India Consumption OPIUM for the Masses€¦ · Elara Securities (India) Private Limited Private &...

India Consumption OPIUM for the Masses

(Seventh CPC + OROP + DBT) January 2016

Elara Securities (India) Private Limited Private & Confidential

Table of Content

2

Bountiful rewards: INR 10,917bn over FY17-18E 3

King of good times: top beneficiaries 4

At a glance 5

Trifacta of levers: Pay Commission, OROP and DBT 6

Seventh CPC payout 3.3x bigger 7

DBT: incremental inflows of INR 798bn 8

How will households spend and save incremental income? 9

Winsome Threesome: low inflation, low rates, rising sentiments 10

Retail loans continue to show traction with 15% growth 11

Urban indicators: modest improvement 12

Rural indicators: in search of fresh drivers 15

Top buys

Hindustan Unilever: Proxy play 19

Hero MotoCorp: Getting ready to rev up 22

Maruti Suzuki: Engine of hope 25

Sun TV: Sunny skies 28

Dish TV: Well poised 31

Crompton Greaves: Pure play 34

Raymond: Growing clout 37

Indian Hotels: Shining bright 40

Cox & Kings: Going large 43

Mahindra Holidays: Going global 46

MT Educare: Scaling new highs 49

Career Point: Small cap marvel 52

Prestige Estates Projects: In a sweet spot 55

Brigade Enterprises: Annuity play 58

Appendix 61


OPIUM for the Masses

3

Bountiful rewards

INR 6,415bn in hand, worth two in the bush: Starting in 2016,

Seventh CPC payouts, OROP and DBT would generate cashflow of INR

6,415bn for India’s consumers, which means 24% hike in incremental

income on average. If we assume a multiplier effect of 1.5-1.9x,

then we arrive at actual spend of INR 10,917bn

Seventh Pay Commission: Incremental payout of INR

5,333bn from the Centre and States is 3.3x bigger than the

Sixth CPC over FY17-18E. With a multiplier of 1.7x, actual

spend would rise to INR 9,067bn

One Rank, One Pension: Ex-service personnel and their

families would receive additional pay and arrears of INR 284bn

over FY17-18E. With a multiplier of 1.9x, actual spend

would almost double to INR 540bn

Direct Benefit Transfer: Incremental money of INR 798bn will

flow into the bank accounts of aggrieved households as subsidy

from the Central government over FY17-18E. With a multiplier

of 1.6x, actual spend would swell to INR 1,310bn

Sabka Saath, Sabka Vikaas: Banks open 200mn first-time

accounts since August 2014 to ensure financial inclusion & lower

pilferage

The New Normal: Inflation cut in half from three years ago;

ditto for food prices. Interest rates down cumulatively by 125bp

since January 2015. These prevailing economic conditions are lifting

consumer sentiments …

Beat that, World! India today remains the fastest-growing economy

globally – we forecast real growth at 7.4% each for FY16 and

FY17 and early gains at 7.9% in FY18

Dole-outs to boost Urban India: Payouts would drive urban

consumption first, followed by a secondary impact on Rural India as

primary drivers are still awaited there

Flavor at a premium: Additional income, some in the form of

arrears, is likely to chase premiumization in product segments. And,

we expect demand for basic items to remain flat

4.7mn federal employees & 5.2mn pensioners and millions of State government workers


India Consumption – top beneficiaries

4

King of good times

Biggest beneficiaries: travel & leisure, durables, education, real estate and textiles & garmenting

Durables + Discretionary: Additional demand valued at INR 556bn for FY17 and INR 580bn for FY18

Top Picks: Maruti Suzuki, Hero MotoCorp, Crompton Greaves, Dish TV

Staples + Discretionary: Additional demand valued at INR 556bn for FY17 and INR 580bn for FY18

Top Picks: Hindustan Unilever, Sun TV

Real estate: For mid-income households, a major spend will be EMI payouts. Further demand of INR 899bn for FY17 and INR 938bn for FY18

Top Picks: Prestige Estates, Brigade Enterprises

Travel & Leisure: Incremental spend of INR 604bn for FY17 and INR 630bn for FY18

Top Picks: Indian Hotels, Cox & Kings, Mahindra Holidays

Education: Additional demand of INR 433bn for FY17 and INR 451bn for FY18

Top Picks: MT Educare, Career Point

Textiles & Garmenting: Staggered spend of INR 326bn for FY17 and INR 340bn for FY18

Top Picks: Raymond


At a glance

5

Sector Market size (INR bn)

Basket of beneficiaries Our top pick USP

Travel & Tourism (Discretionary)

2,827 EIH, Hotel Leela, Taj GVK, Thomas Cook India, Sterling Holidays

Indian Hotels Doubled the number of rooms across segments

Cox & Kings Eying education sector to drive growth

Mahindra Holidays Global acquisitions of 30 resorts add to drive membership additions

Automobiles (Discretionary)

2,500 M&M, TVS Motor, Bajaj Auto, Tata Motor, Eicher Motors

Hero MotoCorp Two new Scooter launches and strong positioning in the MC segment

Maruti Suzuki New launch Baleno and expected launches across product groups

FMCG (Staples + Discretionary)

2,500 Asian Paints, Berger Paints, Akzo Nobel, Kansai Nerolac, Pidilite, Whirlpool, IFB

Hindustan Unilever Core consumption to pick up; premiumization to lead to better margin

Media & Entertainment (Discretionary)

543@ Zee Entertainment, Tatasky, Sun Direct, Reliance BIG TV, Videocon

Sun TV Highly undervalued to nearest peer, Zee Entertainment

Dish TV Uptick in subscriber additions, ARPUs , lead to margin expansion of 1,200bp

Textiles & Garmenting (Discretionary)

2,460$ Arvind Mills, Siyaram, Kewal Kiran Clothing

Raymond Recent product overhaul, increased focused on the shirting segment, and premium apparels portfolio revamp

Education (Discretionary)

5,850 Treehouse Education, Navneet Education, NIIT, Zee Learn

MT Educare Lack of quality in core education and shift to organized segment to spur growth

Career Point Earnings to jump from INR 9mn in FY15 to INR 390mn in FY18E

Real Estate (Real Estate Construction & Development)

1,600* Kolte-Patil, Sobha, Puravankara Projects, Mahindra Lifespaces, Godrej Properties

Prestige Estates Market leader in Bangalore, strong portfolio of mid-income housing projects

Brigade Enterprises Strong brand recall and significant presence in affordable housing

Household Durables (Discretionary)

185** Bajaj Electricals, Havells India, TTK Prestige

Crompton Greaves Government’s energy-efficiency push via LEDs and new kitchen appliances product line

Note: *current market size of the top six cities in India; $size of India’s apparels market ; @India’s overall TV industry; **only lighting & fans

Source: World Travel & Tourism Council, 2015E; Real Estate data from Liases Foras Research for six top metro cities which represent 80-85% (by value) of urban housing demand, Kaizen Education (KE) Report, ELCOMA


Trifacta of levers: Pay Commission, OROP and DBT

6

Seventh Pay Commission payout One Rank One Pension (OROP) Direct Benefit Transfer (DBT)

Note: * subject to a 15-17% median tax rate

Source: Elara Securities Estimate

461

365

596

383

FY10

FY09

Sixth CPC Center States (INR bn)

1,021

1,276

1,634

1,402

FY18

FY17

Seventh CPC

581

217

FY18

FY17

DBT (INR bn)

5,333* 284* 798*

9,067 540 1,310

10,917

1.7x 1.9x 1.6x Multiplier Multiplier

82

82 120

FY18

FY17

OROP Pension Arrears (INR bn)


Seventh CPC payout 3.3x bigger; basic pay remains skewed

7

Source: CMIE, MGNREGA portal, PMJDY Brochure, 14th Finance Commission report, Elara Securities Estimate

35 80 185 750

2,550

6,660

18,000

2.3 2.3

4.1

3.4

2.6 2.7

0

1

2

3

4

5

0

5,000

10,000

15,000

20,000

1st CPC (1946)

2nd CPC (1959)

3rd CPC (1973)

4th CPC (1986)

5th CPC (1996)

6th CPC (2006)

7th CPC (2016)

2.7x rise dampened expectations of a

flatter pay structure

Minimum basic pay (INR)

0 1 13

170

306

1,021

0

200

400

600

800

1,000

1,200

1st CPC (1946)

2nd CPC (1959)

3rd CPC (1973)

4th CPC (1986)

5th CPC (1996)

6th CPC (2006)

7th CPC (2016)

(INR bn)

3.3x rise in payout

Despite absence of arrears, the payout of Seventh CPC will create a parallel upward shift of the consumption basket, leaving large space for discretionary consumption of low-ticket items. Strong bets on consumer durables/discretionary, travel & leisure, real estate,

education and textiles & garmenting

Relative comparison of payouts over Pay Commission Relative comparison of minimum pay over Pay Commission


DBT: incremental inflows of INR 798bn, up 56% over FY16-18E

8

Assumptions: Ex-DBT implementation - LPG Pilferage is assumed to be 30%, for all other categories (food, kerosene, fertilizer, NREGA) it is assumed to be 50%

Post DBT implementation, Pilferage in all categories is assumed to be 10%

MGNREGA wages are assumed to be 75% of total allocation till FY17 and 50% in FY18

Source: CMIE, MGNREGA portal, PMJDY Brochure, 14th Finance Commission report, Elara Securities Estimate

Annual subsidy allocation to different schemes (INR bn)

2006- 07

2007- 08

2008- 09

2009- 10

2010- 11

2011- 12

2012- 13

2013- 14

2014- 15

2015- 16BE

2016- 17E

2017- 18E

Food 240 313 438 584 638 728 850 920 1,227 1,244 1,111 1,261

Petroleum 27 28 29 150 384 685 969 854 603 300 300 300

Fertilizer 262 325 766 613 623 700 656 673 710 730 730 700

Total subsidy 529 666 1,232 1,347 1,645 2,113 2,475 2,447 2,539 2,274 2,141 2,261

MGNREGA wages 57 107 182 254 256 249 272 265 231 260 285 200

Benefits allocated by the government

586 773 1,414 1,601 1,902 2,362 2,746 2,712 2,770 2,534 2,426 2,461

Money lost due to pilferage 288 381 701 771 874 1,044 1,179 1,185 1,264 1,117 792 246

After pilferage, money reaching beneficiaries

298 392 713 830 1,028 1,318 1,567 1,527 1,505 1,417 1,634 2,215


How will households spend and save incremental income?

9

% of total income (INR bn)

Normal Rebalanced FY17 ∆ FY18 ∆

Total Income 100.0 100.0 5,343 5,574

Consumption 77.6 69.5 3,713 3,874

Goods 48.5 23.5 1,256 1,310

Food 31.9 0.0 0 0

Clothing 4.3 6.1 326 340

Durables 6.0 10.4 556 580

Ceremonies (weddings & births) 6.3 7.0 374 390

Services 21.8 27.1 1,448 1,510

Travel/ leisure 7.0 11.3 604 630

Education 5.6 8.1 433 451

Health 6.3 7.7 411 429

Housing 2.9 0.0 0 0

Others (includes EMI) 7.3 18.9 1,010 1,053

Savings/investment 22.4 30.5 1,627 1,697

Cash 3.8 0.0 0 0

Banks 10.3 16.8 899 938

Shares/ Equities 0.7 1.1 58 61

Small savings 0.5 0.8 42 44

Life Insurance 2.4 3.9 207 216

Jewellery 1.1 1.9 100 104

Post office 0.7 1.1 60 63

Others 3.0 4.9 259 271

Assumptions:

Food would not see incremental spending.

