India Strategy-July 2014

Research Team (Rajat@MotilalOswal.
com)
July 2014
The 'A' team... In action!
India Strategy
India Strategy
Contents
1. Automobiles 74-87
Amara Raja Batteries 78
Ashok Leyland 79
Bajaj Auto 80
Eicher Motors 81
Exide Industries 82
Hero MotoCorp 83
Mahindra & Mahindra 84
Maruti Suzuki India 85
Tata Motors 86
TVS Motor 87
2. Capital Goods 88-100
ABB 92
BHEL 93
Crompton Greaves 94
Cummins India 95
Havells India 96
Larsen & Toubro 97
Si emens 98
Thermax 99
Vol tas 100
3. Cement 101-111
ACC 104
Ambuja Cement 105
Birla Corporation 106
Grasim Industries 107
India Cements 108
Jaiprakash Associates 109
Shree Cement 110
UltraTech Cement 111
4. Consumer 112-129
Asian Paints 116
Britannia Industries 117
Colgate Palmolive 118
Dabur India 119
Emami 120
Godrej Consumer Products 121
GSK Consumer 122
Hindustan Unilever 123
ITC 124
Marico 125
Nestle India 126
Pidilite Industries 127
Radico Khaitan 128
United Spirits 129
5a. Financials - Banks 130-150
Axis Bank 136
Bank of Baroda 137
Bank of India 138
Canara Bank 139
Federal Bank 140
HDFC Bank 141
ICICI Bank 142
Indian Bank 143
IndusInd Bank 144
ING Vysya Bank 145
Kotak Mahindra Bank 146
Oriental Bank 147
Punjab National Bank 148
State Bank of India 149
Union Bank 150
5b. Financials - NBFC 151-160
Bajaj Finance 153
HDFC 154
IDFC 155
LIC Housing Finance 156
M & M Financial Services 157
Power Finance Corporation 158
Rural Electricfication 159
Shriram Transport 160
6. Healthcare 161-177
Alembic Pharma 164
Biocon 165
Cadila Healthcare 166
Ci pl a 167
Divi s Laboratories 168
Dr Reddys Labs. 169
Glenmark Pharma 170
GSK Pharma 171
IPCA Laboratories 172
Lupin 173
Ranbaxy Labs. 174
Sanofi India 175
Sun Pharmaceuticals 176
Torrent Pharma 177
7. Media 178-187
D B Corp 182
Dish TV 183
HT Media 184
Jagran Prakashan 185
Sun TV Network 186
Zee Entertainment 187
8. Metals 188-201
Hi ndal co 193
Hindustan Zinc 194
Jindal Steel & Power 195
JSW Steel 196
Nal co 197
NMDC 198
Sesa Goa 199
SAIL 200
Tata Steel 201
9. Oil & Gas 202-218
BPCL 207
Cairn India 208
GAIL 209
Gujarat State Petronet 210
HPCL 211
IOC 212
Indraprastha Gas 213
MRPL 214
Oil India 215
ONGC 216
Petronet LNG 217
Reliance Industries 218
10. Real Estate 219-230
DLF 222
Godrej Properties 223
Indiabulls Real Estate 224
Jaypee Infratech 225
Mahindra Lifespaces 226
Oberoi Realty 227
Phoenix Mills 228
Prestige Estate Projects 229
Sobha Developers 230
11. Retail 231-237
Future Retail 234
Jubilant Food 235
Shoppers Stop 236
Titan Company 237
12. Technology 238-252
Cognizant Technology 242
HCL Technologies 243
Hexaware Technologies 244
I nfosys 245
KPIT Technologies 246
Mindtree 247
Mphasi S 248
Persistent Systems 249
TCS 250
Tech Mahindra 251
Wipro 252
13. Telecom 253-261
Bharti Airtel 258
Bharti Infratel 259
Idea Cellular 260
Reliance Communication 261
14. Utilities 262-275
CESC 266
Coal India 267
Jaiprakash Power Ventures 268
JSW Energy 269
NHPC 270
NTPC 271
Power Grid Corp. 272
PTC India 273
Reliance Infrastructure 274
Tata Power 275
15. Others 276-287
Arvind 276
Bata India 277
Castrol India 278
Gujarat Pipavav Port 279
Jain Irrigation 280
Just Dial 281
Kaveri Seeds 282
PVR 283
Sintex Industries 284
Symphony 285
UPL 286
V-Guard Industries 287
Note: All stock prices and indices for companies as on 4 July 2014, unless otherwise stated
Section A: India Strategy - The 'A' team... In action! ................................................................... 1-60
Section B: 1QFY15 Highlights & Ready Reckoner ..................................................................... 61-72
Section C: Sectors & Companies .............................................................................................. 73-287
Investors are advised to refer through disclosures made at the end of the Research Report.

July 2014 1

India Strategy | The 'A' team... In action!

The 'A' team... In action!
Economy, corporate earnings bottoming out
1QFY15 PREVIEW | Domestic earnings showing signs of bottoming out;
Aggregate PAT up 14% YoY; Sensex PAT up 20% YoY
1QFY15 marks the first quarter of domestic businesses showing some rebound
from the very low growth witnessed over the last two years. This trend should
gather pace over FY15 and we expect strong growth in FY16. 1QFY15 is also the
last quarter of impact of weak currency YoY, which favorably impacts all
exporters earnings. This impact would taper off significantly from 2QFY15.
We expect MOSL Universe of 153 companies (excluding RMs) to report
aggregate PAT growth of 14% YoY. Sales would grow 13% YoY, while EBITDA
growth would be 14%.
The fastest growing sectors in 1Q would be Telecom (+41%; aided by low base),
Autos (+39%; TTMT growth of 91%), Technology (+21%; last quarter of INR
impact), and Private Banks (+20%, remained most consistent across cycle).
Sectors with earnings decline would be the domestic cyclicals: Real Estate (-
32%), Capital Goods (-16%), PSU Banks (-10%) and Cement (-7%). Among these,
the PSU Banks would begin showing growth from 2QFY15, while the other three
would see growth returning in 3Q/4Q.
Margins have bottomed out and are showing signs of recovery. Operating
leverage should start picking up, as domestic volumes and business conditions
improve. Moreover, interest costs are also at their peak, and would aid growth
ahead.
Sensex 1QFY15 PAT is likely to grow 20% YoY versus 11% in 4QFY14. This is the
highest growth in the last nine quarters. This would be largely fueled by Tata
Motors (growing 91% on low base) and ONGC (growth of 53%). Excluding these
two, growth would be 13%. Top PAT growth companies would be: Dr Reddys
(+61%), HDFC Bank (+25%), TCS (+24%), Hero MotoCorp (+24%), and Axis Bank
(+18%). ITC and ICICI Bank would grow at 17% each. Top PAT de-growth
companies would be largely cyclicals: BHEL (-84%), Mahindra & Mahindra (-19%)
and L&T (-5%). Cipla could report 25% earnings decline.

1QFY15 Sensex PAT growth at 20%, higher than LPA of 17%; highest in 9 quarters

Source: Company, MOSL
25
28
39 42
33
24
12
6
31
30
43
33
30
26
17
19
25
23
-7
-15
-25
-21
20
44
26
27
22
-2
12
15
6
29
14
4
7
0
-4
11
19
11
20
13
10
14
1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q
FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15E
LPA:17%

India Strategy
BSE Sensex: 25,962 S&P CNX: 7,752

July 2014 2


ECONOMY | Worst of macro is behind; green shoots are visible; expect GDP
to grow at 6.5% in FY16
The Indian economy has faced turbulent times in the last five years with key
economic indicators taking a turn for worse.
Thus we have seen stagflationary tendency with low growth coupled with high
inflation. The twin deficits had breached their sustainable limits. The private
capex cycle collapsed with negative consequence on credit offtake and its
quality.
We may not be out of the woods as yet but the worst seems behind us.
Growth has shown a marginal uptick in 4QFY14. More importantly the most
cyclical part of growth, viz., industry have shown first signs of growth during
Apr-May, registering a growth rate of 4%.
Inflation has subsided by the latest count, albeit helped by a favorable base
effect.
In a short period of time, India has been able to correct its external imbalance
and impart stability to its currency.
Successive governments have also shown firm commitment to strictly adhere to
the fiscal consolidation path despite challenges of meeting revenue targets in a
low growth environment.
Finally project clearance related governance has improved raising hopes for a
pick-up in private capex.
Thus, we expect GDP growth to revive to 5.5% in FY15 and further to 6.5%
during FY16 from 4.7% in FY14. The period should also see a moderation in
inflation with government taking steps to curb food inflation. Interest rates too
have peaked out and its decline would act as a booster to the economy.

India's current growth rate is well below its potential growth

Source: Government, MOSL
However, GDP growth has bottomed out


GOVERNMENT | Historic mandate to NDA put to test; Various actions
including Budget see Governments earnestness for change
The BJP led NDA has won their biggest ever mandate in an election marked with
many firsts.
Government has taken various measures to live upto the expectations despite
challenging economic environment and limited fiscal space. The directions of
policy measures by the new government were aimed at reinvigorating growth
by focusing on infrastructure, addressing inter-sectoral bottlenecks and faster
project clearances.
5.0
6.2
7.5
4.7
0
3
6
9
12
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8
5
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8
7
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7
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1
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Avg 10-yr gr. (%) GDP gr. (%)
4
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3
5
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5
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.
0
8
.
1
7
.
0
9
.
5
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6
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.
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F
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3
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4
F
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5
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6
F
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7
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8
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9
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1
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1
1
F
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2
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1
3
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1
4
F
Y
1
5
E
F
Y
1
6
E
F
Y
1
7
E
GDP gr. (%)

July 2014 3


Simultaneously, the government has sought to bring down inflation, particularly
food inflation through a variety of administrative and policy measure including
by effecting the lowest MSP hikes in a decade.
At the same time when it is trying to pump up growth, it has avoided breaching
fiscal and external prudent limits. This left headroom only for limited
maneuverability for the Government in its maiden budget. It has used the space
to effect a consumption and investment boost financed by higher disinvestment
and sale of telecom spectrum.
While being constrained by the limited fiscal space and inadequate preparation
time, Government nonetheless made a beginning towards the reform and
development agenda set in its Manifesto.
Moreover, government has sought to enhance its own capacity to deliver by
rejiging the bureaucracy and improving governance standards.
The combination of near term measures and visionary steps are likely to hold
India in good stead for a steady recovery of the economy.

Key big-bang announcements by the Modi government
Particulars Impacted sector Positive
INR125b worth of transmission projects approved Power Positive
Approved road projects worth about INR400b Infrastructure Positive
Fast track clearances for 3 rail lines for coal linkage Power Positive
Railway fares hiked; higher fares for passenger with Fuel adjustment charge Economy Positive
7 big-ticket projects of INR210b cleared Infrastructure Positive
Gas price deferred for 3 months to consult with all stakeholders Energy Negative
Firm resolve to GST implementation Economy Positive
FDI in insurance and defence raised from 26% to 49% Insurance Positive
24 Airports identified for development as Domestic Air Cargo Terminals Infrastructure Positive
PSU Bank consolidation and greater autonomy Financials Positive
Transfer of units of debt mutual funds to be taxed at 20% (vs 10% earlier) Economy Negative
Conducive tax regime for REITS and Infrastructure Investment Trusts Infrastructure Positive
New scheme targeting feeder separate for DISCOMs Infrastructure Positive
Online environmental clearances Infrastructure Positive
Large number of infrastructure projects announced (16 ports, 8,500kms of road project
completion, developing airports in Tier 2 and 3 cities, developing 100 smat cities)
Economy Positive
Construction under EPC vs. PPP earlier Infrastructure Positive

MARKETS | Beginning of a new cycle; markets at high; valuations at long-
term averages
India is the top performing markets, with the Sensex delivering 18% return in
CY14YTD. The Sensex outperformed its EM peers, both in local currency and
USD terms. It currently trades at 16.4x FY15E earnings.
Domestic cyclicals outperformed in CYTD. Top performing sectors are Capital
Goods (+46%), Retail (45%) and PSU Banks (+40%). Telecom is the only sector,
with negative returns.
Valuations of Indian equities remain attractive with market cap-to-GDP ratio of
68% (below long-period average of 72%). The Sensex trades at 15.4x which is
just below long-period average of 15.5x.
FIIs continue to repose faith in Indian equities and pumped USD11.2b in
CY14YTD, whereas DIIs witnessed outflows of USD5.5b.

July 2014 4


12-month forward Sensex P/E (x)

Indias market cap to GDP (%)


MONSOON | Shortfall in rains, potentially in capital flows too? Key risks -
monsoon deficit and market readiness for huge capital issuance
The deficient rainfall in large parts of the country so far and the threat of El Nino
in the second half of the season is a major source of worry for the economy.
While deficient monsoon has affected food inflation materially in the past, the
previous NDA government did well to contain prices during the two drought
years it faced in five years.
The government has taken several pre-emptive measures to tackle food
inflation this time too, including low MSP hike, release of foodstocks and
restrictions on exports.
Its not raining money in the capital markets. However, a few companies have
been successful in raising rather large sums.
There is a very strong pipeline of equity capital raising in the primary capital
market emanating from three sources.
Disinvestment of USD20b-25b over the next two years
Financials to raise USD15b to meet their capital requirement
Private sector may come up with another USD20b-25b as an attempt to repair
the balance sheets of highly leveraged companies.
Such huge capital raising program raises concerns on the absorption capacity of
the market and its consequent impact on the secondary market.

Sharp deviation in rainfall has affected agri production

Source: IMD, MOSL
NDA-I did well to contain food prices despite drought

Source: IMD, Government, MOSL

STRATEGY: Rajat Rajgarhia (Rajat@MotilalOswal.com)
ECONOMIST: Dipankar Mitra (Dipankar.Mitra@MotilalOswal.com)

Sources of exhibits in this section include RBI, CMIE, Bloomberg, IMF, UN, Rogers International, Industry, Companies, and MOSL database
24.6
10.7
15.4
7
12
17
22
27
J
u
l
-
0
4
J
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l
-
0
5
J
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-
0
6
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0
7
J
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-
0
8
J
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-
0
9
J
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l
-
1
0
J
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-
1
1
J
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l
-
1
2
J
u
l
-
1
3
J
u
l
-
1
4
10 Year Avg: 15.5x
42
52
82
83
103
55
95
88
69
63 65
68
F
Y
0
4
F
Y
0
5
F
Y
0
6
F
Y
0
7
F
Y
0
8
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0
9
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1
0
F
Y
1
1
F
Y
1
2
F
Y
1
3
F
Y
1
4
F
Y
1
5
E
Average of 72%
for the period
-11
-15
-12
-20
-19
-2 -2
-6
-18
-7
-30
-20
-10
0
10
20
FY84 FY87 FY88 FY95 FY99 FY01 FY03 FY10
Rainfall deviation Change in foodgrain production
3
2
-30
-20
-10
0
10
20
Rainfall deviation WPI-Food inflation
Potential capital supply (INR t)

1.0-
1.25
1.2 -
1.7
0.5-
0.6
PSUs Private
sector
(excld
financials)
Banking &
Financial
Services

July 2014 5


Domestic earnings showing signs of bottoming out
Aggregate PAT up 14% YoY; Sensex PAT up 20% YoY
1QFY15 marks the first quarter of domestic businesses showing some rebound from
the very low growth witnessed over the last two years. This trend should gather pace
over FY15 and we expect strong growth in FY16. 1QFY15 is also the last quarter of
impact of weak currency YoY, which favorably impacts all exporters earnings. This
impact would taper off significantly from 2QFY15.
We expect MOSL Universe of 153 companies (excluding RMs) to report aggregate PAT
growth of 14% YoY. Sales would grow 13% YoY, while EBITDA growth would be 14%.
The fastest growing sectors in 1Q would be Telecom (+41%; aided by low base), Autos
(+39%; TTMT growth of 91%), Technology (+21%; last quarter of INR impact), and
Private Banks (+20%, remained most consistent across cycle). Sectors with earnings
decline would be the domestic cyclicals: Real Estate (-32%), Capital Goods (-16%), PSU
Banks (-10%) and Cement (-7%). Among these, the PSU Banks would begin showing
growth from 2QFY15, while the other three would see growth returning in 3Q/4Q.
Margins have bottomed out and are showing signs of recovery. Operating leverage
should start picking up, as domestic volumes and business conditions improve.
Moreover, interest costs are also at their peak, and would aid growth ahead.
Sensex 1QFY15 PAT is likely to grow 20% YoY versus 11% in 4QFY14. This is the highest
growth in the last nine quarters. This would be largely fueled by Tata Motors (growing
91% on low base) and ONGC (growth of 53%). Excluding these two, growth would be
13%. Top PAT growth companies would be: Dr Reddys (+61%), HDFC Bank (+25%), TCS
(+24%), Hero MotoCorp (+24%), and Axis Bank (+18%). ITC and ICICI Bank would grow
at 17% each. Top PAT de-growth companies would be largely cyclicals: BHEL (-84%),
Mahindra & Mahindra (-19%) and L&T (-5%). Cipla could report 25% earnings decline.

Early signs of domestic macroeconomic recovery
The macro-economic backdrop for 1QFY15 is showing early signs of recovery as is
evident from
i) Second consecutive month of growth in IIP (4.7% IIP growth registered in May
2014 is highest in six quarters),
ii) Improvement in consumer demand reflected in fourth consecutive double-digit
growth in 2W volumes in 1QFY15,
iii) Growth in sales volume of Maruti in 1QFY15, after two quarters of de-growth,
and
iv) Significant improvement in cement dispatches (8.1% expected growth in
1QFY15, a 2-year high).
This trend should gather pace during the rest of FY15. 1QFY15 is also the last quarter
of YoY impact of a weak INR that benefits the earnings of all exporters. This impact
would taper off significantly from 2QFY15.

1QFY15 PREVIEW

July 2014 6


IIP growth highest in six quarters

Double-digit 2W volume growth


Cement dispatches at two-year high

Maruti volumes start growing again


Expect 1QFY15 aggregate PAT to grow 14% YoY; sales to grow
13% YoY
We expect MOSL Universe of 153 companies (excluding RMs i.e. three major oil
refining & marketing companies, IOC, BPCL, and HPCL) to report aggregate
1QFY15 sales growth of 13% YoY. This would be the fourth consecutive quarter
of double-digit sales growth, led by Autos, Financials, Healthcare and
Technology.
EBITDA margins have bottomed out. We estimate 1QFY15 EBITDA margin at
19.7%, up from 19.1% in 4QFY14 and slightly lower than the long-period average
of 20.4%. We expect EBITDA margin expansion to continue, aided by the
operating leverage available on the back of expected rebound in domestic
businesses.
Companies within MOSL Universe are likely to report aggregate 1QFY15 PAT
growth of 13.7% YoY. This is significantly higher than 8.5% YoY witnessed in
4QFY14 and would be driven by Oil & Gas, Technology, Private Banks, Autos and
Consumer, but dragged by PSU Banks and Utilities. However, the expected
growth is lower than the long period average of 18%. We expect substantial
improvement in FY15 PAT growth, given a lower base in FY14 (PAT growth of
7%) and expected economic recovery in 2HFY15, driven by a stable and reform-
oriented NDA government.

-1.0
-0.6
2.5
0.6
3.5
1.5
-2.5
-1.8
2.6
0.4
2.7
-1.2
-1.3
0.1
1.1
-2.0
-0.5
3.4
4.7
N
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v
-
1
2
J
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-
1
3
M
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-
1
3
M
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-
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3
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3
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1
3
N
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1
3
J
a
n
-
1
4
M
a
r
-
1
4
M
a
y
-
1
4
IIP YoY (%) 19.6
19.8
12.7
11.9
9.4
-4.6
4.9
-0.5
-2.4
8.7
9.4
12.4
10.9
1
Q
F
Y
1
2
2
Q
F
Y
1
2
3
Q
F
Y
1
2
4
Q
F
Y
1
2
1
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F
Y
1
3
2
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F
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1
3
3
Q
F
Y
1
3
4
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F
Y
1
3
1
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F
Y
1
4
2
Q
F
Y
1
4
3
Q
F
Y
1
4
4
Q
F
Y
1
4
1
Q
F
Y
1
5
2W Volume Chg YoY (%)
0.9
6.1
10.2
9.0
9.8
5.6
2.6
4.9
3.3
5.9
2.0
2.3
8.1
1
Q
F
Y
1
2
2
Q
F
Y
1
2
3
Q
F
Y
1
2
4
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F
Y
1
2
1
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F
Y
1
3
2
Q
F
Y
1
3
3
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F
Y
1
3
4
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F
Y
1
3
1
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F
Y
1
4
2
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F
Y
1
4
3
Q
F
Y
1
4
4
Q
F
Y
1
4
1
Q
F
Y
1
5
Cement Dispatches YoY (%)
-1
-20
-28
5 5
-9
26
-5
-10
20
-4
-5
13
1
Q
F
Y
1
2
2
Q
F
Y
1
2
3
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F
Y
1
2
4
Q
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Y
1
2
1
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F
Y
1
3
2
Q
F
Y
1
3
3
Q
F
Y
1
3
4
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F
Y
1
3
1
Q
F
Y
1
4
2
Q
F
Y
1
4
3
Q
F
Y
1
4
4
Q
F
Y
1
4
1
Q
F
Y
1
5
Maruti Volume YoY Chg (%)

July 2014 7


Results to reflect mixed performance by cyclical and non-cyclical sectors
Telecom, Autos, Technology, Metals and Private Banks are likely to report >20%
PAT growth.
Oil & Gas, Consumer, Healthcare, Utilities and NBFCs are likely to report 10-16%
PAT growth.
Capital Goods, PSU Banks, Cement and Real Estate should report significant
decline in PAT growth.
While the overall Financials sector is likely to report a muted 5% PAT growth,
Private Banks would outperform, clocking 20% PAT growth YoY, followed by
NBFCs with 10.1% PAT growth YoY. PSU Banks are likely to report 10% decline in
aggregate PAT, a trend that is continuing for seven quarters now.

1QFY15 performance of MOSL Universe by sector: Mixed bag of cyclicals and non-cyclicals
Sector

Sales

EBITDA

Net Profit PAT Delta
EBITDA
Margin
(No of Companies)

Jun-14
Var %
YoY
Var %
QoQ
Jun-14
Var %
YoY
Var %
QoQ
Jun-14
Var %
YoY
Var %
QoQ
Share % Share %
Chg bp
YoY
High growth sectors 3,425 15 -6 827 20 -2 398 25 -4 43 71 89
Telecom (4) 382 10 1 130 14 3 23 41 5 3 6 121
Auto (10) 1,028 19 -5 143 29 -3 69 39 -11 7 17 106
Technology (10) 638 19 1 164 23 -4 126 21 -4 14 20 85
Metals (9) 1,101 12 -14 230 23 -3 85 21 -4 9 13 182
Private Banks (8) 166 16 4 141 10 -1 83 20 -2 9 12 -488
Med/Low growth sectors 3,100 12 1 670 14 3 411 13 1 44 42 33
Oil Excl. RMs (9) 1,692 12 1 259 20 -1 161 16 -2 17 20 95
Consumer (14) 351 13 3 74 13 6 51 14 3 6 6 3
Healthcare (14) 243 16 5 54 13 7 37 11 1 4 3 -61
Utilities (10) 635 11 -1 179 7 10 98 10 7 11 8 -93
NBFC (9) 116 20 6 97 15 0 61 10 -2 7 5 -409
Retail (4) 63 1 1 6 13 -3 2 8 -10 0 0 106
PAT de-growth sectors 879 6 -18 291 -1 -20 119 -11 -22 13 -13 -237
Media (7) 43 11 7 12 4 5 5 -6 6 1 0 -177
Cement (8) 195 9 -2 35 -1 -3 17 -7 -11 2 -1 -183
PSU Banks (8) 307 13 2 206 1 -13 78 -10 7 8 -8 -794
Capital Goods (9) 285 1 -41 23 3 -65 14 -16 -72 1 -2 14
Real Estate (9) 47 -9 -9 14 -26 11 5 -32 -27 0 -2 -668
MOSL Excl. RMs (153) 7,404 13 -5 1,788 14 -4 928 14 -5 100 100 18
Sensex (30) 4,863 14 -7 1,085 18 -8 570 20 -9 75
Nifty Ex BPCL (49) 5,503 14 -6 1,339 15 -7 712 15 -7 33

Expect double-digit PAT growth in 1QFY15 second time in eight quarters, but still below LPA of 18%


-10
-13
-9
23
40
26
25
26
10
13
11
5
19
14
7 5 1
0
8
14
10
13
14
16
20
M
a
r
-
0
9
J
u
n
e
-
0
9
S
e
p
-
0
9
D
e
c
-
0
9
M
a
r
-
1
0
J
u
n
-
1
0
S
e
p
-
1
0
D
e
c
-
1
0
M
a
r
-
1
1
J
u
n
e
-
1
1
S
e
p
-
1
1
D
e
c
-
1
1
M
a
r
-
1
2
J
u
n
e
-
1
2
S
e
p
-
1
2
D
e
c
-
1
2
M
a
r
-
1
3
J
u
n
e
-
1
3
S
e
p
-
1
3
D
e
c
-
1
3
M
a
r
-
1
4
J
u
n
e
-
1
4
E
S
e
p
-
1
4
E
D
e
c
-
1
4
E
M
a
r
-
1
5
E
MOSL Universe Quarterly PAT Growth YoY (%) LPA: 18%

July 2014 8


Sales growth to taper off in 9MFY15 due to INR depreciation and inflation impact; below LPA of 15%


1QFY15 EBITDA margin (ex Financials & RMs) at 19.7%; expect recovery hereon


1QFY15 PAT margin (ex Financials & RMs) at 10.3%; relatively flat and below LPA of 11.5%


Sectoral quarterly PAT trend
We estimate aggregate PAT for MOSL Universe (ex RMs) at INR847b, the highest
ever in a June-ending quarter, and expect a similar trend in the remainder of
FY15. Corporate India earnings continue to do well. We expect 13%+ earnings
growth in FY15.
Consumer, Financials and Utilities would report record profits in 1QFY15.
Technology is also likely to maintain INR100b+ earnings of 3QFY14 and 4QFY14.
Telecom would continue to show a rebound, led by Bharti.

3
-6
-3
19
29
27
23
21
24
25
21
22
19
16
13
10
6
5
13 13
11
13
7
8 9
M
a
r
-
0
9
J
u
n
e
-
0
9
S
e
p
-
0
9
D
e
c
-
0
9
M
a
r
-
1
0
J
u
n
-
1
0
S
e
p
-
1
0
D
e
c
-
1
0
M
a
r
-
1
1
J
u
n
e
-
1
1
S
e
p
-
1
1
D
e
c
-
1
1
M
a
r
-
1
2
J
u
n
e
-
1
2
S
e
p
-
1
2
D
e
c
-
1
2
M
a
r
-
1
3
J
u
n
e
-
1
3
S
e
p
-
1
3
D
e
c
-
1
3
M
a
r
-
1
4
J
u
n
e
-
1
4
E
S
e
p
-
1
4
E
D
e
c
-
1
4
E
M
a
r
-
1
5
E
MOSL Universe Quarterly Sales Growth YoY (%) LPA: 15%
23.2
20.7
18.6
19.0
22.3
21.3
22.2 22.3 22.3
21.8
22.0
20.6
20.5
20.0
19.0
19.3
19.5
19.1
18.7
19.6
19.1
19.3
19.4
19.1
19.7
20.1
20.6
20.9
1
Q
2
Q
3
Q
4
Q
1
Q
2
Q
3
Q
4
Q
1
Q
2
Q
3
Q
4
Q
1
Q
2
Q
3
Q
4
Q
1
Q
2
Q
3
Q
4
Q
1
Q
2
Q
3
Q
4
Q
1
Q
2
Q
3
Q
4
Q
FY09 FY10 FY11 FY12 FY13 FY14 FY15E
MOSL Universe EBITDA Margin
LPA: 20.4%
14.6
13.3
10.8 10.8
12.3
11.7 11.7
13.0
12.6
12.2
12.5
12.1
11.8
11.2
10.7
11.4
11.0
10.3
10.0
10.5
10.0
10.1
10.4
10.5
10.3
10.6
10.9
11.3
1
Q
2
Q
3
Q
4
Q
1
Q
2
Q
3
Q
4
Q
1
Q
2
Q
3
Q
4
Q
1
Q
2
Q
3
Q
4
Q
1
Q
2
Q
3
Q
4
Q
1
Q
2
Q
3
Q
4
Q
1
Q
2
Q
3
Q
4
Q
FY09 FY10 FY11 FY12 FY13 FY14 FY15E
MOSL Universe PAT Margin
LPA: 11.5%

July 2014 9


Sectoral quarterly PAT trend (INR b)
Sector 2010 2011 2012 2013 2014 2015
Mar Jun Sep Dec

Mar Jun Sep Dec

Mar Jun Sep Dec

Mar Jun Sep Dec

Mar Jun Sep Dec

Mar
Auto 43 46 49 48 51 49 50 62 79 55 49 47 75 49 71 81 77 69 79 86 93
Capital Goods 44 21 27 31 45 22 27 32 61 25 27 26 54 16 21 24 49 14 19 23 51
Cement 21 20 8 13 23 21 12 18 25 26 20 17 21 18 12 10 19 17 11 16 31
Consumer 25 28 30 32 31 32 36 37 37 40 41 46 44 45 48 52 50 51 56 60 59
Financials 124 142 142 159 135 140 162 176 204 191 190 200 214 212 189 198 220 223 232 250 277
Pvt Banks 32 32 36 42 45 42 46 53 58 55 58 68 72 69 72 80 85 83 87 97 96
PSU Banks 62 79 73 82 53 62 75 84 102 92 83 82 83 87 61 59 73 78 81 87 104
NBFC 31 31 33 35 38 36 40 39 44 44 48 50 59 56 57 60 62 61 64 67 76
Healthcare 16 18 20 18 22 20 23 24 24 24 28 27 30 33 37 38 36 36 41 44 44
Media 4 4 4 4 5 5 4 4 4 4 5 5 4 6 5 6 5 5 6 8 7
Metals 90 79 71 71 95 90 72 63 72 78 57 45 78 65 62 61 76 74 77 74 100
Oil & Gas 178 35 238 177 188 56 38 284 367 -251 342 217 403 95 203 137 346 172 207 227 196
O&G Ex RMs 108 105 143 156 128 150 178 139 139 154 173 166 133 139 174 175 165 161 181 189 163
Real Estate 8 10 11 12 9 8 9 9 10 8 6 8 6 6 5 5 5 4 5 9 8
Retail 1 2 2 2 2 2 2 2 2 2 2 3 2 2 2 2 3 2 3 3 3
Technology 43 41 47 51 51 52 54 65 67 74 76 79 79 88 99 107 109 105 112 117 124
Telecom 34 22 23 21 18 16 15 15 16 12 11 6 6 13 12 12 18 19 20 25 29
Utilities 43 39 39 38 49 43 44 43 50 51 50 49 47 51 53 51 39 56 58 54 55
Others 6 5 4 5 9 7 4 5 8 7 4 6 8 8 6 8 10 10 8 10 12
MOSL Excl RMs 611 583 622 662 673 657 694 695 798 752 739 729 804 751 797 831 881 847 906 966 1054
Note: Comparable Universe, excludes Coal India, Just Dial, Prestige Estate, Bharti Infratel, Alembic Pharma, Sesa Sterlite (due to merger) and
Wipro (due to demerger). Source: Company, MOSL

Distribution of PAT growth across sectors continues to improve
Percentage of companies reporting PAT de-growth lowest in 8 quarters.
Companies showing PAT de-growth is likely to shrink to 33% of 153 companies
in MOSL Universe (44% in 4QFY14).
o This would be the lowest level in the last eight quarters and could further
shrink to just 13% by the end of FY15 (lowest since December 2006).
39% of companies are likely to report >15% PAT growth, same as in 4QFY14.
This would rise to 69% by 4QFY15.
Companies with >30% PAT growth would contribute only 18% to aggregate PAT.
This is the lowest observed level in a decade. However, we expect the
contribution of such companies to reach 45% by the end of FY15.

Percentage of companies reporting PAT de-growth lowest in eight quarters

60
54
52
48
44 45
35
30
26
27
32
41
43
51
38
32
39
35
21 21
24 25 25
27
25 24
20
24 24
19 18
22
36
45
19
19 23
23
21
11
18
18
10
14
22
10
17
13
22
21
18
23
24 25 18
22
18
16
20
16
19
18
15
20
21
27
27
24
11
11
11
15
14
19
24
26
22
18
14
14
9
9
10
20
18
18
24
19
16
13
27
17 16
17 21
23
24
17
29
28
24
18
11
17
14 14
21
24 23
26
42 41
32
35
31
27
30
27 25 24
31
34
42 40
30
39 39
42
40
35
37
44
33
22
13 13
55 36
34
25 15 24 26 20
-8 -15 -15
-11
23
42
26
22
24 9 13
11 4
18
11
8 5 0
-2
7 12 8 14 13 16
19
D
e
c

0
6
M
a
r

0
7
J
u
n
e

0
7
S
e
p

0
7
D
e
c

0
7
M
a
r

0
8
J
u
n
e

0
8
S
e
p

0
8
D
e
c

0
8
M
a
r

0
9
J
u
n

0
9
S
e
p

0
9
D
e
c

0
9
M
a
r

1
0
J
u
n

1
0
S
e
p

1
0
D
e
c

1
0
M
a
r

1
1
J
u
n
e

1
1
S
e
p

1
1
D
e
c

1
1
M
a
r

1
2
J
u
n

1
2
S
e
p

1
2
D
e
c

1
2
M
a
r

1
3
J
u
n

1
3
S
e
p

1
3
D
e
c

1
3
M
a
r

1
4
J
u
n

1
4
E
S
e
p

1
4
E
D
e
c

1
4
E
M
a
r

1
5
E
>30% >15-30% >0-15% <0% Ex RMs (%)
%

o
f

M
O
S
L

U
n
i
v
e
r
s
e

c
o
m
p
a
n
i
e
s
Earnings Growth
PAT Growth Ex RMs (%)

July 2014 10


Expect Sensex PAT growth of 20%; TTMT, ONGC are key drivers
Based on our bottom-up estimates of the 30 constituent companies, Sensex PAT
is likely to grow 20% YoY versus 11% witnessed in 4QFY14. This is the highest
growth in nine quarters, largely fueled by Tata Motors (growing 91% on low
base) and ONGC (growth of 53%). Excluding these two companies, the growth
would be 13%.
Sales growth would remain strong at 14% in 1QFY15, but would start tapering
off, as the benefit of INR depreciation would not be available from 2QFY15.
Sharp INR depreciation in 2QFY14 had led to double-digit sales growth in
subsequent quarters.
Nearly 2/3
rd
of Sensex companies are likely to report double-digit YoY growth,
though several would benefit from lower base (Tata Power, Tata Motors, Bharti,
etc).
Other top PAT growth companies would be Dr Reddys (+61%), HDFC Bank
(+25%), TCS (+24%), Hero Moto (+24%), Axis Bank (+18%), ITC (+17%), and ICICI
Bank (+17%).
Top PAT de-growth companies would be largely cyclicals: BHEL (-84%),
Mahindra & Mahindra (-19%) and L&T (-5%). Cipla would also report a 25%
decline in earnings.
Over the next three quarters of FY15, while the Sensex PAT growth would
moderate to 12%, this would be led by a stable INR, which would significantly
moderate the earnings of all exporters.
Many of the domestic businesses would begin to show revival in growth rates in
2HFY15, and would drive Sensex growth in FY16 as well.

1QFY15 Sensex PAT growth at 20%, higher than LPA of 17%; highest in 9 quarters


Expect double-digit growth (14% YoY) in Sensex sales in 1Q; growth would taper off in the rest of FY15

25
28
39 42
33
24
12
6
31
30
43
33
30
26
17
19
25
23
-7
-15
-25
-21
20
44
26
27
22
-2
12
15
6
29
14
4
7
0
-4
11
19
11
20
13
10
14
LPA:17%
20
27
34
23
21
20
16
22
33
30
32
22
37
36
38
44
31
30
6
-5
-11
-6
19
32
28
22
18
23
26
23
25
19
17
11
8
6
2
13 14 12
14
5 5
6
LPA:20%

July 2014 11


Expect 1QFY15 Sensex EBITDA margin at 22.3%; to improve in rest of FY15, but remain below LPA of 25.2%


Sensex companies 1QFY15E performance (INR b)
Company Sales EBITDA PAT PAT Contbn EBITDA margin
Jun-14
Var %
YoY
Jun-14
Var %
YoY
Jun-14
Var %
YoY
(%) Gr. (%) Jun-14 (%) Var (bp)
High PAT Growth (8) 2,429 16 698 24 336 36 59 96 29 175
Tata Power 96 3 25 20 4 260 1 3 26 365
Sesa Sterlite 175 22 64 16 12 96 2 6 36 -169
Tata Motors 601 28 90 45 35 91 6 18 15 169
Bharti Airtel 225 11 75 14 13 82 2 6 33 88
Dr Reddy s Labs 34 23 8 61 5 61 1 2 24 555
ONGC 213 11 115 36 61 53 11 23 54 1002
Wipro 116 19 27 36 21 29 4 5 24 293
HDFC Bank 52 18 39 19 23 25 4 5 75 60
TCS 221 23 64 25 49 24 9 10 29 53
Hero Motocorp 70 15 8 21 7 24 1 1 12 55
Tata Steel 338 3 46 24 13 18 2 2 14 226
Axis Bank 32 13 29 1 17 18 3 3 88 -1089
Infosys 127 13 33 11 28 17 5 4 26 -57
ICICI Bank 45 18 44 17 27 17 5 4 99 -121
ITC 84 14 32 14 22 17 4 3 38 13
Med/Low PAT Growth (10) 2,151 13 355 10 215 5 38 12 17 -45
Maruti Suzuki 112 10 13 12 7 14 1 1 12 26
HDFC 18 17 20 22 13 13 2 2 112 415
Coal India 177 7 45 13 42 12 7 5 25 117
Bajaj Auto 53 7 10 11 8 10 1 1 19 71
Hind. Unilever 75 10 12 12 10 9 2 1 16 36
Sun Pharma 38 15 15 6 12 8 2 1 39 -314
NTPC 191 23 39 -8 23 5 4 1 21 -677
State Bank 132 15 85 13 33 2 6 1 64 -112
GAIL 144 12 15 1 8 2 1 0 10 -113
Hindalco 226 15 24 31 4 1 1 0 11 133
Reliance Inds. 985 12 77 9 53 0 9 0 8 -23
Negative PAT Growth (12) 283 0 31 -10 19 -28 3 -8 11 -119
Larsen & Toubro 104 5 12 15 7 -5 1 0 11 97
Mahindra & Mahindra 95 -2 12 -12 7 -19 1 -2 13 -151
Cipla 30 21 6 -14 4 -25 1 -1 19 -793
BHEL 55 -14 2 -59 1 -84 0 -4 3 -317
Sensex (30) 4,863 14 1,085 18 570 20 100 100 22 75
Note: For Financials, Sales represents Net Interest Income, and EBITDA represents Operating Profit Source: Company, MOSL

25.5
26.4
25.4
30.0
36.8
33.5
33.5
34.1
28.3
28.0
30.3
28.5
26.1
26.2
26.2
24.4
25.2
24.0
23.6
22.7
24.6
23.6
24.124.3
24.6
24.8 24.7
21.6
22.5
22.5
20.7
21.6
20.5
20.1
20.5
21.4
20.7
20.9
21.9
22.4
22.322.6
23.3
23.9
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Sensex Margin LPA: 25.2%

July 2014 12


Nifty and the dollar divide performance to reverse from 2Q
1QFY15 is the last quarter of positive impact on growth from INR depreciation of
2QFY14. We classified the Nifty companies into (1) USD-denominated, and (2)
Others.
USD-denominated would report PAT growth of 17% YoY. Others would see 12%
PAT growth. Sales growth for USD-denominated Nifty would be 18% v/s 8% for
Others.
Growth divergence would reverse in 9MFY15, with USD-denominated
witnessing 3% PAT growth against 21% for Others. Similar impact would be
visible in sales growth.

Nifty sales growth (%)

Nifty EBITDA growth (%)


Nifty PAT growth (%)

Nifty EBITDA margin (%)


25 22 24 19 17 12 9 6 3
14 14
12 13
5 6
7
31
27
33
20
19
16
10
8
3
22 22
21
18
2 2 1
20
17
15
19
15
9
9
4 3
5
6
4
8
9
10
14
J
u
n
e
-
1
1
S
e
p
-
1
1
D
e
c
-
1
1
M
a
r
-
1
2
J
u
n
e
-
1
2
S
e
p
-
1
2
D
e
c
-
1
2
M
a
r
-
1
3
J
u
n
e
-
1
3
S
e
p
-
1
3
D
e
c
-
1
3
M
a
r
-
1
4
J
u
n
e
-
1
4
E
S
e
p
-
1
4
E
D
e
c
-
1
4
E
M
a
r
-
1
5
E
Total Nifty Companies
$ Deonimated Nifty Companies
Balance Nifty Companies
16
13
8
16
11
4
8 7 3
13
16 12 15
12
12
14
16
8
5
0
5
6
8
20
7
28
34
23 24
9
4
5
16 16
9
26
14
4
8
2
1
5
7
6
10
14
17
19
J
u
n
e
-
1
1
S
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p
-
1
1
D
e
c
-
1
1
M
a
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-
1
2
J
u
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e
-
1
2
S
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p
-
1
2
D
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c
-
1
2
M
a
r
-
1
3
J
u
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e
-
1
3
S
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p
-
1
3
D
e
c
-
1
3
M
a
r
-
1
4
J
u
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e
-
1
4
E
S
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p
-
1
4
E
D
e
c
-
1
4
E
M
a
r
-
1
5
E
18
15 8 27
17
7 9 1
-3
9
14
10
14
12
11
14
29
1
7
12
6
20
11
6
9
31
39
23
17
4
-3
5
11
24
9
37
25
0
8
-2
-10
-4
-1
3
12
19
23 21
J
u
n
e
-
1
1
S
e
p
-
1
1
D
e
c
-
1
1
M
a
r
-
1
2
J
u
n
e
-
1
2
S
e
p
-
1
2
D
e
c
-
1
2
M
a
r
-
1
3
J
u
n
e
-
1
3
S
e
p
-
1
3
D
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c
-
1
3
M
a
r
-
1
4
J
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-
1
4
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S
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-
1
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-
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M
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-
1
5
E
2
5
.
0
2
4
.
7
2
3
.
3
2
4
.
0
2
3
.
5
2
2
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9
2
3
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0
2
4
.
2
2
3
.
6
2
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.
7
2
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5
2
4
.
1
2
3
.
9
2
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.
1
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4
.
9
2
5
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4
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1
5
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4
1
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1
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1
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1
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6
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8
1
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0
1
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6
3
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.
7
3
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.
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3
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4
3
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2
3
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3
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0
.
7
3
1
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1
3
1
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3
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1
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8
3
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6
3
1
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E

July 2014 13


Overall sectoral trends in 1QFY15 earnings
In Consumer, all companies would report PAT growth. At 14%, the overall PAT
growth would be marginally higher than 12% and 13% achieved in the previous
two quarters.
All Private Banks in MOSL Universe would report PAT growth. In contrast, 7 out
of 8 PSU Banks within MOSL coverage are likely to witness PAT de-growth (SBI is
an exception; likely to report marginal growth in 1Q).
PAT would continue to de-grow for the eighth consecutive quarter for Capital
Goods and the seventh consecutive quarter for Cement.
All Auto companies would post PAT growth, except M&M. In contrast, all Real
Estate companies under our coverage would witness PAT de-growth, except for
Phoenix Mills, which would report a marginal growth of 0.5%.

1QFY15 sectoral sales growth (%)

1QFY15 sectoral EBITDA growth (%)


1QFY15 sectoral PAT growth (%)

1QFY15 sectoral EBITDA margin (%)


19 19
16
15
13 13
12 12
11 11
10
9
1 1
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23 23
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41 39
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July 2014 14


AUTOS
1QFY15 PAT growth for our Automobile Universe would be 41%, primarily
driven by 91% PAT growth for TTMT.
For 2W companies, PAT growth would rebound to 19% in 1QFY15 v/s flat
growth in 4QFY14. Within the 2W companies, TVSL would report 85% PAT
growth and HMCL would report 24% PAT growth.
MSIL is likely to report 14% PAT growth on healthy volume growth of 12.6%.
MM would report 19% PAT decline on weak core performance and truck
business.

2Ws: PAT growth to rebound, with TVS and Hero reporting
strong growth


JLR continues to form dominant share of Auto PAT


CAPITAL GOODS
Management commentary signals cautious optimism, as the pace of project
execution remains tepid. For 1QFY15, we expect de-growth in revenue, EBITDA
and PAT across our coverage universe. We expect PAT decline of 14% YoY. Order
inflows for 1QFY15 would be muted, as project decisions were delayed by the
recently concluded elections.
Companies are restructuring their balance sheets and infusing capital to prepare
for the next level of growth.
ABB continues to invest in localization initiatives, Voltas continues to bid
cautiously. Siemens had recently hived off its Metallurgical business to Siemens
AG. L&T signed a definitive investment agreement with CPPIB for capital
infusion of INR10b in IDPL. GMR has also raised INR20b through a QIP / warrants
issue.
L&Ts efforts to increase order inflows from overseas operations are gaining
momentum (80% of the orders received (INR96.2b) and those disclosed via
media releases in 1QFY15 were from international operations). Voltas also
expects ordering environment to improve in GCC nations by end-FY15, as the
design consultants are being finalized for large projects including Dubai Expo to
be held in 2020.

18 18
24
16
4
-17
-10
-2
-3
12
10
0
19
1
Q
F
Y
1
2
2
Q
F
Y
1
2
3
Q
F
Y
1
2
4
Q
F
Y
1
2
1
Q
F
Y
1
3
2
Q
F
Y
1
3
3
Q
F
Y
1
3
4
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Y
1
3
1
Q
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Y
1
4
2
Q
F
Y
1
4
3
Q
F
Y
1
4
4
Q
F
Y
1
4
1
Q
F
Y
1
5
2Ws PAT Growth YoY (%)
45 49 49 54 47 46 59 95 50 47 44 76 46 67 78 72 66
47
43
50
46
44
41
57
66
45
44
37
52
38
53
61
55
53
1
Q
F
Y
1
1
2
Q
F
Y
1
1
3
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F
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1
1
4
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1
1
1
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1
2
2
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1
2
3
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1
2
4
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1
2
1
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1
3
2
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1
3
3
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1
3
4
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1
3
1
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1
4
2
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1
4
3
Q
F
Y
1
4
4
Q
F
Y
1
4
1
Q
F
Y
1
5
Auto Universe PAT (INR b) Share of TTMT PAT (%)

Other sector
highlights

July 2014 15


Book to Bill ratio at 2.4x

EBITDA margin impacted by lower operating leverage


FINANCIALS
State-owned banks: Expect earnings to decline 10% YoY, driven by lower non-
interest income and elevated credit cost. However, incremental contribution
from topline growth to be healthy; NII to grow 13%+ YoY, driven by better NIM
performance (stable QoQ though down 8bp YoY). Sale of loans to ARCs may
contain headline GNPA.
Private sector banks: NII growth to moderate to 16% YoY due to moderation in
loan growth and peak NIMs. Expect opex to reduce, non-interest income to
moderate and lead to PPP growth of 10% YoY. Asset quality to be stable and
credit cost containment to help earnings to grow 20% YoY. HDFCB PAT growth
likely to be strong at 25% YoY.

Healthy PAT growth for Private Banks; YoY decline in PAT for PSU Banks to continue,
though pace of decline to moderate (INR b)


2
,
2
3
2
2
,
3
7
2
2
,
5
8
9
2
,
7
8
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2
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1
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3
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6
5
3
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6
3
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1
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3
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9
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3
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1
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1
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3
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4
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Order book (INR b) BTB (x)
9
.
4
1
0
.
1
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4
.
11
6
.
3
9
.
7
1
4
.
7
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6
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9
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81
4
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6
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3
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4
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1
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5
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0
7
3
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0
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0
8
3
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8
1
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0
9
3
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9
1
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1
0
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1
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1
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1
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1
2
1
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1
3
3
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1
3
1
Q
F
Y
1
4
3
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F
Y
1
4
1
Q
F
Y
1
5
EBITDA Margin (%)
55
58
68
72
69
72
80
85
83
92
83
82
83
87
61
59
73
78
1
Q
F
Y
1
3
2
Q
F
Y
1
3
3
Q
F
Y
1
3
4
Q
F
Y
1
3
1
Q
F
Y
1
4
2
Q
F
Y
1
4
3
Q
F
Y
1
4
4
Q
F
Y
1
4
1
Q
F
Y
1
5
E
Private Banks PSU Banks

July 2014 16


CONSUMER
We expect Consumer to post 13.1% sales growth and 14.1% PAT growth in
1QFY15.
Input cost scenario is turning inflationary. We note that few companies have
taken pricing action to pass on the impact of raw material inflation.
We expect management commentaries to remain soft, and in some cases, get
more pessimistic for FY15.

Slight uptick in Consumer PAT growth


HEALTHCARE
Increasing contribution from low competition products in the US has led to
improving sales mix for many Indian generic companies. The gradual shift
towards lifestyle ailments in India and increasing penetration in branded export
markets has also aided expansion in gross margins. This is being reflected in
improving EBITDA margin profile for our coverage.
Revenue growth of 16% for the quarter would be driven by continued strong
performance in US generics. While domestic formulations market is showing
signs of recovery, meaningful uptick is expected from 2HFY15 onwards.
While we expect underlying growth for the sector to remain strong, high base of
1QFY14 would impact operational performance for many companies under our
coverage. We expect EBITDA margin to contract 60bp YoY. Adjusted PAT growth
would be even lower due to higher expected tax rates for most companies.
Major companies to be impacted include Cipla (unusually higher margins in
1QFY14), Ranbaxy (cessation of API supplies from Dewas and Paonta Sahib), Sun
Pharma, Glenmark and Torrent Pharma (price erosion in base business).
Despite the base effect, we expect Dr Reddys, Lupin, Cadila, IPCA Labs, Biocon
and Alembic Pharma to continue to report strong operational performance, led
by improving sales mix and contribution from low competition launches.
Both MNCs under our coverage, Sanofi India and GSK Pharma, are likely to
report healthy operational performance due to increase in prices of products
exiting price control and low base effect of new policy implementation last year.
With regards to currency impact, 7% appreciation of USD would yet again aid
growth in export markets. However, the MTM impact from liabilities would be
miniscule due to largely flat currency movement QoQ.

1
5
.
91
9
.
3
1
6
.
4
2
2
.
0
2
3
.
7
1
5
.
0
2
2
.
9
1
7
.
9
1
2
.
4
1
6
.
6
1
2
.
4
1
3
.
3
1
4
.
1
1
Q
F
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1
2
2
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F
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1
2
3
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F
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1
2
4
Q
F
Y
1
2
1
Q
F
Y
1
3
2
Q
F
Y
1
3
3
Q
F
Y
1
3
4
Q
F
Y
1
3
1
Q
F
Y
1
4
2
Q
F
Y
1
4
3
Q
F
Y
1
4
4
Q
F
Y
1
4
1
Q
F
Y
1
5
PAT Growth(%)

July 2014 17


Healthcare: Improving sales mix driving margin expansion


METALS
Aggregate revenue for our Metals Universe is likely to grow 13% YoY, driven by
10% growth in steel deliveries, 3% improvement in steel realization, and 12%
increase in zinc prices.
Aggregate EBITDA would increase 23% YoY, driven by higher prices, lower coal
costs, and volume growth in steel and aluminum. Aggregate adjusted PAT is
likely to grow 26% YoY.
Hindalco would be reporting significant growth in alumina and aluminum metal,
driven by ramp-up at Utkal refinery, and Hirakud and Mahan smelters.
Jindal Power would report higher volumes due to start of power transmission
from Tamnar-2 power plant to Tamil Nadu.

Metals: EBITDA to increase 23% YoY


OIL & GAS
We estimate 1QFY15 subsidy at INR292b (+15% YoY, -26% QoQ). While lower
diesel/LPG losses and INR appreciation contributed to the QoQ decline, the YoY
increase was led by higher LPG losses v/s 1QFY14 and INR depreciation.
Regional benchmark, Reuters Singapore GRM declined QoQ from USD6.2/bbl to
USD5.8/bbl, led by lower LPG and middle-heavy distillate cracks. Refinery
profitability (RIL, OMCs, MRPL) would be impacted by lower product cracks,
reflected in 7% QoQ decline in benchmark Reuters Singapore GRM.
We expect net realization to increase ~USD7/bbl QoQ for ONGC/OINL, as we
model lower QoQ subsidy, led by lower gross under-recoveries.
18.9
20.7
22.9
22.1
22.4
21.3
23.0
21.6
22.0
23.0
23.7
24.2
24.0
23.3
4
Q
F
Y
1
1
1
Q
F
Y
1
2
2
Q
F
Y
1
2
3
Q
F
Y
1
2
4
Q
F
Y
1
2
1
Q
F
Y
1
3
2
Q
F
Y
1
3
3
Q
F
Y
1
3
4
Q
F
Y
1
3
1
Q
F
Y
1
4
2
Q
F
Y
1
4
3
Q
F
Y
1
4
4
Q
F
Y
1
4
1
Q
F
Y
1
5
E
EBITDA Margin (%)

July 2014 18


RILs PAT is likely to be flat YoY at ~INR53b, despite higher operating profit,
supported by ~7% INR depreciation, due to lower other income. Other income
was boosted in 1QFY14 on account of profit on sale of investments.
Expect lower QoQ operating profit for Cairn, led by operational hiccups in May
and increase of governments share in profit petroleum.

Brent crude price was up 2% QoQ and 6% YoY (USD/bbl)

Source: Bloomberg, MOSL
Singapore GRM down 7% QoQ to USD5.8/bbl in 1QFY15


UTILITIES
We expect Utilities companies in our coverage to report aggregate revenue
growth of 11% YoY and PAT growth of 10% YoY in 1QFY15. PAT growth would be
driven mainly by Tata Power, given the benefit of compensatory tariff hike.
Also, we expect Coal India and Powergrid to post PAT growth of 12% and 11%,
respectively. Given lower than expected volume growth in Coal India, PAT could
be lower than our estimate.
For NTPC, we expect adjusted PAT growth of 4.5% YoY in the first quarter of
new regulation.

Demand growth muted in May 2014, albeit on higher base

Base deficit continues to be sub-4%


0
25
50
75
100
125
1
Q
F
Y
0
4
1
Q
F
Y
0
5
1
Q
F
Y
0
6
1
Q
F
Y
0
7
1
Q
F
Y
0
8
1
Q
F
Y
0
9
1
Q
F
Y
1
0
1
Q
F
Y
1
1
1
Q
F
Y
1
2
1
Q
F
Y
1
3
1
Q
F
Y
1
4
1
Q
F
Y
1
5
110
0
2
4
6
8
10
1
Q
F
Y
0
9
1
Q
F
Y
1
0
1
Q
F
Y
1
1
1
Q
F
Y
1
2
1
Q
F
Y
1
3
1
Q
F
Y
1
4
1
Q
F
Y
1
5
Quarterly GRM
7
9
8
4
8
5
8
6
8
3
8
0
8
4
7
9
8
5
8
5
7
3
8
6
8
3
9
1
8
3
8
7
8
4
8
3
8
0
7
7
8
3
8
4
7
8
8
5
8
9
9
1
A
p
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M
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J
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J
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N
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v
D
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J
a
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b
M
a
r
FY13 FY14 FY15 Gr (%)
7.4%
0.1%
4.4
3.8
2
5
8
11
14
A
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M
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J
u
n
J
u
l
A
u
g
S
e
p
O
c
t
N
o
v
D
e
c
J
a
n
F
e
b
M
a
r
FY15 FY12 FY13 FY14

July 2014 19


TELECOM
YoY earnings rebound to continue, with India business PAT for Bharti/Idea
growing 48%/38% YoY. PAT growth for Bharti Infratel should also remain healthy
at 22%, led by operating leverage.
We expect 13-16% YoY India business EBITDA growth for Bharti/Idea/RCom,
supported by wireless RPM and margin expansion.

Telecom: Quarterly PAT (INR b)


MEDIA
1QFY15E aggregate PAT for our Media Universe is likely to decline ~6% YoY and
remain flat QoQ. YoY decline would be led by impact of preference dividend
provision for Zee and increased loss for Dish TV due to higher depreciation.
While margin pressure and corporate events would drag PAT growth,
advertising growth for our universe would remain healthy at 9-16% (except for
Sun TV). We expect earnings growth to rebound in 2HFY15.

Media: Quarterly PAT (INR b)


15.8
13.9
8.9
10.8
14.8
14
19.4
23.8
21.9
2.3 2.4 2.3
3.8
4.9
4.5 4.7
5.9
6.8
2.1
2.5
2.5
2.9 3.6
2.8
4.1
4.7
4.4
1QFY13 2QFY13 3QFY13 4QFY13 1QFY14 2QFY14 3QFY14 4QFY14 1QFY15E
Bharti (India) Idea Bharti Infratel
4.2
4.6
5.2
4.5
5.6
5.3
6.1
4.9
5.2
1QFY13 2QFY13 3QFY13 4QFY13 1QFY14 2QFY14 3QFY14 4QFY14 1QFY15E

July 2014 20


Intra-sector 1QFY15 earnings divergence (%)
Sectors Sector +30% Growth 15-30% growth 0-15% growth -ve earnings Earnings
Growth (%) growth (%) momentum
High growth sectors
Tel ecom 41 BHARTI: 82, BHIN: 22 RCOM: PL
IDEA: 39,
Auto 39 TTMT: 91, TVSL: 84, HMCL: 24, MSIL: 14, BJAUT: 10, MM: -19,
EIM: 71 EXID: 17 AMRJ: 6 AL: Loss
Technology 21 HCLT: 37 WPRO: 29, TCS: 24, PSYS: 4, KPIT: -3, MTCL: -8,
INFO: 17 TECHM: 0 HEXW: -13
Metal s 21 JSTL: 111, SSLT: 96, TATA: 18, HZ: 12, SAIL: -14,
NACL: 31 NMDC: 17 HNDL: 1 JSP: -19
Banks - Private 20 FB: 104 HDFCB: 25, IIB: 24, KMB: 5,
AXSB: 18, YES: 17, VYSB: 5
ICICIBC: 17
Medium/Low growth sectors
Oil & Gas 17 MRPL: LP, OINL: 18 IGL: 12, GAIL: 2, GUJS: -11, CAIR: -19,
(ex RMS) ONGC: 53 RIL: 0 PLNG: -22
Consumer 14 GCPL: 27, APNT: 23, PIDI: 13, UNSP: 12,
SKB: 22, DABUR: 19, RDCK: 10, HUVR: 9,
BRIT: 18, ITC: 17 CLGT: 8, NEST: 5,
MRCO: 2, HMN: 0
Heal thcare 14 IPCA: 113, LPC: 106, SANL: 28, CDH: 24, SUNP: 8 DIVI: -10, GNP: -16,
DRRD: 61, ALPM: 31 BIOS: 23, GLXO: 23 TRP: -16, CIPLA: -26,
RBXY: -73
Uti l i ti es 10 TPWR: 260, COAL: 12, PWGR: 11, RELI: -13,
PTCIN: 51 JPVL: 10, CESC: 10, JSW: -16
NHPC: 7, NTPC: 5
NBFC 10 IHFL: 28, RECL: 13, HDFC: 13, MMFS: -7, SHTF: -9,
POWF: 24 BAF: 8, LICHF: 4 IDFC: -22
Retai l 8 FRL: LP, JUBI: 9,
SHOP: 214 TTAN: 6
PAT degrowth sectors
Medi a -6 SUNTV: 10, DBCL: 1, HTML: -4, Z: -12,
JAGP: 1 PVRL: -19, DITV: Loss
Cement -7 ACEM: 16 SRCM: 7, UTCEM: -8,BCORP: -15,
ACC: 3 GRASIM: -47,
JPA: -70, ICEM: PL
Banks - PSU -10 SBIN: 2 BOB: -5, INBK: -6,
PNB: -11, CBK: -14,
OBC: -16, UNBK: -33,
BOI: -35
Capital Goods -16 SIEM: LP, VOLT: 82, TMX: 15, KKC: 8, LT: -5, CRG: -13,
ABB: 36 HAVL: 1 BHEL: -84
Real Estate -32 SHOBA: 13, MLIFE: -2, GPL: -13,
PHNX: 1 OBER: -14, PEPL: -17,
DLFU: -44, IBREL: -54,
JPIN: -85
Earnings momentum: Represents number of companies in each of the growth brackets; PL: Profit to Loss; LP: Loss to Profit
2
1
0
1
3
2
3
1 3
3 2
3
2
2
2
5
0
2
1
2
1
3
3
0
6
0
8
2
0
0
2
0 0
4 3
0
5
2
1
0
0
7
1
4
4
5
1
2
0
0
7
2
3 0 3 3
0
2
3
4
2
0
2
6

July 2014 21


Growth to rebound, led by domestic businesses
Expect 16-20% growth in FY15/16
Aggregate PAT of MOSL Universe (ex. RMs) to grow 16% in FY15; Expect further
strengthening in FY16 (20%) and FY17 (18%).
The rebound is largely driven by expectation of start of the investment cycle on the
back of a stable and reform oriented NDA government. Sales growth of 11% in FY13
and FY14 is expected to moderate to 9% in FY15 before bouncing back to 11% in FY16.
Sensex EPS to grow 14% in FY15 to INR1,524, almost same as estimated in 4QFY14
preview. Expect Sensex EPS to accelerate to 20% growth in FY16 (to INR1,836) and a
further to 19% in FY17 (to INR2,190).
Prominent upgrades in FY15 Sensex EPS are Tata Motors, Maruti, Sun Pharma, Sesa
Sterlite and Infosys. Top downgrades drivers include Tata Power, Cipla, HDFC, Reliance
Industries, SBI and Hindalco.

Corporate profit to GDP bottomed in FY14; expect 20% PAT growth in FY16
Corporate profitability as % of GDP has declined from a peak of 7.8% in FY08 to
4.3% in FY14 mainly due to slowdown in economic cycle, lack of policy reforms,
low level of investments, etc.
We expect corporate profitability as % of GDP to rebound to LPA of 5.4% by
FY18, implying a PAT CAGR of 20%.
Our bottom-up estimates for MOSL Universe also indicate growth pick-up, with
20% PAT growth as early as FY16. This could accelerate further in FY17-18, as
GDP growth picks up.

Corporate profit to GDP (%) to move to average in four years

MOSL Universe PAT to grow at 18% CAGR over FY14-17


3.0
4.7
5.4
6.3
7.3
7.8
5.6
6.5
6.2
4.9
4.6
4.3
4.4
4.6
4.9
5.4
F
Y
0
3
F
Y
0
4
F
Y
0
5
F
Y
0
6
F
Y
0
7
F
Y
0
8
F
Y
0
9
F
Y
1
0
F
Y
1
1
F
Y
1
2
F
Y
1
3
F
Y
1
4
F
Y
1
5
E
F
Y
1
6
E
F
Y
1
7
E
F
Y
1
8
E
Average
of 5.4%
Profit CAGR
FY14-18 of 20%
34
29
19
34
28
6
12
21
13
5
6
16
20 18
F
Y
0
4
F
Y
0
5
F
Y
0
6
F
Y
0
7
F
Y
0
8
F
Y
0
9
F
Y
1
0
F
Y
1
1
F
Y
1
2
F
Y
1
3
F
Y
1
4
F
Y
1
5
E
F
Y
1
6
E
F
Y
1
7
E
Long period avg of 19%
Bottoming
FY15-17 estimates

July 2014 22


Interest cost at peak; to moderate from FY15
PAT growth has slipped to single-digit in FY13-14, primarily due to slowdown in
economy and complete breakdown of investment machinery.
Interest cost has also played a very significant role in driving down earnings
growth. Interest as a percentage of sales rose from 1.6% in 2006 to 3.2% in
2014. Similarly, interest as % of EBITDA also doubled during this period. Going
forward, we expect this to moderate led by the following:
Interest rates are at their peak and we expect some moderation in 2HFY15.
Corporate India has begun the process of asset sales and deleveraging (via
capital raising).
Economic growth will help to accelerate sales growth; many idle capacities
will be put to use.

Interest cost as a percentage of sales has peaked

Interest cost as percentage of EBITDA rose steeply post FY11


Margins have bottomed in FY14; expect mean reversion in FY15-16
EBITDA margins have bottomed out.
Operating leverage should start picking up, as domestic volumes and business
conditions improve. Also, interest costs, which are at their peak, would
moderate and aid expansion in margins.

MOSL Universe EBITDA margin (%)

MOSL Universe PAT margin (%)


3.0
2.6
1.9
1.6
1.7
2.0
2.5
2.3
2.3
2.6
2.9
3.2
2
0
0
3
2
0
0
4
2
0
0
5
2
0
0
6
2
0
0
7
2
0
0
8
2
0
0
9
2
0
1
0
2
0
1
1
2
0
1
2
2
0
1
3
2
0
1
4
Interest/Sales (%)
Highest in
a decade
20
17
12
11
11
13
21
16
15
19
23
23
2
0
0
3
2
0
0
4
2
0
0
5
2
0
0
6
2
0
0
7
2
0
0
8
2
0
0
9
2
0
1
0
2
0
1
1
2
0
1
2
2
0
1
3
2
0
1
4
Interest cost/EBITDA (%)
Highest in a
decade
21.5
22.3
21.7
20.4
21.4
21.0
18.5
21.4
21.2
19.4
18.5
18.7
20.1
21.6
18
20
21
23
24
F
Y
0
3
F
Y
0
4
F
Y
0
5
F
Y
0
6
F
Y
0
7
F
Y
0
8
F
Y
0
9
F
Y
1
0
F
Y
1
1
F
Y
1
2
F
Y
1
3
F
Y
1
4
F
Y
1
5
E
F
Y
1
6
E
MOSL Universe EBIDTA Margin Incl. Fin (%)
Avg of
20.5%
11.2
12.7
12.4
11.8
12.7
12.4
10.6
11.9
11.6
10.3
9.6 9.3
10.2
11.2
8.5
9.8
11.0
12.3
13.5
F
Y
0
3
F
Y
0
4
F
Y
0
5
F
Y
0
6
F
Y
0
7
F
Y
0
8
F
Y
0
9
F
Y
1
0
F
Y
1
1
F
Y
1
2
F
Y
1
3
F
Y
1
4
F
Y
1
5
E
F
Y
1
6
E
MOSL Universe PAT Margin Incl. Fin (%)
Avg of
11.4%

July 2014 23


Expect significant increase in FY15 and FY16 PAT growth to 16% and 20%,
respectively
In FY15 and FY16, we expect the aggregate PAT growth to rebound to 16% and
20%, respectively, led by Auto, Cement, Financials, Metals and Telecom.
The rebound is driven by expectation of start of investment cycle on the back of
a stable and reform oriented NDA government.

Significant increase in FY15 and FY16 PAT growth

Sales growth to remain subdued


FY15/16 sector earnings: Some interesting observations
FINANCIALS: The sector that reported its maiden de-growth of -0.9% in FY14,
should see a rebound in PAT growth to 21% in FY15 and 24% in FY16. The
growth rebound would be on the back of rebound in credit volume and easing
credit cost pressure on PSU Banks.
TELECOM: Telecom is expected to continue its earnings growth trajectory on the
back of easing competitive pressure after four consecutive years of PAT decline
till FY13. We expect the sector to report 58% and 28% PAT growth in FY15 and
FY16, respectively.
AUTOS: The rebound in FY14 PAT (23% growth), is expected to continue in FY15,
with PAT growth of 19%. While Tata Motors, M&M and Maruti led FY14 PAT
growth; Bajaj Auto, Hero and Maruti are expected to contribute significantly to
FY15 PAT growth.
CEMENT: Cement is expected to de-grow in the first two quarters of FY15.
However, the growth is expected to rebound in 2HFY15 on the back of expected
recovery in the investment cycle. We expect the sector to grow 31% in FY15 and
61% in FY16.
HEALTHCARE and TECHNOLOGY: Both these sectors grew at a healthy growth
rate of 31-32% in FY14, largely on the back of weaker INR. We expect the
growth rate to ease in FY15 to 11-13% owing to a strengthened INR.
CAPITAL GOODS: Capital Goods' PAT de-grew significantly in FY14 (-26%), driven
by declining earnings of the heavyweights, BHEL and L&T. We expect earnings
growth to remain flat in FY15 and post a strong rebound of 40% in FY16.

34
28
6
12
21
13
5
6
16
20
18
F
Y
0
7
F
Y
0
8
F
Y
0
9
F
Y
1
0
F
Y
1
1
F
Y
1
2
F
Y
1
3
F
Y
1
4
F
Y
1
5
E
F
Y
1
6
E
F
Y
1
7
E
MOSL Ex RMs PAT growth (%)
28
36
19
8
23
25
11 11
9
11
10
F
Y
0
7
F
Y
0
8
F
Y
0
9
F
Y
1
0
F
Y
1
1
F
Y
1
2
F
Y
1
3
F
Y
1
4
F
Y
1
5
E
F
Y
1
6
E
F
Y
1
7
E
MOSL Ex RMs Sales growth (%)

July 2014 24


Financials, Autos and Oil (ex RMs) contribute >50% to the
FY15-17 PAT delta


Sector-wise PAT CAGR FY15-17


FY15-17 Estimates: Expect 18% PAT CAGR over FY14-17
Sector
Sales
(INR b)

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

EBIDTA
Margin (%)

PAT
(INR b)

PAT Gr. /
CAGR (%)

PAT delta
Sh. (%)
(No of Companies) FY15E

(FY14-17) (FY14-17)

FY15E FY16E FY17E

FY15E

FY15E FY16E FY17E (FY14-17)

FY14-17
High PAT CAGR (>20%) 14,463

15 19

31 32 33

2,022

21 28 26 25

67
Cement (13) 1,278

16 33

17 21 24

93

31 61 51 47

6
Real Estate (9) 249

15 23

33 37 39

29

19 45 47 37

2
Capital Goods (9) 1,547

13 19

10 11 12

101

1 40 33 23

4
Media (8) 188

13 18

30 31 32

27

16 32 29 26

1
Telecom (4) 1,581

9 13

34 36 36

111

58 28 28 37

5
Auto (11) 4,968

15 20

15 15 16

342

19 32 23 24

11
Others (13) 505

17 21

17 17 18

45

35 27 24 29

2
Financials (32) 2,902

18 19

78 78 80

1,097

21 24 23 23

32
Private Banks (10) 750

20 21

87 88 88

392

18 21 23 21

11
PSU Banks (12) 1,707

18 19

68 69 71

428

26 30 27 28

16
NBFC (10) 445

17 17

97 97 97

276

17 17 17 17

6
Retail (3) 179

19 23

10 10 10

11

19 24 23 22

0
Healthcare (14) 1,066

13 16

26 26 26

167

12 23 18 18

4
Medium PAT CAGR
(10-20%)
15,033

6 12

20 22 23

1,926

10 13 11 11

27
Consumer (14) 1,521

15 16

21 21 22

227

16 17 16 16

5
Utilities (10) 2,314

9 12

30 31 32

405

9 13 13 12

6
Oil & Gas (13) 17,726

0 11

9 10 11

861

4 13 9 9

10
Excl. RMs (10) 8,495

2 12

15 17 19

748

7 12 9 9

9
Technology (10) 2,703

11 10

26 26 25

546

11 13 9 11

8
Low PAT CAGR
(up to 10%)
4,832

6 11

21 21 21

381

27 8 6 13

6
Metals (9) 4,832

6 11

21 21 21

381

27 8 6 13

6
MOSL Excl. RMs (169) 34,327

10 16

25 26 27

4,329

16 20 18 18

100
MOSL (172) 43,558

7 15

20 22 23

4,441

15 20 18 18

NA
Sensex (30) 11,580

9 16

22 24 25

1,352

15 20 19 18

NA
Nifty (50) 13,260

9 16

22 24 25

1,553

14 21 19 18

NA

16
12
11
9
7 7
6
6
5
4 4
4
3
2
1
0
B
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PAT delta (FY15-17): % Share
56
46
37
31
29 28 27
23
22
21
19
17 16
13
11 10
7
C
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PAT CAGR FY15-17 (%)

July 2014 25


Domestic plays to outperform global plays in terms of PAT growth
PAT (INR b) PAT Contribution (%) PAT CAGR (%) P/E (x)
FY03 FY08 FY14 FY17E FY03 FY08 FY14 FY17E FY03-08 FY08-14 FY14-17 FY16 10 Yr Avg
Domestic Plays 318 1,088 1,946 3,562 55 53 52 58 27.9 10.2 22.3
Financials 157 366 908 1,676 27 18 24 27 18.5 16.3 22.7 1.8 1.9
Private Banks 26 91 332 587 4 4 9 10 29.0 24.0 20.9 2.4 2.3
PSU Banks 102 217 339 709 18 11 9 12 16.2 7.7 27.9 0.9 1.1
NBFC 29 58 237 379 5 3 6 6 14.8 26.3 17.0 2.2 2.2
Domestic Consumer 62 271 406 763 11 13 11 12 34.3 7.0 23.4
Auto Ex Tata Motors 18 64 140 275 3 3 4 5 28.1 14.1 25.2 11.1 11.9
Telecom -4 133 70 182 -1 6 2 3 LP -10.1 37.3 18.6 22.6
Consumer 48 74 196 306 8 4 5 5 9.3 17.5 16.1 26.6 24.5
Domestic Non-Consumer 99 451 632 1,123 17 22 17 18 35.3 5.8 21.1
Utilities 72 175 371 515 12 9 10 8 19.4 13.4 11.5 12.5 14.6
Capital Goods 12 71 100 188 2 3 3 3 41.8 5.8 23.3 24.9 20.7
Cement 7 97 71 226 1 5 2 4 68.8 -5.1 46.8 16.2 13.7
Real Estate 1 90 24 62 0 4 1 1 142.6 -19.7 36.5 19.6 21.5
Global Plays 260 965 1,783 2,546 45 47 48 42 30.0 10.8 12.6
Cyclical 200 758 1,145 1,627 35 37 31 27 30.6 7.1 12.4
Oil & Gas ex RMs 170 434 698 911 29 21 19 15 20.6 8.2 9.3 10.7 12.0
Metals 27 303 300 437 5 15 8 7 62.1 -0.2 13.3 10.6 9.5
Tata Motors 3 21 147 279 0 1 4 5 49.1 38.9 23.8 6.5 10.9
Non-Cyclical 61 207 638 919 10 10 17 15 27.8 20.6 12.9
Technology 39 158 490 676 7 8 13 11 32.3 20.8 11.3 15.8 17.1
Healthcare 22 49 148 243 4 2 4 4 17.9 20.2 18.0 20.8 21.9
MOSL Universe ex RMs 579 2,053 3,730 6,108 100 100 100 100 28.8 10.5 17.9 13.5 14.9

EBITDA margins across sectors to expand over FY14-16

FY14 EBITDA margin (%)

FY03-08 EBITDA margin change (bp)




33 32
29
28
26
24
21
19 19
16
14 14
10
9
T
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FY14 Margin (%)
2,291
1,896
1,426
323
233 194 164
77 69
-167-175
-323-351
-586
T
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FY03-08 Chg bps
458
273
211
147 145 85 30
-231-264
-424
-831
-972
-1,510
-2,445
M
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FY08-14 Chg bps
479
431
304
257
240
222
197
132 127
99 91 86
45
-40
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FY14-16 Chg bps

July 2014 26


RoEs for domestic cyclicals to rise in FY17; Cement and PSU Banks to lead the rise in RoE

RoE (%)

FY03 FY08 FY14 FY17E
Change from
FY14 to FY17
Cement 8.2 29.7 8.0 18.1 10.1
Banks PSU 20.1 18.5 10.2 16.0 5.8
Telecom -2.5 21.5 5.8 10.8 5.1
Real Estate 12.4 30.7 4.3 9.3 5.0
Capital Goods 11.1 25.0 11.8 16.4 4.6
Media 24.8 10.9 22.1 26.5 4.4
Consumer 38.5 35.3 35.3 39.4 4.0
Banks Private 18.9 14.6 17.3 20.0 2.7
Auto 19.1 25.9 21.4 22.8 1.3
Metals 14.5 25.7 9.5 10.6 1.1
Utilities 10.5 13.7 15.0 16.1 1.1
NBFC 21.4 17.7 20.1 21.1 1.0
Oil Excl. RMs 21.9 19.7 14.2 13.6 -0.6
Healthcare 26.9 18.9 21.8 20.4 -1.4
Technology 36.0 31.4 27.8 22.8 -4.9
MOSL Excl. RMs 17.8 21.1 14.8 17.0 2.2
Sensex 20.4 22.8 15.9 17.9 2.0

Sector Upgrade/Downgrade since January 2014
Current Est PAT (INR b) Est gr. in Jan YoY (%) Est gr. in July YoY (%)

% Upgrade / Downgrade
Sector FY14 FY15E FY16E FY15E FY16E FY15E FY16E FY15E FY16E
Banks-PSU 339 428 558 18.1 13.8 26.4 30.2 9.2 24.9
Cement 71 93 149 37.6 26.3 30.5 60.6 -9.1 15.6
Automobiles 279 333 439 15.6 21.1 19.1 32.0 1.5 10.8
Banks-Private 332 392 476 15.5 18.6 18.3 21.3 4.4 6.7
Metals 300 381 412 12.4 8.4 27.0 8.0 4.2 3.9
Capital Goods 98 98 137 1.2 33.1 0.1 40.2 -2.7 2.6
Healthcare 146 164 202 18.1 19.1 12.2 23.3 -1.7 1.8
Oil Ex RMs 698 748 836 12.2 7.1 7.2 11.8 -2.7 1.5
NBFC 221 257 299 13.5 16.3 16.1 16.5 1.2 1.4
Consumer 192 222 259 18.5 16.3 15.9 16.5 -1.9 -1.7
Technology 490 546 618 14.6 14.1 11.4 13.3 -1.1 -1.8
Retail 9 11 14 18.8 23.5 18.7 23.6 -2.8 -2.7
Utilities 371 405 457 11.1 10.9 9.1 12.9 -7.3 -5.7
Media 23 27 35 24.9 30.9 16.3 32.0 -11.2 -10.5
Real Estate 24 29 42 28.8 27.9 19.1 45.3 -24.9 -14.7
Telecom 70 111 142 65.3 29.6 58.2 27.7 -17.6 -18.8
MOSL Ex RMs 3,687 4,272 5,108 15.7 14.9 15.9 19.6 -0.9 3.2

FY14-17 estimates: Sensex EPS CAGR at 18%
Our bottom-up estimates of earnings of Sensex constituents indicate Sensex EPS
CAGR of 18% during FY14-17. This is significantly higher than 8% CAGR
witnessed during FY08-14.
A large part of PAT growth in FY15 would be driven by rebound in earnings of
companies that have delivered negative growth in FY14, namely SBI (PAT down

July 2014 27


21%), L&T (PAT down 19%), Coal India (PAT down 9%), and Tata Power (PAT
down 37%).
Sensex EPS is likely to increase to 1,524 (up 14%) in FY15 and 1,836 (up 20%) in
FY16, from 1,340 in FY14. Key contributors to growth in FY15 Sensex EPS would
be SBI (25), HDFC Bank (19), ICICI Bank (17), Tata Steel (14), Tata Motors (12),
ONGC (11) and TCS (11).

Sensex performance: Expect FY14-17 PAT CAGR at 18%

Sales (INR b) Sales EBIDTA Margin (%) EBITDA PAT (INR b) PAT YoY (%) PAT
Contbn
to
Company
FY15 FY16 FY17 CAGR % FY15 FY16 FY17 CAGR % FY15 FY16 FY17 FY15 FY16 FY17 CAGR% Delta %
High PAT Gr. * 7,746 8,923 10,244 13 26 27 28 19 813 1,043 1,319 29 28 27 28 50
Tata Power 92 97 101 5 29 29 29 5 16 17 21 171 12 22 54 1
Bharti Airtel 931 1,019 1,098 9 33 35 35 11 53 65 82 89 24 26 44 4
State Bank 779 934 1,128 19 63 66 70 23 194 257 339 37 33 32 34 14
Maruti Suzuki 527 630 740 19 13 14 15 27 40 52 67 40 30 29 33 3
Larsen & Toubro 617 765 941 18 11 11 11 17 45 61 82 12 37 35 27 3
HDFC Bank 226 276 349 24 81 82 82 26 107 134 168 26 26 25 26 6
Tata Steel 1,450 1,455 1,538 1 13 14 14 10 53 62 67 53 19 8 25 2
Hero MotoCorp 279 322 371 14 13 14 14 27 29 35 41 37 23 15 24 1
Tata Motors 2,656 3,198 3,699 17 16 17 17 19 164 220 279 11 34 27 24 10
ICICI Bank 191 227 279 19 101 101 102 20 114 139 172 17 21 24 21 5
Medium PAT Gr.** 12,398 13,238 13,743 6 21 22 24 13 1,605 1,859 2,122 9 16 14 13 47
Cipla 116 134 154 15 20 22 23 18 14 19 23 -1 35 22 17 1
Axis Bank 129 151 183 15 94 96 96 15 68 82 100 10 20 22 17 3
Hindalco 963 1,097 1,146 9 11 11 12 18 22 27 41 -13 19 53 17 1
ITC 382 438 499 15 37 37 37 15 101 117 134 16 16 15 16 3
HDFC 82 98 116 18 111 110 109 19 60 71 84 10 19 18 16 2
M&M 798 929 801 3 13 14 16 8 46 61 66 6 32 8 15 2
Sun Pharma 178 202 227 12 44 42 40 8 55 65 73 14 17 13 15 2
Bajaj Auto 226 259 293 13 20 20 20 14 37 42 48 14 15 14 14 1
Reliance Inds. 3,885 3,780 3,685 -2 8 10 13 17 231 255 323 5 10 27 14 7
TCS 957 1,099 1,230 15 30 29 28 11 219 251 276 15 15 10 13 6
ONGC 1,905 2,040 2,088 6 34 38 38 11 307 364 382 16 18 5 13 8
Dr Reddys Labs 145 163 184 12 23 24 24 12 22 25 29 2 15 16 11 1
Wipro 476 519 572 10 23 23 24 12 86 97 105 10 13 8 10 2
BHEL 332 366 407 1 11 14 15 12 25 37 48 -32 52 30 10 1
Hind. Unilever 313 354 407 13 16 17 16 14 39 43 48 8 11 11 10 1
Coal India 729 779 838 7 26 27 28 14 175 191 210 9 9 10 10 4
NTPC 781 831 913 8 22 24 26 10 98 113 130 -2 15 16 10 2
Low PAT Gr. (<10%) 1,905 2,150 2,311 9 26 25 24 6 220 243 246 10 10 1 7 3
Infosys 527 581 629 8 27 28 27 8 117 130 139 8 11 7 9 2
Sesa Sterlite 778 879 902 8 36 34 32 4 64 71 60 26 11 -15 6 1
GAIL 601 690 781 11 11 12 11 10 39 42 46 -4 7 11 5 0
Sensex (PAT free float) 22,049 24,311 26,298 9 23 24 26 15 1,352 1,629 1,943 15 20 19 18 100
* 20%+; ** 10-20% Source: Company, MOSL

July 2014 28


Sensex EPS: Expect rebound in FY14-17, with 18% CAGR versus 8% CAGR witnessed during FY08-14


FY15 Sensex EPS estimate remains same, 1.4% upgrade in FY16
Sensex EPS for FY15 is largely the same at 1,524 (v/s 1,525 in 4QFY14 preview).
Individually, top upgrade drivers are Tata Steel, SBI, Maruti, Tata Motors and
BHEL. Top downgrade drivers include Tata Power, Cipla, Hindalco, L&T, Sesa
Sterlite and Dr Reddys.
Sensex EPS for FY16 is upgraded by 1.4% to 1,836 from 1,811 in 4QFY14
preview. Top upgrade drivers are SBI, Hindalco, Tata Steel, Maruti and ICICI
Bank. Top downgrade drivers include Tata Power, Infosys, Dr Reddys, Reliance
and Wipro.

FY15E EPS upgrade over last 9 months (INR)

FY16E EPS in an upgrade mode (INR)


81
129
181
250 266
291 278 280
216 236
272
348
450
523
718
833 820
834
1,024
1,123
1,183
1,340
1,524
1,836
2,190
F
Y
9
3
F
Y
9
4
F
Y
9
5
F
Y
9
6
F
Y
9
7
F
Y
9
8
F
Y
9
9
F
Y
0
0
F
Y
0
1
F
Y
0
2
F
Y
0
3
F
Y
0
4
F
Y
0
5
F
Y
0
6
F
Y
0
7
F
Y
0
8
F
Y
0
9
F
Y
1
0
F
Y
1
1
F
Y
1
2
F
Y
1
3
F
Y
1
4
F
Y
1
5
E
F
Y
1
6
E
F
Y
1
7
E
FY93-96:
45% CAGR
FY96-03: 1% CAGR
FY03-08:
25% CAGR
FY08-14:
8.2% CAGR
FY14-17E:
17.8% CAGR
FY93-FY14: 14% CAGR
1,573
1,586
1,536
1,476
1,518
1,525
1,525
1,524
13.2
15.9 15.8
14.5
15.3
14.6
13.8 13.8
Dec 12 Mar 13 June 13 Sep 13 Dec 13 Mar 14 May 14 June 14
FY15 EPS (INR)
1,766
1,793
1,811
1,836
16.3
17.5
18.8
20.5
Dec 13 Mar 14 May 14 June 14
FY16 EPS (INR)

July 2014 29


Sensex companies FY15E EPS Upgrade/Downgrade in last 3 months (%)


Sensex companies FY16E EPS Upgrade/Downgrade in last 3 months (%)


22
19
9
7
4
3 3
2 2 1
1 0 0 0
-1 -1 -1 -1 -2 -2
-3
-3
-4
-7
-10
-12
-13 -13 -15
-20
T
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P
o
w
e
r
FY15E EPS Upgrade/Downgrade (%)
32
14 14
11
9
7 7
5
4
2 2 2
1 1
0 0
-1 -1 -1 -1 -2 -2
-3 -3
-4 -4 -4
-8 -8
-12
S
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FY16E EPS Upgrade/Downgrade (%)

July 2014 30


Worst of macro is behind; green shoots are visible
Expect GDP to grow at 6.5% in FY16
The Indian economy has faced turbulent times in the last five years with key economic
indicators taking a turn for worse.
Thus we have seen stagflationary tendency with low growth coupled with high
inflation. The twin deficits had breached their sustainable limits. The private capex
cycle collapsed with negative consequence on credit offtake and its quality.
We may not be out of the woods as yet but the worst seems behind us.
Growth has shown a marginal uptick in 4QFY14. More importantly the most
cyclical part of growth, viz., industry have shown first signs of growth during Apr-
May, registering a growth rate of 4%.
Inflation has subsided by the latest count, albeit helped by a favorable base
effect.
In a short period of time, India has been able to correct its external imbalance and
impart stability to its currency.
Successive governments have also shown firm commitment to strictly adhere to
the fiscal consolidation path despite challenges of meeting revenue targets in a
low growth environment.
Finally project clearance related governance has improved raising hopes for a
pick-up in private capex.
Thus, we expect GDP growth to revive to 5.5% in FY15 and further to 6.5% during FY16
from 4.7% in FY14. The period should also see a moderation in inflation with
government taking steps to curb food inflation. Interest rates too have peaked out and
its decline would act as a booster to the economy.

GDP growth has bottomed; potential to rise ~100bps each year
GDP growth has bottomed out, with FY14 seeing marginal recovery, but at 4.7%,
well below its potential.
However, growth is expected to recover FY15 onwards, particularly driven by
industrial revival.
Faster project clearances, streamlined environmental processes, addressing
inter-sectoral bottlenecks and emphasis on infrastructure are the catalysts.

India's current growth rate is well below its potential growth

However, GDP growth has bottomed out


5.0
6.2
7.5
4.7
0
3
6
9
12
F
Y
8
5
F
Y
8
7
F
Y
8
9
F
Y
9
1
F
Y
9
3
F
Y
9
5
F
Y
9
7
F
Y
9
9
F
Y
0
1
F
Y
0
3
F
Y
0
5
F
Y
0
7
F
Y
0
9
F
Y
1
1
F
Y
1
3
Avg 10-yr gr. (%) GDP gr. (%)
4
.
3
5
.
5
4
.
0
8
.
1
7
.
0
9
.
5
9
.
6
9
.
3
6
.
7
8
.
6
8
.
9
6
.
7
4
.
54
.
7
5
.
5
6
.
57
.
2
F
Y
0
1
F
Y
0
2
F
Y
0
3
F
Y
0
4
F
Y
0
5
F
Y
0
6
F
Y
0
7
F
Y
0
8
F
Y
0
9
F
Y
1
0
F
Y
1
1
F
Y
1
2
F
Y
1
3
F
Y
1
4
F
Y
1
5
E
F
Y
1
6
E
F
Y
1
7
E
GDP gr. (%)
ECONOMY

July 2014 31


Deeper downturn in industry, but on the recovery path now


Twin deficit concerns behind us; will improve domestic liquidity
India is well past its twin deficit problem. Fiscal consolidation has received
priority from new government and is set to achieve 3% target by FY17.
A sharp correction in CAD has been achieved in a short period through curb in
gold imports, stable oil prices and some pick up in exports.
These measures restored the confidence in the economy. Thus, capital flows
resumed and INR stabilized.

Fiscal deficit has corrected sharply and on course for more

Sharp improvement in CAD in a short period of time

Source: RBI, MOSL

Currency has stabilised with reduced volatility


Inflation has peaked out; expect rate cuts in 4QFY15
CPI inflation as well as the food component within it has come down to single
digit levels in recent months.
5
.
0
2
.
7
5
.
87
.
0
1
1
.
7
7
.
9
1
2
.
9
1
5
.
5
2
.
5
5
.
3
8
.
2
2
.
9
1
.
1
-
0
.
1
5
.
26
.
67
.
3
F
Y
0
1
F
Y
0
2
F
Y
0
3
F
Y
0
4
F
Y
0
5
F
Y
0
6
F
Y
0
7
F
Y
0
8
F
Y
0
9
F
Y
1
0
F
Y
1
1
F
Y
1
2
F
Y
1
3
F
Y
1
4
F
Y
1
5
E
F
Y
1
6
E
F
Y
1
7
E
IIP growth (%) Apr-May 2014 IIP
growth at 4%
5.7
6.2
5.9
4.5
3.9
4.0
3.3
2.5
6.0
6.5
4.9
5.9
4.9
4.6
4.1
3.6
3.0
F
Y
0
1
F
Y
0
2
F
Y
0
3
F
Y
0
4
F
Y
0
5
F
Y
0
6
F
Y
0
7
F
Y
0
8
F
Y
0
9
F
Y
1
0
F
Y
1
1
F
Y
1
2
F
Y
1
3
F
Y
1
4
F
Y
1
5
E
F
Y
1
6
E
F
Y
1
7
E
Fiscal deficit
-0.6
0.7
1.2
2.3
-0.3
-1.2
-1.0
-1.3
-2.3
-2.8
-2.6
-4.2-4.7
-1.7
-2.1
-2.3
-2.5
F
Y
0
1
F
Y
0
2
F
Y
0
3
F
Y
0
4
F
Y
0
5
F
Y
0
6
F
Y
0
7
F
Y
0
8
F
Y
0
9
F
Y
1
0
F
Y
1
1
F
Y
1
2
F
Y
1
3
F
Y
1
4
F
Y
1
5
E
F
Y
1
6
E
F
Y
1
7
E
Current A/c deficit (% to GDP)
3.3
15.1
12.4
8.2
2
7
12
17
F
Y
0
3
F
Y
0
4
F
Y
0
5
F
Y
0
6
F
Y
0
7
F
Y
0
8
F
Y
0
9
F
Y
1
0
F
Y
1
1
F
Y
1
2
F
Y
1
3
F
Y
1
4
J
u
n
-
1
4
USDINR 6 Month Implied Volatility

July 2014 32


Government has taken further measures to curb food inflation, including low
MSP hikes, export curb, offloading of food stock and actions on hoarding.
Thus, real interest rates (CPI adjusted), that have turned marginally positive
after a gap of six years, may widen, giving scope for rate cut.

CPI inflation including food has eased from their peak

Recent months have shown further easing in CPI inflation


Real rates have turned positive even taking CPI as reference

Source: RBI, Government, MOSL

Private credit and investment cycle at a low ebb
Bank credit growth has nearly halved from the levels during previous upturn.
Sharp drop in credit intensive industrial sectors, particularly Capital Goods, has
lowered credit demand.
Saving and investment ratios are at levels comparable to the start of the
previous upturn. Private investment was particularly affected.

Credit growth poised for a moderate recovery

Source: RBI, Government, MOSL
Private investments dropped to decadal lows

12.4
7.7
2
5
8
11
14
F
Y
0
1
F
Y
0
2
F
Y
0
3
F
Y
0
4
F
Y
0
5
F
Y
0
6
F
Y
0
7
F
Y
0
8
F
Y
0
9
F
Y
1
0
F
Y
1
1
F
Y
1
2
F
Y
1
3
F
Y
1
4
F
Y
1
5
E
CPI Food Inflation (%) CPI Inflation (%)
14.5
9.3
0
4
8
12
16
J
a
n
-
1
2
M
a
r
-
1
2
M
a
y
-
1
2
J
u
l
-
1
2
S
e
p
-
1
2
N
o
v
-
1
2
J
a
n
-
1
3
M
a
r
-
1
3
M
a
y
-
1
3
J
u
l
-
1
3
S
e
p
-
1
3
N
o
v
-
1
3
J
a
n
-
1
4
M
a
r
-
1
4
M
a
y
-
1
4
CPI Food Inflation CPI Inflation
5.4
3.7
1.8
1.4
1.9
2.1
1.6
2.4
-0.9
-5.6
-1.8
-1.6
-2.0
-0.9
0.3
F
Y
0
1
F
Y
0
2
F
Y
0
3
F
Y
0
4
F
Y
0
5
F
Y
0
6
F
Y
0
7
F
Y
0
8
F
Y
0
9
F
Y
1
0
F
Y
1
1
F
Y
1
2
F
Y
1
3
F
Y
1
4
F
Y
1
5
E
Real interest rate (term deposits - CPI)
-14
0
14
28
42
F
Y
0
1
F
Y
0
2
F
Y
0
3
F
Y
0
4
F
Y
0
5
F
Y
0
6
F
Y
0
7
F
Y
0
8
F
Y
0
9
F
Y
1
0
F
Y
1
1
F
Y
1
2
F
Y
1
3
F
Y
1
4
F
Y
1
5
E
F
Y
1
6
E
IIP - Capital goods Bank credit
CAGR 26%
20 20
23
25
32
40
41
46
32
33
35
28
26
F
Y
0
1
F
Y
0
2
F
Y
0
3
F
Y
0
4
F
Y
0
5
F
Y
0
6
F
Y
0
7
F
Y
0
8
F
Y
0
9
F
Y
1
0
F
Y
1
1
F
Y
1
2
F
Y
1
3
Pvt Investment as % of total investment

July 2014 33


Savings growth has dipped to levels last seen in FY04


India is firmly on the fiscal consolidation path
During the last cycle (FY03 to FY08) sharp growth in revenues helped in fiscal
correction. In the current cycle, expenditures had to be cut to meet target.
Fiscal headroom provided space for increased subsidy last time, though it was
largely within 2% of GDP. This time, it is being brought down to that level.
India is clearly on a firm fiscal path, despite challenges on revenue front.
Moreover, fiscal goals have remained despite change in government.

Higher tax collection helped fiscal correction during last cycle

Subsidies <2% during last cycle, coming back to that level
again


India's fiscal glide path remained same despite change of government


24
25
26
29
32
33
35
37
32
34 34
31
30
F
Y
0
1
F
Y
0
2
F
Y
0
3
F
Y
0
4
F
Y
0
5
F
Y
0
6
F
Y
0
7
F
Y
0
8
F
Y
0
9
F
Y
1
0
F
Y
1
1
F
Y
1
2
F
Y
1
3
Savings rate (%)
5.7
4.3 3.9 4.0
3.3 2.5
6.0
6.5
4.8 5.7 4.8 4.6
-10
0
10
20
30
F
Y
0
3
F
Y
0
4
F
Y
0
5
F
Y
0
6
F
Y
0
7
F
Y
0
8
F
Y
0
9
F
Y
1
0
F
Y
1
1
F
Y
1
2
F
Y
1
3
F
Y
1
4
Tax growth Fiscal deficit to GDP
CAGR: 23% CAGR: 11% 1.5
3.9
2.3
2.0
1.0
1.8
2.5
3.3
4.0
F
Y
0
1
F
Y
0
2
F
Y
0
3
F
Y
0
4
F
Y
0
5
F
Y
0
6
F
Y
0
7
F
Y
0
8
F
Y
0
9
F
Y
1
0
F
Y
1
1
F
Y
1
2
F
Y
1
3
F
Y
1
4
R
E
F
Y
1
5
B
E
Subsidy (as % of GDP)
5
.
5

6
.
0

5
.
7

4
.
3

3
.
9

4
.
0

3
.
3

2
.
5

6
.
0

6
.
5

4
.
8

5
.
7

4
.
8

4
.
6

4
.
1

3
.
6

3
.
0

4.3
5.5
4.0
8.1
7.0
9.5
9.6
9.3
6.7
8.6
8.9
6.7
4.5
4.7
5.5
6.5
7.2
F
Y
0
1
F
Y
0
2
F
Y
0
3
F
Y
0
4
F
Y
0
5
F
Y
0
6
F
Y
0
7
F
Y
0
8
F
Y
0
9
F
Y
1
0
F
Y
1
1
F
Y
1
2
F
Y
1
3
F
Y
1
4
F
Y
1
5
F
Y
1
6
F
Y
1
7
Fiscal deficit (as % of GDP) GDP Growth (YoY%)

July 2014 34


Historic mandate to NDA put to test
Various actions including Budget see Governments earnestness for change
The BJP led NDA has won their biggest ever mandate in an election marked with many
firsts.
Government has taken various measures to live upto the expectations despite
challenging economic environment and limited fiscal space. The directions of policy
measures by the new government were aimed at reinvigorating growth by focusing on
infrastructure, addressing inter-sectoral bottlenecks and faster project clearances.
Simultaneously, the government has sought to bring down inflation, particularly food
inflation through a variety of administrative and policy measure including by effecting
the lowest MSP hikes in a decade.
At the same time when it is trying to pump up growth, it has avoided breaching fiscal
and external prudent limits. This left headroom only for limited maneuverability for
the Government in its maiden budget. It has used the space to effect a consumption
and investment boost financed by higher disinvestment and sale of telecom spectrum.
While being constrained by the limited fiscal space and inadequate preparation time,
Government nonetheless made a beginning towards the reform and development
agenda set in its Manifesto.
Moreover, government has sought to enhance its own capacity to deliver by rejiging
the bureaucracy and improving governance standards.
The combination of near term measures and visionary steps are likely to hold India in
good stead for a steady recovery of the economy.

Strongest mandate in three decades; BJP alone crosses 272
BJP won its highest ever tally of 282 seats in 2014 general elections and the NDA
won 336 seats, the highest by any party since 1985.
It is only the second time that a non-Congress party has assumed majority in
Lower House.
Every two in three candidates won with a very convincing 10% or above margin
of votes versus one in three in 2009.

First single-largest party in coalition era (since 1984)

Source: Election Commission, MOSL

GOVERNMENT

July 2014 35


Highest ever seats for NDA


BJP vote share exceeds Congress
We had an inkling of change from the sharp increase in the voter turnout ratio,
which in the past has been associated with a regime shift.
At 66%, this was the highest voter participation ever.
For the first time, the vote share of BJP exceeded that of Congress.

Higher voter turnout led to a decisive mandate in favour of NDA (%)


No direct link between vote share and seat share
for many parties (%)


BJP exceeds Congress vote share for the first time


The new government addresses both the urgent and the important
Within a short period of time the government has cleared many big ticket
projects some of which were pending for a long time. Most of these relate to
bottlenecks in key infrastructure sector.
45
45
55
61
55
60
57
64
62
57
58
62
60
58 58
66
1
9
5
1
1
9
5
7
1
9
6
2
1
9
6
7
1
9
7
1
1
9
7
7
1
9
8
0
1
9
8
4
1
9
8
9
1
9
9
1
1
9
9
6
1
9
9
8
1
9
9
9
2
0
0
4
2
0
0
9
2
0
1
4
Sympathy votes
Non-Congress led alliance
Highest-ever turnout
31.0
19.3
4.1
3.8
3.4
3.3
3.2
3.0
2.5
2.5
2.0
1.9
1.7
1.1
17.2
BJP
Congress
BSP
AITC
SP
CPM
AIADMK
Ind.
TDP
YSRC
AAP
Shiv Sena
DMK
NOTA
Others
19
31
0
10
20
30
40
50
1
9
5
1
1
9
5
7
1
9
6
2
1
9
6
7
1
9
7
1
1
9
7
7
1
9
8
0
1
9
8
4
1
9
8
9
1
9
9
1
1
9
9
6
1
9
9
8
1
9
9
9
2
0
0
4
2
0
0
9
2
0
1
4
Congress vote share (%) BJP vote share (%)

July 2014 36


At the same time, it sought to put a lid to food inflation by effecting one of the
lowest MSP hike in a decade complimented with other measures such as export
restriction, release of foodstock and actions against hoarders.
The government didnt shy away from taking tough decision whenever
warranted. A case in the point was the Rail fare hike which was necessitated
even to meet the FY15 Rail Budget targets.

Modi Sarkar in numbers


Key big-bang announcements by the Modi government
Particulars Impacted sector Positive
INR125b worth of transmission projects approved Power Positive
Approved road projects worth about INR400b Infrastructure Positive
Fast track clearances for 3 rail lines for coal linkage Power Positive
Railway fares hiked; higher fares for passenger with Fuel adjustment charge Economy Positive
7 big-ticket projects of INR210b cleared Infrastructure Positive
Gas price deferred for 3 months to consult with all stakeholders Energy Negative
Firm resolve to GST implementation Economy Positive
FDI in insurance and defence raised from 26% to 49% Insurance Positive
24 Airports identified for development as Domestic Air Cargo Terminals Infrastructure Positive
PSU Bank consolidation and greater autonomy Financials Positive
Transfer of units of debt mutual funds to be taxed at 20% (vs 10% earlier) Economy Negative
Conducive tax regime for REITS and Infrastructure Investment Trusts Infrastructure Positive
New scheme targeting feeder separate for DISCOMs Infrastructure Positive
Online environmental clearances Infrastructure Positive
Large number of infrastructure projects announced (16 ports, 8,500kms of road project
completion, developing airports in Tier 2 and 3 cities, developing 100 smat cities)
Economy Positive
Construction under EPC vs. PPP earlier Infrastructure Positive

Finance Minister gives a big push to consumption
FM has provided various reliefs on the personal income tax front.
This adds to INR222b relief to the taxpayers.
The amount constitutes a good 65% of the total budget for MGNREGA. Thus, it
can provide a boost to urban consumption of nearly equivalent amount of what
MRNREGA has done for rural India.

Largest solar power
project of
1.5GW
7
big ticket
projects of
value
INR210b
worth road
projects approved
INR400b

worth transmission
projects approved
INR125b
rail linkage on fast
track
3
Asian countries
present in swearing in
8

for passengers
14.2%
Rail fares
hiked by
6.5%
for freight
files in Home
Ministry weed out
0.15m
MSP hikes
restricted
to only
1.6%

July 2014 37


Much awaited relief in personal taxation
Earlier income slab Proposed income slab Tax rate
0 to 200,000 0 to 250,000 Nil
200,001 to 500,000 250,001 to 500,000 10%
500,001 to 1,000,000 500,001 to 1,000,000 20%
Above 1,000,000 Above 1,000,000 30%

Relief to taxpayer through other avenues
Annual ceiling under Section 80-IC increased to INR150,000 from INR100,000.
Deduction in interest paid on housing loan enhanced to INR200,000 from
INR150,000.
Employees of private sector eligible for deduction of notified pension scheme
upto INR100,000.
The tax relief can usher consumption boom in urban areas similar to what
MGNREGA has done for rural India.

Extracting growth within a binding fiscal constraint
In his maiden budget, Arun Jaitely has sought to garner additional revenue by
way of higher disinvestment and spectrum auction. He plans to spend this on
higher transfers to states (possibly with an eye to fasten implementation of GST,
as also providing a boost to consumption through relief in personal taxes.
The Economic Survey highlighted a few reforms that are likely to shape
governments approach to the direction of the economy. Important among
them are simplifying the tax structure (with abolition of surcharge, dividend
distribution tax, transaction tax, etc.), reduction in corporate taxes to other
emerging market levels, freer movement of agricultural commodities, an
improvised PPP framework and finally a more permissive economic regime.
A significant tightening of bureaucratic work culture with a strict code has been
enforced to streamline delivery. Institutional realignment and oversight of
Ministers too are part of this process.

Arun Jaitley focused on higher transfer to states and defence and financed by higher taxes, disinvestment and spectrum sale


5,245
(4.6% of
GDP)
5,312
(4.1% of
GDP)
817
640
469
253
51
450 573
510
426
376
276
268
185
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(
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B
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)
INR b
Items that expanded
fiscal deficit Items that lowered fiscal
deficit
FY15 budget allocation (INR b)

340
222
MGNREGA Income Tax
benefits
FY15 Budget allocation (INRb)

July 2014 38


Sharp jump in plan assistance to states indicative of GST preparation


Some unmistakable statements from Economic Survey
Investments Improving long term-growth prospects will help revive investment
Govt. Intervention
Default setting for government intervention in the economy needs to change from prohibited unless permitted to
permitted unless prohibited.
PPP Relook The present model of infrastructure contracting and financing needs to be rexamined
Policy stability and
institutions
Greater policy stability, higher long-term growth and a legal and regulatory framework that strengthens a market
economy will help revive investment
Fiscal A new FRBM Act with teeth is needed
GST A CenGST could be the first step towards a full GST
DDT
Taxes clarified as bad in public finance theory like cesses, surcharges, transaction taxes, and taxes imposed for
ease of collection such as the dividend distribution tax, need to eventually go.
Tax rates
It would be desirable to track the median value (of corporate tax) for EMs. This would ensure that India is a
competitive destination for investments of global and Indian firms.
Cash transfer
Cash transfers to poor households, instead of procurement and distribution of cereals, offer savings on the subsidy
bill
Capital control Capital controls under FEMA do not support a rapidly globalizing economy
Food sector
The welfare of both consumers and farmers lies in freeing up agricultural markets in the same way that economic
freedom was given to other producers.

Bureaucracy Changing times
The value of time
Longer working
hours
Work timings have been elongated. In some ministers such as Road Ministry, six days schedule
are being followed.
Punctuality All bureaucrats have to reach on time. Surprise checks are held by ministers to catch defaulters.
Optimal use of
time
Lengthy meetings have been replaced by short, seven-slide PowerPoint presentations.
Time bound action A two-week time limit to reply to queries is strictly enforced.
Time stamp Every file comes with special mentions on the top-right: 'Must and Time-bound'.
Save time
Delhi Gymkhana Club and the Delhi Golf Club, bureaucracy watering holes, have fallen out of
favour.
Rule driven
conduct
Strict codes Notes and memos regarding working guidelines have been a hallmark of government functioning.
Arms length
principle
Ministers cannot hire personal staff who have worked in the UPA government. Relatives are
banned. Antecedents of all personal staff will be vetted by intelligence agencies.
Minimum
government
maximum
governance
Leaner
bureaucracy
Groups of Ministers have been dissolved, the National Advisory Council put in limbo and the
Planning Commission's financial powers transferred to the ministries.
Oversight over
Ministers
Ministers in check, unlike in the previous government where ministers played a very active role.
Hence, ministers are not even involved in the decision to let them appoint their personal
secretaries.
Source: Media reports, MOSL

0
1,250
2,500
3,750
5,000
FY13 FY14RE FY15BE
Assistance to states plan Revenue expenditure on central plan
10%
Central assistance to states
trebled in FY15. This could
be a precursor to GST that
called for compensation to
states on account of loss of
revenue

July 2014 39


Beginning of a new cycle
Markets at high; valuations at long-term averages
India is the top performing markets, with the Sensex delivering 18% return in
CY14YTD. The Sensex outperformed its EM peers, both in local currency and USD
terms. It currently trades at 16.4x FY15E earnings.
Domestic cyclicals outperformed in CYTD. Top performing sectors are Capital Goods
(+46%), Retail (45%) and PSU Banks (+40%). Telecom is the only sector, with negative
returns.
Valuations of Indian equities remain attractive with market cap-to-GDP ratio of 68%
(below long-period average of 72%). The Sensex trades at 15.4x which is just below
long-period average of 15.5x.
FIIs continue to repose faith in Indian equities and pumped USD11.2b in CY14YTD,
whereas DIIs witnessed outflows of USD5.5b.

World Equity Indices CY14 YTD - Local currency (%)

World Equity Indices CY14 YTD USD (%)


Sectoral performance: Capital Goods, PSU Banks lead the pack
All sectors, except Telecom, delivered positive returns in CY14YTD. 14 sectors
delivered double-digit returns.
Top five performing sectors in CY14YTD include: Capital Goods (+46%), Retail
(45%), PSU Banks (+40%), Real Estate (32%) and BSE Mid-cap (32%). Telecom
(-1%) is only sector that delivered negative returns.
Market breadth has also been good during CY14YTD.
o 28 Sensex companies delivered positive returns
o 22 Sensex companies delivered double digit returns
o 17 Sensex companies returns were above the market average (18%)
Top five Sensex performers for CY14YTD include: L&T (+47%), Sesa Sterlite
(+45%), Maruti (+42%), Axis Bank (+40%), ONGC (+37%).
Infosys (-5%) and Wipro (-1%) were only two Sensex companies that delivered
negative returns for CY14YTD.

-7
-4
-1
-1
1
6
6
6
10
18
Japan
China
South Korea
UK
Russia MICEX
MSCI EM
Brazil
S&P 500
Taiwan
India - Sensex
-4
-3
-3
2
2
6
6
10
13
22
China (HSCEI)
Japan
Russia MICEX
South Korea
UK
MSCI EM
S&P 500
Taiwan
Brazil
India - Sensex
MARKETS

July 2014 40


Sectoral performance for CY14 YTD (%)


Best & worst performers in Sensex for CY14 YTD (%)


Markets have been climbing the wall of worry over last three quarters
At every step in the NDAs journey towards a decisive victory, Indian markets
have climbed walls of worry. This began with the appointment of Mr Narendra
Modi as the Prime Ministerial candidate on 13 September 2013.
Investors continued to have apprehensions that the markets have run ahead of
fundamentals.
The markets have delivered over 29% returns since the announcement of
Mr Narendra Modi as PM candidate.

46 45
40
33 32
30
29
25
25
25
24
20
18 18 18
13
5
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D
F
C
I
C
I
C
I

B
a
n
k
M
&
M
H
D
F
C

B
a
n
k
T
a
t
a

M
o
t
o
r
s
T
a
t
a

S
t
e
e
l
S
E
N
S
E
X
H
e
r
o

M
o
t
o
H
U
L
B
a
j
a
j

A
u
t
o
T
a
t
a

P
o
w
e
r
T
C
S
N
T
P
C
C
i
p
l
a
R
e
l
i
a
n
c
e

I
n
d
.
I
T
C
D
r

R
e
d
d
y
'
s
B
h
a
r
t
i
W
i
p
r
o
I
n
f
o
s
y
s

July 2014 41


Wall of worry: Markets scale new highs despite skepticism


Market valuations are at long-period averages
While Indian markets have reached new highs, valuations are still at long-period
averages.
Indias market cap-to-GDP is at 68%, below the long-period average of 72% and
significantly below the peak of 103% achieved in 2008.
The Sensex trades at 15.4x which is near its long-period average of 15.5x, but
well below the highs of ~21x in January 2008 and 24.6x achieved in December
2007.

12-month forward Sensex P/E (x)

12-month forward Sensex P/B (x)


24.6
10.7
15.4
7
12
17
22
27
J
u
l
-
0
4
J
u
l
-
0
5
J
u
l
-
0
6
J
u
l
-
0
7
J
u
l
-
0
8
J
u
l
-
0
9
J
u
l
-
1
0
J
u
l
-
1
1
J
u
l
-
1
2
J
u
l
-
1
3
J
u
l
-
1
4
10 Year Avg: 15.5x
4.2
1.6
2.5
1.2
2.1
3.0
3.9
4.8
J
u
l
-
0
4
J
u
l
-
0
5
J
u
l
-
0
6
J
u
l
-
0
7
J
u
l
-
0
8
J
u
l
-
0
9
J
u
l
-
1
0
J
u
l
-
1
1
J
u
l
-
1
2
J
u
l
-
1
3
J
u
l
-
1
4
10 Year Avg: 2.7x

July 2014 42


Sensex earnings yield v/s bond yield

Indias market cap to GDP (%)


Market valuations at averages, despite growth acceleration ahead


Sectoral performances vary depending upon market cycle
Indian markets have delivered healthy returns over the past 11 years from FY04
to FY14. This period encompasses two big cycles (i) Upcycle - FY04 to FY08 and
(ii) Downcycle - FY09 to FY14.
During the phase of Upcycle, which was characterized by GDP growth moving
from 4% in FY03 to 9.3% in FY08, Cyclicals outperformed the Sensex. Specifically,
Capital Goods outperformed the Sensex by 3.2x, Metals by 1.8x, Utilities and Oil
& Gas by 1.5x. Consumer, Healthcare and Technology were underperformers,
delivering merely half the Sensex returns.
0.5
1.6
0.7
0.4
0.7
1.1
1.4
1.8
J
u
l
-
0
4
J
u
l
-
0
5
J
u
l
-
0
6
J
u
l
-
0
7
J
u
l
-
0
8
J
u
l
-
0
9
J
u
l
-
1
0
J
u
l
-
1
1
J
u
l
-
1
2
J
u
l
-
1
3
J
u
l
-
1
4
10 Year Avg: 0.87x
42
52
82
83
103
55
95
88
69
63 65
68
F
Y
0
4
F
Y
0
5
F
Y
0
6
F
Y
0
7
F
Y
0
8
F
Y
0
9
F
Y
1
0
F
Y
1
1
F
Y
1
2
F
Y
1
3
F
Y
1
4
F
Y
1
5
E
Average of 72%
for the period
81
129
181
250 266 291
278 280
216 236
272
348
450
523
718
833
820
834
1,024
1,123
1,183
1,340
1,524
1,836
2,190
F
Y
9
3
F
Y
9
4
F
Y
9
5
F
Y
9
6
F
Y
9
7
F
Y
9
8
F
Y
9
9
F
Y
0
0
F
Y
0
1
F
Y
0
2
F
Y
0
3
F
Y
0
4
F
Y
0
5
F
Y
0
6
F
Y
0
7
F
Y
0
8
F
Y
0
9
F
Y
1
0
F
Y
1
1
F
Y
1
2
F
Y
1
3
F
Y
1
4
F
Y
1
5
E
F
Y
1
6
E
F
Y
1
7
E
FY93-96: 45%
CAGR
FY96-03: 1% CAGR
FY03-08: 25%
CAGR
FY08-14:
8% CAGR
FY14-17E: 18%
CAGR
FY93-FY14: 14% CAGR
24.3
24.6
8.3
24.6
15.4
6
12
18
24
30
M
a
r
-
9
3
M
a
r
-
9
4
M
a
r
-
9
5
M
a
r
-
9
6
M
a
r
-
9
7
M
a
r
-
9
8
M
a
r
-
9
9
M
a
r
-
0
0
M
a
r
-
0
1
M
a
r
-
0
2
M
a
r
-
0
3
M
a
r
-
0
4
M
a
r
-
0
5
M
a
r
-
0
6
M
a
r
-
0
7
M
a
r
-
0
8
M
a
r
-
0
9
M
a
r
-
1
0
M
a
r
-
1
1
M
a
r
-
1
2
M
a
r
-
1
3
M
a
r
-
1
4
Sensex P/E (x)
Sensex CAGR 14% Sensex CAGR -1% Sensex CAGR
39%
Sensex CAGR
-1%
Average of 14.9x
M
a
r
-
1
5
M
a
r
-
1
6
M
a
r
-
1
7

July 2014 43


In contrast, during the phase of Downcycle, non-cyclicals such as Consumer,
Healthcare and Technology outperformed the Sensex.
On moderate economic recovery, cyclical and domestic facing sectors are likely
to outperform, in our view.

Consumer, Healthcare, Auto and Technology were the outperformers during 2008-2014


Cyclicals gave healthy returns during FY03-FY08 cycle


Sensitivity: Sensex risk-reward is favorable
Corporate sector earnings are expected to grow at 18% CAGR over FY14-17. This
will bring the growth rates at long period averages, after growing at 8% for the last
six years. This will become an important support for market valuations, to also
trade at averages. Assuming no change in valuation multiples from current levels,
market returns should mirror the earnings growth.
25,024
56,545
57,623
15,457
56,974
13,303
15,730
46,122
9,247
35,920
28,810
11,401
0
15,000
30,000
45,000
60,000
75,000
J
a
n
-
0
8
A
p
r
-
0
8
A
u
g
-
0
8
D
e
c
-
0
8
A
p
r
-
0
9
J
u
l
-
0
9
N
o
v
-
0
9
M
a
r
-
1
0
J
u
n
-
1
0
O
c
t
-
1
0
F
e
b
-
1
1
J
u
n
-
1
1
S
e
p
-
1
1
J
a
n
-
1
2
M
a
y
-
1
2
A
u
g
-
1
2
D
e
c
-
1
2
A
p
r
-
1
3
A
u
g
-
1
3
N
o
v
-
1
3
M
a
r
-
1
4
J
u
l
-
1
4
Consumer 17%
Auto 17%
Healthcare 17%
Technology 13%
Sensex 3%
Utilities -12%
Oil & Gas -4%
Capital Goods -5%
Metals -7%
Pvt Banks 9%
PSU Banks 5%
Telecom -9%
Level of 20,873
CAGR (%)
20,873
19,283
10,684
67,113
11,089
37,811
31,379
9,905
32,108
13,484
53,937
25,034
0
15,000
30,000
45,000
60,000
75,000
A
p
r
-
0
3
J
u
n
-
0
3
S
e
p
-
0
3
D
e
c
-
0
3
M
a
r
-
0
4
J
u
n
-
0
4
S
e
p
-
0
4
N
o
v
-
0
4
F
e
b
-
0
5
M
a
y
-
0
5
A
u
g
-
0
5
N
o
v
-
0
5
F
e
b
-
0
6
M
a
y
-
0
6
A
u
g
-
0
6
O
c
t
-
0
6
J
a
n
-
0
7
A
p
r
-
0
7
J
u
l
-
0
7
O
c
t
-
0
7
J
a
n
-
0
8
Consumer 30%
Auto 47%
Healthcare 31%
Technology 28%
Sensex 50%
Real Estate 42%
Utilities 69%
Oil & Gas 63%
Capital Goods 92%
Metals 70%
Pvt Banks 83%
PSU Banks 56%
CAGR (%)
Level of 3,081

July 2014 44


Sensex sensitivity

Nifty sensitivity


Fund flows: FIIs continues to pump money
FIIs continue to be net buyers of Indian equities, pumping in USD11.2b in CY14YTD
v/s USD20b in CY13. DIIs pulled out USD5.5b.

Yearly trend in net FII investments (USD b)

Yearly trend in net DII investments (USD b)


Yearly trend in net domestic MF investments (USD b)

Yearly trend in net DII ex-MFs (USD b)


EPS CAGR (%) 15 20 25
EPS FY14 1,340 1,772 1,928 2,092
15x -20 6 16 25
18x -4 27 39 50
20x 7 42 54 67
Current (16.0x) 25,024 28,405 30,906 33,535
15x 20,093 26,580 28,920 31,380
18x 24,112 31,896 34,704 37,656
20x 26,791 35,440 38,560 41,840
2 Year CAGR (%)
Sensex Return (%)
Sensex Val ues
S
e
n
s
e
x

P
E

R
a
n
g
e
(
x
)
EPS CAGR (%) 15 20 25
EPS FY14 406 538 585 635
15x -18 8 18 28
18x -2 30 41 53
20x 9 44 57 70
Current (15.9x) 7,460 8,541 9,296 10,090
15x 6,094 8,063 8,775 9,525
18x 7,313 9,675 10,530 11,430
20x 8,126 10,750 11,700 12,700
2 Year CAGR (%)
Ni fty Return (%)
Ni fty Val ues
N
i
f
t
y

P
E

R
a
n
g
e
(
x
)
8.6
10.8
8.1
17.8
-12.2
17.6
29.3
-0.5
24.5
20.0
11.2
C
Y
0
4
C
Y
0
5
C
Y
0
6
C
Y
0
7
C
Y
0
8
C
Y
0
9
C
Y
1
0
C
Y
1
1
C
Y
1
2
C
Y
1
3
C
Y
1
4

Y
T
D
3.7
5.4
16.9
5.3
-4.7
5.9
-10.9
-13.0
-5.5
C
Y
0
6
C
Y
0
7
C
Y
0
8
C
Y
0
9
C
Y
1
0
C
Y
1
1
C
Y
1
2
C
Y
1
3
C
Y
1
4

Y
T
D
3.4
1.7
3.3
-1.2
-6.1
1.3
-3.9
-3.7
-1.2
C
Y
0
6
C
Y
0
7
C
Y
0
8
C
Y
0
9
C
Y
1
0
C
Y
1
1
C
Y
1
2
C
Y
1
3
C
Y
1
4

Y
T
D
0.3
3.7
13.6
6.5
1.4
4.7
-7.0
-9.3
-4.3
C
Y
0
6
C
Y
0
7
C
Y
0
8
C
Y
0
9
C
Y
1
0
C
Y
1
1
C
Y
1
2
C
Y
1
3
C
Y
1
4

Y
T
D

July 2014 45


Shortfall in rains; potentially in capital flows too?
Key risks: Monsoon deficit and market readiness for huge capital issuance
The deficient rainfall in large parts of the country so far and the threat of El Nino in the
second half of the season is a major source of worry for the economy.
While deficient monsoon has affected food inflation materially in the past, the
previous NDA government did well to contain prices during the two drought years it
faced in five years.
The government has taken several pre-emptive measures to tackle food inflation this
time too, including low MSP hike, release of foodstocks and restrictions on exports.
Its not raining money in the capital markets. However, a few companies have been
successful in raising rather large sums.
There is a very strong pipeline of equity capital raising in the primary capital market
emanating from three sources.
Disinvestment of USD20b-25b over the next two years
Financials to raise USD15b to meet their capital requirement
Private sector may come up with another USD20b-25b as an attempt to repair the
balance sheets of highly leveraged companies.
Such huge capital raising program raises concerns on the absorption capacity of the
market and its consequent impact on the secondary market.

Weak monsoon raises the spectre of drought

Monsoon and agriculture
Monsoon remains 43% below normal by July 12.
The threat of El Nino looms large in the second half.
In the past, sharp deviation in rainfall has caused disturbances to foodgrain
production.
Previous NDA government, however, managed to keep food inflation within
tolerable limits despite facing two droughts in close succession.

