Download - Ashika Monthly Insight March 2016

8/17/2019 Ashika Monthly Insight March 2016

1/52NTPC Ltd. | Marico Ltd.

Market Overview

Monthly Insight Performance

Stock Picks

Valuation at a Glance

Q3FY16 Report Card

Sector Outlook: Consumer Durables

Economy Review

Mutual Fund Overview

Technical View

Market Diary

Commodity Monthly Round-Up

World Economic Event Calender


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Inside this issue

28 EconomyReview

01 MarketOverview

23 SectorOutlook

44 Market Diary

12 Valuation at aGlance

38 TechnicalView

37 Mutual FundOverview

45 CommodityMonthly

Round up

48 WorldEconomic

Event Calender

08 Stock Picks•NTPC Ltd.

•Marico Ltd.

04Monthly

Insight

Performance

14 Q3FY16Report Card

MARCH 2016

DisclosureThe Research Analysts and /or Ashika Stock BrokingLimited do hereby certify that all the views expressed inthis research report accurately reflect their views aboutthe subject issuer(s) or securities. Moreover, they alsocertify the followings:-• The Research Analyst or Ashika Stock Broking Limited orhis/its Associates or his/its relative, has any financialinterest in the subject company (ies) covered in this report. No• The Research Analyst or Ashika Stock Broking Limited orhis/its Associates or his/its relative, have actual/beneficialownership of 1% or more in the subject company, at theend of the month immediately preceding the date of thepublication of the research report. No

Name Designation Email ID Contact No.

Paras Bothra VP Equity Research [email protected] +91 22 6611 1704

Krishna Kumar Agarwal Equity Research Analyst [email protected] +91 33 4036 0646Partha Mazumder Equity Research Analyst [email protected] +91 33 4036 0647

Tirthankar Das Technical & Derivative Analyst [email protected] +91 33 4036 0645

DisclaimerThis report is for the personal information of the authorized recipient and does not construe to be any investment, legal or taxation advice to you. Ashika Stock Broking Ltd. isnot soliciting any action based upon it. This report is not for public distribution and has been furnished to you solely for your information and should not be reproduced orredistributed to any other person in any form. The report is based upon information that we consider reliable, but we do not represent that it is accurate or complete, and itshould not be relied upon such. Ashika Stock Broking Ltd. or any of its affiliates or employees shall not be in anyway responsible for any loss or damage that may arise to anyperson from any inadvertent error in the information contained in this report. Ashika Stock Broking Ltd., or any of its affiliates or employees do not provide, at any time, anyexpress or implied warranty of any kind, regarding any matter pertaining to this report, including without limitation the implied warranties of merchantability, fitness for aparticular purpose, and non-infringement. The recipients of this report should rely on their own investigations.

• The Research Analyst or Ashika Stock Broking Limitedor his/its Associates or his/its relatives has any materialconflict of interest at the time of publication of theresearch report.No• The Research Analyst or Ashika Stock Broking Limitedor his/its Associates have received any compensation orcompensation for investment banking or merchantbanking or brokerage services or for product other thanfor investment banking or merchant banking or brokerageservices from the companies covered in this report in thepast 12 months.No• The Research Analyst or Ashika Stock Broking Limitedor his/its Associates have managed or co managed in theprevious 12 months any private or public offering ofsecurities for the company (ies) covered in this report. No

• The Research Analyst or Ashika Stock Broking Limitedor his/its Associates have received any compensation orother benefits from the company (ies) covered in thisreport or any third party in connection with the ResearchReport. No• The Research Analyst has served as an officer, directoror employee of the company (ies) covered in the researchreport.No• The Research Analyst or Ashika Stock Broking Limitedhas been engaged in Market making activity of thecompany (ies) covered in the research report. No

SEBI Registration No. INH000000206


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1

BUDGET 2016-17

Budget 2016-17 presented by our honorable finance

minster Mr Arun Jaitely is a well thought out budget

document where an attempt has been made to make it an

all inclusive budget. The focus of the budget has been

clearly to boost the rural economy, targeted public

investments in roads and railways and maintaining fiscal

prudence. It can well be said in the words of finance

minster expressing in some its forum post the budget isthat the Budget 2016-17 reflects the realty of India. It

address the agriculture sector, emphasizes the rural India,

social and physical infrastructure commitments for the

people of India and also a combination of various other

factors including the housing sector.

If we look at the totality of things major key takeaways as

far as the spending allocation is considered is for

Infrastructure at Rs 2,21,246 crore of which road and

railways almost covers up the larger share in the pie.

Allocation for social sector including education and health

care is at Rs 1,51,581 crore and allocation for rural sector

at Rs 87,765 crore and allocation for agriculture and

farmers’ welfare is Rs 35,984 crore. Other part on which

government tried to focus on is the simplification and

rationalization of taxes and certainty in taxation. One

important measure in the taxation front is that domestic

taxpayers can declare undisclosed income or such income

represented in the form of any asset by paying tax at 30%,

and surcharge at 7.5% and penalty at 7.5%, which is a

total of 45% of the undisclosed income. Declarants will

have immunity from prosecution. This is an important step

to curb black money and one needs to look at the

measures and its effectiveness. Other measures have been

on new dispute resolution scheme and other schemes of

penalty and interest and i ts waiver and also the

retrospective tax issues. This is important to address tax

litigations in a timebound manner.

One more important issue is the governments focus and

thrust on the affordable housing sector. 100% deduction

for profits to an undertaking in housing project for flats

upto 30 sq. metres in four metro cities and 60 sq. metres

in other cities, approved during June 2016 to March 2019

and completed in three years. MAT to apply. Deduction for

additional interest of Rs. 50,000 per annum for loans up to

Rs. 35 lakh sanctioned in 2016-17 for first time home

buyers, where house cost does not exceed Rs 50 lakh.

Other relief measures for small tax payers have been of Rs

6600/- i.e., an Increase in the limit of deduction of rent

paid under section 80GG from Rs. 24000 per annum to Rs.

60000, to provide relief to those who live in rented housesand also the raising of the ceiling of tax rebate under

section 87A from Rs. 2000 to Rs. 5000 to lessen tax

burden on individuals with income upto Rs 5 lacs.

Other important is with the Service tax where there has

been no tinkering and hence is also indicative of the fact

that the government is in no hurry to raise it to a level so

as to comply with the upcoming GST (indicating that GST is

not likely to come up as easily as was anticipated earlier).

Other important untouched area where the market feared

was with the tinkering of the Long-term capital gain tax

which was left untouched.

The negatives have been that the Dividend Distribution Tax

and the STT have been hiked. Also EPF and PF have been

aligned with the superannuation fund. In case of

superannuation funds and recognized provident funds,

including EPF, the same norm of 40% of corpus to be tax

free will apply in respect of corpus created out of

contributions made on or from 1.4.2016. This EPF and PF

taxation is a negative for the middle income salaried

people and who are hit by such measures.

For the Corporate tax it has maintained the same as 30%

and there are certain tweaking with regard to newly set up

manufacturing companies and start-up companies which

are as follows:

New manufacturing companies incorporated on or after

1.3.2016 to be given an option to be taxed at 25% +

surcharge and cess provided they do not claim profit

linked or investment linked deductions and do not avail

of investment allowance and accelerated depreciation.

Lower the corporate tax rate for the next financial year

for relatively small enterprises i.e companies with

•

•


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MARCH 2016

MARKET OVERVIEW

2

turnover not exceeding Rs 5 crore (in the financial year

ending March 2015), to 29% plus surcharge and cess.

100% deduction of profits for 3 out of 5 years forstartups setup during April, 2016 to March, 2019. MAT

will apply in such cases.

For the fiscal part, they have done a commendable job and

also the net borrowing figure of Rs 4.25 lac crore and the

gross borrowing at Rs 6 lac crores is way below what the

market was anticipating and hence the bond market rallied.

The calculation to it also looks realistic. So in a sense it

looks that the fiscal road map by the government has been

laid quite smartly and now it’s the monetary policy which

have the room to maneuver and put the stress off of the

corporate India and the banks by really cutting rates and

not to get too much rattled with the inflation number at a

time when the whole world is reeling under deflationary

tendencies. And also if we look at the quarterly corporate

topline numbers its reflective of the fact that the demand

environment is fragile and flagging and so the pricing

power remains feeble and thereby also the risk to upside

inflation is tamed. In such a scenario the antidote is left

with the RBI is to cut rates and compliment the

commendable fiscal prudence shown by the government

and hence relieve the corporate and banks of viciousrepercussions of the struggling banking bad assets and

ailing corporate defaulting. For the fiscal discipline part the

government has laid out some key initiatives like the

strategic disinvestment and the listing of the general

insurance companies which are profitable. Strengthening of

•

the Bankruptcy code and amendments in the SARFESI Act

and consolidation of the PSU banks and asset quality

review are the measures to be taken by the government to

address the grave concern of defaults. There is also couple

of financial sector reforms which government has

introduced to address issues pertaining to the above

mentioned problems and also to introduce certain

derivative products in the commodity derivative market.

But one key disappointment was wi th the bank

recapitalization amount of Rs 25,000 crores which was less

than what the market was anticipating.

Now as we are done with the budget which is more tilted

towards rural India and its income growth, agri India, social

sector & physical infrastructure and this have a largerbenefit in terms of addressing to the larger section of the

society at large and also laying ground for the future image

makeover with upcoming state elections. A fine balance has

been made along with the focused infrastructure push and

other social schemes. Strengthening certain regulations and

introducing financial reforms and maintaining fiscal

prudence despite of OROP and 7th Pay commission

liabilities, are the key takeways and a complete budget

package from the government and market participants now

will start looking at markets beyond budget in couple of

days. Focus on growth was not the prime or the big agenda

in the overall scheme of things and incentivizing large

corporate was not the priority except for the startup

companies and the new manufacturing set-ups.


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BUDGET 2016-17

3

Revenue Receipts 1101472 1141575 1206084 1377022

Capital Receipts (5+6+7)$ 562201 635902 579307 601038

Total Receipts (1+4)$ 1663673 1777477 1785391 1978060

Non-Plan Expenditure 1201029 1312200 1308194 1428050

Total Expenditure (9+13) 1663673 1777477 1785391 1978060

Revenue Deficit (17-1) 365519 394472 341589 354015

(2.9) (2.8) (2.5) (2.3)

Effective Revenue Deficit (20-18) 234759 268000 209585 187175

(1.9) (2.0) (1.5) (1.2)

Fiscal Deficit {16-(1+5+6)} 510725 555649 535090 533904

(4.1) (3.9) (3.9) (3.5)

Primary Deficit (22-11) 108281 99504 92469 41234

(0.9) (0.7) (0.7) (0.3)

2 Tax Revenue (net to centre) 903615 919842 947508 1054101

3 Non-Tax Revenue 197857 221733 258576 322921

5 Recoveries of Loans 13738 10753 18905 10634

6 Other Receipts 37737 69500 25312 56500

7 Borrowings and otherliabilities * 510725 555649 535090 533904

10 On Revenue Account of which 1109394 1206027 1212669 1327408

11 Interest Payments 402444 456145 442620 492670

12 On Capital Account 91635 106173 95525 100642

Plan Expenditure 462644 465277 477197 550010

14 On Revenue Account 357597 330020 335004 403628

15 On Capital Account 105047 135257 142193 146382

17 Revenue Expenditure (10+14) 1466992 1536047 1547673 1731037

18 Of Which, Grants for creationof Capital Assets 130760 132472 132004 166840

19 Capital Expenditure (12+15) 196681 241430 237718 247023

Particulars (Rs. Crores.)

