India Daily, October 05, 2018 - Kotak Securities · 2018-10-05 · For Private Circulation Only. FOR IMPORTANT INFORMATION ABOUT KOTAK SECURITIES’ RATING SYSTEM AND OTHER DISCLOSURES,

For Private Circulation Only. FOR IMPORTANT INFORMATION ABOUT KOTAK SECURITIES’ RATING SYSTEM AND OTHER DISCLOSURES. REFER TO THE END OF THIS MATERIAL.

Contents

Daily Alerts

Change in Reco

IndusInd Bank: In a more comfortable zone; upgrade to BUY

Valuations lot more comfortable today as compared to a few months back

Few key headwinds to business to remain

Management change is around the corner and likely to occur in FY2020

Company alerts

ICICI Bank: Another chapter comes to a close

Chanda Kochhar receives board approval for early retirement with

immediate effect

New CEO has a lower baggage to carry and to start focusing on improving

return ratios

Maintain BUY with unchanged TP

Sector alerts

Energy: This time, it's no different!

Intervention in fuel prices through cut in excise duty, marketing margins

and a few states' VAT

Expect further interventions with OMCs requiring a hike of ~Rs3-4/liter at

MTM crude and Rupee

Earnings uncertainty for oil PSUs, as the government prioritizes fuel prices

and fiscal receipts

9-15% cut in estimates for now; cut TPs to Rs275 for BPCL, Rs185 for

HPCL and Rs120 for IOCL

Economy alerts

Economy: Fuel excise duty cut: Marginal impact on fiscal and inflation

#1 Fiscal impact: Central excise revenue to be lower by Rs105 bn in FY2019

#2 Inflation impact: Direct impact of around 14 bps

INDIA DAILY October 5, 2018 India 4-Oct 1-day 1-mo 3-mo

Sensex 35,169 (2.2) (7.5) (1.1)

Nifty 10,599 (2.4) (7.6) (1.4)

Global/Regional indices

Dow Jones 26,627 (0.7) 2.5 9.3

Nasdaq Composite 7,880 (1.8) (1.4) 3.9

FTSE 7,418 (1.2) 0.5 (2.4)

Nikkei 23,864 (0.5) 5.7 10.8

Hang Seng 26,624 (1.7) (2.3) (5.5)

KOSPI 2,271 (0.2) (0.9) 0.6

Value traded – India

Cash (NSE+BSE) 432 419 376

Derivatives (NSE) 20,263 10,174 8,721

Deri. open interest 3,698 3,839 3,423

Forex/money market

Change, basis points

4-Oct 1-day 1-mo 3-mo

Rs/US$ 73.6 24 202 484

10yr govt bond, % 8.3 12 12 19

Net investment (US$ mn)

3-Oct MTD CYTD

FIIs (209) (430) (2,436)

MFs 121 357 13,966

Top movers

Change, %

Best performers 4-Oct 1-day 1-mo 3-mo

WPRO IN Equity 326 (0.6) 2.1 23.3

ARBP IN Equity 757 (1.9) 8.6 22.9

JSTL IN Equity 378 (1.5) (5.2) 21.6

DIVI IN Equity 1,284 (1.9) 0.5 19.2

IDBI IN Equity 57 2.3 (4.0) 18.4

Worst performers

JPA IN Equity 7 (4.2) (40.9) (56.0)

YES IN Equity 215 1.1 (37.5) (38.3)

IDEA IN Equity 34 (7.9) (29.4) (38.0)

UT IN Equity 3 1.9 (26.0) (35.7)

RCAPT IN Equity 270 (2.5) (40.7) (26.5)

For Private Circulation Only. FOR IMPORTANT INFORMATION ABOUT KOTAK SECURITIES’ RATING SYSTEM AND OTHER DISCLOSURES, REFER TO THE END OF THIS MATERIAL.

Valuations lot more comfortable today as compared to a few months back

We move our rating on IIB back to BUY from REDUCE with an unchanged TP (higher cost of

equity) but roll forward our estimates to September 2020. The bank would trade at 3.3X book

and 20X September 2020E EPS for RoEs in the range of 16-17% and earnings growth of 30%

for FY2018-20 led by solid balance sheet growth and merger with BHAFIN. We do believe that

the recent correction of ~20% in the past three months and a relatively high degree of

underperformance addresses some of the concerns that we have had on valuations.

Few key headwinds to business to remain

IIB has a few short to medium term challenges that are likely to keep valuation in check: (1) NIM

pressure is likely to remain in the short term given the sharp rise in the cost of funds while the

loan book is unlikely to see a similar offset given the higher share of fixed interest rate retail

loan book. (2) Impact of overloading ban is an event to watch out for, though it is still not

visible in headline volume sales of new commercial vehicles. Adverse mix change is further NIM

dilutive. Also, fee income could slowdown primarily in investment banking and retail fees.

(3) Asset quality is stable in the retail portfolio, especially CVs despite the recent increase in fuel

costs as fleet utilization seems to be comfortable. We are not able to ascertain if the bank has a

sizeable exposure to any specific corporate, especially of the likes of IL&FS. (4) BHAFIN

acquisition is always likely to show unexpected surprises given the nature of its business. As

discussed previously, we believe that it would be incorrect to look at BHAFIN acquisition as a

RoE accretive business considering the high volatility in return ratios, especially when the sector

has a crisis.

Management change is around the corner and likely to occur in FY2020

Management change will happen considering that Mr Sobti’s term would end on March 23,

2020 and he would reach the upper limit of ~70 years. While the management has indicated

that succession planning is in place, the details are not in the public domain. As we have seen in

other banks and companies from other sectors, it is important to understand the senior

management exits that are likely to happen when a change is implemented at the leadership

level. It would not be too surprising if we see a few key members of the bank looking to step

down around the time that Mr Sobti retires. The management has a strong senior team that

can take this bank forward, in our view.

IndusInd Bank (IIB) Banks

In a more comfortable zone; upgrade to BUY. We upgrade IIB to BUY from

REDUCE with an unchanged TP to factor the recent correction in stock price. Our

concern on a few headwinds to business remains as the business is not at its sweetest

spot in the interest rate/loan growth cycle but we derive greater comfort in the

valuation, underlying growth opportunity given the bank’s relatively small share in

business and the impressive execution of their business plan.

BUY

OCTOBER 05, 2018

CHANGE IN RECO.

Coverage view: Attractive

Price (`): 1,590

Target price (`): 1,900

BSE-30: 35,169

M B Mahesh CFA

Nischint Chawathe

Dipanjan Ghosh

IndusInd Bank

Stock data Forecasts/Valuations 2019E 2020E 2021E

52-week range (Rs) (high,low) EPS (Rs) 69.6 86.5 101.2

Market Cap. (Rs bn) EPS growth (%) 15.8 24.3 17.0

Shareholding pattern (%) P/E (X) 22.8 18.4 15.7

Promoters 15.0 NII (Rs bn) 101.4 134.3 165.3

FIIs 57.7 Net profits (Rs bn) 49.4 61.4 71.8

MFs 8.8 BVPS 471.0 541.0 624.3

Price performance (%) 1M 3M 12M P/B (X) 3.4 2.9 2.5

Absolute (14.3) (19.1) (5.9) ROE (%) 17.4 16.7 16.9

Rel. to BSE-30 (7.0) (18.0) (15.2) Div. Yield (%) 0.5 0.6 0.7

Company data and valuation summary

2,038-1,551

955.8

IndusInd Bank Banks

KOTAK INSTITUTIONAL EQUITIES RESEARCH 3

Exhibit 1: Loan mix broadly remains similar qoq Break-up of loans, March fiscal year-ends, 2011-1QFY19 (%)

Source: Company, Kotak Institutional Equities

Exhibit 2: Break-up of the corporate segment; power generation exposure has dropped 40 bps qoq top 3.7% March fiscal year-ends, 2011-1QFY19 (%)


2011 2012 2013 2014 2015 2016 2017 2018 1QFY19

Retail advances 44.4 49.2 50.5 45.0 41.3 41.3 40.3 39.5 40.0

Vehicle financing 43.5 46.9 46.4 39.2 33.8 32.1 30.2 29.3 29.6

Commercial vehicles 21.8 23.6 22.5 17.4 15.4 15.9 15.4 15.6 15.6

Utility vehicles 3.2 3.5 4.0 3.7 2.9 2.3 2.1 2.0 2.0

Cars 3.2 4.0 4.6 4.8 4.6 4.4 4.1 3.7 3.7

Two and three wheelers 9.7 9.7 9.1 8.1 6.8 5.8 5.0 4.2 4.3

Equipment 5.7 6.1 6.1 5.2 4.1 3.7 3.6 3.8 4.0

Home loans 0.9 1.6 3.4 4.9 6.5 7.8 8.5 8.4 8.4

Personal loans — 0.7 0.8 0.8 1.0 1.4 1.5 1.9 2.0

Corporate advances 55.6 50.8 49.5 55.0 58.7 58.7 59.7 60.5 60.0

Large corporate advances 26.1 27.1 26.7 27.4 29.0 28.6 27.8 30.6 29.8

SME/commercial banking 19.3 15.2 14.6 17.6 16.7 18.8 19.6 17.7 17.6

Other loans 10.1 8.5 8.1 10.1 13.0 11.3 12.3 12.3 12.6

2011 2012 2013 2014 2015 2016 2017 2018 1QFY19

Gems and Jewellery 1.4 1.9 1.6 2.4 6.0 6.1 5.2 4.8

Power generation 1.2 1.9 2.3 1.9 1.9 1.2 NA 4.1 3.7

Microfinance 2.5 2.8 3.7

Real Estate Developers 0.6 1.2 1.8 2.4 3.0 2.0 2.8 3.4

Services 2.3 2.2 3.1

Lease Rental 1.2 2.4 3.0 4.3 3.9 4.6 5.1 3.0 2.9

Constn related to infra.- EPC 2.8 2.5 1.9 1.5 2.4 1.6 1.7 2.8 2.5

Steel 1.1 1.3 1.4 1.4 1.4 1.7 1.8 1.6 2.5

Petroleum and products 1.1 0.9 1.2 1.9

Food beverages and processing 1.6 NA NA 1.4 1.3

Telecom 2.0 3.1 3.5 NA 1.2

Roads/other infra 1.1

Power distribution NA NA 0.7

NBFCs (other than HFCs/HFIs) 6.8 5.4 3.3 2.6 2.3 2.2 1.3 NA NA

Pharma 3.5 3.3 1.9 1.2 NA 0.9 NA NA NA

Paper 0.9 NA NA NA NA NA

Food credit 1.3 1.6 NA NA 1.0 NA

Plastic & Plastic Products 1.2 NA NA

Auto ancilliaries NA NA

Hospital and medical services NA NA

Contract construction-civil 1.0 1.1 NA

Media, entertainment and adv. 1.2 NA NA

Power transmission 0.9 NA

Engineering and machinery 0.8 NA

Other Industry 32.8 31.4 37.1 38.7 33.1 31.2 30.9 26.1

Banks IndusInd Bank

4 KOTAK INSTITUTIONAL EQUITIES RESEARCH

Exhibit 3: Real estate exposure has dropped to 5% of from ~11% in FY2017 Break-up of exposure in the real estate sector, March fiscal year-ends, 2010-2018 (Rs mn)


Exhibit 4: IIB is trading at 3.1X one-year forward book March fiscal year-ends, Oct 2011 –2018 (X)

Source: Company, Bloomberg, Kotak Institutional Equities estimates

Exhibit 5: IndusInd banks’ trading at premium to peers IndusInd Bank premium to peers, Oct 2010 – Oct 2018 (X)


2010 2011 2012 2013 2014 2015 2016 2017 2018

Real estate

Developers 1,310 4,360 1,360 5,160 16,429 33,675 42,424 25,017 48,837

Lease rental discounting 2,110 3,100 8,280 13,400 23,409 26,935 41,045 57,486 43,618

Lease rental discounting - others 7,150 10,762 11,806 10,042 8,664 7,748

Housing finance companies 3,610 3,710 1,500 1,210 400 5,083 12,831 14,908 1,901

Loans against property 940 2,532 37,409 56,917 73,386 3,741

Total real estate 7,030 12,110 11,140 26,920 53,532 114,908 163,259 179,461 105,845

Trading

Wholesale 11,500 16,140 19,916 27,525 40,854 55,332 60,974

Retail 14,130 19,650 18,233 23,478 26,912 33,080 42,622

Total exposure to trading — — 25,630 35,790 38,149 51,003 67,766 88,412 103,596

Total exposure 335,810 415,320 540,530 670,310 796,426 974,887 1,232,022 1,652,866 1,993,382

Consumer finance division 82,660 116,120 169,900 220,590 241,880 240,295 281,347 342,597 501,972

Others 253,150 299,200 370,630 449,720 554,546 734,592 950,675 1,310,269 1,491,410

Real estate to total exposure (%) 2.1 2.9 2.1 4.0 6.7 11.8 13.3 10.9 5.3

Real estate to exposure ex consumer (%) 2.8 4.0 3.0 6.0 9.7 15.6 17.2 13.7 7.1

Trading to total exposure (%) 4.7 5.3 4.8 5.2 5.5 5.3 5.2

Real estate to exposure ex consumer (%) 6.9 8.0 6.9 6.9 7.1 6.7 6.9

Loans and debentures -reported in balance sheet

Loans 207,042 263,587 353,164 446,416 555,386 691,406 893,859 1,151,070 1,480,348

Consumer finance division 83,010 116,190 172,370 224,010 247,850 284,120 365,490 455,290 572,400

Debenture and bonds 18,266 33,880 23,773 47,335 47,394 33,181 69,333 25,655 49,424

Total 225,308 297,467 376,937 493,752 602,780 724,587 963,192 1,176,725 1,529,771

Loans and debentures to total exposure (%) 67.1 71.6 69.7 73.7 75.7 74.3 78.2 71.2 76.7

Loans and debentures to exposure, ex consumer (%) 56.2 60.6 55.2 60.0 64.0 60.0 62.9 55.1 64.2

0

9

18

27

36

45

-

1.0

2.0

3.0

4.0

5.0

Sep

-05

Sep

-06

Sep

-07

Sep

-08

Sep

-09

Sep

-10

Sep

-11

Sep

-12

Sep

-13

Sep

-14

Sep

-15

Sep

-16

Sep

-17

Sep

-18

Rolling PBR (X) (LHS) Rolling PER (X) (RHS)

0.8

1.0

1.2

1.4

1.6

Oct-

10

Oct-

11

Oct-

12

Oct-

13

Oct-

14

Oct-

15

Oct-

16

Oct-

17

Oct-

18

IndusInd Bank Banks


Exhibit 6: IndusInd Bank - key growth rates and financial ratios March fiscal year-ends, 2016-2021E (%)

Source: Company, Kotak Institutional Equities estimates

2016 2017 2018 2019E 2020E 2021E

Growth rates (%)

Net loan 28.5 27.9 28.2 34.7 25.2 24.3

Customer assets 28.1 28.1 29.3 33.4 24.4 23.8

Investments excl. CPs and debentures 41.1 24.9 28.6 56.5 27.3 25.5

Net fixed and leased assets 8.4 6.4 0.3 1.4 1.5 7.2

Cash and bank balance (6.2) 84.2 (29.1) 24.5 28.0 24.6

Total assets 27.8 25.0 24.1 35.1 24.3 23.4

Deposits 25.4 36.1 19.8 41.6 32.5 27.6

Current 25.3 26.7 6.3 39.5 36.4 31.3

Savings 33.2 56.8 69.7 40.7 34.7 29.7

Fixed 23.4 32.6 6.2 42.6 30.4 25.5

Net interest income 32.1 34.2 23.7 34.5 32.0 23.1

Loan loss provisions 38.7 72.6 (0.5) 29.0 37.3 32.0

Total other income 29.4 26.5 13.9 28.1 11.9 18.5

Net fee income 31.8 29.7 17.8 20.0 18.0 18.0

Net exchange gains 16.2 9.9 0.2 16.0 16.0 16.0

Operating expenses 27.9 30.3 16.9 28.9 25.3 24.1

Employee expenses 26.1 23.1 17.1 24.5 14.6 12.8

Key ratios (%)

Yield on average earning assets 9.9 9.6 9.2 9.3 9.3 9.3

Yield on average loans 11.8 11.4 10.6 10.7 10.8 10.7

Yield on average investments 6.3 7.0 7.1 6.8 6.8 6.8

Average cost of funds 6.6 6.2 5.8 5.7 5.7 5.6

Interest on deposits 6.8 6.3 5.8 5.8 5.8 5.7

Difference 3.3 3.4 3.4 3.6 3.7 3.7

Net interest income/earning assets 3.8 4.0 4.0 4.1 4.2 4.1

New provisions/average net loans 0.8 1.1 0.8 0.8 0.9 0.9

Total provisions/gross loans 1.1 1.8 2.1 2.2 2.5 2.8

Fee income to total income 28.6 28.3 27.9 25.3 24.0 23.3

Net trading income to PBT 3.3 5.6 4.4 4.8 4.9 4.2

Exchange income to PBT 24.1 21.1 16.8 14.4 13.5 13.4

Operating expenses/total income 47.0 46.7 45.7 44.6 44.9 45.8

Operating expenses/assets 2.9 3.0 2.8 2.8 2.7 2.7

Tax rate 34.1 34.2 34.2 32.5 32.5 32.5

Dividend payout ratio 12.8 12.5 11.7 11.7 11.7 11.7

Share of deposits (%)

