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Private & Confidential Private & Confidential
16th Jun, 2016
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Private & Confidential
Suitability
Suitable for Investors looking for….
Investment horizon over three years.
Having high risk appetite.
Can withstand high volatility and price fluctuation on investments.
Higher return with assumed risk within equity asset class.
Average liquidity of investments.
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Private & Confidential
Business Model 1) Market Share 2) Leadership 3) Niche Business Model
Consistency 1) Sales / EBIDTA / PAT growth (3-5 years) 2) Stable or improving margins (3-5 years)
Visibility 1) Earnings outlook over next 3 years 2) Predictable business model
Corporate Governance 1) Management back ground 2) Accounting & Corporate policies
Sector opportunity 1) Sector potential to grow 2) Cyclical / Non
Cyclical 3) Favoring Policies
Diversification 1) Sectorally well diversified basket of 15 stocks 2) 40:60 Large cap and Midcap companies
Exposure 1) Single Stock exposure < 10% 2) Single Sector exposure < 30%
Active Monitoring 1) Tracking news /policy /Quarter Performance 2) Rebalancing recommended list
Stock Selection
Allocation
Investment Philosophy
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Private & Confidential
Why Mid Cap
The table shows outperformance of the Mid Cap and Small Cap Index over the Sensex Index during the Bull Period.
Outperformance of the Mid Cap happens because of better earnings growth in the bull phase.
The P/E for Mid cap and Small Caps also expands as earnings growth is superior v/s Sensex earnings growth.
Going forward Mid Cap and Small Cap are expected to outperform the Large Cap, however one should keep in mind the risk associated with it as we see the higher volatility in it. Therefore we emphasis on stringent stock selection strategy to create alpha over the benchmark.
Today’s Small Cap
Small Cap
are tomorrows Mid cap
Mid Cap
Which may eventually
become Large Cap
Large Cap
Apr-03 Dec-07 CAGR Volatility
Sensex 2960 20287 51.0% 22.0%
BSE Mid Cap 952 9789 64.6% 25.0%
BSE Small Cap 893 13348 78.4% 31.6%
Dec-07 Dec-11 CAGR Volatility
Sensex 20287 15455 -6.6% 31.2%
BSE Mid Cap 9789 5135 -14.9% 40.5%
BSE Small Cap 13348 5550 -19.7% 45.4%
Dec-11 May-16 CAGR Volatility
Sensex 15455 26668 13.1% 14.3%
BSE Mid Cap 5135 11366 19.7% 19.2%
BSE Small Cap 5550 11142 17.1% 21.8%
Bull Period
Bear Period
Current Bull period
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Private & Confidential
Why Mid Cap
The above graph represents the P/e difference between the CNXMCAP P/e & NIFTY P/e over the last 12 years. The MidCaps had a great rally when the diff. in P/e reached 6 from Minus 7.7. After Jan 08 crash, this difference has largely remained in the negative territory. We have utilize this as an opportunity.
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Difference between NIFTY MIDCAP 100 P/E and NIFTY 50 P/E
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Private & Confidential
Recommended Aggressive Basket
CMP as on 31st May 2016
Symbol Sector Cost CMP % Gain Loss % Holding Mkt Cap Market Cap % Allocation
TATAMOTORS AUTOMOBILES 341 460 34.7% 8.0% 132292 Large Cap 38.9%
IGARASHI AUTOMOBILES 317 617 94.9% 11.9% 1891 Mid Cap 61.1%
LT CAPITAL GOODS 1650 1474 -10.7% 5.5% 137380
WABAG CAPITAL GOODS 813 578 -28.9% 4.4% 3134 Sector % Allocation
SBIN FINANCIALS 184 205 11.2% 5.1% 159020 AUTOMOBILES 20.0%
AXISBANK FINANCIALS 515 515 0.0% 6.5% 123016 CAPITAL GOODS 9.8%
LICHSGFIN FINANCIALS 462 471 1.8% 6.2% 23691 FINANCIALS 17.8%
IOC OIL & GAS 427 416 -2.5% 7.7% 100942 OIL & GAS 7.7%
SYNGENE PHARMA 383 390 1.7% 6.0% 7776 PHARMA 6.0%
APARINDS POWER 343 487 41.9% 9.4% 1883 POWER 9.4%
ECLERX TECHNOLOGY 1426 1426 0.0% 6.5% 5777 TECHNOLOGY 12.5%
NIITTECH TECHNOLOGY 446 486 8.9% 6.1% 2972 TEXTILES 13.5%
RSWM TEXTILES 305 387 27.0% 6.7% 893 TRAVEL 3.4%
ARVIND TEXTILES 307 319 4.0% 6.9% 8237
COX&KINGS TRAVEL 223 148 -33.6% 3.4% 2611
Total 481338 530299 100% Total 100.0%
As on 31st May 2016 1 Month 3 Month 6 Month 1 Year
Since Inception
18th Feb 2015
AGGRESSIVE Basket 2.4% 26.2% -2.0% 6.1% 7.8%
NIFTY 50 4.0% 16.8% 2.8% -3.2% -7.4%
NIFTY MIDCAP 100 0.7% 15.0% 0.3% 0.8% 1.6%
Model Basket Performance
Note: Returns shown above are pre cost, including dividends and adjusted for gain/loss
on the stock replacement done.
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Private & Confidential
Tata Motors Ltd.
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NIFTY 50 Tata Motors Ltd.
