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ITC Limited (ITC IN)

GST disruptive but manageable

INDIA | FMCG | Company Update

7 September 2016

This report should be read for:

Impact of GST implementation (starting FY18) on ITC

Volume, price and profit growth sensitivity under different tax rate scenarios

Company’s strategy in the cigarettes business division

GST implementation may lead to a levy of a sin tax of 40% on cigarettes in addition to the prevailing excise duty structure. The sin tax will replace the state VAT which is currently at 26.5% on a blended basis as per our estimates. This hike is significant and it will have a significant impact on the cigarettes business volume and profit growth. While the impact is significant, we find ITC is preparing ground for GST implementation by taking calibrated price hikes and steadily increasing the share of sub-65mm cigarettes. Post the implementation of GST, the profit growth trajectory for ITC will improve significantly as GST will remove various distribution inefficiencies. We maintain our Buy recommendation on ITC with a target price of Rs 300 after baking in the negative impact of GST implementation starting from FY18. Our key arguments are:

ITC will have to hike cigarette prices by ~22% to offset 10% excise hike and 40% sin tax in FY18; will lose 8% volumes: ITC’s cigarette business pays VAT at a rate of 26.5% on a weighted average basis as per our estimates and excise duty accounts for ~32% of MRP and ~46% of gross sales (excluding VAT). Assuming a base case of excise duty hike of 10% in addition to the levy 40% sin tax, we estimate that ITC will have to increase cigarettes prices by 22% in FY18 to maintain flattish EBIT. Our regression model for price growth-volume growth for cigarettes indicates that this will lead to 8% decline in volumes. However, in case the government only levies 40% sin tax and keeps excise duty unchanged for FY18, ITC’s cigarette EBIT could grow by 10% if it were to hike prices by 20%. In this scenario volumes could decline by around 6%.

ITC is strategically moving 69mm consumers to 64mm: Since the launch of 64mm cigarettes in 2012, its share in total sales has increased to ~21% as per our channel checks. Down-trading by consumers from 69mm to this segment has helped arrest the decline in volumes due to price hikes over the years. We believe that ITC will move consumers to 64mm from 69mm through lower price hikes in 64mm as compared to 69mm or even stop 69mm sales in some regions. We estimate such a strategy will help deliver 5-8% EBIT growth in FY18 and limit volume declines to 4-6% even with 22% price hikes.

ITC’s current pricing strategy indicates it is getting ready for GST implementation in FY18: For the fiscal YTD, ITC has taken a modest price hike of ~6% as compared to 20%/16%/20% taken in FY14/15/16. It has taken a price hike of ~15% only in 84mm segment while in the price sensitive segments the price hike is meagre in the range of 2-4%. We expect volume growth to recover to 5% in FY17 as compared to decline of 3%/6%/9% in FY14/15/16. With volume growth recovery in FY17 and benign price base in the sensitive categories, ITC is well prepared to absorb impact on volumes in FY18 due to a possible 20%+ price hike.

Growth to stabilise from FY19: With the levy of 40% sin tax, uncertainty regarding state taxes on cigarettes will be mitigated to a very large extent extent as state government collections will see a big jump. More importantly, a uniform tax rate of 40% across states in GST regime will solve various logistical issues that cigarette companies today face due to current regime of differential cigarette VAT across states. The current regime leads to significant proliferation of illegal transport of cigarettes which has impacted cigarette sales in large states like TN, Kerala and Maharashtra. With the logistic issues in cigarettes business addressed, we believe that even FMCG other business will get a boost in states affected by high cigarette VAT rates. Also growth in cigarettes business should normalise from FY19 onwards even with 10% excise hike every year.

Revise FY17/18 estimates and introduce FY19 estimates; Maintain Buy: We have reduced our

estimates for FY17/18 by 4%/9% due to moderate price hikes in FY17 and GST impact in FY18,

and introduced our estimates for FY19. The stock has historically traded at 25% discount to FMCG

multiple (ex ITC). Having already built in the entire impact of GST in our numbers, we value the

stock at 30x our September 2018 earnings at Rs 300.