Current 16.6 15.5 15.5 15.9 16.3 16.7

Fixed 64.8 63.1 59.4 58.5 57.6 56.7

Savings 18.5 21.4 25.1 25.6 26.1 26.6

Loans-to-deposit ratio 95.1 89.3 95.6 90.9 85.9 83.6

Equity/assets (EoY) 12.4 11.6 10.8 11.5 10.7 10.0

Asset quality trends (%)

Gross NPL 0.9 0.9 1.2 1.2 1.4 1.5

Net NPL 0.4 0.4 0.5 0.5 0.6 0.6

Slippages 1.2 1.6 2.1 1.6 1.8 1.8

Provision coverage 58.6 58.4 56.3 57.9 58.7 60.3

Dupont analysis (%)


Loan loss provisions 0.5 0.7 0.5 0.5 0.6 0.6

Net other income 2.6 2.6 2.4 2.3 2.0 1.9


Invt. depreciation — — — — — —

(1- tax rate) 65.9 65.8 65.8 67.5 67.5 67.5

RoA 1.8 1.8 1.8 1.9 1.8 1.7

Average assets/average equity 9.5 8.8 9.5 9.2 9.1 9.8

RoE 17.1 15.7 17.1 17.6 16.8 17.0

Banks IndusInd Bank


Exhibit 7: IndusInd Bank – income statement and balance sheet March fiscal year-ends, 2016-2021E (` mn)


2016 2017 2018 2019E 2020E 2021E

Income statement

Total interest income 115,807 144,057 172,807 227,916 297,963 369,615

Loans 92,446 114,791 136,999 181,859 237,013 294,475

Investments 17,806 24,669 30,744 41,486 55,169 67,850

Cash and deposits 5,555 4,597 5,065 4,571 5,781 7,290

Total interest expense 70,641 83,431 97,833 127,049 164,830 205,740

Deposits from customers 57,088 69,313 80,460 106,110 144,274 185,988

Net interest income 45,166 60,626 74,974 100,867 133,134 163,875

Loan loss provisions 6,141 10,600 10,546 13,608 18,683 24,662

Net interest income (after prov.) 39,025 50,026 64,429 87,258 114,450 139,213

Other income 32,969 41,715 47,501 60,868 68,100 80,668

Net fee income 22,315 28,953 34,119 40,943 48,313 57,009

Net capital gains 1,453 2,769 3,638 4,500 4,500 4,500

Net exchange gains 8,370 9,195 9,210 10,684 12,393 14,376

Operating expenses 36,721 47,831 55,914 72,098 90,303 112,108

Employee expenses 12,361 15,210 17,807 22,161 25,394 28,651

Depreciation on investments 295 314 1,209 900 - -

Other provisions 286 - - 900 500 500

Pretax income 34,693 43,597 54,807 74,229 91,748 107,273

Tax provisions 11,828 14,918 18,747 24,124 29,818 34,864

Net profit 22,864 28,679 36,060 50,104 61,930 72,409

Growth (%) 27.5 25.4 25.7 38.9 23.6 16.9

PBT - Treasury + Provisions 39,962 51,741 62,923 85,137 106,431 127,935

Growth (%) 34.1 29.5 21.6 35.3 25.0 20.2

Balance sheet

Cash and bank balance 101,119 186,283 132,159 164,569 210,694 262,530

Cash 7,395 11,355 10,692 11,227 11,788 12,377

Balance with RBI 37,815 66,132 98,932 140,095 185,658 236,905

Balance with banks 55,908 26,578 9,287 13,248 13,248 13,248

Net value of investments 340,555 367,036 500,767 726,111 895,920 1,098,920

Government and other securities 252,680 314,523 403,660 633,480 807,318 1,013,944

Shares 413 1,612 2,919 2,919 2,919 2,919

Debentures and bonds 18,129 25,246 44,764 40,288 36,259 32,633

Net loans and advances 884,193 1,130,805 1,449,537 1,952,514 2,443,598 3,036,756

Fixed assets 12,553 13,352 13,388 13,579 13,783 14,782

Net owned assets 12,553 13,352 13,388 13,579 13,783 14,782

Other assets 90,561 89,023 120,412 138,473 159,244 183,131

Total assets 1,428,982 1,786,499 2,216,262 2,995,247 3,723,239 4,596,119

Deposits 930,003 1,265,722 1,516,392 2,147,319 2,845,693 3,631,183

Borrowings and bills payable 255,159 230,540 389,567 431,048 407,396 432,501

Other liabilities 66,848 83,760 71,886 71,886 71,886 71,886

Total liabilities 1,252,010 1,580,023 1,977,845 2,650,253 3,324,975 4,135,570

Paid-up capital 5,950 5,981 6,002 7,096 7,096 7,096

Reserves and surplus 171,022 200,495 232,268 337,897 391,168 453,453

Total shareholders' equity 176,972 206,476 238,271 344,994 398,264 460,549


Chanda Kochhar receives board approval for early retirement with immediate effect

As per the latest press release, the BoD of ICICI Bank has accepted the request of Chanda Kochhar

for early retirement with immediate effect. She will also relinquish office from the BoD of the

bank’s subsidiaries. Her tenure as MD and CEO of ICICI Bank was until March 31, 2019. The

board has appointed Sandeep Bakshi as the new CEO and MD of the bank for a period of five

years up to October 3, 2023, subject to regulatory and other approvals. The other terms and

conditions of his appointment, such as remuneration, would remain unchanged.

Mr Bakhshi (58) started his career in 1986 and has experience in corporate and retail

businesses. He was the MD and CEO of ICICI Lombard General Insurance between 2002 and

2009. He later moved back to the bank as deputy MD overlooking the wholesale and SME

business. He became the MD of ICICI Prudential Life Insurance on August 1, 2010.

New CEO has a lower baggage to carry and to start focusing on improving return ratios

Similar to the appointment of a new CEO at Axis Bank, we believe that Mr Bakhshi has a relatively

lower headwind to start off. Any residual risk is likely to be negligible and mostly within the

watch-list that the bank has shared in the past. The bank would look to improve its coverage

ratio on bad loans at the earliest to put this episode of corporate cycle behind and focus on

getting the organization back on track.

Unlike Axis Bank, the new CEO is within the group and it is quite likely that the exits, if any,

at the senior leadership level are likely to be far fewer. The approach taken by the CEO is more

driven by identifying a framework to operate the business with the belief that it would take the

firm on the path to better long-term value creation. Rather than taking a very disruptive

approach towards changes, the CEO has taken a softer approach of backing a majority of his

existing team and showing his confidence to achieve the desired outcomes.

Maintain BUY with unchanged TP

We have long argued that the asset quality concerns are getting addressed and the Street has

underestimated the strength of the liability franchise. The steps taken by the firm seem to be

commonsensical at this point. We maintain our BUY rating on the bank (TP unchanged at

`400)—our top pick in the sector.

ICICI Bank (ICICIBC) Banks

Another chapter comes to a close. The ICICI Bank board of directors (BoD) has

approved Chanda Kochhar’s request for an early retirement. The ongoing inquiry to

examine a complaint by a whistleblower will maintain progress and certain benefits will

be subject to the outcome of the inquiry. Sandeep Bakhshi has been elevated as the

MD and CEO for a period of five years until October 3, 2023, subject to regulatory and

other approvals. Directionally positive and we maintain BUY rating. TP unchanged.

BUY

OCTOBER 05, 2018

UPDATE

Coverage view: Attractive

Price (`): 317

Target price (`): 400

BSE-30: 35,169

M B Mahesh CFA

Nischint Chawathe

Dipanjan Ghosh

Shrey Singh

ICICI Bank

Stock data Forecasts/Valuations 2019E 2020E 2021E

52-week range (Rs) (high,low) EPS (Rs) 7.9 25.8 30.7

Market Cap. (Rs bn) EPS growth (%) (17.6) 227.0 18.6

Shareholding pattern (%) P/E (X) 40.1 12.3 10.3

Promoters 0.0 NII (Rs bn) 255.0 297.0 341.2

FIIs 60.1 Net profits (Rs bn) 50.8 166.1 197.1

MFs 17.5 BVPS 146.7 174.7 202.5

Price performance (%) 1M 3M 12M P/B (X) 2.2 1.8 1.6

Absolute (3.7) 15.8 14.6 ROE (%) 4.7 14.4 15.2

Rel. to BSE-30 4.5 17.4 3.2 Div. Yield (%) 0.5 1.6 1.9

Company data and valuation summary

366-255

2,036.7

Banks ICICI Bank


Profile of Sandeep Bakshi

Sandeep Bakshi, aged 58, was the interim whole-time director and COO of ICICI Bank while

Chanda Kochhar was sent on leave until the completion of an inquiry set up by the board

under Justice BN Srikrishna. Mr Bakshi is a mechanical engineering graduate from Punjab

Engineering College and has completed his MBA from XLRI Jamshedpur. He has been

associated with the ICICI group for over 32 years. He started in 1986 as an operations officer

in Delhi and has held a variety of roles at ICICI. Prior to 2002, he looked after corporate

lending operations of ICICI Bank in the Northern and Eastern divisions. He joined ICICI

Lombard General insurance in 2002 and has been instrumental in building the business from

the scratch. He was appointed as the CEO of ICICI Lombard General Insurance in 2007 and

later in 2010 appointed as the CEO of ICICI Prudential Life Insurance.

Exhibit 1: Stock of bad loans continues to drop Break-up of stressed loans across categories, March fiscal year-ends, 1QFY17-1QFY19 (Rs bn)


Exhibit 2: 3.1% of potential stress loans March fiscal year-ends, 3QFY18-1QFY19 (Rs bn)


1QFY17 2QFY17 3QFY17 4QFY17 1QFY18 2QFY18 3QFY18 4QFY18 1QFY19

Outstanding stock of bad loans 758 769 763 727 714 727 748 708 696

Gross NPL 276 325 381 426 431 445 460 541 536

Sub investment grade 387 325 275 190 204 196 191 47 44

Security receipts 22 28 28 33 34 35 34 34 34

Other dispensation 72 90 79 78 45 52 63 86 81

Restructured loans 72 63 64 43 24 20 18 16 14

5:25 — 27 9 17 2 2 2 14 13

SDR — — 6 15 15 27 10 2 —

S4A — — — 3 4 3 6 6 6

Stock of bad loans (% of loans) 16.9 16.9 16.7 15.7 15.4 15.1 14.8 13.8 13.5

Non-GNPL stress (% of loans) 10.7 9.8 8.4 6.5 6.1 5.9 5.7 3.3 3.1

GNPL/total stress (%) 36.4 42.3 49.9 58.6 60.5 61.2 61.6 76.3 77.1

BB and below outstanding 246

3QFY18 4QFY18 1QFY19

Gross restructured loans 18 16 14

Non-fund o/s to restructured loans 4 4 4

Non-fund o/s to non-performing loans 22 30 29

Drilldown list 191 47 44

Other loans under RBI schemes not included above NA 22 19

Non-fund o/s to borrowers where S4A has been implemented NA 15 15

Security receipts 34 34 34

Total 284 168 159

(% of loans) 5.6 3.3 3.1

ICICI Bank Banks


Exhibit 3: Contribution from retail loans has increased over the past few years Composition of loans, March fiscal year-ends, 2010-1QFY19 (%)


Exhibit 4: Share of A- and above rated loans in the overall portfolio has increased Rating-wise total loan portfolio, March fiscal year-ends, 2016-1QFY19 (%)


Exhibit 5: Retail loan growth to remain ahead of overall loan growth in the medium term Retail and overall loan growth, March fiscal year-ends, 1QFY14-1QFY19 (%)


2010 2011 2012 2013 2014 2015 2016 2017 2018 1QFY19

Retail 43.6 38.7 38.0 37.0 39.0 42.5 46.6 51.8 56.6 57.5

Housing 26.2 24.9 19.2 19.9 20.9 23.0 25.2 27.6 29.3 29.9

Auto 4.4 3.6 3.5 4.0 4.6 4.8 5.1 5.5 5.8 5.7

Commercial vehicles 7.0 6.8 7.0 5.2 3.7 2.8 2.9 3.3 3.4 3.4

Personal loans 2.6 1.1 0.4 1.1 1.4 1.8 2.3 3.1 3.4 4.3

Credit card 2.2 1.3 1.0 1.3 1.1 1.0 1.3 1.6 1.8 2.0

Others 1.3 1.0 6.9 5.5 7.3 9.0 9.8 10.8 12.8 12.1

Domestic corporate/others 17.4 21.3 28.6 32.5 30.1 28.8 27.5 27.3 25.9 25.4

Agriculture 10.0 9.7 0.0 0.0 0.0 0.0 0.0 46.4 51.2 51.6

SME 4.0 4.8 6.0 5.2 4.4 4.4 4.4 4.8 5.0 4.6

International 25.0 25.5 27.4 25.3 26.5 24.3 21.6 16.1 12.6 12.5

Aggregate loans (Rs bn) 1,812 2,164 2,537 2,902 3,387 3,875 4,353 4,642 5,124 5,163

2016 2017 2018 1QFY19

AA- and above 31 37 42 43

A+,AA- 21 19 20 20

A- and above 52 56 62 63

BBB+, BBB, BBB- 28 28 28 28

BB and below 19 15 9 8

Unrated 1 1 1 1

30

36

42

48

54

60

0

6

12

18

24

30

1Q

FY1

4

2Q

FY1

4

3Q

FY1

4

4Q

FY1

4

1Q

FY1

5

2Q

FY1

5

3Q

FY1

5

4Q

FY1

5

1Q

FY1

6

2Q

FY1

6

3Q

FY1

6

4Q

FY1

6

1Q

FY1

7

2Q

FY1

7

3Q

FY1

7

4Q

FY1

7

1Q

FY1

8

2Q

FY1

8

3Q

FY1

8

4Q

FY1

8

1Q

FY1

9

Retail loan growth (LHS) Overall loan growth (LHS) Retail to overall loans (RHS)

Banks ICICI Bank


Exhibit 6: ICICI Bank trading at 2X one-year forward P/B Rolling PBR, March fiscal year-ends, Oct 2010- Oct 2018 (X)


Exhibit 7: ICICI Bank has lagged peers ICICI Bank trading premium to private banks, Oct 2010- Oct 2018 (X)


Exhibit 8: Growth slowed down in FY2019E Revenue and earnings growth, March fiscal year-ends, 2011-21E (%)


Exhibit 9: Scope for RoEs improvement low in the medium term RoE (core), March fiscal year-ends, 2011-21E (%)


0

8

16

24

32

40

48

0.0

0.6

1.3

1.9

2.6

3.2

Oct

-10

Oct

-11

Oct

-12

Oct

-13

Oct

-14

Oct

-15

Oct

-16

Oct

-17

Oct

-18

Rolling PBR (X) (LHS) Rolling PER (X) (RHS)

0.5

0.6

0.8

0.9

1.1

1.2

Oct

-10

Oct

-11

Oct

-12

Oct

-13

Oct

-14

Oct

-15

Oct

-16

Oct

-17

Oct

-18

(7)

0

7

14

21

28

(75)

0

75

150

225

300

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

E

20

20

E

20

21

E

Earnings (LHS) Revenue (RHS)

12 13

15 15 15

11 10

6 4

14 15

0.0

3.5

7.0

10.5

14.0

17.5

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

E

20

20

E

20

21

E

ICICI Bank Banks


Exhibit 10: Marginal NIM expansion in medium term Net interest margin, March fiscal year-ends, 2011-21E (%)


Exhibit 11: NII growth at 9% yoy in 1QFY19 NII growth, March fiscal year-ends, 1QFY15-1QFY19 (%)


Exhibit 12: ICICI Bank SoTP (FY2020) valuation


2.6 2.7 3.0 3.2 3.4 3.5 3.4 3.2 3.1 3.2 3.2

11

19

29

19 16

11

2 6

10

15 15

(10)

-

10

20

30

40

2.0

2.3

2.6

3.0

3.3

3.6

2011

2012

2013

2014

2015

2016

2017

2018

2019E

2020E

2021E

NIM (LHS) NII growth (RHS)

(5)

2

9

16

23

30

1Q

FY15

3Q

FY15

1Q

FY16

3Q

FY16

1Q

FY17

3Q

FY17

1Q

FY18

3Q

FY18

1Q

FY19

ICICI share FY2020

(%) (Rs) Valuation methodology

Value of ICICI standalone 100.0 281 Based on residual growth model

Subsidiaries

ICICI Financial Services 94

ICICI Prudential Life 54.9 54 3X Embedded Value and 18X EVOP

General insurance 56.8 22 4.4X FY2020 PBR

Mutual funds 51.0 18 5.5% of AUMs

Other subsidiaries/associates

ICICI Securities 74.0 9 15X FY2020 PER

ICICI Securities Primary Dealer 100.0 2 1X FY2020 PBR

ICICI Homes 100.0 4 1.5X FY2020 PBR

ICICI Bank UK 100.0 3 0.6XFY2020 PBR

ICICI Bank Canada 100.0 3 0.6XFY2020 PBR

Venture capital/MF 100.0 2 10% of AUM of US$2 bn

Value of subsidiaries 118

Value of company 399

Banks ICICI Bank


Exhibit 13: ICICI Bank—forecasts and valuation March fiscal year-ends, 2013-21E


P/B

(standalone)

(X) (X)

