15 January 2018

Market snapshot

Equities - India

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1MChg

10 Yrs G-Sec

7.3

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Flows (USD b)

12-Jan

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0.0

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12-Jan

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CY17%

29.6

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34.0

8.7

15.0

30.9

24.0

CY17%

25.2

14.8

28.6

27.0

CY17%

-6.3

14.4

-4.9

CY17%

0.7

0.0

CY17

7.7

14.0

YTD*

406

5,837

Today’s top research idea

CAPITAL FIRST: Into a different league

A win-win combination



The Boards of IDFC Bank (IDFCB) and Capital First (CAFL) have approved a

merger of the two entities at a 13.9:1 swap ratio. We believe this merger would

have benefits for shareholders of both companies.



The share swap ratio makes it attractive (~12.5% premium to CMP) for CAFL

shareholders. Benefits to IDFCB shareholders will accrue more over a medium

to long term perspective. On our proforma merged numbers, we expect

~20bp/200bp higher ROA/ROE for IDFCB by FY21.



While the merger would result in dilution of BVPS for IDFCB in the short term

(INR41/44 in FY19/20E v/s INR48/51 earlier), we believe its growth and RoE

profile would improve significantly post consolidation. We have a BUY rating on

Capital First and revise target price to INR960 (earlier INR925) – 2.7x FY20 BV.

Research covered

Cos/Sector

Capital First

Infosys

PC Jeweller

H T Media

EcoScope

Results Expectation

Key Highlights

Into a different league

Good show on profitability

Demand outlook robust; growth opportunity massive

Cost optimization supports growth in weak ad market

Retail inflation at a 17-month high in December 2017

Delta Corp | Federal Bank

Piping hot news

IDFC Bank-Capital First may have to raise Rs 4,000 crore to meet norms



The proposed merger between IDFC Bank and Capital First, more than a third

owned by private equity firm Warburg Pincus, will require the merged entity to

raise as much as Rs 4,000 crore…

Chart of the Day: EcoScope–Retail inflation at a 17-month high in December 2017

Retail inflation rises to 5.2% in December 2017...

…primarily driven by vegetables

*Excluding F&B and F&L

Source: Central Statistics Office (CSO), MOSL

Source: CSO, MOSL

Research Team (Gautam.Duggad@MotilalOswal.com)

Investors are advised to refer through important disclosures made at the last page of the Research Report.

Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.

In the news today

Kindly click on textbox for the detailed news link

1

IDFC Bank to grow retail

business with Capital First deal

IDFC Bank Ltd may have finally

found a way to shed its

infrastructure finance company

image and become a people’s

bank—by merging Capital First Ltd

with itself. The merger could be a

way for the lender to build its

retail book, …

2

Italy’s Atlantia in talks with IRB Infra to acquire road assets in $2-

billion deal

Italy’s Atlantia in talks with IRB Infra to acquire road assets in $2-billion

deal

Italian road operator Atlantia, controlled by the Benetton family, is in

exclusive talks with Mumbai-based IRB Infrastructure to acquire its

operational road assets portfolio in a $2-billion deal, multiple sources with

direct knowledge of the matter told ET. This will mark the entry of one of

the world's largest toll road operators into the country.

3

Fortis, RHT Health extend

discussion time by 30 days

Fortis Health Management and

Singapore-listed RHT Health Trust

have extended exclusivity period

to finalise the proposed

acquisition by 30 more days from

January 12. Fortis' board had

approved the proposed

acquisition of entire portfolio of

RHT Health Trust (RHT) for an

enterprise value of around Rs

4,650 crore….

4

Binani Cement’s 11 mt output

capacity may be valued at

Rs7,600 crore: JSW’s Parth

Jindal

Intense competition could result

in Binani Cement Ltd’s 11 million

tonne (mt) production capacity

being valued at upwards of

Rs7,600 crore, according to Parth

Jindal, managing director of JSW

Cement Ltd, one of the potential

bidders …

5

Idea Cellular, Vodafone may

start operating as one entity

from April

Idea Cellular Ltd and Vodafone

Group Plc’s Indian unit are likely

to start operating as a single unit

from April, two people aware of

the matter said. The two

companies, which are currently

negotiating one of the most

complex mergers in India, will

create the world’s second largest

and India’s largest telecom

operator, surpassing Bharti Airtel

Ltd, post completion of the

merger process…

6

Investors wary of Shree

Cement’s plan to buy plant in

the UAE

Investors and analysts are not

impressed with Shree Cement Ltd’s

plans to acquire a 4-million tonne

cement plant in the United Arab

Emirates for an enterprise value of

$305 million, or Rs1,945 crore at

current exchange rates. A day after

it announced the deal, …

7

Cairn India to invest Rs 37,000

crore to ramp up production

Vedanta's oil and gas vertical Cairn

India is planning to invest Rs 37,000

crore to ramp up crude production

at its Barmer oil fields in Rajasthan.

The investment will be made over

the next few years, which will

enhance the production of crude

oil…

15 January 2018

2

Capital First

BSE SENSEX

34,592

S&P CNX

10,681

15 January 2018

Update | Sector: Financials

CMP: INR836

TP: INR960 (+15%)

Buy

Into a different league

A win-win combination



Stock Info

Bloomberg

Equity Shares (m)

52-Week Range (INR)

1, 6, 12 Rel. Per (%)

M.Cap. (INR b)

M.Cap. (USD b)

Avg Val, INRm

Free float (%)

CAFL IN

98.9

853 / 584

20/4/7

81.0

1.3

518

64.4





Financials Snapshot (INR b)

2018E 2019E 2020E

Y/E Mar

NII

18.1 23.4

29.4

PPP

11.5 15.3

19.5

PAT

3.2

4.3

5.5

EPS (INR)

32.8 43.7

56.5

EPS Gr. (%)

33.1 33.4

29.2

BV/Sh. (INR)

263.7 303.2 355.0

RoA on AUM (%) 1.7

1.8

1.9

RoE (%)

13.2 15.4

17.2

Payout (%)

9.0

8.0

7.0

Valuations

P/E (x)

25.5 19.1

14.8

P/BV (x)

3.2

2.8

2.4

Div. Yield (%)

0.4

0.4

0.5

Shareholding pattern (%)

As On

Sep-17 Jun-17 Sep-16

Promoter

36.0

36.0

64.4

DII

13.1

10.9

6.5

FII

24.3

25.7

7.3

Others

26.6

27.4

21.8

FII Includes depository receipts

Stock Performance (1-year)

Capital First

Sensex - Rebased

870

790

710

630

550

The Boards of IDFC Bank (IDFCB) and Capital First (CAFL) have approved a merger of

the two entities at a 13.9:1 swap ratio. We believe this merger would have benefits

for shareholders of both companies, though near term regulatory & integration

challenges persist.

The share swap ratio makes it attractive (~12.5% premium to CMP) for CAFL

shareholders. Benefits to IDFCB shareholders will accrue more over a medium to long

term perspective. On our proforma merged numbers, we expect ~20bp/200bp higher

ROA/ROE for IDFCB by FY21. Without factoring in cost related synergy benefits,

balance sheet realignment would drive 4-5% higher profitability for combined entity.

While the merger would result in dilution of BVPS for IDFCB in the short term

(INR41/44 in FY19/20E v/s INR48/51 earlier), we believe its growth and RoE profile

would improve significantly post consolidation. We have a BUY rating on Capital First

and revise target price to INR960 (earlier INR925) – 2.7x FY20 BV. We expect share

price of CAFL to largely track the price of IDFCB in the ensuing quarters. We have a

neutral rating on IDFCB.

Swap ratio favourable for CAFL shareholders

IDFCB and CAFL have entered into a share swap arrangement at a ratio of 139

shares of IDFCB for 10 shares of Capital First. At the CMP of IDFCB, this implies a

value of INR940/share for CAFL – translating to 3.1x FY19E BVPS. This is a healthy

(12.5%) premium to current market price.

This deal would result in 40% equity

dilution for IDFCB shareholders.

Benefits for Capital First shareholders



Healthy premium (12.5%) to current market price. In the last five trading

session, the stock has already run up by ~11% based on media reports.



Requirement of lower liquidity on balance sheet – Typically 10-12% of total

assets of CAFL which led to drag on earnings.



Reduction in funding cost – 100bps lower with better credit rating of IDFCB

(AAA by ICRA) and access to retail liabilities.



Improved visibility for long term growth on a banking platform and access to

diversified retail liability base.

IDFCB – Long term positive; No major benefits in the near term



Diversification of customer asset from largely wholesale to Retail – Mix to

change from 80:20 to 65:35.



Large retail customer base (~3m) as well as geographical spread (228

locations across the country) of CAFL to capitalize on for cross sell of banking

products.

15 January 2018

3



The combined entity would have a customer base of 5m with an enviable

distribution network of 194 branches, 353 dedicated BC outlets and over 9,100

micro-ATM points.