2014-15

Actuals

2015-16Budget

Estimates

Budget Estimates for 2016-2017:

2015-16

RevisedEstimates

2016-17

BudgetEstimates

*http://indiabudget.nic.in/glance.asp

Notes:

• GDP for BE 2016-2017 has been projected at Rs. 15065010 crore assuming 11% growth over the Advance Estimates of 2015-2016(Rs. 13567192 crore) released by CSO.

• Individual items in this document may not sum up to the totals due to rounding off.

Paras BothraVice President - Equity Research

Email - [email protected]

Phone : 022 6611 1704


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MARCH 2016

MONTHLY INSIGHT PERFORMANCE

4

Over the years, Ashika Research based on its rigorous and

c o nt i nu o u s a na l y s i s o n f u nd a m e nt a l b a s i s , ha s

recommended stocks and consistently achieved the target

price recommended. Since January 2012 we have

recommended 186 stocks out of which 144 has achieved

target. Hit Ratio stands at 78%. Out of these 79 stockshave given a return of more than 100%. During this period

the Nifty has given a return of 37% and a return of 75%

from its peak.

The stocks recommended by us such as Cera Sanitaryware,

Symphony, Srikalahasti Pipes, Aurobindo Pharma, Shree

cement, MRF, Britannia, Torrent Pharma, Wim Plast,

Axiscades Engg, Lupin, Pidilite Ind, Can Fin Homes, Maruti

Suzuki, Glenmark Pharma, Kaveri Seeds, Himatsingka Seide,

HPCL, Gujarat Gas, Relaxo Footwears, Zensar Tech,

Hexaware Ltd., Havels India, PI Industries, Dabur, UPL,

Sharda Motor, VA Tech Wabag, Emami, Bajaj Finserv, Zydus

Wellness, Bharti InfraTel, Indusind Bank, Deccan Cements,

Cummins India, Adani Ports, L&T, Prism Cement, MRF Ltd.,

Dr Reddy, Berger Paints, Godrej Consumer, Divis Lab,

Tatamotor - DVR, BPCL, Gulshan Polyols, Pidilite, Pidilite

Ind., IFB Industries, Motherson Sumi, Escorts, Castrol India,

Rallis India, Info Edge (India), LIC Housing Fin, AIAE n g i n e e r i n g , F i n o l e x I n d . , A s h o k L e y l a n d , Z e e

Entertainment, Indian Bank, Berger Paints India, Dr. Reddy

Lab, Tech M, Axis Bank, FDC Ltd., Dabur India, Multibase

India, Tata Motors, V-Guard Ind., IPCA Lab, Magma Fincorp

and City Union Bank have generated exceptional returns

(more than 100% returns) for our investors. A few of them

have generated returns in excess 200% for our investors.

We have selected stocks across large cap and mid cap

companies and across variety of sectors. For the period

a na l y z e d , t he s t o c k s r e c o m m e nd e d b y u s ha v e

18%

4%

78%

Total Call: 186Target Achieved Exit/Booked Calls Open

More than 100% Return

50-25% Return

100-50% Return

Less than 25% Return

25%

12%

20%

43%

46Stocks

79Stocks

38Stocks

23Stocks

Success Rate Return Classification


7/52

BUDGET 2016-17

Feb-16 HDFC Banking & Finance 1180 1400 18.60% 1194 1.20% 1060.3HCL Tech IT 866 1020 17.80% 877 1.30% 813.3

Hero MotoCorp Auto 2562 2820 10.10% 2728.8 6.50% 2499.9

Jan-16 Pidilite Ind. Paints & Chemical 551 656 19.10% 648 17.60% 586.7

Indraprastha Gas Oil & Gas 525 624 18.90% 608 15.80% 508.4

SH Kelkar Personal Prod. 250 310 24.00% 275.8 10.30% 236.4

Texmaco Rail Engg. & Const. 151 183 21.20% 154.9 2.50% 99

Dec-15 Wabco India Auto 6280 7200 14.60% 6450 2.70% 5299.5

Sanofi India Pharma 4300 5060 17.70% 4525 5.20% 4317.8

Garware Wall Ropes Textiles 388 488 25.80% 436.5 12.50% 278.9

Nov-15 Inox Wind Power 397 500 25.90% 411.4 3.60% 218.8

Sterlite Tech Electrical Equip. 94 130 38.30% 108.6 15.50% 73.5

GP Petroleums Oil & Gas 67 156 132.80% 90.2 34.60% 45

HCC Construction 26 43 65.40% 28.3 8.80% 17.7

Oct-15 Castrol India Oil & Gas 433 510 17.80% 474.4 9.50% 367.4Zee Ent. Media 390 464 19.00% 439.4 12.70% 372.4

Syngene Int Pharma 321 385 19.90% 436 35.80% 395.5 Target Achieved

Sep-15 Berger India Paints & Chemical 208 247 18.80% 283.7 36.40% 224.3 Target Achieved

Ceat Tyre 1080 1245 15.30% 1319.9 22.20% 947.8 Target Achieved

Aug-15 Cummins India Electrical Equip. 962 1130 17.50% 1247.7 29.70% 809.3 Target Achieved

Greenply Ind. Plywood 935 1123 20.10% 210 -77.50% 163.3

TIME Technoplast Plastic Prod. 66 81 22.70% 69.9 5.90% 44.7

SQS India BFSI IT 680 863 26.90% 1291 89.90% 770.5 Target Achieved

Jul-15 Asian Paints Paints & Chemical 760 883 16.20% 926.8 21.90% 846.1 Target Achieved

Idea Cellular Telecom 179 209 16.80% 186.5 4.20% 104.3

Gruh Finance Banking & Finance 261 322 23.40% 279 6.90% 228

Jun-15 Maruti Suzuki Auto 3774 4367 15.70% 4790 26.90% 3236.5 Target Achieved

Whirlpool India Home Appl. 760 879 15.70% 847 11.40% 597.6

May-15 Sun pharma Pharma 925 1220 31.90% 1010 9.20% 853.9

Tata Motors Auto 515 615 19.40% 531 3.10% 299.7Ultratech Cement 2680 3300 23.10% 3369 25.70% 2768.6 Target Achieved

Tata Global FMCG 141 174 23.40% 150.5 6.70% 103.6

Apr-15 Abbott India Pharma 4020 4680 16.40% 6177.7 53.70% 4786.2 Target Achieved

Strides Arcolab Pharma 1153 1340 16.20% 1414 22.60% 879.6 Target Achieved

Elantas Beck India Chemical 1130 1320 16.80% 1605 42.00% 1178.3 Target Achieved

Mar-15 MCX Finance 1177 1552 31.90% 1289.9 9.60% 813.7

BEML Electrical Equip. 978 1200 22.70% 1612 64.80% 945.5 Target Achieved

Rolta IT 191 250 30.90% 196.8 3.00% 68.8 Exit

Feb-15 SML Isuzu Auto 979 1222 24.80% 1671 70.70% 667.1 Target Achieved

HBL Power Battery 34.9 55 57.60% 64.5 84.80% 29.6 Target Achieved

Mangalam Cement Cement 321 432 34.60% 324.5 1.10% 171.5 Exit

Amrutanjan Health Pharma 449 650 44.80% 564.9 25.80% 378.2

Jan-15 Torrent Pharm Pharma 1096 1338 22.10% 1718.4 56.80% 1261 Target Achieved

Emami FMCG 783 924 18.00% 1365 74.30% 983.9 Target AchievedDewan Housing Finance 397 480 20.90% 569.2 43.40% 153.6 Target Achieved

KPIT Tech IT 200 263 31.50% 232.4 16.20% 133.8 Exit

Dec-14 Bajaj Corp Personal Prod. 327 385 17.70% 522 59.60% 381.7 Target Achieved

Alstom India Electrical Equip. 586 725 23.70% 877 49.70% 562 Target Achieved

Transport Corp Transportation 284 354 24.60% 348.5 22.70% 226 Target Achieved

Multibase India Rubber Prod. 164 300 82.90% 342.5 108.80% 179.9 Target Achieved

Albert David Pharma 256 363 41.80% 404.3 57.90% 247.2 Target Achieved

Nov-14 ONGC Oil & Gas 395 516 30.60% 412.5 4.40% 194.1

Cadila Helthcare Pharma 1384 1600 15.60% 2160 56.10% 314.6 Target Achieved

Karur Vysys Banks 541 700 29.40% 619 14.40% 398.3

JK Lakshmi Cement Cement 348 396 13.80% 429.9 23.50% 269 Target Achieved

Diwali Ashok Leyland Auto 44 65 46.20% 99.7 124.20% 87.7 Target Achieved

Pick Karur Vysys Banks 540 700 29.60% 619 14.60% 398.3

SKS Microfinance Finance 317 412 30.00% 589.6 86.00% 483.2 Target Achieved

NOCIL Chemical 43 60 38.40% 64.5 48.80% 38.9 Target Achieved

01/03/2016)

5

Recommended Stocks


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MARCH 2016

MONTHLY INSIGHT PERFORMANCE

6

Oct Kesoram Industries Diversified 117 176 50.40% 148.6 27.00% 85.1 Exit

Akzo Nobel Paints & Chemical 1240 1460 17.70% 1551 25.10% 1313 Target Achieved

IFB Industries Household Appl. 295 380 28.80% 700 137.30% 289 Target Achieved

Munjal Auto Auto Parts 102 155 52.00% 134 31.40% 67.5

Sep-14 Tata Motors Auto 527 598 13.50% 612.4 16.20% 299.7 Target Achieved

Timken India Industrial Prod. 447 545 21.90% 669 49.70% 414.1 Target Achieved

KEC International Electrical Equip. 102 130 27.50% 164.8 61.60% 100.8 Target Achieved

Indoco Remedies Pharma 256 327 27.70% 412.2 61.00% 270.2 Target Achieved

Ingersoll-Rand Industrial Prod. 649 785 21.00% 1124.4 73.30% 608.6 Target Achieved

Aug-14 Bodal Chemicals Chemical 60 94 56.70% 76.3 27.20% 51.5 Exit

Som Distilleries Breweries & Dist. 211 269 27.50% 246 16.60% 187.9

Sharda Motor Auto Parts 391 536 37.10% 1190 204.30% 750 Target Achieved

Axiscades Engg IT 106 138 30.20% 396.2 273.80% 188 Target Achieved

Visaka Industries Cement Prod. 119 173 45.40% 188.8 58.70% 92.8 Target Achieved

Deccan Cements Cement 270 408 51.10% 772 185.90% 506.2 Target Achieved

Gulshan Polyols Chemical 177 274 54.80% 430 142.90% 277.7 Target Achieved

Jul-14 Mahindra Lifespace Real Estate 560 710 26.80% 664.4 18.60% 445.5V-Guard Ind. Industrial Prod. 593 746 25.80% 1198 102.00% 797.9 Target Achieved

