Trend in Sensex EPS Defensives stable while cyclical...

ICICI Securities Ltd. | Retail Equity Research

July 8, 2014

Defensives stable while cyclical declines getting arrested

The I-direct coverage universe is expected to deliver 16.5% revenue growth (excluding oil & gas). This revenue growth is far better than the 4.2% in Q1FY14 and 13.6% YoY in Q4FY14. Though the base effect of Q1FY14 will come into play in Q1FY15E, we feel growth rates have hit the bottom and a gradual recovery is under way for India Inc

On the profitability front, EBITDA margins are expected to improve 70 bps YoY to 20.6% (excluding oil & gas) while QoQ the same is expected to improve 40 bps. Consequently, we expect PAT to grow 23.2% for our coverage universe

On a sectoral basis, the top 5 performing companies (on the basis of PAT growth) come from information technology (two companies), telecom (one company), financials (one company) and automobiles (one company). Hence, the top five companies that top the chart in terms of profitability growth include TCS (~28.1% YoY), Wipro (29.4% YoY), HDFC Bank (22.8% YoY), Tata Motors (138% YoY) & Bharti Airtel (72% YoY)

Conversely, the bottom five performing companies (on the basis of PAT growth) come from metals & mining (two companies), capital goods (one company) and pharma (two companies). Hence, the bottom five includes Hindalco (-29%% YoY), Tata Steel (-32% YoY), Bhel (-36% YoY), Sun Pharma (-6.6% YoY) and Cipla (-39.9% YoY)

Post the favourable outcome of Lok Sabha elections in May 2014, broader markets have rallied 22.8% YTD. We believe valuations have been re-rated on hopes of a reformist government in Delhi. Hence, cyclicals have seen a massive rerating of P/E and P/BV multiples whereas defensives have more or less consolidated at the same levels as a portfolio resetting is under way towards beaten down cyclicals

Exhibit 1: Trend in revenue growth for Sensex companies

200000

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(| c

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Revenues YoY Growth

Source: Company, ICICIdirect.com Research

Trend in Sensex EPS

802 724923

1,0901,1651,1651,365

1,593

1,835

100300500700900

1,1001,3001,5001,7001,9002,100

FY08

FY09

FY10

FY11

FY12

FY13

FY14

FY15

FY16

(|)

-20

-10

0

10

20

30

40

50

(%)

Source: Bloomberg, ICICIdirect.com Research Analyst

Pankaj Pandey Head – Research [email protected]

Q1FY15E Result Preview July 08, 2014

Rectangle


Exhibit 2: Trend in profitability for Sensex companies…

20000250003000035000400004500050000550006000065000

Q1FY

11

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PAT YoY Growth

Top 5 Sensex companies in PAT growth for Q1FY15E Bottom 5 Sensex companies in PAT growth for Q1FY15E

22.8 28.1

137.7

29.471.9

18.40

20406080

100120140160

HDFCBank

TCS TataMotors

Wipro BhartiAirtel

Sensex

(% Y

oY)

-28.5

-39.9-36.2

-32.0

-6.6

18.4

-50

-40

-30

-20

-10

0

10

20

30

Hindalco Cipla BHEL Tata Steel SunPharma

Sensex

(% Y

oY)



What we expect our coverage universe to report and emerging trends

The I-direct coverage universe is expected to deliver revenue growth of 16.5% (excluding oil & gas). The revenue growth is far better than that of 4.2% in Q1FY14 and 13.6% YoY in Q4FY14. Though the base effect of Q1FY14 will come into play in Q1FY15E, we believe growth rates have hit the bottom and a gradual recovery is under way for India Inc

From a sectoral perspective, apart from export oriented sectors like IT, pharma and auto will continue to post strong revenue growth in the range of 18.7%, 23.4% and 21.7%, respectively. However, in domestic based sectors, we expect strong revenue growth recovery in a lot of sectors like power, metals and oil& gas, which are expected to grow 17.3%, 16.2% and 12.9%, respectively

Our estimates for Q1FY15E reiterate our stance that revenue growth for non-Sensex companies have bottomed out and a gradual recovery will follow, going ahead. We expect non-Sensex companies’ revenue growth for Q1FY15E to be at 9% YoY

Exhibit 3: Trend in revenue growth of I-direct coverage universe

375,

789

409,

049

459,

680

427,

655

446,

104

486,

571

443,

889

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385

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826

552,

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001

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Revenues (Ex-Oil& Gas, BFSI) Growth (%)


EBITDA margins are expected to improve 70 bps YoY to 20.6% (excluding oil & gas) while QoQ the same is expected to improve 40 bps. The key reason is the 26.3% improvement in absolute EBITDA for defensives (price hikes across products) and 10% YoY for cyclicals (slight improvement in operating leverage and low base of Q1FY14)

On a sectoral basis, autos, cement and capital goods are expected to witness a margin expansion in Q1FY15E to the tune of 13.7 bps, 11 bps and 10 bps, respectively. On the other hand, pharma, metals and infrastructure may see a decline of 2 bps, 9 bps and 10 bps, respectively


On the profitability front, the I-direct coverage universe is likely to deliver PAT growth (excluding oil & gas) of 23.2% YoY. Robust growth is more of a function of a low base of Q1FY14 wherein PAT declined 9% YoY. If we include oil & gas, then PAT growth further increases to 37% for Q1FY15E

From a sectoral perspective, PAT for the auto sector is expected to grow 54%. Key reason for the same is 138% YoY growth for Tata Motors, which alone will contribute 45% of the auto sector PAT. Other key PAT gainers would be pharma (17% YoY), IT (22% YoY), Cement(24% YoY)

Exhibit 5: Trend in profitability of I-Direct coverage universe

0

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(| c

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-20%-15%-10%-5%0%5%10%15%20%25%30%

PAT YoY Growth (%)


Exhibit 4: Trend in EBITDA margin of I-direct coverage universe

18.919.3 19.3

19.8

18.8 18.7

19.419.8 19.9

21.3

20.320.6

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22

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(%)

EBITDA Margin - Ex O&G (%)



Defensives: Strong show continues

(Sector composition: Consumer disc., IT, FMCG, Pharma) Key highlights:

• Defensives will maintain their consistency on an absolute basis as well on relative basis to cyclicals in terms of financial performance over the last 12-16 quarters. Q1FY15E will manifests growth based on both volume growth as well as price hikes (FMCG sector has seen a price led growth of 6% YoY while the same for cement 2.3% YoY)

• In the defensives space, pharma and IT are expected to post 23.4% and 18.7% YoY revenue growth, respectively. However, IT sector revenues are expected to remain flattish QoQ owing to exchange rate declining 3% QoQ. FMCG sector will witness revenue growth of 12% YoY which will be on back of 6% YoY volume and price growth.

• On an overall basis, revenue growth for defensives is expected to grow 17.9% YoY Q1FY15E vs. 13.7% YoY growth in Q1FY14

• We expect the absolute EBITDA to grow 19.8% YoY as we built in a 37 bps margin expansion for the space mainly led by gains emanating from volume and price hike affected across the sector under the defensive space.

• On the profitability front, defensives are expected to deliver 17.9% YoY growth vs. 16% rise in Q1FY14 and ~31% QoQ growth. On an individual basis, IT and pharma may stand out as they are expected to deliver 17% and 17.9% YoY growth, respectively

Exhibit 6: How performance variables of cyclicals may pan out in Q1FY15E

15.1

21.79.3 17.0

0

5

10

15

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25

30

5 10 15 20 25 30(Revenue growth,% YoY)

(EBI

TDA

Mar

gins

)

Consumer Discretionary IT FMCG Pharma



Exhibit 7: Trend in revenue growth of defensives over last three years

26.3 26.0

32.0

25.8 26.123.8

17.8 16.613.7

20.4 19.9 21.317.9

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Defensive universe revenues Y-o-Y(%)


Exhibit 8: Trend in EBITDA margins

22.1 22.724.1

23.1 23.7 23.5 23.5 23.1 23.825.1 25.6 25.024.2

1517192123252729

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(%)


Exhibit 9: Trend in profitability

500070009000

1100013000150001700019000210002300025000

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(| c

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Cyclicals: Decline arrested but recovery to be gradual

(Sector composition: Auto, cement, capital goods, power, infrastructure, real estate, oil & gas and telecom) Key Highlights:

• We expect the space to deliver revenue growth of 15.6% YoY, which will be the best growth rate recorded over Q1FY13-Q1FY15E

• On an individual basis, power, metals, auto, cement and real estate are expected to record good revenue growth of 17.3%, 24.1%, 21.7%, 13.2 and 10%, respectively. On the negative side, the capital goods space is expected to record negative growth of 6.6% YoY. The key reason for the decline in capital goods would be 10% revenue decline for Bhel in Q1FY15E

• EBITDA margins for cyclicals are expected at 15.4%, a gain of 220 bps YoY. The gains in margins come from a 351 bps and 179 bps margin expansion in the oil & gas and auto space, respectively

• Infrastructure and real estate are expected to see the highest margin erosion YoY by 10 bps and 5 bps, respectively

• Interest costs are expected to be higher by 13.9% YoY in Q1FY15E. The highest interest cost jump may be seen in the metals (63% YoY), real estate (29% YoY) and auto space (21.9% YoY). As a result, the interest to EBITDA ratio is expected to be 14.8% in Q1FY15E, lower by 273 bps YoY

Exhibit 10: How performance variables of cyclicals may pan out in Q1FY15E

05

1015202530354045

-15.0 -10.0 -5.0 0.0 5.0 10.0 15.0 20.0 25.0 30.0

Auto Cement Capital Goods Infrastructure Metals Oil&Gas Power Real Estate Telecom



Exhibit 11: Trend in revenue growth of cyclicals over last three years

37.3

25.9

32.428.1

11.014.4

6.94.9 5.8

11.9

6.99.4

15.6

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Total Y-o-Y(%)


Exhibit 12: Trend in EBITDA margins

15.413.7

16.8 17.6

9.1

16.614.4

18.0

13.215.3 15.0

17.315.4

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Exhibit 13: Interest costs have been a concern for cyclicals…

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Apparel

Revenue growth continues, with Page Industries leading the pack!

We expect our apparel coverage universe to report 14.8% YoY revenue growth in Q1FY15E. While all companies continue to grow in the 8-13% range, Page Industries (Page) is likely to maintain its strong growth momentum and lead the pack with 29.3% YoY growth in revenues to | 393.3 crore. While Kewal Kiran Clothing (KKCL) and Rupa & Company (Rupa) are likely to grow at 10-13%, we do not expect a pick-up in Lovable Lingerie’s (Lovable) sales (up 8.2% YoY) led by a tepid management commentary. Vardhman Textiles (Vardhman) is also likely to witness a slowdown in the pace of growth in demand as China’s yarn imports have started to come down from an average of ~170 million kg/month to ~150 million kg in May 2014. We, thereby, expect Vardhman’s revenues to grow 12.2% YoY.

Operating margin to fall led by input price pressure (except Page)

With an increase in cotton prices, we expect the operating margin of companies in our coverage to witness pressure. KKCL is likely to witness a dip of 130 bps in the operating margin to 22.1% owing to a negative operating leverage. While the revenue growth is likely to be relatively lower, the ad spends continue to remain high thereby impacting the operational efficiency. Lovable is also likely to witness operational pressure owing to higher ad spends (down 70 bps to 19.5%). Rupa may also succumb to increased input prices and witness a margin dip of 20 bps to 13.9%. We expect Vardhman to report a 100 bps dip in operating margin to 20.6% on the back of higher cotton prices and also lower exports. In contrast, Page is likely to witness a margin expansion of 60 bps to 21.5% on the back of price hikes taken.

On the PAT front, we expect KKCL, Lovable and Vardhman to report YoY de-growth owing to weaker sales growth and likely margin pressure. However, Page and Rupa are likely to witness PAT growth of 24.8% and 6.0%, respectively.

Macro trends in sector

Domestic cotton prices have increased 8.1% YoY to | 117/kg (average price: April–June 2014). Similarly, average cotton yarn prices also increased 5.2% YoY to | 217/kg. However, sequentially, yarn prices have come down 2.6% as demand from China has come down. If cotton prices continue to remain high and yarn prices soften owing to lower demand, domestic spinners could witness margin pressure, going forward.

Based on the data provided by Office of Textiles and Apparel (Otexa), India’s apparel and non-apparel exports to the US during January and May 2014 increased 5.6% and 6.1% YoY to $1562 million and $1333 million, respectively.

Exhibit 14: Estimates for Q1FY15E (Apparel) (| Crore Revenue EBITDA PAT

Q1FY15E YoY QoQ Q1FY15E YoY QoQ Q1FY15E YoY QoQKewal Kiran 83.3 13.1 -5.4 18.6 6.6 -18.9 10.8 -11.0 -47.6Lovable Lingerie 60.3 8.2 174.3 11.7 4.3 382.7 12.5 -4.4 2,227.1Page Industries 393.3 29.3 41.0 84.6 32.8 51.4 53.8 24.8 53.1Rupa & Co. 214.2 10.0 -23.0 29.8 8.4 -19.2 15.1 6.0 -22.9Vardhman Tex 1,339.6 12.2 4.5 276.0 2.4 -15.2 133.5 -7.6 -13.5Total 2,090.7 14.8 7.3 420.7 8.1 -5.2 225.7 -0.6 -2.0

Company Change (%) Change (%) Change (%)


Topline & Profitability (Coverage Universe)

1822 19

54 2033

1949

2091

16501700175018001850190019502000205021002150

Q1FY

14

Q2FY

14

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14

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14

Q1FY

15E

| Cr

ore

0.0

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15.0

20.0

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(%)

Revenue EBITDA Margin PAT Margin

Cotton prices (domestic & international)

100

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Jul-1

3

Oct-1

3

Jan-

14

Apr-1

4

0.6

0.7

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|/kg (LHS) $/ lb

Indian Textile exports to USA

60 60

70 72

61

52 53

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77

54

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(%)

Business Destinations Leisure Destinations

Analyst

Bharat Chhoda [email protected] Dhvani Modi [email protected]


Exhibit 15: Company specific view (Apparel) Company RemarksKewal Kiran Revenues are likely to increase 13.1% YoY to | 83.3 crore led by 7.4% YoY increase in

volumes to 8.7 lakh pieces & 5% YoY increase in realisation to | 919/ piece. The operatingmargin is likely to dip 130 bps YoY to 22.1% owing to negative operating leverage. PAT islikely to de-grow 11% YoY to | 10.8 crore

Lovable Lingerie

We expect revenues to increase 8.2% YoY to | 60.3 crore. However, we expect pressureon the operating margin owing to increased promotional spends. We expect the operatingmargin to dip 70 bps YoY to 19.5%. Consequently, PAT is likely to de-grow 4.4% YoY to |12.5 crore

Page Industries

We expect revenues to increase 29.3% YoY to | 393.3 crore, led by 16.6% YoY increase involumes (3.3 crore pieces) & 11.1% YoY increase in realisation to | 121/ piece. Operatingmargin is likely to improve marginally 60 bps to 21.5% led by improved realisations. PATis likely to grow 24.8% YoY to | 53.8 crore

Rupa & Company

Revenues are likely to increase 10.0% YoY to | 214.2 crore. We expect marginal pressureon operating margin due to higher input costs. Operating margin is likely to decline 20 bpsYoY to 13.9%. PAT may grow 6.0% YoY to | 15.1 crore

Vardhman Textiles

Revenues are likely to increase 12.2% YoY to | 1,339.6 crore led by 9% & 18% YoY growthin yarn & fabric segment to | 1,087 crore & | 528 crore (including internal consumption),respectively. Operating margin is likely to dip 100 bps to 20.6% due to higher costs. PATis likely to de-grow 7.6% YoY to | 133.5 crore


China’s cotton yarn import

80

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170

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Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14

milli

on k

gs


Auto and auto ancillary

Improved sentiment, signs of bottoming out visible!

The quarter saw a continued improvement in consumer sentiment, especially in the 2W segment where the impact of excise duty cuts has been visible. Overall auto volumes grew ~13% YoY led mainly by two-wheeler volumes, which grew 14.4% QoQ, led primarily by HMSI (that grew ~34% YoY). PV sales were flat YoY despite a strong performance from MSIL, which grew 12.6% YoY. The CV segment continued to witness volume declines (~16% YoY drop) but with M&HCV volumes showing improvement, there are strong signs of the cycle bottoming out. Ancillary players have benefitted from an improvement in demand and gained from operating leverage benefits. Tyre makers have benefitted from lower raw material prices and are expected to post strong earnings growth. We expect I-direct OEM, ancillary universe topline to grow at YoY ~24%, ~12%, respectively, though Ex-Tata Motors OEM topline is likely to grow at ~8% YoY. Tata Motors DVR and Wabco India are our top picks.

Better volume pick-up, steady RM prices, excise duty cuts augur well

Typically, Q1 is sequentially a weaker quarter in terms of volumes. However, this year Q1 has started on a strong note with ~15% YoY and ~1% QoQ increase in overall volumes. This coupled with the steady trend of raw material prices and extension of excise duty cuts till December 2014 augurs well for the industry coming off a weak year, For the I-direct OEM/ancillary universe, EBITDA margins are likely to improve ~180 bps, ~190 bps YoY to 15.4%, 13.4%, respectively. However, ex-Tata Motors, OEM margins are likely to improve ~40 bps YoY to 12.9%.

Profitability better on higher volumes, operating leverage

With an improvement in volumes, profitability is likely to improve as impact of operating leverage kicks in, especially for ancillary players. For the OEM, ancillary universe, we expect profit to grow at ~59%, ~49%, respectively. However, ex-Tata Motors, the OEM universe is likely to witness growth of ~11% YoY while ex-Motherson Sumi, the ancillary universe is likely to witness ~21% YoY growth in PAT.

Exhibit 3: Estimates for Q1FY15E: Auto and auto ancillary (| Crore) Revenue EBITDA PAT

Q1FY15E YoY QoQ Q1FY15E YoY QoQ Q1FY15E YoY QoQAmara Raja 978.5 9.5 10.2 158.8 9.2 15.3 99.8 2.1 24.7Apollo Tyre` 3,444.8 8.0 6.7 492.3 25.1 6.8 263.5 58.7 -6.4Ashok Leyland 2,332.9 -1.3 -24.2 79.7 242.9 -56.7 -50.2 NA PLBajaj Auto' 5,136.1 4.6 4.1 977.1 7.8 4.9 800.6 8.5 5.0Balkrishna Ind 975.9 19.6 -5.9 255.6 31.3 -4.6 133.5 30.3 -13.4Bosch India 2,358.7 9.7 -6.7 396.5 21.4 -5.5 276.3 18.0 -8.9Eicher Motors` 2,200.1 31.8 14.3 279.7 68.3 26.0 147.3 59.5 5.9Exide 1,535.1 -5.7 -4.8 214.1 -18.4 -2.2 132.6 -16.5 0.3Hero Motocorp 7,024.7 14.0 7.9 1,013.8 10.8 13.4 579.8 5.7 4.6JK Tyre 1,960.7 4.5 2.5 228.6 -2.8 19.0 86.6 56.7 92.6Mahindra CIE 93.8 -9.6 -4.5 16.1 11.5 -8.1 5.4 -7.5 -16.7M & M 10,046.1 0.2 -8.7 1,222.0 -5.1 34.8 882.4 -5.9 -1.6Maruti Suzuki 11,379.5 11.2 -6.0 1,285.0 10.2 3.0 658.3 4.2 -17.7Motherson` 8,485.5 19.8 0.9 892.6 97.3 3.0 352.0 380.9 16.3Tata Motors` 63,901.8 36.6 -2.2 10,858.5 60.8 0.8 4,102.5 137.7 4.7Wabco India 303.2 15.4 -3.9 44.8 0.1 -3.2 37.3 5.4 13.7Total 123,265.5 21.7 -2.1 18,480.2 38.1 3.6 8,544.2 54.8 -3.0


Source: Company, ICICIdirect.com research ,* Year end Sept `Consolidated numbers ‘ Maruti’s numbers are inclusive of SPIL

Topline & Profitability (Coverage universe)

1013

27 1104

07 1212

47

1258

34

1195

90

90000

95000

100000

105000

110000

115000

120000

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15E

| Cr

ore

4.0

6.0

8.0

10.0

12.0

14.0

16.0

(%)


Key players & industry volume YoY quarterly growth (%)

HMSI, 34.1

TML, -23.9

ALL, -8.0

Hyundai, -9.5M&M, -8.4

TVS, 21.2

Industry, 12.1

Maruti, 12.6

BAL, 0.9

HMCL, 10.0

0 12

+ve

-ve

+ve

-ve

Currency volatility chart

80

95

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155

Jun-

12

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14

US$INR US$JPY US$EUR

Top Picks Tata Motors DVR Wabco India

Analyst

Nishant Vass [email protected] Venil Shah [email protected]


Exhibit 17: Company specific view -OEM Company RemarksAshok Leyland

The topline is expected to de-grow ~23% QoQ as overall volumes have declined ~23%QoQ to ~19935 units. M&HCV volumes have declined ~21% QoQ, to ~15000 unitswhile the LCV segment has declined ~29% QoQ to ~5,000 units. We expect EBIDTAmargins to decline ~260 bps QoQ to 3.4%. Topline, PAT (loss) estimated to be ~| 2330 crore, - | 50 crore, respectively

Bajaj Auto BAL has witnessed a mixed bag of a quarter with domestic volumes lagging industryvolumes and growing ~2% YoY. Exports have made a strong comeback (~11% QoQgrowth) after a dull last quarter. Two-wheeler volumes at ~874,900 units were ~6%QoQ higher while 3-W segment volumes at ~113,700 units are likely to be higher ~3%QoQ. EBITDA margins are expected to remain flat QoQ at ~19%. Topline, PAT areexpected at ~| 5140 crore, ~| 800 crore, respectively

Eicher Motors

Eicher’s RE business continues to remain strong and has grown ~15% QoQ to ~74,000units. The VECV business has also been outperforming the industry and grown ~16%QoQ to ~11,350 units. EBIDTA margins, on a consolidated basis, are likely to trendhigher and improve ~120 bps QoQ to 12.7% with the standalone business posting~23% margins while VECV (inferred) margins are likely to improve ~160 bps to 7.5%.Standalone topline, PAT is likely to be | 744 crore, | 132 crore while consolidatedtopline, PAT is expected at | 2,200 crore, | 147 crore, respectively

Escorts The core tractor business is likely to witness a seasonally strong quarter in volumeterms with ~15% QoQ increase (but ~9% YoY decline as volumes remain muted in itsmajor markets of North and Central India) to ~17850 units. The overall topline is likelyto increase ~13% QoQ to ~| 1100 crore. Other businesses have remained underpressure and dampened improvement in overall margins to 5.9%. PAT is, thus, expectedto be ~| 37 crore

Hero Moto HMCL's volumes have been better especially in April and May as the impact of areduction in excise duty helped improve volumes to ~1.7 million units, ~10% YoY and~8% QoQ higher. The motorcycle segment rose ~8% QoQ to ~1.5 million units whilethe scooter segment has grown ~3% QoQ to ~195,170 units. EBITDA margins areexpected to improve ~70 bps QoQ to 14.4% on lower other expenses. Topline and PATare, thus, expected at ~| 7000 crore and ~| 580 crore, respectively

M&M In this quarter, M&M's automotive segment witnessed ~18% QoQ decline in volumes to112,615 units, led by the UV segment, which saw ~16% drop in a seasonally weakquarter to ~52200 units. However, the tractor segment saw ~35% QoQ growth to~74500 units owing to seasonality. EBITDA margins are, subsequently, likely toimprove 400 bps QoQ to 12.2% (comparison is not meaningful owing to the impact ofMTBL merger in Q4FY14). Topline and PAT are expected at ~| 10,000 crore and | 880crore, respectively

Maruti Suzuki

Maruti's performance has been better YoY but lower than the seasonally strong lastquarter as demand for newly launched "Celerio" has aided growth coupled with animprovement in traction in its petrol dominated portfolio. Volumes have de-grown ~8%QoQ to ~300,000 units. Margins are likely to improve ~100 bps QoQ to 11.3%. Toplineand PAT are likely to be ~| 11,400 crore and ~| 660 crore, respectively

Tata Motors

JLR is likely to witness another strong quarter with wholesale volumes likely to rise~30% YoY to ~117,800 units (June numbers estimated). Jaguar is likely to grow ~5%YoY and post volumes of ~19,600 units while LR is likely to post ~37% YoY growth to~98,300 units due to strong growth in new RR sport. JLR is likely to post topline of~£5.3 billion while margins are likely to decline 16.9% (~30 bps QoQ lower).Consequently, PAT is likely to be £453 million. Domestic sales are likely to improve~11% QoQ to ~116,630 units. With the M&HCV segment showing signs of bottomingout with de-growth ~2% QoQ to ~32,800 units, we expect standalone businessmargins to improve ~480 bps QoQ to -1.2%. Dividend from JLR would boost otherincome and lead to a profit of ~| 530 crore. Consolidated topline, PAT are expected tocome in at ~| 63,900 crore, ~| 4100 crore, respectively


Maruti Suzuki’s sales performance

276

288 32

5

266

300

-22.5

3.44.5

12.8

-7.7

0

50

100

150

200

250

300

350

Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15

(000

's)

-25

-20

-15

-10

-5

0

5

10

15

(%)

Sales QoQ growth

JLR sales performance

111.

4

116.

3

90.6 96

.1

119.