Fourth worst June rainfall in more than a century (% deviation)

Source: IMD, MOSL

-44
-48
-47
-43
-13
-9
-17
-5
-3
4 7
3
-3
-18
-22
-7
1
9
0
1
1
9
0
2
1
9
0
5
1
9
1
2
1
9
2
3
1
9
2
4
1
9
2
6
1
9
3
1
1
9
6
2
1
9
6
5
2
0
0
9
2
0
1
4
June (Rainfall deviation %) Final seasonal rainfall
RISK # 1:
KEY RISKS

July 2014 46


Sharp deviation in rainfall has affected agri production

Source: IMD, MOSL
NDA-I did well to contain food prices despite drought

Source: IMD, Government, MOSL

Govt. has taken many pre-emptive steps for food inflation

Govt./RBI acting in tandem to bring down food inflation

Source: Media, MOSL

Capital raising of USD50b over next two years: Will market be
able to absorb the supply of equity?

Capital requirements of Corporate India
Over the last 2 months, we have seen a significant activity amongst companies to
raise capital (Yes Bank, R-Com, Aban, JPA, GMR etc). We believe that this is a
beginning of a very strong pipeline of capital raising from all segments (Government,
Financials and Corporate Sector). Most of this capital raising is largely to repair
balance sheets; Growth capital will be raised only later in FY16.
1. Disinvestment will remain a very active agenda for the Government to get
resources for meeting deficit targets. Moreover, SEBIs norm to lower stake to
75% in all PSUs will also involve stake sales. Over the next two years, the
government may divest to raise upto USD20b-25b. This doesnt include any
special stake sale (SUUTI, HZL etc).
2. Financials, in order to raise their capital requirements ahead of economic
recovery and Basel 3, will likely raise USD15b over the next two years.
3. Private sector will have to significantly repair their balance sheets, particularly in
highly leveraged sectors. In our estimates, this amount could be around
USD20b-25b.
-11
-15
-12
-20
-19
-2 -2
-6
-18
-7
-30
-20
-10
0
10
20
Rainfall deviation Change in foodgrain production
3
2
-30
-20
-10
0
10
20
Rainfall deviation WPI-Food inflation
Lowest MSP hike in a decade
Minimum Export price for onion and potato;
imposes Essential Commodities Act for these
State governments urged to delist fruits and
vegetables from APMC
To release additional foodstock from FCI through
PDS
Withdraw export incentives for milk and sugar
Contingency fund for rainfall
Home Minister warns of strict action against
hoarders
J
a
i
t
l
e
y
s
p
e
a
k
s
The government is
committed to contain it
(inflation) because we
consider it a serious and
sensitive matter
When production of food
items is higher than last
year and still prices rise,
then it means that
intermediaries are
keeping the stock
somewhere
Prices of some items had
touched Rs. 70-100 per kg
last year. Prices are still
lower this year. There is
no panic situation
D
r
.

R
a
j
a
n
s
p
e
a
k
s
Hopefully by the end of
the year we think the
economy is on course to
come down to a CPI
inflation rate of about 8
per cent, and by the end
of next year to a level of 6
per cent, and we are
certainly determined to
make sure it follows this
glide path.
The right answer to
inflation is collaboration
between the Reserve
Bank and the government,
both working on the sides
they can effect best
RISK # 2:
Potential capital supply (INR t)

1.0-
1.25
1.2 -
1.7
0.5-
0.6
PSUs Private
sector
(excld
financials)
Banking &
Financial
Services

July 2014 47


1. Divestment of PSUs: Mobilization of INR975-1,250b over two years
We had argued in our thematic report on India PSUs that Indias divestment
proceeds were miniscule as compared with rest of the world (~1% of global
privatization revenues during FY08-12) and actual divestments of state-owned
entities has been way short of the targets (~44% short of target during FY10-14).

Disinvestment in recent years has been way short of the
target

Source: MOSL, Department of Disinvestment
Indian disinvestments are miniscule compared to the global
privatization proceeds

Source: MOSL, Privatization Barometer's PB report 2012

Given Indias fiscal situation and track record of the NDA-1 government,
disinvestment will remain a key agenda, in our view. Recent guidelines of SEBI
making minimum 25% public shareholding mandatory for PSUs as well (to be
achieved in next three years), will further necessitate increased divestment.
If accepted by the government, compliance with the new guidelines would
supply ~INR 565b from PSUs where the government has more than 75% holding.
Of these, Coal India alone would account for stake sell worth INR365b.

Potential mobilization by PSUs (ex-financials) would be ~ INR565b
Co_Name Sector
Market Cap
(INR b)
Current
government
stake (%)
Dilution (%) to comply
with min 25% public
shareholding
Mobilisation if
govt dilutes to
75% (INR b)
Coal India Utilities 2,489 89.7 14.7 365
NMDC Metals 729 80.0 5.0 36
NHPC Ltd Utilities 303 86.0 11.0 33
Neyveli Lignite Utilities 166 90.0 15.0 25
S A I L Metals 391 80.0 5.0 20
Hind.Copper Metals 104 90.0 15.0 16
SJVN Utilities 102 90.0 15.0 15
MMTC Misc 94 90.0 15.0 14
Natl. Aluminium Metals 153 80.9 5.9 9
NBCC Infrastructure 47 90.0 15.0 7
HMT Auto 39 90.0 15.0 6
F A C T Chem & Fert 27 90.0 15.0 4
Natl.Fertilizer Chem & Fert 22 90.0 15.0 3
MOIL Metals 55 80.0 5.0 3
S T C Misc 13 90.0 15.0 2
R C F Chem & Fert 37 80.0 5.0 2
I T D C Misc 13 87.0 12.0 2
ITI Telecom 9 90.0 15.0 1
Andrew Yule & Co Misc 9 90.0 15.0 1
Scooters India Auto 3 93.7 18.7 0
Dredging Corpn. Misc 13 78.6 3.6 0
Madras Fert. Chem & Fert 4 85.3 10.3 0
Bharat Electron Capital Goods 175 75.0 0.0 0
Total 565
0
150
300
450
600
F
Y
9
2
F
Y
9
3
F
Y
9
4
F
Y
9
5
F
Y
9
6
F
Y
9
7
F
Y
9
8
F
Y
9
9
F
Y
0
0
F
Y
0
1
F
Y
0
2
F
Y
0
3
F
Y
0
4
F
Y
0
5
F
Y
0
6
F
Y
0
7
F
Y
0
8
F
Y
0
9
F
Y
1
0
F
Y
1
1
F
Y
1
2
F
Y
1
3
F
Y
1
4
F
Y
1
5
Disinvestment Target (INR b)
Disinvestment achieved (INR b)
3.2
1.1
0.0
1.9
0.1
0.1
0.2
0.9
0.2
0.9
1.0
1.0
3.6
0.4
0.3
0.0
0.9
0.0
2.3
5.3
1.5
F
Y
9
2
F
Y
9
3
F
Y
9
4
F
Y
9
5
F
Y
9
6
F
Y
9
7
F
Y
9
8
F
Y
9
9
F
Y
0
0
F
Y
0
1
F
Y
0
2
F
Y
0
3
F
Y
0
4
F
Y
0
5
F
Y
0
6
F
Y
0
7
F
Y
0
8
F
Y
0
9
F
Y
1
0
F
Y
1
1
F
Y
1
2
Indian disinvestment proceeds as % World's privatization
revenues
The long-term
disinvestment achievement
rate (actual disinvestment
as a proportion of the
target) is just 46%

July 2014 48


Government may also divest an additional 5%-10% of stake in top 10 PSUs (where
shareholding is <75%, retaining controlling stake of 51%). This can fetch an
additional INR408b-683b. We are not yet considering the stake sale in SUUTI or
special proceeds like HZL / BALCO, each of which is a sizeable amount.

Potential mobilization by top 10 PSUs (ex-fin) @5% and 10% dilution would be INR408b-
683b (where govt holding is upto 75%)
Company
Name
Sector
Market
Cap
(INR b)
Current
govt
stake
(%)
Addl. dilution
of 5% where
s/h is <75%,
but > 51%
Mobilization
if dilutes 5%
(INR b)
Addl. dilution
of 10% where
s/h is <75%,
but >51%
Mobilization
if dilutes
10% (INR b)
O N G C Oil & Gas 3,610 68.9 5.0 180 10.0 361
NTPC Utilities 1,308 75.0 5.0 65 10.0 131
I O C L Oil & Gas 848 68.6 5.0 42 10.0 85
Power Grid Utilities 753 57.9 5.0 38 - -
B H E L Cap Goods 643 63.1 5.0 32 10.0 64
GAIL (India) Oil & Gas 589 56.1 5.0 29 - -
Power Fin Corp NBFC 422 72.8 5.0 21 10.0 42
Total

408

683
Source: MOSL, Capitaline

2. Private sector would need equity capital to optimize their balance sheet
BSE-500 constituents (ex-Financials, PSUs) net debt-to-equity (d/e) has continuously
increased during the last five years (0.85 in FY14 v/s 0.65 in FY10). Our analysis of
the private sectors capital structure indicates a potential equity capital requirement
of INR1.2t-INR1.7t to optimize net d/e. Sectors that would need equity capital
infusion include Auto, Capital goods, Infrastructure, Utilities, Telecom and Metals.

Private sector (excld. financial services) would require capital infusion of ~INR1,200-1,700b
Sector (Ex PSUs
and Financials)
Market cap
(INR b)
Net debt
(INR b)
Networth
(INR b)
Net debt to
equity (x)
Target increase in
equity (INR b)
Automobiles 6,394 848 1,731 0.49 100-150
Capital Goods 3,658 1,953 856 2.28 200-300
Cement 2,152 256 729 0.35 50-100
Chem & Fert 1,350 264 377 0.70
Consumer 8,227 233 815 0.29
Diversified 192 118 85 1.39
Healthcare 5,349 294 1,097 0.27
Infrastructure 439 1,055 348 3.03 200-250
Media 918 26 180 0.14
Metals 3,342 3,283 2,638 1.24 100-150
Oil & Gas 4,329 1,276 2,631 0.48
Real Estate 1,060 372 827 0.45
Retail 562 139 172 0.81
Technology 10,511 -536 1,891 (0.28)
Telecom 2,834 1,468 1,272 1.15 100-150
Textiles 575 513 286 1.79 100-150
Utilities 1,503 2,310 972 2.38 200-250
Misc 3,507 1,489 1,073 1.39 150-200
Total 56,902 15,361 17,979 0.85 1,200-1,700

BSE-500 constituents net debt-
to-equity has continuously
increased in last 5 years

0.64 0.65
0.68
0.83
0.89
0.85
F
Y
0
4
F
Y
1
0
F
Y
1
1
F
Y
1
2
F
Y
1
3
F
Y
1
4

July 2014 49


3. Financial services sector need INR800b-900b annual equity infusion
PSU banks would need additional capital of ~INR600b-650b to meet their
requirements over next two years. Of this, INR110b is expected to be
contributed by the government in FY15 and whereas there would be a sum
allocated for FY16 as well. Hence, there may be a supply of INR380-400b in the
market in next two years. We have considered PSU banks within our coverage
universe and assumed that they will aim to raise it to at least 9%.
Private Banks are adequately capitalized at this stage. However, a couple of
banks that may contemplate to raise capital in FY15 could be HDFCB (INR100b)
and SIB (INR21b).
NBFCs are also relatively well capitalized. We estimate requirement of ~INR75b
over next 2 years.

Will market be able to absorb?
All put together this could mean a total capital raising of upto USD50b. Part of this
money can also be funded via asset sales and sale to strategic partners. However,
this would not be significant. It would be interesting to see secondary market
reaction and flows to match this pipeline. The highest net institutional buying (FIIs
+DIIs) in a single year has been USD 31b in FY08.

Markets had absorbed higher capital raising during FY2010-FY2013

Source: MOSL
FII and DII flows in past (USD b)

Source: MOSL

15
18 22
194
55
95
80
137
80
120
193
172
192
68
459
168
439
417
373
519
84
196
62
36
109
515
255
389
213
303
415
291
103
67
18
417
39
115
220
429
245
70
230
189
116
-56
-28
0
28
56
0
150
300
450
600
1
Q
F
Y
0
4
3
Q
F
Y
0
4
1
Q
F
Y
0
5
3
Q
F
Y
0
5
1
Q
F
Y
0
6
3
Q
F
Y
0
6
1
Q
F
Y
0
7
3
Q
F
Y
0
7
1
Q
F
Y
0
8
3
Q
F
Y
0
8
1
Q
F
Y
0
9
3
Q
F
Y
0
9
1
Q
F
Y
1
0
3
Q
F
Y
1
0
1
Q
F
Y
1
1
3
Q
F
Y
1
1
1
Q
F
Y
1
2
3
Q
F
Y
1
2
1
Q
F
Y
1
3
3
Q
F
Y
1
3
1
Q
F
Y
1
4
3
Q
F
Y
1
4
1
Q
F
Y
1
5
Total equity capital raising (INR b) Sensex return QoQ (%)
9.5 9.2
10.9
5.8
13.1
-10.4
23.4
25.0
8.5
25.8
13.7
15
20 0.3
0.1
3.2
6.4
17.7
13.1
5.1
-4.1
-0.9
-12.7
-8.9
5
10
9.8 9.3 14.1 12.1 30.8 2.7 28.4 20.9 7.6 13.1 4.8 20.0 30.0
FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15E FY16E
FII (USDb) DII (USDb) Total Institution Flows (USDb)
Total
Total Flows: USD107b
FII: USD61b
DII: USD46b
Total Flows: USD46b
FII: USD73b
DII: USD-27b
Financial services sector
would need INR800b-900b of
equity infusion over next 2
years


PSU banks Pvt banks NBFCs
INR600b
- 650b
INR100b
- 150b
INR75b

July 2014 50


ACC, AXSB, HDFC, HNDL, INFY, LT, MSIL, ONGC, SBIN, TTMT
Many growth opportunities
ACC: Narrowing of profitability gap to drive re-rating
Cement volume growth to bounce back sharply, with 8-10% CAGR, against 5%
CAGR in the last five years, driven by a focused government and economic
recovery.
This coupled with slowing capacity addition would drive utilization and cement
prices. We estimate ~8% price CAGR over FY14-17 (v/s 2.5% over FY12-14),
driving doubling of EBITDA/ton for ACC to ~INR1,140 by CY16.
Further potential of upgrades, driven by (a) synergies arising from acquisition by
Ambuja adding up to ~INR120/ton, and (b) its own cost cutting initiatives can
add another ~INR130/ton by CY16.
Healthy B/S and healthy operating leverage to sustain its robust payout strategy
of 50%+.
Reducing profitability gap with peers should drive re-rating. Trading at a
discounted valuation across all parameters: 17.3x FY16E P/E, 10.6x FY16E
EV/EVITDA and USD117 EV/ton.

Volume growth to pick up, raising capacity utilization

Cement price increases in upturn can positively surprise,
driving earnings growth


Cost initiatives to lower EBITDA/ton discount to peers (INR)

driving down valuation discount to peers


60
75
90
105
120
0
4
8
12
16
F
Y
0
2
F
Y
0
3
F
Y
0
4
F
Y
0
5
F
Y
0
6
F
Y
0
7
F
Y
0
8
F
Y
0
9
F
Y
1
0
F
Y
1
1
F
Y
1
2
F
Y
1
3
F
Y
1
4
F
Y
1
5
E
F
Y
1
6
E
F
Y
1
7
E
Volume Growth (%) Effective Cap. Util. (%)
-10
0
10
20
30
-10
6
22
38
54
F
Y
9
4
F
Y
9
6
F
Y
9
8
F
Y
0
0
F
Y
0
2
F
Y
0
4
F
Y
0
6
F
Y
0
8
F
Y
1
0
F
Y
1
2
F
Y
1
4
F
Y
1
6
E
Price Chg (INR/bag) Price Chg (%) - RHS
Cement prices
increased by 13.3%
CAGR on volume
CAGR of over 9%
We factor in
~8% CAGR
price change
over FY14-17E
8
1
6
5
7
2
6
1
4
9
8
5
1
,
3
6
0
1
,
1
2
2
7
1
7
8
7
2
1
,
1
7
3
1
,
4
9
4
1
,
0
0
5
7
5
1
8
4
0
1
,
1
1
6
1
,
4
1
3
247
162
242
159
94
CY12 CY13 CY14E CY15E CY16E
ACC ACEM
UTCEM (ex white) Gap vs Peers
17
10
112
24
14
207
19
11
177
17
9
159
P/E EV/EBITDA EV/ton
ACC Ambuja Ultratech Shree Cement
TOP PICKS

July 2014 51


Axis Bank: Well positioned at the start of the up-cycle
Axis Bank is strongly positioned to benefit from the up-cycle, as (1) branch
network has multiplied 2.4x in last four years, (2) liability and asset side has
become more granular, with higher share of retail business and strong
capitalization (Tier I of 12.6%).
Structural improvement in NIMs has led to best in class RoA of 1.7-1.8%. With
improvement in loan growth, we expect earnings growth to be 20%+ and RoE to
improve to 18.1% by FY17.
The stock trades at 1.9x one-year forward BV (10% discount to LPA).
Improvement in economic growth and infra reforms could lead to strong re-
rating.

Strong expansion, significant improvement in liability mix


Structurally, NIM has moved to higher levels

Highest ever RoA; strong capitalization (%)


339 450
544
644
792
983
1,390
1,622
1,947
2,402
49.7
53.8
51.9
58.7
57.4
65.7
58.8
63.3
67.9
75.0
FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14
Branches CASA + Retail TD (%)
2.4 2.4
2.5
3.1 3.2
3.3
3.4
3.3 3.3
3.6
0.1
0.4
0.4
0.6
0.7
0.8
0.6
0.4
0.6
0.6
NIM (%) Provisions to average assets (%)
8.9 7.3 6.4 10.2 9.3 11.2 9.4 9.5 12.2 12.6
1.1
1.1
1.1
1.2
1.4
1.5
1.6 1.6
1.7 1.7
Tier I % RoA
1
8
.
8
1
8
.
4
2
1
.
0
1
7
.
6
1
9
.
1
1
9
.
2
1
9
.
3
2
0
.
3
1
8
.
5
1
7
.
4
RoE

July 2014 52


HDFC: Beneficiary of housing reforms
Re-balance of AUM mix in favor of corporate loans and maturing retail loans will
drive +15% earnings growth in FY15/16.
Contribution of dividend income and non-operating income reduced to 9.7% in
4QFY14, down from an average to 15.5% in last 12 quarters. Improving market
conditions will positively impact non-interest income.
With revival in capex cycle, banks will shift focus to corporate loans, thus ending
an era of irrational pricing.
Consolidated PAT growth of 20% v/s standalone PAT growth of 12% in FY14.
Subsidiaries now contribute 32% of consolidated PAT v/s ~2% in FY09.

Loan book growth to remain at 20% and RoE at 25%


Recent reforms augur well for HDFC
The governments thrust on housing will expand the business pie, and HDFC
being the largest player, will be a key beneficiary.
Increase in limit for principal repayment to INR0.15m (via 80C) and interest
repayment limit to INR0.2m from INR0.15m (U/S 24) will benefit HDFC (due to
higher ticket size and focus on salaried segment).
Increase in FDI limit in insurance will help HDFC unlock value.

Consolidated PAT growth at 20% v/s standalone PAT growth of 12%


26 30 16 15 20 20 21 16 19 19 20
37
38
28
23 23
22
24
26 25
24
25
F
Y
0
7
F
Y
0
8
F
Y
0
9
F
Y
1
0
F
Y
1
1
F
Y
1
2
F
Y
1
3
F
Y
1
4
F
Y
1
5
E
F
Y
1
6
E
F
Y
1
7
E
Loan Growth (%) RoE (%)
23.8 25.1 16.6 17.6 12.2
40.3
39.7
20.6
21.5
19.6
FY10 FY11 FY12 FY13 FY14
SA PAT Gr (%) Cons. PAT Gr (%)

July 2014 53


Hindalco: Free cash flows turned positive
Aluminum production to grow at 27% CAGR over FY14-17 aided by doubling of
captive alumina production.
New captive bauxite mine is rich and operational.
Novelis to benefit from 20% volume growth, increase in share of Auto to 20%
(v/s 9%), recycling from 46% to 80%.
Operating cash flows are at inflection, following USD8b capex completion.
Peaking of debt and capex will drive equity value.

Novelis EBITDA has passed the infection point (USD m)


Free cash flows turned around on peaking of capex (INR b)

Net debt to EBITDA has peaked


616
428
743
1,072
1,053
961
899
1,041
1,083
1,126
FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15E FY16E FY17E
USD1.7b
Return of
capital
USD250m
Return of
capital
USD250m
Return of
capital
USD250m
Return of
capital
5
26
16
7
-17 -49
-89
22
37
53
80 79
125
119
98
40
40
46
40
55
98
116
127
FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17
Free Cash flows CapEx Opr. Cash flow
3.2 4.1 2.3 2.7 4.2 6.0 6.2 4.8 4.0 3.2
138
179
222
280
F
Y
0
8
F
Y
0
9
F
Y
1
0
F
Y
1
1
F
Y
1
2
F
Y
1
3
F
Y
1
4
F
Y
1
5
E
F
Y
1
6
E
F
Y
1
7
E
I
N
R

/

s
h
a
r
e
R
a
t
i
o

(
x
)
Net Debt / EBITDA Equity value (RHS)

July 2014 54


Infosys: Strategy in place, focused on execution
Re-focusing on large commoditized deals has helped INFO improve its deal
signings in the segment, closing USD700m in Total Contract Value (TCV) in each
of the last two quarters. The uptrend in the deals should gradually reflect in
revenue growth, though deal signings need to improve further.
Last five quarters have witnessed results of INFOs efforts towards improving
efficiency. While utilization is at peak, we see further leverage if growth
accelerates.
Lower than industry growth rate and consequent decline in margins have
impacted INFOs valuation, (14x FY16E EPS, compared to 19x for TCS). Given the
leverage, low-double digit revenue growth will facilitate high-teens earnings
CAGR. We see this translating to 20% annual stock returns, going forward.

Focus on BITS has improved deal wins


Cost optimization efforts reflected in margin performance

Earnings will be boosted by recovery in growth, a key lever


731
219
600
450
500
700
700
3
Q
F
Y
1
3
4
Q
F
Y
1
3
1
Q
F
Y
1
4
2
Q
F
Y
1
4
3
Q
F
Y
1
4
4
Q
F
Y
1
4
1
Q
F
Y
1
5
Deal signings TCV (USD m)
23.6 23.6 23.6 25.0 25.5 25.1
73.0
75.8
78.7
78.1
77.8
81.0
4QFY13 1QFY14 2QFY14 3QFY14 4QFY14 1QFY15
EBIT Margin (%) Utlilization (Excl. trainees)
15.8 5.8 11.5 8.1 12.0 13.0
29.0
25.8
24.5
25.8
25.6
25.3
FY12E FY13E FY14E FY15E FY16E FY17E
USD Revenue growth (%) EBIT Margins(%)

July 2014 55


L&T: Multi-barreled engine to economic recovery
L&T has significantly increased market share in both India and the Middle East,
led by entry into new segments / geographies. This provides a strong base to
capitalize on the next leg of the investment cycle.
Core RoE has been maintained at 20%+ over the last four years, despite the
slowdown.
Manufacturing businesses present interesting possibilities; asset turn of 6-8x
can contribute 25-30% of revenues v/s 3-4% now.
L&T is associated with 125-130 defense products; could be the largest delta in
growth profile.

L&T gains meaningful market share in mid to late cycle, as share of mega / Greenfield
projects increase


L&Ts market share in Middle East has also increased
meaningfully; creating L&T-2 is a serious attempt

Core RoE has remained at respectable levels; attempt to
correct capital structure is an important trigger


7
.
8

6
.
1

5
.
1

4
.
8

6
.
0

5
.
2

4
.
8

4
.
4

4
.
2

5
.
2

5
.
8

6
.
2

5
.
9

5
.
5

5
.
5

M
a
r
-
9
9
M
a
r
-
0
0
M
a
r
-
0
1
M
a
r
-
0
2
M
a
r
-
0
3
M
a
r
-
0
4
M
a
r
-
0
5
M
a
r
-
0
6
M
a
r
-
0
7
M
a
r
-
0
8
M
a
r
-
0
9
M
a
r
-
1
0
M
a
r
-
1
1
M
a
r
-
1
2
M
a
r
-
1
3
L&T's Domestic E&C revenues (% of GFCF)
L&T lost market share
Gainedmkt sh
L&T lost mkt sh
1
.
5
%
0
.
9
%
0
.
8
%
0
.
9
%
1
.
1
%
1
.
2
%
0
.
5
%1
.
2
%
2
.
2
%
2
.
6
%
4
.
9
%
C
Y
0
3
C
Y
0
4
C
Y
0
5
C
Y
0
6
C
Y
0
7
C
Y
0
8
C
Y
0
9
C
Y
1
0
C
Y
1
1
C
Y
1
2
C
Y
1
3
L&T Overseas Market share
1
2
.
5

1
9
.
8

2
4
.
1

2
5
.
3

3
4
.
9

3
9
.
4

3
8
.
4

3
8
.
0

3
4
.
8

3
4
.
1

2
3
.
9

2
4
.
3

2
2
.
9

2
8
.
7

1
2
.
2

1
9
.
2

1
8
.
7

1
8
.
6

2
4
.
0

2
2
.
0

2
1
.
7

1
7
.
4

1
6
.
6

1
8
.
0

1
4
.
4

1
5
.
5

1
4
.
1

1
5
.
8

F
Y
0
3
F
Y
0
4
F
Y
0
5
F
Y
0
6
F
Y
0
7
F
Y
0
8
F
Y
0
9
F
Y
1
0
F
Y
1
1
F
Y
1
2
F
Y
1
3
F
Y
1
4
E
F
Y
1
5
E
F
Y
1
6
E
Core E&C RoE (%) Standalone Reported RoE (%)

July 2014 56


Maruti: Moving from defensive to challenger; waiting to zoom in
the up-cycle
Robust EPS CAGR of 33% over FY14-17
Improving macro environment, higher disposable income (due to reduction in
tax) and improving consumer sentiment to drive PV recovery. MSIL, with is
aggressive product launches (~14 launches in 5 years), to gain market share.
It is well-prepared for an eventual demand pick-up, with adequate capacities,
strong marketing network and equally exciting new products pipeline.
Margins to expand 280bp by FY17 on operating leverage, reduction in discounts
and localization.

MSIL to emerge as challenger now with robust product pipeline


Margins to expand on lower discounts, higher localization
and operating leverage

MSIL should trade at a premium (average P/E of 14x on
strong EPS CAGR of 33% over FY14-17), with upgrade risk


3
6
2
4
7
3
5
3
6
5
6
2
6
7
5
7
6
5
7
9
2
1
,
0
1
8
1
,
2
7
1
1
,
1
3
4
1
,
1
7
1
1
,
1
5
5
1
,
3
4
4
1
,
5
7
3
1
,
8
1
6
F
Y
0
3
F
Y
0
4
F
Y
0
5
F
Y
0
6
F
Y
0
7
F
Y
0
8
F
Y
0
9
F
Y
1
0
F
Y
1
1
F
Y
1
2
F
Y
1
3
F
Y
1
4
F
Y
1
5
E
F
Y
1
6
E
F
Y
1
7
E
Vol. ('000 units)
9.7
11.7
14.5
15.5
14.6
3.7
5.0
1.8
1.8
4.0
1.3
2.9
1.0
1.0
0.5
1.41.0 0.5
0.5
F
Y
0
8
+
v
e

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i
x
-
v
e

F
x
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y
a
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t
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d
n
F
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1
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u
l
l

C
a
s
e
31
42
55
62
42
91
82
58
82
94
133
173
223
241
F
Y
0
5
F
Y
0
6
F
Y
0
7
F
Y
0
8
F
Y
0
9
F
Y
1
0
F
Y
1
1
F
Y
1
2
F
Y
1
3
F
Y
1
4
E
F
Y
1
5
E
F
Y
1
6
E
F
Y
1
7
E
F
Y
1
7
E

(
b
u
l
l

c
a
s
e
)
EPS (INR)

July 2014 57


ONGC: Largest beneficiary of diesel reforms
ONGC will be the largest beneficiary of diesel reforms (expect ~51% cut in
under-recoveries to INR690b by FY17). LPG/kerosene price hikes could lower
subsidy.
We model (a) upstream share @64% v/s last three-year average of 42%, and (b)
gas price at USD4.2/5.3/6.3/mmbtu in FY15/16/17 in our base case.
After a long trend of flat to declining production, ONGCs group production is set
to grow ~4% by FY17.
Realistically, ONGCs net oil realization could reach USD65/bbl by FY17 and at
gas price of USD7/mmbtu, could report EPS of INR50 v/s INR31 in FY14.

Net realization set to increase, led by lower under recoveries


After a flat/declining trend, ONGC group production set to
grow at ~4% CAGR, led by IOR/EOR project completion
(mmtoe)


ONGCs cons EPS can cross INR50 at realistic assumptions


26
38
42 44
53
48
56 54 55
48
41
50
59
60
4
5
17
22
33 40
16
36
62
63
66
58
46
40
30
43
60
66
86
88
72
89
117
111
107 108
105
100
FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15E FY16E FY17E
Net Upstream Discount Gross
In USD/bbl
28 28 26 28 28 27 26 27 27 26 26 27 28 29
26 25
25
25 25 25 26 25 26 25 25
26
26
27
4
5
6 8
9
9
9 9 9
7
8
9
10 10
5
7
.
3

5
8
.
6

5
7
.
5

6
0
.
8

6
1
.
9

6
1
.
3

6
0
.
9

6
2
.
1

6
1
.
2

5
8
.
7

5
9
.
3

6
1
.
4

6
4
.
2

6
6
.
2

F
Y
0
4
F
Y
0
5
F
Y
0
6
F
Y
0
7
F
Y
0
8
F
Y
0
9
F
Y
1
0
F
Y
1
1
F
Y
1
2
F
Y
1
3
F
Y
1
4
F
Y
1
5
E
F
Y
1
6
E
F
Y
1
7
E
Domestic Oil Prodn Domestic Gas Prodn
OVL Prodn ONGC Group Prodn.
23.1
22.7
24.5
30.4
28.3
31.0
35.9
42.5
44.7 (RoE:
18%)
46.8
47.6 (RoE:
20%)
49.9
50.5 (RoE:
20%)
53.7
54.1 (RoE:
18%)
F
Y
0
9
F
Y
1
0
F
Y
1
1
F
Y
1
2
F
Y
1
3
F
Y
1
4
F
Y
1
5
E
F
Y
1
6
E
F
Y
1
7
E
Base Case
Gas price at USD7/mmbtu
Gas price at USD8/mmbtu
Gas @USD8/mmbtu; oil @USD65/bbl

July 2014 58


SBI: Levered to economic growth; RoE to rise 1.7x in three years
Enviable liability franchise (SA ratio of ~35%), strong capitalization (tier-I of
9.6%+) and lowest net stress loans (6.2%) makes SBI best placed to benefit from
an upturn in the economic cycle.
Well-provided pension liability and management focus to bring efficiency will
lead to modest opex growth over FY14-17. With reversion expected in asset
quality, SBI to deliver highest earnings growth of 35%+ over FY14-17.
Return ratios to rebound, with RoE reaching 17%+ v/s 10% in FY14. Stock trades
at 10% discount to LPA, and could significantly re-rate, as the environment
becomes conducive and core parameters improve.

NIMs to improve and credit cost to come down (%)


Highest ever capitalization; rapidly rising branch network

Expect sharp improvement in RoE; stock trades below LPA


3.4
3.5
3.0
2.8
2.7
2.6
3.2
3.8
3.3
3.2
3.2
3.2 3.2
0.7
0.2
0.7
0.7
0.6
0.9
1.4
1.5
1.3
1.4
1.2
1.1
1.1
F
Y
0
5
F
Y
0
6
F
Y
0
7
F
Y
0
8
F
Y
0
9
F
Y
1
0
F
Y
1
1
F
Y
1
2
F
Y
1
3
F
Y
1
4
F
Y
1
5
E
F
Y
1
6
E
F
Y
1
7
E
NIM (%) Provisions to average assets (%)
9
,
1
0
2
9
,
1
7
7
9
,
2
3
1
1
0
,
1
8
6
1
1
,
4
4
8
1
2
,
4
9
6
1
3
,
5
4
2
1
4
,
0
9
7
1
4
,
8
1
6
1
5
,
8
6
9
8.0
9.4
8.0
9.1
9.4
9.5
7.8
9.8
9.5
9.7
Branches Tier I
4
1
.
2
4
7
.
5
4
8
.
4
4
6
.
9
4
1
.
6
4
7
.
2
4
9
.
4
4
4
.
8
4
4
.
8
4
2
.
5
CASA Ratio
1.1
1.3
1.3
17.9
10.0
14.0
18.0
22.0
0.0
0.8
1.5
2.3
3.0
M
a
r
-
0
5
M
a
r
-
0
6
M
a
r
-
0
7
M
a
r
-
0
8
M
a
r
-
0
9
M
a
r
-
1
0
M
a
r
-
1
1
M
a
r
-
1
2
M
a
r
-
1
3
M
a
r
-
1
4
M
a
r
-
1
5
M
a
r
-
1
6
P/B (x)
Avg P/BV
1 yr - forward ROE (%)
1.3

July 2014 59


Tata Motors: CVs to recover sharply from longest ever slump
CV cycle recovery, favorable product lifecycle in JLR to drive 31% EPS CAGR (FY15-
17)
Lead indicators of CV industry are turning positive. MHCV demand typically
rebounds strongly.
Recovery could be sharper this time due to longest ever downturn, and
strongest electoral mandate.
Our base case S/A business FY16 SOTP remains at a steep discount of 48% to
FY11 levels.
JLR demand remains strong. Easing of capacity constraints (4QFY16) with broad-
basing of portfolio to drive strong FCF over FY14-17.

Sharp rebound in S/A profitability expected on CV cycle recovery


JLR FCF to improve significantly over FY14-17E

Base case S/A SOTP contribution to increase significantly


(5.0)
-
5.0
10.0
15.0
-
50
100
150
200
250
F
Y
0
3
F
Y
0
4
F
Y
0
5
F
Y
0
6
F
Y
0
7
F
Y
0
8
F
Y
0
9
F
Y
1
0
F
Y
1
1
F
Y
1
2
F
Y
1
3
F
Y
1
4
E
F
Y
1
5
E
F
Y
1
6
E
F
Y
1
7
E
S/A MHCV vol. ('000 units) S/A margins (%)
(3.4)
25.6
29.1
18.3
15.5 12.2
23.3
13.4
-76
868
1,090
512
978
-3
709
803
FY10 FY11 FY12 FY13 FY14E FY15E FY16E FY17E
JLR vol. gr. (%) FCF (GBP m)
21
39
53
73
97 90
82
78
71
53
40
20
(3)
4
13
17
8 9 7 7
6
6 5 5
FY10 FY11 FY12 FY13 FY14E FY15E FY16E FY17E
JLR S/A Others

July 2014 60


Sector / Portfolio Picks BSE-100 MOSL Wt Wt relative to BSE-100 Sector Stance
Financials 27.4 29.0 1.6 Overweight
Private 15.2 13 -2.2 Neutral
ICICI Bank 5.2 6 0.8 Buy
Axis Bank 2.1 5 2.9 Buy
Yes Bank 0.6 2 1.4 Buy
NBFCs 7.5 9 1.5 Overweight
HDFC 4.9 4 -0.9 Buy
Shriram Transport 0.5 3 2.5 Buy
LIC Housing 0.3 2 1.7 Buy
PSU 4.6 7 2.4 Overweight
SBI 2.8 5 2.2 Buy
Union Bank 0.2 2 1.8 Buy
Cap Goods, Infra & Cement 10.3 12.0 1.7 Overweight
Larsen & Toubro 4.5 6 1.5 Buy
BHEL 0.8 3 2.2 Buy
ACC 0.4 3 2.6 Buy
Auto 8.3 10.0 1.7 Overweight
Tata Motors 2.7 4 1.3 Buy
Maruti 1.1 4 2.9 Buy
Bharat Forge 0.3 2 1.7 Buy
Technology 12.8 9.0 -3.8 Underweight
Infosys 4.9 5 0.1 Buy
HCL Tech 1.3 2 0.7 Buy
Tech Mahindra 1.0 2 1.0 Buy
Energy 11.1 8.0 -3.1 Underweight
ONGC 2.8 5 2.2 Buy
BPCL 0.5 3 2.5 Buy
Consumer / Retail 11.3 6.0 -5.3 Underweight
ITC 5.8 4 -1.8 Buy
Jubilant Food 0.0 2 2.0 Buy
Metals 4.9 4.0 -0.9 Neutral
Hindalco 0.7 2 1.3 Buy
JSPL 0.4 2 1.6 Buy
Utilities 4.8 4.0 -0.8 Underweight
NTPC 1.0 4 3.0 Buy
Healthcare 5.3 3.0 -2.3 Underweight
Lupin 0.8 3 2.2 Buy
Telecom 2.0 2.0 0.0 Neutral
Bharti Airtel 1.3 2 0.7 Buy
Others 1.8 13.0 11.2 Overweight
Alembic Pharma 0.0 1 1.0 Buy
Ashok Leyland 0.1 1 0.9 Buy
Bata 0.0 1 1.0 Buy
Dalmia Bharat 0.0 1 1.0 Buy
Dewan Housing 0.0 1 1.0 Buy
IndiaBulls Housing 0.0 1 1.0 Buy
Jain Irrigation 0.0 1 1.0 Buy
Nagarjuna Construction 0.0 1 1.0 Not Rated
OBC 0.0 1 1.0 Buy
PVR 0.0 1 1.0 Buy
Sobha Developers 0.0 1 1.0 Buy
TVS Motor 0.0 1 1.0 Buy
Voltas 0.0 1 1.0 Buy
Cash 0.0 0.0 0.00
Total 100.0 100.0
MOSL model
portfolio
June 2014 Results Preview

July 2014 61

BSE Sensex: 25,962 S&P CNX: 7,752 4 July 2014

MOSL Universe:
1QFY15 Highlights
&
Ready Reckoner
Note: In our quarterly performance tables, our four-quarter numbers may not always add up to the full-year
numbers. This is because of differences in classification of account heads in the companys quarterly and annual
results or because of differences in the way we classify account heads as opposed to the company.
All stock prices and indices as on 4 July 2014, unless otherwise stated.
MOSL UNIVERSE

July 2014 62
MOSL Universe: 1QFY15 aggregate performance highlights (Ex RMs)

Quarter-wise sales growth (% YoY)

Quarter-wise net profit growth (% YoY)

Sectoral sales growth - quarter ended June 2014 (%)

Sectoral EBITDA growth - quarter ended June 2014 (%)

Sectoral net profit growth - quarter ended June 2014 (%)

12.9%
12.9%
11.0%
13.0%
Sep-13 Dec-13 Mar-14 June-14E
8.0%
12.6%
8.5%
13.7%
Sep-13 Dec-13 Mar-14 June-14E
19 19 16 15
13 13
12 12
11 11
10
9
1 1
-9
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29 23 23
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MOSL UNIVERSE

July 2014 63
Corporate Scoreboard (quarter ended June 2014)

Top 10 by sales growth (%)

Worst 10 by sales growth (%)

Top 10 by EBITDA growth (%)

Worst 10 by EBITDA growth (%)

Top 10 by net profit growth (%)

Worst 10 by net profit growth (%)

Source: MOSL

116
40
36
33
30 30 29 29 29 28
M

&

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MOSL UNIVERSE

July 2014 64
Annual performance - MOSL universe (INR Billion)

SECTOR Sales Change YoY (%) EBITDA Change YoY (%) PAT Change YoY (%)
FY15E FY16E FY17E FY15E FY16E FY17E FY15E FY16E FY17E FY15E FY16E FY17E FY15E FY16E FY17E FY15E FY16E FY17E
Auto (11) 4,968 5,937 6,624 13.6 19.5 11.6 738 916 1,080 16.9 24.1 17.9 342 452 555 19.0 32.1 22.7
Capital Goods (9) 1,547 1,815 2,151 2.8 17.3 18.5 157 199 256 3.3 26.7 28.7 101 141 188 0.7 39.8 33.3
Cement (13) 1,278 1,508 1,763 14.4 18.0 16.9 224 317 422 23.4 41.7 33.2 93 149 226 30.5 60.6 51.0
Consumer (14) 1,521 1,750 2,020 14.2 15.0 15.4 322 374 435 15.4 16.2 16.2 227 264 306 15.7 16.6 16.0
Financials (32) 2,902 3,446 4,135 15.6 18.7 20.0 2,252 2,701 3,291 15.0 19.9 21.9 1,097 1,357 1,676 20.9 23.7 23.4
Private Banks (10) 750 898 1,108 16.6 19.8 23.4 651 786 976 17.0 20.8 24.1 392 476 587 18.3 21.3 23.3
PSU Banks (12) 1,707 2,027 2,416 14.7 18.7 19.1 1,168 1,409 1,723 12.9 20.6 22.3 428 558 709 26.4 30.2 27.1
NBFC (10) 445 521 612 17.5 17.0 17.5 432 505 592 18.2 16.9 17.2 276 323 379 16.6 17.1 17.3
Healthcare (14) 1,066 1,212 1,383 11.2 13.6 14.1 275 310 360 18.0 12.8 15.8 167 206 243 12.5 23.4 18.3
Media (8) 188 216 245 11.9 15.1 13.4 56 66 79 16.3 19.3 18.4 27 35 46 16.3 32.0 29.3
Metals (9) 4,832 5,207 5,543 5.1 7.8 6.5 1,011 1,098 1,163 17.7 8.6 6.0 381 412 437 27.0 8.0 6.0
Oil & Gas (13) 17,726 17,846 17,686 -0.8 0.7 -0.9 1,623 1,830 2,014 10.6 12.8 10.0 861 973 1,060 4.3 13.0 9.0
Excl. RMs (10) 8,495 8,577 8,658 4.6 1.0 0.9 1,310 1,489 1,636 12.6 13.7 9.8 748 836 911 7.2 11.8 9.0
Real Estate (9) 249 283 338 12.1 13.6 19.4 83 104 133 15.1 25.3 28.1 29 42 62 19.1 45.3 47.0
Retail (3) 179 213 255 16.9 19.2 19.7 18 22 26 23.3 24.0 21.0 11 14 17 18.7 23.6 23.0
Technology (10) 2,703 3,039 3,363 10.2 12.4 10.7 707 790 855 9.2 11.7 8.1 546 618 676 11.4 13.3 9.3
Telecom (4) 1,581 1,737 1,889 9.1 9.9 8.7 544 617 682 13.8 13.5 10.4 111 142 182 58.2 27.7 28.2
Utilities (10) 2,314 2,551 2,764 9.4 10.3 8.3 684 784 882 9.6 14.7 12.4 405 457 515 9.1 12.9 12.7
Others (13) 505 589 685 16.9 16.7 16.3 84 102 121 24.6 21.3 18.3 45 57 71 35.2 27.2 23.5
MOSL (172) 43,558 47,348 50,845 5.6 8.7 7.4 8,776 10,232 11,798 13.8 16.6 15.3 4,441 5,319 6,258 15.2 19.8 17.6
Excl. RMs (169) 34,327 38,079 41,817 8.9 10.9 9.8 8,464 9,890 11,420 14.3 16.9 15.5 4,329 5,183 6,108 16.1 19.7 17.9
Sensex (30) 11,580 12,862 13,978 7.2 11.1 8.7 2,586 3,032 3,546 13.0 17.3 16.9 1,352 1,629 1,943 14.7 20.5 19.2
Nifty (50) 13,260 14,712 15,988 7.2 10.9 8.7 2,959 3,477 4,070 12.2 17.5 17.1 1,553 1,872 2,230 13.8 20.5 19.1
For Banks : Sales = Net Interest Income, EBITDA = Operating Profits; Note: Sensex & Nifty Numbers are Free Float.

Valuations - MOSL universe
PE (x) EV / EBITDA (x) P/BV (x) RoE (%) Div Yield (%) EARN. CAGR
Sector FY15E FY16E FY17E FY15E FY16E FY17E FY15E FY16E FY17E FY15E FY16E FY17E FY14 (FY14-FY16)
Auto (11) 14.7 11.1 9.1 6.5 5.0 3.9 3.1 2.5 2.1 21.1 22.8 22.8 1.3 25.4
Capital Goods (9) 34.8 24.9 18.7 20.4 15.3 11.3 3.8 3.4 3.1 11.0 13.9 16.4 1.1 18.6
Cement (13) 26.1 16.2 10.7 12.2 8.4 5.9 2.5 2.3 1.9 9.7 14.0 18.1 1.0 44.8
Consumer (14) 31.0 26.6 22.9 21.1 18.0 15.3 11.4 10.2 9.0 36.6 38.2 39.4 1.6 16.1
Financials (32) 12.2 9.8 8.0 N.M N.M N.M 1.8 1.6 1.5 15.1 16.5 18.3 2.0 22.3
Private Banks (10) 15.8 13.0 10.5 N.M N.M N.M 2.8 2.4 2.1 17.6 18.5 20.0 1.4 19.8
PSU Banks (12) 8.8 6.7 5.3 N.M N.M N.M 1.0 0.9 0.9 11.6 13.6 16.0 2.3 28.3
NBFC (10) 12.3 10.5 8.9 N.M N.M N.M 2.5 2.2 1.9 20.5 20.8 21.1 2.7 16.8
Healthcare (14) 25.6 20.8 17.6 15.4 13.3 11.2 5.2 4.3 3.6 20.1 20.6 20.4 0.7 17.8
Media (8) 26.5 20.1 15.5 12.3 10.1 8.1 5.9 5.0 4.1 22.4 24.9 26.5 1.4 23.9
Metals (9) 11.5 10.6 10.0 6.2 5.7 5.3 1.2 1.1 1.1 10.9 10.8 10.6 2.6 17.1
Oil & Gas (13) 12.1 10.7 9.8 7.1 6.2 5.5 1.6 1.4 1.3 13.2 13.5 13.2 2.4 8.6
Excl. RMs (10) 12.0 10.7 9.8 6.9 6.1 5.3 1.6 1.5 1.3 13.8 13.8 13.6 2.2 9.5
Real Estate (9) 28.5 19.6 13.4 14.9 11.9 9.1 1.4 1.3 1.2 4.9 6.8 9.3 1.4 31.6
Retail (3) 39.4 31.8 25.9 24.9 19.8 16.0 9.5 7.7 6.3 24.1 24.3 24.4 0.7 21.1
Technology (10) 17.9 15.8 14.4 12.4 10.7 9.6 4.7 3.9 3.3 26.1 24.8 22.8 1.6 12.3
Telecom (4) 23.7 18.6 14.5 6.8 6.0 5.0 1.9 1.7 1.6 7.9 9.3 10.8 0.6 42.1
Utilities (10) 14.1 12.5 11.1 10.2 9.0 8.0 2.1 1.9 1.8 15.0 15.6 16.1 6.4 11.0
Others (13) 20.3 16.0 12.9 12.2 9.8 8.0 4.2 3.5 2.9 20.6 21.9 22.4 1.1 31.2
MOSL (172) 16.1 13.4 11.4 N.M N.M N.M 2.4 2.2 1.9 15.1 16.1 16.8 2.0 17.4
MOSL Excl. RMs (169) 16.1 13.5 11.4 N.M N.M N.M 2.5 2.2 2.0 15.3 16.3 17.0 2.0 17.9
Sensex (30) 17.0 14.1 11.9 N.M N.M N.M 2.7 2.4 2.1 16.1 17.1 17.9 1.7 17.6
Nifty (50) 16.9 14.0 11.8 N.M N.M N.M 2.7 2.4 2.1 15.8 16.9 17.6 1.7 17.1
N.M. : Not Meaningful.

MOSL UNIVERSE

July 2014 65
Ready reckoner: quarterly performance

Sector CMP Sales EBITDA Net Profit

(INR)
4.7.14
Reco Jun-14
Var %
YoY
Var %
QoQ
Jun-14
Var %
YoY
Var %
QoQ
Jun-14
Var %
YoY
Var %
QoQ
Automobiles
Amara Raja Batt. 496 Buy

9,831 10.0 10.7

1,635 12.4 18.7

1,034 5.7 25.1
Ashok Leyland 36 Buy

22,615 -4.3 -26.5

440 89.1 -76.1

-1,283 Loss Loss
Bajaj Auto 2,299 Buy

52,621 7.1 6.7

10,089 11.3 8.3

8,146 10.4 6.8
Eicher Motors 8,636 Buy

21,731 30.1 12.9

2,668 60.5 20.2

1,580 71.1 13.6
Exide Inds. 159 Neutral

18,502 13.8 15.0

2,985 13.8 36.4

1,853 16.7 40.2
Hero Motocorp 2,583 Buy

70,358 14.8 9.0

8,205 20.6 31.1

6,798 23.9 22.6
Mahindra & Mahindra 1,229 Buy

94,991 -2.1 -7.0

12,285 -12.3 15.9

7,333 -19.4 -19.9
Maruti Suzuki 2,643 Buy

112,485 9.9 -7.0

13,110 12.4 5.1

7,212 14.2 -9.9
Tata Motors 468 Buy

600,718 28.4 -8.0

90,026 44.8 -10.0

35,045 91.1 -17.3
TVS Motor 171 Buy

23,881 35.7 10.8

1,624 64.2 17.1

953 83.7 15.9
Sector Aggregate 1,027,732 19.4 -5.4 143,067 29.2 -3.1 68,669 39.4 -10.7

Capital Goods

ABB 1,120 Neutral

18,556 6.0 1.5

1,322 22.6 5.2

540 36.4 4.5
BHEL 263 Buy

54,632 -14.0 -63.0

1,609 -58.6 -94.1

762 -83.6 -96.0
Crompton Greaves 207 Buy

34,969 10.8 -7.2

1,787 23.4 -5.0

525 -12.6 -17.7
Cummins India 675 Buy

10,746 2.4 10.6

1,909 8.7 11.7

1,795 8.0 26.6
Havells India 1,200 Neutral

11,661 10.9 -11.0

1,539 9.1 -13.2

1,039 0.9 -24.1
Larsen & Toubro 1,742 Buy

103,554 5.4 -48.4

11,539 15.4 -58.1

7,041 -4.8 -69.9
Siemens 990 Sell

26,414 0.0 -2.4

1,636 0.3 -12.2

727 LP -17.6
Thermax 956 Buy

8,711 1.0 -37.0

877 7.7 -34.4

579 15.2 -45.4
Voltas 215 Buy

16,242 1.3 11.0

1,023 66.5 -2.9

738 81.8 -11.7
Sector Aggregate 285,486 0.9 -40.8 23,239 2.7 -64.6 13,747 -16.3 -71.9

Cement
ACC 1,452 Buy

29,833 6.7 0.5

3,889 -10.3 6.5

2,656 2.5 -13.9
Ambuja Cements 224 Neutral

25,053 6.8 -5.1

5,172 5.1 -10.5

3,771 16.3 -15.7
Birla Corporation 418 Buy

8,083 4.7 3.9

650 -2.7 17.2

392 -14.8 20.3
Grasim Industries 3,388 Buy

12,999 13.1 -15.0

1,148 -43.3 -16.9

1,199 -46.8 -3.4
India Cements 116 Neutral

12,624 1.9 16.9

1,342 -29.7 81.0

-46 PL Loss
Jaiprakash Associates 73 Buy

34,727 4.8 2.1

8,592 9.5 -1.5

59 -71.8 -93.7
Shree Cement 7,276 Buy

16,345 13.4 -1.5

4,498 18.4 5.6

3,048 7.2 34.1
Ultratech Cement 2,604 Buy

55,830 12.6 -4.3

10,203 -2.7 -10.7

6,186 -8.0 -18.9
Sector Aggregate 195,493 8.5 -1.7 35,495 -1.4 -2.8 17,264 -6.6 -11.4

Consumer
Asian Paints 588 Neutral

32,554 15.5 -0.3

5,209 17.8 17.2

3,379 22.8 13.6
Britannia 1,016 Buy

15,719 12.0 -3.0

1,383 18.4 5.3

1,020 18.2 -2.8
Colgate 1,664 Neutral

9,798 16.0 6.4

1,950 18.0 -3.4

1,407 8.4 1.6
Dabur 191 Neutral

18,988 15.0 7.3

2,791 18.5 -3.8

2,222 19.4 -5.6
Emami 543 Buy

4,220 10.0 -5.3

633 6.9 -46.3

609 0.3 -46.5
Godrej Consumer 809 Neutral

19,784 15.0 2.8

2,611 18.3 -21.8

1,653 26.7 -29.0
GSK Consumer 4,751 Neutral

9,894 16.0 -8.3

1,484 25.1 -21.6

1,463 21.9 -14.8
Hind. Unilever 624 Sell

74,559 9.5 5.1

12,153 11.9 12.8

9,623 8.7 15.6
ITC 333 Buy

84,482 14.0 -8.6

31,934 14.4 -0.3

22,061 16.6 -3.2
Marico 249 Buy

16,280 18.0 52.2

2,475 9.0 62.8

1,581 1.8 46.4
Nestle 4,970 Neutral

23,791 7.5 2.8

5,139 5.3 5.8

2,958 4.8 0.9
Pidilite Inds. 333 Neutral

11,874 17.0 30.9

2,553 14.0 118.6

1,754 13.5 89.7
Radico Khaitan 112 Buy

4,109 15.0 16.9

707 15.7 76.6

337 10.1 270.2
United Spirits 2,453 Neutral

25,212 15.0 15.4

2,773 -0.3 36.8

1,323 12.0 67.3
Sector Aggregate 351,263 13.1 2.8 73,795 13.3 5.6 51,390 14.1 3.1

MOSL UNIVERSE

July 2014 66


(INR)
4.7.14
Reco Jun-14
Var %
YoY
Var %
QoQ
Jun-14
Var %
YoY
Var %
QoQ
Jun-14
Var %
YoY
Var %
QoQ
Healthcare

Alembic Pharma 310 Buy

5,051 18.3 8.9

909 27.2 -0.4

612 31.1 -0.2
Biocon 543 Sell

8,052 15.9 11.4

1,771 21.2 4.2

1,149 22.9 1.7
Cadila Health 1,105 Buy

20,131 23.0 2.3

3,621 26.7 1.0

2,419 23.7 -4.3
Cipla 448 Neutral

29,744 20.7 18.1

5,795 -14.2 41.6

3,559 -25.1 36.5
Divis Labs 1,527 Buy

5,967 15.7 -19.1

2,130 8.7 -17.8

1,581 -9.5 -18.1
Dr Reddy s Labs 2,679 Buy

34,343 23.1 -1.3

8,071 61.2 6.4

5,257 60.6 9.2
Glenmark Pharma 602 Buy

14,185 14.6 -13.5

2,494 0.8 -22.7

1,082 -15.9 -37.9
GSK Pharma 2,548 Neutral

6,878 8.0 14.7

1,277 12.4 30.8

1,167 22.7 20.8
IPCA Labs. 881 Buy

9,583 19.0 27.8

2,304 34.7 26.4

1,526 112.6 11.3
Lupin 1,088 Buy

28,309 22.7 0.5

6,567 44.4 2.1

3,943 69.1 -4.2
Ranbaxy Labs 534 Buy

27,484 2.4 11.4

1,714 -34.7 13.7

361 -73.0 164.9
Sanofi India 3,270 Buy

4,929 13.3 10.8

1,016 16.2 25.4

655 27.9 26.6
Sun Pharma 709 Buy

37,797 14.8 5.9

14,639 6.2 4.1

12,213 8.4 -6.3
Torrent Pharma 696 Neutral

10,819 11.3 11.3

2,057 -1.1 18.8

1,247 -16.3 34.9
Media
D B Corp 330 Buy

5,011 11.5 10.3

1,292 -2.7 23.5

771 1.4 26.4
Dish TV 62 Buy

6,356 9.9 -0.2

1,289 6.0 0.0

-502 Loss Loss
HT Media 124 Neutral

5,878 8.7 8.1

786 0.8 4.2

454 -4.4 30.5
Jagran Prakashan 135 Buy

4,496 8.9 6.9

1,051 3.1 33.1

582 0.7 91.4
PVR 667 Buy

3,601 7.4 14.6

604 1.7 82.1

133 -19.4 LP
Sun TV 468 Buy

6,637 10.3 27.6

3,899 10.2 -2.5

1,811 10.2 -8.3
Zee Entertainment 299 Neutral

11,180 14.9 -3.5

2,944 1.0 -5.5

1,977 -12.0 -9.2
Sector Aggregate 43,159 10.9 6.6 11,865 4.2 4.8 5,226 -6.1 6.0
Metals
Hindalco 173 Buy

226,272 14.8 -8.1

24,073 31.3 -4.8

4,465 0.8 -50.4
Hindustan Zinc 167 Buy

33,373 11.8 -8.4

17,586 17.0 0.2

17,779 11.7 -5.5
JSPL 325 Buy

55,808 22.9 9.4

17,656 17.3 34.4

5,655 -18.5 40.5
JSW Steel 1,271 Buy

111,674 19.3 -10.6

23,018 31.6 -7.8

7,574 111.2 -4.9
Nalco 59 Buy

17,237 10.5 -6.2

2,687 75.6 -13.1

2,091 31.0 1.5
NMDC 184 Buy

33,915 18.1 -12.7

22,482 18.0 -9.0

18,326 16.6 -4.4
SAIL 95 Neutral

110,518 7.6 -18.2

13,369 38.2 9.5

4,525 -14.1 6.9
Sesa Sterlite 305 Buy

174,543 21.5 -16.0

63,650 16.2 -4.5

11,753 95.9 -10.9
Tata Steel 536 Buy

337,537 2.9 -20.4

45,587 23.6 -9.0

13,238 18.1 22.4

Others

Arvind 245 Buy

17,886 20.0 -4.8

2,416 19.0 -2.7

882 30.4 -6.2
Bata India 1,329 Buy

6,440 12.5 30.0

1,108 15.3 68.6

713 15.0 81.0
Castrol India 344 Neutral

9,342 8.8 14.6

2,085 9.4 44.5

1,482 5.7 47.8
Gujarat Pipavav 124 Buy

1,504 23.3 -3.7

836 52.2 -8.6

639 81.5 -10.3
Jain Irrigation 127 Buy

16,350 16.0 -10.8

2,419 16.0 -5.6

709 94.8 -4.5
Just Dial 1,523 Buy

1,349 29.0 8.6

452 24.6 20.9

362 29.0 5.9
Kaveri Seed 801 Buy

9,569 30.0 2,340.5

2,232 35.9 3,588.4

2,192 35.5 12,351.7
Sintex Inds. 98 Buy

14,603 29.4 -26.4

2,305 43.2 -35.5

756 50.3 -53.1
Symphony 1,068 Buy

1,475 32.7 30.2

429 42.7 28.0

319 23.3 15.7
UPL 352 Buy

27,365 11.4 -18.0

5,140 12.6 -23.6

2,552 20.0 -36.9
V-Guard Inds 660 Buy

4,612 13.0 9.2

387 25.2 9.4

220 24.6 7.3
Sector Aggregate 110,495 17.6 -1.3 19,809 21.4 1.7 10,826 29.2 5.2

MOSL UNIVERSE

July 2014 67


(INR)
4.7.14
Reco Jun-14
Var %
YoY
Var %
QoQ
Jun-14
Var %
YoY
Var %
QoQ
Jun-14
Var %
YoY
Var %
QoQ
Oil & Gas

BPCL 601 Buy

639,124 8.9 -14.5

8,149 -10.0 -87.1

1,568 4.3 -96.1
Cairn India 364 Neutral

44,508 9.5 -11.8

31,727 5.4 -17.5

25,429 -18.7 -16.2
GAIL 464 Neutral

144,409 12.3 -0.2

14,816 1.2 10.8

8,210 1.6 -15.5
Gujarat State Petronet 95 Neutral

2,637 -10.9 14.4

2,350 -12.7 17.6

1,128 -10.7 23.5
HPCL 422 Buy

551,138 6.5 -14.1

5,931 LP -89.9

-1,595 Loss PL
IOC 349 Buy

1,213,989 10.1 -9.9

35,328 LP -73.7

10,392 LP -88.9
Indraprastha Gas 365 Neutral

8,499 -5.7 -12.1

2,034 5.7 6.7

974 11.6 7.7
MRPL 72 Neutral

167,048 9.4 -12.7

3,763 123.6 3.7

1,892 LP -82.3
Oil India 585 Buy

22,217 12.2 21.7

8,736 25.3 146.5

7,193 18.1 27.2
ONGC 422 Buy

213,275 11.0 2.1

114,556 36.4 2.8

61,250 52.5 25.3
Petronet LNG 178 Buy

104,379 23.6 0.1

4,200 5.6 8.6

1,746 -22.5 3.2
Reliance Inds. 1,032 Neutral

984,782 12.4 3.5

77,194 9.1 -7.3

53,456 -0.1 -5.1
Excl. RMs 1,691,754 12.3 0.6 259,376 19.7 -0.8 161,280 16.1 -2.3

Real Estate
DLF 219 Buy

19,645 -15.1 -0.3

5,697 -37.8 57.0

1,018 -43.8 -53.7
Godrej Properties 240 Neutral

2,831 40.4 -34.0

594 46.6 -21.6

343 -13.1 -29.0
Indiabulls Real Estate 95 Buy

3,466 -31.8 5.8

971 -33.9 -14.1

337 -53.6 -19.1
Jaypee Infratech 33 Buy

6,623 -13.9 -13.4

2,318 -30.8 -9.5

122 -85.0 -7.8
Mahindra Lifespace 554 Buy

1,820 3.4 -3.9

455 -11.9 75.4

213 -2.2 -29.6
Oberoi Realty 259 Buy

2,130 -2.5 -3.4

1,193 -10.6 -4.9

876 -13.9 13.8
Phoenix Mills 346 Buy

773 10.8 -1.7

526 10.7 9.5

421 0.5 15.6
Prestige Estates 263 Buy

4,782 -4.0 -20.5

1,195 -7.3 -2.9

721 -16.8 -24.2
Sobha Developers 491 Buy

5,149 11.5 -17.8

1,442 3.7 -15.8

567 13.1 -17.5
Sector Aggregate 47,219 -9.5 -9.3 14,391 -25.8 10.6 4,617 -31.7 -26.8

Retail
Jubilant Foodworks 1,303 Buy

5,075 28.0 17.0

787 18.0 41.3

372 9.3 48.9
Future Retail 136 Under Review

24,139 7.0 2.9

2,173 14.3 -9.8

-83 LP LP
Shopper's Stop 392 Neutral

6,230 16.0 -15.5

343 46.7 -9.7

73 213.7 -10.4
Titan Company 357 Buy

27,969 -10.0 0.4

2,657 8.5 -5.1

1,926 5.6 -12.3
Sector Aggregate 63,413 0.7 0.6 5,959 13.5 -3.0 2,288 8.4 -10.1

Technology

HCL Technologies 1,481 Buy

84,442 21.6 1.1

21,918 35.7 -1.8

16,398 36.9 1.0
Hexaware Tech. 155 Neutral

5,953 10.9 1.1

1,195 -6.1 5.5

854 -12.7 21.5
Infosys 3,239 Buy

127,352 13.0 -1.1

32,989 10.6 -9.4

27,824 17.2 -7.0
KPIT Tech. 180 Buy

6,928 13.0 -1.0

975 0.3 -13.7

585 -2.7 -4.6
Mindtree 853 Neutral

8,358 29.0 1.5

1,664 39.7 -6.0

1,243 -8.2 26.6
MphasiS 429 Neutral

14,594 NA 41.7

2,512 NA 42.6

1,684 NA 37.9
Persistent Systems 1,100 Buy

4,305 20.5 -3.6

990 27.4 -18.0

596 4.3 -11.4
TCS 2,410 Neutral

220,675 22.7 2.4

64,401 25.0 -3.2

49,488 24.0 -6.6
Tech Mahindra 2,116 Buy

49,981 21.8 -1.2

9,797 13.3 -8.6

6,536 0.1 8.4
Wipro 548 Neutral

115,520 18.7 -0.9

27,314 35.5 -3.1

20,909 28.8 -6.1

Telecom

Bharti Airtel 339 Buy

224,878 11.0 1.2

74,616 14.0 2.1

12,563 82.4 30.7
Bharti Infratel 262 Buy

28,745 9.6 3.0

11,968 14.4 3.8

4,354 21.8 -7.8
Idea Cellular 135 Buy

73,482 12.4 4.3

23,741 13.0 6.5

6,780 39.0 15.0
Reliance Comm 143 Neutral

54,836 1.3 -3.3

19,195 12.8 3.7

-268 PL PL

MOSL UNIVERSE

July 2014 68


(INR)
4.7.14
Reco Jun-14
Var %
YoY
Var %
QoQ
Jun-14
Var %
YoY
Var %
QoQ
Jun-14
Var %
YoY
Var %
QoQ
Utilities

CESC 755 Buy

14,475 0.8 16.2

3,375 5.1 -25.7

1,442 10.1 -40.7
Coal India 394 Neutral

176,863 7.4 -11.6

44,563 12.6 -12.8

41,774 11.8 -20.9
Jaiprakash Power 23 Buy

8,549 8.7 99.0

6,465 9.9 213.0

1,022 10.1 LP
JSW Energy 84 Neutral

27,732 12.2 34.7

8,879 -3.8 28.5

3,381 -15.8 88.5
NHPC 27 Neutral

17,759 9.7 58.2

12,284 14.7 LP

7,632 6.6 LP
NTPC 159 Buy

191,265 22.5 -8.7

39,309 -7.8 -11.5

23,272 4.5 -7.5
Power Grid Corp. 144 Buy

40,969 15.2 4.1

34,569 13.1 3.8

11,750 11.1 -1.3
PTC India 98 Buy

32,250 16.4 13.2

471 38.7 -50.7

443 51.3 -36.4
Reliance Infrastructure 791 Buy

28,775 -12.2 6.2

4,525 2.8 -5.5

3,239 -13.4 -35.2
Tata Power 107 Neutral

96,106 2.9 8.7

24,781 19.9 36.0

3,893 260.1 578.2

Sector CMP Net Interest Income Operating Profit Net Profit

(INR)
4.7.14
Reco Jun-14
Var %
YoY
Var %
QoQ
Jun-14
Var %
YoY
Var %
QoQ
Jun-14
Var %
YoY
Var %
QoQ
Financials
Private Banks
Axis Bank 1,935 Buy

32,414 13.1 2.4

28,639 0.7 -11.8

16,558 17.5 -10.1
Federal Bank 129 Buy

5,750 12.8 -8.0

3,748 -6.4 -10.8

2,156 104.1 -22.2
HDFC Bank 856 Buy

51,972 17.6 4.9

39,198 18.6 3.7

23,074 25.1 -0.8
ICICI Bank 1,462 Buy

45,061 17.9 3.4

44,439 16.5 -0.2

26,573 16.8 0.2
IndusInd Bank 569 Buy

8,268 21.7 5.8

7,172 11.8 -0.3

4,160 24.2 5.0
ING Vysya Bank 662 Buy

4,777 12.3 1.4

3,318 1.5 32.7

1,832 4.6 31.7
Kotak Mahindra Bank 884 Neutral

9,990 9.0 3.4

6,927 -11.1 14.1

4,234 5.1 4.0
Yes Bank 557 Buy

8,019 21.7 11.4

7,210 6.0 6.0

4,697 17.2 9.2
Pvt Bkg. Sector Aggregate 166,250 16.3 3.7 140,651 10.0 -0.7 83,285 19.9 -1.7
PSU Banks

Bank of Baroda 875 Buy

32,602 12.8 4.4

23,429 -3.8 -8.6

11,063 -5.3 -4.4
Bank of India 305 Neutral

29,261 15.3 -4.0

20,400 -6.4 2.2

6,244 -35.2 12.0
Canara Bank 448 Buy

24,689 24.0 -2.6

18,087 -4.7 -3.9

6,821 -13.9 11.7
Indian Bank 185 Buy

11,728 6.9 8.8

7,348 -14.5 4.5

2,997 -5.6 10.5
Oriental Bank of Commerce 322 Buy

13,432 2.8 2.6

9,763 -10.3 -29.4

2,961 -16.2 -4.6
Punjab National Bank 980 Buy

42,736 9.4 6.8

29,891 0.5 -5.8

11,293 -11.4 40.1
State Bank 2,699 Buy

132,172 14.8 2.4

85,214 12.8 -19.8

33,055 2.0 8.7
Union Bank 228 Buy

20,550 7.6 0.1

12,263 -13.1 -7.1

3,744 -33.2 -35.3
PSU Bkg. Sector Aggregate 307,170 13.1 2.2 206,393 1.2 -12.7 78,178 -9.8 6.6
NBFC
Bajaj Finance 2,289 Buy

6,433 7.8 3.6

3,519 6.4 3.8

1,903 8.3 4.5
HDFC 1,009 Buy

17,818 17.1 -16.8

19,928 21.7 -16.4

13,211 12.6 -23.3
IDFC 134 Neutral

7,036 2.6 5.3

8,269 -6.3 -0.8

4,323 -22.4 67.6
Indiabulls Housing 372 Buy

14,678 11.8 11.0

6,030 27.4 28.0

4,462 28.1 -1.2
LIC Housing Fin 327 Buy

5,197 14.3 -2.5

4,915 11.4 -1.6

3,241 4.4 -12.4
M & M Financial 272 Neutral

13,330 116.3 74.8

4,698 12.9 -13.6

1,781 -6.9 -42.7
Power Finance Corp 320 Buy

23,114 19.0 3.0

22,704 18.2 4.8

15,805 24.0 12.9
Rural Electric. Corp. 374 Buy

18,694 16.0 5.4

19,700 20.4 9.8

13,397 12.8 7.4
Shriram Transport Fin. 953 Buy

9,544 5.9 4.6

7,294 -0.7 5.7

3,117 -8.6 5.7
NBFC Bkg. Sector Aggregate 115,845 20.1 5.5 97,058 14.5 -0.2 61,241 10.1 -1.8
Financials Sector Aggregate 589,265 15.3 3.3 444,102 6.6 -6.6 222,704 5.2 1.0

MOSL UNIVERSE

July 2014 69
Ready reckoner: valuations

Sector / Companies CMP Reco EPS (INR) PE (x) EV/EBIDTA (x) RoE (%)
(INR) FY15E FY16E FY17E FY15E FY16E FY17E FY15E FY16E FY17E FY15E FY16E FY17E
Automobiles
Amara Raja Batt. 496 Buy 24.1 30.1 36.2 20.6 16.5 13.7 12.3 9.6 7.8 27.1 27.5 26.9
Ashok Leyland 36 Buy -0.1 1.8 3.5 -578.7 19.9 10.3 13.7 7.1 4.5 -0.4 9.9 17.1
Bharat Forge 675 Buy 22.5 32.3 38.9 30.0 20.9 17.3 14.0 10.7 8.8 18.2 22.4 22.6
Bajaj Auto 2,299 Buy 127.2 146.1 166.3 18.1 15.7 13.8 12.1 10.1 8.4 35.0 33.7 32.0
Eicher Motors 8,636 Buy 222.1 330.7 425.9 38.9 26.1 20.3 21.4 13.5 9.7 26.9 32.3 31.7
Exide Inds. 159 Neutral 7.6 9.8 10.6 21.0 16.2 15.0 10.6 8.2 7.6 15.4 17.3 18.7
Hero Motocorp 2,583 Buy 144.4 176.9 203.6 17.9 14.6 12.7 13.3 10.3 8.2 46.3 46.3 43.0
Mahindra & Mahindra 1,229 Buy 76.9 101.3 109.9 16.0 12.1 11.2 6.0 4.9 4.9 17.5 18.6 18.5
Maruti Suzuki 2,643 Buy 132.5 172.6 222.8 19.9 15.3 11.9 10.1 7.6 5.6 16.1 17.8 19.2
Tata Motors 468 Buy 50.9 68.3 86.8 9.2 6.9 5.4 3.9 2.9 2.2 22.3 23.8 23.9
TVS Motor 171 Buy 10.1 13.7 16.4 16.9 12.5 10.4 10.5 7.7 6.2 29.9 31.6 29.5
Sector Aggregate 14.7 11.1 9.1 6.5 5.0 3.9 21.1 22.8 22.8
Capital Goods
ABB 1,120 Neutral 13.4 20.0 30.3 83.7 56.0 37.0 38.3 28.9 16.7 10.3 14.4 19.6
BHEL 263 Buy 10.0 15.2 19.8 26.2 17.2 13.3 13.6 8.5 6.1 7.3 10.4 12.5
Crompton Greaves 207 Buy 7.3 12.4 17.1 28.4 16.7 12.1 15.7 11.3 8.7 12.4 19.6 22.8
Cummins India 675 Buy 24.6 30.8 38.3 27.4 21.9 17.6 22.8 17.7 13.8 25.1 28.5 31.4
Havells India 1,200 Neutral 48.3 56.0 68.2 24.8 21.4 17.6 15.5 12.9 10.7 29.6 28.6 29.1
Larsen & Toubro 1,742 Buy 48.2 66.1 89.3 36.1 26.4 19.5 21.8 17.3 12.7 14.1 15.8 17.8
Siemens 990 Sell 14.6 19.3 26.5 67.8 51.4 37.4 32.4 25.8 20.6 11.9 14.7 18.5
Thermax 956 Buy 28.0 38.5 58.3 34.2 24.8 16.4 20.1 14.7 9.8 15.5 19.0 24.5
Voltas 215 Buy 8.5 10.6 13.0 25.3 20.4 16.5 17.1 13.7 10.9 14.0 15.4 16.8
Cement
ACC 1,452 Buy 54.4 84.1 119.9 26.7 17.3 12.1 17.7 10.9 7.0 12.8 18.5 23.5
Ambuja Cements 224 Neutral 7.0 9.0 12.3 32.1 24.8 18.2 21.6 15.6 11.4 14.0 16.8 20.5
Birla Corporation 418 Buy 28.7 51.4 77.6 14.6 8.1 5.4 7.9 4.3 2.4 8.3 13.3 17.2
Grasim Industries 3,388 Buy 254.7 370.0 586.0 13.3 9.2 5.8 5.5 3.7 2.4 9.9 12.6 16.8
India Cements 116 Neutral 2.9 10.6 19.0 40.7 11.0 6.1 9.9 6.4 4.4 2.7 8.2 13.2
Jaiprakash Associates 73 Buy 1.5 4.1 5.7 48.2 17.8 12.7 10.5 8.8 7.9 2.4 6.3 8.4
Shree Cement 7,276 Buy 280.2 431.1 610.3 26.0 16.9 11.9 13.2 8.7 5.8 19.5 24.5 27.2
Ultratech Cement 2,604 Buy 91.3 133.0 189.0 28.5 19.6 13.8 16.2 11.1 7.7 13.8 17.4 20.7
Dalmia Bharat 457 Buy -12.3 24.4 82.2 -37.0 18.7 5.6 14.6 7.9 4.8 -3.3 6.5 19.2
J K Cements 394 Buy 22.6 45.3 76.2 17.4 8.7 5.2 8.5 5.5 3.4 8.7 15.8 22.5
JK Lakshmi Cem. 235 Buy 10.5 17.1 34.3 22.3 13.7 6.9 10.4 6.3 4.0 9.2 13.8 23.8
Ramco Cements 304 Buy 9.0 15.1 24.1 33.6 20.1 12.6 14.0 10.1 7.2 8.4 12.9 18.1
Prism Cement 73 Buy 0.4 6.2 11.2 177.9 11.7 6.5 12.7 6.0 3.9 2.0 26.8 35.6
Consumer
Asian Paints 588 Neutral 15.5 18.7 22.8 37.9 31.5 25.8 24.7 20.4 16.3 31.7 32.4 33.1
Britannia 1,016 Buy 38.5 45.6 53.6 26.4 22.3 19.0 18.4 14.9 11.9 42.1 41.3 40.3
Colgate 1,664 Neutral 43.6 51.0 59.7 38.2 32.6 27.9 26.4 21.1 17.8 96.3 99.6 102.6
Dabur 191 Neutral 6.4 7.5 8.8 29.8 25.6 21.6 23.5 20.1 16.9 34.8 33.7 33.2
Emami 543 Buy 19.2 22.8 26.1 28.4 23.8 20.8 23.4 19.3 16.7 45.2 46.4 45.1
Godrej Consumer 809 Neutral 27.3 33.4 40.0 29.6 24.2 20.2 20.4 17.0 14.3 22.9 23.7 23.6
GSK Consumer 4,751 Neutral 138.6 164.7 192.0 34.3 28.8 24.7 30.4 24.9 20.2 30.6 30.7 30.3
Hind. Unilever 624 Sell 18.1 20.1 22.3 34.5 31.1 28.0 25.2 22.1 19.2 107.3 110.2 114.7
ITC 333 Buy 12.9 14.9 17.2 25.9 22.3 19.4 17.6 15.2 13.1 40.6 43.4 45.8
Marico 249 Buy 8.4 9.9 11.3 29.7 25.1 22.0 18.4 15.4 13.2 25.1 24.3 23.1
Nestle 4,970 Neutral 128.2 151.5 174.5 38.8 32.8 28.5 22.4 19.3 16.5 50.1 54.5 57.3
Pidilite Inds. 333 Neutral 10.8 13.0 15.4 30.9 25.6 21.7 19.4 16.0 13.1 23.3 23.5 23.2
Radico Khaitan 112 Buy 8.0 9.2 10.9 14.1 12.2 10.3 9.0 7.9 6.9 11.9 12.5 13.3
United Spirits 2,453 Neutral 42.6 56.0 72.7 57.6 43.8 33.8 30.9 25.7 21.2 7.2 8.9 10.8
MOSL UNIVERSE

July 2014 70

Healthcare
Alembic Pharma 310 Buy 16.3 21.7 26.5 19.0 14.3 11.7 13.2 10.0 8.0 38.9 38.3 35.2
Biocon 543 Sell 23.0 26.8 31.8 23.6 20.3 17.1 14.7 12.3 10.4 13.7 14.4 15.2
Cadila Health 1,105 Buy 46.4 56.8 64.3 23.8 19.5 17.2 17.0 12.2 10.5 25.2 30.1 27.4
Cipla 448 Neutral 17.4 23.4 28.5 25.8 19.1 15.7 15.0 11.5 9.4 12.4 14.6 15.3
Divis Labs 1,527 Buy 65.4 78.8 92.1 23.4 19.4 16.6 16.6 13.8 11.8 27.1 28.2 28.6
Dr Reddy s Labs 2,679 Buy 127.1 146.4 169.2 21.1 18.3 15.8 13.6 11.6 9.9 19.9 19.2 18.6
Glenmark Pharma 602 Buy 26.8 33.7 42.0 22.4 17.9 14.3 13.0 10.9 8.4 19.8 20.0 19.7
GSK Pharma 2,548 Neutral 61.9 84.8 98.0 41.2 30.1 26.0 33.8 22.8 19.3 26.3 34.6 37.6
IPCA Labs. 881 Buy 48.8 59.6 72.7 18.1 14.8 12.1 12.4 10.2 8.2 27.7 26.8 26.1
Lupin 1,088 Buy 41.2 53.0 61.5 26.4 20.5 17.7 15.4 12.5 10.4 23.8 24.7 23.4
Ranbaxy Labs 534 Buy 9.4 18.1 28.1 56.8 29.5 19.0 11.3 17.3 12.5 34.2 16.6 21.4
Sanofi India 3,270 Buy 125.0 152.8 177.5 26.2 21.4 18.4 15.7 12.8 10.7 19.5 21.4 22.4
Sun Pharma 709 Buy 26.6 31.1 35.3 26.6 22.7 20.1 17.4 15.5 13.8 25.7 23.7 21.8
Torrent Pharma 696 Neutral 36.4 43.1 55.7 19.1 16.2 12.5 10.5 9.7 8.1 28.1 27.2 29.1

Media
Dish TV 62 Buy -1.1 0.7 3.5 -57.4 85.1 17.9 11.8 8.8 6.0 NA NA NA
D B Corp 330 Buy 19.2 22.7 26.3 17.2 14.6 12.5 10.1 8.5 7.2 28.6 29.5 29.8
Hindustan Media 170 Buy 17.4 19.8 22.6 9.8 8.6 7.5 4.6 3.5 2.4 19.0 17.9 17.2
HT Media 124 Neutral 8.8 10.0 11.4 14.1 12.3 10.8 5.2 4.2 3.2 10.0 10.3 10.4
Jagran Prakashan 135 Buy 7.9 9.4 10.9 17.2 14.3 12.4 10.3 8.7 7.5 24.2 25.8 26.0
PVR 667 Buy 17.5 28.8 41.1 38.2 23.1 16.2 12.2 9.0 6.9 16.7 23.2 26.5
Sun TV 468 Buy 20.9 25.5 30.5 22.4 18.3 15.4 10.4 8.9 7.6 24.0 27.0 29.2
Zee Entertainment 299 Neutral 10.2 13.0 16.5 29.4 23.0 18.1 18.9 15.0 11.9 31.5 31.4 30.6

Metals
Hindalco 173 Buy 10.9 12.9 19.8 15.9 13.4 8.8 5.8 5.2 4.9 9.2 10.1 13.8
Hindustan Zinc 167 Buy 18.3 18.1 18.7 9.1 9.2 8.9 5.2 4.3 3.6 19.1 16.5 15.1
JSPL 325 Buy 26.7 35.1 40.3 12.2 9.3 8.0 8.7 7.6 6.7 10.3 12.2 12.6
JSW Steel 1,271 Buy 120.0 115.6 140.1 10.6 11.0 9.1 6.7 6.3 5.6 12.4 10.6 11.5
Nalco 59 Buy 3.2 4.1 4.1 18.5 14.3 14.4 7.5 5.3 4.6 6.7 8.2 7.8
NMDC 184 Buy 17.9 18.3 19.6 10.3 10.1 9.4 6.2 6.0 5.5 21.5 21.2 20.6
SAIL 95 Neutral 7.7 7.6 7.2 12.3 12.4 13.1 8.5 7.9 7.4 7.2 6.8 6.1
Sesa Sterlite 305 Buy 21.7 24.1 20.4 14.1 12.7 15.0 4.8 4.3 4.2 8.5 8.8 7.1
Tata Steel 536 Buy 54.1 64.2 69.2 9.9 8.4 7.8 6.5 6.2 5.6 19.3 18.1 16.8

Others
Arvind 245 Buy 18.2 23.6 31.3 13.5 10.4 7.8 6.6 5.4 4.5 16.9 19.0 21.3
Bajaj Electrical 367 Buy 18.6 23.0 27.5 19.8 16.0 13.3 9.1 7.3 6.0 23.8 24.7 24.7
Bata India 1,329 Buy 37.4 47.1 56.2 35.5 28.2 23.6 18.9 14.9 12.3 25.9 26.8 26.1
Castrol India 344 Neutral 10.6 11.9 13.5 32.5 29.0 25.5 22.8 19.7 17.2 70.4 79.4 97.9
Gujarat Pipavav 124 Buy 5.9 7.5 7.4 21.0 16.4 16.6 15.6 12.9 10.5 18.9 21.1 18.3
Jain Irrigation 127 Buy 6.0 10.6 15.0 21.2 12.0 8.5 9.9 7.9 6.4 12.1 18.6 21.7
Just Dial 1,523 Buy 22.0 29.5 37.7 69.2 51.7 40.4 42.0 30.3 22.9 25.9 28.1 28.7
Kaveri Seed 801 Buy 42.4 58.1 75.0 18.9 13.8 10.7 11.9 8.2 5.6 45.0 41.7 37.5
Monsanto India 2,241 Buy 106.3 136.6 169.6 21.1 16.4 13.2 13.5 9.9 7.3 45.2 42.5 38.6
Sintex Inds. 98 Buy 12.8 17.2 21.8 7.7 5.7 4.5 7.2 5.3 4.2 11.1 13.1 14.4
Symphony 1,068 Buy 38.8 50.4 64.4 27.5 21.2 16.6 17.6 13.1 9.7 42.5 42.8 41.5
UPL 352 Buy 29.0 33.5 39.2 12.1 10.5 9.0 7.2 6.2 5.1 21.5 20.7 20.2
V-Guard Inds 660 Buy 31.1 41.0 53.0 21.2 16.1 12.5 12.6 9.9 7.8 26.3 28.2 29.1

MOSL UNIVERSE

July 2014 71

Oil & Gas
BPCL 601 Buy 33.3 45.3 48.1 18.0 13.3 12.5 9.0 7.6 6.6 12.0 14.9 14.4
Cairn India 364 Neutral 55.8 52.1 40.4 6.5 7.0 9.0 3.6 3.5 3.5 17.2 14.4 10.2
Chennai Petroleum 97 Neutral 10.5 14.9 15.7 9.2 6.5 6.2 7.1 6.2 5.6 8.8 11.6 11.3
GAIL 464 Neutral 30.7 32.9 36.5 15.1 14.1 12.7 10.4 8.8 7.9 13.7 13.4 13.6
Gujarat State Petronet 95 Neutral 8.8 10.0 9.9 10.7 9.5 9.6 6.2 5.6 5.7 14.2 14.1 12.4
HPCL 422 Buy 28.3 34.7 40.2 14.9 12.1 10.5 9.3 7.8 7.1 6.3 7.4 8.2
Indraprastha Gas 365 Neutral 28.2 30.9 35.3 12.9 11.8 10.3 6.0 5.1 4.1 20.6 19.5 19.3
IOC 349 Buy 32.4 37.9 41.5 10.8 9.2 8.4 7.5 6.6 5.5 11.2 12.1 12.0
MRPL 72 Neutral 5.1 7.3 7.5 14.2 9.9 9.7 7.0 5.6 5.1 12.1 15.5 14.2
Oil India 585 Buy 64.6 71.7 75.2 9.1 8.2 7.8 6.5 5.5 5.2 17.9 18.0 17.1
ONGC 422 Buy 35.9 42.5 44.7 11.8 9.9 9.4 5.3 4.5 4.4 17.1 18.1 17.0
Petronet LNG 178 Buy 10.4 12.7 16.2 17.2 14.0 11.0 8.2 7.2 5.5 14.6 15.9 17.8
Reliance Inds. 1,032 Neutral 79.0 87.1 108.9 13.1 11.8 9.5 10.8 9.8 6.9 11.2 11.2 12.8
Ex RMS 12.0 10.7 9.8 6.9 6.1 5.3 13.8 13.8 13.6

Real Estate
DLF 219 Buy 3.7 5.9 10.3 59.6 37.3 21.3 20.8 17.5 13.1 2.2 3.5 5.9
Godrej Properties 240 Neutral 8.7 11.7 17.0 27.5 20.5 14.1 19.0 14.7 10.4 9.3 11.3 14.6
Indiabulls Real Estate 95 Buy 9.7 12.0 16.6 9.8 7.9 5.7 12.5 9.6 6.7 5.5 6.5 8.6
Jaypee Infratech 33 Buy 2.6 3.2 4.2 12.8 10.2 7.9 8.4 7.6 6.8 5.8 7.0 8.6
Mahindra Lifespace 554 Buy 25.9 30.8 36.1 21.4 18.0 15.3 16.5 12.5 10.4 7.8 8.5 9.1
Oberoi Realty 259 Buy 13.2 21.2 33.3 19.6 12.2 7.8 13.5 8.3 5.2 9.5 13.7 18.6
Phoenix Mills 346 Buy 7.6 17.4 22.1 45.6 19.8 15.7 11.6 8.5 6.9 6.1 12.5 14.0
Prestige Estates 263 Buy 11.2 16.0 21.3 23.5 16.4 12.4 13.6 10.4 7.8 11.8 14.7 16.6
Sobha Developers 491 Buy 26.9 34.8 40.5 18.2 14.1 12.1 9.4 7.9 6.8 11.1 13.2 13.9

Retail
Jubilant Foodworks 1,303 Buy 25.3 35.1 47.3 51.4 37.1 27.6 24.0 17.3 12.7 22.6 23.8 24.3
Shopper's Stop 392 Neutral 7.8 10.0 12.4 50.0 39.1 31.7 16.2 13.5 11.3 8.3 9.9 11.1
Titan Company 357 Buy 9.8 11.9 14.3 36.3 30.1 25.0 26.7 21.7 18.0 28.4 27.6 27.0

Technology
HCL Technologies 1,481 Buy 99.6 111.7 122.5 14.9 13.3 12.1 10.1 8.6 7.4 36.0 31.6 27.9
Hexaware Tech. 155 Neutral 11.7 13.2 13.4 13.3 11.8 11.6 8.7 8.2 7.8 28.1 28.7 26.6
Infosys 3,239 Buy 204.6 227.6 243.5 15.8 14.2 13.3 10.3 8.8 7.9 24.7 23.8 22.3
KPIT Tech. 180 Buy 14.7 18.2 20.5 12.3 9.9 8.8 6.7 5.1 3.9 20.5 20.7 19.1
Mindtree 853 Neutral 62.2 73.2 80.0 13.7 11.6 10.7 9.6 7.8 6.8 28.3 26.9 24.3
MphasiS 429 Neutral 35.0 39.7 42.4 12.2 10.8 10.1 9.3 8.5 8.1 14.1 15.2 15.4
Persistent Systems 1,100 Buy 74.7 94.6 113.2 14.7 11.6 9.7 7.8 6.1 4.8 22.4 24.0 24.0
TCS 2,410 Neutral 111.9 128.2 141.0 21.5 18.8 17.1 15.6 13.6 12.3 36.4 34.4 30.8
Tech Mahindra 2,116 Buy 138.5 157.4 180.6 15.3 13.4 11.7 9.7 8.1 7.3 28.7 25.7 23.8
Wipro 548 Neutral 34.9 39.3 42.5 15.7 13.9 12.9 10.9 9.6 8.1 22.9 22.0 20.4

Telecom
Bharti Airtel 339 Buy 13.1 16.3 20.6 25.8 20.8 16.4 6.3 5.5 4.6 7.8 8.9 10.3
Bharti Infratel 262 Buy 9.5 11.7 14.6 27.4 22.4 17.9 10.4 9.0 7.8 9.8 11.7 14.1
Idea Cellular 135 Buy 8.2 7.4 7.6 16.4 18.2 17.7 6.4 6.6 5.4 15.0 11.0 10.3
Reliance Comm 143 Neutral 4.4 11.3 17.9 32.7 12.7 8.0 7.0 5.5 4.2 3.4 7.6 11.1

MOSL UNIVERSE

July 2014 72

Utilities
CESC 755 Buy 56.8 61.9 66.9 13.3 12.2 11.3 7.8 7.2 6.5 11.6 11.4 11.1
Coal India 394 Neutral 27.7 30.2 33.3 14.2 13.1 11.8 10.5 9.1 7.8 25.2 24.2 23.4
Jaiprakash Power 23 Buy 1.3 2.9 4.2 17.4 7.8 5.4 9.9 5.8 5.1 6.3 13.9 17.1
JSW Energy 84 Neutral 6.5 5.8 5.4 13.0 14.4 15.5 7.0 7.1 7.3 15.2 12.4 10.6
NHPC 27 Neutral 2.3 2.8 2.9 11.9 9.8 9.3 9.4 8.8 8.2 8.5 8.6 8.6
NTPC 159 Buy 11.8 13.7 15.8 13.4 11.6 10.0 10.0 9.1 7.8 11.0 12.0 13.0
Power Grid Corp. 144 Buy 9.4 11.5 13.4 15.3 12.5 10.7 11.1 9.9 9.1 13.7 15.2 16.0
PTC India 98 Buy 9.5 13.1 15.2 10.3 7.5 6.5 10.7 5.8 4.4 7.0 10.2 11.1
Reliance Infrastructure 791 Buy 54.4 60.7 63.1 14.5 13.0 12.5 8.0 7.2 7.1 6.5 6.9 6.7
Tata Power 107 Neutral 5.8 6.5 7.9 18.5 16.6 13.6 13.6 12.5 11.6 7.4 7.5 7.7

Sector / Companies CMP EPS (INR) PE (x) PB (x) RoE (%)
(INR) Reco FY15E FY16E FY17E FY15E FY16E FY17E FY15E FY16E FY17E FY15E FY16E FY17E
Banks-Private
Axis Bank 1,935 Buy 145.3 173.7 212.2 13.3 11.1 9.1 2.1 1.8 1.5 16.6 17.2 18.1
Federal Bank 129 Buy 10.6 12.5 15.2 12.1 10.4 8.5 1.4 1.3 1.2 12.5 13.2 14.5
HDFC Bank 856 Buy 44.5 55.9 70.0 19.3 15.3 12.2 4.0 3.3 2.7 22.4 23.6 24.5
ICICI Bank 1,462 Buy 99.1 119.9 148.7 14.8 12.2 9.8 2.1 1.9 1.7 15.7 16.6 17.9
IndusInd Bank 569 Buy 33.4 42.3 54.2 17.0 13.4 10.5 2.9 2.5 2.1 18.4 19.9 21.4
ING Vysya Bank 662 Buy 40.3 47.6 56.5 16.4 13.9 11.7 1.6 1.5 1.4 10.4 11.3 12.2
J&K Bank 1,604 Buy 258.4 279.5 305.0 6.2 5.7 5.3 1.2 1.0 0.9 20.2 19.0 18.1
Kotak Mahindra Bank 884 Neutral 39.4 46.5 56.0 22.4 19.0 15.8 3.2 2.8 2.4 15.4 15.7 16.2
South Indian Bank 33 Buy 4.2 4.9 5.8 7.7 6.6 5.6 1.2 1.0 0.9 16.4 16.8 17.3
Yes Bank 557 Buy 51.1 60.5 75.4 10.9 9.2 7.4 2.0 1.7 1.4 22.4 19.6 20.8
Private Bank Aggregate 15.8 13.0 10.5 2.8 2.4 2.1 17.6 18.5 20.0
Banks-PSU
Andhra Bank 102 Neutral 10.8 12.8 13.4 9.5 8.0 7.6 0.7 0.6 0.6 7.1 8.0 7.9
Bank of Baroda 875 Buy 118.2 149.2 184.6 7.4 5.9 4.7 1.0 0.9 0.8 14.5 16.3 17.7
Bank of India 305 Neutral 53.4 66.9 87.2 5.7 4.6 3.5 0.7 0.6 0.5 12.9 14.3 16.3
Canara Bank 448 Buy 60.3 82.9 107.8 7.4 5.4 4.2 0.8 0.7 0.6 11.2 14.0 16.2
Corporation Bank 407 Neutral 45.3 61.9 74.2 9.0 6.6 5.5 0.6 0.6 0.5 7.3 9.3 10.4
Dena Bank 84 Neutral 13.0 15.6 18.9 6.5 5.4 4.5 0.7 0.6 0.5 10.6 11.6 12.8
IDBI Bank 108 Neutral 8.2 10.4 12.4 13.2 10.3 8.7 0.8 0.7 0.7 5.9 7.1 8.0
Indian Bank 185 Buy 29.0 36.5 44.2 6.4 5.1 4.2 0.7 0.6 0.6 11.2 12.8 14.0
Oriental Bank 322 Buy 44.5 54.7 72.5 7.2 5.9 4.4 0.7 0.6 0.6 10.0 11.4 13.7
Punjab National Bank 980 Buy 118.9 157.9 185.3 8.2 6.2 5.3 0.9 0.8 0.7 11.8 14.0 14.5
State Bank 2,699 Buy 259.4 344.3 454.4 10.4 7.8 5.9 1.3 1.1 1.0 13.3 15.6 17.9
Union Bank 228 Buy 28.0 34.3 39.2 8.2 6.6 5.8 0.8 0.7 0.6 10.0 11.3 11.7
PSU Bank Aggregate 8.8 6.7 5.3 1.0 0.9 0.9 11.6 13.6 16.0
NBFC
Bajaj Finance 2,289 Buy 171.4 198.9 234.2 13.4 11.5 9.8 2.4 2.1 1.8 19.7 19.4 19.5
Dewan Housing 356 Buy 54.0 64.5 78.5 6.6 5.5 4.5 1.1 0.9 0.8 17.3 17.8 18.5
HDFC 1,009 Buy 38.5 45.8 54.0 26.2 22.0 18.7 5.1 4.6 4.1 25.5 24.2 25.3
IDFC 134 Neutral 12.7 13.1 13.5 10.5 10.2 9.9 1.2 1.1 1.0 12.2 11.6 10.9
Indiabulls Housing 372 Buy 55.6 66.4 80.3 6.7 5.6 4.6 1.9 1.7 1.5 31.0 32.4 33.7
LIC Housing Fin 327 Buy 28.3 33.1 39.6 11.5 9.9 8.3 1.9 1.6 1.4 17.6 17.8 18.4
M & M Financial 272 Neutral 18.7 21.2 24.8 14.5 12.8 11.0 2.6 2.3 2.0 19.3 19.0 19.4
Power Finance Corp 320 Buy 50.9 60.1 69.8 6.3 5.3 4.6 1.3 1.1 0.9 21.8 21.9 21.6
Rural Electric. Corp. 374 Buy 57.2 66.0 78.4 6.5 5.7 4.8 1.5 1.3 1.0 25.3 24.1 23.8
Shriram Transport Fin. 953 Buy 68.4 82.8 94.6 13.9 11.5 10.1 2.2 1.9 1.6 16.2 17.0 17.9
NBFC Aggregate 12.3 10.5 8.9 2.5 2.2 1.9 20.5 20.8 21.1
Financials Sector Aggregate 12.2 9.8 8.0 1.8 1.6 1.5 15.1 16.5 18.3

July 2014 73

June 2014 Results Preview

Sectors & Companies
BSE Sensex: 25,962 S&P CNX: 7,752 4 July 2014

Note: In our quarterly performance tables, our four-quarter numbers may not always add up to the full-year
numbers. This is because of differences in classification of account heads in the companys quarterly and annual
results or because of differences in the way we classify account heads as opposed to the company.
All stock prices and indices as on 4 July 2014, unless otherwise stated.

July 2014 74

Revival signs visible; monsoon to watch out
MSIL and TTMT top picks; in mid-caps, we like TVSL and AL

Post general elections, consumer sentiments have improved with a stable government
at the helm.
Economic activity has also improved as reflected in the 12-14% rise in freight rates in
CY14 YTD, post two years of weakness.
Recovery in 2Ws gathers strength, while growth in PVs turns positive. Decline in
MHCVs also moderated significantly.
Top picks: MSIL and TTMT. We also like TVSL and AL in mid-caps.

PV demand turns positive; MHCV decline moderates further
MSIL upgrades volume guidance to healthy double digit for FY15. With improved
consumer sentiments, passenger vehicle demand, particularly for entry level
cars, has improved considerably.
Lead indicators of CV industry turns positive with freight rates up 12-14% in
CY14 YTD Channel checks suggest fleet operators' utilization and consequent
freight rates are turning positive over the last four to six months. Recent
railways hike in freight movement would further support road freight rates.
Recovery in two-wheeler industry continues with double digit growth in 1QFY15.
However, expectation of below average monsoon poses a risk to tractors.

Upgrade EPS for TTMT, EXID, BJAUT
We upgrade FY15E/16E EPS for TTMT by 13.3%/9.7% primarily driven by lower
losses in S/A business and margin upgrade for JLR on richer mix.
Recovery in demand, particularly in premium motorcycles and 3Ws, drives
margin and in turn FY15E/16E EPS upgrades for BJAUT by 6.2%/5.8%.
Initial signs of turnaround are visible for Exides auto replacement franchise.
This, coupled with strong inverter demand (power shortage in northern region),
drives 11.7%/27% FY15E/16E EPS upgrade for EXID to INR7.6/9.8 respectively.

Expected quarterly performance summary (INR m)

(INR)
4.7.14
Reco Jun-14
Var %
YoY
Var %
QoQ
Jun-14
Var %
YoY
Var %
QoQ
Jun-14
Var %
YoY
Var %
QoQ
Amara Raja Batt. 496 Buy

9,831 10.0 10.7

1,635 12.4 18.7

1,034 5.7 25.1
Ashok Leyland 36 Buy

22,615 -4.3 -26.5

440 89.1 -76.1

-1,283 Loss Loss
Bajaj Auto 2,299 Buy

52,621 7.1 6.7

10,089 11.3 8.3

8,146 10.4 6.8
Eicher Motors 8,636 Buy

21,731 30.1 12.9

2,668 60.5 20.2

1,580 71.1 13.6
Exide Inds. 159 Neutral

18,502 13.8 15.0

2,985 13.8 36.4

1,853 16.7 40.2
Hero Motocorp 2,583 Buy

70,358 14.8 9.0

8,205 20.6 31.1

6,798 23.9 22.6
Mahindra & Mahindra 1,229 Buy

94,991 -2.1 -7.0

12,285 -12.3 15.9

7,333 -19.4 -19.9
Maruti Suzuki 2,643 Buy

112,485 9.9 -7.0

13,110 12.4 5.1

7,212 14.2 -9.9
Tata Motors 468 Buy

600,718 28.4 -8.0

90,026 44.8 -10.0

35,045 91.1 -17.3
TVS Motor 171 Buy

23,881 35.7 10.8

1,624 64.2 17.1

953 83.7 15.9

s
Company name
Amara Raja Batteries
Ashok Leyland
Bajaj Auto
Eicher Motors
Exide Industries
Hero MotoCorp
Mahindra & Mahindra
Maruti Suzuki
Tata Motors
TVS Motor

Automobiles

Jinesh Gandhi (Jinesh@MotilalOswal.com); +91 22 3982 5416 / Chirag Jain (Chirag.Jain@MotilalOswal.com); +91 22 3982 5418
June Results Preview | July 2014

July 2014 75

Top picks: MSIL and TTMT in large caps; like TVSL and AL in mid-caps
Demand environment and changing competitive landscape in the auto sector
would be the key determinants of stocks performance.
Prefer MSIL (industry demand recovery, favorable product cycle coupled with
margin expansion) and TTMT (cyclical recovery in S/A, JLR demand remains
strong) in large caps.
In mid-caps, we like TVSL (new launches, scooters and exports to continue to
drive growth) and AL (pure play on CVs) in mid-caps.

Revised EPS Estimates (INR)
EPS (INR)

FY15E FY16E
Rev Old Chg (%) Rev Old Chg (%)
BJAUT 131.4 123.7 6.2 150.6 142.4 5.8
HMCL 144.4 142.4 1.4 176.9 176.3 0.4
TVSL 10.1 10.1 0.0 13.7 13.7 0.0
MSIL (Consol) 132.5 117.2 13.1 172.6 149.4 15.5
MM (Consol) 75.1 77.9 -3.6 99.4 101.6 -2.2
TTMT (Consol) 50.9 44.9 13.3 68.3 62.3 9.7
EIM (Consol) 222.1 226.0 -1.7 330.7 340.5 -2.9
AL -0.1 0.1 NA 1.8 1.3 35.0
AMRJ 24.1 24.1 0.0 30.1 30.1 0.0
EXID 7.6 6.8 11.7 9.8 7.7 27.0
Source: MOSL

Volume snapshot for 1QFY15 ('000 units)
1QFY15 1QFY14 YoY (%) 4QFY14 QoQ (%) FY14 FY13 YoY (%)
Two wheelers 4,376 3,947 10.9 4,323 1.2 16,788 15,715 6.8
Three wheelers 203 203 0.3 203 0.0 830 842 -1.4
Passenger cars 542 561 -3.4 627 -13.6 2,338 2,392 -2.3
UVs & MPVs 174 178 -1.9 193 -9.4 751 762 -1.5
Total PVs 716 739 -3.0 820 -12.6 3,089 3,155 -2.1
M&HCV 57 60 -5.6 62 -8.8 222 288 -22.9
LCV 107 124 -13.7 117 -8.5 481 585 -17.8
Total CVs 163 184 -11.1 179 -8.6 703 873 -19.5
Total 5,459 5,071 7.6 5,524 -1.2 21,409 20,584 4.0

Trend in segment-wise EBITDA margins (%)

Commodity cost (index)


1
2
.
7

1
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3

7
.
5

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(
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2W Cars CVs
1QFY13 2QFY13 3QFY13 4QFY13 1QFY14
2QFY14 3QFY14 4QFY14 1QFY15
1
0
0
1
0
0
1
0
0
1
0
0 1
1
1
1
0
8
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9
9
9
1
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4
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6
1
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3
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6
7
6
Steel (HRC) Lead Aluminium Rubber
June 2014 Results Preview | Sector: Automobiles

July 2014 76

Trend in key currencies v/s INR

Trend in EBITDA margins (%)


HDFC Bank's base rate trend

Trend in fuel prices


Relative performance 3-month (%)

Relative performance 1-year (%)


80
110
140
170
J
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USD Euro GBP JPY
6
9
12
15
18
1
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3
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3
3
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1
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4
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1
3
1
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1
4
2
Q
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1
4
3
Q
F
Y
1
4
4
Q
F
Y
1
4
1
Q
F
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1
5
Aggregate Aggregate (incl JLR)
7.0
8.0
9.0
10.0
11.0
J
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-
1
1
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1
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1
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J
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1
4
HDFC Bank Base Rate
25
35
45
55
65
75
M
a
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-
0
7
J
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n
-
0
7
S
e
p
-
0
7
D
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-
0
7
M
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-
0
8
J
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0
8
S
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8
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0
8
M
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0
9
J
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9
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9
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1
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M
a
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1
4
J
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1
4
Petrol (INR/ltr) Diesel (INR/ltr)
90
100
110
120
130
A
p
r
-
1
4
M
a
y
-
1
4
J
u
n
-
1
4
J
u
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-
1
4
Sensex Index MOSL Automobiles Index
75
100
125
150
175
J
u
l
-
1
3
O
c
t
-
1
3
J
a
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-
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-
1
4
Sensex Index MOSL Automobiles Index

July 2014 77

Comparative Valuation
Automobiles
Amara Raja Batt. 496 Buy 24.1 30.1 36.2 20.6 16.5 13.7 12.3 9.6 7.8 27.1 27.5 26.9
Ashok Leyland 36 Buy -0.1 1.8 3.5 -578.7 19.9 10.3 13.7 7.1 4.5 -0.4 9.9 17.1
Bharat Forge 675 Buy 22.5 32.3 38.9 30.0 20.9 17.3 14.0 10.7 8.8 18.2 22.4 22.6
Bajaj Auto 2,299 Buy 127.2 146.1 166.3 18.1 15.7 13.8 12.1 10.1 8.4 35.0 33.7 32.0
Eicher Motors 8,636 Buy 222.1 330.7 425.9 38.9 26.1 20.3 21.4 13.5 9.7 26.9 32.3 31.7
Exide Inds. 159 Neutral 7.6 9.8 10.6 21.0 16.2 15.0 10.6 8.2 7.6 15.4 17.3 18.7
Hero Motocorp 2,583 Buy 144.4 176.9 203.6 17.9 14.6 12.7 13.3 10.3 8.2 46.3 46.3 43.0
Mahindra & Mahindra 1,229 Buy 76.9 101.3 109.9 16.0 12.1 11.2 6.0 4.9 4.9 17.5 18.6 18.5
Maruti Suzuki 2,643 Buy 132.5 172.6 222.8 19.9 15.3 11.9 10.1 7.6 5.6 16.1 17.8 19.2
Tata Motors 468 Buy 50.9 68.3 86.8 9.2 6.9 5.4 3.9 2.9 2.2 22.3 23.8 23.9
TVS Motor 171 Buy 10.1 13.7 16.4 16.9 12.5 10.4 10.5 7.7 6.2 29.9 31.6 29.5
Source: MOSL


July 2014 78

Quarterly performance

(INR Million)
Y/E March FY14

FY15E FY14 FY15E
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Net Sales 8,938 8,071 8,629 8,879

9,831 9,443 10,577 11,570 34,518 41,421
YoY Change (%) 28.4 12.0 13.7 10.5 10.0 17.0 22.6 30.3 15.8 20.0
EBITDA 1,454 1,420 1,503 1,377

1,635 1,580 1,896 1,961 5,754 7,072
Margins (%) 16.3 17.6 17.4 15.5 16.6 16.7 17.9 17.0 16.7 17.1
Depreciation 145 154 157 190

200 250 275 296 646 1,021
Interest 0 1 0 6

2 2 2 3 7 9
Other Income 97 74 73 61 55 65 85 95 304 300
PBT before EO expense 1,405 1,339 1,419 1,243

1,488 1,393 1,704 1,757 5,406 6,342
Extra-Ord expense 0 0 0 39 0 0 0 0 39 0
PBT 1,405 1,339 1,419 1,204

1,488 1,393 1,704 1,757 5,367 6,342
Tax rate (%) 30.4 29.4 33.0 33.5

30.5 30.5 30.5 30.6 31.5 30.5
Adj PAT 978 946 950 826

1,034 968 1,184 1,220 3,701 4,407
YoY Change (%) 28.5 31.4 17.4 38.7

5.7 2.4 24.6 47.7 28.2 19.1
E: MOSL Estimates


Amara Raja Batteries

CMP: INR496 Buy
Expect AMRJs revenue to grow 10% YoY to INR9.8b.
Growth would continue to be driven by replacement segment, while
OEM segment is expected to remain weak.
EBITDA margin is expected to improve 40bp YoY to 16.6% (110bp
QoQ) as the benefit of pricing action undertaken in 4QFY15 comes
with a lag.
Expect PAT growth at 5.7% YoY to INR1b.
Company has guided for double digit revenue and PAT growth for
FY15. Maintain Buy.

Key issues to watch out
Update on demand environment for OEMs, Auto replacement and
Industrial battery segment.
Outlook on RM cost trend, recent pricing action and currency
hedges if any.
Update on capacity expansion plans across product segments.

Bloomberg AMRJ IN
Equity Shares (m) 170.8
M. Cap. (INR b)/(USD b) 85 / 1
52-Week Range (INR) 505 / 208
1,6,12 Rel Perf. (%) 14 / 27 / 46

Financial Snapshot (INR billion)
Y/E March 2014 2015E 2016E 2017E
Sales 34.4 41.1 49.9 58.3
EBITDA 5.6 6.8 8.4 9.8
NP 3.7 4.1 5.1 6.2
EPS (INR) 21.7 24.1 30.1 36.2
EPS Gr. (%) 26.3 11.1 25.2 20.1
RoE (%) 30.6 27.1 27.5 26.9
RoCE (%) 41.7 37.9 38.9 38.3
Valuations
P/E (x) 23.0 20.7 16.5 13.8
P/BV (x) 6.2 5.1 4.1 3.4
EV/EBITDA (x) 14.8 12.4 9.6 7.8
EV/Sales (x) 2.4 2.0 1.6 1.3

July 2014 79

Quarterly Performance (INR Million)
FY14 FY15E FY14 FY15E
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Total Volumes (nos) 21,721 23,110 18,393 26,048 19,981 22,818 19,079 43,134 87,305 105,012
Growth % -21.0 -22.6 -18.9 -24.8 -8.0 -1.3 3.7 65.6 -23.8 20.3
Realizations ('000) 1,088 1,103 1,062 1,181 1,132 1,150 1,133 972 1,139 1,070
% change -0.5 -0.1 1.1 9.7 4.0 4.2 6.7 -17.7 4.6 -6.0
Net Sales 23,638 25,496 19,532 30,768 22,615 26,244 21,613 41,912 99,434 112,383
Change (%) -21.4 -22.6 -17.9 -17.5 -4.3 2.9 10.7 36.2 -20.3 13.0
RM/Sales % 75.5 76.3 79.7 75.3 76.0 74.0 75.5 73.3 76.5 74.4
Staff / sales % 10.9 10.0 12.3 8.0 11.1 9.9 12.3 5.4 10.1 8.9
Oth. Exp./ Sales % 12.6 11.5 13.0 10.7 11.0 10.5 10.0 11.4 11.8 10.8
EBITDA 233 563 -969 1,839 440 1,468 484 4,152 1,666 6,621
EBITDA Margins (%) 1.0 2.2 -5.0 6.0 1.9 5.6 2.2 9.9 1.7 5.9
Other Income 123 231 154 157 129 239 100 245 665 713
Interest 1,007 1,244 1,153 1,126 1,100 1,050 1,000 1,197 4,529 4,347
Depreciation 952 901 883 1,034 975 1,000 1,000 905 3,770 3,880
PBT before EO Exp -1,603 -1,351 -2,851 -163 -1,506 -344 -1,416 2,295 -5,969 -893
EO Exp/(Inc) 65 -438 -923 -3,761 0 0 0 0 -5,057 0
PBT -1,669 -914 -1,928 3,598 -1,506 -344 -1,416 2,295 -912 -893
Tax -251 -663 -256 -36 -223 -49 -209 347 -1,206 -134
Effective Tax Rate (%) 15.0 72.6 13.3 -1.0 14.8 14.1 14.8 15.1 132.2 15.0
Rep. PAT -1,418 -251 -1,672 3,634 -1,283 -295 -1,207 1,948 294 -759
Change (%) -311.6 -117.6 -325.5 142.2 -9.5 17.8 -27.8 -46.4 -93.2 -358.4
Adj. PAT -1,362 -371 -2,473 -127 -1,283 -295 -1,207 1,948 -4,763 -759
Change (%) -303.3 -126.0 188.3 -150.5 -5.8 -20.4 -51.2 -1,633.9 NA -84.1
E: MOSL Estimates

Ashok Leyland

CMP: INR36 Buy
ALs volumes are expected to decline by 8% YoY (-23.3% QoQ) for
1QFY15. EBITDA margin expected at 1.9% (v/s 6% in 4QFY14 and 1%
in 1QFY14). Sequential decline in margins driven by lower volumes
(seasonal).
Expect to report a PBT loss of INR1.5b (v/s PBT loss of INR0.16b in
4QFY14).
MHCVs in June 2014 witnessed a growth post 23 months of decline
driven by early signs of economic recovery and entry into ICV
segment (with BOSS truck).
We expect ALs MHCVs volumes to grow 15% YoY during FY15 on
economic recovery and a low base. Discounts are on a declining
trend over the last four to six months.
We upgrade ALs FY16E EPS to INR1.8 (v/s INR1.3 earlier), mainly
driven by margin upgrade to 9% (v/s 7.9%) led by several cost
cutting initiatives and discount normalization. Maintain Buy.
Current demand environment and discounting trend, plant and
channel inventory for MHCVs.
Industry growth, market share guidance for MHCVs, LCVs for FY15.
Pantnagar volume guidance, RM cost outlook and margin
guidance for FY15.
Capex and investment guidance as well as divestment plans.

Bloomberg AL IN
Equity Shares (m) 2,660.7
1,6,12 Rel Perf. (%) 2 / 66 / 60

Y/E March 2014 2015E 2016E 2017E
Sales 99.4 112.4 146.5 183.8
EBITDA 1.7 7.3 13.2 18.7
NP -4.8 -0.2 5.2 9.9
Adj. EPS (INR) -1.8 -0.1 1.8 3.5
EPS Gr. (%) NA NA NA NA
BV/Sh. (INR) 16.7 17.7 18.9 21.8
RoE (%) -10.7 -0.4 9.9 17.1
RoCE (%) -1.5 4.5 11.0 16.8
Payout (%) 0.0
-
320

27.5 14.3
Valuations
P/E (x) -20.7 -594.8 20.4 10.6
P/BV (x) 2.2 2.1 2.0 1.7
EV/EBITDA (x) 83.0 18.8 10.1 6.7
Div. Yield (%) 0.0 0.5 1.3 1.3

July 2014 80

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Volumes ('000 units) 979.3 961.3 993.7 935.8 988.4 1,079.2 1,118.9 1,012.2 3,870 4,221
Growth YoY (%) -9.2 -8.4 -11.9 -4.6 0.9 12.3 12.6 8.2 (8.7) 9.1
Realization (INR/unit) 50,150 53,831 51,638 52,707 53,236 53,503 53,636 55,348 52,065 53,642
Growth YoY (%) 11.2 13.6 7.6 9.0 6.2 -0.6 3.9 5.0 10.3 3.0
Net Sales 49,111 51,749 51,312 49,323 52,621 57,743 60,014 56,023 201,495 226,400
Change (%) 0.9 4.1 -5.2 3.9 7.1 11.6 17.0 13.6 0.8 12.4
RM/Sales % 69.4 67.0 69.5 69.6 69.5 69.0 68.5 68.1 68.9 68.7
Staff cost/Sales % 3.7 3.5 3.6 3.5 3.6 3.4 3.4 3.7 3.6 3.5
Oth. Exp./Sales % 8.8 7.8 5.2 8.2 7.8 7.4 7.2 8.3 7.5 7.7
EBITDA 9,067 11,320 11,352 9,314 10,089 11,685 12,589 11,716 41,052 46,257
EBITDA Margins (%) 18.5 21.9 22.1 18.9 19.2 20.2 21.0 20.9 20.4 20.4
Other Income 1,756 1,242 2,218 1,848 2,000 1,600 2,350 2,447 7,064 8,397
Interest 1 0 2 2 3 3 3 3 5 10
Depreciation 444 443 460 445 450 475 500 469 1,796 1,894
PBT 10,378 12,118 13,109 10,716 11,637 12,808 14,437 13,691 46,316 52,750
Tax 3,002 3,746 4,063 3,090 3,491 3,842 4,331 4,107 13,896 15,772
Effective Tax Rate (%) 28.9 30.9 31.0 28.8 30.0 30.0 30.0 30.0 30.0 29.9
Rep. PAT 7,377 8,372 9,045 7,626 8,146 8,965 10,106 9,584 32,420 36,978
Change (%) 2.7 13.0 10.5 (8.9) 6.8 7.1 11.7 25.7 6.5 14.1
Adj. PAT 7,377 8,372 9,045 7,626 8,146 8,965 10,106 9,584 32,420 36,801
Change (%) 2.7 13.0 10.5 (0.4) 10.4 7.1 11.7 25.7 6.5 13.5
E: MOSL Estimates


Bajaj Auto

CMP: INR2,299 Buy
BJAUTs volumes to grow marginally for 1QFY15 by 1% YoY (+5.6%
QoQ), after reporting a decline for five consecutive quarters.
Volume recovery is primarily led by 22% growth in exports, while
domestic sales have declined by 11.4%.
Expect realizations to improve by 1% QoQ (+6.2% YoY) led by 380bp
QoQ rise in share of exports to 44.7%, partially offset by higher share
of Discover.
Hence, EBITDA margin to expand 30bp QoQ (+70bp YoY) to 19.2%.
Expect PAT to rise 10.4% YoY (+6.8% QoQ) to INR8.1b.
We upgrade FY15E/FY16E EPS by 2.8%/2.6% as we increase our
volume and margin assumptions on expected revival in demand,
particularly in the premium motorcycle space and 3Ws.
BJAUT plans to launch an all-new Discover 150cc in August 2014.
Maintain Buy.
Update on demand environment, particularly for Discover, at the
retail level, and channel inventory.
Details on new launches, update on forex hedges on exports for
FY15/FY16.
Update on RE60 launch timeline (for export and domestic market),
volume and margin guidance.

Bloomberg BJAUT IN
M. Cap. (INR b)/(USD b) 665 / 11
52-Week Range (INR) 2,364 / 1,683
1, 6, 12 Rel. Per (%) 00/00/00

Y/E March 2014 2015E 2016E 2017E
Sales 201.5 226.4 258.5 293.5
EBITDA 41.1 47.0 53.8 61.2
NP 32.4 38.0 43.6 49.5
Adj. EPS (INR) 112.0 131.4 150.6 171.1
EPS Gr. (%) 6.5 17.3 14.6 13.6
BV/Sh. (INR) 332.0 399.5 480.4 581.7
RoE (%) 37.0 35.9 34.2 32.2
RoCE (%) 51.8 50.1 47.5 44.6
Payout (%) 52.2 48.6 46.3 40.8
Valuation
P/E (x) 20.5 17.5 15.3 13.4
P/BV (x) 6.9 5.8 4.8 4.0
EV/EBITDA (x) 14.0 11.8 9.8 8.2
Div. Yield (%) 2.2 2.4 2.6 2.6

July 2014 81

CY13 CY14 CY13 CY14E
Y/E December 1Q 2Q 3Q 4Q 1Q 2QE 3QE 4QE
Net Op Income 17,243 16,699 16,834 16,795 19,242 21,731 21,053 21,092 68,098 83,119
Growth (%) 1.7 5.4 13.5 1.6 11.6 30.1 25.1 25.6 6.6 424.4
EBITDA 1,705 1,662 1,572 1,666 2,220 2,668 2,626 2,644 7,132 10,157
EBITDA Margins (%) 9.9 10.0 9.3 9.9 11.5 12.3 12.5 12.5 10.5 34.6
Depreciation 275 296 336 394 477 490 510 529 1,300 2,007
EBIT 1,430 1,366 1,237 1,272 1,742 2,178 2,116 2,115 5,832 8,150
Other income 444 211 153 145 553 275 280 187 953 1,295
Interest cost 6 12 23 38 59 46 51 -26 79 129
PBT after EO item 1,868 1,565 1,893 1,379 2,237 2,407 2,345 2,328 6,706 9,316
Effective tax rate (%) 28.9 19.6 23.1 12.1 30.2 23.1 23.2 23.8 21.7 25.0
PAT 1,328 1,258 1,456 1,212 1,562 1,851 1,800 1,774 5,254 6,986
Minority interest 348 335 382 250 170 271 239 301 1,314 981.2
Recurring PAT 979 923 857 962 1,391 1,580 1,561 1,473 3,939 6,005
Growth (%) -10.6 21.7 29.9 32.4 42.0 71.1 82.1 53.0 21.5 52.4
Standalone (Royal Enfield)
Royal Enfield (units) 34,737 40,040 48,240 55,101 64,268 74,138 77,730 73,599 178,118 296,656
Growth (%) 45.3 45.5 60.6 72.4 85.0 85.2 61.1 33.6 57.0 66.6
EBITDA Margins (%) 17.7 17.8 19.3 18.6 23.1 23.0 22.9 22.5 19.0 22.9
Recurring PAT 972 526 618 670 1,606 1,257 1,276 1,237 2,898 5,376
Growth (%) 114.4 62.9 87.4 96.2 65.2 138.9 106.6 84.5 100.2 85.5
VECV (derived)
Total CV Volumes 12,529 11,027 9,428 8,712 9,603 10,417 9,451 9,304 41,695 38,775
Growth (%) -12.7 -8.2 -12.6 -19.8 -23.4 -5.5 0.2 6.8 -13.2 -7.0
EBITDA Margins (%) 8.0 7.6 5.6 5.9 5.8 6.8 6.4 7.4 10.0 15.0
Recurring PAT 764 732 425 542 363 594 523 671 4,138 2,984
Growth (%) -35.3 -8.7 -30.1 -23.7 -52.4 -18.9 23.2 23.9 25.4 -27.9
E: MOSL Estimates


Eicher Motors

CMP: INR8,636 Buy
Royal Enfields (RE) volumes are expected to improve 85% YoY
(+15.3% QoQ). Expect margins to remain strong at 23%.
Expect VECVs volumes to decline by 5.5% YoY (+8.47% QoQ),
primarily driven by strong surge in exports.
VECVs margins expected to decline 80bp YoY (+100bp QoQ) to
6.8%. Sequential margin improvement on the back of higher
volumes, engine plant ramp-up and moderation in CV discounts.
Expect 30% YoY (+13% QoQ) growth in consolidated sales.
Consolidated margins expected to improve both YoY and
sequentially. Consolidated PAT (after minority) to grow by 71% YoY
(+13.6% QoQ) to INR1.58b. Maintain Buy.
Ramp-up of Medium Duty engine project, update on
commissioning/launch of bus body plant and new HCV range.
Update on current CV demand trends, discount levels and channel
inventory.
New launches and timelines under Royal Enfield business.

