India Strategy & Top Ideas · India Strategy & Top Ideas ... seems to be no immediate solution as the politics gets prolonged from once ... removing both ICICI bank and SBI from our

India Strategy & Top Ideas

Disappointing Q3FY16; All eyes on the Union Budget

R Sreesankar [email protected]

+91-22-66322214

Click to edit Master title style LilladherPrabhudas February 2016

Prabhudas Lilladher Pvt. Ltd. and/or its associates (the 'Firm') does and/or seeks to do business with companies covered in its research reports. As a result investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of the report. Investors should consider this report as only a single factor in making their investment decision.

Please refer to important disclosures and disclaimers at the end of the report.

LilladherPrabhudas Contents

2/15/2016 2

Page No.

Large Caps

Infosys 23

HDFC Bank 25

Coal India 27

Maruti Suzuki 29

Tata Motors 31

Larsen & Toubro 33

Indian Oil Corporation 36

IndusInd Bank 38

Dabur India 40

Aurobindo Pharma 42

Britannia Industries 44

Cummins India 46

GlaxoSmithKline Consumer Healthcare 48

ACC 50

Glenmark Pharmaceuticals 52

Petronet LNG 54

Mid-Caps

Hexaware Technologies 57

Jubilant Life Sciences 59

SpiceJet 61

Sadbhav Engineering 63

Capital First 65

Ashoka Buildcon 67

Jammu & Kashmir Bank 69

JK Lakshmi Cement 71

NIIT Technologies 73

VRL Logistics 75

Va Tech Wabag 77

Page No.

All eyes on Union Budget FY17 and Capex 3-4

Global Growth – US to lead the Growth 5

Oil imports shrink in January 2016 6

Direct and Indirect Tax collections up 7

Sharp increase in plan expenditure 8

CPI Inflation up in December 2015 9

Markets

Equity markets under pressure across the globe 10

Weakness all across 11

Small and Midcaps retreat 12

Sharp recovery in some EM currencies 13

Domestics continue to remain buyers 14

Global Agri commodities - Sugar continue to gain 15

Global Industrial commodities bottomed out 16

Will the Fed hike rate soon? 17

Indian Market – Banks Earnings revised downwards further 18

Nifty Valuations: Historic Trends 19

Nifty Valuation 20

Top Pick Summary 21

(Prices as on February 15, 2015)

LilladherPrabhudas All eyes on Union Budget FY17 and Capex

• Union Budget FY 17, what is in store? There seems to be no political trigger points at least in the near term except the impending state elections to Tamil Nadu, West Bengal, Assam, Kerala and Pondicherry and the passage of GST bill. While it may take a while for the former to happen, in case of later there seems to be no immediate solution as the politics gets prolonged from once incident to another, with the latest being the suicide of a student in Hyderabad. While the polices has got the upper hand, decision making and implementation has taken a back seat. All eyes are on the Union Budget for FY17 as it looks as the Government is continuing with their efforts to accelerate the economic growth all alone as there seems to be no support from the private sector.

• Commodities, have we seen the bottom: India continue to see the benefit of weak oil prices, while the exports is impacted in a big way as the global economies have been on a weak wicket with the growth barely managing to meet expectations. The low commodity prices has seen its impact on lower credit growth and reduced revenue growth across the sectors. Global commodities continue to look weak, though we may see sporadic bouts of sharp swings.

• Government Spending, how long can they be the torch bearer, When will see a recovery in capital goods sector: The capital goods sector is one which have disappointed a lot in terms of performance, mainly on account of lack of orders. BHEL reported a loss of over Rs11bn in Q3FY16 alone. Our interaction with some of the capital goods companies increasingly point out to a level of excess capacity built in the system which unless utilized fully will not see capacity additions, thereby continuing to impact the performance of the capital goods companies.

• Politics, how will the outcome of state elections impact decision making at the centre: Pondicherry, Assam, Kerala, West Bengal and Tamil Nadu is going to polls in the next six months. Though these states have not been traditionally the strong holds of the NDA, the election results could throw in some surprises which could make a change to the political equations at the centre.

• PSU banks and NPAs: The PSU banks have been the whipping boys of the market in the last six months. The fall in stock prices have been sharp and quick and they have been falling like nine pins. One of the reasons for the huge underperformance of the PSU banks have been the questions on their under writing and the quality of the assets that they were having. With Bank of Baroda taking the lead in making a single shot provision for the bad assets, we are sure the focus will be on other PSU banks who will be forced by the market forces to provide for the bad loans. Until this uncertainty is over, the PSU banks is likely to remain in the shadow of the Private sector banks.

• Seventh Pay Commission, OROP, what will it do to the domestic economy? The seventh pay commission effect is expected to be reflected in the performance of the economy in FY17. The seventh pay commission has indicated an approximate increase of 23% in the total compensation, resulting into an average of Rs12K per month increase in salaries for a government employee. This is expected to result in sharp increase in the discretionary spend like consume staples and durables, automobiles, spending on holidays etc. We expect a sharp jump in consumption in FY17. Once the OROP( One Rank One Pension) is implemented, that also will see a significant increase in surplus income, though this will be in the hands of retirees, which in our view will not result in a jump in discretionary spend, while it will result in increase in savings. We are positively inclined towards the FMCG sector due to the increased consumption opportunities, improving margins due to low commodity prices and the increasing penetration levels.

• 3QFY16 results disappoint, Recovery still not fully visible: For 3QFY16, in the Nifty stocks, the revenues were down 2%, EBITDA( including OI) up 10%, Interest expense up 8%, Depreciation up 8%, Tax down 21% and PAT down 15%. For the Nifty stocks ex banks, the Revenues were down 4%, EBITDA up 4%, Interest expense up 4%, Depreciation up 8%, Tax down 10% and PAT down 9%. Even without the banks performance, the profit growth has been below expectations. Metals, commodity companies and capital goods companies have added to the profit reduction.

2/15/2016 3

LilladherPrabhudas Contd…

• Financials, Need to go Neutral: We continue to believe that the financials services sector will lead the economic growth. However, with questions getting raised on the global growth itself, the problems of the financial services sector is far from over, at least in the near term. In the absence of any clear positive signals, we are downgrading the sector to Neutral weight, removing both ICICI bank and SBI from our top picks while increasing FMCG to overweight. Among the banks, we like the retail banks more than the corporate banks and we believe PSU banks across the board are focused on corporate banking to a great extent and hence we had continued preference for private sector banks Vs PSU banks. The only exception was on SBI which was one of our top picks and also the only preferred PSU bank. We continue to have a Buy an SBI, though not in the top picks. We have added Capital First to the Top Picks. With 85% of exposure in retail, with LAP contributing 65%, two wheeler financing achieving breakeven and consumer durables at 10%, we feel that the stocks is poised to give handsome returns going forward.

• FMCG, Need to go Overweight: FMCG has had a steady period in terms of performance. We have had a Neutral rating on the sector so far. However, we feel that the sector is poised for a strong out performance. The relative outlook for FMCG remains good. As FMCG companies performance is related to the domestic economic performance, we expect them to have a relatively stable performance. More importantly, the falling commodity prices have resulted in a margin expansion across the companies, though in some cases volumes have contracted and increasing competition from “Patanjali” have heightened the competition turf. We are re introducing Britannia into our top picks, as the stock price have seen a sharp correction, operational performance have been intact, increasing reach, improving cost optimization and high free cash generation has been the reasons for the upgrade.

• Why India will still be preferred among the merging markets?: The benign crude oil prices continue to add significant benefit to the CAD scenario in India. The trade deficit has reduced to US$7bn in Jan 16. We believe, unless a significant growth momentum exist in both USA and Europe, the chances of a headwinds in global growth remains high. With a significant sized domestic economy, India will continue to enjoy a better scenario when compared to most of the other large emerging markets. With the domestic economy also expected to continue to do well, thanks to the benefits of seventh pay commission and OROP benefits, we expect India to continue to have superior economic growth, earnings growth and relatively stable currency. With these in place, we continue to believe that India is a stable place, where the interest is going to be high.

• Nifty earnings growth for FY16, Sharply revised downwards? The 3QFY16 results for the Nifty companies were a disappointment. Banking and Financials, Metals and commodities sectors disappointed significantly. The earnings estimate for the Nifty has been brought down from Rs411.5 to Rs379.7 for FY16. The reduction was due to severe downgrades seen in earnings contraction in banking of 6.9% from a growth estimates of 15.1% as well as Oil & Gas growth being revised downwards from 16.9% to 1.4%.

• Our preferred picks continue to be HDFC Bank, Indusind Bank, J&K Bank and adding Capital First among financials, Larsen & Toubro, Sadbhav Engineering and Ashoka Buildcon among Engineering & Capital Goods, Infosys, Hexaware and NIIT Tech among IT, JK Lakshmi Cement and adding ACC among Basic materials and Tata Motors, and Maruti Suzuki among Automobiles with Glenmark, Jubilant Life and Aurobindo Pharma among Pharmaceuticals, GSK Consumer, adding Britannia and Dabur in FMCG, Petronet LNG in Oil & Gas, and continuing VRL among logistics. We are also adding Spicejet to our top picks as we continue to believe that low crude oil prices, double digit passenger growth and increasing passenger load factors augur well for the aviation sector. We expect the Budget to focus more on Rural Demand Growth.

2/15/2016 4

LilladherPrabhudas Global Growth – US to lead the Growth

• US expected to lead the global growth in CY2016, Non farm pay roll disappoints : US economy is expected end CY2015 at 2.5% and grow at 2.4% in CY2016. Steady job creation, decent real wages growth and higher consumer borrowing is expected to drive the US growth in CY2016 also. However, the recent job addition of 151,000 in Jan 2016 were below the consensus estimates, while the unemployment levels continue to reach a new low.

• Crude oil, touching a new low in 2016: Brent touched a new low of US$27.88 on 20th Jan 2016, before bouncing back to the current levels of US$33 per barrel. Brent touched a 12 year low and we expect the current low levels of crude to probably add to increasing job losses in the energy sector. The global commodities too continue to follow a similar trend, though we have seen some bounce back, sustaining the price reversal seems to be some time away.

• Global Volatility and Indian Volatility seeing wide swings: The CBOE VIX volatility index, a measure of the cost of equity portfolio protection has been reflecting the higher volatility seen in the global markets. The CBOE Global VIX traded at a range from 15 to 30, while the Indian VIX traded at a range between 14 to 26. The volatility continues to remain high.

• Emerging Markets, continue to see high volatility: The global growth indicators are giving mixed signals. While the emerging markets look forward to the developed world for a growth direction, the continued pressure in the developed world and regions is doing havoc with the emerging markets. The low crude oil prices have resulted in recession in Brazil and Russia for the second year in succession. The high current account deficit in many EMs have put pressure on their currencies. We believe the Chinese growth is going to be crucial for all the policy makers in emerging markets as a weak Chinese growth and a weak Chinese currency will lead to increased pressure on the Asian markets to compete more fiercely with Chinese companies for exports. As a result, we expect some emerging market economies to face threat of rising input costs due to weakening currencies. With China focusing on the consumption driven growth model, the need for Asian emerging markets to adjust to this new growth paradigm of China is going be tricky. Many emerging economies have seen their spending power getting increased by cheaper oil imports. They will have to manage the challenge in the face of increased challenges on the export front leading to increased deficits.

• Global Trade at its weakest since state since 2009: Since the financial crisis, 2015 has been the worst year for the Global trade. In the first ten months of 2015, global trade increased by only 2.4%. The emerging markets exports were up 3.4%, while the imports contracted by 0.6%. The Baltic Freight Index touched a new low of 519. And importantly, China saw its export growth fall by 1.4% , while imports fell 7.6% in December 2015. The continued slowness may probably force the policy makers across the globe to have a rethink on the monetary policies across the globe. Further easing is a real possibility in these challenging environment.

2/15/2016 5

LilladherPrabhudas Oil imports shrink in January 2016

2/15/2016 6

• After a lull in imports in Nov15, imports have surged in December 15 only to fall sharply in Jan 2016. Though exports improved, the

trade deficit fell to US$7.6bn with oil imports hitting a new low of US$5bn in Jan 2016. CAD continues to be under control, thanks to the

low oil prices. There was a surge in engineering exports in December 2015.

Trade Deficit

Source: RBI, PL Research

US $ Mn Mar’15 Apr’15 May’15 Jun’15 Jul’15 Aug’15 Sep’15 Oct’15 Nov'15 Dec'15 Jan’16 FYTD YTD YoY

Exports 23,951 22,055 22,347 22,289 23,137 21,266 21,845 21,353 20,014 22,297 21,076 217,680 264,501

Imports 35,745 33,047 32,753 33,117 35,950 33,744 32,324 31,120 29,796 33,961 28,715 324,526 383,869

- Oil 7,413 7,443 8,539 8,676 9,487 7,357 6,627 6,846 6,436 6,657 5,026 73,095 125,176

- Gold 4,980 3,131 2,420 1,967 2,965 4,958 2,057 1,701 3,540 3,806 2,912 29,457 27,739

- Non Oil Non Gold 23,351 25,604 21,794 22,473 23,498 21,429 23,640 22,573 19,820 23,498 20,777 221,975 230,779

Trade Deficit (11,794) (10,992) (10,406) (10,827) (12,812) (12,478) (10,479) (9,767) (9,782) (11,664) (7,639) (106,847) (119,367)

YoY Chng.

Exports -21% -14% -20% -16% -10% -21% -24% -18% -24% -15% -14% -18%

Imports -13% -7% -17% -13% -10% -10% -25% -21% -30% -4% -11% -15%

- Oil -53% -43% -41% -35% -35% -43% -55% -45% -45% -33% -39% -42%

- Gold 59% 79% -6% -37% 62% 143% -45% -59% -36% 179% 85% 6%

- Non Oil Non Gold 10% 7% -2% 3% -1% -5% -5% -1% -22% -2% -7% -4%

Trade Deficit 8% 9% -7% -8% -10% 17% -28% -28% -40% 27% -3% -10%

LilladherPrabhudas Direct and Indirect Tax collections up

Source: Controller General of Accounts – Ministry of Finance, PL Research

Trends in Government’s Fiscal Deficit • The tax receipts at Dec 15 were at 68% of the budget Vs 56% as at Dec 14. The total revenue receipts were at 70% of the budget in Dec 15 vs 58% in Dec 14. Non tax revenues were up 23% YoY, mainly on account of income from auction of telecom licenses.

• Excise duties are up sharply by 68% due to continued increase in excise on petroleum products.

• Both the Plan and Non plan expenditure is up to 74% of the budget in Dec 15 Vs 72% in Non Plan and 61% in Plan expenditure in Dec 14.

• The Capital account Plan Expenditure is at 85% of the budget estimates in Dec 15, as against 68% in Dec 14. this continues to stress the intent of the government in increasing the capital expenditure.


Trends in Tax Receipts

2/15/2016 7

(Rs bn) Upto

Dec'14

Upto

Dec'15 YoY %

Budget

Est

% to total

Budget Est.

Revenue Receipts 6,938 8,038 16% 11,416 70%

Tax Revenue (Net) 5,457 6,222 14% 9,198 68%

Non-Tax Revenue 1,481 1,816 23% 2,217 82%

Non-Debt Capital Receipts 102 220 115% 803 27%

Recovery of Loans 83 91 10% 108 85%

Other Receipts 20 129 NA 695 19%

Total Receipts 7,040 8,258 17% 12,218 68%

Non-Plan Expenditure 8,838 9,680 10% 13,122 74%

On Revenue Account 8,133 8,954 10% 12,060 74%

(i) of which Interest Payments 2,752 3,023 10% 4,561 66%

On Capital Account 705 726 3% 1,062 68%

(i) of which Loans disbursed 102 104 2% 10

Plan Expenditure 3,526 3,460 -2% 4,653 74%

On Revenue Account 2,823 2,307 -18% 3,300 70%

On Capital Account 704 1,153 64% 1,353 85%

(i) of which Loans disbursed 172 191 11% 231

Total Expenditure 12,364 13,140 6% 17,775 74%

Fiscal Deficit 5,324 4,882 -8% 5,556 88%

Revenue Deficit 4,018 3,222 -20% 3,945 82%

Primary Deficit 2,572 1,859 -28% 995 187%

Tax Revenue (in Rs.Bn) Upto

Dec'14

Upto

Dec'15 YoY %

Budget

Est

% to total

Budget Est.

Corporate Tax 2,776 3,057 10% 4,706 65%

Income Tax 1,666 1,861 12% 3,274 57%

Customs 1,356 1,595 18% 2,083 77%

Union Excise Duties 1,019 1,714 68% 2,298 75%

Service Tax 1,052 1,309 24% 2,098 62%

Other Tax 89 96 9% 36 269%

Gross Tax Revenue 7,957 9,632 21% 14,495 66%

Surcharges 34 42 23% 57 73%

Assignment to states 2,466 3,368 37% 5,240 64%

Net Tax Revenue 5,457 6,222 14% 9,198 68%

LilladherPrabhudas Sharp increase in plan expenditure

2/15/2016 8

• The nine months of FY16 has seen a sharp increase in plan expenditure. As at December 2015, the plan expenditure stands at 85% of the budgeted expenditure for FY16.

• The current low oil prices have resulted in the lower outgo of planned subsidies in the petroleum sector, down 47% YoY.


Plan Expenditure and Non-plan expenditure

In Rs Bn Upto

Dec'14

Upto

Dec'15 YoY %

Budget

Est

% to total

Budget Est.

Non-Plan Expenditure 8,838 9,680 10% 13,122 74%

-Dept. of Fertil izers 611 678 11% 730 93%

-Dept. of Food & PDS 1094 1202 10% 1250 96%

-Dept. of Petroleum & Gas 530 281 -47% 301 93%

Plan Expenditure 3,526 3,460 -2% 4,653 74%

-Min. of Road Transport & Highway 251 364 45% 429 85%

-Min. of Rural Development 605 625 3% 733 85%

-Min. of Urban Development 74 110 49% 161 68%

-Min. of Agriculture 194 140 -28% 218 64%

-Min. of Railways 207 273 32% 400 68%

-Min. of Drinking Water & Sanitation 85 69 -19% 62 110%

-Min. of Health & Family Welfare 203 201 -1% 267 75%

-Min. of Human Resource 457 409 -10% 549 75%

LilladherPrabhudas CPI Inflation up in December 2015

• The whole sale inflation still continues to be in the negative territory, while the CPI has inched up to 5.6% in Dec 2015, up from 5.4% in Nov 2015. The higher base effect have seen the WPI in the negative territory for Jan 16 as well and we expect a reversal in the WPI from Feb 2016 onwards.

• 10yr G-Sec Yield is trading at 7.74%, and has been in a narrow range in the last one month.

Source: Bloomberg, PL Research


CPI Inflation

GDP Growth YoY (Quarterly)


10yr. G-Sec Yield & Liquidity

2/15/2016 9

-

2.0

4.0

6.0

8.0

10.0 (2,500)

(2,000)

(1,500)

(1,000)

(500)

-

500

1,000

1,500

Jan

-11

May

-11

Se

p-1

1

Jan

-12

Ma

y-1

2

Sep

-12

Jan

-13

Ma

y-1

3

Sep

-13

Jan

-14

May

-14

Sep

-14

Jan

-15

May

-15

Sep

-15

Jan

-16

Liquidity (Rs bn) 10yr. G-Sec Yied (%) (RHS)

2

4

6

8

10

12

Sep

-07

Dec

-07

Ma

r-0

8Ju

n-0

8Se

p-0

8D

ec-

08

Mar

-09

Jun

-09

Se

p-0

9D

ec-0

9M

ar-1

0Ju

n-1

0Se

p-1

0D

ec-1

0M

ar-

11

Jun

-11

Sep

-11

De

c-1

1M

ar-1

2Ju

n-1

2S

ep

-12

Dec

-12

Mar

-13

Jun

-13

Sep

-13

Dec

-13

Mar

-14

Jun

-14

Sep

-14

Dec

-14

Mar

-15

Jun

-15

Sep

-15

Dec

-15

(%)

8.6

7.98.2 8.5 8.3

6.87.4

7.0

5.6

4.6

3.3

4.3

5.2 5.4 5.34.9 5.0

5.4

3.7 3.74.4

5.05.4 5.6

3.0

4.0

5.0

6.0

7.0

8.0

9.0

Jan

-14

Feb

-14

Mar

-14

Ap

r-1

4

Ma

y-1

4

Jun-

14

Jul-

14

Aug

-14

Sep

-14

Oct

-14

Nov

-14

Dec

-14

Jan

-15

Feb

-15

Mar

-15

Apr

-15

Ma

y-1

5

Jun-

15

Jul-

15

Au

g-1

5

Sep

-15

Oct

-15

Nov

-15

Dec

-15

Consumer Price Index (CPI)

LilladherPrabhudas Equity markets under pressure across the globe

• MoM: Japan, Germany and China were the worst performers of the month, while Indonesia, Russia and Brazil were the gainers.

• YoY and YTD: On a YTD basis, only Indonesia is in a positive territory, while all other markets are nursing losses. On a 12 month basis, the losses range from 4% to 25% across the markets with Hong Kong and India seeing the large losses.



