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STRICTLY CONFIDENTIAL

AMPANTIQUE’S MORNING PRESENTATION

9 February 2015

Global NewsUS stocks fell on Friday, but the Dow Jones Industrial Average still notched itsbiggest weekly percentage gain in two years, as data showed a strong paceof job creation in January and a pick-up in wages.Asian markets closed just in the green on Friday as a rise in oil prices lifted stocks.

Sector & Corporate NewsTVS Motor Company: The good performance of products launched inrecent times has prompted TVS Motor Company to postpone launches ofmotorbikes by a quarter. The company is now planning to launch two motorbikesin the 1Q and 2Q of FY16. The launches include Victor and a high-powerpremium bike. It did not disclose which would come first. It also set a target toincrease its share to 14-14.5% in the domestic market and 15% in exportsduring 4Q, while it is targeting a market share of ~18% in the medium-term.Tech Mahindra: As the Reserve Bank of India announced the applicationfor payment banking licence, Tech Mahindra was among the list of companiesthat applied for the same. The company, along with Mahindra FinanceServices, has applied for the licence. It is already in the mobile paymentsegment, with two of its platforms, MoboMoney, for which it has acquired anRBI licence till 2018. This platform was developed by CanvasM. The wholepayment play of the company also comes from its acquisition of Comviva fromBharti Group in 2006. The other product that the company has in mobilepayment segment is Mobiquity platform.Infosys BPO secured an IT services deal with Dutch insurance services firmasr for supporting back-office operations. The BPO services arm of the Bangalore-based firm will supply back-office services for the asr labelled pensionsadministration system from April 1, 2015. Eighty-seven employees of asr willbe transferred to Infosys BPO.Tata Communications said it has signed an USD20m multi-year deal withGermany-based KION Group to provide global wide area network services tothe group's 330 sites across 30 countries. As part of the deal, it will replace theKION Group's existing stable of multiple WAN providers with a single globalnetwork.

FROM THE RESEARCH DESK

Antique’s Investor Conference “Build India, New India”Day 2 Highlights

QUARTERLY RESULTS REVIEW

NMDC LimitedBeats expectations on higher iron ore realisationsSun TV Network LimitedRevenues in line, beat on profitabilityApollo Tyres LimitedEurope disappoints on the margin front, domestic business onthe volume frontCEAT LimitedWeak demand, led by higher marketing expenses, continuesto inhibit margins from major expansionPTC India LimitedCore intact; onetime provision hits profitability

Market Snapshot

Global Indices Closing % Chg % YTD

Dow Jones 17,824 (0.3) 0.0

NASDAQ 4,744 (0.4) 0.2

FTSE 6,853 (0.2) 4.4

CAC 4,691 (0.3) 9.8

DAX 10,846 (0.5) 10.6

Russia 826 2.7 4.5

Bovespa 48,792 (0.9) (2.4)

Nikkei 17,649 0.8 1.6

Hang Seng 24,679 (0.3) 4.6

Shanghai Composite 3,076 (1.9) (4.9)

Indian Indices Closing % Chg % YTD

Sensex 28,718 (0.5) 4.4

Nifty 8,661 (0.6) 4.6

MSCI India 535 (0.2) 7.7

CNX Midcap 12,745 (0.9) 1.3

BSE Smallcap 11,077 (1.8) (0.1)

Flows (USDm) Prev. Day MTD

FII (3) 3,135

Locals (7) 86

Provisional flows (USDm)FIIs (16)

Locals 19

Volumes USDbn % Chg

Cash (NSE + BSE) 3.8 (4.6)

F&O (net) 33.8 21.0

FII F&O Stock Fut Index FutNet ($ mn) 45 (93)

Open Int (%) (0.5) (2.6)

ADR/GDR Gainers Last % ChgInfosys 35.8 0.1

ADR/GDR Losers Last % ChgICICI Bank 11.0 (3.3)

Tata Motors 46.7 (2.5)

ANTIQUE STOCK BROKING L IMITED 9 February 2015 ||||| 2FROM THE RESEARCH DESK

Sectoral indices Closing % Chg % MTD % YTD

BSE Auto 19,052 (2.8) (4.7) 2.3

BSE Bank 21,535 (1.3) (5.2) 0.4

BSE Cap Goods 16,722 (0.7) (2.2) 8.3

BSE Cons dur 10,342 (1.0) (2.9) 6.9

BSE FMCG 8,290 0.8 0.2 6.7

BSE IT 11,624 0.9 4.0 9.8

BSE Health 15,220 (1.7) (2.9) 3.6

BSE Metal 10,159 (0.8) (0.3) (5.5)

BSE Oil 10,087 (1.1) (0.6) 1.9

BSE Power 2,104 (1.3) (5.4) 0.6

BSE PSU 7,957 (1.0) (3.0) (3.3)

BSE Realty 1,746 (0.6) (3.6) 12.3

BSE TECK 6,304 0.7 2.7 7.9

Bulk DealsDate Security Name Client Name Buy/Sell Qty Price

6-Feb-14 ADCINDIA Rajasthan Global Securities Ltd BUY 63,832.00 238.98

6-Feb-14 GARNETINT Navkar Corporation Limited SELL 82,500.00 118.00

Delivery SpikeCompany Volume Spike (%) Chg (%)

Tata Motors 6,150,424 121% (5.02)

Sun Pharma 2,343,789 96% (3.41)

Mundra Port 1,738,053 96% (3.84)

Cairn 2,123,768 93% 2.87

BHEL 2,454,314 71% (4.59)

ONGC 1,851,222 49% (1.58)

Tata Steel 1,498,380 49% (2.79)

NMDC 2,939,512 45% 2.03

LT 771,115 33% 0.07

HDFC Bank 1,185,680 32% (2.14)

Derivatives Update

Long Build UpCompany Last % Chg % Chg OI OI (in 000)

HDIL 115 8.8 9.3 25,844UPL 431 2.9 4.7 4,595ITC 376 1.6 2.9 33,079NMDC 138 1.5 4.3 14,072

Short Build UpCompany Last % Chg % Chg OI OI (in 000)

TATAMOTORS 564 (5.0) 4.1 22,949

ADANIPORTS 302 (3.5) 6.1 8,186

AUROPHARMA 1,116 (3.4) 10.4 9,469

CANBK 418 (3.2) 9.4 8,263

Short CoveringCompany Last % Chg % Chg OI OI (in 000)

INDIACEM 102 5.4 (6.0) 21,080

UCOBANK 71 3.4 (6.8) 20,192

ALBK 110 2.6 (7.9) 10,504

IRB 261 2.1 (6.7) 7,590

Profit BookingCompany Last % Chg % Chg OI OI (in 000)

PTC 89 (5.3) (7.7) 12,624

DLF 164 (3.5) (2.5) 18,310

TATACHEM 451 (3.1) (4.2) 5,887

BHARATFORG 1,059 (2.7) (4.4) 3,549

Nifty Outperformers

Price % Chg % MTD % YTD

Cairn India Ltd 254 2.9 9.1 5.6

Housing Development Finance 1,281 2.7 1.4 12.7

Nmdc Ltd 141 2.0 (0.3) (2.7)

Infosys Ltd 2,231 1.7 4.1 13.1

Sesa Sterlite Ltd 211 1.3 4.3 (1.8)

Itc Ltd 374 1.2 1.3 1.3

Bharti Airtel Ltd 368 1.0 (1.5) 4.4

Nifty Underperformers

Price % Chg % MTD % YTD

Tata Motors Ltd 560 (5.0) (4.4) 12.9

Bharat Heavy Electricals 264 (4.6) (9.5) (0.4)

Dlf Ltd 163 (3.5) (3.8) 19.0

Sun Pharmaceutical Indus 927 (3.4) 1.0 12.1

Jindal Steel & Power Ltd 142 (2.9) (10.5) (6.5)

Tata Steel Ltd 369 (2.8) (5.6) (7.7)

Bharat Petroleum Corp Ltd 731 (2.5) (2.4) 13.2


Commodities Update

Commodities Last % Chg % MTD % YTD

Gold ($/Ounce) 1,236 0.2 (3.7) 4.3

Crude Oil ($/Bl) 52 1.4 8.6 (2.4)

Aluminium ($/t) 1,856 (0.8) 0.1 1.7

Copper ($/t) 5,670 (1.3) 2.3 (11.0)

Zinc ($/t) 2,153 0.8 1.5 (0.7)

Lead ($/t) 1,839 0.4 (0.3) (0.2)

Nickel ($/t) 15,179 0.4 0.5 0.7

Economy, Money & Banking

Forex Rate Last % Chg % MTD % YTD

INR~USD 61.7 0.1 0.3 2.2

INR~EUR 70.6 0.0 (0.6) 8.5

INR~GBP 94.7 (0.6) (1.4) 3.9

Bond Market Last Chg (bps) MTD (bps) YTD (bps)

10 Year Bond 7.7 0 1 (15)

Interbank call 25.0 1,800 2,000 1,625

Nifty Nifty P/E Nifty P/B

Source: Bloomberg

Sensex FII Provisional Flows (INRcr) DII Provisional Flows (INRcr)

Source: Bloomberg

INR/USD Gold and silver prices Crude prices

Source: Bloomberg

Inflation vs 10 year yield Nifty premium/discount NSE volatility index (%)

Source: Bloomberg

0

2

4

6

8

10

Feb-13 Jul-13 Dec-13 May-14 Oct-14Inf lat ion (%) 10 Yr Yield (%)

-3,000-2,000-1,000

01,0002,0003,0004,0005,000

Feb-13 Aug-13 Feb-14 Aug-14 Feb-15

-1,500

-750

0

750

1,500

Feb-13 Aug-13 Feb-14 Aug-14 Feb-15

y

62.353.4 52.6

39.6

50.9

0102030

40506070

02-Feb 03-Feb 04-Feb 05-Feb 06-Feb

12

14

16

18

20

22

12-Jan 18-Jan 24-Jan 30-Jan 5-Feb

58

59

60

61

62

63

64

Feb-14 May-14 Aug-14 Nov-14 Feb-15

4000

5000

6000

7000

8000

9000

Feb-11 Feb-12 Feb-13 Feb-14 Feb-15

12

14

16

18

20

22


2.0

2.5

3.0

3.5


14000

16000

18000

20000

22000

24000

26000

28000

30000


0

500

1000

1500

2000


0

10

20

30

40

50

60

Gold (LHS) Silver (RHS)

40

50

60

70

80

90

100

110


ANTIQUE STOCK BROKING L IMITED

9 February 2015

Oil & Natural Gas Corporation Ltd. HOLD

BackgroundOil & Natural Gas Corporation, being part of the regulated space, has seen major sectorreforms and oil price volatility. While under-recoveries are estimated to fall below INR400bnnext year, oil prices may also hover at USD60-70/bbl. The Centre is working on a slab-basedupstream subsidy mechanism, wherein the company would not have to bear subsidy up toUSD60/bbl of oil prices. It also aims to raise oil and gas production significantly over themedium-term from western offshore and Krishna Godavari basin projects.

Key takeawaysThe company has guided for FY15/16/17 oil and gas production of 22.93/24.03/24.15mmt and 23.04/25.26/27.76bcm under the nomination block category and 3.54/3.24/2.53mmt and 1.35/1.08/2.14bcm under joint ventures, respectively. Nominatedgas production in FY17 would rise from Daman fields. Oil production growth in FY16would come from marginal fields like WO-16, B-127, D-1, Cluster-7, and B-193. Thelatter three fields are estimated to see 5,000-8,000bbl per day growth. Decreased JVproduction in FY16 would be due to Tapti decline. ONGC Videsh production guidancefor FY15/16 is over 8mmtoe.

ONGC's major brownfield development project like Mumbai High North/SouthRedevelopment and new projects like Daman and Vashishta are viable at USD50/bbloil realisation and current domestic gas prices. Even KG-DWN-98/2 northern developmentarea can be developed at these prices, with almost double-digit internal rate of return.There is no communication on new upstream subsidy sharing mechanism as yet, thoughthe same is expected soon.

Daman and Vashishta are two new major gas projects that it is pursuing in the near- tomedium-term. Daman and Vashishta are expected to hit peak gas production of8.3mmcmd and 5.9mmcmd by FY21 and FY20, respectively. Tendering is currently onfor INR60.8bn Daman project, while the same would be started for the INR41.2bnVashishta project. Operating expenditure and finding and development cost would remainbelow USD4/mmbtu. Between FY15 and FY17, gas output from these two projects wouldbe 4bcm. Decommissioned facilities in Tapti would be used for Daman gas.

Mumbai High Redevelopment projects are underway, with North being underimplementation, while South has been approved by the board. The Bassein project isalso approved. These projects would reduce the field decline rate materially. ONGChas maintained its annual capex guidance of INR360bn, of which 40% would be inexploration, 27% development, 30% capital, and 3% others.

KG-DWN-98/2 field development plan is under preparation and would be submittedsoon. Preliminary estimates for NDA development are: capex USD5-6bn, oil/gas in-place over 100mmt/100bcm, recoverable over 32mmt/61bcm, peak oil/gas production72,000bbl per day/26.5mmcmd, commissioning oil/gas production FY20/FY19, peakingFY21/FY22, operating expenditure ~USD15/boe, and income tax holiday for sevenyears. Average incremental oil production of 2.5-3mmtpa is expected from this block.

Our viewWhile the much awaited upstream subsidy reforms are expected soon, weak oil prices wouldbe an earnings dampener for ONGC. The company's net realisations would improve by~USD10/bbl each in FY15e and FY16e, yet the earnings outlook is embedded in the currentstock price. The offer for sale is also an overhang. Valuing core FY17e EPS at 10x, we arriveat a target price of INR395 per share, which provides room for a 7% upside from currentlevels. We have a Hold rating on the stock.

Key data(INRm) FY15e FY16e FY17e

Revenue 928,731 1,028,841 1,080,840

EBITDA 492,353 584,443 620,690

PAT 251,557 310,122 329,148

RoE (%) 16.7 18.6 17.8

P/E (x) 12.6 10.2 9.6

Source: Company, Antique

Amit Rustagi+91 22 4031 [email protected]

Sabri Hazarika+91 22 4031 [email protected]


ICICI Bank Ltd BUY

BackgroundICICI Bank is India's largest private sector bank, with total assets of INR5.9trn as of March31, 2014 and profit after tax of INR98.1bn for the year-ended March 31, 2014. At present,the bank has a network of 3,853 branches and 12,123 ATMs across India, and a strongCASA franchise. It offers a wide range of banking products and financial services to corporateand retail customers through a variety of delivery channels and group companies.

Key takeawaysRetail advances will continue to power overall loan growth in FY16. The bank is going tocontinue pursuing a strategy of healthy and calibrated growth across both secured andunsecured retail segments. Growth in retail assets will continue to be backed by stronggrowth in the retail deposit franchise. The bank continues to make significant investmentsin its physical and technological infrastructure, which will strengthen its CASA base.Margins are likely to hold up at current levels. The management expects a 50-75bps cutin the base rate over the next six-to-nine months.

It sees higher public investments in the Budget, which should help restart the capex cycle.However, this is likely to happen with a lag of two-to-three quarters. As a consequence,in the interim, corporate loan growth and fees linked to corporate loans are likely toremain weak.

Retail fee income contributes 60% of overall income and is likely to see mid-teen growth,given its strong market share gains in the life insurance business.

Outlook on asset quality is challenging for the next two quarters. The management expectsslippages and restructuring to remain at similar levels of 3Q (INR35-40bn). Iron andsteel exposures of the bank are likely to be under significant stress, given the sharp fall insteel prices. It sees higher slippages from the INR120bn restructured book over the nextcouple of quarters.

Repatriation of capital is likely from its Canadian subsidiary in 4Q.

Our viewWhile the next one or two quarters maybe slightly challenging for the bank, given somepressures linked to the resurfacing of iron and steel exposures, ICICI Bank is extremely wellcapitalised to tide over these issues. Positive macro tailwinds and easing rates cycles make usconfident on the bank. We maintain our Buy recommendation with a target price of INR397per share. We value the standalone bank at INR338 per share (2.3x FY17e P/BV) andsubsidiaries at INR59 per share.


NII 186,454 218,706 256,653

PP Profit 189,497 220,264 259,268

PAT 105,515 131,617 161,319

RoE (%) 13.0 14.5 15.6

P/B (x) 2.5 2.2 1.9


Alok Kapadia+91 22 4031 [email protected]

Renish Patel+91 22 4031 [email protected]


Lupin Ltd. HOLD

BackgroundLupin has grown at a tremendous pace in the last decade, led by consistent market sharegains in the US, India, and Japan. In terms of market capitalisation, it is the second highestpharmaceutical company in India. Majority of the management’s interaction centered on USgrowth going forward and concerns surrounding its Japanese and rest of the world businesses.

Key takeawaysThe management was not happy with its growth in 3QFY15 and expects it to do muchbetter than that.

Impact from channel consolidation is over in the US. Although there has been a slowdownin the approval process in the US, things should improve going forward, as we start tosee a positive impact from Generic Drug User Fee Amendments (GDUFA).

Scrutiny from the US Food & Drug Administration has increased, but the company hasequivalently upgraded its standards and reviews its compliance and manufacturingquality regularly to prevent adverse regulatory events. It hires consultants, which rigorouslyaudit its USFDA approved facilities.

Its oral contraceptive business has not turned out as per the management’s expectations.However, it expects a much better performance once the entire portfolio plays out.

Respiratory will not behave like a normal generic market, as companies might have toundertake a scientific promotion for their products.

Biosimilar launches for Lupin will commence from Japan for regulated markets, since theUSFDA has not been able to lay down clear guidelines for the same. Europe has guidelinesfor only specific products.

The Japanese business has been impacted by a decline in sales from I'rom Pharmaceutical,but Kyowa Pharmaceutical Industry Co’s growth has remained robust. I’rom sales havebeen impacted due to its contact manufacturing business, wherein certain products havewitnessed lower offtake post the acquisition. The company is currently selling five productsin Japan, but would consistently launch more products to improve gross margins of theJapanese business.

Our viewWe have a Hold rating on the stock with a target price of INR1,587 per share, at 22x FY17eEPS. At the current market price of INR1,545 per share, the stock is trading at 24.3x FY16eand 21.4x FY17e EPS. With a huge niche Abbreviated New Drug Application pipelineawaiting approval and excellent execution track record, Lupin should consistently grow at apositive pace in the US. Growth in the domestic formulations business should continue toremain robust, with a revival in overall domestic market growth. Even though the RoW businessis impacted by currency devaluation, the long-term growth drivers are in place to deliverconsistent growth in local currency terms.


Revenue 137,895 155,510 176,029

EBITDA 39,215 43,077 49,193

PAT 24,914 29,055 33,486

RoE (%) 31.3 28.5 26.3

P/E (x) 28.5 24.5 21.2


Hitesh Mahida+91 22 4031 [email protected]


Asian Paints Ltd. Not Rated

BackgroundAsian Paints is India's largest and Asia's third largest paint company. It is a leader in decorativepaints. At present, the company has ~35,000 dealers across the country. It also has a homeimprovement division, wherein it provides home painting services. The company recentlyforayed into other home improvement solutions by acquiring Sleek. Paint brands owned bythe company are: Ace & Apex, Apcolite, Apex, Apex Ultima, Asian Paints, Colour Next,Premium Gloss Enamel, Royale, Royale Play, Touchwood, Tractor Emulsion, and Utsav.

Key takeawaysThe management maintained that consumer demand for decorative paints remains sluggishacross the country, except in the eastern region, which is seeing positive growth.

In terms of industrial paints, automotive original equipment manufacturing demand remainssluggish. However, there are some positive demand signs for other industrial paints.

The management is positive on demand recovery, as overall macro-economic conditionsimprove both for decorative and industrial paints.

On benefits from falling crude prices, the management said it would maintain marginsand take appropriate pricing actions to protect its market share.

The company believes that a reduction in prices doesn't always translate into higherdemand. However, an increase in price slows down demand, as the consumer tends topostpone the painting decision.

Full benefit of a decline in crude prices is expected to reflect in 1QFY16 and partially inthe fourth quarter of FY15.

Asian Paints is in the process of setting up a plant in Indonesia, with a capacity of 24,550tonne, under PT Asian Paints Indonesia. It is also setting up a second company for importingfinished goods including decorative paints, other coatings, and related items for sale inIndonesia. A principal license has been issued by BKPM (Investment Coordinating Boardof the Republic of Indonesia).

In terms of home improvement, it is looking to map the newly acquired businesses with itsexisting channels and leverage the company's reach.

Our viewAsian Paints being a leader in the Indian paint industry is in a sweet spot to reap the benefitsfrom improvement in overall macro and demand sentiments. It has an edge due to its highbrand loyalty, vast product portfolio, and reach. Apart from growth in decorative, pick-up inindustrial activity will lead to higher demand for industrial paints. Construction chemicals willalso aid growth.

Key data(INRm) FY13 FY14 9MFY15

Revenue 108,744 125,816 105,149

EBITDA 17,465 20,285 16,762

PAT 11,139 12,188 10,542

RoE (%) 36.3 33.0 -

P/E (x) 42.3 43.1 -


Sagarika Mukherjee+91 22 4031 [email protected]


Dr. Reddy’s Laboratories Ltd. BUY

BackgroundDr Reddy’s Laboratories is one of the leading generic companies in India, the US, andRussia. But growth offlate has been impacted by currency devaluation in Russia and slowdownin Abbreviated New Drug Application (ANDA) approvals in the US. The managementinteraction was primarily centered on the situation in Russia and receipt of Form 483 for itsSrikakulam facility, which could impact US growth.

Key takeawaysCurrent production has not been impacted due to receipt of Form 483 for its Srikakulamfacility. It has replied to issues raised by the US Food & Drug Administration in its Dec-14Form 483 and is awaiting reply from the regulator. Valsartan and Nexium approvalhave got impacted due to Form 483 for Srikakulam. The management does not expectthese approvals till they receive the Establishment Inspection Report for this facility.

They have started doing site transfer from Srikakulam to other facilities, under the fast-track CBE30 route, which is meant to generate approval within 30 days. However, it isnot giving any guidance on the timeline for approval.

The company has hedged its Russia receivables till Mar-15. It has undertaken double-digit price increases in certain products in Russia to mitigate the currency impact. DRL canundertake price increases in 45% of its Russian portfolio. However, taking further priceincreases could affect affordability, as the Russian market has been growing primarily onthe back of price increases in the last few years.

Venezuela has seen tremendous growth in the last two quarters, on the back of priceincreases and high demand. The management has currently seen no issue on thereceivables front from the region and has been able to repatriate funds as latest as Dec-14. The government has also said it would like to keep the exchange rate unchanged forfood and medicines.

DRL has got out of the tender market in Germany, which is affecting their topline growthbut improving margins.

Pharmaceuticals Services and Active Ingredients (PSAI) business performance will remainmuted, as the trend emerging in the pharmaceuticals business is formulators, which areincreasingly becoming backward integrated.

Our viewAt the current market price of INR3,359 per share, the stock is trading at reasonable valuationsof 21.5x FY16e and 16.8x FY17e EPS. We maintain our Buy recommendation on the stockwith a target price of INR4,006 per share, at 20x FY17e EPS. We believe US growth willmore than offset the currency devaluations in Russia and the CIS region. Improving performancein its domestic formulations and PSAI business also reduces the overall risk in the stock.


Revenue 150,838 173,674 194,363

EBITDA 36,050 42,724 49,174

PAT 23,903 29,290 34,517

RoE (%) 23.8 23.8 22.6

P/E (x) 22.1 18.0 15.3




YES Bank Ltd. BUY

BackgroundYES Bank, India's fourth largest private sector bank, operates a widespread branch networkof over 600 branches across 375 cities, with 1,156 ATMs and two national operating centersin Mumbai and Gurgaon. The bank specialises in retail, private banking, and wealthmanagement business, along with corporate and institutional banking, financial markets,investment banking, corporate finance, branch banking, business and transaction banking,and business lines across the country.

It has demonstrated robust credit growth of 38% CAGR during FY10-14, while earnings havegrown by 60% CAGR during the same period, with stable asset quality. Growth has comelargely from its large- and mid-sized corporate book.

Key takeawaysThe management expects slowdown in the corporate loan growth to continue till theoverall economy revives. It expects improvement in the capex cycle from 2HFY16. Retail/SME segment will drive incremental growth for the bank going forward. With Tier I ratio~12%, the management said it would continue expanding its balance sheet, with over25% loan growth for the next couple of years.

At present, retail/SME loan services are available at only 300 branches. The managementis increasingly focuses on enlarging its retail/SME services by covering additional branches.Going forward, growth in these segments is expected to accelerate with higher penetration.

YES Bank plans to open 125-150 braches per year for the next couple of years. However,branch expansion run-rate could increase, if the economy picks-up earlier-than-expected.

The management has set a target to expand NIM to 3.4% and 3.6% by FY16e andFY17e, driven by ~300bps improvement in CASA ratio, higher incremental growth inretail/SME, and expanding credit-deposit ratio.

It is not considering a near-term base rate cut, due to lack of credit growth. However, ifthe banking system starts cutting rates, than it might also have to follow suit and cut rates.

The management expects other income to grow higher than balance sheet growth, drivenby a pick-up in third-party sales (cross-selling of insurance/mutual funds etc), due toimprovement in the capital market; increase in credit card fees/charges, once consumerspending accelerates; and higher income from ATM fees, on the back of its increasingATM network.

As on December 31, 2015, the bank’s liquidity coverage ratio is substantially higherthan the regulatory requirement of 60%. As a result, it does not foresee excess investmentin SLR securities. The management said it would try to improve the LCR ratio by changingits liability mix.

Cost-to-income ratio to remain stable at 42-43% going forward.

RoA to touch 1.8% by FY18e.

Our viewAt the current market price of INR810 per share, YES Bank is trading at FY16e and FY17e P/BV multiple of 2.4x and 2x, respectively. An improving retail liability franchise, adequatecapital (Tier I at 11.9%), sustainable loan growth, coupled with scope for margin expansion,places YES Bank in the driving seat to participate aggressively in the next credit cycle. Hence,it is our preferred pick in the private sector banking space and is likely to be a significantbeneficiary of easing rates. Consequently, we have Buy rating on the stock with a target priceof INR975 per share, based 2.5x FY17e P/BV.


NII 34,876 43,570 52,732

PP Profit 33,722 44,899 55,121

PAT 20,447 25,091 31,257

RoE (%) 21.6 19.5 20.5

P/B (x) 2.9 2.4 2.0





Oil India Ltd. BUY

BackgroundOil India has been exposed to major sector reforms and oil price volatility. At USD60/70 perbarrel average Brent prices in FY16/17e, gross under-recoveries are likely to be ~INR380-440bn. The Centre is working on a slab-based upstream subsidy mechanism, wherein itwould not have to bear subsidy up to USD60/bbl of oil prices. The company is working toraise its crude oil output, though natural gas production has been robust. It may have to payoil royalty on gross realisations, even though there has been no action from the Assamgovernment as yet.

Key takeawaysOIL's current crude production run-rate is 9,500tonne per day, which if annualised is~3.5mmt. The company hit a high of 10,000t/day and is targeting the same goingforward . In 9MFY15, oil production was 2.58mmt, and hence expects FY15 output~3.5mmt. FY16 production guidance is ~3.7mmtpa. It is attempting to raise productionby drilling horizontal wells, which are likely to be completed by FY15-end. The Baghjan-Duliajan tank farm pipeline has been completed and is awaiting administrative clearanceto commission it.

Natural gas production is steady, with 9MFY15 gas production at 2.1bcm. Hence, it islikely to achieve its FY15 target of 2.8bcm. Going forward, volumes are expected tocross 3bcm, as the Brahmaputra Cracker and Polymer cracker gets commissioned byMar-15. OIL has readied its facilities for supply of gas to BCPL, which is going to usenaphtha as feedstock.

New upstream subsidy sharing mechanism has not been announced yet, but is expectedmost likely before its 3QFY15 result. The management views the new mechanism positively,as USD60/bbl net crude realisations would be a positive jump and drive revenues andprofitability. Domestic natural gas prices are estimated to weaken towards USD4.7-4.8/mmbtu, as benchmarks have declined in sync with a fall in oil prices.

In the Krishna Godavari basin, the company has drilled its first well, which is under study.An announcement is expected soon, while a second well will be drilled. In Mizoram, thefirst well is under drilling.

OIL's capex guidance is INR39bn. Mozambique would require a net annual capex ofUSD150m, for which interest would have to be expensed. It has 4% stake in theMozambique Area 1 consortium. Outlook for the Mozambique asset continues to bestable, despite volatile oil and LNG prices.

It has not heard anything fresh on the royalty issue. Earlier, the Assam government hadsent a notice seeking royalty on gross oil realisations, which it had replied to. Since thenthere has been no official communication. The Value Added Tax case with the Assamgovernment’s appellate authority would come up for hearing next in February.

Our viewOIL would benefit from the new slab-based upstream subsidy mechanism, with net realisationsestimated to improve to USD54/59 per barrel in FY16/17e from USD47/bbl in FY14. Wevalue OIL at 9x FY17e EPS of INR72 per share to arrive at our target price of INR700 pershare, which provides room for a 27% upside from current levels. We recommend a Buy.