Astra Microwaves Defence 142 186 31.00% 166.4 17.20% 107.3

Himatsingka Seide Textile 74 95 28.40% 248.4 235.70% 147.8 Target Achieved

Mangalam Cement Cement 221 285 29.00% 351 58.80% 171.5 Target Achieved

Jun-14 Coal India Coal 392 500 27.60% 447.1 14.10% 311 Target Achieved

Container Corporation Logistics 1180 1500 27.10% 1947.7 65.10% 1158.4 Target Achieved

Balmer Lawrie Logistics 473 700 48.00% 682 44.20% 497.2

Can Fin Homes Housing Finance 305 450 47.50% 1120 267.20% 943.8 Target Achieved

Srikalahasti Pipes Iron & Steel Prod. 46 70 52.20% 349 658.70% 197.3 Target Achieved

May-14 Bank of Baroda Banking 164.4 201.6 22.60% 228.9 39.20% 131.9 Target Achieved

AIA Engineering Industrial Prod. 606 726 19.80% 1364.2 125.10% 807.1 Target Achieved

MOIL Ltd. Metals & Mining 255 341 33.70% 341.7 34.00% 190.1 Target Achieved

Wim Plast Plastic Prod. 620 800 29.00% 2499 303.10% 1649.8 Target Achieved

Apr-14 Engineers India Engg. & Const. 224 270 20.50% 331.7 48.10% 150.2 Target Achieved

Gujarat Gas Gas 263 305 16.00% 862.4 227.90% 481.2 Target AchievedCity Union Bank Banking 52.8 69 30.70% 105.6 99.90% 84.4 Target Achieved

Relaxo Footwears Footwear 297 390 31.30% 960.1 223.30% 391.2 Target Achieved

Mar-14 Motherson Sumi Auto Ancillary 232 285 22.80% 540.8 133.10% 226.5 Target Achieved

PI Industries Agrichem 252 315 25.00% 787.2 212.40% 577.1 Target Achieved

VA Tech Wabag Water Treatment 645 765 18.60% 1945 201.60% 449.3 Target Achieved

Feb-14 Bharti InfraTel Telecom - Infra 171 213 24.60% 499.7 192.20% 356.8 Target Achieved

UPL Fertilizer 187 251 34.20% 576.4 208.20% 381.7 Target Achieved

Finolex Ind. Pipes 155 185 19.40% 347.7 124.30% 307.1 Target Achieved

Jan-14 NIIT Tech IT 355 500 40.80% 631 77.70% 419.6 Target Achieved

Zensar Tech IT 349 500 43.30% 1121 221.20% 843 Target Achieved

Bajaj Finserv Banking 726 850 17.10% 2160 197.50% 1611.9 Target Achieved

FDC Ltd. Pharma 130 170 30.80% 274.4 111.00% 180.1 Target Achieved

Dec-13 MRF Ltd. Tyre 17350 19430 12.00% 46399 167.40% 32547.1 Target Achieved

Info Edge (India) Web Services 446 550 23.30% 1015 127.60% 700.1 Target AchievedIndian Bank Banking 101 120 18.80% 224.3 122.00% 76.1 Target Achieved

Symphony Cons. Durable 405 500 23.50% 3275 708.60% 1968.5 Target Achieved

Nov-13 Pidilite Ind. Paints & Chemical 266 350 31.60% 638 139.80% 586.7 Target Achieved

Aurobindo Pharma Pharma 216 297 37.50% 1535 610.60% 655.7 Target Achieved

Kaveri Seeds Agri Prod. 305 580 90.40% 1075.5 253.10% 351.7 Target Achieved

Speciality Restaurant Restaurants 124 198 59.70% 218.6 76.30% 83.2 Target Achieved

Oct-13 Britannia FMCG 759 845 11.30% 3434.2 352.50% 2756.3 Target Achieved

Glenmark Pharma Pharma 520 610 17.30% 1262.9 142.90% 735.7 Target Achieved

Ultratech Cement Cement 1808 2045 13.10% 3398 87.90% 2768.6 Target Achieved

Sep-13 L&T Engg. & Const. 705 810 14.90% 1893.8 168.60% 1076 Target Achieved

Tech M IT 1375 1495 8.70% 2995.1 117.80% 415.6 Target Achieved

Indusind Bank Banking & Finance 344 470 36.60% 989.3 187.60% 830 Target Achieved

Escorts Auto 82 108 32.50% 188.2 130.90% 125.7 Target Achieved

Aug-13 Hexaware Ltd. IT 107 130 21.50% 335.8 213.80% 235 Target Achieved

Godrej Consumer FMCG 815 950 16.60% 1459 79.00% 1188.4 Target AchievedTorrent Pharma Pharma 421 475 12.80% 1718.4 308.20% 1261 Target Achieved

-14

01/03/2016)


9/52

01/03/2016)

BUDGET 2016-17

7

Jul TCS Ltd IT 1460 1640 12.30% 2839.7 94.50% 2176.8 Target AchievedDabur India FMCG 150 170 13.30% 316.4 110.90% 237.2 Target AchievedRallis India Chemical 130 148 13.80% 298.7 129.70% 147.2 Target Achieved

Jun-13 Hero MotoCorp Auto 1736 2020 16.40% 3270 88.40% 2499.9 Target AchievedDivis Lab Pharma 977 1120 14.60% 2484.7 154.30% 950.6 Target AchievedCorporation Bank Banking & Finance 77 92 19.80% 86 12.00% 32 Booked

May-13 Maruti Suzuki Auto 1673 1920 14.80% 4790 186.30% 3236.5 Target AchievedDr. Reddy Lab Pharma 1991 2280 14.50% 4386.6 120.30% 3036.3 Target AchievedBPCL Oil & Gas 405 460 13.60% 987 143.70% 769.3 Target AchievedKotak Mahindra Bank Banking & Finance 830 1021 22.90% 1475.3 77.70% 630.4 Target Achieved

Apr-13 L&T Engg. & Const. 683 915 34.00% 1893.8 177.30% 1076 Target AchievedPidilite Chemical 264 300 13.60% 638 141.70% 586.7 Target AchievedGodrej Consumer FMCG 778 910 17.00% 1459 87.50% 1188.4 Target Achieved

Mar-13 ITC FMCG 291 352 21.00% 410 40.90% 295.7 Target AchievedBerger Paints Chemical 95 116 21.60% 252.7 166.00% 224.3 Target AchievedLIC Housing Fin Banking & Finance 232 284 22.40% 524 125.80% 421.9 Target AchievedZee Entertainment Media & Ent. 215 265 23.30% 440.7 105.00% 372.4 Target Achieved

Feb-13 Axis Bank Banking & Finance 301 397.8 32.20% 654.9 117.60% 375.8 Target AchievedTata Motors Auto 298 379 27.20% 612.4 105.50% 299.7 Target AchievedCairn India Oil & Gas 324 410 26.50% 386 19.10% 118 BookedPetronet LNG Oil & Gas 152 200 31.60% 272.7 79.40% 235.1 Target Achieved

Jan-13 Adani Ports Others 135 180 33.30% 374.8 177.60% 196.7 Target AchievedJ & K Bank Banking & Finance 130.3 167 28.20% 195.5 50.00% 63.4 Target Achieved

Dec-12 Zee Entertainment Media & Ent 198 235 18.70% 440.7 122.60% 372.4 Target AchievedIndusind Bank Banking & Finance 416 500 20.20% 989.3 137.80% 830 Target Achieved

Nov-12 IPCA Lab Pharma 450 545 21.10% 906.9 101.50% 564.8 Target AchievedL&T Finance Banking & Finance 55 85 54.50% 97.1 76.50% 51 Target AchievedZydus Wellness FMCG 445 560 25.80% 1128.9 153.70% 645.6 Target Achieved

Oct-12 Sun TV Media & Ent. 357 446 24.90% 494.9 38.60% 320.7 Target AchievedAllahabad Bank Banking & Finance 147 180 22.40% 191.1 30.00% 43.4 Target AchievedShoppers stop Others 393 465 18.30% 624.4 58.90% 342.8 Target Achieved

Sep-12 Dish TV Media & Ent. 68 92 35.30% 121.7 78.90% 67.8 Target Achieved

Havels India Cons. Durables 111 127.6 15.00% 346.9 212.50% 272.2 Target AchievedAug-12 Lupin Pharma 570 672 17.90% 2129 273.50% 1754.6 Target Achieved

Bajaj Finserv Banking & Finance 730 877 20.10% 2160 195.90% 1611.9 Target AchievedJul-12 Uflex Others 112 145 29.50% 201.7 80.10% 133.6 Target Achieved

Cummins India Engg. & Const. 438 513 17.10% 1247.7 184.90% 809.3 Target AchievedExide Inds Others 135 165 22.20% 205.2 52.00% 127.9 Target AchievedEngineers India Engg. & Const. 200 280 40.00% 305 52.50% 150.2 Target Achieved

Jun-12 Glenmark Pharma Pharma 350 410 17.10% 1262.9 260.80% 735.7 Target AchievedGodrej Consumer FMCG 558 675 21.00% 1459 161.50% 1188.4 Target AchievedCera Sanitaryware Cons. Durables 248 340 37.10% 2960.9 1093.90% 1698.4 Target AchievedHPCL Oil & Gas 300 365 21.70% 991 230.30% 688 Target Achieved

May-12 Emami FMCG 457 535 17.10% 1365 198.70% 983.9 Target AchievedBerger Paints India Chemical 114 141 23.70% 252.7 121.70% 224.3 Target AchievedGraphite India Others 92 110 19.60% 126.4 37.40% 66.1 Target AchievedRainbow papers Others 66 85 28.80% 94.4 43.00% 29 Target Achieved

Apr-12 Tatamotor - DVR Auto 158 200 26.60% 391.4 147.70% 234.1 Target AchievedPidilite Ind Chemical 172 210 22.10% 638 270.90% 586.7 Target AchievedMar-12 Magma Fincorp Banking & Finance 70 ACCu 141 101.40% 85.4 Target Achieved

Torrent Power Power 222 290 30.60% 252.9 13.90% 227.8 BookedFeb-12 Castrol India Oil & Gas 236 ACCU 544 130.50% 367.4 Target Achieved

Prism Cement Cement 48.75 ACCU 133.5 173.70% 61.9 Target AchievedMRF Auto 9767 ACCU 46399 375.10% 32547.1 Target AchievedShoppers Stop Others 340 ACCU 624.4 83.60% 342.8 Target AchievedAllahabad Bank Banking & Finance 200 ACCU 211.3 5.70% 43.4 Target AchievedZydus Wellness FMCG 382 ACCU 1128.9 195.50% 645.6 Target AchievedMRPL Oil & Gas 71 ACCU 83.2 17.20% 57.6 Target AchievedAkzo Nobal Cons. Durables 857 ACCU 1551 81.00% 1313 Target AchievedMaruti Suzuki Auto 1320 ACCU 4790 262.90% 3236.5 Target AchievedM & M Auto 749 ACCU 1442.1 92.50% 1228.1 Target Achieved

Feb-12 Tata Power Power 115 120 4.30% 117.6 2.20% 57.3 Target AchievedDr Reddy Pharma 1642 1795 9.30% 4386.6 167.10% 3036.3 Target Achieved

Jan-12 Shree cement Cement 2100 ACCU 13360 536.20% 10003.7 Target AchievedDabur FMCG 102 125 22.50% 316.4 210.20% 237.2 Target Achieved

-13


10/52

Rating: BUY Target: Rs 148CMP: Rs 126NTPC Ltd.