Monetary expense on rentals will be flat.

Households will keep same amount of cash as before.

The biggest beneficiaries will

be consumer durables/

discretionary, travel &

tourism, real estate,

education and textiles &

garmenting

1,010 1,053

604 630

433 451

326 340


Winsome threesome: low inflation, low rates, rising sentiments

10

Consumer Price Inflation (CPI) Prevailing rates: LAF repo and base rate Consumer Sentiments Index

10.3

5.0

11.8

5.2

2

4

6

8

10

12

14

FY13 FY14 FY15 FY16E

(%)

Headline CPI Food

7.5

6.8

10.3

9.7

6

7

8

9

10

11

FY13 FY14 FY15 FY16**

(%)

Repo Base Rate*

102.0 102.9 104.0

119.2

80

90

100

110

120

130

FY13 FY14 FY15 FY16**

Current Situation Future Expectations

CPI halves: Consumer price inflation cut in half within three years, from 10.3% in FY13 to 5.0% in FY16E

Better food price management: Sharp disinflation during the same period, from 11.8% to 5.2% in FY16E

Easing interest rate cycle: long-term, rule-based cumulative easing of 125bp since January; banks have passed on half of that

Rise in consumer sentiments: future looks bright

Strong levers in Seventh Pay Commission, OROP and DBT transfers

Source: CSO, Elara Securities Estimate Source: RBI; * Median of Public Sector Banks; ** As of September Source: RBI Consumer Confidence Survey, Sep 29, 2015, ** As of September


Retail loans continue to show traction with 15% growth

Source: RBI, Elara Securities Research

Sector FY16 YoY credit

growth (%)

FY15 YoY credit

growth (%)

Incremental credit YTD FY16

Incremental credit YTD FY15

Sectoral Composition

(%)

O/s as on 18/Sep/15

(INR bn) (%) (INR bn) (%)

Total credit 7.7 8.7 993 1.6 1,361 2.4 100.0 62,016

Non-food credit 7.9 8.6 957 1.6 1,219 2.2 98.3 60,987

Agriculture & allied activities 12.2 18.8 474 6.2 588 8.8 13.1 8,133

Industry (micro & small, medium and large) 4.6 6.0 (283) (1.1) (23) (0.1) 42.4 26,293

Services 6.0 5.3 (117) (0.8) 156) (1.2) 22.6 14,014

Commercial real estate 1.0 20.3 (16) (1.0) 100 6.6 2.7 1,649

Personal loans 15.0 13.0 883 7.6 810 8.0 20.2 12,547

Housing (including priority sector housing) 17.7 14.8 543 8.6 418 7.8 11.0 6,829

Credit card O/s 22.2 17.4 33 10.7 27 11.1 0.5 337

Vehicle loans (4.8) 17.9 85 6.8 335 31.5 2.1 1,331

Other personal loans 22.8 11.0 195 8.3 85 4.2 4.1 2,557

Priority sector 10.2 15.8 889 4.4 752 4.1 33.8 20,992

Micro & small enterprises 9.5 22.1 120 1.5 342 4.8 13.1 8,124

Manufacturing 4.1 18.2 (126) (3.3) 49 1.4 5.9 3,675

Services 14.4 26.0 246 5.9 293 8.1 7.2 4,449

Housing 4.2 9.4 93 2.9 162 5.4 5.3 3,317

Export credit (17.4) (7.3) (71) (16.6) (53) (11.0) 0.6 355

Food credit (2.3) 11.1 36 3.6 142 15.6 1.7 1,030

Credit cards grow by 22% YoY and and other personal loans by 23% YoY

11

URBAN INDICATORS


Urban lead indicators – modest improvement

Hiring activity on an uptrend

Source: Naukri job Index, Elara Securities Research

600

800

1,000

1,200

1,400

1,600

1,800

2,000

-10%

0%

10%

20%

30%

40%

50%

Jan-1

0

May-1

0

Sep-1

0

Jan-1

1

May-1

1

Sep-1

1

Jan-1

2

May-1

2

Sep-1

2

Jan-1

3

May-1

3

Sep-1

3

Jan-1

4

May-1

4

Sep-1

4

Jan-1

5

May-1

5

Sep-1

5

(% change YoY)

Income likely to bottom for private workers & professionals

Source: Aon Hewitt survey, Elara Securities Research

Seventh CPC, OROP-led rise: next triggers for govt employees

Source: India Public Finance statistics, Elara Securities Research

3 8

2 10 8 4

14

61

30

1 8

2

12

0

10

20

30

40

50

60

70

50

100

150

200

250

300

350

FY02

FY03

FY04

FY05

FY06

FY07

FY08

FY09

FY10

FY11

FY12

FY13

FY14

(%) (in '000s)

Cent Govt Salary exp towards an employee (LHS) % increase (RHS)

13

10

12

14 14 14 15

13

7

12 13

11 10 10 10 10.6

5

7

9

11

13

15

17

FY01

FY02

FY03

FY04

FY05

FY06

FY07

FY08

FY09

FY10

FY11

FY12

FY13

FY14

FY15

FY16E

(%)

13


Premium products: set for a good run

14

Source: Company, SIAM, Elara Securities Research

(40)

(20)

0

20

40

1Q

FY11

2Q

FY11

3Q

FY11

4Q

FY11

1Q

FY12

2Q

FY12

3Q

FY12

4Q

FY12

1Q

FY13

2Q

FY13

3Q

FY13

4Q

FY13

1Q

FY14

2Q

FY14

3Q

FY14

4Q

FY14

1Q

FY15

2Q

FY15

3Q

FY15

4Q

FY15

Q1FY16

(%)

Real Estate - YoY (%) Volume Growth in 6 Major cities

(10)

0

10

20

30

40

3Q

FY11

4Q

FY11

1Q

FY12

2Q

FY12

3Q

FY12

4Q

FY12

1Q

FY13

2Q

FY13

3Q

FY13

4Q

FY13

1Q

FY14

2Q

FY14

3Q

FY14

4Q

FY14

1Q

FY15

2Q

FY15

3Q

FY15

4Q

FY15

Q1FY16

Q2FY16

(%) Jubilant Food works - Quarterly Same-Store Sales Growth

(10)

(5)

0

5

10

15

2Q

FY14

3Q

FY14

4Q

FY14

1Q

FY15

2Q

FY15

3Q

FY15

4Q

FY15

Q1FY16

Q2FY16

(%)

Like to like volume growth

Shoppers Stop Hypercity

(20)

0

20

40

60

80

2Q

FY13

3Q

FY13

4Q

FY13

1Q

FY14

2Q

FY14

3Q

FY14

4Q

FY14

1Q

FY15

2Q

FY15

3Q

FY15

4Q

FY15

Q1FY16

Q2FY16

Q3FY16 Q

TD

(%)

Volume Growth YoY (%), Premium Bikes

Jubilant FoodWorks sales show mild recovery Shoppers Stop and HyperCity volume tepid

Real estate volume showing a slow recovery Premium bike volume growth sustains for past four quarters

Source: Company, Elara Securities Research Source: Company, Elara Securities Research

Source: Bloomberg, Elara Securities Research

RURAL INDICATORS

15


Rural India in search of fresh drivers

16

Source: CMIE, Elara Securities Research

Low MSP hikes and a fall in open market price of agri commodities dent farm profitability

Source: CACP, Department of Agriculture & Co-operation, Elara Securities Research

Real rural wage growth in the red now

The government’s target of raising returns from agriculture to 50% of cost from ~20-35% cannot take place without price increase of agri commodities

(5)

0

5

10

15

20

25

FY 0

5

FY 0

6

FY 0

7

FY 0

8

FY 0

9

FY 1

0

FY 1

1

FY 1

2

FY 1

3

FY 1

4

FY15

(% change)

Rural Wage Growth Real Rural Wage Growth CPI-RL

7 9

6 7 9

12 9 8

6

10 8

10 8 6

4

8 10 9 8 9

4 2

- - 3

1 2 1 1 - 1 - 2 3 4

12

3 2 2

7 4 3 2 1

6

2 1 2 1 1 1 4

2 1 4 5

2 4

2 2

0

5

10

15

Paddy

Jow

ar

Bajr

a

Maiz

e

Ragi

Arh

ar

Moong

Ura

d

Cott

on

Gro

undnut

Sunflow

er

Soyabeen

Sesa

mum

Nig

ers

eed

Wheat

Barley

Gra

m

Lentil

Must

ard

Saff

low

er

% CAGR Crop year 2008-15 % change Crop year 2014-15 % change Crop year 2015-16

Poor rains & farm output hurt rural spending in recent times

Source: IMD, Department of Agriculture & Co-operation, Elara Securities Research

Crop year Rainfall % deviation from normal Foodgrain production

All seasons Southwest

Monsoon (June-Sep) mn tonnes (% chg YoY)

2003-04 5 2 213 22 2004-05 (9) (13) 198 (7) 2005-06 (1) (1) 209 5 2006-07 (5) (1) 217 4 2007-08 (1) 5 231 6 2008-09 (10) (2) 234 2 2009-10 (19) (23) 218 (7) 2010-11 2 2 245 12 2011-12 (7) 2 259 6 2012-13 (10) (8) 257 (1) 2013-14 6 6 264 3 2014-15 (12) 257 (3) 2015-16E (14)


Low rural India wages expose chink in armour

17

Rural wage growth in downward trend

Source: CMIE, Elara Securities Research

Spend stagnates in MGNREGA

Source: MGNREGA, Elara Securities Research

Rural spending by government – some traction seen

Source: Ministry of Rural Development, Elara Securities Research

1 3

9

8

12 1

6 19

19

18

12

5

1

5 6

12

13

20 22

20

16

13

10

0

5

10

15

20

25

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

Jul-Sep

2015

(% change)

Men Women

0

20

40

60

80

100

FY06

FY07

FY08

FY09

FY10

FY11

FY12

FY13

FY14

FY15

Budget Actual

(INR BN)

0

10

20

30

40

50

FY06

FY07

FY08

FY09

FY10

FY11

FY12

FY13

FY14

FY15

Budget Actual

(INR BN)

Tractors muted on weak Monsoon and low wages

Source: SIAM, CMIE, Elara Securities Research

-40%

-20%

0%

20%

40%

Q1FY13

Q2FY13

Q3FY13

Q4FY13

Q1FY14

Q2FY14

Q3FY14

Q4FY14

Q1FY15

Q2FY15

Q3FY15

Q4FY15

Q1FY16

Q2FY16

Q3FY16 Q

TD

Volume Growth YoY (%), Tractors

TOP BUYS

18


CMP: INR 198 Upside: 13%

MCap: INR 1,775bn

TP: INR 924

HUVR IN

Proxy play

India’s FMCG industry’s current market size is INR 2,500bn. Industry-wide, sales volume growth is ~5% in FY16 YTD. We expect

incremental money flow of INR 10,900bn over FY17-18E. While discretionary categories in consumption and consumer durables will

get a big fillip, FMCG volume growth rate is expected to grow by ~8% by FY18E. Market leader Hindustan Unilever (HUVR