Month-on-Month

Year-on-Year


Calendar Year-to-date

2/15/2016 10

4.5 2.0

0.5

(2.9) (3.2)(5.0) (5.2) (5.7) (6.9) (7.1)

(10.9)(13.3)

(15.5)(20.0)

(15.0)

(10.0)

(5.0)

-

5.0

10.0

Ind

on

esi

a

Rus

sia

Bra

zil

S.Ko

rea

Au

stra

lia

FTSE

USA

S&P

Ind

ia

Hon

g Ko

ng

Ger

man

y

Chin

a

Japa

n

(%)

2.6

(2.1)

(8.4)(6.4)

(10.0) (9.7) (10.1)(10.5)(12.0)

(16.4)(17.2)

(21.9)(21.4)(25.0)

(20.0)

(15.0)

(10.0)

(5.0)

-

5.0

Ind

on

esi

a

Rus

sia

Bra

zil

S.Ko

rea

Au

stra

lia

FT

SE

USA

S&P

Indi

a

Hon

g Ko

ng

Ger

man

y

Chin

a

Japa

n

(%) (11.8)

(4.3)

(19.8)

(5.5)

(17.0)(17.5)

(12.9)(12.4)

(20.2)

(25.0)

(18.5)

(10.2)

(15.3)

(30.0)

(25.0)

(20.0)

(15.0)

(10.0)

(5.0)

-

Ind

on

esi

a

Rus

sia

Bra

zil

S.Ko

rea

Au

stra

lia

FTSE

USA

S&P

Indi

a

Ho

ng

Ko

ng

Ger

man

y

Chin

a

Japa

n

(%)

LilladherPrabhudas Weakness all across

• MoM: Following the market trend, all sectors had negative returns for the month. Realty, Power and cap goods were the worst performers.

• YoY: On a YoY basis, Realty, Bankex, Cap goods and Metals have seen the worst performance.



Month-on-Month

Year-on-Year



2/15/2016 11

(1.9) (2.8)(5.9) (6.2)

(8.4)(9.9)

(11.4)(13.4) (14.6)

(16.0)

(20.5)(25.0)

(20.0)

(15.0)

(10.0)

(5.0)

-

(%)

12.4

(11.9)(3.0)

(13.2)(18.1)

(38.3)

(27.6)(18.7)

(33.1)(25.6)

(40.4)(50.0)

(40.0)

(30.0)

(20.0)

(10.0)

-

10.0

20.0

(%)

(2.0)

(6.9)

(10.6) (9.9)

(14.3) (14.4)

(18.0)

(14.4)

(20.4)(17.4)

(23.0)(25.0)

(20.0)

(15.0)

(10.0)

(5.0)

-

(%)

LilladherPrabhudas Small and Midcaps retreat

• MoM: Small caps which had out performed the large caps have seen a sharp correction in the last one month.

• YoY: While the performance of the indices have been similar in the last six months, over the six to twelve months, the losses in large caps have been higher.



Month-on-Month

Year-on-Year



2/15/2016 12

(8.0)(9.1)

(10.9)

(15.6)(18.0)

(16.0)

(14.0)

(12.0)

(10.0)

(8.0)

(6.0)

(4.0)

(2.0)

-

BSE100 Index BSE500 Index BSEMDCAP Index BSESMCAP Index

(%)

(19.9)(18.1)

(9.4)

(14.8)

(25.0)

(20.0)

(15.0)

(10.0)

(5.0)

-


(%)

(12.8) (13.3) (13.7)

(18.2)(20.0)

(18.0)

(16.0)

(14.0)

(12.0)

(10.0)

(8.0)

(6.0)

(4.0)

(2.0)

-


(%)

LilladherPrabhudas Sharp recovery in some EM currencies

• MoM: Lower than expected job additions have had an impact on the EM currencies Vs the US Dollar. Malaysia, South Africa, Japan and Turkey all saw turnarounds in their currencies.

• CYTD and YoY: On a twelve month basis, Brazil, South Africa and Russia continue to be the worst performers.



Month-on-Month

Year-on-Year



2/15/2016 13

5.7 5.1 4.2

3.6 3.0 2.7 2.5 1.9 1.4

0.7

(0.1)(0.4)(0.6)(0.9)(1.6)(2.0)

(3.1)(3.8)

(6.0)

(4.0)

(2.0)

-

2.0

4.0

6.0

8.0

(%)

3.0

(2.3)

6.2

(0.3)

2.2 2.7

(0.5)

1.1

(0.5)(1.0)

(3.1)(1.5)

1.4

(1.2)

2.6

(3.1)

(9.4)

(3.7)

(12.0)(10.0)

(8.0)(6.0)(4.0)(2.0)

-2.0 4.0 6.0 8.0

(%)

(15.5)

(35.0)

5.3

(18.6)

(5.4)(4.7)(11.2)(9.3)

(4.6)

(41.6)

(9.1)(7.3)

5.6

(5.1)

8.2

(9.5)

(21.4)

1.2

(50.0)

(40.0)

(30.0)

(20.0)

(10.0)

-

10.0

20.0

(%)

LilladherPrabhudas Domestics continue to remain buyers

• FIIs continue to remain net sellers in Jan 2016 with sales of Rs114.71bn, while the domestic institutions continue to be buyers of Rs128.75bn.

2/15/2016 14

128.75

(114.71)(200.00)(150.00)(100.00)

(50.00)-

50.00 100.00 150.00 200.00 250.00

Jan

-13

Feb

-13

Mar

-13

Apr

-13

May

-13

Jun-

13

Jul-

13A

ug-1

3Se

p-1

3O

ct-1

3N

ov-1

3D

ec-1

3Ja

n-1

4F

eb

-14

Mar

-14

Apr

-14

May

-14

Jun-

14

Jul-

14A

ug-

14

Se

p-1

4O

ct-1

4N

ov-1

4D

ec-1

4Ja

n-1

5Fe

b-1

5M

ar-1

5A

pr-

15

May

-15

Jun-

15

Jul-

15A

ug-1

5Se

p-1

5O

ct-1

5N

ov-1

5D

ec-1

5Ja

n-1

6

DII Net Cash Market FII Net Cash Market

CY14FII Rs973.50bnDII Rs-303.21bn

CY15FII Rs183.55bnDII Rs675.56bn

CY13FII Rs-734.64bnDII Rs1,112.77

CY16

LilladherPrabhudas Global Agri commodities - Sugar continue to gain

• Palm oil was up 8.6% YoY due to lower output from dry weather, while wheat, sugar and rice continue to decline and are down 4.4%, 5% and 5.5% respectively.

• Wheat – Record high stock estimates, weak export demand and beneficial rains improving crop conditions in USA continues to put additional downward pressure.

• Palm Oil – Palm Oil prices are set to rise in 2016 for the first time in 5 years driven by lower output growth from El Nino’s dry weather, but we expect large global oilseeds supplies and low crude prices to limit gains.

• Sugar – Sugar prices remained subdued globally, however rose MoM in India on report of crop damages in India.


Source: Bloomberg, PL Research *Price in US$

Performance of Global Agricultural Commodities

Year-on-Year Performance


Month-on-Month Performance

2/15/2016 15

50

60

70

80

90

100

110

120

130

140

Feb

-15

Mar

-15

Apr

-15

May

-15

Jun-

15

Jul-

15

Aug

-15

Sep

-15

Oct

-15

No

v-1

5

Dec

-15

Jan

-16

Feb

-16

Rice Wheat Corn Soya Plam Oil Sugar

8.6

1.0 0.1

(4.4)(5.0)

(5.6)(8.0)

(6.0)

(4.0)

(2.0)

-

2.0

4.0

6.0

8.0

10.0

Palm Oil Corn Soya Wheat Sugar Rice

(%)

6.7

(14.5)

(10.2)

(16.6)

(19.7)

(1.2)

(25.0)

(20.0)

(15.0)

(10.0)

(5.0)

-

5.0

10.0

Palm Oil Corn Soya Wheat Sugar Rice

(%)

LilladherPrabhudas Global Industrial commodities bottomed out

• After plunging for most part of 2015, global industrial commodities appear to have bottomed out. Zinc and Lead rallied 17.1% and 15.1% respectively in the last one month, while crude was up 9.4%. Aluminium and zinc were flat MoM, while Nickel lost 8.2%.



Month-on-Month

Year-on-Year



2/15/2016 16

17.1 15.1

9.4

2.0 1.7

(0.6)

(8.2)(10.0)

(5.0)

-

5.0

10.0

15.0

20.0

Zinc Lead Brent

crude

Aluminium Copper Thermal

Coal

Nickel

(%)

(18.5)

3.0

(45.0)

(17.6)(20.6)

(25.4)

(48.5)(60.0)

(50.0)

(40.0)

(30.0)

(20.0)

(10.0)

-

10.0

Zinc Lead Brent crude

Aluminium Copper Thermal Coal

Nickel

(%)

7.6

2.4

(12.2)

(1.0)

(5.3)

(2.0)

(13.9)(15.0)

(10.0)

(5.0)

-

5.0

10.0

Zinc Lead Brent crude

Aluminium Copper Thermal Coal

Nickel

(%)

LilladherPrabhudas Will the Fed hike rate soon?

Sources : Bloomberg

• The real GDP growth in USA for the fourth quarter is expected to be modest in comparison to the third quarter growth. However, economic growth is expected to be at 2.4% in CY2016, led by strong private consumption. This is also expected to be aided by a healthy job addition, higher real wages and higher disposable income resulting in increased consumption.

• Though Europe benefitted from the low commodity prices, the Eurozone growth continue to be anemic. Growth continue to remain a challenge. The benefits from a weak oil price, weak euro, easy monetary policies and a more prudent fiscal policy is being offset by the weak investment demand across Europe. The QE is expected to continue beyond Sept 2016 and how the member nations will address the steep increase seen in cross border movement of people from the member nations especially in the face off Paris terrorist attack, sexual assault during new Year celebrations in Germany etc is going to challenge in the medium term for movement of personnel between the member nations. However, the transition economies is expected to have a modest growth.

• Policy makers in Asia is expected to see a challenging period with a tightening monetary policy in the US and a higher import bill domestically due to weakening currencies. More importantly, a weakening Renmibi impacts the Asian exporters worse, making their goods more expensive for Chinese importers and making the Chinese exporters more cost competitive. Vs the Asian counterparts.

• EIU expects the Chinese economic growth to be at 6.5% for CY16, the slowest growth since the first quarter of 2009. Slow industrial output, sluggish property investments and contraction in exports are the main reasons for the lower growth. We believe that economies across the globe will be keenly watching the Chinese economic output as this can have a far reaching impact in economies ranging from Australia to Pakistan.

World Equity Indices:

2/15/2016 17

Index Country Value YTD (%) 1 Week (%) 1 Mth (%) 3 Mth (%)

Dow Jones USA 15,974 (8.33) (1.43) (0.09) (7.37)

S&P 500 USA 1,865 (8.77) (0.81) (0.83) (7.82)

Nasdaq USA 4,338 (13.38) (0.59) (3.36) (11.98)

FTSE 100 LONDON 5,832 (6.57) 2.52 0.49 (4.67)

DAX GERMANY 9,220 (14.17) 2.68 (3.40) (13.90)

CAC 40 FRANCE 4,129 (10.95) 1.55 (1.92) (14.12)

Nikkei JAPAN 16,023 (15.82) (4.74) (6.56) (18.24)

TSX CANADA 12,381 (4.83) (3.00) 2.55 (5.31)

MICEX RUSSIA 1,734 (1.53) (0.56) 7.84 0.36

JSE SA 44,379 (3.10) 0.87 5.40 (3.48)

SGX SA 7,163 (9.86) (3.04) (3.70) (7.72)

TING TURKEY 87,013 (0.47) (1.36) 0.07 (13.70)

IBOV BRAZIL 40,253 (7.14) (1.39) 4.37 (13.47)

Jakarta Comp INDONESIA 4,741 3.22 (1.21) 4.79 5.99

PSEI Phillipine PHILIPPINES 6,693 (3.73) (1.07) 3.77 (2.97)

SE THAI 50 THAILAND 813 (0.10) (1.54) 5.08 (8.49)

Euro Stoxx EUROZONE 2,842 (13.04) 2.02 (3.76) (15.45)

IBEX 35 SPAIN 8,179 (14.31) 0.70 (4.27) (19.11)

Hang Seng HONG KONG 18,918 (13.67) (0.39) (3.09) (15.53)

AS30 AUSTRALIA 4,893 (8.44) (2.56) (1.11) (4.27)

Shanghai CHINA 2,746 (22.41) 2.13 (13.82) (23.50)

Taiwan TAIWAN 8,067 (3.26) (0.17) (0.59) (8.93)

Kospi KOREA 1,862 (5.05) (1.51) (0.89) (5.63)

CNX Nifty INDIA 7,163 (9.86) (3.04) (3.70) (7.72)

BSE Sensex INDIA 23,554 (9.81) (3.02) (3.68) (8.03)

KLCI MALAYSIA 1,650 (2.51) (0.41) 1.31 (0.54)

NZX 50 NEWZEALAND 6,034 (4.59) (1.94) (2.19) 0.76

MEXBOL MEXICO 42,997 0.05 0.52 5.26 (1.42)

LilladherPrabhudas Indian Market – Banks Earnings revised

downwards further • NIFTY earnings for FY16 revised downwards sharply: The 3QFY16 results were a mixed bag. Banking & Financial services gave the

biggest surprise of all. While the new generation private sector banks continued with the good performance, the PSU banks disappointed with sharp increase in NPAs and consequently in provisioning thereby impacting the earnings. The banking sector alone has seen a sharp earnings revision. From an estimated growth of 15.1%, we expect to end the year with a contraction of 6.9% for FY16. Similar is the earnings disappointment of Oil& Gas companies, where significant downgrades to earnings of ONGC has impacted the growth to decreasing the earnings growth from 16.1% to 1.4%.

• Disappointing 3QFY16: For the 3QFY16, the performance of the Nifty were below expectations. Metals, Banks, Capital Goods and Oil & Gas were the sectors which impacted the corporate performance. For the Nifty, revenue were down 2%, EBITDA up 10%, Interest expense up 8%, Depreciation up 8%, Tax down 21% and PAT down 15%. For the Nifty ex Banks, the revenues were down 4%, EBITDA up 4%, Interest expense up 8%, Depreciation up 8%, Tax down 21% and PAT down 15%. Overall a disappointing performance.

• AQR impacts the financials earnings: The AQR by the RBI has thrown in more surprises. Bank of Baroda has bit the bullet by taking a one time write-down in earnings and also have refused capital infusion by the government as they are confident of a turnaround in their business after the pain that they have taken. If the other PSU banks take the route of BOB, we feel that the huge uncertainty facing the sector will get reduced to a great extent and this can have a relook at the PSU banks stock performance as these banks today is trading at attractive valuations.

• MSCI Premium continue to remain high: The chart on Page 19 indicates MSCI India’s premium to MSCI Asia (excluding Japan) over the last ten years. The average of the last 10-year’s premium was at 30% and the current premium is at 39%. India continue to have a stronger growth among the EMs and we believe that the strong economic growth of India is reflected in the overweight position of India in the asset allocation. This is reflected in the higher premia that India is enjoying Vs the peers in Asia. We also expect India to have a superior earnings as well as relatively stable currency.

• PERs on the lower end of the trading range: For the last ten years, the Indian stocks have traded at an average PER of 18X one year forward earnings. At present, the same trades at an average PER of 15.6X one year forward earnings. While the market does not give a bullish direction, unless we see a significant downside in earnings in FY17, we are close to a level which offers good value or investments.

• Nifty to trade between 6800-7500 levels: All eyes will be on the Union Budget for FY17. With no near term political triggers except the passage of GST bill, we believe the Nifty seems to be in course of a trading range between 6800-7500 levels. Given the current environment, we go Neutral in financials from Overweight, continue to remain underweight in Metals and go Overweight in FMCG, while remaining Neutral in other sectors.

2/15/2016 18

LilladherPrabhudas Nifty Valuations: Historic Trends


Nifty 1-year forward P/E


MSCI India Premium to MSCI Asia (Ex‐Japan)

2/15/2016 19

39%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

70%

Fe

b-0

6

May

-06

Au

g-0

6

No

v-0

6

Feb-

07

Ma

y-0

7

Aug

-07

No

v-0

7

Fe

b-0

8

May

-08

Au

g-0

8

No

v-0

8

Feb-

09

Ma

y-0

9

Au

g-0

9

Nov

-09

Fe

b-1

0

May

-10

Au

g-1

0

No

v-1

0

Feb-

11

Ma

y-1

1

Au

g-1

1

Nov

-11

Fe

b-1

2

Ma

y-1

2

Aug

-12

No

v-1

2

Feb-

13

Ma

y-1

3

Au

g-1

3

Nov

-13

Fe

b-1

4

Ma

y-1

4

Aug

-14

No

v-1

4

Feb-

15

May

-15

Au

g-1

5

Nov

-15

Fe

b-1

6

10 year Avg.

30%

15.6

-

5.0

10.0

15.0

20.0

25.0

30.0

Fe

b-0

6

May

-06

Au

g-0

6

No

v-0

6

Fe

b-0

7

May

-07

Au

g-0

7

No

v-0

7

Fe

b-0

8

May

-08

Au

g-0

8

No

v-0

8

Fe

b-0

9

May

-09

Aug

-09

No

v-0

9

Fe

b-1

0

May

-10

Aug

-10

No

v-1

0

Fe

b-1

1

May

-11

Aug

-11

No

v-1

1

Fe

b-1

2

Ma

y-1

2

Aug

-12

Nov

-12

Fe

b-1

3

Ma

y-1

3

Aug

-13

Nov

-13

Fe

b-1

4

Ma

y-1

4

Aug

-14

Nov

-14

Fe

b-1

5

Ma

y-1

5

Aug

-15

Nov

-15

Fe

b-1

6

10 year Avg.

18.0x

LilladherPrabhudas Nifty Valuation

2/15/2016 20

Note: Telecom Nos. are Bloomberg Consensus / Sector Weightages are updated as on February 15, 2015

Weight-

age (%)FY15 FY16E FY17E FY18E

Weight-

age (%)FY15 FY16E FY17E FY18E

Banking & Fin. 29.4% Metals 2.7%

PER (x) 16.5 17.7 13.4 10.6 PER (x) NA NA 9.8 7.7

PAT Growth (%) 12.8 (6.9) 32.3 26.9 PAT Growth (%) NA NA NA 26.8

Technology 17.5% Telecom 2.3%

PER (x) 19.2 17.5 15.7 14.3 PER (x) 19.9 20.3 20.8 17.1

PAT Growth (%) 15.8 9.5 11.6 10.0 PAT Growth (%) 76.7 (1.9) (2.1) 21.4

FMCG 10.6% Media 0.8%

PER (x) 34.0 32.3 28.6 25.2 PER (x) 37.6 35.7 28.2 23.0

PAT Growth (%) 10.4 5.3 13.1 13.6 PAT Growth (%) 9.6 5.4 26.6 22.5

Auto 9.4% Ports & Logistics 0.6%

PER (x) 15.6 16.5 12.4 10.2 PER (x) 15.9 14.4 12.0 10.5

PAT Growth (%) 8.4 (5.8) 33.4 21.0 PAT Growth (%) 33.0 10.4 19.8 14.2

Nifty as on Jan 15 7,163

Oil & Gas 9.1% EPS (Rs) - Free Float 371.6 379.7 467.8 560.3

PER (x) 11.0 10.8 10.0 9.6 Growth (%) 4.7 2.2 23.2 19.8

PAT Growth (%) (22.5) 1.4 8.3 4.7 PER (x) 19.3 18.9 15.3 12.8

Pharma 7.9% EPS (Rs) - Free Float

PER (x) 35.4 34.3 29.4 26.0 Nifty Cons. 371.6 403.7 486.5 584.9

PAT Growth (%) (2.6) 3.2 16.7 13.0 Var. (PLe v/s Cons.) (%) - (6.0) (3.8) (4.2)

Eng. & Power 6.5% Sensex as on Jan 15 23,554

PER (x) 15.4 16.1 12.3 10.1 EPS (Rs) - Free Float 1,230.6 1,251.7 1,521.8 1,778.0

PAT Growth (%) (10.5) (4.3) 30.8 21.3 Growth (%) 3.9 1.7 21.6 16.8

PER (x) 19.1 18.8 15.5 13.2

Cement 3.1%

PER (x) 25.1 27.3 20.3 15.4 Sensex Cons. 1,230.6 1,320.6 1,584.0 1,888.2

PAT Growth (%) 7.3 (7.8) 34.4 31.9 Var. (PLe v/s Cons.) (%) - (5.2) (3.9) (5.8)

LilladherPrabhudas Top Pick Summary

2/15/2016 21

2017E 2018E 2017E 2018E 2017E 2018E 2017E 2018E 2017E 2018E 2017E 2018E

Large Cap

Infosys 1,092 1,500 37.4% 2,497.9 14.0 13.5 17.1 13.2 24.0 24.1 24.0 24.1 16.0 14.2 3.6 3.2

HDFC Bank 974 1,300 33.5% 2,440.3 21.9 20.9 22.9 25.0 19.5 20.7 1.9 1.9 16.2 12.9 3.1 2.6

Coal India 324 400 23.3% 2,048.1 12.6 10.5 14.7 4.1 24.7 25.0 23.1 23.3 11.6 11.1 2.8 2.7

Maruti Suzuki 3,711 4,844 30.5% 1,121.1 20.3 16.8 37.7 19.3 22.1 22.1 21.9 21.9 16.9 14.1 3.4 2.9

Tata Motors 317 502 58.4% 1,077.4 10.0 16.8 45.1 26.8 20.5 21.2 13.0 14.4 6.5 5.1 1.2 1.0

Larsen & Toubro 1,149 1,407 22.4% 1,068.4 15.0 20.0 35.8 29.5 10.9 14.8 5.4 6.1 18.4 14.2 2.2 2.0