BUY (Maintain)

CMP RS 262 / TARGET RS 300 (+14%) COMPANY DATA

O/S SHARES (MN) : 12071

MARKET CAP (RSBN) : 3157

MARKET CAP (USDBN) : 47.2

52 - WK HI/LO (RS) : 263 / 178

LIQUIDITY 3M (USDMN) : 38.1

PAR VALUE (RS) : 1

SHARE HOLDING PATTERN, %

Jun 16 Mar 16 Dec 15

FII / NRI : 20.6 20.5 20.8

FI / MF : 35.1 35.3 35.3

NON PRO : 1.7 1.7 1.6

PUBLIC & OTHERS : 42.6 42.6 42.3

PRICE PERFORMANCE, %

1MTH 3MTH 1YR

ABS 0.5 9.6 23.3

REL TO BSE -1.2 3.6 11.5

PRICE VS. SENSEX

Source: Phillip Capital India Research

KEY FINANCIALS

Rs mn FY17E FY18E FY19E

Net Sales 399,103 422,736 468,424

EBIDTA 152,397 162,039 185,526

Net Profit 104,443 111,133 126,312

EPS, Rs 8.7 9.2 10.5

PER, x 30.3 28.5 25.0

EV/EBIDTA, x 20.3 19.1 16.6

P/BV, x 9.1 9.0 8.8

ROE, % 30.1 31.5 35.1

Source: PhillipCapital India Research Est.

Naveen Kulkarni, CFA, FRM (+ 9122 6667 9947) [email protected] Jubil Jain (+ 9122 6667 9766) [email protected]

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ITC Rel. to BSE


ITC LTD COMPANY UPDATE

Impact of FY18 GST implementation on net realization per stick and EBIT growth for cigarettes

Case 1 (Base Case): 40% sin tax, 10% excise duty hike in FY18/19 Our base case assumption is that government will levy a 40% sin tax on cigarettes (to provide compensation to states) and also increase excise duty on cigarettes by 10% in both FY18/19. Our assumption is based on 2 reasons – 1) A significant increase in taxes will force companies to hike cigarette prices which will significantly impact volumes and 2) Revenue for the government is maximized when it implements both 40% sin tax and 10% excise hike. Since the objectives of the government are to reduce consumption volumes and to increase tax collection, government will maximize its achievement in this case. We estimate that ITC will need to hike cigarette prices by ~22% to compensate for increase in excise duty by 10% and increase in VAT rate of 26.5% to 40% sin tax. This will lead to a volume decline of ~8% but net realisation per stick will grow by 8% translating flattish net sales for the cigarettes business. In this scenario, we estimate cigarettes business EBIT to grow by 10%/0%/11% in FY17/18/19. Assumptions FY16 FY17 FY18 FY19

Excise duty hike 10.0% 10% 10%

VAT rate 26.5% 26.5% 40% 40%

MRP hike 6.0% 22% 6%

Volume growth estimate -8.7% 5.0% -7.9% 6%

Per stick realization growth calculations

(all figures in Rs unless specified) FY16 FY17 FY18 FY19

MRP 6.38 6.75 8.27 8.82

VAT rate 26.5% 26.5% 40% 40%

VAT 1.34 1.41 2.36 2.52

Margin to retailers and distributors 0.63 0.67 0.82 0.87

Gross realization 4.41 4.67 5.09 5.42

Gross realization growth

5.9% 9.0% 6.6%

Excise duty 2.03 2.24 2.47 2.74

Net realization 2.38 2.43 2.62 2.69

Net realization growth

2.2% 7.6% 2.7%

Total tax/MRP 52.8% 54.1% 58.4% 59.6%

EBIT calculation

(all figures in Rs mn unless specified) FY16 FY17 FY18 FY19

Volume (mn sticks) 73,384 77,053 70,951 75,094

Gross sales 323,624 359,825 360,985 407,321

Excise duty 148,742 172,450 175,308 205,532

Net sales 174,882 187,375 185,677 201,789

Operating cost 57,358 58,458 57,053 58,780

EBIT 117,524 128,917 128,624 143,009

EBIT growth yoy

9.7% -0.2% 11.2%

EBIT margin 67.2% 68.8% 69.3% 70.9%

Government collection (Rs mn) FY16 FY17 FY18 FY19

Total excise 148,742 172,450 175,308 205,532

Total VAT 98,052 109,020 167,654 189,174

Total tax 246,795 281,471 342,962 394,706

Source: PhillipCapital estimates

We expect 22% MRP hike to result in 8% volume decline

With 22% MRP hike, gross realization per stick will rise by 9% only, due to rise in sin tax/VAT. Total tax/MRP in FY18 will rise 430bps to 58.4%