2013 83 13 25.8 105 3.2 13.1 14.7 19 83 2.7

2014 98 15 21.9 115 2.9 14.0 14.9 16.5 92 2.4

2015 113 18 19.1 126 2.7 14.7 15.0 14.5 101 2.2

2016 97 15 22.4 139 2.4 11.4 11.1 17.4 104 2.1

2017 98 15 22.2 156 2.2 10.9 10.0 16.9 108 2.1

2018 68 10 35.4 149 2.3 8.3 6.0 28.1 103 2.1

2019E 51 8 42.9 170 2.0 4.7 3.8 38.0 131 1.7

2020E 166 26 13.1 189 1.8 14.4 14.3 9.4 159 1.4

2021E 197 31 11.1 213 1.6 15.2 15.1 7.9 187 1.2

Core RoE

(%)

P/E

(standalone)

ABVPS

(standalone)

(Rs)

BVPS

(Rs)

P/B

(X)

RoE

(%)

PAT

(Rs bn)

EPS

(Rs)

P/E

(X)

ICICI Bank Banks


Exhibit 14: ICICI Bank income statement and balance sheet March fiscal year-ends, 2016-21E (Rs mn)


2016 2017 2018 2019E 2020E 2021E

Growth rates (%)

Net loan growth 12.3 6.7 10.4 11.5 13.5 13.2

Customer assets growth 10.7 6.5 12.4 10.7 12.8 12.6

Corporate loans 3.9 (0.9) (0.8) 8.7 11.3 11.8

Total retail loans 22.7 14.5 20.5 13.6 15.0 14.2

Deposits growth 16.6 16.3 14.5 13.1 15.5 15.0

Borrowings growth (2.6) (26.5) (23.9) 13.5 (3.0) 1.5


Loan loss provisions 226.1 29.1 1.2 12.0 (71.9) 5.8

Non-interest income 25.8 27.3 (10.7) (13.0) 14.6 12.7

Net fee income 6.9 7.7 9.4 16.0 14.0 14.1

Net capital gains 145.1 127.2 (26.9) (73.0) 17.6 —

Total income 17.1 12.8 (1.9) 0.5 15.8 14.1


Employee expenses 5.3 14.6 3.1 9.7 10.4 9.8

DMA 18.0 18.6 17.7 14.1 19.7 19.7

Asset management measures (%)

Yield on average earning assets 8.7 8.4 7.7 7.5 7.6 7.8

Interest on advances 9.5 8.8 8.4 8.4 8.5 8.7

Interest on investments 7.2 7.6 6.8 6.6 6.7 6.8

Average cost of funds 5.6 5.4 5.0 5.1 5.0 5.1

Interest on deposits 5.5 5.0 4.5 4.6 4.9 5.0

Other interest 5.7 6.4 7.6 7.8 5.3 5.4

Difference 3.2 3.0 2.7 2.4 2.6 2.7

Net interest income/earning assets 3.5 3.4 3.2 3.1 3.3 3.3

New provisions/average net loans 2.7 3.2 3.0 3.0 0.8 0.7

Loans-to-deposit ratio 73.3 75.2 77.9 76.8 77.3 77.2

Share of deposits

Current 14.0 15.3 15.9 15.1 14.6 14.2

Fixed 54.2 49.6 48.3 50.0 51.6 52.9

Savings 31.9 35.1 35.8 34.8 33.9 32.9

Tax rate 20.2 13.1 8.8 29.0 29.0 29.0

Dividend payout ratio 29.9 29.7 21.5 20.0 20.0 20.0

Asset quality metrics (%)

Gross NPL 5.7 8.5 9.5 7.8 5.9 4.6

Net NPL 3.0 5.4 5.4 3.1 1.5 0.8

Slippages 4.3 7.7 6.2 2.4 1.3 1.2

Provision coverage (ex write-off) 47.6 35.8 42.6 60.5 73.8 81.6

RoA composition - % of average assets


Loan loss provisions 1.6 2.0 1.9 2.0 0.5 0.5

Net other income 2.3 2.7 2.3 1.8 1.9 1.9


(1- tax rate) 79.8 86.9 91.2 71.0 71.0 71.0

RoA 1.4 1.4 1.1 0.6 1.8 1.9

Average assets/average equity 8.0 7.7 7.5 7.8 8.0 8.1

RoE 11.4 10.9 8.3 4.7 14.4 15.2

Banks ICICI Bank


Exhibit 15: ICICI Bank, growth rates, key ratios and Du Pont analysis March fiscal year-ends, 2016-21E (%)


2016 2017 2018 2019E 2020E 2021E

Total interest income 527,394 541,563 549,659 610,900 692,394 794,667

Interest on advances 389,432 396,034 408,662 455,242 518,991 601,736

Interest on investments 106,253 113,771 115,682 134,809 150,478 168,046

Total interest expense 315,154 324,190 319,400 355,875 395,433 453,464

Deposits from customers 215,488 228,717 234,288 275,044 338,435 395,673

Net interest income 212,240 217,373 230,258 255,025 296,961 341,203

Loan loss provisions 111,127 143,470 145,216 162,595 45,758 48,403

Net interest income (after prov.) 101,114 73,903 85,042 92,430 251,203 292,800

Other income 153,231 195,045 174,196 151,546 173,728 195,738

Net fee income 74,617 80,349 87,894 101,941 116,248 132,596

Net capital gains 37,954 86,232 63,059 17,000 20,000 20,000

Miscellaneous income 2,592 721 834 1,042 1,302 1,628

Operating expenses 126,836 147,551 157,039 172,430 190,989 210,978

Employee expense 50,023 57,337 59,140 64,904 71,656 78,645

DMA 9,340 11,078 13,036 14,872 17,795 21,295

Pre-tax income 121,959 112,787 74,346 71,547 233,942 277,560

Tax provisions 24,694 14,775 6,570 20,748 67,843 80,492

Net profit 97,264 98,012 67,776 50,798 166,098 197,067

% growth (13.9) 0.8 (30.8) (25.0) 227.0 18.6

PBT+provision-treasury gains 200,681 172,545 165,583 217,142 259,700 305,962

% growth 10.4 (14.0) (4.0) 31.1 19.6 17.8

Balance sheet (Rs mn)

Cash and bank balance 530,266 469,000 625,036 720,060 808,308 907,837

Cash 65,797 71,939 80,448 91,000 105,102 120,879

Balance with RBI 205,263 245,085 250,576 331,672 376,078 427,118

Balance with banks 2,446 3,801 4,849 5,334 5,867 6,454

Outside India 256,759 148,175 289,163 292,054 321,260 353,386

Net value of investments 1,604,118 1,615,065 2,029,942 2,266,147 2,443,214 2,723,024

Investments in India 1,522,607 1,541,700 1,962,100 2,198,912 2,376,704 2,657,223

Govt. and other securities 1,106,493 1,104,084 1,391,853 1,618,966 1,774,306 2,030,670

Shares 19,874 27,419 23,781 23,781 23,781 23,781

Subsidiaries 64,218 62,405 61,489 61,489 61,489 61,489

Debentures and bonds 92,742 100,750 153,889 156,967 172,664 189,930

Net loans and advances 4,352,639 4,642,321 5,123,953 5,715,719 6,486,483 7,342,879

Corporate loans 2,221,939 2,201,941 2,184,003 2,374,498 2,643,159 2,955,039

Total retail loans 2,130,700 2,440,380 2,939,950 3,341,221 3,843,324 4,387,840

Fixed assets 75,770 78,052 79,035 72,540 66,288 59,125

Net leased assets 2,415 2,415 2,415 1,035 880 748

Net owned assets 73,355 75,637 76,620 71,505 65,407 58,377

Other assets 575,737 625,345 — — — —

Total assets 7,138,531 7,429,784 7,857,965 8,774,467 9,804,292 11,032,864

Deposits 4,214,257 4,900,391 5,609,752 6,345,572 7,328,947 8,429,051

Borrowings and bills payable 1,726,711 1,269,105 966,385 1,096,642 1,064,208 1,080,399

Preference capital 3,500 3,500 3,500 3,500 3,500 3,500

Other liabilities 300,207 260,778 230,239 241,751 193,401 154,721

Total liabilities 6,241,175 6,430,274 6,806,376 7,683,965 8,586,556 9,664,170

Paid-up capital 11,699 11,651 12,858 12,858 12,858 12,858

Reserves & surplus 885,657 987,860 1,038,731 1,077,644 1,204,878 1,355,836

Total shareholders' equity 897,356 999,511 1,051,589 1,090,502 1,217,736 1,368,694


Intervention in fuel prices through cut in excise duty, marketing margins and a few states’ VAT

The government announced a reduction in retail prices of diesel and gasoline by (1) undertaking

a cut in excise duty by `1.5/liter, (2) asking OMCs to absorb `1/liter implying a reduction in their

marketing margins and (3) urging states to cut VAT by a similar amount of ~`2.5/liter, to which

states that are being ruled by the same government as the center, have obliged. The reduction

in excise duty will reduce the government receipts by ~`105 bn and curtailment of marketing

margins will impact OMCs’ profits by ~`50 bn, for the remainder of FY2019.

Expect further interventions with OMCs requiring a hike of ~`3-4/liter at MTM crude and Rupee

Our calculations suggest that OMCs are already required to increase the price of auto fuels by

~`3-4/liter, post this cut, in order to earn even the curtailed marketing margins at current levels

of Dated Brent crude price at ~US$85/bbl and exchange rate at `73.6/US$. It remains

uncertain, if the OMCs will be able to undertake price hikes to that extent in the coming

fortnight post the current reduction. Even if the OMCs manage to realign prices gradually, (1)

expected crude spike in the short run amid a tightening global oil market due to the impact of

US sanctions on Iran’s crude exports and/or (2) persisting weakening of Rupee, will increase the

ask-rate and may compel the government to intervene yet again.

Earnings uncertainty for oil PSUs, as the government prioritizes fuel prices and fiscal receipts

We see negative implications for the earnings of oil PSUs and more important, uncertainty

around that in the near term, as the government attempts to prioritize between (1) lower fuel

prices for end-consumers before state/central elections, (2) management of fiscal receipts amid

continuing shortfall in GST collections and (3) profitability of oil PSUs. The government’s ad-hoc

interventions in fuel prices and subsidy sharing historically suppressed earnings and return ratios

for these companies, while limiting visibility on profits until the end of every year during that

time.

9-15% cut in estimates for now; cut TPs to `275 for BPCL, `185 for HPCL and `120 for IOCL

We cut our FY2019-20 EPS estimates for OMCs by 9-15% for now, factoring in (1) lower

marketing margins on auto fuels for FY2019, (2) our assumptions of higher crude prices and a

weaker Rupee, (3) lower underlying refining margins and (4) other minor changes. In our view,

the earnings estimates for OMCs lose significance now given the material sensitivity to modest

changes in marketing margins, which becomes tough to predict in the current environment.

A further `0.5/liter reduction in marketing margins on auto fuels, will impact FY2019-20 EPS of

BPCL by 18%, HPCL by 24-25% and IOCL by 14%. We cut our TPs to `275 for BPCL, `185 for

HPCL and `120 for IOCL from `375, `285 and `150 respectively valuing the stocks at 5X

EV/EBITDA multiples instead of 5.5X earlier. Our fair valuation corresponds to 0.9-1.3X forward

book value for these companies, which is perhaps more reliable than earnings estimates.

A sharp moderation in crude price can ease out concerns for OMCs and is a key risk to our

negative stance, but it seems unlikely in the near term.

Energy India

This time, it’s no different! The government’s decision to curtail marketing margins

on auto fuels by `1/liter brings to fore the earnings uncertainty for oil PSUs, associated

with an environment of higher crude prices amid the government’s socio-economic

compulsions. We reiterate our negative stance on OMCs, while seeing a possibility of

further curtailment of profitability given the rising ask-rate of fuel prices hikes amid

higher crude and a weaker Rupee. We also see negative implications for upstream

PSUs, but retain ADD on ONGC with the stock discounting lowest crude price realized

over the past decade. A sharp crude moderation may help, but seems unlikely in the

near term.

ATTRACTIVE

OCTOBER 05, 2018

UPDATE

BSE-30: 35,169

Tarun Lakhotia

Akshay Bhor

https://kie.kotak.com/kinsite/?module=download&action=report&id=22662

India Energy


Exhibit 1: OMCs need to raise auto fuel prices by ~5% to earn curtailed margins at spot crude price

and exchange rate Calculation of marketing margins on auto fuels (Rs/liter)

Source: Kotak Institutional Equities estimates

Exhibit 2: We cut our FY2019-20 EPS estimates for OMCs by 9-15% and TPs by 20-35% Standalone EPS estimates and target price for OMCs, March fiscal year-ends, 2019-20E (Rs)


Exhibit 3: Earnings of OMCs have high sensitivity to changes in refining and marketing margins Change in earnings estimates (standalone), March fiscal year-end, 2019-20E (Rs)


Diesel Petrol

Based on fortnightly average prices

Dated Brent crude price - fortnightly average (US$/bbl) 80.4 80.4

C&F price - fortnightly average (US$/bbl) 95.7 89.9

Exchange rate - fortnightly average (Rs/US$) 72.4 72.4

Refinery transfer price of BS-IV equivalent 44.2 41.4

Specific excise duty 13.8 18.0

Dealer commission 2.5 3.6

VAT/cess in Delhi 10.7 17.3

Retail selling price in Delhi 73.0 81.6

Price charged to dealer (excluding duties) 45.9 42.6

Gross marketing margins 1.7 1.3

Based on current global prices

Dated Brent crude price - current (US$/bbl) 85.0 85.0

C&F price - current (US$/bbl) 100.3 94.6

Exchange rate - current (Rs/US$) 73.6 73.6

Refinery transfer price of BS-IV equivalent 47.1 44.2

Price charged to dealer (excluding duties) 45.9 42.6

Gross marketing margins (1.2) (1.6)

Normative calculation

Curtailed gross marketing margins 1.7 1.7

Required increase in retail price 3.4 4.1

Required increase in retail price (%) 4.6 5.1

New estimates Old estimates Change (%)

Company 2019 EPS 2020 EPS TP 2019 EPS 2020 EPS TP 2019 EPS 2020 EPS TP

BPCL 32.5 33.4 275 37.6 38.7 375 (13) (14) (27)

HPCL 28.2 28.7 185 32.4 31.7 285 (13) (9) (35)

IOCL 15.6 15.3 120 18.2 17.5 150 (15) (12) (20)

BPCL HPCL IOCL BPCL HPCL IOCL

Sensitivity to refining margin

Refining margins (US$/bbl) 6.4 6.1 7.0 6.0 5.5 6.0

Current EPS estimates 32.5 28.2 15.6 33.4 28.7 15.3

Refining margin lower by US$1/bbl 27.4 24.2 13.1 28.0 24.6 12.7

Change (%) (15.7) (14.3) (16.2) (16.1) (14.5) (17.1)

Refining margin higher by US$1/bbl 37.7 32.3 18.1 38.8 32.9 17.9

Change (%) 15.7 14.3 16.2 16.1 14.5 17.1

Sensitivity to marketing margin

Marketing margin on auto fuels (Rs/liter) 1.3 1.3 1.3 1.8 1.8 1.8

Current EPS estimates 32.5 28.2 15.6 33.4 28.7 15.3

Marketing margin lower by Rs0.5/liter 26.7 21.4 13.5 27.2 21.6 13.1

Change (%) (18.1) (24.0) (13.5) (18.4) (24.7) (14.4)

Marketing margin higher by Rs0.5/liter 38.4 35.0 17.7 39.5 35.8 17.5

Change (%) 18.1 24.0 13.5 18.4 24.7 14.4

FY2019E FY2020E

Energy India


Exhibit 4: OMCs have traded at lower P/B multiples in times of uncertainty 12-month forward P/B for OMCs (X)

Source: Bloomberg, Companies, Kotak Institutional Equities estimates

Exhibit 5: We compute fair value of Rs275 for BPCL Fair valuation of BPCL (Rs/share)


Notes:

(a) BPCL's P/B is adjusted for valuation for E&P segment.