Indian Oil Corporation 389 511 31.5% 943.5 (4.1) 2.5 13.0 5.9 14.2 13.6 9.5 9.6 8.4 7.9 1.1 1.0

IndusInd Bank 824 1,050 27.5% 489.3 27.5 26.8 23.7 31.9 16.0 18.2 2.0 2.2 16.2 12.3 2.5 2.1

Dabur India 249 292 17.3% 438.4 14.1 14.2 12.8 14.1 29.6 28.3 34.1 33.8 31.0 27.2 9.0 7.6

Aurobindo Pharma 653 943 44.3% 381.5 22.2 9.9 31.2 19.7 32.3 29.7 20.2 21.4 15.3 12.8 4.4 3.4

Britannia Industries 2,666 3,200 20.0% 319.8 15.9 16.9 16.5 18.5 45.9 42.6 45.7 42.4 35.5 30.0 14.4 11.5

Cummins India 904 1,030 13.9% 250.6 14.4 12.7 15.3 19.6 25.6 26.5 25.4 26.2 28.1 23.5 6.8 5.8

GlaxoSmithKline Consumer Healthcare 5,807 6,940 19.5% 244.2 13.4 13.6 12.3 12.4 30.2 29.7 30.1 29.6 30.4 27.0 8.6 7.5

ACC 1,266 1,600 26.4% 237.9 11.3 14.5 18.3 56.6 8.4 12.6 9.0 13.3 33.3 21.3 2.7 2.6

Glenmark Pharmaceuticals 710 1,186 67.0% 200.4 41.0 7.2 99.8 (16.1) 29.8 19.9 20.2 15.4 11.3 13.5 3.0 2.5

Petronet LNG 258 300 16.2% 193.7 25.3 57.5 25.5 83.9 15.4 24.1 12.4 19.6 18.6 10.1 2.7 2.2

Mid Caps

Hexaware Technologies 233 300 28.8% 70.1 17.3 14.0 26.1 13.2 32.8 33.0 32.1 32.4 14.1 12.5 4.4 3.9

Jubilant Life Sciences 315 578 83.8% 50.1 12.4 10.8 NA 23.7 21.0 21.3 14.3 16.0 6.7 5.4 1.3 1.0

SpiceJet 70 128 82.3% 42.0 21.0 23.3 26.7 37.9 (97.8) (859.0) 166.7 167.5 6.9 5.0 (8.1) 13.0

Sadbhav Engineering 244 340 39.7% 41.3 12.0 25.0 23.3 35.2 10.5 12.7 9.3 10.7 25.3 18.7 2.5 2.2

Capital First 399 450 12.9% 36.3 31.5 26.3 44.8 43.3 13.5 17.0 1.6 1.8 14.9 10.4 1.9 1.6

Ashoka Buildcon 184 224 21.5% 34.4 17.2 12.0 55.0 21.8 7.9 9.0 6.2 6.5 22.0 18.1 1.7 1.6

Jammu & Kashmir Bank 68 125 83.3% 33.1 13.9 17.5 34.9 12.4 13.6 13.8 1.0 1.0 3.5 3.1 0.5 0.5

JK Lakshmi Cement 270 444 64.7% 31.8 23.2 17.9 (1,212.2) 105.3 12.4 22.4 8.7 13.5 18.7 9.1 2.2 1.9

NIIT Technologies 499 650 30.1% 30.5 9.8 8.9 10.0 10.4 18.4 17.8 18.8 18.2 9.9 9.0 1.7 1.5

VRL Logistics 333 439 32.0% 30.4 14.2 13.3 25.0 24.7 24.6 26.6 19.1 21.9 21.7 17.4 5.0 4.3

Va Tech Wabag 536 733 36.7% 29.1 18.1 9.5 39.9 21.9 15.5 16.6 11.8 12.6 17.8 14.6 2.6 2.3

* For Banks P/ABV

PER (x) P/BV (x)*RoE (%)Upside

Mcap

(Rs bn)

RoCE (%)CMP (Rs.) TP (Rs)

Revenue Growth (%) Earnings Growth (%)

LilladherPrabhudas

LARGE CAP

2/15/2016 22

LilladherPrabhudas Infosys

CMP: Rs1,092 TP: Rs1,500 Rating: BUY MCap: Rs2,497.9bn

Infosys’ Q3FY16 performance was comprehensively ahead of expectation with solid revenue beat, healthy deal wins and employee addition driving a better growth outlook. Company has raised FY16 CC revenue growth guidance to 12.8-13.2% (from 10-12%). Benefits of strategic initiatives such as zero bench, zero distance, design thinking etc. is visible across sales and delivery organization and client engagements. Infosys will likely achieve industry leading growth in FY16 itself and we expect further improvement in FY17/18. Management is confident of growth despite pressure on client IT budgets.

Healthy volume growth in seasonally weak quarter: Volumes grew a healthy 3.1% QoQ, despite seasonal weakness. Importantly, Infosys has guided for a better March quarter (implied guidance of 1-2.5% QoQ). Company is driving innovation and automation across all projects and early signs are encouraging. This is resulting in better client engagement, higher ratings on innovation quotient and thus, increasing win rate against competition.

Significant improvement in operating metrics: a) Total contract value of large deals highest ever on YTD basis, b) Revenue contribution from new clients highest since FY08 (indicates success of hunting), c) Strong growth in top clients after three years, d) Steady decline in attrition to 13.4% (4-year low), e) Strong head count addition reminiscent of FY11/12. We believe all this indicates success of various strategic initiatives; full benefits will be realized in FY17/18 and makes us confident on Infosys leading sector revenue growth.

Valuation & Recommendation: Re-iterate Infosys as top pick with revised TP of Rs1,500 (Earlier: Rs 1,485) 20x Dec-17 EPS

2/15/2016 23

Key Financials (Rs m)

Y/e March FY14 FY15 FY16E FY17E FY18E

Revenue (Rs m) 501,330 533,190 619,489 706,121 801,138

Growth (%) 24.2 6.4 16.2 14.0 13.5

EBITDA (Rs m) 134,150 149,010 169,232 196,306 222,880

PAT (Rs m) 106,480 123,290 133,054 155,825 176,370

EPS (Rs) 46.5 53.9 58.2 68.1 77.1

Growth (%) 13.0 15.8 7.9 17.1 13.2

Net DPS (Rs) 15.7 22.2 30.0 35.0 40.0

Source: Company Data, PL Research

Profitability & valuation


EBITDA margin (%) 26.8 27.9 27.3 27.8 27.8

RoE (%) 24.4 24.1 22.9 24.0 24.1

RoCE (%) 24.3 24.0 22.9 24.0 24.1

EV / sales (x) 4.5 4.1 3.5 3.0 2.6

EV / EBITDA (x) 16.7 14.7 12.8 10.8 9.3

PER (x) 23.5 20.3 18.8 16.0 14.2

P / BV (x) 5.3 4.6 4.1 3.6 3.2

Net dividend yield (%) 1.4 2.0 2.7 3.2 3.7


Stock Performance

(%) 1M 6M 12M

Absolute (4.2) (5.0) (4.9)

Relative to Sensex (0.5) 11.1 14.1

LilladherPrabhudas Financials

Infosys

2/15/2016 24

Income Statement (Rs m)


Net Revenue 501,330 533,190 619,489 706,121 801,138

Direct Expenses 307,670 318,140 374,492 424,221 481,894

% of Net Sales 61.4 59.7 60.5 60.1 60.2

Employee Cost - - - - -

% of Net Sales 0.0 0.0 0.0 0.0 0.0

SG&A Expenses 59,510 66,040 75,765 85,595 96,365

% of Net Sales 11.9 12.4 12.2 12.1 12.0

Other Expenses - - - - -

% of Net Sales 0.0 0.0 0.0 0.0 0.0

EBITDA 134,150 149,010 169,232 196,306 222,880

Margin (%) 26.8 27.9 27.3 27.8 27.8

Depreciation 13,740 10,690 14,144 16,366 18,200

PBIT 120,410 138,320 155,088 179,940 204,680

Interest Expenses - - - - -

PBT 147,100 172,590 186,742 219,472 248,409

Total tax 40,620 49,290 53,688 63,647 72,039

Effective Tax rate (%) 27.6 28.6 28.8 29.0 29.0

PAT 106,480 123,290 133,054 155,825 176,370

Extraordinary Gain/(Loss) - - - - -

Adjusted PAT 106,480 123,290 133,054 155,825 176,370


Balance Sheet (Rs m)


Share Capital 11,440 11,440 11,440 11,440 11,440

Reserves & Surplus 432,960 508,130 572,615 648,443 733,389

Shareholder's Fund 475,300 547,630 612,115 687,943 772,889

Preference Share Capital - - - - -

Total Debt - - - - -

Other Liabilities(net) 3,230 460 460 460 460

Deferred Tax Liability 640 1,600 1,600 1,600 1,600

Total Liabilities 479,170 549,690 614,175 690,003 774,949

Gross Block 134,120 155,470 180,869 209,820 242,667

Less: Depreciation 55,250 64,220 78,364 94,730 112,930

Net Block 78,870 91,250 102,505 115,090 129,737

Capital Work in Progress - - - - -

Cash & Cash Equivalent 292,210 313,420 343,604 391,895 445,793

Total Current Assets 397,480 462,210 506,972 579,472 659,923

Total Current Liabilities 91,380 113,830 105,362 114,619 124,771

Net Current Assets 306,100 348,380 401,610 464,853 535,152

Other Assets 61,490 100,310 100,310 100,310 100,310

Total Assets 479,170 549,690 614,175 690,003 774,949


LilladherPrabhudas HDFC Bank

CMP: Rs974 TP: Rs1,300 Rating: BUY MCap: Rs2,440.3bn

Revenue profile remains steady: HDFCB delivered ~21% YoY growth in total revenues at Rs99.4 bn led by steady 24% YoY growth in NII though other income growth remains slightly tepid (weaker third‐party income) at 13% YoY. Core other income also grew similar 21% YoY. NII growth was boosted by 10bp QoQ expansion in margins despite bank base rate cut. HDFCB opened 54 branches and added 1,203 employees during the quarter. Over the past one year HDFCB has added ~8,400 employees, yet commendably the cost‐ratios remain stable over 9MFY16 (down 310bp QoQ for 3QFY16).

Loan growth remains healthy; wholesale – retail mix remains stable: Overall loan growth stood at ~26% YoY (4.3% QoQ) led by healthy growth in both retail and wholesale portfolio. Within wholesale, growth was largely on account of working capital loans while growth in the retail portfolio was led by strong traction in CV loans, personal loans, two‐wheeler, credit cards and other retail segment. The mix of retail increased marginally to 49.2%. HDFCB indicated healthy growth trends on underlying improvement in product segments where it is gaining market share and benefitting from increased distribution presence.

Asset quality deteriorates a little; outlook stable: Asset quality reported slight blip with GNPL/NNPL increasing by 11%/21% QoQ to Rs42.5 bn and Rs12.6bn respectively however there are no pending accounts to take care of as part of RBI's balance sheet clean up drive. Coverage ratio also thus declined by 250bp QoQ though floating provisions remain stable at ~Rs16bn. O/s restructured assets remain tiny at 0.1% of total loans. We remain positive with BUY rating and PT of Rs1,300 based on 3.8x Sep‐2017E ABV

2/15/2016 25



Net interest income 184,826 223,957 273,105 332,998 402,477

Growth (%) 16.9 21.2 21.9 21.9 20.9

Operating profit 143,601 174,045 210,469 262,597 328,323

PAT 84,784 102,159 122,744 150,814 188,497

EPS (Rs) 35.5 41.7 49.0 60.2 75.2

Growth (%) 24.7 17.4 17.6 22.9 25.0

Net DPS (Rs) 6.8 8.0 9.0 10.5 12.0




NIM (%) 4.4 4.3 4.3 4.4 4.3

RoAE (%) 21.3 19.4 18.4 19.5 20.7

RoAA (%) 1.9 1.9 1.9 1.9 1.9

P / BV (x) 5.4 3.9 3.4 2.9 2.5

P / ABV (x) 5.7 4.2 3.6 3.1 2.6

PE (x) 27.4 23.4 19.9 16.2 12.9



Stock Performance

(%) 1M 6M 12M

Absolute (6.6) (11.6) (8.7)



HDFC Bank

2/15/2016 26



Int. Earned from Adv. 316,869 371,808 452,558 550,842 666,788

Int. Earned from Invt. 90,368 107,056 133,556 152,146 181,623

Others - - - - -

Total Interest Income 411,355 484,699 591,876 710,518 857,656

Interest expense 226,529 260,742 318,772 377,520 455,180

NII 184,826 223,957 273,105 332,998 402,477

Growth (%) 16.9 21.2 21.9 21.9 20.9

Treasury Income 65 5,260 - - -

NTNII 79,131 84,704 104,538 123,354 145,558

Non Interest Income 79,196 89,964 104,538 123,354 145,558

Total Income 490,552 574,663 696,414 833,872 1,003,214

Growth (%) 17.0 17.1 21.2 19.7 20.3

Operating Expense 120,422 139,875 167,173 193,755 219,712

Operating Profit 143,601 174,045 210,469 262,597 328,323

Growth (%) 25.7 21.2 20.9 24.8 25.0

NPA Provisions 16,326 17,236 22,832 30,046 37,927

Investment Provisions (41) (38) (34) (31) (28)

Total Provisions 15,873 20,758 24,494 34,091 42,720

PBT 127,728 153,287 185,975 228,506 285,603

Tax Provisions 42,944 51,128 63,232 77,692 97,106

Effective Tax Rate (%) 33.6 33.4 34.0 34.0 34.0

PAT 84,784 102,159 122,744 150,814 188,497

Growth (%) 26.0 20.5 20.1 22.9 25.0




Par Value 2 2 2 2 2

No. of equity shares 2,399 2,506 2,506 2,506 2,506

Equity 4,798 5,013 5,013 5,013 5,013

Networth 434,786 620,094 715,687 834,825 987,122

Adj. Networth 426,586 611,131 702,957 823,451 972,402

Deposits 3,673,375 4,507,956 5,504,215 6,786,697 8,306,917

Growth (%) 24.0 22.7 22.1 23.3 22.4

Low Cost deposits 1,646,214 1,984,921 2,520,930 3,162,601 3,912,558

% of total deposits 44.8 44.0 45.8 46.6 47.1

Total Liabilities 4,915,995 5,905,031 7,154,513 8,742,533 10,636,486

Net Advances 3,030,003 3,654,950 4,499,244 5,516,073 6,718,577

Growth (%) 26.4 20.6 23.1 22.6 21.8

Investments 1,209,511 1,664,599 1,820,904 2,201,301 2,663,361

Total Assets 4,915,995 5,905,031 7,154,513 8,742,533 10,636,486


LilladherPrabhudas Coal India

CMP: Rs324 TP: Rs400 Rating: BUY MCap: Rs2,048.1bn

Street is overly apprehensive on COAL’s ability to pass on the impact of escalation in cost associated with hike in wages of non-executive employees. While, we believe that 6% price hike in power segment and higher scale (+10% increase in volumes) would well off-set the impact. Driven by attractive valuations (EV/EBITDA:6x FY17E), strong outlook on volumes and rich dividend yield, we maintain BUY rating with TP of Rs400, EV/EBITDA of 8x FY17E.

Strong operational performance to sustain: Thanks to smart rail logistics management, improved turnaround time (aided by addition of sidings at key coal fields) and gradual addition of rakes by railways, COAL’s volumes grew 10% YoY in Apr-Jan’16 growth in off take on a high base. We believe that growth trajectory would be sustained in the range of 9%+ for next couple of years on the back of lower congestion and improved availability of rakes. The trajectory would ascend to ~10%, driven by commissioning of Eastern DFC, 3rd line between Howrah-Wardha and Talcher-Cuttack, Jharsuguda-Barpali Rail link, Bhupdeopur-Korba rail link and the high loading capacity wagons sourced by Coal India.

Conservative estimates for FY17: We expect 15% YoY growth in FY17 EPS, largely driven by 9% volume growth and scale benefit. Given the underlying objective of Govt to keep the power tariffs low, we factor nominal price hike for the power FSAs. While, for non-power FSA, we expect an additional revenue of Rs15bn through auction. This will offset the 15% hike in wages assumed for non-executive workers, due in July-16.

2/15/2016 27



Revenue (Rs m) 706,075 741,201 790,439 890,148 983,391

Growth (%) 1.1 5.0 6.6 12.6 10.5

EBITDA (Rs m) 214,566 214,602 223,750 259,756 283,542

PAT (Rs m) 155,201 140,214 154,502 177,256 184,435

EPS (Rs) 24.6 22.2 24.5 28.1 29.2

Growth (%) (17.9) (9.7) 10.2 14.7 4.1

Net DPS (Rs) 29.0 20.7 20.7 22.0 24.0




EBITDA margin (%) 30.4 29.0 28.3 29.2 28.8

RoE (%) 22.6 20.6 22.1 24.7 25.0

RoCE (%) 21.4 19.4 20.8 23.1 23.3

EV / sales (x) 2.1 2.0 1.9 1.7 1.6

EV / EBITDA (x) 7.0 7.0 6.8 5.9 5.4

PER (x) 13.2 14.6 13.3 11.6 11.1

P / BV (x) 3.0 3.0 2.9 2.8 2.7



Stock Performance

(%) 1M 6M 12M

Absolute 1.8 (14.1) (14.2)

Relative to Sensex 5.5 2.0 4.9


Coal India

2/15/2016 28



Net Revenue 706,075 741,201 790,439 890,148 983,391

Direct Expenses 93,969 90,732 94,889 100,901 112,344

% of Net Sales 13.3 12.2 12.0 11.3 11.4

Employee Cost 279,144 298,741 302,296 340,239 373,521

% of Net Sales 39.5 40.3 38.2 38.2 38.0

SG&A Expenses - - - - -

% of Net Sales 0.0 0.0 0.0 0.0 0.0

Other Expenses 118,396 137,125 169,504 189,252 213,984

% of Net Sales 16.8 18.5 21.4 21.3 21.8

EBITDA 214,566 214,602 223,750 259,756 283,542

Margin (%) 30.4 29.0 28.3 29.2 28.8

Depreciation 52,830 61,465 48,999 48,891 54,491

PBIT 161,736 153,137 174,751 210,865 229,051

Interest Expenses 580 73 115 130 147

PBT 232,889 218,820 231,970 266,166 276,497

Total tax 77,679 78,573 77,468 88,911 92,062


PAT 155,210 140,247 154,502 177,256 184,435

Extraordinary Gain/(Loss) 9 33 - - -

Adjusted PAT 155,201 140,214 154,502 177,256 184,435




Share Capital 63,164 63,164 63,164 63,164 63,164




Total Debt 1,781 4,083 2,001 2,001 2,001

Other Liabilities(net) 35,925 40,653 44,527 48,803 53,248

Deferred Tax Liability - - - - -


Gross Block 408,971 441,957 504,099 566,423 638,979


Net Block 145,949 159,015 197,032 232,058 273,877

Capital Work in Progress 45,053 53,729 53,729 53,729 53,729





Other Assets 19,717 19,596 19,596 19,596 19,596

Total Assets 709,899 734,681 752,184 780,748 802,563


LilladherPrabhudas Maruti Suzuki


With sustained performance from existing models, good acceptance of new models driving market share gains MSIL’s performance would remain healthy. Even after being a market leader, Maruti Suzuki has been able to gain market share. Benefits of operating leverage and favourable currency movement are additional positives.

Market share gains driven by newer model: MSIL would be launching five new vehicles over FY16-17, (1) the just launched S-Cross, (2) a light commercial vehicle powered by 800cc diesel engine, (3) diesel Celerio (launched in June 2015), (4) the premium hatchback Baleno (launched in Oct ’15) and (5) a compact SUV. The trend has been that the newer models have been able to garner a good response (eg Celerio, Ertiga, Amaze, EcoSport, Mobilio etc). We expect these newer models to drive market share gain for MSIL over FY15-17E.

Exports to provide an additional edge: Even as global majors are committing resources to India to gain a share of the domestic market and have a low-cost export base, Maruti has already achieved the same, and would be in a position to service export requirements both under its own brand and that of Suzuki’s.

Operating leverage benefits: A highly favourable exchange rate, better operating leverage, steps to control costs would help improve margins ~310bps over FY15-17e, controlled lowering of discounts and higher sales promotion expenses would also help. We believe that positives from a better operating performance - a better product mix and more export revenues, partially set-off by recent adverse currency movement —would continue to benefit the company, despite competitive pressures.

Our TP is Rs4,844 We value MSIL at 22x FY17E EPS to arrive at a target price of Rs4844/share (based upon a target cash PE of 15x FY17e). Our earnings CAGR over FY15-18e is 28.8%. At our TP, MSIL would trade at an EV/EBITDA of ~11.2 FY17e. At CMP, its trades at a PE of 16.9x and EV/E of 9.9x FY17. We rate MSIL a BUY.