Due to volume decline in FY18, for cigarettes business, net sales and EBIT growth will be flattish

With excise duty hike and sin tax levy in FY18, government tax collection from ITC cigarette business will increase from 281bn in FY17 to Rs 343bn in FY18



Case 2: 40% sin tax, 10% excise hike in FY18/19 and differential price hikes to intentionally shift consumers from 69mm to 64mm While this scenario, is an extension of case 1, it is represented separately to highlight that ITC may play across the price segments to sustain EBIT growth in FY18. As against flattish EBIT in FY18 in case 1, ITC may achieve 6% EBIT growth in FY18 if it can arrest volume fall due to price hikes by shifting 69mm smokers to 64mm. ITC had introduced 64mm cigarettes in 2012 as part of its strategy to maximise revenue due to differential excise duties. Similarly, it can again focus on 64mm cigarettes by down-trading 69mm smokers to 64mm, thereby changing the mix. While ITC will have to hike cigarette prices by ~22% in FY18 due to tax hikes, it may hike prices in 69mm more (30%) and 64mm less (20%), or completely stop 69mm for some brands and price 64mm at 69mm. This can help increase realisations significantly, and also maintain price points. If the ratio of 64mm smokers rises from current estimated 22% to 35% at the cost of 69mm share, volumes may fall only by 5% and ITC could still be able to report cigarettes EBIT growth of 6% in FY18.

Assumptions FY16 FY17 FY18 FY19

Excise duty hike

10.0% 10% 10%

VAT rate 26.5% 26.5% 40% 40%

MRP hike

6.0% 22% 6%

Volume growth estimate -8.7% 5.0% -5% 6%

Cigarette estimated Volume break-up FY16 FY17 FY18 FY19

>75 mm 10% 11% 12% 13%

70-mm - 75mm 5% 4% 3% 3%

65 mm- 70 mm 64% 63% 50% 49%

<65 mm 21% 22% 35% 35%

MRP (in Rs) FY16 FY17 FY18 FY19

>75 mm 10.9 12.5 15.6 16.6

70-mm - 75mm 7.8 7.9 9.6 10.2

65 mm- 70 mm 6.3 6.5 8.5 9.0

<65 mm 4.1 4.4 5.3 5.6

Wt. avg MRP 6.37 6.75 8.24 8.81

Price hike

6.0% 22.0% 6.9%



MRP 6.38 6.75 8.24 8.81

VAT rate 26.5% 26.5% 40% 40%

VAT 1.34 1.41 2.35 2.52




5.9% 8.5% 6.9%

Excise duty 2.03 2.24 2.40 2.67



2.2% 9.5% 3.2%

Total tax/MRP 53% 54.1% 57.8% 59%

EBIT growth calculation


Volume (mn sticks) 73,384 77,053 73,201 77,476

Gross sales 323,624 359,825 370,931 419,774

Excise duty 148,742 172,450 175,988 206,842

Net sales 174,882 187,375 194,943 212,932

Operating cost 57,358 58,458 57,741 59,522

EBIT 117,524 128,917 137,202 153,410

EBIT margin 67.2% 68.8% 70.4% 72.0%

EBIT growth yoy

9.7% 6.4% 11.8%

We expect 22% MRP hike to result in 5% volume decline due to intentional mix change. In case 1, volume growth was steeper at 8%.

With 22% MRP hike, gross realization per stick will rise by 8.5% only, due to rise in sin tax/VAT. Total tax/MRP in FY18 will rise 370bps to 57.8%

Due to volume decline in FY18, for cigarettes business, net sales will grow by 4% and EBIT will grow by 6%

ITC may intentionally increase share of 64mm sales at the cost of that of 69mm through differential packaging or differential distribution.




Total excise 148,742 172,450 175,988 206,842

Total VAT 98,052 109,020 172,273 194,958

Total tax 246,795 281,471 348,261 401,800

Source: PhillipCapital India Research

Case 3: 40% sin tax, 0%/10% excise duty hike in FY18/19 This scenario may play out if the central government gives respite to cigarette manufacturers in FY18 to absorb the levy of 40% sin tax. We however, consider the scenario improbable as the tax collection for central government will reduce in this case. As per our estimates, ITC may hike cigarette prices by ~20% to compensate for levy of 40% sin tax. This will lead to a volume decline of ~6% and lead to 13% growth in net realisation per stick. Net sales for cigarettes will increase by 6% yoy. In this case, we estimate cigarettes business EBIT to grow by 10%/10%/12% in FY17/18/19.

