals…

20.2 20.6

19.3 18.4 18.8 19.0 19.1 19.2 18.6 18.5 18.9 20.2 18.9 18.8

20.2

85.3 71.3

5.3

18.4

1.0 0.1

-5.1 -13.3

-8.2

11.7 1.4

5.2

4.1

-33.9

-3.0 -0.4 -18.6

Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16E Mar-17E

FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17

35.0 30.2

31.4

-2.3

1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3QE

18.0

Source: MOSL

21.3 20.1

21.7 20.9 21.8 21.8 21.9 21.3 21.6 19.4 20.4 18.5 20.0 18.8 19.0 18.6

MOSL Universe EBITDA Margin LPA: 20%

18.5

19.9

22.4

Exhibit 3: 3QFY17 EBITDA margin (ex-OMCs, Financials) at 20.6% (+170bp YoY)

Source: MOSL

Source: MOSL

Exhibit 6: 3QFY17 PAT margin (ex-OMCs, Financials) would expand 80 bps to 10.4% led by Metals, O&G and Cements

10.0 10.7 10.2 9.6 11.0 10.5 10.9 10.4 10.3

MOSL Universe PAT Margin LPA: 11%

11.6 11.6 12.6

11.2

13.1 9.6 10.7 11.2 6.3 10.6 5.7

10.4

5.1

12.6 12.0

27.9 24.1 23.3

12.9 12.6 12.2 12.2 11.0 11.9 10.5 11.5 11.0 10.3 10.3 10.7 9.9 10.0 10.5 10.7 10.5 10.0 9.3

14.1

Exhibit 5: …first PAT decline in multiple quarters for Defensives… 33.1 27.5 26.3 21.1 18.5 16.1 10.6

5.54.8

Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16E Mar-17E

-0.9

Source: MOSL

January 2017

FY09

FY10

FY11

FY12

FY13

FY14

FY15

FY16

1Q

3QE

3Q

1Q

3Q

1Q

3Q

1Q

3Q

1Q

3Q

1Q

3Q

1Q

3Q

1Q

3Q

1Q

Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16E Mar-17E

-2.7-4.6

FY17

Source: MOSL

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India Strategy | New Year, New Cards

MOSL Universe PAT to be at all-time high in 2HFY17 

PAT growth for several sectors in MOSL universe to benefit from low base: PSU Banks and Metals to benefit from low base. However, demonetization will drag earnings for Autos, FMCG and Cement.

Exhibit 7: Sectoral quarterly PAT trend (INR b) Sector Auto Capital Goods Cement Consumer Financials Private Banks PSU Banks NBFC Healthcare Logistics Media Metals Oil & Gas Oil & Gas Ex OMCs Retail Technology Telecom Utilities Others

Jun 59 26 25 42 170 54 92 24 21 3 4 75 -251 154 2 90 12 81 6

FY13 Sep Dec 52 49 27 28 19 16 43 47 165 177 57 67 83 82 25 28 27 36 3 3 5 5 54 42 342 217 173 166 2 3 93 97 12 8 63 88 6 6

Mar 79 60 20 45 190 71 83 35 29 3 4 76 403 133 2 97 12 99 4

Jun 53 14 19 48 186 70 87 29 32 3 5 60 94 138 2 106 15 76 7

FY14 Sep Dec 74 83 21 22 11 11 49 54 163 169 72 80 61 59 31 30 42 49 3 3 5 6 57 57 203 137 174 175 2 2 121 129 12 15 68 84 6 7

Mar 81 52 18 51 196 85 73 38 43 3 5 71 346 165 3 134 20 99 6

Jun 93 17 17 53 204 82 90 32 45 4 5 67 187 149 2 132 23 77 9

FY15 Sep Dec 77 77 19 19 14 9 56 60 190 183 85 95 72 54 33 34 51 33 3 4 5 8 73 61 153 71 149 95 3 2 137 144 26 27 57 73 7 7

Mar 60 48 15 57 198 100 57 41 37 4 6 33 248 135 3 141 28 89 6

Jun 98 12 13 58 196 91 71 34 53 3 7 36 251 147 2 141 23 77 9

FY16 Sep Dec 67 86 15 9 15 12 58 64 190 106 98 106 54 -39 38 39 51 48 3 3 8 9 51 -8 131 187 128 131 2 3 152 153 26 25 68 78 6 7

Mar 104 45 19 63 -18 83 -146 45 51 2 12 22 191 137 2 158 28 90 9

Jun 78 15 24 65 169 94 33 41 56 3 7 31 278 148 2 153 26 78 10

FY17 Sep DecE MarE 84 89 106 23 15 55 21 15 24 65 63 66 190 192 216 94 94 99 49 52 62 46 45 54 57 54 56 2 3 3 8 9 9 30 43 43 213 265 206 161 163 137 2 3 2 158 155 161 23 8 0 53 73 82 9 8 10

MOSL Universe 366 915 821 1123 719 837 829 1126 934 869 780 972 979 843 784 778 996 936 994 1038 MOSL Ex Metals, Oil & PSU Banks 451 435 479 561 478 516 575 636 590 572 593 634 621 607 644 712 653 645 634 726

Exhibit 8: Sectoral quarterly PAT growth trend (%) Sector Auto Capital Goods Cement Consumer Financials Private Banks PSU Banks NBFC Health Care Logistics Media Metals Oil & Gas Oil & Gas Ex OMCs Retail Technology Telecom Utilities Others MOSL Universe MOSL Ex Metals, Oil & PSU Banks

Jun 11 12 28 24 38 30 48 27 5 -1 -2 -15 PL 3 6 36 -13 17 -16 -37 19

FY13 Sep Dec -4 -26 -5 -18 63 -2 15 22 19 14 27 28 11 -2 30 43 26 66 22 -7 8 22 -19 -23 812 -24 -3 19 14 22 35 19 7 -46 39 32 -15 -2 70 -3 21 13

Mar -5 -7 -14 17 3 25 -18 38 26 -15 25 6 10 -4 24 15 -24 1 -34 5 6

Jun -10 -47 -26 14 9 29 -5 19 51 -6 26 -20 LP -10 15 17 27 -6 13 96 6

FY14 Sep Dec 41 68 -25 -20 -44 -33 16 13 -1 -4 26 20 -27 -28 24 9 53 38 -1 9 12 18 5 36 -41 -37 1 6 5 -12 31 33 2 94 7 -5 7 31 -8 1 19 20

Mar 3 -13 -11 13 3 20 -12 6 45 22 13 -6 -14 24 12 38 71 0 43 0 13

Jun 75 26 -10 12 10 18 3 10 42 13 -5 11 99 8 -6 25 50 0 26 30 23

FY15 Sep Dec 5 -7 -7 -13 26 -12 14 11 16 8 19 19 18 -7 7 10 21 -32 -2 32 3 33 27 7 -25 -48 -14 -46 24 5 13 11 111 82 -17 -13 12 1 4 -6 11 3

Mar -26 -9 -16 13 1 17 -23 10 -13 20 17 -53 -28 -18 -2 6 36 -10 6 -14 0

Jun 6 -31 -20 9 -4 10 -21 7 17 -9 33 -47 34 -1 -12 7 -1 1 1 5 5

FY16 Sep Dec -13 12 -20 -54 12 32 5 7 0 -42 14 12 -25 PL 17 16 1 44 4 -31 48 16 -30 PL -14 162 -14 37 -37 16 11 7 -2 -7 19 6 -9 -4 -3 0 6 9

Mar 73 -4 26 10 PL -16 PL 10 38 -41 113 -35 -23 2 -11 12 1 0 40 -20 12

Jun -21 29 82 13 -14 3 -53 21 5 -17 4 -12 11 1 26 9 16 1 13 2 5

FY17 Sep DecE MarE 24 3 2 50 63 21 37 24 26 11 -1 5 0 81 LP -3 -12 19 -9 LP LP 21 16 19 12 12 10 -25 -3 29 -3 -4 -26 -42 LP 99 62 42 8 26 25 -1 20 -10 -23 4 1 2 -9 -67 -100 -22 -6 -9 44 20 14 11 27 33 6 -1 2

Note: Comparable Universe excludes Vedanta due to merger, Just Dial, Alembic Pharma, Hathway, Repco Home Finance, MCX, Alkem Labs, Interglobe Aviation, CG Consumer Electricals, Parag Milk Foods, Equitas Holding, IDFC Bank, RBL Bank, L&T Infotech, Manpasand, and SH Kelkar.

January 2017

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India Strategy | New Year, New Cards

Exhibit 9: Key Assumptions – Commodities bottoming out in 2QFY17 Macro GDP Growth (%)

FY16 7.6

1QFY17 7.1

2QFY17 7.3

3QFY17E 6.1

4QFY17E 6.2

FY17E 6.7

IIP Growth (%)

2.4

0.7

-0.9

1.8

2.9

1.2

Inflation CPI-RU (%)

4.9

5.7

5.2

3.8

4.5

4.8

Currency: USD/INR

65.5

66.9

67.0

67.4

68.2

67.4

Oil: Brent (US$/bbl)

47.5

46.0

45.8

50.2

55.0

49.3

Repo Rate (%)

6.9

6.52

6.50

6.25

6.00

6.32

Interest Rate (%): 1Year CP Rate (Avg)

8.6

8.30

7.85

7.27

7.25

7.67

7.7

7.46

7.12

6.54

6.50

6.90

Sectoral

10Year G Sec (Avg)

FY16

1QFY17E

2QFY17E

3QFY17E

4QFY17E

FY17E

Banking: Loan Growth (%)

10.7

8.1

6.6

7.5

8.2

8.2

Auto: CV Volume growth (%)

11.1

9.2

10.3

-4.0

12.0

5.0

Car Volume growth (%)

10.6

2.1

18.4

2.6

17.7

10.0

Cement: Volume growth (%)

4.0

5.6

3.3

-3.0

-10.0

-1.3

Capital Goods: L&T order Intake (INRb)

1,369

297

311

416

481

1,505

Capital Goods: L&T order Intake (% YoY)

-11.9

12.5

8.7

8.1

11.0

10.0

Metal: Steel (USD/Tonne) Aluminium (USD/Tonne) Zinc (USD/Tonne)

494

492

465

515

515

497

1,592

1,570

1,619

1,720

1,712

1,655

1,846

1918

2,252

2,500

2,600

2,318

Oil & Gas: Under Recoveries (INRb)

124.3

24.0

27.8

8.8

13.9

50.5

Singapore GRM (USD/bbl)

7.5

5.0

4.5

6.4

6.4

5.5

6.9

3.6

1.1

1.1

2.4

7.9

Technology: $Revenue growth (%)

* CV volume for Tata Motors and Ashok Leyland; PV Volume for Maruti Suzuki

Interesting sectoral trends Key PAT growth sectors    









At 2.6% YoY, 3QFY17 PAT growth for Autos would be one of the weakest in recent quarters. Eicher, Maruti and Ashok Leyland stand out with 56%, 39% and 38% growth, respectively. Excluding Tata Motors (which is expected to post 16% YoY PAT decline), Autos should post 15% YoY growth. Capital Goods sector is expected to post 20-quarter high PAT growth of 59% YoY, driven by favorable base. BHEL posted a loss in the base quarter; excluding BHEL, growth would be 7% YoY. PSU Banks would report a PAT of INR52b v/s a loss of INR39b in the base quarter. SBIN (up 2.4x), PNB (up 8.7x) and UBI (up 2.9x) are expected to post strong performance. NBFCs are likely to post another quarter of healthy performance, with 16% YoY PAT growth. MMFS (125%), LIC Housing Finance (27%), Muthoot Finance (40%), Bharat Financial (31%) and Gruh Finance (19%) are expected to deliver strong performance. Metals would also have a strong quarter and report a PAT of INR73b v/s a loss of INR10b in the base quarter. Hindalco (up 2.3x), Vedanta (loss to profit) and Tata Steel (loss to profit) are expected to post strong results. Cement is expected to continue its strong momentum, led by Shree Cement.

Key PAT de-growth sectors 

 

January 2017

Consumer companies would report the first YoY PAT decline in 11 years.

Asian Paints would post 4% YoY PAT decline. Britannia would see ~20% YoY decline in PAT.

9

India Strategy | New Year, New Cards



HUVR and ITC are likely to report flattish YoY PAT performance.



For Private Banks, aggregate PAT is likely to decline 12% YoY, driven by Axis Bank (-69%) and ICICI Bank (-26%). Yes Bank (+25%), Kotak Mahindra Bank (27%), and IndusInd Bank (+23%) would report strong growth. Utilities would post 6% YoY PAT decline, largely led by Coal India (-22%). Telecom would report PAT decline (-67% YoY), despite the low base (PAT was down 7% in 3QFY16).

 

Exhibit 10: 3QFY17 sectoral sales growth (%) 22

0

-1

-3

-5

-6

-10

-2 Auto

Cement

-1

Telecom

0

Consumer

0

3

Media

3

4

Logistics

4

Utilities

6

Cap Goods

8

Financials

8

MOSL Ex. OMCs

8

Retail

9

Technology

12

Health Care

Oil Ex. OMCs

Metals

15

-67 Telecom

Retail

Utilities

Media

Logistics

Consumer

Technology

8

Health Care

24

Cement

25

Oil Ex. OMCs

26

MOSL Ex. OMCs

59

Cap Goods

77

Financials

Metals

LP

Auto

Exhibit 11: 3QFY17 sectoral PAT growth (%)

Exhibit 12: ~40% of the universe to report >15% PAT growth Earnings Gr.

>30%

>15-30%

>0-15%

27 21 24 23 26 30 27 42 41 32 35 31 14 19 24 9 9 10 20 26 14 14 13 21 11 17 18 22 22 10 18 22 21 18 10 14 51 44 45 41 43 38 32 35 30 32 27 26

25 24 31 34 18 18

42 40

30

<0%

Ex RMs (%)

-3 8 12 9 17 7 -7 -8 -3 -3 -10 -10 -2 6 26 35

35 38 39 42 41 37 38 45

26

35 37 47 36 39 36 33 33 37 34

27 17 18 21 22 21 18 22 13 27 17 16 20 24 25 25 16 22 17 21 18 23 16 19 19 21 18 12 18 18 13 24 25 18 22 18 17 19 16 27 21 22 14 19 23 16 13 18 39 35 29 27 21 21 24 25 25 28 26 24 19 26 25 20 20 26 18 22 21 20 24 29 28 28 24 19

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 15 June 15 Sep 15 Dec 15 Mar 16 June 16 Sep 16 Dec 16E Mar 17E

% of MOSL Universe companies

15 24 26 20 -8 -15 -15-11 23 42 26 22 24 9 13 11 4 18 11 9 6 0

PAT Growth Ex RMs (%)

40% of the companies would grow at >15% YoY, and almost 30% of the Universe would report >30% PAT growth. More than 1/3rd of the Universe would report PAT de-growth.

January 2017

10

India Strategy | New Year, New Cards

Three key trends for 3QFY17 1] Demonetization impacting revenues for key sectors like Autos, Consumer, and Cement 





We expect Autos (ex JLR) to report flat revenue YoY, impacted by sharp moderation in volumes across segments, especially 2Ws and PVs. Higher discounts and negative operating leverage would lead to sharp moderation in PAT growth for Autos (ex JLR). Cement revenue is likely to decline ~1% YoY, reflecting ~1% YoY volume decline. With cost inflation offsetting higher realization, EBITDA growth would be restricted to ~3% YoY. PAT growth would moderate considerably to ~24% YoY (v/s ~58% YoY in 1HFY17). For our Consumer universe, we expect revenue to be flat YoY, translating into a PAT decline for the first time in 12 years.

Exhibit 13: Demonetization to impact PAT growth for sectors like Auto, Cement, Consumers etc (% YoY)

24

26

21 19 19

17 9 8

Consumer

30

20

18

22 15 15 14

16

19

17

21

24

22 15

17

5

14 16 13 13 12 14 11 13 9

5

7

11 13 12

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-15 June-15 Sep-15 Dec-15 Mar-16 June-16 Sep-16 Dec-16E

-1

Exhibit 14: PAT growth moderates sharply for Autos & Cement sector (%)

26

-16 -20

4 -30

-1

-15

2 -8

-26

19

28 17 18 9

June-12 Sep-12 Dec-12 Mar-13 June-13 Sep-13 Dec-13 Mar-14 June-14 Sep-14 Dec-14 Mar-15 June-15 Sep-15 Dec-15 Mar-16 June-16 Sep-16 Dec-16E

-3

17

98

82

Cement

63

26

-2

-14

-26

-11 -10 -44

-33

12

32 26

37

24

-12 -16 -20

June-12 Sep-12 Dec-12 Mar-13 June-13 Sep-13 Dec-13 Mar-14 June-14 Sep-14 Dec-14 Mar-15 June-15 Sep-15 Dec-15 Mar-16 June-16 Sep-16 Dec-16E

157 126

Autos Excl JLR

2] Global commodity price recovery driving recovery for Global Cyclicals  



January 2017

Recovery in base commodity prices has led to sharp recovery in revenues and PAT for Global Cyclicals like Oil and Metals. We estimate revenue growth for Oil & Gas at 8% YoY, one of the highest in five years, influenced by ~14% YoY increase in crude oil prices. This would reflect in PAT growth of ~42% YoY (~25% QoQ). For Metals, we expect 22.3% YoY revenue growth, the highest in four years, driven by recovery in prices – Steel (up 70% from recent lows), Copper (up 35%),

11

India Strategy | New Year, New Cards

and Aluminum (up 15%). More importantly, PAT is likely to grow ~72% QoQ (from loss to profit on YoY basis). Exhibit 15: Global cyclicals showing smart recovery in PAT on the back of rising commodity prices (INR b) 403

342

217

Oil & Gas PAT (INR b) 346 248 278 265 251 203 187153 187191 213 137 131 94 71

100

89 67

59

Metals PAT (INR b) 84 87 90 77 75 71 66 59 50 41

33 37 42

-10

Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16E

Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16E

-251

73

3] No respite for Healthcare (expect 11.7% YoY revenue growth in 3QFY17 v/s 18.4% CAGR in 10 years) and Technology (expect 8.6% YoY revenue growth in 3QFY17, one of the weakest in 10 years)  

We estimate revenue growth for our Technology universe at 8.6% YoY, one of the lowest in 10 years. For the first time in 12 years, PAT would remain flat YoY. For our Healthcare universe, we expect moderation in revenue growth (11.7% YoY in 3QFY17 v/s 10-year CAGR of 18.4%), reflecting in 8.4% YoY PAT growth.

Exhibit 16: PAT growth for defensives like Technology and Healthcare continues to be weak (%YoY)

31 15 17

26

25 13 11

6 8

13

9

14

51 53 27

Healthcare 38

47

45 42 21

21

5

10

38 6 8 8

9 -10

4 0

Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16E

19

33

64

-28

Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16E

36 35

Technology

38

Cyclicals to drive entire 2HFY17 earnings growth 





January 2017

After witnessing severe stress in 1HFY17, Cyclicals like PSU Banks and Metals are making strong recovery, driven by favorable base, interest rate moderation, recovery in commodity prices, etc. PAT for Cyclicals is likely to grow 54% YoY in 3QFY17 (v/s just 5% growth in 1HFY17). While we estimate MOSL Universe PAT growth at 33% YoY for 2HFY17 (v/s 6% YoY in 1HFY17), 95% of this growth would be driven by Cyclicals. Defensives would drag overall performance. For Domestic Cyclicals, PAT is likely to grow 101% YoY in 2HFY17 (v/s 6% YoY in 1HFY17), driven by PSU Banks, Cement and Capital Goods. For Global Cyclicals, we expect PAT to grow 34% YoY in 2HFY17 (v/s 4% YoY in 1HFY17), driven by Metals and Oil & Gas.

12

India Strategy | New Year, New Cards

Exhibit 17: Cyclicals are expected to drive the entire earnings growth in 2H Contribution to 1HFY17 PAT growth (%)

24

16 15 13 12 11 7 6 4 1 1

18 3 3 2 2 1 1 1 1 0 0

Utilities

-9 Telecom

Retail

Logistics

Consumer

Banks-Pvt

Technology

Others

Automobiles

Cement

Healthcare

NBFC

Capital Goods

Metals

Source: MOSL

Media

0 -1 -2

-37 Banks-PSU

Metals

-25

Banks-PSU

-12 Utilities

Automobiles

Media

Logistics

Retail

Telecom

Others

Banks-Pvt

Healthcare

Consumer

Capital Goods

NBFC

Cement

Oil & Gas

0 -1 -4 Technology

Contribution to 2HFY17 PAT growth (%)

57

Oil & Gas

94

Source: MOSL

Exhibit 18: Cyclicals are expected to grow significantly ahead of MOSL Universe average in 2HFY17 LP

1HFY17 PAT growth (%)

2HFY17 PAT growth (%) 539

46 28 23 21 17 12 7 6

6

3 3

33 26 25 25 18 14 11 9 2 2 2 1 -10

-21

-27 -34

Cement Capital Goods Oil & Gas Retail NBFC Others Consumer Healthcare Technology MOSL Banks-Pvt Telecom Media Automobiles Utilities Logistics Metals Banks-PSU

-1 -2

-7 -16 -17

-84

Banks-PSU Metals MOSL Capital Goods Cement Oil & Gas NBFC Others Logistics Healthcare Automobiles Banks-Pvt Consumer Technology Utilities Retail Media Telecom

58

Source: MOSL

Source: MOSL

Defensives to drag 2HFY17 earnings 

 



January 2017

Defensives solely drove MOSL Universe PAT growth over FY14-16; Cyclicals (both domestic and global) were under pressure, resulting in the share of Defensives in aggregate PAT rising to 36%. However, we expect Cyclicals to be the key driver of PAT growth over FY17-18, with over 78% of the increase in MOSL Universe PAT being driven by Cyclicals. As a result, we expect the share of Cyclicals to increase to 70% by FY18 from 63% in FY16. Key drivers of growth within Cyclicals would be PSU Banks, Autos, Metals, and Cement. For 3QFY17, Defensives would report a 2.7% YoY decline in PAT to the lowest in 20 quarters. This is expected to continue even in 4QFY17, with a decline of 5% YoY. Large part of the 2HFY17 weakness would be due to demonetization-led growth moderation in the Consumer sector.

13

India Strategy | New Year, New Cards

Exhibit 19: Cyclicals to drive entire PAT growth in 3QFY17

82

91

78

1

2

3

4

4

6

6

-0

-0

-5

-1

-0

-13

-17

1,042

MOSL 3QFY17E PAT (INRb)

Telecom

Banks-Pvt

Utilities

Consumer

Media

Retail

Logistics

Technology

Automobiles

Cement

Others

Healthcare

Capital Goods

NBFC

Oil & Gas

Metals

MOSL 3QFY16 PAT (INRb)

Banks-PSU

801

Source: MOSL

Share of defensives comes off further Exhibit 20: PAT share of global cyclicals to see sharp sequential pick up 100% 33

75%

25

50% 25%

Defensives

26 23

40

33

42

27

37

36

27

35

34

34

31

40 39 35 33

26

26 24

31 29

34 37 34 38

Domestic cyclicals

38

39

Global cyclicals

41

45

36

37

32

35

Mar-17E

Dec-16E

Sep-16

June-16

Dec-15

Mar-16

Sep-15

Mar-15

June-15

Dec-14

Sep-14

June-14

Mar-14

Dec-13

Sep-13

June-13

Mar-13

Dec-12

Sep-12

June-12

Mar-12

Sep-11

Dec-11

June-11

Mar-11

Dec-10

Sep-10

June-10

Mar-10

Dec-09

Sep-09

June-09

Mar-09

0%

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

Nifty sales and PAT growth to be 4% and 13%, respectively  

 

January 2017

Nifty PAT is likely to grow 13% YoY in 3QFY17, the highest in 10 quarters. Sales are expected to grow 4% YoY. Performance of Nifty would be driven by Cyclicals like PSU Banks and Metals that are benefiting from the depressed base of 2HFY16. Excluding PSU Banks and Metals, Nifty PAT would be flat YoY. 17 Nifty companies are expected to post YoY PAT decline – two each from Consumer, Cement, Telecom and Technology, and three from Autos. Another notable feature of 3QFY17, as discussed in earlier sections, would be the YoY PAT decline for large-cap Consumer companies (ITC, Asian Paints), an impact of demonetization.

14

India Strategy | New Year, New Cards

Exhibit 21: Nifty - Sectoral contribution to growth 3QFY17 vs Index Weight 3.1

9.4

1.5

4.0

11.3

6.3

6.6

14.4

3.0

0.8

21.5

4.4

10.1

0.8

2.3

66.9 Contr to growth for 3QFY17 (%) 29.2

Weight in Index (%)

26.0 1.4

0.9

0.3 -0.8

-3.6

Consumer

Infra

Media

Cement

Technology

NBFC

Auto

Healthcare

Cap. Goods

Oil & Gas

Metals

Banks-PSU

-0.2

-14.8

-19.7 Telecom

1.6

Banks-Pvt

1.7

5.3

Utilities

5.8

Exhibit 22: Nifty sales to grow 4% in 3QFY17, fourth consecutive quarter of positive sales growth 30 32 19 20

23

37 26

16

25

30

35 33

28

23

26

15

16

22 18 22

26

21

26

21

LPA: 14% 16 14

8

-12 3Q

1Q

FY06

3Q

1Q

FY07

3Q

1Q

FY08

3Q FY09

14 14 14 15 4 4

1Q

-8

-6

-6 -4

1Q

3Q

-9 3Q

1Q

FY10

3Q

1Q

FY11

3Q

1Q

FY12

3Q

1Q

FY13

3Q

1Q

FY14

3 4

3

4 -1

-4 1Q

8

3Q FY15

FY16

8

0

1Q 3QE FY17

Exhibit 23: 3QFY17 Nifty PAT to grow 13% YoY, highest in ten quarters 65 38 22

20 16

36 16

7

19 13 12 21

19

11

27

34 16

LPA: 11%

29

24 4

10

12 0

24 5

5

2

9 9

-1

-8 -5 -15 -20

20

13 4

1 0 4 -7 -12

6

0 0 -5

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

-7

11

FY06

January 2017

FY07

FY08

FY09

FY10

FY11

FY12

FY13

FY14

FY15

FY16

FY17

15

India Strategy | New Year, New Cards

Exhibit 24: Nifty companies 3QFY17 performance (INR b) Company

Sales Dec-16

High PAT Growth (16) Bank of Baroda Tata Steel State Bank Hindalco Bharti Infratel Eicher Motors BPCL GAIL Grasim Industries Maruti Suzuki Bosch Kotak Mahindra Bank Yes Bank Sun Pharma Power Grid Corp. IndusInd Bank Med/Low PAT Growth (17) Cipla Lupin Aurobindo Pharma HDFC Bank Ambuja Cements Reliance Inds. Zee Entertainment ONGC HDFC Mahindra & Mahindra Larsen & Toubro NTPC Tata Power HCL Technologies TCS Hind. Unilever Infosys Negative PAT Growth (17) Ultratech Cement Wipro Adani Ports ITC Asian Paints Bajaj Auto Tech Mahindra Hero MotoCorp Bharti Airtel Tata Motors Coal India Dr Reddy’ s Labs ICICI Bank ACC Axis Bank Idea Cellular BHEL Nifty (50)

January 2017

1,790 33 283 143 254 34 18 459 151 25 166 28 20 15 80 66 15 2,406 39 42 39 80 22 641 16 193 24 103 273 177 95 117 295 79 171 1,981 53 139 18 88 40 50 74 64 241 708 197 37 52 27 45 87 61 6,176

EBITDA Var % YoY 5 21 1 5 9 8 -44 -2 13 7 10 3 14 26 13 23 29 8 26 19 10 13 -7 13 3 5 10 -1 6 2 3 13 8 1 7 0 -7 8 8 -4 5 -9 10 -12 0 -2 4 -6 -5 -7 8 -4 14 4

Dec-16 443 27 34 119 32 15 6 34 17 5 25 4 14 14 27 59 13 615 7 10 9 63 3 120 4 97 22 15 28 50 23 25 80 14 45 449 10 27 12 34 8 10 12 10 87 89 33 8 51 2 43 23 -8 1,508

PAT Var % YoY 34 56 335 24 39 8 12 44 55 22 16 4 14 22 24 25 23 9 30 20 15 9 -12 17 2 12 9 6 5 11 -5 11 3 -4 5 -6 -8 2 9 -6 -3 -16 1 -16 3 -5 -22 -22 -22 -13 7 -27 Loss 10

Dec-16 181 8 5 27 10 8 4 23 10 4 19 3 8 8 18 20 7 374 4 6 6 39 2 80 3 44 17 9 11 22 4 20 63 10 35 173 5 22 6 26 5 8 7 7 11 29 29 4 22 1 7 -10 -7 728

PAT Contbn Var % YoY 179 LP LP 138 130 58 56 52 45 42 39 39 27 25 24 23 23 8 18 18 16 16 11 11 10 9 9 9 6 5 5 3 2 2 1 -25 0 -2 -2 -3 -4 -6 -7 -13 -14 -16 -22 -22 -26 -43 -69 PL Loss 13

EBITDA margin

(%) Grw. (%) 26 1 1 4 1 1 1 3 1 1 3 0 1 1 2 3 1 53 1 1 1 6 0 11 0 6 2 1 2 3 1 3 9 1 5 24 1 3 1 4 1 1 1 1 2 4 4 1 3 0 1 -1 -1 103

150 54 25 20 7 4 2 10 4 1 7 1 2 2 4 5 2 34 1 1 1 7 0 10 0 5 2 1 1 1 0 1 2 0 0 -74 0 -1 0 -1 0 -1 -1 -1 -2 -7 -10 -2 -10 -1 -19 -23 5 110

Dec-16

Var (bp)

25 81 12 83 13 44 32 7 11 21 15 13 68 96 33 90 86 26 18 25 25 78 12 19 27 50 93 15 10 28 24 21 27 17 27 23 18 20 62 38 19 19 16 16 36 13 17 21 99 7 95 26 -12 24

546 1809 918 1232 274 -2 1591 234 305 257 81 13 -39 -379 276 99 -412 24 64 6 96 -300 -69 52 -45 326 -70 99 -11 231 -194 -36 -112 -100 -67 -142 -13 -110 100 -100 -150 -165 -133 -88 120 -38 -552 -429 -2083 -52 -101 -836 1837 123

16

India Strategy | New Year, New Cards

Exhibit 25: Nifty Sectoral 3QFY17 PAT chg YoY (%) LP LP LP

PSU Banks, Cap Goods, Metals to report profits in 3QFY17 against losses in 3QFY16

13

12

12

10

9

8

2

1 -2

-2

-4

-12

Telecom

Banks-Pvt

Utilities

Infra

Consumer

Technology

Auto

Cement

NBFC

Media

Oil Ex BPCL

Nifty Ex BPCL

Healthcare

Metals

Cap Goods

Banks-PSU

-67

Key trends to watch out for in 4QFY17 and thereafter Trend # 1: Re-monetization 













Re-monetization has been faster than expected. Value-wise, almost 50% of the withdrawn currency has been replaced as at the end of December 2016. We expect it to pick up pace over the next quarter. Overall, by the end of March 2017, we expect things to normalize in the economy. The government’s digitization push coupled with lazy money coming back into the banking system should lead to currency in circulation being less than earlier. With the banking system flushed with funds and lower inflation, we expect lower interest rates than in the pre-demonetization era. We expect a shift from unorganized credit sources to organized credit. Banks with strong liability franchise are likely to be key beneficiaries of this shift. Even mid-size private sector banks with strong management and under-utilized capacity are likely to benefit. Apart from banks, other financial intermediaries like insurance and asset management companies also stand to benefit. Normalization of liquidity by March 2017 would also help in restoring normalcy for consumer-focused businesses, especially in rural markets.

Trend # 2: Government actions to improve economic activity Exhibit 26: While some measures have been announced post demonetization, we expect more relief measures over next few months Measures announced 1. 4% subsidy in interest rate for housing loan upto INR0.9m, and 3% subsidy for housing loan upto ~INR1.2m. 2. Loan @3% on housing in rural area for construction/renovation of home. 3. Small traders credit guarantee to increase from loan of INR10m to INR20m. 4. 60 days interest on agriculture loan from cooperative bank will be paid by the government. 5. INR6k will be paid to pregnant ladies in rural area to reduce death rate of ladies. 6. Senior citizen to get 8% interest on 10 years fixed deposit of upto ~INR0.75m. 7. 30m Kisan Credit Cards holders to be given RuPay Debit Cards.

New measures expected 1. A 1-2pp cut in corporate tax rate, providing a relief of INR 150-300b to corporates. 2. Increasing income tax slab and 80C exemptions by INR50k each. This will cost government ~INR300b. 3. Some compensation to states could help fasten GST passage. It could cost ~INR100-200b. 4. Since states would be restricted in terms of their ability to invest, higher capex (by 15-20%) is expected from the Central Govt. 5. An increase in MGNREGA by INR50b to INR430b.

Source: GoI, MOSL

January 2017

17

India Strategy | New Year, New Cards

Trend # 3: Cost pressures from commodity inflation After bottoming out in the last 2-3 quarters, global commodities have witnessed sharp recovery – Crude (up over 90% from the bottom), Steel (up over 70%), Aluminum (up over 15%), Copper (up over 35%), Lead (up over 55%), Rubber (up over 100%), etc. MOSL Universe (ex Metals and OMCs) EBITDA margin has expanded ~310bp over the last two years, partly driven by favorable commodity prices and operating leverage. With commodity prices recovering from recent lows and impact of demonetization on demand, Corporate India would have to focus on cost management.







Exhibit 27: Base commodities have started recovering, after sharp fall over last 2 years

260

Bloomberg Base Metals Spot Price Commodity Index (Ex Steel)

Steel (USD/Ton)

700

Brent Crude (USD/Barrel) 125

600

220

100

500

75

300

50

100

200

25 Apr-12 Oct-12 Apr-13 Oct-13 Apr-14 Oct-14 Apr-15 Oct-15 Apr-16 Oct-16

140

Apr-12 Oct-12 Apr-13 Oct-13 Apr-14 Oct-14 Apr-15 Oct-15 Apr-16 Oct-16

400

Apr-12 Oct-12 Apr-13 Oct-13 Apr-14 Oct-14 Apr-15 Oct-15 Apr-16 Oct-16

180

Source: Bloomberg, MOSL

Exhibit 28: EBITDA margin improvement over last 2 years partly driven by lower commodity prices

26.8

26.9

26.7

Dec-16

Mar-17

28.0 June-16

Sep-16

28.0 Mar-16

26.2

26.4 June-15

25.4

26.3 Mar-15

Dec-15

Sep-15

23.8 Dec-14

23.4

24.1 June-14

Sep-14

24.5

23.5 Dec-13

Mar-14

23.0 Sep-13

23.7 June-13

23.5 Dec-12

24.0

23.5 Sep-12

Mar-13

23.6 June-12

MOSL Excl Metals & OMCs (EBITDA Margin, %)

Source: MOSL

Cutting 2HFY17E PAT for consumer-focused businesses following demonetization 





January 2017

Post demonetization, we have cut our 2HFY17E earnings for MOSL Universe by 3%, driven by cuts in Cement (~22.5%), Autos (12%), Consumer (11%), NBFCs (~6%) and Capital Goods (~8%). 2HFY17E PAT for Telecom has seen sharp cut of ~75%, reflecting tectonic shift in competitive intensity. However, the impact of cuts in above sectors has been offset by upgrades in Metals (+8%) and Oil & Gas (+11%).

18

India Strategy | New Year, New Cards

Exhibit 29: Earnings cut in Cement, Autos, Consumer, Financials diluted by upgrades in Metals and Oil & Gas 11.0

8.4

-11.4 -17.4

-20.4

-22.5 Cement

Retail

-4.5

-7.9

Auto Ex JLR Consumer

Capital Goods

Financials Metals

Oil & Gas Source: MOSL

Exhibit 30: Auto Ex JLR

Exhibit 31: Consumer

PAT growth Pre-Demon YoY (%) Current est. PAT growth YoY (%)

PAT growth Pre-Demon YoY (%) Current est. PAT growth YoY (%)

20.4

14.5

14.5

16.5

14.5

13.3 4.3 2.6

1.5

2.3

2.0

-1.3 3QFY17

4QFY17

2HFY17

3QFY17

4QFY17

2HFY17

Source: MOSL

Exhibit 32: Cement

Exhibit 33: NBFCs

PAT growth Pre-Demon YoY (%) Current est. PAT growth YoY (%)

73.5

Source: MOSL PAT growth Pre-Demon YoY (%) Current est. PAT growth YoY (%)

27.7

24.0

61.8

54.0

19.3

16.0 26.0

24.3

3QFY17

4QFY17

25.7 17.8

25.3

2HFY17

3QFY17

4QFY17

2HFY17

Source: MOSL

Exhibit 34: Metals

Source: MOSL

Exhibit 35: Oil & Gas

PAT growth Pre-Demon YoY (%) Current est. PAT growth YoY (%) 489.7

PAT growth Pre-Demon YoY (%) Current est. PAT growth YoY (%) 41.9

539.0

24.8 99.9 LP

16.0

133.5

9.1

12.5

LP

3QFY17

4QFY17

2HFY17 Source: MOSL

January 2017

8.0

3QFY17

4QFY17

2HFY17 Source: MOSL

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India Strategy | New Year, New Cards

Exhibit 36: Intra-sector 3QFY17 earnings divergence (%) Sector growth High growth sectors

+30% growth

Sectors

Banks PSU

-

LP

Metals

LP

Capital Goods

59

Oil & Gas 25 (Ex OMCs)

Cement

24

NBFC

16

0-15% growth

INBK: 778%,PNB: 768%,CBK: 386%,UNBK: 194%,SBIN: 138%,BOB, BOI & OBC: LP HNDL: 130%,NACL: 93%,HZ: 62%,NMDC: 61%,JSTL, TATA & VEDL: LP CRG: 133%, ATD: LP CAIR: 6817%,MRPL: 277%,IOCL: 109%,PLNG: 87%,BPCL: 52%,HPCL: 50%,GAIL: 45%, OINL & IGL: 37% ICEM: 781%,SRCM: 152%,GRASIM: 42% MMFS: 125%,MUTH: 40%,BHAFIN: 31%

Medium/Low growth sectors IPCA: 136%,GNP: Health 83%,GRAN: 43%, 8 Care GLXO: 40%,BIOS: 34% ESC: 137%,EIM: Autos 3 56%,MSIL & BOS: 39%,AL: 38% Technology

15-30% growth

0

-Ve earnings growth

Earnings momentum

JSP: Loss, SAIL: Loss SIEM: 18%

VOLT: -3%,TMX: BHE: 9%,LT: 6%,ABB: 9%,CROMPTON: -23%,HAVL: 5%,KKC: 3% 41%,BHEL: Loss RIL: 11%, ONGC: 9%

TRCL: 20% LICHF: 27%,IHFL: 21%,GRHF: 19% SUNP: 24%,CIPLA: 18%,LPC: 18%, ARBP: 16%

ACEM: 11%, UTCEM: 0% DEWH: 14%,HDFC: 9%,BAF: 8%,REPCO: 7%,SHTF: 1%

GUJS: -6%

ACC: -43%

SANL: 15%, CDH: -6%,DRRD: -22%,TRP: DIVI: 12%,ALKEM: 11% 35%,ALPM: -58%,FORH: Loss

TVSL: 21%

MM: 9%

TELX: 24%, HEXW: 20%, CYL: 19%

ZENT: 15%,MPHL: 12%,HCLT: 3%, TCS: 2%,INFO: 1%

EXID: -4%,BJAUT: -6%, AMRJ: -12%,HMCL: -13%, TTMT: -16%,BHFC: -19% WPRO: -2%, NITEC: -4%,TECHM: -7%, PSYS: -12%,KPIT: -16%, LTI: -26%,MTCL: -30%

PAT de-growth sectors

Consumer

-1

Logistics

-3

Media

-5

Utilities

-6

Retail

-10

Banks Private

-5

Telecom

-67

January 2017

UNSP: 2146%, JYL: 42%

CESC: 29%

GCPL: -1%,ITC: -3%, PIDI: -3%,APNT: -4%, DABUR & NEST: -5%, HMN: -7%,MRCO: -8%,PG: 14%,BRIT: -20%,RDCK: -28%

AGLL: 10%

CCRI: -7%, GDPL: -10%

SUNTV: 13%,Z: 10%

DBCL: -3%,PVRL & JAGP: 16%,HTML: -31%, DITV: -36%,SITINET: -57%, HATH: Loss

PWGR: 23%, NTPC: 5%

KMB: 27%,YES: 25%, IIB: 23%,DCBB: 21%, HDFCB: 16% BHIN: 58%

PAG: 13%,UBBL: 5%,CLGT: 4%, HUVR & SKB: 2%, PARAG: 0%

COAL: -22%, JSW: -54% TTAN: 1%

SHOP: -52%, JUBI: -56%

FB: 15%, EQUITAS: 0%

IDFCBK: -21%, ICICIBC: -26%,AXSB: -69% BHARTI: -14%, IDEA: PL%

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India Strategy | New Year, New Cards

Key Sectoral Highlights - 3QFY17 SECTOR

Key highlights

Auto

 Automobile volumes were subdued in the





Capital Goods







Cement

January 2017

3QFY17E YoY (%) Sales EBIDTA PAT Margin Key stock to watch Chg YoY (pp) -1.6 -1.6 2.6 0.0  TVS Motor (+ve, despite demonetization impact, PAT is expected to grow 21% YoY).

quarter due to the impact of demonetization. In our view, 2Ws and 3Ws are likely to be the worst hit as the cash component in transactions is higher in this space along with higher rural exposure. PVs are expected to be relatively well placed, primarily due to waiting periods in many models of OEMs and lower cash component. In CVs, LCV volumes are expected to decline due to higher cash component, while MHCV growth is likely to moderate. EBITDA margins for our Auto OEM (ex-JLR) coverage universe are likely to contract 140bp QoQ (stable YoY), given pressure from negative operating leverage due to decline in volumes. Auto aggregate PAT is expected to grow 2% (incl. JLR). Ex JLR, auto sector PAT is estimated to grow ~9% YoY, led by MSIL and AL. Bajaj Auto and HMCL, however, are expected to drag overall PAT. We expect order intake by most companies 6.1 to be flattish in 3QFY17, based on announced orders during the quarter. Industrial capex continues to remain sluggish, while roads, rail and power T&D remain the only bright spots on the infra side. Execution to remain subdued on account of weak opening backlog and continued challenges in execution on account of demonetization scheme, delay in procuring clearances, funding and land acquisition issues. Margins to improve YoY on account of improvement in operational performance and reduction in loss from BHEL.

 Cement demand witnessed healthy recovery -1.0

in October-16, with all-India production increasing ~7% YoY on a relatively high base. However, demand in November was severely impacted due to demonetization. The impact was particularly pronounced in the initial 15 days of implementation of demonetization due to acute shortage of cash. November all-India production declined 15% MoM, but increased ~1% YoY due to low base on account of festival season in November-15. We expect volumes in December to decline in double-digit YoY, partly led by high base and due to the impact of demonetization.

 HMCL ( -ve, demonetization impact to

41.9

59.3

1.8

hit HMCL’s volumes and financial performance; EBTDA margins expected to contract 100bp, while PAT is likely to decline 13% YoY).  MSIL (+ve, PAT is expected to rise 39% YoY, while EBITDA margins are expected to rise 80bp YoY due to benefits of operating leverage and favorable currency movement).  Execution from LT is likely to remain subdued in 3QFY17; profit is likely to grow 6.3% YoY. Operating margins are expected to remain stable.

 Bharat Electronics is likely to report

strong revenue growth of 22% YoY, led by pick-up in revenue booking of orders in hand.

 Havells to report marginal revenue

3.3

24.3

0.7

decline of 1% YoY on account of demonetization. We expect net profit to decline 41% YoY on account of increase in other expenses led by vendor support provided by the company.  Shree Cement would report volume growth, as against ex-south players that are likely to report volume decline due to ramp-up of capacity in eastern operations.

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India Strategy | New Year, New Cards

SECTOR

3QFY17E YoY (%) Sales EBIDTA PAT Margin Key highlights Key stock to watch Chg YoY (pp)  Prices under pressure: Prices increased in  Ramco Cement would continue October on expectation of better 2HFY17 reporting strong profitability due to volume demand, but declined in December strong volume growth and sustenance of due to demonetization. In our view, ASPs prices in south markets. should be impacted for north and east markets.

Consumer

 We expect our consumer universe’s revenue 0.1

-4.5

-1.2

-1.1

Financials

7.7

13.6

76.8

4.3

10.1 earnings pressure at corporate lenders like ICICIBC and AXSB (led by asset quality strain) and sustained growth trajectory at lenders like YES and IIB. We expect most private banks to report a drop in loan growth post demonetization, but deposit intake will be strong. CASA ratio will receive a boost during the quarter, leading to lower cost of funds. Lower C-D ratio and blended yields may have marginal impact on NIMs.  Loan growth trajectory will continue 4.2 remaining muted, while deposit influx will be strong, leading to downward pressure on NIMs. Provisions are expected to remain at elevated levels during the quarter, and operating expenses will increase steeply. Although core revenue will remain under pressure, strong trading gains owing to falling bond yields will provide cushion to earnings.  Housing finance companies with low share 13.7 of LAP and corporate loans are expected to perform relatively well than others. Those with high share of LAP/corporate loans will see significant slowdown in disbursements as well as problems in collections. Companies dealing in vehicle finance are also likely to witness significant slowdown and poor collection levels due to high share

0.9

-11.7

-7.8

 Prefer ICICIBC and YES among corporate

26.6

LP

14.5

 Prefer SBIN, PNB and BOB among PSU

13.9

16.0

0.1

 We expect LICHF to post strong results

Private Banks

PSU Banks

NBFC

January 2017

and PAT to decline 0.5% and 2.8%, respectively, in 3QFY17. Demonetization is likely to affect all companies, particularly those selling products with discretionary demand and which have higher proportion of wholesale trade vis-à-vis direct distribution. The anticipated rural demand recovery after a good monsoon was dented by the effect of demonetization-led liquidity crunch. MOSL Consumer universe EBITDA is likely to decline 6.1%, with 130bp margin decline. PFAD and Palm Oil prices saw steep YoY inflation of 70% and 37%, respectively. Ti02 and Mentha prices have not increased sharply, up just 4% YoY and 3% YoY on average for 3QFY17. Mentha prices over past 20 days are up 10% YoY, though. LLP and HDPE prices still remain benign, with low-single-digit growth YoY.

 Mixed picture expected with sustained

 We expect ITC’s sales to decline 7% YoY

(led by 10% fall in cigarette volumes) and PAT to decline 6.5%. HUVR’s sales growth is estimated at 1.5% (volume decline of 1%), with 100bp EBITDA margin contraction. Barring PAGE, for which we expect 13% PAT growth YoY, none of the other companies is expected to report any material growth in PAT. 11 out of 18 companies under coverage actually are expected to report YoY decline in PAT.

lenders; HDFCB and IIB top pick among retail lenders.

banks.

among HFCs. Other key stocks to watch out for are BHAFIN, MUTH and BAF.

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India Strategy | New Year, New Cards

SECTOR

Healthcare

Key highlights







of cash dealings. Gold financiers and MFIs are likely to be the worst hit, and AUM is unlikely to register sequential growth. With respect to the US market, Glenmark is 11.7 expected to exhibit strong growth in the US, led by Zetia FTF and series of other generic launches. Sun and Lupin should continue to see sequential decline in the US business on the back of competition in key products. Aurobindo should report stable US sales on the back of key launches, including Crestor. After strong 1H numbers, the domestic business is expected to get impacted in 3Q on the back of seasonality and demonetization. EXIM trade continues to be sluggish for 3.6 3QFY17. We expect overall container rail volumes for 3QFY17 to decline by 2% YoY. Margins to remain flat QoQ, with no major improvement in trade.

Logistics



Media

 We expect our universe ad revenue growth

Metals

January 2017

3QFY17E YoY (%) Sales EBIDTA PAT Margin Key stock to watch Chg YoY (pp)

to grow at a meager ~1% YoY, lower than 713% in the preceding four quarters. Both Broadcasters and Print companies are expected to face the demonetization brunt. The ad pain is expected to be more debilitating for Print media, given their higher reliance on local/retail advertisers – most impacted group by the cash squeeze. Zee’s ad growth is expected to moderate to ~4% YoY post six quarters of strong ad revenues. Apart from FMCG, Auto, Telecom, other sectors such as Auto, Consumer Durables, Traditional retail too have cut back on ad spends. Regional/niche channels and publishers are expected to take a bigger hit. Our industry interactions suggest that a full recovery could be expected by 1QFY18.  DTH companies are expected take a hit in recharges and fresh seeding as demonetization impacts both. One can expect cable companies to step up their seeding rates from 1H levels as Delhi HC has quashed all stay orders pertaining to DAS III implementation. Phase III monetization remains a key concern for all stakeholders. Monetization expected to improve in 4QFY17.

 Across-the-board increase in commodity

prices. Zinc/lead average LME up 11/15%.  EBITDA for our coverage universe is expected to increase 18% QoQ (2.7x YoY) on higher realization and volume increase.  NMDC, Nalco and Vedanta to report strong performance.

3.2

9.6

8.4

-0.5

 GNP (+ve; gFTF launch should help drive

growth and margins).

 ARBP (+ve; should report double-digit

growth in the US, despite key launches getting deferred and pricing pressure).

 Sun & LPC (-ve; should report sequential

decline in US sales on the back of competition in key products).

1.5

-3.4

-0.3

 Concor and GDL would report moderate

-0.2

-5.1

-1.1

 Zee Ent: 4%/12% ad/domestic

volume growth on YoY basis due to higher transhipment volumes.

subscription CAGR.

 20% EPS CAGR (adj. for pref dividend)

over FY16-19.

22.3

167.6

LP

10.4

 NMDC EBITDA to increase 79% QoQ on

higher volumes and realization.

 NALCO EBITDA to almost double QoQ to

INR3.5b on higher aluminum and alumina prices.  Vedanta to report 44% QoQ EBITDA increase, led by strong volume and price growth in zinc and aluminum.

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India Strategy | New Year, New Cards

SECTOR

Key highlights

Oil & Gas

 Benchmark Singapore GRMs were up from

Excl. OMCs

 Brent averaged USD49.1/bbl v/s

USD5.1/bbl in 2QFY17 to USD6.7/bbl in the quarter, but lower than USD7.8/bbl in 3QFY16. Inventory gains would also help earnings in the quarter.  Expect ~50% YoY jump in PAT of BPCL and HPCL. Led by higher inventory gains, IOCL is expected to report 109% YoY PAT growth.

3QFY17E YoY (%) Sales EBIDTA PAT Margin Key stock to watch Chg YoY (pp) 8.0 39.8 41.9 3.4  BPCL, HPCL and IOCL (+ve).

15.3 USD45.7/bbl in 2QFY17 and USD43.4/bbl in 3QFY16. Expect better realization YoY. However, operating cost may be higher sequentially.  Expect RIL's PAT to be up +11% YoY, led by higher petchem volume and largely flat refining profit benefited by exchange rate.  IGL witnessed slowdown in conversion of vehicles due to clampdown of authorities on spurious kits. We expect flat sequential performance for GAIL and GSPL.  For our Retail coverage universe, we expect 8.1 tepid 8.1% revenue growth and 9.5% PAT decline in 3QFY17. EBITDA is likely to decline 1% YoY. Retail companies under our coverage are moderating store expansion. Titan added four Tanishq stores (adding 12ksf), Jubilant has likely added 30 stores, while Shoppers Stop is likely to have actually reduced its net store count by 1 in 3QFY17. Expansion plans are likely to be a function of pickup in consumer sentiment, which is getting delayed.

23.1

24.5

1.4

 ONGC/OINL (+ve; Oil producer countries'

-1.0

-9.5

-0.7

 Titan’s jewelry retail revenue reportedly

Technology  Seasonality and subdued spend in the BFSI 8.6 vertical have kept expectations muted for revenue growth in 3Q. Revenue growth has been tepid despite strength in deal wins, and that is expected to continue playing out.

4.2

0.3

-1.0

-3.4

-66.5

-1.2

Retail

 To add to this, currencies have depreciated

against the USD, which means yet another quarter of significant cross-currency impact, and lower USD revenue growth.

 Pricing pressure in traditional

Telecom

January 2017

services/renewals and necessary investments for transitioning to Digital have been weighing on margins. Although the INR has depreciated against the USD by 2% QoQ, the impact of depreciation of other currencies limits any tailwind.  Expect 3QFY17 to see the strong effect of -0.2 disruption in the telecom market led by RJio's free usage. We expect revenue degrowth of 6-7% for Bharti/Idea with ~300400bp margin decline. Despite being seasonally strong quarter, 3Q is likely to see no respite. Idea is expected to report loss at net level for the first time in the history of

efforts to cap production could revive the oil price realization). IGL (+ve; Expect double-digit volume growth to continue). PLNG (+ve; Capacity expansion + takeor-pay contracts to boost earnings).

grew at 15% YoY due to healthy festive season growth. However, its watches segment sales through the trade channel (50% of segment sales) continue to be badly affected. We expect Jubilant Foodworks’ sales to decline by 8%, with same-store sales declining by 14% due to adverse effect of demonetization on discretionary consumption as well as likely weak festive season sales. Shoppers Stop’s LTL growth is likely to be flat YoY and sales growth to be only 5% YoY.  TECHM is expected to lead QoQ growth at 3.1% CC. It would include residual one-month contribution from the acquisition of Target, but organically too growth at 2.5% CC would be better than peers.  INFO: Revenue decline expected as the RBS deal cancellation takes effect. Guidance for FY17 (implying growth for 4Q) and outlook for the year ahead would be keenly watched.  WPRO (Outlook for 4QFY17; post a disappointing guidance of -1 to +1% organic revenue growth for 3Q, given bottoming out of the Energy vertical, and restructuring of the India and Middle East business).

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India Strategy | New Year, New Cards

SECTOR

Key highlights





Utilities





January 2017

3QFY17E YoY (%) Sales EBIDTA PAT Margin Key stock to watch Chg YoY (pp)

listing. Bharti on consolidated basis is expected to report 2.4% revenue de-growth and 210bp decline in EBITDA margin. Voice business is expected to de-grow ~45%, led by 6-7% price decline and 2% traffic growth. RJio's free voice usage has changed incoming/outgoing proportion. Since incoming generates meager INR 0.14/min, the impact on price is significant. Data revenues are expected to fall about 1520% for Bharti/Idea as subscribers shift toward RJio's free usage. This is led by the impact in both data traffic as well as pricing. PAT growth will be led by PWGR on strong 3.8 capitalization momentum over last few quarters. NTPC's PAT growth would be muted on lower PLFs and other income. JSW Energy would see impact of under-utilized capacities. Coal India EBITDA (ex-OBR) is estimated to decline by 19% YoY on wage hike and flat realization.

3.1

-6.0

-0.2

 Coal India e-auction and ASQ realization.

25

India Strategy | New Year, New Cards

EARNINGS FY17-FY19

Demonetization mars 2HFY17, Sensex EPS to grow ~3%

Low base drive growth expectations for FY18, risk to growth from unknowns 





FY17 to be third consecutive year of muted Sensex EPS growth: After YoY flat Sensex EPS in 1HFY17, there were expectations of a recovery from 2HFY17, driven by normal monsoon, the 7th Pay Commission, and bottoming out of Global Cyclicals among others. However, demonetization is likely to defer the recovery by at least six months. We expect muted EPS growth (~3% to ~INR1,360) in FY17 – the third consecutive year of no growth. However, the broader MOSL Universe is likely to witness ~20% earnings growth in FY17, driven by sharp recovery in Cyclicals on low base of 2HFY16. FY18 to see smart recovery, albeit on low base (4% CAGR over FY12-17E): We expect Sensex EPS to grow 22.6% to INR1,668 in FY18 and at a CAGR of ~21% over FY17-19. These growth estimates come on a low base of the last five years, when EPS grew at just 4% CAGR (FY12-17E). Cyclicals are likely to outperform the Defensives over FY17-19, with Financials, Cement, Metals, Capital Goods and Autos delivering 35%, 29%, 31%, 24% and 31% FY17-19E PAT CAGR, respectively. Cyclicals would contribute 2/3rd of Sensex EPS growth and ~73% of MOSL Universe EPS growth in FY18. Risk to earnings – fear the unknown: Given the unprecedented nature of demonetization and multiple moving parts, the exercise has been rendered a little more challenging than usual. Normalization in sectors impacted by demonetization (contributing ~45% of MOSL Universe earnings) would depend on the pace of remonetization. However, there are several unknowns that could materially influence earnings in FY18/19 – GST (timing and magnitude of change), commodity prices (runaway inflation in base commodity prices), further government measures (on direct tax, black money, investments, etc), global factors (Trumponomics, fed rate, etc).

Exhibit 37: Recovery in Cyclicals to drive robust 21% CAGR (FY17-19E) in Sensex EPS EBITDA PAT PAT Gr. / PAT delta margin (INR B) CAGR (%) Share (%) change (bp) (FY17-19) FY17-19 FY17E FY17E FY18E FY19E (FY17-19) FY17-19 17 168 1,912 31 37 28 32 72 15 -391 888 44 39 32 35 37 11 -478 168 LP 107 36 68 15 16 -592 406 -1 27 32 30 14 21 58 313 10 17 27 22 8 24 447 33 1 43 26 34 1 23 197 363 7 33 30 31 13 13 161 222 66 41 22 31 8 20 291 111 42 32 26 29 4 24 188 71 15 29 25 27 2 20 221 225 15 33 18 25 6 22 170 136 26 24 24 24 4 22 178 117 34 23 25 24 3 18 193 11 -9 29 18 24 0 21 86 9 1 22 22 22 0 13 70 1,873 4 12 12 12 25 16 93 259 6 17 17 17 5 20 436 287 -11 17 15 16 5 11 -48 636 6 12 9 10 7 8 -85 1,006 32 4 9 6 7 12 28 633 16 15 10 13 8 7 36 59 -42 -59 102 -9 0 15.4 133.7 3,922 16 25 21 23 100 14.4 88.9 4,295 20 21 20 21 NA 14.5 90.4 1,250 5 23 20 21 NA 14.6 111.3 1,532 9 22 20 21 NA

Sector

Sales Gr. / EBIDTA EBIDTA CAGR (%) Margin (%) CAGR (%)

(No of Companies) High PAT CAGR (>25%) Financials (35) PSU Banks (10) Private Banks (12) NBFC (13) Media (11) Auto (14) Metals (9) Cement (13) Others (25) Healthcare (17) Medium PAT CAGR (20-25%) Capital Goods (16) Logistics (3) Retail (3) Low PAT CAGR (up to 20%) Consumer (19) Utilities (5) Technology (15) Oil & Gas (12) Excl. OMCs (9) Telecom (3) MOSL Excl. OMCs (197) MOSL (200) Sensex (30) Nifty (50)

(FY17-19) 14 18 15 20 20 15 15 8 11 18 15 12 12 11 15 11 14 12 12 11 11 7 13 12 13 12

January 17

FY17E 29.7 84.8 80.1 89.4 88.8 28.3 13.9 18.1 18.6 19.3 23.8 9.7 9.6 13.9 7.9 25.4 22.4 31.1 23 14.8 22.9 35.4 26.4 23.4 26.2 24.9

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India Strategy | New Year, New Cards

Demonetization overshadows other positives: FY17 to be another year of flat Sensex EPS; several sectors to report multi-year low earnings growth 







The narrative for FY17 was shaping up well (normal monsoon, 7th Pay Commission awards, softening interest rates) till 2QFY17, and confidence of double-digit Sensex earnings growth was building up. However, this was pre-demonetization. The aforementioned positive narrative has since been overshadowed by demonetization and its consequences for the economy as well as various sectors. This is reflected in our earnings estimates for FY17. Post demonetization, we now expect another flat year of Sensex EPS - just 2% YoY growth v/s the 14% YoY growth prediction we began with. Several sectors would report multi-year low earnings growth in FY17 - Autos, Consumer, Private Banks, NBFCs, Telecom, Technology, and Utilities. Technology, Utilities and Telecom are impacted by sector-specific issues while deceleration in earnings growth for Autos, Consumer, Private Banks and NBFCs can be largely attributed to demonetization.

FY17-19E estimates: Sensex EPS CAGR at 21% 



We expect Sensex EPS CAGR of 21% over FY17-19, significantly higher than the 4% CAGR over FY12-17. Cyclicals would contribute 2/3rd of FY18E Sensex EPS growth and ~73% of MOSL Universe EPS growth. We estimate Sensex EPS at INR1,360 (3% growth) for FY17, INR1,668 for FY18 (23% growth), and ~INR2,005 for FY19 (20% growth).

Exhibit 38: Sensex EPS – expect rebound in FY17-19, with 21% CAGR versus 6% CAGR witnessed during FY08-17 FY08-17: 6% CAGR

FY17-19E: 21% CAGR

20% 23% 2,005

1,668

FY18E

FY17E

FY16

FY15

1,337 1,356 1,324 1,360

FY14

1,181

FY13

FY12

1,024 1,120

FY11

FY10

FY04

834

FY09

FY03

820

FY08

FY02

720

833

FY07

272

540

FY06

236

446

FY05

216

361

FY01

3%

FY19E

FY01-08: 21% CAGR

Exhibit 39: Nifty EPS – expect rebound in FY17-19, with 21% CAGR versus 4% CAGR witnessed during FY08-17 FY08-17: 4% CAGR

FY17-19E: 21% CAGR

20% 22%

393

417

FY16

FY17E

508

FY18E

415

FY15

FY10

406

FY14

FY09

369

FY13

247

351

FY12

251

315

FY11

281

FY08

FY03

236

FY07

FY02

January 17

131

FY06

92

184

FY05

78

169

FY04

73 FY01

6%

612

FY19E

FY01-08: 21% CAGR

27

India Strategy | New Year, New Cards

FY17/18E Sensex EPS cut 1%/2%; FY18 estimate builds in sharp recovery 





We have cut our FY17 and FY18 Sensex EPS estimates by 1% and 2%, respectively. This follows our 2% cut in Sensex EPS estimates in December 2016, post demonetization. Essentially, our Sensex EPS growth for FY17 now stands revised downwards to 3%. However, the lower base of FY17 (especially in 2HFY17 due to demonetization) should aid sharp rebound in FY18. In FY18, we build 23% Sensex EPS growth. However, we note that visibility of FY18 growth is hazy, given the multiple moving parts around [1] GST implementation, and [2] pace of re-monetization and consequent restoration of normalcy in trade.

Exhibit 40: Top Sensex companies EPS Upgrade/Downgrade since 2QFY17 review (%) Company Tata Steel SBI Adani Ports M&M Reliance Ind. ONGC Tata Motors ITC Sun Pharma Coal India ICICI Bank L&T Hero Moto Dr Reddy’s Bajaj Auto Bharti

FY17 33.3 19.8 3 -2.6 -2.8 -2.9 -2.9 -3.3 -3.7 -4.6 -6.1 -7 -7.2 -7.6 -8.1 -11.2

Company ONGC Tata Steel SBI Reliance Ind. Axis Bank ICICI Bank Wipro M&M Sun Pharma ITC L&T Bajaj Auto Hero Moto Coal India Tata Motors Bharti

FY18 10.6 6.3 4.9 2.5 2.1 1.9 -2.1 -2.4 -3.7 -5.4 -7.6 -7.9 -7.9 -12.8 -15.3 -21.1

Estimate Nifty PAT CAGR at 21%, sales CAGR at 12% over FY17-19   

January 17

50% of the Nifty universe is expected to post 20%+ PAT CAGR over FY17-19. Only Idea is expected to report negative PAT CAGR over FY17-19. EBITDA margin for Nifty is expected to expand 117bp to 24.9% in FY17 and further increase at 25.3% in FY18. PAT margin is likely to expand 25bp in FY17 to 11.4% and 80bp in FY18 to 12.2%.

28

India Strategy | New Year, New Cards

Exhibit 41: Nifty performance: Expect FY17-19 PAT CAGR at 21% Company High PAT Growth (20%+) Tata Steel Axis Bank State Bank Tata Motors BHEL Bank of Baroda Dr Reddy’ s Labs ACC Eicher Motors Cipla Ultratech Cement Yes Bank Kotak Mahindra Bank GAIL IndusInd Bank Sun Pharma ONGC Zee Entertainment Mahindra & Mahindra Grasim Industries Maruti Suzuki HDFC Bank NTPC Bosch Lupin Medium PAT Growth (10-20%) Larsen & Toubro Tata Power Bajaj Auto Power Grid Corp. Aurobindo Pharma Hindalco ITC Asian Paints Hind. Unilever Ambuja Cements Coal India HDFC Tech Mahindra Wipro ICICI Bank Infosys Low PAT Growth (<10%) HCL Technologies TCS Hero MotoCorp Bharti Infratel Adani Ports Reliance Inds. Bharti Airtel BPCL Idea Cellular Nifty (PAT free float)

January 17

Sales (INR b) PAT YoY (%) PAT Contbn to Sales EBIDTA Margin (%) EBITDA PAT (INR b) FY17 FY18 FY19 CAGR % FY17 FY18 FY19 CAGR % FY17 FY18 FY19 FY17 FY18 FY19 CAGR % Delta % 11,818 13,585 15,398 14 27 29 30 20 1,184 1,667 2,144 12 41 29 35 72 1,125 1,288 1,292 7 11 12 13 15 7 36 40 0 383 10 130 2 181 212 257 19 93 89 86 15 31 55 112 -62 79 102 90 6 785 905 1,026 14 78 73 73 10 76 181 240 -38 137 33 77 12 2,866 3,289 3,815 15 12 14 16 29 99 155 239 -21 57 55 56 11 314 334 381 10 4 5 7 49 10 13 21 LP 39 54 47 1 135 154 187 18 80 77 75 14 28 43 61 LP 53 39 46 2 147 173 201 17 18 23 24 36 14 24 29 -38 71 20 43 1 109 119 133 10 11 13 13 22 6 9 12 2 50 34 42 0 70 90 106 23 31 33 33 27 17 24 30 23 43 26 34 1 155 182 210 16 18 20 21 26 15 21 26 -4 41 27 34 1 233 264 296 13 20 23 24 23 26 37 46 19 43 25 33 2 58 72 92 26 95 96 95 26 31 40 50 24 29 25 27 1 81 94 117 21 71 75 80 28 49 59 77 41 22 29 25 2 528 545 730 18 12 14 12 18 36 46 57 58 27 23 25 2 59 73 89 23 87 88 89 23 28 35 44 24 25 24 25 1 309 334 373 10 32 34 36 17 67 91 103 42 37 13 24 3 1,293 1,550 1,622 12 39 41 44 18 190 243 292 9 28 20 24 8 66 75 86 14 28 31 32 23 13 17 20 31 26 20 23 1 832 934 1,044 12 14 14 14 14 39 50 59 23 27 18 22 1 372 403 447 10 20 22 23 18 36 41 53 58 17 28 22 1 675 813 938 18 16 16 17 21 78 94 115 65 21 21 21 3 321 385 472 21 77 78 79 23 146 177 215 19 21 22 21 5 823 964 1,107 16 28 31 34 29 98 118 142 -4 21 21 21 3 107 128 145 16 17 19 20 23 15 20 23 2 30 12 21 1 175 206 232 15 26 27 28 19 28 35 40 22 25 16 20 1 6,382 7,142 7,824 11 26 25 26 12 941 1,069 1,224 2 14 15 14 21 1,092 1,250 1,382 12 10 11 12 19 50 58 71 20 16 22 19 2 93 97 102 5 27 24 26 2 14 16 19 86 15 22 18 0 221 260 299 16 20 21 20 16 38 46 54 1 19 17 18 1 264 312 351 15 89 89 90 16 74 88 101 24 18 15 16 2 155 179 203 14 24 25 25 16 25 29 33 24 19 14 16 1 1,010 1,089 1,106 5 13 13 13 5 38 46 51 55 20 12 15 1 387 431 489 12 37 38 38 15 101 116 132 9 14 15 14 2 153 172 199 14 19 19 19 13 19 22 25 8 12 17 14 0 322 352 394 11 18 19 20 14 43 49 56 4 14 15 14 1 91 98 110 10 17 18 18 12 11 14 15 33 22 7 14 0 753 823 886 8 14 16 17 21 100 114 129 -30 15 13 14 2 97 109 124 13 95 96 96 14 75 85 97 6 13 15 14 2 291 329 361 11 15 16 16 13 28 32 35 -12 16 10 13 1 556 619 672 10 20 21 20 11 84 96 107 -5 13 12 13 2 208 243 282 16 125 95 94 1 100 105 126 3 5 21 12 2 688 781 866 12 27 27 27 12 141 155 171 4 10 11 10 2 7,734 8,757 9,251 9 21 20 20 7 844 876 940 4 4 7 6 7 466 539 603 14 22 21 20 10 80 90 96 42 12 7 9 1 1,184 1,341 1,478 12 27 27 26 9 258 285 306 7 11 7 9 4 288 329 360 12 16 16 15 6 34 38 39 7 13 1 7 0 133 146 159 9 44 44 44 10 32 33 36 42 4 10 7 0 81 92 102 13 66 66 65 12 35 35 39 21 0 12 6 0 2,401 2,759 2,768 7 18 17 17 4 297 321 324 9 8 1 4 2 975 1,010 1,113 7 37 36 37 8 50 38 54 4 -24 42 4 0 1,851 2,182 2,275 11 8 7 7 4 80 82 86 1 2 6 4 0 356 359 392 5 29 27 28 4 -23 -46 -41 PL Loss Loss Loss -1 25,934 29,485 32,473 12 25 25 26 15 1,532 1,867 2,248 7 22 20 21 100

29

NIFTY FY17E SBI Tata Motors ONGC HDFC Bank Tata Steel TCS Axis Bank Sun Pharma Reliance Ind. NTPC Maruti BOB Coal India ITC Infosys Power Grid Wipro Ultratech Kotak Mah. Bk M&M Dr Reddy’s HCL Tech. GAIL HDFC Yes Bank L&T Hindalco Bajaj Auto IndusInd Bk Eicher Mot. Lupin Cipla Grasim HUL Aurobindo ICICI Bank Bosch Hero Moto Tech Mah. BHEL Zee Ent. ACC Ambuja Cem Asian Paints Tata Power BPCL Bharti Infratel Adani Ports Bharti Airtel Idea Cellular NIFTY FY18E

January 17 3,611

2969 105 56 53 30 29 27 24 24 24 20 17 15 15 14 14 13 11 11 11 11 10 10 10 10 9 8 7 7 7 7 7 6 6 6 5 5 5 5 5 4 4 3 2 2 2 1 1 0 -12 -24

NIFTY FY16 BOB Maruti HCL Tech. HDFC Bank Reliance Ind. Sun Pharma BHEL TCS ONGC Power Grid Kotak Mah. Bk Hindalco GAIL Grasim Bharti Infratel L&T ITC M&M Tata Power Infosys Yes Bank Adani Ports IndusInd Bk Lupin Aurobindo Ultratech HDFC Zee Ent. Eicher Mot. ICICI Bank Ambuja Cem Hero Moto Bharti Airtel HUL Asian Paints BPCL Bajaj Auto Bosch ACC Tata Steel Cipla Tech Mah. NTPC Wipro Dr Reddy’s Tata Motors Coal India SBI Axis Bank Idea Cellular NIFTY FY17E 82 31 24 24 23 20 19 16 16 14 14 14 13 13 9 8 3127.292931 8 7 6 6 6 6 5 5 5 4 4 3 3 3 3 2 2 1 1 0 0 0 0 0 -1 -4 -4 -4 -8 -27 -43 -46 -51 -53 2,969

2787

India Strategy | New Year, New Cards

Exhibit 42: Nifty stock absolute FY17E PAT change (INR b)

Exhibit 43: Nifty stock absolute FY18E PAT change (INR b)

30

India Strategy | New Year, New Cards

MARKETS & FLOWS

Disappointing finish to an otherwise strong 2016! Flat returns in a year marked by major disruptive events 













 

The Nifty ended just 3% higher (in INR terms; flat in USD terms) in a year which until November looked set for an encouraging finish. Key events like Brexit, US elections, India’s demonetization, US Fed hike and geopolitical tensions with Pakistan took the center stage in the second half of CY16, fueling significant volatility in the markets. However, the Indian government’s decision to demonetize high-value currency notes triumphed over other narratives, wiping out bulk of the CY16 gains (Nifty was up 8.5% until 8-November). In CY16, Brazil (+39%), Russia (+24%) and the UK (+14%) were the best performers among the key global markets. Over the last 12 months, MSCI EM delivered 9% return, as against MSCI India’s flat return. Over the last ten years, MSCI India outperformed MSCI EM by 81%. In the sectoral space, Metals (+37%) and Oil (+27%) – the underperformers of CY15 – were the top performers in CY16, led by the bottoming out of commodity prices and inexpensive valuations. Cement (+17%), Auto (+9%), PSU Banks (+9%), Media (+6%), Private Banks (+5%), NBFC (+4%), Consumer (+3%) and Utilities (+2%) too ended the year on a positive note. On the other hand, Telecom (-25%), Healthcare (-13%), Technology (-8%), Real Estate (-6%) and Capital Goods (-3%) were the losers for CY16. Midcaps outperformed large caps, delivering +7% returns. Market breadth was positive in CY16, with 30 of the Nifty-50 stocks ending higher. Notably, all Technology, Healthcare and Telecom stocks on the Nifty delivered negative returns. Among the Nifty components, Hindalco (+83%), Yes Bank (+59%), Tata Steel (+51%), BPCL (+42%) and Power Grid (+30%) were the top performers of CY16. Idea (-49%), BHEL (-28%), Aurobindo (-24%), Sun Pharma (-23%) and Bharti Infratel (-20%) were the worst performers. India witnessed FII equity inflows of USD2.9b in CY16 (USD6.8b until 8-November), while DII equity inflows stood at USD5.3b. Domestic MFs recorded inflows of USD7.1b, while DIIs (ex-MFs) saw outflows of USD1.9b in CY16. FII debt outflows were more pronounced at USD6.5b in CY16 (USD5.9b post 8November). Despite these outflows, the INR remained relatively stable with just 2.5% annual depreciation. Correction in 4QCY16 has brought valuations marginally below the 10-year averages. Nifty trades at a P/E of 16.6x, near its long-period average of 16.7x. Mid-cap outperformance continued in CY16, delivering return of +7% v/s +3% by Nifty. However, valuation premium of mid-caps over large-caps has come off to just 1%.

Exhibit 44: After delivering negative return of 4% in CY15, Nifty staged a comeback to end 3% higher in CY16 2016

3

2015

-4

2013

7

2011

-25

2012

28

2014

31

2001

-16

2010

18

2007

55

2000

-15

2004

11

2006

40

2009

76

1998

-18

2002

3

2005

36

2003

72

1996

-1

1997

20

1993

37

1999

67

-52

1995

-23

1994

13

1992

36

1991

69

Year % -30 to -60

Year

%

Year

%

Year

%

Year

%

2008

-30 to 0

0 to 30

30 to 60

>60

Percentage return range

January 17

31

India Strategy | New Year, New Cards

Exhibit 45: Over CY06-16, Indian markets recorded a CAGR of Exhibit 46: In CY16, losses in the last quarter offset gains of 7.5% in local currency and 3.0% in USD preceding two quarters 40 42

55 -52 -61

74

18

76

-25

24

-37

23

84

28

7 -5

31 29

-4

3

-8

0

QoQ Return (%) 15

CAGR in INR: 7.5% CAGR in USD: 3.0%

Trend in Nifty

14 10

8

Annual Return in USD (%)

-4

-6

4

3 0

-1

-2

-3

-5

-5

Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 June-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16

8,186

7,946

8,283

6,304

5,905

4,624

6,135

5,201

2,959

6,139

3,966

0

Annual Return in INR (%)

5 4

3

4

CY06 CY07 CY08 CY09 CY10 CY11 CY12 CY13 CY14 CY15 CY16

7

6

Equities: Global market performance 

In CY16, Brazil (+39%), Russia (+24%) and the UK (+14%) were the top performers among the key global markets. Over the last 12 months, MSCI EM delivered +9% return, as against MSCI India’s flat return.

Exhibit 47: World equity indices (CY16) – local currency (%) Brazil

39

Russia MICEX

24

UK

14

Taiwan

11

S&P 500

10

MSCI EM

9

Exhibit 48: World equity indices (CY16) – USD (%) Brazil

69

Russia MICEX

49

Taiwan

13

S&P 500

10

MSCI EM

9

Japan

4

South Korea

3

South Korea

1

India - Nifty

3

India - Nifty

0

Japan China (HSCEI)

January 2017

0 -3

China (HSCEI)

-3

UK

-4

32

India Strategy | New Year, New Cards

Sector performance: Laggards of yesteryears outperformed in CY16 Telecom, Healthcare and Technology top negative performers for CY16  In the sectoral space, Metals (+37%) and Oil (+27%) – the underperformers of CY15 – were the top gainers in CY16, driven by the bottoming out of commodity prices and inexpensive valuations.  Cement (+17%), Auto (+9%), PSU Banks (+9%), Media (+6%), Private Banks (+5%), NBFC (+4%), Cement (+3%) and Utilities (+2%) were the other gainers.  On the other hand, Telecom (-25%), Healthcare (-13%), Technology (-8%), Real Estate (-6%) and Capital Goods (-3%) were the losers for CY16.  In CY16, mid-caps outperformed large-caps, delivering 7% positive return. Exhibit 49: Sectoral performance in CY16 (% return)

9

7

6

5

4

3

3

2

2 -6

Capital Goods

Utilities

Sensex

Nifty

Consumer

NBFC

Pvt - Banks

Media

Midcap 100

PSU - Banks

Auto

Cement

Oil

Metal

-3

-8

-13

-25 Telecom

9

Healthcare

17

Technology

27

Real Estate

37

Exhibit 50: Sectoral performance over the last 10 years (%) Sector CY06 CY07 CY08 Metal 39 121 -74 Oil 40 115 -55 Cement 108 12 -60 Auto 30 3 -57 PSU - Banks 27 71 -33 Nifty Midcap 29 77 -59 Media 94 45 -59 Pvt - Banks 58 99 -56 NBFC 28 126 -52 Consumer 17 20 -14 Nifty 50 40 55 -52 Sensex 47 47 -52 Utilities 41 122 -60 Capital Goods 56 117 -65 Real Estate -82 Technology 41 -14 -51 Healthcare 22 17 -33 Telecom 82 59 -48 Note: Real Estate CAGR is from CY07-CY16

January 2017

CY09 234 73 84 204 73 99 94 98 109 40 76 81 74 104 70 133 69 -10

Return YoY (%) CY10 CY11 CY12 1 -47 19 1 -29 13 37 5 41 38 -20 40 33 -39 46 19 -31 39 32 -34 55 36 -26 63 38 -27 48 32 10 47 18 -25 28 17 -25 26 -6 -40 11 9 -48 35 -26 -52 53 32 -16 -1 34 -13 39 6 -9 -1

CY13 -10 4 -14 7 -26 -5 6 1 -8 11 7 9 -15 -6 -32 60 23 26

CY14 8 12 37 52 79 56 27 61 49 18 31 30 23 50 8 17 47 1

CY15 -31 -3 1 -1 -30 6 12 2 -8 1 -4 -5 -6 -9 -14 5 15 -3

CY16 37 27 17 9 9 7 6 5 4 3 3 2 2 -3 -6 -8 -13 -25

CAGR (%) CAGR (%) CY11-CY16 CY06-CY16 2 1 10 7 14 15 20 14 8 9 19 11 20 18 23 17 14 17 15 15 12 8 11 7 2 0 11 4 -2 -23 12 7 20 15 -2 -5 Source: Company, MOSL

33

India Strategy | New Year, New Cards

Market breadth positive; 30 Nifty stocks end higher Technology, Healthcare and Telecom stocks in the Nifty delivered negative returns  Among the Nifty components, Hindalco (+83%), Yes Bank (+59%), Tata Steel (+51%), BPCL (+42%) and Power Grid (+30%) were the top performers of CY16.  Idea (-49%), BHEL (-28%), Aurobindo (-24%), Sun Pharma (-23%) and Bharti Infratel (-20%) were the worst performers.  Notably, six Nifty stocks – Eicher, Maruti, IndusInd Bank, Zee Entertainment, Asian Paints and Kotak Mahindra Bank – delivered positive returns for five straight years.  Stocks delivering negative returns for the first time in the last five years were Aurobindo, Lupin, M&M, HUL and HCL Tech.  BHEL delivered negative returns in four of the last five years. Stocks delivering negative returns in at least three of the last five years were Tata Steel, GAIL, Tata Power, ACC, ICICI Bank, BOB, Coal India, Bharti Airtel, Wipro and Idea Cellular. Exhibit 51: Best and worst Nifty performers for CY16 (%)—50% companies outperformed the benchmark 83 59

51

42

30 29

20 19 17 17 15 15 14

13 13 12 11 11 11 10 7 6 4 3 3

33

1 1 0 0 -9 -10-13-15 -19-20-23-24-28 -49

Hindalco Yes Bank Tata Steel BPCL Power Grid Eicher Mot. Tata Motors ONGC GAIL UltraTech Maruti Grasim Ind. IndusInd Bk Hero Moto NTPC Bosch Tata Power SBI HDFC Bank ITC Reliance Ind. L&T Bajaj Auto Zee Ent. Tata Mot.-DVR Nifty Adani Ports Ambuja Cem. Asian Paints Axis Bank Kotak Mah.Bk HDFC Dr Reddy's ACC ICICI Bank BoB TCS HCL Tech HUL Tech Mah. M&M Infosys Coal India Bharti Airtel Cipla Wipro Lupin Bharti Infratel Sun Pharma Aurobindo BHEL Idea Cellular

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

Source: Company, MOSL

Exhibit 52: Stocks that delivered positive returns in at least 4 of the last 5 years Company BPCL Power Grid Eicher Motors Tata Motors ONGC UltraTech Maruti Suzuki Grasim Inds IndusInd Bk Bosch HDFC Bank ITC Reliance Ind. Bajaj Auto Zee Entert. Adani Ports Asian Paints Kotak Mah. Bk

January 2017

CY12 49 15 97 75 4 71 62 26 85 40 59 42 21 34 87 12 70 50

Absolute return YoY (%) CY13 CY14 CY15 -2 86 38 -13 39 2 71 203 12 20 32 -20 8 18 -29 -11 51 4 18 89 39 -14 25 10 1 91 21 6 93 -4 -2 43 14 12 15 -11 7 0 14 -10 28 4 25 38 15 15 105 -18 11 53 18 12 73 14

CY16 42 30 29 20 19 17 15 15 14 12 11 10 7 4 3 3 1 0

CAGR (%) CY11-16 40 13 71 22 2 23 42 11 37 25 23 12 9 11 31 17 28 27

CY12 21 -13 69 47 -24 43 34 -2 57 12 31 15 -7 6 59 -16 43 23

Relative to Nifty (%) CY13 CY14 CY15 -9 54 42 -20 7 6 65 172 16 14 0 -16 1 -13 -25 -18 20 8 12 57 43 -21 -6 15 -6 60 25 0 62 0 -9 12 18 5 -17 -7 0 -32 18 -17 -4 8 18 6 19 8 74 -14 4 22 22 5 42 18

CY16 39 27 26 17 16 14 12 12 11 9 8 7 4 1 0 0 -2 -3

CAGR (%) CY11-16 27 1 59 10 -10 11 30 -1 25 13 11 0 -3 -2 19 5 16 15

34

India Strategy | New Year, New Cards

Exhibit 53: Stocks that delivered negative return for the first time in the last 5 years Company Aurobindo Lupin M&M HUL HCL Tech.

CY12 122 37 36 29 59

Absolute return YoY (%) CY13 CY14 CY15 108 189 54 48 57 29 1 31 3 9 33 14 104 26 7

CY16 -24 -19 -7 -4 -3

CAGR (%) CY11-16 73 27 12 15 34

CY12 95 9 8 1 32

Relative to Nifty (%) CY13 CY14 CY15 101 158 58 41 26 33 -5 -1 7 2 2 18 97 -5 11

CAGR (%) CY16 CY11-16 -27 61 -22 15 -10 0 -7 3 -6 22 Source: Company, MOSL

Exhibit 54: Stocks that delivered negative returns in at least 3 of the last 5 years Company

Tata Steel GAIL Tata Power ACC ICICI Bank Bank of Baroda Coal India Bharti Airtel Wipro BHEL Idea Cellular

CY12 28 -7 26 26 66 31 18 -8 -1 -4 26

Absolute return YoY (%) CY13 CY14 CY15 -1 -6 -35 -4 30 -16 -17 -7 -17 -22 26 -3 -3 61 -26 -26 68 -28 -18 32 -14 4 7 -4 42 -1 1 -23 50 -36 61 -8 -7

CY16 51 17 11 -2 -2 -2 -9 -10 -15 -28 -49

CAGR (%) CY11-16 3 3 -2 3 13 3 0 -2 4 -13 -2

CY12 0 -35 -1 -2 38 3 -10 -35 -29 -32 -1

Relative to Nifty (%) CY13 CY14 CY15 -8 -37 -31 -11 -1 -12 -24 -38 -13 -29 -5 1 -10 29 -22 -32 37 -24 -25 1 -10 -2 -25 0 35 -32 5 -30 19 -32 54 -39 -2

CAGR (%) CY16 CY11-16 48 -9 14 -9 8 -14 -5 -9 -5 1 -6 -9 -12 -12 -13 -14 -18 -9 -31 -25 -52 -14 Source: Company, MOSL

Exhibit 55: % of stocks delivering positive and negative return on the Nifty Nifty Return YoY (%)

Positive return (%)

40 12

55

-52

76 2

30

18

Negative return (%)

-25

28

7

-4

3

10

14

17

31

48

52

42

76 88

96

98

70

90

86

83

52

48

58

24 4 CY06

CY07

CY08

CY09

CY10

CY11

CY12

CY13

CY14

CY15

CY16

Source: Company, MOSL

January 2017

35

India Strategy | New Year, New Cards

Institutional flows: FII flows muted for second consecutive year FIIs sell off in 4QCY16 due to demonetization concerns India witnessed FII equity inflows of USD2.9b in CY16 (USD6.8b until 8November). On debt side, FII debt outflow was more pronounced at USD6.5b in CY16 (USD5.9b post 8-November). Despite these outflows, the INR remained relatively stable with just 2.5% annual depreciation.

 

Exhibit 56: Cumulative FII flows in CY16 (USD b) 6.8 8.0

2.9

5.0 2.0

-2.5

USD3.9b outflows since demonetization reform

-1.0

Exhibit 57: Yearly FII flows in equity (USD b) 24.5

17.6

20.0

15.3

16.2

Dec-16

Nov-16

2nd half

6.4 5.9

2.9

9.2

13.5

0.9

-0.5

10.3

Exhibit 59: Yearly FII flows in debt (USD b)

2014

2013

2012

2011

CY16

CY15

CY14

CY13

CY12

CY11

CY10

CY09

-12.2 CY08

CY07

-1.4

6.2 -2.9

3.0 -0.1 2016

3.3

2015

8.1

CY06

Oct-16

Sep-16

Aug-16

Jul-16

Jun-16

May-16

Apr-16

Exhibit 58: Half-yearly FII flows in equity (USD b) 1st half

29.3 17.8

Mar-16

Mar-16

Jan-16

Jan-16

-4.0

Exhibit 60: Half-yearly FII flows in debt (USD b) 26.3

1st half

2nd half

15.7

January 2017

10.5 -1.3 -6.7

1.1 6.4

-1.9

2016

2015

-4.5 2014

CY16

CY15

-6.5 CY14

CY13

CY12

CY11

CY10

-8.0

2.5 4.3

2013

5.8 2.6

2012

7.6

6.9

1.1

CY09

CY08

CY07

CY06

0.9

2.3

2.7

2011

10.1 8.4

36

India Strategy | New Year, New Cards

Institutional flows: DII flows remained healthy in CY16 Two thirds of DII equity inflows received post 8-November  DII equity inflows stood at USD5.3b in CY16. DII inflows of USD3.5b post 8November offset FII outflows of USD3.9b during the same period. In fact, in fullyear CY16, two thirds of DII equity inflows were received post 8-November. Exhibit 61: Cumulative DII flows in CY16 (USD b)

5.3

3.4

6.0

USD3.5b inflows since demonetization reform

4.0

-0.6

2.0 0.0

Exhibit 62: Yearly domestic MF flows in equity (USD b)

Dec-16

Nov-16

Oct-16

Sep-16

Aug-16

Jul-16

Jun-16

May-16

Apr-16

Mar-16

Mar-16

Jan-16

Jan-16

-2.0

Exhibit 63: Half-yearly domestic MF flows in equity (USD b) 1st half

11.2

2nd half

7.1 5.7 5.0

2011

CY16

CY15

CY14

CY13

CY12

CY11

CY10

1st half

2.6

2012

2011

-1.9

CY16

CY15

CY14

-9.3 -8.8 CY13

CY12

CY11

CY10

CY09

CY08

CY07

-7.0

-4.2

-5.2 -4.1

2013

-2.7 -1.0

CY06

2nd half

-3.8

0.2 -1.1

-0.1 -1.8

-5.0

2016

4.7 1.4

0.3

1.4

2.0

6.5 3.7

-1.1

Exhibit 65: Half-yearly DII ex-MF flows in equity (USD b)

13.6

January 2017

-2.4 -1.4

2015

CY09

CY08

CY07

CY06

Exhibit 64: Yearly DII ex-MF flows in equity (USD b)

2012

-2.7

-3.9 -3.7 -6.1

-1.2

2013

0.6

-1.2

5.2

2015

0.7

2016

1.3

2014

1.7

6.0

3.9

3.3

2014

3.4

37

India Strategy | New Year, New Cards

Valuations near 10-year average; Mid-cap valuation premium comes off further Correction in the last quarter of CY16 has brought valuations marginally near the 10-year averages. The Nifty trades at a P/E of 16.6x, near its long-period average of 16.7x. Market-cap-to-GDP ratio of 72% (FY17E GDP) is below the long-period average of 78%.





Exhibit 66: 12-month forward Nifty P/E (x)

Exhibit 67: 12-month forward Nifty P/B (x)

25

4.5

23.73

21

3.8

10 Year Avg: 16.7x

17

4.06

16.6

13

10 Year Avg: 2.6x

3.0

2.4

2.3

Jan-16

Jan-17

Jan-15

Jan-14

Jan-13

Jan-12

Jan-11

Jan-09

Jan-08

103

20.0

95

83

82

88

72

Average of 78% for the period 71

10 Year Avg: 15.8%

55

81 64

66

FY14

22.5

17.5

70

Exhibit 69: India’s market cap to GDP (%)

FY13

Exhibit 68: 12-month forward Nifty RoE (%)

Jan-07

Jan-17

Jan-16

Jan-15

Jan-14

Jan-13

Jan-12

Jan-11

Jan-10

Jan-09

Jan-08

Jan-07

1.7

1.5

Jan-10

11.11

9

14.7

15.0

FY17E

FY16

FY15

FY12

FY11

FY10

FY09

FY08

FY07

FY06

Jan-17

Jan-16

Jan-15

Jan-14

Jan-13

Jan-12

Jan-11

Jan-10

Jan-09

Jan-08

Jan-07

12.5

Midcaps continue to outperform, trade at a premium to Nifty P/E In CY16, midcaps delivered 7% positive return, as against +3% by the Nifty. Midcaps now trade at just 1% premium to the Nifty on a P/E basis. Exhibit 71: Midcaps outperformed large caps by 53% over last five years

Nifty Midcap 100 Rebased

Nifty Rebased

275

Dec-16

Aug-16

Apr-16

Dec-15

Aug-15

Apr-15

Dec-14

Apr-14

Aug-14

Dec-16

Nov-16

Oct-16

Sep-16

Aug-16

Jul-16

Jun-16

May-16

Apr-16

Mar-16

Feb-16

75 Jan-16

80 Dec-15

125 Dec-13

175

92

January 2017

230 177

Aug-13

104

Nifty Midcap 100 Rebased

225

Apr-12

107 103

Dec-11

116

Apr-13

Nifty Rebased

128

Dec-12

Exhibit 70: Midcaps outperformed large caps in CY16

Aug-12

 

38

India Strategy | New Year, New Cards

Exhibit 72: Midcaps v/s Nifty P/E (x) – 12-month forward Midcap PE (x)

26.5

Nifty PE (x)

19.5

Midcap Vs Nifty PE Prem/(Disc) (%)

25

Nifty Avg: 17.2x Midcap Avg: 16.2x

23.0

Exhibit 73: Midcaps trading at 1% premium to Sensex

10

16.9

16.0

16.6

12.5

Average: -6%

1

-5 -20 Jan-17

Sep-16

May-16

Jan-16

Sep-15

Jan-15

May-15

Sep-14

Jan-14

May-14

Sep-13

May-13

Jan-13

Sep-12

May-12

Jan-17

Sep-16

May-16

Jan-16

Sep-15

Jan-15

May-15

Sep-14

May-14

Jan-14

Sep-13

Jan-13

May-13

Sep-12

Jan-12

May-12

Jan-12

-35

9.0

Sector valuations: Earnings growth remains elusive; expect 2HFY17 earnings growth to remain subdued 





Technology sector trades at a P/E of 15x (8% discount to historical average). Stocks have been holding on to current levels, despite seasonal weakness in 3QFY17. The support comes from the sector being shielded from demonetization, INR depreciation post US elections, and expectations of a better FY18. The sector was the top performer for December (+3.3%), but delivered 8% negative return in CY16. Oil & Gas trades at a P/B of 1.4x (12% discount to historical average) and a P/E of 10.5x (10% discount). Oil prices rose ~10% in Nov-Dec’16 due to production cuts agreed upon by OPEC and non-OPEC. OMCs (HPCL, BPCL and IOCL) debunked the threat of regulation by increasing retail prices again in midDecember 2016. PSU Banks trade at a 32% discount to historical average P/B. The sector was second worst performer for December (-6% MoM) after six months of continuous outperformance. Impact of demonetization is expected to hurt loan growth and NIM. Overall, we expect stress addition in FY17 to be lower than in FY16. Sustained traction in large corporate deleveraging and a reduction in net slippages are the key catalysts for a re-rating.

Exhibit 74: Sector valuations - Snapshot Sector Auto Banks - Private Banks - PSU NBFC Capital Goods Cement Consumer Healthcare Media Metals Oil & Gas Retail Technology Utilities

January 2017

PE (x) Current

10 Yr Avg

15.6 17.2 9.7 12.5 26.8 20.8 33.4 19.7 22.3 12.2 10.5 38.7 15.0 11.7

14.5 16.5 8.9 12.6 27.0 17.2 29.2 21.9 22.6 12.1 11.6 35.5 16.3 14.9

Prem/ Disc (%) 7.3 4.3 8.7 -0.5 -0.6 20.9 14.6 -10.2 -1.6 1.1 -9.6 9.0 -8.4 -21.1

Relative to Nifty P/E (%) Current 10 Yr Avg -6 3 -41 -25 61 25 101 18 34 -26 -37 133 -10 -29

-15 -2 -46 -25 56 2 76 31 36 -29 -30 110 -2 -9

Relative to Nifty P/B (%)

PB (x) Current

10 Yr Avg

3.2 2.3 0.7 2.2 2.6 2.6 10.0 3.8 5.0 1.2 1.4 6.4 3.4 1.5

3.0 2.2 1.1 2.3 4.1 2.3 9.5 4.1 4.4 1.6 1.6 8.1 4.4 1.8

Prem/ Disc (%) 5.6 6.5 -31.6 -4.4 -36.5 10.4 4.7 -5.6 14.2 -23.9 -12.0 -21.3 -21.7 -20.6

Current 10 Yr Avg 32 -4 -70 -11 7 5 309 57 105 -51 -42 161 40 -40

17 -16 -59 -13 52 -12 273 57 67 -41 -39 212 67 -29

39

India Strategy | New Year, New Cards

MOSL model portfolio

SECTOR WEIGHT / PORTFOLIO PICKS Financials Private HDFC Bank ICICI Bank Axis Bank Yes Bank RBL Bank PSU SBI

BSE 100 29.3 18.0 6.7 4.1 2.1 1.1 0.0 3.1 2.1

MOST WEIGHT 31.0 19.0 5.0 5.0 4.0 3.0 2.0 7.0 5.0

WEIGHT RELATIVE TO 1.7 1.0 -1.7 0.9 1.9 1.9 2.0 3.9 2.9

Overweight Overweight Buy Buy Neutral Buy Buy Overweight Buy

PNB NBFCs Max Financial Repco Home Fin Auto Tata Motors Maruti M&M Bharat Forge Cap Goods, Infra & Cement Larsen & Toubro Ramco Cement

0.2 8.2 0.0 0.0 11.5 2.7 2.1 1.6 0.3 7.7 3.1 0.0

2.0 5.0 3.0 2.0 12.0 5.0 3.0 2.0 2.0 9.0 5.0 2.0

1.8 -3.2 3.0 2.0 0.5 2.3 0.9 0.4 1.7 1.3 1.9 2.0

Buy Underweight Buy Buy Overweight Buy Buy Buy Buy Overweight Buy Buy

Shree Cement Technology / Telecom Infosys Tech Mahindra Bharti Infratel Consumption / Retail ITC Britannia Jubilant Foodworks Utilities / Metals Hindalco NMDC

0.0 14.3 5.6 0.9 0.5 12.4 5.8 0.5 0.0 7.2 0.6 0.3

2.0 9.0 4.0 3.0 2.0 9.0 5.0 2.0 2.0 8.0 4.0 2.0

2.0 -5.3 -1.6 2.1 1.5 -3.4 -0.8 1.5 2.0 0.8 3.4 1.7

Buy Underweight Buy Buy Buy Underweight Buy Buy Neutral Neutral Buy Buy

Power Grid Energy IOC BPCL Health Care Sun Pharma Aurobindo Others Exide Manpasand Beverages Muthoot Finance Endurance Dish TV

1.2 9.6 1.0 1.0 6.2 1.9 0.5 1.6 0.2 0.0 0.0 0.0 0.0

2.0 8.0 4.0 4.0 5.0 3.0 2.0 9.0 1.0 1.0 1.0 1.0 1.0

0.8 -1.6 3.0 3.0 -1.2 1.1 1.5 7.4 0.8 1.0 1.0 1.0 1.0

Buy Underweight Buy Buy Underweight Buy Buy Overweight Buy Buy Buy Buy Buy

0.0 0.0 0.0 0.0 100.0

1.0 1.0 1.0 1.0 100.0

1.0 1.0 1.0 1.0

Neutral Buy Buy Buy

Alkem Labs SH Kelkar Arvind Dewan Housing TOTAL

January 2017

EFFECTIVE SECTOR STANCE

40

India Strategy | New Year, New Cards

THIS PAGE INTENTIONALLY LEFT BLANK

January 2017

41

India Strategy | New Year, New Cards

Sectors & Companies BSE Sensex: 26,633

S&P CNX: 8,191

December 2016

MOSL Universe: 3QFY17 Highlights & Ready Reckoner

Note: In our quarterly performance tables, our four-quarter numbers may not always add up to the full-year numbers. This is because of differences in classification of account heads in the company’s quarterly and annual results or because of differences in the way we classify account heads as opposed to the company. All stock prices and indices as on 4 January 2017, unless otherwise stated.

January 2017

42

India Strategy | New Year, New Cards

MOSL Universe: 3QFY17 aggregate performance highlights Quarterly Performance - MOSL Universe (INR b) Sector (Nos of companies)

Dec-16

Auto (13) Capital Goods (12) Cement (7) Consumer (19) Financials (30) Private Banks (11) PSU Banks (8) NBFC (11) Healthcare (17) Logistics (3) Media (9) Metals (9) Oil & Gas (12) Excl. OMCs (9) Retail (3) Technology (15) Telecom (3) Utilities (5) Others (19) MOSL (176) MOSL Excl. OMCs (173) Sensex (30) Nifty Ex BPCL (49)

1,264 478 167 405 650 243 310 96 381 31 61 1,163 3,034 1,242 53 891 361 476 183 9,598 7,806 4,686 5,718

Sales Var % YoY -1.6 6.1 -1.0 0.1 7.7 10.1 4.2 13.7 11.7 3.6 3.2 22.3 8.0 15.3 8.1 8.6 -0.2 3.8 12.9 7.2 8.1 4.7 4.8

Var % QoQ

Dec-16

0.8 3.1 -0.1 -2.3 -0.5 0.2 -2.3 3.9 0.7 1.4 5.0 12.7 8.9 11.1 26.1 0.6 -3.1 5.3 5.6 4.8 4.2 3.5 3.4

174 35 29 89 537 208 254 76 92 5 19 222 450 279 4 204 125 154 40 2,179 2,008 1,243 1,474

Quarter-wise sales growth ex OMCs (% YoY)

EBITDA Var % Var % QoQ YoY -1.6 7.2 41.9 -12.3 3.3 -13.6 -4.5 -5.2 13.6 0.4 0.9 1.4 26.6 -1.0 13.9 2.5 9.6 -0.6 1.5 13.1 -0.2 7.7 167.6 25.8 39.8 35.5 23.1 10.7 -1.0 17.5 4.2 -0.8 -3.4 -9.3 3.1 22.9 20.5 42.6 19.7 9.6 16.4 5.3 8.2 5.8 9.2 4.2

PAT Var % YoY 2.6 59.3 24.3 -1.2 76.8 -11.7 LP 16.0 8.4 -3.4 -5.1 LP 41.9 24.5 -9.5 0.3 -66.5 -6.0 30.2 30.2 26.3 5.5 12.4

Dec-16 89 15 15 63 194 97 52 46 57 3 8 73 265 163 3 157 8 73 19 1,042 940 614 705

Var % QoQ 5.8 -35.3 -26.9 -2.9 -0.2 -2.3 6.3 -2.4 -6.2 18.2 15.2 72.5 24.8 1.1 16.6 -1.8 -63.6 39.1 64.0 8.3 3.2 3.0 -0.2

Quarter-wise net profit growth ex OMCs (% YoY) 26.3%

8.1%

6.2%

4.5% 3.4% -1.3%

0.9%

26 25 24

8

3

-1

-3 -5

-6 -10 Telecom

Retail

Utilities

Media

Technology

Auto

Health Care

Cement

Cap Goods

Financials

-67 Metals

Auto

-1 -2

Cement

Telecom

0

Dec-16E

0

0 Consumer

3

Media

4

Logistics

4

Utilities

6

Cap Goods

8

Financials

8

MOSL Ex. OMCs

8

Retail

Technology

Health Care

Oil Ex. OMCs

Metals

LP 77 59 9

Sep-16

Sectoral net profit growth - quarter ended Dec-16 (%)

22 12

Jun-16

Logistics

Sectoral sales growth - quarter ended Dec-16 (%) 15

-14.2% Mar-16

Dec-16E

Consumer

Sep-16

Oil Ex. OMCs

Jun-16

MOSL Ex. OMCs

Mar-16

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

January 2017

43

India Strategy | New Year, New Cards

Annual performance - MOSL universe (INR Billion) SECTOR

Sales (INR B) Change YoY (%) EBIDTA (INR B) Change YoY (%) PAT (INR B) FY17E FY18E FY19E FY17E FY18E FY19E FY17E FY18E FY19E FY17E FY18E FY19E FY17E FY18E FY19E Auto (14) 5,684 6,564 7,532 4.0 15.5 14.7 787 987 1,192 0.0 25.4 20.8 363 484 627 Capital Goods (16) 2,218 2,481 2,777 8.4 11.8 11.9 213 268 317 27.9 25.6 18.1 117 144 179 Cement (13) 1,227 1,359 1,518 3.1 10.7 11.7 229 280 327 17.5 22.4 16.8 111 146 185 Consumer (19) 1,671 1,888 2,159 5.0 13.0 14.3 375 434 505 4.0 15.9 16.2 259 303 353 Financials (35) 3,150 3,655 4,351 6.5 16.1 19.0 2,670 2,963 3,519 13.8 11.0 18.7 888 1,232 1,623 Private Banks (12) 1,028 1,220 1,482 12.8 18.6 21.4 919 1,015 1,237 15.3 10.4 21.9 406 517 682 PSU Banks (10) 1,532 1,751 2,016 0.4 14.3 15.1 1,227 1,341 1,518 13.6 9.3 13.2 168 349 475 NBFC (13) 590 684 854 13.2 16.0 24.8 524 607 763 11.7 15.9 25.7 313 366 465 Healthcare (17) 1,523 1,750 2,008 10.4 14.9 14.7 362 447 522 8.2 23.3 16.9 225 299 353 Logistics (3) 130 140 159 -0.2 8.0 13.3 18 22 25 -6.0 20.4 15.8 11 14 17 Media (11) 276 321 367 9.3 16.2 14.4 78 100 120 11.3 28.3 19.9 33 48 60 Metals (9) 4,460 5,060 5,228 8.8 13.4 3.3 809 959 1,032 60.0 18.6 7.6 222 313 382 Oil & Gas (12) 12302 14265 15178 0.4 16.0 6.4 1,818 1,991 2,114 24.8 9.5 6.2 1,006 1,049 1,138 Excl. OMCs (9) 5,143 5,958 6,354 2.2 15.8 6.6 1,180 1,378 1,476 15.5 16.8 7.1 633 727 802 Retail (3) 181 209 241 6.4 15.6 15.1 14 17 21 6.4 21.7 21.2 9 11 13 Technology (15) 3,569 4,045 4,467 13.3 13.3 10.4 822 942 1,008 9.0 14.6 7.0 636 712 774 Telecom (3) 1,464 1,515 1,664 1.1 3.5 9.8 518 527 595 -1.2 1.7 12.9 59 24 49 Utilities (5) 2,064 2,339 2,604 4.5 13.3 11.3 641 781 922 5.6 21.8 18.1 287 335 385 Others (25) 793 957 1,105 10.4 20.6 15.5 153 193 234 10.8 26.5 21.0 71 91 114 MOSL (200) 40712 4,549 5,359 4.8 14.3 10.3 9509 10912 12452 14.8 14.8 14.1 4,295 5,205 6,251 Excl. OMCs (197) 33553 38241 42535 6.2 14.0 11.2 8,871 10300 11814 13.1 16.1 14.7 3,922 4,883 5,914 Sensex (30) 10350 11819 13127 5.1 14.2 11.1 2,715 3,114 3,562 12.5 14.7 14.4 1,250 1,533 1,842 Nifty (50) 13188 15009 16587 3.4 13.8 10.5 3,285 3,768 4,316 7.5 14.7 14.5 1,532 1,867 2,248 For Banks: Sales = Net Interest Income, EBIDTA = Operating Profits; Note: Sensex & Nifty Numbers are Free Float

Change YoY (%) FY17E FY18E FY19E 6.8 33.5 29.5 33.6 23.4 24.6 41.7 32.5 26.3 6.2 16.9 16.6 43.8 38.8 31.7 -0.6 27.2 32.0 LP 107.4 35.9 10.4 16.9 27.2 14.7 33.1 17.8 -8.6 29.5 18.5 1.1 43.4 25.8 65.8 40.6 22.1 31.8 4.2 8.5 15.8 14.9 10.3 1.4 22.0 22.1 6.5 12.1 8.6 -41.6 -58.9 102.1 -10.6 16.8 15.1 15.1 28.7 25.2 19.5 21.2 20.1 16.2

24.5

4.7 8.7

22.6 20.2 21.9 20.4

21.1

Valuations - MOSL universe PE (x) Sector Auto (14) Capital Goods (16) Cement (13) Consumer (19) Financials (35) Private Banks (12) PSU Banks (10) NBFC (13) Healthcare (17) Logistics (3) Media (11) Metals (9) Oil & Gas (12) Excl. OMCs (9) Retail (3) Technology (15) Telecom (3) Utilities (5) Others (25) MOSL (200) MOSL Excl. OMCs (197) Sensex (30) Nifty (50) N.M.: Not Meaningful.

January 2017

EV / EBIDTA (x)

P/BV (x)

ROE (%)

FY17E FY18E FY19E FY17E FY18E FY19E FY17E FY18E FY19E FY17E FY18E FY19E 21.4 16.0 12.4 9.5 7.3 5.7 3.8 3.2 2.7 17.6 20.0 21.7 30.8 24.9 20.0 19.8 15.4 13.0 2.9 2.7 2.5 9.5 10.9 12.4 27.1 20.5 16.2 13.6 10.7 8.6 2.8 2.6 2.3 10.5 12.6 14.2 37.9 32.4 27.8 25.5 21.8 18.6 11.1 9.7 8.4 29.3 29.9 30.3 17.9 12.9 9.8 1.7 1.6 1.4 9.7 12.3 14.5 21.0 16.5 12.5 2.5 2.2 2.0 11.9 13.6 15.8 18.2 8.8 6.5 0.8 0.7 0.7 4.2 8.3 10.5 13.6 11.7 9.2 2.4 2.1 1.8 17.7 18.1 19.9 25.0 18.8 16.0 15.4 12.1 9.9 4.5 3.7 3.1 17.8 19.8 19.6 27.4 21.1 17.8 14.5 11.8 9.9 2.6 2.4 2.2 9.5 11.4 12.4 30.7 21.4 17.1 12.7 9.6 7.8 5.1 4.4 3.8 16.7 20.6 22.1 17.1 12.2 10.0 8.1 6.7 5.9 1.3 1.2 1.2 7.8 10.2 11.5 10.9 10.5 9.7 6.1 5.4 4.7 1.5 1.4 1.3 13.8 13.2 13.1 12.5 10.9 9.9 6.3 5.1 4.3 1.3 1.3 1.2 10.7 11.5 11.8 45.8 37.5 30.7 27.9 22.8 18.5 7.0 6.2 5.5 15.2 16.7 17.9 16.5 14.7 13.6 11.4 9.7 8.7 3.9 3.4 3.0 23.4 22.9 21.8 37.2 90.5 44.8 7.0 6.7 5.6 2.0 1.9 1.9 5.3 2.1 4.2 15.4 13.2 11.5 10.5 8.9 7.7 2.3 2.2 2.0 15.1 16.3 17.4 23.8 18.5 14.8 11.2 8.7 7.0 5.4 4.7 4.0 22.7 25.5 27.4 18.9 15.6 13.0 N.M N.M N.M 2.5 2.3 2.0 13.3 14.6 15.8 19.9 16.0 13.2 N.M N.M N.M 2.5 2.3 2.1 12.7 14.4 15.7 19.6 16.0 13.3 N.M N.M N.M 2.7 2.4 2.1 13.6 15.0 16.2 19.6 16.1 13.4 N.M N.M N.M 2.7 2.4 2.1 13.5 14.9 16.0

Div Yield (%) EARN. CAGR FY16 1.0 1.1 0.6 1.5 1.3 0.9 0.9 2.5 0.6 1.2 1.2 7.3 2.3 2.0 0.5 1.8 0.5 5.7 1.8 1.8 1.8 1.5 1.5

(FY17-FY19) 31.5 24.0 29.3 16.8 35.2 29.6 67.9 21.9 25.2 23.9 34.3 31.0 6.4 12.5 22.1 10.3 -8.8 15.9 27.0 20.6 22.8 21.4 21.2

44

India Strategy | New Year, New Cards

Ready reckoner: Quarterly performance Sector

CMP (INR)

RECO

Sales (INR m) Var % Var % Dec-16 YoY QoQ

EBDITA (INR M) Var % Var % Dec-16 YoY QoQ

PAT (INR M) Var % Var % Dec-16 YoY QoQ

Automobiles Amara Raja Batt. Ashok Leyland Bajaj Auto Bharat Forge Bosch Eicher Motors Escorts Exide Inds. Hero Motocorp Mahindra & Mahindra Maruti Suzuki Tata Motors TVS Motor Sector Aggregate

899 84 2,689 913 20,450 22,178 321 182 3,014 1,221 5,510 487 374

Buy Buy Buy Buy Neutral Buy Buy Buy Neutral Buy Buy Buy Buy

12,558 46,272 50,471 9,223 28,228 18,440 10,746 15,515 64,319 103,467 165,942 708,422 30,341 1,263,943

2.5 13.3 -9.3 -12.3 3.0 -44.4 21.0 2.0 -11.8 -1.1 10.0 -2.0 3.2 -1.6

-6.7 0.1 -16.6 3.5 8.1 5.1 8.0 -19.3 -17.5 1.7 -7.0 7.5 -11.5 0.8

2,066 5,021 9,788 2,601 3,613 5,809 838 2,167 10,273 15,006 25,229 89,260 2,169 173,841

-9.6 16.9 -16.4 -18.0 4.0 12.3 145.6 -7.5 -16.5 6.1 16.3 -4.8 10.4 -1.6

-10.1 -6.4 -24.5 5.0 -23.0 7.1 34.2 -25.3 -30.7 2.2 -16.9 42.1 -21.6 7.2

1,198 2,808 8,498 1,377 3,076 4,225 483 1,283 6,900 8,917 19,433 29,165 1,306 88,668

-12.0 38.1 -5.7 -18.5 39.3 56.0 136.6 -4.3 -13.3 8.7 39.4 -15.9 21.2 2.6

-12.1 -4.6 -24.3 8.5 -27.3 2.3 40.8 -28.2 -31.3 -28.8 -19.0 256.1 -26.4 5.8

Capital Goods ABB Bharat Electronics BHEL CG Consumer Elect. Crompton Greaves Cummins India GE T&D India Havells India Larsen & Toubro Siemens Thermax Voltas Sector Aggregate

1,037 1,431 127 152 61 809 302 351 1,376 1,121 780 335

Neutral Buy Sell Buy Sell Neutral Neutral Buy Buy Neutral Sell Buy

26,779 18,500 60,500 7,700 13,160 12,219 8,500 13,318 273,000 22,650 9,664 11,688 477,678

10.4 21.9 13.6 -4.9 7.5 6.5 14.3 -0.9 5.7 -2.1 -7.0 -10.6 6.1

30.3 8.6 -9.2 -13.5 -12.0 -4.5 1.9 -8.3 9.2 -26.7 11.0 20.8 3.1

2,721 3,427 -7,500 555 1,090 1,792 370 1,034 27,700 1,940 902 575 34,606

0.9 17.1 Loss -33.0 13.0 15.6 LP -43.0 4.5 0.0 -8.7 -1.4 41.9

79.5 2.3 PL -43.0 30.7 -10.0 9.0 -49.2 20.6 -19.7 16.7 -16.3 -12.3

1,424 3,219 -6,755 325 969 1,680 40 704 11,000 1,340 614 505 15,065

4.8 8.9 Loss -23.3 132.8 3.5 LP -40.9 6.3 17.5 -9.5 -2.9 59.3

63.5 -6.1 PL -41.3 261.2 -14.7 -80.6 -50.0 6.6 -27.4 2.9 -30.0 -35.3

Cement ACC Ambuja Cements Grasim Industries India Cements Ramco Cements Shree Cement Ultratech Cement Sector Aggregate

1,320 212 867 122 575 14,131 3,299

Neutral Buy UR Neutral Buy Buy Buy

26,566 21,800 24,792 11,919 9,264 18,879 53,435 166,654

-6.7 -7.5 7.2 28.2 14.1 3.3 -7.0 -1.0

7.5 8.8 -0.4 -8.8 -8.5 -5.9 -1.0 -0.1

1,880 2,664 5,238 2,011 2,627 4,941 9,634 28,995

-13.0 -12.4 22.1 37.6 7.4 16.5 -7.7 3.3

-16.3 -3.5 -1.2 -10.4 -24.8 -24.7 -11.9 -13.6

583 1,612 3,701 481 1,409 2,592 5,078 15,457

-43.2 10.9 42.2 780.8 19.7 151.8 -0.2 24.3

-30.7 -41.8 -37.5 -22.9 -31.9 -11.1 -15.5 -26.9

906 2,851 895 277 1,031 1,532 5,058 821 245 335 258 5,893

Neutral Buy Buy Neutral Buy Neutral Neutral Neutral Buy Neutral Buy Neutral

40,343 20,158 9,953 19,943 7,608 25,145 9,517 78,804 88,097 3,763 14,526 19,376

5.0 -6.0 7.5 2.0 5.0 10.0 -3.0 1.5 -4.0 1.0 -5.0 -0.5

7.2 -14.6 -5.1 0.9 30.2 6.7 -11.9 0.5 -8.8 -8.6 0.9 -17.4

7,632 2,483 2,440 3,505 2,543 4,617 1,577 13,728 33,729 468 2,654 3,474

-2.7 -19.1 3.9 -6.0 1.9 1.7 -4.2 -4.0 -6.4 -10.0 -7.5 -0.5

7.0 -20.7 -11.2 -13.0 45.1 -0.3 -35.7 -2.3 -7.1 -26.6 6.5 -22.6

5,025 1,827 1,417 3,007 1,820 3,270 1,356 9,898 25,824 218 1,858 1,972

-3.6 -19.5 3.5 -5.1 -6.8 -1.2 1.8 1.9 -2.7 42.1 -8.0 -5.5

5.6 -22.0 -21.8 -14.4 36.2 1.8 -26.2 -8.5 3.3 -31.9 2.9 -31.5

Consumer Asian Paints Britannia Colgate Dabur Emami Godrej Consumer GSK Consumer Hind. Unilever ITC Jyothy Labs Marico Nestle

January 2017

45

India Strategy | New Year, New Cards

Ready reckoner: Quarterly performance Sector

CMP (INR)

P&G Hygiene Page Industries Parag Milk Foods Pidilite Inds. Radico Khaitan United Breweries United Spirits Sector Aggregate

RECO

Sales (INR m) Var % Dec-16 YoY 7,505 10.0 4,805 9.0 3,991 3.0 13,525 1.0 4,244 0.0 10,676 -2.9 22,894 -5.0 404,872 0.1

Var % QoQ 25.0 -10.6 -15.6 -4.6 -5.1 2.8 12.4 -2.3

EBDITA (INR M) Var % Var % Dec-16 YoY QoQ 1,855 -14.3 22.7 961 6.3 -10.6 350 -7.6 -7.3 2,847 -3.6 -11.7 471 -15.3 -17.0 1,356 -22.5 11.9 2,447 41.2 8.7 89,135 -4.5 -5.2

PAT (INR M) Var % Dec-16 YoY 1,255 -14.4 650 13.3 146 0.4 1,815 -2.7 163 -27.7 747 4.8 1,128 2145.7 63,395 -1.2

Var % QoQ 20.2 -5.3 1.7 -21.4 -27.8 176.1 15.3 -2.9

6,891 13,782 264 608 117 796 1,952

Buy Buy Neutral Buy Neutral Buy Buy

Healthcare Alembic Pharma Alkem Lab Aurobindo Pharma Biocon Cadila Health Cipla Divis Labs Dr Reddy’ s Labs Fortis Health Glenmark Pharma Granules India GSK Pharma IPCA Labs. Lupin Sanofi India Sun Pharma Torrent Pharma Sector Aggregate

605 1,670 666 936 362 568 753 3,091 189 899 110 2,747 550 1,494 4,290 638 1,351

Neutral Neutral Buy Sell Buy Neutral Neutral Neutral Buy Neutral Buy Neutral Neutral Buy Buy Buy Buy

8,075 14,404 38,595 9,273 25,827 39,015 10,349 37,242 11,244 23,424 4,070 8,016 8,098 42,453 6,145 80,368 14,773 381,370

-12.3 13.0 10.4 12.0 6.4 25.6 21.5 -6.1 8.0 35.8 18.0 10.0 18.4 19.4 8.1 13.5 -4.0 11.7

-7.3 -12.1 2.2 -1.3 9.8 4.0 4.3 3.9 -6.0 7.8 11.9 2.4 -7.1 -1.1 -1.6 -2.8 5.1 0.7

1,696 2,548 9,456 2,253 5,553 6,897 3,881 7,821 1,054 5,388 834 1,523 1,218 10,499 1,438 26,834 3,565 92,456

-55.8 8.2 14.9 25.3 -4.0 30.3 20.8 -22.0 665.5 59.5 23.2 48.3 36.5 19.7 27.3 23.7 -41.8 9.6

-4.2 -17.9 1.8 0.2 7.6 1.3 5.5 29.8 6.5 35.4 12.4 22.3 -4.8 2.1 -0.7 -15.3 8.0 -0.6

1,137 2,083 6,106 1,382 3,688 4,077 2,764 4,494 -766 3,108 389 1,166 567 6,241 809 17,534 2,250 57,028

-57.7 11.2 16.3 34.2 -5.5 18.3 12.1 -22.4 Loss 82.9 43.2 40.2 135.8 17.8 14.8 23.8 -35.4 8.4

-4.2 -26.4 3.3 -6.0 9.2 15.1 -8.8 38.5 PL 41.7 -4.7 18.2 20.3 -5.8 0.3 -21.6 8.7 -6.2

Logistics Allcargo Logistics Concor Gateway Distriparks Sector Aggregate

179 1,151 255

Buy Neutral Buy

14,613 13,674 2,876 31,163

9.3 -2.6 7.6 3.6

3.8 -0.8 0.6 1.4

1,316 2,738 616 4,671

11.2 -2.2 -0.4 1.5

4.4 19.7 6.0 13.1

680 1,924 280 2,883

10.5 -6.7 -9.6 -3.4

5.5 21.9 28.8 18.2

Media D B Corp Dish TV Hathway Cable HT Media Jagran Prakashan PVR Siti Networks Sun TV Zee Entertainment Sector Aggregate

374 85 37 75 181 1,173 38 524 458

Buy Buy Buy Neutral Buy Buy Buy UR Buy

6,137 7,935 3,387 6,595 5,833 5,505 3,347 6,252 16,492 61,484

4.8 2.9 12.7 -3.2 1.2 10.0 -9.5 8.9 3.4 3.2

16.1 1.8 5.5 9.5 27.1 -0.7 15.8 0.0 -2.7 5.0

1,811 2,731 569 1,002 1,586 881 957 4,785 4,373 18,694

-3.1 2.9 14.3 -15.5 -7.9 3.3 -23.5 8.6 1.7 -0.2

20.3 3.4 6.7 98.6 30.7 -5.3 102.1 2.6 -10.6 7.7

1,039 441 -413 476 782 258 167 2,439 3,024 8,212

-2.8 -35.7 Loss -30.8 -16.2 -15.6 -57.2 13.1 10.0 -5.1

17.3 -37.1 Loss 54.0 7.7 -11.6 LP -9.8 26.8 15.2

159 251 71 163 66

Buy Neutral Neutral Buy Buy

254,247 56,904 56,664 149,227 18,766

8.8 65.9 23.3 71.6 14.8

3.7 61.4 16.6 12.8 1.7

32,029 33,801 13,574 24,441 3,581

39.0 128.6 146.6 174.1 162.6

5.7 62.8 60.0 -17.4 107.8

10,044 29,300 -3,293 4,170 1,922

130.0 61.8 Loss LP 93.4

8.1 54.1 Loss -42.6 58.5

Metals Hindalco Hindustan Zinc JSPL JSW Steel Nalco

January 2017

46

India Strategy | New Year, New Cards

Ready reckoner: Quarterly performance Sector

CMP

Sales (INR m) Var % Dec-16 YoY 24,300 60.2 107,930 20.7 282,582 0.8 212,241 42.7 1,162,860 22.3

Var % QoQ 39.7 -3.9 7.2 33.8 12.7

EBDITA (INR M) Var % Var % Dec-16 YoY QoQ 14,744 128.9 78.5 -2,259 Loss PL 33,750 335.1 13.6 68,574 136.0 46.9 222,233 167.6 25.8

PAT (INR M) Var % Dec-16 YoY 10,572 61.0 -14,906 Loss 5,073 LP 29,702 LP 72,585 LP

Var % QoQ 37.2 Loss LP 137.2 72.5

(INR)

RECO

134 51 405 217

Buy Sell Sell Neutral

656 243 440 140 461 343 935 108 457 194 375 1,069

Buy Neutral Neutral Neutral Buy Buy Neutral Buy Buy Neutral Buy Neutral

458,795 22,977 150,533 2,523 432,589 900,208 8,889 118,538 23,154 193,263 81,218 640,982 3,033,669 1,242,077

-1.6 12.7 12.5 1.9 -0.4 8.2 -4.1 34.4 4.4 5.1 57.8 13.3 8.0 15.3

2.8 12.7 26.9 -1.6 2.9 12.5 -7.6 18.9 3.2 5.7 22.8 7.6 8.9 11.1

33,984 11,570 16,796 2,205 28,369 108,326 2,461 16,173 7,952 97,075 5,314 119,725 449,949 279,270

43.8 56.7 54.8 5.7 30.7 118.4 33.0 166.2 26.4 12.4 68.2 16.6 39.8 23.1

154.6 11.2 10.8 -1.8 138.6 98.9 -4.4 159.0 6.3 1.8 -26.9 13.4 35.5 10.7

22,583 6,010 9,608 1,159 15,646 63,907 1,439 11,279 5,645 44,489 3,342 80,021 265,129 162,992

51.7 6816.5 44.6 -6.1 50.1 109.1 36.9 277.3 37.5 9.0 87.4 10.9 41.9 24.5

73.0 -22.8 3.9 -10.7 123.1 104.7 -7.3 171.2 -2.7 -10.6 -27.3 3.9 24.8 1.1

Retail Jubilant Foodworks Shopper's Stop Titan Company Sector Aggregate

860 295 359

Neutral Neutral Neutral

5,832 9,573 38,062 53,468

-8.0 5.0 12.0 8.1

-12.4 1.9 44.4 26.1

552 507 3,144 4,204

-24.0 -28.8 12.0 -1.0

-14.1 53.6 20.7 17.5

130 113 2,276 2,519

-55.6 -52.2 0.9 -9.5

-39.7 5.6 23.9 16.6

Technology Cyient HCL Technologies Hexaware Tech. Infosys KPIT Tech. L&T Infotech Mindtree MphasiS NIIT Tech. Persistent Systems Tata Elxsi TCS Tech Mahindra Wipro Zensar Tech Sector Aggregate

494 859 213 998 137 695 526 534 437 647 1,419 2,379 500 476 944

Buy Buy Neutral Buy Neutral Buy Neutral Neutral Neutral Neutral Buy Neutral Buy Neutral Buy

9,234 117,094 9,148 170,887 8,283 16,279 12,995 14,904 7,175 7,326 3,097 294,529 73,632 138,960 7,954 891,494

18.1 13.2 11.6 7.5 1.9 12.1 7.0 -1.7 5.7 23.7 13.0 7.6 9.9 8.1 5.1 8.6

1.1 1.7 1.2 -1.3 -0.3 1.6 0.3 -1.8 3.8 4.1 2.1 0.6 2.7 0.9 2.4 0.6

1,243 24,779 1,591 45,358 997 3,007 1,633 2,186 1,209 1,196 773 80,095 11,502 27,351 1,119 204,039

12.8 11.4 22.2 4.8 -15.5 13.2 -23.9 0.9 -2.1 7.7 16.6 3.4 1.3 2.3 2.7 4.2

-3.1 -1.3 0.9 -4.2 9.1 -1.2 0.8 -11.3 7.8 8.0 3.8 -1.3 7.5 3.1 2.4 -0.8

1,031 19,735 1,196 34,912 619 2,367 1,058 1,952 712 680 494 62,523 7,063 21,863 820 157,026

18.8 2.8 20.4 0.8 -15.8 -25.6 -29.9 12.4 -3.9 -12.2 23.8 2.3 -7.0 -2.1 14.7 0.3

6.0 -2.1 7.4 -3.2 10.2 1.8 11.6 -9.9 -1.1 -7.4 14.7 -5.1 9.5 5.8 19.4 -1.8

Telecom Bharti Airtel Bharti Infratel Idea Cellular Sector Aggregate

314 353 74

Buy Buy Sell

240,516 33,587 86,883 360,986

-0.1 8.1 -3.6 -0.2

-2.4 2.0 -6.6 -3.1

86,965 14,727 22,903 124,595

3.4 8.1 -26.8 -3.4

-7.9 1.6 -19.4 -9.3

10,894 7,798 -10,222 8,471

-14.3 57.5 PL -66.5

-25.6 0.8 PL -63.6

NMDC SAIL Tata Steel Vedanta Sector Aggregate Oil & Gas BPCL Cairn India GAIL Gujarat State Petronet HPCL IOC Indraprastha Gas MRPL Oil India ONGC Petronet LNG Reliance Inds. Sector Aggregate Oil & Gas Excl. OMCs

January 2017

47

India Strategy | New Year, New Cards

Ready reckoner: Quarterly performance Sector

Utilities CESC Coal India JSW Energy NTPC Power Grid Corp. Sector Aggregate Others Arvind Bata India Castrol India Coromandel International Dynamatic Tech. Indo Count Inds. Info Edge Inox Leisure Interglobe Aviation Jain Irrigation Just Dial Kaveri Seed MCX Manpasand Beverages Monsanto India P I Industries SRF S H Kelkar TTK Prestige Other Sector Aggregate

CMP

Sales (INR m) Var % Var % Dec-16 YoY QoQ

EBDITA (INR M) Var % Var % Dec-16 YoY QoQ

PAT (INR M) Var % Var % Dec-16 YoY QoQ

(INR)

RECO

646 306 61 165 186

Buy Neutral Buy Buy Buy

16,028 196,628 20,531 176,559 66,159 475,904

4.2 3.6 -22.5 2.0 23.4 3.8

-20.5 25.7 0.3 -8.2 6.3 5.3

3,576 32,585 8,478 50,238 59,272 154,149

20.0 -22.3 -28.8 11.0 24.8 3.1

-39.5 1761.1 -11.9 -4.1 6.3 22.9

1,450 28,763 1,462 21,775 19,887 73,337

29.5 -21.9 -54.4 5.2 23.3 -6.0

-40.1 379.3 -32.7 -7.0 6.2 39.1

358 463 386 304 2,960 166 859 230 843 93 343 414 1,281 557 2,254 825 1,554 336 5,718

Buy Buy Buy Buy Buy Buy Buy Sell Neutral Buy Buy Neutral Buy Buy Buy Buy Buy Buy Neutral

22,869 5,682 7,834 28,381 3,809 5,529 2,133 3,122 58,156 14,474 1,713 1,057 601 989 1,767 5,621 11,468 2,416 5,016 182,637

6.0 -8.0 -0.6 3.0 5.0 10.0 23.0 5.0 35.3 5.0 0.0 15.0 20.7 10.0 15.0 10.0 4.5 5.0 12.0 12.9

-1.9 -2.7 3.2 -20.6 -0.3 -4.1 1.5 5.0 39.6 0.5 -5.0 56.0 0.9 -3.5 83.2 -1.7 0.3 -1.5 0.1 5.6

2,767 540 2,179 2,327 430 1,205 634 518 22,255 1,737 274 63 194 179 498 1,282 2,236 403 627 40,350

-1.3 -32.3 4.1 40.8 43.3 11.2 64.8 -1.9 33.6 13.8 -26.7 -50.9 44.5 0.7 7.0 22.3 -4.3 -2.6 7.9 20.5

19.1 0.9 3.7 -39.5 -2.4 3.5 -8.7 90.6 130.0 -9.1 22.2 87.8 -0.6 -19.5 2715.8 0.2 -3.9 -3.1 0.9 42.6

1,123 314 1,461 1,177 85 701 573 178 9,446 49 221 26 343 66 448 939 970 242 377 18,741

7.7 -29.5 3.7 82.9 244.5 10.5 163.3 -6.7 43.7 LP -18.3 -71.7 45.5 34.7 -3.1 33.5 -8.1 3.6 1.4 30.2

47.1 -9.2 5.2 -44.8 5.3 11.8 -28.5 1017.2 575.6 -82.5 -25.5 -66.3 -8.8 22.4 4938.2 -7.4 -14.5 -0.2 -3.0 64.0

PL: Profit to Loss; LP: Loss to Profit; UR: Under Review

January 2017

48

India Strategy | New Year, New Cards

Ready reckoner: Quarterly performance Sector (INR Million) Financials Private Banks Axis Bank DCB Bank Equitas Holdings Federal Bank HDFC Bank ICICI Bank IDFC Bank IndusInd Bank Kotak Mahindra Bank RBL Bank Yes Bank Pvt Banking Aggregate PSU Banks Bank of Baroda Bank of India Canara Bank Indian Bank Oriental Bank of Commerce Punjab National Bank State Bank Union Bank PSU Banking Aggregate NBFC Bajaj Finance Bharat Financial Dewan Housing GRUH Finance HDFC Indiabulls Housing LIC Housing Fin M & M Financial Muthoot Finance Repco Home Fin Shriram Transport Fin. NBFC Banking Aggregate Financials Sector Aggregate