9

0

20

40

60

80

100

Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15E

(% s

hare

of t

otal

vol

umes

)

0

20

40

60

80

100

120

140

(000

's)

Jaguar % LR JLR total volumes(RHS)

Q3 volume number includes estimated numbers for June 2014 M&M’s sales performance

198

178

208

192

187-0.7

-10.1

17.1

-2.4

-7.7100

140

180

220


(000

's)

-12.5

-7.5

-2.5

2.5

7.5

12.5

17.5

(%)

Sales QoQ growth

Ashok Leyland’s sales performance

22 23

18

26

20-37.3

-20.06.3

41.1

-23.3

10

15

20

25

30


(000

's)

-60

-40

-20

0

20

40

60

(%)

Sales QoQ growth


Exhibit 18: Company specific view- Ancillaries Company RemarksAmara Raja Batteries

We expect decent volume growth (~10% QoQ), primarily on the back of better 2-Wdemand. Replacement segment is also likely to maintain demand growth while invertersales are expected to remain strong considering delayed monsoon, higher powerdemand owing to elections. Overall, we expect an increase in sales of ~10% QoQ to ~|980 crore. Average lead prices have declined ~2.5% QoQ in INR terms to ~| 131/kgand with no major pricing action taken in the quarter, EBITDA margins are likely toimprove 70 bps QoQ to 16.2%. PAT is estimated at ~| 100 crore

Apollo Tyres

The consolidated topline is expected to grow ~6% QoQ aided by volume growth in thedomestic business. Consolidated EBITDA margins are estimated to remain flat QoQ at14.3%. Domestic margins are likely to improve ~230 bps QoQ on decline in rubberprices. Performance of the European subsidiary Vredestein too is likely to be better onprofitability front. Consolidated topline and PAT are expected at ~| 3450 crore and ~|264 crore, respectively

Balkrishna Industries

The volume performance at ~40,000 MT is likely to be ~15% higher YoY. Sales thoughis expected to rise ~20% YoY owing to rupee depreciation YoY. ASPs in dollar terms arelikley to witness ~2% decline due to price cuts taken due to competitive pressures. Weexpect margins to improve ~40 bps to 26.2% as natural rubber prices remainfavourable. Topline and reported PAT are estimated at ~| 975 and ~|134 crore,respectively

Bosch Bosch's performance has been resilient to the slowdown in the auto industry due to adiversified product portfolio across sub-segments. We expect the topline to grow ~3%QoQ to ~| 2525 crore with strong seasonal growth in the tractor segment aidinggrowth. EBIDTA margins are likely to improve 30 bps QoQ to 16.6%. Subsequently, PATis expected at ~| 303 crore

Exide We expect sales revenues to de-grow ~5% QoQ to ~| 1530 crore as industrial batterybusiness continues to remain weak and offsets the improvement in auto volumes.Favourable raw material prices are likely to aid margins and we expect ~40 bpsimprovevement to 14%. PAT is expected at ~| 133 crore

JK Tyre On the topline front, we expect improvement in the truck bus segment coupled withincreasing radialization to aid volumes and expect showing ~3% QoQ improvement.With rubber prices continuing to remain favourable, margins are likely to remain on theuptrend and are likely to improve ~170 bps to 13.2%. Consolidated topline, PAT isestimated at ~| 1960 crore, ~| 86 crore, respectively

Motherson Sumi

We expect the consolidated topline to remain flat QoQ but ~20% higher YoY as thedomestic business growth has been constrained by low OEM demand in the PVsegment. We expect performance of SMP, SMR to remain robust and expect SMR, SMPto post adjusted EBITDA margins of 10.4%, 5%, respectively. MSSL's margins are likelyto decline ~50 bps QoQ to 23.1%. Consequently, consolidated adjusted EBITDAmargins are expected to improve ~20 bps QoQ to 10.5%. Topline is expected at ~ |8485 crore while reported PAT is expected to be ~| 352 crore

Wabco Wabco's performance is closely linked to the M&HCV industry. In Q1FY15 OEM growthhas been flat QoQ. The replacement segment however is likely to have declined QoQowing to seasonlity. Exports are likely to have continued to grow at ~5% QoQ. Wabco'soverall revenues are likely to de-grow ~4% QoQ to ~| 303 crore. EBIDTA margins arelikely to improve 10 bps QoQ to 14.8% as utilisation levels improve. Subsequently, PATis expected at ~| 37 crore


Eicher Motor’s sales performance 51

74

63

58

86

7.6

14.09.9

17.1

15.6

25

45

65

85

Q2CY13 Q3CY13 Q4CY13 Q1CY14 Q2CY14

(000

's)

024681012141618

(%)

Sales QoQ growth

Hero MotoCorp’s sales performance

1559 15

891681 17

15

1416

-5.4

7.9

-9.2

2.1

18.7

1000

1200

1400

1600

1800


(000

's)

-20

-10

0

10

20

30

(%)

Sales QoQ growth

Bajaj Auto’s sales performance

979

961 994

936

988-0.2

-1.8

3.4

-5.8

5.6

700

800

900

1000

1100

1200


(000

's)

-8

-6

-4

-2

0

2

4

6

8

(%)

Sales QoQ growth

Auto raw material index

RM Auto Index

80

100

120

140

160

180

200

220

240

Feb-

09Ju

n-09

Oct-0

9Fe

b-10

Jun-

10Oc

t-10

Feb-

11Ju

n-11

Oct-1

1Fe

b-12

Jun-

12Oc

t-12

Feb-

13Ju

n-13

Oct-1

3Fe

b-14

Jun-

14

Commodity prices have been indexed to 100 with base as Feb-09


Aviation

Passenger traffic may improve 3.5% YoY led by peak season demand

We expect domestic passenger traffic to grow 3.2% YoY vs. growth of 1.0% last year and de-growth of 1.4% QoQ last quarter. Available seat kilometre (ASKM) is expected to increase 2-3% YoY. However, with a pick-up in demand, we expect domestic load factors to improve 130 bps YoY to 77.8% from 76.5% reported last year. Further, yield per passenger is also expected to increase 5-7% YoY, (up 2-3% QoQ). We expect domestic market share of Jet Airways to remain flat YoY (down 150 bps QoQ) to 22.6% from 22.7% last year. SpiceJet’s domestic market share is also likely to decline 70 bps YoY to 18.9% YoY. For our I-direct coverage universe, this quarter is likely to end with average revenue growth of 12.6% YoY (6.0% QoQ). Further, we expect I-direct aviation universe to report a net loss of | 414 crore vs. loss of | 298.4 crore reported last year and loss of | 2787.5 crore reported last quarter.

Margin may improve QoQ on ATF price fall, strengthening of rupee

Average fuel prices during the quarter have fallen 5.4% QoQ (up 11.0% YoY) during April-June 2014 led by strengthening of the rupee against the dollar (up 3.2% QoQ, down 7.7% YoY) despite higher global crude oil prices (up 1.8% QoQ, 6.7% YoY). Average ATF prices for the quarter stood at | 75,603/kl (| 74,794/kl as of July 1, 2014). Other dollar linked operating cost like lease rentals, maintenance cost & salaries have also fallen due to strengthening of rupee against dollar. Further, average ticket prices have also increased 3% QoQ. Taking this into account, we expect operating profit of | 31.7 crore (OPM 0.5%) vs. operating loss of | 748.6 crore (OPM -11.4%) last quarter.

Exhibit 19: Company specific view

Company RemarksJet Airways (Jet + JetLite)

Domestic passenger traffic may grow ~3.2% YoY led by peak season demand(down 5.2% YoY). International pax traffic may see strong traction in revenue due toincrease in international segment. Margins may improve QoQ led by 5.4% QoQ fall inATF prices and rupee appreciation

Spicejet Revenues are expected to report flat growth with QoQ improvement led by peakseason demand. Operating losses may narrow sharply QoQ due to a reduction inATF prices coupled with strengthening of the rupee against the dollar (up 3.2% QoQ)


Exhibit 20: Estimates for Q1FY15E: (Aviation) (| crore)

Company Revenue EBITDA PATQ1FY15E YoY QoQ Q1FY15E YoY QoQ Q1FY15E YoY QoQ

Jet Airways 5,163.5 15.5 3.9 67.1 -31.5 LP -327.5 NA NASpiceJet 1,772.4 5.0 12.6 -35.4 PL NA -86.9 PL NATotal 6,935.9 12.6 6.0 31.7 -83.4 LP -414.4 NA NA

Change (%) Change (%) Change (%)



6158

5928 67

86

6542

6936

010002000300040005000600070008000

Q1FY

14

Q2FY

14

Q3FY

14

Q4FY

14

Q1FY

15E

| Cr

ore

-50.0

-40.0

-30.0

-20.0

-10.0

0.0

10.0

(%)


Quarterly trends of domestic pax traffic

156

129 15

0

152

158

147 156

150 16

3

020406080

100120140160180

Q1FY

13

Q2FY

13

Q3FY

13

Q4FY

13

Q1FY

14

Q2FY

14

Q3FY

14

Q4FY

14

Q1FY

15E

-15

-10

-5

0

5

10

15

Pax traffic (In lacs) - LHS Growth (%) - RHS

Movement in fuel prices (|./kl)

60,000

65,000

70,000

75,000

80,000

85,000

90,000

Apr-1

3

Jul-1

3

Oct-1

3

Jan-

14

Apr-1

4

Jul-1

4

Average ATF Prices (|./per kl)

As on April 01,2014 | 74,794/-

Analyst Rashesh Shah [email protected]

Darpan Thakkar [email protected]


Banking and Financial Institutions Credit traction to be sluggish; steady to marginally positive NIMs…

For our coverage universe (16 banks), we expect credit growth to reach 18% YoY to | 3487094 crore, led by private banks growth. As regards margins, owing to a drop in CD rates (down ~60 bps), wholesale banks such as Yes Bank and IndusInd are likely to benefit by ~10 bps QoQ. Yes Bank’s margin can further be higher owing to ~| 3000 crore raised via QIP. For the rest, NIMs may stay flat to positive QoQ. The aggregate NII for our banking coverage universe is expected to increase by a modest 11% YoY to | 37674 crore with private banks outperforming.

NPA concerns not abating, fall in G-sec yields can support earnings

NPA concerns may persist. We estimate GNPA will increase 7% QoQ to | 118740 crore for PSU banks while for private (excluding J&K), it is estimated to rise 4.6% QoQ to | 10401 crore. In case of J&K Bank, a large agri account worth ~| 650 is expected to slip into NPA in Q1.

The 10 Year G-sec yields had declined ~30 bps from highs before closing at 8.74% (down ~5 bps QoQ) at the end of Q1. This will enable banks, especially PSUs, to book treasury gains and reduce provisioning cost. Among our universe; Dena Bank, PNB, Axis Bank and J&K Bank seem to be major beneficiaries. PAT growth for our coverage universe is estimated at 5.1% YoY with PSU banks continuing with a PAT decline of 5.7% YoY. However, PAT growth of private banks is estimated to remain strong at 21% YoY.

Exhibit 21: Estimates for Q1FY15E ( | Crore) NII PPP NP

Q1FY15E YoY QoQ Q1FY15E YoY QoQ Q1FY15E YoY QoQ

Bank of India 2908.3 14.6 -4.6 2055.4 -5.7 3.0 629.9 -34.7 13.0

Bank of Baroda 3099.3 7.3 -0.8 2338.7 -4.6 -9.3 1221.3 4.6 5.5Dena Bank 662.8 9.6 7.9 422.8 -27.9 -5.6 117.0 -38.2 -37.5

PNB 4034.3 3.2 0.8 3108.4 4.5 -2.1 1083.1 -15.1 34.3

Syndicate 1459.3 9.1 1.9 1017.7 7.3 2.0 495.9 9.7 21.2SBI* 12488.9 8.5 -3.2 8706.5 15.3 -18.1 3329.5 2.7 9.5

Total 24652.8 8.2 -1.9 17649.6 5.7 -11.0 6876.7 -5.7 11.7

Axis Bank 3451.7 20.5 9.0 3122.8 9.8 -3.8 1723.3 22.3 -6.5

City Union Bank 196.8 5.1 6.6 157.7 -2.4 6.6 95.8 6.1 15.0

DCB 102.8 23.7 2.8 50.6 -1.4 0.9 40.4 -5.8 3.3

Federal Bank 564.2 10.7 -9.7 396.9 -0.9 -5.5 240.2 127.3 -13.4HDFC Bank 5088.8 15.2 2.8 3958.0 19.7 4.7 2264.0 22.8 -2.7

Indusind Bank 809.9 19.2 3.7 744.5 16.0 3.6 418.1 24.9 5.6

J&K Bank 720.1 10.0 2.7 508.3 5.7 5.6 275.7 -10.5 10.0Kotak Bank* 1024.3 11.7 6.0 723.3 -7.1 19.1 431.0 7.0 5.9

SIB 368.2 12.4 1.0 243.0 -3.4 18.6 133.5 16.2 7.1

Yes Bank 758.2 15.0 5.4 730.6 7.5 7.4 479.9 19.7 11.6Total 13085.1 15.8 4.2 10635.8 10.8 2.9 6101.9 20.8 -1.2

HDFC* 1675.3 15.0 -19.0 1914.2 16.9 -19.6 1354.4 15.5 -21.2IDFC 652.6 -4.9 -2.3 781.6 -11.4 -6.2 464.5 -17.1 74.8

LIC HF 559.4 23.0 4.9 541.1 27.6 3.8 378.8 22.0 2.4

Rel Cap 1884.5 -2.8 2.0 179.0 18.6 -44.2 146.4 10.0 -45.2Total 4771.8 5.2 -6.8 3415.9 10.4 -15.8 2344.1 7.7 -10.6

NII: Net Interest Income, PPP: Pre provisioning profits, NP: Net Profit, NC: Not Comparable

Public Sector Banks

Private Banks

NBFCs



Net Interest Income (Coverage Universe)

2512

3

2465

3

1130

2

1166

1

1176

1

1256

1

1308

5

2278

8

2372

5

2465

7

4535

4466

4689

5118

4772

5000

15000

25000

35000

45000

Q1FY

14

Q2FY

14

Q3FY

14

Q4FY

14

Q1FY

15E

(| C

rore

)

PSB Private NBFC

PPP (Coverage Universe)

1982

2

1765

0

9596

9353 95

43 1033

4

1063

6

1669

2

1425

4

1583

9

3095

3075 31

79 4055

3416

5000

10000

15000

20000

25000

30000

Q1FY

14

Q2FY

14

Q3FY

14

Q4FY

14

Q1FY

15E

(| C

rore

)

PSB Private NBFC

Net Profit (Coverage Universe)

6158

6877

5053

5223

5850 61

77 6102

5073

525472

90

2344

2622

2282

224921

77

3000

6000

9000

12000

15000

Q1FY

14

Q2FY

14

Q3FY

14

Q4FY

14

Q1FY

15E

(| C

rore

)

PSB Private NBFC

Top Picks BoB DCB

Analyst

Kajal Gandhi [email protected]

Vasant Lohiya [email protected]

Jaymin Trivedi [email protected]


Exhibit 22: Company specific view (Banks) Banks RemarksBank of Baroda

Profit growth may moderate to 4.6% YoY and improve to 6% QoQ led by lower provisionexpectation. NPA additions expected to stay arrested adding just | 100 crore QoQ.Credit and deposit growth seen at 21% YoY. Lower cost of funds to help maintainmargin around 3%

Bank of India Asset quality is expected to be relatively stable aided by NPA sale and slow Q1 withprofit growing 13% QoQ to | 629 crore. Credit growth may still be strong at 21% YoYwith deposit growth of 14.3%. Ten year G-sec yield correction may turn beneficial withhigher trading profit

Dena Bank Profits are not comparable on YoY or QoQ basis as both Q4FY14 and Q1FY14 includedfew one-offs (Tax reversal, huge trading gains, etc). For Q1FY15E, we have estimatedasset quality will remain stable with GNPA increase of mere | 26 crore QoQ to | 2642crore. Healthy credit growth of18.2% YoY to | 76778 crore will support NII growth of9.6% YoY and 7.9% QoQ to | 662.8 crore

Punjab National Bank

PAT of | 1083 crore is expected, down 15% YoY vs. 28.7% YoY decline witnessed inQ4FY14. Decline in G-sec yields during the quarter should support other income andalso help lower MTM provisioning as it has high AFS portfolio of | 41439 crore withhigher duration of 4.6 years. Credit growth may remain below industry at 12.8% YoY(flat sequentially)

State Bank of India

Expect credit growth of 17% YoY and deposit growth of 15.5% YoY, leading to NIIgrowth of 9% YoY. Margins may be maintained at 3.17%. Net addition to GNPA seen at| 5000-6000 crore. We expect total provisions to decline QoQ | 3881 crore. PAT isseen growing 2.7% YoY to | 33.3 billion

Syndicate Bank

Credit growth of 16.4% YoY (flat QoQ) to | 173882 crore is expected. PAT traction of9.7% YoY to | 496 crore is estimated, supported by lower provisions on fall in G-Secyields and 8% YoY increase in other income to | 318 crore. Asset quality to remainstable with GNPA at ~2.8%. Margins are expected to remain steady at 2.8%

Axis Bank Credit growth may be stable around 17% YoY. We expect deposit growth to improve to17.8% YoY. Strong profitability growth may sustain at 22% YoY to | 1723 croresupported by 20% YoY NII growth. Trading gains can surprise positively. Asset qualitymay remain stable

City Union Bank

We estimate modest credit growth at 8% YoY to | 16620 crore (up by | 523 crore QoQ)in sync with management guidance. Asset quality is expected to improve as the bank islikely to sell ~| 100 crore of assets to ARC. We estimate GNPA will decline by | 23crore QoQ to | 270 crore. PAT growth may stay modest at 6.1% YoY to | 95.8 crore

DCB Credit growth may remain healthy at 23.5% YoY to | 7992 crore, supporting 23.7% YoYNII growth to | 102.8 crore. Asset quality may remain stable with GNPA increase ofmere | 10 crore QoQ to | 148.5 crore. PAT may de-grow from | 42.8 crore in Q1FY14 to| 40.4 crore as Q1FY14 included significant trading gains of | 16 crore against | 5 croreestimated now

HDFC Bank All-round steady performance is expected to continue. NII growth may remain healthyat 15.3% YoY on the back of strong credit growth of 24.8% YoY to | 322695 crore (upby | 19695 crore QoQ). Asset quality may be stable with GNPA addition of mere | 120crore QoQ to | 3108.9 crore

Federal Bank Initial signs of pick-up in credit growth to be witnessed in Q1FY15E. We expect creditgrowth of 6% YoY to | 43739 crore against 1.5% YoY de-growth in Q4FY14. We expectasset quality to remain stable with absolute GNPA increase of mere | 54 crore QoQ to |1142 crore. PAT is not comparable on YoY or QoQ basis as both Q1FY14 and Q4FY14involved one-offs.


C-D Ratio (Industry)

7678 78

76 76 76 76.577.176.977

32

88100

60 56 5775 66.4

55.073.2

65

70

75

80

Jul-1

3Au

g-13

Sep-

13Oc

t-13

Nov

-13

Dec-

13Ja

n-14

Feb-

14M

ar-1

4Ap

r-14

May

-14

Jun-

14

(%)

020406080100120

(%)

CD Ratio Incremental CD Ratio

Asset Quality (Coverage Universe)

3.23.8 4.0 4.0 3.8

1.51.9 2.1 2.1 1.9

0.0

1.0

2.0

3.0

4.0

5.0


(%)

GNPA ratio NNPA ratio

NPA trend (Coverage Universe)

PSBBank of India 12225 3.0 7491 1.0Bank of Baroda 11976 0.8 6075 0.7Dena Bank 2642 1.0 1837 1.0PNB 19481 3.2 10516 6.1SBI 67605 9.7 33803 8.7Syndicate Bank 4811 4.3 2821 3.7Private. BanksAxis Bank 3346 6.4 1075 4.9City Union Bank 270 -8.0 178 -10.0DCB 148 7.2 78 5.0Federal Bank 1142 5.0 338 5.0HDFC Bank 3109 4.0 861 5.0Indusind Bank 646 4.0 188 2.0J&K Bank 1433 83.0 402 294.1Kotak Bank 1096 3.5 579 1.0South Indian Bank 454 5.0 296 5.0Yes Bank 190 8.6 30 15.0

QoQ Growth(%) Q1FY15E

GNPA (| crore)

QoQ Growth(%)

NNPA (| crore)


Exhibit 23: Company specific view contd. (Banks) Jammu & Kashmir Bank

An agri account worth | 650 crore is likely to classified as NPA or as restructured assetin QFY15E. Accordingly, we estimate GNPA will rise from | 783 crore to | 1433 crore.Provision may be higher at | 108.7 crore in Q1FY15E compared to | 36 crore in Q1FY14.PAT may de-grow 10.5% YoY to | 275.7 crore

Kotak Mahindra Bank

Credit growth may remain subdued at ~12% YoY to | 556789 crore. Margins areexpected to stay steady at ~4.9%. Asset quality may stay stable but we haveprovisioned higher QoQ at | 80 crore. Net profit is expected at | 431 crore (up 7% YoY).We expect subsidiaries performance to remain stable

South Indian Bank

Credit growth for Q1FY15E may be largely in line with industry at 14.4% YoY to | 35686crore (flat QoQ). NIM of 3% may be maintained. Asset quality may remain stable withGNPA estimated to rise by | 21.6 crore QoQ to | 454 crore. Overall, steady resultsexpected with PAT growth of 16.2% YoY to | 133.5 crore

Yes Bank A decline of ~50-60 bps in wholesale funding rates should lead to ~10 bps QoQimprovement in NIMs to 3.1%. Margins may be further higher owing to | 3000 croreraised via QIP in June 2014. Credit growth of 19% YoY to | 57024 crore is estimated.Hence, NII may see healthy traction of 15% YoY. Asset quality may remain stable withPAT increasing 19.7% YoY to | 480 crore

IndusInd Bank We expect healthy NII traction of 19% YoY to | 810 crore on healthy NIMs of 3.75% (flatQoQ) supported by drop in wholesale rates during Q1. Further, loan traction couldmoderate to 22% YoY to | 57957 crore but still remains healthy. Asset quality mayremain acceptable with GNPA of ~1.1-1.2%. PAT of | 418 crore is expected (up 24.9%YoY)


Exhibit 24: Company specific view (NBFCs)

NBFC RemarksIDFC Credit growth may stay subdued at 7% YoY with margins maintained at 4%. PAT growth

is seen at 79.3% QoQ with a dip of 17.6% YoY. A gradual transfer of assets to infra debtfund (IDF) may happen as a step towards bank formation

LIC Housing Finance

Margins may stay steady at ~ 2.4% levels supported by a decline in money marketrates during Q1FY15 and some improvement in developer loan proportion to 3.15% vs.3.05% in Q4FY14. NII may grow at a healthy pace of 23% YoY to | 559 crore. Assetquality may remain steady. PAT is estimated to grow 22% YoY, 2.4% QoQ to | 379 crore

Reliance Capital

We expect a normal quarter with 2% YoY dip in revenue. Expect | 30-40 crore as lifeinsurance contribution towards consolidated bottomline. Stable income is seen inconsumer finance and general insurance. AMC may report strong profit. We expect PATto grow at 10% YoY to | 146 crore with a sharp decline QoQ on account of a seasonallystrong Q4

HDFC Ltd Credit to grow at 16% YoY to | 205312 crore, largely led by 20% YoY increase inindividual home loan book. Traction in the corporate book to remain subdued at 9% YoY. Reported NIMs to remain in the range of 4-4.1%. PAT growth of 15.5% YoY to | 1354crore is expected supported by healthy other income growth of 25% YoY to | 432 crore.Dividend income of ~| 290 crore is estimated. Asset quality to remain stable withGNPA increase of | 40 crore QoQ to | 1400 crore.



Capital Goods

Ordering activity muted in Q1FY15E but hopes hinge on H2FY15E

Formation of the new government at the Centre has definitely revived the business and investor confidence, thereby pinning hopes of a capex cycle recovery on H2FY15E. However, given the hangover of the last couple of years of a weak investment climate, order inflows have been muted for majority of the companies under our coverage. L&T has consistently reported order inflows across segments and geographies. Even in Q1FY15E, L&T managed to report order wins of | 17900 crore. Power EPC players like Bhel, BGR Energy and Thermax failed to report any major order wins. In the T&D EPC space, KEC managed to bag orders to the tune of | 1646 crore.

Pain of interest costs seems to be abating

Interest costs may show the lowest growth of 1% YoY in Q1FY15E, which is the lowest in the last 12 quarters. Interest costs for coverage companies for Q1FY15E are expected to be at | 465 crore vs. | 460 crore in Q1FY14. The reason for a muted rise is owing to an improvement in the receivables situation post the restructuring programme of SEBs and high base of Q1FY14 (interest costs were up 21% YoY in Q1FY14). Similarly, interest as percent of EBITDA is expected at 22.7% in Q1FY15E vs. 22.1% in Q1FY14. Individually, BGR and Kalpataru are expected to see a decline in interest costs to the tune of 4% and 9%, respectively. On the other hand, KEC and Jyoti Structures are expected to witness 18% and 26% rise in interest costs, respectively.

Financial performance mixed: L&T, AIA and Kalpataru to perform well

Among large caps, L&T may continue to exhibit a relatively strong financial performance (12.5% revenue growth, 9.6% EBITDA margins and 11% PAT growth) while Bhel may continue to face a decline in Q1FY15E as well (Decline of 10% YoY in revenues and 36% decline in PAT owing to high negative operating leverage impacting margins). In the midcap space, AIA may be the star performer (capacity addition may drive 17.5% revenue growth coupled with margin expansion of 290 bps and PAT growth of 45% YoY) while Thermax is expected to be back on the growth path post a series of quarterly declines (18% revenue and 28% PAT growth). On an overall basis, revenue for our coverage universe may decline ~6.6% with PAT declining 8% YoY (mainly due to a decline in PAT for Bhel, BGR and Jyoti Structures).

Exhibit 25: Estimates for Q1FY15E ( | crore)Revenue EBITDA PATQ1FY15E YoY QoQ Q1FY15E YoY QoQ Q1FY15E YoY QoQ

AIA Engineering 570.2 17.5 -1.1 136.9 33.4 -17.2 93.1 44.9 -22.0BGR 882.5 7.5 8.7 93.6 -11.8 9.2 30.0 -19.9 57.0BHEL 5,806.6 -10.1 -61.4 376.3 -3.2 -86.2 297.0 -36.2 -84.0Greaves Cotton 428.8 4.0 -1.5 51.5 4.2 11.3 32.6 2.8 -36.7Jyoti Structure 763.4 7.3 -41.6 74.1 4.6 7.7 10.6 -35.1 LPKalpataru Power 942.3 5.9 -18.2 95.7 4.0 -12.3 40.9 18.0 -13.0KEC Internnational 1,856.8 6.3 -14.7 120.3 36.5 -20.6 23.6 LP -31.4L&T 11,023.9 -12.2 -45.1 1,058.3 -1.2 -63.5 738.9 -2.3 -72.9Thermax Ltd 1,014.7 17.6 -26.6 96.4 18.4 -28.0 64.5 28.4 -39.1Total 23,289.2 -6.6 -45.8 2,102.9 2.6 -67.1 1,331.1 -8.0 -73.0


Source: Company, ICICIdirect.com research

Topline & Profitability (Coverage universe) 24

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L&T order inflow trends

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Top pick of the sector

L&T AIA Engineering Analyst

Chirag J Shah [email protected]



Company RemarksBGR Energy With a strong execution backlog, we expect a higher share of NTPC’s bulk order

execution in revenues, which is expected to grow 7% YoY to | 882 crore. Highershare of EPC orders may lead to a margin decline of 230 bps to 10.6%. This isexpected to lead to a PAT decline of 20% to | 30 crore

Thermax Thermax is expected to report strong revenues of | 1015 crore, up 17.6%, owing to alower base of Q1FY14. The big ticket order announcement was missing during thequarter. Margins are expected to remain stable YoY at 9.35%. Increased executionmay, therefore, lead to 28% YoY jump in PAT at ~| 65 crore

Jyoti Structures JSL failed to report any order win during Q1FY15E. We expect revenues to grow 7.3%YoY to | 763 crore. Higher execution of low margin international order will lead tomargin decline of 20 bps to 9.7%. High interest costs, up 26% YoY, may lead to adecline of 35% YoY in PAT to | 10.6 crore for Q1FY15E

KEC International Order wins during Q1FY15E stood at | 1646 crore. Revenues are expected to grow6% YoY to | 1856 crore. Margins are expected to improve significantly by 140 bpsYoY to 6.6%. Interest costs may be elevated at | 68 crore but margin gains will helpKEC post a PAT of | 23 crore in Q1FY15E vs. loss of ~| 9 crore in Q1FY14

Kalpataru Power Transmission

We expect KPTL to post revenue growth of ~6% YoY to | 942 crore. Increasedexecution of international orders may lead to a margin decline of 19 bps to 10.1% inQ1FY15E. However, ~9% YoY decline in interest costs may help PAT to grow to | 40crore, up 18% YoY

Larsen & Toubro Revenues and EBITDA are expected to grow 12.5% and 13.2%, respectively, forQ1FY15E. EBITDA margins are expected to go up 60 bps on a reported basis to 9.5%(excludes hydrocarbon business). Consequently, we expect L&T to report a PAT of |739 crore (adjusted PAT of | 665 crore in Q1FY14), up 11% YoY

Bhel Order inflows have been muted for Q1FY15E. Weak execution may persist, leading to11% YoY revenue decline to | 5807 crore. Negative operating leverage may continueto put pressure on margins, which are expected at 6.5% for Q1FY15E. Hence, PAT isexpected to decline 36% YoY to | 297 crore. Key thing to watch is a) movement ofexecution of private sector orders and b) resumption of ordering in the powersegment

Greaves Cotton 3W auto volumes are expected to be flattish YoY whereas pain in the infrastructuresegment may continue to pressure revenues. Hence, we expect revenues to grow 4%to | 429 crore. Margins are expected to be flattish at 12%. PAT is expected to growmarginally by 3% YoY to | 32 crore

AIA Engineering We expect volume growth at 13% YoY at ~50400 tonnes for Q1FY15E as newlycommissioned capacity of 60000 tonnes in FY14 will exhibit its impact. Coupled withthis, a realisation of | 110000/tonne may lead to 17.5% YoY revenue growth inQ1FY15E. We have built in EBITDA margins of 24%, up 290 bps YoY. Consequently,we expect PAT of | 93 crore, up 44.9% YoY



Cement

Demand improvement visible during quarter…

All-India cement sales volumes have shown some visible signs of growth during April and May with YoY production growth of 6.7% and 8.7%, respectively. Our channel checks suggest good demand during June as well along with delayed monsoon resulting in a better quarter in terms of demand. After sluggish production growth of 3% YoY during FY14, early signs of demand improvement in FY15 kept hopes alive, hinging on the new government. For Q1FY15E, we expect companies under our coverage universe to register volume growth of 11.6% YoY (led by expansion based growth in some of the companies) vs. de-growth of 0.06% YoY last year and 6.59% YoY growth last quarter.