0.0

0.5

1.0

1.5

2.0

2.5

3.0

Ap

r-0

1

Ap

r-0

2

Ap

r-0

3

Ap

r-0

4

Ap

r-0

5

Ap

r-0

6

Ap

r-0

7

Ap

r-0

8

Ap

r-0

9

Ap

r-1

0

Ap

r-1

1

Ap

r-1

2

Ap

r-1

3

Ap

r-1

4

Ap

r-1

5

Ap

r-1

6

Ap

r-1

7

Ap

r-1

8

BPCL HPCL IOCL

(X)

P/B based valuation EV/EBITDA based valuation

Refining and marketing business (Rs bn) Refining and marketing business (Rs bn)

March 2019E book value 375 March 2020E standalone EBITDA 112

Less: investments valued separately 112 EV/EBITDA (X) 5.0

March 2019E adjusted book value 262 EV of refining and marketing business (Rs bn) 561

March 2019E adjusted BVPS (Rs) 133 EV of refining and marketing business (Rs) (A) 285

P/B multiple (X) 1.3 Investments (Rs bn)

Value of refining and marketing business (Rs) (A) 173 Numaligarh Refinery 66

Investments (Rs bn) Petronet LNG 42

Numaligarh Refinery 66 Indraprastha Gas 30

Petronet LNG 42 Oil India Ltd 3

Indraprastha Gas 30 Others 58

Oil India Ltd 3 Value of investments (Rs bn) 198

Others 58 Value of investments (Rs) (B) 101

Value of investments (Rs bn) 198 Net debt (Rs bn) 216

Value of investments (Rs) (B) 101 Net debt (Rs) (C) 110

Total equity value (A) + (B) 274 Total equity value (A) + (B) - (C) 276

India Energy


Exhibit 6: We compute fair value of Rs185 for HPCL Fair valuation of HPCL (Rs/share)


Exhibit 7: We compute fair value of Rs120 for IOCL Fair valuation of IOCL (Rs/share)



Refining and marketing business (Rs bn) Refining and marketing business (Rs bn)

March 2019E book value 261 March 2020E standalone EBITDA 88


March 2019E adjusted book value 200 EV of refining and marketing business (Rs bn) 442



Value of refining and marketing business (Rs) (A) 118 HMEL (@2X BV) 79

Investments (Rs bn) MRPL 21

HMEL 79 Oil India 3

MRPL 21 Value of investments (Rs bn) 102

Oil India 3 Value of investments (Rs) (B) 67

Value of investments (Rs bn) 102 Net debt (Rs bn) 261

Value of investments (Rs) (B) 67 Net debt (Rs) (C) 171



Downstream business (Rs bn) Downstream business (Rs bn)

March 2019E book value 1,178 March 2020E standalone EBITDA 300


March 2019E adjusted book value 813 EV of refining and marketing business (Rs bn) 1,500



Value of downstream business (Rs) (A) 94 ONGC 158

Investments (Rs bn) Petronet LNG 42

ONGC 158 CPCL 22

Petronet LNG 42 GAIL India 14

CPCL 22 Oil India 6

GAIL India 14 Value of investments (Rs bn) 242

Oil India 6 Value of investments (Rs) (B) 25

Value of investments (Rs bn) 242 Net debt, including tax liabilities (Rs bn) 607

Value of investments (Rs) (B) 25 Net debt, including tax liabilities (Rs) (C) 64


Energy India


Exhibit 8: Profit model, balance sheet, cash model of BPCL, March fiscal year-ends, 2014-21E (Rs mn)


2014 2015 2016 2017 2018 2019E 2020E 2021E

Profit model (Rs mn)

Net sales 2,600,605 2,380,869 1,884,046 2,022,106 2,363,131 3,438,971 3,324,567 3,269,188

EBITDA 80,862 76,567 110,246 113,193 116,689 107,076 112,202 120,693

Other income 14,687 22,000 17,762 26,007 30,109 27,670 28,020 28,370

Interest (13,591) (5,831) (5,652) (4,959) (8,333) (10,595) (10,663) (10,098)

Depreciation (22,468) (25,160) (18,446) (18,913) (26,485) (29,448) (32,377) (34,302)

Pretax profits 59,490 67,576 103,910 115,328 111,980 94,702 97,182 104,662

Extraordinary items — 6,579 — (4,900) — — — —

Current tax (21,829) (19,836) (26,987) (20,988) (18,468) (22,621) (24,674) (28,141)

Deferred tax 2,948 (3,474) (6,360) (9,047) (14,318) (8,069) (6,858) (5,933)

Adjusted net profits 40,609 46,334 70,564 83,960 79,194 64,013 65,650 70,587

Adjusted EPS (Rs) 20.6 23.6 35.9 42.7 40.3 32.5 33.4 35.9


Total equity 194,588 224,675 273,230 296,684 341,520 374,715 408,759 445,364

Deferred taxation liability 13,609 17,083 35,118 36,182 50,924 58,993 65,851 71,784

Total borrowings 203,298 130,976 158,575 231,592 233,507 255,507 249,007 243,507

Currrent liabilities 312,780 324,555 286,651 355,439 376,274 452,911 450,518 449,506

Total liabilities and equity 724,274 697,289 753,574 919,896 1,002,225 1,142,126 1,174,134 1,210,161

Cash 2,038 13,602 20,674 647 881 1,431 1,112 1,158

Current assets 382,722 279,968 246,069 342,637 369,285 462,037 448,840 440,568

Total fixed assets 221,046 279,807 358,721 430,598 473,852 518,450 561,973 604,226

Investments 118,469 123,911 128,110 146,015 158,208 160,208 162,208 164,208

Total assets 724,274 697,289 753,574 919,896 1,002,225 1,142,126 1,174,134 1,210,161

Free cash flow (Rs mn)

Operating cash flow, excl. working capital 62,232 58,016 86,450 79,658 92,074 73,102 75,813 81,111

Working capital changes 7,086 117,160 7,522 (8,441) (10,640) (16,115) 10,803 7,261

Capital expenditure (47,439) (80,349) (93,246) (89,824) (69,154) (73,289) (74,849) (75,212)

Investments (6,527) (9,092) 26 (29,314) (59) (2,000) (2,000) (2,000)

Other income 11,107 10,351 13,338 17,836 21,718 27,670 28,020 28,370

Free cash flow 26,459 96,085 14,090 (30,086) 33,938 9,368 37,787 39,529

Ratios (%)

Debt/equity 104.5 58.3 58.0 78.1 68.4 68.2 60.9 54.7

Net debt/equity 103.4 52.2 50.5 77.8 68.1 67.8 60.6 54.4

RoAE 20.8 22.6 25.7 25.1 21.8 15.5 14.5 14.2

RoACE 12.0 12.8 17.7 17.0 14.3 10.8 10.3 10.4

Key assumptions

Crude throughput (mn tons) 23.4 23.4 24.1 25.4 28.5 30.3 30.8 31.0

Effective tariff protection (%) 2.3 2.4 2.4 2.4 2.3 2.3 2.3 2.3

Net refining margin (US$/bbl) 4.3 3.6 6.6 5.3 6.9 6.4 6.0 6.2

Sales volume (mn tons) 37.0 36.7 38.4 40.2 43.2 45.9 47.9 49.9

Marketing margin on auto fuels (Rs/liter) 0.0 0.0 1.9 1.8 1.8 1.3 1.8 1.8

Subsidy under-recoveries (Rs mn) (5,115) (4,874) — — — — — —

Adventitious gain/(loss) (Rs mn) 15,770 (31,420) (23,710) 19,872 1,210 14,040 — —

India Energy


Exhibit 9: Profit model, balance sheet, cash model of HPCL, March fiscal year-ends, 2014-21E (Rs mn)


2014 2015 2016 2017 2018 2019E 2020E 2021E


Net sales 2,232,448 2,055,868 1,777,006 1,870,237 2,193,326 3,123,945 3,013,088 2,962,781

EBITDA 52,377 56,666 79,393 110,990 106,719 84,926 88,343 94,361

Other income 9,745 11,684 11,442 15,147 18,495 16,127 16,417 16,689

Interest (13,364) (7,066) (6,536) (5,357) (5,667) (7,060) (8,006) (7,746)

Depreciation (22,019) (19,788) (26,532) (25,353) (27,528) (28,786) (30,429) (32,575)

Pretax profits 26,739 41,497 57,766 95,428 92,019 65,207 66,325 70,730

Extraordinary items — — — (5,219) — — — —

Current tax (7,640) (12,257) (14,336) (22,362) (25,710) (15,980) (17,357) (19,870)

Deferred tax (1,178) (1,952) (7,373) (6,283) (2,739) (6,184) (5,187) (4,171)

Prior-period adjustment (584) 45 1,204 525 — — — —

Adjusted net profits 17,338 27,333 37,262 65,650 63,571 43,043 43,781 46,689

Earnings per share (Rs) 11.4 17.9 24.4 43.1 41.7 28.2 28.7 30.6


Total equity 150,122 160,221 179,698 203,474 239,482 261,409 283,712 307,496

Deferred tax liability 39,084 41,036 49,194 58,956 65,692 71,876 77,063 81,234


Currrent liabilities 264,930 270,896 255,227 309,712 352,989 388,205 371,934 358,984

Total liabilities and equity 775,781 675,506 695,793 784,639 868,072 1,023,399 1,072,618 1,128,623

Cash 347 171 238 337 11,941 1,511 803 500

Current assets 361,857 237,549 240,166 295,693 325,509 435,062 416,147 403,546

Total fixed assets 304,978 325,373 349,603 379,424 419,571 479,025 551,117 623,276

Investments 108,599 112,415 105,786 109,186 111,051 107,801 104,551 101,301

Total assets 775,781 675,506 695,793 784,639 868,072 1,023,399 1,072,618 1,128,623



Working capital changes 21,121 124,486 (14,397) 6,120 9,817 (74,337) 2,644 (349)


Investments (1,581) 3,063 1,484 1,368 (14,170) 3,250 3,250 3,250

Other income 4,906 4,688 4,715 4,473 7,159 16,127 16,417 16,689

Free cash flow 22,223 136,753 20,180 41,560 31,686 (81,315) (17,230) (18,398)

Ratios (%)

Debt/equity 170.0 101.0 92.5 81.0 68.8 90.6 94.2 98.0

Net debt/equity 169.8 101.0 92.4 80.8 64.9 90.1 94.0 97.9

RoAE 9.6 14.0 17.3 25.3 22.4 13.5 12.6 12.5

RoACE 5.3 7.0 9.5 15.0 13.6 8.3 7.3 7.0

Key assumptions





Marketing margin on auto fuels (Rs/liter) — — 1.9 1.8 1.8 1.3 1.8 1.8

Subsidy under-recoveries (Rs mn) (4,818) (4,958) (78) — — — — —


Energy India


Exhibit 10: Consolidated profit model, balance sheet, cash model of IOCL, March fiscal year-ends, 2014-21E (Rs mn)


2014 2015 2016 2017 2018 2019E 2020E 2021E


Net sales 4,732,101 4,375,261 3,471,764 3,599,422 4,212,247 6,112,967 6,008,609 6,024,949

EBITDA 162,880 100,099 223,963 423,280 385,690 322,609 320,273 345,514

Other income 34,446 41,808 23,586 42,407 34,534 36,502 37,479 38,547

Interest (56,524) (38,390) (34,416) (29,913) (34,756) (41,161) (43,343) (39,485)

Depreciation (61,497) (47,548) (50,923) (65,016) (74,072) (78,222) (80,915) (82,754)

Pretax profits 79,306 55,968 162,210 370,758 311,396 239,728 233,493 261,822

Extraordinary items 17,468 16,681 13,643 (93,277) 28,873 — — —

Current tax (28,029) (12,630) (37,479) (77,683) (76,431) (63,144) (60,902) (72,992)

Deferred tax (998) (7,559) (18,532) 2,182 (41,204) (18,821) (18,906) (16,619)

Net profits 67,152 52,340 119,841 201,362 222,590 157,763 153,686 172,211

Adjusted net profits after minority interests 56,388 40,483 106,969 264,296 199,300 152,855 149,498 167,662

Adjusted earnings per share (Rs) 5.8 4.2 11.0 27.9 21.0 16.1 15.8 17.7


Total equity 672,052 691,157 899,864 1,015,332 1,125,182 1,210,670 1,293,505 1,386,217

Deferred tax liability 63,196 67,202 68,590 68,585 122,258 141,079 159,984 176,603


Currrent liabilities 1,005,047 938,148 760,371 1,004,906 1,062,333 1,286,128 1,269,927 1,256,192

Total liabilities and equity 2,658,467 2,302,948 2,303,265 2,691,995 2,933,961 3,382,440 3,411,354 3,450,325

Cash 26,546 1,518 5,518 1,034 901 1,540 1,896 1,931

Current assets 1,386,185 992,932 749,201 979,837 1,115,772 1,491,538 1,441,827 1,403,129

Total fixed assets 1,014,640 1,074,342 1,181,706 1,253,051 1,357,380 1,426,954 1,502,722 1,577,856

Investments 231,097 234,156 366,840 458,072 459,909 462,409 464,909 467,409

Total assets 2,658,467 2,302,948 2,303,265 2,691,995 2,933,961 3,382,440 3,411,354 3,450,325



Working capital changes 51,750 350,039 32,023 (71,558) (32,353) (151,971) 33,509 24,963


Investments (64,573) (2,869) (16,283) (46,057) (18,696) (2,500) (2,500) (2,500)

Other Income 19,290 18,434 22,862 29,133 29,090 36,502 37,479 38,547

Free cash flow (31,188) 305,765 69,735 87,670 93,277 (47,461) 127,833 136,159

Ratios (%)

Debt/equity 124.9 80.0 59.3 55.6 50.0 55.1 47.3 40.4

Net debt/equity 121.3 79.8 58.7 55.6 50.0 55.0 47.2 40.3

RoAE 8.0 5.5 12.5 26.1 17.4 12.0 10.8 11.3

RoACE 5.9 4.5 9.2 18.1 12.7 9.3 8.6 9.1

Key assumptions (IOC standalone)





Marketing margin on auto fuels (Rs/liter) — — 1.9 1.8 1.8 1.3 1.8 1.8

Subsidy under-recoveries (Rs mn) (10,826) (12,005) (91) — — — — —


For Private Circulation Only.

#1 Fiscal impact: Central excise revenue to be lower by `105 bn in FY2019

The central government expects revenue loss on account of the announcement at `105 bn

(0.06% of GDP), which translates into a GFD/GDP slippage of around 3.7 bps only. We note

that the states will have an equivalent impact. We continue to believe that the GST run-rate

poses far more significant challenges to the fiscal math, as of now. The government is looking

to bridge the shortfall through higher-than-budgeted (1) direct taxes (possible), and

(2) divestments (difficult). We believe that without expenditure cuts, it will be difficult to stick to

the budgeted target. We maintain our GFD/GDP estimate at 3.5% factoring in reduction in

capital expenditure and some increase in revenue expenditure to factor for higher food and fuel

subsidy (see Exhibit 1).

#2 Inflation impact: Direct impact of around 14 bps

Petrol (2.19%) and diesel (0.15%) together have 2.34% weightage in the CPI basket. If we

assume around `5/liter reduction (center+states), the direct impact is around 14 bps.

Accounting for indirect impact, which will be lagged and staggered, the total impact of price

reduction by center and states would be around 20 bps. We maintain our March 2019 CPI

inflation estimate at 4.9% and core inflation at 5.7% (see Exhibit 2). We maintain our call of

25 bps hike in the October RBI MPC policy.

Economy Public Finance

Fuel excise duty cut: Marginal impact on fiscal and inflation. The government has

reduced excise duty by `2.5/liter each for petrol and diesel with `1.5/liter through the

budget and `1/liter through the OMCs. Further, the central government would be

requesting the state government to pass on similar benefit to consumers. We estimate

that this move will reduce excise duty revenues by `105 bn (0.06% of GDP) in FY2019

and reduce inflation by around 14 bps point through direct impact. States will see an

equivalent fiscal impact assuming all states reduce VAT rates to the tune of `2.5/liter.

INDIA

OCTOBER 05, 2018

UPDATE

BSE-30: 35,169

QUICK NUMBERS

Center and states

both likely to lose

`105 bn of revenues

for the rest of

FY2019

Overall reduction in

Inflation could be

around 20 bps

including direct

impact of 14 bps

Suvodeep Rakshit

Upasna Bhardwaj

Economy India

KOTAK ECONOMIC RESEARCH 23

Exhibit 1: Expenditure cuts are likely in order to maintain GFD/GDP at 3.3% Major central government budgetary items, March fiscal year-ends, 2016-19E (Rs bn)

Source: Union Budget, Kotak Economics Research estimates

2017/ 2018P/ 2019BE/ 2019E/

2016 2017 2018P 2019BE 2019E 2016 2017 2018P 2018P

Receipts

1. Revenue receipts (2d + 3) 11,950 13,742 14,352 17,257 16,850 15 4 20 17

2. Gross tax revenues (a + b ) 14,556 17,158 19,192 22,712 22,088 18 12 18 15

2.a. Direct taxes 7,458 8,539 10,077 11,552 11,552 14 18 15 15

2.a.1. Corporation tax 4,532 4,849 5,712 6,210 6,210 7 18 9 9

2.a.2. Income tax 2,876 3,646 4,082 5,290 5,290 27 12 30 30

2.a.3. Other taxes 50 43 283 52 52 (13) 553 (81) (81)

2.b. Indirect taxes 7,098 8,620 9,115 11,160 10,536 21 6 22 16

2.b.1. Goods and Services Tax — — 4,347 7,439 6,920 71 59

2.b.1.1. CGST — — 2,033 6,039 5,520 197 172

2.b.1.2. IGST — — 1,688 500 500 (70) (70)

2.b.1.3. Compensation cess — — 626 900 900 44 44

2.b.2. Customs duty 2,103 2,254 1,369 1,125 1,125 7 (39) (18) (18)

2.b.2.1. Basic duties 572 646 808 963 963 13 25 19 19

2.b.2.2. Others 1,532 1,608 562 162 162 5 (65) (71) (71)

2.b.3. Excise duty 2,881 3,821 2,586 2,596 2,491 33 (32) 0 (4)

2.b.4. Service tax 2,114 2,545 812 — — 20 (68)

2.c Transfers to states, UTs and national funds 5,119 6,145 6,765 7,906 7,689 20 10 17 14

2.d Net tax revenues 9,438 11,014 12,427 14,806 14,399 17 13 19 16

3. Non-tax revenues 2,513 2,728 1,925 2,451 2,451 9 (29) 27 27

3.a. RBI's transfer of surplus 659 659 407 400 400 (0) (38) (2) (2)

4. Non-debt capital receipts (a + b) 630 654 1,158 922 922 4 77 (20) (20)

4.a Recovery of loans 208 176 156 122 122 (15) (11) (22) (22)