MARCH 2016

STOCK PICKS

8

Consensus Estimate: Bloomberg, Ashika Research

Particulars (in Rs. Cr.) FY14 FY15 FY16E FY17E

Company Information

BSE Code 532555

NSE Code NTPC

Bloomberg Code NTPC IN

ISIN INE733E01010

Market Cap (Rs. Cr) 101295

Outstanding shares(Cr) 824.5

52-wk Hi/Lo (Rs.) 164.75 / 107.1Avg. daily volume (1yr. on NSE) 4,890,277

Face Value(Rs.) 10

Book Value 99.6

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NTPC vs. Nifty

Volume('000)RHS NTPC Nifty

Promoters75.0

FII9.6

DII13.2

Others2.3

Share holding pattern as on Dec 2015 (%)

Net Sales 78950.6 80622.0 84895.0 93554.3

Growth (%) 13.8 2.1 5.3 10.2

EBITDA 19698.7 17512.3 20035.2 22827.2

EBITDA Margin (%) 25.0 21.7 23.6 24.4

Net profit 11403.6 9986.3 9423.3 10197.4

Net Profit Margin (%) 14.4 12.4 11.1 10.9

EPS (Rs) 13.8 12.1 11.4 12.4

Investment Rationale

Implementation of UDAY scheme

Capacity additions to drive growth

Demand revival in place

Ujwal DISCOM Assurance Yojana (UDAY) aims at permanentresolution of DISCOM issues. The scheme focuses onincreasing DISCOM efficiency as against increasing tariff tocover their losses. Under UDAY, State Electricity Boards(SEBs) would be offered a multi-pronged solution. States

shall take over 75% of their debt as on September 2015,while the interest rate for the balance 25% debt will be atlower rates. This would improve the position of the DISCOMand would thereby increase the demand for power by theDISCOMs. Currently six states have enrolled to be part ofUDAY and performing as per operational milestones will begiven additional / priority funding through various schemesunder the power ministries. The UDAY scheme will alsofocus on operational efficiencies, reduction in T&D lossesand quarterly increase in tariffs in a bid for permanentresolution of SEB issues. NTPC is well placed to benefitfrom such scheme.

NTPC is a long term growth play on the power sector withits strong capacity addition plans. NTPC currently has ageneration capacity of nearly 45000 MW which is thelargest in India and is expected to add ~23,500MW(~7,500MW by FY2017, ~8,050MW in FY2018 and~8,200MW in FY2019) by FY2019. The company isexpecting that the capacity is set to increase by an average~2GW per year during the next few years. The company hasearmarked a consolidated capex of ~‘31,500cr this fiscal.With the strong capex plan, Management expects a 45% jump in regulated equity by FY2018 and a 75% increase

by FY2019. With the incremental capacity coming onstream and PLF likely to improve, the revenues andearnings are likely to witness improvement going forward.

Power sector woes have mostly been related to fuel supplyissues and debt issues of State Electricity Boards (SEB). Thegovernment is proactively taking steps to resolve boththese issues. With increasing production at Coal India, coalavailability issues have already been sorted to a largeextent. Rationalisation and swapping of coal sources arealone expected to result in significant savings in freightcosts. Cabinet approval for gas pooling also raises

expectations of improved availability of gas. As per thePower Ministry, NTPC is expected to save Rs. 8,570cr per


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BUDGET 2016-17

9

annum through substitution of imported coal and freightcost reduction through rationalization of coal sourcing. TheUDAY scheme can help the SEBs restructure their debt and

provide long term solutions for the SEBs via tariff hikes andimprovements in operating efficiencies and also allows theSEBs to start signing new power purchase agreements(PPA). Further it is also expected that demand to improvegoing forward as the industrial cycle picks up. NTPC is bestplaced within the power sector to benefit from any suchrevival in power demand.

The economic activity has not picked up as expected whichhas impacted the capex cycle and thereby the demand forpower. However as and when the revival in capex cycletakes place, the demand for power is likely to increase

gradually thereby leading to higher generation.

NTPC has fuel supply agreements which would allow theCompany to operate majority of its existing capacity. It hasalso been awarded coal mines which have ~5 bn tones ofreserves. While the existing capacity would be able tooperate at nearly 90% PLF with the existing fuel supplyagreement, the incremental capacity would be able tooperate at nearly 65% PLF levels. Owing to the linkages,the Company is relatively better placed and largelyimmune to fuel availability issues.

NTPC’s Q3FY16 result was below estimate. Net sales fell by7% YoY to Rs. 173bn owing to 1% fall in sales volume and6% fall in average realization. This is primarily on the backof lower coal cost which fell by 13% to Rs 106bn. EBIDTAstood at Rs. 45.3b, flat YoY as other operating expensesincreased 12% and lower core performance. A muchsharper fall in other income, down 52% to Rs. 2.4bn andnil incentive income led to fall in adj. net profit to Rs21.4bn. The management has indicated an adjusted profitof Rs 20.7bn, down 10% YoY. NTPC has so far incurred Rs.205bn as capex during 9MFY16 (79% at parent level, 21%

in group companies), thereby achieving 82% of target.

CERC regulations 2014-19 state coal GCV (gross calorificvalue) should be measured at the point of wagonunloading v/s post crushing. CERC in its latest order hasasked NTPC to measure GCV of coal on ‘received basis’from the ‘as fired’ basis for computation of GCV. Currently,NTPC measures the GCV of coal at crushers inside thepower plant. Besides, NTPC currently doesn’t havearrangements to measure GCV at the unloading point asthe regulator directs it to. NTPC has opined thatmeasurement according to GCV would be time consuming

while demurrage would hurt on wagon waiting. Besides,

Economic action to improve

Fuel link in place

Result Analysis

CERC case update

this will create uncertainty due to practical difficulties inmeasuring coal quality from multiple wagons and sourcesand may lead to under-recovery in fuel costs. NTPC’s

appeal is pending with the Appellate and clarity onearnings impact has not been mentioned. The company hasalso changing its accounting or making any provisions.

• Uncertainty on coal GCV to be measured at the place ofunloading or just before burning the coal

• Lower supply of coal from Coal India and higher fuelcost

• Delay in improvement of economic and industrialactivities

Despite the muted demand environment, NTPC, India’slargest power producer with an operating capacity of 45GW continues to remain high on capacity addition. Thecompany has ~23GW of projects under construction whichis expected to increase generation and drive earnings CAGRgoing ahead. Amid a lack of private participation for newprojects, NTPC stands out and anticipates Rs 300bn ofcapex in FY17. Although, the PSU major doesn’t seeimmediate redressal of problems in the power sector,however the transfer of SEB debt to States under the UDAYscheme is a long term positive for the sector in general.The tripartite agreement between States, SEBs and NTPC

guaranteeing payment security is going to expire in 2016and will be renewed for 10 years. So far, 11 states haveconfirmed their participation. The company is comfortablyplaced on PPA front with assured offtake and is alsorelatively better placed with higher linkages for its pre-2009 projects. This is in contrast to the IPPs who sellpower at distressed rates since they don’t have PPAs, thushurting margins. NTPC on the other hand has witnessedimprovement in cost of generation following improvingdomestic coal supply thus reducing its dependence on e-auction and imported coal. With additional incentives torun plants above 85% PLF, the operational metrics isexpected to improve going ahead. The company is now inthe able hands of Mr. Gurdeep Singh, ex-chairman ofGujarat State Electricity Corporation. Under him NTPC isexpected to minimize systemic O&M inefficiencies, improvefuel efficiencies and earn higher incentives (on higher PLF).On valuation front, the company is trading at a significantdiscount from historical valuation (P/E) of 15x. On price tobook value basis the company is trades at one year forwardP/B of 1.1x is at a 10 years historical low and the companyis also have a history of giving high divided to its investor(Dividend Yield of 2.5% in FY15). Thus, we recommend ourinvestors to BUY the scrip with target price of Rs 148 from12 - 18 months investment horizon. Currently, the scrip is

valued at P/E multiple of 10.3x of FY17E EPS.

Key Risks

Valuation


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10

MARCH 2016

STOCK PICKS

Net Sales 4686.5 5733.0 6203.1 6966.1

Growth (%) 2.0 22.3 8.2 12.3

EBITDA 747.7 870.1 1073.1 1246.9

EBITDA Margin (%) 16.0 15.2 17.3 17.9

Net profit 485.4 573.5 725.8 856.8

Net Profit Margin (%) 10.4 10.0 11.7 12.3

EPS (Rs) 3.8 4.5 5.6 6.6

Rating: BUY Target: Rs 280CMP: Rs 236Marico Ltd.

BSE Code 531642

NSE Code MARICO

Bloomberg Code MRCO IN

ISIN INE196A01026

Market Cap (Rs. Cr) 30545

Outstanding shares(Cr) 129.0

52-wk Hi/Lo (Rs.) 246 / 176.1

Avg. daily volume (1yr. on NSE) 1,112,489

Face Value(Rs.) 1

Book Value 14.1

Investment RationaleResult Analysis

Improvement in urban markets evident

Structural changes to driving the next leg of growth

Marico Q3FY16 performance was impressive on all counts.

Consolidated revenues comes in at Rs 15.6bn, up 7.2% yoy

led by domestic volume growth in double digits at 10.5%

yoy and International business reported 8% CC growth.

The volume growth was bolstered by the strong growth in

the Saffola (17%) and Hair Oil portfolio (21%) this quarter.

EBIDTA comes in at Rs 2.9bn, up 24% yoy led by sharp

30% decline in copra prices and crude linked commodities

like LLP, HDPE etc. Gross margin was up 630bps yoy at

51.3% led by lower inputs and EBITDA margin at 18.9%,up 260bps yoy is a bit lower due to higher A&P spend

which increased to 12.1% of sales, up 150bps yoy. With all

these profit of the company increased by 23.7% yoy to Rs

1.97 bn.

Marico registered 20% YoY growth in its sales, which the

company believes to be an early signs of improvement in

urban markets . The company mainta ins that the

improvement will be steady going ahead, while rural

markets will take much longer to improve. The recent

improvement in the economy like OROP, 7th Pay

commission and implementation of GST should certainly

enhance the underlying growth in urban markets, thus the

outlook for urban markets remains quite positive for the

next couple of years which will help the company to have a

better revenue outlook in the future.

Over the last two years, Marico has applied a number of

transformational changes in management and capitalstructure. The company has shift the control from a

promoter who led the management team to more

professionalized personal, further the company changes its

incentive structure of the management team with a greater

focus on long-term growth drivers. Moreover on capital

structure the company is focused on deployment of fund

on organic growth and dividend payouts. Under the

technology initiative the company is now focusing on IT led

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Marico vs. Nifty

Volume('000)RHS Marico Nifty

Promoters59.7

FII27.8

DII3.6

Others9.0

Share holding pattern as on Dec 2015 (%)

Consensus Estimate: Bloomberg, Ashika Research

Particulars (in Rs. Cr.) FY14 FY15 FY16E FY17E

Company Information


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BUDGET 2016-17

11

distribution changes such as automated order system

which should further enhance Marico’s trade. In future the

company is expected to focus more on other initiative in

order to improve its production and distribution system

thereby improving its revenue visibility.