…prices also increase along with demand

Companies increased cement prices across all regions during the quarter. On a YoY basis, the increase in prices may be higher in western and northern regions while the southern region has seen a sharp improvement in price sequentially after the bifurcation of Andhra Pradesh. The quarter also saw the resumption of supply from Binani Cement plant in the Northern region, which kept prices under pressure in the region. They had already hiked prices by | 40-50/bag during the previous quarter. We expect companies under our coverage to report an increase in realisation by ~2.3% YoY and ~3% QoQ

I-direct universe to report topline growth of ~13% YoY pushed by new capacities of some companies

Aggregate revenue of our cement coverage universe is expected to grow 13.2% YoY where volume growth is expected at 11.6% YoY with cement realisation growth of 2.3%. Among our coverage universe, we expect JK Cement and JK Lakshmi to report revenue growth of ~29% YoY supported by strong volume growth along with capacity expansion in case of JK Lakshmi. The average EBITDA margin of our coverage is expected to increase ~110 bps YoY (up ~220 bps QoQ) to 20.3% in Q1FY15E due to higher realisation during the quarter. The bottomline of our universe is also expected to increase ~23% YoY to | 1983.3 crore.

EBITDA/tonne to increase led by better realisation

With higher realisation, we expect EBITDA/tonne to increase 6.2% YoY and 9.1% QoQ of our coverage universe to | 884/tonne. Costs like power & fuel as well as freight costs are expected to increase YoY but higher realisation will be enough to swallow the increased cost.

Exhibit 27: Estimates for Q1FY15E (| Crore) Revenue EBITDA PAT

Q1FY15E YoY QoQ Q1FY15E YoY QoQ Q1FY15E YoY QoQACC^ 3,008.3 7.6 1.4 486.9 12.1 33.3 323.3 23.5 -19.2Ambuja^ 2,571.9 9.6 -2.6 558.9 13.6 -3.2 395.4 22.0 -24.0Heidelberg^ 426.2 18.9 7.9 61.2 92.6 2.2 11.5 LP -76.0India Cement 1,173.5 -5.2 8.7 215.1 12.6 189.9 44.3 163.5 LPJK Cement 849.3 29.2 2.6 134.7 47.3 -14.8 53.3 72.2 -30.3JK Laxmi Cem 589.5 29.0 -9.1 110.1 56.8 -1.7 43.3 175.9 -18.1Mangalam Cement 198.0 17.7 -7.3 31.3 26.4 30.0 13.9 -26.3 80.0Shree Cement * 1,795.0 23.9 7.8 498.7 28.8 15.7 327.3 15.1 47.1UltraTech Cem 5,715.4 15.3 -2.0 1,221.7 16.4 6.9 771.1 14.6 -8.0Total 16,327.1 13.2 0.4 3,318.4 19.7 12.7 1,983.3 22.6 -7.1


Source: Company, ICICIdirect.com Research, ^Q2CY14 result ;* Q4FY14 result June year ending


1442

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Top pick of the sector JK Cement Analyst

Rashesh Shah [email protected]



Exhibit 28: Company specific view Company RemarksACC We expect cement sales volumes to increase 4.5% YoY (QoQ decline of 1.3%) to

6.40 MT in Q2CY14, which is lower than industry average due to the company'slarge exposure to the southern region where demand growth was low. Netrealisation may grow 3% YoY to | 4704/tonne. Better realisation coupled withincreased cost will lead to flat EBITDA/tonne

Ambuja Cement Cement sales volume is expected at 5.80 MT (up 7.8% YoY, down 4.3% QoQ) inQ2CY14. We expect cement realisations to increase ~1.7.% YoY (up ~1.8% QoQ)to | 4,435/tonne. The EBITDA/tonne is expected to increase ~5.4% YoY to |964/tonne due to better realisations and better operational efficiency

UltraTech Cement

The blended sales volume is expected to increase 12.5% to 11.80 MT in Q1FY15with better demand in Northern and Western regions. Blended realisation isexpected to increase ~2.5% YoY to | 4,844/tonne. Blended EBITDA/tonne isexpected to increase by ~3.5% YoY to | 1035/tonne

Shree Cement We expect cement sales volumes to increase ~30% YoY to 4.06 MT supported byincreased capacity and better demand in the northern region. Cement realisationsare expected to increase ~6.7% YoY (up~0.4% QoQ) to | 3,891/tonne. We expectmerchant power sales volume of ~600 million units (down ~25% YoY, ~12%QoQ) at realisation of | 3.60/unit. Cement EBITDA is expected at | 1155/tonne (up18.8% YoY) due to better operational efficiency and better realisation

India Cement Sales volume is expected to decline 5% YoY to 2.52 MT in Q1FY15 due to lowerdemand in the southern region, especially in Andhra Pradesh, during the quarter.Cement realisation is expected to increase 14,!% QoQ (flat YoY) due to asubstantial price increase in May and June in the region. We expect EBITDA/tonneto remain flat QoQ but decline ~32% YoY to | 390/tonne

JK Cement Blended sales volume (grey & white) is expected at 1.81 MT in Q1FY15 (up 26.4%YoY). The blended realisation is expected to increase 2.2% to | 4690/tonne.Blended EBITDA/tonne is expected to increase ~16.5% at | 744/tonne vs. |638/tonne reported last year

JK Lakshmi Cement

Cement sales volume is expected to increase 25% YoY during the quarter to 1.52MT due to increased capacity. The realisation is expected to increase by |3866/tonne vs. | 3745/tonne in Q1FY15. EBITDA/tonne is expected to increase25.4% YoY to | 722/tonne

Mangalam Cement

Sales volume is expected to increase 12.6% YoY (down 10% QoQ) to 0.51 MT inQ1FY15. We expect cement realisations to increase 4.5% YoY (up 3% QoQ) to |3883/tonne. The EBITDA/tonne is expected to increase 12.3% YoY to | 613/tonnedue to better realisation

Heidelberg Cement

We expect the sales volume to increase ~14.4% YoY, up 6.5% QoQ) to 1.09 MT inQ2CY14 due to better demand in the central region. We expect realisations toincrease 3.9% YoY (1.3% QoQ) to | 3923/tonne. EBITDA/tonne is expected at |563/tonne as against | 334/tonne in Q2CY14 due to better operational efficiencies


Sales Volume (Coverage Universe)

Million tonnes Q1FY15E Q1FY14 YoY (%) Q4FY14 QoQ (%)

ACC 6.40 6.12 4.5 6.48 -1.3

Ambuja 5.80 5.38 7.8 6.06 -4.3

UltraTech* 11.80 10.49 12.5 12.51 -5.7

Shree Cem 4.06 3.13 29.7 3.84 5.7

India Cem 2.52 2.65 -5.0 2.64 -4.8

JK Cement* 1.81 1.43 26.4 1.73 4.5

JK Lakshmi 1.52 1.22 25.0 1.69 -9.8

Mangalam 0.51 0.45 12.6 0.57 -10.0

Heidelberg 1.09 0.95 14.4 1.02 6.5

Total 35.50 31.82 11.6 36.54 -2.8

* blended sales volume (grey & white) * RE

Region-wise cement retail prices

|/50 kg bag Q1FY15 Q1FY14 YoY (%) Q4FY14 QoQ (%)

North 306 288 6.3 305 0.3

East 322 318 1.5 316 2.2

South 297 290 2.7 282 5.3

West 318 296 7.5 301 5.6

Central 299 286 4.4 301 -0.7

Average 309 295 4.4 301 2.5

Cement Realisations (Coverage Universe)

| per tonne Q1FY15E Q1FY14 YoY (%) Q4FY14 QoQ (%)

ACC 4704 4567 3.0 4579 2.7

Ambuja 4435 4360 1.7 4356 1.8

UltraTech* 4844 4727 2.5 4662 3.9

Shree Cem 3891 3647 6.7 3876 0.4

India Cem 4665 4677 -0.2 4088 14.1

JK Cement* 4690 4589 2.2 4773 -1.7JK Lakshmi 3866 3745 3.2 3834 0.8Mangalam 3883 3716 4.5 3770 3.0

Heidelberg 3923 3775 3.9 3873 1.3

Average 4538 4437 2.3 4404 3.1

* Blended realisations (grey cement +white cement)

EBITDA per tonne (Coverage Universe)

| per tonne Q1FY15E Q1FY14 YoY (%) Q4FY14 QoQ (%)

ACC 711 710 0.2 564 26.2

Ambuja 964 915 5.4 953 1.1

UltraTech* 1035 1000 3.5 914 13.3

Shree Cem 1155 972 18.8 1089 6.0

India Cem 390 572 -31.9 388 0.4

JK Cement* 744 638 16.5 912 -18.5

JK Lakshmi 722 576 25.4 663 9.0

Mangalam 613 546 12.3 424 44.6

Heidelberg 563 334 68.4 587 -4.1

Average 884 833 6.2 810 9.1

*blended (grey + white)


Construction & Infrastructure

Change of guard at the Centre, finally see light at the end of the tunnel…

‘Policy paralysis’ has been a curse for the infrastructure sector over the past couple of years. However, with the formation of a stable government at the Centre and its 10-year agenda to focus on infrastructure, the tide is finally turning for the tormented sector. Modification of the regulatory framework, speeding up clearances to eliminate execution hurdles and new project awards to revive moribund capex cycle are clearly on top of the agenda for the new government. The restructuring of premium, amendments in the Model Concession Agreement (MCA), setting up of Infra Trust Funds and dovish tone of the RBI towards interest rate are a few activities seen in Q1FY15, which lend us confidence there will be greater rewards in the long run for infrastructure players. These measures will lead to better liquidity and asset valuations, making the de-leveraging exercise more attractive, aiding companies to strengthen their balance sheet. Nonetheless, the impact is some time away. Hence, we believe Q1FY15 may remain dismal yet again for the infrastructure sector.

Dismal order inflows on back of election code of conduct…

The announced order inflow for our coverage universe remained muted in Q1FY15. With NHAI awarding still to see traction, other segments also continued to remain disappointing on the awarding front primarily due to election uncertainty in the first half of Q1FY15.

Construction universe – expect muted growth of 5.5% YoY in Q1FY15

The revenue growth of the construction coverage universe is expected to grow 5.5% YoY as execution remains muted across segments due to stretched working capital of contractors and client side delays in payment. While Supreme’s revenues are expected to grow at 13.6%, we expect SIL to post 3.0% YoY growth in topline.

Infrastructure universe – revenues to remain flat in Q1FY15

We expect revenues to remain flat at | 5571 crore for our infrastructure universe as superior growth of Sadbhav (17.9% YoY due to stronger execution in construction business) and muted growth by GVK (3.3% YoY) is likely to be offset by 2.3% YoY decline by JAL (given the subdued performance of construction and cement segment) and 5.3% YoY decline of IRB (due to muted construction revenue).

Highly leveraged balanced sheet impacting bottomline…

Owing to an increase in interest expense, we expect our construction coverage universe to report a sharp decline of 20.4% YoY in the bottomline. Interest, as percentage of revenues, continues to remain high at 6.5% in Q1 FY15E vs. 6.2% seen in Q1FY14.

The infrastructure coverage universe is expected to report a loss mainly due to GVK’s bottomline (higher losses are mainly due to higher interest cost and additional depreciation for MIAL, which commenced T2 operation in Q4FY14) and JAL’s bottomline due to higher interest and depreciation expenses.

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Sadbhav Engineering Simplex Infrastructure Analyst

Deepak Purswani, CFA [email protected] Bhupendra Tiwary [email protected] Nikunj Gala [email protected]


Exhibit 29: Estimates for Q1FY15E (Construction) (| Crore) Revenue EBITDA PATQ1FY15E YoY QoQ Q1FY15E YoY QoQ Q1FY15E YoY QoQ

Simplex Infra 1,436.5 3.0 -0.3 150.8 2.2 -1.1 9.6 -24.6 -54.9Supreme Infra 501.3 13.6 -37.3 70.2 -2.6 -32.5 18.1 -18.0 -32.8Total 1,937.8 5.5 -13.5 221.0 0.6 -38.8 27.8 -20.4 -65.5



Exhibit 30: Estimates for Q1FY15E (Infrastructure) (| Crore) Revenue EBITDA PAT

Q1FY15E YoY QoQ Q1FY15E YoY QoQ Q1FY15E YoY QoQGVK Power 722.7 3.3 4.1 200.5 -25.8 25.9 -151.5 NA NAIRB Infra 978.3 -5.3 10.8 472.8 3.9 7.0 115.1 -14.5 5.3JP Associates 3,207.0 -2.3 -5.7 631.1 -16.2 -27.6 -98.6 PL PLSadbhav Eng. 663.9 17.9 -16.9 70.9 22.7 -19.7 24.8 53.7 -48.2Total 5,571.8 -0.1 -3.6 1,375.2 -10.5 -11.9 -110.3 PL PL



Exhibit 31: Company specific view (Construction coverage universe) Company RemarksSimplex Infra Simplex is expected to report a muted topline growth of 3.0% YoY. The

bottomline, however, is expected to decline 24.6% YoY given the higher debtlevels and interest cost. The management is targeting a debt reduction throughcollection drive.Key monitorable: management commentary on execution and debt reduction

Supreme Infra Supreme currently has an order book of | 5896 crore, which implies a TTM orderbook to bill ratio of 2.7x. We expect Supreme to report a topline growth of 13.6%YoY on the back of current order book visibility. However, the bottomline isexpected to decline 18.0% YoY due to significant interest cost.Key monitorable: debt and execution


Construction Coverage Universe

No Order inflows announced in Q1FY15

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Major News during Q1FY15 Road Sector NHAI is working on redrafting MCA, which will

give it powers to change the bidding documentsin case of projects being stuck due to variousreasons


Exhibit 32: Company specific view (Infrastructure coverage universe) Company RemarksGVK Power We expect GVK Power to report a muted topline growth of 3.3% YoY in Q1FY15.

On the bottomline front, GVK is expected to post a loss of | 151.5 crore inQ1FY15. Higher losses are mainly due to higher interest cost and additionaldepreciation for MIAL, which commenced T2 operation in Q4FY14Key monitorable: status of stake sale plans in the airport division, monetisationof MIAL land bank

IRB Infrastructure In Q1FY15, IRB’s toll revenues to grow 23.3% to | 343 crore largely on account ofan 18% hike in Mumbai-Pune and contribution from new project commissioning.Nonetheless, revenues are expected to decline 5.3% YoY to | 978 crore due tomuted construction revenues. However, we expect higher revenues in H2FY15 asnew projects win execution is expected to see a pick-up in H2FY15. Overall,bottomline is expected to decline 14.5% YoY to | 115.1 croreKey monitorable: execution of construction division

JP Associates We expect JP to report losses again mainly by the higher depreciation andinterest cost. In the cement division, we expect volumes to grow 3.0% YoY to 3.8MTPA and realisation to grow 5.5% YoY to | 4387/tonneKey monitorable: asset monetisation

Sadbhav Engineering The order book of Sadbhav stands at | 8,941 crore, 3.8x order book to bill ratio.On the back of strong visibility, Sadbhav is expected to report 17.9% YoY toplinegrowth. Given the sharp topline growth and higher margins, the bottomline isexpected to grow 53.7% YoY to | 24.8 crore Key monitorable: execution status of ongoing projects


Infrastructure Coverage Universe

…interest cost* remains at elevated levels

20.6

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Major news during Q1FY15

GVK Power

NHAI has served show cause notices fortermination & debarment on GVK Transportationfor failure to mobilise the money required for |2,815-crore Shivpuri-Dewas project in MadhyaPradesh.

NHAI plans to crack down on the Jaipur-Kishangarh road project on the back of under-reporting concerns over toll revenues

IRB Infra

IRB Infrastructure has entered into a pact withNHAI for a | 2,300 crore project for widening ofa highway stretch in Haryana under NHDP

NHAI gave approval for premium restructuring toAhmedabad-Vadodara project and Tumkur-Chitradurga project

NHAI plans to crack down on Surat- Dahisar onthe back of under-reporting concerns over tollrevenues

JP Associates

Himachal Pradesh State Pollution Control Board(HPSPCB) has directed Jaypee Cement's plantto stop overproduction with immediate effect

The Jaypee-Taqa deal has hit a roadblock onpart of the Himachal Pradesh government

Sadbhav

NHAI has signed the supplementary agreementto concession agreement for two step-downsubsidiaries (Rohtak Panipat & HyderabadYadgiri) where deferral of premium has beenapproved. The deferral of premium willcommence from FY15


July 8, 2014 Consumer Discretionary

Inflationary pressure plays spoilsport for discretionary companies

Consumer discretionary (CD) companies are expected to record ~13% YoY growth during Q1FY15E with volume growth of ~8% as frequent price hikes due to commodity inflation took a toll on overall sales. However, an extended summer helped companies like Symphony, V-Guard and Pidilite record overall sales growth of 19%, 13% and 16% YoY, respectively. Bajaj Electricals’ sales growth of 15% YoY would largely be driven by a sharp growth in the E&P segment to the tune of 36% YoY. Paint companies are expected to record revenue growth of 10-12% YoY led by ~6-8% volume growth led by decorative paints (intact demand from Tier II and Tier III cities) while volume growth in the industrial segment is expected to grow at a lower pace due to moderate GDP growth. Besides, packaging major Essel Propack is expected to record ~14% YoY growth driven by a recovery in demand from Europe.

Higher raw material cost to hit margin of paint companies

We believe higher raw material prices coupled with the rupee being at a lower level against the dollar has forced companies to take price hikes to the tune of ~4-5% during Q1FY15E. However, for paint and adhesive companies, the EBITDA margin is expected to decline in the range of ~50-140 bps YoY due to a rise in titanium di-oxide (TiO2) prices and monomers prices coupled with adverse currency movement (rupee depreciated ~7% YoY). Essel Propack, on the other hand, is expected to record EBITDA margin expansion of ~25 bps YoY led by improved utilisation of the Poland plant. Under electrical goods manufacturer, BEL is expected to record an EBITDA margin of 6% (vs. 2.6% during Q1FY14) on account of execution of high margin projects. Symphony is expected to record EBITDA margin of 27.5% (up ~48 bps YoY) due to higher operating leverage supported by extended summer and recovery in export market.

Bottomline growth of ~15% YoY supported by selective counters

Companies under our coverage are expected to record bottomline growth of 15% YoY led by selective counters. We expect BEL to record PAT of | 26.5 crore after a loss of | 11 crore recorded in Q4FY14 supported by better realisation from the E&P segment. Essel Propack is expected to record PAT growth of 24% YoY to | 29 crore led by recovery in European region. On the flip side, we expect paint and adhesive companies to record a muted performance with PAT growth at ~2-14% mainly due to pressure on the margin front.

Exhibit 33: Estimates for Q1FY15E (Consumer Discretionary) (| Crore)

Company Revenue EBITDA PATQ1FY15E YoY QoQ Q1FY15E YoY QoQ Q1FY15E YoY QoQ

Asian Paints 3,154.8 11.9 -3.4 494.6 6.4 11.3 313.8 14.0 9.2Bajaj Electricals 901.2 15.0 -29.1 54.6 169.8 896.0 26.2 NM LPEssel Propack 548.8 14.3 -6.0 97.0 15.9 9.2 29.1 23.9 6.4Havells 1,196.4 13.8 -8.7 155.5 16.6 -12.2 107.2 13.2 -21.7Kansai Nerolac 872.3 10.4 17.3 107.7 6.2 31.4 62.1 1.9 38.3Pidilite Industries 1,305.0 16.1 31.7 247.4 8.1 140.2 171.3 6.4 134.4Symphony* 132.2 19.0 16.7 36.4 21.1 8.6 28.1 8.6 4.1V-Guard Industries 458.1 12.8 9.3 33.2 15.3 3.9 20.9 18.2 1.9Total 8,568.7 13.3 -1.5 1,226.3 12.4 26.9 758.7 15.1 25.1


Source: Company, ICICIdirect.com Research, ,* year end is June


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EBITDA margin (%) movement EBITDA margin Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15Asian Paints 16.5 15.6 14.6 13.6 15.7Kansai Nerolac 12.8 11.6 10.6 11.0 12.3Pidilite Ind 20.4 17.2 14.9 10.4 19.0Essel Propack 17.4 17.5 16.8 15.2 17.7Havells 12.7 14.4 14.3 13.5 13.0Bajaj Ele 2.6 -0.2 5.6 0.4 6.1V-Guard 7.1 7.3 7.5 7.6 7.3Symphony 27.0 19.2 27.0 29.6 27.5

Titanium dioxide (|/kg) price trend

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Analyst

Sanjay Manyal [email protected] Hitesh Taunk [email protected]


Exhibit 34: Company specific view for Q1FY15E

RemarksAsian Paints We expect the company's overall revenue to grow 12% YoY to | 3155 crore

contributed by moderate ~8% volume growth and ~4% price hikes inQ1FY15E. The EBITDA margin is expected to decline 80 bps YoY to 15.7%due to higher raw material cost (the company benefited from lower rawmaterial price during Q1FY14). PAT is likely to record growth of 14% YoY to~| 314 crore

Bajaj Electricals We expect BEL to post ~15% YoY revenue growth at ~ | 901 crore inQ1FY15E, led by ~35% YoY growth in the E&P segment to | 256 crore and~11% YoY growth in the lighting segments to | 174 crore. We expect theconsumer durable segment to grow at ~8% YoY to | 470 crore. The EBITDAmargin is expected to increase 347 bps YoY at 6% due to execution of highermargin projects. The company is expected to record PAT of ~| 26 crore

Essel Propack We expect the company to report ~14% YoY consolidated revenue growth at~| 549 crore in Q1FY15E, led by ~14% YoY growth in AMESA and Europeregion to | 260 crore and | 74 crore, respectively. We expect higheroperating leverage in its Poland plant to help in driving EBITDA margin by 30bps YoY to 17.7%. PAT is likely to increase ~24% YoY to ~| 29 crore

Havells India We expect Havells to post ~14% YoY standalone revenue growth at ~|1196 crore in Q1FY15E, led by ~16% YoY growth in cable and switchgearsegment to | 471 crore and | 320 crore, respectively. We believe the EBITDAmargin will improve 30 bps YoY at 13%. PAT is likely to increase 13% YoY to~| 107 crore supported by a rise in other income

Kansai Nerolac We expect sales growth of 10% YoY to | 872 crore during Q1FY15E largelycontributed by volume growth of ~6% coupled with 4% price hike. Thevolume growth would largely be driven by the decorative segment, whichcontributes ~55% in overall volume. We believe the EBITDA margin willdecline ~50 bps YoY due to higher raw material cost. As a result, PAT islikely to remain flat at | 62.1 crore

Pidilite Industries We expect Pidilite to post Q1FY15E consolidated revenue growth of ~16%YoY at | 1305 crore led by ~18% YoY growth in the consumer & bazaarsegment and 13% YoY growth in the industrial product segment. The EBITDAmargin is expected to decline 140 bps YoY at 19%, on account of a decline inthe gross margin. PAT is likely to increase ~6% YoY to ~| 171 crore

Symphony We expect Symphony to record ~19% YoY growth in revenue to ~| 132crore during Q4FY14E led by ~14% YoY volume growth. Domestic sales areexpected to increase ~19% YoY while export volumes are expected toincrease 30% YoY. We expect the EBITDA margin to improve by 50 bps YoYto 27.5%. PAT is likely to increase ~9% YoY to ~| 28 crore supported byhigher other income

V-Guard We expect topline growth of ~13% YoY to ~| 458 crore during Q1FY15E ledby 16% YoY growth in the electronics segment to | 192 crore led bystabilisers and digital UPS segments. Revenue from the electricals segmentis expected to increase ~10% YoY led by the pump division. The EBITDAmargin is expected to increase ~20 bps YoY due to higher operatingleverage. PAT is likely to increase ~18% YoY to ~| 21 crore


Volume growth movement of paint companies

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Asian Paints Kansai Nerolac


FMCG

Revenue growth to witness mixed trend

With the limited ability to take price hikes following sustained high food inflation we expect modest revenue growth of ~13% for our coverage universe. Sales growth may witness a mixed trend with a change in sales mix (VST Industries, HUL) and price increases (Marico) aiding higher growth in Q1FY15E. A fairly equal mix (6-8% of volume and 5-6% price growth) of price and volume growth may drive revenue growth for others (Dabur and Colgate). We estimate Nestlé’s revenue growth will remain the lowest (~4% YoY) within our coverage given the company’s premium product portfolio. Sales growth for companies (Dabur, ITC, and Marico) would also get a trigger from new launches on their part in Q1FY15E and H2FY14.

Margin expansion to remain limited

With sales growth remaining modest and price hikes taken largely to the extent of higher input cost pressure, we expect margin expansion to remain limited during the quarter. We estimate margin expansion of 20-30 bps for ITC and HUL led by a change in the sales mix and ~70 bps for Dabur led by price increases. We expect the highest margin expansion for VST Industries (~640 bps YoY) led by a favourable change in the sales mix of its portfolio. However, we expect Colgate, Marico, Nestlé and Tata Global Beverages to witness a decline in margins largely led by a higher raw material cost impact and sustained higher marketing spends given the increasing competition in their segments.

Higher raw material and marketing spends play spoilsport

With raw material costs maintaining their uptrend since H2FY14 along with limited ability of companies to pass it on through prices, we expect input cost pressure to increase 20-30 bps YoY across our coverage universe. The highest input cost inflation has been witnessed in copra and coconut oil (~135% higher YoY), which we believe would be the key reason for Marico’s lower margin (~120 bps lower YoY to 15.9%) in Q1FY15. Further, not so benign palm oil (+5% YoY) and milk prices (+7% YoY) would continue to stress margins of personal product (HUL, Dabur, Marico, ITC) and food (Nestlé) companies in Q1FY15E. Apart from raw material pressures, higher marketing spends, especially in oral care, personal products and beverages segment (following increasing competitive intensity) would restrict margin expansion for Colgate, HUL & Tata Global Beverages.

Exhibit 35: Estimates for Q1FY15 (FMCG) Revenue EBITDA PAT

Q1FY15E YoY QoQ Q1FY15E YoY QoQ Q1FY15E YoY QoQColgate Palmolive 960.5 13.7 4.3 182.8 10.6 -9.4 131.8 -28.8 -0.4Dabur India Ltd 1,881.8 14.0 6.4 286.5 18.9 -3.0 225.4 20.5 -4.3HUL 7,355.2 10.0 6.0 1,217.0 12.1 12.9 998.1 -2.1 14.4ITC 8,588.2 17.0 -6.1 3,282.9 17.6 2.5 2,259.3 19.5 -0.8Jyothy Laboratories 355.5 11.7 7.8 54.2 11.5 62.2 36.2 26.1 24.0Marico Ltd 1,541.4 19.2 44.1 245.8 11.2 59.3 167.9 8.3 89.1Nestle India 2,306.4 4.2 -0.3 488.5 0.4 0.8 271.7 0.1 4.9Tata Global 1,978.7 10.2 6.1 196.6 -5.1 3.1 106.3 -4.8 53.3VST Industries 226.5 28.8 19.8 65.8 65.4 3.1 44.9 65.6 -13.5Total 25,194.1 12.9 2.7 6,020.0 13.9 5.5 4,241.6 9.4 5.6



Topline & Profitability (Coverage Universe) 22

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Top Picks

NA

Analyst

Sanjay Manyal [email protected] Parineeta Rajgarhia [email protected]


Exhibit 36: Company specific view (FMCG) Company RemarksColgate We expect ~8% volume growth and ~6% price growth to drive revenues at ~14%.