Improvement in ROAs/ROEs by ~20/200bps to 1.2-1.3%/~11% due to better

profitability of CAFL.



Better than expected growth rates, with Mr. Vaidyanathan at the helm of

affairs.



Removes the overhang of shareholding issue of IDFC Ltd – Combined entity will

have less than 40% (~38%) shareholding by IDFC Ltd – As required by RBI by

October 2018.



No need for raising additional capital for next three years due to healthy

capitalization of both entities. On our proforma merged numbers, leverage on

balance sheet to remain less than 10x, even by FY21.

Immediate synergy benefits



The merged entity will have to borrow INR60-100b additional (after knocking off

excess liquidity sitting on CAFL balance sheet) over FY19-21 to take care of

CRR/SLR requirement. This would have negative drag of INR1-1.5b on earnings

over FY19-21



We are assuming re-pricing of Capital first liabilities by 100bp leading to gain of

INR2.5-4b over FY19-21.



~30-35% of the Capital First portfolio qualifies for PSL; Hence no additional

benefit of PSL for IDFCB further a drag to shortfall of PSL at CAFL level itself. This

will drag earnings by ~INR1b



Overall balance sheet realignment synergy related immediate benefit could be

INR1-1.4b over FY19-21 at the pre-tax level in our view. Without factoring in

opex and cross sell related synergies we expect benefit of 4-5% on combined

profitability.

Some headwinds post-merger



Shortfall of PSL loans to increase as ~30-35% of the portfolio of CAFL qualifies

for PSL



HR related challenges will remain a key issue to realign culture at both entities.

High profile exit at the corporate banking level in IDFCB would be negative.



Execution remains a key challenge; Post conversion from NBFC to bank IDFCB

has seen rapid changes. From a pure infra lender to across spectrum corporate

lending; acquisition of MFI and now merger with Retail NBFC.

15 January 2018

4

12 January 2018

3QFY18 Results Update | Sector: Technology

Infosys

Buy

BSE SENSEX

34,503

Bloomberg

Equity Shares (m)

M.Cap.(INRb)/(USDb)

52-Week Range (INR)

1, 6, 12 Rel. Per (%)

Avg Val, INRm

Free float (%)

S&P CNX

10,651

INFO IN

2,297

2,470.6 / 38.8

1089 / 862

3/3/-19

5012

87.1

CMP: INR1,078

TP: INR1,250 (+16%)

Good show on profitability

Steady performance and outlook – an encouraging sign

Financials & Valuations (INR b)

2017 2018E

Y/E Mar

684.9

704.8

Net Sales

186.1

188.0

EBITDA

143.8

160.1

PAT

62.8

64.4

EPS (INR)

6.4

2.6

Gr. (%)

301.5

277.2

BV/Sh (INR)

22.0

24.3

RoE (%)

22.0

24.3

RoCE (%)

17.1

16.7

P/E (x)

3.6

3.9

P/BV (x)

2019E

778.6

205.8

152.9

70.7

9.7

322.0

23.1

23.1

15.2

3.3

Estimate change

TP change

Rating change



In-line revenues; optimistic on BFS recovery:

3QFY18 CC revenue growth of

0.8% QoQ was largely in line with our estimate of +1% QoQ. Led by higher

furloughs, budget cuts and delayed ramp-ups, a 1.6% QoQ fall in BFS was in

contrast to 2QFY18 commentary. However, a pick-up in the vertical starting

next quarter, and expectations of a better CY18 v/s CY17 put worries to rest.



Superior margin execution continues:

EBIT margin of 24.3% (+10bp QoQ)

exhibited stability, despite wage hikes for mid/senior management. Strong

execution over last three quarters was driven by improved utilization, which

at 85% is at its all-time high. With little juice left to squeeze out from this

lever, INFO has moved its focus on improving onsite/offshore mix and roll

ratios onsite, and fresher hiring onsite to support its cost structure. INFO still

maintained guidance of 23-25% EBIT margin.



APA boosts PAT:

PAT of INR51b included an exceptional reversal of income

tax expense provision of USD225m, pertaining to previous periods and no

longer required due to conclusion of an Advance Pricing Agreement (APA)

with US IRS. Excluding the one-off, PAT stood at INR37b (-0.8% QoQ; v/s est.

of INR35.3b, -5.4% QoQ). Consequent to the agreement, INFO's overall

effective tax rate is likely to fall 100bp up till FY21, driving minor upgrades.



Valuation view – Banking on the comeback:

While INFO left its 5.5-6.5%

growth guidance unchanged (implying broad range of -0.5% to +3.0% for

4QFY18), expectations of QoQ pick-up lead us to bake in 6% YoY CC growth

for FY18 and pick-up in FY19. Also, robust execution and availability of

further levers to pull are encouraging cues of stable margins. INFO’s

performance after its recent upheaval has been steady. Further solidity with

leadership/board changes will help shift focus on strategy. Our TP of

INR1,250 discounts forward earnings by 16x (16% upside). Maintain

Buy.

FY18E

2Q

3Q

2,728

2,755

2.9

1.0

175,670

177,940

1.5

3.0

38.7

38.5

11.9

11.4

47,020

48,170

26.8

27.1

24.2

24.3

8,830

9,620

27.4

2.9

37,260

36,970

6.8

-0.8

3.3

-0.3

16.3

16.2

198,440

201,691

85.1

85.4

21.4

18.7

44.4

45.2

50.4

51.4

FY17

4Q

2,797

1.5

171,200

0.0

38.4

12.2

47,209

27.6

23.4

7,019

27.0

36,003

-2.6

-0.1

16.6

207,947

88.9

10,208

7.4

684,850

9.7

39.3

12.2

186,050

27.2

24.7

30,790

28.0

143,830

FY18E

10,931

7.1

704,785

2.9

38.6

11.9

188,009

26.7

24.0

33,609

21.0

160,143

Est.

3QFY18

2,751

0.9

178,171

3.2

38.4

12.0

47,122

26.4

23.9

7,090

29.0

35,257

-5.4

-4.9

16.2

209,281

86.3

Var.

(%/bp)

0.1

14bp

-0.1

-13bp

0bp

-62bp

2.2

62bp

38bp

35.7

4.9

460bp

462bp

-3.6

-92bp

Quarterly Performance (Consolidated)

Y/E March

Revenue (USD m)

QoQ (%)

Revenue (INR m)

YoY (%)

GPM (%)

SGA (%)

EBITDA

EBITDA Margin (%)

EBIT Margin (%)

Other income

ETR (%)

PAT

QoQ (%)

YoY (%)

EPS (INR)

Headcount

Util excl. trainees (%)

Attrition (%)

Offs hore rev. (%) (IT Serv)

Fixed Price (%)

1Q

2,501

2.2

167,820

16.9

38.7

12.2

44,470

26.5

24.1

7,530

28.4

34,360

-4.5

13.4

15.0

197,050

81.1

21.0

43.0

45.7

FY17

2Q

3Q

2,587

2,551

3.4

-1.4

173,100

172,730

10.7

8.6

39.1

39.7

11.8

12.2

47,330

47,670

27.3

27.6

24.9

25.1

7,600

8,200

28.8

28.1

36,060

37,080

4.9

2.8

6.1

7.0

15.8

16.2

199,829

199,763

83.1

82.4

20.0

18.4

43.0

43.5

47.1

49.5

4Q

2,569

0.7

171,200

3.4

39.7

12.5

46,580

27.2

24.6

7,460

27.0

36,030

-2.8

0.2

15.8

200,364

82.6

17.1

43.3

49.4

1Q

2,651

3.2

170,780

1.8

38.8

12.1

45,610

26.7

23.7

8,140

28.2

34,880

-3.2

1.5

15.3

198,553

84.5

21.0

43.4

49.3

6.6

11.3

62.8

64.4

200,364 207,947

82.8

86.3

15 January 2018

5

PC Jeweller

BSE SENSEX

34,592

S&P CNX

10,681

12 January 2018

Update

| Sector:

Retail

CMP: INR549

TP: INR645 (+17%)

Buy

Demand outlook robust; growth opportunity massive

Domestic jewelry retail business to grow at a CAGR of 25-30% over the

next five years

We recently met the management of PC Jeweller (PCJL). Our key takeaways:



PCJL remains confident of 25-30% CAGR in the domestic jewelry retail business over

the next five years.



The franchisee model is working well so far; going forward, franchisee stores will be

~80% of incremental annual store openings.



PCJL has massive opportunity to grow at the cost of unorganized players. Though

competition from organized players will increase as the salience of the organized

segment goes up 3-4 years down the line, the company believes its strengths on

design (craft) and low cost manufacturing will serve it well in the long term.



We have a BUY rating on the stock, with a target price of INR645, valuing the

company at 29x December 2018E EPS, 40% discount to Titan. We believe that the

valuation gap vis-à-vis Titan will shrink further, once PCJL demonstrates its ability to

maintain its revenue and earnings trajectory.

