One Pager note on the Model Portfolio Stocks...Carborundum Universal Ltd Buy Conservative Cummins...

March 1, 2019

One Pager note on the Model Portfolio Stocks

HDFC Bank Investment Advisory Group

List of Model Portfolio Stocks

Stock Name Recommendation Model Portfolio

Apar Industries Buy Aggressive

Apollo Hospitals Buy Aggressive

Apollo Tyres Buy Aggressive

Atul Ltd Buy Aggressive

Bajaj Auto Buy Aggressive & Conservative

Bata India Hold Conservative

Bharat Electronics Buy Aggressive & Conservative

Birla Corporation Ltd Buy Aggressive

Carborundum Universal Ltd Buy Conservative

Cummins India Buy Aggressive & Conservative

Cyient Ltd Buy Aggressive

Entertainment Network (India) Ltd Buy Aggressive

Exide Industries Buy Aggressive & Conservative

Godrej Agrovet Ltd Buy Conservative

Grasim Industries Buy Aggressive & Conservative

GSFC Ltd Buy Conservative

Infosys Buy Aggressive & Conservative

ITC Buy Conservative

Jyothy Laboratories Buy Aggressive & Conservative

KEC International Buy Aggressive & Conservative

Larsen & Toubro Buy Aggressive & Conservative

Mahindra & Mahindra Buy Aggressive & Conservative

Minda Industries Buy Aggressive

NTPC Buy Conservative

ONGC Buy Aggressive & Conservative

Petronet LNG Buy Aggressive & Conservative

Phoenix Mills Buy Aggressive

Ramkrishna Forgings Buy Aggressive

RIL Buy Aggressive & Conservative

Sanghi Industries Buy Aggressive

State Bank of India Buy Aggressive & Conservative

Supreme Industries Buy Aggressive

TCS Hold Aggressive & Conservative

Thyrocare Technologies Buy Aggressive & Conservative

Ultratech Cement Buy Aggressive & Conservative

UPL Ltd Hold Aggressive & Conservative

Voltas Buy Aggressive & Conservative

Zydus Wellness Buy Aggressive

*Please note that CMP of all the stocks are as on February 26, 2019. Tata Motors, Union Bank of India and Bank of India are Under Review

Please refer to disclaimer and disclosure on the last page.

Apar Industries Ltd. CMP: Rs.634, Mkt Cap: Rs.24 bn Background

Apar Industries Limited (Apar) is engaged in the business of manufacture of conductors, transformer/specialty oils and power/telecom cables. The Company's segments are Conductor, Transformer/Speciality Oils, Power/Telecom Cables, and Others. The Company's specialty Oil business has a range of products, which falls under approximately four categories, such as transformer oils, white oils and liquid paraffin's, industrial/automotive oils and process oils. The Company produces aluminum conductors. Its Uniflex Cables Division is a manufacturer of electrical and telecommunication cables. Apar's Automotive Division markets a range of automotive lubricants ranging from two wheeler oils and gear oils greases. In industrial lubricants, it offers a range catering various segments of the industry, including hydraulic oils, industrial gear oils, general machinery oils, heat transfer oils, quenching oils, pneumatic oils, gas engine oils, marine oils rust preventives and specialty products.

Valuations and Chart

Earnings Summary (Consolidated)

Y/E Revenue Growth EBITDA Margin Net Profit EPS Growth P/E Div. Yield 31-Mar Rs Mn (%) Rs Mn (%) Rs Mn (Rs) (%) (X) (%)

17A 48,320 (4.9) 4,168 8.6 1,766 45.9 45.1 13.8 1.5 18A 58,185 20.4 4,075 7.0 1,447 37.6 (18.0) 16.9 1.5 19E 64,004 10.0 4,483 7.0 1,708 44.4 18.0 14.3 1.5 20E 69,124 8.0 5,017 7.3 2,055 53.4 20.3 11.9 1.5

View: Apar Industries has established presence across diverse businesses like Conductors (23% market share), Transformers & Specialty Oils (45% market share), Cables and Auto Lubes. We believe with its diversified product profile, Apar is well positioned to reap the benefits of improvement in the power T&D space in India. The company has delivered a strong performance across all the three segments during Q3FY19 and guided for a similar growth going ahead mainly driven by strong growth in conductor and Speciality oil segments. For the conductor segment, management is optimistic in achieving a much higher value growth given the improving mix in the form of high value copper conductor order from Indian Railways and increasing share of High Efficiency Conductors. Additionally, management continued to remain optimistic on the medium to long term demand for conductors business in domestic market driven by strong capex outlay planned in transmission sector apart from new orders from the railway business. We believe with the completion of major capex programs like conductor plant transition to Jharsuguda, new molten metal rod plant in Lapanga and setting up Oil plant in Hamariyah, company is well placed to benefit from the improvement in sales going ahead. Currently, we have a Buy rating on the stock with price target of Rs.801 which is 15x FY20E EPS (maintaining earlier multiple) of Rs.53.4. Any revision in the stock price would depend upon the change in crude oil price, order inflow, and general business momentum.

Key Details

52 week H/L(Rs) 821/535

Book Value (Rs) YTD 314

FV (Rs) 10

PE (X) (TTM) 18.3

Dividend Yield (%) 1.5

Shareholding Pattern (%) on 31 Dec 2018

Promoter 58.19

Institutions 30.03

Public 11.78

Total 100

PE (X)

FY18 FY19E FY20E

16.9 14.3 11.9

Apollo Hospitals Enterprise Ltd. CMP: Rs.1158, Mkt Cap: Rs.161 bn Background

Apollo Hospitals Enterprise, Ltd. (AHEL) is an India-based company, which operates a private hospital group. As of Dec 2018, the Company has 70 (44 owned + 11 Day care/Short surgical stay centers + 10 Cradles + 5 managed) hospitals with total bed capacity of 10164 (8683 owned + 267 Day Care + 280 Cradle + 934 managed) beds. It also has presence in nursing and hospital management colleges, pharmacies, diagnostic clinics, medical transcription services, third-party administration and telemedicine.



Y/E Revenue Growth EBITDA Margin Net Profit EPS Growth P/E Div. Yield 31-Mar Rs Mn (%) Rs Mn (%) Rs Mn (Rs) (%) (X) (%)

17A 71144 14.5 7286 10.2 2210 15.9 (5.6) 72.8 0.5 18A 82435 15.9 7932 9.6 1174 8.4 (46.9) 137.9 0.4 19E 96461 17.0 9839 10.2 1781 12.8 51.7 90.5 0.4 20E 114577 18.8 12374 10.8 2644 19.0 48.5 60.9 0.4

View: AHEL is one of the stronger healthcare delivery services company with leadership position, pan India presence and an aggressive organic and inorganic growth strategy. AHEL has continued with its strategy of focusing on commencement of new hospitals and improvement in occupancy level in these hospitals to bring revenue growth. The company has also started focusing on EBITDA margin improvement by focusing on cost control initiatives and improving operating efficiency, which is visible in current quarter performance. The reorganization of Pharmacy business is likely to be positive as it would help in improving return ratio and also opens up value unlocking opportunity. We remain long term positive on the stock considering its strong brand equity, robust business model with low leverage (~0.8x net debt equity ratio in FY18), focus on improving penetration in Tier-II & Tier-III cities and expected improvement in return ratio as the company is near completion of capex cycle. Given the concern regarding rise in pledge holding, stake sale in Apollo Munich and any other liquidity related event would be key monitorable going ahead. Currently, we maintain Buy rating on the stock with the target price to Rs.1398 at 18x (maintaining earlier EV/EBITDA multiple) to FY20E EBITDA and adjusting net debt of Rs.203 per share in FY18. Any earning/target price revision would depend on the performance of new hospitals, improvement in occupancy level & margins and changes in general business momentum.

Key Details

52 week H/L(Rs) 1387/911


FV (Rs) 5

PE (X) (TTM) 134.1



Promoter 34.4

Institutions 57.44

Public 8.16

Total 100

PE (X)

FY18 FY19E FY20E

137.9 90.5 60.9

Apollo Tyres Ltd. CMP: Rs.209, Mkt Cap: Rs.120 bn Background

Apollo Tyres Ltd. is in the business of manufacture and sale of tyres. Over the years, the company has grown manifold, establishing its footprint across the globe. The company has manufacturing units in India and the Netherlands. It is also setting up a new manufacturing facility in Hungary. The company markets its products under its two global brands - Apollo and Vredestein, and its products are available in over 100 countries through a vast network of branded, exclusive and multi-product outlets.


Earnings Summary

Y/E Revenue Growth EBITDA Margin Net Profit EPS Growth P/E Div. Yield 31-Mar Rs Bn (%) Rs Bn (%) Rs Bn Rs % X %

17A 131.8 11.2 18.5 14.0 11.0 21.6 (2.1) 9.7 1.4 18A 148.4 12.6 16.5 11.1 7.2 13.4 (37.9) 15.6 1.4 19E 172.0 15.9 21.5 12.5 10.0 17.4 30.1 12.0 1.4 20E 201.4 17.1 27.2 13.5 13.5 23.7 35.7 8.8 1.4

View: Apollo Tyre is one of leading tyre-manufacturing company with well-diversified product portfolio and geographical presence. It has a large distribution network of ~5000 dealers in India and ~5800 dealers in Europe and America. In India, it is one of the leaders in Truck tyres with ~25% market share. The market share in Passenger Car segment and Farm (Tractor Rear) tyre segment is close to 15% and 19%, respectively. Going ahead, ramp up of newly added capacity in both India and Europe, increasing trend of radialization in Indian truck tyre segment, entry into two-wheeler segment in India, reduction in Chinese tyres import in both India as well as in Europe and supplying to OEM customers and entry in to TBR segment in Europe is likely to drive volume growth in medium to long term. While the management sounded optimistic for improvement in margins going ahead given the improvement in operating efficiency, we would be closely monitoring the margin in the wake of expected rise in contribution of OEM sales in Europe, focus of the company to create brand by increasing advertisement expenses and volatility in raw material prices. Currently, we have a Buy rating on the stock with the target price of Rs.331 at 14x (maintaining earlier multiple) on FY20E EPS of Rs.23.7 per share. Any earning/target price revision would depend on the changes in margin, delay in ramping up of new capacities, competition intensity in the domestic market and changes in market share and in general business momentum.

Key Details

52 week H/L(Rs) 307/192


FV (Rs) 1

PE (X) (TTM) 13.0



Promoter 40.57

Institutions 44.62

Public 14.81

Total 100

PE (X)

FY18 FY19E FY20E

15.6 12.0 8.8

Atul Ltd. CMP: Rs.3309, Mkt Cap: Rs.98 bn Background

Atul Ltd. (Atul) was originally promoted by Late Shri Kasturbhai Lalbhai in 1947 as Atul Products Ltd. as a step towards backward integration of their cotton textile business. It has one of the biggest integrated chemical complexes in Asia with well diversified portfolio of ~920 products and 460 formulations divided into Life Science Chemicals and Performance & Other Chemicals catering to the requirement of wide range of industries such as adhesives, agriculture, animal feed, automobile, composites, construction, cosmetic, defense, footwear, fragrance, glass, home care, horticulture, hospitality, paint and coatings, paper, personal care, soap and detergent, sports and leisure, textile, tire and wind energy.



Y/E Sales Growth EBITDA Margin PAT EPS Growth P/E Div.Yield 31-Mar Rs Mn (%) Rs Mn (%) Rs Mn (Rs) (%) (x) (%)

17A 28,339 9.2 5,095 18.0 3,234 108.9 17.9 30.4 0.3

18A 32,958 16.3 5,052 15.3 2,812 94.8 (13) 34.9 0.4

19E 41,968 27.3 7,680 18.3 4,637 156.2 64.9 21.2 0.4

20E 49,438 17.8 9,146 18.5 5,601 188.7 20.8 17.5 0.4

View: Atul Ltd is a diversified Indian company (a part of Lalbhai Group, one of the oldest business houses of India with a legacy of conducting business with a larger purpose) meeting the needs of varied industries such as Agriculture, Animal Feed, Automobile, Construction, Capital Goods, FMCG, Textile, Tyre and Wind Energy across the world. The company reported strong improvement in both revenue and EBIT growth in both the segment during 9MFY19. Going ahead, the management’s focus on expanding capacities of high margin segments, developing brand business, introducing new products and formulations, building a strong sales and marketing organization in other countries like Africa and South America and expanding secondary sales is likely to improve the earnings further and return ratios over the medium to long term. Moreover, the company is well positioned to reap the benefits of recovery in the domestic and global markets with its diversified product and customer profile. The government’s initiatives like Make in India for manufacturing and Smart Cities augurs well for the company. Atul Ltd continued to maintain strong balance sheet by becoming a debt free company on gross level basis in FY18. Given the strong performance in 9MFY19, we have revised our earing estimates for FY19 and FY20 upwards. However, due to sharp appreciation in its stock price, we are maintaining our Hold rating on the stock with the target price of Rs.3774 which is 20xFY20E (maintaining earlier multiple) EPS of Rs.188.7. Any changes in the price target/valuation would depend on performance improvement across the segments, improvement in margin profile, roll over to the next financial year and changes in general business.