We expect margins to witness contraction of ~30 bps YoY to 18.9% on the back ofsustained higher raw material (+120 bps YoY) & marketing expenses (following newlaunches). Savings in other expenses and employee cost (-15 bps YoY) would,however, provide some relief to margins

Dabur Both domestic (~65% of revenues) and international businesses may witness modestrevenue growth of ~13% and ~16% YoY, respectively, in Q1FY15E. Domestic revenuegrowth would be led by higher growth in oral care (~13%), foods (~17%), healthsupplements (~13%), home care (~20%), OTC & ethicals (~15%) and skin care(~11%). Other segments like hair care, digestives, skin care and retail are expected towitness modest growth of 9-11%. Margins are estimated to improve ~70 bps YoY to15.2% led largely by savings in other expenses

HUL Volume growth for HUL is expected to remain lower at ~4%. We expect a recovery inrevenues for personal products (~15% growth in Q1FY15E) following a lower base inQ1FY14 (sales of Fair & Lovely were severely impacted) and higher number of newlaunches during the quarter. Soaps & detergents, foods and beverages may witnessmodest growth at ~12% each. Margins are expected to be a tad higher by ~30 bpsYoY to 16.2% led largely by savings in operating expenses

ITC We estimate healthy growth in cigarettes and FMCG (others) at ~12% and ~15% YoY,respectively, to drive ITC's topline growth. Hotels, agri and paperboards revenuegrowth are expected to remain modest at ~6%, ~9% and ~7%, respectively. Marginsare expected to witness a marginal increase of ~20 bps YoY to 37.9% following thehigher burden of raw material costs (+330 bps YoY to 45.6%). However, led by theprice increases in cigarettes (YoY) and increasing contribution of premium products inFMCG sales (especially foods), margins may receive some support and, hence, see amoderate increase

Jyothy Lab Revenues may be driven by modest growth in both soaps & detergents (11.5% YoY)and home care (10.7%). We believe the re-launch of Exo and Pril would be keycontributors to S&D growth. Led by higher incidence of raw material costs by ~70 bpsYoY (following continued high inflation and inability to pass through prices due toslowing demand scenario) and operating expenses being higher by ~100 bps YoY,margins may remain flat at 15.2%. In spite of modest growth in sales and marginsremaining same, PAT growth may be aided by savings in interest cost of ~| 15 crore

Marico Topline growth may be driven by ~20% growth in domestic revenues and ~17%growth in international business. Domestic revenue growth may be largely price led(~15% YoY) following a relentless increase in copra and coconut oil prices (keyinputs). International business growth may be boosted by a revival in Marico'sBangladesh & MENA operations (~65% of international revenues). Despite highergrowth, increase in input costs, sustained higher marketing expenses and higher otherexpenses may pull down margins by ~120 bps YoY to 15.9%

Nestlé India With continued high inflation and no significant uptrend in urban demand, we expectNestlé’s revenue growth to remain modest led largely by price increases. We estimatemuted growth of ~3% & ~5% in chocolates and milk & milk products with tad highergrowth of ~6% & ~7% in prepared dishes and beverages, respectively. Led bycontinued cost pressure on raw materials (especially milk) & higher marketing spends,we estimate ~80 bps YoY dip in margins to 21.1%

Tata Global Beverages

Overall sales growth may be led by higher growth in India (11.2%) with growth ininternational markets remaining modest (9.6%). International business growth may beaided by higher currency impact YoY. On the margins front, we expect a moderation of~160 bps YoY to 9.8% following higher marketing spends (+280 bps YoY to 18.8%) torevive growth, especially in international markets

VST Industries

Change in sales mix (higher contribution of 64 mm at ~53% vs. ~30% YoY) would aidboth volume and revenue growth at ~1% and ~29%, respectively. Led by thechanging mix, margins may also witness a significant increase of ~640 bps YoY to28.9%. Higher margins would, thereby, drive robust earnings growth



Healthcare

Consolidated revenues likely to grow at ~23% YoY

Companies under I-direct Healthcare coverage are expected to post growth of 23.4% YoY to | 26522 crore to be driven mainly by the US and EU. US sales are likely to grow 37% YoY to | 7815 crore on the back of launch of new product launches, incremental traction from legacy products and ~6% depreciation of the rupee vis-à-vis US$ (average basis). New product launches during the quarter were gLunesta (Insomnia), gZemplar (Thyroid treatment) and gNiaspan (CVS). Along with these products, the companies continued to sell gCymbalta (CNS), gDepakote (CNS), gRapamune (Immunosuppressant), gPrevacid (GI), gAvelox (anti-infective), gCaduet (CVS) and gMicardis (CVS). EU sales are likely to increase 94% YoY to | 1740.3 crore on account of consolidation of Actavis Europe business by Aurobindo Pharma. Excluding Actavis, like-to-like EU and overall sales are likely to grow 18% and 20%, respectively. On the domestic front, things seem to be improving slowly but surely. Overall domestic formulations are likely to grow ~14% YoY. Among players, Aurobindo, Cadila, Indoco, Ipca Labs, Sun Pharma and Lupin are expected to do well on the back of strong growth from the exports market, in general, and the US, in particular. On the other hand, companies such as Glenmark and Unichem are likely to be laggards on account of lack of new product launches in the US market and lower growth in domestic formulations.

EBITDA to grow ~21% YoY

We expect the EBITDA of the I-direct coverage to grow 20.8% YoY to | 6542.1 crore. EBITDA margins are likely to decline ~50 bps to 24.7% as most players increased their R&D spend. A slower recovery in the high margin domestic formulations business is another reason for the decline in overall margins.

Like to like net profit to grow 19% YoY

The I-direct coverage universe is expected to post net profit growth of 366% to | 4025.5 crore on a lower base (Sun’s provision towards Protonix liability in Q1FY14). On a like-to-like basis, the net profit universe is expected to grow 19% YoY.

Exhibit 37: Estimates for Q1FY15E (Healthcare) (| Crore) Revenue EBITDA PAT

Q1FY15E YoY QoQ Q1FY15E YoY QoQ Q1FY15E YoY QoQAurobindo Pharma 2,996.4 74.7 28.6 650.2 111.3 -12.5 401.8 2,060.0 -19.9Biocon 814.1 16.2 11.8 194.3 27.9 10.7 119.5 27.8 5.6Cadila Healthcare 1,996.4 21.9 1.4 369.3 29.2 3.0 246.2 25.9 2.9Divi's Lab 632.5 22.3 -14.6 249.8 26.7 -4.6 184.0 5.4 -4.7Cipla* 2,810.9 14.1 11.6 477.8 -29.2 16.7 285.5 -39.9 9.5Dr. Reddys 3,321.6 16.8 -4.6 730.7 26.3 -6.5 418.9 16.1 -13.2Glenmark 1,467.8 18.5 -13.8 295.5 NA -22.6 134.8 4.7 212.7Indoco Remedies 185.0 20.1 0.7 31.3 28.2 -5.0 15.9 72.3 -14.8IPCA Labs 965.6 19.9 28.8 231.7 35.5 27.1 149.8 108.7 9.4Jubilant Life Sc. 1,553.1 14.4 -0.6 279.6 20.4 13.7 91.8 LP -7.1Lupin 2,977.2 23.0 -4.6 744.3 26.3 -15.1 452.8 12.9 -18.1Sunpharma 4,213.9 20.3 3.8 1,738.3 12.1 -3.5 1,209.4 LP -23.8Torrent Pharma 1,251.1 28.7 2.1 337.8 62.4 -3.5 200.8 34.8 -17.7Unichem Laboratories 286.8 8.0 17.5 51.6 1.4 62.8 32.1 -11.1 5.3Apollo Hospitals 1,050.1 17.3 5.2 159.7 9.5 6.4 82.2 4.2 1.1Total 26,522.4 23.4 3.5 6,542.1 20.8 -3.5 4,025.5 365.7 -12.2



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Company Final Tentative

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Top Picks

Torrent Pharma Ipca Laboratories

Analyst

Siddhant Khandekar [email protected]

Krishna Kiran Konduri [email protected]

Nandan Kamat [email protected]


Exhibit 38: Company specific view (Healthcare) Company RemarksApollo Hospitals

Standalone sales are likely to grow at 17% YoY driven by 26% growth in the pharmacybusiness and 13% growth in healthcare service business. We expect Apollo to add ~30pharmacy stores during the quarter. We expect EBITDA margins to decline ~110 bps to15.2% on the back of commissioning of two new hospitals at Nellore (200 beds) andNashik (125 beds) during the quarter

Aurobindo Pharma

Revenues are expected to grow ~74.7% YoY on the back of 75% growth in the US (drivenby gCymbalta and injectable products) and consolidation of Actavis’ European operations.We expect | 680 crore sales from Actavis with negative EBITDA margins of 3.5%. On alower base, EBITDA margins may improve 380 bps to 21.7%

Biocon Revenues are likely to grow ~16% YoY on the back of 22% growth in the researchservices business, 15% growth in the biopharma business (ex-branded) and 18% growthin branded formulations. EBITDA margins are likely to improve 230 bps to ~24% due tohigher growth from the domestic branded business and improvement in research servicesmargins

Cadila Healthcare

Revenues are expected to grow ~22% YoY on the back of 60% growth in the USbusiness. However, sales from India and EU are likely post marginal growth of 12% and10%, respectively. The launch of gPrevacid, gDepakote and gRapamune in H2FY14coupled with supply of authorised generic for AbbVie products are likely to drive USgrowth. EBITDA margins are likely to improve ~100 bps to 18.5% on the back of strongUS traction

Cipla Despite healthy growth of 23.8% in exports & 15% in domestic business, revenues mayincrease only 14% YoY due to 70% de-growth in other operating income (OOI). De-growthin OOI was due to higher base as Cipla received milestone payment from Meda in Q1FY14.EBITDA margins may decline 1040 bps due to consolidation of Cipla Medpro & higherR&D & other operating costs

Divi's Laboratories

Revenues are likely to grow 22% YoY driven by growth in both APIs and custom synthesisbusiness. EBITDA margins are likely to improve 140 bps to 39.5% on the back of highercapacity utilisation at the DSN SEZ facility. Despite an improvement in margins, the netprofit is likely to witness only 5% growth due to higher base of Q1FY14 on account offorex gains

Dr Reddy's Revenues are expected to increase ~17% YoY driven by 30% growth in the USformulation business and 25% growth in RoW markets. Overall global generic andpharmaceutical service and active ingredients (PSAI) businesses are likely post 21.2% and2% growth, respectively. The growth is expected to be led by new launches such asgLunesta, gCymbalta, gZemplar and gAntara and higher revenues from limited competitioninjectable products. EBITDA margins are expected to improve 170 bps to 22%

Glenmark Pharma

Revenues are expected to post ~19% YoY growth on the back of 45% growth in the EUregion (on a lower base), 15% growth in domestic formulations and 12% growth in the USbusiness. The lower growth in the US market would be due to lack of product launches.EBITDA margins are likely to improve 10 bps to 20.1%. Despite healthy growth at theEBITDA level, the net profit growth is likely to be restricted to 5% due to higherdepreciation

Indoco Remedies

Revenues are likely to grow ~20% YoY on the back of 57% growth in export formulationsand 14% growth in domestic formulations business. The growth in export market isexpected to be on the back of a pick-up of sales under the Aspen deal. We expect EBITDAmargins to improve 100 bps to 17%


Expected growth (%) in domestic market in Q1FY15

(| crore) Q1FY15E Q1FY14 Var. (%) Q4FY14 Var. (%)

Biocon 118.8 100.7 18.0 92.6 28.3

Cadila 700.2 625.2 12.0 624.7 12.1

Glenmark 377.9 328.6 15.0 383.0 -1.3

Indoco 111.4 97.7 14.0 105.3 5.8

Ipca 290.4 250.4 16.0 196.6 47.8

Lupin 648.3 589.4 10.0 576.3 12.5

Cipla 1263.4 1098.6 15.0 908.0 39.1

Dr Reddy's 401.7 349.3 15.0 410.1 -2.0

Sun Pharma 1001.4 848.6 18.0 946.5 5.8

Torrent 363.4 316.0 15.0 258.0 40.9

Unichem 184.4 175.6 5.0 139.1 32.6

Total 5461.3 4780.1 14.3 4640.2 17.7

Expected growth (%) in the US market in Q1FY15


Aurobindo 1095.7 624.8 75.4 1160.0 -5.5

Cadila 619.8 387.4 60.0 678.3 -8.6

Glenmark 500.6 447.0 12.0 500.9 -0.1

Lupin 1345.5 1006.9 33.6 1469.9 -8.5

Dr Reddy's 1413.2 1087.1 30.0 1496.4 -5.6

Sun Pharma 2524.0 2031.4 24.3 2486.1 1.5

Torrent 316.4 113.0 180.0 400.0 -20.9

Total 7815.3 5697.5 37.2 8191.6 -4.6

Expected growth (%) in the Europe market in Q1FY15


Aurobindo 1006.9 283.9 254.7 302.6 232.7

Cadila 102.0 92.7 10.0 84.5 20.7

Glenmark 105.2 72.6 44.8 193.2 -45.6

Dr Reddy's 160.4 157.3 2.0 177.4 -9.6

Lupin 111.0 92.5 20.0 79.5 39.6

Torrent 254.8 196.0 30.0 251.0 1.5

Total 1740.3 895.0 94.4 1088.2 59.9 Expected growth (%) in Latin America market in Q1FY15


Cadila 56.1 51.9 8.0 57.3 -2.2

Glenmark 96.8 84.1 15.0 106.2 -8.9

Torrent 135.7 133.0 2.0 128.0 6.0

Total 288.5 269.0 7.2 291.5 -1.0 Expected growth (%) in API market in Q1FY15


Aurobindo 711.6 646.9 10.0 754.8 -5.7

Cadila 93.0 85.8 8.4 94.0 -1.1

Cipla 163.9 146.3 12.0 239.0 -31.4

Glenmark 146.2 127.1 15.0 153.1 -90.2

Indoco 12.5 10.9 15.0 11.7 28.0

Ipca Labs 242.8 213.1 13.9 170.1 -91.8

Lupin 279.3 242.9 15.0 205.9 35.7

Dr Reddy's 598.5 586.8 2.0 664.1 -9.9

Sun Pharma 221.8 192.8 15.0 222.3 -0.2

Unichem 37.5 30.3 23.6 24.0 55.9

Total 2506.9 2282.9 9.8 2539.0 -1.3


Exhibit 39: Company specific view (Healthcare) Ipca Laboratories

Revenues are expected to grow 20% YoY on the back of 41% growth in theinstitutional business, 25% in the generic business and 15% growth in the domesticformulations business. EBITDA margins are expected to improve 280 bps to 24% dueto a decline in the raw material cost for anti-malarial drugs. The net profit is likely toimprove 105% due to lower base of Q1FY14, which included a forex loss

Jubilant Life Science

Revenues are expected to increase ~14% YoY on the back of 18% growth in the lifescience ingredients (LSI) segment and 8% growth in the pharmaceutical segment. Theprice hikes in Niacinamide products and improved capacity utilisation of Symtatfacility will drive the growth in LSI segment while pharma segment is expected topost lower growth due to price erosions in its key generic products

Lupin Revenues are likely to grow 23% YoY driven by 34% growth in the US, 25% growth inRoW markets and 10% growth in the domestic formulations. The growth in the USmarket may be on the back of new product launches such as gNiaspan, gActos,gCipro and gCymbalta. EBITDA margins are expected to increase 65 bps to 25%.Growth in net profit would be restricted to 13% due to higher base of Q1FY14, whichincluded forex gains

Sun Pharma Revenues may grow ~20% YoY on a higher base driven by 24% growth in the USformulations and 18% growth in domestic formulations. EBITDA margins may decline300 bps YoY to 41.3% on a higher base. The company is likely to post net profit of |1209 crore in Q1FY15 compared to net loss of | 1276 crore in Q1FY14 as it provided |2517 crore for Protonix patent litigation settlement. The like-to-like net profit isexpected to decline 2% on a higher base

Torrent Pharma

Revenues are expected to grow ~29% YoY on the back of 180% growth in the US and30% growth in EU markets. Domestic formulations are likely to grow 15%. Robust USgrowth will be on the back of launch of limited competition products gCymbalta andgMicardis Plus. EBITDA margins may improve 560 bps YoY to 27%

Unichem Labs Revenues are expected to grow 8% YoY due to just 5% growth in the domesticformulations and 10% growth in export formulations. We expect EBITDA margins todecline 120 bps to 18% YoY



Hotels

Higher room inventory to keep growth under check

I-direct hotel coverage universe is expected to report revenue growth of 6.3% YoY to | 931.9 crore in Q1FY15 (v/s 4.3% YoY growth in last quarter) led by higher growth in revenues of Hotel Leela due to addition of rooms in Chennai. Foreign Tourist Arrivals (FTAs) reported YoY growth of 10.6% during the quarter compared to just 2.3% YoY growth in Q1FY14. However, higher room inventory with marginal improvement in occupancies kept average room rate (ARR) flat on YoY basis during the quarter. Average occupancy levels at business destinations remained higher compared to leisure destination during the quarter due to seasonality with improvement of 100-200 bps across destinations.

Operating margins to improve marginally

I-direct hotel universe’s margins are expected to improve marginally YoY with improved operational efficiency. We expect I-direct hotel universe operating margins of 16% for Q1FY15E (up 200 bps YoY) while on QoQ basis margins are expected to decline ~970 bps. Indian hotels, EIH and TajGVK are expected to report EBITDA margins improvement of 50 to 150 bps while Hotel Leela is expected to report higher margin improvement on the back of increased revenue from its newest launched Chennai property.

I-direct universe expected to report net loss of | 112.4 crore

Companies under I-direct coverage are expected to report loss of ~| 112 crore in Q1FY15E v/s net loss of | 129.6 crore in Q1FY14. Net loss in previous quarter for the companies under coverage was at | 381.2 crore due to exceptional loss reported by Indian Hotels. Under our coverage, we expect Indian Hotels (standalone) to report net profit of ~| 11.5 crore while companies like Hotel Leela would report losses on account of higher interest and depreciation costs. Profitability of EIH and TajGVK is expected to improve compared to last year due to last year’s low base effect.

Select leisure destinations to drive growth backed by higher FTAs

The average occupancy levels remained higher at business destinations compared to leisure destinations during the quarter due to seasonality. But still improvement in occupancy levels was higher at leisure destinations compared to business destinations due to higher FTA growth (10.6% YoY) during the quarter. In business destinations, Mumbai registered higher occupancy compared to previous year, while almost all leisure destinations registered higher occupancy levels as well as higher ARRs during the quarter compared to previous year.

Exhibit 40: Estimates for Q1FY15E: (Hotels) ( | Crore) Revenue EBITDA PAT

Q1FY15E YoY QoQ Q1FY15E YoY QoQ Q1FY15E YoY QoQEIH 291.8 7.6 -18.8 52.3 14.2 -33.6 14.4 36.1 -60.6Hotel Leela 163.7 8.5 -26.3 21.3 70.6 -68.1 -138.3 NA NAIndian Hotel 416.0 4.9 -28.0 63.4 18.8 -58.4 11.5 17.9 LPTaj GVK Hotels 60.3 4.4 -7.3 11.7 8.3 -24.8 0.0 LP -99.3Total 931.9 6.3 -23.9 148.7 21.4 -52.6 -112.4 NA NA




876

868 11

89

1225

932

0

200

400

600

800

1000

1200

1400

Q1FY

14

Q2FY

14

Q3FY

14

Q4FY

14

Q1FY

15E

| Cr

ore

-60.0-50.0-40.0-30.0-20.0-10.00.010.020.030.040.0

(%)


Growth in foreign tourist arrivals (Year ending March)

100

300

500

700

900

Apr

May Jun

Jul

Aug

Sep

Oct

Nov Dec

Jan

Feb

Mar

(in '0

00)

FY11 FY12 FY13

FY14 FY15

Trends in average occupancy levels

60 60

70 72

61

52 53

70

77

54

40

50

60

70

80

90

Q1FY

14

Q2FY

14

Q3FY

14

Q4FY

14

Q1FY

15

(%)

Business Destinations Leisure Destinations

Top pick of sector

TajGVK \

Analyst

Rashesh Shah [email protected]



Exhibit 41: Company specific view Company RemarksIndian Hotels Standalone revenues are expected to grow 4.9% YoY on the back of rising FTAs.

Operating margin is expected to improve due to better efficiency. We expectstandalone net profit of | 11.5 crore

EIH With better FTAs, revenue is expected to increase 7.6% YoY during the quarter.EBITDA margin is also expected to improve 100 bps

Hotel Leela Revenues are expected to increase 8.5% YoY supported by higher occupancylevel at the Chennai hotel. EBITDA margin are expected to improve due to betteroccupancy. Net loss may be higher due to high interest and depreciation cost

Taj GVK Hotel Revenues are expected to increase 4.4% YoY after the bifurcation of AndhraPradesh and better utilisation at Hyderabad hotel though not in a big way.EBITDA margin for the company is expected to increase 700 bps

Source: ICICIdirect.com Research


Information Technology

Seasonally strong quarter but rupee could be a spoiler…

We expect IT companies to commence Q1FY15E on a positive note post the Q4FY14 lull, which was impacted by program cancellations due to security disruptions in the key US market. Tier-I IT companies could likely report average dollar revenue growth of 3% QoQ vs. 1.8% in Q4 and 2.5% in Q1FY14. Within Tier-I, TCS (5% QoQ) and HCLT (3.8%) are expected to lead, again, while Infosys (2.3%) and Wipro (1%) could be soft. However, rupee revenues could be flat QoQ as a stronger rupee could offset dollar growth. Recall, inter-quarter, the rupee averaged 59.8 vs. 61.75 in Q4, appreciation of 3.2% QoQ. Though Indian vendors continue to benefit from rising outsourcing spends in Europe, the US could be soft owing to slower deal ramp-ups and elongated sales cycles. Though the demand environment continues to be optimistic, material rupee appreciation remains a key risk to our estimates and stock prices.

Multiple factors (rupee, wage hikes, and visa) to impact margins

Rupee appreciation (3.2% QoQ) coupled with wage hikes, visa costs and higher fresher intake could create margin headwinds in Q1. Among tier-I players, we expect margins to decline 230 bps for Infosys (wage hike, visa, rupee), 118 bps for HCL (reinvestments, rupee), 245 bps for TCS (wage hike, rupee, one-time depreciation charge offset by lower investments) and 103 bps for Wipro (one-month wage hike impact, visa, rupee).

Growth polarised in midcaps as Cyient, MindTree set to outperform

Within midcaps, we expect Cyient (7.2%) and MindTree (5.2%) to outperform their peers; Tech Mahindra, KPIT (3.2%, 3%) could be stable while NIIT Tech, eClerx and Persistent Systems (1.7%, 1% and -0.5%) could be soft. Broad based growth across all BUs coupled with ~$4 million incremental contribution from Softential could drive Cyient’s growth while a pick-up in the hi-tech vertical could aid MindTree. Seasonal weakness in IP revenues coupled with a push-out of some services revenue to Q2 could impact Persistent’s growth in Q1. Broadly, EBITDA margins could decline significantly (range from -347 to -96 bps) with the exception of NIIT Tech (up 18 bps).

Exhibit 42: Estimates for Q1FY15E (IT) (| Crore) Revenue EBITDA PAT

Q1FY15E YoY QoQ Q1FY15E YoY QoQ Q1FY15E YoY QoQCyient 618.0 27.7 3.9 90.2 12.5 -16.1 59.5 9.5 -14.8Eclerx 214.7 13.0 -1.1 84.8 7.3 -8.7 65.2 5.7 1.2Firstsource Sol 781.2 8.6 -1.9 89.8 11.5 -9.2 50.7 23.6 -13.8HCL Tech* 8,445.9 21.6 1.2 2,179.0 33.8 -2.4 1,600.4 32.3 -1.5Infosys 12,802.4 13.6 -0.6 3,326.0 11.5 -8.7 2,626.2 10.6 -12.2KPIT Tech 700.0 14.2 0.0 101.5 4.4 -10.2 55.1 -8.4 -10.1Mastek 215.8 -0.4 -2.3 10.8 35.9 22.1 7.1 0.4 -37.1Mindtree 835.6 29.0 1.4 168.8 41.7 -4.6 127.9 -5.5 30.2NIIT Ltd. 233.1 4.9 0.1 13.4 28.4 1.9 13.1 LP -6.2NIIT Technologies 578.8 6.8 -1.6 88.6 13.2 -0.5 54.8 3.0 -11.5Persistent Systems 432.0 20.9 -3.3 103.7 33.4 -14.1 67.2 17.7 0.0TCS 21,991.0 22.3 2.0 6,244.0 21.2 -6.2 4,863.2 28.1 -8.2Tech Mahindra 5,092.1 24.1 0.7 1,030.3 19.2 -3.9 676.5 -1.4 10.1Wipro 11,248.1 15.5 -3.9 2,744.5 35.8 -4.3 2,100.4 29.4 -5.7Total 63,686.7 18.7 0.0 16,185.2 22.4 -5.9 12,307.8 21.7 -6.8



Topline & profitability (Coverage universe) 53

660

6177

3

6282

8

6368

0

6368

7

15000

25000

35000

45000

55000

65000

Q1FY

14

Q2FY

14

Q3FY

14

Q4FY

14

Q1FY

15E

| Cr

ore

10.0

15.0

20.0

25.0

30.0

(%)


Dollar growth, QoQ

IT Services Q1FY15E Q4FY14 Growth (%)

TCS 3,677.4 3,503.3 5.0

Infosys 2,140.9 2,092.0 2.3

Wipro ^ 1,737.6 1,720.2 1.0

HCL Tech * 1,412.4 1,361.1 3.8

Average 3.0

Tech Mahindra 851.5 825.0 3.2

Mindtree 139.7 132.8 5.2

KPIT Technologies 117.1 113.6 3.0

NIIT Technologies 96.8 95.2 1.7

Cyient 103.4 96.4 7.2

Persistent Systems 72.2 72.6 (0.5)

eClerx 35.9 35.5 1.0

Average 3.0

Mastek 36.1 35.9 0.5

Average 1.8

BPO (in |)

Firstsource 826.5 806.3 2.5 * June year end, ^ IT services

Top picks of the sector

TCS MindTree

Analyst

Abhishek Shindadkar [email protected] Hardik Varma [email protected]


Exhibit 43: Company specific view Company Remarks

Cyient (erstwhile Infotech Enterprises)

We expect $, | revenues to grow 7.2%, 3.9% QoQ to $ 103.4 million, | 618 crore,respectively, led by ~$4 million contribution from Softential and broad based growthacross all business units (BU). EBITDA margins could decline 347 bps QoQ to 14.6%,led by increased net hiring, annual wage hikes, and currency appreciation. Commentaryon growth across various BU's coupled with margin trajectory could be of investorinterest

eClerx We expect $ revenues to grow 1% QoQ to $35.9 million while | revenues to decline1.1% QoQ to | 214.7 crore, led by continued impact of client specific issues in bothsales & marketing (largest customer) and cable (consolidation in top cable customers)business. Deal flow from emerging clients (non-top 5) could help partially offset theweakness in these top accounts. EBITDA margins could decline 332 bps QoQ to 39.5%led by double digit wage hikes (11%), salary increases across several levels andcurrency impact. Investor concerns: Potential revenue weakness in FY15E due to topclient corporate restructuring and ramp-up delays led by consolidation in top cablecustomers, rising attrition

Firstsource Solutions

Expected revenues to decline 2.5% QoQ to | 781.2 crore led by base effect – Q4 saw astronger collections business – and impact of customer rationalization. EBITDA margins could decline 92 bps QoQ to 11.5% led by slower revenue growth, wage hike andabsence of the positive impact from collections business in Q4. FY15E growth outlook(particularly healthcare, telecom vertical), margin trajectory could be of investor interest

HCL Tech We expect $, | revenues to grow 3.8% ($ 1,412 million), 1.2% (| 8,446 crore) QoQ ledby continued momentum in IMS (6% QoQ) and helped by demand recovery in coresoftware (2.4% QoQ). EBIT margins may decline 118 bps QoQ to 23.5% led by rupeeheadwinds and business reinvestments. Investor interest: TCV deal signing during thequarter, core software revenue growth momentum and margin outlook

Infosys US$ revenues could grow 2.3% QoQ to $2,141 million led by demand uptick and largedeal ramp-ups. Rupee revenues could decline 0.6% QoQ to | 12,802 crore led by ~3%rupee appreciation relative to the dollar during the quarter. EBIT margins may decline230 bps QoQ to 23.2% led by wage hikes, visa costs and currency appreciation partiallyoffset by costs rationalisation. Investor interest: strategic direction post managementchange, FY15E revenue guidance update, and initiatives to restrain rising attrition