Stock Info

Bloomberg

Equity Shares (m)

52-Week Range (INR)

1, 6, 12 Rel. Per (%)

M.Cap. (INR b)

M.Cap. (USD b)

Avg Val, INRm

Free float (%)

PCJL IN

394.2

552/177

20/111/148

216.4

3.3

754

39.5

Financials Snapshot (INR b)

2018E 2019E

Y/E Mar

Net Sales

103.6 123.9

EBITDA

10.2

12.1

PAT

5.9

7.3

EPS (INR)

15.1

18.4

Gr. (%)

41.0

22.3

BV/Sh (INR)

97.7 112.5

RoE (%)

16.5

17.5

RoCE (%)

17.5

18.0

P/E (x)

36.5

29.9

P/BV (x)

5.6

4.9

2020E

149.8

14.7

9.3

23.5

27.8

131.1

19.3

19.5

23.4

4.2

Domestic business can easily grow 25-30% over next five years

Growth momentum continues to be strong in the domestic business, as organized

players are gaining share sharply. Earlier, unorganized players were able to evade

both direct and indirect taxes and had practices like under-caratage, which is no

longer possible. The management expects 25-30% CAGR in domestic business over

the next five years, led by 10-15% SSSG and 15% growth through new store

additions. Proportion of cash sales has declined from 60% earlier to 35-40%.

Another 40% of sales now come from credit cards and 20-25% from gold exchange,

indicating changing customer practices. Near-term growth in the exports business

is likely to be subdued due to introduction of 5% VAT from January 01, 2018 in UAE

(one of the major buyers of Indian jewelry) on the back of 5% customs duty

imposed in January 2017. Jewelers are still awaiting clarity on whether VAT will be

applicable on re-exported gold jewelry. We believe that sharp growth in the

domestic business along with 5-8% growth in the exports business over next five

years will lead to the share exports declining down below 20% of the standalone

business (34% in FY17 and 32% in 1HFY18).

Shareholding pattern (%)

As On

Dec-17 Sep-17 Dec-16

Promoter

60.5

60.5

70.6

DII

3.1

2.4

0.0

FII

30.4

31.0

23.4

Others

6.0

6.1

6.0

FII Includes depository receipts

Stock Performance (1-year)

PC Jeweller

Sensex - Rebased

600

475

350

225

100

Franchisee model doing well; will help improve RoCE substantially

The franchisee model is working well so far for PCJL. It is confident of opening its

100

th

overall store by the end of the current fiscal. It has already done market

studies and is ready with the expansion plans for the next two years. Going

forward, franchisee stores will be ~80% of annual store openings. Robust systems

for control are also in place to support the backend. Franchisees are able to turn

over gold jewelry 4x a year and diamond jewelry 2x a year. With RoCEs of 20%, the

business is attractive to potential franchisees, who also get gold on lease from

banks. Use of technology helps to further lower working capital requirements for

PCJL.

15 January 2018

6

Starting with high-end jewelry initially, virtual reality goggles at stores will enable

viewing of merchandise from other stores in the city, other stores in the state and

stores in different parts of the country as well, which will then be shipped to the

customer. PCJL plans to add virtual stores in airports and malls as well. With the

ability to get guidance from experts on suitability, the company will have facilities

enabling ordering from these stores as well in two months’ time. Expansion through

franchisees and high asset turns will help improve PCJL’s RoCEs substantially over

the next 3-5 years.

Design and manufacturing capabilities to be the key differentiator

PCJL believes that competition from organized players is not an issue today, but will

increase, as the salience of the organized segment goes up (currently 30% of jewelry

in India) 3-5 years down the line. Yet, it believes that its design skills and lower cost

of manufacturing will act as key differentiators. The company has introduced a

range of wedding jewelry (including premium jewelry under the

Azva

brand) as well

as light-weight jewelry to stay ahead of the competition (unorganized and regional

organized players). It has also increased its annual ad spends to support the new

collection and brand image. Its ad campaign introducing new brand ambassadors,

Akshay Kumar and Twinkle Khanna, has received good response. PCJL will have four

campaigns a year – two for gold jewelry and two for diamond jewelry, enabling

increasing proportion of studded sales. It also aims at own manufacturing (75% of

sales) of 100% in 3-4 years, which will help reduce cost of manufacturing and will

also give higher control on execution. PCJL currently has four factories in the NCR.

Valuation and view

Organized players have only ~30% share of the INR2t jewelry market in India, with

the national players having <10% share. However, armed as they are with the

advantages of scale, technology, brand trust, superior hedging policies, wider variety

and huge marketing muscle, nation-wide players like PCJL will continue to take share

away from the unorganized players for whom the pressures of compliance have

whittled away at their ability to offer lower rates to consumers. The value migration

to organized players is so strong that Titan and PCJL are expected to report by far

the highest EPS CAGR over FY17-20 in our Consumer and Retail universe. While PCJL

might not have had the first mover advantage that Tanishq had, it has emerged as

India’s second-largest Jewelry Retailer in little over a decade. We value the company

at 29x December 2019E EPS (implying 40% discount to our target multiple of 49x for

Titan) and get a revised one-year target price of INR645 for PCJL – an upside of 17%.

15 January 2018

7

12 January 2018

3QFY18 Results Update | Sector: Media

HT Media

Neutral

BSE SENSEX

34,592

Bloomberg

Equity Shares (m)

M.Cap.(INRb)/(USDb)

52-Week Range (INR)

1, 6, 12 Rel. Per (%)

Avg Val, INRm

Free float (%)

Financials & Valuations (INR b)

2017 2018E

Y/E Mar

Net Sales

24.5

23.7

EBITDA

3.0

4.1

Adj PAT

1.7

2.7

Adj EPS (INR)

7.4

11.8

Gr. (%)

-1.8

59.3

BV/Sh (INR)

96.8

108.2

RoE (%)

7.9

11.5

RoCE (%)

9.7

11.1

P/E (x)

15.6

9.8

P/BV (x)

1.2

1.1

EV/EBITDA (x)

12.2

7.9

S&P CNX

10,681

HTML IN

233

19.2 / 0.3

117 / 74

14/31/22

49

30.5

CMP: INR115

TP: INR117(+2%)

Cost optimization supports growth in weak ad market

Subdued revenue growth:

Muted ad and circulation revenue growth pulled

down overall revenue by 4% YoY (+12% QoQ) to INR6.3b (5% miss). However,

EBITDA increased 22% YoY (+29% QoQ) to INR1.3b (est. of INR1.0b), led by the

company’s cost-restructuring initiatives. Margin expanded 450bp YoY (+290bp

QoQ) to 21.5%. This coupled with a) 20% YoY reduction in finance cost and b)

17% YoY rise in other income (led by INR311m gain on sale of Land & Building)

led to overall PAT growth of 36% YoY (+88% QoQ) to INR1.2b (est. of INR0.6b).

English business more hit than Hindi:

English business ad revenue declined 8%

YoY, led by a lower-double-digit decline in ad volumes, partly offset by yield

improvement. Hindi business ad revenues recovered, growing 5% YoY (3%

volume and 2% pricing), as the impact of GST-related uncertainty subsided.

Circulation-wise, both English and Hindi saw a sharp 14-15% YoY decline, as

volumes and pricing were impacted by intense competition in the legacy

markets. However, rising newsprint prices may compel industry players to

increase cover prices, partly mitigating the adverse impact.

Hindi market recovery to support growth:

Improving ad spends from the FMCG

and retail segments are likely to improve Hindi business ad growth, even as

English business ad growth is expected to remain sluggish. Management’s

strong cost-optimization exercise is expected to improve EBITDA margin by

510bp in FY18. This, however, is likely to get partly reversed as discretionary

costs inch up in FY19 to support revenue growth.

Maintaining Neutral; TP at INR117:

We estimate revenue/EBITDA growth of -

3%/59% in FY18, with the impact of lackluster ad/circulation market getting

offset by cost optimizations. We expect ~3% revenue/PAT growth in FY19, as

Hindi print market improvement gets offset by a weak English print market.

Maintain

Neutral

with a TP of INR117, assigning 9x on Dec’19E EPS of INR12.5.