Saffola recovered after 5 quarters of muted growth post

the strategic plan taken by the company to gain volumes

without resorting to aggressive price corrections or by

compromising the premium brand image it carries. Saffola’s

recovery this quarter is due to uptrend in prices of other

base oils helping reduce price premium of Saffola and

regional offerings done by the company for key marketsl ike Maharashtra and also took selective pricing

intervention to fight regional competition while delivering

on the consumer requirements. The other plan the

company took is broader participation through different

variants targeting a wider consumer base, like aggressively

marketing low priced brands like Active and Tasty without

compromising on the gross margin of each brand. The

company is planning to take more different strategies to

further boost the saffola volume growth.

• Management is hopeful of a gradual pickup in urban

consumption though rural as of now remains soft.

• The company expects volume growth of 8-10% with

paramount importance to market share gains; medium

term EBITDA margin target of 16-17%

• Saffola growth was helped by regional pricing strategy,

broadening of consumer base, reduction in price

premium, and favourable base; it expects 10%+ growth

going forward

• Apart from good growth aided by market share gains in

VAHO company sees new launches i.e. Parachute

Ayurvedic hair oil in non south markets and Nihar

Naturals Sarson Kesh Tel as key drivers

• RM prices yoy are down substantially and are expected

to remain soft.

•· International business growth improved as growth

stabilized in the Middle East, South East Asia and

Egypt; Bangladesh is doing well after price corrections

• Gel is doing well; company expects deodorants growth

to rise; serum affected by counterfeits

Saffola strategic proposal to drive growth

Conference call key takeaways

• Project ONE has helped improve direct coverage in top

six metros by 60% leading to incremental turnover of

Rs 650-750mn by FY16 end; to be extended to 14

more towns

• A&P/sales to be in 11-12% band in the medium term;

significant part of A&P has been invested for new

products such as VAHO, foods and the youth portfolio

in India

• Planned capex in FY16/17 is likely to be around Rs 1-

1.25bn each year

• As cash is accumulating despite paying reasonable

dividends company is on the lookout for acquisitions

that could be a strategic fit and at reasonable

valuations

• Spike in raw material prices

• Worsening of rural demand

• Competition in core brands

Marico is the prominent player in the India’s FMCG market

with strong brand portfolio and leadership position in its

core brands . The company has del ivered st rongperformance in a challenging environment with double

digit volume growth and healthy margins. Strong volume

delivery with sharp double-digit volume growth in Saffola

and Value Added Hair Oils is a key positive from Q3FY16

results. As major part of company’s revenue comes from

urban market (~65%), the urban market is expected to

further improve with the implementation of OROP, 7th Pay

commission and GST. The company has also made several

structural changes in the management and capital in order

to improve is production and distribution system thereby

improving its revenue visibility. Management of thecompany is quite optimistic about the future of the

company with improvement in volume growth and margin.

The company is also looking for inorganic growth. The

stellar performance in Saffola and VAHO portfolio;

International operations is also on improvement mode. We

believe Marico is best placed amongst FMCG peers to

deliver strong volume and earnings growth. Thus, we

recommend our investors to BUY the scrip with target price

of Rs 280 from 12 - 18 months investment horizon.

Currently, the scrip is valued at P/E multiple of 26.8x of

FY18E EPS.

Key Risks

Valuation


14/52

MARCH 2016

VALUATION AT A GLANCE

12

1 ACC 1209.0 22698.4 23.4 16.2 2.7 7.1 14.1 34.0 54.9 2.8

2 Adani Ports 201.7 41740.0 16.5 14.7 3.9 23.7 19.4 1.1 9.8 0.5

3 Ambuja Cements 190.0 29509.3 23.9 17.7 N/A N/A 12.8 5.0 52.1 N/A

4 Apollo Hospitals 1489.0 20683.7 54.6 43.7 6.5 11.1 12.6 5.8 25.7 0.4

5 Ashok Leyland 90.2 25684.0 30.1 18.8 5.7 3.2 N/A 0.5 95.6 0.5

6 Asian Paints 862.8 82754.8 45.3 37.9 17.5 31.8 34.5 6.1 41.9 0.77 Aurobindo Pharma 665.8 38943.1 19.1 15.5 7.5 35.4 30.3 2.3 8.3 0.3

8 Axis Bank 387.2 92221.5 11.2 9.3 2.0 17.9 18.6 4.6 17.7 1.2

9 Bajaj Auto 2260.0 65301.5 17.2 15.5 5.9 28.5 30.5 50.0 57.3 2.2

10 Bajaj Finserv 1637.1 26051.4 13.3 11.0 2.3 16.4 18.0 1.8 1.6 0.1

11 Bajaj Holdings 1385.0 15413.6 N/A N/A 1.2 16.0 N/A 32.5 17.8 2.3

12 Bank of Baroda 134.7 31014.0 N/A N/A 0.7 9.8 N/A 3.2 21.8 2.4

13 Bank of India 85.1 6901.3 N/A N/A 0.2 6.4 N/A 5.0 16.5 5.9

14 Bharat Forge 760.7 17721.5 23.2 19.3 5.1 24.9 21.0 7.5 22.8 1.0

15 Bharti Airtel 317.9 127057.4 23.4 21.1 2.0 8.7 8.5 2.2 17.1 N/A

16 Bharti Infratel 367.7 69806.8 29.9 25.6 4.1 11.4 16.0 11.0 104.5 3.0

17 BHEL 91.5 22383.3 39.2 10.7 0.7 4.3 5.0 1.2 19.5 1.3

18 Bosch 16897.6 53001.5 N/A N/A N/A N/A N/A N/A N/A N/A

19 BPCL 792.1 57326.1 8.8 8.5 2.5 22.9 22.7 22.5 33.8 2.8

20 Britannia Industries 2781.6 33374.9 39.6 32.8 26.8 67.4 49.7 16.0 27.9 0.6

21 Cairn India 118.1 22104.6 11.7 11.3 0.4 7.7 3.0 9.0 37.7 7.6

22 Canara Bank 162.4 8815.5 N/A N/A 0.2 9.1 N/A 10.5 18.9 6.5

23 Cipla 515.9 41474.2 22.9 19.1 3.8 11.3 16.1 2.0 13.6 0.4

24 Coal India 314.9 198933.9 13.3 12.1 4.9 33.2 37.5 20.7 95.3 6.6

25 Colgate-Palmolive 825.4 22438.8 N/A N/A 29.1 N/A N/A 12.0 58.4 1.5

26 Container Corp. 1171.0 22882.2 25.5 22.5 3.0 14.7 11.8 13.4 24.8 1.1

27 Cummins India 819.9 22708.2 N/A N/A 7.9 N/A N/A 14.0 49.4 1.7

28 Dabur India 240.2 42245.8 33.7 29.1 12.6 35.5 32.0 2.0 33.0 0.8

29 Divis Lab. 948.9 25173.1 23.5 19.6 7.2 26.4 27.8 10.0 31.2 1.1

30 Dr Reddy’s Lab. 3019.8 51471.0 20.1 19.7 5.2 24.7 17.9 20.0 14.6 0.7

31 Eicher Motors 19170.1 52258.1 41.0 31.5 15.1 31.6 36.4 50.0 22.0 0.3

32 Exide Industries 128.6 10897.0 16.2 14.9 2.8 16.8 16.0 2.2 30.4 1.7

33 Federal Bank 47.9 8227.9 N/A N/A 1.1 14.5 N/A 1.1 17.8 2.334 GAIL 316.7 40210.7 16.1 11.5 1.2 9.5 9.7 6.0 24.1 1.9

35 GlaxoSmith Consumer 5472.1 23004.4 N/A N/A N/A N/A N/A 55.0 39.6 N/A

36 Glaxosmithk Pharma. 3193.0 27045.7 56.4 43.9 14.8 N/A 33.9 N/A N/A N/A

37 Glenmark Pharma. 743.0 20936.1 24.5 14.9 6.7 15.9 27.4 2.0 11.4 0.3

38 Godrej Consumer 1227.9 41812.4 36.7 31.0 9.7 22.4 24.2 5.5 20.6 0.4

39 Grasim Industries 3360.1 31359.9 13.8 10.7 1.3 7.8 11.5 18.0 9.5 0.5

40 HCL Technologies 835.0 117738.3 15.5 13.6 4.4 29.1 26.9 18.0 32.6 N/A

41 HDFC 1052.3 166335.0 19.1 15.7 N/A N/A 22.2 15.0 27.0 N/A

42 HDFC Bank 978.6 247355.0 21.6 17.5 3.9 19.9 17.1 8.0 18.8 0.8

43 Hero MotoCorp 2625.4 52399.0 16.8 14.9 8.0 38.9 N/A 60.0 50.7 2.3

44 Hindalco Industries 69.1 14300.0 29.1 10.4 0.4 2.2 3.7 1.0 24.2 1.4

45 Hindustan Unilever 826.1 178692.5 42.6 37.2 44.4 115.4 108.4 15.0 74.4 1.8

46 HPCL 710.6 24110.3 8.4 7.2 1.7 10.7 19.3 24.5 55.4 3.447 ICICI Bank 200.6 116519.2 9.0 8.2 1.4 15.2 14.9 5.0 23.7 2.5


15/52

13

48 Idea Cellular 105.2 37894.9 12.3 20.2 1.5 14.4 7.1 0.6 6.8 N/A49 Indiabulls Housing Fin. 596.1 25104.9 10.1 8.5 3.2 30.8 25.6 26.0 47.9 4.4

50 Indian Oil Corporation 376.6 91509.5 8.1 7.5 1.3 7.2 16.1 6.6 34.2 1.8

51 IndusInd Bank 860.8 51208.1 N/A N/A 2.9 15.6 N/A 4.0 11.8 N/A

52 Infosys 1116.5 256465.4 19.0 16.7 4.4 23.6 24.1 29.8 55.2 N/A

53 ITC 320.1 257505.6 25.4 22.5 8.1 32.8 30.5 6.3 51.8 2.0

54 JSW Steel 1135.2 27435.5 149.9 15.0 1.2 8.1 8.0 11.0 15.1 1.0

55 Kotak Mahindra Bank 633.3 116210.0 32.6 23.9 4.4 14.8 14.3 0.5 2.7 0.1

56 Larsen & Toubro 1112.0 103599.1 23.7 19.1 2.5 12.1 11.5 16.3 31.7 1.5

57 LIC Housing Finance 436.2 22018.4 13.4 10.3 2.8 18.0 N/A 5.0 18.1 1.1

58 Lupin 1762.5 79435.7 35.8 24.6 8.9 30.4 26.6 7.5 14.0 0.4

59 M & M Financial 209.1 11890.0 16.9 11.9 2.0 16.2 14.2 4.0 24.9 1.9

60 Mahindra & Mahindra 1233.0 76565.2 20.0 15.5 2.8 12.8 14.6 12.0 23.8 1.0

61 Marico 237.0 30570.6 41.9 34.4 16.8 36.0 34.0 1.3 28.1 0.562 Maruti Suzuki 3395.5 102737.4 21.5 17.0 4.2 16.6 21.1 25.0 19.8 0.7