KPIT Tech Dollar revenues could grow 3% QoQ to $117 million, led by traction in auto businesswhile rupee revenues could come in flat QoQ (| 700 crore). EBITDA margins coulddecline 164 bps QoQ to 14.5% led by wage hikes, visa costs and currency headwinds.SAP business and its margin outlook, M&A pipeline and demand environment acrossBU's could be of investor interest

Mastek We expect $ revenues to grow 0.5% QoQ to $36.1 million, while | revenues coulddecline 2.3% QoQ to | 215.8 crore, led by healthy UK business while US continues towitness elongated sales cycle. Reported EBITDA margins could improve 100 bps QoQto 5% led by revenue growth and normalised impact of client ramp-down in Q4 partiallyoffset by higher product development expenses and increase in net hiring in productbusiness. We believe, two deal wins during the quarter could start contributing fromQ2 and help lift the order back log ($90 million in Q4FY14). Investor interest: orderbacklog, US & UK business outlook, FY15E revenue growth and margin trajectory

MindTree Dollar revenues are expected to grow 5.2% QoQ to $139.7 million while those in rupeescould grow 1.4% QoQ to | 835.6 crore led by demand uptick in hi-tech vertical andlarge deal ramp-ups. At 20.2%, EBITDA margins could decline 129 bps QoQ led bycurrency headwinds and visa costs partially offset by productivity gains (utilisation,fresher hiring). Investor interest: wage hike quantum, hi-tech vertical outlook, large dealwins and margin trajectory


EBIT margin impact

EBIT margins Q1FY15E Q4FY14 Change (bps)

TCS 26.7 29.1 (245)

Infosys 23.2 25.5 (230)

Wipro ^ 23.5 24.5 (103)

HCL Tech * 23.5 24.7 (118)

EBITDA margins

Tech Mahindra 20.2 21.2 (96)

Mindtree 20.2 21.5 (129)

KPIT Technologies 14.5 16.1 (164)

NIIT Technologies 15.3 15.1 18

Cyient 14.6 18.1 (347)

Persistent Systems 24.0 27.0 (301)

eClerx 39.5 42.8 (332)

EBITDA margins

Mastek 5.0 4.0 100

EBITDA margins

BPO

Firstsource 12.5 12.4 8

* June year end ^ IT Services $/|

40

50

60

70

Apr-1

0

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0

Apr-1

1

Oct-1

1

Apr-1

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3

Apr-1

4

|

|/$

$ vs. global currencies

0.80.91.01.11.21.3

Sep-

10

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11

May

-11

Sep-

11

Jan-

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-12

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13

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-13

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$/Euro $/GBP AUD/$


Company specific view

Company RemarksNIIT Ltd Net revenues could grow 4.9% YoY to | 233.1 crore led by CLS business partially offset

by continued weakness in ILS (-15% YoY) and SLS (-2.5%) business. ILS will beimpacted by weaker enrolments while conclusion of government school contractscould impact SLS. Though CLS may grow 30% YoY, rupee appreciation could impactQoQ growth. EBITDA margins could increase 105 bps YoY to 5.7% led by risingcontribution of higher margin private schools and CLS business partially offset bycurrency headwinds. Breakeven in SBS business, demand environment for CLS, growthin ILS enrolments and private school sign-ups may be of investor interest

NIIT Tech Reported $ revenues could grow 1.7% QoQ to $ 96.8 million, while | revenues coulddecline 1.6% QoQ to | 578.8 crore led by AAI contract contribution, offset by weaknessin the US. While services revenue may grow QoQ in dollar terms, reported revenuegrowth could be lower due to f/x. EBITDA margins could improve 18 bps QoQ to 15.3%,led by increased contribution of higher margin AAI business. Order bookings mayexceed $100 million. Margins trajectory for FY15E, large deal ramp-ups and clientmining initiatives could be of investor interest

Persistent Systems

We expect $, | revenues to decline 0.5%, 3.3% to $ 72.2 million, | 432 crore led byseasonal weakness in IP business (-5% QoQ) and general softness for servicesbusiness (0.5%) led by ramp-ups delays. That said, FY15E growth outlook remainsintact. EBITDA margins may decline 301 bps QoQ to 24% primarily due to currencyappreciation (~100-150 bps), one time visa impact (~100-150 bps) and sales andsupport hiring (~50 bps). Investor interest: top account mining, and traction in IP andsell-with platform business

TCS US$, | revenues could grow 5%, 2% to $3,677 million, | 21,991 crore, respectively,while constant currency revenues could see an uptick (~4.5%) post the soft Q4 (1.9%).India business (6.7% of FY14 revenues) could see demand uptick in H2FY15 whileMitsubishi JV could start contributing from Q2FY15E. EBIT margins could decline 245bps to 26.7% led by annual wage hikes and currency appreciation partially offset bylower investments and operational efficiencies. Investor interest: Pricing trends, dealpipeline around digital technology and outsourcing trends in Europe

Tech Mahindra

Revenues are expected to grow 3.2%, 0.7% QoQ to $ 851.5 million, | 5,092 crore,respectively, led by 1. absence of BT revenue amortization, 2. base effect, Q4FY14 sawseasonal acceleration in Comviva and one-off projects in Africa. Cross currency couldhave a favorable ~50 bps impact. EBITDA margins could decline 96 bps QoQ to 20.2%primarily due to currency headwinds, deferred revenue amortisation, and visa costs.Telecom vertical, non-BT and BT business outlook, margin trajectory could be ofinvestor interest

Wipro While IT services $ revenues could grow 1% QoQ to $1,738 million (0-2% $ guidance)and constant currency revenues could grow 0.7% QoQ, | revenues could decline 3.9%QoQ to | 11,248 crores. EBIT margins could decline 103 bps to 23.5% led by onemonth impact of wage hikes effective June, visa costs and currency headwinds.Investor interest: Q2FY15E guidance, large deal wins and ramp-ups, top 125 clientmining initiatives and deal pipeline outlook



Logistics

Container volume growth shows marked recovery in major ports

Container volumes at major ports showed an encouraging trend with volumes posting growth of ~3.2% YoY for April-May 2014 against a decline of ~6% for the same period of the previous year. For JNPT and Chennai ports, the recovery has been remarkable as container volume growth has been significantly pronounced at 3.5% and 3% against a decline of 6% and 10%, respectively, for the corresponding periods last year. JNPT recorded 719000 TEUs for April-May 2014 against 695000 TEUs in the same period last year. Similarly, for Chennai port, container volumes stood at 251000 TEUs against 244000 TEUs for the corresponding period last year.

Green shoots visible on cargo volume recovery

As volume recovers, the revenue as well as EBITDA of the I-direct logistics universe is expected to show a marked improvement posting a growth of 8% on YoY basis whereas PAT growth is anticipated at 2%. The total revenue for the universe is expected at | 2693.7 crore against | 2494.2 crore in Q1FY14 while EBITDA is expected at | 508 crore against | 470.2 crore for the corresponding quarter last year. PAT for the quarter is expected at | 374 crore. On the basis of companies, revenue of Concor and Transport Corporation of India is expected to grow ~5% and 6% YoY, respectively. Gateway Distriparks, Gujarat Pipavav and BlueDart Express’ revenues are expected to grow at ~13%, 17% and 14% YoY to | 277.7 crore, | 142.6 crore and | 516.1 crore, respectively. However, on a QoQ basis, for the logistics universe, revenue is expected to decline by ~6% on account of seasonality. EBITDA growth for Concor and BlueDart is expected to remain flattish as freight hikes are difficult to pass on whereas Gateway Distriparks and Gujarat Pipavav are anticipated to post superior EBITDA growth of 19% and 38%, respectively, YoY on account of better CFS and container volumes. On the PAT front, we expect Gateway Distriparks to post growth of 22% due to higher margins in the CFS segment whereas PAT of Gujarat Pipavav is expected to grow 54% YoY due to a lower base. For BlueDart Express, PAT is expected to decline ~22% YoY in the absence of dividend income from subsidiary.

Exhibit 44: Estimates for Q1FY15E: (Logistics) (| Crore)

Revenue EBITDA PAT

Q1FY15E YoY QoQ Q1FY15E YoY QoQ Q1FY15E YoY QoQBlue Dart 516.1 13.8 2.5 49.7 2.8 3.1 31.8 -21.7 3.9Container Corporation 1,252.2 4.8 -3.4 269.8 -0.6 1.3 235.4 -4.5 -4.3Gateway Distriparks 277.7 12.7 4.1 73.4 19.0 11.8 36.5 21.6 -9.3Gujarat Pipavav 142.6 16.9 -8.7 75.6 37.6 -17.4 54.5 54.5 -10.7Transport Corp 505.0 5.7 -5.8 39.4 17.1 -14.9 15.4 9.9 -24.9Total 2,693.7 8.0 -2.4 507.9 8.1 -2.0 373.6 2.0 -6.2




2494 2636

2653

2760

2694

180020002200240026002800300032003400

Q1FY

14

Q2FY

14

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14

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Q1FY

15E

| Cr

ore

0.0

5.0

10.0

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(%)


Container Volumes

500

550

600

650

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Jan'

13

Mar

'13

May

'13

July

'13

Sep'

13

Nov

'13

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Analyst

Bharat Chhoda [email protected] Soumojeet Kr Banerjee [email protected]



Company RemarksContainer Corporation

Container volume of major ports posted growth of ~3% in Q1FY15 vs. a decline of ~6%for the corresponding quarter in FY14. Consequently, we expect volumes to grow nearly10% YoY leading to revenue growth of 5% to | 1252 crore. EBITDA margin may remainunder pressure at 21.5% leading to PAT of | 235 crore

Gateway Distriparks

JNPT Port’s container volume grew 3.5% against decline of ~6% for the correspondingquarter last year. We expect GDL’s CFS and rail volume to post growth of ~13% and 11%, respectively, YoY. Improvement in the CFS segment is expected to improve EBITDAmargin by ~140 bps YoY to 26.4% while PAT is expected at | 36.5 crore

Transport Corporation

TCI’s Q1FY15 revenue is expected to post growth of ~6% YoY to | 505 crore buoyed byrevenue growth in the supply chain and express segment by ~7% YoY. We expectmargin at 7.8%, an improvement of 80 bps YoY as high margin segments show growth.PAT is expected at ~| 15.4 crore for Q1FY15E.

BlueDart We expect revenues to grow 14% YoY but remain flattish sequentially to | 516 crore.EBITDA margin is expected to remain flat QoQ whereas YoY it is expected to contractnearly 100 bps. PAT is expected to decline ~21% YoY to | 31.8 crore in the absence ofdividend income from subsidiaries

Gujarat Pipavav Port

We expect revenues and volumes to grow 14.6% and 10% YoY, respectively, due toupsizing of vessels and dollarisation strategy. As volume picks up, the EBITDA margin isexpected to expand considerably on a YoY basis due to high fixed cost. PAT is expectedat | 54.5 crore in the absence of any extraordinary item



Media

Advertisement revenue to grow at slower pace…

Ad revenues for broadcasters are expected to grow at a relatively lower pace due to lower spends from various categories amid tepid economic recovery. Zee, TV18 (ex-ETV) may report ad revenue growth of 15.5%, 10.4%, respectively, while Sun TV may remain subdued at 4.7% YoY. Benefits from political spends in the quarter were mitigated by lower government related spends due to the model code of conduct. Thus, print players are expected to post consolidated ad growth of 9.6% YoY. However, the overall economic scenario would only improve gradually. Hence, complete ad growth revival would take some time. We expect our media universe to post YoY revenue growth of 13.4% & 1.9% QoQ.

Print still subdued as lower government spend offsets election spend

The benefit of political spends was offset by the absence of the government related spends as the model code of conduct was in force. Moreover, ad spends from education, real estate, etc. remained subdued. Hence, overall ad revenue growth would be subdued for DB Corp, Jagran, HT Media at 10.0%, 9.5%, 9.9% YoY, respectively. However, HT Media may see decent 15.5% YoY growth in the Hindi segment due to better contribution from FMCG sector and improved yields from advertising owing to increased subscription in the UP belt. Newsprint prices have stabilised in the quarter but benefits would only flow, going ahead, due to the three months inventory built-up.

Slower STB seeding, gross billing to be watched…

Phase III & IV digitisation is yet to pick up and the quarter continues to be subdued in terms of subscriber addition. We expect Hathway to seed about 1,20,000 STBs in Q1FY15 on standalone basis. Dish TV is expected to add 260,000 net subscribers. Its ARPU may expand 2.1% QoQ to | 166, as the previous quarter had a lower number of billing days. MSOs are yet to shift towards gross/package wise billing in Phase I and II cities while digitisation is yet to pick up in Phase III and IV cities. We believe any pick up in digitisation can only take place if there are some stringent measures from the government.

Subdued box office performance…

There were very few releases such as Kochadaiyaan, Holiday, etc. this quarter due to IPL and election fervour. Hence, we expect PVR to witness 13% YoY decline in quarterly footfalls per screen to 34400.

Exhibit 46: Estimates for Q1FY15E (Media) (| Crore) Zzzzzzzz

Revenue EBITDA PATQ1FY15E YoY QoQ Q1FY15E YoY QoQ Q1FY15E YoY QoQ

DB Corp 490.6 9.2 8.0 122.2 -8.0 16.8 70.7 -7.0 -6.9Dish TV 654.7 13.2 2.8 153.9 26.5 19.4 -11.4 NA NAENIL 93.1 9.3 -18.7 32.4 8.4 2.6 21.3 6.7 0.1Eros International 200.1 7.4 -36.4 36.0 -8.8 -51.1 19.0 -35.2 -54.1Hathway Cables 286.7 23.2 -2.1 34.2 -55.0 -16.0 -29.3 PL NAHT Media 578.2 6.9 6.3 88.9 14.0 17.9 52.7 11.0 51.3Jagran Prakashan 454.0 9.9 7.9 103.0 1.0 30.4 58.6 1.4 6.2PVR 349.7 4.3 11.3 53.0 -10.8 60.2 8.2 -39.6 1,010.5Sun TV 660.5 9.7 27.0 382.5 8.2 -4.4 183.7 11.7 -7.0TV18 Broadcast 540.5 36.4 -4.0 45.7 93.1 -34.8 21.8 267.4 -56.2Zee Ent. 1,126.0 15.7 -2.8 274.8 -5.7 -11.8 190.8 -14.8 -12.3Total 5,434.3 13.4 1.9 1,326.6 1.4 -1.6 586.2 -4.4 18.2




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ATP Footfalls

Top pick of sector PVR Limited Jagran Prakashan Analyst

Karan Mittal [email protected]

Sneha Agarwal [email protected]


Exhibit 47: Company specific view Company RemarksDB Corp We expect DB Corp to post 10.0% YoY ad-growth as the election led ad spend from

political parties was mitigated by lower spends from other categories. Circulation revenuethough flat QoQ is expected to post 12.3% YoY revenue growth due to cover price hikes.Moreover, though newsprint costs have eased and would remain flat QoQ, YoY there maybe a 17.6% increase in overall newsprint cost. This coupled with lower ad growth isexpected to lead to an EBITDA margin YoY contraction of about 464 bps to 24.9%

Dish TV Gross subscriber addition is estimated to be ~0.4 million, with net adds of 0.26 millionand churn of 0.17 million (0.5% monthly of net base). ARPU is expected to show 2.1%QoQ increase to | 166 as the previous quarter had a lower ARPU due to a lower numberof billing days. Margins are expected to improve 326 bps QoQ to 23.5% due to contentcost reduction from Dish's new initiatives "Request only channels'' and lower sportsrelated content costs

ENIL We expect ad revenues to grow 9.2% YoY far lower than the 23.4% in Q1FY14 due to highbase effect coupled with majority of ad spends being shifted to news broadcasters due toelections. Utilisation is expected to only marginally improve to ~93.9% from 92.3% inQ1FY14. The management remains optimistic on the timeline of the Phase III auctions andexpects it to take place in the ongoing fiscal

Eros International

Even though there were a few movies released this quarter, the company may reportrevenue growth of 7.4% due to syndication and overseas revenue growth of 79% and 19%YoY, respectively. There was only one big release, namely Kochadaiyaan, this quarter andsome regional movies due to IPL season and elections

HT Media HT Media is expected to post consolidated ad growth of 9.9% YoY. In contrast to peers,HT Media is expected to post strong growth in Hindi ads of about 15.5% on the back ofhigher FMCG led spends and increase in advertisement yields due to increased circulationin the UP belt. English ads may grow 7% YoY mainly led by yield improvement while radiois expected to continue to post strong growth of 13.5% YoY. Circulation revenues may beflat sequentially as there has been no significant change in cover prices or number ofcopies. Newsprint costs are expected to remain stable QoQ. The growth in ad growth andrelatively stable newsprint costs would lead to an EBITDA margin expansion of ~100 bpsYoY to reach 15.4% in this quarter

Jagran Prakashan

Jagran is expected to post 9.5% YoY ad growth clocking ad revenues of | 317.3 crore.Even though there was one-time election induced spending by political parties, growth inad revenue was lower due to a slowdown in education related spends and lowergovernment spending with implementation of model code of conduct. Moreover, adgrowth also looks subdued due to high base effect. Newsprint costs have, however,stabilised leading to an EBITDA margin of 22.7%, an improvement of about 390 bps QoQ.We expect the first half of the fiscal to be relatively weaker and ad spends to revive todouble digit levels only in the second half, hence, achieving an ad growth of 13.4% forFY15

Hathway Cable Phase III and IV of digitisation is yet to gain momentum. Hence, we expect seeding ofabout 120000-130000 boxes in the quarter with an average realisation of about | 800 perbox leading to an activation income of | 10 crore, flat QoQ. Both placement andsubscription revenues are expected to remain flat QoQ at | 85 and | 126 crore,respectively, due to status quo in gross billing since Q4. Broadband revenues are,however, expected to grow 5% QoQ to | 41 crore. EBITDA margins may fall to 11%, a 245bps reduction QoQ, higher than the previous quarter due to the presence of one-timeincome of | 22 crore



Exhibit 48: Company specific view Company RemarksPVR PVR has remained consistent with its property roll-out, adding 23 screens in the quarter.

The quarter has, however, been weaker on account of very few releases. More releaseswere from Hollywood such as Godzilla, Spiderman, etc. Hence, we expect footfalls perscreen to decline 13% YoY. The absolute footfalls may still remain flat YoY at 15.3 milliondue to 14% YoY increase in the number of screens. ATP spends may show only amarginal increase of 2.0% QoQ to | 163.2 but F&B spends are expected to show 5% QoQincrease to reach | 58.8. Nevertheless, the coming quarters have a strong movie pipelinethat augurs well for PVR

Sun TV Sun TV is expected to post subdued ad growth of 4.7% YoY due to a high base effectcoupled with the impact of lower ad inventory this quarter relative to the same quarterlast year. Moreover, the company is yet to fully recover from the ad revenue loss it facedin Q3FY14 due to massive hikes undertaken to offset the impact of ad cap. Subscriptionrevenue, on the other hand, may continue to grow at 23% to | 181.7 crore on the back ofdigitisation efforts, covering four major cities of southern India. However, the IPL lossesare expected to increase to | 16.4 crore as the matches were held internationally owingto which there is higher revenue uncertainty. This would result in about 90 bps YoYEBITDA margin contraction to about 57.9%

TV18 Broadcast Limited

Ad revenues for TV18 (ex-ETV) are expected to grow 10.4% YoY with strong growth in the general news segment owing to elections while entertainment ad would remain relativelysubdued. Overall revenues are expected to grow 36% YoY. However, this includes ETVfinancials and, hence, cannot be compared on a like-to-like basis. The net distributionincome would continue to remain flat due to discontinuance of the Indiacast JV

Zee Entertainment

Advertisement revenue for Zee is expected to grow better than other peers at about15.5% YoY. The growth, however, is lower compared to the 18.5% in Q1FY14 due to thehigh base effect and overall slowdown in ad spends from various categories. Subscriptionrevenue though may post 11.0% YoY growth. It is expected to remain flattish QoQ with nomajor headway in digitisation since then in Phase III and IV cities. The dismantling ofMediaPro JV does not augur well for the company and could result in higher carriagefees. Hence, on account of lower revenue growth and higher operating expenditure due tolaunch of a new channels and high carriage fees, margins are expected to decline 550 bps YoY to 24.4%



Metals & Mining

Steel demand continues to be subdued, prices decline sequentially

On the ferrous metal front, demand remained subdued with domestic steel consumption increasing merely 0.5% YoY to 12.6 million tonne (MT) during the first couple of months of FY15. Imports increased 18.2% YoY to 1.1 MT while exports grew 21.2% YoY to 1.0 MT in the aforesaid period. Domestic steel prices witnessed a decline of ~3% QoQ, which resulted in subdued realisations sequentially for companies within our coverage universe. However, the fall in realisations was partially compensated by the drop in prices of key inputs, such as coking coal. On the back of an increase in supplies from Australia and North America, coking coal contract prices have declined from US$143/tonne in Q4FY14 to ~US$125/tonne in Q1FY15.

Non-ferrous metal prices, mixed bag ; zinc outshines

Non-ferrous metal price movement during the quarter was a mixed bag. We witnessed a decline in prices of copper (both QoQ and YoY) while lead declined marginally QoQ. Aluminium was higher QoQ with zinc being the only gainer both QoQ as well as YoY. During the quarter, the average price of zinc was US$2072/tonne, up 2.3% QoQ and 12.5% YoY while aluminium was at US$1801/tonne, up 5.3% QoQ but lower by 1.9% YoY. Lead was at US$2097/tonne, up 2.2% YoY but lower 0.2% QoQ while copper was at US$6796/tonne, lower by 3.4% QoQ and 5.2% YoY.

EBITDA margins to decline QoQ

On account of muted sales volumes QoQ as well as subdued realisations sequentially we expect the topline of our coverage universe to decline 10.0% QoQ. EBITDA margins are expected to decline 100 bps QoQ at 16.8% with absolute coverage EBITDA declining 14.9% QoQ. Within our coverage universe, we expect EBITDA/tonne of SAIL at | 3219/tonne, JSW Steel at | 7581/tonne, Tata Steel India at | 15008/tonne and Tata Steel Europe at US$40/tonne. We expect Novelis to clock EBITDA/tonne of US$320/tonne while mining majors NMDC and Coal India are expected to report EBITDA/tonne of | 2650/tonne and | 331/tonne, respectively.

Exhibit 49: Estimates for Q1FY15E: (Metals) (| Crore)


Coal India 17,936.4 8.9 -10.3 3,955.7 -0.1 -22.6 3,674.1 -1.5 -17.1Graphite India 362.7 -10.2 -25.8 54.7 -16.9 -19.7 32.0 -18.6 -28.7HEG 364.6 55.7 -27.3 64.8 72.8 -16.6 26.8 LP -42.5Hindalco 7,530.1 29.0 -10.7 869.6 81.7 3.0 339.1 -28.5 36.7Hindustan Zinc 3,016.6 1.1 -17.2 1,390.3 -7.5 -20.8 1,516.0 -8.7 -19.4JSW Steel 13,293.0 29.4 -7.3 2,309.0 22.9 -8.7 458.0 LP -5.2NMDC 3,415.5 19.0 -12.1 2,273.6 19.3 -7.9 1,773.8 12.8 -9.6SAIL 11,439.2 11.4 -15.3 964.9 -0.2 -21.0 209.2 -53.6 -53.8Sesa Sterlite 16,926.0 NA -18.6 6,359.9 NA -6.0 1,021.9 NA -37.0Tata Steel 39,296.9 19.8 -7.4 4,336.4 17.6 -13.5 2,224.1 95.3 114.7Usha Martin 969.7 4.4 -22.6 163.2 3.4 -8.3 3.4 -17.1 LPTotal 97,624.8 17.5 -10.0 16,382.2 11.9 -14.9 10,256.5 18.2 -3.0


Source: Company, ICICIdirect.com Research,, Hindalco numbers are of Standalone entity, Total Numbers excludes Sesa Sterlite , QoQ and YoY comparison are excluding Sesa Sterlite Numbers.


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China Import iron ore fines 58% Fe spotChina Import iron ore fines 62% Fe spot

Top pick of sector NMDC Analyst

Dewang Sanghavi [email protected]

Isha Bansal [email protected]



Company RemarksCoal India We expect coal production of 108.3 million tonne (MT) and sales of 119.6 MT in

Q1FY15. Blended realisations are expected at | 1500/tonne while the correspondingEBITDA/tonne is expected at | 331/tonne with EBITDA margins of 22.1%

Graphite India We expect capacity utilisation of the graphite electrodes segment at ~75% inQ1FY15 (~83% in Q4FY14). On the back of muted capacity utilisation, we expectthe topline to decline 25.8% QoQ. However, EBITDA margins are expected toincrease QoQ 120 bps QoQ to 15.1% on the back of a decline in operating costs

HEG We expect capacity utilisation of the graphite electrodes segment at ~75% inQ1FY15 (~58% in Q1FY14). On the back of better utilisation levels, we expecttopline to grow 55.7% YoY. On the back of a decline in operating costs, the EBITDAmargin is also expected to improve 80 bps QoQ to 16.3%

Hindalco Industries

For Q1FY15, we expect domestic operations to report total aluminium metal sales at165 KT and copper metal sales at 88 KT. For the domestic aluminium business, weexpect blended EBITDA/tonne of US$404/tonne. For Novelis, we expect rolledproduct sales at 806 KT with EBITDA/tonne at US$320/tonne

HindustanZinc

We expect integrated zinc sales for Q1FY15 at ~150,000 tonne (lower by 12.3%YoY) with integrated lead sales volumes at 27,750 tonne (lower by 7.5% YoY) andsilver sales at ~77700 kg (lower by 15.5% YoY). On the back of higher operatingcosts, we expect EBITDA margins to drop 430 bps QoQ to 47.8%

JSW Steel As a merged entity, we expect JSW Steel to report steel sales volume of 3.0 MT forQ1FY15, which includes 0.7 MT of steel sales from JSW Ispat. Blended realisationsare expected to decline ~2% QoQ to ~| 41000/tonne. EBITDA margins are alsoexpected to decline ~20 bps to 17.4% on account of muted realisations

NMDC We expected iron ore sales of 8.6 MT in Q1FY15 (7.3 MT in Q1FY14). Export salesare estimated at 0.5 MT in the quarter. Despite the price hikes undertaken by thecompany in June 2014 (| 250/tonne for fines and | 300/tonne for lumps) we expectblended realisations to remain flat QoQ on the back of a steep fall in exportrealisations. EBITDA/tonne is also expected to remain flattish QoQ at | 2650/tonne

SAIL We expect steel sales volumes for Q1FY15 at 3.0 MT. However, on the back of adrop in realisations, we expect EBITDA margins to decline ~60 bps QoQ to 8.4%.We expect blended realisations to decline QoQ by ~| 700/tonne to ~|37300/tonne

Sesa-Sterlite We expect the company to report a subdued performance in Q1FY15. Thecompany's aluminium, zinc and power businesses are expected to report healthysales volume in Q1FY15. Copper sales volumes, however, are expected to besubdued on account of the planned shutdown undertaken during the quarter. Thepower business is expected to report a PLF of ~45% with ~2200 million units ofelectricity sales. We expect the company to report EBITDA margins of 37.6% inQ1FY15. The quarterly performance is not comparable YoY

Tata Steel For Q1FY15, we expect Tata Steel India to report steel sales of 2.2 MT. Blendedrealisations are expected to decline 2.5% QoQ with a corresponding decline inEBITDA margins by 310 bps to ~30.6%. Tata Steel Europe is expected to reportsteel sales of 3.5 MT and EBITDA/tonne of US$40. On a consolidated basis, weexpect EBITDA margins to decline 80 bps QoQ at 11.0%. We expect Tata Steel toreport exceptional gain to the tune of ~|1450 crore on account of stake sale inDhamra Port.

Usha Martin Sales volumes are expected to increase 7.8% YoY to ~1,65,000 tonne whileblended realisation is expected to decline ~1.8% YoY to ~| 59750/tonne.Subsequently, the topline is expected to increase 4.4% YoY. EBITDA margins arelikely to decline marginally by 20 bps YoY to 16.8%


Hindustan Zinc sales trend

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Tata Steel Group MT 6.1 6.5 6.4 7.6 6.7

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Oil and gas

Brent crude price remains at elevated levels in quarter

The Iraq civil unrest and speculation of war in the oil producing region pushed up Brent crude oil prices. Average Brent crude oil prices increased 1.8% QoQ to $109.8/bbl in Q1FY15E and closed at $112.1/bbl. This will lead to some inventory gain for refineries in the quarter. The rupee remained flat QoQ. This will not have any impact on gross realisations of upstream companies (Cairn, ONGC and Oil India).