11/17/2014 29



Revenue (Rs m) 438,437 498,254 580,927 698,947 816,261

Growth (%) 0.6 13.6 16.6 20.3 16.8

EBITDA (Rs m) 52,046 64,986 91,901 111,553 128,615

PAT (Rs m) 28,917 37,112 48,300 66,516 79,323

EPS (Rs) 95.7 122.9 159.9 220.2 262.6

Growth (%) 24.6 28.3 30.1 37.7 19.3

Net DPS (Rs) 12.0 25.0 35.0 45.0 50.0




EBITDA margin (%) 11.9 13.0 15.8 16.0 15.8

RoE (%) 14.6 16.6 18.9 22.1 22.1

RoCE (%) 14.0 16.3 18.7 21.9 21.9

EV / sales (x) 2.6 2.3 1.9 1.6 1.3

EV / EBITDA (x) 21.8 17.3 12.1 9.9 8.5

PER (x) 38.8 30.2 23.2 16.9 14.1

P / BV (x) 5.3 4.7 4.1 3.4 2.9



Stock Performance

(%) 1M 6M 12M

Absolute (13.2) (18.8) 2.6

Relative to Sensex (9.5) (2.8) 21.7


Maruti Suzuki

11/17/2014 30



Net Revenue 438,437 498,254 580,927 698,947 816,261

Direct Expenses 313,488 350,771 392,126 473,536 557,098

% of Net Sales 71.5 70.4 67.5 67.8 68.3

Employee Cost 13,681 16,066 18,475 21,247 24,434

% of Net Sales 3.1 3.2 3.2 3.0 3.0

SG&A Expenses 34,360 39,857 46,474 54,168 61,220

% of Net Sales 7.8 8.0 8.0 7.8 7.5

Other Expenses 24,861 26,574 31,951 38,442 44,894

% of Net Sales 5.7 5.3 5.5 5.5 5.5

EBITDA 52,046 64,986 91,901 111,553 128,615

Margin (%) 11.9 13.0 15.8 16.0 15.8

Depreciation 20,844 24,703 28,119 30,727 32,710

PBIT 31,202 40,283 63,782 80,826 95,905

Interest Expenses 1,416 1,369 131 116 110

PBT 36,585 48,681 67,801 87,521 104,373

Total tax 8,755 11,570 19,662 21,005 25,049


PAT 27,830 37,112 48,139 66,516 79,323


Adjusted PAT 28,917 37,112 48,300 66,516 79,323




Share Capital 1,510 1,510 1,510 1,510 1,510




Total Debt 18,239 1,802 2,802 2,752 2,702

Other Liabilities(net) - - - - -

Deferred Tax Liability 5,866 4,810 4,810 4,810 4,810


Gross Block 227,018 264,617 303,445 343,445 383,445


Net Block 107,904 122,593 133,302 142,575 149,865





Net Current Assets (1,412) (22,553) (19,221) (20,622) (8,743)

Other Assets - - - - -

Total Assets 233,885 247,008 282,220 335,093 399,262


LilladherPrabhudas Tata Motors

CMP: Rs317 TP: Rs502 Rating: BUY MCap: Rs1,077.4bn

Expectation of improved JLR sales in China in CY16, ramp-up of new models like XE and Discovery Sport in global markets, improved CV demand in India, and attractive valuations render Tata Motors a compelling Buy.

JLR witnessing an improving trajectory: We are positive on TTMT, given the strong product portfolio at JLR. With the earlier launches like the New Range Rover, New Range Rover Sport and Jaguar F‐Type doing well, volume is expected to be strong. New launches like the XE, the new Discovery Sport and the F‐Pace (likely in Q4FY16) should be able to sustain the momentum. China retails, which had suffered in H1FY16, have nevertheless recorded a mom improvement for the past 4 months, and H2FY16 retails across regions have been healthy. For JLR, FY16 margins to be lower YoY, as lower China sales and higher marketing spend get factored in. In FY17 however, most of these constraints would be removed and would result in a positive outlook from a medium‐to-long-term perspective.

India PV recovery: New launches in the India PV space can rejuvenate it from the lows of FY14. An improved performance in the standalone operations is likely in FY16. This would arrest the bleeding on the standalone operations.

CV recovery: With the M&HCV volumes already on the move, and a recovery expected in LCVs by 4QFY16, Tata Motors, as the largest CV manufacturer would be a beneficiary of the cyclical upmove. This would help the turnaround in the India operations.

Our TP is Rs502: We value JLR to 9x Mar’17E PE at Rs421/share. With M&HCV segment bottoming out, we built in a strong recovery. We maintain “BUY” with a target price of Rs502. At the current market price, the stock is trading at 9.4x FY16E and 6.5x FY17E earnings.

11/17/2014 31



Revenue (Rs m) 2,328,337 2,627,963 2,688,399 2,956,886 3,454,386

Growth (%) 23.3 12.9 2.3 10.0 16.8

EBITDA (Rs m) 374,029 439,237 387,608 450,135 534,866

PAT (Rs m) 149,764 159,809 114,799 166,521 211,082

EPS (Rs) 46.5 49.6 33.8 49.0 62.2

Growth (%) 41.4 6.7 (31.9) 45.1 26.8

Net DPS (Rs) 2.0 0.0 0.0 1.0 2.0




EBITDA margin (%) 16.1 16.7 14.4 15.2 15.5

RoE (%) 29.0 26.2 17.7 20.5 21.2

RoCE (%) 18.0 15.7 10.8 13.0 14.4

EV / sales (x) 0.5 0.5 0.4 0.4 0.3

EV / EBITDA (x) 3.4 3.2 3.1 2.7 2.1

PER (x) 6.8 6.4 9.4 6.5 5.1

P / BV (x) 1.6 1.8 1.5 1.2 1.0



Stock Performance

(%) 1M 6M 12M

Absolute (7.0) (10.7) (43.3)

Relative to Sensex (3.4) 5.4 (24.3)


Tata Motors

11/17/2014 32



Net Revenue 2,328,337 2,627,963 2,688,399 2,956,886 3,454,386

Direct Expenses 1,668,698 1,861,996 1,957,839 2,201,932 2,606,495

% of Net Sales 71.7 70.9 72.8 74.5 75.5

Employee Cost 215,564 255,490 289,003 273,512 310,895

% of Net Sales 9.3 9.7 10.8 9.3 9.0

SG&A Expenses 70,046 71,240 53,949 31,307 2,130

% of Net Sales 3.0 2.7 2.0 1.1 0.1


% of Net Sales 0.0 0.0 0.0 0.0 0.0

EBITDA 374,029 439,237 387,608 450,135 534,866

Margin (%) 16.1 16.7 14.4 15.2 15.5

Depreciation 110,782 133,886 170,705 187,776 206,553

PBIT 237,595 276,599 184,558 221,927 277,772

Interest Expenses 47,338 48,615 43,753 42,660 41,593

PBT 188,690 217,026 129,413 189,412 246,831

Total tax 47,648 76,429 34,867 22,019 34,798


PAT 139,910 139,863 93,746 166,521 211,082

Extraordinary Gain/(Loss) (9,854) (19,946) (21,053) - -

Adjusted PAT 149,764 159,809 114,799 166,521 211,082




Share Capital 6,438 6,438 6,792 6,792 6,792

Reserves & Surplus 649,597 556,181 724,553 887,112 1,090,328

Shareholder's Fund 656,035 562,619 731,345 893,905 1,097,120


Total Debt 549,545 692,115 697,115 677,115 657,115


Deferred Tax Liability (7,748) (13,900) (13,900) (13,900) (13,900)


Gross Block 1,329,282 1,582,066 1,932,066 2,257,066 2,582,066

Less: Depreciation 688,154 744,241 914,946 1,102,721 1,309,274

Net Block 641,128 837,825 1,017,120 1,154,344 1,272,791

Capital Work in Progress 332,626 286,401 - - -


Total Current Assets 1,046,103 1,034,685 1,330,776 1,374,346 1,563,926

Total Current Liabilities 917,596 1,070,091 1,136,341 1,181,575 1,313,386

Net Current Assets 128,507 (35,407) 194,436 192,771 250,539

Other Assets 49,788 46,970 46,970 46,970 46,970

Total Assets 1,258,916 1,289,157 1,418,893 1,561,453 1,744,668


LilladherPrabhudas Larsen & Toubro


Strong order book gives visibility: L&T maintained their guidance for sales

growth of 10‐15%, while trimmed order inflow guidance for FY16. L&T is

expecting order flow to be flat YoY in FY16 against previous guidance of

5‐7% growth implying Q4 inflow of Rs 600bn (up 27% YoY). Order flow for

the quarter surprised positively (up 11% YoY) to Rs384bn and order book

stood at Rs2.56tn up 14% YoY. Q3FY16 Order Inflow growth led by

Transportation Infra (Roads/Railways), Power T&D, and Water Businesses.

Domestic ordering dominated by public spending and Private sector capex

yet to pick up. Middle East continues to witness tendering activity for basic

infrastructure even in the face of oil price drop.

Concerns on Middle East slow down: The management highlighted that

large part of overseas prospects are from Middle East. While lower crude

prices have raised question on incremental capex in Middle East region,

L&T believes while upstream capex might be curtailed, capex on social

infrastructure is likely to continue. They also highlighted that L&T has not

faced any major execution or working capital issues in Middle East till now.

Outlook and Valuation: The stock at a PER of 11.3x FY17E earnings. L&T

continues to be the best play in the Indian infrastructure space, given its

strong business model, diverse skill sets, strong execution capabilities and

relatively healthy/large balance sheet.

2/15/2016 33



Revenue (Rs m) 851,284 920,046 1,012,050 1,163,858 1,396,630

Growth (%) 14.3 8.1 10.0 15.0 20.0

EBITDA (Rs m) 107,543 113,356 117,140 141,556 175,106

PAT (Rs m) 43,135 44,077 42,741 58,051 75,171

EPS (Rs) 46.5 47.4 46.0 62.5 80.9

Growth (%) (42.2) 1.9 (3.0) 35.8 29.5

Net DPS (Rs) 14.3 13.6 11.3 13.2 18.4




EBITDA margin (%) 12.6 12.3 11.6 12.2 12.5

RoE (%) 15.6 13.3 10.1 10.9 14.8

RoCE (%) 5.9 5.0 4.6 5.4 6.1

EV / sales (x) 2.2 2.1 2.0 1.8 1.5

EV / EBITDA (x) 17.6 17.3 16.9 14.5 12.3

PER (x)* 15.2 14.9 15.4 11.3 8.7

P / BV (x) 2.8 2.6 2.4 2.2 2.0


Source: Company Data, PL Research * Core PE

Stock Performance

(%) 1M 6M 12M

Absolute 3.7 (36.1) (30.8)

Relative to Sensex 7.4 (20.0) (11.8)

LilladherPrabhudas SOTP

2/15/2016 34

Fair Value (Rs) Basis

L&T Core business 962 21x FY17E EPS Ex dividends

L&T Hydrocarbon business 7 10x FY17E EPS

L&T IDPL 136 1.3x P/B

L&T InfoTech 186 12x FY17E EPS

L&T Finance Holding 59 68% stake; 20% Hold co discount on current market cap

L&T's equity investment in BTG 4 1.5x equity investment

Other businesses 50 1.5x book value.

Target price 1,407


Larsen & Toubro

2/15/2016 35



Net Revenue 851,284 920,046 1,012,050 1,163,858 1,396,630

Direct Expenses 663,842 727,468 799,844 912,976 1,095,798

% of Net Sales 78.0 79.1 79.0 78.4 78.5

Employee Cost 80,276 79,222 95,066 109,326 125,725

% of Net Sales 9.4 8.6 9.4 9.4 9.0

SG&A Expenses (378) - - - -

% of Net Sales (0.0) 0.0 0.0 0.0 0.0


% of Net Sales 0.0 0.0 0.0 0.0 0.0

EBITDA 107,543 113,356 117,140 141,556 175,106

Margin (%) 12.6 12.3 11.6 12.2 12.5

Depreciation 14,458 26,225 26,487 28,606 30,895

PBIT 93,085 87,131 90,653 112,949 144,211


PBT 74,892 72,172 72,392 92,745 119,598

Total tax 26,076 22,836 24,613 32,460 41,859


PAT 49,020 47,648 42,741 58,051 75,171

Extraordinary Gain/(Loss) 5,885 3,572 - - -

Adjusted PAT 43,135 44,077 42,741 58,051 75,171




Share Capital 1,854 1,859 1,859 1,859 1,859




Total Debt 862,988 955,700 1,037,667 1,119,928 1,202,529




Gross Block 401,773 437,842 474,345 504,345 534,345

Less: Depreciation - - - - -

Net Block 401,773 437,842 474,345 504,345 534,345





Net Current Assets 696,630 764,205 868,473 959,551 1,064,483

Other Assets 24,166 29,392 29,392 29,392 29,392

Total Assets 1,246,283 1,370,186 1,510,957 1,632,034 1,766,967


LilladherPrabhudas Indian Oil Corporation

CMP: Rs389 TP: Rs511 Rating: BUY MCap: Rs943.5bn

Well diversified business: IOCL’s earnings are likely to grow at 34% CAGR over FY15-18E led by 1) higher petrochem earnings 2) healthy marketing margins 3) improved refining profitability and 4) zero subsidy losses. Continued strength in refining margins (9MFY16 GRM ~US$7.4 v/s FY15 US$6.3/bbl), stable crude prices, coupled with firm marketing and petrochemicals earnings, are likely to support earnings of the company.

Refining margins aided by lower fuel & oil loss to stay healthy: GRMs of the refiners have expanded supported by strong demand traction. Accordingly, we expect refining margins to stay healthy also aided by lower fuel & losses. Sharp fall in crude oil prices will help cut F&O losses; OMC refinery F&O stands at 5-9%.Despite 9MFY16 GRMs of US$5.8/bbl, we have conservatively factored in US$3.5/4.0bbl for FY17/18E.

Petrochemicals recovery gaining traction: Profitability of IOCL’s petrochemicals segment has improved sharply due to falling naphtha prices, in line with crude prices. Falling feedstock prices and firm product prices has meant that integrated Asian crackers’ profitability has improved sharply. IOCL’s 9MFY16 petchem EBIT was at Rs36bn (Rs24.7bn in FY15); we expect operating profits to expand to Rs68.8bn/Rs71.4bn in FY16/17E against Rs38.4bn in FY15.

Marketing profits to remain firm; benign crude price outlook to cut inventory losses: IOCL, with India’s largest retail outlet network of ~25,000 units, will benefit from expanding marketing margins. We have factored in diesel and petrol margins of Rs2/litre and Rs2.25/litre, respectively, lower than recent margin trends. Also, benign crude price outlook will mean no inventory losses.

Valuation & Recommendation: IOCL with a well-diversified business portfolio is attractively valued at current prices. We have a BUY rating with a price target of Rs 511, valued at PER of 10x FY17E. At our price target, it implies core PBV of 1.6xFY16E, with ROE of 16-18%

11/17/2014 36



Revenue (Rs m) 4,883,449 4,495,087 3,911,752 3,752,918 3,845,685

Growth (%) 5.8 (8.0) (13.0) (4.1) 2.5

EBITDA (Rs m) 170,565 105,359 224,847 258,560 267,651

PAT (Rs m) 68,475 48,315 99,564 112,550 119,164

EPS (Rs) 28.2 19.9 41.0 46.4 49.1

Growth (%) 53.9 (29.4) 106.1 13.0 5.9

Net DPS (Rs) 8.7 6.6 11.5 13.2 14.1




EBITDA margin (%) 3.5 2.3 5.7 6.9 7.0

RoE (%) 10.5 7.1 13.8 14.2 13.6

RoCE (%) 6.8 4.9 8.9 9.5 9.6

EV / sales (x) 0.4 0.3 0.4 0.4 0.3

EV / EBITDA (x) 10.4 14.3 6.4 5.2 4.8

PER (x) 13.8 19.5 9.5 8.4 7.9

P / BV (x) 1.4 1.4 1.2 1.1 1.0



Stock Performance

(%) 1M 6M 12M

Absolute (17.1) (6.1) 15.6



Indian Oil Corporation

11/17/2014 37



Net Revenue 4,883,449 4,495,087 3,911,752 3,752,918 3,845,685

Direct Expenses 4,712,884 4,389,727 3,686,905 3,494,358 3,578,035

% of Net Sales 96.5 97.7 94.3 93.1 93.0


% of Net Sales 0.0 0.0 0.0 0.0 0.0


% of Net Sales 0.0 0.0 0.0 0.0 0.0


% of Net Sales 0.0 0.0 0.0 0.0 0.0

EBITDA 170,565 105,359 224,847 258,560 267,651

Margin (%) 3.5 2.3 5.7 6.9 7.0

Depreciation 63,600 52,190 63,623 67,151 70,525

PBIT 106,965 53,169 161,224 191,409 197,125


PBT 99,778 70,144 139,451 158,356 168,083

Total tax 30,113 21,426 42,385 48,031 50,929


PAT 68,475 48,315 99,564 112,550 119,164


Adjusted PAT 68,475 48,315 99,564 112,550 119,164




Share Capital 24,280 24,280 24,280 24,280 24,280




Total Debt 1,026,241 736,084 757,618 683,258 650,385




Gross Block 1,263,476 1,401,010 1,725,006 1,837,522 1,955,040


Net Block 725,005 803,704 1,176,261 1,228,577 1,282,821






Other Assets 878 705 - - -

Total Assets 1,781,644 1,503,495 1,609,146 1,628,888 1,695,071


LilladherPrabhudas IndusInd Bank

CMP: Rs824 TP: Rs1,050 Rating: BUY MCap: Rs489.3bn

IIB continues to report a steady performance with Q3FY16 PAT growing by 30% YoY to Rs5.81bn. Other income continues to remain buoyant, while NII remains upbeat. Margins improved by 3bps QoQ led by strong accretion in CASA deposits, pick‐up in retail loan growth and as benefits from recent capital infusion continues to pour in and now the bank is targeting NIMs of 4% over the medium term. We maintain “Accumulate” with PT of Rs1,050 based on Sep-17 ABV.

Revenue growth remains buoyant: In Q3FY16, IIB delivered 34% YoY growth in core revenues led by 36% YoY growth in NII and 33% YoY growth in other income. Margins expanded by 3bps QoQ to 3.91% aided by strong accretion in CASA deposits, pick‐up in retail loan growth and recent capital infusion. The bank aspires to achieve ~40% CASA mix and ~4% NIM over the medium term as it increases its branch network to 1,200 (from 905 currently), benefits from the revival in high‐yielding CV loans and maintain its SA growth momentum.

Retail loan growth picks‐up with mix at ~42%: IIB reported 7% QoQ growth in its retail portfolio particularly led by strong traction in CV/car loans, credit card and LAP portfolio. Share of consumer loan portfolio, thus, increased slightly to 42% and helped boost margins. Wholesale portfolio grew 3.4% QoQ led by 6% QoQ growth in large corporate portfolio. We expect IIB to deliver average 26% loan growth over FY16‐18E.

Asset quality broadly stable; maintain IIB as one of our top ‘BUY’: In Q3FY16, IIB reported 13% QoQ rise in GNPL led by 55% QoQ growth in slippages in corporate portfolio. Provisions stood higher than estimated and enabled IIB to maintain stable coverage ratio at 60% while restructured p/f declined to 0.58%.

2/15/2016 38


Y/e March FY14 FY15E FY16E FY17E FY18E


Growth (%) 29.5 18.3 30.9 27.5 26.8


PAT 14,080 17,937 23,054 30,155 39,766

EPS (Rs) 26.9 34.0 41.0 50.8 66.9

Growth (%) 25.4 26.6 20.7 23.7 31.9

Net DPS (Rs) 3.5 4.0 5.2 6.5 7.5




NIM (%) 3.7 3.6 3.9 4.1 4.2

RoAE (%) 16.9 18.2 16.4 16.0 18.2

RoAA (%) 1.8 1.8 1.9 2.0 2.2

P / BV (x) 5.0 4.3 2.9 2.5 2.1

P / ABV (x) 5.1 4.3 2.9 2.5 2.1

PE (x) 30.7 24.2 20.1 16.2 12.3



Stock Performance

(%) 1M 6M 12M

Absolute 0.3 (0.8) 12.3



IndusInd Bank

2/15/2016 39





Others - - - - -



NII 28,907 34,203 44,785 57,084 72,369

Growth (%) 29.5 18.3 30.9 27.5 26.8

Treasury Income 1,283 1,158 750 750 750

NTNII 17,622 22,881 30,260 39,315 51,174


Total Income 101,441 120,958 148,000 181,820 227,365

Growth (%) 21.5 19.2 22.4 22.9 25.0



Growth (%) 41.1 19.3 33.5 28.6 30.7

NPA Provisions 3,137 3,389 5,048 6,081 7,473

Investment Provisions 876 (664) 199 40 8


PBT 21,283 27,092 34,930 45,689 60,252

Tax Provisions 7,203 9,155 11,876 15,534 20,486


PAT 14,080 17,937 23,054 30,155 39,766

Growth (%) 32.7 27.4 28.5 30.8 31.9




Par Value 10 10 10 10 10

No. of equity shares 526 529 594 594 594

Equity 5,256 5,295 5,940 5,940 5,940

Networth 90,319 106,305 175,322 200,830 235,235

Adj. Networth 88,479 104,201 172,479 197,653 231,729

Deposits 605,023 741,344 897,767 1,120,413 1,407,239

Growth (%) 11.8 22.5 21.1 24.8 25.6

Low Cost deposits 196,909 252,996 317,810 410,071 527,715


Total Liabilities 870,259 1,091,159 1,326,931 1,628,837 2,028,955

Net Advances 551,018 687,882 865,356 1,096,405 1,394,628

Growth (%) 24.3 24.8 25.8 26.7 27.2

Investments 215,630 248,594 291,067 317,582 361,296

Total Assets 870,259 1,091,159 1,326,931 1,628,837 2,028,955


LilladherPrabhudas Dabur India


Dabur had reported 2.5% decline in standalone volumes in Q3FY16 led by sales decline in Foods (Supply Disruption in Nepal), Honey/ Chyawanprash (late winters and Patanjali’s competition) and Digestives (unorganized competition). Lower input costs and 56% higher other income enabled 12.6% PAT growth. Dabur is looking at sustaining innovations to compete with Patanjali but expects market for herbal products to expand providing enough room for growth. Dabur is looking at base case volume growth of 5%, however monsoons and rural stimulus can accelerate it significantly. IBD growth will be led by Namaste, GCC remains a little uncertain due to political and currency related challenges. We had cut FY17 and FY18 EPS estimates by 6.7-8.5% to factor in the impact of lower sales growth and competition and arrive at 13.5% PAT CAGR over FY16-18. Maintain Buy

Concall Highlights: 1) Foods business sales were impacted by Rs1b due to Nepal disruption, Dabur hopes to reach close to normal sales level in 4QFY16 2) Sales of Honey and Chyawanprash were not only impacted by poor winter but also disruptive competition from Patanjali, Dabur is aiming to launch spices and herb added Honey to regain competitive edge 3) Patanjali’s competition has not impacted sales in HPC portfolio; hair oils have seen mid single digit volume growth and toothpaste sales are up 15%, Skin care is up 9.5% and Home care 8.4% 4) Dabur is looking at base case volume growth of 5% in FY17, however rural stimulus in Budget and normal monsoons can accelerate growth in FY17, 5) Dabur is looking at significantly upping the ante for innovation and value added products across segments to improve its consumer offering 6) Namaste has seen sharp rebound in growth rates, sales in North America are up 35%, Dabur expects margins to revert to earlier levels once sales reach ~110m USD, localisation of production in Africa can significantly increase sales 7) IBD margins were impacted by disruption in Nepal and currency issues in Nigeria, Turkey and Egypt, political situation and currency remains a key monitorable in GCC region.

