Value Guide

Value

GuideApril 2015

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Just a breatherJust a breatherJust a breather

April 2015 Sharekhan ValueGuide2

Sharekhan ValueGuide April 20153

The Indian equitymarket seems tohave hit aroadblock after astrong 18-monthrally. Growingconcerns related toa slower thanexpected revival incorporate earnings and rising global uncertainty have resulted inthe benchmark indices losing close to 5% of the huge gainsamassed since the low of August 2013.

REGULAR FEATURESReport Card 4Earnings Guide I

TECHNICALSNifty 26

Stock Ideas 12Stock Updates 13Sector Updates 24

From Sharekhans Desk EQUITY

06

Just a breather FUNDAMENTALS

DERIVATIVESView 27

TECHNICALS

Crude Oil 28Gold 29Silver 29Copper 29

FUNDAMENTALS

Lead 29

Zinc 29

Nickel 30

Gold 31Silver 31Crude Oil 31

Copper 32Zinc 32Dhaanya Index 32

TECHNICALS

FUNDAMENTALS

USD-INR 34EUR-INR 34

GBP-INR 34JPY-INR 34

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MUTUAL FUNDS DESK

Top MF Picks (equity) 41

Top SIP Fund Picks 42

RESEARCH BASED EQUITY PRODUCTS

Top Picks Basket 07Wealth Creator Portfolio 11

GBP-INR 33JPY-INR 33

ADVISORY DESKMID Trades 39

USD-INR 33EUR-INR 33

Derivative Ideas 39

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CONTENTS

Viewpoint 24


REPORT CARD EQUITY FUNDAMENTALS

STOCK IDEAS STANDING (AS ON APRIL 01, 2015)

COMPANY CURRENT PRICE AS ON PRICE 52 WEEK ABSOLUTE PERFORMANCE RELATIVE TO SENSEXRECO 01-APR-15 TARGET HIGH LOW 1M 3M 6M 12M 1M 3M 6M 12M

AUTOMOBILESApollo Tyres Buy 174.6 260.0 249.8 150.9 -3.9 -24.6 -17.4 5.8 0.8 -26.0 -21.6 -16.5Ashok Leyland Buy 73.7 76.0 76.1 21.7 4.9 42.6 78.1 209.9 10.0 40.0 69.1 144.4Bajaj Auto Buy 2020.9 2400.0 2695.0 1840.1 -6.4 -17.1 -14.2 -1.1 -1.8 -18.6 -18.6 -22.0Gabriel Industries Buy 89.5 110.0 106.8 29.4 0.2 -3.7 8.2 194.8 5.1 -5.5 2.8 132.5Hero MotoCorp Buy 2653.0 3400.0 3271.8 2110.0 -1.7 -15.0 -7.0 20.3 3.1 -16.6 -11.7 -5.1M&M Buy 1197.2 1425.0 1433.7 964.3 -8.1 -3.8 -12.7 22.6 -3.6 -5.5 -17.1 -3.4Maruti Suzuki Buy 3646.0 4250.0 3789.7 1866.0 2.1 11.0 20.7 88.3 7.1 9.0 14.6 48.5Rico Auto Industries Buy 44.3 55.0 51.5 10.4 9.7 -2.8 27.6 309.9 15.1 -4.6 21.2 223.2TVS Motor Hold 253.5 270.0 322.3 84.0 -5.2 -1.5 16.0 174.4 -0.6 -3.3 10.2 116.4BSE Auto Index 19383.7 20386.4 13146.7 -3.6 3.4 8.5 46.7 1.1 1.5 3.1 15.7BANKS & FINANCEAllahabad Bank Buy 101.3 135.0 150.0 87.8 -8.2 -24.5 0.9 10.2 -3.7 -25.9 -4.3 -13.1Andhra Bank Hold 80.4 104.0 110.0 60.5 -7.5 -16.5 21.3 23.5 -3.1 -18.0 15.1 -2.6Axis (UTI) Bank Buy 566.4 610.0 655.4 270.7 -8.6 11.5 48.3 93.8 -4.1 9.5 40.8 52.8Bajaj Finance Buy 4123.0 4305.3 4492.4 1661.6 -6.3 17.9 51.0 131.1 -1.8 15.8 43.3 82.2Bajaj Finserv Buy 1430.9 1544.0 1575.0 735.0 0.5 8.2 25.2 79.8 5.4 6.2 18.9 41.8Bank of Baroda Buy 167.5 212.0 228.9 142.8 -11.7 -24.6 -9.4 14.8 -7.4 -26.0 -14.0 -9.5Bank of India Buy 203.8 275.0 357.0 191.5 -16.4 -35.1 -15.6 -14.3 -12.3 -36.3 -19.9 -32.4Capital First Buy 418.0 484.7 440.0 162.7 -5.1 8.8 24.5 125.3 -0.5 6.8 18.2 77.7Corp Bank Hold 53.6 78.0 83.6 51.6 -15.8 -21.6 -16.4 -4.5 -11.7 -23.0 -20.6 -24.7Federal Bank Buy 132.7 170.1 154.4 86.8 -7.5 -13.0 4.9 40.0 -3.0 -14.5 -0.4 10.4HDFC Hold 1325.1 1359.6 1402.3 810.0 -1.3 16.0 24.9 51.1 3.5 13.9 18.5 19.2HDFC Bank Buy 1027.9 1260.0 1109.3 707.3 -4.5 7.5 17.2 37.7 0.1 5.5 11.3 8.6ICICI Bank Buy 320.5 424.0 393.4 238.4 -8.9 -10.6 10.0 28.7 -4.4 -12.3 4.5 1.5IDBI Bank Hold 72.4 82.5 116.5 58.5 -4.0 -2.9 16.7 9.0 0.7 -4.7 10.8 -14.0LIC Housing Finance Buy 442.2 558.1 509.4 229.8 -8.6 0.4 34.4 88.2 -4.2 -1.5 27.6 48.4PTC India Financial Services Buy 57.4 89.6 73.2 14.0 -8.8 -20.7 22.8 298.6 -4.3 -22.1 16.6 214.4Punjab National Bank Hold 150.4 203.0 231.5 142.5 -12.8 -34.1 -18.6 -2.9 -8.5 -35.3 -22.7 -23.5SBI Buy 270.8 378.0 336.0 186.7 -11.5 -14.4 9.2 40.1 -7.2 -15.9 3.7 10.4Union Bank of India Buy 160.9 268.0 259.7 132.3 -8.7 -34.6 -17.1 14.5 -4.3 -35.8 -21.3 -9.7Yes Bank Buy 838.8 930.0 910.0 404.0 -5.4 5.7 46.0 99.9 -0.8 3.7 38.6 57.7BSE Bank Index 21200.0 23903.8 14221.9 -7.6 -2.8 18.4 44.6 -3.1 -4.5 12.5 14.0CONSUMER GOODSGSK Consumers Hold 6248.4 ** 6415.0 4105.0 8.6 7.4 11.8 47.9 13.9 5.5 6.1 16.6Godrej Consumer Products Hold 1072.0 1175.0 1227.2 740.0 -8.3 7.1 5.5 21.9 -3.8 5.1 0.2 -3.9Hindustan Unilever Hold 882.0 925.0 981.0 550.3 -4.0 14.9 18.0 47.2 0.7 12.8 12.1 16.1ITC Hold 330.7 380.0 410.0 312.4 -9.8 -11.6 -12.0 -6.0 -5.4 -13.2 -16.4 -25.9Jyothy Laboratories Buy 270.2 320.0 314.9 171.3 -2.4 2.8 11.4 30.4 2.4 0.9 5.8 2.8Marico Buy 386.5 430.0 408.9 200.1 8.4 19.1 25.3 85.8 13.7 17.0 19.0 46.5Zydus Wellness Hold 1016.9 1025.0 1130.3 485.0 20.1 24.7 58.8 107.1 26.0 22.4 50.7 63.3BSE FMCG Index 7850.6 8812.2 6539.0 -5.5 0.1 2.0 13.2 -0.9 -1.7 -3.1 -10.7IT / IT SERVICESCMC Hold 1905.0 1925.0 2407.0 1352.0 -5.3 -1.1 -13.9 39.7 -0.7 -2.9 -18.2 10.1Firstsource Solutions Buy 31.3 43.0 44.4 25.3 -3.3 -11.1 -23.4 22.2 1.4 -12.7 -27.2 -3.7HCL Technologies Buy 938.9 1025.0 1058.5 623.2 -3.0 23.3 15.3 43.7 1.8 21.1 9.5 13.3Infosys Buy 2164.1 2540.0 2336.0 1440.0 -3.4 12.5 19.3 38.2 1.3 10.4 13.3 9.0Persistent Systems Buy 750.8 940.0 960.8 440.0 -21.2 -13.6 2.3 37.4 -17.4 -15.2 -2.9 8.3Tata Consultancy Services Buy 2540.2 3100.0 2839.7 1968.8 -4.5 0.0 -6.3 23.5 0.1 -1.8 -11.0 -2.6Wipro Hold 635.6 715.0 677.6 474.7 -4.6 14.2 6.3 17.8 0.0 12.1 0.9 -7.1BSE IT Index 11258.4 12196.1 8155.2 -4.7 7.9 7.3 33.0 -0.1 6.0 1.9 4.9CAPITAL GOODS / POWERBharat Heavy Electricals Hold 230.8 270.0 300.0 172.7 -10.2 -11.1 17.7 21.1 -5.9 -12.7 11.7 -4.5CESC Buy 611.4 730.0 828.1 440.6 1.7 -9.9 -19.5 22.0 6.6 -11.6 -23.6 -3.8Crompton Greaves Buy 165.1 230.0 231.0 145.3 -6.1 -11.5 -17.1 4.2 -1.6 -13.1 -21.3 -17.8Finolex Cables Buy 290.1 335.0 306.5 107.3 6.4 8.5 33.4 159.1 11.6 6.5 26.7 104.3Greaves Cotton Buy 144.1 165.0 159.4 75.2 -2.1 -3.4 9.7 83.3 2.7 -5.1 4.1 44.6Kalpataru Power Transmission Buy 227.0 280.0 254.9 95.9 -7.0 1.7 42.2 132.1 -2.5 -0.1 35.0 83.0PTC India Buy 79.4 120.0 104.9 65.4 -7.0 -14.4 -5.2 21.9 -2.4 -15.9 -10.0 -3.9Skipper Buy 162.3 185.0 200.0 32.0 -18.3 36.9 55.8 - -14.3 34.4 47.9 -Thermax Hold 1085.0 1300.0 1318.0 710.1 -7.7 0.0 16.4 43.8 -3.2 -1.8 10.5 13.4Va Tech Wabag Buy 828.5 950.0 972.5 365.2 -6.3 11.2 -2.9 110.6 -1.8 9.2 -7.8 66.1V-Guard Industries Hold 915.9 1160.0 1198.0 457.0 -2.9 -21.8 3.5 96.9 1.8 -23.2 -1.8 55.2