(INR Million)

1Q

6,147

4.5

5,504

643

10.5

295

247

478

579

0

579

186

32.2

168

224

224

-9.5

3.6

FY17

2Q

3Q

6,022 6,499

0.2 -4.6

5,518 5,394

505 1,105

8.4 17.0

304 312

245 241

780 549

736 1,100

0

0

736 1,100

224

36

30.5 3.3

202 150

309 914

309 914

-16.1 32.9

5.1 14.1

4Q

1Q

5,853 5,990

-7.3

-2.5

5,122 5,191

731

799

12.5 13.3

337

320

218

194

488

531

665

817

0

0

665

817

225

239

33.8 29.2

184

162

256

415

256

415

-40.7 85.5

4.4

6.9

FY18

2Q

3Q

5,606 6,254

-6.9 -3.8

4,561 4,907

1,045 1,347

18.6 21.5

317 307

199 194

435 645

965 1,491

-31

0

997 1,491

219 121

22.0 8.1

116 126

662 1,244

638 933

106.3 2.1

11.4 14.9

FY17

4QE

5,894

0.7

4,987

908

15.4

329

202

465

841

0

841

292

34.7

134

415

415

62.4

7.0

FY18E

3QFY18E Est Var (%)

24,521 23,745 6,589

-5

-2.0

-3.2

1.4

21,538 19,646 5,565

-12

2,983 4,099

1,024

32

12.2

17.3

15.5

599.2

1,248 1,273

363

-15

951

788

236

-18

2,295 2,076

559

15

3,079 4,114

984

52

0

-31

0

3,079 4,145

984

52

671

871

226

21.8

21.0

23.0

705

538

160

1,703 2,737

598

108

1,703 2,712

598

56

-1.9

59.3

-34.5

6.9

11.4

9.1

583.7

2019E

24.5

4.0

2.8

12.1

2.6

119.8

10.6

10.4

9.5

1.0

7.1

Estimate change

TP change

Rating change

Consolidated - Quarterly Earning Model

Y/E March

Net Sales

YoY Change (%)

Total Expenditure

EBITDA

Margins (%)

Depreciation

Interest

Other Income

PBT before EO expense

Extra-Ord expense

PBT

Tax

Rate (%)

Minority Interest & P/L of Asso. Cos.

Reported PAT

Adj. PAT

YoY Change (%)

Margins (%)

15 January 2018

8

E

CO

S

COPE

Retail inflation at a 17-month high in December 2017

November IIP surprises on the upside





12 January 2018

The Economy Observer

CPI inflation rose to a 17-month high of 5.2% in December 2017, higher than our/market expectation of 4.9%/5.1%.

Vegetable inflation shot up to a four-year high of 29.1%, while core CPI rose to a 40-month high of 5.1% on account of a

rise in housing inflation. Inflation in ‘core services’ remained benign at 3.5%.

IIP surprised on the upside, rising by a sharp 8.4% in November 2017, much higher than our/market expectation of an

increase of 2.1%/~4.4%, led by consumer non-durables, capital goods and construction/infra goods.

We expect inflation to inch above 6% in 1QFY19 and peak at ~7% in June 2018 on account of an adverse base effect.

However, a high base is likely to pull down CPI inflation to sub-4% in 2HFY19. Thus, we expect the RBI to look through

such statistical effects and maintain status quo through 2018.





I. Retail inflation surges to a 17-month high in December 2017











CPI inflation rises to 5.2% in December 2017…:

CPI-based inflation rose to 5.2%

YoY in December 2017 from 4.9% in the preceding month

(Exhibit 1).

This was

the first instance of 5%+ inflation in 17 months. The number was higher than our

estimate of 4.9% and consensus of 5.1%. Inflation has continuously increased

over the last six months, from a record-low of 1.6% in June 2017, owing to an

unfavorable base effect.

…pushed up by vegetables:

Inflation in vegetables shot up to a four-year high of

29.1% in December 2017 from 22.5% in November, contributing 22bp to the

MoM rise in headline inflation

(Exhibit 2).

Excluding vegetables, inflation was

150bp lower at 3.7%. Vegetables have been responsible for the sharp rise in

inflation over the last six months. Headline inflation has risen by 375bp between

June and December 2017, but excluding vegetables, it has risen by just 83bp.

Food inflation rose to 4.9% in November 2017 from 4.3% in October.

Core inflation rises to 5.1% in December…:

Core

inflation (all items excluding

‘food & beverages’ and ‘fuel & light’) rose to a 40-month high of 5.1% in

December 2017 from 4.7% in the previous month (Exhibit

3).

Core-core inflation

(excluding petrol/diesel from core inflation) also increased to 5.2% from 4.9% in

the previous month. The rise in both core and core-core inflation was driven by

higher housing inflation (on account of implementation of 7

th

CPC house rent

allowance hikes from August).

…while inflation in ‘core services’ remains muted:

Further refinement of CPI

items shows that inflation in ‘core services’ remained muted at 3.5% in

December 2017; inflation in this category has remained at sub-4% levels since

the last 98 months.

We expect inflation to rise to over 6% in 1QFY19 and peak at ~7% in June 2018

on account of an adverse base. This closes the possibility of a rate cut and

increases the odds of a rate hike. However, a high base should pull down CPI

inflation to sub-4% in 2HFY19. Thus, we believe that the RBI is likely to look

through such statistical effects and maintain status quo in 2018.

15 January 2018

9

December 2017 Results Preview | Sector: Others

Delta Corp

Bloomberg

Equity Shares (m)

M. Cap. (INR b)/(USD b)

52-Week Range (INR)

1,6,12 Rel Perf. (%)

DELTA IN

230.7

47 / 1

218 / 66

28 / 8 / 170



CMP: INR301



Under Review

We expect revenue to grow 45% YoY to INR1,502m, driven by

traction in Goa casinos and ramp-up of online business.

EBITDA margin is likely to expand 1,480bp to 45%, and EBITDA is

expected to grow 115.9% YoY to INR676m on low base.

Net profit is likely to increase 313.8% YoY to INR433m.

Financial Snapshot (INR Billion)

Y/E March

2017 2018E 2019E 2020E

Sales

EBITDA

Adj. PAT

Adj. EPS (INR)

EPS Gr. (%)

BV/Sh.(INR)

RoE (%)

RoCE (%)

Payout (%)

Valuations

P/E (x)

P/BV (x)

EV/EBITDA (x)

Div. Yield (%)

100.2

7.7

38.1

0.1

54.0

5.2

23.1

0.4

38.0

4.7

17.0

0.4

29.6

4.1

13.0

0.5

4.5

1.6

0.7

3.1

125.5

39.7

8.1

8.7

13.2

5.7

2.5

1.5

5.7

85.4

59.3

12.1

11.6

25.5

7.5

3.4

2.1

8.0

42.1

65.7

12.9

12.9

19.5

9.2

4.2

2.8

10.3

28.5

74.4

14.8

22.4

16.3



Key issues to watch for







Commencement of Sikkim airport.

Ramping up of online business.

Change in Goa casino policy.

Consolidated - Quarterly Earning Model

Y/E March

Net Sales

YoY Change (%)

Total Expenditure

EBITDA

Margins (%)

Depreciation

Interest

Other Income

PBT before EO expense

Extra-Ord expense

PBT

Tax

Rate (%)

Minority Interest & P/L of Asso. Cos.

Reported PAT

Adj PAT

YoY Change (%)

Margins (%)

E: MOSL Estimates

1Q

1,087

34.6

671

415

38.2

91

87

9

246

-46

292

85

29.2

4

202

170

2,539.9

15.6

FY17

2Q

3Q

1,343

1,036

43.8

3.4

776

723

567

313

42.2

30.2

93

89

87

82

11

11

399

152

2

5

397

91

22.9

-16

322

323

494.1

24.1

147

40

27.2

6

101

105

-9.4

10.1

4Q

1,081

5.3

737

344

31.8

87

94

19

182

0

181

64

35.4

3

114

114

-29.3

10.5

1Q

1,286

18.4

833

453

35.2

89

70

37

332

-18

350

127

36.1

1

223

211

24.4

16.4

FY18

2Q

3QE

1,453

1,502

8.2

45.0

798

826

655

676

45.1

45.0

94

100

22

10

86

80

624

646

0

0

624

194

31.1

-2

433

433

33.8

29.8

646

213

33.0

0

433

433

313.8

28.8

FY17

4QE

1,535

42.0

849

686

44.7

105

0

80

661

0

661

218

33.0

0

443

443

289.1

28.9

4,547

21.2

2,907

1,640

36.1

361

350

49

978

42

936

280

29.9

2

654

683

118.8

15.0

FY18E

5,717

25.8

3,213

2,504

43.8

389

100

280

2,295

0

2,295

780

34.0

3

1,512

1,512

121.3

26.4

15 January 2018

10

December 2017 Results Preview | Sector: Financials

Federal Bank

Bloomberg

Equity Shares (m)

M. Cap. (INR b)/(USD b)

52-Week Range (INR)

1,6,12 Rel Perf. (%)

Financial Snapshot (INR b)

Y/E Mar

2017 2018E

NII

30.5 36.5

OP

19.2 23.6

NP

8.3

10.2

NIM (%)

3.3

3.2

EPS (INR)

4.8

5.5

EPS Gr. (%)

74.1 15.1

BV/Sh. (INR)

50.8 63.4

ABV/Sh. (INR)

47.2 57.2

ROE (%)

9.9

9.6

ROA (%)

0.8

0.8

Payout (%)

26.1 20.3

Valuations

P/E(X)

22.3 19.4

P/BV (X)

2.1

1.7

P/ABV (X)

2.3

1.9

Div. Yield (%)

1.0

0.7

FB IN

1719.0

185 / 3

128 / 66

-4 / -12 / 36



2019E

43.6

28.6

12.9

3.2

6.6

19.9

69.2

62.3

10.0

0.9

19.7

16.2

1.6

1.7

0.8

2020E

51.8

34.2

16.0

3.2

8.2

23.9

76.6

69.0

11.3

0.9

19.7

13.1

1.4

1.6

0.8





CMP: INR108



TP: INR146 (+35%)

Buy



We expect FB to report ~22% YoY (6% QoQ) loan growth, aided by

renewed focus on corporate growth. Traction in SME and retail

loans would be maintained. We expect NIM to stay flat QoQ, as any

pressure in yields should be supported by benign cost of funds.