IN), which has a 30-50% market share across soaps & detergents, personal care and beverages like tea &coffee, in India, is set to

post volume growth of ~9% by FY18E (from ~5% currently)

Upgrades to the rescue: We expect consumers to switch to higher-priced products. Premiumization will improve sales mix

and improve margin by 340bp by FY18E. HUVR remains our top pick among large caps in the sector

Valuation

We recommend Buy with a target price of INR 924 based on 35x FY18E P/E

Key risks

Uptick in raw material prices and slow-than-expected pickup in economic growth remain key risks

Key financials

Note: pricing as on 7 January 2016; Source: Company, Elara Securities Estimate

YE March

Revenue (INR mn)

YoY (%)

EBITDA (INR mn)

EBITDA margin (%)

Adj PAT (INR mn)

YoY (%)

Fully DEPS (INR)

ROE (%)

ROCE (%)

P/E (x)

EV/EBITDA (x)

FY15 319,722 9.4 54,137 16.9 39,182 3.3 18.1 115.4 100.2 45.3 31.8

FY16E 334,749 4.7 60,752 18.1 42,717 9.0 19.7 103.4 101.7 41.5 28.3

FY17E 372,508 11.3 70,586 18.9 48,918 14.5 22.6 110.9 109.3 36.3 24.2

FY18E 426,336 14.5 82,433 19.3 57,050 16.6 26.4 116.4 115.5 31.1 20.6

Consumer Staples

Hindustan Unilever CMP: INR 820

19

“Our strategy of

delivering consistent and

competitive growth with

sustainable improvement

in operating margin

remains unchanged”

Harish Manwani

Chairman, HUL

Switch to high-priced products to

improve margin

Source: Company, Elara Securities Estimate

0

20

40

0

5

10

FY12

FY13

FY14

FY15

FY16E

FY17E

FY18E

(%)

Volume growth (LHS) EBITDA margin (RHS) Net profit growth (RHS)


Key products

SURF EXCEL RIN WHEEL VIM

DOVE LIFEBUOY LUX PEPSODENT

FAIR & LOVELY

CLOSE UP PEARS CLINIC PLUS PONDS SUNSILK

20

Source: Company


Key financials

(INR mn) FY15 FY16E FY17E FY18E

Net Sales 319,722 334,749 372,508 426,336

YoY (%) 9.4 4.7 11.3 14.5

EBITDA 54,137 60,752 70,586 82,433

YoY (%) 14.1 12.2 16.2 16.8

Margin (%) 16.9 18.1 18.9 19.3

PAT 43,631 42,717 48,918 57,050

YoY (%) 3.3 9.0 14.5 16.6

EPS (INR) 18.1 19.7 22.6 26.4

P/E (x) 45.3 41.5 36.3 31.1

P/B (x) 44.1 41.8 38.7 34.0

ROE (%) 115.4 103.4 110.9 116.4

ROCE (%) 100.2 101.7 109.3 115.5

Pickup in volume growth to ~9% by FY18E following

premiumization of sales mix

Improving sales mix to drive strong margin expansion

10.1%

FY15-18E CAGR

15%

Valuation

21

(INR) FY18E

PAT (INR mn) 57,050

No of shares (mn) 2,163

EPS 26.4

Target P/E (x) 35

Target price 924

CMP 820

Rich valuation justified, given higher

volume growth and earnings

Volume growth of ~9% by FY18E

with margin expansion of 340bp

Note: pricing as on 7 January 2016; Source: Elara Securities Estimate



MCap: INR 503bn

TP: INR 3,284

HMCL IN

Getting ready to rev up

India’s two-wheeler (2W) industry grew at a 8% volume CAGR over FY11-15. Rising aspirations and higher disposable income were

the driving force behind this growth. We expect this trend to continue. Scooters led the pack for the 2Ws, with a CAGR of 22% over

FY11-15 while motorcycles grew at a 4% CAGR over FY11-15. We expect the 2W industry to grow by a 9% volume CAGR at

over FY16-18E

Taking point: Hero MotoCorp will be a key beneficiary, with the recent two new launches in the scooter segment and strong

competitive positioning in the motorcycle segment. We expect scooters for Hero to post volume growth of 13% (from 832K in FY15 to

1.2mn by FY18E) and motorcycles of 8% (from 5.8mn in FY15 to 7.2mn by FY18E). Both these segments would receive a boost from

two structural drivers: 2W penetration as a percentage of households in rural areas remains low at 14% vs all-India average of 21%

and a relatively large population of ~110mn, which would eventually migrate to entry-level 2Ws

Valuation

The stock currently trades at 13.5x FY17E P/E, lower than the historical average of ~16.6x. We recommend Buy with a TP of INR

3,284 based on 16.0x weighted average FY17-18E P/E

Key risks

Any technical issues with the new launches as well as competition

Key financials


YE March

Revenue (INR mn)

YoY (%)

EBITDA (INR mn)

EBITDA margin (%)

Adj PAT (INR mn)

YoY (%)

Fully DEPS (INR)

ROE (%)

ROCE (%)

P/E (x)

EV/EBITDA (x)

FY15 275,853 9.1 35,422 12.8 25,407 20.5 127.2 41.9 57.6 19.8 13.4

FY16E 284,814 3.2 41,598 14.6 30,443 19.8 152.4 41.5 57.0 16.5 11.1

FY17E 330,978 16.2 48,560 14.7 37,371 22.8 187.1 41.1 56.3 13.5 9.3

FY18E 379,349 14.6 57,143 15.1 43,848 17.3 219.6 38.9 53.6 11.5 7.5

Consumer Discretionary

Hero MotoCorp CMP: INR 2,520

22

“Newly launched Duet

addresses product gap of

being a unisex and metal

body scooter. Dealer

customer relations is

expected to benefit Hero

in the scooterization trend

in rural areas”

Dealer, Junagadh, Gujarat

Hero scooter market share revival

10

15

20

25

Apr-

14

Jun-1

4

Aug-1

4

Oct

-14

Dec-

14

Feb-1

5

Apr-

15

Jun-1

5

Aug-1

5

Oct

-15

(%)

Source: Company, Elara Securities Research


Key products

Glamour Passion Pro Splendor Ismart

Duet Maestro Edge

23

Source: Company


Key financials

Net sales CAGR of 11% over FY15-18E on strong positioning in

rural areas once the economy recovers

Margin expansion of 230bp over FY15-18E resulting from lower

raw material prices and LEAP program benefits

11.2%

FY15-18E CAGR

15.1%

Risk-reward favourable as target multiple

trades near historical average

Valuation


(INR) Weighted average

FY17-18E

EPS 205.3

Multiple (x) 16.0

Target Price 3,284

CMP 2,520

Potential (%) 30

24

FY15 FY16E FY17E FY18E

Volume 6,631,703 6,713,084 7,605,309 8,461,419

YoY (%) 6.2 1.2 13.3 11.3

Scooters 832,008 840,000 1,100,000 1,200,000

Scooters (YoY %) 17.6 1.0 31.0 9.1

Exports 200,017 228,070 360,912 501,368

Exports (YoY %) 53.0 14.0 58.2 38.9

Net sales 275,853 284,814 330,978 379,349

EBITDA 35,422 41,598 48,560 57,143

EBITDA margin (%) 12.8 14.6 14.7 15.1

PAT 25,407 30,443 37,371 43,848

EPS (INR) 127.2 152.4 187.1 219.6

Adj P/E (x) 19.8 16.5 13.5 11.5

EV/EBITDA (x) 13.4 11.1 9.3 7.5

P/B (x) 7.7 6.2 5.0 4.0

Dividend Yield (%) 2.2 2.4 3.0 3.2

ROE (%) 41.9 41.5 41.1 38.9

ROCE (%) 57.6 57.0 56.3 53.6

EPS CAGR of 20% over FY15-18E



MCap: INR 1,289bn

TP: INR 5,060

MSIL IN

Engine of hope

India’s passenger vehicles (PV) industry grew at a 6% volume CAGR over FY10-15. Rising aspirations, higher disposable income and

premiumization were the driving force behind this growth. We expect this trend to continue. The entry-level PVs posted a volume

contraction of 2% over FY10-15 while compact hatchbacks and sedans grew at a CAGR of 9% over FY10-15. We expect the

passenger vehicle industry to grow by a 15% volume CAGR over FY16-18E. The Seventh Pay Commission is expected to

boost sales of MSIL as government employees made up ~17% of MSIL sales in FY15 (post implementation of the Sixth Pay

Commission, government employees’ sales contribution increased from 4% in FY08 to ~14% in FY11)

Stands guard: MSIL has managed to gain a 200bp market share in passenger cars in FY15 to 51.9%. Industry’s entry-level car

segment growth has been lacklustre over the past three years, where Maruti has a 70%+ market share, which will improve once the

economy recovers

Valuation

We recommend Buy with a target price of INR 5,060 based on 20x FY17-18E weighted average P/E, owing to a 20%+ ROE and a

37% EPS CAGR over FY15-18E. MSIL is our preferred play among four-wheelers

Key risks

Failure in the premium car market segment and a yen appreciation

Key financials


YE March

Revenue (INR mn)

YoY (%)

EBITDA (INR mn)

EBITDA margin (%)

Adj PAT (INR mn)

YoY (%)

Fully DEPS (INR)

ROE (%)

ROCE (%)

P/E (x)

EV/EBITDA (x)

FY15 499,706 14.3 67,830 13.6 37,812 35.9 125.2 14.5 23.0 34.1 17.2

FY16E 574,577 15.0 93,005 16.2 53,614 41.8 177.5 17.6 28.0 24.0 12.3

FY17E 695,027 21.0 116,206 16.7 71,225 32.8 235.8 19.9 31.7 18.1 9.5

FY18E 795,404 14.4 136,867 17.2 87,042 22.2 288.1 20.9 32.3 14.8 7.8

Automobiles

Maruti Suzuki CMP: INR 4,268

25

“New Baleno response has

been encouraging, which

has come as a big relief as

dealers have invested

heavily in NEXA outlets”

Dealer,

Bengaluru, Karnataka

Maruti PV market share resilient


40

42

44

46

48

50

Apr-

14

Jun-1

4

Aug-1

4

Oct

-14

Dec-

14

Feb-1

5

Apr-

15

Jun-1

5

Aug-1

5

Oct

-15

(%)


Key products

Source: Company

Alto K10 WagonR

Swift Dzire Baleno

26


Key financials

Volume CAGR of 14% over FY15-18E, led by first-time

buyers, new product launches and entry into new segments

(compact UVs)

Reduction in discounts, cost reduction & localization, operating

leverage as well as stable forex

14%

FY15-18E CAGR

360bp

Valuation

(INR)