Gross under-recoveries in Q1FY15E at | 29,149 crore

Gross crude oil under-recoveries are estimated to decline QoQ from | 39,237 crore in Q4FY14 to | 26,947 crore in Q1FY15E on account of a reduction in under-recovery for all sensitive products i.e. diesel, kerosene and LPG. We expect the government’s share of the subsidy burden at 44.1% in Q1FY15E. We estimate upstream companies will bear a subsidy burden of | 15,788 crore ($56 per barrel subsidy burden) while downstream will have a subsidy burden of | 520 crore in Q1FY15E. Since downstream companies will have only a small share of 1.8% as subsidy burden in Q1FY15E, we expect oil marketing companies (HPCL and IOCL) to report a profit in the quarter.

Gross refining margins decline QoQ

Singapore gross refining margins (GRM) have declined QoQ from $6.2/barrel in Q4FY14 to $5.8/barrel in Q4FY14 mainly on account of a decline in gas oil crack spreads from $17.2/barrel in Q4FY14 to $15.6/barrel in Q1FY15E. The fuel oil and LPG crack spreads have also declined during the quarter. This will be negative for refiners like Reliance Industries, Essar Oil, CPCL and MRPL. Complex refineries will not witness any impact of Arab crude heavy-light spreads that have remained flat at US$4.9/barrel during the quarter.

No substantial increase in domestic gas volumes

Although we expect the decline in gas production from Reliance KG-D6 basin to be arrested (13.7 mmscmd in Q4FY14), the higher dependence on costlier LNG from global markets continues. Hence, large gas transportation companies would report muted volumes QoQ.

Exhibit 51: Estimates for Q1FY15E: (Oil and Gas) (| Crore)Revenue EBITDA PAT

Q1FY15E YoY QoQ Q1FY15E YoY QoQ Q1FY15E YoY QoQCairn India Ltd 4,807.0 18.3 -4.8 3,505.6 20.5 -4.8 2,976.5 -4.8 -1.9Gail India 14,666.9 13.7 0.7 1,626.5 7.8 13.0 869.1 7.5 -10.6Gujarat Gas 763.2 1.6 -1.2 118.7 -23.7 59.5 73.2 -27.3 47.5HPCL 60,447.7 16.8 -5.8 1,322.1 LP -77.7 404.8 LP -91.2IOC 125,210.3 13.3 -7.2 3,389.1 LP -75.2 978.9 LP -89.6Indraprastha Gas 968.3 7.3 0.0 197.0 1.6 2.5 91.8 4.8 1.4MRPL 15,058.8 -1.4 -23.6 343.2 LP -63.6 31.0 LP -97.1Oil India Limited 2,479.9 18.2 27.3 1,094.8 34.5 129.3 797.5 30.9 41.0ONGC 20,740.9 7.4 -2.7 10,780.2 27.0 -6.9 4,882.8 21.6 -0.1Petronet LNG 9,924.9 17.5 -4.8 438.9 10.3 13.5 190.7 -15.4 12.6Total 255,067.8 12.9 -6.8 22,816.0 86.0 -40.5 11,296.1 184.8 -54.5




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2738

12

2550

68

0

50000

100000

150000

200000

250000

300000

Q1FY

14

Q2FY

14

Q3FY

14

Q4FY

14

Q1FY

15E

| Cr

ore

0.02.04.06.08.010.012.014.016.0

(%)


Singapore gross refining margins (GRMs)

6.2 5.86.55.4

4.3

0

2

4

6

8


Refin

ing

mar

gins

(US$

per

bbl

)

Brent Crude Oil Prices

109.8107.9

109.4110.0

102.9

95

100

105

110

115

120


US$

per b

bl

Top picks of sector

Oil India GAIL

Analyst

Mayur Matani [email protected] Utkarsh Tathagath [email protected]


Exhibit 52: Company specific view Company RemarksCairn India Revenues are expected to increase 18.3% YoY due to rupee weakness and higher gross

production YoY. Net oil & gas production may increase 6.1% YoY to 140146 boepdwhile oil realisation is expected to increase 1.6% YoY to $96.2/bbl. We expect grossproduction from Rajasthan fields to increase 8% YoY. However it is expected to decline1.7% QoQ from 1,90,881 barrels/day to 1,87,500 barrels/day

Gail We expect a 13.7% YoY increase in revenue due to growth in natural gas trading,petrochemical & LPG and liquid hydrocarbon (LLH) business. We expect transmissionvolumes to decline 3.8% YoY to 95.5 mmscmd. Petchem volumes are expected toremain flat at 120 KTPA vs. 121 KTPA YoY while its realisations are expected toincrease 19.5% YoY due to price increase & rupee weakness YoY. We expect a subsidyburden of | 350 crore in Q1FY15

Gujarat Gas We expect 1.5% YoY increase in revenues due to increase in realisations. Totalvolumes at 2.4 mmscmd are expected to decline 8.2% YoY, as high LNG prices and theslowdown in economy are impacting demand from consumer industries. The grossspread is expected to decline from | 8.6/scm in Q2FY14 to | 7.5/scm in Q1FY15 andincrease from Q5FY15 to | 5.6/scm

Hindustan Petroleum

We expect revenues to increase 16.8% YoY on account of higher sales volume andlower share of under recovery. Refining margins are expected at $2.8/bbl vs. $2.6/bblYoY. We expect HPCL’s net under-recovery at | 120 crore, assuming the downstreamshare at 1.8% of total under-recoveries. This will help the company to post profit inQ1FY15

Indian Oil We expect revenues to increase 13.3% YoY on account of higher sales volume andlower share of under recovery. Refining margins are expected at $3.3/bbl vs. $1.7/bblYoY. We expect IOCL’s net under-recovery at | 271 crore, assuming the downstreamshare at 1.8% of total under-recoveries that will help the company to post profit inQ1FY15

Indraprastha Gas

Revenues are expected to increase 7.2% YoY on account of 6.6% YoY increase in salesvolume. Sales volumes are expected to increase to 3.9 mmscmd while net realisationsare expected to decline 1.2% YoY. CNG prices are expected to decline from | 39.5/kg inQ1FY14 to | 37.1/kg in Q1FY15

MRPL We expect revenues to decline 1.4% YoY, due to a decline in throughput. Thethroughput is expected at 3.1 mmtpa in Q1FY15 against 3.3 mmtpa in Q1FY14 due tomaintenance shutdown. GRMs are expected at US$3.6/barrel in Q1FY15 vs.US$1.9/barrel in Q4FY14, due to commissioning of the new coker heavy gas oil hydrotreating unit

Oil India Revenues are expected to increase 18.2% YoY due to higher production & realisation.We expect oil production of 0.84 MMT, a decline of 7% YoY and an increase of 6.6%QoQ, due to a partial shutdown during Q4FY14. The expected subsidy burden is $56/bbl(| 2026.1 crore vs. | 1982 crore YoY)

ONGC Revenues are expected to increase 7.4% YoY mainly due to higher net realisations YoY.We expect oil production to increase 2.3% YoY to 6.6 MMT, subsidy burden of$63.5/bbl (| 13355.3 crore vs. | 12621.8 crore YoY) and net realisation of $45.3/bbl inQ1FY15E against $40.2/bbl YoY

Petronet LNG We expect 17.5% YoY revenue growth due to higher realisations. Volumes areexpected to increase (6.4% YoY) to 137.9 trillion British thermal units (2.8 MMT) inQ1FY15. Increase in volumes can be mainly attributed to commissioning of the newjetty at Dahej. Higher interest and depreciation costs will lead to lower profitability on aYoY basis


Gross under-recoveries of petroleum products

25579

35328 39725 39237

29149

0

7000

14000

21000

28000

35000

42000


| Cr

ore

Sharing of crude oil under-recoveries (| Crore) Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15

Upstream 15304 16730 15939 19050 15788Downstream 2275 826 13786 -14813 520Government 8000 17772 10000 35000 12841Total 25579 35328 39725 39237 29149

Sharing of crude oil under-recoveries (%)

Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15Upstream 59.8 47.4 40.1 48.6 54.2Downstream 8.9 2.3 34.7 -37.8 1.8Government 31.3 50.3 25.2 89.2 44.1Total 100.0 100.0 100.0 100.0 100.0

Sharing of net crude oil under-recoveries (| Crore) Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15

ONGC 12622 13796 13764 16202 13404OIL India 1982 2234 2173 2348 2034GAIL 700 700 1 500 350IOC 1212 414 7193 -7736 271BPCL 545 215 3403 -3651 128HPCL 518 197 3191 -3426 120Government 8000 17772 10000 35000 12841Total 25579 35328 39725 39237 29149

Gross under-recoveries of petroleum products

782

13851610

1399

461

0

400

800

1200

1600

2000

FY10

FY11

FY12

FY13

FY14

| bn

Gross under-recoveries

Sharing of crude oil under-recoveries (%)

31.3 38.7 39.7 37.3 47.9

56.5 52.4 60.3 62.1 50.6

12.2 8.8 0.0 0.6 1.5

0

20

40

60

80

100

FY10

FY11

FY12

FY13

FY14

%

Upstream companies Government OMC's


Power

Capacity addition much beyond target till date in XIIIth Plan

The power sector added 5.5 GW capacity vs. targeted 0.8 GW capacity during April-May FY15. The total installed capacity currently stands at 248.5 GW. In Q1FY15, industry plant load factor (PLF) was flat at 49%. Average peak deficit declined to 4.7% in April-May 2015 vs. 6.4% YoY while base deficit declined to 4.1% vs. 7.1% YoY in the same period.

Private players withdraw from UMPP bidding; seek change in policy

Pre-qualified bidders for the 4,000 MW TN and Odisha UMPP such as Adani Power, Tata Power, Jindal Steel & Power, JSW Energy, Sterlite, CLP and GMR Energy decided to withdraw from the race for building these projects as they have requested the new government to frame investor friendly clauses for the same. Thus, they are opposing the existing bidding terms of the design - build - finance - operate - transfer model (DBFOT) as lenders are reluctant to finance such projects, which may act as a disincentive for them. Participants have also highlighted the CERC’s view, which says the model is more suited for natural monopoly businesses such as road, transport and T&D but not for de-licensed businesses like power generation. CERC had also highlighted complexities in the transfer process of assets and instead recommended a build-own-operate (BOO) model for UMPPs. The Power Ministry has assured they would review the existing model and draft new policies if felt necessary which could be a time consuming process, further delaying the commencement of these two projects.

Merchant rate unlikely to see sharp fall due to El Nino impact

Merchant rates increased significantly both QoQ (+9.3%) and YoY (+27.3%) to | 3.3/Kwh in Q1FY15 due to increased demand during general elections and delayed monsoon due to the El Nino impact. Going ahead, we do not expect merchant rates to decline in the near term due to predicted below average monsoon in FY15E, which would not only lead to higher temperature but also lower generation from many hydro power stations across the country.

Q1FY15 to witness growth across all companies, Power Grid, NHPC, PTC India to outpace others

Our coverage universe is expected to post a topline and bottomline growth of 14.7% and 12.7% YoY, respectively, in Q1FY15. Of this, PTC is expected to report strong volume growth of ~17.3% YoY to 9.9 BUs driven by higher demand during general elections, which were further elevated by delayed monsoons. While the topline is likely to grow 46.1% YoY, PAT is expected to grow 32.4% YoY. Power Grid is likely to put a healthy performance driven by strong capitalisation coupled with 17.9% YoY and 18.8% YoY growth in topline and bottomline, respectively. We expect NHPC’s sales volume and revenue to increase 16% and 17% YoY, respectively, driven by incremental capacity and improved demand. PAT, however, is likely to grow 12.4% YoY due to increased fixed cost from commissioning of new plants. While NTPC’s revenue is likely to increase 20.6% YoY, PAT is expected to grow only 8.2% YoY due to increased employee (+14.2% YoY), G&A (+15.6% YoY) and depreciation (+26.2% YoY) expenses from commissioning of new capacities. CESC is likely to report 6.8% YoY revenue and 6.3% YoY PAT growth driven by 2.5% YoY rise in generation and declining losses at Spencer Retail. Tata Power is likely to report modest revenue growth of 5% YoY while PAT is expected to grow significantly by 260% YoY to | 227.2 crore due to a lower YoY base and a better performance at the Mundra plant due to declining international coal prices.


3479

2

3628

9 3879

9

3989

4

30000

32500

35000

37500

40000

Q1FY

14

Q2FY

14

Q3FY

14

Q4FY

14

Q1FY

15E

| Cr

ore

0.0

10.0

20.0

30.0

40.0

50.0

60.0

(%)


Trend in all India sectoral PLF Q1FY15

32

66

24

80

36

67 69

33

20

30

40

50

60

70

80

90

Coal Gas Nuclear Hydro

(%)

Q1FY15 Q1FY14

*Upto May 2013 Capacity addition target/achievement 13th Five Year Plan

0

153

84

157

0

-

15,000

30,000

45,000

60,000

Ther

mal

Hydr

o

Nuc

lear

Rene

wab

le

Tota

l

(MW

)

-20

20

60

100

140

(%)

Target Achievement % Achieved (RHS)

Top pick of sector

CESC, Power Grid

Analyst

Chirag Shah [email protected] Anuj Upadhyay

[email protected]


Exhibit 53: Estimates for Q1FY15E: (Power) (| Crore)


CESC 1,515.1 6.8 23.3 334.4 10.0 -23.5 139.2 6.3 -42.7NHPC 1,900.1 17.3 69.2 1,280.1 19.6 LP 809.5 12.4 LPNTPC 18,582.3 20.6 -8.6 4,456.5 9.6 -9.6 2,581.2 8.2 -17.6Power Grid Corp 4,196.1 17.9 5.3 3,661.6 16.6 2.3 1,235.7 18.8 5.1PTC India Ltd 4,048.9 46.1 42.1 50.0 47.2 -47.6 38.4 32.4 -44.2Tata Power 9,651.4 4.6 9.1 2,075.5 6.3 13.9 227.2 260.4 315.7Total 39,893.8 14.7 2.8 11,858.1 6.3 9.5 5,031.1 12.7 32.6



Exhibit 54: Company specific view Company RemarksNTPC We expect NTPC's generation to increase ~10.5% YoY to 63 BUs in Q1FY15E while tariff is

expected to increase 9.3% YoY to | 3.2/Kwh. Consequently, we expect revenues toincrease 21.2% YoY while adjusted PAT is expected to increase 10.8% to | 2581 crore asfixed cost will increase due to new capacity

NHPC We expect NHPC's generation and sales unit to increase ~16% YoY to 7.4 BUs and 6.5BUs, respectively, in Q1FY15E driven by incremental capacity. However, tariff realisation isexpected to remain flat at +1% YoY to ~| 2.9/Kwh. Consequently, we expect toplinegrowth of 17.2% YoY to | 1,900 crore and PAT growth of 12% YoY to | 310 crore inQ1FY15

PTC India We expect trading volumes to grow 17.3% YoY to 9.9 BUs in Q1FY15E due to higherdemand from ongoing elections and an extreme summer climate. Growth across long termtrades is likely to be 65% YoY driven by commencement of LT PPA. Accordingly, sales andPAT are likely to grow 46% and 32.6%, respectively

Tata Power We expect moderate sales growth of 5% YoY driven by increased production and salesacross its coal SPV 23 MT in Q1FY15 vs. 20 MT YoY. Coal realisation is expected at$56/tonne vs. $66/tonne YoY. We expect a consolidated PAT of | 227 crore vs. | 63 croreYoY

Power Grid We expect strong capitalisation of ~| 4,500 crore in Q1FY15E as ~| 1,500 assets wascapitalised during the first week of April 2014. For FY15E, we expect capitalisation of ~|18,500 crore. We expect PGCIL to report sales and PAT growth of 17.9% YoY and 18.8%YoY as | 15,900 crore assets were capitalised in FY14

CESC We expect CESC to sell ~2.5 BUs in Q1FY15E (up 2.5% YoY) as demand was moderate inthe period while tariff is likely to increase 3.0% YoY to | 6.07/Kwh. Accordingly, the toplineand PAT is likely to increase 6.8% YoY and 6.3% YoY to | 1,515 crore and |139.2 crorerespectively in Q1FY15.



Real Estate

Volume to remain subdued; REIT tax framework to be key catalyst for long term re-rating

A strong electoral mandate, unveiling of the government’s 10 year agenda, including housing for all by 2022, and RBI’s dovish tone towards interest rate are positive for the sector. However, we believe the peak level of pricing, particularly in the Mumbai region, is likely to keep volumes subdued. We anticipate our coverage sales volume will decline 6.2% YoY largely due to an 18% decline in sales volume of Sobha. However, we expect 56.3% and 11.0% YoY growth in sales volume of Mahindra Lifespace and Oberoi, respectively.

On the commercial side, we believe Sebi and the government’s finalisation of REIT framework including single layer tax structure would be key catalysts. REIT listing would lead to a compression in the cap rate, leading to better valuation for commercial properties in addition to freed up the capital for developers.

Coverage universe revenue to grow 10.1%; PAT to decline 11% Given the subdued sales volume, revenues of our real estate coverage universe are expected to grow 10.1% YoY mainly due to 15.9% YoY growth in the topline of Mahindra Lifespace and 12.7% YoY growth in the topline of Sobha. The bottomline of our real estate coverage universe is, however, expected to decline 11.0% YoY dragged mainly by 19.1% YoY & 14.0% YoY decline in PAT for Oberoi and Mahindra Lifespace, respectively, largely on account of rising interest expenses.

Exhibit 55: Company specific view (Real Estate coverage universe) Company RemarksOberoi Realty We anticipate Oberoi sales volume to remain muted at ~54,000 sq ft. While,

Oberoi's revenues is expected to grow 2.8% Y-o-Y to |224.5 crore, the bottom lineis expected to decline 19% y-o-Y to |82.3 crore due to interest expenses of |9crore for loan of |300 crore taken for worli project. Key monitrable: Mulund &Borivali launches

Sobha Developers Sobha’s sales volume declined 18% YoY to 0.75 million sq. ft. in Q1FY15 due thelower off take in Gurgaon and Chennai region. Looking at Q1FY15, Sobha needs toachieve average sales volume of ~1.1 mn sq ft per quarter to achieve its salesvolume guidance of 4.0 mn sq ft in FY15, which appears to be tall task for thecompany, going ahead. On financial performance front, we expect top-line togrow by 12.7% YoY to |519.6 crore and PAT to grow by 6.3% YoY to |53.3 crore

Mahindra Lifespace With the planned launches in the affordeable segment, we believe MLD to reportgood set of volumes. In Q1 FY15, we anticipate MLD's revenues to grow 15.9%YoY to |77 crore. However, the net profit is expected to decline 14% yoY to |13.6crore


Exhibit 56: Estimates for Q1FY15E (Real Estate) (| crore) Revenue EBITDA PAT

Q1FY15E YoY QoQ Q1FY15E YoY QoQ Q1FY15E YoY QoQOberoi Realty 224.5 2.8 1.8 128.0 -4.1 2.1 82.3 -19.1 6.9Mahindra Lifespace 77.7 15.9 -9.8 26.0 179.5 426.8 13.6 -14.0 -29.2Sobha Dev. 519.6 12.7 -16.9 141.1 2.0 -17.0 53.3 6.3 -24.1Total 821.7 10.1 -11.8 295.1 4.9 -1.7 149.2 -11.0 -10.4




746 825

771 93

2

822

0100200300400500600700800900

1000

Q1FY

14

Q2FY

14

Q3FY

14

Q4FY

14

Q1FY

15E

| Cr

ore

10.0

15.0

20.0

25.0

30.0

35.0

40.0

(%)



Mahindra Lifespace, Oberoi Realty Major News during Q1FY15 Mahindra Lifespace

Mahindra Lifespace Developers is planning toenter the affordable housing business by offeringhouses in the range of | 10 lakh to | 20 lakh,aimed at families with a combined income of |20,000 to | 40,000 per month.

Mahindra Lifespace Developers allotted 1,35,000 new fully paid up equity shares of | 10 each toeligible employees on exercise of optionsgranted under ESOS 2006 at an exercise price of| 428 per share. The committee also issued andallotted 2,100 new equity shares of | 10 each toemployees on exercise of options granted underESOS 2012, at an exercise price of | 10 pershare

Analyst

Deepak Purswani, CFA [email protected] Bhupendra Tiwary [email protected] Nikunj Gala [email protected]


Retail Some revival in same store sales growth likely…

We expect the retail coverage universe to report revenue growth of 10-12% (except Titan) led by healthy revival in same store sales growth (SSSG). While space addition continues to remain muted, we expect Future Retail (FRL) to witness SSSG of ~8% and Shoppers Stop (SS) to report SSSG of 12% and 8% in the departmental and HyperCity segment, respectively. Bata, also, is expected to report revenue growth of 10.6% as some buoyancy in consumer sentiment was witnessed. However, Titan is likely to witness revenue de-growth of 9.1% YoY owing to a higher base of Q1FY14 where April and May 2013 witnessed a spike in demand for jewellery owing to a steep correction in gold prices. We expect the jewellery segment to witness de-growth of ~3%.

Operational performance – a mixed bag!

Bata and FRL are likely to maintain their operating margin. SS is likely to witness an improvement in the standalone segment owing to stabilisation of stores added in the last 15-18 months thereby leading to margin expansion. Titan could also witness an improved product mix in the jewellery segment (as Q1FY14 witnessed a jump in the demand for gold jewellery) leading to overall margin expansion.

Space addition to remain muted

We expect FRL and SS to add 0.2 and 0.4 million sq ft (YoY) taking the total operational space to 10.5 and 5.5 million sq ft, respectively. While FRL may witness an improvement in revenue per sq ft (| 2,364), SS may witness a dip (| 1,678) owing to continued space addition.

Exhibit 57: Estimates for Q1FY15E (Retail) (| Crore

Revenue EBITDA PAT

Q1FY15E YoY QoQ Q1FY15E YoY QoQ Q1FY15E YoY QoQBata India 632.9 10.6 27.8 106.4 10.7 61.6 66.0 6.5 67.4Future Retail 2,480.0 9.9 8.0 205.2 8.0 -14.8 8.5 LP 424.4Shopper Stop 919.6 11.6 -14.5 30.1 91.9 -37.5 -11.9 NA PLTitan Company 2,807.0 -9.1 0.7 258.1 14.7 -13.0 184.2 0.9 -10.8Total 6,206.6 0.6 0.8 493.4 14.5 -15.7 0.0 0.0 0.0



Exhibit 58: Company specific view (Retail)

Company RemarksBata India Revenues are likely to increase 10.6% YoY to | 632.9 crore. We expect gross margin to

marginally improve (up 60 bps YoY) to 52.5%. However, as the company has raisedpromotional spends, we expect the operating margin to remain flat at 16.8%. Consequently,PAT growth is likely to be relatively muted at 6.5% YoY to | 66.0 crore

Future Retail

With muted space addition (0.12 mn sq ft QoQ, 0.2 mn sq ft YoY) and SSSG of ~8%, weexpect revenues to grow 9.9% YoY to | 2,480.0 crore. Gross margin (26.5%) & operatingmargin (8.3%) are likely to be maintained. As fixed costs continue to remain high, we expectPAT of | 8.5 crore (loss of | 7.5 crore last year)

Shoppers Stop

Owing to 0.4 mn sq ft addition (YoY) & SSSG of 8-12%, revenues are likely to grow 11.6% YoYto | 919.6 crore. Operating margin is likely to increase to 3.3% in Q1FY15E 1.9% - Q1FY14) ledby improvement in standalone performance. However, as losses on the HyperCity end continuewe expect a loss of | 11.9 crore

Titan Company

We expect revenue de-growth of 9.1% YoY to | 2,807.0 crore (high base of Q1FY14) owing to3% de-growth in the jewellery segment. Operating margin is likely to improve 200 bps to 9.2%owing to a better jewellery segment product mix and improved watches segment margin. PATis likely to remain flat at | 184.2 crore



6168

5654 60

16 6158

6207

5000

5300

5600

5900

6200

6500

Q1FY

14

Q2FY

14

Q3FY

14

Q4FY

14

Q1FY

15E

| Cr

ore

0.01.02.03.04.05.06.07.08.09.010.0

(%)


Space addition

0.06 0.07

0.12

-

0.030.06- -(0.03)

0.10

0.310.30

(0.1)

-

0.1

0.1

0.2

0.2

0.3

0.3

0.4

Q4FY

13

Q1FY

14

Q2FY

14

Q3FY

14

Q4FY

14

Q1FY

15E

mn

sq. f

t.

Future Retail Shoppers Stop

Revenue per sq. ft.

2,262

1,989

2,364

2,056

2,3452,243

2,573

2,216

1,678

2,109

1,708

2,003

1,500

1,700

1,900

2,100

2,300

2,500

2,700

Q4FY

13

Q1FY

14

Q2FY

14

Q3FY

14

Q4FY

14

Q1FY

15E

|

Future Retail Shoppers Stop

Top Picks

Titan Company

Analyst

Bharat Chhoda [email protected] Dhvani Modi [email protected]


Shipping/Offshore/Shipbuilding

Dry bulk charter rates continue to soften as supply side catches up

Average Baltic Dry Index (BDI) for Q1FY15 declined 28% QoQ as the spurt in iron ore demand from China showed signs of slowing down. On a segmental basis, the smaller vessel segment also followed suit with Baltic Panamax, Supramax and Handymax indices declining ~40%, 23% and 27%, respectively, on an average for the quarter vis-à-vis Q4FY14. Iron ore inventory in China was significantly higher at an average of 105 million tonnes (MT) for Q1FY15. This would lead to reduced imports of iron ore by China in the near term. On the supply front, the dry bulk segment added ~58 million dwt for 2013 and ~22 million dwt till May 2014. It has a strong order book of approximately 140 million dwt till CY16 (19% of current dry bulk fleet).

Tanker rates too weaken post firming up on extended winter

Quarterly average of Baltic Clean tanker Index (BCTI) and Baltic Dirty Tanker Index (BDTI) softened ~12% and 24%, respectively, in Q1FY15. Tanker rates declined post strengthening in the previous quarter due to extended winter in the US and stocking due to Chinese New Year. However, with a marked decline in activity in the Middle East Gulf region charter rates softened towards end of the quarter for VLCC (largely) and other carriers.

Revenue likely to remain flattish while profits struggle to catch up

Q1FY15E revenue for the I-direct shipping universe is expected to remain flattish YoY whereas it is expected to decline~6% sequentially as charter rates remained volatile and softened towards the end of quarter. On the EBITDA front, the shipping universe is expected to post growth of 11.5% YoY on account of lower charter hire and bunker cost. Further, the PAT of the I-direct shipping universe is anticipated to come in at ~| 107 crore. On the company specific front, the performance of GE Shipping is expected to remain subdued with revenue gaining 3% and EBITDA declining ~3% YoY (due to high dry docking and mobilisation charges) whereas PAT is expected at | 91 crore in the absence of any extraordinary item. SCI is expected to continue to make profit in the quarter also with PAT of ~| 10 crore in Q1FY15.