Revenue 113,230 130,188 137,837

EBITDA 53,491 59,488 63,531

PAT 36,377 39,876 43,691

RoE (%) 15.9 15.8 15.7

P/E (x) 9.0 8.2 7.5





Grasim Industries Ltd. Not Rated

BackgroundOriginally a textile manufacturer, Grasim Industries has successfully diversified into viscosestaple fibre, cement, and chemicals. It is a perfect fit to play on the government’s recent'Make In India' initiative, given its capability to deliver large-scale volumes. Increasinggovernment focus on infrastructure development places Grasim, through its subsidiary UltraTech,in a dominant position in the Indian cement industry, which would ensure robust growth goingforward. Slowdown in new capacity additions in China and pick-up in the domestic textileindustry should lead to an improvement in VSF industry utilisation.

The company, on a consolidated basis, reported 8% revenue CAGR during FY12-14 toINR259bn, while EBITDA de-grew 7% during the same period on the back of a significantfall in EBITDA margins to 19% in FY14 from 25% in FY12. Margins were impacted given: a)Subdued realisation on overcapacity in China’s VSF segment; b) Rising raw material prices,and c) Sluggish demand in cement sector, due to slowdown in infrastructure projects, realestate sector, and capex cycle. Lower EBITDA resulted in 11% de-growth in earnings atINR20.7bn during FY12-14.

Key takeawaysWith a decline in global cotton prices, led by oversupply and changes in China’s cottonpolicy, pricing weakness in domestic VSF is expected to continue for the next six-to-ninemonths. Hence, the management does not foresee any significant improvement in VSFrealisation in the near-term.

Amid challenging conditions, with a slowdown in incremental capex in adding newcapacities, particularly in China; closure of few non-viable capacities; and acquisitionsof small players by large players, industry utilisation is expected to improve gradually.With strong brand equity, ramping up of the new facility at Vilayat, and concentratedmarket and product development activities, the management expects VSF volumes toimprove going forward.

Continuous softening of fuel prices and optimisation of fuel mix is expected to containcost for the cement division in the coming years.

Due to the current surplus supply regime, domestic cement prices are expected to remainunder pressure in the near-term. However, the demand situation is set to improve on theback of: i) Improvement in housing demand, due to higher government focus and softeninginterest rates; and ii) Announcement of infrastructure projects by the government.

Total consolidated cement capacity, including acquisitions, and greenfield/brownfieldexpansion is expected to reach ~75mtpa.

Our viewAt the current market price of INR3,903 per share, Grasim is trading at FY16e and FY17eEV/EBITDA multiple of 6.6x and 5.2x, respectively. VSF volumes are expected to increasegoing forward on the back of a slowdown in new capacity additions in China and anexpected gradual recovery in the domestic textile industry, with the ongoing greenfieldexpansion at Vilayat. With higher share of premium specialty fibre, margins are also expectedto expand in coming years. Revival of infrastructure projects, supplemented by regulatoryreforms and improvement in housing demand, with an interest rate cut augur well for thecement industry. On the back of: a) Pick-up in volumes, post new capacities getting commissionedin the VSF and cement segments; b) Improvement in the VSF pricing environment; and c)Better-than-expected cement demand, the stock could re-rate going forward.


Revenue 276,447 290,042 237,313

EBITDA 59,442 49,348 35,956

PAT 27,044 20,715 12,371

RoE (%) 13.9 10.0 -

P/E (x) 9.5 12.8 -





Bharat Forge Ltd. BUY

BackgroundBharat Forge is a global leader in metal forging, serving sectors such as automotive, energyand utilities, construction and mining, wind energy, et al, with a presence mainly in India, theEU, and the US. After witnessing a strong demand recovery from target export markets inFY15, especially from Americas, it is the turn of an all inclusive growth for the company, ledby a domestic recovery in original equipment manufacturers, in addition to global key marketscontinuing to improve. On the back of the overall entity operating ~75% utilization, there isvisibility of limited capex need in FY16-17e, thus calling for sustenance of major deleveragingand improvement in capital efficiency ahead. Recently, BHFC acquired an entity in France toincrease its footprint in the EU oil and gas forging space. Its aluminium forging facility, underits EU subsidiary, would be operational from CY16, thus diversifying its product portfolio.

Key takeawaysThe management expects 10-12% revenue growth from the oil and gas segment. It hasmainly three-to-four customers in this segment in the US/EU driving growth. BHFC islooking at new avenues in the oil and gas space for manufacturing surface andunderground rig parts.

It expects to significantly grow in the aerospace segment. At present, it has only fourorders: three from Europe and one from the US. It expects revenues of ~USD50m andUSD100m in the next three and five years, respectively, mostly orders from the engineside and landing gears.

In USD terms, the management expects to sustain exports to Americas ~12-15% in yearsto come, including the US commercial vehicle opportunity, which is growing ~15%, besidesadding new customers in the North American truck market. Last quarter, BHFC won fourexport orders from global OEMs for supply of engine components. It also foresees arecovery in the domestic CV cycle, as it has been receiving new orders from CV OEMs.

The company aims to be debt-free soon by using its strong cash flows.

The management aims to grow each vertical to over USD100m in the next four-to-fiveyears, with concerted thrust on new product development. It is looking to enhance marketshare by value addition in existing clients as well as by adding new customers.

It is confident of sustaining margins at present levels of 30% in the foreseeable future.

The management does not see any execution on the domestic defence front for the nextthree years at least, despite much hue and cry in the media based on the government’s‘Make in India’ campaign. It takes almost three years from conceptualisation, designing,and pilot testing for defence-related forgings in general.

Our viewA strong performance, with a healthy growth in exports, particularly the US markets, resultedin higher margin exports now contributing 61% of revenues, amid a favourable currency. Thecompany has a strong global marquee customer base globally and is all set to grow itsearnings at a robust 34% CAGR over FY15-17e. We have a Buy rating on BHFC with a pricetarget of INR1,356 per share, based on 22x FY17e earnings.


Revenue 80,871 99,164 119,460

EBITDA 15,505 19,238 23,570

PAT 8,011 11,094 14,350

RoE (%) 26.7 29.5 29.8

P/E (x) 18.9 13.7 10.6


Basudeb Banerjee+91 22 4031 [email protected]


Marico Ltd. Not Rated

BackgroundMarico is a leading Indian player in consumer products in the global beauty and wellnessspace. Its products in haircare, skincare, healthcare, and male grooming generated a turnoverof ~INR47bn during FY14. It markets well-known brands such as Parachute, Saffola, Set Wet,Zatak, and Livon. The company has remained at the forefront of innovations in the foodscategory and has successfully created a large profitable category of premium edible oils inIndia. A large portion of the category’s growth is derived from consistent marketing efforts toincrease awareness about the product’s health benefits, which has led it to charge a significantpremium over other players, whose offerings are limited to commodity-based oils without anyspecific benefits.

Key takeawaysThe company has not yet initiated any price cuts in Saffola, despite a decline in vegetableoil prices. Safflower prices declined last quarter, while the same for other oils like rice branstarted falling much earlier. Its key competitor in premium edible oils - Sundrop - is yet to cutprices. However, Marico might initiate price cuts, with promotional offers, on large stockkeeping units like five litre packs.

Under 'Project One', which focuses on increasing marketing and distribution in the top sixmetros, Saffola will be the key beneficiary in the product portfolio. Marico expects ProjectOne's Phase 1, which covers only the top six cities, to self-fund the next stage of growth. Asper the management, incremental volume growth will not accrue from increasing consumptionfrom existing consumers but from acquisition of new customers. Hence, an increase indistribution will be the key growth driver for the product.

The management expects the Saffola foods category, in which oats forms a largest chunk,to cross INR1.3bn in sales next year. The same has received positive feedback and matchedthe company's internal expectations. Marico has successfully used the healthy foods platform,under which it launched Saffola Oats, to position the brand in the snack category, thusincreasing the marketing scope of the product by many folds. Oats had an exit marketshare of 19%, which has increased by 600bps over last year. The brand is currentlyincurring cash losses. It will start domestic manufacturing by appointing a miller, thussaving on import duty, and be able to amortise advertising spends henceforth.

In the oats category, Marico has used its learning from the branded rice segment (SaffolaArise) and aligned the portfolio mix in favour of savoury oats (sweet and salty variants).The latter now comprises over 50% of its oats portfolio. The current portfolio offerings arejust in two SKUs (single serve pack of INR10 and a large pack of 400gm). The managementis bullish about the prospects of this product and will explore other categories within foodsafter the current portfolio gains scale.

Our viewMarico is expected to drive volume growth in all its core categories like Parachute CoconutOil, value added hair oils, and edible oils by widening its rural reach, while deepening it inurban markets. It remains the market leader in the coconut oil segment and commands pricingpower compared to its peers. The management believes that the excess benefits, if any, ofdeclining raw materials will have to be passed on to the end consumer, while retaining someportion for investing in brands. The company follows a strategy of maintaining its marginswithin a fixed band of 12-13% in any part of the cycle, thereby leading to higher earningsvisibility, even in the current muted environment. As per consensus EPS estimates of INR9.7/11.4 for FY16/17, the stock is trading at a P/E of 36x/31x, respectively.


Key data(INRm) FY13 FY14 1HFY15

Revenue 45,692 46,865 44,973

EBITDA 6,368 7,591 6,988

PAT 3,959 4,854 4,634

RoE (%) 25.3 29.1 -

P/E (x) 37.8 34.2 -



NHPC Ltd. Not Rated

BackgroundNHPC, a miniratna company, was incorporated by government of India in 1975 as a centralhydro-based power generation utility. It currently owns and operates 6.5GW of hydro-basedgeneration capacity at the group level, with another 3.3GW hydro-based capacity is under-construction.

Key takeawaysUnit-4 of Parbati-III has been declared commercial in Jun-14, whereas Unit 1and 2 ofParbati-III has been declared commercial in Mar-14.

Unit-4 of Uri-II was commissioned in Feb-14 (all four units have been commissioned).

Work on Teesta Low Dam Project has restarted and is expected to get commissioned inFY16.

The company expects the Kishanganga project to get commissioned in FY17.

Work on Parbati II and Subansiri has slowed down considerably and is expected to getcommissioned in FY18 and FY20, respectively.

Regulated equity of commissioned plants are INR97.5bn, which earns 18-19% RoEincluding incentives.

The company's capex requirement for FY16/17 is INR45/43 bn, respectively.

Debtors situation has improved over the quarters, but is still worrying. Debtors as ofSeptember and December-end were INR37bn and INR30.5bn, respectively, as Jammu& Kashmir paid back INR6bn in 3QFY15. However, J&K, Uttar Pradesh, and Punjabremain the highest debtors at INR1.3/2.9/2.2bn, respectively.

As per the recommendation of the Institute of Chartered Accountants of India, NHPC isbooking costs for under-construction projects - Subansiri and TLDP IV - through the Profitand Loss Account. The same will be capitalised as and when the plants get commissioned.

Our viewNHPC's valuations may seem reasonable at 0.8x FY16e book (discount to NTPC and PowerGrid Corporation of India). However, RoEs on a reported basis are likely to remain very lowat 7-8% versus 11% for NTPC and 14% for PGCIL. With muted commissioning over the nextthree years (290MW on a base of 4,857MW), we expect subdued earnings growth. Clarityon Subansiri and Parbati II construction and commissioning timelines are still awaited. Webelieve the issues might remain in the near-term. Even if construction was to start today,commissioning is unlikely within three years. Book value of 20% is being invested in projectsthat are either stuck or facing problems (Parbati II and Subansiri). High cash balance willlead to muted book RoEs over the next two years. With the government's stake at 86%, theoffer for sale remains an overhang on the stock.

Rahul Modi+91 22 4031 [email protected]



Revenue 64,062 74,159 52,868

EBITDA 42,804 44,460 31,764

PAT 26,174 12,188 14,800

RoE (%) 8.4 4.2 -

P/E (x) 9.3 18.7 -



Glenmark Pharmaceuticals Ltd. BUY

BackgroundGlenmark Pharmaceuticals is a niche generic pharmaceutical company, with a focus oninnovation. The company's presence in growth and complex segments like dermatology,modified releases, controlled substances, and oral contraceptives has ensured consistentgrowth in the US. It has a front-end in almost all major emerging markets, with consistentlaunch of differentiated products. The management’s interaction primarily centered on growthin Russia, Venezuela, and the US going forward.

Key takeawaysThe management is guiding for 10-12 Abbreviated New Drug Application approvals inFY16, with 20% overall topline growth.

It sees a busy 2015 in terms of ANDA launches, with several high-value launches likeAzelaic acid, Tarka, Ortho Tricyclen, Desmopressin, Finacea, Welchol, et al.

The company’s oncology injectable facility has received an Establishment InspectionReport from the US Food & Drug Administration, which should result in oncology injectablelaunches in FY16.

Glenmark have filed for 11 ANDAs in the US this fiscal till date and expects to file anadditional four by FY15-end. It has stepped up dermatology filings in FY15.

The company’s oral contraceptive business in the US has been very profitable. However,growth will improve only with new ANDA approvals in this segment.

In Russia, it has been impacted by the RUB’s devaluation, but plans price increases tomitigate the impact. The management believes that an average price hike of 10% couldnullify the currency impact at the EBITDA level. Glenmark has received three-to-four positiveapprovals in Russia in FY15, which can help it grow the business at 20%, in RUB terms,in FY16. It is not hedging its receivables from the region.

At present, 20-25% of its Latin America sales accrue from Venezuela, which has seenhigh growth due to high price and demand. The company has been able to repatriatetill date and has not faced any issue regarding the same. Glenmark is growing at 11-12% in local currency terms in Brazil.

Domestic business will continue to grow at 16-18% going forward.

Our viewWe maintain our Buy recommendation on Glenmark with a target price of INR893 per share.We have valued the company on a SoTP basis, with base business at INR833 per share, or16x FY17e earnings, at a 20-25% discount to larger peers; Crofelemer at INR5 per share;Para IVs at INR22 per share; and NCE/NBE pipeline at INR33 per share. We believeconcerns related to Russia and Venezuela are overdone. The company has a very busy FY16and FY17 ANDA launch pipeline, which should significantly improve its US growth and morethan offset the above concerns. Domestically, it should continue its outperformance.


Revenue 72,050 86,177 106,589

EBITDA 15,503 21,207 33,403

PAT 9,422 14,217 24,287

RoE (%) 27.6 31.6 38.4

P/E (x) 22.1 14.4 10.2




Torrent Pharmaceuticals Ltd. Not Rated

BackgroundTorrent Pharmaceuticals has quickly gained critical mass in the US, despite its late entry, dueto launches like Cymbalta and Micardis. It is among the top five companies in the cardiacand central nervous system segments domestically, and has recently acquired ElderPharmaceuticals' domestic business to provide a further fillip to its Indian business. Themanagement’s interaction centered around its outlook for the domestic and US businesses,and concerns surrounding its Brazil and European operations.

Key takeawaysElder Pharma’s acquisition is going as per its expectation. Its sales were lower during thequarter, primarily due to the buying pattern of distributors. The management expectsElder Pharma’s sales to be more consistent and stabilise over the next two-to-three quarters.

Torrent Pharma has undertaken price increase in Elder Pharma's portfolio. The latter’soperating margins are in excess of 35%, and the management feels it can consistentlygrow the business at 15-20%.

At present, it doesn't see the need to increase capacity for its insulin partnership withNovo Nordisk. It is currently importing active pharmaceutical ingredients from NovoDenmark and selling the formulations to Novo India.

Torrent Pharma is gearing up for Nexium’s launch in the US and expects it to be a six-to-seven player market. The management feels its US business is in a sweet spot, with 20Abbreviated New Drug Applications pending approval and 44 ANDAs in the pipeline.

The company’s current US Food & Drug Administration approved facility is operating at80-85% capacity utilisation. The new Dahej facility will significantly increase its US capacity.

The ANDA approval process has slowed down to 36 months from 24 months earlier. Themanagement expects six-to-seven ANDA approvals in FY16.

Its Brazilian business has not been performing well since the slowdown in the approvalprocess there. It currently has 13 filings pending approval in Brazil. Torrent Pharma hasstarted a generic-generic division in Brazil.

The company’s European operations are profitable. However, margins are lower than itsoverall consolidated margins.

Our viewAt the current market price of INR1,123 per share, the stock is trading at 21.2x FY16e and17.5x FY17e EPS. It has been gaining traction in the US, with consistent ANDA launches andElder Pharma acquisition providing the much-needed impetus to the domestic business. Europehas been growing for the company, with Heumann consistently winning tenders in Germany.



Revenue 30,535 40,363 34,510

EBITDA 7,113 10,545 8,580

PAT 4,328 6,639 6,210

RoE (%) 36.0 39.9 -

P/E (x) 13.6 13.4 -



Havells India Ltd. HOLD

BackgroundHavells India is a leading player in switchgear (mainly domestic switch gears), cables andwires, consumer appliances, and lighting and luminaries. It also operates in Europe, Latin-America, and North America through its subsidiary: Sylvania. Although the company hasbeen delivering robust performance in the domestic business, Sylvania has been showingmuted performance, impacted by muted growth in the European region, currency headwinds,and increasing competition.

Key takeawaysThere is a clear consumer shift to organised from the unorganised market.

At present, the LED business is growing at a fast pace of 50-60% per annum.

In Europe, the overall lighting market is not witnessing any growth.

In Sylvania, the company expects 3-4% of annual growth, led by growth in Latin Americaand an EBITDA margin of 5-6%.

Our viewHavells India is among the leading players in electrical consumer products. It has beensuccessful in establishing formidable brand equity, with its focused strategy. The companyhas been delivering above industry growth in its domestic business. However, mutedperformance in Sylvania remains a drag on return on capital for the company. The stock iscurrently trading at a rich valuation of 30x FY16e and 25x FY17e EPS.


Revenue 87,321 97,457 110,093

EBITDA 8,003 9,848 11,594

PAT 3,972 5,745 6,935

RoE (%) 21.5 28.7 28.7

P/E (x) 39.7 27.5 22.7


Dhirendra Tiwari+91 22 4031 [email protected]

Deepak Narnolia+91 22 4031 [email protected]


JSW Energy Ltd. HOLD

BackgroundJSW Energy is the most profitable private sector power generator in India. It has an operationalcapacity of 4,531MW, with the recent acquisition of Karcham Wangtoo Hydro Electric PowerPlant (1,391MW) and Baspa hydro projects from Jaiprakash Power Ventures. Of the 3,140MWcoal-based projects, 46% is currently sold under a long-term agreement, with the balanceunder merchant. It is the only power company in the private sector with less than 2x debt-to-equity ratio. We believe its strong balance and expected earnings over the next two yearswill provide scope for inorganic expansion.

Key takeawaysOf the 1,200MW imported coal-based capacity at Ratnagiri, the company has a powerpurchase agreement with Maharashtra State Electricity Distribution Company for 300MW.Despite being on a Case 1 basis, it is under-recovering variable cost due to change inthe law in Indonesia. It has also signed a PPA for 375MW with JSW Ispat, based onCentral Electricity Regulatory Commission’s regulations, earning 15.5% RoE. JSWE expectsto increase its PPA with JSW Ispat to 550MW as and when the JSW Ispat's Dolvi capacityis enhanced.

860MW at Vijaynagar continues to be sold on merchant basis in the southern region.The company expects rates to be firm for the next two years, led by transmission constraints.It is scouting for all available options to sign long-term PPAs as and when the opportunitycomes up.

Raj West Power has improved its operational performance, with higher lignite availability,as the Centre approved mining up to 7MT for four years. As it continues to bill theconsumer at an interim tariff of INR4.06/kWh, it is earning a RoE of 11-12%. A finaltariff is expected in the next three-to-six months.

JSWE is planning to participate in three upcoming coal block auctions. This will be linkedto its existing Vijaynagar and Ratnagiri plants, as their equipment can support up to 40%domestic coal blending.

Enterprise value of the JPVL acquisition stands at INR97bn, of which INR45bn is projectdebt. It plans to use INR12-15bn from internal accruals and raise the balance as debt,which is expected to be repaid over the next three-to-four years.

JSWE is planning to raise equity to fund its further acquisitions. It may divert coal blocksto the newly acquired plants, as permitted, with prior approval from the Ministry of Coal.

Our viewWe maintain our Hold rating on the stock due to the recent run-up in the stock. We believe riskto the company's earnings still remain, given the fact that 50% of its capacity still remainsopen and new acquisitions of under-construction plants may lead to back-ended earnings. Atthe current market price of INR102 per share, the stock is trading at 1.9x and 12x FY17e P/B and P/E, respectively.


Revenue 96,169 112,258 109,115

EBITDA 36,013 48,012 45,532

PAT 13,890 14,341 14,325

RoE (%) 18.3 16.6 14.8

P/E (x) 13.0 12.5 12.6





UPL Ltd. Not Rated

BackgroundUPL, formerly known as United Phosphorus, is one of the fastest growing (growth has been3.9x its industry average over the last 10 years) and most profitable generic agro-chemicalcompany in the world, making it one of the most attractive proxies of the global agro-chemicalindustry today. The company has manufacturing plants in 28 locations across 15 countries. Ithas a marketing network in 124 countries, through 50 subsidiaries. The company has built acomplete product solution profile that contains fungicides, herbicides, insecticides, and seeds.It has over 3,500 product registrations with statutory authorities to market agro-chemicals intheir respective countries. The company has grown at a tremendous rate of 25% CAGR in thelast 10 years. In 9MFY15, UPL achieved a turnover of INR85bn, registering a growth of 13%per annum; EBITDA of INR16bn, up 12%; and margin of 19%, which was flat despite a failedmonsoon this year. PAT rose 17% YoY to INR7.3bn.

Key takeawaysIn 9MF15, UPL outperformed the industry by growing at 17% YoY, versus industry growthof 12%, by focusing on innovation and having a pan-India presence, which insulates itfrom a bad crop year for a particular crop or adverse weather conditions.

The company has gained distribution as its products are affordable compared to itspeers, which have expensive patented products as offerings.

UPL has operations in Brazil, sales of which are pegged to the USD and hence facescurrency exposure to that extent.

As per the management, farmers spend 30% of their costs on seeds, 10% on power andwater, and the rest on agro implements, agro-chemicals and labour. Since agro-chemicalsform ~7-8% of total cost, its sales are insulated and unaffected by adverse weatherconditions, as the former forms an insurance by protecting the sunk cost of the farmer.

The whole industry sells through distributors at the national and regional level and notdirectly to farmers.

The company has a full-year working capital requirement that ranges from 90 daysto120 days. Credit days in India are 90 days, 60-90 days in Europe, 50 days in the US,and 250 days in Brazil. Working capital days is a function of crop, so it is higher forregions producing sugarcane for instance.

At present, its net debt-to-equity ratio is 0.5x. The same is expected to reduce to 0.3x overthe next three years.

The management feels the impact of a crude oil price decline will be marginally positivefor UPL, as the raw materials used by it come lower down in the value chain of crudederivatives. Hence, the reduction in prices is not proportionate to the underlying commodity.Overall, crude derivatives form 10% of its raw material basket.

The company has credit insurance in all geographies, which protects it from defaults, ifany, in its distribution network.

Our viewUPL is one of the fastest and most profitable generic insecticide manufacturers. It is expectedto grow faster than the industry, due to its pan-India presence and wide product portfolio,which is affordable compared to its peers. As per consensus, the company’s topline is expectedto grow at 15% per annum for the next couple of years and ~20% at the bottomline.



Revenue 91,857 107,709 83,481

EBITDA 16,733 20,484 15,777

PAT 7,746 9,498 7,040

RoE (%) 18.0 21.1 -

P/E (x) 6.9 8.5 -



Jindal Steel & Power Ltd. Not Rated

BackgroundJindal Steel & Power is part of the OP Jindal group led by Shri Naveen Jindal. It is presentacross the steel, power, and mining verticals. The company has in the recent past expandedsteel capacity to 7.8mtpa from 3mtpa, power capacity to 3,400MW from 1,000MW, andiron ore pellet facility to 9mtpa from 4.5mtpa. JSPL has ventured into international operationsin steel and mining, with a 1.5mtpa gas-based hot briquetted iron and 2mtpa integratedsteel plant in Oman. In coal mining, it has invested in assets in South Africa, Mozambique,Namibia, Botswana, Mauritania, and Australia, which are currently incurring losses.

Key takeawaysSteel realisations were under pressure in 3QFY15. The weaker trend is likely to continuein 4Q, due to higher steel imports from China/CIS and subdued domestic steel demand.

Odisha iron ore fine prices are on a declining trend, along with weaker iron ore pelletprices. The latter fell to levels of INR6,200 per tonne from INR8,500/t. Lower iron oreprices and gradually improving availability of iron ore fines would enable higher capacityutilisation of the new 4.5mtpa iron ore pellet facility. Captive Tensa iron ore mines contribute~30% of its total ore requirement. JSPL has an inventory of 10-12mtpa at Sarda Mines.

JSPL along with Jindal Power have bid for four coal blocks in the initial round of auctions.The company is of the view that the competitive intensity would be significantly higher forthe coals blocks, with end-use for the unregulated sector as compared to coal blocksreserved for the power sector.

In the worst case scenario, the management expects a 4-5% compression in EBITDAmargins on account of higher external iron ore/coal costs. This margin reduction couldbe higher, if the trend of weak steel realisations continues over a longer period of time.

Consolidated net debt levels targeted by the company by FY17 are at a net debt-to-EBITDA level of 4:1, with improvement in operational cash flows and moderation incapex levels. Consolidated net debt stood at INR425bn as at the end of Dec-15. Thecompany is likely to end FY15 with a net debt of INR450bn.

Our viewJSPL has invested in capacity additions across the steel and power space. A demand recoverywould lead to asset sweating and higher return ratios. Steel realisations in the short-termwould remain subdued due to pressure from imports and weaker domestic steel demand.First round of coal block auctions scheduled for completion by February-end would provideclarity on the coal costs for both the steel and power businesses .Key factors that are likely tolead to a re-rating are: a) Improvement in capacity utilisation/plant load factor levels for thenew plants at Angul and 2,400MW power plants; b) Coal blocks acquired in the coal blockauctions are at reasonable valuations; c) Turnaround in the international mining operationsthat are currently loss making; and d) Reduction in leverage levels, with an improvement inoperational cash flows and moderation in capex levels.

Pallav Agarwal+91 22 4031 [email protected]


Revenue 198,068 200,040 149,168

EBITDA 61,217 55,287 48,211

PAT 29,101 19,104 (7,588)

RoE (%) 14.8 8.7 -

P/E (x) 11.2 14.2 -



Shriram City Union Finance Ltd. BUY

BackgroundShriram City Union Finance is a deposit-taking non-banking financial company established in1986 as part of the Shriram Group. The company offers a range of retail loan productscomprising auto loans, two-wheeler loans, gold loans, small business loans, and personalloans, through over 1,000 business outlets across the country, with a major presence in SouthIndia. It is one of the leading financiers in the under-penetrated micro, small, and mediumenterprises segment. The company has recently forayed into housing finance business, with afocus on the self-employed segment.

Key takeawaysThe management’s focus continues to remain on small and medium enterprises and two-wheeler businesses. In its 2W business, it is gaining leadership position even in relativelynew geographies like Maharashtra. SCUF will gradually venture in East India, where itspresence is relatively small. It has become the numero uno 2W financier in Maharashtrasince the past four months.

Efforts to build the MSME ecosystem around Central and North India over the past fiveyears have borne fruits. Some of the branches in these areas are witnessing annualisedgrowth in excess of 50%. Going forward, these geographies will contribute meaningfullyto growth.

Our viewSCUF's well entrenched position in the under-served MSME and 2W space and strong focuson people and processes gives it a competitive edge. We expect AUM CAGR of 18% overFY14-17e, and stable-to-improving credit costs to drive earnings CAGR of 15% and RoAs of3.5%, which are best-in-class. It has one of the strongest balance sheets, with Tier I ratio at25%. Valuations at 2.4x FY17e book are attractive, given its strong growth prospects andbest-in-class profitability profile. We maintain our Buy rating and assign a target price ofINR2,487 per share, valuing the standalone entity at INR2,341 per share (2.8x FY17e book)and the housing finance subsidiary at INR157 per share (3x FY17e book).


NII 21,285 22,914 27,463

PP Profit 13,224 14,314 17,186

PAT 5,818 6,593 7,941

RoE (%) 16.4 14.6 15.4

P/B (x) 3.1 2.7 2.4


Digant Haria+91 22 4031 [email protected]


Crompton Greaves Ltd. BUY

BackgroundCrompton Greaves is a leading player in the Indian power transmission and distribution,industrial motors, and fans and appliances market. The company derives 44% of itsconsolidated revenues through its overseas subsidiaries. Although performance in the domesticbusiness has been stable, its overseas business has been witnessing pressures due to multipleheadwinds, which includes slower market growth as well as internal issues related to losses ina few factories particularly in Hungary.

Key takeawaysAll its overseas factories have been reporting profits, except for the Hungarian andCanadian factories, which reported a loss of EUR4m and USD1.6m in 3QFY15.

Losses in the Hungarian factory was mainly due to legacy orders, which have beentransferred from the Belgium factory under the 'Merlin' restructuring program.

In Hungary, it transferred a huge order from Sonelgaz, Algeria, on which a customer hasraised some quality issues.