Weighted

average FY17-

18E

Weighted avg FY17-18 EPS 253.0

Multiple (x) 20.0

Target Price 5,060

CMP 4,268

Potential (%) 19

27


Volume 1,291,912 1,446,910 1,719,857 1,922,255

YoY (%) 11.8 12.0 18.9 11.8

Net sales 499,706 574,577 695,027 795,404

EBITDA 67,830 93,005 116,206 136,867

EBITDA margin (%) 13.6 16.2 16.7 17.2

PAT 37,812 53,614 71,225 87,042

EPS (INR) 125.2 177.5 235.8 288.1

Adj P/E (x) 34.1 24.0 18.1 14.8

EV/EBITDA (x) 17.2 12.3 9.5 7.8

P/B (x) 5.4 4.7 4.0 3.3

Dividend Yield (%) 0.6 0.9 1.3 1.5

ROE (%) 14.5 17.6 19.9 20.9

ROCE (%) 23.0 28.0 31.7 32.3

Owing to a 20%+ ROE and a 37% EPS

CAGR over FY15-18E

EPS CAGR of 37% over

FY15-18E




MCap: INR 161bn

TP: INR 572

SUNTV IN

Sunny skies

Rising aspirations, increasing income levels and government payouts mean more money in hand to spend. Incrementally INR

10,900bn will flow into the economy over FY17-18E. We expect this money to be spent on consumer goods and services, which will

drive advertising spend by the industry. The current annual TV industry ad spend growth is in the low teens. We expect this to grow

by ~15% by FY18E. Sun TV (SUNTV IN) with its 33 TV channels and 44 radio stations across South India, remains the strongest TV

network in the region, and we expect a 15% ad revenue CAGR over FY15-18E

Pack leader: Sun TV has 6x the viewership of its closest competitor, Vijay TV, among GECs in Tamil Nadu and the network has

>70% share of viewership in the state. It enjoys a viewership share of 14%, 9% and 18% in Andhra Pradesh, Kerala & Karnataka,

respectively. Apart from an uptick in advertising, the implementation of phases III & IV of cable digitization will bring in higher

subscription revenue as 25mn households are expected to make the switch in the next two years. We expect a 20% net profit

CAGR over FY15-18E

Valuation

We recommend Buy with a target price of 572 based on 17x FY18E P/E. With a ~35% net margin, it is one of the most profitable

businesses in the country

Key risks

Ongoing litigation against the promoter and slow-than-expected ad revenue growth

Key financials

YE March

Revenue (INR mn)

YoY (%)

EBITDA (INR mn)

EBITDA margin (%)

Adj PAT (INR mn)

YoY (%)

Fully DEPS (INR)

ROE (%)

ROCE (%)

P/E (x)

EV/EBITDA (x)

FY15 23,954 7.7 16,772 70.0 7,820 3.4 19.8 24.3 23.2 21.3 9.3

FY16E 26,735 11.6 18,704 70.0 9,673 23.8 24.5 27.3 26.0 17.2 8.2

FY17E 30,357 13.5 21,374 70.4 11,270 16.6 28.6 28.1 27.0 14.8 7.0

FY18E 35,109 15.7 25,011 71.2 13,495 19.9 34.2 29.5 28.4 12.4 5.8


Sun TV CMP: INR 423

28

“Advertising looks better

in FY16. Phases III & IV

of digitization will be the

next big driver for

subscription revenue”

SL Narayanan

Group CFO, Sun TV

(15)

0

15

30

FY12

FY13

FY14

FY15

FY16E

FY17E

FY18E

(%)

Ad revenue growth (%)

Net profit growth (%)

Strong earnings growth ahead

Source: Company, Elara Securities Estimate Note: pricing as on 7 January 2016; Source: Company, Elara Securities Estimate


Key products

29

Source: Company

SUN TV GEMINI TV

UDAYA TV SURYA TV


Key financials


Net Sales 23,954 26,735 30,357 35,109

YoY (%) 7.7 11.6 13.5 15.7

EBITDA 16,772 18,704 21,374 25,011

YoY (%) 11.1 11.5 14.3 17.0

Margin (%) 70.0 70.0 70.4 71.2

PAT 7,820 9,673 11,270 13,495

YoY (%) 3.4 23.8 16.6 19.9

EPS (INR) 19.8 24.5 28.6 34.2

P/E (x) 21.3 17.2 14.8 12.4

P/B (x) 5.0 4.4 3.9 3.4

ROE (%) 24.3 27.3 28.1 29.5

ROCE (%) 23.2 26.0 27.0 28.4

Uptick in advertising and pickup in subscription revenue on

digitization to result in strong revenue growth

Pre-movie cost EBITDA increase to be in slightly above

revenue growth

13.6%

FY15-18E CAGR

14.2%

Valuation

30

Low increase in cost of movies to aid in strong earnings

growth

20%

Cheap valuations compared to peer, Zee

Entertainment

(INR) FY18E

PAT (INR mn) 13,495

No of shares (mn) 394

EPS 34.2

Target P/E (x) 17

Target price 572

CMP 423

Trading at 12x FY18E P/E is less

than half of peer Zee Entertainment


Valuation



MCap: INR 104bn

TP: INR 148

DITV IN

Well poised

The Central government has mandated TV households across the country will have to install digital addressable systems by December

2016. So far, ~100mn households have digital cable or DTH. In phases III and IV, another ~75mn households are expected to go

digital by December 2016 (deadline may be rolled forward). DTH, which currently has 50mn users, will be a key beneficiary of this

shift from analog. Dish TV (DITV IN) is expected to add 2-3mn subscribers annually from the current 1.5mn. We expect net profit to

grow from INR 31mn in FY15 to INR 7.4bn over FY15-18E

The party is not over: Broadcasters demand for higher ARPU from MSOs will give a fillip to DTH to raise prices. DITV is expected to

hike price of packs by 5-7% annually. Apart from this, content cost would increase only by ~5-6% because contract renewals with

broadcasters are due only after September 2017. This along with falling DTH license fees would lead to an EBITDA CAGR of 31%

by FY18E

Valuation

We recommend Buy with a target price of INR 148 based on a DCF method

Key risks

Loss of pace in digitization and superior technology-based competition to DTH are key risks

Key financials

YE March

Revenue (INR mn)

YoY (%)

EBITDA (INR mn)

EBITDA margin (%)

Adj PAT (INR mn)

YoY (%)

Fully DEPS (INR)

ROE (%)

ROCE (%)

P/E (x)

EV/EBITDA (x)

FY15 27,816 10.9 7,331 26.4 31 NA 0.0 NA NA NA 15.7

FY16E 31,032 11.6 10,491 33.8 3,146 NA 3.0 NA NA 33.9 10.4

FY17E 36,737 18.4 12,997 35.4 5,072 61.2 4.8 NA NA 21.0 8.2

FY18E 43,302 17.9 16,496 38.1 7,375 45.4 6.9 NA NA 14.4 6.1


Dish TV CMP: INR 100

31

“We have room to improve

margin beyond 34% by at

least 300-500bp if license

fees are reduced in line

with TRAI reco and GST

implementation and

operating leverage in our

business” RC Venkateish

Outgoing CEO, Dish TV

(5,000)

0

5,000

10,000

FY12

FY13

FY14

FY15

FY16E

FY17E

FY18E

(INR mn)

Net profit FCFF

Multiple levers for strong FCF

Source: Company, Elara Securities Estimate Note: pricing as on 7 January 2016; Source: Company, Elara Securities Estimate


Dish TV

DishFlix - India’s First Home Video System DISH truHD+ with Recorder

Hi-Definition Set-Top-Box with Recorder

DISH+ with Recorder

Digital Set-Top-Box with Recorder

DISH on Wheels

Enhance your travelling experience Source: Company

32


Key financials


Net Sales 27,816 31,032 36,737 43,302

YoY (%) 10.9 11.6 18.4 17.9

EBITDA 7,331 10,491 12,997 16,496

YoY (%) 17.5 43.1 23.9 26.9

Margin (%) 26.4 33.8 35.4 38.1

PAT 31 3,146 5,072 7,375

YoY (%) (107.6) 9,920.6 61.2 45.4

EPS (INR) 0.0 3.0 4.8 6.9

P/E (x) NA 33.9 21.0 14.4

P/B (x) NA NA 20.5 8.4

Digitization-led rise in subscriber additions and ARPU hike

resulting in strong revenue growth

Margin expansion on operating leverage and cost controls

15.9%

FY15-18E CAGR

31%

Valuation

(INR mn)

Discounted cash flows 92,300

Terminal value 48,010

Net Debt 3,006

Total shareholders value 1,37,304

Target price (INR) 148

CMP (INR) 100

33

Sharp increase in profit and cashflow 517%

FCF generation to improve sharply

Net profit to grow by CAGR of

517% to INR 7.4bn by FY18E



Pure play

The government plans to add 770mn LED bulbs in households across the country, with 35mn LED streetlights, 10mn agricultural

pumps powered by solar energy, 160mn fans and 1.8mn ACs over the next four years. This energy-efficiency initiative has attracted

industry stalwarts, such as Crompton Greaves (CRG IN) and peers, who have already struck gold from this exercise. We expect CRG

to grow its consumer business by ~15% worth INR 125bn over FY16-18E, with a stable EBIT margin of 12%

Going solo works like a charm: CRG recently demerged its consumer business (23% of FY15 total revenue). It is expected to

be listed in Q4. The new company will focus on reorganizing its product portfolio, dealer networks and pricing

Follow the money: Lighting revenue grew by 13% in FY13 & 17% in FY14 (vs industry’s 12% each); the segment grew by 7%

in FY15, driven by LEDs. Fans grew by 22% in FY13 & 15% in FY14 (vs industry’s 10% and 15%, respectively); the segment

grew by 14% in FY15. Pumps grew by 13% in FY15 (well ahead of industry’s 5%). In FY14, the industry contracted 10% vs

CRG’s flat growth)

New line of business: CRG recently entered into an alliance with SOGO, an European company, to offer new kitchen appliances;

this segment grew by 14% annually

Valuation: CRG sold its consumer business at INR 58.2bn of equity value, implying per share value of INR 93 (which is 50% of its

CMP); this implies 13.5x September 2017E P/E for its consumer business, which is well below peers at 25x

Key risks: A prolonged delay in revival in the overseas division leading to higher losses, slower capex recovery in India, the euro

depreciation and penalty on termination of the franchisee business

Key Financials


34

YE March

Revenue (INR mn)

YoY (%)

EBITDA (INR mn)

EBITDA margin (%)

Adj PAT (INR mn)

YoY (%)

Fully DEPS (INR)

ROE (%)

ROCE (%)

P/E (x)

EV/EBITDA (x)

FY15 140,131 2.8 6,424 4.6 1,841 21.2 2.9 4.8 3.8 63.0 20.7

FY16E 141,751 1.2 8,330 5.9 3,468 88.4 5.5 9.4 7.0 33.4 14.5

FY17E 155,688 9.8 11,397 7.3 6,227 79.6 9.9 14.5 11.2 18.6 10.1

FY18E 174,729 12.2 13,823 7.9 8,267 32.8 13.2 16.3 12.7 14.0 7.8

Consumer Durables

Crompton Greaves

As a standalone company,

Crompton Greaves

Consumer Electrical

would be able to pursue

more strategic goals and

thus maximize value for

all its stakeholders.