11/17/2014 40



Revenue (Rs m) 70,753 78,272 83,880 95,737 109,348

Growth (%) 14.7 10.6 7.2 14.1 14.2

EBITDA (Rs m) 11,598 13,164 14,866 16,806 19,311

PAT (Rs m) 9,146 10,658 12,524 14,171 16,210

EPS (Rs) 5.2 6.1 7.1 8.0 9.2

Growth (%) 19.0 15.7 17.2 12.8 14.1

Net DPS (Rs) 1.8 2.0 2.5 2.9 3.4




EBITDA margin (%) 16.4 16.8 17.7 17.6 17.7

RoE (%) 35.2 32.8 31.0 29.6 28.3

RoCE (%) 32.8 33.6 33.6 34.1 33.8

EV / sales (x) 6.2 5.7 5.3 4.6 4.0

EV / EBITDA (x) 37.8 33.7 29.6 26.2 22.8

PER (x) 47.5 41.0 35.0 31.0 27.2

P / BV (x) 16.3 13.0 10.7 9.0 7.6



Stock Performance

(%) 1M 6M 12M

Absolute (12.2) (17.3) (3.3)



Dabur India

11/17/2014 41



Net Revenue 70,753 78,272 83,880 95,737 109,348

Direct Expenses 35,701 39,067 39,815 46,103 52,849

% of Net Sales 50.5 49.9 47.5 48.2 48.3

Employee Cost 6,077 6,896 7,648 8,594 9,757

% of Net Sales 8.6 8.8 9.1 9.0 8.9

SG&A Expenses 17,377 19,145 21,552 24,234 27,431

% of Net Sales 24.6 24.5 25.7 25.3 25.1


% of Net Sales 0.0 0.0 0.0 0.0 0.0

EBITDA 11,598 13,164 14,866 16,806 19,311

Margin (%) 16.4 16.8 17.7 17.6 17.7

Depreciation 975 1,150 1,303 1,462 1,635

PBIT 10,623 12,014 13,563 15,344 17,676


PBT 11,363 13,194 15,498 17,810 20,695

Total tax 2,191 2,509 2,945 3,607 4,449


PAT 9,154 10,658 12,524 14,171 16,210

Extraordinary Gain/(Loss) 7 - - - -

Adjusted PAT 9,146 10,658 12,524 14,171 16,210




Share Capital 1,744 1,757 1,762 1,767 1,772




Total Debt 7,081 7,336 4,250 3,500 3,000

Other Liabilities(net) 159 182 211 243 278

Deferred Tax Liability 448 587 646 710 781


Gross Block 24,128 25,409 27,159 29,159 31,159


Net Block 17,669 18,771 19,218 19,756 20,121

Capital Work in Progress 217 503 400 400 400






Total Assets 34,248 41,646 45,915 53,310 61,919


LilladherPrabhudas Aurobindo Pharma


Diversified portfolio strategy to be a winner: The strategy to leverage on its manufacturing and strong product filings capability is likely to result in strong earnings growth. Unlocking Injectables Portfolio with launches of more products from Unit IV would accelerate growth and margin expansion in US. We believe that main drivers for Aurobindo are a) Business mix improvement with more formulation sales, b) Scaling up of Aurolife’s control substances sales c) Scale‐up of injectables business and d) Higher operating cash flow to reduce debt.

US remains mainstay for growth: Formulation growth will be driven by injectables and orals. It has filed 67 products from Unit IV (NPNC injectables/ophthalmic) and expects strong array of approvals in FY16-18E. It is targeting 50% YoY growth in revenues from US injectables in FY16E-18EU vs US$66m in FY15. The company’s filed ANDAs address brand size of US$40bn and hopes to achieve sales of US$200-300m in 2-3 years. High value para-IV opportunities especially in injectables would provide boost for growth, margin and operating cash flow in FY16E-18E.

Maintainable margins revised: Management revised maintainable operating margins to 22-24% in FY16E-18E. Core EU formulation sales of US$520m are from six key markets – UK, Netherlands, Italy, Spain, Germany and Portugal. It expects to turn profitable in EU in FY16E. The company’s EU acquisition include additional sales of US$430m in FY15, while we expect improvement in EBITDA margin in FY16E.

Strong candidate for valuation re-rating: The stock currently trades at PER of 15.3x and 12.8x of FY17E and FY18E, which is at a significant (20%) discount to peers. Better cash flow from launches of high margin and limited competition drugs to further reduce gearing ratio and narrow valuation differential with peers in the industry. Our PE 18.5x of FY18E earnings valuation of the company set Aurobindo’s price target at Rs943. We maintain ‘BUY’.

2/15/2016 42



Revenue (Rs m) 80,998 121,205 136,607 166,964 183,535

Growth (%) 38.3 49.6 12.7 22.2 9.9

EBITDA (Rs m) 21,345 25,636 30,600 39,654 46,067

PAT (Rs m) 13,759 16,354 18,949 24,864 29,757

EPS (Rs) 23.6 28.0 32.4 42.6 51.0

Growth (%) 200.9 18.9 15.9 31.2 19.7

Net DPS (Rs) 1.5 2.2 4.5 4.5 4.5




EBITDA margin (%) 26.4 21.2 22.4 23.7 25.1

RoE (%) 43.3 36.7 32.1 32.3 29.7

RoCE (%) 21.2 19.6 18.2 20.2 21.4

EV / sales (x) 5.2 3.5 3.1 2.5 2.2

EV / EBITDA (x) 19.6 16.4 13.9 10.6 8.8

PER (x) 27.7 23.3 20.1 15.3 12.8

P / BV (x) 10.2 7.4 5.7 4.4 3.4



Stock Performance

(%) 1M 6M 12M

Absolute (19.8) (14.3) 16.8



Aurobindo Pharma

2/15/2016 43



Net Revenue 80,998 121,205 136,607 166,964 183,535

Direct Expenses 43,234 63,674 69,738 85,152 90,942

% of Net Sales 53.4 52.5 51.0 51.0 49.5

Employee Cost 8,024 13,023 15,505 17,114 18,812

% of Net Sales 9.9 10.7 11.4 10.3 10.3

SG&A Expenses 8,395 18,873 20,764 25,045 27,714

% of Net Sales 10.4 15.6 15.2 15.0 15.1


% of Net Sales 0.0 0.0 0.0 0.0 0.0

EBITDA 21,345 25,636 30,600 39,654 46,067

Margin (%) 26.4 21.2 22.4 23.7 25.1

Depreciation 3,125 3,326 3,796 4,561 5,416

PBIT 18,220 22,310 26,804 35,093 40,652

Interest Expenses 1,079 843 900 757 517

PBT 17,356 22,275 27,034 35,478 41,288

Total tax 3,635 5,966 8,110 10,643 11,561


PAT 11,729 15,758 18,199 24,077 28,931

Extraordinary Gain/(Loss) (2,031) (596) (750) (788) (827)

Adjusted PAT 13,759 16,354 18,949 24,864 29,757




Share Capital 584 584 584 584 584




Total Debt 37,783 44,754 50,892 45,644 34,482


Deferred Tax Liability 2,054 2,058 1,517 808 (18)


Gross Block 41,830 54,461 66,158 76,958 86,958


Net Block 27,217 37,056 44,957 51,195 55,780






Other Assets 8,074 4,855 10,375 11,845 13,549

Total Assets 77,595 98,629 119,036 134,051 147,890


LilladherPrabhudas Britannia Industries

CMP: Rs2,666 TP: Rs3,200 Rating: BUY MCap: Rs319.8bn

We have cut BRIT’s FY16-18 EPS estimates by 1.5-5.4% to factor in tepid demand and higher tax rate. BRIT continues to grow ahead of the market led by innovations and distribution gains in rural India and Hindi heartland. The company is operating at all-time high profit margins led by double-digit volume growth, cost efficiencies and Premiumisation; however, expansion of incremental margin looks difficult. BRIT is looking at 2.5-3% price increase as sugar prices are up 38% and Wheat 7% from the lows. We estimate 17.5% PAT CAGR over FY16-18 post 52% PAT growth in FY16. Retain ‘BUY’, given 52% ROE and ROCE and 40% dividend payout.

Adj. PAT up 50% on 10.7% sales growth: Sales increased 10.7% led by 11% volume growth. Gross margins expanded 230bps to 41.9%, mainly led by cost efficiencies and mix improvement. EBITDA margin expanded 370bps to 14.2% due to 100bps lower other expenses (40bps) and conversion cost. EBITDA increased 50%; PBT increased 57% aided by 27% higher other income and 16% lower depreciation. Adj. PAT was up by 50% to Rs1.9bn.

Concall Takeaways: 1) BRIT has increased sales by 35% in rural India due to increase in distribution and strong gains by Rs5 Good Day pack 2) BRIT has grown sales by more than 20% in the Hindi Belt where it has 11% market share, relaunch and new variants in Tiger (Cookies, Creams) will boost sales further 3) Floods in Tamil Nadu have impacted sales by 50bps 4) BRIT expects 3-3.5% input cost inflation and is intending a 2.5% price increase in the coming three months 5) BRIT is looking at capex of Rs8.5-9bn in FY16 and FY17 and is looking at four new units in addition to Perundurai Unit in TN and Bangalore Unit 6) BRIT is looking at increasing the ratio of in-house production from 50% to 60-65% over the coming 2/3 years 7) BRIT has launched Rs25-30 packs for Nutrichoice Heavens and Good Day Chunkies to push sales 8) BRIT is planning an integrated dairy model which, if implemented, would look at direct milk procurement, manufacturing of Cheese, Milk powder, Condensed milk and Whey powder in Phase I followed by valued-added products in Phase II 9) Subsidiary growth is led by Middle East business; Dairy business has grown slower.

11/17/2014 44



Revenue (Rs m) 63,074 71,760 80,199 92,972 108,708

Growth (%) 12.3 13.8 11.8 15.9 16.9

EBITDA (Rs m) 5,966 7,715 11,501 13,360 15,522

PAT (Rs m) 3,898 5,097 7,734 9,006 10,668

EPS (Rs) 32.5 42.5 64.5 75.1 88.9

Growth (%) 66.1 30.8 51.7 16.5 18.5

Net DPS (Rs) 12.0 16.0 21.0 27.0 34.0




EBITDA margin (%) 9.5 10.8 14.3 14.4 14.3

RoE (%) 51.9 48.6 52.5 45.9 42.6

RoCE (%) 44.1 48.2 52.1 45.7 42.4

EV / sales (x) 5.0 4.3 3.9 3.3 2.8

EV / EBITDA (x) 53.1 40.2 26.9 22.8 19.3

PER (x) 82.0 62.7 41.3 35.5 30.0

P / BV (x) 37.3 25.8 18.8 14.4 11.5



Stock Performance

(%) 1M 6M 12M

Absolute (9.8) (21.8) 36.5



Britannia Industries

11/17/2014 45



Net Revenue 63,074 71,760 80,199 92,972 108,708

Direct Expenses 44,595 50,348 54,172 62,945 73,578

% of Net Sales 70.7 70.2 67.5 67.7 67.7

Employee Cost 1,725 1,768 1,985 2,256 2,586

% of Net Sales 2.7 2.5 2.5 2.4 2.4

SG&A Expenses 6,790 7,513 8,097 9,254 10,881

% of Net Sales 10.8 10.5 10.1 10.0 10.0

Other Expenses 3,999 4,416 4,445 5,157 6,141

% of Net Sales 6.3 6.2 5.5 5.5 5.6

EBITDA 5,966 7,715 11,501 13,360 15,522

Margin (%) 9.5 10.8 14.3 14.4 14.3

Depreciation 634 1,173 916 1,194 1,407

PBIT 5,332 6,542 10,585 12,166 14,115


PBT 5,626 7,406 11,718 13,543 15,923

Total tax 1,728 2,309 3,984 4,537 5,254


PAT 3,698 6,224 7,734 9,006 10,668

Extraordinary Gain/(Loss) (200) 1,127 - - -

Adjusted PAT 3,898 5,097 7,734 9,006 10,668




Share Capital 240 240 240 240 240




Total Debt 56 139 133 133 133




Gross Block 9,393 10,007 14,757 17,507 20,507


Net Block 5,457 5,260 9,093 10,649 12,243





Net Current Assets 451 4,675 5,295 8,453 12,236

Other Assets (92) 211 445 784 1,262

Total Assets 8,633 12,531 17,187 22,291 28,044


LilladherPrabhudas Cummins India


Positive trends in domestic markets/exports outlook dull: KKC commented that the economy is showing signs of revival though at a slow pace, mainly driven by government spending. The company is seeing revival in segments like Mining, Railways, Defence etc. In domestic Powergen business, demand in HHP is driven by Infrastructure/Pharma/Data centres etc. and on LHP side, demand is driven by segments like Banks/Petrol pumps/Dairy etc. KKC is focusing on increasing market share further in domestic market. The company reiterated that the demand for its products is aligned to growth in capital formation and not proxy of power deficit in India.

Looking to gain market share in LHP exports: KKC mentioned that global scenario today is weak and quite a few countries, especially commodity-linked countries, are struggling. While LHP exports saw decline across most markets like Africa/Mexico/Europe/ME etc, KKC is looking to gain market share in LHP in export market to drive growth. Globally Cummins has only 5% market share in LHP product and hence room to grow is significant and India being the feed factory will be key beneficiary

Outlook and Valuation: The stock is trading at 28.1x FY17E earnings. Cummins continues to be the best franchise in the Capital goods space. Outlook for Cummins continues to be positive, given the strong ramp-up in exports and likely improvement in market position, post changes in emission norms. Low capitalization utilization of 50-60% also leaves upside surprise on margin once volumes improve.

2/15/2016 46



Revenue (Rs m) 39,786 44,058 48,595 55,574 62,613

Growth (%) (13.3) 10.7 10.3 14.4 12.7

EBITDA (Rs m) 6,986 7,351 7,872 9,781 11,458

PAT (Rs m) 5,676 7,044 7,731 8,915 10,659

EPS (Rs) 20.5 25.4 27.9 32.2 38.5

Growth (%) (17.1) 24.1 9.8 15.3 19.6

Net DPS (Rs) 13.0 14.0 13.6 13.6 13.6




EBITDA margin (%) 17.6 16.7 16.2 17.6 18.3

RoE (%) 22.9 25.7 25.1 25.6 26.5

RoCE (%) 23.0 25.8 25.0 25.4 26.2

EV / sales (x) 6.3 5.7 5.1 4.5 3.9

EV / EBITDA (x) 35.7 34.0 31.8 25.5 21.5

PER (x) 44.2 35.6 32.4 28.1 23.5

P / BV (x) 9.8 8.6 7.7 6.8 5.8



Stock Performance

(%) 1M 6M 12M

Absolute (7.0) (24.1) (0.6)



Cummins India

2/15/2016 47



Net Revenue 39,786 44,058 48,595 55,574 62,613

Direct Expenses 24,241 27,225 30,615 34,401 38,758

% of Net Sales 60.9 61.8 63.0 61.9 61.9

Employee Cost 3,396 3,936 4,131 4,724 5,322

% of Net Sales 8.5 8.9 8.5 8.5 8.5


% of Net Sales 0.0 0.0 0.0 0.0 0.0

Other Expenses 5,162 5,547 5,977 6,669 7,075

% of Net Sales 13.0 12.6 12.3 12.0 11.3

EBITDA 6,986 7,351 7,872 9,781 11,458

Margin (%) 17.6 16.7 16.2 17.6 18.3

Depreciation 528 797 806 934 1,062

PBIT 6,459 6,553 7,066 8,847 10,396


PBT 8,194 9,374 9,428 11,144 12,999

Total tax 2,175 1,515 1,697 2,229 2,340


PAT 6,019 7,859 7,731 8,915 10,659

Extraordinary Gain/(Loss) 343 815 - - -

Adjusted PAT 5,676 7,044 7,731 8,915 10,659




Share Capital 554 554 554 554 554




Total Debt - - 200 400 600




Gross Block 16,203 21,203 25,203 29,203 33,203


Net Block 10,149 14,352 17,545 20,611 23,548






Other Assets (465) (631) (631) (631) (631)

Total Assets 25,652 29,172 32,726 37,512 44,041


LilladherPrabhudas Glaxo SmtihKline Consumer Healthcare


We had increased FY16 and FY17 EPS estimates by 2.4-5.7% factoring in benefits of price increase and Novartis’ OTC business. GSK continues to gain share in MFD segment due to stronghold of Horlicks and Boost. However, 11% price increase in the past six months and likely entry of ‘Patanjali’ remains a concern. Although SMP prices are down 18% YoY and remain benign, gradually increasing barley, sugar and wheat prices will cap further increase in gross margins, in our view. We expect GSK to sustain leadership led by strong brands, innovations and rising distribution reach; expect 12% PAT CAGR over FY16-18 due to peak margins in FY16. We remain positive given that GSK has 1) Valuations (28.2xDec17EPS) at a discount to coverage universe 2) strong leadership in MFD segment 3) 22% PAT CAGR in past 10 years and 4) likely upside from Novartis OTC business. Retain Buy

Revenues up 1.7%, Adj.PAT up 36.8%: Revenues increased 1.7%, 7% adjusted for phase out of excise duty benefits, despite 1% impact of Chennai floods. Gross margins increased 400bps to 70.5%. EBITDA margins increased 500bps as 590bps higher employee cost was neutralised by 520bps lower ad-spend and 180bps lower other expenses. EBITDA increased 50.9%. PBT grew by 37.5% on muted increase of 5.3% in depreciation and 3.8% in financial other income. Adj. PAT grew by 36.8 % at Rs1.38bn as tax rate increased by 30bps to 34.9%.

Concall Takeaways: 1) MFD Volumes were flat, (-1.5% in Q2). 2) Rural demand remains benign, small packs are impacted the most 3) Q3 auxiliary income increased by 9% due to pipeline correction in OTC products 4) Chennai floods impacted sales by 1% as 90% of Boost sales is from South India (Tamil Nadu is 45%) 4) GSK has increased MFD prices by 6% from Jan2016 post a 5% increase taken in July2015 5) GSK has added 108000 outlets in Q3FY16, taking the total reach to 3.3m 6) Novartis’ OTC products will be marketed by GSK from July and are expected to have retail sales of >Rs1bn in FY17 7) Malt, Wheat and Sugar prices are up 1-6%, SMP prices are down 18% YoY.

2/15/2016 48


Y/e Mar FY14 FY15 FY16E FY17E FY18E

Revenue (Rs m) 48,686 43,076 44,889 50,892 57,811

Growth (%) 52.7 (11.5) 4.2 13.4 13.6

EBITDA (Rs m) 8,728 7,301 9,016 10,203 11,549

PAT (Rs m) 6,747 5,836 7,161 8,045 9,041

EPS (Rs) 160.4 138.8 170.3 191.3 215.0

Growth (%) 54.5 (13.5) 22.7 12.3 12.4

Net DPS (Rs) 45.0 55.0 70.0 85.0 100.0




EBITDA margin (%) 17.9 16.9 20.1 20.0 20.0

RoE (%) 42.5 29.7 31.2 30.2 29.7

RoCE (%) 42.3 29.6 31.1 30.1 29.6

EV / sales (x) 5.0 5.7 5.4 4.8 4.2

EV / EBITDA (x) 28.0 33.4 27.0 23.8 21.1

PER (x) 36.2 41.8 34.1 30.4 27.0

P / BV (x) 13.5 11.6 9.9 8.6 7.5



Stock Performance

(%) 1M 6M 12M

Absolute (2.4) (7.5) (0.0)



GlaxoSmithKline Consumer Healthcare

2/15/2016 49



Net Revenue 48,686 43,076 44,889 50,892 57,811

Direct Expenses 20,501 17,926 17,357 19,875 22,559

% of Net Sales 42.1 41.6 38.7 39.1 39.0

Employee Cost 4,701 4,313 5,028 5,547 6,359

% of Net Sales 9.7 10.0 11.2 10.9 11.0

SG&A Expenses 13,634 12,212 12,322 13,995 15,898

% of Net Sales 28.0 28.3 27.5 27.5 27.5

Other Expenses 1,123 1,324 1,167 1,272 1,445

% of Net Sales 2.3 3.1 2.6 2.5 2.5

EBITDA 8,728 7,301 9,016 10,203 11,549

Margin (%) 17.9 16.9 20.1 20.0 20.0

Depreciation 625 621 610 665 720

PBIT 8,102 6,680 8,406 9,538 10,829


PBT 10,161 8,891 10,807 12,141 13,644

Total tax 3,413 3,055 3,646 4,096 4,604


PAT 6,747 5,836 7,161 8,045 9,041


Adjusted PAT 6,747 5,836 7,161 8,045 9,041




Share Capital 421 421 421 421 421






Deferred Tax Liability (903) (1,043) (1,180) (1,333) (1,504)


Gross Block 8,546 10,593 12,257 13,257 14,257


Net Block 3,399 4,917 5,971 6,306 6,586

Capital Work in Progress 385 423 500 1,500 3,500






Total Assets 17,318 20,186 23,678 27,280 31,101


LilladherPrabhudas ACC


ACC underperformed its peers for a considerable period due to its high cost operations. ACC is addressing its high costs with the modernisation of old and obsolete plants, increased usage of pet coke/alternate fuel and rationalisation of freight cost. We expect continuous reduction in costs over the next 12 months on the back of elevated capacity utilisation and commissioning of modernisation projects. Controlled costs and improved outlook on demand drive our strong estimates for CY16-CY17 projecting ~36% CAGR growth in EPS. CY16 would have the partial benefit of new 2.8m t clinker line in Jamul (Chhattisgarh) and higher usage of pet coke. We maintain our BUY rating with TP of Rs1,600 at EV/T of US$130 CY15E capacity of 33m tonnes.