Net Interest Income Var % Var % Dec-16 YoY QoQ

Operating Profit Var % Var % Dec-16 YoY QoQ

Net Profit Var % Var % Dec-16 YoY QoQ

CMP (INR)

RECO

454 112 148 66 1,186 251 60 1,101 695 345 1,163

Neutral Neutral Buy Buy Buy Buy UR Buy Buy Buy Buy

44,917 1,949 2,116 7,377 80,157 51,555 5,143 15,140 20,213 3,293 14,632 243,200

7.9 21.5 39.7 21.9 13.4 -5.5 33.1 29.0 14.4 NA 26.5 10.1

-0.5 2.4 5.5 1.6 0.3 -1.9 3.8 3.7 1.3 8.7 1.2 0.2

42,552 1,048 786 4,598 62,637 51,278 3,912 13,066 13,713 2,393 13,985 207,575

6.8 24.4 -3.8 41.3 9.2 -21.8 0.6 23.2 13.8 NA 21.7 0.9

3.8 3.9 -37.9 -3.2 4.0 3.5 -32.8 1.9 -4.8 9.2 0.9 1.4

6,836 498 432 1,871 39,019 22,336 1,917 7,128 8,049 1,197 8,449 96,535

-68.6 20.8 0.4 15.0 16.2 -26.0 -20.8 22.7 26.8 NA 25.0 -11.7

114.2 2.6 -6.8 -7.0 12.9 -28.0 -50.6 1.2 -1.0 33.1 5.4 -2.3

148 108 264 225 107 115 243 125

Buy Neutral UR Buy Neutral Buy Buy Buy

32,781 26,224 23,925 12,238 12,437 37,397 143,275 22,097 310,374

21.2 -3.2 7.4 10.2 -5.0 -9.2 5.3 10.7 4.2

-4.3 -3.6 -2.0 -4.3 -5.5 -3.6 -0.8 -3.0 -2.3

26,580 18,361 21,899 10,121 8,841 32,789 118,715 16,519 253,825

56.0 30.3 41.1 33.1 15.4 12.4 23.7 23.8 26.6

-1.2 -26.3 2.3 0.6 -7.5 -1.0 5.8 -9.2 -1.0

8,246 242 4,130 3,713 2,019 4,426 26,554 2,307 51,637

LP LP 386.1 777.8 LP 767.6 138.1 193.7 LP

49.4 -80.9 15.7 -8.3 31.7 -19.4 4.6 30.6 6.3

870 629 244 328 1,213 644 518 274 287 577 911

Buy Buy Buy Neutral Buy Buy Buy Buy Buy Buy Buy

14,773 1,958 4,785 1,332 23,927 9,409 9,298 8,364 7,386 889 14,003 96,124 649,697

12.6 32.6 12.2 10.9 9.6 10.8 24.5 14.5 31.5 13.9 7.7 13.7 7.7

6.2 -7.4 -2.8 0.7 4.2 6.7 7.4 6.8 -2.3 -1.5 3.5 3.9 -0.5

8,623 1,243 3,770 1,057 22,357 9,806 8,517 4,834 4,201 778 10,553 75,739 537,139

11.8 11.2 14.8 6.1 8.8 21.7 25.2 8.8 41.3 13.9 6.5 13.9 13.6

8.4 -19.7 -5.1 0.7 3.7 6.4 7.7 7.3 -12.4 -7.1 0.2 2.5 0.4

4,404 1,043 2,122 640 16,539 7,298 5,316 1,512 2,617 411 3,781 45,683 193,855

7.8 31.2 14.1 19.2 8.8 21.1 26.9 125.1 40.2 6.6 0.8 16.0 76.8

8.0 -28.5 -8.8 3.4 -9.5 6.6 7.5 59.5 -11.8 -10.0 -2.5 -2.4 -0.2

PL: Profit to Loss; LP: Loss to Profit; UR: Under Review

January 2017

49

India Strategy | New Year, New Cards

Ready reckoner: Full year valuations Sector / Companies

CMP (INR)

RECO

EPS (INR) PE (x) EV/EBIDTA (x) ROE (%) FY17E FY18E FY19E FY17E FY18E FY19E FY17E FY18E FY19E FY17E FY18E FY19E

Automobiles Amara Raja Batt. Ashok Leyland Bajaj Auto Bharat Forge Bosch Endurance Tech. Eicher Motors Escorts Exide Inds. Hero Motocorp Mahindra & Mahindra Maruti Suzuki Tata Motors TVS Motor Sector Aggregate

899 84 2,689 913 20,450 572 22,178 321 182 3,014 1,221 5,510 487 374

Buy Buy Buy Buy Neutral Buy Buy Buy Buy Neutral Buy Buy Buy Buy

29.7 4.9 133.0 25.8 507.6 22.6 608.7 20.7 7.8 169.5 66.0 257.4 29.0 11.9

38.8 6.6 158.9 36.4 657.7 28.7 869.5 34.2 9.4 192.2 83.7 312.5 45.6 16.5

46.1 7.9 186.5 46.3 738.1 34.6 1091.6 46.2 11.2 195.0 99.0 379.1 70.5 19.6

30.3 17.0 20.2 35.4 40.3 25.3 36.4 15.5 23.3 17.8 18.5 21.4 16.8 31.4 21.4

23.2 12.8 16.9 25.1 31.1 19.9 25.5 9.4 19.3 15.7 14.6 17.6 10.7 22.7 16.0

19.5 10.6 14.4 19.7 27.7 16.5 20.3 6.9 16.3 15.5 12.3 14.5 6.9 19.1 12.4

17.5 9.1 14.1 16.5 32.3 11.5 26.3 12.6 11.8 11.8 5.5 13.4 5.6 19.5 9.5

13.9 7.1 11.5 13.1 24.1 9.4 19.2 8.2 9.9 10.2 4.6 10.2 4.2 14.5 7.3

11.5 5.7 9.6 10.7 20.4 7.9 15.4 5.9 7.9 9.9 3.9 8.1 2.9 12.0 5.7

21.9 23.5 29.4 15.9 19.7 19.9 40.3 10.9 13.6 39.0 14.5 23.1 11.5 26.5 17.6

23.6 26.5 30.9 20.0 24.5 21.1 41.6 16.3 14.7 37.5 14.5 23.1 15.9 29.5 20.0

23.1 26.8 31.8 21.9 23.0 21.4 37.8 19.1 15.3 32.6 15.4 23.1 20.6 28.1 21.7

Capital Goods ABB Bharat Electronics BHEL CG Consumer Elect. Crompton Greaves Cummins India GE T&D India Havells India Inox Wind K E C International Larsen & Toubro Siemens Solar Inds. Thermax Va Tech Wabag Voltas Sector Aggregate

1,037 1,431 127 152 61 809 302 351 183 144 1,376 1,121 713 780 486 335

Neutral Buy Sell Buy Sell Neutral Neutral Buy Neutral Buy Buy Neutral Neutral Sell Buy Buy

18.2 60.0 3.9 3.7 0.6 26.0 5.6 7.5 17.5 10.1 53.6 17.0 19.3 24.8 25.2 11.8

26.9 69.9 5.5 5.1 1.9 30.2 10.7 11.3 20.0 12.1 62.2 25.4 22.9 27.6 32.6 14.0

32.2 80.3 8.5 6.3 3.2 36.3 15.0 13.6 23.8 14.0 76.1 31.6 29.6 32.0 36.0 17.6

57.0 23.8 32.2 40.6 109.3 31.1 53.6 46.8 10.5 14.3 25.7 65.9 37.0 31.5 19.2 28.4 30.8

38.5 20.5 23.1 29.5 32.9 26.8 28.4 31.0 9.2 11.9 22.1 44.1 31.1 28.3 14.9 23.8 24.9

32.3 17.8 15.0 24.1 19.0 22.3 20.2 25.9 7.7 10.3 18.1 35.5 24.1 24.4 13.5 19.0 20.0

29.1 18.8 17.0 24.8 7.8 28.7 32.6 26.4 7.4 7.7 18.8 37.3 20.5 20.3 9.7 19.5 19.8

19.3 16.5 9.2 18.8 6.3 23.8 15.5 20.4 6.8 6.8 14.9 28.4 17.6 17.6 7.4 17.0 15.4

16.5 13.5 7.4 15.6 5.1 19.2 11.6 16.4 5.4 5.9 13.1 22.9 14.0 14.7 6.7 12.9 13.0

11.4 19.2 2.9 80.9 4.2 22.0 -6.8 16.9 19.3 16.0 10.9 9.2 18.6 12.2 13.2 15.4 9.5

14.5 18.3 3.9 74.2 6.0 23.1 20.1 23.3 18.6 16.7 11.7 12.6 19.0 12.5 15.4 16.4 10.9

15.4 18.5 5.8 66.1 8.0 25.2 25.1 24.6 18.8 16.8 13.0 14.3 20.9 13.4 15.2 18.1 12.4

Cement ACC Ambuja Cements Birla Corporation Dalmia Bharat Grasim Industries India Cements J K Cements JK Lakshmi Cem. Orient Cement Prism Cement Ramco Cements Shree Cement Ultratech Cement Sector Aggregate

1,320 212 675 1,580 867 122 728 365 126 84 575 14,131 3,299

Neutral Buy Buy Buy UR Neutral Buy Buy Buy Buy Buy Buy Buy

32.6 48.9 65.6 40.5 27.0 5.7 6.9 7.4 37.4 30.6 33.8 44.5 56.6 20.0 15.2 34.2 50.4 72.3 46.2 31.3 76.1 88.7 113.4 11.4 9.8 8.9 10.6 12.7 13.6 11.5 26.4 36.5 48.7 27.5 20.0 4.7 12.2 17.6 77.3 29.9 -1.1 3.3 5.7 -114.9 37.8 0.9 3.5 5.1 94.4 24.0 29.4 31.5 42.3 19.5 18.3 394.3 582.0 725.4 35.8 24.3 94.6 134.8 168.4 34.9 24.5 27.1 20.5

20.1 28.8 11.9 21.9 7.6 9.6 15.0 20.7 21.9 16.6 13.6 19.5 19.6 16.2

19.6 25.9 9.9 11.8 5.7 7.5 12.7 15.8 19.2 22.2 12.4 19.0 19.0 13.6

15.3 22.6 7.3 9.8 4.6 7.4 10.6 12.6 12.1 13.0 10.4 14.1 14.1 10.7

12.9 20.2 5.9 9.3 2.7 6.6 9.5 10.4 10.6 8.9 8.2 11.2 11.7 8.6

7.2 5.9 8.5 7.6 12.9 7.0 10.9 4.2 -2.3 4.5 20.6 20.2 11.9 10.5

10.9 7.1 9.8 10.3 13.3 7.4 13.7 10.5 6.8 16.0 18.6 24.3 15.0 12.6

14.6 7.3 11.9 13.1 14.9 8.0 16.1 14.7 11.0 19.8 21.0 24.2 16.4 14.2

January 2017

50

India Strategy | New Year, New Cards

Ready reckoner: Full year valuations Sector / Companies

CMP (INR)

RECO

EPS (INR) PE (x) EV/EBIDTA (x) ROE (%) FY17E FY18E FY19E FY17E FY18E FY19E FY17E FY18E FY19E FY17E FY18E FY19E

Consumer Asian Paints Britannia Colgate Dabur Emami Godrej Consumer GSK Consumer Hind. Unilever ITC Jyothy Labs Marico Nestle P&G Hygiene Page Industries Parag Milk Foods Pidilite Inds. Radico Khaitan United Breweries United Spirits Sector Aggregate

906 2,851 895 277 1,031 1,532 5,058 821 245 335 258 5,893 6,891 13,782 264 608 117 796 1,952

Neutral Buy Buy Neutral Buy Neutral Neutral Neutral Buy Neutral Buy Neutral Buy Buy Neutral Buy Neutral Buy Buy

20.2 70.6 22.3 7.2 24.7 36.8 157.7 19.7 8.4 7.2 6.0 111.5 138.5 247.4 7.0 16.4 5.3 12.3 27.8

40.0 34.7 32.9 32.6 33.7 35.0 28.3 36.6 25.6 39.5 35.6 42.3 40.8 44.1 27.3 33.1 16.6 48.7 42.8 32.4

34.3 29.1 27.2 27.8 27.8 30.4 25.1 31.8 22.3 33.4 30.3 34.9 34.2 34.2 18.7 29.5 14.2 40.4 31.6 27.8

28.6 29.0 24.1 31.1 31.0 30.5 22.0 29.1 19.8 25.9 29.7 31.4 32.3 36.4 16.0 24.2 12.5 30.8 34.4 25.5

25.7 24.5 19.8 26.1 26.4 25.9 19.1 25.7 17.1 22.1 24.6 25.0 25.7 28.1 12.8 21.4 11.3 24.7 25.1 21.8

22.1 20.3 16.5 22.1 22.0 22.7 16.3 22.3 14.6 19.4 21.1 20.6 21.2 22.4 9.7 18.6 10.2 20.2 19.7 18.6

32.4 42.2 56.3 27.8 34.1 22.3 25.1 68.7 28.4 15.0 32.8 35.9 27.7 42.9 10.8 27.6 7.3 14.5 20.3 29.3

32.0 38.8 63.2 27.9 33.6 22.7 24.7 79.1 28.3 16.5 33.1 39.2 29.4 42.7 10.5 25.6 9.1 16.9 23.6 29.9

32.3 36.9 70.5 27.8 33.8 22.1 24.2 89.8 28.5 17.9 34.8 40.1 30.3 44.0 13.5 23.5 9.9 17.5 24.5 30.3

Healthcare Alembic Pharma Alkem Lab Aurobindo Pharma Biocon Cadila Health Cipla Divis Labs Dr Reddy’ s Labs Fortis Health Glenmark Pharma Granules India GSK Pharma IPCA Labs. Lupin Sanofi India Sun Pharma Torrent Pharma Sector Aggregate

605 1,670 666 936 362 568 753 3,091 189 899 110 2,747 550 1,494 4,290 638 1,351

Neutral Neutral Buy Sell Buy Neutral Neutral Neutral Buy Neutral Buy Neutral Neutral Buy Buy Buy Buy

23.5 30.7 36.5 25.7 19.7 77.3 84.4 98.4 21.6 19.8 42.0 50.0 56.9 15.8 13.3 27.1 34.3 45.0 34.6 27.3 13.6 18.7 22.9 26.6 19.3 18.1 25.6 32.4 31.4 22.2 45.4 51.0 57.0 16.6 14.8 82.7 141.7 170.0 37.4 21.8 -1.3 3.5 6.7 -143.0 53.6 41.4 49.7 60.5 21.7 18.1 7.1 10.0 13.9 15.6 11.0 50.4 61.8 71.6 54.5 44.5 17.0 29.4 39.0 32.3 18.7 61.6 77.0 89.0 24.3 19.4 142.2 172.8 198.9 30.2 24.8 27.8 37.9 42.9 22.9 16.8 57.7 78.4 96.0 23.4 17.2 25.0 18.8

16.6 17.0 11.7 20.8 15.8 17.5 13.2 18.2 28.2 14.9 7.9 38.3 14.1 16.8 21.6 14.9 14.1 16.0

16.7 18.0 11.2 19.8 17.5 17.8 11.7 19.7 19.7 11.1 8.3 45.7 15.1 15.6 16.2 14.0 15.4 15.4

12.7 14.8 9.2 15.7 13.0 13.5 10.0 13.0 11.4 9.8 6.4 36.4 11.2 12.5 13.7 11.1 12.3 12.1

10.2 11.6 7.7 12.2 10.5 10.8 8.5 10.3 9.0 9.6 4.8 29.9 8.7 10.4 11.6 9.0 9.8 9.9

25.1 23.9 29.9 12.2 23.9 11.2 26.7 10.6 -1.5 20.4 20.5 29.6 9.0 22.8 17.8 20.3 26.4 17.8

26.8 21.8 27.2 13.9 27.2 13.9 26.5 16.1 3.8 19.1 22.7 40.8 14.1 23.4 19.4 23.9 29.9 19.8

25.6 21.5 24.2 16.2 26.8 15.1 25.7 16.8 6.4 19.0 26.0 50.3 16.5 22.2 19.7 22.3 30.2 19.6

Logistics Allcargo Logistics Concor Gateway Distriparks Sector Aggregate

179 1,151 255

Buy Neutral Buy

10.5 36.6 9.9

12.5 21.1 11.4 17.8

8.3 18.4 11.1 14.5

6.8 14.7 8.8 11.8

5.8 12.5 6.3 9.9

13.3 8.7 8.5 9.5

16.9 10.5 12.8 11.4

16.5 11.5 16.9 12.4

January 2017

22.6 82.1 27.2 8.5 30.6 43.8 178.8 22.4 9.6 8.5 7.2 139.2 168.9 312.7 9.7 18.4 7.1 16.4 45.7

12.8 46.8 15.6

26.4 97.8 32.9 10.0 37.1 50.4 201.2 25.8 11.0 10.1 8.5 168.7 201.7 402.4 14.1 20.6 8.2 19.7 61.7

14.3 54.4 22.4

44.9 40.4 40.2 38.6 41.7 41.7 32.1 41.6 29.2 46.5 43.2 52.8 49.8 55.7 37.5 37.1 22.2 64.5 70.3 37.9

17.0 31.4 25.8 27.4

14.0 24.6 16.3 21.1

51

India Strategy | New Year, New Cards

Ready reckoner: Full year valuations Sector / Companies

CMP (INR)

RECO

Media D B Corp Den Networks Dish TV Hathway Cable Hindustan Media HT Media Jagran Prakashan PVR Siti Networks Sun TV Zee Entertainment Sector Aggregate

374 72 85 37 270 75 181 1,173 38 524 458

Buy Neutral Buy Buy Buy Neutral Buy Buy Buy UR Buy

20.0 -3.6 2.0 -2.4 26.9 5.4 10.8 20.4 -0.9 25.4 11.7

23.5 1.9 3.3 -1.4 29.7 7.0 12.2 35.8 2.7 30.3 17.7

27.4 7.7 5.1 0.3 33.2 8.0 13.9 57.0 3.2 33.9 21.3

18.7 -19.7 43.1 -15.0 10.1 13.9 16.8 57.6 -41.1 20.6 39.3 30.7

15.9 13.7 38.7 9.3 25.4 16.7 -27.1 134.9 9.1 8.1 10.7 9.4 14.8 13.0 32.7 20.6 13.8 11.8 17.3 15.4 25.9 21.5 21.4 17.1

Metals Hindalco Hindustan Zinc JSPL JSW Steel Nalco NMDC SAIL Tata Steel Vedanta Sector Aggregate

159 251 71 163 66 134 51 405 217

Buy Neutral Neutral Buy Buy Buy Sell Sell Neutral

18.5 21.5 -23.8 12.3 3.7 10.9 -10.4 7.7 21.3

22.1 25.4 -8.4 18.7 4.8 10.8 -14.3 37.1 27.3

24.7 25.3 -5.3 19.1 4.9 11.3 -1.4 40.7 27.9

8.6 11.7 -3.0 13.3 17.8 12.3 -4.9 52.8 10.2 17.1

656 243 440 140 461 935 343 108 457 194 375 1,069

Buy Neutral Neutral Neutral Buy Neutral Buy Buy Buy Neutral Buy Neutral

55.5 56.4 59.8 14.0 12.5 12.8 28.7 36.4 44.7 8.8 11.0 13.2 52.7 45.1 46.2 42.0 43.7 47.6 49.3 40.1 41.9 17.0 15.8 17.2 44.7 54.1 55.7 14.8 18.9 22.7 19.8 26.9 36.3 100.9 109.0 110.0

860 295 359

Neutral Neutral Neutral

10.8 3.0 8.7

18.5 9.2 9.8

494 859 213 998 137

Buy Buy Neutral Buy Neutral

34.6 56.7 13.6 61.7 12.6

44.2 63.2 15.5 67.8 15.6

Oil & Gas BPCL Cairn India GAIL Gujarat State Petronet HPCL Indraprastha Gas IOC MRPL Oil India ONGC Petronet LNG Reliance Inds. Oil & Gas Aggregate Oil & Gas Ex OMCs Retail Jubilant Foodworks Shopper's Stop Titan Company Sector Aggregate Technology Cyient HCL Technologies Hexaware Tech. Infosys KPIT Tech.

January 2017

EPS (INR) PE (x) EV/EBIDTA (x) ROE (%) FY17E FY18E FY19E FY17E FY18E FY19E FY17E FY18E FY19E FY17E FY18E FY19E 10.4 11.8 8.9 12.5 5.0 3.0 9.2 18.0 11.6 10.1 21.3 12.7

8.9 4.8 7.0 8.9 3.7 1.8 8.0 12.5 5.2 8.4 16.7 9.6

7.6 3.0 5.5 6.7 2.5 0.9 6.9 9.3 3.8 7.5 13.4 7.8

25.7 -4.1 43.2 -16.6 19.6 5.2 20.7 10.4 -10.2 25.3 29.4 16.7

26.9 2.1 46.3 -11.0 18.0 6.3 20.6 16.4 23.5 27.6 30.7 20.6

27.6 8.1 44.6 2.3 16.9 6.6 20.4 22.0 20.0 28.1 29.9 22.1

7.2 9.9 -8.4 8.7 13.7 12.4 -3.5 10.9 7.9 12.2

6.4 6.4 5.7 9.9 7.4 5.5 -13.3 11.8 11.0 8.5 7.6 6.0 13.4 8.2 5.4 11.9 8.7 8.0 -36.9 938.5 133.7 9.9 10.0 7.7 7.8 5.0 4.0 10.0 8.1 6.7

5.0 5.1 10.1 5.5 5.1 7.6 11.4 7.3 3.7 5.9

17.3 22.5 -12.8 14.9 7.1 12.8 -11.5 5.8 13.0 7.8

18.1 22.6 -5.0 19.6 8.7 14.2 -18.4 29.2 14.8 10.2

17.1 19.4 -3.3 17.1 8.5 13.7 -2.0 26.0 14.0 11.5

11.8 17.4 15.3 15.9 8.7 22.3 7.0 6.3 10.2 13.1 18.9 10.6 10.9 12.5

11.6 19.5 12.1 12.7 10.2 21.4 8.6 6.8 8.4 10.3 13.9 9.8 10.5 10.9

11.0 19.0 9.8 10.6 10.0 19.7 8.2 6.3 8.2 8.6 10.3 9.7 9.7 9.9

7.8 5.9 9.7 8.9 5.8 12.4 5.1 4.6 7.0 6.0 11.7 5.8 6.1 6.3

7.2 4.6 7.7 7.0 6.6 11.5 5.6 4.7 6.3 4.8 8.6 4.5 5.4 5.1

6.8 3.7 6.4 5.7 6.6 10.4 5.2 3.3 6.0 4.1 5.9 3.8 4.7 4.3

26.2 5.3 12.9 11.9 26.6 21.8 29.3 39.4 11.5 10.1 21.5 11.8 13.8 10.7

22.7 4.6 13.2 13.5 19.7 19.8 20.8 28.4 13.0 12.4 24.7 11.5 13.2 11.5

20.8 4.6 14.9 14.5 17.8 18.6 19.2 25.1 12.5 14.4 27.6 10.6 13.1 11.8

27.2 13.8 11.3

80.0 96.9 41.0 45.8

46.4 32.2 36.8 37.5

31.7 21.5 31.6 30.7

22.7 17.9 30.5 27.9

16.0 10.6 27.3 22.8

11.5 7.8 23.4 18.5

8.9 3.1 20.2 15.2

15.3 8.8 19.7 16.7

20.2 11.9 20.1 17.9

47.5 67.2 15.9 75.0 16.3

14.3 15.2 15.6 16.2 10.9

11.2 13.6 13.8 14.7 8.8

10.4 12.8 13.4 13.3 8.4

9.4 10.8 11.0 10.1 4.7

7.2 9.1 9.0 8.7 3.2

6.2 8.1 8.4 7.7 2.5

16.4 26.6 27.7 22.8 16.9

18.3 25.5 27.5 22.6 17.6

17.3 23.2 24.0 22.5 15.5

52

India Strategy | New Year, New Cards

Ready reckoner: Full year valuations Sector / Companies L&T Infotech Mindtree MphasiS NIIT Tech. Persistent Systems TCS Tata Elxsi Tech Mahindra Zensar Tech Wipro Sector Aggregate

CMP (INR) 695 526 534 437 647 2,379 1,419 500 944 476

RECO Buy Neutral Neutral Neutral Neutral Neutral Buy Buy Buy Neutral

EPS (INR) PE (x) FY17E FY18E FY19E FY17E FY18E 54.9 58.6 62.1 12.7 11.9 26.6 36.2 38.1 19.8 14.5 42.2 54.0 57.2 12.7 9.9 38.6 50.2 54.3 11.3 8.7 36.2 45.0 54.8 17.9 14.4 131.0 144.9 155.3 18.2 16.4 60.2 73.6 88.4 23.6 19.3 30.9 36.0 39.5 16.2 13.9 69.5 92.5 99.2 13.6 10.2 34.3 39.5 44.1 13.9 12.1 16.5 14.7

EV/EBIDTA (x) ROE (%) FY19E FY17E FY18E FY19E FY17E FY18E FY19E 11.2 9.5 8.6 7.9 42.3 36.8 32.5 13.8 12.4 9.3 8.7 18.0 22.0 20.6 9.3 4.8 3.8 2.9 13.7 16.3 15.9 8.1 4.8 3.9 3.3 14.2 16.6 16.0 11.8 9.6 7.1 6.2 16.7 19.2 22.5 15.3 13.5 11.7 10.8 33.0 31.3 28.7 16.1 13.7 11.0 8.9 42.8 41.7 41.0 12.6 10.7 8.6 7.4 19.1 19.3 18.5 9.5 8.6 6.1 5.1 20.3 22.8 20.7 10.8 9.5 7.8 7.2 17.7 18.5 18.5 13.6 11.4 9.7 8.7 23.4 22.9 21.8

Telecom Bharti Airtel Bharti Infratel Idea Cellular Sector Aggregate

314 353 74

Buy Buy Sell

12.4 17.2 -6.3

9.4 17.8 -12.9

13.4 19.7 -11.4

25.3 20.5 -11.8 37.2

33.4 19.8 -5.7 90.5

23.4 17.9 -6.5 44.8

6.1 10.3 8.1 7.0

5.8 8.8 8.8 6.7

4.7 7.5 7.8 5.6

7.3 17.2 -9.2 5.3

5.3 16.6 -21.9 2.1

7.1 16.2 -24.1 4.2

Utilities CESC Coal India JSW Energy NTPC Power Grid Corp. Sector Aggregate

646 306 61 165 186

Buy Neutral Buy Buy Buy

48.4 16.1 5.1 11.9 14.2

70.7 18.4 3.2 14.3 16.8

77.6 20.8 1.5 17.3 19.3

13.4 19.1 11.9 13.9 13.1 15.4

9.1 16.6 18.8 11.5 11.1 13.2

8.3 14.7 41.8 9.5 9.7 11.5

6.5 14.3 6.5 11.2 9.2 10.5

5.8 11.6 7.5 9.1 7.9 8.9

5.4 10.0 8.3 7.3 7.1 7.7

4.7 32.9 9.6 10.6 16.1 15.1

6.3 37.7 5.9 11.9 16.6 16.3

6.6 42.6 2.6 13.3 16.9 17.4

358 463 386 175 304 2,960 224 166 859 230 843 93 343 414 409 1,281 557 2,254 825 336 1,554 1,169 5,718 165 340

Buy Buy Buy Buy Buy Buy Buy Buy Buy Sell Neutral Buy Buy Neutral Buy Buy Buy Buy Buy Buy Buy Sell Neutral Neutral Buy

14.8 24.0 29.8 10.9 14.2 17.7 13.4 14.3 15.9 4.6 8.8 11.3 16.3 20.0 25.5 67.6 112.9 166.7 9.2 12.9 16.7 15.7 18.5 21.5 18.4 20.7 23.5 4.1 8.6 10.9 58.3 72.5 91.2 5.5 7.6 10.0 15.6 18.5 23.0 23.1 28.8 36.3 29.3 35.1 41.7 28.6 47.4 65.2 14.9 23.8 39.0 68.4 87.2 106.6 31.3 38.4 47.6 7.5 10.1 13.0 81.0 106.8 129.7 27.0 35.1 42.9 107.8 139.9 178.6 4.5 5.8 7.0 7.0 11.9 16.0

24.1 42.5 28.8 38.4 18.7 43.8 24.2 10.6 46.6 55.9 14.4 16.8 22.0 18.0 14.0 44.8 37.3 33.0 26.4 44.9 19.2 43.3 53.0 36.5 48.7 23.8

14.9 32.6 27.0 20.0 15.2 26.2 17.4 9.0 41.4 26.8 11.6 12.2 18.5 14.4 11.7 27.0 23.4 25.9 21.5 33.1 14.6 33.3 40.9 28.6 28.5 18.5

12.0 26.2 24.3 15.6 11.9 17.8 13.4 7.7 36.5 21.1 9.2 9.3 14.9 11.4 9.8 19.6 14.3 21.2 17.3 25.8 12.0 27.2 32.0 23.4 21.2 14.8

10.9 23.3 18.2 20.6 10.1 13.5 14.7 6.5 38.5 14.8 4.6 7.2 13.8 13.7 8.1 70.4 17.5 28.0 19.8 26.8 10.5 32.2 32.2 24.3 22.5 11.2

8.4 18.1 17.3 12.2 8.7 11.0 11.9 5.5 33.4 10.5 3.4 5.9 10.5 10.4 6.6 28.1 12.9 22.0 15.1 20.4 8.6 24.7 24.9 19.1 14.2 8.7

7.0 14.4 15.4 10.0 7.1 8.8 9.6 4.5 29.1 8.9 2.7 5.1 7.5 8.0 5.0 18.1 7.6 18.0 11.9 16.1 6.9 20.1 20.1 15.7 10.8 7.0

11.3 15.2 16.5 11.3 13.4 15.0 108.8 104.6 105.2 18.2 29.8 30.7 18.5 20.4 22.8 15.1 20.7 24.3 29.5 33.7 34.9 37.8 31.2 26.6 12.0 12.3 12.9 6.2 11.8 13.2 105.1 110.2 116.0 8.6 11.7 14.8 15.1 15.7 16.9 17.1 20.0 23.1 33.1 31.0 29.3 11.5 17.5 21.7 8.6 9.9 16.5 28.8 35.9 39.8 31.7 30.1 29.2 13.5 16.6 18.9 16.2 18.5 19.4 56.8 65.0 66.3 16.6 19.7 22.4 26.1 27.4 27.3 9.5 14.8 17.5 22.7 25.5 27.4

Others Arvind Bata India Castrol India Century Plyboards Coromandel International Dynamatic Tech. Eveready Inds. Indo Count Inds. Info Edge Inox Leisure Interglobe Aviation Jain Irrigation Just Dial Kaveri Seed Kitex Garments MCX Manpasand Beverages Monsanto India P I Industries S H Kelkar SRF Symphony TTK Prestige V-Guard Inds Wonderla Holiday Sector Aggregate

January 2017

53

India Strategy | New Year, New Cards

Ready reckoner: Full year valuations Sector / Companies Banks-Private Axis Bank DCB Bank Equitas Holdings Federal Bank HDFC Bank ICICI Bank IDFC Bank IndusInd Bank J&K Bank Kotak Mahindra Bank RBL Bank South Indian Bank Yes Bank Private Bank Aggregate Banks-PSU Bank of Baroda Bank of India Canara Bank IDBI Bank Indian Bank Oriental Bank of Commerce Punjab National Bank State Bank Union Bank PSU Bank Aggregate NBFC Bajaj Finance Bharat Financial Dewan Housing GRUH Finance HDFC Indiabulls Housing LIC Housing Fin M & M Financial Muthoot Finance Power Finance Corp Repco Home Fin Rural Electric. Corp. Shriram Transport Fin. NBFC Aggregate Financials Sector Aggregate

CMP (INR)

Reco

EPS (INR) PE (x) PB (x) ROE (%) FY17E FY18E FY19E FY17E FY18E FY19E FY17E FY18E FY19E FY17E FY18E FY19E

454 112 148 66 1,186 251 60 1,101 61 695 345 20 1,163

Neutral Neutral Buy Buy Buy Buy UR Buy Neutral Buy Buy Buy Buy

13.0 7.2 6.0 4.5 57.9 17.2 3.1 47.6 -21.5 26.6 12.2 3.0 74.5

23.2 8.5 6.8 5.5 69.8 18.0 4.2 59.6 12.9 32.4 14.8 3.6 95.8

46.9 10.7 8.9 7.1 84.9 21.7 5.7 74.0 15.8 41.7 20.5 4.3 119.3

34.9 15.6 24.8 14.5 20.5 14.6 19.2 23.1 -2.8 26.2 28.3 6.8 15.6 21.0

19.5 13.1 21.7 12.1 17.0 14.0 14.2 18.5 4.7 21.4 23.3 5.5 12.1 16.5

9.7 10.5 16.7 9.3 14.0 11.6 10.5 14.9 3.8 16.6 16.8 4.6 9.7 12.5

2.0 1.6 2.2 1.3 3.6 1.7 1.4 3.3 0.5 3.4 3.0 0.7 3.0 2.5

1.8 1.4 2.0 1.2 3.1 1.6 1.3 2.9 0.5 2.9 2.7 0.6 2.5 2.2

1.6 1.3 1.8 1.1 2.6 1.4 1.2 2.5 0.4 2.5 2.4 0.6 2.1 2.0

5.8 11.0 11.2 9.3 18.7 10.4 7.5 15.3 -17.7 13.6 12.4 10.3 20.9 11.9

9.7 11.7 9.7 10.4 19.5 10.0 9.5 16.7 11.1 14.5 12.3 11.7 22.6 13.6

17.5 12.9 11.4 12.3 20.3 11.3 11.9 17.8 12.0 16.1 15.3 12.7 23.4 15.8

148 108 264 70 225 107 115 243 125

Buy Neutral UR Neutral Buy Neutral Buy Buy Buy

12.3 -4.0 27.2 1.5 30.4 19.3 8.5 9.8 15.6

18.8 18.5 37.9 6.4 31.9 21.3 13.2 23.3 30.4

26.2 25.1 58.4 8.6 38.5 31.0 17.8 30.9 45.7

12.0 -27.0 9.7 45.7 7.4 5.5 13.6 24.7 8.0 18.2

7.9 5.8 7.0 10.9 7.1 5.0 8.8 10.4 4.1 8.8

5.6 4.3 4.5 8.2 5.9 3.4 6.5 7.9 2.7 6.5

0.9 0.5 0.5 0.6 0.7 0.3 0.6 1.1 0.4 0.8

0.9 0.4 0.5 0.6 0.7 0.2 0.6 1.0 0.4 0.7

0.8 0.4 0.5 0.6 0.6 0.2 0.5 0.9 0.3 0.7

8.1 -1.7 5.6 1.4 10.4 4.8 4.8 4.7 5.2 4.2

11.5 7.5 7.4 5.8 10.1 5.1 7.0 10.1 9.5 8.3

14.5 9.5 10.6 7.3 11.2 7.1 8.8 12.2 12.9 10.5

870 629 244 328 1,213 644 518 274 287 124 577 125 911 13

Buy Buy Buy Neutral Buy Buy Buy Buy Buy Neutral Buy Neutral Buy

31.8 42.7 29.0 7.8 47.5 69.5 39.4 12.7 27.5 24.0 26.9 29.4 63.5

41.3 38.5 36.8 9.6 53.7 87.7 48.1 14.6 32.0 25.5 38.0 35.3 82.3

56.7 63.1 44.6 12.3 61.4 113.1 57.3 16.0 39.0 40.5 51.6 39.9 101.4

27.4 14.7 8.4 41.8 25.5 9.3 13.2 21.6 10.4 5.2 21.4 4.2 14.3 13.6 17.9

21.1 16.3 6.6 34.0 22.6 7.3 10.8 18.7 9.0 4.8 15.2 3.5 11.1 11.7 12.9

15.3 10.0 5.5 26.7 19.7 5.7 9.0 17.1 7.4 3.1 11.2 3.1 9.0 9.2 9.8

5.3 3.2 1.2 11.7 4.9 2.3 2.4 2.3 1.8 0.8 3.3 0.7 1.8 2.4 1.7

4.4 2.7 1.1 9.5 4.4 2.0 2.1 2.1 1.6 0.7 2.7 0.6 1.6 2.1 1.6

3.5 2.1 0.9 7.8 4.0 1.8 1.7 2.0 1.4 0.6 2.3 0.6 1.4 1.8 1.4

21.1 28.6 15.8 30.7 20.8 26.0 20.0 11.3 18.4 16.8 16.4 18.8 13.4 17.7 9.7

22.8 17.7 17.2 30.9 21.1 29.3 20.7 11.9 19.0 16.2 19.7 19.5 15.4 18.1 12.3

25.4 23.5 18.2 32.2 21.6 33.2 20.9 12.0 20.4 22.3 22.2 18.9 16.6 19.9 14.5

UR: Under Review

January 2017

54

India Strategy | New Year, New Cards

Sectors & Companies BSE Sensex: 26,633

S&P CNX: 8,191

December 2016

Note: In our quarterly performance tables, our four-quarter numbers may not always add up to the full-year numbers. This is because of differences in classification of account heads in the company’s quarterly and annual results or because of differences in the way we classify account heads as opposed to the company. All stock prices and indices as on 4 January 2017, unless otherwise stated.

January 2017

55

December 2016 Results Preview | Sector: Automobiles December 2016 Results Preview

Automobiles Company name Amara Raja Batteries

Demonetization derails 3QFY17 auto volumes 2Ws/3Ws/CVs likely to see a decline; PVs relatively well placed 

Ashok Leyland Bajaj Auto Bharat Forge BOSCH



Eicher Motors Escorts



Exide Industries Hero MotoCorp Mahindra & Mahindra Maruti Suzuki Tata Motors TVS Motor Company



We expect the automobile industry’s performance in 3QFY17 to be subdued due to the impact of demonetization. We believe 2Ws and 3Ws are likely to be worst hit as the cash component in transactions in this space is relatively high compared to other segments like PVs and CVs. We estimate 2W and 3W volumes to decline 4% and 20% YoY, respectively. Volumes in PVs are expected to grow by 5% YoY, while those in CVs should decline 4% YoY. EBITDA margin for our auto OEM (ex-JLR) coverage universe is likely to remain constant YoY (-140bp QoQ) at 13%. The 2W pack along with MSIL and ALL are expected to see a QoQ margin decline. We lower our FY18E EPS for TTMT (-17%), HMCL (-8%), BJAUT (-5%), BOS (-6%), but increase for BHFC (+6.5%). Our top picks are MSIL and TTMT among large caps, and AL and Amara Raja among midcaps.

2W/CV volumes to decline, PVs relatively well placed 2W sales are expected to decline 4% YoY in 3QFY17, which is relatively steep compared to other segments, as the cash component in 2W transactions is relatively high due to lower ticket size of vehicles and higher exposure to rural areas. Besides, currency-related issues are likely to pull down 2W exports. Growth in passenger car volumes is expected to moderate to be flat YoY, while UV volumes are expected to increase robustly by 16% driven by new launches. PVs were less impacted, primarily due to waiting periods in many models of OEMs and lower cash component. CV volumes are expected to decline 4% YoY in 3QFY17, with volumes declining by 9% in LCVs offset by 4% growth in MHCV volumes. Many fleet operators have postponed their purchases due to the cash crunch post demonetization.

EBITDA margin to contract as negative operating leverage kicks in EBITDA margin for our auto OEM (ex-JLR) universe is likely to contract 140bp QoQ (stable YoY), given pressure from negative operating leverage due to lower volumes. Among 2Ws, we expect margin contraction in BJAUT (-170bp YoY), HMCL (-100bp), TTMT S/A (-240bp), and expansion in M&M (+100bp) and EIM (+290bp).

Demonetization impact likely to moderate While November and especially December saw a decline in volumes on account of demonetization, the situation on the ground has started showing some signs of recovery. Retail sales volumes have started to gradually pick up, albeit are still below normal levels.

Valuation and view We lower our FY18E EPS for TTMT (-17%), HMCL (-8%), BJAUT (-5%), BOS (-6%), but increase for BHFC (+6.5%). In our view, demand and competition would be the key determinants of stock performance. Our top picks are MSIL, TTMT among large caps, and AL and Amara Raja among midcaps.

Jinesh Gandhi ([email protected]); +91 22 3982 5416 Aditya Vora ([email protected]); +91 22 3078 4701 January 2017

56

December 2016 Results Preview | Sector: Automobiles

Exhibit 1: Summary of expected quarterly performance (INR m) Sector

Automobiles Amara Raja Batt. Ashok Leyland Bajaj Auto Bharat Forge Bosch Eicher Motors Escorts Exide Inds. Hero Motocorp Mahindra & Mahindra Maruti Suzuki Tata Motors TVS Motor Auto Sector Aggregate

CMP (INR)

RECO

899 84 2,689 913 20,450 22,178 321 182 3,014 1,221 5,510 487 374

Buy Buy Buy Buy Neutral Buy Buy Buy Neutral Buy Buy Buy Buy

Sales (INR M) Var % Var % Dec-16 YoY QoQ 12,558 46,272 50,471 9,223 28,228 18,440 10,746 15,515 64,319 103,467 165,942 708,422 30,341 1,263,943

2.5 13.3 -9.3 -12.3 3.0 -44.4 21.0 2.0 -11.8 -1.1 10.0 -2.0 3.2 -1.6

Exhibit 2: Volume snapshot for 3QFY17 ('000 units) 3QFY17 4,567 183 682 269 951 77 104 181 5,883

3QFY16 4,738 230 678 232 909 74 115 189 6,066

YoY (%) -3.6 -20.3 0.6 16.3 4.6 3.8 -9.1 -4.1 -3.0

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

16.3

17.0 14.8

2QFY17

FY16 19,005 943 2,555 901 3,457 336 442 778 24,182

FY15 18,434 939 2,424 806 3,229 263 431 693 23,296

-12.1 -4.6 -24.3 8.5 -27.3 2.3 40.8 -28.2 -31.3 -28.8 -19.0 256.1 -26.4 5.8

YoY (%) 3.1 0.3 5.4 11.9 7.0 27.9 2.6 12.2 3.8

Exhibit 4: Commodity prices recover from lows (index)

3QFY17

9.6

Cars

8.1

3QFY16

4QFY16

1QFY17

2QFY17

3QFY17

6.1 5.6

CVs Source: Company, MOSL

January 2017

QoQ (%) -10.8 -10.7 13.6 7.0 11.6 -4.2 -7.3 -6.0 -7.6

-12.0 38.1 -5.7 -18.5 39.3 56.0 136.6 -4.3 -13.3 8.7 39.4 -15.9 21.2 2.6

14.6 16.1 14.9 14.0 14.2 7.1

2W

2QFY17 5,119 205 600 252 852 80 112 193 6,369

-10.1 -6.4 -24.5 5.0 -23.0 7.1 34.2 -25.3 -30.7 2.2 -16.9 42.1 -21.6 7.2

100 126 142 134 139

16.1

1QFY17

1,198 2,808 8,498 1,377 3,076 4,225 483 1,283 6,900 8,917 19,433 29,165 1,306 88,668

-9.6 16.9 -16.4 -18.0 4.0 12.3 145.6 -7.5 -16.5 6.1 16.3 -4.8 10.4 -1.6

100 99 112 112 112

15.9

4QFY16

2,066 5,021 9,788 2,601 3,613 5,809 838 2,167 10,273 15,006 25,229 89,260 2,169 173,841

100 98 101 119 117

3QFY16

Net Profit (INR m) Var % Var % Dec-16 YoY QoQ

100 147 146 156 155

Two wheelers Three wheelers Passenger cars UVs & MPVs Total PVs M&HCV LCV Total CVs Total

-6.7 0.1 -16.6 3.5 8.1 5.1 8.0 -19.3 -17.5 1.7 -7.0 7.5 -11.5 0.8

EBDITA (INR M) Var % Var % Dec-16 YoY QoQ

Steel

Lead

Alu

Rubber

Source: Company, MOSL

57

December 2016 Results Preview | Sector: Automobiles

Exhibit 5: Trend in key currencies v/s INR USD

170

GBP

Exhibit 6: Continued improvement in EBITDA margins (%) JPY

Aggregate (excld JLR)

Aggregate (incl JLR)

15

140

12 110

9

80

3QFY11 4QFY11 1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13 4QFY13 1QFY14 2QFY14 3QFY14 4QFY14 1QFY15 2QFY15 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17

Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16

6

Source: Bloomberg, MOSL

Source: Company, MOSL

Exhibit 7: Revised estimates EPS (INR)

Rev 133.0 169.5 11.9 257.4 66.0 29.0 4.9 608.7 29.7 25.8 7.8 507.6

Bajaj Auto Hero MotoCorp TVS Motor Maruti * M&M * Tata Motors * # Ashok Leyland Eicher Motors * Amara Raja Bharat Forge Exide Industries BOSCH * Consolidated

FY17E Old 140.3 182.7 12.5 265.7 67.7 27.1 4.8 601.6 30.9 25.0 8.0 539.7

Chg (%) -5.2 -7.2 -4.8 -3.1 -2.6 7.0 2.0 1.2 -3.9 2.9 -2.2 -5.9

Rev 158.9 192.2 16.5 312.5 83.7 45.6 6.6 869.5 38.8 36.4 9.4 657.7

FY18E Old Chg (%) 167.3 -5.0 208.7 -7.9 17.1 -3.8 322.3 -3.0 85.7 -2.4 55.0 -17 6.5 1.6 867.5 0.2 40.1 -3.4 34.2 6.5 9.7 -2.2 700.9 -6.2 Source: Company, MOSL

Exhibit 8: 3QFY17 estimates

BJAUT HMCL TVS Motor MSIL MM TTMT (S/A) TTMT (JLR) TTMT (Cons) Ashok Leyland Eicher (RE) Eicher (VECV) Eicher (Consol) Agg. (ex JLR)

January 2017

Volumes ('000 units) 3QFY17 YoY (%) QoQ (%) 852 -10 -17 1473 -13 -19 719 2 -12 387 3 -7 195 1 5 133 8 -2 151 0 9 33 174 12

6 38 -7

-2 4 -12

3,977

-5.4

-14.0

EBITDA margins (%) 3QFY17 YoY (bp) QoQ (bp) 19.4 -170 -200 14.7 -90 -280 7.2 50 -90 15.2 80 -180 14.5 100 10 3.3 -240 -40 12.4 -200 210 12.6 -40 310 10.9 30 -80 31.5 290 20 5.5 -190 -180 32 290 20 13.0 -10 -120

Adj PAT (INR m) 3QFY17 YoY (%) QoQ (%) 8,498 -6 -24 6,900 -13 -31 1,306 21 -26 19,433 39 -19 8,917 9 -29 -3,558 -800 46 325 21 33 29,165 -16 256 2,808 38 -5 4,205 72 6 266 -59 -59 4,225 56 2 48,529 8.9 -19.1

58

December 2016 Results Preview | Sector: Automobiles

Exhibit 9: Relative performance – Three months (%) Sensex Index

MOSL Automobiles Index

Sensex Index

MOSL Automobiles Index

125

99

Source: Bloomberg, MOSL

Dec-16

Nov-16

Oct-16

Sep-16

Aug-16

Jul-16

Jun-16

Dec-16

Oct-16

May-16

85 Apr-16

90

Mar-16

95 Dec-15

93

Nov-16

105

Sep-16

96

Feb-16

115

Jan-16

102

Exhibit 10: Relative performance – One-year (%)

Source: Bloomberg, MOSL

Exhibit 11: Comparative valuation Sector / Companies Automobiles Amara Raja Batt. Ashok Leyland Bajaj Auto Bharat Forge Bosch Endurance Tech. Eicher Motors Escorts Exide Inds. Hero Motocorp Mahindra & Mahindra Maruti Suzuki Tata Motors TVS Motor Auto Sector Aggregate

January 2017

CMP (INR)

RECO

899 Buy 84 Buy 2,689 Buy 913 Buy 20,450 Neutral 572 Buy 22,178 Buy 321 Buy 182 Buy 3,014 Neutral 1,221 Buy 5,510 Buy 487 Buy 374 Buy

EPS (INR) PE (x) EV/EBIDTA (x) ROE (%) FY17E FY18E FY19E FY17E FY18E FY19E FY17E FY18E FY19E FY17E FY18E FY19E 29.7 4.9 133.0 25.8 507.6 22.6 608.7 20.7 7.8 169.5 66.0 257.4 29.0 11.9

38.8 46.1 6.6 7.9 158.9 186.5 36.4 46.3 657.7 738.1 28.7 34.6 869.5 1091.6 34.2 46.2 9.4 11.2 192.2 195.0 83.7 99.0 312.5 379.1 45.6 70.5 16.5 19.6

30.3 17.0 20.2 35.4 40.3 25.3 36.4 15.5 23.3 17.8 18.5 21.4 16.8 31.4 21.4

23.2 12.8 16.9 25.1 31.1 19.9 25.5 9.4 19.3 15.7 14.6 17.6 10.7 22.7 16.0

19.5 10.6 14.4 19.7 27.7 16.5 20.3 6.9 16.3 15.5 12.3 14.5 6.9 19.1 12.4

17.5 9.1 14.1 16.5 32.3 11.5 26.3 12.6 11.8 11.8 5.5 13.4 5.6 19.5 9.5

13.9 7.1 11.5 13.1 24.1 9.4 19.2 8.2 9.9 10.2 4.6 10.2 4.2 14.5 7.3

11.5 5.7 9.6 10.7 20.4 7.9 15.4 5.9 7.9 9.9 3.9 8.1 2.9 12.0 5.7

21.9 23.5 29.4 15.9 19.7 19.9 40.3 10.9 13.6 39.0 14.5 23.1 11.5 26.5 17.6

23.6 26.5 30.9 20.0 24.5 21.1 41.6 16.3 14.7 37.5 14.5 23.1 15.9 29.5 20.0

23.1 26.8 31.8 21.9 23.0 21.4 37.8 19.1 15.3 32.6 15.4 23.1 20.6 28.1 21.7

59

December 2016 Results Preview | Sector: Automobiles

Bloomberg

AMRJ IN

Equity Shares (m)

170.8

M. Cap. (INR b)/(USD b)

CMP: INR899

153 / 2

52-Week Range (INR)

1077 / 773

1,6,12 Rel Perf. (%)

-3 / 6 / -1







Financial Snapshot (INR b) INR million

2016 2017E 2018E

Sales

46.9

52.5

62.3

71.9

EBITDA

8.2

8.8

11.0

12.9

NP

4.9

5.1

6.6

7.9

EPS (INR)

29

30

39

46



19.8

3.5

30.6

19.0



EPS Gr. (%)

2019E

BV/Sh. (INR)

123

148

180

219

RoE (%)

25.8

21.9

23.6

23.1

RoCE (%)

24.2

20.8

22.6

22.2

31.3

30.3

23.2

19.5

Valuations P/E (x) P/BV (x) EV/EBITDA (x) EV/Sales (x)

7.3

6.1

5.0

4.1

18.7

17.5

13.9

11.5

3.3

2.9

2.4

2.1



Amara Raja Batteries TP:INR1,061 (+18%)

Buy

We expect AMRJ’s revenues to grow 2.5% YoY (-6.7% QoQ) to INR12.6b. Price hikes of 3-4% were taken in Nov-16. Impact of demonetization on OEM sales is likely to moderate growth. Spot LME lead prices increased 9% QoQ in 2QFY16 —the impact is likely to be reflected in 3QFY17. EBITDA margin is likely to contract ~220bp YoY (-60bp YoY) to 16.5%. Rise in raw material costs due to higher lead prices YoY is likely to be offset lower other expenses. We expect PAT to decline 12% YoY to INR1.2b. The stock trades at 23.2x FY18E and 19.5x FY19E EPS; Buy.

Key issues to watch  Update on demand environment for OEMs, auto replacement and industrial battery segments.  Outlook for raw material cost trend, recent pricing action and currency hedges (if any).  Update on capacity expansion plans across product segments.

Quarterly Performance Y/E March (INR m) Net Sales YoY Change (%) RM Cost(% of sales) Staff Cost (% of sales) Other Exp(% of sales)

1Q 11,376 10.5 64.6 4.9 13.0

FY16 2Q 3Q 11,511 12,251 8.6 14.9 64.4 61.6 5.0 5.0 13.2 14.7

4Q 11,697 9.7 62.7 5.3 15.7

1Q 13,208 16.1 66.2 5.0 11.6

FY17 2Q 3QE 13,455 12,558 16.9 2.5 64.3 65.2 5.2 5.1 13.5 13.3

FY16

FY17E

4QE 13,316 13.8 65.8 5.4 12.8

46,907 11.4 63.2 4.6 13.3

52,537 12.0 65.4 4.7 13.9

EBITDA Margins (%) Depreciation Interest Other Income

1,988 17.5 328 13 136

1,999 17.4 343 13 112

2,286 18.7 355 3 113

1,908 16.3 372 1 97

2,273 17.2 441 14 90

2,297 17.1 457 15 120

2,066 16.5 475 4 125

2,126 16.0 485 2 141

8,169 17.4 1,399 5 457

8,761 16.7 1,858 35 475

PBT before EO expense PBT Rate (%) Adj PAT YoY Change (%) E: MOSL Estimates

1,782 1,782 32.1 1,210 14.2

1,756 1,756 29.7 1,234 23.1

2,041 2,041 33.3 1,362 33.0

1,632 1,632 33.5 1,086 6.2

1,908 1,908 31.5 1,307 8.0

1,945 1,945 29.9 1,363 10.4

1,712 1,712 30.0 1,198 -12.0

1,779 1,779 32.6 1,199 10.4

7,222 7,222 32.2 4,894 24.8

7,344 7,344 31.0 5,067 3.5

January 2017

60

December 2016 Results Preview | Sector: Automobiles

Bloomberg

AL IN

Equity Shares (m)

2845.9

M. Cap. (INR b)/(USD b)

239 / 4

52-Week Range (INR)

CMP: INR84 

113 / 74

1,6,12 Rel Perf. (%)

8 / -12 / -13

Financial Snapshot (INR b)





Y/E March

2016 2017E 2018E 2019E

Sales

188.2

205.2

239.2

273.7

EBITDA

21.7

24.4

29.7

34.1

NP

11.1

14.1

18.7

22.5

3.9

4.9

6.6

7.9



EPS Gr. (%)

375.1

26.6

32.9

20.2



BV/Sh. (INR)

19.4

22.7

26.9

32.1

RoE (%)

20.9

23.5

26.5

26.8

RoCE (%)

12.8

17.3

20.8

21.8

Payout (%)

25.6

30.4

30.4

28.5

21.5

17.0

12.8

10.6

4.3

3.7

3.1

2.6

EV/EBITDA (x)

11.5

9.9

7.8

6.4

Div. Yield (%)

1.2

1.8

2.4

2.7

Adj. EPS (INR)

Valuations P/E (x) P/BV (x)





Ashok Leyland

TP:INR92 (+9%)

Buy

Volumes grew 6% YoY (-2% QoQ). M&HCV sales grew 9% YoY, while LCV sales declined 3% YoY led by demonetization impact, especially in Dec-16. We expect realization to improve 4.9% YoY (flat QoQ) on price increase and higher contribution from Defense business. Net revenue is likely to grow ~13% YoY (flat QoQ), led by growth in volume and realization. EBITDA margin is likely to expand 40bp YoY (-70bp QoQ), driven by lower RM costs YoY. EBITDA should grow 17% YoY (decline 6% QoQ) to ~INR5b. Further, lower interest and higher other income would boost adjusted PAT growth by 38% YoY (+1% QoQ) to INR2.8b. The stock trades at EV of 7.8x FY18E and 6.4x FY19E EBITDA. Buy.

Key issues to watch  Current demand environment and discounting trend, as well as plant and channel inventory for MHCVs post demonetization.  Pre-buying in 4QFY17.  Raw material cost outlook and margin guidance for FY17–18.  Capex and investment guidance for FY17.

Quarterly Performance 1Q Total Volumes (nos) Growth % Realizations (INR '000) % change Net operating revenues RM/sales % Staff/sales % Other exp/sales % EBITDA EBITDA Margins(%) Other Income Interest PBT before EO Item EO Exp/(Inc) Effective Tax Rate (%) Adj. PAT Change (%) E: MOSL Estimates

January 2017

28,154 41.2 1,379 11.0 38,831 68.4 8.5 13.0 3,925 10.1 78 701 1,984 36.3 1,264 -364

FY16 2Q 37,369 47.3 1,329 4.8 49,672 69.7 7.6 10.2 6,240 12.6 454 631 4,754 1,570 45.9 2,571 527

3Q

4Q

1Q

30,928 21.8 1,321 -0.2 40,853 70.8 8.5 10.1 4,297 10.5 259 666 2,803 65 27.5 2,034 534

43,991 28.8 1,354 2.6 59,553 71.0 5.7 10.7 7,531 12.6 320 602 6,071 3,793 66.2 4,563 93

31,163 10.7 1,367 -0.9 42,588 68.7 8.4 11.6 4,820 11.3 385 338 4,154 30.0 2,908 130

FY17E 2Q 33,446 -10.5 1,382 4.0 46,224 67.8 8.0 12.6 5,365 11.6 316 339 4,146 0 29.0 2,944 14

3QE

4QE

32,838 6.2 1,386 4.9 46,272 68.3 7.8 13.0 5,021 10.9 475 425 3,846 0 27.0 2,808 38

47,751 8.5 1,468 8.5 70,120 69.2 7.0 10.8 9,173 13.1 680 500 8,168 0 26.9 5,967 31

FY16

FY17E

140,457 33.9 1,340 3.7 188,216 70.5 7.4 10.6 21,660 11.5 1,099 2,735 15,586 3,858 38.1 11,112 330.0

145,198 3.4 1,413 5.5 205,205 68.6 7.7 11.9 24,380 11.9 1,856 1,603 20,315 0 28.0 14,627 31.6

61

December 2016 Results Preview | Sector: Automobiles

Bloomberg

BJAUT IN

Equity Shares (m)

289.4

M. Cap. (INR b)/(USD b)

778 / 11

52-Week Range (INR)

CMP: INR2,689 

3122 / 2173

1,6,12 Rel Perf. (%)

-3 / 4 / 4

Financial Snapshot (INR b) Y/E MARCH

2016 2017E 2018E 2019E

Sales

225.9

221.4

259.8

298.6

47.8

45.1

53.3

61.0

EBITDA NP Adj. EPS (INR)

38.1

38.5

46.0

54.0

131.8

133.0

158.9

186.5

EPS Gr. (%)

25.1

0.9

19.4

17.4

BV/Sh. (INR)

424.8

479.7

548.4

623.0





RoE (%)

33.2

29.4

30.9

31.8

RoCE (%)

32.3

28.6

30.0

30.7



Payout (%)

50.2

58.7

56.7

60.0



20.4

20.2

16.9

14.4

6.3

5.6

4.9

4.3

EV/EBITDA (x)

14.1

14.1

11.5

9.6

Div. Yield (%)

2.0

2.4

2.8

3.6

Valuation P/E (x) P/BV (x)

Quarterly Performance Volumes ('000 units) Growth YoY (%) Realization (INR/unit) Growth YoY (%) Net Sales Change (%) RM/Sales % Staff cost/Sales % Oth. Exp./Sales % EBITDA EBITDA Margins (%) Other Income Interest Depreciation PBT Tax Effective Tax Rate (%) Adj. PAT Change (%)

January 2017

1Q 1,013 2.5 55,273 4.0 55,993 6.6 67.4 4.3 8.0 11,402 20.4 3,063 1 784 13,680 4,106 30.0 9,574 29.4



Bajaj Auto

TP:INR3,097 (+18%)

Buy

Overall volume declined 10.5% YoY (-17% QoQ) to 851.6k units due to a 17.5% YoY fall in exports, while domestic sales volumes declined 5% YoY due to the impact of demonetization in November and December. Total 2W sales declined 10% YoY in 3QFY17. 3W volumes fell sharply by 17% YoY primarily due to a fall in exports as currency issues in African markets continued along with a decline in domestic 3Ws. We expect realization to grow 1% YoY (+1% QoQ) as the launch of premium products in 2Ws is shadowed by a decline in 3Ws. As a result, net revenues are expected to decline by 9.3% YoY. EBITDA margin should contract 160bp YoY (-200bp QoQ) to 19.4% due to deterioration of product mix as well as negative operating leverage. We expect PAT to decline ~5.7% YoY (-24% QoQ) to INR8.4b. We have lowered our total volume estimates by 4%, resulting in EPS cut of 5% for FY17E/FY18E. The stock trades at 16.9x FY18E and 14.4x FY19E EPS; maintain Buy.

Key issues to watch  Update on demand environment at the retail level, channel inventory; outlook for FY18 based on impact of demonetization.  Outlook for export demand and pricing, especially the Nigerian market (sharp currency depreciation); outlook for FY18.

FY16 2Q 3Q 1,057 951 0.1 -3.4 57,543 58,486 1.9 1.8 60,799 55,649 2.0 -1.6 66.7 66.4 4.0 4.1 7.7 8.5 13,167 11,713 21.7 21.0 2,680 1,997 3 3 780 746 15,063 12,961 4,540 3,947 30.1 30.5 10,524 9,013 26.4 4.7

4Q 872 11.4 61,490 1.5 53,627 13.2 65.9 3.8 8.9 11,534 21.5 2,569 4 761 13,338 3,844 28.8 9,493 52.7

1Q 995 -1.8 57,784 4.5 57,480 2.7 67.2 4.7 7.7 11,763 20.5 2,671 2 775 13,657 3,873 28.4 9,784 2.2

FY17 2Q 3QE 1,032 852 -2.3 -10.5 58,676 59,263 2.0 1.3 60,545 50,471 -0.4 -9.3 67.0 67.5 4.3 5.2 7.4 8.0 12,961 9,788 21.4 19.4 3,420 2,900 7 3 770 800 15,605 11,885 4,378 3,387 28.1 28.5 11,228 8,498 6.7 (5.7)

(INR Million) 4QE 848 -2.8 62,455 1.6 52,949 -1.3 66.7 4.8 8.5 10,637 20.1 2,873 -3 817 12,696 3,707 29.2 8,989 (5.3)

FY16E

FY17

3,893 2.2 58,274 2.8 226,876 5.0 66.3 4.0 8.2 48,835 21.5 10,736 11 3,072 56,488 17,328 30.7 39,124 28.4

3,726 (4.3) 59,432 2.0 221,444 -2.4 66.8 4.7 7.9 45,746 20.7 11,864 9 3,161 54,439 15,345 28.2 38,498 -1.6

62

December 2016 Results Preview | Sector: Automobiles

Bloomberg

BHFC IN

Equity Shares (m)

232.8

M. Cap. (INR b)/(USD b)

213 / 3

52-Week Range (INR)



1009 / 687

1,6,12 Rel Perf. (%)

4 / 20 / 1

Financial Snapshot (INR b) Y/E Mar

2016 2017E

Sales

76.5

EBITDA

14.2

NP

CMP: INR913

2018E

2019E

72.9

82.2

92.7

13.3

16.3

19.1





6.6

6.0

8.5

10.8

28.1

25.8

36.4

46.3

EPS Gr. (%)

-10.9

-8.4

41.3

27.1



BV/Sh. (INR)

153.6 169.7

194.1

228.4



EPS (INR)

RoE (%)

18.7

15.9

20.0

21.9

RoCE (%)

12.5

10.9

14.4

16.7

32.4

35.4

25.1

19.7

5.9

5.4

4.7

4.0

16.4

17.1

13.6

11.1

3.0

3.1

2.7

2.3

Valuations P/E (x) P/BV (x) EV/EBITDA (x) EV/Sales (x) Consolidated

Bharat Forge

TP: INR1,096 (+19%)

We expect BHFC’s shipment tonnage to decline 7% YoY to 47,358 tons, which is an improvement from the previous quarters as demand for class 8 trucks are showing signs of improvements along with revival in industrial segments. Net realization is likely to dip ~6% YoY to ~INR194.7k/ton. As a result, net revenue would decline 12.3% YoY (+3.5% QoQ) to ~INR9.2b. EBITDA margin is likely to contract 200bp YoY (+40bp QoQ) to 28.2%, as negative operating leverage due to decline in volumes is likely to put pressure on margins (rise in staff expenses). PAT is likely to decline ~18% YoY (+9% QoQ) to INR1.4b. The stock trades at 25.1x FY18E and 19.7x FY19E EPS; maintain Buy.

Key issues to watch  Outlook for US Class 8 Trucks for CY16–17.  Outlook for oil & gas and mining segments, primarily with regard to price recovery.  Update on ramp-up of new orders under commercial vehicles, PVs, aerospace and rail.

Quarterly performance Tonnage Change (%) Realization (INR '000/ton) Change (%) Net operating income Change (%) RM/Sales (%) Staff Cost (% of Sales) Other Exp. (% of Sales) EBITDA EBITDA Margins (%) Non-Operating Income Interest Depreciation PBT Effective Tax Rate (%) Adj. PAT Change (%) E: MOSL Estimates

January 2017

Buy

(INR Million) 1Q 51,984 5.8 219.1 8.9 11,388 15.3 34.1 8.2 26.4 3,566 31.3 299 213 749 2,904 32.5 1,960 35.2

FY16 2Q 3Q 54,559 50,741 3.8 -4.8 206.0 207.3 -4.9 -7.7 11,239 10,520 -1.3 -12.2 36.0 34.2 8.3 9.0 27.2 26.6 3,204 3,173 28.5 30.2 282 231 222 226 714 674 2,550 2,461 32.4 32.5 1,723 1,690 -2.9 -14.0

4Q 52,413 -7.5 192.3 -10.9 10,080 -17.6 35.9 9.2 25.3 2,982 29.6 225 202 644 2,361 30.3 1,645 -18.9

1Q 49,098 -5.6 184.2 -15.9 9,044 -20.6 34.4 10.1 28.5 2,444 27.0 256 170 740 1,791 31.8 1,221 -37.7

FY17 2QE 3QE 46,203 47,358 -15.3 -6.7 192.8 194.7 -6.4 -6.1 8,909 9,223 -20.7 -12.3 34.4 34.5 10.1 10.3 27.6 27.0 2,477 2,601 27.8 28.2 309 330 189 175 726 760 1,870 1,996 32.2 31.0 1,269 1,377 -26.3 -18.5

4QE 50,262 -4.1 202.1 5.1 10,157 0.8 34.7 10.5 26.4 2,893 28.5 317 166 804 2,240 29.4 1,582 -3.8

FY16

FY17E

209,697 -0.9 205.3 -4.4 43,054

192,921 -8.0 193.5 -5.7 37,332.4 -13.3 34.5 10.3 27.3 10,414 27.9 1,213 700 3,030 7,897 31.0 5,449 -22.6

35.5 8.6 26.1 12,830 29.8 999 863 2,614 10,310 32.0 7,039 -117.6

63

December 2016 Results Preview | Sector: Automobiles

Bloomberg

BOS IN

Equity Shares (m)

31.4

M. Cap. (INR b)/(USD b)

642 / 9

52-Week Range (INR)

25650 / 15753

1,6,12 Rel Perf. (%)

-3 / -6 / 5

Financial Snapshot (INR b) Y/E March

FY16

FY17E

FY18E

FY19E

Sales

96.6

107.1

127.8

144.8

EBITDA

18.2

18.7

24.4

28.3

NP EPS (INR) EPS Gr. (%)

15.2

15.5

20.1

22.5

483.3

507.6

657.7

738.1

11.8

5.0

29.6

12.2

BV/Sh. (INR) 2,639.8 2,434.7 2,928.0 3,481.5 RoE (%)

19.4

19.7

24.5

23.0

RoCE (%)

26.5

27.9

33.6

31.6

41.8

39.8

30.7

27.3

7.6

8.3

6.9

5.8

33.9

31.3

23.4

19.8

6.4

5.5

4.5

3.9

Valuations P/E (x) P/BV (x) EV/EBITDA (x) EV/Sales (x) Consolidated

CMP: INR20,450

TP:INR20,937 (+1%)

Net Sales YoY Change (%) RM Cost (% of sales) Staff Cost (% of sales) Other Expenses (% of sales) EBITDA Margins (%) Depreciation Interest Other Income PBT after EO Expense Tax Rate (%) Adj PAT YoY Change (%) E: MOSL Estimates

January 2017

1Q 23,012 -3.2 52.0 12.4 14.6 4,827 21.0 704 15 1,408 5,516 31.5 3,777 23.1

Neutral

Net revenue is likely to grow ~3% YoY (+8.1% QoQ) to INR28.2b. Sales to OEM (especially 2W OEMs) are likely to moderate on demonetization impact. Exports too are likely to decline.  EBITDA margin is expected to remain flat YoY (-520bp QoQ) as the decline in raw material costs is likely to be offset by a rise other expenses.  EBITDA is projected to grow just 4% YoY (-23% QoQ) to ~INR3.6b.  Adjusted PAT is likely to grow 39% YoY to INR3b on higher other income.  We are downgrading our EPS estimate for FY17/FY18 by ~6% each due to the expected decline in revenues post demonetization.  The stock trades at 41.2x FY17E and 32.2x FY18E EPS; maintain Neutral. Key issues to watch  Rollout of BS-IV emission norms and implication on Bosch’s revenue.  Implementation of BS-VI norms for 2Ws and underlying opportunity for Bosch.  Advancement of BS-VI implementation and its impact on Bosch.  Capex plans for BS VI norms. 

Quaterly Performance Y/E March

Bosch

FY16 2Q 3Q 23,814 27,406 -6.8 15.1 50.9 52.6 14.2 14.2 16.8 20.5 4,326 3,474 18.2 12.7 782 1,115 32 28 1,872 882 5,384 3,213 29.1 31.3 3,817 2,208 24.6 70.1

4Q 24,672 3.3 50.7 13.8 13.1 5,507 22.3 1,177 14 1,779 6,096 22.6 4,720 64.2

1Q 25,196 9.5 51.8 12.9 17.4 4,511 17.9 860 13 1,789 5,428 30.9 3,749 -0.7

FY17 2Q 3QE 26,115 28,228 9.7 3.0 50.5 51.2 13.3 13.5 18.2 22.5 4,694 3,613 18.0 12.8 889 1,150 10 19 2,107 1,950 5,902 4,394 28.3 30.0 4,229 3,076 10.8 39.3

(INR Million) FY16 FY17E 4QE 27,606 11.9 51.4 16.2 11.1 5,874 21.3 1,185 24 1,746 6,411 30.7 4,440 -5.9

96,558 -0.6 51.5 13.5 16.2 18,177 18.8 3,722 99 6,488 21,035 27.2 15,176 11.8

107,145 11.0

18,692 17.4 4,084 66 7,592 22,134 30.0 15,494 2.1

64

December 2016 Results Preview | Sector: Automobiles

Eicher Motors Bloomberg

EIM IN

Equity Shares (m)

27.2

M. Cap. (INR b)/(USD b)

602 / 9

52-Week Range (INR)

CMP: INR22,178 

26602 / 14818

1,6,12 Rel Perf. (%)

-4 / 16 / 23

Financial Snapshot (INR b) Y/E March

FY16 (15m) FY17E FY18E FY19E

Net Income

61.7

70.2 90.2 106.9

EBITDA

16.9

21.8 29.2

35.4 29.6

Net Profit

13.4

16.5 23.6

Adj. EPS (INR)

492.9

608.7 869.5 1,091.6

EPS Gr. (%)

73.7

54.4 42.9

BV/Sh. (INR)

1,276

1,744 2,440 3,332

RoE (%)

35.8

40.3 41.6

37.8

RoCE (%)

21.3

27.1 30.7

29.4

Payout (%)

0.5

0.6

0.8

0.7



25.5 



Valuations P/E (x)

45.0

36.4 25.5

20.3

P/BV (x)

17.4

12.7 9.1

6.7

EV/EBITDA (x)

27.9

22.7 16.6

12.9

Div. Yield (%)

0.5

0.6

0.8

0.7

TP:INR28,755 (+30%)

Royal Enfield’s volumes grew by 38% YoY (+4% QoQ) to 173,838 units. It was insulated from demonetization impact as it has an average waiting period of 2-3 months. Net realization is expected to improve by 4% YoY (flat QoQ), supported by price hikes. EBITDA margin should expand 290bp YoY to 31.5% (+20bp QoQ), driven by lower commodity prices and staff expenses, as well as operating leverage. VECV’s volume declined by 7% YoY (flat QoQ) due to the impact of demonetization as major fleet operators postponed their purchases on account of cash crunch. Net realization should decline by 8.7% YoY (-1% QoQ) as discounts are expected to be at peak. Margin is expected to be at 5.5%, down 190bp YoY (-180bp QoQ). Consolidated revenue would decline ~44% YoY (+5% QoQ) to INR18.4b. Consolidated margin is likely to be 31.5%. Consolidated PAT is estimated to rise 56% YoY (+2% QoQ) to INR4.2b. The stock trades at 25.5x FY17E and 20.3x CY18E EPS. Maintain Buy.

Key issues to watch  Demand for RE at the retail level to assess the impact of demonetization on order book.  Update on current demand trends for commercial vehicles, discount levels and channel inventory.

Quarterly performance (Consolidated) Y/E March

Buy

(INR Million) 1Q

FY16 (15m) 2Q 3Q

4Q *

5Q

1Q

33,166 44.6 15.6 30.4 2,708 76.1

15,322 -40.3 29.5 30.6 3,599 84.3

15,557 42.0 30.2 30.9 3,763 58.6

FY17 2Q

3QE

4QE

18,440 -44.4 31.5 31.0 4,225 56.0

18,675 21.9 31.7 31.1 4,412 22.6

FY16 (15m)

FY17E

61,735 -47.2 27.4 31.2 13,375 -41.9

70,221 42.2 33.0 29.6 17,836 66.7

Consolidated Net Operating income Growth (%) EBITDA Margins (%) Effective tax rate (%) Recurring PAT Growth (%)

25,680 33.5 14.3 32.8 1,953 40.3

10,959 -51.2 26.1 31.3 2,372 50.7

12,997 -42.9 27.0 30.6 2,846 72.4

17,549 35.0 30.9 32.2 4,132 45.2

Standalone (Royal Enfield) Royal Enfield (units) Growth (%) Net Realn (INR/unit) Change - YoY (%) EBITDA Margins (%) Recurring PAT Growth (%)

92,021 106,613 127,611 125,744 148,186 44.4 43.8 55.7 52.9 61.0 104,450 102,791 101,852 102,103 104,258 4.7 2.1 1.7 1.4 -0.2 26.1 26.1 27.2 28.6 29.6 2,135 1,988 2,569 2,450 3,977 32.9 49.2 82.2 97.5 86.3

147,483 166,941 173,838 173,500 38.3 30.8 38.2 17.1 105,603 105,576 106,076 107,095 2.7 3.7 3.9 2.7 30.8 31.3 31.5 30.8 3,371 3,962 4,205 5,083 69.6 54.2 71.6 27.8

600,175 661,762 58.7 37.8 103,073 106,112 2.9 2.9 27.6 31.1 13,097 16,621 288.7 58.6

Total CV Volumes 11,020 12,128 11,657 12,687 15,553 Growth (%) 10.4 6.3 20.8 30.1 41.1 Net Realn (INR '000/unit) 1,458.1 1,472.0 1,529.1 1,602.2 1,427.3 Change - YoY (%) 13.0 12.0 1.5 6.6 -2.1 EBITDA Margins (%) 7.1 8.2 8.0 7.4 8.0 Recurring PAT 436 768 677 657 830 Growth (%) 20.0 69.5 50.3 15.4 90.3 E: MOSL Estimates; * Non-IndAS based

16,071 13,408 11,784 18,673 32.5 15.0 -7.1 20.1 1,331.3 1,470.5 1,463.1 1,512.4 -9.6 -3.8 -8.7 6.0 9.1 7.2 5.5 8.2 1,082 657 266 1,249 40.9 -3.0 -59.5 50.6

63,045 59,936 23.7 18.8 1,526.5 1,444.8 8.1 -5.4 7.9 7.7 3,817 3,254 -40.6 6.6

VECV (derived)

January 2017

65

December 2016 Results Preview | Sector: Automobiles

Escorts Bloomberg

ESC IN

Equity Shares (m)

119.3

M. Cap. (INR b)/(USD b)

38 / 1

52-Week Range (INR)

CMP: INR321 

414 / 113

1,6,12 Rel Perf. (%)

-1 / 47 / 90

Financial Snapshot (INR b) INR million

2016 2017E 2018E 2019E

Sales

35.4

41.1

47.8

53.8

EBITDA

1.5

3.0

4.4

5.5

NP

0.9

1.7

2.8

3.8

11.1

20.7

34.2

46.2

EPS Gr. (%)

-16.6

86.2

65.0

35.2

BV/Sh. (INR)

184.3 196.3 223.4 260.9

EPS (INR)

RoE (%)

6.1

10.9

16.3

19.1

RoCE (%)

7.4

10.6

15.7

18.9

29.3

15.7

9.5

7.1

Valuations P/E (x) P/BV (x) EV/EBITDA (x) EV/Sales (x)

1.8

1.7

1.5

1.2

31.4

14.8

9.7

7.1

1.3

1.1

0.9

0.7





TP: INR410 (+30%)

We expect 21% YoY growth (+8% QoQ) in revenue (on a very low base) to INR10.74b led by strong performance in tractor division. Construction equipment division is currently facing headwinds while we expect some impact in this quarter due to divestment of its Auto equipment business (done in August 2016). EBITDA margin is likely to expand 395bp YoY to 7.8%, translating into EBITDA growth of 146% YoY to INR838m. We expect PAT to grow 137% YoY to INR483m.

Key issues to watch  Progress on key initiatives on tractor volume growth strategy, raw material rationalizations and VRS of employees.  Management commentary on volumes and outlook given expectations of normal monsoon.

Standalone Quarterly Performance Y/E March Net Sales YoY Change (%) Total Expenditure EBITDA Margins (%) Depreciation Interest Other Income PBT before EO expense Extra-Ord expense PBT Tax Rate (%) Reported PAT Adj PAT YoY Change (%) Margins (%) E: MOSL Estimates

January 2017

1Q 9,614 -14.8 9,039 576 6.0 161 158 118

Buy

FY16 2Q 3Q 8,180 8,881 -17.6 -15.1 7,920 8,540 260 341 3.2 3.8 155 149 133 112 138 131

4Q 8,047 -1.6 7,659 388 4.8 137 152 187

1Q 10,514 9.4 9,636 878 8.3 145 112 104

FY17E 2Q 3QE 9,953 10,746 21.7 21.0 9,329 9,908 625 838 6.3 7.8 163 175 96 100 71 90

(INR Million) FY16 FY17E 4QE 9,174 14.0 8,513 661 7.2 185 102 95

34,723 -12.9 33,157 1,566 4.5 601 555 574

40,387 16.3 37,386 3,001 7.4 668 410 361

374

110

212

287

725

437

653

469

983

2,283

0 374 22 6.0 352 352 3.1 3.7

11 99 1 1.5 98 109 -238.3 1.3

-1 212 7 3.4 205 204 -42.8 2.3

131 155 -9 -5.7 164 303 137.7 3.8

63 662 192 29.1 470 514 46.2 4.9

39 398 85 21.4 313 343 215.9 3.4

410 243 63 26.0 180 483 136.6 4.5

70 399 104 26.0 295 347 14.4 3.8

142 841 22 2.6 819 957 28.1 2.8

582 1,702 444 26.1 1,257 1,687 76.3 4.2

66

December 2016 Results Preview | Sector: Automobiles

Bloomberg

EXID IN

Equity Shares (m)

850.0

M. Cap. (INR b)/(USD b)

155 / 2

52-Week Range (INR)

208 / 116

1,6,12 Rel Perf. (%)

2 / 6 / 22

CMP: INR182 



Financial Snapshot (INR b) Y/E MARCH

2016 2017E 2018E 2019E

Net Sales

68.1

73.4

82.7

94.6



EBITDA

10.2

10.9

12.7

14.9

Adj. PAT

6.2

6.6

8.0

9.5



Adj. EPS (INR)

7.3

7.8

9.4

11.2



14.1

6.7

20.7

18.2

EPS Gr. (%) BV/Sh. (INR)

52.2

57.4

64.3

72.9

RoE (%)

14.0

13.6

14.7

15.3

RoCE (%)

14.5

14.0

15.3

16.0

Payout (%)

32.8

28.1

23.3

19.7

24.8

23.3

19.3

16.3

Valuations P/E (x)

3.5

3.2

2.8

2.5

EV/EBITDA (x)

P/BV (x)

12.6

11.8

9.9

7.9

Div. Yield (%)

1.3

1.2

1.2

1.2

S/A Quarterly Performance Y/E March Net Sales Growth YoY (%) RM(%) Employee cost (%) Other Exp(%) EBITDA EBITDA Margin(%) Change (%) Non-Operating Income Interest Depreciation PBT after EO Exp Effective Tax Rate (%) Adj. PAT Change (%) E: MOSL Estimates

January 2017

1Q 18,064 -5.4 64.2 6.1 15.1 2,655 14.7 -8.8 31 2 362 2,322 32.9 1,557 -16.0



Exide Industries

TP:INR205 (+12%)

Buy

We expect net revenue to grow 2% YoY (-19% QoQ) to INR15.5b as moderation in OEM demand due to the impact of demonetization is likely to slow down sales. EBITDA margin is likely to contract by 150bp YoY (-120bp QoQ) to 13.9%, as employee expenses are likely to jump on account of lower volumes. Lead prices increased 9% QoQ in 2QFY17, the effect of which will be reflected in 3Q raw material costs. EBITDA is estimated to decrease 7.5% YoY (-25% QoQ) to ~INR2.1b. PAT is likely to decline by 4% YoY (-28% QoQ) to INR1.3b. The fall in PAT is likely to be arrested due to higher other income. The stock trades at 19.3x FY18E and 16.3x FY19E EPS; maintain Buy.

Key issues to watch  Update on demand environment for OEMs, auto replacement and industrial battery segments post demonetization.  Update on market share in autos and non-autos.  Outlook for raw material cost trend, recent pricing action and currency hedges, if any.  Update on technological upgradation.  Update on capacity expansion plans across product segments.

FY16 2Q 3Q 17,442 15,211 -0.9 -2.2 62.2 62.2 6.7 7.9 16.5 14.5 2,553 2,343 14.6 15.4 22.9 30.0 84 75 0 1 378 406 2,259 2,011 31.4 33.4 1,551 1,339 23.3 37.8

4Q 17,605 7.0 61.0 7.0 17.0 2,652 15.0 11.3 226 0 439 2,439 27.2 1,776 29.1

1Q 20,081 11.2 62.4 6.4 15.5 3,150 15.7 18.6 143 17 491 2,784 29.6 1,961 25.9

FY17 2Q 3QE 19,233 15,515 10.3 2.0 61.2 62.2 6.9 8.9 16.9 15.0 2,901 2,167 15.1 13.9 13.6 -7.5 190 175 6 5 506 505 2,579 1,832 30.7 30.0 1,787 1,283 15.2 -4.3

4QE 18,545 5.3 62.2 7.6 15.9 2,660 14.3 0.3 158 2 517 2,298 29.7 1,616 -9.0

FY16

FY17E

68,092 -0.8 64.1 7.0 14.0 10,171 14.9 11.3 497 3 1,602 9,063 31.3 6,228 14.1

73,375 7.8 62.0 7.3 15.9 10,877 14.8 7.0 666 30 2,019 9,494 30.0 6,646 6.7

67

December 2016 Results Preview | Sector: Automobiles

Bloomberg

HMCL IN

Equity Shares (m)

199.7

M. Cap. (INR b)/(USD b)

602 / 9

52-Week Range (INR)

-8 / -2 / 10 

Financial Snapshot (INR b) Y/E March

2016 2017E 2018E 2019E

Sales

284.4 287.7 328.9 359.8

EBITDA

44.6

46.5

52.4

52.7

NP

31.6

33.8

38.4

38.9

EPS Gr. (%) BV/Sh. (INR)

158.3 169.5 192.2 195.0



 

397.8 470.9 554.7 641.2



7.1

13.4

43.6

39.0

37.5

32.6

RoCE (%)

42.9

38.1

36.7

32.0

Payout (%)

52.3

54.3

53.9

53.1

19.0

17.8

15.7

15.5

7.6

6.4

5.4

4.7

EV/EBITDA (x)

12.5

11.8

10.2

9.9

Div. Yield (%)

2.4

2.7

3.0

3.0

Valuations P/E (x)



1.5

26.6

RoE (%)

P/BV (x)



3740 / 2375

1,6,12 Rel Perf. (%)

Adj. EPS (INR)

CMP: INR3,014

Hero MotoCorp

TP:INR3,011 (+1%)

Sales volume declined 13% YoY (-19% QoQ) to 1.47m units, as demonetization impact derailed November and December sales volumes. Volume decline for Hero was steeper due to higher rural exposure. Realization should grow by 1% YoY (+2% QoQ) to INR43,659 per unit. Net revenue is likely to decline 12% YoY (~2% QoQ) to INR64.3b. EBITDA margin is expected to contract 90bp YoY (-290bp QoQ) to 14.7% on higher fixed costs due to decline in volumes. EBITDA is likely to decline 17% YoY (-31% QoQ) to ~INR9.4b. We expect PAT to decline 13% YoY (-31% QoQ) to INR6.9b. The stock trades at 15.7x FY18E and 15.5x FY19E EPS; maintain Neutral.

Key issues to watch  Update on demand environment (especially rural areas) at the retail level, channel inventory to assess the impact of demonetization.  Guidance on export plans and new launches along with timelines.  Update on cost-saving initiatives.

Quarterly Performance

(INR Million) FY16

Y/E March Total Volumes ('000 nos) Growth YoY (%) Net Realization Growth YoY (%) Net Op Revenues Change (%) RM Cost (% sales) Staff Cost (% sales) Other Exp (% sales) EBITDA EBITDA Margins (%) Other Income Interest Depreciation PBT Effective Tax Rate (%) Adj. PAT Growth (%) E: MOSL Estimates

January 2017

Neutral

1Q 1,646 -4.1 41,960 2.3 69,048 -1.9 69.7 4.5 10.7 10,420 15.1 1,044 12 1,030 10,422 28.3 7,475 32.8

2Q 1,575 -7.0 43,237 5.8 68,093 -1.5 68.5 4.5 10.9 10,956 16.1 1,115 12 1,091 10,968 28.3 7,861 3.0

FY17 3Q 1,690 2.5 43,159 4.0 72,948 6.7 66.9 4.7 12.7 11,399 15.6 842 6 1,139 11,096 28.3 7,958 36.5

4Q 1,722 9.3 43,595 1.1 75,052 10.5 66.0 4.7 13.4 11,919 15.9 1,168 12 1,155 11,920 30.0 8,347 32.2

1Q 1,745 6.1 42,391 1.0 73,989 7.2 67.1 4.5 11.7 12,301 16.6 1,204 15 1,152 12,337 28.4 8,831 18.1

2Q 1,823 15.8 42,755 -1.1 77,963 14.5 66.5 4.6 11.4 13,689 17.6 1,524 16 1,193 14,004 28.3 10,042 27.7

3QE 1,473 -12.8 43,659 1.2 64,319 -11.8 66.5 5.8 13.0 9,482 14.7 1,500 8 1,350 9,624 28.3 6,900 -13.3

4QE 1,648 -4.3 43,363 -0.5 71,468 -4.8 67.1 5.5 11.9 11,040 15.4 1,273 17 1,349 10,947 26.2 8,074 -3.3

FY16

FY17E

6,632 0.0 42,886 3.1 284,427 3.1 67.9 4.6 11.8 44,603 15.7 4,229 49 4,414 44,369 28.7 31,615 24.4

6,690 0.9 43,009 0.3 287,739 1.2 66.8 5.1 12.0 46,511 16.2 5,500 55 5,044 46,912 27.8 33,848 7.1

68

December 2016 Results Preview | Sector: Automobiles

Mahindra & Mahindra

Bloomberg

MM IN

Equity Shares (m)

621.1

M. Cap. (INR b)/(USD b)

758 / 11

52-Week Range (INR)

CMP: INR1,221 

1509 / 1092

1,6,12 Rel Perf. (%)

2 / -14 / -6



Financial Snapshot (INR b) Y/E March

2016 2017E 2018E 2019E

Sales

408.8 431.9 493.1 566.9



EBITDA

45.9

47.3

54.1

64.5

NP (incl. MVML)

32.9

36.9

41.2

47.9

Adj. EPS (INR) *

55.0

61.7

68.8

80.1

4.2

12.1

11.6

16.3



53.6

66.0

83.7

99.0



EPS Gr. (%) Cons. EPS (INR) BV/Sh. (INR)

366.3 406.4 448.2 501.2

RoE (%)

15.4

14.5

14.5

15.4

RoCE (%)

12.6

12.1

12.3

13.2

Payout (%)

26.3

35.3

37.6

31.9

P/E (x)

22.2

19.8

17.7

15.2

Cons. P/E (x)

22.8

18.5

14.6

12.3

3.3

3.0

2.7

2.4

EV/EBITDA (x)

15.6

15.0

13.0

10.7

Div. Yield (%)

1.2

1.4

1.6

1.6

Valuations

P/BV (x)

* incl. MVML





Buy

Overall volumes were flat YoY (+5% QoQ) as 22% YoY growth in tractors was offset by 8% YoY decline in the automotive segment. UVs (incl pick-ups) declined by 7% due to demonetization impact. MM’s (including MVML) realization is expected to decline by 2% YoY (-3% QoQ), as better product mix due to increase in share of tractors is offset by a rise in lower-ASP compact UV volumes. As a result, revenue is likely to marginally decline by 1% YoY (+2% QoQ) to ~INR103b. EBITDA margin should expand 100bp YoY (flat QoQ) to 14.5% due to increase in the share of higher-margin tractor segment. PAT is projected to grow 9% YoY (-29% QoQ) to INR8.9b. We are lowering our consolidated EPS estimate for FY17/FY18 by 3% to factor in lower-than-estimated volume growth on account of demonetization impact. The stock trades at 17.7x FY18E and 15.2x FY19E EPS; Maintain Buy.

Key issues to watch  Outlook for UV and tractor businesses post demonetization.  Product pipeline for FY17.  Update on launch of mild-hybrid.  Update on smaller businesses like two-wheelers, commercial vehicles, Ssangyong, etc.

Quarterly Performance (incl MVML) FY16 Y/E March 1Q 2Q 3Q 4Q Total Volumes (nos) 171,925 158,601 193,763 182,093 Growth YoY (%) -8.1 -10.3 11.9 12.6 Net Realization 549,491 554,969 540,124 557,967 Growth YoY (%) 4.8 8.5 1.0 -1.1 Net Op. Income 94,471 88,019 104,656 101,602 Growth YoY (%) -3.8 -2.7 13.0 11.4 RM Cost (% of sales) 68.0 67.8 68.4 68.7 Staff (% of sales) 7.0 7.3 6.7 5.6 Oth. Exp. (% of Sales) 10.8 11.9 11.4 13.2 EBITDA 13,450 11,445 14,138 12,694 EBITDA Margins (%) 14.2 13.0 13.5 12.5 Other income 1,109 4,867 929 1,004 Interest 562 625 554 588 Depreciation 2,544 2,711 3,328 3,901 PBT 11,454 12,975 11,185 9,269 Effective Tax Rate (%) 27.5 25.0 26.6 30.1 Adj PAT 8,299 9,730 8,205 6,442 Change (%) -7.4 -0.1 15.1 15.3 E: MOSL Estimates

January 2017

TP:INR1,497 (+23%)

FY17 FY16 FY17E 1Q 2Q 3QE 4QE 192,170 185,156 195,047 175,132 707,689 761,088 11.8 16.7 0.7 -3.8 1.3 7.5 547,674 549,363 530,475 565,584 549,064 536,486 -0.3 -1.0 -1.8 1.4 3.8 -2.3 105,247 101,718 103,467 99,052 388,566 408,313 11.4 15.6 -1.1 -2.5 5.1 5.1 68.4 67.1 67.6 68.9 68.2 68.2 6.8 7.1 7.1 7.8 6.6 7.2 10.7 11.3 10.8 10.9 11.8 11.1 14,885 14,682 15,006 11,461 51,988 54,864 14.1 14.4 14.5 11.6 13.4 13.4 1,296 6,879 1,150 2,171 7,910 11,495 428 464 440 494 2,329 1,826 3,484 3,701 3,625 3,656 12,484 14,467 13,179 17,397 12,091 9,481 45,144 50,977 27.0 28.0 26.3 18.8 26.9 26.3 8,952 12,529 8,917 7,702 32,935 36,921 7.9 28.8 8.7 19.6 4.2 12.1

69

December 2016 Results Preview | Sector: Automobiles

Maruti Suzuki Bloomberg

CMP: INR5,510

MSIL IN

Equity Shares (m)

302.1

M. Cap. (INR b)/(USD b)



1664 / 24

52-Week Range (INR)

5972 / 3202

1,6,12 Rel Perf. (%)

5 / 34 / 16 

Financial Snapshot (INR b) Y/E MARCH

2016 2017E 2018E 2019E

Sales

576.5

667.8

805.1

930.1

EBITDA

89.0

106.2

132.4

156.0

Adj. PAT

53.7

76.2

92.7

112.7

EPS (INR)*

155.5

257.4

312.5

379.1

EPS Gr. (%)

23.4

65.5

21.4

21.3

BV/Sh. (INR)



894.0

1,092

1,327

1,616

RoE (%)

19.9

23.1

23.1

23.1



RoCE (%)

27.2

31.1

31.0

30.5



Payout (%)

23.7

21.4

23.5

22.6





Valuations P/E (x)

35.4

21.4

17.6

14.5

P/CE (x)

22.1

16.0

13.4

11.3

EV/EBITDA (x)

16.7

13.6

10.3

8.2

Div. Yield (%) 0.6 *Consol. & adjusted

0.8

1.1

1.3

TP:INR6,415 (+16%)

Volume growth moderated to ~3.5% YoY (-7.5% QoQ) in 3QFY17 to ~387,251 units, as growth for the mini and compact segment took a hit on demonetization woes. Moderation in volumes was limited due to the waiting period of Baleno and Brezza. Net realization is likely to improve 6.3% YoY (flat QoQ) to INR428,514 per unit, boosting net revenue by 10% YoY (-7% QoQ) to INR165.9b. Growth in realization is likely to be driven by improvement in product mix due to compact UV, Vitarra Brezza, and premium hatchback, Baleno. We expect margin to expand 80bp YoY (+180bp QoQ) to 15.2% on marginally lower fixed costs on operating leverage benefits as well as increased exports to Japan on a YoY basis. EBITDA is estimated to grow 16% YoY (-17% QoQ) to INR25.2b. We expect PAT to grow 39% YoY (-19% QoQ) to INR19.4b. We are lowering our EPS estimate by ~3% for FY17/FY18 to ~INR257/INR312 to factor in cut in volumes due to demonetization. The stock trades at 17.6x FY18E and 14.5x FY19E EPS. Maintain Buy.

Key issues to watch  Update on retail demand scenario, channel inventory, discounting trends and new launches (Brezza) post demonetization impact.  Progress on commissioning of Gujarat plant.

Quarterly Performance

(INR Million) 1Q

Total Volumes (nos) Change (%) Realizations (INR/car) Change (%) Net operating revenues Change (%) RM Cost (% of sales) Staff Cost (% of sales) Other Cost (% of sales) EBITDA EBITDA Margins (%) Non-Operating Income Interest Depreciation PBT Effective Tax Rate (%) PAT Adjusted PAT Change (%) E:MOSL Estimates

January 2017

Buy

341,329 13.8 391,907 2.8 133,769 17.1 67.4 3.5 12.9 21,673 16.2 2,065 190 6,716 16,832 28.2 12,081 12,081 58.5

FY16 2Q 353,335 9.8 392,013 2.5 138,512 12.5 66.9 3.0 13.9 22,457 16.2 4,736 178 6,694 20,321 26.3 14,973 14,973 73.6

3Q

4Q

1Q

374,182 15.5 403,063 3.6 150,819 19.7 68.5 3.3 13.8 21,701 14.4 4,065 244 7,221 18,301 23.8 13,943 13,943 68.2

360,354 3.9 424,742 8.1 153,057 12.3 66.0 3.9 14.8 23,500 15.4 3,744 203 7,608 19,433 28.6 13,868 13,868 8.0

348,443 2.1 428,202 9.3 149,204 11.5 67.9 3.9 13.4 22,157 14.9 4,833 181 6,389 20,420 27.2 14,862 14,862 23.0

FY17E 2Q 418,470 18.4 426,382 8.8 178,428 28.8 67.7 2.9 12.4 30,374 17.0 8,126 197 6,300 32,003 25.1 23,980 23,980 60.2

FY16 3QE

387,251 3.5 428,514 6.3 165,942 10.0 68.2 3.5 13.1 25,229 15.2 8,000 200 6,500 26,529 26.8 19,433 19,433 39.4

FY17E

4QE 416,244 1,429,200 1,570,408 15.5 10.6 9.9 418,577 403,394 425,243 -1.5 4.3 5.4 174,230 576,530 667,804 13.8 15.4 15.8 67.5 67.4 67.8 3.7 3.4 3.5 12.5 13.8 12.8 28,410 88,962 106,170 16.3 15.4 15.9 3,949 14,610 24,908 222 815 800 7,087 28,239 26,276 25,050 74,518 104,003 28.5 28.0 26.8 17,907 53,654 76,182 17,907 53,654 76,182 29.1 44.6 42.0

70

December 2016 Results Preview | Sector: Automobiles

Bloomberg

TTMT IN

Equity Shares (m)

3395.9

M. Cap. (INR b)/(USD b)

1652 / 24

52-Week Range (INR)



599 / 266

1,6,12 Rel Perf. (%)

10 / 6 / 25

Financial Snapshot (INR b) Y/E March

2016 2017E 2018E 2019E

Net Sales

2,756

2,866

3,289

3,815

EBITDA

402.4

353.7

503.4

619.3

NP

125.2

92.2

186.9

257.6

Adj. EPS (INR)

CMP: INR487



36.9

27.2

55.0

75.9

EPS Gr. (%)

-15.5

-26.3

102.7

37.8



BV/Sh. (INR)



237.9

264.1

315.9

388.5

RoE (%)

18.3

10.8

19.0

21.5

RoCE (%)

14.3

8.4

13.9

16.3

0.7

13.3

8.8

6.4

Payout (%) Valuations P/E (x)

13.2

17.9

8.9

6.4

P/BV (x)

2.0

1.8

1.5

1.3

EV/EBITDA (x)

4.4

5.3

3.5

2.4

Div. Yield (%)

0.0

0.6

0.8

0.8



Tata Motors

TP:INR613 (+26%)

Buy

We expect JLR’s (including JV) volume to be flat YoY (+9% QoQ). Net realization should increase 15% YoY (flat QoQ) led by ramp-up of F-Pace and increase in share of China. EBITDA margin would contract 200bp YoY (and +200bp QoQ) to 12.4%. Adjusted PAT is likely to decline ~21% YoY (+33% QoQ) to GBP325m. S/A volume grew 8.4% YoY (-2% QoQ) led by a 36% rise in PVs due to the launch of Tiago, while CVs declined by 1% due to the demonetization impact. Margin is likely to contract 240bp YoY (-30bp QoQ) to 3.3%, as the share of CVs decreases. Adjusted PAT is likely to be -INR3.6b (vis-à-vis -INR0.3m in 3QFY16). Consolidated PAT would fall 16% YoY (+256% QoQ) to INR29.2b. We are increasing our FY17 EPS estimates by 7% while downgrade our FY18 estimates by 17% to factor in for Fx hedge loss. The stock trades at 8.9x FY18E and 6.4x FY19E EPS. Buy.

Key issues to watch  Impact of Brexit on JLR business.  Current demand trends for JLR and outlook, particularly in China and the US.  Update on Chery JV operations and CV business outlook.

Quarterly Performance Y/E March (Consolidated) JLR vols. (incl JV) JLR Realizations (GBP/unit) JLR EBITDA (%) JLR PAT (GBP m) S/A vol. (units) S/A Realizations (INR/unit) S/A EBITDA (%) S/A PAT (INR m) Net Op Income Growth (%) EBITDA EBITDA Margins (%) Interest Expenses PBT before EO Exp EO Exp/(Inc) PAT Minority Interest Share in profit of Associate Adj PAT Growth (%) E: MOSL Estimates

January 2017

1Q 114,452 45,206 16.4 492 117,160 795,852 6.1 333 604,009 -6.6 110,068 18.2 11,496 63,398 -6,338 53,251 -232 -708 47,470 (10.9)

FY16 2Q 3Q 116,745 150,461 43,460 42,004 12.2 14.4 52 414 117,439 122,377 910,574 817,198 8.2 5.7 351 -395 615,240 722,564 1.5 3.3 65,189 93,800 10.6 13.0 12,228 10,915 11,911 41,300 33,411 -457 -17,209 35,244 -214 -204 -139 36 9,180 34,690 (72.0) (10.2)

4Q 162,427 43,991 16.2 560 146,766 856,454 8.1 5,014 806,844 19.4 113,872 14.1 12,552 59,567 -6,044 52,065 -383 89 46,975 158.4

1Q 134,334 45,216 12.3 265 126,839 813,594 6.8 996 658,950 9.1 76,220 11.6 11,785 20,663 -4,851 18,314 -240 4,290 18,882 (60.2)

FY17 2Q 3QE 139,227 151,182 47,937 48,177 10.3 12.4 245 325 134,869 132,657 765,369 771,109 3.6 3.3 -6,621 -3,558 659,004 708,422 7.1 -2.0 62,826 89,260 9.5 12.6 10,249 6,500 9,831 34,560 -162 0 5,747 25,001 -198 -175 2,735 4,339 8,191 29,165 (10.8) (15.9)

FY16 FY17E 4QE 183,580 544,085 608,323 48,399 43,602 47,526 14.3 14.9 12.5 558 1584 1392 168,608 532,724 562,973 820,383 6 6 5.7 6.5 4.9 -1,904 -1,297 -10,728 839,462 2,755,611 2,865,838 4.0 4.7 4.0 94,827 365,160 323,132 11.3 13.3 11.3 10,438 46,234 38,972 39,819 158,602 104,874 0 18,794 -5,013 29,720 111,083 78,781 -363 -1,059 -976 6,636 213 18,000 35,993 125,170 92,211 (23.4) -11.3 -26.3

71

December 2016 Results Preview | Sector: Automobiles

TVS Motor Company Bloomberg

TVSL IN

Equity Shares (m)

475.1

M. Cap. (INR b)/(USD b)

178 / 3

52-Week Range (INR)

418 / 256

1,6,12 Rel Perf. (%)

4 / 22 / 27

Financial Snapshot (INR b) Y/E March

2016

2017E

2018E

2019E

Sales

112.4

122.7

143.1

165.9

7.5

9.2

12.1

14.1

EBITDA

CMP: INR374 





TP:INR407 (+9%)

Total volume growth moderated to 2% YoY (-12% QoQ) to 718,562 units, as volumes declined in Dec-16 due to demonetization impact. Motorcycle and scooter volumes declined 5% YoY (-25% QoQ) and 5% YoY (-4% QoQ), respectively, while mopeds volume surged 27% YoY (-5% QoQ) on positive rural sentiment. Net realization is likely to improve 1% YoY (+0.5% QoQ) to INR42,224 per unit as share of mopeds increased, resulting in a better product mix. As a result, net sales would grow 3.2% YoY to ~INR30.4b. Margin should expand 50bp YoY (-90bp QoQ) to 7.2%, driven by benefit of operating leverage and better product mix YoY. We expect PAT to increase ~21% YoY (-26% QoQ) to INR1.3b. We downgrade our EPS estimates for FY17/18 by 5/3% to factor in moderation in volumes due to demonetization. The stock trades at 22.7x FY18E and 19.1x FY19E EPS; maintain Buy.

Adj. PAT

4.3

5.7

7.8

9.3

EPS (INR)

9.1

11.9

16.5

19.6

EPS Gr. (%)

24.2

31.3

38.2

18.7

BV/Sh (INR)

40.8

49.4

62.3

77.1



RoE (%)

24.1

26.5

29.5

28.1



RoCE (%)

23.3

27.4

32.1

31.9

Payout (%)

33.7

27.7

21.9

24.6



41.1

31.3

22.7

19.1

9.2

7.6

6.0

4.9

EV/EBITDA (x)

24.1

19.1

14.2

11.7

Div. Yield (%)

0.7

0.7

0.8

1.1

Key issues to watch  Launch of product with BMW tie-up.  Double-digit EBITDA margin target by FY18.



Buy

Valuations P/E (x) P/BV (x)

S/A Quarterly Performance Y/E March (INR m) Volumes (units) Growth (%) Realization (INR/unit) Growth (%) Net Sales Growth (%) RM (% of sales) Emp cost ( % of sales) Other exp (% of sales) EBITDA EBITDA Margin(%) Interest Depreciation Other Income PBT before EO Exp Tax rate (%) Adjusted PAT Growth (%)

January 2017

1Q 638,033 9.2 40,344 2.2 25,741 11.7 73.0 6.0 14.2 1,728 6.7 130 504 210 1,304 23.2 1,001 38.4

FY16 2Q 3Q 4Q 678,749 702,044 659,512 0.4 7.1 9.4 41,803 41,872 42,688 5.3 3.5 4.8 28,374 29,396 28,154 5.8 10.8 14.6 72.1 71.6 70.2 5.7 6.0 5.8 14.2 15.7 17.6 2,270 1,966 1,785 8.0 6.7 6.3 102 100 131 466 493 518 57 117 243 1,760 1,490 1,380 25.3 27.7 14.7 1,315 1,077 1,178 38.7 19.4 30.1

1Q 717,964 12.5 40,127 (0.5) 28,809 11.9 72.6 6.3 14.2 2,004 7.0 98 660 362 1,608 24.6 1,213 21.2

FY17 2Q 3QE 4QE FY16 FY17E 815,562 718,562 694,069 2,678,338 2,946,157 20.2 2.4 5.2 6.3 10.0 42,014 42,224 42,183 41,981 41,645 0.5 0.8 (1.2) 5.3 (0.8) 34,265 30,341 29,278 112,439 122,692 20.8 3.2 4.0 12.0 9.1 72.3 72.7 72.5 71.4 72.5 5.8 5.8 5.8 5.9 5.9 13.8 14.4 14.0 16.0 14.1 2,767 2,169 2,262 7,507 9,202 8.1 7.2 7.7 6.7 7.5 94 90 87 462 369 724 700 698 1,898 2,782 392 350 359 513 1,462 2,340 1,729 1,835 5,660 7,513 24.2 24.5 24.8 24.2 24.5 1,774 1,306 1,380 4,289 5,672 34.9 21.2 17.2 23.3 32.2

72

December ||Sector: Capital Goods March2016 2015 ResultsPreview Preview December Sector: 2016 Results CapitalPreview Goods 2016Results

Technology Capital Goods Company name ABB Bharat Electronics BHEL Crompton Greaves Crompton Greaves Consumer Cummins India GE T&D Havells India Larsen & Toubro Siemens

Demonetization to extend near-term pain Impending structural reforms to rekindle investment cycle Domestic investment cycle: Demonetization impacts capex cyle temporarily; exports hamstrung by weak global demand

The recent demonetization has temporarily impacted capex activity. CMIE data indicates that the new investment proposals by India Inc reduced to INR1.3t for the December quarter as compared to an average of INR2.4t per quarter in the preceding nine quarters. The near-term outlook remains cautious, with demonetization impacting fresh investments and challenges such as restrained capex activity by private players. However, policy initiatives and efforts are underway for (i) expediting government approvals, and (ii) establishing monetary conditions conducive to industrial revival in the medium term. 

Thermax Voltas





We believe investment revival would be triggered by: (i) sustained recovery in consumption demand, and thus, capacity utilization, and (ii) investment push by the public sector, leading to a virtuous cycle of cash flow generation. Simultaneously, sustained progress in reviving stalled projects is imperative for attracting new investments and providing much-needed stimulus to aggregate demand. By initiating GST, labor and energy sector reforms, the government has partly addressed concerns about the pace and extent of reforms. Successful implementation of substantive reforms is essential for structured investment growth. Indian machinery exports have decelerated due to factors such as weak global demand, geopolitical concerns and sharp currency volatility across several markets. Also, falling crude prices had an adverse impact on global trade, and thus, investment demand. Project awards in the Middle East have been muted—in fact, revenue estimates for global industrial players suggest that sluggishness has continued for around nine quarters.

Equipment manufacturers key beneficiaries of ‘ Make in India’ initiative ‘ Make in India’ is the central government’s initiative to improve the manufacturing sector’s contribution through import substitution and increased exports. The intent is to ensure that customers in the public and private sectors increasingly procure equipment manufactured locally. Power Grid has mandated T&D players to manufacture certain components in India for orders tendered out in key high-end technology products such as SVC/STATCOM, GIS, 765K V transformers and reactors, HTLS conductors, OPGW and HVDC. In our opinion, successful implementation of this initiative should benefit capital goods players. Increased imports over past 5-6 years, particularly from China/South K orea, have been a critical area of concern across several product segments, even where domestic manufacturing capabilities and competitiveness exist. K ey beneficiaries include BHEL/Siemens (railways, solar cells, power T&D, defense, etc), L&T/BEL (defense), ABB/Alstom/CRG/Siemens (power T&D, etc) and TMX (industrial products/power BTG). Ankur Sharma ([email protected]); +91 22 3982 5449 Amit Shah ([email protected]); +91 22 3029 5126 January 2017

73

December 2016 Results Preview | Sector: Capital Goods

Exhibit 1: Summary of expected quarterly performance Sector

Capital Goods ABB Bharat Electronics BHEL CG Consumer Elect. Crompton Greaves Cummins India GE T&D India Havells India Larsen & Toubro Siemens Thermax Voltas Sector Aggregate

CMP (INR)

Reco.

1,037 1,431 127 152 61 809 302 351 1,376 1,121 780 335

Neutral Buy Sell Buy Sell Neutral Neutral Buy Buy Neutral Sell Buy

Sales (INR m) Var % Var % Dec-16 YoY QoQ

EBDITA (INR m) Var % Var % Dec-16 YoY QoQ

PAT (INR m) Var % Var % De-16 YoY QoQ

26,779 18,500 60,500 7,700 13,160 12,219 8,500 13,318 273,000 22,650 9,664 11,688 477,678

2,721 3,427 -7,500 555 1,090 1,792 370 1,034 27,700 1,940 902 575 34,606

1,424 3,219 -6,755 325 969 1,680 40 704 11,000 1,340 614 505 15,065

10.4 21.9 13.6 -4.9 7.5 6.5 14.3 -0.9 5.7 -2.1 -7.0 -10.6 6.1

30.3 8.6 -9.2 -13.5 -12.0 -4.5 1.9 -8.3 9.2 -26.7 11.0 20.8 3.1

0.9 17.1 Loss -33.0 13.0 15.6 LP -43.0 4.5 0.0 -8.7 -1.4 41.9

79.5 2.3 PL -43.0 30.7 -10.0 9.0 -49.2 20.6 -19.7 16.7 -16.3 -12.3

4.8 63.5 8.9 -6.1 Loss PL -23.3 -41.3 132.8 261.2 3.5 -14.7 LP -80.6 -40.9 -50.0 6.3 6.6 17.5 -27.4 -9.5 2.9 -2.9 -30.0 59.3 -35.3 Source: MOSL

Ordering activity supported by finalization of base orders; slight pick-up in domestic tendering activity  Overall ordering activity has been impacted by delay in finalization of large orders (> INR15b) and restrained capex activity by the private sector.  Local ordering activity has seen some improvement, led by finalization of base orders. After remaining subdued for most of 2015, tendering has seen some improvement since January 2016, mainly supported by central government activity. Sector-wise, roads, railways, power T&D and defense registered strong tendering activity (fiscal allocations for roads/railways have been increased).  Overseas project awards, particularly in the Middle East, have started to see some signs of revival since 4QFY16, despite a sharp decline in crude oil prices. Aggregate project awards in the region improved 40% YoY to USD140b (12month moving average).  We believe that growth in large orders is imperative to further boost ordering activity. Exhibit 3: EBITDA margin under pressure on slower project EBITDA Margin (%)

Source: MOSL, Company

January 2017

2QFY17

4QFY16

2QFY16

4QFY15

2QFY15

4QFY14

2QFY14

4QFY13

2QFY13

4QFY12

4QFY11

2QFY11

4QFY10

2QFY10

4QFY09

12.2 13.8 15.6 11.6 13.5 16.3 16.9 13.5 14.5 15.5 16.1 12.0 12.1 12.3 17.9 10.2 12.0 11.3 16.0 8.4 10.0 11.0 14.0 9.9 9.2 10.0 12.0 8.3 7.2 4.3 11.6 8.7 8.4

EBITDA Margin (%)

2QFY09

2QFY17

4QFY16

4QFY15 -1.0 -0.8 2QFY16 -1.4

2QFY15

4QFY14

-5.2 2QFY14 -3.5

4QFY13

2QFY13

4QFY12

2QFY12

4QFY11

2QFY11

4QFY10

2QFY10

4QFY09

2QFY09

16.9 31.8 29.0 20.5 27.5 9.2 7.5 3.7 22.0 12.8 21.7 28.8 16.4 16.8 19.6 18.2 20.9 15.6 6.6

12.2 13.8 15.6 11.6 13.5 16.3 16.9 13.5 14.5 15.5 16.1 12.0 12.1 12.3 17.9 10.2 12.0 11.3 16.0 8.4 10.0 11.0 16.6 14.0 15.3 26.3 9.9 11.7 9.2 10.0 1.3 12.0 8.3 7.2 2.7 4.3 11.6 2.8 3.1 8.7 2.8 8.4

Engg Sector (revenue growth %)

execution

2QFY12

Exhibit 2: Constrained growth in revenue

Source: MOSL, Company

74

December 2016 Results Preview | Sector: Capital Goods

Exhibit 4: Book-to-bill stable at 3.0x

Exhibit 5: Order intake growth remains muted Order intake YoY %

Sensex Index

MOSL Capital Goods Index

Source: Bloomberg, MOSL

Dec-16

Nov-16

Oct-16

Sep-16

Aug-16

Jul-16

Dec-16

Jun-16

78 May-16

80

Apr-16

86

Mar-16

87

Feb-16

94

Dec-15

94

Nov-16

MOSL Capital Goods Index

110 102

Oct-16

2QFY17

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

101

Sep-16

4QFY16

-20

Source: MOSL, Company

Jan-16

108

Sensex Index

2QFY16

4QFY15

Source: MOSL, Company

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

-17 -11

-1 15

-1 2QFY15

4QFY14

2QFY14

4QFY13

-24 2QFY13

-12 2QFY12

-34 4QFY12-47

3,367 3,263 3,112 3,168 3,127 2,964 2,893 2,958 2,989 3,028 2,943 3,230 3,482 3,594 3,605 3,813 3,717 3,641 3,837 3,922 3,871 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13 4QFY13 1QFY14 2QFY14 3QFY14 4QFY14 1QFY15 2QFY15 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17

-2

15

17

31 14 22 18

39

56 52

58

BTB (x)

2.8 2.6 2.3 2.3 2.2 2.2 2.1 2.3 2.3 2.4 2.4 2.6 2.9 3.0 3.1 3.3 3.2 3.1 3.3 3.3 3.0

Order book (INR b)

Source: Bloomberg, MOSL

Exhibit 8: Comparative valuation Sector / Companies

CMP (INR)

Reco

Capital Goods ABB Bharat Electronics BHEL CG Consumer Elect. Crompton Greaves Cummins India GE T&D India Havells India Inox Wind K E C International Larsen & Toubro Siemens Solar Inds. Thermax Va Tech Wabag Voltas Sector Aggregate

1,037 1,431 127 152 61 809 302 351 183 144 1,376 1,121 713 780 486 335

Neutral Buy Sell Buy Sell Neutral Neutral Buy Neutral Buy Buy Neutral Neutral Sell Buy Buy

EPS (INR) FY16 FY17E FY18E 18.2 60.0 3.9 3.7 0.6 26.0 5.6 7.5 17.5 10.1 53.6 17.0 19.3 24.8 25.2 11.8

26.9 69.9 5.5 5.1 1.9 30.2 10.7 11.3 20.0 12.1 62.2 25.4 22.9 27.6 32.6 14.0

32.2 80.3 8.5 6.3 3.2 36.3 15.0 13.6 23.8 14.0 76.1 31.6 29.6 32.0 36.0 17.6

FY16 57.0 23.8 32.2 40.6 109.3 31.1 53.6 46.8 10.5 14.3 25.7 65.9 37.0 31.5 19.2 28.4 30.8

PE (x) FY17E FY18E 38.5 20.5 23.1 29.5 32.9 26.8 28.4 31.0 9.2 11.9 22.1 44.1 31.1 28.3 14.9 23.8 24.9

32.3 17.8 15.0 24.1 19.0 22.3 20.2 25.9 7.7 10.3 18.1 35.5 24.1 24.4 13.5 19.0 20.0

EV/EBIDTA (x) FY16 FY17E FY18E

RoE (%) FY16 FY17E FY18E

29.1 18.8 17.0 24.8 7.8 28.7 32.6 26.4 7.4 7.7 18.8 37.3 20.5 20.3 9.7 19.5 19.8

11.4 19.2 2.9 80.9 4.2 22.0 -6.8 16.9 19.3 16.0 10.9 9.2 18.6 12.2 13.2 15.4 9.5

19.3 16.5 9.2 18.8 6.3 23.8 15.5 20.4 6.8 6.8 14.9 28.4 17.6 17.6 7.4 17.0 15.4

16.5 13.5 7.4 15.6 5.1 19.2 11.6 16.4 5.4 5.9 13.1 22.9 14.0 14.7 6.7 12.9 13.0

14.5 18.3 3.9 74.2 6.0 23.1 20.1 23.3 18.6 16.7 11.7 12.6 19.0 12.5 15.4 16.4 10.9

15.4 18.5 5.8 66.1 8.0 25.2 25.1 24.6 18.8 16.8 13.0 14.3 20.9 13.4 15.2 18.1 12.4

Source: Company, MOSL

January 2017

75

December 2016 Results Preview | Sector: Capital Goods

ABB Bloomberg

ABB IN

Equity Shares (m)

211.9

M. Cap. (INR b)/(USD b)

220 / 3

52-Week Range (INR) 1,6,12 Rel Perf. (%)

CMP: INR1,037 

1433/950 -2 / -13 / -11

Financial Snapshot (INR b) Y/E Dec 2015 2016E 2017E 2018E Net Sales 81.4 88.3 99.6 111.3 EBITDA 7.5 7.5 11.1 12.9 Adj PAT 3.0 3.7 5.7 6.8 Adj EPS (INR) 15.8 18.2 26.9 32.2 EPS Gr (%) 22.8 15.6 48.0 19.3 BV/Sh (INR) 142.0 159.5 186.5 208.9 RoE (%) 11.1 11.4 14.5 15.4 RoCE (%) 17.5 16.3 21.8 22.9 Payout (%) 23.5 25.2 26.1 26.1 Valuations P/E (x) 65.8 57.0 38.5 32.3 P/BV (x) 7.3 6.5 5.6 5.0 EV/EBITDA (x) 29.8 22.9 17.5 13.3 Div. Yield (%) 0.4 0.4 0.7 0.8





TP: INR1,125 (+8%)

Neutral

ABB has received an order to supply 1,600 traction transformers for 800 new electric freight locomotives in India. The transformers will be manufactured locally in ABB’s Vadodara facility, supporting the government’s ‘ Make in India’ initiative. ABB continues to focus on increased localization and cost optimization, whereby its direct RM costs have declined to 65.4% of revenue, from a peak of 81% in 4QCY10. The company has set an internal target to reduce it to 65% over next few years. This has aided margins, despite negative operating leverage. We expect revenue to register 11% YoY growth, led by execution ramp-up in the project segment. Operating margins are expected to decline 90bp YoY to 10.2%, as contribution from projects increases (56% of sales as against 63% in 4QCY15). Net profit is likely to increase 5% YoY to INR1.4b. Maintain Neutral.

Key issues to watch  Management commentary suggests cautious optimism; continued focus on exports and services to be an important driver, with projection of strong double-digit revenue and profit growth.  Continued preference for cash generation vis-à -vis profits.

Quarterly Performance (INR m) Y/E December

CY15 1Q 2Q 3Q Sales 18,146 19,316 19,690 Change (%) (0.7) 6.0 6.7 EBITDA 1,436 1,610 1,557 Change (%) 5.0 15.2 15.3 As % of Sales 7.9 8.3 7.9 Depreciation 422 375 359 Interest 208 246 250 Other Income 7 10 5 PBT 813 999 954 Tax 270 315 366 Effective Tax Rate (%) 33.2 31.5 38.4 Repoted PAT 543 575 587 Adj. PAT 543 685 587 Change (%) -13.4 12.8 4.9 Order Intake 18,560 18,950 22,920 Order Book 79,730 79,560 82,750 BTB (x) 1.0 1.0 1.0 E: MOSL Estimates,*: As reported by ABB

January 2017

4Q 24,251 8.3 2,697 41.2 11.1 442 207 108 2,155 796 36.9 1,294 1,359 42.8 20,580 79,460 1.0

1Q 20,003 10.2 1,571 9.4 7.9 359 206 148 1,154 364 31.5 710 790 45.5 18,300 78,040 0.9

CY16 2Q 3Q 21,015 20,550 8.8 4.4 1,701 1,516 5.6 -2.7 8.1 7.4 357 406 180 178 44 44 1,208 976 434 427 35.9 43.8 774 811 774 871 13.1 48.2 20,400 29,670 77,520 86,760 0.9 1.0

4QE 26,779 10.4 2,721 0.9 10.2 477 221 366 2,389 620 26.0 1,424 1,424 4.8 26,340 77,449 0.9

CY15

CY16E

80,152 5.0 7,465 24.6 9.3 1598 912 130 5,086 1,747 34.4 2,999 3,339 22.8 81,000 79,460 1.0

87,158 8.7 7,509 0.6 8.6 1598 786 578 5,704 1,845 32.4 3,718 3,858 15.6 94,710 123,830 1.4

76

December 2016 Results Preview | Sector: Capital Goods

Bharat Electronics Bloomberg

BHE IN

Equity Shares (m) M. Cap. (INR b)/(USD b) 52-Week Range (INR) 1,6,12 Rel Perf. (%)

240.0

CMP: INR1,431 

343 / 5 1540 / 1009 -1 / 15 / 0



Financial Snapshot (INR b) Y/E March 2016 2017E 2018E 2019E Net Sales 73.0 82.6 95.6 109.3 EBITDA 14.6 15.6 17.2 20.3 NP 13.7 14.4 15.6 17.9 EPS (INR) 56.9 60.0 69.9 80.3 EPS Gr. (%) 17.1 5.5 16.5 14.8 BV/Sh (INR) 364.2 336.7 382.4 434.9 RoE (%) 15.6 19.2 18.3 18.5 RoCE (%) 16.5 17.7 19.4 19.6 P/E (x) 25.1 22.2 20.5 17.8 P/BV (x) 3.9 4.2 3.7 3.3 EV/EBITDA (x) 18.5 17.3 15.1 12.3 EV/ Sales (x) 3.8 3.3 2.8 2.3



 



TP: INR1,600 (+12%)

Buy

Bharat Electronics plans to establish a defense system integration complex, with a capex of USD120m, to manufacture missile systems like navigation, seeker, radar, fire control and guidance. BHE expects order inflow of INR120b-150b in FY17, led by finalization of key projects like Akash missile. BHE has guided revenue growth of 10-12% in FY17, led by execution of key orders in hand, like Akash missile, WLR, hand-held thermal device, tactical control radar, etc. The company has guided that FY17 EBITDA margin would be in the +/-100bp range of FY16 margin (20%). BHE plans to explore opportunities in critical infrastructure protection, air traffic management radars, intelligent traffic management systems, solar power plants and smart city elements. BHE has planned capex of INR23b over the next five years toward modernization and expansion of existing facilities to support the government’s “ Make in India” initiative. Majority of the capex would be spent on developing BMS test bed, TCS test bed, test bed for missile system, etc. Maintain Buy.

Key issues to watch

 Revenue growth: Key orders (Akash missile, intake INR67b in FY11– 12) are currently under execution for Army and Air Force.  Operating at 60% capacity utilization; possibility of strong operating leverage. Quarterly Performance Y/E March

FY16 2Q 3Q 14692 15172 13.5 -5.7 1807 2926 52 5 12.3 19.3 407 414 3 1

1QE 8714 -20.8 -467 -699 -5.4 435 0

4QE 38388 19.4 9297 -7 24.2 566 -3

FY16

FY17

72952 6.6 14582 27 20.0 1689 45

82636 13.3 15606 7 18.9 1905 0

Sales Change (%) EBITDA Change (%) As of % Sales Depreciation Interest Other Income

1337

1316

1355

1336

1387

1714

1150

1004

5322

5256

PBT Tax Effective Tax Rate (%) Reported PAT Change (%) Adj PAT Change (%) E: MOSL Estimates

1007 241 23.9 767 199.5 767 199.5

2712 654 24.1 2059 40.1 2059 40.1

3865 908 23.5 2957 8.8 2957 8.8

10888 2799 25.7 8089 11.9 8017 10.9

486 125 25.7 361 -52.9 361 -52.9

4606 1178 25.6 3427 66.5 3427 66.5

4127 908 22.0 3219 8.9 3219 8.9

9738 2338 24.0 7399 -8.5 7399 -7.7

18169 4515 24.8 13654 17.6 13654 17.4

18956 4550 24.0 14407 5.5 14407 5.5

January 2017

4Q 32148 9.8 9988 26 31.1 468 41

FY17 2Q 3QE 17033 18500 15.9 21.9 3349 3427 85 17 19.7 18.5 455 450 3 0

1Q 10997 8.6 78 -117 0.7 408 0

77

December 2016 Results Preview | Sector: Capital Goods

BHEL Bloomberg

BHEL IN

Equity Shares (m)

2447.6

M. Cap. (INR b)/(USD b)

311 / 5

52-Week Range (INR) 1,6,12 Rel Perf. (%)

CMP: INR127 

175 / 90 -2 / -6 / -27

Financial Snapshot (INR b) Y/E March 2016 2017E 2018E 2019E Net Sales 256.3 314.0 333.9 380.8 EBITDA -19.6 12.1 17.9 27.1 PAT -9.1 9.7 13.5 20.8 EPS (INR) -3.7 3.9 5.5 8.5 EPS Gr. (%) -163.6 -206.3 39.4 54.2 BV/Sh. INR 135.0 138.1 142.3 148.9 RoE (%) -2.7 2.9 3.9 5.8 RoCE (%) -4.1 1.2 2.2 3.5 Payout (%) -10.8 0.0 0.0 20.0 Valuations P/E (x) -32.9 30.9 22.2 14.4 P/BV (x) 0.9 0.9 0.9 5.8 EV/EBITDA (x) -10.2 16.5 8.8 7.2 Div Yield (%) 0.3 0.6 0.9 1.4 * Consolidated







TP: INR110 (-13%)

Sell

BHEL is expected to post loss on the operational front, led by continued weakness in gross profit margin. However, we expect operational performance to improve YoY. We estimate revenue growth of 13.5% YoY, decline in operating loss from INR16.4b in 3QFY16 to INR7.5b, and decline in net loss from INR11b in 3QFY16 at INR6.7b. Loss in 3QFY16 was led by provisioning of INR11.8b for dues and inventory for the projects put on hold. During the quarter, BHEL bagged an order worth INR4.6b for R&M of the 6x60MW Balimela HEP of Odhisa Hydro Power Corporation and the 3x60MW Bairaisul HEP of NHPC. BHEL also secured an order for the supply of 118 sets of IGBTbased traction converters for 3-phase 6,000 HP electric locomotives valued at INR2b. BHEL is L1 in 12GW of orders, of which it expects 7GW of orders to be finalized in FY17.

Key issues to watch  Continued constraint on execution due to operational issues.  Trends in provisions, particularly for liquidated damages on project completion.

Quarterly Performance Y/E March Sales (Net) Change (%) EBITDA Change (%) As a % Sales Interest Depreciation Other Income PBT Tax Effective Tax Rate (%) Reported PAT Change (%) Adj. PAT Change (%) E: MOSL Estimates

January 2017

1Q 43,617 -15.0 -2,093 -196.1 -4.9 33 2,425 4,924 373 34 9.1 339 -82.5 339 -82.5

FY16 2Q 3Q 59,380 53,256 -3.4 -14.1 -4,379 -16,387 -250.2 -657.8 -7.4 -30.8 44 52 2,249 2,255 3,739 1,706 -2,933 -16,989 -1,125 -5,969 38.4 35.1 -1,808 -11,020 -244.8 -618.3 -1,808 -11,020 -244.8 -618.3

4Q 100,048 -21.1 3,638 -78.4 3.6 140 2,428 4,139 5,209 1,555 29.8 3,596 -59.5 3,655 -61.7

1Q 56,225 28.9 710 -133.9 1.3 57 2,182 2,493 965 188 19.4 778 129.5 778 129.5

FY17 2Q 66,645 12.2 1,551 -135.4 2.3 50 2,080 1,961 1,382 292 21.1 1,090 -160.3 1,090 -160.3

3Q 60,500 13.6 -7,500 -54.2 -12.4 55 2,500 1,800 -8,255 -1,500 18.2 -6,755 -38.7 -6,755 -38.7

4Q 130,585 30.5 17,377 377.6 13.3 106 3,191 4,209 18,289 3,745 20.5 14,544 304.5 14,544 298.0

FY16

FY17E

256,300 -15.1 -19,597 -193.4 -7.6 268 9,356 14,501 -14,721 -5,633 38.3 -9,088 -164.0 -9,088 -163.6

313,954 22.5 12,139 -161.9 3.9 268 9,953 2,899 12,381 2,724 22.0 9,657 -206.3 9,657 -206.3

78

December 2016 Results Preview | Sector: Capital Goods

Crompton Greaves Bloomberg

CRG IN

Equity Shares (m)

627.0

M. Cap. (INR b)/(USD b)

38 / 1

52-Week Range (INR) 1,6,12 Rel Perf. (%)

CMP: INR61 

89 / 39 -13 / -15 / -10

Financial Snapshot (INR b) Y/E March 2016 2017E 2018E 2019E Net Sales 52.7 59.3 54.7 59.1 EBITDA 3.7 4.7 5.5 6.5 Adj PAT 1.3 0.3 1.1 2.0 EPS(INR) 2.1 0.6 1.9 3.2 EPS Gr. (%) -51.0 -73.0 232.6 73.1 BV/Sh. (INR) 73.3 73.2 72.7 72.0 RoE (%) 3.0 4.2 6.0 8.0 RoCE (%) 5.1 6.0 7.5 7.9 Payout (%) 0.0 107.4 107.4 107.4 Valuations P/E (x) 35.3 109.3 32.9 19.0 P/BV (x) 1.0 0.8 0.8 0.8 EV/EBITDA (x) 14.7 7.8 6.3 5.1 Div Yield (%) 0.0 1.0 3.3 4.5 * Consolidated

 



TP: INR48 (-21%)

SELL

During the quarter, deal for sale of overseas power business in Europe, North America and Indonesia to First Reserve for an enterprise value of EUR115m on a debt-free, cash-free basis was called off owing to non-fulfillment of certain conditions precedent to the share purchase agreement. The management now intends to sell the overseas power business on either geographical basis or product-wise basis. CRG has reached an agreement to sell its B2B automation business in Spain, UK , Ireland, France and India at an EV of EUR120m. Successful completion of the deal would help Crompton to reduce the debt on its books. The management intends to monetize ~INR10b of non-core assets, including additional land at K anjurmarg, to lower standalone business debt. Maintain SELL.

Key issues to watch  Lowering debt in demerged business through asset sale.  Concrete developments on plans to sell international power business.