NEW

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REPORT CARDEQUITY FUNDAMENTALS

STOCK IDEAS STANDING (AS ON APRIL 01, 2015)

COMPANY CURRENT PRICE AS ON PRICE 52 WEEK ABSOLUTE PERFORMANCE RELATIVE TO SENSEXRECO 01-APR-15 TARGET HIGH LOW 1M 3M 6M 12M 1M 3M 6M 12M

NEW

In Top Picks basket ** Price target under review

NEW

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Triveni Turbines Hold 134.9 145.0 151.8 67.3 7.4 14.7 42.0 81.8 12.6 12.6 34.8 43.4BSE Power Index 2132.6 2408.1 1664.7 -6.2 1.9 7.8 24.8 -1.6 0.1 2.4 -1.6BSE Capital Goods Index 17401.4 18796.8 11782.8 -2.7 12.1 21.3 45.2 2.0 10.0 15.1 14.5INFRASTRUCTURE / REAL ESTATEGayatri Projects Hold 152.0 180.0 192.0 56.2 -2.9 -6.2 -13.0 174.2 1.8 -7.9 -17.4 116.2ITNL Buy 197.5 284.0 257.5 116.4 -8.7 3.4 10.7 70.8 -4.2 1.5 5.1 34.7IRB Infra Buy 244.9 320.0 289.7 101.7 -4.9 -7.5 5.7 138.3 -0.3 -9.2 0.3 87.9Jaiprakash Associates Hold 25.0 26.0 89.9 23.1 -2.2 -1.2 -6.2 -53.8 2.6 -3.0 -11.0 -63.6Larsen & Toubro Buy 1731.0 1840.0 1893.8 1242.0 -2.7 15.1 17.9 36.5 2.0 13.0 12.0 7.7Pratibha Industries Buy 42.6 65.0 66.7 26.0 -4.6 -4.5 -15.6 59.1 0.1 -6.2 -19.9 25.5Punj Lloyd Reduce 30.3 30.0 60.9 27.8 -21.2 -20.5 -16.2 4.8 -17.4 -22.0 -20.5 -17.4CNX Infra Index 3275.6 3524.1 2564.3 -1.7 7.0 7.7 25.5 3.1 5.1 2.2 -1.1BSE Real estate Index 1680.9 2272.7 1357.5 -8.6 7.0 5.3 14.3 -4.2 5.1 -0.1 -9.9OIL & GASOil India Buy 459.8 625.0 670.0 450.0 -6.6 -19.4 -23.7 -3.9 -2.1 -20.9 -27.5 -24.3Reliance Ind Buy 832.6 1045.0 1145.3 796.5 -4.5 -7.3 -12.7 -10.5 0.1 -9.0 -17.1 -29.4Selan Exploration Technology Buy 237.0 550.0 677.4 215.0 -17.3 -34.9 -55.4 -55.9 -13.3 -36.0 -57.6 -65.2BSE Oil and Gas Index 9342.7 12132.0 9043.6 -3.5 -5.6 -12.6 -0.1 1.2 -7.3 -17.0 -21.2PHARMACEUTICALSAurobindo Pharma Buy 1240.5 1272.0 1279.8 509.0 12.8 7.8 26.4 140.3 18.2 5.8 20.0 89.5Cipla Buy 707.2 843.0 752.9 367.5 4.5 13.7 13.7 87.0 9.5 11.7 7.9 47.4Cadila Healthcare Buy 1787.0 2060.0 1794.0 872.1 12.6 8.9 31.7 71.4 18.1 6.9 25.1 35.1Divi's Labs Hold 1803.2 1860.0 1888.1 1210.0 3.7 3.6 -0.8 32.5 8.8 1.7 -5.8 4.5Glenmark Pharmaceuticals Buy 786.9 915.0 879.7 507.1 -0.5 2.1 8.9 39.6 4.4 0.2 3.4 10.1JB Chemicals Hold 206.5 220.0 257.9 128.3 5.9 -0.8 -11.2 57.8 11.0 -2.6 -15.7 24.4Ipca Laboratories Hold 645.0 ** 899.3 591.3 -3.2 -13.1 -19.7 -24.5 1.5 -14.6 -23.8 -40.5Lupin Buy 2032.7 2300.0 2045.0 902.6 15.0 40.6 43.9 115.8 20.6 38.1 36.6 70.2Sun Pharmaceutical Industries Buy 1062.8 ** 1075.0 570.1 12.4 23.9 19.4 78.5 17.9 21.6 13.4 40.7Torrent Pharma Buy 1197.7 1500.0 1231.7 520.3 7.8 3.0 33.5 123.6 13.1 1.1 26.8 76.3BSE Health Care Index 17568.5 17651.1 9881.4 9.0 17.7 20.7 73.0 14.3 15.5 14.6 36.4BUILDING MATERIALSGrasim Buy 3659.0 4475.0 4024.9 2583.1 -3.5 7.0 2.1 26.2 1.2 5.1 -3.1 -0.5The Ramco Cements Buy 309.7 420.0 380.0 202.1 -8.9 -11.5 -5.2 42.2 -4.5 -13.1 -10.0 12.2Shree Cement Hold 10930.0 11500.0 11786.0 5450.0 2.5 14.8 28.5 90.9 7.5 12.7 22.0 50.5UltraTech Cement Buy 2879.6 3440.0 3399.0 1950.5 -8.2 7.5 9.4 32.1 -3.8 5.6 3.8 4.1DISCRETIONARY CONSUMPTIONCentury Plyboards (India) Buy 243.7 290.0 262.0 26.2 -0.1 47.7 101.9 768.8 4.7 45.0 91.7 585.1Cox and Kings Buy 317.7 395.0 368.0 145.0 1.2 9.7 2.6 103.2 6.2 7.8 -2.6 60.2Eros International Media Hold 420.9 452.0 484.0 158.0 1.9 8.6 51.9 137.0 6.9 6.6 44.2 86.9KDDL Buy 321.0 350.0 379.5 69.0 -4.6 24.4 85.3 325.0 0.0 22.1 75.9 235.1KKCL Hold 2125.0 ** 2180.0 1085.0 16.5 9.6 16.2 87.1 22.2 7.6 10.3 47.5Raymond Hold 451.5 560.0 579.5 290.6 -12.1 -12.0 1.4 47.3 -7.9 -13.6 -3.7 16.1Relaxo Footwear Buy 663.9 745.0 764.0 285.2 -9.7 16.0 36.4 121.7 -5.3 13.9 29.5 74.9Speciality Restaurants Hold 178.0 205.0 215.1 127.2 -2.4 -5.8 20.9 24.8 2.4 -7.5 14.8 -1.6Sun TV Network Hold 451.3 467.0 488.0 298.6 7.9 17.8 33.6 13.9 13.1 15.6 26.9 -10.2Thomas Cook India Buy 210.1 250.0 223.3 87.2 5.2 29.7 44.6 134.2 10.3 27.3 37.3 84.7Zee Entertainment Buy 341.5 400.0 402.4 259.0 -1.4 -10.2 8.8 26.8 3.4 -11.9 3.3 0.0DIVERSIFIED / MISCELLANEOUSAditya Birla Nuvo Buy 1667.7 2000.0 1916.2 1060.0 -3.3 -1.5 2.7 53.2 1.4 -3.3 -2.5 20.8Bajaj Holdings Buy 1300.0 1815.0 1638.0 988.6 -7.4 -7.7 -6.9 29.3 -2.9 -9.3 -11.6 2.0Bharti Airtel Hold 402.7 450.0 420.0 304.0 10.4 11.5 -2.9 24.9 15.8 9.5 -7.9 -1.5Bharat Electronics Buy 3512.5 4020.0 4144.9 1035.1 -10.2 13.9 68.7 194.8 -5.8 11.8 60.1 132.5Gateway Distriparks Buy 422.6 465.0 459.4 156.6 -0.8 16.8 60.2 156.5 4.0 14.6 52.1 102.2Max India Buy 446.4 518.0 522.0 198.0 -6.3 8.9 36.2 110.5 -1.8 6.9 29.3 66.0Ratnamani Metals and Tubes Buy 695.5 815.0 806.3 225.0 -6.8 -1.0 61.1 186.2 -2.3 -2.8 52.9 125.7Supreme Industries Hold 720.7 750.0 742.0 425.0 7.9 19.7 9.5 43.6 13.2 17.5 4.0 13.3Technocraft Industries Buy 225.0 270.0 253.0 85.1 -7.5 30.3 27.0 159.4 -3.0 27.9 20.6 104.6UPL Buy 439.8 500.0 458.0 184.0 6.3 27.6 30.0 142.7 11.5 25.3 23.4 91.4BSE500 Index 11138.3 11764.8 8259.0 -3.4 3.2 8.9 35.1 1.3 1.4 3.4 6.5CNX500 INDEX 7027.8 7428.1 5198.5 -3.5 3.2 9.1 35.4 1.2 1.3 3.6 6.7CNXMCAP INDEX 13109.1 13521.7 8541.6 -0.8 3.5 14.1 53.1 4.0 1.7 8.4 20.8


Just a breather

FROM SHAREKHANS DESK

from

shar

ekha

ns d

esk The Indian equity market seems to have hit a roadblock after a strong 18-month rally.Growing concerns related to a slower than expected revival in corporate earnings and

rising global uncertainty have resulted in the benchmark indices losing close to 5% of thehuge gains amassed since the low of August 2013.