Savings in cost to drive the margins: Pet coke consumption increased sharply in Q4CY15 to 27% from 7% in the prior quarter. We expect it to further improve to 50% by the end of Q2CY16 as company has already pursued technical modifications across the kilns to consumer higher proportion of pet coke. Higher consumption of pet coke would make its cost more aligned with its peers. In addition to this, modernisation cum expansion of its Jamul kiln from 2700tpd to 9000tpd would significantly reduce the cost as Jamul constitutes 13% of ACC’s total volumes.

Key beneficiary of recovery in South and Maharashtra: From contraction in demand, we expect to see a strong revival in Andhra Pradesh’s (AP’s) demand, led by an end to the political uncertainty and bifurcation of the state. Hence, stabilization of AP, strong demand environment in IT sector and improved competitiveness of southern industries with the connectivity to national electricity grid, would drive demand in the South. Stronger demand in South, in turn, would keep prices in Maharashtra firm. We see ACC as a big beneficiary of all these as they sell 40% of volumes in these two regions.

2/15/2016 50


Y/e Dec CY13 CY14 CY15E CY16E CY17E

Revenue (Rs m) 108,891 114,803 114,328 127,195 145,646

Growth (%) (2.2) 5.4 (0.4) 11.3 14.5

EBITDA (Rs m) 14,027 12,755 11,730 14,785 20,882

PAT (Rs m) 9,002 8,663 6,039 7,147 11,193

EPS (Rs) 47.9 46.1 32.1 38.0 59.6

Growth (%) (32.3) (3.8) (30.3) 18.3 56.6

Net DPS (Rs) 30.0 34.0 17.0 20.9 32.7




EBITDA margin (%) 12.9 11.1 10.3 11.6 14.3

RoE (%) 11.9 10.8 7.3 8.4 12.6

RoCE (%) 12.7 11.5 7.8 9.0 13.3

EV / sales (x) 1.9 1.9 2.0 1.8 1.4

EV / EBITDA (x) 15.0 17.3 19.2 15.1 10.1

PER (x) 26.2 27.3 39.1 33.0 21.1

P / BV (x) 3.0 2.9 2.8 2.7 2.6



Stock Performance

(%) 1M 6M 12M

Absolute 2.2 (8.4) (22.7)

Relative to Sensex 5.9 7.7 (3.6)


ACC

2/15/2016 51



Net Revenue 108,891 114,803 114,328 127,195 145,646

Direct Expenses 41,471 43,974 42,448 46,643 51,570

% of Net Sales 38.1 38.3 37.1 36.7 35.4

Employee Cost 6,626 7,481 7,722 8,459 9,305

% of Net Sales 6.1 6.5 6.8 6.7 6.4

SG&A Expenses 22,919 25,784 27,042 28,534 32,275

% of Net Sales 21.0 22.5 23.7 22.4 22.2

Other Expenses 23,849 24,809 25,386 28,774 31,613

% of Net Sales 21.9 21.6 22.2 22.6 21.7

EBITDA 14,027 12,755 11,730 14,785 20,882

Margin (%) 12.9 11.1 10.3 11.6 14.3

Depreciation 5,838 5,676 6,626 8,020 9,315

PBIT 8,189 7,079 5,104 6,764 11,567

Interest Expenses 1,136 828 646 763 874

PBT 12,136 11,195 7,655 9,476 14,925

Total tax 1,319 (311) 1,900 2,464 3,880

Effective Tax rate (%) 10.9 (2.8) 24.8 26.0 26.0

PAT 10,947 11,618 5,876 7,147 11,193

Extraordinary Gain/(Loss) (223) (137) (163) - -

Adjusted PAT 9,002 8,663 6,039 7,147 11,193




Share Capital 1,880 1,880 1,880 1,880 1,880




Total Debt 350 - - - -




Gross Block 105,867 111,495 116,495 155,386 160,386


Net Block 55,700 56,660 53,290 84,160 79,845

Capital Work in Progress 12,310 22,078 29,078 - -






Total Assets 83,640 87,616 89,758 92,966 97,993


LilladherPrabhudas Glenmark Pharmaceuticals


US generics: Past delays from regulators to bulk-up approvals in FY16E-17E: US revenues are expected to gain 23% CAGR in FY16-18E on the back of annual approvals of 12-15 products. Glenmark currently has a pipeline of 22 & 18 ANDAs which have been pending for more than 36 months & 24 months.

Zetia to lead revenues from key Para-IV drugs: Glenmark’s US pipeline for approvals in FY16E-18E comprises of limited competition drugs, FTF opportunities and branded generics. Zetia, however, will provide best opportunity with US$240m revenue potential in FY17E. Other key drugs are Welchol, Finacea, Ortho Tri-cyclen Lo and Nitroglycerin.

Investment in high-end drugs to provide sustainable growth: We believe that current rise in investments is mainly due to inclusion of high end drugs such as inhalers, oncology injectables and dermatology. We expect the company to venture into biosim opportunities, given the high commercial benefits and available expertise of R&D in biologics. With focus on key markets, clinical trials for MDI inhalers is expected in the near term for markets which allow generic inhalers as automatic substitute.

India sales continue to outperform industry: With support from the strong brands and expansion of market share by 100bps (3.2%) in FY10-14, we expect domestic sales growth to outperform industry growth and achieve 18% CAGR in FY15-18E. The company’s core therapy contributes 85% of domestic revenues in FY15.

Peer disparity in valuing R&D potentials: Compared to its peers (SPARC, Dr Reddy’s) for their investments in R&D of NDDS/NDA products with potential of much lower revenues, we find value of Glenmarks’ annual investments of US$45-50m for NCE/biologics remains non-existent in the company’s current valuation. To derive comparable EPS of Glenmark with peers, we add back US$50m R&D costs of NCE/NBE research, post adjustment of tax benefits/shields to core earnings. We forecast adj. EPS (core) of Rs32, Rs57.8, Rs 63.3 in FY16E, FY17E and FY18E, respectively. We maintain ‘BUY’

2/15/2016 52



Revenue (Rs m) 60,052 65,953 73,217 103,236 110,701

Growth (%) 20.3 9.8 11.0 41.0 7.2

EBITDA (Rs m) 13,179 11,751 15,888 28,906 24,908

PAT (Rs m) 5,423 4,753 8,862 17,710 14,864

EPS (Rs) 20.0 17.5 31.4 62.8 52.7

Growth (%) (9.9) (12.4) 79.3 99.8 (16.1)

Net DPS (Rs) 2.0 2.0 2.0 2.0 2.0




EBITDA margin (%) 21.9 17.8 21.7 28.0 22.5

RoE (%) 18.9 15.9 21.8 29.8 19.9

RoCE (%) 11.2 8.8 12.4 20.2 15.4

EV / sales (x) 3.6 3.5 3.1 2.1 1.9

EV / EBITDA (x) 16.5 19.4 14.3 7.5 8.5

PER (x) 35.5 40.5 22.6 11.3 13.5

P / BV (x) 6.5 6.4 3.9 3.0 2.5



Stock Performance

(%) 1M 6M 12M

Absolute (14.5) (37.4) (7.4)



Glenmark Pharmaceuticals

2/15/2016 53



Net Revenue 60,052 65,953 73,217 103,236 110,701

Direct Expenses 22,240 23,199 25,626 30,971 38,192

% of Net Sales 37.0 35.2 35.0 30.0 34.5

Employee Cost 10,261 12,024 13,399 16,518 19,926

% of Net Sales 17.1 18.2 18.3 16.0 18.0

SG&A Expenses 14,371 18,978 18,304 26,841 27,675

% of Net Sales 23.9 28.8 25.0 26.0 25.0


% of Net Sales 0.0 0.0 0.0 0.0 0.0

EBITDA 13,179 11,751 15,888 28,906 24,908

Margin (%) 21.9 17.8 21.7 28.0 22.5

Depreciation 2,168 2,600 2,640 2,824 2,996

PBIT 11,011 9,151 13,248 26,083 21,912


PBT 9,240 7,814 11,962 25,173 21,234

Total tax 1,513 1,190 2,601 7,300 6,370


PAT 5,423 4,753 8,862 17,710 14,864


Adjusted PAT 5,423 4,753 8,862 17,710 14,864




Share Capital 271 271 282 282 282




Total Debt 32,670 42,849 35,272 28,062 23,725

Other Liabilities(net) 654 1,217 1,319 1,360 1,402

Deferred Tax Liability (5,142) (2,750) (3,229) (2,725) (2,088)


Gross Block 37,786 42,734 48,004 53,274 57,614


Net Block 30,357 32,704 35,334 37,781 39,125






Other Assets 602 580 638 701 772

Total Assets 58,015 71,320 84,484 94,434 104,546


LilladherPrabhudas Petronet LNG


In a sweet spot: Petronet LNG (PLNG), India’s largest LNG regassification player, is a play on India’s evolving gas market. Confluence of weak domestic gas volume outlook, soft global spot LNG prices and rising domestic demand from user industries mean that LNG demand will keep increasing and so are the LNG imports. Also, government initiatives to revive stranded power and fertiliser plants by importing LNG offer additional support. High share of long-term committed revenues (~84% of FY18 revenues) provides high earnings visibility.

Favourable environment going forward: Global spot LNG prices have come off to ~US$6/mmbtu (~US$15-20/mmbtu in FY15) led by weakening demand in Japan and South Korea along with rising supplies from US and Australia. India with constrained gas supply outlook is ideally placed to capitalise on the opportunity. PLNG with lowest cost structure- new green field capex/ton is over 2x PLNG’s aggregate levels, is ideally placed to capitalise on opportunity.

Earnings momentum to gather pace: PLNG’s PBT is to increase at 43%CAGR over FY15-18E (after 24% CAGR PBT drop over FY13-15) supported by rising volumes and higher margins. Capacity expansion at Dahej to 15MTPA (10MTPA currently), to be commissioned by FY17 will drive medium term earnings; FY18 PBT to increase ~3x FY15 levels and ROE to expand ~750bps to 24%, in our view.

Reiterate ‘BUY’: PLNG offers defensive growth opportunity by virtue of its scale-up potential at attractive returns. Reiterate ‘BUY’ with as DCF based PT of Rs300.

2/15/2016 54



Revenue (Rs m) 377,475 395,010 395,447 495,620 780,532

Growth (%) 30.4 4.6 0.1 25.3 57.5

EBITDA (Rs m) 14,984 14,390 15,144 19,741 32,547

PAT (Rs m) 7,119 8,825 8,299 10,416 19,161

EPS (Rs) 9.5 11.8 11.1 13.9 25.5

Growth (%) (38.1) 24.0 (6.0) 25.5 83.9

Net DPS (Rs) 2.3 2.4 2.2 2.8 5.1




EBITDA margin (%) 4.0 3.6 3.8 4.0 4.2

RoE (%) 15.1 16.5 13.8 15.4 24.1

RoCE (%) 10.9 13.0 11.4 12.4 19.6

EV / sales (x) 0.6 0.5 0.5 0.4 0.3

EV / EBITDA (x) 14.5 14.9 14.1 10.7 6.1

PER (x) 27.2 21.9 23.3 18.6 10.1

P / BV (x) 3.9 3.4 3.0 2.7 2.2



Stock Performance

(%) 1M 6M 12M

Absolute (6.1) 30.2 29.7



Petronet LNG

2/15/2016 55



Net Revenue 377,475 395,010 395,447 495,620 780,532

Direct Expenses 345,914 362,487 360,962 454,984 716,691

% of Net Sales 91.6 91.8 91.3 91.8 91.8

Employee Cost 466 571 657 755 868

% of Net Sales 0.1 0.1 0.2 0.2 0.1


% of Net Sales 0.0 0.0 0.0 0.0 0.0

Other Expenses 16,111 17,562 18,683 20,140 30,425

% of Net Sales 4.3 4.4 4.7 4.1 3.9

EBITDA 14,984 14,390 15,144 19,741 32,547

Margin (%) 4.0 3.6 3.8 4.0 4.2

Depreciation 3,081 3,154 3,352 3,362 3,818

PBIT 11,903 11,236 11,792 16,380 28,729


PBT 10,545 9,849 11,139 15,547 28,598

Total tax 3,426 1,024 2,840 5,130 9,437


PAT 7,119 8,825 8,299 10,416 19,161


Adjusted PAT 7,119 8,825 8,299 10,416 19,161




Share Capital 7,500 7,500 7,500 7,500 7,500




Total Debt 35,800 23,738 30,738 30,738 20,738




Gross Block 77,946 87,869 88,369 88,369 112,369


Net Block 62,650 69,426 66,574 63,212 83,394







Total Assets 91,191 87,895 102,146 111,256 118,015


LilladherPrabhudas

MID-CAP

2/15/2016 56

LilladherPrabhudas Hexaware Technologies


HEXW reported a CY15 CC revenue growth of 17.6% YoY, much ahead of most of the peers. Company won new business from new clients worth US$120mn in CY15, which will be incremental tailwind for CY16 growth. Company has invested in sales and marketing engine in CY15 to build base for future growth. This led to margin drop in CY15, which we believe will be partly recovered in CY16. Management has guided for CY16 revenue growth to be ahead of NASSCOM guidance of 10-12%. Industry leading revenue growth, reasonable valuations (14.3x/12.7x CY16/17 EPS) and attractive dividend yield (~4%) make Hexaware a compelling BUY.

Improved deal win and client additions to drive CY16 growth: Company added 9 new clients during Q4CY15. Company is targeting non-top20-30 clients of Tier-1 IT companies and shared few case studies where they have successfully replaced tier-1 vendor.

Valuation & Recommendation – Retain “BUY” with a TP of Rs300 based on 16x CY17 EPS

2/15/2016 57


Y/e Dec CY13 CY14 CY15 CY16E CY17E

Revenue (Rs m) 22,854 25,817 31,235 36,643 41,758

Growth (%) 17.3 13.0 21.0 17.3 14.0

EBITDA (Rs m) 5,124 4,776 5,357 6,626 7,486

PAT (Rs m) 3,792 3,251 3,932 4,959 5,611

EPS (Rs) 12.6 10.8 13.1 16.5 18.6

Growth (%) 14.5 (14.6) 21.0 26.1 13.2

Net DPS (Rs) 11.1 9.4 8.7 10.5 12.0




EBITDA margin (%) 22.4 18.5 17.2 18.1 17.9

RoE (%) 31.6 26.1 29.0 32.8 33.0

RoCE (%) 30.8 25.6 28.3 32.1 32.4

EV / sales (x) 2.9 2.6 2.1 1.8 1.6

EV / EBITDA (x) 13.0 14.1 12.4 10.1 8.8

PER (x) 18.4 21.6 17.8 14.1 12.5

P / BV (x) 5.8 5.4 4.9 4.4 3.9



Stock Performance

(%) 1M 6M 12M

Absolute 5.2 (17.5) (10.0)

Relative to Sensex 8.9 (1.4) 9.0


Hexaware Technologies

2/15/2016 58



Net Revenue 22,854 25,817 31,235 36,643 41,758

Direct Expenses 13,826 16,278 20,061 23,178 26,537

% of Net Sales 60.5 63.1 64.2 63.3 63.5


% of Net Sales 0.0 0.0 0.0 0.0 0.0

SG&A Expenses 3,904 4,763 5,817 6,840 7,735

% of Net Sales 17.1 18.4 18.6 18.7 18.5


% of Net Sales 0.0 0.0 0.0 0.0 0.0

EBITDA 5,124 4,776 5,357 6,626 7,486

Margin (%) 22.4 18.5 17.2 18.1 17.9

Depreciation 386 440 482 546 601

PBIT 4,738 4,336 4,875 6,080 6,885


PBT 4,796 4,246 5,046 6,358 7,148

Total tax 1,004 980 1,114 1,399 1,537


PAT 3,792 3,200 3,932 4,959 5,611

Extraordinary Gain/(Loss) - (51) - - -

Adjusted PAT 3,792 3,251 3,932 4,959 5,611




Share Capital 600 602 602 602 602








Gross Block 7,337 7,730 8,823 10,106 11,567


Net Block 5,150 5,138 5,755 6,492 7,352






Other Assets 1,695 2,021 2,021 2,021 2,021

Total Assets 12,482 13,344 14,673 16,466 18,459


LilladherPrabhudas Jubilant Life Sciences


Overcoming strong headwinds across business verticals in Pharma and Chemical segments, Jubilant Life (JOL) is set to achieve turnaround on the back of CMO, Radiopharma and Pyridine derivatives. The company’s Nutritional products and Radiopharma sales are expected to gain further momentum with price rise and approvals in Rubi-Fill and Magnevist in FY16E-18E. With price rise in value-added products of Pyridine, JOL invests in pyridine consuming front-end products which will benefit in better realizations in global markets including China.

While JOL’s revenues are likely to improve at 13% CAGR, we estimate EBITDA to grow at 60% CAGR in FY15-18E due to a) rise in CMO profitability, b) break-even in Symtet, c) higher realisation in Radio Pharma and d) no further recurrence of remediation costs (as it was Rs1.05bn in FY15). With achievement of milestones in key business verticals, we believe the high discount of JOL valuation vis-a-vis peers will be narrowed down and gradually re-rated to its normalised 1-yr forward PE 12x-14x by FY17 from the current PE 6x-8x. JOL trades at PE 6.7x and 5.4x of FY17E and FY18E, respectively.

We estimate EBITDA margin of 22% and 23% in FY17E and FY18E, respectively, though the company’s average EBITDA margin is at 20-23% with its normalised business in Pharma and Chemical (LSI) business.

Normalised PAT to grow at 31% CAGR in FY16-18E, respectively, with assumptions of 25% effective tax rate. Higher probability of profit in subsidiary with previous operating losses to provide upside potentials to our estimates.

Maintain JOL’s guidance of annual capex of Rs4-4.5bn in FY16E-17E. ROE and ROCE to grow to 16% and 21% in FY18E from 11.5% and 19% in FY16, respectively.

2/15/2016 59



Revenue (Rs m) 57,216 57,761 65,443 73,547 81,469

Growth (%) 11.9 1.0 13.3 12.4 10.8

EBITDA (Rs m) 9,259 6,392 13,743 16,327 18,331

PAT (Rs m) 3,235 (97) 5,417 7,532 9,314

EPS (Rs) 20.9 (0.6) 34.0 47.3 58.5

Growth (%) (3.2) (102.9) NA NA 23.7

Net DPS (Rs) 3.0 3.0 3.0 3.0 3.0




EBITDA margin (%) 16.2 11.1 21.0 22.2 22.5

RoE (%) 12.7 (0.4) 19.0 21.0 21.3

RoCE (%) 8.1 3.4 11.6 14.3 16.0

EV / sales (x) 1.5 1.6 1.3 1.0 0.8

EV / EBITDA (x) 9.5 14.7 6.0 4.6 3.7

PER (x) 15.0 NA NA 6.7 5.4

P / BV (x) 1.8 2.0 1.5 1.3 1.0



Stock Performance

(%) 1M 6M 12M

Absolute (7.4) (8.7) 105.2



Jubilant Life Sciences

2/15/2016 60



Net Revenue 57,216 57,761 65,443 73,547 81,469

Direct Expenses 32,107 34,653 33,965 37,656 41,957

% of Net Sales 56.1 60.0 51.9 51.2 51.5

Employee Cost 11,052 10,903 12,041 13,238 13,850

% of Net Sales 19.3 18.9 18.4 18.0 17.0

SG&A Expenses 4,798 5,814 5,694 6,325 7,332

% of Net Sales 8.4 10.1 8.7 8.6 9.0


% of Net Sales 0.0 0.0 0.0 0.0 0.0

EBITDA 9,259 6,392 13,743 16,327 18,331

Margin (%) 16.2 11.1 21.0 22.2 22.5

Depreciation 2,812 2,880 3,277 3,527 3,799

PBIT 6,447 3,512 10,466 12,801 14,531


PBT 4,218 884 7,222 10,042 12,418

Total tax 696 805 1,806 2,511 3,105


PAT 1,090 (578) 5,417 7,532 9,314

Extraordinary Gain/(Loss) (2,145) (481) - - -

Adjusted PAT 3,235 (97) 5,417 7,532 9,314




Share Capital 154 159 159 159 159




Total Debt 43,953 47,931 37,336 31,389 23,441




Gross Block 73,306 73,621 78,121 82,621 86,621


Net Block 50,988 49,113 50,336 51,310 51,511






Other Assets 3,274 3,569 3,604 3,532 3,391

Total Assets 76,478 75,915 73,604 75,172 76,642


LilladherPrabhudas SpiceJet


With aviation companies performing better on parameters related to both revenues and profitability, we believe Spicejet is in a strong position to provide the best profitability growth in the sector, coupled with cheaper valuations as compared to the industry leader Interglobe Aviation. We expect revenue CAGR of 11.3% over FY15-18E and an EBITDAR CAGR of 79.3% over the same period.