Quarterly performance (Consolidated)

Sales (Net) Change (%) EBITDA Change (%) As of % Sales (Adj) Depreciation Interest Other Income EO Income/(Exp) PBT Tax Effective Tax Rate (%) Minority interest Reported PAT Adjusted PAT Change (%) Order book Order Intake BTB (x) E: MOSL Estimates

January 2017

1Q 10,275 -70.1 -136 -107.9 -1.3 603 153 425 -11 -479 166 -34.7 -8.3 -637 -626 (197.7) 79,050 25,060 1.6

FY16 2Q 3Q 14,292 12,247 -58.3 -49.2 1,295 964 -23.1 53.8 9.1 7.9 604 622 169 103 178 109 -1 -1,585 698 -1,237 225 -65 32.2 5.3 -23.7 -3.1 497 -1,168 499 416 (28.4) (185.0) 84,280 79,540 16,644 21,040 2.1 2.2

4Q 16,699 6.0 1,548 -48.3 9.3 728 240 257 -2,030 -1,193 -182 15.2 9.8 -1,022 1,008 (63.4) 41,670 12,920 0.8

1Q 15,239 48.3 1,206 -983.2 7.9 604 306 176 0 471 68 14.3 3.6 400 400 (163.9) 35,270 13,730 0.8

FY17 2Q 3Q 14,952 13,160 4.6 7.5 834 1,090 -35.6 13.0 5.6 8.3 567 550 443 306 500 150 -372 -350 696 734 52 120 7.4 16.3 4.1 -5.0 641 619 268 969 (46.2) 132.8 45,290 17,460 22,513 1.0 -

4Q 16,530 -1.0 1,006 -35.0 6.1 381 307 274 -382 974 208 21.3 -28.0 794 1,176 16.7 -

FY16

FY17

52,721 -62.4 3,671 -42.9 7.0 2,558 814 1,116 -1,113 -2,211 144 -6.5 -25.3 -2,329 1,297 (29.5) 75,790 75,664 1.4

59,314 12.5 4,736 29.0 2,101 1,363 1,100 2,372 447 18.8 -25.3 1,950 1,950 50.3 44,071 51,918

79

December 2016 Results Preview | Sector: Capital Goods

CG Consumer Electricals Bloomberg

CROMPTON IN

Equity Shares (m)

626.8

M. Cap. (INR b)/(USD b)

95 / 1

52-Week Range (INR)

191 / 126

1,6,12 Rel Perf. (%)

-

Financial Snapshot (INR b) Y/E March 2016E 2017E 2018E 2019E Net Sales 18.1 37.6 42.9 48.7 EBITDA 2.1 4.0 5.3 6.3 Adj PAT 1.1 2.3 3.2 3.9 EPS (INR) 1.9 3.7 5.1 6.3 EPS Gr. (%) (70.3) 96.6 37.6 22.5 BV/Sh. (INR) 3.6 5.6 8.3 10.8 RoE (%) 52.1 80.9 74.2 66.1 RoCE (%) 27.4 30.2 33.4 34.9 Payout (%) 40.0 40.0 50.0 Valuations P/E (x) 79.8 40.6 29.5 24.1 P/BV (x) 41.6 27.1 18.3 14.1 EV/EBITDA 46.0 23.8 18.0 14.9 (x) Div Yield (%) 1.0 1.4 2.2 * Consolidated

CMP: INR152  





TP: INR180 (+18%)

Buy

We expect CROMPTON’s 3QFY17 operational performance to be impacted on account of the demonetization-led sluggishness. We expect sales to decline 5% YoY, led by weak demand for products on account of liquidity tightness witnessed by consumers following the demonetization. We expect operating profit of INR405m in 3QFY17, a decline of 51% YoY on account of increase in employee cost, led by provision of ESOP cost and negative operating leverage. Operating margin would be 5.3% in 3QFY17 as against 10.2% in 3QFY16. Net profit is expected to be INR175m in 3QFY17 as against INR412m in 3QFY16, a decline of 58.7% YoY.

Key issues to watch  Impact of demonetization on the sales of the company.  Details of segmental sales, as CROMPTON intends to improve sales of premium category products.  Ad spends incurred by the company during the quarter, as CROMPTON intends to position itself as an electrical consumer durables brand as against its current positioning as a fans brand.

Quarterly performance (Consolidated) Y/E March Sales Change (%) EBITDA Change (%) As of % Sales Depreciation Interest Other Income PBT Tax Effective Tax Rate (%) Adjusted PAT Change (%) Extra-ordinary Income (net) Reported PAT Change (%)

January 2017

FY16 3Q 4Q 8,101 10,016 12.0 10.6 828 1,272 -8.1 2.0 10.2 12.7 30 33 158 159 1 0 641 1,079 218 321 33.9 29.7 424 759 (51.1) (10) (11.9) (93) 412 666 (52.4) (21)

1Q 11,208 1,550 13.8 28 180 34 1,376 457 33.2 919 919

FY17 2Q 3Q 8,900 7,700 -4.9 974 555 -33.0 10.9 7.2 27 25 161 160 42 25 827 395 273 70 33.0 17.7 554 325 (23.3) 554 325 (21.1)

4Q 9,753 -2.6 892 -29.8 9.2 29 164 20 719 252 35.0 468 (38) 468 (30)

FY16

FY17

18,117

37,561 107.3 4,047 93.2 10.8 109 709 165 3,394 1,052 31.0 2,342 90.7

2,095 11.6 63 318 39 1,753 525 29.9 1,228 (69.4) (139.3) 1,089 (72.9)

2,342 115.1

80

December 2016 Results Preview | Sector: Capital Goods

Cummins India Bloomberg

K K C IN

Equity Shares (m)

277.2

M. Cap. (INR b)/(USD b)

224 / 3

52-Week Range (INR)

1051 / 747

1,6,12 Rel Perf. (%)

3 / -3 / -25

Financial Snapshot (INR b) Y/E March 2016 2017E 2018E Net Sales 47.0 50.0 56.6 EBITDA 7.7 7.7 9.2 Adj PAT 7.5 7.2 8.4 EPS (INR) 27.2 26.0 30.2 EPS Gr. (%) -4.0 -4.6 16.4 BV/Sh. (INR) 114.4 124.8 136.9 RoE (%) 24.9 22.0 23.1 RoCE (%) 25.2 21.9 23.3 Payout (%) 51.5 51.5 51.5 Valuations P/E (x) 29.7 31.1 26.8 P/BV (x) 7.1 6.5 5.9 EV/EBITDA 28.9 29.0 24.0 (x) Div Yield (%) 1.7 1.7 1.9

2019E 65.5 11.3 10.1 36.3 20.0 151.5 25.2 25.4 51.5 22.3 5.3 19.5 2.3

CMP: INR809 





TP: INR836 (-3%)

Neutral

We expect revenue improvement of 7% YoY, supported by growth in the industrial (21%) and automotive (9%) segments. Industrial segment growth would be driven by a pick-up in the infrastructure (roads and metros) and data center segments. Pick-up in the domestic demand environment and various pricing actions taken by K K C to regain lost market share post CPCB-2 compliance will help domestic revenue to grow 8% YoY in 3QFY17. We expect export revenue to improve 4% YoY to INR3.8b in 3QFY17. Exports had witnessed a muted growth of 1% in 1QFY17, led by weak demand in LatAm, Europe and China. EBIDTA margin is expected to improve by 120bp YoY to 14.7%; net profit should grow 3.5% YoY to INR1.7b. Maintain Neutral.

Key issues to watch  Cost optimization possibilities in power gen business, given increased localization due to a significant decline in imports post CPCB-2 implementation.  Performance of export segment, as exports remained weak, led by poor demand in LatAm, Europe and China.

Quarterly performance (Consolidated) Y/E March Sales Change (%) EBITDA Change (%) As of % Sales Depreciation Interest Other Income PBT Tax Effective Tax Rate (%) Adjusted PAT Change (%) Reported PAT Change (%)

January 2017

1Q 13,101 25.3 2,217 23.3 16.9 203 24 595 2,585 472 18.2 2,114 (0.3) 2,114 (0.3)

FY16 2Q 3Q 11,946 11,469 4.4 5.9 2,019 1,550 6.3 -18.2 16.9 13.5 200 201 24 2 601 566 2,396 1,912 417 288 17.4 15.1 1,980 1,624 (2.2) (10.3) 1,980 1,624 (2.2) (10.3)

4Q 10,614 -6.4 1,773 0.8 16.7 206 24 513 2,056 386 18.8 1,670 (12.3) 1,670 (12.3)

1Q 12,590 -3.9 2,063 -6.9 16.4 206 21 416 2,252 440 19.5 1,812 (14.3) 1,812 (14.3)

FY17 2Q 3QE 12,790 12,219 7.1 6.5 1,990 1,792 -1.4 15.6 15.6 14.7 209 258 43 24 692 590 2,430 2,100 461 420 19.0 20.0 1,969 1,680 (0.5) 3.5 1,969 1,680 (0.5) 3.5

4QE 12,621 18.9 2,100 18.5 16.6 216 24 594 2,455 479 19.5 1,976 18.3 1,976 18.3

FY16

FY16

47,130 7.0 7,822 3.3 16.6 810 96 2,279 9,195 1,561 17.0 7,634 (2.9) 7,634 (2.9)

49,966 6.0 7,692 10.0 15.4 889 96 2,292 9,000 1,800 20.0 7,200 (5.7) 7,200 (5.7)

81

December 2016 Results Preview | Sector: Capital Goods

GE T&D Bloomberg

GETD IN

Equity Shares (m)

256.1

M. Cap. (INR b)/(USD b)

77 / 1

52-Week Range (INR) 1,6,12 Rel Perf. (%)

CMP: INR302 

477 / 285 -4 / -12 / -38

Financial Snapshot (INR b) Y/E March 2016 2017E 2018E 2019E Net Sales 34.1 38.3 43.9 50.4 EBITDA 2.3 2.4 5.0 6.6 Adj PAT 0.8 1.4 2.7 3.8 EPS (INR) 3.0 5.6 10.7 15.0 EPS Gr. (%) -35.7 86.3 88.9 40.6 BV/Sh. (INR) 52.1 50.3 55.8 63.6 RoE (%) 5.9 -6.8 20.1 25.1 RoCE (%) 10.1 13.2 24.5 29.7 Payout (%) 59.5 40.0 40.0 40.0 Valuations P/E (x) 99.9 53.6 28.4 20.2 P/BV (x) 5.8 6.0 5.4 4.8 EV/EBITDA (x) 35.2 32.6 15.5 11.6 EV/ Sales (x) 2.4 2.1 1.8 1.5 Div Yield (%) 0.6 -0.5 1.4 2.0





TP: INR320 (+6%)

Neutral

We expect GETD to register robust revenue growth of 14% YoY to INR8.5b in 3QFY17. Revenue growth would be driven by execution of the Champa-K urukshetra Phase-I project. We expect operating profit in 3QFY17 as against loss of INR14m in 3QFY16. Loss at operating level in 3QFY16 was primarily on account of cost overrun on certain projects. Gross margin is likely to expand 130bp to 32.9% from 31.6% in 3QFY16. GETD is expected to book net profit of INR40m as against loss of INR182m in 3QFY16. Maintain Neutral.

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

Quarterly Performance Y/E March Sales Change (%) EBITDA Change (%) As of % Sales Depreciation Interest Other Income Extra-ordinary Items PBT Tax Effective Tax Rate (%) Reported PAT Change (%) Adj PAT Change (%)

January 2017

1Q 7,660 1.2 72 -90.4 0.9 212 117 412 0 155 54 34.7 102 -67.5 102 -64.4

FY16 2Q 3Q 8,729 7,436 1.2 1.2 680 -14 -22.4 NA 7.8 -0.2 215 215 143 168 213 117 0 0 536 -280 174 -98 32.6 NA 361 -182 1.8 -803.1 361 -182 1.8 NA

4Q 9,715 -28.6 850 -18.5 8.7 216 189 64 0 509 210 41.3 299 -44.8 299 -44.8

1Q 8,546 11.6 21 -70.3 0.2 217 226 326 2,330 -2,425 -455 18.8 -1,970 -2,041.0 360 254.6

FY17 2Q 3QE 8,340 8,500 -4.4 14.3 339 370 -50.1 -2,705.6 4.1 4.4 220 220 239 220 435 130 0 0 315 60 109 20 34.6 33.3 206 40 -43.0 -122.0 206 40 -43.0 NA

4QE 12,892 32.7 1,675 97.1 13.0 234 221 70 0 1,290 451 35.0 839 180.7 839 180.7

FY16E

FY17E

34,135 -7.8 2,324 -9.0 6.8 873 589 427 0 1,289 508 39.4 781 0.0 781 2.0

38,278 12.1 2,405 -9.0 6.3 873 589 427 0 1,370 508 37.1 862 0.0 862 2.0

82

December 2016 Results Preview | Sector: Capital Goods

Havells India Bloomberg

HAVL IN

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

624.6 219 / 3

52-Week Range (INR)

460 / 259

1,6,12 Rel Perf. (%)

3 / -2 / 10

Financial Snapshot (INR b) Y/E March 2016 2017E 2018E 2019E Net Sales 77.1 59.9 68.9 79.9 EBITDA 8.0 7.7 9.7 11.9 Adj PAT 4.8 4.7 7.1 8.5 Adj EPS (INR) 7.8 7.5 11.3 13.6 EPS Gr. (%) -6.0 -3.6 51.0 19.9 BV/Sh(INR) 41.0 44.3 48.6 55.2 RoE (%) 19.0 16.9 23.3 24.6 RoCE (%) 20.4 20.4 23.7 25.7 Payout (%) 93.0 63.6 62.1 51.7 Valuations P/E (x) 45.2 46.9 31.0 25.9 P/BV (x) 8.6 7.9 7.2 6.4 EV/EBITDA (x) 25.4 26.4 20.4 16.4 Div Yield (%) 1.1 1.4 1.7 1.7 * Consolidated

CMP: INR351  





TP: INR390 (+11%)

BUY

We expect HAVL’s 3QFY17 operational performance to be impacted on account of the demonetization-led sluggishness. Standalone revenue is expected to decline 1% YoY on account of decline in the demand for products like switchgears (-10% YoY), electrical consumer durables (-5% YoY) and lighting (-8% YoY). We expect the cables segment, which contributes 41% of the company’s revenue, to register 5% YoY growth, led by improvement in the prices of the copper (+11% YoY). We expect operating margin to shrink 570bp YoY to 7.8% in 3QFY17, led by negative operating leverage, increase in staff cost, and higher ad spend. Net profit is expected to decline 42% YoY. Maintain BUY.

Key issues to watch  Commentary on the impact of demonetization on demand for the company’s product portfolio and outlook for FY18.  Guidance on deployment of cash received from the sale of Sylvannia to Sanghai Feilo.

Quarterly Performance (Standalone) Y/E March Sales Change (%) Adj EBITDA Change (%) Adj EBITDA margin (%) Depreciation Interest Other Income PBT Tax Effective Tax Rate (%) Reported PAT Change (%) Adj PAT Change (%) E: MOSL Estimates

January 2017

1Q 12,523 -1.9 1,620 -1.4 13.1 248 30 170 1,489 421 28.2 1,068 -0.4 1,085 -0.4

FY16E 2Q 3Q 13,359 13,445 -2.1 7.8 1,890 1,815 2.9 0.0 14.2 13.5 261 232 31 19 98 132 1,683 1,712 488 505 29.0 29.5 1,195 1,208 -0.1 3.9 1,204 1,191 -1.0 0.3

4Q 14,754 9.3 2,196 11.1 14.9 237 48 291 2,208 567 25.7 1,641 34.7 1,637 23.6

1Q 14,668 17.1 2,004 23.7 13.7 280 16 307 2,022 567 28.0 1,456 36.3 1,450 33.7

FY17 2Q 3QE 14,522 13,318 8.7 -0.9 2,034 1,034 7.6 -43.0 14.0 7.8 308 300 19 19 253 270 2,030 985 572 281 28.2 28.5 1,458 704 22.0 -41.7 1,409 704 17.0 -40.9

4QE 14,505 -1.7 1,406 -36.0 9.7 371 -4 317 1,356 371 27.3 985 -39.9 985 -39.8

FY16 54,369 3.8 7,479 2.9 13.8 922 126 687 7,119 1,988 27.9 5,130 10.3 5,117 6.2

FY17E 57,014 4.9 6,555 -12.3 11.5 1,259 50 1,147 6,394 1,790 28.0 4,604 -10.3 4,684 -8.5

83

December 2016 Results Preview | Sector: Capital Goods

Larsen & Toubro Bloomberg

LT IN

Equity Shares (m)

935.5

M. Cap. (INR b)/(USD b) 52-Week Range (INR) 1,6,12 Rel Perf. (%) Financial Snapshot (INR b) Y/E March 2016E 2017E Sales 1,020 1,092 EBITDA 103.5 113.1 Adj PAT * 41.8 50.2 EPS (INR)* 44.7 53.6 EPS Gr. (%) -5.3 19.9 BV/Sh (INR) 470.2 510.3 RoE (%) 9.9 10.9 RoCE (%) 6.3 7.5 Payout (%) 28.7 21.8 Valuations P/E (x)* 30.8 25.7 P/BV (x) 3.1 2.9 EV/EBITDA (x) 21.7 19.7 Div Yield (%) 0.9 0.8 * C ons olid ated

1287 / 19

CMP: INR1,376 

1615 / 1017 0 / -10 / 6

2018E 1,250 141.7 58.2 62.2 15.9 555.5 11.7 9.2 24.0

2019E 1,382 159.4 71.1 76.1 22.3 612.0 13.0 10.0 22.5

22.1 2.7 15.6 1.1

18.3 2.5 13.8 1.2



  

TP: INR1,600 (+16%)

Buy

LT announced order intake of INR70b in 3QFY17 compared to INR9.0b in 3QFY16. Domestic order wins are supported by order finalization in the water and T&D space. However, large ticket order finalization has not materialized. K ey orders finalized during the quarter are (a) EPC order of INR14.2b from Department of Water Resources for execution of mega lift irrigation schemes in Odhisa, (b) electrification project of INR10.4b under IPDS scheme from North/South Bihar Power Distribution Limited. Overseas wins have been muted, particularly impacted by the sharp decline in crude prices. LT along with EMAS Chiyoda has won two EPC contracts from Saudi Aramco. For 3QFY17, we expect revenue growth of 6% YoY to INR270b. We expect operating profit growth of 4.5% YoY. We expect net profit growth of 6.3% YoY to INR11b. L&T-MHPS Boiler Private Limited has signed a technology license agreement for selective catalytic reduction systems. The technology licensing agreement is for design, engineering, manufacture, installation, commissioning, and sale of new boilers under BTG, EPC or SG packages or standalone SCR systems, and for existing and under construction boilers on exclusive basis in India. Maintain Buy.

Key issues to watch  Recent demonetization drive has led to 24 days revenue loss for the road BOT Toll players. We have factored in loss of INR300m for 3QFY17 on account of the demonetization drive.  Net working capital (excluding financial services) at 22% of revenue in 2QFY17 remains at a high, given tight liquidity conditions. Quarterly Performance (Consolidated) Y/E March Sales Change (%) EBITDA Change (%) Margin (%) Depreciation Interest Other Income Extraordinary Inc/(Exp) Reported PBT Tax Effective Tax Rate (%) Reported PAT Reported PAT Change (%) Adjusted PAT Change (%) E: MOSL Estimates January 2017

FY16 FY17 FY16 FY17 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 200,482 231,235 258,293 331,570 218,738 250,107 273,000 354,838 1,019,641 1,092,044 7.0 9.3 8.3 18.3 9.1 8.2 5.7 7.0 10% 7% 16,411 21,310 26,499 48,592 19,050 22,977 27,700 43,403 103,494 113,130 -8.9 8.6 -8.3 34.6 16.1 7.8 4.5 -10.7 -8.7 9.3 8.2 9.2 10.3 14.7 8.7 9.2 10.1 12.2 10% 10% 4,658 5,286 6,198 8,203 4,648 4,602 4,400 4,108 17,867 17,758 3,893 4,388 7,446 7,737 3,375 3,517 5,000 7,513 16,405 19,404 2,833 3,217 4,517 2,182 3,024 4,813 3,100 1,897 10,032 12,834 0 457 0 485 0 4,024 0 0 942 0 10,692 15,310 17,371 34,834 14,052 19,671 21,400 33,678 80,196 88,801 4,282 5,347 5,555 9,537 5,488 6,807 7,000 7,942 23,782 23,782 40.1 34.9 32.0 27.4 39.1 34.6 32.7 23.6 30.7 30.7 6,410 9,506 11,816 25,297 8,564 12,864 14,400 25,737 54,946 4,190 7,784 10,348 24,536 6,096 14,346 11,000 22,767 42,790 50,185 -37.3 -9.7 19.4 18.6 45.5 84.3 6.3 -7.2 3.8 3.8 4,190 7,327 10,348 24,051 6,096 10,322 11,000 22,767 41,848 50,185 -21.0 -15.0 19.4 22.0 45.5 40.9 6.3 -5.3 7.9 7.9

84

December 2016 Results Preview | Sector: Capital Goods

Siemens Bloomberg

SIEM IN

Equity Shares (m) M. Cap. (INR b)/(USD b) 52-Week Range (INR) 1,6,12 Rel Perf. (%)

356.1 399 / 6

CMP: INR1,121 

1355 / 969 2 / -11 / -10

Financial Snapshot (INR b) Y/E September 2015 2016 2017E 2018E Net Sales 52.6 46.2 47.7 54.3 EBITDA 4.1 4.1 4.6 5.5 Adj PAT 2.8 3.0 3.3 3.8 Adj EPS (INR) 23.5 24.8 27.6 32.0 EPS Gr (%) 8.2 5.2 11.2 16.1 BV/Sh. (INR) 197.7 212.5 229.2 249.2 RoE (%) 12.5 12.2 12.5 13.4 RoCE (%) 11.3 10.7 12.2 12.9 Payout (%) 32.9 34.2 33.8 32.1 Valuations P/E (x) 33.2 31.5 28.3 24.4 P/BV (x) 3.9 3.7 3.4 3.1 EV/EBITDA (x) 23.3 22.7 19.7 16.4 Div. Yield (%) 1.0 1.1 1.2 1.3







TP: INR1260

Neutral

During the quarter, SIEM approved the sale and transfer of its engineering, design and development services for global wind power business to a subsidiary, Wind Holdco Sociedada Limitada (SA), Spain for a consideration of INR75m. SIEM and Whispering Heights Real Estate Private Limited have executed an MoU for the transfer of the company’s leasehold interest in a property for a consideration of INR6.1b. We expect SIEM to register muted YoY revenue decline of 2.1% to INR22.6b, as we exclude revenue of the healthcare division, which it sold in 3QFY16. Excluding healthcare, we expect robust revenue growth of 19% YoY, led by strong performance by the industrial and energy segments. We expect SIEM to register sales of INR22.1b, a growth of 12% YoY (excluding healthcare division). EBITDA is likely to decline 3% YoY to INR1.9b and net profit is likely to grow 22% YoY to INR1.4b on higher other income and lower tax rate. Maintain Neutral.

Key issues to watch  Raw material imports account for 55% of raw material cost; Siemens AG’s network comprises 82% of imports; EUR depreciating 1% YoY v/s INR could bolster product competitiveness and margin profile.

Quarterly Performance (Standalone) FY17 FY18 1Q 2Q 3Q 4Q 1Q 2Q Total Revenues 23,142 27,836 26,204 30,906 22,650 27,350 Change (%) 5.9 4.9 10.3 -6.3 -2.1 -1.7 EBITDA 1,940 3,061 2,338 2,414 1,940 3,000 As % of Revenues 8.4 11.0 8.9 7.8 8.6 11.0 Depreciation 586 590 625 462 570 600 interest 19 21 21 21 20 20 Other Income 411 270 279 683 640 740 Extra-ordinary Items 0 0 0 22,825 0 0 PBT 1,746 2,720 1,971 25,439 1,990 3,120 Tax 606 946 670 770 650 920 Effective Tax Rate (%) 34.7 34.8 34.0 3.0 32.7 29.5 Reported PAT 1,140 1,774 1,300 24,670 1,340 2,200 Adjusted PAT 1,140 1,774 1,300 1,845 1,340 2,200 Change (%) 7.5 14.9 -22.7 7.1 17.5 24.0 Order Intake (INR b) 34 29 32 25 35 0 Order book (INR b) 108 110 116 111 0 0 BTB (x) 1.0 1.0 1.1 1.0 0.0 0.0 E: MOSL Estimates, Adj EBITDA: Adjusted for change in project revenues and cost estimates Y/E September

January 2017

(INR Million) 3Q 26,400 0.7 3,300 12.5 625 20 740 0 3,395 1,002 29.5 2,393 2,393 84.1 0 0 0.0

4Q 33,498 8.4 4,323 12.9 646 19 774 0 4,431 1,309 29.5 3,122 3,122 69.3 0 0 0.0

FY16

FY17

108,088 1.4 9,731 9.0 2,263 59 1,639 0 9,166 2,992 32.6 6,174 6,056 33.5 121 100 0.9

109,898 4.5 12,563 11.4 2,441 79 2,894 0 13,095 3,881 29.6 9,214 1,340 -77.8 120 101 0.9

85

December 2016 Results Preview | Sector: Capital Goods

Thermax Bloomberg

TMX IN

Equity Shares (m)

119.2

M. Cap. (INR b)/(USD b)

93 / 1

52-Week Range (INR) 1,6,12 Rel Perf. (%)

CMP: INR780 

945 / 691 -7 / -7 / -16

Financial Snapshot (INR b) Y/E March 2016 2017E 2018E 2019E Net Sales 52.6 46.2 47.7 54.3 EBITDA 4.1 4.1 4.6 5.5 Adj PAT 2.8 3.0 3.3 3.8 EPS (INR) 23.5 24.8 27.6 32.0 EPS Gr. (%) 8.2 5.2 11.2 16.1 BV/Sh. (INR) 197.7 212.5 229.2 249.2 RoE (%) 12.5 12.2 12.5 13.4 RoCE (%) 11.3 10.7 12.2 12.9 Payout (%) 32.9 34.2 33.8 32.1 Valuations P/E (X) 33.2 31.5 28.3 24.4 P/BV (X) 3.9 3.7 3.4 3.1 EV/EBITDA (X) 23.3 22.7 19.7 16.4 Div Yield (%) 1.0 1.1 1.2 1.3





TP: INR706 (-9%)

Sell

Revenue is likely to decline 7% YoY, led by constrained execution environment prevailing in the energy segment. Operating margin is expected to remain stable YoY at 9.3%. Ordering activity remains muted on a weak macro environment. We believe domestic orders have remained at the base level (INR5b-7b per quarter), as the company has not announced any meaningful order during the quarter. Increased internationalization of the business is a vital part of TMX’s ongoing strategy. The company also announced plans to partly localize operations in SE Asia by setting up subsidiaries. It is planning to set up a boiler facility in Indonesia with capex of USD50m. TMX expects the facility to generate revenue of USD100m over 3-4 years post commissioning of the plant. Maintain Sell.

Key issues to watch  Demand environment in domestic and overseas markets.  Sustainability of margins in energy (10.1% in 2QFY17) and environment (8% in 2QFY17) segments.

Quarterly Performance (Standalone) Y/E March Sales Change (%) EBITDA Change (%) As of % Sales Depreciation Interest Other Income Extra-ordinary Items PBT Tax Effective Tax Rate (%) Reported PAT Change (%) Adj PAT Change (%)

January 2017

1Q 10,173 21.2 788 36.5 7.7 158 12 210 829 271 32.7 558 34.8 558 34.8

FY16 2Q 3Q 10,829 10,390 -9.1 -9.4 907 988 -25.8 -24.8 8.4 9.5 157 160 12 2 195 131 933 315 33.8 618 (28.2) 618 (28.2)

957 279 29.1 678 (11.1) 678 (11.1)

4Q 12,932 -14.3 1,182 -27.3 9.1 135 -1 478

1Q 8,145 -19.9 637 -19.1 7.8 168 7 211

1,526 413 27.0 1,113 (15.9) 1,113 (15.9)

673 221 32.8 452 (19.0) 452 (19.0)

FY17 2Q 3Q 8,708 9,664 -19.6 -7.0 773 902 -14.7 -8.7 8.9 9.3 166 187 7 10 289 185 888 292 32.8 597 (3.5) 597 (3.5)

890 276 31.0 614 (9.5) 614 (9.5)

4Q 12,382 -4.3 1,401 18.5 11.3 183 22 193

FY16

FY17E

44,589 -5.1 3,742 -20.4 8.4 609 46 1,140

39,387 -11.7 3,714 -0.7 9.4 704 46 877

1,389 387 27.9 1,001 (10.0) 1,001 (10.0)

4,227 1,252 29.6 2,975 (11.4) 2,975 (11.4)

3,840 1,176 30.6 2,665 (10.4) 2,665 (10.4)

86

December 2016 Results Preview | Sector: Capital Goods

Voltas Bloomberg Equity Shares (m) M. Cap. (INR b)/(USD b) 52-Week Range (INR) 1,6,12 Rel Perf. (%)

VOLT IN 330.8 111 / 2

CMP: INR335 

406 / 211 9/7/5

Financial Snapshot (INR b) Y/E March 2016 2017E 2018E 2019E Net Sales 58.6 58.9 65.6 73.9 EBITDA 4.4 4.7 5.3 6.8 Adj PAT 3.9 3.9 4.6 5.8 EPS(INR) 11.7 11.8 14.0 17.6 EPS Gr. (%) 14.0 1.2 19.1 25.3 BV/Sh. (INR) 72.4 80.8 90.8 103.4 RoE (%) 15.3 15.4 16.4 18.1 RoCE (%) 14.8 14.6 15.3 16.7 Payout (%) 28.6 28.6 28.6 28.6 Valuations P/E (x) 32.1 26.4 22.2 17.7 P/BV (x) 4.6 3.9 3.4 3.0 EV/EBITDA (x) 25.5 21.2 18.5 14.1 Div Yield (%) 0.8 0.9 1.1 1.4





TP: INR370 (+10%)

BUY

Unitary cooling division (UCP) is likely to report revenue decline of 5% YoY, with demonetization impacting demand for ACs. As 3Q is usually a lean quarter for AC sales, the impact would be limited. We expect revenue decline of 10% YoY in the MEP segment, led by high base effect (56% YoY growth in 3QFY16). However, the key monitorable would be margins in the segment. VOLT had booked a loss of INR86m in 3QFY16 on cost overrun getting booked for the UAE project, while the acceleration claim is yet to be booked. Sharp decline in crude prices has raised apprehensions over the pace of order awards and also execution in the Middle East. Even in the domestic market, new project awards remain constrained. Maintain Buy.

Key issues to watch  Impact of demonetization scheme on the sales of UCP division and outlook for FY18.  Progress on legacy projects and also capital employed in MEP business.

Quarterly Performance (Consolidated) Y/E March Sales Change (%) EBITDA Change (%) As of % Sales Depreciation Interest Other Income Extra-ordinary Items PBT Tax Effective Tax Rate (%) Reported PAT Change (%) Adj PAT Change (%) Order Book Order Intake BTB - TTM basis (x) E: MOSL Estimates

January 2017

1Q 15,585 -11.3 1,313 -0.4 8.4 59 34 248 0 1,468 452 30.8 1,025 -7.0 1,025 -7.9 40,390 5,940 1.8

FY16 2Q 3Q 10,401 13,077 5.6 37.5 645 583 -17.0 1.6 6.2 4.5 64 69 33 33 477 183 0 -22 1,025 687 378 126 36.9 18.3 647 542 28.9 -49.5 647 520 29.5 -17.3 35,990 35,140 2,010 4,960 1.3 1.3

4Q 18,888 26.8 1,853 29.5 9.8 80 59 478 -279 2,471 664 26.9 1,764 47.9 1,485 27.1 39,140 9,590 1.0

1Q 18,500 18.7 1,995 52.0 10.8 66 48 357 -9 2,248 651 28.9 1,576 53.7 1,567 52.8 44,170 9,500 1.4

FY17 2Q 3Q 9,672 11,688 -7.0 -10.6 687 575 6.4 -1.4 7.1 4.9 63 85 33 45 658 300 0 0 1,249 745 505 220 40.4 29.5 721 505 11.5 -6.8 721 505 11.5 -2.9 42,520 3,820 4,450 1.3 1.6

4Q 18,853 -0.2 1,475 -20.4 7.8 106 60 254 0 1,562 437 28.0 1,110 -37.1 1,110 -25.3 9,230 -

FY16

FY17

58,574 13.0 4,369 6.6 7.5 278 153 1,176 106 5,220 1,599 30.6 3,620 -7.4 3,515 3.9 39,140 22,500 1.4

58,907 0.6 4,732 8.3 8.0 320 186 1,569 0 5,795 1,813 31.3 3,903 7.8 3,903 11.0

87

December 2016 Results Preview

Cement Company name ACC

Demonetization affects demand recovery Volume growth to be muted; prices under pressure

Ambuja Cements

Demonetization derails recovery

Grasim Industries

Cement demand witnessed healthy recovery in October 2016; all India production grew ~7% YoY on a relatively higher base. However, following the announcement of demonetization in November, cement demand was severely impacted. The impact was particularly pronounced in the initial 15 days due to acute cash shortage and absence of alternate methods of payment for a large part of users. November allIndia production declined 15% MoM while still registering a growth of ~1% YoY due to low base – November 2015 was part of the festive season.

India Cements Shree Cement Ramco Cement UltraTech Cement

We expect double-digit YoY volume decline in December, led by high base and demonetization. However, there should be marginal improvement MoM. We expect all-India volume to decline 1% YoY in 3QFY17. MOSL cement universe is likely to see volume decline of 0.9% YoY (+ 2.6% QoQ). We expect (a) pan-India players to report volume decline of 4-8% YoY, (b) players with capacity headroom (SRCM, JK LC) to deliver 2-5% YoY increase in volumes, (c) South-based companies to deliver 15%+YoY growth due to lesser impact of demonetization as also low base. In 4QFY17, we expect industry volume to decline on a YoY basis due to absence of new construction activity as also high base of 4QFY16. In FY18, industry volumes should see over 5% growth, led by stronger government push towards infrastructure and low cost housing.

Prices under pressure Prices increased in October in expectation of demand improvement in 2HFY17, but declined in December due to demonetization that resulted in dampened demand. ASP should decline 2% QoQ in 3QFY17 due to weak realization in North and East markets. We estimate price changes of: (a) -5% QoQ in North India, (b) -2% QoQ in Central India, (c) ~+5% QoQ in West India, (d) -6% QoQ in East India, and (e) -2% QoQ in South India.

Profitability likely to be under check Weaker realizations coupled with subdued volumes and cost push in terms of higher power and fuel cost should result in sharp sequential decline in profitability. The impact would be particularly accentuated for North, Central & East market where price correction has been more dominant. MOSL cement coverage universe EBITDA/ton would be INR728 (-15% QoQ, +3% YoY).

Abhishek Ghosh ([email protected]); +91 22 3982 5436 Varun Gadia ([email protected]); +91 22 3982 5446 January 2017

88

December 2016 Results Preview | Sector: Cement

Top picks include Shree Cement, Ramco Cement and Dalmia Cement The steep ask rate in terms of realization growth should result in a time correction for cement stocks. We believe this could be an attractive entry opportunity for stocks with strong operating cash flows, superior return ratios and higher mediumto-longer-term earnings visibility. We prefer Shree Cement due to superior return ratios – RoCE of 30%, with 38% EBITDA CAGR over FY16-18. Ramco Cement is likely to generate free annual cash flows of INR7b-8b, given strong profitability; it generates a yield of 6-7%. Dalmia Cement trades at an attractive EV/EBITDA of 9.3x FY18E, given strong earnings growth on sustenance of profitability and lower interest cost. Exhibit 1: Expected quarterly performance summary Sector

CMP (INR)

Cement ACC Ambuja Cements Grasim Industries India Cements Ramco Cements Shree Cement Ultratech Cement Cement Sector Aggregate UR: Under Review

RECO

1,320 Neutral 212 Buy 867 UR 122 Neutral 575 Buy 14,131 Buy 3,299 Buy

Sales (INR M) Var % Var % Dec-16 YoY QoQ

EBDITA (INR M) Var % Var % Dec-16 YoY QoQ

PAT (INR M) Var % Var % Dec-16 YoY QoQ

26,566 21,800 24,792 11,919 9,264 18,879 53,435 166,654

1,880 2,664 5,238 2,011 2,627 4,941 9,634 28,995

583 1,612 3,701 481 1,409 2,592 5,078 15,457

-6.7 -7.5 7.2 28.2 14.1 3.3 -7.0 -1.0

7.5 8.8 -0.4 -8.8 -8.5 -5.9 -1.0 -0.1

-13.0 -12.4 22.1 37.6 7.4 16.5 -7.7 3.3

-16.3 -3.5 -1.2 -10.4 -24.8 -24.7 -11.9 -13.6

-43.2 -30.7 10.9 -41.8 42.2 -37.5 780.8 -22.9 19.7 -31.9 151.8 -11.1 -0.2 -15.5 24.3 -26.9 Source: MOSL

Exhibit 2: MOSL universe volume at 42mt (-1%YoY) 16.9

3QFY17E

1.6 41 2QFY17

4QFY16

47 1QFY17

49

-0.9

42

5.7 42 3QFY16

3.7

3QFY15

40 2QFY16

2QFY15

1.6

1QFY15

43 1QFY16

40

-5.0

5.1

39

42

4QFY15

5.5 43

4QFY14

8.9

9.3

44

3QFY14

6.3 38

1.2

37 2QFY14

3QFY13

39

0.4

2QFY13

Volume growth (%)

1QFY14

38

-1.3

1.8

36

4QFY13

2.5 39 1QFY13

42

3.2

8.3

Volumes (MT) - RHS

Source: Company, MOSL

Exhibit 4: Pan-India average cement prices (INR/bag) lower in 3QFY17 due to weak prices in North and East

January 2017

West

South

298 299 293

East

296 296 288

North

3QFY17

331 337 330

291 282 295

2QFY17

293 298 280

1QFY17

278 285 270 3QFY17E

1QFY17

3QFY16

1QFY16

3QFY15

1QFY15

3QFY14

1QFY14

3QFY13

1QFY13

3QFY12

1QFY12

3QFY11

1QFY11

77 68 70 78 72 65 71 80 73 65 68 78 70 65 67 76 73 67 65 71 71 66 65 76 72 65 65

Exhibit 3: Utilizations remain flattish qoq(%)

Central

Average prices (INR/bag)

89

December 2016 Results Preview | Sector: Cement

Exhibit 5: MOSL coverage realization to decline 2% QoQ in 3QFY17

Exhibit 6: Profitability to decline 15% QoQ, led by weak volume and lower operating leverage

Realization (INR/ton)

3,220 3,617 3,777 3,566 3,841 3,962 4,176 4,200 4,028 3,989 4,017 3,873 3,946 4,000 4,147 4,229 4,100 4,294 4,226 4,307 4,179 3,960 4,223 4,339 4,269

498 837 683 750 747 948 806 1,010 793 814 788 489 566 714 759 681 570 833 717 724 705 806 966 857 728

3QFY11 4QFY11 1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13 4QFY13 1QFY14 2QFY14 3QFY14 4QFY14 1QFY15 2QFY15 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17E

3QFY11 4QFY11 1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13 4QFY13 1QFY14 2QFY14 3QFY14 4QFY14 1QFY15 2QFY15 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17E

EBITDA (INR/ton)

Source: Company, MOSL

Source: Company, MOSL

Exhibit 7: Relative performance— 3 months (%) Sensex Index

Exhibit 8: Relative performance— 1 year (%)

MOSL Cement Index

Sensex Index

107

149

98

133

MOSL Cement Index

117 89

101 Dec-16

Nov-16

Oct-16

Sep-16

Aug-16

Jul-16

Jun-16

May-16

Apr-16

Mar-16

Feb-16

Jan-16

Dec-16

Nov-16

Oct-16

Sep-16

Dec-15

85

80

Source: Bloomberg, MOSL

Exhibit 9: 3QFY17 estimates for MOSL coverage Volume (m ton) ACC Ambuja Cement UltraTech Birla Corp India Cement Shree Cement Dalmia Bharat J K Cements JK Lakshmi Madras Cement Orient Cement Prism Cement Sector Aggregate

January 2017

3QFY17

YoY (%)

QoQ (%)

5.5 5.1 10.9 1.8 2.2 4.9 3.4 1.9 1.7 1.9 1.2 1.2 41.8

-8.5 -7.1 -5.1 -10.0 16.0 4.7 16.0 -5.0 -2.0 19.0 15.0 -2.0 -0.9

8.1 11.1 0.1 0.5 -8.7 7.7 0.4 -0.1 1.1 -4.9 2.9 1.5 2.6

Realization (INR/ton) YoY QoQ 3QFY17 (INR/T) (INR/T) 4,285 -54 -87 4,284 -16 -92 4,081 -58 -80 4,336 647 -100 5,259 512 0 3,765 266 -200 4,865 -30 125 4,693 223 -50 3,722 59 -100 4,769 -282 0 3,423 84 150 4,412 594 70 4,269 90 -70

EBITDA (INR/ton) YoY QoQ 3QFY17 (INR/T) (INR/T) 343 -18 -100 524 -32 -79 873 -11 -119 232 -93 -261 895 140 -17 1,000 204 -300 997 -132 -144 623 0 -138 242 -136 -304 1,376 -149 -150 520 321 383 617 141 174 728 24 -129 Source: MOSL

90

December 2016 Results Preview | Sector: Cement Exhibit 10: Comparative valuation Sector / Companies Cement ACC Ambuja Cements Birla Corporation Dalmia Bharat Grasim Industries India Cements J K Cements JK Lakshmi Cem. Orient Cement Prism Cement Ramco Cements Shree Cement Ultratech Cement Cement Sector Aggregate

January 2017

CMP (INR)

RECO

1,320 212 675 1,580 867 122 728 365 126 84 575 14,131 3,299

Neutral Buy Buy Buy Under Review Neutral Buy Buy Buy Buy Buy Buy Buy

EPS (INR) PE (x) EV/EBIDTA (x) ROE (%) FY17E FY18E FY19E FY17E FY18E FY19E FY17E FY18E FY19E FY17E FY18E FY19E 32.6 5.7 33.8 34.2 76.1 8.9 26.4 4.7 -1.1 0.9 29.4 394.3 94.6

48.9 6.9 44.5 50.4 88.7 10.6 36.5 12.2 3.3 3.5 31.5 582.0 134.8

65.6 7.4 56.6 72.3 113.4 12.7 48.7 17.6 5.7 5.1 42.3 725.4 168.4

40.5 26.1 20.0 46.2 11.4 13.6 27.5 77.3 -114.9 94.4 19.5 35.8 34.9 27.1

27.0 21.4 15.2 31.3 9.8 11.5 20.0 29.9 37.8 24.0 18.3 24.3 24.5 20.5

20.1 20.1 11.9 21.9 7.6 9.6 15.0 20.7 21.9 16.6 13.6 19.5 19.6 16.2

19.6 17.2 9.9 11.8 5.7 7.5 12.7 15.8 19.2 22.2 12.4 19.0 19.0 13.6

15.3 14.7 7.3 9.8 4.6 7.4 10.6 12.6 12.1 13.0 10.4 14.1 14.1 10.7

12.9 13.1 5.9 9.3 2.7 6.6 9.5 10.4 10.6 8.9 8.2 11.2 11.7 8.6

7.2 5.9 8.5 7.6 12.9 7.0 10.9 4.2 -2.3 4.5 20.6 20.2 11.9 10.5

10.9 14.6 7.1 7.3 9.8 11.9 10.3 13.1 13.3 14.9 7.4 8.0 13.7 16.1 10.5 14.7 6.8 11.0 16.0 19.8 18.6 21.0 24.3 24.2 15.0 16.4 12.6 14.2 Source: MOSL

91

December 2016 Results Preview | Sector: Cement

ACC Bloomberg

ACC IN

Equity Shares (m)

188.0

M. Cap. (INR b)/(USD b)

307 / 5

52-Week Range (INR)

1,738/1,173

1,6,12 Rel Perf. (%)

-1/4/12

Financial Snapshot (INR Billion) Y/E Dec

2015 2016E 2017E 2018E

Sales

114.3 109.2 118.6

133

EBITDA

11.7

15.1

18

11.9

NP

6.0

6.1

9.2

12

Adj. EPS (INR)

32.0

32.6

48.9

66

EPS Gr. (%)

-30.3

1.9

50.0

34

BV/Sh (INR)

449.3 451.7 446.4

452

RoE (%)

7.2

7.2

10.9

15

RoCE (%)

7.4

7.4

10.8

14

Payout (%)

65.1

92.5

111.0

92

P/E (x)

41

41

27

20

P/BV (x) EV/EBITDA (x)

3 19

3 19

3 15

3 13

EV/Ton (x)

107

104

103

98

Valuations

CMP: INR1320

TP: INR1,321 (+0%)

Neutral

Dispatches in 4QCY16 are estimated at 5.48mt (-9% YoY). Average realizations are expected to be lower by 2% QoQ (-1% YoY) at INR4285/ton due to weak realization in East and North markets. Revenues are expected to de-grow 7% YoY to INR26.6b. EBITDA margin is expected to be 7.1%, down 2pp QoQ (and +0.5pp YoY). EBITDA/ton is estimated at INR343 (-INR18 YoY, -INR100 QoQ). Pure cement EBITDA/ton is estimated at INR315 (-INR103 QoQ) due to weak volumes. PAT is likely to de-grow 43% YoY to INR583m. The stock trades at 27x CY17E EPS, 15x CY17E EV/EBITDA, and CY17 EV/ton of USD103. Maintain Neutral. Key issues to watch out for  Cement pricing recovery.  Volume growth and demand revival.  Update on post demonetization volume demand.  Ramp up of new plant in East.

Quarterly Performance (Standalone) Y/E December Cement Sales (m ton) YoY Change (%) Cement Realization YoY Change (%) QoQ Change (%) Net Sales YoY Change (%) Total Expenditure EBITDA Margins (%) Depreciation Interest Other Income PBT before EO Item PBT after EO Item Tax Rate (%) Reported PAT Adjusted PAT Margins (%) YoY Change (%) E: MOSL Estimates

January 2017

CY15 1Q 2Q 3Q 4Q 5.82 6.20 5.61 5.99 -10.2 -2.4 -0.2 4.0 4,535 4,385 4,438 4,339 5.5 -1.2 -1.8 -2.3 2.1 -3.3 1.2 -2.2 28,854 29,612 27,400 28,461 -2.8 -1.6 -0.1 3.0 24,718 26,817 24,762 26,300 4,137 2,795 2,638 2,162 14.3 9.4 9.6 7.6 1,698 1,657 1,607 1,559 226 143 150 154 1,141 775 678 844 3,353 1,771 1,559 1,292 3,230 1,771 1,559 1,292 824 456 389 267 25.5 25.8 24.9 20.6 2,406 1,314 1,170 1,026 2,497 1,314 1,170 1,026 8.7 4.4 4.3 3.6 -5.2 -45.5 -42.9 -15.5

CY16 CY15 CY16E CY17E 1Q 2Q 3Q 4QE 6.36 6.12 5.07 5.48 23.62 23.03 23.61 9.3 -1.3 -9.6 -8.5 -2.4 -2.5 2.5 4,171 4,267 4,371 4,285 4,423 4,268 4,513 -8.0 -2.7 -1.5 -1.2 0.0 -3.5 5.7 -3.9 2.3 2.4 -2.0 29,274 28,698 24,706 26,566 114,328 109,243 118,571 1.5 -3.1 -9.8 -6.7 -0.4 -4.4 8.5 25,578 24,607 22,458 24,685 102,597 97,328 103,425 3,696 4,092 2,247 1,880 11,731 11,916 15,146 12.6 14.3 9.1 7.1 10.3 10.9 12.8 1,434 1,410 1,529 1,704 6,521 6,077 7,034 164 183 197 206 673 750 700 1,121 686 744 748 3,437 3,300 5,000 3,220 3,185 1,265 719 7,974 8,389 12,412 3,220 3,185 1,265 719 7,974 8,389 12,412 898 806 424 136 1,936 2,265 3,227 27.9 25.3 33.5 18.9 24.3 27.0 26.0 2,322 2,378 841 583 6,039 6,124 9,185 2,322 2,378 841 583 6,039 6,124 9,185 7.9 8.3 3.4 2.2 5.3 5.6 7.7 -7.0 81.0 -28.1 -43.2 -30.0 1.4 50.0

92

December 2016 Results Preview | Sector: Cement

Ambuja Cements Bloomberg

ACEM IN

Equity Shares (m)

1,551.9

M. Cap. (INR b)/(USD b)

402 / 6

52-Week Range (INR)

282/185

1,6,12 Rel Perf. (%)

-5/-2/16

Financial Snapshot (INR Billion) Y/E DEC

2015

2016E 2017E 2018E

Sales

93.7

91.4

98.1

109.7

EBITDA

14.4

15.5

17.3

19.3

NP

8.5

11.3

13.7

14.6

Adj. EPS (INR)

5.5

5.7

6.9

7.4

EPS Gr. (%)

-35.9

3.8

22.1

6.6

BV/Sh. (INR)

66.9

96.2

99.6

101.8

RoE (%)

8.3

5.9

7.1

7.3

RoCE (%)

8.9

8.0

7.3

7.6

Payout (%)

44.9

61.2

50.7

69.9

38.8

26.1

21.4

20.1

Valuations P/E (x) P/BV (x)

3.2

1.5

1.5

1.5

EV/EBITDA (x)

19.0

17.2

14.7

13.1

EV/Ton (USD)

138

131

125

119

CMP: INR212

TP: INR246 (+15%)

Buy

Dispatches in 3QCY16 are estimated to decline 7.1% YoY to 5.1mt. Average realizations are expected to remain flat YoY (-2.1% QoQ) at INR4,284/ton. Revenue is estimated at INR21.8b (-7.5% YoY). EBITDA margin is expected to be 12.2% (-1.5pp QoQ, -0.7pp YoY). EBITDA/ton is estimated at ~INR524 (-INR79 QoQ, -INR32 YoY). Adjusted PAT is estimated to grow 10.9% YoY to INR1.61b due low base. The stock trades at 21.4x CY17E EPS, 14.7x CY17E EV/EBITDA, and CY17E EV/ton of USD125. Maintain Buy.

Key issues to watch out for  Volume growth recovery and outlook.  Cement pricing outlook and sustainability.  Post demonetization volume demand.

Quarterly Performance Y/E December Sales Volume (m ton)* YoY Change (%) Realization (INR/ton) YoY Change (%) QoQ Change (%) Net Sales YoY Change (%) EBITDA Margins (%) Depreciation Interest Other Income PBT before EO Item Rate (%) Reported Profit Adj PAT YoY Change (%) E: MOSL Estimates

January 2017

1Q 5.43 -10.4 4,465 2.6 2.0 24,246 -8.1 4,715 19.4 1,578 214 1,336 4,259 25.4 3,177 3,177 -29.0

CY15 2Q 3Q 5.95 4.90 1.8 1.9 4,190 4,277 -9.5 -6.0 -6.2 2.1 24,928 20,952 -7.9 -4.2 3,661 2,944 14.7 14.1 1,485 1,553 316 207 1,234 898 3,094 2,082 26.8 26.2 2,264 1,536 2,264 1,536 -44.6 -35.8

4Q 5.48 0.8 4,300 -1.8 0.5 23,558 -1.0 3,042 12.9 1,641 181 1,067 2,287 36.4 1,100 1,454 -43.2

1Q 5.97 9.9 4,053 -9.2 -5.7 24,183 -0.3 4,235 17.5 1,477 182 1,415 3,992 27.7 3,038 2,885 -9.2

CY16 2Q 3Q 5.85 4.58 -1.7 -6.5 4,344 4,376 3.7 2.3 7.2 0.7 25,412 20,043 1.9 -4.3 5,813 2,760 22.9 13.8 1,511 1,595 205 192 1,368 2,503 5,465 3,477 26.9 20.3 3,995 2,770 3,995 2,770 76.5 80.4

4QE 5.09 -7.1 4,284 -0.4 -2.1 21,800 -7.5 2,664 12.2 1,587 185 1,114 2,006 19.6 1,612 1,612 10.9

CY15

CY16E

CY17E

21.76 -1.8 4,306 -3.8

21.49 -1.2 4,256 -1.2

22.02 2.5 4,456 4.7

93,683 26.8 14,362 15.3 6,257 918 4,535 11,722 27.7 8,076 8,478 -35.8

91,438 7.5 15,472 16.9 6,170 763 6,400 14,939 24.7 11,415 11,256 32.8

98,128 1.4 17,285 17.6 6,140 625 7,800 18,320 25.0 13,740 13,740 22.1

93

December 2016 Results Preview | Sector: Cement

Grasim Industries Bloomberg

GRASIM IN

Equity Shares (m)

93.4

M. Cap. (INR b)/(USD b)

458 / 7

52-Week Range (INR)

5,349/3,242

1,6,12 Rel Perf. (%)

7/15/31

Financial Snapshot (INR Billion) Y/E March

2016 2017E

Sales

365.9 371.8 403.5

EBITDA Adj. PAT Adj. EPS (INR) EPS Gr. (%) BV/Sh. (INR)

2018E

60.2 73.4

87.8

2019E 447.1 103.0

22.6 35.5

41.4

53.0

241.7 76.1

88.7

113.4

26.8 57.5

16.6

27.8

2,767 624.2 708.0

816.4

RoE (%)

9.2 12.9

13.3

14.9

RoCE (%)

10.0 12.8

14.1

16.4

Payout (%)

11.0 6.9

5.6

4.4

Valuations P/E (x)

17.9

11.4

9.8

7.6

P/BV (x)

1.6

1.4

1.2

1.1

EV/EBITDA (x)

10.2

8.5

6.8

6.3

EV/Ton (x)

125

105

103

98

CMP: INR867

Under review

We expect VSF volumes to grow 2% YoY (-1% QoQ) to 123,114 tons in 3QFY17, while realizations are expected to improve 3.9% YoY (0.2% QoQ) to INR130,963/ton. We expect Chemicals volumes to decline 5%YoY. Standalone revenues likely to increase 7%YoY to INR24.8bn. Standalone EBITDA margin is estimated at 21.1%, +2.6pp YoY (-0.2pp QoQ). EBITDA is estimated to de-grow 1.2% QoQ (+ 22% YoY) to INR5.24b, translating into PAT of INR3.7b (+42.2% YoY). The stock trades at 9.8x FY18E consolidated EPS, 6.8x FY18E EV/EBITDA, and implied cement EV/ton of USD103. Key issues to watch out for  Pick-up in cement demand and pricing thereon.  Outlook on VSF business, and strategy to utilize upcoming capacities globally.  Impact of demonetization on caustic soda demand

Quarterly Performance Y/E March (Standalone) VSF Volume (ton) YoY Change (%) VSF Realization (INR/ton) YoY Change (%) QoQ Change (%) Net Sales YoY Change (%) EBITDA Margins (%) Depreciation Interest Other Income PBT after EO Items Tax Rate (%) Reported PAT Adj. PAT Margins (%) YoY Change (%) E: MOSL Estimates

January 2017

(INR Million) FY16 1Q 2Q 3Q 4Q 102,737 113,756 120,700 130,000 18.9 12.7 24.4 9.7 113,309 116,708 126,090 126,090 -4.8 -1.4 8.0 13.8 2.3 3.0 8.0 0.0 19,261 21,197 23,120 25,044 35.3 34.0 49.7 47.2 2,671 3,354 4,289 4,298 13.9 15.8 18.6 17.2 947 1,006 1,231 1,287 409 401 396 268 249 2,557 550 635 1,564 4,504 3,213 3,086 537 688 609 1,001 34.3 15.3 19.0 32.4 1,028 3,815 2,604 2,086 1,028 3,815 2,604 2,086 5.3 18.0 11.3 8.3 -2.9 27.5 182.4 359.1

FY17 1Q 121,000 17.8 128,039 13.0 1.5 23,959 24.4 5,078 21.2 1,104 231 781 4,525 1,317 29.1 3,209 3,209 13.4 212.2

2Q 123,994 9.0 130,713 12.0 2.1 24,887 17.4 5,301 21.3 1,119 156 3,587 7,612 1,690 22.2 5,923 5,923 23.8 55.2

3QE 123,114 2.0 130,963 3.9 0.2 24,792 7.2 5,238 21.1 1,150 150 1,350 5,288 1,586 30.0 3,701 3,701 14.9 42.2

4QE 123,292 -5.2 130,617 3.6 -0.3 24,136 -3.6 4,978 20.6 1,109 158 1,582 5,001 1,768 35.4 3,233 3,233 13.4 55.0

FY16

FY17E

FY18E

468,000 16.2 121,693 5.0

491,400 5.0 130,093 6.9

496,314 1.0 133,593 2.7

88,622 41.7 14,613 16.5 4,471 1,474 3,992 12,659 2,835 22.4 9,825 9,825 11.1 81.1

97,772 10.3 20,594 21.1 4,481 694 7,300 22,719 6,361 28.0 16,357 16,357 16.7 66.5

100,438 2.7 21,910 21.8 4,731 694 7,500 23,984 7,195 30.0 16,789 16,789 16.7 2.6

94

December 2016 Results Preview | Sector: Cement

India Cements Bloomberg

ICEM IN

Equity Shares (m)

307.2

M. Cap. (INR b)/(USD b)

46 / 1

52-Week Range (INR)

CMP: INR122

0/59/76

Financial Snapshot (INR Billion) Y/E March 2016 2017E 2018E 2019E Sales 42.3 51.9 54.2 62.1 EBITDA 7.7 8.9 9.1 9.9 NP 1.4 2.7 3.0 3.4 Adj. EPS (INR) 4.4 8.9 10.6 12.7 EPS Gr. (%) BV/Sh (INR) RoE (%) RoCE (%) Payout (%) Valuations P/E (x) P/BV (x) EV/EBITDA(x) EV/Ton (USD)

-11,446 103.5

18.2

20.0

13.6

11.5

9.6

1.0 8.6 67

1.0 7.1 65

0.9 6.7 65

0.8 6.0 64

Quarterly Performance (Standalone) Y/E March Sales Dispatches (m ton) YoY Change (%) Realization (INR/ton) YoY Change (%) QoQ Change (%) Net Sales YoY Change (%) EBITDA Margins (%) Depreciation Interest Other Income PBT before EO expense Extra-Ord expense PBT Tax Rate (%) Reported PAT Adj PAT E: MOSL Estimates

January 2017

EBITDA is estimated at INR2.01b, and EBITDA margin is likely to decline 0.3pp QoQ to 16.9%, translating into blended EBITDA/ton of INR895 (+INR140 YoY). PAT is expected at INR481m (v/s INR55m in 3QFY16). Valuations stand at 11.5x FY18E EPS and 6.7x FY18E EBITDA. The stock trades at US$ D65/t on FY18 replacement cost. Maintain Neutral.

118.8 126.2 134.8 145.9 3.9 7.0 7.4 8.0 5.9 7.2 7.5 8.1 25.9 13.5 12.0 0.0 27.7

1Q 2.10 -18 5,047 18.9 4.7 10,743 -12.4 1,960 18.2 554 965 44 485 107 378 0 0.0 378 485

Neutral

India Cements’ volumes are expected to grow 16% YoY to 2.25mt in 3QFY17 on account of low base and higher infrastructure spend in A.P and Telangana due to creation of new state. We expect realizations to grow 11% YoY (flat QoQ) to INR5,259/ton. Revenue is estimated at INR11.9b (+28.2% YoY, -9% QoQ).

156/64

1,6,12 Rel Perf. (%)

TP: INR118 (-3.2%))

Key issues to watch out for  Visibility on AP demand recovery.  Demand, especially in South India, post demonetization.  Pricing outlook in South India.

FY16 2Q 2.17 -8 5,570 19.7 10.4 12,258 8.3 2,296 18.7 557 985 33 788 40 748 363 48.5 385 405

3Q 4Q 1.94 2.50 -8 19 4,746 3,957 -0.6 -17.9 -14.8 -16.6 9,296 11,471 -10.3 11.9 1,462 2,115 15.7 18.4 552 522 906 913 74 70 79 0 79 24 30.9 55 55

750 0 750 238 31.7 512 512

1Q 2.31 10 5,173 2.5 30.7 12,025 11.9 2,014 16.7 511 825 32 710 0 710 271 38.1 440 440

FY17 2Q 3QE 2.46 2.25 14 16 5,259 5,259 -5.6 10.8 1.7 0.0 13,075 11,919 6.7 28.2 2,244 2,011 17.2 16.9 521 545 876 890 69 65 917 0 917 293 31.9 624 624

641 0 641 160 25.0 481 481

4QE 2.79 12 5,265 33.1 -4.0 14,918 30.0 2,637 17.7 701 545 130 1,521 0 1,521 413 27.2 1,107 1,107

FY16

(INR Million) FY17E FY18E

8.70 -4.5 4,797 4.1

9.80 12.7 5,240 9.2

9.94 1.4 5,395 3.0

42,269 51,937 -4.4 22.9 7,813 8,907 18.5 17.1 2,180 2,279 3,704 3,135 222 296

54,191 4.3 9,092 16.8 2,378 3,043 296

2,150 147 2,003 625 31.2 1,378 1,480

3,789

3,966

3,789 1,137 30.0 2,652 2,652

3,966 992 25.0 2,975 2,975

95

December 2016 Results Preview | Sector: Cement

Ramco Cements Bloomberg

TRCL IN

Equity Shares (m)

238.0

M. Cap. (INR b)/(USD b)

146 / 2

52-Week Range (INR)

623/327

1,6,12 Rel Perf. (%)

11/41/75

Financial Snapshot (INR Billion) Y/E MARCH

2016 2017E 2018E 2019E

Sales

35.9 39.9

44.2

51.1

EBITDA

10.5 12.3

14.0

16.8

7.0

7.5

10.1

23.4 29.4

31.5

42.3

EPS Gr. (%)

130.3 25.5

6.9

34.4

BV/Sh. (INR)

129.9 155.8 182.6 220.3

NP Adj EPS (INR)

5.6

RoE (%)

19.5 20.6

18.6

21.0

RoCE (%)

13.2 14.5

14.3

17.3

Payout (%)

14.9 11.8

14.8

11.0

Valuations P/E (x)

24.5

19.5

18.3

13.6

EV/EBITDA (x)

14.9

12.3

10.2

8.0

EV/Ton (USD)

149

138

131

123

CMP: INR575

TP: INR698 (+21%)

Buy

3QFY17 volumes are estimated to grow 19% YoY (decline 5% QoQ) to 1.93mt on account of low base as also higher volumes to eastern market. Average realizations are expected to decline 5.6% YoY (flat QoQ) to 4,769/ton due to firm realizations in southern market. EBITDA margin is likely to decline 6.1pp QoQ to 28.4%. EBITDA/ton (ex-windmill) is estimated at INR1,376 (-INR150 QoQ, -INR149 YoY) due to partial increase in power and fuel cost. Interest cost is likely to decline 35%YoY due to debt repayment as also re pricing of debt at lower rate. PAT is estimated to increase 20% YoY to INR1.4b. The stock trades at 18.3x FY18E EPS, 10.2x FY18E EBITDA, and FY18E EV/ton of USD131. Maintain Buy. Key issues to watch out for  Volume growth recovery and outlook.  Cement pricing outlook and demand sustainability in South (AP and Tamil Nadu).

Quarterly Performance

(INR Million)

Y/E March Sales Dispatches (m ton) YoY Change (%) Realization (INR/ton) YoY Change (%) QoQ Change (%) Net Sales YoY Change (%) EBITDA Margins (%) Depreciation Interest Other Income PBT Tax Rate (%) Adj PAT YoY Change (%) Margins (%) E: MOSL Estimates

January 2017

1Q 1.81 -14.8 5,178 17.7 -2.5 9,041 -2.2 2,104 23.3 667 493 452 1,396 403 28.9 992 173.7 11.0

FY16 2Q 3Q 1.71 1.63 -11.9 -5.4 4,876 5,051 2.9 6.5 -5.8 3.6 8,766 8,119 -4.9 3.3 2,840 2,446 32.4 30.1 671 679 456 418 130 109 1,842 1,458 421 280 22.8 19.2 1,421 1,177 58.4 412.8 16.2 14.5

4Q 2.09 10.9 4,990 -6.0 -1.2 9,788 1.8 2,956 30.2 652 435 308 2,176 342 15.7 1,834 96.3 18.7

1Q 2.08 14.5 4,541 -12.3 -9.0 9,667 6.9 2,988 30.9 663 291 73 2,106 547 26.0 1,559 57.1 16.1

FY17 2Q 3QE 2.03 1.93 18.9 19.0 4,769 4,769 -2.2 -5.6 5.0 0.0 10,124 9,264 15.5 14.1 3,493 2,627 34.5 28.4 667 650 282 270 93 100 2,637 1,807 567 398 21.5 22.0 2,070 1,409 45.6 19.7 20.4 15.2

4QE 2.31 10.9 4,739 -5.0 -0.6 10,849 10.8 3,181 29.3 710 325 404 2,549 582 22.8 1,968 7.3 18.1

FY16

FY17E

FY18E

7.235 -5.6 5,024 5.0

8.36 15.5 4,704 -6.4

8.94 7.0 4,874 3.6

35,872 -0.2 10,504 29.3 2,670 1,802 999 7,031 1,448 20.6 5,583 130.4 15.6

39,904 11.2 12,288 30.8 2,690 1,168 669 9,100 2,093 23.0 7,007 25.5 17.6

44,187 10.7 14,005 31.7 2,843 1,028 880 11,015 3,525 32.0 7,490 6.9 17.0

96

December 2016 Results Preview | Sector: Cement

Shree Cement Bloomberg

CMP: INR14,131 TP: INR17,096 (+21%)

SRCM IN

Equity Shares (m)

34.8

M. Cap. (INR b)/(USD b)

We expect 3QFY17 cement volumes to grow 4.7% YoY (and 7.7% QoQ) to 4.92mt (including clinker) led by ramp up of new capacity in eastern market. Realizations to decline 5% QoQ to INR3,765/ton due to weak realization in its focus markets of North and East.

626 / 9

52-Week Range (INR)

18,519/9,350

1,6,12 Rel Perf. (%)

5/34/42

Financial Snapshot (INR Billion) Y/E March

2016 2017E 2018E 2019E

Sales

72.9

84.3

98.9 112.1

EBITDA

16.7

24.1

30.5

5.9

13.7

20.3

NP Adj EPS (INR) EPS Gr. (%) BV/Share (INR) RoE (%)

Merchant power sale is expected to be meaningfully lower at 100m units (v/s 538m units in 2QFY17) due to shrp decline in merchant power rates. Power EBITDA is estimated at INR20m (v/s INR622m in 2QFY17).

36.3

25.3 168.0 394.3 582.0 725.4 26.1 96.1 47.6 24.6 1,774 2,128 2,663 3,342 10.2 20.2 24.3 24.2

RoCE (%)

10.6

19.8

23.4

23.7

Payout (%)

17.4

10.3

8.0

6.4

Revenue is estimated at INR18.88b (+11% YoY) and EBITDA at INR4.9b, translating into margin of 26.2% (-6.5pp QoQ, +1.14pp YoY). Adjusted PAT is likely to be INR2.6b (v/s INR2.2b in 3QFY16). Valuations stand at 24.3x FY18E EPS, 14.1x FY18E EBITDA, and FY18E EV/ton of USD211. Maintain Buy.

Valuation P/E (x)

70.3

35.8

24.3

19.5

P/BV (x)

8.0

6.6

5.3

4.2

EV/EBITDA (x)

27.9

19.0

14.1

11.2

EV/Ton (USD)

267

240

211

174

Key issues to watch out for  Volume and pricing recovery for North India.  Update on scale-up of recently commissioned units in East.  New expansion plan.

Quarterly Performance - Shree Cement (S/A) Y/E June

(INR Million)

FY16

1Q 2Q Sales Dispat. (m ton) 4.19 4.70 YoY Change (%) 7.9 23.3 Realization (INR/Ton) 3,619 3,500 YoY Change (%) -0.8 -1.1 QoQ Change (%) 4.1 -3.3 Net Sales 17,119 18,268 YoY Change (%) 6.6 18.5 EBITDA 4,163 4,240 Margins (%) 24.3 23.2 Depreciation 2,448 3,042 Interest 235 233 Other Income 958 236 PBT before EO Exp 2,438 1,200 PBT 2,438 1,199 Tax -26 170 Rate (%) -1.1 14.2 Reported PAT 2,464 1,029 Adj PAT 2,464 1,030 YoY Change (%) 107.4 9.0 E:MOSL Estimates ** FY16 is March ending 12 months

January 2017

Buy

3Q 5.60 35.6 3,200 -9.5 -8.6 20,174 28.2 5,050 25.0 3,338 286 755 2,182 2,181 -53 -2.4 2,233 2,234 79.3

1Q 5.13 18.0 3,885 11.8 21.4 21,987 27.9 7,308 33.2 1,540 276 979 6,471 6,471 1,394 21.5 5,077 5,077 106.1

FY17 2Q 3QE 4.57 4.92 9.2 4.7 3,965 3,765 9.6 7.6 2.1 -5.0 20,068 18,879 17.2 3.3 6,563 4,941 32.7 3.3 4,322 2750 293 300 1,233 1350 3,180 3241 3,180 3241 265 648 8.3 20.0 2,915 2592 2,915 2592 18.3 16.0

4QE 5.03 -10.2 3,914 22.3 4.0 23319 15.6 5249 22.5 3421 286 1539 3081 3081 -71 -2.3 3152 3152 41.0

FY16

FY17E

FY18E

18.83 16.5 3,431 -3.3

19.65 4.4 3,881 13.1

21.62 10.0 4,231 9.0

72,755 13.0 16,969 23.3 11,210 1,017 2,393 7,133 6,891 125 1.8 6,767 7,004 50.9

84,253 15.8 24,060 28.6 12,033 1155 5100 15972 15972 2236 14.0 13736 13736 96.1

98,864 17.3 30,509 30.9 12,242 541 7,000 24,727 24,727 4,451 18.0 20,276 20,276 47.6

97

December 2016 Results Preview | Sector: Cement

UltraTech Cement Bloomberg

UTCEM IN

Equity Shares (m)

274.4

M. Cap. (INR b)/(USD b)

1,077 / 16

52-Week Range (INR)

4,130/2,581

1,6,12 Rel Perf. (%)

-3/11/34

Financial Snapshot (INR Billion) Y/E March

2016 2017E 2018E 2019E

Sales

238.4

232.5

264.0

295.5

EBITDA

43.5

47.2

61.6

71.9

NP

21.7

26.0

37.0

46.2

Adj EPS(INR)

79.3

94.6

134.8

168.4

EPS Gr. (%)

7.9

19.3

42.5

24.9

BV/Sh (INR)

755.8

838.8

RoE (%)

11.0

11.9

15.0

16.4

RoCE (%)

9.3

10.2

12.7

14.0

13.9

12.3

12.9

13.8

Payout (%) Valuation

956.2 1,101.3

P/E (x)

41.6

34.9

24.5

19.6

P/BV (x)

4.4

3.9

3.5

3.0

EV/EBITDA (x)

20.5

18.4

13.5

10.8

EV/Ton (USD)

200

195

186

175

CMP: INR3,299

TP: INR3,749 (+14%)

3QFY17 cement volumes are estimated to de-grow 5.1% YoY (flat QoQ) to 10.88mt due to lower demand in North and West markets. Realizations are estimated to de-grow 1.4% YoY (and 1.9% QoQ) to INR4,081/ton. We estimate grey cement EBITDA/ton at INR873 (-INR119 QoQ) due to weak realizations. EBITDA margin is expected to decrease 2.2pp QoQ (and 0.1pp YoY) to 20.3%. EBITDA is estimated to decline 12% QoQ (and 8% YoY) to INR10.9b, translating into PAT de-growth of 16% QoQ to INR5.1b. The stock trades at 24.5x FY18E EPS, 13.5x FY18E EV/EBITDA, and FY18E EV/ton of USD186. Maintain Buy. Key issues to watch out for  Volume growth recovery and outlook.  Cement pricing outlook and sustainability.  Update on scale-up of newly commenced Rajasthan plant.

Quarterly Performance Y/E March

FY16 1Q 2Q 3Q 4Q Sales (m ton) 12.14 10.80 11.47 13.60 YoY Change (%) 3.8 4.3 4.4 15.2 Grey Cement Realn.(INR/ton) * 4,183 4,192 4,139 3,946 YoY Change (%) 2.2 -2.8 -0.1 -9.4 QoQ Change (%) -4.0 0.2 -1.3 -4.7 Net Sales 59,476 55,270 57,473 64,359 YoY Change (%) 5.3 2.8 4.7 4.8 EBITDA 10,939 9,212 10,439 12,850 Margins (%) 18.4 16.7 18.2 20.0 Depreciation 2,852 3,352 3,238 3,493 Interest 1,399 1,319 1,257 1,110 Other Income 1,770 1,945 1,318 1,055 PBT after EO Expense 8,459 6,485 7,262 9,301 Rate (%) 28.6 29.5 30.0 26.7 Adj PAT 6,040 4,574 5,086 6,814 YoY Change (%) -3.4 11.5 39.6 10.8 E: MOSL Estimates; * Grey cement realization is our estimate

January 2017

Buy

(INR Million) FY17 1Q 2Q 3QE 4QE 12.91 10.87 10.88 12.09 6.3 0.6 -5.1 -11.1 4,083 4,161 4,081 4,228 -2.4 -0.7 -1.4 7.2 3.5 1.9 -1.9 3.6 61,823 53,979 53,435 63,281 3.9 -2.3 -7.0 -1.7 13,723 10,938 9,634 12,903 22.2 20.3 18.0 20.4 3,027 3,139 3,300 4,099 1,525 1,367 1,330 1,337 2,006 2,335 2,250 2,409 11,177 8,767 7,254 9,877 30.7 31.4 30.0 28.0 7,749 6,011 5,078 7,115 28.3 31.4 -0.2 4.4

FY16

FY17E

FY18E

48.1 7.2 4,138 -2.1

46.8 -2.8 4,138 0.0

49.7 6.3 4,438 7.2

238,410 5.2 43,498 18.2 12,890 5,053 5,015 30,570 28.9 21,747 7.9

232,518 -2.5 47,198 20.3 13,565 5,558 9,000 37,075 30.0 25,953 19.3

263,992 13.5 61,604 23.3 13,755 5,012 10,000 52,837 30.0 36,986 42.5

98

December 2016 Results Preview December 2016 Results Preview | Consumer

Consumer Company name Asian Paints Britannia Industries Colgate Dabur Emami Godrej Consumer GSK Consumer Hindustan Unilever ITC Jyothy Labs Marico Nestle India Page Industries Parag Milk Foods Pidilite Industries P&GHH Radico K haitan United Breweries United Spirits

Demonetization dents monsoon recovery narrative Sales likely to decline, resulting in adverse margin effect Discretionary demand likely to suffer We expect our consumer universe’s revenues to remain flat YoY in 3QFY17, with a PAT decline of 1.2%. Demonetization is likely to affect all companies, particularly those selling products with discretionary demand and having higher proportion of wholesale trade vis-à-vis direct distribution. Hopes of rural demand recovery after good monsoon this year were dashed due to demonetization-led cash crunch. MOSL consumer universe EBITDA is likely to decline 4.5% YoY, with 110bp margin contraction. Barring Nestle (likely flat margins YoY), we expect a YoY margin decline for all FMCG companies under our coverage due to weak sales growth/sales decline and increasing cost for a few commodities. Adspends, which could have acted as a buffer to margins, are unlikely to decline steeply enough to protect margin. We expect ITC’s sales to decline 4% YoY (led by a 7% decline in cigarette volumes) and PAT to fall 3% YoY. HUVR’s sales growth is estimated at 1.5% YoY (volume decline of 1%), with 100bp EBITDA margin contraction. Barring PAGE, for which we expect 13% PAT growth YoY, none of the other companies are expected to report any material growth in PAT (11 out of the 18 companies under our coverage expected to report YoY decline in PAT).

RM costs, promotions and new launches PFAD and palm oil prices increased steeply by 70% and 37% YoY, respectively, while Ti02 and mentha prices saw moderate increases of 4% YoY and 3% YoY, respectively. Mentha prices over past 20 days are up by 10% YoY, however. LLP and HDPE prices still remain benign, with low-single-digit growth YoY. Some companies have started taking selective price hikes/grammage reduction/reduction of offers following increase in raw material costs. However, promotion intensity remains high in other categories owing to the weak operating environment. Thus, majority of new launches are likely to be postponed to 1QFY18.

Preference for quality and longevity of growth The consumer sector is characterized by rich near-term valuations, given the market’s continued preference for quality with healthy growth. Our framework for earnings visibility, longevity of growth and quality management drives our choices in the sector universe. We continue preferring Britannia, Colgate, Emami and P&G Hygiene, notwithstanding the near-term challenges. We recently upgraded Marico to Buy, as correction in the share price provided a reasonable entry point in an admirable business franchise with remarkable track record of earnings growth, topnotch management quality and impressive disclosure levels. In the discretionary pack, we like Pidilite, Page Industries and United Breweries, despite the near-term challenges.

Krishnan Sambamoorthy (K [email protected]); +91 22 6129 1545 Vishal Punmiya ([email protected]); +91 22 6129 1547 January 2017

99

December 2016 Results Preview | Consumer

Exhibit 1: Summary of expected quarterly performance Sector

Consumer Asian Paints Britannia Colgate Dabur Emami Godrej Consumer GSK Consumer Hind. Unilever ITC Jyothy Labs Marico Nestle P&G Hygiene Page Industries Parag Milk Foods Pidilite Inds. Radico K haitan United Breweries United Spirits Sector Aggregate

Sales (INR M)

CMP (INR)

RECO

906 2,851 895 277 1,031 1,532 5,058 821 245 335 258 5,893 6,891 13,782 264 608 117 796 1,952

Neutral Buy Buy Neutral Buy Neutral Neutral Neutral Buy Neutral Buy Neutral Buy Buy Neutral Buy Neutral Buy Buy

Var % Dec-16 Var % YoY QoQ

EBDITA (INR M) Var % Dec-16 Var % YoY QoQ

40,343 20,158 9,953 19,943 7,608 25,145 9,517 78,804 88,097 3,763 14,526 19,376 7,505 4,805 3,991 13,525 4,244 10,676 22,894 404,872

7,632 2,483 2,440 3,505 2,543 4,617 1,577 13,728 33,729 468 2,654 3,474 1,855 961 350 2,847 471 1,356 2,447 89,135

5.0 -6.0 7.5 2.0 5.0 10.0 -3.0 1.5 -4.0 1.0 -5.0 -0.5 10.0 9.0 3.0 1.0 0.0 -2.9 -5.0 0.1

7.2 -14.6 -5.1 0.9 30.2 6.7 -11.9 0.5 -8.8 -8.6 0.9 -17.4 25.0 -10.6 -15.6 -4.6 -5.1 2.8 12.4 -2.3

-2.7 -19.1 3.9 -6.0 1.9 1.7 -4.2 -4.0 -6.4 -10.0 -7.5 -0.5 -14.3 6.3 -7.6 -3.6 -15.3 -22.5 41.2 -4.5

PAT (INR M) Dec-16 Var % YoY

7.0 -20.7 -11.2 -13.0 45.1 -0.3 -35.7 -2.3 -7.1 -26.6 6.5 -22.6 22.7 -10.6 -7.3 -11.7 -17.0 11.9 8.7 -5.2

Var % QoQ

5,025 -3.6 5.6 1,827 -19.5 -22.0 1,417 3.5 -21.8 3,007 -5.1 -14.4 1,820 -6.8 36.2 3,270 -1.2 1.8 1,356 1.8 -26.2 9,898 1.9 -8.5 25,824 -2.7 3.3 218 42.1 -31.9 1,858 -8.0 2.9 1,972 -5.5 -31.5 1,255 -14.4 20.2 650 13.3 -5.3 146 0.4 1.7 1,815 -2.7 -21.4 163 -27.7 -27.8 747 4.8 176.1 1,128 2145.7 15.3 63,395 -1.2 -2.9 Source: Company, MOSL

Exhibit 2: 3QFY17 volume growth expectations (%) Quarter Ending Asian Paints Britannia (Biscuits) Colgate (Toothpaste) Dabur Emami Godrej Consumer Soaps GSK Consumer Hindustan Unilever ITC (cigarette) Marico Parachute Hair Oil Saffola Pidilite Radico K haitan

3Q14 7.0 3.0 11.0 9.0 1.5

4Q14 12.0 3.0 7.0 9.2 -10.0

1Q15 11.0 10.0 5.0 8.3 12.5

2Q15 10.0 6.0 7.0 8.7 11.5

3Q15 3.0 8.0 5.0 7.4 11.0

4Q15 4.0 8.0 5.0 8.1 12.0

1Q16 12.0 10.0 2.0 8.1 15.0

2Q16 5.0 12.0 3.0 5.5 13.5

3Q16 15.0 11.0 1.0 -2.5 9.3

4Q16E 13.0 10.0 1.5 6.0 13.0

1Q17 11.0 8.0 5.0 4.1 18.0

2Q17 12.0 10.0 4.0 4.5 11.0

3Q17E 6.0 -5.0 2.0 5.0 1.0

6.0 11.0 4.0 -2.0

-4.0 8.0 3.0 -3.0

MSD 3.0 5.0 -2.5

LSD 2.0 5.0 -4.0

LSD 5.0 3.0 -13.0

5.0 2.0 6.0 -12.0

DD 2.0 6.0 -17.0

MSD 2.0 7.0 -15.0

MSD 0.0 6.0 -5.0

MSD 2.0 6.0 -3.0

LDD -6.0 4.0 3.0

-MSD -3.0 -1.0 4.0

-MSD -4.0 -1.0 -7.0

2.0 8.0 9.0 11.0 7.6

10.0 5.0 11.0 12.0 3.5

6.0 11.0 10.0 13.0 -3.5

7.0 13.0 9.0 10.0 -3.9

8.0 10.0 3.0 7.0 2.0

5.0 5.0 -1.0 5.5 -4.2

8.0 14.0 4.0 5.0 -10.3

11.0 8.0 4.0 3.0 -7.2

4.0 21.0 17.0 11.0 -3.8

7.0 15.0 10.0 12.0 2.0

Exhibit 3: Relative performance – 3m (%) Sensex Index

102

7.0 -6.0 0.0 9.0 11.0 -5.0 11.0 8.0 -1.0 9.0 7.8 1.0 3.6 4.5 -5.0 Source: Company, MOSL

Exhibit 4: Relative performance – 1Yr (%)

MOSL Consumer Index

Sensex Index

MOSL Consumer Index

115

99

Dec-16

Nov-16

Oct-16

Sep-16

Aug-16

Jul-16

Jun-16

May-16

Apr-16

Mar-16

Feb-16

Jan-16

Dec-16

85

Nov-16

90 Oct-16

95 Sep-16

93

Dec-15

105

96

Source: Bloomberg, MOSL January 2017

100

December 2016 Results Preview | Consumer

Exhibit 6: Palm oil prices rise 36.7% YoY and 12.3% QoQ

2,000

Source: Bloomberg, MOSL

Exhibit 8: TiO2 prices up 3.7% YoY and 1.6% QoQ

Mentha Oil prices INR / kg

TiO2 price (INR/kg)

310

1,250

1,065

1,000

270 225

Source: Bloomberg, MOSL

Aug-16

Apr-16

Dec-15

Aug-15

Apr-15

Dec-14

Aug-14

Dec-13

Dec-16

Sep-16

Jun-16

Mar-16

Dec-15

Sep-15

Jun-15

Mar-15

Dec-14

150

Sep-14

500 Jun-14

190

Mar-14

750

Apr-14

230

Dec-13

Dec-16

Aug-16

Dec-15

Source: Bloomberg, MOSL

Dec-16

Exhibit 7: Mentha prices up 2% YoY and 3% QoQ

Apr-16

1,500 Dec-13

Dec-16

Aug-16

Apr-16

Dec-15

Aug-15

Apr-15

Dec-14

Aug-14

Apr-14

Dec-13

15,000

2,500

Aug-15

24,000

3,000

Apr-15

33,000

3,199

Dec-14

42,000

Palm Oil (Malaysian Ringgit Per Metric Tonne)

3,500

Aug-14

46,904

Malaysian Ringgit\ MT

Palm Fatty Acid price (INR/MT)

Apr-14

Exhibit 5: PFAD prices up 70.5% YoY and 12.6% QoQ

Source: Bloomberg, MOSL

Exhibit 9: Comparative valuation Sector / Companies Consumer Asian Paints Britannia Colgate Dabur Emami Godrej Consumer GSK Consumer Hind. Unilever ITC Jyothy Labs Marico Nestle P&G Hygiene Page Industries Parag Milk Foods Pidilite Inds. Radico K haitan United Breweries United Spirits Consumer Sector Aggregate

January 2017

CMP (INR)

RECO

906 2,851 895 277 1,031 1,532 5,058 821 245 335 258 5,893 6,891 13,782 264 608 117 796 1,952

Neutral Buy Buy Neutral Buy Neutral Neutral Neutral Buy Neutral Buy Neutral Buy Buy Neutral Buy Neutral Buy Buy

EPS (INR) PE (x) EV/EBIDTA (x) ROE (%) FY17E FY18E FY19E FY17E FY18E FY19E FY17E FY18E FY19E FY17E FY18E FY19E 20.2 70.6 22.3 7.2 24.7 36.8 157.7 19.7 8.4 7.2 6.0 111.5 138.5 247.4 7.0 16.4 5.3 12.3 27.8

22.6 82.1 27.2 8.5 30.6 43.8 178.8 22.4 9.6 8.5 7.2 139.2 168.9 312.7 9.7 18.4 7.1 16.4 45.7

26.4 97.8 32.9 10.0 37.1 50.4 201.2 25.8 11.0 10.1 8.5 168.7 201.7 402.4 14.1 20.6 8.2 19.7 61.7

44.9 40.4 40.2 38.6 41.7 41.7 32.1 41.6 29.2 46.5 43.2 52.8 49.8 55.7 37.5 37.1 22.2 64.5 70.3 37.9

40.0 34.7 32.9 32.6 33.7 35.0 28.3 36.6 25.6 39.5 35.6 42.3 40.8 44.1 27.3 33.1 16.6 48.7 42.8 32.4

34.3 29.1 27.2 27.8 27.8 30.4 25.1 31.8 22.3 33.4 30.3 34.9 34.2 34.2 18.7 29.5 14.2 40.4 31.6 27.8

28.6 29.0 24.1 31.1 31.0 30.5 22.0 29.1 19.8 25.9 29.7 31.4 32.3 36.4 16.0 24.2 12.5 30.8 34.4 25.5

25.7 24.5 19.8 26.1 26.4 25.9 19.1 25.7 17.1 22.1 24.6 25.0 25.7 28.1 12.8 21.4 11.3 24.7 25.1 21.8

22.1 20.3 16.5 22.1 22.0 22.7 16.3 22.3 14.6 19.4 21.1 20.6 21.2 22.4 9.7 18.6 10.2 20.2 19.7 18.6

32.4 42.2 56.3 27.8 34.1 22.3 25.1 68.7 28.4 15.0 32.8 35.9 27.7 42.9 10.8 27.6 7.3 14.5 20.3 29.3

32.0 32.3 38.8 36.9 63.2 70.5 27.9 27.8 33.6 33.8 22.7 22.1 24.7 24.2 79.1 89.8 28.3 28.5 16.5 17.9 33.1 34.8 39.2 40.1 29.4 30.3 42.7 44.0 10.5 13.5 25.6 23.5 9.1 9.9 16.9 17.5 23.6 24.5 29.9 30.3 Source: MOSL

101

December 2016 Results Preview | Consumer

Asian Paints Bloomberg

APNT IN 959.2

Equity Shares (m)

CMP: INR906

869 / 13

M. Cap. (INR b)/(USD b) 52-Week Range (INR)

1230 / 825

1,6,12 Rel Perf. (%)

-4 / -7 / -1

EBITDA

142.8

153.4

172.2

198.9

27.7

29.6

32.8

37.9

Adj. PAT

18.0

19.3

21.7

25.3

Adj. EPS.INR

18.7

20.2

22.6

26.4

EPS Gr. (%)

26.3

7.7

12.2

16.7

BV/Sh.(INR)

58.4

66.2

75.4

88.3

RoE (%)

34.7

32.4

32.0

32.3

RoCE (%)

30.6

29.0

28.9

29.4

Payout (%)

40.4

49.6

50.8

43.6

P/E (x)

48.4

44.9

40.0

34.3

Valuations P/BV (x)

15.5

13.7

12.0

10.3

EV/EBITDA (x)

30.6

28.5

25.5

21.9

Div. Yield (%)

1.0

1.3

1.5

1.5

Neutral



We expect Asian Paints’ (APNT) revenue to grow 5% to INR40.3b in 3QFY17, with ~6% rise in domestic decorative volumes.



We note crude prices are up 18% YoY in 3QFY17. The magnitude of price movement in crude derivatives is lower vis-à-vis crude prices. Operating margin should contract 150bp to 18.9% in 3QFY17. We estimate 3.6% PAT decline for 3QFY17.



The stock trades at 40x FY18E EPS of INR22.6; maintain Neutral.

Financial Snapshot (INR b) Y/E March 2016 2017 2018E 2019E Sales

TP: INR1,020 (13%)

Key issues to watch for  Volume growth trends and demand scenario in urban/rural geographies.  Demand outlook for industrial paints.  Outlook for raw materials/pricing actions.

Quarterly Performance (Consolidated, INR m) Y/E March Volume Growth % * Net Sales Change (%) Raw Material/PM Gross Profit Gross Margin (%) Operating Expenses % of Sales EBITDA Margin (%) Change (%) Interest Depreciation Other Income PBT Tax Effective Tax Rate (%) PAT before Minority Minority Interest Adjusted PAT E: MOSL Estimates

January 2017

1Q 12.0 33,343

FY16 2Q 3Q 7.0 15.0 34,349 38,422

4Q 13.0 36,698

19,088 14,254 42.8 7,468 22.4 6,786 20.4

19,641 14,708 42.8 8,628 25.1 6,080 17.7

21,713 16,709 43.5 8,864 23.1 7,845 20.4

20,055 16,643 45.4 9,669 26.3 6,974 19.0

89 663 610 6,643 2,047 30.8 4,596 59 4,537

92 677 629 5,940 1,843 31.0 4,096 59 4,037

76 694 430 7,504 2,274 30.3 5,230 15 5,215

149 721 466 6,570 2,279 34.7 4,291 117 4,174

1Q 11.0 36,374 9.1 19,191 17,183 47.2 8,981 24.7 8,203 22.6 20.9 64 855 719 8,003 2,603 32.5 5,400 50 5,351

FY17 2Q 12.0 37,633 9.6 20,876 16,758 44.5 9,628 25.6 7,130 18.9 17.3 60 844 791 7,017 2,207 31.5 4,810 51 4,759

3QE 6.0 40,343 5.0 22,799 17,544 43.5 9,912 24.6 7,632 18.9 -2.7 76 778 473 7,250 2,175 30.0 5,075 50 5,025

4QE 7.0 39,018 6.3 21,896 17,123 43.9 10,452 26.8 6,670 17.1 -4.4 151 845 457 6,131 1,819 29.7 4,312 101 4,211

FY16

FY17

11.8 142,811

7.5 153,368 7.4 84,761 68,607 44.7 38,973 25.4 29,634 19.3 7.0 352 3,321 2,441 28,402 8,805 31.0 19,597 251 19,347

80,497 62,314 43.6 34,630 24.2 27,685 19.4 34.5 407 2,756 2,134 26,656 8,444 31.7 18,213 250 17,962

102

December 2016 Results Preview | Consumer

Britannia Industries Bloomberg

BRIT IN 120.0

Equity Shares (m)

342 / 5

M. Cap. (INR b)/(USD b)

CMP: INR2,851

-8 / 3 / -8

1,6,12 Rel Perf. (%)

We estimate Britannia’s (BRIT) sales to decline 6% YoY to INR20.2b, with ~5% volumes decline.



Sales decline, coupled with higher wheat and sugar prices YoY, will affect margins. We expect 200bp contraction in operating margin YoY. We expect EBITDA and PAT to decline 19.1% and 19.5%, respectively.



The stock trades at 34.7x FY18E EPS of INR82.1; maintain Buy. Britannia is one of our top picks in the tier-II consumer space.

Financial Snapshot (INR b) Y/E March

2016 2017E 2018E 2019E

Sales

83.3

88.3

104.0

120.9

EBITDA

11.5

11.5

13.4

15.9

Adj. PAT

8.4

8.5

9.9

11.7

Adj. EPS. INR

70.1

70.6

82.1

97.8

EPS Gr. (%)

46.3

0.8

16.3

19.1

BV/Sh.(INR)

147.2

187.1

235.8

293.8

RoE (%)

55.9

42.2

38.8

36.9

RoCE (%)

46.0

34.4

32.1

30.9

Payout (%)

28.5

35.0

35.0

35.0

P/E (x)

40.7

40.4

34.7

29.1

P/BV (x)

19.4

15.2

12.1

9.7

EV/EBITDA (x)

29.0

28.9

24.4

20.2

Div. Yield (%)

0.7

0.9

1.0

1.2

Valuations

Buy



3575 / 2507

52-Week Range (INR)

TP: INR3,380 (+19%)

Key issues to watch for  Volume growth in biscuits.  Outlook for raw materials.  Performance of subsidiaries.

Quarterly Performance (INR m) 1Q 9.0 19,411

FY16 2Q 3Q 11.0 13.0 21,277 21,444

4Q 10.0 21,121

11,587 7,824 40.3 5,102 26.3 2,722 14.0

12,717 8,560 40.2 5,492 25.8 3,068 14.4

12,807 8,637 40.3 5,567 26.0 3,070 14.3

12,878 8,244 39.0 5,557 26.3 2,687 12.7

274 7 401 2,842 906 31.9 1,936

272 15 506 3,287 1,076 32.7 2,211

281 12 478 3,256 986 30.3 2,270

308 15 578 2,942 952 32.4 1,990

Y/E March Base business volume growth (%) Net Sales YoY Change (%) COGS Gross Profit Margins (%) Other Operating Exp % of Sales EBITDA Margins (%) YoY Growth (%) Depreciation Interest Other Income PBT Tax Rate (%) Adjusted PAT YoY Change (%) E: MOSL Estimates

January 2017

1Q 10.0 21,063 8.5 12,879 8,184 38.9 5,367 25.5 2,817 13.4 3.5 279 15 739 3,263 1,071 32.8 2,192 13.2

FY17 2Q 3QE 10.0 -5.0 23,612 20,158 11.0 -6.0 14,902 12,321 8,709 7,837 36.9 38.9 5,578 5,354 23.6 26.6 3,131 2,483 13.3 12.3 2.0 -19.1 289 337 15 9 670 549 3,496 2,686 1,156 860 33.1 32.0 2,340 1,827 5.8 -19.5

4QE 8.0 23,431 10.9 14,086 9,345 39.9 6,300 26.9 3,045 13.0 13.3 470 9 539 3,104 992 32.0 2,112 6.2

FY16

FY17E

10.8 83,254 7.1 49,989 33,265 40.0 21,718 26.1 11,547 13.9 38.2 1,134 49 1,962 12,326 3,920 31.8 8,407 46.4

5.7 88,263 6.0 54,188 34,075 38.6 22,599 25.6 11,476 13.0 -6.3 1,375 49 2,497 12,549 4,078 32.5 8,471 0.8

103

December 2016 Results Preview | Consumer

Bloomberg

CLGT IN 272.0

Equity Shares (m)

CMP: INR895

244 / 4

M. Cap. (INR b)/(USD b) 52-Week Range (INR)

1033 / 788

1,6,12 Rel Perf. (%)

-4 / -1 / -12 2016 2017E 2018E 2019E

Sales

38.0

41.3

46.7

53.0

9.5

10.0

12.0

14.3

EBITDA Adj. PAT Adj. EPS (INR)

6.1

6.1

7.4

9.0

22.3

22.3

27.2

32.9

EPS Gr. (%)

8.7

-0.4

22.4

20.9

BV/Sh.(INR)

37.5

41.6

44.6

48.8

RoE (%)

67.9

56.3

63.2

70.5

RoCE (%)

67.0

55.2

62.0

69.4

Payout (%)

49.1

70.0

70.0

70.0

P/E (x)

40.1

40.2

32.9

27.2

P/BV (x)

23.9

21.5

20.1

18.4

EV/EBITDA (x)

25.4

24.1

19.8

16.5

Div. Yield (%)

1.2

1.7

2.1

2.6

Valuations

Quarterly Performance (INR m) Y/E March

Toothpaste Volume Gr % Net Sales YoY Change (%) COGS Gross Profit Gross Margin (%) Other operating Expenses % to sales Other operating Income EBITDA Margins (%) YoY Growth (%) Depreciation Interest Financial other Income PBT Tax Rate (%) Adj PAT YoY Change (%) E: MOSL Estimates

January 2017

Buy



We expect Colgate’s (CLGT) sales to grow 7.5% YoY to INR10b. Toothpaste volume growth is likely to be ~2%.



We estimate gross margin expansion of 30bp and EBITDA margin contraction of 80bp to 24.1%. Hence, we have modeled EBITDA growth of 3.9% and adjusted PAT growth of 3.5% in 3QFY17.



The stock trades at 32.9x FY18E EPS of INR27.2; we have Buy rating on the stock.

Financial Snapshot (INR b) Y/E March

TP: INR1,200 (+34%)

Colgate

Key issues to watch for  Volume growth in toothpaste and market share movement.  Ad spends and competitive intensity in toothpaste, especially from Patanjali.

1Q 2.0 9,237

FY16 2Q 3Q 3.0 1.0 9,581 9,259

4Q 3.0 9,939

3,641 5,596 60.6 3,630 39.3 72 2,038 21.9

3,658 5,924 61.8 3,448 36.0 67 2,543 26.4

3,584 5,674 61.3 3,496 37.8 170 2,349 24.9

4,070 5,869 59.1 3,478 35.0 142 2,533 25.1

253 0 81 1,866 626 33.5 1,241

269 0 107 2,380 812 34.1 1,569

295 0 32 2,086 717 34.4 1,369

297 0 26 2,263 770 34.0 1,493

1Q 5.0 10,056 8.9 3,818 6,238 62.0 4,197 41.7 76 2,117 20.9 3.9 316 0 96 1,897 640 33.7 1,257 1.3

FY17 2Q 4.0 10,483 9.4 3,910 6,574 62.7 3,909 37.3 83 2,748 26.0 8.1 333 0 113 2,527 714 28.3 1,813 15.6

3QE 2.0 9,953 7.5 3,823 6,130 61.6 3,852 38.7 161 2,440 24.1 3.9 339 0 80 2,180 763 35.0 1,417 3.5

4QE 3.0 10,784 8.5 4,456 6,328 58.7 3,779 35.0 139 2,688 24.6 6.1 324 0 66 2,429 864 35.6 1,565 4.9

FY16

FY17E

2.3 38,016 -3.9 14,953 23,063 60.7 14,051 37.0 451 9,463 24.6 15.1 1,114 0 246 8,595 2,516 29.3 6,079 8.7

3.5 41,276 8.6 16,006 25,270 61.2 15,736 38.1 458 9,992 23.9 5.6 1,313 0 355 9,034 2,981 33.0 6,053 -0.4

104

December 2016 Results Preview | Consumer

Dabur Bloomberg

DABUR IN

Equity Shares (m)

1761.5

M. Cap. (INR b)/(USD b)

487 / 7

52-Week Range (INR)

320 / 231

1,6,12 Rel Perf. (%)

-4 / -8 / -4

Financial Snapshot (INR b) Y/E March

2016 2017E 2018E 2019E

Sales

77.6

79.9

91.0 103.7

EBITDA

15.0

15.0

17.5

20.3

Adj. PAT

12.5

12.6

14.9

17.5

Adj. EPS (INR)

7.1

7.2

8.5

10.0

EPS Gr. (%)

17.2

0.8

18.5

17.2

BV/Sh.(INR)

23.6

27.9

32.9

38.8

RoE (%)

33.3

27.8

27.9

27.8

RoCE (%)

27.7

23.7

24.1

24.7

Payout (%)

28.0

35.0

35.0

35.0

P/E (x)

38.9

38.6

32.6

27.8

P/BV (x)

11.7

9.9

8.4

7.1

EV/EBITDA (x)

31.1

31.0

26.0

22.0

Div. Yield (%)

0.7

0.9

1.1

1.3

Valuations

CMP: INR277

We expect sales to grow 2% YoY to INR19.9b, led by ~5% domestic organic volume growth.



We expect Dabur’s EBITDA margin to contract 150bp.



Hence, we have modeled EBITDA and PAT decline of 6% and 5%, respectively, in 3QFY17.



The stock trades at 32.6x FY18E EPS of INR8.5; maintain Neutral.

Key issues to watch for  Domestic volume growth and outlook for rural demand.  Update on project CORE.  Margin performance in international business.  Competitive intensity, especially from Patanjali.

January 2017

0%

1Q 8.1 19,017

FY16 2Q 3Q 5.5 -2.5 19,553 19,552

4Q 7.0 19,800

15,861 3,157 16.6

15,551 4,001 20.5

15,822 3,730 19.1

15,688 4,112 20.8

325 118 531 3,244 620 19.1 10 2,615

328 125 558 4,106 744 18.1 0 3,362

320 111 655 3,953 783 19.8 3 3,167

358 132 578 4,201 868 20.7 15 3,318

22%

12%

4%

27%

Y/E March

Neutral



Quarterly Performance (Consolidated, INR m) 49%

Domestic Vol Growth (%) Net Sales YoY Change (%) Total Exp EBITDA Margins (%) YoY Growth (%) Depreciation Interest Other Income PBT Tax Rate (%) Minority Interest Adjusted PAT YoY Change (%) E: MOSL Estimates

TP: INR300 (+8%)

1Q 4.1 19,239 1.2 15,796 3,443 17.9 9.1 343 118 655 3,637 701 19.3 8 2,927 12.0

FY17 2Q 3QE 4.5 5.0 19,757 19,943 1.0 2.0 15,730 16,437 4,028 3,505 20.4 17.6 0.7 -6.0 357 384 166 113 893 753 4,397 3,762 873 752 19.9 20.0 11 3 3,513 3,007 4.5 -5.1

4QE 3.5 20,919 5.7 16,915 4,004 19.1 -2.6 442 122 522 3,962 793 20.0 4 3,165 -4.6

FY16

FY17

4.5 77,616 -0.6 62,614 15,002 19.3 15.8 1,332 485 2,352 15,538 2,999 19.3 27 12,512 17.4

4.3 79,858 2.9 64,878 14,980 18.8 -0.1 1,527 519 2,823 15,757 3,120 19.8 26 12,612 0.8

105

December 2016 Results Preview | Consumer

Emami Bloomberg

HMN IN 227.0

Equity Shares (m)

CMP: INR1,031

234 / 3

M. Cap. (INR b)/(USD b)

-1 / -6 / 0

1,6,12 Rel Perf. (%)

We project Emami’s (HMN) sales to grow 5% YoY to INR7.6b, with ~1% volume growth.



We expect gross margin to contract 50bp to 66.1% and EBITDA margin to contract 100bp to 33.4%. Thus, EBITDA is likely to increase 1.9% YoY to INR2.5b.



PAT is expected to decline 6.8% YoY to INR1.8b due to low tax rate of 14.1% in the base quarter.



The stock trades at 33.7x FY18E EPS of INR30.6; maintain Buy. Emami remains one of our preferred ideas.

Financial Snapshot (INR b) Y/E March

2016 2017E 2018E 2019E

Sales

23.9

25.9

29.7

34.4

EBITDA

6.8

7.6

8.8

10.3

NP

5.7

5.6

6.9

8.4

EPS (INR)

25.2

24.7

30.6

37.1

EPS Gr. (%)

17.7

-1.9

23.6

21.3

BV/Sh. (INR)

61.8

83.1

98.7 120.9

RoE (%)

43.4

34.1

33.6

33.8

RoCE (%)

37.9

31.4

35.3

39.1

Payout (%)

27.9

44.5

39.3

32.4

P/E (x)

40.9

41.7

33.7

27.8

P/BV (x)

16.7

12.4

10.4

8.5

EV/EBITDA (x)

35.0

31.0

26.4

22.0

0.8

1.1

1.2

1.2

Key issues to watch for  Volume growth and broad consumer demand across categories.  Outlook for mentha oil prices.  Competitive intensity, especially from Patanjali.  Performance of re-launches this year.

Valuations

Div. Yld (%)

Quarterly Performance (INR m) Y/E MARCH

-17% 1Q

Domestic volume Growth (%) Net Sales YoY Change (%) COGS Gross Profit Gross margin (%) Other Expenditure % to sales EBITDA Margins (%) YoY Change Depreciation Interest Other Income PBT Tax Rate (%) PAT YoY Change (%) Amortization Reported PAT

Buy



1261 / 901

52-Week Range (INR)

TP: INR1,240 (+20%)

FY16 2Q

3Q

4Q

1Q 18.0 6,444 19.9 2,287 4,157 64.5 2,684 41.7 1,473 22.9 49.2 106 125 51 1,292 117 9.1 1,175 18.0 609 596

15.0 5,372

13.5 5,306

9.3 7,246

18.0 6,026

2,114 3,258 60.6 2,271 42.3 987 18.4

1,783 3,523 66.4 2,001 37.7 1,523 28.7

2,423 4,823 66.6 2,329 32.1 2,494 34.4

2,193 3,833 63.6 1,992 33.1 1,841 30.6

88 44 187 1,041 42 4.0 996

92 192 122 1,361 139 10.2 1,219

99 172 53 2,276 320 14.1 1,953

169 136 88 1,623 87 5.4 1,541

137 866

620 631

617 1,367

727 850

FY17 2Q 11.0 5,846 10.2 1,929 3,916 67.0 2,164 37.0 1,752 30.0 15.1 111 160 87 1,568 230 14.7 1,336 9.6 680 690

3QE

4QE

1.0 7,608 5.0 2,582 5,026 66.1 2,484 32.6 2,543 33.4 1.9 111 110 105 2,427 607 25.0 1,820 -6.8 600 1,220

-4.0 6,035 0.2 2,228 3,807 63.1 2,006 33.2 1,801 29.8 -2.1 165 91 146 1,692 416 24.6 1,276 -17.2 511 765

FY16

FY17E

14.0 23,937 8.0 8,513 15,424 64.4 8,580 35.8 6,844 28.6 26.7 450 543 449 6,301 459 7.3 5,841 20.7 2,100 3,741

9.0 25,933 8.3 9,026 16,906 65.2 9,338 36.0 7,569 29.2 10.6 493 486 389 6,980 1,370 19.6 5,610 -4.0 2,400 3,210

E: MOSL Estimates

January 2017

106

December 2016 Results Preview | Consumer

Godrej Consumer Bloomberg

GCPL IN 340.5

Equity Shares (m)

522 / 8

M. Cap. (INR b)/(USD b)

1710 / 1120

52-Week Range (INR)

Financial Snapshot (INR b) Y/E March

2016 2017E 2018E 2019E

Sales

89.7

94.9 107.0 122.6

EBITDA

16.2

17.9

20.9

23.7

Adj. PAT

11.3

12.5

14.9

17.1

Adj. EPS (INR)

33.2

36.8

43.8

50.4

EPS Gr. (%)

24.4

10.8

19.0

15.2

Neutral

We expect Godrej Consumer’s revenue to rise 10% YoY to INR25.1b.



Demand trends in international business remain weak, primarily driven by macroeconomic trends.



We estimate operating margin to contract 150bp YoY to 18.4%.



We have modeled 1.7% EBITDA growth, but expect PAT to decline 1.2% YoY.



The stock trades at 35x FY18E EPS of INR43.8. We have Neutral rating on the stock.

152.2 177.0 209.0 247.7

RoE (%)

23.4

22.3

22.7

22.1

RoCE (%)

16.7

15.3

15.5

15.9

Payout (%)

29.3

32.1

27.0

23.4

P/E (x)

46.2

41.7

35.0

30.4

P/BV (x)

10.1

8.7

7.3

6.2

EV/EBITDA (x)

33.4

30.5

26.0

22.7

Div. Yield (%)

0.6

0.8

0.8

0.8

Valuations

Key issues to watch for  Growth trend in soap volumes.  Competitive intensity across categories.  Outlook for international business— demand outlook in Indonesia and margin guidance for LatAm.

Quarterly Performance (Consolidated, INR m) FY16 Y/E March 1Q 2Q 3Q Net Sales 19,854 21,166 22,859 YoY Change (%) EBITDA 3,132 4,072 4,540 Margins (%) 15.8 19.2 19.9 YoY Growth (%) Depreciation 230 235 257 Interest 329 313 296 Other Income 218 220 196 PBT 2,806 3,750 4,264 Tax 636 757 948 Rate (%) 22.7 20.2 22.2 Minority Int 5 0 5 Adj PAT 2,166 2,993 3,311 YoY Change (%) E: MOSL Estimates

January 2017

TP: INR1,655 (+8%)



3 / -4 / 11

1,6,12 Rel Perf. (%)

BV/Sh.(INR)

CMP: INR1,532

4Q 22,087 4,547 20.6 284 250 159 4,228 1,030 24.4 0 3,199

1Q 21,202 6.8 3,775 17.8 20.5 327 326 166 3,298 754 22.9 6 2,538 17.2

FY17 2Q 3QE 23,575 25,145 11.4 10.0 4,631 4,617 19.6 18.4 13.7 1.7 358 193 350 340 194 255 4,118 4,338 907 1,063 22.0 24.5 0 6 3,212 3,270 7.3 -1.2

4QE 24,974 13.1 4,908 19.7 8.0 195 316 249 4,647 1,146 24.7 0 3,490 9.1

FY16

FY17E

89,678 8.8 16,242 18.1 21.7 1,031 1,002 820 15,028 3,171 21.1 395 11,298 28.1

94,897 5.8 17,931 18.9 10.4 1,072 1,332 864 16,391 3,869 23.6 12 12,510 10.7

107

December 2016 Results Preview | Consumer

GSK Consumer Bloomberg

SK B IN 42.1

Equity Shares (m)

CMP: INR5,058

213 / 3

M. Cap. (INR b)/(USD b) 52-Week Range (INR)

6675 / 4650

1,6,12 Rel Perf. (%)

0 / -15 / -26

2016 2017E 2018E 2019E

Sales

41.9

40.2

45.0

51.3

EBITDA

9.4

8.4

9.5

10.9

Adj. PAT

7.0

6.6

7.5

8.5

Adj. EPS (INR) EPS Gr. (%) BV/Sh. (INR)

We expect GSK Consumer to report net sales of INR9.5b (-3% YoY) led by 2% volume decline in MFD. In our view, discretionary demand in core MFD category is yet to witness an uptrend.



We estimate EBITDA margin to contract 20bp YoY to 16.6%, and PAT growth of 1.8% YoY.



The stock trades at 28.3x FY18E EPS. We have a Neutral rating on the stock.

167.1 157.7 178.8 201.2 20.4

-5.6

13.4

12.6

581.5 673.6 774.4 774.4

RoE (%)

30.8

25.1

24.7

24.7

RoCE (%)

30.8

25.2

24.7

24.7

Payout (%)

33.7

35.0

40.0

40.0

30.3

32.1

28.3

25.1

8.6

7.4

6.5

6.5

EV/EBITDA (x)

20.1

24.8

21.5

21.5

Div. Yield (%)

1.1

1.1

1.3

1.3

Key issues to watch for  Growth in MFD volume.  Outlook for market growth and raw materials.  Performance of non-MFD portfolio.  Competitive intensity, especially from Patanjali.

Valuations P/E (x) P/BV (x)

Neutral



Financial Snapshot (INR b) Y/E December

TP: INR5,465 (+8%)

Quarterly Performance (INR m) FY16

Y/E Mar MFD Volume Growth (%) Net Sales YoY Change (%) Total Exp EBITDA Margins (%) YoY Change (%) Depreciation Interest Other Income PBT Tax Rate (%) Adj PAT YoY Change (%) E: MOSL Estimates

January 2017

FY17

1Q

2Q

3Q

4Q

1Q

2Q

3QE

4QE

2.0 9,955

0.0 10,918

0.0 9,811

0.0 10,565

7,907 2,048 20.6

8,537 2,381 21.8

8,165 1,646 16.8

8,152 2,413 22.8

192 7 549 2,398 838 34.9 1,561

136 7 589 2,827 988 35.0 1,839

173 2 569 2,039 708 34.7 1,332

182 2 578 2,807 966 34.4 1,841

-6.0 9,439 -5.2 7,404 2,035 21.6 -0.6 147 6 592 2,474 868 35.1 1,606 2.9

-3.0 10,803 -1.1 8,351 2,452 22.7 3.0 148 6 578 2,876 1,039 36.1 1,837 -0.1

-4.0 9,517 -3.0 7,939 1,577 16.6 -4.2 199 6 682 2,055 699 34.0 1,356 1.8

-2.0 10,454 -1.1 8,073 2,380 22.8 -1.3 225 5 646 2,796 965 34.5 1,831 -0.5

FY16

FY17E

0.5 41,887

-3.8 40,212 -4.0 31,767 8,445 21.0 -10.6 718 24 2,498 10,200 3,570 35.0 6,630 -5.6

32,438 9,450 22.6 718 8 1,921 10,645 3,619 34.0 7,026

108

December 2016 Results Preview | Consumer

Hindustan Unilever Bloomberg

HUVR IN 2163.5

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

1776 / 26

52-Week Range (INR)

954 / 765

1,6,12 Rel Perf. (%)

-4 / -6 / -8

Financial Snapshot (INR b) Y/E March

2016 2017E 2018E 2019E

Sales

305.0 315.3 345.1 386.4

EBITDA

57.3

59.1

67.0

76.9

Adj. PAT

41.2

42.7

48.5

55.8

Adj. EPS (INR)

19.0

19.7

22.4

25.8

EPS Gr. (%)

12.9

3.6

13.7

15.0

BV/Sh.(INR)

29.0

28.5

28.3

29.1

RoE (%)

82.4

68.7

79.1

89.8

RoCE (%)

108.1

Payout (%)

CMP: INR821

Neutral

TP: INR900 (+10%)



We expect Hindustan Unilever’s revenue to grow 1.5%, with underlying ~1% volume decline.



PFAD prices have gone up by 70% YoY in 3QFY17 of a low base and LAB prices are up 3% YoY.



We expect operating margin to contract 100bp YoY to 17.4% in 3QFY17.



We estimate EBITDA decline of 4% YoY, but expect PAT to grow 1.9% YoY. The stock trades at 36.6x FY18E EPS of INR22.4; maintain Neutral.

89.3 103.2 117.8

84.0

96.3

91.4

87.2

P/E (x)

43.1

41.6

36.6

31.8

P/BV (x)

28.3

28.9

29.0

28.2

EV/EBITDA (x)

30.5

29.5

26.0

22.6

Div. Yield (%)

1.9

2.3

2.5

2.7

Valuations

Key issues to watch for  Comments on volume growth and consumer environment.  Competitive intensity in S&D and shampoos.

demand

Quarterly performance (INR m) Y/E March Volume Growth (%) Net Sales YoY Change (%) COGS Gross Profit Margin % Operating Exp % to sales EBITDA YoY Change (%) Margins (%) Depreciation Interest Other Income PBT Tax Rate (%) Adjusted PAT Reported Profit YoY Change (%) E: MOSL Estimates

January 2017

1Q 6.0 78,445

FY16 2Q 3Q 7.0 6.0 77,314 77,640

4Q 4.0 77,212

38,976 39,469 50.3 24,349 31.0 15,120

38,965 38,349 49.6 24,982 32.3 13,366

37,424 40,216 51.8 25,914 33.4 14,302

37,688 39,523 51.2 24,820 32.1 14,703

19.3 749 47 1,230 15,554 4,960 31.9 10,628 10,692

17.3 761 45 1,944 14,503 4,560 31.4 9,902 9,822

18.4 822 45 1,451 14,886 4,373 29.4 9,717 9,717

19.0 875 16 1,014 14,826 4,203 28.3 11,135 11,135

1Q 4.0 81,282 3.6 39,555 41,727 51.3 25,368 31.2 16,359 8.2 20.1 933 60 1,076 16,442 5,411 32.9 11,277 11,739 9.8

FY17 2Q -1.0 78,427 1.4 39,620 38,807 49.5 24,760 31.6 14,046 5.1 17.9 945 49 2,528 15,580 4,807 30.9 10,818 10,956 11.5

3QE -1.0 78,804 1.5 39,167 39,637 50.3 25,909 32.9 13,728 -4.0 17.4 904 45 1,161 13,940 4,043 29.0 9,898 9,898 1.9

4QE 5.0 83,012 7.5 41,818 41,194 49.6 26,190 31.5 15,004 2.0 18.1 843 16 1,317 15,463 4,475 28.9 10,988 10,988 (1.3)

FY16 Ind AS

FY17E

5.8 310,610

1.8 321,525 3.5 160,161 161,364 50.2 102,227 31.8 59,137 2.9 18.4 3,624 170 6,082 61,425 18,735 30.5 42,690 42,690 2.4

153,053 157,557 50.7 100,065 32.2 57,491 18.5 3,208 153 5,638 59,769 18,096 30.3 41,673 41,673

109

December 2016 Results Preview | Consumer

ITC Bloomberg

ITC IN 12070.8

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

2954 / 43

52-Week Range (INR)

266 / 179 4/2/9

1,6,12 Rel Perf. (%)

Financial Snapshot (INR b)

CMP: INR245

TP: INR290 (+19%)

Buy



We expect net sales to decline 4% YoY to INR88.1b, with cigarette volume declining 7% YoY (base quarter saw volume decline of 5%).



We expect cigarette EBIT to decline 7.6% YoY. We have factored in EBITDA decline of 6.4% YoY to INR33.7b for the company.



We expect Other FMCG to post revenue decline of ~8% YoY.

Y/E March

2016 2017E 2018E 2019E

Sales

362.2 382.9 426.2 484.0



We estimate PAT decline of 3% YoY to INR25.8b.

EBITDA

137.2 142.2 162.4 187.3



Adj. PAT

93.1 101.0 115.5 132.5

The stock trades at 25.6x FY18E EPS of INR9.6; maintain Buy.

Adj. EPS (INR)

7.7

8.4

9.6

11.0

EPS Gr. (%)

-3.5

8.5

14.3

14.6

BV/Sh.(INR)

27.3

31.6

36.1

40.8

RoE (%)

29.3

28.4

28.3

28.5

RoCE (%)

27.8

27.3

27.6

28.3

Payout (%)

88.4

64.4

64.4

64.4

31.7

29.2

25.6

22.3

Valuations P/E (x) P/BV (x)

9.0

7.7

6.8

6.0

EV/EBITDA (x)

20.1

19.3

16.6

14.2

Div. Yield (%)

2.8

2.2

2.5

2.9

Key issues to watch for  Trends in cigarette volume.  Demand outlook for FMCG category and segmental profitability.

Quarterly Performance (INR m) 1Q -17.0 91,600

FY16 2Q 3Q -14.0 -5.0 87,989 91,767

59,078 32,522

54,162 33,827

55,715 36,052

64,817 36,871

35.5 2,576 105 3,565 33,407 11,746 35.2 21,661

38.4 2,582 103 3,926 35,068 12,443 35.5 22,625

39.3 2,625 161 6,779 40,045 13,517 33.8 26,528

36.3 2,549 123 4,116 38,315 13,363 34.9 24,952

Y/E March Cigarette Vol Gr (%) Net Sales YoY Change (%) Total Exp EBITDA Growth (%) Margins (%) Depreciation Interest Other Income PBT Tax Rate (%) Adj PAT E: MOSL Estimates

January 2017

4Q 0.0 101,687

1Q 3.0 100,540 9.8 65,278 35,262 8.4 35.1 2,613 101 4,205 36,754 12,907 35.1 23,847

FY17 2Q 4.0 96,607 9.8 60,307 36,300 7.3 37.6 2,684 107 4,754 38,262 13,262 34.7 25,000

3QE -7.0 88,097 -4.0 54,368 33,729 -6.4 38.3 2,888 195 6,779 37,426 11,602 31.0 25,824

4QE -4.0 101,608 -0.1 64,656 36,952 0.2 36.4 3,413 175 5,002 38,367 11,996 31.3 26,371

FY16

FY17E

-9.0 365,827 0.2 228,647 137,179 1.4 37.5 10,319 491 17,693 144,061 50,949 35.4 93,113

-1.0 386,852 5.7 244,608 142,244 3.7 36.8 11,597 578 20,740 150,809 49,767 33.0 101,042

110

December 2016 Results Preview | Consumer

Jyothy Labs Bloomberg

JYL IN

Equity Shares (m)

181.0

M. Cap. (INR b)/(USD b)

61 / 1 381 / 253

52-Week Range (INR)

-10 / 12 / 4

1,6,12 Rel Perf. (%)

Financial Snapshot (INR b) Y/E March

2016 2017E 2018E 2019E

Net Sales

16.6

17.4

19.8

22.8

EBITDA

2.2

2.5

2.8

3.2

Adj PAT

0.7

1.3

1.5

1.8

Adj PAT for NCD

0.1

0.7

0.8

1.1

Adj.EPS (INR)

4.1

7.2

8.5

10.1

EPS Gr. (%)

-41.6

75.7

17.8

18.4

BV/Sh (INR)

46.7

49.5

53.5

59.1

RoE (%)

9.1

15.0

16.5

17.9

RoCE (%)

7.2

12.1

13.5

14.5

81.7

46.5

39.5

33.4

7.2

6.8

6.3

5.7

29.3

25.9

22.1

19.4

1.2

1.2

1.2

1.2

Valuations P/E (x) P/BV (x) EV/EBITDA Dividend Yield (%)

Quarterly Performance (INR m) Y/E March Net Sales YoY Change (%) Other Operating Income Total Sales COGS Gross Profit Margins (%) Total Exp EBITDA EBITDA Growth % Margins (%) Depreciation Interest Other Income PBT Tax Rate (%) Adjusted PAT YoY Change (%) E: MOSL Estimates

January 2017

CMP: INR335

TP: INR360 (+7%)

Neutral



We expect Jyothy Labs’ net sales to grow 1% YoY to INR3.8b.



EBITDA margin is likely to contract by 150bp YoY to 12.4%.



We have factored in EBITDA decline of 10% YoY to INR468m.



The stock trades at 22.1x FY18E EV/EBITDA. Speculation around Henkel deal will overshadow fundamentals in FY17, in our view. Maintain Neutral.

Key issues to watch for  Update on new launches and innovations.  Update on Henkel call option.  Pick-up in Henkel brands’ performance.

1Q 4,040

FY16 2Q 3Q 3,894 3,726

4Q 4,917

3.4 4,043 2,096 1,947 48.2 1,366 581

6.6 3,900 2,029 1,871 48.0 1,374 498

6.4 3,732 1,923 1,810 48.5 1,290 520

3.8 4,920 2,910 2,010 40.8 1,381 625

14.4 69 164 50 398 149 37.5 258

12.8 72 151 35 310 121 39.0 199

13.9 74 151 25 320 166 52.0 153

12.7 100 152 32 405 257 63.4 148

1Q 4,373 8.3 3.9 4,377 2,219 2,158 49.3 1,364 795 36.8 18.2 71 157 29 596 146 24.6 459 78.2

FY17 2Q 4,117 5.7 4.2 4,121 2,101 2,020 49.0 1,383 637 28.0 15.5 73 164 31 430 119 27.7 320 61.2

3QE 3,763 1.0 6.7 3,770 1,983 1,787 47.4 1,319 468 -10.0 12.4 78 151 29 267 49 18.5 218 42.1

4QE 5,184 5.4 7.4 5,191 3,122 2,070 39.9 1,497 573 -8.3 11.0 96 155 80 401 75 18.6 327 120.8

FY16

FY17E

16,576 10.1 20.2 16,596 8,958 7,638 46.1 5,410 2,227 36.6 13.4 314 618 141 1,436 693 48.3 743 -39.6

17,437 5.2 22.2 17,460 9,425 8,035 46.1 5,563 2,473 11.0 14.2 317 628 168 1,695 390 23.0 1,305 75.7

111

December 2016 Results Preview | Consumer

Marico Bloomberg

MRCO IN

Equity Shares (m)

1289.6

M. Cap. (INR b)/(USD b)

332 / 5

52-Week Range (INR)

307 / 208

1,6,12 Rel Perf. (%)

0 / -1 / 10

CMP: INR258 

We expect sales to decline 5% YoY to INR14.5b, with flat domestic volumes. In our opinion, Parachute volumes would likely remain flat, while Saffola and VAHO volumes would decline 1% and 5%, respectively (Saffola and VAHO volumes grew 17% and 21%, respectively, in the base quarter).



We observe copra prices have corrected 10% YoY (two months data available for 3QFY17), while kardi oil prices are up 5% YoY. We are modeling 100bp YoY gross margin expansion, with 50bp EBITDA margin contraction for 3QFY17.



PAT is projected to decline 8% YoY to INR1.9b.



The stock trades at 35.6x FY18E EPS of INR7.2; maintain Buy. We like MRCO’s franchise, portfolio strength, management quality and its multiple growth driver models.

Financial Snapshot (INR b) Y/E March

2016 2017E 2018E 2019E

Sales

60.1

60.1

70.1

79.7

EBITDA

10.4

10.9

13.1

15.2

Adj. PAT

7.2

7.7

9.3

11.0

Adj. EPS (INR)

5.6

6.0

7.2

8.5

EPS Gr. (%)

26.1

6.4

21.1

17.7

BV/Sh.(INR)

16.3

20.1

23.5

25.5

RoE (%)

36.9

32.8

33.1

34.8

RoCE (%)

31.4

28.7

29.2

30.7

Payout (%)

60.2

50.3

44.3

64.6

P/E (x)

45.9

43.2

35.6

30.3

P/BV (x)

15.8

12.8

11.0

10.1

EV/EBITDA (x)

31.5

29.7

24.6

21.1

Div. Yield (%)

1.3

1.2

1.2

2.1

Valuations

Buy

TP: INR300 (+16%)

Key issues to watch for  Comments on volume growth trends across key categories.  Outlook for raw materials.  Margin expansion and guidance for international business.

Quarterly Performance (INR m) Y/E March Domestic volume growth (%) Net Sales YoY Change (%) COGS Gross Profit Gross margin (%) Other Expenditure % to Sales EBITDA Margins (%) YoY Change (%) Depreciation Interest Other Income PBT Tax Rate (%) Minority Interest Adjusted PAT YoY Change (%) E: MOSL Estimates

January 2017

1Q 6.0 17,482

FY16 2Q 3Q 5.5 10.5 14,518 15,290

4Q 8.4 12,878

9,662 7,821 44.7 4,657 26.6 3,164 18.1

7,595 6,922 47.7 4,652 32.0 2,271 15.6

7,530 7,760 50.8 4,890 32.0 2,870 18.8

5,993 6,885 53.5 4,782 37.1 2,102 16.3

188 45 337 3,267 982 30.1 0 2,285

221 37 193 2,206 676 30.7 0 1,530

230 60 190 2,770 720 26.0 30 2,020

311 68 320 2,044 678 33.2 4 1,362

1Q 8.0 17,499 0.1 8,419 9,079 51.9 5,384 30.8 3,695 21.1 16.8 208 54 319 3,753 1,072 28.6 2 2,679 17.2

FY17 2Q 3.4 14,390 -0.9 6,847 7,543 52.4 5,050 35.1 2,493 17.3 9.8 209 21 285 2,548 740 29.1 2 1,806 18.1

3QE 0.0 14,526 -5.0 7,008 7,517 51.8 4,863 33.5 2,654 18.3 -7.5 253 18 238 2,620 760 29.0 2 1,858 -8.0

4QE 4.0 13,685 6.3 6,449 7,236 52.9 5,143 37.6 2,093 15.3 -0.4 388 15 242 1,932 575 29.8 2 1,355 -0.5

FY16

FY17E

7.0 61,224 7.0 30,614 30,610 50.0 20,052 32.8 10,558 17.2 23.1 1,018 202 830 10,167 2,956 29.1 118 7,092 23.7

4.0 60,099 -1.8 28,724 31,376 52.2 20,440 34.0 10,935 18.2 3.6 1,058 107 1,084 10,854 3,148 29.0 8 7,698 14.6

112

December 2016 Results Preview | Consumer

Nestle India Bloomberg

NEST IN 96.4

Equity Shares (m)

568 / 8

M. Cap. (INR b)/(USD b)

CMP: INR5,893

We expect Nestle India’s net sales to remain flattish YoY at INR19.4b, despite Maggi sale for part of the base quarter. Demonetization is likely to have detrimental on sales. Maggi relaunch has been successful, with several new variants. It has already clawed back to > 57% market share.



We estimate EBITDA margin to also stay flattish YoY at 17.9%. EBITDA and PAT are projected to decline 0.5% YoY (to INR3.5b) and 5.5% YoY (to INR2b), respectively.



The stock trades at 42.3x CY17E EPS; maintain Neutral.

-7 / -7 / 0

1,6,12 Rel Perf. (%)

Financial Snapshot (INR b) Y/E December

2015 2016E 2017E 2018E

Sales

81.2

88.4 104.5 120.4

EBITDA

15.9

17.5

21.6

25.8

Adj. PAT

11.6

10.8

13.4

16.3

Adj. EPS (INR) EPS Gr. (%) BV/Sh.(INR)

119.9 111.5 139.2 168.7 -7.3

-7.0

24.8

21.2

292.3 329.3 381.2 460.1

RoE (%)

40.9

35.9

39.2

40.1

RoCE (%)

40.7

35.9

39.2

40.1

Payout (%)

40.5

49.3

46.7

39.1

P/E (x)

49.2

52.8

42.3

34.9

P/BV (x)

20.2

17.9

15.5

12.8

EV/EBITDA (x)

34.5

31.3

24.8

20.5

Div. Yield (%)

0.8

0.9

1.1

1.1

Valuations

Quarterly performance (INR m) Y/E December Net Sales YoY Change (%) COGS Gross Profit Margin (%) Operating Exp EBITDA Margins (%) YoY Growth (%) Depreciation Interest Other income PBT Tax Rate (%) Adjusted PAT YoY Change (%) E : M O S L E s tim ates

January 2017

Neutral



7390 / 4990

52-Week Range (INR)

TP: INR6,410 (+9%)

1Q 25,068 8.4 10,626 14,442 57.6 8,443 6,000 23.9 23.5 950 34 352 5,367 1,663 31.0 3,704 26.4

Key issues to watch for  Volume trends and management commentary on demand environment.  Recovery in sales and market share of Maggi.

CY15 2Q 3Q 19,338 17,362 -20.1 -32.1 8,553 7,429 10,785 9,934 55.8 57.2 7,183 7,075 3,602 2,858 18.6 16.5 -26.1 -46.5 720 906 1 0 533 334 3,414 2,286 1,093 637 32.0 27.9 2,322 1,649 -21.9 -49.6

4Q 19,464 -22.6 8,082 11,383 58.5 7,892 3,491 17.9 -36.0 897 -2 403 2,999 913 30.4 2,086 -36.7

1Q 22,957 -8.4 9,851 13,106 57.1 7,927 5,180 22.6 -13.7 891 38 416 4,666 1,614 34.6 3,052 -17.6

CY16 2Q 3Q 22,561 23,462 16.7 35.1 9,495 9,860 13,066 13,602 57.9 58.0 8,709 9,115 4,357 4,487 19.3 19.1 21.0 57.0 889 882 1 1 522 547 3,989 4,151 1,136 1,273 28.5 30.7 2,853 2,878 22.9 74.5

4QE 19,376 -0.5 8,083 11,293 58.3 7,819 3,474 17.9 -0.5 881 3 419 3,010 1,038 34.5 1,972 -5.5

CY15

CY16E

81,233 -17.2 34,689 46,544 57.3 30,593 15,951 19.6 -22.3 3,473 33 1,621 14,067 4,305 30.6 9,762 -21.7

88,356 8.8 37,288 51,067 57.8 33,570 17,497 19.8 9.7 3,544 42 1,904 15,815 5,061 32.0 10,754 10.2

113

December 2016 Results Preview | Consumer

Page Industries Bloomberg

PAG IN

Equity Shares (m)

11.2

M. Cap. (INR b)/(USD b)

154 / 2

52-Week Range (INR)

2 / 1 / -2

Financial Snapshot (INR b) Y/E March

2016 2017E 2018E 2019E

Sales

17.8

21.1

26.1

3.8

4.2

5.5

6.8

Adj. PAT

2.3

2.8

3.5

4.5

FCF to PAT BV/Sh.INR

Buy

We expect Page to report net sales of INR4.8b, up 9% YoY, led by double-digit volume growth.