Laurent Demortier CEO & MD, Crompton Greaves

(20)

(10)

0

10

20

30

FY12 FY13 FY14 FY15

(%)

CG - Fans CG - Lightning

CG - Pumps Industry - Fans

Industry - Lightning Industry - Pumps

Crompton ahead of the industry



MCap: INR 116bn

TP: INR 200

CRG IN

CMP: INR 185


Key Projects

Fans

Instant water heaters

Lighting

Pumps Home automation

Integrated security systems

LED flood lights LED bulb

Source: Company

35


Key financials

36


Net Sales 140,131 141,751 155,688 174,729

YoY (%) 2.8 1.2 9.8 12.2

EBITDA 6,424 8,330 11,397 13,823

YoY (%) 5.0 29.7 36.8 21.3

Margin (%) 4.6 5.9 7.3 7.9

PAT 1,841 3,468 6,227 8,267

YoY (%) 21.2 88.4 79.6 32.8

EPS (INR) 2.9 5.5 9.9 13.2

P/E (x) 63.0 33.4 18.6 14.0

Dividend yield (%) 0.2 0.3 0.3 0.3

ROE (%) 4.8 9.4 14.5 16.3

ROCE (%) 3.8 7.0 11.2 12.7

Strong revenue levers from consumer durables business

Sharp margin expansion from rise in automation and lighting

businesses

Lower interest outgo to further push up earnings growth

8%

FY15-18E CAGR

29%

65%

At CMP, the consumer business

trades at P/E of 13.5x, well below

peers which trade at an average

P/E of 33x FY16E and 25x FY17E

Valuation (consolidated)


(INR) FY18E

PAT (INR mn) 8,267

No of shares (mn) 626.8

EPS 13.2

Target P/E (x) 14.1

Target price 200

CMP 185

Basis Implied

Value (x) Per share

(INR)

Standalone business (Other than consumer business)

P/E 7.5 47

Demerged Consumer business P/E 13.5 93

Subsidiaries business EV/Sales 0.65 46

At CMP 185

Implied valuation at CMP

Consumer business to outgrow the industry by

15% at INR 125bn over FY16-18E across

its products lines – lighting, fans and pumps



Growing clout

India’s apparels market is estimated to be at INR 2,460bn (USD 41bn). Out of this, men’s wear is the largest segment, with a 42%

share. We expect apparels industry to grow by 12% by FY18E as we estimate INR 666bn of flows to come from the consumption

impulse. Organized retail, which contributes 33% of overall industry, is likely to post a sales CAGR of 16% over FY15-

18E. Raymond (RW IN) plans to register textiles & apparels sales CAGR of 13% over FY15-18E, with a 40bp margin

expansion

Driving change: Management’s recent product revamp in the textiles and apparels markets led to growth of 21% in FY15 vs 8-10%

over FY10-14. This success is led by increased focus on the shirting segment, introduction of Raymond’s premium apparels and

product portfolio revamp. Raymond is currently overhauling its distribution reach, adding new 80 stores annually, refurbishing ~150

key Raymond stores and increasing large, multi-brand distribution network

Valuation

We recommend Buy with a SOTP-based TP of INR 583 based on 7.6x FY18E EV/EBITDA

Key risks

Rising rental yields to decelerate retail expansion

Key financials

YE March

Revenue (INR mn)

YoY (%)

EBITDA (INR mn)

EBITDA margin (%)

Adj PAT (INR mn)

YoY (%)

Fully DEPS (INR)

ROE (%)

ROCE (%)

P/E (x)

EV/EBITDA (x)

FY15 53,326 17.3 4,459 8.4 1,159 6.1 18.4 7.4 8.5 22.7 8.3

FY16E 57,043 7.0 4,741 8.3 753 (35.1) 11.8 4.6 9.1 35.5 7.8

FY17E 63,757 11.8 5,985 9.4 1,631 116.8 26.1 9.4 12.1 16.0 6.2

FY18E 71,416 12.0 7,054 9.9 2,262 38.7 36.4 11.9 14.1 11.5 5.2


Raymond

37

“ Apparels brands, Park

Avenue and Color Plus,

have >150 exclusive

brand stores. We will

double our store count

over the next three years”

Sanjay Behl

CEO, Lifestyle Business

EBITDA margin expansion likely


0

5

10

15

20

Textile

Appare

l

Garm

enting

Denim

B2B

Shirting

Tools

Auto

sp

are

s

(%)

FY15 FY18E


MCap: INR 25bn

TP: INR 583

RW IN

CMP: INR 410



Key projects

38

Source: Company


Key financials


Net Sales 53,326 57,043 63,757 71,416

YoY (%) 17.3 7.0 11.8 12.0

Textiles & apparels segment revenue 35,560 39,161 45,035 51,791

EBITDA 4,459 4,741 5,985 7,054

YoY (%) (10.1) 6.3 26.2 17.9

Margin (%) 8.4 8.3 9.4 9.9

PAT 1,159 753 1,631 2,262

YoY (%) 5.8 26.8 21.9 38.0

EPS (INR) 18.4 11.8 26.1 36.4

P/E (x) 22.2 34.7 15.6 11.2

EV/EBITDA (x) 8.1 7.7 6.1 5.1

ROE (%) 7.4 4.6 9.4 11.9

ROIC (%) 10.3 10.9 14.8 17.9

Management focus on consumer-led segments, such as

branded textiles and apparels to drive growth

Sharp margin expansion in the range of 550-600bp in apparels

13%

FY15-18E CAGR

17.8%

Attractively priced at just 7.6x FY17E

compared to 12-15x peer valuation

Valuation

(INR mn) FY17E

EBITDA 5,985

Mutiple (x) 7.6

Enterprise value 45,725

Net debt 9,919

Market cap 35,806

No of shares (mn) 61

TP (INR) 583

39

Textiles and sales CAGR of 13%

over FY15-18E



Shining bright

India’s hospitality industry is on the cusp of a recovery, with occupancy rate improving by 250-300bp to 63% in FY16E and to 66% at

the pan-India level in FY17E for premium hotels. This expansion is expected from the meetings, incentives, conferences and

exhibitions (MICE) segment and corporate & domestic travelers. Indian Hotels (IH IN) is well positioned as it has doubled the number

of rooms in 11 years from 7,942 in FY04 to ~15,751 in FY15, to grab this opportunity. We expect the company to post an

EBITDA CAGR of 25% and a sales CAGR of 11.4% over FY15-18E

Domestic takes off: Standalone EBITDA could improve from INR 3,587mn in FY15 to INR 5,176mn in FY17E based on higher

occupancy and ARR. Expanding products portfolio with light assets (adding more rooms through management contracts)

is expected to post a 23% revenue CAGR to INR 2.6bn over FY15-18E

Valuation

We recommend Buy with a TP of INR 155 on a weighted average EV/Room of INR 25mn for premium rooms, INR 4mn for Ginger and

21x FY18E EV/EBITDA

Key risks

Economic slowdown, threat from ISIS and natural calamities could affect the business

Key Financials

40


Indian Hotels Upside: 32%

MCap: INR 95bn

TP: INR 155

IH IN

CMP: INR 118

“We plan to re-engineer

our operations, rationalize

cost structure and tighten

our day-to-day

operations”

Rakesh Sarna MD & CEO, Indian Hotels

ARR improvement likely


(2)

0

2

4

6

3,000

4,000

5,000

6,000

7,000

FY13

FY14

FY15

FY16E

FY17E

FY18E

(%) (INR mn)

EBITDA (LHS) ARR Growth (RHS)


YE March

Revenue (INR mn)

YoY (%)

EBITDA (INR mn)

EBITDA margin (%)

Adj PAT (INR mn)

YoY (%)

Fully DEPS (INR)

ROE (%)

ROCE (%)

P/E (x)

EV/EBITDA (x)

FY15 41,886 3.0 4,886 11.7 (252) (2,644.4) (0.3) (1.0) 3.9 (463.6) 27.2

FY16E 47,738 14.0 6,574 13.8 674 (367.6) 0.7 2.5 5.1 173.3 21.1

FY17E 52,545 10.1 7,807 14.9 1,435 112.9 1.5 4.5 6.5 81.4 17.5

FY18E 57,939 10.3 9,436 16.3 2,573 79.3 2.6 7.8 9.0 45.4 14.1


Key Projects

Source: Company

Taj Hotels & Resorts Vivanta by Taj Gateway Taj

Pierre Boston Taj Campton Place

41


Key financials

42

Better occupancy to drive sales growth 11.4%

CAGR

25%

Valuation


Sales 41,886 47,738 52,545 57,939

EBITDA 4,886 6,574 7,807 9,436

EBITDA Margin (%) 11.7 13.8 14.9 16.3

PAT (252) 674 1,435 2,573

EPS (INR) (0.3) 0.7 1.5 2.6

P/E (x) (463.6) 173.3 81.4 45.4

EV/EBITDA (x) 27.2 21.1 17.5 14.1

P/B (x) 4.3 3.0 3.0 2.8

ROE (%) (1.0) 2.5 4.5 7.8

ROCE (%) 3.9 5.1 6.5 9.0

At CMP, the stock is currently

trading at 13.8x FY18E

EV/EBITDA

Operating leverage to improve margin

EBITDA CAGR of 25% and sales

CAGR of 11.4% over FY15-18E

Better demand to drive occupancy


(INR mn) FY18E FY18E

EV/Adj room EV/EBITDA

Valuation Ex-Ginger EBITDA 9,436

Ginger Room Count 2,813 Target EV/EBITDA (x) 21

Target EV/Room 4 Target EV 198,162

Ginger EV (a) 11,251 Target Mcap 159,982

Valuation Premium room

Premium Adjusted Room Count 6,981

Target EV/Room 25

Premium Room EV (b) 174,537

Total EV (a+b) 185,787

Mcap 147,607

Target Price (INR) 149 Target Price (INR) 162

Weightage (%) 50

Weighted Target Price (INR) 155

Upside (%) 32

60

65

70

75

80

3,000

4,000

5,000

6,000

7,000

FY13 FY14 FY15 FY16E FY17E FY18E

(%) (INR mn)

EBITDA (LHS) OR Growth (RHS)



Going large

India’s travel & tourism is highly unorganized, with a market size of INR 2,827bn. We believe the shift towards an organized market

(currently: ~20%) presents significant opportunity. The sector will receive an additional fillip of 60% from a consumption

impulse of INR 1,234bn by FY18E. Cox & Kings (COXK IN) India business (~24% consolidated sales in FY16E) is expected to

grow at a CAGR of 16% over FY15-18E. The company will post an overall sales CAGR of 3% over FY15-18E

Driver of growth: Cox & Kings is eying opportunities in the education segment (school activities & Summer camps: ~30%) by

expanding brands across Europe. This segment is expected to post a CAGR of ~11% over FY15-18E, led by new centers in Australia

and the baby boom in the UK. Expansion of Germany’s Meininger (~18%) into newer markets would drive growth in the hotel

segment. Meininger has 7,340 beds across 2,092 rooms; management expects to reach 19,000 beds over FY16-18 through the

leasing model

Valuation

We recommend Buy with a TP of INR 436 on a weighted average of 16x FY18E earnings and 8x FY18E EV/EBITDA

Key risks

Adverse macro economy, national calamities and currency fluctuations

Key Financials

43


Cox & Kings CMP: INR 198

“We are working towards

doubling bed counts at

Meininger over the next

three years. We opened a

second PGL site in

Australia and plan on

raising bed capacity in

PGL Europe & Australia”

Peter Kerkar Promoter & Non-ED

Cox & Kings

Expansion into newer markets to

drive growth


38

39

40

41

42

(20)