SECTOR
NSE Symbol BSE Code Bloomberg
TATAMOTORS 500570 TTMT IN
CMP Market Cap (cr) Equity (cr)
448 129462 577
EPS (TTM) BV FV
38.2 279.4 2
P/E P/BV Div Yield
11.7 1.6 0.00
52 Week H 52 Week L Avg Vol ('000)
470.3 265.8 4069.8
Group
Promoter 33.01
Others 66.99
AUTOMOBILES
Share Holding Pattern
Tata Motors Ltd.
FY 14 FY 15 FY 16 FY 17 E FY 18 E
Net Sales 232,834 262,796 272,646 303,993 343,836
EBIDTA 33,224 39,239 36,756 44,184 50,772
EBIDTA Margin 14.3% 14.9% 13.5% 14.5% 14.8%
PAT 14,104 14,060 11,108 15,978 18,700
PAT Margin 6.1% 5.4% 4.1% 5.3% 5.4%
EPS 43.0 43.0 32.5 45.9 54.5
Source: Anand Rathi Research, Bloomberg, Ace equity
Figures INR crore
Tata Motors Limited is a leading global automobile manufacturer with a portfolio that covers a wide range of cars, sports vehicles, buses, trucks and defence vehicles. Company now sell vehicles in more than 50 countries. It has built a strong global network of subsidiaries and associate companies, including Jaguar Land Rover in UK and Tata Daewoo in south korea.
In Q4FY16 consolidated revenues inched up 19% YoY to Rs 807bn and PAT up 158% to Rs 47bn. JLR reported an EBIDTA margin of 13.7%. Excluding one-off the adjusted EBIDTA margin in JLR business stood at 16.2%. Standalone Net sales at Rs 124.6bn up 16.7% YoY EBITDA grew 1.8x at Rs 10.2bn. EBITDA margins were at 8.1% increase of 240bp QoQ due to improved product mix along with benefit from operating leverage. Further, Adj PAT was at Rs 5bn as compared to a loss of Rs 39.5 cr. Capex planned at £3.75 bn in FY17.
Tata motors is at sweet spot to sustain strong performance 1) Domestic M&HCV business is expected to maintain its traction, while LCV business has started showing resilience. 2) better than expected profits at Chery-JLR JV 3) JLR’s performance to improved backed by new product launches also expected to generate strong operating cash flow to fund investment, free cash flow may be negative in the medium-term.
CMP 448
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Private & Confidential
Igarashi Motors India Ltd.
SECTOR
NSE Symbol BSE Code Bloomberg
IGARASHI 517380 IGM IN
CMP Market Cap (cr) Equity (cr)
658 2015 31
EPS (TTM) BV FV
20.8 96.2 10
P/E P/BV Div Yield
31.7 6.8 0.23
52 Week H 52 Week L Avg Vol ('000)
773.7 375 22.3
Group
Promoter 85.85
Others 14.15
AUTOMOBILES
Share Holding Pattern
Igarashi Motors India Ltd.
FY 14 FY 15 FY 16 FY 17 E FY 18 E
Net Sales 361 385 445 534 627
EBIDTA 69 80 105 123 144
EBIDTA Margin 19.1% 20.9% 23.6% 23.0% 23.0%
PAT 46 49 64 75 88
PAT Margin 12.8% 12.7% 14.3% 14.0% 14.0%
EPS 15.2 16.0 20.8 24.4 28.7
Source: Anand Rathi Research, Bloomberg, Ace equity
Figures INR crore
Igarashi Motors India Ltd (IMIL) manufacture electric DC motors for automobiles. Globally 70 million cars are built; each car will have about 20(conservatively) small electric motors that make the electric motors market a 1.5 billion in numbers and with developing markets expected to build more cars going forward it is expected to grow to 100 million vehicles per year globally.
In Q4FY16 revenue was up by 24.34% YoY at 126.6 cr, EBIDTA up by 48% at 31.9 cr, with EBIDTA margin improving to 25.23% as against 21.65% YoY.
IMIL is working with global auto ancillary suppliers. Bosch, Continental, Delphi, Cooper, Magneti Marelli, Pierburg, Visteon are some major customers. Company’s products are distributed widely and presently Europe USA contributes 85% of our revenues. Company is planning to set up distribution network between Europe, America, India and Far East Markets.
IMIL has getting dual benefit against competitors as currency is now in favor of exporters and cheap labour cost also providing labour cost arbitrage to company.
The key growth drivers for IML are: 1) Content per car increasing, 2) Fuel efficiency as well as emission reduction mandates for automakers worldwide and 3) Revenue synergies with new Japanese parent IEW.
CMP 658
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NIFTY MIDCAP 100
Igarashi Motors India Ltd.
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Private & Confidential
Larsen & Toubro Ltd.
SECTOR
NSE Symbol BSE Code Bloomberg
LT 500510 LT IN
CMP Market Cap (cr) Equity (cr)
1461 136124 186
EPS (TTM) BV FV
54.6 471.8 2
P/E P/BV Div Yield
26.7 3.1 1.11
52 Week H 52 Week L Avg Vol ('000)
1888 1016.05 994.9
Group
Promoter 0
Others 100
CAPITAL GOODS
Share Holding Pattern
Larsen & Toubro Ltd.