Key Details

52 week H/L(Rs) 3633/2524


FV (Rs) 10

PE (X) (TTM) 35.5



Promoter 44.68

Institutions 29.09

Public 26.23

Total 100.00

PE (X)

FY18 FY19E FY20E

34.9 21.2 17.5

Bajaj Auto Ltd. CMP: Rs.2853, Mkt Cap: Rs.825 bn

Background

Bajaj Auto Limited is an India-based manufacturer of motorcycles, three-wheelers and parts. The Company's business segments include Automotive, Investments and Others. The Company's vehicles include two-wheelers and commercial vehicles. Its two-wheelers include Bajaj V, Bajaj V Avenger, Avenger Cruise 220, Pulsar RS 200, Pulsar FOS, Pulsar 200 NS, Pulsar 220, Pulsar 180, Pulsar 150, Pulsar 135 LS Discover, New Discover 125, New Discover 150S, New Discover 150F, Platina 100, Platina 100 ES, CT 100, CT 100 Ninja, Ninja 650R and Ninja 300. Its products also include CT 100B, Boxer BM150X, Avenger 220 Cruise, Avenger 220 Street, Avenger 150 Street, Pulsar AS 150 and Maxima-Cargo. The Company's geographic segments include India and Rest of the world. The Company's plants include Waluj plant, Chakan plant and Pantnagar plant. The Company's subsidiaries include PT. Bajaj Auto Indonesia and Bajaj Auto International Holdings BV.


Promoter 49.3

Institutions 24.4

Public 26.3

Total 100


Earnings Summary

Y/E Revenue Growth EBITDA Margin Net Profit EPS Growth P/E Div. Yield 31-Mar Rs Bn (%) Rs Bn (%) Rs Bn Rs (%) X (%)

17A 217.7 (3.6) 44.2 20.3 38.3 132.3 (2.6) 21.6 2.0

18A 251.6 15.6 47.8 19.0 40.7 140.6 6.3 20.3 2.1

19E 303.3 20.5 51.6 17.0 43.6 150.7 7.2 18.9 2.1

20E 353.3 16.5 62.2 17.6 50.7 175.2 16.2 16.3 2.1

View: Bajaj Auto continued to gain market share in domestic motorcycle business with exports business continuing its improvement journey in 9MFY19. The management expects overall growth momentum to continue in Q4FY19 driven by higher growth in entry-level segment that is likely to drive market share. Addressing to the concern on margin, the management also guided that the company expects some improvement in margin in Q4FY19 and larger improvement in FY20. We maintain our long-term positive stance on Bajaj Auto considering its focus on increasing market share in domestic Motorcycle industry, strong R&D capabilities, robust balance sheet with huge cash and cash equivalent of ~Rs.165 bn (as on Dec’18) and strong return ratios with ROE of over 20%, ROCE of over 30% and dividend yield of over 2% for past three years. Currently, we have a Buy rating on the stock with the target price of Rs.3278 at 18x (maintaining earlier multiple) FY20E EPS of Rs.175.2 and adding Rs.125 per share for 48% stake in KTM AG of Austria (at 18x CY17 Bajaj’s share of EPS of Rs.10 after 30% holding company discount). Any earning/target price revision would depend on the performance of new launches, improvement in overall EBITDA, rollover to the next financial year and changes in general business momentum.

Key Details

52 week H/L(Rs) 3214/2425


FV (Rs) 10

PE (X) (TTM) 17.6


PE (X)

FY18 FY19E FY20E

20.3 18.9 16.3

Bata India Ltd. CMP: Rs.1310, Mkt Cap: Rs.168 bn Background

Backed by eight decades of operations, Bata India Ltd. (BIL) enjoys strong brand equity in India and is the market leader with ~25% share in the organized footwear segment. It has a strong distribution network of 1,375 (as on 31 March 2018) stores across 500 cities. Company has five state of art manufacturing units with the total capacity to produce more than 21 mn pieces pairs per annum and sales of over 50 mn pairs of footwear. In terms of sales of the shoes, men’s shoes contribute 50%-55% to sales while women and kid footwear account for 30%-32% and 7%-8%, respectively.


Promoter 52.96

Institutions 31.08

Public 15.96

Total 100


Earnings Summary

Y/E Sales Growth EBITDA Margin PAT EPS Growth P/E Div.Yield 31-Mar Rs Mn (%) Rs Mn (%) Rs Mn Rs % X %

17A 24672 2.1 2776 11.3 1804 14.0 26.3 93.6 0.2 18A 26293 6.6 3538 13.5 2236 17.4 23.9 75.3 0.2 19E 29082 10.6 4236 14.6 2695 21.0 20.6 62.4 0.3 20E 33386 14.8 5097 15.3 3225 25.1 19.7 52.2 0.3

View: Bata continued to improve its profitability in Q3FY19 as well on the back of improved product mix given the new launches in the premium segment and portfolio refreshes across categories. Bata has recently adopted a strategy to design products based on various consumers’ category as well as introduction of new value added products. Company plans to bring new brands, which will be more casual and stylish to attract the youth. Moreover, new launches in its premium brands like Hush Puppies, Naturalizer, Power, Marie Claire, Weinbrenner, Bata Comfit and Bubblegummers, are further expected to grow at steady pace given the changing demand dynamic scenario in the country. Thus, we believe that with these efforts Bata is moving in right direction for transforming itself from conventional footwear play to fashion footwear play by shifting its focus towards the fashion conscious youth, working women and children through the introduction of latest and trendier styles of footwear. We believe that with the further pick up in premium segment volume on the back of changing consumer preference is further likely to drive the volumes as well as margin for the company going ahead. Moreover with the rationalization of new stores, we believe Bata is moving in the right direction of generating higher same store sales going ahead. Due to the sharp run up in the stock prices in recent past, currently we have a Hold rating on the stock with the target price of Rs.954 based on PE multiple of 38x (maintained earlier multiple) FY20E EPS of Rs.25.1. Any earnings/target price revision would depend upon the change in the product mix, any disruption in the competition, scale up on e-com platform and general changes in the business.

Key Details

52 week H/L(Rs) 1329/674


FV (Rs) 5

PE (X) (TTM) 76.0


PE (X)

FY18 FY19E FY20E

75.3 62.4 52.2

Bharat Electronics Ltd. CMP: Rs.80, Mkt Cap: Rs.194 bn

Background

Bharat Electronics Ltd. (BEL) was established at Bangalore, India, by the Government of India under the Ministry of Defence in 1954 to meet the specialised electronic needs of the Indian defence services. Over the years, it has grown into a multi-product, multi-technology, multi-unit company servicing the needs of customers in diverse fields in India and abroad. BEL’s segments are Radars, Military Communication, Naval Systems, Weapon Systems, Electronic Warfare, Avionics, C4I Systems, Electro-optics, Tank Electronics, Gun up-grades, Civilian Equipments & Systems and Components. BEL’s joint venture companies include GE BE Private Ltd. and BEL Multitone Private Ltd.


Promoter 66.09

Institutions 24.08

Public 9.83

Total 100



Y/E Sales Growth EBITDA Margin PAT EPS Growth P/E Div. Yield 31-Mar Rs Mn (%) Rs Mn (%) Rs Mn Rs % X %

17A 86,683 17.9 17,870 20.6 15,236 6.3 14.9 12.7 2.0 18A 104,008 20.0 20,352 19.6 14,317 5.9 (6.0) 13.6 2.4 19E 119,609 15.0 22,770 19.0 15,451 6.3 7.9 12.7 2.5 20E 136,354 14.0 26,621 19.5 18,005 7.4 16.5 10.8 2.5

View: BEL is a niche public sector play on defence sector with strong and readily available manufacturing base in the defense space compared to various other players which are at planning stage of setting up the capacity. During Q3FY19, BEL saw sharp improvement in its operational performance both on the revenue growth as well as improvement in operating margin on the back of improved mix towards service related orders which was able to offset the execution of low margin orders for Electronic Voting Machine (EVM) and VVPAT. Additionally, current order book to bill ratio continues to remain robust at ~4.1x on Trailing Twelve Month (TTM) revenue basis and expected order inflow for Akash Missile System in coming quarters is further likely to drive the order inflow and also improves the revenue visibility for the company. However, the recent announcement of revision of PBT margins from 12.5% to 7.5% on prospective nomination based defence orders would be structural negative news for Defence sector PSUs as it would remain a cause of concerns on the future business margins. We continue to like BEL for a long term play on defence sector given its strong execution in the past, robust order inflow guidance and strong balance sheet strength. We continue to have a Buy rating on the stock with a target price of Rs.143 at 15x (maintained earlier multiple) FY20E EPS of Rs.7.4 and adding cash per share of Rs.33. Any revision in target price would depend upon the general business momentum, changes in order inflow, execution issues and rollover of earnings to next financial year.

Key Details

52 week H/L(Rs) 158/73


FV (Rs) 1

PE (X) (TTM) 13.6


PE (X)

FY18 FY19E FY20E

13.6 12.7 10.8

Birla Corporation Ltd. CMP: Rs.462, Mkt Cap: Rs.36 bn Background

Birla Corporation (BCorp), established in 1919, is part of the MP Birla group. It manufactures cement, jute products, synthetic viscose and cotton yarn. Cement constitutes about 90% of its revenue. It has cement plants in Rajasthan, Madhya Pradesh, Uttar Pradesh and West Bengal. . Birla Cement operates under brand names Birla Samrat Cement and Birla Samrat Ultimate Cement. Jute products include jute yarn, floor and wall covering, Lino Hessian, decorative fabrics, nursery cloth, scrim, jute carpets, non-woven jute felt, hydrocarbon-free bags/cloth, D.W. canvas, carpet backing cloth, hessian cloth/bags and sacking bags/cloth.


Promoter 62.90

Institutions 17.85

Public 19.25

Total 100.00



Y/E Sales Growth EBITDA Margin Net Profit EPS Growth P/E Div.Yield 31-Mar Rs Mn (%) Rs Mn (%) Rs Bn Rs % X %

17A 43,477 33 6,235 14.3 2263 29.4 34.9 15.7 1.3 18A 57,342 31.9 8,066 14.1 1,664 21.6 (26.5) 21.4 1.5 19E 63,120 10.1 9,784 15.5 3,214 41.7 93.1 11.1 1.5 20E 70,056 11 11,909 17 4,487 58.3 39.6 7.9 1.5

View: During Q3FY19, company has delivered strong performance for the cement business on the back of improved efficiency and better realizations. Going ahead, company’s strategy of cross branding of production at the acquired Reliance plants is expected to yield better profitability. We think with the economic growth picking up and sand unavailability issues behind us coupled with government’s continued spending on infrastructure; demand growth in the cement sector is likely to continue going ahead as well. We think that the stock commands premium to the current valuation due to visible synergy benefits between the acquired Reliance Cement plants (capacity 5.5 MTPA) and Standalone BCorp capacities and thereby expected pick up in the valuations due to improvement in profitability and strong cash flow generation capability given the entry into high growing central regions via the acquisition. We have a Buy rating on the stock with a price target of Rs.1325 which is 12xFY20E EV/EBITDA (maintained earlier multiple). However, any changes to the price target would be hinged upon changes in business momentum/economic cycle, capex execution issues and acceleration of cost optimization initiatives.

Key Details

52 week H/L(Rs) 1290/440


FV (Rs) 10.0

PE (X) (TTM) 13.8


PE (X)

FY18 FY19E FY20E

21.4 11.1 7.9

Carborundum Universal Ltd. CMP: Rs.348, Mkt Cap: Rs.66 bn Background

Carborundum Universal Limited (CUMI) develops services and solutions for abrasives, electro minerals or ceramics. The Abrasives segment consists of bonded, coated, processed cloth, polymers, power tools and coolants. The operations are carried out through over 10 manufacturing facilities located pan India, Russia and other countries. The Ceramics segment consists of super refractories, industrial ceramics, anti-corrosives and bio ceramics. Its user industries include power generation and transmission, coal washers, grain handling, ballistic protection and construction. The Electro minerals segment includes abrasive/refractory grains, micro grits for the photovoltaic industry and captive power generation from hydel power plant. Its product range includes white and brown fused alumina, silicon carbide, fused zirconia, alumina zirconia and zirconia mullite. Its geographical segments include India and Rest of the world.