63 Motherson Sumi 229.9 30409.5 23.6 18.0 9.2 27.5 34.7 2.0 30.7 0.9

64 MRF 33048.9 14016.5 6.8 7.2 3.1 22.2 N/A 50.0 2.3 0.2

65 NMDC 81.2 32193.5 8.9 9.8 1.0 20.4 9.9 8.6 53.4 10.5

66 NTPC 121.1 99811.3 10.9 10.0 1.2 11.8 11.3 2.5 20.6 2.1

67 Oil India 303.6 18250.5 7.5 7.9 0.8 12.4 10.1 20.0 46.1 6.6

68 ONGC 191.1 163666.5 9.1 8.7 0.9 10.4 9.7 9.5 44.3 5.0

69 Oracle Financial Serv. 3250.1 27573.7 21.7 18.1 8.0 19.5 30.8 665.0 471.9 20.5

70 Petronet LNG 238.0 17846.3 N/A N/A 3.1 16.5 N/A 2.0 17.0 0.8

71 Power Finance Corp. 154.6 20414.4 N/A N/A 0.6 20.0 N/A 9.1 20.0 5.9

72 Power Grid Corp. 133.6 69815.6 11.3 9.6 1.8 13.8 15.9 2.0 22.2 1.5

73 Punjab National Bank 72.9 14314.6 N/A N/A N/A N/A N/A 3.3 18.0 N/A

74 Reliance Capital 327.9 8271.2 7.7 7.7 0.6 7.8 7.2 9.0 22.7 2.7

75 Reliance Comm. 52.1 12992.5 16.4 16.3 N/A N/A 2.3 N/A N/A N/A

76 Reliance Industries 981.0 318028.2 11.5 10.7 1.3 11.3 11.3 10.0 12.5 1.0

77 Reliance Infrastructure 421.6 11090.3 6.2 5.1 0.4 6.7 7.4 8.0 11.7 1.9

78 Rural Electrification 157.4 15557.4 N/A N/A 0.6 23.3 N/A 10.7 19.8 6.8

79 Shriram Transport Fin. 827.5 18776.8 14.2 11.4 2.0 11.6 15.0 10.0 22.1 1.2

80 Siemens 1009.2 35943.2 47.3 37.6 7.0 N/A 16.6 6.0 30.1 0.6

81 State Bank of India 161.4 125291.2 8.6 7.2 0.7 9.1 9.3 3.5 15.6 N/A

82 Steel Authority of India 35.6 14682.5 N/A N/A 0.3 4.9 -2.0 2.0 38.3 5.6

83 Sun Pharma. 863.4 207815.8 38.2 25.9 7.0 20.6 23.6 3.0 15.9 0.3

84 Sundaram Finance 1239.8 13774.1 21.8 18.2 3.7 16.9 16.6 10.5 20.3 0.8

85 Tata Chemicals 324.8 8282.1 11.1 9.0 1.5 10.7 15.0 10.0 53.4 3.1

86 TCS 2244.2 441967.0 18.3 16.6 6.5 35.1 34.4 39.0 77.9 1.887 Tata Global 107.1 6765.7 17.5 15.0 1.2 4.4 7.4 2.3 57.3 2.1

88 Tata Motors 308.0 101187.8 8.9 6.8 1.8 23.0 18.4 0.0 0.0 0.0

89 Tata Power 58.6 15849.1 14.5 11.5 1.2 0.4 9.2 1.3 783.1 2.2

90 Tata Steel 250.0 24290.1 N/A 28.8 N/A N/A 2.0 8.0 N/A N/A

91 Tech Mahindra 432.2 41802.5 13.5 11.8 2.8 20.1 21.1 6.0 21.9 N/A

92 Titan Company 326.5 29026.2 36.5 29.0 9.4 29.1 25.8 2.3 25.0 0.7

93 UltraTech Cement 2824.5 77510.8 32.9 23.8 4.1 11.6 14.1 9.0 11.8 0.3

94 United Breweries 807.9 21361.3 65.3 50.5 11.5 14.8 17.9 1.0 10.3 0.1

95 United Spirits 2646.3 38462.4 93.5 56.7 58.3 -91.4 38.8 0.0 N/A 0.0

96 UPL 394.9 16921.3 13.4 11.1 2.9 20.6 20.0 5.0 18.7 1.3

97 Vedanta 71.6 21242.0 12.7 9.5 0.4 -24.7 4.1 4.1 N/A 5.7

98 Wipro 536.7 132547.5 14.6 13.5 2.9 20.9 20.1 12.0 34.0 N/A

99 Yes Bank 707.5 29752.8 N/A N/A 2.5 21.3 N/A 9.0 18.8 1.3100 Zee Entertainment 387.9 37255.8 37.2 29.4 10.6 26.6 21.6 2.3 26.0 0.6

BUDGET 2016-17

#N/A: Not AvailableSource: Bloomberg Consensus as on Feb. 29, 2016


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Q3FY16Report Card

The corporate earnings performance continue to scare and

it seems like we are still to reach the bottom and rebound.

The global timid demand environment has obviously added

to the cause, however on the domestic front also we are

yet to see a meaningful recovery. Revenue declined by 2%

yoy in Q3FY16 for Nifty companies highlighting the

sustained weak demand conditions while lower commodityprices helped to better EBITDA margins by ~80 bps to 19%

while profits continued to see decline of ~14% yoy. Among

sectors, Metals, Telecommunications and Agri input &

chemicals were the major drags while Auto ancilliaries,

Construction & Infra, Retail and Pharma performed

relatively stronger. In the Nifty space, Tata Power, Hindalco

and OMCs surprised strongly on PAT front while Bank of

Baroda, Tata Steel and BHEL were major draggers. Excluding

Oil & Gas and financials, Adjusted PAT for Nifty was slightly

better compared to previous two quarters with a decline of

~1% YoY. The turmoil in the Global markets led by China

had a severe impact on the performance of the companies

directly or indirectly particularly in the commodity and the

capital goods space. Domestic demand and capacity

utilization still needs to pick up meaningfully while the

GDP growth for Q3 remains stable at 7.5%. IIP for Q3FY16

however declined to 1.73% as against 4.73% in the

previous quarter and 2.03% in the same quarter last year.

The RBI has maintained status quo on the interest rates

CNX 500 (Excluding Banks, NBFC & Oil Companies)

(In Rs. Cr.) Q3FY14 Q4F14 Q1F15

Net Sales 658076 711826 681904 698515 723156 747692 718106 768194 788676

Growth (YoY) 12% 12% 13% 10% 10% 5% 5% 10% 9%

Growth (QoQ) 4% 8% -4% 2% 4% 3% -4% 7% 3%

Operating Expenses 536342 591441 552368 572320 600053 623808 581888 634128 650276

Growth (YoY) 10% 12% 11% 10% 12% 5% 5% 11% 8%

Growth (QoQ) 3% 10% -7% 4% 5% 4% -7% 9% 3%

% of Sales 82% 83% 81% 82% 83% 83% 81% 83% 82%

Operating Profit 121734 120385 129536 126195 123103 123883 136218 134067 138401

Growth (YoY) 20% 10% 23% 10% 1% 3% 5% 6% 12%

Growth (QoQ) 6% -1% 8% -3% -2% 1% 10% -2% 3%

OPM 18% 17% 19% 18% 17% 17% 19% 17% 18%

Depreciation 30683 32457 32936 33458 34694 34681 35459 37060 38177Growth (YoY) 15% 16% 16% 12% 13% 7% 8% 11% 10%

Growth (QoQ) 3% 6% 1% 2% 4% 0% 2% 5% 3%

Interest 25889 27629 27400 29016 29227 31746 32469 32951 31388

Growth (YoY) 20% 24% 10% 10% 13% 15% 18% 14% 7%

Growth (QoQ) -2% 7% -1% 6% 1% 9% 2% 1% -5%

Other Income 21052 19693 19851 18112 19573 21760 18882 19491 16123

Growth (YoY) 25% -13% 24% 18% -7% 10% -5% 8% -18%

Growth (QoQ) 37% -6% 1% -9% 8% 11% -13% 3% -17%

Adj Profit 61287 59808 63864 57252 53000 55439 60467 60223 60649

Growth (YoY) 23% 0% 40% 10% -14% -7% -5% 5% 14%

Growth (QoQ) 18% -2% 7% -10% -7% 5% 9% 0% 1%

NPM 9% 8% 9% 8% 7% 7% 8% 8% 8%

Source: Capitaline

Note: Due to some exceptional income or loss, we have not taken Vedanta, Tata Steel, S A I L, B H E L, Alok Inds., JSW Steel in our calculation.

Q2F15 Q3F15 Q4F15 Q1F16 Q2F16 Q3F16

MARCH 2016

Q3FY16 Report

14


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since the rates were lowered by 50 bps in September 2015

and was frontloaded. However, the lower interest rates still

need to be reflected through the G-Sec yields. India CPI

inflation although under the target range for RBI, but has

been slowly creeping up since its lowest mark of 3.69% in

July 2015, largely on account of higher food inflation

following deficient monsoon. While India continues to

report deflation at the whole sale price level and is a major

challenge for the Govt to report lower nominal GDP growth

at ~8-8.5% vs 11-11.5% forecasted. However, higher

indirect taxes in the face of lower direct taxes following

weak corporate performance and savings from the decline

in crude oil prices are still the saving grace for thegovernment. The government has started to loosen the

purse and step up the plan expenditure when the

corporate are unwilling to commit to capex. All in all, there

have been green shoots with revival of demand in the auto

industry while Cement, Pharma, Power companies enjoy

the benefit of lower raw materials while metal & mining

and capital goods are still to witness any meaningful

recovery and infrastructure remains at the mercy of

government.

In 2015 FIIs were net buyers of Rs. 17,806 cr in the equitysegment. For the month of January 2016, FIIs were net

seller of Rs. 11,126 cr and during Q3FY16 they were the

net seller of Rs. 3,241 cr while DIIs were the net buyers of

Rs. 67,587 cr in 2015. For the month of January 2016, DIIs

were net buyers of Rs. 12,874 cr and during Q3FY16 they

were the net buyers of Rs. 13,309 cr.

The quarter gone by was tough on most banks, but public

sector banks' (PSBs) performance was worse than their

private peers, especially in terms of asset quality and top

line growth, leading to a dismal show on the profit front. A

sharp rise in provisions (due to recognition of stressed

loans as NPAs, in line with the Reserve Bank of India [RBI]'s

Sectoral performance review

Banking Sector

directive) coupled with subdued operating performance

(interest income reversals on NPAs, base rate cut effect on

margins) contributed to extreme pressure on bottom line.

PSBs' provisioning for bad loans totalled Rs 43,717 crore in

the December 2015 quarter - a figure that has doubled

from the year-ago levels. And, this figure is eight times the

provisions made by private-sector peers, even as PSBs'

share of advances (industry market share) is three times

that of private peers. The overall asset quality for the

industry itself weakened in the December 2015 quarter as

the total gross non-performing assets (NPAs) recognized

stood at Rs 4,37,860 crore, up 50 per cent y-o-y (each for

public and private sector banks). PSBs accounted for 90 percent of the total gross NPAs in the quarter. Average gross

NPA ratio for PSB stands at 7.32 % about three times more

than private banks which stands at 2.74 %.

Private banks reported robust NII growth of 21.6 % YoY

while the figure has declined by about two per cent for

PSBs. Decline was steep in case of Bank of Baroda, UCO

Bank , Dena Bank , and Al lahabad Bank . The new

methodology to calculate base lending rate effective from

April 2016 could further dent the NIIs.