Exhibit 59: Estimates for Q1FY15E: (Shipping) (|Crore)

Revenue EBITDA PAT

Q1FY15E YoY QoQ Q1FY15E YoY QoQ Q1FY15E YoY QoQGE Shipping 756.0 2.7 -5.4 330.5 -3.1 -6.3 91.2 -62.8 36.4Pipavav Defence 495.8 -29.5 10.0 138.8 -8.1 -0.9 6.3 -14.2 380.5SCI 1,129.0 17.7 -11.7 220.5 74.2 -10.9 9.5 LP -28.1Total 2,380.8 -0.7 -5.8 689.8 11.5 -6.8 106.9 -30.4 31.4




2398

2631

2139

2529

2381

2000

2400

2800

Q1FY

14

Q2FY

14

Q3FY

14

Q4FY

14

Q1FY

15E

| Cr

ore

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

(%)


Dry Bulk Indices

0

2000

4000

6000

8000

Jun-

10

Dec-

10

Jun-

11

Dec-

11

Jun-

12

Dec-

12

Jun-

13

Dec-

13

Jun-

14

Inde

x

BDI BCI BPI

Source : Bloomberg, ICICIdirect.com Research Tanker Indices

200

400

600

800

1000

1200

1400

Jun-

11

Dec-

11

Jun-

12

Dec-

12

Jun-

13

Dec-

13

Jun-

14

Inde

x

Baltic clean tanker index Baltic dirty tanker index

Source : Bloomberg, ICICIdirect.com Research

Analyst

Bharat Chhoda [email protected]

Soumojeet Kr Banerjee [email protected]



Company RemarksGE Shipping We expect revenues to grow marginally YoY basis whereas decline ~5% sequentially

due to higher dry docking expected in the quarter.Consequently, EBITDA margin isexpected to contract ~40bps QoQ to 43.7% in Q1FY15E. In absence of any extra-ordinary item we expect PATat | 91.6 crore in Q1FY15 for GE Shipping

SCI We expect SCI revenue to grow~18% YoY on account of firmer charter rateshowever, QoQ we anticipate decline due to seasonality.We expect EBITDA margin toremain flattish QoQ whereas on YoY basis margin to improve significantly. In absenceof any extra-ordinary item we expect PAT at |9.5 crore for Q1FY15E

Pipavav Defence & Offshore Engineering Company

We expect PDOECL revenue at |496 crore, a growth of10% QoQ but decline of ~30%YoY basis due to lower trading revenue. EBITDA margin is anticipated to expand onYoY basis to 28% on account of higher shipbuilding revenue. Consequently, PAT forthe quarter is expected at |6.3 crore


BPR Asia Pacific Shipbuilding Index

0

200

400

600

800

1000

Jun-11

Dec-11

Jun-12

Dec-12

Jun-13

Dec-13

Jun-14

Inde

x

Source: Bloomberg, ICICIdirect.com Research China’s monthly iron ore inventory

30

50

71

91

111

May

-09

Nov

-09

May

-10

Nov

-10

May

-11

Nov

-11

May

-12

Nov

-12

May

-13

Nov

-13

May

-14

mln

tonn

es

Source: Bloomberg, ICICIdirect.com Research


Telecom

Subscriber growth rate declines on a QoQ basis…

We expect subscribers to grow ~1.1% QoQ to 458.4 million subscribers for telecom operators under our coverage. Growth rate would decline primarily due to churn in RCom’s subscriber base, which is expected to fall by 1.7 million to 110.4 million subscribers. We expect Airtel to lead subscriber addition adding about 4.1 million subscribers followed by Idea that is expected to add about 2.6 million subscribers in the quarter. Airtel, Idea & RCom are expected to end the quarter with 209.6, 138.4 & 110.4 million subscribers, respectively. ARPMs for all three are expected to increase marginally by 0.2-0.3% QoQ leading to a sequential decline in average MoUs for both Idea and Airtel in the range of 0.6-0.7%. RCom, however, may see a 4% QoQ rise in MoUs to 308 minutes due to churn of ineffective users in the quarter. Revenue growth for all three telcos may majorly stem from QoQ growth in data revenues to the tune of 9.3%, 6.6% and 10.9% for Bharti Airtel, RCom and Idea, respectively. We expect our telecom universe to post revenue growth of 10.5% YoY and 2.4% QoQ.

Data to lead growth in telecom sector

Overall data usage is expected to continue to grow at a rapid pace, increasing 9.1% QoQ to 132 million GB for all three telcos. However, realisation per MB is expected to continue to decline due to disruptive pricing done to push data consumption. We expect per MB realisation to decline about 1.0-2.5% for Airtel, Idea and RCom to reach 27.7, 25.3 and 17.7 paisa, respectively. Contribution of data to revenue has been consistently increasing over the past few quarters. We expect the total data revenue to increase as a percentage of total revenue from 11.8% in Q4FY14 to 12.4% in Q1FY15E displaying 8.9% QoQ growth to | 3108.2 crore. Airtel, Idea and RCom have 11.8%, 10.8% and 16.0% contribution from data in their total revenues.

ARPMs to grow, minutes to rise 2.1% QoQ led by subscriber addition

Telcos have been gradually reducing discounts and hiking tariffs, hence, leading to an ARPM expansion. Voice ARPM for all three telcos under our coverage is expected to expand marginally by 0.2-0.3%. Overall ARPM is expected to expand 0.8-2.0% on account of continued subscriber addition and higher data consumption aiding margin expansion. We expect ARPMs to range between 44 and 45 paisa. Though MoUs across telcos are expected to decline owing to ARPU expansion, total traffic is expected to continue to grow owing to continued subscriber addition mitigating the impact of declining usage per subscriber. We expect 2.1% QoQ growth to reach 535 billion minutes in Q1FY15 from 524 billion minutes in Q4FY14. Declining MoU would limit ARPU expansion, which would grow 0.4%, 0.4% and 6.0% for Airtel, Idea and RCom to | 197, | 174 and 136, respectively. RCom’s growth is inflated due to the high rate of churn that may be seen in the quarter.

EBITDA margin improves

Margins across players are expected to improve sequentially as well YoY buoyed by an increase in tariffs and, hence, higher operating leverage. Airtel may post about 30 bps QoQ expansion in the blended EBITDA margin. Idea’s margins are expected to remain flattish as savings due to lower discounts would be offset by higher advertisement expenses. RCom is expected to post a high EBITDA margin growth of ~200 bps due to lower administrative expenses in the quarter.


3165

2

3215

3

3302

7

3373

1

3454

3

05000

10000150002000025000300003500040000

Q4FY

13

Q1FY

14

Q2FY

14

Q3FY

14

Q4FY

14E

| Cr

ore

0.05.010.015.020.025.030.035.0

(%)


ARPU Trend

120 125 128 136174

164 169 173 174

197196195192200

129

80

100

120

140

160

180

200

220


|

Airtel RCom Idea

Voice ARPM Trend

25.00

28.00

31.00

34.00

37.00

40.00


|

Airtel RCom Idea

Top Pick of the Sector Bharti Airtel Analyst

Karan Mittal [email protected]

Sneha Agarwal sneha. [email protected]


Exhibit 61: Estimates for Q1FY15E (Telecom) (| Crore)

Revenue EBITDA PAT

Q1FY15E YoY QoQ Q1FY15E YoY QoQ Q1FY15E YoY QoQBharti Airtel 22,688.4 11.8 1.9 7,517.6 14.9 2.9 1,184.1 71.9 23.1Idea Cellular 7,244.9 10.8 2.9 2,302.6 10.9 3.2 580.5 25.5 -1.6RCom 5,594.5 5.3 3.5 1,762.3 9.8 11.1 43.8 -59.6 -71.9Total 35,527.8 10.5 2.4 11,582.5 13.3 4.1 1,808.5 43.5 5.9



Exhibit 62: Company specific view (Telecom) Company RemarksBharti Airtel Bharti Airtel's India mobile subscriber growth has remained consistent with an

addition of about 2.8 million subscribers in the first two months of the quarter. Weexpect subscriber growth to remain modest at 2.0% reaching about 209.6 millionsubscribers. Voice ARPM is expected to expand to 37.2 paisa from 37.0 paisa onthe back of hike in tariffs. However, with an increase in realisations, MoU maydecline marginally by 0.6% QoQ to 434.3 minutes, even though total traffic wouldincrease 2.1% to 270.4 billion minutes. The topline would continue to be driven bystrong data growth to come from increase in the data subscribers to 60.2 million(28.8% of total subscribers), a 6.5% QoQ growth in data usage per subscriber to294.7 MB and an overall growth of 12.1% QoQ in data traffic to 52.3 billion MB forthe domestic business. Data revenues would be forming 11.8% of the total mobilityrevenues. There has, however, been some churn in the telemedia operations of thecompany. Hence, we have factored in a subscriber de-growth of 1.5% QoQ to reach3.3 million. The African business would show only a

marginal growth of 1% as the 5.6% QoQ growth in the total voice volume would bemitigated by continued price wars. Hence, this would result in flat QoQ Africanbusiness EBITDA margins at 25.5%

Idea Cellular Idea Cellular has added only about 1.9 million subscribers within the first twomonths of the quarter. We expect it to exhibit 2.0% QoQ growth to about 138million subscribers by quarter end. Voice realisation is expected to increase 2%QoQ to about 36.7 paisa leading to a marginal QoQ decline in MoUs to 394 minutesfrom 397 minutes. Total voice traffic may, however, grow 3.0% QoQ to 162.2 billionminutes. ARPMs will also be aided by higher data usage per subscriber, which islikely to grow 3% QoQ to 389 MB from 377 MB a quarter ago. Data revenues areexpected to form about 10.8% of total revenues in the quarter. In addition, Idea isalso expected to see a pick-up in 3G subscribers post the TDSAT ruling allowingintra-circle roaming on 3G

Reliance Communication

There has been negative subscriber growth in the past two months for RCom.Hence, we expect a 1.5% QoQ dip in subscriber numbers to 110.4 millionsubscribers. The decline in subscribers would lead to a flat overall voice traffic at102.7 billion minutes. However, the 0.2% growth in voice ARPMs to 33.1 paisamay lead to a 1% QoQ expansion in voice revenues to | 3396.2 crore, despite thede-growth in subscriber numbers. Revenue growth in the quarter would mostlycome from data growth, which is expected to post 9% QoQ growth as the datausage per subscriber increases 3% QoQ to 468.7 MB leading to 3% QoQ growth indata revenues to | 1130.6 crore (forming 16% of the total India mobility revenue).We expect RCom to report margins of about 31.5%, a 216 bps improvement QoQ,on account of higher operating leverage. RCom recently concluded the QIP for |4800 crore and intends to use the money so raised for the reduction of debt.However, any interest benefits would start flowing in only from the next quarter



Others Exhibit 63: Estimates Q1FY15E (| Crore)


Cox & Kings 657.7 12.2 32.9 289.0 4.2 428.9 120.8 -10.4 LPInfoEdge 143.0 18.4 3.7 45.0 22.2 4.1 34.4 17.1 2.5Jindal SAW 1,700.2 40.9 24.7 194.3 36.4 19.4 57.5 278.3 0.7Kajaria Ceramics 527.9 20.7 0.8 80.5 24.5 -4.1 39.7 54.0 -5.7Mah. Seamless 319.3 -2.5 -2.3 21.8 -33.7 46.3 22.7 -17.8 -20.1Mcleod Russel 176.8 1.4 -43.8 30.7 1.7 LP 29.6 13.0 LPNavneet Publications

451.5 14.2 139.8 0.0 0.0 0.0 0.0 0.0 0.0Sintex Industries 1,496.0 33.1 4.1 218.5 35.8 -3.5 67.3 44.3 -36.3TTK Prestige 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Talwalkars 45.8 21.9 -30.9 15.5 24.8 -54.6 4.6 44.6 -68.9Total 5,518.3 -22.9 -27.2 895.4 -25.7 19.0 376.7 -30.7 132.9


Source: Company, ICICIdirect.com Research, * Standalone numbers


Exhibit 64: Company specific view Company RemarksCox & Kings Standalone India revenue is expected to grow ~13% YoY. Leisure international business

may grow at 5% YoY to due to seasonality. Sale of the camping division may drag revenuegrowth moderately QoQ. PAT may grow sharply QoQ due to peak season of HBR divisionsales

InfoEdge We expect revenues to grow 3.7% QoQ to | 143 crore led by demand uptick in the Naukribusiness. EBITDA margins may be flat QoQ at 31.5% (+20 bps) led by absence of non-cash charges, which impacted Q4 offset by wage hikes and higher advertising. Investorinterest: Demand trends across businesses and margin outlook

Maharashtra Seamless

We expect pipe segment sales volume for Q1FY15 at 56,250 tonnes (lower by 6% QoQ)wherein seamless pipes sales volumes are expected at 41250 tonnes (lower by 14% QoQ)while that of ERW may be 15000 tonnes (higher by 27% QoQ). We expect topline todecline ~2% QoQ. However, on the back of a lower base, we expect the EBITDA marginto increase 220 bps QoQ to 6.8%

Jindal SAW For the quarter, we expect the pipes segment sales volume at ~2,50,000 tonnes, higherby 21% YoY. Subsequently, we expect topline to increase 41% YoY. We expect EBITDAmargins to decline marginally by 50 bps QoQ to ~11.4%

Navneet Education

We expect revenues to increase 14.2% YoY to | 451.5 crore led by 14.5% and 13.5% YoYgrowth in the publication & stationery segment, respectively. We expect ~30 bpsexpansion in operating margin to 29.7% led by marginally higher publication revenues.Hence, PAT is likely to grow 17.8% YoY to | 83.6 crore

Sintex Industries The monolithic business including EPC business, is expected to drive growth in thequarter with ~ | 200 crore of revenue from EPC business. Sales of prefab are expected toincrease 24% YoY while custom holding is expected to grow 11% YoY. The company isexpected to report EBITDA margin improvement of 300 bps

Talwalkars Better Value Fitness

Revenue is expected to grow ~22% YoY mainly due to growth in gym additions and risein average realisations. Operating margins are expected to improve 700 bps YoY to 33.8%.We expect net profit of | 4.6 crore (vs. | 3.2 crore last year, | 14.9 crore last quarter)

McLeod Russel We expect ~4% higher tea sales volume at 10.3 million kg led by higher domestic teasales volume (9.6 mkg) with exports remaining a tad lower (0.7 mkg). We expectdomestic realisations to remain flat YoY at ~| 170/kg but believe export realisation wouldbe slightly lower at ~| 190/kg. Being a lean season for tea growers (no production duringthe quarter) we do not expect any significant improvement in margins. We estimatemargins will remain flat YoY at 17.4%

TTK Prestige Revenues are likely to remain flattish at | 316.4 crore (up 3.3% YoY) led by single digitgrowth in all segments, except the appliances segment, which is expected to de-growowing to weak demand. The operating margin is likely to be maintained at 13.4%.Consequently, PAT is likely to grow 2.0% YoY to | 26.3 crore

Kajaria Ceramics We expect production volume to grow by 13% YoY aided mainly by 20.7% YoY growth inin-house manufacturing. On financial front, we expect Kajaria to report 20.7% YoY toplinegrowth to |527.9 crore. We expect EBITDA margins to remain at 15.2% in Q1FY15.Consequently, bottomline is expected to grow 54.0% YoY led by robust topline growth

United Spirits United Spirits has sought approval from RBI for a reduction in reserves due to expectedwrite-off of | 3690 crore for provision of intra-group loan taken for acquisition of Whyte &Mackay. The financial results may be delayed as it is also awaiting clarification on sometrade debtors and loan given to UBHL



Page 57

ICICIdirect.com Coverage Universe Exhibit 65: Valuation Matrix

CMP M Cap(|) TP(|) Ratings (| Cr) FY14 FY15E FY16E FY14 FY15E FY16E FY14 FY15E FY16E FY14 FY15E FY16E FY14 FY15E FY16E

Auto & Auto ancillaryAmara Raja Batteries (AMARAJ) 496 460 Buy 8,488 21.5 25.0 30.6 23.1 19.8 16.2 14.4 12.1 9.2 35.3 32.7 32.4 27.0 25.0 24.4Apollo Tyre (APOTYR) 212 260 Buy 10,680 19.9 22.1 23.7 10.6 9.6 9.0 6.2 5.4 5.2 23.8 24.6 21.2 22.0 20.5 18.2Ashok Leyland (ASHLEY) 36 26 Sell 10,274 0.1 0.1 1.8 326.4 256.4 20.5 90.0 23.6 11.0 -2.3 2.3 9.9 0.7 0.8 9.7Bajaj Auto (BAAUTO) 2,299 2,300 Hold 66,531 112.1 125.0 153.3 20.5 18.4 15.0 15.5 14.0 11.2 40.6 38.6 39.9 33.8 32.8 33.9Balkrishna Industries Ltd (BALIND) 743 593 Hold 7,183 50.5 51.4 59.3 14.7 14.5 12.5 10.6 9.6 8.0 17.2 15.7 17.6 25.9 21.1 19.8Bosch Limted (MICO) 13,589 11,000 Hold 42,667 281.8 354.3 445.8 48.2 38.4 30.5 31.1 26.0 20.2 14.1 15.0 17.4 14.1 15.6 17.0Eicher Motors (EICMOT) 8,638 6,110 Hold 23,370 145.9 203.5 268.4 59.2 42.5 32.2 30.8 22.4 15.5 18.3 21.5 25.1 19.2 22.0 23.5Exide Industries (EXIIND) 159 112 Sell 13,532 5.7 6.6 8.1 27.8 24.3 19.6 15.8 14.3 11.8 18.8 18.6 20.3 13.1 13.6 15.0Hero Honda (HERHON) 2,584 2,400 Hold 51,598 105.6 129.6 177.8 24.5 19.9 14.5 13.6 12.3 9.4 43.4 50.3 55.0 37.7 39.5 43.1JK Tyre & Industries (JKIND) 321 285 Buy 1,319 64.1 87.3 105.6 5.0 3.7 3.0 4.1 3.9 3.3 19.2 18.2 20.0 24.0 23.5 22.5Mahindra & Mahindra (MAHMAH) 1,230 1,162 Hold 75,758 56.5 56.2 61.6 21.8 21.9 20.0 16.1 13.8 12.4 18.5 19.0 18.6 22.1 18.9 17.9Mahindra CIE Automotive (MAHAUT) 182 175 Buy 1,681 6.7 10.4 12.8 27.0 17.5 14.2 4.6 3.5 2.8 8.3 11.9 14.8 8.6 12.8 14.9Maruti Suzuki India (MARUTI) 2,643 2,375 Hold 79,825 92.1 111.5 148.4 28.7 23.7 17.8 14.1 11.6 9.0 13.3 14.4 16.5 13.3 14.1 16.2Motherson Sumi (MOTSUM) 369 305 Hold 32,547 8.7 15.2 20.3 42.5 24.3 18.1 13.2 9.5 7.4 24.2 33.0 37.2 25.9 37.4 37.9Tata Motors (TELCO) 469 500 Buy 143,523 43.5 55.6 64.3 10.8 8.4 7.3 4.3 4.2 3.8 21.8 24.0 23.8 21.3 26.1 23.6Wabco India (WABTVS) 3,502 3,700 Buy 6,642 61.9 78.8 142.3 56.5 44.5 24.6 39.5 30.8 17.2 17.3 19.4 28.7 15.6 16.8 23.7

#N/AAviationJet Airways (JETAIR) 274 269 Hold 3,117 -360.2 -95.1 -17.1 NA NA NA -6.0 219.6 13.4 -37.2 1.7 32.2 NA NA NASpiceJet (MODLUF) 20 21 Hold 1,057 -18.7 -3.8 2.0 NA NA 9.9 -3.2 91.2 7.5 -174.4 -14.3 50.8 NA NA NA

#N/ACapital GoodsAIA Engineering (AIAENG) 778 796 Buy 7,336 33.9 37.4 43.0 23.0 20.8 18.1 14.4 13.3 11.4 25.2 23.4 23.3 19.1 18.1 18.0BGR (BGRENE) 219 169 Sell 1,578 27.9 45.0 21.2 7.8 4.9 10.3 4.2 3.6 7.9 10.8 9.8 11.2 8.5 7.3 9.7BHEL (BHEL) 263 220 Hold 64,347 14.0 12.4 14.5 18.8 21.3 18.1 12.9 12.8 11.5 9.8 8.6 9.8 10.3 8.5 9.4Greaves Cotton (GREAVE) 126 128 Buy 3,084 6.3 6.0 7.9 20.1 21.0 16.0 15.1 12.6 9.8 18.5 21.1 25.3 19.1 17.1 20.4Jyoti Structure (JYOSTR) 64 59 Hold 526 3.8 7.9 9.7 16.6 8.1 6.6 5.4 4.5 4.4 13.0 15.1 15.1 4.1 7.9 8.9Kalpataru Power (KALPOW) 189 172 Hold 2,903 9.8 12.8 15.9 19.4 14.8 11.9 8.9 7.6 6.9 11.7 13.1 13.6 7.5 9.1 10.3KEC Internnational (KECIN) 133 84 Hold 3,419 2.6 6.5 9.2 51.0 20.5 14.4 9.5 7.8 7.0 13.7 17.6 18.6 5.5 12.2 15.1Larson & Toubro (LARTOU) 1,743 2,277 Buy 161,672 56.7 60.9 69.5 30.7 28.6 25.1 23.3 20.5 18.1 0.0 15.1 15.6 0.0 16.2 15.5Thermax Ltd (THERMA) 952 850 Hold 11,340 32.7 21.7 30.1 29.1 43.8 31.6 22.2 26.8 20.8 25.3 15.4 19.1 20.6 12.5 15.5

RoE (%)EPS (|) P/E (x) EV/EBITDA (x) RoCE (%)Sector / Company

CMP as on July 04, 2014


Page 58

Exhibit 66: Valuation Matrix CMP #N/A M Cap

(|) TP(|) Ratings (| Cr) FY14 FY15E FY16E FY14 FY15E FY16E FY14 FY15E FY16E FY14 FY15E FY16E FY14 FY15E FY16EConstructionSimplex Infrastructure (SIMCON) 376 300 Buy 1,862 12.2 14.8 23.1 30.8 25.4 16.3 8.0 7.1 6.6 9.3 10.0 11.2 4.5 5.1 7.6Supreme Infra (SUPINF) 422 417 Buy 847 44.8 50.4 65.7 9.4 8.4 6.4 5.8 5.4 4.9 16.2 15.7 17.0 14.2 13.4 14.8

#N/ACementACC (ACC) 1,451 1,375 Hold 27,241 58.3 69.5 77.3 24.9 20.9 18.8 18.0 16.4 13.2 10.0 10.2 12.0 14.0 15.1 15.4Ambuja Cement (GUJAMB) 224 215 Hold 34,612 8.4 11.3 12.7 26.7 19.8 17.6 19.4 16.1 13.2 11.4 7.7 8.8 13.6 9.0 9.4Heidelberg Cement (MYSCEM) 64 58 Buy 1,462 -1.8 2.4 2.1 NA 27.2 30.5 31.3 11.8 9.6 -0.5 4.9 6.6 -4.9 6.3 5.3India Cement (INDCEM) 116 110 Hold 3,576 -1.2 0.3 6.9 NA 339.9 16.9 11.8 10.8 7.5 3.9 4.5 7.5 -0.9 0.3 4.6JK Cement (JKCEME) 396 524 Buy 2,766 13.0 29.0 46.1 30.4 13.6 8.6 13.0 8.1 5.4 5.5 9.6 13.6 5.2 10.4 14.2JK Laxmi Cement (JKCORP) 235 225 Buy 2,770 7.9 10.3 16.4 29.8 22.8 14.3 12.7 10.3 7.8 6.1 6.9 9.5 7.1 8.3 12.0Mangalam Cement (MANCEM) 221 210 Buy 590 11.1 26.0 31.0 19.9 8.5 7.1 19.3 5.7 4.9 2.1 11.9 13.3 5.8 12.3 13.2Shree Cement (SHRCEM) 7,275 6,180 Hold 25,343 288.5 198.3 271.8 25.2 36.7 26.8 16.5 19.2 14.7 21.4 13.4 15.7 26.1 16.8 19.1UltraTech Cement (ULTCEM) 2,601 2,250 Hold 71,331 78.2 94.5 113.8 33.3 27.5 22.9 19.9 15.3 12.8 11.9 14.4 15.8 12.5 13.2 13.8

#N/AConsumer DiscritionaryAsian Paints (ASIPAI) 589 516 Hold 56,463 12.7 14.9 17.3 46.3 39.6 34.1 29.3 25.0 21.4 47.4 48.3 50.0 34.0 34.6 35.3Bajaj Electricals (BAJELE) 369 287 Hold 3,687 3.1 18.3 25.9 118.1 20.2 14.2 31.4 11.9 9.6 10.6 28.1 29.2 4.2 20.6 23.5Essel Propack (ESSPAC) 112 80 Hold 1,764 6.9 8.7 11.7 16.4 12.8 9.6 6.9 5.7 4.8 15.0 14.3 17.3 15.3 12.3 14.7Havells India (HAVIND) 1,199 880 Hold 14,967 35.8 42.8 49.3 33.5 28.0 24.3 20.1 17.3 15.2 24.8 26.3 27.2 26.8 27.3 26.8Kansai Nerolac (GOONER) 1,654 1,478 Buy 8,915 38.0 52.8 61.6 43.5 31.3 26.9 24.7 18.3 15.8 20.1 24.8 25.3 14.4 17.7 18.0Pidlilite Industries (PIDIND) 333 304 Hold 17,056 8.8 10.2 12.0 37.7 32.6 27.9 25.0 22.1 18.9 30.2 31.9 34.1 23.7 24.9 26.3Symphony (SYMCOM) 1,064 777 Hold 3,722 26.1 34.4 41.6 40.7 30.9 25.6 31.1 23.6 19.5 41.8 43.7 42.7 33.5 34.9 34.2VGuard (VGUARD) 660 497 Hold 1,970 23.5 28.9 34.5 28.1 22.9 19.1 18.7 15.0 12.5 23.0 24.5 25.1 22.0 22.5 22.3

#N/AFMCGColgate-Palmolive (COLPAL) 1,666 1,285 Hold 22,655 36.3 41.6 47.6 45.9 40.1 35.0 33.4 27.9 23.7 92.6 93.6 91.0 81.6 72.4 69.0Dabur India Ltd (DABIND) 191 182 Hold 33,615 5.2 6.3 7.3 36.5 30.5 26.3 28.3 23.3 19.9 42.4 43.2 41.2 38.3 36.1 33.2Hindustan Unilever Ltd (Hinlev) 625 600 Hold 135,201 17.9 18.8 21.6 35.0 33.2 29.0 29.7 25.7 22.0 128.6 131.0 131.3 118.0 109.9 107.0ITC (ITC) 333 387 Buy 265,159 11.0 12.6 14.4 30.2 26.4 23.2 21.0 18.0 16.0 44.9 47.1 47.8 34.4 35.1 36.1Jyothi Laboratories (JYOLAB) 181 188 Hold 3,281 4.5 7.4 8.9 40.3 24.5 20.4 23.3 18.5 16.0 10.0 9.5 10.6 9.3 14.0 15.3Marico Ltd (MARIN) 249 262 Buy 16,064 7.5 8.6 10.5 33.2 28.9 23.7 21.9 18.5 15.2 25.5 26.6 28.2 22.3 21.4 21.9Nestle India (NESIND) 4,974 4,615 Hold 47,957 115.9 120.2 130.6 42.9 41.4 38.1 24.5 23.5 21.9 46.0 54.8 60.8 47.2 47.4 50.3Tata Global Beverages (TATTEA) 168 182 Buy 10,380 6.7 7.1 8.8 25.0 23.7 19.0 14.2 12.8 10.7 8.9 9.4 10.8 9.4 8.1 9.4VST Industries (VSTIND) 1,792 2,098 Buy 2,768 98.8 120.0 124.3 18.1 14.9 14.4 12.3 9.7 8.7 58.8 66.5 67.5 46.3 50.0 48.0

EPS (|) P/E (x) RoE (%)Sector / Company

EV/EBITDA (x) RoCE (%)



Page 59


(|) TP(|) Ratings (| Cr) FY14 FY15E FY16E FY14 FY15E FY16E FY14 FY15E FY16E FY14 FY15E FY16E FY14 FY15E FY16EHotelEIH (EIH) 93 124 Buy 5,318 1.9 2.5 3.1 49.6 37.0 29.9 17.2 15.0 12.7 6.2 7.0 8.2 4.1 5.1 6.0Hotel Leela (HOTLEE) 28 23 Sell 1,253 -10.5 -12.3 -12.5 NA NA NA 44.6 41.1 35.4 -0.6 -0.3 0.3 -50.7 -206.3 190.8Indian Hotel (INDHOT) 107 119 Hold 8,640 -6.9 1.8 2.7 NA 58.2 39.0 20.9 17.3 14.9 3.8 5.1 6.1 -21.0 5.5 7.7Taj GVK Hotels (TAJGVK) 99 116 Buy 622 0.8 1.0 1.7 125.0 95.2 56.9 15.6 14.0 12.4 5.1 6.0 7.2 1.4 1.9 3.1