FY 14 FY 15 FY 16 FY 17 E FY 18 E
Net Sales 85,128 92,005 101,336 114,878 113,894
EBIDTA 9,929 10,755 12,343 14,308 16,927
EBIDTA Margin 11.7% 11.7% 12.2% 12.5% 14.9%
PAT 4,875 4,964 5,538 5,568 6,685
PAT Margin 5.7% 5.4% 5.5% 4.8% 5.9%
EPS 52.9 51.3 54.6 59.6 71.5
Source: Anand Rathi Research, Bloomberg, Ace equity
Figures INR crore
Larsen and Toubro (LT) is India's largest E&C Company. Larsen has made significant investments in defence, shipbuilding and power, over the last 4-5 years. Larsen has also expanded into new geographies like Saudi Arabia and Qatar. Most of these businesses are highly capital intensive, which shall fetch revenues in the coming years.
In Q4FY16 LT reported consolidated sales of Rs331bn, up 18% YoY. Domestic sales were up 15% YoY and International sales were up 23% YoY. While E&C business grew by 19% YoY (infrastructures segment sales up 18% YoY), Services businesses (IT&Ts and Financial services) up ~ 16% YoY. EBITDA was up 35% YoY to Rs48.5bn and EBITDA margin stood at 14.3% up 180bps YoY.
The company has a order pipeline of Rs 2.5trn crore. Management guided for Inflow growth of 15% for FY17 (FY16 De growth of 12%). The current prospect pipeline is Rs 5trn. Out of prospect pipeline, Rs2.5trn is from infrastructure, ~Rs 1tn from hydrocarbon, ~1tn from power and ~ Rs 500bn from defence and other segments.. The company expect to bag defence orders worth Rs 150bn in FY17 against ~ Rs 50‐60bn in FY16.
LT continues to be the best play in the Indian infrastructure space, given its strong business model, diverse skill sets, strong execution capabilities and relatively healthy/large balance sheet.
CMP 1461
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NIFTY 50
Larsen & Toubro Ltd.
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Private & Confidential
eClerx Services Limited
SECTOR
NSE Symbol BSE Code Bloomberg
ECLERX 532927 ECLX IN
CMP Market Cap (cr) Equity (cr)
1494 6100 41
EPS (TTM) BV FV
88.9 266.1 10
P/E P/BV Div Yield
16.8 5.6 1.76
52 Week H 52 Week L Avg Vol ('000)
1580 1051.5 6.8
Group
Promoter 50.38
Others 49.62
TECHNOLOGY
Share Holding Pattern
eClerx Services Ltd.
FY 14 FY 15 FY 16 FY 17 E FY 18 E
Net Sales 841 942 1,314 1,409 1,592
EBIDTA 355 316 486 510 594
EBIDTA Margin 42.2% 33.6% 37.0% 36.2% 37.3%
PAT 256 230 363 393 456
PAT Margin 30.4% 24.4% 27.6% 27.9% 28.6%
EPS 63.5 56.8 89.0 96.4 111.9
Source: Anand Rathi Research, Bloomberg, Ace equity
Figures INR crore
Incorporated in 2000, eClerx is India’s first publicly listed KPO specializes in providing operational support, data management and analytics solutions to over 50 of Global Fortune 1000 clients in sectors like High Tech, Financial Services, E-com, Retail & Distribution, Broadband, Cable & Telecom, etc
With increase in automation and digitization of processes, platform-based and verticalised services have increased significantly. India’s BPM sector, in fact, is expected to transcend into a USD 300 billion entity by 2020.
For FY16 eClerx witnessed revenue growth of ~15% in organic terms while in constant currency terms it grew by 34%. EBITDA margins grew by ~350 bps to 37% for the year despite consolidation of low margin acquisitions. In FY16 company had 40 clients in $0.5 million + bucket. Of which 27 clients were from digital segment, 9 from financial services and 4 from cable segment.
Management expects flat 1HFY17E with subsequent pick-up based on project schedules. It expect a ’low to mid teens’ revenue growth for FY17 with growth from financial services to remain sluggish (though outlook improved) and better growth from Cable Division as well as Digital Business. Margins to remain at 30% based on investments in highlighted initiatives i.e. (1) key client focus, (2) onsite investments, (3) investments in building delivery skill-sets around automation and (4) focus on analytics
CMP 1494
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NIFTY MIDCAP 100
eClerx Services Ltd.
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Private & Confidential
VA Tech Wabag Ltd.
SECTOR
NSE Symbol BSE Code Bloomberg
WABAG 533269 VATW IN
CMP Market Cap (cr) Equity (cr)
606 3305 11
EPS (TTM) BV FV
16.9 181.9 2
P/E P/BV Div Yield
35.8 3.3 0.66
52 Week H 52 Week L Avg Vol ('000)
834 408.8 30.2
Group
Promoter 28.94
Others 71.06
CAPITAL GOODS
Share Holding Pattern
VA Tech Wabag Ltd.
FY 14 FY 15 FY 16 FY 17 E FY 18 E
Net Sales 2,239 2,435 2,542 3,118 3,775
EBIDTA 189 209 221 270 355
EBIDTA Margin 8.4% 8.6% 8.7% 8.6% 9.4%
PAT 114 110 93 148 198
PAT Margin 5.1% 4.5% 3.7% 4.8% 5.2%
EPS 21.3 20.3 16.9 27.0 36.1
Source: Anand Rathi Research, Bloomberg, Ace equity
Figures INR crore
VA Tech Wabag Limited (WABAG) is an Indian Multinational with European parentage offering world class services into high growth water markets with a respectable market share.
The company also offers leading European technologies in emerging markets at viable prices and with evolving global mercantilism and virtual water trade, global water equipment market is more than half trillion dollar opportunity already.