The RBI's asset quality review (AQR) resulted in recognitions

of significant amount of stressed cases as NPAs of which

~50% is taken in Q3FY2016 and remaining will be spread

over Q4FY2016. BOB decided to take the full impact in Q3

itself resulting in elevated slippages. The retail focused

banks (HDFC Bank, IndusInd Bank) reported a stable asset

quality performance whereas corporate focused banks

(ICICI Bank, Axis Bank) witnessed NPA pressures.

Given the RBI's thrust on early clean-up of banks' balance

sheets coupled with continued sluggishness in key sectors

of economy (viz infra, steel, textiles etc) the asset quality of

banks may remain under pressure in the next few quarters.

Hence, going forward, with credit growth stabilizing at 11

per cent despite weak corporate demand, capital infusion

appears critical for PSBs to combat the provisioning

pressures and see any significant improvement in credit

15

BUDGET 2016-17


18/52

BSE Bankex & Bank Nifty

Company (Rs. Cr.) NII YoY QoQ Net Profit YoY QoQ NIM GNPA NNPA CAR RoA (A)(%) (%) (%) (%) (%)

St Bk of India 13606 -1% -5% 1115 -62% -71% 2.9 5.1 2.9 12.5 0.2

HDFC Bank 7069 24% 6% 3357 20% 17% 4.3 1.0 0.3 15.9 2.0

ICICI Bank 5453 13% 4% 3018 4% 0% 3.5 4.7 2.3 15.8 1.8

Axis Bank 4162 16% 2% 2175 15% 14% 3.8 1.7 0.8 13.9 1.8

Punjab Natl.Bank 4120 -3% -5% 51 -93% -92% 2.8 8.5 5.9 11.3 0.0

Bank of India 2708 -3% -10% -1506 -968% 34% 2.0 9.2 5.3 11.3 -0.9

Bank of Baroda 2705 -18% -17% -3342 -1101% -2785% 1.7 9.7 5.7 12.2 -1.9

Canara Bank 2227 -6% -16% 85 -87% -84% 2.2 5.8 3.9 11.5 0.1

Union Bank (I) 1997 -6% -5% 79 -74% -88% 2.2 7.1 4.1 10.3 0.1

Kotak Mah. Bank 1766 67% 5% 635 37% 11% 4.3 2.3 1.0 15.2 1.4

IndusInd Bank 1173 36% 7% 581 30% 4% 3.9 0.8 0.3 16.4 1.9

Yes Bank 1157 27% 4% 676 25% 11% 3.4 0.7 0.2 14.9 1.8Federal Bank 605 3% -1% 163 -39% 1% 3.0 3.2 1.7 14.3 0.8

Total 48748 6% -3% 7087 -51% -51%

Source: Capitaline

Auto & Auto ancillary

Auto sector came out with decent performance in the

December quarter driven by volume growth amid festival

season. Subdued demand from rural markets due to two

consecutive sub-normal monsoons capped the volume

growth, while lower commodity prices aided operating

margins growth. M&HCVs recorded good growth due to

highest correlation to the macro improvement while LCV

segment showed signs of revival. In PVs, good growth was

seen due to improvement in consumer sentiment; however

pressure was witnessed in 2W sales. Tractor sales continue

to be under pressure due to stress in rural economy. PVs

posted strong volumes led by new launches. MHCV growth

too remains robust due to high replacement demand and

the improving health of transport agencies due to low fuel

prices. The festive season helped 2Ws clock mid-single-digit growth in Q3 backed by strong double-digit growth in

scooter volumes, though the momentum is flagging. We

expect 2W volumes to show double-digit growth from

H2FY16. The benefit of commodity price correction was

seen in most of the auto and auto ancillary companies,

which witnessed a gross margin expansion. Prices of key

inputs like rubber & steel have resulting into lower raw

material cost and higher margin. On the volume front, the

growth in the domestic medium and heavy commercial

vehicle (MHCV) segment was strong at 22.4% followed bya 14.6% growth in the domestic passenger vehicle (PV)

segment and a 14.2% growth in the domestic scooter

segment. The light commercial vehicle (LCV) volumes in the

domestic market registered a growth of 4.2% after 10

consecutive quarters of a decline. The motorcycle volumes

in the domestic market were muted, up by 0.6%, while the

three-wheeler volumes were up 8.1% for the quarterending December 2015. The weakness in the rural demand

and concern around exports continue to affect the

motorcycle volumes.

The urban demand is likely to remain strong driven by

lower fuel prices, moderation in interest rate and improving

economy. Further faster reforms and clearance of various

long pending projects could lead to higher employment

and provide additional boost to auto demand outlook. The

key impact of economic recovery could be more visible in

M&HCV & CVs followed by passenger vehicles, three-wheelers and two-wheeler. In commercial vehicle (CV)

segment volume would be driven by medium and heavy

commercial vehicle segment in FY16 and FY17. PVs are

likely to be driven by executive & midsize car segment on

the back of new launches in FY16 and FY17. Due to flurry

of launches lined up in utility vehicles segment in 2016, it

is expected that sales to remain strong in future.

Tata Motors profitability was impacted due to JLR adverse

market and product mix reflecting in realizations decline

and EBITDA margins decline. Maruti Suzuki posted belowexpected numbers despite of strong volume growth but

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profitability run down due to higher discounts, transitory

impact of inventory run-down and higher fixed costs. M&M

posted in line result, as the company is showing

improvement in volume growth in both UV and tractor

although margins were better than expected due to lower

raw material prices and inventory gains. Ashok Leyland

showed below expected performance due to lower defence

kits and spares sales. In two wheeler segment, Hero

MotoCorp's Revenue came in slightly better than estimate

as blended realisation surprised positively, and better than

expected operating margin. Both higher realisations and

lower input costs helped operating margins to expand.

Bajaj Auto, and TVS Motor's EBITDA margin also expanded

YoY due to lower raw material prices and higher

realizations.

BSE Auto & CNX Auto

Company (Rs Cr) Net YoY QoQ Operating YoY QoQ OPM Net YoY QoQ NPMSales % % Profit % % % Profit % % %

Tata Motors 72256 3% 18% 9126 -8% 116% 13% 3508 -2% 916% 5%

Maruti Suzuki 15082 20% 8% 2170 34% -4% 14% 1019 27% -17% 7%

M & M 11008 17% 19% 1242 25% 21% 11% 808 -14% -13% 7%

Motherson Sumi 9860 8% 7% 945 14% 6% 10% 307 21% 7% 3%

Hero Motocorp 7295 7% 7% 1140 39% 5% 16% 796 37% 3% 11%

Bajaj Auto 5565 -2% -9% 1171 -5% -11% 21% 901 5% -3% 16%

Ashok Leyland 4085 22% -17% 423 76% -3% 10% 199 519% -31% 5%

Eicher Motors 3317 45% 6% 517 71% 5% 16% 271 76% 6% 8%

MRF 3261 -3% -2% 738 18% -5% 23% 388 20% -16% 12%

Apollo Tyres 2943 -5% -2% 506 23% 5% 17% 279 51% 0% 9%

TVS Motor Co. 2940 11% 2% 197 23% -7% 7% 108 19% -7% 4%

Bosch 2698 13% 3% 347 74% -23% 13% 221 99% -28% 8%

Exide Inds. 1525 -2% -12% 234 30% -9% 15% 134 38% -14% 9%Amara Raja Batt. 1225 16% 6% 229 32% 15% 19% 136 33% 11% 11%

Cummins India 1147 6% -4% 171 -9% -15% 15% 178 -1% -10% 16%

Bharat Forge 1052 -12% -6% 313 -14% -3% 30% 166 -15% -5% 16%

Total 145258 7% 10% 19469 7% 33% 13% 9419 11% 55% 6%

Source: Capitaline

Metal & Mining

Continuing the trend from the previous quarter, Q3FY16

earnings performance of metals and mining companies

remained weak, on account of decline in global metal

prices. Weak demand scenario, renewed concerns about

global slowdown coupled with rising imports from China,

South Korea and Japan continued to put pressure on the

revenues. Base metals hit multi-year lows on the London

Metal Exchange (LME) due to heightening risk of a demand

slowdown from China. In ferrous metals, cheaper imports of

steel from China, Russia and FTA countries made the

situation worse. In case of nonferrous metals, fragile

demand, strength in USD Index and region specific issues

weighed on prices and premiums as well. Average INR/USDdepreciated further to 65.9 in Q3FY16.

Over the past month, the steel sector has been upbeat with

positive news flows with the MIP levied on steel imports

w.e.f. 5 Feb'16, and now it is expected that domestic steel

prices to get delinked from global movements. Otherpositive news flows are from China and European Union

with China's finished steel exports for Dec'15-Jan'16

remaining flat versus successive increases, China

announcing a 13% capacity cut over 2020, Yuan

appreciation, and EU levy of an antidumping duty on CR

steel from China and Russia. However, market expects that

any rally in steel stocks would hinge upon a sharp demand

recovery or extension of the MIP levy to beyond a year.

Prices of aluminum and zinc have remained stable since

January.Ferrous companies underperformed due to poor volumes

17

BUDGET 2016-17


20/52

and substantial fall in realizations on account of weak

demand and sharp rise in cheaper imports. Non-ferrous

segment on the other hand reported in line performance as

higher volumes helped contain lower LMEs to a large

extent. Among the metal & mining space Coal India's

performance was superior on cost optimizations and

operating leverage. In Ferrous segment, in Q3FY16 Steel

majors SAIL, Tata Steel and JSW Steel revenues were

adversely impacted by steep fall in steel prices on account

of slowdown in Chinese consumption, huge surge in

imports of low priced steel and subdued domestic demand.

SAIL's losses widened with EBITDA/ tonne loss of Rs 4764.

Tata Steel Europe's EBITDA loss extended to US$31/ tonne.

JSW Steel's domestic performance was weak but better

than expectations with EBITDA/ tonne of Rs 3443. In the

mining space, NMDC reported weak performance due to

drop in iron ore prices. MOIL continued to disappoint due

to sharp drop in realizations and volume both. In Non-

ferrous sector segment Hindalco posted better than

expected performance. Adj. EBITDA/ tonne for Novelis

stood in line with estimates. Consolidated results of

Vedanta was lower than expectations due to weakness in

Cairn India, while Hindustan Zinc performance was broadly

in line

BSE Metal & CNX MetalCompany (Rs Cr) Net YoY QoQ Operating YoY QoQ OPM Net YoY QoQ NPM

Sales % % Profit % % % Profit % % %

Tata Steel 28039 -17% -4% 64 -98% 101% 0% -2127 -1454% -239% -8%

Coal India 19599 7% 12% 4820 20% 60% 25% 3718 14% 46% 19%

Vedanta 14877 -23% -10% 3106 -49% -22% 21% 18 -99% -98% 0%

S A I L 8939 -20% -3% -1381 -215% -31% -15% -1529 -364% -45% -17%

JSW Steel 8698 -34% -20% -1230 -154% -171% -14% -923 -381% -890% -11%

Hindalco Inds. 8150 -5% -9% 672 -27% 11% 8% 40 -89% -61% 0%

Jindal Steel 4362 -14% -8% 550 237% 0% 13% -573 65% 7% -13%

Hind.Zinc 3431 -11% -15% 1478 -29% -32% 43% 1811 -24% -21% 53%

Bhushan Steel 2538 3% -20% 362 -19% -36% 14% -697 -53% 5% -27%

Welspun Corp 2032 -10% -19% 239 12% -22% 12% 87 397% -14% 4%

Natl. Aluminium 1635 -14% -10% 136 -74% -60% 8% 133 -62% -41% 8%

NMDC 1517 -49% -5% 642 -67% -28% 42% 655 -59% -19% 43%

Jindal Saw 1077 -39% -20% 154 -22% -10% 14% 39 -37% -61% 4%

Orissa Minerals 0 NM NM -9 10% 5% NM 4 -40% -13% NM

Total 104895 -16% -6% 9602 -58% 63% 9% 656 -92% -90% 1%

Information Technology

The IT sector came out with a muted performance duringthe December quarter of FY16. Seasonal weakness was

reflected in weak revenue growth across the sector. Despite

favorable Rupee during the quarter, revenues saw only

modest increase driven mostly by volume growth while net

profits remained muted because of cross currency

headwinds and pressure on billing rates especially in the

traditional services. Revenue growth was supported by

growth in key verticals of BFSI, retail and healthcare.