Promoter 42.4

Institutions 28.67

Public 28.93

Total 100


Earnings Summary (Standalone)

Y/E Sales Growth EBITDA Margin Net Profit EPS Growth P/E Div. Yield 31-Mar Rs. Mn (%) Rs. Mn (%) Rs. Mn Rs. % X %

17A 21125 8.7 3346 15.8 1742 9.7 25.2 35.7 0.4 18A 23678 12.1 3986 16.8 2157 11.6 19.3 29.9 0.9 19E 27378 15.6 4712 17.2 2542 13.5 15.8 25.9 0.9 20E 31271 14.2 5629 18.0 3094 16.4 21.7 21.3 0.9

View: CUMI continues to show sharp improvement in topline across all the three segments (abrasive, ceramic and electro minerals) during Q3FY19. While the operating margins during Q3FY19 were impacted due to higher input prices and power and fuel cost, we believe given the company’s market leadership position across most of its segments, it would be able to take the required price hike in the near term. In abrasives, improved demand from end-user industries, market share gains through shift from unorganized to organized, better pricing power should drive overall growth. In ceramics, further traction in metz cylinders in which CUMI is a part of a global duopoly along with overall growth for refractories is likely to drive the revenue for the ceramic segment. Lastly, in electro minerals, stabilization of operations post shift of Zirconia facility from South Africa to India, stable revenues in Russia and receding impact of power cost increase going ahead is likely to result in operational improvement for the segment. With the initial signs of capex recovery visible, we believe CUMI is likely to be the early beneficial of capex cycle revival in the form of improved free cash flow and return ratios led by improved operating leverage. We have a Buy rating on the stock, valuing the company at Rs.507/share, which is 31x (maintained earlier multiple) FY20 EPS of Rs.16.4. Any earnings/target price revision would depend upon a slowdown in industrial activities or new capex announcement, market‐share loss to competitors, sharp rise in key raw material prices and adverse currency movement.

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Daily closing price for last 3 years of Carborundum Universal

Source: Bloomberg

Key Details

52 week H/L(Rs) 401/314


FV (Rs) 1

PE (X) (TTM) 26.1


PE (X)

FY18 FY19E FY20E

29.9 25.9 21.3

Cummins India Ltd. CMP: Rs.722, Mkt Cap: Rs.200 bn Background

Cummins in India, a power leader, is a group of complementary business units that design, manufacture, distribute and service engines and related technologies, including fuel systems, air handling, filtration, emission solutions and electrical power generation systems. Its technology and pioneering initiatives are bringing innovative solutions and dependable services at the best possible value to users across the country. Its high performance outlook is based on customer focus, integrity and capability of its people. Part of the US company Cummins Inc., Cummins in India is a Group of eight legal entities across 200 locations in the country. Cummins India Ltd., the country’s leading manufacturer of diesel and natural gas engines is one of the eight legal entities of the Cummins Group in India. Comprising of four business units - Industrial Engine, Power Generation, Distribution, and Automotive, Cummins India Ltd. is also the largest entity of the Cummins Group in India.


Promoter 51.00

Institutions 36.34

Public 12.66

Total 100




17A 50773 7.8 8018 15.8 7346.3 26.5 (2.6) 27.2 2.1 18A 50825 0.1 7324 14.4 7084.7 25.6 (3.6) 28.2 2.1 19E 55233 8.7 8009 14.5 7646 27.6 7.9 26.2 2.3 20E 61615 11.6 8934 14.5 8497 30.7 11.1 23.5 2.5

View: Cummins continued to report steady growth in Q3FY19 led by sharp improvement in domestic as well as exports business during Q3FY19. Given the sharp uptick in performance during 9MFY19, and expectation of government push for infrastructure and strong pick up in orders from data centres, management has revised its growth guidance upwards for domestic (from 10-12% YoY to 13-15% YoY for FY19) and revised the export business growth guidance from 3-5% YoY to 4-4.5% YoY for FY19. The management continues to be cautiously optimistic on the exports markets given the structurally weak demand in Middle-east and Africa markets apart from weak demand expectation in European market. Domestic growth is expected to see good traction on the back of improving market share with its key user sectors, increased content in railways and marine business and new product launches for Central Pollution Control Board (CPCB) III norms, BS VI and Gas Gensets. The new avenues of growth for the company are being seen in electrification, renewable (fuel cell, gas engines, alternate fuels), alternate fuels space. The company continues to remain the best placed in its business owing to scale advantage, technology leadership, strong distribution network and strong partnerships. We continue to like the company on the back of negative net debt and healthy ROCE and ROE of 23.6% and 17.8% respectively for FY18. Currently, we have a Buy rating on the stock with a price target of Rs.828 at 27x (maintaining earlier multiple) FY20E EPS of Rs.30.7. Any changes in our earnings/price objective would hinge on the pace of economic recovery, changes in the margin profile and general business momentum.

Key Details

52 week H/L(Rs) 885/612


FV (Rs) 2

PE (X) (TTM) 29.7


PE (X)

FY18 FY19E FY20E

28.2 26.2 23.5

Cyient Ltd. CMP: Rs.630, Mkt Cap: Rs.71 bn Background

Cyient Ltd., formerly Infotech Enterprises Ltd., provides engineering solutions, including product development and life-cycle support, process, network and content engineering to the organizations worldwide. The Company offers a range of publication solutions, including simple authoring and information architecture development, transforming unstructured documents to structured documents, such as Technical documentation and online technical query support, two dimensional (2D) and third dimensional (3D) illustration with color codes, Usage and customization of content management system, authoring and illustration tools, Industry-certified technical publication, and Data management. The Company’s Data Transformation and Analytics business unit specifically targets three industries: Transport and Navigation, Energy and Natural Resources, and Content and Geospatial Providers.


Promoter 22.1

Institutions 67.38

Public 10.52

Total 100




17A 36065 16.3 4,848 13.4 3,439 30.6 5.6 20.6 1.7 18A 39175 8.6 5,492 14 4,050 36.04 17.8 17.5 2.1 19E 45051 15 6,307 14 4,663 41.5 15.1 15.2 2.4 20E 50908 13 7,127 14 5,269 46.89 13 13.4 2.7

View: Cyient continued to show steady revenue performance across its key business segments. We think that better business pipelines, benefits from acquisitions, cross selling opportunities and higher client additions could help the company ramp up projects in its existing businesses. The order book for the company at USD 274 mn rose by 11.8% YoY reflecting the steady business momentum. The management stated that some project got pushed to subsequent quarters which should improve the order book in the near to medium term. The company is looking to grow revenues by focusing on areas like IoT, Digitization, innovations in Communications, Augmented/Virtual Reality, Defence and Aerospace, which is also likely to drive earnings in future. The company has a very strong balance sheet with cash balance of Rs.12.3 bn, which would help it to do more buyouts to improve either domain knowledge or to get access to more clients. We expect the management to be able to deliver steady earnings growth in the medium term. We have a Buy rating on the stock with a price target of Rs.800 at 15x (maintaining earlier multiple) FY20E EPS of Rs.46.9 (adding Rs.97 of cash per share). Any earnings/target price revision would depend upon the volatility in the organic business, change in the margin profile and change in general business momentum.

Key Details

52 week H/L(Rs) 887/571


FV (Rs) 5

PE (X) (TTM) 16.9


PE (X)

FY18 FY19E FY20E

17.5 15.2 13.4

Entertainment Network (India) Ltd. CMP: Rs.529, Mkt Cap: Rs.25 bn Background

Entertainment Network (India) Ltd. (ENIL) is promoted by Bennett, Coleman & Co. Ltd, which is the flagship company of The Times of India Group, one of India’s leading media groups. ENIL is engaged in the radio broadcasting business. The Company operates in two segments: Radio Broadcasting, which consists of the activities relating to airtime sales and Events, which consist of activities relating to management of events, creating and marketing media properties. The Company operates its radio broadcasting business under the brand Radio Mirchi and Mirchi Love.


Promoter 71.15

Institutions 21.87

Public 6.98

Total 100


Earnings Summary

Y/E Sales Growth EBITDA Margin Net Profit EPS Growth P/E Div. Yield 31-Mar Rs Mn (%) Rs Mn (%) Rs Mn Rs % X %

17A 5,565 9.4 1,259 22.6 545 11.4 (49.5) 46.4 0.2 18A 5,371 (3.5) 1,166 21.7 356 7.5 (34.6) 70.5 0.2 19E 6,264 16.6 1,597 25.5 827 17.4 132.1 30.4 0.2 20E 7,350 17.3 2,021 27.5 1,206 25.3 45.8 20.9 0.2

View: ENIL’s performance improved in Q3FY19 as guided by the management and is expected to improve further in coming quarters because of lower base, launch of new stations and improvement in Solution business. With improving general consumer sentiments and impending election season, we expect robust demand for the radio inventory of ENIL, given its leadership position. We think that the company is poised to post strong earnings growth post the investment phase that it has been in over the last two years, on the back of improved topline, better cost management and increased reach. Additionally, we believe, management’s decision to continue to follow its long-term strategy of inventory ad-cap to improve listenership experience would yield higher realization for the company going ahead and thereby improve the profitability. We continue to like the company given the growth potential, strong balance sheet and ability to scale up its new stations profitably. Currently, we have a Buy rating on the stock with a price target of Rs.759 at 30x (maintaining earlier multiple) on FY20E EPS of Rs.25.3. Any changes in the earnings/price target would depend on ability of the company to scale up its news stations, changes in the margin profile and changes in the general business/economic momentum.

Key Details

52 week H/L(Rs) 763/510


FV (Rs) 10

PE (X) (TTM) 54.4


PE (X)

FY18 FY19E FY20E

70.5 30.4 20.9

Exide Industries Ltd. CMP: Rs.219, Mkt Cap: Rs.186 bn

Background

Exide Industries Ltd. (Exide) is a manufacturer of lead acid storage batteries for automotive and industrial applications. The Company's business segments include Storage Batteries & allied products, Solar Lantern & Homelights, and Life Insurance business. The Storage batteries & allied products segment manufactures lead acid storage batteries and allied products. The Life Insurance business segment is engaged in life insurance business carried by one of its subsidiaries. The Company sells automotive batteries in the domestic market under brand names Exide, SF and Sonic. The Company markets its industrial batteries to the domestic market, under Exide, SF and CEIL brands, and its international brands for industrial batteries include CEIL, Chloride and Index.


Promoter 45.99

Institutions 34.6

Public 19.41

Total 100


Earnings Summary

Y/E Sales Growth EBITDA Margin Net Profit EPS Growth P/E Div. Yield 31-Mar Rs Bn (%) Rs Bn (%) Rs Bn Rs % X %

17A 75.8 10.5 10.8 14.3 6.9 8.2 11.1 30.9 1.1 18A 91.9 21.1 12.4 13.5 6.7 8.4 2.4 30.1 1.1 19E 107.5 17 14.9 13.9 8.8 10.4 24.1 24.3 1.1 20E 125.8 17 17.7 14.1 10.6 12.5 20.8 20.2 1.1

View: While the Exide has seen steady growth in 9MFY19 particularly in Automobile segment, the company may see some slowdown in demand from automobile OEMs given the recent slowdown in automobile sales especially in passenger vehicle segment. However, the strong market share in Industrial segments of Solar, Backup Power, Manufacturing and Project sector may drive the volume growth with the expected recovery in industrial capex cycle over the long term. The company is working on expanding its portfolio for emerging requirements like electric vehicles, hybrid cars and start-stop batteries and has recently added e-rickshaw battery and completely sealed and maintenance-free battery in its portfolio. The company is also expanding its reach in overseas markets like GCC (Gulf Co-operation Council) countries, South East Asian countries and select African nations. The lead prices (key raw material) had been very volatile and would be the key parameter to watch out for in the near term. However, the management is working on various costs cutting initiatives and improving the product mix to maintain its margins. We are revising our earnings estimate for FY19 and FY20 given the weak operating efficiency, rising depreciation and slowdown in passenger vehicle segment. We maintain our Buy rating on the stock with the target price of Rs.268 at 22x (maintaining earlier multiple) FY20E EPS of Rs.11.0 and adding Rs.25 per share for the embedded value in Insurance business (as of March 2018). Any earning/target price revision would depend on the improvement in margin, changes in market share, implementation of GST and its tax structure, value in Insurance business and changes in general business momentum.

Key Details

52 week H/L(Rs) 305/195


FV (Rs) 1

PE (X) (TTM) 25.8


PE (X)

FY18 FY19E FY20E

30.1 24.3 20.2

Godrej Agrovet Ltd CMP: Rs.477, Mkt Cap: Rs.92 bn

Background

Godrej Agrovet Ltd. (GAVL) is a well-diversified, research and development focused agri-business company with operations across five business verticals i.e. animal feed, crop protection, oil palm, dairy, and poultry and processed foods. In animal feed business, GAL’s portfolio of products comprises cattle feed, poultry feed (broiler and layer), aqua feed (fish and shrimp) and specialty feed. In crop protection business, GAL manufactures a wide range of products that cater to the entire crop lifecycle including plant growth regulators, organic manures, generic agrochemicals and specialized herbicides. Company purchases fresh fruit bunches (FFBs) from palm oil farmers and work closely with them by providing planting material, agricultural inputs and technical guidance. In dairy business, which it operates through Subsidiary, Creamline Dairy, it sells a majority of milk and milk based products under the ‘Jersey’ brand across the states of Telangana, Andhra Pradesh, Tamil Nadu, Karnataka and Maharashtra. GAL also manufactures and market processed poultry and vegetarian products through its brands ‘Real Good Chicken’ and ‘Yummiez’.