Bloomberg EIM IN
M. Cap. (INR b)/(USD b) 233 / 4
52-Week Range (INR)
8,750 /
2 9
1,6,12 Rel Perf. (%)
15 / 50 /
08
Y/E December 2013 2014E 2015E 2016E
Net Income 68.1 83.1
110.
8
141.
0
EBITDA 7.1 10.2 15.7 20.6
Net Profit 3.9 6.0 8.9 11.5
Adj. EPS (INR) 146 222 331 426
EPS Gr. (%) 21.5 52.2 48.9 28.8
BV/Sh. (INR) 760 888 1,161 1,523
RoE (%) 20.7 26.9 32.3 31.7
RoCE (%) 21.8 26.3 34.9 36.3
Payout (%) 0.3 0.4 0.5 0.5
Valuations
P/E (x) 59.2 38.9 26.1 20.3
P/BV (x) 11.4 9.7 7.4 5.7
EV/EBITDA (x) 41.1 25.1 16.6 12.3
Div. Yield (%) 0.3 0.4 0.5 0.5

July 2014 82

S/A Quarterly Performance (INR Million)
Y/E March FY14 FY15E FY14 FY15E
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Net Sales 16,263 14,280 13,014 16,086

18,502 16,740 14,978 19,542 59,642 69,762
Growth YoY (%) 4.9 -5.9 -11.0 4.6 13.8 17.2 15.1 21.5 -1.8 17.0
RM (%) 64.3 65.5 65.1 66.8

65.0 65.5 65.0 64.6 65.5 65.0
Employee Cost (%) 5.8 6.0 6.9 5.4

4.9 5.7 6.7 5.4 6.0 5.6
Other Exp. (%) 13.8 14.5 17.1 14.2 14.0 14.2 14.0 14.5 14.8 14.2
EBITDA 2,624 2,012 1,426 2,189

2,985 2,448 2,145 3,017 8,252 10,596
EBITDA Margin (%) 16.1 14.0 10.9 13.6

16.1 14.6 14.3 15.4 13.8 15.2
Change (%) 12.7 6.9 -13.4 7.1 13.8 21.7 50.5 37.8 4.5 28.4
Non-Operating Income 62 37 49 98

80 80 80 61 246 301
Interest 4 5 4 0

5 5 5 5 12 20
Depreciation 300 313 317 326 336 346 356 349 1,256 1,386
PBT after EO Exp 2,383 1,731 1,155 1,961

2,725 2,177 1,865 2,724 7,230 9,491
Adj. PAT 1,588 1,185 775 1,321

1,853 1,481 1,268 1,852 4,870 6,454
Change (%) 4.5 -1.5 -25.5 -9.8 16.7 25.0 63.6 40.2 -6.9 32.5
E: MOSL Estimates


Exide Industries

CMP: INR159 Neutral
Expect 13.8% YoY growth in revenue at INR18.5b (+15% QoQ),
primarily driven by revival in inverter demand (on power shortage,
delay in monsoon).
Growth in auto replacement is also expected to be healthy
benefiting from the recent initiatives undertaken to improve focus
on smaller dealers and improve service turnaround.
EBITDA margin expected to remain flat YoY (+260bp QoQ) to 16.1%.
Sequential rise in margin to be largely driven by operating leverage
and higher share of high margin inverter revenue.
PAT expected to rise by 16.7% YoY (+40.2% QoQ) to INR1.9b.
We upgrade FY15E/FY16E EPS by 11.7%/27% driven by a) robust
growth in inverters, b) market share gains in auto replacement
segment from unorganized players, c) faster-than-expected
recovery in OEM and industrial demand and d) margin expansion on
operating leverage and cost reduction measures. Maintain Neutral.

Update on demand environment for OEMs, Auto replacement and
industrial battery segment.
Outlook on RM cost trend, recent pricing action and currency
hedges if any.
Update on capacity expansion plans across product segments.

Bloomberg EXID IN
M. Cap. (INR b)/(USD b) 135 / 2
1,6,12 Rel Perf. (%) 2 / 11 / -3

Y/E March 2014 2015E 2016E 2017E
Net Sales 59.6 69.8 80.6 93.1
EBITDA 8.3 10.6 13.2 15.2
Adj. PAT 4.9 6.5 8.3 9.7
Adj. EPS (INR) 5.7 7.6 9.8 11.4
EPS Growth (%) -6.8 32.5 29.2 15.3
BV/Share (INR) 43.9 49.2 56.6 65.7
RoE (%) 13.1 15.4 17.3 17.3
RoCE (%) 18.8 22.1 24.4 24.4
Payout (%) 31.4 26.3 20.4 19.4
Valuations
P/E (x) 27.8 21.0 16.2 14.0
P/BV (x) 3.6 3.2 2.8 2.4
EV/EBITDA (x) 13.9 10.6 8.2 6.6
Div. Yield (%) 1.1 1.3 1.3 1.4

July 2014 83

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Total Volumes ('000 nos) 1,559 1,416 1,681 1,589 1,715 1,510 1,815 1,650 6,215 6,691
Growth YoY (%) -5.1 6.3 6.9 4.2 10.0 6.6 8.0 3.8 2.3 7.7
Net Realization 39,293 40,223 40,727 40,616 41,022 41,432 41,846 42,222 40,425 41,634
Growth YoY (%) 4.0 4.1 4.2 2.0 4.4 3.0 2.7 4.0 4.1 3.0
Net Sales 61,268 56,965 68,459 64,557 70,358 62,574 75,968 69,666 251,249 278,567
Change (%) -1.3 10.6 11.3 6.3 14.8 9.8 11.0 7.9 6.5 10.9
RM Cost (% sales) 72.7 71.9 73.0 72.5 72.5 72.5 72.5 72.5 72.6 72.5
Staff Cost (% sales) 3.6 4.0 3.6 3.7 3.6 4.2 3.7 3.9 3.7 3.8
Other Exp (% sales) 9.3 10.0 10.8 10.9 9.2 10.4 10.0 10.1 10.3 9.9
EBITDA 8,825 8,029 8,671 8,369 10,305 8,113 10,498 9,364 33,895 38,280
EBITDA Margins (%) 14.4 14.1 12.7 13.0 14.6 13.0 13.8 13.4 13.5 13.7
Adj. EBITDA Margins (%) 11.1 10.0 9.6 9.7 11.7 13.0 13.8 13.4 10.1 13.0
Other Income 1,449 1,452 1,266 1,802 1,750 1,600 1,700 1,943 5,969 6,993
Interest 30 30 30 29 35 35 35 20 118 125
Depreciation 2,744 2,869 2,732 2,728 2,800 750 800 864 11,074 5,214
PBT 7,502 6,583 7,174 7,414 9,220 8,928 11,363 10,423 28,673 39,934
Adj. PAT 5,486 4,814 5,247 5,544 6,791 6,577 8,370 7,677 21,091 29,415
Growth (%) -10.9 9.3 7.5 -3.4 23.8 36.6 59.5 38.5 -0.4 39.5
E: MOSL Estimates


Hero MotoCorp

CMP: INR2,583 Buy
Expect Hero Motos (HMCL) 1QFY15 volumes to rise 10% YoY
(+7.9% QoQ) to 1.7m units. Realizations to improve by 1% QoQ
(+4.4% YoY) to INR41,000/unit on price hike undertaken in 1QFY15.
Margins (adjusted for royalty amortization) to improve 60bp YoY
(+200bp QoQ) to 11.7%, with benefits of operating leverage, cost
reduction measures and one-time excise duty impact in 4Q.
HMCL saved ~INR1.5b (~60bp) through cost reduction measures in
FY14 (4QFY14 at ~INR600m), with an exit rate of ~INR250m/month
(implied 110bp for FY15).
Expect PAT to grow 24% YoY (+22.5% QoQ) to INR6.8b.
Management has guided for industry growth of 10-11% in FY15 (v/s
7% growth in FY14). Urban demand recovery (post 2-years of muted
growth) along with continued rural demand to drive FY15 growth.
Guides for significant ramp-up in exports in FY15, with a target of
250,000 v/s 130,000 in FY14. Maintain Buy.
Update on demand environment at the retail level, channel
inventory, competitive intensity.
Guidance on export plans, new launches together with timelines.
Progress on cost reduction measures and margin outlook.

Bloomberg HMCL IN
M. Cap. (INR b)/(USD b) 516 / 9
52-Week Range (INR)
2,775 /
636
1,6,12 Rel Perf. (%) -3 / -1 / 22

Y/E March 2014 2015E 2016E 2017E
Sales 251.2 278.6 321.6 370.8
EBITDA 33.9 37.1 43.8 51.9
NP 21.1 28.8 35.3 40.7
Adj. EPS (INR) 105.6 144.4 176.9 203.6
EPS Gr. (%) -0.4 36.7 22.6 15.1
BV/Sh. (INR) 280.4 343.4 421.6 526.4
RoE (%) 39.8 46.3 46.3 43.0
RoCE (%) 52.0 63.8 64.4 60.4
Payout (%) 70.8 55.8 55.2 48.0
Valuations
P/E (x) 24.4 17.9 14.6 12.7
P/BV (x) 9.2 7.5 6.1 4.9
EV/EBITDA (x) 14.0 12.5 10.3 8.2
Div. Yield (%) 2.5 2.7 3.3 3.3

July 2014 84

Y/E March FY14

FY15E FY14 FY15E
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Total Volumes (nos) 194,962 175,799 207,097 189,431 184,578 183,404 220,400 200,545 777,735 816,737
Growth YoY (%) 7.0 -6.7 -1.0 -3.1 -5.3 4.3 6.4 5.9 -1.2 5.0
Net Realization 497,564 492,631 494,533 539,217

514,636 520,188 523,250 536,743 499,104 506,112
Growth YoY (%) 2.1 0.3 1.0 5.6

3.4 5.6 5.8 -0.5 2.4 1.4
Net Op. Income 97,006 86,604 102,416 102,144

94,991 95,404 115,324 107,641 388,171 413,360
Growth YoY (%) 9.3 -6.4 0.0 2.3 -2.1 10.2 12.6 5.4 1.2 6.5
RM Cost (% of sales) 70.2 68.5 69.0 69.6

70.0 69.5 69.8 69.5 69.4 69.7
Staff (% of sales) 5.5 6.2 5.7 6.4

6.2 6.3 6.1 6.0 6.0 6.1
Oth. Exp. (% of Sales) 9.9 10.8 10.3 13.6 10.9 11.4 11.0 10.4 11.2 11.0
EBITDA 14,008 12,544 15,325 10,604

12,285 12,200 15,135 14,643 52,481 54,264
EBITDA Margins (%) 14.4 14.5 15.0 10.4 12.9 12.8 13.1 13.6 13.5 13.1
Other income 972 3,628 975 1,073

1,000 4,000 1,000 1,272 6,648 7,272
Interest 759 892 883 1,078

975 925 875 862 3,611 3,637
Depreciation 2,080 2,244 2,235 3,200

2,700 2,800 2,850 2,931 9,760 11,281
EO Expense 528 528 0
PBT 12,141 13,036 13,182 7,927

9,610 12,475 12,410 12,122 46,286 46,618
Tax 3,045 2,759 3,181 -1,750

2,278 2,957 2,941 2,870 7,235 11,046
Adj PAT 9,097 10,276 10,001 9,149

7,333 9,519 9,469 9,252 39,051 35,573
Change (%) 16.9 5.1 9.3 2.0 -19.4 -7.4 -5.3 1.1 7.4 -8.9
E: MOSL Estimates


Mahindra & Mahindra

CMP: INR1,229 Buy
M&Ms passenger UV volumes to decline 8.3% YoY (down 16.9%
QoQ), while tractor volumes are expected to be flat YoY at 1.4% (up
34.6% QoQ). Pick-up volumes to decline 10.2% YoY (down 16.1%
sequentially).
Considering the merger of M&Ms truck business (MTBL) in 4QFY14,
financials are not comparable sequentially on a like-to-like basis.
Expect M&M (incl. MVML) revenue to decline 2.1% YoY to INR95b.
EBITDA margin to decline 150bp YoY (improve 260bp QoQ).
Adjusted PAT estimated at INR7.56b (-16.9% YoY).
M&M continues to face pressure on UV business led by weak
industry demand and higher competitive pressures. Recent
hailstorms and delay in monsoon pose risks to our 5% tractor
growth forecast for FY15. Maintain Buy.

Update on launch of three new UV platforms in CY15.
Update on retail demand environment for auto and tractor
division; plant and channel inventory.
Considering competitive launches in FY15/FY16, guidance on auto
volumes and margins.
Guidance for FY15 tractor volumes.
Update on Ssangyong business and financial performance.

Bloomberg MM IN
M. Cap. (INR b)/(USD b) 757 / 13
52-Week Range (INR) 1,269 / 742
1,6,12 Rel Perf. (%) -4 / 12 / -9

Y/E March 2014 2015E 2016E 2017E
Sales 405.1
432.

509.5 602.8
EBITDA 47.2 48.8 61.2 72.6
NP (incl. MVML) 39.1 35.6 43.6 51.6
Adj. EPS (INR) 65.2 59.4 72.9 86.3
EPS Gr. (%) 7.4 -8.9 22.6 18.4
Cons.EPS (INR) 72.7 76.9 101.3 119.9
BV/Sh. (INR) 284.4
326.

382.9 451.6
RoE (%) 22.1 17.5 18.6 18.5
RoCE (%) 20.3 18.5 20.1 20.6
Payout (%) 25.7 30.4 24.5 20.8
Valuations
P/E (x) 18.8 20.7 16.9 14.2
Cons. P/E (x) 16.9 16.4 12.4 10.2
P/BV (x) 4.3 3.8 3.2 2.7
EV/EBITDA (x) 15.2 14.8 11.6 9.4
Div. Yield (%) 1.1 1.2 1.2 1.2

July 2014 85

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Total Volumes (nos) 266,434 275,586 288,151 324,870 299,894 335,500 330,500 377,680 1,155,041 1,343,574
Change (%) -10.0 19.6 -4.4 -5.5 12.6 21.7 14.7 16.3 -1.4 16.3
Realizations (INR/car) 375,144 370,550 368,546 363,780 366,414 370,014 376,315 393,974 369,206 377,496
Change (%) 5.4 5.8 1.4 -4.2 -2.3 -0.1 2.1 8.3 1.5 2.2
Net Sales 99,951 102,118 106,197 118,181 109,885 124,140 124,372 148,796 426,448 507,193
Change (%) -5.1 26.5 -3.1 -9.5 9.9 21.6 17.1 25.9 260.8 18.9
RM Cost (% of Sales) 71.9 69.4 71.6 73.4 72.0 71.5 70.5 69.4 71.7 70.8
Staff Cost (% of Sales) 2.9 3.6 2.8 3.3 2.8 3.0 2.6 2.9 3.1 2.8
Other exp. (% of Sales) 13.8 14.4 13.2 13.0 13.5 13.2 13.7 12.8 13.6 13.3
EBITDA 11,662 13,214 13,548 12,475 13,110 15,622 16,875 22,507 50,959 68,114
EBITDA Margins (%) 11.4 12.6 12.4 10.3 11.7 12.3 13.2 14.8 11.7 13.1
Non-Operating Income 2,043 1,010 1,170 4,066 2,543 1,510 1,550 3,517 8,229 9,120
Interest 442 434 448 434 450 450 450 504 1,759 1,854
Depreciation 4,802 4,992 5,414 5,637 5,837 5,987 6,187 6,402 20,844 24,413
PBT 8,461 8,799 8,856 10,470 9,366 10,695 11,788 19,118 36,586 50,968
Tax 2,145 2,097 2,044 2,470 2,154 2,460 2,711 4,397 8,755 11,723
PAT 6,316 6,702 6,811 8,000 7,212 8,235 9,077 14,721 27,831 39,245
Adjusted PAT 6,316 6,702 6,811 8,000 7,212 8,235 9,077 14,721 27,831 39,245
Change (%) 49.0 194.7 35.9 -35.5 14.2 22.9 33.3 84.0 16.3 41.0
E:MOSL Estimates;* Including SPIL Merger


Maruti Suzuki

CMP: INR2,643 Buy
Volumes have improved by 12.6% YoY (-7.7% QoQ) driven by
demand recovery on improved consumer sentiments and a low
base (inventory rationalization last year).
Expect margins to improve by 30bp to 11.7% QoQ. 4Q had a one-
time impact of 120bp of excise duty cut and 60bp impact for prior
period employee cost.
PAT expected to grow 14.2% YoY (decline 9.9% QoQ) to INR7.2b.
Management has upgraded its volume guidance to healthy double
digit growth, from the earlier 8-10%.
While discounts continued to remain high in 1Q, management
guided for normalization from July 2014 onwards.
Celerios capacity to be increased from July 2014 by 30% to 7,000
units. Maintain Buy.

Update on retail demand scenario, channel inventory, discounting
trends and new launches.
Guidance on FY15 volume growth, margins, forex hedges,
localization efforts.

Bloomberg MSIL IN
M. Cap. (INR b)/(USD b) 798 / 13
52-Week Range (INR) 2,663 / 1,217
1,6,12 Rel Perf. (%) 7 / 22 / 36

Y/E March 2014 2015E 2016E 2017E
Sales 437.0 518.9 621.5 731.5
EBITDA 51.0 68.1 85.5 106.2
Adj. PAT 27.8 39.2 51.4 66.5
Cons. EPS (INR) 94.4 132.5 172.6 222.8
EPS Gr. (%) 15.5 40.3 30.3 29.1
BV/Sh. (INR)
694.

806.9 953.8
1,144.
9
RoE (%) 13.3 16.1 17.8 19.2
RoCE (%) 16.5 19.8 22.1 23.9
Payout (%) 13.0 11.5 11.8 11.4
Valuations
P/E (x) 28.0 19.9 15.3 11.9
P/CE (x) 16.2 12.4 10.0 8.1
EV/EBITDA (x) 13.9 10.2 7.7 5.7
Div. Yield (%) 0.5 0.6 0.8 0.9

July 2014 86

Consolidated Quarterly Performance

(INR Million)
Y/E March
FY14 FY15E
FY14 FY15E
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
JLR vols. (units) 90,620 101,931 116,357 120,953

113,633 113,095 124,678 130,992 429,861 482,398
Growth (%) 8.6 31.6 22.7 4.0

25.4 11.0 7.2 8.3 15.5 12.2
JLR EBITDA (%) 15.8 17.5 19.1 17.2

17.0 17.6 17.4 17.1 17.5 17.3
S/A vol. (units) 153,172 151,466 130,337 131,616

106,160 145,772 141,071 245,629 565,873 625,053
Growth (%) -19.7 -32.3 -36.1 -33.0

-30.7 -3.8 8.2 86.6 -30.1 10.46
S/A EBITDA (%) 2.3 2.0 -4.3 -6.2

-3.4 2.2 1.6 4.4 -1.4 1.90
Net Sales 467,513 557,012 635,361 647,158 0 0 0 0 2,306,771 0
Total Op Income 467,847 568,823 638,768 653,171 600,718 634,663 675,419 745,048 2,328,337 2,655,848
Growth (%) 8.0 31.1 38.6 16.6 28.4 11.6 5.7 14.1 23.3 14.1
EBITDA 62,192 86,351 99,485 99,998 90,026 98,934 105,123 105,875 348,377 399,959
EBITDA Margins (%) 13.3 15.2 15.6 15.3 15.0 15.6 15.6 14.2 15.0 15.1
Depreciation 23,477 27,293 28,527 31,255 32,000 35,000 38,000 37,881 110,782 142,881
Other Income 1,823 2,321 1,575 2,548 1,350 1,100 1,800 401 8,286 4,651
Interest Expenses 9,482 11,117 10,012 16,676 11,000 9,000 7,000 6,341 47,338 33,341
PBT after EO Exp 29,270 47,524 61,277 50,530 48,376 56,034 61,923 62,055 188,690 228,388
Tax rate (%) 39.8 25.1 21.4 21.7 27.7 27.7 27.7 28.9 25.3 28.0
PAT 17,628 35,590 48,191 39,561 34,995 40,535 44,795 44,139 141,042 164,465
Minority Interest -198 -106 -85 -205 -100 -250 -175 -315 -595 -840
Share in profit of Associate -169 -65 -58 -173 150 160 190 -153 -537 347
Reported PAT 17,261 35,419 48,048 39,183 35,045 40,445 44,810 43,672 139,910 163,972
Adj PAT 18,337 37,469 49,026 42,382 35,045 40,445 44,810 43,672 147,276 163,972
Growth (%) -28.5 80.0 182.7 7.9 91.1 7.9 (8.6) 3.0 42.6 11.3
E: MOSL Estimates


Tata Motors

CMP: INR468 Buy
JLR volumes likely to grow 25.4% YoY (-6.1% QoQ) driven largely by
LR (31% growth) as Jaguar has stabilized on a high base (2.5%
growth).
EBITDA margin to improve by 120bp YoY (-20bp QoQ) on higher
volumes and stronger mix (higher Range Rover/Sport).
S/A volumes to decline 30.7% YoY (-19.3% QoQ) led by 30.5%/31.4%
decline in CVs/PVs respectively. Within CVs, MHCVs declined 11%,
while LCVs to decline 38%. S/A margins to remain weak at -3.4% (v/s
-6.2% in 4QFY14, 2.3% in 1QFY14) on lower volumes. Discounts,
though remain high, have been on a declining trend.
Expect 28.4% YoY (-8% QoQ) rise in TTMTs consolidated revenue.
Consolidated margins to rise 170bp YoY (-30bp QoQ). Expect
consolidated PAT to rise by 91% YoY (-17.3% QoQ) to INR35b, led by
strong JLR performance, but partially offset by higher standalone
loss. Maintain Buy.
Current JLR demand trends and outlook, particularly China and US.
Order book for new Range Rover and Range Rover Sport and their
ramp-up schedule.
Current capacity, details on new capacity addition.
FY15 volume guidance for MHCVs & PVs, channel inventory,
discount trends.

Bloomberg TTMT IN
M. Cap. (INR b)/(USD b) 1,508 / 25
1,6,12 Rel Perf. (%) 6 / 5 / 27

Y/E March 2014 2015E 2016E 2017E
Net Sales 2,328 2,656 3,198 3,699
EBITDA 374.0 426.9 528.5 638.1
NP 147.3 164.0 220.0 279.5
Adj. EPS (INR) 45.8 50.9 68.3 86.8
EPS Gr. (%) 42.6 11.3 34.2 27.0
BV/Sh. (INR) 203.8 254.1 320.6 405.6
RoE (%) 28.5 22.3 23.8 23.9
RoCE (%) 25.7 22.6 25.0 26.2
Payout (%) 5.1 4.6 5.1 4.0
Valuations

P/E (x) 10.2 9.2 6.9 5.4
P/BV (x) 2.3 1.8 1.5 1.2
EV/EBITDA (x) 4.4 3.8 2.9 2.1
Div. Yield (%) 0.4 0.4 0.6 0.6

July 2014 87

S/A Quarterly Performance

(INR Million)
Y/E March FY14 FY15E
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q FY14 FY15E
Volumes (units) 494,494 506,617 519,308 560,801 603,153 640,500 661,000 688,455 2,081,220 2,593,108
Growth (%) (4.8) 4.2 0.2 10.1 22.0 26.4 27.3 22.8 2.4 24.6
Realization (INR/unit) 35,596 39,248 39,622 38,440 39,593 40,385 40,789 41,091 38,256 40,491
Growth (%) (0.1) 11.4 14.2 12.0 11.2 2.9 2.9 6.9 9.4 5.8
Net Sales 17,602 19,884 20,576 21,557 23,881 25,866 26,961 28,289 79,619 104,997
Growth (%) (4.8) 16.1 14.4 23.3 35.7 30.1 31.0 31.2 12.0 31.9
RM (%) 71.1 71.2 71.0 71.6 71.5 71.3 71.0 70.8 71.3 71.1
Emp cost (%) 6.4 5.9 6.0 5.7 5.7 5.7 5.7 5.6 6.0 5.7
Other exp (%) 16.8 17.0 17.0 16.3 16.0 15.8 15.8 15.6 16.8 15.8
EBITDA 989 1,171 1,234 1,387 1,624 1,888 2,036 2,260 4,781 7,807
EBITDA margin (%) 5.6 5.9 6.0 6.4 6.8 7.3 7.5 8.0 6.0 7.4
Interest 65 52 53 83 65 55 45 44 254 209
Depreciation 314 314 327 361 370 380 390 392 1,317 1,532
Other Income 81 77 78 66 81 80 80 91 302 332
PBT before EO Exp 691 882 932 1,009 1,270 1,533 1,681 1,915 3,513 6,399
EO Exp 0 -303 0 -301 0 0 0 0 -603 0
PBT after EO Exp 691 1185 932 708 1270 1533 1681 1915 4,116 6,399
Total Tax 172 296 244 187 318 383 420 479 909 1,600
Tax rate (%) 24.9 33.6 26.1 18.5 25.0 25.0 25.0 25.0 22.1 25.0
Reported PAT 519 888 688 521 953 1,150 1,260 1,436 3,207 4,799
Adjusted PAT 519 586 688 822 953 1,150 1,260 1,436 2,737 4,799
E: MOSL Estimates


TVS Motor

CMP: INR171 Buy
TVS Motor's (TVSL) volumes have risen 22% YoY (+7.6% QoQ) to
603,153 units.
Volume growth has been driven by a robust 53% YoY growth in
scooter portfolio. Motorcycle growth has also rebounded with 21%
YoY growth in 1Q (v/s 6% growth in FY14).
Margins are expected to improve to ~120bp YoY/ 40bp QoQ to
6.8%. 4Q margins had a 50bp impact of one-time excise duty cut.
Management has guided for 25% volume growth for FY15 driven
by: a) recent success of Jupiter, b) upcoming launch of new Scooty
Zest (110cc variant) and c) two motorcycle launches -- Star City Plus
(launched in May 2014) and Victor (expected in 3QFY15).
Recent launch of Star City Plus received good response from
customers. Our channel checks indicate a wait list of two to three
weeks. Maintain Buy.
Update on new launches together with timelines.
Regional demand scenario, particularly in southern region, given
its high exposure.
Guidance on margins.
Capex outlook, progress update on BMW tie-up.

Bloomberg TVSL IN
1,6,12 Rel Perf. (%)
24 / 92 /
388

Financial Snapshot (INR Million)
Y/E March 2014 2015E 2016E 2017E
Sales 79.6 105.0 128.6 146.8
EBITDA 4.8 7.8 10.1 11.9
Adj. PAT 2.6 4.8 6.5 7.8
EPS (INR) 5.5 10.1 13.7 16.4
EPS Gr. (%) 44.0 84.1 35.5 19.9
BV/Sh (INR) 29.8 37.8 48.8 62.3
RoE (%) 19.7 29.9 31.6 29.5
RoCE (%) 20.3 32.7 36.5 35.7
Payout (%) 29.6 20.8 19.2 17.8
Valuations
P/E (x) 30.3 16.5 12.2 10.1
P/BV (x) 5.6 4.4 3.4 2.7
EV/EBITDA (x) 17.3 10.2 7.5 6.0
Div. Yield (%) 0.8 1.1 1.4 1.5

July 2014 88

Optimism built in macro support awaited
Operational/financial restructuring underway to support macro push

Cautious optimism prevails, policy support awaited: Managements
commentary, post 4QFY14 conference call, signaled cautious optimism as pace of
project execution continues to be tepid. Overall, ordering activity was restricted to
PSUs, while private sector/industrial sector ordering continued to remain lull.
Infrastructure / Metal & Mining / Power sectors await macro support for before re-
starting their capex plans. Several industry players that we have interacted with
suggest that the next cycle of Greenfield project ordering can possibly commence
by end FY15 / mid FY16.

Focus shifts to margins, better contractual terms: Unexecuted order books of
several developers still comprise of legacy projects, which are impacted severely by
cost and time overruns. Considering the same, managements sounded cautious and
prefer cash profits over revenue growth. Incremental orders bagged in 2HFY14 have
been with higher margins and better contractual terms.

Overseas expansion initiatives deliver tangible results: L&Ts efforts to
increase order inflows from overseas operations seem to be gaining momentum, as
80% of the orders received (INR96.2b) and those disclosed via media releases in
1QFY15 were from international operations. Also, media reports stated that L&T has
emerged as the lowest bidder for construction of Duqm airport in Oman. L&Ts bid
for the project was worth RO36.3m (USD94m), while Galfar Engineering &
Construction and Mohammed Abdel Mohsen Al Kharafi & Sons were the third
lowest bidder. Voltas too expects ordering environment to improve in GCC nations
by end FY15, as the design consultants are being finalized for large projects including
Dubai Expo to be held in 2020.


(INR)
4.7.14
Reco Jun-14
Var %
YoY
Var %
QoQ
Jun-14
Var %
YoY
Var %
QoQ
Jun-14
Var %
YoY
Var %
QoQ
ABB 1,120 Neutral

18,556 6.0 1.5

1,322 22.6 5.2

540 36.4 4.5
BHEL 263 Buy

54,632 -14.0 -63.0

1,609 -58.6 -94.1

762 -83.6 -96.0
Crompton Greaves 207 Buy

34,969 10.8 -7.2

1,787 23.4 -5.0

525 -12.6 -17.7
Cummins India 675 Buy

10,746 2.4 10.6

1,909 8.7 11.7

1,795 8.0 26.6
Havells India 1,200 Neutral

11,661 10.9 -11.0

1,539 9.1 -13.2

1,039 0.9 -24.1
Larsen & Toubro 1,742 Buy

103,554 5.4 -48.4

11,539 15.4 -58.1

7,041 -4.8 -69.9
Siemens 990 Sell

26,414 0.0 -2.4

1,636 0.3 -12.2

727 LP -17.6
Thermax 956 Buy

8,711 1.0 -37.0

877 7.7 -34.4

579 15.2 -45.4
Voltas 215 Buy

16,242 1.3 11.0

1,023 66.5 -2.9

738 81.8 -11.7
Sector Aggregate 285,486 0.9 -40.8 23,239 2.7 -64.6 13,747 -16.3 -71.9

Capital Goods

Company Name
ABB
BHEL
Crompton Greaves
Cummins India
Havells India
Larsen & Toubro
Siemens
Thermax
Voltas

Satyam Agarwal (AgarwalS@MotilalOswal.com) /
Amit Shah (Amit.Shah@MotilalOswal.com) / Nirav Vasa (Nirav.Vasa@MotilalOswal.com)
June Results Preview | July 2014

July 2014 89

Operational, financial restructuring underway for next growth levels: Post
reporting losses across projects due to time and cost overruns, several companies
have hired consultants to streamline organizational policies to realign themselves
with existing ground realties. Also, balance sheet restructuring and capital infusion
initiatives are in place to prepare for the next level of growth across many
companies. While ABB continues to invest in localization initiatives, Voltas continues
to bid cautiously. Siemens had recently hived off its Metallurgical business to
Siemens AG. After selling its stake in Dhamra port for an EV of INR55b, L&T signed
definitive investment agreement with CPPIB for capital infusion of INR10b in IDPL.
GMR has also raised INR20b through a QIP / warrants issue.

1QFY15 operational performance to remain muted: For 1QFY15, we expect
de-growth in revenue/EBITDA across our coverage universe, with PAT decline of
14% on a YoY basis. Order inflows for 1QFY15 are expected to be muted as project
decisions were impacted by ongoing elections. L&T, BHEL and TMX are our top
picks.

Revenue failed to improve in constrained environment

EBITDA margin impacted by lower operating leverage


Book to Bill ratio at 2.4x

Order intake remains subdued


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Order book (INR b) BTB (x)
4
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7
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Order intake YoY %
June 2014 Results Preview | Sector: Capital Goods

July 2014 90

Monthly Order Finalization (Domestic, INR b)
May 2013 - May 2014 2013 2014
INR b % Share May Jun Jul Aug Sep Oct Nov Dec Jan- Feb Mar Apr May
Power Generation 467 24 12 38 28 28 5 16 54 28 1 158 92 6 -
Buildings and Factories 279 14 19 13 21 39 31 9 27 7 23 31 37 11 11
T&D 287 14 9 19 3 58 25 24 32 14 31 5 19 10 38
Water and Waste water 273 14 11 12 17 19 65 35 3 9 18 29 50 5 0
O&G 141 7 18 0 35 41 3 11 8 2 13 5 1 2 1
Railways 107 5 5 67 - 0 0 - 0 1 6 0 18 7 2
Metro rail 77 4 10 14 19 11 11 0 1 - 1 1 4 3 2
Roads 141 7 - 4 0 7 22 7 1 17 6 24 11 35 7
Metals and Mining 43 2 - 3 11 6 9 9 - - - - 5 - -
Airport 9 0 - - 0 - - - 9 0 - 0 - - -
Ports 104 5 - 0 - - - - - 6 - 97 - - 0
Cement 6 0 - 2 2 2 0 - - - - - 1 - -
Defence 6 0 - 3 - - - - - - 2 - - - 1
Others 47 2 3 0 0 2 2 8 0 1 7 5 7 5 5
Total 1,986 100% 87 176 138 211 173 118 137 86 109 356 243 84 68

Company-wise order finalization (TTM, Domestic)

Sector-wise order finalization (TTM, Domestic)
Company Name INR b % Share

Sector INR B % Share
L&T 489 25

Power Gen 467 24
PGCIL 127 6

T&D 287 14
BHEL 145 7

Buildings and factories 279 14
Lanco 73 4

Water and waste water 273 14
Mcnally Bharat 41 2

Roads 141 7
SPML 38 2

O&G 141 7
IVRCL 71 4

Railways 107 5
Era 16 1

Ports 104 5
Thermax 20 1

Metro rail 77 4
Pratibha Ind 31 2

Others 47 2
BGR 16 1

Metals and mining 43 2
Siemens 15 1

Airport 9 0
C&C Constructions 19 1

Defence 6 0
KEC International 17 1

Cement 6 0
Alstom 47 2

Telecom - 0
Bajaj Electricals 11 1

Total 1,986 100
Shriram EPC 6 0

Others 806 41

Total 1,986 100

Source: MOSL


July 2014 91

Relative Performance - 3m (%)

Relative Performance 1 Yr (%)


Comparative valuation
Capital Goods
ABB 1,120 Neutral 13.4 20.0 30.3 83.7 56.0 37.0 38.3 28.9 16.7 10.3 14.4 19.6
BHEL 263 Buy 10.0 15.2 19.8 26.2 17.2 13.3 13.6 8.5 6.1 7.3 10.4 12.5
Crompton Greaves 207 Buy 7.3 12.4 17.1 28.4 16.7 12.1 15.7 11.3 8.7 12.4 19.6 22.8
Cummins India 675 Buy 24.6 30.8 38.3 27.4 21.9 17.6 22.8 17.7 13.8 25.1 28.5 31.4
Havells India 1,200 Neutral 48.3 56.0 68.2 24.8 21.4 17.6 15.5 12.9 10.7 29.6 28.6 29.1
Larsen & Toubro 1,742 Buy 48.2 66.1 89.3 36.1 26.4 19.5 21.8 17.3 12.7 14.1 15.8 17.8
Siemens 990 Sell 14.6 19.3 26.5 67.8 51.4 37.4 32.4 25.8 20.6 11.9 14.7 18.5
Thermax 956 Buy 28.0 38.5 58.3 34.2 24.8 16.4 20.1 14.7 9.8 15.5 19.0 24.5
Voltas 215 Buy 8.5 10.6 13.0 25.3 20.4 16.5 17.1 13.7 10.9 14.0 15.4 16.8

90
105
120
135
150
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Sensex Index MOSL Capital Goods Index
80
110
140
170
200
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Sensex Index MOSL Capital Goods Index

July 2014 92

Quarterly Performance

(INR Million)
Y/E December CY13 CY14 CY13 CY14E
1Q 2Q 3Q 4Q 1Q 2QE 3QE 4QE
Sales 19,700 17,512 17,859 22,039 18,277 18,556 19,938 24,327 77,220 81,097
Change (%) 10.0 (7.0) (1.3) 5.8 (7.2) 6.0 11.6 10.4 3.3 5.0
EBITDA 1,065 1,079 1,054 1,495 1,257 1,322 1,570 2,109 4,699 6,258
Change (%) 9.2 1.8 58.8 124.4 18.0 22.6 48.9 41.1 29.9 33.2
As % of Sales 5.4 6.2 5.9 6.8 6.9 7.1 7.9 8.7 6.1 7.7
Adjusted EBITDA (%) * 6.5 6.3 6.2 7.9 7.6 6.9
Depreciation 246 260 257 270 274 300 310 338 1033 1222
Interest 198 256 270 288 221 260 220 299 1,011 1,000
Other Income 14 38 9 7 11 20 25 17 70 73
PBT 636 601 537 944 774 782 1,065 1,488 2,749 4,110
Tax 210 205 180 360 257 243 330 444 956 1,274
Repoted PAT 426 396 356 583 517 540 735 1,044 1,793 2,836
Adj. PAT 426 396 356 583 517 540 735 1,044 1,769 2,836
Change (%) -10.7 -23.3 66.9 247.8 21.4 36.4 106.2 79.0 -4.1 60.3
Order Intake 15,310 17,310 17,620 16,660 19,820 15,199 20,265 29,153 67,170 84,437
Order Book 82,290 82,350 82,520 77,090 78,760 75,403 75,730 74,850 77,090 74,850
BTB (x) 1.1 1.1 1.1 1.0 1.0 1.0 1.0 0.9 1.0 0.9
E: MOSL Estimates,*: As reported by ABB


ABB

CMP: INR1,120 Neutral
ABB continues to focus on increased localization and cost
optimization, whereby its direct RM costs have dipped to 68% of
revenue, from a peak of 81% in 4QCY10.
ABB announced plans to collaborate with many Indian universities
and also sponsor university programs to look into new materials
and manufacturing techniques.
ABBs preference continues to be cash over profits, resulting in
lower NWC days at end-CY13. Its NWC fell to 71 days at end-
4QCY13, from 88 at end-2QCY13. Thus, its net debt position
improved to INR3.1b at end-CY13 v/s INR6.3b at end-2QCY13.
Maintain Neutral.
Management commentary suggested cautious optimism and
guided for near term order inflows from short cycle orders, before
ordering activity picks up across the industrial segment.
In a recent media interaction, management stated it was
confident on explosive growth in rooftop solar power plants,
which however is subject to certain policy related issues.

Bloomberg ABB IN
M. Cap. (INR b)/(USD b) 237 / 4
52-Week Range (INR) 1,200 / 448
1,6,12 Rel Perf. (%) 18 / 43 / 52

Y/E Dec 2013 2014E 2015E 2016E
Net Sales 77.2 81.1 93.2 112.1
EBITDA 4.7 6.3 8.2 13.9
Adj PAT 1.7 2.8 4.2 6.4
Adj EPS (INR) 8.3 13.4 20.0 30.3
EPS Gr (%) 28.7 60.3 49.3 51.5
BV/Sh (INR) 126.4 133.6 144.3 164.1
RoE (%) 6.7 10.3 14.4 19.6
RoCE (%) 11.1 14.7 20.3 26.0
Payout (%) 41.5 40.0 40.0 30.0
Valuations
P/E (x) 70.3 83.7 56.0 37.0
P/BV (x) 4.6 8.4 7.8 6.8
EV/EBITDA (x) 27.1 38.3 28.9 20.8
Div. Yield (%) 0.6 0.6 0.8 0.9

July 2014 93

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Sales (Net) 63,526 88,190 84,624 147,549 54,632 68,788 69,392 130,927 383,888 323,738
Change (%) -23.7 -15.2 -15.7 -21.7 -14.0 -22.0 -18.0 -11.3 -19.4 -15.7
EBITDA 3,886 4,119 9,859 27,334 1,609 4,541 4,519 25,560 45,198 36,228
As a % Sales 6.1 4.7 11.7 18.5 2.9 6.6 6.5 19.5 11.8 -19.8
Adjusted EBITDA 3,886 6,033 9,859 27,334 1,609 4,541 4,519 25,560 47,112 36,228
Change (%) -67.7 -68.2 -39.7 -41.2 -58.6 -24.7 -54.2 -6.5 -49.8 -23.1
As a % Sales 6.0 6.7 11.7 18.5 2.9 6.6 6.5 19.5 11.8 -19.8
Interest 278 247 323 479 450 450 450 432 1,326 1,782
Depreciation 2,308 2,387 2,416 2,718 2,720 2,750 2,780 2,816 9,829 11,066
Other Income 5,385 4,979 2,908 2,889 2,650 3,100 3,050 3,454 16,160 12,254
PBT 6,685 6,465 10,028 27,025 1,089 4,441 4,339 25,765 50,203 35,634
Tax 2,031 1,905 3,080 8,519 327 1,332 1,302 8,086 15,535 11,047
Reported PAT 4,654 4,560 6,948 18,446 762 3,109 3,037 17,679 34,608 24,587
Change (%) -49.5 -64.2 -41.2 -43.0 -83.6 -31.8 -56.3 -4.2 -47.7 -29.0
Adj. PAT 4,654 5,899 6,948 18,819 762 3,109 3,037 17,679 36,303 24,587
Change (%) -49.5 -53.7 -41.2 -41.9 -83.6 -47.3 -56.3 -6.1 -44.6 -32.3
Order intake 14,690 30,010 67,624 163,410 19,355 82,259 12,339 215,082 280,070 329,035
Order book (INRb) 1,086 1,023 1,006 1,016 1,010 1,024 967 999 1,016 999
BTB (x) 2.4 2.3 2.4 2.6 2.7 2.9 3.4 3.1 2.6 3.1
E: MOSL Estimates


BHEL

CMP: INR263 Buy
With a slowdown in utility segment, BHEL intends to expand
industrial and defence business. In 1QFY15, company invited
multiple EoIs with the intent to get access to high-end technology.
Major EoIs included for participation in the 765kv reactor package
tenders of NTPC. EoIs like technical collaboration STATCOM
projects, armored recovery vehicle and defense simulators saw an
extension in bid submission deadlines.
BHEL was favorably positioned in 3gw of orders, which were
expected to be awarded in FY15. However, 1QFY15 saw no major
project awards, impacted by the delayed decision making given
ongoing elections. Maintain Buy.
Mr Anant Geete was recently appointed as Minister for Heavy
Industries. In his initial review, he asked BHEL to venture into
power generation. Also, the department of heavy industry intends
to set up a JV company for executing projects worth INR75b in the
first phase. We await more clarity on these issues.
At end-4QFY14, BHELs cash balance increased to INR92.2b v/s
INR53.6b at end-2QFY14, aided by increased focus on collections.

Bloomberg BHEL IN
M. Cap. (INR b)/(USD b) 643 / 11
1,6,12 Rel Perf. (%) -3 / 34 / 16

Y/E March 2014 2015E 2016E 2017E
Net Sales 391.1 331.8 365.7 406.9
EBITDA 45.2 36.2 49.6 62.8
Adj PAT 36.3 24.6 37.3 48.4
EPS (INR) 14.8 10.0 15.2 19.8
EPS Gr. (%) -44.6 -32.3 51.8 29.6
BV/Sh. (INR) 135.0 141.5 151.4 164.3
RoE (%) 11.4 7.3 10.4 12.5
RoCE (%) 16.1 10.8 15.1 18.1
Payout (%) 19.1 30.0 30.0 30.0
Valuations
P/E (x) 11.0 26.2 17.2 13.3
P/BV (x) 1.2 1.9 1.7 1.6
EV/EBITDA

6.7 13.6 8.5 6.1
Div Yield (%) 1.1 1.1 1.7 2.3
* Consolidated

July 2014 94

Quarterly performance (Standalone) (INR Million)
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Sales 18,194 17,658 18,677 20,367 18,719 18,837 20,168 22,296 74,896 80,019
Change (%) 9.7 5.7 7.0 -1.1 2.9 6.7 8.0 26.3 15.5 6.8
EBITDA 1,524 1,590 1,693 1,852 1,624 1,608 1,841 2,250 6,658 7,323
Change (%) -3.8 8.2 27.7 30.4 6.6 1.1 8.7 41.5 -7.6 10.0
As of % Sales (Adj) 8.4 9.0 9.1 9.1 8.7 8.5 9.1 10.1 8.9 9.2
Depreciation 212 217 220 245 248 250 255 265 894 1,018
Interest -66 -107 -9 -38 -50 -50 -50 -50 -221 -200
Other Income 298 295 294 252 275 290 300 305 1,139 1,170
PBT 1,676 1,775 1,777 1,896 1,701 1,698 1,936 2,341 7,125 7,675
Tax 430 427 421 635 499 499 499 499 1,914 1,995
Effec. Tax Rate (%) 25.7 24.1 23.7 33.5 29.3 29.4 25.8 21.3 26.9 26.0
Reported PAT 1,246 1,348 1,355 1,261 1,202 1,199 1,437 1,842 5,211 5,679
Adj PAT 1,246 1,348 1,355 1,261 1,202 1,199 1,437 1,842 5,211 5,679
Change (%) 3.6 20.7 27.7 17.1 -3.5 -11.1 6.0 36.6 3.2 9.0
E: MOSL Estimates


Crompton Greaves

CMP: INR207 Buy
CRGs Spanish acquisition, ZIV, bagged an order worth INR2.4b from
a Spanish utility for supply of 1m meters operating on single and
three phases. This is expected to be executed till year 2016. Other
orders won by ZIV include the supply of 0.75m meters to Spains
GNF, which would be executed in the next two years. Earlier, ZIV
had won an order for supply of 2m meters from major European
utilities.
ZIV was acquired by CRG in July 2012 for an enterprise value of
Euro150m, of which 50% was funded through internal accruals and
remaining 50% via debt. Consolidated debt at end-FY14 was at
INR22b, of which INR21.6b is on its subsidiary balance sheet.
Incremental orders across subsidiaries hold the key to increasing
operating leverage; subsidiaries reported EBITDA margin of just
0.3% and cash loss of 1.8% for FY14. Maintain Buy.
Increase in exports from domestic operations. Key factories
commissioned includes HT Motors, Drives, Switchgears, etc which
need pre-qualifications.
Performance Improvement in Canada / USA, traction on smart
metering initiatives globally, stabilization in Hungary, etc.
Any update on supply chain related issues which impacted
appliances business.

Bloomberg CRG IN
M. Cap. (INR b)/(USD b) 130 / 2
1,6,12 Rel Perf. (%) -7 / 42 / 100

Y/E March 2014 2015E 2016E 2017E
Net Sales 134.8 148.2 167.3 192.9
EBITDA 6.8 9.4 12.9 16.6
Adj PAT 2.6 4.5 7.7 10.7
EPS(INR) 3.9 7.3 12.4 17.1
EPS Gr. (%) 26.8 87.8 70.0 38.4
BV/Sh. (INR) 59.5 57.3 67.4 81.7
RoE (%) 7.1 12.4 19.6 22.8
RoCE (%) 5.7 9.4 14.7 18.0
Payout (%) 20.0 20.0 20.0 20.0
Valuations
P/E (x) 53.3 28.4 16.7 12.1
P/BV (x) 3.5 3.6 3.1 2.5
EV/EBITDA

20.5 14.8 10.6 7.9
Div Yield (%) 0.7 0.7 0.9 1.2
* Consolidated

July 2014 95

Quarterly Performance (Standalone) (INR Million)
Y/E March 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Sales 10,493 9,327 10,230 9,716 10,746 10,013 11,803 12,172 39,767 44,734
Change (%) -16.6 -14.2 -6.1 -15.8 2.4 7.4 15.4 25.3 -13.4 -2.5
EBITDA 1,756 1,526 1,976 1,709 1,909 1,615 2,060 2,257 6,967 7,841
Change (%) -24.5 -23.6 -5.3 -11.8 8.7 5.8 4.3 32.1 -16.5 -6.1
As of % Sales 16.7 16.4 19.3 17.6 17.8 16.1 17.5 18.5 17.5 17.5
Depreciation 117 131 133 146 150 160 165 175 528 650
Interest 12 9 10 11 15 15 15 15 42 60
Other Income 668 558 236 315 650 750 300 258 1,777 1,958
PBT 2,294 1,944 2,069 1,867 2,394 2,190 2,180 2,325 8,175 9,089
Tax 632 496 597 450 598 548 545 581 2,175 2,272
Reported PAT 1,662 1,448 1,472 1,418 1,795 1,643 1,635 1,744 6,000 6,817
Change (%) -8.0 -10.0 -37.1 -24.8 8.0 13.4 11.1 23.0 (21.5) (10.8)
Adjusted PAT 1,662 1,448 1,472 1,418 1,795 1,643 1,635 1,744 6,000 6,817
Change (%) (8.0) (10.0) (19.0) (5.1) 8.0 13.4 11.1 23.0 (9.2) 3.2
Operational Details
Domestic Sales 7,550 6,118 7,186 6,170 7,373 7,373 7,373 7,373 27,001 29,493
Change (%) (8.0) (20.0) (12.6) (25.8) (2.3) 20.5 2.6 19.5 (8.4) 9.2
Exports 2,737 3,020 2,820 3,390 3,200 3,400 3,650 4,138 11,990 14,388
Change (%) (35.0) (0.3) 13.3 14.5 16.9 12.6 29.4 22.1 (16.7) 20.0
E: MOSL Estimates


Cummins India

CMP: INR675 Buy
Net working capital stood at 83 days in March 2014 (excluding ICDs
of INR1.14b to Cummins Technologies), v/s 65 days YoY. The
deterioration is largely led by higher inventories and receivables.
LHP is the new thrust area for Cummins India. Growth across MHP
and HHP segment is however subject to industrial recovery.
Macro push in terms of increased pace of project execution across
multiple segments would be the key trigger to support growth
levels for Cummins India. Maintain Buy.
Any change in guidance; as Cummins can possibly benefit from
increased pent up demand.
Any change in competitive scenario, after the implementation of
revised CPCB norms with effect from July 2014.
Quantum of improvement in margins, considering the value
engineering initiatives and a change in business mix.
Tax rates, given increased production in SEZ.

Bloomberg KKC IN
M. Cap. (INR b)/(USD b) 187 / 3
1,6,12 Rel Perf. (%) -1 / 22 / 19

Y/E March 2014 2015E 2016E 2017E
Net Sales 39.8 44.7 53.9 66.1
EBITDA 7.0 7.8 10.0 12.5
Adj PAT 6.0 6.8 8.5 10.6
EPS (INR) 21.6 24.6 30.8 38.3
EPS Gr. (%) (9.2) 13.6 25.2 24.6
BV/Sh. (INR) 94.2 101.8 113.9 130.0
RoE (%) 23.9 25.1 28.5 31.4
RoCE (%) 24.0 25.3 28.7 31.6
Payout (%) 70.3 69.0 60.8 58.0
Valuations
P/E (x) 31.2 27.4 21.9 17.6
P/BV (x) 7.2 6.6 5.9 5.2
EV/EBITDA (x) 17.2 22.9 17.7 13.8
Div Yield (%) 2.9 2.1 2.4 2.8

July 2014 96

Quarterly Performance (Standalone)

(INR Million)

FY14

FY15E FY14 FY15E
Sales 10,513 11,740 11,844 13,100

11,661 12,540 13,096 14,375 47,197 51,673
Change (%) 1.8 21.8 11.9 12.0 10.9 6.8 10.6 9.7 11.7 9.5
Adj EBITDA 1,411 1,690 1,633 1,772

1,539 1,786 1,751 2,159 6,500 7,234
Change (%) 10.1 41.8 16.7 20.2

9.1 5.7 7.2 2.6 21.9 11.3
Adj EBITDA margin (%) 14.1 14.3 13.2 15.4 13.2 14.2 13.4 15.0 13.8 14.0

162 165 185 169 636 681
Interest 56 61 85 67

50 50 50 50 269 200
Other Income 32 78 106 141 40 90 125 195 357 450
PBT 1,154 1,554 1,559 1,685

1,367 1,661 1,641 2,135 5,951 6,803
Tax 207 296 345 316

328 399 394 512 1,164 1,633
Reported PAT 947 1,257 1,215 1,369

1,039 1,262 1,247 1,623 4,787 5,170
Change (%) 18.3 44.6 28.3 24.8 9.7 0.4 2.7 18.5 28.9 8.0
Adj PAT 1,029 1,253 1,185 1,369

1,039 1,262 1,247 1,623 5,122 5,170
Change (%) 16.9 58.9 21.4 27.5 0.9 0.7 5.3 18.5 37.7 1.0
E: MOSL Estimates;


Havells India

Cable and Wire segment revenue increased 21% YoY in 4QFY14
aided by base effect and higher growth levels in flexible cable
segment.
For FY15, management has guided for 15% YoY growth across
Indian business and 5% growth across Sylvanias operations, with
EBITDA margin at ~7%.
Growth across Sylvania is subject to sustainable economic growth
across EU nations and increased support from banking system,
mainly for catering to replacement demand.
HAVL is in the process of developing and leveraging several in-
house brands like Reo and Standard. Under the process, it intends
to cross sell products (fans sold under the Standard brand were
earlier used mainly for cables). Maintain Neutral.
HAVL is promoting Standard as a value-for-money brand across
urban India. Earlier, its focus was on leveraging the Havells brand,
which has matured, and thus intends to create a secondary brand
to attract new customers.
Revenue from Standard increased from INR100m per month to
INR250m per month. Await more clarity on Cross-Sell strategy
which has been an important driver at HAVL.

Bloomberg HAVL IN
M. Cap. (INR b)/(USD b) 150 / 3
52-Week Range (INR) 1,242 / 586
1,6,12 Rel Perf. (%) 8 / 23 / 34

Y/E March 2014 2015E 2016E 2017E
Net Sales 81.9 89.2 97.1 108.1
EBITDA 7.4 9.7 11.3 13.2
Adj PAT 5.7 6.0 7.0 8.5
Adj EPS (INR) 45.6 48.3 56.0 68.2
EPS Gr. (%) 32.7 5.9 15.9 21.9
BV/Sh.(INR) 133.5 163.1 195.6 234.5
RoE (%) 34.2 29.6 28.6 29.1
RoCE (%) 22.6 23.3 23.7 25.1
Payout (%) 49.1 38.8 41.9 42.9
Valuations
P/E (x) 26.3 24.8 21.4 17.6
P/BV (x) 9.0 7.4 6.1 5.1
EV/EBITDA

20.4 15.5 12.9 10.7
Div Yield (%) 1.2 1.3 1.7 2.1
* Consolidated

July 2014 97


(INR Million)
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Net Sales 98,239 123,084 143,875 200,791 103,554 132,169 156,689 224,850 565,989 617,263
Change (%) 11.8 11.1 5.4 7.4 8.9 12.0 9.7 9.1
EBITDA 8,917 11,857 16,886 29,010 10,459 12,953 16,766 28,095 66,670 68,272
Change (%)

34.2 36.2 17.3 9.2 -0.7 -3.2 21.8 2.4
Margin (%) 9.1 9.6 11.7 14.4 10.1 9.8 10.7 12.5 11.8 11.1
Adjusted EBIDTA 9,997 12,857 16,886 27,510 10,459 12,953 16,766 28,095 67,250 68,272
Change (%)

22.1 22.0 4.6 0.7 -0.7 2.1 18.5 1.5
Adjusted Margin (%) 10.2 10.4 11.7 13.7 10.1 9.8 10.7 12.5 11.9 11.1
Depreciation 1,868 1,926 1,992 2,138 2,050 2,100 2,125 2,206 7,924 8,481
Interest 2,424 2,379 2,909 3,049 2,950 2,850 2,700 2,500 10,761 11,000
Other Income 4,871 4,656 4,329 4,953 4,600 5,100 5,020 6,191 18,809 20,911
Extraordinary Inc/(Exp) 0 0 1,044 4,841 0 0 0 0 5,885 0
Reported PBT 9,496 12,208 17,358 33,616 10,059 13,103 16,961 29,580 72,679 69,702
Tax 2,852 3,562 4,953 6,381 3,018 3,800 4,579 6,029 17,748 17,426
Reported PAT 6,643 8,646 12,406 27,235 7,041 9,303 12,381 23,551 54,931 52,277
Adjusted PAT 7,399 9,346 11,362 23,362 7,041 9,303 12,381 23,551 51,469 52,277
Change (%) 22.1 46.2 -4.8 -0.5 9.0 0.8 22.9 1.6
Order Intake 224 233 217 267 223 255 292 292 941 1,063
Order book (INR b) 1,553 1,650 1,712 1,630 1,749 1,872 2,008 2,076 1,630 2,073
BTB (x) 2.9 3.1 3.1 2.9 3.1 3.2 3.4 3.4 2.9 3.4
E: MOSL Estimates


Larsen & Toubro

CMP: INR1,742 Buy
L&Ts efforts to increase order inflows from overseas operations
seem to be gaining momentum, as 80% of the orders received
(INR96.2b) and those reported in media in 1QFY15 were from
international operations.
Major international orders received in 1QFY15 were a) INR45.1b
(USD740m) Doha metro order, b) INR28.8b (USD480m) order for
EPC work related to two gas-based power plants in Bangladesh, c)
INR7.6b order from Saudi Arabia for construction of sub-stations
and transmission lines.
Also, media reports stated that L&T emerged as the lowest bidder
for construction of Duqm airport in Oman. Its bid for the project
was worth RO36.3m (USD94m), while Galfar Engineering &
Construction and Mohammed Abdel Mohsen Al Kharafi & Sons
were the third lowest bidder. Maintain Buy.

Pace of order inflows, especially from domestic customers. Orders
worth INR24b reported through press releases.
Management commentary in terms of asset monetization,
including Singapore REIT and fund infusion by Canada Pension
Fund.

Bloomberg LT IN
M. Cap. (INR b)/(USD b) 1,615 / 27
52-Week Range (INR) 1,775 / 678
1,6,12 Rel Perf. (%) -1 / 48 / 53

Y/E March 2014 2015E 2016E 2017E
Sales 571.6 623.4 772.8 950.6
EBITDA 66.7 0.0 0.0 105.5
Adj PAT * 39.8 44.5 61.0 82.4
EPS (INR)* 43.2 48.2 66.1 89.3
EPS Gr. (%) -19.2 11.8 37.0 35.0
BV/Sh (INR) 360.2 401.6 453.9 521.9
RoE (%) 15.5 14.1 15.8 17.8
RoCE (%) 13.1 12.3 13.7 15.6
Payout (%) 28.2 26.9 26.9 26.9
Valuations
P/E (x)* 22.4 36.1 26.4 19.5
P/BV (x) 2.7 4.3 3.8 3.3
EV/EBITDA (x) 14.4 24.0 19.2 14.3
Div Yield (%) 1.4 0.8 1.0 1.3
* Consolidated

July 2014 98

Y/E September FY13 FY14 FY13 FY14E
1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QE
Total Revenues 24,962 29,556 26,420 32,589 23,939 27,063 26,414 33,222 113,527 110,638
Change (%) -0.2 -26.4 -12.5 -3.4 -4.1 -8.4 0.0 1.9 -5.6 -2.5
EBITDA 1,556 614 276 1,753 1,493 1,863 1,636 2,088 4,207 7,079
As % of Revenues 6.2 2.1 1.0 5.4 6.2 6.9 6.2 6.3 3.7 6.4
Operational EBIDTA 1,841 1,514 1,630 1,905 1,330 1,863 1,636 2,251 6,905 7,079
As % of Revenues 7.4 5.1 6.2 5.8 5.6 6.9 6.2 6.8 6.1 6.4
Depreciation 588 610 626 678 564 588 620 672 2,502 2,443
Interest Income -87 -84 -39 21 -17 -24 -40 -69 -189 -150
Other Income 69 125 26 134 73 88 110 130 345 400
Extra-ordinary Items 0 -139 338 -523 0 0 0 0 -325 0
PBT 951 -94 -701 1,752 985 1,338 1,086 1,476 1,537 4,886
Tax 314 -115 -213 260 334 456 358 464 246 1,612
Reported PAT 636 21 -488 1,492 651 883 727 1,012 1,290 3,274
Adjusted PAT 636 299 -218 1,073 651 883 727 1,012 1,680 3,274
Change (%) 5.8 -91.1 -141.1 162.2 2.3 194.7 -433.8 -5.7 -80.1 94.9
Order Intake (INR b) 20 28 26 35 20 26 25 38 102 110
Order book (INR b) 132 130 130 133 129 122 120 125 137 133
BTB (x) 1.0 1.1 1.2 1.2 1.2 1.1 1.1 1.2 1.2 1.2
E: MOSL Estimates; Adj EBITDA: Adjusted for change in project revenues and cost estimates


Siemens

CMP: INR990 Sell
Siemens Indias product portfolio largely comprises of late cycle
products. Order inflow for 2QFY14 was at INR26b v/s INR20b at
end-1QFY14, while BTB ration remained stagnant at 1.3x.
Recently, SIEM had received a repeat order from BHEL for supply of
large gear units and gear components. Earlier, an order for supply
of 60 gear units was bagged in 2013. Maintain Sell.

Recently, Siemens AG entered into agreement with Mitsubishi
Hitachi Metals Machinery Inc to set up a JV for operating in
metallurgical industry. Hence, SIEM decided to transfer its metal
technology business to the new entity.
SIEM had earlier divested several of its business verticals as a part
of value unlocking initiatives. Seek more clarity on the same.
In May 2014, Siemens AG had decided to lower its manpower by
11,600 to lower its costs by USD1.4b from CY16. Await more
clarity on the impact of this decision across Indian operations.

Bloomberg SIEM IN
M. Cap. (INR b)/(USD b) 353 / 6
52-Week Range (INR) 1,010 / 414
1,6,12 Rel Perf. (%) 2 / 33 / 51

Y/E Sept 2013 2014E 2015E 2016E
Net Sales 113.5 110.6 122.4 140.7
EBITDA 4.2 7.1 10.3 12.7
Adj PAT 1.7 3.3 5.1 6.8
Adj EPS (INR) 4.8 9.3 14.6 19.3
EPS Gr (%) -67.7 94.8 57.0 31.9
BV/Sh. (INR) 114.5 119.2 126.5 136.2
RoE (%) 4.2 8.0 11.9 14.7
RoCE (%) 5.1 9.2 13.5 16.6
Payout (%) 124.0 49.7 49.7 49.7
Valuations
P/E (x) 129.1 106.6 67.9 51.5
P/BV (x) 8.7 8.3 7.8 7.3
EV/EBITDA

50.1 47.5 32.0 25.1
Div. Yield (%) 0.5 0.4 0.6 0.8

July 2014 99

Sales 8,628 10,433 10,138 13,825

8,711 10,969 11,214 16,793 43,022 47,687
Change (%) -12.3 -12.5 -3.2 -5.8 1.0 5.1 10.6 21.5 34.1 54.4
EBITDA 814 937 908 1,337

877 1,125 1,160 1,820 4,092 4,981
Change (%) -15.5 -23.1 -18.8 -20.1

7.7 20.1 27.7 36.1 -1.3 29.7
As of % Sales 9.4 9.0 9.0 9.7 10.1 10.3 10.3 10.8 9.5 10.4

150 155 165 169 578 639
Interest 8 19 23 39

15 20 30 35 88 100
Other Income 81 75 229 351 115 145 265 351 643 876
PBT 745 853 968 1,503

827 1,095 1,230 1,967 4,069 5,118
Tax 243 551 301 444

248 328 369 590 1,539 1,536
Reported PAT 503 302 666 1,059

579 766 861 1,377 2,530 3,583
Change (%) -25.2 -66.9 -12.7 -8.2 15.2 154.1 29.2 30.0 -11.9 153.3
Adj PAT 503 592 666 1,059

579 766 861 1,377 2,530 3,583
Change (%) (25.2) (35.0) (12.7) (8.2) 15.2 29.5 29.2 30.0 (11.5) 39.8
Order Book 55,300 53,080 56,990 53,890

54,588 55,142 57,538 55,651 53,890 58,256
Order Intake 21,230 7,680 13,650 11,410

9,509 11,622 14,264 17,434 53,970 52,829
BTB (x) 1.2 1.2 1.3 1.3 1.3 1.3 1.3 1.4 1.3 0.3
E: MOSL Estimates


Thermax

CMP: INR956 Buy
With the pace of order finalization under pressure and lower
visibility on mega orders (such as the INR17b order bagged from
Reliance Ind in FY14), maintaining the pace of order inflows
continues to be a challenge.
Near term domestic order inflows are expected from base
industries, while focus continues on ramping up exports /
international business.
PBIT margin in the Environment segment declined to 2.6% in
4QFY14. Stabilization in the one-off parameters will be an
important monitorable.
TMX recently started to market construction chemicals, which
would be manufactured at its Jagadia-based factory. The business
also has a good export potential. Maintain Buy.

Updates on the recovery seen across EU nations, which are
catered to by its subsidiaries.
Management commentary on the pace of order inflows from its
domestic customers.

Bloomberg TMX IN
M. Cap. (INR b)/(USD b) 114 / 2
1,6,12 Rel Perf. (%) 0 / 11 / 28

Y/E March 2014 2015E 2016E 2017E
Net Sales 51.6 58.5 69.7 88.0
EBITDA 4.3 5.5 6.9 9.5
Adj PAT 2.5 3.5 4.7 6.9
EPS (INR) 20.6 29.6 39.2 57.7
EPS Gr. (%) -23.6 43.2 32.7 47.0
BV/Sh. (INR) 172.5 192.7 219.1 263.9
RoE (%) 12.7 16.5 19.4 24.2
RoCE (%) 10.7 14.5 17.4 22.2
Payout (%) 39.7 31.7 32.8 22.3
Valuations
P/E (X) 30.2 32.3 24.3 16.6
P/BV (X) 3.6 5.0 4.4 3.6
EV/EBITDA

15.7 18.9 14.6 10.1
Div Yield (%) 1.1 0.8 1.2 1.2

July 2014 100

Quarterly Performance (Consolidated)

(INR Million)
Sales 16,033 10,805 11,194 14,628

16,242 10,515 12,417 16,773 52,660 55,947
Change (%) -0.8 -7.2 -2.9 -8.4 1.3 -2.7 10.9 14.7 -4.8 6.2
EBITDA 614 432 684 1,054

1,023 486 848 1,281 2,656 3,638
Change (%) -34.6 -1.7 181.8 26.9

66.5 12.3 24.1 21.6 -21.1 52.9
As of % Sales 3.8 4.0 6.1 7.2 6.3 4.6 6.8 7.6 5.0 6.5

65 68 70 75 248 278
Interest 179 55 54 65

160 50 75 124 226 409
Other Income 221 303 170 308 200 250 175 229 1,002 854
Extra-ordinary Items 1 0 -43 -174 0 0 0 0 215 0
PBT 595 620 783 1,402

998 618 878 1,312 3,399 3,806
Tax 190 196 164 392

259 161 228 340 941 989
Reported PAT 405 424 619 1,010

738 457 650 972 2,458 2,817
Change (%) -48.7 -1.4 -18.7 1,023.3 81.2 8.1 5.1 -3.7 18.3 14.6
Adj PAT 406 424 577 836

738 457 650 972 2,242 2,817
Change (%) -47.7 48.9 237.5 15.5 80.9 8.1 12.9 16.3 14.7 25.6
Order Book 38,110 43,490 39,460 36,120

33,384 31,660 30,190 37,419 36,120 43,376
Order Intake 7,850 12,089 2,399 73

3,362 4,482 5,603 15,054 22,410 28,500
BTB - TTM basis (x) 1.2 1.4 1.4 1.3
E: MOSL Estimates


Voltas

CMP: INR215 Buy
Voltas has a market share of ~21% in Indias room air conditioner
market. Companys focus seems to be on maintaining its market
share at the current level.
Improvement in margins across project business depends on the
pace of project execution across recently-awarded projects (bagged
at higher margins) and closure of legacy projects (witnessing cost
overruns). Management expects to complete the legacy projects by
2QFY15.
NWC at end-4QFY14 fell to 53 days from a peak of 69 at end-
2QFY13. Maintain Buy.

Managements commentary on the status of Sidra project, which
is 95% complete and getting commissioned. Await more clarity on
its commissioning schedule and time line by which the negotiation
process for recovery of cost overruns would start.
Any signs of growth for its Engineering product/service segment,
which is dependent on revival of textile capex for its growth and is
expanding its product portfolio.
EBIT margin across the engineering products and service segment
had increased to 28% in FY14, which was aided by one-time gains
of INR215m. Revenues to be impacted given discontinuation of
key principals.

Bloomberg VOLT IN
1,6,12 Rel Perf. (%) 0 / 63 / 136

Y/E March 2014 2015E 2016E 2017E
Net Sales 52.7 55.9 64.2 72.9
EBITDA 1.6 2.7 4.4 5.4
Adj PAT 1.8 2.3 3.5 4.3
EPS (INR) 7.4 8.5 10.6 13.0
EPS Gr. (%) 18.7 14.6 24.0 23.3
BV/Sh. (INR) 55.0 61.0 68.4 77.5
RoE (%) 12.3 14.0 15.4 16.8
RoCE (%) 11.6 14.8 16.5 18.2
Payout (%) 39.4 37.2 36.8 36.3
Valuations
P/E (x) 29.3 31.3 25.0 20.0
P/BV (x) 2.9 3.5 3.1 2.8
EV/EBITDA (x) 20.0 19.0 15.2 12.1
Div Yield (%) 1.1 1.0 1.3 1.6

July 2014 101

Jinesh Gandhi (Jinesh@MotilalOswal.com); +91 22 3982 5416
Sandipan Pal (Sandipan.Pal@MotilalOswal.com); +91 22 3982 5436
Demand recovery continues with ~8% growth
Upgrading FY16 EPS, led by increase in pricing improvement to ~INR20/bag

Demand recovery continues; expect ~8% growth for our Cement universe
Cement demand recovery continued in 1QFY15, driven by strong rural housing
demand and partial resolution of sand mining issue. We estimate growth of 8.3%
YoY (decline of 4.5% QoQ) for our Cement universe. Capacity utilization would
remain stable YoY at ~74% (down 4pp QoQ). Cement dealers across regions indicate
improved sentiment and sustenance of demand recovery in 2HFY15.

Pre-monsoon price hikes across markets, estimate INR6/bag QoQ increase
While cement prices retraced from the highs of March-April 2014, especially in
North India, as the Binani plant commenced operations, blended prices were still
higher than in 4QFY14. Overall, we expect weighted average national prices to
increase by INR6/bag QoQ (and INR14/bag YoY) in 1QFY15. This includes specific
trends of (a) ~INR14/bag QoQ average increase in South India, benefiting from upto
~INR100/bag price increase in June 2014, (b) ~INR6/bag increase in West and
Central India, (c) INR3/bag increase in North India, and (d) ~INR4/bag decline in East
India. We now factor in INR12.5/INR20/INR20 per bag increase in realizations in
FY15/FY16/FY17 on back of ~INR5/bag decline in FY14 (v/s earlier assumption of
~INR12.5/12.5/15 per bag increase).

Profitability stable QoQ; south players to enjoy partial benefits of price hike
Profitability is likely to remain stable QoQ, as the benefit of higher price gets offset
by freight cost pressure and negative operating leverage, resulting in EBITDA/ton of
~INR731 (down INR73/ton YoY). While players focused on South India would benefit
significantly from sharp pricing recovery, weak pricing would impact profitability of
players based in North and East India. We estimate EBITDA/ton at
INR795/1,075/1,345 for FY15/FY16/FY17, against ~INR673/ton in FY14.

Valuation and view
While our FY15E EPS has seen downgrades, our assumption of higher pricing change
has led to up to 39% upgrade in FY16E EPS. While demand recovery would be
gradual, slowing capacity addition coupled with higher capex and opex cost would
support cement prices and profitability. Demand recovery would be critical for
operating and stock performance. Among large caps, we prefer ACC, UTCEM and
SRCM, and DBEL, JKCE, JKLC, and PRSC in mid-caps.

Company name
ACC
Ambuja Cements
Birla Corporation
Grasim Industries
India Cements
Jaiprakash Associates
Shree Cement
Ultratech Cement

Technology

June 2014 Results Preview | July 2014

Cement

July 2014 102


(INR)
4.7.14
Reco Jun-14
Var %
YoY
Var %
QoQ
Jun-14
Var %
YoY
Var %
QoQ
Jun-14
Var %
YoY
Var %
QoQ
ACC 1,452 Buy

29,833 6.7 0.5

3,889 -10.3 6.5

2,656 2.5 -13.9
Ambuja Cements 224 Neutral

25,053 6.8 -5.1

5,172 5.1 -10.5

3,771 16.3 -15.7
Birla Corporation 418 Buy

8,083 4.7 3.9

650 -2.7 17.2

392 -14.8 20.3
Grasim Industries 3,388 Buy

12,999 13.1 -15.0

1,148 -43.3 -16.9

1,199 -46.8 -3.4
India Cements 116 Neutral

12,624 1.9 16.9

1,342 -29.7 81.0

-46 PL Loss
Jaiprakash Associates 73 Buy

34,727 4.8 2.1

8,592 9.5 -1.5

59 -71.8 -93.7
Shree Cement 7,276 Buy

16,345 13.4 -1.5

4,498 18.4 5.6

3,048 7.2 34.1
Ultratech Cement 2,604 Buy

55,830 12.6 -4.3

10,203 -2.7 -10.7

6,186 -8.0 -18.9
Sector Aggregate 195,493 8.5 -1.7 35,495 -1.4 -2.8 17,264 -6.6 -11.4

Cement demand recovery apparent in 1QFY15 (%)
-5
0
5
10
15
1
Q
F
Y
1
2
2
Q
F
Y
1
2
3
Q
F
Y
1
2
4
Q
F
Y
1
2
1
Q
F
Y
1
3
2
Q
F
Y
1
3
3
Q
F
Y
1
3
4
Q
F
Y
1
3
1
Q
F
Y
1
4
2
Q
F
Y
1
4
3
Q
F
Y
1
4
4
Q
F
Y
1
4
1
Q
F
Y
1
5
E
IIP Data MOSL Universe

MOSL cement universe volumes to grow 8% YoY (3% QoQ)
6
.
4
3
.
6
4
.
3
4
.
0
9
.
4
1
0
.
4
1
3
.
8
8
.
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2
.
7
1
.
9
-
2
.
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.
4
3
.
4
1
.
5
6
.
1
8
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3
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3
8
13
18
2
Q
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4
Q
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Y
1
1
1
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F
Y
1
2
2
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F
Y
1
2
3
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F
Y
1
2
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Y
1
2
1
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3
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3
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Y
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3
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4
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3
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F
Y
1
4
4
Q
F
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1
4
1
Q
F
Y
1
5
E
Volumes (MT) - RHS Volume growth (%)

Utilizations fail to improve in a seasonally strong quarter
60%
70%
80%
90%
100%
1
Q
F
Y
1
0
3
Q
F
Y
1
0
1
Q
F
Y
1
1
3
Q
F
Y
1
1
1
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F
Y
1
2
3
Q
F
Y
1
2
1
Q
F
Y
1
3
3
Q
F
Y
1
3
1
Q
F
Y
1
4
3
Q
F
Y
1
4
1
Q
F
Y
1
5

Trend in average quarterly cement price (INR/bag)
2
5
9
3
1
6
2
7
5
2
8
9
2
6
2
2
8
1
2
4
5
3
0
7
2
7
2
2
9
4
2
6
4
2
7
7
2
4
5
3
0
8
2
7
1
3
0
0
2
6
62
7
9
2
6
9
3
2
8
2
8
1
2
8
12
9
3
2
8
9
2
7
2
3
2
4
2
8
7
2
9
5
2
9
8
2
9
5
North East West South Central National
Average


Relative Performance - 3 months (%)
90
100
110
120
130
A
p
r
-
1
4
M
a
y
-
1
4
J
u
n
-
1
4
J
u
l
-
1
4
Sensex Index MOSL Cement Index

Relative Performance 1 year (%)


June 2014 Results Preview | Sector: Cement

July 2014 103

Realization to improve marginally QoQ, as suggested by price
trend
3
,
2
6
2
3
,
4
7
8
3
,
8
7
9
4
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F
Y
1
4
1
Q
F
Y
1
5
E
Realization (INR/ton)

Weaker realizations, cost push and weak operating leverage
to keep profitability under pressure
4
0
0
6
0
5
9
2
4
1
,
0
1
9
6
1
38
1
2
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5
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6
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Q
F
Y
1
3
3
Q
F
Y
1
3
4
Q
F
Y
1
3
1
Q
F
Y
1
4
2
Q
F
Y
1
4
3
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F
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1
4
4
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F
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1
4
1
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F
Y
1
5
E
EBITDA (INR/ton)


Revised EPS estimates (INR)
FY15E/CY14E FY16E/CY15E
Rev Old Chg (%) Rev Old Chg (%)
ACC 54.4 60.4 -9.9 84.1 79.2 6.2
Ambuja Cement 7.0 7.0 -0.3 9.0 8.1 11.6
UltraTech 91.3 94.9 -3.7 133.0 119.9 10.9
Birla Corp 28.7 36.1 -20.6 51.4 49.5 3.9
India Cement 2.9 3.8 -25.7 10.6 8.2 29.1
Shree Cement 280.2 257.8 8.7 431.1 336.9 28.0
JK lakshmi 10.5 11.4 -7.7 17.1 12.3 38.7
Ramco Cement 9.0 8.4 7.5 15.1 13.4 12.2
JK Cement 22.6 18.8 20.2 45.3 37.0 22.5
Orient Cement 5.3 6.6 -19.5 5.4 4.8 12.6
Prism Cement 0.4 0.2 106.0 6.2 5.1 23.3
Dalmia Cement -12.3 -7.2 71.7 24.4 20.4 19.6
Source: MOSL

Cement
ACC 1,452 Buy 54.4 84.1 119.9 26.7 17.3 12.1 17.7 10.9 7.0 12.8 18.5 23.5
Ambuja Cements 224 Neutral 7.0 9.0 12.3 32.1 24.8 18.2 21.6 15.6 11.4 14.0 16.8 20.5
Birla Corporation 418 Buy 28.7 51.4 77.6 14.6 8.1 5.4 7.9 4.3 2.4 8.3 13.3 17.2
Grasim Industries 3,388 Buy 254.7 370.0 586.0 13.3 9.2 5.8 5.5 3.7 2.4 9.9 12.6 16.8
India Cements 116 Neutral 2.9 10.6 19.0 40.7 11.0 6.1 9.9 6.4 4.4 2.7 8.2 13.2
Jaiprakash Associates 73 Buy 1.5 4.1 5.7 48.2 17.8 12.7 10.5 8.8 7.9 2.4 6.3 8.4
Shree Cement 7,276 Buy 280.2 431.1 610.3 26.0 16.9 11.9 13.2 8.7 5.8 19.5 24.5 27.2
Ultratech Cement 2,604 Buy 91.3 133.0 189.0 28.5 19.6 13.8 16.2 11.1 7.7 13.8 17.4 20.7
Dalmia Bharat 457 Buy -12.3 24.4 82.2 -37.0 18.7 5.6 14.6 7.9 4.8 -3.3 6.5 19.2
J K Cements 394 Buy 22.6 45.3 76.2 17.4 8.7 5.2 8.5 5.5 3.4 8.7 15.8 22.5
JK Lakshmi Cem. 235 Buy 10.5 17.1 34.3 22.3 13.7 6.9 10.4 6.3 4.0 9.2 13.8 23.8
Ramco Cements 304 Buy 9.0 15.1 24.1 33.6 20.1 12.6 14.0 10.1 7.2 8.4 12.9 18.1
Prism Cement 73 Buy 0.4 6.2 11.2 177.9 11.7 6.5 12.7 6.0 3.9 2.0 26.8 35.6


July 2014 104


Cement Sales (m ton) 6.42 6.12 5.54 5.85 6.48 6.36 5.76 6.28 23.9 24.89
YoY Change (%) -4.5 1.2 2.6 -1.5 0.9 4.0 4.0 7.4 -0.7 4.0
Cement Realization 4,269 4,298 4,235 4,307 4,304 4,404 4,304 4,554 4,278 4,393
YoY Change (%) 0.9 -5.7 -5.9 3.4 0.8 2.5 1.6 5.7 -1.8 2.7
QoQ Change (%) 2.5 0.7 -1.5 1.7 -0.1 2.3 -2.3 5.8 0.0 0.0
Net Sales 29,111 27,952 25,087 26,934 29,671 29,833 26,500 30,444 109,084 116,448
YoY Change (%) 2.4 1.4 3.2 -13.1 1.9 6.7 5.6 13.0 -2.0 6.8
EBITDA 4,468 4,335 2,254 2,626 3,653 3,889 2,110 4,123 13,683 13,776
Margins (%) 15.3 15.5 9.0 9.8 12.3 13.0 8.0 13.5 12.5 11.8
Depreciation 1,383 1,387 1,444 1,526 1,366 1,400 1,440 1,448 5,740 5,654
Interest 108 179 110 120 108 106 106 104 517 425
Other Income 1,205 908 1,023 1,438 1,668 1,000 1,200 1,382 4,573 5,250
PBT before EO Item 4,182 3,677 1,722 2,419 3,848 3,383 1,764 3,953 12,000 12,947
PBT after EO Item 5,861 3,677 1,722 3,178 4,975 3,383 1,764 3,953 14,437 14,075
Tax 1,484 1,086 514 396 988 727 379 861 3,479 2,956
Rate (%) 25.3 29.5 29.8 12.5 19.9 21.5 21.5 21.8 24.1 21.0
Reported PAT 4,377 2,591 1,208 2,781 3,987 2,656 1,384 3,092 10,958 11,119
Adjusted PAT 3,124 2,591 1,208 2,117 3,084 2,656 1,384 3,092 9,108 10,228
Margins (%) 10.7 9.3 4.8 7.9 10.4 8.9 5.2 10.2 8.3 8.8
YoY Change (%) -19.1 -38.0 -51.4 -11.5 -1.3 2.5 14.6 46.0 -29.5 12.3
E: MOSL Estimates; * Merger of RMC business from 4QCY12

ACC

CMP: INR1,452 Buy
We expect dispatches to grow 4% YoY (decline 2% QoQ) in 2QCY14 to
6.36m tons. Average realization is likely to grow 2.3% QoQ (+2.5%
YoY) to INR4,404/ton.
Revenue would grow 6.7% YoY (1% QoQ) to INR29.8b. EBITDA margin
would shrink 2.5pp YoY (but expand 0.7pp QoQ) to 13% due to
moderate realization growth. We estimate cement EBITDA/ton at
INR600 (INR102 lower YoY; INR48 higher QoQ).
PAT would grow 2.5% YoY (but decline 14% QoQ) to INR2.65b.
We are cutting our CY14 EPS estimate (ex-synergies) by 9.9% to
INR54.4, while raising our CY15 EPS estimate by 6.2% to INR84.1 to
factor in for deferred recovery and higher pricing in FY15.
The stock trades at 16.2x CY15E EPS, and at an EV of 9.9x CY15E
EBITDA and USD120/ton. Maintain Buy with a target price of
INR1,804 (CY15E EV of USD152/ton).

Key issues to watch for
Volume growth recovery and outlook
Cement pricing outlook and sustainability
Progress in ongoing capex for 5m-ton Jamul expansion
Update on synergies and other guided cost saving measures

Bloomberg ACC IN
M. Cap. (INR b)/(USD b) 273 / 5
1,6,12 Rel Perf. (%) -3 / 9 / -16

Financial and Valuation Summary (INR b)
Y/E Dec 2013 2014E 2015E 2016E
Sales 109.1 116.4 137.0 163.0
EBITDA 13.7 13.8 22.7 33.7
NP 9.1 10.2 15.8 22.5
Adj. EPS (INR) 48.6 54.4 84.1 119.9
EPS Gr. (%) -29.3 12.1 54.6 42.5
BV/Sh (INR) 416.4 434.9 472.5 545.9
RoE (%) 12.0 12.8 18.5 23.5
RoCE (%) 15.3 15.7 24.1 31.3
Payout (%) 60.2 68.8 55.3 38.8
Valuations
P/E (x) 30.3 27.0 17.5 12.3
P/BV (x) 3.5 3.4 3.1 2.7
EV/EBITDA (x) 17.6 16.4 10.7 6.8
EV/Ton (x) 133.2 124.9 120.6 113.0

July 2014 105


Sales Volume (m ton)* 5.96 5.46 4.89 5.29 6.03 5.62 5.03 5.67 21.60 22.36
YoY Change (%) -3.6 -3.1 2.0 -1.8 1.2 3.0 3.0 7.1 -1.8 3.5
Realization (INR/ton) 4,271 4,297 4,103 4,142 4,376 4,456 4,356 4,556 4,207 4,437
YoY Change (%) 0.3 -5.7 -9.2 -3.5 2.5 3.7 6.1 10.0 -4.4 5.5
QoQ Change (%) -0.5 0.6 -4.5 0.9 5.6 1.8 -2.2 4.6 0.0 0.0
Net Sales 25,448 23,457 20,049 21,913 26,398 25,053 21,920 25,820 90,868 99,191
YoY Change (%) -3.3 -8.6 -7.4 -5.3 3.7 6.8 9.3 17.8 46.1 40.2
EBITDA 5,118 4,920 2,554 2,890 5,776 5,172 3,224 4,522 15,482 18,694
Margins (%) 20.1 21.0 12.7 13.2 21.9 20.6 14.7 17.5 17.0 18.8
Depreciation 1,204 1,223 1,246 1,228 1,197 1,225 1,275 1,272 4,901 4,969
Interest 132 171 178 169 161 160 160 160 651 641
Other Income 1,339 1,051 940 1,019 1,414 1,175 1,100 1,311 4,349 5,000
PBT before EO Item 5,121 4,578 2,070 2,512 5,832 4,962 2,889 4,400 14,280 18,084
Extraordinary Inc/(Exp) 1,741 0 481 1,046 948 0 0 0 3,269 948
PBT after EO Exp/(Inc) 6,862 4,578 2,551 3,558 6,780 4,962 2,889 4,400 17,549 19,031
Tax 1,983 1,336 891 393 1,579 1,191 693 1,057 4,603 4,521
Rate (%) 28.9 29.2 34.9 11.0 23.3 24.0 24.0 24.0 26.2 23.8
Reported Profit 4,879 3,242 1,660 3,165 5,200 3,771 2,196 3,343 12,946 14,510
Adj PAT 3,641 3,242 1,346 2,234 4,473 3,771 2,196 3,343 10,464 13,788
YoY Change (%) -28.3 -30.9 -60.1 -2.8 22.9 16.3 63.1 49.6 -32.2 31.8
E: MOSL Estimates


Ambuja Cements

CMP: INR224 Neutral
We expect dispatches to grow 3% YoY (decline 7% QoQ) to 5.62m
tons in 2QCY14. Average realization would grow 3.7% YoY (1.8% QoQ)
to INR4,456/ton. We estimate revenue at INR25.1b (up 6.8% YoY, but
down 5% QoQ).
EBITDA margin would remain flat YoY (decline 1.3pp QoQ) to 20.6%.
We estimate EBITDA/ton at ~INR920 (up INR19/ton YoY; down
INR38/ton QoQ).
Adjusted PAT is likely to grow 16% YoY (decline 16% QoQ) to INR3.8b.
We are raising our CY15 EPS estimate (ex-synergies) by 11.6% to
factor in higher realizations. Our CY14 EPS estimate is unchanged.
Maintain Neutral with a target price of INR247 (CY15E EV of
USD160/ton).
Progress in ongoing mining land acquisition and capex in 4.5m-ton
Nagaur (Rajasthan) plant.

Bloomberg ACEM IN
M. Cap. (INR b)/(USD b) 443 / 7
1,6,12 Rel Perf. (%) -7 / 1 / -15

Y/E Dec 2013 2014E 2015E 2016E
Sales 90.9 99.2 114.6 136.5
EBITDA 15.5 18.7 25.8 35.0
NP 10.5 13.8 17.9 24.3
Adj. EPS (INR) 6.8 7.0 9.0 12.3
EPS Gr. (%) -32.4 2.9 29.7 36.1
BV/Sh. (INR) 61.2 51.5 56.0 63.8
RoE (%) 11.5 14.0 16.8 20.5
RoCE (%) 16.3 19.0 23.7 28.9
Payout (%) 49.9 55.7 50.2 36.9
Valuations
P/E (x) 32.7 31.8 24.5 18.0
P/BV (x) 3.6 4.3 4.0 3.5
EV/EBITDA (x) 19.0 21.0 14.8 10.6
EV/Ton (USD) 173.3 224.5 218.0 211.1

July 2014 106

Y/E March FY14

FY15E FY14 FY15E
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q

Cement Sales (m ton) 1.87 1.85 1.81 1.91 1.98 1.96 1.95 2.06 7.43 7.96
YoY Change (%) 14.8 17.3 16.5 11.6 6.0 6.0 8.0 8.0 15.0 7.0
Cement Realization 3,864 3,541 3,579 3,753 3,813 3,713 3,913 4,212 3,686 3,916
YoY Change (%) -3.9 -10.0 -5.4 4.8 -1.3 4.8 9.3 12.2 -3.7 6.2
QoQ Change (%) 7.9 -8.3 1.1 4.8 1.6 -2.6 5.4 7.6 0.0 0.0
Net Sales 7,720 7,107 7,098 7,780 8,083 7,818 8,169 9,203 29,705 33,273
YoY Change (%) 17.3 13.3 15.9 16.9 4.7 10.0 15.1 18.3 15.9 12.0
EBITDA 668 585 299 555 650 555 885 1,118 2,107 3,208
Margins (%) 8.7 8.2 4.2 7.1 8.0 7.1 10.8 12.1 7.1 9.6
Depreciation 302 311 319 393 360 365 380 391 1,326 1,496
Interest 207 249 202 198 200 205 215 222 856 842
Other Income 367 422 323 485 400 450 350 690 1,598 1,890
Profit before Tax 525 448 101 448 490 435 640 1,194 1,523 2,759
Tax 66 32 -59 186 98 87 128 239 225 552
Rate (%) 12.5 7.1 -58.0 41.6 20.0 20.0 20.0 20.0 14.8 20.0
Reported PAT 460 416 160 262 392 348 512 955 1,298 2,207
EO Income/(Expense) 0 0 0 -109 0 0 0 0 -109 0
PAT 460 416 160 326 392 348 512 955 1,391 2,207
Margins (%) 6.0 5.9 2.3 4.2 4.8 4.5 6.3 10.4 4.7 6.6
YoY Change (%) -45.7 -48.2 -50.4 -55.1 -14.8 -16.3 220.4 193.1 -48.5 58.7
E: MOSL Estimates


Birla Corporation

CMP: INR418 Buy
We expect volumes to grow 6% YoY (3.9% QoQ) to 1.98m tons in
1QFY15. Average realization is likely to grow 1.6% YoY (decline 1.3%
QoQ) to INR3,813/ton.
EBITDA margin would shrink 0.7pp YoY (but expand 0.9pp QoQ) to
8%. EBITDA/ton (including non-cement business) is likely to decline by
INR29 YoY (but increase by ~INR37 QoQ).
We estimate PAT at INR392m, down 14.8% YoY.
We are cutting our EPS estimate for FY15 by 21% to factor in lower
realizations for the year, but raising our EPS estimate for FY16 by
3.9% to factor in better realizations.
The stock trades at 8.1x FY16E EPS, and at an EV of 3.8x FY16E EBITDA
and USD40/ton. We maintain Buy, with a target price of INR566
(FY16E EV of USD60/ton).
Timeline and clarity on Rajasthan Mining permission

Bloomberg BCORP IN
1,6,12 Rel Perf. (%) 4 / 32 / 46

Y/E March 2014 2015E 2016E 2017E
Sales 29.7 33.3 38.5 43.5
EBITDA 2.1 3.2 5.8 8.5
NP 1.3 2.2 4.0 6.0
Adj. EPS (INR) 16.9 28.7 51.4 77.6
EPS Gr. (%) -51.9 70.1 79.3 50.9
BV/Sh. (INR) 328.0 346.2 386.0 452.0
RoE (%) 5.1 8.3 13.3 17.2
RoCE (%) 6.1 9.0 14.0 18.1
Payout (%) 55.5 36.5 22.6 15.0
Valuations
P/E (x) 24.8 14.6 8.1 5.4
P/BV (x) 1.3 1.2 1.1 0.9
EV/EBITDA (x) 11.5 7.4 3.8 2.1
EV/Ton (x) 43.4 42.6 39.9 31.7

July 2014 107

Quarterly Performance (Standalone) (INR Million
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
VSF Volume (ton) 77,518 93,025 97,049 99,385 85,270 102,328 109,665 114,736 366,977 411,999
YoY Change (%) 0.7 9.0 23.5 4.4 10.0 10.0 13.0 15.4 9.2 12.3
VSF Realization (INR/ton) 116,501 121,590 121,590 119,150 118,150 119,150 120,150 125,058 119,854 120,854
YoY Change (%) -9.0 -4.0 -0.1 0.0 1.4 -2.0 -1.2 5.0 -3.1 0.8
QoQ Change (%) -2.2 4.4 0.0 -2.0 -0.8 0.8 0.8 4.1 0.0 0.0
Net Sales 11,489 14,055 14,558 15,284 12,999 15,288 16,047 17,275 55,386 61,608
YoY Change (%) -7.3 4.5 19.8 11.0 13.1 8.8 10.2 13.0 6.9 11.2
Total Expenditure 9,464 11,443 12,613 13,902 11,850 13,794 14,423 14,949 47,422 55,017
EBITDA 2,025 2,613 1,945 1,382 1,148 1,493 1,625 2,325 7,964 6,591
Margins (%) 17.6 18.6 13.4 9.0 8.8 9.8 10.1 13.5 14.4 10.7
Depreciation 484 530 547 635 650 700 720 726 2,196 2,796
Interest 78 95 134 109 120 125 125 125 415 495
Other Income 958 2,213 492 835 1,000 2,000 750 1,000 4,497 4,750
PBT before EO Items 2,420 4,201 1,757 1,472 1,378 2,668 1,530 2,474 9,850 8,050
Extraordinary Inc/(Exp) 8 184 27 72 0 0 0 0 291 0
PBT after EO Items 2,429 4,385 1,783 1,544 1,378 2,668 1,530 2,474 10,141 8,050
Tax 167 250 522 242 179 347 199 322 1,181 2,093
Rate (%) 6.9 5.7 29.3 15.7 13.0 13.0 13.0 13.0 11.6 26.0
Reported PAT 2,261 4,135 1,261 1,303 1,199 2,322 1,331 2,153 8,960 5,957
Adj. PAT 2,254 3,962 1,242 1,242 1,199 2,322 1,331 2,153 8,703 5,957
YoY Change (%) -17.4 3.5 -37.3 -41.7 -46.8 -41.4 7.2 73.4 -18.1 -31.5
E: MOSL Estimates


Grasim Industries

CMP: INR3,388 Buy
VSF volumes are likely to grow 10% YoY (but decline 14% QoQ) to
85,270 tons. VSF realizations would to decline by ~INR1/kg QoQ to
INR118.15/kg.
We are assuming price of INR121/kg in FY15 and INR124/kg in FY16.
Standalone EBITDA margin is likely to decline 8.8pp YoY (but remain
stable QoQ) to 13.3%.
EBITDA would decline by 56% YoY (12% QoQ) to INR1.1b, translating
into PAT of INR1.2b, down 47% YoY.
We cut our consolidated EPS estimate by 13% for FY15 but raise our
consolidated EPS estimate by 9.5% for FY16 to factor in deferred
realization uptick in FY16 in both cement and VSF.
The stock trades at 9.2x FY16E consolidated EPS, and at an EV of 5.4x
FY16E EBITDA and USD103/ton. Maintain Buy, with a target price of
INR4,173 (FY16-based SOTP).

Outlook on VSF business and strategy to utilize upcoming
capacities (~47% capacity growth)
Outlook on cement demand and pricing, and status of capacity
addition

Bloomberg GRASIM IN
M. Cap. (INR b)/(USD b) 311 / 5
52-Week Range (INR) 3755 / 2121
1,6,12 Rel Perf. (%) -3 / 4 / -13

Y/E March 2014 2015E 2016E 2017E
Sales 290.0 323.8 380.8 445.1
EBITDA 45.9 52.9 76.0 103.6
Adj. PAT 27.6 31.9 46.6 73.9
Adj. EPS (INR) 215.1 254.7 370.0 586.0
EPS Gr. (%) -26.1 18.4 45.3 58.4
BV/Sh. (INR) 2,354 2,584 2,928 3,485
RoE (%) 9.1 9.9 12.6 16.8
RoCE (%) 12.9 14.4 19.5 24.2
Payout (%) 10.1 9.5 7.0 5.0
Valuations
P/E (x) 14.3 12.1 8.3 5.3
P/BV (x) 1.3 1.2 1.1 0.9
EV/EBITDA (x) 8.4 7.5 5.0 3.2
EV/Ton (x) 106.6 109.8 94.8 76.3

July 2014 108

(INR Million)
Y/E March FY14 FY15E FY14E FY15E
1Q 2Q 3Q 4QE 1Q 2Q 3Q 4Q
Sales Dispatches (m ton) 2.65 2.44 2.29 2.65 2.73 2.56 2.45 2.91 10.04 10.65
YoY Change (%) 11.3 -2.9 -5.2 -4.4 3.0 5.0 7.0 9.5 -0.2 6.1
Realization (INR/ton) 4,188 4,116 4,429 4,009 4,209 4,609 4,409 4,609 4,178 4,460
YoY Change (%) -6.2 -5.5 1.5 -5.0 0.5 12.0 -0.4 15.0 -4.2 6.8
QoQ Change (%) -0.8 -1.7 7.6 -9.5 5.0 9.5 -4.3 4.5 0.0 0.0
Net Sales 12,384 10,859 10,365 10,801 12,624 12,483 11,107 13,757 44,409 49,972
YoY Change (%) 3.1 -3.3 -4.2 -9.3 1.9 15.0 7.2 27.4 -3.4 12.5
EBITDA 1,910 1,276 1,444 742 1,342 1,989 1,444 2,373 5,371 7,148
Margins (%) 15.4 11.7 13.9 6.9 10.6 15.9 13.0 17.3 12.1 14.3
Depreciation 680 682 686 716 680 700 706 710 2,764 2,796
Interest 999 988 773 778 750 800 825 852 3,537 3,227
Other Income 25 80 19 272 30 50 60 30 396 170
PBT before EO expense 257 -314 4 -480 -58 539 -27 841 -533 1,296
Extra-Ord expense 0 0 0 1,091 0 0 0 0 1,091 0
PBT 257 -314 4 -1,571 -58 539 -27 841 -1,624 1,296
Tax 89 -89 0 0 -12 108 -5 168 0 259
Rate (%) 34.6 28.3 0.0 0.0 20.0 20.0 20.0 20.0 0.0 20.0
Reported PAT 168 -225 4 -1,571 -46 431 -22 673 -1,624 1,036
Adj PAT 168 -225 4 -480 -46 431 -22 673 -533 1,036
YoY Change (%) -77.5 -145.9 -98.4 -282.2

-127.4 -291.5 -622.1 -240.2 -130.2 -294.5
Margins (%) 1.4 -2.1 0.0 -4.4 -0.4 3.5 -0.2 4.9 -1.2 2.1
E: MOSL Estimates


India Cements

CMP: INR116 Neutral
We expect volumes to grow 3% YoY (3% QoQ) to 2.73m tons. Strong
uptick in prices in June 2014 should aid 1QFY15 realizations. We
expect 0.5% YoY decline (but 5% QoQ increase) in realizations to
INR4,209/ton.
We estimate EBITDA at INR1.34b, up 81% QoQ. EBITDA margin is
likely to shrink 4.8pp YoY (but expand 3.7pp QoQ) to 10.6%,
translating into net loss of INR46m (v/s INR480m in 4QFY14).
Pure Cements EBITDA/ton is likely to increase by ~INR108/ton QoQ
to INR375/ton.
We are revising our EPS estimates for FY15/FY16 by -26%/+29% to
factor in deferred uptick in cement realizations in FY16.
The stock trades at 11x FY16E EPS, and at an EV of 6.1x FY16E EBITDA
and USD73/ton. Maintain Neutral, with a target price of INR126
(FY16E EV of USD75/ton).

Demand and pricing outlook, especially in South India
Expected timeline and potential cost savings from captive coal
block in Indonesia and AP power plant
Timeline and capex plan for TN expansion of 2.6m tons

Bloomberg ICEM IN
1,6,12 Rel Perf. (%) 1 / 72 / 73

Y/E March 2014 2015E 2016E 2017E
Sales 44.4 50.0 59.1 69.9
EBITDA 5.4 7.1 10.3 13.6
NP -0.5 1.0 3.3 5.7
Adj. EPS (INR) -7.9 2.9 10.6 19.0
EPS Gr. (%) -235.7 -136.2 269.8 79.7
BV/Sh (INR) 125.4 126.4 133.6 148.7
RoE (%) -1.3 2.7 8.2 13.2
RoCE (%) 4.2 6.4 10.8 14.8
Payout (%) 0.0 68.9 32.7 18.7
Valuations
P/E (x) -14.7 40.7 11.0 6.1
P/BV (x) 0.9 0.9 0.9 0.8
EV/EBITDA (x) 12.0 9.4 6.1 4.2
EV/Ton (USD) 78.5 78.1 72.9 65.9

July 2014 109

Quarterly performance (INR Million)
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Sales 33,149 31,761 31,378 34,026 34,727 32,086 35,332 39,163 129,732 147,508
Change (%) 11.9 6.5 -7.7 -11.9 4.8 1.0 12.6 15.1 -1.8 13.7
EBITDA 7,847 7,904 7,189 8,718 8,592 9,001 9,266 10,918 31,080 37,777
Change (%) 1.7 2.5 -5.7 2.5 9.5 13.9 28.9 25.2 -2.1 21.5
As of % Sales 23.7 24.9 22.9 25.6 24.7 28.1 26.2 27.9 24.0 25.6
Depreciation 1,943 1,962 1,968 1,862 1,875 1,950 2,050 2,086 7,736 7,961
Interest 5,900 6,542 7,515 7,564 7,000 6,750 6,250 6,260 27,521 26,260
Other Income 371 1,245 441 905 375 390 410 413 3,539 1,588
Extra-ordinary income 4,038 0
PBT 4,327 656 -1,854 275 92 691 1,376 2,985 3,400 5,144
Tax 982 -206 -968 -730 33 249 496 1,016 -737 1,793
Effective Tax Rate (%) 22.7 -31.4 52.2 -265.8 36.0 36.0 36.0 34.0 -21.7 34.9
Reported PAT 3,345 862 -886 1,005 59 442 881 1,969 4,138 3,351
Adj PAT 207 851 -885 927 59 442 881 1,969 932 3,351
Change (%) -85.0 -33.5 -180.3 -22.3 -71.8 -48.0 -199.6 112.5 -81.1 259.7
E: MOSL Estimates, *Change (% YoY) is not comparable due to Jaypee Cement de-merger


Jaiprakash Associates

CMP: INR73 Buy
For 1QFY15, we estimate revenue of INR34.7b, EBITDA of INR8.6b,
and net profit of INR59m.
For Cement, we assume realization of INR4,404/ton against
INR4,264/ton in 1QFY14. We expect volumes to grow 8% YoY to 3.9m
tons.
For the EPC division, we expect revenue to grow 2% YoY to INR12.8b.
EBIT margin would be 26%.
According to media articles, JPA is also considering sale of its
Himachal-based and Rewa cement capacities. Recently, JPA
completed its QIP of USD250m, to be utilized towards debt
repayment.
We expect JPA to post standalone net profit of INR3.4b (up 2.6x) in
FY15 and INR9.1b (up 170% YoY) in FY16. The stock trades at 18x
FY16E EPS.
Cement realizations and cost
Update on further disinvestment
EPC division profitability and visibility on revenues/order book
Ramp-up in Real Estate division, revenue recognition

Bloomberg JPA IN
M. Cap. (INR b)/(USD b) 162 / 3
1,6,12 Rel Perf. (%) -16 / 14 / 5

Y/E March 2014 2015E 2016E 2017E
Sales 131.2 147.5 167.6 180.7
EBITDA 32.5 37.8 44.5 48.3
NP 0.9 3.4 9.1 12.7
Adj. EPS (INR) 0.4 1.5 4.1 5.7
EPS Gr. (%) -81.4 259.2 170.5 40.6
BV/Sh. (INR) 61.7 62.9 66.0 70.5
RoE (%) 0.7 2.4 6.3 8.4
RoCE (%) 6.9 8.1 9.7 10.6
Payout (%) 5.1 22.8 22.8 22.8
Valuations
P/E (x) 173.3 48.2 17.8 12.7
P/BV (x) 1.2 1.2 1.1 1.0
EV/ EBITDA (x) 12.1 10.5 8.8 7.9
Div. Yield (%) 0.1 0.4 1.1 1.6

July 2014 110

Y/E June FY13 FY14 FY13 FY14E
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE
Sales Dispat. (m ton) 3.04 3.00 3.26 3.17 3.26 3.44 3.84 3.86 12.46 14.39
YoY Change (%) 22.4 5.2 -6.2 -6.0 7.2 14.7 17.8 21.8 -16.2 15.5
Realization (INR/Ton) 3,815 3,724 3,498 3,578 3,334 3,430 3,863 3,925 3,628 3,656
YoY Change (%) 12.2 4.1 -1.7 -4.6 -12.6 -7.9 10.4 9.7 3.4 0.8
QoQ Change (%) 1.7 -2.4 -6.1 2.3 -6.8 2.9 12.6 1.6 0.0 0.0
Net Sales 12,964 14,281 14,281 14,414 12,475 13,170 16,600 16,345 55,671 58,590
YoY Change (%) 52.2 19.4 0.3 0.4 -3.8 -7.8 16.2 13.4 -4.0 5.2
EBITDA 3,902 3,717 4,058 3,800 2,494 2,694 4,261 4,498 15,378 13,947
Margins (%) 30.1 26.0 28.4 26.4 20.0 20.5 25.7 27.5 27.6 23.8
Depreciation 942 818 1,265 1,332 1,139 1,156 1,667 1,639 4,356 5,600
Interest 543 563 447 378 312 309 363 394 1,931 1,378
Other Income 328 323 572 913 740 111 546 804 2,114 2,200
PBT before EO Exp 2,745 2,659 2,918 3,003 1,783 1,339 2,777 3,269 11,205 9,169
Extra-Ord Expense 10 120 1 0 11 32 59 -48 11 0
PBT 2,736 2,539 2,917 3,002 1,773 1,308 2,719 3,317 11,194 9,169
Tax 454 365 176 159 50 153 494 225 1,155 921
Rate (%) 16.6 14.4 6.0 5.3 2.8 11.7 18.2 6.8 10.3 10.1
Reported PAT 2,281 2,174 2,741 2,843 1,722 1,155 2,225 3,093 10,040 8,248
Adj PAT 2,289 2,277 2,741 2,843 1,732 1,183 2,273 3,048 10,049 8,248
YoY Change (%) 438.0 284.6 85.2 -19.1 -24.3 -48.0 -17.1 7.2 59.6 -17.9
E:MOSL Estimates


Shree Cement

CMP: INR7,276 Buy
We expect 4QFY14 cement volumes to grow 22% YoY (12% QoQ) to
3.86m tons (including clinker) and realizations to grow 9.7% YoY
(1.6% QoQ) to INR3,925/ton. Moderate rise in realizations and
benefit of positive operating leverage QoQ would lead to Cement
business profitability at INR1,139/ton (up INR63/ton QoQ).
We estimate merchant power sales at 368m units (v/s 536m units
QoQ and 795m QoQ) at ~INR3.3/unit (v/s INR3.3/unit in 3QFY14 and
INR3.88/unit in 4QFY13). Power EBITDA contribution would be
INR104m (v/s INR130m in 4QFY13 and INR840m in 3QFY14). Adjusted
PAT would be INR3b (v/s INR2.8b in 4QFY13 and INR2.3b in 3QFY14).
We are raising our EPS estimates by 8.7% for FY15 and 28% for FY16
to factor in higher volumes and realizations.
The stock trades at 16.9x FY16E EPS, and at an EV of 8.7x FY15E
EBITDA and USD162/ton. Buy with a target price of INR8,250 (FY16E
EV of USD190/ton).
Volume and pricing outlook for North India
Pet coke price trend and update on any forward agreements for
merchant power
Update on planned expansion and progress in capex plans

Bloomberg SRCM IN
M. Cap. (INR b)/(USD b) 253 / 4
52-Week Range (INR) 7982 / 3413
1,6,12 Rel Perf. (%) -4 / 41 / 26

Y/E March 2014 2015E 2016E 2017E
Sales 58.6 70.7 85.8 102.9
EBITDA 13.9 18.4 25.4 33.7
NP 8.2 9.8 15.0 21.3
Adj EPS (INR) 236.7 280.2 431.1 610.3
EPS Gr. (%) -17.9 18.4 53.9 41.6
BV/Sh. (INR) 1,312 1,562 1,958 2,534
RoE (%) 19.6 19.5 24.5 27.2
RoCE (%) 19.6 22.0 27.2 31.1
Payout (%) 11.9 10.8 8.1 5.7
Valuations
P/E (x) 30.7 26.0 16.9 11.9
P/BV (x) 5.5 4.7 3.7 2.9
EV/EBITDA (x) 17.4 13.2 8.7 5.8
EV/Ton (USD) 197.7 174.1 161.9 143.2

July 2014 111

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Sales (m ton) 10.09 9.23 9.98 12.18 11.57 10.16 11.18 13.33 41.5 46.2
YoY Change (%) -2.3 -0.6 0.4 9.4 14.7 10.0 12.0 9.4 2.0 11.5
Grey Cement
Realn.(INR/ton) * 4,120 3,973 3,936 3,912 4,032 3,932 4,182 4,493 3,982 4,179
YoY Change (%) 0.0 -5.8 -2.8 -2.5 -2.2 -1.0 6.2 14.9 -2.9 4.9
QoQ Change (%) 2.7 -3.6 -0.9 -0.6 3.1 -2.5 6.4 7.5 0.0 0.0
Net Sales 49,575 45,021 47,864 58,319 55,830 49,250 57,013 72,513 200,779 234,606
YoY Change (%) -2.3 -4.2 -1.5 8.2 12.6 9.4 19.1 24.3 0.3 16.8
EBITDA 10,491 6,597 7,641 11,429 10,203 6,050 10,437 17,948 36,160 44,638
Margins (%) 21.2 14.7 16.0 19.6 18.3 12.3 18.3 24.8 18.0 19.0
Depreciation 2,521 2,573 2,645 2,785 2,850 3,000 3,200 3,348 10,523 12,398
Interest 660 888 905 739 800 825 835 855 3,192 3,315
Other Income 1,882 574 996 1,858 1,750 800 1,000 1,600 5,310 5,150
PBT before EO expense 9,192 3,711 5,088 9,763 8,303 3,025 7,402 15,345 27,755 34,076
Extra-Ord expense 0 0 0 -956 0 0 0 0 -956 0
PBT after EO Expense 9,192 3,711 5,088 10,719 8,303 3,025 7,402 15,345 28,711 34,076
Tax 2,466 1,070 1,391 2,340 2,117 771 1,887 3,913 7,266 8,689
Rate (%) 26.8 28.8 27.3 21.8 25.5 25.5 25.5 25.5 25.3 25.5
Reported PAT 6,726 2,641 3,698 8,379 6,186 2,254 5,514 11,432 21,445 25,386
Adj PAT 6,726 2,641 3,698 7,632 6,186 2,254 5,514 11,432 20,731 25,386
YoY Change (%) -13.6 -52.0 -38.5 5.1 -8.0 -14.7 49.1 49.8 -21.9 22.5
E: MOSL Estimates; * Grey cement realization is our estimate


Ultratech Cement

CMP: INR2,604 Hold
We expect cement volumes to grow 14.7% YoY (but decline 5% QoQ)
to 11.57m tons. Realizations are likely to grow 3.1% QoQ (but decline
2.2% QoQ) to INR4,032/ton.
White cement volumes and realizations are likely to grow 8.8% YoY
and 12% YoY, respectively. RMC volumes and realizations would grow
7.1% YoY and 2% YoY, respectively.
We estimate EBITDA/ton at INR871 (down INR55/ton QoQ). EBITDA
margin would decline by 2.9pp YoY (and 1.3pp QoQ) to 18.3%.
EBITDA is likely to de-grow 3% YoY (and 11% QoQ) to INR10.2b,
translating into PAT de-growth of 8% YoY to INR6.2b.
We are revising our FY15/FY16 EPS estimates by -3.7%/+10.9% to
factor in deferred uptick in realizations.
The stock trades at 19.6x FY16E EPS, and at an EV of 10.9x FY16E
EBITDA and USD185/ton. Maintain Buy, with a target price of
INR2,906 (EV of FY16E USD200/ton).

Progress and timeline of JPA deal
Update on financial performance of Star Cement, UAE

Bloomberg UTCEM IN
M. Cap. (INR b)/(USD b) 714 / 12
52-Week Range (INR) 2868 / 1405
1,6,12 Rel Perf. (%) -3 / 26 / 3

Y/E March 2014 2015E 2016E 2017E
Sales 200.8 234.6 280.8 334.1
EBITDA 36.2 44.2 62.8 85.9
NP 20.7 25.0 36.5 51.8
Adj EPS (INR) 75.6 91.3 133.0 189.0
EPS Gr. (%) -21.2 20.8 45.7 42.1
BV/Sh (INR) 623.5 703.1 823.4 998.4
RoE (%) 12.8 13.8 17.4 20.7
RoCE (%) 14.4 15.9 20.9 26.2
Payout (%) 13.5 12.7 9.6 7.4
Valuations
P/E (x) 34.5 28.5 19.6 13.8
P/BV (x) 4.2 3.7 3.2 2.6
EV/EBITDA (x) 18.7 15.5 10.9 7.4
EV/Ton (USD) 191.7 193.7 185.5 171.2

July 2014 112

Gautam Duggad (Gautam.Duggad@MotilalOswal.com); +91 22 3982 5404
Manish Poddar (Manish.Poddar@MotilalOswal.com); +91 22 3027 8029
Deja Vu 4QFY14
Consumer demand sequentially stable

Expect 13% sales growth, 14% PAT growth for our Consumer coverage
We expect our Consumer coverage universe to post 13% revenue growth and 14%
PAT growth in 1QFY15. Broadly, consumption demand trends remained unchanged
sequentially. While consumer sentiments improved post elections, it will reflect with
a lag in numbers, in our view. Staples categories continue to see muted demand,
while discretionary segment like Paints will see double digit volume growth, in our
view. EBITDA is likely to grow 13.3%, with flat margins for our universe. We expect
ITC to post 14% sales growth (1% decline in cigarette volumes) and 16.6% PAT
growth. HUVRs sales are likely to grow 10% (volume growth of ~5%), with 40bp
EBITDA margin expansion.

Demand revival yet to be seen; weak monsoon could drive Agri commodity
inflation
Our channel checks and management interactions indicate no meaningful pick-up in
demand trends yet. Demand trends remain largely unchanged sequentially across
categories and geographies. Like in previous quarters, Decorative Paints continue to
witness good momentum with likely double digit volume growth for the category.
Monsoon has begun on a weak note with June receiving the scantiest rainfall in a
decade and probability of El Nino has been revised up by Skymet, revising the
probability of drought to 60% now v/s 25% in April. While we believe that the
relevance of monsoon for FMCG consumption is blurring, poor monsoon could raise
the prospect of Agri commodity inflation, going forward.


(INR)
4.7.14
Reco Jun-14
Var %
YoY
Var %
QoQ
Jun-14
Var %
YoY
Var %
QoQ
Jun-14
Var %
YoY
Var %
QoQ
Asian Paints 588 Neutral

32,554 15.5 -0.3

5,209 17.8 17.2

3,379 22.8 13.6
Britannia 1,016 Buy

15,719 12.0 -3.0

1,383 18.4 5.3

1,020 18.2 -2.8
Colgate 1,664 Neutral

9,798 16.0 6.4

1,950 18.0 -3.4

1,407 8.4 1.6
Dabur 191 Neutral

18,988 15.0 7.3

2,791 18.5 -3.8

2,222 19.4 -5.6
Emami 543 Buy

4,220 10.0 -5.3

633 6.9 -46.3

609 0.3 -46.5
Godrej Consumer 809 Neutral

19,784 15.0 2.8

2,611 18.3 -21.8

1,653 26.7 -29.0
GSK Consumer 4,751 Neutral

9,894 16.0 -8.3

1,484 25.1 -21.6

1,463 21.9 -14.8
Hind. Unilever 624 Sell

74,559 9.5 5.1

12,153 11.9 12.8

9,623 8.7 15.6
ITC 333 Buy

84,482 14.0 -8.6

31,934 14.4 -0.3

22,061 16.6 -3.2
Marico 249 Buy

16,280 18.0 52.2

2,475 9.0 62.8

1,581 1.8 46.4
Nestle 4,970 Neutral

23,791 7.5 2.8

5,139 5.3 5.8

2,958 4.8 0.9
Pidilite Inds. 333 Neutral

11,874 17.0 30.9

2,553 14.0 118.6

1,754 13.5 89.7
Radico Khaitan 112 Buy

4,109 15.0 16.9

707 15.7 76.6

337 10.1 270.2
United Spirits 2,453 Neutral

25,212 15.0 15.4

2,773 -0.3 36.8

1,323 12.0 67.3
Source: MOSL

Company name
Asian Paints
Britannia Industries
Colgate
Dabur
Emami
Godrej Consumer
GSK Consumer
Hindustan Unilever
ITC
Marico
Nestle India
Pidilite Industries
Radico Khaitan
United Spirits

Consumer


July 2014 113

Input cost turning inflationary; price hikes in select categories
The input costs scenario is turning inflationary, with inflation in copra, palm oil, tea,
coffee, sugar, milk, LLP, Caustic Soda and HDPE (packaging) and correction in wheat,
safflower oil and mentha oil prices. We note selective pricing actions by HUVR,
APNT, Marico, ITC and Dabur to pass on the impact of raw material (RM) inflation.
We expect operating margin expansion for APNT, Britannia, HUL, Dabur and GCPL,
while UNSP, Nestle, Pidilite and Marico should post margin contraction. Competitive
intensity continues to remain high in HPC categories, given the backdrop of muted
volume growth.

Downside risks to earnings estimates for FY15E
We expect downside risks for our coverage universe for FY15. While we have built a
modest volume growth recovery in 2HFY15, if the current trends persist, we expect
downside risks to our and consensus estimates.

Sector valuations expensive; prefer to stay selective
Continued modest sector demand trends coupled with rich valuations drive our
cautious sector stance. We prefer stocks with inbuilt resilience (ITC), special catalyst
(Emami distribution expansion, aggressive new launch calendar), inexpensive
valuations (ITC) or turnaround potential (Britannia margins still have a room for
expansion). Pick-up in consumer sentiments could drive urban consumption going
forward and benefit urban-oriented plays like Nestle, GCPL and Marico, in our view.
Spike in input costs due to deficient monsoon and rise in competitive intensity,
leading to irrational pricing, are the key risks and monitorables.

1QFY15 volume growth expectations
Quarter Ending Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14E
Asian Paints 15.0 15.0 12.0 18.0 -2.0 5.0 13.0 2.0 10.0 12.0 7.0 12.0 11.0
Colgate (Toothpaste) 14.0 15.0 15.0 14.0 13.0 11.0 8.0 11.0 11.0 9.0 11.0 7.0 9.0
Dabur 8.6 10.0 10.8 12.4 12.0 10.5 9.5 12.0 9.0 10.7 9.2 9.4 8.0
Godrej Consumer
Soaps 9.0 19.0 20.0 17.0 24.0 6.0 2.0 4.0 7.0 4.0 6.0 -4.0 1.0
GSK Consumer 14.0 8.0 12.0 7.0 7.4 4.5 6.0 8.0 7.0 10.0 11.0 11.0 8.0
Hindustan Unilever 8.3 9.8 9.1 10.0 9.0 7.0 5.0 6.0 4.0 5.0 4.0 3.0 5.0
ITC (cigarette) 8.0 7.5 5.0 5.5 1.5 0.5 1.5 2.5 -2.0 -2.0 -2.0 -3.0 -1.0
Marico
Parachute 10.0 10.0 13.0 11.1 18.0 9.0 6.0 5.0 4.0 1.0 2.0 10.0 8.0
Hair Oil 32.0 26.0 20.0 17.5 25.0 20.0 30.0 24.0 16.0 15.0 8.0 5.0 8.0
Saffola 15.0 11.0 15.0 3.3 12.0 6.0 4.0 5.0 10.0 7.0 9.0 11.0 10.0
Radico Khaitan 10.1 12.3 9.7 10.5 6.8 9.9 8.2 7.2 7.6 7.2 7.6 3.5 7.0

Impact of input price changes
Input Price Trend (Y-o-Y) Unit Current Price 12mon chg % Impact Companies
LAB Up INR/Kg 123.1 1.7 Negative HUL
Soda Ash Sideways INR/50Kg 1295 21.8 Negative HUL
Palm Fatty Acid UP US$/MT 775 23.0 Negative HUL, Godrej Consumer
Palm Oil UP MYR/MT 2484 3.9 Negative Britannia, Nestle, HUL, ITC
HDPE Up INR/Kg 123 24.5 Negative All Companies
Sugar Up INR/Qtl 3326 8.0 Negative Britannia, Nestle, GSK Consumer
Titanium Dioxide Sideways INR/Kg 250 4.2 Negative Asian Paints
Copra Up INR/Qtl 10750 133.6 Negative Marico
June 2014 Results Preview | Sector: Consumer

July 2014 114

New launches during 1QFY15
Company Brand Category
Marico Parachute Advansed Summer Refresh Body Lotion
Emami Fair and Handsome Face Wash
Godrej Consumer Protekt brand Hand Sanitizers, Handwash and Mosquito Repellant
Colgate Colgate Maximum Cavity Protection Toothpaste
Hindustan Unilever Ponds Men Face Wash and Moisturizers
Hindustan Unilever Close Up Diamond Attraction Toothpaste
Emami He Deodorant
Hindustan Unilever Axe Signature Collection Deodorant
Jyothy Labs Re-launched Henko Detergents

PFAD prices are down 1.3% QoQ

Source: Company, Bloomberg, MOSL
LAB prices up 3.3% YoY


Copra prices up 135% YoY

Sugar prices see uptick of 8% QoQ


40,732
44,285
37,560
33,527
40,550
45,506
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109
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LAB Prices (INR/Kg)
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July 2014 115

Relative Performance -3 month (%)

Relative Performance 1 year (%)


Consumer
Asian Paints 588 Neutral 15.5 18.7 22.8 37.9 31.5 25.8 24.7 20.4 16.3 31.7 32.4 33.1
Britannia 1,016 Buy 38.5 45.6 53.6 26.4 22.3 19.0 18.4 14.9 11.9 42.1 41.3 40.3
Colgate 1,664 Neutral 43.6 51.0 59.7 38.2 32.6 27.9 26.4 21.1 17.8 96.3 99.6 102.6
Dabur 191 Neutral 6.4 7.5 8.8 29.8 25.6 21.6 23.5 20.1 16.9 34.8 33.7 33.2
Emami 543 Buy 19.2 22.8 26.1 28.4 23.8 20.8 23.4 19.3 16.7 45.2 46.4 45.1
Godrej Consumer 809 Neutral 27.3 33.4 40.0 29.6 24.2 20.2 20.4 17.0 14.3 22.9 23.7 23.6
GSK Consumer 4,751 Neutral 138.6 164.7 192.0 34.3 28.8 24.7 30.4 24.9 20.2 30.6 30.7 30.3
Hind. Unilever 624 Sell 18.1 20.1 22.3 34.5 31.1 28.0 25.2 22.1 19.2 107.3 110.2 114.7
ITC 333 Buy 12.9 14.9 17.2 25.9 22.3 19.4 17.6 15.2 13.1 40.6 43.4 45.8
Marico 249 Buy 8.4 9.9 11.3 29.7 25.1 22.0 18.4 15.4 13.2 25.1 24.3 23.1
Nestle 4,970 Neutral 128.2 151.5 174.5 38.8 32.8 28.5 22.4 19.3 16.5 50.1 54.5 57.3
Pidilite Inds. 333 Neutral 10.8 13.0 15.4 30.9 25.6 21.7 19.4 16.0 13.1 23.3 23.5 23.2
Radico Khaitan 112 Buy 8.0 9.2 10.9 14.1 12.2 10.3 9.0 7.9 6.9 11.9 12.5 13.3
United Spirits 2,453 Neutral 42.6 56.0 72.7 57.6 43.8 33.8 30.9 25.7 21.2 7.2 8.9 10.8

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July 2014 116

Quarterly performance (Consolidated)

(INR Million)
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Volume Growth % * 10.0 12.0 7.0 12.0 11.0 11.0 12.0 12.0 11.0 11.0
Net Sales 28,185 30,841 34,126 32,664 32,554 35,929 39,928 38,051 125,816 146,462
Change (%) 11.1 18.1 12.5 21.4

15.5 16.5 17.0 16.5 15.0 16.4
Gross Profit 12,048 13,176 13,747 13,438

13,673 15,090 16,370 15,817 52,409 60,950
Gross Margin (%) 42.7 42.7 40.3 41.1 42.0 42.0 41.0 41.6 41.7 41.6
Operating Expenses 7,627 8,374 8,767 8,994

8,464 9,342 10,261 10,516 33,762 38,583
% of Sales 27.1 27.2 25.7 27.5 26.0 26.0 25.7 27.6 26.8 26.3
EBITDA 4,421 4,802 4,980 4,444 5,209 5,749 6,109 5,301 18,647 22,368
Margin (%) 15.7 15.6 14.6 13.6

16.0 16.0 15.3 13.9 14.8 15.3
Change (%) 1.0 32.9 0.6 18.9

17.8 19.7 22.7 19.3 7.7 20.0
Interest 86 120 100 117 103 144 120 129 422 495

671 675 709 725 2,457 2,780
Other Income 503 760 694 718 603 912 867 718 2,674 3,101
PBT 4,239 4,839 4,941 4,423 5,039 5,842 6,147 5,165 18,442 22,193
Tax 1,390 1,449 1,540 1,336

1,562 1,811 1,906 1,601 5,715 6,880
PAT before Minority 2,850 3,390 3,401 3,087 3,477 4,031 4,241 3,564 12,727 15,314
Minority Interest 98 122 107 113 98 122 107 99 440 426
Adjusted PAT 2,752 3,268 3,294 2,974 3,379 3,909 4,134 3,466 12,288 14,888
Change (%) -4.6 36.7 -1.8 18.4 22.8 19.6 25.5 16.5 10.3 21.2
E: MOSL Estimates


Asian Paints

CMP: INR588 Neutral
We expect Asian Paints to post 15.5% revenue growth to INR32.6b in
1QFY15, with ~10-11% domestic decorative volume growth.
Decorative Paints segment demand remained strong despite the
macro headwinds.
Our company and dealer interactions suggest continued healthy
demand in Decoratives, while Industrial demand could revive with a
lag.
Pricing growth stands at 6% for the quarter.
Expect moderate 30bp operating margin expansion to 16%.
International business to report mixed performance, with continued
outperformance by Middle East and Asia.
We estimate PAT growth for 1QFY15 at 22.8% (4.6% de-growth in
1QFY15).
The stock trades at 31.5x FY16E EPS of INR18.7. Maintain Neutral.