We expect EBITDA margin to contract 50bp YoY to 20%, and PAT to post 13.3% YoY growth to INR650m.



The stock trades at 44.1x FY18E EPS of INR312.7; maintain Buy.

32.1

EBITDA

EPS Gr. %

TP: INR17,100 (+24%)



17351 / 9770

1,6,12 Rel Perf. (%)

Adj. EPS (INR)

CMP: INR13,782

208.6 247.4 312.7 402.4 18.7

18.6

26.4

28.7

0.8

0.6

0.6

0.9

453.0 576.6 733.0 914.1

RoE (%)

46.0

42.9

42.7

44.0

RoCE (%)

42.6

40.2

41.1

45.3

Payout (%)

49.1

50.0

50.0

55.0

P/E (x)

66.1

55.7

44.1

34.2

EV/EBITDA (x)

40.9

36.4

28.1

22.4

Valuations

Quarterly Performance (INR m) 26% Y/E MARCH 1Q Net Sales 4,489 YoY Change (%) COGS 1,783 Gross Profit 2,705 Gross margin (%) 60.3 Other Expenditure 1,701 % to sales 37.9 EBITDA 1,004 Margins (%) 22.4 YoY Change Depreciation 56 Interest 50 Other Income 56 PBT 953 Tax 327 Rate (%) 34.3 PAT 626 YoY Change (%)

Key issues to watch for  Volume trends and management commentary on demand environment.  Update on foray into kidswear segment.  GST impact.

25% FY16 2Q 3Q 4,663 4,408

24%

27%

4Q 4,343

1,808 2,855 61.2 1,844 39.6 1,011 21.7

1,653 2,755 62.5 1,852 42.0 904 20.5

1,630 2,712 62.5 1,811 41.7 901 20.7

58 37 9 926 323 34.9 602

57 34 2 814 241 29.5 574

69 36 3 800 241 30.2 558

1Q 5,719 27.4 2,570 3,149 55.1 2,057 36.0 1,092 19.1 8.8 59 39 59 1,053 373 35.5 679 8.5

26% FY17 2Q 5,378 15.3 2,156 3,222 59.9 2,147 39.9 1,075 20.0 6.3 60 40 62 1,037 350 33.8 687 14.0

23%

25%

3QE 4,805 9.0 1,802 3,003 62.5 2,042 42.5 961 20.0 6.3 51 40 60 929 279 30.0 650 13.3

4QE 5,160 18.8 1,868 3,293 63.8 2,182 42.3 1,111 21.5 23.3 50 50 61 1,072 326 30.5 745 33.5

FY16

FY17E

17,840 15.6 6,913 10,927 61.2 7,150 40.1 3,776 21.2 18.5 238 153 62 3,448 1,116 32.4 2,332 19.0

21,062 18.1 8,395 12,667 60.1 8,428 40.0 4,239 20.1 12.2 221 170 242 4,090 1,328 32.5 2,762 18.4

E: MOSL Estimates

January 2017

114

December 2016 Results Preview | Consumer

Parag Milk Foods Bloomberg

CMP: INR264

PARAG IN

Equity Shares (m)

84.1

We expect Parag to report net sales of INR4b, up 3% YoY, led by growth in value-added products.

-/-/-



We estimate EBITDA margin to contract 100bp YoY to 8.8%, and PAT to stay fattish at INR146m.

2016 2017E 2018E 2019E



The stock trades at 27.3x FY18E EPS of INR9.7. We have a Neutral rating on the stock.

22 / 0

52-Week Range (INR)

357 / 202

1,6,12 Rel Perf. (%) Financial Snapshot (INR b) Sales

16.5

17.1

19.9

23.9

EBITDA

1.5

1.5

1.9

2.4

Adj. PAT

0.5

0.6

0.8

1.2

Adj. EPS (INR)

6.7

7.0

9.7

14.1

EPS Gr. %

-66.7

4.6

37.7

45.5

BV/Sh.INR

51.4

87.3

97.0 111.1

RoE (%)

19.5

10.8

10.5

13.5

RoCE (%)

12.4

8.8

9.4

11.9

39.2

37.5

27.3

18.7

5.1

3.0

2.7

2.4

15.1 1.4

16.0 1.4

12.8 1.2

9.7 1.0

Valuations P/E (x) P/BV (x) EV/EBITDA (x) EV/Sales (x)

Neutral



M. Cap. (INR b)/(USD b)

Y/E March

TP: INR285 (+8%)

Key issues to watch for  Milk prices and global SMP price movement.  Execution of value-added products distribution.  Competitive intensity.  Impact from higher sales tax.

Consolidated - Quarterly Earning Model (INR m) Y/E March Net Sales YoY Change (%) Gross Profit Margin (%) Total Expenditure EBITDA YoY Change (%) Margins (%) Depreciation Interest Other Income PBT before EO expense PBT Tax Rate (%) Adj PAT YoY Change (%) Margins (%) E: MOSL Estimates

January 2017

FY16

FY17

1Q 3,738

2Q 4,696

3Q 3,875

959 25.7 674 285

1,258 26.8 844 414

1,156 29.8 777 378

7.6 90 112 5

8.8 64 146 -3

9.8 82 112 10

87 87 17 19.3 70

201 201 105 51.9 97

194 194 49 25.1 145

1.9

2.1

3.7

FY16

4Q 4,142 19.6 1,303 31.4 904 399 38.1 9.6 97 120 4

1Q 3,835 2.6 1,147 29.9 817 330 15.8 8.6 98 92 8

2Q 4,728 0.7 1,444 30.5 1,067 377 -8.9 8.0 115 64 23

3QE 3,991 3.0 1,250 31.3 900 350 -7.6 8.8 90 60 10

4QE 4,564 10.2 1,502 32.9 1,093 409 2.5 9.0 80 63 12

186 186 25 13.4 161 0.1 3.9

147 147 39 26.5 108 54.0 2.8

222 222 78 35.4 143 47.8 3.0

210 210 64 30.5 146 0.4 3.6

278 278 84 30.3 194 20.5 4.2

FY17E

16,451 17,118 13.9 4.1 4,676 5,343 28.4 31.2 3,200 3,877 1,476 1,465 37.7 -0.7 9.0 8.6 334 383 490 280 16 53 668 668 195 29.2 473 46.9 2.9

857 857 266 31.0 591 24.9 3.5

115

December 2016 Results Preview | Consumer

P&G Hygiene and Healthcare Bloomberg

CMP: INR6,891

PG IN 32.5

Equity Shares (m)

224 / 3

M. Cap. (INR b)/(USD b)

7280 / 5171

52-Week Range (INR)

Financial Snapshot (INR b) Y/E March 2016 2017E 2018E 2019E Sales

22.8

25.5

30.9

36.9

EBITDA

6.1

6.5

8.0

9.6

Adj. PAT

4.2

4.5

5.5

6.6

Adj. EPS (INR) EPS Growth (%) BV/Share (INR)

Buy



We expect PGHH to report net sales of INR7.5b, up 10% YoY.



We estimate EBITDA margin to contract 700bp YoY to 24.7% over an unusually high margin base in 2QFY16 (June ending), and PAT to post 14.4% YoY decline to INR1.3b in 2QFY17 (June ending).



The stock trades at 40.7x FY18E EPS of INR168.9; maintain Buy.

1 / 12 / 19

1,6,12 Rel Perf. (%)

TP: INR8,340 (+21%)

129.9 138.5 168.9 201.7 22.0

6.6

22.0

19.4

465.6 534.1 617.6 717.5

RoE (%)

30.8

27.7

29.4

30.3

RoCE (%)

31.3

28.0

29.6

30.5

P/E (x)

53.0

49.8

40.8

34.2

P/BV (x)

14.8

12.9

11.2

9.6

Key issues to watch for  Healthcare business growth, given high base.  Margin performance, given exceptionally high base.

Valuations

Standalone - Quarterly Earning Model (INR m) Y/E June 1Q Net Sales

EBITDA Margins (%) Depreciation Interest Other Income

3Q

4Q

1Q

5,208

5,336

6,004

FY17 2QE 3QE 7,505

5,885

FY16

FY17

22,754

25,518

4QE

5,387

6,823 5.9

-6.2

-4.3

11.5

10.0

13.0

14.8

-2.5

12.1

4,418

4,660

3,876

3,748

4,493

5,651

4,262

4,619

16,701

19,024

YoY Change (%) Total Expenditure

FY16 2Q

6,124

970

2,164

1,332

1,588

1,512

1,855

1,623

1,505

6,053

6,494

18.0

31.7

25.6

29.8

25.2

24.7

27.6

24.6

26.6

25.4

127

142

124

124

127

163

142

209

517

641

17

25

10

8

4

10

6

15

60

35

212

206

236

222

225

206

236

282

876

950

PBT before EO expense

1,038

2,203

1,435

1,677

1,605

1,887

1,711

1,564

6,353

6,768

PBT Tax Rate (%) Reported PAT Adj PAT YoY Change (%) Margins (%) E: MOSL Estimates

1,038 343 33.0 696 696

2,203 736 33.4 1,467 1,467 61.8 21.5

1,435 466 32.5 969 969 11.5 18.6

1,677 585 34.9 1,092 1,092 2.0 20.5

1,605 561 34.9 1,044 1,044 50.1 17.4

1,887 632 33.5 1,255 1,255 -14.4 16.7

1,711 573 33.5 1,138 1,138 17.4 19.3

1,564 501 32.0 1,063 1,063 -2.7 17.4

6,353 2,129 33.5 4,223 4,223 22.0 18.6

6,768 2,267 33.5 4,500 4,500 6.6 17.6

January 2017

12.9

116

December 2016 Results Preview | Consumer

Pidilite Industries Bloomberg

PIDI IN

Equity Shares (m)

512.7

M. Cap. (INR b)/(USD b)

CMP: INR608 

311 / 5

52-Week Range (INR)

770 / 529

1,6,12 Rel Perf. (%)



-5 / -13 / 5

Financial Snapshot (INR b) Y/E March

2016 2017E 2018E 2019E



Sales

54.1

55.9

63.7

73.9



EBITDA

12.2

12.5

13.9

15.6

Adj. PAT

7.6

8.4

9.4

10.6

Adj. EPS (INR)

14.8

16.4

18.4

20.6

EPS Gr. (%)

47.3

10.9

12.2

12.3

BV/Sh.(INR)

54.3

64.3

79.1

96.2

RoE (%)

29.9

27.6

25.6

23.5

RoCE (%)

28.5

26.1

24.5

22.7

Payout (%)

28.5

29.6

16.3

14.6

P/E (x)

41.2

37.1

33.1

29.5

P/BV (x)

11.2

9.5

7.7

6.3

EV/EBITDA (x)

25.0

24.2

21.4

18.6

Div. Yield (%)

0.7

0.8

0.5

0.5

TP: INR700 (+15%)

Buy

We expect Pidilite’s (PIDI) revenue to grow 1% YoY, led by singledigit volume growth in Consumer and Bazaar segment. EBITDA margin is expected to contract 100bp YoY to 21%. Base quarter (3QFY16) had witnessed 600bp YoY EBITDA margin expansion. We expect EBITDA and PAT to decline 4% and 3% YoY, respectively. The stock trades at 33.1x FY18E EPS of INR18.4; maintain Buy. Pidilite is one of our preferred ideas. Dominant leadership position in core Adhesives segment imparts strong pricing power. This, coupled with its strategy of building adjacencies in portfolio and potential gains from distribution outreach, drives our long-term preference for Pidilite.

Key issues to watch for  Volume growth in Fevicol.  Outlook for VAM prices.  Outlook for industrial and construction chemical segments.  Progress on Elastomer project (if any).

Valuations

Consolidated - Quarterly Earning Model (INR m) Y/E March 1Q Net Sales YoY Change (%) Total Expenditure EBITDA Margins (%) Depreciation Interest Other Income PBT before EO expense Extra-Ord expense PBT Tax Rate (%) Adj PAT YoY Change (%) Margins (%) E : M O S L E s tim ates

January 2017

FY16 2Q

3Q

4Q

14,695 13,185 13,391 12,409 9.4

5.1

11.4

18.9

11,272 10,175 10,438 10,025

1Q

FY17 2Q 3QE

FY16

FY17E

4QE

15,694 14,177 13,525 12,463

54,138

55,858

0.4

11.8

3.2

11,750 10,951 10,678 10,014

41,956

43,393

12,183

12,465

6.8

7.5

1.0

3,423

3,010

2,953

2,384

3,943

3,225

2,847

2,449

23.3

22.8

22.0

19.2

25.1

22.8

21.0

19.7

22.5

22.3

242

248

330

351

258

303

297

265

1,331

1,122

39

31

31

35

35

26

16

8

133

85

139

216

97

186

241

324

97

63

66

724

3,281

2,947

2,688

2,184

3,891

3,220

2,631

2,240

10,785

11,982

-9

14

7

35

4

11

0

-11

48

4

3,290 948 28.8 2,333 35.5 15.9

2,932 893 30.5 2,053 49.6 15.6

2,681 822 30.7 1,866 48.6 13.9

2,150 637 29.6 1,547 83.9 12.5

3,887 1,174 30.2 2,717 16.4 17.3

3,209 912 28.4 2,309 12.4 16.3

2,631 816 31.0 1,815 -2.7 13.4

2,251 693 30.8 1,547 0.0 12.4

10,737 3,221 30.0 7,564 45.7 14.0

11,978 3,595 30.0 8,387 10.9 15.0

117

December 2016 Results Preview | Consumer

Radico Khaitan Bloomberg

RDCK IN

Equity Shares (m)

132.6

M. Cap. (INR b)/(USD b)

16 / 0

52-Week Range (INR)

CMP: INR117

-3 / 27 / -2

Neutral



We expect Radico’s (RDCK ) revenue to remain flat at INR4.2b, with a 5% decline in volumes.



The premium segment should continue accelerating, aided by uptrading (premiumization) and RDCK ’s strategy to defocus on regular brands (given the harsh taxation environment and unfavorable raw material scenario).

151 / 84

1,6,12 Rel Perf. (%)

TP: INR120 (+3%)

Financial Snapshot (INR b) Y/E March

2016 2017E 2018E 2019E

Sales

16.4

17.0

19.3

21.2

EBITDA

2.1

1.9

2.2

2.4



We expect operating margin to contract 200bp YoY to 11.1%.

Adj. PAT

0.9

0.7

0.9

1.1



Adj. EPS (INR)

6.9

5.3

7.1

8.2

PAT is estimated to decline 27.7% YoY to INR163m.

EPS Gr. (%)

3.9 -23.5

33.8

16.6



The stock trades at 16.6x FY18E EPS of INR7.1. Maintain Neutral.

BV/Sh.(INR)

69.5

74.3

80.1

86.9

RoE (%)

10.3

7.3

9.1

9.9

RoCE (%)

8.6

6.8

7.7

8.1

10.8

15.0

15.0

15.0

17.0

22.2

16.6

14.2

1.7

1.6

1.5

1.3

EV/EBITDA (x)

11.4

12.5

11.3

10.2

Div. Yield (%)

0.6

0.7

0.9

1.1

Payout (%) Valuations P/E (x) P/BV (x)

Key issues to watch for  Further price hikes, if any.  Price trend and outlook for ENA.

Quarterly Performance (INR m) 1Q 4,173

FY16 2Q 4,026

3Q 4,244

4Q 3,997

3,710 462 11.1

3,536 490 12.2

3,688 556 13.1

3,661 336 8.4

107 213 98 240 68 28.4 172

108 208 81 255 78 30.4 178

100 197 68 327 103 31.3 225

103 230 148 150 55 36.7 95

Y/E March Net sales YoY Change (%) Total Expenses EBITDA Margins (%) YoY Change (%) Depreciation Interest Other Income PBT Tax Rate (%) Adjusted PAT YoY Change (%) E: MOSL Estimates

January 2017

1Q 4,304 3.1 3,733 571 13.3 23.5 105 214 39 291 68 23.4 223 29.6

FY17 2Q 4,473 11.1 3,905 568 12.7 15.8 105 206 44 301 76 25.1 225 26.8

3QE 4,244 0.0 3,773 471 11.1 -15.3 115 187 68 237 75 31.5 163 -27.7

4QE 4,026 0.7 3,746 280 7.0 -16.6 134 173 159 132 41 31.2 91 -4.3

FY16

FY17E

16,367 10.0 14,275 2,092 12.8 15.7 403 847 371 1,212 296 24.4 917 25.5

17,047 4.2 15,157 1,890 11.1 -9.7 459 780 310 961 259 27.0 701 -23.5

118

December 2016 Results Preview | Consumer

United Breweries Bloomberg

UBBL IN

Equity Shares (m)

264.4

CMP: INR796

TP: INR1,065 (+34%)

Buy



We expect United Breweries’ revenue to decline 2.9% YoY to INR10.7b.

-8 / 5 / -19



We build in EBITDA margin contraction of 320bp YoY to 12.7%, and 22.5% EBITDA decline YoY to INR1.4b.

Y/E March

2016 2017E 2018E 2019E



Sales

48.3

49.5

57.4

66.0

We estimate 5% PAT growth in 3QFY17, mainly due to low interest costs and tax rate compared to the base quarter.

EBITDA

6.8

6.9

8.8

10.6



PAT

2.9

3.3

4.3

5.2

The stock trades at 48.7x FY18E EPS of INR16.4. Maintain Buy.

M. Cap. (INR b)/(USD b)

211 / 3

52-Week Range (INR)

976 / 690

1,6,12 Rel Perf. (%) Financial Snapshot (INR b)

EPS (INR)

11.1

12.3

16.4

19.7

EPS Gr. (%)

12.8

11.2

32.6

20.4

BV/Sh.(INR)

79.8

90.2 103.9 120.7

RoE (%)

14.8

14.5

16.9

17.5

RoCE (%)

13.2

12.9

14.7

15.5

P/E (x)

71.8

64.5

48.7

40.4

P/BV (x)

10.0

8.8

7.7

6.6

EV/EBITDA (x)

31.7

30.8

24.7

20.2

4.4

4.3

3.8

3.2

Valuations

EV/Sales (x)

Key issues to watch for  Trends in volume growth and margins.  Price trend and outlook for raw materials.

Standalone - Quarterly Earning Model (INR m) Y/E March Net Sales YoY Change (%) Total Expenditure EBITDA YoY Change (%) Margins (%) Depreciation Interest Other Income

FY16 1Q 2Q 3Q 4Q 14,546 10,723 10,996 12,074 12,062 2,484

9,373 1,350

17.1 583 202 167

12.6 598 205 242

15.9 615 184 191

10.2 638 168 311

PBT before EO expense

1,866

789

1,140

739

2,260

376

996

1,033

4,534

4,665

Extra-Ord expense PBT Tax Rate (%)

0 1,866 645 34.5

0 789 268 33.9

0 1,140 428 37.5

0 739 216 29.2

0 2,260 790 34.9

0 376 106 28.1

0 996 249 25.0

0 1,033 258 25.0

0 4,534 1,556 34.3

0 4,665 1,403 30.1

Minority Interest & Profit/Loss of Asso. Cos. Reported PAT Adj PAT YoY Change (%) Margins (%) E: MOSL Estimates

0 1,221 1,221

0 521 521

0 713 713

0 524 524

4.9

6.5

4.3

0 270 270 -48.1 2.6

0 747 747 4.8 7.0

0 775 775 47.9 6.1

0 2,979 2,979

8.4

0 1,471 1,471 20.4 9.4

0 3,263 3,263 9.5 6.6

January 2017

9,247 10,839 1,749 1,235

FY17 1Q 2Q 3QE 4QE FY16 FY17E 15,642 10,386 10,676 12,784 48,340 49,487 7.5 -3.1 -2.9 5.9 2.4 12,733 9,174 9,320 11,393 41,521 42,620 2,909 1,212 1,356 1,391 6,818 6,868 17.1 -10.3 -22.5 12.6 0.7 18.6 11.7 12.7 10.9 14.1 13.9 637 702 600 608 2,435 2,547 148 141 90 90 759 469 136 8 330 340 910 814

6.2

119

December 2016 Results Preview | Consumer

United Spirits Bloomberg

UNSP IN 145.3

Equity Shares (m)

284 / 4

M. Cap. (INR b)/(USD b)

CMP: INR1,952

TP: INR2,620 (+34%)

Buy



We expect United Spirits’ (UNSP) revenue to decline 5% YoY to INR22.9b and have built in 10% YoY volume growth.

52-Week Range (INR)

3017 / 1775

1,6,12 Rel Perf. (%)

0 / -23 / -38



We build in EBITDA margin expansion of 350bp YoY to 10.7% (base quarter margins stood at 7.2%).

Y/E March

2016 2017E 2018E 2019E



Sales

83.4

86.7

We estimate PAT of INR1.1b in 3QFY17, mainly due to low interest costs and low tax rate compared to the base quarter.

EBITDA

8.8

9.2

12.4

15.6



PAT

2.4

4.0

6.6

9.0

Maintain Buy.

16.7

27.8

45.7

61.7

LP

66.0

64.5

35.2

Financial Snapshot (INR b)

EPS (INR) EPS Gr. (%) BV/Sh.(INR)

98.0 114.2

123.1 150.9 193.6 252.5

RoE (%)

19.8

20.3

23.6

24.5

RoCE (%)

8.5

10.6

14.4

17.2

Payout (%)

0.0

0.0

5.5

4.0

116.7

70.3

42.8

31.6

P/BV (x)

15.9

12.9

10.1

7.7

EV/EBITDA (x)

33.7

31.4

22.8

17.9

Div. Yield (%)

0.0

0.0

0.1

0.1

Valuations P/E (x)

Key issues to watch for  Trends in volume growth, premiumization and margins.  Price trend and outlook for ENA.  Impact of ban on alcohol in certain states.

Quarterly Performance (INR m) Y/E March (Standalone) Volume Growth % Net Sales YoY Change (%) Total Exp EBITDA Margins (%) Depreciation Interest PBT From operations Other income PBT Tax Rate (%) PAT E: MOSL Estimates

January 2017

1Q 0.4 18,487

FY16 2Q 3Q -2.3 1.6 18,923 24,099

4Q -4.0 21,251

16,773 1,715 9.3 249 1,284 182 320 502 386 76.9 116

16,020 2,903 15.3 241 1,100 1,562 293 1,855 601 32.4 1,254

19,421 1,830 8.6 271 1,009 550 965 1,515 504 33.3 1,010

22,366 1,733 7.2 249 1,077 407 82 488 438 89.7 50

1Q -0.2 20,273 9.7 18,251 2,023 10.0 261 1,030 732 346 1,078 309 28.6 769

FY17 2Q 3QE 1.0 -10.0 20,377 22,894 7.7 -5.0 18,126 20,447 2,251 2,447 11.0 10.7 332 299 885 646 1,034 1,502 389 220 1,423 1,722 445 594 31.3 34.5 978 1,128

4QE 0.0 22,446 5.6 19,982 2,464 11.0 320 568 1,576 222 1,798 639 35.5 1,159

FY16

FY17

-1.1 82,760 2.1 74,580 8,180 9.9 1,010 4,469 2,701 1,660 4,361 1,930 44.3 2,431

-4.2 85,990 3.9 76,805 9,185 10.7 1,212 3,128 4,845 1,177 6,021 1,987 33.0 4,034

120

Results Preview December 2016 Results PreviewDecember | Sector:2016 Financials - Banks

Financials - Banks Technology An unusual quarter; Several moving parts Sharp CASA uptick, weak core profitability but high trading gains 









3QFY17 is a historic quarter for banks, with three defining trends (1) sharp uptick in CASA (expect at least 500bp QoQ rise in CASA) and digitalization drive, (2) massive flows to bond markets and sharp drop in yields (down ~30bp; difference between peak and low at 65bp), and (3) collapse in loan growth to a multi-year low. We believe the current quarter cannot to be extrapolated, however benefits of demonetization – improved CASA ratio and low interest rates (led by low inflation) are here to stay. Weak loan growth (down 4% QoQ for our coverage universe), negative carry on old currency notes and excess liquidity would impact NIM. Moderation in loan growth, delayed buying decision for some retail products, and RBI directive on cards/payments would impact fee income growth. High footfalls and occupation of complete bandwidth in accepting deposits will impact branch profitability. Bond yields in India are divergent with global trends, with Indian bond yields down ~30bp QoQ (difference between peak and low at 65bp). Our interactions with banks’ indicate that they have realized high trading gains/are sitting on high MTM gains on investment portfolios. This would be handy to clean the stress loans from balance sheet. Within our universe, we believe SBIN, PNB, CBK and AXSB are likely to be large beneficiaries. We do not see material change in reported asset quality as (a) large corporate slippages are already taken care of, (b) small value accounts have got forbearance from the RBI for a quarter, and (c) small value NPAs were recovered, with borrowers depositing old currency. We would keenly watch management comments on SME repayments. RBI AQR in FY16 led to high NPAs and due to weak recoveries till date, provision levels are likely to remain elevated (ageing of NPAs). Retail loan growth has moderated during the quarter, as the entire focus of the management was towards demonetization. We see this as temporary and expect retail products like vehicle finance, credit cards and personal loans to bounce back soon. The big impact of demonetization would be shift in the market share from unorganized to organized credit. This along with low interest rates and improvement in resolution process for stress loans would benefit Financials. Our top picks are ICICIBC and YES amongst private banks; SBIN and PNB amongst PSU banks; and RBL and Equitas amongst emerging banks.

Alpesh Mehta ([email protected]); +91 22 6129 1526 Sohail Halai ([email protected]); +91 22 6129 1544 January 2017

121

December 2016 Results Preview | Sector: Financials - Banks

Exhibit 1: Expected quarterly performance (INR m) Sector CMP (INR)

Reco.

Net Interest Income Var % Var % Dec-16 YoY QoQ

Private Banks Axis Bank 454 Neutral 44,917 DCB Bank 112 Neutral 1,949 Equitas Holdings 148 Buy 2,116 Federal Bank 66 Buy 7,377 HDFC Bank 1,186 Buy 80,157 ICICI Bank 251 Buy 51,555 IDFC Bank 60 Under Review 5,143 IndusInd Bank 1,101 Buy 15,140 K otak Mahindra Bank 695 Buy 20,213 RBL Bank 345 Buy 3,293 Yes Bank 1,163 Buy 14,632 Pvt Banking Sector Aggregate 243,200 PSU Banks Bank of Baroda 148 Buy 32,781 Bank of India 108 Neutral 26,224 Canara Bank 264 Under Review 23,925 Indian Bank 225 Buy 12,238 Oriental Bank of Commerce 107 Neutral 12,437 Punjab National Bank 115 Buy 37,397 State Bank 243 Buy 143,275 Union Bank 125 Buy 22,097 PSU Banking Sector Aggregate 310,374 Financials Sector Aggregate 648,997

Operating Profit Var % Var % Dec-16 YoY QoQ

Net Profit Var % Var % Dec-16 YoY QoQ

7.9 21.5 39.7 21.9 13.4 -5.5 33.1 29.0 14.4 NA 26.5 10.1

-0.5 2.4 5.5 1.6 0.3 -1.9 3.8 3.7 1.3 8.7 1.2 0.2

42,552 1,048 786 4,598 62,637 51,278 3,912 13,066 13,713 2,393 13,985 207,575

6.8 24.4 -3.8 41.3 9.2 -21.8 0.6 23.2 13.8 NA 21.7 0.9

3.8 3.9 -37.9 -3.2 4.0 3.5 -32.8 1.9 -4.8 9.2 0.9 1.4

6,836 498 432 1,871 39,019 22,336 1,917 7,128 8,049 1,197 8,449 96,535

-68.6 20.8 0.4 15.0 16.2 -26.0 -20.8 22.7 26.8 NA 25.0 -11.7

114.2 2.6 -6.8 -7.0 12.9 -28.0 -50.6 1.2 -1.0 33.1 5.4 -2.3

21.2 -3.2 7.4 10.2 -5.0 -9.2 5.3 10.7 4.2 7.6

-4.3 -3.6 -2.0 -4.3 -5.5 -3.6 -0.8 -3.0 -2.3 -0.6

26,580 18,361 21,899 10,121 8,841 32,789 118,715 16,519 253,825 537,189

56.0 30.3 41.1 33.1 15.4 12.4 23.7 23.8 26.6 13.6

-1.2 -26.3 2.3 0.6 -7.5 -1.0 5.8 -9.2 -1.0 0.4

8,246 242 4,130 3,713 2,019 4,426 26,554 2,307 51,637 194,296

LP LP 386.1 777.8 LP 767.6 138.1 193.7 LP 77.2

49.4 -80.9 15.7 -8.3 31.7 -19.4 4.6 30.6 6.3 0.1

Demonetization: CASA flows strong... Demonetization led to strong CASA inflows for the banking sector. Of the total INR15t+, we expect 30-40% to remain with the banking sector by end of FY17. Our back-of-the-envelope calculations suggest that it will lead to ~5% QoQ increase in the CASA ratio at the industry level. QTD deposit growth was 4% and banks have utilized strong liquidity to repay high cost borrowings. If only demonetization is accounted for, QoQ deposit growth would be 7-8%; however, due to FCNR (B) deposit redemption, deposit growth would be ~4%. Strong liquidity and high CASA balance would lead to a sharp fall in cost of funds for banks in 2H, in turn supporting margins.

… but, near-term loan growth disrupted QTD loans declined 4%+, as (a) a large part of the branch bandwidth was engaged in deposit collection, (b) demand for working capital loans was weak due to economic disruption, (c) banks took a cautious approach to SME/LAP/MFI, etc, (d) investment sentiment was weak due to uncertainty, (e) FCNR (B) deposit-related loans came up for redemption, and (f) repayments from loans completing the restructuring moratorium were higher. ICICIBC and SBIN may report less than 5% YoY loan growth for the quarter. Improvement in sentiment (led by improving liquidity at the ground level) and fiscal/monetary policies hold the key for loan growth improvement. We expect retail growth to moderate for private banks; yet growth would remain healthy, as they would have captured market share from NBFCs. We expect smaller private banks to grow, as their market share is low.

January 2017

122

December 2016 Results Preview | Sector: Financials - Banks

Margins stable/decline marginally; bulk financiers to benefit We expect NII to decline 2% QoQ (but grow 4% YoY) for state-owned banks, and grow 10% YoY (stable QoQ) for private sector banks. Weak loan growth, negative carry on old currency notes (until 10th December) and excess liquidity would impact margins. With sharp reduction in the MCLR rates, yields on loans may come under pressure, negating the benefit of high interest income reversals in 3QFY16 and lower cost of funds. Increasingly, intense competition in the refinancing market and retail loans should put some pressure on blended yields. Banks’ lending rate cuts have been in sync with the 75-200bp deposit rate cuts over the past year; hence, margins could be stable or decline a little.

Profit on sale of investments to drive earnings During the quarter, bond yields declined ~30bp (65bp differential between peak and bottom during the quarter), which should benefit trading income. Volatility was high during the quarter, which led to high trading gains. SBIN’s profit on sale of investments factors in gain on life insurance stake sale during the quarter. To provide for balance sheet stress, banks may have booked trading gains on the sale of HTM security in OMO. MTM/realized losses on equity exposure (taken via SDRs) would marginally negate gains on the investment portfolio.

Asset quality stress to be elevated, but decline QoQ Factors likely to continue weighing on performance include (a) banks’ continued cleanup exercise (expect largely from RL and watch list), (b) non-fund-based exposure turning into NPAs for some stressed corporates, and (c) impact on the supply chain of stressed large corporates. Performance on the watch list will be the key thing to watch out for. SME and agriculture portfolio may see stable asset quality partially, driven by prepayment of loans and dispensation on recognition of NPL given by the RBI. We factor slippage ratio of 2.2% (2.5% in 2QFY17) and provision-to-average-assets of 1.1% (1.5% in 2QFY17) for state-owned banks and 120bp (135bp in 2QFY17) for private sector banks. Ageing of NPA will lead to higher provisioning charge during the quarter.

Core operating profits under pressure; trading gains a key to profitability Core revenue growth is likely to remain muted YoY, led by moderate balance sheet growth, stable/declining margins and moderate fee income growth. Non-core revenue is expected to be high but operating expenditure would also be high and credit cost would be elevated. Private sector banks would continue outperforming state-owned banks. Over the past year, Indian banks (mainly state-owned) have sold assets worth ~INR700b to asset reconstruction companies (ARCs). We believe writedowns and the resultant MTM provisioning for the same (as per the RBI’s guidelines) would begin over the coming 1-2 quarters. Overall profit growth is expected to be 1.1x YoY (on a lower base; 3QFY16 was impacted by AQR exercise). We expect private banks’ earnings to decline 11% YoY and state-owned banks’ earnings to be INR52b v/s loss of INR39b in 3QFY16.

January 2017

123

December 2016 Results Preview | Sector: Financials - Banks

Marginal cut in estimates; expect flat earnings QoQ Demonetization is likely to have higher impact on loan growth. While we have marginally lowered growth estimates and factored in margin reduction, better trends on profit on sale of investment are leading to just 2-3% earnings cut. We are closely looking at the activities at the ground level/management commentary for small value delinquencies (expected to hit in 1QFY18) due to demonetization. Rather than current quarter earnings, management commentary on business growth in the ensuing quarters (with more data in place) is important. Our top picks are ICICIBC and YES amongst private banks; SBIN and PNB amongst PSU banks; and RBL and Equitas amongst emerging banks. Exhibit 2: Financials - valuations

Reco

EPS (INR) PE (x) PB (x) ROE (%) FY17E FY18E FY19E FY17E FY18E FY19E FY17E FY18E FY19E FY17E FY18E FY19E

454 112 148 66 1,186 251 60 1,101 61 695 345 20 1,163

Neutral Neutral Buy Buy Buy Buy UR Buy Neutral Buy Buy Buy Buy

13.0 7.2 6.0 4.5 57.9 17.2 3.1 47.6 -21.5 26.6 12.2 3.0 74.5

23.2 8.5 6.8 5.5 69.8 18.0 4.2 59.6 12.9 32.4 14.8 3.6 95.8

46.9 10.7 8.9 7.1 84.9 21.7 5.7 74.0 15.8 41.7 20.5 4.3 119.3

34.9 15.6 24.8 14.5 20.5 14.6 19.2 23.1 -2.8 26.2 28.3 6.8 15.6 21.0

19.5 13.1 21.7 12.1 17.0 14.0 14.2 18.5 4.7 21.4 23.3 5.5 12.1 16.5

9.7 10.5 16.7 9.3 14.0 11.6 10.5 14.9 3.8 16.6 16.8 4.6 9.7 12.5

2.0 1.6 2.2 1.3 3.6 1.7 1.4 3.3 0.5 3.4 3.0 0.7 3.0 2.5

1.8 1.4 2.0 1.2 3.1 1.6 1.3 2.9 0.5 2.9 2.7 0.6 2.5 2.2

1.6 1.3 1.8 1.1 2.6 1.4 1.2 2.5 0.4 2.5 2.4 0.6 2.1 2.0

148 108 264 70 225 107 115 243 125

Buy Neutral UR Neutral Buy Neutral Buy Buy Buy

12.3 -4.0 27.2 1.5 30.4 19.3 8.5 9.8 15.6

18.8 18.5 37.9 6.4 31.9 21.3 13.2 23.3 30.4

26.2 25.1 58.4 8.6 38.5 31.0 17.8 30.9 45.7

12.0 -27.0 9.7 45.7 7.4 5.5 13.6 24.7 8.0 18.2

7.9 5.8 7.0 10.9 7.1 5.0 8.8 10.4 4.1 8.8

5.6 4.3 4.5 8.2 5.9 3.4 6.5 7.9 2.7 6.5

0.9 0.5 0.5 0.6 0.7 0.3 0.6 1.1 0.4 0.8

0.9 0.4 0.5 0.6 0.7 0.2 0.6 1.0 0.4 0.7

0.8 0.4 0.5 0.6 0.6 0.2 0.5 0.9 0.3 0.7

3.5

Dec-16

Sep-15

0.9 Dec-11

Dec-16

Sep-15

2.4

1.5 0.5

Jun-14

Dec-11

Sep-10

Jun-09

Mar-08

Dec-06 January 2017

Mar-13

0.6

LPA (x)

2.2

Sep-10

0.8

0.2

Pvt Banks Sector PB (x)

3.3

2.5

1.1

0.8

17.5 12.9 11.4 12.3 20.3 11.3 11.9 17.8 12.0 16.1 15.3 12.7 23.4 15.8

8.1 11.5 14.5 -1.7 7.5 9.5 5.6 7.4 10.6 1.4 5.8 7.3 10.4 10.1 11.2 4.8 5.1 7.1 4.8 7.0 8.8 4.7 10.1 12.2 5.2 9.5 12.9 4.2 8.3 10.5 Source: Company, MOSL

Jun-14

LPA (x)

1.4

9.7 11.7 9.7 10.4 19.5 10.0 9.5 16.7 11.1 14.5 12.3 11.7 22.6 13.6

Exhibit 4: Private sector banks— one-year forward P/BV

Jun-09

PSU Banks Sector PB (x) 1.9

2.0

5.8 11.0 11.2 9.3 18.7 10.4 7.5 15.3 -17.7 13.6 12.4 10.3 20.9 11.9

Mar-13

Exhibit 3: State-owned banks— one-year forward P/BV

Mar-08

Banks-Private Axis Bank DCB Bank Equitas Holdings Federal Bank HDFC Bank ICICI Bank IDFC Bank IndusInd Bank J&K Bank K otak Mahindra Bank RBL Bank South Indian Bank Yes Bank Private Bank Aggregate Banks-PSU Bank of Baroda Bank of India Canara Bank IDBI Bank Indian Bank Oriental Bank of Commerce Punjab National Bank State Bank Union Bank PSU Bank Aggregate UR: Under Review

CMP (INR)

Dec-06

Sector / Companies

124

January 2017

Source: MOSL, Company 24 16 15 17 21 17 47 32 49

3QFY17

65

2QFY17

53

1QFY17

PSBS

4QFY16

76

3QFY17

1QFY17

3QFY16

1QFY16

3QFY15

1QFY15

3QFY14

87.1 91.6 91.8 93.8 96.0 102.1

1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17

105.9

85.3

4QFY15

3QFY17

82.8

3QFY15

17.5 14.5

13.5

15.9

12.0

9.7

9.9

10.9

11.3

11.0

10.8 10.7

12.4 13.1

14.6

14.4 15.9

13.5

11.0 13.1

11.2

9.4

11.3

11.1

9.5

9.9

9.0

11.0 10.1

14.3 13.3

5.8

82.9

73.4

3QFY17

79.5

75.7

2QFY17

2QFY15

72.6

1QFY17

1QFY15

72.8

4QFY16

77.4

70.2

3QFY16

4QFY14

68.3

2QFY16

75.0

66.6

1QFY16

3QFY14

65.4

4QFY15

73.3

63.2

3QFY15

70.7

62.7

2QFY15

2QFY14

61.2

1QFY15

1QFY14

60.1

4QFY14

69.0

57.6

3QFY14

64.7

56.5

2QFY14

4QFY13

54.0

1QFY14

15.1 14.0

Deposits (INR t)

3QFY16

39 52 61

2QFY16

16 12 13 13 1QFY14

PSU

1QFY16

20 55 57 61

4QFY15

41 3QFY13

10.0

3QFY15

PBs

2QFY15

Exhibit 9: State-owned banks’ net slippage ratio expected to decline QoQ but remain elevated (%, annualized) 3QFY13

53.5

4QFY13

Chg YoY (%)

1QFY15

5.0

4QFY14

6.0

1QFY13

7.0

3QFY12

8.0

3.1 3.4 3.3 3.5 3.4 3.6 3.3 3.7 3.0 3.6 3.0 3.7 3.0 3.7 2.9 3.8 2.8 3.8 2.8 3.8 2.8 3.8 2.7 3.8 2.7 3.9 2.7 4.1 2.7 4.1 2.6 4.0 2.6 4.1 2.6 4.0 2.4 4.0 2.5 4.0 2.5 4.0 2.5 3.9 2.4 3.8

9.0

1QFY12

Jan-16

Jan-15

9.0

3QFY14

Net Slippage Ratio (%) 11.0

Exhibit 7: 10-year g-sec yields fell steeply (%)

2QFY14

8.4

Jan-14

Jan-13

Jan-12

Jan-11

Jan-10

Jan-09

Jan-08

Jan-07

Jan-06

50.3

3QFY13

Loans (INR t)

3.2 2.4 2.0

2.0 1.1 2.7 2.7 2.0 1.1 3.3 1.9 2.1 1.1 1.9 2.1 2.6 1.9 2.0 2.5

Exhibit 5: Loan growth to moderate in 3Q

1QFY14

3QFY12 4QFY12 1QFY13 2QFY13 3QFY13 4QFY13 1QFY14 2QFY14 3QFY14 4QFY14 1QFY15 2QFY15 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17E

December 2016 Results Preview | Sector: Financials - Banks

Exhibit 6: Deposit growth to pick up sharply Chg YoY (%)

Exhibit 8: NIMs expected to decline sequentially (%) Private

6.42

Exhibit 10: Provisions to PPoP (%) to remain elevated in case of state-owned banks 173

131 80 75 72

35

Source: MOSL, Company

125

December 2016 Results Preview | Sector: Financials - Banks

Exhibit 11: Relative performance— 3 months (%) Sensex Index

102

Exhibit 12: Relative performance— 1-year (%)

MOSL Financials Index

99

Sensex Index

125

MOSL Financials Index

110

96 95

93

January 2017

Dec-16

Nov-16

Oct-16

Sep-16

Aug-16

Jul-16

Jun-16

May-16

Apr-16

Mar-16

Feb-16

Jan-16

Dec-16

Nov-16

Oct-16

Sep-16

Source: Bloomberg, MOSL

Dec-15

80

90

Source: Bloomberg, MOSL

126

December 2016 Preview ||Sector: Financials --Banks December 2015 Results Preview | Sector: Financials December 2016 Results Results Preview Sector: Financials Banks

Bloomberg

AXSB IN

Equity Shares (m)

2382.8

M. Cap. (INR b)/(USD b)

1081 / 16

52-Week Range (INR)

638 / 367

1,6,12 Rel Perf. (%)



Y/E March

2016 2017E

2018E

2019E

NII

168.3

180.6

212.1

256.7

OP

161.0

168.4

189.6

222.0

NP

82.2

30.9

55.4

111.8

NIM (%)

3.8

3.6

3.6

3.6

EPS (INR)

34.5

13.0

23.2

46.9

EPS Gr. (%)

11.2

-62.4

79.1

101.9

BV/Sh. (INR)

216.8

229.8

248.9

287.6

ABV/Sh. (INR)

209.9

202.3

226.5

269.8

RoE (%)

17.1

5.8

9.7

17.5

RoA (%)

1.7

0.5

0.8

1.4

15.0

0.0

17.6

17.6

Valuations P/E(X)



-3 / -14 / -1

Financial Snapshot (INR b)

Payout (%)

CMP: INR454

13.1

34.9

19.5

9.7

P/BV (X)

2.1

2.0

1.8

1.6

P/ABV (X)

2.2

2.2

2.0

1.7

Div. Yield (%)

1.1

0.0

0.8

1.6





Axis Bank

TP: INR519 (+14%)

Neutral

In line with the industry trend, we expect loan growth to moderate to ~14% YoY. Deposit growth is likely to be higher at ~21% YoY, led by strong CASA inflows. CD ratio would fall from 93% in 2QFY17 to 88%. Sequentially, NIM is likely to contract ~15bp to 3.6% due to (a) lower incremental spreads, (b) RBI’s temporary incremental CRR hike, and (c) continued high stress addition. Though incremental cost of funds would have fallen significantly, this would only partially compensate for the negative impact. AXSB had created a stressed asset watch list of INR252.5b (both fund-based and non-fund based) in 4QFY16. The management has guided for materially higher slippages from the watch list, above the previous 60% guidance. As at the end of 2QFY17, the watch list stood at INR137.9b. We continue to expect relatively high proportion of slippages in FY17, leading to higher credit costs. High provisions may be partially compensated by strong trading gains. AXSB trades at 1.8x FY18E BV and 19.5x FY18E EPS. Neutral.

Key issues to watch for  Quantum of slippages from stressed asset watch list.  Quantum of loans rescheduled under the 5:25, SDR and S4A schemes.

Quarterly Performance Net Interest Income % Change (Y-o-Y) Other Income Net Income Operating Expenses Operating Profit % Change (Y-o-Y) Other Provisions Profit before Tax Tax Provisions Net Profit % Change (Y-o-Y) Operating Parameters NIM (Reported,%) NIM (Cal, %) Deposit Growth (%) Loan Growth (%) CD Ratio (%) Asset Quality OSRL (INR b) OSRL (%) Gross NPA (INR b) Gross NPA (on cust. assets, %) E: MOSL Estimates

January 2017

(INR Million) 1Q 40,562 22.5 22,983 63,545 22,624 40,921 41.3 11,218 29,703 9,919 19,784 18.7

FY16 2Q 40,621 15.2 20,414 61,035 24,755 36,280 14.7 7,072 29,208 10,051 19,156 18.9

3Q 41,621 15.9 23,378 64,998 25,148 39,851 20.2 7,126 32,725 10,972 21,753 14.5

4Q 45,526 19.8 26,940 72,466 28,481 43,985 9.6 11,683 32,302 10,759 21,543 -1.2

1Q 45,169 11.4 27,383 72,552 27,858 44,694 9.2 21,172 23,522 7,967 15,555 -21.4

FY17 2Q 45,139 11.1 25,397 70,535 29,534 41,002 13.0 36,227 4,774 1,584 3,191 -83.3

3.8 3.9 13.2 23.5 92.5

3.9 3.9 14.2 23.1 92.0

3.8 3.8 16.2 21.0 93.2

4.0 4.0 11.0 20.5 94.6

3.8 3.8 16.3 21.2 96.4

3.6 3.7 17.3 18.5 92.9

85.2 3.0 42.5 1.4

84.3 2.8 44.5 1.4

77.5 2.5 57.2 1.68

80.7 2.4 60.9 1.67

73.6 2.1 95.5 2.5

67.0 1.9 163.8 4.2

FY16

FY17E

3QE 44,917 7.9 30,085 75,002 32,450 42,552 6.8 32,349 10,203 3,367 6,836 -68.6

4QE 45,380 -0.3 28,196 73,576 33,388 40,188 -8.6 32,177 8,011 2,664 5,348 -75.2

168,330 18.3 93,715 262,044 101,008 161,036 20.3 37,099 123,938 41,701 82,237 11.8

180,604 7.3 111,061 291,665 123,230 168,435 4.6 121,925 46,510 15,581 30,929 -62.4

3.6 20.8 14.2 88.1

3.5 20.0 12.0 88.3

3.9 3.8 11.0 20.5 94.6

3.6 20.0 12.0 88.3

226.7 5.8

80.7 2.4 60.9 1.7

226.7 5.8

196.1 5.3

127

December 2016 Results Preview | Sector: Financials - Banks

Bloomberg

BOB IN

Equity Shares (m)

2310.5

M. Cap. (INR b)/(USD b)

342 / 5

52-Week Range (INR) 1,6,12 Rel Perf. (%)

CMP: INR148 

179 / 109 -10 / -5 / -6

Financial Snapshot (INR b) Y/E March 2016 2017E 2018E 2019E NII 127.4 134.6 154.5 186.9 OP 88.2 107.8 119.5 140.7 NP -54.0 28.4 43.5 60.6 NIM (%) 2.0 2.1 2.3 2.4 EPS (INR) -23.4 12.3 18.8 26.2 EPS Gr. (%) -252.4 NM 52.9 39.3 BV/Sh. (INR) 146 155.9 170.3 190.4 ABV/Sh. (INR) 92 101.2 127.7 159.6 RoE (%) -15.3 8.1 11.5 14.5 RoA (%) -0.8 0.4 0.6 0.7 Div. Payout (%) 0.0 23.2 23.2 23.2 Valuations P/E(X) -6.3 12.0 7.9 5.6 P/BV (X) 1.0 0.9 0.9 0.8 P/ABV (X) 1.6 1.5 1.2 0.9 Div. Yield (%) 0.0 1.7 2.5 3.5













Bank of Baroda

TP: INR223 (+51%)

We expect balance sheet consolidation to continue, with a YoY decline in loans in absolute terms. Portfolio rebalancing towards granular loans and SEB loans conversion could weigh on growth. While deposit intake has been muted in the past few quarters, this quarter will see a strong revival in deposit growth. We expect margins to decline sequentially to 2.1%, led by fall in C-D ratio. Bulk of the asset quality stress has been taken over the last few quarters, and we expect only a marginal deterioration in asset quality. We expect only a marginal increase in GNPAs in 3QFY17. Fee income would remain muted. However, higher share of noncore income should support earnings. PAT should increase ~50% sequentially; however, return ratios will still remain sub-optimal. The stock trades at 7.9x FY18E EPS and 0.9x FY18E BV. Buy.

Key issues to watch for  Stress addition, mainly from international book.  Guidance on loan growth, margins and operating expenses.

Quarterly Performance

Net Interest Income % Change (YoY) Other Income Net Income Operating Expenses Operating Profit % Change (YoY) Other Provisions Profit before Tax Tax Provisions Net Profit % Change (YoY) Operating Parameters NIM (Reported, %) NIM (Calculated, %) Deposit Growth (%) Loan Growth (%) CD Ratio (%) Asset Quality OSRL (INR B) OSRL (%) Gross NPA (INR B) Gross NPA (%) E: MOSL Estimates

January 2017

1Q 34,596 3.9 9,672 44,269 22,249 22,020 -11.2 5,997 16,022 5,501 10,522 -22.7

Buy

FY16 2Q 3Q 32,445 27,053 -4.6 -17.7 11,440 11,129 43,885 38,183 20,515 21,141 23,370 17,041 -2.7 -27.1 18,917 61,646 4,453 -44,604 3,208 -11,184 1,245 -33,420 -88.7 -1,100.7

4Q 33,304 5.0 17,747 51,051 25,326 25,725 -4.5 68,577 -42,852 -10,551 -32,301 -639.8

1Q 33,711 -2.6 14,444 48,155 21,460 26,695 21.2 20,041 6,654 2,418 4,236 -59.7

FY17 2Q 34,261 5.6 15,614 49,875 22,973 26,902 15.1 17,958 8,944 3,422 5,521 343.5

2.3 2.1 7.5 7.0 68.9

2.1 2.0 8.0 7.6 67.7

1.7 1.7 4.4 -2.4 65.2

2.2 2.1 -7.0 -10.3 66.9

2.2 2.2 -5.2 -11.2 64.5

2.3 2.2 -7.3 -14.6 62.4

255 6.3 173 4.1

229 5.5 237 5.6

171 4.5 389 9.7

137 3.6 405 10.0

142 3.9 430 11.2

139 3.9 429 11.4

(INR Million) FY16 FY17E 3QE 32,781 21.2 18,038 50,819 24,239 26,580 56.0 14,800 11,780 3,534 8,246 -124.7

4QE 33,855 1.7 19,428 53,283 25,648 27,635 7.4 12,569 15,066 4,632 10,434 -132.3

127,398 -3.4 49,989 177,387 89,231 88,156 -11.1 155,137 -66,981 -13,025 -53,955 -258.8

134,608 5.7 67,524 202,132 94,320 107,812 22.3 65,368 42,444 14,006 28,437 -152.7

2.1 2.0 -8.8 58.3

2.2 8.0 -5.0 58.8

2.1 2.0 -7.0 -10.3 66.9

1.9 8.0 -5.0 58.8

435 11.2

137 3.6 405 10.0

435 11.2

434 11.6

128

December 2016 Results Preview | Sector: Financials - Banks

Bank of India Bloomberg

BOI IN

Equity Shares (m)

1055.4

M. Cap. (INR b)/(USD b)

114 / 2

52-Week Range (INR) 1,6,12 Rel Perf. (%)

January 2017

1Q 29,127 8.4 8,406 37,533 20,490 17,042 -17.3 15,147 1,895 598 1,297 -83.9

Neutral

Continued asset quality strain and capital conservation efforts would keep loan growth below the industry average – expect 4% decline on a YoY basis, although deposit growth will pick up marginally. We expect NIM to decline marginally QoQ to ~1.9%



Non-interest income is likely to grow ~70% YoY, led by higher noncore income. Fee income is expected to remain muted.



We expect operating profit to decline 26% QoQ (but grow 30% YoY) as a result of lower NII growth and one-off gains booked from stake sale in the previous quarter. Continued deterioration in asset quality would keep provisioning elevated.

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BOI trades at 0.4x FY18E BV and 5.8x FY18E EPS. Maintain Neutral.

-9 / 1 / -10

Quarterly Performance

TP: INR125 (+14)



129 / 79

Financial Snapshot (INR b) Y/E March 2016 2017E 2018E 2019E NII 117.2 107.6 136.1 154.9 OP 60.4 80.1 94.7 100.8 NP -60.9 -4.2 19.5 26.5 NIM (%) 2.1 1.9 2.2 2.2 EPS (INR) -74.5 -4.0 18.5 25.1 EPS Gr. (%) NM NM -562.6 35.7 ROE (%) -24.5 -1.7 7.5 9.5 ROA (%) -1.0 -0.1 0.3 0.3 BV/Sh. (INR) 283 239 254 273 ABV/Sh. (INR) 61 86 129 184 Div. Payout (%) 0.0 0.0 23.2 23.2 Valuations P/E(X) -1.4 -27.0 5.8 4.3 P/BV (X) 0.38 0.45 0.42 0.39 P/ABV (X) 1.77 1.26 0.84 0.59 Div. Yield (%) 0.0 0.0 3.4 4.7

Net Interest Income % Change (Y-o-Y) Other Income Net Income Operating Expenses Operating Profit % Change (Y-o-Y) Other Provisions Profit before Tax Tax Provisions Net Profit % Change (Y-o-Y) Operating Parameters NIM (Reported, %) NIM (Cal, %) Deposit Growth (%) Loan Growth (%) CD Ratio (%) Asset Quality OSRL (INR b) OSRL (%) Gross NPA (INR b) Gross NPA (%) E: MOSL Estimates

CMP: INR108

Key issues to watch for  Stress addition trends and outlook for FY17.  Upgrade/recovery trends; management is targeting INR175b in FY17 v/s INR85.5b in FY16.  Quantum of loans rescheduled under the 5:25 scheme.  Outlook on balance sheet growth and further capital infusion.  Update on asset monetization plan to increase Tier I ratio.

FY16 2Q 3Q 4Q 30,197 27,080 31,872 -0.4 -2.6 12.0 7,781 10,473 8,836 37,978 37,553 40,708 23,396 23,463 26,066 14,583 14,090 14,642 -31.7 -24.5 2.6 32,374 36,039 54,704 -17,791 -21,950 -40,062 -6,529 -6,894 -4,191 -11,262 -15,056 -35,871 -243.3 -968.4 NM

1Q 27,752 -4.7 12,384 40,136 23,597 16,539 -3.0 27,702 -11,163 -3,750 -7,414 NM

FY17 2Q 3QE 27,197 26,224 -9.9 -3.2 20,106 19,174 47,304 45,398 22,375 27,037 24,928 18,361 70.9 30.3 22,962 18,000 1,966 361 698 119 1,268 242 NM NM

2.1 2.1 1.5 3.5 77.7

2.3 2.2 1.3 -1.1 75.2

2.0 1.9 -0.3 -3.2 75.1

2.1 2.3 -3.6 -7.2 74.3

2.2 2.0 -2.0 -1.9 77.8

2.2 2.0 -3.8 -1.8 76.8

193.9 4.9 268.9 6.8

193.1 4.9 298.9 7.6

172.7 4.3 365.2 9.2

128.7 3.4 498.8 13.1

119.5 3.1 518.7 13.4

120.1 3.1 522.6 13.5

1.9 0.3 -4.3 71.7

524.1 13.8

(INR Million)

FY16

FY17E

4QE 26,472 -16.9 19,723 46,195 25,899 20,297 38.6 17,757 2,540 855 1,685 NM

117,246 3.0 36,525 153,772 93,415 60,356 -19.4 138,264 -77,908 -17,016 -60,892 NM

107,646 -8.2 71,388 179,034 98,908 80,125 32.8 86,421 -6,296 -2,078 -4,218 NM

1.9 2.0 5.2 76.6

2.1 2.1 -3.6 -7.2 74.3

2.0 2.0 5.2 76.6

523.9 13.1

128.7 3.4 498.8 13.1

523.9 13.1

129

December 2016 Results Preview | Sector: Financials - Banks

Canara Bank Bloomberg Equity Shares (m) M. Cap. (INR b)/(USD b) 52-Week Range (INR) 1,6,12 Rel Perf. (%)

CMP: INR264

CBK IN 543.0 143 / 2



We expect slippages to moderate (2% of loans), however, credit cost is likely to stay elevated (due to ageing of the portfolio) and we pencil in credit costs at ~190bp for the quarter.



Low balance sheet growth and subdued margins (-8bp QoQ) would mar core PPoP growth (-23% YoY).



Loan growth is expected to decline 4% YoY, while deposits are expected to increase 4% YoY.



We expect CBK ’s fee income growth to be muted. However, trading gains are expected to come in strong, leading to 75% YoY growth in non-interest income.

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Non-core income growth is expected to provide cushion to provisions; we expect PBT to grow 13%, sequentially. The banking business trades at 0.5x FY18E BV and 7x FY18E EPS. Under Review.

339 / 156 -16 / 19 / 9

Financial Snapshot (INR b) Y/E March 2016 2017E 2018E 2019E NII 97.6 96.6 102.3 120.1 OP 71.5 87.1 96.1 115.8 NP -28.1 14.8 20.6 31.7 NIM (%) 1.9 1.8 1.8 1.9 EPS (INR) -51.8 27.2 37.9 58.4 EPS Gr. (%) NM NM 39.3 54.3 BV/Sh. (INR) 477 499 528 573 ABV/Sh. (INR) 227 242 304 398 RoE (%) -10.8 5.6 7.4 10.6 RoA (%) -0.5 0.3 0.3 0.4 Div. Payout (%) 0.0 20.9 23.2 23.2 Valuations P/E (x) -5.1 9.7 7.0 4.5 P/BV (x) 0.55 0.53 0.50 0.46 P/ABV (x) 1.16 1.09 0.87 0.66 Div. Yield (%) 0.0 1.9 2.9 4.4

Under Review

Key issues to watch for  Quantum of loans rescheduled under the 5:25, SDR and S4A schemes.  Outlook on balance sheet growth.

Quarterly Performance

Net Interest Income % Change (Y-o-Y) Other Income Net Income Operating Expenses Operating Profit % Change (Y-o-Y) Other Provisions Profit before Tax Tax Provisions Net Profit % Change (Y-o-Y) Operating Parameters NIM (Rep, %) NIM (Cal, %) Deposit Growth (%) Loan Growth (%) CD Ratio (%) Asset Quality OSRL (INR b) OSRL (%) Gross NPA (INR b) Gross NPA (%) E: MOSL Estimates

January 2017

1Q 25,165 3.6 11,130 36,295 16,259 20,036 11.6 13,597 6,438 1,650 4,788 -40.7

FY16 2Q 26,465 11.8 12,105 38,570 19,129 19,441 19.6 12,123 7,318 2,029 5,289 -15.6

3Q 22,266 -6.5 11,686 33,952 18,427 15,524 -13.6 14,289 1,236 386 850 -87.0

4Q 23,738 -4.5 13,832 37,570 21,104 16,466 -5.0 63,315 -46,850 -7,795 -39,055 -737.2

1Q 23,074 -8.3 15,847 38,921 20,732 18,189 -9.2 14,929 3,260 970 2,290 -52.2

FY17 2Q 24,424 -7.7 17,818 42,241 20,834 21,408 10.1 15,857 5,550 1,981 3,569 -32.5

2.2 2.0 10.0 7.0 68.7

2.2 2.1 5.2 3.9 66.6

2.2 1.7 6.1 6.3 67.7

2.2 1.9 1.3 -1.6 67.7

2.2 1.9 -1.4 -0.9 69.0

2.2 2.0 -0.2 1.3 67.5

230.4 7.1 130.8 4.0

228.9 7.1 140.2 4.3

206.1 6.2 198.1 5.8

130.6 4.0 316.4 9.4

133.8 4.2 323.3 9.7

131.5 4.0 333.2 9.8

(INR Million) FY16 FY17E 3QE 23,925 7.4 20,455 44,380 22,481 21,899 41.1 15,825 6,074 1,944 4,130 386.1 1.9 3.7 -4.4 62.4

341.7 10.4

4QE 25,129 97,634 96,551 5.9 1.0 -1.1 21,196 48,752 75,316 46,325 146,386 171,867 20,756 74,919 84,803 25,569 71,467 87,065 55.3 2.8 21.8 18,406 103,324 65,018 7,163 -31,858 22,047 2,381 -3,730 7,276 4,783 -28,128 14,772 -112.2 -204.1 -152.5 1.9 9.0 4.0 64.6

2.2 1.9 1.3 -1.6 67.7

1.9 9.0 4.0 64.6

346.7 9.9

130.6 4.0 316.4 9.4

346.7 9.9

130

December 2016 Results Preview | Sector: Financials - Banks

Bloomberg

DCBB IN

Equity Shares (m)

284.4

M. Cap. (INR b)/(USD b)

32 / 0

52-Week Range (INR) 1,6,12 Rel Perf. (%)

133 / 69 2 / 11 / 36

Financial Snapshot (INR b) Y/E MARCH 2016 2017E 2018E 2019E NII 6.2 7.7 9.3 11.5 OP 3.5 4.1 4.7 5.9 NP 1.9 2.0 2.4 3.0 NIM (%) 3.9 3.9 3.8 3.8 EPS (INR) 6.8 7.2 8.5 10.7 EPS Gr. (%) 0.9 5.0 18.7 25.1 BV/Sh. (INR) 61.6 68.8 77.3 88.0 ABV/Sh. (INR) 59.2 65.9 74.2 84.6 RoE (%) 11.8 11.0 11.7 12.9 RoA (%) 1.1 1.0 0.9 0.9 Valuations P/E (x) 16.4 15.6 13.1 10.5 P/BV (x) 1.8 1.6 1.4 1.3 P/ABV (X) 1.9 1.7 1.5 1.3

DCB Bank

CMP: INR112

TP: INR128 (+14%)

Neutral

Loan growth (26% YoY) and deposit growth (32% YoY) would be significantly above industry average.  We expect NII to grow 22% YoY, led by strong loan growth, although margins are expected to contract ~20bp QoQ.  Non-interest income is expected to grow by ~62% YoY, led by healthy trading gains. Overall, we expect revenue growth to remain strong at 30% YoY and PPP growth to be 24% YoY. We model opex growth of 35% YoY, led by branch expansion strategy and demonetization-related manpower and ATM costs.  Credit costs may be elevated this quarter (estimated at 82bp) owing to stress in SME segment. We expect PBT/PAT growth of 18%/21% YoY.  DCBB trades at 1.4x FY18E BV and 13.1x FY18E EPS. Maintain Neutral. Key issues to watch for  Management commentary on slippages in SME segment.  Update and commentary on balance sheet growth strategy.  CASA ratio and NIM performance. 

Quarterly Performance

Net Interest Income % Change (Y-o-Y) Other Income Net Income Operating Expenses Operating Profit % Change (Y-o-Y) Other Provisions Profit before Tax Tax Provisions Net Profit % Change (Y-o-Y) Operating Parameters NIM (Reported,%) NIM (Cal, %) Deposit Growth (%) Loan Growth (%) Tax Rate (%) Asset Quality Gross NPA (INR B) Gross NPA (%) E: MOSL Estimates

January 2017

(INR Million) 1Q 1,404 1.0 631 2,035 1,138 897 10.4 180 716 248 469 5.0

FY16 2Q 3Q 1,500 1,605 27.4 31.6 487 472 1,987 2,077 1,206 1,234 781 843 30.5 23.3 217 210 564 633 195 221 369 412 -10.1 -3.1

4Q 1,687 30.1 615 2,301 1,331 970 42.6 273 698 2 695 10.4

1Q 1,770 26.1 601 2,372 1,444 927 3.4 205 722 252 470 0.3

FY17 2Q 1,903 26.9 616 2,519 1,511 1,009 29.2 265 744 259 485 31.3

FY16

FY17E

3QE 1,949 21.5 765 2,714 1,666 1,048 24.4 300 748 251 498 20.8

4QE 2,079 23.3 722 2,801 1,663 1,138 17.3 257 881 291 590 -15.2

6,195 21.9 2,205 8,400 4,909 3,490 25.8 879 2,611 666 1,945 1.7

7,702 24.3 2,704 10,406 6,284 4,122 18.1 1,027 3,095 1,052 2,043 5.0

3.8 3.6 25.8 25.7 34.6

3.8 3.8 24.4 27.2 34.6

4.0 3.9 18.9 23.7 34.9

3.9 3.9 18.4 23.5 0.3

4.1 3.8 18.2 27.9 34.9

4.0 3.8 30.4 29.1 34.8

3.6 31.8 25.5 33.5

3.7 28.0 20.0 33.0

3.9 3.8 18.4 23.5 25.5

3.8 28.0 20.0 34.0

2.1 2.0

2.2 2.0

2.3 2.0

2.0 1.5

2.3 1.7

2.6 1.8

2.7 1.8

2.7 1.7

2.0 1.5

2.7 1.7

131

December 2016 Results Preview | Sector: Financials - Banks

Bloomberg

EQUITAS IN

Equity Shares (m)

335.7

M. Cap. (INR b)/(USD b)

50 / 1

52-Week Range (INR)

CMP: INR148

Y/E March 2016 2017E 2018E 2019E NII 5.1 8.4 11.1 14.4 OP 3.2 4.1 4.8 6.3 NP 1.7 2.0 2.3 3.0 NIM (%) 11.6 12.4 10.2 9.1 EPS (INR) 6.2 6.0 6.8 8.9 EPS Gr. (%) 56.1 -3.2 14.1 29.9 BV/Sh. (INR) 50 67 74 83 ABV/Sh. (INR) 49 66 72 79 RoE (%) 13.3 11.2 9.7 11.4 RoA (%) 3.0 2.3 1.7 1.5 Div. Payout (%) 0.0 0.0 0.0 0.0 Valuations P/E(X) 24.0 24.8 21.7 16.7 P/BV (X) 3.0 2.2 2.0 1.8 P/ABV (X) 3.1 2.3 2.1 1.9 Div. Yield (%) 0.0 0.0 0.0 0.0



Non-interest income would be ~INR300m (+20%YoY).



Operating expenses are expected to grow significantly by ~70% YoY (v/s 37% YoY growth in total income), driven by greater employee and other expenses as a result of increased focus on collections during the past few months.



We expect asset quality to remain largely stable, with the company witnessing relatively strong collection efficiency. We factor in provisions of INR150m during the quarter. The stock trades at 2x FY18E BV. Maintain Buy.

Key issues to watch for  Update on the transition progress.  Commentary on growth and asset quality in MFI.

Quarterly Performance Net Interest Income % Change (Y-o-Y) Other Income Net Income Operating Expenses Operating Profit % Change (Y-o-Y) Other Provisions Profit before Tax Tax Provisions Net Profit % Change (Y-o-Y) E: MOSL Estimates

January 2017

Buy

We expect NII growth of 40% YoY, led by healthy loan growth of 24%+ YoY and margin expansion. Margins (calculated) would improve ~13bp QoQ, led by sharp fall in cost of funds owing to strong inflow of deposits.

-/-/-

Financial Snapshot (INR b)

TP: 240 (+62%)



206 / 134

1,6,12 Rel Perf. (%)

Equitas Holdings

(INR Million) 1Q 1,256

FY16 2Q 3Q 1,428 1,515

4Q 1,629

237 1,493 745 748

178 1,607 851 755

250 1,765 948 817

296 1,925 1,050 875

165 583 207 376

138 617 218 399

143 674 243 431

146 729 261 468

1Q 2,043 62.7 230 2,273 1,134 1,139 52.3 176 963 352 612 62.6

FY17E 2Q 3QE 2,006 2,116 40.4 39.7 667 300 2,673 2,416 1,408 1,630 1,265 786 67.5 -3.8 528 150 737 636 273 203 464 432 16.1 0.4

4QE 2,232 37.1 522 2,754 1,865 889 1.6 129 760 255 505 7.9

FY16

FY17E

5,071

8,397 65.6 1,719 10,115 6,037 4,078 27.8 983 3,095 1,083 2,012 20.4

1,718 6,789 3,597 3,192 591 2,601 930 1,671

132

December 2016 Results Preview | Sector: Financials - Banks

Bloomberg

FB IN

Equity Shares (m)

1719.0

M. Cap. (INR b)/(USD b)

113 / 2

52-Week Range (INR)

86 / 41

1,6,12 Rel Perf. (%)

CMP: INR66

TP: INR106 (+60%)

We expect 21% YoY (-1% QoQ) loan growth, aided by greater focus on corporate credit growth. Traction in SME, agriculture and retail loans would be maintained. We expect NIM to contract marginally by 7bp QoQ (but expand 13bp YoY).



We build in higher opex growth of 20% YoY, led by demonetizationrelated expenses.



Non-interest income would grow by 50%+ YoY, led by strong trading gains, leading to strong PPoP growth of 41% YoY.



We expect slippages to increase marginally owing to stress in SME book. We expect trading gains to be utilized for shoring up the coverage ratio. Accordingly, we factor in higher credit cost.



PBT/PAT is expected to grow 14/15% YoY. We maintain Buy with a target price of INR106. FB trades at 1.2x FY18E BV and 12.1x FY18E EPS.

Key issues to watch for  Outlook on asset quality.  Strategy on balance sheet growth.

Quarterly Performance Net Interest Income % Change (YoY) Other Income Net Income Operating Expenses Operating Profit % Change (YoY) Other Provisions Profit before Tax Tax Provisions Net Profit % Change (YoY) Operating Parameters NIM (Cal, %) Deposit Growth (%) Loan Growth (%) CD Ratio (%) Asset Quality Gross NPA (INR b) Gross NPA (%) E: MOSL Estimates

January 2017

Buy



-5 / 11 / 14

Financial Snapshot (INR b) Y/E Mar 2016 2017E 2018E 2019E NII 25.0 29.3 33.4 41.6 OP 14.2 18.7 21.0 27.0 NP 4.8 7.8 9.4 12.2 NIM (%) 3.2 3.2 3.1 3.1 EPS (INR) 2.8 4.5 5.5 7.1 EPS Gr. (%) -52.9 63.5 20.6 29.7 BV/Sh. (INR) 47 51 55 60 ABV/Sh. (INR) 43 47 51 57 ROE (%) 6.0 9.3 10.4 12.3 ROA (%) 0.5 0.8 0.8 0.8 Payout (%) 29.3 23.2 23.2 23.2 Valuations P/E(X) 23.8 14.5 12.1 9.3 P/BV (X) 1.4 1.3 1.2 1.1 P/ABV (X) 1.5 1.4 1.3 1.2 Div. Yield (%) 1.1 1.4 1.7 2.2

Federal Bank

(INR Million) 1Q 6,048 7.2 1,939 7,987 4,315 3,672 4.5 1,531 2,141 727 1,414 -35.8

FY16 2Q 6,083 0.4 1,823 7,906 4,540 3,366 -17.9 873 2,493 880 1,613 -32.9

3Q 6,052 3.1 1,833 7,885 4,630 3,255 -18.1 751 2,504 877 1,627 -38.5

4Q 6,859 10.1 2,269 9,128 5,183 3,945 -15.9 3,886 59 -44 103 -96.3

1Q 6,927 14.5 2,370 9,297 5,039 4,259 16.0 1,685 2,574 901 1,673 18.3

FY17 2Q 3QE 7,262 7,377 19.4 21.9 2,616 2,777 9,878 10,155 5,128 5,556 4,750 4,598 41.1 41.3 1,684 1,750 3,066 2,848 1,053 977 2,013 1,871 24.8 15.0

FY16

FY17E

4QE 7,699 12.2 2,978 10,677 5,542 5,135 30.2 1,736 3,399 1,170 2,229 2,072.2

25,042 5.2 7,864 32,906 18,668 14,238 -12.5 7,041 7,197 2,440 4,757 -52.7

29,265 16.9 10,742 40,007 21,265 18,742 31.6 6,855 11,887 4,101 7,786 63.7

3.2 16.7 10.1 68.7

3.1 14.3 5.0 68.9

3.1 14.1 9.8 70.5

3.4 11.8 13.3 73.4

3.3 12.5 19.3 72.9

3.3 17.0 27.2 75.0

3.2 21.2 21.4 70.7

3.2 19.0 20.0 74.0

3.2 11.8 13.3 73.4

3.3 19.0 20.0 74.0

13.0 2.6

15.0 2.9

16.8 3.2

16.7 2.8

17.5 2.9

18.2 2.8

19.1 3.0

20.7 3.0

16.7 2.8

20.7 3.0

133

December 2016 Results Preview | Sector: Financials - Banks

HDFC Bank Bloomberg Equity Shares (m) M. Cap. (INR b)/(USD b) 52-Week Range (INR) 1,6,12 Rel Perf. (%)

HDFCB IN 2528.2 2999 / 44

CMP: INR1,186 

1318 / 929 -2 / 4 / 7

Financial Snapshot (INR b) Y/E MARCH 2016 2017E 2018E 2019E NII 275.9 321.5 385.3 471.9 OP 213.6 247.6 299.8 373.1 NP 123.0 146.5 176.6 214.7 NIM (%) 4.7 4.6 4.6 4.5 EPS (INR) 48.6 57.9 69.8 84.9 EPS Gr. (%) 19.3 19.1 20.5 21.6 BV/Sh. (INR) 287 331.8 385.3 450.5 ABV/Sh. (INR) 284 325.9 378.0 436.9 RoE (%) 18.3 18.7 19.5 20.3 RoA (%) 1.9 1.9 1.9 1.9 Payout (%) 22.9 23.4 23.4 23.4 Valuations P/E(X) 24.4 20.5 17.0 14.0 P/BV (X) 4.1 3.6 3.1 2.6 P/ABV (X) 4.2 3.6 3.1 2.7 Div. Yield (%) 0.8 1.0 1.2 1.4









TP: INR1,510 (+27%)

We expect loan growth to be ~15% YoY due to constrained growth strategy post demonetization and FCNR (B) linked loans repayments; however it will still remain ~2x the system growth. Fee income growth would continue to lag loan growth in the near term; however, trading gains should compensate. Computed NIM is likely to decline 15bp QoQ owing to controlled loan growth amidst strong deposit inflows. Opex growth is expected to be ~16% YoY. Moderation in core PPP growth would lead to 16% YoY PAT growth, lower than the trend rate of 20%. Reversal of contingency provisions may lead to 20% YoY growth – not factored in our estimates. GNPA would remain stable QoQ at ~1.1 %. HDFCB trades at 3.1x FY18E BV and 17x FY18E EPS. Comfort on earnings (~20% CAGR over FY16-19) remains high. Maintain Buy.

Key issues to watch for  Performance in retail loan/SME portfolio— especially in segments like CV/CE.  Trends in digital banking/payment industry and various initiatives by the bank.  Overall B/S growth outlook and economic recovery.

Quarterly Performance

(INR Million) 1Q 63,888 23.5 24,619 88,507 40,008 48,499 26.2 7,280 41,219 14,262 26,957 20.7

FY16 2Q 66,809 21.2 25,518 92,327 41,898 50,429 24.2 6,813 43,616 14,922 28,695 20.5

3Q 70,685 24.0 28,722 99,407 42,048 57,359 20.0 6,539 50,820 17,251 33,568 20.1

4Q 74,533 24.0 28,659 103,192 45,843 57,349 21.5 6,625 50,725 16,982 33,742 20.2

Net Interest Income % Change (Y-o-Y) Other Income Net Income Operating Expenses Operating Profit % Change (Y-o-Y) Other Provisions Profit before Tax Tax Provisions Net Profit % Change (Y-o-Y) Operating Parameters NIM (Reported,%)* 4.3 4.2 4.3 4.3 NIM (Cal, %)# 4.7 4.6 4.6 4.7 Deposit Growth (%) 30.1 29.7 26.5 21.2 Loan Growth (%) 22.4 27.9 25.7 27.1 CD Ratio (%) 78.9 82.6 83.3 85.0 Asset Quality OSRL (INR B) 3.8 4.2 4.4 4.6 OSRL (%) 0.1 0.1 0.1 0.1 Gross NPA (INR B) 38.5 38.3 42.6 43.9 Gross NPA (%) 1.0 0.9 1.0 0.9 E: MOSL Estimates; * Reported on total assets; # Cal. on interest earning assets

January 2017

Buy

1Q 77,814 21.8 28,066 105,881 47,689 58,192 20.0 8,667 49,525 17,136 32,389 20.2

FY17E 2Q 3Q 79,936 80,157 19.6 13.4 29,010 31,062 108,945 111,219 48,700 48,583 60,246 62,637 19.5 9.2 7,490 4,400 52,756 58,237 18,202 19,218 34,553 39,019 20.4 16.2

4.4 4.7 18.5 23.2 82.0

4.2 4.5 16.7 18.1 83.6

4.7 0.1 49.2 1.0

4.9 0.1 50.7 1.0

4.4 20.8 15.6 79.7

56.9 1.1

FY16

FY17E

4Q 83,570 12.1 34,926 118,496 51,987 66,509 16.0 6,267 60,242 19,729 40,512 20.1

275,915 23.2 107,517 383,432 169,797 213,635 22.7 27,256 186,379 63,417 122,962 20.4

321,478 16.5 123,064 444,542 196,958 247,584 15.9 26,825 220,759 74,285 146,473 19.1

4.5 16.0 16.0 85.0

4.3 4.7 21.2 27.1 85.0

4.5 16.0 16.0 85.0

58.9 1.1

4.6 0.1 43.9 0.9

0.0 0.0 58.9 1.1

134

December 2016 Results Preview | Sector: Financials - Banks

Bloomberg Equity Shares (m)

ICICIBC IN 5813.3

CMP: INR251 

M. Cap. (INR b)/(USD b)

1460 / 21

52-Week Range (INR)

298 / 181

1,6,12 Rel Perf. (%)

-5 / 4 / -6



Financial Snapshot (INR b) Y/E March 2016 2017E 2018E 2019E NII 212.2 208.3 242.9 282.3 OP 238.6 260.7 230.5 265.4 NP 97.3 100.1 104.7 126.4 NIM (%) 3.6 3.2 3.3 3.3 EPS (INR) 16.7 17.2 18.0 21.7 EPS Gr (%) -13.2 2.9 4.6 20.8 BV/Sh (INR)* 132.9 145.2 158.0 173.4 ABV/Sh (INR)* 117.3 118.3 127.6 145.7 RoE (%) 11.3 10.4 10.0 11.3 RoA (%) 1.4 1.3 1.2 1.3 Valuations AP/E (x) 11.7 10.5 9.4 7.2 AP/BV (x) 1.5 1.2 1.1 0.9 AP/ABV (x) 1.7 1.5 1.3 1.1 Div. Yield (%) 2.0 1.8 1.9 2.3 * BV adj for invt in subsidiaries







ICICI Bank

TP: INR332 (+32%)

We expect loan growth to moderate to 4.5% YoY. Retail loan growth has picked up over the last two years. However, demonetization may have resulted in a temporary moderation. Slower growth, coupled with a YoY decline in NIM (due to lower C-D ratio) should lead to moderate growth in NII on a YoY basis. Fee income growth will remain muted. We have factored in ~2% YoY growth in fee income, led by low corporate fees. Trading gains should be healthy. Overall, we expect non-interest income to decline 12% YoY owing to gains booked on stake sale in PruLife in 3QFY16. Gross slippages are expected to remain high in 3QFY17, with slippage ratio estimated at ~7%. Outstanding watch list (fund based and non-fund based) stood at INR324.9b in 2QFY17. We expect PAT to decline 26% YoY, led by higher operating expenses and elevated credit costs. ICICIBC trades at 1.1x FY18E core BV and 9.4x FY18E EPS. Buy.

Key issues to watch for  Movement of watch list accounts.  Plans on monetization of stakes in various ventures.  Outlook on asset quality and trend on further relapse from RL.  Quantum of loans rescheduled under the 5/25 scheme.

Quarterly Performance

Net Interest Income % Change (YoY) Other Income Net Income Operating Expenses Operating Profit % Change (YoY) Other Provisions Profit before Tax Tax Provisions Net Profit % Change (YoY) Operating Parameters NIM (Reported,%) NIM (Cal, %) Deposit Growth (%) Loan Growth (%) Asset Quality Gross NPA (INR b) Gross NPA (%) E: MOSL Estimates

January 2017

1Q 51,151 13.9 29,899 81,050 30,672 50,378 11.5 9,554 40,824 11,063 29,762 12.1

Buy

FY16 2Q 3Q 4Q 52,515 54,530 54,045 12.8 13.3 6.4 30,074 42,169 51,089 82,588 96,698 105,134 31,004 31,100 34,059 51,584 65,598 71,075 9.8 30.2 30.0 9,422 28,441 69,262 42,163 37,158 1,813 11,862 6,976 -5,206 30,301 30,181 7,019 11.9 4.5 -76.0

1Q 51,585 0.8 34,293 85,878 33,731 52,147 3.5 25,145 27,002 4,679 22,324 -25.0

FY17 2Q 3QE 52,533 51,555 0.0 -5.5 91,197 37,216 143,730 88,771 37,369 37,492 106,361 51,278 106.2 -21.8 70,827 25,000 35,534 26,278 4,511 3,942 31,023 22,336 2.4 -26.0

(INR Million) FY16 FY17E 4QE 52,667 -2.6 38,309 90,976 40,074 50,903 -28.4 21,985 28,917 4,528 24,389 247.5

212,240 11.5 153,231 365,471 126,836 238,635 21.0 116,678 121,957 24,694 97,263 -13.0

208,340 -1.8 201,014 409,354 148,666 260,689 9.2 142,958 117,731 17,660 100,072 2.9

3.5 3.7 9.6 15.2

3.5 3.7 9.2 13.3

3.5 3.7 14.6 15.8

3.4 3.5 16.6 12.3

3.2 3.3 15.3 12.4

3.1 3.3 16.8 10.9

3.1 15.2 4.5

3.1 18.6 10.2

3.5 3.6 16.6 12.3

3.2 18.6 10.2

151.4 3.7

158.6 3.8

211.5 4.7

262.2 5.8

271.9 5.9

321.8 6.8

364.9 7.8

391.7 7.9

262.2 5.8

391.7 7.9

135

December 2016 Results Preview | Sector: Financials - Banks

Bloomberg

IDFCBK IN

Equity Shares (m)

3392.6

M. Cap. (INR b)/(USD b)

203 / 3

52-Week Range (INR)

83 / 43

1,6,12 Rel Perf. (%)

CMP: INR60

Y/E March 2H2016 2017E 2018E 2019E NII 8.5 20.5 25.3 31.1 OP 7.4 18.4 22.9 31.2 NP 4.7 10.6 14.3 19.3 NIM (%) 2.5 2.2 2.2 EPS (INR) 3.1 4.2 5.7 EPS Gr. (%) 34.8 35.2 BV/Sh. (INR) 40.2 42.6 45.8 50 ABV/Sh. (INR) 37.8 39.4 42.1 46 RoE (%) 7.5 9.5 11.9 RoA (%) 1.1 1.1 1.3 Valuations P/E(X) 19.2 14.2 10.5 P/BV (X) 1.4 1.3 1.2 P/ABV (X) 1.5 1.4 1.3 Div. Yield (%) 1.0 1.4 1.9

Under Review



We expect 22% YoY (5% QoQ) loan growth, aided by greater focus on retail banking. Though incremental deposits raised in 3Q would aid cost of funds, we expect NIM (calculated) to remain largely stable at 2%, led by lower asset yields.



Non-interest income would be ~INR2.5b (-40% QoQ due to one-off gains in 2Q), led by moderate fee income growth. Trading gains are expected to be healthy. Operating expenses are likely to grow 15% QoQ (v/s 16% QoQ de-growth in total income), driven by costs associated with expansion of retail and rural banking franchise and demonetization-related overheads, leading to 33% QoQ decline in PPP (flat YoY).



We expect high provisioning at ~INR1.05b.



The stock trades at 1.3x FY18E BV and 14.2x FY18E EPS. Under Review

-11 / 31 / -2

Financial Snapshot (INR b)

IDFC Bank

Key issues to watch for  Outlook on balance sheet growth and costs.  Retail franchise building plans and update.

Quarterly Performance Net Interest Income % Change (Y-o-Y) Other Income Net Income Operating Expenses Operating Profit % Change (Y-o-Y) Other Provisions Profit before Tax Tax Provisions Net Profit % Change (Y-o-Y) Operating Parameters NIM (Reported,%) Tax Rate (%) E: MOSL Estimates

January 2017

(INR Million) FY16 3Q 3,863

4Q 4,168

1Q 4,989

FY17E 2Q 4,956

2,179 6,042 2,153 3,889

1,377 5,545 2,947 2,598

2,128 7,117 2,768 4,349

4,101 9,057 3,234 5,823

123 3,766 1,345 2,422 NA

119 2,479 829 1,651 NA

236 4,113 1,465 2,648 NA

2.0 35.7

2.1 33.4

2.4 35.6

223 5,600 1,722 3,878 NA

3QE 5,143 33.1 2,500 7,643 3,731 3,912 0.6 1,050 2,862 944 1,917 -20.8

4QE 5,408 29.8 3,270 8,679 4,400 4,278 64.7 1,044 3,234 1,085 2,149 30.2

2.2 30.8

33.0

33.6

2HFY16

FY17E

8,031

20,496 NA 12,000 32,496 14,134 18,362 NA 2,554 15,809 5,217 10,592 NA

3,556 11,587 5,100 6,487 242 6,246 2,173 4,072

34.8

33.0

136

December 2016 Results Preview | Sector: Financials - Banks

Bloomberg

INBK IN

Equity Shares (m)

480.3

M. Cap. (INR b)/(USD b)

108 / 2

52-Week Range (INR) 1,6,12 Rel Perf. (%)

CMP: INR225

276 / 76 -8 / 51 / 95

Financial Snapshot (INR b) Y/E March 2016 2017E 2018E 2019E NII 44.5 49.7 55.2 66.8 OP 30.3 39.6 41.9 48.6 NP 7.1 14.6 15.3 18.5 NIM (%) 2.5 2.6 2.7 2.9 EPS (INR) 14.8 30.4 31.9 38.5 EPS Gr. (%) -29.2 105.3 5.0 20.5 BV/Sh. (INR) 281 304 328 358 ABV/Sh (INR) 202 222 262 305 RoE (%) 5.5 10.4 10.1 11.2 RoA (%) 0.4 0.7 0.7 0.7 Div. Payout (%) 23.2 23.2 23.2 23.2 Valuations P/E (x) 15.2 7.4 7.1 5.9 P/ BV (x) 0.8 0.7 0.7 0.63 P/ABV (x) 1.1 1.0 0.9 0.74 Div. Yield (%) 0.7 2.7 2.8 3.4

Quarterly Performance Net Interest Income % Change (Y-o-Y) Other Income Net Income Operating Expenses Operating Profit % Change (Y-o-Y) Other Provisions Profit before Tax Tax Provisions Net Profit % Change (Y-o-Y) Operating Parameters NIM (Rep, %) NIM (Cal, %) Deposit Growth (%) Loan Growth (%) Asset Quality OSRL (INR b) OSRL (%) Gross NPA (INR b) Gross NPA (%) E: MOSL Estimates

January 2017



1Q 11,203 4.5 3,756 14,959 7,873 7,086 11.2 4,081 3,006 853 2,153 3.9

FY16 2Q 10,804 -8.2 4,375 15,179 7,824 7,355 -3.8 1,371 5,984 2,291 3,693 17.5







Indian Bank

TP: INR314 (+40%)

Buy

We expect an uptick in deposit growth to 5.6% v/s 3.2% in 2QFY17 and 2.1% in FY16. Net loans are expected to decline ~5% YoY owing to muted credit environment. Decline in cost of funds would be negated by excessive liquidity and reducing yields, leading to ~17bp decline in margins on a QoQ basis. Fee income would be subdued. Trading gains growth is expected to drive 62% YoY growth in non-interest income. We expect slippage ratio to remain elevated at 2.7% and credit costs to increase to 1.6% v/s 1.1% in 2QFY17, as INBK looks to improve provision coverage; however, trading gains will provide cushion to earnings INBK trades at 0.7x FY18E BV and 7.1x FY18E EPS. Maintain Buy.

Key issues to watch for  Outlook on business growth and asset quality remains the key factor to monitor.  Quantum of loans rescheduled under the 5/25 scheme.  View on margins with an improvement in liquidity and lower interest rates.

3Q 11,108 0.5 4,390 15,498 7,893 7,605 -4.3 7,181 425 2 423 -84.8

4Q 11,346 2.4 5,294 16,640 8,366 8,274 1.2 8,136 138 -707 845 -59.0

1Q 12,363 10.4 4,417 16,780 7,748 9,032 27.5 4,170 4,862 1,788 3,074 42.8

FY17 2Q 12,783 18.3 5,846 18,629 8,567 10,062 36.8 4,783 5,279 1,228 4,051 9.7

2.4 2.5 12.9 5.7

2.3 2.4 4.7 5.0

2.3 2.5 8.1 6.4

2.4 2.5 5.4 2.5

2.5 2.7 1.1 1.5

2.6 2.8 3.2 0.1

101.1 8.3 58.2 4.7

100.6 8.2 57.7 4.6

88.6 7.0 70.7 5.6

63.7 4.9 88.3 6.7

62.9 5.1 88.9 7.0

64.1 5.2 91.9 7.3

(INR Million)

FY16

FY17E

3QE 12,238 10.2 7,126 19,364 9,243 10,121 33.1 5,103 5,018 1,305 3,713 777.8

4QE 12,359 8.9 6,906 19,265 8,864 10,402 25.7 5,275 5,126 1,359 3,767 345.8

44,463 -0.3 17,814 62,277 31,955 30,322 6.9 20,768 9,554 2,439 7,115 -29.2

49,744 11.9 24,295 74,039 34,421 39,618 18.9 19,331 20,286 5,680 14,606 105.3

2.6 5.6 -4.7

2.6 7.0 -2.0

2.3 2.5 5.4 2.5

2.7 7.0 -2.0

94.6 7.3

63.7 4.9 88.3 6.7

94.6 7.3

93.9 7.6

137

December 2016 Results Preview | Sector: Financials - Banks

Bloomberg

IIB IN

Equity Shares (m)

595.0

M. Cap. (INR b)/(USD b) 52-Week Range (INR) 1,6,12 Rel Perf. (%)

655 / 10

CMP: INR1,101 

1255 / 799 1 / 2 / 14

Financial Snapshot (INR Billion) Y/E MARCH 2016 2017E 2018E 2019E NII 45.2 59.2 72.7 89.0 OP 41.4 51.8 64.1 78.9 NP 22.9 28.3 35.5 44.0 NIM (%) 4.0 4.3 4.3 4.2 EPS (INR) 38.4 47.6 59.6 74.0 EPS Gr. (%) 13.4 23.9 25.2 24.1 BV/Sh. (INR) 291 332 383 446.9 ABV/Sh. (INR) 288 328 379 441.9 RoE (%) 16.6 15.3 16.7 17.8 RoA (%) 1.8 1.8 1.9 1.9 Payout (%) 18.5 14.0 14.0 14.0 Valuations P/E (X) 28.6 23.1 18.5 14.9 P/BV (X) 3.8 3.3 2.9 2.5 P/ABV (X) 3.8 3.4 2.9 2.5 Div. Yield (%) 0.4 0.5 0.7 0.8







IndusInd Bank

TP: INR1,405 (+28%)

We expect strong loan/deposit growth of ~25%/~38% YoY in 3QFY17. Continuation of positive growth trend in the CV/CFD segment would remain a key factor to monitor. Overall, NIM is likely to remain largely stable QoQ at 3.8-3.9%, led by lower cost of funds. We expect non-interest income growth to be strong at ~25%, helped by high trading gains. We expect moderation in fee growth. Opex growth would remain high at ~32%+ YoY, led by higher demonetization-related currency management costs. Strong PPP growth (+23% YoY) would keep earnings growth strong at 22%+ YoY, despite factoring in higher credit costs (+27% YoY increase in provisions) IIB trades at 2.9x FY18E BV and 18.5x FY18E EPS, with best-in-class RoA of ~2% and RoE of 17-18%. Buy.

Key issues to watch for  Uptick in CV/CE demand would be the key for CFD growth.  Corporate asset quality a key monitorable.  Traction in the non-vehicle consumer lending portfolio.

(INR Million) FY16 FY17E

Quarterly Performance

Net Interest Income % Change (YoY) Other Income Net Income Operating Expenses Operating Profit % Change (YoY) Other Provisions Profit before Tax Tax Provisions Net Profit % Change (YoY)

1Q 9,807 22.5 7,616 17,423 8,196 9,227 23.2 1,233 7,994 2,744 5,250 24.7

FY16 2Q 10,943 31.3 7,835 18,778 8,713 10,065 38.9 1,581 8,484 2,884 5,600 30.2

3Q 11,734 36.2 8,390 20,124 9,514 10,610 37.1 1,771 8,839 3,029 5,810 29.9

4Q 12,682 37.1 9,128 21,810 10,298 11,512 35.4 2,137 9,375 3,172 6,204 25.3

1Q 13,564 38.3 9,730 23,294 10,956 12,338 33.7 2,305 10,033 3,419 6,614 26.0

FY17 2Q 14,603 33.4 9,704 24,307 11,491 12,817 27.3 2,139 10,678 3,635 7,043 25.8

3QE 15,140 29.0 10,525 25,665 12,599 13,066 23.2 2,250 10,816 3,688 7,128 22.7

Operating Parameters 3.7 3.9 3.9 3.9 4.0 4.0 NIM (Reported,%) 3.5 3.7 3.7 3.8 3.8 3.9 3.8 NIM (Cal, %) 21.6 22.5 24.6 25.4 31.0 38.9 37.8 Deposit Growth (%) 23.1 30.6 28.7 28.5 29.7 26.4 24.6 Loan Growth (%) Asset Quality 4.6 4.9 4.8 4.7 4.6 4.4 OSRL (INR b) 0.6 0.6 0.6 0.5 0.5 0.4 OSRL (%) 5.7 6.0 6.8 7.8 8.6 9.0 10.1 Gross NPA (INR b) Gross NPA (%) 0.8 0.8 0.8 0.9 0.9 0.9 1.0 E: MOSL Estimates; Quarterly calculated margins based on total assets, yearly on interest earning assets

January 2017

Buy

4QE 15,882 25.2 11,318 27,200 13,662 13,538 17.6 2,078 11,461 3,916 7,545 21.6

45,166 32.1 32,970 78,135 36,721 41,414 33.7 6,722 34,693 11,828 22,865 27.5

59,190 31.1 41,277 100,467 48,708 51,759 25.0 8,771 42,988 14,659 28,329 23.9

3.8 32.0 24.0

3.9 3.7 25.4 28.5

3.8 32.0 24.0

11.5 1.0

4.7 0.5 7.8 0.9

11.5 1.0

138

December 2016 Results Preview | Sector: Financials - Banks

Kotak Mahindra Bank

Bloomberg

K MB IN

Equity Shares (m)

1834.4

M. Cap. (INR b)/(USD b)

1275 / 19

52-Week Range (INR)

836 / 587

1,6,12 Rel Perf. (%)

-6 / -4 / -5

Financial Snapshot (INR b) Y/E MARCH 2016 2017E 2018E 2019E NII 69.0 80.6 93.8 117.1 OP 40.4 56.9 70.5 93.7 NP 20.9 33.2 41.3 55.2 Cons. NP 34.6 48.7 59.4 76.6 NIM (%) 4.1 4.4 4.5 4.6 Cons. EPS (INR) 18.9 26.6 32.4 41.7 EPS Gr. (%) 40.8 22.0 28.8 Cons. BV. (INR) 182 207 239 279 Cons. RoE (%) 10.9 13.6 14.5 16.1 RoA (%) 1.1 1.6 1.8 2.0 Payout (%) 5.1 5.8 5.8 5.8 Valuations P/E(X) (Cons.) 36.9 26.2 21.4 16.6 P/BV (X) (Cons.) 3.8 3.4 2.9 2.5 Div. Yield (%) 0.0 0.1 0.1 0.1

Quarterly Performance Y/E March 1Q

CMP: INR695 









TP: INR932 (+34%)

We expect the standalone bank to report 10%+ loan growth and 11%+ deposit growth in 3QFY17. NIMs are expected to decline marginally by ~10bp QoQ, but improve 10bp on a YoY basis. Overall, we expect NII growth of 14% YoY. With strong customer acquisition and merger synergies from eIVBL, fee growth should remain healthy. Traction on CASA should pick up considerably post demonetization, leading to incrementally lower cost of funds. We expect asset quality to remain stable, with GNPA less than ~2.5%, and NSL to decline sequentially, with increase in provision coverage ratio. On a reported basis, we expect standalone bank earnings to grow 27% YoY. The stock trades at 2.9x FY18E consolidated BV and 21.4x FY18E consolidated earnings. Maintain Buy.

Key issues to watch for  Guidance on balance sheet growth.  Performance on CASA, fees and growth – the initial pain of merger is behind now.  Performance of non-banking subsidiaries and their contribution to overall profit.

FY16 2Q

3Q

4Q

1Q

FY17E 2Q

Kotak Bank (standalone) Net Interest Income 15,982 16,787 17,662 18,572 19,191 19,954 % Change (Y-o-Y) 59.5 61.6 66.7 65.4 20.1 18.9 Operating Profit 5,970 10,448 12,052 11,942 13,150 14,401 % Change (Y-o-Y) -10.3 42.4 63.4 38.7 120.3 37.8 Net Profit 1,898 5,695 6,347 6,958 7,420 8,133 % Change (Y-o-Y) -55.8 28.1 36.6 32.0 291.0 42.8 Other Businesses K otak Prime 1,190 1,270 1,260 1,300 1,200 1,300 K otak Mah. Investments 300 360 390 500 400 530 K otak Mah. Capital Co 30 70 60 170 230 50 K otak Securities 670 780 550 510 600 960 International subs 250 320 260 220 130 310 K otak Mah. AMC & Trustee Co. 200 230 40 250 190 70 K otak Investment Advisors 0 0 -10 50 110 10 K otak OM Life Insurance 660 480 600 770 710 630 Con.adj and MI -30 230 -40 -180 -240 30 Conso. PAT 5,168 9,435 9,457 10,548 10,750 12,023 % Change (Y-o-Y) -25.9 31.5 32.0 15.5 108.0 27.4 E: MOSL Estimates, Quarterly numbers vary from full year number due to difference in reporting

January 2017

Buy

FY16

FY17

21,260 14.5 15,684 31.3 9,564 37.5

69,004 63.4 40,411 34.8 20,898 12.0

80,618 16.8 56,948 40.9 33,165 58.7

1,483 623 276 765 235 443 100 646 -115 14,019 32.9

5,025 1,540 320 2,515 1,050 720 50 2,510 -19 34,608 13.7

5,358 2,128 766 3,025 900 853 300 2,636 -420 48,710 40.8

3QE

4QE

20,213 14.4 13,713 13.8 8,049 26.8 1,375 575 210 700 225 150 80 650 -95 11,919 26.0

139

December 2016 Results Preview | Sector: Financials - Banks

Oriental Bank of Commerce

Bloomberg

OBC IN

Equity Shares (m)

346.2

M. Cap. (INR b)/(USD b)

37 / 1

52-Week Range (INR) 1,6,12 Rel Perf. (%)

CMP: INR107 

144 / 75 -11 / -6 / -26

Financial Snapshot (INR b) Y/E March 2016 2017E 2018E 2019E NII 53.7 51.2 54.1 65.7 OP 36.8 37.8 36.5 45.4 NP 1.6 6.7 7.4 10.7 EPS (INR) 4.9 19.3 21.3 31.0 EPS Growth (%) 0.0 0.0 10.3 46.0 BV/Sh. (INR) 418.0 411.5 427.8 451.6 ABV/Sh. (INR) 202 129 148 213 RoE (%) 1.2 4.8 5.1 7.1 RoA (%) 0.1 0.3 0.3 0.4 Div. Payout (%) 16.7 23.2 23.2 23.2 Valuations P/E (x) 0.0 5.5 5.0 3.4 P/BV (x) 0.26 0.26 0.25 0.24 P/ABV (x) 0.53 0.83 0.72 0.50 Div. Yield (%) 0.0 3.6 4.0 5.8

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

TP: INR108 (+1%)

Neutral

Loan portfolio is expected to decline 7% YoY and deposit growth is also expected to be muted at 2% YoY. CD ratio is expected to decline by ~700bp YoY and ~600bp QoQ. NII is likely to remain subdued (-5% YoY), led by moderate loan growth and sequentially lower NIMs (factored decline of ~10bp). Given the subdued economic environment, fee income growth is likely to remain in low single digit. Overall, non-interest income is expected to increase by 67%+ YoY, driven by favorable base and trading gains during the quarter. Opex is expected to grow by ~9%. Overall PPP is expected to degrow 15% YoY. Over the last two quarters, slippages (ex AQR) have risen sharply. However, the clean-up exercise taken up by the new management might throw more negative surprises in 3Q. Hence, we remain cautious on asset quality (expect 150bp of credit costs). The stock trades at 0.25x FY18E BV and 5x FY18E EPS. Neutral.

Key issues to watch for  Outlook on asset quality, as net stressed loans remain one of the highest in the industry.  Quantum of loans rescheduled under the 5:25 scheme.  Balance sheet growth and traction in focus loan segments.

Quarterly Performance

(INR Million)

Y/E March Interest Income Interest Expense Net Interest Income % Change (YoY) Other Income Net Income Operating Expenses Operating Profit % Change (YoY) Other Provisions Profit before Tax Tax Provisions Net Profit % Change (YoY) Operating Parameters NIM (Rep, %) NIM (Cal,%) Deposit Growth (%) Loan Growth (%) Asset Quality OSRL (INR b) OSRL (%) Gross NPA (INR b) Gross NPA (%)

January 2017

1Q 51,149 37,863 13,285 6.9 4,539 17,824 7,380 10,445 -8.5 5,777 4,668 2,090 2,578 -29.3

FY16 2Q 3Q 50,296 49,560 36,465 36,466 13,831 13,093 11.0 0.9 4,246 3,945 18,076 17,038 8,151 9,375 9,925 7,664 16.1 -24.5 5,694 11,831 4,231 -4,167 1,218 80 3,013 -4,247 3.4 NM

4Q 49,584 36,047 13,537 4.3 4,933 18,469 9,682 8,787 -27.7 10,261 -1,474 -1,690 216 NM

1Q 47,789 35,743 12,046 -9.3 6,138 18,184 9,013 9,171 -12.2 7,504 1,667 660 1,007 -60.9

FY17 2Q 3QE 46,953 46,976 33,797 34,539 13,156 12,437 -4.9 -5.0 5,834 6,607 18,991 19,044 9,432 10,203 9,559 8,841 -3.7 15.4 7,745 6,057 1,813 2,784 280 766 1,533 2,019 -49.1 NM

2.7 2.5 5.0 8.3

2.8 2.7 6.9 7.0

2.6 2.5 4.4 7.9

2.7 2.5 2.4 3.7

2.4 2.2 4.4 4.0

2.7 2.5 1.2 -1.0

147.9 9.9 85.8 5.9

140.6 9.4 85.6 5.7

133.0 8.7 118.2 7.8

95.4 6.2 147.0 9.6

95.4 6.1 172.1 11.5

76.2 5.1 183.8 12.4

2.4 2.5 -6.3

189.3 13.3

FY16

FY17E

4QE 48,757 35,156 13,601 0.5 6,906 20,506 10,234 10,272 16.9 7,338 2,934 823 2,111 876.2

200,587 146,841 53,746 5.7 17,663 71,408 34,588 36,821 -12.9 33,562 3,258 1,698 1,561 -68.6

190,475 139,235 51,239 -4.7 25,485 76,724 38,881 37,843 2.8 28,645 9,198 2,530 6,669 327.3

2.5 5.0 -3.4

2.7 2.6 2.4 3.7

2.4 5.0 -3.4

194.9 13.1

95.4 6.2 147.0 9.6

194.9 13.1

140

December 2016 Results Preview | Sector: Financials - Banks

Bloomberg

PNB IN

Equity Shares (m)

2128.0

M. Cap. (INR b)/(USD b)

245 / 4

52-Week Range (INR) 1,6,12 Rel Perf. (%)

-16 / 5 / -2

Quarterly Performance Y/E March

January 2017



164 / 69

Financial Snapshot (INR b) Y/E March 2016 2017E 2018E 2019E NII 153.1 152.1 168.6 199.7 OP 122.2 133.7 145.3 166.6 NP -39.7 18.1 28.0 37.9 NIM (%) 2.6 2.4 2.5 2.6 EPS (INR) -20.2 8.5 13.2 17.8 EPS Gr. (%) NM NM 55.1 35.3 BV/Sh. (INR) 180 183 195 210 ABV/Sh. (INR) 54 69 93 135 RoE (%) -10.9 4.8 7.0 8.8 RoA (%) -0.6 0.3 0.4 0.4 Valuations P/E(X) -5.7 13.6 8.8 6.5 P/BV (X) 0.6 0.6 0.6 0.5 P/ABV (X) 2.13 1.68 1.24 0.85 Div. Yield (%) 0.0 1.1 1.7 2.3

Net Interest Income % Change (YoY) Other Income Net Income Operating Expenses Operating Profit % Change (YoY) Other Provisions Profit before Tax Tax Provisions Net Profit % Change (YoY) Operating Parameters NIM (Rep, %) NIM (Cal, %) Deposit Growth (%) Loan Growth (%) CD Ratio (%) Asset Quality Gross NPA (INR B) Gross NPA (%) E: MOSL Estimates

CMP: INR115

1Q 41,025 -6.3 13,974 54,998 23,677 31,321 0.2 18,114 13,207 6,000 7,207 -48.7

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Punjab National Bank TP: INR172 (+49%)

Buy

In line with industry trend, loan growth is expected to be muted. Deposits should grow 11%+ YoY. CD ratio is expected to fall from ~72% to ~64%. However, CASA ratio is expected to improve. NII is likely to be muted (-9% YoY), led by drop in CD ratio, following the bank’s strategy to grow in safer assets. Fee income growth is likely to remain moderate (+10% YoY); overall non-interest income is expected to grow 59%+ YoY, led by higher growth in non-core income. Stress addition is likely to be elevated but recoveries could surprise positively, with intense efforts. Expect credit costs to remain ~275bp in an effort to tick coverage ratio up (37% in 2QFY17). Value unlocking in housing finance and insurance business, and improvement in asset quality remains a key trigger. The stock trades at 0.6x FY18E BV and 8.8x FY18E EPS. Maintain Buy.

Key issues to watch for  Outlook on asset quality, as net stressed loans remain one of the highest in the industry.  Capital raising plans via fresh issue and sale of non-core assets.

FY16 2Q 3Q 4Q 43,220 41,196 27,677 4.1 -2.7 -27.0 13,569 16,706 24,522 56,789 57,902 52,199 27,404 28,724 19,920 29,385 29,179 32,279 2.2 6.1 0.8 18,821 37,755 104,852 10,564 -8,577 -72,574 4,354 -9,087 -18,902 6,210 510 -53,671 7.9 -93.4 NM

1Q 36,990 -9.8 23,551 60,541 27,794 32,746 4.6 27,384 5,362 2,299 3,064 -57.5

FY17E 2Q 3QE 38,799 37,397 -10.2 -9.2 23,879 26,526 62,678 63,923 29,557 31,133 33,120 32,789 12.7 12.4 25,338 26,184 7,783 6,605 2,289 2,180 5,494 4,426 -11.5 NM

(INR Million)

FY16

FY17E

4QE 38,908 40.6 28,310 67,217 32,196 35,021 8.5 27,423 7,599 2,531 5,068 NM

153,118 -7.5 68,770 221,888 99,725 122,163 2.2 179,542 -57,379 -17,635 -39,744 NM

152,093 -0.7 102,265 254,358 120,681 133,677 9.4 106,328 27,349 9,299 18,050 NM

2.9 2.9 16.4 9.6 73.6

3.0 3.0 14.0 6.7 70.6

2.8 2.8 13.3 8.4 71.6

1.8 1.8 10.3 8.4 74.6

2.5 2.4 7.0 2.8 70.7

2.5 2.6 6.5 3.4 68.5

2.4 11.6 -0.8 63.7

2.5 12.5 0.0 66.3

2.6 2.6 10.3 8.4 74.6

2.5 12.5 0.0 66.3

254 6.5

249 6.4

343 8.5

558 12.9

567 13.8

565 13.6

554 13.5

569 13.1

558 12.9

569 13.1

141

December 2016 Results Preview | Sector: Financials - Banks

RBL Bank Bloomberg Equity Shares (m) M. Cap. (INR b)/(USD b) 52-Week Range (INR) 1,6,12 Rel Perf. (%)

RBK IN 361.7 125 / 2 421 / 274 -/-/-

Financial Snapshot (INR b) Y/E MARCH 2016 2017E 2018E 2019E NII 8.2 12.2 14.4 19.5 OP 5.4 8.7 10.3 14.2 NP 2.9 4.4 5.4 7.4 NIM (%) 2.7 3.0 2.9 3.0 EPS (INR) 9.0 12.2 14.8 20.5 EPS Gr. (%) 27.6 35.0 21.9 38.4 BV/Sh. (INR) 92.0 114.2 126.2 142.7 ABV/Sh. (INR) 89.5 113.7 125.5 141.7 RoE (%) 11.2 12.4 12.3 15.3 RoA (%) 0.9 1.0 1.0 1.0 Valuations P/E(X) 38.3 28.3 23.3 16.8 P/BV (X) 3.7 3.0 2.7 2.4 P/ABV (X) 3.9 3.0 2.7 2.4

CMP: INR345 

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TP: 450 (+30%)

Buy

Loan growth (+ 4%QoQ) and deposit growth (+9% QoQ) would be significantly above industry average. We expect NII to grow 9% QoQ, led by strong loan growth and ~10bp QoQ expansion in NIMs (owing to substantial CASA inflow, sharp fall in bulk rates and recent equity infusion). Overall non-interest income is expected to grow by ~9% QoQ, which in our view would be driven by strong growth in trading gains. While opex will be high during the quarter owing to branch expansion costs and demonetization-related manpower and currency costs, we expect PPP growth to be strong at 9% QoQ. Asset quality is expected to remain stable this quarter, although there may be some stress that could materialize in the SME segment. Credit costs will largely be under control. We expect PBT/PAT growth of 27%/33% QoQ. RBL trades at 2.7x FY18E BV and 23.3x FY18E EPS. Maintain Buy.

Key issues to watch for  Management commentary on slippages in SME segment.  Update and commentary on balance sheet growth strategy.  CASA ratio and traction on NIMs.

Quarterly Performance Interest Income Interest Expense Net Interest Income % Change (Y-o-Y) Other Income Net Income Operating Expenses Operating Profit % Change (Y-o-Y) Other Provisions Profit before Tax Tax Provisions Net Profit % Change (Y-o-Y) Operating Parameters NIM (Reported,%) NIM (Cal, %) CD Ratio (%) Asset Quality Gross NPA (INR b) Gross NPA (on customer assets, %) E: MOSL Estimates

January 2017

(INR Million) FY16 1Q 6,049 4,382 1,667

2Q 6,644 4,744 1,899

1,259 2,926 1,810 1,116

1,123 3,022 1,814 1,209

227 889 286 603

223 986 316 669

3.0

3.0

0.0 0.0

1Q 8,637 6,190 2,447 46.8 1,675 4,122 2,277 1,845 65.3 426 1,419 445 973 61.4

FY17 2Q 9,019 5,990 3,029 59.5 1,691 4,721 2,530 2,191 81.3 781 1,410 512 899 34.3

3QE 9,507 6,215 3,293

4QE 9,931 6,480 3,451

1,850 5,143 2,750 2,393

1,735 5,186 2,895 2,291

600 1,793 596 1,197

297 1,994 663 1,330

FY16

FY17E

27,443 19,251 8,192 47.2 4,905 13,097 7,673 5,424 50.6 1,144 4,280 1,355 2,925 41.2

37,095 24,875 12,220 49.2 6,952 19,172 10,452 8,719 60.7 2,104 6,616 2,216 4,399 50.4

85.2

2.8 0.0 86.3

3.4 3.2 89.0

3.3 84.5

3.3 85.0

2.7

3.0

1.6 0.93

2.5 1.1

2.7 1.1

3.0 1.2

3.3 1.1

2.1 1.0

3.3 1.1

142

December 2016 Results Preview | Sector: Financials - Banks

Bloomberg

SBIN IN

Equity Shares (m)

7763.6

M. Cap. (INR b)/(USD b)

1886 / 28

52-Week Range (INR)

289 / 148

1,6,12 Rel Perf. (%)

-6 / 11 / 6

Financial Snapshot (INR b) Y/E March 2016 2017E NII 569 578.8 OP 433 465.8 NP 100 106.4 NIM (%) 3.0 2.7 EPS (INR) 15.7 9.8 EPS Gr. (%) -30.8 -37.6 Cons. BV (INR) 222 229.9 Cons. ABV (INR) 159 144.6 RoE (%) 7.6 7.5 RoA (%) 0.5 0.4 Div. Payout (%) 20.1 20.1 Valuations Cons. P/E (x) 14.8 23.8 Cons. P/BV (x) 1.0 0.9 Cons P/ABV (x) 1.5 1.6 Div. Yield (%) 1.1 0.7

2018E 2019E 666.5 756.9 500.6 563.4 140.4 186.0 2.8 2.8 23.3 30.9 137.5 32.5 248.7 273.7 182.5 232.2 9.2 11.3 0.5 0.6 19.3 19.3 10.0 0.9 1.3 1.6

Y/E March

January 2017



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Quarterly performance Net Interest Income % Change (YoY) Other Income Net Income Operating Expenses Operating Profit % Change (YoY) Other Provisions Profit before Tax Tax Provisions Net Profit % Change (YoY) Operating Parameters NIM (Reported, %) NIM (Cal, %) Deposit Growth (%) Loan Growth (%) Asset Quality OSRL (INR B) OSRL (%) Gross NPA (INR B) Gross NPA (%) E: MOSL Estimates

CMP: INR243

1Q 137,320 3.6 50,880 188,200 96,179 92,021 4.7 39,997 52,024 15,099 36,924 10.3

7.6 0.8 1.0 2.1

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State Bank of India TP: INR338 (+39%)

Buy

We expect loan growth to be muted at 2% YoY. With deposit growth being strong at 17% YoY, CD ratio should fall 600bp YoY. Incremental loan growth would be driven by retail loans and relatively low-yielding low-risk corporate loans. Computed NIM is likely to decline marginally QoQ to 2.7%. The bank has reduced its MCLR by ~90bp, which may pressurize NIMs in the ensuing quarter, despite strong CASA flow. We expect stress additions to moderate broadly in line with the last quarter. We expect non-interest income growth of 56% YoY, primarily led by income from stake sale in SBI Life and higher trading gains. Fee income growth would remain muted and cost pressure would remain high (+19% YoY) on account of administrative expense. Overall PPoP growth is expected to be 24% YoY. We expect credit cost to remain elevated, led by focus on improving strength of the balance sheet. The stock trades at 0.9x FY18E consolidated BV and 10x FY18E consolidated EPS. Buy.

Key issues to watch for  Performance and guidance on asset quality.  Growth outlook and key focus segments for growth.  Outlook and update on non-core stake sales and ABs merger.

FY16 2Q 3Q 142,526 136,065 7.4 -1.2 61,973 61,775 204,498 197,840 101,839 101,861 102,659 95,979 21.9 3.3 43,606 79,494 59,053 16,485 20,262 5,332 38,791 11,153 25.1 -61.7

4Q 152,907 3.9 106,956 259,864 117,945 141,919 11.2 131,741 10,178 -2,460 12,638 -66.2

1Q 143,123 4.2 73,351 216,474 105,935 110,539 20.1 74,131 36,408 11,198 25,210 -31.7

FY17 2Q 3QE 144,375 143,275 1.3 5.3 84,241 96,237 228,616 239,512 116,373 120,797 112,243 118,715 9.3 23.7 78,967 80,780 33,276 37,935 7,893 11,380 25,383 26,554 -34.6 138.1

3.0 3.0 13.7 6.8

3.0 3.0 10.9 10.5

2.8 2.8 10.7 12.9

3.1 3.2 9.8 12.6

2.8 2.9 10.5 10.7

2.8 2.8 13.8 7.2

560 4.4 564 4.3

535 4.0 568 4.2

486 3.5 728 5.1

391 2.7 982 6.5

366 2.6 1,015 6.9

366 2.6 1,058 7.1

2.7 16.8 2.0

1,081 7.4

(INR Million)

FY16

FY17E

4QE 148,051 -3.2 111,547 259,598 135,292 124,305 -12.4 81,999 42,306 13,007 29,299 131.8

568,818 3.4 281,584 850,402 417,824 432,578 9.4 294,838 137,741 38,234 99,507 -24.0

578,823 1.8 365,376 944,199 478,397 465,802 7.7 315,877 149,925 43,478 106,446 7.0

2.7 14.0 4.0

3.0 3.0 9.8 12.6

2.8 14.0 4.0

1,097 7.0

391 2.7 982 6.5

1,097 7.0

143

December 2016 Results Preview | Sector: Financials - Banks

Bloomberg

UNBK IN

Equity Shares (m)

687.4

M. Cap. (INR b)/(USD b)

86 / 1

52-Week Range (INR) 1,6,12 Rel Perf. (%)

CMP: INR125

TP: INR168 (+34%)

Buy



Demonetization, capital constraint and low risk appetite would lead to lower loan growth of 1.5% YoY. Deposit growth is expected to be healthy at ~12% YoY, and resultantly, CD ratio is expected to contract by 350bp+ QoQ (and 750bp+ YoY).



We expect NIM decline of 10bp+ on account of excess liquidity built during the quarter and lower incremental spreads on investments. Despite this, NII growth is expected to be healthy at 11% YoY, on account of lower interest income reversals (3QFY16 had an impact of higher slippages based on AQR review).



Non-interest income is likely to grow 45%+ YoY, led by higher noncore income.

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The stock trades at 0.4x FY18E BV and 4.1x FY18E EPS. Buy.

160 / 104 -14 / -5 / -17

Financial Snapshot (INR b) Y/E March 2016 2017E 2018E 2019E NII 83.1 88.9 100.2 116 OP 56.4 68.2 77.1 89.6 NP 13.5 10.7 20.9 31.4 NIM (%) 2.3 2.3 2.4 2.5 EPS (INR) 19.7 15.6 30.4 45.7 EPS Gr. (%) -29.6 -20.5 94.3 50.6 BV/Sh. (INR) 293.9 307.7 334.5 375 ABV/Sh. (INR) 151.1 121.4 130.0 179 RoE (%) 7.0 5.2 9.5 12.9 RoA (%) 0.3 0.3 0.4 0.6 Div. Payout (%) 11.5 11.6 11.6 11.6 Valuations P/E(X) 6.4 8.0 4.1 2.7 P/BV (X) 0.43 0.41 0.38 0.33 P/ABV (X) 0.8 1.0 1.0 0.70 Div. Yield (%) 1.6 1.2 2.4 3.6

Union Bank of India

Key issues to watch for  Performance on asset quality— slippage from restructured loans, going forward.  Quantum of loans rescheduled under the 5:25 scheme.  Trends and efforts to improve CASA ratio and NIM.  Update and trends on balance sheet growth.

Quarterly Performance

Net Interest Income % Change (YoY) Other Income Net Income Operating Expenses Operating Profit % Change (YoY) Other Provisions Profit before Tax Tax Provisions Net Profit % Change (YoY) Operating Parameters NIM (Cal, %) Deposit Growth (%) Loan Growth (%) Asset Quality OSRL (%) Gross NPA (INR b) Gross NPA (%) E: MOSL Estimates

January 2017

(INR Million) 1Q 21,302 0.6 7,832 29,134 14,252 14,882 8.5 6,424 8,458 3,270 5,188 -21.9

FY16 2Q 21,017 0.8 9,595 30,612 16,505 14,107 5.8 4,325 9,782 3,200 6,582 77.3

3Q 19,965 -5.9 8,927 28,892 15,551 13,342 -9.0 12,377 965 180 785 -74.0

4Q 20,847 -1.7 9,964 30,811 16,715 14,096 -14.7 15,647 -1,551 -2,512 961 -78.3

1Q 21,023 -1.3 10,399 31,421 15,171 16,251 9.2 13,530 2,721 1,058 1,663 -67.9

FY17 2Q 22,774 8.4 11,394 34,169 15,972 18,197 29.0 16,203 1,994 227 1,767 -73.2

FY16

FY17E

3QE 22,097 10.7 13,082 35,179 18,661 16,519 23.8 13,561 2,957 651 2,307 193.7

4QE 22,959 10.1 12,359 35,318 18,123 17,194 22.0 10,350 6,844 1,838 5,006 420.8

83,131 -1.5 36,317 119,448 63,022 56,426 -3.1 38,772 17,654 4,138 13,516 -24.1

88,852 6.9 47,234 136,087 67,926 68,161 20.8 53,644 14,516 3,774 10,742 -20.5

2.4 10.0 6.0

2.3 10.2 3.3

2.2 4.6 5.0

2.3 8.2 4.6

2.3 3.5 3.5

2.4 9.3 7.7

2.2 12.6 1.4

2.3 9.5 2.0

2.3 8.2 4.6

2.3 9.5 2.0

5.5 141.4 5.5

5.5 155.4 6.1

5.2 185.0 7.1

3.1 241.7 8.7

2.7 272.8 10.2

2.0 298.6 10.7

316.2 11.7

329.4 11.5

3.1 241.7 8.7

0.0 329.4 11.5

144

December 2016 Results Preview | Sector: Financials - Banks

Yes Bank Bloomberg

YES IN

Equity Shares (m)

421.1

M. Cap. (INR b)/(USD b) 52-Week Range (INR) 1,6,12 Rel Perf. (%)

490 / 7

CMP: INR1,163 

1450 / 632 -3 / 6 / 61

Financial Snapshot (INR b) Y/E March 2016 2017E 2018E 2019E NII 45.7 57.5 72.3 91.8 OP 43.0 54.5 69.2 87.1 NP 25.4 31.4 40.4 50.2 NIM (%) 3.4 3.5 3.6 3.7 EPS (INR) 60.4 74.5 95.8 119.3 EPS Gr. (%) 25.8 23.4 28.6 24.5 BV/Sh. (INR) 327.8 386.8 463.0 558.0 ABV/Sh. (INR) 323.4 381.2 456.7 549.9 RoE (%) 19.9 20.9 22.6 23.4 RoA (%) 1.7 1.7 1.8 1.8 Div. Payout (%) 19.1 20.3 20.3 20.3 Valuations P/E(X) 19.3 15.6 12.1 9.7 P/BV (X) 3.5 3.0 2.5 2.1 P/ABV (X) 3.6 3.1 2.5 2.1 Div. Yield (%) 0.9 1.1 1.4 1.8

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

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



TP: INR1,500 (+30%)

On a lower base, we expect loan growth to be above the industry average at 33%+ YoY (nearly 5x industry growth rates) on the back of refinancing opportunities and strong growth in retail banking. Despite benefits flowing in form of lower cost of funds, excess liquidity, incremental CRR and competitive pressure on the lending side would pressurize NIMs (factored a 10bp decline). Consequently, NII growth is expected to be healthy at ~27% YoY – the best among peers. Non-interest income growth is likely to be ~23% YoY, led by strong growth from third-party distribution, continued momentum in financial advisory and higher trading gains. Led by aggressive franchise expansion, we expect opex growth to remain high (30%+ YoY). Asset quality performance so far has been significantly better than industry; we expect this trend to continue. YES trades at 2.5x FY18E BV and 12.1x FY18E EPS. Return ratios also remain strong (RoA of ~1.8% and RoE of 20%+). Maintain Buy.

Key issues to watch for  Implementation of retail strategy on assets and liabilities sides.  Performance on asset quality and quantum of loans rescheduled under 5:25 scheme/sale to ARCs.

Quarterly Performance Net Interest Income % Change (Y-o-Y) Other Income Net Income Operating Expenses Operating Profit % Change (Y-o-Y) Other Provisions Profit before Tax Tax Provisions Net Profit % Change (Y-o-Y) Operating Parameters NIM (Cal, %) Deposit Growth (%) Loan Growth (%) CD Ratio (%) Tax Rate (%) Asset Quality Gross NPA (INR B) Gross NPA (%) E: MOSL Estimates

January 2017

Buy

(INR Million) 1Q 10,598 42.2 5,452 16,050 6,967 9,083 43.7 980 8,103 2,591 5,512 27.7

FY16 2Q 3Q 11,085 11,569 29.4 27.3 6,181 7,461 17,266 19,030 7,074 7,534 10,191 11,496 24.7 33.2 1,039 1,479 9,152 10,016 3,048 3,260 6,104 6,757 26.5 25.1

4Q 12,414 27.1 8,028 20,443 8,188 12,255 30.7 1,865 10,390 3,369 7,021 27.4

1Q 13,166 24.2 9,005 22,171 9,103 13,068 43.9 2,066 11,001 3,683 7,318 32.8

FY17 2Q 3QE 14,462 14,632 30.5 26.5 8,879 9,175 23,340 23,807 9,481 9,823 13,860 13,985 36.0 21.7 1,617 1,375 12,243 12,610 4,228 4,161 8,015 8,449 31.3 25.0

FY16

FY17E

4QE 15,264 23.0 10,624 25,888 11,163 14,724 20.2 1,856 12,869 4,096 8,773 25.0

45,667 30.9 27,121 72,789 29,764 43,025 32.4 5,363 37,662 12,268 25,394 26.6

57,524 26.0 36,512 94,036 39,570 54,466 26.6 6,914 47,553 16,168 31,385 23.6

3.5 25.2 35.1 83.6 32.0

3.6 24.0 29.0 80.5 33.3

3.6 23.1 26.7 83.2 32.5

3.6 22.5 30.0 87.9 32.4

3.5 28.6 33.0 86.4 33.5

3.7 28.9 37.7 86.1 34.5

3.6 32.5 33.2 83.6 33.0

3.6 27.0 25.0 86.5 31.8

3.6 22.5 30.0 87.9 32.6

3.6 27.0 25.0 86.5 34.0

3.7 0.5

4.9 0.6

5.6 0.7

7.5 0.8

8.4 0.8

9.2 0.8

10.8 1.0

10.4 0.8

7.5 0.8

10.4 0.8

145

December 2016 Results Preview | Dec 2016

Financials - NBFCs Company name

Expect demonetization-led subdued performance

Bajaj Finance

Disbursement growth – the key monitorable; Asset quality impact camouflaged

Bharat Financial Inclusion



Dewan Housing GRUH Finance HDFC Indiabulls Housing LIC Housing Fin M & M Financial Muthoot Finance Repco Home Fin Shriram Transport Fin.









We expect NBFCs under our coverage universe to report PAT growth of 16% YoY in 3QFY17. In our view, disbursements for all NBFCs have been hit on account of demonetization. Asset quality woes may not be reflected in the quarterly numbers due to the Reserve Bank of India (RBI) dispensation. We expect housing finance companies (HFCs), especially those with a low share of LAP and corporate loans, to perform relatively well on the asset quality front compared to NBFC-AFCs. Our discussions with managements indicate that the business performance was not as bad as envisaged. We believe management commentary on the 4Q outlook is the key. Within our NBFC coverage universe, BHAFIN and LICHF are likely to post strong earnings growth of 25%+ YoY, which is commendable in this environment. HFCs should see a stable quarter in terms of loan growth due to the outstanding sanction pipeline. We would closely look at the margins performance, considering the sharp reduction in bond yields and the significant proportion of incremental funding from bonds. Housing finance companies: HFCs under our coverage universe should deliver PAT growth of 15% YoY in 3QFY17, driven by a continued focus on the individual segment. The sharp rally in bond yields was the key positive in the quarter. DHFL raised INR140b via bonds in the prior quarter, the full benefits of which should be reflected in the NIM in this quarter, in our view. HDFC is likely to deliver 14% loan growth, and dividend from the bank will support earnings growth. We believe players with a high share of self-employed customers and LAP/builder loans are likely to witness slowdown in disbursements and problems in collections. However, the numbers might not reflect the stress in the segment due to the RBI dispensation on NPA recognition. Asset finance companies: We expect growth for AFCs under our coverage to slow down sharply from prior quarters, especially in vehicle finance. We expect SHTF/MMFS to report flat AUM QoQ. BAF, however, will be an exception, with 25%+ AUM growth, driven by all segments, except 2W/3W financing and LAP. We do not foresee significant asset quality issues for BAF as its customers are mostly salaried and collections are mainly non-cash based. Gold financing: Specialized gold financing company, MUTH, is likely to have a subdued quarter with stable AUM QoQ (+10% YoY). We expect margins to improve YoY, but remain largely stable QoQ. We believe future movements in gold prices hold the key. Microfinance: BHAFIN is likely to report slower AUM growth of ~30%, given slowdown in disbursements post demonetization. Margins, however, should remain stable, resulting in ~30% NII growth. The company recently raised INR7.5b, the benefit of which should be reflected in 2H. Reduction in lending rates due to declining cost of funds and increase in one-year loan ticket-size by the RBI should boost demand for microcredit over medium term, in our view.