Promoter 68.79

Institutions 5.95

Public 25.26

Total 100


Earnings Summary


17A 49111 31.0 4380 8.9 2344 12.7 (28.5) 37.6 0 18A 51855 5.6 4430 8.5 2350 12.2 (3.3) 39.1 1.0 19E 60234 16.2 5722 9.5 3622 18.9 54.1 25.2 1.0 20E 70955 17.8 7167 10.1 4696 24.5 29.6 19.5 1.0

View: GAVL has been witnessing improvement in its revenue growth numbers for past three quarters while profitability is taking hit due one time provisions. The management sounded confident of recovering some of the provision and also expects margins to improve going ahead under various segments owing to price hike, correction in some of the raw materials and backward integration activity. GAVL continued to focus on improving its market share across all its business verticals, which are underpenetrated and are largely catered by unorganized players. GAVL is also working on strategy to increase its revenue and profitability by extending its product pipeline by introducing innovative and value added products and expanding its geographical presence across its business divisions. GAVL also intends to improve its cost efficiency and productivity by implementing effective and efficient operational techniques in order to improve its margins in the long term. We have a positive view on the stock considering the strong parentage, leadership position in various divisions, expected improvement in margins and return ratios, strong and robust balance sheet. We maintain our Buy rating on the stock with the target price of Rs.734 based on a PE multiple of 30x (maintaining earlier multiple) FY20E EPS of Rs.24.5. Any earning/target price revision would depend on the performance of its sub-divisions, improvement in market share and changes in general business momentum.

0

100

200

300

400

500

600

700

800O

ct-1

7

No

v-1

7

Dec

-17

Jan

-18

Feb

-18

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-18

Ap

r-1

8

May

-18

Jun

-18

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18

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g-1

8

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-18

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-18

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v-1

8

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-18

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-19

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-19

Daily closing price from date of Listing of Godrej Agrovet

Source: Bloomberg

Key Details

52 week H/L(Rs) 737/462


FV (Rs) 10

PE (X) (TTM) 38.1


PE (X)

FY18 FY19E FY20E

39.1 25.2 19.5

Grasim Industries Ltd. CMP: Rs.781; Mkt Cap: Rs.514 bn

Background

Grasim Industries Ltd. (Grasim) is engaged in two businesses include viscose staple fibre (VSF) and cement. The Company also produces Rayon Grade Pulp, Caustic Soda and allied chemicals, which are used in the manufacture of VSF. The Company manufactures fibre and pulp, which includes viscose staple fibre and rayon grade pulp; chemicals, which include caustic soda, epoxy and allied chemicals, and others, which include textiles. The manufacturing plants of the Company are located in India, Canada, Sweden, China, Middle East, Sri Lanka and Bangladesh. The Company’s subsidiary is UltraTech Cement Ltd.


Promoter 40.09

Institutions 40.21

Public 19.7

Total 100



Y/E Sales Growth EBITDA Margin PAT EPS Growth P/E Div. Yield 31-Mar Rs Bn (%) Rs Bn (%) Rs Bn Rs. (%) (X) (%)

17A 103.5 15.3 21.5 20.8 15.6 33.4 56 23.4 0.9 18A 157.9 52.6 30.6 19.4 20.2 30.7 -8.2 25.4 0.7 19E 167.5 6.1 34.6 20.7 21.7 33.1 7.8 23.6 0.8 20E 181.5 8.3 38.4 21.2 23.4 35.5 7.5 22.0 0.8

View: Grasim is a global leader in viscose staple fibre (VSF) with an aggregate installed capacity of 546,000 ton per annum (tpa) as on Q3FY19. The company is also the largest producer of Sodium Sulphate, a by-product of VSF, widely used in the paper and pulp, detergent, glass and textile industries. On VSF business, management highlighted that realization witnessed improvement during Q3FY19 led by improved mix and guided that prices are expected to sustain going ahead on the back of balanced demand-supply scenario globally. Caustic soda demand in India is expected to see stable growth going ahead led by growth in users like textile, aluminium, paper, soap and detergent. On standalone level, we see improvement in growth outlook for the VSF and Chemical business, while investment in ABCL gives investors access in key verticals of insurance, asset management and retail lending space. While, the expected capital commitments towards Vodafone-Idea venture and also potential infusion into ABCL are likely to remain overhang on the stock in the near term. Currently, we have a Buy rating on the stock with a target price of Rs.1,167 which is summation of 9xFY20E (maintaining earlier multiple) EPS of Rs.35.5 for Standalone business along with 60.2% company’s stake in UltraTech Cement valued at Rs.671/share (after providing for 40% holding company discount based on our FY20 target price of Rs.4450 for UltraTech) and 56% company stake in ABCL valued at Rs.178/share (after providing for 40% holding company discount based on current market price). Any revision in the target price would depend upon change in VSF volumes, realizations, valuation of UltraTech Cement or ABCL, general business momentum and the valuation of the business which is to be merged.

Key Details

52 week H/L(Rs) 1201/689


FV (Rs) 2

PE (X) (TTM) (Standalone) 15.6


PE (X)

FY18 FY19E FY20E

25.4 23.6 22.0

Gujarat State Fertiliser & Chemicals Ltd. CMP: Rs.91, Mkt Cap: Rs.36 bn Background

Gujarat State Fertilizers & Chemicals Ltd. (GSFC) is engaged in the fertilizer business. The Company operates through two business segments: Fertilizer products and Industrial products. Its Fertilizer products segment includes Urea, Ammonium Sulphate, Di-ammonium, Phosphate, Ammonium Phosphate Sulphate, NPK and traded fertilizer products. Its Industrial products segment includes Caprolactam, Nylon-6, Nylon Filament Yarn, Nylon Chips, Melamine, Methanol, Polymer products and traded industrial products. It also produces chemicals which are used in the manufacture of products such as toothbrushes, paints, tires, dyes, cosmetics and medicines. It markets its products under the Sardar brand.


Promoter 37.84

Institutions 31.99

Public 30.17

Total 100


Earnings Summary

Y/E 31-Mar

Sales Rs Mn

Growth %

EBITDA Rs Mn

Margin (%)

PAT Rs Mn

EPS Rs

Growth %

P/E X

Div. Yld

%

17A 52,645 (13.8) 4,866 9.2 4,195 10.5 2.5 8.7 2.4 18A 62,706 19.1 5,666 9.0 4,757 11.9 13.4 7.6 2.4 19E 73,026 16.5 7,011 9.6 5,062 12.7 6.4 7.2 2.4 20E 85,752 17.4 8,575 10.0 5,901 14.8 16.6 6.1 2.4

View: GSFC is India’s largest producer of the chemical “Caprolactam” and has a leading position in the Complex Fertilizer segments. The company’s standalone balance sheet continues to remain robust with debt to equity ratio at 0.18x in H1FY19. The management has maintained its volume growth guidance for FY19. The issue related to Direct Benefit Transfer Scheme is also getting resolved and now company is also getting faster disbursal of subsidies which would help in reducing the interest burden. The ramp-up of recently commissioned Nylon-6 plant and Melamine plant would be key growth driver for the company going ahead. The management expects that post completion of its capex, the company would be able to increase the contribution of value-added products and reduce dependence on subsidized products such as DAP. Currently, we have a Buy rating on the stock with the target price of Rs.148 which is 10x FY20E EPS (maintaining earlier PE multiple) of Rs.14.8. Any revision in earnings and target price would depend upon changes in Caprolactam-Benzene spreads, improvement volume growth, rollover of earnings in the next year and general business momentum.

Key Details

52 week H/L(Rs) 138/86


FV (Rs) 2

PE (X) (TTM) 7.6


PE (X)

FY18 FY19E FY20E

7.6 7.2 6.1

Infosys Ltd. CMP: Rs.742, Mkt Cap: Rs.3240 bn

Background

Infosys Ltd. (Infosys) is an Information technology services company that provides business consulting, technology, engineering and outsourcing services. The Company also offers products, platforms and solutions to clients in different industries. Its business solutions include business IT services, consulting and systems integration services, products, business platforms and solutions, and cloud computing and enterprise mobility. Business IT services comprise application development and maintenance, independent validation services, infrastructure management, engineering services comprising product engineering and life cycle solutions and business process management. Consulting and systems integration services include consulting, enterprise solutions, systems integration and advanced technologies. Products, business platforms and solutions include Finacle, the company’s banking product.


Promoter 12.82

Institutions 57.22

Public 29.96

Total 100



Y/E Sales Growth EBITDA Margin Net Profit EPS Growth P/E Div. Yield 31-Mar Rs. Bn (%) Rs. Bn (%) Rs. Bn Rs. % X %

17A 685 9.7 186 27.2 144 32.9 6.4 22.6 2.6 18A 705 3 190 27 160 36.7 11.7 20.2 5.9 19E 842 19.4 223 26.5 176 40.3 9.7 18.4 3.1 20E 963 14.4 255 26.5 200 45.8 13.6 16.2 3.4

View: The Q3FY19 numbers of Infosys were strong on the revenue front, while the margin was weaker than expectation. We think that most of the top tier IT companies are continuing to invest in hiring and reskilling manpower in line with the requirements of the emerging digital business landscape. The benefit of this is likely to be reaped in the medium term. The guidance of the company signifies that it continues to see improved business traction and expects strong deal wins going ahead which was quite encouraging. The company’s strategy on improving productivity in the legacy business and trying to grow newer high margin services business is likely to help it to achieve better growth. The strong deal wins and currency tailwinds would lead to improvement in revenue growth in the medium term. The capital allocation strategy of the company would also help in improving the shareholder value in the medium to long term. Given the improved revenue momentum, we have revised our earnings estimates for the company upwards. We have a Buy rating on the stock with a revised price target of Rs.834 at 17x FY20E EPS (maintaining earlier multiple) of Rs.45.8 added with Rs.56 of cash per share. Any changes in the price target/valuation multiple would depend on the ability of the company to outperform its guidance, future margin profile, inorganic initiatives and general business momentum.

Key Details

52 week H/L(Rs) 771/550


FV (Rs) 5

PE (X) (TTM) 21.7


PE (X)

FY18 FY19E FY20E

20.2 18.4 16.2

ITC Ltd. CMP: Rs.275, Mkt Cap: Rs.3368 bn Background

ITC Ltd. (ITC) is engaged in fast moving consumer goods (FMCG), hotels, paperboards and specialty papers, packaging, agri-business, and information technology. It operating segments include FMCG, hotels, agri business and paperboards, paper and packaging. FMCG businesses consist of cigarettes, cigars, smoking mixtures, and branded packaged foods, personal care products, education and stationery products, lifestyle retailing, incense sticks (agarbattis) and safety matches. The Hotels involve in hoteliering. The paperboards, paper and packaging segment includes paperboards, paper including specialty paper and packaging including flexibles. The Agri business segment includes agri commodities such as soya, spices, coffee and leaf tobacco. Others includes information technology services and filter rods, among others.


Promoter 0.00

Institutions 54.96

Public 45.04

Total 100


Earnings Summary


17A 400.9 9.6 145.8 36.4 102.0 8.4 8.7 32.7 1.7 18A 406.3 1.3 155.4 38.3 112.2 9.2 10.0 29.9 1.8 19E 461.4 13.6 177.6 38.5 128.1 10.5 14.2 26.2 1.8 20E 513.1 11.2 199.1 38.8 141.8 11.7 10.7 23.5 1.8

View: ITC continued to report improvement in volume growth in Cigarette segment for second consecutive quarter in Q3FY19. In addition, the company is also witnessing improvement in FMCG business’ performance with gradual improvement in margins. Moreover, the company was able to consolidate its position in some of the major categories in FMCG business and continue to enter into new categories in the FMCG business. In addition, the company has been aggressively focusing on new launches in the existing business and entering into new markets in order to bring the incremental growth. We believe cigarette business may continue to witness improvement going ahead given the stability starting to emerge post GST implementation, however, if there is any upward revision in GST rates that may force company to take price hike then the company might start to see pressure on volumes again. However, ITC has been consolidating its leadership position in the Cigarette segment and continuing to improve its standing in key competitive markets across the country. Hence, Cigarette segment should continue to perform well over the longer term on the back of healthy margins and strong brands available at various sizes. We maintain our positive stance on the company given the long-term positive benefits of GST, expected improvement in FMCG business and steep discount as compared to its peers. Hence, we are maintaining our Buy rating on the stock with target price of Rs.350 at 30x (maintaining earlier multiple) FY20E EPS of Rs.11.7. Any earning/target price revision would depend on the performance of FMCG business, any regulatory changes in Cigarette business and in general business momentum.

Key Details

52 week H/L(Rs) 323/251


FV (Rs) 1

PE (X) (TTM) 30.6


PE (X)

FY18 FY19E FY20E

29.6 26.2 23.5

Jyothy Laboratories Ltd. CMP: Rs.178, Mkt Cap: Rs.65 bn Background

Jyothy Laboratories Ltd. (Jyothy), a fast moving consumer goods (FMCG) company, was founded by Mr. M P Ramachandran in 1983. Over years, Jyothy has evolved from a single product company into a multi-product company. Jyothy is principally engaged in manufacturing and marketing of fabric whiteners, soaps, detergents, mosquito repellents, scrubber, bodycare and incense sticks. Jyothy has 10 brands under its product portfolio offering including Ujala, Maxo, Exo, Henko, Prill, Margo, Neem, Fa, Mr. White and Check. Jyothy also runs laundry chain through its subsidiary Jyothy fabricare services Ltd.