Apart from fundamental factors, the pull-back can be partially attributed to the Marcheffect as liquidity tightens up and market participants tend to unwind leveraged positionsin the last month of a financial year. The loss of the ready-to-reap Rabi crop caused byunseasonal rains in several regions added to already weak market sentiment. Fortunately,we see most of the factors as temporary and the situation seems to be more of a pause in themulti-year rally in the Indian stock market.

The meltdown in the commodity complex, especially crude oil and energy, is a quitefavourable development from the perspective of an import-dependent India. It has reducedthe pressure on fiscal health and left enough legroom for the government to increase allocationfor public spending on infrastructure development in the next fiscal. Unfortunately, in thenear term the commodity prices (weak crude oil and base metal prices) and unexpectedlyhigh volatility in currency movements would adversely affect the financial performance ofsome of the index heavyweights, such as Reliance Industries, Oil and Natural GasCorporation, GAIL, Sesa Sterlite and Hindalco Industries as well as information technologystocks among others. The corporate earnings shall be further depressed by expectations ofhigher provisioning in banks (essentially public sector banks) as the provisioning norms forrestructured assets get tighter from April 1, 2015. Consequently, weakness in corporateearnings could persist in Q4FY2015 also.

On the brighter side, the macros bode well for corporates in terms of easing interest rates,lower raw material cost and initial signs of revival in urban discretionary consumption.The increased public spending by the central and state governments should also add togrowth in labour intensive and core sectors like cement and construction. Thus, the corporateearnings are likely to grow at mid double digits in FY2016.

Globally, the Yemen conflict has again highlighted the fragile situation in the Middle East.However, the uncertainty related to a hike of interest rates in the USA remains a key dragfor equities globally. The event whenever it takes place would mark a change in the monetarystance of the USA after close to six years of a nearly zero interest rate regime. Given the sizeand importance of the US economy and the dollar-based currency status, the run-up to theevent would cause volatility in currencies, equities and liquidity flows globally. But goingby the experience of tapering off of the USAs quantitative easing, stock markets tend toadjust sooner than later to a known and anticipated event.

From a retail investors perspective, a possible sideways movement or consolidation wouldprovide the much awaited window to increase the exposure to equities or for that matter toenter the equity market (for those who are still sitting on the sidelines and have completelymissed the bus). You could choose your picks from our basket of over 150 well-researchedquality stocks (under our active and soft coverage) or follow some of our model portfolioslike Top Picks (which is revised on a monthly basis with the aim of consistently beating theSensex, Nifty and CNX Mid-cap Index) and Wealth Creator (for investors willing to takea view of two to three years and looking at meaningful wealth creation).


Sharekhan Top PicksSHAREKHAN TOP PICKS

After a strong rally, the Indian equity market shaved off some ofthe gains in March this year. The correction was largely led byglobal volatility along with some domestic concerns like unseasonalrains spoiling ready-to-reap Rabi crop, strong opposition toamendments to the land acquisition bill and expectations of anotherquarter of weak corporate results ahead.

However, we continue to believe that most of the issues aretemporary and the long-term uptrend in the market stays intact,though there could be a consolidation phase in the immediate term.Accordingly, we are realigning our Top Picks portfolio to increaseits exposure to the pharmaceutical sector by introducing CadilaHealthcare in place of Bharat Electronics.

Another change includes Zee Entertainment Enterprises, which isreplacing Reliance Industries. Though Reliance Industries hascorrected significantly and is attractive at the current levels, we see

*CMP as on March 31, 2015 # Price target for next 6-12 months ** Under review

NAME CMP* PER ROE (%) PRICE UPSIDE(RS) FY14 FY15E FY16E FY14 FY15E FY16E TARGET (RS)# (%)

Apollo Tyres 168 8.1 7.6 7.1 26.4 21.9 19.4 260 55Ashok Leyland 73 NA 98.9 24.2 NA 4.3 15.1 ** -Cadila Healthcare 1,740 44.4 36.1 21.8 21.9 21.4 26.7 2,060 18Gateway Distriparks 412 31.5 24.1 21.6 17.5 21.3 22.1 465 13HDFC Bank 1,023 28.9 24.9 20.4 21.3 19.8 19.2 1,260 23Lupin 2,000 48.8 37.7 31.4 26.5 26.4 24.4 2,300 15Maruti Suzuki 3,699 40.2 31.5 22.6 14.1 15.8 18.0 4,250 15PTC India Financial Services 55 10.9 10.6 7.3 16.1 14.8 19.3 90 63TCS 2,543 26.0 23.2 20.5 35.2 31.6 29.3 3,100 22Thomas Cook 209 83.6 46.7 41.8 12.2 13.3 16.3 250 20Yes Bank 814 18.1 17.1 14.2 25.0 21.0 18.9 930 14Zee Entertainment 342 36.7 32.9 30.0 20.6 19.8 19.5 400 17

ABSOLUTE RETURNS (TOP PICKS VS BENCHMARK INDICES) % CONSTANTLY BEATING NIFTY AND SENSEX (CUMULATIVE RETURNS) SINCEAPRIL 2009Sharekhan Sensex Nifty CNX

(Top Picks) MIDCAP

CY2015 11.8 1.7 2.6 3.3CY2014 63.6 29.9 30.9 55.1CY2013 12.4 8.5 6.4 -5.6CY2012 35.1 26.2 29.0 36.0CY2011 -20.5 -21.2 -21.7 -25.0CY2010 16.8 11.5 12.9 11.5CY2009 116.1 76.1 72.0 114.0Since inception 413.5 178.7 178.5 258.9(Jan 2009)

CONSISTENT OUTPERFORMANCE (ABSOLUTE RETURNS; NOT ANNUALISED) (%)1 month 3 months 6 months 1 year 3 years 5 years

Top Picks -3.5 11.8 27.9 66.8 151.8 134.1Sensex -5.5 1.7 4.9 24.7 60.8 57.1Nifty -5.6 2.6 6.6 26.2 61.3 59.7CNX Mid-cap -3.2 3.3 13.9 51.0 70.3 68.5

EQUITY FUNDAMENTALSSHAREKHAN TOP PICKS

a number of issues limiting the possible upside in the near term. Onthe other hand, we are enthused by the successful launch of a newgeneral entertainment channel by the Zee group and thus see therecent correction in the Zee Entertainment Enterprises stock as abuying opportunity.

In terms of performance, we continue to beat the benchmark indices,Sensex and Nifty (which have declined by 5.5% each since the lastrevision in the Top Picks basket) with a relatively lower decline of3.5% in the Top Picks in the same period. The CNX Mid-cap Indexalso performed better than the Sensex and the Nifty with a declineof 3.2% since our last revision in the Top Picks basket.Consequently, Top Picks has consistently and comprehensivelyoutperformed the benchmark indices across various time periodswith revisions and changes carried out just once at the beginning ofthe month.


NAME CMP PER ROE (%) PRICE UPSIDE(RS) FY14 FY15E FY16E FY14 FY15E FY16E TARGET (RS) (%)

APOLLO TYRES 168 8.1 7.6 7.1 26.4 21.9 19.4 260 55

Remarks: Apollo Tyres is a leading player in the domestic passenger car and truck tyre segments. The tyre industrys volume has been subdued,given the weak macro environment. We expect the demand to improve in FY2016 with a pick-up in the economy and higher utilisationof commercial vehicles (CV).

The profitability of the tyre companies has improved, given the soft natural rubber prices. Additionally, a slide in crude oil prices and itsimpact on crude derivatives, such as synthetic rubber and carbon black, have led to expansion of the gross profit margin (GPM). Thisbenefit is expected to continue in FY2016 and margins are expected to remain elevated.

The European operations too have reported a strong performance with a strong volume growth and high profitability. The company willbe investing EUR200 million for setting up a greenfield facility in Eastern Europe which will start production in Q4FY2017 and cater tothe long-term growth in Europe. Additionally, it will invest Rs2,000 crore in its Indian operations for capacity expansion.

We like the stock for its consistent performance and long-term growth prospects (expansion in Europe and Chennai) and have a Buyrecommendation on it.

ASHOK LEYLAND 73 NA 98.9 24.2 NA 4.3 15.1 ** -

Remarks: Ashok Leyland Ltd (ALL) is the second largest CV manufacturer in India with a market share of 25% in the heavy truck segment andan even higher share of about 40% in the bus segment. Given the scale of economic slowdown, the segment had halved over FY2012-14. With the pick-up in the economy a sharp recovery is expected in the segment.

ALL entered the light CV (LCV) segment with the launch of the Dost in joint venture (JV) with Nissan. The JV has additionally launchedthe Partner LCV and Stile van. Going forward, we expect ALL to gain a foothold in the LCV segment and expand its market share.

The company is also concentrating on verticals other than CVs to de-risk its business model. It has a strong presence in exports andcontinues to expand in newer geographies. The diesel genset business is also showing signs of a recovery after a tepid performancein FY2013-14. Additionally, ALLs defence business is expected to get a leg-up due to the governments focus on indigenous manufactureof defence products and FDI in the sector.

ALLs operating profit margin (OPM) has recovered from the lows on the back of a reduction in discounts and price hikes taken by thecompany. Its margins are expected to expand further, given the operating leverage. ALL has raised Rs660 crore via a qualifiedinstitutional placement and sold non-core assets to pare its debts. With no significant capital expenditure (capex) planned, we expectthe balance sheet to get de-leveraged and return ratios to improve.