Volume growth trends and demand scenario in urban and rural
geographies.
Outlook on demand in Industrial paints.
Outlook on raw material scenario.

Bloomberg APNT IN
M. Cap. (INR b)/(USD b) 564 / 9
1,6,12 Rel Perf. (%) 11 / -4 / -5

Y/E March 2014 2015E 2016E 2017E
Sales 127.1 146.5 172.3 203.2
EBITDA 20.0 22.4 26.7 32.9
Adj. PAT 12.3 14.9 17.9 21.9
Adj. EPS (INR) 12.8 15.5 18.7 22.8
EPS Gr. (%) 10.3 21.1 20.5 21.9
BV/Sh.(INR) 42.1 48.9 57.7 68.8
RoE (%) 30.4 31.7 32.4 33.1
RoCE (%) 40.7 42.0 43.0 44.4
Payout (%) 41.4 45.1 45.5 43.9
Valuations
P/E (x) 45.9 37.9 31.5 25.8
P/BV (x) 14.0 12.0 10.2 8.6
EV/EBITDA (x) 27.4 24.7 20.4 16.3
Div. Yield (%) 1.0 1.4 1.7 19.9

July 2014 117

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Net Sales 14,034 15,945 16,144 16,198 15,719 18,017 18,727 19,006 62,321 71,470
YoY Change (%) 14.9 13.7 11.1 9.0 12.0 13.0 16.0 17.3 12.4 14.7
COGS 8,374 9,666 9,885 10,172 9,353 10,810 11,330 11,631 38,097 43,124
Gross Profit 5,660 6,278 6,259 6,026 6,366 7,207 7,397 7,375 24,224 28,345
Margins (%) 40.3 39.4 38.8 37.2 40.5 40.0 39.5 38.8 38.9 39.7
Other Exp 4,492 4,902 4,909 4,712 4,983 5,585 5,749 5,803 19,015 22,121
% of Sales 32.0 30.7 30.4 29.1 31.7 31.0 30.7 30.5 30.5 31.0
Total Exp 12,867 14,568 14,794 14,884 14,335 16,396 17,079 17,435 57,113 65,245
EBITDA 1,168 1,377 1,350 1,314 1,383 1,622 1,648 1,571 5,208 6,224
Margins (%) 8.3 8.6 8.4 8.1 8.8 9.0 8.8 8.3 8.4 8.7
YoY Growth (%) 79.5 127.0 72.8 13.2 18.4 17.8 22.0 19.6 62.8 4.2
Depreciation 153 157 160 164 176 180 184 183 634 723
Interest 34 11 6 4 23 8 4 7 54 43
Other Income 267 199 192 447 294 219 212 478 1,106 1,203
PBT 1,249 1,408 1,377 1,593 1,478 1,653 1,671 1,859 5,626 6,661
Tax 386 451 414 544 458 512 518 576 1,795 2,065
Rate (%) 30.9 32.0 30.0 34.2 31.0 31.0 31.0 31.0 31.9 31.0
Adjusted PAT 863 957 963 1,049 1,020 1,140 1,153 1,283 3,832 4,596
YoY Change (%) 98.6 109.8 69.1 19.4 18.2 19.2 19.7 22.3 63.8 20.0
E: MOSL Estimates


Britannia Industries

CMP: INR1,016 Buy
We estimate Britannia to post sales of INR15.7b, a growth of 12%
YoY. Volume growth base is likely to remain in 3-5% band as the
discretionary processed foods category remains under pressure.
Within the overall Biscuits category, premium creams and cookies
segment continue to outperform and hence will likely offset any
margin pressure due to low volume growth.
We estimate 50bp YoY EBITDA margin expansion to 8.8%, driven by
better gross margins and cost savings in overheads. We expect
Britannia to maintain its ad-spends given the low volume growth and
high competitive intensity characterizing the industry.
We model 18% EBITDA and PAT growth.
The stock trades at 22x FY16E EPS. It is one of our top pick in tier II
consumer space. Maintain Buy.
Volume growth in biscuits.
Outlook on raw material scenario.
Performance of subsidiaries.

Bloomberg BRIT IN
M. Cap. (INR b)/(USD b) 121 / 2
52-Week Range (INR) 1,050 / 658
1,6,12 Rel Perf. (%) 8 / -14 / 14

Y/E March 2014 2015E 2016E 2017E
Sales 62.3 71.5 82.7 98.1
EBITDA 5.2 6.2 7.5 9.3
Adj. PAT 3.8 4.6 5.5 6.4
Adj. EPS (INR) 32.1 38.5 45.6 53.6
EPS Gr. (%) 63.8 20.0 18.6 17.4
BV/Sh.(INR) 75.3 91.5 110.6 133.0
RoE (%) 42.6 42.1 41.3 40.3
RoCE (%) 61.3 57.0 61.7 61.9
Payout (%) 46.2 50.0 50.0 50.0
Valuations
P/E (x) 31.7 26.4 22.3 19.0
P/BV (x) 13.5 11.1 9.2 7.6
EV/EBITDA (x) 22.4 18.4 14.9 11.9
Div. Yield (%) 1.5 1.9 2.2 2.6

July 2014 118

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Toothpaste Volume Gr % 11.0 9.0 11.0 7.0 10.0 11.0 12.5 11.0 9.0 11.0
Net Sales 8,446 8,957 8,840 9,206 9,798 10,408 10,298 10,700 35,449 41,204
YoY Change (%) 14.7 15.8 15.9 13.4 16.0 16.2 16.5 16.2 14.9 16.2
COGS 3,283 3,621 3,458 3,659 3,762 4,080 3,965 4,208 14,020 16,015
Gross Profit 5,164 5,336 5,382 5,547 6,035 6,328 6,333 6,492 21,429 25,188
Gross Margin (%) 61.1 59.6 60.9 60.3 61.6 60.8 61.5 60.7 60.4 61.1
Other operating Expenses 3,662 3,923 3,948 3,595 4,086 4,496 4,552 4,199 15,128 17,333
% to sales 43.4 43.8 44.7 39.1 41.7 43.2 44.2 39.2 42.7 42.1
Other operating Income 151 50 71 67 7,848 8,576 8,517 8,407 339 386
EBITDA 1,653 1,463 1,505 2,019 1,950 1,832 1,782 2,293 6,640 8,242
Margins (%) 19.2 16.2 16.9 21.8 19.9 17.6 17.3 21.4 18.6 20.0
YoY Growth (%) 1.7 -16.8 0.4 19.7 18.0 25.2 18.4 13.6 1.1 24.1
Depreciation 117 117 121 153 137 146 144 145 507 572
Interest 0 0 0 0 0 0 0 5 0 5
Financial other Income 171 130 162 39 197 150 187 155 503 689
PBT 1,707 1,477 1,547 1,905 2,009 1,836 1,824 2,298 6,636 8,354
Tax 409 382 418 521 603 551 556 713 1,881 2,423
Rate (%) 24.0 25.8 27.0 27.3 30.0 30.0 30.5 31.0 28.3 29.0
Adj PAT 1,297 1,095 1,129 1,385 1,407 1,285 1,268 1,586 4,755 5,931
YoY Change (%) 10.5 -24.5 1.7 12.4 8.4 17.3 12.3 14.5 -4.3 24.7
E: MOSL Estimates


Colgate

We expect sales growth of 16% YoY to INR9.8b. Toothpaste volume
growth is estimated to be 8-9%, with industry panel data indicating
moderation in growth rate for Oral Care category.
We expect 70bp expansion in EBITDA margin at 19.9% on the back of
lower ad spends as base quarter saw preemptive higher ad spends
ahead of P&Gs Oral B launch in July 2013.
Thus, we model for 18% EBITDA growth in 1QFY15. However, higher
tax rate of 600bp should result in muted 8.4% YoY PAT growth.
The stock trades at 32x FY16E EPS. Maintain Neutral.
Volume growth in Toothpaste and market share movement.
Ad-spends and competitive intensity in Toothpaste.

Bloomberg CLGT IN
M. Cap. (INR b)/(USD b) 226 / 4
52-Week Range (INR) 1,671 /
90
1,6,12 Rel Perf. (%) 15 / -2 / -11

Y/E March 2014 2015E 2016E 2017E
Sales 35.4 41.2 47.7 55.7
EBITDA 6.6 8.2 10.2 12.0
Adj. PAT 4.8 5.9 6.9 8.1
Adj. EPS (INR) 35.0 43.6 51.0 59.7
EPS Gr. (%) -4.3 24.7 16.9 17.1
BV/Sh.(INR) 42.5 48.0 54.4 61.9
RoE (%) 88.0 96.3 99.6 102.6
RoCE (%) 88.1 96.4 99.6 102.7
Payout (%) 75.0 75.0 75.0 75.0
Valuations
P/E (x) 47.6 38.2 32.6 27.9
P/BV (x) 39.1 34.7 30.6 26.9
EV/EBITDA (x) 33.0 26.4 21.1 17.8
Div. Yield (%) 1.6 2.0 2.3 2.7

July 2014 119

Quarterly performance (Consolidated)

(INR Million)
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Volume Growth (%) 9.0 10.7 9.0 10.0 8.0 10.0 11.0 12.0 10.0 10.0
Net Sales 16,511 17,488 19,043 17,690 18,988 20,286 22,471 21,023 70,732 82,768
YoY Change (%) 12.9 14.9 16.8 15.5 15.0 16.0 18.0 18.8 15.1 17.0
Total Exp 14,156 14,250 16,117 14,790 16,196 16,432 18,875 17,298 59,313 68,801
EBITDA 2,355 3,238 2,925 2,901 2,791 3,854 3,595 3,726 11,419 13,966
Margins (%) 14.3 18.5 15.4 16.4 14.7 19.0 16.0 17.7 16.1 16.9
YoY Growth (%) 15.2 26.9 14.0 16.6 18.5 19.0 22.9 28.4 2.8 22.3
Depreciation 287 236 255 263 316 259 281 334 1,042 1,190
Interest 133 200 72 137 133 200 72 144 542 549
Other Income 420 280 390 437 483 322 448 535 1,527 1,787
PBT 2,355 3,083 2,988 2,938 2,825 3,717 3,691 3,782 11,363 14,015
Tax 484 579 546 582 593 743 751 729 2,191 2,817
Rate (%) 20.6 18.8 18.3 19.8 21.0 20.0 20.4 19.3 19.3 20.1
Minority Interest 10 6 -7 -2 10 6 -7 4 7 13
Adjusted PAT 1,860 2,498 2,435 2,353 2,222 2,968 2,947 3,049 9,165 11,185
YoY Change (%) 20.7 23.5 15.3 17.4 19.4 18.8 21.0 29.5 19.3 22.0
E: MOSL Estimates


Dabur

CMP: INR191 Neutral
We expect sales growth of 15% to INR19b led by ~8-9% domestic
organic volume growth. Unlike the commentaries of other staples,
Dabur is still guiding for 8-10% volume growth for FY15.
Project CORE should add incremental growth in a challenging
consumption backdrop, in our view.
We expect margin expansion of 40bp to 14.7% led by operating
leverage in international business and price hikes to pass on input
inflation. We expect ad-spends to remain in 14-14.5% band.
We expect PAT growth of 19.4% to INR2.2b.
The stock trades at 26x FY16E EPS of INR7.5. Maintain Neutral.
Domestic volume growth and outlook on rural demand.
Update on Project CORE.
Margin performance in International business.

Bloomberg DABUR IN
M. Cap. (INR b)/(USD b) 334 / 6
1,6,12 Rel Perf. (%) -1 / -10 / -13

Y/E March 2014 2015E 2016E 2017E
Sales 70.7 82.8 96.0 110.6
EBITDA 11.4 14.0 16.1 18.8
Adj. PAT 9.2 11.2 13.0 15.4
Adj. EPS (INR) 5.3 6.4 7.5 8.8
EPS Gr. (%) 19.3 22.0 16.5 18.2
BV/Sh.(INR) 15.3 18.5 22.2 26.7
RoE (%) 34.5 34.8 33.7 33.2
RoCE (%) 37.6 38.8 40.0 40.6
Payout (%) 42.8 42.7 42.7 42.7
Valuations
P/E (x) 36.3 29.7 25.5 21.6
P/BV (x) 12.5 10.3 8.6 7.2
EV/EBITDA (x) 29.0 23.4 20.1 16.8
Div. Yield (%) 1.2 1.4 1.7 2.0

July 2014 120


(INR Million)
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Volume Growth (%) 6.0 6.0 1.5 -10.0 5.0 5.0 10.0 12.0

8.0
Net Sales 3,837 4,067 5,847 4,457 4,220 4,718 6,958 5,361 18,208 21,257
YoY Change (%) 13.2 12.8 6.6 -1.2 10.0 16.0 19.0 20.3 7.2 16.7
COGS 1,578 1,496 2,045 1,685 1,709 1,699 2,366 1,963 6,803 7,736
Gross Profit 2,259 2,572 3,802 2,773 2,511 3,020 4,592 3,398 11,405 13,521
Gross margin (%) 58.9 63.2 65.0 62.2 59.5 64.0 66.0 63.4 62.6 63.6
Other Expenditure 1,667 1,699 2,034 1,593 1,878 2,076 2,574 1,992 6,992 8,521
% to sales 43.4 41.8 34.8 35.7 44.5 44.0 37.0 37.2 38.4 40.1
EBITDA 592 873 1,768 1,180 633 944 2,018 1,406 4,413 5,000
Margins (%) 15.4 21.5 30.2 26.5

15.0 20.0 29.0 26.2 24.2 23.5
YoY Change 27.9 36.3 29.1 18.0

6.9 8.1 14.1 19.2 29.2 13.3
Depreciation 57 59 62 65 68 68 71 79 242 285
Interest -15 -4 18 25

-12 -3 26 55 54 66
Other Income 151 164 122 184 174 189 140 241 622 744
PBT 702 983 1,811 1,275

751 1,068 2,061 1,512 4,740 5,393
Tax 95 183 304 138

143 203 392 306 721 1,043
Rate (%) 13.6 18.6 16.8 10.8 19.0 19.0 19.0 20.2 15.2 19.3
Adjusted PAT 607 800 1,507 1,137

609 865 1,669 1,206 4,019 4,349
YoY Change (%) 30.2 35.1 31.1 21.0 0.3 8.2 10.8 6.1 28.0 8.2
E: MOSL Estimates


Emami

CMP: INR543 Buy
We expect sales growth of 10% YoY to INR4.2b led by 5% volume
growth. Base quarter volumes were impacted by transporters strike.
We expect 60bp expansion in gross margin to 59.5% due to benign
Mentha oil prices.
However, higher ad spends necessitated by recent new launches in
Deo category should result in 40bp YoY decline in EBITDA margin to
15%, in our view. Thus, we model for 7% YoY EBITDA growth to
INR633m.
Higher tax rate of 540bp to 19% should result in YoY flat PAT at
INR609m.
The stock trades at 24x FY16E EPS of INR22.8 and is our top pick in
tier II consumer space. Maintain Buy.

Volume growth and broad consumer demand for its categories.
Outlook on Mentha oil prices.
Update on Deodorant category entry, SHE acquisition and strategy
for new launches, going forward.

Bloomberg HMN IN
M. Cap. (INR b)/(USD b) 123 / 2
1,6,12 Rel Perf. (%) 14 / -11 / -
26

Y/E March 2014 2015E 2016E 2017E
Sales 18.2 21.3 24.8 29.0
EBITDA 4.4 5.0 6.0 6.8
NP 4.0 4.3 5.2 5.9
EPS (INR) 17.8 19.2 22.8 26.1
EPS Gr. (%) 28.7 7.4 19.0 14.4
BV/Sh. (INR) 39.6 45.3 53.0 62.7
RoE (%) 47.0 45.2 46.4 45.1
RoCE (%) 48.8 49.7 51.9 51.2
Payout (%) 45.2 47.0 46.2 45.7
Valuations
P/E (x) 30.4 28.3 23.8 20.8
P/BV (x) 13.7 12.0 10.2 8.7
EV/EBITDA (x) 26.9 23.4 19.3 16.7
Div. Yld (%) 1.2 1.4 1.7 1.9
EV/Sales (x) 6.5 5.5 4.6 3.9

July 2014 121

Quarterly performance (Consolidated) (INR Million)
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Net Sales 17,203 19,574 19,789 19,240 19,784 22,510 23,153 22,687 75,806 88,133
YoY Change (%) 23.9 22.7 16.8 12.0 15.0 15.0 17.0 17.9 18.6 16.3
EBITDA 2,208 2,954 3,071 3,339 2,611 3,557 3,820 4,100 11,573 14,088
Margins (%) 12.8 15.1 15.5 17.4

13.2 15.8 16.5 18.1 15.3 16.0
YoY Growth (%) 11.0 21.1 9.5 21.4 18.3 20.4 24.4 22.8 15.9 21.7
Depreciation 221 244 225 128 254 281 259 228 819 1,022
Interest 240 257 307 269

276 296 354 286 1,074 1,212
Other Income 178 172 207 269

204 197 238 359 826 999
PBT 1,769 2,562 2,716 3,191 2,285 3,178 3,446 3,944 10,238 12,853
Tax 338 470 558 737

480 667 758 889 2,104 2,795
Rate (%) 19.1 18.3 20.6 23.1 21.0 21.0 22.0 22.5 20.5 21.7
Minority Int 126 142 202 126

152 170 242 205 596 770
Adj PAT 1,305 1,950 1,956 2,328 1,653 2,340 2,446 2,850 7,539 9,289
YoY Change (%) 6.5 22.4 13.6 13.4 26.7 20.0 25.0 22.4 13.0 23.2
E: MOSL Estimates 6,234


Godrej Consumer

CMP: INR809 Neutral
We expect GCPL to post 15% revenue growth to INR19.8b. We expect
HI, Hair Color and Soaps business to post 15%, 17% and 10% revenue
growth respectively. We expect Soaps business to post lackluster
volume growth in low single digits; category volumes have declined in
the last two quarters.
Indonesia should continue to report double digit constant currency
revenue growth aided by recent price hikes to pass on cost inflation.
We estimate operating margin expansion of 40bp to 13.2%, driven by
higher ad spends in the base.
We model 18.3% and 26% EBITDA and PAT growth, respectively.
The stock trades at 24x FY16E EPS of INR33.4. Maintain Neutral.
Volume growth trends in soaps. Comments on growth outlook for
Household insecticide portfolio.
Competitive intensity in Hair Colors post Maricos entry in the
category.
International business outlook margin guidance for LatAm,
timelines of stake increase in Darling.

Bloomberg GCPL IN
M. Cap. (INR b)/(USD b) 275 / 5
1,6,12 Rel Perf. (%) -2 / -27 / -34

Y/E March 2014 2015E 2016E 2017E
Sales 75.8 88.1 103.4 119.6
EBITDA 11.6 14.1 16.8 19.5
Adj. PAT 7.5 9.3 11.4 13.6
Adj. EPS (INR) 22.2 27.3 33.4 40.0
EPS Gr. (%) 13.0 23.2 22.2 19.9
BV/Sh.(INR) 103.6 119.2 140.9 169.2
RoE (%) 21.4 22.9 23.7 23.6
RoCE (%) 25.9 28.6 30.1 30.3
Payout (%) 45.1 36.6 30.0 25.0
Valuations
P/E (x) 36.5 29.6 24.2 20.2
P/BV (x) 7.8 6.8 5.7 4.8
EV/EBITDA (x) 24.9 20.4 17.0 14.3
Div. Yield (%) 1.2 1.2 1.2 1.2

July 2014 122


(INR Million)
MFD Volume Growth (%) 8.0 9.0 8.0 7.0 7.5 8.0
Net Sales 10,452 9,618 10,600 8,863

10,791 9,894 11,177 9,075 36,038 40,937
YoY Change (%) 11.2 12.8 9.1 5.6 14.8 16.0 15.0 8.2 17.0 13.6
Total Exp 8,313 8,168 8,863 9,561 8,898 8,410 9,333 8,264 31,060 34,905
EBITDA 2,139 1,451 1,737 -698

1,893 1,484 1,844 811 4,978 6,032
Margins (%) 20.5 15.1 16.4 -7.9

17.5 15.0 16.5 8.9 13.8 14.7
YoY Change (%) 25.2 22.2 15.9 -219.4 10.8 25.1 23.0 38.7 7.3 6.7
Depreciation 200 200 200 -1,149

169 174 179 28 457 549
Interest 10 10 10 -34

2 1 1 0 9 4
Other Income 500 530 701 2,959 887 914 941 543 3,038 3,286
PBT 2,429 1,770 2,228 3,444

2,610 2,223 2,606 1,327 7,551 8,765
Tax 809 589 742 -5,075

893 760 860 422 2,521 2,935
Rate (%) 33.3 33.3 33.3 -147.4 34.2 34.2 33.0 31.8 33.4 33.5
Adj PAT 1,620 1,181 1,486 8,519

1,717 1,463 1,746 905 5,031 5,831
YoY Change (%) 3.6 -1.6 1.2 968.2 9.8 21.9 18.8 13.5 15.2 15.9
E: MOSL Estimates


GSK Consumer

We expect GSK to report net sales of INR9.9b, up 16% YoY, driven by
8% volume growth.
While overall consumption environment remains sluggish, GSKs
strategy of driving LUP portfolio and innovation in core product
basket should help maintain the volume growth trend.
We estimate 110bp YoY EBITDA margin expansion at 15%, aided by a
low base. We estimate YoY PAT growth of 21.9%.
The stock trades at 29x CY15E EPS. Maintain Neutral.

MFD volume growth.
Outlook on market growth and raw material environment.
Performance of non-MFD portfolio.

Bloomberg SKB IN
M. Cap. (INR b)/(USD b) 200 / 3
3 8
1,6,12 Rel Perf. (%) 0 / -16 / -48

Y/E Dec 2014 2015E 2016E 2017E
Sales 36.0 40.9 47.6 56.5
EBITDA 5.0 6.0 7.2 8.7
Adj. PAT 5.0 5.8 6.9 8.1
Adj. EPS (INR) 119.6 138.6 164.7 192.0
EPS Gr. (%) 15.2 15.9 18.8 16.6
BV/Sh.(INR) 382.7 453.2 537.0 634.6
RoE (%) 31.3 30.6 30.7 30.3
RoCE (%) 52.6 51.8 51.1 45.0
Payout (%) 49.1 49.1 49.1 49.1
Valuations
P/E (x) 39.9 34.3 28.8 24.7
P/BV (x) 12.4 10.5 8.8 7.5
EV/EBITDA (x) 37.3 30.4 24.9 20.2
Div. Yield (%) 1.1 1.2 1.5 1.7

July 2014 123

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Volume Growth (%) 4.0 5.0 4.0 3.0 5.0 5.0 6.0 6.0 4.0 5.5
Net Sales (incl service inc) 68,090 68,926 72,234 70,941

74,559 76,853 81,624 80,340 280,191 313,376
YoY Change (%) 6.7 9.2 8.5 9.7 9.5 11.5 13.0 13.2 26.7 11.8
COGS 34,828 34,699 36,601 37,308 37,801 38,273 40,975 41,694 143,436 158,743
Gross Profit 33,262 34,227 35,633 33,633

36,758 38,580 40,649 38,647 136,755 154,633
Margin % 48.9 49.7 49.3 47.4 49.3 50.2 49.8 48.1 48.8 49.3
Operating Exp 22,406 23,374 23,365 22,857

24,604 26,207 26,528 26,112 92,003 103,451
% to sales 32.9 33.9 32.3 32.2 33.0 34.1 32.5 32.5 32.8 33.0
EBITDA 10,856 10,853 12,268 10,776

12,153 12,373 14,121 12,535 44,753 51,183
YoY Change (%) 12.3 11.1 12.7 10.9

11.9 14.0 15.1 16.3 36.0 14.4
Margins (%) 15.9 15.7 17.0 15.2 16.3 16.1 17.3 15.6 16.0 16.3

746 769 816 518 2,606 2,849
Interest 62 63 182 53

75 75 75 75 360 301
Other Income 1,768 1,510 1,427 1,506 2,033 1,736 1,641 1,661 6,210 7,071
PBT 11,897 11,661 12,868 11,571

13,365 13,266 14,870 13,603 47,997 55,104
Tax 3,046 2,831 3,321 3,246

3,742 3,781 4,387 4,071 12,444 15,980
Rate (%) 25.6 24.3 25.8 28.1 28.0 28.5 29.5 29.9 25.9 29.0
Adjusted PAT 8,851 8,830 9,547 8,325

9,623 9,485 10,483 9,532 35,553 39,124
YoY Change (%) 3.6 9.6 9.4 6.6 8.7 7.4 9.8 14.5 37.1 10.0
E: MOSL Estimates


Hindustan Unilever

CMP: INR624 Sell
We expect HUL to post 5% volume growth and 10% revenue growth.
Consumer demand has remained unchanged sequentially, with no
signs of uptick. However, 1QFY15 will likely benefit from a lower base
as 4QFY13 had inventory filling ahead of the transporters strike.
Lower base is particularly going to benefit PP. F&L re-launch is
witnessing encouraging response and is sequentially strengthened.
Despite input cost inflation in Palm, Coffee, LAB we expect gross
margin to remain stable due to pricing action. Operating margins are
expected to expand 40bp to 16.3% led by operating leverage. High
competitive intensity in Oral Care is expected to keep ASP spends
higher.
We expect EBITDA and PAT to grow at subdued 11.9% and 8.7% YoY,
respectively. The stock trades at 31x FY16E EPS of INR20.1. Maintain
Sell.
Comments on volume growth and consumer demand
environment.
Competitive intensity and comments on F&L/Skin Care business.
Early impact of deficient monsoon, if any.

Bloomberg HUVR IN
M. Cap. (INR b)/(USD b) 1,350 / 23
1,6,12 Rel Perf. (%) -2 / -14 / -30

Y/E March 2014 2015E 2016E 2017E
Sales 274.1 307.6 347.1 399.0
EBITDA 44.8 51.2 58.4 66.9
Adj. PAT 36.4 39.1 43.4 48.2
Adj. EPS (INR) 16.8 18.1 20.1 22.3
EPS Gr. (%) 14.1 7.5 10.9 11.2
BV/Sh.(INR) 15.2 16.9 18.2 19.4
RoE (%) 122.3 113.0 114.5 118.5
RoCE (%) 151.0 146.8 153.3 163.7
Payout (%) 77.3 77.4 79.8 80.7
Valuations
P/E (x) 37.1 34.5 31.1 28.0
P/BV (x) 41.2 37.0 34.3 32.1
EV/EBITDA (x) 28.9 25.2 22.1 19.2
Div. Yield (%) 2.1 2.2 2.6 2.9

July 2014 124

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Cigarette Vol Gr (%) -2.0 -4.0 -2.0 -3.0 -1.0 2.0 4.0 4.0 -2.8 2.5
Cigarette-net EBIT Margin (%) 63.4 64.8 64.4 62.6 64.0 65.5 65.0 63.0 63.8 64.4
Non Cigarette FMCG Loss -189 -127 104 431 250 250 300 300 218 1,100
Net Sales 74,107 78,625 87,269 92,385

84,482 91,992 99,486 105,673 332,386 381,633
YoY Change (%) 10.5 8.8 13.2 11.9 14.0 17.0 14.0 14.4 11.2 14.8
Total Exp 46,194 48,446 54,426 60,351 52,548 56,667 62,079 69,072 209,417 240,366
EBITDA 27,913 30,179 32,843 32,034

31,934 35,325 37,407 36,601 122,969 141,267
Growth (%) 17.5 12.2 14.9 18.4

14.4 17.0 13.9 14.3 15.7 14.9
Margins (%) 37.7 38.4 37.6 34.7 37.8 38.4 37.6 34.6 37.0 37.0
Depreciation 2,153 2,209 2,259 2,378

2,365 2,576 2,786 1,864 8,999 9,591
Interest 170 21 91 95

136 17 73 78 377 303
Other Income 2,032 2,462 3,911 2,667 2,540 3,077 4,888 3,390 11,071 13,895
PBT 27,622 30,412 34,403 32,227

31,973 35,810 39,436 38,050 124,664 145,268
Tax 8,709 9,436 10,550 9,447

9,912 11,101 12,225 11,360 38,142 44,597
Rate (%) 31.5 31.0 30.7 29.3 31.0 31.0 31.0 29.9 30.6 30.7
Adj PAT 18,913 20,976 23,853 22,780

22,061 24,709 27,211 26,690 86,523 100,671
YoY Change (%) 18.1 14.2 16.3 18.2 16.6 17.8 14.1 17.2 16.6 16.4
E: MOSL Estimates


ITC

CMP: INR333 Buy
We expect ITC to post 1% cigarette volume decline. This will be a
sequential improvement over the 2% volume decline of 4Q.
Absence of excise duty increase in 4QFY14 (vote-on-account instead
of regular budget due to elections) should drive Cigarette margins.
We estimate net sales to grow at 4% to INR84.5b, driven by
Cigarettes and Paper (largely realization), while Hotels revenue
should remain sluggish as macros still remain weak.
We expect EBITDA to post 14.5% YoY growth to INR31.9b.
Cigarette margins will also be supported by ~22% average price hike
implemented post budget.
We expect FMCG others to post ~15% revenue growth, with positive
segment EBIT of INR250m.
We estimate 16.6% PAT growth YoY to INR22.1b.
The stock trades at 22x FY16E EPS of INR14.9. Maintain Buy.
Cigarette volume trends and update on 64mm segment.
Demand outlook in FMCG categories and segment profitability.
Signs of pick-up in Hotels business.

Bloomberg ITC IN
M. Cap. (INR b)/(USD b) 2,645 / 44
1,6,12 Rel Perf. (%) -4 / -19 / -35

Y/E March 2014 2015E 2016E 2017E
Sales 328.8 374.1 429.1 489.5
EBITDA 123.0 141.2 162.9 187.0
Adj. PAT 74.2 86.5 100.7 116.8
Adj. EPS (INR) 11.1 12.9 14.9 17.2
EPS Gr. (%) 16.6 16.3 16.1 15.1
BV/Sh.(INR) 28.9 31.7 34.4 37.5
RoE (%) 38.8 40.6 43.4 45.8
RoCE (%) 53.4 57.0 61.2 64.9
Payout (%) 76.1 78.4 81.9 81.9
Valuations
P/E (x) 30.4 25.9 22.3 19.4
P/BV (x) 11.5 10.5 9.7 8.9
EV/EBITDA (x) 19.9 17.1 14.7 12.7
Div. Yield (%) 2.1 2.6 3.1 3.6

July 2014 125

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Domestic organic vol gr (%) 10.0 4.0 3.0 6.0

Net Sales 13,797 11,154 11,984 10,698 16,280 12,938 13,661 12,297 47,632 55,176
YoY Change (%) 8.9 -3.5 3.0 7.3 18.0 16.0 14.0 14.9 3.9 15.8
COGS 6,710 5,594 6,206 5,597 8,466 6,598 7,104 6,413 24,107 28,581
Gross Profit 7,086 5,560 5,778 5,101 7,814 6,340 6,557 5,883 23,525 26,595
Gross margin (%) 51.4 49.8 48.2 47.7 48.0 49.0 48.0 47.8 49.4 48.2
Other Expenditure 4,816 3,905 3,783 3,581 5,340 4,399 4,344 4,121 16,085 18,205
% to Sales 34.9 35.0 31.6 33.5 32.8 34.0 31.8 33.5 33.8 33.0
EBITDA 2,270 1,655 1,995 1,520 2,475 1,941 2,213 1,762 7,439 8,390
Margins (%) 16.5 14.8 16.6 14.2 15.2 15.0 16.2 14.3 15.6 15.2
YoY Change (%) 23.5 11.4 23.6 26.6 9.0 17.3 10.9 15.9 16.6 12.8
Depreciation 206 168 207 215 244 194 205 228 796 871
Interest 121 104 73 68 103 88 62 61 365 314
Other Income 167 158 204 151 200 190 245 185 679 819
PBT 2,109 1,541 1,918 1,388 2,327 1,848 2,191 1,658 6,957 8,024
Tax 512 431 501 281 698 555 657 497 1,572 2,407
Rate (%) 24.3 27.9 26.1 20.2 30.0 30.0 30.0 30.0 22.6 30.0
Adjusted PAT 1,553 1,059 1,354 1,080 1,581 1,237 1,464 1,117 5,198 5,398
YoY Change (%) 23.5 23.3 32.3 50.0 1.8 16.8 8.1 3.5 34.7 3.9
E: MOSL Estimates


Marico

CMP: INR204 Buy
We expect sales growth of 18% to INR16.3b, driven by price hikes in
Coconut oil portfolio, post sharp inflation in Copra prices. We
expect Parachute, Saffola and VAHO portfolio to post 8%, 10% and
8% growth respectively.
Copra prices are up 135% YoY and 28% QoQ. Marico has
implemented price hikes in Parachute and Saffola. Sunflower, Rice
Bran and Kardi Oil prices are benign and down on a YoY basis, while
Packaging costs are up % YoY.
We estimate a gross margin decline of 350bp YoY and EBITDA
margin contraction of 130bp due to margin improvement in
international business and savings in ad spends.
Expect PAT growth of 1%. Effective tax rate to move up 570bp YoY
to 30%, as per management guidance.
The stock trades at 25x FY16E EPS of INR9.9. Maintain Buy.
Comments on volume growth trends in key categories.
Raw material outlook.
Margin expansion and guidance in international business.

Bloomberg MRCO IN
M. Cap. (INR b)/(USD b) 160 / 3
1,6,12 Rel Perf. (%) -2 / -9 / -14

Y/E March 2014 2015E 2016E 2017E
Sales 47.6 55.2 64.3 74.1
EBITDA 7.4 8.4 9.8 11.1
Adj. PAT 5.2 5.4 6.4 7.3
Adj. EPS (INR) 8.1 8.4 9.9 11.3
EPS Gr. (%) 34.7 3.9 18.3 14.4
BV/Sh.(INR) 26.0 33.5 40.8 49.1
RoE (%) 31.0 25.1 24.3 23.1
RoCE (%) 40.2 36.9 36.1 35.1
Payout (%) 9.9 9.5 22.2 22.9
Valuation
P/E (x) 30.8 29.7 25.1 21.9
P/BV (x) 9.6 7.4 6.1 5.1
EV/EBITDA (x) 21.3 18.4 15.4 13.2
Div. Yield (%) 0.3 0.3 0.9 1.0

July 2014 126

Net Sales 22,481 22,132 23,483 22,523 23,135 23,791 25,476 26,728 90,619 99,130
YoY Change (%) 9.8 11.4 11.0 4.6 2.9 7.5 8.5 18.7 9.1 9.4
COGS 10,158 10,004 10,568 10,494 10,707 10,849 11,695 12,450 41,224 45,701
Gross Profit 12,323 12,128 12,915 12,029

12,428 12,942 13,781 14,277 49,396 53,429
Margin (%) 54.8 54.8 55.0 53.4

53.7 54.4 54.1 53.4 54.5 53.9
Operating Exp 6,997 7,248 7,992 7,353 7,572 7,804 8,407 8,813 29,715 32,596
EBITDA 5,326 4,880 4,923 4,676

4,856 5,139 5,374 5,464 19,680 20,833
Margins (%) 23.7 22.0 21.0 20.8

21.0 21.6 21.1 20.4 21.7 21.0
YoY Growth (%) 16.5 13.8 11.0 -5.7

-8.8 5.3 9.2 16.9 7.8 5.9
Depreciation 821 887 835 757 839 975 918 911 3,300 3,643
Interest 79 85 100 101

103 75 75 65 365 318
Other income 200 249 348 426 390 261 365 422 1,222 1,438
PBT 4,626 4,157 4,336 4,244

4,304 4,350 4,746 4,911 17,238 18,310
Tax 1,512 1,334 1,416 1,347

1,374 1,392 1,519 1,666 5,609 5,951
Rate (%) 32.7 32.1 32.7 31.7

31.9 32.0 32.0 33.9 32.5 32.5
Adjusted PAT 3,114 2,823 2,920 2,897 2,930 2,958 3,227 3,244 11,629 12,360
YoY Change (%) 7.9 16.5 11.0 -1.5 -5.9 5 10.5 12.0 6.9 6.3
E: MOSL Estimates


Nestle India

We expect Nestle India to report net sales of INR23.8b, up 7.5% YoY;
growth to be price-led. Volume growth in Nestles core categories
continues to remain sluggish, as per our channel checks.
We estimate EBITDA margin decline of 40bp YoY at 21.6%, impact of
RM inflation in milk.
We estimate EBITDA and PAT growth at 5% each to INR5.1b and
INR2.95b, respectively.
Lower base of CY13 can provide a good platform for sales recovery in
CY14. However, underlying recovery in its volume growth will be a
function of revival in macro and consumer sentiments, in our view.
The stock trades at 30x CY15E EPS. Maintain Neutral.
Volume and management commentary on portfolio
rationalization.
Broader consumer demand environment for the industry.

Bloomberg NEST IN
M. Cap. (INR b)/(USD b) 479 / 8
36
1,6,12 Rel Perf. (%) -1 / -31 / -37

Y/E March 2014 2015E 2016E 2017E
Sales 90.6 99.1 111.6 127.6
EBITDA 19.7 20.8 23.8 27.4
Adj. PAT 11.6 12.4 14.6 16.8
Adj. EPS (INR) 120.6 128.2 151.5 174.5
EPS Gr. (%) 5.7 6.3 18.2 15.2
BV/Sh.(INR) 245.7 265.8 290.2 319.4
RoE (%) 55.8 50.1 54.5 57.3
RoCE (%) 49.4 50.6 62.7 70.6
Payout (%) 47.0 80.9 80.8 80.1
Valuations
P/E (x) 37.7 35.5 30.0 26.1
P/BV (x) 18.5 17.1 15.7 14.2
EV/EBITDA (x) 22.2 20.5 17.6 15.0
Div. Yield (%) 1.1 2.0 2.7 3.4

July 2014 127

Y/E March
FY14

FY15E
FY14 FY15E
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Sales 10,148 9,912 9,649 9,073

11,874 11,547 11,386 10,722 38,782 45,529
Change (%) 11.2 20.7 15.2 19.3 17.0 16.5 18.0 18.2 16.4 17.4
Gross Profit 4,681 4,426 4,363 3,864

5,509 5,196 5,181 4,612 17,334 20,498
Gross Margin % 46.1 44.6 45.2 42.6 46.4 45.0 45.5 43.0 44.7 45.0

2,957 3,060 3,245 2,996 10,533 12,258
% of sales 24.1 26.0 29.2 29.7 24.9 26.5 28.5 27.9 27.2 26.9
EBITDA 2,240 1,846 1,547 1,168

2,553 2,136 1,936 1,616 6,801 8,240
EBITDA Margin % 22.1 18.6 16.0 12.9

21.5 18.5 17.0 15.1 17.5 18.1
Change (%) 17.5 25.8 2.2 -5.8 14.0 15.7 25.1 38.3 11.0 21.2

168 185 199 203 686 752

29 30 28 14 118 101
Other Income 90 87 70 183 81 78 63 255 429 477
PBT 2,140 1,727 1,404 1,155

2,436 1,999 1,771 1,655 6,426 7,865
Tax 595 470 329 230

682 560 496 464 1,624 2,202
Adj PAT 1,546 1,257 1,075 925

1,754 1,439 1,275 1,190 4,803 5,662
Change (%) 16.0 12.5 -6.3 -3.3 13.5 14.5 18.6 28.8 5.5 17.9
E: MOSL Estimates


Pidilite Industries

CMP: INR333 Neutral
We expect Pidilite to post 17% revenue growth, led by double digit
volume growth in consumer and bazaar segments, while industrial
chemicals is expected to remain sluggish as expected improvement in
macro environment, post elections, is yet to manifest on ground.
We expect healthy double digit volume growth in Consumer & Bazaar
segment.
EBITDA margin is expected to contract 60bp YoY at 21.5% due to
higher RM cost (Vinyl Acetate Monomer).
PAT is expected to register 13.5% YoY growth to INR1.75b.
The stock trades at 25.6x FY16E EPS of INR13. Maintain Neutral.
Volume growth in Fevicol.
Outlook on VAM prices.
Outlook on industrials and construction chemicals segment.
Progress on Elastomer project, if any.

Bloomberg PIDI IN
M. Cap. (INR b)/(USD b) 171 / 3
1,6,12 Rel Perf. (%) 8 / -7 / -10

Y/E March 2014 2015E 2016E 2017E
Sales 38.8 45.5 53.6 63.8
EBITDA 6.8 8.2 9.8 11.6
Adj. PAT 4.8 5.7 6.8 8.1
Adj. EPS (INR) 9.2 10.8 13.0 15.4
EPS Gr. (%) 5.5 17.9 20.3 18.2
BV/Sh.(INR) 39.8 46.4 55.2 66.4
RoE (%) 23.0 23.3 23.5 23.2
RoCE (%) 29.5 31.1 31.5 31.4
Payout (%) 37.6 39.0 32.4 27.4
Valuations
P/E (x) 36.3 30.8 25.6 21.7
P/BV (x) 8.4 7.2 6.0 5.0
EV/EBITDA (x) 24.4 19.9 16.4 13.4
Div. Yield (%) 0.9 1.1 1.1 1.1

July 2014 128

Y/E March FY14

FY15E FY14 FY15E
1Q 2Q 3Q 4Q

1Q 2Q 3Q 4Q

Net sales 3,573 3,521 3,909 3,514 4,109 4,067 4,534 4,093 14,517 16,803
YoY Change (%) 17.6 18.5 19.9 6.0

15.0 15.5 16.0 16.5 15.4 15.7
Total Expenses 2,963 2,957 3,358 3,114 3,403 3,408 3,899 3,612 12,391 14,322
EBITDA 611 564 550 400

707 659 635 481 2,126 2,481
Margins (%) 17.1 16.0 14.1 11.4

17.2 16.2 14.0 11.7 14.6 14.8
YoY Change (%) 16.5 14.9 10.4 -0.8 15.7 16.8 15.3 20.1 10.7 16.7

109 111 113 111 388 445
Interest 204 198 222 224

225 218 244 255 848 942
Other Income 85 89 90 101

89 93 95 95 365 371
PBT 396 358 320 180 462 423 372 209 1,255 1,466
Tax 90 78 94 89

125 118 106 61 352 410
Rate (%) 22.7 21.8 29.4 49.5 27.0 28.0 28.5 29.3 28.0 28.0
Adjusted PAT 306 280 226 91 337 304 266 148 903 1,055
YoY Change (%) 21.2 35.0 2.6 -45.5 10.1 8.6 17.7 62.3 6.3
E: MOSL Estimates


Radico Khaitan

CMP: INR112 Buy
We expect Radico to post 15% revenue growth to INR4.1b, led by 7%
volume growth.
The premium segment should continue to grow at a faster pace,
aided by up-trading and conscious strategy of Radico to drive
premiumization in a harsh taxation environment.
We expect flattish operating margins due to inflationary RM prices.
We estimate PAT growth of 10%, with 430bp expansion in tax rates to
27%.
The stock trades at 12.2x FY16E EPS of INR9.2. Maintain Buy.

Update on issues in Tamil Nadu.
Price hikes received, if any, during the quarter.
ENA price trend and outlook.

Bloomberg RDCK IN
1,6,12 Rel Perf. (%) 3 / -46 / -16

Y/E March 2014 2015E 2016E 2017E
Sales 14.5 16.8 19.0 21.6
EBITDA 2.1 2.5 2.8 3.3
Adj. PAT 0.9 1.1 1.2 1.4
Adj. EPS (INR) 6.8 8.0 9.2 10.9
EPS Gr. (%) 6.3 16.8 15.6 18.5
BV/Sh.(INR) 63.3 69.8 77.4 86.4
RoE (%) 11.3 11.9 12.5 13.3
RoCE (%) 9.7 10.6 11.6 13.2
Payout (%) 17.6 17.6 17.6 17.6
Valuations
P/E (x) 16.5 14.1 12.2 10.3
P/BV (x) 1.8 1.6 1.4 1.3
EV/EBITDA (x) 10.8 9.3 8.2 7.3
Div. Yield (%) 1.0 1.1 1.2 1.5

July 2014 129

Quarterly performance (Standalone) (INR Million)
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Volume Growth % 0 -1 -3.7 0 5.0 7 8.0 10 3 8
ENA Price/Case 171 180 189 193 180 190 200 205 183 195
Net Sales 21,924 20,387 22,784 21,850

25,212 23,648 25,974 25,647 86,944 100,481
YoY Change (%) 6.6 -8.2 4.8 6.2

15.0 16.0 14.0 17.4 2.2 15.6
Total Exp 19,142 18,334 20,727 19,823 22,439 20,811 23,117 22,722 78,025 89,088
EBITDA 2,782 2,053 2,058 2,027

2,773 2,838 2,857 2,924 8,919 11,392
Margins (%) 12.7 10.1 9.0 9.3 11.0 12.0 11.0 11.4 10.3 11.3

224 193 210 217 742 844
Interest 1,595 1,364 1,505 1,457 1,355 1,160 1,279 1,509 5,920 5,303
PBT From operations 992 521 370 374

1,194 1,485 1,368 1,198 2,257 5,246
Other income 781 891 731 826 781 909 746 674 3,229 3,109
PBT 1,773 1,412 1,101 1,199

1,975 2,394 2,114 1,872 5,486 8,355
Tax 592 470 313 408

652 790 698 702 1,783 2,842
Rate (%) 33.4 33.3 28.4 34.1 33.0 33.0 33.0 37.5 32.5 34.0
PAT 1,181 943 788 791

1,323 1,604 1,416 1,170 3,703 5,513
YoY Change (%) -18.5 140.1 -2.2 1.8 12.0 70.2 79.7 47.9 8.1 48.9
Extraordinary inc/(Exp) 0 0 -139 0

0 0 0 0 0 0
Reported PAT 1,181 943 649 791 1,323 1,604 1,416 1,170 3,703 5,513
E: MOSL Estimates


United Spirits

We expect United Spirits (UNSP) to post 15% revenue growth to
INR25.2b led by a lower base.
Raw material prices continue to remain inflationary and with
elections just getting over in 1QFY15, liquor manufacturers did not
get requisite price hikes from state governments.
Expect margin contraction of 170bp to 11% driven by combination of
gross margin pressure and higher brand spends.
Expect flattish PAT at INR791m. QoQ debt movements and working
capital changes will however be key monitorables. Maintain Neutral.
Volume growth and commentary on Tamil Nadu volumes.
ENA price trend and outlook.
Strategy on further debt reduction, post W&M stake sale, and
update on issues on debtors and group debt.

Bloomberg UNSP IN
M. Cap. (INR b)/(USD b) 357 / 6
993
1,6,12 Rel Perf. (%) -18 / -34 / -
38

Y/E March 2014 2015E 2016E 2017E
Sales 96.7 110.7 127.9 145.4
EBITDA 11.0 13.6 16.4 19.6
Adj. PAT 3.7 6.2 8.1 10.6
Adj. EPS (INR) 25.4 42.6 56.0 72.7
EPS Gr. (%) 83.3 67.5 31.5 29.8
BV/Sh.(INR) 572.7 594.2 627.7 674.5
RoE (%) 4.4 7.2 8.9 10.8
RoCE (%) 7.8 9.9 11.3 13.3
Payout (%) 17.7 11.7 8.9 6.9
Valuations
P/E (x) 96.5 57.6 43.8 33.7
P/BV (x) 4.3 4.1 3.9 3.6
EV/EBITDA (x) 35.5 28.3 23.5 19.4
Div. Yield (%) 0.2 0.2 0.2 0.2

June 2014 Results Preview | Sector: Financials

July 2014 130

Post decisive mandate for development focused NDA government at the centre;
hopes have increased for the faster economic revival. Our industry interaction
suggests that issues faced by infrastructure segment and state-owned banks are
being given the top most priority by the new government. Worst for the Indian
economy is behind in our view. Our economist expects gradual recovery in GDP
growth to 5.5% in FY15 and 6.5%+ in FY16 from 4.8% in FY14. This in turn would
lead to improvement in business parameters for banks.
Growth improvement coupled with better liquidity conditions and capital
markets would lead to acceleration in de-leveraging and deceleration in
incremental stress addition. This would result in margin expansion and
reduction of credit cost primarily for state owned banks. Positive budget
announcement and policy reforms in important sectors would be the key for the
further re-rating.
Despite the run up in stock prices by 30- 100%+, private banks are still trading at
PBV multiple of 15%+ LPA and state-owned banks at a discount of 10% over LPA.
Private banks would continue to command premium valuation driven by
improved visibility on growth, healthy core operations and return ratios, top
managements' continuity, lower asset quality issues, adequate capitalization,
strengthening liability franchise and low hanging fruits (ability to capture market
share from state-owned banks due to superior service). Our Top picks: ICICIBC,
SBIN, HDFCB, PNB, OBC and INBK.

Key takeaways from 1QFY15 results
For private banks, NIMs are expected to remain stable QoQ and seasonality of
fall in NIMs to moderate, with the improvement in ALM and liability profile. Bulk
lenders are expected to be the key beneficiaries with the improvement in
systemic liquidity.
Fee income growth is expected to be moderate as new sanctions are yet to pick
up. Retail focused banks are likely to perform better.
Operating leverage benefit is expected to continue for private banks. However,
higher staff related expenses would dent opex growth for state-owned banks.
SBIN performance on opex is expected to surprise positively.
Trading income and MTM reversals are likely to be moderate YoY as yields have
moved in a narrow range (down only by 5-20bp QoQ) during the quarter. Equity
trading gains are expected to be healthy.
Stress addition is likely to be higher QoQ, partially on account of seasonal
factors. Gradual improvement is expected from 2HFY15. Additional slippages
due to formation of JLF on SMA accounts cant be ruled out. Media reports
suggest reduction in referrals to CDR cell and high sale to ARCs.
Provisioning to remain elevated driven by NPA provisions and provisions for un-
hedged forex exposures.

Company name
Axis Bank
Bank of Baroda
Bank of India
Canara Bank
Federal Bank
HDFC Bank
ICICI Bank
Indian Bank
Indusind Bank
ING Vysya Bank
Kotak Mahindra Bank
Oriental Bank of Commerce
Punjab National Bank
State Bank of India
Union Bank of India

Technology

Bulk lenders are expected
to be the key beneficiaries
with the improvement in
systemic liquidity.
Stress addition is likely to
be higher QoQ, partially on
account of seasonal factors.

Financials - Banks

Alpesh Mehta (Alpesh.Mehta@MotilalOswal.com); +91 22 3982 5415
Sohail Halai (Sohail.Halai@MotilalOswal.com); +91 22 3982 5430


July 2014 131

Sector CMP Net Interest Income Operating Profit Net Profit

(INR)
4.7.14
Reco Jun-14
Var %
YoY
Var %
QoQ
Jun-14
Var %
YoY
Var %
QoQ
Jun-14
Var %
YoY
Var %
QoQ
Private Banks
Axis Bank 1,935 Buy

32,414 13.1 2.4

28,639 0.7 -11.8

16,558 17.5 -10.1
Federal Bank 129 Buy

5,750 12.8 -8.0

3,748 -6.4 -10.8

2,156 104.1 -22.2
HDFC Bank 856 Buy

51,972 17.6 4.9

39,198 18.6 3.7

23,074 25.1 -0.8
ICICI Bank 1,462 Buy

45,061 17.9 3.4

44,439 16.5 -0.2

26,573 16.8 0.2
IndusInd Bank 569 Buy

8,268 21.7 5.8

7,172 11.8 -0.3

4,160 24.2 5.0
ING Vysya Bank 662 Buy

4,777 12.3 1.4

3,318 1.5 32.7

1,832 4.6 31.7
Kotak Mahindra Bank 884 Neutral

9,990 9.0 3.4

6,927 -11.1 14.1

4,234 5.1 4.0
Yes Bank 557 Buy

8,019 21.7 11.4

7,210 6.0 6.0

4,697 17.2 9.2
Pvt Bkg. Sector Aggregate 166,250 16.3 3.7 140,651 10.0 -0.7 83,285 19.9 -1.7
PSU Banks

Bank of Baroda 875 Buy

32,602 12.8 4.4

23,429 -3.8 -8.6

11,063 -5.3 -4.4
Bank of India 305 Neutral

29,261 15.3 -4.0

20,400 -6.4 2.2

6,244 -35.2 12.0
Canara Bank 448 Buy

24,689 24.0 -2.6

18,087 -4.7 -3.9

6,821 -13.9 11.7
Indian Bank 185 Buy

11,728 6.9 8.8

7,348 -14.5 4.5

2,997 -5.6 10.5
Oriental Bank of Commerce 322 Buy

13,432 2.8 2.6

9,763 -10.3 -29.4

2,961 -16.2 -4.6
Punjab National Bank 980 Buy

42,736 9.4 6.8

29,891 0.5 -5.8

11,293 -11.4 40.1
State Bank 2,699 Buy

132,172 14.8 2.4

85,214 12.8 -19.8

33,055 2.0 8.7
Union Bank 228 Buy

20,550 7.6 0.1

12,263 -13.1 -7.1

3,744 -33.2 -35.3
PSU Bkg. Sector Aggregate 307,170 13.1 2.2 206,393 1.2 -12.7 78,178 -9.8 6.6
Source: MOSL

Margins to be stable QoQ; Bulk borrowers to benefit
NIMs are expected to be stable for most banks as liquidity condition has eased and
short terms rates have declined. 6M/12M CD rates on an average basis for 1QFY15
are stable/lower compared to 9.5/9.5% in 4QFY14 and 9.2/9.2% in 3QFY14.
However, for few state-owned banks reported NIMs may be lower due to higher
share of interest on IT refunds in 4QFY14. NII growth for state-owned banks is
expected to be at 13% YoY (2% QoQ), while private banks' growth is expected to be
at 16% YoY (3% QoQ) led by healthy loan growth and stable NIMs.

Lower trading income would lead to weak non-interest income
Non-interest income is expected to be a drag on overall profitability of the banks
(YoY growth) due to lower share of trading income. In 1QFY14, banks benefitted
from sharp volatility in the interest rate which led to sharp increase in trading
income. Bond yields have remained in a narrow range and have declined by 5-20bps
since end of 4QFY14. Thus, opportunity to earn trading income through bond gains
was lower and we expect trading gains for banks to be subdued during the quarter.
Some banks with high equity portfolio can benefit from positive capital markets
performance during 1QFY15. Core fee-based income growth is expected to be
moderate.

Moderate business growth performance
Overall business growth is expected to be moderate with loan growth for the
industry for the fortnight ended June 13, 2014 at 13.9%. However, deposits growth
declined marginally to 13.9%. We expect pick up in loan growth in 2HFY15 driven by
improving sentiments and stable interest rates (expect it to decline once inflation
NII growth for state-owned
banks is expected to be at
13% YoY (2% QoQ), while
private banks' growth is
expected to be at 16% YoY
(3% QoQ)
Expect non-core income to
be a drag on profitability
due to lower trading gains
Loan and deposit growth
expected to be ~14% YoY

July 2014 132

eases out). Retail segment is expected to remain key focus for both private and
public sector banks.

Asset quality issues to persist; sale to ARCs to the rescue
While sentiments have improved and expectation on recovery has firmed up, it
would take two/three quarters to translate into ground reality. Hence we continue
to build high slippages (at similar levels of 4QFY14) for most of the banks. However,
the reprieve for banks would be increasing sale to ARC, which can help contain
headline GNPA. For private banks, we expect asset quality to remain stable;
however, there may be some rise in restructured pool for corporate lenders.

Provisions to remain high
Banks MTM position is unlikely to be altered significantly. This along with elevated
credit cost and provisioning on account of un-hedged forex exposure will keep
overall provisioning high. Thus, lower non-interest income coupled with high
provisions will keep earnings growth subdued for PSU banks. While PPP growth is
expected to be flat YoY, PAT is expected to decline 10% YoY. For private banks,
credit cost is expected to be stable/rise marginally. We expect NII, PPP and PAT
growth of 16% YoY, 10% YoY and 20% YoY, respectively.

Sector strategy
Our interactions with banks' management indicate fresh impairment would remain
at a high level for next few quarters. Increased recovery efforts and sale of loans to
ARCs will help contain headline stressed assets numbers. Budget will be critical as it
could materially alter the outlook on medium to long term growth. Also policy
reforms in important segments like infrastructure where banks have high exposure
would be the key. Kick start in reforms would lead to declining stress on the books,
resulting in lower provisioning and higher profitability.

Despite the recent rally in stocks, valuations for state-owned banks are below LPA
and for private banks just above LPA. We prefer banks with i) strong capitalization
(risk of dilution low) and liability franchise (emerge stronger in the upturn of
economy), ii) managements stability, iii) P&L strength (to absorb credit cost risk), iv)
levered to interest rate reversal cycle (earnings cushion) and v) those who have
recognized stress upfront (risk of setback remains low). Our top picks are ICICIBC,
SBIN, HDFCB, PNB, OBC and INBK.

Stress addition to remain
elevated, however
aggressive sale to ARC may
contain headline GNPA
Elevated credit cost,
provisioning on account
of un-hedged forex
exposure to keep overall
provisions high
Top picks: ICICIBC, SBIN,
HDFCB, PNB, OBC and INBK.

July 2014 133

Revision in target prices

CMP
Upside on
new TP
Reco EPS (INR) BV (INR) TP (INR) RoA (%)
(INR) (INR)

FY15 FY16 FY15 FY16 Old New FY15 FY16
Private Banks
ICICIBC* 1,462 28 Buy 99 120 580 668 1,454 1,865 1.78 1.84
HDFCB 856 21 Buy 44 56 215 258 825 1,033 1.97 2.01
AXSB 1,935 34 Buy 145 174 932 1,080 1,740 2,592 1.66 1.70
KMB* 884 -4 Neutral 39 47 275 318 852 852 1.88 1.89
VYSB 662 19 Buy 40 48 402 439 655 791 1.19 1.21
FB 129 23 Buy 11 12 89 99 118 158 1.13 1.15
J&KBK 1,604 18 Buy 258 280 1,372 1,576 1,891 1,891 1.47 1.37
SIB 33 22 Buy 4 5 27 31 31 40 0.96 0.96
PSU Banks
SBIN (cons)* 2,699 37 Buy 259 344 2,097 2,378 3,240 3,685 0.78 0.92
PNB 980 35 Buy 119 158 1,056 1,196 1,320 1,320 0.73 0.84
BOI 305 15 Neutral 53 67 437 496 350 350 0.56 0.61
BOB 875 37 Buy 118 149 859 974 1,200 1,200 0.73 0.81
CBK 448 40 Buy 60 83 562 626 560 626 0.53 0.62
UNBK 229 39 Buy 28 34 291 319 290 319 0.47 0.51
OBC 322 24 Buy 45 55 460 502 400 400 0.57 0.60
INBK 185 45 Buy 29 36 270 298 235 269 0.67 0.72
CRPBK 407 1 Neutral 45 62 638 687 275 412 0.32 0.38
ANDB 102 13 Neutral 11 13 156 165 66 115 0.35 0.36
IDBI 108 12 Neutral 8 10 143 151 76 121 0.38 0.42
DBNK 84 17 Neutral 13 16 128 141 56 98 0.53 0.55
*Multiples adj. for value of key ventures/Investments; For ICICI Bank BV is adjusted for investments in subsidiaries


July 2014 134

Loan growth remains stable
3
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Loans (INR t) Chg YoY (%)

Deposit growth moderates
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Deposits (INR t) Chg YoY (%)

CD rates: Interest remain stable during the quarter (%)
7
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6 Month 12 Month

Yield curve declines marginally (%)
7.5
8.7
9.9
11.1
1 Yr 2 Yr 5 Yr 10 Yr
18-Jul-13 31-Jul-13 30-Sep-13
30-Dec-13 17-Apr-14 27-Jun-14

Net slippage ratio to remain high (%, annualized)
1.7
3.1
2.0
1.1
2.7 2.7
2.0
1.1
3.3
1.9
2.1
1.1
1.8
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E
Net Slippage Ratio (%)

Source: MOSL, Company
NIMs expected to remain stable (%)
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E
PSU Private



July 2014 135


Relative Performance - 1Yr (%)


Banks-Private
Axis Bank 1,935 Buy 145.3 173.7 212.2 13.3 11.1 9.1 2.1 1.8 1.5 16.6 17.2 18.1
Federal Bank 129 Buy 10.6 12.5 15.2 12.1 10.4 8.5 1.4 1.3 1.2 12.5 13.2 14.5
HDFC Bank 856 Buy 44.5 55.9 70.0 19.3 15.3 12.2 4.0 3.3 2.7 22.4 23.6 24.5
ICICI Bank 1,462 Buy 99.1 119.9 148.7 14.8 12.2 9.8 2.1 1.9 1.7 15.7 16.6 17.9
IndusInd Bank 569 Buy 33.4 42.3 54.2 17.0 13.4 10.5 2.9 2.5 2.1 18.4 19.9 21.4
ING Vysya Bank 662 Buy 40.3 47.6 56.5 16.4 13.9 11.7 1.6 1.5 1.4 10.4 11.3 12.2
J&K Bank 1,604 Buy 258.4 279.5 305.0 6.2 5.7 5.3 1.2 1.0 0.9 20.2 19.0 18.1
Kotak Mahindra Bank 884 Neutral 39.4 46.5 56.0 22.4 19.0 15.8 3.2 2.8 2.4 15.4 15.7 16.2
South Indian Bank 33 Buy 4.2 4.9 5.8 7.7 6.6 5.6 1.2 1.0 0.9 16.4 16.8 17.3
Yes Bank 557 Buy 51.1 60.5 75.4 10.9 9.2 7.4 2.0 1.7 1.4 22.4 19.6 20.8
Private Bank Aggregate 15.8 13.0 10.5 2.8 2.4 2.1 17.6 18.5 20.0
Banks-PSU
Andhra Bank 102 Neutral 10.8 12.8 13.4 9.5 8.0 7.6 0.7 0.6 0.6 7.1 8.0 7.9
Bank of Baroda 875 Buy 118.2 149.2 184.6 7.4 5.9 4.7 1.0 0.9 0.8 14.5 16.3 17.7
Bank of India 305 Neutral 53.4 66.9 87.2 5.7 4.6 3.5 0.7 0.6 0.5 12.9 14.3 16.3
Canara Bank 448 Buy 60.3 82.9 107.8 7.4 5.4 4.2 0.8 0.7 0.6 11.2 14.0 16.2
Corporation Bank 407 Neutral 45.3 61.9 74.2 9.0 6.6 5.5 0.6 0.6 0.5 7.3 9.3 10.4
Dena Bank 84 Neutral 13.0 15.6 18.9 6.5 5.4 4.5 0.7 0.6 0.5 10.6 11.6 12.8
IDBI Bank 108 Neutral 8.2 10.4 12.4 13.2 10.3 8.7 0.8 0.7 0.7 5.9 7.1 8.0
Indian Bank 185 Buy 29.0 36.5 44.2 6.4 5.1 4.2 0.7 0.6 0.6 11.2 12.8 14.0
Oriental Bank 322 Buy 44.5 54.7 72.5 7.2 5.9 4.4 0.7 0.6 0.6 10.0 11.4 13.7
Punjab National Bank 980 Buy 118.9 157.9 185.3 8.2 6.2 5.3 0.9 0.8 0.7 11.8 14.0 14.5
State Bank 2,699 Buy 259.4 344.3 454.4 10.4 7.8 5.9 1.3 1.1 1.0 13.3 15.6 17.9
Union Bank 228 Buy 28.0 34.3 39.2 8.2 6.6 5.8 0.8 0.7 0.6 10.0 11.3 11.7
PSU Bank Aggregate 8.8 6.7 5.3 1.0 0.9 0.9 11.6 13.6 16.0

90
100
110
120
130
A
p
r
-
1
4
M
a
y
-
1
4
J
u
n
-
1
4
J
u
l
-
1
4
Sensex Index MOSL Financials Index
75
100
125
150
175
J
u
l
-
1
3
O
c
t
-
1
3
J
a
n
-
1
4
A
p
r
-
1
4
J
u
l
-
1
4

July 2014 136

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Interest Income 72,778 76,090 77,891 79,652

82,569 85,054 88,055 87,948 306,412 343,625
Interest Expense 44,126 46,723 48,051 47,995 50,155 51,408 53,465 60,068 186,895 215,096
Net Interest Income 28,652 29,367 29,840 31,658

32,414 33,646 34,590 27,880 119,517 128,529
% Change (Y-o-Y) 31.4 26.2 19.6 18.8 13.1 14.6 15.9 -11.9 23.6 7.5
Other Income 17,813 17,661 16,444 22,134 17,025 19,175 21,080 25,933 74,052 83,213
Net Income 46,465 47,028 46,284 53,792 49,439 52,821 55,670 53,813 193,569 211,743
Operating Expenses 18,030 19,530 20,134 21,314 20,801 22,704 23,160 24,454 79,008 91,119
Operating Profit 28,436 27,498 26,150 32,477

28,639 30,116 32,510 29,359 114,561 120,624
% Change (Y-o-Y) 44.8 26.2 10.7 16.0 0.7 9.5 24.3 -9.6 23.1 5.3
Other Provisions 7,123 6,875 2,025 5,052 3,740 5,704 4,048 4,469 21,075 17,961
Profit before Tax 21,313 20,623 24,125 27,425

24,899 24,412 28,462 24,890 93,486 102,663
Tax Provisions 7,224 7,000 8,084 9,002 8,341 8,178 9,535 8,338 31,310 34,392
Net Profit 14,089 13,623 16,041 18,423

16,558 16,234 18,927 16,552 62,177 68,271
% Change (Y-o-Y) 22.1 21.3 19.1 18.5 17.5 19.2 18.0 -10.2 20.0 9.8
Operating Parameters
NIM (Reported,%) 3.9 3.8 3.7 3.9

3.8
NIM (Cal, %) 3.7 3.7 3.6 3.7 3.6 3.7 3.7 2.8 3.6 3.4
Deposit Growth (%) 7.1 8.4 7.3 11.2 19.0 14.5 15.8 15.0 11.2 15.0
Loan Growth (%) 15.8 16.9 17.8 16.8 17.0 19.2 19.2 18.0 16.8 18.0
CD Ratio (%) 83.1 78.8 80.6 81.9 81.7 82.1 82.9 84.0 81.9 84.0
Core CASA ratio (%) 38.9 39.4 38.0 39.0 39.0
Asset Quality
OSRL (INR b) 42.1 48.1 55.0 60.8

60.8
OSRL (%) 2.1 2.4 2.6 2.6

2.6

Gross NPA (INR b) 24.9 27.3 30.1 31.5 33.1 33.6 34.1 32.4 31.5 32.4
Gross NPA (on customer assets, %) 1.1 1.2 1.3 1.2 1.3 1.3 1.2 1.1 1.2 1.1

Axis Bank

CMP: INR1935 Buy
Loan growth is expected to be ~17% YoY, whereas deposit growth is
expected to be higher at 19% YoY.
1Q is generally weak from NIM perspective as impact of PSL (low
yielding), which gets build in 4Q, runs off in ensuing quarters.
However, led by benefit of FCNR (B) deposit raised, NIM decline is
expected to be moderate QoQ.
Fee income growth is expected to improve to ~15% YoY albeit on a
lower base as growth in large/mid-corporate and retail fees rebound.
Slippages in 4Q were significantly lower than quarterly run-rate. We
remain conservative and factor higher slippage ratio and credit cost.
While PPP growth is expected to be flat (due to higher trading gains in
1QFY14), lower provisioning would help earnings grow 18%
Provisioning for un-hedged forex exposures
Over last three quarters, profitability of the bank was helped by
repatriation of profits from international subsidiaries which could
further aid earnings.
Bank had guided for gross stress addition of INR65b for FY15. Any
revision in the same remains critical.

Bloomberg AXSB IN
M.Cap. (INR b) /(USD b) 905.04/15.06
52-Week Range (INR) 1,990/764
1, 6, 12 Rel. Per (%) -3/29/16

Y/E March 2014 2015E 2016E 2017E
NII 119.5 128.5 151.2 183.4
OP 114.6 120.6 144.6 176.3
NP 62.2 68.3 81.6 99.7
NIM (%) 3.6 3.4 3.4 3.4
EPS (INR) 132.3 145.3 173.7 212.2
EPS Gr. (%) 19.6 9.8 19.6 22.1
ABV/Sh. (INR) 794.7 916.3 1,063.5 1,240.2
RoE (%) 17.4 16.6 17.2 18.1
RoA (%) 1.7 1.7 1.7 1.7
Payout (%) 17.7 17.5 17.5 17.5
Valuations
P/E(X) 14.5 13.2 11.1 9.1
P/BV (X) 2.4 2.1 1.8 1.5
P/ABV (X) 2.4 2.1 1.8 1.6
Div. Yield (%) 1.0 1.1 1.4 1.7

July 2014 137

FY14

FY15E FY14 FY15E
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Interest Income 94,869 94,735 96,907 102,886

105,678 109,476 113,611 119,167 389,397 447,932

32,602 33,843 35,330 37,330 119,653 139,105
% Change (YoY) 3.3 1.1 7.6 11.0 12.8 16.9 15.6 19.5 5.7 16.3
Other Income 12,306 9,739 9,321 13,263 9,483 12,021 12,019 14,783 44,627 48,307
Net Income 41,197 38,687 39,892 44,506

42,085 45,864 47,350 52,113 164,281 187,412

23,429 26,030 26,506 29,553 92,910 105,518
% Change (YoY) 8.7 -11.0 -2.7 19.5 -3.8 23.4 21.5 15.3 3.2 13.6
Profit before Tax 14,182 12,482 14,201 14,109 13,828 15,299 16,188 18,297 54,973 63,612
Tax Provisions 2,503 801 3,722 2,536 2,766 3,060 3,238 3,659 9,562 12,722
Net Profit 11,679 11,681 10,478 11,573

11,063 12,239 12,950 14,638 45,411 50,889
% Change (YoY) 2.5 -10.2 3.6 12.5 -5.3 4.8 23.6 26.5 1.3 12.1
NIM (Reported, %) 2.4 2.3 2.4 2.3

2.3
NIM (Calculated, %) 2.2 2.2 2.3 2.1

2.1 2.2 2.2 2.2 2.1 2.1
Deposit Growth (%) 22.0 18.8 21.5 20.0

20.6 18.5 19.7 11.0 20.0 11.0
Loan Growth (%) 12.4 16.3 17.7 21.0

22.3 18.0 19.4 15.0 21.0 15.0
CASA Ratio (%) 31.2 32.7 32.3 31.8

31.8
Tax Rate (%) 17.7 6.4 26.2 18.0

20.0 20.0 20.0 20.0 17.4 20.0
Asset Quality
OSRL (INR B) 207.2 215.3 211.7 224.5

224.5
OSRL (%) 6.4 6.3 6.0 5.7

5.7
Gross NPA (INR B) 97.6 108.9 119.3 118.8

124.6 129.6 131.1 130.6 118.8 130.6
Gross NPA (%) 3.0 3.2 3.3 2.9 3.2 3.2 3.1 2.9 2.9 2.9
E: MOSL Estimates


Bank of Baroda

CMP: INR875 Buy
Loan and deposit growth is expected to be above industry growth
rates of 22% YoY and 20% YoY, respectively.
NIMs are expected to be stable at 2.3% QoQ.
Fee income is expected to grow at 16% YoY. However lower share of
non-core income (trading, recoveries) will translate into 23% YoY
decline in non-interest income.
Slippages have declined in the past two quarters however, on a
conservative basis we factor in higher slippage ratio and credit cost.
Further, provisioning for un-hedged forex exposures of corporate will
also increase provisioning charge.
PPP growth is expected to be weak mainly due to subdued non-
interest performance. Provisioning expense is expected to remain
elevated hence earnings are expected to decline 5% YoY.

Outlook on asset quality and restructuring: Management has
guided for an improvement in asset quality.
Expected sale to ARC.
Improvement in domestic CD ratio which is currently at ~70%.
Change in management with Mr. Mundra set to retire in July 2014.

Bloomberg BOB IN
M.Cap. (INR b) /(USD b) 377.16/6.28
1, 6, 12 Rel. Per (%) -3/11/26

Y/E March 2014 2015E 2016E 2017E
NII 120 139 167 196
OP 93 106 128 152
NP 45 51 64 79
NIM (%) 2.1 2.1 2.2 2.2
EPS (INR) 105 118 149 185
EPS Gr. (%) -0.6 12.1 26.3 23.7
BV/Sh. (INR) 768 859 974 1,115
ABV/Sh. (INR) 677 769 889 1,038
ROE (%) 14.4 14.5 16.3 17.7
ROA (%) 0.8 0.7 0.8 0.8
Div. Payout (%) 27.7 23.2 23.2 23.2
Valuations
P/E(X) 8.3 7.4 5.9 4.7
P/BV (X) 1.1 1.0 0.9 0.8
P/ABV (X) 1.3 1.1 1.0 0.8
Div. Yield (%) 2.5 2.7 3.4 4.2

July 2014 138


(INR Million)
1Q 2Q 3Q 4Q

1Q 2Q 3Q 4Q

Interest Income 85,412 92,393 97,692 103,604 104,544 108,685 112,929 119,263 379,101 445,420

29,261 30,860 32,139 34,640 108,305 126,900
% Change (Y-o-Y) 24.1 15.1 17.8 23.1 15.3 22.1 18.2 13.7 20.0 17.2
Other Income 11,808 11,003 10,971 9,137 8,586 10,546 11,687 13,878 42,918 44,696
Net Income 37,178 36,274 38,162 39,610 37,847 41,406 43,825 48,518 151,224 171,596

17,448 18,413 19,063 21,330 66,995 76,254

20,400 22,993 24,762 27,188 84,229 95,342
% Change (Y-o-Y) 30.3 13.4 15.5 -3.8

-6.4 9.4 15.5 36.2 12.9 13.2

8,553 10,941 12,344 15,238 35,451 47,076
Tax Provisions 5,217 2,484 1,544 -1,087 2,309 2,954 3,333 4,114 8,158 12,711
Net Profit 9,642 6,218 5,858 5,575

6,244 7,987 9,011 11,124 27,293 34,366
% Change (Y-o-Y) 8.6 106.0 -27.1 -26.3 -35.2 28.5 53.8 99.5 -0.7 25.9
NIM (Cal, %) 2.3 2.2 2.2 2.4

2.2 2.3 2.3 2.4 2.3 2.3
Deposit Growth (%) 22.4 29.9 30.1 24.9

18.4 17.1 17.0 15.0 24.9 15.0
Loan Growth (%) 17.1 29.4 27.2 28.4

25.0 18.3 16.2 15.9 28.4 15.9
CASA Ratio (Reported, %) 31.4 30.4 31.0 30.0

30.0
Tax Rate (%) 35.1 28.5 20.9 -24.2

27.0 27.0 27.0 27.0 23.0 27.0
Asset Quality
OSRL (INR b) 162.3 175.0 163.9 135.6

135.6
OSRL (%) 5.2 5.2 4.6 3.6

3.6
Gross NPA (INR b) 94.1 98.8 100.2 118.7

122.2 127.8 132.0 134.5 118.7 134.5
Gross NPA (%) 3.0 2.9 2.8 3.2 3.2 3.2 3.2 3.1 3.2 3.1
E: MOSL Estimates


Bank of India

CMP: INR305 Neutral
Business growth is expected to be above industry average with loan
and deposit growth of 23%+ YoY and 18% YoY, respectively.
Factored in NIM (calculated) decline of 15bp+ QoQ as bank had one-
off income of INR3.8b on interest on IT refund in 4QFY14.
Fee income is expected to be healthy. However lower trading income
and recoveries would lead to steep decline in non-interest income
(-27% YoY).
While slippages will remain elevated, it is expected to be lower on a
sequential basis (4.9% in 4QFY14). Credit cost is also expected to
remain high. Provisioning for unhedged forex exposures will increase
the provisioning charge.
Lower non-interest income would result in 6% YoY decline in PPP.
Further higher provisioning expense is expected to translate into
35%+ YoY) decline in earnings.

Outlook on balance sheet growth given weak capitalization levels
(CET 1 of less than 7.2%). Further capital infusion and asset
monetization plan to increase Tier I ratio.
Bank has been aggressive in offloading loans to ARCs. Hence,
quantum of loans sold and future pipeline for asset sale.

Bloomberg BOI IN
M.Cap. (INR b) /(USD b) 195.31/3.25
52-Week Range (INR) 357/127
1, 6, 12 Rel. Per (%) -8/3/3

Y/E March 2014 2015E 2016E 2017E
NII 108.3 126.9 147.3 178.2
OP 84.2 95.3 109.4 134.2
NP 27.3 34.4 43.0 56.1
NIM (%) 2.3 2.3 2.3 2.3
EPS (INR) 42.4 53.4 66.9 87.2
EPS Gr. (%) -7.9 25.9 25.1 30.4
ROE (%) 11.7 12.9 14.3 16.3
ROA (%) 0.5 0.6 0.6 0.7
BV/Sh. (INR) 390 437.2 496.1 572.2
ABV/Sh. (INR) 315 359 430 522
Div. Payout (%) 13.7 14.5 14.5 14.5
Valuations
P/E(X) 7.2 5.7 4.5 3.5
P/BV (X) 0.8 0.7 0.6 0.5
P/ABV (X) 1.0 0.8 0.7 0.6
Div. Yield (%) 1.6 2.2 2.7 3.6

July 2014 139

Quarterly Performance (INR million)
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Interest Income 92,696 96,545 100,839 105,397 107,366 109,829 113,721 119,879 395,476 450,795

24,689 25,262 26,532 27,772 89,444 104,255
% Change (Y-o-Y) 8.0 12.0 12.0 21.3 24.0 15.3 19.1 9.5 13.5 16.6
Other Income 12,383 7,730 8,514 10,700 9,391 9,622 9,728 11,945 39,328 40,686
Net Income 32,294 29,642 30,784 36,052

34,080 34,884 36,260 39,717 128,772 144,941

18,087 18,085 18,309 20,617 67,962 75,098
% Change (Y-o-Y) 36.2 11.1 4.9 10.9 -4.7 26.9 15.1 9.5 15.4 10.5

8,745 8,222 8,420 10,256 30,632 35,643
Tax Provisions 1,900 1,250 1,300 1,800 1,924 1,809 1,852 2,256 6,250 7,841
Net Profit 7,921 6,259 4,093 6,108

6,821 6,413 6,568 8,000 24,382 27,802
% Change (Y-o-Y) 2.2 -5.3 -42.4 -15.8 -13.9 2.5 60.4 31.0 -15.1 14.0
NIM (Rep, %) 2.2 2.2 2.2 2.3

2.2
NIM (Cal, %) 2.0 2.2 2.1 2.3

2.2 2.1 2.2 2.2 2.1 2.2
Deposit Growth (%) 14.2 16.3 26.2 18.2

13.4 14.5 14.1 15.0 18.2 15.0
Loan Growth (%) 10.8 30.3 31.8 24.3

22.9 12.5 15.4 16.0 24.3 16.0
CD Ratio (%) 65.4 71.8 70.4 71.6

70.9 70.5 71.2 72.2 71.6 72.2
CASA Ratio (%) 23.1 24.3 23.1 24.5

24.5
Tax Rate (%) 19.3 16.6 24.1 22.8

22.0 22.0 22.0 22.0 20.4 22.0
Asset Quality
OSRL (INR b) 172.7 180.5 184.5 202.5

202.5
OSRL (%) 6.9 6.4 6.4 6.7 6.7
Gross NPA (INR b) 73.3 74.8 80.7 75.7

79.6 84.4 85.5 86.7 75.7 86.7
Gross NPA (%) 2.9 2.6 2.8 2.5 2.5 2.6 2.5 2.5 2.5 2.5
E: MOSL Estimates

Canara Bank

CMP: INR448 Buy
Loan growth is expected to be above industry average at 22% YoY,
whereas deposit growth is expected to be 13.5% YoY.
Reported NIM is expected to decline QoQ, however this is on account
of one-off interest income of INR1b booked in 4QFY14. Hence,
adjusted NIM is expected to be stable QoQ.
Lower trading income will drag overall non-interest income. Core fee
based income is expected to be healthy.
We expect pressure on asset quality to continue resulting into higher
credit cost.
Strong NII growth and containment in opex growth will keep the core
operating performance healthy. Expect 23% YoY growth in Core PPP.

Outlook on asset quality- slippages, restructuring pipeline and sale
to ARCs
Capital raising plans
Business growth outlook, especially on bulk deposit proportion
and strategy to improve low cost CASA deposits.

Bloomberg CBK IN
M.Cap. (INR b) /(USD b) 212.94/3.54
1, 6, 12 Rel. Per (%) -2/37/-9

Y/E March 2014 2015E 2016E 2017E
NII 89.4 104.3 125.4 154.0
OP 68.0 75.1 93.7 118.5
NP 24.4 27.8 38.2 49.7
NIM (%) 2.1 2.1 2.2 2.2
EPS (INR) 52.9 60.3 82.9 107.8
EPS Gr. (%) -18.5 14.0 37.5 30.0
BV/Sh. (INR) 515.9 562.1 625.7 708.4
ABV/Sh. (INR) 431.8 469.7 539.2 640.8
ROE (%) 10.5 11.2 14.0 16.2
ROA (%) 0.5 0.5 0.6 0.7
Div. Payout (%) 24.2 23.2 23.2 23.2
Valuations
P/E(X) 8.5 7.4 5.4 4.2
P/BV (X) 0.9 0.8 0.7 0.6
P/ABV (X) 1.0 1.0 0.8 0.7
Div. Yield (%) 2.5 2.7 3.7 4.8

July 2014 140

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Interest Income 16,533 17,144 17,397 18,387 18,129 18,733 19,418 20,784 69,461 77,064

5,750 6,076 6,381 6,320 22,286 24,527
% Change (YoY) 3.7 8.4 9.7 30.3 12.8 10.8 17.0 1.1 12.9 10.1
Other Income 2,158 1,434 1,563 1,784 1,907 1,951 2,041 2,408 6,938 8,306
Net Income 7,254 6,918 7,018 8,035

7,657 8,026 8,422 8,728 29,225 32,833
Operating Profit 4,005 3,539 3,559 4,200 3,748 3,875 4,163 4,266 14,804 16,052
% Change (YoY) 15.6 1.2 -9.7 13.7 -6.4 9.5 17.0 1.6 1.4 8.4
Other Provisions 2,451 110 73 550 667 791 760 848 2,679 3,067
Tax Provisions 498 1,171 1,185 877

924 925 1,021 1,025 3,728 3,896
Net Profit 1,057 2,258 2,301 2,773 2,156 2,159 2,382 2,392 8,397 9,090
% Change (YoY) -44.5 5.0 9.2 24.9 104.1 -4.4 3.5 -13.7 0.2 8.2
NIM (Reported,%) 3.1 3.3 3.2 3.6

3.3
NIM (Cal, %) 3.1 3.3 3.3 3.6

3.3 3.4 3.4 3.2 3.3 3.3
Deposit Growth (%) 12.7 14.7 11.9 3.7

7.4 11.0 13.6 15.0 3.7 15.0
Loan Growth (%) 8.5 16.3 5.4 -1.5

6.8 7.6 14.5 16.0 -1.5 16.0
CD Ratio (%) 72.4 74.3 72.1 72.7

72.0 72.0 72.7 73.4 72.7 73.4
CASA Ratio (%) 29.0 30.7 30.4 30.8 30.8
Asset Quality
Gross NPA (INR b) 14.8 14.7 12.0 10.9

11.4 11.9 12.1 12.2 10.9 12.2
Gross NPA (%) 3.5 3.4 2.8 2.5 2.5 2.6 2.5 2.4 2.5 2.4
E: MOSL Estimates


Federal Bank

CMP: INR129 Buy
Business growth is expected to remain muted as bank continues to
tread on the path of risk aversion. Loan growth is expected to be 8%
YoY and deposit growth to be at 7% YoY.
Reported NIM is expected to decline 30bp+ QoQ as one off interest
on IT refund is expected to be lower, however adjusted NIM is
expected to improve by 10bp QoQ.
Fee income growth is expected to be moderate at 12% YoY. However,
lower trading income is expected to result into 10% YoY decline in
non-interest income.
Slippages run-rate is expected to continue at ~2%, however, loans
sale to ARCs could contain GNPA increase.
We factor credit cost of 50bp for 1QFY15 as against negligible credit
cost in last three quarters, but significantly lower than 2.2% in
1QFY14 and aid earnings growth (100%+ YoY)
Outlook on asset quality in the corporate segment. Sale of loans
to ARCs.
Strategy on balance sheet growth, with consolidation in corporate
segment now largely over.

Bloomberg FB IN
M.Cap. (INR b) /(USD b) 112.38/1.87
1, 6, 12 Rel. Per (%) 10/33/29

Y/E March 2014 2015E 2016E 2017E
NII 22.3 24.5 28.6 34.3
OP 14.8 16.1 18.9 23.3
NP 8.4 9.1 10.7 13.0
NIM (%) 3.3 3.3 3.3 3.3
EPS (INR) 9.8 10.6 12.5 15.2
EPS Gr. (%) 0.2 8.2 17.2 21.9
BV/Sh. (INR) 81.3 89.4 98.9 110.6
ABV/Sh. (INR) 78.8 85.6 94.3 106.5
ROE (%) 12.6 12.5 13.2 14.5
ROA (%) 1.2 1.1 1.1 1.2
Payout (%) 23.6 23.2 23.2 23.2
Valuations
P/E(X) 13.1 12.1 10.4 8.5
P/BV (X) 1.6 1.4 1.3 1.2
P/ABV (X) 1.7 1.5 1.4 1.2
Div. Yield (%) 1.5 1.6 1.9 2.4

July 2014 141

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Interest Income 96,630 100,933 105,907 107,886 113,541 119,583 126,086 132,361 411,355 491,571
Net Interest Income 44,187 44,765 46,348 49,527 51,972 54,320 57,560 61,904 184,826 225,756
% Change (Y-o-Y) 21.0 15.3 16.4 15.3 17.6 21.3 24.2 25.0 16.9 22.1
Other Income 19,256 18,444 21,483 20,014 20,944 22,513 25,942 25,490 79,196 94,890
Net Income 63,443 63,209 67,830 69,541 72,915 76,833 83,502 87,395 264,023 320,645
% Change (Y-o-Y) 23.6 26.9 24.6 27.6 18.6 26.0 25.5 36.3 25.7 26.9
Tax Provisions 9,351 10,184 11,734 11,667 11,624 12,555 14,748 13,626 42,937 52,554
Net Profit 18,439 19,823 23,257 23,266 23,074 24,923 29,277 29,426 84,784 106,700
% Change (Y-o-Y) 30.1 27.1 25.1 23.1 25.1 25.7 25.9 26.5 26.1 25.8
NIM (Reported,%)* 4.6 4.3 4.2 4.4 4.4
NIM (Cal, %)# 4.8 4.8 4.6 4.6 4.6 4.6 4.7 4.7 4.6 4.6
Deposit Growth (%) 17.8 14.2 22.9 24.0 26.0 28.2 21.8 21.0 24.0 21.0
Loan Growth (%) 21.2 16.0 22.9 26.4 27.7 27.9 25.0 26.0 26.4 26.0
CD Ratio (%) 85.3 85.8 85.0 82.5 86.5 85.6 87.2 85.9 82.5 85.9
CASA Ratio (%) 44.7 45.0 41.1 44.8 44.8 43.8
Tax Rate (%) 33.6 33.9 33.5 33.4 33.5 33.5 33.5 31.7 33.6 33.0
Asset Quality
OSRL (INR B) 5.2 5.4 5.9 6.1 6.1
OSRL (%) 0.2 0.2 0.2 0.2 0.2
Gross NPA (INR B) 27.2 29.4 30.2 29.9 32.6 36.2 39.4 41.1 29.9 41.1
Gross NPA (%) 1.0 1.1 1.0 1.0 1.0 1.1 1.1 1.1 1.0 1.1
E: MOSL Estimates; * Reported on total assets; # Cal. on interest earning assets

HDFC Bank

CMP: INR856 Buy
We expect a healthy loan growth of 28% YoY and 9% QoQ driven by
improving macro environment and a well balanced portfolio. Deposit
growth is expected to be at 26% YoY and 4% QoQ.
NIM is expected to remain stable at 4.6% QoQ (though lower by 16bp
YoY). Consequently, NII is expected to grow 18% YoY.
Fee income growth is expected to be at 19% YoY. However, lower
income from sale of investments would drag non-interest income
growth lower to 9% YoY.
Asset quality remains best in class with lowest net stressed loans.
However, with a conservative approach we expect provisions to be at
INR4.5b.
Strong operating performance coupled with healthy asset quality
would lead to a 25% YoY earnings growth.
Performance on retail loan portfolio especially in segments like CV
where commentary from the industry experts has been improving.
Performance of branches opened in the unbanked areas during
FY14 and branch expansion strategy for FY15.
Capital raising plans

Bloomberg HDFCB IN
M.Cap. (INR b) /(USD b) 1,981.77/32.97
1, 6, 12 Rel. Per (%) -2/2/-6

Y/E March 2014 2015E 2016E 2017E
NII 184.8 225.8 276.0 348.6
OP 143.6 182.2 225.9 285.2
NP 84.8 106.7 134.0 167.8
NIM (%) 4.6 4.6 4.6 4.6
EPS (INR) 35.3 44.5 55.9 70.0
EPS Gr. (%) 25.0 25.8 25.6 25.2
BV/Sh. (INR) 181.3 215.4 258.2 311.9
ABV/Sh. (INR) 178.9 211.0 252.5 305.5
RoE (%) 21.3 22.4 23.6 24.5
RoA (%) 1.9 2.0 2.0 2.0
Payout (%) 22.7 23.4 23.4 23.4
Valuations
P/E (x) 24.2 19.2 15.3 12.2
P/BV (x) 4.7 4.0 3.3 2.7
P/ABV (x) 4.8 4.0 3.4 2.8
Div. Yield (%) 0.8 1.0 1.3 1.6

July 2014 142



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Interest Income 104,207 108,133 114,550 114,893 118,528 122,539 126,886 132,729 441,782 500,682
Net Interest Income

38,205 40,435 42,551 43,565 45,061 46,684 48,377 50,417 164,756 190,539
% Change (YoY) 19.7 19.9 21.6 14.5 17.9 15.5 13.7 15.7 18.8 15.6
Other Income 24,843 21,665 28,010 29,761 27,966 29,977 30,750 31,528 104,279 120,221
Net Income

63,048 62,100 70,561 73,326 73,027 76,661 79,127 81,945 269,034 310,760
Operating Profit

38,142 38,879 44,390 44,535 44,439 47,040 49,278 51,029 165,946 191,786
% Change (YoY) 29.3 21.8 28.6 23.6 16.5 21.0 11.0 14.6 25.7 15.6
Profit before Tax

32,210 32,631 37,444 37,397 37,961 39,443 42,305 43,738 139,682 163,447
Tax Provisions 9,468 9,110 12,122 10,877 11,388 11,833 12,692 13,122 41,577 49,034
Net Profit

22,742 23,521 25,322 26,520 26,573 27,610 29,614 30,617 98,105 114,413
% Change (YoY) 25.3 20.2 12.5 15.1 16.8 17.4 16.9 15.4 17.8 16.6
NIM (Reported,%)

3.3 3.3 3.3 3.4 3.3
NIM (Cal, %)

3.1 3.3 3.3 3.3 3.3 3.3 3.3 3.3 3.2 3.3
Deposit Growth (%)

8.7 9.8 10.7 13.4 18.5 15.0 17.8 18.9 13.4 18.9
Loan Growth (%)

12.3 15.5 16.0 16.7 16.9 14.2 14.5 18.2 16.7 18.2
CASA Ratio (%)

39.0 40.3 39.1 39.1 39.1
Asset Quality
OSRL (INR b)

59.2 68.3 86.0 105.6 105.6
OSRL (%)

2.0 2.1 2.6 3.1 3.1
Gross NPA (INR b)

100.1 100.3 104.0 105.1 107.8 110.6 112.1 112.4 105.1 112.4
Gross NPA (%) 3.2 3.1 3.1 3.0 3.0 3.0 2.9 2.8 3.0 2.8
E: MOSL Estimates


ICICI Bank

CMP: INR1462 Buy
Loan is expected to grow 4% QoQ and 17% YoY. Retail loan growth
has picked up over last few quarters, which is expected to remain a
key driver of loan growth.
Margins are expected to remain stable QoQ at 3.3% (up 15bp YoY).
Consequently, NII is expected to grow 3% QoQ and 18% YoY.
Fee income is expected to grow ~16% YoY, whereas non-interest
income is expected to increase 13% YoY, led by lower contribution
from profit on sale of investments.
GNPA is expected to remain stable QoQ, however, restructuring
portfolio is likely to increase. Management had guided for
incremental restructuring of INR15b at the end of FY14. Further
provisioning for un-hedged forex exposures will also lead to higher
provisioning expenses.

Performance on asset quality and restructuring pipeline
Outlook on domestic loan growth and areas of focus.
Guidance on margins and opex growth which has been one of
the drivers of profitability in recent quarters.

Bloomberg ICICIBC IN
M.Cap. (INR b) /(USD b) 1,662.00/27.65
1, 6, 12 Rel. Per (%) -4/12/2

Y/E March 2014 2015E 2016E 2017E
NII 164.8 190.5 227.3 279.2
OP 165.9 191.8 230.2 285.4
NP 98.1 114.4 138.5 171.8
NIM (%) 3.2 3.3 3.4 3.4
EPS (INR) 85 99 120 149
EPS Gr (%) 17.7 16.6 21.1 24.0
BV/Sh (INR)* 508 580 668 777
ABV/Sh (INR)* 488.2 556.6 639.7 743.7
RoE (%) 15.2 15.7 16.6 17.9
RoA (%) 1.7 1.8 1.8 1.9
Div. Payout (%) 31.4 31.3 31.3 31.3
Valuations
AP/E (x) 14.6 12.3 9.9 7.8
AP/BV (x) 2.4 2.1 1.8 1.5
AP/ABV (x) 2.5 2.2 1.9 1.6
Div. Yield (%) 1.6 1.8 2.2 2.8
* BV adj for invt in susbdiaries, Prices adj for
sub value

July 2014 143


(INR Million)
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Interest Income 36,658 38,013 38,698 39,107

40,625 42,304 44,219 46,049 152,492 173,197
% Change (Y-o-Y) -4.9 -2.4 -4.6 -2.8 6.9 13.3 20.9 33.8 -3.7 18.7
Other Income 5,297 2,769 2,426 3,241 2,853 3,732 3,162 4,332 13,717 14,080
Net Income 16,265 13,706 13,332 14,018 14,582 16,128 16,351 18,755 57,321 65,816
% Change (Y-o-Y) 2.3 -22.3 -15.5 24.6 -14.5 18.3 25.1 32.7 -1.4 14.8
Tax Provisions 1,738 1,749 1,298 -1,618 1,284 1,438 1,500 1,557 3,167 5,779
Net Profit 3,174 3,058 2,645 2,713 2,997 3,355 3,500 3,629 11,589 13,484
% Change (Y-o-Y) -31.3 -38.4 -20.0 -7.1 -5.6 9.7 32.3 33.8 -26.7 16.3
NIM (Rep, %) 2.7 2.6 2.7 2.6

2.7
NIM (Cal, %) 2.9 2.8 2.7 2.6

2.7 2.8 2.8 3.0 2.7 2.8
Deposit Growth (%) 17.8 16.4 16.6 14.3

10.7 11.7 13.1 16.0 14.3 16.0
Loan Growth (%) 15.7 15.1 12.1 15.7

14.9 18.0 21.6 16.0 15.7 16.0
Tax Rate (%) 35.4 36.4 32.9 -147.8

30.0 30.0 30.0 30.0 21.5 30.0
Asset Quality
Gross NPA (INR b) 37.2 41.8 38.3 45.6

49.2 51.5 52.4 52.7 45.6 52.7
Gross NPA (%) 3.4 3.8 3.4 3.7 3.9 3.9 3.8 3.7 3.7 3.7
E: MOSL Estimates


Indian Bank

CMP: INR185 Buy
Loan growth is expected to be near industry growth rate at ~15% YoY.
We factor ~10bp QoQ improvement in margins. Consequently, NII is
expected to grow 9% QoQ and 7% YoY.
Fee income is expected to grow in line with loan growth; however,
profit on sale of investments is expected to be significantly lower than
INR3.1b reported in 1QFY14. Other income is expected to decline
45%+ YoY and impact earnings.
We factor in slippage ratio of 3% versus 3.3% in 4QFY14. Further,
asset sale to ARCs may help contain headline GNPA,which is currently
not factored in our estimates.
PPP is expected to decline 14% YoY led by weak non-interest income
performance. However, lower base will help PAT (de-growth of 6%
YoY versus -31% YoY in 1QFY14 and -7% YoY in 4QFY14).

Business growth outlook.
Comments on capital raising though not an immediate
requirement.
Pipeline of sale of assets to ARCs. Outlook on asset quality a key.
Implementation of retail focuses strategy guided by management.

Bloomberg INBK IN
M.Cap. (INR b) /(USD b) 83.81/1.39
1, 6, 12 Rel. Per (%) 0/33/26

Y/E March 2014 2015E 2016E 2017E
NII 44 52 61 73
OP 29 33 39 47
NP 12 13 17 21
NIM (%) 2.7 2.8 2.8 2.8
EPS (INR) 25 29 36 44
EPS Gr. (%) -32.2 16.3 25.7 21.3
BV/Sh. (INR) 248 270 298 332
ABV/Sh (INR) 210 227 258 289
RoE (%) 10.3 11.2 12.8 14.0
RoA (%) 0.7 0.7 0.7 0.7
Div. Payout (%) 20.8 23.2 23.2 23.2
Valuations
P/E (x) 7.3 6.2 5.0 4.1
P/ BV (x) 0.7 0.7 0.6 0.5
P/ABV (x) 0.9 0.8 0.7 0.6
Div. Yield (%) 2.6 3.2 4.0 4.9

July 2014 144


(INR Million)
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Interest Income 19,122 20,186 21,435 21,793

22,807 23,690 24,491 25,089 82,535 96,077

8,268 8,714 9,141 9,592 28,907 35,714
% Change (YoY) 40.4 37.3 26.4 18.1 21.7 24.5 25.2 22.8 29.5 23.5
Other Income 4,706 4,167 4,803 5,229 5,014 5,557 5,963 6,260 18,905 22,794
Net Income 11,501 11,167 12,104 13,041 13,281 14,271 15,105 15,852 47,812 58,508

7,172 7,897 8,307 8,639 25,960 32,015
% Change (YoY) 58.8 40.0 37.1 32.3 11.8 34.3 28.3 20.1 41.1 23.3
Other Provisions 1,321 889 1,262 1,206 916 1,486 1,578 1,530 4,676 5,510

6,256 6,411 6,729 7,108 21,283 26,505
Tax Provisions 1,747 1,688 1,743 2,025 2,096 2,148 2,288 2,414 7,203 8,945
Net Profit 3,348 3,302 3,469 3,961

4,160 4,263 4,441 4,694 14,080 17,559
% Change (YoY) 41.7 32.0 29.8 28.8 24.2 29.1 28.0 18.5 32.7 24.7
NIM (Reported,%) 3.7 3.7 3.7 3.8

3.7
NIM (Cal, %) 3.7 3.7 3.7 3.7

3.7 3.7 3.7 3.7 3.9 4.1
Deposit Growth (%) 23.5 11.1 10.1 11.8

16.3 26.9 27.5 25.0 11.8 25.0
Loan Growth (%) 27.3 24.2 23.7 24.3

24.9 25.2 25.0 25.0 24.3 25.0
CASA Ratio (%) 30.0 31.8 32.2 32.5

32.5
Asset Quality
OSRL (%) 0.3 0.3 0.3 0.3

0.3
Gross NPA (INR b) 5.1 5.5 6.3 6.2

7.2 8.0 8.7 9.2 6.2 9.2
Gross NPA (%) 1.1 1.1 1.2 1.1 1.2 1.3 1.3 1.3 1.1 1.3
E: MOSL Estimates; Quarterly calculated margins based on total assets, yearly on interest earning assets


Indusind Bank

CMP: INR569 Buy
Loan and deposit growth is expected to be above industry average at
25% YoY and 16% YoY, respectively.
Margins expected to remain stable at 3.7% QoQ as systemic interest
rates have cooled off.
Focus on investment banking and forex segment will aid healthy
growth of ~25% YoY in fee income.
PPP is expected to grow ~12% YoY, however, lower provisions
(primarily on account of absence of floating provisions of INR500m)
will keep earnings growth strong at 24% YoY.
Slippages are expected to rise but will be manageable. NNPA is
expected to be contained below 40bp versus 33bp in FY14. Also,
credit costs are expected to be stable QoQ at 55bp.

Implementation of planning cycle 3 strategy, with focus on its
branch expansion strategy.
Traction in CASA deposit growth.
CV/CE industry performance will be a key for growth and asset
quality.
Management succession plan as Mr. Sobti is expected to retire in
Jan-15.

Bloomberg IIB IN
M.Cap. (INR b) /(USD b) 302.96/5.04
1, 6, 12 Rel. Per (%) 2/15/-12

Y/E March 2014 2015E 2016E 2017E
NII 28.9 35.7 44.4 55.7
OP 26.0 32.0 39.8 51.2
NP 14.1 17.6 22.2 28.5
NIM (%) 3.9 4.1 4.1 4.1
EPS (INR) 26.8 33.4 42.3 54.2
EPS Gr. (%) 32.0 24.7 26.7 28.1
BV/Sh. (INR) 168.1 195.7 230.6 275.3
ABV/Sh. (INR) 165.8 192.4 226.0 270.0
RoE (%) 17.3 18.4 19.9 21.4
RoA (%) 1.8 1.8 1.9 1.9
Payout (%) 15.3 17.5 17.5 17.5
Valuations
P/E (X) 21.4 17.2 13.5 10.6
P/BV (X) 3.4 2.9 2.5 2.1
P/ABV (X) 3.5 3.0 2.5 2.1
Div. Yield (%) 0.6 0.9 1.1 1.4

July 2014 145


(INR Million)
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Interest Income 13,086 13,173 12,733 13,061 13,500 13,994 14,527 15,050 52,051 57,072
Interest Expense 8,832 8,770 8,572 8,348

8,724 9,072 9,435 9,760 34,521 36,992
% Change (Y-o-Y) 23.9 19.4 3.3 11.2 12.3 11.8 22.4 12.2 13.9 14.5
Other Income 2,445 1,847 2,146 2,234

2,300 2,430 2,555 2,868 8,671 10,153
Net Income 6,699 6,250 6,307 6,947 7,077 7,352 7,647 8,157 26,202 30,233

3,758 4,069 4,200 4,381 14,927 16,408
% Change (Y-o-Y) 50.3 21.4 4.2 -12.1 1.5 18.8 25.7 51.0 13.6 22.6
Other Provisions 681 181 230 406

625 500 500 776 1,498 2,651
Tax Provisions 837 820 839 703 862 891 943 880 3,199 3,575
Net Profit 1,751 1,763 1,673 1,391

1,832 1,892 2,004 2,120 6,578 7,598
% Change (Y-o-Y) 34.6 17.4 3.1 -18.3 4.6 7.4 19.7 52.4 7.3 15.5
NIM (Reported,%) 3.6 3.5 3.4 3.7

3.5
NIM (Cal, %) 3.4 3.5 3.3 3.6

3.6 3.6 3.5 3.5 3.5 3.5
Deposit Growth (%) 14.1 10.7 3.4 -0.3

2.7 8.7 16.2 15.0 -0.3 15.0
Loan Growth (%) 13.0 9.4 7.8 12.8

10.6 16.2 17.8 20.0 12.8 20.0
CD Ratio (%) 80.7 82.1 87.4 86.9

86.9 87.8 88.6 90.7 86.9 90.7
CASA Ratio (%) 30.2 32.5 34.7 33.4

Asset Quality
Gross NPA (INR B) 5.9 5.7 5.8 6.4

7.0 7.4 8.0 8.5 6.4 8.5
Gross NPA (%) 1.8 1.7 1.7 1.8

1.9 1.9 1.9 1.9 1.8 1.9
Net NPA (%) 0.19 0.19 0.21 0.28 0.29 0.28 0.28 0.26 0.28 0.26
E: MOSL Estimates


ING Vysya Bank

CMP: INR662 Buy
Loan growth is expected to be below industry growth rate at 11% YoY
led by repayment of one large account in 2QFY14; adjusted for this
YoY growth would have been 17% YoY. Deposit growth is expected to
be lower at 3% YoY primarily helped by capital infusion in 2QFY14.
NIM is expected to moderate by 5bp+ QoQ (up 17b YoY).
Consequently, NII is expected to grow 12% YoY (largely flat QoQ).
Fee income growth is expected to be ~10% YoY. However, lower
contribution from non-core income is expected to result into 6% YoY
decline in non-interest income.
Asset quality performance is expected to remain healthy, though
there may be some pressure on account of increased stress in mid-
corporate and SME segment.
PPP growth is expected to be flat whereas earnings are expected to
grow 5% YoY.

Branch expansion and trajectory of cost to average assets.
Traction in SA deposits and if any plans to raise SA deposit rates.
Performance of SME and outlook on LAP.

Bloomberg VYSB IN
M.Cap. (INR b) /(USD b) 126.59/2.11
1, 6, 12 Rel. Per (%) -1/-13/-30

Y/E March 2014 2015E 2016E 2017E
NII 17.5 20.1 23.7 28.2
OP 11.3 13.8 16.4 19.7
NP 6.6 7.6 9.0 10.7
NIM (%) 3.3 3.4 3.4 3.4
EPS (INR) 34.9 40.3 47.6 56.5
EPS Gr. (%) -11.9 15.5 18.1 18.7
BV/Sh. (INR) 369.5 401.5 439.4 484.4
ABV/Sh. (INR) 365.7 397.4 433.7 478.0
RoE (%) 11.4 10.4 11.3 12.2
RoA (%) 1.1 1.2 1.2 1.2
Payout (%) 20.2 20.3 20.3 20.3
Valuations
P/E(X) 18.9 16.4 13.9 11.7
P/BV (X) 1.8 1.6 1.5 1.4
P/ABV (X) 1.8 1.7 1.5 1.4
Div. Yield (%) 0.9 1.1 1.3 1.5

July 2014 146

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Kotak Bank (standalone)
% Change (Y-o-Y) 27.1 21.9 10.9 7.0 9.0 10.3 17.3 16.1 16.0 13.2
% Change (Y-o-Y) 73.7 25.8 2.1 -7.1 -11.1 13.7 25.8 28.5 19.5 12.4
Net Profit 4,028 3,525 3,400 4,072 4,234 4,314 4,475 4,806 15,025 17,829
% Change (Y-o-Y) 42.6 25.7 -6.0 -6.7 5.1 22.4 31.6 18.0 10.4 18.7
Other Businesses
Kotak Prime 1,170 1,250 1,230 1,260 1,320 1,380 1,430 1,495 4,915 5,625
Kotak Mah. Investments 40 110 110 160 105 110 115 113 418 443
Kotak Mah. Capital Co 40 -20 70 50 30 35 40 50 139 155
Kotak Securities 310 400 460 440 550 500 550 574 1,595 2,174
International subs -100 10 90 60 20 25 25 25 70 95
Kotak AMC & Trustee Co. 70 170 120 40 100 120 130 131 410 481
Kotak Investment Advisors 10 40 70 50 45 50 55 80 180 230
Kotak OM Life Insurance 710 440 600 650 675 675 650 629 2,390 2,629
Con.adj and MI -3 -96 -237 -149 -55 -55 -55 -60 -492 -225
Conso. PAT 6,275 5,829 5,913 6,633 7,024 7,154 7,415 7,844 24,650 29,436
% Change (Y-o-Y) 41.5 16.1 2.4 -0.3 11.9 22.7 25.4 18.3 12.6 19.4
E: MOSL Estimates


Kotak Mahindra Bank

CMP: INR884 Neutral
Lending business
For the standalone bank, loan growth is expected to be moderate at
10% YoY and deposit growth at 16% YoY.
Margins are expected to stable QoQ. Credit cost (including standard
asset provisioning) expected to be ~50bp (1.4% in 1QFY14).
Profit from the lending business is expected to increase 7%+ YoY, led
by both standalone bank (expect PAT growth of ~5% YoY) and Kotak
Prime (PAT growth to be healthy at 13% YoY).
Capital Market and Asset Management business
Profitability of Kotak Securities is expected to be strong YoY basis
with improving capital market activities.
In Asset Management business, profitability is expected to improve
and profit from this business is expected to be INR165m as compared
to loss of INR20m reported in 1QFY14.
With strong capital base, strategy for loan growth amidst
improving sentiments on the economy would be a key.
Asset quality performance in the CV segment.
With improving sentiments in the capital markets, performance of
its subsidiary businesses and their contribution to overall profit.

Bloomberg KMB IN
M.Cap. (INR b) /(USD b) 681.75/11.34
1, 6, 12 Rel. Per (%) -2/1/-7

Y/E March 2014 2015E 2016E 2017E
NII 37.2 42.1 50.0 62.0
OP 25.8 29.0 34.0 42.4
NP 15.0 17.8 21.5 26.8
NIM (%) 4.6 4.8 4.7 4.7
EPS (INR) 33.0 39.4 46.5 56.0
EPS Gr. (%) 12.6 19.4 18.0 20.5
Cons. BV.(INR)236.3 274.6 319.7 374.1
Cons. RoE (%) 15.0 15.4 15.7 16.2
RoA (%) 1.8 1.9 1.9 1.9
Payout (%) 2.9 2.9 2.9 2.9
Valuations
P/E(X) (Cons.) 27.0 22.6 19.1 15.9
P/BV (X) (Cons.) 3.8 3.2 2.8 2.4
P/ABV (X) (Cons.)3.9 3.3 2.8 2.4
Div. Yield (%) 0.1 0.1 0.1 0.2

July 2014 147


(INR Million)
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Interest Income 47,177 46,758 47,232 49,008 49,877 50,867 52,266 54,422 190,175 207,431
% Change (YoY) 16.1 10.7 2.2 7.8 2.8 8.1 16.1 14.5 9.1 10.3
Other Income 5,381 3,119 3,408 7,545 4,088 4,113 4,338 6,193 19,453 18,732
Net Income 18,451 15,928 15,712 20,632 17,520 17,955 18,624 21,176 70,724 75,275
% Change (YoY) 21.4 -10.4 -7.3 46.2 -10.3 20.5 22.6 -12.3 12.6 1.9
Tax Provisions 2,022 232 730 1,427 1,269 1,361 1,505 1,588 4,410 5,724
Net Profit 3,534 2,514 2,243 3,103 2,961 3,176 3,512 3,706 11,394 13,356
% Change (YoY) -9.7 -16.8 -31.3 0.8 -16.2 -39.6 10.2 35.7 -14.2 17.2
NIM (Rep, %) 2.9 2.8 2.7 2.7

2.8
NIM (Cal,%) 2.8 2.7 2.6 2.6

2.6 2.6 2.6 2.6 2.6 2.6
Deposit Growth (%) 11.5 6.7 8.3 10.0

10.9 14.9 13.6 14.5 10.0 14.5
Loan Growth (%) 12.4 9.2 8.4 8.1

11.5 13.2 13.5 14.9 8.1 14.9
CASA Ratio (%) 23.5 24.5 24.2 24.3

24.3
Tax Rate (%) 36.4 8.4 24.6 31.5

30.0 30.0 30.0 30.0 27.9 30.0
Asset Quality
OSRL (INR b) 102.7 94.1 96.9 106.6

106.6
OSRL (%) 8.0 7.3 7.2 7.6

7.6
Gross NPA (INR b) 43.0 48.9 51.8 56.2

58.0 58.8 58.9 58.8 56.2 58.8
Gross NPA (%) 3.4 3.8 3.9 4.0 4.1 4.0 3.9 3.6 4.0 3.6
E: MOSL Estimates


Oriental Bank of Commerce

CMP: INR322 Buy
Bank is expected to continue its cautious stance on loan and deposit
growth at 12% and 11% (YoY), respectively. However, growth would
gradually pick up with improving macro environment.
NIM is expected to be stable at 2.6% QoQ.
Fee income growth is expected to be ~15% YoY. However, lower
trading income would drag the overall non-interest income lower by
24% YoY.
Asset quality pressure is expected to continue in 1QFY15, hence we
factor slippage ratio of 3.3% and credit cost of 1.1%.
Sale to ARCs may help contain rise in GNPA (4.1% in 1QFY15 versus
4% in FY14).
PAT is expected to decline 16% YoY driven by weak PPP performance
and high provisions.

Business growth outlook and de-bulking of liability franchise.
Outlook on restructuring pipeline and sale of assets to ARCs.

Bloomberg OBC IN
M.Cap. (INR b) /(USD b) 98.59/1.64
1, 6, 12 Rel. Per (%) -11/26/29

Y/E March 2014 2015E 2016E 2017E
NII 51 57 66 80
OP 42 42 49 59
NP 11 13 16 22
EPS (INR) 38 45 55 73
EPS Gr. (%) -16.5 17.2 22.9 32.5
BV/Sh. (INR) 426 460 502 558
ABV/Sh. (INR) 342 373 421 477
RoE (%) 9.2 10.0 11.4 13.7
RoA (%) 0.5 0.6 0.6 0.7
Div. Payout (%) 23.2 23.2 23.2 23.2
Valuations
P/E (x) 8.6 7.3 6.0 4.5
P/BV (x) 0.8 0.7 0.6 0.6
P/ABV (x) 1.0 0.9 0.8 0.7
Div. Yield (%) 2.3 2.7 3.4 4.5

July 2014 148

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Interest Income 104,045 107,335 109,839 111,013

113,979 117,696 121,231 124,747 432,233 477,653

42,736 43,491 43,876 45,502 161,460 175,605
% Change (YoY) 5.8 10.1 13.1 6.0 9.4 8.3 3.9 13.7 8.7 8.8
Other Income 13,421 8,993 9,384 13,969 12,489 11,380 12,813 14,038 45,767 50,720
Net Income 52,496 49,149 51,596 53,987 55,225 54,871 56,689 59,540 207,227 226,325

29,891 29,195 30,574 32,596 113,845 122,257
% Change (YoY) 4.7 0.1 0.8 11.3 0.5 15.2 13.1 2.7 4.4 7.4

16,133 14,047 14,994 16,301 46,905 61,476
Tax Provisions 6,320 1,306 3,569 2,284 4,840 4,214 4,498 4,890 13,479 18,443
Net Profit 12,753 5,055 7,554 8,064

11,293 9,833 10,496 11,411 33,426 43,033
% Change (YoY) 2.4 -52.6 -42.1 -28.7 -11.4 94.5 38.9 41.5 -29.6 28.7
NIM (Rep, %) 3.5 3.5 3.6 3.2

3.4
NIM (Cal, %) 3.5 3.5 3.6 3.2

3.3 3.3 3.2 3.2 3.3 3.2
Deposit Growth (%) 3.0 1.2 9.0 15.3

16.0 15.8 16.1 15.0 15.3 15.0
Loan Growth (%) 3.6 6.5 9.7 13.1

16.8 16.3 16.4 15.0 13.1 15.0
Tax Rate (%) 33.1 20.5 32.1 22.1 30.0 30.0 30.0 30.0 28.7 30.0
Asset Quality
Gross NPA (INR B) 150.9 165.3 166.0 188.8

199.5 207.0 211.4 214.9 188.8 214.9
Gross NPA (%) 4.8 5.1 5.0 5.3 5.5 5.5 5.4 5.2 5.3 5.2
E: MOSL Estimates


Punjab National Bank

CMP: INR980 Buy
Loan and deposit growth both is expected to be 16%+ YoY, partially
driven by lower base as bank was in consolidation mode last year.
Margins are expected to improve 10bp+ QoQ led by lower slippages
(translating into lower interest income reversals) and continued
benefit on account of reduction in bulk deposits and rising CASA ratio.
Fee income is expected to grow 12% YoY. However, weak trading
income is expected to result into a decline of 7% YoY in other income.
Performance on the slippages has been volatile. We have factored in
a slippage ratio of 3.5% and credit cost of 1.2%.
PPP is expected to be flat YoY. PAT is expected to decline 11% YoY
due to higher provisioning expense.

Balance sheet growth and traction in focus loan segments.
Margins and traction in fee income.
Outlook on asset quality as net stressed loans is one of the highest
in the industry.

Bloomberg PNB IN
M.Cap. (INR b) /(USD b) 360.17/5.99
1, 6, 12 Rel. Per (%) -2/37/25

Y/E March 2014 2015E 2016E 2017E
NII 161 176 209 245
OP 114 122 149 176
NP 33 43 57 67
NIM (%) 3.3 3.2 3.3 3.2
EPS (INR) 92 119 158 185
EPS Gr. (%) -31.3 28.7 32.8 17.4
BV/Sh. (INR) 951 1,056 1,196 1,359
ABV/Sh. (INR) 773 883 1,050 1,228
ROE (%) 10.2 11.8 14.0 14.5
ROA (%) 0.6 0.7 0.8 0.8
Div. Payout (%) 12.6 11.6 11.6 11.6
Valuations
P/E(X) 10.7 8.3 6.3 5.4
P/BV (X) 1.0 0.9 0.8 0.7
P/ABV (X) 1.3 1.1 0.9 0.8
Div. Yield (%) 1.0 1.2 1.6 1.9

July 2014 149

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Interest Income 317,183 339,217 348,531 358,576 368,475 378,391 393,796 412,968 1,363,508 1,553,630
% Change (YoY) 3.6 11.4 12.9 16.5 14.8 12.7 13.8 15.8 11.2 14.3
Other Income 44,743 32,782 42,148 65,857 42,706 43,664 48,713 70,586 185,529 205,668
Net Income 159,862 155,292 168,312 194,885 174,878 181,750 192,334 220,020 678,351 768,982
% Change (YoY) -7.6 -14.2 -2.2 36.9 12.8 33.5 23.3 11.1 3.3 18.8
Tax Provisions 14,443 9,079 12,345 16,960 15,555 15,909 16,981 22,011 52,827 70,456
Net Profit 32,411 23,750 22,343 30,407 33,055 33,806 36,084 46,774 108,912 149,719
% Change (YoY) -13.6 -35.1 -34.2 -7.8 2.0 42.3 61.5 53.8 -22.8 37.5
NIM (Reported, %) 3.2 3.2 3.2 3.1 3.2
NIM (Cal, %) 3.2 3.3 3.3 3.2 3.2 3.3 3.3 3.3 3.2 3.2
Deposit Growth (%) 14.0 14.0 16.7 15.9 13.7 14.5 14.0 15.0 15.9 15.0
Loan Growth (%) 15.7 19.0 17.5 15.7 16.3 15.2 15.6 16.0 15.7 16.0
CASA Ratio (%) 44.7 43.6 43.9 44.4 44.4
Tax Rate (%) 30.8 27.7 35.6 35.8 32.0 32.0 32.0 32.0 32.7 32.0
Asset Quality
OSRL (INR B) 330 392 394 431 431
OSRL (%) 3.1 3.6 3.4 3.6 3.6
Gross NPA (INR B) 609 642 678 616 641 644 633 599 616 599
Gross NPA (%) 5.6 5.6 5.7 5.0 4.9 4.8 4.5 4.2 5.0 4.2
E: MOSL Estimates

State Bank of India

CMP: INR2699 Buy
Loan and deposit growth to remain healthy at 16% and 14% (YoY),
respectively. NIM is expected to be stable at 3.2% QoQ and
consequently, NII growth to be 15% YoY.
Improving fee based income has been a key focus of the new
management and traction is expected to pick up in 1Q.
We have factored a slippage ratio of 3.5% and credit cost of 1.1% as
asset quality stress is expected to continue. Further, provisioning for
un-hedged forex exposures would also dent earnings.
Core operating profit growth is expected to be ~30% YoY driven by
healthy NII growth, strong fee income performance and operating
cost containment. However, earnings growth is expected to be lower
at 3% YoY due to higher provisioning requirement.
Progress and update on new strategy formulated by the
management in the last analyst meet.
Outlook on opex control and fee income growth.
Performance on asset quality, pipeline of sale of loans to ARCs and
restructuring.