Our viewWe expect its overseas business to show a meaningful improvement in FY16e, led by higherexecution of automation orders and closure of legacy orders. Crompton Greaves’ standalonebusiness has been showing stable performance, which is encouraging in light of the depresseddomestic market conditions. It has announced a de-merger and separate listing of its consumerbusiness, which would result in significant value unlocking. The stock trades at an attractivevaluation of 17x FY16e and 12x FY17e EPS. We remain positive on the stock and maintainour Buy rating.


Revenue 143,330 159,580 180,992

EBITDA 8,597 13,189 15,792

PAT 4,365 8,023 9,930

RoE (%) 11.0 17.0 17.5

P/E (x) 24.0 13.1 10.6





Just Dial Ltd. HOLD

BackgroundJust Dial is one of India’s leading search service providers. It bridges the gap between usersand businesses by helping the former find relevant providers of products and services quickly,while helping the latter listed in the company's database to market their offerings. In 3QFY15e,it boasted a strong 14.7m listings and 312,800 paid campaigns. Its average realisation perpaid campaign stood ~INR20,300 in 3Q. Mobile is expected to be the most dominantplatform for JDL's services, with the company clocking 12,000 mobile application downloadsa day organically. As at the end of 3QFY15, it had 9,226 employees. The company is on thecusp of breaking out of its standalone local search provider image, and is well positioned toextend its value proposition to being a credible online marketplace too. Along with its coresearch operations, JDL offers services such as the reverse auction, wherein vendors competeamong each other on offerings and price to grab the consumer’s attention. It intends to be aone-stop shop for both consumers and small and medium enterprises for a wide range ofofferings.

Key takeawaysManagement confident of clocking over 25-30% revenue growth in itscore search business: The management is confident of clocking a CAGR of 25-30%in its core search-related revenues over FY15-17e, aided by proactive sign-ups of SMEs/vendors.

Five revenue streams to be introduced: The management reiterated that FY16eis expected to see a significant change in revenue streams as monetisation of Search PlusServices begins. There will be five revenue streams: 1) Core search revenues; 2) Transactionfee for the various Search Plus transactions; 3) Subscription revenues for select vendorapplications (doctor’s appointment); 4) Shop front revenues; and 5) Banner advertisementrevenues.

One-off advertising spend on mass launch of Search Plus pegged~INR0.4bn: The management guided that the mass launch of Search Plus Servicescould entail a one-off advertisement spend of ~INR0.4bn, which is expected to be incurredin 1QFY16e.

Expects its micro payment platform integration to go live by 1QFY16e: Thecompany is confident of going live with JD Cash, its payment platform integration, by1QFY16e.

Doctor’s appointment: One of the top 10 categories for JDL: The managementsuggested that out of ~1m registered doctors in India, ~0.3m doctors are listed with JDL,of which 25,000-30,000 doctors are paid listings. It is in the process of developing avendor application for doctors, which should help monetise the category better.

Our viewWe have factored in 42% earnings CAGR over FY15-17e, with Search Plus Servicescontributing meaningfully by FY17e. At 36x FY17e earnings, upside in the stock seemspriced in. We maintain the earnings estimate for FY16 and FY17 and retain our Hold ratingon the stock. However, we recommend a Buy on dips.


Revenue 5,967 7,975 10,505

EBITDA 1,722 2,586 3,910

PAT 1,513 2,017 3,032

RoE (%) 22.6 27.5 32.4

P/E (x) 83.1 53.6 35.9


Jay Gandhi+91 22 4031 [email protected]


Mangalore Refinery & BUY

Petrochemicals LtdBackgroundMangalore Refinery & Petrochemicals' Phase III project is largely completed, with most newunits having currently stabilised. The polypropylene unit is also largely ready. The benefits ofPhase III would be seen from FY16e onwards, with incremental gross refining margins andhigher throughput. With lower oil prices, fuel and loss cost have declined sharply, whiledemand outlook is likely to improve. However, the company has a pending crude liability toIran, which once paid would result in a rise in net debt.

Key takeawaysThe company's Phase III expansion and upgradation project has been fully commissioned,with all units stable and running and performance guaranteed. PPU would be completedby Feb-15, with stabilisation requiring another two months. There have been no issueswith the power plant. Petcoke sales have also commenced, with pricing based on marketrates. The fiscal benefits of Phase III, relating to entry tax, octroi exemption, and VATdeferment, have also started accruing.

MRPL's product slate post Phase III would be 25% light distillates, 54% middle distillates,13-14% heavier ends, and 8-9% fuel and loss (loss: 0.4-0.5%). It expects USD6/bbl ofcore GRMs going forward. PPU would add incremental GRM of close to USD1/bbl,while the single-buoy mooring facility could provide additional USD0.5/bbl once LatinAmerican crude is unloaded through very large crude carriers. The company's refinery is100% Euro IV compliant. It is confident of hitting 100% capacity utilisation at 15mmtpaand even crossing the same.

It is not looking at hedging its receivables, considering the volatility in petroleum prices.Inventory days for crude oil are 20-25, while that of products are 7-10 days. MRPL isexporting a considerable quantity of products, amounting to ~40%. It is looking at retailingpetrol and diesel and has lined up a capex of INR2bn in FY16 for the same. It is initiallytargeting 20 retail outlets. ONGC Mangalore Petrochemicals has also begun operations.

MRPL is comfortable with the Iran arrangement in respect to pending crude payables.The company's balance sheet can withstand the same, if sanctions get lifted entirely. Itsources ~5mmtpa of Iran crude currently. Around INR60bn payables have been clearedto Iran in FY15. Iranian crude has an attractive credit period of 90 days.

MRPL's capex guidance for FY15 and FY16 is INR18bn and INR15bn, respectively,which include residual payments for the Phase III project. Around INR2bn of capexwould also be on a platform revamp, while normal maintenance capex thereafter wouldbe INR1bn per year. Operating expenditure is estimated to be in the USD1.2-1.3/bblrange. Propylene to polypropylene conversion is expected to cost INR350/mt.

Lower fuel and loss theoretically would drive GRMs, though actual GRMs may adjustthemselves in reality. The possibility of an actual major earnings jump may be diluted.

Our viewBased on lower F&L and steady product margins, we estimate MRPL to report over USD6/bblGRM from FY16e onwards. Although new debt would grow, yet higher GRMs are expectedto offset balance sheet stress. We value the company on DCF methodology to arrive at atarget price of INR75 per share. We recommend a Buy on the stock.


Revenue 670,123 631,355 632,684

EBITDA (13,753) 28,600 31,644

PAT (10,743) 10,891 12,653

RoE (%) 8.5 (17.9) 15.9

P/E (x) (9.2) 9.1 7.8





Ramco Cements Ltd. Not Rated

BackgroundRamco Cements is among the largest cement manufacturers in South India, a region whereover capacity is leading to lower utilisation levels for all players. The company has a totaleffective capacity of 12.9mtpa, including grinding units, currently spread across Tamil Nadu,Andhra Pradesh, Karnataka, and West Bengal. It has strong cement brands across the region.

Key takeaways3QFY15 result was impacted by a sharp 9-10% drop in prices in October/November ascompared to previous months, before recovering in December. January realisations havebeen firm. In 3Q, there was a breakdown of the 25MW captive thermal power plant,due to turbine failure, resulting in higher freight costs on inter unit movement of clinker.The power plant is running normally since Dec-14.

Cement demand remains weak, and the management does not see a major improvementover the next six months. As a result, cement volumes in 4QFY15, at 1.8MT, are expectedto be flat YoY. Even in FY16, volume growth is likely to be subdued ~5%. Of the effectivecapacity of 12.9mtpa, it is likely to operate at an utilisation level of only ~65%.

Currently, Ramco Cements relies on imported coal for its captive thermal power plants, asits cement facilities are within 100-150km from the ports. Petcoke is a negligible portionof the fuel mix, as sourcing is an issue in the Southern region.

It has invested in limestone beneficiation plants, which yields benefits in terms of improvedlimestone yield, and reduces silica and waste products. These have been set-up at two ofits facilities and are expected to result in savings up to INR100/t in raw material costs.

Capex incurred in 9MFY15 stood at INR3.2bn. The company expects to spend up toINR3.5bn in FY15, while guidance for FY16 stands at INR2bn. Odisha capex plansmay be deferred in the short-term, and the plant may come up by FY17. Ramco Cementshas acquired additional land near its existing cement facilities for INR0.3-0.4bn.

Our viewGrowth in cement demand has been subdued, with excess capacity in the Southern regionwhere the company operates. Capacity utilisation levels would remain subdued in the short-term to support cement realisations, leading to marginal profit growth in the short-term.



Revenue NA 36,835 18,555

EBITDA NA 5,939 3,926

PAT NA 1,146 1,278

RoE (%) NA 5.7 -

P/E (x) NA 44.9 -



DB Corp Ltd. Not Rated

BackgroundDB Corp is a force to reckon with in the print media and is a dominant and leading player inMadhya Pradesh, Chhattisgarh, Haryana, Chandigarh, urban Rajasthan, and key cities ofGujarat and Punjab. It enjoys a total and daily readership of 44.2m and ~19.8m, respectively.The company boasts of a strong brand portfolio, comprising its flagship Dainik Bhaskar,Divya Bhaskar, Daily Bhaskar, and Divya Marathi. It has 58 newspaper editions and threemagazines, 17 radio stations, four online properties, and 200 district editions. DB Corp’sradio operations, which was launched in FY06, now operates from 17 stations in seven statesand is a market leader in most markets. The same achieved EBITDA break even in two-and-a-half years since its commencement of operations. Radio advertisement revenues clockedINR692m in 9MFY15, with a healthy EBITDA margin of 40%. Overall advertisement revenuesfor the company for 9MFY15 stood at INR11.6bn, while circulation revenues stood atINR2.7bn. EBITDA margins for the group came in at 29% for 9MFY15.

Key takeawaysThe management said categories such as automobiles and real estate have remainedsoft, despite the recent 25bps repo rate cut. Together, auto; realty; banking, financialservice and insurance; and consumer durables constitute ~26% of the total advertisementrevenue pie. It sees most of the increase in advertisement going forward to be volumedriven and not yield driven.

In a bid to expand in Maharashtra, it launched editions in Akola and Amravati. Inaddition, it also launched an edition in Patna, which was the only missing link in theRanchi, Jamshedpur, Dhanbad, and Patna corridor. The company has guided that someof the editions in Maharashtra and Jharkhand are likely to achieve EBITDA break evenby FY15e-end. DB Corp is planning further launches in Bihar in FY16e.

Aided by lower crude prices, newsprint prices have been reducing on lower marinefreight costs. This, coupled with cheaper Russian newsprint being diverted to India isbenefiting print players. Newsprint prices stood at INR35,323/MT in 3QFY15 and isexpected to decline by ~2% from 3Q levels.

The government recently allowed radio companies to broadcast news from the bulletinsof All India Radio, which bodes well for DB Corp. This will increase listener stickiness andhelp it commanding better advertising rates. The management also indicated plans toinvest ~INR0.3bn as capex for scaling up its radio operations. However, it plans to stickto Tier II and III cities in the coming auctions.

The management seems confident of its digital business performance, underpinned bythe strong 540m page views and 18m unique visitors it garnered this fiscal. Its digitalproperties boast of 250 editors and an over 400 strong employee force. It has undertakendoor-to-door surveys in important markets to assist downloading its mobile application.

Our viewA bounceback in ad revenues from interest-rate sensitive clients, reducing losses from emergingeditions, robust growth in its radio and digital properties, coupled with lowering newsprintcosts, which accounts for 32% of revenues currently, is expected to aid margins and could bea strong re-rating trigger for the stock.



Revenue 15,923 18,598 15,240

EBITDA 3,760 5,003 4,428

PAT 2,181 3,066 2,523

RoE (%) 22.3 28.2 -

P/E (x) 31.8 22.7 -



Persistent Systems Ltd. HOLD

BackgroundPersistent Systems is a leading software product and technology services company, with 23%revenue CAGR in the last five years. Its offerings include: 1) Product engineering services; 2)Platform solutions; and 3) Intellectual property-led business. The company's strong productdevelopment background is helping it foray into the emerging enterprise digital transformationspace, which is expected to be the next growth driver for the company.

Key takeawaysThe company expects growth to continue going forward, driven by both platform and IPbusinesses. The platform business has been growing at over 10% QoQ, and the companyis seeing strong traction, especially in the Appian platform.

In the IP business, it is seeing strong traction in Radia client automation and Tivoli NetcoolPerformance Manager product. Other IPs like location is likely to remain flat going forward.According to the management, traction in products like Radia client automation, TNPM,and Doyenz is likely to help it report over 20% organic growth in the IP business in FY16.

The growth in outsourced software product development business is likely to remainmuted, and the management expects it to be in high single-digits to low double-digits.

As indicated earlier, Persistent is focusing on maintaining its PBT margins in the 18-20%range. The management said that if it doesn't invest in the business, it might becomeirrelevant in few years. However, a sharp INR appreciation might change the targetrange, as it will continue to invest in the business.

Our viewWe expect Persistent to report an EPS of INR88.1 and INR103 in FY16e and FY17e,respectively, implying a two-year EPS CAGR of ~17.5%. The stock is currently quoting aFY16e and FY17e P/E of 18.9x and 16.2x, respectively. Though the company's net profit isexpected to grow at a rate higher than its peers, current valuations factor that in. We thereforemaintain our Hold rating on the stock with a target price of INR1,650 per share, or 16xFY17e EPS.


Revenue 19,194 23,480 28,201

EBITDA 4,082 5,064 6,129

PAT 2,987 3,526 4,121

RoE (%) 22.4 22.7 22.6

P/E (x) 22.6 19.1 16.4


Ashish Aggarwal+91 22 4031 [email protected]

Sagar Lele+91 22 4031 [email protected]


Great Eastern Shipping Co. Ltd. Not Rated

BackgroundGE Shipping is one of India's largest private sector shipping companies. It provides offshoreoilfield services, with the principal activity of offshore logistics and drilling services. The companyhas diverse asset base. It has a 30-year uninterrupted dividend track record and continuousdeclining debt-to-equity ratio. With earnings CAGR of ~87% over FY10-14, the company hasbeen one of the most consistent in tough global markets.

Key takeawaysIt has 30 ships, aggregating 2.5m DWT, of which 21 are tankers (eight crude carriers,12 product tankers, and one very large gas carrier) and nine are dry bulk carriers (oneCapesize, three Kamasarmax, and five Supramax).

The company has the following vessels on order: 1) One medium range product tanker,2) Two Kamsarmax dry bulk carriers; and 3) Three Supramax dry bulk carriers, withexpected delivery of 4QFY15, 1HFY16, and 3QCY16, respectively. It has a total committedcapital expenditure plan of USD180m.

The management said most analysts predict an oil surplus is likely to persist at leasttill1HFY16 and could lead to a continued pressure on prices. Lower oil prices supportstocking/storage. Steep contagion could lead to floating storage. The latter reducestonnage availability, supporting higher rates for crude oil tankers.

Seaborne bulk trade has been growing steadily, with global dry bulk seaborne tradetouching 4.5bn tonne in 2014. It is expected to grow at 3-4% in 2015. Dry bulk tradesare expected to be driven by iron ore volumes, continued import substitution from China,and coal imports from India.

On the offshore business, GE Shipping currently owns three jack-up rigs, five platformsupply vessels, nine anchor handling tug cum supply vessels, two multipurpose platformsupply and support vessels, and six platform/ROV support vessels.

Our viewGE Shipping has a young fleet with an average age of ~4 years. Demand has been shiftingto modern vessels, especially as safety becomes a major concern for oil companies. It hasrevenue efficiencies, led by higher utilisation rates and minimum downtime. Also, it has costefficiencies resulting out of lower operating costs and reduced maintenance capex andoperating expenditure. With fleet expansion, lower oil prices, and growing seaborne trade,the company stands to benefit.


Revenue 29,821 30,492 16,579

EBITDA 11,624 14,357 7,377

PAT 5,378 5,740 4,296

RoE (%) 8.7 8.8 -

P/E (x) 6.5 9.0 -



SKS Microfinance Ltd. BUY

BackgroundSKS Microfinance in India's second largest and only listed microfinance institution. It catersprimarily to women in rural India, under a joint-liability group model, with doorstep service. Ithas a presence across India, with 1,268 branches in 15 states (Sep-14). Post the AndhraPradesh microfinance crisis, the company has diversified its loan book to limit exposure to asingle state to 15%. Its assets under management as on Sep-14 stood at INR32bn. It hasrecently applied to the Reserve Bank of India for a small finance bank licence.

Key takeawaysLower profits in 3QFY15 were largely on account of one-offs. It reduced lending rates by100bps to 23.5% to maintain the 10% spread cap. The resulting operational changeson account of this (EMI, passbook, collections, and disbursements) slowed down thepace of business in Oct-14. Demand trends continue to remain strong and 4QFY15should see strong growth in loan book as well as earnings.

The company has applied for a small finance bank licence. The benefits of a small banklicense in terms of new products, lower risk perceptions, and favourable regulatory regimefar outweigh the increased compliance and regulatory costs. SKS intends to comply withthe shareholding norms through a large fresh equity raising from domestic investors.

Our viewBenign sector outlook in terms of stable regulatory environment, improved funding access,and reduced competitive fervour will ensure AUM CAGR of 31% for SKS over FY14-17e.Initiatives to tap the cross-selling opportunities within its vast customer network as well ascontinued focus on operating efficiencies will ensure pre-provisioning profit CAGR of 71%over FY14-17e. Stable asset quality and recoveries from the state of Andhra Pradesh willkeep provisions under check and aid earnings CAGR of 62%. In case SKS is awarded thesmall bank licence by RBI, it could be a game changer for its future. Our residual incomemodel values SKS at INR496 per share, which discounts FY17e earnings by 21x.


NII 3,649 5,308 7,100

PP Profit 2,056 3,130 4,187

PAT 1,909 2,242 2,974

RoE (%) 25.5 19.4 21.0

P/B (x) 5.1 4.2 3.4




IL&FS Transportation Networks Ltd. Not Rated

BackgroundIL&FS Transportation Networks is the largest build, operate, and transfer road asset owner inIndia in terms of the length of roadways in its portfolio. It has a diverse portfolio of projects inthe surface transportation segment, mainly in the public private partnership road model. Itacts as developer, operator, and facilitator of surface transportation infrastructure projects,taking projects from conceptualisation through commissioning to operations and maintenance.

The company is a market leader in the transportation infrastructure sector, with over13,100lane km in its portfolio comprising of 25 road projects. The project portfolio of ITNL has anoptimum blend of toll and annuity-based projects. It is geographically diversified with apresence in 17 states within India, and has projects in various stages of commissioning aswell as commissioned projects.

ITNL has also ventured into other transportation sub-sectors such as railways, urban transportationsystems, and border check-posts. It is currently developing a metro rail project in Gurgaon, aborder check-post project for the Madhya Pradesh government, and operating a city bustransportation network in Nagpur. In Mar-08, it commenced its international operations throughthe acquisition of Elsamex SA, a Spanish group involved in providing maintenance servicesprimarily for highways and roads in many European and Latin American countries

Key takeawaysThe management said that engineering, procurement, and construction projects arecurrently facing quality issues, project delays, and cost overruns.

The number of EPC contracts have also come down, and more projects are coming underthe BOT model.

Cost overruns in EPC projects are bound to be at least 1-1.2x as they are bid much lowerthan actual costs to win the bid.

BOT offers better internal rate of return and higher margins than EPC.

At present, the definition of project costs are getting standardised. Lenders are usingdata from National Highways Authority of India for accepting the cost estimation of 70%of the project. For project termination cost, they are being advised by project consultantsfrom outside.

As per the management, IL&FS will attain a RoE of 20% by FY17 as most projects willbecome operational by then.

By Sep-16, it will require INR9bn of funding for existing projects.

It has passed an enabling resolution for USD100-125m for funding future projects.

For annuity-based projects, the company is floating AAA-rated bonds at 12.25% andrefinancing it at 10.25%, leading to 2% savings on the USD100m project. This will resultin costs savings of ~USD40-45m over the whole life of the annuity (~15 years).

Our viewGiven the new government’s thrust on infrastructure and with a target of 30km/day forconstruction of roads, we expect overall order books of all road construction companies toswell. Most of the new orders in this segment are expected to be under the EPC and BOTmode, where ITNL has an advantage due to its superior quality of construction andmanagement. We expect it to continue to show improved financial performance in an easinginterest rate scenario.


Revenue 66,448 65,870 29,216

EBITDA 18,533 19,031 11,798

PAT 5,202 4,630 2,367

RoE (%) 16.2 10.2 -

P/E (x) 6.7 5.3 -




Kajaria Ceramics Ltd. BUY

BackgroundThe management of Kajaria Ceramics, India’s largest player in the tile industry, shared itsperspective on the probable growth prospects, gas pricing scenario, and strategies withrespect to its foray into other allied products.

Key takeawaysThe tiles industry is currently growing at 10-12% in value terms as opposed to the last fiveyear’s CAGR of 14-15%.

The challenges to growth still persist, with slowness in the real estate market. However,KCL's outperformance in growth is likely to continue, with the company expected to gainmarket share from unbranded as well as branded players.

While spot gas prices have seen a sharp deceleration, long-term contract rates areexpected to reduce only from 4Q on a gradual basis, assuming crude prices remain inthe USD60-70/bbl range.

The focus on value addition persists, with the company's aggression in launching newdesigns and sizes in double charged vitrified tiles and glaze vitrified tiles.

While anti-dumping duty on tiles cease to exist, the industry seems to be working hard toget the same reimposed possibly over the next couple of quarters.

Sanitaryware segment is expected to ramp-up production after initial teething problems.Its faucetware plant is expected to commission commercial production by Apr-15.

Our viewWe expect KCL to report revenue and PAT CAGR of 22% and 30%, respectively, overFY14-17e. We maintain our Buy recommendation on the stock with a target price of INR800per share.


Revenue 22,072 27,205 33,362

EBITDA 3,498 4,441 5,437

PAT 1,696 2,182 2,806

RoE (%) 25.9 25.1 24.8

P/E (x) 33.0 25.5 20.1


Nehal Shah+91 22 4031 [email protected]


Allcargo Logistics Ltd. Not Rated

BackgroundAllcargo Logistics is one of the leading integrated logistic players, with a global presence inover 90 countries. The company will benefit from its established position in multimodal transportoperations, container-freight station, and projects businesses. Diversity in business operationsis expected to ensure that the group's business performance maintains its steady growth, witha limited impact on profitability. The company has good relationships with shipping lines andfreight forwarders, and has a competitive advantage due to its global network and highervolumes. There is a ~2x relationship between GDP growth rates and the logistics industry.Growth in export-import trade has a direct positive impact on port-oriented logistics, with a1.5-2x GDP multiple for the EXIM container trade.

Key takeawaysThe MTO segment commands 80% of its total revenues, with market share of 5% globallyand EBITDA of ~5%. The company operates in less-than-container-load under MTO,which the management said is less affected by a slowdown during rough times in theglobal trade. It expects to grow 15-20% in this segment over the next two years, with 55%of volumes accruing from the Asian region.

In the CFS segment, the company has three-to-four CFS in India at major ports, whichoperate at 65% capacity and contribute 22% to EBITDA, clocking margins of 32%. Thelatter has the potential to touch levels of 38%, with higher EXIM trades and volumes. Itexpects 10-12% growth over the next two years, with EXIM trades picking up and higherport infrastructure. With 200 acres of free land, the company is free to expand to meetthe demand for warehousing in the future.

In the project and engineering solutions segment, which is only 9% of revenues at present,the same is expected to grow faster once the capex cycle in the economy revives ingreenfield and brownfield projects. It expects higher margins and capacity utilisation of~85% from present levels of ~60-65% once the economy picks-up.

As per the management, the company expects to be debt-free by FY17e from 0.33 atpresent. With no major capex or acquisitions in the near future and significant cash flowgeneration from past investments and acquisitions, the management sees significantimprovement in its earnings.

The management said business can be affected by the rise and fall in the levels ofimports and exports in the country or globally. The company is also focusing on its CFS/inland container depot business, a relatively high margin segment, which is essentiallydependent on imports and exports of containerised cargo in India.

Our viewGiven the projected growth in the Indian economy and expected recovery in global trade,rising spending in the infrastructure and manufacturing space, and increasing per capitaand disposable income, it is estimated that imports will continue to rise steadily. The diversifiedrevenue streams reduce the business risk significantly for the company, providing stability tocash flow. We believe Allcargo Logistics with its presence across the critical value chain inlogistics would be a major beneficiary of increased global trade and recovery in domesticindustrial activity.


Revenue 39,255 48,452 27,797

EBITDA 3,592 4,033 2,359

PAT 1,697 1,493 1,126

RoE (%) 39.8 35.3 -

P/E (x) 8.7 13.0 -


Jigar Shah+91 22 4031 [email protected]


Century Plyboards India Ltd. Not Rated

BackgroundCentury Plyboards India has grown at a rapid pace over the last few quarters, in terms ofboth topline as well as bottomline. The management’s discussion during our conferencelargely revolved around the sustenance of growth and profitability.

Key takeawaysWhile the ground reality continues to remain challenging, growth at Century Ply is likelyto be 23-25% over the next two years, led by higher revenues in face veneer segment ofplywoods and increasing capacity utilisation in the laminates segment.

Growth in the plywood vertical is to be largely led by increased penetration of its commercialplywood brand: Sainik. The brand is likely to grow at 30% revenue CAGR over the nextthree years.

Focus in the laminates segment would be towards increasing the contribution from the1mm thickness category.

The company has been aggressively increasing its distribution network and strengtheningits sales force to capitalise on growth opportunities.

The company continues to aggressively spend on branding measures in both plywoodand laminates to further increase its retail penetration and brand pull.

Our viewBased on the aforesaid observations, we expect the company to maintain its growth momentumover the next few years. We remain positive on the stock over the medium- to long-term.


Revenue 11,816 13,477 11,475

EBITDA 1,249 1,795 1,361

PAT 552 603 1,028

RoE (%) 11.2 22.0 -

P/E (x) 21.9 10.1 -




Dalmia Bharat Ltd. Not Rated

BackgroundWith the government’s extensive thrust on 'Make in India', infrastructure development wouldbe a key focus area. Hence, we expect quality cement players to gain significantly. SinceDalmia Bharat is one of the largest cement producers in India, with aggregated capacity of~24mtpa by FY15 and significant reach across South, East and Northeast India, it is wellplaced to accelerate earnings in the coming years.

On a consolidated basis, the company reported 13% revenue CAGR during FY12-14 toINR29.5bn, while EBITDA de-grew 13% during the same period, due to significant fall inEBITDA margins to 14% in FY14 from 24% in FY12. Margins were impacted by: a) Slowdownin volume growth and under-utilisation of newly acquired facilities; and b) Spike in operatingcost due to higher freight. Higher interest expense due to increase in debt (incremental capex)and depreciation expenses led to a net loss of INR84m in FY14 from INR1.4bn PAT in FY12.

Key takeawaysTotal capacity at the consolidated level is expected to reach ~24mtpa by FY15e.Considering the 1mtpa clinker unit of Calcom Cement, capacity would stand ~25mtpa.

Higher-than-industry volume growth is expected to continue, with the ramping up of newcapacities from FY16e onwards, as the Telangana statehood issue has been resolved.We expect southern demand to improve significantly. Being a major player in the south,Dalmia Bharat would be the biggest beneficiary.

The management expects cement volumes to increase to 13mtpa by FY16e from currentlevels of ~11mtpa.

No major capex is expected in the coming couple of years, as the management focuseson improving the utilisation rate of existing capacities.

EBITDA per tonne on a consolidated basis is expected to increase to ~INR900/t byFY16e from INR720/t in absolute EBITDA terms. The same is expected to reach INR12/13bn by FY16e, mainly driven by decrease in freight and fuel costs.

The management expects freight cost of INR950/t to reduce going forward, due to fall infuel cost (~80% is road freight cost) and expected improvement in port utilisation andloading/unloading time. With the implementation of waste heat project at several facilities,fuel cost of INR1,050/t would also gradually reduce.

Net debt to increase by INR5bn during FY16e.

Our viewAt the current market price of INR494 per share, Dalmia Bharat is trading at FY16e andFY17e EV/EBITDA multiple of 8.5x and 6.6x, respectively. Given the size and encouragingoutlook on cement demand, coupled with management's focus on achieving scale, deepeningproduct portfolio, and widening presence by way of organic and inorganic growth, webelieve the company will be one of biggest beneficiaries of a revival in the cement industry.The stock has potential to re-rate on the back of an: a) Improvement in earnings, driven by aturnaround in south and northeast operations; b) Pick-up in the recently added capacities inKarnataka and Calcom Cement; and c) Sustaining profitability without scarifying long-termgrowth aspirations.




Revenue 27,906 29,545 21,349

EBITDA 6,347 4,270 2,902

PAT 1,971 (84) (442)

RoE (%) 6.6 (0.3) -

P/E (x) 6.0 nm -



Raymond Ltd. Not Rated

BackgroundRaymond is one of the largest integrated manufacturers of worsted fabric in the world. Itowns brands like Raymond, ColorPlus, Park Avenue, Parx, and Makers. The company hastwo business divisions: textiles (fabric, apparel, and denim) and engineering (files, tools,and automobile components). Its product portfolio includes suiting, shirting, branded apparel,accessories, denim fabric, hardware, tools, and auto components. It derives ~85% of itsrevenues from the fabric and apparel business. It currently has 196 exclusive brand outletsand a distribution reach in over 760 outlets in the form of The Raymond Shop.