Other income growth is likely to moderate to 14% YoY, with

moderation in treasury gains partly offset by healthy fee income.

Overall PPoP growth is expected to be ~24% YoY, led by strong

revenue growth and controlled opex (+12% YoY).

We expect slippages to decline to INR2.5b (at 1.4% annualized

slippage ratio) v/s INR2.8b in 2QFY18, which had a bulky

restructured account slipping into NPA. GNPA is expected to

decline marginally to 2.2%.

We expect PAT of INR2.6b v/s INR2.1b in 3QFY17 and ~INR2.6b in

2QFY18. FB trades at 1.6x FY19E BV and 16.2x FY19E EPS. Buy.

Key issues to watch for



Outlook on asset quality.



Strategy on balance sheet growth, particularly corporate growth.

Quarterly Performance

1Q

6,927

14.5

2,370

9,297

5,039

4,259

16.0

1,685

2,574

901

1,673

18.3

3.3

12.5

19.3

72.9

17.5

2.9

9.9

1.7

2.3

FY17

2Q

3Q

7,262

7,914

19.4

30.7

2,616

2,747

9,878

10,661

5,128

5,912

4,750

4,749

41.1

45.9

1,684

1,588

3,066

3,161

1,053

1,104

2,013

2,057

24.8

26.4

3.3

17.0

27.2

75.0

18.2

2.8

10.4

1.6

2.1

3.3

23.3

32.0

75.5

19.5

2.8

11.0

1.6

2.1

4Q

8,424

22.8

2,821

11,245

5,753

5,492

39.2

1,227

4,265

1,699

2,566

2,400.9

3.3

23.4

26.2

75.1

17.3

2.3

9.4

1.3

1.7

1Q

8,007

15.6

3,291

11,298

5,719

5,579

31.0

2,364

3,214

1,113

2,102

25.6

3.0

18.1

29.1

79.6

18.7

2.4

10.6

1.4

2.9

FY18E

2Q

8,989

23.8

2,872

11,861

6,029

5,832

22.8

1,768

4,064

1,427

2,637

31.0

3.3

12.6

24.7

83.0

19.5

2.4

10.7

1.3

1.8

FY17

3Q

9,362

18.3

3,013

12,375

6,502

5,873

23.7

1,979

3,894

1,293

2,602

26.5

3.3

15.7

22.2

79.7

19.0

2.2

10.7

1.3

1.4

4Q

10,142

20.4

3,264

13,406

7,044

6,362

15.8

2,144

4,219

1,400

2,818

9.8

3.3

19.0

22.0

77.0

18.9

2.1

10.7

1.2

1.5

30,526

21.7

10,818

41,345

22,095

19,249

35.2

6,184

13,065

4,757

8,308

74.7

3.3

23.4

26.2

75.1

17.3

2.3

9.4

1.4

1.9

(INR m)

FY18E

36,499

19.6

12,441

48,940

25,294

23,646

22.8

8,254

15,392

5,233

10,158

22.3

3.2

19.0

22.0

77.0

18.9

2.1

10.7

1.2

1.5

Net Interest Income

% Change (YoY)

Other Income

Net Income

Operating Expenses

Operating Profit

% Change (YoY)

Other Provisions

Profit before Tax

Tax Provisions

Net Profit

% Change (YoY)

Operating Parameters

NIM (Cal, %)

Deposit Growth (%)

Loan Growth (%)

CD Ratio (%)

Asset Quality

Gross NPA (INR b)

Gross NPA (%)

Net NPA (INR b)

Net NPA (%)

Slippage ratio (%)

E: MOSL Estimates

15 January 2018

11

In conversation

1. MAS FINANCIAL SERVICES: Don't see the need to raise capital

for next 3-5 years; Kamlesh Gandhi, Chairman & MD









Have doubled assets under management (AUM) every three years and always

concentrated on quality growth.

Focus has always been on calibrated growth and quality growth.

Company ties up with local and smaller non-banking financial companies

(NBFCs) in order to promote products directly through 3,200 centers of

distribution. Have a revenue-sharing model with them.

Have raised primary capital only 2 times and have grown through internal

accruals. Have had five rounds of capital raising over the journey of 22 years.

With the addition of the initial public offering (IPO) money, don’t see the need

to raise capital within next 3-5 years.

2. INDUSIND BANK: Seeing good credit growth in vehicle finance;

Romesh Sobti, MD & CEO







Gross non-performing assets (NPAs) went up by 8 basis points (bps), gross

slippages fell from 1.75 percent to 1.3 percent, so the book improved and the

credit cost also fell from 18 bps to 15 bps, so there was no chunky account.

NPAs spread across consumer finance, vehicle finance side, SMEs and so on.

Credit cost target for this year was 60 bps and bank is well on target. Have not

received a preliminary report on divergence from Reserve Bank of India (RBI) yet

but any divergence will be in addition to the credit cost guidance of 60 bps for

2017.

Bank had exposure to 8 accounts out of the forty referred to the National

Company Law Tribunal (NCLT) of which 6 were already NPA with bank. For the

other 2 have made provisions in Q1 and Q2. The additional provisions that bank

had to make was about Rs 30-35 crore.

3. TCS: Digital deals will help improve margin; V Ramakrishnan,

CFO, Ajoyendra Mukherjee, EVP & Head of Global Human

Resources, Rajesh Gopinathan, MD & CEO and N Ganapathy

Subramaniam ED & Chief Operating Officer









Rather than looking at margins quarter-on-quarter (QoQ), one has to look at

other factors. On the client matrix, significant movement has been seen across

bands. Attrition has been trending down or at a very steady level. Typically a lot

of churn adds to cost. So there are so many areas on which company works on

to make sure of the most optimum results.

Levers exist in the form of all the investments which have been made in the

training etc. The kind of digital deals that the company has been doing will help

on the overall margin side. The automation story is playing out in the form of

the large transformation deals where Ignio is embedded. Once the same scales

up, it will be a good lever for margins.

Have seen steady growth in each of the sectors. Energy resources which is

growing at year-on-year (YoY) basis close to about 30 percent.

Each sectors becoming of significant size. So, on a quarterly run rate itself, they

are all becoming of good size. In the banking sector, especially in the US market

15 January 2018

12









there has been a slowdown in the last 15-18 months. So, that has shown up in

numbers. Retail will now show up.

Digital has been growing significantly on the back of very significant

partnerships.

No specific pressure point. No exchange impact this quarter.

Across segments seeing momentum very clearly. Retail will see the uptick. BFS,

probably couple of more quarters or so will see some growth. However, other

levers, other aspects of the organisation, do not see any specific headwind from

an operational perspective.

In this fiscal company has hired about 39,000, close to 40,000 and out of that

9,000 odd are in overseas market.

4. COCHIN SHIPYARD: Will bring end-to-end solutions for

Mumbai port trust post MOU; Madhu S Nair, CMD











Mumbai Port Trust had the hugest dry dock which is very old but very effective

and efficient one.

Port used to lease it out and then the work used to be done by a consortium of

various sub-contractors. Company will now bring in end-to-end solutions based

on ship repair domain expertise. Will make some investments also there

because there are a fair bit of upgradations and revamp that is to be done.

Also intend to bring in a floating dry dock into the Mumbai area. So all in all, it is

a very robust situation.

Ship repair growth can happen in the Mumbai area with this new arrangement.

Ship repair is doing very well. Doing exceedingly well from Cochin operations.

Would expect in the first year, that is FY19, Mumbai operations will add up

another 20 percent into the topline of company’s ship-repair revenue turnover

15 January 2018

13

From the think tank





A global opportunity for the Indian workforce

The integration of developing economies such as China and India into the global

economy in the last few decades has helped lift millions out of poverty. The

introduction of their labour forces into the global economy increased growth and

income in these economies which also resulted in a decline in global inequality.

The World Bank’s latest “Global Economic Prospects” report shows that the

second wave of change in the global labour market will play out over the next two

decades, with developing economies contributing to all of the addition in the

global skilled labour force, as the number of skilled workers in advanced

economies is expected to decline. The rising level of skill and education in

developing economies will also lift potential global growth and continue to reduce

global inequality.