GATEWAY DISTRIPARKS 412 31.5 24.1 21.6 17.5 21.3 22.1 465 13

Remarks: An improvement in exim trade along with a rise in port traffic at the major ports signals an improving business environment for thelogistic companies. Gateway Distriparks being a major player in the container freight station (CFS) and rail logistic segments isexpected to witness an improvement in the volumes of its CFS and rail divisions going ahead.

The improving trend in the rail freight and cold chain subsidiaries would sustain on account of the recent efforts to control costs andimprove utilisation.

We continue to have faith in the companys long-term growth story based on the expansion of each of its three business segments, ieCFS, rail transportation and cold storage infrastructure segments. The coming on stream of the Faridabad facility and the strongoperational performance will further enhance the performance of the rail operations. Also, the expected turnaround in the global tradeshould have a positive impact on the CFS operations.

Given the improvement in the profitability led by lower non-performing asset (NPA) provisions, a healthy growth in the core income andimproved operating metrics, we recommend a Buy with a price target of Rs465.

CADILA HEALTHCARE 1,740 44.4 36.1 21.8 21.9 21.4 26.7 2,060 18

Remarks: Cadila Healthcare is set to enter a high-growth trajectory, thanks to its aggressive product filings in the USA and Latin America, arecovery in its joint venture business and the launch of niche products in the Indian market including the generic version of GileadSciences' Hepatitis C drug, Sofosbuvir, in India under the brand name SoviHep.

The US market is witnessing a surge in demand for generic products since ObamaCare was implemented to expand the insurancecoverage on US citizens without inflating the healthcare costs. Cadila Healthcare, which generates close to 36% of its total revenuesfrom the US market, is likely to be among the key beneficiaries of a favourable business environment in the generic space. Thecompany has over 145 abbreviated new drug applications (ANDAs) pending approval out of 230 ANDAs filed with the US Food andDrug Administration (USFDA) that will unfold over the next two to three years. We expect the company to see a revenue compoundedannual growth rate (CAGR) of 34% over FY2014-17 in the US market.

We expect the company to record a overall revenue CAGR of 20% over FY2014-17 from the base business and the OPM of thecompany will see a sustained expansion over the next two to three years, mainly on the back of stronger traction in the brandedbusiness in India and Latin America, a better generic pricing scenario in the USA and optimisation of capabilities in the joint venturebusiness. We expect the OPM to expand from 16.6% in FY2014 to 23% in FY2017. In view of better traction in the generic business inthe US market, the potential from the launch of Hepatitis-C drug in India and the product ramp-up in the other key markets includingbusiness from joint ventures. We recommend a Buy with a price target of Rs2,060.

SHAREKHAN TOP PICKSEQUITY FUNDAMENTALS



HDFC BANK 1,023 28.9 24.9 20.4 21.3 19.8 19.2 1,260 23

Remarks: HDFC Bank has a strong presence in the retail segment (~50% of the book) and therefore has been able to maintain a strong growthin loans even in tough times. Going ahead, with a recovery in the economy and improving sentiment in consumer sectors, the loangrowth will improve further which will drive the profitability.

With a current account and savings account (CASA) ratio of 41% and a high proportion of retail deposits, the cost of funds remainsamong the lowest in the system and helps to maintain a higher net interest margin (NIM). In addition, the banks loan growth is led byhigh yielding products such as personal loans, vehicle loans, credit card, mortgages etc which has a positive impact on the NIM.

The bank maintains impeccable asset quality and its NPA ratios are among the lowest in the system. Given the banks stringent creditappraisal procedures and insignificant exposure to troubled sectors, it is expected to maintain robust asset quality.

HDFC Bank is adequately capitalised and further capital raising of Rs10,000 crore will boost its capital ratios and help to tap the growthopportunities going ahead. The bank is likely to maintain healthy return on equity (RoE) of 19-20% and return on asset (RoA) of 1.8%on a sustainable basis. Therefore, we expect the valuation premium that it enjoys compared with the other private banks to expandfurther.

LUPIN 2,000 48.8 37.7 31.4 26.5 26.4 24.4 2,300 15

Remarks: A vast geographical presence, focus on niche segments like oral contraceptives, ophthalmic products, para-IV filings and brandedbusiness in the USA are the key elements of growth for Lupin. The company has remarkably improved its brand equity in the domesticand international generic markets to occupy a significant position in the branded formulation business. Its inorganic growth strategyhas seen a stupendous success in the past. The company is now debt-free and that enhances the scope for inorganic initiatives.

The management has given a guidance to sustain the OPM at 27% to 28% in FY2015 (vs 25% in FY2014) which especially impressus. Lupin has recently forged an alliance with Merck Serono to out-licence select drugs and signed an agreement with Salix Pharmato in-licence products for the Canadian market. These initiatives will support growth in the long term.

Lupin is expected to see stronger traction in the US business on the back of the key generic launches in recent months and a strongpipeline in the US generic business (over 95 ANDAs pending approvals including 86 first-to-file drugs) to ensure the future growth. Thekey products that are going to provide a lucrative generic opportunity for the company include Nexium (market size of $2.2 billion),Lunesta (market size of $800 million) and Namenda (market size of $1.75 billion) that will be going out of patent protection in CY2015.The company has recently got the Foreign Investment Promotion Boards clearance to raise the investment limit for foreign institutionalinvestors to 49% from 32% currently.

MARUTI SUZUKI 3,699 40.2 31.5 22.6 14.1 15.8 18.0 4,250 15

Remarks: Maruti Suzuki India Ltd (MSIL) is the market leader in the domestic passenger vehicle (PV) industry. In M9FY2015, as against an industrygrowth of a modest 3.7% MSIL has grown its volumes by 13% and in the process expanded its market share by 373BPS to 45%.

The company has further strengthened its sales and service network. Additionally, the drive undertaken by its management to tap thepotential in rural areas paid rich dividends in difficult times for the industry and in times of rising competitive intensity; this reaffirms theresilience of MSILs positioning and business model.

The recent launches of Celerio and Alto K10 with the new automatic manual transmission have enthused the market and the companyplans to offer the same in other models too. MSIL has a pipeline of new launches over the next few years with the most important beingthe entry into the compact utility vehicle and LCV segments.

We expect customer sentiment to improve on the back of a strong government at the centre. Additionally the PV segment is expectedto benefit from the pent-up demand over the past two years; this will benefit MSIL the most due to its high market share in the entrylevel segment. The recent depreciation of the Japanese Yen is expected to boost profitability.

PTC INDIA FIN. SER. 55 10.9 10.6 7.3 16.1 14.8 19.3 90 63

Remarks: PTC India Financial Services (PFS) stands to benefit from the governments strong thrust on the renewable energy sector (mainly solarand wind) which should result in a robust growth in the loan book (at a 40% CAGR over FY2014-17). About 70% of the incrementaldisbursement will be from the renewable segments (loan sanction pipeline of ~Rs7,000 crore or 1.2x of the existing loan book) which haslesser quality issues due to a low gestation period and fuel supply risk, thanks to fiscal support from the government.

Given the favourable interest rate scenario, the interest spreads may sustain at healthy levels (~4.3%). Any likely downward movement inthe hedging cost will further reduce the funding cost. The company also has ~Rs300 crore of equity investments in power projects; thesehave appreciated significantly and will result in substantial gains going ahead.

We expect PFS to register a strong growth in earnings (~40% CAGR over FY2014-17 excluding the one-off gains of FY2014) withoutfactoring in the gains on its equity investments. The asset quality is likely to remain robust and the company is likely to deliver high RoAs(~3.5%) which leaves scope for more upside.

EQUITY FUNDAMENTALSSHAREKHAN TOP PICKS



THOMAS COOK 209 83.6 46.7 41.8 12.2 13.3 16.3 250 20

Remarks: Thomas Cook India Ltd (TCIL) is an integrated leisure travel company with offerings across the value chain including travel services,holiday packages and foreign exchange services. The improvement in the foreign tourist arrivals in India and improving sentiments ofthe domestic travelers would help TCILs travel and financial services businesses to post a better performance in the coming years.

Quess Corp (a human resource management business acquired in early 2013) has exponentially grown its consolidated revenues toRs1,401 crore in FY2014 from merely Rs49 crore in FY2009. The business is well poised to grow at a CAGR of 30% in the comingyears.

An improving financial performance of Sterling and value unlocking potential in Quess Corp are re-rating triggers. We maintain our Buyrating with a price target of Rs250.

YES BANK 814 18.1 17.1 14.2 25.0 21.0 18.9 930 14

Remarks: Given a decline in inflation and the possibility of further reduction in the policy rates by the Reserve Bank of India, the cost of funds willreduce and benefit Yes Bank. In addition, the banks investment book stands to benefit from a fall in bond yields due to surplusstatutory liquidity ratio securities and substantial corporate bond book (~Rs10,000 crore). The bank will also be included in the Niftyindex which will be positive for the stock.

The bank is well capitalised (tier-I capital adequacy ratio of 12.2%) and is likely to benefit from the revival in the economy which willresult in a strong growth in advances. Apart from the decline in the funding cost, there are other structural drivers of margins: (a) arising CASA ratio, and (b) focus on retail, and small and medium enterprise lending. Hence, we expect an uptick of 15-20 basis pointsin the margins over FY2017.

We expect Yes Banks earnings to grow at healthy rates (about 22% CAGR over FY2014-17) driven by an expansion in the NIM andan uptick in the non-interest income. The asset quality remains robust and the quality is likely to sustain going ahead. The return ratiosare expected to improve further (RoA of 1.7% and RoE of 20%) resulting in better valuations. We have rolled over our valuations toFY2017 estimates resulting in a fresh price target of Rs930 (2.4x FY2017E book value). We maintain our Buy rating on the stock.

TCS 2,543 26.0 23.2 20.5 35.2 31.6 29.3 3,100 22

Remarks: TCS pioneered the IT services outsourcing business from India and is the largest IT service firm in the country. It is a leader in mostservice offerings and has further consolidated its position as a full-service provider by delivering a robust financial and operationalperformance consistently over the years.