Key takeawaysOn e-commerce, the management said generating sales in not a tough task. However,profitability on those sales is an area one should focus on. Raymond on a monthly run-rate generates INR150-200m worth of sales from the e-commerce channel. It has tied-upwith all the top e-commerce sites in India such as Flipkart, Myntra, and Amazon.

The company has an arrangement with all e-commerce sites on price. Hence, there won'tbe any pricing differential between products available on e-commerce sites and its brickand mortar stores.

In terms of store expansion, the management said the company is focused on storeprofitability rather than the absolute number. The number of profitable stores has increasedto 80% from 60% in the past. During 3QFY15, it shut few of its Parx and accessory stores.

During 3Q, fresh sales contributed ~75% to revenues, while discounted sales accountedfor 22% of total sales.

The current mix for the company stands at Raymond Shop (40%), EBOs (25%), largeformat stores (15%), and multi-brand outlets (20%). The management said that in termsof product mix, apparel will be leading growth for the company. Parx would be madeavailable at MBOs and on e-commerce sites.

On consumer sentiment, the management said that though the sentiment remains sluggish,it is positive on a revival. Hence, the company is looking at ramping up its capacities inorder to meet the demand.

Our viewAs the consumer demand sentiment improves, Raymond, with its strong brand equity and vastproduct portfolio across various price points, should gain traction in revenues. The company'sinitiatives on improving operating efficiencies and expansion should enable better marginprofile and higher profitability.

Sreekanth PVS+91 22 4031 [email protected]


Revenue 40,692 45,480 39,323

EBITDA 3,732 4,988 3,537

PAT 287 1,076 913

RoE (%) 2.8 9.5 -

P/E (x) 61.1 17.3 -



Manappuram Finance Ltd. BUY

BackgroundManappuram Finance was founded by late Shri VC Padmanabhan in 1949 and is currentlymanaged by his son Shri V P Nandakumar. It is India's second largest gold loan non-bankingfinancial company and is involved in lending against gold ornaments. It has a pan-Indianetwork of nearly 3,300 branches and a loan book of INR85bn as of Sep-14. Over the pastfew years, it has successfully diversified from being a South India-based player to a pan-India player. The company has recently announced its intention to diversify into vehicle financing,home loans, and microfinance. It has initiated the process to acquire controlling stake inChennai-based Asirvad Microfinance.

Key takeawaysThe legacy portfolio has almost run-off and auctions have reached normalised levels.MGFL is trying to build a short-term portfolio through its three month product. This significantlyreduces the risk of defaults and auctions in case of a gold price decline. It also allowsthem to charge slightly higher interest rates. About 60% of its current portfolio has durationof a three months, while the remaining 40% has a duration of 12 months.

Efforts to revive growth have gained momentum. Branch level activation programs; localmarkets of gold loan products; and employee incentive schemes, based on disbursements,are being implemented at a pan-India level. It is also in the process of a rationalising itsbranch network, wherein it will relocate 100 branches to high potential locations. Theseefforts should aid ~10-15% loan book growth in FY15e.

Our viewThe worst for MGFL is over and branch level efforts, coupled with an improving economy, willaid strong loan book growth and operating leverage. The company has announced itsintention to diversify into areas of microfinance, affordable housing, and vehicle finance. Thiswill provide the much needed diversification as well as growth. It has a Tier I ratio in excessof 25%, and will keep on rewarding shareholders with handsome dividends. Given theattractive dividend yield, revival in loan growth, and attractive valuations, we maintain ourBuy recommendation with a target price of INR46 per share.


NII 10,976 12,046 13,274

PP Profit 5,377 6,644 7,748

PAT 2,765 3,521 4,119

RoE (%) 10.8 12.9 13.9

P/B (x) 1.1 1.0 0.9




Navneet Education Ltd. Not Rated

BackgroundNavneet Education is a leading player in the publication of educational, children's generalbooks, scholastic paper, and non-paper stationery production. The company has over 50years of experience in developing content for state boards and schools. Apart from publication,it also has an e-learning platform - eSense - catering to over 2,300 institutions, covering morethan 13,000 classrooms.

Key takeawaysThe company's product portfolio comprises of educational text books, supplementarybooks, workbooks, and question paper sets, most of which are published in five languages:English, Gujarati, Hindi, Marathi, and Urdu.

In Maharashtra and Gujarat, it commands 65% and 70% market share, respectively. InMaharashtra, Chetna, Jeevandeep Prakashan, and Reliable Publication are its keycompetitors, while Bhavik Publication and Vikas Publications are its main competitors inGujarat.

The management sees e-learning as a big opportunity, and hence ventured into e-learningin 2009. Under this business, it has created digital content for English, Marathi, andGujarati mediums in Maharashtra and Gujarat, under the brand name of eSense.

As per the management, there are 1.3m schools, of which ~0.4m is private and 80,000English medium schools. Every year, 10,000 schools get converted to English medium.

Syllabus change is a major growth driver for Navneet, as any change takes away oldand second-hand books from the system.

Our viewAt the current market price of INR112 per share, the company is currently trading at 24xFY14 EPS. It is constantly aiming for higher growth in terms of venturing into new geographiesand business segments. We believe Navneet will stand to benefit from changes in the syllabusby the state boards to the CBSE pattern.


Revenue 8,057 8,809 6,413

EBITDA 1,943 2,080 1,763

PAT 1,067 1,152 1,018

RoE (%) 27.3 25.7 -

P/E (x) 12.9 11.8 -




Siti Cable Network Ltd. Not Rated

BackgroundIncorporated in 1994 and headquartered in Delhi national capital region, Siti Cable Networkis one of the leading multi system operators in India, with 56 analogue and 14 digital headends. The company has a network of over 12,000km of optical fibre and coaxial cables,reaching out to over 80 key cities. It boasts of a 10.5m strong subscriber base, of which 4.9mare digital subscribers. It is expected to touch 10m digital subscribers by FY16e. The companyhas a unique model vis-à-vis its peers, wherein it proactively shares carriage revenues withlocal cable operators. Its subscription revenues stood at INR3.4bn, with carriage income ofINR2.3bn for FY14. The company also offers broadband services through both DOCSIS 2.0/3.0 modems. Broadband subscribers as on 3QFY15 stood at 54,000. It enjoys a broadbandaverage revenue per user ranging from INR460 to INR850, subject to the modem.

Key takeawaysAggressive on expansion: The company has expanded its footprint by enteringinto newer markets like Nagpur, Pune, Mysore, and Dehradun. It has also made inroadsinto Phase III and IV towns in Kerala, Madhya Pradesh, Gujarat, and Maharashtra.

Realisations improving: Realisations in Phase I improved sequentially to INR100per subscriber per month from INR91. In Phase II markets, realisations are up 10% to~INR70 per subscriber per month at present.

Gross billing - Direct point acquisition: Siti has initiated acquisition of directpoints in 2QFY15 and made considerable progress in the last quarter. Direct pointsubscriber base increased to ~40,000. The management is acquiring primary pointsthrough ‘right to use’ management agreements, which are long-term fixed fee contractswith LCOs to manage/use their networks.

On broadband: With ~0.1m broadband home passes, the management is confidentof touching 2.5m broadband subscribers. It enjoys an ARPU of INR850 on DOCSIS andINR460 on non-DOCSIS subscribers. Broadband EBITDA is currently ~30%, which couldexpand to 40% once the entire broadband rollout is complete. Capex per subscriber is~INR6,000.

On inventory, subsidy, and cable capex: Current inventory stands ~1.2m boxes.Subsidy per box is ~INR500, and the management has guided for INR6bn of capextowards cable.

On content cost: The management said content cost in Phase I markets, on a persubscriber basis, is ~INR10 (net of carriage fees) and the same for Phase II markets is~INR20 per subscriber.

Our viewAlthough a spike in content cost, courtesy STAR going on Reference Interconnect Offer, isexpected to squeeze margins in the short-term, the higher margin broadband business couldpotentially offset the squeeze on margins, as the broadband rollout gains steam. Significantcapex is expected over the next two-to-three years as players become aggressive in seedingboxes and rolling out broadband connections.


Revenue 4,696 6,652 4,213

EBITDA 821 1,324 755

PAT (641) (941) (545)

RoE (%) nm nm -

P/E (x) nm nm -




DEN Networks Ltd. BUY

BackgroundEstablished in Jul-07, DEN Networks today is a formidable cable TV distribution company,serving an estimated 13m homes in over 200 cities. Its geographical footprint spans 13 keystates across India, including Delhi, Uttar Pradesh, Karnataka, Maharashtra, Gujarat,Rajasthan, Haryana, Kerala, West Bengal, Jharkhand, Madhya Pradesh, Uttarakhand, andBihar. Of its 13m subscriber universe, 6.6m are digital subscribers (5m in Phase I/II markets).The company's broadband offering - DEN Boomband - uses the DOCSIS 3.0 technology.Services have already been launched in Delhi national capital region. DOCSIS 3.0 as of2QFY15 had achieved 9,600 subscribers. The company enjoys broadband average revenueper user of INR740 per month. Its 50:50 joint venture with Snapdeal - DEN Snapdeal TVShop - has already clocked an annualised gross merchandise value of INR0.8bn in its firstmonth of operations. It is also the owner of Delhi Dynamos FC, the Delhi franchisee of theHero Indian Super League, through its wholly-owned subsidiary DEN Soccer Pvt.

Key takeawaysCollections improving: The management suggested that collections across variousphases have improved. In Delhi, collections have improved to INR120 per subscriber permonth (net of local cable operator share and taxes). The corresponding number forMumbai and Kolkata is INR80/85, respectively. On a blended basis, collections inPhase I markets are ~INR110 (net of LCO share and taxes). The corresponding numberfor Phase II is INR65.

STAR Reference Interconnect Offer to push multi system operators intoincreased tiering of packages: The management said that post STAR offering itschannels on a RIO basis, especially since the ICC Cricket World Cup is just around thecorner, DEN is expected to implement tiering of packs soon.

On broadband: The company has managed to do 0.2m broadband home passesand expects this to touch 2m in a steady state. The capex per home pass is ~INR1,200-1,300. Its broadband services are currently commanding an ARPU of INR740 persubscriber per month.

Expects to clock 20m digital subscribers post digitisation: At present, DENhas a 13m subscriber universe, of which 6.6m are digital subscribers. The managementseemed confident of digitising its entire universe and adding another 7m to its kitty insteady state.

DEN-Snapdeal a promising venture: The management is confident of the potentialin DEN Snapdeal TV Shop. The channel had launched its pilot in Sep-14 in selectgeographies, offering products primarily in three categories: home and kitchen, electronics,and fashion and lifestyle. The channel did INR0.8bn in annualised GMV in the firstmonth of the pilot. The management said that the channel could enjoy ~25% EBITDAmargin in a steady state.

Our viewWe had cut our EBITDA estimates considering that the company is expected to be in investmentmode with Phase III/ IV digitisation just around the corner and increased capex on its newbusiness initiatives: broadband and soccer. The stock trades at 5.5x FY17e EV/EBIT versusHathway Cable & Datacom's 15.5x. We retain our Buy rating with a target price of INR220per share, implying an EV/EBIT of 12x FY17e.


Revenue 14,053 17,588 17,953

EBITDA 4,231 6,889 6,174

PAT 1,080 2,033 1,698

RoE (%) 5.5 9.4 7.3

P/E (x) 18.4 9.8 11.7




Simplex Infrastructures Ltd. Not Rated

BackgroundSimplex Infrastructures is the largest pure play civil construction and engineering contractor inIndia, with more than nine decades of successful operations and completion of over 2,700projects in India and abroad. With an expected improvement in the macro-economic situation,we expect the company to return to its growth trajectory. The order book of the company isone of the most diversified geographically and segment-wise. Its order book stands atINR164bn and provides 3x revenue visibility.

Key takeawaysThe company has received INR18bn worth of orders in 3QFY15. The management saidit has contracts from diversified segments and is ready to take advantage of the Centre’sspecial thrust on the closely monitored sectors of roads and bridges and building andhousing. Both sectors constitute 63% of its order book.

The company’s overseas operations, mainly from West Asia, account for 16% of revenues.It has an INR20bn expressway building project from Oman. However, due to fall incrude, the company does not expect major order flow from West Asia, except Oman.

Simplex has a higher EBITDA of 10.8% in new orders as against ~10% for old orders.However, the management does not expect significant improvement in EBITDA further.

The company is facing a major challenge in improving its working capital cycle, whichwas ~210 days in FY14. However, it expects a gradual improvement in the same overFY15-17e.

Our viewThe management expects an improvement in the working capital cycle from 4QFY15. Simplexis poised to capitalise on the government’s new infrastructure thrust, with its strength in piling,fabrication, and construction. With this, it expects to grow 15-20% over the next two years.International projects currently account for ~16% of the turnover. For nearly 100 years, it hasranked among the top infrastructure builders in India. Today, across sectors, it is often the firstchoice when it comes to meeting difficult engineering challenges. The private sector's sharehas expanded across key infrastructure segments, ranging from roads and communicationsto power and airports. Of the total planned infrastructure investments worth USD1trn duringthe 12th Five Year Plan, the share of the private sector is estimated to be 47%, up from 25%during the 10th Five Year Plan.

Jigar Shah+91 22 4031 [email protected]


Revenue 58,975 56,154 25,887

EBITDA 4,722 5,323 2,735

PAT 533 585 254

RoE (%) 4.3 4.3 -

P/E (x) 11.9 7.7 -



Kridhan Infra Ltd Not Rated

BackgroundKridhan Infra is the second largest foundation and geotechnical company in Singapore,where it has successfully executed over 250 projects with a total value amounting to SGD527m.It intends to bring its expertise in the piling industry to benefit from the growth opportunity inIndian infrastructure space. It is targeting the high growth economies of India, Myanmar,Malaysia, Indonesia, and West Asia, and plans to be a leading foundation and engineeringcompany in this region over the next five years.

Key takeawaysKridhan is the second largest foundation and geotechnical company in Singapore. Veryfew players in India have the kind of expertise in the piling industry. Moreover, it canleverage its strong relationship with Indian engineering, procurement, and constructiondevelopers and contractors. It intends to target the high growth economies of India,Mynmar, Malaysia, Indonesia, and West Asia. It plans to be a leading foundation andengineering company in the region over the next five years.

It has transited from being a steel solutions company to a specialist in infrastructuresolutions by: 1) Exploiting growth in the infrastructure segment; 2) Entering new emergingmarkets; 3) Driving and capitalising technology tie-ups; 4) Enhancing business acquisitionsto boost landscape; and 5) Improving financial health in terms of margins and paymentcycles. At present, foundation engineering contributes over 92% of revenues.

It sees growth opportunities in India as there are few very specialists in piling operations.Most piling companies have already diversified into full-service construction companies.In Myanmar, it has the benefit of the unavailability of any specialist piling company,while piling works forms 10% of the total project's construction cost.

Kridhan has a significant competitive edge in the market on account of: 1) Its globalscale, with presence in more than five countries; 2) Local focus ensuring proximity tocustomers; 3) Strong engineering capabilities enabling cost-effective solutions for customers,4) Diverse customer base and services across the construction sector in infrastructure,industrial, commercial, and residential; and 5) Strong track record and growth credentials.

Our viewThe company has the potential to propel growth, given it is the second largest foundationand geotechnical company in Singapore. This will help growth in the Indian infrastructurespace, where investments are expected to reach 12.1% of GDP by 2020 from the current8%. Moreover, the outlook for Singapore looks bright, given increased government spendingon infrastructure, and for Myanmar, given growth in the construction of manufacturing plants,upgradation of road and rail, and rising residential construction.




Revenue 4,692 6,799 3,373

EBITDA 642 740 192

PAT 343 400 135

RoE (%) NA 39.0 -

P/E (x) 1.4 6.0 -



Future Lifestyle Fashions Ltd. Not Rated

BackgroundFuture Lifestyle Fashions is an integrated fashion company, with a presence across key segmentswithin the fashion industry: design to distribution. The company has various store formatscatering to different consumer needs. Central, Brand Factory, Planet Sports, and aLL are thevarious store formats, while the company distributes 24 domestic and international brandsthrough exclusive brand outlets, its own chains, and other modern retail stores.

Key takeawaysFLF has a network of 379 stores in 78 cities in India, with 5m sq ft of retail space. Thecompany has 29 Central stores, 41 Brand Factory stores, 43 exclusive brand outletsstores, 77 Plant Sports, and other stores. The company also has 189 EBOs and franchiseesfor brands such as I am In, BARE, and Lee Cooper.

The management believes that fashion retailing is one of the most organised forms ofretailing in the country, with vast opportunity on account of the changing consumerdemographics.

The management's strategy is to create new fashion brands across various consumergroups.

FLF has tied-up with various local and global brands in term of licences and joint-ventures.It has been constantly investing in emerging brands by acquiring minority stakes.

The company through its vast retail network and expertise in retailing plans to leveragethe brands, create bigger brands, and exit once the brands become sizeable.

About 50% of the company's revenues are generated through its own brands.

It doesn't see e-commerce as a threat, as the management believes that it is difficult tosustain the discounting offered by e-commerce players in the long run.

The company licensing arrangements with various brands span a period of 10-20 years,and the licence fee ranges from 3% to 5%.

In terms of inventory risks, the management only has risk on its own brands, while forother brands it operates on sale or return model.

Our viewFashion retailing as an industry is a vast opportunity in a country like India, which is evolvingin fashion. Moreover, the young population is catalyst for future growth. FLF with its experienceand vast reach is well placed to tap the opportunity. However, an issue such as supply chainmanagement needs to be taken care of by companies for better profitability.



Revenue - 26,608 15,572

EBITDA NA NA -

PAT (3) 233 105

RoE (%) NA NA -

P/E (x) NA NA -



Atul Auto Ltd. Not Rated

BackgroundAtul Auto (ATA IN) is one of the leading three-wheeler (3W) manufacturers in India, focusingprimarily on the western and northern markets, with a facility based out of Rajkot in Gujarat.The company has been absent from the larger petrol segment of the domestic passenger 3Wmarket (~0.2m units), and thus has been operating at a low share of ~5% against leaderBajaj Auto. With the launch of the petrol version of 0.35t passenger 3W, under brandGemini, by mid-CY16, it expects its market share to improve going forward. From annualexport levels of 585 units, inclusion of petrol models would definitely boost exports multi-fold.Improving reach beyond Gujarat and Rajasthan to Maharashtra, Kerala, and Odisha, withincrease in dealer count to 225 at present from 187 in FY14, and aiming at a 10% annualincrease would be the perfect driver for growth ahead.

Key takeawaysAt present, the company operates out of its facility in Rajkot, with a capacity of 48,000units per annum. It is set to de-bottleneck it to 60,000 units over the next few months, asit is operating close to 90% utilisation. ATA has already initiated its greenfield project inAhmedabad for a fresh 60,000 unit capacity plant, at a total investment of INR1.8bn.Phase I of 30,000 units is expected to be operational by mid-CY17.

The company will launch the much awaited petrol passenger 0.35t 3W model in 1QFY16in a phased manner across states. With petrol 3W models being of prime demand inexport markets like Africa, Latin America etc, ATA will be in a position to export its newmodel like peers Bajaj Auto and TVS Motor Company and scale-up its export volumesmanifold to target levels of 3,000-4,000 units by FY17e.

Led by the present weakness in rural markets, ATA’s growth trajectory has slowed downto ~10% levels on a rising base. The management is confident of the new petrol modelproviding enough fillip to sales, taking it back to the 20% growth path soon.

The management does not see 4W small commercial vehicles as a secular threat to itsbusiness model, as the cost economics of operating them are vastly different. Being muchcheaper of the two, ATA is confident of passenger and cargo 3W remaining the preferredchoice of last mile low tonnage transportation in a cost conscious market like India,especially in rural markets.

In terms of margin, the company is confident of moving up the scale, with rising volumeand reach comparable to its peers. Better pricing with scale from its main vendors likeGreaves Cotton and strategic steps like making in-house petrol engines etc would propelmargins ahead.

Our viewOn back of robust fundamentals of 30% earnings CAGR and ~40% RoE, ATA is trading ~18xFY17e consensus earnings. With the asset turn of the business being structurally sound inaddition to ever increasing margin, ATA is a self-sustaining growth model, tapping the ruralas well as the urbanisation theme in India, with no requirement of external funding. Thisfeature would help ATA continue to trade at the higher end of the auto original equipmentmanufacturer peer set valuations going forward.


Revenue 3,629 4,293 3,683

EBITDA 441 499 430

PAT 259 298 320

RoE (%) 39.8 35.3 -

P/E (x) 6.3 13.4 -




Hikal Ltd. Not Rated

BackgroundHikal is involved in research, manufacturing, and marketing of fine chemicals for humanhealth, animal health, and agro-chemical industries. The company primarily engages withmid-sized pharmaceutical companies for research, custom synthesis, and manufacturing. Ithas traditionally concentrated on central nervous system and anti-diabetic therapies in thehuman health space, which is expected to be its key growth driver going forward.

Key takeawaysThe management believes overall volumes have risen, but the price erosion has affectedgrowth. Its product portfolio consists of many legacy products, which has affected growth.

Oil prices however are coming down, which could have a positive impact on margins.

The company has been increasing strength in R&D and the manufacturing capacity sideof the business. About 4-5% of overall sales are being spent on R&D.

The management expects growth to remain muted at 10-12% for the next one year,before it starts launching new products in the market. Post that, it expects growth toimprove to 15%.

Hikal has developed a positive process for Pregabalin, which is a USD3bn market. Itexpects to significantly benefit from the drug supplies. However, the same would be a2017-18 opportunity.

They plan to file four drug master files every year. The filing is usually determined bycustomer's requirement and their R&D capabilities.

Crop protection business is expected to perform better going forward, as a lot of efforthas gone into bringing this business back on track over the last three years. Competitionis lesser in crop protection than in pharmaceuticals. Agro margins have been recentlyimpacted, due to currency devaluations in certain countries.

The management has guided for a topline of INR14-15bn over the next five years.

Our viewAt the current market price of INR759 per share, the stock is trading at 19x FY14 EPS. Hikal'sconsistent increase in R&D spends and capex is expected to deliver high growth for thecompany going forward.


Revenue 6,595 8,292 6,583

EBITDA 1,870 2,055 1,088

PAT 252 639 303

RoE (%) 14.1 15.8 -

P/E (x) 26.2 12.1 -




Ballarpur Industries Ltd. Not Rated

BackgroundBallarpur Industries (BILT), part of the USD3bn Avantha Group, is the largest manufacturer ofwriting and printing paper in India and Malaysia. The company has a paper capacity of0.9mtpa, with a market share of over 25% of the Indian WPP market. In Malaysia, it commandsa 25% volume share in the WPP market. It has the largest paper distribution network in India,with over 135 distributors, including 54 exclusive distributors, spread across 52 locations inIndia. The company has set-up its own pulp unit and has its own pulp wood plantation inMalaysia for captive consumption, which significantly reduces risk of material shortage forthe company.

Key takeawaysIn the last 10 years, India and China together contributed 70% of growth in the globalpaper market, out of which India's contribution was 20%.

At present, the paper industry is going through a tough phase, as global pulp prices areat rock bottom and paper prices have fallen by 10% over the last three years.

The company looking for a strategic partner to reduce its debt burden, and the sameshould be over in the next three-to-six months.

The government's increased focus on environmental measures could be a huge driver forpaper price recovery in India. The Centre is also thinking of levying an anti-dumping dutyon paper in India.

Being a capital intensive industry, high cost of debt remains a key concern for domesticmanufacturers, as its makes them globally uncompetitive.

Upside from volume growth is limited as capacity utilisation is over 95%.

Our viewThe company has invested heavily in the last few years, with a capex plan of USD841m, withan expected return on capital of 15%, which has significantly reduced the company’sdependence on pulp prices. Any uptick in pulp prices would directly benefit EBITDA of thecompany, as raw material costs have been capped through captive plantation. Given thelow per capita consumption of paper in India, the domestic paper market is likely to witnesssteady 10-12% growth over the next few years. It has also restructured its capital structurethrough funding from the World Bank. BILT is looking for a strategic partner to dilute its debt,while listing on the Singapore Stock Exchange is also under active consideration. Given thecompany’s leading position in the market, steady growth potential, and likelihood ofimprovement in cash flow, we remain positive on the company. The stock is currently tradingat 20x FY14 EPS.


Revenue 48,548 52,203 24,037

EBITDA 8,687 9,551 4,523

PAT 779 498 21

RoE (%) 2.0 1.4 -

P/E (x) 11.1 25.3 -





Tribhovandas Bhimji Zaveri Ltd. Not Rated

BackgroundTribhovandas Bhimji Zaveri is a 148-year old jewellery brand, which is in the process oftransforming itself from a national jewellery retailer with 28 showrooms in 22 cities across 10states and a carpet area of ~91,000sq ft. The flagship showroom is located at Zaveri Bazaar,Mumbai, which accounts for ~15% of its revenues. Of the 28 showrooms operated by thecompany, 22 are large format stores, with a carpet area of over 3,000sq ft, while six aresmall format stores, with an area of 1,000-3,000sq ft. Gold jewellery contributes ~75% ofrevenues, while diamond jewellery contributes ~25% of revenues. TBZ has its own manufacturingfacility in Mumbai, with an annual gold refining capacity of 4,000kg, gold jewellerycomponents capacity of 4,500kg, and 100,000cts of diamond jewellery. The diamondjewellery is manufactured at its facility in Mumbai, while gold jewellery is sourced from 150third-party manufactures.

Key takeawaysThe management said consumer demand is witnessing a revival on account of favourablemacro-economic conditions.

Of the overall revenue, wedding sales account for ~65% and remains its focus area.

It is also looking at the franchise model for expansion. Till date, it has received over 700applications.

Relaxation of 80:20 import regulation is favourable. However, the high customs dutyremains an area of concern.

The management said availability of gold has led to stability in gold prices and premium.

It is also evaluating the option of sales through e-commerce channels and is in the processof developing its own platform. The products that would be sold from this channel will bedifferent from those available in the store. Their ticket price would be less than INR50,000as against the current average ticket price of INR0.14m.

As the management moves towards gold on loan, it would achieve better operationalefficiencies and profitability.

In terms of competition, the management believes that TBZ has a unique proposition andexpertise in wedding jewellery.

The recently launched TV advertisement has resulted in higher sales.

Our viewWe believe the opportunity in the Indian jewellery space is huge, given the sheer size of theindustry and scope of shift from unorganised to organised players. TBZ is already anestablished brand in the market, in which it has been present for long. Its brand strength innew markets is yet to be tested. Also, it stands out in terms of its unique proposition and targetcustomers.


Revenue 16,583 18,243 14,712

EBITDA 1,535 1,401 499

PAT 850 551 76

RoE (%) 17.9 13.3 -

P/E (x) 20.5 13.0 -




V-Mart Retail Ltd. Not Rated

BackgroundV-Mart Retail is a medium-sized hypermarket format retail chain based in New Delhi. It is amulti-brand family store, which offers apparel, general merchandise, and kirana bazaar.The company has established stores in metro and Tier I, II, and III cities, which are primarilylocated as standalone stores in high-street areas and shopping hubs. The company currentlyhas 107 stores in 90 cities. In FY14, apparel accounted for 87.8% of the company's sales,while 12.2% came in from the kirana business.

Key takeawaysThe management indicated that Diwali festival demand was weaker-than-expectation.

The company plans to set-up two stores per month towards its target of setting up 20-25stores per year. Till now, the company added 18 stores in FY15. For a store, the companyrequires a capex of INR10-12m (average size ~8,000sq ft). The management indicatedthat in order to set up 20-25 stores, capex will be met through cash flow generation,internal accruals, and by availing debt, if required. The Management guided for debt-equity ratio below 0.8x.

It believes 4QFY15 to better than the previous quarters, on account of the Holi festival,which is a big festival in Bihar and Uttar Pradesh. These states contribute ~70% of thecompany's overall revenues.

The company plans to set-up more stores in existing clusters of Uttar Pradesh and Bihar.However, it may also look at clusters in West Bengal, Odisha, Assam, etc, which havesimilar demographics.

Our viewAt the current market price of INR529 per share, the stock is currently trading at 43x FY14EPS. V-Mart Retail is one of the most efficient players in the Indian retail industry, with a leancost structure. The company's stores are located in Tier II and III cities, as a result the leaserentals are less than INR30 per sq ft/month. The company has higher operating margins andrevenue per sq ft, when compared to players such as Future Retail, Shoppers Stop, etc.



Revenue 3,835 5,750 5,488

EBITDA 402 542 -

PAT 180 252 358

RoE (%) 17.8 15.8 -

P/E (x) 13.7 20.4 -



Intellect Design Arena Ltd. Not Rated

BackgroundIntellect Design Arena (IDA) is the recently demerged products arm of Polaris. It got listed asa separate entity on December 18, 2014. The company has five major products in thebanking, financial services, and insurance space. The nature of business is very different forproduct companies, relative to IT services companies. Product companies are characterisedby lumpy quarterly revenues, non-linear growth, relatively high gross margins, and high R&Dexpenses. Their assessment and valuation measures hence differ from traditional listedcompanies in this space. The fact that it is a newly listed company, with a distinct andnewfangled business model, makes it an interesting company to gauge.