Sunesh Khanna (Sunesh.K [email protected]); +91 22 3982 5521 Alpesh Mehta ([email protected])/Piran Engineer ([email protected]); +91 22 3980 4393 January 2017

146

December 2016 Results Preview | Sector: Financials

Exhibit 1: Expected quarterly performance summary (INR m) Sector

NBFC Bajaj Finance Bharat Financial Dewan Housing GRUH Finance HDFC Indiabulls Housing LIC Housing Fin M & M Financial Muthoot Finance Repco Home Fin Shriram Transport Fin. NBFC Banking Sector

CMP (INR)

Reco

870 629 244 328 1,213 644 518 274 287 577 911

Buy Buy Buy Neutral Buy Buy Buy Buy Buy Buy Buy

Net Interest Income Var % Var % Dec-16 YoY QoQ

Operating Profit Var % Var % Dec-16 YoY QoQ

Net Profit Var % Var % Dec-16 YoY QoQ

14,773 1,958 4,785 1,332 23,927 9,409 9,298 8,364 7,386 889 14,003 96,124

8,623 1,243 3,770 1,057 22,357 9,806 8,517 4,834 4,201 778 10,553 75,739

4,404 1,043 2,122 640 16,539 7,298 5,316 1,512 2,617 411 3,781 45,683

12.6 32.6 12.2 10.9 9.6 10.8 24.5 14.5 31.5 13.9 7.7 13.7

Exhibit 2: Relative performance— 3 months (%) Sensex Index

11.8 11.2 14.8 6.1 8.8 21.7 25.2 8.8 41.3 13.9 6.5 13.9

8.4 -19.7 -5.1 0.7 3.7 6.4 7.7 7.3 -12.4 -7.1 0.2 2.5

7.8 8.0 31.2 -28.5 14.1 -8.8 19.2 3.4 8.8 -9.5 21.1 6.6 26.9 7.5 125.1 59.5 40.2 -11.8 6.6 -10.0 0.8 -2.5 16.0 -2.4 Source: MOSL

Exhibit 3: Relative performance— 1-year (%)

MOSL Financials Index

Sensex Index

MOSL Financials Index

Dec-16

Nov-16

Oct-16

Sep-16

Aug-16

Dec-16

Oct-16

Source: Bloomberg, MOSL

Jul-16

80 Jun-16

90

May-16

90

Apr-16

93

Mar-16

100

Dec-15

96

Nov-16

110

Sep-16

99

Feb-16

120

Jan-16

102

6.2 -7.4 -2.8 0.7 4.2 6.7 7.4 6.8 -2.3 -1.5 3.5 3.9

Source: Bloomberg, MOSL

Exhibit 4: Comparative valuation Sector / Companies NBFC Bajaj Finance Bharat Financial Dewan Housing GRUH Finance HDFC Indiabulls Housing LIC Housing Fin M & M Financial Muthoot Finance Power Finance Corp Repco Home Fin Rural Electric. Corp. Shriram Transport Fin. NBFC Aggregate

January 2017

CMP (INR)

Reco

870 629 244 328 1,213 644 518 274 287 124 577 125 911

Buy Buy Buy Neutral Buy Buy Buy Buy Buy Neutral Buy Neutral Buy

FY16 31.8 42.7 29.0 7.8 47.5 69.5 39.4 12.7 27.5 24.0 26.9 29.4 63.5

EPS (INR) FY17E FY18E 41.3 38.5 36.8 9.6 53.7 87.7 48.1 14.6 32.0 25.5 38.0 35.3 82.3

56.7 63.1 44.6 12.3 61.4 113.1 57.3 16.0 39.0 40.5 51.6 39.9 101.4

FY16 27.4 14.7 8.4 41.8 25.5 9.3 13.2 21.6 10.4 5.2 21.4 4.2 14.3 13.6

PE (x) FY17E FY18E 21.1 16.3 6.6 34.0 22.6 7.3 10.8 18.7 9.0 4.8 15.2 3.5 11.1 11.7

15.3 10.0 5.5 26.7 19.7 5.7 9.0 17.1 7.4 3.1 11.2 3.1 9.0 9.2

FY16 5.3 3.2 1.2 11.7 4.9 2.3 2.4 2.3 1.8 0.8 3.3 0.7 1.8 2.4

PB (x) FY17E FY18E 4.4 2.7 1.1 9.5 4.4 2.0 2.1 2.1 1.6 0.7 2.7 0.6 1.6 2.1

3.5 2.1 0.9 7.8 4.0 1.8 1.7 2.0 1.4 0.6 2.3 0.6 1.4 1.8

FY16 21.1 28.6 15.8 30.7 20.8 26.0 20.0 11.3 18.4 16.8 16.4 18.8 13.4 17.7

RoE (%) FY17E FY18E 22.8 25.4 17.7 23.5 17.2 18.2 30.9 32.2 21.1 21.6 29.3 33.2 20.7 20.9 11.9 12.0 19.0 20.4 16.2 22.3 19.7 22.2 19.5 18.9 15.4 16.6 18.1 19.9 Source: MOSL

147

December 2016 Results Preview | Sector: Financials

Bajaj Finance Bloomberg Equity Shares (m) M. Cap. (INR b)/(USD b) 52-Week Range (INR) 1,6,12 Rel Perf. (%)

BAF IN 535.5 466 / 7

CMP: INR900 

1180 / 535 -5 / 9 / 40

Financial Snapshot (INR b) Y/E March 2016 2017E 2018E 2019E NII 40.3 51.4 66.3 85.7 PPP 25.1 33.3 44.1 58.8 PAT 12.8 17.0 22.1 30.4 EPS (INR) 23.9 31.8 41.3 56.7 EPS Gr. (%) 33.4 33.1 30.1 37.2 BV/Sh. (INR) 136.8 163.9 199.2 247.6 RoA on AUM (%) 3.2 3.3 3.3 3.4 RoE (%) 21.1 21.1 22.8 25.4 Payout (%) 2.9 14.0 14.0 14.0 Valuations P/E (x) 37.7 28.3 21.8 15.9 P/BV (x) 6.6 5.5 4.5 3.6 Div. Yield (%) 0.3 0.3 0.3 0.5

    

TP: INR1,096 (+22%)

We expect AUM growth of 27% YoY in 3QFY17, driven by strong growth in consumer and commercial lending. LAP and 2W/3W financing will be a drag on AUM growth. NII should grow 13% YoY; margins are likely to decline 190bp YoY off a high base. Asset quality is likely to remain stable. As of September 2016, GNPAs were at 1.58% and NNPAs at 0.43%. We expect provisions of INR1.9b, as against INR1.7b in 2QFY17 and INR1.6b in 3QFY16. Net profit is likely to grow 8% YoY to INR4.2b. The stock trades at 5.1x FY17E and 4.2x FY18E BV. Maintain Buy.

Key issues to watch for  Commentary on business growth momentum due to the impact of demonetization.  Guidance on margin due to changing product mix going forward.  Asset quality trends, especially in LAP and 2W/3W businesses.  Performance of businesses such as rural SME lending, lifestyle financing and e-commerce financing.

Quarterly Performance

(INR Million)

Income from operations Other Operating Income

1Q 15,716 746

FY16 2Q 3Q 15,921 19,717 878 897

4Q 18,212 957

Operating Income

16,462

16,799

20,614

32.4 6,771 9,692 30.3 96 9,788 4,531 5,257 30.3 1,033 4,224 1,468 2,756 30.4 32.0 34.7 46.3 34.8

36.3 6,947 9,853 43.3 206 10,059 4,411 5,648 49.1 1,368 4,280 1,486 2,794 41.7 35.6 30.0 43.9 34.7

39.6 7,493 13,121 48.4 83 13,203 5,490 7,714 54.0 1,462 6,252 2,167 4,085 58.1 41.0 37.2 41.6 34.7

Y/E March

YoY Growth (%) Interest expenses Net Income YoY Growth (%) Other income Total Income Operating Expenses Operating Profit YoY Growth (%) Provisions and Cont. Profit before Tax Tax Provisions Net Profit YoY Growth (%) Loan Growth (%) Borrowings Growth (%) Cost to Income Ratio (%) Tax Rate (%) E: MOSL Estimates

January 2017

Buy

1Q 21,659 1,205

FY17 2Q 3QE 21,802 23,001 1,668 1,668

4QE 23,611 1,648

FY16

FY17E

69,566 3,477

90,073 6,189

19,168

22,864

23,470

24,669

25,259

73,043

96,262

34.1 8,058 11,110 35.9 406 11,516 5,061 6,455 40.9 1,565 4,890 1,740 3,150 36.4 36.5 38.7 43.9 35.6

38.9 8,833 14,031 44.8 147 14,178 5,865 8,312 58.1 1,797 6,515 2,275 4,240 53.8 39.5 40.5 41.4 34.9

39.7 9,562 13,909 41.2 190 14,098 6,144 7,954 40.8 1,691 6,263 2,185 4,078 45.9 38.0 39.0 43.6 34.9

19.7 9,896 14,773 12.6 250 15,023 6,400 8,623 11.8 1,900 6,723 2,319 4,404 7.8 34.0 36.0 42.6 34.5

31.8 10,408 14,851 33.7 315 15,166 6,778 8,388 29.9 1,915 6,473 2,181 4,292 36.2 38.0 42.1 44.7 33.7

35.7 29,269 43,775 39.7 792 44,566 19,492 24,283 42.4 5,429 18,854 6,861 12,785 42.4 38.8 38.7 44.5 34.1

31.8 38,699 57,564 31.5 901 58,465 25,187 32,376 33.3 7,303 25,073 8,961 17,013 33.1 26.0 29.7 43.8 35.1

148

December 2016 Results Preview | Sector: Financials

Bharat Financial Inclusion Bloomberg

SK SM IN

Equity Shares (m) M. Cap. (INR b)/(USD b) 52-Week Range (INR) 1,6,12 Rel Perf. (%) Financial Snapshot (INR m) Y/E March 2016 2017E NII 5,796 7,902 PPP 4,325 5,592 PAT 3,030 5,858 EPS (INR) 23.8 42.7 BV/Share (INR) 108.6 198.4 RoA on AUM (%) 5.1 6.3 RoE (%) 24.9 28.6 Valuations P/E (x) 26.6 14.8 P/BV (x) 5.8 3.2

137.1 86.6/1.3 2095 / 835 -3/16/64

2018E 10,954 7,750 5,278 38.5 236.9 3.8 17.7

2019E 16,905 12,427 8,647 63.1 300.0 4.4 23.5

16.4 2.7

10.0 2.1

Quarterly Performance Y/E March Income from operations Other Income Total income Y - o- Y G row th ( % ) Interest expenses Other income Net Income Y - o- Y G row th ( % ) Operating Expenses Provisions Profit before tax Y - o- Y G row th ( % ) Tax Provisions Net Profit Y - o- Y G row th ( % )

January 2017

CMP: INR632

TP: INR893 (41%)

Buy

BFI’s GLP growth is likely to slow down to 30% YoY, given slower pace of disbursements post 8-November.  Net profit is likely to grow 54% YoY to INR1.2b, driven by strong loan growth and stable costs.  Net interest income is likely to grow 31% YoY to INR2.75b, with margins largely stable.  Cost-to-income ratio is expected to increase sharply from 47% in 3QFY16 and 2QFY17 to 55% in 3QFY17.  Asset quality is expected to remain stable; in 2QFY17, GNPAs were at 0.1% and NNPAs at 0.04%.  We factor in provisions of INR200m, as against INR90m in 2QFY17.  The stock trades at 3.0x FY17E and 2.5x FY18E BV (post-dilution). Maintain Buy. Key issues to watch for  Management commentary on growth trends/demand for loans.  Guidance on C/I ratio.  Movement in borrowing costs and margins.  Asset quality trends and collection efficiency in UP and Maharashtra. 

(INR Million) 1Q 2,173 236 2,409 5 8 .6 1,008 418 1,819 5 0 .1 952 72 795 6 1 .2 183 611 2 4 .0

FY16 2Q 2,664 249 2,913 5 3 .2 1,169 330 2,073 5 4 .8 974 88 1,012 7 8 .2 233 779 3 7 .2

3Q 2,805 268 3,073 6 6 .6 1,327 362 2,107 6 4 .3 989 87 1,031 1 5 1 .1 236 795 9 3 .6

4Q 3,000 297 3,298 6 6 .9 1,341 406 2,362 6 7 .8 1,121 139 1,102 1 3 7 .2 257 845 1 0 8 .4

1Q 3,341 348 3,690 5 3 .2 1,361 452 2,780 5 2 .9 1,269 120 1,391 7 4 .9 -969 2,359 2 8 5 .8

FY17 2Q 3,692 382 4,074 3 9 .9 1,576 422 2,921 4 0 .9 1,372 90 1,459 4 4 .2 0 1,459 8 7 .4

3Q 3,692 344 4,036 3 1 .3 1,733 450 2,753 3 0 .7 1,509 200 1,043 1 .2 0 1,043 3 1 .2

4Q 3,800 534 4,334 6 1 .0 1,953 392 2,773 1 7 .4 1,483 295 995 -9 .7 0 995 1 7 .8

FY16

FY17

10,642 1,049 11,691 6 1 .5 4,846 1,515 8,361 5 9 .6 4,036 386 3,939 1 0 3 .5 909 3,030 6 1 .4

14,525 1,609 16,133 3 8 .0 6,623 1,715 11,226 3 4 .3 5,634 705 4,888 2 4 .1 -969 5,856 9 3 .3

149

December 2016 Results Preview | Sector: Financials

Dewan Housing Finance Bloomberg

DEWH IN

Equity Shares (m)

291.8

M. Cap. (INR b)/(USD b)

74 / 1

52-Week Range (INR)

337 / 141

1,6,12 Rel Perf. (%)

-4 / 18 / 2

CMP: INR255  

Financials & Valuation (INR b) Y/E March 2016 2017E 2018E 2019E NII 14.8 19.5 23.7 29.2 PPP 12.8 15.7 19.4 24.2 Adj. PAT 7.3 8.9 11.0 13.4 EPS (INR) 25.0 29.7 36.8 44.6 EPS Gr. (%) 17.2 19.0 23.7 21.2 BV (INR) 172 201 228 263 RoAA (%) 1.2 1.2 1.3 1.3 RoE (%) 15.1 16.1 17.1 18.2 Payout (%) 46.1 23.2 23.2 23.2 Valuations P/E (x) 10.2 8.6 6.9 5.7 P/BV (x) 1.5 1.3 1.1 1.0 P/ABV (x) 1.5 1.3 1.1 1.0 Div. Yield (%) 7.8 2.3 2.9 3.5

DEWH: Quarterly performance Y/E March Net Interest Income YoY Growth (%) Fees and other income Net Income YoY Growth (%) Operating Expenses YoY Growth (%) Operating Profits YoY Growth (%) Provisions Profit before Tax Tax Provisions Profit after tax YoY Growth (%) Cost to Income Ratio (%) Tax Rate (%) E: MOSL Estimates

January 2017

1Q 3,988 21.6



  

TP: INR413 (62%)

Buy

AUM is likely to grow moderately by 8% YoY on account of the impact of demonetization. NII growth is likely to moderate to 16%, and margins are likely to remain largely stable on a sequential basis. DHFL will get the full benefit of NCD raise in the prior quarter. Operating expenses will grow moderately at 10.5% YoY. However, due to sluggish NII growth, C/I ratio will increase 270bp QoQ to 28.7%. Asset quality to remain stable. As of June 2016, GNPAs were 0.96% and NNPAs nil. We factor in provisions of INR550m for 3QFY17. Net profit is likely to grow 23% YoY to INR2.23b. The stock trades at 1.5x FY17E and 1.3x FY18E BV. Maintain Buy.

Key issues to watch for  Business growth trends and momentum, and management commentary on the same.  Management views on margins due to change in liability mix.  Asset quality trends in non-retail and LAP segments.

FY16 2Q 3Q 4,065 4,264 22.5 20.2

4Q 4,373 19.7

1Q 4,564 14.5

FY17 2Q 3QE 4,923 4,930 21.1 15.6

(INR Million) FY16 FY17E 4QE 5,087 16.3

16,690 21.0

19,505 16.9

201

477

392

507

275

447

500

872

1,577

2,094

4,189 17.7 1,256 15.6 2,934 18.6 320 2,614 881 1,733 17.8 30.0 33.7

4,542 22.5 1,318 7.6 3,223 30.0 450 2,773 970 1,804 18.5 29.0 35.0

4,656 18.5 1,372 8.5 3,285 23.3 480 2,805 946 1,859 16.5 29.5 33.7

4,880 19.9 1,550 28.1 3,330 16.4 500 2,830 934 1,897 16.9 31.8 33.0

4,840 15.5 1,361 8.4 3,479 18.6 450 3,029 1,015 2,014 16.2 28.1 33.5

5,371 18.3 1,398 6.1 3,972 23.2 450 3,522 1,196 2,326 29.0 26.0 34.0

5,430 16.6 1,405 2.4 4,025 22.6 550 3,475 1,185 2,290 23.2 25.9 34.1

5,958 22.1 1,711 10.4 4,248 27.5 750 3,498 1,216 2,282 20.3 28.7 34.8

18,267 19.7 5,495 14.8 12,772 21.9 1,750 11,022 3,730 7,292 17.4 30.1 33.8

21,599 18.2 5,875 6.9 15,724 23.1 2,200 13,524 4,612 8,912 22.2 27.2 34.1

150

December 2016 Results Preview | Sector: Financials

Gruh Finance Bloomberg

GRHF IN

Equity Shares (m) M. Cap. (INR b)/(USD b) 52-Week Range (INR) 1,6,12 Rel Perf. (%)

363.4 119 / 2 370 / 226 6 / 15 / 19

CMP: INR333   

Financials & Valuation (INR b) Y/E March 2016 2017E 2018E 2019E NII 4.2 5.2 6.4 8.2 PPP 3.8 4.7 5.8 7.4 PAT 2.4 2.9 3.5 4.5 EPS (INR) 6.7 7.8 9.6 12.3 EPS Gr. (%) 19.4 17.0 22.9 27.6 BV/Sh. (INR) 23.0 28.1 34.3 42.1 ABV/Sh. (INR) 23.0 28.1 34.3 42.2 RoA (%) 2.4 2.2 2.2 2.3 RoE (%) 31.5 30.7 30.9 32.2 Payout (%) 34.3 30.0 30.0 31.0 Valuations P/E (x) 49.7 42.5 34.6 27.1 P/BV (x) 14.5 11.9 9.7 7.9 Div. Yield (%) 0.7 0.7 0.9 1.1

   

TP: INR339 (+2%)

Neutral

We expect loan growth to moderate to 15% YoY from 22% YoY in the prior quarter. Margins are likely to remain largely unchanged sequentially, but decline modestly on a YoY basis. NII is likely to grow 11% YoY to INR1.3b. Operating expenses are likely to grow 34% YoY and 1% QoQ. We expect asset quality to remain stable despite the impact of demonetization. We expect provisions of INR80m for the quarter. Net profit is likely to grow 19% YoY to INR640m. The stock trades at 11.5x FY17E and 9.4x FY18E BV. Maintain Neutral.

Key issues to watch for  Business outlook, loan growth in various geographies.  Movement in borrowing costs and margins.  Outlook on asset quality.  Management’s outlook on developments in the affordable housing space.

GRHF IN: Quarterly performance Y/E MARCH Operating Income Total income Y-o-Y Growth (%) Interest expenses Net Income Operating Expenses Operating Profit Y-o-Y Growth (%) Provisions and Cont. Profit before Tax Tax Provisions Net Profit Y-o-Y Growth (%) Int Exp/ Int Earned (%) Cost to Income Ratio (%) Tax Rate (%)

(INR Million) 1Q 2,967 2,967 22.8 1,902 1,066 196 869 18.6 121 749 246 503 20.0 64.1 18.4 32.8

FY16 2Q 3,118 3,118 21.0 1,987 1,131 257 874 22.7 72 803 286 517 19.9 63.7 22.7 35.6

3Q 3,236 3,236 19.3 2,034 1,202 205 997 21.8 178 818 281 537 20.0 62.9 17.1 34.4

4Q 3,705 3,705 21.5 2,151 1,554 245 1,309 22.8 61 1,248 370 878 18.5 58.1 15.8 29.6

1Q 3,463 3,463 16.7 2,241 1,222 201 1,021 17.5 125 896 294 601 19.6 64.7 16.5 32.8

FY17 2Q 3,674 3,674 17.8 2,351 1,323 273 1,050 20.1 91 958 339 619 19.9 64.0 20.7 35.4

3QE 3,766 3,766 16.4 2,434 1,332 275 1,057 6.1 80 977 337 640 19.2 64.6 20.6 34.5

4QE 4,695 4,695 26.7 2,815 1,880 296 1,584 21.0 63 1,521 532 989 12.7 60.0 15.7 35.0

FY16

FY17E

12,752 12,754 20.3 8,074 4,680 844 3,836 20.4 219 3,617 1,181 2,436 19.5 63.3 18.0 32.7

15,597 15,599 22.3 9,841 5,758 1,046 4,712 22.8 359 4,353 1,502 2,851 17.0 63.1 18.2 34.5

E: MOSL Estimates

January 2017

151

December 2016 Results Preview | Sector: Financials

HDFC Bloomberg

HDFC IN

Equity Shares (m) M. Cap. (INR b)/(USD b) 52-Week Range (INR) 1,6,12 Rel Perf. (%)

1574.7 1909 / 28 1463 / 1012 -2 / -1 / -4

Financial Snapshot (INR b) Y/E March 2016 2017E 2018E 2019E NII 87.0 96.9 108.8 124.4 PAT 70.9 75.0 84.8 97.1 Adj. EPS (INR) 30.6 34.3 36.9 42.1 EPS Gr. (%) 5.8 12.2 7.6 14.0 BV/Sh. (INR) 221.7 245.3 272.5 304.7 ABV/Sh. (INR) 169.5 193.2 215.9 248.1 RoAA (%) 2.6 2.5 2.5 2.5 Core RoE (%) 21.4 19.5 18.9 18.1 Payout (%) 43.9 43.5 43.5 43.5 Valuation AP/E (x) 26.1 19.6 16.4 11.7 P/BV (x) 5.5 5.0 4.5 4.0 AP/ABV (x) 4.7 3.5 2.8 2.0 Div. Yield (%) 1.4 1.5 1.7 1.9

HDFC: Quarterly Performance Y/E March Interest Income Interest Expense Net Interest Income Y oY C h ang e ( % ) Gross fee income Core Income Y oY C h ang e ( % ) Operating Expenses % of c ore inc om e Commission expenses % of c ore inc om e Core Operating profits Y oY C h ang e ( % ) Provisions Core PBT Y oY C h ang e ( % ) Profit on Sale of Inv. Dividend income One off expense/Prov PBT Provision for Tax PAT YoY Change (%) E: MOSL Estimates

January 2017

CMP: INR1,216 TP: INR1,553 (+28%)  

  

 

Buy

We expect moderate earnings growth of 12%+ YoY, in line with growth witnessed in the prior quarter. We estimate AUM growth at 14%, which will be largely driven by the individual segment. We expect demonetization to have a lagged impact on growth, i.e. growth will be impacted more in 4QFY17. Margins are likely to decline 20+bp YoY, but remain largely stable QoQ. This will drive 6% YoY NII growth for the quarter. Cost-to-income ratio will inch up marginally to 8%. Asset quality has remained healthy over past several quarters, and the trend is likely to continue. However, asset quality in corporate loan book would be a key monitorable. We estimate provisions of INR700m, as against INR950m in 2QFY17. The stock trades at 3.7x FY17E AP/ABV and 3.0x FY18E AP/ABV (price adjusted for value of other businesses and book value adjusted for investments made in those businesses). Buy.

Key issues to watch for  Loan growth and uptick in corporate loans.  Impact of demonetization on real estate demand.  Movement in spreads and margins (on individual loans) and asset quality trends. (INR Million)

1Q 68,630 48,245 20,385 1 6 .8 1,755 22,140 1 6 .8 2,029 9 .2 978 4 .4 19,133 1 6 .5 500 18,633 1 6 .0 230 548 0 19,520 5,910 13,610 1.2

FY16 2Q 68,632 48,586 20,047 6 .7 1,768 21,815 6 .5 1,872 8 .6 1,053 4 .8 18,890 6 .5 520 18,370 5 .6 480 4,248 0 23,236 7,193 16,043 18.2

3Q 70,037 48,216 21,821 8 .2 1,810 23,631 9 .8 2,001 8 .5 1,087 4 .6 20,543 9 .1 680 19,863 8 .1 569 1,356 0 21,905 6,700 15,205 6.7

4Q 73,400 48,699 24,701 4 .9 2,894 27,595 8 .0 1,688 6 .1 1,304 4 .7 24,603 7 .4 950 23,653 5 .5 15,199 1,917 -4,500 36,421 10,350 26,071 40.0

1Q 73,552 51,262 22,291 9 .3 1,913 24,204 9 .3 2,274 9 .4 1,369 5 .7 20,561 7 .5 650 19,911 6 .9 9,216 510 -2,750 26,997 8,290 18,707 37.5

FY17 2Q 75,431 52,459 22,972 1 4 .6 1,985 24,958 1 4 .4 2,048 8 .2 1,344 5 .4 21,565 1 4 .2 950 20,615 1 2 .2 281 4,560

3Q 76,734 53,508 23,227 6 .4 2,750 25,977 9 .9 2,170 8 .4 1,400 5 .4 22,407 9 .1 700 21,707 9 .3 750 1,650

4Q 83,523 56,221 27,302 1 0 .5 2,596 29,898 8 .3 1,891 6 .3 1,635 5 .5 26,372 7 .2 450 25,922 9 .6 1,503 2,609

25,575 7,310 18,265 13.9

24,257 7,277 16,980 11.7

30,247 9,246 21,001 -19.4

FY16

FY17

280,699 193,745 86,954 8 .8 8,183 95,137 1 0 .1 7,590 8 .0 4,422 4 .6 83,126 9 .7 2,650 80,476 8 .5 16,478 8,113 -4,500 101,081 30,150 70,931 18.4

309,241 213,449 95,791 1 0 .2 9,245 105,037 1 0 .4 8,384 8 .0 5,748 5 .5 90,905 9 .4 2,750 88,155 9 .5 11,750 9,329 -2,750 107,076 32,123 74,953 5.7

152

December 2016 Results Preview | Sector: Financials

Indiabulls Housing Bloomberg

IHFL IN

Equity Shares (m)

421.3

M. Cap. (INR b)/(USD b)

271 / 4

52-Week Range (INR) 1,6,12 Rel Perf. (%)

-14 / -4 / -15

Quarterly Performance Y/E March

January 2017

TP: INR1,015 (+48%)

Buy



We expect strong loan growth to continue, driven by retail home loans.



NII is likely to grow 11% YoY in the quarter. Spreads are likely to contract (but remain over 300bp) due to increased share of home loans.



Expenses are likely to grow 28% YoY, resulting in modest uptick in cost-income ratio.



Asset quality is expected to remain stable. In 1QFY17, GNPAs were at 0.83% and NNPAs at 0.34%.



PAT is likely to grow 21% YoY to INR7.3b during the quarter.



The stock trades at 2.3x FY17E and 2.0x FY18E BV. Maintain Buy.

895 / 551

Financial Snapshot (INR b) Y/E March 2016 2017E 2018E 2019E Net Fin inc 28.7 38.9 49.7 63.7 PPP 36.4 45.4 57.0 71.4 EPS (INR) 55.7 69.5 87.7 113.1 EPS Gr. (%) 4.1 24.9 26.1 29.0 BV/Sh. (INR) 254 281 317 364 RoA on AUM (%) 3.3 3.3 3.3 3.4 RoE (%) 27.1 26.0 29.3 33.2 Payout (%) 76.0 52.5 50.0 58.5 Valuations P/E (x) 12.4 9.9 7.8 6.1 P/BV (x) 2.7 2.5 2.2 1.9 P/ABV (x) 2.7 2.5 2.2 1.9 Div. Yield (%) 6.5 5.3 6.4 8.2

Income from operations Other Income Total income Y-o-Y Growth (%) Interest expenses Net Income Y-o-Y Growth (%) Operating Expenses Profit before tax Y-o-Y Growth (%) Tax Provisions Net Profit Minority Int Net Profit after MI Y-o-Y Growth (%) E: MOSL Estimates

CMP: INR688

Key issues to watch for  AUM growth trend and growth guidance post demonetization.  Movement in incremental spreads and margins.  Asset quality trends in corporate segment and loan against property.  Updates on acquisition of retail bank, NorthOak Bank, in the UK.

(INR Million) 1Q 18,290 1,960 20,249 27.4 11,390 8,859 26.6 1,937 6,922 29.2 1,810 5,113 0 5,113 20.7

FY16 2Q 19,850 2,607 22,457 31.7 12,450 10,007 33.4 2,594 7,413 31.1 1,858 5,555 0 5,555 23.9

3Q 20,751 2,326 23,077 24.2 12,258 10,820 30.2 2,765 8,055 29.5 2,010 6,045 -21 6,024 26.0

4Q 24,009 2,463 26,472 24.7 13,616 12,855 22.3 3,957 8,898 18.7 2,083 6,815 -60 6,754 22.6

1Q 23,720 2,255 25,975 28.3 14,109 11,866 33.9 3,116 8,750 26.4 2,401 6,349 -49 6,301 23.2

FY17 2Q 25,098 3,651 28,749 28.0 16,279 12,470 24.6 3,258 9,212 24.3 2,352 6,861 -18 6,843 23.2

3QE 25,851 3,940 29,790 29.1 16,442 13,348 23.4 3,542 9,806 21.7 2,452 7,355 -57 7,298 21.1

4QE 26,752 4,224 30,976 17.0 15,685 15,290 18.9 3,622 11,668 31.1 2,852 8,816 -56 8,760 29.7

FY16

FY17E

82,899 9,356 92,256 26.8 49,714 42,541 27.7 11,253 31,289 26.5 7,761 23,528 -81 23,447 23.3

101,421 14,070 115,490 25.2 62,516 52,975 24.5 13,538 39,437 26.0 10,056 29,380 -179 29,201 24.5

153

December 2016 Results Preview | Sector: Financials

LIC Housing Finance Bloomberg

LICHF IN

Equity Shares (m)

505.0

M. Cap. (INR b)/(USD b)

262 / 4

52-Week Range (INR)

624 / 389

1,6,12 Rel Perf. (%)

-9 / 6 / 2

Financial Snapshot (INR b) Y/E March 2016 2017E 2018E 2019E NII 29.4 36.4 42.6 50.7 PPP 27.1 33.2 38.7 46.0 Adj. PAT 16.6 19.9 24.3 28.9 Adj. EPS (INR) 32.9 39.4 48.1 57.3 EPS Gr. (%) 23.3 19.7 22.3 19.1 BV/Sh (INR) 181.1 212.8 251.4 297.4 RoAA (%) 1.5 1.5 1.5 1.6 RoE (%) 19.6 20.0 20.7 20.9 Payout (%) 19.4 20.3 20.3 20.3 Valuations P/E (x) 15.8 13.2 10.8 9.1 P/BV (x) 2.9 2.4 2.1 1.8 Div. Yield (%) 1.1 1.3 1.6 1.9

CMP: INR521  



  

TP: INR719 (+38%)

LICHF is likely to report strong earnings growth of 27% YoY, led by stable loan growth and improvement in spreads. Margins are likely to improve ~20bp YoY, driven by significantly lower cost of funds due to falling bond yields as well as significant share of fixed rate book. We expect loan growth of 15% YoY, driven primarily by the retail home loan segment. The share of builder loans is likely to remain below 3% of overall book. Operating expenses shall grow 6% YoY, resulting in C/I ratio of 13% (v/s 15% YoY). Asset quality is likely to remain stable. We model provisions of INR400m, as against INR303m in 2QFY17. The stock trades at 2.6x FY17E and 2.2x FY18E BV. Maintain Buy.

Key issues to watch for  Trend in incremental spreads, given stable share of LAP and lower cost of funds.  Performance of corporate loan book and loans against property.  Management commentary on increasing competitive intensity (which is resulting in higher repayments) and margin trends.

LICHF: Quarterly Performance Y/E March Interest Income Interest Expenses Net Interest Income YoY Growth (%) Fees and other income Net Income YoY Growth (%) Operating Expenses Operating Profit YoY Growth (%) Provisions and Cont. Profit before Tax Tax Provisions Net Profit YoY Growth (%) Adj PAT (Post Tax) YoY Growth (%) Loan Growth (%) Borrowings Growth (%) Cost to Income Ratio (%) Tax Rate (%) E: MOSL Estimates

January 2017

1Q 29,174 22,585 6,589 30.2 481 7,069 24.6 835 6,234 25.3 443 5,790 1,969 3,821 18.6 3,821 18.6 17.9 17.8 11.8 34.0

Buy

(INR Million) FY16 2Q 3Q 30,260 31,018 23,091 23,549 7,169 7,469 34.8 36.2 634 549 7,803 8,018 31.3 30.0 1,060 1,214 6,743 6,804 35.4 28.8 301 344 6,442 6,460 2,325 2,271 4,117 4,189 20.6 21.7 4,117 4,189 20.6 21.7 17.0 15.2 15.2 14.6 13.6 15.1 36.1 35.2

4Q 32,057 23,843 8,214 26.4 683 8,897 25.3 1,578 7,319 27.0 376 6,943 2,463 4,480 18.5 4,480 18.5 15.5 14.9 17.7 35.5

1Q 33,263 25,018 8,245 25.1 535 8,780 24.2 1,382 7,399 18.7 1,165 6,234 2,156 4,078 6.7 4,078 6.7 15.4 15.7 15.7 34.6

FY17 2Q 3QE 34,283 35,821 25,626 26,523 8,657 9,298 20.8 24.5 616 500 9,273 9,798 18.8 22.2 1,364 1,281 7,909 8,517 17.3 25.2 303 400 7,606 8,117 2,659 2,800 4,948 5,316 20.2 26.9 4,948 5,316 20.2 26.9 14.9 15.0 14.2 0.0 14.7 13.1 35.0 34.5

4QE 37,282 27,057 10,225 24.5 918 11,143 25.2 1,758 9,385 28.2 432 8,953 3,204 5,749 28.3 5,749 28.3 16.6 0.0 15.8 35.8

FY16

FY17E

122,508 93,068 29,441 31.6 2,346 31,787 27.7 4,687 27,100 29.1 1,465 25,636 9,028 16,608 19.8 16,608 23.3 15.5 14.9 14.7 35.2

140,649 104,225 36,425 23.7 2,569 38,994 22.7 5,784 33,210 22.5 2,300 30,910 10,819 20,092 21.0 19,884 19.7 16.6 21.1 14.8 35.0

154

December 2016 Results Preview | Sector: Financials

Mahindra Financial Services Bloomberg Equity Shares (m) M. Cap. (INR b)/(USD b)

MMFS IN 563.5 154 / 2

52-Week Range (INR)

405 / 173

1,6,12 Rel Perf. (%)

0 / -19 / 8

Financial Snapshot (INR b) Y/E March 2016 2017E 2018E 2019E NII 32.1 33.7 37.9 43.4 PPP 20.9 20.1 21.9 24.6 PAT 6.7 7.1 8.2 9.1 EPS (INR) 11.9 12.7 14.6 16.0 BV/Sh.(INR) 107.8 116.9 127.5 139.0 ABV/Sh (INR) 93.6 105.0 117.7 130.1 RoA on AUM (%) 1.9 1.8 1.9 1.8 RoE (%) 11.4 11.3 11.9 12.0 Payout (%) 47.2 28.1 28.1 28.1 Valuations P/E (x) 23.6 22.2 19.3 17.5 P/BV (x) 2.6 2.4 2.2 2.0 P/ABV (x) 3.0 2.7 2.4 2.2 Div. Yield (%) 1.4 1.1 1.2 1.4

CMP: INR281       

TP: INR339 (+21%)

MMFS’ AUM is likely to grow 8% YoY, but remain largely stable on a sequential basis. NII is likely to grow 15% YoY to INR8.5b, on account of modest spread expansion. Net income is likely to remain flat YoY at INR7.9b. Margins are likely to improve QoQ on back of lower slippages. Asset quality might deteriorate sequentially. We expect MMFS to use the RBI dispensation regarding NPA recognition norms. We expect provisions of INR2.5b v/s INR3.0b in 2QFY17 and INR3.4b in 3QFY16. As a result, we expect net profit to grow 125% YoY to INR1.5b. The stock trades at 2.2x FY17E and 2.0x FY18E BV. Maintain Buy.

Key issues to watch for  Management commentary on performance of rural areas.  Commentary on pick-up in the CV cycle  Asset quality trend in the wake of good monsoon.  Margin and growth trends.  Performance of subsidiaries.

Quarterly Performance

(INR Million)

Y/E March Operating Income Other Income Total income YoY Growth (%) Interest Expenses Net Income Operating Expenses Operating Profit YoY Growth (%) Provisions Profit before Tax Tax Provisions Net Profit YoY Growth (%) Cost to Income Ratio (%) Provisions/Operating Profits (%) Tax Rate (%) E: MOSL Estimates

January 2017

Buy

1Q 13,608 76 13,684 6.7 6,445 7,239 2,635 4,604 -0.2 3,228 1,376 486 890 -42.6 36.4 70.1 35.3

FY16 2Q 14,200 183 14,383 5.1 6,542 7,841 2,808 5,033 0.7 2,772 2,261 799 1,462 -29.4 35.8 55.1 35.3

3Q 14,002 85 14,087 0.9 6,696 7,391 2,946 4,445 -6.8 3,406 1,039 367 672 -50.8 39.9 76.6 35.3

4Q 16,721 176 16,897 9.9 6,711 10,186 3,391 6,795 5.7 1,089 5,706 2,003 3,703 11.1 33.3 16.0 35.1

1Q 13,664 93 13,757 0.5 6,910 6,847 3,260 3,587 -22.1 2,245 1,341 472 870 -2.2 47.6 62.6 35.2

FY17 2Q 14,916 241 15,157 5.4 7,086 8,071 3,567 4,504 -10.5 3,042 1,462 514 948 -35.1 44.2 67.5 35.2

3QE 15,662 120 15,782 12.0 7,298 8,484 3,650 4,834 8.8 2,500 2,334 821 1,512 125.1 43.0 51.7 35.2

4QE 17,593 138 17,730 4.9 6,851 10,879 3,700 7,179 5.6 1,289 5,889 2,074 3,815 3.0 34.0 18.0 35.2

FY16

FY17E

58,532 519 59,051 5.7 26,393 32,658 11,781 20,877 0.3 10,495 10,383 3,656 6,727 -19.1 36.1 50.3 35.2

61,835 591 62,426 5.7 28,145 34,281 14,178 20,104 -3.7 9,077 11,028 3,881 7,146 6.2 41.4 45.1 35.2

155

December 2016 Results Preview | Sector: Financials

Muthoot Finance Bloomberg

MUTH IN

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

398.0 114 / 2

52-Week Range (INR)

405 / 170

1,6,12 Rel Perf. (%)

-3 / 2 / 57

Financial Snapshot (INR b) Y/E March 2016 2017E 2018E 2019E NII 25.4 29.7 34.4 40.1 PPP 14.8 17.6 20.6 24.6 PAT 8.1 11.0 12.8 15.6 EPS (INR) 20.3 27.5 32.0 39.0 BV/Sh.(INR) 140.8 158.4 178.7 203.6 RoA on AUM (%) 3.4 4.2 4.2 4.2 RoE (%) 15.1 18.4 19.0 20.4 Div. Yld. (%) 2.1 2.9 3.3 4.1 Valuations P/E (x) 14.2 10.5 9.0 7.4 P/BV (x) 2.0 1.8 1.6 1.4

Quarterly Performance Y/E March Income from operations Other operating income Total Operating income YoY Growth (%) Other income Total Income YoY Growth (%) Interest Expenses Net Income Operating Expenses Operating Profit YoY Growth (%) Provisions Profit before Tax Tax Provisions Net Profit YoY Growth (%) E: MOSL Estimates

January 2017

CMP: INR288  

   

TP: INR373 (+29%)

Buy

AUM is expected to grow 10% YoY, but remain largely stable on a sequential basis at INR275b. Calculated margins are likely to improve YoY to ~11% led by better auction realization and increase in lending rates. Moreover, cost of funds is also declining. As a result, NII is expected to grow 31% YoY to INR7.6b. Asset quality is likely to remain stable with GNPL of ~2.2%. We estimate provisions of INR200m, as against INR171m in 2QFY17 and INR74m in 1QFY17. The stock trades at 1.8x FY17E and 1.6x FY18E BV. Maintain Buy.

Key issues to watch for  Management commentary on business growth and steps taken to sustain AUM growth in the wake of demonetization.  Movement in yields and margins, with declining cost of funds.  Progress in gold auctions.

(INR Million) 1Q 11,256 145 11,401 4.8 26 11,426 4.6 5,670 5,756 2,816 2,940 4.6 106 2,835 1,003 1,832 1.7

FY16 2Q 11,226 136 11,361 7.4 38 11,400 7.4 5,652 5,747 2,918 2,830 7.2 146 2,684 939 1,745 2.2

3Q 11,235 148 11,383 6.6 29 11,412 6.7 5,616 5,796 2,823 2,972 23.3 74 2,898 1,032 1,867 20.9

4Q 14,291 179 14,469 31.5 43 14,513 31.7 5,639 8,874 2,824 6,049 116.9 1,299 4,750 2,098 2,652 60.6

1Q 12,712 252 12,964 13.7 44 13,008 13.8 5,571 7,437 3,025 4,413 50.1 176 4,237 1,534 2,703 47.6

FY17 2Q 13,497 320 13,817 21.6 45 13,862 21.6 5,937 7,925 3,130 4,795 69.5 171 4,624 1,657 2,967 70.0

3QE 13,632 150 13,782 21.1 45 13,827 21.2 6,246 7,581 3,380 4,201 41.3 200 4,001 1,384 2,617 40.2

4QE 13,525 135 13,660 -5.6 52 13,712 -5.5 5,946 7,766 3,547 4,220 -30.2 199 4,021 1,334 2,687 1.3

FY16

FY17E

48,007 607 48,614 12.7 136 48,750 12.7 22,577 26,173 11,381 14,792 38.9 1,624 13,169 5,072 8,097 20.7

53,366 857 54,224 11.5 186 54,410 11.6 23,700 30,710 13,081 17,628 19.2 746 16,884 5,909 10,975 35.5

156

December 2016 Results Preview | Sector: Financials

Repco Home Finance Bloomberg

REPCO IN

Equity Shares (m) M. Cap. (INR b)/(USD b) 52-Week Range (INR) 1,6,12 Rel Perf. (%)

61.0 35 / 1

Interest Income Interest Expenses Net Interest Income YoY Growth (%) Other income Total Income YoY Growth (%) Operating Expenses YoY Growth (%) Operating Profits YoY Growth (%) Provisions Profit before Tax Tax Provisions Profit after tax YoY Growth (%) Cost to Income Ratio (%) Tax Rate (%) E: MOSL Estimates

January 2017



891 / 500 -1 / -23 / -19

Financial Snapshot (INR b) Y/E March 2016 2017E 2018E 2019E NII 3.0 3.6 4.8 6.4 PPP 2.7 3.2 4.3 5.8 PAT 1.5 1.7 2.4 3.2 EPS (INR) 24.0 26.9 38.0 51.6 BV/Sh. (INR) 152.7 176.5 210.1 255.7 RoAA (%) 2.2 1.9 2.2 2.4 RoE (%) 17.0 16.4 19.7 22.2 Payout (%) 9.0 11.6 11.6 11.6 Valuation P/E (x) 25.3 22.6 16.0 11.8 P/BV (x) 4.0 3.4 2.9 2.4 Div. Yield (%) 0.3 0.4 0.6 0.9

REPCO: Quarterly performance Y/E March

CMP: INR607

1Q 1,935 1,271 664 25.2 66 730 24.7 154 37.0 576 21.8 113 463 161 302 21.8 21.1 34.7

 

  

TP: INR842 (+39%)

Buy

We expect loan growth to slow down to 18% YoY (stable on a sequential basis), driven by strong sanction pipeline and incremental sanctions during the quarter. Calculated margins are likely to be decline marginally YoY on account of yield pressure. Asset quality is expected to remain stable on a sequential basis. We believe it would take some time for asset quality pressure to ease. Provisions are expected to be INR150m v/s INR127m in the prior quarter and INR92m in 3QFY16. As a result, PAT is expected to grow 7% YoY to INR411m. The stock trades at 2.9x FY17E and 2.4x FY18E BV. Maintain Buy.

Key issues to watch for  Business outlook, loan growth, and share of home loans and LAP.  Repayment trends on account of high share of self-employed customers.  Movement in borrowing costs and margins.  Asset quality trends in the LAP segment.

FY16 2Q 3Q 2,084 2,191 1,344 1,410 740 781 24.7 32.8 80 63 820 843 28.4 32.4 175 160 36.8 13.0 644 683 26.3 37.9 47 92 597 591 207 205 391 386 21.2 25.5 21.4 19.0 34.6 34.7

4Q 2,312 1,460 852 28.7 91 943 26.2 153 -7.1 790 35.7 140 650 228 422 21.3 16.2 35.0

1Q 2,389 1,550 840 26.5 80 920 26.0 149 -3.5 771 33.9 179 592 196 395 30.8 16.2 33.2

FY17 2Q 3QE 2,500 2,550 1,597 1,661 903 889 22.1 13.9 98 90 1,000 979 22.0 16.1 163 201 -6.8 25.3 837 778 29.9 13.9 127 150 710 628 253 217 457 411 17.0 6.6 16.3 20.5 35.7 34.5

4QE 2,980 2,054 925 8.6 65 991 5.1 199 29.9 792 0.3 152 640 220 420 -0.6 20.1 34.5

(INR Million) FY16 FY17E 8,521 5,486 3,036 27.7 300 3,336 27.7 643 17.5 2,693 30.4 392 2,301 800 1,501 21.9 19.3 34.8

10,418 6,862 3,557 17.2 333 3,890 16.6 712 10.7 3,178 18.0 608 2,570 886 1,683 12.1 18.3 34.5

157

December 2016 Results Preview | Sector: Financials

Shriram Transport Finance Bloomberg Equity Shares (m) M. Cap. (INR b)/(USD b) 52-Week Range (INR) 1,6,12 Rel Perf. (%)

SHTF IN 226.9 207 / 3 1325 / 737 0 / -24 / 4

Financial Snapshot (INR b) Y/E March 2016 2017E 2018E 2019E Net Inc. 50.7 57.0 66.1 76.8 PPP 38.4 42.9 49.8 58.0 PAT 11.8 14.4 18.4 22.6 Cons.PAT 12.1 14.4 18.7 23.0 EPS (INR) 51.9 63.3 81.2 99.7 Cons. EPS (INR) 53.3 63.5 82.3 101.4 BV/Sh (INR) 447.5 497.3 561.1 639.5 Cons. BV (INR) 449.6 499.6 564.5 644.6 RoA on AUM (%) 2.1 2.2 2.5 2.7 RoE (%) 12.2 13.4 15.4 16.6 Payout (%) 22.3 21.2 21.2 21.2 Valuations P/Cons. EPS (x) 17.6 14.8 11.4 9.3 P/Cons. BV (x) 2.1 1.9 1.7 1.5 Div. Yield (%) 1.1 1.2 1.6 1.9

SHTF: Quarterly Performance Y/E March

CMP: INR939       

TP: INR1,282 (+37%)

SHTF’s AUM is expected to continue to slow down to 13% YoY. Calculated margins on AUMs will decline QoQ given higher share of newer vehicles. Cost to income is likely to increase ~100bp YoY to 26%, given sluggish NII growth GNPLs would remain elevated at +6.5%. We expect the company to use the RBI dispensation provision regarding NPA recognition. Recoveries in the construction equipment financing business also remain a key monitorable. We factor in provisions of INR4.8b, as against INR4.6b in 2QFY17. The stock trades at 1.7x FY17E and 1.5x FY18E consolidated BV. Maintain Buy.

Key issues to watch for  Business growth and momentum, and management commentary on the same.  Movement in borrowing costs and margins.  Asset quality trends given impact of demonetization  Recoveries in equipment financing portfolio.

FY16 FY17 1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QE Interest Income 22,015 22,402 23,675 27,207 24,764 24,626 25,611 28,633 Interest expenses 11,972 12,059 12,239 14,474 13,165 13,358 13,893 15,191 Net Interest Income 10,043 10,343 11,436 12,733 11,598 11,268 11,719 13,441 YoY Growth (%) 39.3 31.3 24.5 34.3 15.5 8.9 2.5 5.6 Securitization income 1,313 1,586 1,567 1,705 1,863 2,262 2,285 2,575 Net Income (Incl. Securitization) 11,356 11,929 13,002 14,438 13,461 13,530 14,003 16,016 YoY Growth (%) 17.4 18.4 23.5 33.0 18.5 13.4 7.7 10.9 Fees and Other Income 162 211 193 197 167 169 250 242 Net Operating Income 11,519 12,140 13,195 14,635 13,628 13,699 14,253 16,258 YoY Growth (%) 16.2 18.6 23.6 32.9 18.3 12.8 8.0 11.1 Operating Expenses 2,905 3,001 3,287 3,896 3,341 3,168 3,700 4,684 Operating Profit 8,613 9,139 9,909 10,739 10,287 10,531 10,553 11,574 YoY Growth (%) 16.4 19.3 24.3 33.9 19.4 15.2 6.5 7.8 Provisions 3,823 3,997 4,199 8,567 4,591 4,591 4,780 7,012 Profit before Tax 4,790 5,142 5,710 2,172 5,697 5,940 5,773 4,562 Tax Provisions 1,579 1,761 1,959 733 1,956 2,063 1,992 1,560 Net Profit 3,211 3,381 3,751 1,439 3,741 3,877 3,781 3,002 YoY Growth (%) 4.8 11.9 20.1 -54.6 16.5 14.7 0.8 108.6 AUM Growth (%) 11.3 13.8 16.6 23.1 23.6 19.1 0.0 0.0 Securitization Inc. / Net Inc. (%) 11.4 13.1 11.9 11.7 13.7 16.5 16.0 15.8 Cost to Income Ratio (%) 25.2 24.7 24.9 26.6 24.5 23.1 26.0 28.8 Tax Rate (%) 33.0 34.3 34.3 33.7 34.3 34.7 34.5 34.2 E: MOSL Estimates; * Quarterly nos. and full year nos. will not tally due to different way of reporting financial nos

January 2017

Buy

(INR Million) FY16

FY17

95,300 50,744 44,556 32.0 6,171 50,727 23.3 762 51,489 23.1 13,089 38,400 23.7 20,586 17,814 6,032 11,782 -4.8 23.1 12.0 25.4 33.9

103,634 55,608 48,026 7.8 8,984 57,010 12.4 800 57,810 12.3 14,893 42,917 11.8 20,973 21,944 7,571 14,373 22.0 14.2 15.5 25.8 34.5

158

December 2016 Results Preview

Healthcare Pricing pressure in the US to keep growth under check

Company name Alembic Pharmaceuticals Biocon Cadila Healthcare Cipla Divi's Laboratories Dr Reddy’ s Labs Glenmark Pharma GSK Pharma Ipca Laboratories Lupin Ranbaxy Labs Sanofi India Sun Pharma Torrent Pharmaceuticals







 



We expect our pharma universe to report sequentially flat EBITDA growth in 3QFY17, largely led by pricing pressure and higher R&D expenditure. Also, increased US regulatory scrutiny is resulting in higher remediation expenses and de-risking of key products. This, in turn, should weigh down on operating margins for our coverage universe. Glenmark is expected to exhibit strong growth in the US, led by Z etia FTF and a series of other generic launches. Aurobindo should report stable US sales, driven by key launches (including Crestor). On the other hand, Sun and Lupin should continue witnessing a sequential decline in the US business on the back of competition in key products. After a strong 1HFY17, the domestic pharma business is expected to face headwinds from seasonal weakness and demonetization. Although the chronic business may benefit at the margin due to demonetization, the acute segment may be see some impact in the near term. Among MNCs, Sanofi is likely to report better numbers, while GSK should face some pressure from the ongoing supply issues. The pace of approvals has picked up at the US FDA. However, the lack of key approvals, higher R&D spends and regulatory concerns in the domestic/US markets are likely to keep growth under check. We maintain our top picks – Aurobindo, Sun Pharma, Fortis and Granules.

Exhibit 1: Expected quarterly performance summary (INR m) Sector CMP RECO (INR) Healthcare Alembic Pharma Alkem Lab Aurobindo Pharma Biocon Cadila Health Cipla Divis Labs Dr Reddy’ s Labs Fortis Health Glenmark Pharma Granules India GSK Pharma IPCA Labs. Lupin Sanofi India Sun Pharma Torrent Pharma Sector Aggregate

605 1,670 666 936 362 568 753 3,091 189 899 110 2,747 550 1,494 4,290 638 1,351

Neutral Neutral Buy Sell Buy Neutral Neutral Neutral Buy Neutral Buy Neutral Neutral Buy Buy Buy Buy

Sales (INR m) Var Var Dec-16 % YoY % QoQ 8,075 14,404 38,595 9,273 25,827 39,015 10,349 37,242 11,244 23,424 4,070 8,016 8,098 42,453 6,145 80,368 14,773 381,370

-12.3 13.0 10.4 12.0 6.4 25.6 21.5 -6.1 8.0 35.8 18.0 10.0 18.4 19.4 8.1 13.5 -4.0 11.7

-7.3 -12.1 2.2 -1.3 9.8 4.0 4.3 3.9 -6.0 7.8 11.9 2.4 -7.1 -1.1 -1.6 -2.8 5.1 0.7

EBDITA (INR m) Var Var Dec-16 % YoY % QoQ 1,696 2,548 9,456 2,253 5,553 6,897 3,881 7,821 1,054 5,388 834 1,523 1,218 10,499 1,438 26,834 3,565 92,456

-55.8 8.2 14.9 25.3 -4.0 30.3 20.8 -22.0 665.5 59.5 23.2 48.3 36.5 19.7 27.3 23.7 -41.8 9.6

-4.2 -17.9 1.8 0.2 7.6 1.3 5.5 29.8 6.5 35.4 12.4 22.3 -4.8 2.1 -0.7 -15.3 8.0 -0.6

PAT (INR m) Var Var Dec-16 % YoY % QoQ 1,137 2,083 6,106 1,382 3,688 4,077 2,764 4,494 -766 3,108 389 1,166 567 6,241 809 17,534 2,250 57,028

-57.7 11.2 16.3 34.2 -5.5 18.3 12.1 -22.4 Loss 82.9 43.2 40.2 135.8 17.8 14.8 23.8 -35.4 8.4

-4.2 -26.4 3.3 -6.0 9.2 15.1 -8.8 38.5 PL 41.7 -4.7 18.2 20.3 -5.8 0.3 -21.6 8.7 -6.2

Kumar Saurabh (K [email protected]); +91 22 6129 1519 January 2017

159

December 2016 Results Preview

Exhibit 2: 3QFY17 Aggregates Healthcare Universe Sales 9.1 9.3 20.5 16.2 11.7

MNC Pharma Big 5 Generics CRAMS Second Tier generics Sector Aggregate

YoY Growth (%) EBITDA Adj PAT 37.3 28.6 10.4 10.6 21.2 15.2 -0.5 1 9.6 8.4

EBITDA Margin (%) Dec-16 Dec-15 CHG (BPS) 20.9 16.6 429 26.8 26.6 25 32.7 32.5 20 20.1 23.5 -337 24.2 24.7 -47

Dec-16 13.9 17 21.9 12.5 15

PAT margin (%) Dec-15 CHG (BPS) 11.8 211 16.8 19 22.9 -101 14.3 -187 15.4 -45

Depreciated USD/INR to benefit export-oriented companies

The average rate of the INR against the USD has depreciated by ~2.3% YoY over the past year (67.46 in 3QFY17 v/s 65.95 last year). USD/INR, however, has been flat sequentially. It is thus unlikely to result in any significant MTM impact for companies with large forex debt and derivative exposure. Brexit was expected to have a negative impact on companies from 2QFY17. However, we note that most Indian companies have limited exposure to the UK market (< 1-2% of sales). Also, post the Brexit vote, it is still unclear whether or not Indian companies will have to conduct separate trials for approval in the UK and other EU markets. Separate trials would mean additional cost for companies (however, this is not expected to happen at least for next two years).

 

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Relative Performance-1 Yr (%)

Relative Performance-3- month (%)

Sensex Index

120

MOSL Health care Index

Sensex Index

MOSL Health care Index

Exhibit 3: Comparative valuation

Sector / Companies Healthcare Alembic Pharma Alkem Lab Aurobindo Pharma Biocon Cadila Health Cipla Divis Labs Dr Reddy’ s Labs Fortis Health Glenmark Pharma Granules India GSK Pharma IPCA Labs. Lupin Sanofi India Sun Pharma Torrent Pharma Sector Aggregate

January 2017

Dec-16

Oct-16

Sep-16

Dec-16

Nov-16

Oct-16

Sep-16

Aug-16

Jul-16

88 Jun-16

80 May-16

92 Apr-16

90

Mar-16

96

Feb-16

100

Jan-16

100

Dec-15

110

Nov-16

104

CMP RECO (INR)

EPS (INR) PE (x) EV/EBIDTA (x) ROE (%) FY17E FY18E FY19E FY17E FY18E FY19E FY17E FY18E FY19E FY17E FY18E FY19E

605 1,670 666 936 362 568 753 3,091 189 899 110 2,747 550 1,494 4,290 638 1,351

23.5 77.3 42.0 27.1 13.6 18.1 45.4 82.7 -1.3 41.4 7.1 50.4 17.0 61.6 142.2 27.8 57.7

Neutral Neutral Buy Sell Buy Neutral Neutral Neutral Buy Neutral Buy Neutral Neutral Buy Buy Buy Buy

30.7 84.4 50.0 34.3 18.7 25.6 51.0 141.7 3.5 49.7 10.0 61.8 29.4 77.0 172.8 37.9 78.4

36.5 98.4 56.9 45.0 22.9 32.4 57.0 170.0 6.7 60.5 13.9 71.6 39.0 89.0 198.9 42.9 96.0

25.7 21.6 15.8 34.6 26.6 31.4 16.6 37.4 -143.0 21.7 15.6 54.5 32.3 24.3 30.2 22.9 23.4 25.0

19.7 19.8 13.3 27.3 19.3 22.2 14.8 21.8 53.6 18.1 11.0 44.5 18.7 19.4 24.8 16.8 17.2 18.8

16.6 17.0 11.7 20.8 15.8 17.5 13.2 18.2 28.2 14.9 7.9 38.3 14.1 16.8 21.6 14.9 14.1 16.0

16.7 18.0 11.2 19.8 17.5 17.8 11.7 19.7 19.7 11.1 8.3 45.7 15.1 15.6 16.2 14.0 15.4 15.4

12.7 14.8 9.2 15.7 13.0 13.5 10.0 13.0 11.4 9.8 6.4 36.4 11.2 12.5 13.7 11.1 12.3 12.1

10.2 11.6 7.7 12.2 10.5 10.8 8.5 10.3 9.0 9.6 4.8 29.9 8.7 10.4 11.6 9.0 9.8 9.9

25.1 23.9 29.9 12.2 23.9 11.2 26.7 10.6 -1.5 20.4 20.5 29.6 9.0 22.8 17.8 20.3 26.4 17.8

26.8 21.8 27.2 13.9 27.2 13.9 26.5 16.1 3.8 19.1 22.7 40.8 14.1 23.4 19.4 23.9 29.9 19.8

25.6 21.5 24.2 16.2 26.8 15.1 25.7 16.8 6.4 19.0 26.0 50.3 16.5 22.2 19.7 22.3 30.2 19.6

160

December 2016 Results Preview

Alembic Pharma Bloomberg

ALPM IN

Equity Shares (m)

188.5

M. Cap. (INR b)/(USD b)

114 / 2

52-Week Range (INR)

-4 / 7 / -15

Financial Snapshot (INR Billion) Y/E MARCH

2016

2017E

2018E

Sales

31.5

31.9

38.5

45.1

EBITDA

10.0

6.7

8.9

10.8

4.8

4.4

5.8

6.9

38.2

23.5

30.7

36.5

EPS Gro. (%)

154.6

-38.4

30.4

18.8

BV/Sh. (INR)

84.9

102.4

127.1

157.6

RoE (%)

38.8

25.1

26.8

25.6

RoCE (%)

50.6

23.5

25.6

24.9

15.8

25.7

19.7

16.6

7.1

5.9

4.8

3.8

11.1

16.7

12.7

10.2

EV/Sales (x)

3.5

3.5

2.9

2.4

Div. Yield (%)

0.7

0.8

0.8

0.8

EPS (INR)

2019E

Valuations P/E (x) P/BV (x) EV/EBITDA (x)

Quarterly performance Y/E March Net Sales YoY Change (%) EBITDA Margins (%) Depreciation Interest Other Income PBT Tax Rate (%) MI & Profit/Loss of Asso. Cos. Reported PAT Adj PAT YoY Change (%) Margins (%) E: MOSL Estimates

January 2017



700 / 514

1,6,12 Rel Perf. (%)

NP

CMP: INR605

1Q 5,833 18.0 1,021 17.5 129 6 0 886 188 21.2 1 698 698 7.9 12.0

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



TP: INR640 (+6%)

Neutral

We expect Alembic Pharma (ALPM) to post 12.3% YoY decline in 3QFY17 reported sales to INR8b. International business is expected to decline 34.4% YoY owing to lower contribution from gAbilify, while India business is expected to witness 14.2% YoY growth aided by strong traction within the Anti-Infective portfolio. Reported EBITDA is likely to decline 55% YoY to INR1.7b, with EBITDA margin contracting 2070bp YoY, primarily on account of lower gAbilify sales in 3QFY17 numbers. We expect reported PAT to decrease 57.7% YoY to INR1.1b, in line with operational performance. We believe increase in competition in gAbilify, coupled with high R&D expense and rise in depreciation due to planned capex of INR15b over next 2-3 years, will keep profit growth under check. The stock trades at 19.7x FY18E EPS—in line with peers. We maintain our Neutral rating with a target price of INR640 (20x FY18E EPS).

Key issues to watch out  Contribution of Chronic portfolio and growth strategy.  Performance of US operations amid market pressure.  Outlook on future ANDA launches/filings.

FY16 2Q 10,033 83.7 3,748 37.4 133 7 10 3,618 737 20.4 -1 2,882 2,882 273.1 28.7

3Q 9,210 80.3 3,839 41.7 217 10 28 3,640 951 26.1 -1 2,690 2,690 280.7 29.2

4Q 6,256 24.7 1,423 22.7 244 13 26 1,192 286 24.0 -5 911 911 29.5 14.6

1Q 7,270 24.6 1,559 21.4 194 11 14 1,369 333 24.3 16 1,020 1,020 46.2 14.0

FY17 2Q 8,716 -13.1 1,771 20.3 206 10 12 1,567 332 21.2 49 1,187 1,187 -58.8 13.6

(INR million) FY16 FY17E 3QE 8,075 -12.3 1,696 21.0 222 3 15 1,486 350 23.6 -1 1,137 1,137 -57.7 14.1

4QE 7,824 25.1 1,670 21.3 405 -11 -9 1,267 237 18.7 -5 1,034 1,034 13.6 13.2

31,453 68.8 10,025 31.9 722 37 91 9,357 1,986 21.2 6 7,365 7,365 212.8 23.4

31,885 1.4 6,696 21.0 1,027 12 32 5,688 1,251 22.0 -2 4,438 4,438 -39.7 13.9

161

December 2016 Results Preview

Bloomberg

ALK EM IN

Equity Shares (m) M. Cap. (INR b)/(USD b) 52-Week Range (INR) 1,6,12 Rel Perf. (%)

119.6 200 / 3 1853 / 1175 -3 / 25 / 5

CMP: INR1670 

Financial Snapshot (INR Billion) Y/E March

2016 2017E 2018E 2019E

Sales

49.9

59.2

68.0

80.5

EBITDA

8.5

10.7

12.5

15.3

NP

7.7

9.2

10.1

11.8

EPS (INR)

64.7

77.3

84.4

98.4

EPS Gro. (%)

67.4

19.3

9.3

16.6

BV/Sh. (INR)

293.0

354.7

420.1

496.3

RoE (%)

23.8

23.9

21.8

21.5

RoCE (%)

17.6

22.0

20.2

25.0

25.8

21.6

19.8

17.0

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





Valuations P/E (x) P/BV (x) EV/EBITDA (x)

5.7

4.7

4.0

3.4

23.3

18.4

15.1

11.9

Alkem Labs

TP: INR1800 (+8%)

Buy

After growing strongly (~20% YoY) over past two quarters, revenues are expected to increase 13% YoY in 3Q. The slowing pace of growth can be attributed to seasonal weakness and demonetization. Additionally, we expect revenues to be weighed down by NPPA-led downward price erosions. EBITDA margin is expected to decline 80bp YoY and 130bp QoQ on the back of high base effect, seasonality factor and demonetisation. We expect PAT to grow 10% YoY, while tax rate is expected to inch up to ~14% from mid-single-digit in 1HFY17. ALK EM's US business could potentially double from ~USD150m in FY16 to ~USD300m over next 3-4 years, driven by a strong pipeline of ~50 pending ANDAs. Lower base effect will continue to have a positive impact, as the US will still contribute ~22% to sales, much lower than peers at ~40%+. Maintain Buy.

Key issues to watch out  Impact of demonetization.  Update on visibility of approval post EIR at Ankleshwar facility.  Pick-up in chronic business.

(INR Million)

Quarterly Performance Y/E March Net Revenues YoY Change (%) EBITDA Margins (%) Depreciation Net Other Income PBT before EO Exp EO Exp/(Inc) PBT Tax Rate (%) PAT (pre Minority Interest) Minority Interest Reported PAT YoY Change (%) Adj Net Profit YoY Change (%)

January 2017

FY16 1Q 12,075

2Q 13,820

2,062 17.1 206 251 2,107

2,556 18.5 259 502 2,798

2,107 68 3.2 2,039 28 2,011

2,798 81 2.9 2,717 47 2,670

2,011

2,670

FY17E 3Q 12,747 29.0 2,354 18.5 244 161 2,270

4Q 11,426 25.3 1,580 13.8 260 319 1,639

1Q 14,808 22.6 2,711 18.3 230 181 2,663

2Q 16,383 18.6 3,105 19.0 255 219 3,069

3Q 14,404 13.0 2,548 17.7 260 205 2,493

4Q 13,560 18.7 2,344 17.3 259 294 2,378

2,270 345 15.2 1,925 35 1,889 17 1,872 17.0

1,639 1,066 65.0 573 6 567 -56.3 1,577 21.4

2,663 230 8.6 2,433 45 2,388

3,069 187 6.1 2,882 53 2,828

2,493 360 14.4 2,133 50 2,083

2,378 389 16.4 1,989 52 1,937

2,388 18.7

2,828 5.9

2,083 11.2

1,937 22.8

FY16

FY17E

49,915 31.7 8,482 17.0 1,006 975 8,451 0 8,451 1,606 19.0 6,845 114 6,731 0 6,731 45.5

59,156 18.5 10,707 18.1 1,003 899 10,603 0 10,603 1,166 11.0 9,436 200 9,236 0 9,236 37.2

162

December 2016 Results Preview

Aurobindo Pharma Bloomberg

ARBP IN

Equity Shares (m)

585.2

M. Cap. (INR b)/(USD b)

390 / 6

52-Week Range (INR)

895 / 582

1,6,12 Rel Perf. (%)

-9 / -10 / -25

Financial Snapshot (INR Billion) Y/E MARCH

2016

2017E

2018E

2019E

Sales

139.0

155.2

178.5

203.3

EBITDA

32.1

37.7

44.6

50.8

NP

19.8

24.6

29.2

33.3

EPS (INR)

33.9

42.0

49.9

56.9

EPS Gro. (%)

25.5

23.9

18.9

14.0

BV/Sh. (INR)

120.6

160.1

207.5

261.8

RoE (%)

32.5

29.9

27.2

24.2

RoCE (%)

20.8

20.6

20.7

19.8

19.7

15.9

13.3

11.7

5.5

4.2

3.2

2.5

13.2

11.2

9.2

7.7

EV/Sales (x)

3.0

2.7

2.3

1.9

Div. Yield (%)

0.2

0.3

0.3

0.4

Valuations P/E (x) P/BV (x) EV/EBITDA (x)

Quarterly Performance Y/E March Net Sales YoY Change (%) EBITDA Margins (%) Depreciation Interest Other Income PBT before EO expense Extra-Ord expense PBT Tax Rate (%) Minority Interest Reported PAT Adj PAT YoY Change (%) Margins (%) E: MOSL Estimates

January 2017

1Q 32,989 13.3 7,251 22.0 890 208 294 6,446 106 6,340 1,634 25.8 -19 4,725 4,784 15.8 14.5

CMP: INR666 







TP: 1050(+58%)

Buy

We expect Aurobindo (ARBP) to post 10% YoY sales growth to INR38.5b in 3QFY17, aided by sustained traction in the US. We expect US business (~58% of formulation sales) to grow 18% YoY in 3Q. Europe and RoW sales are expected to exhibit modest 3% YoY growth, while API sales are estimated to grow ~5% YoY in 3Q. EBITDA margin is likely to expand 100bp YoY to 24.5% (stable sequentially). Overall EBITDA is estimated to grow 15% YoY to INR9.45b. We expect reported PAT at INR6.1b, compared to INR5.3b in the corresponding quarter last year. The stock trades at 13.3x FY18E EPS, which is at ~15% discount to peers. We maintain Buy as we expect the valuation gap to narrow on account of the company’s increasing profitability, strong earnings growth trajectory (25% CAGR) and improving free cash flow. Maintain Buy.

Key issues to watch out  Debt reduction during the quarter.  Outlook on US business (~ 35-40 launches expected over next 12 months).  Profitability of acquired Actavis business in Europe.

FY16 2Q 33,651 16.8 7,791 23.2 926 241 122 6,746 439 6,306 1,767 28.0 4 4,536 4,856 20.9 14.4

3Q 34,955 10.4 8,230 23.5 995 227 69 7,077 -129 7,206 1,860 25.8 -3 5,350 5,251 32.3 15.0

4Q 37,468 18.5 8,824 23.5 1,113 251 206 7,666 -46 7,711 2,097 27.2 -14 5,629 5,582 38.7 14.9

1Q 37,666 14.2 8,890 23.6 1,062 206 159 7,780 -70 7,850 2,008 25.6 -8 5,850 5,789 21.0 15.4

FY17 2Q 3QE 37,755 38,595 12.2 10.4 9,292 9,456 24.6 24.5 1,102 1,050 175 200 83 150 8,098 8,356 -202 0 8,300 8,356 2,240 2,250 27.0 26.9 3 -15 6,057 6,121 5,912 6,106 21.8 16.3 15.7 15.8

(INR Million) FY16 FY17E 4QE 41,199 10.0 10,080 24.5 1,154 233 158 8,851 2 8,849 2,340 26.4 -30 6,538 6,510 16.6 15.8

138,961 14.6 32,056 23.1 3,926 927 3,137 30,339 660 29,680 7,444 25.1 -39 22,275 20,304 36.6 14.6

155,214 11.7 37,717 24.3 4,368 815 3,496 36,029 -270 36,299 8,839 24.3 -50 27,511 24,366 20.0 15.7

163

December 2016 Results Preview

Biocon Bloomberg

BIOS IN

Equity Shares (m)

200.0

M. Cap. (INR b)/(USD b)

187 / 3

52-Week Range (INR)

1020 / 431

1,6,12 Rel Perf. (%)

1 / 28 / 71

Financial Snapshot (INR Billion) Y/E MARCH

2016

2017E

Sales

34.5

40.5

49.2

62.2

7.9

9.6

12.1

15.4

EBITDA NP EPS (INR)

2018E

2019E

4.6

5.4

6.9

9.0

23.2

27.1

34.3

45.0

EPS Gro. (%)

15.5

16.5

26.5

31.4

BV/Sh. (INR)

202.7

221.9

246.1

278.0

RoE (%)

11.5

12.2

13.9

16.2

RoCE (%)

15.9

8.7

10.1

14.7

40.3

34.6

27.3

20.8

4.6

4.2

3.8

3.4

EV/EBITDA (x)

24.0

19.8

15.8

12.2

Div. Yield (%)

0.5

0.7

0.9

1.2

CMP: INR936 







Valuations P/E (x) P/BV (x)



TP: INR750 (-20%)

Sell

Biocon’s revenue is likely to increase 12% YoY to INR9.3b, driven by 18% growth in CRO division, 12% growth in bio-pharma sales and licensing income at INR67m. EBITDA is expected to increase 22% YoY to INR2.2b, with EBITDA margins at 24.3%. We expect PAT to grow to INR1.4b (up 34% YoY), primarily owing to stable revenue growth and EBITDA margin improvement. The key thing to watch would be the impact of fire at the R&D center of Syngene. K ey growth drivers for FY17E/18E will be 1) commercialization and ramp-up of the insulin plant in Malaysia, 2) ramp-up in CRO division, 3) contribution from API/immuno-suppressants supplies to partners and 4) branded formulations in India. However, capex for long-term initiatives is likely to exert pressure on profitability and return ratios in the near term. The stock trades at 27.3x FY18E earnings. Maintain Sell.

Key issues to watch out  Update on Middle-East problems.  Progress on Rh-Insulin/Glargine in Europe/US and other outlicensing opportunities.

Quarterly Performance Y/E March (Consolidated) Net Sales YoY Change (%) Total Expenditure EBITDA Margins (%) Depreciation Interest Other Income PBT Tax Rate (%) Minority Interest Adj PAT YoY Change (%) Margins (%)

January 2017

1Q 8,105 12.8 6,127 1,978 24.4 591 44 304 1,647 376 22.8 33 1,238 20.2 15.3

FY16 2Q 7,860 4.9 6,270 1,590 20.2 610 30 -750 200 290 145.0 20 970 -4.9 12.3

3Q 8,282 8.8 6,483 1,799 21.7 621 15 289 1,452 241 16.6 181 1,030 13.4 12.4

4Q 9,450 13.8 7,598 1,852 19.6 647 166 3,014 4,053 591 14.6 159 742 -63.2 7.9

1Q 9,814 21.1 7,276 2,538 25.9 661 57 502 2,322 552 23.8 104 1,466 34.6 17.0

FY17 2Q 9,400 19.6 7,150 2,250 23.9 680 70 520 2,020 420 20.8 130 1,470 51.5 15.6

(INR Million) FY16 FY17E 3QE 9,273 12.0 7,020 2,253 24.3 621 75 375 1,932 400 20.7 150 1,382 34.2 14.9

4QE 11,820 25.1 9,476 2,344 19.8 803 50 103 1,594 355 22.3 316 923 -72.1 7.8

34,507 12.8 26,654 7,853 22.8 2,423 102 1,192 6,520 1,131 17.3 744 4,646 -7.0 13.5

40,473 17.3 30,922 9,551 23.6 2,765 252 1,500 8,034 1,727 21.5 893 5,414 16.5 13.4

164

December 2016 Results Preview

Cadila Healthcare Bloomberg

CDH IN

Equity Shares (m)

1023.7

M. Cap. (INR b)/(USD b)

370 / 5

52-Week Range (INR)



429 / 296

1,6,12 Rel Perf. (%)

-10 / 11 / 9

Financial Snapshot (INR Billion) Y/E MARCH

CMP: INR362

2016

2017E

2018E

2019E

Sales

97.5

100.3

120.5

141.4

EBITDA

23.0

22.0

28.9

34.6

NP

15.8

13.9

19.2

23.4

EPS (INR)

15.4

13.6

18.7

22.9

EPS Gro. (%)

37.7

-11.8

37.5

22.2

BV/Sh. (INR)

52.3

61.5

75.9

94.4

RoE (%)

32.8

23.9

27.2

26.8

RoCE (%)

23.3

18.9

22.8

23.7

23.5

26.6

19.4

15.8

6.9

5.9

4.8

3.8

16.7

17.5

13.0

10.6

0

0

0

0







Valuations P/E (x) P/BV (x) EV/EBITDA (x) Div. Yield(%)



TP: INR450 (+24%)

Buy

Cadila Healthcare's (CDH) 3QFY17 revenue is likely to grow 6.4% YoY to INR25.8b, driven by 5% YoY growth in the US formulations business. Growth in the US formulations business is expected to be largely driven by the recent launch of authorized generic of Asacol HD. Overall export formulations are expected to grow 5.4% YoY to INR13.7b, while domestic formulation is likely to grow 13.4% YoY to INR10.1b. We expect EBITDA to decline 4% YoY to INR5.5b and the margin to contract 230bp. Adj. PAT is also likely to decline 5.5% YoY to INR3.7b. We believe CDH has made investments in the right areas, and will start accruing benefits over next 2-3 years. We expect sharp rampup in the US business post successful remediation of Moraiya warning letter. We estimate 10% EPS CAGR for FY16-18E, with better return ratios over next two years. The stock trades at 19.3x FY18E EPS. Maintain Buy.

Key issues to watch out  Update on US FDA resolution for Moraiya facility.  Outlook for recovery in domestic formulations.  Progress on improvement in balance sheet.

Quarterly Performance Y/E March Net Revenues YoY Change (%) EBITDA Margins (%) Depreciation Interest Other Income PBQ before EO Income EO Exp/(Inc) PBQ after EO Income Tax Rate (%) Min. Int/Adj on Consol Adj PAT YoY Change (%) Margins (%) E: MOSL Estimates

January 2017

1Q 23,159 23.7 5,111 22.1 691 119 240 4,541 -506 5,047 577 11.4 -132 4,096 103.2 17.7

FY16 2Q 3Q 23,308 24,284 10.6 10.9 5,907 5,787 25.3 23.8 725 770 130 126 200 255 5,252 5,146 -155 9 5,407 5,137 736 1,149 13.6 22.4 -79 92 4,595 3,903 64.6 38.6 19.7 16.1

4Q 24,491 7 5,814 23.7 783 100 241 5,172 -8 5,180 1,259 24.3 34 3,881 -15.7 15.8

1Q 22,871 -1.2 5,239 22.9 843 140 153 4,409 2 4,407 966 21.9 -121 3,564 -13 15.6

FY17E 2Q 3QE 23,531 25,827 1 6.4 5,160 5,553 21.9 21.5 864 860 187 140 236 215 4,345 4,768 0 0 4,345 4,768 1,068 1,200 24.6 25.2 -99 -120 3,376 3,688 -26.5 -5.5 14.3 14.3

(INR Million) FY16 FY17E 4QE 28,059 14.6 6,011 21.4 906 99 188 5,194 0 5,194 1,071 20.6 -140 4,263 9.9 15.2

95,242 12.9 20,695 21.7 3,022 463 918 18,128 -660 18,788 4,298 22.9 300 14,350 22.4 15.1

100,288 5.3 21,963 21.9 3,473 566 792 18,716 0 18,716 4,305 23 -480 14,891 3.8 14.8

165

December 2016 Results Preview

Cipla Bloomberg

CIPLA IN

Equity Shares (m)

802.9

M. Cap. (INR b)/(USD b)

456 / 7

52-Week Range (INR)

658 / 458

1,6,12 Rel Perf. (%)

-2 / 14 / -16

CMP: INR568 



Financial Snapshot (INR Billion) Y/E MARCH

2016

2017E

2018E

2019E

Sales

136.8

155.2

182.2

210.1

25.0

27.3

35.5

43.1

EBITDA NP

15.1

14.5

20.5

26.0

EPS (INR)

18.8

18.1

25.6

32.4

EPS Gro. (%)

34.0

-3.8

41.2

26.6

BV/Sh. (INR)

147.4

161.8

184.4

213.7

RoE (%)

12.8

11.2

13.9

15.1

RoCE (%)

10.6

8.8

11.1

12.5

30.2

31.4

22.2

17.5

3.9

3.5

3.1

2.7

EV/EBITDA (x)

20.0

18.1

13.7

10.9

Div. Yield (%)

0.4

0.4

0.4

0.4

Valuations P/E (x) P/BV (x)

Quarterly Performance Y/E March Net Revenues YoY Change (%) EBITDA Margins (%) Depreciation Interest Other Income PBT after EO expense Tax Rate (%) Minority Interest Reported PAT YoY Change (%) Margins (%)

1Q 38,385 41.1 10,545 27.5 1,494 639 505 8,917 2,418 27.1 7.4 6,492 120.4 16.9





TP: INR525 (-8%)

Neutral

We expect Cipla’s revenues to grow 25.6% YoY to INR39b in 3QFY17. Export formulation business is expected to grow 25.5% YoY to INR21.7b. Domestic business is also expected to grow 15% YoY to INR13.7b, driven by traction in Respiratory business. Impact of demonetization will be the key to watch. Export API sales are expected to report 11.8% YoY growth to INR2.4b. EBITDA is likely to grow 30.3% YoY to INR6.9b, with margin expansion of 70bp to 17.7%, owing to lower gNexium sales compared to 3QFY16. We expect reported PAT to increase 18.3% YoY to INR4.07b. We believe that earnings acceleration and potential upgrades on successful EU inhaler portfolio monetization would help it sustain current multiples going forward (24x one-year forward P/E). The stock trades at 22.2x FY18E earnings. Maintain Neutral.

Key issues to watch out  Launch of combination inhaler in UK market (USD450m market size).  Margin improvement in Medpro operations (acquired in July 2014).  Sustained strong growth in domestic formulations (38% of sales).

FY16 2Q 3Q 34,551 31,066 24.9 12.3 7,860 5,294 22.7 17.0 1,584 1,375 636 230 308 51 5,948 3,741 401 120 6.7 3.2 117.0 174.2 5,430 3,447 81.8 5.1 15.7 11.1

4Q 32,665 5.6 4,421 13.5 1,414 368 547 3,186 -39 -1.2 185.4 3,040 17.1 9.3

1Q 36,500 -4.9 6,112 16.7 2,038 315 252 4,011 553 13.8 67.6 3,391 -47.8 9.3

FY17E 2Q 3QE 37,510 39,015 8.6 25.6 6,807 6,897 18.1 17.7 2,292 1,650 352 350 272 275 4,436 5,172 719 1,000 16.2 19.3 173.6 95.0 3,543 4,077 -34.7 18.3 9.4 10.4

(INR Million) FY16 FY17E 4QE 42,172 29.1 7,498 17.8 2,614 333 301 4,852 1238 25.5 83.8 3,531 16.1 8.4

136,666 20.5 28,120 20.6 5,867 1,872 1,411 21,792 2,899 13.3 484.0 18,409 55.9 13.5

155,197 13.6 27,315 17.6 8,594 1,350 1,100 18,471 3,510 19.0 420.0 14,542 -21.0 9.4

E: MOSL Estimates

January 2017

166

December 2016 Results Preview

Divis Laboratories Bloomberg

DIVI IN

Equity Shares (m)

265.5

M. Cap. (INR b)/(USD b)

200 / 3

52-Week Range (INR)

CMP: INR753 

1380 / 745

1,6,12 Rel Perf. (%)

-35 / -32 / -38 

Financial Snapshot (INR Billion) Y/E MARCH

2016

2017E

2018E

2019E

Sales

37.7

42.9

48.4

54.8

EBITDA

14.1

16.1

18.4

21.1

NP

11.1

12.0

13.5

15.1

EPS (INR)

41.9

45.4

51.0

57.0

EPS Gro. (%)

30.6

8.3

12.3

11.9

BV/Sh. (INR)

161.5

178.4

206.4

237.8







TP: INR975 (+29%)

Divis Laboratories (DIVI) is likely to register 21.5% YoY growth in 3QFY17 revenue to INR10.3b on the back of lower base and muted 2QFY17 growth. Adjusted EBITDA is also likely to exhibit 21% YoY growth to INR3.9b, with margins at 37.5% aided by lower raw material costs. We expect PAT to increase 12.1% YoY to INR2.8b, in line with EBITDA growth during this quarter. Management expects FY17 revenue to grow at low-to-mid-teens, with EBITDA margin sustaining at 37%. Steep correction in the stock price over past few days is attributed to form 483 observations which the company received for its Unit 2 API plant. Notably, this plant accounts for more than 60% of revenue for Divi’s. Delay in the commissioning of the new plant is another key concern for the company. The stock trades at 14.8x FY18E earnings. Maintain Neutral.

RoE (%)

28.6

26.7

26.5

25.7

RoCE (%)

28.4

26.5

26.4

25.6

18.0

16.6

14.8

13.2

4.7

4.2

3.6

3.2

EV/EBITDA (x)

14.2

12.2

10.5

8.9

Key issues to watch out

Div. Yield (%)

2.1

2.2

2.6

2.9

 Clarity on Unit 2 483s.  Ramp-up at Vizag SEZ .  Outlook for growth beyond FY18.

Valuations P/E (x) P/BV (x)



Quarterly Performance Y/E March

FY16 1Q 2Q Net Op Revenue 8,069 9,619 YoY Change (%) 26.1 15.9 EBITDA 3,000 3,736 Margins (%) 37.2 38.8 Depreciation 289 301 Interest 2 3 Other Income 360 321 PBT before EO Income 3,069 3,752 EO Income 0 0 PBT 3,069 3,752 Tax 617 795 Deferred Tax 0 0 Rate (%) 20.1 21.2 Adj PAT 2,452 2,957 YoY Change (%) 46.0 28.8 Margins (%) 30.4 30.7 Reported PAT 2,452 2,957 E: MOSL Estimates; Quarterly numbers are standalone

January 2017

Neutral

3Q 8,518 8.1 3,212 37.7 299 2 163 3,074 0 3,074 608 0 19.8 2,466 11.8 28.9 2,466

4Q 10,934 34.2 3,960 36.2 292 15 193 3,845 0 3,845 623 0 16.2 3,222 40.8 29.5 3,222

1Q 10,060 24.7 4,016 39.9 301 4 184 3,896 0 3,896 878 0 22.5 3,018 23.1 30.0 3,018

FY17E 2Q 3QE 9,918 10,349 3.1 21.5 3,680 3,881 37.1 37.5 308 525 4 7 226 340 3,595 3,689 0 0 3,595 3,689 565 925 0 0 15.7 25.1 3,030 2,764 2.5 12.1 30.5 26.7 2,239 2,764

(INR Million) FY16 FY17E 4QE 12,540 14.7 4,541 36.2 690 7 461 4,305 0 4,305 865 0 20.1 3,440 6.8 27.4 3,440

37,690 21.5 14,064 37.3 1,182 23 922 13,781 0 13,781 2,662 21 19.5 11,098 30.6 29.4 11,098

42,867 13.7 16,118 37.6 1,824 22 1,212 15,484 0 15,484 3,262 0 22.2 12,047 8.6 28.1 11,431

167

December 2016 Results Preview

Dr Reddy’s Labs Bloomberg

DRRD IN

Equity Shares (m)

170.5

M. Cap. (INR b)/(USD b)

527 / 8

52-Week Range (INR)

CMP: INR3,091 

3689 / 2750

1,6,12 Rel Perf. (%)

-4 / -8 / -3 

Financial Snapshot (INR Billion) Y/E MARCH

2016

2017E

2018E

2019E

Sales

154.7

146.9

172.6

200.9

EBITDA

39.1

26.5

39.7

48.8

NP

22.6

14.1

24.2

29

132.3

82.7

141.7

170

EPS Gro. (%)

1.7

-37.5

71.3

19.9

BV/Sh. (INR)

752

814

942

1087



RoE (%)

18.8

10.6

16.1

16.8



RoCE (%)

13.9

7.9

12.9

14.2

23.4

38.7

22.6

18.8

4.1

3.9

3.4

2.9

EV/EBITDA (x)

13.2

20.4

13.4

10.7

Div. Yield (%)

0.6

0.4

0.7

0.8

EPS (INR)

Valuations P/E (x) P/BV (x)

Quarterly Performance Y/E March Sales YoY Change (%) Total Expenditure EBITDA Margins (%) Amortization Other Income Profit before Tax Tax Rate (%) Reported PAT Adjusted PAT YoY Change (%) Margins (%) E - MOSL Estimates

January 2017

1Q 37,578 6.8 27,723 9,855 26.2 2,268 390 7,977 1,721 21.6 6,256 6,256 13.7 16.6



TP: INR3,000 (-3%)

Neutral

Dr Reddy’s Lab is expected to report subdued numbers in 3QFY17, with revenue declining 6.1% YoY to INR37.2b and PAT down 22.4% to INR4.5b. This is primarily due to the lack of new launches in the US and increased generic competition in gVidaza. US business is likely to decline 13.6% YoY to INR8.96b, while Russia and CIS region sales are expected to decline in single-digits due to currency devaluation. However, India business is expected to report robust 12% YoY growth in 3QFY17 EBITDA is expected to decline 4% YoY to INR7.8b and the margin to contract 430bp YoY to 21%, weighed down by higher remediation costs and increased competition in the key products. PAT is expected to decline 22.4% YoY with taxes at 23% in 3QFY17. Even though near-term earnings growth is muted due to recent warnings letters, we believe the company is focusing on the right areas for growth in the US. Stock trades at 21.8x FY18E earnings. Maintain Neutral.

Key issues to watch out  Update on USFDA resolution of warning letters for Srikakulam, Duvvada and Miryalaguda API plants.  FY18 outlook for both generics and PSAI businesses.

FY16 2Q 3Q 39,890 39,679 11.2 3.2 28,486 29,646 11,404 10,033 28.6 25.3 2,466 2,577 160 124 9,098 7,580 1,879 1,788 20.7 23.6 7,219 5,792 7,219 5,792 25.7 0.8 18.1 14.6

4Q 37,562 -3 29,313 8,249 22 3,032 -2,732 2,484 1,739 70 745 3,762 -27.5 10

1Q 32,345 -13.9 28,572 3,773 11.7 2,681 615 1,707 444 26 1,263 1,263 -79.8 3.9

FY17E 2Q 3QE 35,857 37,242 -10.1 -6.1 29,834 29,421 6,023 7,821 16.8 21 2,914 2,500 726 515 3,835 5,836 885 1,342 23.1 23 2,950 4,494 3,244 4,494 -55.1 -22.4 9 12.1

(INR Million) FY16 FY17E 4QE 41,479 10.4 32,669 8,810 21.2 2,191 70 6,689 1,309 19.6 5,381 5,381 43 13

154,708 4.4 115,620 39,088 25.3 10,343 -1,605 27,139 7,127 26.3 20,012 20,012 -9.8 12.9

146,946 -5 120,495 26,450 18 10,286 1,926 18,089 3,980 22 14,109 14,109 -29.5 9.6

168

December 2016 Results Preview

Glenmark Pharma Bloomberg

GNP IN

Equity Shares (m)

271.3

M. Cap. (INR b)/(USD b)

244 / 4

52-Week Range (INR)

993 / 672

1,6,12 Rel Perf. (%)

2 / 12 / -7

CMP: INR899 



Financial Snapshot (INR Billion) Y/E MAR

2016 2017E 2018E 2019E

Sales

75.9

95.7 109.9 125.0

EBITDA

13.7

24.7

27.3

26.9

7.0

11.7

14.0

17.1

24.9

41.4

49.7

60.5

42.0

66.4

20.1

21.6

NP EPS (INR) EPS Gro. (%) BV/Sh. (INR)



151.3 202.9 260.8 317.6

RoE (%)

16.4

20.4

19.1

19.0

RoCE (%)

12.7

20.6

19.3

17.2

36.1

21.7

18.1

14.9

5.9

4.4

3.4

2.8

EV/EBITDA (x)

20.1

11.1

9.8

9.6

Div. Yield (%)

0.2

0.3

0.3

0.3



Valuations P/E (x) P/BV (x)

Quarterly Performance Y/E March Net Revenues (Core) YoY Change (%) EBITDA Margins (%) Depreciation Interest Other Income PBT before EO Expense Extra-Ord Expense PBT after EO Expense Tax Rate (%) Reported PAT (incl one-offs) Reported PAT (excl MI) YoY Change (%) Margins (%) E: MOSL Estimates

January 2017

1Q 16,258 10.0 3,374 20.8 654 419 273 2,574 0 2,574 745 28.9 1,829 1,829 -1.1 11.2



TP: INR990 (+10%)

Neutral

We expect Glenmark Pharmaceuticals (GNP) to report robust 36% YoY growth in overall revenues to INR23.4b, driven by buoyant performance in the US and India market. The India branded business is likely to grow 15% YoY, while the US generic segment is expected to grow 70.6% YoY, primarily aided by the gZ etia launch. LatAm business is expected to witness a 19% YoY decline in 3Q sales owing to no sales in Venezuela. We also do not factor any out-licensing income in our 3QFY17 assumptions. EBITDA is likely to increase 59% YoY to INR5.4b. Nevertheless, we expect margins to increase 340bp YoY to 23% on the back of Z etia launch in Dec-16. Adjusted PAT is expected at INR3.1b, up 82.9% YoY, aided by lower tax expenses. We expect GNP to gradually reduce its net debt over FY16-18E, resulting in an improvement in D/E from 1.0x in FY16 to 0.6x by FY18E. We also expect a gradual improvement in return ratios over the same period. The stock trades at 18.1x FY18E EPS. Maintain Neutral.

Key issues to watch out  New ANDA filings in complex category.  Update on free-cash generation and debt repayment schedule.  Progress of NCE/NBE pipeline and potential out-licensing prospects.

FY16 2Q 3Q 18,440 17,245 10.3 1.9 3,713 3,379 20.1 19.6 634 559 426 469 314 340 2,967 2,692 0 0 2,967 2,692 962 992 32.4 36.9 2,004 1,699 2,004 1,699 21.4 48.1 10.9 9.9

4Q 21,740 24.0 1,952 9.0 584 475 1,189 2,082 0 2,082 594 28.5 1,487 1,487 1,301.5 6.8

1Q 18,832 15.8 3,192 17.0 642 430 1,358 3,477 0 3,477 1,209 34.8 2,268 2,268 24.0 12.0

FY17 2Q 3QE 21,732 23,424 17.9 35.8 3,978 5,388 18.3 23.0 770 770 629 600 491 340 3,070 4,358 0 0 3,070 4,358 876 1,250 28.5 28.7 2,193 3,108 2,193 3,108 9.4 82.9 10.1 13.3

(INR Million) FY16 FY17E 4QE 30,538 40.5 11,025 36.1 762 580 -939 8,744 0 8,744 1,864 21.3 6,880 6,880 362.5 22.5

75,909 15.1 14,326 18.9 2,691 1,789 787 10,632 0 10,632 3,028 28.5 7,604 7,604 60.0 10.0

95,676 26.0 25,211 26.4 2,945 2,239 1,250 21,277 0 21,277 5,200 24.4 16,077 16,077 111.4 16.8

169

December 2016 Results Preview

Granules India Bloomberg

GRAN IN

Equity Shares (m)

216.7

M. Cap. (INR b)/(USD b)

24 / 0

52-Week Range (INR)

151 / 91

1,6,12 Rel Perf. (%)

-3 / -21 / -29

Financial Snapshot (INR Billion) Y/E MARCH

2016

2017E

2018E

Sales

14.3

14.3

16.7

24

2.8

2.9

3.5

5.3

NP

1.2

1.6

2

2.9

EPS (INR)

5.5

7

8

11.7

EBITDA

2019E

CMP: INR110 







EPS Gro. (%)

22.3

27.3

14.3

46.3

BV/Sh. (INR)

30.7

40.9

59.2

68.3

RoE (%)

21.6

20

16.5

18.3

14

11.5

9.9

12

20.1

15.7

13.7

9.4

P/BV (x)

3.6

2.7

1.9

1.6

EV/EBITDA (x)

11

11.4

8.6

6.1

Div. Yield (%)

0.6

0.9

1.4

2

1Q 3,226 3.7 2,599 627 19.4 139 81 14 420 133 31.6 285 24.8 8.8

FY16 2Q 3,529 14.7 2,844 685 19.4 144 88 10 462 144 31.1 323 46.2 9.1

RoCE (%)

TP: INR160 (+46%)

Buy

We expect Granules India (GRAN) to post 5% YoY growth in 3QFY17 reported sales to INR3.6b. However, reported EBITDA is likely to increase 8.1% YoY to INR732m, with EBITDA margin expanding 60bp YoY, primarily owing to lower raw material costs and better business mix. We expect reported PAT to increase 43.8% YoY to INR391m, in line with operational performance. We expect GRAN to report 34% PAT CAGR over FY16-18E, driven by improving traction in finished dosages formulations. However, the story beyond FY18 is much rosier, as we see more approvals in the US for the OTC and Rx business and ramp-up is expected in Omnichem JV, which will drive both revenue and profitability. At CMP, the stock trades at 11x FY18E EPS. We maintain Buy with target price of INR160 (@16x FY18E EPS).

Valuations P/E (x)

Quarterly performance Y/E March (Consolidated) Net Sales YoY Change (%) Total Expenditure EBITDA Margins (%) Depreciation Interest Other Income PBT before EO expense Tax Rate (%) Reported PAT YoY Change (%) Margins (%) E: MOSL Estimates

January 2017

Key issues to watch out  Contribution of Auctus portfolio and outlook on ANDA filings.  Performance of Omnichem JV operations.  Outlook for growth beyond FY18E.

3Q 3,449 7.9 2,772 677 19.6 167 114 26 422 151 35.7 272 15.2 7.9

4Q 3,723 5.0 2,940 783 21.0 174 99 14 525 193 36.7 332 48.2 8.9

1Q 3,498 8.4 2,813 685 19.6 163 79 30 472 154 32.5 390 36.5 11.1

FY17 2Q 3,638 3.1 2,896 742 20.4 185 83 39 513 156 30.4 408 43.1 11.2

(INR million) FY16 FY17E 3QE 3,621 5.0 2,890 732 20.2 189 92 35 486 145 29.9 391 43.8 10.8

4QE 3,536 -5.0 2,836 700 19.8 164 92 36 481 150 31.3 409 23.1 11.6

14,295 11.2 11,571 2,725 19.1 643 399 77 1,759 617 35.1 1,140 36.9 8.0

14,294 0.0 11,435 2,859 20.0 701 346 140 1,952 605 31.0 1,597 40 11.2

170

December 2016 Results Preview

GSK Pharma Bloomberg

GLXO IN

Equity Shares (m)

84.7

M. Cap. (INR b)/(USD b)

233 / 3

52-Week Range (INR)

3850 / 2600

1,6,12 Rel Perf. (%)

-2 / -19 / -20







Financial Snapshot (INR Billion) Y/E MARCH

2016

2017E

2018E

2019E

Sales

27.4

30.5

34.3

38.4

EBITDA

4.5

4.9

6.2

7.6

NP

3.7

4.3

5.2

6.1

EPS (INR)

CMP: INR2,747

44.2

50.4

61.8

71.6

EPS Gro. (%)

-29.2

14.1

22.6

16.0

BV/Sh. (INR)

200.2

170.1

151.4

142.5

RoE (%)

22.1

29.6

40.8

50.3

RoCE (%)

21.2

27.2

38.4

48.7





TP: INR3,150 (+15%)

Neutral

In 3QFY17, we expect GlaxoSmithK line Pharmaceuticals (GLXO) to report 10% YoY increase in revenues to INR8b. EBITDA is also likely to increase 48.3% YoY to INR1.5b, with the margin expanding 490bp YoY to 19%. We expect adjusted PAT to increase 40.2% YoY to INR1.16b. Growth and profitability are expected to gradually improve with volume ramp-up in key NLEM products. We believe GLXO has strong parent support, superior brand portfolio (competitive advantage), high payout ratio (~100%) and industry-leading return ratios (RoCE of 50%+). However, the current valuation of 44.5x FY18E EPS adequately reflects the recovery in business over this period, in our view. Maintain Neutral.

Valuations P/E (x)

62.2

54.5

44.5

38.4

P/BV (x)

13.7

16.1

18.1

19.3

EV/EBITDA (x)

48.5

45.7

36.4

29.9

Div. Yield (%)

2.4

2.5

2.5

2.5

Quarterly Performance Y/E March (Standalone) Net Sales YoY Change (%) Total Expenditure EBITDA Margins (%) Depreciation Other Income PBT before EO Expense Tax Rate (%) Adjusted PAT YoY Change (%) Margins (%) Extra-Ord Expense Reported PAT E: MOSL Estimates

January 2017

1Q 6,219 -5.1 5,183 1,036 16.7 49 463 1,450 493 34.0 957 -2.7 15.4 24 933

Key issues to watch out  New product introductions in FY17-18E.  Market performance of products impacted by DPCO 2013.

FY16 2Q 7,000 -5.3 5,894 1,105 15.8 53 489 1,541 507 32.9 1,034 -19.6 14.8 78 956

3Q 7,287 12.8 6,260 1,027 14.1 78 334 1,282 450 35.1 832 -8.9 11.4 33 799

4Q 6,861 11.8 5,641 1,220 17.8 67 310 1,463 565 38.6 898 -17.3 13.1 898

1Q 6,852 10.2 6,150 702 10.2 54 441 1,090 386 35.4 705 -26.4 10.3 -18 723

FY17 2Q 7,829 11.8 6,584 1,245 15.9 66 343 1,522 536 35.2 987 -4.5 12.6 -2 988

(INR Million) FY16 FY17E 3QE 8,016 10.0 6,493 1,523 19.0 42 310 1,791 625 34.9 1,166 40.2 14.6 0 1,166

4QE 7,810 13.8 6,362 1,448 18.5 98 713 2,064 653 31.6 1,411 57.0 18.1 0 1,411

27,411 N/A 22,895 4,516 16.5 248 1,500 5,769 2,026 35.1 3,742 -29.2 13.7 135 3,607

30,507 11.3 25,588 4,918 16.1 259 1,808 6,468 2,199 34.0 4,269 14.1 14.0 111 4,157

171

December 2016 Results Preview

Ipca Laboratories Bloomberg

IPCA IN

Equity Shares (m)

126.2

M. Cap. (INR b)/(USD b)

69 / 1

52-Week Range (INR)

CMP: INR550

744 / 402

1,6,12 Rel Perf. (%)

-2 / 16 / -29 

Financial Snapshot (INR Billion) Y/E MARCH

2016

2017E

2018E

2019E

Sales

28.9

32.7

38.1

44.6

EBITDA

3.4

4.9

6.6

8.2

NP

1.3

2.1

3.7

4.9

EPS (INR)

10.5

17.0

29.4

39.0

EPS Gro. (%)

-46.9

61.8

72.8

32.7

BV/Sh. (INR)

181.0

195.4

220.4

253.6

RoE (%)

5.9

9.0

14.1

16.5

RoCE (%)

5.5

7.9

12.1

14.1

Valuations P/E (x)

32.3

18.7

14.1

3.0

2.8

2.5

2.2

EV/EBITDA (x)

15.1

11.9

11.9

0.0

Div. Yield (%)

0.0

0.5

0.8

1.1

Quarterly Performance Y/E March Net Revenues (Core) YoY Change (%) EBITDA Margins (%) Depreciation Interest Other Income PBT before EO Expense Extra-Ord Expense PBT after EO Expense Tax Rate (%) Adj PAT YoY Change (%) Margins (%) E: MOSL Estimates

January 2017







52.3

P/BV (x)



1Q 7,580 -19.0 822 10.8 421 55 41 388 116 271 82 21.3 305 -79.0 2.5

FY16 2Q 7,468 -4.3 841 11.3 369 73 56 455 236 218 95 20.9 360 -41.3 1.7

TP: INR540 (-2%)

Neutral

We expect Ipca Laboratories (IPCA) to witness 18.4% YoY growth in overall revenues, aided by strong domestic anti-malarial sales. Domestic formulation is expected to exhibit robust 16% YoY growth, while total API sales would witness 34.4% YoY growth. EBITDA is likely to grow 36.5% YoY, with margin improving 200bp YoY to 15% in 3QFY17. However, profitability is still lower due to negative operating leverage (US import alerts and weak traction in institutional business). We expect reported PAT to improve to INR567m, with taxes at 30% in 3QFY17. While we believe that the regulatory overhang would weigh on valuation multiples, growth in the domestic business remains healthy. We expect IPCA to clock FY16-18E EPS CAGR of 75% on the back of 15% revenue CAGR and recovery in EBITDA margin to 18%. Stock trades at 18.7x FY18E EPS. Maintain Neutral.

Key issues to watch out  Update on resolution of USFDA regulatory issues.  Outlook for institutional tender business.  Impact of emerging market currency weakness.

3Q 6,841 -7.6 892 13.0 448 91 50 403 9 394 162 40.3 241 -54.3 3.4

4Q 6,246 -0.5 635 10.2 392 81 87 249 28 221 -156 -62.7 405 -375.5 6.0

1Q 8,422 11.1 1,285 15.3 422 65 49 847 81 766 290 34.2 557 82.5 5.6

FY17 2Q 3QE 8,720 8,098 16.8 18.4 1,280 1,218 14.7 15.0 429 430 68 76 62 60 845 772 -78 0 923 772 374 205 44.2 26.5 471 567 31.1 135.8 6.3 7.0

FY16 4QE 7,449 19.3 1,133 15.2 427 86 79 699 0 699 147 21.0 552 36.3 7.4

28,850 -8.2 3,417 11.8 1,722 316 169 1,548 116 1,432 186 12.0 1,362 -51.1 4.3

(INR Million) FY17E 32,689 13.3 4,917 15.0 1,708 294 250 3,164 236 2,928 1016 32.1 2,148 53.4 5.8

172

December 2016 Results Preview

Lupin Bloomberg

LPC IN

Equity Shares (m)

447.5

M. Cap. (INR b)/(USD b)

CMP: INR1,494

669 / 10

52-Week Range (INR)

1912 / 1294

1,6,12 Rel Perf. (%)

-4 / -2 / -21





Financial Snapshot (INR Billion) Y/E MARCH

2016

2017E

2018E

2019E

Sales

142.1

174.6

205.6

232.1

EBITDA

37.5

45.2

55.1

63.8

NP

22.7

27.7

34.7

40.1

EPS (INR)

50.4

61.6

77.0

89.0

EPS Gro. (%)

-5.7

22.2

25.1

15.5

BV/Sh. (INR)

243.8

295.6

362.1

440.6

RoE (%)

22.9

22.8

23.4

22.2

RoCE (%)

16.8

15.3

16.4

16.4

29.6

24.3

19.4

16.8

6.1

5.1

4.1

3.4

EV/EBITDA (x)

19.5

15.6

12.5

10.4

Div. Yield (%)

0.5

0.6

0.6

0.6







TP: INR1,825 (+22%)

Buy

We expect Lupin's (LPC) 3QFY17 revenue to grow 19.4% YoY to IN42.4b, aided by buoyant performance in US generic segment (gGlumetza and gFortamet sales, consolidation of Gavis financials). India business is expected to exhibit 13% YoY growth to INR9.8b. Japan sales are expected to improve 20.3% YoY to INR4.5b in 3QFY17, aided by currency tailwinds. EBITDA is estimated to improve 19.7% YoY to INR10.5b, with EBITDA margin at 24.7%. Reported PAT is likely to grow 17.8% YoY to IN6.2b, slower than EBITDA growth, due to higher interest expenses. K ey growth drivers for FY17/18 will be the strong product pipeline for the US, including higher contribution from oral contraceptives and launches in niche areas of ophthalmic and dermatology. The stock trades at 19.4x FY18E EPS. Maintain Buy.

Valuations P/E (x) P/BV (x)

Quarterly Performance Y/E March Net Sales YoY Change (%) EBITDA Margins (%) Depreciation Interest Other Income PBT Tax Rate (%)

1Q 31,561 -5.5 8,248 26.1 1,014 70 757 7,921 2,258 28.5

Minority Interest Recurring PAT YoY Change (%) Margins (%)

-3 5,686 -9.0 18.0

Key issues to watch out    

Gavis sales ramp-up. Outlook on future ANDA launches and Gavis integration. Impact of new competition in Glumetza and Fortamet. Outlook on inorganic growth initiatives.

FY16 2Q 3Q 33,297 35,558 4.9 11.9 6,626 8,772 19.9 24.7 1,155 1,114 241 92 578 653 5,809 8,219 1,591 2,909 27.4 35.4 27 4,198 -33.4 12.6

13 5,298 -11.9 14.9

4Q 41,707 35.5 13,050 31.3 1,487 213 349 11,699 4,188 35.8

1Q 44,677 41.6 13,080 29.3 2,027 320 826 11,560 2,734 23.7

51 7,479 36.7 17.9

6 8,820 55.1 19.7

FY17 2Q 3QE 42,905 42,453 28.9 19.4 10,281 10,499 24.0 24.7 2,112 2,110 263 350 271 600 8,177 8,639 1,589 2,300 19.4 26.6 8 6,622 58.0 15.4

98 6,241 17.8 14.7

(INR Million) FY16 FY17E 4QE 44,538 6.8 11,354 25.5 2,073 277 603 9,606 2,672 27.8

142,085 11.3 37,534 26.4 4,635 446 1,877 34,330 11,536 33.6

174,574 22.9 45,215 25.9 8,322 1,210 2,300 37,982 9,496 25.0

263 6,671 -10.8 15.0

88 22,707 -5.5 16.0

375 28,112 23.8 16.1

E: MOSL estimates; Quarterly nos will not add up to full year nos due to restatement of past quarters

January 2017

173

December 2016 Results Preview

Sanofi India Bloomberg

SANL IN

Equity Shares (m)

23.0

M. Cap. (INR b)/(USD b)

99 / 1

52-Week Range (INR)

-1 / -5 / -5 

Financial Snapshot (INR Billion) Y/E December

2015

2016

2017E

2018E

Sales

21.9

23.9

27.0

30.5

EBITDA

4.6

5.6

6.5

7.4

Net Profit

2.4

3.3

4.0

4.6

103.2

142.2

172.8

198.9

EPS Gr. (%)

20.6

37.8

21.6

15.1

BV/Sh. (INR)

725.2

797.8

RoE (%)

14.2

17.8

19.4

19.7

RoCE (%)

16.1

17.8

19.6

20.2

Payout (%)

41.6

49.0

47.0

40.8

41.6

29.9

24.6

21.4

P/BV (x)

5.9

5.3

4.8

4.2

EV/EBITDA (x)

20.3

16.0

13.5

11.5

Div. Yield (%)

1.2

1.4

1.6

1.6

Quarterly performance Y/E December Net Sales YoY Change (%) EBITDA Margins (%) Depreciation Interest Other Income PBT before EO Items Extra-Ord Expense PBT after EO Items Tax Effective tax Rate (%) Reported PAT Adj PAT YoY Change (%) Margins (%) E: MOSL Estimates

January 2017

 



TP: INR5,200 (+21%)

BUY

We expect Sanofi India's (SANL) revenue to grow 8.1% YoY in 4QCY16 to INR6.1b. High growth of brands like Lantus, Allegra, Amaryl M, Enterogermina, Avila, Vaxlgrip and Cardace, and new product launches should drive SANL’s revenue growth. EBITDA is also likely to grow 27.4% YoY to INR1.4b during this quarter. We expect PAT to increase 14.8% YoY to INR809m. We expect earnings growth momentum to sustain over next few years, led by strong revenue CAGR of 13% over CY15-17E and ~210bp margin expansion from current levels. The stock trades at 24.8x CY17E EPS. Maintain Buy.

889.4 1,007.1

Valuations P/E (x)



4770 / 3850

1,6,12 Rel Perf. (%)

Adj. EPS (INR)

CMP: INR4,290

1Q 4,889 9.9 829 17.0 259 1 194 763 -161 924 279 30.2 645 484 -6.4 9.9

Key issues to watch out  Amortization of goodwill and brands acquired from Universal Medicare.  Clarity on nature of reversal of recently withdrawn NPPA guidelines.

CY15 2Q 3Q 5,497 5,858 8.7 13.8 1,214 1,419 22.1 24.2 284 290

4Q 5,687 11.1 1,129 19.9 296

1 99 1,028 0 1,028 386 37.5 642 642 11.7 11.7

1 126 958 -677 1,635 433 26.5 1,202 704 171.9 12.4

1 94 1,222 0 1,222 497 40.7 725 725 16.9 12.4

(INR million) CY15 CY16E

1Q 5,444 11.4 1,291 23.7 301

CY16E 2Q 3Q 6,080 6,242 10.6 6.6 1,458 1,447 24.0 23.2 300 300

4QE 6,145 8.1 1,438 23.4 295

21,931 10.9 4,591 20.9 1,129

23,911 9.0 5,634 23.6 1,196

1 256 1,245 0 1,245 439 35.3 806 806 66.5 14.8

7 164 1,315 0 1,315 462 35.1 853 853 32.9 14.0

-7 114 1,263 0 1,263 454 36 809 809 14.8 13.2

4 514 3,972 -838 4,810 1,595 33.2 3,215 2,377 20.6 10.8

4 682 5,115 0 5,115 1,841 36 3,274 3,274 37.7 13.7

3 148 1,292 0 1,292 486 37.6 806 806 11.2 12.9

174

December 2016 Results Preview

Sun Pharma Bloomberg

SUNP IN

Equity Shares (m)

2406.1

M. Cap. (INR b)/(USD b)

1534 / 23

52-Week Range (INR)

898 / 572

1,6,12 Rel Perf. (%)

-12 / -15 / -24

CMP: INR638 





Financial Snapshot (INR Billion) Y/E MARCH

2016

2017E

2018E

2019E

Sales

277.4

309.3

334.0

373.5

EBITDA

79.6

97.6

115.1

132.7

NP

47.1

66.9

91.3

103.2

EPS (INR)

19.6

30.6

37.9

42.9

EPS Gro. (%)

-0.7

56.4

24.0

13.1

BV/Sh. (INR)

130.5

143.5

174.4

210.3

RoE (%)

16.5

20.3

23.9

22.3

RoCE (%)

18.7

22.3

24.8

23.9

32.6

23.0

16.8

14.9

4.9

4.4

3.7

3.0

EV/EBITDA (x)

18.4

14.0

11.1

9.0

Div. Yield (%)

0.0

0.9

0.9

0.9





Valuations P/E (x) P/BV (x)

Quarterly performance Y/E March Net Revenues YoY Change (%) EBITDA Margins (%) Depreciation Net Other Income PBT before EO Exp EO Exp/(Inc) PBT Tax Rate (%) PAT (pre Minority Interest) Minority Interest Reported PAT YoY Change (%)

January 2017

1Q 67,615 6.6 17,678 26.1 2,402 296 15,573 6,852 8,721 1,128 7.2 7,593 2,034 5,559 -53.9

TP: INR925 (+45%)

Buy

Sun Pharmaceuticals (SUNP) is likely to register 13.5% YoY growth in revenues, primarily driven by Benicar AG launch. India business is expected to grow 9% YoY to INR20.6b, while the US business is likely to report 11.1% YoY jump in revenues. We expect margins to improve to 33.4% in 3QFY17 compared to 30.6% in 3QFY16. Overall EBITDA is expected to grow 23.7% YoY to INR26.8b over a low base. We expect total reported PAT at INR17.5b, compared to INR14.1b in 3QFY16 and INR22.3b in 2QFY17. We believe SUNP is an attractive Indian play on specialty business in the US. We maintain Buy rating in light of its multiple earnings triggers (MK -3222, RBXY integration benefits and specialty product pipeline), superior execution track record, high RoIC (30%) and cash-rich balance sheet (net cash of USD850m). The stock trades at 16.8x FY18E EPS.

Key issues to watch out  Update on resolution of USFDA warning letter and 483 observations on Halol.  Turnaround of Ranbaxy’s business.  Outlook on competitive landscape for Taro’s products.

FY16 2Q 68,733 -14.5 18,729 27.2 2,584 -429 15,716 0 15,716 2,946 18.7 12,769 2,481 10,288 -49.8

3Q 70,821 2.2 21,690 30.6 2,508 1,022 20,205 0 20,205 2,020 10.0 18,185 4,019 14,166 258.3

4Q 76,342 24.0 25,203 33.0 2,643 -1,235 21,325 0 21,325 1,706 8.0 19,619 2,482 17,137 93.0

1Q 82,430 21.9 29,210 35.4 3,160 225 26,275 0 26,275 3,527 13.4 22,748 2,411 20,337 265.8

FY17E 2Q 3QE 82,651 80,368 20.2 13.5 31,677 26,834 38.3 33.4 3,038 3,100 657 400 29,295 24,134 0 0 29,295 24,134 4,417 3,850 15.1 16.0 24,879 20,284 2,528 2,750 22,351 17,534 117.3 23.8

(INR million) FY16 FY17E 4QE 76,869 0.7 22,835 29.7 3,102 118 19,851 0 19,851 3,140 15.8 16,711 3,312 13,400 -21.8

282,697 3.0 84,816 30.0 10,135 -177 74,505 0 74,505 9,349 12.5 65,156 11,145 54,011 19.0

322,318 14.0 110,555 34.3 12,400 1,400 99,555 0 99,555 14,933 15.0 84,622 11,000 73,622 36.3

175

December 2016 Results Preview

Torrent Pharmaceuticals Bloomberg

TRP IN

Equity Shares (m)

169.2

M. Cap. (INR b)/(USD b)

229 / 3

52-Week Range (INR)

0 / -1 / -11

Financial Snapshot (INR Billion) Y/E MARCH

2016 2017E 2018E 2019E

Sales

66.8

60.8

70.8

82.2

EBITDA

27.2

15.2

18.4

22.2

NP

10.1

9.8

13.3

16.2

EPS (INR)

59.7

57.7

78.4

96.0

EPS Gro. (%)

78.9

-3.4

35.8

22.4

200.3 237.2 287.2 348.6

RoE (%)

34.4

26.4

29.9

30.2

RoCE (%)

40.7

19.3

25.4

27.7

Valuations P/E (x)

22.6

23.4

17.2

14.1

P/BV (x)

6.7

5.7

4.7

3.9

EV/EBITDA (x)

8.9

16.1

12.8

12.8

Div. Yield (%)

2.6

1.3

1.7

2.1

Quarterly performance Y/E March INR m Net Revenues YoY Change (%) EBITDA Margins (%) Depreciation Interest Other Income PBT before EO Expense Extra-Ord Expense PBT after EO Expense Tax Rate (%) Reported PAT YoY Change (%) Margins (%) E: MOSL Estimates

January 2017



1768 / 1186

1,6,12 Rel Perf. (%)

BV/Sh. (INR)

CMP: INR1,351

1Q 19,470 74.8 9,090 46.7 590 580 670 8,590 0 8,590 4,100 47.7 4,490 75.4 23.1







TP: INR1,750 (+30%)

Buy

We expect Torrent Pharmaceuticals (TRP) to post 4% YoY decline in 3QFY17 reported sales to INR14.7b. US business is expected to decline 36.3% YoY owing to lower contribution from gAbilify, while India business is expected to witness 13% YoY growth with successful integration of Elder’s portfolio. Reported EBITDA is likely to decline 42% YoY to INR3.5b, with EBITDA margin contracting 1570bp YoY, primarily on account of lower gAbilify sales in 3QFY17 numbers. We expect reported PAT to decrease 35.4% YoY to INR2.25b, in line with operational performance. We expect core earnings (excluding one-offs) trajectory to remain strong (forecast 20% CAGR over FY16-18E) as we think margin upside in domestic portfolio is still not fully reflected. The stock trades at 17.2x FY18E EPS, which is at 20% premium over its last five-year average valuations. Maintain Buy.

Key issues to watch out  Contribution of Elder Pharma portfolio and growth strategy.  Performance of Brazilian operations amid market pressure.  Outlook on future ANDA launches.

FY16 2Q 3Q 16,570 15,390 36.2 31.8 7,170 6,130 43.3 39.8 590 610 480 420 710 510 6,810 5,610 0 1,930 6,810 3,680 1,720 200 25.3 3.6 5,090 3,480 157.1 108.4 30.7 22.6

4Q 14,990 29.9 4,840 32.3 650 380 240 4,050 0 4,050 480 11.9 3,570 174.6 23.8

1Q 15,070 -22.6 4,370 29.0 680 490 260 3,460 0 3,460 540 15.6 2,920 -35.0 19.4

FY17E 2Q 3QE 14,060 14,773 -27.8 -4.0 3,300 3,565 23.5 24.1 690 690 510 450 430 425 2,530 2,850 0 0 2,530 2,850 460 600 18.2 21.1 2,070 2,250 -53.9 -35.4 14.7 15.2

(INR million) FY16 FY17E 4QE 15,739 2.3 3,945 25.1 696 459 285 3,075 0 3,075 545 17.7 2,530 -27.3 16.1

66,760 43.5 27,201 40.7 2,460 1,859 2,156 25,039 0 25,039 6,414 25.6 18,625 148.0 27.9

60,842 -8.9 15,180 25.0 2,756 1,909 1,400 11,914 0 11,914 2,145 18.0 9,770 -47.5 16.1

176

December 2016 Results Preview | Sector: Logistics

Logistics Company name

EX IM trade continues to suffer

Allcargo

No major impact of demonetization on EX IM trade

Concor



Gateway Distriparks

 

EX IM originating container rail volume declined ~ 2% YoY in October-November 2016 as trade continues to be weak. Margins are unlikely to see meaningful improvement due to increased competitive intensity. Sequential improvement in earnings for CCRI would be due to low base in 2QFY17. GDPL’s earnings are likely to be flat sequentially.

EX IM originating container trade declined ~ 2%YoY in October-November   

EXIM originating volume by rail is likely to decline by 2% for 3QFY17, as EXIM trade continues to be sluggish. CCRI is likely to report EXIM volume growth of 7% YoY for 3QFY17, led by strong volume growth in the month of November. GDPL is likely to report 6-7% YoY volume growth in the rail segment, led by ramp up of Faridabad terminal.

Margins likely to be flattish sequentially   

We expect CCRI to report flat margins QoQ, as higher volumes would be offset by rate rationalization in select routes by key players. GDPL should see some sequential improvement in rail profitability, led by higher proportion of double-stacking. AGLL is likely to see marginal improvement in margins, led by profitability improvement in MTO segment.

Lower leads to hurt margins 

Lead distance for EXIM trade by rail has declined by ~6% YoY (OctoberNovember 2016) due to higher container movement from the Mundra and Pipavav ports than from JNPT.

Exhibit 1: Expected quarterly performance summary Sector

Logistics Allcargo Logistics Concor Gateway Distriparks Sector Aggregate

CMP (INR)

Reco.

179 1,151 255

Buy Neutral Buy

Sales (INR m) Var % Var % Dec-16 YoY QoQ 14,613 13,391 2,938 30,942

9.3 -4.7 10 3.6

EBDITA (INR m) Var % Var % Dec-16 YoY QoQ

3.8 -2.9 2.8 1.4

1,316 2,625 592 4,533

11.2 -6.3 -4.3 1.5

4.4 14.7 1.8 13.1

PAT (INR m) Var % Var % Dec-16 YoY QoQ 680 1,818 243 2,741

10.5 5.5 -11.8 15.2 -16.6 -3.4 -3.4 18.2 Source: MOSL

Abhishek Ghosh ([email protected]); +91 22 3982 5436 Abhinil Dahiwale ([email protected]); +91 22 3980 4309 January 2017

177

December 2016 Results Preview | Sector: Logistics

Expect EX IM originating rail volumes to decline by ~ 2% YoY Exhibit 2: EX IM volumes to decline ~ 2% YoY in Oct-Nov 16 EXIM tonnes originating (million)

(12)

(4) (2) (2) (2)

(5)

3 6

6 (6) (8)

(5) (8) (10)(9) (6) (11) (16) (15)(18)(17) (20)(12) (18) (16) (19) (20)

0.8 0.8 0.8 0.8 0.7 0.7 0.7 0.7 0.8 0.8 0.8 0.8 0.6 0.6 0.7 0.7 0.7 0.7 0.9 0.8

(6) (9)

(4) (4)

YoY (%) 24 14 4 4

Apr'15 May'15 June'15 July'15 Aug'15 Sep'15 Oct'15 Nov'15 Dec'15 Jan'16 Feb'16 Mar'16 Apr'16 May'16 June'16 July'16 Aug'16 Sep'16 Oct'16 Nov'16

3

Domestic tonnes originating (millions)

2.9 3.1 3.2 3.1 3.1 3.2 3.2 2.8 3.3 3.2 2.8 3.2 3.2 3.5 3.0 3.2 3.2 3.1 2.9 3.0

(1)

10 13

Apr'15 May'15 June'15 July'15 Aug'15 Sep'15 Oct'15 Nov'15 Dec'15 Jan'16 Feb'16 Mar'16 Apr'16 May'16 June'16 July'16 Aug'16 Sep'16 Oct'16 Nov'16

4

Exhibit 3: Domestic volumes to grow ~ 9% YoY in Oct-Nov 16

YoY (%)

Source: Indian Rail, MOSL

Source: Indian Rail, MOSL

Exhibit 4: EX IM lead distance declined YoY in OctoberNovember 2016 EXIM average lead (kms)

YoY (%)

1,362 1,381 1,364 1,375 1,369 1,382 1,418 1,295 1,304 1,368 1,388 1,452 1,446 1,419 1,334 1,390 1,393 1,386 1,359 1,337

(7) (7) (7) (5) (8)

Apr'15 May'15 June'15 July'15 Aug'15 Sep'15 Oct'15 Nov'15 Dec'15 Jan'16 Feb'16 Mar'16 Apr'16 May'16 June'16 July'16 Aug'16 Sep'16 Oct'16 Nov'16

(3)

948 907 921 923 932 926 917 927 908 910 913 930 882 857 890 861 864 860 871 856

(7) (6)

Domestic average lead (kms) YoY (%) 4 6 3 3 2 0 (2) 1 (4) (4) (4) (5) (3) (8) (6) (10) (7) (7) (10)(10)

Apr'15 May'15 June'15 July'15 Aug'15 Sep'15 Oct'15 Nov'15 Dec'15 Jan'16 Feb'16 Mar'16 Apr'16 May'16 June'16 July'16 Aug'16 Sep'16 Oct'16 Nov'16

(0) (2) (0) (3) (2) (2) 1 (4) (5) (4) (3) (2)

Exhibit 5: Domestic lead distance flat YoY for OctoberNovember 2016

Source: Indian Rail, MOSL

Source: Indian Rail, MOSL

Exhibit 6: India’s EX IM trade grew ~ 8% YoY in Oct-Nov 2016 (imports grew 9% YoY, exports grew 5% YoY) Export - YoY (%)

20%

Exhibit 7: IIP declined ~ 2% YoY in October 2016

Import - YoY (%)

IIP growth (% YoY) 9.9

10% 0%

4.8 4.24.3 2.8 2.53.02.5

-10%

6.3

3.7

1.9 (0.9)

-20% -30%

(3.3)

January 2017

1.32.2

(0.7) (1.9)

Sep-16

Source: CEIC, MOSL

Jul-16

Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16

(2.6)

Nov-16

(1.3)

0.6

Source: CEIC, MOSL

May-16

Mar-16

Jan-16

Nov-15

Sep-15

Jul-15

May-15

Mar-15

Jan-15

-40%

(1.6)

0.3

178

December 2016 Results Preview | Sector: Logistics

Allcargo Bloomberg

AGLL IN

Equity Shares (m)

252.1

M. Cap. (INR b)/(USD b)

45 / 1

52-Week Range (INR)

222 / 135

1,6,12 Rel Perf. (%)

8 / 3 / -13

CMP: INR179 



Financial snapshot (INR b) Y/E March 2016 2017E 2018E 2019E Sales

56.6

57.9

62.2

67.1

EBITDA

5.2

5.1

5.7

5.9

NP

2.7

2.6

3.2

3.6

EPS (INR)

10.8

10.5

12.8

14.3

EPS Growth (%)

17.2

(2.7)

22.1

11.7

BV/Share (INR)

87.5

71.0

81.2

92.5

RoE (%)

13.2

13.3

16.9

16.5

RoCE (%)

11.2

10.8

13.7

13.9

Valuations 16.6

17.0

14.0

12.5

P/BV (x)

P/E (x)

2.0

2.5

2.2

1.9

EV/EBITDA (x)

9.4

8.5

7.1

6.1





TP: INR196 (+9%)

Buy

We expect AGLL to report EBITDA of INR1.3b (+11% YoY, +4% QoQ) and PAT of INR680m (+10% YoY, +6% QoQ), led by volume growth and higher margins. We estimate MTO volumes at 125k TEU (-2% QoQ, +8% YoY) and CFS volumes at 73k TEU (+6% QoQ, +11% YoY); the rise in volumes would be led by recovery in macro trade. We estimate EBITDA/PAT CAGR of 5%/10% over FY16-18, and expect return ratios to improve from ~13% to ~17%, driven by margin expansion and reduction in capex intensity in the business. The stock trades at 14x FY18E EPS of INR12.8. Maintain Buy.

Key issues to watch for  (a) Volume data, and (b) set up of logistics park in Jhajjar.

Consolidated - Quarterly Earning Model Y/E March Net Sales YoY Change (%) Total Expenditure EBITDA Margins (%) Depreciation Interest Other Income PBT before EO expense Extra-Ord expense PBT Tax Rate (%) Reported PAT Min. Interest & P& L of Asso. Cos. Adj PAT YoY Change (%) Margins (%) E: MOSL Estimates

January 2017

1Q 14,764 11.8 13,353 1,411 9.6 362 106 67 1,009 49 960 190 19.8 770 -4 751 45.7 5.1

FY16 2Q 3Q 14,534 13,365 -0.6 -6.7 13,194 12,182 1,340 1,183 9.2 8.9 556 386 102 115 70 125 752 807 15 39 737 769 131 162 17.8 21.1 606 606 9 603 -16.9 4.1

-18 615 -22.4 4.6

4Q 13,976 -1.2 12,760 1,216 8.7 359 95 122 884 6 878 169 19.3 709

1Q 13,937 -5.6 12,641 1,297 9.3 436 75 111 897 17 880 256 29.1 624

-32 691 22.5 4.9

-14 610 -18.7 4.4

FY17 2Q 3QE 14,084 14,613 -3.1 9.3 12,824 13,297 1,261 1,316 9.0 9.0 434 445 75 76 80 122 832 917 10 0 822 917 178 238 21.7 26.0 643 679 1 644 6.9 4.6

1 680 10.5 4.7

(INR Million) FY16 FY17 4QE 15,133 8.3 13,874 1,259 8.3 436 77 192 939 0 939 244 26.0 695

56,639 0.6 51,488 5,150 9.1 1,663 419 384 3,453 109 3,344 652 19.5 2,691

57,768 2.0 52,635 5,132 8.9 1,750 303 505 3,584 26 3,558 917 25.8 2,641

1 696 0.7 4.6

-45 2,660 2.5 4.7

-12 2,629 -1.1 4.6

179

December 2016 Results Preview | Sector: Logistics

Concor Bloomberg

CCRI IN

Equity Shares (m)

195.0

M. Cap. (INR b)/(USD b)

224 / 3

52-Week Range (INR)

1544 / 1051

1,6,12 Rel Perf. (%)

2 / -19 / -19

Financial snapshot (INR b) Y/E March 2016 2017E 2018E 2019E Sales

63.1

59.8

65.0

73.0

EBITDA

11.6

10.5

13.0

14.3

7.9

7.1

9.0

9.8

NP EPS (INR)

40.6

36.3

45.9

50.2

EPS Gr. (%)

-24.9

-10.7

26.6

9.3

BV/Sh (INR)

409.4

431.0

458.3

488.2

RoE (%)

10.2

8.6

10.3

10.6

RoCE (%)

9.8

8.3

10.0

10.3

40.0

40.5

40.5

40.5

28.3

31.7

25.1

22.9

2.8

2.7

2.5

2.4

EV/EBITDA (x)

17.1

19.2

15.4

13.9

Div. Yield (%)

1.2

1.1

1.3

1.5

Payout (%) Valuations P/E (x) P/BV (x)

CMP: INR1,151 TP: INR1,317(+14%) 

  

We expect CCRI to report net sales of INR13.4b (-5% YoY, -3% QoQ), led by (a) realization decline of 12% YoY (flat QoQ), and (b) volume growth of 8% YoY (decline of 2% QoQ). We expect EXIM volumes to improve 7% YoY and expect domestic volumes to grow 15% YoY. We estimate EBITDA at INR2.6b (-6% YoY, +15% QoQ) and PAT at INR1.8b (-12% YoY, +15% QoQ). The stock trades at 15.4x/13.9x FY18E/FY19E EV/EBITDA. CCRI remains a direct play on the upcoming dedicated freight corridor (DFC) project, which will multiply its asset turnover and significantly improve profitability. Neutral.

Key issues to watch for  EX IM and domestic volumes, and realizations.  Progress on MMLPs and DFC projects.

Container Corporation

(INR Million)

Y/E March Net Sales YoY Change (%) Terminal & Service Charges A s a % of rev enu e Employee Expenses Other Expenses Total Expenditure EBITDA Margins (%) YoY Change (%) Depreciation Interest Other Income PBT Tax Rate (%) Adj PAT YoY Change (%) Margins (%) E: MOSL Estimates

January 2017

Neutral

1Q 14,209 11.9 8,963 6 3 .1 373 1,994 11,330 2,878 20.3 -3.6 907 0 798 2,770 701 25.3 2,069 -21.0 14.6

FY16 2Q 15,019 10.9 9,456 6 3 .0 369 2,034 11,859 3,161 21.0 1.1 876 0 858 3,137 808 25.8 2,335 21.7 15.5

3Q 14,046 -3.3 8,848 6 3 .0 396 2,001 11,246 2,800 19.9 -23.7 876 0 813 2,737 676 24.7 2,061 -31.5 14.7

4QE 14,152 -6.2 9,180 6 4 .9 401 2,596 12,177 1,975 14.0 -40.1 988 0 978 1,965 555 28.3 1,409 -51.9 10.0

1Q 13,392 -5.7 8,493 6 3 .4 380 1,901 10,773 2,619 19.6 -9.0 841 0 692 2,470 685 27.7 1,785 -13.7 13.3

FY17 2Q 13,786 -8.2 8,497 6 1 .6 405 2,597 11,498 2,288 16.6 -27.6 873 3 763 2,175 596 27.4 1,578 -32.4 11.4

3QE 13,391 -4.7 8,253 6 1 .6 393 2,120 10,766 2,625 19.6 -6.3 870 0 770 2,525 707 28.0 1,818 -11.8 13.6

4QE 13,861 -2.1 8,543 6 1 .6 437 1,939 10,919 2,942 21.2 49.0 956 0 808 2,794 741 26.5 2,053 45.7 14.8

FY16

FY17E

57,426 15.2 68,844 1 1 9 .9 3,118 17,421 46,612 10,813 18.8

54,430 -5.2 33,786 62.1 1,615 8,556 43,957 10,473 19.2

4,027 0 3,447 10,232 2,740 26.8 7,492 -23.9 13.0

3,540 0 3,032 9,960 2,729 27.4 7,235 -3.4 13.3

180

December 2016 Results Preview | Sector: Logistics

Gateway Distriparks Bloomberg

GDPL IN

Equity Shares (m)

108.6

M. Cap. (INR b)/(USD b)

28 / 0

52-Week Range (INR)

360 / 206

1,6,12 Rel Perf. (%)

9 / -16 / -23

Financial snapshot (INR b) Y/E March 2016 2017E 2018E 2019E Sales

10.5

11.6

12.3

14.0

EBITDA

2.5

2.4

2.9

3.5

NP

1.2

1.0

1.7

2.2

EPS (INR)

11.4

9.6

15.6

20.0

EPS (INR)*

8.7

7.6

11.7

14.3

EPS Gr. (%)*

-31.3

-12.8

54.1

22.5

RoE (%)

10.1

8.3

12.8

15.2

RoCE (%)

7.5

7.7

10.7

12.7

81.7

59.0

45.1

45.4

Payout (%)

CMP: INR255  

 

TP: INR313 (+23%)

Buy

We expect GDPL to report net sales of INR2.9b (+10% YoY, +3% QoQ), led by increased volumes in Rail and CFS businesses. We estimate EBITDA at INR592m (-4% YoY, +2% QoQ) and EBITDA margin at 20.1%. We estimate adjusted PAT at INR243m (-17% YoY, -3% QoQ). The stock trades at 9.9/8x FY18E/FY19E adjusted EV/EBITDA. GDPL remains a direct play on the upcoming dedicated freight corridor project, which will multiply its asset turnover and significantly improve profitability. Buy.