VA Tech Wabag has reported a growth of 4.7% in its consolidated revenues at Rs. 25.5 bn in FY16 as against Rs. 24.4 bn in FY15. Its standalone revenues grew 22.7% to Rs. 15.1 bn in FY16 as against Rs. 12.3 bn in previous year. The company’s India business continues to perform better due to increased focus on projects execution while its overseas business was affected by factors like currency volatility, delay in approvals.
The outstanding order book (excluding framework orders) stood at 73.1 bn as against Rs 54.4 bn in same quarter previous year, a growth of ~34%. Its framework contracts stood at Rs 10.1 bn during the current quarter.
We believe Wabag being a leader in its segment stands to benefit from various water based projects like Namami Gange, Swacch Bharat & Smart Cities which are currently pegged in upwards of Rs 2,000 billion.
CMP 606
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NIFTY MIDCAP 100
VA Tech Wabag Ltd.
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Private & Confidential
Syngene International Ltd.
SECTOR
NSE Symbol BSE Code Bloomberg
SYNGENE 539268 SYNG IN
CMP Market Cap (cr) Equity (cr)
397 7936 200
EPS (TTM) BV FV
11.1 51.8 10
P/E P/BV Div Yield
35.9 7.7 0.25
52 Week H 52 Week L Avg Vol ('000)
436 295 53.6
Group
Promoter 74.55
Others 25.45
PHARMA
Share Holding Pattern
Syngene International Ltd.
FY 14 FY 15 FY 16 FY 17 E FY 18 E
Net Sales 700 860 1,107 13,520 1,649
EBIDTA 214 281 358 454 567
EBIDTA Margin 30.5% 32.7% 32.3% 3.4% 34.4%
PAT 134 175 221 270 338
PAT Margin 19.1% 20.4% 20.0% 2.0% 20.5%
EPS 7.2 8.8 11.1 14.0 16.9
Source: Anand Rathi Research, Bloomberg, Ace equity
Figures INR crore
Pharmaceutical companies have been facing stiff issues relating to patent cliff and rising R&D costs. There is a large opportunity awaiting the global CRO and CRAMS sectors where companies like Syngene, an integrated end–to-end discovery & development service provider for novel molecular entities (NMEs) across the range of industrial sectors likely to benefit the most.
In Q4FY16 Revenues grew by 31.7% y-o-y to Rs.331.5crs on account of expansion in services for dedicated clients, strong biological services growth and growth in chemical development group. EBITDA margins declined 220 bps y-o-y to 31.6% due to lower gross margin and higher employee expenses. EBITDA grew 23.6% to Rs.103.1crs. Net profit increased 19.6% to Rs.66.5crs.
Client base has increased from 221 in FY15 to 256 in FY1. During FY16, It cleared three USFDA inspections without any major observations. Realisation was muted in FY16 as the company passed on the currency benefits to customers. The company has guided ~3% annual increment in realisation.
Company to benefit from (1) Large and growing addressable market 2) Flexible Business Models 3)Customer engagement with dedicated center model and tailored service offering 4) Moving from CRO to CRAMS with commercial manufacturing 5) World Class Infrastructure and Qualified Pool of Scientists 6) Attractive Blue Chip Customer Base..
CMP 397
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NIFTY MIDCAP 100
Syngene International Ltd.
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Private & Confidential
State Bank Of India
SECTOR
NSE Symbol BSE Code Bloomberg
SBIN 500112 SBIN IN
CMP Market Cap (cr) Equity (cr)
208 161116 776
EPS (TTM) BV FV
15.7 230.9 1
P/E P/BV Div Yield
13.2 0.9 1.25
52 Week H 52 Week L Avg Vol ('000)
291.8 148.25 9106.7
Group
Promoter 60.18
Others 39.82
FINANCIALS
Share Holding Pattern
The banking sector has been under pressure due to change in base rate methodology and margin impact, asset quality trends, efficacy of 5/25 refinancing and continued sluggishness in credit growth etc.
SBIN’s 3QFY16 PAT was INR11.2b led by weak core PPoP growth (-6% YoY) and high credit costs (2.2% v/s 1.2% 2Q) – 56% related to RBI asset quality review (AQR). Led by AQR, NNPA increased ~75bp QoQ Gross slippages were INR207b (6.7% of loans, annualized) v/s INR58.8b (1.9%) in 2QFY16.
Management expects similar level of stress to persist in 4Q. Fresh restructured loans were INR13b (0.4%) and 5:25 refinancing during 3Q was INR5.1b (v/s INR39.6b in 2Q). SBIN invoked SDR on 17 accounts amounting to ~INR165b. Reported NIM were down 26bp QoQ (2.77%) partly led by higher slippages (~10bp impact) and base rate cut (35bp cut in Oct-15). Overall NII de-grew by 1% YoY (-4.5% QoQ). Fee growth continues to remain moderate (+7% YoY).
We belive most of the negative have been already factored in the price after a recent correction . Gradual recovery in credit growth and in asset quality to drive the modest improvement in Core sector growth. Perception of default risk would persist untill asset quality consistently improves for the sector.