2018: The year of bank resolution and recovery?

Globally, bankers are expected to do three things: collect deposits, give loans

and invest in government bonds and other financial instruments. In India, they

end up doing a few other things as well, including cleaning up the

neighbourhood where their branches are located with a broom as part the

government’s Clean India Mission to promote sanitation. Ironically, the balance

sheets of many banks in India at the moment are in dire need of a clean-up. In

2015, the Indian banking community took a break from other activities to open

bank accounts under a financial inclusion drive by the government aimed at

ensuring access to basic banking services for every household.





Wrong time for fiscal squeeze

The Union budget for financial year (FY) 2018-19 will be presented in Parliament on

1 February. It will be the fifth time for Arun Jaitley as Union finance minister. It

might also be the last budget of this government. Of course, a sixth budget is

possible, as the date of presentation has been brought forward from 28 February

to 1 February, so that it can be approved by Parliament before the end of the

financial year. But it might not be desirable with a general election due soon

thereafter. It would be more appropriate to present an interim budget in February

2019 so that the regular Union budget for FY20 is presented by the new

government that assumes office. In either case, the budget to come next month is

critical, not only in the sphere of economics but also in the realm of politics. In the

polity, the government is on the last lap of its tenure. But the compulsions of

electoral politics are far greater in a democracy where the election season never

seems to end.

15 January 2018

14





2018: Will politics dictate economics?

On the face of it, India’s ruling Bharatiya Janata Party (BJP) scored a facile win in

the just concluded elections to the assemblies of Gujarat and Himachal Pradesh

states. A closer scrutiny of the verdict, especially in contrast to the build-up which

forecast a comfortable win for the BJP, shows the contest in Gujarat was close. Less

charitable critics would dub it a great escape for the BJP, given that the western

Indian state is the home turf of Prime Minister Narendra Modi and party president

Amit Shah. This may or may not be the case. The bigger take-away from a post-

mortem of the verdict in Gujarat is that one of the key reasons why the BJP

struggled was widespread rural distress.

International





Good times at last?

In February 2017, I wrote an optimistic commentary called “The Global

Economy’s Surprising Resilience.” The piece came as a surprise to those who

saw only bleak prospects for Western countries, not least the United States,

where US President Donald Trump had just been inaugurated. Now, nearly a

year later, my three decades of experience in global financial markets leads me

to believe that the economic situation is not quite as straightforward. On the

positive side, the half-dozen cyclical indicators I listed last February remain

strong, and some have even strengthened further. One key indicator is South

Korea’s monthly trade data. The country’s exports grew by 15.8% in 2017, the

largest increase since 1956, when it began reporting these data. Moreover,

export growth occurred even as Trump threatened to withdraw from the US-

Korea Free Trade Agreement and stoked tensions with North Korea – a powerful

rebuke to those who have predicted retrenchment of global trade.

15 January 2018

15

Click excel icon

for detailed

valuation guide

Valuation snapshot

Company

Automobiles

Amara Raja

Ashok Ley.

Bajaj Auto

Bharat Forge

Bosch

CEAT

Eicher Mot.

Endurance Tech.

Escorts

Exide Ind

Hero Moto

M&M

Mahindra CIE

Maruti Suzuki

Motherson Sumi

Tata Motors

TVS Motor

Aggregate

Banks - Private

AU Small Finance

Axis Bank

DCB Bank

Equitas Hold.

Federal Bank

HDFC Bank

ICICI Bank

IDFC Bank

IndusInd

J&K Bank

Kotak Mah. Bk

RBL Bank

South Indian

Yes Bank

Aggregate

Banks - PSU

BOB

BOI

Canara

Indian Bk

PNB

SBI

Union Bk

Aggregate

NBFCs

Aditya Birla Cap

Bajaj Fin.

Capital First

Cholaman.Inv.&F

n

Dewan Hsg.

GRUH Fin.

HDFC

HDFC Stand. Life

Indiabulls Hsg

Reco

Buy

Buy

Buy

Buy

Neutral

Buy

Buy

Buy

Sell

Buy

Neutral

Buy

Buy

Buy

Buy

Buy

Neutral

CMP

(INR)

858

129

3175

730

19740

1974

28514

1368

811

224

3686

766

254

9460

385

436

751

TP % Upside

EPS (INR)

EPS Gr. YoY (%)

P/E (x)

P/B (x)

ROE (%)