The Indian aviation sector is in a sustained growth phase on the back of multiple levers like increasing load factor, sustained growth in passenger traffic and fall in jet fuel prices. Lower industry fleet size and the continued propensity of Indian travelers to gravitate towards Low Cost Airline Carriers (as against preferring alternative modes or Full Service Carriers) have led to higher Passenger Load Factor (PLF) for the airline companies. Our positive stance on the sector is further reinforced by the sharp fall in crude oil price which leads to not only higher profitability, but eases up the working capital requirement.

In tune with the above, SpiceJet (SJ) offers the highest PLF in the industry after a striking return to profitability in FY16 post four years of being in the red. In addition to the aforementioned triggers, with its strategy to increase non-passenger related revenues, SJ is focusing on cargo services and other ancillary services like food and beverage and this foray is expected to result in increasing the share of cargo services revenues from 2.9% of sales in FY15 to 5.3% in FY18E. Similarly, with its fleet size expected to increase on a steady basis from 43 in FY16 to 56 by FY18-end, there is ample scope to take advantage of the growing passenger traffic.

We have ‘BUY’ rating on SJ with a price target of Rs128 (based upon 12.5x FY17e EPS); at CMP it trades at 6.9x FY17e. At our price target, SJ trades at EV/EBITDAR of 4.5x FY17e.

2/15/2016 61



Revenue (Rs m) 63,561 52,448 48,431 58,581 72,257

Growth (%) 11.2 (17.5) (7.7) 21.0 23.3

EBITDA (Rs m) (7,993) (6,149) 5,552 8,024 10,652

PAT (Rs m) (10,032) (7,300) 4,829 6,120 8,439

EPS (Rs) (18.7) (12.2) 8.1 10.2 14.1

Growth (%) NA NA NA 26.7 37.9

Net DPS (Rs) - - - - -




EBITDA margin (%) (12.6) (11.7) 11.5 13.7 14.7

RoE (%) 164.6 64.6 NM NM NM

RoCE (%) NM NM 183.9 166.7 167.5

EV / sales (x) 0.8 1.1 1.1 0.9 0.6

EV / EBITDA (x) NM NM 9.4 6.2 4.1

PER (x) NM NM 8.7 6.9 5.0

P / BV (x) (3.8) (3.3) (5.7) (8.1) 13.0

Net dividend yield (%) - - - - -


Stock Performance

(%) 1M 6M 12M

Absolute (5.1) 171.3 256.2



SpiceJet

2/15/2016 62



Net Revenue 63,561 52,448 48,431 58,581 72,257

Direct Expenses 55,266 44,579 30,348 35,763 43,990

% of Net Sales 86.9 85.0 62.7 61.0 60.9

Employee Cost 5,757 5,375 4,837 5,563 6,536

% of Net Sales 9.1 10.2 10.0 9.5 9.0


% of Net Sales 0.0 0.0 0.0 0.0 0.0

Other Expenses 10,532 8,644 7,693 9,232 11,078

% of Net Sales 16.6 16.5 15.9 15.8 15.3

EBITDA (7,993) (6,149) 5,552 8,024 10,652

Margin (%) (12.6) (11.7) 11.5 13.7 14.7

Depreciation 1,483 1,266 1,235 1,296 1,361

PBIT (9,476) (7,416) 4,318 6,728 9,291

Interest Expenses 1,366 1,635 899 630 409

PBT (10,032) (6,871) 4,829 7,649 10,549

Total tax - - - 1,530 2,110


PAT (10,032) (6,871) 4,829 6,120 8,439

Extraordinary Gain/(Loss) - 429 - - -

Adjusted PAT (10,032) (7,300) 4,829 6,120 8,439




Share Capital 5,353 5,995 5,995 5,995 5,995

Reserves & Surplus (15,881) (22,145) (17,316) (11,197) (2,757)

Shareholder's Fund (9,945) (12,645) (7,317) (5,202) 3,237


Total Debt 15,163 14,185 11,685 8,685 3,685




Gross Block 21,726 21,138 23,138 25,138 28,138


Net Block 18,767 17,138 17,904 18,607 20,246

Capital Work in Progress 8 - - - -

Cash & Cash Equivalent 51 236 1,265 712 1,961





Total Assets 5,218 1,539 4,368 3,482 6,922


LilladherPrabhudas Sadbhav Engineering


Strong bidding momentum: Outlook on inflows continues to be strong: Order book at the end of Q3FY16 stood at Rs83bn, up 12% YoY. Order inflow in the 9MFY16 stood at Rs22bn SEL expect further orders worth Rs25bn in H2FY16 largely from the Road sector. SEL continues to show healthy traction in the Road sector; it highlighted that bid for 27 tenders worth Rs180bn are likely to be submitted in the next three months. In mining segment, SEL expects two large MDO orders (Karnataka Power corporation/Neyveli Lignite corporation) to be finalized in the next six months..

BOT projects: Healthy traffic growth/improved financing should aid cash flow: SEL saw average traffic growth of ~8-10% across projects. They believe that traffic has bottomed out and expect steady recovery in traffic growth, going ahead. At SPV level SEL has been able to refinance debt in few projects (Aurangabad- Jalna/ Hyderabad- Yadgiri/ Bijapur-Hungud/ Dhule) and reduce interest cost by ~100-120bps, it expect benefit of ~ Rs 400-450mn crs in a 12 month period due to re-financing . They have also been able to renegotiate payment tenure for this project (more back ended payment) and been able to tie-up funds for the first major maintenance due between FY16-FY19 in the above 4 projects at various times. This measure should help improve cash flow of the projects in medium term.

Outlook and valuation: The stock is trading at Core PE of 12x FY17E earnings. We believe healthy order book (Rs82bn, 2.8x FY15 sales) provides strong visibility and an improving outlook in its key segments of Roads/mining/Irrigation augur well for future growth. Limited commitment on the current BOT portfolio and well-funded balance sheet makes it well-placed to benefit from improved ordering in the Road sector

11/17/2014 63



Revenue (Rs m) 23,581 30,041 32,256 36,127 45,158

Growth (%) 30.2 27.4 7.4 12.0 25.0

EBITDA (Rs m) 2,494 3,345 3,370 4,027 5,077

PAT (Rs m) 1,064 1,480 1,324 1,632 2,206

EPS (Rs) 7.0 8.7 7.8 9.6 13.0

Growth (%) 42.9 24.5 (10.6) 23.3 35.2

Net DPS (Rs) 0.7 0.7 0.7 0.7 0.7




EBITDA margin (%) 10.6 11.1 10.4 11.1 11.2

RoE (%) 11.9 12.8 9.3 10.5 12.7

RoCE (%) 10.3 10.1 8.1 9.3 10.7

EV / sales (x) 1.9 1.7 1.5 1.3 1.1

EV / EBITDA (x) 18.0 15.1 14.6 12.1 9.9

PER (x) 34.7 27.9 31.2 25.3 18.7

P / BV (x) 3.9 3.0 2.8 2.5 2.2



Stock Performance

(%) 1M 6M 12M

Absolute (17.2) (25.1) (24.0)

Relative to Sensex (13.5) (9.0) (4.9)


Sadbhav Engineering

11/17/2014 64



Net Revenue 23,581 30,041 32,256 36,127 45,158

Direct Expenses 19,450 24,362 26,712 29,734 37,140

% of Net Sales 82.5 81.1 82.8 82.3 82.2

Employee Cost 602 974 819 921 1,135

% of Net Sales 2.6 3.2 2.5 2.6 2.5

SG&A Expenses 1,035 1,360 1,355 1,445 1,806

% of Net Sales 4.4 4.5 4.2 4.0 4.0


% of Net Sales 0.0 0.0 0.0 0.0 0.0

EBITDA 2,494 3,345 3,370 4,027 5,077

Margin (%) 10.6 11.1 10.4 11.1 11.2

Depreciation 474 817 968 975 1,219

PBIT 2,020 2,528 2,403 3,051 3,858

Interest Expenses 958 891 881 1,068 1,128

PBT 1,205 1,802 1,697 2,176 2,941

Total tax (242) 321 373 544 735

Effective Tax rate (%) (20.1) 17.8 22.0 25.0 25.0

PAT 1,064 1,480 1,324 1,632 2,206


Adjusted PAT 1,064 1,480 1,324 1,632 2,206




Share Capital 152 170 170 170 170




Total Debt 8,633 9,383 9,433 9,983 10,533




Gross Block 7,301 8,601 9,901 11,201 12,501


Net Block 4,982 5,465 5,797 6,122 6,202







Total Assets 18,562 23,255 24,491 26,534 29,152


LilladherPrabhudas Capital First


Capital First (CAFL) remains the few NBFCs which has been posting strong performance. It continues to diversify its loan mix from pure LAP lender to retail lending in consumer durable & 2Wheelers. We remain positive on the business model and believe return ratios to improve gradually as business continues to scale up. We recommend BUY with PT of Rs450 based on 2.1x Sep-17 ABV.

Revenue growth remains steady; margins buoyant: In Q3FY16, CAFL reported 49% YoY growth in total revenues led by 29% YoY growth in interest income and ~50bps QoQ expansion in margins. Margin expansion was aided by improvement in product mix in favour of high‐yielding two‐wheeler and consumer durable loans. CAFL also pushed two new products ‐ used car financing and low‐ticket LAP to boost interest yield. CAFL borrowing mix is still dominated by bank loans and hence offers an attractive opportunity to lower funding cost as it realigns its borrowing mix in favour of NCDs/CPs.

AUM grows 28% YoY; off‐balance sheet mix declines marginally: CAFL reported 28% YoY growth in total AUMs, led by continued traction in consumer durable (festive season demand) and two‐wheeler business while the growth in core MSME business remains steady. Wholesale portfolio also reported a pick‐up led by opportunistic lending to smaller NBFCs and developers. We expect AUMs to grow at ~26% CAGR over FY15‐18E, led by continued traction in retail business.

Asset quality ratios remain stable; CAFL remains well capitalized for growth: Both GNPL and NNPL ratio remained stable at 0.89% and 0.46% respectively (based on 150dpd recognition). The credit cost though increased due to change in provisioning policy and the rising share of high‐yielding consumer durable and two‐wheeler business. CAFL remains well capitalized for growth with CAR of ~20%.

11/17/2014 65




Growth (%) 20.8 61.8 46.8 31.5 26.3

PPP 292 1,493 3,087 4,517 6,071

PAT 589 1,143 1,681 2,435 3,488

EPS (Rs) 7.7 13.2 18.5 26.8 38.3

Growth (%) -25.2 70.9 39.8 44.8 43.3

Net DPS (Rs) 2.0 2.5 3.5 4.7 5.9




NIM (%) 8.8 27.8 39.2 43.6 46.4

RoE (%) 5.5 8.3 10.2 13.5 17.0

RoA (%) 0.7 1.1 1.4 1.6 1.8

P / BV (x) 2.8 2.3 2.1 1.9 1.6

P / ABV (x) 2.8 2.3 2.2 2.0 1.7

PE (x) 51.5 30.2 21.6 14.9 10.4



Stock Performance

(%) 1M 6M 12M

Absolute 4.5 0.5 (2.5)



Capital First

11/17/2014 66



Int. Inc. / Operating Inc. 9,781 13,241 16,937 21,862 27,419



Growth (%) 20.8 61.8 46.8 31.5 26.3

Non interest income - - - - -

Growth (%) - - - - -

Net operating income 3,314 5,363 7,875 10,359 13,081

Expenditure

Employees 1,268 1,358 1,725 2,105 2,525

Other expenses 1,695 2,412 3,063 3,737 4,485

Depreciation 59 100 - - -

Total expenditure 3,022 3,870 4,788 5,842 7,010

PPP 292 1,493 3,087 4,517 6,071

Growth (%) 0.2 411.5 106.8 46.3 34.4

Provision 489 1,055 2,047 2,666 3,047

Other income 844 1,225 1,507 1,838 2,261

Exchange Gain / (Loss) - - - - -

Profit before tax 647 1,664 2,547 3,689 5,285

Tax 58 520 866 1,254 1,797

Effective tax rate (%) 9.0 31.3 34.0 34.0 34.0

PAT 589 1,143 1,681 2,435 3,488

Growth (%) 21.6 93.9 47.0 44.8 43.3




Sources of funds

Equity 820 910 910 910 910


Networth 11,710 15,738 17,064 19,071 22,025

Growth (%) 21.9 34.4 8.4 11.8 15.5

Loan funds 84,192 84,138 112,858 145,655 183,954

Growth (%) 35.1 (0.1) 34.1 29.1 26.3

Others - - - - -

Minority Interest 5,417 6,945 8,806 10,326 11,978

Deferred tax liability (171) (421) (489) (567) (658)

Total 101,149 106,399 138,240 174,485 217,300

Application of funds

Net fixed assets 340 191 242 222 256

Advances 69,657 87,845 116,834 149,781 188,724

Growth (%) 26.0 26.1 33.0 28.2 26.0

Net current assets 3,844 2,917 3,588 4,485 5,561

Investments 23,605 11,519 13,257 15,245 17,532

Growth (%) 98.1 (51.2) 15.1 15.0 15.0

Other Assets 3,702 3,927 4,320 4,752 5,227

Total 101,149 106,399 138,240 174,485 217,300


LilladherPrabhudas Ashoka Buildcon


Order book visibility improves: Outstanding order book in the EPC segment for the quarter stood at Rs44.4bn (up 20% YoY) and inflow for 9M stood at ~Rs25bn (5 EPC and 2 BOT projects); further it is L1 in projects worth ~Rs4bn. ABL is targeting further inflow of Rs40bn inFY16. The company highlighted that tending activity continues to be good with tenders worth ~Rs4000-5000km likely to be awarded in the next six months. Management commented that the competitive intensity in domestic market has reduced in the recent bids. ABL entered international markets by bagging a Road EPC order in Maldives worth Rs2.3bn. The company is further targeting Africa and Mauritius in International markets. With improved order book and good outlook on ordering company, we expect the EPC revenue to grow by 10-25% over the next two years.

Favorable policy framework for private-public partnerships: After a long lull, we expect increased tendering under the BOT route. The government is planning ~15000km of road project awards through FY17, with an approximate EPC:BOT mix of 60:40. Our sense is that land acquisition and funding hurdles are getting sorted, and the government is acting on stuck projects . Recent data points to traffic growth of 5-6%, the highest in the last 3-4 years. We expect this momentum to continue in the medium term on account of a GDP uptick, higher industrial & mining activity

The stock is trading at 9x FY17 core earnings. We expect the EPC segment to deliver Sales and PAT CAGR of 17% and 28%, respectively, over FY15-17E and expect toll collection to grow at a CAGR of 114% over FY15-17E. We believe limited equity commitment in the current portfolio, funding from SBI Macquarie and a well-funded balance sheet makes it one of the beneficiaries of upcoming opportunities in the Road sector

2/15/2016 67



Revenue (Rs m) 17,949 23,197 27,972 32,789 36,735

Growth (%) (3.1) 29.2 20.6 17.2 12.0

EBITDA (Rs m) 3,945 5,109 8,049 9,273 9,607

PAT (Rs m) 1,132 814 1,007 1,562 1,902

EPS (Rs) 7.2 5.1 5.4 8.4 10.2

Growth (%) 1.8 (28.4) 4.9 55.0 21.8

Net DPS (Rs) 1.8 1.9 1.8 1.8 1.8




EBITDA margin (%) 22.0 22.0 28.8 28.3 26.2

RoE (%) 9.8 6.2 6.1 7.9 9.0

RoCE (%) 3.9 4.0 5.8 6.2 6.5

EV / sales (x) 3.3 2.9 2.5 2.2 1.8

EV / EBITDA (x) 15.0 13.0 8.8 7.8 6.9

PER (x) 25.7 35.9 34.2 22.0 18.1

P / BV (x) 2.3 2.2 1.8 1.7 1.6



Stock Performance

(%) 1M 6M 12M

Absolute (0.6) 3.2 24.4



Ashoka Buildcon

2/15/2016 68



Net Revenue 17,949 23,197 27,972 32,789 36,735

Direct Expenses 12,988 16,712 18,321 21,670 25,096

% of Net Sales 72.4 72.0 65.5 66.1 68.3


% of Net Sales 0.0 0.0 0.0 0.0 0.0


% of Net Sales 0.0 0.0 0.0 0.0 0.0

Other Expenses 1,015 1,376 1,603 1,846 2,032

% of Net Sales 5.7 5.9 5.7 5.6 5.5

EBITDA 3,945 5,109 8,049 9,273 9,607

Margin (%) 22.0 22.0 28.8 28.3 26.2

Depreciation 1,389 1,517 2,435 2,922 3,079

PBIT 2,556 3,592 5,614 6,351 6,528


PBT 1,467 1,070 1,697 2,605 2,717

Total tax 688 796 929 1,163 1,043


PAT 1,132 814 1,007 1,562 1,902


Adjusted PAT 1,132 814 1,007 1,562 1,902




Share Capital 790 793 935 935 935




Total Debt 31,032 37,843 42,686 44,715 43,806




Gross Block 21,163 132,023 138,885 142,863 141,856


Net Block 14,499 125,712 130,140 131,196 127,110






Other Assets 21 99 99 99 99

Total Assets 48,306 56,460 67,206 70,581 71,464


LilladherPrabhudas Jammu & Kashmir Bank


J&K bank is now getting back on track with focus returning to home state where in the franchise still remain undisputable despite rising competition, while it lends to only top‐notch PSUs/corporates outside J&K. Asset quality should thus show a gradual improvement as bulky delinquent accounts have already been provided for and the bank has minimal exposure to accounts included in the RBI’s newly constructed list. JKBK aims to improve upon its RoA to >1.5% over the medium term led by stable margins at ~4%, moderation in credit cost and higher share of more profitable home state business. We remain positive on JKBK with PT of Rs125 and maintain BUY.

Loan growth to recover to ~18%: JKBK is aiming for loan growth of 25% in the home state while for rest of India it is targeting a growth of 15% (top quality PSUs/ corporates) vs lower single digits currently. JKBK is confident of achieving growth target in J&K as development push continues.

Flavor of current loan portfolio: JKBK has versatile portfolio in J&K state (51% share) with corporate book comprising only 17%, while non J&K state book (49% share currently) is predominantly corporate with 82% share, however part of the book also has lower risk marquee corporate like PFC/REC/PTC/Reliance Industries/Tata group/Food corporation of India and so on.

Margins to remain the key earnings driver: JKBK is confident of maintaining margins at 3.85%‐4% (currently at 4%) despite reducing product spreads in certain cases and increased focus on top‐rated corporate/PSUs. This would be enabled by strong CASA mix in J&K and continued momentum in mobilization of CASA deposits. JKBK expects minor 10‐15bp impact from recent RBI’s loan pricing guideline.

2/15/2016 69




Growth (%) 15.9 -1.3 6.8 13.9 17.5


PAT 11,825 5,086 7,043 9,505 10,741

EPS (Rs) 24.4 10.5 14.5 19.6 22.0

Growth (%) 12.1 -57.0 38.5 34.9 12.4

Net DPS (Rs) 5.0 2.1 2.9 3.9 4.5




NIM (%) 3.6 3.5 3.6 3.5 3.5

RoAE (%) 22.3 8.6 11.0 13.6 13.8

RoAA (%) 1.6 0.7 0.9 1.0 1.0

P / BV (x) 0.6 0.5 0.5 0.4 0.4

P / ABV (x) 0.6 0.7 0.6 0.5 0.5

PE (x) 2.8 6.5 4.7 3.5 3.1



Stock Performance

(%) 1M 6M 12M

Absolute (2.3) (34.7) (38.1)

Relative to Sensex 1.4 (18.6) (19.0)


Jammu & Kashmir Bank

2/15/2016 70





Others - - - - -



NII 26,845 26,509 28,305 32,254 37,900

Growth (%) 15.9 (1.3) 6.8 13.9 17.5

Treasury Income 636 1,160 1,044 856 985

NTNII 3,266 4,779 3,636 3,590 3,906


Total Income 71,573 76,551 77,676 87,628 101,431

Growth (%) 8.1 7.0 1.5 12.8 15.8



Growth (%) 4.9 (3.4) (8.9) 7.9 17.4

NPA Provisions 756 8,132 6,202 3,601 4,288

Investment Provisions - - (150) - 1


PBT 17,520 8,203 10,358 13,977 16,276

Tax Provisions 5,696 3,117 3,314 4,473 5,535


PAT 11,825 5,086 7,043 9,505 10,741

Growth (%) 12.1 (57.0) 38.5 34.9 13.0




Par Value 1 1 1 1 2

No. of equity shares 485 485 485 485 245

Equity 485 485 485 485 490

Networth 57,236 61,101 66,456 73,692 81,806

Adj. Networth 55,939 48,128 54,205 62,065 69,891

Deposits 693,359 657,562 770,663 901,675 1,063,977

Growth (%) 8.0 (5.2) 17.2 17.0 18.0

Low Cost deposits 270,833 274,764 327,418 387,587 462,673


Total Liabilities 780,197 760,855 888,689 1,037,429 1,220,846

Net Advances 463,846 445,858 508,278 599,768 719,722

Growth (%) 18.3 (3.9) 14.0 18.0 20.0

Investments 261,951 251,243 303,475 346,991 393,614

Total Assets 786,197 760,855 888,689 1,037,429 1,220,846


LilladherPrabhudas JK Lakshmi Cement


JK Lakshmi cement (JKLC) is the 5th largest cement producer in North India with a ~7% market share in the region with a capacity of 9mtpa. This backed by 1) one of the most efficient operations, 2) entry into the most profitable eastern region with a capacity of 1.7mtpa, and 3) increasing consolidation in Gujarat (~40% of its total volumes) ranks JKLC as one of our top pick in the sector with a PT of Rs400 at EV/T of US$90 FY17E capacity of 12m tonnes.