The consistency and predictability of the earnings performance has put the company on the top of its league. Moreover, the quality ofits performance has also been quite impressive, ie it has been able to report a broad-based growth in all its service lines, geographiesand verticals consistently.

Though cross-currency headwinds and softness in some verticals will affect the earnings in the near term, we believe the overallimprovement in the USA will drive the growth in the coming years. Also, the companys increasing capabilities in the digital space,which is a high-growth area, consolidates its position among the top-tier global IT companies. We maintain TCS as our top pick in theIT sector and have a Buy rating on the stock.

ZEE ENTERTAINMENT 342 36.7 32.9 30.0 20.6 19.8 19.5 400 17

Remarks: Among the key stakeholders of the domestic TV industry, we expect the broadcasters to be the prime beneficiary of the mandatorydigitisation process initiated by the government. The broadcasters would benefit from higher subscription revenues at the least incrementalcapex as the subscriber declaration improves in the cable industry.

The management maintains that the advertisement spending will continue to grow in double digits going ahead and ZEEL will be ableto outperform the same. The growth in the advertisement spending will be driven by an improvement in the macro-economic factorsand the fact the ZEEL is well placed to capture the emerging opportunities being a leader in terms of market share.

ZEEL is well placed to benefit from the digitisation theme and the overall recovery in the macro economy. Also, the success of thenewly launched channel, &TV, would augur well and improve the companys position in the general entertainment channel space.We have a Buy rating on the stock with a price target of Rs400.

SHAREKHAN TOP PICKSEQUITY FUNDAMENTALS


WEALTH CREATOR PORTFOLIOEQUITY FUNDAMENTALS

Wealth Creator portfolioObjective: To build a balanced and actively managed portfolio ofquality companies that will help create meaningful wealth forinvestors in the multi-year rally expected in the Indian equity market.

In addition to some bottom-up picks, the portfolio contains stocksidentified based on three key themes:

Policy push: Stocks from sectors benefiting from improvementin the policy environment

Early gainers: Beneficiaries of an economic recovery (stocks fromauto, banking & financial services, logistic sectors)

Evergreen: Steady performers that provide stable and consistentreturns including urban consumption plays

WEALTH CREATOR PORTFOLIO APRIL 01 2015

COMPARATIVE RETURNSParticulars Returns (on April 01, 2015)

Since inception (Aug 21, 2014)

Wealth Creator folio (weighted average retruns) 17.7%

- Large-cap (64%) 11.8%

- Mid-cap (36%) 28.1%

Sensex 7.2%

Nifty 8.8%

CNX Mid-cap 17.7%

Portfolio performance review Wealth Creator folio has appreciated by 17.7% (weighted

average returns) since its inception comprehensively beatingthe returns from the benchmark indices.

Since last revision (considering closing prices of April 1), theportfolio declined by 3.4% compared to over 5% decline inSensex/Nifty. Surprisingly, the midcaps performed better thanbenchmark indices with CNX Midcap index declining atrelatively lower rate of 2% and our midcap picks in the foliolargely remaining stable (down by just 0.5%).

No changes/revisions suggested in the folio.

UPDATE ON WEALTH CREATOR PORTFOLIOSr No Scrip Weights Reco price (Rs) Target price (Rs) Potential upside 01-Mar-15 Dec-17

Large-caps (64% weightage)

1 Axis Bank 8% 570 1210 112.3%

2 Larsen & Toubro 8% 1735 3800 119.0%

3 Maruti Suzuki 8% 3640 7450 104.7%

4 Cummins 8% 886 1708 92.8%

5 State Bank of India 8% 274 580 111.8%

6 Sun Pharmaceuticals 8% 1075 1650 53.5%

7 Tata Consultancy Services 8% 2544 5100 100.5%

8 Tata Motors DVR 8% 338 850 151.5%

Mid-caps (36% weightage; 4% each)

9 PTC India Financials 4% 57 144 151.7%

10 Finolex Cables 4% 288 650 126.0%

11 Gateway Distripark 4% 422 810 91.9%

12 IRB Infra 4% 249 680 173.4%

13 Network 18 Media 4% 51 150 195.0%

14 Gabriel India 4% 91 200 120.6%

15 Century Plyboard 4% 243 440 81.1%

16 Triveni Turbine 4% 135 265 96.6%

17 Dhanuka Agritech 4% 660 1260 90.9%

* Please note we see scope for an upward revision in the price target (3-year) of some of the stocks depending on the extent of economic recovery and will keep updating you on the same


Revving up

COMPANY DETAILS

Price target: Rs3,400

Market cap: Rs52,774 cr

52-week high/low: Rs3,271/2,056

NSE volume (No of shares): 7.0 lakh

BSE code: 500182

NSE code: HEROMOTOCO

Sharekhan code: HEROMOTOCO

Free float (No of shares): 12.0 cr

PRICE CHART

SHAREHOLDING PATTERN

(%) 1m 3m 6m 12m

Absolute -5.9 -15.4 -4.2 32.9

Relative -6.4 -20.2 -10.7 -1.1to Sensex

PRICE PERFORMANCE

BUY CMP: RS2,643 MARCH 13, 2015

KEY POINTS Poised to defend market share: Hero MotoCorp Ltd (HMCL) is the market leader in

the domestic two-wheeler industry with a market share of 41.6%. Two-wheelers are

expected to remain the preferred mode of transportation in India, given the low cost

of ownership and lower penetration levels especially in rural India. We expect the

two-wheeler industry to grow at a 10% CAGR over the medium term. HMCL, with

strong brands, a relatively larger presence in rural India and increasing contribution

from the scooter segment, is poised to defend its market share in the motorcycle

segment and is targeting to increase its market share in the scooter segment.

Strengthening presence in the scooter segment: With the scooter market consistently

outpacing the motorcycle market, HMCL has enhanced its focus on scooters. In

H1FY2015 the companys volume sales from scooters were hampered by capacity

constraints. However, the company is increasing the manufacturing capacity for

scooters. At the same time it is on schedule to launch two new products which will

enable it to strengthen its market share in the fast-growing scooter segment.

Opening of new vistas with exports: The agreement with erstwhile partner Honda

was the biggest impediment to reaching out to the overseas markets. Now with the

opening up of opportunities after the split with Honda, the management has drawn

an ambitious plan to establish presence in 50 countries by 2020 as well as set up

assembly operations in Bangladesh, Columbia and Kenya. HMCL plans to increase

the export contribution from 2% in FY2014 to 10% by FY2020.

LEAP programme to boost bottom line: HMCL has embarked upon an ambitious

programme, LEAP, to improve its profitability by improving efficiency across the

value chain. On a like-to-like basis, the management expects to expand the OPM

by 150-200BPS through LEAP. We expect a margin expansion of about 50BPS in

each of the next two years largely driven by the benefits of the programme.

Valuations: The steady growth in volumes and revenues, expectations of a margin

expansion and the ending of amortised lump sum royalty payments to Honda are

expected to boost the bottom line of HMCL. We expect a 23.6% earnings CAGR

over FY2014-17 with RoE of over 45% and a high dividend pay-out ratio.

Consequently, we initiate coverage on the stock with a Buy rating and a price target

of Rs3,400, giving a 17x P/E multiple based on the FY2017E earnings.

Risk: Weakening of consumer sentiment translating in a lower than expected growth

for the industry and competitive pressures affecting the margins and bottom line of

HMCL.

HERO MOTOCORP

Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding

or having a postition in the companies mentioned in the article.

VALUATIONSParticulars Y2013 FY2014 FY2015E FY2016E FY2017ENet sales (Rs cr) 26,691.5 28,528.5 30,994.6 35,133.6 40,393.1

Growth (%) 0.9 6.5 9.6 12.5 14.1

EBITDA (Rs cr) 3,294.1 3,554.1 3,622.9 4,342.5 5,252.6

EBITDA margin (%) 13.9 14.1 13.1 13.9 14.8

PAT (Rs cr) 2,118.2 2,109.1 2,574.7 3,255.0 3,986.8

Growth (%) -10.9 -0.4 22.1 26.4 22.5

FD EPS (Rs) 106.1 105.6 128.9 163.0 199.6

P/E (x) 24.9 25.0 20.5 16.2 13.2

P/B (x) 10.5 9.4 8.2 7.0 5.6

EV/EBITDA (x) 15.0 13.7 13.6 11.1 9.0

RoE (%) 45.6 39.8 42.8 46.4 46.7

RoCE (%) 46.4 52.0 59.5 64.5 64.7

For detailed report, please visit the Research section of our website, sharekhan.com.

EQUITY FUNDAMENTALSSTOCK IDEA

Promoters39.9%

FIIs39.3%

Institutions7.4%

Corporate Bodies1.8%

Public & Others11.5%


Expected to get back on track; upgraded to Buywith a revised PT of Rs2,400

COMPANY DETAILS



52 week high/low: Rs2,690/1,844

NSE volume (no. of shares): 2.9 lakh

BSE code: 532977

NSE code: BAJAJ-AUTO

Sharekhan code: BAJAJ-AUTO

Free float (no. of shares): 14.5 cr

(%) 1m 3m 6m 12m

Absolute -7.0 -19.1 -9.1 10.3

Relative to Sensex -9.1 -22.2 -14.3 -17.5

PRICE PERFORMANCE

BUY CMP: RS2,129 MARCH 10, 2015BAJAJ AUTO

KEY POINTS An unexpectedly sharp dip in exports: The stock of Bajaj Auto (Bajaj) has suffered due to a

sharp slowdown in the companys exports and a political turmoil in its key overseas markets.For Bajaj, exports contribute around 45% of the total volume sales. However, a lot of negativesare already factored in the stock price, which has corrected by around 17-18% andunderperformed the market.