Bloomberg SBIN IN
M.Cap. (INR b) /(USD b) 2,001.41/33.30
52-Week Range (INR) 2,834/1,453
1, 6, 12 Rel. Per (%) -2/33/7

Y/E March 2014 2015E 2016E 2017E
NII 492.8 563.3 680.1 821.7
OP 321.1 381.5 479.6 610.4
NP 108.9 149.7 205.6 269.0
NIM (%) 3.2 3.2 3.2 3.2
EPS (INR) 190 259 344 454
EPS Gr. (%) -27.5 36.6 32.7 32.0
BV (INR) 1,885 2,097 2,378 2,749
ABV (INR) 1,506 1,732 2,053 2,528
RoE (%) 10.5 12.7 15.6 17.9
RoA (%) 0.6 0.8 0.9 1.0
Div. Payout (%) 18.4 18.4 18.3 18.3
Valuations
Cons. P/E (x) 13.7 10.0 7.6 5.7
Cons. P/BV (x) 1.4 1.2 1.1 0.9
Cons P/ABV (x) 1.7 1.5 1.3 1.0
Div. Yield (%) 1.1 1.5 2.0 2.6

July 2014 150

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Interest Income 68,573 72,711 75,503 76,707

78,420 80,650 83,516 87,074 293,494 329,661
Interest Expense 49,482 53,167 55,868 56,185

57,870 59,317 61,097 63,491 214,701 241,774
% Change (YoY) 4.8 5.6 3.8 3.7 7.6 9.2 14.2 14.9 4.5 11.5
Other Income 7,563 6,112 6,799 7,743 6,140 6,864 7,680 9,501 28,215 30,186
Net Income 26,654 25,656 26,434 28,265

26,690 28,198 30,099 33,085 107,009 118,072

12,263 12,743 14,065 15,387 52,181 54,458
% Change (YoY) 11.4 -3.7 -7.1 -21.7 -13.1 4.0 11.5 16.6 -6.5 4.4

4,992 5,595 6,270 6,781 20,670 23,638
Tax Provisions 1,700 801 3,023 -1,797 1,248 1,399 1,567 1,695 3,708 5,910
Net Profit 5,602 2,081 3,489 5,790 3,744 4,196 4,702 5,086 16,962 17,729
% Change (YoY) 9.5 -62.5 15.4 -26.7 -33.2 101.6 34.8 -12.2 -21.4 4.5
NIM (Reported, %) 2.6 2.5 2.5 2.6

2.6
NIM (Cal, %) 2.6 2.5 2.4 2.5

2.5 2.5 2.6 2.6 2.5 2.5
Deposit Growth (%) 22.3 27.0 19.1 12.9

11.8 7.9 11.9 11.0 12.9 11.0
Loan Growth (%) 16.0 25.7 20.0 10.1

17.1 9.7 10.1 12.0 10.1 12.0
Tax Rate (%) 23.3 27.8 46.4 -45.0

25.0 25.0 25.0 25.0 17.9 25.0
Asset Quality
Gross NPA (INR b) 70.9 80.6 87.8 95.6

101.0 103.5 105.3 107.3 95.6 107.3
Gross NPA (%) 3.5 3.6 3.9 4.1 4.3 4.3 4.2 4.2 4.1 4.2
E: MOSL Estimates


Union Bank of India

CMP: INR228 Buy
Loan growth expected to be a tad higher than industry average at
17% YoY, whereas deposit growth to be moderate at 12% YoY.
Margin is expected to be marginally lower at 2.5% QoQ owing to
lower yields on loans and slowing CASA growth impacting cost of
funds.
Non-interest income expected to decline 19% YoY primarily driven by
slowdown in fee income growth to ~10% YoY (19% YoY in 1QFY14)
and lower trading income.
Asset quality performance remains a key, as slippage ratio is expected
to increase to 2.5%. The bank guided for restructuring of INR18b in
1QFY15, which needs to be watched.
Earnings are expected to decline 33% driven by weak PPP
performance (down 13% YoY) and higher provisioning.
CASA ratio and margins are on a continuous decline. Trends and
efforts to improve the same needs to be watched.
Outlook on balance sheet growth, slippages and restructuring.
Strategy to improve fee income performance.

Bloomberg UNBK IN
M.Cap. (INR b) /(USD b) 147.93/2.46
1, 6, 12 Rel. Per (%) 3/56/0

Y/E March 2014 2015E 2016E 2017E
NII 79 88 100 114
OP 52 54.5 59.9 66.7
NP 17 17.7 21.7 24.8
NIM (%) 2.5 2.5 2.5 2.5
EPS (INR) 27 28.0 34.3 39.2
EPS Gr. (%) -25.7 4.5 22.7 14.2
BV/Sh. (INR) 267 291 319 351
ABV/Sh. (INR) 208 227 258 296
RoE (%) 10.4 10.0 11.3 11.7
RoA (%) 0.5 0.5 0.5 0.5
Div. Payout (%) 17.3 17.4 17.4 17.4
Valuations
P/E(X) 8.6 8.3 6.7 5.9
P/BV (X) 0.9 0.8 0.7 0.7
P/ABV (X) 1.1 1.0 0.9 0.8
Div. Yield (%) 1.7 1.8 2.2 2.5

July 2014 151

NBFCs: Seasonally weak quarter
Monsoon impact Key monitorable

NBFCs under our coverage universe are expected to deliver 10% YoY PAT
growth. For retail NBFCs, the quarter will be marred by seasonal weakness,
translating into an increase in slippages and margins compression. Lower
collection efficiencies due to general elections and weak monsoon will impact
the reported asset quality of SHTF and MMFS. However, positive election
outcome, improving macro-economic environment, stable liquidity/interest
rates led to a sharp rally in stocks. With incremental data points indicating
bottoming out of the cycle, growth (moderating over last three to four quarters)
and asset quality outlook is expected to improve for NBFCs. Top picks are HDFC,
SHTF, LICHF, and POWF.
Housing finance companies: HFCs are expected to deliver 15-18% growth on the
back of healthy growth in individual segment. Seasonality will impact QoQ asset
quality and disbursement growth however margins are expected to be stable
YoY. Led by DTL creation on special reserves, tax rate is likely to increase YoY,
leading to lower PAT growth v/s PBT growth. On the back of expected
improvement in growth, profitability and RoE, we revise HDFC and LICHFs
target price to INR 1185 (FY16 SOTP Based) and INR400 (2x FY16E BV)
respectively.
Infrastructure finance companies: Outlook on infrastructure financing segment
is improving with the new government placing thrust on removing bottlenecks
for stalled projects and clearing several new projects. Nevertheless, near term
performance is likely to be muted as the initiatives will deliver results with a lag.
While the reforms initiated on discoms are showing results and is a relief for
state-owned NBFCs like RECL and POWF, fuel availability remains the most
critical issue for power sector with a resolution still not in sight. Among
infrastructure finance companies, we expect growth to remain healthy for RECL
and POWF at +18%. IDFC will likely report a sequential decline in loan book due
to rundown of short term loans to the telecom sector. Moreover, due to the
transition into a bank, the balance sheet will shrink over the next 12-18 months.
Asset finance companies: Retail asset finance companies (AFCs) delivered
strong performance both in terms of growth and asset quality during the cycle.
Among AFCs under our coverage, we expect BAF to report healthy AUM growth
and stable asset quality, with the seasonality factor playing out. While SHTF is
likely to deliver lower growth due to underlying stress in the CV segment,
margins are likely improve during the quarter; asset quality will remain a key
monitorable. While MMFS performed impressively during this cycle, continued
challenges in South India, poor monsoon and weak collections during the
election period could impact growth in collections and asset quality. MMFS is
likely to deliver 18% AUM growth (compared to +30% delivered since last 16
quarters). SHTF is our preferred pick in this segment with a revised target price
of INR 1,115 (2.2x FY16 Consol BV). We have also revised BAFs target price to
INR2,685 (2.4x FY16E BV).

Company name
Bajaj Finance
HDFC
IDFC
LIC Housing Finance
Mahindra Financial Services
Power Finance Corporation
Rural Electrification Corporation
Shriram Transport Finance

Financials - NBFC

Sunesh Khanna (Sunesh.Khanna@MotilalOswal.com)/ Alpesh Mehta (Alpesh.Mehta@MotilalOswal.com)

July 2014 152


(INR)
4.7.14
Reco Jun-14
Var %
YoY
Var %
QoQ
Jun-14
Var %
YoY
Var %
QoQ
Jun-14
Var %
YoY
Var %
QoQ
NBFC
Bajaj Finance 2,289 Buy

6,433 7.8 3.6

3,519 6.4 3.8

1,903 8.3 4.5
HDFC 1,009 Buy

17,818 17.1 -16.8

19,928 21.7 -16.4

13,211 12.6 -23.3
IDFC 134 Neutral

7,036 2.6 5.3

8,269 -6.3 -0.8

4,323 -22.4 67.6
Indiabulls Housing 372 Buy

14,678 11.8 11.0

6,030 27.4 28.0

4,462 28.1 -1.2
LIC Housing Fin 327 Buy

5,197 14.3 -2.5

4,915 11.4 -1.6

3,241 4.4 -12.4
M & M Financial 272 Neutral

13,330 116.3 74.8

4,698 12.9 -13.6

1,781 -6.9 -42.7
Power Finance Corp 320 Buy

23,114 19.0 3.0

22,704 18.2 4.8

15,805 24.0 12.9
Rural Electric. Corp. 374 Buy

18,694 16.0 5.4

19,700 20.4 9.8

13,397 12.8 7.4
Shriram Transport Fin. 953 Buy

9,544 5.9 4.6

7,294 -0.7 5.7

3,117 -8.6 5.7
NBFC Bkg. Sector Aggregate 115,845 20.1 5.5 97,058 14.5 -0.2 61,241 10.1 -1.8




NBFC
Bajaj Finance 2,289 Buy 171.4 198.9 234.2 13.4 11.5 9.8 2.4 2.1 1.8 19.7 19.4 19.5
Dewan Housing 356 Buy 54.0 64.5 78.5 6.6 5.5 4.5 1.1 0.9 0.8 17.3 17.8 18.5
HDFC 1,009 Buy 38.5 45.8 54.0 26.2 22.0 18.7 5.1 4.6 4.1 25.5 24.2 25.3
IDFC 134 Neutral 12.7 13.1 13.5 10.5 10.2 9.9 1.2 1.1 1.0 12.2 11.6 10.9
Indiabulls Housing 372 Buy 55.6 66.4 80.3 6.7 5.6 4.6 1.9 1.7 1.5 31.0 32.4 33.7
LIC Housing Fin 327 Buy 28.3 33.1 39.6 11.5 9.9 8.3 1.9 1.6 1.4 17.6 17.8 18.4
M & M Financial 272 Neutral 18.7 21.2 24.8 14.5 12.8 11.0 2.6 2.3 2.0 19.3 19.0 19.4
Power Finance Corp 320 Buy 50.9 60.1 69.8 6.3 5.3 4.6 1.3 1.1 0.9 21.8 21.9 21.6
Rural Electric. Corp. 374 Buy 57.2 66.0 78.4 6.5 5.7 4.8 1.5 1.3 1.0 25.3 24.1 23.8
Shriram Transport Fin. 953 Buy 68.4 82.8 94.6 13.9 11.5 10.1 2.2 1.9 1.6 16.2 17.0 17.9
NBFC Aggregate 12.3 10.5 8.9 2.5 2.2 1.9 20.5 20.8 21.1

90
100
110
120
130
A
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1
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125
150
175
J
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J
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4

July 2014 153

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Income from operations 8,837 8,742 10,274 10,032

10,434 10,851 12,479 14,933 37,886 48,696
Other Operating Income 446 875 429 679 703 727 753 498 2,429 2,681
Operating Income 9,283 9,617 10,703 10,711

11,136 11,578 13,231 15,430 40,314 51,376
YoY Growth (%) 32.4 30.7 29.7 28.7

20.0 20.4 23.6 44.1 30.3 27.4
Interest expenses 3,314 3,821 4,097 4,501 4,703 4,891 5,375 6,052 15,732 21,021
Net Income 5,969 5,796 6,607 6,211

6,433 6,687 7,856 9,378 24,582 30,355
YoY Growth (%) 36.4 31.5 31.1 22.8

7.8 15.4 18.9 51.0 30.2 23.5
Total Income 6,010 5,819 6,722 6,450

6,683 6,787 7,946 9,539 25,001 30,956

3,519 3,538 4,739 5,047 13,071 16,241
YoY Growth (%) 38.8 25.2 29.9 19.6

6.4 16.0 26.6 48.9 26.2 24.3
Provisions and Cont. 639 523 795 622 800 1,000 1,000 1,005 2,578 3,805
Tax Provisions 911 857 1,007 947 816 761 1,122 1,747 3,722 4,446
Net Profit 1,757 1,670 1,941 1,821 1,903 1,776 2,617 2,294 7,190 8,592
YoY Growth (%) 26.7 29.8 20.8 11.2 8.3 6.3 34.8 26.0 21.6 19.5
Loan Growth (%) 32.8 29.0 32.2 37.2

37.2 27.0
Cost to Income Ratio (%) 45.3 47.8 45.1 49.3

49.2 48.6 40.8 47.9 46.8 46.5
Tax Rate (%) 34.1 33.9 34.2 33.5 34.5 35.5 36.5 37.5 35.5 35.7
E: MOSL Estimates


Bajaj Finance

CMP: INR2,289 Buy
AUM is expected to grow at a healthy pace at +30% YoY, as 1Q is
seasonally a strong period due to strong consumer demand
(primarily air conditioners).
We expect NII to grow at 8% YoY and 4% QoQ. Margins are likely to
decline YoY due to changing loan mix towards low yielding
mortgage assets.
Asset quality is expected to remain stable. As of March 2014,
GNPAs were 1.18% and NNPAs were 0.28%.
We expect provisions of INR0.8b v/s INR639m during 4QFY13 and
INR622m during the last quarter.
We expect net profit to grow at 8% YoY to INR1.93b.
The stock trades at 2.3x FY15E and 2x FY16E BV. Maintain Buy.

Business growth momentum, as the company has been growing
its AUMs at 30%+ rate for the past 16 quarters.
Margin trends, as changing product mix is exerting some pressure
on margins.
Asset quality trends in CE and two-wheeler business.
Performance of new businesses such as rural lending and lifestyle
financing.

Bloomberg BAF IN
M.Cap. (INR b) /(USD b) 105.61/1.77
1, 6, 12 Rel. Per (%) -1/14/18

Y/E March 2014 2015E 2016E 2017E
NII 22.2 27.7 33.9 41.9
PPP 13.5 16.8 20.6 24.6
PAT 7.2 8.6 10.0 11.7
EPS (INR) 143 171 199 234
EPS Gr. (%) 21 19 16 18
BV/Sh. (INR) 796 939 1,106 1,301
RoA on AUM (%) 3.4 3.1 2.9 2.7
RoE (%) 19.5 19.7 19.4 19.5
Payout (%) 14.0 14.0 14.0 14.0
Valuations
P/E (x) 16.0 13.4 11.5 9.8
P/BV (x) 2.9 2.4 2.1 1.8
Div. Yield (%) 0.7 1.0 1.2 1.4

July 2014 154

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Interest Income 52,844 56,245 58,418 62,816 61,812 65,590 67,814 73,769 230,323 268,985
YoY Change (%) 16.6 27.1 14.5 8.1 17.1 21.5 10.9 18.7 13.3 17.0
Profit on Sale of Inv. 0 868 346 1,276

750 900 1,200 1,640 2,490 4,490
Other operating income 2,726 2,347 1,434 2,111 3,250 2,900 2,100 2,615 8,617 10,865
Net Operating Income 17,936 19,003 19,400 24,797 21,818 22,977 22,844 29,678 81,136 97,317
YoY Change (%) 16.0 12.3 12.8 11.4

21.6 20.9 17.8 19.7 12.4 19.9
Other Income 80 80 111 275 100 120 150 177 547 600
Total Income 18,016 19,083 19,511 25,072 21,918 23,097 22,994 29,855 81,683 97,917
Pre Provisioning Profit 16,381 17,363 17,827 23,831

19,928 21,307 20,804 28,485 75,403 90,578
YoY Change (%) 15.4 12.3 12.5 12.2

21.7 22.7 16.7 19.5 12.2 20.1
Provisions 300 150 250 300 500 500 600 714 1,000 2,314
PBT 16,081 17,213 17,577 23,531 19,428 20,807 20,204 27,771 74,403 88,263
YoY Change (%) 16.5 13.5 13.8 12.1

20.8 20.9 14.9 18.0 13.2 18.6
Provision for Tax 4,350 4,550 4,800 6,300 6,217 6,658 6,465 8,904 20,000 28,244
PAT 11,731 12,663 12,777 17,231 13,211 14,149 13,739 18,867 54,403 60,019
YoY Change (%) 17.1 11.0 12.1 10.8 12.6 11.7 7.5 9.5 12.2 10.3
E: MOSL Estimates


HDFC

CMP: INR1005 Buy
HDFCs loan growth (net of selldowns) is likely to remain healthy at
+16% YoY and 4% QoQ.
Spreads should largely be stable at 2.3% levels. HDFC has not
changed the home loan rates during the quarter.
NII is likely to remain strong at INR17.8b, registering a growth of
17% YoY.
Non-interest income is likely to grow at 45% YoY on the back of
increase in dividend income from subsidiaries.
Barring seasonal increase, asset quality remained healthy over the
past several quarters and the trend is likely to continue. In 4QFY14,
GNPAs were 0.69% on 90-day overdue basis.
We model provisions of INR500m v/s INR300m seen in 1QFY14.
Creation of DTL on special reserves will increase the tax rate to 32%
The stock trades at 5.1x FY15 AP/ABV and 4.6x FY15E AP/AEPS
(price adjusted for value of other businesses and book value
adjusted for investments made in those businesses). Maintain Buy

Loan growth and movement in spreads (on individual loans).
Asset quality trends
Dividend income from subsidiaries

Bloomberg HDFC IN
M.Cap. (INR b) /(USD b) 1,579.94/26.48
1, 6, 12 Rel. Per (%) 6/3/-17

Y/E March 2014 2015E 2016E 2017E
NII 70.0 82.0 98.2 116.3
PAT 54.4 60.0 71.4 84.3
Adj. EPS (INR) 29.7 32.6 39.0 46.0
BV/Sh. (INR) 179.1 197.0 219.0 245.4
ABV/Sh. (INR) 125.6 143.2 165.2 191.6
RoAA (%) 2.6 2.4 2.5 2.5
Core RoE (%) 25.6 25.5 24.2 25.3
Payout (%) 46.8 47.6 46.4 46.4
Valuations
AP/E (x) 25.9 22.3 17.2 14.6
P/BV (x) 5.6 5.1 4.6 4.1
AP/ABV (x) 6.1 5.1 4.1 3.5
Div. Yield (%) 1.4 1.6 1.8 2.1

July 2014 155

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Net interest income 6,860 6,860 6,640 6,680 7,036 6,782 6,586 6,504 27,040 27,216
% Change (YoY) 10.8 6.7 0.8 3.9

2.6 -1.1 -0.8 -2.6 5.5 0.6
Infra Loans 6,310 6,420 6,100 6,050

6,402 6,172 5,993 5,918 24,880 24,972
Treasury 550 440 540 630 633 610 593 585 2,160 2,243
Other operating income 2,715 1,061 996 2,296

2,000 2,155 2,335 2,419 7,068 6,353
Asset management 930 1,040 870 1,170

1,100 1,200 1,350 1,422 4,010 4,180
IB and Broking 130 80 190 370

200 225 225 236 770 840
Fixed Income 1,390 -180 -300 110

300 305 310 305 1,020 -70
Loan related/others 265 121 236 646 400 425 450 456 1,268 1,403
Principal investments 630 960 890 580

550 650 900 1,190 1,880 2,020
Other Income 6 6 22 146 5 10 15 20 180 179
Net Income 10,211 8,886 8,548 9,703

9,591 9,597 9,836 10,132 37,348 36,728
% Change (YoY) 32.3 4.5 2.2 -4.3

-6.1 8.0 15.1 4.4 7.5 -1.7
Operating profit 8,826 7,512 7,233 8,339

8,269 8,165 8,098 8,366 31,910 31,352
% Change (YoY) 34.6 3.4 2.9 -2.8

-6.3 8.7 12.0 0.3 8.4 -1.7
Provisions 592 501 365 4,825 2,000 1,500 1,000 444 6,283 7,691
PBT 8,234 7,011 6,868 3,513

6,269 6,665 7,098 7,922 25,627 23,661
Tax 2,627 2,099 1,811 848 1,881 2,000 2,129 2,362 7,385 6,638
PAT 5,607 4,912 5,057 2,666

4,388 4,666 4,969 5,560 18,242 17,023
Less: Consol Adjustments 34 44 50 86 65 65 65 55 215 246
Consol PAT 5,573 4,868 5,007 2,579

4,323 4,601 4,904 5,505 18,027 16,777
% Change (YoY) 46.7 2.3 10.0 -50.9 -22.4 -5.5 -2.1 113.4 -1.8 -6.9
E: MOSL Estimates, * FY11 asset mgmt fees includes carry income which is clubbed in principal investments in FY10


IDFC

CMP: INR133 Neutral
IDFC has consciously moderated its loan growth in the wake of new
banking licence. Loan growth is likely to decline 2% on a YoY basis
and 5% QoQ due to closure of short term loans.
We expect margins to decline 5bp on a YoY basis, translating into
sub 2% YoY growth in NII.
Other operating income is expected to decline sequentially due to
lower loan related fees. However, we expect revenue from fixed
income and broking to improve sequentially.
Cost to income ratio on a 12-month rolling basis is likely to remain
stable at 15%.
Asset quality is expected to remain stable; we model provisions of
INR2b v/s INR592m in 1QFY14 and INR4.8b during the last quarter.
The stock trades at 1.1x FY15E and 1x FY16E ABV. Maintain Buy.

Loan growth guidance in the wake of run-down of book due to
transition to bank.
Asset quality trends and restructured book.
Movement in spreads and asset quality trends.

Bloomberg IDFC IN
M.Cap. (INR b) /(USD b) 205.45/3.44
1, 6, 12 Rel. Per (%) -2/2/-27

Y/E March 2014 2015E 2016E 2017E
NII 27.2 27.5 27.2 26.5
PPP 31.9 32.8 33.7 34.5
Cons. PAT 18.0 19.3 19.9 20.4
EPS (INR) 11.9 12.7 13.1 13.5
EPS Gr. (%) -1.9 7.0 3.2 2.8
BV/Sh. (INR) 99.2 108.7 118.4 128.4
ABV/Sh. (INR) 89.5 98.9 108.7 118.7
RoAA (%) 2.6 2.8 3.0 3.3
Core RoE (%) 13.1 12.8 11.9 11.2
Payout (%) 25.5 25.6 25.6 25.6
Valuations
P/E (x) 11.2 10.5 10.1 9.9
P/BV (x) 1.3 1.2 1.1 1.0
P/ABV (x) 1.2 1.1 1.0 0.9
Div. Yield (%) 2.0 2.1 2.2 2.2
* Adj for value of subs

July 2014 156


(INR Million)
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Interest Income 21,303 22,237 23,120 24,074

24,971 26,122 26,863 27,742 90,733 105,698
YoY Growth (%) 29.7 28.2 23.8 15.7

14.3 22.6 28.6 15.5 23.7 20.1
Fees and other income 477 787 644 705 450 600 700 1,067 2,613 2,817
Net Income 5,024 5,321 5,221 6,037

5,647 6,158 6,587 7,222 21,602 25,615
YoY Growth (%) 25.6 30.7 24.4 19.0

12.4 15.7 26.2 19.6 24.6 18.6
Operating Expenses 613 744 733 1,043

732 882 930 1,143 3,133 3,687
YoY Growth (%) 26.8 34.9 27.4 21.0

11.4 15.3 26.1 21.7 27.2 18.7
Provisions and Cont. 171 341 -75 -223 150 150 150 147 215 597
Tax Provisions 1,135 1,136 1,297 1,516 1,525 1,640 1,762 1,898 5,083 6,826
Net Profit 3,105 3,101 3,266 3,700 3,241 3,486 3,745 4,034 13,172 14,505
YoY Growth (%) 36.3 27.6 38.2 17.0 4.4 12.4 14.7 9.0 28.7 10.1
Loan Growth (%) 22.1 20.4 18.9 17.4 17.2 17.2 17.3 18.2 17.4 18.2
Borrowings Growth (%) 22.6 20.6 20.3 19.3

16.8 15.1 16.0 18.5 19.3 18.5

13.0 14.3 14.1 15.8 14.5 14.4
Tax Rate (%) 26.8 26.8 28.4 29.1 32.0 32.0 32.0 32.0 27.8 32.0
E: MOSL Estimates


LIC Housing Finance

CMP: INR324 Buy
LICHFs loan growth is likely to remain healthy at +17% YoY on the
back of healthy retail growth and some uptick in developer
segment.
Individual loan segment is likely to grow by +17% YoY and 3% QoQ,
while the developer segment is expected to grow +6% YoY. Share of
builder loan is likely to remain below 3% of overall book.
We expect margins to remain flat on a YoY basis at 2.3%. During the
quarter, LICHF did not revise rates, despite competitive pressures.
Barring seasonal uptick, asset quality is likely to remain stable. We
model provisioning reversal of INR150m (v/s provisioning reversal
of INR223m in 4QFY14).
Creation of DTL on special reserves will increase the tax rate to 32%
We expect net profit to grow at 4% YoY to INR3.2b.
The stock trades at 1.9x FY15E and 1.6x FY16E BV. Maintain Buy.

Asset quality in the developer category; outlook on performance
in the developer portfolio.
Margin trends - margins have been under pressure for the past
few quarters. Though margins bounced back in the last quarter,
sustaining/improving them will be key.

Bloomberg LICHF IN
M.Cap. (INR b) /(USD b) 165.38/2.77
1, 6, 12 Rel. Per (%) -7/27/1

Y/E March 2014 2015E 2016E 2017E
NII 19.0 22.8 26.6 31.8
PPP 18.5 21.9 25.6 30.6
Adj. PAT 12.0 14.3 16.7 20.0
Adj. EPS (INR) 23.8 28.3 33.1 39.6
EPS Gr. (%) 17.4 18.9 16.9 19.6
BV/Sh (INR) 149.2 172.0 198.7 230.6
RoAA (%) 1.5 1.5 1.4 1.4
RoE (%) 17.2 17.6 17.8 18.4
Payout (%) 20.0 20.3 20.3 20.3
Valuations
P/E (x) 13.6 11.5 9.8 8.2
P/BV (x) 2.2 1.9 1.6 1.4
Div. Yield (%) 1.4 1.6 1.8 2.2

July 2014 157


(INR Million)
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Operating Income 10,925 12,031 12,658 13,602

13,330 14,130 14,978 16,244 49,216 58,682
Other Income 60 96 53 104 150 150 150 147 314 597
Total income 10,985 12,127 12,711 13,706

13,480 14,280 15,128 16,391 49,530 59,279
YoY Growth (%) 30.9 30.5 27.0 21.8 22.7 17.8 19.0 19.6 27.2 19.7
Net Income 6,224 6,875 6,820 7,732

7,326 7,880 8,567 9,955 27,650 33,728

4,698 5,372 5,919 6,866 18,516 22,855
YoY Growth (%) 28.1 27.6 13.2 16.4

12.9 16.2 37.9 26.2 20.7 23.4
Provisions 1,252 1,262 1,796 748 2,000 1,800 1,500 1,559 5,058 6,859

2,698 3,572 4,419 5,307 13,459 15,997
Tax Provisions 995 1,151 854 1,584

917 1,214 1,503 1,804 4,585 5,439
Net Profit 1,912 2,212 1,641 3,107 1,781 2,358 2,917 3,503 8,873 10,559
YoY Growth (%) 18.7 17.9 -18.0 -2.4 -6.9 6.6 77.7 12.7 2.3 19.0
AUM growth (%) 34.8 30.2 27.1 23.1

19.1 16.0 15.6 16.0 23.1 16.0

35.9 31.8 30.9 31.0 33.0 32.2
Provi./Operating Profits (%) 30.1 27.3 41.9 13.7

42.6 33.5 25.3 22.7 27.3 30.0
Tax Rate (%) 34.2 34.2 34.2 33.8 34.0 34.0 34.0 34.0 34.1 34.0
E: MOSL Estimates; We have not included EO inc. of INR154m in 4QFY13 for presentation purpose; According taxes have been adj.


Mahindra Financial Services

CMP: INR275 Neutral
MMFS AUM growth is likely to moderate to 19% YoY and 3% QoQ
on the back of +10% sequential decline in disbursements.
We expect NII to grow at 17% YoY to INR7.3b. Margins are likely to
decline 25bp on a YoY basis to 8.9%; margins stood at 9.7% during
the last quarter.
Asset quality is likely to remain weak as collections were impacted
due to the elections. MMFS is likely to report GNPAs of above 5%
v/s 4.2% during 1QFY14.
We expect provisions of INR2b v/s INR1.2b during 1QFY14 and
INR0.7b during the last quarter.
We expect net profit to decline 7% YoY to INR1.8b.
The stock trades at 2.9x FY15E and 2.5x FY16E ABV. Maintain
Neutral.

Asset quality trends as the last quarter was an election period.
Margin and growth trends.

Bloomberg MMFS IN
M.Cap. (INR b) /(USD b) 163.21/2.74
1, 6, 12 Rel. Per (%) -14/-38/-31

Y/E March 2014 2015E 2016E 2017E
NII 27.3 33.1 37.6 42.8
PPP 18.5 22.9 25.7 28.9
PAT 8.9 10.6 12.0 14.0
EPS (INR) 15.7 18.7 21.2 24.8
EPS Gr. (%) 0.4 19.0 13.4 16.9
BV/Sh. (INR) 90.4 103.9 119.2 137.1
ABV/Sh. (INR) 83.8 95.4 108.2 123.2
RoA on AUM (%) 3.1 3.0 2.9 3.0
RoE (%) 18.6 19.3 19.0 19.4
Payout (%) 28.3 28.1 28.1 28.1
Valuations
P/E (x) 17.5 14.7 12.9 11.1
P/BV (x) 3.0 2.6 2.3 2.0
P/ABV (x) 3.3 2.9 2.5 2.2
Div. Yield (%) 1.4 1.6 1.9 2.2

July 2014 158


(INR Million)
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Interest Income 49,590 52,230 54,180 54,990

57,465 59,878 62,393 68,134 210,990 218,865

23,114 23,638 24,341 23,863 84,580 88,264
YoY Gr % 39.4 43.1 28.8 29.0

19.0 12.0 12.6 6.4 35.2 19.9
Other Income 100 220 140 100 50 50 50 100 560 510
Net Operational Income 19,530 21,330 21,750 22,530

23,164 23,688 24,391 23,963 85,140 88,774
YoY Gr % 39.2 43.1 28.9 28.7

18.6 11.1 12.1 6.4 34.5 4.3
Exchange gain/(loss) -1,070 -1,350 -290 160 -500 -500 -500 -1,000 -2,550 -1,980
Total Net Income 18,460 19,980 21,460 22,690 22,664 23,188 23,891 22,963 82,590 86,794
YoY Gr % 39.2 36.2 30.8 28.9

22.8 16.1 11.3 1.2 33.3 5.1
Operating Expenses 319 721 402 869 460 565 715 914 2,310 2,654
YoY Gr % 11.8 105.6 3.4 103.9

44.1 -21.6 78.0 5.3 59.3 14.9
YoY Gr % 39.8 34.5 31.4 27.1 22.4 17.5 10.1 1.0 32.7 4.8
Adjusted PPP (For Forex) 19,211 20,609 21,348 21,662 22,704 23,123 23,676 23,049 82,830 86,323
YoY Gr % 39.8 41.6 29.5 26.8

18.2 12.2 10.9 6.4 0.0 4.2
Provisions 910 1,370 510 1,910 1,200 1,400 1,500 1,497 4,700 4,990
PBT 17,231 17,889 20,548 19,912

21,004 21,223 21,676 20,552 75,580 79,149
YoY Gr % 33.0 24.7 35.9 15.3

21.9 18.6 5.5 3.2 26.6 4.7
Tax 5,230 5,159 5,206 5,800

5,566 5,624 5,744 5,446 21,395 21,731
Tax Rate % 30.4 28.8 25.3 29.1 26.5 26.5 26.5 26.5 28.3 27.5
PAT 12,001 12,730 15,343 14,112

15,438 15,599 15,932 15,106 54,185 57,419
YoY Gr % 23.5 22.7 37.2 9.0 28.6 22.5 3.8 7.0 22.6 6.0
Adjusted PAT (For Forex) 12,746 13,691 15,559 13,998

15,805 15,966 16,299 15,841 55,994 59,053
YoY Gr % 23.8 29.8 35.0 8.7 24.0 16.6 4.8 13.2 23.8 5.5
E: MOSL Estimates; Quarterly and annual numbers may vary due to differences in classification


Power Finance Corporation

CMP: INR318 Buy
Loan growth is expected to remain healthy at 18% YoY. On a
sequential basis, loans and borrowings are expected to grow by 5%
and 7% respectively.
NII is expected to grow at a healthy 19% YoY on the back of healthy
loan growth.
We expect MTM loss of INR500m during the quarter, compared
with a gain of INR160m incurred in 4QFY14.
We expect NIM to remain flat at 4.75% YoY.
Barring a couple of accounts, asset quality at large remained
healthy. However, it will remain a key monitorable given issues
related to fuel linkages.

Growth trends and asset quality performance against the
backdrop of challenging fuel linkages issues hurting power
generation companies.
Movement in spreads and yields on assets.
Overall disbursement trends and disbursements to SEBs for
transnational finance.

Bloomberg POWF IN
M.Cap. (INR b) /(USD b) 417.53/7.00
1, 6, 12 Rel. Per (%) -1/76/98

Y/E March 2014 2015E 2016E 2017E
NII 79.2 95.0 112.7 131.6
PPP 80.3 96.4 114.4 133.6
Adj. PAT 56.0 67.2 79.4 92.1
Adj. EPS (INR) 42.4 50.9 60.1 69.8
EPS Gr. (%) 24.0 20.0 18.1 16.1
BV/Share (INR)214.8 252.4 296.9 348.7
Adj. RoAA (%) 3.2 3.3 3.2 3.1
RoE (%) 21.3 21.8 21.9 21.6
Payout (%) 25.5 25.5 25.5 25.5
Valuations
P/E (x) 7.5 6.2 5.3 4.6
P/BV (x) 1.48 1.26 1.07 0.91
Div. Yield (%) 2.8 3.4 4.1 4.7

July 2014 159


(INR Million)
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Interest Income 39,141 41,672 43,290 43,962

45,720 47,092 48,504 51,789 168,064 193,106
Interest Expenses 23,020 25,194 25,938 26,234

27,026 28,095 29,207 29,111 100,385 113,439
YoY Gr (%) 42.8 30.1 23.2 26.2

16.0 15.3 11.2 27.9 30.0 17.7
Other Operational Income 675 432 476 464

500 600 700 739 2,116 2,539
Net Operational Income 16,796 16,910 17,828 18,192 19,194 19,596 19,997 23,418 69,795 82,205
YoY Gr (%) 39.9 28.3 23.8 23.2

14.3 15.9 12.2 28.7 28.0 17.8
Other Income 130 140 290 470

300 300 300 334 1,028 1,234
Total Net Income 16,926 17,050 18,118 18,662 19,494 19,896 20,297 23,751 70,823 83,439
YoY Gr (%) 39.1 27.9 24.6 25.1 15.2 16.7 12.0 27.3 28.4 17.8
Operating Expenses 564 514 599 715 660 665 665 825 2,392 2,815
YoY Gr (%) 23.8 -12.1 18.3 9.0

17.0 29.4 11.0 15.4 8.6 17.7
% to Income 3.3 3.0 3.3 3.8 3.4 3.3 3.3 3.5 3.4 3.4

18,834 19,231 19,632 22,927 68,431 80,624
YoY Gr % 39.7 29.8 24.8 25.8

15.1 16.3 12.1 27.7 29.2 17.8
Provisions 560 340 754 1,475 1,000 1,100 1,100 1,133 3,120 4,333
PBT 15,802 16,196 16,765 16,472 17,834 18,131 18,532 21,793 65,311 76,291
YoY Gr (%) 34.9 27.1 21.6 24.7

12.9 11.9 10.5 32.3 26.5 16.8
Tax 4,343 5,088 4,484 4,560 4,658 4,733 4,833 6,374 18,474 20,599
Tax Rate (%) 27.5 31.4 26.7 27.7

26.1 26.1 26.1 29.2 28.3 27.0
PAT 11,459 11,108 12,281 11,912 13,175 13,399 13,699 15,419 46,837 55,692
YoY Gr (%) 31.8 17.3 20.2 24.1 15.0 20.6 11.5 29.4 22.7 18.9
E:MOSL Estimates; Quarterly and annual numbers would not match due to differences in classification


Rural Electrification

CMP: INR369 Buy
Loan growth is expected to remain healthy at +17% YoY and +4.5%
QoQ.
RECLs margins stood at 4.9% (the highest in last four years) led by
an improvement in yields, while it also maintained a tight leash on
cost of funds. However, in the current quarter, we factor 10bp
moderation in margins.
Barring a couple of accounts, asset quality at large remained
healthy. However, it will remain a key monitorable given the
uncertain macro environment. We model provisions of INR1b
during the quarter.
We expect PAT to grow by 15% YoY to INR13.2b.

Growth trends and asset quality performance against the
backdrop of a challenging macro environment.
Movement in spreads and yield on assets.
Overall disbursements trends and disbursements to SEBs for
transnational finance.

Bloomberg RECL IN
M.Cap. (INR b) /(USD b) 365.21/6.12
1, 6, 12 Rel. Per (%) 9/50/52

Y/E March 2014 2015E 2016E 2017E
NII 67.7 79.7 92.0 109.2
PPP 68.4 80.6 93.3 110.8
PAT 46.8 55.7 64.3 76.3
EPS (INR) 48.9 57.2 66.0 78.4
EPS Gr. (%) 26.4 17.0 15.5 18.7
BV/Sh. (INR) 204.0 248.1 299.0 359.4
RoAA (%) 3.6 3.5 3.4 3.4
RoE (%) 25.6 25.3 24.1 23.8
Payout (%) 23.2 23.2 23.2 23.2
Valuations
P/E (x) 7.5 6.5 5.6 4.7
P/BV (x) 1.8 1.5 1.2 1.0
Div. Yield (%) 2.6 3.1 3.5 4.2

July 2014 160

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Interest Income 13,856 15,598 16,832 16,379

17,034 17,630 18,071 17,674 62,664 70,410
Interest expenses 8,702 9,836 10,434 10,011 10,411 10,828 11,044 10,355 38,982 42,638

6,623 6,803 7,027 7,319 23,683 27,772
YoY Growth (%) 90.7 41.0 36.3 26.4

28.5 18.1 9.8 14.9 42.8 17.3
Securitisation income 3,859 3,262 2,919 2,756 2,921 3,097 3,282 3,460 12,796 12,761
Net Income (Incl. Sec.) 9,013 9,024 9,318 9,124

9,544 9,899 10,309 10,780 36,479 40,533
YoY Growth (%) 12.3 4.0 4.1 2.2

5.9 9.7 10.6 18.1 5.3 11.1
Fees and Other Income 823 419 171 242 400 400 400 621 1,655 1,821
Net Operating Income 9,837 9,443 9,488 9,367 9,944 10,299 10,709 11,401 38,134 42,354
YoY Growth (%) 12.7 5.0 2.6 -1.4

1.1 9.1 12.9 21.7 4.4 11.1
YoY Growth (%) 8.3 2.0 -2.5 -7.5

-0.7 6.1 12.6 21.7 -0.3 9.7
Provisions 2,503 2,533 2,800 2,458 2,825 2,725 2,625 2,582 10,293 10,757

4,469 4,974 5,334 5,812 18,280 20,591
Tax Provisions 1,435 1,457 1,254 1,493 1,352 1,505 1,614 1,758 5,638 6,229
Net Profit 3,410 3,268 3,014 2,950

3,117 3,470 3,721 4,054 12,642 14,362
YoY Growth (%) 6.0 -3.2 -12.9 -17.0 -8.6 6.2 23.5 37.4 -7.1 13.6
AUM Growth (%) 25.2 22.0 14.7 6.9

3.2 3.2 7.1 11.2 6.9 11.2
Securitisation Inc. / Net Inc. (%) 39.2 34.5 30.8 29.4

29.4 30.1 30.6 30.4 33.6 30.1

26.6 25.2 25.7 26.4 25.1 26.0
Tax Rate (%) 29.6 30.8 29.4 33.6 30.3 30.3 30.3 30.3 30.8 30.3
E: MOSL Estimates; * Quaterly nos and full year nos will not tally due to different way of reporting financial nos


Shriram Transport Finance

CMP: INR939 Buy
AUM likely to grow at 3.2%/2% YoY/QoQ. We expect disbursements
to decline 6% YoY and increase 12% QoQ.
Calculated margins on AUM are expected to improve YoY at 7.2%.
Hence, NII (including securitization income) should grow 6% YoY.
While incremental data points indicate a revival in CV cycle, given
the weak monsoon and election period, asset quality continues to
be a key monitorable.
We factor higher provisions of INR2.8b v/s INR2.4b in 1QFY14 and
INR2.5b reported during the last quarter.
We expect PAT to decline 8.6% YoY to INR3.1b.
The stock trades at 2.1x FY15E and 1.8x FY16E consolidated BV.
Maintain Buy.
Business growth, momentum and management commentary on
the same.
Movement in borrowing costs and margins.
Asset quality trends, given a weak CV cycle.

Bloomberg SHTF IN
M.Cap. (INR b) /(USD b) 213.68/3.58
1, 6, 12 Rel. Per (%) -6/16/4

Y/E March 2014 2015E 2016E 2017E
Net Inc. 36.5 40.5 47.4 57.0
PPP 28.6 31.3 36.6 44.3
PAT 12.6 14.4 17.4 21.3
Cons.PAT 13.6 15.5 18.7 21.4
EPS (INR) 55.7 63.3 76.9 93.9
EPS Gr. (%) -7.1 13.6 21.4 22.1
Cons.EPS (INR) 60.1 68.4 82.8 94.6
Cons.EPS Gr.(%) -7.1 13.9 21.0 14.3
BV/Sh. (INR) 364.6 418.6 484.3 564.4
Cons. BV (INR) 374.9 434.0 505.6 586.4
RoA on AUM (%) 2.2 2.2 2.4 2.5
RoE (%) 16.3 16.2 17.0 17.9
Payout (%) 14.5 14.5 14.5 14.5
Valuations
P/Cons. EPS (x) 15.6 13.7 11.3 9.9
P/Cons. BV (x) 2.5 2.2 1.9 1.6
Div. Yield (%) 0.7 0.8 1.0 1.2

July 2014 161

Alok Dalal (Alok.Dalal@MotilalOswal.com) / Hardick Bora (Hardick.Bora@MotilalOswal.com)

Aggregate core EBITDA to grow 13%, adj. PAT to grow 11%
INR depreciation to aid operations; higher taxes to impact PAT growth

Expect aggregate core EBITDA to grow 13% YoY
For 1QFY15, we expect core sales growth of 16% YoY and core EBITDA growth of
13% YoY for our Healthcare Universe (excluding one-offs). Adjusted PAT is likely to
grow 11% YoY, mainly due to higher taxes. High base effect would impact
operational performance for most companies.

Higher contribution from recently launched products in the US and better sales mix
would drive growth for Dr Reddys, Lupin, Cadila Healthcare, and Alembic Pharma.
Increasing contribution from branded business is likely to drive operational
performance for IPCA Labs. Biocon is likely to report high growth due to lower R&D
expenses. Both MNCs under our coverage, Sanofi India and GSK Pharma, would
report healthy operational performance due to increase in prices of products exiting
price control and low base.

Favorable currency movement should favorably impact operating performance for
the rest of our Healthcare Universe. A sequentially flat INR against the USD may lead
to insignificant MTM impact from monetary forex liabilities. Yet, due to higher taxes,
adjusted PAT would grow slower than core EBITDA.


(INR)
4.7.14
Reco Jun-14
Var %
YoY
Var %
QoQ
Jun-14
Var %
YoY
Var %
QoQ
Jun-14
Var %
YoY
Var %
QoQ
Alembic Pharma 310 Buy

5,051 18.3 8.9

909 27.2 -0.4

612 31.1 -0.2
Biocon 543 Sell

8,052 15.9 11.4

1,771 21.2 4.2

1,149 22.9 1.7
Cadila Health 1,105 Buy

20,131 23.0 2.3

3,621 26.7 1.0

2,419 23.7 -4.3
Cipla 448 Neutral

29,744 20.7 18.1

5,795 -14.2 41.6

3,559 -25.1 36.5
Divis Labs 1,527 Buy

5,967 15.7 -19.1

2,130 8.7 -17.8

1,581 -9.5 -18.1
Dr Reddys Labs 2,679 Buy

34,343 23.1 -1.3

8,071 61.2 6.4

5,257 60.6 9.2
Glenmark Pharma 602 Buy

14,185 14.6 -13.5

2,494 0.8 -22.7

1,082 -15.9 -37.9
GSK Pharma 2,548 Neutral

6,878 8.0 14.7

1,277 12.4 30.8

1,167 22.7 20.8
IPCA Labs. 881 Buy

9,583 19.0 27.8

2,304 34.7 26.4

1,526 112.6 11.3
Lupin 1,088 Buy

28,309 22.7 0.5

6,567 44.4 2.1

3,943 69.1 -4.2
Ranbaxy Labs 534 Buy

27,484 2.4 11.4

1,714 -34.7 13.7

361 -73.0 164.9
Sanofi India 3,270 Buy

4,929 13.3 10.8

1,016 16.2 25.4

655 27.9 26.6
Sun Pharma 709 Buy

37,797 14.8 5.9

14,639 6.2 4.1

12,213 8.4 -6.3
Torrent Pharma 696 Neutral

10,819 11.3 11.3

2,057 -1.1 18.8

1,247 -16.3 34.9
Note: Above numbers exclude one-offs to aid comparison of core operations. Source: MOSL

Expected quarterly performance summary (Incl. upside from one-off opportunities, INR m))
Sector CMP Sales EBDITA Net Profit

(INR)
4.7.14
RECO Jun-14
Var %
YoY
Var %
QoQ
Jun-14
Var %
YoY
Var %
QoQ
Jun-14
Var %
YoY
Var %
QoQ
Glenmark Pharma 602 Buy 14,484 17.0 -13.9 2,792 12.9 -22.4 1,351 5.0 213.6
Lupin 1,088 Buy 29,775 23.0 -2.4 7,593 42.2 -6.0 4,823 20.3 -12.8
Sun Pharma 709 Buy 43,328 24.4 7.2 19,064 24.6 6.8 15,310 -220.0 -3.5
Torrent Pharma 696 Neutral 12,815 31.8 4.6 3,454 66.1 -1.3 2,444 64.0 0.2

Company name
Alembic Pharmaceuticals
Biocon
Cadila Health
Cipla
Divi's Laboratories
Dr Reddy s Labs
Glenmark Pharma
GSK Pharma
Ipca Laboratories
Lupin
Ranbaxy Labs
Sanofi India
Sun Pharma
Torrent Pharmaceuticals


Healthcare

July 2014 162

1QFY15 Aggregates excluding one-offs
Healthcare Universe YoY growth (%) EBITDA Margin Net Profit Margin
Aggregates Sales EBITDA Adj PAT Jun-14 Jun-13 CHG (BP) Jun-14 Jun-13 CHG (BP)

MNC Pharma 10.1 14.1 24.5 19.4 18.8 67 15.4 13.6 178
Big 5 Generics 16.5 12.4 10.3 23.3 24.2 -84 16.1 17.0 -90
CRAMS 15.7 8.7 -9.5 35.7 38.0 -228 26.5 33.9 -737
Second Tier generics 17.5 16.4 17.3 19.4 19.6 -17 11.8 11.9 -2
Sector Aggregate 16.4 13.3 11.4 22.3 23.0 -61 15.1 15.8 -69
Source: MOSL; Big-5 Generics include Sun, Ranbaxy, Cipla, Dr Reddy's and Lupin.

Core 1QFY15 performance: Key highlights
We expect Dr Reddys, Lupin, Cadila Healthcare, IPCA Labs, Biocon, and Alembic
Pharma to record strong operational performance. We attribute the following
company-specific reasons for this performance:
Dr Reddys: We expect Dr Reddys to report strong growth of 61% in core
EBITDA, driven by a robust 33% growth in US base business and higher
contribution from low competition launches like gDacogen, gReclast, gVidaza.
The company will also benefit from low base effect. We expect core EBITDA
margin to expand 550bp YoY to 23.5%.
Lupin: Lupin is likely to witness 44% YoY growth in core EBITDA, as improving
product mix in the US started driving up margins post 2QFY14.
Cadila Healthcare: Uptick in recent launches and contribution from authorized
generics opportunities is likely to result in 50% growth in US sales. EBITDA
margin is likely to expand 50bp YoY due to benefit of operating leverage and
improving sales mix.
IPCA Labs: We expect sales growth momentum to continue, aided by 27%
growth in export formulations. Improving sales mix aided by higher contribution
from branded exports could result in EBITDA margin expansion of 280bp YoY.
Biocon: Slowdown in R&D activity is yet again likely to result in lower R&D
expenses. As such, we expect Biocons EBITDA margin to expand 100bp YoY.
Alembic Pharma: We expect revenue to grow 18% YoY, driven by increasing
contribution from recent launches in the US generics market. With improving
business mix, EBITDA could grow 27%.
MNCs: We expect GSK Pharma and Sanofi India to report healthy operational
performance due to price increases in products exiting price control and low
base effect.

Key developments
Sun Pharma announced acquisition of 100% stake in Ranbaxy for USD4b
The transaction would be an all-stock deal, resulting in 16.3% dilution for Sun
Pharma shareholders. Promoter stake would reduce to 54.7%. Ranbaxy
shareholders would receive 0.8 shares of Sun Pharma for each Ranbaxy share.
Consequently, Daiichi Sankyo would become the largest shareholder in Sun
Pharma, with a stake of 9%.
This transaction would make Sun Pharma the largest pharma company in India,
the largest Indian pharma company in the US, and strengthen its presence in
emerging markets.
The transaction is likely to be closed by the end of 2014. The acquisition would
add to Sun Pharmas cash earnings per share in the first full year. Sun Pharma
expects to realize revenue and operating synergies of USD250m by the third
year post closing of the transaction.
June 2014 Results Preview | Sector: Healthcare

July 2014 163

Ranbaxys exclusive copy to finally see light of day
Ranbaxy received FDA approval for its generic version of Diovan on 26 June
2014. This approval paves the way for the company to exercise its 180-day
exclusivity on the USD2.2b opportunity.
We estimate that the product could generate one-off sales of ~USD100m and
INR7/share of one-time profit for Ranbaxy over the exclusivity period. Our
expectation is based on the assumption that Novartis will introduce an
authorized generic version through its generics unit, Sandoz.
This development also increases the likelihood of Ranbaxy capitalizing on other
FTF opportunities gValcyte and gNexium.

INR depreciation to aid operations; minor MTM impact from forex liabilities
On an average, in 1QFY15, the INR depreciated 7% YoY against the USD. We
expect companies with largely unhedged net exports to realize the benefit of
favorable currency at the EBITDA level. Companies that are likely to benefit the
most include Alembic Pharma, Biocon, Cadila, Divis Labs, IPCA, and Dr Reddys.
The INR/USD exchange rate has remained flat QoQ. There would be no
significant MTM impact for companies with large forex liabilities.

Currency movement (INR/USD)


Comparative Valuation
Healthcare
Alembic Pharma 310 Buy 16.3 21.7 26.5 19.0 14.3 11.7 13.2 10.0 8.0 38.9 38.3 35.2
Biocon 543 Sell 23.0 26.8 31.8 23.6 20.3 17.1 14.7 12.3 10.4 13.7 14.4 15.2
Cadila Health 1,105 Buy 46.4 56.8 64.3 23.8 19.5 17.2 17.0 12.2 10.5 25.2 30.1 27.4
Cipla 448 Neutral 17.4 23.4 28.5 25.8 19.1 15.7 15.0 11.5 9.4 12.4 14.6 15.3
Divis Labs 1,527 Buy 65.4 78.8 92.1 23.4 19.4 16.6 16.6 13.8 11.8 27.1 28.2 28.6
Dr Reddys Labs 2,679 Buy 127.1 146.4 169.2 21.1 18.3 15.8 13.6 11.6 9.9 19.9 19.2 18.6
Glenmark Pharma 602 Buy 26.8 33.7 42.0 22.4 17.9 14.3 13.0 10.9 8.4 19.8 20.0 19.7
GSK Pharma 2,548 Neutral 61.9 84.8 98.0 41.2 30.1 26.0 33.8 22.8 19.3 26.3 34.6 37.6
IPCA Labs. 881 Buy 48.8 59.6 72.7 18.1 14.8 12.1 12.4 10.2 8.2 27.7 26.8 26.1
Lupin 1,088 Buy 41.2 53.0 61.5 26.4 20.5 17.7 15.4 12.5 10.4 23.8 24.7 23.4
Ranbaxy Labs 534 Buy 9.4 18.1 28.1 56.8 29.5 19.0 11.3 17.3 12.5 34.2 16.6 21.4
Sanofi India 3,270 Buy 125.0 152.8 177.5 26.2 21.4 18.4 15.7 12.8 10.7 19.5 21.4 22.4
Sun Pharma 709 Buy 26.6 31.1 35.3 26.6 22.7 20.1 17.4 15.5 13.8 25.7 23.7 21.8
Torrent Pharma 696 Neutral 36.4 43.1 55.7 19.1 16.2 12.5 10.5 9.7 8.1 28.1 27.2 29.1
Source:

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July 2014 164

Quarterly Performance (Consolidated) (INR Million)
Y/E March FY14

FY15E FY14 FY15E
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Net Sales 4,272 4,864 4,857 4,640

5,051 5,730 5,627 5,610 18,632 22,018
YoY Change (%) 16.5 19.5 31.5 22.7 18.3 17.8 15.9 20.9 22.5 18.2
EBITDA 715 927 1,022 913

909 1,203 1,215 1,185 3,577 4,513
Margins (%) 16.7 19.1 21.1 19.7 18.0 21.0 21.6 21.1 19.2 20.5

115 125 130 136 405 506

25 30 35 44 98 134
Other Income 0 2 2 28 5 5 5 5 32 20
PBT before EO expense 605 805 888 808

774 1,053 1,055 1,010 3,106 3,893
PBT 605 805 888 808

774 1,053 1,055 1,010 3,106 3,893
Tax 139 189 229 195

163 221 222 212 751 818
Rate (%) 22.9 23.4 25.8 24.1

21.0 21.0 21.0 21.0 24.2 21.0
Minority Interest. 0 0 0 0 0 0 0 0 0 0
Reported PAT 466 616 659 613

612 832 834 798 2,355 3,075
Adj PAT 466 616 659 613

612 832 834 798 2,355 3,075
YoY Change (%) 51.3 45.1 36.6 40.4

31.1 35.0 26.5 30.2 42.5 30.6
Margins (%) 10.9 12.7 13.6 13.2 12.1 14.5 14.8 14.2 12.6 14.0
E: MOSL Estimates


Alembic Pharmaceuticals

CMP: INR310 Buy
We expect sales to grow 18% YoY to INR5.1b, led by 60% growth in
international generics. While the domestic formulations business is
likely to grow 10% YoY, total API revenues would be flat.
EBITDA is likely to grow 27% YoY to INR909m, with EBITDA margin up
130bp to 18%, aided by recently launched products in the US generics
market and improving sales mix in domestic formulations.
We expect adjusted PAT to grow just 31% YoY to INR612m, primarily
driven by strong operational performance.
We believe ALPM has a focused management team in place and has
stepped into its next phase of high growth. The strong improvement
in operational performance over the last few quarters, we believe, is
but an undertone of this transformation.
Business mix is likely to improve further, with higher contribution
from US generics and specialty therapies in India, while low-margin
APIs and acute therapies may continue to face slowdown.
The stock trades at 19x FY15E and 14.3x FY16E EPS. Maintain Buy.
Upside from Micardis HCT launch
Outlook for domestic formulations and US generics business

Bloomberg ALPM IN
1,6,12 Rel Perf. (%) 21 / 23 / 87

Y/E March 2014 2015E 2016E 2017E
Sales 18.6 22.0 26.8 31.8
EBITDA 3.6 4.5 5.9 7.1
NP 2.4 3.1 4.1 5.0
EPS (INR) 12.5 16.3 21.7 26.5
EPS Gr. (%) 42.7 30.4 32.8 22.3
BV/Sh. (INR) 35.8 48.1 65.0 85.7
RoE (%) 40.0 38.9 38.3 35.2
RoCE (%) 43.2 42.9 42.7 40.4
Valuation
P/E (x) 24.8 19.0 14.3 11.7
P/BV (x) 8.7 6.5 4.8 3.6
EV/EBITDA (x) 16.6 13.2 10.0 8.0
EV/Sales (x) 3.2 2.7 2.2 1.8

July 2014 165

Y/E March FY14

FY15E FY14 FY15E
1Q 2Q 3Q 4Q

1Q 2Q 3Q 4Q
Net Sales 6,948 7,339 7,000 7,230 8,052 8,052 7,734 8,456 28,517 32,294
YoY Change (%) 21.7 23.9 10.4 14.7 15.9 9.7 10.5 17.0 17.5 13.2
Total Expenditure 5,486 5,650 5,320 5,530

6,280 6,240 6,033 6,537 21,986 25,090
EBITDA 1,462 1,689 1,680 1,700 1,771 1,812 1,702 1,919 6,531 7,204
Margins (%) 21.0 23.0 24.0 23.5 22.0 22.5 22.0 22.7 22.9 22.3

560 575 590 666 2,033 2,391
Interest 4 3 0 10

24 24 24 25 17 97
Other Income 284 187 190 230

285 290 300 315 891 1,190
PBT 1,259 1,373 1,360 1,380 1,472 1,503 1,388 1,543 5,372 5,906
Tax 297 319 260 190

294 301 278 309 1,066 1,181
Rate (%) 23.6 23.2 19.1 13.8 20.0 20.0 20.0 20.0 19.8 20.0
Minority Interest 27 31 50 60

29 30 31 33 168 123
PAT 935 1,023 1,050 1,130 1,149 1,172 1,079 1,202 4,138 4,602
YoY Change (%) 18.7 14.2 14.5 69.0

22.9 14.6 2.8 6.4 -18.7 11.2
Margins (%) 13.5 13.9 15.0 15.6 14.3 14.6 14.0 14.2 14.5 14.3
Licensing income 76 34 40 0

74 73 73 73 150 292
YoY Change (%) -45.3 - -54.5 -

-2.1 113.2 81.3 - -39.0 94.6
Contract research 1,546 1,881 1,830 1,880

1,942 2,060 2,020 2,082 7,137 8,104
YoY Change (%) 26.3 45.7 31.0 13.3 25.6 9.5 10.4 10.7 28.1 13.5
E: MOSL Estimates; Note - Quarterly nos will not add up to full-year nos due to restatements


Biocon

CMP: INR543 Sell
We expect sales to grow 16% YoY to INR8b, led by 26% growth in CRO
division. The Biopharma division is likely to grow 13%.
We estimate licensing income at INR74m (INR76m in 1QFY14).
EBITDA is likely to grow 21% YoY to INR1.8b, with EBITDA margin
expanding 100bp to 22%. BIOS R&D activity has been moderating
since 3QFY14, which is likely to result in lower R&D spend YoY.
We expect adjusted PAT to grow just 23% YoY to INR1.1b, in line with
operational performance.
Key growth drivers for FY15/FY16 would be (1) traction in insulin
initiative in RoW, (2) ramp-up in CRO division, (3) contribution from
immuno-suppressant supplies, and (4) branded formulations.
However, high R&D costs and long-term capex in the near term would
put pressure on profitability and return ratios.
The stock trades at 23.6x FY15E and 20.3x FY16E earnings. Option
values for the future include separate listing of Contract Research
business and potential out-licensing of the Oral Insulin NCE by BMS.
Return ratios are likely to remain subdued, with both RoE and RoCE in
the 13-14% range from FY13 to FY15. Maintain Sell.
Update on initiatives to out-license Anti-CD6
Progress on product registration for Rh-Insulin in Europe/US
Outlook for listing of Syngene

Bloomberg BIOS IN
M. Cap. (INR b)/(USD b) 109 / 2
1,6,12 Rel Perf. (%) 15 / -12 / 59

Y/E March 2014 2015E 2016E 2017E
Sales 28.5 32.3 38.5 45.6
EBITDA 6.5 7.2 8.8 10.5
Net Profit 4.1 4.6 5.4 6.4
Adj. EPS (INR) 20.7 23.0 26.8 31.8
EPS Gr. (%) 26.5 11.2 16.5 18.8
BV/Sh. (INR) 151.3 167.6 186.5 209.1
RoE (%) 13.7 13.7 14.4 15.2
RoCE (%) 11.7 11.6 12.2 13.2
Payout (%) 28.1 29.3 29.3 29.3
Valuations
P/E (x) 26.3 23.6 20.3 17.1
P/BV (x) 3.6 3.2 2.9 2.6
EV/EBITDA (x) 15.5 14.7 12.3 10.4
Div. Yield (%) 0.9 1.1 1.2 1.5

July 2014 166


(INR Million)
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Net Revenues 16,371 17,468 18,717 19,685

20,131 20,156 20,535 21,614 72,240 82,436
YoY Change (%) 5.7 12.9 16.7 22.1 23.0 15.4 9.7 9.8 13.6 14.1
EBITDA 2,858 2,605 2,953 3,586

3,621 3,673 3,542 3,523 12,001 14,359
Margins (%) 17.5 14.9 15.8 18.2 18.0 18.2 17.2 16.3 16.6 17.4

550 575 600 617 2,012 2,342
Interest 278 319 301 271

250 275 250 236 1,170 1,011
Other Income 125 248 239 162 125 150 125 191 775 591
PBT after EO Income 2,239 2,017 2,360 2,812

2,946 2,973 2,817 2,861 9,422 11,597
Tax 203 101 408 348

442 446 423 429 1,060 1,739
Rate (%) 9.1 5.0 17.3 12.4 15.0 15.0 15.0 15.0 11.3 15.0
Min. Int/Adj on Consol 80 82 92 72 85 87 87 91 326 350
Reported PAT 1,956 1,834 1,860 2,392

2,419 2,440 2,307 2,341 8,036 9,507
Adj PAT 1,956 1,834 1,894 2,529

2,419 2,440 2,307 2,341 8,207 9,507
YoY Change (%) 0.4 92.9 84.1 -3.7

23.7 33.1 21.8 -7.4 25.2 15.8
Margins (%) 11.9 10.5 10.1 12.8 12.0 12.1 11.2 10.8 11.4 11.5
Domestic formulation sales 6,252 6,263 5,883 6,247 6,877 7,015 6,765 7,184 24,645 27,841
YoY Change (%) 7.5 4.1 3.2 9.4 10.0 12.0 15.0 15.0 6.1 13.0
US sales 3,874 4,730 6,316 6,783

5,792 6,145 6,795 7,287 21,703 26,019
YoY Change (%) 7.9 28.7 61.1 74.7 49.5 29.9 7.6 7.4 44.0 19.9
E: MOSL Estimates


Cadila Healthcare

CMP: INR1,105 Buy
We expect revenue to grow 23% YoY to INR20.1b, led by 50% YoY
growth in the US formulations. Total export formulations would grow
37% YoY to INR8.6b. Domestic formulations would grow 10% YoY to
INR6.9b, impacted by the new drug policy.
inching up 50bp YoY, aided by improving sales mix in the US.
Adjusted PAT is likely to grow 24% YoY to INR2.4b, slower than
EBITDA due to higher taxes.
We believe CDH has made investments in the right areas and will
unlock value at the appropriate time. We expect FY15 to be a year of
recovery for CDH.
New launches in the US would be an important trigger for the
company for FY15.
We estimate 17% EPS CAGR over FY14-17, with improving return
ratios over the next three years.
The stock trades at 23.8x FY15E and 19.5x FY16E EPS. Maintain Buy.
Update on US launches from the Moraiya facility
Outlook for recovery in domestic formulations
Progress on improvement in balance sheet

Bloomberg CDH IN
M. Cap. (INR b)/(USD b) 226 / 4
52-Week Range (INR) 1,144 / 631
1,6,12 Rel Perf. (%) 16 / 17 / 8

Y/E March 2014 2015E 2016E 2017E
Sales 72.2 82.4 97.8 111.4
EBITDA 12.0 14.4 19.5 22.7
Net Profit 8.2 9.5 11.6 13.2
Adj. EPS (INR) 40.1 46.4 56.8 64.3
EPS Gr. (%) 25.6 15.8 22.3 13.2
BV/Sh. (INR) 168.0 200.5 247.6 300.1
RoE (%) 25.2 25.2 30.1 27.4
RoCE (%) 18.7 20.8 26.0 26.9
Payout (%) 26.5 28.9 29.2 29.2
Valuations
P/E (x) 27.6 23.8 19.5 17.2
P/BV (x) 6.6 5.5 4.5 3.7
EV/EBITDA (x) 20.3 17.0 12.2 10.5
Div. Yield (%) 0.8 1.0 1.5 1.7

July 2014 167


(INR Million)
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Net Revenues 24,639 25,124 25,808 25,195 29,744 28,501 28,944 29,299 101,003 116,489
YoY Change (%) 25.8 14.6 24.6 28.1 20.7 13.4 12.2 16.3 22.0 15.3
EBITDA 6,754 5,642 4,673 4,093 5,795 5,677 5,864 6,199 21,330 23,535
Margins (%) 27.4 22.5 18.1 16.2 19.5 19.9 20.3 21.2 21.1 20.2
Depreciation 789 914 912 1,050 1,100 1,125 1,150 1,200 3,726 4,575
Interest 408 450 333 341 350 350 350 350 1,457 1,400
Other Income 691 756 524 775 400 400 400 400 2,654 1,600
PBT after EO expense 6,249 5,034 3,952 3,477 4,745 4,602 4,764 5,049 18,800 19,160
Tax 1,500 1,358 987 753 1,186 1,151 1,191 1,262 4,634 4,790
Rate (%) 24.0 27.0 25.0 21.7 25.0 25.0 25.0 25.0 24.6 25.0
Minority Interest 0.0 95.7 122.2 116.9 65.0 65.0 140.0 140.0 282.5 410.0
Reported PAT 4,749 3,581 2,843 2,607 3,559 3,387 3,433 3,647 14,166 13,960
Adj PAT 4,749 3,581 2,843 2,607 3,559 3,387 3,433 3,647 14,166 13,960
YoY Change (%) 80.4 1.3 -16.1 -2.6 -25.1 -5.4 20.7 39.9 23.8 -1.5
Margins (%) 19.3 14.3 11.0 10.3 12.0 11.9 11.9 12.4 14.0 12.0
Domestic formulation sales 11,039 10,398 10,443 9,080 12,906 11,958 12,009 10,351 41,242 47,224
YoY Change (%) 17.6 11.4 13.0 16.7 16.9 15.0 15.0 14.0 14.9 14.5
Export formulations 10,344 12,190 13,520 12,820

14,362 14,140 15,177 16,356 48,874 60,036
YoY Change (%) 27.7 17.3 39.5 34.4 38.8 16.0 12.3 27.6 29.6 22.8
E: MOSL Estimates; Note: Quarterly numbers 2QFY14 onwards and annual numbers are consolidated


Cipla

CMP: INR448 Neutral
We expect revenue to grow 21% YoY to INR29.7b.

The domestic formulations business would grow 14% YoY to
INR12.9b, while export formulations revenue would grow 39% YoY to
INR14.4b, aided by consolidation of Cipla Medpro.

EBITDA is likely to decline 14% YoY to INR5.8b, with EBITDA margin
likely to contract 7.9% YoY to 19.5% from a high base.

We expect adjusted PAT to decline 25% YoY to INR3.6b on account of
higher depreciation and lower other income.

We believe the next few quarters would remain an investment phase,
the benefits of which would come through only in FY16.

The stock trades at 25.8x FY15E and 19.1x FY16E EPS. Maintain
Neutral.
Update on launch of inhalers in Europe
Improvement in profitability at Cipla Medpro

Bloomberg CIPLA IN
M. Cap. (INR b)/(USD b) 360 / 6
1,6,12 Rel Perf. (%) 10 / -10 / -20

Y/E March 2014 2015E 2016E 2017E
Sales 101.0 116.5 134.4 153.8
EBITDA 21.3 23.5 29.7 34.9
Net Profit 14.2 14.0 18.8 22.9
Adj. EPS (INR) 17.6 17.4 23.4 28.5
EPS Gr. (%) 23.8 -1.5 34.7 21.8
BV/Sh. (INR) 125.1 140.1 160.9 186.5
RoE (%) 14.1 12.4 14.6 15.3
RoCE (%) 17.4 16.0 18.7 19.8
Payout (%) 13.5 13.5 11.2 10.2
Valuations
P/E (x) 25.4 25.8 19.1 15.7
P/BV (x) 3.6 3.2 2.8 2.4
EV/EBITDA (x) 17.4 15.3 11.7 9.6
Div. Yield (%) 0.4 0.4 0.5 0.6

July 2014 168

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Net Op Revenue 5,159 5,659 6,874 7,380 5,967 6,453 7,830 8,751 25,072 29,000
YoY Change (%) 10.1 19.7 28.9 13.6 15.7 14.0 13.9 18.6 17.2 15.7
EBITDA 1,959 2,477 2,859 2,592 2,130 2,646 3,398 3,448 9,887 11,622
Margins (%) 38.0 43.8 41.6 35.1 35.7 41.0 43.4 39.4 39.4 40.1
Depreciation 209 225 233 254 260 270 285 305 921 1,120
Interest 4 4 4 9 4 4 4 4 21 14
Other Income 547 376 98 120 160 160 160 160 1,140 640
PBT 2,293 2,624 2,721 2,449 2,027 2,532 3,270 3,299 10,086 11,127
Tax 546 574 531 518 446 557 719 726 2,169 2,448
Rate (%) 23.8 21.9 19.5 21.2 22.0 22.0 22.0 22.0 21.5 22.0
Reported PAT 1,747 2,049 2,190 1,931 1,581 1,975 2,550 2,573 7,917 8,679
Adj PAT 1,747 2,049 2,190 1,931 1,581 1,975 2,550 2,573 7,917 8,679
YoY Change (%) 4.4 73.7 51.8 6.2 -9.5 -3.6 16.4 33.3 31.5 9.6
Margins (%) 33.9 36.2 31.9 26.2 26.5 30.6 32.6 29.4 31.6 29.9
E: MOSL Estimates; Quarterly numbers are standalone


Divi's Laboratories

CMP: INR1,527 Buy
We expect revenue to grow 16% YoY to INR6b on increased capacity
utilization at new the SEZ unit and favorable currency impact. Growth
would be driven by both CCS and API businesses.
EBITDA is likely to grow 9% YoY to INR2.1b, with 230bp YoY decline in
margins as contribution of generics in near term is likely to remain
higher.
We expect PAT to decline 10% YoY to INR1.6b due to lower other
income (forex gain of INR430m in 1QFY14).
DIVI expects FY15 revenue to grow more than 20%, with EBITDA
margin sustaining at 40%. Revenue growth would be aided by
capacity utilization at DSN SEZ.
We estimate 17% revenue, EBITDA, PAT CAGR over FY14-16, with
EBITDA margin stabilizing at ~40%.
We expect the balance sheet to continue strengthening, and expect
dividend payout to go up from 40% in FY14 to 45% in FY15.
The stock trades at 23.4x FY15E and 19.4x FY16E EPS. Buy.
Ramp-up at Vizag SEZ
Outlook for growth beyond FY15

Bloomberg DIVI IN
M. Cap. (INR b)/(USD b) 203 / 3
52-Week Range (INR) 1,546 / 905
1,6,12 Rel Perf. (%) 19 / -2 / 25

Y/E March 2014 2015E 2016E 2017E
Sales 25.3 29.0 34.6 40.6
EBITDA 10.1 11.6 13.9 16.2
Net Profit 7.7 8.7 10.5 12.2
Adj. EPS (INR) 58.3 65.4 78.8 92.1
EPS Gr. (%) 28.5 12.2 20.5 16.9
BV/Sh. (INR) 223.3 259.2 298.6 344.7
RoE (%) 28.3 27.1 28.2 28.6
RoCE (%) 36.0 34.6 36.1 36.6
Payout (%) 40.2 45.0 50.0 50.0
Valuations
P/E (x) 26.2 23.4 19.4 16.6
P/BV (x) 6.8 5.9 5.1 4.4
EV/EBITDA (x) 20.1 17.3 14.6 12.6
Div. Yield (%) 1.3 1.6 2.2 2.6

July 2014 169

Quarterly Performance - IFRS (INR Million)
1Q 2Q 3Q 4Q

1Q 2Q 3Q 4Q
Gross Sales 28,449 33,575 35,338 34,809

34,343 35,894 37,666 37,323 132,171 145,226
YoY Change (%) 12.0 16.5 23.3 4.2

20.7 6.9 6.6 7.2 13.7 9.9
Total Expenditure 23,051 25,119 25,576 27,223

26,273 27,100 29,379 29,000 100,969 111,752
EBITDA 5,398 8,456 9,762 7,586

8,071 8,794 8,286 8,323 31,202 33,474
Margins (%) 19.0 25.2 27.6 21.8

23.5 24.5 22.0 22.3 23.6 23.0
Amortization 1,603 1,733 1,793 1,956

1,800 1,850 1,900 2,096 7,085 7,646
Other Income 342 972 735 437

300 300 300 302 2,486 1,203

6,571 7,244 6,687 6,529 26,602 27,031
Tax 528 792 2,521 1,252

1,314 1,449 1,337 1,306 5,093 5,406
Rate (%) 12.8 10.3 29.0 20.6

20.0 20.0 20.0 20.0 19.1 20.0
Net Profit 3,609 6,903 6,183 4,815

5,257 5,795 5,349 5,224 21,510 21,625
One-off/low-competition PAT in US 335 0 0 0

0 0 0 0 335 0
Adjusted PAT 3,273 6,903 5,686 4,815

5,257 5,795 5,349 5,224 21,174 21,625
YoY Change (%) 23.8 97.9 56.5 22.9

60.6 -16.0 -5.9 8.5 54.8 2.1
Margins (%) 11.5 20.6 16.1 13.8 15.3 16.1 14.2 14.0 16.0 14.9
E - MOSL Estimates


Dr Reddys Labs

CMP: INR2,679 Buy
We expect 20% YoY growth in core revenue for 1QFY15 to INR34.2b.
Growth would be led by 27% YoY growth in US revenue and 22% YoY
growth in Russia/CIS. Revenue growth would be restricted by 12%
growth in domestic formulations and 13% growth in PSAI segment.
Core EBITDA is likely to grow 49% YoY to INR80b due to base effect
and improving product mix in the US. Consequently, we expect
EBITDA margin to expand 450bp YoY to 23.5%.
PAT could see a growth of 46% YoY to INR5.2b, slower than EBITDA
growth due to higher taxes.
Adjusted for one-off contribution from gActos in 1QFY14, core sales
should grow 23%, while core EBITDA and PAT grow 61%.
Though FY15 is likely to be a muted year for DRRD, we believe
accelerated launches in the US in FY16 could drive strong double-digit
growth in FY16.
The stock trades at 21.1x FY15E and 18.3x FY16E core earnings.
Maintain Buy.
View on pipeline of products in the US
FY16 outlook for both generics and PSAI businesses

Bloomberg DRRD IN
M. Cap. (INR b)/(USD b) 456 / 8
52-Week Range (INR) 2,940 / 2025
1,6,12 Rel Perf. (%) 11 / -17 / -13

Y/E March 2014 2015E 2016E 2017E
Sales 132.2 145.2 162.9 183.5
EBITDA 31.2 33.5 38.3 44.0
Net Profit 21.2 21.6 24.9 28.8
Adj. EPS (INR) 124.5 127.1 146.4 169.2
EPS Gr. (%) 54.5 2.1 15.1 15.6
BV/Sh. (INR) 533.8 639.9 763.9 907.5
RoE (%) 23.3 19.9 19.2 18.6
RoCE (%) 18.0 17.9 17.9 18.1
Payout (%) 16.7 17.6 17.6 17.6
Valuation
P/E (x) 21.5 21.1 18.3 15.8
P/BV (x) 5.0 4.2 3.5 3.0
EV/EBITDA (x) 14.9 13.6 11.6 9.9
Div. Yield (%) 0.7 0.7 0.8 0.9

July 2014 170

Y/E March FY14

FY15E FY14 FY15E
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Net Revenues (Core) 12,379 14,630 16,012 16,817

14,484 16,000 18,488 19,419 59,839 68,391
YoY Change (%) 19.0 16.6 15.9 25.9 17.0 9.4 15.5 15.5 19.4 14.3
EBITDA 2,474 3,153 3,644 3,598

2,792 3,299 4,148 4,328 12,870 14,566
Margins (%) 20.0 21.6 22.8 21.4 19.3 20.6 22.4 22.3 21.5 21.3

620 650 680 700 2,168 2,650
Interest 464 485 473 464

500 500 500 500 1,886 2,000
Other Income 37 138 56 97 80 80 80 82 328 322
PBT before EO Expense 1,698 2,201 2,617 2,628

1,752 2,229 3,048 3,210 9,144 10,238
Extra-Ord Expense 0 0 0 2,175 0 0 0 0 2,175 0
PBT after EO Expense 1,698 2,201 2,617 453

1,752 2,229 3,048 3,210 6,969 10,238
Tax 392 628 474 19

385 490 670 706 1,513 2,252
Rate (%) 23.1 28.5 18.1 4.1 22.0 22.0 22.0 22.0 21.7 22.0
Reported PAT (incl one-offs) 1,306 1,573 2,143 434

1,367 1,738 2,377 2,504 5,456 7,986
Minority Interest 19 30 -19 3 16 16 16 16 33 64
Adj PAT (excl one-offs) 1,287 1,330 2,130 1,520

1,082 1,722 2,361 2,383 4,964 7,549
YoY Change (%) 154.1 -6.6 35.3 2.2

-15.9 29.5 10.9 56.8 -0.5 52.1
Margins (%) 10.4 9.1 13.3 9.0 7.5 10.8 12.8 12.3 8.3 11.0
E: MOSL Estimates


Glenmark Pharma

CMP: INR602 Buy
We expect Glenmark Pharmaceuticals (GNP) to post 15% YoY growth
in core revenue (excluding one-offs and R&D income) to INR14.2b,
led primarily by high growth in emerging markets and APIs. Reported
sales would grow 17% YoY to INR14.5b.
The branded business is likely to grow 20% YoY, while the generics
segment would grow just 5% due to slowdown in the US. We expect
R&D licensing income of INR299m from Sanofi (nil in 1QFY14).
Core EBITDA is likely to be flat YoY at INR2.5b, with core EBITDA
margin down 240bp YoY, impacted by adverse sales mix. Reported
EBITDA would grow 13% YoY to INR2.8b.
Adjusted PAT is likely to decline 16% YoY to INR1.1b, mainly due to
higher depreciation. Reported PAT is likely to grow 5% YoY.
We expect GNP to gradually reduce its net debt over FY14-16,
resulting in improvement in D/E from 1.1x in FY14 to 0.7x by FY16.
We also expect gradual improvement in return ratios.
Product pipeline for US
Update on free cash generation and debt repayment schedule
Progress of NCE/NBE pipeline

Bloomberg GNP IN
M. Cap. (INR b)/(USD b) 163 / 3
1,6,12 Rel Perf. (%) 7 / -8 / -29

Y/E March 2014 2015E 2016E 2017E
Sales 59.8 68.4 79.8 94.0
EBITDA 12.9 14.6 17.4 22.1
Net Profit 4.6 7.3 9.1 11.4
Adj. EPS

16.8 26.8 33.7 42.0
EPS Gr. (%) -8.8 59.9 25.5 24.8
BV/Sh. (INR) 110.0 135.7 168.0 212.8
RoE (%) 15.3 19.8 20.0 19.7
RoCE (%) 17.7 17.4 19.3 21.6
Payout (%) 11.6 11.9 9.7 7.2
Valuations
P/E (x) 35.8 22.4 17.9 14.3
P/BV (x) 5.5 4.4 3.6 2.8
EV/EBITDA(x) 14.6 13.0 10.9 8.4
Div. Yield (%) 0.3 0.5 0.5 0.5

July 2014 171


(INR Million)
Net Sales 6,321 6,369 6,205 6,306

5,999 6,878 7,037 7,290 25,202 27,204
YoY Change (%) 1.5 -2.3 -7.2 -4.0 -5.1 8.0 13.4 15.6 -3.1 7.9
EBITDA 1,629 1,137 1,080 1,116

977 1,277 1,645 1,968 4,961 5,867
Margins (%) 25.8 17.9 17.4 17.7 16.3 18.6 23.4 27.0 19.7 21.6

43 44 44 43 199 174
Other Income 817 454 455 544 549 508 509 609 2,269 2,175

1,483 1,741 2,111 2,535 7,029 7,869
Tax 698 590 468 518

517 575 696 836 2,274 2,624
Rate (%) 29.1 38.3 31.5 32.3 34.9 33.0 33.0 33.0 32.4 33.4
Adjusted PAT 1,706 951 1,017 1,085

966 1,167 1,414 1,698 4,755 5,244
YoY Change (%) -8.1 -44.0 -37.8 -31.3

-43.4 22.7 39.0 56.6 -29.8 10.3
Margins (%) 27.0 14.9 16.4 17.2 16.1 17.0 20.1 23.3 18.9 19.3
Extra-Ord Expense 16 -201 8 -84

0 0 0 0 371 0
Reported PAT 1,690 1,151 1,010 1,169 966 1,167 1,414 1,698 4,384 5,244
E: MOSL Estimates


GSK Pharma

We expect GLXO to report 8% YoY growth in 2QCY14 sales to INR6.9b.
expanding 70bp YoY to 18.6% on a low base.
Growth and profitability would remain impacted by supply chain
issues highlighted in CY13 and price revisions taken due to fresh price
control implemented last year.
We expect adjusted PAT to grow 23% YoY to INR1.2b, faster than
EBITDA due to lower taxes.
GLXO deserves premium valuations due to strong parentage (giving
access to large product pipeline), brand-building ability, and likely
positioning in the post patent era. It is one of the few companies with
the ability to drive reasonable growth without any major capital
requirement, leading to high RoCE of 45-50%.
At 41.2x CY14E and 30.1x CY15E EPS, current valuations adequately
reflect the recovery in business over this period. Maintain Neutral.
Update on supply chain related issues
Market performance of products impacted by DPCO 2013

Bloomberg GLXO IN
M. Cap. (INR b)/(USD b) 216 / 4
52-Week Range (INR) 3,054 / 2,175
1,6,12 Rel Perf. (%) -1 / -39 / -36

Y/E Dec 2013 2014E 2015E 2016E
Sales 25.2 27.2 31.2 35.9
EBITDA 5.0 5.9 8.7 10.3
Net Profit 4.8 5.2 7.2 8.3
Adj. EPS (INR) 56.2 61.9 84.8 98.0
EPS Gr. (%) -29.8 10.3 36.9 15.7
BV/Sh. (INR) 238.1 235.8 244.7 260.9
RoE (%) 23.6 26.3 34.6 37.6
RoCE (%) 34.8 39.3 51.6 56.0
Payout (%) 101.5 101.3 87.5 81.4
Valuations
P/E (x) 45.4 41.2 30.1 26.0
P/BV (x) 10.7 10.8 10.4 9.8
EV/EBITDA (x) 39.3 33.8 22.8 19.3
Div. Yield (%) 2.0 2.2 2.6 2.7

July 2014 172

Y/E March FY14

FY15E FY14 FY15E
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q

9,583 9,775 9,373 9,126 32,818 37,857
YoY Change (%) 27.0 9.8 18.8 11.6 19.0 15.5 12.5 21.7 16.7 15.4
EBITDA 1,710 2,345 2,173 1,823

2,304 2,441 2,293 2,255 8,106 9,292
Margins (%) 21.2 27.7 26.1 24.3 24.0 25.0 24.5 24.7 24.7 24.5

300 310 320 336 1,031 1,266

72 71 70 72 269 285
Other Income -435 -346 30 244 315 320 100 102 -500 837
PBT after EO Expense 963 1,690 1,893 1,745

2,247 2,380 2,003 1,949 6,306 8,578
Tax 245 396 502 375

539 571 481 468 1,524 2,059
Rate (%) 25.4 23.4 26.5 21.5 24.0 24.0 24.0 24.0 24.2 24.0
Reported PAT 718 1,295 1,391 1,370

1,708 1,808 1,522 1,481 4,782 6,520
YoY Change (%) 67.0 3.5 58.3 81.7

138.0 39.7 9.4 8.1 47.4 36.3
Margins (%) 8.9 15.3 16.7 18.3 17.8 18.5 16.2 16.2 14.6 17.2
Domestic formulation 2,504 2,762 2,463 1,966

2,904 3,204 2,857 2,280 9,694 11,245
YoY Change (%) 11.7 5.1 15.8 10.2 16.0 16.0 16.0 16.0 10.4 16.0
Export formualtions 3,300 3,626 3,818 3,732

4,176 4,297 4,266 4,402 14,476 17,141
YoY Change (%) 47.0 6.9 20.3 19.2 26.5 18.5 11.7 18.0 21.2 18.4
E: MOSL Estimates


Ipca Laboratories

CMP: INR881 Buy
We expect revenue to grow 19% YoY to INR9.6b, led by 27% growth
in export formulations. Domestic formulations would grow 16% YoY
on a low base, while total API sales would grow 12% YoY.
EBITDA is likely to grow 35% YoY to INR2.3b, aided by 280bp YoY
expansion in EBITDA margin to 24%. This would be driven by higher
contribution from international formulations.
We expect adjusted PAT to grow 113% YoY to INR1.5b, boosted by
higher other income (forex loss in 1QFY14).
We expect significant ramp-up in IPCA's international formulations
revenue, led by 36% CAGR in US generics and 33% CAGR in US
business over FY13-16. Domestic formulations growth is likely to be
maintained at 16%.
We expect IPCA to clock EPS CAGR of 24% over FY14-17 on the back
of 18% revenue CAGR, aided by 80-100bp EBITDA margin expansion
and reversal of MTM losses.
The stock trades at 18.1x FY15E EPS and 14.8x FY16E EPS. Buy.
Ramp-up at recently approved Indore SEZ for US
Outlook for institutional tender business after FY14

Bloomberg IPCA IN
M. Cap. (INR b)/(USD b) 111 / 2
1,6,12 Rel Perf. (%) 6 / 1 / -5

Y/E March 2014 2015E 2016E 2017E
Sales 32.8 37.9 45.2 53.4
EBITDA 8.1 9.3 11.3 13.7
Net Profit 4.8 6.2 7.5 9.2
Adj. EPS (INR) 37.9 48.8 59.6 72.7
EPS Gr. (%) 47.4 28.8 22.1 22.0
BV/Sh. (INR) 155.3 196.8 247.4 309.2
RoE (%) 27.2 27.7 26.8 26.1
RoCE (%) 29.4 31.5 31.4 31.3
Payout (%) 15.4 15.0 15.0 15.0
Valuation
P/E (x) 23.3 18.1 14.8 12.1
P/BV (x) 5.7 4.5 3.6 2.9
EV/EBITDA (x) 14.2 12.4 10.2 8.2
Div. Yield (%) 0.7 0.8 1.0 1.2

July 2014 173

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Net Sales 24,207 26,315 29,830 30,516 29,775 29,156 32,841 33,578 110,866 125,350
YoY Change (%) 9.1 17.5 21.0 20.3 23.0 10.8 10.1 10.0 17.2 13.1
EBITDA 5,340 6,232 7,343 8,080 7,593 6,793 8,374 8,462 28,029 31,222
Margins (%) 22.1 23.7 24.6 26.5 25.5 23.3 25.5 25.2 25.3 24.9
Depreciation 624 606 637 743 700 725 750 787 2,610 2,962
Interest 54 49 42 122 45 45 45 45 267 180
Other Income 565 1,178 714 742 500 500 500 500 2,164 2,000
PBT 5,226 6,755 7,379 7,957 7,348 6,523 8,079 8,130 27,317 30,081
Tax 2,172 2,582 2,542 2,327 2,425 2,153 2,666 2,683 9,622 9,927
Rate (%) 41.6 38.2 34.4 29.2 33.0 33.0 33.0 33.0 35.2 33.0
EO Exp/(Inc) -1,000 0 0 0 0 0 0 0 -1,000 0
Recurring PAT 2,331 3,383 4,001 4,115 4,808 4,268 5,311 5,345 13,831 19,732
YoY Change (%) 30.7 22.9 42.3 37.2 106.2 26.2 32.7 29.9 33.7 42.7
Margins (%) 9.6 12.9 13.4 13.5 16.1 14.6 16.2 15.9 12.5 15.7
Advanced mkt formulations 13,917 14,183 17,948 18,712 17,669 15,726 19,649 20,631 64,760 73,172
YoY Change (%) 17.7 20.8 22.5 25.8 27.0 10.9 9.5 10.3 22.0 13.0
Emerging mkt formulations 7,861 9,270 8,909 8,889 9,253 10,509 10,132 9,938 34,966 39,763
YoY Change (%) -2.3 12.3 16.3 10.2 17.7 13.4 13.7 11.8 9.2 13.7
E: MOSL estimates; Quarterly nos will not add up to full year nos due to restatement of past quarters


Lupin

CMP: INR1,088 Buy
We expect revenue to grow 23% YoY to INR30b, driven mainly by 27%
YoY growth in advanced market formulations. Domestic formulations
would grow 16% YoY, while RoW markets are likely to grow 23%.
Core revenue excluding one-off upsides from generic Tricor, Trizivir
and Niaspan is likely to grow 23% YoY to INR28.3b.
EBITDA would grow 42% YoY to INR7.6b, with EBITDA margin
expanding by 340bp YoY to 25.5%. Core EBITDA would be INR6.6b,
with core EBITDA margin at 23.2%, up 350bp YoY, aided by improving
sales mix in the US.
Reported PAT is likely to grow 20% to INR4.8b, while adjusted PAT is
likely to grow 69% to INR3.9b on a low base.
Key growth drivers for FY15/FY16 would be strong product pipeline
for the US, and higher contribution from oral contraceptives. Growth
in India formulations is likely to rebound to 16% in FY15.
Outlook on future launches in the US
Revival in constant currency sales growth in Irom
Outlook on domestic formulations business post DPCO 2013

Bloomberg LPC IN
M. Cap. (INR b)/(USD b) 487 / 8
52-Week Range (INR) 1,102 / 742
1,6,12 Rel Perf. (%) 13 / -8 / -6

Y/E March 2014 2015E 2016E 2017E
Sales 109.3 125.3 146.2 167.4
EBITDA 26.5 31.2 37.7 43.9
Rep. PAT 18.4 19.8 24.0 28.0
Rep.EPS (INR) 41.0 44.1 53.6 62.5
Adj. PAT 13.8 18.5 23.8 27.6
Adj. EPS (INR) 30.8 41.2 53.0 61.5
EPS Gr. (%) 33.4 33.4 28.8 16.0
BV/Sh. (INR) 154.6 191.6 237.0 289.9
RoE (%) 22.8 23.8 24.7 23.4
RoCE (%) 40.1 36.2 35.9 34.4
Payout (%) 16.0 15.9 15.3 15.0
Valuations
P/E (x) 35.3 26.4 20.5 17.7
P/BV (x) 7.0 5.7 4.6 3.8
EV/EBITDA (x) 18.3 15.4 12.5 10.4
Div. Yield (%) 0.6 0.6 0.6 0.7

July 2014 174

2Q 3Q 4Q 5Q 1Q 2Q 3Q 4Q
Net Income 26,834 28,016 28,940 24,668 27,484 36,661 37,439 27,023 133,797 128,607
YoY Change (%) -16.9 4.1 6.7 -0.2 2.4 30.9 29.4 9.5 7.4 -3.9
EBITDA 2,625 1,938 2,602 1,508 1,714 9,571 9,307 3,065 10,912 23,657
Margins (%) 9.8 6.9 9.0 6.1 6.2 26.1 24.9 11.3 8.2 18.4
Depreciation 763 849 915 953 910 920 925 936 4,276 3,691
Interest 488 503 543 689 525 540 575 616 2,735 2,256
Other Income -1,378 -297 -209 -225 280 300 305 347 -1,855 1,232
PBT before EO Expense -3 289 935 -360 559 8,411 8,112 1,860 2,045 18,942
Extra-Ord Expense 4,863 4,202 1,539 -657 0 0 0 0 9,129 0
PBT after EO Expense -4,866 -3,913 -603 296 559 8,411 8,112 1,860 -7,084 18,942
Tax 311 570 981 1,099 140 2,103 2,028 465 3,314 4,735
Rate (%) -6.4 -14.6 -162.6 370.5 25.0 25.0 25.0 25.0 -46.8 25.0
Reported PAT -5,177 -4,483 -1,585 -802 419 6,308 6,084 1,395 -10,398 14,206
Minority Interest 64 58 5 -66 75 70 75 73 120 293
Reported PAT (incl one-offs) -5,241 -4,542 -1,589 -737 344 6,238 6,009 1,322 -10,519 13,913
Adj PAT (excl. one-offs) 1,337 644 1,200 136 361 1,238 1,000 1,378 3,941 3,976
YoY Change (%) -50.6 -68.8 0.0 -78.1 -73.0 92.1 -16.7 911.8 -53.8 0.9
Margins (%) 5.0 2.3 4.1 0.6 1.3 3.4 2.7 5.1 2.9 3.1
E: MOSL Estimates; FY14E figures are 15 months; We assume all exclusivities to flow through in 2QFY15


Ranbaxy Labs

CMP: INR534 Buy
We expect a muted 2% YoY growth in sales to INR27.5b, impacted by
slowdown in US generics and APIs.
EBITDA is likely to decline 35% YoY to INR1.7b due to discontinuation
of operations at Dewas and Paonta Sahib. Also, consent decree
related costs continue to impact profitability.
We estimate reported PAT at INR344m compared to INR5.2b in the
corresponding quarter last year. PAT adjusted for forex impact is
likely to decline 73% YoY to INR361m due to subdued operational
performance and higher tax rate.
Operational pressure in the near term would be overcome by the
monetization of key FTF opportunities.
Moreover, SUNPs track record in turning around acquisition targets
gives us the confidence that RBXYs core margins can expand to
industry average of 18-20% over the next five years.
The stock trades at 51.7x FY15E and 26.9x FY16E core EPS. We
maintain Buy.

Timeline for resolving US FDA issues under the consent decree
Improvement in core EBITDA margins
Launch timeline for Divan and Valcyte

Bloomberg RBXY IN
M. Cap. (INR b)/(USD b) 226 / 4
1,6,12 Rel Perf. (%) 16 / -13 / 25

Y/E March 2014 2015E 2016E 2017E
Sales* 133.8 128.6 128.2 141.9
EBITDA* 10.9 23.7 15.5 21.2
Adj. PAT 3.9 4.0 7.6 11.9
Rep. EPS

-24.9 32.9 18.1 28.1
Adj. EPS

9.3 9.4 18.1 28.1
EPS Gr. (%) -53.8 0.9 92.3 55.1
BV/Sh. (INR) 69.2 96.2 108.6 130.9
RoE (%) 13.5 34.2 16.6 21.4
RoCE (%) 9.6 22.1 12.7 16.7
Payout (%) 25.1 62.2 32.3 20.9
Valuations
P/E (x) 52.2 51.7 26.9 17.3
P/BV (x) 7.0 5.0 4.5 3.7
EV/EBITDA

25.8 21.6 16.0 11.6
Div. Yield (%) 0.4 1.0 1.0 1.0
Reporting period changed to March ending;
FY14E figures are 15 months; *Estimates include
upside from FTF

July 2014 175

Net Sales 3,881 4,351 4,974 4,883 4,449 4,929 5,689 5,532 18,089 20,598
YoY Change (%) 12.3 10.8 19.6 15.5 14.6 13.3 14.4 13.3 21.1 13.9
EBITDA 720 874 1,246 1,147 810 1,016 1,368 1,269 3,987 4,462
Margins (%) 18.6 20.1 25.1 23.5 18.2 20.6 24.0 22.9 22.0 21.7
Depreciation 223 227 234 247 240 245 250 255 931 990
Interest 3 1 0 0 2 1 1 1 4 5
Other Income 163 145 153 118 215 200 200 200 579 815
PBT before EO Items 657 791 1,165 1,018 783 970 1,316 1,213 3,631 4,282
Extra-Ord Expense 0 0 0 -254 0 0 0 0 -254 0
PBT after EO Items 657 791 1,165 1,272 783 970 1,316 1,213 3,885 4,282
Tax 213 279 396 191 266 315 428 394 1,079 1,403
Effective tax Rate (%) 32.4 35.3 34.0 18.8 34.0 32.5 32.5 32.5 27.8 32.8
Reported PAT 444 512 769 1,081 517 655 889 818 2,806 2,879
Adj PAT 444 512 769 827 517 655 889 818 2,552 2,879
YoY Change (%) 10.7 26.4 49.9 84.6 16.4 27.9 15.6 -1.0 34.7 12.8
Margins (%) 11.4 11.8 15.5 16.9 11.6 13.3 15.6 14.8 14.1 14.0
E: MOSL Estimates


Sanofi India

CMP: INR3,270 Buy
We expect revenue to grow 13% YoY in 2QCY14 to INR4.9b, led by the
export formulations business.
EBITDA is likely to grow 16% YoY to INR1b, with EBITDA margin
expanding 50bp due to increasing contribution from exports and
price increases in key products.
We expect PAT to grow 28% YoY to INR655m. Growth is likely to be
higher than EBITDA due to higher other income and lower taxes.
We believe SANL is witnessing a phase of change in margin profile,
led by (a) pricing benefit under new DPCO, and (b) discontinuation of
some loss-making projects that had hurt margins in the past.
We expect increasing momentum in earnings growth over the next
few years.
The stock trades at 26.2x CY14E and 21.4x CY15E EPS. Maintain Buy.
Amortization of goodwill and brands acquired from Universal
Medicare
Impact of Drug Price Control Order (DPCO), 2013

Bloomberg SANL IN
52-Week Range (INR) 3,540 / 2,280
1,6,12 Rel Perf. (%) -7 / -7 / -2

Y/E Dec 2013 2014E 2015E 2016E
Sales 18.1 20.6 23.6 26.9
EBITDA 4.0 4.5 5.3 6.2
Net Profit 2.4 2.9 3.5 4.1
Adj. EPS (INR) 104.1 125.0 152.8 177.5
EPS Gr. (%) 35.7 20.1 22.3 16.1
BV/Sh. (INR) 580.3 641.5 713.2 792.1
RoE (%) 17.9 19.5 21.4 22.4
RoCE (%) 26.3 28.1 30.9 32.4
Payout (%) 45.9 51.0 53.1 55.5
Valuations
P/E (x) 31.4 26.2 21.4 18.4
P/BV (x) 5.6 5.1 4.6 4.1
EV/EBITDA (x) 18.2 15.7 12.8 10.7
Div. Yield (%) 1.4 1.7 2.1 2.6

July 2014 176


(INR Million)
Y/E March FY14

FY15E FY14 FY15E
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Net Revenues 34,822 41,921 42,866 40,436 42,871 44,474 45,123 43,724 160,044 176,192
YoY Change (%) 31.0 57.8 50.3 31.6 23.1 6.1 5.3 8.1 42.4 10.1
EBITDA 15,306 18,284 19,751 17,856 18,006 19,346 19,629 17,483 71,196 74,463
Margins (%) 44.0 43.6 46.1 44.2 42.0 43.5 43.5 40.0 44.5 42.3
Depreciation 978 1,005 1,050 1,061 1,080 1,100 1,130 1,150 4,094 4,460
Net Other Income 735 1,079 1,535 2,050 1,740 1,790 1,890 1,997 5,399 7,415
PBT before EO Exp 15,063 18,358 20,236 18,844 18,665 20,036 20,388 18,330 72,501 77,419
EO Exp/(Inc) 25,174 0 0 0 0 0 0 0 25,174 0
PBT -10,111 18,358 20,236 18,844 18,665 20,036 20,388 18,330 47,327 77,419
Tax 1,511 2,760 2,438 1,199 3,173 3,406 3,466 3,116 7,908 13,161
Rate (%) 10.0 15.0 12.0 6.4 17.0 17.0 17.0 17.0 10.9 17.0
Profit after Tax -11,622 15,598 17,798 17,645 15,492 16,630 16,922 15,214 39,419 64,258
Share of Minority Partner 1,139 1,975 2,487 1,774 1,393 1,802 1,884 1,673 7,375 6,751
Reported PAT -12,761 13,623 15,311 15,871 14,100 14,827 15,038 13,541 32,044 57,506
One-off upsides 1,145 1,938 2,722 2,843 3,097 1,218 1,218 1,218 8,647 6,751
Adj Net Profit 11,269 11,686 12,589 13,028 11,002 13,609 13,820 12,323 48,572 50,755
YoY Change (%) 98.4 51.2 57.3 42.5 -2.4 16.5 9.8 -5.4 59.0 4.5
Margins (%) 32.4 27.9 29.4 32.2 25.7 30.6 30.6 28.2 30.3 28.8
E: MOSL Estimates; * Quarterly no. dont match with annual no. because of reinstatement of financials


Sun Pharma

CMP: INR709 Buy
We expect sales to grow 24% YoY to INR43.3b, driven by 28% growth
in US revenues. Domestic formulations would grow 18% YoY, while
RoW markets could grow 31%. Core sales are likely to grow 15% YoY
to INR37.8b.
EBITDA is likely to grow 25% YoY to INR19.1b. We expect EBITDA
margin to remain flat YoY at 44% on a high base, aided primarily by
Doxil and Cymbalta one-off sales. Core EBITDA margin is likely to
decline 310bp YoY to 38.7%, with core EBITDA at INR14.6b.
We estimate reported PAT at INR15.3b compared to net loss of
INR12.8b last quarter. Adjusted PAT is likely to grow 8% YoY to
INR12.2b, impacted by higher tax outgo.
We believe that operational outperformance in the near term will be
driven by recent price increases taken in certain products at Taro.
Consolidation of RBXYs business and its subsequent turnaround
would be growth drivers in the longer run.
The stock trades at 26.6x FY15E and 22.7x FY16E core EPS. Buy.
Outlook on competitive landscape for Taros products
Sustainability of price increases at URL Pharma

Bloomberg SUNP IN
M. Cap. (INR b)/(USD b) 1,468 / 25
1,6,12 Rel Perf. (%) 14 / -2 / 4

Y/E March 2014 2015E 2016E 2017E
Sales 160.0 178.1 201.9 227.2
EBITDA 71.2 78.4 84.8 90.8
Rep. PAT 32.0 61.9 70.4 78.1
Rep.EPS (INR) 15.5 29.9 34.0 37.7
Adj. PAT 48.6 55.1 64.5 73.2
Core EPS
( )
23.5 26.6 31.1 35.3
EPS Gr. (%) 59.0 13.5 17.0 13.4
BV/Sh. (INR) 90.8 116.6 145.9 177.7
RoE (%) 28.7 25.7 23.7 21.8
RoCE (%) 26.2 34.2 31.0 28.1
Payout (%) 18.4 12.3 12.5 14.2
Valuations
P/E (x) 30.2 26.6 22.7 20.1
P/BV (x) 7.8 6.1 4.9 4.0
EV/EBITDA (x) 19.5 17.4 15.5 13.8
Div. Yield (%) 0.4 0.5 0.6 0.7

July 2014 177

Y/E March FY14

FY15E FY14 FY15E
1Q 2Q 3Q 4Q 1Q 2Q 3QE 4Q

12,815 13,532 13,252 13,191 41,840 52,790
YoY Change (%) 26.7 26.9 27.3 40.6 31.8 39.2 30.6 7.7 30.3 26.2
EBITDA 2,080 1,790 2,150 3,500

3,454 2,986 3,188 3,252 9,520 12,881
Margins (%) 21.4 18.4 21.2 28.6 27.0 22.1 24.1 24.7 22.8 24.4

250 450 500 550 870 1,750
Interest 80 150 160 200

200 560 560 580 590 1,900
Other Income 80 100 100 100 90 90 85 80 380 345

3,094 2,066 2,213 2,202 8,440 9,576
Extra-Ord Expense 0 0 0 0 0 0 0 0 0 0
PBT after EO Expense 1,870 1,520 1,880 3,170

3,094 2,066 2,213 2,202 8,440 9,576
Tax 380 390 300 730

650 434 465 462 1,800 2,011
Rate (%) 20.3 25.7 16.0 23.0 21.0 21.0 21.0 21.0 21.3 21.0
Reported PAT 1,490 1,130 1,580 2,440

2,444 1,632 1,749 1,740 6,640 7,565
Adj PAT 1,490 1,130 1,324 924

1,247 1,457 1,573 1,568 4,869 5,845
YoY Change (%) 46.3 17.4 17.9 -22.3

-16.3 28.9 18.8 69.6 3.5 20.1
Margins (%) 15.3 11.6 13.0 7.5 9.7 10.8 11.9 11.9 11.6 11.1
Dom. formulations sales 3,120 2,970 2,970 2,560 3,619 4,632 4,632 4,157 11,620 17,040
YoY Change (%) 12.3 9.6 14.9 17.4 16.0 56.0 56.0 62.4 13.5 46.6
Intl. formulations sales 5,390 5,720 6,390 8,820

8,195 7,530 7,765 7,889 26,320 31,379
YoY Change (%) 28.0 31.1 42.3 67.7 52.0 31.6 21.5 -10.6 43.5 19.2
E: MOSL Estimates; Consolidation of Elder Pharma brands from 2QFY15


Torrent Pharmaceuticals

CMP: INR696 Neutral
We expect 32% YoY growth in 1QFY15 reported sales to INR12.8b
over a high base, led by ~3x growth in US business due to one-off
launches. Domestic formulations would grow 16% YoY, while export
formulations are likely to grow 52% YoY.
Core sales (excluding one-offs) are likely to grow 11% YoY.
Reported EBITDA would grow 66% YoY to INR3.5b, with EBITDA
margin expanding 560bp YoY, aided by one-off opportunities. Core
EBITDA would remain flat at INR2b, with core EBITDA margin
declining 240bp YoY.
We expect reported PAT to grow 64% YoY to INR2.4b, in line with
operational performance. Adjusted PAT would decline 16% YoY to
INR1.2b, impacted by higher interest costs.
We expect 17% CAGR in core earnings over FY14-16, slower than the
27% growth witnessed over the last two years. However, the stock
trades at 19.1x FY15E and 16.2x FY16E EPS, which is at 18-20%
premium over its last 5-year average valuations. Maintain Neutral.
Sustained recovery in domestic formulations
Performance of Brazilian operations amidst market pressures
Outlook for US business

Bloomberg TRP IN
M. Cap. (INR b)/(USD b) 118 / 2
1,6,12 Rel Perf. (%) 8 / 24 / 32

Y/E March 2014 2015E 2016E 2017E
Sales 41.8 52.8 60.4 69.2
EBITDA 9.5 12.9 13.6 15.9
Net Profit 5.2 6.2 7.3 9.4
Adj. EPS
( )
31.0 36.4 43.1 55.7
EPS Gr. (%) 11.4 17.6 18.4 29.1
BV/Sh. (INR) 115.0 144.0 173.3 209.8
RoE (%) 31.0 28.1 27.2 29.1
RoCE (%) 36.3 29.9 23.8 26.3
Payout (%) 29.8 35.1 35.1 35.1
Valuation
P/E (x) 22.5 19.1 16.2 12.5
P/BV (x) 6.1 4.8 4.0 3.3
EV/EBITDA
( )
12.2 10.5 9.7 8.1
Div. Yield (%) 1.4 1.9 1.9 2.4

July 2014 178

Expect a moderate start to the fiscal
Earnings momentum to accelerate in the second half

Expect double digit ad revenue growth: We expect double digit ad revenue growth
of 11-16% for all media companies barring Sun TV which has been impacted by the
YoY correction in the ad inventory and market share loss. While ad growth is
expected to be particularly strong at ~16% for ZEE, growth momentum is also likely
to remain healthy (9%-13%) for print despite impact of lower government spends
due to model code of conduct pre-election.

Muted earnings growth due to margin contraction: EBITDA margin is expected to
decline across the board for all our coverage universe companies except Sun TV.
EBITDA margin for ZEE is expected to decline ~360bp YoY due to high base of non-
sports margin (we model 1QFY15E non-sports margin of 31.6% vs 35.1% in 1QFY14
and 28.7% in 4QFY14. We expect Sun TV to report the highest earnings growth of
~10% YoY. Among print companies, while DB Corp/Jagran are expected to report flat
earnings, we expect 4-5% YoY decline for HT Media/HMVL. For Dish TV, we expect
net loss to increase YoY largely led by increased depreciation.

Subscriber additions to increase QoQ for Dish TV: We expect DTH subscriber
additions to increase QoQ for Dish TV led by market share gains. We model ~0.6m
gross additions during the quarter as compared to ~0.4m in 4QFY14.

Firm progress in phase I gross billing for MSOs: While there have been initial
hiccups in the implementation of digitization mandate, MSOs have successfully
implemented package wise billing and collection in phase-1 cities as well as some
phase II markets. This provides better visibility on monetization for MSOs ahead of
upcoming phase III/IV digitization deadline of December 2014.

Digitization remains a strong theme for broadcasting; earnings revival to continue
for regional print: With the new government at the center, most industry
participants expect ad growth acceleration in 2HFY15/FY16. Digitization remains a
strong theme for broadcasting and distribution stocks as government is expected to
be largely committed to the timelines.


(INR)
4.7.14
Reco Jun-14
Var %
YoY
Var %
QoQ
Jun-14
Var %
YoY
Var %
QoQ
Jun-14
Var %
YoY
Var %
QoQ
D B Corp 330 Buy

5,011 11.5 10.3

1,292 -2.7 23.5

771 1.4 26.4
Dish TV 62 Buy

6,356 9.9 -0.2

1,289 6.0 0.0

-502 Loss Loss
HT Media 124 Neutral

5,878 8.7 8.1

786 0.8 4.2

454 -4.4 30.5
Jagran Prakashan 135 Buy

4,496 8.9 6.9

1,051 3.1 33.1

582 0.7 91.4
PVR 667 Buy

3,601 7.4 14.6

604 1.7 82.1

133 -19.4 LP
Sun TV 468 Buy

6,637 10.3 27.6

3,899 10.2 -2.5

1,811 10.2 -8.3
Zee Entertainment 299 Neutral

11,180 14.9 -3.5

2,944 1.0 -5.5

1,977 -12.0 -9.2
Sector Aggregate 43,159 10.9 6.6 11,865 4.2 4.8 5,226 -6.1 6.0

Technology

Company name
D B Corp
Dish TV India
HT Media
Jagran Prakashan
PVR
Sun TV
Zee Entertainment


Media

Shobhit Khare (Shobhit.Khare@MotilalOswal.com); +91 22 3982 5428

July 2014 179

Media coverage: Quarterly snapshot
1QFY13 2QFY13 3QFY13 4QFY13 1QFY14 2QFY14 3QFY14 4QFY14 1QFY15 YoY (%) QoQ (%)
Advertisement Revenue (INR b)
Zee 4.5 5.3 5.1 4.8 5.3 5.8 6.8 5.8 6.1 16 6
Sun TV 2.8 2.8 3.3 3.1 3.1 2.7 3.0 3.1 3.3 4 6
Dish TV NM NM NM NM NM NM NM NM NM NM NM
DB Corp 2.7 2.6 3.2 2.8 3.3 3.1 3.8 3.2 3.6 11 15
Jagran Prakashan 2.2 2.2 2.4 2.3 2.9 2.8 3.2 2.9 3.2 9 8
HT Media 3.7 3.6 4.1 3.8 4.1 3.9 4.5 4.2 4.5 11 9
HMVL 1.2 1.1 1.2 1.1 1.3 1.3 1.4 1.3 1.5 13 13
Subscription Revenue (INR b)
ZEEL 3.6 3.9 4.1 4.5 4.2 4.6 4.6 4.6 4.6 9 0
Sun TV 1.5 1.5 1.6 1.6 1.8 1.9 2.0 2.0 2.1 20 4
Dish TV 4.6 4.7 4.9 5.0 5.3 5.3 5.6 5.6 6.0 13 6
DB Corp 0.7 0.7 0.7 0.7 0.8 0.8 0.8 0.8 0.9 12 3
HT Media 0.5 0.6 0.6 0.6 0.6 0.6 0.7 0.7 0.7 9 1
HMVL 0.4 0.4 0.4 0.4 0.4 0.4 0.5 0.5 0.5 9 1
Total Revenue (INR b)
ZEEL 8.4 9.5 9.4 9.6 9.7 11.0 11.9 11.6 11.2 15 -4
Sun TV 4.3 4.3 4.9 4.7 6.0 4.7 5.1 5.2 6.6 10 28
Dish TV 5.2 5.3 5.6 5.6 5.8 5.9 6.2 6.4 6.4 10 0
DB Corp 3.8 3.8 4.4 4.0 4.5 4.4 5.2 4.5 5.0 12 10
HT Media 4.9 5.1 5.5 5.0 5.4 5.3 5.8 5.4 5.9 9 8
HMVL 1.6 1.6 1.6 1.6 1.8 1.8 1.9 1.8 2.0 12 10
EBITDA (INR b)
ZEEL 2.3 2.2 2.6 2.4 2.9 3.1 2.9 3.1 2.9 1 -6
Sun TV 3.2 3.3 3.8 3.5 3.5 3.4 3.7 4.0 3.9 10 -3
Dish TV 1.6 1.6 1.4 1.2 1.2 1.5 1.5 1.3 1.3 6 0
DB Corp 0.76 0.86 1.19 0.94 1.33 1.08 1.55 1.05 1.29 -3 24
HT Media 0.67 0.57 0.87 0.72 0.78 0.64 0.95 0.75 0.79 1 4
HMVL 0.28 0.29 0.29 0.29 0.40 0.41 0.37 0.34 0.37 -7 10
EBITDA Margin (%)
ZEEL 27.7 22.8 27.8 25.1 30.0 28.2 24.5 26.9 26.3 -361bps -55bps
Sun TV 75.9 75.9 77.5 73.7 58.8 72.4 73.2 76.9 58.7 -1bps -1816bps
Dish TV 29.9 29.2 24.7 21.6 21.0 25.0 23.3 20.2 20.3 -75bps 4bps
DB Corp 20.3 22.7 27.2 23.6 29.6 24.6 29.9 23.0 25.8 -377bps 276bps
Jagran Prakashan 24.8 24.3 26.1 15.8 24.7 22.2 24.1 18.8 23.4 -131bps 460bps
HT Media 13.7 11.1 16.0 14.3 14.4 12.0 16.3 13.9 13.4 -104bps -50bps
HMVL 17.7 18.0 17.6 18.9 22.0 23.2 19.6 18.2 18.3 -372bps 7bps
Adj. PAT (INR b)
ZEEL 1.58 1.88 1.94 1.80 2.25 2.36 2.14 2.18 1.98 -12 -9
Sun TV 1.64 1.52 1.90 1.78 1.64 1.56 1.86 1.98 1.81 10 -8
Dish TV -0.32 -0.21 -0.45 -0.44 -0.30 -0.16 -0.28 -0.33 -0.50 NA NA
DB Corp 0.44 0.49 0.71 0.55 0.76 0.60 0.94 0.61 0.77 1 26
HT Media 0.41 0.33 0.53 0.40 0.48 0.21 0.67 0.35 0.45 -4 31
HMVL 0.21 0.22 0.21 0.23 0.30 0.25 0.29 0.27 0.29 -5 6

June 2014 Results Preview | Sector: Media

July 2014 180

1QFY15 ad revenue growth (YoY, %)

1QFY15 subscription/circulation growth (YoY, %)

Industry DTH subscriber base and additions trend

Source: TRAI, MOSL
Newsprint: USD prices stable; softening in Rupee terms


16
13
11
11
9
4
ZEEL HMVL DB Corp HT Media Jagran Sun TV
20
13
12
10
9 9
Sun TV Dish TV DB Corp Jagran
Prakashan
HT Media ZEEL
7
8
11 13 15 17 19 21 24 26 32 36 39 41 44 46 48 51 55 57 59 61 63
1.0
1.2
3.1
2.0 2.1 2.2
1.8
2.2
2.5
2.7
5.6
3.5
2.9
2.3
3.4
2.0
2.2
2.5
3.6
2.0
2.4
1.8
2.3
1
Q
F
Y
0
9
2
Q
F
Y
0
9
3
Q
F
Y
0
9
4
Q
F
Y
0
9
1
Q
F
Y
1
0
2
Q
F
Y
1
0
3
Q
F
Y
1
0
4
Q
F
Y
1
0
1
Q
F
Y
1
1
2
Q
F
Y
1
1
3
Q
F
Y
1
1
4
Q
F
Y
1
1
1
Q
F
Y
1
2
2
Q
F
Y
1
2
3
Q
F
Y
1
2
4
Q
F
Y
1
2
1
Q
F
Y
1
3
2
Q
F
Y
1
3
3
Q
F
Y
1
3
4
Q
F
Y
1
3
1
Q
F
Y
1
4
2
Q
F
Y
1
4
3
Q
F
Y
1
4
DTH subscribers (m) Quarterly subscriber adds (m)
200
350
500
650
800
15,000
22,000
29,000
36,000
43,000
J
a
n
-
0
8
A
u
g
-
0
8
M
a
r
-
0
9
O
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-
0
9
M
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D
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-
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J
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-
1
1
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e
b
-
1
2
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e
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-
1
2
A
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-
1
3
N
o
v
-
1
3
J
u
n
-
1
4
Newsprint price INR (LHS) Newsprint price - USD (RHS)

July 2014 181




Media
Dish TV 62 Buy -1.1 0.7 3.5 -57.4 85.1 17.9 11.8 8.8 6.0 NA NA NA
D B Corp 330 Buy 19.2 22.7 26.3 17.2 14.6 12.5 10.1 8.5 7.2 28.6 29.5 29.8
Hindustan Media 170 Buy 17.4 19.8 22.6 9.8 8.6 7.5 4.6 3.5 2.4 19.0 17.9 17.2
HT Media 124 Neutral 8.8 10.0 11.4 14.1 12.3 10.8 5.2 4.2 3.2 10.0 10.3 10.4
Jagran Prakashan 135 Buy 7.9 9.4 10.9 17.2 14.3 12.4 10.3 8.7 7.5 24.2 25.8 26.0
PVR 667 Buy 17.5 28.8 41.1 38.2 23.1 16.2 12.2 9.0 6.9 16.7 23.2 26.5
Sun TV 468 Buy 20.9 25.5 30.5 22.4 18.3 15.4 10.4 8.9 7.6 24.0 27.0 29.2
Zee Entertainment 299 Neutral 10.2 13.0 16.5 29.4 23.0 18.1 18.9 15.0 11.9 31.5 31.4 30.6

90
100
110
120
130
A
p
r
-
1
4
M
a
y
-
1
4
J
u
n
-
1
4
J
u
l
-
1
4
Sensex Index MOSL Media Index
80
95
110
125
140
J
u
l
-
1
3
O
c
t
-
1
3
J
a
n
-
1
4
A
p
r
-
1
4
J
u
l
-
1
4
Sensex Index MOSL Media Index

July 2014 182

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Sales 4,494 4,380 5,182 4,542 5,011 4,946 5,950 5,201 18,598 21,108
YoY (%) 19.2 15.8 18.1 14.1 11.5 12.9 14.8 14.5 16.8 13.5
EBITDA 1,328 1,077 1,551 1,046 1,292 1,188 1,994 1,421 5,003 5,895
YoY (%) 73.7 25.1 30.2 11.4 -2.7 10.3 28.5 35.8 33.1 17.8
EBITDA margin (%) 29.6 24.6 29.9 23.0 25.8 24.0 33.5 27.3 26.9 27.9
Depreciation 158 159 161 165 166 166 169 176 643 677
Interest 25 23 13 14 18 18 18 18 75 73
Other Income 45 39 74 81 60 30 40 56 239 186
PBT 1,191 934 1,451 948 1,169 1,033 1,846 1,284 4,524 5,331
Tax 430 332 506 338 397 351 628 436 1,606 1,813
PAT 761 602 945 610 771 682 1,218 847 2,917 3,519
Adj PAT 761 602 945 610 771 682 1,218 847 2,917 3,519
YoY (%) 74.3 23.8 33.8 10.5 1.4 13.3 29.0 38.8 33.7 20.6
Revenue break-up (INRm)
Ad revenue (print) 3,253 3,099 3,751 3,151 3,611 3,502 4,332 3,629 13,254 15,074
Circulation revenue 767 796 830 839 860 893 931 941 3,232 3,625
Radio 172 175 238 214 197 201 274 246 799 918
Event management 15 18 11 10 12 14 9 8 53 43
Others 288 292 352 328 331 336 404 378 1,260 1,449
Total revenue 4,494 4,380 5,182 4,542 5,011 4,946 5,950 5,201 18,598 21,108


D B Corp

CMP: INR330 Buy
We expect print advertising revenue to grow 11% YoY to INR3.61b.
We expect circulation revenue to grow 12% YoY to INR0.86b.
DBs aggregate revenue is likely to increase 12% YoY to INR5b.
We estimate 1QFY15 EBITDA of INR1.29b, down 3% YoY. We expect
EBITDA margin to decline 380bp YoY to 25.8%.
Net profit is expected at INR0.77b, up 1% YoY.
The stock trades at a P/E of 17.2x FY15 and 14.6x FY16. Buy.

Key things to watch-out: YoY ad growth (we expect 11%), EBITDA
margin (we expect 25.8%).