Key takeawaysIDA operates in the areas of retail banking, capital markets, transaction banking, andinsurance. It sees demand growth being driven by: 1) Transaction banking; 2) Digital;and 3) Risk (Basel III). At present, 50% of its revenues accrue from North America andEurope, and the rest from emerging markets. Over the next three years, it plans to focuson developed markets to constitute two-third of total revenues.

It has been targeting Tier I banks, which constitutes a majority of the BFSI spend. IDAcategorises any bank with assets above USD100bn as Tier I. The market constitutes ofroughly 130 banks, with ~80% of the total spend.

Over the next three years, it aims to grow revenues ~20% YoY. It also aims to improvegross margins in the developed and emerging markets from 60% to 65% and 40% to50%, respectively. It can expand margins as: 1) R&D expenditure is expected to remainconstant on an absolute basis; 2) General and administrative cost can be leveraged asrevenue growth kicks in. The company expects to break-even by Mar-16.

IDA has been actively making investments in R&D and selling and marketing to driverevenue growth. Over the last one year, it has been investing in an intra-day liquidity riskmanagement product that complies with Basel III norms. It has been testing this product inFY15 and also demonstrated it to ~20 clients. This can contribute to growth ahead.

The company has a full suite of products across various functions of BFSI, while competitorsare present only in select segments. It faces major competition from players like Fundtech,ACI Worldwide, Bottomline Technologies, FIS, among others.

Our viewIDA currently trades ~1.3x FY17e EV/sales. Globally, product companies with revenues overUSD100m trade at 2-3x EV/sales. It trades at a deep discount given: 1) Moderate revenuegrowth; and 2) Negative margins. The company is currently implementing a number ofchanges to restructure operations, invest in the front-end, and drive profitable revenue growth.The stock has the potential to re-rate, given improvement in the revenue growth rate, whichcan get a boost on account of: 1) Technology changes in the banking sector (modernisationof legacy systems); 2) Strengthened management, with the establishment of separateleadership and S&M for individual products; 3) Strong partnerships with IT service vendors;and 4) Tapping additional number of banks across geographies.




ITD Cementation India Ltd. Not Rated

BackgroundThe new government’s initiatives like: a) River inter-linking project, cleaning of the Ganges; b)Development of Ports; c) Deepening air-connectivity by building new airports beyond metrocities; d) Expanding Metro projects to several cities; d) Fast-tracking of investments in roadinfrastructure; and e) Increased thrust on renewable space, including hydro, and clearing upissues in the power sector is expected open up ample opportunities for engineering, construction,and procurement/infrastructure players. ITD Cementation, a mid-sized EPC player, withtremendous expertise in executing construction projects in the toughest of the terrains wouldbe the biggest beneficiary. The company has a track record of successfully completing EPCprojects for leading names in the public and private sector.

The company on a consolidated basis reported a negative growth of 3% revenue CAGR overFY12-14 to INR15.8bn, while EBITDA de-grew 1% during the same period, due to slowdownin revenue reorganisation on the back of delay in project execution. However, disputedclaims on road projects of the National Highways Authority of India and irrigation projects inAndhra Pradesh stretched working capital of the company, which in turn has impacted earningssignificantly, due to elevated interest costs. As a result, PAT de-grew by 29% CAGR duringFY12-14.

Key takeawaysThe management expects order inflows to remain robust, driven by the government’sthrust on building infrastructure and the company's successful track record of executingconstruction projects within a specified deadline.

On the back of strong order inflow, improvement in turnaround time in project execution,and current order book of INR71bn gives the management confidence to double itsrevenue by CY16e.

Expected write-offs in some orders to be executed over the next couple of quarters andslower-than-expected execution in some orders (10-12% of the total order book) is likelyto result in a moderate improvement in EBITDA margins and reach by 9% in CY15e.However, with strong margin and accretive flows of new orders, the management expectsEBITDA margins to accelerate to 15% by CY17.

Net debt is expected to reduce to INR4bn by CY15e-end from current levels of INR6.2bn,on the back of a settlement of the ~INR1.7bn dispute with NHAI within the next two-to-three months.

With consistent positive operating cash flow from CY15e onwards and improvement inworking capital cycle, cost of debt at 12.7% is expected to reduce gradually.

Our viewAt the current market price of INR490 per share, ITD is trading at CY15e and CY17e EV/EBITDA multiple of 6.5x and 5.1x, respectively. The company has taken significant steps inthe last few months to bring down its working capital levels. Working capital, as a percentageof sales, stands ~56% versus an industry average of 20-30%. Once the working capitalsituation improves, it would enable the company to curb interest cost and accelerate earnings.With expected acceleration in order inflows on the back of the government's path-breakinginitiatives, urge to remove policy-bottlenecks to operationalise stalled infrastructure projects,and an improvement in the working capital cycle, we believe ITD is in a sweet spot to grabthe opportunity and boost earnings in coming years.


Revenue 15,784 NA 8,199

EBITDA 1,777 NA 444

PAT 93 NA (244)

RoE (%) 2.3 NA -

P/E (x) 17.3 NA -





Supreme Infrastructure Ltd. Not Rated

BackgroundSupreme Infrastructure India is a three decade old company, having a presence in over 13states domestically and internationally through its six verticals. The company is well positionedin engineering, procurement, and construction and build, operate, and transfer segmentsthrough roads, bridges, buildings, railways, sewerage and water, and power. At present,the company has total 11 projects in hand, of which five are operational, four will be operationalin FY16, and the remaining two in FY17.

The company is backwardly integrated in its business operations and has four ready mixconcrete plants, with 103 acres quarry blocks, along with crushing, wet mix concrete, andasphalt units near Mumbai. It also owns 70 acres of quarry near Delhi. The company ownscrushing and building quarries in Oman also.

Key takeawaysThe management expects sales to touch INR15,000/19,000m in FY15/16, respectively,with four projects turning operational in FY16 (one in each quarter).

The company's two projects - Panvel-Indapur Tollway and Jipur-Rangpur project - arecurrently under the 5/25 rule. The earlier project will be operational in a nine monthperiod from now.

It expects INR3.5-4/7-8/13m toll collection per day in FY15/16/17, respectively.

The company has recently won a major distribution order of INR5,500m, awarded bythe Bihar Power Distribution Company for village electrification in Supaul district, thustaking its order book to INR9,000m.

Average interest payments currently stand at INR410m. The company targets to reducethis to INR250-260m by FY17.

Average receivables for the company have increased to 130 from 80 days earlier.

The company has laid down a roadmap for reduction of debt, with all projects becomingoperational, higher RoEs, and fast execution of projects. With this, the company expectsthe cash flow to improve. It has also received a two-year moratorium period from banksand recently undertook a qualified institutional placement of INR1bn, which will boost itsdebt reduction further.

Our viewThe company looks promising with fast-track projects execution, strong order book, and newprojects turning operational in coming quarters. Reduction in debt and interest payments willhelp the company's cash flow to improve going forward.




Revenue 23,329 25,823 7,026

EBITDA 3,644 4,498 1,142

PAT 1,002 792 140

RoE (%) 21.1 11.8 -

P/E (x) 3.3 5.0 -



Liberty Shoes Ltd. Not Rated

BackgroundLiberty Shoes is a leading player in the Indian branded footwear industry. The company has~400 exclusive showrooms pan India. It recently announced their corporate restructuringplans, wherein the existing business arrangements with group companies - Liberty Enterprisesand Liberty Group Marketing Division - will be expiring on March 31, 2015. The arrangementincludes two manufacturing facilities at Gharaunda and Karnal and their distribution networkand licence usage of sub-brands. Key brands of the company are Coolers, Fortune, Warrior,Gliders, Force10, Senorita, Windsor, Prefect, Tiptopp, and Footfun. Operations are run bythree promoter families: two Gupta families and one Bansal family. The promoters have beenin the footwear/leather business for almost 60 years.

Key takeawaysAs per industry sources, the organised footwear market is expected to grow ~15% CAGRover the next three years, driven by a shift from unorganised market, increase in reach,premiumisation, and usage.

The company, which derives ~75% of its revenues from northern and southern Indianmarkets, is planning to expand its reach in western and eastern regions. Expansion willbe both a mix of company-owned and franchise stores.

The company derives ~47%, ~26%, and ~28% from retail, distribution, and institutionalchannels, respectively. There are ~150 distributors, 100 company owned stores, ~450franchisees, and over 8,000 multi-brand outlets. The management has outlined aggressiveplans of adding ~100 exclusive outlets per year for the next three years, taking its totalexclusive store count to ~800 over that period. The management said majority of itsexpansion would be in high street rather than in shopping malls.

Liberty Shoes announced its corporate restructuring plans, wherein its existing businessarrangements with group companies - Liberty Enterprises and Liberty Group MarketingDivision - will expire on March 31, 2015. The arrangement includes two manufacturingfacilities at Gharaunda and Karnal, distribution network, and licence usage of sub-brands.

Our viewAt the current market price of INR257 per share, the stock is trading at 61x FY14 EPS. Thecompany being a leading player in the Indian branded footwear industry is well placed toreap the benefits of evolving consumer behaviour for branded footwear. Also, the company'sambitious plans of distribution expansion will aid in higher revenues, scale, and better operatingefficiencies.


Revenue 3,620 4,839 3,898

EBITDA 306 413 309

PAT 54 133 100

RoE (%) 4.2 9.7 -

P/E (x) 26.7 19.0 -




Nandan Denim Ltd. Not Rated

BackgroundNandan Denim commenced its operations in 1994 with a textile trading business and forayedinto textile manufacturing in 2004. The company currently engages in manufacturing ofdenims, cotton fabrics, and khakis. Consolidated revenues/EBITDA/PAT has grown at aCAGR of 24/23/36% over the last five years, respectively. The company is on its way toexpanding its denim fabric capacity and is undergoing backward integration. It is alsodiversifying operations by adding shirting capacity, thus creating ample space for growthgoing forward.

Key takeawaysThe management sees strong domestic and global demand for denim apparels. In lieuof this, the company is on its way to expand its denim fabric capacity to 110MMPA from71MMPA. It is also improving capacity utilisation for its expected denim capacity. Onthese lines, it expects 10-15% growth in revenues in the year ahead.

The company also plans to backward integrate by expanding its spinning capacity to124tonne per day in FY15-16 from 64TPD in FY15-16, resulting in higher margins andimproved return ratios. In-house production of cotton yarn would result in ~10-15% savingsas compared to purchase of yarn from the market.

It is also diversifying operations by adding shirting capacity, which currently stands at10MMPA. Overall, the company's operations involve procuring fibre, spinning yarn(ring spinning and open end spinning), and weaving and processing fabric for denimand shirting.

Its manufacturing facilities are strategically located, as it procures 70% of its cottonrequirement from Gujarat. Sourcing material from Gujarat offers multiple advantagesgiven: 1) The state is the largest producer of cotton in India, with 31% share; 2) Gujaratis the largest producer of denim fabric in India, with 65-70% share, 3) Its textile policyaids in terms of interest subsidy, power tariff subsidy, and value added/entry tax andstamp duty reimbursement; 4) Lower cost of production on account of easy availability ofmaterial, power, and labour; 5) Close proximity to machinery vendors, fabric dealers,and garment manufacturers, leading to faster delivery and service

Despite the current over-supply in the domestic denim market, Nandan Denim has beenable to grow its revenues at 24% CAGR as compared to industry growth of 12-15% overthe last five-years. It has a strong global and domestic agent based network and distributornetwork, which it leverages to maintain operational superiority.

Our viewAmid strong domestic and global demand for denim apparels, Nandan Denim expects 10-15% growth in revenues for the next year. It is witnessing improving capacity utilisation for theexpanded denim capacity. Moreover, on account of its spinning capacity expansion, it expectsEBITDA margins to improve to 19% from 15%. Expansion in denim fabric and spinningcapacities, higher capacity utilisation in denim, and larger margins on account of increasedbackward integration through higher spinning capacities are likely to aid revenue growthand margin expansion going forward.


Revenue 7,031 8.,938 15 8,182

EBITDA 1,069 1,327 1,279

PAT 311 393 361

RoE (%) 18.1 19.6 -

P/E (x) 9.8 7.7 -





Acrysil Ltd. Not Rated

BackgroundAcrysil has big ambitions and laid out its growth strategies and vision for the next five-to-seven years.

Key takeawaysThe company started operations in 1989 in collaboration with Shock & Co. The agreementwith the German entity expired in 2002.

It manufactures granite and high-end stainless steel kitchen sinks. It has also recentlyforayed into appliances (chimneys, hobs, ovens, and dishwashers), which are currentlyimported, but will be partly manufactured from FY16 onwards, post commissioning ofthe assembly/manufacturing facility.

Granite sinks are manufactured using quartz technology, which only four suppliers,including Acrysil, have access to. The key raw material quartz is imported from Germany.

It operates at a capacity of 300,000 and 75,000 pieces of granite and stainless steelsinks, respectively. Capacity utilisation for granite and stainless steel sinks currently stand~80% and 70%, respectively.

To address the growth potential, it intends to raise its granite sinks capacity to 500,000pieces over the next three years. Capex, excluding land, is generally ~INR50m for acapacity of 50,000 pieces.

It has achieved 25-30% revenue CAGR over the last five years, and expects to at leastmaintain this growth momentum for the next three-to-five years.

The global market size for kitchen sinks is ~INR150bn, of which composite quartz kitchensinks account for ~10%.

Exports to over 80 countries account for ~80% of revenues. About 70% exports are whitelabelling (the US and EU), with the balance under its brand Carysil (Asia, Australia, andNew Zealand). With the company now planning to focus on the domestic market, itsrevenue share from the same can increase to 40% over the next three years.

Our viewWhile the company seems interesting, the recent diversification into stainless steel sinks andkitchen appliances can enable it to sustain the growth momentum over the medium-term.


Revenue 796 1,065 641

EBITDA 133 186 115

PAT 48 77 62

RoE (%) 18.4 25.0 -

P/E (x) 8.0 10.6 -




Sunil Hitech Ltd. Not Rated

BackgroundSunil Hitech is an engineering, procurement, and construction player engaged in fabrication,erection and commissioning, and civil construction. The project segment is involved in thefabrication, erection, and commissioning of boilers, electrostatic precipitators, rotatingmachineries, sugar plants, transmission and distribution, EPC contracts, and balance of plant.The company is among the few EPC companies with healthy balance sheet and positive cashflows. Over last three years, it has delivered 25% revenue CAGR. It has an order book ofINR36bn, with a book-to-bill ratio of 2.3x. Over 80% of it constitutes the power generationsegment.

Key takeawaysCompetition in the EPC market has been showing a stablising trend.

The company has a strong bid pipeline and already bid for INR100bn worth of orders.

It expects revenue growth of 15% in FY16.

SHL is aggressively focusing on its manufacturing business, which provides repairs ofpressure parts in power plants up to 800MW.

Our viewSHL is among the few EPC companies with a healthy balance sheet and cash flows. Its netprofit has doubled in the last five years. It has an impeccable track record of consistentprofits. Given the government’s focus on infrastructure, SHL is well positioned to benefit froman uptick in demand. The stock is trading at an attractive valuation of 6x FY14 EPS.


Revenue 12,350 15,746 6,881

EBITDA 1,449 1,597 706

PAT 356 292 156

RoE (%) 12.2 8.8 -

P/E (x) 1.9 3.0 -





Adlabs Entertainment Ltd. Not Rated

BackgroundAdlabs Entertainment owns and operates Imagica - the theme park; Aquamagica - the waterpark; and a family hotel. The company is strategically located at Khalapur, 74km from Mumbai,off the Mumbai-Pune Expressway. It has identified Hyderabad as the next location to developa new theme park. Promoter Shri Manmohan Shetty has over three decades of experience inthe Indian media and entertainment industry, and is the former promoter of Adlabs Films, oneof India's largest entertainment companies. It owns 302 acres of land, of which it utilises~138 acres for Imagica and Aquamagica. The firm hosted over 0.8m visitors in FY14 andexpects 1.1m footfalls in FY15e. It clocked revenues of ~INR1bn in FY14, with an EBITDA ofINR39m. Average realisations per visitor stood at INR1,650 for Imagica in FY14. It expects toenjoy realisations of ~INR1,800 and ~INR1,500 for Imagica and Aquamagica in FY15e,respectively. According to the management, the average ticket size is ~5-6 people.

We value Adlabs at 12x FY17e EBITDA (enterprise value: INR26.9bn) similar to its globalpeers valuation. With increasing visibility and execution, multiples could rerate. Lower-than-expected footfalls remain the key risk.

Key takeawaysSignificant scope to scale up; Addressable market over 15m: Adlabs'addressable market is ~15m, as derived by the number of car-owning households (Source:Census 2011). The same in its immediate catchment area - Mumbai, Mumbai suburbs,Thane, and Pune - is 3.5m. In the first full year of its operations, it managed to cater to0.8m visitors. This can be significantly scaled up, considering the large opportunity thisaddressable market presents. Both the immediate addressable market and consequentfootfalls could grow further, if and when the company expands into other geographies.

Revenue pegged to footfalls, could potentially grow to INR5bn revenuesby FY17e: The company has achieved decent scale in its first full-year of launch, andwill likely surpass 1m visitors in FY15e. We expect footfalls to increase significantly to1.8m and 2.3m by FY16e and FY17e, respectively, driven by both a push and pullstrategy. It has increased its marketing spend and started targeting the Gujarat market.With its hotel expected to commence operations in FY16e, it will open to corporateclients. Visitors can be categorised as: 1) Walk-ins; 2) Corporate/social groups; 3) Schools,colleges, etc; 4) Websites/call-centers; and 5) Travel agents.

Bulk of the capex is behind Adlabs; Has potential to be free cash flowpositive by FY16e: Capital expenditure for Adlabs is predominantly on equipmentsand rides. With the INR16.5bn Mumbai project now fully operational, bulk of the capitalexpenditure is behind it. A major portion of the funds raised through the initial publicoffering is expected to be utilised in paring down its debt. Consequently, with bulk of thecapital expenditure already incurred and with lower interest outgo, we expect FCF toincreasingly mirror EBITDA.

Our viewWe value Adlabs at 12x FY17e EBITDA (enterprise value: INR26.9bn) similar to its globalpeers. With increasing visibility and execution, multiples could re-rate. Lower-than-expectedfootfalls remain the key risk.



Revenue 1,880 3,670 4,979

EBITDA 220 1,527 2,239

PAT (1,578) 140 625

RoE (%) nm nm nm

P/E (x) nm nm nm



Quarterly financials(INRm) 3QFY15 3QFY14 YoY (%) 2QFY15 QoQ (%)

Net revenues 29,461 28,232 4.4 31,051 (5.1)

Expenses 9,979 9,204 8.4 10,990 (9.2)

EBITDA 19,482 19,028 2.4 20,060 (2.9)

EBITDA margin (%) 66.1 67.4 64.6

Adjusted PAT 15,930 15,673 1.6 16,789 (5.1)

Reported PAT 15,930 15,673 1.6 15,668 1.7


3QFY15 RESULT REVIEW

NMDC LimitedBeats expectations on higher iron ore realisationsNMDC's standalone revenues rose 4.4% YoY to INR29.5bn, driven byimproved iron ore realisations. While iron ore volumes declined 5% YoY to7MT, realisations increased 9.5% YoY to INR4,172 per tonne. Realisationsdeclined by a marginal 0.9% on a sequential basis. EBITDA improved by2.4% YoY to INR19.5bn, with margins of 66.1% and EBITDA/t of INR2,795, animprovement of 7.8% YoY and 1.2% QoQ. Higher EBITDA led to adjusted PATof INR15.9bn, which was flat YoY. Both EBITDA and PAT were higher than ourestimates due to higher-than-expected realisations. The company declared asecond interim dividend of INR4.3 per share, taking the total interim dividenddeclared to INR7.3 per share for FY15.

Iron ore production and turnover at record levels for 3QFY15 and 9MFY15

The company produced 8.1MT of iron ore in 3QFY15 and 22.5MT in 9MFY15, which is thehighest ever achieved in the 3Q and 9M, respectively. Iron ore sales for 9MFY15 were alsoat record levels of 22.8MT, which is an increase of 8% over 9MFY14. In 3QFY15, thecompany faced evacuation problems with railway tracks being damaged by extremists andthe impact of Cyclone Hudhud also contributing to lower volumes. New iron ore mines inBailadila (Deposit 11-B) is expected to be commissioned in FY15, while the Kumaraswamyiron ore mine is likely to be commissioned by 2QFY16-end. The1.2mtpa pellet plant atDonimalai is targeted for commissioning by 1QFY16-end.

Iron ore prices for Feb-15 reduced, which reflects weak international prices

In the backdrop of higher ore imports by domestic steel players like JSW Steel and Tata Steel,the company has reduced iron ore lumps and fines prices for Feb-15 to INR3,750/t andINR2,760/t as compared to INR4,200/t and INR3,060/t in Jan-15, respectively.

Royalty increase passed on to customers; Profitability has been broadly maintained

Iron ore royalty rates had been hiked to 15% from 10%, effective Sep-14. Higher royalty hasnot materially impacted the company in 3QFY15, as it is has passed on the higher royaltyburden to its customers. Royalty and cess costs more than doubled YoY to INR4.6bn, withroyalty cost as a percentage of sales increasing to 15.6% from 8% in 3QFY14 and 8.7% in2QFY15. EBITDA per tonne increased marginally to INR2,795 from INR2,761 YoY.

Valuations and outlook

Weaker international iron ore prices and higher iron ore imports have affected the company'svolumes and led to the reduction in iron ore prices recently. We revise our FY15/16e iron orevolume assumptions downwards by 10.5/13.8% to 31.5/32.8MT, respectively, while aligningour realisation assumptions with the revised iron ore prices announced by the company,leading to a reduction in FY15/16e EBITDA by 6.4/13.9%, respectively. We maintain ourBuy rating on the stock with a revised target price of INR173 per share from INR184 earlier,based on a target multiple of 5x FY17e EV/EBITDA and adding back FY17e capital work in-progress at 0.5x book.


Current Reco : BUYPrevious Reco : BUYCMP : INR141Target Price : INR173Potential Return : 23%

Market dataSensex : 28,718Sector : MetalsMarket Cap (INRbn) : 559.2Market Cap (USDbn) : 9.1O/S Shares (m) : 3,964.752-wk HI/LO (INR) : 196/123Avg Daily Vol ('000) : 2,519Bloomberg : NMDC IN

Returns (%)1m 3m 6m 12m

Absolute 1 (12) (18) (2)Relative (5) (14) (27) (30)Source: Bloomberg

Shareholding patternPromoters : 80%FII : 6%DII : 11%Others : 3%Source: Bloomberg

ValuationFY15e FY16e FY17e

EPS (INR) 17.3 17.5 18.0P/E (x) 8.1 8.1 7.8P/BV (x) 1.7 1.6 1.4EV/EBITDA (x) 4.4 4.5 4.4Dividend yield (%) 6.0 6.0 6.0

Source: Bloomberg

Price performance vs Nifty

Source: Bloomberg

Source: Bloomberg

80100120140160

Feb-14 Jun-14 Oct-14 Feb-15

NMDC NIFTY


Quarterly performance - StandaloneINRm 3QFY15 3QFY14 YoY (%) 2QFY15 QoQ (%)

Revenues 29,461 28,232 4.4 31,051 (5.1)

Expenditure 9,979 9,204 8.4 10,990 (9.2)

EBITDA 19,482 19,028 2.4 20,060 (2.9)

Other income 5,251 5,077 3.4 5,268 (0.3)

Depreciation 533 362 47.2 409 30.2

EBIT 24,201 23,743 1.9 24,920 (2.9)

Exceptional items - - (1,122)

PBT 24,201 23,743 1.9 23,798 1.7

Taxes 8,271 8,070 2.5 8,130 1.7

Reported PAT 15,930 15,673 1.6 15,668 1.7

Adjusted PAT 15,930 15,673 1.6 16,789 (5.1)

Key ratios 3QFY15 3QFY14 YoY (bps) 2QFY15 QoQ (bps)

EBITDA margin (%) 66.1 67.4 (127) 64.6 152.4

EBIT margin (%) 82.1 84.1 (196) 80.3 189.2

PAT margin (%) 54.1 55.5 (144) 54.1 0.1

EPS (INR/share) 4.0 4.0 4.2

ETR (%) 34.2 34.0 19 34.2 1.2

Operating metrics 3QFY15 3QFY14 YoY (%) 2QFY15 QoQ (%)

Iron ore despatches (MT) 7.0 7.3 (5.0) 7.3 (4.1)

Iron ore realisation (INR/tonne) 4,172 3,811 9.5 4,211 (0.9)

EBITDA (INR/tonne) 2,795 2,592 7.8 2,761 1.2


Volume decline YoY and sequentially Iron ore realisations decline marginally QoQ, higher YoY


NMDC’s target priceFY17e EBITDA (INRm) 89,595

EV/EBITDA multiple (x) 5.0

Target enterprise value (INRm) 447,975

Add: FY17e net cash (INRm) 165,172

Add: FY17e capital work-in-progress at 0.5x book value (INRm) 74,384

Target market capitalisation (INRm) 687,532

Target price (INR per share) 173


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Y15

NMDC iron ore volumes (MT)


FinancialsProfit and loss account (INRbn)Year-ended Mar 31 2013 2014 2015e 2016e 2017eRevenues 107 121 130 132 141

Expenses 33 43 45 47 51

EBITDA 74 78 85 85 90

Depreciation & amortisation 1 2 2 2 2

EBIT 72 76 83 83 87

Other income 22 21 21 22 21

Interest expense 0 0 - - -

Profit before tax 95 97 104 105 108

Extraordinaries 0.0 0.5 - - -

Tax 31 33 35 36 37

Profit after tax 63 64 69 69 71

Adjusted PAT 63 64 69 69 71

EPS (INR) 16.0 16.1 17.3 17.5 18.0

Balance sheet (INRbn)Year-ended Mar 31 2013 2014 2015e 2016e 2017eShare Capital 4 4 4 4 4

Reserves & Surplus 271 296 325 355 387

Networth 275 300 329 359 391

Debt - - - - -

Deferred tax/ other liabilities 1 1 1 1 1

Capital Employed 276 301 330 360 392

Gross Fixed Assets 26 28 33 38 43

Accumulated Depreciation 13 14 16 18 20

Net Assets 13 14 17 20 22

Capital work in progress 32 53 79 109 149

Investments 2 3 2 2 2

Liquid Investments 2 3 2 2 2

Current Assets Loans & Advances

Inventory 6 7 9 10 10

Debtors 11 14 16 16 17

Cash & Bank 210 187 180 177 163

Loans & advances and others 34 38 43 43 46

Current Liabilities & Provisions

Creditors 14 14 16 16 18

Provisions 19 0 0 0 0

Net Current Assets 229 232 232 229 218

Application of Funds 276 301 330 360 392

Per share data*Year-ended Mar 31 2013 2014 2015e 2016e 2017eNo. of shares (Mn) 3,965 3,965 3,965 3,965 3,965

BVPS (INR) 69.4 75.6 83.0 90.6 98.6

CEPS (INR) 16.3 16.5 17.8 18.0 18.6

DPS (INR) 7.0 8.5 8.5 8.5 8.5


Cash flow statement (INRbn)Year-ended Mar 31 2013 2014 2015e 2016e 2017ePBT 95 97 104 105 108

Depreciation 1 2 2 2 2

(Inc)/ Dec in working capital (5) (27) (6) (1) (3)

Tax paid (31) (33) (35) (36) (37)

CF from operating activities 60 38 64 71 71

Capex (19) (22) (31) (35) (45)

CF from investing activities (20) (22) (31) (35) (45)

Dividends & Interest paid (32) (39) (39) (39) (39)

Others (1) (0)

CF from financing activities (32) (40) (39) (39) (39)

Net cash flow 8 (24) (6) (4) (14)

Add: Opening balance 203 210 187 180 177

Closing balance 210 187 180 177 163

Growth indicators (%)Year-ended Mar 31 2013 2014 2015e 2016e 2017eRevenue (5.0) 12.6 8.0 1.1 6.9

EBITDA (17.4) 5.4 9.1 0.3 5.4

PAT (13.3) 0.5 7.8 0.7 3.1

EPS (13.3) 0.5 7.8 0.7 3.1

ValuationYear-ended Mar 31 2013 2014 2015e 2016e 2017ePE (x) 8.8 8.8 8.1 8.1 7.8

P/BV (x) 2.0 1.9 1.7 1.6 1.4

EV/EBITDA (x) 4.7 4.7 4.4 4.5 4.4

EV/Sales (x) 3.2 3.1 2.9 2.9 2.8

Dividend Yield (%) 5.0 6.0 6.0 6.0 6.0

Financial ratiosYear-ended Mar 31 2013 2014 2015e 2016e 2017eRoE 24.4 22.2 21.9 20.1 19.0

RoCE 95.7 57.8 42.6 33.5 28.4

Debt/Equity (x) (0.8) (0.6) (0.6) (0.5) (0.4)

EBIT/Interest (x) - - - - -

Margins (%)Year-ended Mar 31 2013 2014 2015e 2016e 2017eEBITDA 68.9 64.4 65.1 64.5 63.6

EBIT 67.6 63.2 63.7 63.0 62.0

PAT 59.2 52.9 52.8 52.6 50.7

Source: Company Antique



Sun TV Network LimitedRevenues in line, beat on profitabilitySun TV Network's 3QFY15 revenues were in line with our estimate atINR5.5bn. Advertising revenues growth remained soft at 7% YoY and 3%lower than our estimate at INR2.9bn. We had factored in 10% YoY growth inadvertisement revenues, taking into account the festive season. Themanagement expects 4Q to be weaker as advertising volume growthmoderates post January. Subscription revenues surprised positively,underpinned by a pick-up in cable revenues. The latter grew 18.4%sequentially to INR580m, while overall subscription revenues came in atINR1.9bn, 4% ahead of our estimate. The management guided for a 10%growth in subscription for FY16e sans the Phase III digitisation impact and20% growth if Phase III digitisation picks-up meaningfully. Margins surprisedpositively, aided by lower ammortisation cost, which had spiralled in 2Q.Ammortisation expense was down 36% QoQ to INR1bn, which coupled withlower other expenses led to an 11pps margin expansion (EBIT margin: 54.7%).The management maintained its FY15e amortisation guidance of INR4.8-4.9bn. It has already done ~INR3.9bn for 9MFY15. With the management'sstrategy of investing in movies to regain ratings share, coupled with increasedcompetitive intensity in Southern markets, movies acquisition cost areexpected to remain high.Ad revenues grew 7% to INR2.9bnAd revenues grew 7% to INR2.9bn, 3% lower than our estimate. Growth this quarter wasprimarily driven by festive season. Automobiles, telecom, and jewellery sectors aided growth.However, retail sector spends remained weak. The management expects 4Q to be weaker asad volume growth moderates post January. In comparison, Zee Entertainment Enterprises,excluding sports, reported an ad revenue growth in the mid-to-high teens in 3QFY15. We arefactoring in ad revenue growth of 12% and 14% for FY16e and FY17e, respectively.Subscription revenue growth 4% ahead of estimate at INR1.9bnSubscription revenues surprised positively, underpinned by a pick-up in cable revenues. The lattergrew 18.4% sequentially to INR580m. Overall subscription revenues came in at INR1.9bn, 4%ahead of our estimate. The management guided for a 10% growth in subscription for FY16e sansPhase III digitisation impact and 20% growth if Phase III digitisation picks-up meaningfully. We arefactoring in a subscription revenue growth of 12% and 15% for FY16e and FY17e, respectively.Margins surprised positively at 54.8%Margins surprised positively at 54.8% (13pps margin expansion QoQ) as amortisation expenses(INR1bn) normalised from 2Q levels. 2QFY15 had witnessed a significant jump in movie-ledamortisation expenses. The management maintained its FY15e amortisation guidance of INR4.8-4.9bn. It has already done ~INR3.9bn for 9MFY15. Post the controlled 3QFY15 quarter, webelieve 4Q too will see some restrain in movie-related amortisation expenses.