Key issues to watch for  Volume growth, realization and per TEU profitability.

Valuations P/E (x)

22.4

26.6

16.3

12.7

Adj. P/E (x)

29.4

33.7

21.9

17.8

EV/EBITDA (x)

2.2

2.2

2.0

1.9

EV/EBITDA (x)*

11.8

12.5

9.9

8.0

Div. Yield (%)

16.6

17.6

14.0

11.5

* Adjusted for Blackstone’s stake

Quarterly performance

(INR Million) Y/E March FY16 FY17 FY16 FY17E (Consolidated) 1Q 2Q 3Q 4Q 1Q* 2Q* 3QE 4QE Net Sales 2,628 2,595 2,671 2,575 2,782 2,857 2,938 2,978 10,470 11,556 YoY Change (%) -6.1 -11.3 -2.4 -2.9 5.9 10.1 10.0 15.7 -5.8 10.4 Total Expenditure 1,938 1,954 2,053 2,006 2,227 2,276 2,346 2,336 7,951 9,186 EBITDA 690 641 619 569 555 581 592 642 2,518 2,370 M arg ins ( % ) 2 6 .3 2 4 .7 2 3 .2 2 2 .1 1 9 .9 2 0 .3 2 0 .1 2 1 .5 2 4 .1 2 0 .5 YoY Change (%) -8 -25 -28 -28 -20 -9 -4 13 -23 -6 Depreciation 201 202 202 200 195 194 206 211 805 805 Interest 51 50 46 38 51 88 89 82 184 310 Other Income 57 48 47 13 40 80 67 74 165 261 PBT 495 437 418 345 349 379 364 422 1,695 1,515 Tax 296 141 126 108 124 127 121 124 671 496 Rate (%) 59.8 32.2 30.1 31.4 35.6 33.6 33.2 29.3 39.6 32.7 PAT before minority / 199 297 292 237 225 252 243 299 1,024 1,019 profit of assoc. YoY Change (%) -48.0 -38.0 -44.5 -46.0 13.0 -15.0 -16.6 26.3 -43.9 -0.5 Margins (%) 7.6 11.4 10.9 9.2 8.1 8.8 8.3 10.0 9.8 8.8 E: MOSL Estimates, *1QFY17 and 2QFY17 is addition of Rail and CFS details as provided and not actual consolidated number

January 2017

181

December 2016 Results Preview

Media Company name D B Corp Dish TV India Hathway Cable & Datacom HT Media Jagran Prakashan PVR Sun TV Z ee Entertainment

Demonetization-led pain to be felt across Media Aggregate earnings to remain flat Expect muted ad revenue growth: We expect ad revenue for our Media universe to grow at a meager ~1% YoY, lower than the 7-13% growth in the preceding four quarters. Both broadcasters and print companies are likely to face the brunt of demonetization. The ad pain is expected to be more debilitating for print media, given higher reliance on local/retail advertisers, who are most impacted by the cash squeeze. Z ee’s ad growth is expected to moderate to ~4% YoY after six quarters of strong ad revenues. Apart from FMCG, Telecom, Auto, Consumer Durables, and Traditional Retail too have cut back on ad spends. Regional/niche channels and publishers are expected to take a bigger hit. Our industry interactions suggest that a full recovery could be expected by 1QFY18.

Expect aggregate Media universe earnings to remain flat YoY: Aggregate Media sector earnings are expected to remain flat YoY, largely led by a decline in profitability of print and distribution platforms. Z ee/SUNTV are expected to clock earnings growth of 10%/13% YoY. Within the print pack, DB Corp, Jagran, HT Media and HMVL’s earnings are expected to decline by 3%, 16%, 31% and 9%, respectively. While DB Corp’s relative outperformance v/s its print peers is courtesy a lower base, Jagran is expected to report a lower dip in profitability than smaller UP rivals HT Media/HMVL due to its stronger foothold in the government ad revenue pie. Dish TV too is expected to see an impact on profitability as both recharges and activation take a hit following demonetization. However, normalization of the same is expected to be swift. Expect monetization to improve over the next two quarters for Pay TV operators; increased activity toward Phase III seeding: We expect monetization for Pay TV operators to improve over the next two quarters as all stay orders on DAS III implementation have been now lifted by the Delhi High Court. This should drive increased MSO share in digital cable revenue—the key to improve economics of MSOs as well as pricing for broadcasters and DTH operators. However, with Phase I/II monetization remaining sub-par, we expect MSOs to be more cautious in Phase III markets. We expect subscriber additions to remain flat QoQ for Dish TV due to demonetization. We model 0.6m gross additions for Dish TV during the quarter compared with an estimated 0.67m in 2QFY17. Digitization upside, ad growth revival remain key themes: Subscriber-level ARPU increases in Phase I/II markets and Phase III digitization are key growth triggers. MSOs are likely to witness profitability improvement, as they continue to drive monetization efforts in Phase I/II/III. FMCG-led ad spend outlook remains weak; however, any revival in the same coupled with renewed spends by Telecom and Auto over the next two quarters could keep ad growth healthy. Broadcasters as well as print companies will be the key beneficiaries of the same, in our view.

Jay Gandhi ([email protected]); +91 22 3089 6693 Aliasgar Shakir ([email protected]); +91 22 6129 1565 January 2017

182

December 2016 Results Preview | Sector: Media

Media coverage: Quarterly snapshot FY15 Advertisement Revenue (INR b) Z EEL Sun TV Dish TV DB Corp Jagran Prakashan Hathway cable and Datacom HT Media HMVL Subscription Revenue (INR b) Z EEL Sun TV Dish TV DB Corp Jagran Prakashan Hathway Cable and Datacom HT Media HMVL Total Revenue (INR b) Z EEL Sun TV Dish TV DB Corp Jagran Prakashan Hathway cable and Datacom HT Media HMVL EBITDA (INR b) Z EEL Sun TV Dish TV DB Corp Jagran Prakashan Hathway cable and Datacom HT Media HMVL EBITDA Margin (%) Z EEL Sun TV Dish TV DB Corp Jagran Prakashan Hathway cable and Datacom HT Media HMVL Adj. PAT (INR b) Z EEL Sun TV Dish TV DB Corp Jagran Prakashan Hathway cable and Datacom HT Media HMVL

January 2017

3Q

4Q

1Q

2Q

FY16 3Q

4Q

1Q

FY17 2Q

3QE

7.4 3.2 NM 3.9 3.4 NM 0.0 1.5

6.7 3.3 NM 3.2 2.9 NM 0.0 1.5

7.8 3.5 NM 3.1 3.3 NM 0.0 1.7

8.3 3.3 NM 3.1 3.2 NM 0.0 1.7

9.4 3.3 NM 3.9 3.7 NM 5.1 1.8

8.6 3.1 NM 3.2 3.3 NM 4.4 1.7

9.1 3.4 NM 3.7 3.5 NM 4.5 1.8

9.6 3.4 NM 3.3 3.4 NM 4.3 1.7

9.8 3.4 NM 4.0 3.8 NM 4.7 1.7

4 5 NM 2 3 NM -8 -5

2 1 NM 21 12 NM 10 1

4.5 2.3 6.6 1.0 1.0 1.0 0.0 0.5

5.1 2.3 6.8 1.0 1.0 1.2 0.0 0.5

4.6 2.3 6.8 1.0 1.0 0.9 0.0 0.5

4.8 2.3 6.9 1.1 1.0 0.9 0.0 0.5

5.2 2.4 7.1 3.9 1.0 1.1 0.8 0.5

5.9 2.5 7.4 3.2 1.1 1.2 0.8 0.5

5.3 2.7 7.3 3.7 1.1 1.1 0.8 0.6

5.8 2.7 7.3 3.3 1.1 1.1 0.8 0.5

5.8 2.8 7.4 4.0 1.1 1.2 0.8 0.6

11 15 4 2 4 7 4 6

0 4 2 21 0 5 6 7

13.6 5.5 7.1 5.5 4.7 2.4 6.1 2.1

13.5 5.5 7.5 4.9 4.2 2.7 5.8 2.0

13.4 6.9 7.4 4.7 4.8 2.6 5.9 2.2

13.8 5.7 7.5 4.8 5.1 2.7 6.0 2.3

16.0 5.7 7.7 5.9 5.8 3.0 6.8 2.4

15.3 5.7 8.0 5.1 5.3 3.4 6.3 2.3

15.7 7.6 7.8 5.7 5.6 3.0 6.1 2.4

17.0 6.3 7.8 5.3 5.6 3.2 6.0 2.3

16.5 6.3 7.9 6.1 5.8 3.4 6.6 2.3

3 9 3 5 1 13 -3 -2

-3 0 2 16 3 5 10 2

3.5 4.3 1.9 1.8 1.3 0.2 0.0 0.4

2.7 4.2 2.2 1.2 1.0 0.3 0.0 0.4

3.1 4.1 2.4 1.2 1.3 0.4 0.0 0.5

3.6 4.3 2.6 1.1 1.4 0.5 0.0 0.5

4.3 4.4 2.7 1.87 1.7 0.5 1.2 0.6

4.1 4.3 2.6 1.1 1.4 0.8 0.7 0.5

4.5 4.4 2.6 1.8 1.5 0.4 0.6 0.6

4.9 4.7 2.6 1.5 1.2 0.5 0.5 0.5

4.4 4.8 2.7 1.8 1.6 0.6 1.0 0.5

2 9 3 -3 -8 14 -16 -13

-11 3 3 20 31 7 99 4

25.9 77.5 26.8 33.3 28.2 10.3 0.0 19.4

20.1 77.2 29.4 24.6 24.8 11.5 0.0 22.0

23.2 59.2 32.1 25.7 28.0 15.9 0.0 24.4

26.0 76.1 33.9 23.6 28.0 16.9 0.0 23.1

27.0 76.7 34.4 31.9 29.9 16.6 17.4 25.0

27.0 74.7 32.6 22.2 25.6 23.5 11.1 22.5

28.8 57.4 34.0 31.8 27.7 14.7 10.5 23.8

28.9 74.6 33.9 28.5 21.5 16.6 8.4 22.0

26.5 76.5 34.4 29.5 27.2 16.8 15.2 22.3

-45bps -19bps 0bps -238bps -268bps 22bps -222bps -273bps

-234bps 198bps 51bps 103bps 570bps 18bps 682bps 28bps

3.09 2.14 -0.03 1.05 0.66 -0.6 0.67 0.37

2.31 2.03 0.35 0.64 0.49 -0.8 0.39 0.39

2.44 1.97 0.54 0.66 0.78 -0.4 0.25 0.42

2.85 2.18 0.87 0.60 0.71 -0.3 0.37 0.45

2.75 2.16 0.68 1.07 0.93 -0.3 0.69 0.47

2.61 2.36 4.83 0.64 0.80 -0.5 0.38 0.47

2.17 2.33 0.41 1.04 0.84 -0.5 0.22 0.49

2.38 2.70 0.70 0.89 1.08 -0.4 0.31 0.55

3.23 18 36 2.44 13 -10 0.44 -36 -37 1.04 -3 17 0.78 -16 -28 -0.4 26 2 0.48 -31 54 0.43 -9 -22 Source: Company, MOSL

YoY (%) QoQ (%)

183

December 2016 Results Preview | Sector: Media

Exhibit 2: 3QFY17 estimated ad revenue growth (YoY, %) 5

4

3

2

-5 -8 Z EEL

HMVL

Jagran

HT Media

Sun TV

DB Corp

Source: Company, MOSL

Exhibit 3: 3QFY17 estimated subscription/circulation growth (YoY, %) 15 11

4

4

4

Dish TV

HT Media

JAGP

2

DB Corp

Sun TV

Z EEL Source: Company, MOSL

Exhibit 4: Media universe quarterly PAT (INR b)

1QFY17

4QFY16

3QFY16

7.0

8.2

8.4

3QFY17E

8.4

7.7

2QFY16

1QFY16

4QFY15

3QFY15

1QFY14

4QFY13

6.7

5.8

5.0

2QFY14

5.8

4.9

7.4

2QFY17

11.6

Source: Company, MOSL

Exhibit 5: Newsprint prices moderating Newsprint price - INR (RHS)

43,000

Newsprint price - USD

800 650

36,000

Dec-16

Jun-16

Dec-15

Jun-15

Dec-14

Jun-14

Dec-13

Jun-13

Dec-12

Jun-12

Dec-11

Jun-11

Dec-10

200 Jun-10

15,000 Dec-09

350

Jun-09

22,000

Dec-08

500

Jun-08

29,000

Source: Company, MOSL

January 2017

184

December 2016 Results Preview | Sector: Media

Exhibit 1: Expected quarterly performance summary (INR m)

6,137 7,935 3,387 6,595 5,833 5,505 3,347 6,252 16,492 61,484

1,811 2,731 569 1,002 1,586 881 957 4,785 4,373 18,694

1,039 441 -413 476 782 258 167 2,439 3,024 8,212

4.8 2.9 12.7 -3.2 1.2 10.0 -9.5 8.9 3.4 3.2

90

90

80 Dec-16

Source: Bloomberg, MOSL

Dec-16

93

Nov-16

100

MOSL Media Index

Oct-16

96

Dec-15

110

Nov-16

Sensex Index

120

Sep-16

MOSL Media Index

Oct-16

-2.8 17.3 -35.7 -37.1 Loss Loss -30.8 54.0 -16.2 7.7 -15.6 -11.6 -57.2 LP 13.1 -9.8 10.0 26.8 -5.1 15.2 Source: MOSL

Exhibit 3: Relative Performance-1 Yr (%)

99

Sep-16

20.3 3.4 6.7 98.6 30.7 -5.3 102.1 2.6 -10.6 7.7

Aug-16

Sensex Index

102

-3.1 2.9 14.3 -15.5 -7.9 3.3 -23.5 8.6 1.7 -0.2

Jul-16

Exhibit 2: Relative Performance-3m (%)

16.1 1.8 5.5 9.5 27.1 -0.7 15.8 0.0 -2.7 5.0

Jun-16

Buy Buy Buy Neutral Buy Buy Buy UR Buy

Net Profit (INR m) Var % Var % Dec-16 YoY QoQ

May-16

374 85 37 75 181 1,173 38 524 458

EBITDA (INR m) Var % Var % Dec-16 YoY QoQ

Apr-16

Media D B Corp Dish TV Hathway Cable HT Media Jagran Prakashan PVR Siti Networks Sun TV Z ee Entertainment Media Sector Aggregate

Sales (INR m) Var % Var % Dec-16 YoY QoQ

Mar-16

RECO

Feb-16

CMP (INR)

Jan-16

Sector

Source: Bloomberg, MOSL

Exhibit 4: Comparative valuations Sector / Companies Media D B Corp Den Networks Dish TV Hathway Cable Hindustan Media HT Media Jagran Prakashan PVR Siti Networks Sun TV Z ee Entertainment Sector Aggregate

January 2017

CMP (INR)

Reco.

374 72 85 37 270 75 181 1,173 38 524 458

Buy Neutral Buy Buy Buy Neutral Buy Buy Buy UR Buy

EPS (INR) PE (x) EV/EBIDTA (x) RoE (%) FY17E FY18E FY19E FY17E FY18E FY19E FY17E FY18E FY19E FY17E FY18E FY19E 20.0 -3.6 2.0 -2.4 26.9 5.4 10.8 20.4 -0.9 25.4 11.7

23.5 1.9 3.3 -1.4 29.7 7.0 12.2 35.8 2.7 30.3 17.7

27.4 7.7 5.1 0.3 33.2 8.0 13.9 57.0 3.2 33.9 21.3

18.7 -19.7 43.1 -15.0 10.1 13.9 16.8 57.6 -41.1 20.6 39.3 30.7

15.9 38.7 25.4 -27.1 9.1 10.7 14.8 32.7 13.8 17.3 25.9 21.4

13.7 9.3 16.7 134.9 8.1 9.4 13.0 20.6 11.8 15.4 21.5 17.1

10.4 11.8 8.9 12.5 5.0 3.0 9.2 18.0 11.6 10.1 21.3 12.7

8.9 4.8 7.0 8.9 3.7 1.8 8.0 12.5 5.2 8.4 16.7 9.6

7.6 3.0 5.5 6.7 2.5 0.9 6.9 9.3 3.8 7.5 13.4 7.8

25.7 -4.1 43.2 -16.6 19.6 5.2 20.7 10.4 -10.2 25.3 29.4 16.7

26.9 27.6 2.1 8.1 46.3 44.6 -11.0 2.3 18.0 16.9 6.3 6.6 20.6 20.4 16.4 22.0 23.5 20.0 27.6 28.1 30.7 29.9 20.6 22.1 Source: MOSL

185

December 2016 Results Preview | Sector: Media

D B Corp Bloomberg

DBCL IN

Equity Shares (m)

183.4

M. Cap. (INR b)/(USD b)

69 / 1

52-Week Range (INR)

448 / 287

1,6,12 Rel Perf. (%)

3 / -1 / 11

CMP: INR374 



Financial Snapshot (INR Billion) Y/E MARCH

2016 2017E 2018E 2019E

Net Sales

20.5

22.8

25.7

28.7

5.4

6.4

7.3

8.2

EBITDA Adj. Net Profit

3.0

3.7

4.3

5.0

Adj. EPS (INR)

16.2

20.0

23.5

27.4

Adj. EPS Gr. (%)

-7.4

23.6

17.6

16.2

BV/Sh (INR)

73.3

82.3

92.9 105.2

RoE (%)

22.6

25.7

26.9

27.6

RoCE (%)

20.0

23.0

24.3

25.2

Div. Payout (%)

81.5

55.0

55.0

55.0

23.1

18.7

15.9

13.7

5.1

4.5

4.0

3.6

EV/EBITDA (x)

12.9

10.4

8.9

7.6

Div. Yield (%)

2.9

2.5

2.9

3.3

Valuations P/E (x) P/BV (x)





  

TP: INR450

Buy

We expect ad growth for print media to be impacted by demonetization. Print media companies receive ~55% of ad revenues from local advertisers that have been most impacted. Despite low base, we expect weak 2% YoY ad growth (~INR4b) for DBCL in 3QFY16. Circulation revenue is likely to grow 11% YoY to INR1.27b. DBCL’s aggregate revenue is likely to grow 5% YoY to INR6.13b, as print ad revenue, which accounts for ~65% of overall revenue, remains under pressure. Raw material cost is expected to increase 2% YoY despite an expected 5% YoY growth in newsprint prices. DBCL has been trying to reduce newsprint consumption to salvage margins. We expect EBITDA margin to decline by ~240bp YoY to 29.5%. Startup losses related to the Bihar footprint expansion are expected to continue at 2Q levels. We estimate net profit at INR1.04b, down 3% YoY. We have cut our FY17/FY18 ad revenue estimates by ~6% each, and consequently, our EPS estimates by 8%/9% to factor in the demonetization impact. We revise our target price to INR450 (17x December 2018E EPS). The stock trades at 18.7x/15.9 FY17E/FY18E EPS. Buy.

Key things to watch for  YoY ad growth (we expect 2%).  EBITDA margin (we expect 29.5%). Quarterly Performance

(INR Million)

Y/E March Sales YoY (%) Operating Expenses EBITDA YoY (%) EBITDA margin (%) Depreciation Interest Other Income PBT Tax Effective Tax Rate (%) Adj PAT YoY (%)

January 2017

1Q 4,734 -3.2 3,515 1,218 -9.5 25.7 208 21 68 1,057 393 37.2 665 -16.0

FY16 2Q 4,781 -0.4 3,654 1,127 -8.7 23.6 215 27 53 938 337 35.9 601 -11.8

3Q 5,859 5.6 3,991 1,868 1.2 31.9 233 19 37 1,654 585 35.4 1,068 1.6

4Q 5,143 5.9 4,001 1,142 -4.4 22.2 222 24 122 1,017 375 36.8 642 0.4

1Q 5,704 20.5 3,892 1,812 48.7 31.8 211 34 41 1,608 568 35.3 1,040 56.5

FY17 2Q 5,287 10.6 3,782 1,505 33.6 28.5 216 6 41 1,325 440 33.2 885 47.3

3QE 6,137 4.8 4,326 1,811 -3.1 29.5 227 25 51 1,610 572 35.5 1,039 -2.8

4QE 5,706 11.0 4,391 1,315 15.2 23.0 226 26 52 1,115 400 35.9 714 11.2

FY16 20,516 1.9 15,161 5,355 -5.6 26.1 878 92 281 4,666 1,690 36.2 2,976 -7.3

FY17E 22,835 11.3 16,391 6,443 20.3 28.2 880 91 187 5,660 1,981 35.0 3,679 23.6

186

December 2016 Results Preview | Sector: Media

Dish TV India Bloomberg

DITV IN

Equity Shares (m)

1064.8

M. Cap. (INR b)/(USD b)

90 / 1

52-Week Range (INR)

110 / 65

CMP: INR85 

-2 / -13 / -19



Y/E March

2016 2017E 2018E 2019E



Net Sales

30.6

31.7

36.0

40.7

EBITDA

10.2

10.9

13.0

15.7



Adj. NP

6.9

2.1

3.6

5.4



Adj. EPS (INR)

6.5

2.0

3.3

5.1



Adj. EPS Gr.(%)

NA

-69.7

69.4

52.5

BV/Sh (INR)

3.6

5.5

8.9

14.0

1,6,12 Rel Perf. (%) Financial Snapshot (INR Billion)

RoE (%)

NA

43

46

45

RoCE (%)

12.7

11.4

14.3

18.1

NA

NA

NA

NA

13

43

25

17

P/BV (x)

NA

15.3

9.6

6.1

EV/EBITDA (x)

9.6

8.8

6.9

5.5

Div. Payout(%) Valuations P/E (x)

EV/Sub (INR)

6,789 6,082 5,152 4,514

TP: INR115

Buy

We expect DITV’s revenue to increase 3% YoY and 2% QoQ on a reported basis to INR7.93b. Subscription revenue is expected to increase 2% QoQ to INR7.42b as demonetization is expected to impact both monthly recharges as well as fresh set-top box seeding. We expect gross additions of 0.6m and net additions of 0.28m. ARPU is expected to be flat QoQ at INR162 per subscriber per month. EBITDA margin is expected to be largely flat QoQ at 34.4%. We expect net profit of INR0.44b in 3QFY17. The stock trades at EV/EBITDA of 8.8x FY17E and 6.9x FY18E. Buy.

Key things to watch for  Quarterly gross adds (we expect 0.6m).  ARPU (we expect INR162).  EBIDTA margin (we expect 36.2%)

Quarterly Performance Y/E March Sales YoY Change (%) Operating expenses EBITDA YoY Change (%) EBITDA margin (%) Depreciation Interest Other Income PBT Tax Effective Tax Rate (%) Net profit Net Subs (m) ARPU (INR/month)

January 2017

(INR Million) 1Q 7,367 15.0 4,998 2,368 50.8 32.1 1,598 480 252 542

542 13.3 173

FY16 2Q 7,524 11.9 4,974 2,550 57.1 33.9 1,330 548 197 870

870 13.7 171

3Q 7,715 8.1 5,060 2,655 38.8 34.4 1,463 549 42 686

686 14.0 172

4Q 7,994 5.9 5,385 2,609 17.6 32.6 1,516 512 218 799 -4,029 (504.2) 4,828 14.5 174

1Q 7,786 5.7 5,140 2,646 11.7 34.0 1,613 521 119 631 223 35.3 409 14.9 165

FY17 2Q 7,793 3.6 5,151 2,642 3.6 33.9 1,635 554 111 565 -136 (24.1) 701 15.2 162

3QE 7,935 2.9 5,204 2,731 2.9 34.4 1,659 452 120 741 300 40.5 441 15.4 162

4QE 8,142 1.9 5,284 2,859 9.6 35.1 1,662 380 120 937 384 41.0 553 15.8 161

FY16

FY17E

30,599 10.0 20,350 10,249 39.4 33.5 5,907 2,087 640 2,895 -4,029

31,656 3.5 20,776 10,880 6.2 34.4 6,509 1,925 470 2,916 817 28.0 2,100 15.8 163

6,924 14.5 172

187

December 2016 Results Preview | Sector: Media

Hathway Cable Bloomberg

HATH IN

Equity Shares (m)

830.5

M. Cap. (INR b)/(USD b)

31 / 0

52-Week Range (INR)

45 / 24

1,6,12 Rel Perf. (%)

1 / 10 / -19

CMP: INR37   

Financial Snapshot (INR Billion) Y/E March

2016 2017E 2018E 2019E

Net Sales

20.8

22.7

26.4

29.3

3.9

4.0

5.7

7.3

EBITDA EBITDA #

1.6

2.2

5.1

6.9

Adj. NP

-1.6

-2.0

-1.1

0.2

Adj. EPS (INR)

-1.9

-2.4

-1.4

0.3

NA

NA

NA

NA

Adj. EPS Gr. (%)

16.3

13.2

11.5

11.8

RoE (%)

BV/Sh (INR)

-11.3

-16.6

-11.0

2.3

RoCE (%)

-2.6

-4.7

-0.1

6.9

-19.4

-15.0

EV/EBITDA (x)*

15.4

15.1

10.7

8.1

EV/EBITDA (x)*#

37.2

27.3

11.9

8.6

Valuations P/E (x)

EV/Sub (INR)*

-27.1 134.9

4,858 4,928 4,965 4,819

 

TP: INR47

Buy

We expect standalone revenue to grow 5% QoQ to INR3.38b. Cable subscription revenue is expected to grow 5% QoQ to INR1.16b. EBITDA is expected to grow 7% QoQ to INR569m on overall basis, and 11% QoQ on an ex-activation basis to INR349m. EBITDA margin is likely to largely remain flat QoQ at ~16.8%. On an ex-activation basis too, EBITDA margin is likely to largely remain flat QoQ at 10% We expect net loss to largely remain flat QoQ at INR0.41b in 3QFY17. The stock trades at attributable EV/EBITDA (ex-activation) of 27.4x FY17E and 11.9x FY18E. Maintain Buy.

Key things to watch for  Cable subscription revenue growth (we expect 5% QoQ).  EBITDA margin (we expect 16.8%).  EBITDA margin (ex-activation) (we expect 10%).

* Based on attributable EBITDA and subs post minority stake; # (ex-activation)

Quarterly Performance (Standalone) Y/E March Sales YoY Change (%) Operating expenses EBITDA YoY Change (%) EBITDA margin (%) Depreciation Interest Other Income PBT Adjusted net profit YoY Change (%) Forex and exceptional items Reported PAT

January 2017

(INR Million) FY16

FY17

1Q

2Q

3Q

4Q

1Q

2QE

3QE

4QE

2,587 3.4 2,176 411 -6.3 15.9 592 214 45 -349 -349 NA 24 -374

2,704 2.6 2,247 457 13.9 16.9 615 231 34 -356 -356 NA -36 -320

3,004 25.6 2,507 498 102.5 16.6 637 225 28 -336 -336 NA -10 -326

3,399 25.9 2,601 798 157.4 23.5 701 230 17 -116 -116 NA 343 -459

3,021 16.8 2,576 445 8.3 14.7 704 298 51 -505 -505 NA 27 -532

3,211 18.8 2,677 533 16.7 16.6 727 246 16 -424 -424 NA -20 -404

3,387 12.7 2,818 569 14.3 16.8 742 255 16 -413 -413 NA 0 -413

3,703 8.9 2,968 735 -7.9 19.8 749 264 16 -263 -263 NA 0 -263

FY16

FY17E

11,694 14.3 9,531 2,163 55.0 18.5 2,545 900 124 -1,158 -1,158 -35.4 321 -1,479

13,321 13.9 11,040 2,282 5.5 17.1 2,923 1,063 99 -1,605 -1,605 38.6 7 -1,612

188

December 2016 Results Preview | Sector: Media

HT Media Bloomberg

HTML IN

Equity Shares (m)

232.8

M. Cap. (INR b)/(USD b)

17 / 0

52-Week Range (INR)

96 / 70

1,6,12 Rel Perf. (%)

CMP: INR75  

3 / -5 / -22 

Financial Snapshot (INR Billion) Y/E MARCH

2016 2017E 2018E 2019E

Net Sales

25.0

25.7

28.6

31.2

EBITDA

3.1

2.8

3.4

3.7



Adj. NP

1.7

1.2

1.6

1.8



Adj. EPS (INR)

7.3

5.4

7.0

8.0

-16.2

-26.1

29.4

14.5

Adj. EPS Gr. (%) BV/Sh (INR)

99.2 106.5 115.5 125.7

RoE (%)

7.7

5.2

6.3

6.6

RoCE (%)

8.7

7.0

7.9

8.4

Div. Payout (%)

4.3

4.3

4.3

4.3

10.2

13.9

10.7

9.4

P/BV (x)

0.8

0.7

0.6

0.6

EV/EBITDA (x)*

4.6

4.6

3.1

2.2

Div. Yield (%)

0.4

0.3

0.4

0.5





TP: INR85

Neutral

We expect revenue to decline 3% YoY to INR6.59b. Print ad revenue is likely to decline 8% YoY to INR4.71b, impacted by languishing English print ad revenue and demonetization. Hindi ad revenue is also likely to decline 5% YoY to INR1.72b. Radio ad revenue growth is expected to moderate to 18% YoY to INR381m. We expect circulation revenue to increase 4% YoY to INR0.8b. EBITDA margin is expected to decline by ~220bp YoY to 15.2%. Adjusted net profit is likely to decline YoY to INR0.47b, primarily led by higher interest outgo related to new radio licenses and trickledown impact of revenue decline. The stock trades at 13.8x FY17E and 10.7x FY18E EPS. We revise our target price to INR85 (11x December 2018E EPS). Neutral.

Valuations P/E (x)

* Proportionate

Key things to watch for  YoY English ad growth (we expect 9% YoY de-growth).  Hindi ad growth (we expect 5% YoY de-growth).  EBITDA margin (we expect 9.4%).

Quarterly Performance (Consolidated) Y/E March Revenue YoY (%) Operating expenses EBITDA YoY (%) EBITDA margin (%) Depreciation Interest Other Income Extra-ordinary exps PBT Tax Effective Tax Rate (%) PAT Minority Interest Reported PAT Adj PAT YoY (%)

January 2017

1Q 5,872 7.5 5,303 568 -8.3 9.7 228 94 281 0 527 171 32.4 356 107 249 249 -23.8

(INR Million) FY16 2Q 6,011 7.2 5,352 659 -8.5 11.0 269 123 457 0 724 208 28.7 516 147 368 368 -16.0

3Q 6,811 12.5 5,625 1,186 37.7 17.4 247 209 271 0 1,001 193 19.2 809 121 688 688 -11.7

4Q 6,310 9.4 5,612 697 44.4 11.1 271 202 535 0 759 263 34.6 497 121 376 376 -4.2

1Q 6,147 4.7 5,504 643 13.1 10.5 295 247 478 0 579 186 32.2 392 168 224 224 -10.1

FY17 2Q 3QE 6,022 6,595 0.2 -3.2 5,518 5,592 505 1,002 -23.4 -15.5 8.4 15.2 304 322 245 260 780 300 0 0 736 720 224 182 30.5 25.3 512 538 202 62 309 476 309 476 -16.1 -30.8

4QE 6,914 9.6 6,228 686 -1.7 9.9 340 260 301 0 387 97 25.2 289 60 229 229 -39.1

FY16

FY17E

25,004 9.2 21,892 3,111 15.9 12.4 1,015 628 1,543 0 3,011 834 27.7 2,178 496 1,682 1,682 -6.5

25,678 2.7 22,842 2,836 -8.9 11.0 1,261 1,012 1,859 0 2,421 690 28.5 1,731 493 1,238 1,238 -26.4

189

December 2016 Results Preview | Sector: Media

Jagran Prakashan Bloomberg

JAGP IN

Equity Shares (m)

326.9

M. Cap. (INR b)/(USD b)

59 / 1

52-Week Range (INR)

213 / 144

1,6,12 Rel Perf. (%)

CMP: INR181  

4/4/6 

Financial Snapshot (INR Billion) Y/E March

2016 2017E 2018E 2019E

Net Sales

21.1

22.9

25.4

28.3

EBITDA

6.0

6.3

7.1

8.0

Adj. NP

3.4

3.5

4.0

4.5

Adj. EPS (INR)

10.5

10.8

12.2

13.9

Adj.EPS Gr (%)

44.6

2.7

13.8

14.0

BV/Sh (INR)

49.3

55.4

63.5

73.4

RoE (%)

24.7

20.7

20.6

20.4

RoCE (%)

24.8

16.6

16.9

17.1

Div. Payout (%)

40.5

38.1

33.5

29.4

17.2

16.7

14.7

12.9

  

TP: INR215

Buy

We expect advertising revenue to grow 3% YoY to INR4.45b. Advertising revenue (ex-Radio) is expected to grow 3% YoY to INR3.78b. We expect circulation revenue to grow 4% YoY to INR1.06b. We estimate Radio revenue at INR0.68b and EBITDA at INR0.23b. Aggregate revenue is expected to grow 1% YoY to INR5.83b. We estimate EBITDA at INR1.59b and EBITDA margin at 27.2%. Adjusted earnings are expected at INR0.78b, down 16% YoY. While our numbers factor in a further 3% cut in FY18 EPS for demonetization impact, our target price remains unchanged at INR215 (16x December 2018E EPS). The stock trades at 16.7x FY17E and 14.7x FY18E EPS. Buy.

Valuations P/E (x) P/BV (x)

3.7

3.2

2.8

2.5

EV/EBITDA (x)

10.1

9.1

7.9

6.8

Div. Yield (%)

2.0

1.9

1.9

1.9

Key things to watch for  YoY ad growth (we expect 3%).  YoY ad growth (ex-Radio City) (we expect ~ 3%).  EBITDA margin (we expect 27.2%).

Quarterly Performance (Consolidated, INR m) Y/E March Sales YoY (%) Operating expenses EBITDA YoY (%) EBITDA margin (%) Depreciation Interest Other Income Exceptional item PBT Tax Effective Tax Rate (%) Reported net profit YoY (%)

January 2017

1Q 4,750 7.9 3,408 1,341 25.3 28.2 231 186 195 51 1,068 348 32.5 721 30.8

FY16 2Q 5,064 16.1 3,649 1,416 33.2 28.0 287 81 -6 -145 1,186 327 27.6 859 51.8

3Q 5,764 22.5 4,043 1,721 29.9 29.9 284 172 64 0 1,329 396 29.8 933 40.8

4Q 5,295 25.3 3,937 1,358 29.5 25.6 242 143 148 0 1,120 319 28.4 802 -38.2

1Q 5,580 17.5 4,034 1,546 15.3 27.7 244 139 89 0 1,252 407 32.5 840 8.9

FY17 2Q 4,590 -9.4 3,377 1,213 -14.3 26.4 209 91 164 0 1,077 351 32.6 726 1.7

3QE 5,833 1.2 4,247 1,586 -7.9 27.2 355 100 90 0 1,222 440 36.0 782 -16.2

4QE 5,825 10.0 4,231 1,594 17.4 27.4 304 103 43 0 1,229 445 36.2 784 -2.1

FY16

FY17E

21,065

22,882

15,092 5,896 30.9 28.0 1,044 523 345 -95 4,769 1,390 29.2 3,378 44.5

16,592 6,291 6.7 27.5 1,112 432 386 0 5,133 1,642 32.0 3,490 6.3

190

December 2016 Results Preview | Sector: Media

PVR Bloomberg

PVRL IN

Equity Shares (m)

46.7

M. Cap. (INR b)/(USD b)

55 / 1

52-Week Range (INR)

1334 / 646

1,6,12 Rel Perf. (%)

9 / 19 / 42

CMP: INR1,173 TP: INR1,429(+22%) 



Financial Snapshot (INR Billion) Y/E March 2016 2017E 2018E 2019E Sales EBITDA NP

18.7

21.2

26.0

32.8

3.3

3.5

4.8

6.2

1.2

1.0

1.7

2.7

EPS (INR)

25.5

20.4

35.8

57.0

EPS Gr (%)

664.3

-20.2

75.9

58.9

BV/Sh (INR)

186.2

204.0

234.4

282.9

RoE (%)

18.7

10.4

16.4

22.0

RoCE (%)

14.5

8.8

12.4

17.8

45.7

57.3

32.6

20.5

6.3

5.7

5.0

4.1

19.3

18.7

13.0

9.7

0.3

0.3

0.7

1.1

18.7

21.2

26.0

32.8





Buy

Hindi movie, D ang al reported stellar net box office collection (NBO) of INR2.4b until December 31, 2016 in India. This should boost 3QFY17 performance of PVR, which has ~20% market share. We broadly expect average ticket prices (ATP) to remain flattish, given poor content overall (except for D ang al), SPH improvement of ~5%, and advertisement income growth of 10-11%. SSG is expected to decline ~3% – the decline would be lower than we had anticipated initially. The base quarter was very strong, with 19.7% footfall growth to 18.8m and 37% occupancy. On a high base, we expect 10% revenue growth to INR5.5b. EBITDA is expected to increase 3.3% to INR881m, while EBITDA margin is expected to decline 100bp to 16%. We expect PAT to decline 15.6% YoY to INR258m.

Payout (%) Valuations P/E (x) P/BV (x) EV/EBITDA (x) Div Yield (%)

Key things to watch for  Footfalls, occupancy rate during the quarter.  Impact of demonetization on ATP and SPH.

Quarterly Performance (INR m) Y/E March Net Sales YoY Change (%) Total Expenditure EBITDA Margins (%) Depreciation Interest Other Income PBT before EO expense Extra-Ord expense PBT Tax Rate (%) Reported PAT Adj PAT YoY Change (%) Margins (%) E: MOSL Estimates

1Q 4,860 34.2 3,754 1,107 22.8 267 218 25 647 33 615 175 28.5 435 458 468.0 9.0

FY16 2Q 3Q 4,746 5,005 18.6 19.1 3,871 4,152 875 853 18.4 17.0 273 304 206 192 114 67 510 424 20 5 491 420 184 119 37.5 28.4 307 299 319 305 233.6 -5.3 6.5 6.0

4Q 4,126 37.7 3,661 465 11.3 359 223 65 -52 29 -81 22 -27.1 -104 -66 -70.1 -2.5

1Q 5,702 17.3 4,536 1,167 20.5 331 192 63 707 26 681 249 36.6 428 444 -3.0 7.5

FY17 2Q 3QE 5,542 5,505 16.8 10.0 4,612 4,624 930 881 16.8 16.0 346 380 193 180 49 45 440 366 0 0 440 366 149 109.7 33.8 30.0 291 254 291 258 -8.7 -15.6 5.3 4.6

4QE 4,497 9.0 4,002 495 11.0 430 185 55 -65 0 -65 -20 30.0 -46 -46 NM -1.0

FY16

FY17E

18,736 26.8 15,437 3,299 17.6 1,202 839 271 1,530 86 1,443 500.5 34.7 941 1,248 744.2 5.0

21,199 13.1 17,723 3,477 16.4 1,486 759 200 1,431 0 1,431 479.4 33.5 952 952 -23.8 4.5

Niket Shah ([email protected]) Chintan Modi ([email protected]) / Chitvan Oza ([email protected]) January 2017

191

December 2016 Results Preview | Sector: Media

SITI Cable Bloomberg

SITINET IN

Equity Shares (m)

678.3

M. Cap. (INR b)/(USD b)

25 / 0

52-Week Range (INR)

42 / 31

CMP: INR38 

7 / -1 / -2



Y/E March

2016 2017E 2018E 2019E



Net Sales

1,6,12 Rel Perf. (%) Financial Snapshot (INR Billion) 11.9

12.5

17.4

21.0

EBITDA

3.0

3.0

6.5

8.5

EBITDA#

0.9

0.7

5.4

7.5



Adj. NP

0.0

-0.8

2.4

2.9



Adj. EPS (INR)

0.0

-0.9

2.7

3.2

Adj. EPS Gr. (%)

NM

NM

NM

NM

BV/Sh (INR)

9.1

9.5

14.1

17.7

RoE (%)

0.1

-10.2

23.5

20.0



RoCE (%)

6.4

1.4

18.2

17.3



P/E (x)

NM

NM

13.8

11.8

EV/EBITDA (x)* EV/ EBITDA (x)* EV/Sub (INR)*

13.7

14.2

6.3

4.7

47.8

63.2

7.5

5.3

Valuation

3,335 3,457 3,346 3,201

* Based on attributable EBITDA and subs post

TP: INR45

Buy

We expect reported revenue to grow 16% QoQ to INR3.35b, primarily led by higher activation and broadband revenue. Cable subscription revenue is expected to grow 6% QoQ to ~INR1.48b as digitization-led triggers for subscription remain elusive in 3Q and are expected to pick up in 4Q. Activation revenue is expected to more than double QoQ to INR0.76b in 3QFY17, as seeding picks up post a subdued 1H. We have factored in set-top box seeding of ~0.8m for 3Q. Carriage revenue expected to decline QoQ to INR0.72b in 3Q. EBITDA is expected to nearly double QoQ to INR0.96b, primarily led by higher activation and broadband revenue. On an ex-activation basis, EBITDA is expected to improve to INR197m in 3Q from INR90m in 2QFY17. We expect net profit of INR167m v/s net loss of ~INR469m in 2Q. The stock trades at attributable EV/EBITDA (ex-activation) of 6.7x FY18E. Maintain Buy with a DCF-based target price of INR45.

Key things to watch for  Subscription revenue growth (6% QoQ).  Activation revenue (we expect INR0.76b).  EBITDA margin (we expect 28.6%).

minority stake; # (ex-activation)

Quarterly Performance (Consolidated) Y/E March Sales YoY (%) Operating Expenses EBITDA YoY (%) EBITDA margin (%) Depreciation Interest Other Income PBT Tax Effective Tax Rate (%) Reported Net Profit

January 2017

(INR Million) FY16

FY17

1Q

2Q

3Q

4Q

1Q

2Q

3QE

4QE

2,297 9.9 1,953 344

2,339 6.7 1,943 395

3,699 66.9 2,449 1,251

3,567 39.3 2,614 952

2,820 22.7 2,395 425

2,890 23.6 2,416 473

3,347 -9.5 2,390 957

3,449 -3.3 2,340 1,109

0.5 15.0 358 344 24 -334 5 -1.6 -367

-4.0 16.9 367 348 87 -233 35 -14.9 -315

159.2 33.8 391 346 48 562 2 0.4 390

913.1 26.7 515 351 81 167 89 53.1 241

23.5 15.1 547 297 49 -370 65 -17.7 -536

19.7 16.4 572 280 24 -355 22 -6.1 -469

-23.5 28.6 566 276 80 194 42 21.6 167

16.4 32.1 566 298 74 318 41 12.9 293

FY16

FY17E

11,890

12,506

8900 2,990

9,542 2,964

25.1 1,632 1,378 240 220 131 59.6 -16

23.7 2,251 1,336 178 -446 170 -38.2 -778

192

December 2016 Results Preview | Sector: Media

Sun TV Bloomberg

SUNTV IN

Equity Shares (m)

394.1

M. Cap. (INR b)/(USD b)

206 / 3

52-Week Range (INR)

567 / 312

1,6,12 Rel Perf. (%)

5 / 43 / 20

CMP: INR524   

Financial Snapshot (INR Billion) Y/E March

2016 2017E 2018E 2019E

Net Sales

24.0

26.7

30.8

34.4

EBITDA

17.1

18.8

22.1

24.7

Adj. Net Profit

8.3

10.0

11.9

13.4

Adj. EPS (INR)

21.1

25.4

30.3

33.9

20.2

19.4

12.0

Adj. EPS Gr. (%)

13.0

BV/Sh (INR)

92.2 100.3 109.8 120.6

RoE (%)

23.4

25.3

27.6

28.1

RoCE (%)

24.1

26.3

28.7

29.3

Div. Payout (%)

59.0

59.1

59.4

58.9

24.8

20.6

17.3

15.4



Under Review

We expect Sun TV’s revenue to grow 9% YoY to INR6.25b. Advertising and broadcasting revenue is expected to grow 5% YoY to INR3.4b as demonetization impact sets in. We expect domestic subscription revenue to grow 5% QoQ to INR2.4b.  Sun TV’s EBITDA/EBIT is estimated to grow ~9%/13% YoY to INR4.78b/INR3.73b. PAT is expected to grow 13% YoY to INR2.44b. The stock trades at 20.6x FY17E and 17.3x FY18E EPS. Under Review.

Valuations P/E (x) P/BV (x)

5.7

5.2

4.8

4.3

EV/EBITDA (x)

11.3

10.1

8.4

7.5

Div. Yield (%)

2.5

2.9

3.4

3.8

Key things to watch for  YoY ad growth (we expect 5%).  QoQ domestic subscription growth (we expect 5%).

Quarterly Performance (Standalone) * Y/E March Revenue YoY (%) EBITDA YoY (%) As of % Sales Depreciation and Amortization Interest Other Income PBT Tax Effective Tax Rate (%) Reported PAT Extraordnary Item Adj PAT YoY (%)

(INR million)

1Q 6,911 9.1 4,092 11.3 59.2 1,302 8 222 3,003 1,031 34.3 1,973

FY16 2Q 5,681 11.6 4,322 9.2 76.1 1,176 1 204 3,349 1,166 34.8 2,184

3Q 5,741 3.9 4,404 2.9 76.7 1,348 5 246 3,298 1,142 34.6 2,156

1,973 19.1

2,184 41.4

2,156 0.7

4Q 5,707 4.0 4,266 0.8 74.7 1,007 8 223 3,475 1,294 37.2 2,180 180 2,360 16.3

1Q 7,608 10.1 4,364 6.7 57.4 1,008 1 216 3,571 1,240 34.7 2,331

FY17 2Q 6,255 10.1 4,663 7.9 74.6 1,030 2 488 4,119 1,415 34.4 2,704

3QE 6,252 8.9 4,785 8.6 76.5 1,300 8 244 3,721 1,282 34.5 2,439

4QE 6,558 14.9 5,018 17.6 76.5 1,363 10 223 3,868 1,334 34.5 2,534

FY16

FY17E

24,040 7.2 17,084 5.8 71.1 4,835 21 911 13,139 4,633 35.3 8,507

26,673 11.0 18,830 10.2 70.6 4,701 21 1,170 15,278 5,271 34.5 10,007

2,331 18.1

2,704 23.8

2,439 13.1

2,534 7.4

8,673 17.6

6,700 -22.7

*Incl IPL rev/EBITDA loss

January 2017

193

December 2016 Results Preview | Sector: Media

Z ee Entertainment Bloomberg

Z IN

Equity Shares (m)

960.4

M. Cap. (INR b)/(USD b)

439 / 6

52-Week Range (INR)

CMP: INR458 

589 / 350

1,6,12 Rel Perf. (%)

2/1/4

Financial Snapshot (INR Billion)

 

Y/E MARCH

2016 2017E 2018E 2019E

Net Sales

58.3

66.2

74.9

86.2

EBITDA

15.0

18.4

23.2

28.0

Adj. NP

10.2

13.3

16.9

20.3



Adj. EPS (INR)

10.6

11.7

17.7

21.3



Adj. EPS Gr. (%)

3.9

10.1

51.6

20.4



EPS ex-&TV (INR)

11.8

12.4

18.4

21.0



RoE (%)

27.0

29.4

30.7

29.9



RoCE (%)

17.7

19.6

23.4

25.0

Div. Payout (%)

21.3

19.3

18.4

19.3

43.2

39.3

25.9

21.5

P/E ex-&TV (x)

38.8

37.0

24.9

21.8

EV/EBITDA (x)

29.5

22.4

17.4

13.8

Div. Yield (%)

0.5

0.5

0.7

0.9

Valuations P/E (x)

TP: INR590

Buy

We expect advertising revenue to grow 4% YoY to INR9.79b, as the demonetization impact is largely expected to wipe off gains from the festive season. Subscription revenue is likely to grow 11% YoY to INR5.81b. (Domestic subscription to grow 12% YoY to INR4.7b). Total revenue growth is expected to moderate to 3% YoY (INR16.5b), led by demonetization-led ad pain and lack of any syndication and movie-based revenue triggers. We are building in ~11% YoY increase in content cost. We expect EBITDA margin to largely remain flat YoY at 26.5%. Sports losses are expected to be minimal at INR126m. Adjusted PAT is expected to grow ~10% YoY to INR3.02b. We have cut our FY17/FY18 earnings estimates by 5%/8.5% to factor in the demonetization impact and sluggishness in FMCG ad spends (contributes ~55% to TV ad spends). Our revised TP is INR590 (29x December 2018E EPS (ex-&TV) plus INR19/share towards &TV DCF less INR19/share towards preference share liability). The stock trades at 39.3x FY17E and 25.9x FY18E EPS. Buy.

Key things to watch for  YoY ad growth (we expect 4%).  Sports loss (we expect INR126m).

Quarterly Performance Y/E March Advertsing Revenue Subscription Revenue Other Sales and Services Net Sales Change (%) Prog, Transmission & Direct Exp Staff Cost Selling and Other Exp EBITDA Change (%) EBITDA margin (%) Depreciation Finance cost Other Income Fair Value through P&L Extraordinary items PBT Tax Effective Tax Rate (%) PAT Minority Interest/Associates Adj PAT after Minority Interest Change (%) Sports EBITDA Non-Sports EBITDA

January 2017

(INR Million) 1Q 7,799 4,625 974 13,399 23.4 6,108 1,380 2,799 3,112 0.7 23.2 168 15 680

3,609 1,185 32.8 2,423 -15 2,438 15.8 15 3,097

FY16 2Q 8,290 4,791 705 13,786 23.3 6,032 1,197 2,971 3,586 11.9 26.0 198 21 589 -331 3,626 1,123 31.0 2,504 -11 2,846 25.0 22 3,564

3Q 9,419 5,218 1,314 15,951 17.0 7,023 1,288 3,337 4,302 21.8 27.0 201 45 290

4Q 8,645 5,944 727 15,316 13.7 6,881 1,297 3,002 4,136 52.7 27.0 273 42 458

1Q 9,120 5,282 1,315 15,716 17.3 6,575 1,499 3,110 4,532 45.6 28.8 251 75 734 -1,132

4,346 1,602 36.9 2,744 -6 2,750 -10.9 -150 4,452

4,278 1,618 37.8 2,658 53 2,605 12.9 -236 4,372

3,807 1,626 42.7 2,181 12 2,170 -11.0 171 4,361

FY17 2Q 9,592 5,833 1,529 16,954 23.0 7,688 1,533 2,841 4,892 36.4 28.9 336 86 432 -829 4,074 1,634 40.1 2,440 56 2,384 -16.2 -168 5,060

3QE 9,796 5,816 880 16,492 3.4 7,765 1,484 2,870 4,373 1.7 26.5 319 83 442 -300

4QE 9,714 6,744 549 17,006 11.0 7,617 1,531 3,221 4,636 12.1 27.3 302 80 653

FY16

FY17E

34,037 20,578 3,640 58,255 19.3 25,969 5,209 12,084 14,992 22.5 25.7 840 123 2,016

4,113 1,069 26.0 3,044 20 3,024 10.0 -126 4,499

4,908 1,275 26.0 3,633 20 3,613 38.7 0 4,636

-331 15,714 5,528 35.2 10,186 22 10,495 7.4 -349 15,341

38,220 23,675 4,273 66,168 13.6 29,646 6,046 12,043 18,433 23.0 27.9 1,208 323 2,262 -2,261 0 16,902 5,605 33.2 11,297 108 11,190 6.6 -123 18,555

194

December 2016 Results Preview | Sector: Metals

Metals Company name Hindalco Hindustan Z inc JSW Steel Nalco NMDC SAIL Tata Steel Vedanta

Across-the-board price increase drives strong performance NMDC, Nalco and Vedanta benefit from volume and price increases

Across-the-board increase in commodity prices Metal stocks continue benefiting from across-the-board rise in metal prices and volume ramp-up. Steel prices in 3QFY17 were up 9-12% QoQ or INR3,000-3,800 per ton, led by a seasonally weak base (monsoon) and cost-led price increase. Among base metals, zinc/lead average LME was up 11%/15% to USD2,511/USD2,156 per ton. Z inc LME is up ~USD930 per ton (~60%) since the recent low in 4QFY16, driven by supply tightness. Aluminum LME was up 6% QoQ to USD1,710 per ton, driven by steady demand, slower supply ramp-up in China and cost pressure. Alumina was up 29% QoQ to USD302 per ton on increased demand in China, transportation issues and cost factors.

NMDC and Nalco to outperform We estimate EBITDA for our metal coverage universe to increase 18% QoQ (2.7x YoY) on higher realization and volume increase. NMDC and Nalco are likely to outperform the pack. NMDC’s EBITDA is estimated to rise 79% QoQ to INR14.7b, led by an increase of 24% QoQ in volumes (to 10mt) and 13% QoQ in domestic realization (to INR2,440 per ton). Strong domestic iron ore demand and pricing discount to international ore would continue driving strong earnings momentum for NMDC. Nalco’s EBITDA is estimated to almost double QoQ to INR3.5b on higher realization (both aluminum and alumina) and alumina volumes, and lower cost.

Vedanta to benefit from volume ramp-up and commodity price increases Vedanta’s EBITDA is estimated to increase 44% QoQ to INR67b, led by strong volume- and price-led growth in zinc and aluminum. Other commodities should also contribute positively, with iron ore benefiting from price increase and volume recovery post lull in 2Q due to monsoon, and oil & gas benefiting from an increase in oil prices (USD51/bbl v/s QoQ USD45/bbl). Hindalco’s EBITDA is estimated to increase 6% QoQ to INR32b, led by higher aluminum prices.

Steel companies to see margins decline on higher cost; Tata Steel to outperform Among the steel mills, while realization was impressively higher, the margins will be impacted by an increase in coking coal prices and volume impact due to demonetization. Tata Steel, however, is likely to outperform, with estimated EBITDA increase of 14% QoQ to INR33b led by advantage on captive coking coal and limited impact on margins in EU (USD53/t v/s USD67 in 2Q). JSW Steel’s EBITDA is estimated to decline 17% QoQ to INR24b due to raw material price increase. SAIL will be back in red at operating level. Sanjay Jain ([email protected]); +91 22 3982 5412 Dhruv Muchhal ([email protected]); +91 22 3027 8033 January 2017

195

December 2016 Results Preview | Sector: Metals

Revising zinc LME estimate We have revised our FY18 zinc price estimates to USD2,570/t from USD2,200/t earlier. Our revised TPs are presented in Exhibit 15, Exhibit 16 and Exhibit 17. Vedanta’s TP is upgraded to INR250/share from INR220/share on higher zinc price estimate – maintain Neutral. Tata Steel’s TP is revised to INR321 from INR290 on higher margins in India – maintain Sell. Exhibit 1: Expected quarterly performance summary Sector

Metals Hindalco Hindustan Z inc JSPL JSW Steel Nalco NMDC SAIL Tata Steel Vedanta Metals Sector Aggregate

CMP (INR)

RECO

159 251 71 163 66 134 51 405 217

Buy Neutral Neutral Buy Buy Buy Sell Sell Neutral

Sales (INR M) Var % Var % Dec-16 YoY QoQ 254,247 56,904 56,664 149,227 18,766 24,300 107,930 282,582 212,241 1,162,860

8.8 65.9 23.3 71.6 14.8 60.2 20.7 0.8 42.7 22.3

3.7 61.4 16.6 12.8 1.7 39.7 -3.9 7.2 33.8 12.7

EBDITA (INR M) Var % Var % Dec-16 YoY QoQ

Net Profit (INR M) Var % Var % Dec-16 YoY QoQ

32,029 33,801 13,574 24,441 3,581 14,744 -2,259 33,750 68,574 222,233

10,044 29,300 -3,293 4,170 1,922 10,572 -14,906 5,073 29,702 72,585

39.0 128.6 146.6 174.1 162.6 128.9 Loss 335.1 136.0 167.6

5.7 62.8 60.0 -17.4 107.8 78.5 PL 13.6 46.9 25.8

130.0 8.1 61.8 54.1 Loss Loss LP -42.6 93.4 58.5 61.0 37.2 Loss Loss LP LP LP 137.2 LP 72.5 Source: MOSL

Exhibit 2: Comparative valuation Sector / Companies Metals Hindalco Hindustan Z inc JSPL JSW Steel Nalco NMDC SAIL Tata Steel Vedanta Metals Sector Aggregate

CMP (INR) 159 251 71 163 66 134 51 405 217

RECO

EPS (INR) PE (x) EV/EBIDTA (x) ROE (%) FY17E FY18E FY19E FY17E FY18E FY19E FY17E FY18E FY19E FY17E FY18E FY19E

Buy 18.5 Neutral 21.5 Neutral -23.8 Buy 12.3 Buy 3.7 Buy 10.9 Sell -10.4 Sell 7.7 Neutral 21.3

22.1 25.4 -8.4 18.7 4.8 10.8 -14.3 37.1 27.3

24.7 25.3 -5.3 19.1 4.9 11.3 -1.4 40.7 27.9

8.6 11.7 -3.0 13.3 17.8 12.3 -4.9 52.8 10.2 17.1

7.2 9.9 -8.4 8.7 13.7 12.4 -3.5 10.9 7.9 12.2

6.4 9.9 -13.3 8.5 13.4 11.9 -36.9 9.9 7.8 10.0

6.4 5.7 7.4 5.5 11.8 11.0 7.6 6.0 8.2 5.4 8.7 8.0 938.5 133.7 10.0 7.7 5.0 4.0 8.1 6.7

5.0 5.1 10.1 5.5 5.1 7.6 11.4 7.3 3.7 5.9

17.3 22.5 -12.8 14.9 7.1 12.8 -11.5 5.8 13.0 7.8

18.1 17.1 22.6 19.4 -5.0 -3.3 19.6 17.1 8.7 8.5 14.2 13.7 -18.4 -2.0 29.2 26.0 14.8 14.0 10.2 11.5 Source: MOSL

Spot

39,000

Quaterly average Avg. is up INR4210 QoQ

36,000 33,000 30,000 27,000

Dec-16

Nov-16

Oct-16

Sep-16

Aug-16

Jul-16

Jun-16

May-16

Apr-16

Mar-16

Feb-16

Jan-16

24,000 Dec-15

Domestic HRC steel prices average is higher by INR4,210/t QoQ.

HRC Mumbai (INR/t)

Exhibit 3: India import parity HRC prices

Source: Company, MOSL

January 2017

196

December 2016 Results Preview | Sector: Metals

Exhibit 4: China steel spreads with raw material Chinese steel mills product spreads have improved on rise in steel prices.

HRC

315

Rebar

270 225 180 135 Dec-16

Sep-16

Jun-16

Mar-16

Dec-15

Sep-15

Jun-15

Mar-15

Dec-14

Sep-14

Jun-14

Mar-14

Dec-13

Sep-13

Jun-13

Mar-13

Dec-12

Sep-12

90

Source: MOSL, Company

Exhibit 5: Domestic steel demand growth – trailing 12-month (YoY %)

3.3 3.4

Oct-16

Aug-16

Jun-16

Apr-16

Feb-16

Oct-15

Dec-15

Aug-15

Jun-15

Apr-15

Feb-15

Dec-14

Oct-14

Aug-14

Jun-14

Apr-14

Feb-14

Dec-13

Oct-13

Aug-13

1.6 Jun-13

10.0 8.0 6.0 4.0 2.0 0.0 -2.0

Trailing 12m Growth (%)

5.6 6.9 6.1 5.7 6.7 5.9 5.9 5.1 6.5 6.3 6.3 6.9 5.1 6.9 6.7 6.2 6.7 5.9 6.6 5.4 6.6 6.7 6.5 7.2 5.5 7.3 7.1 6.6 6.9 6.3 7.2 5.9 6.3 7.0 7.1 8.1 5.8 7.4 6.8 6.6 7.3 6.7 7.1 6.2

Cons. (mt)

Apr-13

Domestic steel consumption declined in October. It grew by 4.6% YoY in November. YTD growth remains tepid at just 3.1% to 54mt.

Source: MOSL, Company

However, domestic mills benefit from import substitution. India has turned into a marginal net exporter of steel in the last three months to November.

Exhibit 6: India net steel imports – kt Net steel imports (kt) 700

611 551

582 500

500

461

300 100

94

-284

-100 Apr-12 Jun-12 Aug-12 Oct-12 Dec-12 Feb-13 Apr-13 Jun-13 Aug-13 Oct-13 Dec-13 Feb-14 Apr-14 Jun-14 Aug-14 Oct-14 Dec-14 Feb-15 Apr-15 Jun-15 Aug-15 Oct-15 Dec-15 Feb-16 Apr-16 Jun-16 Aug-16 Oct-16

-300

Source: MOSL, Company

Exhibit 7: India steel – sales volumes (mt) JSW Steel

7.9

8.2

7.8

2.9

3.1

3.0

3.1

3.1

3.1

2.6

2.8

2.9

2.9

3.2

2.7

2.7

2.9

2.1

2.1

2.1

2.4

2.1

2.3

2.3

2.7

4QFY15

1QFY16

2QFY16

3QFY16

4QFY16

3.3 3.8

8.3

10.1

9.2

3.8

3.6

3.6

3.1

2.2

2.6

2.6 3QFY17

8.6

2QFY17

8.0

1QFY17

8.1

3QFY15

9.8

7.7

2QFY15

SAIL

1QFY15

Tata Steel

3.3 2.8

Source: MOSL, Company

January 2017

197

December 2016 Results Preview | Sector: Metals

Exhibit 8: India steel – EBITDA/ton (INR) Average

20,000

Tata Steel

SAIL

JSW Steel

15,000 10,000 5,000 0 -5,000 2QFY17

1QFY17

4QFY16

3QFY16

2QFY16

1QFY16

4QFY15

3QFY15

2QFY15

1QFY15

4QFY14

3QFY14

2QFY14

1QFY14

4QFY13

3QFY13

2QFY13

1QFY13

4QFY12

3QFY12

2QFY12

1QFY12

-10,000

Source: MOSL, Company

Exhibit 9: India steel – realization (INR/ton) Tata Steel

SAIL

JSW Steel

60 53 46 39 32 2QFY17

1QFY17

4QFY16

3QFY16

2QFY16

1QFY16

4QFY15

3QFY15

2QFY15

1QFY15

4QFY14

3QFY14

2QFY14

1QFY14

4QFY13

3QFY13

2QFY13

25 1QFY13

Realization (000' INR/T)

Average

Source: MOSL, Company

Exhibit 10: Quarterly average aluminum prices – USD/ton Quarter

3QFY17E 2QFY17 1QFY17 4QFY16 3QFY16 2QFY16 1QFY16 4QFY15 3QFY15 2QFY15 1QFY15 4QFY14 3QFY14 2QFY14 1QFY14

January 2017

Avg.

1,710 1,620 1,570 1,516 1,495 1,591 1,765 1,800 1,966 1,987 1,798 1,708 1,768 1,780 1,834

Aluminum QoQ YoY

6% 3% 4% 1% -6% -10% -2% -8% -1% 11% 5% -3% -1% -3% -8%

14% 2% -11% -16% -24% -20% -2% 5% 11% 12% -2% -15% -11% -7% -7%

Avg.

Premium QoQ

73 76 100 111 93 100 198 377 414 404 374 313 246 248 246

-3% -24% -10% 20% -8% -49% -48% -9% 3% 8% 19% 27% -1% 1% 2%

YoY

-21% -25% -50% -70% -78% -75% -47% 20% 68% 63% 52% 29% 1% -1%

Aluminum total price Avg. QoQ YoY

1,783 1,696 1,672 1,627 1,588 1,692 1,963 2,177 2,380 2,391 2,172 2,022 2,015 2,029 2,081

5% 1% 3% 2% -6% -14% -10% -9% 0% 10% 7% 0% -1% -2% -7%

12% 0% -15% -25% -33% -29% -10% 8% 18% 18% 4% -10% -10% -6%

Avg.

Alumina QoQ

YoY

302 29% 29% 235 -7% -20% 253 15% -25% 219 -6% -36% 233 -20% -34% 293 -13% -9% 336 -2% 6% 343 -3% 4% 355 11% 10% 322 2% 1% 317 -3% -3% 328 2% -4% 323 1% -1% 318 -3% 1% 327 -4% 3% Source: MOSL, Company

198

December 2016 Results Preview | Sector: Metals

YoY

1.4

-

Source: MOSL, Company, Bloomberg

Oct-16

10 Jul-16

1.7 Apr-16

20

Jan-16

2.0

Oct-15

30

Jan-15

2.3

Oct-14

40

YoY growth (%)

50

2.6

Jul-14

m tons

YoY growth (%)

-13.0

Production

2.9

Oct-16

3,000 Jul-16

-4.0

Apr-16

3,600

Jan-16

5.0

Oct-15

4,200

Jul-15

14.0

Apr-15

4,800

Jan-15

23.0

Jul-15

YoY

5,400

Oct-14

'000 tons

Production

Exhibit 12: China aluminum production trend

Apr-15

Exhibit 11: Global aluminum production trend

Source: MOSL, Company, Bloomberg

Exhibit 13: LME aluminum and inventories

USD/t

Spot

3.5

1,700

2.9

1,600 2.3

1,500 Dec-16

Nov-16

Oct-16

Sep-16

Aug-16

Jul-16

Jul-16

Jun-16

May-16

Apr-16

Mar-16

Feb-16

1.7 Jan-16

1,400

m tons

Inventories (RHS)

1,800

Source: MOSL, Bloomberg

Exhibit 14: Other base metals quarterly average prices – USD/ton Quarter 3QFY17E 2QFY17 1QFY17 4QFY16 3QFY16 2QFY16 1QFY16 4QFY15 3QFY15 2QFY15 1QFY15 4QFY14 3QFY14 2QFY14 1QFY14

January 2017

Avg. 2,511 2,253 1,875 1,581 1,616 1,892 2,183 2,083 2,235 2,311 2,073 2,029 1,906 1,859 1,840

Z inc QoQ 11% 17% 19% -2% -15% -13% 5% -7% -3% 11% 2% 6% 3% 1% -9%

YoY 56% 22% -14% -24% -28% -18% 5% 3% 17% 24% 13% 0% -2% -1% -5%

Avg. 5,266 4,772 4,726 4,672 4,892 5,259 6,043 5,818 6,624 6,995 6,787 7,040 7,153 7,073 7,147

Copper QoQ 10% 1% 1% -4% -7% -13% 4% -12% -5% 3% -4% -2% 1% -1% -10%

YoY 8% -9% -22% -20% -26% -25% -11% -17% -7% -1% -5% -11% -10% -8% -9%

Avg. 2,156 1,873 1,718 1,744 1,681 1,714 1,942 1,806 2,000 2,181 2,095 2,105 2,111 2,101 2,053

Lead QoQ 15% 9% -1% 4% -2% -12% 8% -10% -8% 4% 0% 0% 0% 2% -11%

YoY 28% 9% -12% -3% -16% -21% -7% -14% -5% 4% 2% -8% -4% 6% 4%

Silver (Rs/kg) Avg. QoQ YoY 41,340 -10% 19% 45,851 15% 32% 39,726 12% 7% 35,595 2% -4% 34,804 0% -5% 34,651 -7% -19% 37,194 0% -11% 37,167 1% -17% 36,694 -14% -20% 42,691 2% -7% 41,862 -7% -7% 44,935 -3% -20% 46,099 0% -23% 46,077 3% -17% 44,837 -20% -18% Source: MOSL, Company

199

December 2016 Results Preview | Sector: Metals

Exhibit 15: Earnings and TP change – Steel and Iron ore

Old Tata Steel New Change Old SAIL New Change Old JSW Steel New Change Old NMDC New Change

EBITDA (INR b) 3QFY17E FY17E FY18E 32 123 158 34 125 161 5% 2% 2% 4 2 23 -2 -4 0 -273% -98% 30 110 137 24 116 138 6% 1% 15 43 48 15 44 51 0% 2% 5%

Adj. PAT (INR b) 2QFY17E FY17E FY18E 4 7 36 5 9 38 31% 25% 6% -9 -38 -38 -15 -45 -60 17% 58% 8 26 45 4 30 45 16% 1% 11 34 32 11 35 34 0% 1% 5%

TP

Comments

290 321 11% 30 28 -7% 190 195 3% 156 162 4%

Increase in margins in India due to price increase.

Impact of coking coal price increase.

Increase in margins in India due to price increase.

Realization increase Source: MOSL, Company

Exhibit 16: Earnings and TP change – Aluminum

Hindalco (Standalone) Hindalco (Consol) Nalco

Old New Change Old New Change Old New Change

EBITDA (INR b) 3QFY17E FY17E FY18E 12 47 50 13 49 51 6% 4% 1% 31 130 141 32 132 141 2% 2% 0% 3 11 18 4 12 17 9% 11% -5%

Adj. PAT (INR b) 2QFY17E FY17E FY18E 3 14 17 4 16 18 16% 10% 3% 9 37 45 10 38 46 6% 5% 1% 1.8 7 10 2.0 7 10 11% 13% -5%

TP

Comments Slightly higher LME aluminum

234 234 0% 77 75 -3%

Slightly lower LME premium in FY18 Source: MOSL, Company

Exhibit 17: Earnings and TP change – Others EBITDA (INR b)

HZ L

VEDL

Old New Change Old New Change

Adj. PAT (INR b)

TP

3QFY17E

FY17E

FY18E

2QFY17E

FY17E

FY18E

30 34 12% 62 69 11%

95 106 11% 209 227 9%

108 130 20% 239 266 11%

25 29 18% 24 30 25%

89 91 2% 69 82 18%

96 107 12% 85 102 19%

Comments

242 282 17% 209 250 20%

Increasing zinc LME estimate from USD2,200/t earlier to USD2,570/t Increasing zinc LME estimate from USD2,200/t earlier to USD2,570/t Source: MOSL, Company

Source: Bloomberg, MOSL

January 2017

Dec-16

Nov-16

Oct-16

Sep-16

Aug-16

Jul-16

80 Jun-16

90

MOSL Metals Index

May-16

105 Apr-16

97 Dec-16

130

Nov-16

104

Oct-16

155

Sep-16

111

Mar-16

Sensex Index

180

Jan-16

MOSL Metals Index

118

Dec-15

Sensex Index

Exhibit 19: Relative performance – one-year (%)

Feb-16

Exhibit 18: Relative performance – three-month (%)

Source: Bloomberg, MOSL

200

December 2016 Results Preview | Sector: Metals

Hindalco Bloomberg

HNDL IN

Equity Shares (m)

2065.2

M. Cap. (INR b)/(USD b)

328 / 5

52-Week Range (INR)

CMP:INR159 

185 / 59

1,6,12 Rel Perf. (%)

-10 / 29 / 93

Financial Snapshot (INR Billion) Y/E March Sales

2016 2017E 2018E 2019E 1,000.5

1,010

1,089

1,106

106.1

132.1

141.0

146.0

NP

24.7

38.2

45.7

51.0

Adj. EPS (INR)

12.0

18.5

22.1

24.7

EBITDA

EPS Gr(%)

-11.5

54.6

19.6

11.5

BV/Sh. (INR)

101.8

112.3

132.8

155.9

RoE (%)

11.6

17.3

18.1

17.1

RoCE (%)

5.9

8.2

8.9

9.2

13.7

8.9

7.4

6.6

13.0

8.4

7.0

6.3

P/BV

1.5

1.4

1.2

1.0

EV/EBITDA (x)

8.3

6.4

5.6

5.0

Div. Yield (%)

0.9

0.9

0.9

0.9

Payout (%)



TP:INR234 (+47%)

Buy

Standalone: We estimate standalone EBITDA to increase by 11% QoQ (91% YoY) to INR12.8b on higher aluminum realization. Aluminum segment EBITDA is estimated to increase by 16% QoQ to INR9b on higher realization. Aluminum sales volumes are estimated to be broadly flat QoQ at 318kt. LME aluminum averaged USD1,660/t (up 3% QoQ). While average cash LME is higher, we estimate the benefit to Hindalco will be lower due to hedges. Copper volumes are estimated to be down by 7% QoQ to 95kt. Novelis: We estimate Novelis to report adjusted EBITDA of USD273m, up 1% QoQ. Adj. EBITDA/t is estimated at USD350 (v/s. USD349 in 2QFY17). Volumes are estimated to be flat YoY at 779kt.

Valuations P/E (x)

Key issues to watch for  Lower margins in aluminum.  Foreign exchange rate impact at Novelis.

Quarterly Performance Y/E March (Standalone) Alumina (Production, kt) Aluminium (sales, kt) Copper (sales, kt) Exchange USD/INR Avg LME Aluminium (USD/T) Net Sales Change (YoY %) EBITDA Change (YoY %) As % of Net Sales EBITDA - Aluminium EBITDA-Copper Interest Depreciation Other Income PBT (after EO item) Total Tax % Tax Reported PAT Adjusted PAT Consolidated Financials Net Sales EBITDA Consolidated adj. PAT

January 2017

(INR million) 1Q 660 248 96 63.7 1,765 85,753 7.2 8,773 17.2 10.2 5,088 3,686 6,017 3,320 1,944 1,381 309 22.4 1,072 1,145

FY16 2Q 3Q 628 704 277 292 104 87 65.0 65.9 1,593 1,495 89,246 81,503 4.3 -5.3 6,028 6,716 -32.8 -27.3 6.8 8.2 2,275 2,988 3,753 3,728 6,160 5,824 2,958 3,080 4,175 2,501 1,086 313 53 -92 4.9 -29.3 1,033 405 900 259

4Q 703 329 97 67.6 1,516 86,675 -7.5 11,664 37.6 13.5 7,642 4,023 5,747 3,412 2,041 4,547 983 21.6 3,563 3,769

1Q 708 291 62 67.0 1,570 75,973 -11.4 11,325 29.1 14.9 8,488 2,837 5,996 3,382 2,184 4,129 1,189 28.8 2,941 3,009

250,505 247,542 233,588 246,016 22,977 22,004 23,034 31,025 3,471 5,801 4,367 10,272

226,771 29,916 7,582

FY17 2Q 726 320 102 67.0 1,619 90,123 1.0 11,564 91.8 12.8 7,905 3,659 5,943 3,516 3,364 6,326 1,929 35.3 4,397 3,984 245,276 30,289 9,293

3QE 715 318 95 68.0 1,660 93,333 14.5 12,853 91.4 13.8 9,174 3,679 5,986 3,498 2,184 5,553 1,506 27.1 4,047 4,045

4QE 710 327 95 68.0 1,680 96,814 11.7 13,467 15.5 13.9 9,767 3,700 5,976 3,481 2,335 6,345 1,448 22.8 4,897 4,622

FY16

FY17E

2,298 1,146 384 65.5 1,592 343,177 -0.6 33,182 -2.9

2,859 1,256 354 67.5 1,632 356,243 3.8 49,209 48.3

17,992 15,190 23,748 12,770 10,662 7,326 1,254 17.1 6,073 6,073

35,334 13,874 23,900 13,877 10,067 22,353 6,071 27.2 16,282 15,659

254,247 260,712 1,000,538 1,010,323 32,029 32,856 106,053 132,129 10,044 10,771 24,717 38,222

201

December 2016 Results Preview | Sector: Metals

Hindustan Z inc Bloomberg

HZ IN

Equity Shares (m)

4225.3

M. Cap. (INR b)/(USD b)

1061 / 16

52-Week Range (INR)

290 / 136

1,6,12 Rel Perf. (%)

CMP:INR251 

-10 / 38 / 70

Financial Snapshot (INR Billion) Y/E March

2016E 2017E 2018E 2019E

Sales

142.3

181.5

212.4

210.6

EBITDA

67.8

105.9

129.9

125.9

NP

83.6

90.8

107.2

106.7

Adj. EPS (INR)

19.8

21.5

25.4

25.3 -0.5

EPS Gr(%) BV/Sh. (INR)

2.1

8.6

18.1

88.5

103.0

121.3

RoE (%)

20.7

22.5

22.6

19.4

RoCE (%)

20.6

26.7

27.1

23.4

164.9

32.7

27.7

27.8

12.7

11.7

9.9

10.0

2.8

2.4

2.1

1.8

EV/EBITDA (x)

10.5

7.4

5.5

5.1

Div. Yield (%)

11.0

2.4

2.4

2.4

Payout (%)



TP: INR282 (+12%)

Neutral

We expect HZ L’s EBITDA to increase 61% QoQ (+2x YoY) to INR33.8b on normalization in production and higher product prices. Z inc LME is up 11% QoQ to USD2,511/t, while lead LME is up 15% QoQ to USD2,156/t. Z inc production is estimated to increase 57% QoQ to 233kt. Lead production is estimated to increase 19% QoQ to 37kt. We estimate PAT to increase 54% QoQ to INR29.3b.

Valuations P/E (x) P/BV

Quarterly Performance Y/E March

1Q Production (integrated only) Z n refined (000 tons) Pb refined (000 tons) Silver (tons) Z inc LME (USD/t) Net Sales Change (YoY %) EBITDA As % of Net Sales Interest Depreciation Other Income PBT (before EO item) Extra-ordinary Income PBT (after EO item) Total Tax % Tax Reported PAT Adjusted PAT Change (YoY %) E: MOSL Estimates

January 2017

187 27 86 2,190 36,302 20.7 19,655 54.1 16 1,729 5,637 23,546 -1,761 21,785 1,287 5.9 20,498 22,155 37.0

Key issues to watch for  Delay in recovery of volumes at Rampura Agucha.  Decline in global zinc prices.

FY16 2Q 211 39 110 1,898 40,333 34.1 20,245 50.2 12 1,750 8,689 27,171 0 27,171 5,715 21.0 21,456 21,456 32.6

3Q

4Q

1Q

206 35 116 1,616 34,306 -9.8 14,783 43.1 51 1,716 5,547 18,562 0 18,562 449 2.4 18,114 18,114 -17.1

154 38 127 1,680 31,324 -18.7 13,081 41.8 90 1,930 7,422 18,482 4 18,487 -3,013 -16.3 21,500 21,495 -9.7

102 25 95 1,918 25,306 -30.3 11,309 44.7 712 3,644 6,101 13,053 5 13,059 2,680 20.5 10,379 10,375 -53.2

FY17 2Q 3QE 149 31 107 2,252 35,257 -12.6 20,767 58.9 712 4,317 7,702 23,440 0 23,440 4,421 18.9 19,019 19,019 -11.4

233 37 118 2,511 56,904 65.9 33,801 59.4 90 3,644 6,559 36,625 0 36,625 7,325 20.0 29,300 29,300 61.8

(INR Million)

FY16

FY17E

758 139 439 1,846 142,264 -3.8 67,763 47.6 169 6,716 27,294 88,173 -1,757 86,416 4,438 5.1 81,978 83,644 2.1

734 138 464 2,315 181,477 27.6 105,884 58.3 1,604 15,250 24,751 113,781 0 113,781 22,965 20.2 90,816 90,816 8.6

4QE 250 45 144 2,580 64,010 104.4 40,008 62.5 90 3,644 4,389 40,663 0 40,663 8,539 21.0 32,123 32,123 49.4

202

December 2016 Results Preview | Sector: Metals

Bloomberg

JSTL IN

Equity Shares (m)

2417.2

M. Cap. (INR b)/(USD b)

394 / 6

52-Week Range (INR)

-2 / 13 / 52 

Financial Snapshot (INR Billion) Y/E March

2016 2017E 2018E 2019E

Sales

418.8 580.4

651.6

654.2

EBITDA

60.7 115.7

138.1

139.0

Adj. PAT

-0.1

29.6

45.2

46.1

0.0

12.3

18.7

19.1

-100.5 -35,195

52.4

2.0

Adj. EPS (INR) BV/Sh. (INR)

77.5

87.2

103.3

119.9

RoE (%)

0.0

14.9

19.6

17.1

RoCE (%)

2.7

7.6

9.0

8.4

-36.6

12.4

8.0

7.8

-4,521.9

12.9

8.5

8.3

2.0

1.8

1.5

1.3

Payout (%) Valuation P/E (x) P/BV



189 / 95

1,6,12 Rel Perf. (%)

EPS Gr(%)

CMP: INR163

EV/EBITDA (x)

14.6

7.5

5.9

5.4

Div. Yield (%)

0.7

0.8

0.8

0.8

JSW Steel

TP: INR195 (+20%)

Consolidated EBITDA is estimated to decline by 17% QoQ to INR24.4b due to increase in raw material cost and impact on volumes due to demonetization of currency. Adj. PAT is estimated to decline by 43% QoQ to INR4.2b. Standalone EBITDA is estimated to decline 16% QoQ to INR22.8b. Volumes are estimated to be down 7% QoQ (+40% YoY) to 3.6mt due impact of demonetization. Realization is estimated to increase 12% QoQ to ~INR35,700/t, coming off a weaker base (monsoon in 2Q) and cost pressure-led price increases. EBITDA margin estimated at INR6,392/t, down from INR7,077/t in 2Q.

Key issues to watch for  Steel price hikes and impact of coking coal.  Domestic steel demand growth.

Quarterly Performance (Consolidated) Y/E March Net Sales Change (YoY %) EBITDA Change (YoY %) Interest Depreciation Other Income PBT (before EO Item) EO Items PBT (after EO Item) Total Tax % Tax Reported PAT MI (Profit)/Loss Share of P/(L) of Ass. Pref. Dividend Adjusted PAT Change (YoY %) E: MOSL Estimates

January 2017

1Q 115,762 -12.7 16,273 -37.7 8,222 9,385 258 -1,077 -7 -1,084 166 -15.3 -1,250 199 -17 70 -1,135 -117.5

Buy

(INR Million) FY16 2Q 3Q 4Q 109,069 86,983 106,975 -21.5 -34.2 -15.1 17,293 8,918 18,246 -38.5 -61.2 8.4 8,363 8,107 8,335 6,822 7,734 7,938 390 226 808 2,498 -6,696 2,781 -14 -21,221 -11 2,483 -27,917 2,770 1,424 -18,100 1,270 57.3 64.8 45.8 1,060 -9,817 1,500 132 610 10 -22 -26 203 70 70 70 1,105 -1,701 1,649 -85.2 -152.8 161.4

1Q 117,080 1.1 32,694 100.9 9,358 8,315 334 15,356 0 15,356 4,507 29.4 10,848 112 130 0 11,090 -1,076.8

FY17 FY16 FY17E 2Q 3QE 4QE 132,278 149,227 181,785 418,789 580,370 21.3 71.6 69.9 -20.9 38.6 29,586 24,441 29,023 60,730 115,744 71.1 174.1 59.1 -35.4 90.6 9,646 10,047 10,139 33,027 39,191 8,915 9,075 9,236 31,879 35,541 296 830 836 1,682 2,296 11,320 6,149 10,482 -2,494 43,307 0 0 0 -21,254 0 11,320 6,149 10,482 -23,748 43,307 4,734 2,657 4,044 -15,241 15,941 41.8 43.2 38.6 64.2 36.8 6,587 3,492 6,439 -8,508 27,366 -117 -117 -117 950 -240 795 795 795 138 2,516 0 0 0 279 0 7,265 4,170 7,117 -84 29,641 557.5 -345.2 331.6 -100.5 nm

203

December 2016 Results Preview | Sector: Metals

Bloomberg

NACL IN

Equity Shares (m)

1932.9

M. Cap. (INR b)/(USD b)

127 / 2

52-Week Range (INR)

72 / 30

1,6,12 Rel Perf. (%)

15 / 55 / 65

Financial Snapshot (INR Billion) Y/E March

2016 2017E 2018E 2019E

Sales

68.2

73.3

80.0

80.0

EBITDA

9.4

11.9

16.8

16.9

NP

7.0

7.1

9.3

9.5

Adj. EPS (INR) EPS Gr(%) BV/Sh. (INR)

2.7

3.7

4.8

4.9

-43.4

36.9

29.7

2.4

50.1

53.7

56.4

59.2

RoE (%)

5.4

7.1

8.7

8.5

RoCE (%)

7.5

8.3

11.7

11.5

74.0

56.8

43.8

42.8

Payout (%)

CMP: INR66 

  

TP: INR75 (+17%)

Nalco Buy

We estimate Nalco’s 3QFY17 EBITDA to more than double QoQ to INR3.5b on higher alumina volumes, aluminum and alumina realization. Aluminum sales volume is estimated to decline marginally QoQ to 96kt. Aluminum LME is up 6% QoQ to USD1,710/t. Realized premium is estimated at USD153/t, up from USD132/t in 2QFY17. Alumina realization is estimated at USD290/t, up 9% QoQ.

Valuations P/E (x)

21.6

15.8

12.2

11.9

P/BV

1.2

1.1

1.0

1.0

EV/EBITDA (x)

9.9

7.0

4.6

4.3

Div. Yield (%)

3.0

3.0

3.0

3.0

Key issues to watch for  Availability of coal for captive power plant.  LME price trend, utilization of smelter.

Quarterly performance Y/E March (Consolidated) Aluminium Prod. ('000 tons) Alumina Sales ('000 tons) Avg LME Aluminium (USD/ton) NSR premiums (USD/ton) Alumina NSR (USD/ton) Net Sales Change (YoY %) EBITDA Change (YoY %) Other Income PBT (before EO Item) Extra-ordinary Income PBT (after EO Item) Total Tax % Tax Reported PAT Adjusted PAT E: MOSL Esitmates

January 2017

(INR Million) 1Q 86 220 1,769 349 306 14,913 -11.2 2,237 -19.1 1,308 2,543 0 2,543 908 35.7 1,634 1,634

FY16 2Q 3Q 94 96 315 285 1,593 1,495 300 261 308 263 18,151 16,353 -9.0 -14.2 3,393 1,363 -28.5 -74.1 1,260 1,240 3,581 1,558 0 535 3,581 2,092 1,319 757 36.8 36.2 2,261 1,335 2,261 994

4Q 96 375 1,517 224 239 18,744 4.1 2,387 -44.2 1,558 2,812 0 2,812 733 26.1 2,079 2,079

1Q 94 291 1,570 290 257 15,490 3.9 1,946 -13.0 1,336 2,089 0 2,089 739 35.4 1,350 1,350

FY17 2Q 3QE 94 96 290 335 1,619 1,710 132 153 266 290 18,461 18,766 1.7 14.8 1,723 3,581 -49.2 162.6 1,369 632 1,733 2,853 0 0 1,733 2,853 521 931 30.1 32.6 1,212 1,922 1,212 1,922

4QE 104 361 1,720 153 301 20,571 9.8 4,609 93.1 689 3,931 0 3,931 1,283 32.6 2,648 2,648

FY16

FY17E

372 1,195 1,593 283 299 68,160 -7.7 9,380 -45.0 5,366 10,493 535 11,028 3,718 33.7 7,310 6,956

388 1,277 1,655 182 263 73,289 7.5 11,859 26.4 4,025 10,606 10,606 3,474 32.8 7,132 7,132

204

December 2016 Results Preview | Sector: Metals

Bloomberg

NMDC IN

Equity Shares (m)

3163.9

M. Cap. (INR b)/(USD b)

425 / 6

52-Week Range (INR)

143 / 75

1,6,12 Rel Perf. (%)

8 / 44 / 45

64.6

82.4

91.0

95.3

EBITDA

32.3

43.7

50.6

53.0

Adj. PAT

33.2

34.6

34.2

35.7

8.4

10.9

10.8

11.3

-49.7

30.7

-1.0

4.3

BV/Sh. (INR)

75.9

74.9

78.5

82.6

RoE (%)

15.9

12.8

14.2

13.7

RoCE (%)

15.6

11.9

13.3

12.9

177.0

65.9

66.5

63.8

14.6

11.2

11.3

10.8

1.6

1.6

1.6

1.5

EV/EBITDA (x)

10.9

7.8

7.2

6.9

Div. Yield (%)

9.0

4.9

4.9

4.9

EPS Gr(%)

Payout (%) Valuation P/E (x) P/BV



2016E 2017E 2018E 2019E

Sales

Adj. EPS (INR)





Financial Snapshot (INR Billion) Y/E March

CMP: INR134



TP: INR162 (+21%)

Key issues to watch for  Increase in global iron ore prices.  Stronger-than-expected iron ore demand.

(INR Million)

Y/E March

January 2017

Buy

NMDC’s EBITDA is estimated to increase 79% QoQ to INR14.7b on higher realization and volumes. Iron ore sales volumes are estimated to increase by 24% QoQ (38% YoY) to 10mt, aided by increase in domestic demand. Domestic iron ore realization is up 14% QoQ to INR2,284/t on price hikes taken amid increase in international iron ore prices and strong domestic demand. PAT is estimated to increase 37% QoQ to INR10.6b.

Quarterly Performance

Production (m tons) Sales (m tons) Avg Dom. NSR (USD/t) Avg Dom. NSR (INR/t) Net Sales EBITDA Change (QoQ %) EBITDA per ton (USD) EBITDA per ton (INR/t) Interest Depreciation Other Income PBT (before EO Item) Extra-ordinary item PBT (after EO Item) Total Tax % Tax Reported PAT Adjusted PAT E: MOSL Estimates

NMDC

1Q 6.0 6.7 45 2,786 18,557 11,027 -43.4 27 1,655 0 401 4,887 15,513 0 15,513 5,412 34.9 10,101 10,101

FY16 2Q 3Q 6.4 7.4 6.4 7.2 39 31 2,409 2,054 15,528 15,172 9,395 6,441 -14.8 -31.4 24 14 1,457 892 0 0 506 523 4,264 4,212 13,153 10,130 -154 -23 12,999 10,107 4,525 3,557 34.8 35.2 8,474 6,550 8,574 6,565

4Q 8.8 8.5 25 1,658 15,299 5,398 -16.2 9 634 654 647 4,380 8,476 -1,672 6,804 1,275 18.7 5,529 6,888

1Q 7.6 7.8 32 2,162 17,207 8,164 -13.1 16 1,051 81 560 3,452 10,975 0 10,975 3,862 35.2 7,113 7,113

FY17 2Q 3QE 6.3 10.0 8.1 10.0 29 33 2,005 2,284 17,392 24,300 8,258 14,744 1.2 78.5 15 22 1,025 1,480 15 0 544 558 2,735 1,361 10,434 15,547 0 0 10,434 15,547 2,727 4,975 26.1 32.0 7,708 10,572 7,708 10,572

4QE 9.1 9.1 36 2,432 23,466 12,557 -14.8 20 1,380 0 572 1,390 13,375 0 13,375 4,280 32.0 9,095 9,095

FY16

FY17E

28.8 28.8 34 2,201 64,556 32,260 -58.5 17 1,119

34.9 34.9 33 2,230 82,365 43,724 35.5 18 1,253

2,078 17,744 47,927 -1,848 46,079 14,769 32.1 31,309 32,565

2,234 8,938 50,428 50,428 15,843 31.4 34,584 34,584

205

December 2016 Results Preview | Sector: Metals

SAIL Bloomberg

SAIL IN

Equity Shares (m)

4130.4

M. Cap. (INR b)/(USD b)

209 / 3

52-Week Range (INR)

56 / 34

1,6,12 Rel Perf. (%)

-2 / 10 / 2

CMP: INR51 



Financial Snapshot (INR Billion) Y/E March

2016 2017E 2018E 2019E

Sales

395.0

EBITDA

-28.6

NP

-37.0 -9.0

Adj. EPS (INR) EPS Gr(%)

450.5

574.5

673.4

0.7

5.3

63.9

-43.0

-58.9

-5.7

-10.4

-14.3

-1.4

-271.5

16.1

37.1

-90.4

BV/Sh. (INR)

95.5

84.7

70.4

69.1

RoE (%)

-8.8

-11.5

-18.4

-2.0

RoCE (%)

-6.0

-3.4

-3.7

3.4

0.0

0.0

0.0

0.0

-5.5

-4.7

-3.4

-35.8

0.5

0.6

0.7

0.7

-19.5

929.4

132.5

11.3

0.0

0.0

0.0

0.0

Payout (%)

 

TP: 28 (-45%)

Sell

We estimate SAIL to turn EBITDA negative in 3QFY17 at INR2.2b on increase in coking coal prices and impact of demonetization on volumes. Realization is estimated to increase 12% QoQ to INR34,816/t, coming off a weak base (monsoon in 2Q) and cost pressure-led price increase. EBITDA/t loss is estimated at ~INR730, as against profit of ~INR310/t in 2Q. PAT loss is estimated at INR14.9b, up from INR6b in 2Q.

Valuation P/E (x) P/BV EV/EBITDA (x) Div. Yield (%)

Key issues to watch for  Commissioning of ISP and Bhilai capacity expansion.

Quarterly Performance Y/E March (Standalone) Production (m tons) Change (YoY %) Sales (m tons) Change (YoY %) Realization (INR per ton) Change (YoY %) Net Sales Change (%) EBITDA Change (YoY %) EBITDA per ton (INR) EBITDA per ton (USD) Interest Depreciation Other Income PBT (after EO Inc.) Total Tax % Tax Reported PAT Adjusted PAT Change (YoY %) E: MOSL Estimates

January 2017

1Q 3.1 4.5 2.7 -2.3 35,313 -14.2 95,028 -16.2 -817 -107.2 -303 -5 4,430 4,261 1,743 -7,765 -4,549 58.6 -3,216 -3,216 -160.7

FY16 2Q 3Q 4Q 2.7 3.0 3.6 -18.3 -4.6 5.0 2.7 2.9 3.8 -6.7 1.4 19.3 33,797 30,825 30,163 -15.1 -20.6 -17.7 92,569 89,391 113,716 -20.7 -19.5 -1.8 -7,685 -13,815 -11,235 -157.5 -214.4 -220.8 -2,806 -4,764 -2,980 -43 -72 -44 4,674 5,242 6,121 4,358 4,591 7,786 1,306 1,046 1,735 -15,410 -22,603 -23,406 -7,651 -7,315 -11,097 49.6 32.4 47.4 -7,760 -15,287 -12,309 -7,760 -15,287 -12,309 -219.5 -465.4 -468.3

1Q 3.4 10.1 2.8 4.1 32,993 -6.6 92,381 -2.8 2,338 -386.2 835 12 5,941 6,002 893 -9,254 -3,899 42.1 -5,355 -5,042 56.8

FY17E 2Q 3QE 3.5 3.4 30.6 13.2 3.6 3.1 31.4 6.9 31,182 34,816 -7.7 12.9 112,256 107,930 21.3 20.7 1,114 -2,259 -114.5 -83.6 310 -729 5 -11 6,028 6,521 6,659 7,145 682 560 -12,531 -15,367 -5,215 -461 41.6 3.0 -7,316 -14,906 -6,358 -14,906 -18.1 -2.5

(INR Million) FY16 FY17E 4QE 3.7 12.4 2.5 -3.4 3.5 12.1 -6.9 3.3 38,080 32,290 26.2 -17.3 133,661 390,704 17.5 -14.5 -5,448 -33,551 -51.5 -172.9 -1,552 -2,773 -23 -42 6,815 20,468 7,625 20,995 557 5,830 -19,332 -69,184 -580 -30,612 3.0 44.2 -18,752 -38,572 -18,752 -38,572 52.3 -301.4

14.0 13.1 13.0 7.5 34,299 6.2 446,227 14.2 -4,256 -87.3 -327 -5 25,304 27,432 2,691 -56,484 -10,155 18.0 -46,329 -44,539 15.5

206

December 2016 Results Preview | Sector: Metals

Tata Steel Bloomberg

TATA IN

Equity Shares (m)

971.4

M. Cap. (INR b)/(USD b)

394 / 6

52-Week Range (INR)

CMP: INR405 

441 / 211

1,6,12 Rel Perf. (%)

-3 / 25 / 54

Financial Snapshot (INR Billion) Y/E March

2016 2017E 2018E 2019E

Sales

1,172

1,125

1,288

1,292

EBITDA

76

125

161

166

Adj. PAT

7

7

36

40

Adj. EPS (INR)

7.7

7.7

37.1

40.7

168.6

-0.1

383.3

9.9

BV/Sh. (INR)

152

113

141

172

RoE (%)

4.6

5.8

29.2

26.0

EPS Gr(%)

RoCE (%)

5.4

6.0

8.5

8.6

-28.6

-36.0

23.8

21.8

51.2

51.3

10.6

9.6

2.6

3.5

2.8

2.3

EV/EBITDA (x)

15.2

9.9

7.7

7.2

Div. Yield (%)

2.0

2.0

2.0

2.0

Payout (%)





TP: 321 (+52%)

Sell

India: We estimate Tata Steel’s standalone EBITDA to increase 22% QoQ to INR23.3b on higher realization. Volumes are estimated at 2.6mt, down 2% QoQ, despite the ramp-up at K alinganagar, on impact of demonetization. Blended sales realization is estimated to increase by INR3,600/t QoQ to INR44,000/t. Steel EBITDA is estimated at INR9,086/t, up from INR7,297/t in 2Q. Europe: EU steel margin is estimated to decline by USD14/t QoQ to USD53/t on higher raw material cost. Volumes are estimated to be up 7% QoQ to 2.4mt. EBITDA is estimated at INR8.7b, down from INR10.3b in 2Q. Consolidated EBITDA is estimated at INR33b, an increase of 6% QoQ. PAT is estimated at INR5.1b, an improvement from a loss of INR1.1b in 2QFY17.

Valuation P/E (x) P/BV

Quarterly Performance

Y/E March (Consolidated) Sales (k tons) Change (YoY %) Avg Realization (INR/tss) Net Sales Change (YoY %) EBITDA (% of Net Sales) Steel EBITDA(USD/tss) Interest Depreciation Other Income PBT (before EO Inc.) EO Income(exp) PBT (after EO Inc.) Total Tax % Tax Reported PAT Minority Interests Share of asso. PAT Adj. PAT (after MI & asso) E: MOSL Estimates

January 2017

1Q 6,330 -2.0 47,868 303,003 -16.8 27,742 9.2 69 10,980 13,465 7,622 10,919 1,584 12,503 5,154 47.2 7,349 -68 212 6,045

Key issues to watch out  Imports from China and global iron ore prices.

FY16 2Q 3Q 4Q 6,290 6,370 6,940 -3.2 1.1 -1.7 46,589 44,017 42,518 293,047 280,390 295,076 -18.1 -16.6 -12.4 18,305 7,757 22,052 6.2 2.8 7.5 45 18 47 10,487 9,641 10,178 13,708 11,327 12,319 29,382 962 1,291 23,491 -12,249 847 -5,637 -7,118 -28,578 17,854 -19,367 -27,731 2,402 2,434 5,060 10.2 -19.9 597.4 15,452 -21,801 -32,791 8 -310 -720 -157 219 -67 20,925 -14,155 -3,560

1Q 5,410 -14.5 46,635 252,298 -16.7 32,420 12.8 89 10,707 12,417 1,367 10,662 -35,231 -24,568 7,405 69.4 -31,973 142 3,400

FY17E 2Q 3QE 4QE 5,650 5,693 6,029 -10.2 -10.6 -13.1 46,674 49,639 54,090 263,710 282,582 326,091 -10.0 0.8 10.5 29,700 33,750 29,397 11.3 11.9 9.0 78 87 72 13,511 13,441 13,364 14,677 14,422 14,497 1,084 983 1,298 2,597 6,871 2,835 634 3,230 6,871 2,835 3,634 1,712 849 139.9 24.9 29.9 -403 5,159 1,986 -6 -8 -91 -92 -92 -1,127 5,073 1,901

(INR Million)

FY16

FY17E

25,930 -1.5 45,180 1,171,516 -16.0 75,857 6.5 45 41,286 50,818 39,257 23,008 -39,749 -16,740 15,050 65.4 -31,790 -1,089 207 9,256

22,781 -12.1 49,368 1,124,680 -4.0 125,267 11.1 81 51,023 56,012 4,733 22,964 -34,597 -11,632 13,598 59.2 -25,231 -14 -133 9,247

207

December 2016 Results Preview | Sector: Metals

Vedanta Bloomberg

VEDL IN

Equity Shares (m)

3717.0

M. Cap. (INR b)/(USD b)

806 / 12

52-Week Range (INR)

249 / 58

1,6,12 Rel Perf. (%)

-5 / 59 / 140

CMP:INR217 



Financial Snapshot (INR Billion) Y/E March

2016E 2017E 2018E 2019E

Sales

644.3

749.4

EBITDA*

110.4

186.3

215.3

217.7

31.9

79.4

101.5

103.7

NP Adj. EPS (INR)

857.4

897.1

10.8

21.4

27.3

27.9

EPS Gr(%)

-37.3

6.4

153.7

30.6

BV/Sh. (INR)

151.8

176.9

191.3

206.5

RoE (%)

7.9

13.0

14.8

14.0

RoCE (%)

7.4

12.5

13.9

13.3

48.9

24.7

19.3

18.9

Payout (%)

 

TP:INR202 (+15%)

Neutral

We estimate VEDL’s EBITDA to increase 44% QoQ to INR67b on higher prices and volumes in zinc and aluminum. Other commodities are also supportive. Ex-Cairn and HZ L, we estimate EBITDA to increase by 41% QoQ to INR21.9b, driven by an increase in aluminum prices and volumes. Iron ore EBITDA is estimated to be up ~3x QoQ to INR3.6b on an increase in iron ore prices and a recovery in volumes post a lull 2Q (due to monsoon). HZ L EBITDA is estimated to increase by 63% QoQ to INR33.8b on higher zinc/lead prices and volumes. Cairn India EBITDA is estimated to increase by 24% QoQ to INR12.8b on higher oil realization.

Valuation 19.9

10.0

7.8

7.7

P/BV

P/E (x)

1.3

1.1

1.0

1.0

EV/EBITDA (x)

9.2

6.0

4.9

4.5

Div. Yield (%) 2.1 2.1 2.1 Note: Sesa-Sterlite merged entity basis * attrib.

2.1

Key issues to watch for  Progress on ramp-up of 1.25mtpa smelter.  Movement in base metal prices.

Quarterly Performance

(INR Million)

Y/E March Net Sales Change (YoY %) Total Expenditure EBITDA Change (YoY %) As % of Net Sales Interest D&A Other Income PBT (before EO item) Extra-ordinary Income PBT (after EO item) Total Tax % Tax Reported PAT Minority interest Adjusted PAT Change (YoY %) E: MOSL Estimates

January 2017

1Q 170,169 -0.2 124,816 45,353 -20.1 26.7 13,578 17,175 11,480 26,080 -4,143 21,937 3,525 16.1 18,412 8,459 14,096 -29.6

FY16 2Q 3Q 165,609 148,766 -15.3 -22.6 127,008 119,708 38,601 29,057 -39.0 -52.7 23.3 19.5 14,181 13,906 16,602 17,704 12,152 7,154 19,969 4,602 0 2,000 19,969 6,602 2,040 1,606 10.2 24.3 17,929 4,996 9,587 4,819 8,342 -1,823 -51.2 -111.5

4Q 159,793 -10.3 125,073 34,720 -13.7 21.7 15,380 15,629 13,757 17,468 -123,123 -105,655 -2,841 2.7 -102,814 9,004 11,305 54.7

1Q 144,371 -15.2 109,975 34,396 -24.2 23.8 13,931 14,920 10,935 16,480 0 16,480 4,914 29.8 11,567 5,417 6,150 -56.4

FY17 2Q 3QE 158,596 210,583 -4.2 41.6 111,922 143,381 46,674 67,202 20.9 131.3 29.4 31.9 14,503 14,627 15,289 16,481 12,521 12,611 29,403 48,705 0 0 29,403 48,705 6,623 9,570 22.5 19.6 22,780 39,134 10,259 10,509 12,521 28,625 50.1 -1,670.5

4QE 235,832 47.6 156,918 78,914 127.3 33.5 14,685 16,423 10,736 58,542 0 58,542 11,808 20.2 46,734 11,659 35,076 210.3

FY16

FY17E

644,336 -12.5 496,605 147,731 -33.4 22.9 57,045 67,109 44,543 68,119 -125,266 -57,147 4,330 -7.6 -61,477 31,869 31,920 -47.1

749,382 16.3 522,196 227,186 53.8 30.3 57,746 63,112 46,803 153,130 0 153,130 32,915 21.5 120,215 37,843 82,372 158.1

208

December 2016 Results Preview | Sector: Oil & Gas

Oil & Gas Company name

A quarter of sunshine for OMCs

BPCL

GRMs up, Inventory gains to help too

GAIL



Gujarat State Petronet HPCL Indraprastha Gas



IOC MRPL 

Oil India ONGC Petronet LNG

Singapore complex GRM increased sequentially from USD5.1/bbl in 2QFY17 to USD6.7/bbl in 3QFY17. However, it was lower than USD7.8/bbl in 3QFY16. Rise in crude oil prices is also expected to help with inventory gains. While rise in oil prices would be beneficial for upstream companies, we expect operating cost to be higher, which would result in marginal QoQ rise in EBITDA of ONGC and Oil India. RIL is also likely to benefit from good GRMs this quarter. However, HDPE and LLDPE delta seem to have declined 5-10% QoQ.

Brent up 7% QoQ and 13% YoY; upstream subsidy nil in 3QFY17

Reliance Industries





Brent averaged at USD49.1/bbl (Brent has risen from USD35.8/bbl on 31st December 2015 to USD55.8/bbl on 31st December 2016), up from USD45.7/bbl in 2QFY17 and USD43.4/bbl in 3QFY16 on account of OPEC and non-OPEC decision to cut oil production with effect from January 2017. We do not build any net under-recovery either for the OMCs or for the upstream companies.

GRM at USD6.7/bbl, up from USD5.1/bbl in 2QFY17; refiners to benefit 



Petrol crack spread of USD11.8/bbl in 3QFY17 was higher than USD8.9/bbl in 2QFY17, but lower than USD15.9/bbl in 3QFY16. Diesel crack spread also increased from USD10.6/bbl in 2QFY17 to USD11.3/bbl in 3QFY17; however, it was down from USD13/bbl in 3QFY16. Both PE and PP deltas seem to have declined 3-4% QoQ. However, PVC has strengthened by 1% QoQ. Compared with 3QFY16, PE, PP and PVC deltas are up 7-22%. RIL is expected to benefit from YoY strengthening.

Exhibit 1: Expected quarterly performance summary Sector Oil & Gas BPCL GAIL Gujarat State Petronet HPCL IOC Indraprastha Gas MRPL Oil India ONGC Petronet LNG Reliance Inds. Sector Aggregate Excl. OMCs

CMP (INR)

Reco.

656 440 140 461 343 935 108 457 194 375 1,069

Buy Neutral Neutral Buy Buy Neutral Buy Buy Neutral Buy Neutral

Sales (INR m) Var % Var % Dec-16 YoY QoQ 452,342 150,533 2,523 432,589 900,208 8,889 116,760 23,154 193,263 81,218 640,982 3,025,437 1,240,299

-3.0 12.5 1.9 -0.4 8.2 -4.1 32.4 4.4 5.1 57.8 13.3 7.7 15.1

1.3 26.9 -1.6 2.9 12.5 -7.6 17.2 3.2 5.7 22.8 7.6 8.6 10.9

EBDITA (INR m) Var % Var % Dec-16 YoY QoQ

PAT (INR m) Var % Var % Dec-16 YoY QoQ

33,984 16,796 2,205 28,369 108,326 2,461 16,173 7,952 97,075 5,314 119,725 449,949 279,270

22,569 9,608 1,159 15,646 63,907 1,439 11,280 5,645 44,489 3,342 80,021 265,116 162,993

43.8 54.8 5.7 30.7 118.4 33.0 166.2 26.4 12.4 68.2 16.6 39.8 23.1

154.6 10.8 -1.8 138.6 98.9 -4.4 159.0 6.3 1.8 -26.9 13.4 35.5 10.7

51.6 72.9 44.6 3.9 -6.1 -10.7 50.1 123.1 109.1 104.7 36.9 -7.3 277.4 171.2 37.5 -2.7 9.0 -10.6 87.4 -27.3 10.9 3.9 41.9 24.8 24.5 1.1 Source: MOSL

Swarnendu Bhushan ([email protected]); +91 higher 22 6129QoQ 1529 Auto fuel marketing margins Abhinil Dahiwale ([email protected]); +91 22 3980 4309 January 2017

209

December 2016 Results Preview | Sector: Oil & Gas





Despite rise in crude oil prices, the OMCs have broadly been able to take price hikes to maintain gross marketing margin of ~INR2.7/liter (including freight) on diesel and petrol in the quarter. The gross marketing margins are higher than INR2.3/liter during the regulation era. We expect marketing margins to remain higher than regulated era margins.

Valuation and view  Against the backdrop of a lower oil price regime, auto fuel pricing freedom and stable marketing margins, we retain OMCs (IOCL/HPCL/BPCL) as our top picks.  We expect strong performance from MRPL due to revival in GRM in the quarter.  RIL is expected to report improvement in GRM in the quarter. While core earnings growth would be significant, telecom losses would cap consolidated earnings and return ratios.  Although volume growth would continue for CGD players, we might see margin compression in the industrial segment due to increase in LNG prices. Cut in APM price is negative for ONGC/OINL; however, OPEC and non-OPEC efforts to cut oil production should revive realizations, benefitting ONGC/OINL.

Dec-16

Nov-16

Dec-16

Oct-16

Oct-16

85 Sep-16

95

Aug-16

96

Jul-16

99

Jun-16

107

MOSL Oil & Gas Index

May-16

103

Dec-15

118

Nov-16

107

Sep-16

Sensex Index

129

Apr-16

MOSL Oil & Gas Index

Mar-16

Sensex Index

Feb-16

111

Exhibit 3: Relative performance - 1Yr (%)

Jan-16

Exhibit 2: Relative performance - 3m (%)

Source: Bloomberg, MOSL

Exhibit 4: Comparative valuations Sector / Companies Oil & Gas BPCL GAIL Gujarat State Petronet HPCL Indraprastha Gas IOC MRPL Oil India ONGC Petronet LNG Reliance Inds. Sector Aggregate Ex OMCs

January 2017

CMP (INR)

Reco

656 440 140 461 935 343 108 457 194 375 1,069

Buy Neutral Neutral Buy Neutral Buy Buy Buy Neutral Buy Neutral

EPS (INR) PE (x) P/BV (x) RoE (%) FY17E FY18E FY19E FY17E FY18E FY19E FY17E FY18E FY19E FY17E FY18E FY19E 55.5 28.7 9.5 52.7 42.0 49.3 17.0 44.7 14.8 19.8 100.9

56.3 59.8 36.4 44.7 11.0 13.2 45.1 46.2 43.7 47.6 40.1 41.9 15.8 17.2 54.1 55.7 20.0 23.8 26.9 36.3 109.0 110.0

11.8 15.3 14.7 8.7 22.3 7.0 6.3 10.2 13.1 18.9 10.6 10.9 12.5

11.6 12.1 12.7 10.2 21.4 8.6 6.8 8.4 9.7 13.9 9.8 10.4 10.7

11.0 9.8 10.6 10.0 19.7 8.2 6.3 8.2 8.2 10.3 9.7 9.6 9.7

2.8 1.7 1.8 2.1 4.6 1.9 2.2 1.1 1.3 3.8 1.2 1.5 1.3

2.5 1.5 1.6 1.9 3.9 1.7 1.7 1.1 1.3 3.2 1.1 1.4 1.3

2.1 1.4 1.4 1.7 3.4 1.5 1.4 1.0 1.2 2.6 1.0 1.3 1.2

26.2 12.9 12.8 26.6 21.8 29.3 39.4 11.5 10.1 21.5 11.8 13.8 10.7

22.6 20.8 13.2 14.9 13.4 14.4 19.7 17.8 19.8 18.6 20.8 19.2 28.4 25.1 13.0 12.5 13.1 15.1 24.7 27.6 11.5 10.6 13.3 13.3 11.7 12.0 Source: MOSL

210

December 2016 Results Preview | Sector: Oil & Gas

On QoQ basis, GRM up 31%, Brent up 9%, light/heavy spreads rise Exhibit 5: Brent crude price was up +9% QoQ and +15% YoY to an average of USD49.9/bbl in 3QFY17

0

4

3QFY17

4QFY15

2QFY17

3QFY17

Fuel Oil

6

1QFY17

Jet/K ero

10

4QFY16

Diesel

8

3QFY16

LPG

Exhibit 8: YoY GRM decline led by lower gasoline cracks 2QFY16 20

Reuters Singapore GRM (USD/bbl) 10

1QFY14

Source: Bloomberg, MOSL

Source: Bloomberg, MOSL

Exhibit 7: Reuters Singapore GRM up 31% QoQ, but down 16% YoY to average of USD6.7/bbl

2QFY12

3QFY10

2QFY05

3QFY17

(8)

4QFY15

0 1QFY14

0

2QFY12

35

3QFY10

8

4QFY08

70

1QFY07

16

2QFY05

105

4QFY08

Brent less WTI (USD/bbl) 24

1QFY07

Brent Crude Price (USD/bbl) 140

Exhibit 6: Premium of Brent over WTI declined QoQ to USD0.7/bbl in 3QFY17

(10)

2

Naphtha

3QFY17

4QFY15

1QFY14

2QFY12

3QFY10

4QFY08

1QFY07

2QFY05

Gasoline

(20)

0

Source: Bloomberg, MOSL

Exhibit 9: Crude differentials declined in 3QFY17 (USD/bbl) Brent - Dubai

In USD/bbl 11

Arab L-H

Source: Reuters, MOSL

Our key assumptions 



8 5

Our crude price assumptions are USD49.3/bbl for FY17 and USD60/bbl over long term. We expect the regional benchmark Singapore Reuters GRM to remain in the USD5-6/bbl range for the near term, with downward bias.

2

3QFY17

4QFY15

1QFY14

2QFY12

3QFY10

4QFY08

1QFY07

2QFY05

(1)

Source: Bloomberg, MOSL

January 2017

211

December 2016 Results Preview | Sector: Oil & Gas

Exhibit 10: Polymer spreads declined QoQ (INR/kg) 3QFY14 4QFY14 1QFY15 2QFY15 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17 QoQ (%) YoY (%)

RIL Basic prices PE PP 107.6 109.8 112.3 113.0 109.0 107.7 113.0 110.3 109.3 107.0 90.7 84.3 102.3 100.3 95.8 85.8 88.8 76.7 85.6 70.4 92.4 81.5 91.4 83.9 88.8 82.7 -2.9% -1.4% -0.0% 7.8%

PVC 72.3 74.3 77.0 79.4 70.0 63.7 70.1 65.5 65.0 62.3 68.1 69.2 70.8 2.2% 8.9%

POY 103.4 97.9 97.7 102.9 92.7 80.6 84.8 79.0 73.0 71.5 74.4 74.1 74.1 0.0% 1.5%

Exhibit 11: Polymer spreads declined (INR/kg): PE , PP, PVC spreads change -2.7%/-4.0%/0.9% QoQ 80

PE

PP

Simple Spreads PE PP 48.4 50.6 53.9 54.6 51.4 50.1 57.1 54.4 69.1 66.8 60.1 53.8 66.7 64.7 66.4 56.4 59.6 47.6 62.8 47.6 65.0 54.1 65.5 57.9 63.7 55.6 -2.7% -4.0% 6.8% 16.8%

PSF Naphtha 106.0 59.3 100.9 58.4 97.6 57.6 103.6 55.9 92.4 40.2 79.8 30.5 84.0 35.6 80.5 29.4 77.5 29.2 74.0 22.8 79.7 27.4 79.3 26.0 79.3 27.1 0.0% 4.3% 2.4% -7.0%

PVC 13.1 15.9 19.5 23.5 29.8 33.2 34.5 36.1 35.8 39.5 40.7 43.3 43.7 0.9% 21.8%

Int. Spreads POY PSF 56.3 58.9 51.4 54.4 51.8 51.7 58.5 59.2 61.0 60.7 56.6 55.8 56.8 56.0 56.1 57.5 50.2 54.7 53.8 56.3 53.1 58.3 53.9 59.2 53.0 58.2 -1.7% -1.6% 5.6% 6.5% Source: Company, MOSL

Exhibit 12: POY spread down 1.7% QoQ; PSF spreads down 1.6% QoQ (INR/kg)

PVC

POY

80

60

PSF

60

40 40

20 0 2QFY11

3QFY12

4QFY13

1QFY15

2QFY16

20 2QFY11

3QFY17

3QFY12

4QFY13

Source: Bloomberg, Company, MOSL

1QFY15

2QFY16

3QFY17

Source: Bloomberg, Company

Exhibit 13: We model nil subsidy for OMCs in FY17 and FY18 (INR b) FY08 FY09 Fx Rate (INR/USD) 40.3 46.0 Brent (USD/bbl) 82 85 Product-wise Gross Under recoveries (INR b) Petrol 73 52 Diesel 353 523 K erosene 191 282 LPG* 156 176 Total 773 1,033 Sharing of Gross Under recoveries (INR b) Government 353 713 Upstream 257 329 OMC's 163 (9) Total 773 1033 Sharing of Gross Under recoveries (%) Government 46 69 Upstream 33 32 OMC's 21 (1) Total 100 100 *LPG includes DBTL component

January 2017

FY10 47.5 70

FY11 45.6 86

FY12 47.9 114

FY13 54.5 111

FY14 60.6 108

FY15 61.1 86

FY16E 65.5 48

FY17E 67.4 49.3

FY18E 70.0 60

52 93 174 143 461

27 348 200 205 780

0 819 278 284 1,385

0 915 296 399 1,610

0 628 306 465 1,399

0 109 248 366 723

0 0 116 161 276

0 0 114 174 287

0 0 126 242 368

260 145 56 461

410 303 67 780

829 552 0 1,385

1,000 600 10 1,610

707 671 21 1,399

273 428 22 723

263 13 0 276

270 17 0 287

332 36 0 368

56 31 12 100

53 39 9 100

60 40 0 100

62 37 1 100

51 48 2 100

38 59 3 100

95 5 0 100

94 6 0 100

90 10 0 100

Source: Company, MOSL

212

December 2016 Results Preview | Sector: Oil & Gas

Exhibit 14: Petrol-diesel price difference (INR/liter)

Exhibit 15: Diesel in over-recovery zone post deregulation Diesel (under)/over recovery (INR/ltr) 3

Petrol - Diesel price difference (INR/ltr)

40 30

Source: PPAC, MoPNG, MOSL

FY13

FY14

FY15

Dec-16

Nov-16

Sep-16

Jun-16

Aug-16

Exhibit 17: Expect higher LNG volumes in 3QFY17 (mmscmd) and lower production in RIL’s KG-D6 RIL K G-D6

Gross Realization

96 95 97

63 110 1Q 47 110 2Q 47 63 62 110 3Q 48 63 114 4Q 51 63 103 1Q 40 64 109 2Q 45 62 108 3Q 46 74 107 4Q 33 62 109 1Q 47 61 102 2Q 41 76 3Q 36 40 56 4Q 56 5 64 1Q 59 2Q 49 2 51 44 3Q 44 35 4Q 35 46 1Q 46 48 2Q 48 50 3Q 50

Subsidy Burden

Mar-16

Source: PPAC, MoPNG, MOSL

Exhibit 16: With almost nil subsidy, model ONGC’s net realization for 3QFY17 at USD50/bbl Net Realization

May-16

Jan-16

Dec-15

Nov-15

Sep-15

Aug-15

Jun-15

Mar-15

May-15

Dec-14

Dec-16

Mar16

Sep-14

Jun-15

(1) Dec-13

0 Mar13

0

Jun-12

10

Sep-11

1

Dec-10

20

Feb-15

2

PLNG

GAIL India 95 96

94

91

GSPL

86 87

90

97

105

100

101 101 57 59

95

90

51 48 43 46 44 29 43 46 25 25 25 40 24 20 21 22 24 23 23 24 24 25 9 8 8 12 14 13 13 12 12 12 11 11 10 38 36

85

80

75

70

65

60

3QFY14 1QFY15 3QFY15 1QFY16 3QFY16 1QFY17 3QFY17E

FY16 FY17 Source: Company, MOSL

Source: Company, MOSL

Exhibit 18: Expect RIL’s GRM at USD11.5/bbl (USD/bbl)

7

5

5

8

8 6

5

11.5 5

7

3

10.1

3

11.5

10.8

8

4

11.5

10.4 2

10.6

10.1 1

1 6

7

RIL GRM

9

7.3

8.3 4 5

8.7

9.3

3 6

3

3 6

7.6

7.7 2

4

2

Premium / (Disc)

9 7

7

9

1

1

5

3

8.4

9.6

0

10.1

9.5 7.6

Singapore GRM

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q FY13

FY14

FY15

FY16

FY17 Source: MOSL, Company

January 2017

213

December 2016 Results Preview | Sector: Oil & Gas

BPCL Bloomberg Equity Shares (m)

BPCL IN 1446.2

CMP: INR656

TP: INR756 (+15%)

Buy



We expect OMCs’ (IOCL, BPCL, HPCL) core earnings to improve, led by improvement in refining margins QoQ. Also, on a reported basis, earnings would increase due to inventory gains during 3QFY17.

Financial snapshot (INR b) Y/E March 2016 2017E 2018E 2019E Sales 1,884 1,844 2,182 2,275 EBITDA 142 142 150 154 Adj. PAT 80 80 81 86 Adj. EPS (INR) 55.2 55.5 56.3 59.8 EPS Gr.% 104.1 67.0 2.1 7.7 BV/Sh.INR 193.8 230.2 267.3 306.6 RoE (%) 31.6 26.2 22.6 20.8 RoCE (%) 18.8 16.0 15.1 14.9



We model nil subsidy-sharing for OMCs; the subsidy in 3QFY17 would entirely be borne by the government.



We peg BPCL’s refinery throughput at 6.43mmt for 3QFY17 v/s 5.87mmt in 3QFY16 and 6.39mmt in 2QFY17.



We expect BPCL to report PAT of INR22.5b in 3QFY17 (+73% QoQ, +52% YoY).

Payout*(%) Valuation P/E (x) P/BV (x) EV/EBITDA (x) Div. Yld (%)

BPCL trades at 11.6x FY18E EPS and 2.4x FY18E BV (adjusted for investments), with ~3% dividend yield. Buy.

M. Cap. (INR b)/(USD b) 52-Week Range (INR) 1,6,12 Rel Perf. (%)

948 / 14 695 / 366 7 / 21 / 44

33.0

34.3

34.1

34.3



11.8 3.4 8.2 2.4

11.8 2.8 8.3 2.5

11.6 2.4 7.7 2.5

10.9 2.1 7.3 2.7

Key issues to watch for  (a) Inventory and forex change impact, (b) GRM, (c) Kochi refinery expansion, and (d) update on Mozambique/Brazil E&P blocks.

Standalone - Quarterly Earning Model Y/E March Net Sales YoY Change (%) Total Expenditure EBITDA Margins (%) Depreciation Interest Other Income PBT Tax Rate (%) Reported PAT Adj PAT YoY Change (%) Margins (%) Key Assumptions Refining throughput (mmt) GRM (USD/bbl) Mkt. sales volume incl exports (mmt) Marketing GM per litre (INR/litre) E: MOSL Estimates

January 2017

(INR Million)

FY16 FY17 FY16 FY17E 1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QE 519,167 464,227 466,131 441,455 468,902 446,464 458,795 480,527 1,890,981 1,854,688 -22.2 -25.1 -19.5 -14.0 -9.7 -3.8 -1.6 8.9 -20.5 -1.9 481,481 451,415 442,500 407,075 430,195 433,114 424,811 454,961 1,782,471 1,743,080 37,686 12,813 23,631 34,380 38,707 13,351 33,984 25,567 108,510 111,608 7.3 2.8 5.1 7.8 8.3 3.0 7.4 5.3 5.7 6.0 5,372 4,172 4,564 4,435 4,315 4,524 4,582 4,582 18,543 18,002 1,147 1,074 975 2,433 1,111 1,024 1,482 1,482 5,629 5,099 3,794 7,373 3,545 7,461 4,134 10,687 5,953 5,953 22,174 26,726 34,962 14,940 21,637 34,973 37,415 18,489 33,873 25,455 106,512 115,232 11,200 4,760 6,751 9,482 11,210 5,437 11,290 8,484 32,193 36,421 32.0 31.9 31.2 27.1 30.0 29.4 33.3 33.3 30.2 31.6 23,762 10,180 14,886 25,491 26,205 13,052 22,583 16,971 74,319 78,811 23,762 10,180 14,886 25,491 26,205 13,052 22,583 16,971 74,319 78,811 95.4 119.3 170.1 -10.6 10.3 28.2 51.7 -33.4 46.2 6.0 4.6 2.2 3.2 5.8 5.6 2.9 4.9 3.5 3.9 4.2 6.1 8.6 9.3 4.4

6.0 3.9 9.1 3.0

5.9 7.7 9.7 3.2

6.2 6.3 10.3 4.9

6.2 6.1 10.1 4.5

6.4 3.1 9.6 3.1

6.4 8.3 10.0 3.3

6.4 5.6 10.0 3.3

21.5 6.6 38.4 4.4

24.5 5.8 39.6 3.3

214

December 2016 Results Preview | Sector: Oil & Gas

GAIL Bloomberg Equity Shares (m) M. Cap. (INR b)/(USD b) 52-Week Range (INR) 1,6,12 Rel Perf. (%)

GAIL IN 1268.5 558 / 8 456 / 291 2 / 13 / 18

Financial snapshot (INR b) Y/E March 2016 2017E 2018E 2019E Sales 516.1 528.2 544.5 729.7 EBITDA 39.7 65.0 77.9 90.4 Adj. PAT 23.0 36.4 46.2 56.7 Adj. EPS (INR) 18.1 28.7 36.4 44.7 EPS Gr. (%) -23.2 58.3 26.9 22.8 BV/Sh.(INR) RoE (%) RoCE (%) Payout (%) Valuations P/E (x) P/BV (x) EV/EBITDA (x) Div. Yield (%)

241.1 7.7 6.5 36.5

263.2 12.9 9.6 32.2

286.3 13.2 10.9 36.5

314.7 14.9 12.3 36.5

24.3 1.8 12.9 1.3

15.3 1.7 8.6 2.0

12.1 1.5 6.8 2.5

9.8 1.4 5.6 3.2

Quarterly Performance Y/E March

Net Sales Change (%) EBITDA % of Net Sales Depreciation Interest Other Income Extraordinary item* PBT Tax Rate (%) PAT Adj PAT Change (%) EPS (INR) Key Assumptions Gas Trans. volume (mmsmd) Petchem sales ('000MT) Segmental EBIT Breakup (INR m) Gas Transmission LPG Transmission Natural Gas Trading Petrochemicals LPG & Liq.HC (pre-subsidy) Unallocated; GAILTEL Total January 2017

1Q 125,191 -6.4 9,976 8.0 3,077 1,636 1,248 0 6,511 2,270 34.9 4,241 4,241 -31.7 3.3

CMP: INR440

TP: INR429 (-2%)

Neutral



We expect GAIL to report a PAT of INR9.6b (+45% YoY and +4% QoQ). We model nil subsidy sharing for GAIL in 3QFY17 (v/s nil in 3QFY16 and 2QFY17).



We estimate EBITDA at INR16.8b in 3QFY17 v/s INR10.8b in 3QFY16 and INR15.1b in 2QFY17.



Segmental EBIT (pre-subsidy) is expected to be INR15.6b, up 52% YoY, led by turnaround in petchem division profitability and likely higher gas transmission profitability.



GAIL trades at 12.1x FY18E EPS of INR36.4. Maintain Neutral.

Key issues to watch for  (a) Petchem profitability, (b) profitability in gas trading business, (c) progress of pipeline projects worth USD4b, (d) pending tariff revisions for key pipelines, and (e) transmission volumes post RasGas contract renegotiation.

FY16 2Q 3Q 140,880 133,801 -0.3 -10.6 7,675 10,847 5.4 8.1 3,227 3,330 1,635 1,583 3,787 3,284 0 0 6,599 9,218 2,194 2,576 33.2 27.9 4,405 6,643 4,405 6,643 -66.2 18.7 3.5 5.2

4Q 116,272 -18.5 11,186 9.6 3,497 1,546 3,256 0 9,399 1,699 18.1 7,700 7,700 50.8 6.1

1Q 106,866 -14.6 15,732 14.7 3,354 1,774 1,362 4,893 16,858 3,506 20.8 13,352 8,459 99.4 6.7

FY17 2Q 3QE 118,582 150,533 -15.8 12.5 15,155 16,796 12.8 11.2 3,563 3,697 1,198 1,258 3,361 2,499 0 0 13,755 14,340 4,508 4,732 32.8 33.0 9,247 9,608 9,247 9,608 109.9 44.6 7.3 7.6

(INR Million)

FY16

FY17E

4QE 152,553 31.2 17,315 11.4 3,810 1,535 1,585 0 13,556 4,473 33.0 9,082 9,082 18.0 7.2

516,143 -9.0 39,684 7.7 13,131 6,400 11,576 0 31,728 8,739 27.5 22,989 22,989 -23.2 18.1

528,534 2.4 64,998 12.3 14,425 5,765 8,807 4,893 58,508 17,220 29.4 41,288 36,395 58.3 28.7

87 50

90 84

97 84

95 116

96 110

101 136

101 155

101 193

92 334

100 594

3,937 822 3,424 -3,002 2,768 681 8,630

3,955 580 1,925 -2,369 721 1,101 5,914

4,277 543 4,834 -1,606 2,328 -121 10,255

4,510 693 3,766 -1,089 1,642 979 10,501

5,554 526 4,219 930 2,144 606 13,979

6,424 710 3,292 1,553 1,469 51 13,499

6,701 654 3,100 1,713 2,460 969 15,598

5,885 655 3,029 2,119 2,434 969 15,090

16,679 2,639 13,950 -8,066 7,459 2,640 35,300

24,564 2,544 13,641 6,315 8,506 2,596 58,167 215

December 2016 Results Preview | Sector: Oil & Gas

Gujarat State Petronet Bloomberg

GUJS IN

Equity Shares (m)

563.0

M. Cap. (INR b)/(USD b)

79 / 1

52-Week Range (INR)

173 / 119

1,6,12 Rel Perf. (%)

-7 / 4 / -4

CMP: INR140

2016 2017E 2018E 2019E

Sales

9.9

10.4

12.6

14.4

EBITDA

8.6

9.2

11.1

12.6

Adj. PAT

4.4

4.9

6.2

7.4

Adj. EPS (INR)

7.9

8.8

11.0

13.2

EPS Gr. (%)

23.9

11.2

25.7

20.0

BV/Sh.(INR)

70

77.3

85.9

96.2

RoE (%)

11.7

11.9

13.5

14.5

RoCE (%)

9.7

9.9

11.3

12.2

22.2

22.7

22.3

22.1

17.7

15.9

12.7

10.6

P/BV (x)

2.0

1.8

1.6

1.5

EV/EBITDA (x)

9.9

8.9

7.0

5.7

Div. Yield (%)

1.1

1.2

1.5

1.8

Payout (%)

Neutral



We expect GUJS to report net sales of INR2.5b and PAT of INR1.16b (-11% QoQ, -6% YoY).



We model transmission volume at 25mmscmd (falt YoY, +2% QoQ) and transmission tariff at INR1,080/mscm (+2% YoY, flat QoQ).



GUJS had won the bids for three cross-country pipelines (MehsanaBhatinda, Bhatinda-Srinagar, Mallavaram-Bhilwara). We await clarity on the current status, timelines and other details regarding these pipelines.



We build gas transmission volumes of 25.7mmscmd for FY17 and 28mmscmd for FY18 and model tariff at INR1,078/mscm for FY17 and INR1,200/mscm for FY18. The stock trades at 12.7x FY18E EPS of INR11. Maintain Neutral.

Financial snapshot (INR b) Y/E March

TP: INR168 (+20%)

Valuations P/E (x)

Quarterly Performance Y/E March Net Sales Change (%) Employee Costs Operating expenses Other Expenditure EBITDA % of Net Sales % Change Depreciation Interest Other Income PBT Tax Rate (%) PAT Adj. PAT Change (%) EPS (INR) Transmission Vol. (mmscmd) Implied adj. tariff (INR/mscm)

January 2017

Key issues to watch for  Transmission volumes.  Progress on clearances of the three pipelines.