Bloomberg DBCL IN
M.Cap. (INR b) /(USD b) 60.6/1.0
1, 6, 12 Rel. Per (%) 4/-10/5

Y/E March 2014 2015E 2016E 2017E
Net Sales 18.6 21.1 23.8 26.7
EBITDA 5.00 5.89 6.75 7.64
Adj. Net Profit 2.92 3.52 4.16 4.83
Adj. EPS (INR) 15.9 19.2 22.7 26.3
Adj. EPS Gr. (%) 33.7 20.6 18.3 16.0
BV/Sh (INR) 62.5 71.5 82.2 94.5
RoE (%) 26.8 28.6 29.5 29.8
RoCE (%) 23.5 24.3 25.6 26.3
Div. Payout (%) 53.3 53.0 53.0 53.0
Valuations
P/E (x) 20.8 17.2 14.6 12.5
P/BV (x) 5.3 4.6 4.0 3.5
EV/EBITDA (x) 12.2 10.1 8.5 7.3
Div. Yield (%) 2.2 2.6 3.1 3.6

July 2014 183

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Sales 5,784 5,926 6,238 6,369 6,356 6,706 7,110 7,359 24,258 27,531
YoY Change (%) 11.2 11.1 11.8 14.7 9.9 13.2 14.0 15.5 12.0 13.5
Operating expenses 4,567 4,447 4,785 5,080 5,067 5,101 5,507 5,492 18,745 21,166
EBITDA 1,217 1,479 1,454 1,289 1,289 1,605 1,604 1,867 5,513 6,365
YoY Change (%) -21.8 -5.0 5.5 7.4 6.0 8.5 10.3 44.9 -4.9 15.5
EBITDA margin (%) 21.0 25.0 23.3 20.2 20.3 23.9 22.6 25.4 22.7 23.1
Depreciation 1,444 1,504 1,534 1,491 1,605 1,661 1,719 1,770 5,973 6,756
Interest 354 345 301 326 330 333 336 345 1,327 1,344
Other Income 277 211 97 201 143 144 146 149 660 582
PBT -304 -160 -284 -327 -502 -245 -306 -99 -1,127 -1,153
Adjusted net profit -304 -160 -284 -327 -502 -245 -306 -99 -1,127 -1,153
YoY Change (%) -6.0 -24.9 -36.6 -25.1 65.2 53.2 7.6 -69.6 -10.0 2.3
Net Subs (m) 10.8 11.0 11.2 11.4 11.8 12.0 12.5 12.8 11.4 12.8
ARPU (INR/month) 167 165 169 166 171 176 182 182 165 178
Revenue break-up (INR m)
Subscription revenue 5,268 5,345 5,641 5,643 5,959 6,300 6,696 6,927 21,897 25,881
Lease rentals 300 260 210 530 113 113 113 113 930 450
Others 216 321 387 196 285 294 302 319 1,431 1,200
Total revenue 5,784 5,926 6,238 6,369 6,356 6,706 7,110 7,359 24,258 27,531
E: MOSL Estimates


Dish TV India

CMP: INR62 Buy
We expect DITVs revenue to increase 10% YoY and remain flat QoQ
at INR6.36b.
Subscription revenue is expected to increase 6% QoQ to INR5.96b.
We expect gross additions of 0.6m and net additions of 0.35m.
EBITDA margin is expected to remain flat QoQ at 20.3%.
Net loss is expected to increase 65% YoY to INR502m led by higher
depreciation charges.
The stock trades at EV/EBITDA of 11.8x FY15 and 8.7x FY16. Buy.
Key things to watch-out: Quarterly gross adds (we expect 0.6m), ARPU
(we expect INR171), and EBIDTA margin (we expect 20.3%).

Bloomberg DITV IN
M.Cap. (INR b) /(USD b) 66.1/1.1
1, 6, 12 Rel. Per (%) 9/-16/-33

Y/E March 2014 2015E 2016E 2017E
Net Sales 24.3 27.5 31.8 36.0
EBITDA 5.5 6.4 8.3 11.2
Adj. NP -1.1 -1.2 0.8 3.7
Adj. EPS (INR) -1.1 -1.1 0.7 3.5
Adj. EPS Gr. (%) NA NA NA NA
BV/Sh (INR) -2.9 -4.0 -3.3 0.2
RoE (%) NA NA NA NA
RoCE (%) -5.3 -2.7 16.6 54.3
Div. Payout (%) NA NA NA NA
Valuations
P/E (x) NA NA 85.1 17.9
P/BV (x) NA NA NA NA
EV/EBITDA (x) 13.6 11.8 8.7 6.0
EV/Sub (INR) 6,579 5,842 5,161 4,417

July 2014 184

Quarterly performance (Consolidated) (INR Million)
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Revenue 5,409 5,347 5,813 5,438 5,878 5,782 6,345 5,930 22,007 23,936
YoY (%) 10.4 4.7 6.3 8.7 8.7 8.1 9.2 9.0 7.4 8.8
EBITDA 779 644 948 754 786 754 973 870 3,124 3,382
YoY (%) 16.5 13.9 8.4 5.1 0.8 17.1 2.7 15.4 10.5 8.3
EBITDA margin (%) 14.4 12.0 16.3 13.9 13.4 13.0 15.3 14.7 14.2 14.1
Depreciation 219 223 200 216 220 225 229 240 858 914
Interest 137 174 164 174 174 172 171 169 649 686
Other Income 276 570 357 421 340 357 375 396 1,624 1,467
PBT 699 816 941 785 731 714 948 857 3,240 3,250
Tax 183 177 193 363 205 200 265 240 916 910
PAT 516 639 747 422 527 514 682 617 2,324 2,340
Minority Interest 41 57 74 74 72 84 79 84 319
Reported PAT 475 582 673 348 454 430 603 533 2,078 2,021
Adj PAT 475 207 673 348 454 430 603 533 1,704 2,021
YoY (%) 16.7 -37.7 27.6 -13.2 -4.4 107.3 -10.4 53.2 2 19
Ad revenue growth (%) 10 6 9 10 11 11 11 11 9 11
-English 8 4 6 6 9 9 9 9 6 9
-Hindi 14 11 16 20 13 13 13 13 15 13
Circulation revenue growth (%) 16 14 18 14 9 9 9 9 15 9
-English 25 11 18 15 10 10 10 10 17 10
-Hindi 12 15 18 14 9 9 9 9 15 9
E: MOSL Estimates


HT Media

CMP: INR124 Neutral
We expect HT Media to post revenue of INR5.9b, up 9% YoY.
We expect ad revenue to grow 11% YoY to INR4.53b.
We expect circulation revenue to increase 9% YoY to INR0.66b.
EBITDA margin is expected to decline ~100bp YoY to 13.4%.
Net profit is expected to decline 4% YoY to INR0.45b.
The stock trades at a P/E of 14.1x FY15 and 12.4x FY16. Neutral.

Key things to watch-out: YoY English ad growth (we expect 9% YoY
growth), Hindi ad growth (we expect 13% YoY growth), EBITDA margin
(we expect 13.4%).

Bloomberg HTML IN
M.Cap. (INR b) /(USD b) 29.1/0.5
1, 6, 12 Rel. Per (%) 1/32/-3

Y/E March 2014 2015E 2016E 2017E
Net Sales 22.01 23.94 26.01 28.23
EBITDA 3.12 3.38 3.62 3.81
Adj. Net Profit 1.70 2.02 2.31 2.63
Adj. EPS (INR) 7.4 8.8 10.0 11.4
Adj. EPS Gr. (%) 3.6 18.6 14.5 13.9
BV/Sh (INR) 82.7 92.4 103.5 116.1
RoE (%) 9.4 10.0 10.3 10.4
RoCE (%) 12.1 12.3 12.4 12.3
Div. Payout (%) 4.4 4.3 4.3 4.3
Valuations
P/E (x) 16.8 14.1 12.4 10.8
P/BV (x) 1.5 1.3 1.2 1.1
EV/EBITDA (x)* 7.5 6.1 5.1 4.0
Div. Yield (%) 0.3 0.3 0.3 0.4
* Proportionate

July 2014 185

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Sales 4,131 4,137 4,552 4,207 4,496 4,548 5,035 4,642 17,027 18,720
YoY (%) 30.1 28.4 30.5 22.7 8.9 9.9 10.6 10.3 27.9
EBITDA 1,019 918 1,099 790 1,051 1,097 1,324 957 3,826 4,429
YoY (%) 29.3 17.5 20.6 46.1 3.1 19.5 20.5 21.2 26.6
EBITDA margin (%) 24.7 22.2 24.1 18.8 23.4 24.1 26.3 20.6 22.5
Depreciation 181 190 198 220 222 225 228 230 789 905
Interest 71 78 95 101 85 84 82 84 345 335
Other Income -12 -55 75 458 100 60 90 112 466 362
Exceptional item 101 101 0
PBT 755 595 881 826 844 848 1,104 755 3,057 3,551
Tax 177 139 204 274 261 263 342 234 795 1,101
Effective Tax Rate (%) 23.5 23.3 23.2 33.2 31.0 31.0 31.0 31.0 26.0
Reported net profit 578 456 677 552 582 585 762 521 2,263 2,450
Extra-ordinary item 0 0 0 248 0 0 0 0 248 0
Adjusted net profit 578 456 677 304 582 585 762 521 2,015 2,450
YoY (%) 48.1 -6.2 46.8 7.5 0.7 28.4 12.6 71.4 24.4 21.6


Jagran Prakashan

CMP: INR135 Buy
We expect advertising revenue to grow 9% YoY to INR3.16b.
We expect circulation revenue to grow 10% YoY to INR0.95b.
Jagrans aggregate revenue is likely to increase 9% YoY to INR4.5b.
We estimate 1QFY15 EBITDA of INR1.05b. We expect EBITDA margin
of 23.4%.
Adjusted earnings are expected at INR0.58b, up 1% YoY.

Key things to watch-out: YoY ad growth (we expect 9%, EBITDA
margin (we expect 23.4%).

Bloomberg JAGP IN
M.Cap. (INR b) /(USD b) 42.0/0.7
1, 6, 12 Rel. Per (%) 6/34/33

Y/E March 2014 2015E 2016E 2017E
Net Sales 17.0 18.7 20.7 22.6
EBITDA 3.8 4.4 5.1 5.6
Adj. Net Profit 2.0 2.5 2.9 3.4
Adj. EPS (INR) 6.4 7.9 9.4 10.9
Adj. EPS Gr. (%) 37.7 22.6 19.6 15.8
BV/Sh (INR) 30.7 34.1 38.9 45.1
RoE (%) 21.3 24.2 25.8 26.0
RoCE (%) 16.7 17.0 18.6 19.4
Div. payout (%) 72.3 59.4 49.7 42.9
Valuations
P/E (x) 21.0 17.2 14.3 12.4
P/BV (x) 4.4 4.0 3.5 3.0
EV/EBITDA (x) 11.6 9.8 8.3 7.1
Div. Yield (%) 2.9 3.0 3.0 3.0

July 2014 186

1Q* 2Q* 3Q* 4Q* 1Q 2Q 3Q 4Q
Revenue 6,019 4,664 5,083 5,202 6,637 5,340 5,952 5,957 20,968 23,885
YoY (%) 41.4 7.6 4.6 10.1 10.3 14.5 17.1 14.5 15.4 13.9
EBITDA 3,537 3,377 3,720 4,000 3,899 3,853 4,377 4,556 14,634 16,686
YoY (%) 9.5 2.6 -1.1 14.8 10.2 14.1 17.7 13.9 6.3 14.0
As of % Sales 58.8 72.4 73.2 76.9 58.7 72.2 73.5 76.5 69.8 69.9
Depreciation and Amortization 1,174 1,176 1,061 1,123 1,373 1,381 1,252 1,327 4,533 5,334
Interest 7 9 23 6 8 12 18 7 45 45
Other Income 134 378 149 132 158 190 228 269 792 845
PBT 2,489 2,570 2,785 3,003 2,676 2,650 3,335 3,491 10,847 12,151
Tax 845 879 927 1,027 864 856 1,077 1,128 3,678 3,925
Reported PAT 1,644 1,692 1,858 1,976 1,811 1,794 2,258 2,363 7,170 8,226
Adj PAT 1,644 1,560 1,858 1,976 1,811 1,794 2,258 2,363 7,038 8,226
YoY (%) 0.1 2.9 -2.2 11.3 10.2 15.0 21.5 19.6 3.0 16.9
Revenue Breakup (INR m)
Advertising and Broadcast 3,140 2,683 3,030 3,080 3,266 3,031 3,515 3,442 11,933 13,254
International 290 323 330 310 336 356 370 380 1,253 1,441
DTH 1,060 1,084 1,130 1,210 1,239 1,267 1,321 1,414 4,484 5,241
Domestic Cable 420 492 540 510 546 591 643 607 1,962 2,386
Films, IPL, and Others 1,109 82 53 92 1,250 95 105 114 1,336 1,564
Total 6,019 4,664 5,083 5,202 6,637 5,340 5,952 5,957 20,968 23,885


Sun TV

CMP: INR468 Buy
We expect Sun TVs revenue to increase 10% YoY to INR6.6b including
revenue from IPL.
Advertising and broadcasting revenue is expected to grow 4% YoY to
INR3.27b.
We expect domestic subscription revenue to grow 21% YoY to
INR1.78b.
Sun TVs EBITDA is estimated to grow 10% YoY to INR3.9b.
PAT is expected grow 10% YoY to INR1.81b.
Key things to watch-out: YoY ad and broadcasting growth (we expect
4%), QoQ domestic subscription growth (we expect 4% growth)

Bloomberg SUNTV IN
M.Cap. (INR b) /(USD b) 184.4/3.1
1, 6, 12 Rel. Per (%) 5/2/-12

Y/E March 2014 2015E 2016E 2017E
Net Sales 21.0 23.9 27.3 30.8
EBITDA 14.6 16.7 19.3 22.0
Adj. Net Profit 7.0 8.2 10.1 12.0
Adj. EPS (INR) 17.9 20.9 25.5 30.5
Adj. EPS Gr. (%) 3.0 16.9 22.2 19.4
BV/Sh (INR) 80.5 86.9 94.5 104.2
RoE (%) 22.6 24.0 27.0 29.2
RoCE (%) 44.6 47.2 50.8 53.2
Div. Payout (%) 52.2 59.9 60.8 59.1
Valuations
P/E (x) 26.2 22.4 18.3 15.4
P/BV (x) 5.8 5.4 5.0 4.5
EV/EBITDA (x) 12.1 10.4 8.9 7.6
Div. Yield (%) 2.0 2.7 3.3 3.8

July 2014 187

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Advertsing Revenue 5,301 5,833 6,843 5,824 6,149 6,533 7,254 6,764 23,800 26,699
Subscription Revenue 4,241 4,581 4,565 4,635 4,631 4,996 5,129 5,349 18,022 20,105
Other Sales and Services 191 599 476 1,129 400 414 428 438 2,395 1,681
Net Sales 9,733 11,013 11,884 11,588 11,180 11,943 12,811 12,551 44,217 48,485
Change (%) 15.5 15.5 26.6 20.2 14.9 8.4 7.8 8.3 19.5 9.7
Prog, Transmission & Direct Exp 4,108 5,041 6,095 5,444 5,118 5,220 5,429 5,326 20,688 21,092
Staff Cost 956 992 959 998 1,068 1,108 1,071 1,116 3,906 4,364
Selling and Other Exp 1,754 1,875 1,923 2,030 2,050 2,070 2,184 2,211 7,582 8,516
EBITDA 2,915 3,105 2,907 3,116 2,944 3,544 4,127 3,898 12,042 14,514
Change (%) 25.0 42.6 11.3 28.6 1.0 14.2 42.0 25.1 26.2 20.5
As of % Sales 30.0 28.2 24.5 26.9 26.3 29.7 32.2 31.1 27.2 29.9
Depreciation 87 91 135 189 120 125 130 195 502 569
Finance cost 22 34 32 70 30 31 31 30 158 122
Other Income 722 549 380 155 550 561 572 593 1,806 2,277
PBT 3,528 3,529 3,121 3,012 3,344 3,950 4,538 4,267 13,190 16,099
Tax 1,289 1,166 985 850 1,070 1,264 1,452 1,365 4,291 5,152
PAT 2,239 2,363 2,136 2,162 2,274 2,686 3,086 2,902 8,900 10,948
Minority Interest/Associates -8 0 0 -14 -5 -5 -5 -6 -21 -21
Provision for preference dividend 303 303 303 303 1,210
Adj PAT after Minority Interest 2,246 2,363 2,136 2,176 1,977 2,388 2,788 2,605 8,921 9,758
Change (%) 42.0 25.9 10.1 21.2 -12.0 1.1 30.5 19.7 24.0 9.4
Subscription revenue (INR m) 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q FY14 FY15E
Domestic 3,168 3,350 3,322 3,344 3,558 3,765 3,886 4,057 13,184 15,266
International 1,073 1,231 1,243 1,292 1,073 1,231 1,243 1,292 4,839 4,839
Total Subscription revenue 4,241 4,581 4,565 4,636 4,631 4,996 5,129 5,349 18,023 20,105


Zee Entertainment

CMP: INR299 Neutral
We expect advertising revenue to increase 16% YoY to INR 6.15b.
We estimate subscription revenue growth of 9% YoY to INR4.63b.
Total revenue is expected to increase by 15% YoY driven by sports as
well as non-sports segments.
EBIDTA margin is expected to decline 360bp YoY to 26.3%, primarily
led by decline in non-sports margins.
Adj PAT is expected to decline 12% YoY to INR1.98b, impacted by
preference dividend outlay.
The stock trades at a P/E of 29.4x FY15 and 23x FY16. Neutral.

Key things to watch-out: YoY ad growth (we expect 16%), sports loss
(we expect INR 167m).

Bloomberg Z IN
M.Cap. (INR b) /(USD b) 287.2/4.8
1, 6, 12 Rel. Per (%) 5/-18/10

Y/E March 2014 2015E 2016E 2017E
Net Sales 44.2 48.5 57.8 67.6
EBITDA 12.0 14.5 17.9 21.9
Adj. Net Profit 8.9 9.8 12.5 15.9
Adj. EPS (INR) 9.3 10.2 13.0 16.5
Adj. EPS Gr. (%) 23.2 9.4 28.2 26.7
BV/Sh (INR) 28.3 36.1 46.8 61.0
RoE (%) 26.9 31.5 31.4 30.6
RoCE (%) 31.1 31.9 33.9 35.1
Div. Payout (%) 21.6 17.5 14.0 11.3
Valuations
P/E (x) 32.2 29.4 23.0 18.1
P/BV (x) 10.9 8.5 6.5 5.0
EV/EBITDA (x) 22.7 18.3 14.6 11.5
Div. Yield (%) 0.7 0.7 0.7 0.7

July 2014 188

Sanjay Jain (Sanjayjain@MotilalOswal.com); +91 22 3982 5412
Marginal improvement in demand
Steel & aluminum business margins improving
Indian steel demand improved marginally in April and May 2014. There are
high expectations of stronger demand in 2HFY15.
Primary steel mills in India should benefit from a stable steel pricing and lower
coking coal costs. Non-integrated steel mills have to bear higher iron ore costs.
NMDC is a beneficiary of firm iron ore pricing.
Non-ferrous companies are benefiting from stronger aluminum prices and
production ramp-up at new projects.
During the quarter, we raised target prices by removing discounts to CWIPs in
view of improving demand and near completion of these projects and raise
the target EV/EBITDA multiple to 6.5x (v/s 6x). Hindalco, Tata Steel and JSW
Steel are our top picks.

Steel: demand improves marginally; margins to be strong
Indian steel demand improved marginally during 1QFY15. According to JPC data, the
12-month moving average in May 2014 was significantly better at 2%. The long
product pricing was strong during the seasonally weak months of April and May due
to various input (such as iron ore) and supply side issues and improved demand
sentiments. June however was a bit lackluster. There is high expectation of stronger
demand in 2HFY15.
Apparent steel consumption growth (%) has hit the bottom
5.7
4.2 4.2
2.8 2.8
2.2
2.6 2.5 2.5
2.2 2.4
-0.3
0.4 0.6
0.3
2.0
-10
-4
2
8
14
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Apparent Consumption growth 12m Moving Avg. growth

Indias monthly steel trade (kt)
0
250
500
750
1000
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Export Import

Source: JPC

Metals

Company name
Hindalco
Hindustan Zinc
Jindal Steel & Power
JSW Steel
Nalco
NMDC
Sesa Sterlite
SAIL
Tata Steel

India again turned into a
net importer of steel in
April and May

July 2014 189

Average Mumbai TMT prices were up INR856/t QoQ as per SteelMint data, while
import parity prices of HRC were down by INR2,217/t QoQ, as per our estimate. We
rely on import parity prices for flat product market as it is difficult to get a true
picture of producers prices due to the practice of discounts. As a combined effect of
opposite movement in long and flat product prices, we expect average realization to
remain stable QoQ for steel companies -- Tata, SAIL and JSPL. JSW Steel however
may witness some downward pressure as its product mix is skewed towards flat
products and exports. Export prices were weaker QoQ. Product mix improvements
should aid JSW Steel offset some pricing headwind.

HRC import parity prices (USD/t)
30,000
32,400
34,800
37,200
39,600
42,000
J
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HRC Mumbai

Source: MOSL

Long product prices (INR/t)
30,000
32,000
34,000
36,000
38,000
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TMT (Mumbai)

Source: MOSL, SteelMint

Indian iron ore prices moved up due to a shortage as 26 mines were closed in
Odisha in the third week of May, while demand was strong. Weaker international
seaborne prices had no impact on domestic pricing. NMDC increased iron ore prices
in June; it benefited from higher iron ore prices, while JSW Steel bore the extra
costs. JSW Steel has started importing iron ore for its Dolvi plant to substitute the
dwindling supplies from Odisha. Continued operation of Essar Steels slurry pipeline
aided NMDC to post strong deliveries.

Import parity prices of
HRC were down by
INR2,217/t QoQ
Average Mumbai TMT
prices were up INR856/t
QoQ

July 2014 190

Prices of iron ore fines ex-mines basis (INR/t)

Source: MOSL, SteelMint

Primary steel producers were in an advantageous position due to weakening of
coking coal prices and closure of iron ore mines in Odisha. Tata Steel and SAILs iron
ore mines in Odisha too were shut for two weeks on Supreme Courts order. Steel
production at the two mills was not interrupted due to availability of other mines
and inventories. Falling coking coal prices and stronger USD/INR rate too would
have helped primary mills on the cost side. Stable steel pricing and lower costs
should aid Tata, SAIL and JSW Steel post stronger margins.

Coking coal prices (USD/t) on FoB Australia basis
100
120
140
160
180
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Spot coking coal (fob Australia)

Source: MOSL

EBITDA per ton (INR)
0
5,000
10,000
15,000
20,000
1
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F
Y
1
2
2
Q
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1
2
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1
2
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1
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1
3
2
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1
3
3
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1
3
4
Q
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1
3
1
Q
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1
4
2
Q
F
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1
4
3
Q
F
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1
4
4
Q
F
Y
1
4
1
Q
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1
5
E
Average Tata Steel SAIL JSW Steel JSPL

Source: MOSL

1,400
1,900
2,400
2,900
3,400
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Fines 63% (Odisha) NMDC Fines
Steady decline in coking
coal prices and weaker
USD against INR is helping
Indian blast furnaces on
the cost side
Margins are expected to be
stronger on a combined
effect of stable steel pricing
and lower coking coal costs

July 2014 191

Non-ferrous: stronger prices to aid aluminum smelters
The earnings of Indian aluminum smelter will get a boost from stronger total
aluminum prices. Hindalco has been ramping up metal production at Hirakud and
Mahan smelters and alumina and bauxite production at Utkal and Baphlimali in
Odisha. SSLT too has started to ramp up production at new capacities of 325ktpa at
Korba and at first of the four lines of total 1.25mtpa at Jharsuguda. Zinc realization
should be stable as stronger LME will offset lower INR/USD rate. Silver prices are
down 7% QoQ.

Top picks Hindalco, Tata Steel and JSW Steel
Indian metal companies witnessed significant re-rating, with a change of Indian
political leadership, as optimism is the undertone for a revival of demand and fast
projects clearance. The perceived IRR of capital work in progress (CWIP) has
changed. Thus, we have done away with the practice of discounting CWIP. Further,
we have raised the target EV/EBITDA multiple to 6.5x (v/s 6x) to factor high growth
ahead. Hence, we see meaningful upside in most metal stocks. During 1QFY15, we
upgraded Tata Steel, JSW Steel and JSPL to Buy and SAIL to a Neutral. Maintain a
Buy on Hindalco, SSLT and Nalco.

Hindalco, Tata Steel and JSW Steel are our top picks.

Summary of SOTP valuation
S.N. Company CMP Mkt Cap Reco. SOTP (INR/sh.) Upside (%)

(INR b) FY15 FY16 FY17 FY15 FY16 FY17
1 Hindalco 173 357 Buy 179 222 280 4 28 62
2 SSLT 305 904 Buy 236 343 359 -23 13 18
3 Nalco 59 152 Buy 58 70 74 -2 19 26
4 JSPL 325 297 Buy 422 411 485 30 27 49
5 Tata steel 536 521 Buy 539 645 724 1 20 35
6 SAIL 95 392 Neutral 126 116 100 33 22 5
7 NMDC 184 730 Buy 210 220 242 14 20 32

Quarterly average of base metal prices on LME (3M contract) (USD/T)

Quarter
Zinc Copper Lead Silver (INR/kg)
Avg. QoQ YoY

Avg. QoQ YoY

Avg. QoQ YoY

Avg. QoQ YoY
1QFY15 2,073 2% 13%

6,787 0% -5%

2,095 0% 2%

41,862 -7% -7%
4QFY14 2,029 6% 0%

7,040 -2% -11%

2,105 0% -8%

44,935 -3% -20%
3QFY14 1,906 3% -2%

7,153 1% -10%

2,111 0% -4%

46,099 0% -23%
2QFY14 1,859 1% -1%

7,073 -1% -8%

2,101 2% 6%

46,077 3% -17%
1QFY14 1,840 -9% -5%

7,147 -10% -9%

2,053 -11% 4%

44,837 -20% -18%


July 2014 192

Quarterly average of base metal prices on LME (3M contract) (USD/T)

Quarter
Aluminum Alumina Premium Aluminum total price
Avg. QoQ YoY Avg. QoQ YoY Avg. QoQ YoY Avg. QoQ YoY
1QFY15 1,798 5% -2% 317 -3% -3% 289 31% 61% 2,088 8% 4%
4QFY14 1,708 -3% -15%

328 2% -4%

221 19% 23% 1,929 -1% -12%
3QFY14 1,768 -1% -11%

323 1% -1%

185 0% 6% 1,953 -1% -10%
2QFY14 1,780 -3% -7%

318 -3% 1%

186 3% 4% 1,966 -2% -6%
1QFY14 1,834 -8% -7% 327 -4% 3% 180 1% 28% 2,014 -8% -5%



(INR)
4.7.14
Reco Jun-14
Var %
YoY
Var %
QoQ
Jun-14
Var %
YoY
Var %
QoQ
Jun-14
Var %
YoY
Var %
QoQ
Hindalco 173 Buy

226,272 14.8 -8.1

24,073 31.3 -4.8

4,465 0.8 -50.4
Hindustan Zinc 167 Buy

33,373 11.8 -8.4

17,586 17.0 0.2

17,779 11.7 -5.5
JSPL 325 Buy

55,808 22.9 9.4

17,656 17.3 34.4

5,655 -18.5 40.5
JSW Steel 1,271 Buy

111,674 19.3 -10.6

23,018 31.6 -7.8

7,574 111.2 -4.9
Nalco 59 Buy

17,237 10.5 -6.2

2,687 75.6 -13.1

2,091 31.0 1.5
NMDC 184 Buy

33,915 18.1 -12.7

22,482 18.0 -9.0

18,326 16.6 -4.4
SAIL 95 Neutral

110,518 7.6 -18.2

13,369 38.2 9.5

4,525 -14.1 6.9
Sesa Sterlite 305 Buy

174,543 21.5 -16.0

63,650 16.2 -4.5

11,753 95.9 -10.9
Tata Steel 536 Buy

337,537 2.9 -20.4

45,587 23.6 -9.0

13,238 18.1 22.4





Metals
Hindalco 173 Buy 10.9 12.9 19.8 15.9 13.4 8.8 5.8 5.2 4.9 9.2 10.1 13.8
Hindustan Zinc 167 Buy 18.3 18.1 18.7 9.1 9.2 8.9 5.2 4.3 3.6 19.1 16.5 15.1
JSPL 325 Buy 26.7 35.1 40.3 12.2 9.3 8.0 8.7 7.6 6.7 10.3 12.2 12.6
JSW Steel 1,271 Buy 120.0 115.6 140.1 10.6 11.0 9.1 6.7 6.3 5.6 12.4 10.6 11.5
Nalco 59 Buy 3.2 4.1 4.1 18.5 14.3 14.4 7.5 5.3 4.6 6.7 8.2 7.8
NMDC 184 Buy 17.9 18.3 19.6 10.3 10.1 9.4 6.2 6.0 5.5 21.5 21.2 20.6
SAIL 95 Neutral 7.7 7.6 7.2 12.3 12.4 13.1 8.5 7.9 7.4 7.2 6.8 6.1
Sesa Sterlite 305 Buy 21.7 24.1 20.4 14.1 12.7 15.0 4.8 4.3 4.2 8.5 8.8 7.1
Tata Steel 536 Buy 54.1 64.2 69.2 9.9 8.4 7.8 6.5 6.2 5.6 19.3 18.1 16.8

90
105
120
135
150
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Sensex Index MOSL Metals Index
50
90
130
170
210
250
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Sensex Index MOSL Metals Index

July 2014 193


INR million
1Q 2Q 3Q 4Q

1Q 2Q 3Q 4Q
Alumina (Production, kt) 348 334 355 318

321 324 328 331 1,355 1,304
Aluminium (sales, kt) 130 132 151 186

166 173 199 218 599 756
Copper (sales, kt) 68 77 85 92

85 85 85 85 322 340
Avg LME Aluminium (USD/T) 1,834 1,780 1,770 1,707 1,805 1,850 1,900 1,950 1,773 1,876
Net Sales 58,379 63,049 72,732 84,351

75,340 76,721 80,785 83,978 278,510 316,824
Change (YoY %) -3.2 2.3 5.8 20.6 29.1 21.7 11.1 -0.4 6.9 13.8
EBITDA 4,785 5,398 6,295 8,441

7,579 8,157 9,297 10,354 24,919 35,386
Change (YoY %) 3.3 4.8 8.2 31.2

58.4 51.1 47.7 22.7 13.1 42.0
As % of Net Sales 8.2 8.6 8.7 10.0 10.1 10.6 11.5 12.3 8.9 11.2
EBITDA - Aluminium 3,515 2,550 2,838 4,798

4,441 5,019 6,159 7,216 13,701 22,836
EBITDA-Copper 1,270 2,848 3,457 3,643 3,138 3,138 3,138 3,138 11,219 12,550
Interest 1,487 1,832 1,652 2,146

3,677 3,636 4,656 4,618 7,117 16,587
Depreciation 1,831 1,964 1,998 2,441

3,467 3,475 4,288 4,300 8,233 15,529
Other Income 2,249 2,798 2,042 2,125 1,906 1,736 1,683 1,624 9,214 6,950
PBT (before EO item) 3,716 4,401 4,688 5,979

2,341 2,782 2,036 3,060 18,784 10,220
Extra-ordinary Income 2,030 -3,960 -1,930
PBT (after EO item) 5,746 4,401 4,688 2,019

2,341 2,782 2,036 3,060 16,854 10,220
% Tax 27.0 18.9 28.7 -7.7 25.4 19.0 38.9 27.1 16.1 26.9
Reported PAT 4,741 3,571 3,340 2,482

1,746 2,253 1,244 2,230 14,134 7,472
Adjusted PAT 3,116 3,691 3,931 5,014 1,746 2,253 1,244 2,230 16,064 7,472
Novelis Shipments (kt) 708 718 721 753

758 768 808 843 2,900 3,177
Novelis adj. EBITDA (USDm) 218 228 203 250 246 250 266 278 899 1,041
E: MOSL Estimates

June 2014 Results Preview | Sector: Metals

Hindalco

CMP: INR173 Buy
Standalone: net sales to increase 29% YoY: We expect net sales to
increase 29% YoY to INR75b due to higher sales volumes in both
Aluminum and Copper segment. Aluminum sales volumes are
expected to increase 28% YoY, while copper sales volumes are likely
to increase 25% YoY.
Standalone EBITDA to increase 58% YoY to INR7.6b: Aluminum
EBITDA per ton is expected to increase by ~USD29 QoQ to USD445/t.
Novelis EBITDA to increase 13% YoY to USD246m: We expect
Novelis shipments to increase 7% YoY to 758kt, while EBITDA per ton
is expected to increase 6% YoY to USD325/ton.
Reiterate Buy: Consolidated EBITDA is expected to increase at 18%
CAGR over FY14-17E due to increase in production of aluminum
(Mahan & Aditya), alumina (Utkal), bauxite (Baphlimali mine) and
Novelis FRP -- as a benefit of the just completed USD8b capex. Stock
trades at attractive valuations. Maintain Buy.

Production ramp-up at recently-commissioned projects of Utkal
alumina and Mahan aluminum smelter.
Progress on Mahan coal block.
Production ramp-up at Aditya smelter.

Bloomberg HNDL IN
M. Cap. (INR b)/(USD b) 357 / 6
1,6,12 Rel Perf. (%) 3 / 21 / 39

Y/E March 2014 2015E 2016E 2017E
Sales 877.0 962.7 1,097.1 1,146.0
EBITDA 82.9 104.7 122.8 136.4
NP 25.7 22.5 26.7 40.8
Adj. EPS (INR) 12.5 10.9 12.9 19.8
EPS Gr(%) -26.6 -12.6 18.7 52.9
BV/Sh. (INR) 113.3 122.5 133.8 151.9
RoE (%) 11.6 9.2 10.1 13.8
RoCE (%) 4.6 5.5 6.5 7.8
Payout (%) 13.2 15.0 12.7 8.3
Valuations
P/E (x) 13.9 15.9 13.4 8.8
P/BV 1.5 1.4 1.3 1.1
EV/EBITDA (x) 10.5 8.2 6.9 5.9
Div. Yield (%) 0.8 0.8 0.8 0.8

July 2014 194

Y/E March FY14

FY15E FY14 FY15E
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Production (integrated only)

Zn refined (000 tons) 173 195 196 175 175 186 192 203 739 757
Pb refined (000 tons) 27 29 25 29 31 32 32 33 110 128
Silver (tons) 86 92 81 78 87 89 90 92 358 358
Net Sales 29,842 35,591 34,501 36,427 33,373 35,645 36,589 38,357 136,360 143,964
Change (YoY %) 8.6 24.2 8.6 -6.8 11.8 0.2 6.1 5.3 7.4 5.6
EBITDA 15,031 18,834 18,238 17,552 17,586 19,040 19,581 20,417 69,654 76,623
As % of Net Sales 50.4 52.9 52.9 48.2 52.7 53.4 53.5 53.2 51.1 53.2
Interest 109 80 100 203 203 203 203 203 492 810
Depreciation 1,843 1,865 2,097 2,041 1,817 1,817 1,817 1,817 7,846 7,266
Other Income 5,403 2,669 4,240 5,887 5,107 5,158 5,424 5,544 18,198 21,233
PBT (before EO item) 18,481 19,558 20,280 21,195 20,674 22,179 22,986 23,942 79,514 89,781
Extra-ordinary Income 795 -612 183
PBT (after EO item) 19,275 18,946 20,280 21,195 20,674 22,179 22,986 23,942 79,697 89,781
Total Tax 2,671 2,544 3,053 2,383 2,894 3,105 3,218 3,352 10,651 12,569
% Tax 13.9 13.4 15.1 11.2 14.0 14.0 14.0 14.0 13.4 14.0
Reported PAT 16,605 16,403 17,227 18,812 17,779 19,074 19,768 20,590 69,046 77,211
Adjusted PAT 15,920 16,932 17,227 18,812 17,779 19,074 19,768 20,590 68,887 77,211
Change (YoY %) 0.7 10.0 6.8 -13.8 11.7 12.7 14.7 9.5 -0.4 12.1
Avg LME Zinc (USD/T) 1,840 1,859 1,897 2,035 2,065 2,100 2,100 2,100 1,908 1,908
Avg LME Lead (USD/T) 2,053 2,101 2,111 2,111 2,104 2,100 2,100 2,100 2,094 2,094
Silver (USD/oz) 21.5 19.7 19.7 20.5 20.5 20.5 20.5 20.5 20.2 21.0
E: MOSL Estimates


Hindustan Zinc

CMP: INR167 Buy
Net sales to increase 12% YoY: We expect net sales to increase 12%
YoY to INR33.4b, largely driven by prices. Prices on LME have
increased by 12% YoY to USD2,065/t for zinc and by 2% for lead to
USD2,104. Silver prices are down 5% YoY. USD/INR rate too has
increased 7%, aiding the realization. Volumes are largely flat.
EBITDA to increase 17% YoY: We expect EBITDA to increase 17% YoY
to INR17.6b, largely due to stronger LME.
Maintain Buy: Company has guided for only marginal growth in
volume in FY15 as it is making a transition to underground mining in
Rampur Agucha. Zawar and Kayad mines will provide additional
volumes. We expect EBITDA to post 5% CAGR over FY14-17E on
higher sales volumes. The stock trades at attractive EV/EBITDA and
P/BV valuations. Maintain Buy.
Rampur Agucha mine is making a transition from open pit to
underground mining. HZL toned down its volume growth guidance
in the last 12 months. We await a new guidance.

Bloomberg HZ IN
M. Cap. (INR b)/(USD b) 705 / 12
1,6,12 Rel Perf. (%) -6 / 2 / 31

Y/E March 2014 2015E 2016E 2017E
Sales 136.4 144.0 151.3 155.1
EBITDA 69.7 76.6 79.6 80.1
NP 68.9 77.2 76.6 79.0
Adj. EPS (INR) 16.3 18.3 18.1 18.7
EPS Gr(%) -0.4 12.1 -0.8 3.1
BV/Sh. (INR) 88.6 102.7 116.8 131.4
RoE (%) 19.8 19.1 16.5 15.1
RoCE (%) 22.0 21.5 19.9 18.1
Payout (%) 25.1 22.4 22.6 21.9
Valuations
P/E (x) 10.2 9.1 9.2 8.9
P/BV 1.9 1.6 1.4 1.3
EV/EBITDA (x) 6.5 5.2 4.3 3.6
Div. Yield (%) 2.1 2.1 2.1 2.1

July 2014 195


(INR Million)
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Sales volume

Steel (000 tons) 665 740 765 766

765 813 893 940 2,935 3,324
Pellets (000 tons) 551 639 525 320

610 830 932 1,189 2,035 3,561
CPP (M kwh) 384 116 300 290

377 295 185 97 1,090 1,415
Jindal Power (M kwh) 2,000 1,952 1,968 1,751

2,469 2,587 2,824 2,824 7,671 10,704
Net Sales 34,252 36,556 37,767 36,865 37,858 40,675 43,656 46,640 145,440 168,829
Change (YoY %) 2.8 1.9 -1.2 -12.5 10.5 11.3 15.6 26.5 -2.7 16.1
EBITDA 10,477 10,833 12,098 9,715

10,655 11,408 12,182 12,960 43,123 47,205
As % of Net Sales 30.6 29.6 32.0 26.4 28.1 28.0 27.9 27.8 29.7 28.0
Interest 2,318 3,337 3,667 4,050

4,299 4,712 4,780 4,849 13,371 18,640
Depreciation 3,036 3,036 2,985 3,157

3,548 3,888 3,912 3,935 12,214 15,283
Other Income 63 56 9 1,341 193 89 234 1,537 1,469 2,053
PBT (before EO item) 5,185 4,516 5,456 3,849

3,001 2,898 3,724 5,713 19,006 15,335
PBT (after EO item) 3,185 3,516 5,456 3,849

3,001 2,898 3,724 5,713 16,006 15,335
Total Tax 796 950 1,800 -459

840 811 1,043 1,600 3,087 4,294
% Tax 25.0 27.0 33.0 -11.9 28.0 28.0 28.0 28.0 19.3 28.0
Reported PAT 2,389 2,567 3,656 4,308

2,160 2,087 2,681 4,113 12,919 11,041
Adjusted PAT 4,389 3,567 3,656 4,308 2,160 2,087 2,681 4,113 15,919 11,041
Change (YoY %) -4.6 -38.7 -29.8 -25.4 -50.8 -41.5 -26.7 -4.5 -29.8 -30.6
JPL Power Sales (MU) 2,000 1,952 1,968 1,751

2,469 2,587 2,824 2,824 7,984 10,704
JPL PAT 3,217 3,006 2,666 2,182 3,410 3,544 3,814 3,814 11,070 14,582
Adj consol PAT 6,943 5,521 5,615 4,025

5,655 5,683 6,506 6,602 22,104 24,446
Change (YoY %) -27.6 -38.5 -35.3 -53.2 -18.5 2.9 15.9 64.0 -36.6 10.6
E: MOSL Estimates


Jindal Steel & Power

CMP: INR325 Buy
Standalone net sales to increase 11% YoY: We expect net sales to
increase 11% YoY to INR38b driven by 15% growth in steel volumes
and 11% growth in Pellet sales. JSPL recently doubled the pellet
capacity to 9mtpa and increased the steel capacity at Angul.
Standalone EBITDA to increase 2%: Margins are expected to improve
179bp QoQ to 28.1% due to better steel prices. EBITDA will increase
2% YoY. Higher interest and depreciation will erode earnings.
Jindal Power: Tamnar-II has started supplying power to Tamil Nadu
state. This has helped power volumes to increase 23% YoY to 2.5b
kwh.
Maintain Buy: Consolidated EBITDA is expected to clock a CAGR of
20% over FY14-17E aided by capacity expansion at Angul, Oman and
Tamnar-II. Stock trades at a discount to the replacement cost. We
expect the stock to get re-rated as PPA and FSA for Tamnar-II unsold
capacity gets into place. Maintain Buy.
Utkal B1 coal block for coal gasification project at Angul.
Stabilization of coal gasification, DRI and steel melt shop at Angul.
Transmission line connectivity to Southern grid. This will help
Jindal Power to sell/generate more.

Bloomberg JSP IN
M. Cap. (INR b)/(USD b) 297 / 5
1,6,12 Rel Perf. (%) -6 / 3 / 16

Y/E March 2014 2015E 2016E 2017E
Sales 200.0 244.5 288.0 336.2
EBITDA 60.8 76.7 90.7 104.6
Adj. PAT 22.1 24.4 32.1 37.0
Adj. EPS (INR) 24.1 26.7 35.1 40.3
EPS Gr(%) -35.2 10.6 31.4 15.0
BV/Sh. (INR) 247.1 271.3 302.9 339.7
RoE (%) 10.2 10.3 12.2 12.6
RoCE (%) 7.9 8.5 9.4 10.5
Payout (%) 7.7 7.0 5.3 4.6
Valuations
P/E (x) 13.4 12.2 9.3 8.0
P/BV 1.3 1.2 1.1 1.0
EV/EBITDA (x) 10.7 8.7 7.6 6.7
Div. Yield (%) 0.5 0.5 0.5 0.5

July 2014 196


(INR Million)
1Q 2Q 3Q 4Q

1Q 2Q 3Q 4Q
Sales ('000 tons) 2,550 3,130 3,080 3,100

2,900 3,100 3,150 3,250 11,860 12,400
Change (YoY %) 20.9 44.2 41.9 27.6

13.7 -1.0 2.3 4.8 33.6 4.6
Realization (INR per ton) 36,699 36,695 38,846 40,288

38,508 37,733 37,733 37,733 38,194 37,914
Change (YoY %) -14.4 -10.2 1.7 5.4

4.9 2.8 -2.9 -6.3 -4.5 -0.7
Net Sales 93,582 114,857 119,645 124,894 111,674 116,971 118,857 122,631 452,977 470,132
Change (YoY %) 3.5 29.5 44.3 34.4

19.3 1.8 -0.7 -1.8 27.6 3.8
EBITDA 17,491 22,340 23,032 24,963 23,018 24,658 25,451 28,567 87,826 101,694
Change (YoY %) -1.3 46.5 75.3 47.1

31.6 10.4 10.5 14.4 39.2 15.8
As % of Net Sales 18.7 19.4 19.3 20.0

20.6 21.1 21.4 23.3 19.4 21.6
EBITDA (INR per ton) 6,859 7,137 7,478 8,052

7,937 7,954 8,080 8,790 7,405 8,201
EBITDA (USD per ton) 122 115 121 130 133 136 138 150 122 139
Interest 6,418 6,890 7,192 6,902

7,040 7,181 7,324 7,471 27,401 29,015
Depreciation 6,439 6,852 6,904 7,064

7,205 7,349 7,496 7,646 27,259 29,695
Other Income 723 1,208 607 773

781 789 797 805 3,311 3,171
PBT (before EO Item) 5,357 9,806 9,543 11,771 9,554 10,917 11,428 14,255 36,476 46,155
EO Items -8,529 -8,394 -16,923
PBT (after EO Item) -3,173 1,412 9,543 11,771

9,554 10,917 11,428 14,255 19,553 46,155
Total Tax -965 400 3,021 3,752

1,911 2,183 2,286 2,851 6,208 9,231
% Tax 30.4 28.3 31.7 31.9

20.0 20.0 20.0 20.0 31.8 20.0
Reported PAT -2,208 1,013 6,521 8,019 7,643 8,734 9,142 11,404 13,345 36,924
Preference Dividend 70 70 70 70 70 70 70 70 279 279
Adjusted PAT 3,586 6,623 6,443 7,964 7,574 8,664 9,073 11,334 24,616 36,645
Change (YoY %) -48.1 33.1 119.3 43.5 111.2 30.8 40.8 42.3 20.8 48.9
Consolidated adj PAT 1,110 2,356 2,318 2,528 5,656 6,753 7,167 9,436 8,313 29,012
E: MOSL Estimates


JSW Steel

CMP: INR1,271 Buy
Standalone (S/A) net sales to increase 19% YoY: We expect S/A net
sales to increase 19% YoY to INR112b, driven by 14% growth in
volumes and 5% growth in realization.
S/A EBITDA to increase 32% YoY: We expect EBITDA to increase 32%
YoY to INR23b, driven by growth in volume and expansion of margins.
EBITDA per ton is expected to increase 9% YoY to INR7,937/t.
Subsidiaries: JSW Coated remains the key driver of EBITDA for
subsidiaries. Weak iron ore and coking coal prices would depress the
operating performance of US and Chile mining assets.
Maintain Buy: JSW Steel is Indias most efficient steel producer with
lowest conversion cost. Despite challenges in sourcing iron ore and
headwind of slower domestic demand, it has been able to improve
margins and grow volumes. Although we expect volume CAGR at ~5-
6% over FY14-17E, the upside risk remains in view of underutilized
capacities. Maintain Buy.
The impact of iron ore imports in view of supply shrinkage in
Odisha.
The impact of weaker international prices on exports.

Bloomberg JSTL IN
M. Cap. (INR b)/(USD b) 307 / 5
52-Week Range (INR) 1,325 / 452
1,6,12 Rel Perf. (%) -5 / 3 / 74

Y/E March 2014 2015E 2016E 2017E
Sales 512.2 548.9 558.5 599.9
EBITDA 91.7 106.8 108.6 119.3
Adj. PAT 8.3 29.0 27.9 33.9
Adj. EPS (INR) 34.4 120.0 115.6 140.1
EPS Gr(%) -30.8 249.0 -3.7 21.3
BV/Sh. (INR) 907.5 1,031.3 1,156.9 1,283.1
RoE (%) 4.1 12.4 10.6 11.5
RoCE (%) 10.3 10.8 10.5 11.2
Payout (%) 80.2 10.4 10.8 9.8
Valuations
P/E (x) 37.0 10.6 11.0 9.1
P/BV 1.4 1.2 1.1 1.0
EV/EBITDA (x) 8.0 6.7 6.3 5.6
Div. Yield (%) 0.9 0.9 0.9 0.9
Note: JSW Ispat included in FY14 and FY15

July 2014 197


(INR Million)
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Aluminium Sales ('000 tons) 85 75 78 82

80 80 81 81 320 322
Alumina Sales ('000 tons) 283 374 313 372

338 328 406 446 1,342 1,518
Avg LME Aluminium (USD/ton) 1,834 1,780 1,770 1,707

1,805 1,850 1,900 1,950 1,773 1,876
NSR premiums (USD/ton) 327 314 327 399

469 407 399 400 368 419
Alumina Exports (USD/ton) 325 316 313 305 316 324 333 341 315 328
Net Sales 15,606 17,382 16,439 18,382 17,237 16,775 18,793 20,040 67,809 72,844
Change (YoY %) -10.7 8.1 -2.9 -1.6 10.5 -3.5 14.3 9.0 -2.0 7.4
EBITDA 1,530 2,677 2,043 3,093 2,687 2,367 3,226 3,954 9,342 12,234
Change (YoY %) -49.7 -l/p- 11.9 -26.7

75.6 -11.5 57.9 27.8 3.0 31.0
As % of Net Sales 9.8 15.4 12.4 16.8 15.6 14.1 17.2 19.7 13.8 16.8
Interest

Depreciation 1,245 1,286 1,308 1,409

1,416 1,424 1,431 1,438 5,247 5,708
Other Income 1,787 1,228 1,208 1,354

1,805 1,241 1,220 1,367 5,577 5,633
PBT (before EO Item) 2,072 2,619 1,943 3,037 3,075 2,185 3,015 3,883 9,672 12,158
Extra-ordinary Income -494 -494
PBT (after EO Item) 2,072 2,619 1,943 2,543

3,075 2,185 3,015 3,883 9,178 12,158
Total Tax 476 827 633 819

984 699 965 1,243 2,755 3,891
% Tax 23.0 31.6 32.6 32.2 32.0 32.0 32.0 32.0 30.0 32.0
Reported PAT 1,597 1,792 1,310 1,725

2,091 1,486 2,050 2,641 6,424 8,268
Adjusted PAT 1,597 1,792 1,310 2,059

2,091 1,486 2,050 2,641 6,769 8,268
Change (YoY %) -28.4 3,648.7 10.2 -16.3 31.0 -17.1 56.5 28.2 14.2 22.1
E: MOSL Estimates


Nalco

CMP: INR59 Buy
Net sales to increase 10% YoY to INR17b: We expect net sales to
increase 10% YoY to INR17b driven by 20% growth in alumina sales,
7% weaker INR/USD rate and stronger metal premiums. However,
LME is down 2% YoY and metal volumes are down 5% YoY due to
ramp-down of smelters.
EBITDA to increase 76% YoY to INR2.7b: EBITDA is expected to
increase 76% YoY to INR2.7b driven by higher volumes of alumina and
better margins. Margins are expanding due to better realization and
lower cost. Nalco has minimized purchase of imported coal to contain
costs, even though this strategy has affected metal volumes.
Maintain Buy: We believe alumina prices are likely to increase over
next few years gradually due to shortage of bauxite post the export
ban from largest supplier, Indonesia. Nalco will be a key beneficiary
due to its captive source. Successful start of Utkal E coal block can
significantly reduce power cost and help ramp up metal volumes.
Aluminum production has been affected due to constraints in
supply of linkage coal from MCL and lower LME prices. Nalco is
operating at 25-30% lower capacity and the trend is likely to
continue due to limited linkage coal supply.
Utkal E coal block remains the key to profitability of the idle
smelter capacity.

Bloomberg NACL IN
M. Cap. (INR b)/(USD b) 153 / 3
1,6,12 Rel Perf. (%) 1 / 35 / 67

Y/E March 2014 2015E 2016E 2017E
Sales 67.8 72.8 78.5 80.3
EBITDA 9.3 12.2 15.9 15.8
NP 6.8 8.3 10.7 10.6
Adj. EPS (INR) 2.6 3.2 4.1 4.1
EPS Gr(%) 14.2 22.1 29.4 -0.7
BV/Sh. (INR) 47.3 49.1 51.8 54.4
RoE (%) 5.6 6.7 8.2 7.8
RoCE (%) 7.5 9.1 11.3 10.7
Payout (%) 58.7 45.6 35.2 35.5
Valuations
P/E (x) 22.6 18.5 14.3 14.4
P/BV 1.3 1.2 1.1 1.1
EV/EBITDA (x) 10.6 7.5 5.3 4.6
Div. Yield (%) 2.1 2.1 2.1 2.1

July 2014 198


(INR Million)
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Production (m tons) 6.9 5.9 7.3 9.9

8.5 7.5 8.5 9.5 30.0 34.0
Sales (m tons) 7.3 6.5 7.3 9.4

8.5 7.5 8.5 9.5 30.5 34.0
Avg Dom. Realisation (USD/t) 67 53 58 62

63 64 63 62 60 63
Avg Dom. Realisation (INR/t) 3,735 3,290 3,580 3,827

3,759 3,759 3,664 3,626 3,634 3,698
Lumps % (production) 37 34 36 37

36 36 36 36 36 36
Net Sales 28,706 24,799 28,232 38,845 33,915 29,654 32,674 36,002 120,582 132,246
EBITDA 19,052 14,936 19,028 24,697 22,482 19,099 21,258 22,613 77,713 85,452
As % of Net Sales 66.4 60.2 67.4 63.6

66.3 64.4 65.1 62.8 64.4 64.6
EBITDA per ton (USD) 47 37 42 42

44 44 43 41 42 43
EBITDA per ton (INR/t) 2,627 2,296 2,591 2,627

2,645 2,547 2,501 2,380 2,548 2,513
Interest 0 0 0 19 0 0 0 0 19 19

442 453 464 476 1,504 1,834
Other Income 5,209 5,384 5,077 5,275 4,910 5,140 5,319 5,526 20,945 20,896
PBT (after EO Item) 23,897 19,972 23,743 29,523 26,950 23,786 26,113 27,664 97,136 104,495
Total Tax 8,176 6,788 8,070 10,356

8,624 7,612 8,356 8,852 33,391 33,444
% Tax 34.2 34.0 34.0 35.1 32.0 32.0 32.0 32.0 34.4 32.0
Reported PAT 15,722 13,184 15,673 19,166

18,326 16,175 17,757 18,811 63,745 71,051
Adjusted PAT 15,722 13,184 15,673 19,166 18,326 16,175 17,757 18,811 63,745 71,051
E: MOSL Estimates


NMDC

CMP: INR184 Buy
Iron ore sales to increase 17% YoY: We expect net sales to increase
17% YoY (-13% QoQ) to INR34b due to 1% higher realization and 17%
growth in tonnage to 8.5mt. NMDC achieved iron ore sales of 5.65mt
in the first two months of the quarter aided by start of a slurry
pipeline.
EBITDA to increase 18% YoY: We expect EBITDA to increase 18% YoY
to INR22.5b, in-line with growth in volumes. EBITDA per ton is
expected to be marginally higher at INR2,645/t.
Domestic tailwinds are stronger than global headwinds: We
continue to believe that iron ore supply is getting tighter in India,
which will improve the pricing power for iron ore fines. We expect
NMDC to deliver ~10% volume CAGR during FY14-17E. The stock
trades at attractive valuations and dividend yield of 5-6%. Maintain
Buy.
Progress on steel plant project.
Uninterrupted operations of Essar Steels slurry pipeline.
Naxal activities in Chhattisgarh.
Operations of Pellet plant in Karnataka.

Bloomberg NMDC IN
M. Cap. (INR b)/(USD b) 729 / 12
1,6,12 Rel Perf. (%) -8 / 8 / 48

Y/E March 2014 2015E 2016E 2017E
Sales 120.6 132.2 137.1 149.4
EBITDA 77.7 85.5 88.3 97.5
Adj. PAT 63.9 71.1 72.5 77.9
Adj. EPS (INR) 16.1 17.9 18.3 19.6
EPS Gr(%) -3.6 11.2 2.0 7.4
BV/Sh. (INR) 75.6 82.4 88.4 95.2
RoE (%) 22.6 21.5 21.2 20.6
RoCE (%) 22.6 21.5 21.1 20.6
Payout (%) 61.4 62.0 67.2 65.5
Valuations
P/E (x) 11.4 10.3 10.1 9.4
P/BV 2.4 2.2 2.1 1.9
EV/EBITDA (x) 7.0 6.2 6.0 5.5
Div. Yield (%) 4.6 5.2 5.7 6.0

July 2014 199

Quarterly Performance (Adjusted Proforma) (INR Million)
Y/E March FY14

FY15E FY14 FY15E
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Net Sales 143,610 180,260 194,140 207,840 174,543 191,684 200,856 210,756 725,850 777,840
Change (YoY %) -22.2 1.3 13.7 10.4 21.5 6.3 3.5 1.4 1.1 7.2
EBITDA 54,790 69,550 65,650 66,650 63,650 71,225 71,517 73,086 256,640 279,478
Change (YoY %) 2.3 5.5 14.0 16.2 2.4 8.9 9.7 1.7 8.9
As % of Net Sales 38.2 38.6 33.8 32.1 36.5 37.2 35.6 34.7 35.4 35.9
Interest 15,710 14,730 15,300 15,370 16,822 16,937 17,205 17,544 61,110 68,509
D & A 18,870 20,520 20,930 23,930 22,431 22,811 23,694 24,603 84,250 93,539
Other Income 6,680 4,870 3,900 7,640 9,505 9,598 9,896 10,124 23,090 39,123
PBT (before EO item) 26,890 39,170 33,320 34,990 33,902 41,075 40,514 41,063 134,370 156,554
Extra-ordinary Income 1,730 820 -1,970 580
PBT (after EO item) 26,890 40,900 34,140 33,020 33,902 41,075 40,514 41,063 134,950 156,554
Total Tax 3,100 5,010 -1,390 3,280 5,309 5,898 5,719 4,615 10,000 21,542
% Tax 11.5 12.2 -4.1 9.9 15.7 14.4 14.1 11.2 7.4 13.8
Reported PAT 23,790 35,890 35,530 29,740 28,592 35,177 34,795 36,448 124,950 135,012
Profit from Associates

Minority interest 17,790 20,140 16,980 18,520 16,840 18,264 17,932 17,751 73,430 70,787
Adjusted PAT 6,000 14,020 17,730 13,190 11,753 16,913 16,863 18,697 50,940 64,225
Change (YoY %) -76.1 10.9 7.4 -4.3 95.9 20.6 -4.9 41.7 -29.8 26.1
E: MOSL Estimates; C: Company's adjusted proforma reporting


Sesa Sterlite

CMP: INR305 Buy
Net sales to increase 22% YoY: Stronger zinc, lead, aluminum, oil
prices and weaker USD/INR rate is the key driver of revenue. The
revenue was hit last year (1QFY14) due to shutdown of a copper
smelter. Copper production was restored in 2QFY14. Working interest
in oil production increased 5.6%, driven by 9% growth in Rajasthan
block production. Volumes for all other businesses are largely flat.
EBITDA to increase 16% YoY: EBITDA to increase 16% driven by
better product realization on lower cost of production of aluminum.
PBT to increase 26% YoY due to higher EBITDA and other income. PAT
will increase 96% YoY to INR11.7b.
Maintain Buy: We have raised LME assumption for zinc by USD100 to
USD2,100. We roll over the target to FY16 estimates and raise
EV/EBITDA multiple to 6.5x (v/s 6x). In anticipation of successful
minority buyout in HZL, the holding company discount too is
removed. Thus, the SOTP has increased to INR343/share. Maintain
Buy.
Status of Balcos coal mine and restoration of factory permission
for the expansion project.
Progress of TSPL project.
Ramp-up of 1.25mtpa Jharsuguda Phase-II project.

Bloomberg SSLT IN
M. Cap. (INR b)/(USD b) 905 / 15
1,6,12 Rel Perf. (%) -1 / 29 / 81

Y/E March 2014 2015E 2016E 2017E
Sales 725.9 777.8 879.2 901.9
EBITDA* 174.6 196.2 215.3 207.6
NP 50.9 64.2 71.4 60.5
Adj. EPS (INR) 17.2 21.7 24.1 20.4
EPS Gr(%) -27.4 -15.0 40.1 -5.8
BV/Sh. (INR) 113.9 139.2 165.6 188.5
RoE (%) 7.3 8.5 8.8 7.1
RoCE (%) 10.8 11.5 11.7 11.2
Payout (%) 22.1 18.9 21.9 31.5
Valuations
P/E (x) 17.8 14.1 12.7 15.0
P/BV 1.2 1.2 1.1 1.0
EV/EBITDA (x)* 8.0 6.8 6.0 5.8
Div. Yield (%) 1.1 1.1 1.5 1.8
Note: Sesa-Sterlite merged entity basis;
*(attrib.)

July 2014 200


(INR Million)
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Sales (m tons) 2.6 3.0 3.0 3.5 2.9 3.3 3.2 3.7 12.1 13.1
Change (YoY %) 4.8 15.3 7.8 8.4 9.5 8.3 8.4 7.2 9.1 8.3
Realization (INR per ton) 39,190 38,260 38,647 38,931

38,508 37,733 37,733 37,733 38,750 37,903
Change (YoY %) -9.1 -7.5 -0.4 1.0

-1.7 -1.4 -2.4 -3.1 -3.9 -2.2
Net Sales 102,679 115,355 114,587 135,092 110,518 123,197 121,310 140,365 467,714 495,390
Change (%) -4.7 6.6 7.4 9.6 7.6 6.8 5.9 3.9 4.9 5.9
EBITDA 9,673 8,669 11,320 12,208

13,369 16,807 19,693 24,025 41,870 73,893
Change (YoY %) -36.2 -21.9 -0.6 35.1

38.2 93.9 74.0 96.8 -10.3 76.5
EBITDA per ton (INR) 3,692 2,875 3,818 3,518

4,658 5,148 6,125 6,458 3,469 5,654
EBITDA per ton (USD) 66 46 62 57 78 88 105 110 57 96
Interest 1,918 2,165 2,468 3,126

3,200 3,389 3,574 3,917 9,676 14,080
Depreciation 3,929 3,988 4,087 5,163

5,230 5,519 5,805 6,448 17,167 23,002
Other Income 2,262 1,527 2,088 1,751 863 834 808 782 7,628 3,287
PBT (before EO Inc.) 6,088 4,043 6,853 5,671

5,802 8,733 11,121 14,442 22,654 40,098
EO Income(exp) -879 9,881 199 389

9,590
PBT (after EO Inc.) 5,209 13,924 7,052 6,060 5,802 8,733 11,121 14,442 32,245 40,098
Total Tax 700 2,121 1,726 1,535

1,276 1,921 2,447 3,177 6,081 8,822
% Tax 13.4 15.2 24.5 25.3 22.0 22.0 22.0 22.0 18.9 22.0
Reported PAT 4,509 11,804 5,326 4,525

4,525 6,812 8,675 11,265 26,164 31,276
Adjusted PAT 5,270 3,427 5,176 4,235

4,525 6,812 8,675 11,265 18,382 31,276
Change (YoY %) -37.9 -31.4 5.5 -12.6 -14.1 98.7 67.6 166.0 -20.9 70.1
E: MOSL Estimates


SAIL

CMP: INR95 Neutral
Net sales to increase 8% YoY to INR110b: We expect net sales to
increase 8% YoY to INR110b driven largely by corresponding growth
in volumes. The average steel realization will benefit positively on
QoQ basis due to stronger long product prices. However, weaker flat
product prices will affect the realization negatively.

EBITDA to increase 38% YoY to INR13b: EBITDA is expected to
increase 38% YoY to INR13b due to margin expansion. Margins are
expected to expand on the benefit of lower coking coal prices.

Maintain Neutral: Post a hiatus of seven years with stagnation, steel
production is expected to grow at an accelerated pace on the benefit
of addition of two new blast furnaces at Roorkela and Burnpur.
Margins are expected to expand benefiting from lower coking coal
prices, operating leverage and demand improvement. Lower IRR on
new capacities has stretched the valuations. Maintain Neutral.
Ramp-up of steel production at Roorkela steel plant.
Commissioning of BOF at ISP, Burnpur.

Bloomberg SAIL IN
M. Cap. (INR b)/(USD b) 391 / 7
1,6,12 Rel Perf. (%) -10 / 9 / 62

Y/E March 2014 2015E 2016E 2017E
Sales 471.2 499.1 562.2 636.5
EBITDA 45.9 78.2 90.8 99.7
NP 19.1 31.9 31.5 29.8
Adj. EPS (INR) 4.6 7.7 7.6 7.2
EPS Gr(%) -23.0 66.7 -1.0 -5.4
BV/Sh. (INR) 105.0 110.3 115.6 120.5
RoE (%) 4.5 7.2 6.8 6.1
RoCE (%) 4.9 7.2 7.1 6.7
Payout (%) 36.2 30.3 30.6 32.4
Valuations
P/E (x) 20.5 12.3 12.4 13.1
P/BV 0.9 0.9 0.8 0.8
EV/EBITDA (x) 13.4 8.5 7.9 7.4
Div. Yield (%) 2.1 2.1 2.1 2.1

July 2014 201


(INR Million)
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Steel Sales ('000 tons) 2,005 2,038 2,066 2,407

2,075 2,238 2,266 2,407 8,516 8,986
Change (YoY %) 26.1 17.8 9.5 5.6

3.5 9.8 9.7

13.8 5.5
Net Sales 94,554 99,210 101,434 121,912 103,105 107,805 109,175 115,659 417,110 435,744
EBITDA 28,343 29,379 29,359 41,088

32,717 33,967 35,124 39,085 128,169 140,894
(% of Net Sales) 30.0 29.6 28.9 33.7

31.7 31.5 32.2 33.8 30.7 32.3
Steel EBITDA(INR/tss) 13,493 13,284 13,010 15,920

15,067 14,186 14,506 15,284 14,134 14,881
Steel EBITDA(USD/tss) 241 214 210 258

252 242 248 261 234 253
Interest 4,664 4,366 4,529 4,646 4,693 4,740 4,787 4,835 18,206 19,055
Depreciation 4,596 5,510 4,565 4,616

4,662 4,709 4,756 4,804 19,287 18,931
Other Income 1,442 3,257 2,648 530 1,449 3,273 2,661 532 7,876 7,916
PBT (before EO Inc.) 20,525 22,760 22,913 32,355

24,811 27,791 28,243 29,979 98,553 110,823
EO Income(exp)

-1,418

-1,418
PBT (after EO Inc.) 20,525 22,760 22,913 30,937 24,811 27,791 28,243 29,979 97,135 110,823
Total Tax 6,964 7,173 7,726 11,151

8,188 9,171 9,320 9,893 33,013 36,572
% Tax 33.9 31.5 33.7 36.0 33.0 33.0 33.0 33.0 34.0 33.0
Reported PAT 13,561 15,587 15,188 19,786

16,624 18,620 18,923 20,086 64,122 74,252
Adjusted PAT 13,561 15,587 15,188 21,204 16,624 18,620 18,923 20,086 65,540 74,252
Consolidated Financials

Net Sales 328,048 366,449 367,358 424,281

337,537 358,244 352,209 401,636 1,486,136 1,449,627
EBITDA 36,880 37,054 40,065 50,111

45,587 46,721 40,004 58,297 164,110 190,609
Rep. PAT (before MI & asso.) 11,423 9,510 4,995 10,712

13,597 13,937 5,236 23,024 35,499 55,794
Adj. PAT (after MI & asso) 11,213 9,168 5,028 10,817 13,238 13,589 4,965 22,600 36,278 54,392
TSE Sales (000 tons) 3,140 3,460 3,190 4,070

3,234 3,564 3,286 4,192 13,860 14,276
TSE EBITDA(USD/tss) 44 26 43 33 57 53 21 69 36 51
E: MOSL Estimates; tss=ton of steel sales; 1HFY12 numbers don't reconcile with FY12 due to revised format under Schedule 6


Tata Steel

CMP: INR536 Buy
Tata Steel India (TSI): We expect net sales to increase 9% YoY to
INR103b driven by 5% growth in realization and 3% growth in sales
volume. EBITDA is expected to increase 15% YoY to INR32.7b aided by
expansion in steel EBITDA per ton by 12% YoY to INR15,067.
Overseas subsidiaries: We expect Tata Steel Europe (TSE) and other
South East Asia subsidiaries to report EBITDA per ton of USD52. TSE
volumes are expected to increase 3% YoY to 3.2mt.
Maintain Buy: Tata Steel is likely to benefit from a jump in volumes of
its high margin Indian business aided by completion of the new
3mtpa Kalinganagar Greenfield project (KPO). The margins of Indian
business are likely to remain resilient despite global headwinds. TSE
and other overseas subsidiaries too are likely to meet capex from its
own cash flows. Valuations are attractive. Maintain Buy.
Free cash flow generation at TSE.
Progress at KPO.
Iron ore supply to Indian business in view of the recent temporary
mines closure in Odisha.

Bloomberg TATA IN
M. Cap. (INR b)/(USD b) 521 / 9
1,6,12 Rel Perf. (%) -5 / 6 / 69

Y/E March 2014 2015E 2016E 2017E
Sales 1,486 1,450 1,455 1,538
EBITDA 164 191 199 218
Adj. PAT 34 53 62 67
Adj. EPS (INR) 35.5 54.1 64.2 69.2
EPS Gr(%) 2,162.2 52.5 18.6 7.8
BV/Sh. (INR) 235 326 381 442
RoE (%) 15.7 19.3 18.1 16.8
RoCE (%) 9.7 11.1 11.1 11.4
Payout (%) 25.6 16.3 15.6 14.5
Valuations
P/E (x) 15.1 9.9 8.3 7.7
P/BV 2.3 1.6 1.4 1.2
EV/EBITDA (x) 7.7 6.5 6.2 5.6
Div. Yield (%) 1.5 1.5 1.7 1.7

June 2014 Results Preview | Sector: Oil & Gas

July 2014 202

1QFY15 Preview: Policy action to guide stock performance
Operationally, likely to be subdued; to watch out for subsidy sharing

1QFY15 oil PSU profitability will largely depend on the subsidy sharing and given the large
variance in the quarterly sharing it will not be indicative of the full year profit performance.
To watch for key policy directions in the upcoming budget as well as government decision on
the gas price hike which has been postponed by three months

Likely lower subsidy to increase ONGC/OINL net realization on QoQ basis
Expect net realization to increase ~USD7/bbl QoQ for ONGC/OINL, as we model
lower QoQ subsidy led by lower gross under recoveries.
As in earlier quarters, oil PSUs profitability would depend on the subsidy
sharing, but at the same time will not be indicative of full year profitability given
the quarterly variations.
Refinery profitability (RIL, OMCs, MRPL) would be impacted by lower product
cracks, reflected in 7% QoQ decline in benchmark Reuters Singapore GRM.
RILs PAT is likely to be flat YoY at ~INR53b, despite higher operating profit
supported by ~7% INR depreciation, due to lower other income which was
boosted in 1QFY14 on account of profit on sale of investments.
Expect lower QoQ operating profit for Cairn, led by operational hiccups in May
and increase of governments share in profit petroleum.

GRM down 7% QoQ to USD5.8/bbl in 1QFY15, crude up QoQ and YoY
Regional benchmark, Reuters Singapore GRM declined QoQ from USD6.2/bbl to
USD5.8/bbl, led by lower LPG and middle-heavy distillate cracks. Bunching up of
annual refinery maintenance shutdowns globally had boosted 4QFY14 GRM.
Brent crude average is up 6% YoY and 2% QoQ to USD110/bbl, led by constant
geo-political tensions in Ukraine and the Middle East. QoQ decline in Light-
Heavy differentials would lower the premium for complex refiners.

Expected quarterly performance summary

(INR)
4.7.14
Reco Jun-14
Var %
YoY
Var %
QoQ
Jun-14
Var %
YoY
Var %
QoQ
Jun-14
Var %
YoY
Var %
QoQ
BPCL 601 Buy

639,124 8.9 -14.5

8,149 -10.0 -87.1

1,568 4.3 -96.1
Cairn India 364 Neutral

44,508 9.5 -11.8

31,727 5.4 -17.5

25,429 -18.7 -16.2
GAIL 464 Neutral

144,409 12.3 -0.2

14,816 1.2 10.8

8,210 1.6 -15.5
Gujarat State Petronet 95 Neutral

2,637 -10.9 14.4

2,350 -12.7 17.6

1,128 -10.7 23.5
HPCL 422 Buy

551,138 6.5 -14.1

5,931 LP -89.9

-1,595 Loss PL
IOC 349 Buy

1,213,989 10.1 -9.9

35,328 LP -73.7

10,392 LP -88.9
Indraprastha Gas 365 Neutral

8,499 -5.7 -12.1

2,034 5.7 6.7

974 11.6 7.7
MRPL 72 Neutral

167,048 9.4 -12.7

3,763 123.6 3.7

1,892 LP -82.3
Oil India 585 Buy

22,217 12.2 21.7

8,736 25.3 146.5

7,193 18.1 27.2
ONGC 422 Buy

213,275 11.0 2.1

114,556 36.4 2.8

61,250 52.5 25.3
Petronet LNG 178 Buy

104,379 23.6 0.1

4,200 5.6 8.6

1,746 -22.5 3.2
Reliance Inds. 1,032 Neutral

984,782 12.4 3.5

77,194 9.1 -7.3

53,456 -0.1 -5.1
Excl. RMs 1,691,754 12.3 0.6 259,376 19.7 -0.8 161,280 16.1 -2.3

Company name
BPCL
Cairn India
GAIL
Gujarat State Petronet
HPCL
Indraprastha Gas
IOC
MRPL
Oil India
ONGC
Petronet LNG
Reliance Industries

Oil & Gas

Harshad Borawake (HarshadBorawake@MotilalOswal.com) / Nitish Rathi (Nitish.Rathi@motilaloswal.com)


July 2014 203

QoQ subsidy fall led by lower diesel and LPG losses; gas price hike decision
postponed
We estimate 1QFY15 subsidy at INR292b (+15% YoY, -26% QoQ). While lower
diesel/LPG losses and INR appreciation contributed to the QoQ decline, the YoY
increase was led by higher LPG losses v/s 1QFY14 and INR depreciation.
We model (a) continued monthly diesel price hikes, and (b) no change in
LPG/kerosene prices, leading to ~46% cut in gross under-recoveries from
INR1.4t in FY14 to INR750b by FY16.
For subsidy sharing in FY15/FY16, we model OMCs share at ~2% (similar to
FY14), upstream at 64%/64% (v/s 48% in FY14) and lower government share at
34%/34% (v/s 51% in FY14), as we expect the government to take maximum
benefit of lower subsidy. Any variation in this will impact our estimates for oil
PSUs.
We do not model any gas price hike in our FY15 estimates, but model gas price
in FY16/FY17 at ~USD5.3/6.3/mmbtu for ONGC/OINL and USD7/mmbtu for RIL.

Valuation and view
We would watch for (a) subsidy sharing and its likely rationalization (b) decision
on gas price hike, and (c) deregulation of petroleum products.
We prefer ONGC/OINL in upstream (significant earnings growth opportunity led
by higher gas price and lower subsidy) and BPCL among OMCs (strong balance
sheet and E&P potential). We maintain Neutral on GAIL due to headwinds for
gas availability.
We maintain Neutral on Cairn India, as any ramp-up in production will take
time. We reiterate Neutral on RIL, as the next earnings growth phase is still
some time away we believe FY17, when its new core business/E&P projects
commission.

Oil & Gas
BPCL 601 Buy 33.3 45.3 48.1 18.0 13.3 12.5 9.0 7.6 6.6 12.0 14.9 14.4
Cairn India 364 Neutral 55.8 52.1 40.4 6.5 7.0 9.0 3.6 3.5 3.5 17.2 14.4 10.2
Chennai Petroleum 97 Neutral 10.5 14.9 15.7 9.2 6.5 6.2 7.1 6.2 5.6 8.8 11.6 11.3
GAIL 464 Neutral 30.7 32.9 36.5 15.1 14.1 12.7 10.4 8.8 7.9 13.7 13.4 13.6
Gujarat State Petronet 95 Neutral 8.8 10.0 9.9 10.7 9.5 9.6 6.2 5.6 5.7 14.2 14.1 12.4
HPCL 422 Buy 28.3 34.7 40.2 14.9 12.1 10.5 9.3 7.8 7.1 6.3 7.4 8.2
Indraprastha Gas 365 Neutral 28.2 30.9 35.3 12.9 11.8 10.3 6.0 5.1 4.1 20.6 19.5 19.3
IOC 349 Buy 32.4 37.9 41.5 10.8 9.2 8.4 7.5 6.6 5.5 11.2 12.1 12.0
MRPL 72 Neutral 5.1 7.3 7.5 14.2 9.9 9.7 7.0 5.6 5.1 12.1 15.5 14.2
Oil India 585 Buy 64.6 71.7 75.2 9.1 8.2 7.8 6.5 5.5 5.2 17.9 18.0 17.1
ONGC 422 Buy 35.9 42.5 44.7 11.8 9.9 9.4 5.3 4.5 4.4 17.1 18.1 17.0
Petronet LNG 178 Buy 10.4 12.7 16.2 17.2 14.0 11.0 8.2 7.2 5.5 14.6 15.9 17.8
Reliance Inds. 1,032 Neutral 79.0 87.1 108.9 13.1 11.8 9.5 10.8 9.8 6.9 11.2 11.2 12.8
Ex RMS 12.0 10.7 9.8 6.9 6.1 5.3 13.8 13.8 13.6


July 2014 204

GRM down 7% QoQ; crude up 2% QoQ, Arab L-H spread declines QoQ

Brent crude price was up 2% QoQ and 6% YoY (USD/bbl)

Premium of Brent over WTI dropped to USD6.8/bbl in 1QFY15


Singapore GRM down 7% QoQ to USD5.8/bbl in 1QFY15 (USD/bbl)

GRM decline was led by LPG, mid-heavy distillate cracks (USD/bbl)


Arab L-H differential declined QoQ in 1QFY15 (USD/bbl)


1
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1QFY09 1QFY10 1QFY11 1QFY12 1QFY13 1QFY14 1QFY15
Quarterly GRM

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Arab L-H Brent - Dubai
Our key assumptions
Our crude price assumptions for FY15/16/17 are
USD108/105/100/bbl and USD100/bbl over long
term.
We expect regional benchmark Singapore Reuters
GRM to remain in the USD6-8/bbl range for the
near term.


July 2014 205

Except for PVC, petchem margins declined QoQ in 1QFY15 (INR/kg)
(RIL Basic prices - INR/kg) Simple Spreads Int.Spreads
PE PP PVC POY PSF PE PP PVC POY PSF
1QFY13 91.9 92.1 61.8 92.4 95.8 43.3 43.5 13.3 54.0 57.4
2QFY13 91.2 91.9 63.5 93.8 96.2 40.3 41.0 12.6 53.3 55.7
3QFY13 89.4 92.2 62.0 94.0 98.3 37.9 40.7 10.6 53.2 57.5
4QFY13 93.0 97.9 63.5 97.3 101.4 40.6 45.4 11.1 55.8 59.9
1QFY14 92.5 95.9 63.3 95.0 96.3 44.3 47.7 15.2 56.9 58.1
2QFY14 104.4 109.7 72.8 107.2 107.9 46.6 51.9 15.0 61.4 62.1
3QFY14 107.6 109.8 72.3 103.4 106.0 48.4 50.6 13.1 56.3 58.9
4QFY14 112.3 113.0 74.3 97.9 100.9 53.9 54.6 15.9 51.4 54.4
1QFY15 109.0 107.7 77.0 97.7 97.6 51.6 50.3 19.6 52.0 51.8
QoQ (%) -3.0% -4.7% 3.6% -0.2% -3.3% -4.3% -7.9% 23.5% 1.1% -4.8%
YoY (%) 17.8% 12.3% 21.6% 2.9% 1.4% 16.4% 5.4% 29.6% -8.7% -10.9%

Polymer spreads over naphtha increased YoY (INR/kg)

Source: Bloomberg, Company
POY/PSF spreads continue to decline YoY (INR/kg)

Source: Bloomberg, Company

1QFY15 under-recoveries down QoQ at INR292b; we model upstream share at INR588b/480b/443b in FY15/16/17


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POY PSF
(INR b) FY09 FY10 FY11 FY12 FY13 FY14 FY15E FY16E FY17E
Fx Rate (INR/USD) 46.0 47.5 45.6 47.9 54.5 60.6 59.0 58.0 58.0
Brent (USD/bbl) 85 70 86 114 111 108 108 105 100
Product-wise Gross Under recoveries (INR b)
Auto Fuel s 575 144 375 812 915 628 186 0 0
Domesti c Fuel s 458 316 405 573 696 770 732 750 691
Total 1,033 461 780 1,385 1,610 1,399 918 750 691
Sharing of Gross Under recoveries (INR b)
Government 713 260 410 829 1,000 707 312 255 235
Upstream 329 145 303 552 600 671 588 480 443
OMC's (9) 56 67 0 10 21 18 15 14
Total 1,033 461 780 1,385 1,610 1,399 918 750 691
Sharing of Gross Under recoveries (%)
Government 69 56 53 60 62 51 34 34 34
Upstream 32 31 39 40 37 48 64 64 64
OMC's (1) 12 9 0 1 2 2 2 2
Total 100 100 100 100 100 100 100 100 100
Sharing within Upstream Sharing (INR b)
ONGC 282 116 249 445 494 564 496 405 374
OI L 30 15 33 74 79 88 78 63 58
GAI L 18 13 21 32 27 19 14 11 11
Total 329 144 303 550 600 671 588 480 443

July 2014 206

Petrol and diesel price difference (INR/liter)

Source: PPAC, MoPNG, MOSL
Diesel under-recoveries fell to INR1.6/liter in June 2014

Source: PPAC, MoPNG, MOSL
Expect ONGCs net realization estimated at USD40/bbl

GAIL transmission volumes under pressure (mmscmd)

Expect RIL premium to Singapore GRM at ~USD2.7/bbl

Cairns Rajasthan production likely to average 189kbpd





11.85
11.33
32.27
13.74
19.86
15.76
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Jul-06 Jul-08 Jul-10 Jul-12 Jul-14

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E
FY11 FY12 FY13 FY14 FY15
Net Realization Subsidy Burden
117
119 119
116
110
106 105
99 99
95 96 95 95
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FY12 FY13 FY14 FY15
Transmission volume (mmscmd)

-4
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FY09 FY10 FY11 FY12 FY13 FY14 FY15
Premium/ (discount) Singapore GRM RIL
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7

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E
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Sensex Index MOSL Oil & Gas Index
80
95
110
125
140
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Sensex Index MOSL Oil & Gas Index

July 2014 207

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Net Sales 587,053 617,574 647,342 747,366

639,124 594,785 631,674 673,915 2,599,335 2,539,497
Change (%) 7.7 8.6 3.8 12.8 8.9 -3.7 -2.4 -9.8 8.3 -2.3
EBITDA 9,054 16,806 -9,492 63,224 8,149 13,393 17,686 18,259 79,592 57,487
% of Sales 1.5 2.7 -1.5 8.5 1.3 2.3 2.8 2.7 3.1 2.3
Depreciation 5,305 5,382 5,592 6,189

5,924 5,976 5,956 5,995 22,468 23,851
Interest 5,253 3,244 3,045 2,048

3,105 3,042 3,006 2,988 13,591 12,141
Other Income 3,695 4,839 2,842 4,581

3,228 3,906 3,906 3,228 15,957 14,267
PBT 2,191 13,020 -15,288 59,567 2,347 8,281 12,630 12,503 59,490 35,762
Tax 688 3,708 -4,399 18,884

780 2,751 4,195 4,153 18,881 11,879
Tax rate (%) 31.4 28.5 28.8 31.7 33.2 33.2 33.2 33.2 31.7 33.2
PAT 1,503 9,311 -10,889 40,684

1,568 5,530 8,435 8,350 40,609 23,883
Change (%) nm -81.5 nm -15.2 4.3 -40.6 nm -79.5 53.7 -41.2
Adj. PAT 1,503 9,311 -10,889 40,684 1,568 5,530 8,435 8,350 40,609 23,883
Adj. EPS 2.1 12.9 -15.1 56.3 2.2 7.6 11.7 11.5 56.2 33.0
Key Assumption (INR b)
Gross under recovery 61 88 99 97

70 56 48 38 345 212
Upstream sharing 37 42 40 38

42 34 29 31 156 136
Govt. sharing 19 44 25 96 22 21 20 9 184 72
Net Under/(Over) recovery 5 2 34 -37

7 1 -1 -2 5 4
As a % of Gross 8.9 2.4 34.5 nm 9.2 2.0 nm nm 1.5 1.9
E: MOSL Estimates


BPCL

CMP: INR601 Buy
Quarterly profitability of the OMCs (BPCL, HPCL, IOC) has remained
dependent on the subsidy sharing, which is ad-hoc, than on business
fundamentals. For 1QFY15, we model upstream sharing at 60%,
government sharing at 31%, and OMC sharing at 9%. The final picture
will only be clear when the government finalizes subsidy sharing for
1QFY15.
We model marginal sharing by OMCs for FY15 (2% / INR18b), with the
rest being shared by upstream (64% / INR587b) and the government
(34% / INR312b). For FY16/FY17, we model OMCs share at ~2%, with
the rest being shared by upstream and the government.
1QFY15 gross under-recoveries have declined by 26% QoQ due to
lower under-recoveries in diesel (led by price hikes), LPG and
kerosene (led by lower international prices).
We peg refinery throughput at 5.9mmt for 1QFY15 against 6.1mmt in
4QFY14 and 5.6mmt in 1QFY14.
We expect BPCL to report net profit of INR1.57b in 1QFY15 v/s
INR1.51b in 1QFY14 and INR40.7b in 4QFY14.
BPCL trades at 13.2x FY16E EPS and at 0.7x FY16E BV, adjusted for
investments. E&P upsides from Mozambique and Brazil are the key
medium-term triggers for BPCL. Buy.

(a) Updates on Mozambique/Brazil reserves, (b) Subsidy sharing,
(c) GRM, and (d) Forex changes.

Bloomberg BPCL IN
M.Cap. (INR b) /(USD b) 433.34/7.24
1, 6, 12 Rel. Per (%) 0/58/30

Y/E March 2014 2015E 2016E 2017E
Sales 2,643 2,665 2,714 2,660
EBITDA 92.1 70.3 77.1 82.2
Adj. PAT 39.1 24.1 32.7 34.8
Adj. EPS (INR) 54.1 33.3 45.3 48.1
EPS Gr. (%) 107.9 -38.4 35.9 6.3
BV/Sh.(INR) 266 288 318 350
RoE (%) 21.7 12.0 14.9 14.4
RoCE (%) 15.5 10.5 12.5 12.9
Payout* (%) 35.4 35.1 33.6 34.0
Valuation
P/E (x) 11.1 18.0 13.3 12.5
P/BV (x) 2.3 2.1 1.9 1.7
EV/EBITDA (x) 7.7 9.0 7.6 6.6
Div. Yield (%) 2.8 1.6 2.2 2.3
*Based on standalone

July 2014 208

1Q 2Q 3Q 4Q

1Q 2Q 3Q 4Q

Net Sales 40,629 46,499 50,000 50,489

44,508 46,625 45,659 43,309 187,617 180,101
Change (%) -8.5 4.7 16.9 15.7

9.5 0.3 -8.7 -14.2 7.1 -4.0
EBITDA 30,099 35,325 36,922 38,439

31,727 34,142 33,141 31,278 140,784 130,289
% of Net Sales 74.1 76.0 73.8 76.1

71.3 73.2 72.6 72.2 75.0 72.3
% Change -13.8 2.3 12.4 18.0

5.4 -3.3 -10.2 -18.6 4.4 -7.5
Exploration w/off 1,001 513 1,003 1,608

890 1,290 1,980 2,888 4,124 7,048
D,D&A 5,193 5,465 5,948 6,367

5,786 5,571 5,571 5,320 22,974 22,249
Interest 105 110 91 109

20 20 20 20 415 80
Other Income (Net) 1,251 1,109 1,403 4,070

2,737 2,776 2,808 2,914 7,834 11,235
Forex Fluctuations 6,820 4,292 -1,290 -2,431

-276 0 0 0 7,390 -276
PBT 31,871 34,637 29,992 31,995

27,491 30,037 28,378 25,964 128,496 111,870
Tax 599 787 1,152 1,641

2,062 2,253 2,128 912 4,178 7,355
Tax rate* (%) 2.4 2.6 3.7 4.8

7.4 7.5 7.5 3.5 3.4 6.6
Adj. PAT 31,272 33,851 28,840 30,354

25,429 27,785 26,249 25,052 124,318 104,515
YoY Change (%) -18.3 45.8 -8.6 18.4

-18.7 -17.9 -9.0 -17.5 4.8 -15.9
PAT 31,272 33,851 28,840 30,354

25,429 27,785 26,249 25,052 124,318 104,515
Adj. EPS 16.4 17.7 15.1 15.9

13.3 14.5 13.7 13.1 65.1 54.7
Key Assumptions and Cain's share in production (kboepd)

Exchange rate (INR/USD) 55.9 62.5 62.0 62.0

59.8 59.0 59.0 58.2 60.6 59.0
Brent Price (USD/bbl) 102.8 110.6 109.2 107.7

109.7 108.0 107.0 107.3 107.6 108.0
Ravva & Cambay Prodn 10.6 10.0 10.4 9.2

9.2 9.2 9.2 9.2 10.1 9.2
Rajasthan Prodn 121.0 122.8 130.5 133.6

132.3 126.0 126.0 123.0 127.0 126.8
Total 131.6 132.9 140.8 142.8

141.5 135.2 135.2 132.1 137.0 136.0
E: MOSL Estimates; * Excluding forex fluctuations, includes MAT credit.

Cairn India

CMP: INR364 Neutral
We expect CAIRs 1QFY15 Rajasthan production to decline marginally
QoQ to 189kbpd v/s 191kbpd in 4QFY14 and 173kbpd in 1QFY14, as
CAIR faced some issues with its turbines in May 2014.
We estimate CAIRs 1QFY15 net sales at INR44.5b (v/s INR50.5b in
4QFY14 and INR40.6b in 1QFY14). Despite flat Rajasthan production
and higher realization, we expect net sales to decline due to higher
expected profit petroleum. We estimate EBITDA at INR31.7b v/s
INR38.4b in 4QFY14 and INR30b in 1QFY14.
We estimate forex loss (~3.6% INR appreciation over USD) of
INR276m v/s profit of INR6.8b in 1QFY14 and loss of INR2.4b in
4QFY14. We model in Brent crude price of USD108/105/100/bbl in
FY15/16/17 and long-term price of USD100/bbl, and take a quality
discount of 12% for CAIR.
The stock trades at 6.8x FY16E EPS of INR52. Maintain Neutral.
In the medium-term : (a) Update on PSC extension, (b) Production
ramp-up, and (c) Reserve updates, with 100-well exploration
program ongoing in Rajasthan. With increasing cash balance on
the balance sheet, clarity on utilization would be positive.
During the quarter: (a) Net realization, (b) Forex fluctuations and
guidance or production ramp-up and reserve upgrades.

Bloomberg CAIR IN
M.Cap. (INR b) /(USD b) 688.56/11.51
1, 6, 12 Rel. Per (%) -1/-11/-10

Y/E March 2014 2015E 2016E 2017E
Sales 187.6 180.1 183.9 178.7
EBITDA 140.8 130.3 124.9 112.4
Adj. PAT 124.3 104.5 97.7 75.7
Adj. EPS (INR) 65.2 55.8 52.1 40.4
EPS Gr. (%) 3.3 -14.4 -6.5 -22.6
BV/Sh.(INR) 301 343 381 409
RoE (%) 23.6 17.2 14.4 10.2
RoCE (%) 22.9 18.2 15.1 12.8
Payout (%) 22.5 24.6 24.6 24.6
Valuation
P/E (x) 5.4 6.3 6.8 8.7
P/BV (x) 1.2 1.0 0.9 0.9
EV/EBITDA (x) 3.5 3.3 3.3 3.2
Div. Yield (%) 3.4 3.3 3.0 2.4


July 2014 209


(INR Million)
Y/E March FY14

FY15E

FY14 FY15E
1Q 2Q 3Q 4Q

1Q 2Q 3Q 4Q

Net Sales 128,556 139,446 159,806 144,643

144,409 146,696 152,625 156,951

572,451 600,681
Change (%) 15.9 22.7 28.1 16.6

12.3 5.2 -4.5 8.5

20.9 4.9
EBITDA 14,642 14,055 22,317 13,370

14,816 15,775 17,024 20,210

64,384 67,826
% of Net Sales 11.4 10.1 14.0 9.2

10.3 10.8 11.2 12.9

11.2 11.3
Depreciation 2,808 2,888 3,008 3,057

2,892 2,952 3,770 3,909

11,762 13,523
Interest 612 1,082 913 1,056

1,100 1,150 1,350 1,423

3,662 5,023
Other Income 1,018 2,798 2,661 5,136

1,250 2,689 2,450 1,517

11,614 7,906
PBT 12,241 12,883 24,507 14,393

12,074 14,362 14,354 16,395

64,023 57,186
Tax 4,159 3,726 7,713 4,673

3,864 4,596 4,593 5,246

20,271 18,299
Rate (%) 34.0 28.9 31.5 32.5

32.0 32.0 32.0 32.0

31.7 32.0
Adj PAT 8,082 9,157 13,345 9,720

8,210 9,766 9,761 11,149

40,303 38,886
Change (%) -28.7 -7.1 3.9 60.3

1.6 6.7 -26.9 14.7

0.5 -3.5
EPS (INR) 6.4 7.2 10.5 7.7

6.5 7.7 7.7 8.8

31.8 30.7
Key Assumptions

Gas Trans. volume (mmsmd) 99 95 96 95

95 96 96 101

96 97
Petchem sales ('000MT) 121 108 109 107

115 125 175 215

445 630
Segmental EBIT Breakup (INRm)

Natural Gas Transmission 5,538 5,762 4,112 2,604

4,275 5,303 5,395 5,011

18,016 19,984
LPG Transmission 550 426 597 579

581 609 606 566

2,153 2,362
Natural Gas Trading 3,025 4,870 5,054 2,854

3,578 3,968 3,884 3,498

15,803 14,927
Petrochemicals 4,383 3,909 3,356 1,965

2,630 3,188 2,238 2,288

13,612 10,345
LPG & Liq.HC (pre-subsidy) 6,891 4,707 7,624 9,979

5,695 6,403 7,452 9,996

29,201 29,545
Unallocated; GAILTEL -255 17 292 250

0 0 0 0

304 0
Total 20,132 19,691 21,035 18,231

16,759 19,472 19,574 21,358

79,089 77,163
Less: Subsidy -7,000 -6,987 -13 -5,000

-3,500 -3,500 -3,500 -3,500

-19,000 -14,000
Total 13,132 12,704 21,022 13,231

13,259 15,972 16,074 17,858

60,089 63,163
E: MOSL Estimates


GAIL

CMP: INR464 Neutral
We expect GAIL to report PAT of INR8.2b (up 1.6% YoY; down 16%
QoQ). We model GAILs subsidy sharing at INR3.5b in 1QFY15 v/s
INR7b in 1QFY14 and INR5b in 4QFY14. Expect full year GAILs subsidy
sharing at INR14b (v/s INR19b in FY14).
Subsidy sharing assumption: For FY15/16/17, we model upstream
share at 64/60/60%. For GAIL, we have assumed a sharing of
INR14b/11b/9b in FY15/16/17 v/s INR19b in FY14.
We model gas transmission volumes at 95mmscmd, flat QoQ, v/s
99mmscmd in 1QFY14. Segmental EBIT (pre-subsidy) is expected to
decrease by 6.8% QoQ and 18% YoY.
The stock trades at 11.6x FY16E EPS of INR32.9. Though we like the
management's strategy to build network to enable gas sourcing, we
remain Neutral due to medium-term earnings concern led by likely
under-utilization of its new network on account of headwinds to
incremental gas availability.

(a) Subsidy sharing, (b) Transmission volumes, and (c) Cost of
natural gas for consumption in LPG and Petrochemicals.

Bloomberg GAIL IN
M.Cap. (INR b) /(USD b) 581.79/9.73
1, 6, 12 Rel. Per (%) 17/13/6
Y/E March 2014 2015E 2016E 2017E
Sales 572.5 600.7 689.9 781.0
EBITDA 64.4 67.8 80.0 85.3
Adj. PAT 40.3 38.9 41.7 46.3
Adj. EPS (INR) 31.8 30.7 32.9 36.5
EPS Gr. (%) 0.2 -3.5 7.2 11.0
BV/Sh.(INR) 214 234 256 279
RoE (%) 17.0 13.7 13.4 13.6
RoCE (%) 17.0 15.0 15.6 16.3
Payout (%) 32.3 35.0 35.0 35.0
Valuations
P/E (x) 12.0 12.5 11.6 10.5
P/BV (x) 1.8 1.6 1.5 1.4
EV/EBITDA (x) 9.2 9.3 8.1 7.2
Div. Yield (%) 2.2 1.9 2.2 2.4


July 2014 210


(INR Million)
Y/E March FY14

FY15E FY14 FY15E
1Q 2Q 3Q 4Q

1Q 2Q 3Q 4Q

Net Sales 2,961 2,770 2,439 2,304

2,637 2,859 2,979 3,024 10,473 11,499
Change (%) 10.6 1.4 -6.4 -35.8

-10.9 3.2 22.2 31.2 -9.7 9.8
EBITDA 2,691 2,508 2,057 1,999

2,350 2,540 2,625 2,633 9,255 10,149
% of Net Sales 90.9 90.6 84.4 86.7

89.1 88.8 88.1 87.1 88.4 88.3
% Change 9.2 -0.5 -12.0 -38.8

-12.7 1.3 27.6 31.7 -12.6 9.7

470 490 510 516 1,839 1,986
Interest 380 367 353 319

320 322 310 313 1,418 1,265
Other Income 139 141 151 155

125 139 125 132 585 521
PBT 1,992 1,812 1,394 1,384

1,684 1,866 1,929 1,934 6,583 7,419
Tax 729 671 520 471

556 616 637 639 2,391 2,448
Rate (%) 36.6 37.1 37.3 34.0

33.0 33.0 33.0 33.0 36.3 33.0
PAT 1,263 1,141 873 914

1,128 1,250 1,292 1,296 4,191 4,970
Change (%) 1 -14 -27 -43

-11 10 48 42 -22 19
EPS (INR) 2.2 2.0 1.6 1.6

2.0 2.2 2.3 2.3 7.4 8.8
Transmission Vol. (mmscmd) 22.1 21.2 20.2 20.8

22.5 23.0 24.0 24.5 21.1 23.5
Implied tariff (INR/mscm) 1,411 1,365 1,291 1,210

1,240 1,305 1,305 1,330 1,322 1,295
E: MOSL Estimates


Gujarat State Petronet

CMP: INR94 Buy
We expect GSPL to report net sales of INR2.6b and PAT of INR1.1b
(down 17% YoY; up 15% QoQ).
We build 8% increase in gas transmission volumes QoQ to
22.5mmscmd in 1QFY15 (v/s 22.1mmscmd in 1QFY14 and
20.8mmscmd in 4QFY14), as Asian spot LNG prices have dropped
QoQ.
GSPL had won the bids for three cross-country pipelines (Mehsana-
Bhatinda, Bhatinda-Srinagar, Mallavaram-Bhatinda), and was awaiting
environmental clearances and other approvals. We await current
status and clarity on the timelines and other details regarding these
pipelines.
We build gas transmission volumes of 23.5/25.5/28mmscmd in
FY15/16/17 and model average tariff at INR1,295/mscm for FY15. The
stock trades at 9.3x FY16E EPS of INR10. Maintain Neutral.
Transmission volumes, and
Tariff

Bloomberg GUJS IN
M.Cap. (INR b) /(USD b) 52.03/0.87
1, 6, 12 Rel. Per (%) 19/37/34

Y/E March 2014 2015E 2016E 2017E
Sales 10.5 11.5 12.3 12.3
EBITDA 9.3 10.1 10.9 10.8
Adj. PAT 4.2 5.0 5.6 5.6
Adj. EPS

7.4 8.8 10.0 9.9
EPS Gr. (%) -22.1 18.6 12.8 -1.0
BV/Sh.(INR) 59 66 75 84
RoE (%) 13.4 14.2 14.1 12.4
RoCE (%) 17.0 17.5 17.2 15.5
Payout (%) 12.2 15.7 13.2 11.7
Valuation
P/E (x) 12.7 10.7 9.5 9.6
P/BV (x) 1.6 1.4 1.3 1.1
EV/EBITDA

6.8 6.2 5.6 5.7
Div. Yield (%) 1.1 1.1 1.1 1.1


July 2014 211

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

Net Sales 517,639 518,602 553,945 641,268 551,138 494,256 538,744 577,702 2,231,454 2,161,840
Change (%) 17.4 7.0 5.0 4.7 6.5 -4.7 -2.7 -9.9 8.0 -3.1
EBITDA -6,879 10,142 -9,912 58,730 5,931 10,253 13,579 13,795 52,081 43,559
% of Net Sales -1.3 2.0 -1.8 9.2

1.1 2.1 2.5 2.4 2 2
Change (%) nm -54.9 nm -42.3 nm 1.1 nm -76.5 -24.3 19.6
Depreciation 5,100 5,426 5,566 5,793 5,800 6,100 6,250 6,328 21,884 24,478
Interest 4,668 3,962 4,432 1,985

4,041 3,743 3,677 3,478 15,046 14,939
Other income 2,042 2,435 2,570 3,958

2,315 2,795 2,795 2,315 11,004 10,220
Exceptional Item 0 0 0 0 0 0 0 0 0 0
PBT -14,605 3,189 -17,339 54,910

-1,595 3,205 6,446 6,305 26,155 14,361
Tax 0 0 0 8,817

0 1,065 2,141 1,565 8,817 4,770
Rate (%) 0.0 0.0 0.0 16.1

0.0 33.2 33.2 24.8 33.7 33.2
PAT -14,605 3,189 -17,339 46,092 -1,595 2,140 4,305 4,740 17,338 9,591
Change (%) nm -86.3 nm -40.0 nm -32.9 nm -89.7 91.6 -44.7
Adj. EPS -43.1 9.4 -51.1 136.0 -4.7 6.3 12.7 14.0 51.1 28.3
Key Assumptions (INR b)

Gross under recovery 58 82 92 92

69 56 51 41 325 216
Upstream sharing 35 39 37 57

42 34 31 33 168 139
Govt. subsidy 18 41 23 69 21 21 22 9 152 74
Net Under recovery 5 2 32 -34 6 1 -1 -2 5 6
Net Sharing (%) 9 2 35 nm 9 2 nm nm nm nm
E: MOSL Estimates; * 1QFY14 net sales includes receivables from ONGC


HPCL

CMP: INR422 Buy
1QFY15.
(34% / INR312b). For FY16/17, we model OMCs share at ~2%, with
1QFY15 gross under-recoveries declined 26% QoQ due to lower
under-recoveries in diesel (led by price hikes), LPG and kerosene (led
by lower international prices).
We peg refinery throughput at 3.85mmt for 1QFY15 (v/s 4.4mmt in
4QFY14 and 3.4mmt in 1QFY14). QoQ decline would be led by
planned turnaround at Mumbai refinery in May 2014.
We expect HPCL to report net loss of INR1.6b in 1QFY15 v/s net loss
of INR14.6b in 1QFY14 and profit of INR46b in 4QFY14.
HPCL trades at 11.3x FY16E EPS and at 0.9x FY16E BV. Buy.
(a) Subsidy sharing, (b) GRM, and (c) Forex changes.

Bloomberg HPCL IN
M.Cap. (INR b) /(USD b) 140.23/2.34
1, 6, 12 Rel. Per (%) -5/61/35

Y/E March 2014 2015E 2016E 2017E
Sales 2,231 2,162 2,167 2,149
EBITDA 52.1 43.6 45.5 48.3
Adj. PAT 17.3 9.6 11.8 13.6
Adj. EPS (INR) 51.1 28.3 34.7 40.2
EPS Gr. (%) 91.6 -44.7 22.7 15.9
BV/Sh.(INR) 438 456 479 505
RoE (%) 12.1 6.3 7.4 8.2
RoCE (%) 8.2 6.1 6.9 7.6
Payout (%) 35.5 35.2 35.1 35.2
Valuations
P/E (x) 8.2 14.9 12.1 10.5
P/BV (x) 1.0 0.9 0.9 0.8
EV/EBITDA (x) 7.3 7.2 5.5 5.0
Div. Yield (%) 3.7 2.0 2.5 2.9


July 2014 212

Quarterly performance (INR million)
Y/E MARCH FY14

FY15E FY14 FY15E
1Q 2Q 3Q 4Q

1Q 2Q 3Q 4Q

Net Sales 9,015 10,090 10,404 9,665

8,499 8,919 8,743 8,779 39,174 34,939
Change (%) 18.6 18.1 19.7 9.6

-5.7 -11.6 -16.0 -9.2 16.4 -10.8
EBITDA 1,924 2,001 1,942 1,906

2,034 2,107 2,019 2,083 7,773 8,242
EBITDA (Rs/scm) 5.7 5.7 5.6 5.5

5.7 5.6 5.5 5.7 5.6 5.6
% of Net Sales 21.3 19.8 18.7 19.7

23.9 23.6 23.1 23.7 19.8 23.6
% Change 7.3 -2.9 3.8 3.1

5.7 5.3 3.9 9.3 2.7 6.0

571 599 606 628 2,195 2,403
Interest 128 98 119 96

94 88 87 84 441 353

90 100 100 132 259 422
PBT 1,315 1,404 1,345 1,332

1,459 1,521 1,426 1,502 5,395 5,908
Tax 442 476 450 427

485 505 474 499 1,795 1,962
Rate (%) 33.6 33.9 33.5 32.1

33.2 33.2 33.2 33.2 33.3 33.2
PAT 873 928 895 905

974 1,016 952 1,003 3,600 3,945
PAT (Rs/scm) 2.6 2.6 2.6 2.6

2.7 2.7 2.6 2.8 2.6 2.7
Change (%) 2.6 -6.5 3.6 8.3

11.6 9.5 6.5 10.8 1.7 9.6
EPS (INR) 6.2 6.6 6.4 6.5

7.0 7.3 6.8 7.2 25.7 28.2
Gas Volumes (mmscmd)

CNG 2.77 2.87 2.80 2.83 2.88 3.00 2.92 2.92 2.82 2.93
PNG 0.95 0.97 0.97 1.01 1.04 1.07 1.07 1.13 0.98 1.08
Total 3.71 3.84 3.77 3.85 3.92 4.07 3.99 4.05 3.79 4.01
YoY Change (%)
CNG 3.7 2.3 (0.2) 2.4 4.0 4.5 4.5 3.0 2.0 4.0
PNG 7.5 10.0 6.9 3.6 10.0 10.0 10.0 11.5 6.9 10.4
Total 4.6 4.2 1.5 2.7 5.5 5.9 5.9 5.2 3.2 5.6
E: Mosl Estimates

Indraprastha Gas

CMP: INR365 Buy
We expect IGL to report 1QFY15 volume of 3.9mmscmd and PAT of
INR974m (up 11.6% YoY; down 7.7% QoQ).
Earlier in February 2014, the ministry had announced 100% domestic
gas allocation to CNG/PNG consumption. The government has
deferred the gas price hike, which would have led to higher CNG
prices. Any gas price hike will negate the benefit of 100% domestic
gas allocation to CNG/PNG.
IGL's volume growth has averaged lower at 6% in the last four
quarters, with ~3% in CNG (75% of total volumes) and 10% in PNG v/s
FY09-13 average of ~20%. We model total volumes of
4.3/4.6mmscmd in FY15/FY16.
We expect 1QFY15 CNG volumes to grow 4% YoY to 2.9mmscmd and
PNG volumes to grow 10% YoY to 1mmscmd.
The stock trades at 11.4x FY16E EPS of INR31. Post the High Court
quashing PNGRB's tariff cut order, PNGRB approached the Supreme
Court, and the hearing is still on. We maintain Neutral due to lack of
clarity in predicting earnings for IGL and await the Supreme Court
decision.
Supreme court verdict in case against PNGRB
EBITDA margin
Sales volume

Bloomberg IGL IN
M.Cap. (INR b) /(USD b) 51.15/0.86
1, 6, 12 Rel. Per (%) 6/12/-5

Y/E March 2014 2015E 2016E 2017E
Sales 39.2 34.9 39.9 44.6
EBITDA 7.8 8.2 9.0 10.3
Adj. PAT 3.6 3.9 4.3 4.9
Adj. EPS

25.8 28.2 30.9 35.3
EPS Gr. (%) 2.1 9.1 9.5 14.5
BV/Sh.(INR) 126 147 170 196
RoE (%) 22.2 20.6 19.5 19.3
RoCE (%) 28.4 26.7 25.6 25.6
Payout (%) 21.3 21.3 22.7 22.6
Valuation
P/E (x) 14.1 13.0 11.8 10.3
P/BV (x) 2.9 2.5 2.2 1.9
EV/EBITDA

6.7 6.0 5.1 4.1
Div. Yield (%) 1.5 1.6 1.9 2.2


July 2014 213

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

Net Sales 1,102,332 1,098,595 1,174,152 1,346,688 1,213,989 1,053,912 1,178,325 1,139,583 4,721,766 4,585,809
Change (%) 14.1 3.8 1.9 4.8 10.1 -4.1 0.4 -15.4 5.8 -2.9
EBITDA -13,994 31,224 -5,983 134,479 35,328 42,967 52,813 50,383 145,725 195,047
% of Net Sales -1.3 2.8 -0.5 10.0 2.9 4.1 4.5 4.4 3.1 4.3
% Change nm -65.5 nm -18.6 nm 37.6 nm -62.5 39.1 33.8
Depreciation 13,858 14,342 14,535 14,866 15,960 16,120 16,430 16,697 57,601 59,703
Interest 14,702 13,542 12,619 9,981 13,789 12,600 12,150 11,700 50,844 49,932
Other Income 11,621 13,500 23,524 13,331 9,483 11,983 12,983 8,069 61,976 59,837
PBT -30,932 16,839 -9,614 122,963 15,061 26,230 37,215 30,055 99,256 108,562
Tax 0 0 0 29,064 4,669 8,131 11,537 9,317 29,064 33,654
Rate (%) nm 0.0 nm 23.6 31.0 31.0 31.0 31.0 29.3 31.0
Adj. PAT -30,932 16,839 -9,614 93,899 10,392 18,099 25,679 20,738 70,192 74,908
Change (%) nm -82.5 nm -35.3 nm 7.5 nm -77.9 40.2 6.7
Extraordinary Items 0 0 0 0 0 0 0 0 0 0
PAT -30,932 16,839 -9,614 93,899 10,392 18,099 25,679 20,738 70,192 74,908
Adj. EPS -12.7 6.9 -4.0 38.7 4.3 7.5 10.6 8.5 28.9 30.9
Gross under recovery (INR
b) 136 183 206 204 153 125 112 98 729 488
Upstream sharing 82 86 83 96 92 75 67 78 347 312
Govt. sharing 43 92 52 185 47 48 48 23 372 166
Net Under recovery 12 4 72 -77 14 3 -3 -4 11 10
E: MOSL Estimates


IOC

CMP: INR349 Buy
1QFY15.
(34% / INR312b). For FY16/FY17 we model OMCs share at ~2%, with
1QFY15 gross under-recoveries have declined 26% QoQ due to lower
under-recoveries in diesel (led by price hikes), LPG and kerosene (led
by lower international prices).
We peg refinery throughput at 13mmt for 1QFY15 v/s 13.6mmt in
4QFY14 and 13.1mmt in 1QFY14.
We expect IOCL to report net profit of INR10.4b in 1QFY15, v/s loss of
INR30.9b in 1QFY14 and profit of INR93.9b in 4QFY14.
IOCL trades at 9.0x FY16E EPS and at 1.1x FY16E BV. Buy.

(a) Update on Paradeep refinery project, (b) Subsidy sharing, (c)
GRM, and (d) Forex changes.

Bloomberg IOCL IN
M.Cap. (INR b) /(USD b) 831.70/13.90
1, 6, 12 Rel. Per (%) -6/47/22

Y/E March 2014 2015E 2016E 2017E
Sales 4,873 4,404 4,389 4,219
EBITDA 159.7 198.9 218.6 247.7
Adj. PAT 70.9 78.7 91.9 100.8
Adj. EPS (INR) 29.2 32.4 37.9 41.5
EPS Gr. (%) 59.3 11.1 16.8 9.6
BV/Sh.(INR) 280 301 325 366
RoE (%) 10.8 11.2 12.1 12.0
RoCE (%) 8.9 10.9 12.2 13.3
Payout (%) 46.9 37.9 38.7 36.2
Valuation
P/E (x) 12.0 10.8 9.2 8.4
P/BV (x) 1.2 1.2 1.1 1.0
EV/EBITDA (x) 9.7 6.8 6.0 5.0
Div. Yield (%) 2.5 2.9 3.4 3.4


July 2014 214

1Q 2Q 3Q 4Q

1Q 2Q 3Q 4Q

Net Sales 152,659 187,623 186,547 191,275

167,048 192,124 191,290 201,440 718,105 751,903
Change (%) 19.2 15.0 3.7 2.9

9.4 2.4 2.5 5.3 9.3 4.7
EBITDA 1,683 7,305 -2,585 3,630

3,763 7,050 8,225 8,950 10,032 27,988
% of Net Sales 1.1 3.9 -1.4 1.9

2.3 3.7 4.3 4.4 1.4 3.7
% Change nm nm nm nm

124 -3 nm 147 21.0 179.0
Depreciation -1,688 -1,761 -1,845 -1,771

-1,805 -2,693 -3,155 -4,209 -7,064 -11,861
Interest -779 -926 -928 -582

-650 -1,500 -2,500 -2,355 -3,214 -7,005
Other Income 293 335 1,005 1,612

1,434 1,048 663 679 3,245 3,825
PBT b/f forex/exceptional -491 4,953 -4,353 2,890

2,742 3,905 3,232 3,066 2,998 12,946
Forex gain/(loss) -5,166 -2,495 1,889 5,753

0 0 0 0 -19 0
Exceptional items 1,118 0 0 0

0 0 0 0 1,118 0
PBT -4,539 2,458 -2,464 8,642

2,742 3,905 3,232 3,066 4,097 12,946
Tax 0 -100 -13 2,028

-850 -1,211 -1,002 -951 1,915 -4,013
Rate (%) nm 4.1 -0.5 -23.5

31.0 31.0 31.0 31.0 -46.7 31.0
PAT -4,539 2,358 -2,477 10,670

1,892 2,695 2,230 2,116 6,012 8,933
Change (%) nm -80.1 nm nm

nm 14.3 nm -80.2 -179.3 48.6
EPS -2.6 1.3 -1.4 6.1

1.1 1.5 1.3 1.2 3.4 5.1
GRM (USD/bbl) 2.9 5.0 -0.6 3.2

3.5 5.1 5.8 6.0 2.6 5.1
Throughput (mmt) 3.3 3.7 3.8 3.8 3.4 3.9 3.9 4.2 14.6 15.3
E: Mosl Estimates


MRPL

CMP: INR72 Buy
We expect MRPL to report PAT of INR1.9b (v/s loss of INR4.5b in
1QFY14 and loss of INR10.7b in 4QFY14). We estimate EBITDA at
INR3.8b (v/s INR1.7b in 1QFY14 and INR3.6b in 3QFY14).
Regional benchmark Reuters Singapore GRM is down 6% QoQ to
USD5.8/bbl from USD6.2/bbl, led by decrease in cracks of LPG and
middle-heavy distillates (diesel, jet/kerosene, and FO). Medium-term
GRM outlook continues to be subdued due to overcapacity and
sluggish global demand. Expect GRM to be subdued (occasional
spurts) due to occasional bunching up of shutdowns.
On the operational front, we expect refinery throughput at 3.35mmt.
For MRPL, we model in GRM of USD5.1/5.9/bbl for FY15/FY16. The
stock trades at 9.2x FY16E EPS, and at an EV of 5.1x FY16E EBITDA.
Neutral.
(a) GRM, (b) Forex fluctuations, (c) Inventory changes
Commissioning schedule of the expanded capacity in FY15, which
is likely to improve margin profile for MRPL.

Bloomberg MRPL IN
M.Cap. (INR b) /(USD b) 127.3/2.1
1, 6, 12 Rel. Per (%) -5/46/63

Y/E March 2014E 2015E 2016E 2017E
Sales 718.1 751.9 758.5 736.5
EBITDA 10.0 28.0 33.7 33.8
Adj. PAT 6.0 8.9 12.8 13.1
Adj. EPS
( )
3.4 5.1 7.3 7.5
EPS Gr. (%) -175.0 48.6 43.5 2.5
BV/Sh.(INR) 40 44 50 56
RoE (%) 8.9 12.1 15.5 14.2
RoCE (%) 4.4 13.3 18.3 17.4
Payout (%) 0.0 23.0 24.0 23.4
Valuation
P/E (x) 21.1 13.3 9.9 9.7
P/BV (x) 1.8 1.5 1.4 1.2
EV/EBITDA
( )
10.8 6.4 5.1 4.6
Div. Yield (%) 0.0 1.5 2.1 2.1


July 2014 215


(INR Billion)
Y/E March FY14

FY15E

FY14 FY15E
1Q 2Q 3Q 4Q

1Q 2Q 3Q 4Q
Net Sales 19.8 27.1 26.1 18.3

22.2 27.2 29.8 28.7

91.3 107.9
Change (%) -15.1 13.0 8.0 -23.2

12.2 0.3 14.4 57.1

-4.2 18.3
EBITDA 7.0 13.3 11.7 3.5

8.7 12.6 14.5 13.2

35.5 49.0
% of Net Sales 35.2 49.0 44.8 19.4

39.3 46.2 48.5 46.0

38.9 45.4
Change (%) -36.4 15.8 3.8 -59.8

25.3 -5.4 24.0 272.1

-16.5 38.0
D,D&A 2.7 4.7 2.2 2.2

2.5 2.9 3.0 3.7

11.8 12.0
Interest 0.0 0.0 0.3 0.3

0.3 0.3 0.3 0.3

0.7 1.1
OI (incl. Oper. other inc) 4.7 4.7 4.5 7.2

4.8 4.8 4.9 7.7

21.1 22.1
PBT 9.0 13.3 13.6 8.2

10.7 14.3 16.1 16.9

44.1 58.0
Tax 2.9 4.3 4.6 2.5

3.5 4.7 5.3 5.6

14.3 19.1
Rate (%) 32.2 32.2 33.6 31.0

33.0 33.0 33.0 33.0

32.4 33.0
PAT 6.1 9.0 9.0 5.7

7.2 9.6 10.8 11.3

29.8 38.8
Change (%) -34.5 -5.3 -4.0 -26.0

18.1 5.8 19.5 99.6

-16.9 30.3
Adj. PAT 6.1 9.0 9.0 5.7

7.2 9.6 10.8 11.3

29.8 38.8
Adj. EPS (INR) 10.1 15.0 15.0 9.4

12.0 15.9 18.0 18.8

49.6 64.6
Key Assumptions (USD/bbl)

Exchange rate (INR/USD) 56.0 62.5 62.0 61.9

59.8 59.0 59.0 58.2

60.6 59.0
Gross Oil Realization 101.9 108.3 108.1 106.6

108.7 107.0 106.0 106.3

106.2 107.0
Subsidy 56.0 56.0 56.0 69.2

63.0 48.6 42.3 46.9

59.3 50.2
Net Oil Realization 45.9 52.3 52.1 37.4

45.7 58.4 63.7 59.4

47.1 56.8
Subsidy (INR b) 19.8 22.3 21.7 23.5

23.2 18.8 16.7 18.9

87.4 77.6
*Standalone; E: MOSL Estimates


Oil India

CMP: INR585 Buy
We expect Oil India to report PAT of INR7.2b (v/s INR6.1b in 1QFY14
and INR5.7b in 4QFY14).
We estimate EBITDA at INR8.7b (up 25% YoY and 146% QoQ). We
estimate gross realization at USD108.7/bbl v/s USD101.9/bbl in
1QFY14 and USD106.6/bbl in 4QFY14, and net realization at
USD45.7/bbl v/s USD45.9/bbl in 1QFY14 and USD37.4/bbl in 4QFY14.
Subsidy sharing assumption: For FY15/FY16, we model upstream
sharing at INR587/480b, and Oil India's share at 13.2% of upstream.
We model Oil Indias share at INR23.2b in 1QFY15.
Our Brent price assumption is USD108/105/100/bbl for FY15/16/17
and USD100/bbl for long term.
The stock trades at 8.2x FY16E EPS of INR71.7. We remain positive on
Oil India due to ongoing diesel reforms and scheduled gas price hike
that will drive earnings. Valuations are attractive; Buy.

(a) Subsidy sharing, (b) DD&A charges, and (c) Oil & Gas
production volumes.

Bloomberg OINL IN
M.Cap. (INR b) /(USD b) 354.67/5.93
1, 6, 12 Rel. Per (%) -1/0/-31

Y/E March 2014 2015E 2016E 2017E
Sales 91.3 107.9 120.2 123.5
EBITDA 35.5 49.0 57.9 59.5
Adj. PAT 29.8 38.8 43.1 45.2
Adj. EPS (INR) 49.6 64.6 71.7 75.2
EPS Gr. (%) -16.9 30.3 11.0 4.8
BV/Sh.(INR) 344 379 419 460
RoE (%) 14.9 17.9 18.0 17.1
RoCE (%) 16.7 18.6 19.6 19.0
Payout (%) 50.5 45.4 45.4 45.4
Valuations
P/E (x) 11.8 9.1 8.2 7.8
P/BV (x) 1.7 1.5 1.4 1.3
EV/EBITDA (x) 9.3 6.5 5.5 5.2
Div. Yield (%) 3.7 4.3 4.8 5.0


July 2014 216

Quaterly performance (Standalone)

(INR Billion)
Y/E March FY14

FY15E FY14 FY15E
1Q 2Q 3Q 4Q

1Q 2Q 3Q 4Q

Net Sales 192.2 223.1 207.4 208.8

213.3 235.4 251.2 221.3 831.6 921.2
Change (%) -4.3 12.8 -1.2 -2.4

11.0 5.5 21.1 6.0 1.1 10.8
EBITDA 84.0 120.0 122.1 111.5

114.6 130.0 141.6 116.6 437.6 502.7
% of Net Sales 43.7 53.8 58.9 53.4

53.7 55.2 56.4 52.7 52.6 54.6
Change (%) -23.9 16.8 8.7 8.3

36.4 8.3 16.0 4.6 2.1 14.9
D,D & A 39.0 45.0 44.0 59.7

41.3 44.2 47.2 60.3 187.7 193.1
Interest 0.0 0.0 0.0 0.0

0.0 0.0 0.0 0.0 0.0 0.0
Other Income 12.9 15.9 27.7 18.0

13.5 14.2 14.4 8.5 74.5 50.7
PBT 57.8 90.9 105.8 69.8

86.8 100.0 108.7 64.8 324.3 360.2
Tax 17.7 30.3 34.6 20.9

25.5 29.4 32.0 19.1 103.4 105.9
Rate (%) 30.6 33.3 32.7 29.9

29.4 29.4 29.4 29.4 31.9 29.4
PAT 40.2 60.6 71.3 48.9

61.2 70.6 76.8 45.7 220.9 254.3
Change (%) -33.9 2.8 28.1 44.2

52.5 16.4 7.7 -6.4 5.6 15.1
Adjusted PAT 40.2 60.6 68.3 48.9

61.2 70.6 76.8 45.7 218.0 254.3
Adj. EPS 4.7 7.1 8.0 5.7

7.2 8.2 9.0 5.3 25.5 29.7

Fx rate (INR/USD) 55.9 62.5 62.0 61.9

59.8 59.0 59.0 58.2 60.6 59.0
Gross Oil Realization 102.9 109.0 108.2 106.7

109.7 108.0 107.0 107.3 106.7 108.0
Subsidy 62.7 64.2 62.2 73.9

69.9 55.6 48.4 58.3 65.7 58.0
Net Oil Realization 40.2 44.8 46.0 32.8

39.8 52.4 58.6 49.0 40.9 50.0
Subsidy (INR b) 126.2 138.0 137.6 162.0

148.7 120.0 106.3 121.0 563.8 496.0
E: MOSL Estimates


ONGC

CMP: INR422 Buy
We expect ONGC to report adjusted PAT of INR61.2b in 1QFY15 (v/s
INR40.2b in 1QFY14 and INR48.9b in 4QFY14).
We estimate EBITDA at INR115b (v/s INR84b in 1QFY14 and INR112b
in 4QFY14). We estimate gross realization at USD108.7/bbl v/s
USD101.9/bbl in 1QFY14 and USD106.6/bbl in 4QFY14, and net
realization at USD45.7/bbl v/s USD45.9/bbl in 1QFY14 and
USD37.4/bbl in 4QFY14.
Subsidy sharing assumption: For FY15/FY16, we model upstream
sharing at INR587b/480b, and ONGC's share at 84.6% of upstream.
We expect ONGC to share INR141b in 1QFY15.
Our Brent price assumption is USD108/105/100/bbl for FY15/16/17
and at USD100/bbl for long term.
The stock trades at 9.9x FY16E consolidated EPS of INR42.5. We
remain positive on ONGC due to ongoing diesel reforms, scheduled
gas price hike, and likely production increase in FY15, which will drive
earnings. Maintain Buy.
(a) Subsidy sharing, (b) DD&A charges, and (c) Oil & Gas
production volumes.