4.b Other receipts (disinvestments) 421 477 1,002 800 800 13 110 (20) (20)

5. Total receipts (1 + 4) 12,580 14,396 15,510 18,179 17,772 14 8 17 15

Expenditure

6. Revenue expenditure 15,378 16,906 18,790 21,418 21,603 10 11 14 15

6.a. Interest payments 4,417 4,807 5,292 5,758 5,758 9 10 9 9

6.b. Subsidies 2,641 2,348 2,242 2,928 3,114 (11) (5) 31 39

6.b.1. Food 1,394 1,102 1,003 1,693 1,843 (21) (9) 69 84

6.b.2. Fertilizer 724 663 664 701 701 (8) 0 5 5

6.b.3. Oil 300 275 244 249 285 (8) (12) 2 17

6.b.4. Other subsidies 223 308 331 285 285 38 7 (14) (14)

6.c. Pay, allowances and pensions 3,301 3,996 4,414 4,791 4,791 21 10 9 9

6.c.1.a. Pay and allowances 2,334 2,682 2,940 3,107 3,107 15 10 6 6

6.c.1.b. Pensions 967 1,314 1,474 1,685 1,685 36 12 14 14

6.d. Agriculture and farmers' welfare 153 369 374 467 467 141 1 25 25

6.e. Education 672 720 800 850 850 7 11 6 6

6.f. Health and family welfare 322 377 514 528 528 17 36 3 3

6.g. Rural development 774 951 1,086 1,124 1,124 23 14 4 4

6.h. Others 3,097 3,338 4,069 4,971 4,970 8 22 22 22

7. Capital expenditure 2,530 2,846 2,637 3,004 2,798 12 (7) 14 6

7. a. Defence 836 915 955 996 896 9 4 4 (6)

7. b. Railways 350 452 434 531 504 29 (4) 22 16

7. c. Roads and Highways 275 412 508 594 594 50 23 17 17

7. d. Housing and urban affairs 106 165 153 164 156 56 (7) 7 2

7. e. Others 963 902 587 720 648 (6) (35) 23 10

8. Total expenditure (6 + 7) 17,908 19,752 21,427 24,422 24,401 10 8 14 14

Deficit

Primary deficit (PD) 911 549 624 485 871 (55) 14 (22) 39

Revenue deficit (RD) 3,427 3,164 4,438 4,160 4,752 3 40 (6) 7

Gross fiscal deficit (GFD) 5,328 5,356 5,917 6,243 6,629 0 10 6 12

Gross borrowings (dated securities) 5,840 5,830 5,451 5,350 5,350 3 (7) (2) (2)

Net market borrowing 4,406 4,082 4,055 3,916 3,915 (4) (1) (3) (3)

Net market borrowing (adjusted for buyback) 4,041 3,497 3,485 3,651 3,887 5 (0) 5 12

Short-term borrowing (T-bills) 507 55 775 170 320

Nominal GDP at market prices 137,640 152,537 167,731 187,223 187,188 10.8 10.0 11.6 11.6

PD/GDP (%) 0.7 0.4 0.4 0.3 0.5

RD/GDP (%) 2.5 2.1 2.6 2.2 2.5

GFD/GDP (%) 3.9 3.5 3.5 3.3 3.5

Change (%)

India Economy

24 KOTAK ECONOMIC RESEARCH

Exhibit 2: CPI inflation likely at 4.9% in March 2019 Headline and core CPI inflation (%)

Source: CEIC, Kotak Economics Research estimates

0

2

4

6

8

10

Jan

-14

Apr-

14

Jul-1

4

Oct

-14

Jan

-15

Apr-

15

Jul-1

5

Oct

-15

Jan

-16

Apr-

16

Jul-1

6

Oct

-16

Jan

-17

Apr-

17

Jul-1

7

Oct

-17

Jan

-18

Apr-

18

Jul-1

8

Oct

-18

Jan

-19

CPI inflation Core CPI inflation

Mar-19: 5.7

Mar-19: 4.9


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September 2018: Results calendar

Source: NSE, Kotak Institutional Equities

Mon Tue Wed Thu Fri Sat Sun

8-Oct 9-Oct 10-Oct 11-Oct 12-Oct 13-Oct 14-Oct

Indiabulls Ventures TCS Hindustan Unilever AU Small Finance

Zee Entertainment Enterprises Avenue Supermarts


Hero Motocorp ACC SBI Life Insurance HDFC Bank

Infosys Mphasis UltraTech Cement ICICI Lombard

Mahindra CIE Automotive


Asian Paints Bajaj Finance Bajaj Auto Crompton Greaves Consumer Bharat Electronics

GlaxoSmithkline Pharmaceuticals Bajaj Finserv Bajaj Holding & Investment Coromandel International

Kansai Nerolac HDFC Standard Life Bharat Financial Inclusion Dr Reddy's Laboratories

TVS Motor Hexaw are Technologies PI Industries

IDFC Bank

Jubilant Foodw orks

Mahindra & Mahindra Financial

Wipro

29-Oct 30-Oct 31-Oct 1-Nov 2-Nov 3-Nov 4-Nov

Colgate-Palmolive (India) Cholamandalam Dabur India Berger Paints Aditya Birla Fashion

GRUH Finance Info Edge HDFC Axis Bank

Tata Pow er Tech Mahindra

The Ramco Cement

Torrent Pow er

5-Nov 6-Nov 7-Nov 8-Nov 9-Nov 10-Nov 11-Nov

Timken Amara Raja Batteries

Titan Company

12-Nov 13-Nov 14-Nov 15-Nov 16-Nov 17-Nov 18-Nov


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Kotak Institutional Equities: Valuation summary of KIE Universe stocks


Target O/S ADVT

Price (Rs) price Upside Mkt cap. shares EPS (Rs) EPS growth (%) P/E (X) EV/EBITDA (X) 3mo

Company Rating 4-Oct-18 (Rs) (%) (Rs bn) (US$ bn) (mn) 2019E 2020E 2021E 2019E 2020E 2021E 2019E 2020E 2021E 2019E 2020E 2021E 2019E 2020E 2021E 2019E 2020E 2021E 2019E 2020E 2021E (US$ mn)

Automobiles

Amara Raja Batteries REDUCE 729 780 7.0 125 1.7 171 32 37 43 17.1 15.9 14.5 22.6 19.5 17.0 12.0 10.3 8.8 3.7 3.2 2.8 17.4 17.5 17.4 0.7 0.8 0.9 6.4

Apollo Tyres BUY 203 340 67.2 116 1.6 541 19 23 28 38.9 26.1 18.1 10.9 8.7 7.3 7.0 5.9 4.8 1.1 1.0 0.9 10.4 12.0 12.7 1.5 1.5 1.5 12.7

Ashok Leyland BUY 118 160 35.5 347 4.7 2,926 6.2 8.9 9.4 15.3 43.2 6.1 19.0 13.3 12.5 9.7 7.0 6.5 4.1 3.5 2.9 23.4 28.4 25.4 1.6 2.3 2.4 46.2

Bajaj Auto SELL 2,657 2,600 (2.1) 769 10.4 289 155 168 180 10.8 8.1 7.4 17.1 15.8 14.7 11.5 10.3 9.3 3.6 3.2 2.9 22.2 21.4 20.6 2.3 2.5 2.7 31.6

Balkrishna Industries REDUCE 1,046 1,300 24.2 202 2.7 193 50 62 70 34.5 24.1 12.8 20.8 16.8 14.8 11.3 9.3 8.0 4.1 3.4 2.8 21.6 22.1 20.7 0.6 0.6 0.7 16.0

Bharat Forge SELL 592 600 1.4 275 3.7 466 23 27 29 44.4 14.6 7.1 25.3 22.1 20.6 14.4 12.6 11.6 5.0 4.3 3.7 21.5 21.0 19.4 0.8 0.9 1.0 12.3

CEAT ADD 1,055 1,500 42.2 43 0.6 40 99 108 116 53.7 8.3 7.9 10.6 9.8 9.1 7.2 6.3 5.7 1.4 1.3 1.1 14.4 13.8 13.2 0.9 0.9 1.0 12.6

Eicher Motors SELL 21,908 21,500 (1.9) 597 8.1 27 981 1,124 1,251 23.7 14.6 11.3 22.3 19.5 17.5 15.8 13.7 11.7 8.1 6.1 4.8 41.8 35.8 30.8 0.1 0.1 — 25.8

Escorts BUY 618 1,200 94.2 53 1.0 89 59 71 78 52.3 19.9 10.2 10.5 8.7 7.9 6.1 4.8 3.9 1.8 1.6 1.4 17.6 18.0 17.1 1.4 1.7 1.9 15.1

Exide Industries SELL 252 235 (6.9) 214 2.9 850 10 11 13 25.3 11.0 11.6 24.5 22.1 19.8 14.0 12.4 11.1 3.6 3.3 3.0 15.4 15.5 15.7 1.2 1.4 1.6 8.6

Hero Motocorp SELL 2,764 2,600 (5.9) 552 7.5 200 174 182 196 (6.1) 4.7 7.6 15.9 15.2 14.1 9.2 8.6 7.8 4.2 3.8 3.4 27.9 26.2 25.4 3.1 3.3 3.5 22.3

Mahindra CIE Automotive ADD 249 290 16.7 94 1.3 378 14 16 17 45.0 12.7 10.4 17.9 15.8 14.4 9.0 7.9 7.0 2.2 1.9 1.7 13.2 13.1 12.7 — — — 2.2

Mahindra & Mahindra BUY 795 1,125 41.6 988 13.4 1,138 45 54 56 18.8 19.0 4.2 17.6 14.8 14.2 11.4 9.5 8.9 2.6 2.3 2.1 15.8 16.6 15.4 1.1 1.4 1.4 32.4

Maruti Suzuki ADD 7,199 9,200 27.8 2,175 29.4 302 298 362 408 16.7 21.2 12.9 24.1 19.9 17.6 13.1 10.4 8.8 4.5 3.9 3.4 20.1 21.1 20.5 1.0 1.3 1.4 83.2

Motherson Sumi Systems SELL 242 280 15.7 510 6.9 2,105 11 14 16 40.2 21.5 13.8 21.1 17.4 15.3 8.6 7.1 6.2 4.4 3.7 3.2 22.5 23.2 22.3 1.1 1.3 1.5 15.8

MRF REDUCE 61,604 69,000 12.0 261 3.5 4 3,425 3,932 4,411 28.3 14.8 12.2 18.0 15.7 14.0 8.3 7.2 6.1 2.3 2.0 1.8 13.9 13.9 13.7 0.1 0.1 0.1 7.9

Schaeffler India BUY 5,200 6,000 15.4 86 1.2 17 156 199 233 9.0 27.3 17.6 33.3 26.2 22.3 20.2 15.4 12.8 4.6 4.0 3.5 14.5 16.4 17.0 0.6 0.8 0.9 0.6

SKF ADD 1,701 1,800 5.9 87 1.2 51 69 82 97 19.7 18.5 18.2 24.6 20.8 17.6 15.7 13.0 10.7 4.1 3.6 3.1 16.7 17.1 17.4 0.7 0.8 1.0 0.4

Tata Motors BUY 223 425 90.4 758 9.6 3,396 22 36 39 10.7 62.7 8.0 10.1 6.2 5.7 3.3 2.7 2.5 0.7 0.7 0.6 7.6 11.2 10.8 — — — 48.3

Timken SELL 579 570 (1.5) 44 0.6 68 19 24 28 41.7 25.1 18.0 30.2 24.1 20.4 18.4 14.8 12.5 4.7 3.9 3.2 16.9 17.5 17.2 0.2 0.2 0.2 0.3

TVS Motor SELL 527 350 (33.6) 251 3.4 475 15 17 20 8.4 15.1 15.6 34.9 30.3 26.2 19.1 16.7 14.6 7.5 6.5 5.6 23.1 22.9 22.9 0.9 1.0 1.1 15.2

Varroc Engineering BUY 832 1,250 50.3 112 1.5 135 39 47 51 52.3 19.9 10.2 21.4 17.8 16.2 16.7 14.2 12.2 3.3 2.7 2.2 15.3 15.3 13.5 — — — —

WABCO India SELL 6,422 6,350 (1.1) 122 1.6 19 169 222 225 17.8 31.3 1.0 37.9 28.9 28.6 24.6 18.6 18.3 6.7 5.5 4.7 19.2 20.9 17.7 0.2 0.2 0.2 0.4

Automobiles Neutral 8,780 118 17.4 25.0 9.7 19.0 15.2 13.8 8.4 7.0 6.2 2.8 2.5 2.2 14.8 16.2 15.6 1.1 1.2 1.3 416.6

Banks

Axis Bank REDUCE 586 600 2.3 1,506 20.4 2,567 19 41 46 1,635.7 118.8 12.3 31.4 14.4 12.8 — — — 2.5 2.1 1.8 7.3 14.3 14.3 0.5 1.0 1.2 94.8

Bank of Baroda NR 103 — — 273 3.7 2,652 21 26 29 323.7 26.4 12.1 5.0 4.0 3.6 — — — 0.9 0.7 0.5 12.7 14.0 13.7 — — — 42.0

Canara Bank ADD 229 300 30.9 168 2.3 733 (5) 51 68 91.6 1,147.0 33.3 (47.3) 4.5 3.4 — — — 1.4 0.8 0.5 (1.0) 10.1 12.0 — — — 26.7

City Union Bank REDUCE 166 200 20.5 121 1.6 665 9 11 12 5.8 13.3 16.7 17.6 15.5 13.3 — — — 2.7 2.4 2.1 15.5 15.6 16.0 1.0 1.1 1.3 2.0

DCB Bank ADD 148 210 41.5 46 0.6 308 10 12 16 28.2 21.0 33.1 14.5 12.0 9.0 — — — 1.7 1.5 1.3 11.7 12.7 14.9 0.6 0.8 1.0 4.3

Equitas Holdings BUY 113 190 67.8 39 0.5 340 4.4 8.4 11.4 378.4 89.9 35.6 25.5 13.4 9.9 — — — 1.6 1.5 1.3 6.4 11.2 13.4 — — — 5.0

Federal Bank BUY 68 105 54.3 135 1.8 1,972 5.7 8.0 9.8 27.8 39.5 22.9 11.9 8.6 7.0 — — — 1.1 1.0 0.9 8.9 11.5 12.9 1.9 2.6 3.2 17.8

HDFC Bank REDUCE 1,958 2,000 2.2 5,320 72.0 2,595 78 94 112 15.7 20.0 19.1 25.1 20.9 17.6 — — — 3.7 3.3 2.9 16.7 16.2 17.0 0.8 0.9 1.1 77.5

ICICI Bank BUY 317 400 26.4 2,037 27.6 7,072 8 26 31 (17.6) 227.0 18.6 40.1 12.3 10.3 — — — 2.2 1.8 1.6 4.7 14.4 15.2 0.5 1.6 1.9 94.2

IDFC Bank NR 37 — — 125 1.7 3,404 1.2 2.9 4.3 (52.7) 146.7 44.8 30.7 12.5 8.6 — — — 0.8 0.8 0.7 2.6 6.3 8.6 0.7 1.6 2.3 6.6

IndusInd Bank BUY 1,590 1,900 19.5 956 12.9 600 70 86 101 15.8 24.3 17.0 22.8 18.4 15.7 — — — 3.4 2.9 2.5 17.4 16.7 16.9 1— 0.6 0.7 37.6

J&K Bank BUY 40 100 150.0 22 0.3 557 7 11 15 82.4 63.8 33.5 6.0 3.7 2.8 — — — 0.5 0.4 0.4 5.9 9.1 11.2 3.3 5.4 7.3 0.3

Karur Vysya Bank ADD 79 110 38.9 64 0.9 727 3 13 14 (32.3) 306.7 9.1 24.6 6.0 5.5 — — — 1.1 1.0 0.8 3.7 14.1 13.9 1.0 4.1 4.7 1.8

Punjab National Bank ADD 65 90 38.9 179 2.4 2,761 (27) 12 18 40.4 145.3 46.9 (2.4) 5.4 3.7 — — — 3.2 1.1 0.6 (23.4) 10.7 13.8 — — — 41.2

RBL Bank SELL 509 475 (6.7) 216 2.9 420 22 29 36 48.1 31.5 21.0 22.7 17.3 14.3 — — — 3.0 2.6 2.3 13.3 15.5 16.5 0.7 0.9 1.1 15.8

State Bank of India BUY 271 370 36.4 2,422 32.8 8,925 8 37 53 204.8 380.5 42.7 35.3 7.3 5.1 — — — 1.8 1.3 1.0 3.1 13.6 16.7 — 0.1 0.2 101.5

Ujjivan Financial Services ADD 252 420 66.8 30 0.4 121 19 28 32 3,033.9 47.3 15.1 13.5 9.1 7.9 — — — 1.6 1.4 1.2 12.1 15.8 15.8 0.7 1.1 1.4 5.4

Union Bank ADD 68 120 76.3 80 1.1 1,169 8 33 40 117.1 330.8 22.5 8.9 2.1 1.7 — — — 1.0 0.6 0.4 3.9 15.2 16.3 1.7 7.3 8.9 10.3

YES Bank SELL 215 200 (7.0) 496 6.7 2,303 18 19 25 (4.4) 10.6 28.2 12.3 11.1 8.6 — — — 1.8 1.6 1.4 14.7 14.5 16.4 1.4 1.5 1.9 136.9