Efficient and focused producer: JKLC is the second lowest cost producer in the region on the back of 100% pet-coke usage (one of the first mover), thermal and waste heat recovery based CPP, balanced rail/road mix and low fixed overheads. We expect the trend to continue at its upcoming green field plant in Durg on the back of proximity to both slag source and end markets with well laid logistics.

Greenfield expansion in Durg to drive the next round of volume growth: JKLC has commissioned a 1.7mtpa cement plant in Durg, Chhattisgarh at a cost of Rs17.5bn. Thanks to better market dynamics of the region on the front of consolidation and demand outlook, the addition would improve the earnings profile of JKLC.

Concerns on over-leveraged balance sheet overstated: Our interaction suggest that investors are concerned on the company due to steep increase in interest cost and high gearing. On the contrary, we believe that growth in EBITDA (on the back of capacity expansion) would more than off-set the increase in interest and depreciation cost. We expect 20% CAGR (FY15-18) in PAT even after 37%/30% increase in interest and depreciation cost. On the leverage, company is comfortably placed with D/E and Net debt/EBITDA at 1.3x and 3x FY17.

2/15/2016 71



Revenue (Rs m) 20,566 23,071 27,266 33,603 39,627

Growth (%) 0.1 12.2 18.2 23.2 17.9

EBITDA (Rs m) 3,020 3,495 3,142 5,367 7,558

PAT (Rs m) 1,073 1,497 (152) 1,695 3,481

EPS (Rs) 9.1 12.7 (1.3) 14.4 29.6

Growth (%) (42.9) 39.5 NA NA 105.3

Net DPS (Rs) 2.0 2.0 (0.3) 3.6 7.4




EBITDA margin (%) 14.7 15.1 11.5 16.0 19.1

RoE (%) 8.4 11.4 (1.2) 12.4 22.4

RoCE (%) 5.7 6.7 3.4 8.7 13.5

EV / sales (x) 2.2 2.1 1.8 1.5 1.2

EV / EBITDA (x) 14.7 13.8 15.7 9.2 6.1

PER (x) 29.6 21.2 NA 18.7 9.1

P / BV (x) 2.4 2.4 2.4 2.2 1.9

Net dividend yield (%) 0.7 0.7 (0.1) 1.3 2.7


Stock Performance

(%) 1M 6M 12M

Absolute (2.4) (3.4) (18.1)

Relative to Sensex (0.9) 6.6 (9.6)


JK Lakshmi Cements

2/15/2016 72



Net Revenue 20,566 23,071 27,266 33,603 39,627

Direct Expenses 9,732 10,798 12,841 14,843 16,696

% of Net Sales 47.3 46.8 47.1 44.2 42.1

Employee Cost 1,230 1,461 1,826 2,100 2,415

% of Net Sales 6.0 6.3 6.7 6.3 6.1

SG&A Expenses 4,568 5,162 6,565 7,671 8,507

% of Net Sales 22.2 22.4 24.1 22.8 21.5

Other Expenses 2,016 2,155 2,892 3,622 4,450

% of Net Sales 9.8 9.3 10.6 10.8 11.2

EBITDA 3,020 3,495 3,142 5,367 7,558

Margin (%) 14.7 15.1 11.5 16.0 19.1

Depreciation 1,352 1,119 1,670 1,751 1,834

PBIT 1,668 2,376 1,472 3,616 5,725

Interest Expenses 772 907 1,903 1,792 1,686

PBT 1,154 1,118 (328) 2,103 4,319

Total tax 229 162 (102) 408 838


PAT 925 956 (226) 1,695 3,481

Extraordinary Gain/(Loss) (148) (541) (74) - -

Adjusted PAT 1,073 1,497 (152) 1,695 3,481




Share Capital 589 589 589 589 589




Total Debt 16,313 18,992 19,492 18,692 17,492




Gross Block 29,305 40,946 41,346 44,506 44,906


Net Block 15,715 25,825 24,555 25,964 24,531





Net Current Assets 4,248 2,711 1,766 771 2,541


Total Assets 30,990 34,245 34,268 35,003 36,840


LilladherPrabhudas NIIT Technologies


NIIT Technologies (NIIT Tech) Q3FY16 revenue was below our expectation However, there was a strong beat on margins and EPS front. Revenues were soft due to seasonality and completion of projects in travel & transportation vertical. Company expects revenue growth to recover from Q1FY17, led by ramp up of deals. Management has guided for FY16 revenue at lower end of industry average and expects to grow at industry average in FY17. Company expects further margin improvement in Q4FY16 and YoY margin improvement in FY17, driven largely by better business mix. A strong order intake of $123m (+54% QoQ) was a positive.

Revenue miss; Beat on margins: NIIT Tech reported an overall revenue decline of 1.3% QoQ in USD terms to US$103.4m (PLe: US$104.8m, Cons.: US$105.4m), and a growth of 0.1% QoQ in INR terms to Rs6,787m (PLe: Rs6,898m, Cons:Rs6,938m). In CC terms, revenue growth was flat QoQ. EBITDA margins expanded by 58bps QoQ at 18.2% (PLe: 18.0%, Cons: 17.5%), mainly due to reduced G&A expenses. This is the highest margin the company has reported since Q1FY12. Adj. EPS for the quarter grew by 9.8% QoQ to Rs12.3 (PLe: Rs11.4,Cons: Rs11.6), aided by high Other income and lower tax rate.

Order intake strong: Fresh Order intake for NIIT Tech was strong at $123m(+54% QoQ) driven by 2 wins each from EMEA and RoW. This includes the £23mn Ofcom (UK telecom regulator) deal which will contribute to revenues from Q1FY17. The order executable over next 12 months, however, remained constant at $301mn, as the proportion of digital business increased which are primarily short term deals. The pipeline continues to be strong. Of the 3 large deals talked about last quarter, one has been closed and one is still in pipeline.

Valuation & Recommendation: Retain “BUY”, with TP of Rs650 based on 12x Dec‐17 EPS: We expect further margin improvement in FY16 and revenue recovery in FY17. Return to industry growth can drive multiple expansion in FY17.

2/15/2016 73



Revenue (Rs m) 23,050 23,724 26,975 29,621 32,254

Growth (%) 14.0 2.9 13.7 9.8 8.9

EBITDA (Rs m) 3,516 3,456 4,765 5,309 5,790

PAT (Rs m) 2,307 1,939 2,790 3,067 3,387

EPS (Rs) 38.0 31.8 45.7 50.2 55.5

Growth (%) 7.3 (16.4) 43.9 10.0 10.4

Net DPS (Rs) 9.0 9.5 15.0 18.0 18.0




EBITDA margin (%) 15.3 14.6 17.7 17.9 18.0

RoE (%) 19.1 14.5 19.1 18.4 17.8

RoCE (%) 18.9 14.4 19.6 18.8 18.2

EV / sales (x) 1.2 1.2 1.0 0.9 0.8

EV / EBITDA (x) 8.0 8.1 5.8 5.0 4.3

PER (x) 13.1 15.7 10.9 9.9 9.0

P / BV (x) 2.3 2.2 2.0 1.7 1.5



Stock Performance

(%) 1M 6M 12M

Absolute (2.9) (1.5) 34.5



NIIT Technologies

2/15/2016 74



Net Revenue 23,050 23,724 26,975 29,621 32,254

Direct Expenses 15,166 15,656 16,900 18,467 20,145

% of Net Sales 65.8 66.0 62.7 62.3 62.5


% of Net Sales 0.0 0.0 0.0 0.0 0.0

SG&A Expenses 4,368 4,612 5,310 5,845 6,319

% of Net Sales 19.0 19.4 19.7 19.7 19.6


% of Net Sales 0.0 0.0 0.0 0.0 0.0

EBITDA 3,516 3,456 4,765 5,309 5,790

Margin (%) 15.3 14.6 17.7 17.9 18.0

Depreciation 619 916 1,090 1,192 1,281

PBIT 2,897 2,540 3,675 4,117 4,508


PBT 3,185 2,559 3,870 4,330 4,756

Total tax 803 541 913 1,083 1,189


PAT 2,307 1,139 2,777 3,067 3,387

Extraordinary Gain/(Loss) - (800) (13) - -

Adjusted PAT 2,307 1,939 2,790 3,067 3,387




Share Capital 607 610 610 610 610




Total Debt 53 49 49 49 49




Gross Block 7,508 9,336 10,685 12,166 13,779


Net Block 4,534 5,579 5,838 6,127 6,458






Other Assets 778 1,134 1,134 1,134 1,134

Total Assets 13,790 14,149 16,190 18,339 20,807


LilladherPrabhudas VRL Logistics


VRL Logistics (VRL) is the largest pan-India surface logistics and parcel delivery service provider with an experience of four decades in the Indian markets. The company owns and operates Pan-India a fleet of Commercial Vehicles (3739) in goods transportation (GT), while Bus operations (368 buses) are concentrated in Southern and Western regions of India. VRL provides general parcel and priority parcel delivery (less than truckload services -LTL), courier and full-truckload (FTL) services through its widespread transportation network covering more than 1000 locations. VRL is expected to have earnings CAGR of 24.8% over FY16-FY18E period led by strong performance in Goods and Transport Segment. However, if reforms like New Road Transport and Safety Bill & GST Bill gets implemented in time, then VRL may emerge as a key beneficiary with almost double-digit volume growth as we anticipate the LTL to garner significant volume shift from unorganised to organised segment. VRL trades at 17.4x FY18E PER and 8.4x EV/EBITDA FY18E. The premium is justified considering: 1) Strong management pedigree with proven track record 2) High visibility on operating cash-flows 3) Superior returns ratios (above 25% RoE) amidst listed logistics players 4) Steady margins on the back of lower fuel prices and efficient use of Bio-diesel and 5) Strong balance sheet (D/E of 0.47x FY16E).

2/15/2016 75



Revenue (Rs m) 14,938 16,712 17,167 19,609 22,209

Growth (%) 12.7 11.9 2.7 14.2 13.3

EBITDA (Rs m) 2,066 2,728 2,784 3,190 3,768

PAT (Rs m) 570 912 1,118 1,397 1,742

EPS (Rs) 6.7 10.7 12.2 15.3 19.1

Growth (%) 164.2 60.0 14.9 25.0 24.7

Net DPS (Rs) 4.0 4.0 5.0 5.8 7.3




EBITDA margin (%) 13.8 16.3 16.2 16.3 17.0

RoE (%) 19.1 27.5 25.2 24.6 26.6

RoCE (%) 12.0 15.8 16.6 19.1 21.9

EV / sales (x) 2.2 2.0 1.9 1.7 1.4

EV / EBITDA (x) 16.2 12.0 11.8 10.2 8.4

PER (x) 49.9 31.2 27.2 21.7 17.4

P / BV (x) 9.3 8.0 5.7 5.0 4.3



Stock Performance

(%) 1M 6M 12M

Absolute (13.4) (11.4) -

Relative to Sensex (9.7) 4.6 -


VRL Logistics

2/15/2016 76



Net Revenue 14,938 16,712 17,167 19,609 22,209

Direct Expenses 10,912 11,794 11,732 13,497 15,243

% of Net Sales 73.0 70.6 68.3 68.8 68.6

Employee Cost 1,745 1,980 2,403 2,647 2,887

% of Net Sales 11.7 11.8 14.0 13.5 13.0


% of Net Sales 0.0 0.0 0.0 0.0 0.0

Other Expenses 216 211 247 275 311

% of Net Sales 1.4 1.3 1.4 1.4 1.4

EBITDA 2,066 2,728 2,784 3,190 3,768

Margin (%) 13.8 16.3 16.2 16.3 17.0

Depreciation 866 877 899 973 1,041

PBIT 1,200 1,851 1,885 2,217 2,727


PBT 768 1,379 1,668 2,054 2,562

Total tax 198 467 551 657 820


PAT 570 912 1,118 1,397 1,742


Adjusted PAT 570 912 1,118 1,397 1,742




Share Capital 855 855 912 912 912




Total Debt 5,055 4,434 2,550 2,500 2,000




Gross Block 12,102 12,414 13,314 14,314 15,314


Net Block 7,394 7,051 7,053 7,079 7,038


Cash & Cash Equivalent 1,085 1,012 926 1,259 1,372


Total Current Liabilities 736 563 585 445 255

Net Current Assets 563 962 919 1,565 2,051

Other Assets - - 1 - -

Total Assets 9,041 8,968 8,843 9,596 10,090


LilladherPrabhudas Va Tech Wabag


Va Tech Wabag (VATW) is amongst the key beneficiaries of the strong capex of various government and funding agencies on providing improved water sources both domestically and globally. The water opportunity is huge with Rs13.5trn estimated to be invested in urban water supply and sewerage in India alone over the next 20 years. VATW also benefits from a strong presence in fast growing water markets of Philippines, Turkey, Romania and the MENA region. Strong book-to-bill ratio of 2.24x and growing visibility of new orders makes us believe that VATW is best placed to capture this multi-year growth opportunity and achieve its Euro1bn turnover vision over the next 8 years (at a CAGR 15%). VATW trades at 14.6x FY18E earnings and 7.7x EV/EBITDA FY18E, which are at a premium to its average valuations, post listing in 2010. VATW has been consolidating over the last 12 months primarily on account of weak overseas operations and sluggish domestic ordering. With Oman losses factored in by the management on conservative accounting policy, we feel VATW can deliver a 30% earnings growth over FY16-FY18E period. Further, VATW is an attractive proposition due to continuous flow of new orders, excellent project execution track record, marquee client reference list, asset-light business model, Strong balance sheet and limited options available in water space. All these factors makes VATW a long-term portfolio stock. Maintain “BUY”

Key catalysts include: 1) Desalination projects worth Rs50bn to be awarded in Tamil-Nadu, 2) Multiple domestic opportunities through the Ganga Rejuvenation plan (Rs510bn), Swachh Bharat Mission (Sewage and Solid waste management - Rs500bn) and creation of 100 smart cities (Rs480bn). Assuming even if 25-30% of announcements materializes, incremental opportunity would provide significant business traction.

Strong past performance, order-book of Rs 64bn and cash of Rs3.8bn offers comfort: With Rs64bn order book spread evenly across segments and geographies, VATW provides strong visibility. Further, cash of Rs3.8bn provides strength to operations and cash-in on emerging opportunities as and when they arise.

2/15/2016 77



Revenue (Rs m) 22,301 24,284 27,707 32,724 35,845

Growth (%) 39.2 8.9 14.1 18.1 9.5

EBITDA (Rs m) 2,005 2,044 2,318 2,940 3,503

PAT (Rs m) 1,133 1,101 1,167 1,632 1,990

EPS (Rs) 21.3 20.3 21.5 30.1 36.6

Growth (%) 27.8 (4.8) 6.0 39.9 21.9

Net DPS (Rs) 4.0 4.0 4.5 5.5 6.5




EBITDA margin (%) 9.0 8.4 8.4 9.0 9.8

RoE (%) 14.6 12.6 12.3 15.5 16.6

RoCE (%) 12.5 11.0 10.0 11.8 12.6

EV / sales (x) 1.2 1.1 1.0 0.9 0.8

EV / EBITDA (x) 13.2 13.6 11.9 9.6 7.7

PER (x) 25.2 26.4 24.9 17.8 14.6

P / BV (x) 3.4 3.2 2.9 2.6 2.3



Stock Performance

(%) 1M 6M 12M

Absolute (12.2) (28.3) (33.9)

Relative to Sensex (8.5) (12.2) (14.8)


Va Tech Wabag

2/15/2016 78



Net Revenue 22,301 24,284 27,707 32,724 35,845

Direct Expenses 16,979 18,328 21,738 24,742 26,851

% of Net Sales 76.1 75.5 78.5 75.6 74.9

Employee Cost 2,217 2,777 2,180 3,540 3,845

% of Net Sales 9.9 11.4 7.9 10.8 10.7


% of Net Sales 0.0 0.0 0.0 0.0 0.0

Other Expenses 1,099 1,136 1,471 1,503 1,646

% of Net Sales 4.9 4.7 5.3 4.6 4.6

EBITDA 2,005 2,044 2,318 2,940 3,503

Margin (%) 9.0 8.4 8.4 9.0 9.8

Depreciation 150 109 200 226 242

PBIT 1,855 1,935 2,118 2,714 3,261


PBT 1,662 1,671 1,792 2,503 3,049

Total tax 526 566 609 851 1,037


PAT 1,133 1,101 1,167 1,632 1,990


Adjusted PAT 1,133 1,101 1,167 1,632 1,990




Share Capital 53 109 109 109 109

Reserves & Surplus - - - - -



Total Debt 1,583 1,806 2,448 2,766 3,116




Gross Block 1,752 2,521 2,721 2,921 3,121

Less: Depreciation 560 607 807 1,033 1,274

Net Block 1,192 1,913 1,913 1,888 1,846

Capital Work in Progress 7 6 - - -





Other Assets 792 229 250 280 320

Total Assets 11,847 13,305 15,220 17,076 19,257


LilladherPrabhudas Disclaimer

2/15/2016 79

BUY : Over 15% Outperformance to Sensex over 12-months

Accumulate : Outperformance to Sensex over 12-months

Reduce : Underperformance to Sensex over 12-months

Sell : Over 15% underperformance to Sensex over 12-months

Trading Buy : Over 10% absolute upside in 1-month

Trading Sell : Over 10% absolute decline in 1-month

Not Rated (NR) : No specific call on the stock

Under Review (UR) : Rating likely to change shortly

Prabhudas Lilladher Pvt. Ltd.

3rd Floor, Sadhana House, 570, P. B. Marg, Worli, Mumbai 400 018, India.

Tel: (91 22) 6632 2222 Fax: (91 22) 6632 2209

Rating Distribution of Research Coverage PL’s Recommendation Nomenclature

47.2%39.8%

13.0%

0.0%0%

10%

20%

30%

40%

50%

BUY Accumulate Reduce Sell

% o

f To

tal C

ove

rage

DISCLAIMER/DISCLOSURES ANALYST CERTIFICATION We/I, Mr. R Sreesankar (B.Sc), Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. Terms & conditions and other disclosures: Prabhudas Lilladher Pvt. Ltd, Mumbai, India (hereinafter referred to as “PL”) is engaged in the business of Stock Broking, Portfolio Manager, Depository Participant and distribution for third party financial products. 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Neither PL nor any of its affiliates, its directors or its employees accepts any responsibility of whatsoever nature for the information, statements and opinion given, made available or expressed herein or for any omission therein. Recipients of this report should be aware that past performance is not necessarily a guide to future performance and value of investments can go down as well. The suitability or otherwise of any investments will depend upon the recipient's particular circumstances and, in case of doubt, advice should be sought from an independent expert/advisor. Either PL or its affiliates or its directors or its employees or its representatives or its clients or their relatives may have position(s), make market, act as principal or engage in transactions of securities of companies referred to in this report and they may have used the research material prior to publication. PL may from time to time solicit or perform investment banking or other services for any company mentioned in this document. PL is in the process of applying for certificate of registration as Research Analyst under Securities and Exchange Board of India (Research Analysts) Regulations, 2014 PL submits that no material disciplinary action has been taken on us by any Regulatory Authority impacting Equity Research Analysis activities. PL or its research analysts or its associates or his relatives do not have any financial interest in the subject company. PL or its research analysts or its associates or his relatives do not have actual/beneficial ownership of one per cent or more securities of the subject company at the end of the month immediately preceding the date of publication of the research report. PL or its research analysts or its associates or his relatives do not have any material conflict of interest at the time of publication of the research report. PL or its associates might have received compensation from the subject company in the past twelve months. PL or its associates might have managed or co-managed public offering of securities for the subject company in the past twelve months or mandated by the subject company for any other assignment in the past twelve months. PL or its associates might have received any compensation for investment banking or merchant banking or brokerage services from the subject company in the past twelve months. PL or its associates might have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company in the past twelve months PL or its associates might have received any compensation or other benefits from the subject company or third party in connection with the research report. PL encourages independence in research report preparation and strives to minimize conflict in preparation of research report. 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The research analysts for this report has not served as an officer, director or employee of the subject company PL or its research analysts have not engaged in market making activity for the subject company Our sales people, traders, and other professionals or affiliates may provide oral or written market commentary or trading strategies to our clients that reflect opinions that are contrary to the opinions expressed herein, and our proprietary trading and investing businesses may make investment decisions that are inconsistent with the recommendations expressed herein. In reviewing these materials, you should be aware that any or all o the foregoing, among other things, may give rise to real or potential conflicts of interest. 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