Promoter 66.85

Institutions 22.92

Public 10.23

Total 100


Earnings Summary


17A 16,830 5.7 2,545 15.1 2,042 5.6 175.7 31.8 1.1 18A 17,459 3.7 2,708 15.5 1,789 4.9 (12.4) 36.3 0.6 19E 19,554 12 3,129 16 2,160 5.9 20.8 30.2 0.6 20E 22,201 13.5 3,708 16.7 2,650 7.3 22.7 24.4 0.6

View: Jyothy has seen sequential improvement in its volume growth in Q3FY19 with Kerala market returning to normalcy. The management has highlighted that the demand scenario continued to be encouraging and maintained its stance of focusing on increasing its direct reach, brand building and innovation in order to drive the revenue growth going ahead. In addition, the company is focusing on individual segment to drive the next leg of growth like extending its dominant position in post-wash segment (fabric care), strengthening position in dishwash segment, increasing footprint in household insecticides and reviving and bringing extension of existing brands in personal care segment. The company would also be launching some more brands in high margin segments in the coming years. Given the long-term benefits of GST, management’s guidance of double-digit revenue growth and 16% EBITDA margin for FY19, we have a long-term positive outlook on the stock. Currently we have a Buy rating on the stock with the target price of Rs.255 at 35x PE multiple (maintaining earlier multiple) on FY20E EPS of Rs.7.3. Any revision in target price and earnings would depend on the performance of its power brands, improvement in EBITDA margin and changes in general business momentum.

Key Details

52 week H/L(Rs) 249/169


FV (Rs) 1

PE (X) (TTM) 41.7


PE (X)

FY18 FY19E FY20E

36.3 30.2 24.4

KEC International Ltd. CMP: Rs.256; Mkt Cap: Rs.66 bn Background

KEC was incorporated in 1945 as Kamani Engineering Corporation by the RPG Group. KEC is a Global Power Transmission Infrastructure major for Engineering Procurement and Construction (EPC) projects. It has presence in the verticals of Power Transmission & Distribution (T&D), Cables, Railways, Water, Renewables (Solar Energy) and Civil. Globally, the company has powered infrastructure development in more than 61 countries. KEC is a leader in Power Transmission EPC projects and has more than seven decades of experience. Over the years, it has grown through organic as well as inorganic route.


Promoter 51.17

Institutions 30.73

Public 18.1

Total 100


Earnings Summary – Consolidated


17A 85.8 0.8 8.2 9.5 3.0 11.9 106.1 21.5 0.7 18A 100.6 17.2 10.1 10.0 4.6 17.9 51.1 14.4 0.7 19E 115.7 15.0 11.6 10.0 5.5 21.3 18.9 12.0 1.0 20E 133.0 15.0 14.0 10.5 6.7 26.1 22.6 9.8 1.0

View: KEC delivered muted performance during Q3FY19 mainly on account of poor performance in the T&D business. While the order inflow also declined sharply during Q3FY19 (down by 35.2% YoY in Q3FY19), the strong order book at the end of Q3FY19 (up by 20.1% YoY at the end of Q3FY19) and sharp pick up in Railway and Civil business are likely to drive the revenue growth in the near to medium term. While the management guided that weakness in T&D ordering is likely to continue until elections, post which the ordering momentum is likely to see a sharp pick up given the increasing desire by various State Electricity Board to improve the T&D ecosystem. Moreover, Indian Railways’ long term plan to electrify ~35000 kms of railway lines by FY20 improves the revenue visibility for the railway segment for KEC, given the leadership position in the railway overhead electrification segment. We believe, expected improvement in order inflow, reducing debt profile, diversification of overall company revenue via both, diversified client base and segment base coupled with expectation of improving ROCEs and ROE going ahead is likely to drive profitability for the company in the medium to long term. We have a Buy rating on the stock with the target price of Rs.392 based on PE multiple of 15x (maintaining earlier multiple) FY20E EPS of Rs.26.1. Any earning/target price revision would depend on the ordering and tendering activities by domestic T&D players, improvement in market share and changes in general business momentum.

Key Details

52 week H/L(Rs) 443/230


FV (Rs) 2

PE (X) (TTM) 13.4


PE (X)

FY18 FY19E FY20E

14.4 12.0 9.8

Larsen & Toubro Ltd. CMP: Rs.1264, Mkt Cap: Rs.1773 bn

Background

Larsen & Toubro (L&T) Ltd. is technology, engineering, construction and manufacturing company. The company operates in 5 segments includes Hydrocarbon, IT & Technology Services, Financial Services, Developmental Projects and Others comprising Realty, Shipbuilding, Ready Mix Concrete, Mining and Aviation. While its segments at the standalone level: Infrastructure, Power, Metallurgical and Material, Handling, Heavy Engineering, Electrical and Automation, Machinery and Industrial Products.


Promoter 0.00

Institutions 56.5

Public 43.5

Total 100




17A 657 3.0 65 9.9 46 32.5 49.9 38.9 1.0 18A 745 13.3 74 10 50 35.4 8.7 35.7 1.3 19E 849 14.0 87 10.2 59 42.4 19.8 29.8 1.3 20E 968 14.0 104 10.7 71 50.8 20 24.9 1.3

View: L&T is India's largest Engineering & Construction Company. L&T delivered good overall growth in Q3FY19 led by execution pick-up in infrastructure, defence and heavy engineering segment on the back of faster execution push for the government projects ahead of elections. While the order inflows declined during Q3FY19, management continued to maintain its 10-12% YoY growth guidance for order inflow for full year FY19. Management is optimistic for FY19 and is confident of achieving the order inflow and revenue growth targets for the fiscal and does not see much impact from the upcoming general elections. L&T is exposed to several levers across business/geographic segments and has emerged as the Engineering & Construction partner of choice in India, which provides a robust foundation to capitalize on the next leg of investment cycle. The management continues to be optimistic about opening up of the defense sector which could be a big opportunity for L&T as it is ready with capacity and expertise to grab such opportunities. Management guided that incremental order inflow growth would be supported by pick up in ordering activity in the Metro and Hydrocarbon segment (specially for Refineries in Middle East region) apart from defence segment. We have a Buy rating on the stock with a target price of Rs.1561, valuing Standalone business at 20x (maintained earlier multiple) FY20E EPS of Rs.50.8 and Subsidiary value of Rs.545/share. Any revision in the target price would depend upon changes in order inflow, execution, profitability in subsidiaries, and rollover to the next financial year, management guidance and general business momentum.

Key Details

52 week H/L(Rs) 1459/1183


FV (Rs) 2



PE (X)

FY18 FY19E FY20E

35.7 29.8 24.9

Mahindra & Mahindra Ltd CMP: Rs.650, Mkt Cap: Rs.808 bn Background

Mahindra and Mahindra Ltd (M&M) is having operations in various industries that include aerospace, aftermarket, agribusiness, automotive, components, construction equipment, consulting services, defense, energy, farm equipment, finance and insurance, industrial equipment, information technology, leisure and hospitality, logistics. The Company’s business segments include Automotive Segment that comprises of sale of automobiles, spare parts and related services and Farm Equipment Segment (FES), which includes sale of tractors, spare parts and related services. Its subsidiaries include Tech Mahindra Ltd., Mahindra & Mahindra Financial Services Ltd., Mahindra Investments (India) Private Ltd. and Mahindra Investments (International) Private Ltd. etc.


Promoter 20.45

Institutions 52.42

Public 27.13

Total 100


Earnings Summary (M&M+MVML)

Y/E Revenue Growth EBITDA Margin Net Profit EPS Growth P/E Div. Yield 31-Mar Rs Bn (%) Rs Bn (%) Rs Bn Rs (%) X %

17A 414 6.4 54 13.1 39 33.1 17.2 19.6 1.0 18A 476 15.0 70 14.8 46 37.2 12.5 17.5 1.2 19E 559 17.6 84 15.0 52 42.2 13.5 15.4 1.2 20E 651 16.5 99 15.2 63 50.3 19.2 12.9 1.2

View: The management expects domestic Tractor industry volume to remain flat in Q4FY19, leading to a reduction in growth guidance for full year to 10% YoY from earlier guidance of 12-14% YoY for FY19. Further, it expects tractor industry to grow in single digit in FY20 as the industry had witnessed strong double-digit growth in last two-three years. On the Automotive business, the management highlighted that the new launches are getting good response. The management has reiterated its stance of focusing on building a strong product pipeline in both FES and Automotive segment by introducing new product/variant of existing vehicle every year and further preparing itself in upcoming electric vehicle space by increasing the capex activity. This may put some pressure on margins in near term but is expected to improve as the volumes increases and operating efficiency kicks-in. We believe M&M is geared up to take on the competition and to grab the opportunity arising from ongoing improvement in growth in auto industry and recovery in rural demand. We remain positive on the medium term potential of the company on the back of new product launches that is likely to drive revenue growth for the company and on healthy return ratios of 15% plus (i.e, RoCE in FY18). Currently, we have a Buy rating on the stock with the target price of Rs.1037 at 16x (maintaining earlier multiple) FY20E EPS of Rs.50.3 adding Rs.232 as value of subsidiaries at 30% holding company discount. Any earning/target price revision would depend on the performance of new launches, improvement in market share, any regulatory changes, changes in the value of subsidiaries, rollover to next financial year and changes in general business momentum.

Key Details

52 week H/L(Rs) 992/616


FV (Rs) 5

PE (X) (TTM) 14.1


PE (X)

FY18 FY19E FY20E

17.5 15.4 12.9

Minda Industries Ltd CMP: Rs.308; Mkt Cap: Rs.81 bn Background

Established in 1958, by Late Shri S L Minda, Minda Industries Limited (MIL) is the flagship Company of UNO MINDA Group and one of the leading suppliers of proprietary automotive solutions to OEMs. The Company is one of the oldest and most respected players in the Indian auto components industry. Headquartered at Manesar, Gurgaon, the Company has 32 plants across India and R&D centres spread across across the globe in six locations. The Company offers a wide range product across different verticals of auto component like Switching systems, Lighting systems, Acoustic systems and Alloy Wheels among others. With more than five decades of existence, the Company has expanded its product portfolio from one product in 1958 to more than 10 products in 2017, thus serving customers across the automotive value chain.


Promoter 70.79

Institutions 14.83

Public 14.38

Total 100


Earnings Summary

Y/E Revenue Growth EBITDA Margin Net Profit EPS Growth P/E Div. Yield 31-Mar Rs Mn (%) Rs Mn (%) Rs Mn Rs % X %

17A 33863 34.0 3740 11.0 1658 7.0 (49.1) 48.9 0.6 18A 44706 32.0 5338 11.9 2714 10.4 49.2 29.6 0.9 19E 56440 26.2 6942 12.3 3582 13.7 31.8 22.5 0.9 20E 72083 27.7 9010 12.5 4629 17.7 29.2 17.4 0.9

View: The merger announcement is likely to be positive for the company as it would enhance its product portfolio and provide access to new customers. While the company is awaiting for regulatory approvals, we await more clarity on equity dilution as there are two options for HSSL shareholders for conversion. We remain long term positive on MIL, as it has been constantly outperforming the industry growth and is expected to do so going ahead. The company is likely to be benefitted from the expected increase in premiumization in the passenger vehicle as the company is ready with products like airbags, infotainment system, RPAS and also working on inorganically expanding its product portfolio with the help of new products like high end cockpit electronic etc. These products are not only expected to bring the incremental revenue growth but also likely to improve margins as some of these products are high margin products. In addition, the company is likely to do well also on the back of steady growth expected in overall automobile sector in the long term on the back of favourable demographics and shift in customers’ buying in aftermarket segment from Unorganized players to Organized players like MIL. We maintain our long term positive view on the stock and have a Buy rating on the stock with the target price of Rs.443 based on PE multiple of 25x (maintaining earlier multiple) FY20E EPS of Rs.17.7. We have not revised our numbers post the announcement as we would for actual change in equity share for MIL. Any earning/target price revision would depend on the performance of subsidiaries, improvement in market share and changes in general business momentum.

Key Details

52 week H/L(Rs) 455/256


FV (Rs) 2

PE (X) (TTM) 25.7


PE (X)

FY18 FY19E FY20E

29.6 22.5 17.4

NTPC Ltd. CMP: Rs.141, Mkt Cap: Rs.1160 bn Background

NTPC Ltd. (NTPC) is India’s largest energy conglomerate to accelerate power development in India. NTPC has established itself as the dominant power major with presence in the entire value chain of the power generation business. From fossil fuels it has forayed into generating electricity via hydro, nuclear and renewable energy sources. To strengthen its core business, NTPC has diversified into the fields of consultancy, power trading, training of power professionals, rural electrification, ash utilization and coal mining as well. The total installed capacity of the company is ~53.2 GW as on Dec 2018. The company has set a target to have an installed power generating capacity of 130 GW by the year 2032. The capacity will have a diversified fuel mix comprising 56% coal, 16% Gas, 11% Nuclear and 17% Renewable Energy Sources including hydro. By 2032, non-fossil fuel based generation capacity shall make up nearly 28% of NTPC’s portfolio.