Assumptions FY16 FY17 FY18 FY19

Excise duty hike 10.0% 0% 10%

VAT rate 26.5% 26.5% 40% 40%

MRP hike 6.0% 20% 6%

Volume growth estimate -8.7% 5.0% -6% 6%



MRP 6.38 6.75 8.13 8.67

VAT rate 26.5% 26.5% 40% 40%

VAT 1.34 1.41 2.32 2.48




5.9% 7.2% 6.6%

Excise duty 2.03 2.24 2.25 2.49



2.2% 13.4% 3.2%

Total tax/MRP 53% 54% 56% 57%



Volume (mn sticks) 73,384 77,053 72,276 76,497

Gross sales 323,624 359,825 361,700 408,127

Excise duty 148,742 172,450 162,348 190,337

Net sales 174,882 187,375 199,352 217,790

Operating cost 57,358 58,458 57,459 59,217

EBIT 117,524 128,917 141,893 158,573

EBIT margin 67.2% 68.8% 71.2% 72.8%

EBIT growth yoy

9.7% 10.1% 11.8%


Total excise 148,742 172,450 162,348 190,337

Total VAT 98,052 109,020 167,986 189,549

Total tax 246,795 281,471 330,334 379,886


With excise duty hike and sin tax levy in FY18, government tax collection from ITC cigarette business will increase from 281bn in FY17 to Rs 348bn in FY18

We expect 20% MRP hike to result in 6% volume decline

With 20% MRP hike, gross realization per stick will rise by 7.2% only due to rise in sin tax/VAT. Total tax/MRP in FY18 will rise 200bps to 56%

Due to volume decline in FY18, for cigarettes business, net sales will grow by 6%. However EBIT will grow by 10% yoy.

With no excise duty hike and only a sin tax levy in FY18, government tax collection from ITC cigarette business will increase from 281bn in FY17 to Rs 330bn in FY18



Case 4: No change in VAT rate in FY18/19, 10% excise duty hike in FY18/19 This scenario is highly unlikely as it minimizes the growth in tax collection for centre and states combined. Also, in this case cigarette volumes in FY18 may again see positive growth which is against the government’s interests. In this case, ITC will only have to hike MRP by 7% and will see volume growth of 5%. EBIT growth will be healthy in FY17/18/19 at 10%/13%/13%. Assumption FY16 FY17 FY18 FY19

Excise duty hike

10.0% 10% 10%

VAT rate 26.5% 26.5% 26.5% 26.5%

MRP hike

6.0% 7% 7%

Volume growth estimate -8.7% 5.0% 5% 5%



MRP 6.38 6.75 7.25 7.81

VAT rate 26.5% 26.5% 26.5% 26.5%

VAT 1.34 1.41 1.52 1.64




5.9% 7.4% 7.6%

Excise duty 2.03 2.24 2.47 2.74



2.2% 4.6% 4.6%

Total tax/MRP 53% 54% 55% 56%



Volume (mn sticks) 73,384 77,053 80,891 84,919

Gross sales 323,624 359,825 405,682 458,319

Excise duty 148,742 172,450 199,868 232,422

Net sales 174,882 187,375 205,815 225,897

Operating cost 57,358 58,458 60,093 61,844

EBIT 117,524 128,917 145,722 164,053

EBIT margin 67.2% 68.8% 70.8% 72.6%

EBIT growth yoy

9.7% 13.0% 12.6%


Total excise 148,742 172,450 199,868 232,422

Total VAT 98,052 109,020 122,914 138,862

Total tax 246,795 281,471 322,782 371,284


We expect 7% MRP hike to result in 5% volume growth

Gross realization will rise in line with MRP due to absence of VAT hike. It will however be marginally impacted by mix change. Total tax/MRP in FY18 will rise 100bps to 55%

Net sales will grow by 9% and EBIT will grow by 13%

Government tax collection from ITC cigarette business will increase from 281bn in FY17 to Rs 322bn in FY18



EPS sensitivity The table shows our estimate for FY18 EPS for ITC based on different scenarios of volume growth and price hike for the base case (case 1), (10% excise duty hike in FY18 and levy of 40% sin tax).