Banks Attractive 14,234 193 804.7 147.0 26.4 28.9 11.7 9.3 1.7 1.5 1.3 6.0 13.1 14.5 0.6 0.9 1.1 721.6

P/B (X) RoE (%) Dividend yield (%)


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NBFCs

Bajaj Finance SELL 2,179 2,000 (8.2) 1,259 17.0 575 68 90 114 56.6 31.9 27.3 32.1 24.3 19.1 — — — 6.5 5.3 4.2 22.4 24.0 24.6 0.3 0.4 0.5 76.3

Bajaj Finserv REDUCE 5,632 6,100 8.3 896 12.1 159 245 307 376 39.7 25.2 22.5 23.0 18.3 15.0 — — — 3.6 3.1 2.6 17.5 18.1 18.6 0.2 0.2 0.2 21.7

Bharat Financial Inclusion NA 990 — — 139 1.9 139 43 54 69 31.1 27.2 25.8 23.1 18.2 14.4 — — — 3.7 3.0 2.5 17.9 18.5 19.0 — — — 11.2

Cholamandalam ADD 1,193 1,425 19.5 187 2.5 156 74 92 113 19.4 23.8 23.1 16.0 13.0 10.5 — — — 3.2 2.7 2.2 20.6 21.3 21.7 0.7 0.9 1.1 7.7

HDFC ADD 1,778 2,020 13.6 3,012 40.8 1,676 55 65 79 (27.3) 18.7 21.2 32.4 27.3 22.5 — — — 4.1 3.7 3.4 13.6 14.2 15.7 1.2 1.4 1.7 81.0

HDFC Standard Life Insurance SELL 372 405 8.8 750 10.1 2,007 6 7 8 14.8 10.9 14.7 58.6 52.9 46.1 — — — 15.5 13.9 12.4 28.0 27.7 28.4 0.4 0.5 0.5 7.9

ICICI Lombard SELL 778 620 (20.3) 353 4.8 454 26 32 37 37.1 21.5 18.5 29.9 24.6 20.8 — — — 6.5 5.5 4.6 23.8 24.2 24.0 0.8 0.9 1.1 5.6

ICICI Prudential Life BUY 326 500 53.3 468 6.3 1,436 12 13 15 10.1 7.0 10.0 26.3 24.5 22.3 — — — 5.9 4.9 4.2 24.5 21.8 20.2 0.6 0.7 0.8 8.5

IIFL Holdings SELL 484 625 29.1 154 2.1 319 38 45 52 31.5 18.6 16.0 12.9 10.9 9.4 — — — 2.3 2.0 1.7 20.5 20.0 20.0 1.7 2.0 2.3 1.9

L&T Finance Holdings ADD 126 165 31.0 252 3.4 1,996 13 14 16 70.9 12.3 12.8 10.0 8.9 7.9 — — — 1.8 1.6 1.3 18.9 18.8 18.3 1.6 2.0 1.9 20.0

LIC Housing Finance BUY 411 580 41.0 208 2.8 505 48 55 66 10.9 13.9 19.8 8.5 7.5 6.2 — — — 1.3 1.2 1.0 17.0 16.2 16.9 1.8 2.1 2.5 17.0

Magma Fincorp BUY 116 165 42.2 31 0.4 237 13 17 21 34.0 31.8 23.0 8.9 6.8 5.5 — — — 1.1 1.0 0.9 13.9 15.8 17.0 1.7 2.2 2.7 1.0

Mahindra & Mahindra Financial ADD 399 450 12.8 246 3.3 614 23 28 34 58.4 23.2 18.6 17.4 14.1 11.9 — — — 2.5 2.3 2.0 14.3 15.8 16.7 1.6 2.0 2.3 12.1

Max Financial Services ADD 359 650 80.8 96 1.3 268 6 6 6 36.9 1.8 1.8 57.3 56.3 55.3 — — — — — — 8.3 8.0 7.8 1— 0.6 0.6 5.7

Muthoot Finance ADD 397 480 21.1 159 2.1 400 40 42 48 (7.8) 6.0 14.8 10.0 9.4 8.2 — — — 1.8 1.6 1.4 19.0 17.6 17.8 2.3 2.4 2.8 7.5

PNB Housing Finance REDUCE 889 1,200 35.0 149 2.0 167 62 75 92 25.3 20.9 22.4 14.3 11.8 9.6 — — — 2.1 1.8 1.6 15.2 15.9 17.0 0.4 0.4 0.4 4.2

SBI Life Insurance ADD 565 785 38.8 565 7.6 1,000 15 18 21 26.0 22.9 17.0 38.9 31.6 27.1 — — — 7.4 6.2 5.2 20.6 21.3 20.9 0.4 0.5 0.6 3.2

Shriram City Union Finance ADD 1,648 2,120 28.6 109 1.5 66 139 171 206 38.1 22.6 20.5 11.8 9.7 8.0 — — — 1.9 1.6 1.4 15.5 16.7 17.4 1.1 1.3 1.6 1.5

Shriram Transport BUY 1,094 1,450 32.5 248 3.4 227 109 127 143 57.8 16.2 12.5 10.0 8.6 7.7 — — — 1.7 1.5 1.3 17.6 17.2 16.8 1.4 1.6 2.0 34.7

NBFCs Neutral 9,282 126 13.2 19.5 19.6 23.9 20.0 16.8 3.8 3.3 2.9 15.9 16.5 17.1 0.8 1.0 1.1 721.6

Cement

ACC SELL 1,528 1,270 (16.9) 287 3.9 188 62 70 81 27.0 13.8 15.2 24.7 21.7 18.8 13.6 11.7 9.9 2.8 2.6 2.3 11.9 12.5 13.1 1.1 1.1 1.1 16.9

Ambuja Cements REDUCE 214 210 (1.7) 424 5.7 1,986 9 11 12 14.5 23.2 15.8 24.8 20.1 17.4 8.3 6.8 5.6 2.0 1.9 1.7 8.1 9.5 10.4 1.7 1.7 1.7 10.9

Dalmia Bharat ADD 2,159 2,830 31.1 193 2.6 89 94 122 139 55.8 29.3 14.8 23.0 17.8 15.5 8.9 7.2 6.1 2.8 2.4 2.1 12.9 14.6 14.5 0.1 0.1 0.1 4.3

Grasim Industries BUY 959 1,170 22.0 631 8.5 657 46 55 70 (2.5) 18.8 28.0 20.8 17.5 13.7 7.2 6.9 6.4 1.0 1.0 0.9 5.2 5.9 7.1 0.6 0.6 0.6 16.8

India Cements REDUCE 99 118 18.7 31 0.4 308 4 8 12 28.0 102.6 41.3 23.8 11.7 8.3 8.1 6.4 5.3 0.6 0.6 0.5 2.5 4.8 6.5 1.0 1.0 1.0 9.8

J K Cement ADD 734 890 21.3 51 0.7 70 45 79 78 3.7 75.4 (0.8) 16.4 9.3 9.4 9.8 8.1 6.6 2.3 1.9 1.6 15.0 22.3 18.5 1.1 1.1 1.1 0.5

JK Lakshmi Cement ADD 298 370 24.4 35 0.5 118 11 28 37 153.5 147.9 30.5 26.3 10.6 8.1 9.4 6.1 4.9 2.3 1.9 1.6 8.9 19.5 21.0 0.7 0.7 0.7 0.4

Orient Cement ADD 91 145 59.1 19 0.3 205 7 11 15 212.9 58.7 41.3 13.5 8.5 6.0 6.8 5.1 3.8 1.7 1.4 1.2 12.9 18.2 21.8 1.6 2.2 2.2 0.3

Shree Cement SELL 16,384 12,500 (23.7) 571 7.7 35 421 630 760 6.0 49.7 20.6 38.9 26.0 21.6 18.0 13.5 11.0 5.6 4.7 3.9 15.4 19.7 19.8 0.3 0.3 0.3 5.6

UltraTech Cement SELL 3,944 2,950 (25.2) 1,083 14.7 275 126 162 201 42.7 28.9 24.0 31.4 24.3 19.6 16.4 13.6 11.3 3.7 3.3 2.8 12.6 14.3 15.4 0.3 0.3 0.3 19.3

Cement Cautious 3,324 45 19.5 30.3 21.8 26.9 20.6 16.9 10.4 8.9 7.7 2.2 2.1 1.9 8.4 10.0 11.0 0.6 0.6 0.6 84.7



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Consumer products

Asian Paints REDUCE 1,225 1,325 8.2 1,175 15.9 959 27 33 39 32.1 20.3 18.3 45.2 37.6 31.8 28.3 23.4 19.7 12.2 10.6 9.3 28.8 30.3 31.3 1.0 1.2 1.5 24.1

Bajaj Corp. ADD 399 470 17.8 59 0.8 148 15 17 19 7.8 10.3 9.5 25.9 23.4 21.4 20.7 17.6 15.3 12.0 12.0 11.8 46.3 51.2 55.4 3.3 3.5 3.8 0.6

Britannia Industries ADD 5,625 6,700 19.1 676 9.1 120 104 127 152 24.5 22.2 19.2 54.0 44.2 37.1 35.4 28.9 24.1 15.7 12.7 10.4 32.5 31.8 30.9 0.6 0.8 1.0 15.1

Coffee Day Enterprises REDUCE 262 290 10.5 55 0.7 211 8 10 12 129.9 30.0 21.2 34.1 26.3 21.7 11.6 10.2 9.4 2.2 2.0 1.8 6.6 8.0 8.9 — — — 1.2

Colgate-Palmolive (India) ADD 1,069 1,250 16.9 291 3.9 272 27 32 36 14.7 15.6 15.5 39.2 33.9 29.4 22.4 19.4 16.9 17.1 14.8 13.0 46.0 46.9 47.3 1.5 1.8 2.2 7.5

Dabur India REDUCE 415 390 (6.1) 734 9.9 1,762 9 10 12 17.3 12.9 13.6 45.6 40.4 35.5 38.1 32.9 28.5 12.8 11.2 9.8 28.1 29.6 29.4 0.9 1.1 1.3 21.2

GlaxoSmithKline Consumer ADD 6,552 7,300 11.4 276 3.7 42 199 223 246 19.5 12.1 10.1 32.9 29.4 26.7 22.7 19.5 17.1 7.1 6.4 5.9 22.8 23.0 23.1 1.4 1.6 1.9 2.2

Godrej Consumer Products SELL 721 733 1.8 737 10.0 1,022 17 19 22 18.8 13.7 12.7 42.6 37.5 33.3 30.2 26.1 22.8 10.0 8.7 7.5 25.3 24.7 24.2 0.8 0.9 1.0 13.7

Hindustan Unilever REDUCE 1,574 1,570 (0.3) 3,407 46.1 2,160 29 33 37 19.5 13.2 12.6 53.7 47.4 42.1 37.1 32.6 28.9 42.0 35.7 30.7 83.5 81.4 78.3 1.3 1.5 1.7 37.1

ITC ADD 287 330 14.9 3,514 47.5 12,275 10 11 12 8.2 12.3 11.7 29.8 26.5 23.7 19.2 16.9 15.1 6.4 6.1 5.7 20.4 22.2 24.2 2.0 2.3 2.7 58.4

Jubilant Foodworks BUY 1,126 1,650 46.6 149 2.0 132 25 35 46 74.7 37.6 32.4 44.3 32.2 24.3 21.9 16.4 12.3 11.0 8.4 6.4 29.0 29.7 29.9 0.2 0.3 0.4 28.5

Jyothy Laboratories ADD 196 240 22.2 71 1.0 364 6 7 8 27.6 16.7 15.4 34.9 29.9 25.9 23.4 19.8 16.9 5.4 4.7 4.1 16.6 16.8 16.9 0.5 0.8 1.0 0.8

Marico ADD 314 375 19.4 405 5.5 1,291 7 8 9 8.9 20.0 14.5 46.0 38.4 33.5 31.9 26.3 22.7 15.1 14.0 12.9 33.7 37.9 40.2 1.5 1.8 2.0 10.3

Nestle India ADD 9,348 11,000 17.7 901 12.2 96 171 197 223 34.2 15.7 13.2 54.8 47.4 41.8 31.2 27.0 23.6 24.2 22.2 20.4 46.1 49.0 50.8 1.2 1.4 1.6 9.9

Page Industries SELL 30,638 25,000 (18.4) 342 4.6 11 418 508 607 34.3 21.6 19.5 73.3 60.3 50.4 47.4 39.1 32.6 31.0 24.6 19.7 47.8 45.5 43.4 0.6 0.7 0.9 18.0

Pidilite Industries REDUCE 968 1,080 11.6 492 6.7 508 21 26 31 16.8 21.8 20.2 45.9 37.7 31.4 30.4 25.1 20.8 11.6 9.8 8.2 27.4 28.2 28.4 0.7 0.9 1.0 8.2

S H Kelkar and Company BUY 207 290 40.0 30 0.4 145 7 10 12 (6.2) 41.9 23.2 29.8 21.0 17.1 19.3 13.9 12.0 3.2 2.9 2.6 11.3 14.5 16.0 0.8 1.0 1.3 0.5

Tata Global Beverages REDUCE 218 250 14.6 138 1.9 631 8 9 10 7.7 17.0 12.9 27.6 23.6 20.9 15.0 13.2 11.6 1.9 1.8 1.7 7.0 7.9 8.5 1.4 1.6 1.8 10.3

Titan Company SELL 777 840 8.1 690 9.3 888 16 20 23 25.6 21.8 19.3 48.4 39.7 33.3 32.1 25.5 21.0 11.4 9.6 8.1 25.6 26.3 26.4 0.6 0.7 0.9 38.8

United Breweries SELL 1,240 1,100 (11.3) 328 4.4 264 21 26 31 39.2 23.6 20.6 59.7 48.3 40.0 29.5 25.3 21.6 10.3 8.7 7.4 18.7 19.6 20.0 0.3 0.3 0.5 14.6

United Spirits REDUCE 490 590 20.4 356 4.8 727 10 13 17 34.7 30.9 24.5 47.8 36.5 29.3 28.0 22.6 18.9 9.8 7.2 5.5 24.2 22.7 21.3 — — 0.5 11.9

Varun Beverages ADD 731 800 9.4 134 1.8 183 15 20 26 29.8 34.5 30.7 48.9 36.4 27.8 16.3 13.9 11.7 6.7 5.8 4.9 14.6 17.1 19.0 — — 0.3 1.3

Consumer products Cautious 14,958 202 17.7 16.0 14.7 42.1 36.3 31.7 27.2 23.3 20.3 11.0 9.8 8.8 26.1 27.1 27.8 1.2 1.5 1.7 334.1

Energy

BPCL REDUCE 331 275 (17.0) 718 9.7 1,967 33 33 36 (19.2) 2.6 7.5 10.2 9.9 9.2 7.6 7.2 6.6 1.7 1.6 1.5 17.9 16.8 16.5 3.9 4.0 4.3 24.1

Castrol India SELL 142 155 9.5 140 1.9 989 7 8 9 2.9 10.1 9.7 20.0 18.2 16.6 12.4 11.2 10.1 13.1 12.8 12.4 67.1 71.5 76.0 3.9 4.4 4.8 3.6

GAIL (India) BUY 368 455 23.7 830 11.2 2,255 29 31 33 41.7 6.4 8.0 12.7 12.0 11.1 8.0 7.5 6.9 1.9 1.7 1.6 15.4 14.9 14.7 2.6 2.7 2.9 25.6

GSPL SELL 181 185 2.0 102 1.4 564 16 12 13 31.3 (25.1) 12.1 11.6 15.6 13.9 4.7 5.6 4.9 1.8 1.6 1.5 16.2 10.9 11.1 1.3 1.0 1.1 1.5

HPCL REDUCE 217 185 (14.8) 331 4.5 1,524 28 29 31 (32.3) 1.7 6.6 7.7 7.6 7.1 7.4 7.6 7.5 1.3 1.2 1.1 17.2 16.1 15.8 5.3 5.4 5.7 21.5

Indraprastha Gas SELL 235 240 2.0 165 2.2 700 12 13 15 16.4 12.3 10.7 19.6 17.5 15.8 12.3 10.7 9.5 4.0 3.5 3.1 22.1 21.5 20.9 1.1 1.3 1.7 9.9

IOCL REDUCE 140 120 (14.5) 1,363 18.4 9,479 16 15 17 (24.1) (1.8) 12.3 9.0 9.2 8.2 5.3 5.1 4.5 1.1 1.1 1.0 12.9 11.9 12.6 4.4 4.4 4.9 16.9

Mahanagar Gas ADD 794 965 21.6 78 1.1 99 56 60 64 16.0 7.6 5.4 14.1 13.1 12.5 8.2 7.4 6.8 3.3 2.9 2.6 24.8 23.5 22.0 2.8 3.0 3.2 12.7

ONGC ADD 172 200 16.0 2,212 29.9 12,833 20 20 19 16.8 0.3 (5.9) 8.5 8.5 9.0 4.0 3.9 3.8 0.9 0.9 0.8 11.2 10.6 9.5 3.9 4.1 4.1 15.8

Oil India SELL 209 200 (4.3) 237 3.2 1,135 23 24 23 (6.7) 3.4 (2.5) 9.1 8.8 9.0 5.9 5.7 5.7 0.8 0.8 0.7 9.2 9.0 8.4 4.4 4.6 4.4 2.2