Promoter 61.77

Institutions 35.14

Public 3.09

Total 100


Earnings Summary

Y/E Sales Growth EBITDA Margin Adj PAT EPS Growth P/E Div. Yild 31-Mar Rs Bn (%) Rs Bn (%) Rs Bn Rs % X %

17A 783 10.5 213 27.2 97 11.8 (9.6) 11.9 3.0

18A 835 6.6 217 26.0 99 12.0 1.3 11.8 3.5

19E 926 11.0 251 27.1 115 14.0 17.1 10.1 3.5

20E 1037 12.0 286 27.6 141 17.1 22.5 8.2 3.5

View: NTPC Ltd is the largest power generating company in India with an installed capacity of ~53.2 GW at the end of Q3FY19. NTPC’s profitability has improved significantly in Q3FY19 vs the underperformance seen in H1FY19 due to reduction in under-recovery of fixed cost, given the improved availability of coal supplies in its key operating thermal plants and resuming of operations at Unchahar plant. Going forward, company expects under-recovery to be lower as government as well as company has taken various steps to improve the coal availability which is likely to improve the profitability in Q4FY19 and FY20. We believe NTPC’s momentum in capacity addition to continue in Q4FY19 and FY20 as many projects are near completion and management has maintained the target to add 5 GW in FY19 and a similar target for FY20. This suggest commissioning activity to pick going ahead (800 MW achieved in 9MFY19) and we believe this will lead to increase in the declared capacity and increase in earnings going forward. With strong pipeline of capacity addition in order to achieve its long term capacity guidance of 130 GW by 2032, growth visibility for the company remains promising. We have a Buy rating on the stock with target price of Rs.219 which is 1.5x FY20E (maintaining earlier multiple) book value of Rs.146/share. Any revision in the target price would depend upon changes in the capacity addition/execution, PLF and general business momentum.

Key Details

52 week H/L(Rs) 180/128


FV (Rs) 10

PE (X) (TTM) 11.0


PE (X)

FY18 FY19E FY20E

11.8 10.1 8.2

Oil and Natural Gas Corporation Ltd. CMP: Rs.148, Mkt Cap: Rs.1895 bn Background

Oil and Natural Gas Corporation Ltd. (ONGC) is an oil exploration and production company. The Company is the producer of crude oil and natural gas in India. The company has organized into the geographical and business segments. The geographical segment includes operations in two categories: In India, which include onshore and offshore, and outside India. The business segment includes exploration & production and refining activities. The Company’s wholly owned subsidiaries include ONGC Videsh Ltd. and Mangalore Refinery and Petrochemicals Ltd. (MRPL).


Promoter 67.48

Institutions 19.12

Public 13.4

Total 100




17E 779 (42.6) 360 46.2 179 13.9 3.5 10.6 5.1 18A 850 9.1 440 51.8 199 15.5 11.4 9.5 5.1 19E 1,063 25.0 606 57.1 270 21.1 35.5 7.0 5.1 20E 1,137 7.0 660 58.1 294 22.9 8.9 6.4 5.1

View: ONGC has witnessed subdued oil production in 9MFY19 owing to the various operational issues; however, gas production has seen some improvement during the same period. However, given the higher crude oil prices and rupee depreciation, realizations saw sharp improvement in Q3FY19 in INR terms which were able to offset the impact of muted production growth. Although decline in the Oil production during 9MFY19 was disappointing, management has guided for ~4-5% YoY decline in oil production for the full year FY19. On the positive side, ONGC is in the midst of developing its KG Basin asset, one of its largest single upstream assets with peak production rate of ~15.5 mmscmd of gas and ~78000 bbl per day of oil. We believe, KG Basin output is likely to contribute significantly to the ONGC’s group output by FY22 where gas production is expected to begin from December 2019 and Oil production from March 2021. On the ONGC operational front, strong traction expected in the gas production going ahead led by several ongoing projects is likely to drive growth for the company. ONGC’s large size in the oil & gas space, strong balance sheet, steady cash flows and consistent dividend payment track record gives us the comfort. We maintain our Buy rating on the stock with a price target of Rs.249 which is 9x FY20E (maintaining earlier multiple) EPS of Rs.22.9 and balance value accruing from ONGC Videsh Ltd and other listed investment. Any revision in the earnings/target price would depend upon change in the international crude oil prices, subsidy share, general business momentum and rollover to next financial year.

Key Details

52 week H/L(Rs) 194/128


FV (Rs) 5

PE (X) (TTM) 8.6


PE (X)

FY18 FY19E FY20E

9.5 7.0 6.4

Petronet LNG Ltd. CMP: Rs.222, Mkt Cap: Rs.333 bn Background

Petronet LNG Ltd (PLNG) is engaged in sale of re-gasified liquefied natural gas (RLNG). The company is engaged in the import and re-gasification of liquefied natural gas (LNG). The company operates through the segment of natural gas business. The Company's terminals include Dahej LNG terminal, Kochi LNG terminal and solid cargo port. The company's Dahej LNG terminal is LNG receiving and regasification terminal with a nameplate capacity of approximately 15 mn metric tons per annum (MMTPA), located at Dahej, Gujarat. The Kochi LNG terminal is LNG receiving, regasification and re loading terminal with nameplate capacity of approximately 5 MMTPA, located at Kochi, Kerala.


Promoter 50

Institutions 35.38

Public 14.62

Total 100


Earnings Summary


17A 246.2 (9.3) 25.9 10.5 17.1 11.4 100.5 19.5 1.1

18A 306.0 24.3 33.1 10.8 20.8 13.9 21.8 16.0 1.1

19E 365.5 19.4 39.0 10.7 25.3 16.9 22.0 13.1 2.0

20E 418.7 14.5 46.4 11.1 29.6 19.8 17.0 11.2 2.0

View: PLNG remains a structural story of India’s increasing gas demand from key users like power stations, fertilizers companies, refineries and petrochemical companies, city gas distribution for compressed natural gas (CNG), domestic purpose usage and steel manufacturers. While the Q3FY19 volumes were impacted during the quarter due to poor demand from power sector, management believes that such loss would be recovered in coming quarters. Moreover, we do not see any meaningful competition for Dahej LNG terminal from upcoming terminals given the PLNG competitive edge in terms of lower re-gas tariff. While the Kochi terminal is currently underutilized, a slight uptick in the utilization levels for Kochi terminal by Q1FY20 and beyond would result in sharp rise in the earnings for the company given the improving utilization. Thus we believe improving utilization at Kochi and additional 2.5 MMTPA capacity additions at Dahej terminal is likely to further improve the earnings and profitability for PLNG. Moreover, international expansion plans given the higher free Cash flow generation capability of the company could also work in favour of the company and this is also likely to improve the growth over the long term. We believe visibility on PLNG’s medium/long term earnings on the back of huge gas demand-supply gap in India, volume growth via Kochi ramp up and gradual capacity addition at Dahej along with earnings growth boosted by annual re-gas charge escalation of 5% YoY is likely to drive the margins as well as profitability in future apart from other international expansion plans announced by the company. Currently, we have a Buy rating on the stock with the target price of Rs.316 based on PE multiple of 16x (maintained earlier multiple) FY20E EPS of Rs.19.8. Any earnings/target price revision would depend upon the fluctuation in LNG prices, any disruption from the upcoming competition; scale up of existing terminal, any decision by government on re-gas tariffs and general changes in the business scenario.

Key Details

52 week H/L(Rs) 252/202


FV (Rs) 10

PE (X) (TTM) 15.8


PE (X)

FY18 FY19E FY20E

16.0 13.1 11.2

The Phoenix Mills Ltd. CMP: Rs.582, Mkt Cap: Rs.89 bn

Background

The Phoenix Mills Limited (PML) is an India-based company engaged in the construction of buildings carried out on own-account basis or on a fee or contract basis. It specializes in the ownership, management and development of retail-led mixed use properties that include shopping, entertainment, commercial, residential and hospitality assets. Its core business includes Retail, Hospitality, Commercial and Residential. Under the Retail segment, it operates eight malls in six cities. Under Commercial and Hospitality segments, it operates four commercial centers in two cities and two completed hotel projects.


Promoter 62.8

Institutions 32.12

Public 5.08

Total 100


Earnings Summary – Standalone


17A 18246 2.5 8478 46.5 1706 11.1 21.7 52.4 0.4 18A 16197 (11.2) 7774 48 2422 15.8 42.0 36.8 0.4 19E 18141 12 9006 49.6 3061 20 26.4 29.1 0.4 20E 20549 13.3 11251 54.8 4433 29 44.8 20.1 0.4

View: PML continued to deliver steady rental growth during Q3FY19 as more malls turn mature with rental income growing at faster pace as compared to consumption growth. With the next leg of growth being partly funded via CPPIB deal and near completion of minority buyouts in existing malls, PML is expected to generate strong free cash flows. We believe these free cash flows can be utilized to unlock development potential of 4.6 msf in its existing land parcels. On the industry dynamics for retail sector, as per FICCI and PWC report, India’s retail sector is expected to touch USD 1.3 trillion by 2020 from USD 630 bn in 2015, growing at a CAGR of 16.7% over the same period (Source: PML Annual Report). With increasing household incomes, consumer attitude towards discretionary spending is gradually shifting and consumers are increasingly using quality and premium products. Thus we believe that India stands at an inflection point from where the retail consumption pie in the country is set to grow at a much higher growth rate for the next decade and given the PML’s leadership position in the mall business in India, it is best equipped to tap this huge opportunity going ahead. Key growth drivers for PML in the form of i) doubling its mall portfolio to ~10-11 msf over the next few years, ii) focus on building retail mixed led commercial portfolio, iii) bottoming of real-estate sector and (iv) improving dynamics for hospitality sector augurs well for the company. Given the healthy cash flow generating assets, reasonable valuations and positive long term outlook on the organized retail segment, we continue to remain positive on the company and have a Buy rating on the stock with a target price of Rs.898 at 31x (maintained earlier multiple) FY20E EPS of Rs.29.0. Any earnings/target price revision would depend upon a slowdown in retail business; slowdown in real estate business, any new policy or announcement by Government on the real estate policy frame work, change in the interest rate and changes in general business momentum.

Key Details

52 week H/L(Rs) 725/492


FV (Rs) 2

PE (X) (TTM) 29.7


PE (X)

FY18 FY19E FY20E

36.8 29.1 20.1

Ramkrishna Forgings Ltd. CMP: Rs.473, Mkt Cap: Rs.15 bn

Background

Ramkrishna Forgings Ltd is engaged in the manufacturing of forgings. The company supplies its products to various sectors in domestic and overseas markets. It also operates as a critical safety item supplier for screw coupling, bolster suspension, side frame keys and draw gear assembly for railway coaches and wagon. The company offers its products under product categories, such as rolled products, forged products and machined products. Its forgings are used in various industries and sectors, which include automotive, earth moving and mining, farm equipment, general engineering, railways, steel plants and oil exploration. Its facilities perform various activities, such as engineering and designing, press forgings, ring rolling, heat treatment, machining, surface treatment and quality inspection.


Promoter 44.78

Institutions 35.91

Public 19.31

Total 100




17A 8809 (3.7) 1578 17.9 109 3.4 (82.0) 139.1 0.4 18A 14355 63.0 2842 19.8 947 29.0 766.6 16.3 0.2 19E 18077 25.9 3728 20.6 1488 45.7 57.2 10.4 0.2 20E 20537 13.6 4342 21.1 1806 55.4 21.3 8.5 0.2

View: RKF is a leading forging player in India with a pure play on the domestic as well as global CV cycle as majority of its revenue is derived from the CV components. The domestic CV sales continued to see steady improvement in Q3FY19 as well with improved product mix towards higher share of machining product reflected in improved realizations and margin. Similarly, given the higher order book for US Class 8 trucks, the outlook remains robust for the exports business as well. On the operational front, with sharp ramp up of its 80,000 MT press line capacity including a 12,500 ton press line given the improved demand from multi axles and heavy tonnage CVs, company is emerging as a strong competition to existing large player as RKF has been able to increase its product share in the OEMs total demand. We believe, further ramp up in utilization of its press line capacity along with increased share of machining products is likely to drive the margin for the company. Additionally, company’s plan to enter into Passenger Vehicles, Light Commercial Vehicles and bearing segment via its new Greenfield project further improves the outlook for the company and we believe that the step is in the right direction to de-risk itself from any slowdown in the cyclical CV business. We continue to remain positive on the company and currently we have a Buy rating on the stock with the target price of Rs.1108, which is 20x FY20 EPS of Rs.55.4. Any earnings/target price revision would depend upon a slowdown in US Class‐8 trucks sales or domestic CV sales, slower execution of newly won orders,

and market‐share loss by any key OEMs.

Key Details

52 week H/L(Rs) 852/412


FV (Rs) 10

PE (X) (TTM) 16.3


PE (X)

FY18 FY19E FY20E

16.3 10.4 8.5

Reliance Industries Ltd. CMP: Rs.1220, Mkt Cap: Rs.7731 bn

Background

Reliance Industries Ltd. (RIL) is a private sector enterprise, with business in the energy and materials value chain. The Company operates in three segments: petrochemicals, refining and oil & gas. The petrochemicals segment includes production and marketing operations of petrochemical products which include, polyethylene, polypropylene, polyvinyl chloride, poly butadiene rubber, polyester yarn, polyester fibre, purified terephthalic acid, paraxylene, ethylene glycol, olefins, aromatics, linear alkyl benzene, butadiene, acrylonitrile, caustic soda and polyethylene terephthalate. The refining segment includes production and marketing operations of the petroleum products. The oil and gas segment includes exploration, development and production of crude oil and natural gas.