Exports to normalise in a few months: We expect the exports to Nigeria to normalise afterthe general election in the country which are now scheduled for this March end. The changeof government in Sri Lanka led to a freeze on an order for 1.25 lakh Discover motorcycles;the management expects the order to be back on track in due course. With a market share of80% and 43% in Sri Lanka and Nigeria respectively, Bajaj is the leader in these markets.

New launches to aid growth: Efforts are being made to regain the lost market share in the domesticmotorcycle segment. The company has just launched the new Platina and is expected to launch thenew generation of Pulsar and a new commuter motorcycle over the next few months. Additionally,a favourable decision from the Supreme Court regarding quadricycles would pave the way for theintroduction of Bajajs RE60, giving the company a first mover advantage.

Correction offers an opportunity: Bajaj maintains strong margins and a depreciation of therupee against the dollar would boost its profitability. We upgrade the stock to a Buy fromHold with a revised price target of Rs2,400. We value the core business at 9.5x FY2017EEBITDA and the 47.9% stake in the premium motorcycle manufacturer, KTM AG, at Rs120per share.


Sharekhan Limited, its analyst or dependant(s) of the analyst might be

holding or having a postition in the companies mentioned in the article. For detailed report, please visit the Research section of our website, sharekhan.com.

Risk-reward ratio favourable, BuyCOMPANY DETAILSPrice target: Rs4,020




BSE code: 500049

NSE code: BEL

Sharekhan code: BEL


(%) 1m 3m 6m 12m

Absolute -13.3 16.1 57.4 195.5

Relative to Sensex -9.4 15.0 52.1 134.1

PRICE PERFORMANCE

BUY CMP: RS3,105 MARCH 27, 2015BHARAT ELECTRONICS

KEY POINTS Bharat Electronics Ltd (BEL), the flag bearer of Indias defence play and Make in

India initiative, has recently corrected by close to 22% from its high of close to Rs4,000.The underperformance could be attributed to a lower than expected increase in thedefence allocation in the Union Budget for FY2016 (a 10% increase YoY), lower orderaccretion by the company (down 10% YoY to Rs22,500 crore) and strong re-rating inthe stock price in the last one year (BEL touched a peak multiple of 22x one-yearforward earnings in February 2015, gaining around 200% in one year). Nevertheless,we view the correction in the stock as a short-term aberration and opportunity to buythe stock with an investment perspective for the next 12 months.

Recently, the consortium of BEL and Rolta India (Rolta) has been selected as thedevelopment agency for a Battlefield Management System project by the defenceministry. The order is valued at Rs50,000 crore (around 70% of the work is for theBEL-Rolta consortium) to be implemented over the next five to seven years.

We continue to prefer BEL, which is a pure proxy play on the fast-growing defencesector, more on the Make in India theme. We see BEL as a long-term growth-cum-value play on the defence sector and advise investors to use the recent weakness tobuild position in the stock. At the current market price of Rs3,105 the stock trades at15.5x FY2017E earnings. That is a 30% discount to its peak valuation of 22x. Wereiterate our Buy rating on the stock with an unchanged price target of Rs4,020 (20xFY2017E).




STOCK UPDATEEQUITY FUNDAMENTALS


PT revised to Rs2,060; upgraded to BuyCOMPANY DETAILSPrice target: Rs2,060


52 week high/low: Rs1,760/873


BSE code: 532321

NSE code: CADILAHC

Sharekhan code: CADILAHC


(%) 1m 3m 6m 12m

Absolute 0.4 6.4 24.9 63.3

Relative to Sensex 3.7 2.9 19.4 23.7

PRICE PERFORMANCE

BUY CMP: RS1,639 MARCH 23, 2015CADILA HEALTHCARE

KEY POINTS Set to enter a high-growth trajectory: Cadila Healthcare is set to enter a high-growth

trajectory, thanks to its aggressive product filings in the USA and Latin America, arecovery in its JV business and the launch of niche products in the Indian marketincluding the generic version of Gilead Sciences' Hepatitis C drug, Sofosbuvir, underthe brand SoviHep. It is expected to record a revenue CAGR of 20% over FY2014-17from the base business.

US market witnessing healthy trend; to favour Cadila: The US market is witnessing asurge in demand for generic products since ObamaCare was implemented to expandthe insurance coverage on US citizens without inflating the healthcare costs. CadilaHealthcare, which generates about 36% of its total revenues from the US market, maybe among the key beneficiaries of a favourable business environment in the genericspace. It has over 145 ANDAs pending approval out of 230 ANDAs filed with theUSFDA that will unfold over the next two to three years. We expect it to see a revenueCAGR of 34% over FY2014-17 in the US market.

Expect a sustained expansion in OPM: We expect the OPM to expand from 16.6% inFY2014 to 23% in FY2017 mainly due to stronger traction in the branded business inIndia and Latin America, a better generic pricing scenario in the USA and optimisationof capabilities in the JV business.

Estimates revised, PT raised to Rs2,060 and upgraded to Buy: We have revised ourearnings estimates up by 6% and 7% for FY2016 and FY2017 respectively, in view ofbetter traction in the generic business in the US market, the potential from the launchof Hepatitis-C drug in India and the product ramp-up in the other key markets includingthe business from the JVs. A better growth outlook also comforts us to increase thevaluation multiple. Accordingly, we revise our price target to Rs2,060, which implies20x FY2017R EPS. We upgrade our rating on the stock to Buy.



holding or having a postition in the companies mentioned in the article.

For detailed report, please visit the Research section of our website, sharekhan.com.

In a sweet spotCOMPANY DETAILSPrice target: Rs485


52 week high/low: Rs438/143


BSE code: 532938

NSE code: CAPF

Sharekhan code: CAPF


(%) 1m 3m 6m 12m

Absolute 7.2 20.8 49.5 194.1


PRICE PERFORMANCE

BUY CMP: RS432 MARCH 3, 2015CAPITAL FIRST

KEY POINTS Capital First is likely to benefit from an announcement in the Union Budget 2015-16

allowing non-banking finance companies of above Rs500 crore asset size to be consideredfor the SARFAESI Act (which is presently available to banks and housing financecompanies). The act empowers banks and financial institutions to recover their non-performing assets (NPAs) without the intervention of the court. The company expectsto get the benefit on its small and medium enterprises mortgage book (which accountsfor about 70% of the assets under management) which will help it to improve thecollection performance and further reduce the NPAs (gross NPAs at 0.63% inQ3FY2015).

In addition, the reduction in the corporate tax rates from 30% to 25% in a phasedmanner as announced in the budget (more clarity awaited though) will improve itsprofitability. The current tax rate is about 34% and hence any easing of the tax benefitspost-FY2016 will improve the earnings and expedite the improvement in the returnratios. However, we have not factored this in our estimates.

Capital First had invested in building high-yielding retail products (two-wheeler loans,consumer durables etc) which have shown strong traction and are margin accretive.Additionally, the company is likely to benefit from a drop in interest rates and revivalin consumption. Given the strong management bandwidth and stringent riskmanagement procedures, the companys asset quality may remain healthy. We expectthe earnings to grow at a CAGR of 57% over FY2014-17 and the return ratios toimprove significantly from FY2017 onwards. We reiterate our Buy rating on the stockwith a price target of Rs485.




STOCK UPDATE EQUITY FUNDAMENTALS


Improving demand and GST roll-out make uspositive; PT revised to Rs290

COMPANY DETAILS

Price target: Rs290


52-week high/low: Rs262/22


BSE code: 532548

NSE code: CENTURYPLY

Sharekhan code: CENTURYPLY


(%) 1m 3m 6m 12m

Absolute 33.6 51.7 164.9 1019.1


PRICE PERFORMANCE

BUY CMP: RS240 MARCH 4, 2015CENTURY PLYBOARDS (INDIA)

KEY POINTS Infrastructure and housing thrust in Union Budget:The Union Budget 2015-16 has

provided the much required thrust on the infrastructure and housing fronts, which arethe starting point of demand for the companys products. The governments thrust onhousing for all, would pave the way for growth in the plyboard industry. This willbenefit players like Century Plyboards (Century), as it also caters to mid- and lower-end segments via its various sub brands like Sainik.

Despite sharp run-up, strong growth and attractive valuations in the peer set, we arepositive on the stock: Over the last three months, since our initiation report on November28, 2014, the stock of Century has given a 62% return, outperforming the benchmarkindices (BSE Sensex and CNX Nifty) along with the mid-cap index. This was on accountof the strength of its brand equity, superior execution capabilities, access to key rawmaterials, operating leverage and the benefit of lower raw material prices that gotreflected in the financials (M9FY2015, the revenues and the earnings grew by 22%and 196% YoY respectively). Despite the outperformance, the outlook remains positive.We envisage a growth (CAGR) of 22% and 50% in the revenues and earningsrespectively over FY2014-17. The valuations remain attractive (trading at 21x FY2017Eearnings vs average of 26x for the other building material players like Greenply, CeraSanitaryware and Kajaria Ceramics). Hence, we believe that there is still scope for re-rating. We value the company at 25x FY2017E earnings to arrive at our revised pricetarget of Rs290 and maintain our Buy rating on the stock.




Aggressive coal auction throws new challenge;PT revised down to Rs730

COMPANY DETAILS

Price target: Rs730




BSE code: 500084

NSE code: CESC

Sharekhan code: CESC


(%) 1m 3m 6m 12m

Absolute -15.3 -13.4 -13.4 30.0

Relative to Sensex -14.3 -15.8 -21.5 -8.0

PRICE PERFORMANCE

BUY CMP: RS585 MARCH 2, 2015CESC

KEY POINTS CESC managed to retain the Sarisatolli coal mine in West Bengal during the first round

of coal block auction in mid February 2015. However, the asset comes at a price, giventhe aggressive bid price of Rs470/tonne and the limited ability of the company to coverthe expected rise in the fuel cost as only Rs100/tonne is recoverable through tariff. Webelieve the irrecoverable burden would be Rs820/tonne which would translate into anirrecoverable cost of Rs200 crore annually. However, the company is allowed to use15% of the output for merchant power which could cover partially at Rs125 crore(assuming a variable profit of Rs1.75/unit). On a net basis, CESC is likely to take a hitof around Rs75 crore annually (around 10-12% of the bottom line).