Bloomberg ONGC IN
M. Cap. (INR b)/(USD b) 3,610 / 60
1,6,12 Rel Perf. (%) -2 / 28 / 3

Y/E March 2,014 2015E 2016E 2017E
Sales 1,732 1,905 2,040 2,088
EBITDA 570 656 774 788
Adj. PAT 264 310 368 386
Adj. EPS (INR) 31.0 35.9 42.5 44.7
EPS Gr. (%) 9.9 17.7 18.5 5.1
BV/Sh.(INR) 199 222 249 277
RoE (%) 16.6 17.1 18.1 17.0
RoCE (%) 14.6 14.7 15.6 14.9
Payout (%) 35.4 35.8 35.7 36.6
Valuation
P/E (x) 13.6 11.8 9.9 9.4
P/BV (x) 2.1 1.9 1.7 1.5
EV/EBITDA
( )
6.1 5.3 4.5 4.4
Div. Yield (%) 2.3 2.6 3.1 3.3


July 2014 217

Y/E March FY14

FY15E FY14 FY15E
1Q 2Q 3Q 4Q

1Q 2Q 3Q 4Q
Net Sales 84,442 94,935 93,821 104,278

104,379 110,882 116,696 110,070 377,476 442,028
Change (%) 20.1 25.8 11.4 23.2

23.6 16.8 24.4 5.6 20.0 17.1
EBITDA 3,978 3,639 3,499 3,868

4,200 4,529 4,767 4,685 14,984 18,180
% of Net Sales 4.7 3.8 3.7 3.7

4.0 4.1 4.1 4.3 4.0 4.1
Change (%) -13.0 -29.8 -33.8 -11.0

5.6 24.5 36.2 21.1 -22.7 21.3
Depreciation 467 597 1,017 1,000

1,098 1,098 1,098 1,221 3,081 4,515
Interest 240 386 783 786

760 725 750 733 2,196 2,968
Other Income 152 161 216 308

265 249 249 202 838 965
PBT 3,423 2,818 1,916 2,389

2,607 2,955 3,168 2,932 10,545 11,661
Tax 1,170 1,000 560 696

860 975 1,045 967 3,426 3,848
Rate (%) 34.2 35.5 29.2 29.1

33.0 33.0 33.0 33.0 32.5 33.0
PAT 2,253 1,818 1,356 1,693

1,746 1,980 2,122 1,964 7,119 7,813
Change (%) -16.8 -42.2 -57.4 -30.9

-22.5 8.9 56.6 16.0 -38.0 9.7
EPS (INR) 3.0 2.4 1.8 2.3

2.3 2.6 2.8 2.6 9.5 10.4
Dahej Gas Volumes (mmt) 2.6 2.4 2.4 2.3

2.6 2.8 2.9 2.8 9.7 11.2
Kochi Gas Volumes (mmt)

0.0 0.0 0.0

0.1 0.1 0.1 0.1 0.1 0.3
Avg. Dahej Regas (INR/mmbtu) 41.8 41.4 39.8 45.8

42.1 42.1 42.6 42.7 42.2 42.4
E: MOSL Estimates


Petronet LNG

CMP: INR178 Buy
We expect Petronet to report PAT of INR1.7b (down 22.5% YoY; up
3% QoQ) primarily due to high depreciation and high interest burden
post commissioning of the Kochi plant in August 2013. We estimate
EBITDA at INR4.2b (up 5.6% YoY; up 9% QoQ).
We have built in Dahej LNG volumes at 2.6mmt in 1QFY15.
Asian spot LNG prices (for August delivery) have dropped to
~USD11.5/mmbtu, the lowest since March 2011 (Fukushima nuclear
crisis).
Near term earnings growth is stunted by lower utilization at Kochi
terminal, but as and when the pipeline issues get sorted out, expect
meaningful earnings growth. The stock trades at 14x FY16E
consolidated EPS of INR12.7. Maintain Buy.
(a) Ramp-up at Kochi Kochi terminal, (b) Spot volumes, and (c)
Marketing margin on spot volumes.
Petronet LNG earnings are largely protected due to take-or-pay
contracts with the offtakers. Early completion of Kochi-
Mangalore-Bangalore pipeline and lower spot prices would
provide earnings upside.

Bloomberg PLNG IN
M. Cap. (INR b)/(USD b) 134 / 2
1,6,12 Rel Perf. (%) 10 / 22 / 10

Y/E March 2014 2015E 2016E 2017E
Sales 377.5 442.0 389.6 454.9
EBITDA 15.0 18.2 21.4 25.4
Adj. PAT 7.1 7.8 9.5 12.2
Adj. EPS (INR) 9.5 10.4 12.7 16.2
EPS Gr. (%) -38.0 9.2 22.8 27.4
BV/Sh.(INR) 67.0 75.1 85.0 97.6
RoE (%) 15.0 14.6 15.9 17.8
RoCE (%) 16.2 16.8 18.0 20.6
Payout (%) 19.1 22.2 22.2 22.2
Valuation
P/E (x) 18.8 17.2 14.0 11.0
P/BV (x) 2.7 2.4 2.1 1.8
EV/EBITDA (x) 10.1 8.4 7.4 5.7
Div. Yield (%) 0.9 1.1 1.4 1.7


July 2014 218

Quarterly Performance (Standalone) (INR Billion)
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Net Sales 876.5 1,037.6 1,035.2 951.9 984.8 976.8 974.8 949.0 3,901.2 3,885.4
Change (%) -4.6 14.9 10.3 13.1 12.4 -5.9 -5.8 -0.3 8.3 -0.4
EBITDA 70.8 78.5 76.2 83.3 77.2 79.8 83.9 88.6 308.8 329.5
% of Net Sales 8.1 7.6 7.4 8.8 7.8 8.2 8.6 9.3 7.9 8.5
Change (%) 4.9 1.9 -9.0 6.5 9.1 1.7 10.1 6.3 0.3 6.7
Depreciation 21.4 22.3 21.4 22.8 22.1 21.6 22.9 23.7 87.9 90.3
Interest 8.1 8.1 7.9 8.0 8.0 8.2 8.3 8.2 32.1 32.7
Other Income 25.4 20.6 23.1 20.4 21.0 21.3 21.6 22.6 89.4 86.4
PBT 66.6 68.7 69.9 72.9 68.1 71.3 74.3 79.2 278.2 292.9
Tax 13.1 13.8 14.8 16.6 14.6 15.0 15.6 16.2 58.3 61.4
Rate (%) 19.7 20.1 21.2 22.8 21.5 21.0 21.0 20.4 21.0 21.0
Adj. PAT 53.5 54.9 55.1 56.3 53.5 56.4 58.7 63.0 219.8 231.5
Change (%) 19.7 2.1 0.2 0.8 -0.1 2.6 6.4 11.9 4.7 5.3
Adj. EPS (INR) 18.3 18.8 18.9 19.3 18.3 19.3 20.1 21.6 75.2 79.2
Fx Rate (INR/USD) 56.0 62.1 62.0 62.0 59.8 59.0 59.0 59.0 60.5 59.2
KG-D6 Gas Price (USD/mmbtu) 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.2
Brent Price (USD/bbl) 103 111 110 110 110 108 107 107 109 108
RIL GRM 8.4 7.7 7.6 9.3 8.5 8.8 9.0 9.2 8.2 8.9
Singapore GRM 6.6 5.4 4.3 6.2 5.8 5.9 6.1 6.6 5.6 6.1
Premium/(disc) to Singapore 1.8 2.3 3.3 3.1 2.7 2.9 2.9 2.6 2.6 2.8
KG-D6 Gas Prodn (mmscmd) 14.8 14.0 12.4 13.7 13.0 13.0 13.0 13.0 13.8 13.0
Segmental EBIT Breakup (INRb)
Refining 29.5 31.7 31.4 39.5 34.9 36.0 37.0 37.6 132.2 145.6
Petrochemicals 18.9 25.0 21.2 21.0 20.0 21.5 22.5 25.2 86.1 89.2
E&P 3.5 3.6 5.4 3.8 4.3 4.2 5.2 5.3 16.3 18.9
Others 0.8 0.4 0.9 2.0 0.4 1.0 0.9 1.2 4.2 3.5
Total 52.8 60.8 59.0 66.3 59.6 62.7 65.5 69.4 238.8 257.2
E: MOSL Estimates; Segmental EBIT includes non-interest other income


Reliance Industries

CMP: INR1032 Neutral
We estimate GRM at USD8.5/bbl v/s USD8.4/bbl in 1QFY14 and
USD9.3/bbl in 4QFY14. On the petchem front, we expect decrease of
5% QoQ in EBIT, as polymer and polyester spreads have declined
QoQ.
We expect average KG-D6 volume of ~13mmscmd v/s 13.7mmscmd
in 4QFY14.
We expect RIL to report PAT of INR53.5b in 1QFY15 v/s INR53.5b in
1QFY14 and INR56.3b in 4QFY14.
RIL trades at 13.1x FY16E adjusted EPS of INR87.1. RIL's new
refining/petchem projects are likely to add to earnings from
FY16/FY17, but medium-term outlook on core business remain weak,
with RoE reaching sub-12%. Maintain Neutral.

(a) GRM, (b) Petchem margin, and (c) KG-D6 production.

Bloomberg RIL IN
M. Cap. (INR b)/(USD b) 3,335 / 56
52-Week Range (INR) 1,143 / 765
1,6,12 Rel Perf. (%) -9 / -5 / -14

Y/E March 2014 2015E 2016E 2017E
Sales 3,901 3,885 3,780 3,685
EBITDA 309 329 363 495
Adj. PAT 220 231 255 323
Adj. EPS (INR) 75.2 79.0 87.1 108.9
EPS Gr. (%) 4.7 5.3 10.3 26.6
BV/Sh.(INR) 674 739 814 898
RoE (%) 11.7 11.2 11.2 12.8
RoCE (%) 11.1 10.7 10.9 13.3
Payout (%) 16.4 16.4 16.3 16.4
Valuation
P/E (x) 15.2 14.4 13.1 10.5
P/BV (x) 1.5 1.4 1.3 1.1
EV/EBITDA (x) 10.9 10.8 9.8 7.0
Div. Yield (%) 0.9 1.0 1.1 1.3

July 2014 219

Expect weaker presales in 1QFY15
Enquiries up, but conversions yet to improve; gearing to go up QoQ

Core operations to remain subdued
We expect presales momentum to moderate QoQ to sub-normal levels in 1QFY15.
This is largely due to lack of real uptick in buyer sentiment and lower new launches
by developers. High pent-up demand is evident in the rise in enquiries. However,
conversions are yet to take-off. We expect a slew of new launches by several
developers in 2HFY15, which should drive up presales.

Revenue booking mixed bag, cash flow sub-par, leverage to move up
P&L performance is likely to be mixed and would hinge on one-off impact from big
threshold crossing in select cases. Major uptick in margins is unlikely, as the
overhang of legacy projects is yet to ease. Weak presales in recent quarters should
limit improvement in operating cash flows. We expect gearing to go up QoQ for DLF
(negative FCFE; no asset sales), IBREL, Oberoi (land purchases; weak presales),
Godrej Properties, and Prestige (higher capex).

Adopted strategies to decide on quantum of recovery benefits
Over the downcycle of FY12-14, real estate players have made mixed efforts to gain
scale or build strengths. We expect the quantum of operating recovery to hinge
upon (1) regional mix (anticipate relative outperformance of MMR, NCR), (2) scope
to improve leverage (gap with normalcy), and (3) readiness to derive benefits
(approvals, execution, etc).

Valuations mimic mid-cycle optimism
Post the run-up following the election results, realty stock prices factor in consensus
optimism on demand recovery cycle, and improvement in regulatory and funding
framework. However, actual improvement in on-ground operations would be
evident only after 9-12 months. Current stock prices already factor in mid-cycle
operational normalcy. Visibility of peak cycle dynamics would be the next re-rating
trigger. The markets would watch for favorable policy decisions (REIT, infrastructure
status, interest rate cuts, easier approval cycles, etc) and parallel macroeconomic
improvement substantiating the optimism. We prefer Phoenix Mills, Oberoi, and
IBREL.

Expected quarterly performance summary

(INR)
4.7.14
Reco Jun-14
Var %
YoY
Var %
QoQ
Jun-14
Var %
YoY
Var %
QoQ
Jun-14
Var %
YoY
Var %
QoQ
DLF 219 Buy

19,645 -15.1 -0.3

5,697 -37.8 57.0

1,018 -43.8 -53.7
Godrej Properties 240 Neutral

2,831 40.4 -34.0

594 46.6 -21.6

343 -13.1 -29.0
Indiabulls Real Estate 95 Buy

3,466 -31.8 5.8

971 -33.9 -14.1

337 -53.6 -19.1
Jaypee Infratech 33 Buy

6,623 -13.9 -13.4

2,318 -30.8 -9.5

122 -85.0 -7.8
Mahindra Lifespace 554 Buy

1,820 3.4 -3.9

455 -11.9 75.4

213 -2.2 -29.6
Oberoi Realty 259 Buy

2,130 -2.5 -3.4

1,193 -10.6 -4.9

876 -13.9 13.8
Phoenix Mills 346 Buy

773 10.8 -1.7

526 10.7 9.5

421 0.5 15.6
Prestige Estates 263 Buy

4,782 -4.0 -20.5

1,195 -7.3 -2.9

721 -16.8 -24.2
Sobha Developers 491 Buy

5,149 11.5 -17.8

1,442 3.7 -15.8

567 13.1 -17.5
Sector Aggregate 47,219 -9.5 -9.3 14,391 -25.8 10.6 4,617 -31.7 -26.8

Company name
DLF
Godrej Properties
Indiabulls Real Estate
Jaypee Infratech
Mahindra Lifespaces
Oberoi Realty
Phoenix Mills
Prestige Estate Projects
Sobha Developers

Technology


Real Estate

Sandipan Pal (Sandipan.Pal@MotilalOswal.com); +91 22 3982 5436

July 2014 220

Trend in launch and presales (msf) PAN India
73
96
67
91
85
70
73
85
48
85
110
73
111
91
55
94
56
61
53
57
52
48
62
67
62
69
57
62
58
53
65 68
2
Q
C
Y
1
0
3
Q
C
Y
1
0
4
Q
C
Y
1
0
1
Q
C
Y
1
1
2
Q
C
Y
1
1
3
Q
C
Y
1
1
4
Q
C
Y
1
1
1
Q
C
Y
1
2
2
Q
C
Y
1
2
3
Q
C
Y
1
2
4
Q
C
Y
1
2
1
Q
C
Y
1
3
2
Q
C
Y
1
3
3
Q
C
Y
1
3
4
Q
C
Y
1
3
1
Q
C
Y
1
4
Launch (msf) Sales (msf)

Source: LF, MOSL
Trend in presales (INR b) and realizations (INR/sf) PAN India
2
0
8
2
3
1
2
0
2
2
3
8
2
1
2
2
2
3
1
9
6
2
1
0
2
6
6
3
0
9
2
7
7
3
2
8
2
4
73
1
8
3
0
8
2
7
3
3
6
1
3
8
2
2,400
3,200
4,000
4,800
5,600
140
220
300
380
460
4
Q
C
Y
0
9
1
Q
C
Y
1
0
2
Q
C
Y
1
0
3
Q
C
Y
1
0
4
Q
C
Y
1
0
1
Q
C
Y
1
1
2
Q
C
Y
1
1
3
Q
C
Y
1
1
4
Q
C
Y
1
1
1
Q
C
Y
1
2
2
Q
C
Y
1
2
3
Q
C
Y
1
2
4
Q
C
Y
1
2
1
Q
C
Y
1
3
2
Q
C
Y
1
3
3
Q
C
Y
1
3
4
Q
C
Y
1
3
1
Q
C
Y
1
4
Sales value (INR b) Realizations (INR/sf)

Source: LF, MOSL

FY14 witnessed worst run for NCR and Mumbai, while Bangalore maintained resilience

FY11 FY12 FY13 FY14

1Q 2Q 3Q 4Q FY14
NCR Centric developers 149 137 102 34 12 13 10 69
DLF 59 53 38 24 7 6 3 41
Unitech 43 38 28 5 3 4 4 15
Anantraj 5 7 3 1 0 1 1 4
JPIN 41 39 32 4 2 2 2 10
Mumbai Centric developers 79 40 39 19 8 6 6 40
IBREL 48 19 30 16 6 5 4 31
HDIL 21 11 - 3 1 1 1 6
ORL 10 10 9 1 1 1 1 3
Bangalore Centric developers 31 45 70 19 21 18 18 76
Sobha 11 17 22 6 6 5 6 23
PEPL 14 21 31 10 11 9 6 36
Puravankara 7 7 17 3 4 4 6 16
Diversified 17 19 24 5 3 5 10 23
MAHLIFE 7 6 4 1 1 1 1 4
GPL 10 13 20 4 3 3 9 19

Office spaces leasing (msf) overall marginal QoQ rise
0.0
1.3
2.5
3.8
5.0
1
Q
2
0
1
0
2
Q
2
0
1
0
3
Q
2
0
1
0
4
Q
2
0
1
0
1
Q
2
0
1
1
2
Q
2
0
1
1
3
Q
C
Y
1
1
4
Q
C
Y
1
1
1
Q
C
Y
1
2
2
Q
C
Y
1
2
3
Q
C
Y
1
2
4
Q
C
Y
1
2
1
Q
C
Y
1
3
2
Q
C
Y
1
3
3
Q
C
Y
1
3
4
Q
C
Y
1
3
1
Q
C
Y
1
4
NCR Mumbai Bangalore

Source: DTZ, MOSL
Bank loan to developers stood at INR1.5t as on April-14
-8
0
8
16
24
0
400
800
1,200
1,600
S
e
p
-
0
5
M
a
r
-
0
6
S
e
p
-
0
6
M
a
r
-
0
7
S
e
p
-
0
7
M
a
r
-
0
8
S
e
p
-
0
8
M
a
r
-
0
9
S
e
p
-
0
9
M
a
r
-
1
0
S
e
p
-
1
0
M
a
r
-
1
1
S
e
p
-
1
1
M
a
r
-
1
2
S
e
p
-
1
2
M
a
r
-
1
3
Loan (INR b) Growth (%)

Source: RBI, MOSL

We expect presales to
remain subdued across
regions (including
Bangalore) in 1QFY15 on
the back of lower launch.
Enquiries have improved
but conversion is yet to take
to take place
June 2014 Results Preview | Sector: Real Estate

July 2014 221




Comparative valuations
Real Estate
DLF 219 Buy 3.7 5.9 10.3 59.6 37.3 21.3 20.8 17.5 13.1 2.2 3.5 5.9
Godrej Properties 240 Neutral 8.7 11.7 17.0 27.5 20.5 14.1 19.0 14.7 10.4 9.3 11.3 14.6
Indiabulls Real Estate 95 Buy 9.7 12.0 16.6 9.8 7.9 5.7 12.5 9.6 6.7 5.5 6.5 8.6
Jaypee Infratech 33 Buy 2.6 3.2 4.2 12.8 10.2 7.9 8.4 7.6 6.8 5.8 7.0 8.6
Mahindra Lifespace 554 Buy 25.9 30.8 36.1 21.4 18.0 15.3 16.5 12.5 10.4 7.8 8.5 9.1
Oberoi Realty 259 Buy 13.2 21.2 33.3 19.6 12.2 7.8 13.5 8.3 5.2 9.5 13.7 18.6
Phoenix Mills 346 Buy 7.6 17.4 22.1 45.6 19.8 15.7 11.6 8.5 6.9 6.1 12.5 14.0
Prestige Estates 263 Buy 11.2 16.0 21.3 23.5 16.4 12.4 13.6 10.4 7.8 11.8 14.7 16.6
Sobha Developers 491 Buy 26.9 34.8 40.5 18.2 14.1 12.1 9.4 7.9 6.8 11.1 13.2 13.9

95
110
125
140
155
A
p
r
-
1
4
M
a
y
-
1
4
J
u
n
-
1
4
J
u
l
-
1
4
Sensex Index MOSL Real Estate Index
80
100
120
140
160
J
u
l
-
1
3
O
c
t
-
1
3
J
a
n
-
1
4
A
p
r
-
1
4
J
u
l
-
1
4
Sensex Index MOSL Real Estate Index

July 2014 222

Y/E March FY14 FY15E
FY14 FY15E
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q

Sales 23,141 19,561 20,584 19,695 19,645 18,335 23,573 25,756 82,980 87,309
Change (%) 5.3 -4.1 57.1 -11.5 -15.1 -6.3 14.5 30.8 6.8 5.2
EBITDA 9,156 5,948 6,120 3,629 5,697 6,051 8,251 8,535 24,852 28,533
Change (%) -14.2 -20.3 603.2 -50.0 -37.8 1.7 34.8 135.2 -5.4 14.8
As % of Sales 39.6 30.4 29.7 18 29 33 35 33 29.9 32.7
Depreciation 1,782 1,660 1,561 1,627 1,600 1,650 1,700 1,712 6,629 6,662
Interest 5,914 6,091 6,331 6,297 6,000 5,800 5,600 5,474 24,633 22,874
Other Income 1,391 2,685 5,318 5,522 3,000 2,000 2,000 2,000 14,916 9,000
PBT 2,909 1,680 -574 1,193 1,097 601 2,951 3,348 5,207 7,996
Tax 913 855 -1,925 -678 219 132 738 910 -836 1,999
Effective Tax Rate (%) 31.4 50.9 0.0 -56.9 20 22.0 25.0 27.2 -16.1 25.0
Reported PAT Pre MI 1,996 825 1,352 1,871 878 468 2,213 2,438 6,044 5,997
Change (%) (29.5) (35.1) (44.7) 495.1 (56.0) (43.2) 63.7 30.3 -11.2 -0.8
Reported PAT 1,812 1,001 1,453 2,197 1,018 608 2,353 2,559 6,462 6,538
Adj. PAT 1,812 1,001 1,453 2,197 1,018 608 2,353 2,559 6,462 6,538
Change (%) (38.1) (27.8) (49.0) LTP (43.8) (39.2) 62.0 LTP (9.2) 1.2
Presales (msf) 1.8 0.9 0.6 0.4 0.6 0.7 1.5 1.8 3.8 4.5
Presales (INR b) 24.3 7.3 6.0 3.1 5.0 5.2 18.0 17.9 40.7 46.1
Realization (INR/sf) 13,425 8,022 9,836 7,045 8,500 8,000 12,000 10,178 10,796 10,251
Leasing (msf) 0.4 0.6 0.1 0.6 0.3 0.2 0.7 0.8 1.7 2.0
E: MOSL Estimates


DLF

CMP: INR219 Buy
We expect a stable quarter, with potential uptick in margins to 29%.
In 4QFY14, margins were 18%, impacted by one-offs pertaining to the
Aman Resort transaction.
We see 1QFY15 revenue at INR19.6b (down 15% YoY, flat QoQ), as
several of its newer projects are yet to cross the required threshold.
We estimate EBITDA at INR5.7b (down 38% YoY) and PAT at INR1b
(v/s INR2.2b in 4QFY14, including profit from the Aman Resort deal).
Slowdown in Gurgaon and lack of major launches are likely to keep
overall presales subdued. We estimate presales of INR5b and leasing
velocity of 0.3msf.
Gearing may increase by INR3b-4b QoQ in the absence of any major
divestment and continued weakness in cash flows.
The stock trades at 37.3x FY16E EPS, 1.3x FY16E BV, and at 12%
discount to our NAV estimate of INR250. Maintain Buy.
Guidance on launch plan and presales target of FY15-16
Trend in operating cash flows and clarity over further divestments
Status of further CMBS plan

Bloomberg DLFU IN
M.Cap. (INR b) /(USD b) 385.72/6.42
1, 6, 12 Rel. Per (%) -5/5/-11

Y/E March 2014 2015E 2016E 2017E
Net Sales 83.0 87.3 92.0 107.6
EBITDA 24.9 28.5 34.0 44.7
Adj PAT 6.5 6.5 10.4 18.3
EPS (INR) 3.6 3.7 5.9 10.3
EPS Gr. (%) -13.4 1.2 59.7 75.2
BV/Sh. (INR) 157.3 158.6 162.2 170.2
RoE (%) 2.3 2.2 3.5 5.9
RoCE (%) 6.3 6.0 6.9 8.8
Payout (%) 64.4 63.7 39.9 22.2
Valuations
P/E (x) 60.3 59.6 37.3 21.3
P/BV (x) 1.4 1.4 1.3 1.3
EV/EBITDA (x) 22.7 20.2 17.0 12.7
Div. Yield (%) 0.9 0.9 0.9 0.9

July 2014 223

Quarterly Performance (Consolidated) (INR million)
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Total Revenue 2,016 3,065 2,420 4,292 2,831 3,680 3,114 4,530 11,792 14,155
Change (%) -11 32 -9 38 40.4 20 29 6 13.7 20.0
Total Expenditure 1,610 2,257 1,565 3,534 0 0 0 3,371 8,966 10,635
EBITDA 406 808 854 758 594 957 810 1,159 2,826 3,520
Change (%) 1 12 14 -23 46.6 18 -5 53 -1.1 24.5
As of % Sales 20.1 26.4 35.3 17.7 21.0 26.0 26.0 25.6 24.0 24.9
Depreciation 12 14 15 16 16 16 17 17 58 66
Interest 8 8 8 20 17 20 20 20 45 77
Other Income 427 139 120 65 100 100 100 200 750 500
PBT 812 925 950 787 661 1,021 873 1,322 3,474 3,877
Tax 299 319 347 146 218 337 288 436 1,111 1,279
PAT before MI 514 606 603 641 443 684 585 885 2,363 2,597
Minority -119 -263 -229 -157 -100 -105 -105 -558 -768 -868
Reported PAT 395 343 374 483 343 579 480 327 1,594 1,729
Change (%) 130.1 5.1 5.3 -9.1 -13.1 69.0 28.4 -32.4 15.2 8.4
Presales (msf)** 0.5 0.4 0.4 1.0 0.3 0.4 1.0 1.3 2.3 3.0
Presales (INR b) 4.2 2.8 3.3 8.8 2.5 3.5 8.0 11.0 19.1 25.0
Realizations (INR/sf) 8,715 6,455 8,527 8,566 8,333 8,750 8,000 8,462 8,197 8,333
E: MOSL Estimates ** GPL's share


Godrej Properties

CMP: INR240 Neutral
We estimate revenue at ~INR2.8b (up 40% YoY), EBITDA at INR594m
(margin at 21%), and PAT at INR343m (down 12% YoY). Margins
would remain subdued on low-margin commercial asset sales.
The Panvel project has witnessed decent response during initial
marketing. Barring this, there has been no new launch. Quarterly
presales would be sub-par.
The stock trades at 20.5x FY16E EPS and 2.2x FY16E BV, and close to
its SOTP value of INR245. Maintain Neutral.
Progress in approvals in planned launches and demand
momentum in major markets
Leasing progress in BKC commercial
Trend in cash flow and leverage

Bloomberg GPL IN
M.Cap. (INR b) /(USD b) 48.85/0.81
1, 6, 12 Rel. Per (%) -9/18/-36

Y/E March 2014 2015E 2016E 2017E
Net Sales 11.8 14.2 18.2 24.6
EBITDA 2.8 3.5 4.6 6.5
NP 1.6 1.7 2.3 3.4
EPS (INR) 8.0 8.7 11.7 17.0
EPS Gr. (%) -9.3 8.4 34.1 45.4
BV/Sh (INR) 90.5 98.0 108.5 123.8
RoE (%) 9.9 9.3 11.3 14.6
RoCE (%) 9.0 8.4 9.9 12.1
Payout (%) 14.5 13.4 10.0 10.3
Valuations
P/E (x) 29.9 27.5 20.5 14.1
P/BV (x) 2.7 2.5 2.2 1.9
EV/EBITDA (x) 14.4 12.3 9.5 6.7
Div. Yield (%) 0.8 0.8 0.8 1.2

July 2014 224

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Sales 5,083 4,506 4,497 3,276 3,466 4,236 6,740 4,814 17,362 19,257
Change (%) 136.8 31.6 35.7 -20.5 -31.8 -6.0 49.9 46.9 33.5 10.9
EBITDA 1,467 1,687 1,119 1,130 971 1,271 2,224 1,467 5,404 5,933
Change (%) 85.4 39.5 -14.8 -17.6 -33.9 -24.7 98.7 29.8 15 10
As % of Sales 28.9 37.4 24.9 34.5 28.0 30.0 33.0 30.5 31 31
Depreciation 55 46 49 59 60 60 60 60 210 240
Interest 491 526 661 535 550 575 600 622 2,213 2,347
Other Income 165 201 129 142 150 150 150 150 637 600
PBT 1,087 1,316 538 678 511 786 1,714 935 3,619 3,946
Tax 385 452 235 243 174 267 686 294 1,315 1,420
Reported PAT (Pre Minority and
associates) 702 863 303 436 337 519 1,028 641 2,238 3,920
Change (%) 144.4 136.9 -39.5 -27.7 -52.0 -40 240 47.2 28.5 75.1
Reported PAT 726 812 284 417 337 519 1,028 641 2,238 3,920
Change (%) 92 152 -46 -20 -54 -36 263 54 29 75
Presales (msf) 1.6 0.7 0.6 0.5 0.5 0.7 1.2 1.2 3.4 4
Presales (INR b) 15.9 6.4 4.8 3.6 3.5 5.0 12.0 11.1 31 32
E: MOSL Estimates


Indiabulls Real Estate

CMP: INR95 Buy
We are factoring in revenue of INR3.4b (stable QoQ), EBITDA of
INR971m (margin of 28%), and PAT of INR337m. Major revenue scale-
up from Blu (Worli) project is likely in 2HFY15.
Presales would mimic the last three quarters subdued momentum,
as new launch in Gurgaon took place towards the end of the quarter.
London entry should raise gearing to the extent of initial payment (v/s
expected peak debt addition of INR13b-14b for this project).
The stock trades at 37% discount to our NAV estimate of INR160, and
at 7.5x FY16E EPS and 0.5x FY16E BV. Maintain Buy with a target price
of INR145.

Progress in planned launches in NCR and Chennai
Sales momentum in Central Mumbai projects
Cash flow and leverage trends

Bloomberg IBREL IN
M.Cap. (INR b) /(USD b) 41.68/0.69
1, 6, 12 Rel. Per (%) -15/15/15

Y/E March 2014 2015E 2016E 2017E
Net Sales 17.4 19.3 22.5 28.5
EBITDA 5.4 5.9 7.4 9.9
NP 2.2 3.9 4.8 6.7
EPS (INR) 5.9 9.7 12.0 16.6
EPS Gr. (%) 28.5 66.1 23.6 37.5
BV/Sh. (INR) 162.1 168.2 175.9 182.4
RoE (%) 3.3 5.5 6.5 8.6
RoCE (%) 6.0 5.8 6.9 8.9
Payout (%) 59.8 34.2 32.2 30.1
Valuations
P/E (x) 16.2 9.3 7.5 5.7
P/BV (x) 0.6 0.6 0.5 0.5
EV/EBITDA (x) 12.1 12.7 9.7 6.8
Div Yield (%) 3.1 3.1 4.2 5.2

July 2014 225

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q Consl Consl
Sales 7,692 7,966 9,878 7,651 6,623 9,141 10,553 11,043 33,187 37,360
Change (%) 13.4 13.0 5.9 -20.2 -13.9 14.7 6.8 44.3 1.4 12.6
EBITDA 3,352 3,541 3,571 2,561 2,318 3,291 4,010 4,327 13,025 13,946
Change (%) 23.2 -1.2 -15.5 -39.6 -30.8 -7.1 12.3 68.9 -11.8 7.1
As of % Sales 43.6 44.4 36.1 33.5 35.0 36.0 38.0 39.2 39.2 37.3
Depreciation 86 67 30 32 70 100 140 172 214 482
Interest 2,315 2,212 2,265 2,148 2,136 2,225 2,181 2,359 8,940 8,900
Other Income 74 51 4 5 50 50 60 27 134 187
PBT 1,025 1,313 1,280 386 162 1,016 1,750 1,823 4,005 4,751
Tax 215 275 268 255 41 254 437 456 1,013 1,188
Reported PAT 810 1,038 1,012 132 122 762 1,312 1,367 2,992 3,563
Change (%) -61.4 -42.6 -34.7 -91.1 -85.0 -26.6 29.7 936.7 -56.9 19.1
Adj PAT 810 1,038 1,012 132 122 762 1,312 1,367 2,992 3,563
Change (%) -61.4 -42.6 -34.7 -91.1 -85.0 -26.6 29.7 936.7 -56.9 19.1
Presales (msf) 1.0 0.5 0.6 1.2 1.0 0.5 0.6 1.2 3.3 5.6
Presales (INR b) 4.0 1.8 2.4 1.8 4.0 1.8 2.4 1.8 10.1 16.2
E: MOSL Estimates


Jaypee Infratech

CMP: INR33 Buy
We estimate revenue at INR6.6b (down 14% YoY), EBITDA at INR2.3b
(down 31% YoY), margin at 35%, and PAT at INR122m (down 85%
YoY).
We have assumed INR2b of land revenue (from INR15b of divestment
concluded in 1QFY14), and INR430m of Expressway revenue.
We expect presales momentum to remain subdued.
The stock trades at 12.8x FY16E EPS and 0.7x FY14E BV. Maintain Buy.
Traffic growth and toll revenue trend in expressway
Response to parcel-3, Agra launches, and overall market outlook
Any further divestment plan and deleveraging
Clarity on forest approval hurdle in Noida Expressway projects

Bloomberg JPIN IN
M.Cap. (INR b) /(USD b) 47.99/0.80
1, 6, 12 Rel. Per (%) -13/21/-4

Y/E March 2014 2015E 2016E 2017E
Net Sales 32.7 33.2 37.4 35.6
EBITDA 14.8 13.0 13.9 15.4
Adj PAT 6.9 3.0 3.6 4.5
Adj EPS (INR) 5.0 2.2 2.6 3.2
EPS Gr. (%) -46.2 -56.9 19.1 25.7
BV/Sh. (INR) 44.5 43.6 45.0 47.0
RoE (%) 11.6 4.9 5.8 7.0
RoCE (%) 10.9 9.1 9.6 10.3
Payout (%) 23.4 54.3 45.6 36.3
Valuations
P/E (x) 6.6 15.3 12.8 10.2
P/BV (x) 0.7 0.8 0.7 0.7
EV/EBITDA (x) 8.4 9.2 8.4 7.6
Div. Yield (%) 3.0 3.0 3.0 3.0

July 2014 226

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Sales 1,761 1,962 1,436 1,894

1,820 1,899 1,978 2,215 7,053 7,912
Change (%) 45.6 51.6 14.1 -47.7

3.4 -3.2 37.7 17.0 -4.5 12.2
EBITDA 517 493 434 259

455 494 534 682 1,702 2,165
As % of Sales 29.3 25.1 30.2 13.7

25.0 26.0 27.0 30.8 24.1 27.4
Change (%) 45.9 24.6 32.5 -80.7

-11.9 0.2 23.0 163.1 -29.6 27.2

27 30 36 40 101 133
Interest 168 158 143 33

150 170 190 202 502 712

100 120 140 140 509 500
PBT 395 425 391 399

378 414 448 581 1,609 1,821
Tax 132 201 88 88

125 137 148 192 509 601
Effective Tax Rate (%) 33.5 47.4 22.5 22.1

33.0 33.0 33.0 33.0 31.6 33.0
PAT before minority 263 224 303 311

253 277 300 389 1,100 1,220
Change (%) 43.4 -10.0 46.7 -66.3

-3.5 24.0 -0.9 25.1 -29.6 10.9
Minority Interest 45 29 11 9

40 30 20 71 94 161
Reported PAT 218 195 292 303

213 247 280 320 1,006 1,059
Sales volume (msf) 0.2 0.2 0.3 0.2

0.15 0.2 0.4 0.3 0.9 1.0
Sales value (INR b) 0.7 0.7 1.3 1.0

0.7 0.8 1.5 1.4 3.7 4.4
Realizations (INR/sf) 4,300 4,500 4,226 4,261

4,300 4,000 4,286 4,366 4,314 4,311
E: MOSL Estimates


Mahindra Lifespaces

CMP: INR554 Buy
For 1QFY15, we estimate consolidated revenue at INR1.8b (flat YoY),
margins at ~25%, EBITDA at INR446m (down 14% YoY), and PAT at
INR207m.
Presales would remain at sub-normal levels in the absence of any
new launch after Nova (Chennai) in 4QFY14. We expect most of its
planned launches (Alibaug, NCR, Mumbai, Chennai, and Bangalore) in
2HFY15. In 1QFY15, the company launched its affordable housing
brand Happinest.
It has concluded the Byculla land deal. Its share of sales proceeds was
INR3.25b, which should result in sequential moderation in leverage.
Demand for DTA/SEZ at Jaipur would be awaiting positive
developments on taxation during the impending budget.
The stock trades at 18x FY16E EPS and 1.5x FY16E BV.
Progress in approvals relating to recent acquisitions
Any further acquisitions and trend in gearing level
Leasing progress in Jaipur DTA, and clarity on possible re-sizing
Progress of land acquisition in North Chennai SEZ

Bloomberg MLIFE IN
M.Cap. (INR b) /(USD b) 22.25/0.37
1, 6, 12 Rel. Per (%) 16/16/-2

Y/E March 2014 2015E 2016E 2017E
Net Sales 7.1 7.9 9.6 10.7
EBITDA 1.7 2.2 2.8 3.3
Adj PAT 1.0 1.1 1.3 1.5
Adj EPS (INR) 24.6 25.9 30.8 36.1
EPS Gr. (%) -28.9 5.3 19.0 17.2
BV/Sh.(INR) 308.9 331.7 360.9 398.2
RoE (%) 8.0 7.8 8.5 9.1
RoCE (%) 7.7 8.9 10.8 11.9
Payout (%) 26.2 23.6 19.4 15.3
Valuations
P/E (x) 22.5 21.4 18.0 15.3
P/BV (x) 1.8 1.7 1.5 1.4
EV/EBITDA (x) 21.1 16.5 12.5 10.5
Div. Yield (%) 0.9 0.9 0.9 0.9

July 2014 227

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Total Revenue 2,184 1,890 1,705 2,206 2,130 2,012 4,734 2,959 7,985 11,835
Change (%) 9.3 -26.7 -40.4 -27.4 -2.5 6.5 177.6 34.1 -23.8 48.2
EBITDA 1,335 861 898 1,254 1,193 1,127 2,509 1,695 4,348 6,524
Change (%) 17.2 -42.5 -47.4 -29.5 -10.6 30.9 179.4 35.1 -29.0 50.0
As of % Sales 61 46 53 57 56 56 53 57 54.5 55
Depreciation 69 68 68 67 69 68 68 149 272 332
Interest 1 1 1 1 1 1 1 1 3 308
Other Income 210 127 154 79 210 127 154 721 571 601
PBT 1,476 919 983 1,265 1,334 1,185 2,594 2,265 4,640 6,481
Tax 457 278 303 496 457 278 303 1,102 1,533 2,140
Effective Tax Rate,% 31.0 30.2 30.8 39.2 34.3 23.4 11.7 48.7 33.0 33.0
Reported PAT 1,018 642 681 770 876 908 2,292 1,163 3,107 4,341
Change (%) 1.0 -48.4 -49.4 -47.0 -13.9 41.5 236.7 51.1 -38.4 39.7
Presales (msf) 0.05 0.04 0.03 0.05 0.05 0.06 0.20 0.29 0.2 0.60
Presales (INR b) 0.9 0.8 0.6 1.1 1.0 1.2 2.5 5.2 3.4 9.9
E: MOSL Estimates


Oberoi Realty

CMP: INR259 Buy
We estimate revenue at INR2.1b (down 3% YoY), EBITDA at INR1.2b
(margins of 56%), and PAT at INR876m (down 14% YoY). Esquire
recognition should drive strong revenue booking in 2HFY15.
Post payment for Borivali land, net debt would be INR8b-9b.
Overall enquiries have improved in Mumbai but not translated into
presales yet. We expect the weak sales and collections run-rate to
continue in 1QFY15, driven mainly by the Goregaon project.
Ritz Carton has come up as a hotel operator in the Worli project
during the quarter, which should now pave the way for launch of the
branded residential section.
discount to our NAV estimate of INR297.
Launch timelines for Mulund, Oasis (with hotel operator now in),
and JVLR projects
Leasing visibility in Commerz II
Sales momentum in Esquire (Goregaon) and Grande (Andheri)
Clarity on approval timeline for Borivli land

Bloomberg OBER IN
M.Cap. (INR b) /(USD b) 86.01/1.43
1, 6, 12 Rel. Per (%) 0/-15/-10

Y/E March 2014 2015E 2016E 2017E
Net Sales 8.0 11.8 19.4 28.6
EBITDA 4.3 6.5 11.1 16.7
Adj PAT 3.1 4.3 7.0 10.9
Adj EPS (INR) 9.5 13.2 21.2 33.3
EPS Gr. (%) -38.4 39.7 60.0 57.2
BV/Sh (INR) 133.9 144.8 163.7 193.5
RoE (%) 7.3 9.5 13.7 18.6
RoCE (%) 10.7 13.2 18.1 25.4
Payout (%) 24.7 17.7 11.0 10.5
Valuations
P/E (x) 27.4 19.6 12.2 7.8
P/BV (x) 1.9 1.8 1.6 1.3
EV/EBITDA (x) 18.6 13.5 8.3 5.2
Div. Yield (%) 0.8 0.8 0.8 1.2

July 2014 228

Quarterly Performance (Standalone) (INR million)
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q Consol Consol
Sales 698 707 756 787 773 806 839 872 14,485 17,116
Change (%) 11.5 6.4 9.0 9.0 10.8 14.0 11.0 10.8 208.3 18.2
EBITDA 475 479 497 480 526 548 562 569 6,784 7,157
Change (%) 20.4 9.2 4.9 0.2 10.7 14.6 13.1 18.4 157.8 5.5
As % of Sales 68 68 66 61 68 68 67 65 46.8 41.8
Depreciation 65 65 59 65 65 65 65 65 1,055 1,286
Interest 72 97 146 129 125 125 130 140 3,451 3,513
Other Income 215 172 197 216 225 200 200 200 391 500
PBT 553 488 489 501 561 558 567 564 2,669 2,857
Tax 135 123 111 137 140 139 142 141 909 943
Effective Tax Rate (%) 24 25 23 27 25 25 25 25 34.1 33.0
Reported PAT Pre MI 418 365 378 364 421 418 425 423 1,760 1,914
Change (%) 36.7 10.6 10.8 0.7 0.5 14.6 12.5 16.2 114.7 8.8
Adj. PAT 418 365 378 364 421 418 425 423 1,285 1,098
Change (%) 36.7 10.6 10.8 0.7 0.5 14.6 12.5 16.2 52.7 -14.5
E: MOSL Estimates


Phoenix Mills

CMP: INR345 Buy
We estimate High Street Phoenix's (HSP) 1QFY15 revenue at INR773m
(up 11% YoY), EBITDA at INR526m (margin of 68%), and PAT at
INR421m (up 0.5% YoY). We expect rentals to post 10-12% YoY
growth to ~INR580x, in line with growth in consumption.
Market City and hotels businesses should report stable performance
QoQ, with no major change in leasing and occupancies.
Clarity on new hotel operators timeline is yet to emerge.
Sales momentum in Phase II projects in Market City
Progress in residential launch in Bangalore
Improvement in operating cash flow, which could lead to de-
leveraging
Update on proposed stake purchases in Market City projects
Update on new hotel operator

Bloomberg PHNX IN
M.Cap. (INR b) /(USD b) 47.80/0.80
1, 6, 12 Rel. Per (%) 20/25/7

Y/E March 2014 2015E 2016E 2017E
Net Sales 14.5 17.1 22.5 24.4
EBITDA 6.8 7.2 9.6 11.3
Adj PAT 1.3 1.1 2.5 3.2
EPS (INR) 8.9 7.6 17.4 22.1
EPS Gr. (%) 52.7 -14.5 129.7 26.7
BV/Sh. (INR) 119.0 124.2 139.3 157.9
RoE (%) 7.5 6.1 12.5 14.0
RoCE (%) 12.3 11.2 15.3 18.0
Payout (%) 29.0 30.9 13.4 15.9
Valuations
P/E (x) 39.0 45.6 19.8 15.7
P/BV (x) 2.9 2.8 2.5 2.2
EV/EBITDA (x) 12.1 11.6 8.5 6.9
Div. Yield (%) 0.6 0.6 0.6 0.9

July 2014 229

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q Consol Consol
Total Revenue 4,983 4,753 4,305 6,012 4,782 5,285 6,795 8,305 25,492 30,667
Change (%) 127 97 -13 7 -4.0 11 58 38 30.9 20.3
EBITDA 1,289 1,187 1,319 1,231 1,195 1,348 1,835 2,166 7,203 8,778
Change (%) 83.2 63.7 -7.4 -6.8 -7.3 13.6 39.1 75.9 24.4 21.9
As of % Sales 25.9 25.0 30.6 20.5 25.0 25.5 27.0 26.1 28 29
Depreciation 80 83 85 108 100 105 105 105 893 989
Interest 257 265 348 390 400 425 450 425 2,290 2,445
Other Income 310 288 295 579 350 350 400 400 975 800
PBT 1,263 1,126 1,180 1,312 1,045 1,168 1,680 2,036 4,995 6,144
Tax 396 350 375 361 324 362 537 674 1,750 2,027
Reported PAT 867 776 806 951 721 806 1,142 1,362 3,245 4,116
Adj PAT 867 776 806 951 721 806 1,142 1,362 3,143 3,916
Change (%) 75.8 69.9 -12.5 6.9 -16.8 3.8 41.8 43.2 9.9 24.6
Presales (msf) 1.8 1.8 1.6 1.0 0.9 1.4 2.0 2.4 6.1 6.7
Presales (INR b) 10.2 10.7 9.4 6.0 6.0 9.0 12.8 15.4 36.3 43.1
Leasing (msf) 0.16 0.48 0.22 0.24 0.2 0.25 0.50 0.55 1.1 1.5
E: MOSL Estimates


Prestige Estate Projects

CMP: INR263 Buy
Most projects are likely to cross revenue threshold in 2HFY15. For
1QFY15, we estimate revenue at INR4.8b (down 4% YoY), margins at
25%, translating to EBITDA of INR1.2b, and PAT at INR721m (down
17% YoY).
Buying momentum was weaker in 1QFY15 in Bangalore. Its lone
launch at Falcon City witnessed decent booking of 25-30% of 6msf.
We expect overall presales of INR6b. Scale up in capex momentum in
the annuity segment is likely to result in sequentially higher leverage.
The stock trades at 16.4x FY16E EPS, 2.4x FY16E BV, maintain Buy.
Outlook for Bangalore residential market and leasing momentum
Execution progress in ongoing projects, collections, etc
Cash flow dynamics, land acquisition (acquired 8acre premium
land for INR3.45b) and debt movement

Bloomberg PEPL IN
M.Cap. (INR b) /(USD b) 84.54/1.41
1, 6, 12 Rel. Per (%) 19/43/35

Y/E March 2014 2015E 2016E 2017E
Net Sales 25.5 30.7 35.6 42.9
EBITDA 7.2 8.8 11.3 14.6
Adj PAT 3.1 3.9 5.6 7.4
Adj EPS (INR) 9.0 11.2 16.0 21.3
EPS Gr (%) 9.9 24.6 43.4 32.4
BV/Sh(INR) 85.1 94.6 108.9 128.4
RoE (%) 10.5 11.8 14.7 16.6
RoCE (%) 12.2 13.2 16.1 19.0
Payout (%) 19.5 15.7 10.7 8.1
Valuations
P/E (x) 29.3 23.5 16.4 12.4
P/BV (x) 3.1 2.8 2.4 2.1
EV/EBITDA (x) 16.6 13.6 10.4 7.8
Div. Yield (%) 0.6 0.6 0.6 0.6

July 2014 230

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4E

Sales 4,616 5,408 5,443 6,267 5,149 5,149 6,085 7,021 21,734 23,403
Change (%) 7 30 27 7 12 -5 12 12 17 8
EBITDA 1,390 1,433 1,490 1,712 1,442 1,390 1,704 2,003 6,025 6,539
Margin % 30 26.5 27.4 27.3 28.0 27.0 28.0 28.5 27.7 27.9
Depreciation 165 172 172 181 190 200 220 233 690 843
Interest 396 434 446 458 400 430 440 449 1,734 1,719
Other Income 14 37 12 40 20 20 20 25 103 85
PBT 843 864 884 1,113 872 780 1,064 1,346 3,704 4,061
Tax 342 298 301 427 305 273 372 471 1,368 1,421
Effective Tax Rate,% 41 34 34 38 35 35 35 35 37 35
Net PAT 501 566 583 687 567 507 691 876 2,336 2,640
Reported PAT 501 566 583 687 567 507 691 876 2,350 2,641
Change (%) 11 13 11 -1 13 -10 19 27 8 12
Presales (msf) 0.9 1.0 0.7 0.9 0.8 0.8 1.2 1.3 3.6 4.1
Presales (INR b) 6.0 6.3 5.0 6.1 4.8 5.5 8.0 9.1 23.4 27.4
E: MOSL Estimates


Sobha Developers

CMP: INR491 Buy
We estimate revenue at INR5.1b (up 12% YoY), EBITDA at INR1.4b
(margin of 28%) and PAT at INR567m (up 13% YoY).
There have been no new launches in 1Q, though the company had
launched three projects towards the end of 4QFY14 in Bangalore,
Coimbatore and Cochin, which would be the key presales drivers.
However, on the back of weaker momentum, presales are likely to
remain subnormal at INR5b.
Payment of INR1.6b to Puravankara for the land deal concluded in
4QFY14 and another INR0.6b towards an acquisition in Pune in
1QFY15 should increase net debt QoQ.
Outlook for Bangalore residential market
Timeline and approval status for new launches
Execution progress in ongoing projects, collections
Cash flow dynamics, land acquisition and debt movement
Spending in commercial assets

Bloomberg SOBHA IN
M.Cap. (INR b) /(USD b) 47.94/0.80
1, 6, 12 Rel. Per (%) 3/23/11

Y/E March 2014 2015E 2016E 2017E
Net Sales 21.7 23.4 27.5 31.7
EBITDA 6.0 6.5 7.9 9.2
Adj PAT 2.4 2.6 3.4 4.0
EPS (INR) 24.0 26.9 34.8 40.5
EPS Gr. (%) 8.2 12.4 29.3 16.4
BV/Sh (INR) 233.7 251.2 276.7 306.7
RoE (%) 10.6 11.1 13.2 13.9
RoCE (%) 14.8 14.9 16.8 18.0
Payout (%) 29.2 29.7 23.0 22.2
Valuation
P/E (x) 20.5 18.2 14.1 12.1
P/BV (x) 2.1 2.0 1.8 1.6
EV/EBITDA (x) 10.1 9.4 7.9 6.8
Div. Yield (%) 1.4 1.6 1.6 1.8

July 2014 231

Gautam Duggad (Gautam.Duggad@MotilalOswal.com) / Manish Poddar (Manish.Poddar@MotilalOswal.com)
Improving sentiment to reflect in numbers with a lag
Retail companies gearing up for expected demand recovery

Aggregate PAT for our Retail universe to grow 8.4% YoY
We expect our Retail universe to post sales growth of 0.7% YoY, EBITDA growth of
13.5% YoY, and PAT growth of 8.4% YoY. The flattish revenues would largely be an
impact of 10% decline in Titans revenues, owing to higher base. During the quarter,
the Jewelry sector witnessed major relief, with the RBI withdrawing its ban on Gold
on Lease scheme, which it enforced in August 2013 as a part of the various
measures it took to control gold imports.

Consumer sentiment picking up selectively
The Retail sector continues to bear the impact of a weak macro-led spending
slowdown in the discretionary segment. While there has been modest improvement
in urban consumer sentiment, post elections, our interactions with Retail
managements do not suggest broad recovery in same store sales (SSS) growth yet.
We expect the improved sentiment to reflect with a lag in 2HFY14. Jubilant
Foodworks is likely to post another muted quarter, though better QoQ, with 2% SSS
growth, aided by a weak base. Future Retails SSS numbers would be impacted by
higher base in the Value division. Titans Jewelry segment revenues are likely to
decline 15% due to high base. We expect Shoppers Stop to report 6-7% SSS growth.

Space expansion plans unchanged; preparing ground for demand recovery
Retail companies are gearing up for the expected demand recovery and continuing
with space expansion plans. Shoppers Stop opened one store during the quarter
while we expect Jubilant to have opened 35-40 stores (in line with its annual
guidance of 150 store openings). Titan should add at least 100ksf of space in
Jewelry, notwithstanding the near-term demand and regulatory challenges
pertaining to its Golden Harvest Scheme.

Regulatory breather for Jewelers
During the quarter, the RBI withdrew the ban on Gold on Lease scheme, which it
had implemented in August 2013 to discourage gold imports. Titan had resorted to
international hedging, as volumes and liquidity on domestic exchanges were not
sufficient. While this did not impact Titans P&L, it has had to resort to debt, as
inventory had to be funded with upfront payment. With the withdrawal of the ban,
Titan and TBZ are reverting to Gold on Lease. This is a key positive for the sector, as
it will allow Jewelry companies to proceed with their expansion plans without
resorting to high cost debt on the balance sheet. Interest cost including LC charges
works out to 3.5-5% for Gold on Lease against 10%+ for a regular loan.


(INR)
4.7.14
Reco Jun-14
Var %
YoY
Var %
QoQ
Jun-14
Var %
YoY
Var %
QoQ
Jun-14
Var %
YoY
Var %
QoQ
Future Retail 136 Under Review

24,139 7.0 2.9

2,173 14.3 -9.8

-83 LP LP
Jubilant Foodworks 1,303 Buy

5,075 28.0 17.0

787 18.0 41.3

372 9.3 48.9
Shopper's Stop 392 Neutral

6,230 16.0 -15.5

343 46.7 -9.7

73 213.7 -10.4
Titan Company 357 Buy

27,969 -10.0 0.4

2,657 8.5 -5.1

1,926 5.6 -12.3

Company name
Future Retail
Jubilant Foodworks
Shoppers Stop
Titan Company

Retail


July 2014 232

Play urban consumption recovery theme; Titan and Jubilant top picks
We expect urban consumer sentiment to pick up progressively, and drive footfalls
and conversion for both traditional and specialty retailers. We prefer Titan
Industries and Jubilant Foodworks, as both business models have meaningful
operating leverage. Even a minor improvement in SSS performance can result in
earnings upgrade, in our view. From a long-term perspective, both categories are
still scratching the surface, as far as per capita consumption and penetration of
branded jewelry and QSR categories are concerned, and represent a secular long-
term play on rising aspirations of the Indian middle class.

Shoppers Stop LTL growth moderated to HSD

Jubilant Foodworks SSS growth has decelerated sharply


Gold prices increased 4.3% YoY


Shoppers Stop: One store added in 1QFY15

Jubilant Foodworks: Expected to add 35 stores in 1QFY15


16
21
13
22
14
7
11
-1
10
1
5
13
10
12
16
6
8
M
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LTL Sales Gr (%)
36.7
26.7
30.1
26.2
22.3
19.8
16.1
7.7
6.3 6.6
-2.6
-3.4
1
Q
F
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1
2
2
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1
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18.6
28.4
35.9
28.2
32.3
20.0
12.2
8.0
-6.3
-4.1
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4.3
1
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1
2
2
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2
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1
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1
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4
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1
4
1
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1
5
41
43
49
51
52
54
55 55
60
61
65
67
68
10 10
12 12 12 12 12 12
13
14
15 15 15
J
u
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-
1
1
S
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1
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J
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1
4
Shoppers Stop Hypercity
378
392
411
439
465
489
515
552
576
602
632
679
726
90 93 96 100 105 110 112 118 123 128 132
142
152
4
Q
F
Y
1
1
1
Q
F
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1
2
2
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F
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1
2
3
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F
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1
2
4
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1
2
1
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1
3
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3
3
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1
3
4
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1
4
2
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1
4
3
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F
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1
4
4
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1
4
Stores Cities

July 2014 233





Retail
Jubilant Foodworks 1,303 Buy 25.3 35.1 47.3 51.4 37.1 27.6 24.0 17.3 12.7 22.6 23.8 24.3
Shopper's Stop 392 Neutral 7.8 10.0 12.4 50.0 39.1 31.7 16.2 13.5 11.3 8.3 9.9 11.1
Titan Company 357 Buy 9.8 11.9 14.3 36.3 30.1 25.0 26.7 21.7 18.0 28.4 27.6 0.0

85
100
115
130
145
A
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M
a
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1
4
J
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J
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4
Sensex Index MOSL Retail Index
80
95
110
125
140
J
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1
3
O
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t
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1
3
J
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Sensex Index MOSL Retail Index

July 2014 234


(INR Million)
Y/E March FY14 FY15E FY14 FY15
1Q 2Q 3Q 4Q 5Q

1Q 2Q 3Q 4Q
Net sales 23,360 22,560 23,167 23,233 23,451

24,139 24,557 24,627 24,934 115,771 98,258
YoY Change (%) -22.8 -23.9 -24.3 -26.7 0.4

7.0 7.0 6.0 6.3

-15.1
Total Expenses 21,580 20,659 21,123 20,964 21,043

21,967 22,347 22,361 22,661 105,369 89,336
EBITDA 1,780 1,901 2,044 2,269 2,408 2,173 2,210 2,266 2,273 10,402 8,921
Margins (%) 7.6 8.4 8.8 9.8 10.3 9.0 9.0 9.2 9.1 9.0 9.1
YoY Change (%) -35.9 -31.2 -22.8 -18.3 35.3

14.3 8.1 -0.2 -5.6

-14.2
Depreciation -730 -786 -798 -843 -881

-890 -899 -907 -876 -4,038 -3,571
Interest -1,160 -1,288 -1,439 -1,493 -1,553

-1,475 -1,401 -1,331 -1,283 -6,932 -5,490
Other Income 30 59 59 80 51 70 71 88 70 279 300
PBT -80 -115 -133 14 25 -122 -18 115 185 -289 160
Tax 0 38 52 -104 -8

-39 -6 37 61 23 53
Rate (%) 0.0 33.1 38.8 762.0 30.6 32.0 32.0 32.0 32.9 -7.8 33.0
Adjusted PAT -80 -77 -81 -91 18 -83 -12 78 124 -311 107
YoY Change (%) -166.6 -298.0 65.1 -296.3 -122.1 7.7 -84.8 -186.5 599.9 -134.5
E: MOSL Estimates

June 2014 Results Preview | Sector: Retail

Future Retail

CMP: INR136 Under Review
For 1QFY15, results would be comparable on a YoY basis.
We expect Future Retail to report sales of INR24.2b, up 7% YoY.
Same store sales (SSS) growth in the Value segment would be 3%. In
the base quarter, SSS growth in the Value segment was 10.7%.
We estimate EBITDA at INR2.1b (9.0% EBITDA margins, up 60bp YoY).
We expect interest cost to decrease 5% QoQ to INR1.5b. Net debt
stands at INR62b.
We expect adjusted PAT of INR -83m.
Our stock recommendation is Under Review
Same store performance commentary on consumer demand
Progress on debt reduction and inventory optimization

Bloomberg FRL IN
1,6,12 Rel Perf. (%) -2 / 49 / 9

Y/E March 2013 2014 2015E 2016E
Sales 180.2 115.7 98.3 105.7
EBITDA 16.1 10.4 8.9 9.9
Adj. PAT 0.7 7.7 0.1 0.6
Adj. EPS (INR) 1.2 -1.6 0.5 2.7
BV/Sh.(INR) 33 141 141.2 143.8
RoE (%) 2.9 -1.5 0.3 1.9
RoCE (%) 14.2 6.8 5.9 6.6
Payout (%) 0.0 0.0 0.0 0.0
Valuations
P/E (x) 108.4 -77.9 276.7 48.1
P/BV (x) 3.9 0.9 0.9 0.9
EV/EBITDA (x) 14.0 10.0 11.4 10.2
Div. Yield (%) 0.0 0.0 0.0 0.0

July 2014 235


(INR Million)
Y/E March FY14 FY15 FY14 FY15
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
No of Stores 602 632 679 726 761 795 835 876 726 876
LTL Growth (%) 6.3 6.6 -2.6 -3.4 2.0 5.0 10.0 12.0 1.6
Net Sales 3,965 4,367 4,566 4,337

5,075 5,720 6,141 5,855 17,235 22,792
YoY Change (%) 26.1 27.6 18.5 18.6 28.0 31.0 34.5 35.0 22.4 32.2
Gross Profit 2,937 3,195 3,349 3,267

3,781 4,222 4,532 4,408 12,748 16,943
Gross Margin (%) 74.1 73.2 73.3 75.3 74.5 73.8 73.8 75.3 74.0 74.3
Other Expenses 2,270 2,542 2,675 2,710 2,994 3,335 3,580 3,549 10,197 13,459
EBITDA 667 653 674 557

787 887 952 859 2,551 3,484
EBITDA Growth % 16.4 11.3 0.3 -9.1

18.0 35.8 41.2 54.3 4.4 36.6
Margins (%) 16.8 15.0 14.8 12.8 15.5 15.5 15.5 14.7 14.8 15.3

260 260 284 330 767 1,133
Other Income 22 24 24 24 28 30 29 33 93 120
PBT 510 498 502 368

555 657 698 562 1,877 2,471
Tax 170 165 166 118

183 217 223 191 619 815
Rate (%) 33.3 33.2 33.1 32.1 33.0 33.1 32.0 34.1 33.0 33.0
Adjusted PAT 340 332 336 250

372 439 474 370 1,258 1,656
YoY Change (%) 5.1 2.8 -10.9 -23.7 9.3 32.2 41.2 48.4 -6.9 31.6
E: MOSL Estimates


Jubilant Foodworks

CMP: INR1,303 Buy
We expect revenue to grow 28% YoY to INR5.1b. Like-to-like (LTL)
sales growth would be 2%, aided by low base.
While consumer sentiment has improved post elections, it is yet to
reflect in on-the-ground consumer spending in discretionary
categories. We expect back-ended recovery in 2HFY15.
We expect 130bp contraction in EBITDA margin to 15.5% due to low
operating leverage and costs related to Dunkin operations. Dominos
has tactically tweaked its promotion strategy to ensure better
footfalls on weekdays and lean store timings (lunch).
We estimate 9.3% PAT growth at INR372m.
We expect addition of 35-40 stores during the quarter.
The stock trades at 37x FY16E EPS of INR35.1. Buy.
Comments on demand outlook for QSR and Pizza space as well as
competition
Performance of Dunkin Donuts and margin guidance
Changes in expansion and capex strategy, if any

Bloomberg JUBI IN
52-Week Range (INR) 1,390 / 939
1,6,12 Rel Perf. (%) 0 / -21 / -16

Y/E March 2014 2015E 2016E 2017E
Sales 17.2 22.8 30.2 39.2
EBITDA 2.5 3.5 4.7 6.3
Adj. PAT 1.3 1.7 2.3 3.1
Adj. EPS (INR) 19.2 25.3 35.1 47.3
EPS Gr. (%) -4.3 31.9 38.5 34.7
BV/Sh.(INR) 87.0 112.3 147.4 194.7
RoE (%) 22.1 22.6 23.8 24.3
RoCE (%) 30.8 31.6 33.8 34.8
Payout (%) 0.0 0.0 0.0 0.0
Valuations
P/E (x) 67.8 51.4 37.1 27.6
P/BV (x) 15.0 11.6 8.8 6.7
EV/EBITDA (x) 32.9 24.0 17.3 12.6
Div. Yield (%) 0.0 0.0 0.0 0.0

July 2014 236

Y/E March FY14

FY15E FY14 FY15
1Q 2Q 3Q 4Q

1Q 2Q 3Q 4Q
LTL Sales Gr % 12.0 15.5 5.5 8.4

6.0 8.0 10.0 10.0 11.0 8.5
Deptt Stores 60 61 65 67

68 72 74 75 67 75
Net Sales 5,371 7,252 7,118 7,375 6,230 8,593 8,221 8,355 27,115 31,399
YoY Change (%) 20.2 25.1 17.8 18.1 16.0 18.5 15.5 13.3 20.2 15.8
Total Exp 5,137 6,854 6,592 6,995

5,887 8,060 7,604 7,828 25,578 29,380
EBITDA 234 398 526 379 343 533 617 527 1,537 2,019
Growth % 69.4 36.7 16.2 -0.9

46.7 34.0 17.2 38.9 21.6 31.4
Margins (%) 4.3 5.5 7.4 5.1 5.5 6.2 7.5 6.3 5.7 6.4

146 184 154 205 618 689
Interest 98 98 115 108

128 127 150 126 419 530

41 43 42 48 134 174
PBT 34 166 303 131 110 265 355 245 634 974
Tax 11 66 130 50

37 90 121 83 257 331
Rate (%) 32.2 40.1 42.8 38.1 34.0 34.0 34.0 34.0 40.6 34.0
Adjusted PAT 23 99 173 81 73 175 234 162 377 643
YoY Change (%) 86.1 55.2 1.4 -46.6 213.7 76.0 35.0 99.4 -5.6 70.7
E: MOSL Estimates


Shoppers Stop

CMP: INR392 Neutral
We expect revenue to grow 16% YoY to INR6.2b. Same store sales
(SSS) growth would be 6-7%. Discretionary consumption demand
remains sluggish despite improvement in consumer sentiment, post
elections.
We estimate EBITDA margin at 5.5%, up 120bp YoY, led by better
operating leverage.
HyperCITY should continue to report losses, in our view.
It has added one Shoppers Stop department stores during 1QFY15.
The stock trades at 39x FY16E EPS (standalone). Maintain Neutral.
Comments on same store performance
Margin outlook
Guidance on HyperCITY breakeven

Bloomberg SHOP IN
1,6,12 Rel Perf. (%) -10 / -29 / -30

Y/E March 2014 2015E 2016E 2017E
Sales 27.1 31.4 36.0 41.6
EBITDA 1.5 2.0 2.4 2.9
Adj. PAT 0.4 0.6 0.8 1.0
Adj. EPS (INR) 4.6 7.8 10.0 12.4
EPS Gr. (%) -5.6 70.7 27.9 23.3
BV/Sh.(INR) 87.3 93.8 101.5 110.9
RoE (%) 5.3 8.3 9.9 11.1
RoCE (%) 8.4 11.6 13.2 14.9
Payout (%) 19.1 15.0 20.0 20.0
Valuations
P/E (x) 85.4 50.0 39.1 31.7
P/BV (x) 4.5 4.2 3.9 3.5
EV/EBITDA (x) 21.5 16.2 13.5 11.3
Div. Yield (%) 0.2 0.3 0.5 0.6

July 2014 237


(INR Million)
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Net Sales 31,077 23,290 26,505 27,868

27,969 27,482 33,926 34,939 108,739 124,316
YoY Change (%) 40.9 2.3 -11.1 7.5 -10.0 18.0 28.0 25.4 8.1 14.3
Total Exp 28,627 20,672 24,136 25,068 25,312 24,514 30,533 31,242 98,504 111,601
EBITDA 2,449 2,617 2,369 2,800

2,657 2,968 3,393 3,698 10,236 12,715
EBITDA Growth % 15.6 4.9 -4.4 13.6

8.5 13.4 43.2 32.1 7.1 24
Margins (%) 7.9 11.2 8.9 10.0 9.5 10.8 10.0 10.6 9.4 10.2

171 174 183 209 656 737
Interest 170 200 274 227

213 249 342 341 871 1,146
Other Income 382 304 514 421 447 355 601 495 1,621 1,899
PBT 2,515 2,573 2,452 2,789

2,721 2,900 3,468 3,643 10,329 12,731
Tax 691 706 673 594

794 847 1,013 899 2,664 3,553
Rate (%) 27.5 27.4 27.5 21.3 29.2 29.2 29.2 24.7 25.8 27.9
Adjusted PAT 1,825 1,867 1,779 2,195

1,926 2,053 2,456 2,744 7,666 9,179
YoY Change (%) 16.9 3.6 -12.8 18.7 5.6 10.0 38.0 25.0 5.7 19.7
E: MOSL Estimates


Titan Company

CMP: INR357 Buy
We expect sales de-growth of 10% YoY to INR28b. The base quarter
had 67% volume growth in the Jewelry division due to gold price
correction.
Jewelry revenue is likely to decline 15% YoY; Watches should see 8%
growth.
During the quarter, the RBI withdrew the ban on Gold on Lease
scheme, which it had implemented in August 2013. Consequently,
Titan and other jewelers are switching back to the Gold on Lease
route of inventory funding.
We estimate margin expansion of 160bp YoY due to mix
improvement in Jewelry (the base quarter had seen pick-up in
investment-led coin demand due to price correction). Watch segment
margins would benefit from low base.
The stock trades at 30.1x FY16E EPS of INR11.9. Buy.
Comments on consumer demand in Jewelry and Watches
Expansion plans
Update on Golden Harvest Scheme

Bloomberg TTAN IN
M. Cap. (INR b)/(USD b) 317 / 5
1,6,12 Rel Perf. (%) 7 / 33 / 22

Y/E March 2014 2015E 2016E 2017E
Sales 108.7 124.3 146.6 174.1
EBITDA 10.2 12.2 14.7 17.4
Adj. PAT 7.5 8.7 10.5 12.7
Adj. EPS (INR) 8.6 9.8 11.9 14.3
EPS Gr. (%) 5.7 14.0 20.5 20.5
BV/Sh.(INR) 27.7 34.6 42.9 52.9
RoE (%) 31.1 28.4 27.6 27.0
RoCE (%) 38.7 36.9 36.6 36.3
Payout (%) 30.0 30.0 30.0 30.0
Valuations
P/E (x) 41.3 36.3 30.1 25.0
P/BV (x) 12.9 10.3 8.3 6.7
EV/EBITDA (x) 30.7 26.6 21.6 18.0
Div. Yield (%) 0.7 0.8 1.0 1.2

July 2014 238

June 2014 Results Preview | Sector: Technology

1QFY15 Preview: Growth to remain polarized
in a seasonally strong quarter amid healthy demand environment

Expect TCS to lead growth, CTSH and HCLT to follow, MTCL to lead in tier-II
INR appreciation and visa cost to impact margins across the board
Expect INFO to maintain guidance, WPRO to guide for growth acceleration (double
digit YoY in 2Q)
Watch out for INFOs guidance, commentary by peers on margins

Polarized growth in seasonally strong quarter
1Q is a seasonally strong quarter for the industry. However, we expect polarized
growth in our coverage universe, with the seasonality reflecting in TCS (+5.5% QoQ),
CTSH (+5.1% QoQ), HCLT (+4.3% QoQ) and MTCL (+4.9% QoQ). Company-specific
issues are likely to keep growth relatively muted at INFO (+2.2% QoQ), WPRO
(+1.2% QoQ), TECHM (+1.8% QoQ) and PSYS (-0.4% QoQ). Aggregate growth in our
coverage universe would be +3.5% QoQ in tier-I and +3.2% QoQ in tier-II.

Margins to decline across the board, irrespective of wage hikes
While 1Q margins are sequentially lower primarily due to wage hikes, only 4 of the
10 coverage companies have wage hikes becoming effective in 1QFY15. Yet, we
expect operating margins to decline across the board, primarily on [1] ~3% QoQ
appreciation in INR (impacting margins by 75-150bp), and [2] visa costs incurred in
1Q. Cross-currency movements are likely to boost revenue growth by 40-60bp QoQ
across the top-tier, but unlikely to offset margin headwinds meaningfully.

Expect INFO to retain guidance, WPRO to guide for YoY growth acceleration
INFO guided for 7-9% YoY growth for FY15, implying a CQGR of 2-3%. We expect the
company to retain that band despite the ongoing flux and inward focus. WPRO is
likely to guide for USD revenue growth of 2.5-4.5% QoQ for 2QFY15, implying 9.5-
11.5% YoY growth.


(INR)
4.7.14
Reco Jun-14
Var %
YoY
Var %
QoQ
Jun-14
Var %
YoY
Var %
QoQ
Jun-14
Var %
YoY
Var %
QoQ
HCL Technologies 1,481 Buy

84,442 21.6 1.1

21,918 35.7 -1.8

16,398 36.9 1.0
Hexaware Tech. 155 Neutral

5,953 10.9 1.1

1,195 -6.1 5.5

854 -12.7 21.5
Infosys 3,239 Buy

127,352 13.0 -1.1

32,989 10.6 -9.4

27,824 17.2 -7.0
KPIT Tech. 180 Buy

6,928 13.0 -1.0

975 0.3 -13.7

585 -2.7 -4.6
Mindtree 853 Neutral

8,358 29.0 1.5

1,664 39.7 -6.0

1,243 -8.2 26.6
MphasiS 429 Neutral

14,594 NA 41.7

2,512 NA 42.6

1,684 NA 37.9
Persistent Systems 1,100 Buy

4,305 20.5 -3.6

990 27.4 -18.0

596 4.3 -11.4
TCS 2,410 Neutral

220,675 22.7 2.4

64,401 25.0 -3.2

49,488 24.0 -6.6
Tech Mahindra 2,116 Buy

49,981 21.8 -1.2

9,797 13.3 -8.6

6,536 0.1 8.4
Wipro 548 Neutral

115,520 18.7 -0.9

27,314 35.5 -3.1

20,909 28.8 -6.1
Source: MOSL

Company name
Cognizant Technology
HCL Technologies
Hexaware Technologies
Infosys
KPIT Technologies
MindTree Consulting
Mphasis
Persistent Systems
TCS
Tech Mahindra
Wipro

Technology

Technology


Technology

Ashish Chopra (Ashish.Chopra@MotilalOswal.com) / Siddharth Vora (Siddharth.Vora@MotilalOswal.com)

July 2014 239


Watch out for TCS growth, and peers commentary on 2Q rebound and
margin trajectory
TCS outlook of growth acceleration in FY15 along with normal seasonality in 2H
implies strong ask rate in 1H, making it imperative to deliver a strong 1Q. Anything
below 4.5% QoQ will mean a steep ask rate to meet estimates. Guidance at INFO
and WPRO will be crucial. While the changes in INFO will be afforded more time,
strong guidance is more crucial for WPRO. After a quarter of margin decline across
the board, outlook on sustainable profitability and levers to offset potential
currency risks will be keenly watched.

Limited upsides in near term; prefer TECHM, INFO, HCLT, PSYS
Outlook of a sanguine FY15 is reflected across rich valuations, with the exceptions of
laggards like INFO and WPRO in tier-I and KPIT in tier-II. However, a slow start to the
year will make it difficult to beat the industry outlook, and necessitates a rebound in
2Q for most companies before a seasonally weak 2H. We prefer TECHM, INFO and
HCLT in the top tier. Upside in the near term may be limited at TECHM, but
expectations for INFO run low, leaving room for surprise. Strong growth visibility
keeps us sanguine on HCLT. In tier-II, we prefer PSYS, given its operations in cutting-
edge technologies, pricing power and relationships with the largest ISVs. We also
like KPIT, given the likely turnaround in earnings performance from improvement in
SAP profitability, better growth, and discontinuation of lower-rate hedges.

TCS to lead polarized growth


WPRO and TECHM only players to show incremental revenue decline sequentially


Ashish Chopra (Ashish.Chopra@MotilalOswal.com); +91 22 3982 5424
Siddharth Vora (Siddharth.Vora@MotilalOswal.com); +91 22 3982 5585


July 2014 240

Decline in PSYS and lower growth in KPIT due to internal reasons


Aggregate tier I revenue growth at 3.5%; margin to decline by 149bp
Revenues (USD m) Revenues (INR b)
Company 1QFY15E 1QFY14 Yoy (%) 4QFY14 QoQ (%) 1QFY15E 1QFY14 Yoy (%) 4QFY14 QoQ (%)
TCS 3,696 3,165 16.8 3,503 5.5 221 180 22.7 216 2.4
Infosys 2,138 1,991 7.4 2,092 2.2 125 113 11.0 129 -2.8
Wipro 1,741 1,588 9.6 1,720 1.2 116 97 18.7 117 -0.9
HCLT 1,419 1,228 15.6 1,361 4.3 84 69 21.6 83 1.1
Tech Mahindra 840 724 16.0 825 1.8 32.7 25.7 27.2 32.5 0.7
Aggregate 9,835 8,696 13.1 9,501 3.5 578 485 19.3 577 0.3
EBITDA margin (%) PAT (INR b)
Company 1QFY15E 1QFY14 YoY (%) 4QFY14 QoQ (%) 1QFY15E 1QFY14 YoY (%) 4QFY14 QoQ (%)
TCS 29.2 28.6 50 30.9 -170 49 40 23.9 53 -6.6
Infosys 25.7 26.5 -70 28.3 -250 27 24 14.8 30 -8.9
Wipro 23.6 20.7 290 24.2 -50 21 16 28.8 22 -6.1
HCLT 25.9 23.3 270 26.7 -80 16 12 36.7 16 0.8
Tech Mahindra 19.6 21.1 -150 21.2 -159 6.5 6.5 0 6.0 8
Aggregate 26.3 25.4 93 27.8 -149 121 98 22.5 127 -5.4

Aggregate tier II revenue growth to be lower at 3.2% QoQ and margin decline to be higher than tier I at 160bp
Revenues (USD m) Revenues (INR b)
Persistent Systems 72 63 14.8 73 -0.4 4.3 3.6 20.5 4.5 -3.6
Hexaware 100 95 5.5 96 4.4 6.0 5.4 10.9 5.9 1.1
KPIT Cummins 116 109 7.0 114 2.5 6.9 6.1 13.0 7.0 -1.0
Mindtree 139 118 18.4 133 4.9 8.4 6.5 29.0 8.2 1.5
Aggregate 428 384 11.4 415 3.2 26 22 18.5 26 -0.2
EBITDA margin (%) PAT (INR b)
Persistent Systems 23.0 21.7 120 27.0 -400 0.6 0.6 4 0.7 -11.4
Hexaware 20.1 23.7 -360 19.2 80 0.9 1.0 -13 0.7 21.5
KPIT Cummins 14.1 15.9 -180 16.1 -210 0.6 0.6 -3 0.5 13.6
Mindtree 19.9 18.4 150 21.5 -160 1.2 1.4 -8 1.0 26.6
Aggregate 18.9 19.6 -70 20.5 -160 3.3 3.5 -6 2.9 14.1


July 2014 241

1QFY15 currency highlights (INR)
Rates (INR) Change (QoQ)
USD EUR GBP AUD USD EUR GBP AUD
Average 59.8 81.9 100.7 55.8 -3.2% -3.1% -1.5% 0.8%
Closing 60.1 82.1 102.3 56.5 0.4% -0.6% 2.6% 2.2%

1QFY15 currency highlights (in USD)
Rates (USD) Change (QoQ)
EUR GBP AUD EUR GBP AUD
Average 1.37 1.68 0.93 0.1% 1.7% 4.0%
Closing 1.37 1.70 0.94 -0.8% 2.1% 1.4%

Crossed currencies: Assumed rates v/s actual
Guided at EUR GBP AUD INR/USD
Infosys 1.38 1.67 0.93 60.00
Wipro 1.37 1.66 0.90 61.62
Actual (Average) 1.37 1.68 0.93 59.78

Change (%) EUR GBP AUD INR/USD
Impact on USD
revenue
Infosys -0.6% 0.8% 0.3% -0.4% 0.03%
Wipro 0.1% 1.4% 3.7% -3.0% 0.58%

EPS estimates (INR): MOSL v/s consensus
1QFY15 FY15 FY16 Upside/Downside to Consensus

MOSL Consensus MOSL Consensus MOSL Consensus 1QFY15 FY15 FY16
Infosys
48.7 47.5 199.0 206.4 215.5 233.1 2.6% -3.6% -7.5%
TCS
25.3 25.5 105.9 110.7 121.4 127.0 -0.8% -4.4% -4.4%
Wipro
8.5 8.7 34.9 35.9 39.3 40.2 -2.7% -2.7% -2.1%
HCL Tech
23.1 22.9 93.3 99.1 103.5 111.1 1.0% -5.9% -6.8%
Tech Mahindra
30.5 30.5 138.5 138.5 157.4 158.5 0.2% 0.0% -0.7%
Cognizant
0.59 0.56 2.4 2.5 2.9 2.9 5.2% -5.2% -0.9%
Persistent Systems
14.9 17.2 74.7 78.5 94.6 91.6 -13.3% -4.9% 3.2%
Mindtree
11.7 14.5 62.2 55.3 73.2 68.0 -19.4% 12.5% 7.7%
KPIT Cummins
2.9 3.4 14.7 15.8 18.2 18.4 -12.3% -6.9% -0.8%
Hexaware
2.8 2.9 11.7 12.0 13.2 13.6 -2.1% -2.3% -3.5%
Mphasis
8.0 8.8 35.0 38.1 39.7 41.2 -8.7% -8.0% -3.8%

Comparative valuations
Technology
HCL Technologies 1,481 Buy 99.6 111.7 122.5 14.9 13.3 12.1 10.1 8.6 7.4 36.0 31.6 27.9
Hexaware Tech. 155 Neutral 11.7 13.2 13.4 13.3 11.8 11.6 8.7 8.2 7.8 28.1 28.7 26.6
Infosys 3,239 Buy 204.6 227.6 243.5 15.8 14.2 13.3 10.3 8.8 7.9 24.7 23.8 22.3
KPIT Tech. 180 Buy 14.7 18.2 20.5 12.3 9.9 8.8 6.7 5.1 3.9 20.5 20.7 19.1
Mindtree 853 Neutral 62.2 73.2 80.0 13.7 11.6 10.7 9.6 7.8 6.8 28.3 26.9 24.3
MphasiS 429 Neutral 35.0 39.7 42.4 12.2 10.8 10.1 9.3 8.5 8.1 14.1 15.2 15.4
Persistent Systems 1,100 Buy 74.7 94.6 113.2 14.7 11.6 9.7 7.8 6.1 4.8 22.4 24.0 24.0
TCS 2,410 Neutral 111.9 128.2 141.0 21.5 18.8 17.1 15.6 13.6 12.3 36.4 34.4 30.8
Tech Mahindra 2,116 Buy 138.5 157.4 180.6 15.3 13.4 11.7 9.7 8.1 7.3 28.7 25.7 23.8
Wipro 548 Neutral 34.9 39.3 42.5 15.7 13.9 12.9 10.9 9.6 8.1 22.9 22.0 20.4


July 2014 242


(USD Million)
Y/E March CY13 CY14 CY13 CY14E
Revenue (USD m) 2,021 2,161 2,306 2,355 2,422 2,547 2,683 2,755 8,843 10,408
QoQ (%) 3.7 7.0 6.7 2.2 2.8 5.1 5.4 2.7 20.4 17.7
GPM (%) 40.6 41.1 40.0 40.1 40.9 40.7 40.3 40.1 40.5 40.5
SGA (%) 20.4 19.5 19.2 19.1 20.0 20.0 20.0 20.0 19.5 20.0
EBITDA 408 469 480 494 505 526 545 555 1,850 2,131
EBITDA Margin (%) 20.2 21.7 20.8 21.0 20.8 20.7 20.3 20.1 20.9 20.5
EBIT Margin (%) 18.1 19.7 19.0 19.0 19.0 18.8 18.5 18.3 19.0 18.6
Other income 11.3 -6.4 1.8 3.3 13.2 11.6 12.3 16.5 10.0 53.6
ETR (%) 24.6 28.5 27.2 28.1 26.3 26.5 26.5 26.5 27.2 26.4
PAT 284 300 320 324 349 361 373 383 1,229 1,466
PAT margin (%) 14.1 13.9 13.9 13.8 14.4 14.2 13.9 13.9 13.9 14.1
QoQ (%) 1.9 5.7 6.4 1.5 7.6 3.5 3.4 2.5

YoY (%) 16.6 19.2 15.4 16.3 22.8 20.2 16.8 18.0 16.9 19.3
Headcount 162,700 164,300 166,400 171,400 178,600 185,500 193,900 199,300 171,400 199,300
Util excl. trainees (%) 67.0 70.0 75.0 74.0 76.0 75.0 75.5 74.0 71.6 75.1
Offshore rev. (%) 49.0 49.0 49.0 49.0 49.0 48.1 48.3 47.8 49.0 48.3
E: MOSL Estimates


Cognizant Technology

CMP: USD50 Not Rated
For 2QCY14, CTSH had guided revenues of USD2,500m-2,530m,
implying QoQ growth of 3.2-4.4%. We expect CTSH to beat the
higher end of its guidance and post 5.1% QoQ growth to
USD2,547m.
CTSH retained its CY14 revenue growth guidance of at least
USD10.3b, +16.5% YoY (16.1% organic). CTSHs 2QCY14 guidance
implies: [1] limited likelihood of significant beat to start-of-the-year
guidance, unlike CY13, [2] deceleration in YoY growth, and [3] CY14
growth likely to match TCS organic growth at best.
We expect EBITDA margin of 20.7%, flat QoQ. Our SGA estimate is
20%, same as the last quarter.
We expect net income of USD361m, +3.5% QoQ, and net margin of
14.2%, -20bp QoQ.
The stock trades at 20.9x CY14E and 17.3x CY15E EPS. Not Rated.
Any upgrade to full year outlook after strong Accenture
commentary
Commentary on margins and competitive intensity

Bloomberg CTSH US
M.Cap. (USD b) 30.3

Financial Snapshot (INR m)
Y E Dec 2013 2014E 2015E 2016E
Sales 8.8 10.4 12.2 14.0
EBITDA 1.9 2.1 2.6 3.0
PAT 1.2 1.5 1.8 2.0
EPS (USD) 2.0 2.4 2.9 3.3
EPS Gr. (%) 16.2 18.9 20.9 15.7
BV/Sh. (USD) 10.0 12.6 15.5 18.9
RoE (%) 22.4 21.1 20.5 19.5
RoCE (%) 29.0 27.1 26.5 25.6
Valuations
P/E (x) 24.8 20.9 17.3 14.9
P/BV (x) 5.0 4.0 3.2 2.6
EV/EBITDA (x) 14.6 12.2 9.6 7.5


July 2014 243

HCL Tech Quarterly Performance (US GAAP)

(INR Million)
Y/E June FY14 FY15E FY14E FY15E
1Q 2Q 3Q 4QE 1Q 2Q 3Q 4Q
Revenue (USD m) 1,270 1,321 1,361 1,419 1,468 1,519 1,571 1,634 5,372 6,192
QoQ (%) 3.5 4.0 3.0 4.3 3.5 3.4 3.4 4.0 14.6 15.3
Revenue (INR m) 79,610 81,840 83,490 84,442 85,904 88,102 91,139 93,931 329,382 359,076
QoQ (%) 14.6 2.8 2.0 1.1 1.7 2.6 3.4 3.1

YoY (%) 30.7 30.4 30.0 21.6 7.9 7.7 9.2 11.2 28.0 9.0
GPM (%) 39.0 38.4 38.9 38.6 37.3 36.4 36.1 36.1 38.7 36.4
SGA (%) 12.7 12.5 12.1 12.6 13.0 12.9 12.9 12.9 12.5 12.9
EBITDA 20,930 21,250 22,320 21,881 20,903 20,651 21,178 21,794 86,381 84,527
EBITDA Margin (%) 26.3 26.0 26.7 25.9 24.3 23.4 23.2 23.2 26.2 23.5
EBIT Margin (%) 23.8 23.7 24.7 23.8 22.3 21.4 21.2 21.1 24.0 21.5
Other income -1,200 -470 -70 850 661 1,458 2,315 2,558 -890 6,993
ETR (%) 20.2 21.0 20.9 22.0 21.0 21.0 21.0 21.0 21.1 21.0
PAT 14,160 14,950 16,240 16,369 15,634 16,028 17,071 17,705 61,719 66,438
PAT margin (%) 17.8 18.3 19.5 19.4 18.2 18.2 18.7 18.8 18.7 18.5
QoQ (%) 18.2 5.6 8.6 0.8 -4.5 2.5 6.5 3.7

YoY (%) 63.9 58.3 59.4 36.7 10.4 7.2 5.1 8.2 53.3 7.6
Headcount 87,196 88,332 90,190 92,390 95,290 98,440 101,690 105,240 92,390 105,240


HCL Technologies

CMP: INR1480 Buy
We expect USD revenue growth of 4% QoQ to USD1,416m. Traction
in IMS would remain strong, with our estimate of 6.6% QoQ to
USD499m. We expect Software Services revenue of USD854m,
+2.7% QoQ.
In INR terms, our revenue estimate is INR84.3b, +0.9% QoQ.
Realized currency rate is likely to decline 3% QoQ.
EBITDA margin is likely to decline 90bp QoQ to 25.8% due to impact
of deferred wage hikes and INR appreciation.
PAT estimate for the quarter is INR16,319m, flattish QoQ. We
estimate forex losses of INR479m and other income (excluding
forex losses) at INR1,601m.
TPI suggested a positive outlook for broader market in 1HFY14, with
a stronger industry pipeline and global market increase of ~5%. We
expect HCLT to continue its healthy deal signing momentum.
TCV of deals signed during the quarter
Growth in Software Services segment
Commentary on margins

Bloomberg HCLT IN
M.Cap. (INR b) /(USD b) 1,046/17.5
1, 6, 12 Rel. Per (%) +2/-3/+52

Financial Snapshot (INR b)
Y/E June 2014E 2015E 2016E 2017E
Sales 329.4 359.1 409.5 466.0
EBITDA 86.4 84.5 91.9 101.1
PAT 61.7 66.4 74.2 82.1
EPS (INR) 87.2 93.3 103.5 114.2
EPS Gr. (%) 52.9 6.9 11.0 10.4
BV/Sh. (INR) 279.9 355.1 432.5 520.6
RoE (%) 41.5 34.0 29.8 26.9
RoCE (%) 35.0 29.0 26.3 24.1
Payout (%) 17.2 17.8 23.4 21.3
Valuations
P/E (x) 17.0 15.9 14.3 13.0
P/BV (x) 5.3 4.2 3.4 2.8
EV/EBITDA (x) 11.0 10.7 9.4 8.0
Div yld (%) 1.0 1.1 1.6 1.6


July 2014 244

Quarterly Performance (Indian GAAP)

(INR Million)
Revenue (USD m) 94 95 99 100 96 100 103 105 388 404
QoQ (%) 1.8 0.7 4.3 1.3 -4.3 4.4 2.5 2.5 6.4 4.1
Revenue (INR m) 5,077 5,366 6,211 6,200 5,889 5,953 6,053 6,204 22,854 24,100
QoQ (%) 1.1 5.7 15.7 -0.2 -5.0 1.1 1.7 2.5

YoY (%) 15.8 7.3 22.4 23.4 16.0 10.9 -2.5 0.1 17.3 5.5
GPM (%) 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4
SGA (%) 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2
EBITDA 979 1,273 1,478 1,394 1,133 1,195 1,283 1,331 5,124 4,942
EBITDA Margin (%) 19.3 23.7 23.8 22.5 19.2 20.1 21.2 21.5 22.4 20.5
EBIT Margin (%) 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2
Other income 72 142 254 214 220 160 85 72 682 537
ETR (%) 0.2 0.2 0.2 0.2 0.3 0.2 0.2 0.2 0.2 0.2
PAT 793 979 988 1,032 703 854 957 1,008 3,792 3,523
PAT margin (%) 15.6 18.2 15.9 16.6 11.9 14.3 15.8 16.3 16.6 14.6
QoQ (%) 19.8 23.5 0.9 4.5 -31.9 21.5 12.1 5.3

YoY (%) -10.3 10.0 17.6 55.9 -11.3 -12.7 -3.1 -2.3 15.7 -7.1
Headcount 8,670 8,700 8,950 8,845 8,952 9,163 9,373 9,583 8,845 9,583
Utilization (%) 70.6 70.9 71.8 74.6 72.9 74.5 74.5 74.5 71.7 74.9
Offshore rev. (%) 47.7 47.5 46.4 46.7 47.1 47.3 47.2 47.0 47.0 47.1
E: MOSL Estimates


Hexaware Technologies

CMP: INR156 Neutral
We estimate revenue growth of 4.4% QoQ to USD100m. In Rupee
terms, we expect revenue growth of 1.1% QoQ to INR5.95b.
There were delays in client ramp-ups and few project completions
for top clients, which resulted in a weak 4QCY13 and revenue
decline of 4.3% QoQ in 1QCY14 as well.
We model EBITDA margin uptick of 90bp QoQ to 20.1% in 2QCY14
despite INR appreciation. Our estimate is on the back of strong
revenue growth and consequent uptick in blended utilization
(+160bp QoQ). We expect SGA to increase by 50bp QoQ to 18%.
Our PAT estimate for the quarter is INR854m, +21.5% QoQ. Our
implied PAT margin estimate is 14.3%, +240bp QoQ.
Large deal progression at HEXW had taken a hit over the past few
quarters. The deal pipeline had shrunk to 2-3 from 4-6 large deals in
4QCY13. Large deal wins are critical for better CY14 over CY13.
HEXW has discontinued giving any guidance on revenues and
margins post Barings acquisition of promoter stake. While 4QCY13
was a positive surprise on dividends, 1QCY14 was a big miss on
operating performance.
The stock trades at 13.3x CY14E and 11.8x CY15E earnings. Neutral.
Upgrades to Peoplesoft 9.2 among clients
Large deal pipeline and traction

Bloomberg HEXW IN
M.Cap. (INR b) /(USD b) 42.8/0.72
1, 6, 12 Rel. Per (%) -2/-6/+52

Y/E Dec 2013 2014E 2015E 2016E
Sales 22.9 24.1 26.1 28.6
EBITDA 5.1 4.9 5.2 5.4
PAT 3.8 3.5 4.0 4.0
EPS (INR) 12.6 11.7 13.2 13.4
EPS Gr. (%) 15.6 -7.1 12.4 1.8
BV/Sh. (INR) 39.9 43.5 48.1 52.6
RoE (%) 31.6 28.1 28.7 26.6
RoCE (%) 33.9 29.5 28.1 26.7
Payout (%) 85.8 66.5 59.2 58.2
Valuations
P/E (x) 12.4 13.3 11.8 11.6
P/BV (x) 3.9 3.6 3.2 3.0
EV/EBITDA (x) 7.7 8.5 8.0 7.7
Div yld (%) 7.1 5.1 5.1 5.1


July 2014 245

Infosys Quarterly Performance (IFRS)

(INR Million)
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Revenue (USD m) 1,991 2,066 2,100 2,092 2,140 2,209 2,260 2,319 8,249 8,928
QoQ (%) 2.7 3.8 1.6 -0.4 2.3 3.2 2.3 2.6 11.5 8.2
Revenue (INR m) 112,670 129,650 130,260 128,750 127,352 131,417 132,206 135,689 501,330 526,663
QoQ (%) 7.8 15.1 0.5 -1.2 -1.1 3.2 0.6 2.6

YoY (%) 17.2 31.5 25.0 23.2 13.0 1.4 1.5 5.4 24.2 5.1
GPM (%) 37.9 37.9 38.9 39.8 37.5 38.1 38.0 38.4 38.6 38.0
SGA (%) 11.4 11.8 11.1 11.5 11.6 11.5 11.5 11.5 11.4 11.5
EBITDA 29,830 33,890 36,200 36,420 32,989 34,917 35,088 36,554 136,340 139,549
EBITDA Margin (%) 26.5 26.1 27.8 28.3 25.9 26.6 26.5 26.9 27.2 26.5
EBIT Margin (%) 23.6 23.6 25.0 25.5 23.1 23.8 23.8 24.2 24.5 23.7
Other income 5,770 5,100 7,310 8,510 8,449 6,630 7,164 7,411 26,690 29,655
ETR (%) 26.8 26.4 27.9 27.6 26.5 26.5 26.5 26.5 27.2 26.5
PAT 23,740 26,260 28,750 29,920 27,824 27,881 28,376 29,613 106,480 113,693
PAT margin (%) 21.1 20.3 22.1 23.2 21.8 21.2 21.5 21.8 21.2 21.6
QoQ (%) -0.8 10.6 9.5 4.1 -7.0 0.2 1.8 4.4

YoY (%) 3.7 10.8 21.4 25.0 17.2 6.2 -1.3 -1.0 13.0 6.8
Headcount 157,263 160,227 158,404 160,405 163,468 166,848 170,674 175,359 160,405 175,359
Offshore rev. (%) 46.8 47.5 48.9 48.9 49.2 49.5 49.7 50.0 48.0 49.6
E: MOSL Estimates


Infosys

CMP: INR3219 Buy
For FY15, INFO guided USD revenue growth at 7-9%, implying CQGR
of 2-3%. For 1QFY15, we expect INFO to grow its revenues by 2.3%
QoQ to USD2,140m. In CC terms, we expect revenue growth of
1.8%, and cross currency to have a positive impact of 50bp QoQ.
In FY14, INFO started by guiding 6-10% YoY growth, which got
upgraded through the course of the year. However, our current
estimate for the full year FY15 is 8.2% growth, at the midpoint of its
guidance, given the inward focus that we expect in the first half of
the year under the new management.
We expect EBITDA margin to decline by 240bp QoQ to 25.9%. The
decline in operating margins is due to 7% offshore and 2% onsite
wage hikes effective from April 1
st
, impacting OPM by 250-300bp, in
addition to ~3% sequential INR appreciation. We expect continued
cost efficiencies to partially offset the headwinds.
Our other income estimate for the quarter is INR8.4b, similar to 4Q.
Our PAT estimate is INR27.8b, down 7% QoQ on the back of weak
revenues and decline in margins.
The stock trades at 16.2x FY15E and 14.9x FY16E earnings. Buy.
Commentary on organization changes and new focus areas, if any
Revenue guidance for FY15 and growth trajectory
Deal signings in BITS and commentary on margins

Bloomberg INFO IN
M.Cap. (INR b) /(USD b) 1,839/30.8
52-Week Range (INR) 3,847/2,393
1, 6, 12 Rel. Per (%) 0/-29/-2

Y/E Mar 2014 2015E 2016E 2017E
Sales 501.3 526.7 580.9 628.5
EBITDA 136.3 139.5 153.2 160.6
PAT 108.7 113.7 123.2 130.4
EPS (INR)* 186.3 199.0 215.5 228.2
EPS Gr. (%) 13.0 6.8 8.3 5.9
BV/Sh. (INR) 832 949 1,071 1,205
RoE (%) 24.9 24.1 22.7 21.2
RoCE (%) 28.1 24.6 24.0 22.3
Payout (%) 33.1 35.2 37.1 35.1
Valuations
P/E (x) 17.3 16.2 14.9 14.1
P/BV (x) 3.9 3.4 3.0 2.7
EV/EBITDA (x) 11.3 10.5 9.2 8.4
Div Yield (%) 2.0 2.2 2.5 2.5


July 2014 246

Quarterly Performance (Indian GAAP)

(INR Million)
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Revenue (USD m) 109 112 110 114 116 124 131 136 444 508
QoQ (%) 3.1 3.1 -2.3 3.6 2.5 6.6 5.5 4.1 8.3 14.3
Revenue (INR m) 6,132 7,028 6,779 7,001 6,928 7,324 7,728 8,048 26,940 30,028
QoQ (%) 7.6 14.6 -3.5 3.3 -1.0 5.7 5.5 4.1

YoY (%) 13.9 23.9 20.4 22.9 13.0 4.2 14.0 14.9 20.3 11.5
GPM (%) 31.5 33.6 32.8 32.0 29.9 30.3 31.9 33.0 32.5 31.3
SGA (%) 15.7 18.1 17.4 15.9 15.8 15.5 15.3 15.2 16.8 15.4
EBITDA 972 1,088 1,042 1,130 975 1,084 1,284 1,433 4,233 4,777
EBITDA Margin (%) 15.9 15.5 15.4 16.1 14.1 14.8 16.6 17.8 15.7 15.9
EBIT Margin (%) 13.9 13.4 13.4 14.2 12.0 12.7 14.5 15.7 13.7 13.8
Other income 59 23 18 -174 31 15 16 22 -74 84
Interest 63 74 79 71 59 59 59 59 287 234
ETR (%) 29.0 24.9 28.2 27.7 27.0 27.0 27.0 27.0 28.2 27.0
PAT 601 667 608 515 585 645 789 895 2,391 2,913
PAT margin (%) 9.8 9.5 9.0 7.4 8.4 8.8 10.2 11.1 8.9 9.7
QoQ (%) 17.5 11.0 -8.9 -15.3 13.6 10.2 22.3 13.5

YoY (%) 23.7 64.1 1.5 0.6 -2.7 -3.4 29.7 73.9 19.1 21.8
Headcount 8,456 8,816 9,136 9,296 9,505 9,835 10,199 10,508 9,296 10,508
Offshore rev. (%) 45.8 45.4 47.2 45.7 45.8 44.6 44.6 44.8 46.0 44.9
E: MOSL Estimates


KPIT Technologies

CMP: INR173 Buy
KPITs revenue growth in 1QFY15 is unlikely to be spectacular due
to change in scope of work in a deal with an account in Telematics.
Also, the large SAP deal in the utilities space remains on hold,
pending go-ahead from authorities. We are modeling revenue
growth of 2.5% QoQ to USD116.4m. In rupee terms, our revenue
estimate is INR6,928m.
During the quarter, margins face headwinds from: [1] wage hike
(~250bp impact), [2] INR appreciation (25-30bp EBITDA sensitivity),
and [3] visa costs. However, the margins may not decline to that
extent, given that SAP should be near breakeven, compared to 4-5%
loss in 4Q (~100bp offset).
Our EBITDA margin estimate for the quarter is 14.1%, down 100bp
QoQ. Our GPM estimate is 29.9%, -210bp QoQ, and SGA estimate is
15.8%, -10bp QoQ.
Our PAT (before extraordinary items) estimate is INR584m, +13.6%
QoQ, mainly due to marginal gains on forex, compared to
INR239.2m loss in 4QFY14.
KPIT trades at 11.7x FY15E and 9.5x FY16E earnings. Maintain Buy.

Growth in top account (Cummins) and SAP
Growth trajectory in the remainder of the year vis--vis guidance
Margin performance and outlook; commentary on cash generation

Bloomberg KPIT IN
M.Cap. (INR b) /(USD b) 34.3/0.57
1, 6, 12 Rel. Per (%) 0/-23/+4

Y/E Mar 2014 2015E 2016E 2017E
Sales 26.9 30.0 34.3 38.8
EBITDA 4.2 4.8 5.7 6.3
PAT 2.4 2.9 3.6 4.1
EPS (INR) 12.6 14.7 18.2 20.5
EPS Gr. (%) 19.0 16.9 24.1 12.7
BV/Sh. (INR) 64.1 78.8 97.0 117.5
RoE (%) 20.5 20.5 20.7 19.1
RoCE (%) 27.7 26.3 26.5 25.1
Payout (%) 8.0 10.2 8.2 7.3
Valuations
P/E (x) 13.7 11.7 9.5 8.4
P/BV (x) 2.7 2.2 1.8 1.5
EV/EBITDA (x) 7.4 6.3 4.7 3.6
Div yld (%) 0.6 0.9 0.9 0.9


July 2014 247


(INR Million)
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Revenue (USD m) 118 124 127 133 139 146 151 156 502 592
QoQ (%) 4.2 5.4 2.5 4.5 4.9 5.0 3.0 3.4 15.1 18.0
Revenue (INR m) 6,477 7,696 7,906 8,237 8,358 8,631 8,890 9,189 30,316 35,069
QoQ (%) 5.8 18.8 2.7 4.2 1.5 3.3 3.0 3.4

YoY (%) 15.0 29.1 34.0 34.5 29.0 12.2 12.5 11.6 28.4 15.7
GPM (%) 41.0 42.2 40.8 40.9 39.9 38.9 39.4 39.2 41.2 39.3
SGA (%) 22.6 21.4 21.3 19.4 20.0 19.0 19.0 19.0 21.1 19.2
EBITDA 1,191 1,598 1,541 1,770 1,664 1,713 1,812 1,857 6,100 7,047
EBITDA Margin (%) 18.4 20.8 19.5 21.5 19.9 19.9 20.4 20.2 20.1 20.1
EBIT Margin (%) 15.6 18.2 16.8 18.8 17.4 17.3 17.9 17.7 17.4 17.6
Other income 735 248 -189 -298 163 114 201 129 496 608
ETR (%) 22.4 23.0 22.6 21.4 23.0 23.0 23.0 23.0 22.0 23.0
PAT 1,354 1,287 885 982 1,243 1,241 1,377 1,355 4,508 5,216
PAT margin (%) 20.9 16.7 11.2 11.9 14.9 14.4 15.5 14.8 14.9 14.9
QoQ (%) 71.6 -4.9 -31.2 11.0 26.6 -0.2 11.0 -1.6

YoY (%) 52.1 78.3 -10.4 24.5 -8.2 -3.6 55.6 38.0 33.0 15.7
Headcount 12,239 12,941 12,992 12,926 13,926 14,276 14,476 14,976 12,926 14,976
Util incl. trainees (%) 69.6 65.9 67.4 68.5 70.0 71.0 70.0 71.0 67.8 70.5
Offshore rev. (%) 61.3 58.6 57.2 56.2 54.4 55.3 53.9 54.2 58.2 54.4
E: MOSL Estimates


MindTree

CMP: INR862 Neutral
We model 1QFY15 revenue at USD139m, growth of 4.9% QoQ. The
company guided for better growth than 4QFY14s 4.5%. Hi-tech
should also contribute to growth during the quarter, while IT
Services continue to see traction.
In rupee terms, our revenue estimate stands at INR8.36b, +1.5%
QoQ.
Our estimate for EBITDA margin is 19.9%, down 160bp QoQ. We
estimate GPM at 39.9%, -100bp QoQ, and SGA at 20%, +60bp QoQ.
Investments at the front end, visa expenses and appreciation in INR
drive reduced margin estimate for the quarter.
Our PAT estimate for the quarter is INR1,243m, which implies a PAT
margin of 14.9%, and significant PAT growth of 26.6% QoQ. We
model INR49m of forex gains versus losses of INR426m in 4QFY14,
driving significant delta in PAT.
MTCL has signed deals of TCV USD133m last quarter, taking total
deal signings of last four quarters to USD500m+, and providing
good visibility for FY15 growth outlook.
The stock trades at 13.9x FY15E and 11.8x FY16E earnings. Neutral.

Performance and outlook of the Hi-tech vertical
Deal wins during the quarter
Outlook on FY15 revenue growth

Bloomberg MTCL IN
M.Cap. (INR b) /(USD b) 71.8/1.2
1, 6, 12 Rel. Per (%) +9/-13/+74

Y/E Mar 2014 2015E 2016E 2017E
Sales 30.3 35.1 40.7 46.1
EBITDA 6.1 7.0 8.4 9.1
PAT 4.5 5.2 6.1 6.7
EPS (INR) 53.8 62.2 73.2 80.0
EPS Gr. (%) 31.7 15.5 17.7 9.3
BV/Sh. (INR) 195.5 243.8 299.6 359.8
RoE (%) 30.5 28.3 26.9 24.3
RoCE (%) 35.5 33.1 32.1 28.4
Payout (%) 23.2 19.3 20.5 21.3
Valuations
P/E (x) 16.0 13.9 11.8 10.8
P/BV (x) 4.4 3.5 2.9 2.4
EV/EBITDA (x) 10.7 9.0 7.3 6.3
Div Yld (%) 1.5 1.4 1.7 2.0


July 2014 248


(INR Million)
Y/E March 5M FY14 FY15E 5M FY15E
Jan-14 Mar-14* Jun 14 Sep 14 Dec-14 Mar-15 FY14
Revenue (USD m) 255 170 246 254 258 264 424 1,022
QoQ (%) -1.9 -0.2 -3.1 3.2 1.5 2.2 -0.6 0.4
Revenue (INR m) 15,640 10,299 14,594 14,938 15,160 15,491 25,939 60,183
QoQ (%) -1.9 -1.2 -5.5 2.4 1.5 2.2

YoY (%) 24.4 -26.7 -5.2 -6.3 -3.1 50.4 7.4 -3.3
GPM (%) 28.2 28.5 27.8 27.1 27.2 27.9 0.3 0.3
SGA (%) 10.8 11.4 10.5 10.5 10.3 10.2 0.1 0.1
EBITDA 2,636 1,761 2,512 2,469 2,559 2,741 4,397 10,281
EBITDA Margin (%) 16.9 17.1 17.2 16.5 16.9 17.7 17.0 17.1
EBIT Margin (%) 15.0 15.1 15.0 14.4 14.7 15.5 0.2 0.1
Other income 279 221 168 319 409 440 500 1,337
Interest Expense 68 43 40 40 40 40 -111 -160
ETR (%) 26.8 29.4 27.5 27.5 27.5 27.5 0.0 0.0
PAT 1,870 1,221 1,684 1,757 1,884 2,033 3,091 7,358
PAT margin (%) 12.0 11.9 11.5 11.8 12.4 13.1 11.9 12.2
QoQ (%) -1.7 -2.1 -8.1 4.4 7.2 7.9

YoY (%) 1.4 -30.8 -12.6 -7.6 0.8 11.0 -58.4 138.0
Headcount 34,394 34,168 33,948 33,998 34,048 34,223 34,168 34,223
Net Additions -1180 -226 -220 50 50 175 -1406 55
HP Channel rev. (%) 37.0 36.0 36.8


Mphasis

CMP: INR 435 Neutral
For MPHL, the HP channel is likely to decline ~6% in 1QFY15 and is
in line with the companys initial forecast of 20% volume decline for
HP in FY15. Direct Channel mature market is likely to grow 1% QoQ,
while the emerging market would remain flat for the quarter. The
weak performance would be further magnified by the decline in
Digital Risk revenue during the quarter (~15% QoQ decline).
We model revenue decline of 4.4% QoQ to USD246m. Hedge loss
during the quarter is likely to be INR60m. We estimate INR revenue
at INR14.6b for USD/INR exchange rate of INR59.5.
MPHL has 100bp tailwind for margins, as hedge losses are likely to
decline from INR139m in 2QFY14 to INR60m in 1QFY15. The decline
in Digital Risk revenue sets off the potential gains from hedges and
we expect EBIT margin to be 15%, -10bp QoQ.
We expect PAT to be INR1.68b; our PAT margin estimate is 11.5%, -
40bp QoQ.
The stock trades at 12.4x FY15E and 11x FY16E EPS. Maintain
Neutral.
Outlook for Digital Risk and HP channel
Deal wins resulting from incremental investments in S&M

Bloomberg MPHL IN
M.Cap. (INR b) /(USD b) 91.3/1.5
1, 6, 12 Rel. Per (%) -1/-21/-23

Y/E Mar 2014 2015E 2016E 2017E
Sales 25.9 60.2 63.9 66.8
EBITDA 4.4 10.3 11.2 11.8
PAT 3.1 7.4 8.3 8.9
EPS (INR) 14.7 35.0 39.7 42.4
EPS Gr. (%)* -0.1 -0.8 13.3 7.0
BV/Sh. (INR) 243 254 268 285
RoE (%)* 14.8 14.1 15.2 15.4
RoCE (%)* 16.7 15.5 16.2 16.3
Payout (%) 47.6 60.0 55.5 51.9
Valuations
P/E (x)* 12.3 12.4 11.0 10.3
P/BV (x) 1.8 1.7 1.6 1.5
EV/EBITDA

7.0 6.5 5.6 5.0
Div yld (%) 3.9 4.8 5.1 5.1
*Annualised values for 5m FY14E


July 2014 249

Quarterly Performance (IFRS)

(INR Million)
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Revenue (USD m) 63 68 70 73 72 77 81 87 274 318
QoQ (%) 1.5 8.6 2.2 3.9 -0.4 6.9 5.1 7.2 15.2 16.1
Revenue (INR m) 3,573 4,324 4,328 4,467 4,305 4,563 4,797 5,141 16,692 18,806
QoQ (%) 7.0 21.0 0.1 3.2 -3.6 6.0 5.1 7.2

YoY (%) 18.8 32.3 30.0 33.8 20.5 5.5 10.8 15.1 28.9 12.7
GPM (%) 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4
SGA (%) 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2
EBITDA 777 1,122 1,197 1,207 990 1,049 1,184 1,428 4,303 4,651
EBITDA Margin (%) 21.7 26.0 27.7 27.0 23.0 23.0 24.7 27.8 25.8 24.7
EBIT Margin (%) 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2
Other income 263 -24 -70 -19 77 99 124 109 150 409
ETR (%) 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3
PAT 571 608 642 672 596 659 779 955 2,493 2,988
PAT margin (%) 16.0 14.1 14.8 15.0 13.8 14.4 16.2 18.6 14.9 15.9
QoQ (%) 10.0 6.5 5.6 4.7 -11.4 10.6 18.3 22.5

YoY (%) 37.3 36.1 29.7 29.5 4.3 8.4 21.4 42.1 32.9 19.9
Headcount 7,144 7,457 7,602 7,857 8,066 8,325 8,584 8,893 7,857 8,893
IP rev. proportion (%) 15.1 19.1 17.8 19.6 17.3 18.1 18.5 19.8 18.0 18.5
E: MOSL Estimates


Persistent Systems

CMP: INR1062 Buy
We expect revenue to remain flattish at USD72.4m (v/s 4QFY14
revenue of USD72.6m). Soft revenue growth outlook for the quarter
is due to [1] seasonally strong 4Q for IP-led revenue, and [2] some
deferment of work to 2Q due to the delay in issuance of visas. In
Rupee terms, we expect revenue at INR4,305m, down 3.6% QoQ.
1Q margins will be faced with headwinds of up to 350-400bp from:
[1] visa-related costs (USD1m, implies 140bp impact), [2] ~3% QoQ
INR appreciation (150bp impact), [3] investments in the front end
towards building enterprise customer base and selling own IPs, and
[4] QoQ decline in non-linear IP-led revenue.
We expect EBITDA margin of 23%, -400bp QoQ. Our GPM estimate
is 40.4%, -240bp QoQ, and SGA estimate is 16.9%, +120bp QoQ
Our PAT estimate for the quarter is INR596m, -11.8% QoQ. Our
estimate for other income is INR76.6m, compared to loss of
INR19m in the previous quarter.
Growth and outlook in the traditional Product Engineering Services
Commentary on potential of winning large deals
Commentary on IP and Platform business growth

Bloomberg PSYS IN
M.Cap. (INR b) /(USD b) 42.50/0.72
1, 6, 12 Rel. Per (%) -6/-14/+79

Y/E Mar 2014 2015E 2016E 2017E
Sales 16.7 18.8 22.1 26.0
EBITDA 4.3 4.7 5.6 6.5
Adj. PAT 2.5 3.0 3.8 4.5
Adj. EPS (INR) 62.3 74.7 94.6 113.2
EPS Gr. (%) 32.9 19.9 26.6 19.7
RoE (%) 22.3 22.4 24.0 24.0
RoCE (%) 16.0 18.1 18.4 19.6
Payout (%) 19.3 22.8 25.4 21.2
Valuations
P/E (x) 17.0 14.2 11.2 9.4
P/BV (x) 3.4 2.9 2.4 2.0
EV/EBITDA (x) 8.2 7.2 5.6 4.4
Div. Yield (%) 1.1 1.6 2.3 2.3


July 2014 250

TCS Quarterly Performance (IFRS)

(INR Million)
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Revenue (USD m) 3,165 3,337 3,438 3,503 3,696 4,036 4,157 4,290 13,443 16,180
QoQ (%) 4.1 5.4 3.0 1.9 5.5 9.2 3.0 3.2 16.2 20.4
Revenue (INR m) 179,871 209,772 212,940 215,511 220,675 236,099 241,107 248,842 818,094 946,723
QoQ (%) 9.5 16.6 1.5 1.2 2.4 7.0 2.1 3.2

YoY (%) 21.0 34.3 32.5 31.2 22.7 12.6 13.2 15.5 29.9 15.7
GPM (%) 47.2 49.0 49.3 48.0 46.6 45.6 45.4 45.5 48.4 45.8
SGA (%) 18.6 17.3 17.9 17.1 17.4 17.2 17.2 16.9 4.0 17.2
EBITDA 51,532 66,390 66,866 66,534 64,361 66,901 68,112 71,269 251,322 270,642
EBITDA Margin (%) 28.6 31.6 31.4 30.9 29.2 28.3 28.2 28.6 30.7 28.6
EBIT Margin (%) 27.0 30.2 29.7 29.1 27.6 26.7 26.6 27.0 29.1 27.0
Other income 4,477 -963 5,386 6,990 4,923 4,284 4,470 6,526 15,891 20,203
ETR (%) 23.2 25.0 24.0 24.0 24.0 24.0 24.0 24.0 23.9 24.0
PAT 39,922 46,483 51,797 52,967 49,458 50,698 51,691 55,558 191,168 207,406
PAT margin (%) 22.2 22.2 24.3 24.6 22.4 21.5 21.4 22.3 23.4 21.9
QoQ (%) 11.0 16.4 11.4 2.3 -6.6 2.5 2.0 7.5

YoY (%) 21.7 32.4 45.8 47.3 23.9 9.1 -0.2 4.9 37.1 8.5
Headcount 277,586 285,250 290,713 300,464 310,849 323,124 333,430 341,427 300,464 341,427
Offshore rev. (%) 48.5 48.1 47.8 47.4 47.6 45.0 44.8 44.8 47.9 45.5
E: MOSL Estimates


TCS

CMP: INR2397 Neutral
We expect TCS to grow its revenues by 5.5% QoQ in 1QFY15 to
USD3,696m. Our CC revenue growth estimate is 5%, and we assume
a 50bp impact from cross currency.
In INR terms, our revenue estimate is INR220.7b, +2.4% QoQ.
We expect EBITDA margin to decline 170bp QoQ to 29.2%. Our
GPM estimate is 46.6%, -140bp, and SGA estimate is 17.4%, +30bp.
Factors contributing towards margin decline are: [1] wage hikes:
~200bp impact, [2] appreciation in INR: 100bp. High growth should
help partially offset the impact from headwinds.
Our estimate for other income stands at INR4.9b, of which interest
income is INR4.3b.
Our PAT estimate for the quarter is INR49.5b, down 6.6% on
account of INR appreciation, lower operating margin, and little
impact from forex hedges compared to INR2b gains in 4QFY14.
The stock trades at 22.6x FY15E and 19.7x FY16E EPS. Neutral.
1QFY15 growth and ask rate implied to accelerate full-year growth
Roadmap on investments following some appreciation in the INR
and full-year margin outlook
Trends in Digital Technologies and TCS progress

Bloomberg TCS IN
M.Cap. (INR b) /(USD b) 4,695/78.6
52-Week Range (INR) 2,427/1,465
1, 6, 12 Rel. Per (%) +6/-11/+26

Y/E Mar 2014 2015E 2016E 2017E
Sales 818.1 946.7 1,080.5 1,229.9
EBITDA 251.3 270.6 304.4 345.7
PAT 191.2 207.4 237.8 273.3
EPS (INR) 97.6 105.9 121.4 139.5
EPS Gr. (%) 37.0 8.5 14.7 14.9
BV/Sh. (INR) 282.5 326.9 399.1 489.5
RoE (%) 39.7 34.8 33.4 31.4
RoCE (%) 47.6 41.4 39.2 36.5
Payout (%) 32.8 34.9 34.6 30.1
Valuations
P/E (x) 24.6 22.6 19.7 17.2
P/BV (x) 8.5 7.3 6.0 4.9
EV/EBITDA (x) 18.0 16.4 14.3 12.3
Div. yield (%) 1.3 1.5 1.8 1.8


July 2014 251


(INR Million)
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Revenue (USD m) 724 758 791 825 840 870 913 954 3,098 3,577
QoQ (%) 3.7 4.7 4.4 4.3 1.8 3.6 4.9 4.5 17.7 15.5
Revenue (INR m) 41,032 47,715 48,985 50,581 49,981 51,349 53,859 56,293 188,313 211,482
QoQ (%) 8.9 16.3 2.7 3.3 -1.2 2.7 4.9 4.5

YoY (%) 21.7 35.4 33.5 34.3 21.8 7.6 9.9 11.3 31.4 12.3
GPM (%) 37.4 39.6 38.7 35.8 34.6 35.6 36.5 35.7 37.9 35.6
SGA (%) 16.3 16.3 15.5 14.6 15.0 14.6 14.6 14.6 15.7 14.7
EBITDA 8,645 11,110 11,363 10,718 9,797 10,793 11,788 11,892 41,836 44,270
EBITDA Margin (%) 21.1 23.3 23.2 21.2 19.6 21.0 21.9 21.1 22.2 20.9
EBIT Margin (%) 18.2 20.7 20.3 18.4 16.6 18.2 19.1 18.4 19.4 18.1
Other income 2,073 380 -457 -867 715 890 842 873 1,129 3,320
Interest expense 223 241 112 97 78 78 78 78 673 311
ETR (%) 25.0 28.3 26.9 25.1 24.0 26.0 26.0 26.0 26.4 26.0
PAT excl. BT amort & EOI 6,528 6,848 6,422 6,030 6,536 7,438 8,079 8,184 25,828 30,237
PAT margin (%) 15.9 14.4 13.1 11.9 13.1 14.5 15.0 14.5 13.7 14.3
QoQ (%) 8.1 4.9 -6.2 -6.1 8.4 13.8 8.6 1.3

YoY (%) 28.8 62.1 123.0 -0.2 0.1 8.6 25.8 35.7 41.8 17.1
Headcount 83,063 85,234 87,399 89,441 90,101 92,648 96,077 98,845 89,441 98,845
Offshore rev. (%) 49.0 49.0 48.0 47.0 47.6 48.2 48.1 48.3 48.2 48.1
E: MOSL Estimates


Tech Mahindra

CMP: INR 2104 Buy
Revenue growth in 1Q will be subdued for TECHM due to: [1] strong
base of Comviva revenue in 4Q, [2] contribution from one-off
projects in 4Q, and [3] 1-month impact from discontinuation of BT
amortization. Total impact is USD10m+. We expect revenue growth
of 1.8% QoQ to USD840m.
In INR terms, our revenue estimate is INR49.98b, -1.2% QoQ.
Impact from acquisition of MES is likely from 3QFY15.
Margins are facing 200bp+ headwind from the following factors: [1]
visa expenses due to skew of applications towards H1B (v/s L1B), [2]
~3% INR appreciation, [3] transition costs in the Network deal,
which currently has an inverted pyramid.
Impact from hedges/forex on other income will be relatively muted
compared to losses amounting to INR3.08b in 2HFY14. Our estimate
for other income is INR714.5m.
Our PAT estimate is INR6,536m, which implies growth of 8.4% QoQ,
primarily due to heavy forex losses in 4QFY14.
TECHM trades at 15.2x FY15E and 13.4x FY16E EPS. Maintain Buy.
Deals TCV following healthy deal signings activity in FY14
Outlook on profitability for the remainder of the year
FY15 growth outlook v/s NASSCOM
Large deals progress in the Enterprise business

Bloomberg TECHM IN
M.Cap. (INR b) /(USD b) 488.8/8.24
1, 6, 12 Rel. Per (%) +8/-9/+62

Y/E Mar 2014 2015E 2016E 2017E
Sales 188.3 211.5 240.4 264.5
EBITDA 41.8 44.3 50.0 51.0
Adj. PAT 25.8 30.2 34.4 39.4
Adj. EPS (INR) 121.0 138.5 157.4 180.6
EPS Gr. (%) 30.4 14.5 13.7 14.7
BV/Sh.(INR) 440.7 558.1 697.9 861.5
RoE (%) 36.4 28.7 25.7 23.8
RoCE (%) 34.7 30.1 27.8 25.6
Payout (%) 16.6 10.1 10.8 9.4
Valuations
P/E (x) 17.4 15.2 13.4 11.7
P/BV (x) 4.8 3.8 3.0 2.4
EV/EBITDA (x) 9.6 8.7 7.2 6.5
Div. Yield (%) 1.0 0.7 0.8 0.8


July 2014 252


Wipro

CMP: INR542 Neutral
WPRO guided for revenues of USD1,715m-1,755m in 1QFY15,
implying growth of -0.3% to +2% QoQ. We expect growth of 1.5%
QoQ to USD1,741m. Our CC revenue growth estimate is 1.2% QoQ,
and we model 30bp positive impact from cross currencies.
Our overall rupee revenue estimate is INR115.8b, -0.6% QoQ, and
we assume 2% appreciation in realized INR rate for the company.
Our overall operating profit margin estimate is 21.6%, +10bp QoQ.
Our GPM estimate is 33.1%, -20bp QoQ, and our SGA estimate
stands at 11.5%, -10bp QoQ.
In IT Services, we expect EBIT margin of 23.7%, -80bp QoQ. The
decline is a function of wage hikes effective June 1
st
(one month
impact) and appreciation in INR.
Our estimate for other income is INR2.3b, including INR0.94b of
forex losses. We expect PAT of INR21b, down 5.5% QoQ on the back
of weak revenue growth and headwinds to profitability.
We expect WPRO to guide for USD revenue growth of 2.5-4.5%
QoQ for 2QFY15.
Revenue growth guidance for 2QFY15
Commentary on large deal wins and ramp-up schedule
Outlook on growth in Americas

Bloomberg WPRO IN
M.Cap. (INR b) /(USD b) 1,334/22.3
1, 6, 12 Rel. Per (%) +6/-4/+54

Y/E Mar 2014 2015E 2016E 2017E
Sales 434.3 476.1 519.1 572.3
EBITDA 97.1 110.0 120.9 137.9
PAT 78.0 86.0 96.9 104.8
EPS (INR) 31.7 34.9 39.3 42.5
EPS Gr. (%) 27.0 10.3 12.7 8.2
BV/Sh. (INR) 139.9 165.5 193.3 224.3
RoE (%) 24.9 22.9 22.0 20.4
RoCE (%) 22.5 22.9 22.1 22.1
Payout (%) 25.3 22.9 25.4 23.5
Valuations
P/E (x) 17.1 15.5 13.8 12.7
P/BV (x) 3.9 3.3 2.8 2.4
EV/EBITDA (x) 12.4 10.7 9.5 8.0
Div Yld (%) 1.5 1.5 1.8 1.8

Wipro Quarterly Performance (IFRS)

(INR Million)
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Revenue (USD m) 1,588 1,631 1,678 1,720 1,741 1,800 1,858 1,920 6,618 7,319
QoQ (%) 0.2 2.7 2.9 2.5 1.2 3.4 3.2 3.3 6.4 10.6
Revenue (INR m) 97,294 107,727 112,713 116,535 115,520 115,800 120,068 124,740 434,269 476,128
QoQ (%) 1.3 10.7 4.6 3.4 -0.9 0.2 3.7 3.9

GPM (%) 30.9 31.1 32.2 33.3 33.0 31.7 32.5 33.4 32.0 32.7
SGA (%) 12.8 12.3 12.0 11.6 11.5 11.7 11.6 11.6 12.2 11.6
EBITDA 20,151 22,845 25,923 28,180 27,314 25,597 27,497 29,642 97,099 110,050
EBITDA Margin (%) 20.7 21.2 23.0 24.2 23.6 22.1 22.9 23.8 22.4 23.1
IT Serv. EBIT (%) 20.0 22.5 23.0 24.5 23.6 22.0 23.1 24.2 22.6 23.3
EBIT Margin (%) 18.1 18.8 20.2 21.7 21.5 20.0 20.9 21.8 19.8 21.1
Other income 2,918 4,949 3,518 3,627 2,342 1,772 3,528 3,682 15,012 11,325
PAT 16,233 19,321 20,147 22,265 20,909 19,199 22,058 23,816 77,966 85,983
PAT margin (%) 16.7 17.9 17.9 19.1 18.1 16.6 18.4 19.1 18.0 18.1
QoQ (%) 3.0 19.0 4.3 10.5 -6.1 -8.2 14.9 8.0

YoY (%) 10.8 28.4 26.8 41.3 28.8 -0.6 9.5 7.0 27.1 10.3
Headcount 147,281 147,216 146,402 146,053 149,068 153,583 158,098 162,813 146,053 162,813
Offshore rev. (%) 46.1 45.8 45.9 45.9 46.4 46.5 46.5 46.7 45.9 46.5
Rev Guidance (USDm)
1575-
1610
1620-
1650
1660-
1690
1712-
1745
1715-
1755

June 2014 Results Preview | Sector: Telecom

July 2014 253

Steady quarter; expect no major surprises
Watch for next round of spectrum auction, 4G rollout plans

Expect moderate uptick in traffic; YoY growth likely to decelerate further: During
1QFY15, we expect average wireless traffic (Bharti/Idea/RCom/Vodafone) to grow
2% QoQ as compared to 4.3% QoQ in 4QFY14 and 2.3% QoQ in 1QFY14. On a YoY
basis, traffic growth deceleration is likely to continue, with expected growth of only
4.6% YoY. Idea is likely to lead, with ~10% YoY traffic growth.