CMP 208
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NIFTY 50 State Bank Of India
State Bank Of India (Standalone)
FY 14 FY 15 FY 16 FY 17 E FY 18 E
NET INT Income 49,282 55,015 56,882 67,282 77,664
TOTAL Income 67,835 77,591 85,040 97,954 111,217
Operating EXP 35,726 38,678 41,782 46,817 52,412
PAT 10,891 13,102 9,950 15,463 19,137
NIM % 3.2% 3.2% 3.0% 3.20% 3.20%
EPS 15.7 17.6 15.7 19.9 24.7
BV 188 206 224 242 265
Source: Anand Rathi Research, Bloomberg, Ace equity
Figures INR crore
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Private & Confidential
Axis Bank
SECTOR
NSE Symbol BSE Code Bloomberg
AXISBANK 532215 AXSB IN
CMP Market Cap (cr) Equity (cr)
530 126564 477
EPS (TTM) BV FV
35.0 224.4 2
P/E P/BV Div Yield
15.2 2.4 0.87
52 Week H 52 Week L Avg Vol ('000)
613.45 366.75 4359.1
Group
Promoter 30.76
Others 69.24
FINANCIALS
Share Holding Pattern
Axis Bank is the third-largest private sector bank in India in terms of asset size, with a balance sheet of ~Rs. 5.25tn. It has a network of over 2,904 branches 12,743 ATMs spread across the country. The bank earns substantial fee income from transaction and merchant banking activities.
4QFY16 PAT came at Rs. 21.5b was flat QoQ and YoY basis (9% miss). While reported PPOP came at Rs. 44b (+23% YoY, 12% QoQ). Q4FY16 performance was steady with: a) slippages restricted to Rs. 14.7bn (1.9%); b) incremental restructuring at Rs. 9.3bn (due to change in DCCO); and c) credit cost at 69bps (even after creating Rs. 3bn contingent provision).
Management guided for FY 17: a) NIM > 3.6%, (b) Cost/Income ratio of < 40%, (c) High teens Pre Provisioning operating growth, (d) credit costs 125bp (Base Case) -150bp (adverse case) (e) Provision Coverage (~70%), (f) loan growth of 18-20%, (g) CASA ratio 40%, (h) 350-400 new branches
The bank is all set to take next leap (1) strong capitalization (12.5% CET I), healthy ROA (1.5%) 2) Expanding deposit franchise (2,904 branches – 15%+ CAGR over FY12-15). 3) Retail Asset Focus-Leveraging on the strong distribution network retail loans now form 41% of loans. Increased share of retail loans and strong SME business would help reduce revenue volatility.
CMP 530
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NIFTY 50
Axis Bank Ltd.
Axis Bank Ltd.
FY 14 FY 15 FY 16 FY 17 E FY 18 E
NET INT Income 11,952 14,224 16,833 19,029 22,142
TOTAL Income 19,357 22,589 26,109 29,849 34,642
Operating EXP 7,901 10,309 11,496 12,913 14,729
PAT 6,218 7,358 8,129 8,644 10,890
NIM % 3.4% 3.5% 3.6% 3.50% 3.50%
EPS 26.5 31.0 34.1 36.3 45.7
BV 163 189 224 252 291
Source: Anand Rathi Research, Bloomberg, Ace equity
Figures INR crore
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Private & Confidential
LIC Housing Finance Ltd.
SECTOR
NSE Symbol BSE Code Bloomberg
LICHSGFIN 500253 LICHF IN
CMP Market Cap (cr) Equity (cr)
470 23704 101
EPS (TTM) BV FV
33.0 182.6 2
P/E P/BV Div Yield
14.2 2.6 1.06
52 Week H 52 Week L Avg Vol ('000)
523.95 388.65 690.1
Group
Promoter 40.31
Others 59.69
FINANCIALS
Share Holding Pattern
LIC Housing Finance Ltd.
FY 14 FY 15 FY 16 FY 17 E FY 18 E
NET INT Income 1,916 2,237 2,944 3,618 4,162
TOTAL Income 2,160 2,489 3,179 3,899 4,488
Operating EXP 313 379 469 548 642
PAT 1,317 1,386 1,661 2,048 2,477
NIM % 2.3% 2.3% 2.5% 2.6% 2.5%
EPS 26.1 27.5 33.5 42.0 47.5
BV 150 155 182 216 254
Source: Anand Rathi Research, Bloomberg, Ace equity
Figures INR crore
LIC Housing Finance (LICHF) is a proxy player of India Housing Sector Growth with a consistent performer on all fronts and operates on a distribution network business model.
Apart from wide marketing network comprising Direct Selling Agents (DSAs), Home Loan Agents (HLAs) and Customer Relationship Associates (CRAs), a wholly owned subsidiary LICHF Financial Services (LICHFLFS) also distributes the company’s product.
In Q4FY16 LICHF reported 18.5% YoY growth in net earnings. NII growth stood at 26% YoY adversely impacted by rising trend in prepayments. Incremental spread however improved further to 2.1% vs 1.74% in FY15.
Despite a challenging macro environment LICHF has so far maintained a decent asset quality. In Q4FY16 the GNPA ratio came down to 0.45% vs 0.58% YoY, while the NNPA ratio came down to 0.22% vs 0.32% YoY.
Going forward, the key to margin improvement is (a) higher incremental spreads (b) Replacement of high cost bank borrowing with lower cost NCDs and (c) increase in the share of LAP and corporate loan portfolio.
CMP 470
80
90
100
110
120
130
140
May
/15
Jun
/15
Jul/
15
Au
g/1
5
Sep
/15
Oct
/15
No
v/1
5
Dec
/15
Jan
/16
Feb
/16
Mar
/16
Ap
r/1
6
May
/16
NIFTY 50
LIC Housing Finance Ltd.