On the positive side, soon in Haldia regulated plants of 600MW are expected to comeon stream and we expect clarity on the fuel linkage for the Chandrapur plant, given thepriority of the government to improve coal availability for the ready-to-operate plants.

Given the likely hit from the aggressive coal block bidding, we have revised down ourearnings estimate and cut down the estimated value of the regulated power business byRs56/share in the SOTP valuation. Further, to factor in the recent revision of the pricetarget for FSL from Rs51 to Rs43, we have cut down the price target for CESC byRs14/share to arrive at a revised price target of Rs730. However, we retain our Buyrating on CESC as the negatives are already factored in the current price and the stockis available at below its FY2016E book value.






PT revised up to Rs843; upgraded to BuyCOMPANY DETAILSPrice target: Rs843




BSE code: 500087

NSE code: CIPLA

Sharekhan code: CIPLA


(%) 1m 3m 6m 12m

Absolute 8.0 12.6 32.3 95.2


PRICE PERFORMANCE

BUY CMP: RS725 MARCH 4, 2015CIPLA

KEY POINTS Building strong foundation to grow faster: Cipla is in the process of transforming its

business which is affecting its performance in the short term but will lead to a solidfoundation for a long-term growth and profitability. During the last 12 months, thecompany has entered into several collaborative and joint venture deals (17 deals duringthe year) to expand its presence in the key markets and sharpen its focus on nichesegments. Although most of these deals are focused on Europe and emerging markets,the market is buzzing about the possible inorganic initiatives in the US market.

Expect margin profile to improve: Most of the recent deals are focused on sharpeningits focus on niche segments, where competition is low and margins are better. A selectivebusiness approach and focus on technology-intensive products are set to strengthen itsmargin profile over time. We expect an improvement of over 350BPS in the OPM overFY2015-17.

The managements guidance seems to be conservative: The management has guidedfor a 9-10% growth in the revenues and an OPM of over 20% in FY2015 while FY2016will see a growth in mid teens with an improvement in the OPM. The guidance seemsto be conservative in our opinion, given a decent upside from the supply of genericNexium to Teva and new tenders rolling out in the emerging markets.

We revise our price target on roll-over; upgrade to Buy: Owing to a better visibility ofgrowth, we have rolled over our valuations to the earnings of FY2017E. Accordingly,our price target stands revised to Rs843, which includes Rs720 (21x FY2017E EPS) forthe base business and Rs123 for the inhaler opportunity in Europe. We upgrade ourrating on the stock to Buy.



holding or having a postition in the companies mentioned in the article.For detailed report, please visit the Research section of our website, sharekhan.com.

Wired for sustained growth; PT revised to Rs335COMPANY DETAILSPrice target: Rs335




BSE code: 500144

NSE code: FINCABLES

Sharekhan code: FINCABLES


(%) 1m 3m 6m 12m

Absolute -0.1 6.4 30.7 146.9


PRICE PERFORMANCE

BUY CMP: RS284 MARCH 31, 2015FINOLEX CABLES

KEY POINTS Finolex Cables Ltd (FCL) is expected to sustain a healthy, high double-digit earnings

growth in the next two to three years, given its efforts taken to strengthen the distributionnetwork and enhance the product portfolio. In the near term, we expect a strongperformance in Q4FY2015 with an expectation of a 25% growth on its adjustedearnings.

Structurally, organised players with a strong brand equity and a wide product portfolioare likely to gain from the implementation of the GST from 2016 onwards. Moreover,to capitalise on the opportunities the company has commissioned its new manufacturingfacility at Roorkee (for switchgear and electrical cables; business to consumer products)on time.

Given the superior growth outlook, strong free cash-flows and healthy return ratios,FCL has emerged as a quality stock and our preferred pick within the sector. Whatsmore, we see further scope for re-rating as improving capacity utilisation would boostthe margins and return ratios. Hence, we reiterate our Buy call with a revised pricetarget of Rs335 (target multiple of 16x on FY2017 estimates).

Risk: Weaker than expected demand environment and increased competition couldaffect the financial performance.






Concerns grow on import alert; downgraded toHold, PT under review

COMPANY DETAILS

Price target: Under review




BSE code: 524494

NSE code: IPCALAB

Sharekhan code: IPCALAB


(%) 1m 3m 6m 12m

Absolute 15.2 7.0 2.6 -8.2

Relative to Sensex 18.5 3.2 -2.9 -29.2

PRICE PERFORMANCE

HOLD CMP: RS665 MARCH 25, 2015IPCA LABORATORIES

KEY POINTS The latest import alerts on two facilities to linger on the resolution: The USFDA has

issued import alerts on two of Ipcas manufacturing facilities located at Pithampur(Indore, Madhya Pradesh) and Piparia (Silvassa), which were earlier served an adverseinspection report by the agencys inspectors. The companys Ratlam API facility isalready under import alert. However, as the USFDA is yet to issue warning letters, thegravity of the impact cannot be ascertained at this moment. Nonetheless, the latestimport alerts are set to linger on the resolution process, thereby affecting the resumptionof sales in the US and Canadian markets.

Downgrade recommendation to Hold but keep PT under review till more clarity emergesfrom warning letters: We have considered the impact of blockage of supplies of twoproducts, hitherto exempted from the first round of import alert, delay in resolution ofthe USFDA issues (may take more than 12 months) and uncertainty over WHO-GMPclearance, which would help resume 80% of the tender business. Accordingly, we havereduced our earnings estimates by 16% and 8% for FY2016 and FY2017 respectively.We have downgraded our rating to Hold. However, we keep the price target underreview until more details emerge from the USFDAs warning letters to understand thegravity of the issues. Also, the management is likely to give annual growth guidance forFY2016 after the Q4FY2015 results, which will give more visibility.




Outlook positive; use dips to buyCOMPANY DETAILSPrice target: Rs320




BSE code: 532947

NSE code: IRB

Sharekhan code: IRB


(%) 1m 3m 6m 12m

Absolute -9.3 -4.4 -8.2 135.0

Relative to Sensex -7.2 -10.1 -14.7 77.5

PRICE PERFORMANCE

BUY CMP: RS231 MARCH 17, 2015IRB INFRASTRUCTURE DEVELOPERS

KEY POINTS IRB Infrastructure Developers (IRB) showed an impressive surge in its toll revenues in

Q3FY2015 on the back of increased traffic movement on its BOT road projects. We believethat the growth in the construction revenues would also pick up meaningfully with the financialclosure of two large projects (the Solapur-Yedeshi and Yedeshi-Aurangabad projects worthover Rs1,956 crore). Two more projects are also expected to commence construction soon.

Project awarding by the NHAI almost doubled to 2,132km in M10FY2015 as against 1,041kmin M10FY2014. As was expected, the EPC segment maintained its dominance in the projectsbeing awarded but the BOT segment still comprised 31% of the total projects awarded in thequarter in value terms. Further, our interaction with industry players suggests an increase inproject awards during the next two to three months. We expect EPC road project awards tobenefit players like Ashoka Buildcon, Sadbhav Engineering and Gayatri Projects. However, afew large project awards through the BOT route would be beneficial to players like Larsenand Toubro, IL&FS Transportation Networks and IRB.

IRB is well funded to meet the Rs2,600-crore equity requirement for the next three yearsfrom internal accruals. An improving macro environment (better visibility of the tenderingbusiness, potential easing of interest rates etc) and a potential upside from a better thanexpected growth in traffic on the back of an economic revival are the key re-rating triggers forthe stock. IRB has corrected by around 10% during the current month which provides anopportunity to enter the stock with a medium- to long-term horizon to benefit from thestructurally positive scenario building up in the road construction sector. We maintain ourBuy rating on the stock with a price target of Rs320.






Recent correction presents opportunity,upgraded to Buy

COMPANY DETAILS

Price target: Rs320




BSE code: 532926

NSE code: JYOTHYLAB

Sharekhan code: JYOTHYLAB


(%) 1m 3m 6m 12m

Absolute -4.8 6.0 9.9 32.7


PRICE PERFORMANCE

BUY CMP: RS267 MARCH 30, 2015JYOTHY LABORATORIES

KEY POINTS The stock price of Jyothy Laboratories Ltd (JLL) has corrected by close to 10% (from about

Rs300) and the stock is currently trading at 22x FY2017E earnings, which makes it one ofthe discounted stocks in the FMCG space. The correction provides an upside of 20% (fromour price target of Rs320) which gives investors an opportunity to add a quality mid-capFMCG stock to their kitty.

JLL has a strong presence in the fast-growing domestic categories such as household insecticidesand dishwashing detergents while it is the market leader in the fabric whitener space. Thecompany is well poised to achieve about 15% revenue growth in FY2016. Most of thisgrowth will be led by a growth in the volumes. On the other hand, the correction in the pricesof crude oil and crude derivatives would help JLLs gross profit margin to improve by 300-400 basis points aiding a strong improvement in the profitability.

JLL has maintained its focus on introducing new products under the existing brands and shallcontinue to revamp some of the existing products with new formulations or marketing strategiesin the coming months. The company is also keen to strengthen its balance sheet by reducingthe debt on books by improving the cash flows and hiving off some of the non-core assets.Thus, strong earnings visibility and potential upside of 20% from the current levels make itone of the better picks in the FMCG space over the medium to long term. Hence, we upgradeour rating on the stock from Hold to Buy and maintain the price target at Rs320.

Key risk: A slowdown in any of the key categories and increased competition from the newentrants would act as key risks to the earnings estimates.