EPS for FY18 (Rs per share)

MRP hike

20% 22% 24%

Volume decline 6% 9.10 9.43 9.77

8% 8.90 9.23 9.56

10% 8.71 9.03 9.36

EPS growth for FY18

MRP hike

20% 22% 24%

Volume decline 6% 4.7% 8.5% 12.4%

8% 2.4% 6.2% 10.0%

10% 0.2% 3.9% 7.7%



Appendix

Regression analysis for price hikes vs. volume growth for last 5 years

Source: Company, PhillipCapital India Research

State-wise VAT in 2016

Sr. No. State

Cigarette Revenue

Contribution %

Current VAT Rate

% on cigarettes

1 Kerala 8 30.0

2 West Bengal 10 35.0

3 Karnataka 9 20.0

4 Tamil Nadu 11 30.0

5 Maharashtra 10 35.0

6 Andhra Pradesh 10 20.0

7 Uttar Pradesh 2.5 40.0

8 Rajasthan 2.5 45.0

9 Jammu & Kashmir 1 40.0

10 Gujarat 3 30.0

11 Delhi 2 20.0

12 Himachal Pradesh 2 36.0

13 Bihar 2 20.0

14 Assam 3 30.0

15 Madhya Pradesh 2 13.0

16 Chattisgarh 2 14.0

17 Jharkhand 2 20.0

18 Orissa 2 13.5

19 Uttarakhand 2 12.5

20 Goa 2 22.0

21 Meghalaya 2 20.0

22 Punjab 2 33.0

23 Tripura 2 13.5

24 Arunachal Pradesh 2 20.0

25 Manipur 2 13.5

26 Nagaland 2 13.3

Weighted avg. VAT

26.5


y = -0.86x + 0.11

-20%

-15%

-10%

-5%

0%

5%

10%

15%

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0%

Vo

lum

e gr

ow

th

Price hike

As per regression analysis, Vol. growth = 0.11 - 0.86 x price growth



Estimated volume break-up for cases (1), (3) and (4), and estimated weighted average MRP for cigarette segments of ITC in 2016