Valuation and outlookWe maintain our Buy rating on Sun TV with a revised target price of INR440 per share,based on 17x FY17e P/E, which factors in FY17e earnings revision of 5%, primarily onaccount of our subscription assumptions. Though the stock trades at over 50% discount toZEEL, with rising political risks, we expect ZEEL's premium over Sun to remain elevated.

Quarterly financials(INRm) 3QFY15 3QFY14 YoY (%) 2QFY15 QoQ (%)

Total revenues 5,524 5,083 8.7 5,090 8.5

Expenditure 1,244 1,363 (8.8) 1,132 9.9

EBITDA 4,281 3,720 15.1 3,958 8.2

EBITDA margin (%) 77.5 73.2 430bps 77.8 (27bps)

Dep and amortisation 1,254 1,061 18.2 1,850 (32.2)

EBIT 3,027 2,660 13.8 2,108 43.6

EBIT margin 54.8 52 247bps 41 1,337bps

Adjusted PAT 2,141 1,858 15.3 1,545 38.6

NPM (%) 38.8 36.5 221bps 30.3 841bps



Market dataSensex : 28,718Sector : MediaMarket Cap (INRbn) : 150.2Market Cap (USDbn) : 2.4O/S Shares (m) : 394.152-wk HI/LO (INR) : 488/299Avg Daily Vol ('000) : 541Bloomberg : SUNTV IN


Absolute 9 15 (9) 5Relative 2 12 (19) (26)Source: Bloomberg


ValuationFY15e 2016e FY17e


Source: Bloomberg


Source: Bloomberg

Source: Bloomberg


80100120

140160


Sun TV NIFTY


Advertising revenues rose 7% YoY to INR2.9bn

Source : Company, Antique

Subscription revenues surprise positively at INR1.9bn, led by pick-up in cable revenues


EBIT margins up 11pps YoY to 54.8%


Aided by automobiles,telecom, and jewellerysectors. However, retailad spends remainedweak. 4Q is expected tobe soft as ad volumesdrop post January

Cable revenues up18.4% QoQ. Thecompany added 0.1mDTH subscribers (10.8msubscriber base). ARPUat INR41

Controlled amortisationexpense aids margins.Amortisation guidancefor FY15e atINR4.8-4.9bn

2,93

0

2,69

4

2,79

2

2,33

6

2,72

0

2,82

0

2,80

4

2,60

3

2,91

6

20%

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-4%-7%

5%

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-

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5%

10%

15%

20%

25%

Advertisement revenues (INRm) YoY (%)37

0

380

420

492

540

510

483

490

580

945

1,00

0

1,06

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4

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9

16%18%

24%27% 27%

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-

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400

600

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0%

5%

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15%

20%

25%

30%

Cable revenues (INRm) DTH revenues (INRm) Total subscription revenues YoY (%)

4,85

9

4,72

7

6,01

9

4,66

4

5,08

3

5,20

2

6,33

6

5,09

0

5,52

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47.2%52.3% 55.3%

36.1%41.4%

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-

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4,000

5,000

6,000

7,000

3QF

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1QF

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2QF

Y15

3QF

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0%

10%

20%

30%

40%

50%

60%

Revenues (INRm) EBIT margin


Result review(INRm) 3QFY15 3QFY14 YoY (%) 2QFY15 QoQ (%) Antique Var (%)Advertising revenues 2,916 2,720 7.2 2,603 12.0 2,992 (3)Subscription revenues 1,909 1,671 14.2 1,791 6.6 1,840 4Total revenues 5,524 5,083 8.7 5,090 8.5 5,558 (1)Expenditure 1,244 1,363 (8.8) 1,132 9.9 1,449 (14)EBITDA 4,281 3,720 15.1 3,958 8.2 4,109 4EBITDA margin (%) 77.5 73.2 430bps 77.8 (27bps) 73.9 355bpsDepreciation and amortisation 1,254 1,061 18.2 1,850 (32.2) 1,685 (26)EBIT 3,027 2,660 13.8 2,108 43.6 2,424 25EBIT margin 54.8 52 247bps 41 1,337bps 44 1,118bpsOther income 226 149 52.1 222 1.8 233 (3)Finance expenses 12 23 (47.4) 5 167.4 5 167PBT 3,240 2,785 16.4 2,325 39.3 2,652 22Less: Provision for tax 1,099 927 18.6 781 40.8 902 22Effective tax rate (%) 33.9 33.3 63bps 33.6 34bps 34.0 (9bps)Adjusted PAT 2,141 1,858 15.3 1,545 38.6 1,751 22NPM (%) 38.8 36.5 221bps 30.3 841bps 31.5 726bps


Viewership share (%)

Flagship Sun TV continues to enjoy market leadership Sun TV increases fictional content; Expect recovery by FY15e-end

Source: Company, Antique, TAM

Expect increased fictional content to drive ratings higher Malayalam market share continues to remain weak

Source: Company, Antique, TAM

0

10

20

30

40

50

60

70

80

Jan-

10

May

-10

Sep

-10

Jan-

11

May

-11

Sep

-11

Jan-

12

May

-12

Sep

-12

Jan-

13

May

-13

Sep

-13

Jan-

14

May

-14

Sep

-14

Jan-

15

Sun TV Kalaignar TVVijay TV Jaya TVRaj TV DD5 Podhigai (Tamil)

05

101520253035404550

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11M

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Gemini TV Zee TeluguMaa Telugu Eenadu TV(ETV Telugu)

05

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Udaya TV Suvarna ETV Kannada Zee Kannada

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Asianet Surya TV (SUN) Kairali

Amrita TV DD4 M alayalam


Key takeaways from the management interaction:

On the advertisement revenue front

The management expects ad revenue to grow at 12-15% in the long run, with expectationof 10-12% YoY ad growth in FY16e

Clarity over 10+2 ad cap will drive the increase in number of ad minutes given toproducers

The company is focusing on re-gaining viewership share in Andhra Pradesh and expectsto replicate the strategy implemented in the Karnataka market.

On the subscription front

Pay channel subscription revenue growth was underpinned by the Telecom RegulatoryAuthority of India recommended tariff increase. TRAI on March 31, 2014 had allowed27.5% increase in tariff ceiling for the non-addressable cable TV markets in phasedmanner. The first instalment of 15% was effective from April 1, 2014 and an additional12.5% effective from Jan-15. The company had some catch revenues pertaining to 1HFY15on account of the tariff increase effective from Apr-14

The management guided for a 10% growth in subscription for FY16e sans Phase IIIdigitisation impact and 20% growth if Phase III digitisation picks-up meaningfully. All thesubscription deals are on minimum guarantee and not on per subscriber basis

Arasu continues to give INR25m per month. The company has put an application forhigher payout, but there is no direction on the same

On the radio business

Revenue at INR1.1bn in 9MFY15, clocking a growth of 30% YoY

EBIT at INR450m for 9MFY15, up 40% YoY

PAT grew 70% YoY to INR320m for 9MFY15

The management continues to indicate that focus will be in southern India for Phase IIIexpansion. The company expects to spend over INR2bn towards migration fees andinvestment in new channels in Phase III.

Others

Movie acquisition cost is expected to hover ~INR4.5bn in FY16e.

The company has declared third interim dividend of INR6.8 per share, totalling INR11.3per share vs INR9.5 per share in FY14. The same entailed a one-off payout, as receivableshave improved YoY. To maintain current RoCE levels, additional cash on the balancesheet was returned to shareholders. There is no change in the annual pay-out policy.


FinancialsProfit and loss account (INRm)Year ended 31 Mar 2013 2014 2015e 2016e 2017eRevenues 19,230 22,236 24,296 27,098 30,835

Expenses 5,139 7,139 7,801 8,778 9,586

EBITDA 14,091 15,097 16,495 18,320 21,250

Depreciation & amortisation 4,417 4,783 5,923 6,310 7,105

EBIT 9,674 10,314 10,572 12,010 14,145

Interest expense 49 46 49 53 56

Other income 722 866 922 1,010 1,108

Profit before tax 10,347 11,134 11,445 12,967 15,197

Taxes incl deferred taxation 3,306 3,682 3,842 4,353 5,102

Profit after tax 7,042 7,452 7,602 8,614 10,096

Recurring profit after tax 7,096 7,480 7,688 8,670 10,156

Recurring EPS (INR) 18.0 19.0 19.5 22.0 25.8

Balance sheet (INRm)Year ended 31 Mar 2013 2014 2015e 2016e 2017eShare Capital 1,970 1,970 1,970 1,970 1,970

Reserves & Surplus 25,884 28,984 32,110 35,646 39,802

Networth 27,854 30,954 34,081 37,617 41,772

Minority Interest 1252 1340 1254 1199 1138

Deferred tax liabilities (net) 284 260 260 260 260

Capital Employed 29,391 32,554 35,595 39,075 43,170

Gross Fixed Assets 36,004 40,539 46,299 52,232 58,945

Accumulated Depreciation 22,235 26,806 32,729 39,039 46,144

Net Assets 13,769 13,733 13,570 13,192 12,801

Capital work in progress 2,109 1,638 737 705 674

Investments 2,437 4,716 4,716 4,716 4,716

Deferred tax assets (net) 284 260 260 260 260

Current Assets, Loans & Adv. 14,081 15,538 19,903 24,071 28,837

Inventory 5 6 6 7 8

Debtors 5,835 6,342 6,930 7,729 8,795

Cash & Bank balance 4,162 6,094 9,493 12,460 15,625

Loans & advances and others 4,080 3,097 3,474 3,875 4,409

Current Liabilities & Prov. 3,006 3,082 3,342 3,619 3,868

Creditors 369 470 559 629 691

Other liabilities & provisions 2,637 2,612 2,782 2,991 3,177

Net Current Assets 11,076 12,457 16,561 20,452 24,969

Application of Funds 29,391 32,554 35,595 39,075 43,170

Per share dataYear ended 31 Mar 2013 2014 2015e 2016e 2017eNo. of shares (m) 394 394 394 394 394

BVPS (INR) 71 79 86 95 106

CEPS (INR) 29 31 35 38 44

DPS (INR) 10 10 10 11 13

Margins (%)Year ended 31 Mar 2013 2014 2015e 2016e 2017eEBITDA 73 68 68 68 69

EBIT 50 46 44 44 46

PAT 36 32 30 31 32


Cash flow statement (INRm)Year ended 31 Mar 2013 2014 2015e 2016e 2017ePBT 10,347 11,134 11,445 12,967 15,197


(Inc)/Dec in working capital (2,399) 402 (706) (923) (1,353)

Others (76) (699) (836) (955) (1,047)

Tax Paid (3,359) (3,707) (3,507) (3,975) (4,660)

CF from operating activities 7,606 11,702 12,319 13,425 15,242

Capital expenditure (2,791) (4,181) (4,859) (5,900) (6,682)

Inc/(Dec) in investments (114) (2,163) - - -

Interest received 722 866 922 1,010 1,108

CF from investing activities (2,183) (5,478) (3,937) (4,890) (5,574)

Dividends paid (4,357) (4,380) (4,561) (5,134) (6,001)

Interest paid 21 88 (422) (434) (502)

CF from financing activities (4,336) (4,292) (4,983) (5,567) (6,503)

Net cash flow 1,087 1,932 3,399 2,968 3,165

Opening balance 3,075 4,162 6,094 9,493 12,460

Closing balance 4,162 6,094 9,493 12,460 15,625

Growth indicators (%)Year ended 31 Mar 2013 2014 2015e 2016e 2017eRevenue 4 16 9 12 14

EBITDA (0) 7 9 11 16

PAT 2 5 3 13 17

EPS 2 5 3 13 17

Valuation (x)Year ended 31 Mar 2013 2014 2015e 2016e 2017ePE 21.2 20.1 19.6 17.4 14.8

P/BV 5.4 4.9 4.4 4.0 3.6

EV/EBITDA 10.3 9.3 8.3 7.3 6.2

EV/Sales 7.6 6.3 5.7 5.0 4.3

Dividend Yield (%) 2.5 2.5 2.5 2.8 3.3

EV/EBIT 15.0 13.7 13.0 11.2 9.3

Financial ratiosYear ended 31 Mar 2013 2014 2015e 2016e 2017eRoE 25.5 24.2 22.6 23.0 24.3

RoCE 32.9 31.7 29.7 30.7 32.8

Debt/Equity (x) - - - - -

EBIT/Interest (x) 198 224 214 227 253



Quarterly financialsYear-ended March (INRm) 3QFY15 3QFY14 YoY (%) 2QFY15 QoQ (%)

Net sales 31,048 34,851 (11) 33,153 (6)

EBITDA 4,905 5,147 (5) 4,935 (1)

EBITDA margin (%) 15.8 14.8 103bps 14.9 91bps

PAT 1,842 3,380 (45) 2,579 (29)

EPS (INR) 5.2 5.0 4 5.1 2Source: Company, Antique


Apollo Tyres LimitedEurope disappoints on the margin front, domestic businesson the volume frontApollo Tyres (APTY IN) reported consolidated adjusted earnings of INR2.6bnversus our estimate of INR3bn. Earnings was slightly lower than our expectation,led by combination of weaker winter tyre demand and pricing power in theEuropean Union, weaker demand in the domestic market, and an adverse EUR-INR movement. Despite being the seasonally strongest quarter of the year,Vredestein's revenues were flat QoQ, with EBIT margin too remaining flat, inspite of the massive decline in raw material basket costing, led by continuousprice cuts within the industry. At the standalone level, APTY being a relativelycommercial vehicle tyre heavy entity had to pass on bulk of the raw materialbenefits, thus resulting in no improvement in its gross margins QoQ. EBITDAmargin improved ~100bps on a QoQ and YoY basis at the consolidated level to15.8%, with the margin thrust for the standalone entity accruing from staff andfixed costs, whereas for Vredestein it came in from gross margins. QoQ flatmargins for Vredestein in a seasonally strong December quarter reflects thestate of pricing power at the ground level in EU, which potentially can be apretty risky proposition in case the RMB starts inching up briskly.

Trim FY16 earnings estimate by 11%, led by sluggish demand and extremely weak pricingenvironment in the EUWe are trimming our FY16e consolidated earnings by ~11%, factoring in a 6% cut instandalone volumes and slight decrease in blended realisations across both India and EU,keeping our margin estimate unchanged at 15%. With no signs of a turnaround in thedemand scenario in EU, aggressive price cuts across European tyre majors have been theorder of the day in the past three quarters, leading to nil benefits of lower raw material pricestrickling into the Profit and Loss Account. We are introducing our FY17 earnings estimate atalmost the same level as that of FY16, factoring a consolidated revenue growth of 18% anda margin reduction of ~200bps. With capex plans remaining unchanged at INR70bn overFY15-18e, APTY will remain free cash flow neutral in the coming years, despite expecting ademand recovery in the domestic market.

Key takeaways from the management interaction:A contraction of 6% YoY in Vredestein's volumes was led by yet another year of weakwinter demand. At best, the management expects 1-2% growth in CY15 in EU. Pricingwar in the EU is getting accentuated, led by higher dumping of low-priced Chinese tyres.

South African operations, which were closed for whole of November, impacted revenuesthere.

Aggressive price cuts in the CV bias category led to numbers not reflecting the impact ofa lower RMB.

Passenger car radials grew 3% YoY for the India business. Sees some minor pick-up in CVsegment tyre demand.

Valuation and outlookWe revise down the target price to INR234 per share on back of an 11% cut in FY16earnings estimates and rollover our target to FY17-based estimates. We continue to valueAPTY at 10x forward earnings, given its exposure to the positive risk of a larger-than-expectedCV cycle recovery, a clean balance sheet, and improving global footprint.

Market dataSensex : 28,718Sector : Anto AncillariesMarket Cap (INRbn) : 108.8Market Cap (USDbn) : 1.8O/S Shares (m) : 509.052-wk HI/LO (INR) : 250/111Avg Daily Vol ('000) : 4,159Bloomberg : APTY IN


Absolute (4) (9) 25 90Relative (9) (12) 11 34Source: Bloomberg




Source: Bloomberg


Source: Bloomberg

Source: Bloomberg



80120160

200240


Apollo Tyres NIFTY


Quarterly financials (Consolidated)Year-ended March (INRm) 3QFY15 3QFY14 YoY (%) 2QFY15 QoQ (%)

Net sales 31,048 34,851 (11) 33,153 (6)

- Raw material 16,191 20,361 (20) 18,475 (12)

(% of net sales) 52.1 58.4 (628bps) 55.7 (358bps)

- Staff expenditure 4,370 4,129 6 4,264 2

(% of net sales) 14.1 11.8 223bps 12.9 121bps

- Other expenditure 5,583 5,214 7 5,479 2


Total expenditure 26,143 29,704 (12) 28,218 (7)

EBITDA 4,905 5,147 (5) 4,935 (1)

EBITDA margin (%) 15.8 14.8 103 14.9 91

Depreciation 933 1,064 (12) 1,070 (13)

EBIT 3,973 4,083 (3) 3,865 3

Interest 455 742 (39) 497 (8)

Other income 111 216 (48) 196 (43)

PBT 3,630 3,558 2 3,564 2

Tax 997 1,022 (2) 985 1

Tax rate (%) 27.5 28.7 (124) 27.6 (16)

Adjusted PAT 2,632 2,536 4 2,579 2

EPS 5.2 5.0 4 5.1 2


Quarterly financials (Standalone)Year-ended March (INRm) 3QFY15 3QFY14 YoY (%) 2QFY15 QoQ (%)

Net sales 21,218 21,536 (1) 22,496 (6)

- Raw material 13,455 14,492 (7) 14,170 (5)

(% of net sales) 63.4 67.3 (388bps) 63.0 42bps

- Staff expenditure 1,347 1,255 7 1,407 (4)


- Other expenditure 3,166 3,110 2 3,654 (13)

(% of net sales) 14.9 14.4 48bps 16.2 (132bps)

Total expenditure 17,967 18,856 (5) 19,231 (7)

EBITDA 3,251 2,679 21 3,265 (0)

EBITDA margin (%) 15.3 12.4 288 14.5 81

Depreciation 598 649 (8) 677 (12)

EBIT 2,653 2,030 31 2,588 3

Interest 448 635 (29) 460 (2)

Other income 148 141 5 154 (4)

PBT 2,353 1,537 53 2,282 3

Tax 733 500 47 666 10

Tax rate (%) 31.2 32.5 (137) 29.2 200

PAT 1,619 1,103 47 1,617 0

EPS 3.2 2.2 47 3.2 0

Standalone volume (tonne) 98,000 99,000 (1) 104,500 (6)

Realisation/kg 217 218 (0) 215 1

RMC/kg 137 146 (6) 136 1

GP/kg 79 71 11 80 (1)Source: Company, Antique


Standalone volume scenario pretty weak, down 1% YoY Raw material benefit at the standalone level getting passed onand 6% QoQ amid weak demand across segments

Source: Company, Antique Source: Company, Antique

Gross profit/kg seems to have peaked out with rising price cuts EBITDA margin set to remain at the standalone level ~15% in theacross segments near future, despite price cuts


Margins flat QoQ in a seasonally strong quarter, signifying weakness atPrice cuts, amid weak demand, in EU hurting Vredestein's growth the ground level in EU


1,5002,5003,5004,5005,5006,5007,5008,5009,500

10,50011,500

1QF

Y10

2QF

Y10

3QF

Y10

4QF

Y10

1QF

Y11

2QF

Y11

3QF

Y11

4QF

Y11

1QF

Y12

2QF

Y12

3QF

Y12

4QF

Y12

1QF

Y13

2QF

Y13

3QF

Y13

4QF

Y13

1QF

Y14

2QF

Y14

3QF

Y14

4QF

Y14

1QF

Y15

2QF

Y15

3QF

Y15

10

14

18

22

26

30

34

Vredestein revenue (INRm)Vredestein % of conso sales (RHS)

0.9

6.8

18.1

11.1

11.7

8.2

13.6

18.4

9.8 10

.615

.7 17.6

14.3

14.2 17

.211

.712

.2

18.5

13.3

11.3 13

.013

.2

12.3

02468

101214161820

1QF

Y10

2QF

Y10

3QF

Y10

4QF

Y10

1QF

Y11

2QF

Y11

3QF

Y11

4QF

Y11

1QF

Y12

2QF

Y12

3QF

Y12

4QF

Y12

1QF

Y13

2QF

Y13

3QF

Y13

4QF

Y13

1QF

Y14

2QF

Y14

3QF

Y14

4QF

Y14

1QF

Y15

2QF

Y15

3QF

Y15

Vredestein EBIT margin (%)

20

30

40

50

60

70

80

3QF

Y08

4QF

Y08

1QF

Y09

2QF

Y09

3QF

Y09

4QF

Y09

1QF

Y10

2QF

Y10

3QF

Y10

4QF

Y10

1QF

Y11

2QF

Y11

3QF

Y11

4QF

Y11

1QF

Y12

2QF

Y12

3QF

Y12

4QF

Y12

1QF

Y13

2QF

Y13

3QF

Y13

4QF

Y13

1QF

Y14

2QF

Y14

3QF

Y14

4QF

Y14

1QF

Y15

2QF

Y15

3QF

Y15

Standalone gross profit (INR/kg)

4%

6%

8%

10%

12%

14%

16%

18%3Q

FY

06

1QF

Y07

3QF

Y07

1QF

Y08

3QF

Y08

1QF

Y09

3QF

Y09

1QF

Y10

3QF

Y10

1QF

Y11

3QF

Y11

1QF

Y12

3QF

Y12

1QF

Y13

3QF

Y13

1QF

Y14

3QF

Y14

1QF

Y15

3QF

Y15

EBITDA margin (%) Mean EBITDA margin (%)

40,000

50,000

60,000

70,000

80,000

90,000

100,000

110,0001Q

FY

102Q

FY

103Q

FY

104Q

FY

101Q

FY

112Q

FY

113Q

FY

114Q

FY

111Q

FY

122Q

FY

123Q

FY

124Q

FY

121Q

FY

132Q

FY

133Q

FY

134Q

FY

131Q

FY

142Q

FY

143Q

FY

144Q

FY

141Q

FY

152Q

FY

153Q

FY

15

Standalone volume (MT)

70

100

130

160

190

220

1QF

Y08

3QF

Y08

1QF

Y09

3QF

Y09

1QF

Y10

3QF

Y10

1QF

Y11

3QF

Y11

1QF

Y12

3QF

Y12

1QF

Y13

3QF

Y13

1QF

Y14

3QF

Y14

1QF

Y15

3QF

Y15

NRV (INR/kg) RMB (INR/kg)


Despite high capex plans, capital structure to remain steady Capex cycle picking up from FY15 itself


Further reduction in natural rubber prices not expected by mostRoCE to correct a bit, led by falling margin and rising capex tyre makers

Source: Company, Antique Source: Bloomberg, Antique

Benefits of lower crude prices to get passed on going forward Maintain target P/E at 10x

Source: Bloomberg, Antique Source: Bloomberg, Antique

(X)

0

2

4

6

8

10

12

14

16

Jul-0

8

Jan-

09

Jul-0

9

Jan-

10

Jul-1

0

Jan-

11

Jul-1

1

Jan-

12

Jul-1

2

Jan-

13

Jul-1

3

Jan-

14

Jul-1

4

Jan-

15

0.7

0.30.4

0.7

0.9 0.9

0.6

0.10.1 0.1 0.1

0.0

0.10.2

0.3

0.40.5

0.6

0.7

0.80.9

1.0F

Y07

FY

08

FY

09

FY

10

FY

11

FY

12

FY

13

FY

14

FY

15e

FY

16e

FY

17e

Net debt/equity (x)

2,47

0

228

5,15

1

10,3

13 12,9

90

7,82

9

5,31

4

4,23

9

18,0

00

18,0

00

1800

0

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

FY

07

FY

08

FY

09

FY

10

FY

11

FY

12

FY

13

FY

14

FY

15e

FY

16e

FY

17e

Capex (INRm)

12

14

16

18

20

22

24

26

28

30

FY

07

FY

08

FY

09

FY

10

FY

11

FY

12

FY

13

FY

14

FY

15e

FY

16e

FY

17e

RoCE (%)

(RSS4 INR/quintal)

5,000

9,000

13,000

17,000

21,000

25,000

29,000

Feb

-09

Jun-

09

Oct

-09

Feb

-10

Jun-

10

Oct

-10

Feb

-11

Jun-

11

Oct

-11

Feb

-12

Jun-

12

Oct

-12

Feb

-13

Jun-

13

Oct

-13

Feb

-14

Jun-

14

Oct

-14

Feb

-15

30

40

50

60

70

80

90

100

110

120

130

Feb

-09

May

-09

Aug

-09

Nov

-09

Feb

-10

May

-10

Aug

-10

Nov

-10

Feb

-11

May

-11

Aug

-11

Nov

-11

Feb

-12

May

-12

Aug

-12

Nov

-12

Feb

-13

May

-13

Aug

-13

Nov

-13

Feb

-14

May

-14

Aug

-14

Nov

-14

Feb

-15



Expenses 113,378 115,365 114,447 124,176 149,312

EBITDA 14,569 17,825 19,839 22,113 22,603


EBIT 10,603 13,717 15,689 17,533 17,626

Interest expense 3,128 2,838 2,051 2,175 2,410

Other income 945 978 800 200 300


Taxes incl deferred taxation 2,448 2,269 3,754 3,889 3,724

Profit after tax 5,972 9,588 10,684 11,668 11,792

Adjusted PAT 5,972 9,588 10,684 11,668 11,792


Balance sheet (INRm)Year ended 31 Mar 2013 2014 2015e 2016e 2017eShare Capital 504 504 509 509 504


Networth 34,008 45,746 56,782 68,004 79,349

Debt 22,816 9,889 7,889 9,889 13,389




Capital work in progress 3,000 2,000 2,000 2,000 5,000

Net Assets 44,892 45,022 58,872 72,293 85,316

Investments 546 637 637 637 637

Current Assets, Loans & Advances

Inventory 20,311 20,664 20,352 22,171 26,055

Debtors 9,908 10,427 9,933 10,821 12,246

Cash & Bank balance 3,347 6,541 1,071 183 879



Liabilities 17,598 21,905 21,429 23,344 27,433

Provisions 5,884 6,963 6,857 7,470 8,779


Deferred expenses 4,928 5,241 5,000 5,000 5,000


Per share dataYear ended 31 Mar 2013 2014 2015e 2016e 2017eNo. of shares (m) 504.1 504.1 509.0 509.0 504.1

BVPS (INR) 77.2 101.1 121.4 143.4 167.3

CEPS (INR) 19.7 27.2 35.0 31.9 33.3

DPS (INR) 0.5 0.8 0.8 0.8 0.8

Margins (%)Year ended 31 Mar 2013 2014 2015e 2016e 2017eEBITDA 11.4 13.4 14.8 15.1 13.1

EBIT 8.3 10.3 11.7 12.0 10.3

PAT 4.7 7.2 8.0 8.0 6.9


Key AssumptionsYear ended 31 Mar 2013 2014 2015e 2016e 2017eStandalone volume (tonne) 395,983 402,286 412,343 470,071 545,283

Standalone NRV (INR/kg) 215 214 214 211 214

Standalone gross profit/kg (INR) 63 69 78 78 72

Subsidiary EBITDA margin (%) 12.4 16.4 15.0 15.0 15.0

Standalone EBITDA margin (%) 10.6 11.7 14.7 15.2 12.3




(Inc)/Dec in working capital 2,779 4,231 (414) (689) (1,001)

Tax paid (2,448) (2,269) (3,754) (3,889) (3,724)

CF from operating activities 15,844 20,766 16,471 17,734 18,178

Capital expenditure (5,314) (4,239) (18,000) (18,000) (18,000)

Inc/(Dec) in investments (388) (91) - - -

CF from investing activities (5,701) (4,330) (18,000) (18,000) (18,000)

Inc/(Dec) in share capital - - 5

Inc/(Dec) in debt (5,904) (12,928) (2,000) 2,000 3,500

Dividends paid/Other charges (2,623) (313) (1,146) (2,622) (2,981)

CF from financing activities (8,527) (13,241) (3,141) (622) 519

Net cash flow 1,616 3,194 (4,670) (888) 697

Opening balance 1,730 3,347 6,541 1,071 183

Closing balance 3,347 6,541 1,871 183 879

Growth indicators (%)Year ended 31 Mar 2013 2014 2015e 2016e 2017eRevenue 5.3 4.1 0.8 8.9 17.5

EBITDA 24.9 22.4 11.3 11.5 2.2

PAT 35.2 60.6 11.4 9.2 1.1

EPS 35.2 60.6 10.4 9.2 2.0

Valuation (x)Year ended 31 Mar 2013 2014 2015e 2016e 2017eP/E 18.0 11.2 10.2 9.3 9.1

Cash P/E 10.8 7.9 6.1 6.7 6.4

P/BV 2.8 2.1 1.8 1.5 1.3

EV/EBITDA 8.7 6.2 5.8 5.3 5.3

EV/Sales 1.0 0.8 0.9 0.8 0.7

Dividend Yield (%) 0.2 0.4 0.4 0.4 0.4


RoCE 21.5 27.4 26.3 23.4 20.4

Debt/Equity (x) 0.6 0.1 0.1 0.1 0.1

EBIT/Interest (x) 3.4 4.8 7.6 8.1 7.3




CEAT LimitedWeak demand, led by higher marketing expenses,continues to inhibit margins from major expansionCEAT (CEAT IN) reported consolidated earnings at INR893m, lower than ourestimate of INR1bn. Slight disappointment was seen at the volume and marginlevel, led to earnings miss. Rising need for marketing expenses, amidextended weak demand environment, inhibited consolidated margin at 12.9%from expanding to its full potential, despite extremely muted input commoditycosts. Price pass on in exports, original equipment manufacturers, and CVbias segments continued, but the same is yet to get initiated in the passengervehicle replacement space. Gross margin expanded 200bps QoQ, with staffand selling, general, and administrative costs increasing 130bps QoQ onaccount of lower scale, higher discounts, and larger branding-related spends.Volumes unexpectedly came in flat QoQ, despite being a quarter of bettersales at the OEM level. This resulted in a revenue decline of 1% QoQ toINR14.2bn, on the back of a 1% QoQ drop in blended realisations.