(INR) Downside FY18E FY19E FY20E FY18E FY19E FY18E FY19E FY18E FY19E FY18E FY19E

984

156

4023

859

20025

2221

34678

1554

688

265

3922

858

297

11026

458

593

756

15

21

27

18

1

12

22

14

-15

18

6

12

17

17

19

36

1

28.7

4.7

149.7

19.4

454.9

82.5

823.8

27.6

35.8

7.8

181.3

37.6

9.0

286.5

10.0

32.8

14.2

34.2

6.2

179.6

26.3

604.8

116.9

1,071.3

38.5

45.9

9.8

193.9

44.3

12.0

380.0

14.4

60.7

25.6

41.1

2.6

7.7

2.3

208.4

6.1

34.4

48.1

730.1

-3.9

140.6 -11.6

1,343.8 33.6

51.8

17.5

57.6

79.5

11.6

-4.3

214.2

7.2

48.8

37.5

14.9

94.3

482.9 15.2

18.3

30.0

66.3

65.5

34.4

21.0

26.2

21.7

40.2

12.8

9.9

8.2

105.4

21.8

3.4

101.4

17.2

51.9

30.2

4.9

29.5

-41.8

19.7

21.5

-65.7

15.1

21.0

-11.1

-7.4

27.0

LP

19.4

35.0

-22.6

22.1

19.1

199.6

Loss

51.0

17.6

69.4

3,751.8

128.4

323.3

NA

42.8

33.1

28.5

25.5

21.1

40.4

5.4

22.0

18.9

33.9

20.0

35.9

33.0

41.7

30.1

39.6

28.0

25.8

6.9

17.6

33.0

32.6

43.9

85.2

80.4

42.3

42.4

67.4

23.2

231.4

19.9

23.2

25.2

16.3

29.2

59.1

29.7

40.8

97.1

30.9

31.7

26.2

LP

138.9

11.4

79.1

70.8

59.5

79.8

46.5

39.3

33.4

16.3

22.4

19.1

-9.8

13.9

27.1

29.8

27.6

21.2

37.7

43.4

23.9

34.6

49.6

22.6

28.8

20.3

20.3

28.3

33.0

38.4

13.3

52.8

25.3

65.2

30.2

23.6

94.3

20.8

27.2

23.4

24.3

27.9

9.7

31.8

33.1

17.0

19.1

26.3

9.1

NM

12.5

10.9

16.5

26.3

7.5

21.1

49.6

38.7

25.5

22.2

16.5

51.3

26.8

96.6

14.7

25.1

20.6

17.7

27.7

32.6

16.9

26.6

35.5

17.7

22.9

19.0

17.3

21.2

24.9

26.7

7.2

29.3

17.8

45.8

18.1

19.2

28.4

17.3

22.0

18.7

20.9

21.6

6.1

24.5

23.5

8.6

14.6

20.0

7.2

33.2

5.2

9.8

9.2

15.4

4.7

11.7

33.9

27.8

19.1

19.1

13.5

43.1

29.7

84.8

11.5

4.9

5.6

4.9

7.1

6.3

3.0

10.9

9.3

3.5

3.5

6.4

3.2

2.7

6.9

8.3

2.0

12.2

4.7

8.7

2.1

2.4

2.4

1.8

4.9

2.5

1.5

4.4

0.8

4.4

3.4

1.2

3.1

3.2

1.0

0.7

0.7

1.1

0.9

1.2

0.4

0.9

4.7

6.2

3.2

4.0

2.2

15.3

6.0

3.1

3.8

4.2

4.8

4.4

6.0

5.6

2.6

8.2

7.7

3.0

3.2

5.5

2.9

2.4

5.8

6.8

1.6

9.1

3.9

7.3

1.9

2.1

2.2

1.7

4.1

2.3

1.4

3.8

0.7

3.7

3.0

1.1

2.6

2.8

0.9

0.7

0.7

1.1

0.9

1.1

0.4

0.9

3.6

5.2

2.8

3.4

1.9

12.6

5.0

2.6

3.4

17.6

21.1

24.2

20.3

15.1

13.0

36.0

20.5

16.8

12.3

33.4

14.1

9.9

20.4

23.4

17.0

25.4

18.7

14.3

7.3

11.5

2.6

9.6

18.8

8.8

6.3

17.0

8.4

14.8

12.4

6.9

17.3

12.1

6.4

-0.4

5.0

10.9

5.3

5.3

5.9

4.4

12.5

20.2

13.2

19.6

13.9

32.7

19.1

20.0

27.6

18.1

25.0

26.0

23.4

18.2

16.2

35.2

23.8

18.4

13.9

31.2

14.6

11.8

23.1

28.1

24.8

35.8

22.1

17.3

10.8

11.8

8.2

10.0

20.4

10.5

6.9

19.1

12.3

16.5

13.7

12.7

19.5

13.9

9.4

1.8

11.3

11.2

9.0

8.0

9.1

7.3

12.3

20.4

15.4

19.2

15.2

32.1

18.3

19.1

31.0

Buy

Buy

Neutral

Buy

Buy

Buy

Buy

Neutral

Buy

Buy

Buy

Buy

Buy

Buy

705

556

201

163

115

1866

318

68

1706

81

1019

532

33

341

705

680

197

209

146

2150

370

56

2076

100

1179

665

38

382

0

22

-2

28

27

15

16

-17

22

23

16

25

16

12

10.8

18.4

8.5

1.7

5.5

68.7

13.6

2.8

61.1

8.4

32.1

16.0

1.9

17.8

15.4

30.8

10.5

5.7

6.6

84.7

17.0

3.2

78.9

13.4

41.6

22.6

3.8

23.3

Buy

Neutral

Neutral

Buy

Buy

Buy

Neutral

163

163

354

375

174

302

138

217

175

366

438

250

415

153

33

7

3

17

44

38

11

17.9

-1.2

28.4

34.4

10.5

11.5

18.4

22.6

4.9

67.8

38.3

18.9

19.6

29.4

29.7

10.3

99.7

42.3

24.1

34.9

45.0

Buy

Buy

Buy

Buy

Buy

Neutral

Buy

Buy

Buy

184

1770

836

1314

613

506

1761

455

1227

231

2300

925

1500

710

500

2182

370

1550

25

30

11

14

16

-1

24

-19

26

3.7

45.7

32.8

59.1

37.2

9.9

65.8

4.7

83.7

5.4

63.7

43.7

68.7

45.5

11.7

59.3

5.4

106.3

7.8

87.0

56.5

84.2

56.5

14.6

68.9

6.7

132.7

15 January 2018

16

Click excel icon

for detailed

valuation guide

Valuation snapshot

P/E (x)

P/B (x)

FY18E FY19E FY18E FY19E

24.3 16.5

3.5

3.0

14.3 12.5

2.3

2.0

35.2 26.8

4.9

4.3

35.6 25.7

3.2

3.0

10.6 10.8

2.3

2.0

25.1 19.8

3.5

3.1

18.8 16.1

3.1

2.7

18.4

18.8

26.3

77.3

25.1

35.0

47.8

52.4

67.8

37.0

45.8

47.6

26.3

27.6

66.9

44.3

42.7

18.1

36.1

34.5

14.6

14.3

22.9

52.0

22.2

43.7

32.3

41.9

43.1

28.0

38.3

38.4

21.4

23.4

42.7

37.1

36.7

16.7

32.3

29.1

35.1

26.6

21.2

38.1

10.5

18.1

18.3

23.2

22.5

19.0

27.9

21.3

15.1

43.3

29.9

24.3

46.0

44.0

40.5

38.6

38.8

40.3

35.5

49.7

2.5

2.7

4.7

8.5

4.5

1.2

9.4

23.2

1.4

6.5

9.3

9.3

5.1

3.4

6.1

8.7

5.2

3.0

5.6

3.8

2.7

3.8

2.7

5.2

1.6

1.1

3.8

3.5

4.4

3.2

6.6

2.7

2.4

7.3

4.5

3.4

14.6

17.3

23.1

11.2

14.2

9.9

8.0

45.6

2.2

2.3

4.0

7.6

4.0

1.1

8.6

19.0

1.4

6.0

8.1

8.2

4.3

3.1

5.6

7.3

4.7

2.6

5.0

3.5

2.5

3.5

2.4

4.6

1.4

1.1

3.2

3.0

3.7

2.8

5.4

2.4

2.1

6.3

4.0

3.1

12.5

14.0

21.7

10.0

12.3

8.7

7.3

42.1

ROE (%)

FY18E FY19E

15.8 19.6

16.9 16.9

19.8 17.0

10.7 12.2

23.8 19.9

15.0 16.7

18.1 17.9

14.3

15.1

17.9

10.9

17.9

3.3

20.2

51.0

2.1

18.1

21.8

19.5

19.5

12.8

9.1

21.4

12.8

17.5

16.5

10.9

6.2

10.3

7.3

10.3

11.5

3.5

17.5

9.9

16.0

12.3

13.7

6.5

10.8

17.6

11.1

10.3

26.9

34.0

48.8

26.0

31.7

23.8

20.7

75.9

15.9

17.4

17.5

14.5

18.1

2.6

27.8

49.8

3.3

22.2

22.6

21.2

20.2

13.8

13.1

21.5

13.5

16.4

16.3

12.0

7.4

13.7

12.0

12.7

14.5

6.0

19.2

13.9

17.9

15.6

21.3

12.0

14.6

15.7

14.2

12.7

29.4

35.2

55.2

27.3

34.0

22.9

21.4

88.0

Company

Reco

L&T Fin Holdings Buy

LIC Hsg Fin

Neutral

MAS Financial

Buy

M&M Fin.

Buy

Muthoot Fin

Neutral

PNB Housing

Buy

Repco Home

Buy

Shriram City

Buy

Union

Shriram Trans.

Buy

Aggregate

Capital Goods

ABB

Sell

Bharat Elec.

Buy

BHEL

Sell

Blue Star

Neutral

CG Cons. Elec.

Buy

CG Power & Indu. Neutral

Cummins

Buy

GE T&D

Neutral

Havells

Buy

K E C Intl

Neutral

L&T

Buy

Siemens

Neutral

Solar Ind

Neutral

Thermax

Neutral

Va Tech Wab.

Buy

Voltas

Neutral

Aggregate

Cement

Ambuja Cem.

Neutral

ACC

Neutral

Birla Corp.

Buy

Dalmia Bharat

Buy

Grasim Inds.

Neutral

India Cem

Neutral

J K Cements

Buy

JK Lakshmi Ce

Buy

Ramco Cem

Buy

Orient Cem

Buy

Prism Cem

Buy

Sagar Cements Not Rated

Sanghi Inds.

Buy

Shree Cem

Buy

Ultratech

Buy

Aggregate

Consumer

Asian Paints

Neutral

Britannia

Buy

Colgate

Buy

Dabur

Buy

Emami

Buy

Godrej Cons.

Neutral

GSK Cons.

Neutral

HUL

Buy

CMP

(INR)

180

567

646

480

452

1317

677

2123

1515

TP % Upside

(INR) Downside

240

33

640

13

740

15

562

17

515

14

1750

33

800

18

2700

1700

27

12

EPS (INR)

EPS Gr. YoY (%)

FY18E FY19E FY20E FY18E FY19E

7.4

10.9

13.5

41.8 47.4

39.7 45.5

53.9

3.9

14.4

18.3 24.1

29.6

21.9 31.3

13.5 18.7

23.1

90.5 38.5

42.6 42.0

48.1

44.4

-1.4

52.5 66.5

88.8

66.2 26.6

36.0 41.9

50.0

23.5 16.5

115.6 145.3

80.6

106.2

173.7

127.6

37.1

44.9

35.3

-3.4

12.7

119.0

28.0

10.9

-64.9

-4.4

64.4

20.5

20.5

13.8

10.9

27.3

-1.7

15.2

13.4

15.3

25.6

31.8

15.0

48.7

13.3

-19.9

48.3

25.2

57.4

32.2

19.4

23.9

23.3

17.9

56.9

19.5

16.3

8.0

12.0

18.8

1472

178

103

789

272

98

939

431

548

376

1329

1322

1162

1294

623

633

1230

210

78

685

315

90

1150

440

590

350

1450

1313

1120

1150

745

580

-16

18

-24

-13

16

-8

23

2

8

-7

9

-1

-4

-11

20

-8

19.0

7.1

2.9

16.5

5.2

1.4

25.3

9.4

11.5

14.3

48.1

19.8

26.2

30.3

34.5

17.5

28.3

8.0

2.3

24.4

6.5

2.3

33.5

11.2

14.3

17.6

56.7

31.0

31.3

35.2

37.2

19.6

34.1

8.6

3.5

31.0

7.8

3.0

39.6

14.0

17.7

21.7

67.2

35.3

39.3

38.4

41.9

22.4

270

1805

1203

3188

1222

191

1132

443

788

172

139

1077

134

18857

4391

275

1795

1435

3568

1286

188

1324

512

913

205

130

-

157

22424

4914

2

-1

19

12

5

-1

17

16

16

19

-6

17

19

12

6.1

7.7

48.6 67.8

32.2 56.7

60.8 83.7

81.9 116.8

5.8

10.5

47.8 61.8

12.1 19.1

27.1 35.1

6.3

9.1

2.7

5.0

25.2 50.6

5.8

8.9

423.0 435.8

102.2 147.1

9.8

80.4

61.6

111.7

133.5

12.1

79.1

25.2

44.7

15.2

6.6

70.6

12.0

724.2

184.0

25.5 25.3 44.0

34.5 39.5 37.2

12.8 76.1 37.4

56.8 37.6 52.4

20.8 42.5 14.9

3.9

80.4 32.6

41.7 29.5 23.7

74.3 57.2 36.5

-0.5

29.3 29.0

LP

44.0 27.3

905.1 81.3 50.5

LP

101.0 42.8

102.0 53.5 23.1

10.0

3.0 44.6

6.4

43.9 43.0

21.2 37.3 33.3

2.6

14.7

10.3

6.8

0.2

11.9

3.0

16.2

19.8

26.4

19.8

20.0

25.0

15.8

13.4

21.0

55.1

55.7

48.5

46.3

48.4

46.7

40.3

60.2

1190

4705

1136

358

1288

989

6478

1373

1282

6098

1357

410

1655

1042

5785

1497

8

30

19

15

29

5

-11

9

21.6 25.8

84.5 106.9

23.4 28.1

7.7

9.3

26.6 33.2

21.2 24.5

160.8 182.3

22.8 27.6

31.1

133.8

33.7

10.9

38.6

27.4

206.5

32.4

15 January 2018

17

Click excel icon

for detailed

valuation guide

Valuation snapshot

P/E (x)