(10)

0

10

20

30

FY14 FY15 FY16E FY17E FY18E

(%) (%)

PAT Growth (LHS)

EBITDA Margin (RHS)


YE March

Revenue (INR mn)

YoY (%)

EBITDA (INR mn)

EBITDA margin (%)

Adj PAT (INR mn)

YoY (%)

Fully DEPS (INR)

ROE (%)

ROCE (%)

P/E (x)

EV/EBITDA (x)

FY15 25,691 11.3 10,108 39.3 3,074 17.9 17.4 14.3 11.3 13.8 7.1

FY16E 22,990 (10.5) 9,274 40.3 3,484 13.3 19.7 12.5 11.8 12.1 7.2

FY17E 25,240 9.8 10,270 40.7 4,342 24.6 24.6 13.0 13.0 9.7 6.1

FY18E 28,125 22.3 11,444 40.7 5,051 45.0 28.6 13.0 13.9 8.4 5.1

Upside: 82%

MCap: INR 41bn

TP: INR 436

COXK IN

CMP: INR 239


Key projects

Source: Company

44

http://www.meininger-hotels.com/en/hotels/berlin/airport/


Key financials

45

3%

CAGR

4%

18% Deleveraging and margin expansion of 140bp to drive an

earnings CAGR of 18% over FY15-18E

Valuation


Sales 25,691 22,990 25,240 28,125

EBITDA 10,108 9,274 10,270 11,444

EBITDA Margin (%) 39.3 40.3 40.7 40.7

PAT 3,074 3,484 4,342 5,051

EPS (INR) 17.4 19.7 24.6 28.6

P/E (x) 13.8 12.1 9.7 8.4

EV/EBITDA (x) 7.1 7.2 6.1 5.1

P/B (x) 1.6 1.3 1.1 1.0

ROE (%) 14.3 12.5 13.0 13.0

ROCE (%) 11.3 11.8 13.0 13.9

FY18E

P/E valuation

EPS (INR) 28.6

Target P/E (x) 16.0

Target Price (INR) 458

Weightage (%) 50

EV/EBITDA valuation

EBIDTA (INR mn) 11,444

Target EV/EBIDTA (x) 8

Target EV (INR mn) 91,553

Target Mcap (INR mn) 73,280


Weightage (%) 50


Upside (%) 82

At CMP, the stock is trading at an

attractive valuation of 8.4x FY18E P/E

Overall sales CAGR of 3% over

FY15-18E



Going global

Improving economic conditions, rising incomes and aspirations are driving Indians to seek out exciting vacation destinations. We are

banking on this newfound optimism to drive the travel & leisure industry in India. Mahindra Holidays (MHRL IN) is taking advantage of

this resurgence by driving the time share industry and we expect the company to grow at a 15.6% revenue CAGR over FY15-

18E (from ~12% over FY12-15)

Key drivers: Mahindra Holidays is likely to grow at a healthy pace after acquiring Holiday Club Resort (HCR) with 30 resorts in

Finland, Sweden, and Spain. It plans to focus on increasing membership acquisition (currently ~60% of total revenue) from tier 2 & 3

cities and increasing digital marketing. These recent initiatives will offer its existing customers new and exciting holiday destinations

across Europe. The synergy benefits also will drive up the occupancy rate of resorts of HCR as well as Mahindra Holidays. We expect

an earnings CAGR of ~15% over FY15-18E, assuming membership additions of 15k in FY16E, 16k in FY17E and 17K in FY18E

Valuation

We recommend Buy with a target price of INR 496 based on an average of 28x FY18E P/E and 15x FY18E EV/EBITDA

Key risks

Cheaper international locations and increasing aspirations for international holidaying to impact member addition

Adverse economic scenario could impact the business

Key Financials

46


Mahindra Holidays

“We are trying to increase

our room count from

2,800 to about 3,400 in

the next 2.5 years with an

investment of INR 6bn”

Kavinder Singh

MD & CEO, Mahindra Holidays

Higher membership addition to

drive growth


(45)

(30)

(15)

0

15

30

FY13

FY14

FY15

FY16E

FY17E

FY18E

(%)

Addition of members growth

Total Sales Consolidated growth


Upside: 16%

MCap: INR 38bn

TP: INR 495

MHRL IN

CMP: INR 425

YE March

Revenue (INR mn)

YoY (%)

EBITDA (INR mn)

EBITDA margin (%)

Adj PAT (INR mn)

YoY (%)

Fully DEPS (INR)

ROE (%)

ROCE (%)

P/E (x)

EV/EBITDA (x)

FY15 8,119 (0.5) 1,804 22.2 1,031 18.5 11.6 13.9 15.1 36.6 21.5

FY16E 9,548 17.6 2,231 23.4 1,146 11.1 12.9 15.1 18.3 33.0 17.3

FY17E 11,054 15.8 2,624 23.7 1,371 19.7 15.4 16.4 20.2 27.5 14.6

FY18E 12,526 13.3 2,968 23.7 1,563 14.0 17.6 16.7 21.0 24.2 12.9


Key Projects

The Royal Court, Jaisalmer Dharamshala Gir, Gujarat

Le poshe Kodaikanal Thekkady, Kerala Emerald Palms, Goa

Source: Company

47


Key financials

48

Higher membership addition to drive revenue growth 15.6%

CAGR

18%

15%

Valuation


Sales 8,119 9,548 11,054 12,526

EBITDA 1,804 2,231 2,624 2,968

EBITDA Margin (%) 22.2 23.4 23.7 23.7

PAT 1,031 1,146 1,371 1,563

EPS (INR) 11.6 12.9 15.4 17.6

P/E (x) 36.6 33.0 27.5 24.2

EV/EBITDA (x) 21.5 17.3 14.6 12.9

P/B (x) 5.2 4.8 4.3 3.8

ROE (%) 13.9 15.1 16.4 16.7

ROCE (%) 15.1 18.3 20.2 21.0

FY18E

P/E based Valuation

EPS (INR) 17.6

Target PE (x) 28


Weightage (%) 50

EV/EBITDA

EBIDTA (INR mn) 2,968

Target EV/EBITDA (x) 15

Target EV (INR mn) 44,524

Target Mcap (INR mn) 43,944


Weightage (%) 50


Upside (%) 16

At CMP, the stock is trading at 25.1x

FY18E P/E

Earnings CAGR of 15% over

FY15-18E



Scaling new highs

India’s education sector is a INR 5,850bn entity (USD 90bn) currently, and its tutorial industry forms 8% of this sector, i.e, INR 455bn

or USD 7bn. The tutorial market grew at a 15% CAGR over FY11-15. We expect INR 884bn of inflows from the Consumption impulse

in the education sector by FY18E. Lack of quality in core education will spur growth and drive the shift from the unorganized into the

organized segment. The popularity of tutorials shows India’s propensity to spend 5x more on tutoring than on school fees. MT

Educare (MTEL IN) is well poised to take advantage of this opportunity. If we capture this inflow, then we expect the company

to post a ~20% revenue CAGR over FY15-18E

New maths: The company has addressed scalability issues by acquiring two coaching companies in North and South India (Lakshya

and Gayatri). Currently, ~82,000 students are enrolled in MT Educare’s tutorial classes. At ~20% revenue CAGR, we expect a ~6%

price increase and 14% enrolment growth to 122,000 students

Valuation


Key risks

Better quality of education in schools could reduce the requirement of coaching classes

Key financials


YE March

Revenue (INR mn)

YoY (%)

EBITDA (INR mn)

EBITDA margin (%)

Adj PAT (INR mn)

YoY (%)

Fully DEPS (INR)

ROE (%)

ROCE (%)

P/E (x)

EV/EBITDA (x)

FY15 2,270 12.5 466 20.5 251.6 21.2 6.1 20.9 25.5 30.0 15.4

FY16E 2,621 15.4 487 18.6 276.0 9.7 7.1 19.1 23.6 25.8 14.7

FY17E 3,027 15.5 583 19.3 357.0 29.3 9.0 20.5 25.7 20.3 12.3

FY18E 3,475 14.8 698 20.1 439.0 23.0 11.2 21.3 25.7 16.3 10.3


MT Educare

49

“We have always been

cash rich and will remain

cash rich ”

Mahesh Shetty MD, MT Educare

Focus on quality core education to

drive growth


70

80

90

100

110

1,500

2,000

2,500

3,000

3,500

4,000


(in'000) (INR mn)

Fees Received No of Students(RHS)


MCap: INR 7.2bn

TP: INR 223

MTEL IN

CMP: INR 175


Key offerings

50

Source: Company


Key financials


Net Sales 2,270 2,621 3,027 3,475

YoY (%) 12.5 15.4 15.5 14.8

EBITDA 466 487 583 698

YoY (%) 10.0 4.4 19.9 19.7

Margin (%) 20.5 18.6 19.3 20.1

PAT 258 281 357 444

YoY (%) 21.2 9.7 29.3 23.0

EPS (INR) 6.1 7.1 9.0 11.2

P/E (x) 30.0 25.8 20.3 16.3

EV/EBITDA (x) 15.4 14.7 12.3 10.3

ROE (%) 20.9 19.1 20.5 21.3

ROCE (%) 25.5 23.6 25.7 25.7

Healthy growth with the introduction of Flip classrooms

improving scale

ROCE-centric growth focus with a consistent 20%-plus return

ratios

15%

FY15-18E CAGR

Valued at 20x FY18E P/E led by steady

growth and healthy ROCE

Valuation

(INR mn) FY18E

Net Profit 444

Multiple (x) 20

Equity Value 8,872

No of Shares (mn) 39.8

TP (INR) 223

51

Revenue CAGR of 20% over

FY15-18E



Midcap marvel

India’s test preparation segment is a INR 98bn (USD 1.5bn) industry, catering to ~212mn people. It grew at a 20% CAGR over FY11-

15. The engineering vertical dominates this segment. Career Point (CRPT IN) catered to 14,000 students in FY15, and we expect this

number to swell to 25,000 by FY18E. A revenue CAGR of ~30% is expected over FY15-18E, after factoring in Consumption

Impulse growth of 6%

Growth pickup: We expect earnings to jump from INR 9mn in FY15 to 390mn in FY18E. The tutorial segment is now likely to

rebound led by recovery in enrolments with 15% enrolment growth in own classes. The company holds marketable investments of

INR 1.5bn with a book value of INR 440mn, nearly 40% of balance sheet. With no capex requirement, operating cash flow is likely to

directly translate into a healthy FCF

Valuation


Key risks

Regulatory intervention and any change in IIT & NIT entrance eligibility criteria

Key financials


YE March

Revenue (INR mn)

YoY (%)

EBITDA (INR mn)

EBITDA margin (%)

Adj PAT (INR mn)

YoY (%)

Fully DEPS (INR)

ROE (%)

ROCE (%)

P/E (x)

EV/EBITDA (x)

FY15 779 19.4 98 12.6 3 (109.2) 3.2 0.1 1.2 41.1 23.3

FY16E 863 10.8 257 29.7 117 3,672.8 9.4 3.4 5.6 14.1 8.9

FY17E 1,076 24.7 420 39.1 246 109.4 16.1 6.6 9.2 8.2 5.5

FY18E 1,308 21.6 603 46.1 390 58.6 23.5 9.2 11.9 5.6 3.8


Career Point

52

“ By FY17E, we will

touch ~30% margin,

which is sustainable for

our kind of business”