Trim FY16e earnings by 8%; Do not foresee more than mid, single-digit earnings growth inFY17eWe are trimming our FY16 revenue estimate by 5% and factor in FY15-17e revenue CAGR of15%, on the back of a cyclical recovery across OEM segments. Led by weaker export demandand sluggish demand in the domestic replacement market, price cuts at the industry levelaggravated further in 3Q across exports, OEMs, and CV bias segments. It has scope to beapplicable in PVs for the rest of the portfolio soon, including PV and the two-wheeler replacementmarkets. We expect margins for CEAT to peak out in FY16e ~13%, with rising risk of fallinggross margins, led by mean reversion in the commodity cycle. Capex plans are intact at INR16bnover FY15-17e to cater to the Hallol brownfield expansion (to be ready by mid-CY15), Nagpur2W tyre facility, off-the-road capacity, and maintenance capex. We continue to believe thatCEAT will remain free cash flow negative in FY15-16e, but manage to keep the leverage onbooks at a pretty comfortable level of 0.5x, courtesy the recent equity raising.

Key takeaways from the management interaction:Export revenues contracted 10%, contributing close to 20% of sales. It has delayedoperational commencement of Bangladesh plant by three-to-five months, led by muteddemand. As a consequence, it would take close to 10-12 months to kick-start its operations.

Initiated price cuts of 2% followed by 1% in the commercial vehicle/OEM segments in thepast couple of months. This is broadly an industry-wide phenomenon to pass on incrementalraw material benefits. No price cuts have been initiated in PV/2W replacement tyres yet.

Nagpur 2W tyre facility to be ready by 4QCY16. Hallol incremental capacity to beready by mid-CY15, slightly ahead of schedule to ramp-up radial capacity to cater torising demand.

ValuationWe maintain our Buy rating on CEAT with a revised price target of INR869 per share, basedon 9x FY17e EPS of INR97. We have cut our FY16e earnings by 8% and rolled over our pricetarget to FY17-based estimates, keeping the target earnings multiple unchanged at 9x asagainst a10% earnings CAGR over FY15-17e.



Quarterly financialsINRm 3QFY15 3QFY14 YoY (%) 2QFY15 QoQ(%)Net sales 14,202 14,387 (1) 14,377 (1)EBITDA 1,826 1,643 11 1,754 4EBITDA margin (%) 12.9 11.4 144bps 12.2 66bpsPAT 893 667 34 823 8EPS (INR) 22.1 18.6 19 22.9 (3)Source: Company, Antique

Market dataSensex : 28,718Sector : AutomobilesMarket Cap (INRbn) : 30.4Market Cap (USDbn) : 0.5O/S Shares (m) : 40.552-wk HI/LO (INR) : 1010/266Avg Daily Vol ('000) : 286Bloomberg : CEAT IN


Absolute (11) (14) 43 141Relative (17) (17) 28 70Source: Bloomberg




Source: Bloomberg


Source: Bloomberg

Source: Bloomberg

80

160

240

320

Feb-14 Jun-14 Oct-14 Feb-15CEAT NIFTY


Quarterly financials (consolidated)INRm 3QFY15 3QFY14 YoY 2QFY15 QoQNet sales 14,202 14,387 (1) 14,377 (1) - Raw material 8,389 9,345 (10) 8,779 (4)(% of net sales) 59.1 65.0 (588bps) 61.1 (199bps) - Staff expenditure 967 845 14 907 7(% of net sales) 6.8 5.9 93bps 6.3 50bps - Other expenditure 3,013 2,553 18 2,938 3(% of net sales) 21.2 17.7 347bps 20.4 78bpsTotal expenditure 12,369 12,744 (3) 12,623 (2)EBITDA 1,826 1,643 11 1,754 4EBITDA margin (%) 12.9 11.4 144 12.2 66Depreciation 245 215 14 227 8EBIT 1,581 1,428 11 1,527 4Interest 311 481 (35) 349 (11)Other income 48 37 31 70 (32)PBT 1,318 984 34 1,248 6Tax 444 317 40 428 4Tax rate (%) 33.7 32.2 150 34.3 (61)PAT 893 667 34 823 8EPS 22.1 18.6 19 22.9 (3)Standalone volume (tonne) 61,500 61,124 1 61,651 (0)Standalone realisation/kg(INR) 222.1 226.7 (2) 224.1 (1)Standalone gross profit/kg (INR) 90.3 79.3 14 88.4 2Standalone EBITDA/kg (INR) 29.7 26.9 10 28.4 4Source: Company, Antique

Blended realisation down 1% QoQ and 2% YoY led by priceVolume continue to disappoint; broadly flat YoY and QoQ cuts till date in OEMs/exports and CV bias


200

205

210

215

220

225

230

235

1Q F

Y11

2Q F

11

3Q F

Y11

4Q F

Y11

1Q F

Y12

2Q F

Y12

3Q F

Y12

4Q F

Y12

1Q F

Y13

2Q F

Y13

3Q F

Y13

4Q F

Y13

1Q F

Y14

2Q F

Y14

3Q F

Y14

4Q F

Y14

1Q F

Y15

2Q F

Y15

3Q F

Y15

NRV/kg (INR)

30,000

35,000

40,000

45,000

50,000

55,000

60,000

65,000

1Q F

Y11

2Q F

113Q

FY

11

4Q F

Y11

1Q F

Y12

2Q F

Y12

3Q F

Y12

4Q F

Y12

1Q F

Y13

2Q F

Y13

3Q F

Y13

4Q F

Y13

1Q F

Y14

2Q F

Y14

3Q F

Y14

4Q F

Y14

1Q F

Y15

2Q F

Y15

3Q F

Y15

Standalone tonnage sold


Raw material cost/kg down ~5% QOQ further; do not Standalone gross profit/kg up 2% QoQ; expecting it to havesee much scope left ahead oeaked out with risk of aggressive price cuts kicking in


Need for higher branding expenses in 2-W and PV segments Consolidated EBITDA margin up 150bps YoY and 70bps QoQamid weak overall volume continues mainly led by a stronger gross margin


Recent equity raising cushioning balance sheet in terms ofdebt/equity ahead despite aggressive capex Capex plans intact; expansion across growing segments


125

135

145

155

165

175

1Q F

Y11

2Q F

11

3Q F

Y11

4Q F

Y11

1Q F

Y12

2Q F

Y12

3Q F

Y12

4Q F

Y12

1Q F

Y13

2Q F

Y13

3Q F

Y13

4Q F

Y13

1Q F

Y14

2Q F

Y14

3Q F

Y14

4Q F

Y14

1Q F

Y15

2Q F

Y15

3Q F

Y15

RMC/kg (INR)

35

45

55

65

75

85

95

4Q F

Y11

1Q F

Y12

2Q F

Y12

3Q F

Y12

4Q F

Y12

1Q F

Y13

2Q F

Y13

3Q F

Y13

4Q F

Y13

1Q F

Y14

2Q F

Y14

3Q F

Y14

4Q F

Y14

1Q F

Y15

2Q F

Y15

3Q F

Y15

CEAT Gross profit/kg (INR)

12

14

16

18

20

22

1Q F

Y11

2Q F

11

3Q F

Y11

4Q F

Y11

1Q F

Y12

2Q F

Y12

3Q F

Y12

4Q F

Y12

1Q F

Y13

2Q F

Y13

3Q F

Y13

4Q F

Y13

1Q F

Y14

2Q F

Y14

3Q F

Y14

4Q F

Y14

1Q F

Y15

2Q F

Y15

3Q F

Y15

Standalone other expense/sales (%)

6

7

8

9

10

11

12

13

141Q

FY

12

2Q F

Y12

3Q F

Y12

4Q F

Y12

1Q F

Y13

2Q F

Y13

3Q F

Y13

4Q F

Y13

1Q F

Y14

2Q F

Y14

3Q F

Y14

4Q F

Y14

1Q F

Y15

2Q F

Y15

3Q F

Y15

Consol EBITDA margin (%)

0.8 0.80.7

1.5

1.8

1.1

0.9

0.50.6

0.5

0.4

0.8

1.2

1.6

2.0

FY

08

FY

09

FY

10

FY

11

FY

12

FY

13

FY

14

FY

15e

FY

16e

FY

17e

Net debt/Equity (x)

946358

2,366

5,637

3,516

4791,155

6,000

7,000

3,000

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15eFY16eFY17e

Capex (INRm)


RoCE to remain steady around the 15-18% levels despiteTo stay FCF negative in FY15-16e led by high capex plans falling margins ahead


Falling natural rubber prices comforting gross margin Maintaining target earnings multiple at 9x

Source: Bloomberg, Antique Source: Bloomberg, Antique

1,145779

(2,660)

3,616

(2,294)

(1,301)

(2,968)

765

(535)

(4,714)(5,000)

(4,000)

(3,000)

(2,000)

(1,000)

0

1,000

2,000

3,000

4,000

FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15e FY16e FY17e

FCF (INRm)

20.1

0.8

15.4

3.7

8.1

13.9

18.2

15.3 15.1

0

5

10

15

20

25

FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15e FY16e

RoCE (%)

1

2

3

4

5

6

7

8

9

10

Dec

-11

Feb

-12

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

P/E

(RSS4 INR/quintal)

5,000

9,000

13,000

17,000

21,000

25,000

29,000

Feb

-09

Jun-

09

Oct

-09

Feb

-10

Jun-

10

Oct

-10

Feb

-11

Jun-

11

Oct

-11

Feb

-12

Jun-

12

Oct

-12

Feb

-13

Jun-

13

Oct

-13

Feb

-14

Jun-

14

Oct

-14

Feb

-15



Expenses 45,978 48,961 50,866 55,523 67,947

EBITDA 4,544 6,578 6,992 8,189 8,408

Depreciation & amortisation 806 865 887 1,097 1,187

EBIT 3,737 5,713 6,105 7,092 7,221


Other income (100) 140 200 140 140

Extraordinary Items - (97) - - -


Taxes incl deferred taxation 463 1,324 1,664 1,839 1,923

Profit after tax 1,198 2,711 3,231 3,733 3,904

Adjusted PAT 1,198 2,808 3,231 3,733 3,904


Balance sheet (INRm)Year ended 31 Mar 2013 2014 2015e 2016e 2017eShare Capital 342 360 405 405 405


Networth 7,855 10,284 17,038 20,298 23,729

Debt 10,378 12,282 11,282 13,282 12,782




Capital work in progress 274 449 449 449 449

Net Assets 15,786 16,425 21,538 27,441 29,255

Investments 6 - - - -

Current Assets, Loans & Advances

Inventory 5,588 7,356 7,232 8,142 9,769

Debtors 6,629 7,545 7,704 8,489 10,185

Cash & Bank balance 1,121 1,679 2,216 877 887



Liabilities 11,623 10,419 11,168 12,303 14,756

Provisions 828 964 1,004 1,105 1,325


Deferred expenses 571 1,284 559 559 559


Per share dataYear ended 31 Mar 2013 2014 2015e 2016e 2017eNo. of shares (m) 34.2 36.0 40.5 40.5 40.5

BVPS (INR) 246.1 321.7 435.0 515.6 600.4

CEPS (INR) 58.5 99.5 101.8 119.4 125.9

DPS (INR) 4.0 10.0 10.0 10.0 10.0

Margins (%)Year ended 31 Mar 2013 2014 2015e 2016e 2017eEBITDA 9.0 11.8 12.1 12.9 11.0

EBIT 7.4 10.3 10.6 11.1 9.5

PAT 2.4 5.1 5.6 5.9 5.1


Key AssumptionsYear ended 31 Mar 2013 2014 2015e 2016e 2017eStandalone volume (tonne) 214,500 238,224 248,944 278,817 329,004

Sri Lanka/B'desh JV volume (tonne) 15,000 16,600 16,800 17,200 21,216

Blended realisation (INR/kg) 218 218 223 220 222

Gross profit/kg (INR) 67 78 86 86 82


Depreciation & amortisation 806 865 887 1,097 1,187


(Inc)/Dec in working capital 1,787 (4,819) 582 (798) (1,326)

Tax paid (463) (1,324) (1,664) (1,839) (1,923)

CF from operating activities 5,768 575 6,110 5,692 5,298

Capital expenditure (479) (1,155) (6,000) (7,000) (3,000)

Inc/(Dec) in investments 303 6 - - -

CF from investing activities (176) (1,149) (6,000) (7,000) (3,000)

Inc/(Dec) in share capital - 227 3,996 - -

Inc/(Dec) in debt (2,734) 1,904 (1,000) 2,000 (500)

Dividends paid/Other charges (2,134) (1,000) (2,569) (2,091) (1,915)

CF from financing activities (4,868) 1,131 427 (91) (2,415)

Net cash flow 724 558 537 (1,399) (116)

Opening balance 397 1,121 1,679 2,275 1,003

Closing balance 1,121 1,679 2,216 877 887


EBITDA 66.1 44.8 6.3 17.1 2.7

PAT 565.4 134.3 15.1 15.5 4.6

EPS 565.4 123.1 2.3 15.5 4.6


Cash P/E 12.9 7.6 7.4 6.3 6.0

P/BV 3.1 2.3 1.7 1.5 1.3

EV/EBITDA 7.7 5.7 5.7 5.2 5.0

EV/Sales 0.7 0.7 0.7 0.7 0.6

Dividend Yield (%) 0.5 1.3 1.3 1.3 1.3


RoCE 20.3 26.5 22.6 21.8 20.4

Debt/Equity (x) 1.1 0.9 0.5 0.6 0.5

EBIT/Interest (x) 1.9 3.3 4.3 4.3 4.7




PTC India LimitedCore intact; One-time provision hits profitabilityPTC India's reported 3QFY15 EBITDA and profit of INR502m and INR67m,respectively, on account of: 1) One-time loss of INR65.2m and provision ofINR267m on sale/devaluation of investment in the 1,200MW Teesta Urjahydro project; 2) 5.6% YoY decline in volumes; and 3) 16.4% YoY increase incore trading margins. Tolling revenues witnessed a 13.7% YoY decline inEBITDA, as margins fell by 35.8% YoY to 25.4p/kWh, despite a 17% YoYincrease in volumes, due to lower power prices in the Southern region.9MFY15 average tolling margins stood at 28.8p/kWh, which is higher thanour FY15 estimate of 27.2p/kWh. Long-term volumes increased as supply of104MW to Rajasthan commenced. Short-term volumes being volatile saw a15% YoY decline, led by transmission constraints, which we view astemporary and should recover in coming quarters. On the outstandingpayment of INR2.5bn from TANGEDCO, the arbitration process has concludedand the Arbitral Tribunal has directed the Tamil Nadu State Electricity Board topay PTC INR2.2bn (INR7/share), which it expects to receive by Mar-15.

The 1,200MW Teesta Urja Hydro project was jointly promoted by Asian Genco(51% stake), PTC (10.6%), Government of Sikkim (26%), and Athena EnergyVentures (12.4%). In 2011, work on the project was stalled due to a majorearthquake. Since then, progress has been slow on account of financialconstraints of the promoters to funds cost overruns. The Centre intervened anddecided to fast-track the project through financial restructuring. As part of therestructuring, PTC has divested part of its 10.6% stake (INR2.3bn investment) inTUL for the Government of Sikkim to acquire 51% (current stake is 26%). Theshares of TUL were revalued at INR8.5 per share as against its face value ofINR10 for the transaction. Post the fund infusion by the Government of Sikkimand part stake sale by existing holders, PTC will hold 6.9% stake in TUL, valuedat INR1.8bn. Due to this transaction, it incurred a loss of INR65.2m. It has alsoprovided for INR266.9m, revaluing its balance shareholding at INR8.5 per share.This is a step in the right direction as the changes in ownership will fast-trackwork on the project and help meet its commissioning target of FY16-end.

We reiterate our Buy rating on PTC with a target price of INR139 per share andvalue its TUL stake at INR1.8bn. We believe once the project is commissioned itcan command higher valuation (recent Karcham Wangtoo deal was at 2x).

Volume decline 5.6% YoY, however core trading margins improve to 4.7p/kWhVolume decreased to 7,773m kWh in 3QFY15 from 8,236m kWh in 3QFY14, down 5.6% YoY,mainly due to transmission bottlenecks, wherein PTC had to forego 61% of the quarter's contractedcapacity due to corridor unavailability. EBITDA for the quarter fell 56.6% YoY to INR502m.However, adjusting for the rebates disallowed and surcharge income, adjusted EBITDA was3.7% YoY lower at INR333m vs INR346m in 3QFY14. Core trading margins improved 16.4%YoY to 4.7p/kWh from 4p/kWh, due to higher contribution of long-term volumes.

ValuationsAt the current market price of INR89 per share, the stock is trading at 0.9x FY17e P/B, 8.4xFY17e standalone P/E, and 4.1x FY17e consolidated P/E. We revise our target price toINR139 per share from INR143 earlier due to devaluation of the Teesta Urja investment.

Quarterly financialsINRm 3QFY15 3QFY14 YoY (%) 2QFY15 QoQ (%)Net revenue 28,232 27,515 2.6 42,123 (33.0)EBIDTA 502 1,156 (56.6) 824 (39.1)Adjusted EBITDA 333 346 (3.7)Reported net profit 67 908 (92.6) 963 (93.0)Units traded 7,773 8,236 (5.6) 12724 (38.9)Source: Company, Antique




Market dataSensex : 28,718Sector : UtilitiesMarket Cap (INRbn) : 26.3Market Cap (USDbn) : 0.4O/S Shares (m) : 296.052-wk HI/LO (INR) : 105/52Avg Daily Vol ('000) : 2,822Bloomberg : PTCIN IN


Absolute (4) (3) 6 60Relative (9) (6) (6) 13Source: Company, Antique




Source: Bloomberg


Source: Bloomberg

Source: Bloomberg

80

120

160

200


PTC India NIFTY


5.6% volume decline due to transmission constraints

Revenues for the quarter increased 7.9% YoY due to a 14% YoY increase in power tradedprices, despite a 5.6% YoY decline in trading volumes. Volumes decreased to 7,773m kWh in3QFY15 from 8,236m kWh in 3QFY14, as December volumes saw a significant drop asagainst its monthly average. Lower volumes were mainly led by transmission bottlenecks,wherein PTC had to forego 61% of the quarter's contracted capacity due to corridorunavailability. EBITDA for the quarter fell 56.6% YoY to INR502m. However, adjusting for therebates disallowed and surcharge income, adjusted EBITDA was down 3.7% YoY at INR333mvs INR346m in 3QFY14. Tolling volume, at 500m kWh, was up 17% YoY, as both plantMeenakshi and Simhapuri were operational. Long-term volumes rose 11.8% YoY to 3,080MUs.Short-term volumes for the quarter fell 14.9% YoY to 4,373MUs.

Core trading margins improve to 4.7p/kWh

Core trading margins improved 16.4% YoY to 4.7p/kWh from 4p/kWh, due to highercontribution of long-term volumes. It has earned INR42.7m as surcharge and disallowedrebate of INR126.4m towards delayed payments. PTC earned an EBITDA of INR127m fromerstwhile tolling projects, implying a margin of 25.4p/kWh, which is lower than 27p/kWhQoQ due to cooling off of prices in the southern region.

Detailed quarterly financialsINRm 3QFY15 3QFY14 YoY (%) 2QFY15 QoQ (%)

Sales 28,190 26,132 7.9 41,933 (32.8)

Other operating income 42.7 1,383 189.7

Net revenue 28,232 27,515 2.6 42,123 (33.0)

Cost of power purchased 27,597 25,592 7.8 41,174 (33.0)

Other operating expenses - 653 -

Personnel cost 54 46 17.5 54 0.4

General/administrative expenses 79 68 16.1 71 11.2

EBIDTA 502 1,156 (56.6) 824 (39.1)

Adjusted EBITDA 333 346 (3.7)

EBITDA margin (%) 1.8 4.4 2.0

Depreciation 11 10 5.0 11 1.0

Interest 3 2 3

Other income 94 154 (39.1) 442 (78.8)

PBT 582 1,298 (55.1) 1,252 (53.5)

Tax 191 432 (55.8) 292 (34.7)

PAT 391 866 (54.8) 960 (59.2)

Prior period adjustment (324) 42 0.0 4

Reported net profit 67 908 (92.6) 963 (93.0)

Units traded 7,773 8,236 (5.6) 12,724 (38.9)Source: Company, Antique

AdjustmentsINRm 3QFY15 3QFY14 YoY (%) 2QFY15 QoQ (%)

Sales 28,232 26,132 8.0 42,123 (33.0)

Adjustments

Less: Revenue from tolling 127 147 (13.7) 125

Rebate disallowed 126.4 80.7 88

Surcharge received 42.7 189.7

Sales 27,936 25,904 7.8 41,720 (33.0)

Units sold, excluding tolling 7,273 7,809 12,724

Sales per unit 3.84 3.32 15.8 3.28 17.1

Purchase cost 27,597 25,592 7.8 41,174 (33.0)

Units purchased 7,273 7,809 12,724

Purchase cost per unit 3.79 3.28 15.8 3.24 17.3

Margin 0.0466 0.0401 16.4 0.0429 8.7



Quarterly volumes (mkWh)


Volume break-up (mkWh)3QFY15 3QFY14 YoY (%) 2QFY15 QoQ (%)

Long-term 3,080 2,755 11.8 5,567 (44.7)

Short-term 4,373 5,137 (14.9) 6,213

Medium-term 318 342 (7.0) 480 (33.8)

Generation 2 2 - 464

7,773 8,236 (5.6) 12,724 (38.9)Source: Company, Antique

Valuations

We value the core business at INR50 per share, or 6x FY17e P/E; cash per share at INR20;and balance in other investments (PTC Financial Services at INR62 per share and Teesta Urjaat INR6 per share). Standalone and consolidated RoE will increase to 10.1% and 14.9% inFY17e from 5.5% and 7.5% in FY13. At the current market price of INR89 per share, thestock is trading at 0.9x FY17e P/B, 8.4x FY17e standalone P/E, and 4.1x FY17e consolidatedP/E.