Petronet LNG BUY 214 280 30.7 321 4.3 1,500 16 18 20 16.7 13.1 9.4 13.2 11.7 10.7 8.8 7.4 6.6 2.9 2.6 2.3 23.3 23.2 22.7 2.6 3.4 4.2 10.1

Reliance Industries SELL 1,122 985 (12.2) 6,641 89.9 5,922 69 78 87 17.6 12.4 11.9 16.2 14.4 12.9 11.2 9.5 8.1 2.0 1.8 1.6 12.2 12.1 12.1 0.6 0.6 0.6 151.1

Energy Attractive 13,139 178 4.0 5.6 6.7 12.3 11.6 10.9 7.5 6.9 6.3 1.5 1.4 1.3 12.6 12.2 12.0 2.1 2.2 2.3 295.1



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Target O/S ADVT

Price (Rs) price Upside shares 3mo


Industrials

ABB SELL 1,383 1,020 (26.2) 293 4.0 212 26 29 36 30.1 14.2 23.5 53.7 47.0 38.0 31.5 28.3 23.5 7.5 6.8 6.0 14.5 15.1 16.7 0.7 0.7 0.7 2.3

BHEL REDUCE 74 89 21.1 270 3.7 3,671 3.3 5.5 7.6 47.9 69.3 38.0 22.6 13.4 9.7 7.1 4.3 3.2 0.8 0.8 0.8 3.6 6.1 8.2 2.7 4.6 6.4 9.5

Carborundum Universal SELL 352 322 (8.5) 67 0.9 189 14 17 20 25.0 21.4 13.8 24.7 20.3 17.9 13.5 11.0 9.5 3.8 3.4 3.1 16.3 17.8 18.1 1.2 1.5 1.7 0.5

CG Power and Industrial BUY 44 62 39.6 28 0.4 627 1.4 3.6 5.7 71.6 157.3 57.0 31.6 12.3 7.8 7.8 5.7 4.4 1.0 1.0 0.9 3.3 8.4 12.5 — — — 4.8

Cummins India REDUCE 676 710 5.1 187 2.5 277 28 33 37 15.2 17.5 13.7 24.3 20.7 18.2 20.3 17.4 15.0 4.4 4.1 3.8 18.7 20.6 21.8 2.2 2.6 3.0 5.1

Kalpataru Power Transmission BUY 306 560 82.7 47 0.6 153 23.9 32.7 41.3 23.4 36.6 26.4 12.8 9.4 7.4 6.3 4.9 4.1 1.6 1.4 1.2 13.0 15.5 16.9 0.5 0.5 0.5 0.6

KEC International BUY 270 410 51.7 69 0.9 257 21 27 33 16.9 29.7 23.0 12.9 10.0 8.1 7.4 6.0 5.1 2.8 2.3 1.8 24.1 25.2 24.9 0.8 1.1 1.3 2.6

L&T BUY 1,258 1,600 27.2 1,763 23.9 1,401 62.8 67.1 83.3 21.5 6.8 24.1 20.0 18.7 15.1 16.0 15.3 13.2 3.2 2.9 2.6 16.7 16.1 18.0 1.7 1.8 2.2 48.4

Siemens SELL 963 1,000 3.8 343 4.6 356 29 35 — 21.4 21.7 — 33.1 27.2 - 18.6 14.9 — 4.0 3.7 — 12.3 14.0 — 1.2 1.5 — 3.8

Thermax REDUCE 921 1,065 15.7 110 1.5 113 27.8 38.7 43.8 34.7 39.2 13.2 33.1 23.8 21.0 21.0 15.5 13.2 3.6 3.3 2.9 11.1 14.3 14.7 1.0 1.2 1.3 1.1

Industrials Neutral 3,177 43 23.8 17.8 15.7 22.8 19.4 16.7 15.2 13.3 11.1 2.7 2.5 2.5 11.8 12.9 14.7 1.6 1.9 2.1 78.7

Infrastructure

Adani Ports and SEZ BUY 317 460 45.1 657 8.9 2,071 19 23 29 1.2 21.1 29.8 16.9 14.0 10.8 11.9 9.8 8.5 2.7 2.3 1.9 17.0 17.7 19.4 0.6 0.6 0.6 15.0

Ashoka Buildcon BUY 107 220 105.6 30 0.4 282 9 10 10 4.1 17.8 (1.3) 12.2 10.4 10.5 8.1 6.9 6.4 1.3 1.2 1.1 11.8 12.3 11.0 1.6 1.2 1.2 0.6

Container Corp. SELL 611 635 4.0 298 4.0 487 21 25 29 17.4 20.9 15.0 29.5 24.4 21.2 18.1 14.3 11.8 2.9 2.7 2.5 10.3 11.6 12.3 1.4 1.7 1.6 5.1

Dilip Buildcon BUY 628 1,240 97.4 86 1.2 137 56 71 85 19.8 27.5 20.1 11.3 8.9 7.4 6.2 4.9 4.2 2.7 2.1 1.6 26.7 26.2 24.4 — — — 3.6

Gateway Distriparks BUY 149 250 67.6 16 0.2 109 7 8 11 (5.8) 15.2 37.5 20.8 18.1 13.1 9.9 8.2 6.7 2.8 2.4 2.1 9.8 14.5 17.1 — 2.0 2.0 0.3

Gujarat Pipavav Port BUY 102 150 46.9 49 0.7 483 5.3 6.5 7.8 29.7 22.9 19.3 19.1 15.6 13.0 10.1 8.2 6.8 2.4 2.3 2.3 12.7 15.3 17.8 4.3 5.3 6.2 0.7

IRB Infrastructure BUY 132 320 142.6 46 0.6 351 31 33 23 36.8 7.1 (31.3) 4.3 4.0 5.8 5.9 6.4 7.6 0.7 0.6 0.6 17.6 16.3 10.0 2.3 3.0 3.2 5.8

Mahindra Logistics REDUCE 516 565 9.4 37 0.5 71 15 21 25 50.7 39.3 23.7 34.9 25.1 20.3 19.4 14.0 11.1 7.3 5.9 4.7 22.7 25.8 25.8 — — — 0.5

Sadbhav Engineering BUY 214 435 102.9 37 0.5 172 17 22 23 31.7 31.0 2.6 12.6 9.7 9.4 9.6 7.5 6.4 1.7 1.5 1.3 14.5 16.5 14.7 — — — 1.3

Infrastructure Attractive 1,255 17 11.3 20.3 16.7 16.3 13.5 11.6 10.4 8.8 7.9 2.4 2.1 1.8 14.8 15.5 15.7 0.9 1.1 1.1 32.8

Internet

Info Edge ADD 1,375 1,425 3.6 168 2.3 122 26 33 40 14.9 27.5 20.6 53.2 41.7 34.6 40.0 30.2 24.5 6.3 5.7 5.1 13.2 14.3 15.6 0.6 0.6 0.7 3.2

Just Dial ADD 477 610 28.0 32 0.4 67 26 30 33 23.0 15.0 9.4 18.2 15.9 14.5 9.1 7.2 5.8 2.8 2.4 2.1 16.7 16.6 15.7 0.5 0.6 0.7 21.6

Internet Cautious 200 3 17.6 23.0 16.8 40.7 33.1 28.3 29.3 23.0 19.2 5.3 4.7 4.2 12.9 14.2 14.7 0.6 0.6 0.7 24.8

Media

DB Corp. REDUCE 202 270 33.9 37 0.5 184 20 23 26 14.9 12.3 14.8 10.0 8.9 7.7 5.3 4.6 — 2.0 1.9 — 20.7 22.3 25.2 8.4 10.4 12.5 0.6

DishTV ADD 55 90 62.3 102 1.4 1,925 1.8 3.4 4.9 514.6 88.2 42.6 NM 16.1 11.3 4.9 3.8 3.0 1.5 1.4 1.2 5.1 8.9 11.5 — — — 4.8

Jagran Prakashan REDUCE 113 168 48.5 34 0.5 311 11 12 14 10.0 12.2 14.6 10.7 9.5 8.3 4.6 4.1 3.5 1.8 1.7 1.6 15.9 18.3 20.2 4.4 8.0 8.0 0.4

PVR BUY 1,200 1,430 19.2 56 0.8 47 38 50 61 41.2 32.3 22.4 31.6 23.9 19.5 12.2 10.4 8.9 4.5 3.9 3.3 15.3 17.6 18.3 0.3 0.4 0.5 11.6

Sun TV Network REDUCE 639 925 44.8 252 3.4 394 35 39 43 20.7 10.9 10.7 18.4 16.6 15.0 12.3 10.7 9.1 4.9 4.4 4.0 28.1 27.9 27.9 2.7 3.1 3.5 18.0

Zee Entertainment Enterprises ADD 439 600 36.6 422 5.7 960 17 20 22 11.3 17.0 13.9 26.3 22.4 19.7 16.1 13.6 11.8 4.9 4.3 3.8 19.9 20.6 20.7 1.0 1.3 1.6 18.6

Media Attractive 902 12 28.7 20.9 17.2 21.6 17.9 15.3 10.2 8.7 7.2 3.5 3.2 3.0 16.3 17.8 19.9 1.8 2.2 2.5 53.9

Mkt cap. EPS (Rs) EPS growth (%) P/E (X) EV/EBITDA (X) P/B (X) RoE (%) Dividend yield (%)


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Target O/S ADVT



Metals & Mining

Coal India ADD 273 320 17.1 1,696 23.0 6,207 25 25 27 120.4 2.2 6.6 11.0 10.7 10.1 8.4 7.1 6.5 6.7 7.4 7.9 62.7 65.9 76.0 7.3 9.1 9.1 14.6

Hindalco Industries BUY 252 330 31.0 565 7.7 2,229 28 33 35 28.1 17.8 6.4 9.0 7.6 7.2 5.8 4.9 4.4 0.9 0.8 0.7 10.8 11.4 10.9 0.5 0.5 0.5 37.1

Hindustan Zinc REDUCE 289 280 (3.1) 1,221 16.5 4,225 21 24 27 (3.8) 15.7 12.3 14.0 12.1 10.7 8.2 6.7 5.6 3.0 2.6 2.3 22.9 23.2 22.6 2.8 2.8 2.8 6.1

Jindal Steel and Power REDUCE 191 215 12.4 185 2.5 968 8 14 22 195.9 68.5 60.8 23.5 13.9 8.7 6.7 6.1 5.2 0.6 0.6 0.5 2.7 4.3 6.5 — — — 35.7

JSW Steel SELL 378 350 (7.3) 913 12.3 2,406 31 26 31 16.1 (16.2) 17.2 12.1 14.4 12.3 7.1 8.3 7.3 2.6 2.2 1.9 23.5 16.6 16.8 0.9 0.9 0.9 36.2

National Aluminium Co. BUY 69 87 25.9 134 1.8 1,933 10 8 9 238.9 (16.0) 3.6 7.0 8.4 8.1 3.3 3.9 3.7 1.2 1.2 1.2 17.6 14.4 14.6 8.7 8.7 8.7 11.5

NMDC REDUCE 115 120 4.3 364 4.9 3,164 12 10 11 4.2 (14.3) 5.9 9.4 11.0 10.4 5.8 6.7 6.2 1.4 1.3 1.3 15.3 12.4 12.5 4.8 4.8 4.8 6.3

Tata Steel ADD 582 660 13.3 666 9.0 1,205 76 85 94 12.8 12.1 10.9 7.7 7 6.2 5.9 6.2 5.9 1.0 0.9 0.8 14.3 14.3 14.4 1.7 1.7 1.7 72.4

Vedanta BUY 239 360 50.4 890 12.0 3,717 27 38 39 26.7 39.0 2.2 8.8 6.3 6.2 5.4 4.1 3.7 1.3 1.2 1.0 15.4 19.4 17.7 3.4 4.8 4.9 48.4

Metals & Mining Attractive 6,634 90 35.8 10.0 9.1 10.4 9.4 8.7 6.5 5.9 5.4 1.8 1.7 1.5 17.3 17.5 17.3 3.6 4.3 4.3 268.4

Pharmaceutical

Apollo Hospitals ADD 1,047 1,090 4.1 146 2.0 139 20 27 33 133.5 36.7 21.6 53.1 38.9 32.0 18.7 15.8 13.9 4.2 3.9 3.6 8.2 10.5 11.8 0.5 0.6 0.8 15.6

Aster DM Healthcare BUY 159 240 50.8 80 1.1 505 5 8 12 74.4 62.0 51.4 33.1 20.4 13.5 12.0 9.4 7.3 2.6 2.4 2.0 8.3 12.2 16.3 — — — 0.2

Aurobindo Pharma ADD 757 760 0.4 444 6.0 584 42 57 64 1.0 35.8 12.3 17.9 13.2 11.8 12.0 8.9 7.9 3.2 2.6 2.2 19.3 19.9 18.6 0.7 0.8 1.0 39.5

Biocon SELL 625 330 (47.2) 375 5.1 601 8 15 18 35.9 75.7 21.7 74.2 42.2 34.7 32.3 21.6 18.4 6.2 5.6 5.0 8.7 13.9 14.3 0.5 0.8 1.0 23.2

Cipla BUY 638 680 6.5 514 7.0 805 24 31 40 34.5 31.0 29.4 27.1 20.7 16.0 15.3 12.1 9.5 3.2 2.9 2.5 12.4 14.6 15.7 0.8 1.0 1.3 23.4

Dr Lal Pathlabs REDUCE 927 900 (2.9) 77 1.0 83 24 29 34 19.0 17.9 18.4 38.1 32.3 27.3 23.3 19.5 15.9 8.2 6.8 5.7 23.4 23.1 22.9 0.5 0.6 0.7 1.2

Dr Reddy's Laboratories REDUCE 2,372 2,150 (9.4) 394 5.3 166 89 118 141 50.2 32.8 19.3 26.8 20.1 16.9 13.5 9.6 8.0 2.8 2.5 2.2 11.1 12.6 13.3 0.6 0.8 0.9 34.4

HCG BUY 215 270 25.6 19 0.3 85 2 4 7 28.8 87.5 73.4 106.8 56.9 32.8 16.5 13.7 10.8 3.4 3.2 2.9 3.3 5.9 9.4 — — — 0.2

Laurus Labs ADD 417 500 19.8 44 0.6 106 16 29 34 2.4 79.9 17.5 25.7 14.3 12.2 12.0 8.3 7.3 2.7 2.2 1.9 10.9 17.1 15.6 — — — 0.6

Lupin REDUCE 855 800 (6.4) 387 5.2 450 27 39 50 (28.9) 44.0 27.4 31.5 21.9 17.2 14.8 10.7 8.6 2.6 2.4 2.1 8.6 11.4 12.4 0.5 0.7 0.9 46.0

Narayana Hrudayalaya ADD 232 265 14.5 47 0.6 204 3 6 9 23.0 103.2 40.7 74.9 36.8 26.2 21.4 15.0 12.0 4.3 3.9 3.4 5.9 11.0 13.7 — — — 0.2

Sun Pharmaceuticals SELL 599 540 (9.9) 1,437 19.4 2,406 16 24 29 7.5 45.5 21.6 36.7 25.2 20.8 19.7 14.2 11.7 3.5 3.1 2.7 9.8 12.9 13.2 0.5 0.8 1.0 60.8

Torrent Pharmaceuticals NR 1,639 — — 277 3.8 169 47 61 81 18.0 29.6 32.1 34.6 26.7 20.2 15.2 13.0 10.7 5.3 4.6 3.9 15.3 17.2 19.3 0.7 0.9 1.1 7.9

Pharmaceuticals Neutral 4,241 57 11.3 40.7 22.6 32.0 22.7 18.5 16.5 12.2 10.2 3.5 3.1 2.7 10.9 13.5 14.6 0.6 0.8 1.0 253.2

Real Estate

Brigade Enterprises BUY 189 290 53.1 26 0.3 136 9 15 17 (17.0) 59.2 15.8 20.6 12.9 11.2 13.1 10.2 8.2 1.1 1.0 0.9 5.4 8.1 8.8 1.3 1.3 1.3 0.3

DLF RS 158 — — 283 3.8 1,784 5.3 23.9 14.1 (74.4) 354.6 (41.0) 30.2 6.6 11.2 45.7 8.0 14.9 0.8 0.7 0.7 2.6 11.3 6.2 1.3 1.3 1.3 20.7

Godrej Properties SELL 576 400 (30.6) 132 1.8 216 12.9 15.1 18.2 (32.9) 16.3 20.8 44.5 38.3 31.7 730.1 208.0 112.1 4.6 4.1 3.1 10.9 11.4 10.1 — — — 1.7

Oberoi Realty BUY 395 560 41.6 144 1.9 340 62 44 66 385.4 (28.0) 49.3 6.4 8.9 6.0 9.0 11.1 4.7 1.5 1.3 1.0 27.4 15.2 19.2 0.5 0.5 0.5 2.5

Prestige Estates Projects ADD 196 315 60.4 74 1.0 375 10 10 11 (24.2) 8.4 — 20.7 19.0 18.4 13.0 12.9 12.8 1.5 1.4 — 7.3 7.5 7.3 0.8 0.8 0.8 0.7

Sobha REDUCE 400 510 27.6 38 0.5 95 20 23 24 (7.5) 14.8 3.5 19.8 17.2 16.7 11.9 11.2 10.5 1.3 1.3 1.5 6.8 7.4 9.1 1.8 1.8 1.8 1.6