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Private & Confidential
Indian Oil Corporation Ltd
SECTOR
NSE Symbol BSE Code Bloomberg
IOC 530965 IOCL IN
CMP Market Cap (cr) Equity (cr)
414 100481 2428
EPS (TTM) BV FV
46.2 313.0 10
P/E P/BV Div Yield
9.0 1.3 1.59
52 Week H 52 Week L Avg Vol ('000)
465.9 344.9 371.8
Group
Promoter 58.57
Others 41.43
OIL & GAS
Share Holding Pattern
Indian Oil Corporation Ltd.
FY 14 FY 15 FY 16 FY 17 E FY 18 E
Net Sales 488,793 450,079 354,425 376,861 432,155
EBIDTA 17,039 9,183 23,197 26,634 29,026
EBIDTA Margin 3.5% 2.0% 6.5% 7.1% 6.7%
PAT 6,967 4,872 11,606 13,019 14,058
PAT Margin 1.4% 1.1% 3.3% 3.5% 3.3%
EPS 29.2 20.2 46.2 51.8 56.5
Source: Anand Rathi Research, Bloomberg, Ace equity
Figures INR crore
IOC has the most diversified business model, while its annuity pipeline business contributes ~20% to EBITDA, ~8% comes from the growing petchem and ~50% from the buzzing marketing business. With diesel accounting for ~50% of volumes, IOC is well placed to gain from marketing margin expansion.
Q4FY16 EPS is down 80% YoY hit by product inventory loss of Rs11bn and sharply lower GRM due to crude inventory loss. However, its FY16 standalone EPS is up 97% YoY driven mainly by jump in its GRM (US$5.1/bbl v/s US$0.3/bbl in FY15), and 78% YoY rise in petrochemical EBITDA to Rs61bn. FY16 consolidated EPS is up 128 YoY, as its subsidiary Chennai Petroleum made profit of Rs8bn in FY16 v/s a loss of Rs300mn in FY15.
IOC bottom line would get a boost of 20-30% after its 15 million tonne per annum (mtpa) greenfield project in Odisha is fully commissioned by FY18. This (Paradip) refinery would contribute nearly 20-30% to the company’s profit and would offer one of the best refiining margins, higher by $6-7 a barrel over the average refining margin $10-12.
The benefits of lower crude prices are mostly priced in. Expansion in the marketing margins can be the next trigger. We sense a favourable outlook for raising marketing margins till crude is below US$ 60/bbl.
CMP 414
80
90
100
110
120
130
140
May
/15
Jun
/15
Jul/
15
Au
g/1
5
Sep
/15
Oct
/15
No
v/1
5
Dec
/15
Jan
/16
Feb
/16
Mar
/16
Ap
r/1
6
May
/16
NIFTY 50
Indian Oil Corporation Ltd.
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Private & Confidential
Apar Industries Ltd.
SECTOR
NSE Symbol BSE Code Bloomberg
APARINDS 532259 APR IN
CMP Market Cap (cr) Equity (cr)
521 2006 38
EPS (TTM) BV FV
42.3 223.2 10
P/E P/BV Div Yield
12.3 2.3 0.67
52 Week H 52 Week L Avg Vol ('000)
541.95 321 8.1
Group
Promoter 58.21
Others 41.79
OIL & GAS
Share Holding Pattern
Apar Industries Ltd.
FY 14 FY 15 FY 16 FY 17 E FY 18 E
Net Sales 4,632 5,122 5,047 5,404 6,063
EBIDTA 307 264 363 402 402
EBIDTA Margin 6.6% 5.1% 7.2% 7.4% 6.6%
PAT 90 49 164 156 191
PAT Margin 1.9% 1.0% 3.2% 2.9% 3.2%
EPS 23.3 12.9 42.3 40.6 49.7
Source: Anand Rathi Research, Bloomberg, Ace equity
Figures INR crore
Apar posted 4QFY16 revenues of Rs.13.25bn, flat on y-o-y basis as oil segment revenues decline by 14% y-o-y owing to lower base oil prices. Boosted by healthy margin in oil and conductor segments, EBITDA grew 115% y-o-y to Rs.83.5 cr. EBITDA margin rose 340bps y-o-y to 6.3%.
Conductor segment witnessed 6% revenue growth for 4QFY16 led by a pick-up in deliveries of high temperature conductors and preponement of PGCIL conductor deliveries, which resulted in 22% y-o-y volume growth to 50489mt
Transformer and specialty oils segment revenue decline of 15% YoY to Rs 4.1bn (31% of total sales) owing to lower realisation with low crude oil prices, even though volume rose 3.4% YoY to 89,000KL, the highest quarterly sales.
Cables segment sales, up 13% y-o-y to Rs.1950mn, led by 52% growth in elastomeric cables (solar and wind power) and 35% y-o- y growth in power cables. Order book for cables segment is at Rs.1990mn, up 8% y-o-y.
Key Triggers: 1) Increased activity in domestic conductor tendering seen, will improve H2FY16-17. 2) The government’s initiatives like the UDAY scheme to turnaround and revive the power discoms and an improvement in power T&D sector 3) Substantial increase in capacity addition of Solar & Wind Power expected which will boost demand for Elastomeric- E beam cables.
CMP 521
8090
100110120130140150160170
May
/15
Jun
/15
Jul/
15
Au
g/1
5
Sep
/15
Oct
/15
No
v/1
5
Dec
/15
Jan
/16
Feb
/16
Mar
/16
Ap
r/1
6
May
/16
NIFTY MIDCAP 100
Apar Industries Ltd.