(INR Million) 1Q 2,557 11.0 74 193 53 2,237 87.5 11.9 434 207 143 1,738 610 35.1 1,128 1,128 33 2.0 24.2 1,126

FY16 2Q 2,526 -28.0 113 121 52 2,240 88.7 -30.7 464 213 122 1,685 600 35.6 1,085 1,085 -2 1.9 24.3 1,068

3Q 2,475 1.9 89 243 57 2,086 84.3 2.7 472 184 288 1,718 483 28.1 1,235 1,235 39 2.2 25.1 1,054

4Q 2,313 -2.1 71 130 69 2,042 88.3 3.5 473 168 137 1,538 541 35.2 997 997 35 1.8 24.4 1,028

1Q 2,579 0.9 79 117 52 2,330 90.4 4.2 430 167 147 1,881 668 35.5 1,213 1,213 8 2.2 25.1 1,073

FY17E 2Q 2,564 1.5 77 175 67 2,245 87.6 0.2 436 148 304 1,965 666 33.9 1,298 1,298 20 2.3 24.6 1,079

3QE 2,523 1.9 96 156 66 2,205 87.4 5.7 465 150 175 1,765 606 34.3 1,159 1,159 -6 2.1 25.0 1,080

4QE 2,761 19.4 123 166 72 2,399 86.9 17.5 483 151 169 2,165 743 34.3 1,422 1,422 43 2.5 28.0 1,080

FY16

FY17E

9,870 -6.9 347 687 231 8,605 87.2 -6.8 1,843 773 690 6,679 2,234 33.4 4,445 4,445 24 7.9 24.5 1,069

10,426 5.6 375 614 257 9,179 88.0 6.7 1,814 616 795 8,183 2,823 34.5 5,359 5,359 21 9.5 25.7 1,078

216

December 2016 Results Preview | Sector: Oil & Gas

HPCL Bloomberg Equity Shares (m) M. Cap. (INR b)/(USD b) 52-Week Range (INR) 1,6,12 Rel Perf. (%)

HPCL IN 1017.0 469 / 7 486 / 212 6 / 36 / 58

Financial snapshot (INR b) Y/E MARCH 2016 2017E 2018E 2019E Sales 1,793 1,734 1,922 2,002 EBITDA 76.2 100.8 94.9 99.5 Adj. PAT 38.6 53.6 45.9 46.9 Adj. EPS (INR) EPS Gr. (%) BV/Sh.(INR) RoE (%) RoCE (%) Payout (%) Valuations P/E (x) P/BV (x) EV/EBITDA (x) Div. Yield (%)

38.0 52.7 45.1 46.2 41.3 38.8 (14.4) 2.3 182.1 214.7 243.9 273.9 22.4 26.6 19.7 17.8 13.0 14.7 10.5 9.4 36.4 35.1 35.1 35.1 12.1 2.5 8.0 2.5

8.7 2.1 6.9 3.4

10.2 1.9 7.7 2.9

10.0 1.7 7.7 3.0

Standalone - Quarterly Earning Model Y/E March 1Q Net Sales 517,204 YoY Change (%) -12.6 Total Expenditure 487,402 EBITDA 29,802 Margins (%) 5.8 Depreciation 7,508 Interest 1,227 Other Income 3,138 PBT 24,204 Tax 8,324 Rate (%) 34.4 Minority Interest & Profit/Loss of Asso. Cos. 0 Reported PAT 15,880 Adj PAT 15,880 YoY Change (%) 3,349.3 Margins (%) 3.1 Key Assumptions Refining throughput (mmt) 3.8 GRM (USD/bbl) 8.6 Mkt sales volume incl exports (mmt) 8.6 Marketing GM per litre (INR/litre) 4.5

January 2017

CMP: INR461

TP: INR543 (+18%)

Buy



We expect OMCs’ (IOCL, BPCL, HPCL) core earnings to improve, led by improvement in refining margins QoQ. Also, on a reported basis, earnings would increase due to inventory gains during 3QFY17.



We model nil subsidy-sharing for OMCs; the subsidy in 3QFY17 would entirely be borne by the government.



We peg refinery throughput at 4mmt for 3QFY17 (v/s 4.57mmt in 3QFY16 and 4.04mmt in 2QFY17).



We expect HPCL to report PAT of INR15.6b in 3QFY17 (+50% YoY; +123% QoQ).



HPCL trades at 10.2x FY18E standalone EPS and 1.9x FY18E BV. Buy.

Key issues to watch for  (a) GRM,  (b) impact of forex and inventory change, and  (c) Bhatinda refinery profits.

(INR Million) FY16 FY17 FY16 FY17E 2Q 3Q 4Q 1Q 2Q 3QE 4QE 420,036 434,311 421,260 447,793 420,306 432,589 430,004 1,792,811 1,730,692 -18.7 -14.9 -5.4 -13.4 0.1 -0.4 2.1 -13.1 -3.5 421,301 412,600 395,339 412,139 408,416 404,221 408,092 1,716,643 1,632,868 -1,265 21,711 25,921 35,653 11,890 28,369 21,913 76,168 97,825 -0.3 5.0 6.2 8.0 2.8 6.6 5.1 4.2 5.7 5,428 6,978 6,754 6,108 6,160 6,817 6,817 26,668 25,902 1,650 1,610 1,913 1,395 1,164 1,407 1,407 6,401 5,373 3,640 2,732 4,771 3,368 6,188 3,324 3,324 14,282 16,203 -4,704 15,855 22,025 31,518 10,755 23,468 17,012 57,381 82,753 -1,499 5,433 6,495 10,534 3,741 7,822 5,670 18,753 27,767 31.9 34.3 29.5 33.4 34.8 33.3 33.3 32.7 33.6 0 0 0 0 0 0 0 0 0 -3,205 10,423 15,529 20,984 7,013 15,646 11,342 38,627 54,985 -3,205 10,423 15,529 20,984 7,013 15,646 11,342 38,627 54,985 -137.7 -420.3 -28.2 32.1 -318.8 50.1 -27.0 41.3 42.3 -0.8 2.4 3.7 4.7 1.7 3.6 2.6 2.2 3.2 4.2 2.7 7.8 1.9

4.6 7.9 8.7 3.7

4.7 7.5 9.1 5.1

4.5 6.8 8.9 4.7

4.0 3.2 8.0 3.5

4.0 8.3 8.9 3.8

4.0 5.0 8.9 3.8

17.2 6.7 34.1 3.8

16.5 5.8 34.6 3.9

217

December 2016 Results Preview | Sector: Oil & Gas

Indraprastha Gas Bloomberg

IGL IN

Equity Shares (m)

140.0

M. Cap. (INR b)/(USD b)

131 / 2

52-Week Range (INR)

CMP: INR935

14 / 53 / 76

We expect IGL to report volumes of 4.4mmscmd and PAT of INR1.4b (up 36% YoY, flat QoQ) for 3QFY17.



We expect 3QFY17 CNG volumes at 3.38mmscmd (+10% YoY, -2.5% QoQ). We model total volumes of 4.4/4.8mmscmd in FY17/FY18.



Due to increased gas cost, IGL has hiked CNG prices by INR1.85/kg. However, it is yet to pass on the increased gas cost to industrial consumers. In 3QFY17, EBITDA/scm could be lower than INR6.5 in 1QFY17 and INR6.1 in 2QFY17.



We expect IGL to report EBITDA of INR2.5b (+33% YoY, -4.4% QoQ) for 3QFY17. The stock trades at 21.4x FY18E EPS of INR43.7. Neutral.

Financial Snapshot (INR b) Y/E MARCH

Sales EBITDA Adj. PAT Adj. EPS (INR) EPS Gr. (%) BV/Sh.(INR)

2016 2017E 2018E 2019E 36.7

36.2

41.5

45.7

7.6

10.0

10.4

11.0

4.2

5.9

6.1

6.7

29.7

42.0

43.7

47.6

-4.9

41.2

4.0

9.0

172.6 204.4 237.5 273.4

Neutral



960 / 484

1,6,12 Rel Perf. (%)

TP: INR898 (-4%)

RoE (%)

18.4

21.8

19.8

18.6

RoCE (%)

17.1

21.0

18.8

17.8

Payout (%)

20.2

19.1

20.6

21.0



31.4

22.3

21.4

19.7

5.4

4.6

3.9

3.4

Key issues to watch for

EV/EBITDA (x)

16.6

12.4

11.5

10.4

Div. Yield (%)

0.6

0.9

1.0

1.1

Valuation P/E (x) P/BV (x)

 (a) Likely increase in volumes following lower gas prices, and  (b) EBITDA margin.

Quarterly performance

(INR Million)

Y/E MARCH Net Sales Change (%) EBITDA EBITDA (Rs/scm) % of Net Sales % Change Depreciation Interest Other Income PBT after EO Tax Rate (%) PAT EPS (INR) Gas Volumes (mmscmd) CNG PNG Total YoY Change (%) CNG PNG T o ta l E: MOSL Estimates

January 2017

1Q 8,994 3.7 1,938 5.6 21.5 -6.3 386 36 79.1 1,596 577 36.2 1,018 7.3

FY16 2Q 9,658 1.8 1,880 5.0 19.5 -12.4 395 27 99.2 1,557 542 34.8 1,016 7.3

3Q 9,269 -1.5 1,850 5.0 20.0 -1.9 399 18 135.1 1,569 517 33.0 1,051 7.5

4Q 8,816 -3.4 1,929 5.2 21.9 12.2 398 10 106.1 1,627 551 33.9 1,076 7.7

1Q 8,970 -0.3 2,570 6.5 28.7 32.7 466 0 106.5 2,211 731 33.1 1,480 10.6

FY17 2Q 9,624 -0.3 2,575 6.1 26.8 37.0 483 0 251.4 2,177 735 33.8 1,442 11.1

3QE 8,889 -4.1 2,461 6.1 27.7 33.0 478 0 189.0 2,172 734 33.8 1,439 10.3

4QE 8,759 -0.6 2,429 6.0 27.7 25.9 478 0 170.3 2,121 716 33.8 1,405 10.0

FY16

FY17E

36,737 0.1 7,597 5.2 20.7 -2.9 1,577 91 419.5 6,349 2,187 34.4 4,162 29.7

36,242 -1.3 10,036 5.1 27.7 32.1 1,905 0 717.2 8,681 2,916 33.6 5,765 42.0

2.97 0.87 3.84

3.10 0.98 4.08

3.07 0.94 4.01

3.15 0.95 4.10

3.31 1.02 4.34

3.47 1.11 4.58

3.38 1.02 4.40

3.42 1.02 4.44

3.07 0.93 4.01

3.40 1.04 4.44

4.7 (4.8) 2.3

2.9 4.7 3.3

4.1 5.1 4.3

7.1 7.7 7.2

11.7 17.7 13.0

11.9 13.3 12.3

10.0 8.0 9.5

8.5 8.3 8.4

4.7 3.1 4.3

10.5 11.7 10.8

218

December 2016 Results Preview | Sector: Oil & Gas

IOC Bloomberg

IOCL IN

Equity Shares (m)

4855.9

M. Cap. (INR b)/(USD b)

1666 / 24

52-Week Range (INR)

352 / 173

1,6,12 Rel Perf. (%)

CMP: INR343

Y/E MARCH

2016 2017E 2018E 2019E

Sales

3,544 3,574 4,203 4,547

EBITDA

217.0 395.2 367.6 384.3

Adj. PAT

98.5 239.5 194.5 203.3

Adj. EPS (INR)

20.3

49.3

40.1

41.9

EPS Gr. (%)

203.8 143.0 (18.8)

4.6

BV/Sh.(INR)

156.5 179.8 205.2 230.3

Buy



We expect OMCs’ (IOCL, BPCL, HPCL) core earnings to improve, led by improvement in refining margins QoQ. Also, on a reported basis, earnings would increase due to inventory gains during 3QFY17.



We model nil subsidy-sharing for OMCs; the subsidy in 3QFY17 would entirely be borne by the government.



We peg refinery throughput at 15.7mmt for 3QFY17 (+8.8% YoY) – higher due to contribution from Paradip refinery.



We expect IOCL to report net profit of INR64b in 3QFY17 (+105% QoQ, +109% YoY).



IOCL trades at 8.6x FY18E EPS and at 1.7x FY18E BV. Dividend yield is ~4%. Buy.

17 / 46 / 58

Financial snapshot (INR b)

TP: INR464 (+35%)

RoE (%)

13.6

29.3

20.8

19.2

RoCE (%)

10.3

19.8

14.9

14.3

Payout (%)

36.4

34.5

34.7

34.6

16.9

7.0

8.6

8.2

P/BV (x)

2.2

1.9

1.7

1.5

Key issues to watch for

EV/EBITDA (x)

9.9

5.5

6.0

5.6

Div. Yield (%)

2.0

4.2

3.5

3.6

 (a) Update on Paradip refinery, (b) GRM, (c) capex plans, and (d) forex/inventory changes.

Valuations P/E (x)

Standalone - Quarterly Earning Model Y/E March Net Sales YoY Change (%) Total Expenditure EBITDA Margins (%) Depreciation Interest Other Income PBT Tax Rate (%) Reported PAT Adj PAT YoY Change (%) Margins (%) Key Assumptions Refining throughput (mmt) GRM (USD/bbl) Mkt sales volume incl exports (mmt) Blended marketing GM (INR/lit)

January 2017

(INR Million)

FY16 FY17 FY16 1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QE 1,010,089 851,148 831,788 800,189 856,553 800,435 900,208 944,128 3,493,214 -19.0 -23.5 -22.2 -14.4 -15.2 -6.0 8.2 18.0 -20.0 912,062 846,899 782,198 764,053 723,972 745,979 791,881 869,982 3,305,213 98,027 4,249 49,589 36,136 132,581 54,456 108,326 74,146 188,001 9.7 0.5 6.0 4.5 15.5 6.8 12.0 7.9 5.4 11,435 11,286 11,693 14,114 14,350 15,048 15,070 15,070 48,528 5,922 7,293 6,104 10,682 6,800 6,147 6,249 6,249 30,001 6,604 8,465 9,331 10,881 8,957 11,807 8,849 8,849 35,280 91,999 -1,604 45,854 22,146 120,388 45,069 95,856 61,676 158,395 27,642 1,688 15,286 9,789 37,698 13,850 31,949 20,557 54,405 30.0 -105.2 33.3 44.2 31.3 30.7 33.3 33.3 34.3 64,357 -3,292 30,569 12,356 82,690 31,219 63,907 41,120 103,991 64,357 -3,292 30,569 12,356 82,690 31,219 63,907 41,120 95,034 155.1 -63.4 -215.9 -80.3 28.5 -1,048.4 109.1 232.8 127.7 6.4 -0.4 3.7 1.5 9.7 3.9 7.1 4.4 2.7 13.6 10.8 19.4 3.4

13.7 0.8 18.1 3.4

14.4 6.0 19.1 3.5

15.0 3.0 20.5 3.4

16.1 10.0 20.4 3.4

15.6 4.3 18.5 3.5

15.7 9.0 18.9 3.5

15.3 5.1 18.9 3.5

56.7 5.1 77.1 3.4

FY17E 3,501,323 0.2 3,131,814 369,509 10.6 59,537 25,445 38,462 322,989 104,053 32.2 218,935 218,935 130.4 6.3 62.7 7.1 76.7 3.5

219

December 2016 Results Preview | Sector: Oil & Gas

MRPL Bloomberg

MRPL IN

Equity Shares (m)

1752.7

M. Cap. (INR b)/(USD b)

188 / 3

52-Week Range (INR)

Y/E MARCH

2016 2017E 2018E 2019E

Sales

396.3

425.8

553.2

568.9

EBITDA

29.6

47.3

44.2

45.3

Adj. PAT

12.9

29.8

27.7

30.1

7.4

17.0

15.8

17.2

EPS Gr. (%)

NA

130.4

(6.8)

8.5

BV/Sh.(INR)

36.6

49.7

61.8

74.9

RoE (%)

22.1

39.4

28.4

25.1

RoCE (%)

14.3

23.2

19.4

19.4

-

23.4

23.4

23.4

14.6

6.3

6.8

6.3

P/BV (x)

2.9

2.2

1.7

1.4

EV/EBITDA (x)

4.0

4.9

5.1

3.6

-

3.2

2.9

3.2

Payout (%) Valuation P/E (x)

Div. Yield (%)

Buy

We expect MRPL to report EBITDA of INR16b (v/s INR6.2b in 2QFY17). We estimate adjusted PAT of INR11.3b (v/s INR4.1b in 2QFY17).



Regional benchmark Reuters Singapore GRM is down 14% YoY and up 31% QoQ to USD6.7/bbl. We model MRPL’s GRM at USD9.5/bbl v/s USD5.5/bbl in 2QFY17 and USD8.4/bbl in 3QFY16.



We expect refinery throughput at 4mmt v/s 3.8mmt in 3QFY16 and 4.03mmt in 2QFY17.



For MRPL, we model GRM of ~USD7bbl for FY17/FY18. The stock trades at 6.8x FY18E EPS, and at an EV of 5.1x FY18E EBITDA. Buy.

2 / 61 / 58

Financial snapshot (INR b)

TP: INR115 (+7%)



112 / 52

1,6,12 Rel Perf. (%)

Adj. EPS (INR)

CMP: INR108

Key issues to watch for  (a) GRM, (b) forex fluctuations, and (c) inventory changes.  Updates on foray into petrol and diesel marketing.  Payment of outstanding dues to Iran.

Standalone - Quarterly Earning Model Y/E March Net Sales YoY Change (%) Total Expenditure EBITDA Margins (%) Depreciation Interest Other Income PBT before EO expense Extra-Ord expense PBT Tax Rate (%) Reported PAT Adj PAT YoY Change (%) Margins (%) Key Assumptions Refining throughput (mmt) GRM (USD/bbl) E: MOSL Estimates

January 2017

1Q 113,131 -28.1 102,848 10,283 9.1 1,486 1,218 -945 6,634 1,542 5,092 1,032 20.3 4,060 5,278 -1,564.1 4.7 3.9 5.1

(INR Million)

FY16 2Q 3Q 102,176 88,166 -35.8 -40.1 104,327 82,091 -2,151 6,075 -2.1 6.9 1,593 1,596 1,588 1,515 -4,590 26 -9,922 2,991 205 6 -10,127 2,984 -1,032 0 10.2 0.0 -9,095 2,984 -8,933 2,989 -8.4 -115.8 -8.7 3.4 3.5 5.3

3.8 8.4

4Q 92,848 -16.3 77,410 15,438 16.6 2,449 1,458 2,333 13,864 77 13,787 254 1.8 13,534 13,594 16.2 14.6

1Q 84,259 -25.5 68,445 15,814 18.8 1,707 1,431 -1,306 11,370 0 11,370 4,167 36.6 7,203 7,203 36.5 8.5

4.4 9.0

3.7 5.3

FY17 2Q 3QE 99,664 116,760 -2.5 32.4 93,419 100,587 6,245 16,173 6.3 13.9 1,681 1,758 1,115 1,076 2,536 749 5,984 14,088 0 0 5,984 14,088 1,826 2,808 30.5 19.9 4,159 11,280 4,159 11,280 -146.6 277.4 4.2 9.7 4.0 5.5

4.0 9.5

4QE 125,017 34.6 113,979 11,039 8.8 1,758 1,076 749 8,954 0 8,954 1,785 19.9 7,169 7,169 -47.3 5.7

FY16

FY17E

396,320 -31.0 366,676 29,645 7.5 7,124 5,778 -3,177 13,566 1,830 11,736 254 2.2 11,483 13,273 -176.3 3.3

425,699 7.4 376,430 49,269 11.6 6,903 4,699 2,728 40,395 0 40,395 10,584 26.2 29,811 29,811 124.6 7.0

4.0 6.9

15.6 6.9

15.7 5.4

220

December 2016 Results Preview | Sector: Oil & Gas

Oil India Bloomberg

OINL IN

Equity Shares (m)

601.1

M. Cap. (INR b)/(USD b)

275 / 4

52-Week Range (INR)

CMP: INR457

4 / 25 / 11

We expect OINL to report adjusted PAT of INR5.6b (v/s INR4.1b in 3QFY16 and INR5.8b in 2QFY17).



We estimate EBITDA at INR7.8b (up 25% YoY and 5% QoQ). We estimate gross and net realization at USD47.8/bbl, with no subsidy sharing burden.



Our Brent price assumption is USD49.3/60/bbl for FY17/18. The stock trades at 8.4x FY18E EPS of INR54. We remain positive on OINL due to attractive valuations and high dividend yield of ~4%. Buy.

Financial snapshot (INR b) Y/E MARCH

2016 2017E 2018E 2019E

Sales

92.7

91.8

114.2

118.4

EBITDA

31.2

39.4

43.6

45.1

Adj. PAT

23.3

26.9

32.5

33.5

Adj. EPS (INR)

38.8

44.7

54.1

55.7

EPS Gr. (%)

-7.2

15.3

21.1

2.8

BV/Sh.(INR)

377.9

402.2

431.7

461.9

RoE (%)

10.5

11.5

13.0

12.5

RoCE (%)

8.3

8.5

9.6

9.3

48.3

45.6

45.6

45.6

11.8

10.2

8.4

8.2

1.2

1.1

1.1

1.0

8.9

7.0

6.3

6.0

3.5

3.7

4.6

4.8

Payout (%)

Buy



465 / 301

1,6,12 Rel Perf. (%)

TP: INR508 (+11%)

Key issues to watch for  (a) Subsidy sharing, (b) DD&A charges, and (c) oil & gas production volumes.

Valuations P/E (x) P/BV (x) EV/EBITDA (x) Div. Yield (%)

Quarterly Performance

(INR Billion)

Y/E March Net Sales Change (%) EBITDA % of Net Sales Change (%) D,D&A Interest OI (incl. Oper. other inc) PBT before exceptionals Exceptional item PBT after exceptionals Tax Rate (%) PAT Change (%) Adj. EPS (INR) Key Assumptions(USD/bbl) Exchange rate (INR/USD) Gas Price (USD/bbl) Gross Oil Realization Subsidy Net Oil Realization Subsidy (INR b)

January 2017

1Q 27.5 9.4 10.8 39.4 -2.7 1.9 0.8 4.1 12.2 0.0 12.2 4.5 36.7 7.8 -9.0 12.9

FY16 2Q 24.0 15.2 7.7 32.1 10.4 2.2 0.9 5.6 10.2 0.0 10.2 3.4 33.8 6.7 10.9 11.2

3Q 22.2 7.6 6.3 28.4 21.3 2.5 0.9 3.7 6.6 0.0 6.6 2.5 37.6 4.1 -17.6 6.8

4Q 19.0 -26.2 6.3 33.2 -7.6 3.1 0.9 5.4 7.8 2.2 5.6 0.9 11.7 4.7 -14.9 11.4

63.5 4.7 61.9 4.4 57.4 1.7

65.0 4.7 48.7 2.3 46.4 0.8

65.9 4.2 42.0 42.0 -

67.5 4.2 32.6 32.6 (1.0)

1Q 21.3 -22.4 7.8 36.3 -28.5 2.3 1.0 3.3 7.7 0.0 7.7 2.8 36.2 4.9 -36.2 8.2

FY17 2Q 22.4 -6.5 7.5 33.3 -2.9 2.5 1.0 4.8 8.8 0.0 8.8 2.9 33.7 5.8 -14.0 9.7

3QE 23.2 4.4 8.0 34.3 26.4 2.3 1.0 3.8 8.4 0.0 8.4 2.8 33.0 5.6 37.5 9.4

4QE 24.9 31.0 16.3 65.4 157.6 2.3 0.9 2.6 15.6 0.0 15.6 5.2 33.0 10.5 123.2 17.4

66.9 3.4 43.1 43.1 -

67.0 3.4 44.6 44.6 -

67.4 2.6 47.8 47.8 -

68.0 2.6 52.8 52.8 -

FY16

FY17E

92.7 0.4 31.2 33.6 3.4 9.7 3.5 18.8 36.8 2.2 34.6 11.3 30.8 23.3 -7.2 42.3

91.8 -0.9 39.4 43.0 26.6 9.5 3.9 14.5 40.6 0.0 40.6 13.7 33.8 26.9 15.3 44.7

65.5 4.4 46.3 1.7 44.6 1.6

67.3 3.0 47.0 47.0 -

221

December 2016 Results Preview | Sector: Oil & Gas

ONGC Bloomberg

ONGC IN

Equity Shares (m)

12833.3

M. Cap. (INR b)/(USD b)

2494 / 37

52-Week Range (INR)

210 / 125

1,6,12 Rel Perf. (%)

CMP: INR194

-2 / 28 / 18

2016 2017E 2018E 2019E

Sales

1,293

1,293

1,573

1,646

EBITDA

452

505

659

730

Adj. PAT Adj. EPS (INR) EPS Gr. (%)

176

193

263

312

13.6

14.8

20.0

23.8

-0.7

9.9

36.3

18.7

BV/Sh.(INR)

144

150

155

161

RoE (%)

9.5

10.1

13.1

15.1

RoCE (%)

8.7

8.5

10.8

12.4

73.2

71.0

75.9

73.6

14.3

13.1

9.7

8.2

1.4

1.3

1.3

1.2

6.1

6.0

4.7

4.0

4.4

4.6

6.7

7.7

Payout (%) Valuation P/E (x) P/BV (x) EV/EBITDA (x) Div. Yield (%)

Neutral



We expect ONGC to report adjusted PAT of INR44.5b in 3QFY17 (v/s INR49.7b in 2QFY17 and INR40.8b in 3QFY16).



We estimate EBITDA at INR97.1b (v/s INR95.4b in 2QFY17 and INR86.4b in 3QFY16). We estimate gross and net realization at USD50.1/bbl, as we expect the entire subsidy to be borne by the government.



The stock trades at 9.7x FY18E consolidated EPS of INR20, with implied dividend yield of 3-4%. Neutral.

Financial snapshot (INR b) Y/E March

TP:INR223 (+15%)

Key issues to watch for  (a) Subsidy sharing, (b) DD&A charges, (c) oil & gas production volumes, and (d) new investments in KG Basin following new deep water gas pricing policy.

Quarterly performance (Standalone) Y/E March Net Sales Change (%) EBITDA % of Net Sales Change (%) D,D & A Interest Other Income (Impairment) / writeback PBT Tax Rate (%) PAT Change (%) Adjusted PAT Adj. EPS Key Assumptions (USD/bbl) Fx rate (INR/USD) Gross Oil Realization Subsidy Net Oil Realization Subsidy (INR b) E: MOSL Estimates

January 2017

1Q 227.0 4.4 120.0 52.9 -4.7 45.8 0.0 9.4

(INR Billion) FY16 2Q 205.6 1.0 103.9 50.5 -4.3 46.1 0.0 12.5

83.5 28.9 34.6 54.6 14.2 54.6 4.3

70.4 22.0 31.2 48.4 -11.1 48.4 3.8

3Q 184.0 -1.7 86.4 47.0 -8.0 39.5 0.0 9.6 -39.9 16.6 3.7 22.3 12.9 -64.0 40.8 3.2

63.7 63.8 4.9 58.9 11.3

65.0 51.2 2.4 48.8 6.0

66.0 44.3 0.0 44.3 0.0

4Q 161.4 -24.2 59.7 37.0 -39.9 41.0 0.1 20.9 24.0 63.5 19.3 30.4 44.2 12.2 27.5 2.1

1Q 176.7 -22.1 92.8 52.5 -22.7 37.0 2.9 10.7 0.0 63.5 21.2 33.4 42.3 -22.5 42.3 3.3

67.3 34.9 0.0 34.9 0.0

67.0 46.1 0.0 46.1 0.0

FY17E 2Q 182.9 -11.1 95.4 52.2 -8.2 34.5 3.0 12.9 0.0 70.7 21.0 29.7 49.7 2.7 49.7 3.9 67.0 47.9 0.0 47.9 0.0

3QE 193.3 5.1 97.1 50.2 12.4 34.3 3.0 9.6 0.0 69.4 24.9 35.9 44.5 245.8 44.5 3.5

4QE 197.6 22.4 97.8 49.5 63.9 58.1 3.0 6.3 0.0 43.0 19.2 44.7 23.8 -46.2 23.8 1.9

FY16

FY17E

778.0 -5.3 370.0 47.6 -13.5 172.4 0.1 52.4 -15.9 233.9 73.9 31.6 160.0 -9.7 171.3 13.3

750.4 -3.5 383.0 51.0 3.5 163.9 12.0 39.5 0.0 246.6 86.3 35.0 160.3 0.2 160.3 12.5

67.4 50.1 0.0 50.1 0.0

68.0 55.1 0.0 55.1 0.0

65.5 48.6 1.8 46.7 17.3

67.4 49.8 0.0 49.8 0.0

222

December 2016 Results Preview | Sector: Oil & Gas

Petronet LNG Bloomberg

PLNG IN 750.0

Equity Shares (m)

281 / 4

M. Cap. (INR b)/(USD b)

-1 / 29 / 46

1,6,12 Rel Perf. (%)

Financial snapshot (INR b) Y/E March

2016 2017E 2018E 2019E

Sales

271.3

263.8

281.0

375.4

15.9

23.6

30.4

40.7

8.4

14.9

20.2

27.3

Adj. EPS (INR)

Adj. PAT

11.2

19.8

26.9

36.3

EPS Gr. (%)

12.2

76.6

35.6

35.2

BV/Sh.(INR)

85.0

99.3

118.6

144.7

RoE (%)

14.0

21.5

24.7

27.6

RoCE (%)

11.0

16.1

20.7

25.9

Payout (%)

24.0

28.1

28.1

28.1

33.4

18.9

13.9

10.3

P/BV (x)

4.4

3.8

3.2

2.6

EV/EBITDA (x)

1.1

1.1

0.9

0.6

Div. Yield (%)

0.7

1.3

1.7

2.3

Valuation P/E (x)

TP: INR411 (+11%)

We expect PLNG to report PAT of INR3.3b (+87% YoY, -27% QoQ) and EBITDA of INR5.3b (+68% YoY, -27% QoQ) for 3QFY17.



We model Dahej LNG volumes at 3.3mmt in 3QFY17.



Dahej terminal utilization is above ~110% and long-term growth would depend on Dahej’s ramp-up and K ochi terminal’s pipeline connectivity.



As against 15mmt capacity, PLNG has ~16mmt (RasGas: 8.5, new contracts: ~7.5) long-term take-or-pay contracts.



The stock trades at 13.9x FY18E consolidated EPS of INR26.9. Maintain Buy.

Key issues to watch for  (a) Ramp-up at Dahej terminal, (b) progress on Kochi-Mangalore pipeline, (c) spot volumes and marketing margin on spot volumes.  Petronet LNG’s earnings are largely protected due to take-or-pay contracts with ‘ off-takers’.

Standalone - Quarterly Earning Model Y/E March Net Sales YoY Change (%) Total Expenditure EBITDA Margins (%) Depreciation Interest Other Income PBT Tax Rate (%) Reported PAT Adj PAT YoY Change (%) Margins (%) Key Assumptions Sales volume (tbtu) E: MOSL Estimates

January 2017

1Q 83,772 -17.6 80,161 3,611 4.3 801 612 333 2,531 780

Buy



411 / 230

52-Week Range (INR)

EBITDA

CMP: INR375

(INR Million) FY16 2Q 3Q 75,450 51,460 -31.3 -54.0 70,781 48,302 4,668 3,158 6.2 6.1 808 807 612 588 360 584 3,608 2,348 1,120 564

4Q 60,653 -15.3 56,187 4,466 7.4 800 576 427 3,517 1,124

1Q 53,373 -36.3 46,948 6,425 12.0 806 556 494 5,556 1,777

FY17 2Q 3QE 66,144 81,218 -12.3 57.8 58,880 75,904 7,264 5,314 11.0 6.5 860 882 554 399 915 742 6,765 4,775 2,170 1,432

4QE 63,068 4.0 58,445 4,623 7.3 882 399 742 4,085 1,225

FY16

FY17E

271,334 -31.3 255,431 15,903 5.9 3,216 2,387 1,704 12,004 3,588

263,803 -2.8 240,177 23,626 9.0 3,429 1,909 2,892 21,181 6,605

30.8 1,751 1,751 11.8 2.1

31.0 2,488 2,488 -5.3 3.3

24.0 1,784 1,784 9.9 3.5

32.0 2,393 2,393 42.1 3.9

32.0 3,779 3,779 115.8 7.1

32.1 4,596 4,596 84.7 6.9

30.0 3,342 3,342 87.4 4.1

30.0 2,859 2,859 19.5 4.5

29.9 8,416 8,416 12.2 3.1

31.2 14,576 14,576 73.2 5.5

92.6

84.5

63.0

127.0

118.1

124.7

131.6

109.9

367.1

484.3

223

December 2016 Results Preview | Sector: Oil & Gas

Reliance Industries Bloomberg

RIL IN

Equity Shares (m)

3240.0

M. Cap. (INR b)/(USD b)

3463 / 51

52-Week Range (INR)

CMP: INR1,069

6 / 11 / 3

We expect RIL to report GRM of USD11.3/bbl (v/s USD10.1/bbl in 2QFY17 and USD11.5/bbl in 3QFY16.



RIL’s refining segment profit is likely to improve QoQ due to improvement in GRMs. Petchem profitability is expected to increase YoY, led by improved petchem.



We expect RIL to report standalone PAT of INR80.0b (+10% YoY). Reported consolidated numbers would include shale gas business, but with a one-quarter lag.



RIL trades at 9.8x FY18E adjusted EPS of INR109. RIL's new refining/petchem projects are likely to add to earnings from 2HFY18/FY19, but Telecom business would be a drag on profitability. Maintain Neutral.

Financial snapshot (INR b) Y/E March

Net Sales

2016 2017E 2018E

2019E

2,331.6 2,400.7 2,759.4 2,768.4

EBITDA

401.4

Net Profit Adj. EPS (INR) EPS Gr. (%)

274.2

297.5

321.2

324.2

93.0

100.9

109.0

110.0

20.5

8.5

8.0

0.9

BV/Sh. (INR)

814.7

901.2

RoE (%)

12.0

11.8

11.5

10.6

RoCE (%)

8.9

9.3

9.7

9.3

13.5

14.4

14.4

14.4

Adj. P/E (x)

11.5

10.6

9.8

9.7

Key issues to watch for

P/BV (x) EV/EBITDA (x) EV/Sales (x)

1.3

1.2

1.1

1.0

1.8

1.6

1.2

1.1

10.3

8.6

7.1

6.4

   

Payout (%)

435.9

470.7

468.7

994.4 1,088.5

Valuations

GRM. Petchem margins. KG-D6 production. Update on Telecom venture.

Standalone - Quarterly Earning Model Y/E March Net Sales YoY Change (%) Total Expenditure EBITDA Margins (%) Depreciation Interest Other Income PBT Tax Rate (%) Adj PAT YoY Change (%) Margins (%) Key Assumptions Refining throughput (mmt) GRM (USD/bbl) Petchem EBITDA/tonne (USD/MT) Petchem volumes (mmt)

January 2017

Neutral



1129 / 889

1,6,12 Rel Perf. (%)

TP: INR1,002 (-6%)

(INR Million)

FY16 FY17 FY16 1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QE 658,170 608,170 565,670 499,570 534,960 595,770 640,982 629,020 2,331,580 -31.7 -37.0 -29.5 -10.9 -18.7 -2.0 13.3 25.9 -29.1 565,100 509,840 462,950 392,300 426,790 490,220 521,258 526,590 1,930,190 93,070 98,330 102,720 107,270 108,170 105,550 119,725 102,430 401,390 14.1 16.2 18.2 21.5 20.2 17.7 18.7 16.3 17.2 22,650 23,720 24,050 25,240 19,500 20,290 25,613 25,613 95,660 5,970 6,940 6,090 5,540 9,240 6,330 10,820 10,820 24,540 18,180 16,170 22,890 18,580 20,330 22,800 22,000 26,113 75,820 82,630 83,840 95,470 95,070 99,760 101,730 105,291 92,109 357,010 19,450 18,230 23,290 21,870 24,280 24,690 25,270 20,264 82,840 24 22 24 23 24 24 24 22 23 63,180 65,610 72,180 73,200 75,480 77,040 80,021 71,845 274,170 11.8 14.2 41.9 17.3 19.5 17.4 10.9 -1.9 20.7 9.6 10.8 12.8 14.7 14.1 12.9 12.5 11.4 11.8 16.6 10.4 273.2 1.9

17.1 10.6 259.9 2.1

18.0 11.5 261.4 2.1

17.8 10.8 271.6 2.1

16.8 11.5 303.8 1.9

18.0 10.1 314.4 2.1

17.0 11.3 250.0 2.5

17.0 9.0 250.0 2.5

69.5 10.8 266.5 8.2

FY17E 2,400,732 3.0 1,964,857 435,875 18.2 91,017 37,210 91,243 398,890 94,504 24 304,386 11.0 12.7 68.8 10.5 279.6 9.0

224

December 2016 Results Preview | January 2017

Retail Hit by double whammy of demonetization, weak festive season

Company name

Barring Titan, sales likely to be anemic for retail peers

Jubilant Foodworks Shoppers Stop

Retail coverage universe likely to grow sales at 8.1% For our retail coverage universe, we expect revenues to increase 8.1% YoY, but PAT to decline 9.5% YoY in 3QFY17. EBITDA is likely to decline 1% YoY. Titan’s jewelry retail revenue reportedly grew 15% YoY in 3QFY17, led by healthy festive season growth. The company also exhibited a sharp recovery relative to unorganized peers in the jewelry segment, leading to market share gains. However, its watches segment sales via the trade channel (50% of segment sales) continued to be adversely affected, while its retail segment reported single-digit sales growth. We expect Jubilant Foodworks’ sales to drop 8% YoY, with same-store sales declining 14% due to the adverse impact of demonetization on discretionary consumption as well as likely weak festive season sales (according to our channel checks). Demonetization and weak festive season sales are also likely to result in flat LTL growth at Shoppers Stop, with sales growth of just 5% YoY. Brick-and-mortar retail companies continue to face the onslaught of online retailers.

Titan Company

Store expansion subdued Retail companies under our coverage are moderating store expansion. Titan added four Tanishq stores (adding 12ksf), Jubilant has likely added 30 stores, while Shoppers Stop is likely to have reduced its net store count by 1 in 3QFY17. Expansion plans are likely to be a function of pick-up in consumer sentiment. No preferred pick in the sector given weak environment Demand remains sluggish across retail players with no recovery in sight. Competition is also a worry for JUBI and SHOP in a period of slowdown. While we like JUBI’s business model (decent RoEs even during slowdown and strong potential earnings growth on recovery), poor medium-term visibility (possible worsening in consumer sentiment) refrains us from turning constructive. The share price correction has been concurrent with a steep cut in earnings estimates as a result of delayed recovery, which means that valuations still remain expensive. Similarly, while we like TTAN’s franchise, management quality and long-term opportunity in the jewelry segment, demand headwinds remain a worry for the company. Exhibit 1: Summary of expected quarterly performance Sector

Retail Jubilant Foodworks Shopper's Stop Titan Company Retail Sector Aggregate

January 2017

CMP (INR)

RECO

860 295 359

Neutral Neutral Neutral

Sales (INR m) Var % Var % Dec-16 YoY QoQ

EBDITA (INR m) Var % Var % Dec-16 YoY QoQ

PAT (INR m) Var % Var % Dec-16 YoY QoQ

5,832 9,573 38,062 53,468

552 507 3,144 4,204

130 -55.6 -39.7 113 -52.2 5.6 2,276 0.9 23.9 2,519 -9.5 16.6 Source: Company, MOSL

-8.0 5.0 12.0 8.1

-12.4 1.9 44.4 26.1

-24.0 -28.8 12.0 -1.0

-14.1 53.6 20.7 17.5

225

December 2016 Results Preview | January 2017

Exhibit 2: SHOP to post flat LTL sales in 3QFY17 on a base of 17.4% LTL sales growth in 3QFY16 LTL Sales growth (%)

2.0

2.9

3QFY16

4QFY16

4.2

3.2 2QFY16

Source: Company, MOSL

2QFY17

1QFY17

-3.2

4.6

6.6

1QFY16

4QFY15

-5.3 2QFY15

1.9 -2.4 1QFY15

3QFY15

-3.4

6.6 2QFY14

-2.6

6.3 1QFY14

4QFY14

7.7 4QFY13

3QFY14

16.1

Jun-16

Sep-16

Dec-15

Mar-16

Sep-15

Jun-15

0.1 Mar-15

Sep-14

2.2

5.9

0.8 Dec-14

Jun-14

3.7 Mar-14

Sep-13

Dec-13

Jun-13

Mar-13

Dec-12

5.5

19.8

5.5

4.0

3QFY13

8.4

2QFY13

12.7

11.0

5.0

Sep-12

SSS Growth (%)

17.4

15.5 12.5 12.0 10.0

Exhibit 3: Jubilant Foodworks’ SSS to decline by 14% in 3QFY17

Source: Company, MOSL

Exhibit 4: Gold prices rose 13% YoY in 3QFY17 Gold price YoY (%) 3.5%

3QFY17

2QFY17

1QFY17

-2.9%

3QFY16

2QFY16

-5.7% -6.8% 1QFY16

-10.2% 4QFY15

-12.8% 3QFY15

-4.9% 1QFY15

4QFY14

3QFY14

2QFY14

1QFY14

4QFY13

13.0%

10.2%

4.3% -2.1% -0.1% -6.3% -4.1%

3QFY13

20.4%

4QFY16

8.0%

2QFY15

12.2%

Source: Company, MOSL

Exhibit 5: Shoppers Stop has 81 stores and 19 HyperCITY stores

Sep-16

Dec-16

Jun-16

Mar-16

Dec-15

Jun-15

Sep-15

Mar-15

Dec-14

Sep-14

Jun-14

Mar-14

Dec-13

Sep-13

Jun-13

Dec-12

Mar-13

82 81 77 81 72 73 72 73 74 76 69 65 67 60 61 55 55 19 20 19 17 17 17 17 16 14 15 15 15 15 15 12 12 13

Source: Company, MOSL

January 2017

Dominos stores 411 439 465 489 515 552 576 602 632 679 726 761 797 838 876 911 950 990 1,026 1,049 1,081

Hypercity

2QFY12 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13 4QFY13 1QFY14 2QFY14 3QFY14 4QFY14 1QFY15 2QFY15 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17

Shoppers Stop

Exhibit 6: Dominos is expected to add 30 stores in 3QFY17

Source: Company, MOSL

226

December 2016 Results Preview | January 2017

Exhibit 7: Relative performance – three months (%) Sensex Index

108

Exhibit 8: Relative performance – one-year (%)

MOSL Retail Index

Sensex Index

MOSL Retail Index

112

101

Source: Bloomberg, MOSL

Dec-16

Nov-16

Oct-16

Sep-16

Aug-16

Jul-16

Jun-16

May-16

Dec-16

Oct-16

Apr-16

80 Mar-16

80

Feb-16

88 Dec-15

87

Nov-16

96

Sep-16

94

Jan-16

104

Source: Bloomberg, MOSL

Exhibit 9: Comparative valuation Sector / Companies Retail Jubilant Foodworks Shopper's Stop Titan Company Retail Sector Aggregate

CMP (INR)

RECO

860 295 359

Neutral Neutral Neutral

EPS (INR) PE (x) EV/EBIDTA (x) ROE (%) FY17E FY18E FY19E FY17E FY18E FY19E FY17E FY18E FY19E FY17E FY18E FY19E 10.8 3.0 8.7

18.5 9.2 9.8

27.2 13.8 11.3

80.0 96.9 41.0 45.8

46.4 32.2 36.8 37.5

31.7 21.5 31.6 30.7

22.7 17.9 30.5 27.9

16.0 10.6 27.3 22.8

11.5 7.8 23.4 18.5

8.9 3.1 20.2 15.2

15.3 8.8 19.7 16.7

20.2 11.9 20.1 17.9

Source: Company, MOSL

January 2017

227

December 2016 Results Preview | Sector: Retail

Jubilant Foodworks Bloomberg

JUBI IN

Equity Shares (m)

65.8

M. Cap. (INR b)/(USD b)

57 / 1

52-Week Range (INR)

CMP: INR860 

1502 / 761

1,6,12 Rel Perf. (%)

0 / -28 / -45 

Financial Snapshot (INR b) Y/E March

2016 2017E 2018E 2019E

Sales

24.4

25.4

30.4

37.8



EBITDA

2.6

2.4

3.4

4.6



Adj. PAT

1.0

0.7

1.2

1.8

15.0

10.8

18.5

27.2

EPS Gr. (%)

Adj. EPS (INR)

-11.7

-28.1

72.3

46.6

BV/Sh.(INR)

111.3 121.0 121.3 134.7

RoE (%)

13.4

8.9

15.3

20.2

RoCE (%)

14.1

9.2

15.3

21.1

Payout (%)

16.7

23.2

13.5

44.2

57.5

80.0

46.4

31.7

7.7

7.1

7.1

6.4

EV/EBITDA (x)

21.0

22.7

16.0

11.5

Div. Yield (%)

0.3

0.3

0.3

1.4

Valuations P/E (x) P/BV (x)

TP: INR900 (+5%)

Neutral

We expect JUBI’s revenues to decline 8% YoY. 3QFY17 SSSG is likely to be negative at around 14%. Discretionary spending was expected to improve in 2HFY17, but it is likely to be impacted by demonetization. Commodity inflation continues. We expect EBITDA margin to contract 200bp YoY to 9.5%, and EBITDA to decline 24% YoY to INR552m. We estimate PAT to decline 55.6% to INR130m. The stock trades at 46.4x FY18E EPS of INR18.5. Maintain Neutral.

Key issues to watch for  Clarity on appointment of new CEO.  Demand outlook for QSR and Pizza space, as well as competition.  Performance of D u n k i n D o n u t s and margin guidance.  Changes in expansion and capex strategy (if any).

Quarterly Performance Y/E March No of Stores LTL Growth (%) Net Sales YoY Change (%) Gross Profit Gross Margin (%) Other Expenses EBITDA EBITDA Growth % Margins (%) Depreciation Other Income PBT Tax Rate (%) Adjusted PAT YoY Change (%) E: MOSL Estimates

January 2017

1Q 911 4.6 5,707 4,320 75.7 3,647 673 11.8 292 29 411 135 32.9 276

FY16 2Q 3Q 950 990 3.2 2.0 5,875 6,339 14.4 4,474 4,880 76.1 77.0 3,870 4,153 604 727 10.3 307 29 326 107 33.0 219

11.5 316 24 436 143 32.8 293

4Q 1026 2.9 6,180 14.0 4,728 76.5 4,015 713 11.5 328 29 415 136 32.9 278

1Q 1049 -3.2 6,089 6.7 4,675 76.8 4,098 577 -14.2 9.5 326 31 282 92 32.7 190 -31.1

FY17 2Q 1081 4.2 6,655 13.3 4,979 74.8 4,336 643 6.4 9.7 366 43 320 104 32.5 216 -1.3

3QE 1111 -14.0 5,832 -8.0 4,402 75.5 3,850 552 -24.0 9.5 389 31 194 64 33.1 130 -55.6

4QE 1146 2.0 6,808 10.2 5,133 75.4 4,463 671 -6.0 9.9 423 11 258 86 33.5 172 -38.2

Consol. FY16 1026 3.2 24,383 17.5 18,583 76.2 15,943 2,640 0.4 10.8 1,282 110 1,467 483 32.9 984 -20.2

Consol. FY17E 1146 -2.7 25,385 4.1 19,189 75.6 16,746 2,443 -7.4 9.6 1,504 115 1,054 347 32.9 707 -28.1

228

December 2016 Results Preview | Sector: Retail

Shoppers Stop Bloomberg

SHOP IN

Equity Shares (m)

82.2

M. Cap. (INR b)/(USD b)

24 / 0

52-Week Range (INR)

420 / 265

1,6,12 Rel Perf. (%)

-2 / -21 / -30

CMP: INR295  



Financial Snapshot (INR b) Y/E March

2016 2017E 2018E 2019E

Sales

34.1

36.2

41.6

47.8

EBITDA

2.2

1.4

2.4

3.1

Adj. PAT

0.5

0.3

0.8

1.1

Adj. EPS (INR)

5.8

3.0

9.2

13.8

-47.7 201.0

50.0

EPS Gr. (%)

19.3

BV/Sh.(INR)

95.6 101.1 110.4 124.4

RoE (%)

6.3

3.1

8.8

11.9

RoCE (%)

6.2

4.3

7.8

9.8

Payout (%)

0.0

0.0

0.0

0.0

50.6

96.9

32.2

21.5

Valuations P/E (x) P/BV (x) EV/EBITDA (x)

3.1

2.9

2.7

2.4

12.0

17.9

10.6

7.8



TP: INR300 (+2%)

Neutral

We expect SHOP’s revenue to grow 5% YoY to INR9.6b. Same-store sales (SSS) are estimated to be flat on a base of 17.4% LTL sales growth. EBITDA margin is likely to contract 250bp to 5.3% in 3QFY17; we have factored in EBITDA decline of 28.8% and PAT decline of 52% to INR113m. The stock trades at 32.2x FY18E EPS of INR9.2; maintain Neutral.

Key issues to watch for  Comments on same-store performance; margin outlook.  Update on Omni-channel strategy.  Guidance on HyperCITY’s breakeven.

Quarterly performance FY16

Y/E March LTL Sales Gr % Deptt Stores Net Sales YoY Change (%) Total Exp EBITDA Growth % Margins (%) Depreciation Interest Other Income PBT Tax Rate (%) Adjusted PAT YoY Change (%) E: MOSL Estimates;

January 2017

FY17

FY16

FY17E

1Q

2Q

3Q

4Q

1Q

2Q

3QE

4QE

12.7

0.1

17.4

5.9

5.5

2.2

0.0

2.7

9.0

2.6

73 6,846 11.8 6,677 169 -45.2 2.5 199 139 207 37 16 41.9 22 188.1

74 8,769 2.5 8,359 410 -26.2 4.7 309 135 242 207 87 42.0 120 -24.5

76 9,118 19.1 8,405 712 33.0 7.8 211 158 58 402 166 41.2 236 71.3

77 8,959 9.7 8,437 523 6.5 5.8 258 141 50 174 72 41.5 102 -1.2

81 7,559 10.4 7,485 74 -56.4 1.0 372 159 237 -220 -85 38.5 -136 -726.9

82 9,395 7.1 9,065 330 -19.3 3.5 243 143 225 170 63 37.1 107 -11.0

81 9,573 5.0 9,066 507 -28.8 5.3 226 155 58 185 72 39.0 113 -52.2

82 9,652 7.7 9,152 500 -4.3 5.2 163 105 50 282 112 39.7 170 67.2

77 34,132 11.9 31,960 2,173 15.0 6.4 977 573 213 836 346 41.4 490 20.3

82 36,180 6.0 34,768 1,412 -35.0 3.9 1,003 562 570 417 163 39.0 254 -48.1

229

December 2016 Results Preview | Sector: Retail

Titan Company Bloomberg

TTAN IN

Equity Shares (m)

887.8

M. Cap. (INR b)/(USD b)

318 / 5

52-Week Range (INR)

445 / 296

1,6,12 Rel Perf. (%)

9 / -9 / -2

Financial Snapshot (INR b) Y/E March

2016 2017E 2018E 2019E

Sales

111.8 119.6 137.5 155.4

EBITDA

8.6

10.4

11.6

13.4

Adj. PAT

7.1

7.8

8.7

10.1

Adj. EPS (INR)

8.0

8.7

9.8

11.3

EPS Gr. (%)

-13.4

8.9

11.5

16.2

BV/Sh.(INR)

40.4

46.3

52.7

60.3

RoE (%)

21.3

20.2

19.7

20.1

RoCE (%)

21.8

20.4

19.8

20.0

Payout (%)

30.0

30.0

30.0

30.0

44.6

41.0

36.8

31.6

8.9

7.7

6.8

5.9

EV/EBITDA (x)

36.9

30.4

27.3

23.3

Div. Yield (%)

0.7

0.7

0.8

0.9

Valuation P/E (x) P/BV (x)

CMP: INR359  

 



TP: INR360 (0%)

Neutral

We expect TTAN’s revenue to increase 12% to INR38b. The jewelry division witnessed 40% YoY like-to-like sales growth in the festive period, and also saw abnormally high sales on 8 November. Retails sales growth for Tanishq stood at 15% for 3QFY17. During the quarter, TTAN added only four Tanishq stores (12ksf). We factor in EBITDA growth of 12% in 3QFY17, with underlying flat margins of 8.3%, and 0.9% PAT growth. The stock trades at 36.8x FY18E EPS of INR9.8; maintain Neutral.

Key issues to watch for  Comments on consumer demand for Jewelry and Watches.  Expansion initiatives.  Update on the new Golden Harvest Scheme.

Quarterly Performance Y/E March Net Sales YoY Change (%) Total Exp EBITDA EBITDA Growth % Margins (%) Depreciation Interest Other Income PBT Tax Rate (%) Adjusted PAT YoY Change (%) E : M O S L E s tim ates

January 2017

1Q 26,868 -7.1 24,872 1,996 -27.3 7.4 227 118 395 2,045 530 25.9 1,516 -14.5

FY16 2Q 26,547 -25.5 24,717 1,830 -39.9 6.9 240 87 326 1,829 365 20.0 1,464 -39.0

3Q 33,984 17.3 31,041 2,807 11.6 8.3 250 114 440 2,883 627 21.7 2,257 18.3

4Q 24,372 -1.5 22,414 1,958 -21.2 8.0 254 104 452 2,052 156 7.6 1,896 -11.9

1Q 27,825 3.6 25,067 2,759 38.2 9.9 261 88 297 2,706 471 17.4 2,236 47.5

FY17 2Q 26,364 -0.7 23,760 2,604 42.3 9.9 260 117 277 2,504 667 26.6 1,837 25.5

3QE 38,062 12.0 34,918 3,144 12.0 8.3 283 131 440 3,171 894 28.2 2,276 0.9

4QE 27,343 12.2 25,445 1,898 -3.1 6.9 265 129 466 1,970 556 28.2 1,413 -25.5

FY16

FY17E

111,770 -5.5 103,179 8,591 -20.4 7.7 971 423 1,612 8,809 1,678 19.0 7,131 -13.4

119,594 7.0 109,189 10,405 21.1 8.7 1,068 465 1,479 10,350 2,588 25.0 7,763 8.9

230

December 2016 Results Preview

Technology Company Name Cyient HCL Technologies Hexaware Technologies Infosys K PIT Technologies L&T Infotech MindTree Consulting Mphasis NIIT Tech Persistent Systems TCS Tech Mahindra Wipro Z ensar Technologies

In the middle of old and (potentially) new problems Gradual recovery to continue at TECHM; seasonality and BFSI keep 3Q expectations modest Expectations laid low by macro and seasonality… After a seasonally strong 1H offered nothing to write home about, compounding of furloughs in the third quarter keeps our expectations muted. The situation would be further accentuated by the depreciation of GBP, EUR, AUD and JPY against the USD. The brunt of client-specific and other issues has been evident in:  INFO’s termination of a contract with RBS’ standalone UK bank, Williams & Glyn (W&G), leading to gradual ramp down of as many as 3,000 employees, which is expected to kick off in 3Q.  MTCL’s revenue decline in 2Q, and lack of visible revival in 3Q from top client spending bumps, pricing pressure and delayed ramp-up of projects.  WPRO’s organic growth guidance of -1% to +1% for 3Q despite improvement measures under the new leadership. … but expect TECHM’s slow and gradual recovery to continue  We expect TECHM to lead sequential growth at 3.1% QoQ CC. Its revenue would include residual one-month contribution from Target acquisition (~0.6pp). However, excluding this too, our organic growth estimate of ~2.5% QoQ CC betters peers.  It also enjoys a favorable base to expand margins this quarter, given 100bp impact from one-time hit in the last quarter. We model 70bp QoQ expansion in EBITDA margin to 16.6% and better sequential performance than other top-tier peers. Cross currencies are at it again!  We see top-tier growth in constant currency ranging between -1% and 3.1% QoQ and 6.6% to 13.1% YoY. However, strengthening of the USD against other major global currencies means yet another quarter of significant cross-currency impact, with QoQ depreciation in EUR, JPY, GBP and AUD of 1% to 10% QoQ.  Consequently, in USD terms (including impact from GBP depreciation and other currencies), we expect growth of -2.1% to 1.7% QoQ and 4.1% to 10.8% YoY. Margin movement YoY is a fair reflection of business pressure Pricing pressure in traditional services and renewals, and necessary investments for transitioning to Digital have been weighing on margins. Although the INR has depreciated against the USD by 2.1% QoQ, the impact of depreciation of other currencies limits any tailwind. We see sequential movement of margins in the range of -80bp and 70bp for Tier-I, and -160bp and 100bp for Tier-II. Six of the 14 companies under our coverage are expected to report positive sequential movement in EBITDA margins. On a YoY basis though, margin movement for Tier-I ranges from -130bp to -40bp.

Ashish Chopra ([email protected]); +91 22 3982 5424 Sagar Lele ([email protected]); +91 22 3982 5585 January 2017

231

December 2016 Results Preview | Sector: Technology

Any hopes of the sector’s health getting on the mend?  As if uncertain macro, deteriorating pricing and margins in traditional services combined with capability uptick challenges in Digital were not enough, any protectionist impetus in the US is an added overhang, going forward.  But for that, there is a case for a rosier picture come FY18, given that macroeconomic challenges that resulted in a deterioration of performance through FY17 aren’t expected to impact FY18 with the same force. Interest rate cycle reversal in the US augurs well for BFSI spending.  Add to that, deal wins haven’t been showing any signs of let-off. INFO’s TCV of large deal wins at USD3.1b is 34% higher YoY, and MTCL’s deal wins of USD888m are up 24% YoY – quite a contradiction from revenue growth.  Companies’ outlook on the balance of these counteracting forces will be keenly watched, with valuation multiples still at corrected levels. PAT decline led by margin contraction and forex movement  Aggregate PAT is expected to grow by a tepid 1% YoY for tier-I and decline by 6.9% YoY for tier-II. The primary reasons for the drop have been [ 1] industrywide pressure on margins, and [ 2] forex losses (on hedges, and on translation).  EBITDA margins are expected to decline YoY in 3QFY17 for all companies under our coverage (barring Mphasis, Hexaware and L&T Infotech). Cumulative EBITDA margins are modeled to decline by ~100bp for both Tier-I and Tier-II companies under our coverage. Valuation comfort offset by uncertainty; prefer INFO, HCLT, TECHM  Lest the macro turns for the better, we see limited upside triggers for the sector over the near term. Although issues cited as causes for the recent slowdown have been taking a turn, other than improved deal wins, there are few signs to find comfort in.  Risks are lesser at HCLT given visibility from its unchanged guidance for the year, and TECHM, with improvement in Telecom and continued strength in Enterprise.  Moreover, the prospective improvement in profitability at TECHM, led by leverage lent by revival of Top 10 customers, and likely profitability stability/resurrection in subsidiaries could lead to a trajectory different from the industry.  Given the traction in revenue growth leadership (notwithstanding the cyclical speed breaker) at INFO under new leadership, we take greater comfort in its valuations, compared to TCS, which too is citing challenges in BFSI – a risk to its premium multiple.  Potential of double-digit organic growth at HCLT (substantiated by order book), better growth compared to TECHM and WPRO, along with 25%+ RoE leaves ample room for upside despite embedding conservatism on the margin outlook. Moreover, its exposure to IMS and Engineering Services protects it from the weakness seen in BFSI.  Among the Tier-II IT, we prefer CYL, LTI and Z ENT.

January 2017

232

December 2016 Results Preview | Sector: Technology

Exhibit 1: Earnings aggregate for 3QFY17 Sector CMP (INR) Cyient 494 HCL Technologies 859 Hexaware Tech. 213 Infosys 998 K PIT Tech. 137 L&T Infotech 695 Mindtree 526 MphasiS 534 NIIT Tech. 437 Persistent Systems 647 Tata Elxsi 1,419 TCS 2,379 Tech Mahindra 500 Wipro 476 Z ensar Tech 944 Technology Sector Aggregate

Reco Buy Buy Neutral Buy Neutral Buy Neutral Neutral Neutral Neutral Buy Neutral Buy Neutral Buy

Sales (INR M) Var % Var % Dec-16 YoY QoQ 9,234 18.1 1.1 117,094 13.2 1.7 9,148 11.6 1.2 170,887 7.5 -1.3 8,283 1.9 -0.3 16,279 12.1 1.6 12,995 7.0 0.3 14,904 -1.7 -1.8 7,175 5.7 3.8 7,326 23.7 4.1 3,097 13.0 2.1 294,529 7.6 0.6 73,632 9.9 2.7 138,960 8.1 0.9 7,954 5.1 2.4 891,494 8.6 0.6

EBDITA (INR M) Var % Var % Dec-16 YoY QoQ 1,243 12.8 -3.1 24,779 11.4 -1.3 1,591 22.2 0.9 45,358 4.8 -4.2 997 -15.5 9.1 3,007 13.2 -1.2 1,633 -23.9 0.8 2,186 0.9 -11.3 1,209 -2.1 7.8 1,196 7.7 8.0 773 16.6 3.8 80,095 3.4 -1.3 11,502 1.3 7.5 27,351 2.3 3.1 1,119 2.7 2.4 204,039 4.2 -0.8

Net Profit (INR M) Var % Var % Dec-16 YoY QoQ 1,031 18.8 6.0 19,735 2.8 -2.1 1,196 20.4 7.4 34,912 0.8 -3.2 619 -15.8 10.2 2,367 -25.6 1.8 1,058 -29.9 11.6 1,952 12.4 -9.9 712 -3.9 -1.1 680 -12.2 -7.4 494 23.8 14.7 62,523 2.3 -5.1 7,063 -7.0 9.5 21,863 -2.1 5.8 820 14.7 19.4 157,026 0.3 -1.8

Exhibit 2: Double-digit USD revenue growth (YoY) seen only in HCLT amongst tier-I Company TCS Infosys Wipro HCLT TECHM Aggregate

3QFY17E 4,363 2,532 1,914 1,735 1,091 11,635

Company TCS Infosys Wipro HCLT TECHM Aggregate

3QFY17E 27.2 26.5 19.7 21.2 15.6 23.8

January 2017

Revenue (USD m) 3QFY16 YoY (%) 2QFY17 4,145 5.3 4,374 2,407 5.2 2,587 1,838 4.1 1,916 1,566 10.8 1,722 1,015 7.5 1,072 10,971 6.1 11,672 EBITDA Margin (%) 3QFY16 YoY (%) 2QFY17 28.3 (110) 27.7 27.2 (70) 27.3 20.8 (110) 19.3 21.5 (40) 21.8 16.9 (130) 14.9 24.7 (97) 24.1

QoQ (%) (0.2) (2.1) (0.1) 0.7 1.7 (0.3)

3QFY17E 295 171 139 117 74 795

QoQ (%) (50) (80) 40 (60) 69 (36)

3QFY17E 63 35 22 20 7 146

Revenue (INR b) 3QFY16 YoY (%) 2QFY17 QoQ (%) 274 7.6 293 0.6 159 7.5 173 (1.3) 129 8.1 138 0.9 103 13.2 115 1.7 67 9.9 72 2.7 732 8.7 790 0.6 PAT (INR b) 3QFY16 YoY (%) 2QFY17 QoQ (%) 61 2.3 66 (5.1) 35 0.8 36 (3.2) 22 (2.1) 21 5.8 19 2.8 20 (2.1) 8 (4.2) 6 12.8 145 1.0 149 (1.9) Source: Company, MOSL

233

December 2016 Results Preview | Sector: Technology

Exhibit 3: Margin decline expected to be steep across tier-II, YoY Company Persistent Systems Hexaware K PIT Tech. Mindtree Mphasis Cyient NIIT Tech Z ensar LTI Aggregate

3QFY17E 109 136 123 193 226 137 106 118 241 1,387

Company Persistent Systems Hexaware K PIT Tech. Mindtree Mphasis Cyient NIIT Tech Z ensar LTI Aggregate

3QFY17E 16.3 17.4 12.0 12.6 14.7 13.5 16.9 14.1 18.5 15.2

Revenue (USD m) 3QFY16 YoY (%) 2QFY17 90 21.1 105 124 9.2 135 123 (0.5) 123 184 4.4 193 229 (1.4) 224 118 15.5 137 103 3.2 103 115 2.6 116 225 7.2 240 1,312 5.8 1,376 EBITDA margin (%) 3QFY16 YoY (%) 2QFY17 18.8 (240) 15.7 15.9 150 17.4 14.5 (250) 11.0 17.7 (510) 12.5 14.3 40 16.2 14.1 (60) 14.0 18.2 (130) 16.2 14.4 (30) 14.1 34.6 20 19.0 16.2 (100) 15.4

QoQ (%) 3.2 0.2 (0.6) (0.3) 0.7 0.2 2.9 1.6 0.6 0.8

3QFY17E 7.3 9.1 8.3 13.0 14.9 9.2 7.2 8.0 16.3 93.3

QoQ (%) 60 100 10 (160) (60) 60 (50) (20)

3QFY17E 0.7 1.2 0.2 1.1 2.0 1.0 0.7 0.8 2.4 10.0

Revenue (INR b) 3QFY16 YoY (%) 2QFY17 QoQ (%) 5.9 23.7 7.0 4.1 8.2 11.6 9.0 1.2 8.1 1.9 8.3 (0.3) 12.1 7.0 13.0 0.3 15.2 (1.7) 15.2 (1.8) 7.8 18.1 9.1 1.1 6.8 5.7 6.9 3.8 7.6 5.1 7.8 2.4 15.5 12.1 16.0 1.6 87.2 8.2 92.4 1.0 PAT (INR b) 3QFY16 YoY (%) 2QFY17 QoQ (%) 0.8 (12.2) 0.7 (7.4) 1.0 20.4 1.1 7.4 0.3 (18.0) 0.2 15.5 1.5 (29.9) 0.9 11.6 1.7 12.4 2.2 (9.9) 0.9 18.8 1.0 6.0 0.7 (3.9) 0.6 19.5 0.7 14.7 0.7 19.4 3.2 (25.6) 2.3 1.8 10.8 (6.9) 9.7 3.1 Source: Company, MOSL

Exhibit 4: Seasonal weakness dampens revenue growth (QoQ, CC, %) 1QFY16

2QFY16

3QFY16

4QFY16

1QFY17

2QFY17

3QFY17E

6.0 3.5

4.4

3.9

3.1 2.1 1.5 1.0

1.91.7 0.2

2.9 2.7 2.0 0.91.3

3.2 3.1

2.8 2.1 1.7 0.3

1.3 0.4

-1.0 TCS

INFO

WPRO

HCLT

TECHM

Exhibit 5: YoY traction seen picking up only at HCLT, led by Volvo IT acquisition (YoY,CC,%) 1QFY17

2QFY17

3QFY17

15.8 13.6 9.2 8.1 11.4 13.1 13.1

4QFY16

8.3 8.4 6.0 7.6 9.5 7.2 7.1

3QFY16

10.8 14.0 12.4 15.0 12.0 8.9 6.6

2QFY16

15.8 12.0 9.8 10.3 9.9 6.8 7.9

1QFY16

TCS

INFO

WPRO

HCLT Source: Company, MOSL

January 2017

234

December 2016 Results Preview | Sector: Technology

Exhibit 6: TCS and HCLT to outperform peers organically in 3Q (revenue growth, QoQ, USD, %) TCS

9

Infosys

Wipro

HCL Tech

Tech Mahindra

7 3 1 -0.2

2QFY17

1QFY17

4QFY16

3QFY16

2QFY16

1QFY16

-1

3QFY17

-0.1 0.7 1.7

5

Source: Company, MOSL

Exhibit 7: Incremental revenue to revive at TECHM, aided by acquisitions; cross-currency movements unsupportive again TCS 200

Infosys

Wipro

HCL Tech

Tech Mahindra

Cross currency impact on USD revenues (bp)

Incremental revenue (USD m)

150 100 50

-40 (50) (80) (110) (120) (140) PSYS

NITEC

Z ENT

CYL

MTCL

LTI

MPHL

TECHM

HCLT

WPRO

TCS

3QFY17

2QFY17

1QFY17

4QFY16

3QFY16

2QFY16

1QFY16

-100

INFO

(110) (140)(140)(140) (160)

-50

HEXW

0

K PIT

(70) (80) (70)

Source: Company, MOSL

Exhibit 8: Margins lower across the board in YoY terms (EBITDA margin, %) TCS

Infosys

HCL Tech

Wipro

Tech Mahindra

30

27.2 26.5

26 22

21.2 19.7

18 2QFY17

1QFY17

4QFY16

3QFY16

2QFY16

1QFY16

4QFY15

3QFY15

2QFY15

1QFY15

3QFY17

15.6

14

Source: Company, MOSL

January 2017

235

December 2016 Results Preview | Sector: Technology

Exhibit 9: Sequential improvement seen in some midcaps due to company-specific dynamics (revenue growth, QoQ, USD, %) 4QFY16

1QFY17

2QFY17

3QFY17

3.1 1.8 1.6 0.4 2.1 0.6 3.7 0.6

4.2 2.9

Cyient

NIIT Tech

-1.4 -3.7

-1.2 -1.4 -2.5

Persistent Hexaware K PIT Tech. Mindtree Mphasis Systems

0.2

0.7 0.0 2.1 3.1

1.7

-3.0 -0.3 -3.4 -1.6 -0.3 -0.2

2.3

-0.6

0.7 -3.5

-1.0

-0.8 -1.9

0.2

3.0

6.1

6.2 4.6

3.2

0.4

4.3

8.1

9.5

12.0

3QFY16

Z ensar

LTI

Source: Company, MOSL

Exhibit 10: 3QFY17 currency highlights (INR)

Average Closing

USD 67.45 67.92

Rates (INR) EUR GBP 72.7 83.7 71.7 83.5

AUD 50.5 49.1

USD 0.7% 2.0%

Exhibit 11: 3QFY17 currency highlights (in USD) EUR

Rates (USD) GBP

AUD

EUR

Average

1.08

1.24

0.87

-3.4%

Closing

1.05

1.23

0.72

-6.4%

Change (QoQ) EUR GBP AUD -2.7% -4.9% -0.5% -3.7% -3.4% -3.3% Source: Company, MOSL

Change (QoQ) GBP -5.4%

AUD -1.4%

-4.9% -5.9% Source: Company, MOSL

Exhibit 12: Cross currencies: Assumed rates v/s actual Guided at Infosys Wipro Actual (Average)

EUR 1.10 1.11 1.08

GBP 1.51 1.26 1.24

AUD 0.73 0.76 0.87

INR/USD nm 67.01 67.45

Exhibit 13: Cross currencies: Change compared to guided Change (%) Infosys Wipro

January 2017

EUR -2.0% -2.9%

GBP -17.8% -1.5%

AUD INR/USD 18.7% nm 14.0% 0.7% Source: Company, MOSL

236

December 2016 Results Preview | Sector: Technology

Dec-16

Nov-16

Oct-16

Sep-16

Aug-16

Jul-16

Oct-16

Jun-16

85

MOSL Technology Index

May-16

95

Apr-16

95

Dec-16

97

Nov-16

105

Sep-16

99

Source: Bloomberg, MOSL

Sensex Index

115

Mar-16

MOSL Technology Index

Feb-16

Sensex Index

Jan-16

101

Exhibit 15: Relative performance— 1Yr (%)

Dec-15

Exhibit 14: Relative performance— 3m (%)

Source: Bloomberg, MOSL

Exhibit 16: Comparative valuation Companies Cyient HCL Technologies Hexaware Tech. Infosys K PIT Tech. L&T Infotech Mindtree MphasiS NIIT Tech. Persistent Systems TCS Tech Mahindra Z ensar Tech Wipro

January 2017

CMP (INR) 494 859 213 998 137 695 526 534 437 647 2,379 500 944 476

RECO Buy Buy Neutral Buy Neutral Buy Neutral Neutral Neutral Neutral Neutral Buy Buy Neutral

EPS (INR) PE (x) ROE (%) EPS Growth (%) FY17E FY18E FY19E FY17E FY18E FY19E FY17E FY18E FY19E FY17E FY18E FY19E 34.6 44.2 47.5 14.3 11.2 10.4 16.4 18.3 17.3 12.8 27.7 7.5 56.7 63.2 67.2 15.2 13.6 12.8 26.6 25.5 23.2 5.9 11.5 6.3 13.6 15.5 15.9 15.6 13.8 13.4 27.7 27.5 24.0 5.4 13.7 2.8 61.7 68.7 75.0 16.2 14.5 13.3 22.8 22.8 22.5 4.5 11.4 9.2 12.6 15.6 16.3 10.9 8.8 8.4 16.9 17.6 15.5 -10.3 23.7 4.0 54.9 58.6 62.1 12.7 11.9 11.2 42.3 36.8 32.5 4.7 6.8 5.9 26.6 36.2 38.1 19.8 14.5 13.8 18.0 22.0 20.6 -25.8 36.1 5.3 42.2 54.0 57.2 12.7 9.9 9.3 13.7 16.3 15.9 22.4 28.1 5.9 38.6 50.2 54.3 11.3 8.7 8.1 14.2 16.6 16.0 -15.6 30.1 8.1 36.2 45.0 54.8 17.9 14.4 11.8 16.7 19.2 22.5 -2.6 24.2 21.8 131.0 144.9 155.3 18.2 16.4 15.3 33.0 31.3 28.7 6.4 10.6 7.2 30.9 36.0 39.5 16.2 13.9 12.6 19.1 19.3 18.5 -11.8 16.4 9.8 69.5 92.5 99.2 13.6 10.2 9.5 20.3 22.8 20.7 1.9 33.1 7.2 34.3 39.5 44.1 13.9 12.1 10.8 17.7 18.5 18.5 -5.1 15.2 11.8 Source: MOSL

237

December 2016 Results Preview | Sector: Technology

Cyient Bloomberg

CYL IN

Equity Shares (m)

112.2

M. Cap. (INR b)/(USD b)

55 / 1

52-Week Range (INR)

555 / 371

1,6,12 Rel Perf. (%)

-2 / 4 / -4

Financial Snapshot (INR b) Y/E Mar 2016 2017E 2018E 2019E Sales 31.0 36.3 42.6 47.9 EBITDA 4.2 5.0 6.2 6.8 PAT 3.3 3.9 5.0 5.3 EPS (INR) 30.7 34.6 44.2 47.5 EPS Gr. (%) -1.9 12.8 27.7 7.5 BV/Sh. (INR) 186.6 210.9 241.8 275.1 RoE (%) 16.5 16.4 18.3 17.3 RoCE (%) 15.1 15.4 17.2 16.2 Payout (%) 22.8 30.0 30.0 30.0 Valuations P/E (x) 15.6 13.9 10.9 10.1 P/BV (x) 2.6 2.3 2.0 1.7 EV/EBITDA (x) 11.1 9.1 6.9 5.9 Div yld (%)

1.5

2.2

Quarterly Performance Y/E March Revenue (USD m) QoQ (%) Revenue (INR m) YoY (%) GPM (%) SGA (%) EBITDA Margin (%) EBIT Margin (%) Other income ETR (%) PAT before EOI QoQ (%) YoY (%) EPS (INR) Headcount Util excl. trainees (%) Attrition (%) Fixed Price (%) E: MOSL Estimates

January 2017

1Q 114 -2.6 7,263 16.8 35.4 22.7 12.6 10.1 298 28.7 748 -20.3 9.2 6.7 11,507 75.4 18.8 44.7

2.8

3.0

CMP: INR494

TP: INR600 (+21%)

Buy

We expect CYL’s USD revenue to grow 0.2% QoQ in 3QFY17 (+1.6% QoQ in CC).  In the core services business, CYL’s revenue is expected to decline by 1.8% QoQ, led by cross-currency headwinds. We expect a CC decline of 0.4% in core services revenue because of seasonal weakness on the high base of 2Q formed by the 7.4% QoQ growth.  The movement of Rangsons towards achieving its 50% annual growth guidance is expected to be bulky in 2H, in line with which we expect USD16m revenue in 3Q (+16% QoQ).  Margins are expected to decline by 50bp QoQ to 13.5% because of cross-currency headwinds and higher incremental revenue from lower-margin Rangsons.  PAT estimate for the quarter is INR1b, up 6% QoQ. Higher other income is a function of translation gains in 3Q, compared to a loss in the previous quarter.  The stock trades at 13.9x FY17E and 10.9x FY18E EPS. Maintain Buy. Key issues to watch for  Update on problem verticals like Semiconductor and Energy.  Outlook for Rangsons for FY17/18 and progress on synergy through DLM.  Margin trajectory going ahead. 

FY16 2Q 3Q 118 118 3.6 0.0 7,717 7,818 14.8 9.8 36.6 34.4 21.6 20.3 15.1 14.1 12.6 11.3 299 246 23.5 20.8 985 869 31.7 -11.8 9.2 -13.9 8.8 7.7 11,311 11,481 76.1 76.7 21.6 20.6 44.6 43.3

4Q 121 2.1 8,158 11.7 34.2 21.1 13.0 9.4 222 20.4 844 -2.8 -10.1 7.5 11,569 73.3 18.4 41.0

1Q 125 3.1 8,349 15.0 35.0 22.0 13.1 10.4 116 25.5 740 -12.3 -1.1 6.6 12,297 75.5 19.9 42.9

FY17E 2Q 3QE 137 137 9.5 0.2 9,136 9,234 18.4 18.1 34.4 33.2 20.4 19.7 14.0 13.5 11.5 11.3 184 287 22.6 23.5 973 1,031 31.5 6.0 -1.2 18.8 8.7 9.2 12,797 12,747 77.2 74.8 22.7 42.4 40.3

4QE 141 3.3 9,607 17.8 33.9 19.7 14.2 12.1 310 23.5 1,141 10.6 35.1 10.2 12,847 76.3

FY16

(INR m) FY17E

472 5.6 30,955 13.1 35.1 21.4 13.7 10.8 1,065 23.4 3,446

539 14.3 36,326 17.4 34.1 20.4 13.7 11.3 897 23.7 3,885

-1.9 30.7 11,569

12.8 34.6 12,847

41.1

238

December 2016 Results Preview | Sector: Technology

HCL Technologies Bloomberg

HCLT IN

Equity Shares (m)

1412.9

M. Cap. (INR b)/(USD b)

1214 / 18

52-Week Range (INR)

890 / 707

1,6,12 Rel Perf. (%)

7 / 17 / -2

CMP: INR INR859 



Financial Snapshot (INR b) Y/E June

2016

2017E

2018E

2019E

Sales

311.4

466.3

539.3

602.7

EBITDA

68.2

100.5

114.5

121.8

PAT

56.7

80.5

90.4

96.3

EPS (INR)

40.1

56.7

63.2

67.2

EPS Gr. (%)

-20.3

41.2

11.5

6.3

BV/Sh. (INR)

200.2

232.5

273.7

319.0

RoE (%)

21.5

26.6

25.5

23.2

RoCE (%)

19.9

24.2

23.5

21.6

Payout (%)

42.4

35.3

30.1

28.3

21.4

15.2

13.6

12.8

4.3

3.7

3.1

2.7

12.0

10.7

9.0

8.1

2.0

2.3

2.2

2.2



 

TP: INR960 (+12%)

Buy

We expect HCLT’s USD revenue to grow 0.7% QoQ in 3QFY17 and 2.1% QoQ on a constant currency basis. Impact from cross currency movement should shave off ~140bp from revenue growth. We expect momentum to continue in the IMS business. Deal signings over the last many quarters, and growth so far provide visibility and confidence in execution of its 12-14% revenue growth guidance. EBIT margin is likely to decline by 60bp to 19.5% because of continued investments in the business. EBIT margin of 19.5% over the remainder of the year is likely to lead to 19.9% EBIT margin for FY17 – near the mid-point of the 19.5-20.5% guidance range. PAT estimate for the quarter is INR19.7b, -2.1% QoQ, on the back of lower margins. The stock trades at 15.2x FY17E and 13.6x FY18E EPS. Maintain Buy.

Valuation P/E (x) P/BV (x) EV/EBITDA (x) Div yld (%)

Quarterly Performance (US GAAP) Y/E March FY15 Revenue (USD m) QoQ (%) Revenue (INR m) YoY (%) GPM (%) SGA (%) EBITDA Margin (%) EBIT Margin (%) Other income ETR (%) PAT before EOI QoQ (%) YoY (%) EPS Headcount Util excl. trainees (%) Attrition (%) Fixed Price (%) E: MOSL Estimates

January 2017

Key issues to watch for  Commentary on performance expectations for FY17.  Deal signings.  Organic growth in IMS and traction in Engineering.

FY16

FY17

4Q

1Q

2Q

3Q

1Q

2Q

3QE

4QE

1,538 3.2 97,770 16.1 34.2 12.8 21.5 20.2 2,120 18.6 17,820 5.8 -2.9 12.6 106,107 83.5 16.5 56.1

1,545 0.5 100,970 15.6 34.4 12.5 21.9 20.6 2,410 21.3 18,230 2.3 6.1 12.9 105,571 83.6 16.3 56.2

1,566 1.4 103,410 11.4 34.6 13.0 21.5 20.0 3,550 20.9 19,190 5.3 -0.2 13.6 103,696 84.7 16.7 57.0

1,587 1.3 106,980 15.4 34.9 12.7 22.2 20.8 2,000 20.5 19,250 0.3 14.3 13.6 104,896 85.6 17.3 56.8

1,691 6.5 113,360 15.9 34.4 12.1 22.2 20.6 2,530 21.0 20,430 6.1 14.6 14.5 107,968 85.8 17.8 60.9

1,722 1.9 115,190 14.1 33.6 11.8 21.8 20.1 2,350 21.1 20,150 -1.4 10.5 14.3 109,795 85.3 18.6 61.3

1,735 0.7 117,094 13.2 33.2 12.0 21.2 19.5 2,353 21.5 19,735 -2.1 2.8 13.8 111,245 85.5

1,774 2.3 120,649 12.8 33.0 12.0 21.0 19.4 2,340 21.5 20,182 2.3 4.8 14.1 114,245 85.0

FY16

(INR m) FY17E

4,698 7.1 311,360 14.6 34.6 12.7 21.9 20.5 7,960 20.9 56,670

6,922 11.0 466,293 14.0 33.5 12.0 21.5 19.9 9,573 21.3 80,497

4.0 40.1 104,896 81.8

8.1 56.7 114,245 83.0

239

December 2016 Results Preview | Sector: Technology

Hexaware Technologies

Bloomberg

HEXW IN

Equity Shares (m)

301.8

M. Cap. (INR b)/(USD b)

64 / 1

52-Week Range (INR)

274 / 178

1,6,12 Rel Perf. (%)

4 / -4 / -14

Financial Snapshot (INR b) Y/E Dec

2015

2016E

2017E

2018E

Sales

31.2

35.1

40.4

45.4

EBITDA

5.4

5.7

6.8

7.1

PAT

3.9

4.2

4.7

4.8

EPS (INR)

12.9

13.6

15.5

15.9

EPS Gr. (%)

22.1

5.4

13.7

2.8

BV/Sh. (INR)

47.4

51.4

61.5

71.1

RoE (%)

28.9

27.7

27.5

24.0

RoCE (%)

27.7

25.1

26.4

23.5

Payout (%)

64.5

38.8

24.8

30.2

15.4

14.6

12.8

12.5

4.2

3.9

3.2

2.8

10.1

9.9

8.1

7.5

4.3

2.8

2.0

2.5

Valuation P/E (x) P/BV (x) EV/EBITDA (x) Div yld (%)

CMP: INR213  



  



TP: INR230 (+8%)

Neutral

We expect USD revenue to grow 0.2% QoQ to USD135.5m (1% QoQ CC). The expectation is on the back of volume growth in the underlying business, partly offset by seasonality and furloughs, and further by cross-currency headwinds (-80bp). EBITDA margin expanded 180bp QoQ in 3QCY16 despite partimpact of wage hikes. The management has been guiding for better profitability compared to revenue growth in 2HCY16. However, 4Q margins too are expected to be impacted by part wage hikes. We expect EBITDA margin to remain flat QoQ at 17.4%. This would lead to EBITDA margin of 16% for CY16, lower than the management’s desired level of 17%. Our PAT estimate for the quarter is INR1,155m, up 3.7% from the previous quarter, on the back of higher other income led by translation gains. The stock trades at 14.6x CY16E and 12.8x CY17E earnings. Neutral.

Key issues to watch for  Large deal pipeline and traction post the increased S&M spend.  Commentary on sustenance of revenue growth.  Margin outlook for the next year.

Quarterly Performance (Indian GAAP) Y/E Dec Revenue (USD m) QoQ (%) Revenue (INR m) YoY (%) GPM (%) SGA (%) EBITDA Margin (%) EBIT Margin (%) Other income ETR (%) PAT QoQ (%) YoY (%) EPS (INR) Headcount Utilization (%) Attrition (%) Offshore rev. (%) E: MOSL Estimates

January 2017

(INR m) CY15

1Q 114.9 0.3 7,134 21.1 35.7 17.9 17.8 16.2 -96 21.2 834 -11.2 18.6 2.8 10,100 73.6 16.6 41.1

2Q 121.3 5.6 7,722 26.5 35.0 17.8 17.1 15.6 84 23.5 989 18.6 29.3 3.3 11,009 72.1 17.1 38.8

3Q 125.1 3.1 8,184 22.0 35.3 17.4 17.8 16.4 97 22.4 1,115 12.7 29.7 3.7 11,341 70.4 17.4 39.2

4Q 124.1 -0.8 8,195 15.1 34.7 18.8 15.9 14.3 88 21.0 994 -10.9 5.9 3.3 11,375 69.7 16.9 37.7

1Q 121.7 -1.9 8,202 15.0 33.6 19.0 14.6 12.9 55 24.2 842 -15.3 1.0 2.8 11,599 69.6 16.0 36.9

CY16 2Q 129.7 6.6 8,697 12.6 34.6 19.0 15.6 14.0 132 25.8 999 18.6 1.0 3.3 11,875 70.0 16.6 36.1

3Q 135.2 4.2 9,041 10.5 35.4 18.0 17.4 15.9 67 25.8 1,114 11.5 -0.1 3.7 11,859 74.1 16.5 34.4

4QE 135.5 0.2 9,148 11.6 34.9 17.5 17.4 15.8 167 25.8 1,196 7.4 20.4 3.9 12,008 74.0 35.1

CY15

CY16E

485 14.9 31,235 21.0 35.1 18.0 17.1 15.6 173 22.1 3,932

522 7.5 35,088 12.3 34.6 18.4 16.3 14.7 421 25.5 4,151

20.4 12.9 11,375 72.3

5.6 13.6 12,008 72.5

39.2

35.6

240

December 2016 Results Preview | Sector: Technology

Bloomberg

INFO IN

Equity Shares (m)

2285.6

M. Cap. (INR b)/(USD b)

2282 / 33

52-Week Range (INR)

CMP: INR998 

1278 / 900

1,6,12 Rel Perf. (%)

3 / -13 / -12



Financial Snapshot (INR b) Y/E Mar

2016E 2017E 2018E 2019E

Sales

624.4

687.5

781.1

865.6

EBITDA

170.8

184.6

210.3

230.3

PAT

134.9

141.0

157.1

171.5

59.0

61.7

68.7

75.0

9.4

4.5

11.4

9.2

EPS (INR) EPS Gr. (%)

270.3

300.3

332.8

369.1

RoE (%)

BV/Sh. (INR)

24.7

22.8

22.8

22.5

RoCE (%)

23.2

21.6

21.7

21.4

Payout (%)

41.9

50.3

43.7

45.3

16.9

16.2

14.5

13.3

3.7

3.3

3.0

2.7

11.3

10.1

8.7

7.7

2.5

3.1

3.0

3.4

Valuations P/E (x) P/BV (x) EV/EBITDA (x) Div Yield (%)

Quarterly Performance (IFRS) Y/E March Revenue (USD m) QoQ (%) Revenue (INR m) YoY (%) GPM (%) SGA (%) EBITDA Margin (%) EBIT Margin (%) Other income ETR (%) PAT QoQ (%) YoY (%) EPS (INR) Headcount Util excl. trainees (%) Attrition (%) Offshore rev. (%) (IT Serv) Fixed Price (%) E: MOSL Estimates

January 2017

1Q 2,256 4.5 143,540 12.4 38.6 12.4 26.2 24.0 7,580 27.9 30,300 -2.2 5.0 13.3 179,523 80.9 19.2 43.9 42.4

   

TP: INR1,250 (+25%)

Infosys

Buy

INFO revised its revenue guidance for FY17 downward after 2Q to 8-9% CC from 10.5-12% earlier. Termination of the RBS contract and worsening of the macro has led to a further dampened outlook. In CC terms, our revenue growth estimate is -1% QoQ on the back of seasonal weakness and the RBS ramp-down. Cross-currency headwinds of 110bp are likely to lead to USD revenue decline of 2.1% QoQ. A 1% CC decline in revenue in 3Q would result in an ask rate of 0-4% for 4Q in order to achieve the revised guidance. We expect EBITDA margin to decline 80bp QoQ to 26.5%, as revenue growth momentum gets affected. Our PAT estimate is INR34.9b, -3.2% QoQ, led by lower revenue and profitability. The stock trades at 16.2x FY17E and 14.5x FY18E earnings. Buy.

Key issues to watch for  TCV of deal wins during the quarter.  Commentary around contribution of newly-launched services.  Commentary around macro, verticals, margins and pricing.

FY16 2Q 3Q 2,392 2,407 6.0 0.6 156,350 159,020 17.2 15.3 40.1 39.5 12.3 12.3 27.8 27.2 25.5 24.9 7,930 8,020 29.0 27.2 33,980 34,650 12.1 2.0 9.8 6.6 14.9 15.2 187,976 193,383 82.0 81.4 19.9 18.1 43.9 43.5 44.0 44.6

4Q 2,446 1.6 165,500 23.4 40.5 12.5 28.0 25.5 7,720 27.9 35,970 3.8 16.1 15.7 194,044 80.8 17.3 43.5 45.1

1Q 2,501 2.2 167,820 16.9 38.7 12.2 26.5 24.1 7,530 28.4 34,360 -4.5 13.4 15.0 197,050 81.1 21.0 43.0 45.7

FY17E 2Q 3QE 2,587 2,532 3.4 -2.1 173,100 170,887 10.7 7.5 39.1 38.7 11.8 12.2 27.3 26.5 24.9 24.1 7,600 8,057 28.8 29.0 36,060 34,912 4.9 -3.2 6.1 0.8 15.8 15.3 199,829 203,687 83.1 81.9 20.0 43.0 47.1

4QE 2,584 2.1 175,710 6.2 39.0 12.0 27.0 24.6 6,845 29.0 35,577 1.9 -1.1 15.6 209,283 81.3

FY16

(INR m) FY17E

9,501 9.1 624,410 17.1 39.7 12.4 27.4 25.0 31,250 28.0 134,930

10,204 7.4 687,517 10.1 38.9 12.0 26.8 24.4 30,032 28.8 140,959

9.4 59.0 194,044 81.7

4.5 61.7 209,283 82.1

241

December 2016 Results Preview | Sector: Technology

Bloomberg

K PIT IN

Equity Shares (m)

200.5

M.Cap. (INR b) /(USD b)

34/1

52-Week Range (INR)

197 / 108

1, 6, 12 Rel. Per (%)

2/-7/-23

Financial Snapshot (INR b) Y/E Mar

2016 2017E 2018E 2019E

Sales

32.2

33.2

36.9

40.4

4.4

4.0

5.0

5.3

EBITDA PAT

3.0

2.5

3.1

3.2

EPS (INR)

14.1

12.6

15.6

16.3

EPS Gr. (%)

19.0

-10.3

23.7

4.0

BV/Sh. (INR)

69.0

80.8

96.4 112.7

RoE (%)

21.0

16.9

17.6

15.5

RoCE (%)

24.3

18.9

20.9

19.2

Payout (%)

10.6

15.8

12.8

12.3

P/E (x)

9.7

10.8

8.8

8.4

P/BV (x)

2.0

1.7

1.4

1.2

EV/EBITDA (x)

5.4

5.1

3.6

2.9

Div yld (%)

1.1

1.5

1.5

1.5

Valuations

Quarterly Performance (Indian GAAP) Y/E March 1Q Revenue (USD m) 118 QoQ (%) -3.3 Revenue (INR m) 7,583 YoY (%) 9.9 GPM (%) 28.2 SGA (%) 18.7 EBITDA Margin (%) 9.5 EBIT Margin (%) 7.3 Other income 106 Interest 47 ETR (%) 27.9 PAT 444 QoQ (%) -11.8 YoY (%) -12.6 EPS (INR) 2.2 Headcount 10,839 Util excl. trainees (%) 66.4 Offshore rev. (%) 44.7 Fixed Price (%) 26.2 E: MOSL Estimates

January 2017

CMP: INR137  

 

 

KPIT Technologies

TP: INR170 (+24%)

Neutral

Revenue performance has been lumpy for K PIT, with guidance of a better 2H compared to 1H. We expect the impact of seasonal weakness, and pressure in ERP implementation to continue weighing on overall performance, further accentuated by cross-currency movements. We expect revenue of US123m, down 0.6% QoQ in USD terms and up 0.5% QoQ CC. Cost optimization methods, operational efficiency improvement and increased fresher hiring are likely to lead to margin expansion (+100bp QoQ) post the cumulative 515bp decline in EBITDA margin over the last two quarters. Our PAT estimate is INR619m, up 10.2% QoQ because of the compounding of higher margins and other income. K PIT trades at 10.8x FY17E and 8.8x FY18E earnings. Maintain Neutral.

Key issues to watch for  Growth in IES, Engineering services and top client.  Margin performance and guidance.  Commentary on deal wins across segments.  Plan to recoup revenue growth and profitability.

FY16 2Q 3Q 125 123 5.3 -1.0 8,123 8,130 7.2 4.3 32.1 32.9 18.1 18.3 14.0 14.6 11.9 12.3 86 36 44 35 25.4 26.5 751 735 69.1 -2.1 6.3 12.5 3.8 3.7 10,659 10,559 69.7 69.1 44.9 41.2 27.1 29.1

4Q 124 0.7 8,407 10.2 35.3 19.1 16.2 13.6 20 25 13.4 885 20.4 75.7 4.4 10,910 70.2 42.1 26.4

1Q 120 -3.5 8,032 5.9 28.9 18.3 10.7 8.3 116 56 24.3 551 -37.8 24.0 2.8 11,288 68.1 41.5 28.5

FY17E 2Q 3QE 123 123 3.0 -0.6 8,310 8,283 2.3 1.9 29.5 30.0 18.5 18.0 11.0 12.0 8.6 9.5 49 86 14 39 25.1 26.0 562 619 2.0 10.2 -25.2 -15.8 2.8 3.1 11,666 11,565 69.2 70.8 43.3 43.8 28.0

4QE 126 2.7 8,566 1.9 31.3 16.7 14.6 12.1 75 37 26.0 796 28.6 -10.1 4.0 11,724 71.5 43.7

FY16

(INR m) FY17E

490 0.3 32,243 7.8 32.2 18.6 13.5 11.4 248 152 22.8 2,815

492 0.3 33,191 2.9 30.0 17.9 12.1 9.7 326 146 25.4 2,527

18.7 14.1 10,910 68.8 43.2

-10.2 12.6 11,724 69.9 43.1

242

December 2016 Results Preview | Sector: Technology

Bloomberg

LTI IN

Equity Shares (m)

175.0

M. Cap. (INR b)/(USD b) 52-Week Range (INR)

122 / 2 716 / 595

1,6,12 Rel Perf. (%)

- / -/ -

CMP: INR695  

Financial Snapshot (INR b)

Y/E March FY16 FY17E FY18E FY19E Net Sales 58.5 64.6 72.8 81.4 EBITDA 10.4 12.4 13.4 14.2 PAT 9.2 9.6 10.3 10.9 EPS (INR) 52.4 54.9 58.6 62.1 Gr. (%) 21.5 4.7 6.8 5.9 BV / Sh (INR) 115.6 144.1 174.6 206.9 ROE (%) 45.3 42.3 36.8 32.5 ROCE (%) 39.9 45.2 39.5 35.7 Payout (%) 59.6 40.0 40.0 40.0 Valuations P /E (x) 13.3 12.7 11.9 11.2 P / BV (x) 6.0 4.8 4.0 3.4 EV/EBITDA 11.6 9.5 8.6 7.9 Div. Yield 4.5 3.2 3.4 3.6 (%) Quarterly Performance Y/E March Revenue (USD m) QoQ (%) Revenue (INR m) YoY (%) GPM (%) SGA (%) EBITDA Margin (%) EBIT Margin (%) Other income ETR (%) PAT QoQ (%) YoY (%) EPS (INR) Headcount Util incl. trainees (%) Attrition (%) Offshore rev. (%)

1Q 209 0.0 13,332 14.5 34.0 18.5 2,068 15.5 12.2 512 18.2 1,746 -21.2 7.5 10.0 20,331 73.8 20.1

   

L&T Infotech

TP: INR800 (+15%)

Buy

LTI has been seeing strong traction across its portfolio, which we expect to continue into 3Q. We expect the confluence of this traction, with seasonality and cross-currency movements to result in 0.6% QoQ revenue growth to USD241m. This would translate into constant currency revenue growth of 1.4% QoQ. LTI has been making investments to augment its S&M capabilities, which is likely to keep margins under check. We expect 50bp decline in EBITDA margin to 18.5% because of increased costs. Our PAT estimate for the quarter is INR2.4b, which implies 1.8% QoQ growth. The stock trades at 12.7x FY17E and 11.3x FY18E earnings. Buy.

Key issues to watch for  Health and outlook of top accounts and E&U vertical.  Margin trajectory, going forward, given the increased investments.  Growth in Digital.

FY16 2Q 3Q 224 225 7.3 0.4 14,682 15,451 18.7 16.8 34.5 nm 17.9 nm 2,431 5,349 16.6 34.6 13.6 nm 532 nm 24.4 nm 1,917 2,363 9.8 23.3 7.2 18.4 11.0 13.5 21,171 nm 72.8 nm 19.7 nm

4Q 230 2.1 15,939 20.5 35.0 14.9 3,204 20.1 17.4 500 19.2 2,644 11.9 19.4 15.1 20,072 75.9 18.4

1Q 231 0.6 15,550 16.6 35.3 15.7 3,050 19.6 16.9 372 21.2 2,359 -10.8 35.1 13.5 19,292 77.4 19.5

FY17E 2Q 3QE 240 241 3.7 0.6 16,020 16,279 9.1 5.4 35.4 35.2 16.4 16.7 3,044 3,007 19.0 18.5 16.1 15.5 365 477 21.0 21.0 2,326 2,367 -1.4 1.8 21.3 0.2 13.3 13.5 21,074 21,344 78.7 75.0 18.5

4QE 246 2.2 16,754 5.1 35.9 16.3 3,282 19.6 16.7 437 21.0 2,552 7.8 -3.5 14.6 21,614 76.0

FY16

(INR m) FY17E

887 9.5 58,471 17.5 33.5 15.8 10,359 17.7 14.7 2,802 19.7 9,171

958 8.0 64,603 10.5 35.4 16.3 12,383 19.2 16.3 1,651 21.0 9,604

21.5 52.4 20,072 73.8

4.7 54.9 21,614 76.7

E: MOSL Estimates

January 2017

243

December 2016 Results Preview | Sector: Technology

Bloomberg

MTCL IN

Equity Shares (m)

167.7

M. Cap. (INR b)/(USD b)

88 / 1

52-Week Range (INR)

16 / -19 / -31

Financial Snapshot (INR b) Y/E Mar

2016

2017E

2018E

2019E

Sales

46.9

52.6

60.3

68.1

EBITDA

8.3

7.1

9.3

9.7

PAT

6.0

4.5

6.1

6.4

EPS (INR)

35.9

26.6

36.2

38.1

EPS Gr. (%)

16.5

-25.8

36.1

5.3

BV/Sh. (INR)

142.4

153.5

175.3

195.3

RoE (%)

27.4

18.0

22.0

20.6

RoCE (%)

30.6

19.6

25.0

22.9

Payout (%)

29.3

47.0

33.1

39.3

14.7

19.8

14.5

13.8

3.7

3.4

3.0

2.7

10.1

11.8

8.9

8.3

2.0

2.4

2.3

2.9

Valuations P/E (x) EV/EBITDA (x) Div Yld (%)

Quarterly Performance Y/E March Revenue (USD m) QoQ (%) Revenue (INR m) YoY (%) GPM (%) SGA (%) EBITDA Margin (%) EBIT Margin (%) Other income ETR (%) PAT QoQ (%) YoY (%) EPS (INR) Headcount Util incl. trainees (%) Attrition (%) Offshore rev. (%) Fixed Price (%)



804 / 400

1,6,12 Rel Perf. (%)

P/BV (x)

CMP: INR526

1Q 154 4.4 9,775 15.9 41.1 24.0 17.1 13.6 321 22.4 1,283 -0.3 -0.9 7.6 14,427 70.3 18.4 51.9 48.9

 



 

TP: INR520 (-1%)

MindTree

Neutral

MTCL’s performance continues to be weighed upon by [ 1] crosscurrency movements, [ 2] project cancellations, [ 3] slower ramp-up at large clients, and [ 4] continued weakness in Bluefin. We expect these factors to result in 0.3% decline in revenue to USD193m. We are modeling 0.4% QoQ growth in CC terms. We don’t see margins reviving till revenue growth bounces back. Ongoing optimization measures and cessation of revenue decline are likely to result in flat margins QoQ. We expect the trend of robust deal wins to continue. The company won deals with TCV of USD888m LTM (average of USD222m per quarter), of which 36% is Digital. Our PAT estimate for the quarter is INR1.1b, which implies 11.6% QoQ growth and 30% YoY decline. The stock trades at 19.8x FY17E and 14.5x FY18E earnings. Neutral.

Key issues to watch for  Update on top clients, pricing pressure and outlook, going forward.  Margin trajectory, going forward, given the increased investments and revenue growth issues.  Deal wins during the quarter and growth in Digital.

FY16 2Q 3Q 180 184 16.9 2.3 11,693 12,145 31.6 33.2 41.3 40.3 22.8 22.6 18.5 17.7 15.8 14.8 195 147 22.5 22.6 1,582 1,509 23.3 -4.6 15.1 7.2 9.4 9.0 15,582 16,243 71.4 68.5 17.1 16.0 47.6 45.5 49.7 50.0

4Q 195 5.7 13,203 43.8 38.0 21.3 16.7 13.1 42 25.0 1,330 -11.9 3.3 7.9 16,623 69.4 15.7 42.4 47.7

1Q 199 2.1 13,276 35.8 37.0 22.3 14.7 10.8 198 24.2 1,235 -7.1 -3.7 7.4 16,110 71.4 16.5 40.5 48.7

FY17E 2Q 3QE 193 193 -3.0 -0.3 12,954 12,995 10.8 7.0 34.2 34.3 21.7 21.7 12.5 12.6 8.6 8.6 170 275 26.0 24.0 948 1,058 -23.2 11.6 -40.1 -29.9 5.6 6.3 16,219 16,119 71.4 71.5 16.4 40.8 40.6 50.6

4QE 197 2.2 13,372 1.3 35.4 21.2 14.2 10.2 256 24.0 1,233 16.5 -7.3 7.3 16,419 72.0 40.8

FY16

(INR m) FY17E

715 22.5 46,896 31.7 40.2 22.5 17.7 14.8 810 22.4 6,033

781 9.2 52,597 12.2 35.2 21.7 13.5 9.6 900 24.5 4,474

12.5 35.9 16,623 69.9

-25.8 26.6 16,419 71.6

46.6

40.7

E: MOSL Estimates

January 2017

244

December 2016 Results Preview | Sector: Technology

Bloomberg

MPHL IN

Equity Shares (m)

210.1

M. Cap. (INR b)/(USD b)

112 / 2

52-Week Range (INR)

CMP: INR534 

622 / 404

1,6,12 Rel Perf. (%)

1 / -3 / 4 

Financial Snapshot (INR b) Y/E Mar

2016 2017E 2018E 2019E

Sales EBITDA PAT EPS (INR) EPS Gr. (%)* BV/Sh. (INR) RoE (%) RoCE (%) Payout (%) Valuations P/E (x) P/BV (x) EV/EBITDA (x) Div yld (%)

60.9 9.0 7.2 34.5 6.8 299.4 12.3 11.2 0.0

60.6 9.5 8.9 42.2 22.4 317.2 13.7 12.8 87.7

66.8 10.5 11.3 54.0 28.1 344.7 16.3 15.8 40.7

73.4 11.3 12.0 57.2 5.9 375.5 15.9 15.6 38.4

15.5 1.8 9.8 0.0

12.7 1.7 2.1 6.9

9.9 1.5 1.3 4.1

9.3 1.4 0.6 4.1

*Annualized values for 5m FY14

Quarterly Performance Y/E March Jun 15 Revenue (USD m) 234 QoQ (%) 1.7 Revenue (INR m) 14,945 YoY (%) 0.3 GPM (%) 26.2 SGA (%) 11.9 EBITDA Margin (%) 14.1 EBIT Margin (%) 12.7 Other income 440 ETR (%) 29.2 PAT 1,658 QoQ (%) -6.7 YoY (%) -5.1 EPS (INR) 8.3 Headcount 34,159 Net Additions 100 HP Channel rev. (%) 28.8 Fixed Price (%) 12.3

FY16 Sep 15 237 1.2 15,575 6.3 26.9 11.9 15.1 13.9 492 26.4 1,900 14.6 18.6 9.0 24,169 -9990 26.5 14.0

 

 

TP: INR560 (+5%)

Mphasis

Neutral

In 2QFY17, HP channel revenue grew for the first time in 20 quarters. This is expected to remain stable with the renewed MSA coming into effect after the completion of the transaction between HPE and Blackstone. We expect revenue growth of 0.7% QoQ (1.4% QoQ CC), driven by stability in HP channel and Digital Risk and continued traction in the Direct International business. Margins are likely to be lower in 3Q on account of wage hikes. We estimate a 160bp decline in EBIT margin to 13%. MPHL had raised its EBIT margin guidance by 100bp at the end of 4QFY16 to 14-16% for FY17, and expressed confidence in achieving the higher end of the range. Our PAT estimate is INR1.9b (-9.9% QoQ). The stock trades at 12.7x FY17E and 9.9x FY18E EPS. Neutral.

Key issues to watch for  Outlook for Digital Risk given an interest rate cycle reversal.  Deal TCV during the quarter in Direct Channel (organic business), and focus areas.  Performance in Direct International business, and outlook for the year.

Dec 15 229 -3.4 15,167 7.5 25.6 11.3 14.3 13.2 456 27.7 1,736 -8.6 5.1 8.3 23,563 -606 24.2 19.2

Mar 16 225 -1.7 15,160 6.1 27.9 12.2 15.7 14.5 490 31.1 1,920 10.6 8.0 9.2 22,324 -1239 24.3 21.1

Jun 16 224 -0.3 15,167 1.5 28.1 12.0 16.1 15.2 572 27.7 2,043 6.4 23.2 9.7 22,374 50 23.4 19.8

FY17E Sep 16 Dec 16 224 226 -0.2 0.7 15,176 14,904 -2.6 -1.7 28.1 26.6 11.8 11.9 16.2 14.7 15.3 13.7 711 670 27.7 27.7 2,166 1,952 6.0 -9.9 14.0 -25.1 10.3 9.3 22,284 21,202 -90 -1082 23.9 19.1

Mar 17 230 2.1 15,343 1.2 27.5 11.8 15.7 14.6 1,492 27.7 2,691 37.9 -6.6 12.8 21,647 445

FY16

(INR m) FY17E

926 -2.2 60,879 5.1 26.6 11.8 14.7 13.5 1,954 27.1 7,242

905 -2.3 60,590 -0.5 27.6 11.9 15.7 14.7 3,445 27.7 8,852

6.9 34.5 22,324 -11735

22.2 42.2 21,647 -677

E: MOSL Estimates

January 2017

245

December 2016 Results Preview | Sector: Technology

Bloomberg

NITEC IN

Equity Shares (m)

61.2

M. Cap. (INR b)/(USD b) 52-Week Range (INR) 1,6,12 Rel Perf. (%) Financial Snapshot (INR b) Y/E March FY16 FY17E Sales 26.8 28.1 EBITDA 4.7 4.6 PAT 2.8 2.7 EPS (INR) 45.7 38.6 EPS Gr. (%) 143.7 -15.6 BV/Sh (INR) 259.8 283.1 RoE (%) 19.0 14.2 RoCE (%) 18.6 15.7 Payout (%) 21.9 28.5 Valuation P/E (x) 9.6 11.3 P/BV (x) 1.7 1.5 EV/EBITDA (x) 4.9 4.9 Div Yield (%) 2.3 2.5

27 / 0 594 / 370 3 / -14 / -29

FY18E 30.9 5.2 3.1 50.2 30.1 320.2 16.6 15.6 21.9

FY19E 33.3 5.5 3.3 54.3 8.1 360.0 16.0 15.0 22.1

8.7 1.4 4.0 2.5

8.1 1.2 3.4 2.7

Y/E March

January 2017

 



   

Quarterly Performance (IFRS) Revenue (USD m) Ex. forex QoQ (%) Revenue (INR m) YoY (%) GPM (%) SGA (%) EBITDA Margin (%) EBIT Margin (%) Other income ETR (%) Minority Interest PAT QoQ (%) YoY (%) EPS (INR) Headcount Util excl. trainees (%) Attrition (%) Offshore rev. (%) Fixed Price (%)

CMP: INR 437

1Q 98 5.9 6,411 11.0 36.4 20.1 16.3 12.0 79 25.9 40.0 587 -433.5 35.6 9.6 9,228 79.5 14.3 39.0 42.0

NIIT Technologies

TP: INR450 (+3%)

Neutral

We expect revenue growth for NITEC to remain subdued in 3Q (0.5% QoQ CC). Although deal wins have been strong for NITEC in recent quarters, project completions and delays in the commencement of new deals have been keeping revenue growth under check. This would be further aggravated by cross-currency movement, which is likely to result in 0.7% decline in revenue: 120bp negative impact. Deal wins in international geographies are expected to continue showing strength. We expect EBITDA margin to expand by 70bp QoQ to 16.9%, aided by higher international revenue. Our PAT estimate is INR712m, down 1.1% QoQ, driven by the decline in revenue. The stock trades at 11.3x FY17E and 8.7x FY18E earnings. Neutral.

Key issues to watch for  Traction in the international business.  Demand environment and update on ramp-up delays.  Deal wins.

FY16 2Q 104 6.2 6,779 15.2 37.2 19.6 17.6 13.7 13 22.9 43.0 683 16.4 70.8 11.2 9,592 79.7 13.7 41.0 41.0

3Q 103 -0.9 6,787 14.0 37.3 19.1 18.2 14.2 52 20.9 48.0 741 8.5 53.7 12.1 9,517 78.7 13.6 41.0 43.0

3Q 102 -1.2 6,847 12.0 37.1 18.7 18.4 14.2 39 18.2 39.0 790 6.6 -548.9 12.9 9,476 79.0 13.6 39.0 46.0

1Q 99 -2.5 6,692 4.4 35.3 20.0 15.3 10.9 71 10.3 46.0 720 -8.9 22.7 5.1 9,022 79.8 13.4 39.0 46.0

FY17E 2Q 3Q 103 103 4.2 -0.7 6,913 7,175 2.0 5.7 35.3 36.9 19.0 20.0 16.2 16.9 12.0 12.9 27 90 24.2 24.5 54.0 54.0 720 712 0.0 -1.1 5.4 -3.9 9.7 11.6 8,868 9,058 81.0 77.5 12.9 39.0 46.0

4Q 105 2.5 7,331 7.1 36.7 19.3 17.4 13.4 83 24.5 54.0 751 5.4 -5.0 12.2 9,258 78.0

FY16

(INR m) FY17E

406 8.6 26,824 338.9 37.0 19.5 17.6 13.5 183 21.8 170.0 2,801 145.9

410 1.4 28,506 344.6 36.6 19.4 17.3 13.2 234 21.4 208.0 2,578 -8.0

45.8 9,476 79.2

42.0 9,318 79.1

40.0

38.5

246

December 2016 Results Preview | Sector: Technology

Bloomberg

PSYS IN

Equity Shares (m)

80.0

M. Cap. (INR b)/(USD b)

52 / 1

52-Week Range (INR)

797 / 501

1,6,12 Rel Perf. (%)

8 / -3 / -3

CMP: INR647 



Financial Snapshot (INR b) Y/E March

2016 2017E 2018E 2019E

Sales

23.1

29.0

33.9

38.1

4.2

4.7

6.3

7.0

EBITDA Adj. PAT

3.0

2.9

3.6

4.4

37.2

36.2

45.0

54.8

EPS Gr. (%)

2.3

-2.6

24.2

21.8

BV/Sh.(INR)

211.0

236.0

245.6

256.5

RoE (%)

19.5

16.7

19.2

22.5

RoCE (%)

18.9

17.0

15.4

18.3

Payout (%)

29.6

33.1

26.7

21.9

17.4

17.9

14.4

11.8

3.1

2.7

2.6

2.5

EV/EBITDA (x)

10.2

9.3

6.8

6.0

Div. Yield (%)

1.7

1.9

1.9

1.9

Adj. EPS (INR)

Valuations P/E (x) P/BV (x)

Quarterly Performance (IFRS) Y/E March Revenue (USD m) QoQ (%) Revenue (INR m) QoQ (%) YoY (%) GPM (%) SGA (%) EBITDA Margin (%) EBIT Margin (%) Other income ETR (%) PAT QoQ (%) YoY (%) EPS (INR) Headcount Util excl. trainees (%) Attrition (%) IP rev. proportion (%)

1Q 78.6 -1.8 5,004 0.6 15.0 39.7 20.4 19.4 14.8 198 28.5 672 -11.6 -2.3 8.4 8,454 72.9 16.4 18.4

FY16 2Q 83.0 5.5 5,427 8.5 16.9 38.9 20.2 18.7 14.4 182 25.5 718 6.9 0.7 9.0 8,545 76.1 17.1 16.2

Persistent Systems







TP: INR700 (+8%)

Neutral

Revenue growth is expected to be strong at PSYS, led by the Enterprise segment and pick-up in the recently announced IBM Watson deal. Growth in ISV, however, is likely to continue following the same trajectory as earlier. Aided by these factors, we expect 3QFY17 revenue to grow 3.2% QoQ to USD108.5m. EBITDA margin is likely to expand, as revenue from the IBM Watson IoT deal continues to gradually increase. However, 2Q had a onetime tailwind of 150bp because of accounting changes relating to leave encashment, which won’t be present in 3Q. We expect 60bp QoQ EBITDA margin expansion to 16.7%. Our PAT estimate for the quarter is INR680m, down 7.4% QoQ owing to lower other income. A sharp decline in the cash balance is likely to result in lower absolute yield. The stock trades at 17.9x FY17E and 14.4x FY18E earnings. Neutral.

Key issues to watch for  Performance and outlook for top clients in ISV (ex-IBM).  Commentary on traction with Enterprise customers and potential of winning large deals.  Outlook on sustainable profit margins in the near to medium term.

3Q 89.7 8.1 5,921 9.1 19.7 38.8 20.1 18.8 14.6 160 24.4 775 7.8 4.1 9.7 8,966 74.5 17.1 20.1

4Q 100.4 12.0 6,771 14.4 36.1 35.7 19.8 15.9 12.1 210 21.4 808 4.3 6.3 10.1 9,264 75.2 16.4 28.2

1Q 104.8 4.3 7,018 3.6 40.2 34.7 19.6 15.1 10.2 253 24.3 733 -9.3 9.0 9.2 9,389 75.3 16.7 28.2

FY17E 2Q 3Q 105.2 108.5 0.4 3.2 7,040 7,326 0.3 4.1 29.7 23.7 35.5 36.8 19.8 19.7 15.7 16.3 10.5 11.7 243 57 25.3 25.3 735 680 0.3 -7.4 2.3 -12.2 9.2 8.5 9,305 9,475 74.2 75.0 15.9 27.8 28.1

4Q 112.0 3.2 7,616 4.0 12.5 38.5 20.3 17.7 13.2 1 25.3 750 10.2 -7.2 9.4 9,645 75.0 28.6

FY16

(INR m) FY17E

352 14.0 23,123

430 22.4 28,999

22.3 38.1 20.1 18.0 13.9 750 24.8 2,974

25.4 36.4 20.2 16.2 11.4 555 25.1 2,898

2.3 37.2 9,264 74.7

-2.6 36.2 9,645 74.5

21.1

28.2

E: MOSL Estimates

January 2017

247

December 2016 Results Preview | Sector: Technology

Bloomberg

TCS IN

Equity Shares (m)

1970.4

M. Cap. (INR b)/(USD b)

4687 / 69

52-Week Range (INR)

2740 / 2055

1,6,12 Rel Perf. (%)

8 / -2 / -4

Sales

2016

2017E

2018E

2019E

1,086.5 1,183.9 1,340.7 1,478.0

EBITDA

306.8

322.8

364.5

386.1

PAT

242.7

263.1

290.9

311.7

EPS (INR)

123.5

133.8

148.0

158.6

EPS Gr. (%)

11.5

8.3

10.6

7.2

BV/Sh. (INR)

371.4

423.5

501.0

580.7

RoE (%)

38.2

33.4

30.8

28.0

RoCE (%)

36.8

32.4

30.0

27.3

Payout (%)

35.2

34.8

37.7

39.5

19.3

17.8

16.1

15.0

6.6

5.4

4.6

3.9

EV/EBITDA (x)

14.4

13.4

11.6

10.6

Div. yield (%)

1.8

2.0

2.3

2.6

Valuations P/E (x) P/BV (x)







 

Quarterly Performance (IFRS) Y/E March Revenue (USD m) QoQ (%) Revenue (INR m) YoY (%) GPM (%) SGA (%) EBITDA Margin (%) EBIT Margin (%) Other income ETR (%) PAT QoQ (%) YoY (%) EPS (INR) Headcount CC QoQ rev gr (%) Attrition (%) E: MOSL Estimates

January 2017





Financial Snapshot (INR b) Y/E March

CMP: INR 2,379

1Q 4,036 3.5 256,681 16.1 44.9 16.8 28.1 26.3 7,707 23.2 57,086 -3.3 12.9 29.1 324,935 3.4 15.9

TCS

TP: INR2,500 (+5%)

Neutral

TCS saw a deferment to the tune of ~USD27m in an India-based contract, which is expected to get added in 3Q. A 0.6% tailwind from the deferment coupled with seasonal weakness leads us to expect 1.5% CC growth. Cross-currency movement is expected to shave off 160bp from revenue, leading to 0.1% QoQ decline in USD terms. A pullback in discretionary spend has been weighing on TCS’ performance; outlook on deal wins, project delays and budgets would be keenly watched. Our EBIT margin estimate for 3Q stands at 25.5% QoQ (-50bp QoQ), below the lower end of the guided range of 26-28%. There is a possibility of TCS’ margins being lower than the range for FY17 lest there is a pick-up in profitability in 4Q. Our PAT estimate stands at INR62.5b (-5.1% QoQ). The decline would be led by lower revenue, profitability and other income. The stock trades at 17.8x FY17E and 16.1x FY18E earnings. Neutral.

Key issues to watch for  Outlook on revenue from TCS Japan.  Traction in new Digital initiatives (automation/solutions).  Outlook for BFSI vertical, going ahead.

FY16 2Q 3Q 4,156 4,145 3.0 -0.3 271,655 273,640 14.1 11.7 45.5 45.6 16.7 17.3 28.8 28.3 27.1 26.6 6,751 6,990 24.1 23.2 60,553 61,095 6.1 0.9 14.5 12.2 30.8 31.0 335,620 344,691 3.9 0.5 16.2 15.9

4Q 4,207 1.5 284,486 17.5 44.8 17.0 27.8 26.1 9,050 23.7 63,412 3.8 7.4 32.3 353,843 2.1 15.5

1Q 4,362 3.7 293,050 14.2 43.9 17.1 26.7 25.1 9,630 24.0 63,179 -0.4 10.7 32.1 362,079 3.1 13.6

FY17E 2Q 3QE 4,374 4,363 0.3 -0.2 292,840 294,529 7.8 7.6 44.8 44.5 17.1 17.3 27.7 27.2 26.0 25.5 10,520 7,180 23.8 23.8 65,860 62,523 4.2 -5.1 8.8 2.3 33.4 31.7 371,519 369,802 1.0 -0.2 12.9

4QE 4,463 2.3 303,502 6.7 44.7 17.3 27.4 25.7 9,567 23.8 66,608 6.5 5.0 33.8 377,448 2.3

FY16

(INR m) FY17E

16,544 7.1 1,086,462 14.8 45.2 17.0 28.2 26.5 30,498 23.6 242,146

17,563 6.2 1,183,920 9.0 44.5 17.2 27.3 25.6 36,897 23.9 258,170

11.6 123.2 353,843 11.8

6.6 131.0 377,448 8.4

248

December 2016 Results Preview | Sector: Technology

Bloomberg

TECHM IN

Equity Shares (m)

984.7

M. Cap. (INR b)/(USD b)

492 / 7

52-Week Range (INR)

564 / 405

1,6,12 Rel Perf. (%)

7 / -1 / -7

Financial Snapshot (INR b) Y/E Mar

2016 2017E 2018E 2019E

Sales

264.9 291.0 328.6 360.7

EBITDA

43.4

44.6

52.8

57.1

Adj. PAT

31.2

28.4

32.0

35.2

Adj. EPS (INR)

35.1

32.0

36.0

39.5

EPS Gr. (%)

18.4

-8.7

12.5

9.8

BV/Sh.(INR)

165.6 176.7 203.1 233.0

RoE (%)

23.4

19.1

19.3

18.5

RoCE (%)

20.1

16.0

16.7

16.3

Payout (%)

34.2

28.3

24.3

22.1

14.3

15.6

13.9

12.6

3.0

2.8

2.5

2.1

Valuation P/E (x) P/BV (x) EV/EBITDA (x)

9.1

9.4

7.5

6.4

Div. Yield (%)

2.4

1.8

1.8

1.8

Quarterly Performance Y/E March Revenue (USD m) QoQ (%) Revenue (INR m) YoY (%) GPM (%) SGA (%) EBITDA Margin (%) EBIT Margin (%) Other income Interest expense ETR (%) PAT excl. BT amort & EOI QoQ (%) YoY (%) EPS (INR) Headcount Util excl. trainees (%) Attrition (%) Offshore rev. (%) E: MOSL Estimates

January 2017

1Q 989 0.5 62,938 22.9 29.4 15.0 14.4 11.6 1,244 215 25.6 6,225 31.9 -1.3 7.6 103,673 74.0 19.0 39.0

CMP: INR500

Tech Mahindra

TP: INR550 (+10%)

Buy

We expect 3.1% QoQ CC growth in TECHM’s revenue. In USD terms, we expect TECHM’s revenue to grow by 1.7% QoQ – 140bp negative impact of cross-currency movement.  In Telecom, 2H is expected to be strong because of seasonality in Comviva. Moreover, Enterprise is also likely to do well in 3Q, as revenue got deferred in 2Q, resulting in a spillover effect. On an organic basis, we expect 2.5% CC growth.  Revenue will also include one-month addition of Target, which should result in an additional 0.6pp in growth.  We expect EBITDA margin to expand by 70bp to 15.6%. A reversal of the one-time expense incurred in 2Q would result in a 100bp tailwind, which is likely to be partly offset by cross-currency movement.  We expect PAT to grow 12.8% QoQ to INR7.3b, also led by normalization of the ETR (23.5% in 3Q v/s 30.8% in 2Q).  The stock trades at 15.6x FY17E and 13.9x FY18E earnings. Buy. Key issues to watch for  Performance of the Telecom segment.  Comments on profitability including LCC.  TCV of deal wins in the Enterprise segment. 

FY16 2Q 3Q 1,011 1,015 2.2 0.4 66,155 67,011 20.5 16.5 32.0 31.3 15.4 14.3 16.6 16.9 13.7 14.4 1,658 639 173 244 24.8 23.2 7,855 7,592 26.2 -3.3 9.2 -2.3 8.8 8.5 105,235 107,137 77.0 77.0 20.0 20.0 38.3 37.3

4Q 1,023 0.8 68,837 12.5 30.6 13.8 16.7 13.6 1,603 340 17.0 8,581 13.0 81.8 10.1 105,432 77.0 21.0 36.8

1Q 1,032 0.9 69,209 10.0 29.5 14.6 14.9 12.0 1,519 274 25.9 6,561 -23.5 5.4 7.4 107,216 78.0 21.0 36.6

FY17E 2Q 3QE 1,072 1,091 4.0 1.7 71,674 73,632 8.3 9.9 30.6 30.3 15.7 14.7 14.9 15.6 11.5 12.2 1,387 820 345 381 30.8 23.5 6,447 7,269 -1.7 12.8 -17.9 -4.2 7.3 8.2 111,743 109,535 78.0 78.1 19.0 36.5 36.0

4QE 1,125 3.2 76,519 11.2 30.0 14.2 15.8 12.0 1,052 362 23.5 7,685 5.7 -10.4 8.6 111,611 78.2 35.4

FY16

(INR m) FY17E

4,037 10.2 264,941 17.9 30.8 14.5 16.4 13.5 5,322 961 21.4 31,180

4,320 7.0 291,034 9.8 30.1 14.8 15.3 11.9 4,779 1,362 25.9 27,963

20.0 35.1 103,673 76.2

-10.3 32.5 105,235 78.1

37.8

36.1

249

December 2016 Results Preview | Sector: Technology

Bloomberg

WPRO IN

Equity Shares (m)

2466.0

M. Cap. (INR b)/(USD b)

1173 / 17

52-Week Range (INR)

607 / 410

1,6,12 Rel Perf. (%)

CMP: INR476

We expect revenue to decline by 0.1% in USD terms and growth of 1.3% QoQ in constant currency terms; a negative impact of 140bp is likely on account of depreciation of currencies against the USD.



In 2Q, WPRO had guided for 0-2% QoQ growth in 3Q. However, this includes incremental revenue from the acquisition of Appirio. Our CC revenue growth estimate bakes in 0.3% QoQ CC organic growth and 1pp contribution from Appirio (1-month revenue).



We expect EBIT margin in IT Services to decline by 60bp because of flattish organic revenue and the integration of lower margin Appirio.



We expect overall EBIT margin to expand by 40bp, led by improved profitability in the Products business.



Our PAT estimate is INR21.9b, 5.8% QoQ growth on account of improved profitability and higher other income.



The stock trades at 13.9x FY17E and 12.6x FY18E earnings. Neutral.

Financial Snapshot (INR b) 2016 2017E 2018E 2019E

Sales

512.4

556.2

618.8

672.0

EBITDA

108.1

109.2

127.5

134.5

PAT

88.9

84.4

95.8

107.1

EPS (INR)

36.1

34.3

39.5

44.1

2.9

-5.1

15.2

11.8

189.7

198.8

225.7

251.8

RoE (%)

20.3

17.7

18.5

18.5

RoCE (%)

16.7

14.4

16.3

16.0

Payout (%)

16.6

37.4

32.9

34.0

13.2

13.9

12.1

10.8

P/BV (x)

2.5

2.4

2.1

1.9

EV/EBITDA (x)

9.8

9.5

7.7

7.0

Div Yld (%)

1.3

2.7

2.7

3.1

EPS Gr. (%) BV/Sh. (INR)

Valuations P/E (x)

Quarterly Performance (IFRS) Y/E March Revenue (USD m) QoQ (%) Revenue (INR m) QoQ (%) YoY (%) GPM (%) SGA (%) EBITDA Margin (%) IT Serv. EBIT (%) EBIT Margin (%) Other income ETR (%) PAT QoQ (%) YoY (%) EPS (INR) Headcount Util excl. trainees (%) Attrition (%) Offshore rev. (%) Rev Guidance (USDm) Fixed Price (%)

1Q 1,794 1.1 122,376 0.8 9.9 30.7 12.2 21.3 21.0 18.5 5,286 21.2 21,877 -3.8 4.0 8.9 161,789 81.9 16.4 45.4 1821-1857 54.5

Neutral



3 / -13 / -19

Y/E Mar

TP: INR560 (+18%)

Wipro

Key issues to watch for  Revenue growth guidance for 4QFY17.  Stabilization of the Energy vertical.  Commentary on large deal wins and ramp-up schedule.

(INR m) FY16 FY17E FY16 FY17E 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1,832 1,838 1,882 1,931 1,916 1,914 1,971 7,346 7,732 2.1 0.3 2.4 2.6 -0.8 -0.1 2.9 3.7 5.3 125,135 128,605 136,324 135,992 137,657 138,960 143,607 512,440 556,216 2.3 2.8 6.0 -0.2 1.2 0.9 3.3 7.1 7.2 12.3 11.1 10.0 8.1 5.3 9.1 8.5 31.4 29.8 29.7 29.1 28.9 28.7 29.1 30.4 29.0 12.4 12.0 12.3 13.0 13.2 12.5 12.5 12.2 12.8 21.8 20.8 20.6 19.5 19.3 19.7 20.0 21.1 19.6 20.7 20.2 20.1 17.8 17.8 17.2 17.5 20.5 17.6 19.0 17.9 17.4 16.1 15.8 16.2 16.6 18.2 16.1 5,138 5,715 5,426 4,848 4,958 5,687 3,800 21,565 19,293 22.4 21.8 22.7 22.9 22.2 22.2 22.2 22.1 22.4 22,354 22,341 22,350 20,518 20,672 21,863 21,393 88,922 84,446 2.2 -0.1 0.0 -8.2 0.8 5.8 -2.2 7.2 1.9 -1.8 -6.2 -7.5 -2.1 -4.3 2.7 -5.0 9.1 9.1 9.1 8.3 8.5 9.0 8.8 36.1 34.3 168,396 170,664 172,912 173,863 174,238 174,623 179,208 172,912 179,208 82.3 78.0 77.5 79.7 82.8 82.8 82.8 74.9 76.9 16.4 16.3 16.1 16.5 16.6 46.1 46.2 45.8 45.6 46.1 45.7 45.1 45.9 45.6 1841-1878 1875-1912 1901-1939 1931-1950 1931-1950 53.4 55.9 56.9 56 56.4

E: MOSL Estimates

January 2017

250

December 2016 Results Preview | Sector: Technology

Bloomberg

Z ENT IN

Equity Shares (m)

45.4

M. Cap. (INR b)/(USD b)

43 / 1

52-Week Range (INR)

1136 / 805

1,6,12 Rel Perf. (%)

-5 / -7 / -15

Financial Snapshot (INR b) Y/E March

2016

2017

2018

2019

Net Sales

29.6

31.6

37.1

42.2

EBITDA

4.3

4.5

5.9

6.5

PAT

3.1

3.1

4.2

4.5

EPS (INR)

68.2

69.5

92.5

99.2

Gr. (%)

17.0

1.4

33.1

7.2

BV / Sh (INR)

CMP: INR944

Z ensar Technologies TP: INR1,250 (+32%)

Buy



We expect revenue of USD118m, representing growth of 1.6% QoQ. This would translate into 2.1% QoQ CC growth. While EUR and GBP have depreciated against USD, Z AR’s appreciation will slightly offset the negative impact.



The quarter will include ~2 months of revenue from the acquisition of Foolproof, which should add 1.6pp. Organic revenue growth is likely to be 0.5% QoQ CC, as higher-than-usual furloughs are likely to be offset by ramp-up in recent deal wins.



Despite the pruning of non-core/low-yield business, we expect EBITDA margin to remain flat because of the requirement of investments to boost capabilities and augment sales and marketing.

314.4

369.0

441.4

518.3

ROE (%)

24.0

20.3

22.8

20.7



Post this, we expect margin expansion in the remainder of the year.

ROCE (%)

28.5

25.4

28.5

26.7



Payout (%)

17.6

20.3

18.6

19.2

Our PAT estimate is INR820m, +19.4% QoQ on account of a jump in other income (translation gains).

13.8

13.6

10.2

9.5



The stock trades at 13.6x FY17E and 10.2x FY18E earnings. Buy.