Cigarette estimated Volume break-up FY16 FY17 FY18 FY19

>75 mm 10% 11% 12% 13%

70-mm - 75mm 5% 4% 3% 3%

65 mm- 70 mm 64% 63% 62% 60%

<65 mm 21% 22% 23% 24%

MRP (in Rs) FY16

>75 mm 10.9

70-mm - 75mm 7.8

65 mm- 70 mm 6.3

<65 mm 4.1

Wt. avg. MRP 6.37




One-year forward P/E Band EV/EBITDA band

Source: Company. PhillipCapital India Research

8x

16x

24x

32x

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3000000 Rs mn



Financials

Income Statement Y/E Mar, Rs mn FY16E FY17E FY18E FY19E

Net sales 364,753 399,103 422,736 468,424

Growth, % 1.1 9.4 5.9 10.8

Other income 3,621 4,056 4,542 4,906

Total income 368,374 403,159 427,279 473,330

Raw material expenses -137,030 -150,819 -160,110 -173,310

Employee expenses -23,285 -25,144 -26,632 -29,042

Other Operating expenses -70,127 -74,800 -78,497 -85,451

EBITDA (Core) 137,932 152,397 162,039 185,526

Growth, % 2.4 10.5 6.3 14.5

Margin, % 37.8 38.2 38.3 39.6

Depreciation -10,345 -11,285 -12,462 -13,609

EBIT 127,588 141,112 149,577 171,918

Growth, % 2.0 10.6 6.0 14.9

Margin, % 35.0 35.4 35.4 36.7

Interest paid -491 -521 -552 -593

Other Non-Operating Income 18,037 20,091 21,949 23,002

Pre-tax profit 145,134 160,682 170,974 194,326

Tax provided -51,137 -56,239 -59,841 -68,014

Profit after tax 93,997 104,443 111,133 126,312

Net Profit 93,997 104,443 111,133 126,312

Growth, % 2.4 11.1 6.4 13.7

Net Profit (adjusted) 93,997 104,443 111,133 126,312

Unadj. shares (m) 12,023 12,023 12,023 12,023

Wtd avg shares (m) 12,023 12,023 12,023 12,023

Balance Sheet Y/E Mar, Rs mn FY16E FY17E FY18E FY19E

Cash & bank 65,640 71,224 70,767 90,359

Debtors 16,864 18,479 19,573 13,475

Inventory 85,198 86,773 87,731 64,576

Loans & advances 31,887 35,076 38,583 42,442

Total current assets 199,589 211,552 216,656 210,853

Investments 128,542 128,542 128,542 128,542

Gross fixed assets 226,478 256,478 286,478 316,478

Less: Depreciation -84,432 -95,717 -108,179 -121,788

Add: Capital WIP 25,008 25,008 22,918 25,318

Net fixed assets 167,054 185,769 201,217 220,008

Total assets 495,185 525,863 546,415 559,404

Current liabilities 62,657 67,669 73,083 78,929

Provisions 83,186 91,504 100,655 100,655

Total current liabilities 145,843 159,174 173,738 179,584

Non-current liabilities 20,052 20,141 20,238 20,343

Total liabilities 165,894 179,315 193,976 199,927

Paid-up capital 8,047 12,071 12,071 12,071

Reserves & surplus 321,243 334,477 340,368 347,405

Shareholders’ equity 329,291 346,548 352,439 359,476

Total equity & liabilities 495,185 525,863 546,415 559,404

Source: Company, PhillipCapital India Research Estimates

**All numbers are in old reporting format

Cash Flow

FY16E FY17E FY18E FY19E

Pre-tax profit 145,134 160,682 170,974 194,326

Depreciation 10,345 11,285 12,462 13,609

Chg in working capital 14,267 7,042 9,100 31,347

Total tax paid -48,969 -56,239 -59,841 -68,014

Cash flow from operating activities 108,596 109,538 126,805 164,230

Capital expenditure -14,472 -30,000 -27,910 -32,400

Chg in investments -44,488 0 0 0

Cash flow from investing activities -58,960 -30,000 -27,910 -32,400

Free cash flow 49,636 79,538 98,895 131,830

Equity raised/(repaid) 21,933 17,257 5,891 7,037

Dividend (incl. tax) -81,816 -91,210 -105,242 -119,275

Cash flow from financing activities -59,883 -73,953 -99,351 -112,237

Net chg in cash -10,246 5,584 -457 19,593

Valuation Ratios

FY16E FY17E FY18E FY19E

Per Share data

EPS (INR) 7.8 8.7 9.2 10.5

Growth, % 2.4 11.1 6.4 13.7

Book NAV/share (INR) 27.4 28.8 29.3 29.9

FDEPS (INR) 7.8 8.7 9.2 10.5

CEPS (INR) 8.7 9.6 10.3 11.6

CFPS (INR) 8.5 8.5 9.2 12.3

DPS (INR) 5.7 6.5 7.5 8.5

Return ratios Return on assets (%) 20.0 20.5 20.8 22.9

Return on equity (%) 28.5 30.1 31.5 35.1

Return on capital employed (%) 22.9 23.5 23.9 26.6

Turnover ratios Asset turnover (x) 1.6 1.6 1.6 1.8

Sales/Total assets (x) 0.8 0.8 0.8 0.8

Sales/Net FA (x) 2.2 2.3 2.2 2.2

Working capital/Sales (x) 0.2 0.2 0.2 0.1

Working capital days 71.3 66.5 62.9 32.4

Liquidity ratios

Current ratio (x) 3.2 3.1 3.0 2.7

Quick ratio (x) 1.8 1.8 1.8 1.9

Dividend cover (x) 1.4 1.3 1.2 1.2

Valuation

PER (x) 33.6 30.3 28.5 25.0

Price/Book (x) 9.6 9.1 9.0 8.8

Yield (%) 2.2 2.5 2.9 3.2

EV/Net sales (x) 8.5 7.7 7.3 6.6

EV/EBITDA (x) 22.4 20.3 19.1 16.6

EV/EBIT (x) 24.3 21.9 20.7 17.9



Stock Price, Price Target and Rating History

Rating Methodology We rate stock on absolute return basis. Our target price for the stocks has an investment horizon of one year.

Rating Criteria Definition

BUY >= +15% Target price is equal to or more than 15% of current market price

NEUTRAL -15% > to < +15% Target price is less than +15% but more than -15%

SELL <= -15% Target price is less than or equal to -15%.