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Private & Confidential
NIIT Technologies Ltd.
SECTOR
NSE Symbol BSE Code Bloomberg
NIITTECH 532541 NITEC IN
CMP Market Cap (cr) Equity (cr)
565 3461 61
EPS (TTM) BV FV
45.7 259.9 10
P/E P/BV Div Yield
12.4 2.2 1.68
52 Week H 52 Week L Avg Vol ('000)
631 378.75 56.8
Group
Promoter 30.8
Others 69.2
TECHNOLOGY
Share Holding Pattern
NIIT Technologies Ltd.
FY 14 FY 15 FY 16 FY 17 E FY 18 E
Net Sales 2,305 2,372 2,675 2,934 3,251
EBIDTA 354 336 472 517 572
EBIDTA Margin 15.4% 14.2% 17.7% 17.6% 17.6%
PAT 238 122 297 307 343
PAT Margin 10.3% 5.1% 11.1% 10.5% 10.6%
EPS 38.0 18.7 45.8 50.3 56.0
Source: Anand Rathi Research, Bloomberg, Ace equity
Figures INR crore
NIIT Technologies is a global IT solutions organization with over 9000 professionals addressing the requirements of clients across the Americas, Europe, Middle East, Asia and Australia. The Company has built a robust portfolio of marquee customers in key verticals such as Travel and Transportation, Banking and Financial Services, Insurance, Manufacturing, Media and the Government.
In Q4FY16 revenues came in at Rs 6.8bn with flat CC QoQ growth. Vertical-wise, BFSI grew 6% QoQ while transportation declined 10%. PAT increased 6.6% QoQ to Rs 790 cr led by better margins. We note that an order intake of US$ 120mn is positive, with the company booking US$ 100mn+ orders for the second consecutive quarter. Its order book at FY16-end stood at US$ 301mn, indicating an improved large-deal win ratio and providing greater revenue visibility for FY17.
Management is now focusing on refreshing/enhancing service capabilities through initiatives (1) Smart IT – embracing automation (2) Uplift Services – reskilling and client centricity and (3) Scale Digital – Emotionally Empathetic Experiences (E3). These refreshed service portfolio will aid company to capture demand on the Digital front while addressing contraction in Tradition IT spend (15-25% contraction in traditional IT spend by 2020 as per industry).
CMP 565
80
100
120
140
160
180
May
/15
Jun
/15
Jul/
15
Au
g/1
5
Sep
/15
Oct
/15
No
v/1
5
Dec
/15
Jan
/16
Feb
/16
Mar
/16
Ap
r/1
6
May
/16
NIFTY MIDCAP 100
NIIT Technologies Ltd.
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Private & Confidential
Arvind Ltd.
SECTOR
NSE Symbol BSE Code Bloomberg
ARVIND 500101 ARVND IN
CMP Market Cap (cr) Equity (cr)
307 7924 258
EPS (TTM) BV FV
14.0 102.4 10
P/E P/BV Div Yield
21.8 3.0 0.83
52 Week H 52 Week L Avg Vol ('000)
365.7 216.3 951.1
Group
Promoter 43.78
Others 56.22
TEXTILES
Share Holding Pattern
Arvind Ltd.
FY 14 FY 15 FY 16 FY 17 E FY 18 E
Net Sales 6,948 7,851 8,431 9,555 10,885
EBIDTA 934 1,027 1,065 1,237 1,427
EBIDTA Margin 13.4% 13.1% 12.6% 12.9% 13.1%
PAT 353 338 365 452 565
PAT Margin 5.1% 4.3% 4.3% 4.7% 5.2%
EPS 13.7 13.2 14.0 17.5 21.9
Source: Anand Rathi Research, Bloomberg, Ace equity
Figures INR crore
Arvind offers a good mix of export and domestic consumption growth. Its textiles business will benefit from a recovery in the developed markets and improving competitiveness, while its brands and expanding retail network will benefit from secular growth in India’s organized apparel market.
In Q4FY16 revenue grew by 14% at Rs.2319 cr on the back of strong growth in brands and retail business (B&R) of 31% on y-o-y basis to Rs. 763 cr. Brands posted a 44% YoY growth while Mega-Mart revenues de-grew 4%. L2L growth for brands stood at 2.7% while power brands grew 31%. Textiles grew 4% to Rs. 1360 cr with garments growth of 27% and woven fabrics growing 4% YoY.
Management expects revenues to grow at a CAGR of ~15% over next five years with brands and retail revenues contributing 45-50% of the overall pie. Revenue growth guidance for FY17 is 15-16% with 8-9% growth in textiles and 24% in brands and retail. It expects textiles margins to be maintained and a 75-100bp expansion in B&R margin
Brands and retail on secular growth Arvind’s leading position in menswear and its track record of growing licensed brands like Arrow and Tommy Hilfiger etc. will enable it to exploit opportunities in the branded apparel space.
CMP 307
80
90
100
110
120
130
140
150
160
May
/15
Jun
/15
Jul/
15
Au
g/1
5
Sep
/15
Oct
/15
No
v/1
5
Dec
/15
Jan
/16
Feb
/16
Mar
/16
Ap
r/1
6
May
/16
NIFTY MIDCAP 100
Arvind Ltd.
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Private & Confidential
RSWM Ltd.