P / BV (x)

3.0

2.6

2.1

1.8

EV/EBITDA

9.5

8.5

6.0

5.0

Div. Yield (%)

1.3

1.5

1.8

2.0

Valuations P /E (x)

Quarterly Performance (IFRS) Y/E March Revenue (USD m) QoQ (%) Revenue (INR m) YoY (%) GPM (%) SGA (%) EBITDA EBITDA Margin (%) EBIT Margin (%) Other income ETR (%) PAT QoQ (%) YoY (%) EPS (INR) Headcount Utilization (%) Offshore rev. (%)

1Q 111 5.1 7,046 16.5 31.7 16.4 1,080 15.3 13.8 148 29.8 762 6.2 36.3 17.6 7,895 79.0 35.0

Key issues to watch for  Traction in Digital, large deals and other new initiatives.  Margin outlook, given the need for reinvestment.  Progress on restructuring.

FY16 2Q 3Q 116 115 4.8 -1.4 7,564 7,568 16.8 5.5 32.1 30.6 16.6 16.2 1,171 1,089 15.5 14.4 14.0 12.9 229 95 26.9 30.4 913 715 19.8 -21.7 35.7 2.9 20.6 15.8 8,050 8,192 80.0 82.0 37.0 34.0

4Q 111 -3.7 7,464 13.5 30.8 18.5 922 12.4 10.7 116 21.1 703 -1.7 -2.1 15.5 8,256 81.0 36.0

1Q 114 3.1 7,624 8.2 29.1 15.3 1,053 13.8 12.5 169 30.5 763 8.5 0.1 16.9 8,238 79.8 31.2

FY17E 2Q 116 1.8 7,767 2.7 29.7 15.6 1,092 14.1 12.5 37 28.0 687 -10.0 -24.8 15.2 8,316 80.1 33.8

3Q 118 1.6 7,954 5.1 29.6 15.5 1,119 14.1 12.6 186 28.0 820 19.4 14.7 18.2 8,517 79.0 33.4

4Q 121 3.1 8,261 10.7 30.9 16.0 1,233 14.9 13.4 137 28.0 866 5.6 23.2 19.2 8,567 80.0 33.4

FY16

(INR m) FY17E

453 5.4 29,643 12.8 31.3 16.9 4,262 14.4 12.8 588 27.3 3,094

469 3.6 31,605 6.6 29.8 15.6 4,497 14.2 12.8 529 28.6 3,136

17.0 68.2 8,256 80.5 35.5

1.4 69.5 8,567 79.7 33.0

E: MOSL Estimates

January 2017

251

December 2016 Results Preview | Sector: Telecom

Telecom Company name Bharti Airtel

Huge disruption; overhaul of market structure Voice and data traffic shifting toward RJio

Bharti Infratel Idea Cellular

RJio’s freebees and demonetization hurting overall usage Despite being seasonally strong, the third quarter this year is expected to be dismal for the telecom industry. RJio’s welcome offer with free data/voice – which started on 5 September 2016 – has significantly diluted voice and data usage in the industry. Additionally, the demonetization-led cash crunch has led to lower voice/data recharges, particularly in the initial two weeks, impacting both traffic and pricing. Bharti and Idea’s revenues are expected to decline 6-7% QoQ (down 1-3% YoY) with EBITDA margins down by about 300-400bp.

Expect low revenue growth We expect Bharti’s India wireless revenue to decline 5.9% QoQ and 0.8% YoY to INR138.6b. On a consolidated basis, Bharti’s revenues should drop 2.4% QoQ to INR240.5b, with a flat performance in Africa. Idea too should see a revenue decline of 6.6% QoQ and 3.6% YoY to INR86.9b. However, Bharti Infratel is likely to witness a healthy quarter with improved tenancy post weakness over the last two quarters, driven by fresh rollouts across telcos post spectrum auctions and limited exits. We expect Bharti Infratel’s revenues to increase 2% QoQ and 8% YoY to INR33.6b. 



Voice revenues to decline 4-5% QoQ: 3QFY17 saw a shift in outgoing voice usage toward RJio. However, the impact was seen on pricing instead of voice minutes. This is because RJio’s free usage reduced Bharti and Idea’s outgoing minutes but increased incoming traffic. Given that there is a paltry INR0.14/minute interconnect charge on income minutes compared to ~INR0.60/min charge on outgoing minutes, we believe voice pricing should be impacted significantly. Also, telcos are rationalizing high-ARPU subscriber plans to match RJio’s pricing. Assuming price decline of ~5-6% QoQ and voice traffic growth of ~2% QoQ, we expect voice revenues for Bharti and Idea to decline ~4% QoQ and 0-2% YoY, respectively. Data revenues to see sharper decline: The impact on the data business is likely to be much steeper as many subscribers have shifted to RJio’s free data offering. As announced on 30-November, RJio reached the 50m subscriber mark, which is nearly 35-40% of the industry’s 15m broadband subscribers (as per September TRAI report) and ~5% of voice subscribers. Further, demonetization is expected to have had a considerable impact on the industry’s data business, which mostly relies on the higher-ticket-size data recharges (95% prepaid subscribers in the Indian telecom market). Given that RJio recorded data usage of about 27GB/sub/month, it is likely to have eaten up significant amount of business of other operators. We expect Bharti and Idea’s data revenues to decline steeply by 14-17% QoQ and 4-7% YoY, respectively, in 3QFY17 on the back of ~10-15% QoQ data price decline and 2-5% QoQ lower data traffic.

Aliasgar Shakir ([email protected]); +91 22 39825423 Jay Gandhi ([email protected]); +91 22 3089 6693 January 2017

252

December 2016 Results Preview | Sector: Telecom

EBITDA margin in contraction mode Weak revenue performance, coupled with heavy network investment, is expected to put EBITDA margins under significant pressure in 3QFY17. During the quarter, the cost structure should see a sharp variation due to declining access cost led by lower outgoing minutes. On the contrary, we expect network and SG&A costs to increase significantly in a bid to counter RJio’s aggressive service launch. We expect India EBITDA margins for Bharti/Idea to see contraction of ~300-400bp QoQ. On a YoY basis, this implies just 40bp impact for Bharti India wireless to 39.3%, given the steadily improving margins over past three quarters. However, Idea is expected to see a strong 840bp YoY impact on EBITDA margin to 26.4% due to its steady rise in network investment. Bharti’s Africa business to report flat revenue QoQ, 30bp EBITDA margin improvement: After the decline last quarter due to the sale of businesses in two African regions (Burkina Faso and Sierre Leone), Bharti’s Africa revenues are expected to remain flat QoQ this quarter at USD909m. Nigeria, which contributes about one-third of Africa revenues, saw flat currency (Naira) movement, leading to flat revenue expectation in INR terms too. We expect Africa EBITDA margin to improve 30bp to 24% due to cost-rationalization measures. Bharti Infratel to see recovery in tenancy: We expect Bharti Infratel to report healthy numbers with tenancies growing by 5,800, as against average tenancy addition of 2,000 in 1HFY17. This is driven by fresh rollouts across telcos post the spectrum auction and limited exits during the quarter. We also expect 2% QoQ and 8% YoY improvement in Bharti Infratel’s revenues to INR33.6b. Ex-energy EBITDA margin is expected to trend down by 20bp QoQ to 66.1%, translating into 43.8% overall margin (-20bp QoQ), due to expectations of pricing pressure on rental rates from tenancy renewals. Ex-energy EBITDA should grow 1.3% QoQ to INR13.9b. Our view: We expect Bharti and Idea’s revenue and EBITDA to decline sharply as the industry undergoes a complete overhaul. Bharti Infratel should see healthy recovery in tenancies, driving its growth further. Expected quarterly performance summary Sector

CMP (INR)

RECO

Telecom Bharti Airtel Bharti Infratel Idea Cellular Sector Aggregate

314 353 74

Buy Buy Sell

January 2017

Sales (INR m) Var % Var % Dec-16 YoY QoQ 240,516 33,587 86,883 360,986

-0.1 8.1 -3.6 -0.2

EBITDA (INR m) Var % Var % Dec-16 YoY QoQ

-2.4 86,965 2.0 14,727 -6.6 22,903 -3.1 124,595

3.4 8.1 -26.8 -3.4

-7.9 1.6 -19.4 -9.3

Net Profit (INR m) Var % Var % Dec-16 YoY QoQ 10,894 7,798 -10,222 8,471

-14.3 57.5 PL -66.5

-25.6 0.8 PL -63.6

253

December 2016 Results Preview | Sector: Telecom

Exhibit 1: Wireless subscriber net additions (m) Wireless Subsriber net additions

7 5 6 5

10

21

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

4

-3

-1

-5

Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16

-6

Source: TRAI, MOSL

Exhibit 2: QoQ wireless traffic growth (%) Bharti (India)

10

Idea

RCOM

Vodafone - India

6 2 -2 3QFY17E

2QFY17

1QFY17

4QFY16

3QFY16

2QFY16

1QFY16

4QFY15

3QFY15

2QFY15

1QFY15

4QFY14

3QFY14

2QFY14

-6

Source: Company, MOSL

Exhibit 3: Trend in wireless RPM (INR) Bharti (India)

65

Idea

RCOM

Vodafone - India

58 51 44 3QFY17E

2QFY17

1QFY17

4QFY16

3QFY16

2QFY16

1QFY16

4QFY15

3QFY15

2QFY15

1QFY15

4QFY14

3QFY14

2QFY14

37

Source: Company, MOSL

January 2017

254

December 2016 Results Preview | Sector: Telecom

Exhibit 4: Aggregate India wireless revenue growth (QoQ, %) Aggregate India wireless revenue growth (QoQ, %)

1.1

1.2

-2.9 1QFY17

1QFY16

4QFY15

3QFY15

2QFY15

1QFY15

4QFY14

1.7

-1.1

-1.2 3QFY14

2QFY14

1QFY14

3.8 1.8

2QFY17

2.5

-1.9 4QFY13

4.8

3QFY16

3.4

3.1

4QFY16

5.7

2QFY16

5.7

Source: Company, MOSL

January 2017

Dec-16

Nov-16

Oct-16

Sep-16

Aug-16

Jul-16

Jun-16

70

MOSL Telecom Index

May-16

95

Apr-16

80

Mar-16

97

Dec-16

90

Nov-16

99

Oct-16

100

Sep-16

101

Source: Bloomberg, MOSL

Sensex Index

110

Feb-16

MOSL Telecom Index

Jan-16

Sensex Index

103

Exhibit 6: Relative Performance-1 Yr (%)

Dec-15

Exhibit 5: Relative Performance-3m (%)

Source: Bloomberg, MOSL

255

December Telecom June 2016 Results Preview | Sector: Telecom

Wireless KPIs EOP Wireless SUBS (m) Bharti (India) Idea RCOM Vodafone - India AV. Wireless Subs (m) Bharti (India) Idea RCOM Vodafone - India ARPU (INR/month) Bharti (India) Idea RCOM Vodafone - India MOU/Sub Bharti (India) Idea RCOM Vodafone - India Revenue per min (p) Bharti (India) Idea RCOM Vodafone - India Wireless traffic (B min) Bharti (India) Idea RCOM Vodafone - India

January 2017

2Q

FY14 3Q

4Q

1Q

FY15 2Q 3Q

4Q

1Q

FY16 2Q 3Q

4Q

1Q

FY17 2Q

193 127 116 156

199 129 118 160

206 136 112 167

209 139 110 170

212 144 111 174

217 151 107 179

226 158 111 184

231 162 111 185

235 167 112 188

243 172 102 194

251 175 104 198

256 176 99 199

260 179 100 201

264 182

8.3 5.7

1.4 1.7

192 126 122 156

196 128 117 158

202 133 115 164

207 138 111 169

211 142 111 172

214 148 109 177

222 155 109 182

228 160 111 185

233 165 112 187

239 170 107 191

247 174 103 196

253 176 102 199

258 178 100 200

262 180

9.4 6.4

1.5 1.6

192 165 121 191

195 170 125 193

196 174 128 192

202 181 135 193

198 176 136 187

202 180 141 189

198 179 144 184

198 180 137 184

193 173 134 178

192 174 138 175

194 179 152 177

196 180 144 176

188 173 148 171

174 159

-9.4 -9.1

-7.4 -8.1

437 368 277 334

434 376 288 334

437 397 296 335

435 401 311 336

418 384 307 321

416 388 315 319

418 400 330 321

424 408 316 327

404 383 307 316

405 387 313 316

415 387 329 317

414 379 328 314

406 368 347 306

406 370

0.2 -4.4

0.0 0.5

44.0 44.8 43.5 57.2

44.8 45.3 43.5 57.7

44.9 43.7 43.1 57.3

46.5 45.1 43.5 57.4

47.2 45.8 44.2 58.2

48.6 46.3 44.7 59.3

47.5 44.9 43.7 57.4

46.8 44.2 44.3 56.2

47.6 44.7 43.7 56.2

47.5 44.4 44 55.3

46.8 46.4 46.3 55.8

47.3 47.7 45.2 56.2

46.3 47.0 44.6 55.3

42.9 42.9

-9.7 -3.4

-7.4 -8.8

251 139 102 156

255 145 102 158

265 157 102 164

271 165 103 170

264 162 102 166

267 171 103 169

278 185 108 174

290 196 105 181

282 189 103 177

290 196 100 181

308 202 102 186

315 199 100 187

313 196 97.9 184

319 200

9.9 2.1

1.7 2.3

3QE

YoY (%)

QoQ (%)

256

Quarterly Financials (pro forma) 2Q Revenue (INR b) Bharti (ex Africa) Bharti (consolidated) Idea RCOM Vodafone - India EBITDA (INR b) Bharti (ex Africa) Bharti (consolidated) Idea RCOM EBITDA Margin (%) Bharti (ex Africa) Bharti (consolidated) Idea RCOM PAT (INR b) Bharti (consolidated) Idea RCOM EPS (INR) Bharti Idea RCOM

FY14 3Q

4Q

FY15 2Q 3Q

1Q

4Q

1Q

FY16 2Q 3Q

4Q

1Q

FY17 2Q

3QE

YoY (%)

QoQ (%)

143.0 147.1 151.6 159.9 159.5 163.9 168.0 174.3 174.7 177.3 185.1 213.2 219.4 222.2 229.6 228.5 232.2 230.2 235.9 237.5 239.8 249.6 63.2 66.1 70.4 75.6 75.7 80.2 84.2 87.9 86.9 90.1 94.8 53.9 54.0 56.7 55.2 54.0 54.7 57.0 55.4 53.6 53.0 59.2 89.1 91.1 94.2 97.1 96.5 99.9 100.1 101.7 99.5 100.0 104.0

193.0 255.5 94.9 53.6 105.0

193.5 187.2 246.5 240.5 93.0 86.9 53.8 102.5

5.6 0.3 -3.6

-3.2 -2.4 -6.6

49.2 68.1 19.7 18.9

52.1 70.7 20.6 18.5

54.8 72.7 22.3 18.5

59.8 76.8 25.0 18.6

60.6 76.9 24.9 18.3

62.8 77.7 27.5 18.5

68.0 80.9 30.6 19.8

69.6 82.2 29.8 18.8

69.6 82.3 30.6 17.8

70.8 84.1 31.3 18.0

76.8 91.1 36.2 19.6

81.5 95.5 30.7 15.6

81.8 94.4 28.4 16.8

74.2 87.0 22.9

4.8 3.4 -26.8

-9.4 -7.9 -19.4

34.4 32.0 31.2 35.0

35.4 32.2 31.1 34.2

36.2 32.7 31.7 32.7

37.4 33.4 33.1 33.7

38.0 33.7 32.9 33.8

38.3 33.5 34.3 33.8

40.5 35.1 36.4 34.7

39.9 34.9 33.9 33.8

39.8 34.7 35.2 33.3

39.9 35.1 34.7 34.0

41.5 36.5 38.1 33.1

42.2 37.4 32.4 29.1

42.3 38.3 30.5 31.3

39.6 -31bps -267bps 36.2 108bps -214bps 26.4 -836bps -418bps

5.1 4.5 2.7

6.1 4.7 1.5

9.6 5.9 2.0

11.1 7.3 1.6

13.8 7.6 2.1

14.4 7.7 2.3

12.6 9.4 0.1

21.1 8.5 1.9

15.4 8.1 1.6

11.1 7.6 2.0

13.2 5.8 1.5

14.6 2.2 0.9

14.6 0.9 -0.6

10.9 -1.7 -25.4 -6.3 -181.9 -784.5 0.1 -97.3 -108.4

1.3 1.3 1.3

1.5 1.4 0.7

2.4 1.8 1.0

2.8 2.1 0.8

3.5 2.1 0.9

3.6 2.1 1.0

3.1 2.6 0.0

5.3 2.4 0.8

3.8 2.2 0.7

2.8 2.1 0.8

3.3 1.6 0.6

3.7 0.6 0.4

3.7 2.7 -1.7 -25.4 0.3 -1.7 -181.9 -784.5 -0.3 0.0 -97.3 -108.4 Source: Company, MOSL

Comparative valuation Sector / Companies

CMP (INR)

Reco.

Telecom Bharti Airtel Bharti Infratel Idea Cellular Sector Aggregate

314 353 74

Buy Buy Sell

January 2017

EPS (INR) FY15 FY16E FY17E 12.4 17.2 -6.3

9.4 17.8 -12.9

13.4 19.7 -11.4

FY15 25.3 20.5 -11.8 37.2

PE (x) FY16E FY17E 33.4 19.8 -5.7 90.5

23.4 17.9 -6.5 44.8

EV/EBIDTA (x) FY15 FY16E FY17E 6.1 10.3 8.1 7.0

5.8 8.8 8.8 6.7

4.7 7.5 7.8 5.6

RoE (%) FY15 FY16E FY17E 7.3 5.3 7.1 17.2 16.6 16.2 -9.2 -21.9 -24.1 5.3 2.1 4.2 Source: Company, MOSL

257

December 2016 Results Preview | Sector: Telecom

Bharti Airtel Bloomberg

BHARTI IN

Equity Shares (m)

3,997.0

M. Cap. (INR b)/(USD b)

1678/26

52-Week Range (INR)

437/327

1,6,12 Rel Perf. (%)

CMP: INR309

-1 / 18 / 15 

Financial Snapshot (INR Billion) Y/E March

2016 2017E

Net Sales

965.3

975.1 1,010.0 1,112.9

EBITDA

340.1

358.5

366.2

414.7

Adj. NP

47.5

49.6

37.7

53.6

AdjEPS(INR)

11.9

12.4

9.4

13.4

AdjEPS Gr(%)

72.5

-11.1

-20.7

8.2

BV/Sh (INR)

164.2

174.4

182.2

194.0

7.4

7.3

5.3

7.1

RoE (%) RoCE (%)

2018E

2019E

5.9

5.8

5.0

5.9

11.9

13.8

17.4

12.2

26.2

25.1

33.1

23.2

P/BV (x)

1.9

1.8

1.7

1.6

EV/EBITDA x

6.3

6.4

6.1

5.0

Div. Yld (%)

0.4

0.4

0.4

0.4

Payout (%) Valuations P/E (x)









TP: INR410

Buy

We expect consol. revenue to decline 2.4% QoQ (flat YoY) to INR240.5b, impacted by RJio’s free offer. We expect India wireless revenue to decline sharply by 5.9% QoQ (-0.8% YoY) to INR138.6b and Africa revenue to be flat QoQ at ~USD909b. Consol. EBITDA margin is expected to decline 210bp QoQ to ~36.2%, led by India wireless margin contraction of 310bp to 39.3%, partly offset by 30bp improvement in Africa EBITDA margin to 24%. Consolidated net profit of INR10.9b is expected to decline 25% QoQ (-2% YoY). India wireless ARPU is expected to come down 7.4% QoQ (-9.4% YoY) to INR174, as voice ARPU shrinks by 5% and data ARPU by 18%. Bharti trades at proportionate EV/EBITDA of 6.4x FY17E and 6.1x FY18E. Maintain Buy.

Key monitorables:  Consol. revenue (expect 2.4% decline QoQ).  India wireless revenue (expected to decline 5.9% YoY).  Consol. EBITDA margin (expected at 36.2%, -210bp QoQ).  India wireless EBITDA margin (expected at 39.3%, -310bp QoQ).

Consolidated - Quarterly Earning Model Y/E March Gross Revenue YoY Change (%) Total Expenditure EBITDA Margins (%) Depreciation Interest Other Income PBT before EO expense Extra-Ord expense PBT Tax Rate (%) Minority Interest & Profit/ Loss of Asso. Cos. Reported PAT Mobile ARPU (INR/month) QoQ Growth (%) Mobile MOU/sub/month QoQ Growth (%) Mobile Traffic (B Min) QoQ Growth (%) Mobile RPM (INR) QoQ Growth (%)

1Q 236,709 3.1 154,466 82,243 34.7 40,404 19,206 2,419 25,051 -21,384 46,435 21,827 47.0

(INR Million) FY16 2Q 3Q 238,357 240,659 4.3 3.7 156,014 156,522 82,343 84,137 34.5 35.0 42,390 43,541 18,752 14,167 1,929 3,037 23,129 29,465 -6,761 3,405 29,890 26,060 13,394 13,523 44.8 51.9

4Q 249,596 8.4 158,474 91,122 36.5 48,163 17,010 3,129 29,078 2,999 26,079 10,789 41.4

1Q 255,465 7.9 159,985 95,480 37.4 50,402 19,399 2,787 28,466 3,536 24,930 10,089 40.5

FY17 2QE 3QE 246,515 240,516 3.4 -0.1 152,113 153,551 94,402 86,965 38.3 36.2 49,560 51,058 19,057 18,036 1,568 2,963 27,353 20,834 66 0 27,287 20,834 11,136 8,482 40.8 40.7

4QE 232,580 -6.8 150,963 81,617 35.1 52,557 18,036 2,963 13,988 0 13,988 5,695 40.7

FY16

FY17E

965,321 315.0 625,259 340,062 35.2 174,498 68,865 9,501 106,200 -14,505 120,705 59,368 49.2

975,076 NA 616,612 358,464 36.8 203,577 74,527 10,280 90,641 3,602 87,039 35,402 40.7

3,478

1,133

1,457

2,095

222

1,544

1,458

979

6,495

4,202

21,130 198.2 -0.1 345.0 -1.7 9,097 4.4 0.57 1.7

15,363 192.6 -2.8 333.7 -3.3 9,480 4.2 0.58 0.4

11,080 192.0 -0.3 325.8 -2.4 10,066 6.2 0.59 2.1

13,195 194.2 1.1 321.3 -1.4 10,102 0.4 0.60 2.5

14,619 195.7 0.8 310.1 -3.5 9,427 -6.7 0.6 4.5

14,607 187.9 -4.0 329.3 6.2 8,819 -6.4 0.6 -9.6

10,894 173.9 -7.4 303.3 -7.9 9,460 7.3 0.6 0.5

7,314 157.3 -9.6 322.1 6.2 8,850 -6.4 0.5 -14.8

54,842 192.9 -2.6 342.7 -1.1 38,746 8.2 0.6 -1.5

47,435 178.7 -7.3 314.2 -8.3 36,556 -5.7 0.6 1.1

E: MOSL Estimates January 2017

258

December 2016 Results Preview | Sector: Telecom

Bharti Infratel Bloomberg

BHIN IN

Equity Shares (m)

1,888.7

M. Cap. (INR b)/(USD b)

843/13

52-Week Range (INR)

505/244

1,6,12 Rel Perf. (%)

CMP: INR342 



Y/E March

2016

2017E

2018E 2019E

Net Sales

123.3

133.2

146.2

159.0

54.1

58.4

64.7

70.5

 

EBITDA Adj. NP

22.5

31.9

33.0

36.4

AdjEPS INR

11.8

17.2

17.8

19.7

Gr. (%)

48.1

64.0

50.5

14.1

BV/Sh (INR)

96.7

98.5

111.3

126.0

RoE (%)

12.7

17.2

16.6

16.2

RoCE (%)

11.2

12.8

12.9

12.7

Payout (%)

39.0

26.9

26.0

23.6

28.7

19.7

19.1

17.3

Valuations P/E (x) P/BV (x)

3.5

3.5

3.1

2.7

EV/EBITDAx

11.5

10.5

9.0

7.8

Div. Yld (%)

1.2

1.1

1.1

1.1

Buy

We expect revenue to grow 8.1%/2% on YoY/QoQ to INR33.6b.

-7 / 32 / 66

Financial Snapshot (INR Billion)

TP: INR435

Consol. rental revenue (including Ind-AS) is expected at INR21.1b, up 1.6% QoQ and 7.1% YoY. Energy and other reimbursements are expected to grow 2.5% QoQ. We expect consol. EBITDA to improve 1.6% QoQ to INR14.7b. EBITDA margin is expected to contract 20bp QoQ to 43.8% owing to pressure on rental rates. We expect PAT to grow 0.8% QoQ to INR7.8b. Bharti Infratel trades at an attractive valuation of EV/EBITDA of 10.6x FY17E and 9.1x FY18E. Maintain Buy.

Key monitorables  Consol. co-location additions (we expect a steady rise of ~ 5,800 v/s avg. of 2,000 in 1HFY17).  Consol. revenue per sharing operator (expected to decline 0.4% QoQ due to tenancy renewal risks).

Quarterly Performance Y/E March (Consolidated) Revenue from operations YoY Change (%) Total Expenditure EBITDA Margins (%) Depreciation Interest Other Income PBT Tax Rate (%) Reported PAT Adj PAT YoY Change (%) Margins (%)

January 2017

(INR Million) 1Q 30,031 5.6 17,135 12,896 42.9 5,450 566 564 7,444 3,020 40.6 4,424 4,424 -4.4 14.7

FY16 2Q 30,410 3.8 17,315 13,095 43.1 5,562 -1,675 564 9,772 3,855 39.4 5,917 5,917 27.2 19.5

3Q 31,056 5.3 17,433 13,623 43.9 5,526 292 487 8,292 3,342 40.3 4,950 4,950 -2.3 15.9

4Q 31,817 8.0 17,322 14,495 45.6 5,697 -1,029 433 10,260 3,076 30.0 7,184 7,184 28.9 22.6

1Q 32,106 6.9 18,159 13,947 43.4 5,648 -1,281 352 9,932 2,369 23.9 7,563 7,563 71.0 23.6

FY17 2Q 32,919 8.3 18,421 14,498 44.0 5,629 -2,472 333 11,674 3,936 33.7 7,738 7,738 30.8 23.5

3QE 33,587 8.1 18,860 14,727 43.8 5,664 -2,753 0 11,816 4,017 34.0 7,798 7,798 57.5 23.2

4QE 34,609 8.8 19,302 15,307 44.2 5,647 -2,753 0 12,414 4,221 34.0 8,193 8,193 14.0 23.7

FY16

FY17E

123,314 5.7 69,205 54,109 43.9 22,235 -1,847 2,048 35,769 13,293 37.2 22,476 22,476 12.8 18.2

133,170 8.0 74,742 58,429 43.9 22,605 -9,891 685 46,400 14,543 31.3 31,857 31,857 41.7 23.9

259

December 2016 Results Preview | Sector: Telecom

Idea Cellular Bloomberg

IDEA IN

Equity Shares (m)

3,597.8

M. Cap. (INR b)/(USD b)

632/10

52-Week Range (INR)

204/130

1,6,12 Rel Perf. (%)

2 / 13 / 23

Financial Snapshot (INR Million)

  

Y/E March

2016 2017E 2018E 2019E

Net Sales

359.8

355.5

EBITDA

130.3

Adj. NP

30.8 8.6

AdjEPS (INR)

CMP: INR81

358.9

392.4

101.5

96.4

110.2

-22.6

-46.4

-41.1

-6.3

-12.9

-11.4

Adj.EPSGr(%)

56.5 -170.7 -250.7

82.0

BV/Sh(INR)

71.6

65.3

52.4

42.4

RoE (%)

12.6

-9.2

-21.9

-24.1

RoCE (%)

7.1

2.7

0.3

1.3

Payout (%)

8.4

0.0

0.0

0.0

P/E (x)

9.4

-12.8

-6.2

-7.0

P/BV (x)

1.1

1.2

1.5

1.9

Valuations

EV/EBITDA(x)

5.3

8.5

9.2

8.1

Div. Yield (%)

0.7

0.0

0.0

0.0

 



TP: INR75

Sell

Idea’s consolidated revenue is expected to decline 6.6% QoQ (~3.6% YoY) to INR86.9b. Voice RPM is likely to drop 6% on price decline and unfavorable mix of incoming/outgoing minutes due to RJio’s free plans. We expect Idea to report voice traffic growth of 2.1% QoQ (flat YoY). MoU per subscriber per month at 370 is estimated to be down 0.5% QoQ and 6% YoY. EBITDA margin is expected to contract ~420bp QoQ/840bp YoY to 26.4% due to weak revenues and increased network cost. We expect Idea to report net loss for the first time since its listing, at INR6.3b v/s INR 7.6b same period last year and INR 915m last quarter. Idea trades at an EV/EBITDA of 8.2x FY17E and 8.7x FY18E.

Key monitorables  Voice RPM trajectory (we expect RPM to decline 6% QoQ), voice traffic (we expect 3.7% QoQ growth).  Data revenue performance (we expect 17% decline QoQ).  EBITDA margin (we expect ~ 420bp contraction QoQ).

Consolidated - Quarterly Earning Model Y/E March Gross Revenue YoY Change (%) Total Expenditure EBITDA Margins (%) Depreciation Share in Profits from Associates Interest Other Income PBT before EO expense Extra-Ord expense PBT Tax Rate (%) Reported PAT Margins (%)

1Q 87,915 16.3 58,122 29,793 33.9 14,117 927 3,240 0 13,364 0 13,364 4,816 36.0 8,548 9.7

(INR Million) FY16 2Q 86,891 14.8 56,320 30,570 35.2 15,381

3Q 90,097 12.4 58,812 31,285 34.7 16,231

4Q 94,839 12.6 58,678 36,160 38.1 19,737

2,726 0 12,464 0 12,464 4,371 35.1 8,093 9.3

3,349 0 11,705 0 11,705 4,063 34.7 7,642 8.5

7,678 0 8,745 0 8,745 2,989 34.2 5,756 6.1

1Q 94,866 7.9 64,124 30,742 32.4 19,192 1,035 9,224 0 3,362 0 3,362 1,158 34.4 2,204 2.3

FY17 2Q 3QE 93,002 86,883 7.0 -3.6 64,601 63,980 28,401 22,903 30.5 26.4 19,543 21,107 1,057 1,078 8,753 13,096 0 0 1,162 -10,222 0 0 1,162 -10,222 247 0 21.3 0.0 915 -10,222 1.0 -11.8

4QE 80,751 -14.9 61,322 19,429 24.1 22,899 1,100 13,096 0 -15,466 0 -15,466 0 0.0 -15,466 -19.2

FY16

FY17E

359,809 14.0 229,510 130,300 36.2 66,508

355,503 -1.2 254,027 101,476 28.5 82,741 4,270 44,169 0 -21,164 0 -21,164 1,405 -6.6 -22,569 -6.3

16,545 0 47,247 0 47,247 16,447 34.8 30,799 8.6

E: MOSL Estimates

January 2017

260

DecemberDecember 2016 Results Preview Utilities 2016 Results|Preview

Utilities Company name

Expect muted profit growth for Utilities universe

CESC

Power Grid to outperform on strong capitalization momentum

Coal India

Amongst our Utilities sector coverage universe, we expect Power Grid to report strong set of numbers. Other companies would at best report muted profit growth. Power Grid’s 3QFY17 PAT is likely to increase 23% YoY to INR19b.

JSW Energy NTPC Power Grid Corp.

We expect NTPC’s PAT to grow ~5% YoY to INR21.7b on lower other income. NTPC’s commercial capacity is flat QoQ at 45.9GW. JSW Energy is likely to be impacted by under-utilization of its Vijaynagar plant. We estimate Vijaynagar operated at just ~50% PLF in 3QFY17 v/s 96% in 3QFY16. JSWE’s PAT is likely to decline 54% YoY to INR1.4b on lower generation and higher fuel cost due to higher coal prices. CESC’s PAT would be broadly flat YoY at INR1.4b, as gain from increase in regulated equity base would be offset by impact from the negative bid for the captive coal block. Coal India is likely to disappoint, with EBITDA (ex-OBR) decline estimated at ~19% YoY to INR40b. Realization would be flat YoY at INR1,378/t while volumes would grow 4% YoY to 142mt. Provisioning for the wage hike would impact profitability.

Generation growth tepid: Electricity generation was up 4.8% YoY in 3QFY17 (YTD 5.1%). Coal-based generation grew at a similar rate; however, the pace of growth has improved in the last couple of months. Conventional generation capacity stood at 262GW (up 6.5% YoY). System PLF was down 67bp to 50% YTD December 2016. For coal-based plants, PLF was down 243bp to 59% YTD December 2016.

ST prices remain low: Short-term (ST) prices on IEX were marginally higher QoQ at INR2.37/kWh. IEX day-ahead volumes were up 13% YoY to 10bu in 3QFY17. Growth was led by the southern region. Exhibit 1: Expected quarterly performance summary Sector

CESC Coal India JSW Energy NTPC Power Grid Corp. Utilities Sector Aggregate

CMP (INR) 646 306 61 165 186

Reco Buy Neutral Buy Buy Buy

Sales (INR m) EBDITA (INR m) Net Profit (INR m) Var % Var % Var % Var % Var % Var % Mar-16 Mar-16 Mar-16 YoY QoQ YoY QoQ YoY QoQ 16,028 4.2 -20.5 3,576 20.0 -39.5 1,450 29.5 -40.1 196,628 3.6 25.7 32,585 -22.3 1761.1 28,763 -21.9 379.3 20,531 -22.5 0.3 8,478 -28.8 -11.9 1,462 -54.4 -32.7 176,559 2.0 -8.2 50,238 11.0 -4.1 21,775 5.2 -7.0 66,159 23.4 6.3 59,272 24.8 6.3 19,887 23.3 6.2 475,904 3.8 5.3 154,149 3.1 22.9 73,337 -6.0 39.1

Sanjay Jain ([email protected]); +91 22 3982 5412 Dhruv Muchhal ([email protected]); +91 22 3027 8033 January 2017

261

December 2016 Results Preview | Utilities

Exhibit 2: Power generation - BU Generation - BU

change yoy - %

78 84 76 79 79 82 79 77 83 84 77 85 87 90 88 89 89 85 90 85 87 86 81 86 86 95 89 92 94 95 98 86 90 92 89 96 99 100 97 94 94 97 99 93 95 8

6

Dec-16

Oct-16

Aug-16

2021

Jun-16

Apr-16

1

3

Feb-16

4

9

15 12 10 8 7 5

Dec-15

-1

1

6

Oct-15

Aug-14

Jun-14

Feb-14

Dec-13

Oct-13

Aug-13

6

Aug-15

4

1

0

536 2

Jun-15

7

Apr-15

5

12

Feb-15

686

7

16 14 1213 10

Dec-14

5

Jun-13

Apr-13

4

6

12 12

Oct-14

13

Apr-14

Power generation in December increased 6% YoY. Power generation in 3QFY17 is up 4.8% YoY.

Source: MOSL, CEA

Exhibit 3: NTPC coal-based power plants monthly PLF (%)

Nov-16

Sep-16

Jul-16

May-16

Mar-16

Jan-16

Nov-15

Sep-15

Jul-15

May-15

Mar-15

Jan-15

Nov-14

Sep-14

Jul-14

May-14

Mar-14

88.9 89.6 87.4 87.2 83.9 81.6 75.7 69.8 74.0 79.4 81.7 81.5 82.5 85.3 80.4 77.1 81.5 73.6 76.2 76.5 78.2 79.4 76.7 77.8 78.5 82.2 83.1 81.3 80.9 81.7 73.7 72.3 78.0 72.3 77.7 79.0

NTPC coal-based monthly PLF - %

Jan-14

PLF was up 100/125bp in November/December. However, PLF incentives are likely to be lower, as few plants operated at more than 85% PLF v/s last year.

Source: MOSL, CEA

Exhibit 4: NTPC commercialized and commissioned capacity (MW) Commercialized

Commissioned

1565 1255

1Q17

4Q16

3Q16

2Q16

1Q16

4Q15

800

450525

15 2Q15

1Q15

4Q14

3Q14

20 20

3Q15

110 2Q14

1Q14

99

660

0 0

0 3Q17

675

565

1105 800 650 500 500

2Q17

1160

Source: MOSL, Company Data

January 2017

262

December 2016 Results Preview | Utilities Exhibit 5: NTPC regulated equity – INR b

414

420

3Q16

4Q16

1Q17

423

427

3Q17

394

2Q17

389

2Q16

4Q14

369

1Q16

3Q14

369

4Q15

2Q14

366

3Q15

326

352

2Q15

326

352

1Q15

326

352

1Q14

Regulated Equity

Source: MOSL, Company

Exhibit 6: Power Grid capex and capitalization (INR b) Capitalized

Capex

45

50

66

56 25

67

53

70

53

3Q17

51 51

2Q17

64

1Q17

45

4Q16

68

3Q16

51

2Q16

50

1Q16

2Q15

71

4Q15

47 49

3Q15

49 58

1Q15

172

Source: MOSL, Company Data

Exhibit 7: Power Grid regulated equity base (INR b)

328

3Q15

4Q15

1Q16

2Q16

420

3Q17

316

404

2Q17

305

388

1Q17

293

382

4Q16

276

370

3Q16

265

2Q15

Regulated equity

1Q15

Regulated equity base is up 13% YoY.

Source: MOSL, Company Data

January 2017

263

December 2016 Results Preview | Utilities

Coal India’s volume monitor – December 2016 Exhibit 1: Production grew 4.1% YoY in December Production (mt)

2

5 5 6 0 -2

1

13 7

6

5

11

13 12

YoY (%)

13.5 10 10.7 10.0 7 6.3 5 5 7 5.5 3.9 3.4

-2

5.34.1

-1.9 -5.2 -10.4

-3.4

Dec-16

Oct-16

Aug-16

Jun-16

Apr-16

Feb-16

Dec-15

Oct-15

Aug-15

Jun-15

Apr-15

Feb-15

Dec-14

Oct-14

Aug-14

Jun-14

Apr-14

Feb-14

Dec-13

44 47 43 53 38 36 35 33 35 35 40 44 47 47 48 57 42 41 39 35 36 37 44 47 52 53 51 59 40 43 43 37 32 35 44 50 54

5

9

15 13

Source: MOSL, Company

Exhibit 2: Dispatches grew 6.8% YoY in December Dispatches (mt)

1 2

-2

3

6 0

7

2

-2

7 6 7 7

10

7 9

15 14

-1

9 109.6 5.53.5 4.16.6 1.5 -2.5

6.8 6.2

-3.1 -6.6 -9.6

Dec-16

Oct-16

Aug-16

Jun-16

Apr-16

Feb-16

Dec-15

Oct-15

Aug-15

Jun-15

Apr-15

Feb-15

Dec-14

Oct-14

Aug-14

Jun-14

Apr-14

Feb-14

Dec-13

43 44 40 45 41 41 38 38 37 35 39 42 44 44 43 48 44 44 42 41 41 40 44 45 48 48 46 49 42 46 45 41 37 38 43 48 51

1 2

6

10

YoY (%)

Source: MOSL, Company

Exhibit 3: Inventory at mines declined MoM in December (26mt destocked YTD FY17) COAL inventory - mt

35 32

Dec-16

41 38

Oct-16

47 44

Aug-16

52 49

Jun-16

58 55

Apr-16

42

48

Feb-16

Dec-15

35 32 32 34 38

Oct-15

39

Aug-15

49 45

Jun-15

54 52

Apr-15

39

44

Feb-15

Dec-14

37 31 33

Oct-14

32 32 29

Aug-14

40 37

Jun-14

Apr-14

46

Source: MOSL, Company

January 2017

264

December 2016 Results Preview | Utilities Exhibit 4: Coal India monthly e-auction realization

Nov-16

Sep-16

Jul-16

May-16

Mar-16

Jan-16

Nov-15

Sep-15

Jul-15

May-15

Mar-15

Jan-15

Nov-14

Sep-14

Jul-14

May-14

Jan-14

Mar-14

2,143 2,164 2,183 2,256 2,317 2,555 3,045 3,347 3,566 3,616 3,114 2,061 2,218 2,305 2,220 2,023 1,879 1,885 1,605 1,934 1,803 1,718 1,361 1,715 1,723 1,769 1,285 1,293 1,447 1,227 1,469 1,515 1,608 1,783 1,448

Avg. realization - INR/t

Source: MOSL, Company

Dec-16

Nov-16

Oct-16

Dec-16

Oct-16

Source: Bloomberg, MOSL

Sep-16

80 Aug-16

90

Jul-16

90

Jun-16

93

MOSL Utilities Index

May-16

100

Apr-16

96

Dec-15

110

Nov-16

99

Sep-16

Sensex Index

120

Mar-16

MOSL Utilities Index

Jan-16

Sensex Index

102

Exhibit 6: Relative performance—1Yr (%)

Feb-16

Exhibit 5: Relative performance—3m (%)

Source: Bloomberg, MOSL

Exhibit 7: Comparative valuation Sector / Companies Utilities CESC Coal India JSW Energy NTPC Power Grid Corp. Sector Aggregate

January 2017

CMP (INR)

Reco.

646 Buy 306 Neutral 61 Buy 165 Buy 186 Buy

EPS (INR) PE (x) EV/EBIDTA (x) RoE (%) FY16E FY17E FY18E FY16E FY17E FY18E FY16E FY17E FY18E FY16E FY17E FY18E 48.4 16.1 5.1 11.9 14.2

70.7 18.4 3.2 14.3 16.8

77.6 20.8 1.5 17.3 19.3

13.4 19.1 11.9 13.9 13.1 15.4

9.1 16.6 18.8 11.5 11.1 13.2

8.3 14.7 41.8 9.5 9.7 11.5

6.5 14.3 6.5 11.2 9.2 10.5

5.8 11.6 7.5 9.1 7.9 8.9

5.4 10.0 8.3 7.3 7.1 7.7

4.7 32.9 9.6 10.6 16.1 15.1

6.3 37.7 5.9 11.9 16.6 16.3

6.6 42.6 2.6 13.3 16.9 17.4

265

December 2016 Results Preview | Utilities

CESC Bloomberg

CESC IN

Equity Shares (m)

133.2

M. Cap. (INR b)/(USD b)

86 / 1

52-Week Range (INR)

10 / 7 / 20

Financial Snapshot (INR Million) Y/E MARCH 2016 2017E 2018E 2019E 119.0

137.1

149.0

157.0

28.5

32.9

35.6

36.8

3.7

6.4

9.4

10.3

EPS (INR)

27.8

48.4

70.7

77.6

EPS Gr. (%)

86.6

73.9

46.2

9.8

EBITDA NP

BV/Sh. (INR )

470.5

439.4

498.1

563.7

RoE (%)

6.0

10.6

15.1

14.6

RoCE (%)

9.1

10.2

11.2

11.3

36.0

20.7

14.1

12.9

Payout (%)



683 / 405

1,6,12 Rel Perf. (%)

Sales

CMP: INR646

 

TP: INR940

Buy

We expect CESC’s PAT to be broadly flat YoY at INR1.45b (on Ind-AS basis) as steady increase in capitalization is offset by the impact of negative bid on the captive coal block. Sales volume growth is estimated at 2% YoY to 2,284MU. Profitability of Dhariwal is likely to improve with the commissioning of 34MW PPA with Noida.

VALUATION 17.0

13.0

8.9

8.1

Key issues to watch for

P/BV (x)

1.0

1.4

1.3

1.1

EV/EBITDA (x)

6.8

6.4

5.7

5.3

Div. Yield (%)

2.1

1.6

1.6

1.6

 Performance of Spencer.  Commissioning of full 187MW PPA with Noida.

P/E (x)

Quarterly Performance - Standalone Y/E March Sales Change (%) EBITDA Change (%) As of % Sales Depreciation Interest Other Income Regulatory (inc)/exp PBT Tax Effective Tax Rate (%) Reported PAT Adjusted PAT Change (%) E: MOSL Estimates

January 2017

1Q 17,040 -8.5 3,860 2.1 22.7 910 1,200 250 0 2,000 480 24.0 1,520 1,520 0.7

INR Million FY16 2Q 3Q 17,720 15,380 6.7 23.1 4,380 2,980 3.5 -0.3 24.7 19.4 900 890 1,160 1,050 250 430 0 0 2,570 1,470 620 350 24.1 23.8 1,950 1,120 1,950 1,120 1.6 0.9

4Q 14,790 4.4 4,760 5.5 32.2 990 1,120 300 0 2,950 470 15.9 2,480 2,480 -12.6

1Q 20,120 18.1 5,110 32.4 25.4 960 1,150 260 620 2,640 900 34.1 1,740 1,740 14.5

FY17 2Q 3QE 20,160 16,028 13.8 4.2 5,910 3,576 34.9 20.0 29.3 22.3 990 1,000 1,160 1,183 320 443 600 0 3,480 1,835 1,060 385 30.5 21.0 2,420 1,450 2,420 1,450 24.1 29.5

4QE 15,335 3.7 4,218 -11.4 27.5 877 1,261 273 0 2,353 -181 -7.7 2,534 2,534 2.2

FY16

FY17E

64,340 4.9 15,980 3.2 24.8 3,690 4,530 1,230 0 8,990 1,920 21.4 7,070 7,070 -3.9

70,772 10.0 18,814 17.7 26.6 3,827 4,754 1,296 1,220 10,309 2,165 21.0 8,144 8,144 15.2

266

December 2016 Results Preview | Utilities

Coal India Bloomberg

COAL IN

Equity Shares (m)

6207.4

M. Cap. (INR b)/(USD b)

1901 / 28

52-Week Range (INR)

350 / 272

1,6,12 Rel Perf. (%)

CMP: INR306 

-1 / -1 / -11 

Financial Snapshot (INR Million) 2016 2017E 2018E 2019E Y/E MARCH Net Sales

756.4

753.0

823.2

885.8

EBITDA

187.5

132.8

172.3

198.1

NP

142.7

99.7

114.2

129.4

Adj.EPS (INR)



TP: INR297

We expect Coal India’s EBITDA (ex-OBR) to decline 19% YoY to INR40b, as realization is estimated to be flat YoY while cost is expected to rise on wage hike provisioning. Dispatches are up 4% YoY to 143mt. FSA volumes are estimated to decline 6% YoY to 110mt on weak demand by power sector. Eauction volumes are up 80% YoY to ~27mt on special e-auctions. FSA realization is estimated to increase 2% YoY to INR1,303/t. While realization has been disappointing over the past couple of quarters, we expect the quarter to benefit from increase in share of dispatches from higher grade mines and non-power sector. E-auction realization is estimated to increase 8% QoQ to INR1,450/t due to increase in share of lower grade special eauction volumes. PAT is estimated to decline 22% YoY to INR28.7b on weak operating performance.

22.6

16.1

18.4

20.8

EPS Gr. (%)

4.0

-29.0

14.6

13.3

BV/Sh. (INR)

53.6

48.7

48.8

48.9

RoE (%)

42.2

32.9

37.7

42.6

RoCE (%)

40.0

33.4

40.5

45.7

145.5

99.6

99.6

99.6

12.8

18.0

15.7

13.9

5.4

5.9

5.9

5.9

Key issues to watch for

6.4

9.0

7.2

6.4

9.5

4.6

5.3

6.0

 E-auction volumes and realization.  Global coal prices.

Payout (%) VALUATION P/E (x) P/BV (x) EV/EBITDA (x) Div. Yield (%)





Neutral

Quarterly Performance Y/E March Sales Change (%) Cash EBITDA (OBR adj.) As of % Sales Depreciation OBR Interest Other Income EO Income/(Expense) PBT Tax Effective Tax Rate (%) Reported PAT Adjusted PAT Change (%) E: MOSL Estimates

January 2017

INR Million 1Q 189,558 6.5 50,911 26.9 5,575 7,091 40 20,095 -226 58,072 20,429 35.0 37,643 37,869 -5.7

FY16 2Q 3Q 169,576 189,715 8.2 6.8 25,171 49,337 14.8 26.0 5,864 6,279 410 7,419 15 30 19,636 19,819 248 337 38,766 55,766 13,328 18,584 34.6 33.5 25,438 37,182 25,190 36,845 15.2 12.4

4Q 207,595 -0.1 62,100 29.9 6,946 13,195 121 21,393 56 63,287 20,807 32.9 42,479 42,424 0.4

1Q 177,961 -6.1 38,621 21.7 6,672 2,331 890 17,564 0 46,293 15,641 33.8 30,653 30,653 -19.1

FY17 2Q 3QE 156,450 196,628 -7.7 3.6 3,176 40,004 2.0 20.3 6,921 6,956 1,425 7,419 970 876 19,800 18,177 0 0 13,661 42,930 7,660 14,167 56.1 33.0 6,001 28,763 6,001 28,763 -76.2 -21.9

4QE 221,990 6.9 50,969 23.0 7,032 15,722 804 18,443 0 45,854 11,602 25.3 34,252 34,252 -19.3

FY16

FY17E

756,443 5.0 187,519 24.8 24,664 28,114 207 80,943 415 215,891 73,148 33.9 142,743 142,329 3.7

753,028 -0.5 132,769 17.6 27,580 26,896 3,540 73,985 0 148,738 49,069 33.0 99,669 99,669 -30.0

267

December 2016 Results Preview | Utilities

JSW Energy Bloomberg

JSW IN

Equity Shares (m)

1640.1

M. Cap. (INR b)/(USD b)

100 / 1

52-Week Range (INR)

88 / 54

1,6,12 Rel Perf. (%)



996.9 872.6 914.5 1,028.1 41.4

37.1

34.5

34.7

NP

12.5

8.4

5.3

2.4

7.6

5.1

3.2

1.5

-10.0

-32.4

-36.8

-54.9

BV/Sh. (INR )

52.0

54.9

55.9

55.0

RoE (%)

15.5

9.6

5.9

2.6

RoCE (%)

12.5

9.9

8.9

8.0

Payout (%)

26.3

38.9

61.6

136.7

EPS Gr. (%)



2019E

EBITDA EPS (INR)



7 / -25 / -32

Financial Snapshot (INR Million) Y/E March 2016 2017E 2018E Sales

CMP: INR61

TP: INR85

Buy

We expect JSW Energy’s PAT to decline 54% YoY to INR1.5b due to under-utilization of Vijaynagar plant and increase in cost of imported coal. Vijaynagar is estimated to have operated at ~50% PLF v/s 96% in 3QFY16. Imported coal price average is estimated to increase by ~USD14/t QoQ to USD72/t.

VALUATION

P/E (x)

9.2

11.0

17.4

38.7

P/BV (x)

1.3

1.0

1.0

1.0

EV/EBITDA (x)

6.8

6.3

7.3

8.1

Div. Yield (%)

2.9

3.5

3.5

3.5

Key issues to watch for  International coal prices.  Short-term power market prices.

Quarterly Performance Y/E March Net Sales YoY Change (%) Total Expenditure EBITDA Margins (%) Depreciation Interest Other Income PBT before EO expense Extra-Ord expense PBT Tax Rate (%) Minority Interest & Profit/ Loss of Asso. Cos. Reported PAT Adj PAT YoY Change (%) Margins (%) E: MOSL Estimates

January 2017

1Q 21,070 -17.6 12,897 8,173 38.8 1,984 2,640 691 4,239 0

FY16 2Q 3Q 25,314 26,491 12.4 11.3 15,332 14,579 9,983 11,913 39.4 45.0 2,240 2,650 3,511 4,491 898 264 5,129 5,035 -1,500 0

4Q 26,814 22.5 15,436 11,378 42.4 2,627 4,389 247 4,610 0

1Q 24,500 16.3 13,328 11,173 45.6 2,398 4,293 416 4,899 0

FY17 2Q 20,470 -19.1 10,843 9,627 47.0 2,471 4,356 516 3,316 0

3QE 20,531 -22.5 12,052 8,478 41.3 2,545 4,225 390 2,098 0

4QE 21,756 -18.9 13,931 7,825 36.0 2,586 3,871 238 1,606 0

FY16

FY17E

99,690 6.3 58,244 41,446 41.6 9,502 15,032 2,100 19,013 -1,500

87,257 -12.5 50,154 37,103 42.5 10,000 16,745 1,560 11,919 0

4,239 1,155 27.2

6,629 1,537 23.2

5,035 1,816 36.1

4,610 1,543 33.5

4,899 1,248 25.5

3,316 1,167 35.2

2,098 566 27.0

1,606 237 14.8

20,513 6,051 29.5

11,919 3,218 27.0

310

172

12

12

-14

-25

69

246

507

276

2,775 2,775 -15.2 13.2

4,920 3,767 16.4 14.9

3,206 3,206 -19.0 12.1

3,054 3,054 -5.9 11.4

3,665 3,665 32.1 15.0

2,174 2,174 -42.3 10.6

1,462 1,462 -54.4 7.1

1,123 1,123 -63.2 5.2

13,955 12,897 -6.0 12.9

8,425 8,425 -34.7 9.7

268

December 2016 Results Preview | Utilities

NTPC Bloomberg

NTPC IN

Equity Shares (m)

8245.5

M. Cap. (INR b)/(USD b)

1359 / 20

52-Week Range (INR)

170 / 117

1,6,12 Rel Perf. (%)

1 / 8 / 11

Financial Snapshot (INR Million) 2016 2017E 2018E 2019E Y/E MARCH Net Sales 787.1 822.9 963.5 1,107. 2 EBITDA 191.6 230.7 300.4 381.4 NP Adj.EPS (INR) EPS Gr. (%) BV/Sh. (INR)

101.6



 

97.8 117.9 142.4

12.3

11.9

14.3

17.3

1.7

-3.8

20.6

20.8

TP: INR199

Buy

We estimate a modest 5% YoY growth in adjusted PAT to INR21.7b in 3QFY17. Generation business PAT is likely to grow 7% YoY to INR19.5b while other income is estimated to decline 9% YoY to INR2.3b. PLF incentives are expected to be insignificant. Commercial capacity is estimated to remain unchanged at 45.9GW. NTPC shifted to coal sampling ‘ at wagon’ from ‘ at secondary crusher’. The impact of this change will be a key variable to watch for.

108.2 115.2 124.1 135.4

RoE (%)

11.9

10.6

11.9

13.3

RoCE (%)

7.3

6.9

8.1

9.5

27.2

33.7

31.5

28.9

10.5

13.5

11.2

9.3

1.2

1.4

1.3

1.2

EV/EBITDA (x)

11.1

11.0

9.0

7.2

Div. Yield (%)

2.5

2.8

3.1

3.7

Payout (%)

CMP: INR165

VALUATION

P/E (x) P/BV (x)

Key issues to watch for  PLF for coal-based projects and generation loss.  Core RoE and incentives.  Impact of shift in GCV determination.

Quarterly Performance (standalone) Y/E March Sales Change (%) EBITDA Depreciation Interest Other income Exceptional PBT Tax PAT Change (%) Adj. PAT Change (%) A. Generation Core RoE (%) a. Base RoE - 15.5% b. PLF incentive c. Others B. Other income Key metrics Regulated Equity Commercial capacity (MW) Coal-based PLF (%) E: MOSL Estimates January 2017

INR million

1Q 170,187 -5.9 33,718 12,380 7,309 3,046 0 17,076 -4,278 21,354 -3.0 21,330 9.6 18,742 20 14,305 780 3,657 2,588

FY16 2Q 3Q 177,229 173,175 6.9 -7.6 38,550 45,277 13,229 13,935 8,145 8,251 4,510 3,405 0 -384 21,686 26,113 -7,297 1,184 28,983 24,929 39.9 -18.9 22,165 20,691 24.2 -10.1 19,364 18,197 20 19 14,690 15,168 890 -17 3,784 3,046 2,801 2,493

4Q 179,901 -6.4 53,355 14,710 8,599 5,706 -39 35,712 8,548 27,164 -7.7 25,603 -6.3 21,355 21 15,656 1,052 4,647 4,248

1Q 187,354 10.1 50,874 13,952 9,004 2,810 33 30,761 7,066 23,695 11.0 24,047 12.7 21,850 21 16,166 1,530 4,154 2,197

369,160 43,143 77.6

389,020 43,943 77.3

414,204 45,103 81.3

420,146 45,878 81.4

393,853 44,443 78.2

FY17 2Q 3QE 192,415 176,559 8.6 2.0 52,393 50,238 14,342 15,829 8,898 9,973 3,471 2,852 -44 0 32,580 27,287 7,621 5,512 24,960 21,775 -13.9 -12.7 23,410 21,775 5.6 5.2 20,991 19,499 20 18 16,337 16,476 0 0 3,756 3,023 2,419 2,276 423,072 45,928 74.7 50

427,302 45,928 0.0

4QE 179,415 -0.3 57,299 17,623 11,174 5,637 0 34,139 6,896 27,243 0.3 27,243 6.4 22,745 21 16,941 2,061 3,743 4,498 447,085 48,028 0.0

FY16

FY17E

700,492

735,743

170,900 54,253 32,304 16,667 -424 100,587 -1,842 102,429 -0.5 89,789

210,804 61,745 39,050 14,770 -11 124,768 27,094 97,673 -4.6 96,475 7.4 85,085 20 65,920 3,591 14,676 11,391

77,658 20 59,819 2,705 15,134 12,132 414,204 45,103 78.6

447,085 48,028

269

December 2016 Results Preview | Utilities

Power Grid Corporation Bloomberg

PWGR IN 5231.6

Equity Shares (m)

CMP: INR186 

974 / 14

M. Cap. (INR b)/(USD b)

196 / 129

52-Week Range (INR)

0 / 15 / 28



Financial Snapshot (INR Million) Y/E MARCH 2016 2017E 2018E 2019E



1,6,12 Rel Perf. (%)

Sales

213.5

263.9

311.6

350.8

EBITDA

TP: INR209

Buy

We expect PWGR’s adjusted PAT to grow 23% YoY to INR19b on higher capitalization. We estimate capitalization at INR70b. We expect regulated equity base to increase to INR420b by 3QFY17 from INR369b in 2QFY16. We estimate core-RoE of 17.3% (v/s 17.2% in 2Q).

186.0

234.3

278.8

314.5

NP

60.1

74.4

87.8

100.7

EPS (INR)

11.5

14.2

16.8

19.3

EPS Gr. (%)

18.2

23.6

18.1

14.7

BV/Sh. (INR )

82.6

94.5

108.2

119.5

RoE (%)

14.7

16.1

16.6

16.9

RoCE (%)

6.6

7.4

8.0

8.5

20.8

17.1

18.1

42.0

11.9

12.7

10.8

9.4

Key issues to watch for

1.7

1.9

1.7

1.5

9.5

9.1

7.8

7.0

1.5

1.1

1.4

3.7

 Capitalization/capex guidance for FY18.  Details on competitively bid projects.  Development on green energy projects, state JVs, etc.

Payout (%) VALUATION P/E (x) P/BV (x) EV/EBITDA (x) Div. Yield (%)

Quarterly Performance Y/E March Sales Change (%) EBITDA Change (%) As of % Sales Depreciation Interest Other Income Extraordinary Inc / (Exp) PBT Tax Effective Tax Rate (%) Reported PAT Adjusted PAT (Pre Exceptional) Change (%) E: MOSL Estimates

January 2017

INR million 1Q 47,170 19.8 41,369 22.8 87.7 13,695 11,091 710 0 17,293 3,628 21.0 13,665

FY16 2Q 49,046 18.1 43,051 21.1 87.8 14,481 11,490 1,224 0 18,304 3,823 20.9 14,480

1Q 60,691 28.7 53,688 29.8 88.5 17,573 15,178 1,902 0 22,840 4,819 21.1 18,022

FY17 2Q 62,254 26.9 55,746 29.5 89.5 18,769 15,876 2,507 0 23,608 4,888 20.7 18,720

3Q 53,596 23.1 47,486 27.0 88.6 15,805 12,875 1,452 0 20,259 4,127 20.4 16,131

4Q 57,536 23.4 50,874 26.6 88.4 17,847 14,773 2,079 0 20,332 4,341 21.4 15,991

3QE 66,159 23.4 59,272 24.8 89.6 20,191 16,447 2,538 0 25,173 5,286 21.0 19,887

4QE 66,075 14.8 59,027 16.0 89.3 21,158 15,783 -905 0 21,180 4,448 21.0 16,732

FY16

FY17E

207,348 21.2 182,781 24.5 88.2 61,828 50,230 5,464 0 76,188 15,920 20.9 60,267

255,598 23.3 227,903 24.7 89.2 77,691 63,283 6,098 0 93,027 19,536 21.0 73,491

13,665

14,480

16,131

15,991

18,022

18,720

19,887

16,732

60,267

73,491

14.7

19.7

28.8

13.2

31.9

29.3

23.3

4.6

19.0

21.9

270

December 2016 Results Preview | Sector: Textiles

Arvind Bloomberg

ARVND IN

Equity Shares (m)

258.2

M. Cap. (INR b)/(USD b)

92 / 1

52-Week Range (INR)

CMP: INR358

We expect single-digit growth in the textiles segment, with margin improvement following inventory gains (cotton price increase). Based on our industry checks and management interaction, we believe (a) all formats (EBO/MBO/K ey Accounts (K A)) in the B&R division did well in October due to festive season, (b) all formats performed poorly in November due to demonetization, and (c) the EBO and K A format have returned to normalcy in December, while MBO is still impacted.



We expect ARVND’s revenue to grow 6% YoY (but decline 2% QoQ) to INR22.9b in 3QFY17, driven by impact on brand and retail segments due to demonetization.



We expect EBITDA margin to decline 90bp YoY (but expand 210bp QoQ) to 12.1%, and estimate EBITDA at INR2.77b (-1.3% YoY). Adjusted PAT is likely to grow 7.7% to INR1.12b. Buy.

3 / 8 / -1

Financial Snapshot (INR Billion) Y/E March

2016 2017E 2018E 2019E

Sales

84.5

92.7 106.2 120.8

EBITDA

10.7

10.5

13.4

15.6

3.6

3.8

6.2

7.7

14.0

14.8

24.0

29.8

6.3

5.6

61.9

24.0

NP EPS (INR) EPS Gr. (%) BV/Sh. (INR)

112.8 148.9 168.1 191.8

RoE (%)

12.9

11.3

15.2

16.5

RoCE (%)

10.5

9.5

12.0

13.3

Div Payout (%)

20.5

29.0

20.8

20.8

25.5

24.1

14.9

12.0

3.2

2.4

2.1

1.9

11.6

11.0

8.5

7.1

0.7

1.0

1.1

1.4

Valuations P/E (x) P/BV (x) EV/EBITDA (x) Div Yield (%)

Buy



424 / 236

1,6,12 Rel Perf. (%)

TP: INR444 (+24%)

Key things to watch for  Impact of demonetization in the brand and retail (B&R) segment.  Performance of newly acquired brands and newer formats.  Realizations in textiles segment.

Quarterly Performance (Consolidated) Y/E March Net Sales YoY Change (%) Total Expenditure EBITDA Margins (%) Depreciation Interest Other Income PBT before EO expense Extra-Ord expense PBT Tax Rate (%) MI & Profit/Loss of Asso. Cos. Reported PAT Adj PAT YoY Change (%) Margins (%) E: MOSL Estimates

1Q 17,868 0.8 15,792 2,077 11.6 586 959 270 802 -29 773 233 30.2 -12 552 572 -36.9 3.1

FY16 2Q 3Q 19,571 21,575 -0.4 4.0 17,294 18,770 2,277 2,805 11.6 13.0 572 654 906 895 196 188 994 1,445 56 -13 1,050 1,432 358 386 34.1 26.9 -15 13 707 1,033 670 1,042 -30.1 -6.1 3.6 4.8

4Q 23,196 13.7 20,229 2,967 12.8 664 945 208 1,566 0 1,566 458 29.2 5 1,103 1,104 47.0 4.8

1Q 21,041 17.8 18,627 2,415 11.5 691 891 196 1,029 -2 1,027 317 30.9 -24 734 735 28.5 3.5

FY17 2Q 3QE 23,311 22,869 19.1 6.0 20,988 20,102 2,323 2,767 10.0 12.1 719 710 731 660 221 230 1,094 1,627 -63 0 1,031 1,627 270 504 26.1 31.0 45 0 717 1,123 763 1,123 13.9 7.7 3.1 4.9

4QE 25,515 10.0 22,555 2,960 11.6 700 690 240 1,810 0 1,810 570 31.5 0 1,240 1,240 12.3 4.9

FY16

FY17E

82,210 4.7 72,084 10,126 12.3 2,477 3,705 862 4,807 80 4,727 1,434 30.3 -9 3,284 3,684 -3.7 4.0

92,695 12.8 82,221 10,475 11.3 2,810 2,971 881 5,575 61 5,514 1,764 32.0 82 3,831 3,873 5.1 4.1

Niket Shah ([email protected]) Chintan Modi ([email protected]) / Chitvan Oza ([email protected]) January 2017

271

December 2016 Results Preview | Sector: Consumer

Bata India Bloomberg

BATA IN

Equity Shares (m)

128.5

M. Cap. (INR b)/(USD b)

59 / 1

52-Week Range (INR)

CMP: INR463

Bata’s revenue has declined 10-15% in November – sales were severely affected in the first week of demonetization, but somewhat improved thereafter. Bata rolled out some companylevel schemes in the second week of demonetization, the response to which has been in line with management expectations.



We expect revenue to decline 8% YoY (and 2.7% QoQ) to INR5.68b in 3QFY17.



EBITDA is likely to decline 32% YoY to INR540m, with margin decline of 340bp to 9.5%.



On a high base, adjusted PAT is expected to decline 30% YoY to INR314m.

12 / -15 / -13

Financial Snapshot (INR Billion) Y/E March

2016 2017E 2018E 2019E

Sales

24.3

23.1

26.0

29.5

EBITDA

2.7

2.4

3.0

3.7

NP

1.4

1.4

1.8

2.3

11.2

10.9

14.2

17.7

-31.2

-2.8

30.5

24.5

EPS (INR) EPS Gr. (%) BV/Sh.(INR)

92.0 100.4 111.0 124.5

RoE (%)

13.1

11.3

13.4

15.0

RoCE (%)

13.2

11.4

13.5

15.1

Payout (%)

25.4

22.2

25.5

23.9

41.5

42.7

32.7

26.3

Valuations P/E (x)

5.1

4.6

4.2

3.7

EV/EBITDA (x)

P/BV (x)

20.8

23.4

18.2

14.4

Dividend yield

0.8

0.4

0.6

0.8

Buy



614 / 400

1,6,12 Rel Perf. (%)

TP: INR483 (+4%)

Key things to watch for  SSS growth during the quarter.  Share of accessories in total revenue.  Impact on margins due to promotional campaigns.  New store additions.

Quarterly Performance Y/E March Consolidated Net Sales YoY Change (%) Total Expenditure EBITDA Margins (%) Depreciation Interest Other Income PBT before EO expense Extra-Ord expense PBT Tax Rate (%) Reported PAT Adj PAT YoY Change (%) Margins (%) E: MOSL Estimates

1Q 6,849 10.1 6,015 834 12.2 194 5 78 713 430 1,143 240 33.7 902 473 -22.3 6.9

FY16 2Q 3Q 5,747 6,176 4.9 15.0 5,267 5,378 480 798 8.4 12.9 192 195 6 4 97 71 380 669 318 0 697 669 154 224 40.6 33.5 543 445 226 445 -42.1 27.4 3.9 7.2

4Q 5,447 10.9 4,894 553 10.2 206 3 104 447 0 447 169 37.7 279 279 10.5 5.1

1Q 6,746 -1.5 5,926 820 12.2 162 7 110 761 0 761 257 33.8 504 504 6.6 7.5

FY17 2Q 3QE 5,837 5,682 1.6 -8.0 5,302 5,142 535 540 9.2 9.5 160 170 13 4 141 110 504 476 0 0 504 476 158 162 31.3 34.0 346 314 346 314 53.2 -29 5.9 5.5

4QE 5,012 -8.0 4,560 451 9.0 180 3 100 368 0 368 125 34.0 243 243 -12.9 4.8

FY16

FY17E

24,220 NM 21,554 2,666 11.0 788 18 350 2,210 747 1,463 787 35.7 2,185 1,439 315.9 5.9

23,145 -4.4 20,784 2,361 10.2 679 14 450 2,118 0 2,118 720 34.0 1,398 1,398 -3 6.0

Niket Shah ([email protected]) Chintan Modi ([email protected]) / Chitvan Oza ([email protected]) January 2017

272

December 2016 Results Preview | Sector: Oil & Gas

Castrol (India) Bloomberg

CSTRL IN 494.6

Equity Shares (m)

191 / 3

M. Cap. (INR b)/(USD b)

CMP: INR386

We expect revenue to remain flat YoY (and grow 3% QoQ) at INR7.8b due to the combined effect of YoY flat volume at 46.4m liters and realization at INR169/liter.



We expect CSTRL to report EBITDA of INR2.2b (+4% YoY, +4% QoQ). EBITDA margin would be 27.8%, higher than 26.6% in 4QCY15.



We estimate net profit at INR1.5b (+4% YoY, +5% QoQ).



The stock trades at 28.8x CY16E and 27x CY17E EPS. Buy.

-4 / -1 / -17

1,6,12 Rel Perf. (%)

Financial Snapshot (INR b) Y/E Dec

2014

Sales

33.9

33

33.6

36

EBITDA

7.2

9.3

9.9

10.3

Adj. PAT

4.7

6.4

6.6

7.1

2015 2016E 2017E

Adj. EPS (INR)

9.6

12.8

13.4

14.3

EPS Gr. (%)

6.1

33.8

4.2

6.7

BV/Sh.(INR)

10

11.6

12.9

14.3

RoE (%)

76 118.4 108.8 104.6

RoCE (%)

76.2 118.5 109.1 104.7

Payout (%)

92.7

87.1

90.3

90.3

P/E (x)

45.9

34.3

28.8

27

P/BV (x)

43.8

37.8

29.8

26.9

EV/EBITDA (x)

29.8

22.8

18.2

17.3

Div. Yield (%)

1.9

2.2

2.6

2.8

Valuations

Key issues to watch for (a) Volume growth. (b) Operating margin expansion. (c) Launch of new products. (d) Competitive pressure from other players.

Quarterly Performance Y/E December Net Sales YoY Change (%) Total Expenditure EBITDA YoY Change (%) Margins (%) Depreciation Interest Other Income PBT Tax Rate (%) Reported PAT Adj PAT YoY Change (%) Margins (%) E: MOSL Estimates

1Q 7,958 -2.4 6,085 1,873 29.9 23.5 111 3 164 1,923 761 39.6 1,162 1,162 15.9 14.6

Buy



495 / 354

52-Week Range (INR)

TP: INR499 (+29%)

CY15 2Q 9,202 1.1 6,474 2,728 45.1 29.6 94 2 186 2,818 973 34.5 1,845 1,845 43.7 20.0

3Q 7,811 -2.3 5,684 2,127 22.7 27.2 94 1 181 2,213 781 35.3 1,432 1,432 21.5 18.3

4Q 7,882 -7.9 5,789 2,093 2.8 26.6 91 2 250 2,250 842 37.4 1,408 1,408 6.7 17.9

1Q 8,521 7.1 6,005 2,516 34.3 29.5 86 4 223 2,649 925 34.9 1,724 1,724 48.4 20.2

CY16 2Q 9,679 5.2 6,535 3,144 15.2 32.5 149 7 202 3,190 1,121 35.1 2,069 2,069 12.1 21.4

(INR Million) CY15 CY16E 3Q 7,589 -2.8 5,488 2,101 -1.2 27.7 107 10 183 2,167 778 35.9 1,389 1,389 -3.0 18.3

4QE 7,834 -0.6 5,655 2,179 4.1 27.8 113 5 193 2,254 793 35.2 1,461 1,461 3.7 18.6

32,853 -2.8 24,032 8,821 24.4 26.8 390 8 781 9,204 3,357 36.5 5,847 5,847 22.2 17.8

33,623 2.3 23,683 9,940 12.7 29.6 455 26 801 10,260 3,617 35.3 6,643 6,643 13.6 19.8

Swarnendu Bhushan ([email protected]) /Abhinil Dahiwale ([email protected]) January 2017

273

December 2016 Results Preview | Sector: Fertilizers

Coromandel International Bloomberg

CRIN IN

Equity Shares (m)

291.3

M. Cap. (INR b)/(USD b)

88 / 1

52-Week Range (INR)

20 / 23 / 57

Financial Snapshot (INR Billion) Y/E March

2016 2017E 2018E 2019E

Sales

115.2 116.4 129.8 143.1

NP EPS (INR)

7.7

9.6

10.6

3.4

4.7

5.8

7.4

16.3

20.0

25.5

37.8

22.7

27.6

EPS Gr. (%)

-14.9 83.2

RoE (%)

14.9

18.5

20.4

22.8

10.8

13.6

15.6

18.8

25.6

18.6

15.2

11.9

3.6

3.3

2.9

2.5

14.1

10.4

9.1

7.4

0.9

0.9

0.7

0.7

Valuations P/BV (x) EV/EBITDA (x) EV/Sales (x)



EBITDA margin is likely to expand 220bp YoY (shrink 260bp QoQ) to 8.2%. EBITDA should grow 41% YoY to INR2.33b.



We expect adjusted PAT to grow 83% YoY to INR1,177m on a very low base.

92.3 103.9 119.2

RoCE (%) P/E (x)

We expect revenue to grow 3% YoY (decline 21% QoQ) to INR28.4b in 3QFY17 on a low base.

12.6

11.8

BV/Sh. (INR)

Under Review



307 / 146

1,6,12 Rel Perf. (%)

EBITDA

CMP: INR304

Key issues to watch for  Performance of exports in the non-subsidy business.

Quarterly Performance Y/E March Consolidated Net Sales YoY Change (%) Total Expenditure EBITDA Margins (%) Depreciation Interest Other Income PBT before EO expense Extra-Ord expense PBT Tax Rate (%) Minority Interest & Profit/ Loss of Asso. Cos. Reported PAT Adj PAT YoY Change (%) Margins (%) E: MOSL Estimates

(INR Million) 1Q 22,041 17.2 21,112 929 4.2 261 599 156 225 0 225

FY16 2Q 3Q 36,003 27,555 3.9 -7.0 32,930 25,902 3,072 1,653 8.5 6.0 281 247 498 542 247 142 2,540 1,006 0 -250 2,540 1,256

4Q 30,209 0.8 28,205 2,004 6.6 275 567 116 1,278 0 1,278

1Q 20,595 -6.6 19,709 886 4.3 244 651 125 117 0 117

FY17 2Q 3QE 35,752 28,381 -0.7 3.0 31,906 26,054 3,846 2,327 10.8 8.2 254 270 586 480 177 180 3,183 1,757 0 0 3,183 1,757

FY16

FY17E

4QE 31,719 5.0 29,150 2,569 8.1 280 470 198 2,017 0 2,017

115,807 2.4 108,149 7,658 6.6 1,063 2,206 660 5,049 -250 5,299

116,448 0.6 106,818 9,630 8.3 1,064 2,178 688 7,078 0 7,078

72 32.0

844 33.2

453 36.0

351 27.5

38 32.1

1,054 33.1

580 33.0

666 33.0

1,720 32.4

2,336 33.0

0 153 153 -53.0 0.7

1 1,695 1,695 -5.8 4.7

0 804 644 -47.9 2.3

0 927 927 35.0 3.1

5 75 75 -51.0 0.4

-4 2,134 2,134 25.9 6.0

0 1,177 1,177 82.9 4.1

0 1,352 1,352 45.8 4.3

1 3,579 3,410 -15.6 2.9

0 4,742 4,742 39.1 4.1

Niket Shah ([email protected]) Chintan Modi ([email protected]) / Chitvan Oza ([email protected]) January 2017

274

December 2016 Results Preview | Sector: Aerospace

Dynamatic Tech Bloomberg

DYTC IN

Equity Shares (m)

6.3

M. Cap. (INR b)/(USD b)

19 / 0

52-Week Range (INR)

CMP: INR2,960

We expect revenue to grow 5% YoY (flattish QoQ) to INR3.81b in 3QFY17, led by weak performance in the Indian Hydraulics division. YoY growth is likely to decline, led by demonetization.



EBITDA margin is likely to expand 300bp YoY to 11.3%. EBITDA is expected to grow 43% YoY to INR430m.



We estimate adjusted PAT at INR85m as against profit of INR25m in 3QFY16. Buy.

-1 / 21 / 21

Financial Snapshot (INR Billion) Y/E March

2016 2017E 2018E 2019E

Sales

14.9

15.6

17.3

19.1

1.4

1.8

2.2

2.7

0.4

0.7

1.1

EBITDA NP EPS (INR)

0.1 19.4

67.6 112.9 166.7

EPS Gr. (%)

-30.6 249.1

BV/Sh(INR)

406.2 489.6 602.5 769.2

67.0

47.6

RoE (%)

4.7

15.1

20.7

24.3

RoCE (%)

6.8

10.3

12.3

22.4

152.8

43.8

26.2

17.8

7.3

6.0

4.9

3.8

16.8

13.3

10.8

8.7

1.6

1.6

1.4

1.2

Valuations P/E (x) P/BV (x) EV/EBITDA (x) EV/Sales (x)

Buy



3650 / 1482

1,6,12 Rel Perf. (%)

TP: INR3,388 (+14%)

Key issues to watch for  Execution outlook and ramp-up for the Aerospace division.  Impact of demonetization in Indian Automotive division.

Consolidated - Quarterly Earning Model (INR Million) Y/E March Net Sales YoY Change (%) Total Expenditure EBITDA Margins (%) Depreciation Interest Other Income PBT before EO expense PBT Tax Rate (%) Reported PAT Adj PAT YoY Change (%) Margins (%) E: MOSL Estimates

1Q 3,728 -12.3 3,483 245 6.6 129 193 11 -66 -66 31 -46.1 -97 -97 NM -2.6

FY16 2Q 3,704 -14.2 3,366 338 9.1 130 182 6 32 32 29 90.1 3 3 -90.4 0.1

3Q 3,628 -5.4 3,327 300 8.3 127 175 4 2 2 -22 -973.8 25 25 339.1 0.7

4Q 3,878 -0.2 3,351 528 13.6 138 177 28 241 241 49 20.3 192 192 281.4 5.0

1Q 3,946 5.9 3,467 479 12.1 128 181 26 197 197 68 34.7 128 128 NM 3.3

FY17 2Q 3,819 3.1 3,378 441 11.6 131 188 20 142 142 62 43.4 80 80 2,452.5 2.1

3QE 3,809 5.0 3,379 430 11.3 130 186 12 126 126 42 33.0 85 85 244.5 2.2

4QE 4,034 4.0 3,541 492 12.2 132 184 16 193 193 64 33.0 129 129 -32.9 3.2

FY16

FY17E

14,938 -8.3 13,527 1,411 9.4 524 727 50 209 209 86 41.2 123 123 -30.5 0.8

15,616 4.5 13,773 1,843 11.8 527 740 65 640 640 211 33.0 429 429 248.8 2.7

Niket Shah ([email protected]) Chintan Modi ([email protected]) / Chitvan Oza ([email protected]) January 2017

275

December 2016 Results Preview | Sector: Textiles

Indo Count Industries Bloomberg

ICNT IN

Equity Shares (m)

197.4

M. Cap. (INR b)/(USD b)

33 / 0

52-Week Range (INR)

7 / -15 / -26

Financial Snapshot (INR Billion) Y/E March

2016 2017E 2018E 2019E

Sales

22.1

23.6

26.3

Buy

We expect revenue to grow 10% YoY (decline 4% QoQ) to INR5.53b in 3QFY17.



EBITDA margin is likely to expand 25bp YoY to 21.8%. EBITDA should grow 11% YoY to INR1.21b.



PAT should grow 10.5% YoY to INR701m. Buy.

29.6

EBITDA

4.7

5.2

5.9

6.8

NP

2.6

3.1

3.7

4.2

13.4

15.7

18.5

21.5

EPS Gr. (%)

61.6

17.0

18.2

15.8

BV/Sh. (INR)

33.3

49.7

69.2

92.0

RoE (%)

48.9

37.8

31.2

26.6

RoCE (%)

33.3

30.8

28.8

25.7

12.8

11.0

9.3

8.0

Valuations P/E (x)

TP: INR223(+29%)



250 / 135

1,6,12 Rel Perf. (%)

EPS (INR)

CMP: INR166

P/BV (x)

5.2

3.5

2.5

1.9

EV/EBITDA (x)

7.1

6.1

5.2

4.2

EV/Sales (x)

1.5

1.3

1.2

1.0

Key things to watch for  Any addition of clients and geographies, and ramp-up there.  Progress on the brands business.  Foreign exchange gains and losses.

Standalone - Quarterly Earning Model (INR Million) Y/E March Net Sales YoY Change (%) Total Expenditure EBITDA Margins (%) Depreciation Interest Other Income PBT Tax Rate (%) Reported PAT Adj PAT YoY Change (%) Margins (%) E: MOSL Estimates

1Q 4,579 44.9 3,567 1,012 22.1 67 146 0 798 277 34.6 522 522 109.4 11.4

FY16 2Q 5,765 20.4 4,713 1,052 18.2 69 156 0 828 311 37.6 516 516 21.5 9.0

3Q 5,026 17.3 3,942 1,084 21.6 45 93 0 946 311 32.9 634 634 45.4 12.6

4Q 5,250 15.0 4,087 1,163 22.2 51 119 0 993 333 33.5 660 660 44.5 12.6

1Q 4,926 7.6 3,824 1,103 22.4 80 98 0 924 321 34.8 603 603 15.6 12.2

FY17 2Q 5,763 0.0 4,599 1,164 20.2 73 116 0 975 348 35.7 627 627 21.5 10.9

3QE 5,529 10.0 4,324 1,205 21.8 59 90 6 1,062 361 34.0 701 701 10.5 12.7

4QE 5,880 12.0 4,581 1,300 22.1 60 84 6 1,162 395 34.0 767 767 16.2 13.0

FY16

FY17E

22,128 24.2 17,393 4,735 21.4 188 549 0 3,998 1,351 33.8 2,647 2,647 61.6 12.0

23,567 6.5 18,406 5,161 21.9 250 374 85 4,622 1,525 33.0 3,097 3,097 17.0 13.1

Niket Shah ([email protected]) Chintan Modi ([email protected]) / Chitvan Oza ([email protected]) January 2017

276

December 2016 Results Preview | Sector: Others

Info Edge Bloomberg Equity Shares (m) M. Cap. (INR b)/(USD b) 52-Week Range (INR) 1,6,12 Rel Perf. (%)

INFOE IN 121.7

CMP: INR859

105 / 2 1012 / 690

 

-3 / 4 / -1

Financial Snapshot (INR b) Y/E March 2016 2017E 2018E 2019E Sales 7.2 8.5 9.5 10.7 EBITDA 1.6 2.5 2.8 3.2 PAT 1.4 2.4 2.5 2.9 EPS (INR) 13.0 18.4 20.7 23.5 EPS Gr. (%) -5.3 42.1 12.5 13.4 BV/Sh. (INR) 145.3 162.2 175.2 190.4 RoE (%) 9.2 12.0 12.3 12.9 RoCE (%) 9.2 12.0 12.3 12.8 Payout (%) 37.0 35.7 37.5 35.6 Valuation P/E (x) 65.5 46.1 41.0 36.1 EV/EBITDA (x) 54.6 34.8 30.1 26.1 EV/Sales (x) 11.9 10.3 8.9 7.8

Quarterly Performance (Standalone) Y/E March FY16 1Q 2Q Revenues 1,747 1,741 YoY (%) 20.6 18.0 Salary costs 792 753 Ad and 461 375 Other Expenses 261 280 Operating Profit 234 334 Margins (%) 13.4 19.2 Other Income 193 195 Depreciation 45 50 PBT bef. Extra382 478 Provision for Tax 95 138 ETR (%) 24.9 29.0 PAT bef. 286 339 EOI 0 0 Adjusted PAT 286 339 YoY (%) -29.3 0.0 EPS (INR) 2.4 2.8 E: MOSL

3Q 1,734 19.0 804 271 274 385 22.2 216 54 546 169 31.0 377 -160 218 -44.8 1.8





TP: INR1,050 (+22%)

Buy

We expect standalone revenue to grow 23% YoY to INR2.1b. Recruitment segment (~75% of business) is likely to grow 23% YoY to INR1.6b. We estimate real estate portal, 99acres.com’s revenue at INR285m (up 5% YoY) and that of matrimonial portal, Jeevansathi.com at INR146m (up 25% YoY). Our EBITDA margin estimate for the quarter stands at 29.7% compared to 33.1% in 2QFY17 and 22.2% in 3QFY16. We expect the YoY margin improvement to be led by reduced advertisement and marketing spends, especially in 99acres.com. We expect PAT to grow 163% YoY to INR573m. In 3QFY16, there were exceptional items, including capital gains on policybazaar.com.

Key issues to watch for  Impact of consolidation in the real estate segment, and outlook on ad spends, given the state of competitive dynamics.  Traction in the recruitment business from segments other than IT.  Commentary around monetization in Z omato.com.

4Q 2,042 18.0 890 212 318 623 30.5 203 60 767 195 25.4 572 0 572 -30.9 4.7

1Q 1,976 13.1 963 258 277 478 24.2 243 60 661 217 32.9 444 0 444 54.9 3.6

FY17E 2Q 2,100 20.6 915 221 269 695 33.1 248 62 881 254 28.8 627 174 801 136.0 5.1

3Q 2,133 23.0 948 256 294 634 29.7 248 63 818 246 30.0 573 0 573 163.3 4.7

4Q 2,265 10.9 971 294 301 699 30.9 229 65 863 259 30.0 604 0 604 5.6 5.0

FY16

(INR m) FY17E

7,235 18.3 3,205 1,318 1,131 1,580 21.8 827 210 2,197 621 28.3 1,576 -160 1,417 -28.0 11.7

8,474 17.1 3,797 1,030 1,142 2,505 29.6 968 249 3,223 976 30.3 2,248 174 2,422 71.0 18.4

Ashish Chopra ([email protected]) / Sagar Lele ([email protected]) January 2017

277

December 2016 Results Preview | Sector: Media

Inox Leisure Bloomberg

INOL IN

Equity Shares (m)

96.2

M. Cap. (INR b)/(USD b)

22 / 0

52-Week Range (INR)

293 / 170

1,6,12 Rel Perf. (%)

4 / -4 / -6

CMP: INR231

2016 2017E 2018E 2019E

Sales

11.6

12.2

14.5

17.2

EBITDA

1.9

1.7

2.4

2.8

NP

0.8

0.4

0.8

1.0

EPS (INR)

8.4

4.1

8.6

10.9

EPS Gr. (%)

284.0

BV/Sh. (INR)

61.4

-51.2 108.3 65.4

73.6

84.0

RoE (%)

14.9

6.2

11.8

13.2

RoCE (%)

13.2

6.6

10.4

11.6

INOL’s 3QFY17 performance would be buoyed by stellar box office collections by D ang al. This movie has garnered net box office collection (NBO) of INR2.4b until December 31, 2016 in India. We expect the impact of demonetization to be lower than our expectations, led by D ang al’s collections.



We expect revenue to grow 5% YoY (and 5% QoQ) to INR3.12b.



EBITDA margin is likely to decline 120bp YoY to 16.6%. We expect EBITDA to decline 1.9% YoY to INR518m.



We expect PAT to decline 6.7% YoY to INR178m. Sell.

27.0

27.5

56.3

27.0

21.3

Valuations P/E (x) P/BV (x) EV/EBITDA (x)

Sell



Financial Snapshot (INR Billion) Y/E March

TP: INR206 (-11%)

3.8

3.5

3.2

2.8

13.8

16.0

11.4

9.6

Key things to watch for  Footfalls during the quarter due to demonetization.  Number of screen additions.

Quarterly performance (INR Million) Y/E Mar Net Sales YoY Change (%) Total Expenditure EBITDA Margins (%) Depreciation Interest Other Income PBT before EO expense Extra-Ord expense PBT Tax Rate (%) Reported PAT Adj PAT YoY Change (%) Margins (%) E: MOSL Estimates

1Q 3,025 30.2 2,380 645 21.3 197 62 15 400 0 400 148 36.9 253 253 452.0 8.4

FY16 2Q 3Q 3,078 2,973 15.7 -1.1 2,512 2,445 565 528 18.4 17.8 197 201 62 61 20 9 327 275 0 -50 327 226 115 70 35.0 30.9 213 156 213 190 302.8 33.1 6.9 6.4

4Q 2,513 15.4 2,363 151 6.0 207 59 16 -100 0 -100 -262 N.M 161 161 N.M 6.4

1Q 3,369 11.4 2,748 621 18.4 203 58 25 385 0 385 136 35.2 250 250 -1.3 7.4

FY17 2Q 3QE 2,974 3,122 -3.4 5.0 2,702 2,604 272 518 9.1 16.6 208 240 58 66 21 20 27 232 0 0 27 232 11 55 41.7 23.5 16 178 16 178 -92.5 -6.7 0.5 5.7

4QE 2,664 6.0 2,395 269 10.1 255 62 22 -26 0 -26 -6 N.M -20 -20 N.M -0.7

FY16

FY17E

11,589 14.0 9,700 1,889 16.3 802 244 60 903 -50 853 70 8.3 783 828 298.6 7.1

12,174 19.7 10,502 1,672 13.7 952 270 55 505 0 505 126 25.0 378 378 -54.3 3.1

Niket Shah ([email protected]) Chintan Modi ([email protected]) / Chitvan Oza ([email protected]) January 2017

278

December 2016 Results Preview | Sector: Aviation

InterGlobe Aviation Bloomberg

INDIGO IN 360.4

Equity Shares (m)

304 / 4

M. Cap. (INR b)/(USD b)

CMP: INR843

1,6,12 Rel Perf. (%)

-2 / -17 / -37

We expect INDIGO to report revenue of INR58.2b in 3QFY17 (+35% YoY, +40% QoQ) and EBITDAR of INR22.2b (+34% YoY, +130% QoQ).



We model yield at INR4.1 and RPK at 12.2b (+35% YoY). Any deviation in yield would have a meaningful impact on our estimates.



We expect net profit to grow 44% YoY to INR9.4b.



We model ASK at 55.9b/69.9b in FY17/FY18 v/s 42.8b in FY16, and RPK at 46.6b/58.5b in FY17/FY18 v/s 35.9b in FY16, driven by an increase in fleet size.



We model INDIGO’s fleet at 127 aircraft as at end-3QFY17 (v/s 107 aircraft as at end-FY16), and at 136/154 aircraft by end-FY17/FY18.



The stock trades at 14.4x/11.6x FY17E/FY18E reported EPS of INR58.3/INR72.5 and at an EV of 8.4x/7.2x FY17E/FY18E adjusted EBITDAR. Maintain Neutral.

Financial Snapshot (INR Billion) Y/E March

2016 2017E 2018E 2019E

Sales

161.4 202.1

277.1

325.8

EBITDA

30.1

30.1

38.4

46.9

NP

19.9

21.0

26.1

32.9

EPS (INR)

55.2

58.3

72.5

91.2

EPS Gr. (%)

52.1

5.7

24.3

25.9

BV/Sh (INR)

50.9

60.1

71.5

85.9

176.5 105.1

RoE (%)

110.2

116.0

RoCE (%)

42.9

46.8

55.2

83.0

Payout (%)

93.4

84.3

84.3

84.3

P/E (x)

15.3

14.4

11.6

9.2

P/BV (x)

16.6

14.0

11.8

9.8

Adj.EV/EBITDAR(x)

8.5

8.4

7.2

6.6

Div. Yield (%)

9.8

9.9

7.5

6.1

Valuations

Quarterly performance Y/E March Net Sales YoY Change (%) Fuel cost Employee cost Other expenses Total Expenditure EBITDAR Margins (%) Net Rentals EBITDA Margins (%) Depreciation Interest Other Income PBT Tax Rate (%) Reported PAT EPS YoY Change (%) E: MOSL Estimates

1Q 42,115 NA 13,477 3,825 9,072 26,374 15,741 37 6,017 9,724 23.1 1,200 328 1,057 9,253 2,762 29.9 6,491 18.0

Neutral



1372 / 702

52-Week Range (INR)

TP: INR1,015 (+20%)

Key issues to watch for  Induction of new aircraft in the fleet.  Fuel costs and their impact on yields.

FY16 2Q 3Q 35,399 42,978 NA NA 12,421 11,659 4,472 4,670 9,809 9,989 26,703 26,318 8,697 16,660 25 39 6,324 6,782 2,373 9,878 6.7 23.0 1,283 1,307 382 340 891 1,097 1,599 9,329 473 2,756 29.5 29.5 1,127 6,573 3.1 18.2 23.7

4Q 40,907 7.0 10,236 4,932 10,689 25,858 15,049 37 6,999 8,050 19.7 1,242 269 1,569 8,108 2,315 28.6 5,793 16.1 0.3

1Q 45,789 8.7 13,674 4,789 12,046 30,509 15,279 33 7,127 8,152 17.8 1,148 1,163 1,626 7,467 1,549 20.7 5,918 16.4 -8.8

FY17 2Q 3QE 41,669 58,156 17.7 35.3 15,524 17,247 5,080 5,547 11,388 13,107 31,992 35,902 9,677 22,255 23 38 7,721 8,740 1,956 13,514 4.7 23.2 1,189 1,289 610 690 1,608 1,585 1,765 13,120 367 3,674 20.8 28.0 1,398 9,446 3.9 26.2 24.1 43.7

(INR Million) FY16 FY17E 4QE 56,496 38.1 20,665 6,187 14,069 40,921 15,575 28 9,071 6,504 11.5 1,330 771 1,517 5,919 1,657 28.0 4,262 11.8 -26.4

161,399 15.9 47,793 17,899 39,560 105,252 56,147 35 26,122 30,025 18.6 5,031 1,319 4,614 28,290 8,306 29.4 19,983 55.5 53.2

202,110 25.2 67,110 21,603 50,611 139,324 62,786 31 32,660 30,126 14.9 4,956 3,234 6,335 28,271 7,247 25.6 21,024 58.3 5.2

Swarnendu Bhushan ([email protected]); /Abhinil Dahiwale ([email protected]) January 2017

279

December 2016 Results Preview | Sector: Agri

Jain Irrigation Bloomberg

JI IN

Equity Shares (m)

443.1

M. Cap. (INR b)/(USD b)

41 / 1

52-Week Range (INR)

109 / 47

1,6,12 Rel Perf. (%)

Y/E March

2016 2017E 2018E 2019E

Sales

62.9

69.0

78.2

88.6

EBITDA

8.2

9.7

11.3

13.1

NP

1.0

2.6

3.8

5.4

2.2

5.5

7.6

10.0

EPS Gr. (%)

17.7 153.6

37.2

31.9

BV/Sh (INR)

60.5

65.1

66.9

71.1

RoE (%)

4.0

8.6

11.7

14.8

RoCE (%)

8.2

10.0

10.8

12.5

42.5

16.8

12.2

9.3

P/BV (x)

1.5

1.4

1.4

1.3

EV/EBITDA (x)

9.4

7.7

6.3

5.4

EV/Sales (x)

1.2

1.1

0.9

0.8

Valuations P/E (x)

Under Review



We expect revenue to grow 5% YoY to INR14.47b in 3QFY17.



EBITDA is likely to increase 14% YoY to INR1.74b. We expect EBITDA margin to expand 90bp YoY to 12%.



We expect adjusted PAT at INR49m as against a loss of INR265m in 3QFY16. Buy.

5 / 27 / 21

Financial Snapshot (INR Billion)

EPS (INR)

CMP: INR93

Key things to watch for  Receivable days in the MIS business.  Execution of solar pump orders and new tenders.  Debt reduction.

Quarterly performance (Consolidated, INR Million) Y/E March Net Sales YoY Change (%) Total Expenditure EBITDA Margins (%) Depreciation Interest Other Income PBT before EO expense Extra-Ord expense PBT Tax Rate (%) MI& Profit/Loss of Asso. Cos. Reported PAT Adj PAT YoY Change (%) Margins (%) E: MOSL Estimates

1Q 15,950 2.7 13,950 2,000 12.5 672 1,236 60 152 0 152 15 9.8 -8 144 144 -29.0 0.9

FY16 2Q 3Q 13,178 13,785 3.8 6.7 11,635 12,258 1,544 1,527 11.7 11.1 639 673 1,187 1,199 148 56 -135 -289 0 384 -135 94 -72 7 53.4 6.9 -9 -4 -54 92 -54 -265 NM NM -0.4 -1.9

4Q 20,100 -1.6 17,224 2,876 14.3 714 1,223 179 1,118 18 1,135 245 21.6 -7 898 884 -14.1 4.4

1Q 16,558 3.8 14,223 2,335 14.1 687 1,086 131 693 0 693 84 12.2 24 585 585 305.5 3.5

FY17 2Q 3QE 14,406 14,474 9.3 5.0 12,494 12,738 1,912 1,737 13.3 12.0 738 690 1,200 1,100 145 129 119 76 0 0 119 76 -174 15 -146.6 20.0 13 12 280 49 280 49 1.9 0.3

4QE 23,517 17.0 19,754 3,763 16.0 692 1,055 103 2,119 0 2,119 424 20.0 12 1,683 1,683 90.4 7.2

FY16

FY17E

63,014 2.4 55,068 7,946 12.6 2,699 4,846 443 844 401 1,246 194 NM -28 1,080 1,042 21.2 1.7

68,979 9.5 59,255 9,723 14.1 2,799 4,440 517 3,001 0 3,001 360 NM 61 2,581 2,641 153.6 3.8

Niket Shah ([email protected]) Chintan Modi ([email protected]) / Chitvan Oza ([email protected]) January 2017

280

December 2016 Results Preview | Sector: Technology

Just Dial Bloomberg

JUST IN

Equity Shares (m)

70.2

M. Cap. (INR b)/(USD b)

24 / 0

52-Week Range (INR)

2016 2017E 2018E 2019E

Sales

6.9

7.5

8.4

9.4

EBITDA

1.7

1.1

1.3

1.7

NP

1.4

1.1

1.3

1.6

EPS (INR) EPS Growth (%)

20.4

15.6

18.5

23.0

3.7

-23.4

18.4

24.1

BV/Sh (INR)

96.7 110.0 125.6 145.6

RoE (%)

21.1

15.1

15.7

16.9

RoCE (%)

21.1

15.1

15.7

16.9

0.0

14.8

15.7

12.6

16.8

21.9

18.5

14.9

3.5

3.1

2.7

2.4

18.1

26.4

21.0

16.0

0.0

0.8

1.0

1.0

Payout (%) Valuations P/E (x) P/BV (x) EV/EBITDA (x) Div Yield (%)

Buy

JD Omni has temporarily shut down while paid campaign additions are likely to be impacted due to demonetization. Advertisement campaigns are expected to start from 4QFY17.



We expect flattish revenue YoY (-5% QoQ) at INR1.7b in 3QFY17.



We expect EBITDA margin to contract 580bp YoY (but expand 360bp QoQ) to 16%. Consequently, we expect EBITDA to de-grow 27% YoY to INR274m.



PAT should decline 18.3% YoY to INR221m. Buy.

-11 / -42 / -63

Financial Snapshot (INR Billion)

TP: INR426 (+24%)



903 / 318

1,6,12 Rel Perf. (%)

Y/E March

CMP: INR343

Key things to watch for  Performance of Search Plus.  Addition of paid campaigns; impact of demonetization on this.  Promotional campaigns.  Employee addition.

Consolidated - Quarterly Earning Model Y/E March Net Sales YoY Change (%) Total Expenditure EBITDA Margins (%) Depreciation Interest Other Income PBT before EO expense Extra-Ord expense PBT Tax Rate (%) Minority Interest & Profit/ Loss of Asso. Cos. Reported PAT Adj PAT YoY Adj PAT Change (%) Margins (%) E: MOSL Estimates

1Q 1,660 23.0 1,208 452 27.2 67 0 137 521 0 521 161 31 0 361 361 28.2 21.7

FY16 2Q 3Q 1,639 1,713 11.2 11.0 1,322 1,339 317 374 19.3 21.8 79 81 0 0 264 96 501 389 0 0 501 389 97 119 19 31 0 405 405 28.6 24.7

0 270 270 -16.0 15.8

4Q 1,796 14.9 1,346 450 25.1 84 0 155 521 0 521 168 32

1Q 1,763 6.2 1,470 293 16.6 90 0 287 490 0 490 100 20

0 353 353 -25.1 19.7

0 389 389 8.0 22.1

FY17 2Q 3QE 1,803 1,713 10.0 0.0 1,579 1,439 224 274 12.4 16.0 102 106 0 0 260 130 383 298 0 0 383 298 86 78 23 26.0

FY16

FY17E

4QE 1,976 10.0 1,640 336 17.0 110 0 110 336 0 336 87 26

6,908 17.1 5,202 1,706 24.7 311 0 585 1,980 0 1,980 561 28.4

7,497 8.5 6,372 1,125 15.0 397 0 702 1,429 0 1,429 343 24.0

0 296 296 -26.8 16.4

0 249 249 -29.7 12.6

0 1,419 1,419 2.8 20.5

0 1,086 1,086 -23.4 14.5

0 221 221 -18.3 12.9

Niket Shah ([email protected]) Chintan Modi ([email protected]) / Chitvan Oza ([email protected]) January 2017

281

December 2016 Results Preview | Sector: Agri

Kaveri Seed Bloomberg

K SCL IN

Equity Shares (m)

69.1

M. Cap. (INR b)/(USD b)

29 / 0

52-Week Range (INR)

472 / 300

1,6,12 Rel Perf. (%)

Sales

8.9

7.2

8.7

1.9

1.7

2.2

2.7

1.7

1.6

2.0

2.5

24.9

23.1

28.8

36.3

EPS Gr. (%)

-42.9

-7.6

25.1

25.9

BV/Sh (INR)

131.3 138.8 149.6 165.5

RoE (%)

20.7

17.1

20.0

23.1

RoCE (%)

22.2

18.5

21.7

25.0

Payout (%)

48.1

67.6

62.4

56.1

Valuations P/E (x) EV/EBITDA (x) Div Yield (%)

We expect revenue to grow 15% YoY to INR1.06b.



We estimate EBITDA at INR63m, with 6% margin in 3QFY17 v/s EBITDA of INR129m and margin of 14% in 3QFY16.



We expect adjusted PAT of INR26m in 3QFY17. Buy.

10.5

EBITDA

P/BV (x)

Buy

2016 2017E 2018E 2019E

NP EPS (INR)

TP: INR489 (+18%)



0 / -5 / 9

Financial Snapshot (INR Billion) Y/E March

CMP: INR414

16.5

17.8

14.2

11.3

3.1

3.0

2.7

2.5

15.0

16.5

12.5

9.7

2.5

3.2

3.7

4.2

Key things to watch for  Impact on cotton acreages due to reduced sowing.  Cotton yields.  Any write-offs.

Quarterly Performance Y/E March Net Sales YoY Change (%) Total Expenditure EBITDA Margins (%) Depreciation Interest Other Income PBT before EO expense PBT Tax Rate (%) Minority Interest & Profit/Loss of Asso. Cos. Reported PAT Adj PAT YoY Change (%) Margins (%) E: MOSL Estimates

1Q 5,394 -34.8 3,137 2,256 41.8 52 0 21 2,225 2,225 34 1.5 0 2,191 2,191 -5.1 40.6

FY16 2Q 3Q 663 919 -67.5 1.3 1,109 790 -446 129 -67.3 14.0 53 81 1 1 29 42 -470 89 -470 89 11 -1 -2.4 -0.7 0 -3 -482 92 -482 92 NM -74.2 -72.7 10.0

4Q 438 9.7 486 -47 -10.8 75 1 57 -66 -66 12 -17.7 -3 -75 -75 NM -17.0

1Q 4,940 -8.4 3,357 1,583 32.0 78 0 54 1,559 1,559 15 1.0 0 1,544 1,544 -29.6 31.3

FY17 2Q 3QE 678 1,057 2.2 15.0 644 994 34 63 5.0 6.0 72 82 0 0 170 48 132 29 132 29 54 3 41.1 10.0 0 0 77 26 77 26 NM NM 11.4 2.5

(INR Million) FY16 FY17E 4QE 504 15.0 514 -10 -2.0 84 0 50 -44 -44 -4 10.0 0 -40 -40 NM -7.9

7,414 -36.2 5,522 1,892 25.5 261 2 148 1,777 1,777 56 3.2

7,244 -2.3 5,578 1,666 23.0 317 2 312 1,659 1,659 66 4.0

1,721 1,721 -42.8 23.2

1,593 1,593 -7.5 22.0

Niket Shah ([email protected]) Chintan Modi ([email protected]) / Chitvan Oza ([email protected]) January 2017

282

December 2016 Results Preview | Sector: Consumer

Manpasand Beverages Bloomberg

MANB IN

Equity Shares (m)

57.1

M. Cap. (INR b)/(USD b)

32 / 0

52-Week Range (INR)

CMP: INR556

We expect revenue to grow 10% YoY to INR989m in 3QFY17, impacted due to demonetization. Typically, this is a lean quarter, and hence, the impact is not much.



EBITDA margin is likely to decline 170bp YoY to 18.1% and EBITDA is likely to be flat YoY at INR179m.



We expect PAT to grow 35% YoY to INR66m. Buy.

-11 / -4 / 5

Financial Snapshot (INR Billion) Y/E March Sales

2016 5.6

2017 2018E 2019E 7.7

12.1

20.2

EBITDA

1.1

1.5

2.4

4.0

NP

0.5

0.9

1.4

2.2

Adj EPS (INR)

10.1

14.9

23.8

39.0

EPS Gr. (%)

26.7

47.6

59.4

64.0

BV/Sh. (INR)

120.2 204.7 222.4 249.7

RoE (%)

11.4

8.6

9.9

16.5

RoCE (%)

12.2

9.7

11.1

18.6

52.4

35.5

22.2

13.6

4.4

2.6

2.4

2.1

23.1

16.5

12.3

7.2

4.6

3.2

2.4

1.4

Valuations P/E (x) P/BV (x) EV/EBITDA (x) EV/Sales (x)

Buy



776 / 389

1,6,12 Rel Perf. (%)

TP: INR761 (+44%)

Key issues to watch for  Update on capex plans post fund-raising.  Update on advertisement campaigns and plans ahead.  Fruits Up performance and outlook for 4QFY17.

Standalone - Quarterly Earning Model Y/E March Net Sales YoY Change (%) Total Expenditure EBITDA Margins (%) Depreciation Interest Other Income PBT Tax Rate (%) Minority Interest & P/L of Asso. Cos. Reported PAT Adj PAT YoY Change (%) Margins (%) E: MOSL Estimates

1Q 1,453 15.1 1,114 339 23.3 123 41 1 175 18 10.3 0 157 157 9.4 10.8

FY16 2Q 3Q 762 899 23.1 76.1 602 722 159 178 20.9 19.8 135 153 10 3 35 35 49 56 6 7 11.4 12.6 0 0 43 49 43 49 388.6 -290.0 5.7 5.5

4Q 2,304 91.0 1,876 428 18.6 160 3 21 287 31 10.8 0 256 256 47.6 11.1

1Q 2,293 57.9 1,841 453 19.7 149 1 17 320 33 10.4 0 286 286 82.5 12.5

FY17 2Q 1,025 34.6 803 222 21.7 171 8 17 61 7 10.8 0 54 54 24.5 5.3

(INR Million) FY16 FY17E 3QE 989 10.0 810 179 18.1 180 0 75 74 8 10.5 0 66 66 34.7 6.7

4QE 3,387 47.0 2,753 633 18.7 200 0 75 508 53 10.5 0 455 455 78.0 13.4

5,417 50.6 4,314 1,104 20.4 571 57 91 567 62 10.9 0 505 505 68.6 9.3

7,694 42.0 6,207 1,487 19.3 700 8 184 963 101 10.5 0 862 862 70.6 11.2

Chintan Modi ([email protected]) / Niket Shah ([email protected]) Chitvan Oza ([email protected]) January 2017

283

December 2016 Results Preview | Sector: Media

MCX Bloomberg

MCX IN

Equity Shares (m)

51.0

M. Cap. (INR b)/(USD b)

65 / 1

52-Week Range (INR)

1420 / 726

1,6,12 Rel Perf. (%)

6 / 28 / 36

Financial Snapshot (INR Billion) Y/E MAR

2016 2017E 2018E 2019E

Sales

2.1

2.5

4.0

5.3

EBITDA

0.6

0.9

2.1

3.2

PAT

0.4

1.5

2.5

3.4

EPS (INR)

23.4

28.6

47.4

65.2

EPS Gr. (%)

-5.0

22.4

66.0

37.5

BV/Sh. (INR)

3.5

11.5

17.5

21.7

RoCE (%)

8.8

11.3

17.2

21.4

Payout (%)

0.0

63.6

51.0

37.1

53.2

43.5

26.2

19.1

5.3

4.8

4.4

3.9

Valuation P/BV (x)

 

  

TP: INR1,450 (+17%)

Buy

Total volumes at MCX traded during the quarter stood at INR13.7t, down 16.1% QoQ and up 5.2% YoY. However, during the quarter, MCX increased its pricing by ~25%. This drives our revenue estimate for the quarter to INR601m, up 0.6% QoQ and 21% YoY. Our EBIT margin estimate for the quarter is 25.2%, down 40bp QoQ and compares with 14% in 3QFY16. We do not expect much change in costs; including in advertisement expenses, which have declined after FY16. Our PAT estimate is INR343m, up 5.2% YoY. We are modeling an ETR of 25% for 3QFY17.

236.1 259.4 283.5 316.7

RoE (%)

P/E (x)

CMP: INR1,243

Key things to watch for  Any move to enter the commodities space by potential competitors like NSE.  Cost base and impact on margins.  Pace of reforms under SEBI.

Quarterly Performance

(INR m)

Y/E March Sales Q-o-Q Gr. (%) Staff Costs Other expenses Depreciation EBIT Margins (%) Other Income PBT bef. Exceptional Tax Rate (%) PAT Q-o-Q Gr. (%) EPS (INR) Total volumes (INR t) Q-o-Q Gr. (%) Y-o-Y Gr. (%) E: MOSL Estimates

1Q 518 -1.8 90 282 63 83 16.1 300 382 131 34.3 251 -49.0 4.9 13.6 -3.5 15.4

FY16 2Q 563 8.8 109 318 65 71 12.7 338 409 99 24.2 310 23.5 6.1 14.8 9.2 18.5

3Q 498 -11.6 100 264 64 70 14.0 276 346 110 31.8 236 -24.0 3.5 13.0 -12.0 -3.3

4Q 556 11.6 106 313 54 82 14.8 278 360 72 20.1 287 21.8 5.3 14.9 14.3 5.9

1Q 582 16.9 143 265 49 125 21.5 356 480 152 31.7 328 14.1 6.5 16.0 7.3 17.7

FY17E 2Q 596 7.1 144 257 42 152 25.6 359 511 134 26.3 376 14.8 7.4 16.4 2.3 10.3

3QE 601 0.9 146 262 42 151 25.2 307 458 115 25.0 343 -8.8 6.7 13.7 -16.1 5.2

4QE 733 21.9 148 309 43 233 31.8 311 543 136 25.0 407 18.6 8.0 17.5 27.5 17.5

FY16

FY17E

2,135 4.8 406 986 246 498 23.3 1,191 1,689 413 24.4 1,277 2.1 25.0 56.3

2,512 17.6 580 1,035 177 719 28.6 1,332 2,050 537 26.2 1,513 261.8 29.7 63.6

8.7

12.8

Ashish Chopra ([email protected]) / Sagar Lele ([email protected]) January 2017

284

December 2016 Results Preview | Sector: Agri

Bloomberg

MCHM IN

Equity Shares (m)

17.3

M. Cap. (INR b)/(USD b)

39 / 1

52-Week Range (INR)

2745 / 1520

1,6,12 Rel Perf. (%)

-2 / -10 / -2

Financial Snapshot (INR Billion) Y/E March Sales

5.4

6.1

7.3

8.7

1.1

1.3

1.7

2.0

1.5

1.8

1.0

1.2

EPS (INR)

60.1

68.4

87.2 106.6

EPS Gr. (%)

-2.3

13.8

27.5

BV/Sh (INR)

28.8

35.9

39.8

RoCE (%)

26.5

28.8

35.9

39.8

Payout (%)

61.6 105.6

82.8

67.8

37.5

25.9

21.2

Valuations P/BV (x) Div Yield (%)

We expect revenue to grow 15% YoY to INR1.77b in 3QFY17.



EBITDA is estimated to grow 7% YoY to INR498m, with 210bp fall in margin to 28.2%.



We expect adjusted PAT to decline by 3% YoY to INR448m.

239.4 235.6 250.6 285.0 26.4

EV/EBITDA (x)



22.2

RoE (%)

P/E (x)

TP: INR2,616 (+16%) Under Review

2016 2017E 2018E 2019E

EBITDA NP

CMP: INR2,254

Monsanto India

32.9

9.4

9.6

9.0

7.9

36.1

29.2

22.9

18.8

1.3

2.7

2.7

2.7

Key things to watch for  Trends in shift of crop to corn due to increasing corn prices.  Age profile of corn seeds sold.  Realizations in glyphosate.

Quarterly performance (INR Million) Y/E March Net Sales YoY Change (%) Total Expenditure EBITDA Margins (%) Depreciation Interest Other Income PBT before EO expense Extra-Ord expense PBT Tax Rate (%) Reported PAT Adj PAT YoY Change (%) Margins (%) E: MOSL Estimates

1Q 2,633 -0.6 1,921 712 27.0 21 3 27 716 0 716 88 12.3 628 628 -11.6 23.8

FY16 2Q 3Q 378 1,537 -58.2 14.8 634 1,071 -256 466 -67.7 30.3 22 29 1 1 22 28 -257 464 0 56 -257 408 6 1 -2.5 0.2 -264 407 -264 463 NM -4.3 -69.8 30.1

4Q 869 28.8 710 158 18.2 22 2 64 198 -27 225 -16 -7.0 241 241 NM 27.7

1Q 2,403 -8.7 1,801 603 25.1 21 3 24 602 0 602 37 6.1 566 566 -9.9 23.5

FY17 2Q 3QE 965 1,767 155.3 15.0 947 1,269 18 498 1.8 28.2 22 28 3 0 29 45 22 515 13 0 9 515 0 67 3.3 13.0 9 448 9 448 NM -3.1 0.9 25.4

4QE 999 15.0 827 172 17.2 30 0 57 199 0 199 26 13.0 173 173 -28.1 17.3

FY16

FY17E

5,416 -2.7 4,336 1,080 19.9 93 7 141 1,121 29 1,092 79 7.2 1,013 1,039 -2.2 19.2

6,096 12.6 4,798 1,298 21.3 95 0 170 1,373 0 1,373 192 14.0 1,181 1,181 13.6 19.4

Niket Shah ([email protected]) Chintan Modi ([email protected]) / Chitvan Oza ([email protected]) January 2017

285

December 2016 Results Preview | Sector: Agri

PI Industries Bloomberg

PI IN

Equity Shares (m)

136.6

M. Cap. (INR b)/(USD b)

CMP: INR825

113 / 2

52-Week Range (INR)

922 / 495

1,6,12 Rel Perf. (%)

Y/E March

2016 2017E 2018E 2019E

Sales

21.0

24.9

30.1

36.1

EBITDA

4.3

5.6

7.2

8.9

NP

3.0

4.3

5.2

6.5

22.1

31.3

38.4

47.6

41.6

22.6

24.0

EPS (INR) EPS Gr. (%)

22.8

BV/Sh. (INR)

85.8 111.6 143.3 182.9

RoE (%)

29.2

31.7

30.1

29.2

RoCE (%)

26.8

30.4

29.9

29.2

37.4

26.4

21.5

17.4

Buy



We expect revenue to grow 10% YoY (decline 2% QoQ) to INR5.62b.



We estimate 230bp margin expansion to 22.8%, and expect EBITDA to grow 22% YoY to INR1.28b.



We estimate adjusted PAT at INR939m, as against INR704m in 3QFY16, growth of 33.5%. Buy.

-2 / 17 / 21

Financial Snapshot (INR Billion)

TP: INR959 (+16%)

Valuations P/E (x) P/BV (x) EV/EBITDA (x) EV/Sales (x)

9.6

7.4

5.8

4.5

26.7

20.3

15.5

12.2

5.5

4.6

3.7

3.0

Key things to watch for  CSM growth and order book.  Agrochemical business updates for FY17.

Standalone - Quarterly Earning Model (INR m) Y/E March Net Sales YoY Change (%) Total Expenditure EBITDA Margins (%) Depreciation Interest Other Income PBT before EO expense Extra-Ord expense PBT Tax Rate (%) Reported PAT Adj PAT YoY Change (%) Margins (%) E: MOSL Estimates

1Q 5,921 25.7 4,577 1,344 22.7 115 27 86 1,288 0 1,288 429 33.3 859 859 24.4 14.5

FY16 2Q 3Q 4,768 5,110 11.8 1.2 3,933 4,062 835 1,048 17.5 20.5 117 137 15 27 89 51 792 935 0 -29 792 964 223 239 28.1 24.7 570 725 570 704 25.2 19.1 12.0 13.8

4Q 5,848 8.9 4,775 1,073 18.3 170 26 70 947 -20 967 14 1.4 953 934 64.0 16.0

1Q 6,834 15.4 5,178 1,656 24.2 178 16 113 1,575 0 1,575 306 19.4 1,269 1,269 47.7 18.6

FY17 2Q 3QE 5,719 5,621 20.0 10.0 4,440 4,338 1,279 1,282 22.4 22.8 181 185 13 14 134 62 1,219 1,145 0 0 1,219 1,145 205 206 16.8 18.0 1,014 939 1,014 939 77.9 33.5 17.7 16.7

4QE 6,725 15.0 5,284 1,442 21.4 195 12 60 1,295 0 1,295 233 18.0 1,062 1,062 13.7 15.8

FY16

FY17E

21,647 11.6 17,347 4,300 19.9 538 95 296 3,963 -48 4,011 904 22.5 3,107 3,070 33.1 14.2

24,899 15.0 19,240 5,659 22.7 739 55 368 5,233 0 5,233 950 18.2 4,283 4,283 39.5 17.2

Niket Shah ([email protected]) Chintan Modi ([email protected]) / Chitvan Oza ([email protected]) January 2017

286

December 2016 Results Preview | Sector: Consumer Product

SH Kelkar Bloomberg

SHK L IN

Equity Shares (m)

144.6

M. Cap. (INR b)/(USD b)

49 / 1

52-Week Range (INR)

10 / 60 / 31

Financial Snapshot (INR Billion) 2016

2017 2018E 2019E

Sales

9.3

10.4

12.3

14.3

EBITDA

1.5

1.8

2.3

2.9

NP

0.8

1.1

1.5

1.9

Adj EPS (INR)

5.5

7.5

10.1

13.0

EPS Gr. (%)

4.2

34.8

35.7

28.3

BV/Sh. (INR)

52.7

57.8

64.6

73.4

RoE (%)

12.6

13.5

16.6

18.9

RoCE (%)

16.9

19.5

24.4

28.3

60.4

44.8

33.0

25.7

6.4

5.8

5.2

4.6

31.3

27.0

20.5

16.2

5.2

4.7

3.9

3.3

Valuations P/E (x) P/BV (x) EV/EBITDA (x) EV/Sales (x)

TP: INR338 (+1%)

Buy



We expect revenue to grow 5% YoY (but decline 2% QoQ) to INR2.4b in 3QFY17, impacted by demonetization.



EBITDA margin is likely to decline 130bp YoY to 16.7%. EBITDA is expected to be flat YoY at INR403m.



We estimate PAT at INR242m as against INR234m in 3QFY16 – a growth of 4%. Buy.

362 / 201

1,6,12 Rel Perf. (%)

Y/E March

CMP: INR335

Key issues to watch for  Impact on inventory due to demonetization.  Growth in acquired flavors entity, HTT.  Management commentary on new client acquisition and shift of production from Netherlands to Vapi facility.

Consolidated - Quarterly Earning Model Y/E March Net Sales YoY Change (%) Total Expenditure EBITDA Margins (%) Depreciation Interest Other Income PBT before EO expense Extra-Ord expense PBT Tax Rate (%) Minority Interest & Profit/Loss of Asso. Cos. Reported PAT Adj PAT YoY Change (%) Margins (%) E: MOSL Estimates

1Q 2,211 1,807 404 18.3 74 72 19 278 0 278 83 29.8 0 195 195 8.8

FY16 2Q 3Q 2,082 2,301 17.5 1,827 1,887 255 414 12.3 18.0 74 71 73 32 23 24 131 334 0 0 131 61 46.4 0 70 70 3.4

334 100 29.9 0 234 234 413.4 10.2

4QE 2,658 12.8 2,210 448 16.9 77 14 50 407 0

1Q 2,559 15.7 2,085 473 18.5 44 19 32 442 0

407 147 36.2 0 260 260 24.0 9.8

442 167 37.7 0 275 275 41.3 10.8

FY17 2Q 3QE 2,453 2,416 17.8 5.0 2,036 2,012 416 403 17.0 16.7 49 50 22 12 29 26 375 367 0 0 375 132 35.1 0 243 243 246.0 9.9

367 125 34.0 0 242 242 3.6 10.0

(INR Million) FY16 FY17E 4QE 2,924 10.0 2,409 515 17.6 55 8 25 477 0

9,251 114.4 7,730 1,521 16.4 296 190 115 1,150 0

10,350 11.9 8,543 1,807 17.5 198 61 112 1,660 0

477 162 34.0 0 315 315 21.2 10.8

1,150 391 34.0 0 759 759 197.6 8.2

1,660 585 35.2 0 1,075 1,075 41.7 10.4

Chintan Modi ([email protected]) / Niket Shah ([email protected]) Chitvan Oza ([email protected]) January 2017

287

December 2016 Results Preview | Sector: Diversified

SRF SRF IN

Bloomberg Equity Shares (m)

57.4

M. Cap. (INR b)/(USD b)

76/1

52-Week Range (INR)

Y/E March

2016

2017 2018E 2019E

Sales

46.0

47.5

55.8

64.0

EBITDA

9.6

9.9

12.2

14.5

NP

4.2

4.6

6.1

7.6

EPS (INR)

73.7

EPS Gr. (%)

39.7

81.0 106.8 129.7 9.9

31.8

16.2

18.5

19.4

RoCE (%)

19.4

18.3

22.1

25.2

21.1

19.2

14.6

12.0

Valuations P/BV (x) EV/EBITDA (x) EV/Sales (x)

Also, prices of caprolactum (a major raw material for technical textiles) have increased from USD1,300/ton to USD1,800/ton in a short span of time. SRF maintains inventory for a month and prices its sales based on average raw material costs.



We expect SRF’s revenue to grow 4.5% YoY to INR11.47b and EBITDA to decline 4% YoY to INR2.24b. EBITDA margin could decline 180bp YoY to 19.5% and adjusted PAT could decline 8.1% YoY to INR0.97b.

456.8 523.0 610.5 722.8 17.0

P/E (x)



21.4

RoE (%)

3.4

3.0

2.5

2.2

11.9

11.5

9.3

7.5

2.5

2.4

2.0

1.7

Buy

Fluorochemicals (refrigerants) is a distribution-based business. We believe the domestic part of the business has got impacted by demonetization, but as 3Q is a lean season, not much impact would be evident in consolidated financials.

4/-8/3

Financial Snapshot (INR Billion)

TP: INR1,922 (+24%)



1496/1019

1,6,12 Rel Perf. (%)

BV/Sh. (INR)

CMP: INR1,554

Key things to watch for  Growth in the chemicals segment (particularly specialty chemicals).  Client additions and capex plans in specialty chemicals.  Margins in the technical textiles and packaging segments.

Consolidated - Quarterly Earning Model (INR m) Y/E March Net Sales YoY Change (%) Total Expenditure EBITDA Margins (%) Depreciation Interest Other Income PBT before EO expense Extra-Ord expense PBT Tax Rate (%) Reported PAT Adj PAT YoY Change (%) Margins (%) E: MOSL Estimates

1Q 12,214 5.7 9,547 2,667 21.8 725 344 45 1,644 -8 1,652 522 31.6 1,129 1,124 21.3 9.2

FY16 2Q 3Q 11,628 10,974 -2 -1 9,144 8,637 2,484 2,337 21.4 21.3 733 713 334 305 68 92 1,485 1,411 103 65 1,382 1,346 361 339 26.1 25.2 1,021 1,007 1,097 1,056 34 37 9.4 9.6

4Q 11,150 3 8,918 2,232 20.0 725 315 106 1,299 -57 1,356 268 19.8 1,088 1,042 80 9.3

1Q 12,192 0 9,352 2,841 23.3 734 282 55 1,880 -63 1,943 501 25.8 1,442 1,395 24 11.4

FY17 2Q 3QE 11,438 11,468 -2 4.5 9,112 9,231 2,326 2,236 20.3 19.5 735 765 242 225 70 65 1,419 1,311 -72 0 1,491 1,311 298 341 20.0 26.0 1,193 970 1,135 970 3 -8.1 9.9 8.5

4QE 12,432 12 9,909 2,524 20.3 795 220 71 1,580 0 1,580 411 26.0 1,169 1,169 12 9.4

FY16

FY17E

45,966 1.2 36,245.6 9,720 21.1 2,895 1,297 312 5,839 104 5,736 1,491 26.0 4,245 4,322 42.7 9.4

47,529 3.4 37,609.9 9,919 20.9 3,030 965 259 6,183 -135 6,318 1,567 24.8 4,751 4,650 7.6 9.8

Niket Shah ([email protected]) Chintan Modi ([email protected]) / Chitvan Oza ([email protected]) January 2017

288

December 2016 Results Preview | Sector: Technology

Tata Elxsi Bloomberg

TELX IN

Equity Shares (m)

31.1

M. Cap. (INR b)/(USD b)

44 / 1

52-Week Range (INR)

2396 / 1022

1,6,12 Rel Perf. (%)

5 / -17 / -40

Financial Snapshot (INR Billion) Y/E March

2016

2017 2018E 2019E

Sales

10.8

12.4

14.7

17.3

EBITDA

2.5

3.0

3.6

4.3

PAT

1.5

1.9

2.3

2.8

49.7

60.2

73.6

88.4

50.5

21.1

22.2

20.1

EPS (INR) EPS Gr. (%) BV/Sh. (INR)

CMP: INR1,419

TP: INR1,766 (+25%)

Buy



We expect revenue to grow 13% YoY (and 2% QoQ) to INR3.1b in 3QFY17, driven by the automotive and broadcast divisions.



EBITDA margin is likely to expand 76bp YoY to 25%. EBITDA should grow 17% YoY to INR773m.



We estimate PAT at INR494m as against INR399m in 3QFY16, a growth of 23.8% YoY. Buy.

123.9 157.7 195.3 235.8

RoE (%)

46.3

42.8

41.7

41.0

RoCE (%)

46.3

42.8

41.7

41.0

Payout (%)

33.8

43.8

48.9

36.2

Valuations P/E (x)

28.2

23.3

19.0

15.8

P/BV (x)

11.3

8.9

7.2

5.9

EV/EBITDA (x)

16.9

13.6

10.9

8.8

Div. Yield (%)

1.0

1.6

2.1

2.9

Key things to watch for  Impact of EUR depreciation.  Impact of Brexit on the company’s operations and clients.

Consolidated - Quarterly Earning Model (INR m) Y/E March Net Sales YoY Change (%) Total Expenditure EBITDA Margins (%) Depreciation Interest Other Income PBT Tax Rate (%) Reported PAT Adj PAT YoY Change (%) Margins (%) E: MOSL Estimates

1Q 2,435 27.7 1,875 560 23.0 90 0 76 546 189 34.6 357 357 71.8 14.7

FY16 2Q 2,637 28.1 2,024 613 23.2 57 0 27 583 202 34.7 381 381 61.2 14.5

3Q 2,741 23.7 2,077 663 24.2 57 0 10 616 217 35.2 399 399 43.8 14.6

4Q 2,940 27.1 2,268 672 22.8 59 0 6 618 208 33.6 411 411 37.7 14.0

1Q 2,943 20.9 2,253 691 23.5 67 0 11 634 215 33.8 419 419 17.4 14.2

FY17 2Q 3QE 3,033 3,097 15.0 13.0 2,288 2,324 745 773 24.6 25.0 64 62 0 0 -30 37 651 748 220 254 33.8 34.0 431 494 431 494 13.1 23.8 14.2 15.9

4QE 3,380 15.0 2,591 790 23.4 62 0 40 767 261 34.0 506 506 23.3 15.0

FY16

FY17E

10,752 26.6 8,244 2,508 23.3 263 0 119 2,363 815 34.5 1,548 1,548 50.5 14.4

12,445 15.7 9,433 3,012 24.2 249 0 70 2,833 958 33.8 1,875 1,875 21.1 15.1

Niket Shah ([email protected]) Chintan Modi ([email protected]) / Chitvan Oza ([email protected]) January 2017

289

December 2016 Results Preview | Sector: Consumer

TTK Prestige Bloomberg

TTK PT IN

Equity Shares (m)

11.7

M. Cap. (INR b)/(USD b)

67 / 1

52-Week Range (INR)

CMP: INR5,717

We expect revenue to grow 12% YoY to INR5.1b in 3QFY17. The impact of demonetization will not be very sharp on TTK , as the current year will include incremental sales from the acquired entity, Horwood (a high margin business). There was disruption in demand in November. However, healthy sales in October and demand recovery in December have softened the impact.



We expect EBITDA margin to decline 50bp YoY to 12.5%. EBITDA should increase 8% YoY to INR627m.



We expect adjusted PAT to be flattish at INR377m.

8 / 25 / 17

Financial Snapshot (INR Billion) Y/E March

2016

2017 2018E 2019E

Sales

15.3

17.3

20.1

22.7

1.8

2.1

2.7

3.2

1.2

1.3

1.6

2.1

EBITDA NP EPS (Rs) EPS Gr. (%) Sales

100.7 107.8 139.9 178.6 29.6

7.0

29.8

27.7

620.3 675.1 748.7 849.1

RoE (%)

17.2

16.6

19.7

22.4

RoCE (%)

17.3

16.2

18.7

22.1

56.7

53.0

40.8

32.0

9.2

8.5

7.6

6.7

36.3

32.5

25.1

20.3

4.3

3.9

3.3

2.9

Valuations P/E (x) P/BV (x) EV/EBITDA (x) EV/Sales (x)

Hold



6550 / 4010

1,6,12 Rel Perf. (%)

TP: INR4,896 (-14%)

Key things to watch for  Performance of the appliances division post demonetization.  Outlook on exports and recent acquisition of Horwood Homeware.

Quarterly Performance (INR m) Y/E March Net Sales YoY Change (%) Total Expenditure EBITDA Margins (%) Depreciation Interest Other Income PBT before EO expense Extra-Ord expense PBT Tax Rate (%) Reported PAT Adj PAT YoY Change (%) Margins (%) E: MOSL Estimates

1Q 3,404 1.2 3,026 378 11.1 47 6 28 354 37 317 97 30.6 220 246 -7.4 7.2

FY16 2Q 3Q 4,099 4,478 7.3 16.7 3,575 3,897 524 581 12.8 13.0 49 52 7 5 24 20 492 544 0 0 492 544 152 172 30.8 31.7 340 372 340 372 21.7 32.6 8.3 8.3

4Q 3,077 7.5 2,740 338 11.0 62 2 30 303 0 303 87 28.6 216 216 131.2 7.0

1Q 3,790 11.3 3,320 470 12.4 56 23 18 409 82 327 109 33.4 217 272 10.8 7.2

FY17 2Q 3QE 5,011 5,016 22.2 12.0 4,389 4,389 621 627 12.4 12.5 55 82 22 18 17 25 561 552 0 0 561 552 172 175 30.6 31.7 389 377 389 377 14.3 1.4 7.8 7.5

4QE 3,508 14.0 3,140 368 10.5 82 18 25 293 0 293 84 28.6 209 209 -3.1 6.0

FY16

FY17E

15,059 8.5 13,238 1,821 12.1 209 20 102 1,693 37 1,656 508 30.7 1,148 1,174 29.6 7.8

17,311 15.0 15,233 2,077 12.0 279 79 91 1,810 82 1,728 529 30.6 1,199 1,256 7.0 7.3

Niket Shah ([email protected]) Chintan Modi ([email protected]) / Chitvan Oza ([email protected]) January 2017

290

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