Blended RPM likely to increase by 1.5-2% QoQ: Post 5-6% RPM increase up to
4QFY14 (v/s 4QFY13), we expect RPM for GSM incumbents to improve by 1.5-2%
QoQ, supported by marginal increase in voice realizations as well as data growth.
Industry continues to expect gradual improvement in voice RPMs in FY15, although
the rate of increase could be lower than FY14.

EBITDA margin to improve QoQ for Bharti/Idea: We expect EBITDA margin for India
business to improve by 60-65bp QoQ for Bharti/Idea, led by operating leverage from
traffic growth as well as RPM improvement.

Bharti Africa expect margins to be under pressure: Performance of Bharti Africa is
likely to remain muted due to (1) cross currency impact, and (2) increased marketing
investments impacting margins. We model 1.5% revenue growth but a 1.4% decline
in EBITDA for Bharti Africa on a QoQ basis. However, PAT loss in Africa is likely to
decline QoQ due to lower finance costs (one-off finance costs in 4QFY14).

Subscriber additions volatile: Subscriber additions became volatile in CY14. Monthly
additions increased to 8.5m during January-February 2014 (v/s 5.2m in 4QCY13) but
declined to 2m per month in March-April 2014. VLR subscriber base stood at 780m
as of April 2014, implying an active subscriber penetration of ~63%.

Watch for next round of spectrum auction, 4G rollout plans: February spectrum
auction concluded with aggressive uptake from incumbents, mostly for data
spectrum. Key events to watch would be the next round of spectrum auction, likely
to be scheduled in 2HFY15. 4G launch plan of Reliance JIO as well as GSM
incumbents that have secured 1,800 MHz band contiguous spectrum across many
circles would also be critical. Reliance JIO estimates its investments at INR700b and
intends to launch services in a phased manner during 2015.


(INR)
4.7.14
Reco Jun-14
Var %
YoY
Var %
QoQ
Jun-14
Var %
YoY
Var %
QoQ
Jun-14
Var %
YoY
Var %
QoQ
Bharti Airtel 339 Buy

224,878 11.0 1.2

74,616 14.0 2.1

12,563 82.4 30.7
Bharti Infratel 262 Buy

28,745 9.6 3.0

11,968 14.4 3.8

4,354 21.8 -7.8
Idea Cellular 135 Buy

73,482 12.4 4.3

23,741 13.0 6.5

6,780 39.0 15.0
Reliance Comm 143 Neutral

54,836 1.3 -3.3

19,195 12.8 3.7

-268 PL PL

Company name
Bharti Airtel
Bharti Infratel
Idea Cellular
Reliance Communications

4 July 2014

Telecom

Shobhit Khare (Shobhit.Khare@MotilalOswal.com); +91 22 3982 5428


July 2014 254

Valuation and view: During FY14-16, we expect 13%/17%/14% EBITDA CAGR for
Bharti/Idea/RCom, led by 5%/10%/4% traffic CAGR and 2.5-4% RPM CAGR in the
India wireless business (including data). We reiterate Buy on Bharti (trades at 5.8x
proportionate FY16E EV/EBITDA), Idea (6.6x FY16E EV/EBITDA), and Bharti Infratel
(7.5x FY16E EV/EBITDA). We have Neutral rating on RCom (6.1x FY16E EV/EBITDA).

Wireless subscriber net additions (m)

Source: TRAI, MOSL

QoQ wireless traffic growth (%)


Trend in wireless RPM (INR)


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F
Y
1
4
3
Q
F
Y
1
4
4
Q
F
Y
1
4
1
Q
F
Y
1
5
E
Bharti Idea Vodafone-India RCOM

July 2014 255

Aggregate traffic growth and RPM trend for wireless majors


Aggregate India wireless revenue growth (YoY, %)


Telecom
Bharti Airtel 339 Buy 13.1 16.3 20.6 25.8 20.8 16.4 6.3 5.5 4.6 7.8 8.9 10.3
Bharti Infratel 262 Buy 9.5 11.7 14.6 27.4 22.4 17.9 10.4 9.0 7.8 9.8 11.7 14.1
Idea Cellular 135 Buy 8.2 7.4 7.6 16.4 18.2 17.7 6.4 6.6 5.4 15.0 11.0 10.3
Reliance Comm 143 Neutral 4.4 11.3 17.9 32.7 12.7 8.0 7.0 5.5 4.2 3.4 7.6 11.1
Source: MOSL




4
-3
3
5
2
-4
2
4
2
-2
0
0
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3
1 1
-1
1
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E
QoQ traffic growth (%) QoQ RPM growth (%)
11
8
6
7
12
12
12
10
8
1
Q
F
Y
1
3
2
Q
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1
3
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1
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1
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1
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E
90
100
110
120
A
p
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1
4
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a
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Sensex Index MOSL Telecom Index
80
95
110
125
140
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Sensex Index MOSL Telecom Index

July 2014 256

Wireless KPIs
1QFY13 2QFY13 3QFY13 4QFY13 1QFY14 2QFY14 3QFY14 4QFY14 1QFY15E YoY (%) QoQ (%)
EOP Wireless Subs (m)

Bharti (India) 187 186 182 188 191 193 198 206 209 9.5 1.8
Idea 117 115 114 122 125 127 129 136 139 11.3 2.4
RCOM 155 135 119 123 127 116 118 112 114 -10.5 1.3
Vodafone - India 154 153 147 152 155 156 160 167 169 9.2 1.6
AV. Wireless Subs (m)
Bharti (India) 184 187 184 185 190 192 196 202 207 9.4 2.7
Idea 115 116 115 118 123 126 128 132 137 11.5 3.9
RCOM 154 145 127 121 125 122 117 115 113 -9.7 -2.1
Vodafone - India 152 153 150 150 154 155 158 163 168 9.3 2.7
ARPU (INR/month)
Bharti (India) 185 177 185 193 200 192 195 196 197 -1.7 0.3
Idea 156 148 158 167 174 164 169 173 174 0.1 0.6
RCOM 98 102 119 128 119 121 125 128 132 11.4 3.5
Vodafone - India 174 169 176 187 196 191 193 192 194 -0.8 1.3
MOU/Sub
Bharti (India) 433 417 435 455 455 437 434 437 432 -5.0 -1.1
Idea 379 359 384 406 398 368 376 397 392 -1.4 -1.2
RCOM 228 236 271 291 282 277 288 296 305 7.9 3.0
Vodafone India (reported) 324 313 329 344 346 334 334 335 335 -3.3 -0.2
Vodafone India (adj) 433 418 438 459 461 445 446 447 446 -3.3 -0.2
Revenue per min (p)
Bharti (India) 42.7 42.6 42.6 42.4 44.0 44.0 44.8 44.9 45.6 3.5 1.4
Idea 41.2 41.2 41.1 41.1 43.7 44.7 44.9 43.6 44.4 1.5 1.9
RCOM 43.1 43.2 43.8 43.9 42.0 43.5 43.5 43.1 43.3 3.2 0.5
Vodafone India (reported) 53.6 53.9 53.6 54.3 56.6 57.2 57.7 57.3 58.1 2.6 1.5
Vodafone India (adj) 40.2 40.4 40.2 40.7 42.5 42.9 43.3 43.0 43.6 2.6 1.5
Wireless traffic (B min)
Bharti (India) 239 234 241 253 258 251 255 265 269 4.0 1.5
Idea 131 126 132 143 147 139 145 157 162 9.8 3.0
RCOM 105 102 103 105 106 102 102 102 103 -3.0 0.8
Vodafone India (reported) 148 144 148 155 160 156 158 164 169 5.6 2.5
Vodafone India (adj) 197 192 197 207 213 207 211 219 225 5.6 2.5


July 2014 257

Quarterly financial (proforma)
1QFY13 2QFY13 3QFY13 4QFY13 1QFY14 2QFY14 3QFY14 4QFY14 1QFY15E YoY (%) QoQ (%)
Revenue (INR b)

Bharti (India) 127 127 131 134 141 141 144 149 152 8.0 2.3
Bharti (consolidated) 186 188 194 196 203 213 219 222 225 11.0 1.2
Idea 55 53 56 61 65 63 66 70 73 12.4 4.3
RCOM 53 52 53 54 54 54 54 57 55 1.3 -3.3
Vodafone - India (implied) 79 78 79 84 90 89 91 94 98 8.4 4.0
EBITDA (INR b)

Bharti (India) 40.4 40.9 41.5 45.2 49.3 49.1 52.0 54.9 57.0 15.6 3.8
Bharti (consolidated) 54.9 57.0 57.7 60.6 65.4 68.3 70.9 73.1 74.6 14.0 2.1
Idea 14.4 14.2 14.7 17.5 21.0 19.7 20.6 22.3 23.7 13.0 6.5
RCOM 16.5 16.4 16.5 16.7 17.0 18.9 18.5 18.5 19.2 12.8 3.7
EBITDA Margin (%)

Bharti (India) 31.9 32.3 31.6 33.9 34.9 34.8 36.0 36.8 37.4 248bp 55bp
Bharti (consolidated) 29.6 30.3 29.8 30.9 32.3 32.0 32.3 32.9 33.2 88bp 30bp
Idea 26.1 26.8 26.4 28.9 32.1 31.2 31.1 31.7 32.3 17bp 65bp
RCOM 31.0 31.5 31.2 30.9 31.4 35.0 34.2 32.7 35.0 357bp 235bp
PAT (INR b)

Bharti (India) 15.8 13.9 8.9 10.8 14.8 14.0 19.4 23.8 21.9 48.3 -7.7
Bharti (consolidated) 7.6 7.2 2.8 5.1 6.9 5.1 6.1 9.6 12.6 82.4 30.7
Idea 2.3 2.4 2.3 3.8 4.9 4.5 4.7 5.9 6.8 39.0 15.0
RCOM 1.9 1.3 1.1 -2.4 1.3 2.7 1.5 2.0 -0.3 -120.6 -113.1
EPS (INR)

Bharti 2.0 1.9 0.7 1.3 1.8 1.3 1.5 2.4 3.1 74.5 30.7
Idea 0.7 0.7 0.7 0.9 1.4 1.3 1.4 1.8 1.9 37.1 7.7
RCOM 0.9 0.6 0.6 -1.2 0.6 1.3 0.7 1.0 -0.1 -120.8 -113.3
Capex (INR b)

Bharti (India) 26.5 25.5 12.0 18.8 12.6 10.4 17.8 20.3 20.0 59.3 -1.4
Idea 4.1 9.7 6.5 13.3 4.3 8.8 10.2 12.9 10.0 132.7 -22.8
RCOM 3.7 4.2 4.2 3.4 2.1 3.6 3.3 4.7 4.1 98.4 -12.5


July 2014 258

Quarterly Performance INR Million)
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Revenue 202,639 213,244 219,385 222,193 224,878 227,900 235,481 242,913 857,460 931,171
YoY Growth (%) 9.2 9.9 13.3 13.5 11.0 6.9 7.3 9.3 11.5 8.6
EBITDA 65,449 68,321 70,934 73,066 74,616 75,635 78,992 82,435 277,770 311,677
YoY Growth (%) 19.3 15.1 22.8 20.6 14.0 10.7 11.4 12.8 19.4 12.2
QoQ Growth (%) 8.0 4.4 3.8 3.0 2.1 1.4 4.4 4.4
Margin (%) 32.3 32.0 32.3 32.9 33.2 33.2 33.5 33.9 32.4 33.5
Net Finance Costs 11,676 16,111 10,682 9,911 9,431 10,089 10,165 10,410 48,379 40,095
Share of JV/associate/others 3,075 833 1,738 104 1,406 1,421 1,436 1,444 5,750 5,707
Depreciation & Amortization 38,470 39,394 39,188 39,444 40,462 41,378 42,860 44,240 156,496 168,941
Income Tax Expense / (Income) 9,685 8,635 16,569 13,562 12,844 12,984 13,262 13,869 48,450 52,958
Profit after Tax 8,693 5,015 6,233 10,253 13,284 12,604 14,141 15,361 30,194 55,390
Minority interest -1,804 106 -131 -637 -721 -721 -721 -721 -2,467 -2,884
Reported Net Profit / (Loss) 6,889 5,120 6,101 9,616 12,563 11,883 13,419 14,640 27,727 52,506
YoY Growth (%) -9.6 -29.0 115.1 89.1 82.4 132.1 120.0 52.2 21.8 89.4
India - Mobile ARPU
(INR/month) 200 192 195 196 197 193 197 202 194 198
QoQ Growth (%) 3.8 -4.1 1.3 0.9 0.3 -2.0 2.2 2.7
India - Mobile MOU/sub/month 455 437 434 437 432 418 422 429 436 426
QoQ Growth (%) -0.1 -4.0 -0.5 0.6 -1.1 -3.2 1.0 1.5
Consolidated net debt (INR b) 593 620 582 611 583 556 646 617 611 617
India - Mobile Traffic (B Min) 258 251 255 265 269 264 271 279 1,030 1,082
QoQ Growth (%) 2.1 -2.7 1.5 3.8 1.5 -1.7 2.4 2.9
India - Mobile RPM (p/min) 44.0 44.0 44.8 44.9 45.6 46.1 46.7 47.2 44.5 46.4
QoQ Growth (%) 3.9 0.0 1.9 0.3 1.4 1.2 1.2 1.1
Africa - Revenue (USD m) 1,062 1,119 1,165 1,145 1,162 1,197 1,231 1,254 4,491 4,844
Africa - EBITDA (USD m) 283 301 300 290 286 303 324 329 1,174 1,241
Africa - EBITDA margin (%) 26.7 26.9 25.8 25.3 24.6 25.3 26.3 26.2 26.1 25.6


Bharti Airtel

CMP: INR339 Buy
We expect consolidated revenue to grow 11% YoY and 1.2% QoQ to
INR224.9b. We expect India revenue to grow 8% YoY to INR152.5b
and Africa business revenue to grow 9% YoY to USD1.16b.
Consolidated EBITDA margin is likely to expand ~30bp QoQ, led by
India business. India mobile revenue should grow 7% YoY to
INR124.7b, driven by 4% YoY (1.5% QoQ) traffic growth and 3.5% YoY
(1.4% QoQ) wireless RPM growth. We estimate EBITDA margin for the
mobile business at 35.3%, up 40bp QoQ.
Cross-currency fluctuations and marketing investments are likely to
impact performance in Africa. We model 1.5% QoQ revenue growth
and 1.4% decline in EBITDA for Bharti Africa.
Consolidated net profit is likely to increase 82% YoY to INR12.6b.
The stock trades at proportionate EV/EBITDA of 6.7x FY15E and 5.8x
FY16E. Maintain Buy.

Key issues to watch out for
RPM growth (we expect 1.4% QoQ), mobile traffic in India
business (we expect 1.5% QoQ growth), and Africa business
financials (we expect 1.4% QoQ EBITDA decline).

Bloomberg BHARTI IN
M. Cap. (INR b)/(USD b) 1,353 / 23
1,6,12 Rel Perf. (%) -9 / -22 / -21
Y/E MARCH 2014 2015E 2016E 2017E
Net Sales 857.5 931.2 1,019.4 1,098.2
EBITDA 277.8 311.7 352.4 381.9
Adj. Net Profit 27.7 52.5 65.1 82.3
Adj. EPS (INR) 7.0 13.1 16.3 20.6
Adj. EPS Gr. (%) 17.0 87.2 23.9 26.4
BV/Sh (INR) 161.8 174.7 190.3 209.7
RoE (%) 4.7 7.8 8.9 10.3
RoCE (%) 5.0 6.2 7.0 7.8
Div. payout (%) 10 10 10 10
Valuations
P/E (x) 48.2 25.8 20.8 16.4
P/BV (x) 2.1 1.9 1.8 1.6
EV/EBITDA (x) 7.5 6.7 5.8 4.9
Div. Yield (%) 0.2 0.4 0.5 0.6


July 2014 259

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Sales 26,220 26,837 27,311 27,899 28,745 29,581 30,378 31,177 108,267 119,882
YoY Change (%) 8.5 5.0 4.0 4.3 9.6 10.2 11.2 11.7 5.4 10.7
EBITDA 10,463 10,729 11,283 11,526 11,968 12,275 12,597 12,730 44,001 49,570
YoY Change (%) 18.1 12.0 14.9 14.7 14.4 14.4 11.6 10.4 14.9 12.7
EBITDA margin (%) 39.9 40.0 41.3 41.3 41.6 41.5 41.5 40.8 40.6 41.3
Depreciation 5,528 5,326 5,252 5,153 5,359 5,573 5,796 6,025 21,259 22,754
Interest 1,044 1,335 792 826 908 908 908 905 3,997 3,630
Other Income 1,556 569 917 1,445 970 1,060 1,150 1,225 4,487 4,405
PBT 5,447 4,637 6,156 6,992 6,670 6,853 7,042 7,026 23,232 27,591
Tax 1,871 1,863 2,051 2,268 2,316 2,380 2,445 2,439 8,053 9,580
Adjusted net profit 3,576 2,774 4,105 4,724 4,354 4,474 4,597 4,586 15,179 18,012
YoY Change (%) 67.6 12.0 61.6 64.4 21.8 61.3 12.0 (2.9) 51.7 18.7
Revenue mix
Rent revenue mix (%) 61 60 61 61 60 60 60 60 61 60
Energy & other reimb. (%) 39 40 39 39 40 40 40 40 39 40


Bharti Infratel

CMP: INR262 Buy
We expect revenue to grow 9.6% YoY to INR28.75b.

Revenue from rent is likely to grow 2.7% QoQ, while we expect
energy and other reimbursements to grow 3.6% QoQ.

We expect EBITDA to grow 3.8% QoQ to INR11.97b. EBITDA margin is
likely to expand ~30bp QoQ.

We expect 21.8% YoY increase in reported PAT to INR4.35b, led by
14.4% YoY EBITDA growth.

Bharti Infratel trades at an EV/EBITDA of 8.8x FY15E and 7.5x FY16E.
Buy.

Consolidated co-location additions (we expect ~4,000),
Trend in consolidated sharing revenue per sharing operator (we
expect 0.3% QoQ increase).

Bloomberg BHIN IN
M. Cap. (INR b)/(USD b) 494 / 8
1,6,12 Rel Perf. (%) 2 / 25 / 36

Y/E MARCH 2014 2015E 2016E 2017E
Net Sales
108.
3
119.

133.

147.

EBITDA 44.0 49.6 56.5 63.6
Adj. Net Profit 15.2 18.0 22.0 27.5
Adj. EPS (INR) 8.0 9.5 11.7 14.6
Adj. EPS Gr. (%) 43.9 18.7 22.4 25.0
BV/Sh (INR) 95.5 98.2
101.

105.
6
RoE (%) 8.6 9.8 11.7 14.1
RoCE (%) 7.4 8.2 9.5 11.3
Div. payout (%) 64.0 72.1 71.4 71.9
Valuation
P/E (x) 32.6 27.4 22.4 17.9
P/BV (x) 2.7 2.7 2.6 2.5
EV/EBITDA (x) 10.1 8.8 7.5 6.5
Div. Yield (%) 2.0 2.6 3.2 4.0


July 2014 260

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Gross Revenue 65,388 63,233 66,131 70,438 73,482 71,620 75,635 80,701 265,190 301,438
YoY Growth (%) 18.8 19.0 18.5 16.2 12.4 13.3 14.4 14.6 18.1 13.7
QoQ Growth (%) 7.9 -3.3 4.6 6.5 4.3 -2.5 5.6 6.7
EBITDA 21,013 19,715 20,557 22,302 23,741 22,658 24,777 27,200 83,337 98,376
YoY Growth (%) 46.4 38.6 39.5 27.5 13.0 14.9 20.5 22.0 38.8 18.0
QoQ Growth (%) 20.1 -6.2 4.3 8.5 6.5 -4.6 9.4 9.8
Margin (%) 32.1 31.2 31.1 31.7 32.3 31.6 32.8 33.7 31.4 32.6
Income Tax Exp. / (Income) 2,572 2,495 2,638 3,058 3,462 3,252 3,803 4,584 10,763 15,102
Adj Net Profit / (Loss) 4,878 4,476 4,678 5,898 6,780 6,369 7,449 8,979 19,679 29,578
YoY Growth (%) 108.2 86.5 104.6 53.5 39.0 42.3 59.3 52.2 94.7 50.3
QoQ Growth (%) 27.0 -8.2 4.5 26.1 15.0 -6.1 17.0 20.5
Margin (%) 7.5 7.1 7.1 8.4 9.2 8.9 9.8 11.1 7.4 9.8
Mobile ARPU (INR/month) 174 164 169 173 174 166 171 178 167 172
QoQ Growth (%) 4.2 -5.7 3.0 2.4 0.6 -4.9 3.3 4.2 7.0 2.7
Mobile MOU/sub/month 398 368 376 397 392 370 376 387 381 381
QoQ Growth (%) -2.0 -7.5 2.2 5.6 -1.2 -5.7 1.6 2.9 1.2 0.1
Mobile Traffic (B Min) 147 139 145 157 162 156 162 171 588 652
QoQ Growth (%) 2.8 -5.8 4.1 8.6 3.0 -3.5 4.0 5.5 10.4 10.9
Mobile RPM (INR) 0.44 0.45 0.45 0.44 0.44 0.45 0.45 0.46 0.44 0.45
QoQ Growth (%) 6.3 2.2 0.5 -2.9 1.9 1.1 1.3 1.3 5.7 2.6


Idea Cellular

CMP: INR135 Buy
We expect Ideas consolidated revenue to grow 12.4% YoY (4.3%
QoQ) to INR73.5b .
We expect Idea to report mobile traffic growth of 3% QoQ (9.8% YoY).
RPM should improve 1.9% QoQ, led by voice as well as data.
ARPU is likely to increase 0.6% QoQ to INR174.
EBITDA margin should expand 65bp QoQ to 32.3%. We estimate
EBITDA loss in new circles at INR1.7b.
We expect net profit to grow 39% YoY (15% QoQ) to INR6.78b.
Idea trades at an EV/EBITDA of 6.4x FY15E and 6.6x FY16E. Buy.

RPM trajectory (we expect RPM to increase 1.9% QoQ)
Mobile traffic (we expect 3% QoQ growth)
EBITDA loss in new circles (we expect INR1.7b).

Bloomberg IDEA IN
M. Cap. (INR b)/(USD b) 485 / 8
1,6,12 Rel Perf. (%) -5 / -41 / -39

Y/E MARCH 2014 2015E 2016E 2017E
Net Sales 265.2 301.4 335.3 373.0
EBITDA 83.3 98.4 113.1 128.4
Adj. Net Profit 19.7 29.6 26.7 27.5
Adj. EPS (INR) 5.9 8.2 7.4 7.6
Adj. EPS Gr. (%) 94.1 38.7 -9.7 2.9
BV/Sh (INR) 49.8 64.0 70.8 77.9
RoE (%) 12.7 15.0 11.0 10.3
RoCE (%) 7.2 8.2 7.9 7.9
Div. Payout (%) 7.9 7.9 7.9 7.9
Valuations
P/E (x) 22.8 16.4 18.2 17.7
P/BV (x) 2.7 2.1 1.9 1.7
EV/EBITDA (x) 7.8 6.4 6.6 5.4
Div. Yield (%) 0.3 0.5 0.4 0.4


July 2014 261

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Gross Revenue 54,116 53,942 54,034 56,708 54,836 56,403 57,667 59,526 218,800 228,433
YoY Growth (%) 1.7 3.7 1.9 4.9 1.3 4.6 6.7 5.0 4.2 4.4
QoQ Growth (%) 0.1 -0.3 0.2 4.9 -3.3 2.9 2.2 3.2
EBITDA 17,010 18,856 18,454 18,516 19,195 20,521 21,474 22,977 72,843 84,175
YoY Growth (%) 3.1 15.1 11.6 11.0 12.8 8.8 16.4 24.1 10.2 15.6
QoQ Growth (%) 2.0 10.9 -2.1 0.3 3.7 6.9 4.6 7.0
Margin (%) 31.4 35.0 34.2 32.7 35.0 36.4 37.2 38.6 33.3 36.8
Profit before Tax 1,309 2,733 1,484 -8,220 -273 2,247 3,903 5,122 -2,687 11,006
Income Tax Expense / (Income) 7 12 30 -10,258 -5 45 78 102 -10,209 220
Adjusted Net Profit / (Loss) 1,302 2,721 1,454 2,038 -268 2,202 3,825 5,019 7,522 10,786
YoY Growth (%) -32.0 105.7 27.2 -183.7 -120.6 -19.1 163.1 146.3 286.7 43.4
Margin (%) 2.4 5.0 2.7 3.6 -0.5 3.9 6.6 8.4 3.4 4.7
Reported Net Profit / (Loss) 1,082 6,750 1,084 1,559 -643 1,827 3,450 4,644 10,482 10,411
Wireless ARPU (INR/month) 119 121 125 128 132 133 134 135 125 135
QoQ Growth (%) -7.1 1.7 3.9 1.9 3.5 0.6 0.6 0.6 14.4 6.5
Wireless MOU/sub/month 282 277 288 296 305 305 305 305 291 298
QoQ Growth (%) -2.9 -1.8 3.8 2.8 3.0 0.0 0.0 0.0 15.7 4.7
Wireless Traffic (B Min) 106 101 102 102 103 105 107 109 412 445
QoQ Growth (%) 1.0 -4.9 0.7 0.5 0.8 1.7 2.0 1.9 -1.0 3.0
Wireless RPM (INR) 0.42 0.43 0.44 0.43 0.43 0.44 0.44 0.44 0.43 0.45
QoQ Growth (%) -4.3 3.6 0.1 -0.9 0.5 0.6 0.6 0.6 -1.1 1.7
E: MOSL Estimates


Reliance Communications

CMP: INR143 Neutral
We expect revenue to decline 3.3% QoQ to INR54.8b, led by decline
in global segment revenue, which had a one-off component in
4QFY14. On a YoY basis, we expect revenue to grow 1.3%.

RPM is likely to increase 0.5% QoQ to INR0.43.

We expect wireless traffic to grow 0.8% QoQ to 103b minutes.

Consolidated EBITDA is likely to grow 3.7% QoQ to INR19.2b.

We expect RCom to report proforma net loss of INR268m.

RCom trades at an EV/EBITDA of 7.6x FY15E and 6.1x FY16E. Neutral.

RPM trend (we expect 0.5% QoQ growth)
Traffic growth (we expect 0.8% QoQ).

Bloomberg RCOM IN
M. Cap. (INR b)/(USD b) 295 / 5
1,6,12 Rel Perf. (%) -5 / -16 / -27

Y/E MARCH 2014 2015E 2016E 2017E
Net Sales 218.8 228.4 248.5 269.9
EBITDA 72.8 84.2 95.4 108.0
Adj. Net Profit 7.5 10.8 27.8 44.3
Adj. EPS (INR) 3.6 4.4 11.3 17.9
Adj. EPS Gr. (%) 286.7 19.9 157.5 59.4
BV/Sh (INR) 135.0 142.0 153.3 171.2
RoE (%) 2.6 3.4 7.6 11.1
RoCE (%) 4.3 3.9 6.0 8.3
Div. Payout (%) 0.0 0.0 0.0 0.0
Valuations
P/E (x) 39.2 32.7 12.7 8.0
P/BV (x) 1.1 1.0 0.9 0.8
EV/EBITDA (x) 9.6 7.6 6.1 4.8
Div. Yield (%) 0.0 0.0 0.0 0.0

July 2014 262

Clarity on regulatory issues still some time away
Prefer CPSUs; NTPC and CESC our top picks

Expect aggregate revenue growth of 11% YoY, PAT growth of 10% YoY: We expect
Utilities companies under our coverage to report aggregate revenue growth of 11%
YoY and aggregate PAT growth of 10% YoY in 1QFY15. Given the benefit of
compensatory tariff hike, we believe Tata Power would be the main growth driver.
We estimate PAT growth at 12% YoY for Coal India and 11% YoY for Powergrid. For
NTPC, we project adjusted PAT growth of 4.5% YoY in the first quarter of new
regulation.

Generation growth muted, coal project PLF remains low: In April-May 2014, all
India generation grew 9% YoY, led by heat wave felt during both months.
Generation grew 12% YoY in April, followed by 7% growth in May. Delayed monsoon
could have led to higher generation growth for June 2014. Overall PLF for April-May
2014 was flat YoY at 56%. While reported PLF was flat, coal project PLF declined
from 70.3% in the corresponding period last year to 68.8%. Gas-based generation
de-grew 20% YoY and PLF stood at 24%, lower than 36% in the corresponding period
last year. YoY growth of 11% in coal-based generation was the key driver of overall
generation growth. Nuclear and hydropower grew 15% YoY and 12% YoY,
respectively in April-May 2014.

Power deficit declines below 4% for May 2014, peak deficit remains low: Power
demand for May 2014 was flat YoY partly due to higher base, but declined by 2.4%
QoQ. Power demand for April 2014, however, grew 2.6% YoY. Power supply
increased 7% YoY in April-May 2014 against demand growth of 3.6% YoY, leading to
base deficit below 4% v/s 6% for the same period last year. The southern region
registered significant improvement, with deficit reducing to 5.4% from 12.4% last
year. The improvement was partly led by lower demand, while supply is looking up.



(INR)
4.7.14
Reco Jun-14
Var %
YoY
Var %
QoQ
Jun-14
Var %
YoY
Var %
QoQ
Jun-14
Var %
YoY
Var %
QoQ
CESC 755 Buy

14,475 0.8 16.2

3,375 5.1 -25.7

1,442 10.1 -40.7
Coal India 394 Neutral

176,863 7.4 -11.6

44,563 12.6 -12.8

41,774 11.8 -20.9
Jaiprakash Power 23 Buy

8,549 8.7 99.0

6,465 9.9 213.0

1,022 10.1 LP
JSW Energy 84 Neutral

27,732 12.2 34.7

8,879 -3.8 28.5

3,381 -15.8 88.5
NHPC 27 Neutral

17,759 9.7 58.2

12,284 14.7 LP

7,632 6.6 LP
NTPC 159 Buy

191,265 22.5 -8.7

39,309 -7.8 -11.5

23,272 4.5 -7.5
Power Grid Corp. 144 Buy

40,969 15.2 4.1

34,569 13.1 3.8

11,750 11.1 -1.3
PTC India 98 Buy

32,250 16.4 13.2

471 38.7 -50.7

443 51.3 -36.4
Reliance Infrastructure 791 Buy

28,775 -12.2 6.2

4,525 2.8 -5.5

3,239 -13.4 -35.2
Tata Power 107 Neutral

96,106 2.9 8.7

24,781 19.9 36.0

3,893 260.1 578.2

Company name
CESC
Coal India
Jaiprakash Power
JSW Energy
NHPC
NTPC
Power Grid Corporation
PTC India
Reliance Infrastructure
Tata Power

Utilities


Nalin Bhatt (NalinBhatt@MotilalOswal.com); +91 22 3982 5429

July 2014 263

Imported coal prices lower QoQ; ST prices look up: Imported coal prices averaged
at USD75/ton in 1QFY15 against USD81/ton in 1QFY14 and USD79/ton in 4QFY14.
Post the increase in 3QFY14, global coal prices have again softened. There could be
marginal benefit to importers, as the INR has appreciated QoQ to INR60/USD. Short-
term price at IEX has looked up QoQ and the 1QFY15 average stood at INR3.6/unit.
This is owing to the heat wave in April-May 2014.

Valuation and view: The Utilities sector has witnessed several regulatory initiatives
to address concerns on SEBs, fuel supply pacts and PPAs. It would take a while
before clarity on several issues emerges. We continue to prefer CPSUs, which are
relatively better positioned on these fronts. Our top picks are NTPC and CESC.

May 2014 generation growth up due to heat wave
7
3
7
2
7
0
7
4
7
1
7
3
7
3
7
1
7
7
7
5
7
9
7
6
7
5
7
3
7
2
7
8
7
3
7
6
7
8
6
8
8
0
7
7
8
4
7
6
8
0
7
8
8
2
7
9
7
78
2
7
9
8
7
8
4
8
7
8
9
14
9 9
5
14
8
2
8
2
4
6
8
2
2
4
6
3
5
7
-4
4 4
6
0
6
7
13
8
-2
7
0
27
5
4
12
J
u
l
-
1
1
S
e
p
-
1
1
N
o
v
-
1
1
J
a
n
-
1
2
M
a
r
-
1
2
M
a
y
-
1
2
J
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-
1
2
S
e
p
-
1
2
N
o
v
-
1
2
J
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-
1
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M
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-
1
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M
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-
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J
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-
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3
S
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p
-
1
3
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-
1
3
J
a
n
-
1
4
M
a
r
-
1
4
M
a
y
-
1
4
All India Generation (BUs) Gr (YoY, %)

Source: CEA
Centre sector coal PLF remains robust (%)
46
58
70
82
94
J
u
l
-
1
1
S
e
p
-
1
1
N
o
v
-
1
1
J
a
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-
1
2
M
a
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-
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-
1
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-
1
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S
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-
1
2
N
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v
-
1
2
J
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-
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M
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-
1
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M
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-
1
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J
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-
1
3
S
e
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-
1
3
N
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-
1
3
J
a
n
-
1
4
M
a
r
-
1
4
M
a
y
-
1
4
Centre Sector State Sector Private Sector

Source: CEA
Power demand growth remains muted
7
9
8
4
8
5
8
6
8
3
8
0
8
4
7
9
8
5
8
5
7
3
8
6
8
3
9
1
8
3
8
7
8
4
8
3
8
0
7
7
8
3
8
4
7
8
8
5
8
9
9
1
7.4%
0.1%
April May June July Aug Sept Oct Nov Dec Jan Feb Mar
FY13 FY14 FY15 Gr (%)

Source: CEA
Base deficit remains below 4% for May 2014
4.4
3.8
2
5
8
11
14
Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar
FY15 FY12 FY13 FY14

Source: CEA
Peak deficit too trends lower
4.9
4.1
2
5
8
11
14
Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar
FY15 FY12 FY13 FY14

Source: CEA
ST prices remain muted, though up QoQ (INR/unit)
5
.
3
3
.
1
2
.
3
3
.
6
3
.
1
2
.
9
4
.
6
3
.
4
3
.
1
3
.
5
3
.
5
3
.
2
2
.
7
2
.
5
2
.
9
3
.
1
3
.
6
1
Q
F
Y
1
1
2
Q
F
Y
1
1
3
Q
F
Y
1
1
4
Q
F
Y
1
1
1
Q
F
Y
1
2
2
Q
F
Y
1
2
3
Q
F
Y
1
2
4
Q
F
Y
1
2
1
Q
F
Y
1
3
2
Q
F
Y
1
3
3
Q
F
Y
1
3
4
Q
F
Y
1
3
1
Q
F
Y
1
4
2
Q
F
Y
1
4
3
Q
F
Y
1
4
4
Q
F
Y
1
4
1
Q
F
Y
1
5

Source: CEA

June 2014 Results Preview | Sector: Utilities

July 2014 264

RB Index* prices decline QoQ (USD/ton)
9
1
8
8
1
0
4
1
2
1
1
2
1
1
1
7
1
0
7
1
0
5
9
6
8
8
8
6
8
5
8
1
7
3
8
3
7
9
7
5
-40%
-15%
10%
35%
60%
50
70
90
110
130
1
Q
F
Y
1
1
2
Q
F
Y
1
1
3
Q
F
Y
1
1
4
Q
F
Y
1
1
1
Q
F
Y
1
2
2
Q
F
Y
1
2
3
Q
F
Y
1
2
4
Q
F
Y
1
2
1
Q
F
Y
1
3
2
Q
F
Y
1
3
3
Q
F
Y
1
3
4
Q
F
Y
1
3
1
Q
F
Y
1
4
2
Q
F
Y
1
4
3
Q
F
Y
1
4
4
Q
F
Y
1
4
1
Q
F
Y
1
5
Avg RB Index (USD/ton) YoY QoQ

* 6000Kcal, FoB South Africa Source: Bloomberg
INR witness marginal appreciation
46
46
45 45
44
46
51
50
55 55
54 54
57
63 62 62
60
-10%
0%
10%
20%
30%
36
44
52
60
68
1
Q
F
Y
1
1
2
Q
F
Y
1
1
3
Q
F
Y
1
1
4
Q
F
Y
1
1
1
Q
F
Y
1
2
2
Q
F
Y
1
2
3
Q
F
Y
1
2
4
Q
F
Y
1
2
1
Q
F
Y
1
3
2
Q
F
Y
1
3
3
Q
F
Y
1
3
4
Q
F
Y
1
3
1
Q
F
Y
1
4
2
Q
F
Y
1
4
3
Q
F
Y
1
4
4
Q
F
Y
1
4
1
Q
F
Y
1
5
QoQ (%) YoY (%) INR/USD

Source: RBI

90
105
120
135
150
A
p
r
-
1
4
M
a
y
-
1
4
J
u
n
-
1
4
J
u
l
-
1
4
Sensex Index MOSL Utilities Index

90
105
120
135
150
J
u
l
-
1
3
O
c
t
-
1
3
J
a
n
-
1
4
A
p
r
-
1
4
J
u
l
-
1
4
Sensex Index MOSL Utilities Index



Utilities
CESC 755 Buy 56.8 61.9 66.9 13.3 12.2 11.3 7.8 7.2 6.5 11.6 11.4 11.1
Coal India 394 Neutral 27.7 30.2 33.3 14.2 13.1 11.8 10.5 9.1 7.8 25.2 24.2 23.4
Jaiprakash Power 23 Buy 1.3 2.9 4.2 17.4 7.8 5.4 9.9 5.8 5.1 6.3 13.9 17.1
JSW Energy 84 Neutral 6.5 5.8 5.4 13.0 14.4 15.5 7.0 7.1 7.3 15.2 12.4 10.6
NHPC 27 Neutral 2.3 2.8 2.9 11.9 9.8 9.3 9.4 8.8 8.2 8.5 8.6 8.6
NTPC 159 Buy 11.8 13.7 15.8 13.4 11.6 10.0 10.0 9.1 7.8 11.0 12.0 13.0
Power Grid Corp. 144 Buy 9.4 11.5 13.4 15.3 12.5 10.7 11.1 9.9 9.1 13.7 15.2 16.0
PTC India 98 Buy 9.5 13.1 15.2 10.3 7.5 6.5 10.7 5.8 4.4 7.0 10.2 11.1
Reliance Infra 791 Buy 54.4 60.7 63.1 14.5 13.0 12.5 8.0 7.2 7.1 6.5 6.9 6.7
Tata Power 107 Neutral 5.8 6.5 7.9 18.5 16.6 13.6 13.6 12.5 11.6 7.4 7.5 7.7


July 2014 265

Generation, PLF for various projects
Capacity May-14 May-13 YTDFY15 YTDFY14
(MW)* Generation PLF (%) Generation PLF (%) Generation PLF (%) Generation PLF (%)
Adani Power

- Mundra 4,620 3,074.8 89.5 2,521.8 73.4 5,901.7 87.3 5,045.3 74.6
- Tirora 2,640 1,311.7 66.8 0.0 0.0 2,460.2 63.7 733.1 37.9
GVK

- JP 1 & 2 455 74.0 22.3 70.5 21.2 127.0 19.1 154.9 23.3
- Gautami 464 - 0.0 0.0 0.0 0.0 0.0 0.0 0.0
GMR

- Barge Mounted 1,270 275.6 35.2 142.4 34.2 546.1 65.6 111.9 34.9
- Chennai 200 89.7 61.4 91.5 62.7 200.0 68.5 170.1 58.2
- Vemagiri 370 0.0 0.0 2.3 0.8 0.0 0.0 177.5 32.9
JPL

- Chattisgarh 2,200 794.5 98.3 758.5 102.0 1,627.7 99.0 1,488.9 101.7
Rel Infra

- Dahanu 500 380.2 102.2 356.7 95.9 752.9 102.9 741.4 101.3
- Samalkot (AP) 220 25.2 15.7 33.0 20.5 25.2 7.8 70.5 21.9
- Goa 48 21.7 61.9 21.7 61.9 34.3 49.0 45.6 65.1
- Kochi 174 119.3 93.9 0.0 0.0 222.4 87.5 46.9 18.5
Rel Power

- Rosa 1,200 866.3 97.0 792.3 88.7 1,648.4 93.8 1,159.2 66.0
Tata Power

- Trombay 1,580 586.4 43.6 822.0 65.8 1,138.2 43.0 1,609.4 65.8
- TISCO (Jamshedpur) 441 238.6 89.1 200.4 74.8 479.1 90.9 431.3 81.8
- Mundra UMPP 4,000 2,204.5 74.6 2,152.4 72.3 4,348.1 74.3 3,898.4 66.6
- Maithon 1,050 581.0 74.3 598.6 76.6 1,187.7 77.3 1,181.9 76.9
Torrent Power

- Existing 500 287.9 96.7 244.3 82.1 559.4 95.5 439.6 75.1
- Sugen 1,148 213.4 25.5 194.0 23.2 416.3 24.8 369.9 22.1
JSW Energy

- Rajwest 1,080 660.2 82.1 590.3 73.5 1,279.8 80.9 1,060.0 67.0
- Karnataka/Ratnagiri 2,060 1,308.1 85.3 1,430.6 93.3 1,300.6 103.3 1,305.6 103.7
CESC 1,285 822.2 86.1 815.9 85.3 1,631.5 86.7 1,612.6 85.7
Lanco Infratech

- Kondapali 716 134.5 25.7 146.7 28.1 293.7 28.1 304.3 29.1
- Amarkantak 600 218.9 49.0 209.6 46.9 410.4 46.7 400.9 45.6
- UPCL 1,200 702.9 78.7 674.5 75.6 1,396.0 79.5 1,353.4 77.0
- Anpara 1,200 741.6 83.0 563.1 63.1 1,467.2 83.5 1,105.4 62.9
KSK

- Wardha 1,140 318.6 37.5 268.1 66.7 592.9 35.5 513.3 64.9
Sterlite

- Jharsuguda 2,400 704.3 39.4 1,204.8 67.5 1,598.1 45.5 2,065.6 58.8
Source: CEA, *Monitored capacity by CEA

July 2014 266

Quarterly Performance - Standalone (excl Spencers Retail) (INR Million)
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Sales 14,360 16,320 12,070 12,460

14,475 15,560 15,690 17,360 54,450 62,346
Change (%) 1.1 21.4 16.1 -17.6 0.8 -4.7 30.0 39.3 3.9 14.5
EBITDA 3,210 3,760 2,930 4,540

3,375 3,610 3,640 4,593 14,330 15,218
Change (%) 10.7 20.9 10.2 -0.7

5.1 -4.0 24.2 1.2 8.2 6.2
As of % Sales 22.4 23.0 24.3 36.4 23.3 23.2 23.2 26.5 26.3 24.4

800 850 900 1,028 3,390 3,578
Interest 900 1,030 990 770

1,000 1,030 990 1,045 3,690 4,065
Other Income 190 270 260 170 250 300 350 448 1,000 1,348
PBT 1,660 2,160 1,350 3,080

1,825 2,030 2,100 2,968 8,250 8,923
Tax 350 450 280 650

383 426 441 535 1,730 1,785
Reported PAT 1,310 1,710 1,070 2,430

1,442 1,604 1,659 2,433 6,520 7,138
Adjusted PAT 1,310 1,710 1,070 2,430

1,442 1,604 1,659 2,433 6,520 7,138
Change (%) 4.8 25.7 5.9 -5.1 10.1 -6.2 55.0 0.1 5.5 9.5
E: MOSL Estimates


CESC

CMP: INR755 Buy
We expect revenue of INR14.5b, flat YoY, and EBITDA of INR3.4b, up
5% YoY. Reported PAT is likely to grow 10% YoY to INR1.4b, largely on
the back of capacities commissioned in FY14.
We estimate generation of 2.4BU and sales of 3.5BU in 1QFY15. PLF is
likely to be flat YoY.
Spencers has expanded its hypermarket presence by adding 9 stores
in FY14. As at the end of FY14, it had 34 stores against 25 as at the
end of FY13. Growth in area under operations was muted, rising from
0.88msf as at the end of FY13 to 1.07msf as at the end of FY14. This
was due to closure of small format stores. Same store sales (SSS)
grew 6% in FY14 to INR1,383/sf/month.
CESC has synchronized one of its units at 600MW Dhariwal project
and is selling infirm power. CoD will be announced shortly. The
second unit is likely to be synchronized shortly.
We expect CESC to post standalone PAT (ex Spencers) of INR7.1b in
FY15 (up 10%) and INR7.8b in FY16 (up 9%).
Performance of Spencers SSS growth, store EBITDA
Details on commissioning and operations of Chandrapur
Capex on Haldia project

Bloomberg CESC IN
1,6,12 Rel Perf. (%) 20 / 44 / 77

Y/E March 2014 2015E 2016E 2017E
Sales 54.5 62.3 69.2 75.8
EBITDA 13.7 14.5 15.2 16.0
Net Profit 6.5 7.1 7.8 8.4
Adj. EPS (INR) 51.9 56.8 61.9 66.9
EPS Gr. (%) 5.4 9.5 8.8 8.2
BV/Sh (INR) 464.8 515.9 572.0 633.2
RoE (%) 11.8 11.6 11.4 11.1
RoCE (%) 10.3 10.0 9.9 9.9
Payout (%) 15.4 14.1 12.9 12.0
Valuations
P/E (x) 14.5 13.3 12.2 11.3
P/BV (x) 1.6 1.5 1.3 1.2
EV/EBITDA (x) 8.8 8.1 7.5 6.7
Div. Yield (%) 1.1 1.1 1.1 1.1

July 2014 267

1Q 2Q 3Q 4Q

1Q 2Q 3Q 4Q
Sales 164,724 154,115 169,281 199,980

176,863 161,075 184,282 206,971 688,100 729,191
Change (%) -0.2 5.8 -2.3 0.5 7.4 4.5 8.9 3.5 0.7 6.0
EBITDA 39,579 27,940 41,037 51,076 44,563 27,125 49,082 67,893 159,632 188,663
Change (%) -17.8 -2.4 -4.3 -29.2

12.6 -2.9 19.6 32.9 -11.7 18.2
As of % Sales 24.0 18.1 24.2 25.5 25.2 16.8 26.6 32.8 23.2 25.9
Depreciation 4,757 4,949 4,417 5,841 4,850 5,000 5,100 5,219 19,964 20,169
Interest 74 80 96 330

75 85 100 115 580 375
Other Income 22,196 21,828 21,825 23,845

22,250 22,500 22,750 23,238 89,694 90,738
EO Income/(Expense) -50 -91 -111 267

0 0 0 0 14 0
PBT 56,894 44,647 58,237 69,017 61,888 44,540 66,632 85,797 228,795 258,857
Tax 19,585 14,124 19,297 24,674

20,113 14,476 21,655 27,742 77,679 83,986
Reported PAT 37,310 30,524 38,940 44,343 41,774 30,065 44,977 58,056 151,116 174,871
Adjusted PAT* 37,360 30,615 39,052 52,840

41,774 30,065 44,977 58,056 159,866 174,871
Change (%) -16.6 -0.5 -16.6 -14.3 11.8 -1.8 15.2 9.9 -9.5 9.4
E: MOSL Estimates; *Pre Exceptional


Coal India

CMP: INR394 Neutral
We expect revenue to grow 7% YoY to INR177b and EBITDA to grow
13% YoY to INR44.6b, largely driven by volume growth. Reported PAT
is likely to grow 12% YoY to INR41.8b.
We had estimated production of 110m tons (growth of 7% YoY) and
dispatches of 122m tons (growth of 6% YoY) in 1QFY15. However,
actual production was 108m tons and dispatches were 120m tons.
The RB Index has softened from USD79/ton in 4QFY14 to USD75/ton,
which along with marginal INR appreciation could have bearing on
COALs market-linked realization. We expect e-auction realization to
be flat QoQ at INR2,175/ton.
We expect COAL to report consolidated PAT of INR174.9b in FY15 (up
9%) and INR190.7b in FY16 (up 9%). The stock trades at 13.1x FY16E
earnings.
Volume mix, realization trend, and guidance for FY15
Modalities of coal import
News flows on price hike

Bloomberg COAL IN
M. Cap. (INR b)/(USD b) 2,489 / 42
1,6,12 Rel Perf. (%) -4 / 17 / -2

Y/E March 2014 2015E 2016E 2017E
Sales 688.1 729.2 779.0 837.5
EBITDA 159.6 188.7 210.7 238.3
NP* 159.9 174.9 190.7 210.3
EPS (INR)* 25.3 27.7 30.2 33.3
EPS Gr. (%) -9.5 9.4 9.0 10.3
BV/Sh. (INR) 67.1 78.2 90.3 103.6
RoE (%)** 27.0 25.2 24.2 23.4
RoCE (%) 52.1 58.2 54.1 51.8
Payout (%) 130.0 55.0 60.0 60.0
Valuations
P/E (x) 15.6 14.2 13.1 11.8
P/BV (x) 5.9 5.0 4.4 3.8
EV/EBITDA (x) 12.3 10.5 9.1 7.8
Div. Yield (%) 7.6 3.5 4.6 5.1
EV/ Sales (x) 2.9 2.7 2.5 2.2
*Adjusted EPS, **RoE is adjusted for OB
reserves accounts, as applicable under IFRS

July 2014 268

Quarterly Performance (standalone) (INR Million)
Y/E MARCH FY14 FY15E FY14 FY15E
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Sales 7,863 9,692 4,924 4,296 8,549 11,388 10,800 12,581 26,775 43,319
Change (%) 44.2 7.0 15.3 14.7 8.7 17.5 119.3 192.8 18.9 61.8
EBITDA 5,882 7,610 2,766 2,066 6,465 9,151 6,956 8,665 18,324 31,237
Change (%) 20.0 -6.2 3.2 26.2

9.9 20.2 151.5 319.5 5.7 70.5
As of % Sales 74.8 78.5 56.2 48.1 75.6 80.4 64.4 68.9 68.4 72.1
Depreciation 1,082 1,075 1,073 1,236 1,250 1,300 1,600 2,228 4,466 6,378
Interest 3,506 3,574 3,601 3,672

3,700 3,800 5,500 6,761 14,352 19,761
Other Income 48 74 214 294 120 175 200 268 630 763
PBT 1,343 3,036 -1,694 -2,549 1,635 4,226 56 -55 135 5,862
Tax 414 517 -166 -828

613 1,585 21 7 -63 2,226
Effective Tax Rate (%) 30.8 17.0 9.8 32.5 37.5 37.5 37.5 -13.3 -46.5 38.0
Reported PAT 929 2,519 -1,529 -1,721 1,022 2,641 35 -62 198 3,636
Adjusted PAT (Pre Exceptional) 929 2,519 -1,529 -1,721

1,022 2,641 35 -62 198 3,636
Change (%) -49.2 -31.2 56.6 76.9 10.1 4.8 -102.3 -96.4 -94.4 1,735.4
E: MOSL Estimates


Jaiprakash Power Ventures

CMP: INR23 Buy
We expect revenue to grow 9% YoY to INR8.5b, EBITDA to grow 10%
YoY to INR6.5b, and PAT to grow 10% YoY to INR1b.
We expect generation of 1.5BU (flat YoY) from Karcham Wangtoo and
775MU (higher than 481MU in 4QFY14 and 301MU in 1QFY14) from
Bina. Vishnuprayag would be operational during the quarter and we
estimate generation at 525MU (against 438MU in 1QFY14).
JPVLs board has sought extension of approval from shareholders to
raise INR30b funds through various options (QIP/ECB with right of
conversion into shares / FCCBs/ ADRs/ GDRs/ FPO, preference shares,
etc), hitherto valid up to July 2014.
Cost of the Bara project is revised from INR108b to INR136b.
We expect JPVL to post net profit of INR3.9b in FY15 and INR8.6b (up
122%) in FY16. The stock trades at 7.8x FY16E EPS.
Commissioning of Nigrie power project
Fund raising, conclusion of divestment of hydropower projects
Plans to divest other projects

Bloomberg JPVL IN
1,6,12 Rel Perf. (%) -11 / -4 / -4

Y/E March 2014 2015E 2016E 2017E
Sales 28.7 44.6 102.6 108.4
EBITDA 20.2 32.4 58.0 59.7
NP 1.1 3.9 8.6 12.3
EPS (INR) 0.4 1.3 2.9 4.2
EPS Gr. (%) (71.6) 261.2 122.9 43.3
BV/Sh. (INR) 21.6 19.8 22.4 26.6
RoE (%) 1.7 6.3 13.9 17.1
RoCE (%) 5.0 7.7 12.1 13.2
Valuations
P/E (x) 62.7 17.4 7.8 5.4
P/BV (x) 1.1 1.2 1.0 0.9
EV/EBITDA (x) 15.3 9.9 5.8 5.1

July 2014 269


(INR Million)
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Total Operating Income 24,718 20,246 21,505 20,583 27,732 21,826 21,959 23,445 87,054 94,961
Change (%) 12.8 -2.5 -9.1 -10.5 12.2 7.8 2.1 13.9 -2.6 9.1
EBITDA 9,226 8,378 7,995 6,913 8,879 7,016 7,524 7,505 32,514 30,925
Change (%) 58.1 45.2 -4.5 -13.1 -3.8 -16.3 -5.9 8.6 16.4 -4.9
Depreciation 2,008 2,032 2,065 1,995 2,100 2,150 2,200 2,226 8,100 8,676
Interest 2,747 2,927 3,365 3,021 2,950 2,900 2,700 2,456 12,059 11,006
Other Income 453 549 472 548 450 700 550 687 2,022 2,387
Extraordinary items 1,872 1,675 183 47 0 0 0 0 3,777 0
PBT 3,052 2,293 2,855 2,398 4,279 2,666 3,174 3,511 10,600 13,630
Tax 870 569 753 643 899 533 722 882 2,836 3,036
Reported PAT 2,182 1,724 2,101 1,755 3,381 2,133 2,452 2,629 7,764 10,595
Share of profit from Assoc 46 61 60 -1 0 0 0 0 166 0
Minority interest -5 37 9 10 0 0 0 0 51 0
Exceptional Income/ (Expense) 1,872 685 183 47 0 0 0 0 2,787 0
Reported PAT (Post MI) 2,141 1,626 2,032 1,746 3,381 2,133 2,452 2,629 7,547 10,595
Adjusted PAT 4,013 2,311 2,215 1,793 3,381 2,133 2,452 2,629 10,334 10,595
Change (%) 105.9 43.1 -40.4 -45.9 -15.8 -7.7 10.7 46.6 -2.4 2.5
E: MOSL Estimates


JSW Energy

CMP: INR84 Neutral
We expect consolidated revenue to grow 12% YoY to INR27.7b,
EBITDA to decline 4% YoY to INR8.8b, and PAT to decline 16% YoY to
INR3.4b.
We estimate generation at 5.5BU (including coal and lignite capacity),
flat YoY. We assume that JSWEL would monetize its entire banked
energy inventory in 1Q and estimate sales at 5.6BU.
We have assumed short-term realization of INR4.3/unit, marginally
lower YoY. We expect fuel cost to be INR2.55/unit (coal based).
Media articles indicate that JSWEL is exploring inorganic growth
options, including acquisition of Lancos Udupi project and JPVLs
projects.
We expect JSWEL to report consolidated PAT of INR10.6b in FY15 (up
3%) and INR9.5b in FY15 (down 10%). The stock trades at 14.4x FY16E
earnings.
ST realization, fuel mix and cost for 1QFY15, and guidance for FY15
RajWest project: lignite mine clearance
Inorganic growth opportunities

Bloomberg JSW IN
M. Cap. (INR b)/(USD b) 138 / 2
1,6,12 Rel Perf. (%) 0 / 35 / 54

Y/E March 2014 2015E 2016E 2017E
Sales 87.1 95.0 94.1 82.6
EBITDA 32.5 30.9 27.7 24.7
NP 10.3 10.6 9.5 8.9
Adj. EPS (INR) 6.3 6.5 5.8 5.4
EPS Gr. (%) -2.4 2.5 -9.9 -7.0
BV/Sh. (INR) 40.2 44.8 49.0 52.9
RoE (%) 16.2 15.2 12.4 10.6
RoCE (%) 14.6 15.1 13.0 11.9
Payout (%) 31.7 25.0 25.0 25.0
Valuations
P/E (x) 13.3 13.0 14.4 15.5
P/BV (x) 2.1 1.9 1.7 1.6
EV/EBITDA (x) 6.7 7.0 7.1 7.3
Div. yield (%) 2.4 1.9 1.7 1.6

July 2014 270

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Sales 16,194 16,500 11,234 11,228

17,759 18,793 13,466 13,325 55,370 63,343
Change (%) 13.9 -6.9 11.2 2.1 9.7 13.9 19.9 18.7 4.3 14.4
EBITDA 10,707 10,187 6,237 -3,745

12,284 12,993 7,266 6,749 23,593 39,292
Change (%) 18.4 -15.4 1.7 -161.9

14.7 27.5 16.5 -280.2 -29.0 66.5
As of % Sales 66.1 61.7 55.5 -33.4 69.2 69.1 54.0 50.7 42.6 62.0
Depreciation 2,760 2,825 3,156 3,367

3,000 3,175 3,675 3,987 12,108 13,837
Interest 1,160 1,203 1,512 6,349

1,250 1,275 1,400 1,516 10,224 5,441
Other Income 2,486 3,002 2,736 6,558 2,350 2,600 2,800 2,959 14,570 10,709
PBT 9,272 9,161 4,307 -6,902

10,384 11,143 4,991 4,206 15,831 30,723
Tax 2,073 2,085 1,713 172

2,752 2,897 1,323 1,311 6,043 8,282
Reported PAT 7,199 7,076 2,594 -7,074

7,632 8,246 3,669 2,895 9,788 22,441
Adjusted PAT 7,160 7,747 2,594 -7,081

7,632 8,246 3,669 2,895 10,420 22,441
Change (%) 11.0 6.5 7.3 -347.4 6.6 6.4 41.5 -140.9 -45.2 115.4
E: MOSL Estimates


NHPC

CMP: INR27 Neutral
We expect revenue to grow 10% YoY to INR17.8b and PAT to grow 7%
YoY to INR7.6b. NHPC is likely to generate 6.6BU as compared to
6.4BU in 1QFY14, led by commissioning of capacities in FY14.
Against capacity addition of 807MW in FY14, as at the end of FY14,
total projects under construction stood at 3.3GW. Most of these
projects are likely to commission in FY16 (160MW), FY17 (330MW)
and FY19 (2.8GW). Hence, near-term growth option remains limited.
Starting work on Subanshiri Lower and TLDP IV is crucial, as interest
and O&M cost for the project was charged off to P&L in FY14 and can
be capitailized only after construction begins.
We expect NHPC to report consolidated PAT of INR28.9b in FY15 (up
14%) and INR30.8b in FY16 (up 21%). The stock trades at 9.8x FY15E
earnings.
Cost approval for commissioned projects
Status update on resuming construction work on Subanshiri Lower
and TLDP IV

Bloomberg NHPC IN
M. Cap. (INR b)/(USD b) 337 / 6
1,6,12 Rel Perf. (%) 1 / 20 / 10

Y/E March 2014 2015E 2016E 2017E
Sales 66.0 72.9 76.2 79.8
EBITDA 42.3 47.3 48.5 49.8
NP 25.6 28.9 30.8 32.5
Adj. EPS (INR) 2.0 2.3 2.8 2.9
EPS Gr. (%) 20.2 13.6 21.1 5.4
BV/Sh. (INR) 26.5 27.9 29.3 30.7
RoE (%) 7.5 8.5 8.6 8.6
RoCE (%) 8.1 8.8 9.0 9.2
Payout (%) 33.5 36.0 37.8 39.5
Valuations
P/E (X) 13.5 11.9 9.8 9.3
P/BV (X) 1.0 1.0 0.9 0.9
EV/EBITDA (X) 10.2 8.7 8.1 7.5
Div. Yield (%) 2.4 3.0 3.3 3.7

July 2014 271

1Q 2Q 3Q 4Q

1Q 2Q 3Q 4Q

Sales 156,129 162,723 187,794 209,381 191,265 193,243 199,177 197,238 716,026 780,923
Change (%) -2.2 0.9 19.0 27.2 22.5 18.8 6.1 -5.8 11.3 9.1
EBITDA 42,653 41,088 46,301 44,418 39,309 41,543 43,024 45,059 173,482 168,934
Change (%) 17.5 -2.7 15.9 13.7

-7.8 1.1 -7.1 1.4 10.1 -2.6
As of % Sales 27.3 25.3 24.7 21.2 20.6 21.5 21.6 22.8 24.2 21.6
Depreciation 9,423 9,679 10,243 12,076 12,100 12,400 12,550 12,806 41,422 49,856
Interest 6,174 6,205 6,010 5,677

6,500 6,750 7,250 7,902 24,066 28,402
Other Income 7,459 7,871 7,747 6,998

8,750 7,750 8,850 8,889 31,052 34,239
EO Inc./(Exp.) 0 0 0 0

0 0 0 0 0 0
PBT 34,514 33,075 37,795 33,663 29,459 30,143 32,074 33,239 139,047 124,915
Tax 9,244 8,146 9,182 2,727

6,186 6,631 7,056 7,392 29,299 27,266
Reported PAT 25,270 24,929 28,613 30,935 23,272 23,511 25,018 25,847 109,747 97,648
Adjusted PAT 22,263 21,989 29,896 25,161

23,272 23,511 25,018 25,847 99,308 97,648
Change (%) -8.4 11.8 18.2 21.8 4.5 6.9 -16.3 2.7 10.4 -1.7
E: MOSL Estimates; # Adj profit based on the calculations provided by the management


NTPC

CMP: INR159 Buy
We expect PAT to grow 5% YoY to INR23.3b, led by the addition of
projects and higher generation for few projects (85%+ PLF).
Generation would grow 13% YoY, led by higher power generation
from coal projects (up 14% YoY to 61BU). Gas-based generation is
likely to decline 10% YoY to 3.3BU.
The capacity addition target for FY15 stands at 1.8GW. Addition of
two units of Koldam project can provide upside.
NTPC is scouting for inorganic growth opportunities and we
understand that the board has constituted a committee to explore
such opportunities. News flows on this front need to be monitored.
NTPC has contested against the latest tariff regulation enunciated by
Central Electricity Regulatory Commission (CERC) in Delhi High Court.
The next hearing is on 27 July 2014.
We expect NTPC to report PAT of INR97.6b in FY15 (down 2%) and
INR112.6b in FY16 (up 15%).
PLF for coal-based projects and generation loss
Updates on captive coal block development
Developments on regulatory front and possible impact

Bloomberg NTPC IN
M. Cap. (INR b)/(USD b) 1,308 / 22
1,6,12 Rel Perf. (%) -8 / -4 / -24

Y/E March 2014 2015E 2016E 2017E
Sales 716.0 780.9 830.8 912.8
EBITDA 177.6 173.3 195.6 235.8
NP 99.3 97.6 112.6 130.4
Adj EPS (INR) 12.0 11.8 13.7 15.8
EPS Gr. (%) 10.4 -1.7 15.3 15.8
BV/Sh. (INR) 104.1 110.5 117.8 126.4
RoE (%) 12.0 11.0 12.0 13.0
RoCE (%) 11.2 9.8 10.5 11.7
Payout (%) 47.2 46.1 46.1 46.1
Valuations
P/E (x) 12.7 12.9 11.2 9.7
P/BV (x) 1.5 1.4 1.3 1.2
EV/EBITDA (x) 9.9 10.0 9.1 7.8
Div. Yield (%) 3.6 3.1 3.6 4.1

July 2014 272

1Q 2Q 3Q 4Q

1Q 2Q 3Q 4Q
Sales 35,565 39,816 36,833 39,341 40,969 42,862 45,200 47,003 151,527 176,035
Change (%) 23.1 29.0 9.6 16.6 15.2 7.6 22.7 19.5 19.2 16.2
EBITDA 30,557 33,709 31,041 33,309

34,569 36,512 38,550 40,017 128,583 149,649
Change (%) 24.0 26.3 6.2 17.7

13.1 8.3 24.2 20.1 18.1 16.4
As of % Sales 85.9 84.7 84.3 84.7

84.4 85.2 85.3 85.1 84.9 85.0
Depreciation 9,644 9,660 9,903 10,750 11,000 11,600 12,250 12,543 39,957 47,393
Interest 7,599 8,014 7,874 8,189

8,500 9,300 10,100 10,899 31,675 38,799
Other Income 803 1,228 1,160 2,496

1,250 1,100 1,400 1,462 5,687 5,212
Extraordinary Inc / (Exp) 60 0 0 0 0 0 0 0 0 0
PBT 14,177 17,263 14,425 16,865

16,319 16,712 17,600 18,037 62,638 68,669
Tax 3,747 4,815 3,995 5,107

4,569 4,679 5,016 5,118 17,663 19,383
Effective Tax Rate (%) 26.4 27.9 27.7 30.3

28.0 28.0 28.5 28.4 28.2 28.2
Reported PAT 10,431 12,447 10,431 11,758 11,750 12,033 12,584 12,920 44,974 49,287
Adjusted PAT (Pre Exceptional) 10,571 10,436 10,561 11,899

11,750 12,033 12,584 12,920 43,439 49,287
Change (%) 16.6 3.6 -4.6 8.9 11.1 15.3 19.2 8.6 5.0 13.5
E: MOSL Estimates


Power Grid Corporation

CMP: INR144 Buy
We expect PAT to grow 11% YoY to INR11.8b, mainly led by
capitalization. We expect PWGR to capitalize INR42.5b in 1QFY15.
Our capitalization assumption is on the back of INR18b capitalization
announced by the company in early April 2014.
We estimate Consultancy revenue at INR1.8b and Telecom revenue at
INR800m. We estimate PBT contribution of ~INR1b from Consultancy
and Telecom.
PWGR has recently emerged successful in its bid for NRSS XXXI
Transmission Project.
We expect PWGR to report PAT of INR49.3b in FY15 (up 13.5%) and
INR60.1b in FY16 (up 22%). The stock trades at 11.5x FY16E EPS and
1.7x FY16E BV.
Capitalization / capex guidance for FY15
Details on existing and recently won competitively bid projects
Developments on green energy projects, state JVs, etc

Bloomberg PWGR IN
M. Cap. (INR b)/(USD b) 753 / 13
1,6,12 Rel Perf. (%) 11 / 19 / 0

Y/E March 2014 2015E 2016E 2017E
Sales 152.3 176.0 208.6 241.0
EBITDA 129.4 149.6 178.3 206.1
NP 43.4 49.3 60.1 70.2
EPS (INR) 8.3 9.4 11.5 13.4
EPS Gr. (%) -7.1 13.5 21.9 16.8
BV/Sh. (INR ) 65.9 72.0 79.5 88.2
RoE (%) 14.3 13.7 15.2 16.0
RoCE (%) 8.6 8.4 9.1 9.3
Payout (%) 33.8 35.0 35.0 35.0
Valuations
P/E (x) 15.9 14.0 11.5 9.8
P/BV (x) 2.0 1.8 1.7 1.5
EV/EBITDA (x) 11.2 10.7 9.6 8.8
Div. Yield (%) 1.9 2.1 2.6 3.0

July 2014 273

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Power Traded (MUs) 8,068 10,450 7,808 7,176 8,500 11,500 9,300 8,693 33,502 37,993
Sales 27,704 31,402 27,515 28,487 32,250 40,158 35,844 33,891 115,107 142,143
Change (%) 39.4 12.4 46.5 29.6 16.4 27.9 30.3 19.0
EBITDA 340 679 1,156 955 471 488 472 418 3,129 1,849
Change (%) 8.6 19.2 285.8 86.5 38.7 -28.1 -59.2 -56.2 84.1 -40.9
As of % Sales 1.2 2.2 4.2 3.4 1.5 1.2 1.3 1.2 2.7 1.3
Depreciation 11 11 10 10 11 12 12 13 42 48
Interest 4 3 2 18 3 2 3 2 28 10
Other Income 81 189 154 120 175 185 195 211 543 766
Extraordinary Income/(Expense) 3 1 42 8 0 0 0 0 -39 0
PBT 410 854 1,339 1,053 633 659 652 614 3,642 2,557
Tax 114 235 432 349 190 198 195 184 1,130 767
Reported PAT 296 619 908 689 443 461 456 430 2,512 1,790
Adjusted PAT 293 618 866 696 443 461 456 430 2,473 1,790
Change (%) 27.8 38.7 297.0 84.7 51.3 -25.4 -47.3 -38.3
E: MOSL Estimates, % Change for FY13E not comparable given inclusion of tolling profits from 1QFY13 onwards


PTC India

CMP: INR98 Buy
We expect revenue to grow 16% YoY to INR32.3b and PAT to grow
51% YoY to INR443m.
Volumes would grow 5% YoY to ~8.5BU. We estimate adjusted
trading margin at 5.25paise/kwh.
For Simhapuri/Meenaxi tolling business, we expect sales volume of
500MU and PBT spread of INR0.25/unit, marginally down QoQ.
Higher rebate and surcharge income had boosted PAT in FY14.
Booking of rebate and surcharge for 1QFY15 would remain key
monitorables, in our view.
We expect PTCIN to report consolidated PAT of INR2.8b in FY15
(down 22%) and INR3.9b in FY16 (up 38%). The stock trades at 7.5x
FY16E earnings.
Trading volumes and margin guidance for FY15, and
commissioning of projects
Simhapuri and Meenakshi business volumes and PBT contribution
Cash utilization policy

Bloomberg PTCIN IN
1,6,12 Rel Perf. (%) 4 / 37 / 64

Y/E March 2014 2015E 2016E 2017E
Sales 123.1 142.1 164.8 191.1
EBITDA 3.6 1.8 3.0 3.5
NP* 3.6 2.8 3.9 4.5
Adj. EPS (INR) 12.2 9.5 13.1 15.2
EPS Gr. (%) 82.0 -22.1 37.5 16.0
BV/Sh. (INR) 84.7 88.1 93.1 99.0
RoE (%) 12.1 7.0 10.2 11.1
RoCE (%) 15.0 7.7 12.3 13.7
Payout (%) 23.5 45.0 45.0 45.0
Valuations
P/E (x) 8.0 10.3 7.5 6.5
P/BV (x) 1.2 1.1 1.1 1.0
EV/EBITDA (x) 6.6 10.7 5.8 4.4
EV/ Sales (x) 0.2 0.2 0.1 0.1
Div. yield (%) 2.4 2.8 4.2 4.9
*Consolidated

July 2014 274

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Sales 32,789 28,318 25,363 27,099

28,775 29,750 30,775 30,526 113,569 119,826
Change (%) -4.9 -19.1 -26.6 -30.9 -12.2 5.1 21.3 12.6 -20.7 5.5
EBITDA 4,401 4,768 5,149 4,790

4,525 4,750 5,275 4,731 19,108 19,281
Change (%) -4.3 5.1 5.1 -6.6

2.8 -0.4 2.4 -1.2 -0.3 0.9
As of % Sales 13.4 16.8 20.3 17.7 15.7 16.0 17.1 15.5 16.8 16.1

1,000 1,025 1,075 1,068 3,421 4,168
Interest 2,172 2,316 2,440 3,034

2,225 2,275 2,300 2,327 9,962 9,127
Other Income 3,141 3,004 3,027 3,074

2,650 2,850 3,000 2,968 12,245 11,468
PBT 4,542 4,608 4,862 3,957

3,950 4,300 4,900 4,304 17,969 17,454
Tax (incl contingencies) 800 1,150 1,180 -1,040

711 774 882 775 2,090 3,142
Reported PAT 3,742 3,458 3,682 4,997

3,239 3,526 4,018 3,529 15,879 14,312
PAT (Pre Exceptionals) 3,742 3,458 3,682 4,997

3,239 3,526 4,018 3,529 15,879 14,312
Change (%) 14.4 -16.5 -1.8 -16.6 -13.4 2.0 9.1 -29.4 -7.4 -9.9
E: MOSL Estimates; Quarterly nos. are on standalone basis


Reliance Infrastructure

CMP: INR791 Buy
We expect revenue to decline 12% YoY to INR28.8b, due to lower
revenue from EPC division. We estimate EPC revenue at INR11.8b
against INR16.5b in 1QFY14. PAT would decline 13% YoY to INR3.2b.
RELI announced commercial operation of its maiden Metro project in
Mumbai. Also, it announced completion of its 10th road project
Trichy-Karur in Tamil Nadu. This completes the commissioning of all
its six projects in Tamil Nadu.
Operations have commenced at its first 5m-ton cement plant in
Madhya Pradesh (built at a cost of INR30b). We estimate annual
revenue contribution from the project at INR30b.
EPC revenue in FY15/16 may get impacted due to prolonged delays in
the large projects of Chittrangi, Krishnapattnam and Tilaiya.
We expect RELI to report standalone PAT of INR14.3b in FY15 (down
10%) and INR16b in FY16 (up 12%).
Performance of EPC division and order book position
Performance of infrastructure business

Bloomberg RELI IN
M. Cap. (INR b)/(USD b) 208 / 3
1,6,12 Rel Perf. (%) 3 / 67 / 86

Y/E March 2014 2015E 2016E 2017E
Sales 113.6 118.6 129.2 133.8
EBITDA 19.1 18.0 19.1 18.8
NP 15.9 14.3 16.0 16.6
Adj.EPS (INR) 60.5 54.4 60.7 63.1
EPS Gr. (%) -7.3 -10.0 11.6 3.8
BV/Sh. (INR) 811 855 908 962
ROE (%) 7.8 6.5 6.9 6.7
ROCE (%) 8.2 7.4 8.5 8.4
Payout (%) 12.5 15.5 13.9 13.4
Valuations
P/E (x) 13.1 14.5 13.0 12.5
P/BV (x) 1.0 0.9 0.9 0.8
EV/EBITDA (X) 10.9 8.0 7.2 7.1
Div. yield (%) 0.8 0.9 0.9 0.9

July 2014 275

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Units Generated 3,897 3,404 3,212 2,670 4,365 3,744 3,597 3,477 13,183 15,183
Total Operating Income 26,075 21,995 20,079 18,121 22,750 22,350 22,745 23,981 86,270 91,826
Change (%) 14.2 -12.7 -21.2 -18.2 -12.8 1.6 13.3 32.3 -9.8 6.4
EBITDA 7,420 6,023 7,118 4,982 6,730 6,710 6,705 6,740 25,543 26,885
Change (%) 97.4 14.1 25.2 -14.0 -9.3 11.4 -5.8 35.3 24.5 5.3
As of % Sales 28.5 27.4 35.4 27.5 29.6 30.0 29.5 28.1 29.6 29.3
Depreciation 1,360 1,396 1,484 1,631 1,380 1,410 1,425 1,452 5,871 5,667
Interest 2,363 1,620 2,143 2,556 2,300 2,325 2,350 2,351 8,682 9,326
Other Income 1,799 463 -93 1,754 900 750 800 787 3,922 3,237
PBT 5,496 3,470 3,397 2,548 3,950 3,725 3,730 3,724 14,912 15,129
Tax 1,926 852 886 1,706 1,304 1,192 1,212 1,201 5,371 4,908
Reported PAT 3,570 2,618 2,511 842 2,647 2,533 2,518 2,523 9,541 10,220
Adjusted PAT 3,527 2,703 1,307 1,338 2,647 2,533 2,518 2,523 8,875 10,220
Change (%) -14.8 -9.0 1.8 51.2 -25.0 -6.3 92.6 88.5 -4.3 15.2
Consolidated Adjusted PAT 1,081 2,525 1,602 574 3,893 3,854 3,859 4,045 5,782 15,651
Change (%) -64.7 22.4 -41.9 -57.1 260.1 52.7 140.9 604.7 -37.3 170.7
E: MOSL Estimates


Tata Power

CMP: INR107 Neutral
We expect standalone PAT to decline 25% YoY to INR2.6b and
consolidated PAT to grow 2.6x YoY to INR3.9b, including past
arrears/benefit from compensatory tariff.
Generation from TPWRs 2,021MW (Mumbai region) capacity in April-
May 2014 was 1.6BU, down 20% YoY. Mundra UMPP generation for
the period stood was 4.4BU and PLF was 74%. Maithon generation
was 1.2BU at a PLF of 77%.
Global coal prices have corrected to USD75/ton from USD79/ton in
4QFY14. This, along with marginal appreciation in INR could put
pressure on realization.
TPWR has entered into an option with Bakrie group to sell 5% stake in
KPC mines at USD250m.
We expect TPWR to report consolidated PAT of INR15.7b in FY15 (up
102%) and INR17.5b in FY16 (up 12%). The stock trades at 18.5x
FY15E earnings.
Contribution of Maithon/Mundra UMPP project
Update on Mundra UMPP tariff revision case
Sales / realization for KPC/Arutmin mines

Bloomberg TPWR IN
M. Cap. (INR b)/(USD b) 290 / 5
1,6,12 Rel Perf. (%) -3 / 8 / -4

Y/E March 2014 2015E 2016E 2017E
Sales 86.3 91.8 96.5 101.0
EBITDA 25.5 26.9 28.2 29.2
NP 5.8 15.7 17.5 21.3
Adj. EPS (INR) 2.9 5.8 6.5 7.9
EPS Gr. (%) (26.2) 101.8 11.8 21.5
BV/Sh. (INR) 52.7 56.0 59.0 62.4
RoE (%) 7.4 7.4 7.5 7.7
RoCE (%) 8.4 8.8 8.9 9.0
Payout (%) 33.2 34.8 34.4 30.3
Valuations
P/E (x) 44.0 18.5 16.6 13.6
P/BV (x) 2.0 1.9 1.8 1.7
EV/EBITDA (x) 13.4 13.6 12.5 11.6
Div. yield (%) 1.2 1.2 1.2 1.2

July 2014 276

Niket Shah (Niket.Shah@MotilalOswal.com) / Atul Mehra (Atul.Mehra@MotilalOswal.com)


(INR Million)
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Net Sales 14,905 17,182 17,743 18,791

17,886 20,876 21,558 22,815 68,621 83,359
YoY Change (%) 28.9 29.7 26.3 33.6 20.0 21.5 21.5 21.4 29.7 21.5
EBITDA 2,029 2,328 2,543 2,482

2,416 2,922 3,151 3,157 9,382 11,670
Margins (%) 13.6 13.6 14.3 13.2 13.5 14.0 14.6 13.8 13.7 14.0

715 683 701 707 2,252 2,765
Interest 820 905 835 986

805 939 905 1,072 3,545 3,770
Other Income 187 186 99 180 203 202 108 196 652 709
PBT before EO expense 866 1,047 1,230 1,094

1,098 1,502 1,652 1,573 4,237 5,843
PBT 749 1,007 1,224 1,094

1,098 1,502 1,652 1,573 4,073 5,843
Tax 76 111 206 155

220 300 330 315 548 1,169
Rate (%) 10.1 11.0 16.8 14.2

20.0 20.0 20.0 20.0 13.4 20.0
MI & Profit/Loss of Asso. Cos. -3 -4 -4 -2 -3 -4 -4 -2 -13 -13
Reported PAT 676 900 1,022 941

882 1,206 1,325 1,261 3,539 4,688
YoY Change (%) 108.3 39.0 35.6 24.1

30.4 33.9 29.7 34.0 42.5 32.5
Margins (%) 4.5 5.2 5.8 5.0 4.9 5.8 6.1 5.5 5.2 5.6
E: MOSL Estimates

June 2014 Results Preview | Sector: Textiles

Arvind

CMP: INR245 Buy
We expect ARVNDs revenue to grow 20% YoY (decline 4.8% QoQ) to
INR17.9b, driven primarily by Brands and Retail.
EBITDA margin is likely to remain flat YoY at 13.5% (expand 30bp
QoQ), with EBITDA expected at INR2.4b.
We expect PAT to grow 30.4% YoY (de-grew 6% QoQ) to INR882m.
The stock is trading at 6.6x FY15E and 5.4x FY16E EV/EBITDA.
Maintain Buy with a target price of INR270, valuing it at 7x FY16E
EV/EBITDA.
USD realization for exports.
Margin expansion in Brands and Retail.

Bloomberg ARVND IN
1,6,12 Rel Perf. (%) 18 / 45 / 197

Y/E March 2014 2015E 2016E 2017E
Sales 68.6 83.4 100.4 119.0
EBITDA 9.3 11.7 14.5 17.4
NP 3.5 4.7 6.1 8.1
EPS (INR) 13.7 18.2 23.6 31.3
EPS Gr. (%) 42.5 32.5 30.1 32.4
BV/Sh. (INR) 100.1 114.8 133.7 160.3
RoE (%) 14.6 16.9 19.0 21.3
RoCE (%) 15.1 16.3 18.5 20.6
Div Payout (%) 20.1 19.4 19.8 15.0
Valuations
P/E (x) 16.0 12.1 9.3 7.0
P/BV (x) 2.2 1.9 1.6 1.4
EV/EBITDA (x) 7.8 6.6 5.4 4.5
Div Yield (%) 1.1 1.4 1.8 1.8
EV/Sales (x) 1.1 0.9 0.8 0.7

July 2014 277


Net Sales 4,538 5,725 4,844 5,544

4,954 6,440 5,522 6,431 20,651 23,387
YoY Change (%) 11.8 13.6 14.3 8.9 9.2 12.5 14.0 16.0 12.1 13.3
EBITDA 628 961 633 997

657 1,108 801 1,222 3,218 3,794
Margins (%) 13.8 16.8 13.1 18.0 13.3 17.2 14.5 19.0 15.6 16.2

136 150 160 170 592 616
Interest 2 2 2 6

3 2 2 2 13 10
Other Income 69 78 89 78 74 100 110 115 313 394

592 1,056 749 1,165 2,926 3,561
PBT 564 895 563 798

592 1,056 749 1,165 2,819 3,561
Tax 180 276 187 276

198 343 243 373 919 1,157
Rate (%) 32.0 30.8 33.2 34.6

33.5 32.5 32.5 32.0 32.6 32.5
Reported PAT 384 619 376 522

394 713 505 792 1,901 2,404
Adj PAT 384 619 376 591 394 713 505 792 1,973 2,404
YoY Change (%) 6.6 17.6 17.3 16.2

2.6 15.0 34.5 33.9 15.0 21.9
Margins (%) 8.5 10.8 7.8 10.7 7.9 11.1 9.2 12.3 9.6 10.3
E: MOSL Estimates


Bata India

CMP: INR1,329 Buy
We expect revenue to grow 12.5% YoY (30% QoQ) to INR6.4b in
2QCY14. Same store sales (SSS) growth is likely to sustain at ~9%.
EBITDA margin is likely to expand 40bp YoY to 17.2% (3.9% QoQ).
EBITDA is likely to grow 15% to INR1.1b in 2QCY14.
We expect PAT to grow 15% YoY (and 81% QoQ) to INR713m.
The stock is trading at 35.2x CY14E and 28.0x CY15E EPS. Maintain
Buy with a target price of INR1,400, valuing the stock at 30x CY15E
earnings.
Stores added during the quarter.
Impact of ad campaign on revenue.
SSS growth.

Bloomberg BATA IN
52-Week Range (INR) 1,360 / 765
1,6,12 Rel Perf. (%) 11 / 3 / 20

Y/E Dec 2013 2014E 2015E 2016E
Sales 20.7 23.4 27.1 31.5
EBITDA 3.2 3.8 4.7 5.5
NP 2.0 2.4 3.0 3.6
EPS (INR) 30.8 37.4 47.1 56.2
EPS Gr. (%) 14.9 21.6 25.9 19.4
BV/Sh.(INR) 130.7 157.7 193.1 237.8
RoE (%) 25.7 25.9 26.8 26.1
RoCE (%) 38.2 38.6 40.1 39.0
Payout (%) 25.8 27.9 24.6 20.6
Valuations
P/E (x) 42.8 35.2 28.0 23.4
P/BV (x) 10.1 8.4 6.8 5.5
EV/EBITDA (x) 22.6 18.9 14.9 12.3
Dividend yield 0.5 0.7 0.8 0.8
EV/Sales (x) 4.0 3.5 3.1 2.6

July 2014 278

Harshad Borawake (HarshadBorawake@MotilalOswal.com) / Nitish Rathi (Nitish.Rathi@motilaloswal.com)

Y/E December CY13

CY14 CY13 CY14E
Volumes (m litres) 50.1 54.1 44.8 47.8

48.8 54.0 45.0 48.5 196.8 196.3
Realizations (INR/ ltr) 156 159 161 169

167 173 178 182 160.9 174.9
Net Sales 7,814 8,588 7,196 8,063

8,151 9,342 8,010 8,839 31,661 34,342
YoY Change (%) 0.0 0.9 -0.2 6.4 4.3 8.8 11.3 9.6 1.4 8.5
Net Raw Material 4,429 4,638 4,091 4,727

4,882 5,346 4,500 4,922 17,885 19,650
Employee Expenses 335 385 432 308

391 370 390 360 1,460 1,511
Other Operating Expenses 1,366 1,659 1,212 1,338

1,436 1,541 1,362 1,574 5,575 5,913
EBITDA 1,684 1,906 1,461 1,690

1,442 2,085 1,758 1,983 6,741 7,268
YoY Change (%) 7.4 12.5 20.2 1.5

-14.4 9.4 20.3 17.4 9.8 7.8
Margins (%) 21.6 22.2 20.3 21.0 17.7 22.3 22.0 22.4 21.3 21.2

84 84 85 85 305 338
Interest 5 3 1 8

4 4 4 5 17 17
Other Income 245 226 197 303 177 212 247 279 971 914
PBT before EO Item 1,853 2,056 1,578 1,903

1,530 2,208 1,916 2,172 7,390 7,826
Extraordinary Inc/(Exp) 198 30 228
PBT 1,853 2,254 1,608 1,903

1,530 2,208 1,916 2,172 7,618 7,826
Tax 610 718 563 641

528 726 630 714 2,532 2,598
Rate* (%) 32.9 31.9 35.0 33.7 34.5 32.9 32.9 32.9 33.2 33.2
Reported PAT 1,243 1,536 1,045 1,262

1,002 1,482 1,286 1,459 5,086 5,228
Adj. PAT 1,243 1,401 1,026 1,262

1,002 1,482 1,286 1,459 4,932 5,228
YoY Change (%) 1.1 15.9 19.7 7.0

-19.4 5.7 25.4 15.6 10.2 6.0
Margins (%) 15.9 16.3 14.3 15.7 12.3 15.9 16.0 16.5 15.6 15.2
Adj. EPS 2.5 2.8 2.1 2.6 2.0 3.0 2.6 2.9 10.0 10.6
Equity 495 495 495 495 495 495 495 495 495 495
*Adjusted for exceptional item, E: MOSL Estimates


Castrol

CMP: INR344 Neutral
We estimate EBITDA margin at 22.3% against 22.2% in 2QCY13 and
17.7% in 1QCY14.
We expect revenue to grow ~9% YoY, led by 9% increase in
realizations and flat volumes.
Net profit would grow ~6% YoY to INR1.5b.
The stock trades at 24.4x CY15E EPS. Though we remain positive on
CSTRL's long-term prospects, the ongoing headwinds would keep
near-term earnings subdued. Maintain Neutral.

Bloomberg CSTRL IN
M. Cap. (INR b)/(USD b) 170 / 3
1,6,12 Rel Perf. (%) 10 / -12 / -29

Y/E Dec 2013 2014E 2015E 2016E
Sales 31.7 34.1 36.9 39.6
EBITDA 6.7 7.7 8.6 9.6
Adj. PAT 4.9 5.4 6.0 6.7
Adj. EPS (INR) 10.0 11.0 12.2 13.5
EPS Gr. (%) 10.2 9.9 11.0 13.6
BV/Sh.(INR) 14.8 11.4 13.1 14.7
RoE (%) 71.4 71.4 83.6 97.9
RoCE (%) 94.2 93.2 114.3 132.8
Payout (%) 79.4 85.1 86.2 86.4
Valuations
P/E (x) 29.8 27.1 24.4 25.5
P/BV (x) 20.1 26.0 22.7 23.4
EV/EBITDA (x) 20.8 18.2 16.2 17.2
Div. Yield (%) 2.4 2.7 3.0 2.9

July 2014 279

Nalin Bhatt (NalinBhatt@MotilalOswal.com)


(INR Million)
Net Sales 1,245 1,220 1,263 1,452 1,562 1,504 1,548 1,782 5,179 6,396
YoY Change (%) 24.0 19.0 33.9 22.2 25.5 23.3 22.6 22.7 24.5 23.5
Total Expenditure 675 670 648 617 647 668 683 718 2,611 2,715
EBITDA 570 549 615 835 916 836 866 1,064 2,568 3,681
Margins (%) 45.8 45.0 48.7 57.5 58.6 55.6 55.9 59.7 49.6 57.6
Depreciation 140 151 149 168 174 175 180 187 608 716
Interest 95 95 98 87 84 82 85 87 374 338
Other Income 19 49 74 27 55 60 70 34 168 219
PBT before EO expense 354 352 442 607 712 639 671 824 1,754 2,847
Extra-Ord expense 0 0 0 -164 102 0 0 0 -164 102
PBT 354 352 442 771 610 639 671 824 1,918 2,744
Reported PAT 354 352 442 771 610 639 671 824 1,918 2,744
Adj PAT 354 352 442 607 712 639 671 824 1,754 2,847
YoY Change (%) 151.3 124.0 440.5 68.7

101.4 81.5 51.9 35.8 137.1 62.3
Margins (%) 28.4 28.9 35.0 41.8 45.6 42.5 43.3 46.3 33.9 44.5
E: MOSL Estimates;

June 2014 Results Preview | Sector: Infrastructure

Gujarat Pipavav Port

CMP: INR124 Buy
In 2QCY14, we expect revenue to grow 23% YoY to INR1.5b, EBITDA
to grow 52% YoY to INR836m, and net profit to grow 82% YoY to
INR639m.
Revenue growth would be driven by 15% volume growth in
containers and marginal increase in realization. The INR has
appreciated marginally during the quarter, and there could be some
impact on realization.
We expect margin expansion of ~300bp arising from volume growth,
given the high fixed cost structure for container cargo. Also,
contribution from liquid cargo would aid gross margins.
Introduction of a new service, NMG, an India Middle-East service
operated jointly by Simatech, X-PRESS Feeders and OEL, with the first
call being on 19 September 2013, would aid volumes in CY14/15.
We expect GPPL to post standalone net profit of INR2.8b in CY14 (up
62%) and INR3.6b in CY15 (up 28%). The stock trades at 16x CY15E
earnings.
Container volume growth and average realization
Reefer volumes and contribution to revenues
Contribution from liquid cargo

Bloomberg GPPV IN
1,6,12 Rel Perf. (%) -3 / 66 / 135

Y/E December 2013 2014E 2015E 2016E
Sales 5.2 6.4 7.4 8.7
EBITDA 2.6 3.7 4.4 5.3
NP 1.8 2.8 3.6 3.6
EPS (INR) 3.6 5.9 7.5 7.4
EPS Gr. (%) 137.2 62.3 27.7 -1.1
BV/Sh (INR) 29.0 33.2 38.2 43.0
RoE (%) 13.4 18.9 21.1 18.3
RoCE (%) 13.2 17.8 19.8 21.7
Payout (%) 0.0 30.0 32.4 36.0
Valuations
P/E (x) 34.1 21.0 16.4 16.6
P/BV (x) 4.3 3.7 3.2 2.9
EV/EBITDA (x) 23.6 15.8 13.1 10.7
Div. Yield (%) 0.0 1.2 1.6 1.8

July 2014 280



(INR Million)
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Net Sales 14,094 12,171 13,746 18,333

16,350 14,362 16,770 22,733 58,344 70,249
YoY Change (%) 11.5 22.3 26.6 9.0 16.0 18.0 22.0 24.0 16.1 20.4
EBITDA 2,086 1,523 1,710 2,562

2,419 1,745 2,075 3,453 7,880 9,663
Margins (%) 14.8 12.5 12.4 14.0 14.8 12.1 12.4 15.2 13.5 13.8

489 517 529 575 2,045 2,110
Interest 1,168 1,153 1,174 1,182

1,108 1,094 1,114 1,122 4,677 4,437
Other Income 58 72 176 -15 70 80 100 100 290 351
PBT before EO expense 502 -60 199 807

892 214 532 1,856 1,448 3,467
Extra-Ord expense 1,316 1,000 3 -12 0 0 0 0 2,307 0
PBT -815 -1,060 196 820

892 214 532 1,856 -859 3,467
Tax -216 -259 -65 78

178 43 106 371 -462 693
Rate (%) 26.5 24.4 -33.1 9.5

20.0 20.0 20.0 20.0 53.7 20.0
MI & Profit/Loss of Asso. Cos. 5 6 1 -12 5 6 1 -12 0 0
Reported PAT -603 -807 259 753

709 165 425 1,497 -398 2,774
YoY Change (%) 23.8 -280.5 -155.2 39.4

NM NM 63.8 98.6 53.1 NM
Margins (%) 2.6 -0.4 1.9 4.0 4.3 1.2 2.5 6.6 1.1 3.9
E: MOSL Estimates

June 2014 Results Preview | Sector: Agri

Jain Irrigation

CMP: INR127 Buy
We expect revenue to grow to INR16.3b in 1QFY15, marking a YoY
growth at 16% (decline of 11% QoQ), primarily driven by growth in
the MIS business.
EBITDA margin is expected at 14.8% (flat YoY, 80bp increase QoQ).
PAT is expected to grow to INR709m (loss of INR603m YoY).
The stock is trading at 22x FY15E and 12.4x FY16E EPS. Maintain Buy
with a target price of INR170, valuing it at 16x FY16E earnings.
Working capital cycle of domestic MIS business.
Cash generation and debt reduction.
Impact of deficit rainfall.

Bloomberg JI IN
1,6,12 Rel Perf. (%) 0 / 59 / 126

Y/E March 2014 2015E 2016E 2017E
Sales 58.3 70.2 84.1 99.5
EBITDA 7.7 9.7 11.8 14.0
NP 0.7 2.8 4.9 6.9
EPS (INR) 1.4 6.0 10.6 15.0
EPS Gr. (%) 32.7 315.8 77.4 40.9
BV/Sh. (INR) 47.0 52.3 62.0 75.9
RoE (%) 3.1 12.1 18.6 21.7
RoCE (%) 10.0 12.8 16.3 19.1
Valuations
P/E (x) 91.5 22.0 12.4 8.8
P/BV (x) 2.8 2.5 2.1 1.7
EV/EBITDA (x) 12.9 9.9 7.9 6.4
EV/Sales (x) 1.7 1.4 1.1 0.9

July 2014 281



(INR Million)
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Net Sales 1,046 1,127 1,199 1,242

1,349 1,453 1,546 1,602 4,613 5,945
YoY Change (%) 28.0 28.6 25.9 26.4 29.0 29.0 29.0 29.0 27.2 28.9
Total Expenditure 683 774 865 868 897 1,003 1,121 1,130 3,191 4,138
EBITDA 363 352 333 374

452 451 425 473 1,422 1,807
Margins (%) 34.7 31.3 27.8 30.1 33.5 31.0 27.5 29.5 30.8 30.4

45 47 45 48 173 183
Other Income 73 87 111 129 95 113 144 169 400 520
PBT 393 394 402 459

502 516 525 594 1,649 2,144
Tax 113 108 104 118

141 145 147 166 443 600
Rate (%) 29 27 26 26 28 28 28 28 26.8 28.0
Reported PAT 280 287 298 341

362 372 378 428 1,206 1,544
Adj PAT 280 287 298 341

362 372 378 428 1,206 1,544
YoY Adj PAT Change (%) 68.5 84.9 85.7 59.7

29.0 29.7 26.9 25.3 72.3 28.0
Margins (%) 26.8 25.4 24.8 27.5 26.8 25.6 24.4 26.7 26.1 26.0
E: MOSL Estimates


Just Dial

CMP: INR1,523 Buy
We expect revenue to grow 29% YoY (8.6% QoQ) to INR1.3b, largely
driven by addition of 13,000 campaigns to 275,000 campaigns during
the quarter.
EBITDA margin would decline 120bp YoY (expand 340bp QoQ) to
33.5%, primarily driven by higher advertising expenses.
PAT is likely to grow 29% YoY to INR362m.
The stock is trading at 69.4x CY14E and 51.9x CY15E EPS. Maintain
Buy with a target price of INR1,750, valuing the stock at 60x FY16E
earnings.
Progress in monetization of new launches (Search Plus) during the
quarter.
Guidance on one-time advertising expenditure for new launches.

Bloomberg JUST IN
M. Cap. (INR b)/(USD b) 107 / 2
1,6,12 Rel Perf. (%) 12 / -30 / 104

Y/E March 2014 2015E 2016E 2017E
Sales 4.6 5.9 7.5 9.3
EBITDA 1.4 1.8 2.5 3.2
NP 1.2 1.5 2.1 2.6
EPS (INR) 17.2 22.0 29.5 37.7
EPS Gr. (%) 70.2 28.0 33.8 27.9
BV/Sh (INR) 76.2 93.6 116.1 146.8
RoE (%) 25.1 25.9 28.1 28.7
RoCE (%) 34.3 36.0 39.0 39.8
Payout (%) 13.5 21.1 23.6 18.5
Valuations
P/E (x) 88.9 69.4 51.9 40.5
P/BV (x) 20.1 16.3 13.2 10.4
EV/EBITDA (x) 54.0 42.0 30.3 22.9
Div Yield (%) 0.2 0.3 0.5 0.5
EV/Sales (x) 16.6 12.8 9.9 7.7

July 2014 282



(INR Million)
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Net Sales 7,361 1,032 1,326 392

9,569 1,414 1,790 510 10,111 13,151
YoY Change (%) 53.5 62.1 40.8 -47.0 30.0 37.0 35.0 30.0 42.2 30.1
Total Expenditure 5,718 906 943 332 7,337 1,216 1,253 418 7,899 10,126
EBITDA 1,642 126 382 61

2,232 198 537 92 2,212 3,025
Margins (%) 22.3 12.2 28.8 15.4 23.3 14.0 30.0 18.0 21.9 23.0

38 42 54 56 164 189
Interest 1 9 0 1

1 0 0 0 2 1
Other Income 37 12 32 16 56 19 48 23 97 146
PBT before EO expense 1,642 90 371 30

2,248 174 531 59 2,143 2,980
PBT 1,642 90 371 30

2,248 174 531 59 2,143 2,980
Tax 25 8 6 13

56 4 13 1 52 75
Rate (%) 1.5 9.2 1.5 42.4

2.5 2.5 2.5 2.5 2.4 2.5
MI & Profit/Loss of Asso. Cos. 0 0 2 0 0 0 0 0 2 0
Reported PAT 1,617 81 364 18

2,192 170 518 58 2,090 2,906
Adj PAT 1,617 81 364 18

2,192 170 518 58 2,090 2,906
YoY Change (%) 60.6 23.2 228.0 -84.2

35.5 108.5 42.4 226.6 65.3 39.1
Margins (%) 22.0 7.9 27.4 4.5 22.9 12.0 28.9 11.3 20.7 22.1
E: MOSL Estimates

June 2014 Results Preview | Sector: Agri

Kaveri Seeds

CMP: INR801 Buy
We expect revenue to grow 30% YoY to INR9.6b due to strong growth
in cotton segment, driven by market share gains.
Margins are likely to expand 100bp YoY to 23.3%, driven by better
margins in cotton due to lower cost of production and higher
contribution from single cross corn.
We expect PAT to grow 35.5% YoY to INR2.1b.
The stock is trading at 18.9x FY15E and 13.8x FY16E EPS. Maintain
Buy with a target price of INR930, valuing the stock at 16x FY16E
earnings.
Impact of monsoon
Mix between single cross and double cross

Bloomberg KSCL IN
1,6,12 Rel Perf. (%) 19 / 93 / 110

Y/E March 2014 2015E 2016E 2017E
Sales 10.1 13.2 16.9 21.1
EBITDA 2.2 3.0 4.1 5.2
NP 2.1 2.9 4.0 5.1
EPS (INR) 30.5 42.4 58.1 75.0
EPS Gr. (%) 64.8 39.1 37.0 29.1
BV/Sh. (INR) 75.3 113.3 165.5 234.6
RoE (%) 48.6 45.0 41.7 37.5
RoCE (%) 49.6 46.1 42.7 38.4
Payout (%) 9.1 10.4 10.2 7.9
Valuations
P/E (x) 26.3 18.9 13.8 10.7
P/BV (x) 10.6 7.1 4.8 3.4
EV/EBITDA (x) 17.0 11.9 8.2 5.6
Div Yield (%) 0.3 0.5 0.6 0.6
EV/Sales (x) 3.7 2.7 2.0 1.4

July 2014 283


Y/E March (Rs mn) FY14 FY15 FY14 FY15E
1Q 2Q 3Q 4Q 1QE 2Q 3Q 4Q
Net Sales 3,352 3,658 3,373 3,142

3,601 4,343 4,340 3,806 13,512 16,033
YoY Change (%) 86.3 89.8 68.7 28.4 7.4 18.7 28.7 21.1 67.8 18.7
EBITDA 594 748 493 332

604 889 751 430 2,154 2,707
Margins (%) 17.7 20.4 14.6 10.5 16.8 20.5 17.3 11.3 17.5 16.9

280 320 330 340 944 1,287
Interest 194 210 207 184

209 200 180 200 795 805
Other Income 21 13 21 21 25 30 40 50 76 142
PBT before EO expense 238 342 99 -176

140 399 281 -60 491 756
Extra-Ord expense 41 23 0 -85 0 0 0 0 32 0
PBT 197 319 99 -90

140 399 281 -60 523 756
Tax 57 42 -41 -40

7 20 14 -3 19 38
Rate (%) 29.1 13.2 -41.1 44.1

5.0 5.0 5.0 5.0 3.7 5.0
Minority Interest & Profit/Loss of Asso.
Cos. 4 -1 3 59 0 0 0 0 -57 0
Reported PAT 143 275 142 8

133 379 267 -57 504 719
YoY Change (%) 89 70 55 -93

-7.1 37 89 -786 0.1 35.7
Margins (%) 4.3 7.5 4.2 0.3 3.7 8.7 6.2 -1.5 3.7 4.5
E: MOSL Estimates


PVR

CMP: INR667 Buy
We expect revenue to grow 7.4% YoY (14.6% QoQ) to INR3.6B in
1QFY15. We estimate footfalls at 16m, ATP at INR179 and F&B SPH at
INR60.
EBITDA margin is likely to decline 90bps YoY (expand 620bp QoQ).
We expect PAT to de-grow 7.1% YoY to INR133m.
The stock is trading at an EV of 11.8x FY15E and 8.7x FY16E EBITDA.
We maintain Buy, with a target price of INR760 (10x FY16E
EV/EBITDA).

Bloomberg PVRL IN
1,6,12 Rel Perf. (%) -2 / -22 / 69

Y/E March 2014 2015E 2016E 2017E
Sales 13.5 16.0 19.8 23.3
EBITDA 2.2 2.7 3.6 4.4
NP 0.6 0.7 1.2 1.7
EPS (INR) 13.6 17.5 28.8 41.1
EPS Gr (%) 21.4 28.1 65.0 42.7
BV/Sh (INR) 97.1 111.7 136.5 173.6
RoE (%) 10.8 16.7 23.2 26.5
RoCE (%) 11.1 15.2 22.0 26.4
Payout (%) 23.6 16.6 14.1 9.9
Valuations
P/E (x) 48.9 38.2 23.1 16.2
P/BV (x) 6.9 6.0 4.9 3.8
EV/EBITDA (x) 15.5 12.2 9.0 6.9
EV/Sales (x) 2.5 2.1 1.6 1.3
Div Yield (%) 0.6 0.6 0.8 0.8

July 2014 284

Sandipan Pal (Sandipan.Pal@MotilalOswal.com)

Quarterly performance 56 62.1 56 62.1 (INR Million)
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Operating Income 11,281 13,649 13,884 19,831 14,603 16,326 17,100 20,358 58,645 68,387
YoY Growth (%) 4.4 13.9 -2.7 41.5 29.4 19.6 23.2 2.7 14.8 16.6
EBITDA 1,609 2,121 2,447 3,574 2,305 2,691 2,859 3,425 9,642 11,281
EBITDA Margin (%) 14.3 15.5 17.6 18.0 15.8 16.5 16.7 16.8 16.4 16.5
YoY Growth (%) -13.2 1.8 14.4 33.6 10.7 6.1 -5.1 -6.6 25.3 17.0
Depreciation 564 572 595 817 700 750 800 838 2,548 3,088
Interest 434 476 774 1,058 680 700 790 825 2,894 2,995
Other Income 87 5 335 95 80 100 100 120 774 400
Extraordinary items -37 -84 -41 1 50 70 140 140 -161 400
Profit before Tax 661 993 1,372 1,796 1,055 1,411 1,509 2,023 4,814 5,998
Tax Provisions 201 269 535 175 253 339 362 445 1,180 1,400
Tax / PBT 29 27 39 10 24 24 24 24 23.7 25.0
PAT before MI & Income from
Assoc 460 724 836 1,621 802 1,072 1,147 1,577 3,634 4,599
Min. Int. and Profit from Associate 6 5 11 -9 4 4 4 3 13 15
Consolidated PAT 466 729 847 1,612 806 1,076 1,151 1,580 3,647 4,614
Adj. Consolidated PAT 503 813 888 1,611 756 1,006 1,011 1,440 3,808 4,214
YoY Growth (%) -33.5 5.3 -10.0 -0.9 50.3 23.8 13.9 -10.6 -8.1 10.7
E: MOSL Estimates

June 2014 Results Preview | Sector: Diversified

Sintex Industries

CMP: INR98 Buy
We expect Sintex's 1QFY15 revenues to grow 29% YoY to INR14.6b,
EBITDA to grow 11% YoY to INR2.3b and Adjusted PAT at INR756m.
Growth in revenue YoY would be led by contribution from EPC
business was insignificant in 1QFY15. Prefab to register a growth of
20% YoY, margins 25%
Overseas composites to grow 15% YoY, margin 9%. Domestic
composites to grow 20% YoY on the back of a weak base.
The stock trades at FY16E P/E of 5.7x and EV/EBITDA of 5.3x. We
value Sintex at INR129.

Outlook in monolithic business
Commencement of spinning mill at Gujarat
Operating stabilization of recent acquisitions in Germany and
Poland, along with outlook on overseas and domestic composite
business.

1,6,12 Rel Perf. (%) -3 / 142 / 115

Y/E March 2014 2015E 2016E 2017E
Net sales 58.6 68.4 80.3 93.5
EBITDA 9.6 11.3 15.0 18.3
Adj. PAT 3.8 4.2 5.7 7.8
Adj EPS (INR) 12.2 12.8 17.2 21.8
EPS Gr. (%) -8.1 4.5 34.8 26.3
BV/Sh. (INR) 113.9 123.3 140.1 162.8
RoE (%) 11.4 11.1 13.1 14.4
RoCE (%) 10.9 10.2 11.9 13.0
Payout (%) 7.0 5.8 7.0 7.0
Valuations
P/E (x) 8.1 7.7 5.7 4.5
P/BV (x) 0.9 0.8 0.7 0.6
EV/EBITDA (x) 6.8 7.3 5.3 4.2
Div. Yield (%) 0.7 0.7 0.7 0.7

July 2014 285



(INR Million)
Y/E June FY13 FY14 FY13 FY14E
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE
Net Sales 243 877 852 1,112

721 1,152 1,133 1,475 3,083 4,481
YoY Change (%) -15.5 56.1 9.0 27.7 196.5 31.4 33.0 32.7 23.3 45.3
Total Expenditure 241 675 605 811 582 842 798 1,046 2,332 3,268
EBITDA 2 202 247 301

139 310 335 429 752 1,213
Margins (%) 1.0 23.0 29.0 27.0 19.2 26.9 29.6 29.1 24.4 27.1

3 3 3 3 13 11
Interest 1 0 1 3

0 0 0 0 5 0
Other Income 23 45 26 69 51 40 30 30 163 152

187 348 362 456 896 1,353
PBT 21 243 269 363

187 348 355 456 896 1,346
Tax 0 82 89 104

52 101 85 137 275 374
Rate (%) 0.0 33.6 33.1 28.7 27.9 29.0 23.8 30.0 30.7 27.8
Reported PAT 21 161 180 259

135 247 270 319 621 971
Adj PAT 21 161 180 259

135 247 276 319 621 977
YoY Change (%) -53.5 44.4 20.3 31.7

557.6 53.1 53.3 23.3 23.6 57.3
Margins (%) 8.4 18.4 21.1 23.3 18.7 21.4 24.4 21.6 20.1 21.8
E: MOSL Estimates

June 2014 Results Preview | Sector: Consumer Durables

Symphony

CMP: INR1,068 Buy
We expect revenue to grow 32.7% YoY (and 30.2% QoQ) to INR1.5b,
led by cooler sales on extended summers and strong exports.
EBITDA margin is likely to increase 210bp YoY to 29.1% due to higher
contribution from new products and higher share of exports.
We expect PAT to grow 23.3% YoY (18.1% QoQ) to INR319m.
The stock is trading at 37.2x FY15E and 27.4x FY16E EPS. Maintain
Buy with a target price of INR1,260, valuing the stock at 25x FY16E
earnings.
Based on our channel checks, volume growth for the quarter could
post a positive surprise, given the intensity of summer season and
expectation of El Nino condition.
Growth in export market.

Bloomberg SYML IN
1,6,12 Rel Perf. (%) 4 / 143 / 209

Y/E June 2013 2014E 2015E 2016E
Sales 3.8 5.1 6.5 8.2
EBITDA 0.8 1.2 1.6 2.1
NP 0.6 1.0 1.4 1.8
EPS (INR) 17.2 28.6 38.8 50.4
EPS Gr. (%) 13.2 66.4 35.8 29.9
BV/Sh (INR) 63.5 79.9 102.7 133.0
RoE (%) 29.2 39.9 42.5 42.8
RoCE (%) 43.9 55.4 57.4 57.8
Payout (%) 42.7 41.2 40.0
Valuations
P/E (x) 62.0 37.2 27.4 21.1
P/BV (x) 16.8 13.3 10.4 8.0
EV/EBITDA (x) 37.9 24.0 17.6 13.1
Div. Yld (%) 1.0 1.3 1.6
EV/Sales (x) 7.9 5.8 4.4 3.4

July 2014 286

Jinesh Gandhi (Jinesh@MotilalOswal.com)


(INR Million)
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Net Revenues 24,558 23,316 26,469 33,388 27,365 27,203 31,547 35,325 107,709 121,440
YoY Change (%) 10.5 25.6 15.3 18.4 11.4 16.7 19.2 5.8 17.1 12.7
EBITDA 4,566 4,259 4,651 6,723 5,140 5,062 5,751 7,377 20,196 23,330
Margins (%) 18.6 18.3 17.6 20.1 18.8 18.6 18.2 20.9 18.8 19.2
Depreciation 863 968 1,043 1,195 1,020 1,100 1,150 1,275 4,069 4,545
Interest 1,358 1,212 1,095 1,201 1,200 1,150 1,150 1,086 4,866 4,586
Other Income 265 282 501 264 270 300 500 460 1,314 1,530
PBT before EO Expense 2,609 2,360 3,012 4,592 3,190 3,112 3,951 5,475 12,574 15,728
Extra-Ord Expense 0 199 397 496 0 0 0 0 1,092 0
PBT after EO Expense 2,609 2,162 2,615 4,097 3,190 3,112 3,951 5,475 11,482 15,728
Tax 683 578 521 436 893 871 1,185 668 2,217 3,617
Rate (%) 26.2 26.7 19.9 10.6 28.0 28.0 30.0 12.2 19.3 23.0
Reported PAT 1,927 1,584 2,094 3,661 2,297 2,241 2,766 4,808 9,266 12,111
Income from Associate Co 200 -38 128 -58 255 -50 150 -21 232 334
Adjusted PAT 2,127 1,745 2,619 4,046 2,552 2,191 2,916 4,787 10,379 12,445
YoY Change (%) 4.8 45.7 51.0 29.9 20.0 25.5 11.3 18.3 29.4 19.9
Margins (%) 8.7 7.5 9.9 12.1 9.3 8.1 9.2 13.6 9.6 10.2
E: MOSL Estimates

June 2014 Results Preview | Sector: Agrochemicals

UPL

CMP: INR352 Buy
We estimate United Phosphorus (UPLL) will report 11% YoY growth in
consolidated revenue to INR27.6b. We also estimate 7.5% growth in
domestic revenue and 8.6% growth in international revenue.
EBITDA margin is expected to improve 20bp YoY to 18.8%, translating
into EBITDA growth of 12.6% to INR5.1b.
We estimate PAT growth of 20% YoY to INR2.55b, driven by lower
interest cost and higher contribution from associates (as it divested
stake in the 50% loss-making JV, Sipcam UPL Brasil).
UPLL has sold its 50% stake in Sipcam Agro for USD58.5m to the JV
partner. Divestment of this JV would free up ~INR3.5b, which we
believe would be used for further debt reduction. In our recent
meeting with the management, it had indicated its target to reduce
gross debt-equity to 0.3-0.4x from the current 0.8x.
Current valuation of 11.8x FY15E EPS of INR29 and 10.2x FY16E EPS of
~INR33.5 are very attractive. Maintain Buy with a target price of
INR402 (12x FY16E EPS).
Update on season in the US, EU and Kharif crop in India.
Outlook for FY15, especially on increasing probability of El Nino.
Status of integration of DVA Agro, Brazil and expected margin
improvement in FY15.

Bloomberg UPLL IN
M. Cap. (INR b)/(USD b) 151 / 3
1,6,12 Rel Perf. (%) 10 / 52 / 128

Y/E March 2014 2015E 2016E 2017E
Sales 107.7 121.4 136.0 152.4
EBITDA 20.2 23.3 26.1 29.3
NP 10.4 12.4 14.4 16.8
Adj EPS (INR) 24.2 29.0 33.5 39.2
EPS Gr. (%) 33.6 19.9 15.4 17.0
BV/Sh (INR) 122.4 147.4 176.8 211.9
RoE (%) 21.0 21.5 20.7 20.2
RoCE (%) 19.6 21.3 21.4 21.6
Payout (%) 16.2 14.5 12.5 10.7
Valuations
P/E (x) 14.5 12.1 10.5 9.0
P/BV (x) 2.9 2.4 2.0 1.7
EV/EBITDA (x) 8.8 7.4 6.3 5.3
Div. Yield (%) 0.9 1.0 1.0 1.0

July 2014 287



(INR Million)
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Net Sales 4,082 3,340 3,529 4,224

4,612 4,109 4,412 5,069 15,176 18,208
YoY Change (%) 28.0 6.6 1.1 11.5 13.0 23.0 25.0 20.0 11.6 20.0
EBITDA 309 271 291 354

387 370 397 446 1,225 1,610
Margins (%) 7.6 8.1 8.3 8.4 8.4 9.0 9.0 8.8 8.1 8.8

35 35 39 39 120 148

58 51 58 56 211 223
Other Income 11 11 12 14 11 12 13 14 48 50

305 295 314 365 943 1,288
PBT 237 205 218 283

305 295 314 365 943 1,288
Tax 60 60 43 78

85 83 88 102 241 361
Rate (%) 25.5 29.4 19.5 27.6

28.0 28.0 28.0 28.0 25.6 28.0
Reported PAT 176 145 175 205

220 213 226 263 701 927
Adj PAT 176 145 175 205

220 213 226 263 701 927
YoY Change (%) -14.6 -19.4 14.2 129.1

24.6 46.8 28.8 28.3 11.5 32.2
Margins (%) 4.3 4.3 5.0 4.8 4.8 5.2 5.1 5.2 4.6 5.1
E: MOSL Estimates

June 2014 Results Preview | Sector: Electrical Goods

V-Guard Industries

CMP: INR660 Buy
We expect revenue to grow 13% YoY (9.2% QoQ) to INR4.6b in
1QFY15. We expect overall growth to be driven by Cables, Electric
Water Heaters and Fans.
EBITDA margin would expand 80bp YoY (flat QoQ) to 8.4%, primarily
due to lower ad spends during the quarter and lower employee
expense.
We expect PAT to grow 24.6% YoY to INR220m, driven by margin
expansion.
The stock is trading at 21x FY15E and 15.9x FY16E EPS. Maintain Buy
with a target price of INR750, valuing the stock at 18x FY16E earnings.
Demand for inverters.
Movement in copper prices.

Bloomberg VGRD IN
1,6,12 Rel Perf. (%) 11 / 14 / 6

Y/E March 2014 2015E 2016E 2017E
Sales 15.2 18.2 22.2 27.2
EBITDA 1.2 1.6 2.0 2.5
NP 0.7 0.9 1.2 1.6
EPS (INR) 23.5 31.1 41.0 53.0
EPS Gr. (%) 11.5 32.2 31.9 29.3
BV/Sh (INR) 106.7 129.6 161.3 202.7
RoE (%) 24.2 26.3 28.2 29.1
RoCE (%) 27.3 34.2 38.2 40.1
Payout % 22.4 26.1 22.6 21.9
Valuations
P/E (x) 27.8 21.0 15.9 12.3
P/BV (x) 6.1 5.0 4.0 3.2
EV/EBITDA (x) 16.7 12.6 9.9 7.8
Dividend yield 0.7 1.1 1.2 1.5
EV/Sales (x) 1.3 1.1 0.9 0.7

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