SECTOR
NSE Symbol BSE Code Bloomberg
RSWM 500350 RJS IN
CMP Market Cap (cr) Equity (cr)
384 888 23
EPS (TTM) BV FV
45.6 217.3 10
P/E P/BV Div Yield
8.4 1.8 3.26
52 Week H 52 Week L Avg Vol ('000)
418.4 217 13.3
Group
Promoter 51.44
Others 48.56
TEXTILES
Share Holding Pattern
RSWM Ltd.
FY 14 FY 15 FY 16 FY 17 E FY 18 E
Net Sales 3,131 3,003 2,955 3,323 3,800
EBIDTA 386 346 410 430 479
EBIDTA Margin 12.3% 11.5% 13.9% 12.9% 12.6%
PAT 102 85 106 128 168
PAT Margin 3.3% 2.8% 3.6% 3.9% 4.4%
EPS 43.5 36.7 45.6 55.3 72.3
Source: Anand Rathi Research, Bloomberg, Ace equity
Figures INR crore
RSWM specializes in manufacturing of quality yarn with focus on making value - added blended variants. Among India's largest polyester yarn manufactures, making it a preferred partner of downstream users. Ability to customize blends, shades & batch size.
It has 11 states - of - the- art manufacturing facilities in Rajasthan & TN. It markets its product within India (67%) & globally (33%) in 78 countries. One of its leading brand `Mayur Suitings' enjoys high brand equity in its target segment in the country. Has strong clientele base includes names like Raymonds, Welspun India, Siyarams', Raid & Taylor, etc.
In Q4 FY16, net revenue remained flat at Rs. 7791mn on y-o-y basis. Yarn division witnessed marginally growth of ~3% at Rs. 6804mn while fabric division de-grew by ~5% at 1241mn. Margins for the quarter came in at 15.2% versus 14.4% Q4FY15. The company is now focusing on value added products that account for 15% of total revenues and exports 30%.
It has completed all its expansion of capacities and now streamlining the capacities. Management guided for margin expansion in FY17 given cost reductions, new capacities being added both in the yarn as well as in the denim division which will go on stream. Also management is confident of the company being debt free by FY19.
CMP 384
80
100
120
140
160
180
May
/15
Jun
/15
Jul/
15
Au
g/1
5
Sep
/15
Oct
/15
No
v/1
5
Dec
/15
Jan
/16
Feb
/16
Mar
/16
Ap
r/1
6
May
/16
NIFTY MIDCAP 100
RSWM Ltd.
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Private & Confidential
Cox & Kings (India) Ltd.
SECTOR
NSE Symbol BSE Code Bloomberg
COX&KINGS 533144 COXK IN
CMP Market Cap (cr) Equity (cr)
155 2729 88
EPS (TTM) BV FV
3.1 147.5 5
P/E P/BV Div Yield
50.6 1.0 0.65
52 Week H 52 Week L Avg Vol ('000)
317 140.1 153.0
Group
Promoter 49.15
Others 50.85
TRAVEL
Share Holding Pattern
Cox & Kings (India) Ltd.
FY 14 FY 15 FY 16 FY 17 E FY 18 E
Net Sales 2,308 2,569 2,347 2,409 2,883
EBIDTA 890 1,011 818 938 1,132
EBIDTA Margin 38.6% 39.3% 34.9% 38.9% 39.3%
PAT 449 90 54 323 407
PAT Margin 19.5% 3.5% 2.3% 13.4% 14.1%
EPS 28.1 5.4 3.2 19.9 25.0
Source: Anand Rathi Research, Bloomberg, Ace equity
Figures INR crore
A Diversified, Multinational Travel Conglomerate: Cox & Kings Ltd (C&K) is a premium brand established in 23 countries including India, U. K., USA, UAE, Australia and Japan among others. The company's business can be broadly categorized as Leisure India, Leisure International, Education and Meininger.
In Q3FY16 Consolidated (Excluding Camping Div.) Net Sales grew by 10% to Rs 511.9 cr. EBITDA (excl. forex gain /loss) decreased by 27% yoy to Rs 115.9 cr PAT stood at Rs.106.7 cr aided by exceptional item gain. Leisure International impact by Paris attacks, severe weather conditions in the U.K. and higher brand spend at Superbreak and Laterooms. Education segment revenues on constant currency basis fell by 5% yoy. Meininger business saw 5% euro terms growth yoy on account of higher bed occupancy.
Consumer services, travel and education will be the most sought-after avenues of personal investment considering the New age consumer.
C&K is looking to add around 721 beds in current year which will be ready for operation in FY17 and 781 beds in FY17 to be ready for operation in FY18 in Education segment.
We expect future business growth to be driven mainly by Education and Meininger. Increasing shift towards B2C in the leisure segment would drive growth.
CMP 155
40
50
60
70
80
90
100
110
120
May
/15
Jun
/15
Jul/
15
Au
g/1
5
Sep
/15
Oct
/15
No
v/1
5
Dec
/15
Jan
/16
Feb
/16
Mar
/16
Ap
r/1
6
May
/16
NIFTY MIDCAP 100
Cox & Kings (India) Ltd.
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Private & Confidential
Research Disclaimer and Disclosure inter-alia as required under Securities and Exchange Board of India (Research Analysts) Regulations,
2014
Anand Rathi Share and Stock Brokers Ltd. (hereinafter refer as ARSSBL) (Research Entity, SEBI Regn No. INH000000834,Date of Regn. 29/06/2015)
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Continued…
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Private & Confidential
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Private & Confidential
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Answers to the Best of the knowledge and belief of the ARSSBL/ its Associates/ Research Analyst who is preparing this report
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NO
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NO
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