P/B (x)

FY18E FY19E FY18E FY19E

29.4 26.6

6.5

6.0

43.8 35.0

6.3

6.2

50.4 40.5 15.3 14.5

60.6 53.0 22.5 20.4

76.2 54.7 30.3 24.3

32.2 23.3

3.3

2.9

52.7 43.7 11.6 9.5

61.3 52.6 36.3 30.3

65.6 35.7

3.1

2.9

79.0 64.5 11.5 10.0

104.4 68.0 19.7 14.6

46.3 39.5 12.5 11.2

25.6

33.1

28.5

15.0

83.6

25.7

27.0

33.6

40.2

76.8

16.5

21.1

56.0

31.4

18.0

24.5

33.5

33.9

22.6

40.3

27.8

30.0

22.3

25.1

23.4

13.3

54.7

18.9

22.6

24.9

21.2

29.4

14.6

16.1

45.1

21.4

14.5

21.5

29.8

20.6

13.2

26.5

22.5

22.5

34.2

10.8

21.8

28.4

17.7

16.5

25.9

13.2

22.9

4.8

5.3

6.8

3.3

6.3

5.5

3.5

5.6

3.2

1.2

3.2

2.6

12.3

2.7

3.1

2.8

5.8

4.7

2.4

3.7

4.8

3.9

2.5

1.5

4.2

3.8

2.3

2.7

3.8

2.5

3.5

4.1

4.5

5.4

2.7

5.9

4.5

3.1

5.0

2.8

1.1

2.7

2.3

14.1

2.4

2.6

2.6

5.3

3.8

2.1

3.3

4.2

3.4

2.3

1.3

3.5

3.4

2.1

2.4

3.5

2.3

3.2

10.6

3.1

3.0

3.8

2.7

ROE (%)

FY18E FY19E

23.2 23.4

14.3 17.9

32.3 36.8

39.1 40.4

39.8 44.4

10.8 13.3

24.1 23.9

64.8 62.9

4.9

8.5

15.5 16.5

18.9 21.5

27.0 28.3

19.9

17.0

26.4

24.6

7.6

23.4

12.8

16.3

8.2

1.6

19.6

14.2

22.0

8.8

18.4

12.0

17.2

14.7

11.4

9.3

18.2

12.9

1.9

14.1

19.1

13.7

11.8

14.1

11.5

9.2

11.4

13.3

21.9

-6.3

4.9

-1.2

19.8

19.4

25.7

22.3

10.7

26.1

13.5

21.2

14.1

3.9

18.4

15.4

31.4

11.9

19.2

12.5

17.7

20.5

17.0

13.2

19.9

15.2

7.0

12.9

17.5

12.6

11.7

15.4

14.1

18.2

14.2

34.9

22.3

0.2

10.1

5.2

Company

ITC

Jyothy Lab

Marico

Nestle

Page Inds

Parag Milk

Pidilite Ind.

P&G Hygiene

Prabhat Dairy

United Brew

United Spirits

Aggregate

Healthcare

Alembic Phar

Alkem Lab

Ajanta Pharma

Aurobindo

Biocon

Cadila

Cipla

Divis Lab

Dr Reddy’s

Fortis Health

Glenmark

Granules

GSK Pharma

IPCA Labs

Jubilant Life

Lupin

Sanofi India

Shilpa Medicare

Strides Shasun

Sun Pharma

Torrent Pharma

Aggregate

Infrastructure

Ashoka Buildcon

IRB Infra

KNR

Constructions

Sadbhav

Engineering

Aggregate

Logistics

Allcargo Logistics

Concor

Gateway

Distriparks

Aggregate

Media

Dish TV

D B Corp

Den Net.

Ent.Network

Hathway Cable

Reco

Neutral

Neutral

Neutral

Neutral

Buy

Neutral

Buy

Neutral

Not Rated

Buy

Neutral

CMP

(INR)

268

369

313

7788

22607

288

907

9287

228

1158

3810

TP % Upside

(INR) Downside

276

3

375

2

355

14

8173

5

28650

27

314

9

1044

15

9461

2

-

1320

14

3449

-9

EPS (INR)

EPS Gr. YoY (%)

FY18E FY19E FY20E FY18E FY19E

9.1

10.0

11.4

8.5

10.2

8.4

10.5

13.1

-25.0 25.2

6.2

7.7

9.3

-1.2

24.3

128.6 146.9 177.7

4.0

14.2

296.6 413.1 544.5 24.3 39.3

8.9

12.4

16.8 147.7 38.7

17.2 20.8

24.0

2.9

20.7

151.5 176.7 209.4 14.0 16.6

3.5

6.4

9.7

-2.0

83.8

14.7 18.0

22.3

68.9 22.4

36.5 56.0

76.9

36.5 53.5

9.7

17.2

21.6 24.9

68.0 89.5

52.7 64.1

44.6 50.3

6.5

9.9

17.5 23.7

22.6 27.0

32.4 43.7

60.8 115.7

1.9

4.9

37.9 42.8

6.8

9.0

44.2 54.9

17.8 26.2

44.2 55.0

37.6 42.7

140.1 157.4

18.1 29.9

36.3 62.5

14.5 22.1

49.7 61.4

29.7

109.1

79.2

55.3

18.3

26.4

33.3

52.4

144.6

8.4

50.5

13.0

60.6

35.2

64.4

57.1

180.5

37.8

77.9

27.5

78.5

0.3

-8.9

-8.1

13.5

-36.7

23.0

42.3

-18.9

-16.2

-81.8

-3.4

-5.4

28.6

10.9

19.7

-33.6

8.5

29.3

12.6

-44.5

-9.9

-14.7

LP

12.5

11.5

29.3

15.1

31.7

21.7

12.8

53.0

35.8

19.5

35.0

90.1

160.8

12.9

31.1

24.3

47.0

24.4

13.7

12.4

65.1

71.9

52.0

23.6

33.2

Neutral

Buy

Buy

Buy

Neutral

Buy

Neutral

Neutral

Neutral

Buy

Neutral

Buy

Neutral

Neutral

Buy

Buy

Buy

Buy

Buy

Buy

Neutral

555

2247

1501

668

540

449

611

1090

2448

145

624

144

2475

560

798

919

4688

615

822

584

1380

540

2500

1791

900

485

555

600

1100

2575

185

650

200

2500

550

957

1000

5000

797

1074

610

1400

-3

11

19

35

-10

24

-2

1

5

28

4

39

1

-2

20

9

7

30

31

4

1

Buy

Neutral

Buy

Buy

241

250

317

416

275

240

325

445

14

-4

3

7

1.8

22.9

13.3

14.2

7.1

23.2

14.5

14.6

16.0

19.7

16.0

17.0

290.2 133.4

1.4 10.9

9.0

3.5

23.8

29.4

19.6

Buy

Neutral

Buy

219

1432

243

242

1496

282

10

4

16

10.9

42.7

8.8

13.3

55.2

18.4

15.3

68.1

21.3

10.7

12.4

29.6

13.1

22.0

29.3

20.1

33.5

109.2 27.6

33.4

30.5

Buy

Buy

Neutral

Buy

Buy

78

376

133

788

40

106

430

90

910

47

35

14

-32

15

16

0.7

20.7

-2.9

9.0

-0.2

2.2

25.2

0.1

20.0

0.8

3.8

29.3

4.0

31.7

2.0

-36.4

1.8

Loss

-21.5

Loss

237.6 120.2 35.6 15.0

21.5 18.1 14.9

3.7

LP

NM 1,876.6 3.0

122.7 87.8 39.4

4.2

LP

NM

53.2

2.9

15 January 2018

18