Pramod Maheshwari MD, Career Point

0

250

500

750

1,000


(INR mn)

Tutorials Service

Residential Campus

Formal Education Division

Healthy FCF



MCap: INR 2.7bn

TP: INR 322

CRPT IN

CMP: INR 131


Key offerings

53

Source: Company


Key financials

Steady recovery in the tutorial segment with improvement in

formal education

Sharp operating leverage led by capacity

19%

FY15-18E CAGR

Valued at just 15x FY18E PAT

Valuation

(INR mn) FY18E

Net Profit 389.5

Multiple (x) 15.0

Market cap 5,842.8


TP (INR) 322.2

54

253%


Net Sales 779 863 1,076 1,308

YoY (%) 19.4 10.8 24.7 21.6

Tutorial Segment 494 645 787 938

Formal Segment 32 59 86 109

Hostel Segment 123 160 203 261

EBITDA 98 257 420 603

YoY (%) 1.5 161.2 63.8 43.6

Margin (%) 12.6 29.7 39.1 46.1

PAT 9 117 246 390

YoY (%) (109.2) 3,672.8 109.4 58.6

EPS (INR) 3.2 9.4 16.1 23.5

P/E (x) 41.1 14.1 8.2 5.6

EV/EBITDA 23.3 8.9 5.5 3.8

ROE (%) 0.1 3.4 6.6 9.6

ROIC (%) 0.8 4.9 11.9 21.0

Revenue CAGR of 30% over

FY15-18E




MCap: INR 71bn

TP: INR 313

PEPL IN

In a sweet spot

Among tier-1 six cities, 40% of demand comes from the Mumbai and National Capital Region (NCR) regions. However, with an

average price of >INR 10mn per apartment, the Southern region with a lower price tag of INR 6-8mn offers more value for money.

According to Liases Foras, the current market size of the top six cities in India is INR 1,600bn. Of this, Bengaluru makes up 15-20% of

demand. Prestige Estates Projects has lined up ~14mn sq ft of launches in H2FY16 (five in Bengaluru and one in

Mangalore). We expect these new and ongoing projects to drive sales of 18mn sq ft worth INR 122bn over FY16-18E

Bengaluru office market in an upswing: Bengaluru is on track to achieve annual absorption of more than 10mn sq ft in

CY15E, and we expect these levels to sustain over CY16-17. PEPL’s rental income to rise by ~60% to INR 5.3bn by FY18E

from INR 3.3bn in FY15

Valuation

We recommend Buy with a SOTP-based TP of INR 313 based on 1.0x FY17E NAV of INR 117bn. With the Bengaluru residential

market seeing stable demand and the office market exhibiting strong signs of a recovery, we believe PEPL is well placed to ride the

dual benefits of focus on mid-income residential projects and having a strong portfolio of operational rental assets

Key risks

Longer-than-anticipated slowdown in the Bengaluru property market and tepid leasing activity

Key financials


YE March

Revenue (INR mn)

YoY (%)

EBITDA (INR mn)

EBITDA margin (%)

Adj PAT (INR mn)

YoY (%)

Fully DEPS (INR)

ROE (%)

ROCE (%)

P/E (x)

EV/EBITDA (x)

FY15 34,198 34.2 9,939 29.1 3,324 5.8 8.9 11.8 13.6 21.4 10.6

FY16E 39,964 16.9 10,891 27.3 4,214 26.8 11.2 11.2 12.3 16.9 10.1

FY17E 47,110 17.9 14,506 30.8 5,137 21.9 13.7 14.1 14.6 13.9 7.8

FY18E 53,716 14.0 16,253 30.3 7,088 38.0 15.6 14.7 14.8 12.2 7.2

Real Estate

Prestige Estates Projects CMP: INR 190

55

“The company is on track

to launch 14mn sq ft of

projects in FY16 with five

developments in

Bengaluru and one in

Mangalore”

Irfan Razack MD, Prestige Estates Projects

Uptake in sales bookings


5.0

5.5

6.0

6.5

7.0

30,000

35,000

40,000

45,000

FY14

FY15

FY16E

FY17E

FY18E

(msf) (INR mn)

Sales Value (LHS) Area sold (RHS)


Key ongoing projects

White Meadows, Bengaluru Bella Vista, Chennai

Kingfisher Towers, Bengaluru Sheraton Hotel, Bengaluru

56

Source: Company


Key financials


Net Sales 34,198 39,964 47,110 53,716

YoY (%) 34.2 16.9 17.9 14.0

EBITDA 9,939 10,891 14,506 16,253

YoY (%) 38.0 9.6 33.2 12.0

Margin (%) 29.1 27.3 30.8 30.3

PAT 3,324 4,214 5,137 7,088

YoY (%) 5.8 26.8 21.9 38.0

EPS (INR) 8.9 11.2 13.7 15.6

P/E (x) 21.4 16.9 13.9 12.2

P/B (x) 1.9 1.7 1.5 1.4

ROE (%) 11.8 11.2 14.1 14.7

ROCE (%) 13.6 12.3 14.6 14.8

Strong revenue levers from pickup in rental income and

ongoing projects

Margin profile to improve as rental income grows

16.2%

FY15-18E CAGR

17.8%

Attractively priced at a discount of 37% to

net asset value with 12.5x FY18E P/E

Valuation

(INR) FY17E

NAV (INR mn) 117,286


Target price 313

CMP 190

57

PEPL’s rental income to grow by

60% to INR 5.3bn in FY18E




Mcap: INR 17bn

TP: INR 254

BRGD IN

Annuity play

Bengaluru is fast turning into a Mecca for mid-income consumers, with attractively priced apartments in the range of INR 6-8mn. Its

appeal lies in the fact that it houses companies from key sectors, such as information technology & biotechnology, and sunshine

sectors such as e-Commerce and the start-ups. The city is likely to absorb 15-20% of new demand by FY18E. Brigade Enterprises

(BRGD IN) has lined up ~5mn sq ft of launches in H2FY16 (primarily in Bengaluru). We expect new and ongoing projects

to drive sales of 9mn sq ft worth INR 50bn over FY16-18E

Office space to drive demand: Brigade has a ready portfolio of marquee rental and hospitality assets at Bengaluru. This makes

the company a proxy for revival in the city’s rental market over the next three years. We expect rental income to grow by

53% from INR 1.6bn in FY15 to INR 2.3bn in FY18E, owing to ramp-up in occupancy in existing portfolio and addition of

1mn sq ft of rental assets by FY18E

Valuation

We recommend Buy with a SOTP-based TP of INR 254 on 1.0x FY17E NAV of INR 29bn. Of this, the operational rental and hospitality

assets would contribute 70% of NAV

Key risks

Sustained slowdown in the Bengaluru property market and weak leasing activity

Key Financials

YE March

Revenue (INR mn)

YoY (%)

EBITDA (INR mn)

EBITDA margin (%)

Adj PAT (INR mn)

YoY (%)

Fully DEPS (INR)

ROE (%)

ROCE (%)

P/E (x)

EV/EBITDA (x)

FY15 13,108 38.5 3,830 29.2 952 3.5 8.4 7.1 12.3 17.6 7.8

FY16E 17,438 33.0 5,353 30.7 1,372 44.1 12.2 9.7 13.7 12.2 5.7

FY17E 21,333 22.3 6,879 32.2 2,096 52.7 18.6 13.5 16.2 8.0 4.4

FY18E 26,098 22.3 7,711 29.5 2,314 10.4 20.5 13.3 16.8 7.3 3.7

Real Estate

Brigade Enterprises

58

“During H2FY16, we

expect to launch 5mn sq ft

of residential projects

apart from 2mn sq ft in

commercial as well as

hospitality segments”

Suresh Kris,

CFO, Brigade Enterprises

Healthy sales bookings


2.0

2.5

3.0

3.5

10,000

12,500

15,000

17,500

20,000

FY14

FY15

FY16E

FY17E

FY18E

(msf) (INR mn)

Sales Value (LHS)

Sales Bookings (RHS)



Key operational projects

World Trade Centre, Bengaluru Orion Mall, Bengaluru

Sheraton Hotel, Bengaluru Grand Mercure Hotel, Bengaluru

59

Source: Company


Key financials

60


Net Sales 13,108 17,438 21,333 26,098

YoY (%) 38.5 33.0 22.3 22.3

EBITDA 3,830 5,353 6,879 7,711

YoY (%) 28.3 39.7 5.1 (8.4)

Margin (%) 29.2 30.7 32.2 29.5

PAT 952 1,372 2,096 2,314

YoY (%) 3.5 44.1 52.7 10.4

EPS (INR) 8.4 12.2 18.6 20.5

P/E (x) 17.6 12.2 8.0 7.3

P/B (x) 1.2 1.1 1.0 0.9

ROE (%) 7.1 9.7 13.5 13.3

ROCE (%) 12.3 13.7 16.2 16.8

Rise in rental income, three operational hotels and robust

residential sales driving top line

Margin expansion as rental income grows

25.8%

FY15-18E CAGR

26.3%

Valuation

(INR) FY17E

NAV (INR mn) 28,617


Target price 254

CMP 149

Attractively priced at a discount of 40% to

net asset value with 0.9x FY18E P/B

Operational asset equity value at

INR 179 per share


APPENDIX

61


Pradhan Mantri Jan Dhan Yojna

62

PMJDY - the speed of money transfers and money into accounts seems to accelerate, as zero balance accounts have fallen sharply. We believe this

will pick up as more schemes come under its purview

Source: PMJDY Portal, Elara Securities Research

30

40

50

60

70

80

90

Oct

-14

Nov-1

4

Dec-

14

Jan-1

5

Feb-1

5

Mar-

15

Apr-

15

May-1

5

Jun-1

5

Jul-15

Aug-1

5

Sep-1

5

Oct

-15

Nov-1

5

(%)

Overall Public Sector Banks Reginal Rural Bank Private Banks

% of Zero Balance accounts under PMJDY

0

5

10

15

20

25

30

35

0

50

100

150

200

250

300

Oct

-14

Nov-1

4

Dec-

14

Jan-1

5

Feb-1

5

Mar-

15

Apr-

15

May-1

5

Jun-1

5

Jul-15

Aug-1

5

Sep-1

5

Oct

-15

Nov-1

5

(%) (INR bn)

Balance In Accounts (INR bn) % increase in money in accounts (MoM)