However, the slowdown in the energy vertical put

downward pressure on the revenues. While among the

geographies revenue growth from US continues to be in

low teens. The sector is seeing a fundamental shift towards

digital and SMAC. Q3FY16 has seen some improvement in

spending environment in the developed markets.

For Q3FY16, top five IT companies have shown a mixed

trend in earnings performance with Infosys continued to

beat earnings estimates once again with positive surprises,

while HCL Technologies (HCL Tech) has led the pack with

better than expected result. Tata Consultancy Services (TCS)

and Wipro have lagged behind the estimates. Tier-I IT

service Companies reported a USD revenue growth of 1.1%

QoQ in Q3FY16. Changing the pecking order, Wipro led the

pack with 3.1% sequential growth, followed by HCL Tech;

2.4%, Infosys 1.7%, Tech Mahindra 1.3% and TCS lag at

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0.7% Q-o-Q growth. Growth of most of the companies is

volume driven. Margins across the top-5 remained under

pressure during the quarter amid continued pressure on

billing rates and cross currency headwinds despite of INR

depreciation. Revenue surprise was the maximum at

Persistent System among Tier-II IT, which grew 9.1% QoQ.

Growth was also robust at eClerx Services 4.8% QoQ,

Mindtree 3.9% QoQ and Tata Elxsi 4% QoQ.

The managements of most of the companies expect

Q4FY16 to be better than Q3FY16, given a low base of

Q3FY16 and absence of effect of Chennai flood. Notably,

Infosys has increased its constant-currency guidance for

FY16 to 12.8-13.2% from 10-12% earlier led by strong

volume growth and indicated to achieve the industry

leading growth in FY17. TCS and Wipro look optimistic on

growth prospects in FY17 on account of higher spending in

digital transformation. The softness in BFSI and weakness in

energy space could restrict revenue growth. However

Nasscom has guided for 10-12% CC growth for FY17, and

also has estimated 1.5x growth in the digital space for

FY17. Overall it is expected that growth should pick up in

the coming years with higher incremental spending in the

digital space coupled with stabilisation in growth

deceleration in insurance and energy space.

BSE IT & CNX IT


TCS 27364 12% 1% 7715 9% -1% 28% 6083 14% 0% 22%

Infosys 15902 15% 2% 3959 7% -1% 25% 3465 7% 2% 22%

Wipro 12952 7% 3% 2764 0% -1% 21% 2234 2% 0% 17%

HCL Technologies 10341 11% 2% 2226 -4% 6% 22% 1920 0% 11% 19%

Tech Mahindra 6701 17% 1% 1136 -3% 3% 17% 759 -6% -3% 11%

MphasiS 1517 8% -3% 217 7% -5% 14% 174 7% -6% 11%

Mindtree 1215 33% 4% 215 15% -1% 18% 151 7% -5% 12%

Oracle Fin.Serv. 1020 9% 2% 403 18% -8% 40% 289 16% -10% 28%

Hexaware Tech. 820 15% 0% 130 8% -11% 16% 99 14% -11% 12%

KPIT Tech. 813 4% 0% 118 9% 4% 15% 73 12% -2% 9%Cyient 782 10% 1% 110 -5% -7% 14% 87 -14% -12% 11%

Zensar Tech. 762 6% 0% 114 8% -4% 15% 72 3% -22% 9%

NIIT Tech. 679 14% 0% 122 42% 3% 18% 74 54% 9% 11%

Persistent Sys 592 20% 9% 108 9% 7% 18% 77 4% 8% 13%

eClerx Services 344 43% 5% 125 54% 2% 36% 89 46% -4% 26%

Tata Elxsi 274 24% 4% 66 32% 8% 24% 40 44% 5% 15%

Info Edg.(India) 173 19% 0% 27 -24% -19% 16% 22 -44% -36% 13%

Just Dial 171 11% 0% 37 -25% -6% 22% 27 -16% -42% 16%

Total 82421 12% 2% 19593 5% 0% 24% 15736 7% 1% 19%

Source: Capitaline

FMCG SectorConsumer companies continued to be hit by sluggish

demand, as the rural market remained in slowdown mode

in Q3 while the urban market recovers at a very slow pace.

Revenue grew moderately but there was an improvement

as compared to the first two quarters, led by the low base

effect and a favourable shift in festive season. During

Q3FY16, most of the FMCG companies under registered a

single-digit revenue growth with volume growth sustaining

on a sequential basis. The price cuts undertaken to pass on

the benefits of lower commodity prices to consumers

affected the overall revenue growth of many companies.Premiumisation trend continued in urban markets as most

companies either launched premium products or cut pricesto increase consumer acquisition rate in premium products.

Britannia Industries, Marico and Berger are the only

exception, which clocked double-digit revenue growth

during the quarter on the back of redefined strategies and

adequate promotional activities while other companies like,

Asian Paints, GCPL and HUL registered a volume growth of

7-9%. Weak volumes growth of below 5% was reported by

Nestle (negative), GSK, Colgate, JFL, Dabur and Emami.

The benign input prices continued to aid FMCG companies

to post better operating profit margins in the absence of

double-digit revenue growth. The operating profit marginsof most of the FMCG companies improved in the range of

19

BUDGET 2016-17


22/52

BSE FMCG & CNX FMCG


ITC 9177 3% 3% 3605 4% 1% 39% 2653 1% 9% 29%

Hind. Unilever 7981 3% 0% 1314 0% 1% 16% 971 -22% 1% 12%

United Spirits 2651 22% 24% 227 -3% -14% 9% 41 -45% -96% 2%

Godrej Inds. 2431 6% -25% 137 29% -43% 6% 139 53% 3% 6%

Godrej Consumer 2356 5% 5% 457 15% 15% 19% 323 23% 12% 14%

Britannia Inds. 2240 10% 1% 312 50% -4% 14% 208 51% -5% 9%

Dabur India 2127 2% 1% 378 7% -7% 18% 319 13% -7% 15%

Tata Global 2081 -3% 2% 162 -19% 13% 8% 59 -30% -24% 3%Nestle India 1959 -23% 12% 329 -40% 35% 17% 183 -44% 47% 9%

Marico 1556 7% 5% 294 24% 30% 19% 198 24% 31% 13%

United Breweries 1158 16% 2% 183 51% 22% 16% 72 81% 50% 6%

GlaxoSmith C H L 1029 2% -9% 160 51% -33% 16% 132 37% -40% 13%

Colgate-Palm. 1015 2% -2% 231 19% -9% 23% 159 22% 2% 16%

Hatsun AgroProd. 831 17% -3% 71 30% -15% 9% 18 36% -43% 2%

Emami 789 14% 37% 250 18% 64% 32% 134 -27% 119% 17%

P & G Hygiene 714 11% 19% 216 68% 123% 30% 147 62% 110% 21%

KRBL 704 -8% -22% 108 -17% -8% 15% 66 -20% -16% 9%

Jubilant Food. 634 14% 8% 76 4% 19% 12% 32 -9% 33% 5%

Godfrey Phillips 534 0% -8% 35 -15% -58% 7% 14 29% -72% 3%

Gillette India 508 2% 6% 77 16% 51% 15% 52 41% 56% 10%

Jyothy Lab. 385 7% -4% 51 40% 4% 13% 39 47% 1% 10%Advanta 384 -21% 25% 72 3% 112% 19% 61 139% 36% 16%

Bajaj Corp 213 4% 2% 56 18% 6% 26% 50 19% 6% 23%

Total 43458 3% 1% 8801 5% 3% 20% 6068 -1% -7% 14%

100-300 bps in Q3FY16 as average raw material to sales

ratio declined by 400-600 bps and were partially deployed

in higher advertisement and promotion expenses to tackle

increasing competition. The companies like Britannia,

Godrej Consumer, Dabur, P&G, Marico, GSK Consumer and

Jyothy Laboratories have consistently registered strong

double digit growth in PAT. ITC's operating performance was

affected by sluggish performance by the core cigarette

business, while Hindustan Unilever's PAT growth was

affected by lower revenue growth and lower other income.

Consumer goods companies continued to gain benefits

from lower raw material prices, which aided to post strong

double-digit earnings growth for the past few quarters. The

factors , such as implementat ion of Seventh Pay

Commission and softening of inflation will play a major role

in driving urban consumption in the coming quarters.

ITC result was below estimate due to lower cigarettevolume. Hindustan Unilever's result was inline with

estimates with mid single digit volume growth. Britannia's

performance was inline with estimates with biscuits volume

growth in double digits. GCPL reported the strongest set of

numbers better than expected, with 9% YoY volume

growth overall. Dabur's result was inline with estimates

with mid single digit volume growth but key surprise was

lower AD spending. Jyothy Labs consolidated net sales was

inline with estimates, led by volume growth but tax rate

increase was a bit dragger in net profit. P&G also came up

with strong set of numbers.

Pharma Sector

In December Quarter, Pharma companies came out with a

decent performance. Overall sector sales and EBITDA margin

were in line with the estimates. Approval of key products,

less competition due to niche and complex product

launches, a better product mix and cost-control measureshelped profitability to grow in Q3FY16. During the quarter,

the US business of a majority of pharmaceutical players

reported a double-digit growth on account of new product

approvals with low competition. On the other hand, the

revenues of the businesses in the other emerging markets

were affected due to currency headwinds. The domestic

growth was in line with the industry growth during the

quarter. Emerging markets growth for large caps was hit by

20

MARCH 2016

Q3FY16 Report


23/52


Sun Pharma.Inds. 7082 2% 4% 2169 0% 12% 31% 1417 258% 28% 20%

Dr Reddy’s Labs 3968 3% -1% 746 8% -17% 19% 579 1% -20% 15%

Lupin 3556 12% 7% 877 -1% 31% 25% 530 -12% 30% 15%

Aurobindo Pharma 3496 10% 5% 823 34% 6% 24% 535 39% 18% 15%

Cipla 3107 12% -10% 454 -18% -43% 15% 343 5% -20% 11%

Cadila Health. 2428 10% -1% 578 28% -7% 24% 390 38% 0% 16%

Piramal Enterp. 1859 33% 20% 613 91% 31% 33% 322 29% 31% 17%

Glenmark Pharma. 1756 3% -6% 370 39% -8% 21% 170 48% -15% 10%

Torrent Ph