S (TP 300)

S (TP 300) S (TP 300)

B (TP 320) S (TP 340)

N (TP 300)

S (TP 300) S (TP 270)

S (TP 270)

S (TP 270)

S (TP 270) B (TP 340)

B (TP 375)

B (TP 375)

B (TP 275)

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210

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290

A-13 O-13 N-13 J-14 F-14 A-14 M-14 J-14 A-14 O-14 D-14 J-15 M-15 A-15 J-15 J-15 A-15 O-15 D-15 J-16 M-16 A-16 J-16 J-16



Contact Information (Regional Member Companies)

SINGAPORE: Phillip Securities Pte Ltd

250 North Bridge Road, #06-00 RafflesCityTower,

Singapore 179101

Tel : (65) 6533 6001 Fax: (65) 6535 3834

www.phillip.com.sg

MALAYSIA: Phillip Capital Management Sdn Bhd

B-3-6 Block B Level 3, Megan Avenue II,

No. 12, Jalan Yap Kwan Seng, 50450 Kuala Lumpur

Tel (60) 3 2162 8841 Fax (60) 3 2166 5099

www.poems.com.my

HONG KONG: Phillip Securities (HK) Ltd

11/F United Centre 95 Queensway Hong Kong

Tel (852) 2277 6600 Fax: (852) 2868 5307

www.phillip.com.hk

JAPAN: Phillip Securities Japan, Ltd

4-2 Nihonbashi Kabutocho, Chuo-ku

Tokyo 103-0026

Tel: (81) 3 3666 2101 Fax: (81) 3 3664 0141

www.phillip.co.jp

INDONESIA: PT Phillip Securities Indonesia

ANZTower Level 23B, Jl Jend Sudirman Kav 33A,

Jakarta 10220, Indonesia

Tel (62) 21 5790 0800 Fax: (62) 21 5790 0809

www.phillip.co.id

CHINA: Phillip Financial Advisory (Shanghai) Co. Ltd.

No 550 Yan An East Road, OceanTower Unit 2318

Shanghai 200 001

Tel (86) 21 5169 9200 Fax: (86) 21 6351 2940

www.phillip.com.cn

THAILAND: Phillip Securities (Thailand) Public Co. Ltd.

15th Floor, VorawatBuilding, 849 Silom Road,

Silom, Bangrak, Bangkok 10500 Thailand

Tel (66) 2 2268 0999 Fax: (66) 2 2268 0921

www.phillip.co.th

FRANCE: King & Shaxson Capital Ltd.

3rd Floor, 35 Rue de la Bienfaisance

75008 Paris France

Tel (33) 1 4563 3100 Fax : (33) 1 4563 6017

www.kingandshaxson.com

UNITED KINGDOM: King & Shaxson Ltd.

6th Floor, Candlewick House, 120 Cannon Street

London, EC4N 6AS

Tel (44) 20 7929 5300 Fax: (44) 20 7283 6835

www.kingandshaxson.com

UNITED STATES: Phillip Futures Inc.

141 W Jackson Blvd Ste 3050

The Chicago Board of TradeBuilding

Chicago, IL 60604 USA

Tel (1) 312 356 9000 Fax: (1) 312 356 9005

AUSTRALIA: PhillipCapital Australia

Level 10, 330 Collins Street

Melbourne, VIC 3000, Australia

Tel: (61) 3 8633 9800 Fax: (61) 3 8633 9899

www.phillipcapital.com.au

SRI LANKA: Asha Phillip Securities Limited

Level 4, Millennium House, 46/58 Navam Mawatha,

Colombo 2, Sri Lanka

Tel: (94) 11 2429 100 Fax: (94) 11 2429 199

www.ashaphillip.net/home.htm

INDIA

PhillipCapital (India) Private Limited

No. 1, 18th Floor, Urmi Estate, 95 Ganpatrao Kadam Marg, Lower Parel West, Mumbai 400013

Tel: (9122) 2300 2999 Fax: (9122) 6667 9955 www.phillipcapital.in

Management(91 22) 2483 1919

Kinshuk Bharti Tiwari (Head – Institutional Equity) (91 22) 6667 9946

(91 22) 6667 9735

Research IT Services Pharma & Speciality Chem

Dhawal Doshi (9122) 6667 9769 Vibhor Singhal (9122) 6667 9949 Surya Patra (9122) 6667 9768

Nitesh Sharma, CFA (9122) 6667 9965 Shyamal Dhruve (9122) 6667 9992 Mehul Sheth (9122) 6667 9996

Banking, NBFCs Infrastructure Strategy

Manish Agarwalla (9122) 6667 9962 Vibhor Singhal (9122) 6667 9949 Naveen Kulkarni, CFA, FRM (9122) 6667 9947

Pradeep Agrawal (9122) 6667 9953 Deepak Agarwal (9122) 6667 9944 Anindya Bhowmik (9122) 6667 9764