#N/AInfrastructureGVK Power (GVKPOW) 19 18 Hold 2,985 -2.3 -3.7 -2.5 NA NA NA 24.9 15.4 9.6 1.8 2.7 5.9 -13.3 -26.9 -21.8IRB Infrastructure (IRBINF) 257 191 Hold 8,537 13.8 14.9 12.3 18.6 17.2 20.9 9.7 8.6 6.0 8.9 9.0 10.4 12.9 12.7 9.9Jaiprakash Associate (JAIASS) 73 90 Buy 16,199 0.0 -0.6 2.1 1,616.6 NA NA 14.0 12.8 10.4 5.9 5.5 7.7 3.0 -1.1 3.4Sadbhav Engineering (SADENG) 203 240 Buy 3,088 7.0 7.3 9.1 28.9 27.9 22.4 15.8 12.8 11.1 10.7 12.8 13.7 11.1 10.4 11.6

#N/AITCyient (INFENT) 351 350 Buy 3,939 23.8 31.6 33.5 14.8 11.1 10.5 7.9 6.5 5.5 28.0 27.5 26.6 18.7 21.3 19.5Eclerx (ECLSER) 1,170 1,122 Hold 3,530 82.8 91.3 102.1 14.1 12.8 11.5 9.1 8.4 7.2 62.5 50.9 46.1 44.8 39.6 36.3Firstsource Solutions (FIRSOU) 39 40 Buy 2,583 2.8 4.0 4.9 13.8 9.7 7.9 9.1 6.6 5.0 10.5 13.2 15.1 10.3 12.6 13.5HCL Tech* (HCLTEC) 1,480 1,600 Buy 103,621 87.9 99.7 110.8 16.8 14.9 13.4 11.4 10.4 9.1 42.2 34.6 31.2 34.4 30.0 26.7Infosys (INFTEC) 3,246 3,400 Hold 185,474 186.4 198.8 216.8 17.4 16.3 15.0 11.8 10.8 9.6 27.6 25.4 24.2 24.4 22.4 21.5KPIT Tech (KPISYS) 181 170 Hold 3,521 13.0 16.9 19.2 14.0 10.7 9.4 7.0 5.4 4.3 25.6 27.4 26.5 21.7 23.0 21.4Mastek (MASTEK) 204 240 Buy 453 21.1 24.0 27.2 9.7 8.5 7.5 3.7 3.1 2.0 7.8 8.0 8.6 9.0 8.6 9.1Mindtree (MINCON) 854 790 Hold 7,138 53.8 61.8 70.4 15.9 13.8 12.1 11.5 10.1 8.8 37.1 36.4 36.3 31.7 31.8 31.6NIIT Ltd. (NIIT) 55 42 Hold 907 1.1 3.8 5.5 51.0 14.3 10.0 10.9 7.3 5.0 NM 1.6 3.9 2.7 9.2 11.6NIIT Technologies (NIITEC) 457 400 Hold 2,777 37.8 44.4 50.9 12.1 10.3 9.0 7.1 5.7 4.9 24.2 26.1 25.8 19.6 20.0 19.9Persistent Systems (PERSYS) 1,101 1,080 Hold 4,403 62.3 73.8 84.9 17.7 14.9 13.0 9.8 8.4 6.9 29.3 27.6 27.1 22.3 22.0 21.3TCS (TCS) 2,411 2,375 Buy 472,151 97.6 108.2 118.7 24.7 22.3 20.3 18.5 17.1 15.5 49.1 42.7 38.6 37.9 33.7 30.4Tech Mahindra (TECMAH) 2,116 1,800 Hold 49,594 126.8 125.1 141.1 16.7 16.9 15.0 11.1 10.1 8.5 42.4 34.4 31.4 37.4 28.3 26.0Wipro (WIPRO) 547 600 Buy 133,986 31.7 34.9 38.8 17.3 15.7 14.1 12.3 10.9 9.6 28.0 25.6 24.5 24.9 23.1 22.1

#N/ALogisticsBluedart Express (BLUDAR) 4,256 3,138 Hold 10,098 51.6 68.1 94.0 82.5 62.5 45.3 57.4 41.2 30.8 22.5 21.5 28.5 19.1 25.0 32.6Container Corporation (CONCOR) 1,271 1,560 Buy 24,774 48.7 55.9 65.5 26.1 22.7 19.4 20.5 17.0 14.1 15.6 12.8 14.0 16.7 13.8 14.2Gateway Distriparks (GATDIS) 245 195 Buy 2,667 12.5 13.5 16.2 19.6 18.2 15.1 11.0 9.7 8.1 18.2 19.5 21.2 16.2 16.5 18.4Gujarat Pipavav (GUJPPL) 124 95 Hold 5,975 4.0 4.7 5.6 31.2 26.5 21.9 23.9 19.5 16.0 11.4 12.1 13.0 13.7 13.8 14.3Transport Corp (TRACOR) 229 193 Buy 1,668 9.8 11.8 14.3 23.3 19.4 15.9 11.3 10.4 9.2 23.6 22.4 23.0 15.0 15.5 16.1

RoE (%)P/E (x)Sector / Company

EPS (|) EV/EBITDA (x) RoCE (%)



Page 60


(|) TP(|) Ratings (| Cr) FY14 FY15E FY16E FY14 FY15E FY16E FY14 FY15E FY16E FY14 FY15E FY16E FY14 FY15E FY16EMediaDB Corp (DBCORP) 330 340 Buy 6,061 16.7 17.8 21.2 19.8 18.5 15.5 12.1 10.3 8.4 34.2 32.6 32.5 26.7 23.6 23.0DISH TV (DISHTV) 62 50 Hold 3,307 -1.5 -0.5 0.5 NA NA 113.3 6.9 6.6 5.1 2.5 0.7 16.7 50.4 14.7 -18.9Entertainment Network (ENTNET) 448 390 Hold 2,134 17.5 18.8 22.6 25.5 23.9 19.8 14.3 12.5 10.0 16.0 15.4 16.1 14.4 13.5 14.0Eros International (EROINT) 235 220 Buy 2,163 21.7 21.6 27.5 10.8 10.9 8.5 8.0 8.0 6.6 18.5 16.4 17.5 16.5 14.1 15.2Hathway Cables (HATCAB) 319 360 Buy 4,850 -9.3 -7.1 -3.9 NA NA NA 19.1 16.5 13.4 0.5 2.6 4.6 -14.7 -18.8 -11.4HT Media (HTMED) 124 104 Buy 2,916 8.9 10.0 11.6 13.9 12.4 10.7 7.7 5.1 3.5 9.8 11.6 13.4 11.9 11.7 12.0Jagran Prakashan (JAGPRA) 135 130 Buy 4,399 7.3 8.2 10.0 18.6 16.4 13.5 12.1 9.7 7.5 21.3 22.1 23.8 23.5 21.1 20.5PVR (PVRLIM) 667 780 Buy 2,745 13.6 18.2 26.3 48.9 36.6 25.4 14.8 11.9 9.9 12.4 14.6 16.6 14.0 15.5 18.4Sun TV (SUNTV) 468 465 Buy 18,481 19.0 21.1 24.2 24.7 22.1 19.3 11.7 10.4 9.0 31.9 31.9 33.0 23.5 23.7 24.5TV18 Broadcast (GLOBRO) 32 30 Sell 5,426 0.6 0.9 1.2 52.4 33.7 26.8 26.4 20.0 15.1 3.9 4.8 6.5 3.0 4.5 5.4Zee Ent. (ZEETEL) 299 268 Hold 28,732 9.3 9.0 10.8 32.2 33.1 27.6 22.9 21.9 18.3 24.3 22.1 22.6 18.8 16.1 16.8Metals & MiningCoal India (COALIN) 394 382 Hold 248,960 23.9 26.8 31.0 16.5 14.7 12.7 12.3 11.1 8.3 32.8 34.2 31.6 35.6 33.6 32.0Graphite India (CAREVE) 115 90 Hold 2,245 6.6 7.7 8.5 17.3 15.0 13.5 9.0 8.0 7.4 8.8 9.4 10.1 7.4 8.2 8.7HEG (HEG) 291 225 Hold 1,162 21.7 27.5 32.1 13.4 10.6 9.1 8.3 7.7 6.7 8.9 9.0 10.0 9.4 11.0 11.8Hindalco (HINDAL) 173 108 Sell 35,770 10.5 12.8 13.8 16.4 13.5 12.5 10.5 9.3 8.2 4.5 5.1 5.7 5.4 6.1 6.3Hindustan Zinc (HINZIN) 167 162 Buy 70,478 16.4 16.6 15.4 10.2 10.0 10.8 6.5 5.8 5.8 16.5 14.3 11.6 18.5 16.5 13.9JSW Steel (JINVIJ) 1,271 1,000 Sell 30,717 89.6 91.1 115.4 14.2 14.0 11.0 7.0 6.8 6.0 10.6 10.3 11.3 9.9 9.3 10.6NMDC (NATMIN) 184 256 Buy 72,911 16.2 19.2 21.1 11.4 9.6 8.7 7.0 5.3 5.0 25.4 28.2 27.9 21.4 22.2 21.2SAIL (SAIL) 95 70 Sell 39,199 6.3 7.7 9.1 15.0 12.3 10.4 14.9 9.8 8.2 3.6 6.4 7.2 6.3 7.3 8.1Sesa Sterlite (SESGOA) 305 190 Hold 90,423 21.2 22.5 23.6 14.4 13.5 12.9 6.2 4.2 3.7 8.8 12.4 12.2 8.6 8.5 8.3Tata Steel (TISCO) 537 460 Hold 52,115 37.3 45.0 41.6 14.4 11.9 12.9 7.1 6.8 6.2 8.7 9.4 9.7 8.5 9.5 8.3Usha Martin (USHBEL) 42 35 Hold 1,277 0.4 0.8 2.9 119.6 50.5 14.6 6.8 6.7 5.8 6.5 6.4 7.6 0.5 1.3 4.2Oil & GasCairn India Ltd (CAIIND) 364 361 Hold 68,224 65.1 54.5 51.3 5.6 6.7 7.1 3.5 3.5 3.1 19.9 15.8 14.4 21.7 16.0 13.5Gail India (GAIL) 465 551 Buy 58,984 31.8 33.2 37.6 14.6 14.0 12.4 9.8 9.2 7.8 14.7 14.8 15.8 15.1 14.4 14.7Gujarat Gas (GUJGAS) 532 367 Hold 6,828 32.6 26.6 27.6 16.3 20.0 19.3 9.8 11.1 10.4 42.1 31.8 30.3 29.9 29.9 29.9Hindustan Petroleum (HINPET) 421 432 Hold 14,271 51.2 46.4 48.8 8.2 9.1 8.6 7.7 7.7 6.7 6.8 5.9 6.3 11.7 9.9 9.8Indian Oil Corporation (INDOIL) 349 341 Hold 84,723 28.9 21.3 32.3 12.1 16.4 10.8 9.7 9.3 6.7 6.9 6.4 9.2 10.7 7.6 10.7Indraprastha Gas Ltd (INDGAS) 365 295 Hold 5,112 25.7 27.6 29.5 14.2 13.2 12.4 6.3 5.6 5.0 27.3 26.9 24.7 20.4 18.8 17.5Mangalore Refinary (MRPL) 73 77 Hold 12,724 3.4 3.9 6.3 21.2 18.8 11.4 17.9 8.1 5.3 2.0 8.1 13.2 8.5 9.0 13.3Oil India Limited (OILIND) 583 782 Buy 35,067 49.6 58.0 76.9 11.8 10.1 7.6 11.8 10.1 7.6 9.4 11.9 15.4 14.4 15.5 18.2ONGC (ONGC) 422 533 Buy 360,871 31.0 30.4 44.7 13.6 13.9 9.4 13.6 13.9 9.4 16.6 17.4 24.2 15.8 14.3 18.6Petronet LNG (PETLNG) 178 157 Hold 13,373 9.5 10.5 12.8 18.8 16.9 14.0 10.8 9.3 8.2 13.0 12.3 13.8 14.3 14.2 15.2

EV/EBITDA (x) RoCE (%) RoE (%)Sector / Company

EPS (|) P/E (x)



Page 61

Exhibit 69: Valuation Matrix

CMP #N/A M Cap(|) TP(|) Ratings (| Cr) FY14 FY15E FY16E FY14 FY15E FY16E FY14 FY15E FY16E FY14 FY15E FY16E FY14 FY15E FY16E

Pharma Apollo Hospitals (APOHOS) 1,061 896 Hold 14,762 22.8 25.4 34.5 46.6 41.8 30.8 23.3 19.9 16.4 11.6 12.2 14.8 10.6 11.0 13.5Aurobindo Pharma (AURPHA) 765 619 Hold 22,304 40.3 39.9 51.6 19.0 19.2 14.8 12.1 12.6 10.2 24.6 21.0 23.1 31.3 24.1 24.1Biocon (BIOCON) 544 454 Hold 10,870 20.7 25.5 30.3 26.3 21.3 18.0 14.9 12.8 10.4 13.5 15.2 16.9 13.7 15.3 16.1Cadila Healthcare (CADHEA) 1,112 1,059 Buy 22,759 39.2 51.0 66.0 28.3 21.8 16.8 20.6 15.6 12.0 16.4 19.8 22.5 23.4 24.6 25.4Cipla (Cipla) 449 403 Hold 36,075 17.3 17.8 22.4 26.0 25.3 20.1 17.3 15.7 12.2 15.4 15.3 17.9 13.8 12.6 13.9Divi's Lab (DIVLAB) 1,529 1,425 Buy 20,292 59.6 63.8 79.2 25.6 24.0 19.3 19.4 16.6 13.4 30.4 28.8 29.5 26.1 23.6 24.4Dr Reddys (DRREDD) 2,678 2,857 Hold 45,622 126.7 120.4 142.8 21.1 22.3 18.8 14.1 13.6 11.4 19.2 17.7 19.2 23.7 19.0 19.0Glenmark (GLEPHA) 601 616 Hold 16,291 20.0 28.1 34.2 30.0 21.4 17.5 14.3 12.3 10.3 15.9 20.9 22.9 18.3 21.8 22.4Indoco Remedies (INDREM) 162 150 Hold 1,497 6.3 9.5 11.7 25.9 17.1 13.8 13.3 10.1 7.6 16.1 19.3 23.6 12.7 16.5 17.3IPCA Labs (IPCLAB) 881 879 Buy 11,117 37.9 45.3 55.0 23.2 19.5 16.0 3.5 3.1 2.6 28.8 26.0 26.7 24.4 23.3 22.7Jubilant Life Sciences (VAMORG) 208 202 Hold 3,311 6.8 24.5 35.8 30.4 8.5 5.8 7.2 5.8 4.6 10.1 11.9 14.9 4.2 13.3 16.9Lupin (LUPIN) 1,088 1,048 Hold 48,821 41.0 44.1 52.4 26.6 24.7 20.8 16.1 14.7 12.1 36.3 33.6 33.3 26.5 23.5 22.9Torrent Pharma (TORPHA) 697 748 Buy 11,793 39.2 43.1 49.9 17.8 16.2 14.0 12.4 10.6 9.3 30.3 26.4 27.7 34.9 30.2 28.0Unichem Laboratories (UNILAB) 227 206 Hold 2,059 18.7 14.3 17.2 12.2 15.8 13.2 11.4 9.6 7.9 15.7 17.4 19.3 20.7 14.7 16.1

#N/APowerCESC (CESC) 755 825 Buy 9,436 36.3 25.5 49.7 20.8 29.6 15.2 13.6 13.7 9.1 6.6 5.8 9.1 8.1 5.7 10.0NHPC (NHPC) 27 34 Buy 30,334 1.3 2.0 2.2 20.4 13.5 12.6 17.5 10.7 9.3 6.1 8.6 8.9 5.6 8.1 8.2NTPC (NTPC) 159 166 Buy 130,787 13.3 10.9 12.7 11.9 14.5 12.5 10.1 10.0 8.9 11.1 9.9 10.5 12.5 9.9 10.8Power Grid Corp (POWGRI) 144 148 Buy 75,440 8.6 10.0 11.7 16.8 14.4 12.3 11.5 10.9 10.2 8.3 8.5 8.5 13.1 13.6 14.3PTC India Ltd (POWTRA) 98 100 Buy 2,901 6.7 6.2 7.2 14.6 15.7 13.7 7.5 7.5 6.8 16.3 10.7 11.6 11.2 7.0 7.7Tata Power (TATPOW) 107 107 Hold 28,980 -1.3 5.9 6.5 NA 18.2 16.4 8.1 6.3 5.9 9.6 15.0 15.6 -2.4 11.0 11.6

#N/AReal EstateOberoi Realty (OBEREA) 259 275 Buy 8,514 9.5 15.0 20.7 27.4 17.3 12.5 18.6 11.3 7.7 9.1 11.9 15.4 7.1 10.2 12.5Mahindra Lifespace (GESCOR) 551 701 Buy 2,259 24.6 90.8 42.8 22.4 6.1 12.9 21.1 13.4 7.9 5.8 7.9 12.3 8.0 23.2 10.2Sobha Developers (SOBDEV) 492 467 Hold 4,821 24.0 31.1 43.4 20.5 15.8 11.3 10.3 8.5 6.6 14.3 15.9 19.2 10.3 12.3 15.4

#N/ARetailBata India (BATIND) 1,326 1,225 Buy 8,521 29.7 36.8 47.0 44.7 36.0 28.2 24.8 20.9 16.9 32.6 32.4 34.8 22.7 23.8 26.1Future Retail (PANRET) 136 UR er Review 3,063 0.1 5.1 6.4 1,402.2 26.5 21.4 2.8 2.8 2.8 7.2 6.1 7.0 0.1 2.2 2.6Shoppers Stop (SHOSTO) 392 440 Buy 3,268 -1.0 2.6 5.0 NA 151.7 78.7 24.3 17.8 14.3 3.4 6.5 9.7 NA 4.2 7.6Titan Industries (TITIND) 357 385 Buy 31,712 8.3 11.0 12.8 42.8 32.5 27.8 29.4 22.1 18.1 29.5 36.1 38.3 29.4 30.5 28.5

Sector / CompanyEPS (|) P/E (x) EV/EBITDA (x) RoCE (%) RoE (%)



Page 63


(|) TP(|) Ratings (| Cr) FY14 FY15E FY16E FY14 FY15E FY16E FY14 FY15E FY16E FY14 FY15E FY16E FY14 FY15E FY16EPSU BanksBank of Baroda (BANBAR) 876 1,250 Buy 37,595 105.4 114.8 125.8 8.3 7.6 7.0 1.3 1.2 1.1 0.8 0.7 0.7 13.4 13.1 13.0Bank of India (BANIND) 305 410 Buy 19,573 42.4 44.9 51.6 7.2 6.8 5.9 0.9 1.0 0.9 0.5 0.5 0.5 10.1 10.0 11.6Dena Bank (DENBAN) 84 85 Hold 4,523 13.3 14.4 16.4 6.3 5.8 5.1 1.0 0.9 0.8 0.6 0.6 0.6 10.9 10.3 10.9Punjab National Bank (PUNBAN) 980 1,156 Buy 35,485 92.5 109.2 129.3 10.6 9.0 7.6 1.5 1.3 1.1 0.7 0.7 0.7 9.9 10.8 11.6State Bank of India (STABAN) 2,698 3,234 Buy 201,433 145.9 187.8 217.7 18.5 14.4 12.4 2.3 2.2 2.0 0.6 0.7 0.7 10.0 11.3 11.9Syndicate bank (SYNBN) 176 182 Hold 10,980 27.4 29.1 35.5 6.4 6.0 5.0 1.3 1.2 1.1 0.7 0.7 0.7 15.2 14.4 15.8

#N/APrivate BanksAxis Bank (UTIBAN) 1,936 2,405 Buy 91,263 132.3 151.0 168.8 14.6 12.8 11.5 2.4 2.1 1.8 1.7 1.7 1.7 17.4 17.2 16.5City Union Bank (CITUNI) 75 75 Hold 4,073 6.4 7.2 9.4 11.7 10.5 8.0 2.3 1.9 1.6 1.4 1.4 1.6 19.0 18.0 20.3Development Credit Bank (DCB) 85 100 Buy 2,129 6.1 7.4 8.2 14.0 11.5 10.4 2.1 1.8 1.5 1.3 1.3 1.2 14.8 15.5 15.0Federal Bank (FEDBAN) 129 128 Hold 11,039 9.8 11.8 13.7 13.2 11.0 9.4 1.7 1.6 1.5 1.2 1.3 1.3 13.0 14.8 15.8HDFC Bank (HDFBAN) 857 900 Hold 206,357 35.3 40.8 49.0 24.2 21.0 17.5 4.8 4.1 3.6 1.9 1.9 1.9 21.3 20.8 21.4Indusind Bank (INDBA) 569 650 Buy 29,962 26.8 33.1 40.9 21.3 17.2 13.9 3.4 2.9 2.5 1.8 1.8 1.9 16.9 17.8 18.9Jammu & Kashmir Bank (JAMKAS) 1,603 1,700 Hold 7,772 243.8 267.3 317.0 6.6 6.0 5.1 1.4 1.2 1.0 1.6 1.5 1.6 22.3 20.7 21.0Kotak Bank (KOTMAH) 884 945 Hold 67,985 19.6 23.3 28.3 45.2 37.9 31.3 6.2 5.5 4.7 1.7 1.9 1.9 14.5 14.8 15.6South Indian Bank (SOUIN0) 33 30 Hold 4,455 3.8 4.4 5.3 8.8 7.5 6.3 1.5 1.3 1.1 1.0 1.0 1.0 16.6 17.2 17.9Yes Bank (YESBAN) 557 625 Buy 23,095 44.9 47.4 56.5 12.4 11.7 9.9 2.8 2.0 1.7 1.6 1.6 1.6 24.8 20.7 18.4

#N/ANBFCsHDFC (HDFC) 1,013 920 Hold 158,748 35.2 39.8 45.3 28.8 25.5 22.3 5.8 5.3 4.7 2.6 2.5 2.5 20.8 21.4 22.1IDFC (IDFC) 134 140 Buy 20,326 11.9 11.7 11.7 11.3 11.4 11.4 1.4 1.3 1.2 2.5 2.3 2.3 12.8 11.6 10.5LIC HF (LICHF) 327 UR Hold 16,515 26.1 31.4 37.6 12.5 10.4 8.7 2.2 1.9 1.6 1.5 1.5 1.6 18.0 18.8 19.2Reliance Capital Ltd (RELCAP) 656 UR Hold 16,112 6.7 29.3 34.0 97.7 22.4 19.3 1.5 1.5 1.4 0.4 1.5 1.5 1.3 5.6 6.2

P/BV (x) RoNA (%) RoE (%)EPS (|) P/E (x)

SBI and Kotak Bank Standalone EPS CMP as on July 04, 2014



(|) TP(|) Ratings (| Cr) FY14 FY15E FY16E FY14 FY15E FY16E FY14 FY15E FY16E FY14 FY15E FY16E FY14 FY15E FY16EShippingGE Shipping (GESHIP) 375 390 Buy 5,647 38.1 44.6 46.7 9.8 8.4 8.0 6.0 5.1 4.7 6.8 7.2 6.9 8.5 9.2 9.0Guj Pipavav Port (GUJPPL) 124 95 Hold 5,975 4.0 4.7 5.6 31.2 26.5 21.9 23.9 19.5 16.0 11.4 12.1 13.0 13.7 13.8 14.3Pipavav Defence (PIPSHI) 67 80 Buy 4,922 0.0 0.1 0.2 1,807.9 0.0 387.8 14.9 14.3 13.1 6.3 6.3 6.8 0.1 0.2 0.5Shipping Corp. of India (SCI) 67 53 Sell 3,135 -5.9 -3.6 -2.1 NA NA NA 17.2 13.2 11.4 -1.7 -0.9 -0.5 -4.5 -2.7 -1.6

#N/ATelecomBharti Airtel (BHATE) 339 480 Buy 135,478 6.9 13.3 16.3 48.8 25.4 20.8 7.2 6.2 5.4 8.7 10.6 11.8 4.6 8.3 9.3Idea Cellular (IDECEL) 135 170 Buy 47,845 5.9 7.8 10.4 22.8 17.3 13.0 8.0 6.6 5.4 10.9 13.0 16.3 12.0 14.2 16.1Reliance Comm. (RELCOM) 143 140 Sell 34,413 5.1 3.7 5.3 28.2 38.2 27.0 11.2 9.2 8.3 3.0 4.9 5.1 3.9 2.7 3.6

#N/AApparelsKewal Kiran (KEWKIR) 1,709 1,230 Hold 2,106 54.4 67.4 82.2 31.4 25.4 20.8 22.3 18.2 14.9 29.2 34.1 35.8 23.1 27.0 28.4Lovable Lingerie (LOVLIN) 395 295 Sell 664 12.6 13.6 15.2 31.4 29.1 26.0 24.7 22.9 20.4 12.0 11.8 12.1 11.1 11.0 11.2Page Industries (PAGIND) 7,181 5,770 Hold 8,010 137.9 172.0 221.8 52.1 41.8 32.4 32.4 26.4 20.7 55.0 57.9 59.0 53.2 52.0 52.5Rupa & Co. (RUPACO) 231 Unrated Unrated 1,835 8.3 9.5 10.7 27.8 24.3 21.6 15.6 14.2 12.8 23.8 24.3 24.7 22.8 22.0 21.1Vardhman Textiles (MAHSPI) 514 430 Buy 3,272 114.9 94.6 104.7 4.5 5.4 4.9 4.4 4.2 3.6 18.8 15.6 16.7 27.3 18.9 18.0

#N/AOthersCox & Kings (CNKLIM) 265 260 Buy 3,621 28.1 23.6 32.5 9.4 11.2 8.2 8.2 7.0 5.0 9.4 10.7 12.6 21.8 17.7 19.6InfoEdge (INFEDG) 643 750 Buy 7,076 8.2 13.0 16.0 78.3 49.5 40.1 66.5 36.8 28.5 10.4 18.0 20.1 11.9 16.6 17.9Maharashtra Seamless (MAHSEA) 320 250 Sell 2,144 14.9 16.4 20.4 21.5 19.5 15.7 16.2 13.0 10.1 1.8 2.3 3.2 3.5 3.8 4.6Jindal SAW (SAWPIP) 83 75 Hold 2,283 -3.1 9.5 18.9 NA 8.7 4.4 12.5 7.5 5.1 3.3 7.0 10.7 -2.4 6.9 12.2Kajaria Ceramics (KAJCER) 557 515 Hold 4,213 16.4 19.8 25.8 33.9 28.1 21.6 15.8 13.0 10.1 29.2 26.4 29.2 23.5 21.8 23.4McLeod Russel (MCLRUS) 320 326 Hold 3,499 24.0 28.7 32.6 13.3 11.2 9.8 10.1 8.9 8.2 13.2 14.4 14.2 12.4 13.4 13.8Navneet Publications (NAVPUB) 82 80 Hold 1,959 4.8 5.9 6.6 17.1 14.0 12.4 10.5 8.7 7.7 29.0 31.3 32.4 25.7 27.4 26.9Sintex Industries (SININD) 98 57 Hold 3,237 11.7 13.1 16.3 8.4 7.5 6.0 6.9 6.9 6.1 9.8 9.9 10.6 10.3 10.9 12.0TTK Prestige (TTKPRE) 3,847 3,130 Hold 4,478 95.9 117.5 149.4 40.1 32.7 25.7 27.5 20.6 16.5 23.7 26.9 28.5 19.0 20.2 22.1Talwarkars (TALWAL) 205 203 Buy 536 14.0 17.8 22.5 14.7 11.5 9.1 7.7 6.3 5.2 15.8 17.2 18.6 15.2 16.0 16.8United Spirits (MCDOWE) 2,455 3,072 Buy 35,675 20.9 25.0 41.5 117.6 98.1 59.2 37.1 29.1 22.5 7.9 10.3 13.0 3.9 4.5 7.0

RoCE (%) RoE (%)Sector / Company

EPS (|) P/E (x) EV/EBITDA (x)



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Pankaj Pandey Head – Research [email protected] ICICIdirect.com Research Desk, ICICI Securities Limited, 1st Floor, Akruti Trade Centre, Road No 7, MIDC, Andheri (East) Mumbai – 400 093 [email protected]

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