Promoter 46.17

Institutions 35.47

Public 18.36

Total 100




17A 2,420 3.8 433 17.9 314 49.6 14.8 24.6 0.4 18A 2,900 19.8 517 17.8 336 53 7 23.0 0.4 19E 3,737 28.8 598 16 384 60.6 14.3 20.1 0.4 20E 4,249 13.7 701 16.5 444 70 15.5 17.4 0.4

View: RIL continues to be on track to improve the profitability on the back of improved performance for the Petrochemical business despite muted performance for the Refining business. Petrochemical business continued its strong performance during Q3FY19, clearly indicating Reliance’s dominance in the segment. Strong ramp up in JIO paid subscriber base during last few quarters along with recent announcement to buy stakes in Multi Service operators (MSOs) companies Hathway and Den has raised the revenue visibility for the telecom venture going ahead. Although Refining margins have come off slightly in the last few quarters, we believe benefits of Petcoke Gasification plant is likely to be seen from FY20. Also, revised IMO regulations on usage of Low Sulphur Fuel Oil (LSFO) from 1 January 2020 is also likely to improve demand for Middle distillates like diesel and thereby likely to benefit complex refinery like to Reliance Industries. Key monitorable for Reliance going ahead would be subscriber ramp-up and average revenue per user (ARPU) in the telecom business with expected ramp up of the petcoke gasifier over the next six months to further improve the profitability for petrochemical business. We currently have a Buy rating on the stock with a target price of Rs.1455 at 15x (maintained earlier multiple) FY20E EPS of Rs.70 and balance value accruing from RJIO, Shale Gas and Retail Business. Any changes in the estimates/target price would depend upon trend in crude price, currency movement, gas price & GRM and changes in capex and general business momentum.

Key Details

52 week H/L(Rs) 1329/881


FV (Rs) 10



PE (X)

FY18 FY19E FY20E

23.0 20.1 17.4

Sanghi Industries Ltd. CMP: Rs.53, Mkt Cap: Rs.13 bn Background

Sanghi Industries Ltd. (Sanghi) is the flagship company of the Ravi Sanghi Group dealing in the production and distribution of Cement under the Brand Name "Sanghi Cement". Sanghi Cement is produced at one of the world's largest single stream Cement Plant located at Sanghipuram in the Abdasa Taluka of Kutch District of Gujarat State. This plant is fully automatic with state-of-the-art technology from Fuller International, USA and having total capacity of 4.1 MTPA. The company produces superior quality 53 Grade OPC and PPC Cement and have revolutionized the way cement is produced and sold in India.


Promoter 65.72

Institutions 17.11

Public 17.17

Total 100


Earnings Summary

Y/E Sales Growth EBITDA Margin Net Profit EPS Growth P/E Div.Yield 31-Mar Rs Mn (%) Rs Mn (%) Rs Mn Rs % X %

17A# 9,975 30.9 1,982 19.9 631 2.5 (17.3) 21.2 0.0 18A 10,264 2.9 2,146 20.9 933 3.7 47.8 14.3 0.0 19E 12,747 24.2 2,740 21.5 1,431 5.7 53.3 9.3 0.0 20E 15,832 24.2 3,471 21.9 1,633 6.5 14.2 8.2 0.0

#FY17 nos. are not comparable to FY16 is as FY16 is a 9M period year.

View: Management indicated Q3FY19 operating performance was majorly impacted by higher operating cost and expects cost pressure to come down going ahead on the back of improving efficiency in the operations as company continues to remain one of the lowest cost cement producer in India. Management guided that demand in the key markets of Gujarat where Sanghi operates is likely to remain strong and have guided for steady improvement in volumes for FY19 on the back of higher demand from rural and affordable housing. Going ahead, management is optimistic about the demand scenario in Gujarat market (which accounts for ~90% of sales) led by various government projects like Ahmedabad-Gandhinagar Metro and irrigation projects for Narmada branch canal along with housing led demand. We expect company to deliver healthy growth in EBITDA/ton mainly led by volume growth (driven by higher sales to Mumbai market and a favorable base) and pricing improvement going ahead given the strong demand seen in last few months. We have a Buy rating on the stock with a price target of Rs.110 which is 9xFY20E EV/EBITDA (maintained earlier multiple). Any changes to the earnings/price target would be hinged upon changes in business momentum/economic cycle, capex execution issues and acceleration of cost optimization initiatives.

Key Details

52 week H/L(Rs) 129/51


FV (Rs) 10

PE (X) (TTM) 30.0


PE (X)

FY18 FY19E FY20E

14.3 9.3 8.2

State Bank of India Ltd. CMP: Rs.266, Mkt Cap: Rs.2377 bn Background

State Bank of India (SBI) is India’s largest commercial bank. Founded in 1806, Bank of Calcutta was the first Bank established in India and over a period evolved into SBI. SBI represents a sterling legacy of over 200 years. It is the oldest commercial Bank in the Indian subcontinent, strengthening the nation’s trillion-dollar economy and serving the aspirations of its vast population. The Bank is largest commercial Bank in terms of assets, deposits, profits, branches, number of customers and employees, enjoying the continuing faith of millions of customers across the social spectrum. Its banking activities include Personal Banking, Agricultural/Rural, NRI Services, International Banking, Corporate Banking and Services.


Promoter 57.7

Institutions 33.53

Public 8.77

Total 100


View: We recommend a Buy on the stock with the target of Rs.395 based on PBV multiple of 2x on FY20E core adjusted book value of Rs.182.4 and balance value accruing from Subsidiaries. Any revision in the target price would depend on changes in the NPA profile, Capital dilution and momentum in the NPA resolution process.

0

50

100

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400

Feb

-16

Ap

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6

Jun

-16

Au

g-1

6

Oct

-16

Dec

-16

Feb

-17

Ap

r-1

7

Jun

-17

Au

g-1

7

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-17

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Ap

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8

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-19

Daily closing price for last 3 years of SBI

Source: Bloomberg

Key Details

52 week H/L(Rs) 326/232

Book Value (Rs) FY18 120

FV (Rs) 1

PE (X) (TTM) NA


PE (X)

FY17 FY18

887.7 NA

Adjusted BV (Rs.)

FY18 FY19E FY20E

120.0 159.6 182.4

Supreme Industries Ltd. CMP: Rs.1102, Mkt Cap: Rs.140 bn Background

Supreme Industries Ltd. (SIL) is engaged in production of plastic products. The Company operates in two segments: Plastics and Construction. The Company offers a wide range of plastic products with a variety of applications in Moulded Furniture, Storage and Material Handling Products, XF Films and products, Performance Films, Industrial Molded Products, Protective Packaging Products, Plastic Piping System, Composite LPG Cylinder and Petrochemicals. The Company’s products include molded furniture, material handling products, petrochemicals F films and products (SILPAULIN), performance films, industrial molded products, protective packaging products, plastic piping system and bathroom fittings.


Promoter 49.7

Institutions 29.21

Public 21.09

Total 100


Earnings Summary


17A# 44.6 50.7 7.6 17.1 4.3 33.7 94.8 32.7 1.5 18A 49.7 11.3 7.9 15.8 4.3 33.9 0.7 32.5 1.2 19E 56.1 12.9 8 14.3 4.5 35.3 4.1 31.2 1.2 20E 63.8 13.8 9.4 14.8 5.4 42.4 20 26.0 1.2

^#FY17 nos. are not comparable to FY16 as FY16 is 9 months year ending in March 2016

View: SIL’s management continued to work on its strategy of focusing on value led growth and has maintained its volume growth guidance of 10% YoY despite challenging environment in Q3FY19. The management maintained its positive outlook on the demand scenario on the back of likely formalization of economy leading to improvement in market share for organized players like SIL, rising demand via various government reforms in sectors like affordable housing, agriculture, irrigation and social sector like water supply, sewerage and drainage network. Moreover, the low per capita consumption of plastic in the country and expected boost in composite LPG Cylinder demand provides huge revenue growth opportunity for the company. The management further reduced its EBITDA margin guidance to 14-14.5% as it expects some more inventory loss to arise in Q4FY19. We remain positive on the company on the back of improving product mix, consistent earnings growth and healthy ROE of over 20% in last two years. We have maintained our Buy rating on the stock with the target price of Rs.1265 based on PE multiple of 29x (maintaining earlier multiple) FY20E EPS of Rs.42.4 adding Rs.36 for stake in Supreme Petrochem. Any earning/target price revision would depend on the volume and revenue growth for the company, pace of shift in trade from unorganized to organized players, change in the value of Supreme Petrochem and changes in general business momentum.

Key Details

52 week H/L(Rs) 1434/936


FV (Rs) 2

PE (X) (TTM) 30.1


PE (X)

FY18 FY19E FY20E

32.5 31.2 26.0

Tata Consultancy Services Ltd. CMP: Rs.2032, Mkt Cap: Rs.7626 bn

Background

Tata Consultancy Services Ltd. (TCS) is an information technology (IT) services, consulting and business solutions organization. TCS offers a consulting-led, integrated portfolio of IT, Business Process Services (BPS), infrastructure, engineering and assurance services. It services portfolio comprises assurance services, business intelligence (BI) and performance management. TCS offers software, including Digital Software and Solutions, TCS BaNCS, TCS MasterCraft and TCS Technology Products. It serves various industries, including Banking and Financial Services, Energy, Government, Healthcare, High Tech, Insurance, Life Sciences, Resources, Retail and Consumer Products, Telecom, Travel, and Utilities.


Promoter 72.05

Institutions 23.53

Public 4.42

Total 100



Y/E Sales Growth EBITDA Margin Net Profit EPS Growth P/E Div. Yield

31-Mar Rs. Bn (%) Rs. Bn (%) Rs. Bn Rs. % X %

17A 1179.7 8.6 323.1 27.4 262.9 66.7 8.3 30.5 1.0 18A 1231.0 4.4 325.2 26.4 258.3 67.5 (1.8) 30.1 1.2 19E 1452.6 18 384.9 26.5 306.2 80 18.6 25.4 1.6 20E 1626.9 12 439.3 27 349.1 93 14 21.8 1.8

View: Despite Q3FY19 being a seasonally weak quarter, the company was able to shore up its revenues and bagged record high deal wins. The strong client metrics, industry leading growth in digital services, a very strong order book and deal pipeline are all validations that differentiated capabilities of the company are being recognized by its customers who are selecting it for their growth and transformation programs. The company has seen improved growth as it is moving up the IT value chain which should support the revenues in the medium to long term. The adoption of new technologies in the Digital, Automation, Analytics, Cloud migration, Micro services, Cyber security, Intelligent automation etc. are likely to drive the incremental growth in the company. However, the margins could be under pressure as the company seems to be subcontracting more and spending to reskill its human resources in the digital vertical. With signs of rising discretionary spends on digital side, we think that IT sector can see improved performance over the next few quarters. The improving performance in the BFSI space seems to be a testimony of the same. With the strong deal-flow, impressive traction in digital business, rising non-linearity in earnings and currency tailwinds, TCS is likely to deliver a double-digit revenue growth in FY19 and beyond. TCS has been proactive in its capital allocation policy with high dividend payouts and buyback. We have a HOLD rating on the stock with a price target of Rs.2002 at 21x (maintaining earlier multiple) FY20E EPS of Rs.93 and adding Rs.48 worth cash per share. Further rerating or de-rating of the multiples would depend on the earnings growth trajectory compared to the peers and overall business growth momentum.

Key Details

52 week H/L(Rs) 2273/1391


FV (Rs) 1

PE (X) (TTM) 25.2


PE (X)

FY18 FY19E FY20E

30.1 25.4 21.8

Thyrocare Technologies Ltd. CMP: Rs.536, Mkt Cap: Rs.28 bn Background

Thyrocare Technologies Ltd (Thyrocare) is India's first fully automated diagnostic laboratory with a focus on providing quality at affordable costs to laboratories and hospitals in India and other countries. Thyrocare operates with a Centralized Processing Laboratory (CPL) in Mumbai - India for esoteric tests; and Regional Processing Laboratory (RPL) in major metro cities of India and other parts of Asia. Thyrocare is the first Indian numerical pathology laboratory to have an IT enabled, 24x7, fully automated diagnostic laboratory set up covering over 2,00,000 sq. ft. floor space that ensures error free processing of over 60,000 specimens and over 2,50,000 clinical chemistry investigations per night.