Maintain Buy with a revised PT of Rs2,300COMPANY DETAILS



52 week high/low: Rs2,037/904


BSE code: 500257

NSE code: LUPIN

Sharekhan code: LUPIN


(%) 1m 3m 6m 12m

Absolute 12.5 38.9 41.7 109.9


PRICE PERFORMANCE

BUY CMP: RS2,001 MARCH 30, 2015LUPIN

KEY POINTS Well positioned to take on long strides: Having built a strong foundation in the business

of generic drugs, Lupin is now positioning itself to play longer innings with focus onniche segments like respiratory, oral contraceptives and biosimilars. Strong productsbuilt in niche space in the key markets, various in-licencing deals and collaborationsare set to give the company an edge over peers over a longer period.

A revenue goal of $5 billion in FY2018 implies 30% CAGR over 2014-18: The companyaims to achieve a revenue goal of $5 billion in FY2018 through organic and inorganicmeans ($1 billion may come from inorganic initiatives) and that implies a revenueCAGR of 30% over FY2014-18 (organic CAGR of 23%). The focus on niche segmentsand cost rationalisation process that it regularly undertakes will help the company toimprove its profitability profile as well.

Strong case for re-rating; we revise PT up to Rs2,300, maintain Buy: If compared withlarge-cap companies, Lupin is expected to grow faster in terms of earnings and generatea better return on equity. The company is sufficiently equipped with multiple growthelements to sustain the growth over a longer period. The stock is currently trading at24.5x FY2017E earnings. Given a better growth visibility over a long period, we believeLupin is a fit case for re-rating in the near future. We assign a valuation multiple of 28xto the EPS of FY2017E to set a fresh price target of Rs2,300 and maintain our Buyrating on the stock.





Promoters47%

Non-promoter corporate

2% Institutions11%

Public and others

8%

Foreign32%


Ahead of the pack; maintain Buy withrevised PT of Rs430

COMPANY DETAILS

Price target: Rs430




BSE code: 531642

NSE code: MARICO

Sharekhan code: MARICO


(%) 1m 3m 6m 12m

Absolute 3.3 14.2 26.9 83.8


PRICE PERFORMANCE

BUY CMP: RS369 MARCH 18, 2015MARICO

KEY POINTS With close to 70% of its revenues coming from urban India, Marico is expected to be one of

the key beneficiaries of an improving demand environment in the urban India. Its key brandslike Saffola (edible oil) and Parachute (coconut oil) are expected to achieve sales volumegrowth of 13% and 8% respectively over the next two years. Its international business islikely to benefit from cross-pollination and entry in new categories under the existing brands(the focus areas are the Middle-East and South-East Asia). Consequently, we are estimating ahealthy growth of close to 16% CAGR in revenues over the next two years.

Copra prices continue to witness a downward trend and currently stand at Rs95 per kg,which is 4% lower than the average copra price in Q3FY2015. Further, decelerationwould add on to gross profit margins in the coming quarters along with the softness inthe other key raw materials, such as liquid paraffin and high-density polyethylene. Evenafter reinvesting some part of the margin gains in higher advertisement and promotionalactivities, the company is likely to show an improvement of 100-120BPS (to 16.5%) inthe operating profit margins in FY2016.

With a strong portfolio of brands (largely catering to urban India) and focus on expandingthe urban-centric youth and wellness portfolio, Marico remains one of the better picks in theFMCG space. Hence, with a better earnings visibility of above 20% earnings growth it wouldcommand a premium over its peers. We maintain our Buy recommendation on the stockwith a revised price target of Rs430 (valuing the stock at 31x its FY2017E EPS).

Risk: Any sudden spike in the copra prices from the current levels remains key risk toour earnings estimates.




Fundamentals remain strong, upgraded to BuyCOMPANY DETAILSPrice target: Rs518




BSE code: 500271

NSE code: MAX

Sharekhan code: MAX


(%) 1m 3m 6m 12m

Absolute -0.9 11.9 27.7 142.8


PRICE PERFORMANCE

BUY CMP: RS463 MARCH 11, 2015MAX INDIA

KEY POINTS Max India has corrected by around 13% from the 52-week high and offers a decent

upside at our sum-of-the-parts-based price target of Rs518. The company continues toreport a healthy performance and the long-term structural drivers (low insurancepenetration, pick-up in savings rate and revival in economy) for the life insurance sectorare intact. We, therefore, upgrade the rating on the stock from Hold to Buy, keepingthe price target unchanged.

In the life insurance business the company continues to grow ahead of its peers and hasexpanded its market share (10.2% among private players). The operating metrics(conservation ratio, expense ratio, etc) of Max Life Insurance are among the best in theindustry and rejig of the portfolio of the non-par unit-linked insurance plans will improvethe profitability. The healthcare segment, including new hospitals, has shown a stronggrowth in revenues while the health insurance business (Max Bupa Health InsuranceCompany) has seen an uptick in premium due to focus on the business-to-consumerstrategy.

Going ahead, the demerger of the businesses into three separate entities will enhancethe focus on individual businesses and thus be positive over the long term. In addition,a revival in the insurance sector and an expansion in the healthcare business will boostrevenues. An increase in foreign direct investment limits from 26% to 49% will resultin value unlocking from the life insurance and health insurance businesses. In view ofMax Indias strong fundamentals and the recent correction in the stock price werecommend investors to accumulate the stock.






Buy into weakness for long-term gain,PT revised to Rs940

COMPANY DETAILS

Price target: Rs940



NSE volume (no. of shares): 70,025

BSE code: 533179

NSE code: PERSISTENT

Sharekhan code: PERSISTENT


(%) 1m 3m 6m 12m

Absolute 0.2 10.0 26.4 49.7


PRICE PERFORMANCE

BUY CMP: RS770 MARCH 16, 2015PERSISTENT SYSTEMS

KEY POINTS The management expects the revenue growth of Persistent Systems Ltd (PSL) to remain

muted in Q4FY2015 owing to softness in the product engineering space and a negativecross-currency impact of around 30BPS. PSLs top account IBM, which had a ramp-downearlier, has stabilised and is expected to show an improvement. Earlier, PSL had indicateda 15% Y-o-Y growth for FY2015 which required it to deliver a 10% sequential growth inQ4FY2015. However, the management has acknowledged that Q4 may be muted, andPSL may miss the growth guidance and settle for a 12.5% Y-o-Y growth in the fiscal.

The management continued to emphasise on the long-term value proposition in theenterprise digital transformation business and indicated PSL is making an initialbreakthrough in the space. Recently, the company has closed a couple of deals in therange of $1.0-2.5 million and expects to grow 50-60% in the enterprise space in thenext two to three years. On the overall demand environment, the management maintainsits positive outlook and expects to deliver strong numbers in FY2016. On the intellectualproperty (IP) front, both Radia and HP are witnessing strong traction.

We have tweaked our earnings estimates primarily on account of a lower revenuegrowth assumption. We now expect its earnings to grow at 12.5%, 16.8% and 19.1%over FY2015, FY2016 and FY2017 respectively. PSL remains a good investment betfor the long-term investors, given it is a pure play on corporate digital spending, has astrong balance sheet and follows good corporate governance practices. In the past twoweeks, the stock has corrected by close to 18% from its recent high of Rs940. We seethis as an opportunity to re-enter the stock with a time horizon of the next 12 months.We upgrade the stock from Hold to Buy with a revised price target of Rs940.




Early signs of recovery, OPM to improve;PT revised to Rs750

COMPANY DETAILS

Price target: Rs750




BSE code: 509930

NSE code: SUPREMEIND

Sharekhan code: SUPREMEIND


(%) 1m 3m 6m 12m

Absolute 3.3 19.9 3.5 53.0

Relative to Sensex 5.7 12.7 -3.8 15.6

PRICE PERFORMANCE

HOLD CMP: RS716 MARCH 17, 2015SUPREME INDUSTRIES

KEY POINTS Supreme Industries (Supreme) is witnessing an improvement in the demand for PVC

pipes on the back of an uptrend in PVC prices and the seasonality factor. The rebuildingof stock inventory by distributors along with a price hike of 10-15% would help toimprove the volume growth and mitigate the risk of inventory loss ahead.

The company had witnessed a muted volume growth and a sharp decline in the operatingprofit margin (OPM; of 300-400 basis points) in Q2FY2015 led by inventory losses.At the same time, PVC prices had also declined by 25-30% which had worsened theoperating performance significantly. However, during March 2015 PVC prices recoveredsharply by 16% from their bottom owing to demand recovery.

We expect the company to report an improvement in the margins and earnings (at18% compounded annual growth rate in FY2014-17) driven by better operatingleverage, focus on innovative product-mix and increasing share of value-added products.It also expects to book real estate transaction revenues of Rs93.3 crore during Q3while the pending export order of 38,000 cylinders would be accounted for in FY2015.It got approval for 10kg cylinder from the regulatory authority and is in an advancedstage of getting the product approval for the 5kg cylinder. Its bathroom fitting businesscontinues to witness an accelerated pace of growth.

We believe the recent sharp run-up of 20% in the stock price factored in all thesepositives. Though we revise our earnings estimates upward for FY2016 and FY2017(up 7% each) to reflect the better growth visibility (margin expansion and earnings),we retain our Hold rating on the stock with a revised price target of Rs750 (price/earnings of 21x on FY2017E earnings).






Another soft quarter in offing, owing tocross-currency headwinds

COMPANY DETAILS





BSE code: 532540

NSE code: TCS

Sharekhan code: TCS


(%) 1m 3m 6m 12m

Absolute 9.2 4.3 6.7 26.4

Relative to Sensex 7.2 1.2 -2.0 -10.2

PRICE PERFORMANCE

BUY CMP: RS2,696 MARCH 5, 2015TATA CONSULTANCY SERVICES

KEY POINTS The management of Tata Consultancy Services (TCS) stated that Q4FY2015 would

remain soft, in line with the trend seen in Q4FY2014. However on a reported basis,owing to a cross-currency negative impact of 200BPS, the reported revenues in dollarterms would remain flat. The overall net currency impact for the quarter including therupee would be of minus 275BPS. Overall, the revenue growth is expected to be ~15.3%in F

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