The Note is based on our estimates and is being provided to you (herein referred to as the “Recipient”) only for information purposes. The sole purpose of this Note is to provide preliminary information on the business activities of the company and the projected financial statements in order to assist the recipient in understanding / evaluating the Proposal. Nothing in this document should be construed as an advice to buy or sell or solicitation to buy or sell the securities of companies referred to in this document. Each recipient of this document should make such investigations as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in this document (including the merits and risks involved) and should consult its own advisors to determine the merits and risks of such an investment. Nevertheless, Elara Securities (India) Private Limited or any of its affiliates is committed to provide independent and transparent recommendation to its client and would be happy to provide any information in response to specific client queries. Elara Securities (India) Private Limited or any of its affiliates have not independently verified all the information given in this Note and expressly disclaim all liability for any errors and/or omissions, representations or warranties, expressed or implied as contained in this Note. The user assumes the entire risk of any use made of this information. Elara Securities (India) Private Limited or any of its affiliates, their directors and the employees may from time to time, effect or have effected an own account transaction in or deal as principal or agent in or for the securities mentioned in this document. They may perform or seek to perform investment banking or other services for or solicit investment banking or other business from any company referred to in this Note. Each of these entities functions as a separate, distinct and independent of each other. This Note is strictly confidential and is being furnished to you solely for your information. This Note should not be reproduced or redistributed or passed on directly or indirectly in any form to any other person or published, copied, in whole or in part, for any purpose. This Note is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject Elara Securities (India) Private Limited or any of its affiliates to any registration or licensing requirements within such jurisdiction. The distribution of this document in certain jurisdictions may be restricted by law, and persons in whose possession this document comes, should inform themselves about and observe, any such restrictions. Upon request, the Recipient will promptly return all material received from the company and/or the Advisors without retaining any copies thereof. The Information given in this document is as of the date of this report and there can be no assurance that future results or events will be consistent with this information. This Information is subject to change without any prior notice. Elara Securities (India) Private Limited or any of its affiliates reserves the right to make modifications and alterations to this statement as may be required from time to time. However, Elara Securities (India) Private Limited is under no obligation to update or keep the information current. Neither Elara Securities (India) Private Limited nor any of its affiliates, group companies, directors, employees, agents or representatives shall be liable for any damages whether direct, indirect, special or consequential including lost revenue or lost profits that may arise from or in connection with the use of the information. This Note should not be deemed an indication of the state of affairs of the company nor shall it constitute an indication that there has been no change in the business or state of affairs of the company since the date of publication of this Note. The disclosures of interest statements incorporated in this document are provided solely to enhance the transparency and should not be treated as endorsement of the views expressed in the report. Elara Securities (India) Private Limited generally prohibits its analysts, persons reporting to analysts and their family members from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover. The analyst for this report certifies that all of the views expressed in this report accurately reflect his or her personal views about the subject company or companies and its or their securities, and no part of his or her compensation was, is or will be, directly or indirectly related to specific recommendations or views expressed in this report.

Any clarifications / queries on the proposal as well as any future communication regarding the proposal should be addressed to Elara Securities (India) Private Limited.

Elara Securities (India) Private Limited was incorporated in July 2007 as a subsidiary of Elara Capital (India) Private Limited.

Elara Securities (India) Private Limited is a SEBI registered Stock Broker in the Capital Market and Futures & Options Segments of National Stock Exchange of India Limited (NSE) and in the Capital Market Segment of BSE Limited (BSE).

Elara Securities (India) Private Limited’s business, amongst other things, is to undertake all associated activities relating to its broking business.

The activities of Elara Securities (India) Private Limited were neither suspended nor has it defaulted with any stock exchange authority with whom it is registered in last five years. However, during the routine course of inspection and based on observations, the exchanges have issued advise letters or levied minor penalties on Elara Securities (India) Private Limited for minor operational deviations in certain cases. Elara Securities (India) Private Limited has not been debarred from doing business by any Stock Exchange / SEBI or any other authorities; nor has the certificate of registration been cancelled by SEBI at any point of time.

Elara Securities (India) Private Limited offers research services primarily to institutional investors and their employees, directors, fund managers, advisors who are registered or proposed to be registered.

Details of Associates of Elara Securities (India) Private Limited are available on group company website www.elaracapital.com

Elara Securities (India) Private Limited is maintaining arms-length relationship with its associate entities.

Research Analyst or his/her relative(s) may have financial interest in the subject company. Elara Securities (India) Private Limited does not have any financial interest in the subject company, whereas its associate entities may have financial interest. Research Analyst or his/her relative does not have actual/beneficial ownership of 1% or more securities of the subject company at the end of the month immediately preceding the date of publication of Research Report. Elara Securities (India) Private Limited does not have actual/beneficial ownership of 1% or more securities of the subject company at the end of the month immediately preceding the date of publication of Research Report. Associate entities of Elara Securities (India) Private Limited may have actual/beneficial ownership of 1% or more securities of the subject company at the end of the month immediately preceding the date of publication of Research Report. Research Analyst or his/her relative or Elara Securities (India) Private Limited or its associate entities does not have any other material conflict of interest at the time of publication of the Research Report.

Disclosures & Confidentiality for non U.S. Investors

63


India

Elara Securities (India) Pvt. Ltd.

Indiabulls Finance Centre, Tower 3, 21st Floor,

Senapati Bapat Marg, Elphinstone Road (West)

Mumbai – 400 013, India

Tel : +91 22 6164 8500

Europe

Elara Capital Plc.

29 Marylebone Road,

London NW1 5JX,

United Kingdom

Tel : +4420 7486 9733

USA

Elara Securities Inc.

36W 44th Street, 803, New York, NY 10036, USA

Tel :+1-212-430-5870

Asia / Pacific

Elara Capital (Singapore) Pte.Ltd.

30 Raffles Place

#20-03, Chevron House

Singapore 048622

Tel : +65 6536 6267

Disclaimer for non U.S. Investors The information contained in this note is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

This material is based upon information that we consider to be reliable, but Elara Capital Inc. does not warrant its completeness, accuracy or adequacy and it should not be relied upon as such. This material is not intended as an offer or solicitation for the purchase or sale of any security or other financial instrument. Securities, financial instruments or strategies mentioned herein may not be suitable for all investors. Any opinions expressed herein are given in good faith, are subject to change without notice, and are only correct as of the stated date of their issue. Prices, values or income from any securities or investments mentioned in this report may fall against the interests of the investor and the investor may get back less than the amount invested. Where an investment is described as being likely to yield income, please note that the amount of income that the investor will receive from such an investment may fluctuate. Where an investment or security is denominated in a different currency to the investor’s currency of reference, changes in rates of exchange may have an adverse effect on the value, price or income of or from that investment to the investor. The information contained in this report does not constitute advice on the tax consequences of making any particular investment decision. This material does not take into account your particular investment objectives, financial situations or needs and is not intended as a recommendation of particular securities, financial instruments or strategies to you. Before acting on any recommendation in this material, you should consider whether it is suitable for your particular circumstances and, if necessary, seek professional advice. Certain statements in this report, including any financial projections, may constitute “forward-looking statements.” These “forward-looking statements” are not guarantees of future performance and are based on numerous current assumptions that are subject to significant uncertainties and contingencies. Actual future performance could differ materially from these “forward-looking statements” and financial information.

Disclaimer for U.S. Investors

Research Analyst or his/her relative(s) has not served as an officer, director or employee of the subject company.

Research analyst or Elara Securities (India) Private Limited or its associate entities have not received any compensation from the subject company in the past twelve months. Research analyst or Elara Securities (India) Private Limited or its associate entities have not managed or co-managed public offering of securities for the subject company in the past twelve months. Research analyst or Elara Securities (India) Private Limited or its associate entities have not received any compensation for investment banking or merchant banking or brokerage services from the subject company in the past twelve months. Research analyst or Elara Securities (India) Private Limited or its associate entities may have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company or third party in connection with the Research Report in the past twelve months.

Disclosures for U.S. Investors The research analyst did not receive compensation from Petronet LNG Limited, Indraprastha Gas Limited, Gujarat Gas Company Limited, GAIL (India) Limited and Gujarat State Petronet Limited. Elara Capital Inc.’s affiliate did not manage an offering for Petronet LNG Limited, Indraprastha Gas Limited, Gujarat Gas Company Limited, GAIL (India) Limited and Gujarat State Petronet Limited. Elara Capital Inc.’s affiliate did not receive compensation from Petronet LNG Limited, Indraprastha Gas Limited, Gujarat Gas Company Limited, GAIL (India) Limited and Gujarat State Petronet Limited in the last 12 months. Elara Capital Inc.’s affiliate does not expect to receive compensation from Petronet LNG Limited, Indraprastha Gas Limited, Gujarat Gas Company Limited, GAIL (India) Limited and Gujarat State Petronet Limited in the next 3 months.

64


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Elara Securities (India) Private Limited

CIN: U74992MH2007PTC172297

SEBI RA Regn. No.: INH000000933

Member (BSE, NSE)

Regn Nos: CAPITAL MARKET SEBI REGN. NO.: BSE: INB

011289833, NSE: INB231289837 DERIVATIVES SEBI REGN.

NO.: NSE: INF 231289837

CLEARING CODE: M51449.

Website: www.elaracapital.com Investor Grievance Email ID:

[email protected]

Team Details

Harendra Kumar Managing Director [email protected] +91 22 6164 8571 Vishal Purohit Co-Head Institutional Equities [email protected] +91 22 6164 8572 Sales Deepak Sawhney India [email protected] +91 22 6164 8549 Kalpesh Parekh India [email protected] +91 22 6164 8513 Nishit Master India [email protected] +91 22 6164 8521 Prashin Lalvani India [email protected] +91 22 6164 8544 Sushil Bhojwani India [email protected] +91 22 6164 8512 Parin Vora North America [email protected] +91 22 6164 8558 Sales Trading & Dealing Manan Joshi India [email protected] +91 22 6164 8555 Manoj Murarka India [email protected] +91 22 6164 8551 Sanjay Joshi India [email protected] +91 22 6164 8554 Vishal Thakkar India [email protected] +91 22 6164 8552

Research Aarthisundari Jayakumar Analyst Pharmaceuticals [email protected] +91 22 6164 8510 Aashish Upganlawar Analyst FMCG, Media [email protected] +91 22 6164 8546 Abhishek Karande Analyst Technical & Alternate Strategy [email protected] +91 22 6164 8562 Adhidev Chattopadhyay Analyst Infrastructure, Real Estate [email protected] +91 22 6164 8526 Aliasgar Shakir Analyst Mid caps, Telecom [email protected] +91 22 6164 8516 Ashish Kejriwal Analyst Metals & Mining, Railways [email protected] +91 22 6164 8505 Ashish Kumar Economist [email protected] +91 22 6164 8536 Deepak Agrawala Analyst Power, Capital Goods [email protected] +91 22 6164 8523 Jay Kale, CFA Analyst Auto & Auto Ancillaries [email protected] +91 22 6164 8507 Rakesh Kumar Analyst Banking & Financials [email protected] +91 22 6164 8559 Ravi Menon Analyst IT Services [email protected] +91 22 6164 8502 Ravi Sodah Analyst Cement [email protected] +91 22 6164 8517 Sumant Kumar Analyst Agri, Travel & Hospitality, Paper [email protected] +91 22 6164 8503 Swarnendu Bhushan Analyst Oil and gas [email protected] +91 22 6164 8504 Bhawana Chhabra Sr. Associate Strategy [email protected] +91 22 6164 8511 Durgesh Poyekar Sr. Associate Oil and gas [email protected] +91 22 6164 8541 Manuj Oberoi Sr. Associate Banking & Financials [email protected] +91 22 6164 8535 Harshit Kapadia Associate Power, Capital Goods [email protected] +91 22 6164 8542 Priyanka Sheth Editor [email protected] +91 22 6164 8568 Gurunath Parab Production [email protected] +91 22 6164 8515 Jinesh Bhansali Production [email protected] +91 22 6164 8537

65


Notes

66


Notes

67

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