Promoter 63.96

Institutions 27.89

Public 8.15

Total 100


Earnings Summary

Y/E Sales Growth EBITDA Margin PAT EPS Growth P/E Div.Yld

31-Mar Rs. Mn (%) Rs. Mn (%) Rs. Mn Rs. % X %

17A 3044 26.3 1152 37.8 703 13.1 35.7 40.9 1.9 18A 3563 17.1 1447 40.6 955 17.4 32.7 30.8 1.9 19E 4515 26.7 1761 39 1112 20.7 19.2 25.9 1.9 20E 5819 28.9 2240 38.5 1430 27.1 30.9 19.8 1.9

View: The performance in Q3FY19 was impacted due to seasonal factors and sharp price reduction. However, the management is hopeful of improvement in coming quarters as the benefits of price correction to accrue in terms higher volume growth. We remain long-term positive on the stock given the current structural drivers like low spending on Preventive and Wellness healthcare and rising urbanization, sedentary lifestyle, and peaking stress levels leading to lifestyle diseases such as cancer, obesity, heart disease, diabetes, among others. With bulk of the market in the pathology segment being unorganised, there is significant headroom for the organised sector to grow although the management expects it at a slower pace. Thyrocare being a pan India player with the clear focus on expanding its network both on diagnostic as well as on imagining services business, it is well placed to grab this opportunity. Moreover, strong brand, lower pricing model, expanding the number of diagnostic tests and expanding the platforms also puts Thyrocare in a favorable position. Thyrocare’s well established brand image, huge opportunity size, robust return ratios and cash rich balance sheet supports our long term view. Hence we maintain our Buy rating on the stock with the target price of Rs.813 based on a PE multiple of 30x (maintaining earlier multiple) FY20E EPS of Rs.27.1 (mainly due to reduction in equity due to buyback offer). Any earning/target price revision would depend on the performance of its sub-segments, impact of its new strategy, change in regulation, delay in expansion plans and changes in general business momentum.

0

100

200

300

400

500

600

700

800M

ay-1

6

Au

g-1

6

No

v-1

6

Feb

-17

May

-17

Au

g-1

7

No

v-1

7

Feb

-18

May

-18

Au

g-1

8

No

v-1

8

Feb

-19

Daily closing price since listing of Thyrocare Tech

Source: Bloomberg

Key Details

52 week H/L(Rs) 725/482


FV (Rs) 10

PE (X) (TTM) 30.1


PE (X)

FY18 FY19E FY20E

30.8 25.9 19.8

UltraTech Cement Ltd. CMP: Rs.3787, Mkt Cap: Rs.1040 bn Background

Ultratech Cement Ltd. (UltraTech) is the largest manufacturer of grey cement, Ready Mix Concrete (RMC) and white cement in India. It is also one of the leading cement producers globally. UltraTech as a brand embodies 'strength', 'reliability' and 'innovation'. Together, these attributes inspire engineers to stretch the limits of their imagination to create homes, buildings and structures that define the new India. The company has an installed capacity of 96.5 Mn Tons Per Annum (MTPA) at the end of FY18.


Promoter 61.69

Institutions 28.14

Public 10.17

Total 100


Earnings Summary

Y/E Sales Growth EBITDA Margin PAT EPS Growth P/E Div.Yld

31-Mar Rs. Bn (%) Rs. Bn (%) Rs. Bn Rs. % X %

17A 239 0.8 50 20.8 26 96 11.3 39.4 0.3 18A 298 24.7 59 19.7 24 86.8 (9.6) 43.6 0.3 19E 373 25.1 69 18.4 29 104.3 20.1 36.3 0.3 20E 417 12 90 21.5 42 153.9 47.6 24.6 0.3

View: UltraTech Cement, with pan India presence, is the largest cement manufacturing company in India with total capacity of ~90.8 MTPA at the end of FY18. Over the years, the company has managed to report higher EBITDA/ton compared to its peers due to strong brand, pan India presence and strong operating efficiency. On the long term, management expects cement demand in the country to grow at a faster pace as compared to capacity additions, which is expected to drive utilization and hence profitability for the company. The government has also announced many new infrastructure projects in roads (Bharatmala), ports (Sagarmala), metros etc, which may drive the cement demand in Q4FY19 and FY20. Moreover, revival of real estate sector due to pick up in affordable housing projects is further likely to drive cement demand in the country. We believe, continued double digit growth witnessed in cement demand in the country over the last four quarters is likely to pave wave for price hikes going ahead, which is likely to offset the cost pressure to some extent witnessed by the industry in the form of higher Power & Fuel, Freight and Raw material cost. Currently, we have a Buy rating on the stock with a target price of Rs.4,450 which is 15xFY20E EV/EBITDA (maintained earlier multiple). Any revision in earnings/target price would depend upon changes in volumes growth, blended realization, EBITDA/ton, rollover of financial year and general business momentum.

Key Details

52 week H/L(Rs) 4490/3264


FV (Rs) 10

PE (X) (TTM) 50.9


PE (X)

FY18 FY19E FY20E

43.6 36.3 24.6

UPL Ltd. CMP: Rs.853; Mkt Cap: Rs.435 bn

Background

UPL Ltd. (formerly known as United Phosphorus Ltd.) had started as a small scale unit to manufacture Red Phosphorus. Through backward and forward integrations respectively, today it is a leading global producer of crop protection products, intermediates, speciality chemicals and other industrial chemicals. Being the largest manufacture of agrochemicals in India, UPL offers a wide range of products that includes Insecticides, Fungicides, Herbicides, Fumigants, PGR and Rodenticides. It operates in every continent and have a customer base in 123 countries with its own subsidiary offices in Argentina, Australia, Bangladesh, Brazil, China, Canada, Denmark, France, Germany, Hong Kong, Indonesia, Japan, Korea, Mauritius, Mexico, New Zealand, Russia, Italy, Turkey, Spain, South Africa, Taiwan, USA, UK, Vietnam, Zambia, Shanghai, Columbia and Netherland. UPL ranks amongst the top 5 post patent agrochemical industries in the world.


Promoter 27.89

Institutions 51.31

Public 20.8

Total 100



Y/E Sales Growth EBITDA Margin Adj.Net Profit EPS Growth P/E Div. Yield 31-Mar Rs Bn (%) Rs Bn (%) Rs Bn Rs % X %

17A 163.1 16.1 32.2 19.8 17.3 34.2 67.1 24.9 0.8 18A 173.8 6.5 35.2 20.2 20.3 39.9 16.8 21.4 0.9 19E 189.4 9.0 39.3 20.7 23.5 46.2 15.7 18.5 0.9 20E 212.2 12.0 45.0 21.2 28.5 56.0 21.1 15.2 0.9

View: UPL is a leading global generic player in the Agrochemical Industry and would be ranked among the top-5 post patent agrochemical manufacturers in the world after the acquisition of Arysta. The acquisition would provide access to high growing segments, more balanced geographical revenue mix and synergy benefit. UPL’s leadership position in key pest resistance products and its cost advantage is helping the company to outperform the industry in key markets and gain market share. Going ahead, the overall volume growth is expected to improve on the back of increased focus on 1) product portfolio expansion, 2) sustainable technology, 3) untapped markets like Africa & China and 4) synergy benefit of consolidation of seeds business of Advanta and agrochemical business of Arysta. However, the debt levels have increased significantly from net debt of Rs.37.5 bn to Rs.71 bn as of Dec’18. This is likely to affect the company’s profitability in the near term. We are currently keeping our estimates for FY19 and FY20 unchanged and would update the number post Q4FY19 where we may get more clarity on the overall outlook on the company. Currently, we have a Hold rating on the stock with the target price of Rs.728, which is 13x (maintaining earlier multiple) FY20E EPS of Rs.56.0. Any revision in the target price would depend upon the change in the product launching strategy, volume growth, forex impact, management guidance, accrual of synergy benefits and general business momentum.

Key Details

52 week H/L(Rs) 857/538


FV (Rs) 2

PE (X) (TTM) 20.6


PE (X)

FY18 FY19E FY20E

21.4 18.5 15.2

Voltas Ltd. CMP: Rs.537, Mkt Cap: Rs.178 bn Background

Voltas Ltd. (Voltas) is India's one of largest air conditioning company, and one of the world's premier engineering solutions providers and project specialists. Voltas Ltd. offers engineering solutions for a wide spectrum of industries in areas such as heating, ventilation and air conditioning, refrigeration, electro-mechanical projects, textile machinery, mining and construction equipment, water management & treatment, cold chain solutions, building management systems, and indoor air quality. The Company’s operating subsidiaries include Universal Comfort Products Ltd., Auto Aircon (India) Ltd., Saudi Ensas Company for Engineering Services WLL, Weathermaker Ltd. and Lalbuksh Voltas Engineering Services & Trading LLC.


Promoter 30.3

Institutions 48.22

Public 21.48

Total 100



Y/E Sales Growth EBITDA Margin PAT EPS Growth P/E Div. Yield 31-Mar Rs Mn (%) Rs Mn (%) Rs Mn Rs % X %

17A 60,328 5.5 5,669 9.4 5,174 15.7 33.9 34.2 0.5 18A 64,044 6.2 6,626 10.3 5,728 17.3 10.5 31.0 0.6 19E 71,346 11.4 7,491 10.5 6,479 19.6 13.1 27.4 0.7 20E 81,286 13.9 9,348 11.5 7,929 24 22.4 22.4 0.7

View: Voltas Ltd is one of India’s leading engineering solution providers. While, the sales for the Unitary Cooling Product (UCP) segment remained weak during Q3FY19 due to high base of corresponding quarter and higher inventory in the channel, management commentary on the overall growth for the company remains positive on the back of strong traction for EMP business. Although the sales for the UCP segment remained muted during the quarter, company continues to remain market leader (with increased market share of ~24% in 9MFY19 vs ~22% in FY18) led by higher than industry growth during the same period. Moreover, company has also successfully launched new products under its recently formed Joint Venture “Voltas Beko” and management guided that the initial feedback for the products was positive. We believe existing dealer and channel network in the ACs segment would be leveraged by the company for growth into other durable goods as well. On the EMP, Voltas saw further expansion in EBIT margin on YoY basis during Q3FY19 and expects EBIT margins to remain steady as slow moving orders move out of the backlog and newer projects with better profitability come into execution. The company continues to have strong balance sheet and cash flow generation capability which would augur well for the capital requirement for the entry into other consumer durable products. We have a Buy rating on the stock with a price target of Rs.719 which is 30x (maintaining earlier multiple) FY20E EPS of Rs.24. Any change in earnings/price target would depend upon the order inflow/execution in domestic and international markets, margin improvement; scale up of the new JV, general business momentum and rollover to the next financial year.

Key Details

52 week H/L(Rs) 665/471


FV (Rs) 1

PE (X) (TTM) 31.2


PE (X)

FY18 FY19E FY20E

31.0 27.4 22.4

Zydus Wellness Ltd. CMP: Rs.1247, Mkt Cap: Rs.72 bn Background

Zydus Wellness Ltd. (Zydus Wellness) is engaged in manufacturing of consumer products. The Company’s products include Everyuth, Sugar Free, Nutralite and Actilife. The Company has a range of skincare products under the brand name of Everyuth Naturals. Everyuth Naturals includes skincare solutions for sun protection, pigmentation and acne. Its product, Sugar Free is a nutritious, safe and ideal low calorie sugar substitute available in two options: Sugar Free Gold, which is a sugar alternative made from Aspartame, and Sugar Free Natura, which contains Sucralose, a zero calorie sweetener.


Promoter 72.54

Institutions 13.27

Public 14.19

Total 100


Earnings Summary


17A 4306 8.5 991 23.0 1113 27.9 5.5 44.7 0.5 18A 5126 19.1 1253 24.4 1365 34.3 22.9 36.4 0.7 19E 5998 17.0 1475 24.6 1630 41.7 21.7 29.9 0.7 20E 7017 17.0 1754 25.0 1914 49.0 17.4 25.4 0.7

View: Zydus would be looking to consolidate its position in wellness category with the help of iconic brands of Heinz going ahead. Zydus is also expected to benefit from Heinz distribution reach and customer touch points in long-term. As the EBITDA margin of Heinz business is lower than its existing margin, the margins may get dilute post the deal completion. Also, interest cost is expected to increase as the deal is partly funded thorough debt. Over the long term, we believe, increasing penetration level, new launches and product extension in existing category coupled with newly acquired brands would augur well for the company. We are positive on the stock given the structural growth drivers of the health & wellness industry and its strong market share across existing product category. We are awaiting for more clarity on synergies and other financial details of Heinz post the deal. Hence, we have not incorporated the Heinz number in current assumption and would add the same once more clarity emerges on the same. Currently, we have a Buy rating on the stock with the target price of Rs.1470 at a target PE multiple of 30x (maintaining earlier PE multiple) on FY20E EPS of Rs.49.0. Any earning/target price revision would depend on the improvement in performance of key brands, launch of new products, increase in distribution reach, accrual of synergy benefits and performance of acquired brands from Heinz portfolio, impact of acquisition on balance sheet and return ratios, rollover to next financial year and changes in general business momentum.

Key Details

52 week H/L(Rs) 1830/1085


FV (Rs) 10

PE (X) (TTM) 50.0


PE (X)

FY18 FY19E FY20E

36.4 29.9 25.4

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Rating Expected to

Buy Appreciate more than 10% over a 12 to 15 month period

Hold Appreciate below 10% over a 12 to 15 month period

Under Review Rating under review

Exit Exited out of the Model Portfolio

Rating Interpretation

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