SoTPINRm Value per share

Core trading business (6x P/E to INR2,109m - post tax EBITDA in FY17e) 12,653 43

Madhucon/Meenakshi trading 2,281 8

PTC Financial Services

(25% holding discount to three-months average market capitalisation) 18,450 62

Investment in Teesta Urja (revised valuation) 1,795 6

Cash and balance 6,000 20

SoTP 41,179 139Source: Company, Antique

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

1QF

Y12

2QF

Y12

3QF

Y12

4QF

Y12

1QF

Y13

2QF

Y13

3QF

Y13

4QF

Y13

1QF

Y14

2QF

Y14

3QF

Y14

4QF

Y14

1QF

Y15

2QF

Y15

3QF

Y15

-30%

-20%

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0%

10%

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40%

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60%


FinancialsKey assumptionsYear ended 31 Mar 2013 2014 2015e 2016e 2017e Power Traded (MU) 28,597 35,130 40,289 53,276 70,959

Long term 3,771 5,807 12,564 27,858 48,069

Cross border 4,800 5,579 5,200 5,000 4,500

IEX 6,623 5,500 5,500 4,500 4,050

Short term 12,451 15,972 12,983 11,876 12,098

Medium term 0 652 1800 1800 0

Tolling volumes 952 1,620 2,243 2,243 2,243


Depreciation & amortisation 42 42 42 42 42

Interest expense 9 28 - - -

Interest / Dividend Recd (136) (582) (813) (910) (960)

Other Adjustments (163) (114) (96) (96) (96)

(Inc)/Dec in working capital 3,421 433 1,950 (334) (1,595)

Tax paid (497) (1,130) (933) (1,018) (1,334)

CF from operating activities 4,461 2,318 3,262 1,078 504

Capital expenditure (28) (16) (94) (100) (100)

Net Investments (1,010) (353) - - -

Income from investments (9) (28) - - -

Other items 136 582 813 910 960

CF from investing activities (911) 186 718 810 860

Dividends & Interest paid (474) (592) (592) (592) (592)

CF from financing activities (474) (592) (592) (592) (592)

Net cash flow 3,076 1,912 3,388 1,296 772

Opening balance 458 3,535 5,447 8,835 10,131

Closing balance 3,534 5,447 8,835 10,131 10,903


EBITDA 16.9 84.1 (25.2) 7.9 39.7

PAT 6.8 95.1 (13.3) 9.1 31.0

EPS 6.8 95.1 (13.3) 9.1 31.0


Consolidated PE 13.2 7.3 6.6 5.2 4.1

P/BV 1.1 1.0 1.0 0.9 0.9

EV/EBITDA 13.3 6.6 7.4 6.4 4.3

EV/Sales 0.3 0.2 0.1 0.1 0.1

Dividend Yield (%) 1.8 2.3 2.3 2.3 2.3

Financial ratiosYear ended 31 Mar 2013 2014 2015e 2016e 2017eRoE (%) 5.5 10.0 8.2 8.4 10.1

Adjusted RoE 4.4 4.8 6.9 8.4 10.1

Consolidated RoE 7.5 12.4 12.3 13.7 14.9

RoCE (%) 7.1 12.3 8.7 8.8 11.4

Net Debt/Equity (x) (0.2) (0.2) (0.3) (0.4) (0.4)

EBIT/Interest (x) 181.2 112.3 NM NM NM


Profit and loss account (INRm)Year ended 31 Mar 2013 2014 2015e 2016e 2017eNet revenues 88,569 114,427 134,101 178,046 235,853Raw materials consumed 82,157 109,627 120,291 164,337 221,110Staff costs 130 155 167 180 195Other expenses 219 538 250 265 281Total Expense 86,869 111,298 131,759 175,519 232,323EBITDA 1,700 3,129 2,341 2,527 3,530Adjusted EBITDA 1,340 1,212 1,841 2,527 3,530Depreciation & amortisation 42 42 42 42 42EBIT 1,658 3,087 2,299 2,485 3,488Other income 136 582 813 910 960Financial expense 9 28 - - -PBT 1,785 3,642 3,112 3,395 4,448Current tax 497 1,151 933 1,018 1,334Deferred tax - (21) - - -PAT 1,287 2,512 2,178 2,376 3,114Adjusted PAT 1,034 1,209 1,828 2,376 3,114Consolidated PAT 1,983 3,608 3,994 5,019 6,332Standalone EPS (INR) 4.3 8.5 7.4 8.0 10.5Adjusted Standalone (EPS) 3.5 4.1 6.2 8.0 10.5

Consolidated EPS (INR) 6.7 12.2 13.5 17.0 21.4

Balance sheet (INRm)Year ended 31 Mar 2013 2014 2015e 2016e 2017eEquity share capital 2,960 2,960 2,960 2,960 2,960Reserves & surplus 20,297 22,124 23,614 25,302 27,728Shareholder's funds 23,257 25,084 26,574 28,263 30,688Deferred tax liability / (asset) (42) (63) (63) (63) (63)Capital employed 23,214 25,021 26,511 28,199 30,625Gross fixed assets 647 656 750 850 950Less: Accumulated depreciation 320 356 398 440 482Net fixed assets 327 300 352 410 468Capital work in progress 0 1 1 1 1Goodwill 0 0 0 0 0Investments 9,245 9,599 9,599 9,599 9,599Inventory 183 - - - -Debtors 21,421 20,857 20,040 24,036 30,661Cash & cash equivalent 3,535 5,447 8,835 10,131 10,903Loans & advances and others 461 883 1,068 1,424 1,886Current assets, loans & adv. 25,599 27,186 29,943 35,591 43,451Creditors 11,010 10,857 12,024 16,024 21,227Other liabilities & provisions 947 1,208 1,359 1,377 1,666Current liabilities & prov. 11,957 12,064 13,383 17,401 22,893Net current assets 13,643 15,122 16,560 18,190 20,558

Application of funds 23,215 25,021 26,511 28,199 30,625

Per share dataYear ended 31 Mar 2013 2014 2015e 2016e 2017eOutstanding shares (m) 296.0 296.0 296.0 296.0 296.0

BVPS (INR) 78.6 84.7 89.8 95.5 103.7

CEPS (INR) 4.5 8.6 7.5 8.2 10.7

DPS (INR) 1.6 2.0 2.0 2.0 2.0

Margins (%)Year ended 31 Mar 2013 2014 2015e 2016e 2017eGross margin 7.2 4.2 10.3 7.7 6.3

EBITDA 1.9 2.7 1.7 1.4 1.5

EBIT 1.9 2.7 1.7 1.4 1.5

PAT 1.5 2.2 1.6 1.3 1.3



Valuation GuideCompany Reco C M P T P Re tu rn M.Cap M.Cap Net profit (INRbn) EPS (INR) P/E (x) EV/EBITDA (x) P/BV (x) RoE (%) RoCE (%) Absolute (%)

(INR) (INR) (%) (INRbn) (USDbn ) FY15 FY16 FY17 FY15 FY16 FY17 FY15 FY16 FY17 FY15 FY16 FY17 FY16 FY16 FY16 1m 12m

AUTOMOBILES

Ashok Leyland BUY 61 80 32 173 2.8 1.1 6.0 12.5 0.4 2.1 4.4 159.2 29.0 13.8 24.1 14.5 9.0 3.9 14.1 10.6 4 278

Bajaj Auto HOLD 2,223 2,659 20 643 10.4 33.6 39.1 45.5 116.1 135.0 157.3 19.2 16.5 14.1 13.4 11.3 9.5 5.4 32.7 47.3 (6) 15

Bosch BUY 23,040 18,824 (18) 723 11.7 12.6 15.7 19.5 399.7 498.6 620.0 57.6 46.2 37.2 40.2 32.2 25.7 8.4 18.1 26.7 18 153

Eicher Motors BUY 15,588 16,367 5 423 6.8 6.5 11.4 17.9 240.5 421.1 660.7 64.8 37.0 23.6 37.9 20.9 12.4 11.8 32.0 37.8 6 252

Exide Industries BUY 185 211 14 157 2.5 6.0 7.7 9.5 7.1 9.1 11.2 26.1 20.4 16.4 18.2 14.6 12.1 3.4 16.4 21.6 (3) 75

Hero MotoCorp BUY 2,776 3,245 17 554 9.0 26.3 31.9 37.9 131.8 159.6 190.0 21.1 17.4 14.6 15.9 13.0 10.8 8.3 47.9 66.1 (7) 38

M&M HOLD 1,150 1,317 15 714 11.6 36.5 48.4 60.8 55.6 73.6 92.5 20.7 15.6 12.4 13.5 10.2 8.1 3.2 20.6 25.0 (7) 28

Maruti Suzuki BUY 3,503 4,252 21 1,058 17.1 34.9 50.6 67.3 115.7 167.7 222.9 30.3 20.9 15.7 16.6 12.1 9.1 3.7 17.9 25.1 1 110

Tata Motors BUY 560 740 32 1,670 27.1 207.1 237.3 298.6 64.3 73.7 92.8 8.7 7.6 6.0 4.5 3.8 3.0 1.7 22.3 22.4 7 55

Balkrishna Industries Limited HOLD 647 638 (1) 63 1.0 4.3 4.8 6.2 44.1 50.1 63.8 14.7 12.9 10.1 9.4 8.1 6.4 2.3 19.3 15.1 0 80

Ceat Limited BUY 751 1,024 36 30 0.5 3.5 4.1 4.6 85.9 100.8 113.8 8.7 7.5 6.6 5.3 4.9 4.3 1.4 19.5 22.9 (13) 149

Apollo Tyres Limited BUY 214 260 22 109 1.8 11.5 13.2 12.6 22.6 26.0 25.0 9.5 8.2 8.5 5.6 5.0 5.2 1.4 18.6 24.5 (5) 87

Bharat Forge BUY 1,058 1,356 28 246 4.0 8.0 11.1 14.4 34.4 47.6 61.6 30.7 22.2 17.2 16.5 12.9 10.1 5.8 29.5 31.7 14 210

INDUSTRIALS

ABB HOLD 1,280 1,270 (1) 271 4.4 2.1 3.4 5.8 10.1 16.1 27.1 126.3 79.6 47.2 50.6 37.8 25.5 9.1 11.8 11.6 1 117

Alstom T&D HOLD 492 436 (11) 126 2.0 1.9 2.7 3.2 7.2 10.5 12.5 67.9 47.1 39.5 32.1 24.6 21.0 7.5 17.0 16.2 1 173

BHEL BUY 264 356 35 647 10.5 24.7 38.3 54.5 10.1 15.6 22.3 26.2 16.9 11.9 14.1 9.0 5.9 1.7 10.5 10.7 4 70

Crompton Greaves BUY 159 294 85 100 1.6 4.4 8.0 9.9 7.0 12.8 15.8 22.8 12.4 10.0 13.2 8.3 6.5 2.1 17.0 12.5 (17) 34

Cummins India BUY 900 1,136 26 249 4.0 7.9 8.9 11.1 26.6 33.7 42.1 33.8 26.7 21.4 32.4 25.4 19.7 7.5 28.5 25.3 3 101

Havells India SELL 244 223 (9) 153 2.5 4.7 5.9 7.1 7.6 9.5 11.4 32.3 25.8 21.5 16.5 13.5 11.3 1.3 28.0 33.2 (11) 56

Honeywell Automation BUY 7,115 7,763 9 63 1.0 1.6 1.7 2.0 177.7 192.6 221.8 40.0 36.9 32.1 24.5 22.3 17.2 5.8 16.9 16.6 5 177

Larsen & Toubro BUY 1,684 1,842 9 1,564 25.3 51.6 62.9 76.9 55.6 67.8 83.0 30.3 24.8 20.3 19.8 16.4 13.5 3.7 15.0 13.0 12 71

Siemens BUY 1,108 1,260 14 395 6.4 5.8 9.7 12.8 16.4 27.2 36.0 67.7 40.7 30.8 35.7 23.1 17.8 6.8 19.9 21.6 21 101

KEC HOLD 84 82 (2) 22 0.3 3.0 1.7 2.1 5.1 6.8 8.3 16.6 12.4 10.1 7.7 6.3 5.8 1.3 8.9 14.8 (8) 61

Voltas HOLD 265 240 (9) 88 1.4 1.2 1.7 2.2 9.1 13.4 16.8 29.2 19.9 15.8 22.2 14.9 11.7 3.7 20.1 18.7 8 124

INFORMATION TECHNOLOGY

Cyient BUY 534 640 20 60 1.0 3.3 3.9 4.7 29.8 34.6 41.7 17.9 15.4 12.8 12.1 9.8 7.6 2.9 18.5 23.0 1 58

HCL Tech BUY 1,955 2,036 4 1,373 22.3 77.2 85.4 95.9 109.3 120.9 135.8 17.9 16.2 14.4 13.3 11.4 9.7 4.8 29.8 25.9 26 41

Hexaware Tech HOLD 231 195 (15) 69 1.1 3.3 4.1 4.8 10.9 13.5 16.1 21.1 17.0 14.3 14.4 11.7 10.1 5.4 31.8 31.1 10 64

Infosys Ltd. BUY 2,231 2,340 5 2,562 41.5 124.9 139.6 157.2 109.3 122.1 137.6 20.4 18.3 16.2 14.8 12.7 10.9 4.0 23.6 19.2 8 25

KPIT BUY 212 250 18 42 0.7 2.5 3.2 3.9 12.8 16.9 20.4 16.6 12.5 10.4 10.2 7.7 6.1 2.4 18.8 18.7 5 30

Mphasis HOLD 352 430 22 74 1.2 6.5 7.9 9.2 31.0 37.6 43.6 11.4 9.4 8.1 5.9 4.7 3.7 1.3 14.2 10.3 (8) (7)

NIIT Tech BUY 344 450 31 21 0.3 1.8 2.2 2.5 30.0 36.1 40.9 11.5 9.5 8.4 5.4 4.3 3.5 1.4 14.5 14.6 (4) (15)

Persistent Sys HOLD 1,670 1,650 (1) 67 1.1 3.0 3.5 4.1 74.7 88.1 103.0 22.4 19.0 16.2 14.7 11.5 9.2 4.3 22.7 18.7 (8) 75

TCS HOLD 2,576 2,720 6 5,045 81.8 217.7 247.6 277.6 109.0 124.0 139.0 23.6 20.8 18.5 18.0 15.4 13.4 7.2 34.8 31.8 3 22

Tech Mahindra BUY 2,860 3,075 8 687 11.1 28.6 34.0 41.7 131.9 157.0 192.2 21.7 18.2 14.9 15.0 12.2 10.0 4.8 26.2 25.3 7 57

Wipro HOLD 643 600 (7) 1,588 25.7 87.0 98.3 114.0 34.8 39.4 45.7 18.5 16.3 14.1 14.7 12.6 10.3 3.3 21.9 17.2 16 15

MEDIA

Den Networks BUY 111 220 98 20 0.3 1.1 2.0 1.7 6.1 11.4 9.6 18.3 9.7 11.6 5.3 3.5 3.4 0.9 9.4 10.8 (16) (27)

Dish TV India BUY 78 85 9 83 1.3 (1.1) 0.6 1.6 (1.1) 0.6 1.5 (74.3) 134.8 53.3 12.8 10.2 8.8 (22.9) nm 1.9 16 66

Hathway Cable HOLD 63 70 11 52 0.8 (2.0) 1.3 2.0 (2.4) 1.5 2.4 (25.8) 40.8 26.5 23.7 9.2 7.0 0.1 8.2 12.0 (3) 21

Just Dial Ltd HOLD 1,481 1,650 11 104 1.7 1.3 2.1 3.1 18.6 28.8 43.0 79.7 51.4 34.4 56.0 36.4 23.3 12.5 25.1 28.2 1 6

Sun TV Network BUY 381 370 (3) 150 2.4 7.4 8.4 9.7 18.8 21.2 24.5 20.3 18.0 15.5 8.4 7.3 6.2 4.0 22.4 29.7 8 5

Zee Ent HOLD 362 355 (2) 347 5.6 9.4 11.0 13.3 9.8 11.5 13.8 36.9 31.5 26.1 25.8 21.9 18.0 9.2 19.0 26.1 0 33

METALS & MINING

Hindalco Industries SELL 147 137 (7) 304 4.9 35.1 41.3 55.2 17.0 20.0 26.7 8.7 7.4 5.5 8.3 6.9 5.6 0.6 9.1 6.1 (5) 38

Hindustan Zinc BUY 170 189 11 718 11.6 70.4 74.8 79.8 16.7 17.7 18.9 10.2 9.6 9.0 5.8 4.8 3.9 1.5 16.4 42.9 4 36

JSW Steel HOLD 961 1,113 16 232 3.8 21.6 24.4 31.2 89.3 101.1 129.1 10.8 9.5 7.4 6.4 5.9 5.2 0.9 10.2 7.0 (5) 11

SAIL HOLD 74 83 13 304 4.9 28.7 31.9 43.0 7.0 7.7 10.4 10.6 9.5 7.1 9.4 8.1 6.3 0.6 6.9 5.0 (6) 16

TATA Steel BUY 369 596 62 358 5.8 40.9 61.9 69.1 42.1 63.7 71.2 8.8 5.8 5.2 6.5 5.7 5.2 0.7 12.0 6.3 (8) (4)

NMDC BUY 141 184 31 559 9.1 72.6 78.8 79.4 18.3 19.9 20.0 7.7 7.1 7.0 4.2 3.8 3.8 1.5 22.3 36.9 4 (3)

Nalco BUY 49 67 36 127 2.1 11.7 12.8 13.6 4.6 5.0 5.3 10.8 9.9 9.3 4.8 4.1 3.2 0.9 9.7 10.1 (3) 50

UR: Under Review contd...


Valuation GuideCompany Reco C M P T P Re tu rn M.Cap M.Cap Net profit (INRbn) EPS (INR) PE (x) EV/EBITDA (x) P/BV (x) RoE (%) RoCE (%) Absolute (%)


OIL & GAS

BPCL HOLD 731 730 (0) 529 8.6 31.6 37.2 42.5 48.1 56.7 64.8 15.2 12.9 11.3 8.8 7.4 6.4 1.9 15.0 13.4 8 108

Cairn India SELL 254 195 (23) 476 7.7 49.9 34.3 38.3 35.3 18.3 20.4 7.2 13.9 12.5 5.6 8.9 6.3 0.8 5.4 3.2 5 (24)

GAIL India SELL 420 405 (3) 532 8.6 33.1 31.7 35.6 26.1 25.0 28.1 16.1 16.8 14.9 12.4 10.1 9.2 1.8 10.6 11.0 (4) 18

Gujarat State Petro BUY 117 150 29 66 1.1 5.0 5.7 5.9 8.8 10.2 10.5 13.3 11.5 11.2 7.8 6.5 6.3 1.6 13.6 16.6 (6) 104

HPCL HOLD 584 560 (4) 198 3.2 13.1 17.9 24.5 38.7 52.9 72.3 15.1 11.0 8.1 9.4 7.4 6.3 1.1 10.4 6.7 (1) 142

Indian Oil Corp BUY 328 440 34 795 12.9 50.0 86.9 99.4 21.1 36.7 41.9 15.5 8.9 7.8 11.9 7.0 6.2 1.0 11.3 8.6 (4) 33

Indraprastha Gas BUY 460 450 (2) 64 1.0 4.1 4.5 4.8 29.6 31.9 34.2 15.5 14.4 13.4 8.2 7.4 6.7 2.8 19.2 22.8 2 73

MRPL SELL 54 49 (10) 95 1.5 (10.7) 10.9 12.7 (6.1) 6.2 7.2 (8.8) 8.7 7.5 (11.8) 6.9 6.6 1.4 15.9 12.0 7 23

Oil India BUY 547 720 32 329 5.3 36.4 39.9 43.7 60.5 66.3 72.7 9.0 8.2 7.5 5.8 5.0 4.5 1.3 15.8 13.5 (3) 22

ONGC BUY 351 420 20 3,003 48.7 251.6 310.1 329.1 33.3 39.8 41.9 10.5 8.8 8.4 5.9 5.0 4.6 1.8 18.6 22.9 - 30

Petronet LNG SELL 184 193 5 138 2.2 8.2 8.6 9.9 10.9 11.5 13.2 16.9 16.1 14.0 9.2 9.3 8.0 2.2 13.8 13.8 (14) 57

Reliance Industries BUY 910 1,045 15 2,944 47.7 245.2 203.7 260.8 75.9 63.0 80.6 12.0 14.4 11.3 10.3 11.2 8.2 1.1 8.6 5.8 6 12

PHARMACEUTICALS

Cipla HOLD 655 684 4 526 8.5 13.4 20.0 24.8 16.7 24.9 30.9 39.2 26.3 21.2 26.0 17.5 14.0 4.1 18.0 16.0 4 57

Dr Reddy's BUY 3,044 4,006 32 518 8.4 23.9 29.3 34.5 140.4 172.1 202.8 21.7 17.7 15.0 14.5 11.9 9.8 4.2 23.8 20.0 (4) 16

Lupin HOLD 1,568 1,587 1 704 11.4 23.3 28.4 32.3 52.2 63.5 72.1 30.1 24.7 21.7 18.6 15.9 13.7 6.3 28.4 26.0 10 71

Sun Pharma BUY 927 1,145 24 1,920 31.1 70.0 95.8 126.1 33.8 39.3 51.8 27.4 23.6 17.9 21.0 14.7 10.8 6.1 26.0 26.9 12 54

Aurobindo HOLD 1,109 1,128 2 324 5.2 17.9 19.7 22.6 61.2 68.1 78.2 18.1 16.3 14.2 12.5 11.1 9.4 4.4 38.8 21.2 (5) 119

Cadila Health BUY 1,467 1,841 25 300 4.9 12.3 16.2 18.8 59.8 79.2 92.0 24.5 18.5 15.9 17.4 13.1 11.0 5.2 28.5 20.5 (13) 62

Strides BUY 866 1,132 31 52 0.8 1.9 3.6 5.8 31.2 45.5 72.4 27.7 19.0 12.0 19.5 9.9 6.0 3.7 30.5 23.1 (7) 170

Glenmark BUY 740 990 34 201 3.3 8.8 13.6 23.7 33.1 50.8 71.4 22.4 14.6 10.4 14.8 10.3 6.2 3.9 31.6 27.7 1 31

Biocon HOLD 412 429 4 82 1.3 3.7 5.0 6.4 17.6 24.2 31.5 23.3 17.0 13.1 12.0 9.4 7.7 2.3 14.5 10.2 (1) (5)

Unichem HOLD 206 215 5 19 0.3 0.6 1.1 1.5 6.6 12.4 16.5 31.3 16.6 12.4 18.4 11.2 8.8 2.2 13.2 10.4 (12) 2

UTILITIES

CESC HOLD 683 641 (6) 91 1.5 3.2 7.9 11.6 24.1 59.4 87.4 28.3 11.5 7.8 11.3 6.6 5.4 1.3 11.3 8.8 (1) 52

JSW Energy HOLD 102 105 3 168 2.7 13.9 14.3 14.3 8.5 8.7 8.7 12.1 11.7 11.7 6.8 6.6 6.6 1.9 16.6 14.6 2 125

NTPC HOLD 140 158 13 1,154 18.7 89.9 92.5 103.2 10.9 11.2 12.5 12.8 12.5 11.2 10.3 10.1 9.5 1.4 10.8 7.7 (0) 3

Power Grid BUY 143 166 16 750 12.2 52.1 61.0 71.3 10.0 11.7 13.6 14.4 12.3 10.5 11.6 10.3 9.1 1.7 14.2 7.5 4 47

PTC India BUY 89 143 61 26 0.4 1.9 2.6 3.3 6.2 8.0 10.5 14.4 11.1 8.4 10.8 9.8 6.9 10.0 9.1 9.8 (5) 59

Tata Power HOLD 82 98 20 222 3.6 13.7 14.7 15.6 5.0 5.4 5.8 16.3 15.1 14.3 6.8 6.6 6.2 1.5 10.0 9.4 3 14

Coal India BUY 364 456 25 2,299 37.3 157.6 185.2 212.1 25.0 29.3 33.6 14.6 12.4 10.8 10.6 8.1 6.3 4.2 34.0 32.2 (3) 35

OTHERS

Supreme Industries HOLD 625 655 5 79 1.3 2.7 3.6 4.5 25.6 34.1 38.4 24.4 18.3 16.3 13.8 11.1 9.3 5.5 29.9 31.7 6 51

Cera Sanitaryware HOLD 2,292 2,456 7 29 0.5 0.7 0.9 1.2 56.7 74.8 98.2 40.4 30.7 23.3 24.5 19.0 14.7 8.0 29.2 36.3 25 202

Kajaria Ceramics BUY 766 800 4 61 1.0 1.7 2.2 2.8 21.4 27.5 35.3 35.9 27.9 21.7 18.2 14.1 11.5 6.7 24.8 32.3 28 137

Finolex Industries BUY 281 360 28 35 0.6 1.8 2.4 3.0 14.6 19.2 24.0 19.2 14.6 11.7 10.6 8.6 7.1 3.7 22.3 19.9 10 81

Astral Poly Technik Limited BUY 415 524 26 49 0.8 1.1 1.8 2.5 10.6 16.0 21.8 39.2 26.0 19.1 23.0 16.5 12.5 6.2 25.8 30.3 12 121

HSIL BUY 398 534 34 26 0.4 0.8 1.3 1.8 12.0 20.1 27.0 33.3 19.8 14.7 10.8 8.5 7.0 2.2 11.7 15.0 7 308

Somany Ceramics Limited BUY 350 401 14 14 0.2 0.5 0.7 0.9 13.1 17.8 22.3 26.7 19.7 15.7 13.2 10.4 8.9 4.1 23.0 23.2 13 162

UR: Under Review contd...


UR: Under Review

Valuation GuideCompany Reco C M P T P Re tu rn M.Cap M.Cap Net profit (INRbn) EPS (INR) PE (x) NNPA Ratio (%) P/AdjBV (x) RoE (%) RoA (%) Absolute (%)


FINANCIALS

Axis Bank BUY 563 586 4 1331 21.6 73.4 89.1 115.0 31.2 37.9 49.0 18.0 14.9 11.5 0.4 0.4 0.3 2.6 18.5 1.8 14 150

Bank of Baroda BUY 176 246 40 378 6.1 35.6 58.5 75.8 16.5 27.2 35.2 10.6 6.5 5.0 2.0 1.8 1.6 1.1 14.2 0.7 (17) 58

Bank of India BUY 247 386 56 159 2.6 27.1 45.6 61.6 42.1 70.8 95.7 5.9 3.5 2.6 3.5 3.4 3.1 0.6 13.3 0.6 (16) 35

Canara Bank BUY 415 515 24 191 3.1 42.6 55.6 81.1 92.4 120.6 175.8 4.5 3.4 2.4 2.1 1.8 1.7 0.7 15.6 1.0 (6) 88

Federal Bank BUY 140 175 25 120 1.9 10 12 15 11.2 13.5 17.0 12.5 10.3 8.2 0.2 0.2 0.2 1.4 14.1 1.3 (6) 79

HDFC HOLD 1,281 1,243 (3) 2014 32.6 59.4 73.6 88.1 38.1 47.2 56.4 33.6 27.2 22.7 0.2 0.2 0.2 5.6 21.7 2.7 15 63

HDFC Bank BUY 1,054 1,018 (3) 2548 41.3 106.6 136.8 165.8 44.4 57.0 69.1 23.7 18.5 15.2 0.2 0.2 0.2 4.1 23.7 2.2 8 63

ICICI Bank BUY 329 397 21 1908 30.9 105.5 131.6 161.3 18.2 22.7 27.8 18.1 14.5 11.9 1.1 1.1 1.1 2.2 14.5 1.8 (4) 71

IndusInd Bank HOLD 845 800 (5) 447 7.2 18.7 23.3 28.8 35.5 44.3 54.7 23.8 19.1 15.4 0.3 0.3 0.3 3.6 20.1 2.0 5 117

Kotak Mahindra HOLD 1,267 1,280 1 978 15.8 18.4 24.2 29.1 23.9 31.4 37.8 52.9 40.3 33.5 1.0 1.1 1.2 6.3 15.9 2.1 (7) 92

PNB BUY 170 245 44 309 5.0 38.3 57.9 70.4 21.1 32.0 38.9 8.1 5.3 4.4 3.0 2.4 1.9 0.9 13.8 0.9 (17) 53

SBI BUY 290 375 29 2167 35.1 146.9 227.0 312.7 19.7 30.4 41.9 14.8 9.5 6.9 2.0 1.6 1.5 1.7 16.3 1.0 (4) 90

Union Bank BUY 190 300 58 121 2.0 24.5 31.7 45.2 38.9 50.3 71.8 4.9 3.8 2.6 2.5 2.4 2.1 0.7 15.6 0.8 (17) 80

YES Bank BUY 811 975 20 339 5.5 20.4 25.1 31.3 49.2 60.3 75.1 16.5 13.4 10.8 0.1 0.1 0.0 2.4 19.5 1.7 6 162

Bajaj Auto Fin BUY 4,043 4,250 5 203 3.3 8.9 11.3 13.6 179.8 227.3 273.2 22.5 17.8 14.8 0.2 0.3 0.3 3.5 21.5 3.1 17 171

Chola Invst & Fin. HOLD 551 549 (0) 79 1.3 4.3 5.1 5.9 27.5 33.1 38.1 20.0 16.6 14.4 1.4 1.5 1.5 2.4 16.0 2.0 13 125

Gruh Finance HOLD 255 296 16 93 1.5 2.0 2.6 3.3 5.6 7.2 9.2 45.2 35.2 27.7 - - - 10.1 31.7 2.5 (13) 101

LIC Housing Fin BUY 452 480 6 228 3.7 14.5 18.4 21.5 28.7 36.5 42.7 15.7 12.4 10.6 0.4 0.4 - 2.7 19.2 1.4 (4) 125

M&M Fin. HOLD 252 279 11 143 2.3 7.0 10.1 11.4 12.5 18.0 20.3 20.1 14.0 12.4 3.0 2.5 2.5 2.5 16.1 2.7 (20) (2)

Manappuram BUY 35 46 33 29 0.5 2.8 3.5 4.1 3.3 4.2 4.9 10.5 8.3 7.1 0.4 0.4 0.4 1.0 12.9 3.1 1 65

Muthoot Finance BUY 214 275 29 85 1.4 6.7 7.6 8.7 17.0 19.2 21.8 12.6 11.1 9.8 0.9 0.9 1.0 1.6 14.8 3.1 9 55

PFC BUY 283 377 33 374 6.1 63.8 72.9 84.9 49.5 56.4 65.5 5.7 5.0 4.3 1.0 1.1 0.9 1.0 20.9 3.1 1 95

Repco Home Fin. BUY 629 727 16 39 0.6 1.3 1.7 2.2 21.0 27.1 34.8 29.9 23.2 18.1 0.7 0.7 0.7 4.1 19.3 2.4 (10) 103

REC BUY 328 422 29 324 5.2 54.3 63.3 73.4 56.5 65.6 75.8 5.8 5.0 4.3 0.3 0.5 0.5 1.1 23.6 3.5 4 72

Shriram Transport BUY 1,140 2,498 119 259 4.2 14.1 16.7 21.4 62.4 73.9 94.6 18.3 15.4 12.1 (0.4) 0.1 (0.4) 2.4 16.4 2.7 7 93

SKS Microfinance BUY 419 496 18 53 0.9 1.9 2.2 3.0 15.2 17.8 23.6 27.6 23.5 17.7 0.1 0.2 0.3 4.2 19.4 4.8 (4) 138

PTC Financial BUY 60 73 23 33 0.5 3.0 4.4 5.1 5.4 7.8 9.1 11.1 7.6 6.5 0 0 0 1.7 24.4 3.5 (14) 339

Shriram City Union BUY 2,079 2,487 20 137 2.2 8.8 9.9 11.9 88.3 100.1 120.5 23.5 20.8 17.3 0.8 1 1 2.9 14.6 3.1 6 114


Monday Tuesday Wednesday Thursday Friday Saturday Sun

Events Calendar Feb 2015

9 Feb 10 Feb 11 Feb 12 Feb 13 Feb 14 Feb 15 Feb

Larsen & Toubro ABB BPCL Hindalco Mahindra & Mahindra Sun PharmaBank of India Cadila Healthcare Power Finance Corp ONGC Eicher Motors Balkrishna Ind

Nalco Voltas CESC BoschHexaware Tech Power Grid Corp BHEL HPCL

Hathway Cable Glenmark Pharma IOCLCoal India Oil IndiaCipla MRPL

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