Sunteck Realty REDUCE 371 360 (2.8) 54 0.7 140 19 19 39 22.4 1.6 106.6 19.8 19.5 9.4 17.1 16.6 7.1 1.8 1.7 1.4 9.5 8.9 16.2 0.3 0.3 0.3 1.9

Real Estate Neutral 750 10 (23.2) 68.3 (7.9) 17.6 10.4 11.3 20.6 11.3 11.5 1.2 1.1 1.0 7.0 10.6 9.0 0.8 0.8 0.8 29.3

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Target O/S ADVT



Technology

HCL Technologies REDUCE 1,077 1,100 2.1 1,500 20.3 1,409 71 78 82 14.6 8.9 5.0 15.1 13.9 13.2 9.8 8.7 8.0 3.4 2.9 2.6 24.4 22.3 20.6 0.8 2.9 3.1 34.5

Hexaware Technologies SELL 409 455 11.3 121 1.6 302 20 24 27 19.5 21.6 12.7 20.7 17.0 15.1 15.2 11.5 10.0 5.3 4.5 3.8 27.6 28.7 27.5 2.0 2.0 2.4 22.6

Infosys ADD 707 770 8.9 3,089 41.8 4,350 36 41 45 12.8 13.3 8.9 19.4 17.1 15.7 13.2 11.5 10.3 4.4 3.9 3.5 23.4 24.2 23.7 3.1 2.8 3.0 89.7

L&T Infotech ADD 1,866 2,100 12.6 323 4.4 175 83 96 113 30.5 15.6 18.1 22.5 19.5 16.5 17.0 13.7 11.6 6.8 5.5 4.5 33.5 31.3 30.0 1.3 1.4 1.6 9.7

Mindtree ADD 1,063 1,225 15.2 175 2.4 165 45 57 65 29.5 27.0 14.5 23.8 18.7 16.4 15.0 11.8 10.1 5.4 4.6 3.9 24.7 26.6 25.8 1.3 1.6 1.8 26.0

Mphasis SELL 1,148 900 (21.6) 222 3.0 193 53 60 63 21.9 12.1 4.7 21.5 19.2 18.3 15.8 13.4 12.5 4.2 3.8 3.5 18.9 21.0 20.0 1.7 2.2 2.6 7.0

TCS REDUCE 2,065 1,950 (5.6) 7,905 106.9 3,829 84 94 101 24.9 11.7 7.4 24.5 21.9 20.4 18.0 16.1 15.0 7.9 7.8 7.6 34.3 35.6 37.7 2.0 3.6 3.9 84.1

Tech Mahindra ADD 720 865 20.2 635 8.6 891 46 57 64 8.4 22.4 13.0 15.6 12.7 11.3 9.2 7.3 6.2 2.9 2.5 2.1 20.2 21.2 20.3 1.3 1.4 1.6 38.6

Wipro REDUCE 326 325 (0.2) 1,473 19.9 4,507 19 23 25 12.8 19.5 7.5 17.0 14.3 13.3 11.0 9.2 8.5 2.6 2.4 2.2 16.5 17.6 17.4 0.5 3.1 3.4 20.8

Technology Cautious 15,444 209 15.6 13.0 8.1 20.9 18.5 17.1 14.4 12.6 11.5 5.0 4.6 4.3 24.2 25.1 24.9 1.9 3.1 3.3 333.0

Telecom

Bharti Airtel ADD 310 445 43.5 1,240 16.8 3,997 (6) (4) 5 (221.5) 28.8 215.1 (53.9) (75.8) 65.8 8.8 7.4 5.9 1.9 1.9 1.9 (3.4) (2.5) 2.9 0.3 (0.3) 0.4 25.8

Bharti Infratel REDUCE 256 285 11.3 474 6.4 1,850 13 12 13 (4.8) (8.5) 7.7 19.6 21.4 19.9 7.2 7.6 7.2 2.9 2.9 2.9 14.6 13.7 14.6 4.1 3.8 4.1 9.7

IDEA REDUCE 34 45 33.1 295 4.0 4,359 (17) (17) (15) (75.6) (2.4) 11.4 (2.0) (2.0) (2.2) 37.8 31.8 19.6 0.7 1.0 1.9 (29.7) (41.1) (59.4) — — — 16.2

Tata Communications ADD 480 660 37.4 137 1.9 285 0 3 7 (77.5) 694.2 123.5 1,296 163.2 73.0 10.0 8.8 7.9 (59.6) (81.0) (1,569.4) 7.8 (42.1) (211.0) 1.4 1.6 1.6 3.0

Telecom Cautious 2,146 29 (2,384.5) 5.0 68.0 (29.9) (31.4) (98.3) 10.3 9.0 7.4 2.1 2.3 2.4 (6.9) (7.2) (2.4) 1.2 0.7 1.1 54.7

Utilities

CESC BUY 841 1,180 40.2 112 1.5 133 115 128 141 31.7 11.6 10.1 7.3 6.6 6.0 5.4 4.8 4.2 0.7 0.7 0.6 10.0 10.4 10.5 1.5 1.5 1.6 8.1

JSW Energy REDUCE 63 70 10.9 104 1.4 1,640 5.1 6.5 6.6 65.9 26.8 2.9 12.4 9.8 9.5 5.5 4.5 4.1 0.9 0.8 0.7 7.2 8.5 8.0 — — — 1.2

NHPC ADD 24 30 25.0 246 3.3 10,260 3.1 3.2 3.4 26.9 1.8 8.0 7.8 7.6 7.0 7.2 7.0 7.4 0.8 0.8 0.7 10.4 10.2 10.6 7.3 7.3 6.2 1.5

NTPC BUY 167 190 13.9 1,375 18.6 8,245 15 16 18 18.8 4.4 16.5 11.2 10.7 9.2 8.9 8.3 6.9 1.3 1.2 1.1 11.6 11.3 12.2 2.7 2.8 3.3 11.2

Power Grid BUY 189 250 32.1 990 13.4 5,232 19 21 23 19.3 13.6 7.6 10.1 8.9 8.2 7.2 6.6 6.3 1.6 1.5 1.3 17.1 17.5 17.0 3.3 3.8 4.0 13.8

Tata Power BUY 67 90 34.6 181 2.4 2,705 6.0 7.0 10.9 12.7 15.6 57.0 11.1 9.6 6.1 10.4 9.9 8.6 1.1 1.0 0.8 10.1 10.6 14.6 — — — 4.4

Utilities Attractive 3,008 41 21.1 8.8 14.1 10.3 9.4 8.3 7.9 7.3 6.6 1.2 1.1 1.0 11.9 12.0 12.5 3.0 3.2 3.4 40.2

Dividend yield (%)Mkt cap. EPS (Rs) EPS growth (%) P/E (X) EV/EBITDA (X) P/B (X) RoE (%)


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Others

Aditya Birla Fashion and Retail BUY 183 220 20.5 141 1.9 773 2 4 6 50.6 59.1 53.5 79.5 50.0 32.6 23.4 18.2 14.8 11.1 9.1 7.1 15.0 20.0 24.5 — — — 5.0

Astral Poly Technik SELL 878 640 (27.1) 105 1.4 120 19 25 29 30.2 28.8 16.1 46.0 35.7 30.8 24.8 19.6 16.6 8.1 6.7 5.5 19.8 20.5 19.7 0.1 0.1 0.2 1.0

Avenue Supermarts SELL 1,346 860 (36.1) 840 11.4 624 16 20 26 28.6 26.4 27.5 83.3 65.9 51.7 48.1 37.7 29.7 14.9 12.1 9.8 19.6 20.3 21.0 — — — —

Bayer Cropscience REDUCE 4,365 4,100 (6.1) 150 2.0 34 106 130 154 20.5 23.1 18.3 41.4 33.6 28.4 26.2 21.3 17.8 7.3 6.3 5.4 18.9 20.0 20.3 0.5 0.6 0.7 0.5

Crompton Greaves Consumer SELL 212 215 1.4 133 1.8 627 6 7 9 19.5 20.7 17.4 34.3 28.4 24.2 21.3 18.0 15.2 11.7 9.0 6.9 40.4 35.8 32.3 0.9 1.2 — 2.8

Dhanuka Agritech ADD 405 650 60.5 20 0.3 49 27 31 34 3.9 15.4 10.8 15.2 13.1 11.9 10.8 8.8 7.6 2.7 2.4 2.1 19.2 19.2 18.5 1.4 1.6 1.8 0.2

Godrej Agrovet ADD 526 640 21.7 101 1.4 189 15 19 23 28.9 28.8 21.1 35.4 27.5 22.7 19.3 15.1 12.5 5.2 4.4 3.8 15.7 17.4 17.9 — 1— 0.7 0.9

Godrej Industries RS 486 — — 164 2.2 336 16 20 — 8.9 24.2 — 30.6 24.7 - 26.5 28.8 — 4.0 3.5 — 13.9 15.1 — 0.4 0.4 — 4.0

Havells India SELL 606 485 (19.9) 379 5.1 625 14 17 20 26.6 20.5 17.6 43.2 35.9 30.5 27.6 22.4 18.8 8.9 7.8 6.8 22.0 23.2 23.9 0.8 1.0 1.1 14.8

InterGlobe Aviation BUY 817 980 20.0 314 4.2 383 (11) 42 75 (118.1) 496.4 79.4 (77.0) 19.4 10.8 (44.6) 9.2 4.9 4.7 3.8 2.8 (5.9) 21.5 29.9 (0.1) - 0.5 18.9

Kaveri Seed SELL 519 515 (0.8) 34 0.5 66 34 34 37 7.3 0.1 8.3 15.1 15.1 13.9 12.3 11.6 10.3 3.6 3.2 2.7 26.4 22.4 21.0 1.5 1.9 1.9 4.9

PI Industries BUY 703 875 24.5 97 1.3 138 31 40 48 17.9 26.8 21.5 22.4 17.7 14.6 15.9 12.4 10.0 4.2 3.5 2.9 20.5 21.7 21.9 0.5 0.7 0.8 2.2

Rallis India ADD 177 220 24.3 34 0.5 195 10 12 13 17.2 19.4 9.7 17.5 14.7 13.4 11.5 9.7 8.6 2.6 2.4 2.2 15.8 17.1 16.9 2.1 2.3 2.5 0.7

SIS REDUCE 915 1,130 23.5 67 0.9 73 33 40 48 48.5 21.1 17.8 27.5 22.7 19.2 17.2 14.3 11.9 5.5 4.5 3.7 21.8 21.7 21.1 0.3 0.4 0.5 0.6

SRF BUY 1,749 2,200 25.8 100 1.4 57 100 132 150 23.8 32.2 14.1 17.6 13.3 11.7 10.5 8.3 7.0 2.5 2.1 1.8 15.0 17.3 17.0 0.8 0.8 0.9 11.4

Tata Chemicals ADD 660 760 15.1 168 2.3 255 44 51 56 (15.3) 14.6 11.5 15.0 13.1 11.7 6.1 5.1 4.3 1.4 1.3 1.2 9.7 10.3 10.8 2.3 2.6 2.6 6.8

TCNS Clothing Co. BUY 613 760 24.0 38 0.5 64 18 23 27 15.3 27.5 20.8 34.7 27.2 22.5 18.5 14.0 11.0 6.9 5.3 4.2 22.7 22.2 20.9 — — — —

TeamLease Services SELL 2,198 1,785 (18.8) 38 0.5 17 60 77 100 38.9 29.2 28.7 36.7 28.4 22.1 36.9 27.8 21.3 6.9 5.6 4.4 20.8 21.7 22.4 — — — 1.1

UPL ADD 629 660 5.0 320 4.3 507 49 55 60 14.6 11.9 9.5 12.8 11.4 10.4 8.7 7.4 6.4 2.9 2.4 2.0 24.7 22.9 21.1 1.6 1.8 1.9 29.3

Vardhman Textiles ADD 965 1,300 34.8 55 0.7 56 118 130 142 14.8 9.7 9.8 8.2 7.4 6.8 6.3 5.8 5.1 1.0 0.9 0.8 13.1 13.0 13.0 2.1 3.1 3.1 0.4

Voltas SELL 516 530 2.8 171 2.3 331 17 21 25 0.4 18.8 18.9 29.7 25.0 21.0 22.1 18.0 15.0 3.9 3.5 3.1 13.9 14.8 15.7 0.7 0.8 1.0 11.9

Whirlpool SELL 1,376 1,350 (1.9) 175 2.4 127 37 46 56 33.9 24.7 20.2 37.2 29.8 24.8 22.3 17.6 14.3 8.1 6.7 5.7 23.7 24.5 24.8 — 0.7 1.2 1.7

Others 3,643 49 (10.1) 39.1 18.2 33.7 24.2 20.5 19.7 14.5 11.2 4.8 4.2 3.7 14.4 17.2 18.3 0.6 0.7 0.8 119.1

KIE universe 105,118 1,422 23.1 28.4 15.1 20.9 16.2 14.1 10.6 9.3 8.3 2.6 2.4 2.1 12.6 14.7 15.2 1.4 1.8 2.0

KIE universe (ex-energy) 91,979 1,244 29.5 34.6 16.9 23.2 17.2 14.7 11.7 10.2 9.0 2.9 2.6 2.4 12.6 15.3 16.1 1.3 1.7 1.9

Notes:

(a) We have used adjusted book values for banking companies.

(b) 2019 means calendar year 2018, similarly for 2020 and 2021 for these particular companies.

(c) Exchange rate (Rs/US$)= 73.92

Mkt cap. EPS (Rs) EPS growth (%) P/E (X) EV/EBITDA (X) P/B (X) RoE (%) Dividend yield (%)

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Economy India

Ratings and other definitions/identifiers

Definitions of ratings

BUY. We expect this stock to deliver more than 15% returns over the next 12 months.

ADD. We expect this stock to deliver 5-15% returns over the next 12 months.

REDUCE. We expect this stock to deliver -5-+5% returns over the next 12 months.

SELL. We expect this stock to deliver <-5% returns over the next 12 months.

Our target prices are also on a 12-month horizon basis.

Other definitions

Coverage view. The coverage view represents each analyst’s overall fundamental outlook on the Sector. The coverage view will consist of one of the following

designations: Attractive, Neutral, Cautious.

Other ratings/identifiers

NR = Not Rated. The investment rating and target price, if any, have been suspended temporarily. Such suspension is in compliance with applicable regulation(s)

and/or Kotak Securities policies in circumstances when Kotak Securities or its affiliates is acting in an advisory capacity in a merger or strategic transaction

involving this company and in certain other circumstances.

CS = Coverage Suspended. Kotak Securities has suspended coverage of this company.

NC = Not Covered. Kotak Securities does not cover this company.

RS = Rating Suspended. Kotak Securities Research has suspended the investment rating and price target, if any, for this stock, because there is not a sufficient

fundamental basis for determining an investment rating or target. The previous investment rating and price target, if any, are no longer in effect for this stock

and should not be relied upon.

NA = Not Available or Not Applicable. The information is not available for display or is not applicable.

NM = Not Meaningful. The information is not meaningful and is therefore excluded.

Kotak Institutional Equities Research coverage universe

Distribution of ratings/investment banking relationships

Source: Kotak Institutional Equities As of June 30, 2018

Percentage of companies covered by Kotak Institutional

Equities, within the specified category.

* The above categories are defined as follows: Buy = We

expect this stock to deliver more than 15% returns over

the next 12 months; Add = We expect this stock to

deliver 5-15% returns over the next 12 months; Reduce

= We expect this stock to deliver -5-+5% returns over

the next 12 months; Sell = We expect this stock to deliver

less than -5% returns over the next 12 months. Our

target prices are also on a 12-month horizon basis.

These ratings are used illustratively to comply with

applicable regulations. As of 31/03/2018 Kotak

Institutional Equities Investment Research had

investment ratings on 207 equity securities.

Percentage of companies within each category for

which Kotak Institutional Equities and or its affiliates has

provided investment banking services within the

previous 12 months.

21.4%

31.3%

25.4%21.9%

2.0%5.0% 4.5%

0.5%

0%

10%

20%

30%

40%

50%

60%

70%

BUY ADD REDUCE SELL

Corporate Office Overseas Affiliates

Kotak Securities Ltd.

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28th Floor, New York

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Tel:+1 212 600 8856 Copyright 2018 Kotak Institutional Equities (Kotak Securities Limited). All rights reserved.

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This report has been prepared by the Institutional Equities Research Group of Kotak Securities Limited. The views and opinions expressed in this document may or may not match or may be contrary with the views, estimates, rating, target price of the Private Client Group. In reviewing these materials, you should be aware that any or all of the foregoing, among other things, may give rise to real or potential conflicts of interest. Additionally, other important information regarding our relationships with the company or companies that are the subject of this material is provided herein. This material should not be construed as an offer to sell or the solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. We are not soliciting any action based on this material. It is for the general information of clients of Kotak Securities Limited. 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We or our associates have managed or co-managed public offering of securities for the subject company(ies) in the past 12 months. YES. Visit our website for more details We or our associates may have received compensation for investment banking or merchant banking or brokerage services from the subject company(ies) in the past 12 months. We or our associates may have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company(ies) in the past 12 months. We or our associates may have received compensation or other benefits from the subject company(ies) or third party in connection with the research report. Our associates may have financial interest in the subject company(ies). 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India Daily, October 05, 2018 - Kotak Securities · 2018-10-05 · For Private Circulation Only. FOR IMPORTANT INFORMATION ABOUT KOTAK SECURITIES’ RATING SYSTEM AND OTHER DISCLOSURES,