Paresh Jain (9122) 6667 9948 Logistics, Transportation & Midcap Telecom

Consumer & Retail Vikram Suryavanshi (9122) 6667 9951 Naveen Kulkarni, CFA, FRM (9122) 6667 9947

Naveen Kulkarni, CFA, FRM (9122) 6667 9947 Media Manoj Behera (9122) 6667 9973

Jubil Jain (9122) 6667 9766 Manoj Behera (9122) 6667 9973 Technicals

Preeyam Tolia (9122) 6667 9950 Metals Subodh Gupta, CMT (9122) 6667 9762

Cement Dhawal Doshi (9122) 6667 9769 Production Manager

Vaibhav Agarwal (9122) 6667 9967 Yash Doshi (9122) 6667 9987 Ganesh Deorukhkar (9122) 6667 9966

Economics Mid-Caps & Database Manager Editor

Anjali Verma (9122) 6667 9969 Deepak Agarwal (9122) 6667 9944 Roshan Sony 98199 72726

Engineering, Capital Goods Oil & Gas Sr. Manager – Equities Support

Jonas Bhutta (9122) 6667 9759 Sabri Hazarika (9122) 6667 9756 Rosie Ferns (9122) 6667 9971

Vikram Rawat (9122) 6667 9986

Sales & Distribution Ashvin Patil (9122) 6667 9991 Sales Trader Zarine Damania (9122) 6667 9976

Shubhangi Agrawal (9122) 6667 9964 Dilesh Doshi (9122) 6667 9747 Bharati Ponda (9122) 6667 9943

Kishor Binwal (9122) 6667 9989 Suniil Pandit (9122) 6667 9745

Bhavin Shah (9122) 6667 9974

Ashka Mehta Gulati (9122) 6667 9934 Execution

Archan Vyas (9122) 6667 9785 Mayur Shah (9122) 6667 9945

Corporate Communications

Vineet Bhatnagar (Managing Director)

Jignesh Shah (Head – Equity Derivatives)

Automobiles

http://www.phillip.com.sg/

http://www.poems.com.my/

http://www.phillip.com.hk/

http://www.phillip.co.jp/

http://www.phillip.co.id/

http://www.phillip.com.cn/

http://www.phillip.co.th/

http://www.kingandshaxson.com/

http://www.kingandshaxson.com/

http://www.phillipcapital.com.au/

http://www.ashaphillip.net/home.htm

http://www.phillipcapital.in/



Disclosures and Disclaimers PhillipCapital (India) Pvt. Ltd. has three independent equity research groups: Institutional Equities, Institutional Equity Derivatives, and Private Client Group. This report has been prepared by Institutional Equities Group. The views and opinions expressed in this document may, may not match, or may be contrary at times with the views, estimates, rating, and target price of the other equity research groups of PhillipCapital (India) Pvt. Ltd.

This report is issued by PhillipCapital (India) Pvt. Ltd., which is regulated by the SEBI. PhillipCapital (India) Pvt. Ltd. is a subsidiary of Phillip (Mauritius) Pvt. Ltd. References to "PCIPL" in this report shall mean PhillipCapital (India) Pvt. Ltd unless otherwise stated. This report is prepared and distributed by PCIPL for information purposes only, and neither the information contained herein, nor any opinion expressed should be construed or deemed to be construed as solicitation or as offering advice for the purposes of the purchase or sale of any security, investment, or derivatives. The information and opinions contained in the report were considered by PCIPL to be valid when published. The report also contains information provided to PCIPL by third parties. The source of such information will usually be disclosed in the report. Whilst PCIPL has taken all reasonable steps to ensure that this information is correct, PCIPL does not offer any warranty as to the accuracy or completeness of such information. Any person placing reliance on the report to undertake trading does so entirely at his or her own risk and PCIPL does not accept any liability as a result. Securities and Derivatives markets may be subject to rapid and unexpected price movements and past performance is not necessarily an indication of future performance.

This report does not regard the specific investment objectives, financial situation, and the particular needs of any specific person who may receive this report. Investors must undertake independent analysis with their own legal, tax, and financial advisors and reach their own conclusions regarding the appropriateness of investing in any securities or investment strategies discussed or recommended in this report and should understand that statements regarding future prospects may not be realised. Under no circumstances can it be used or considered as an offer to sell or as a solicitation of any offer to buy or sell the securities mentioned within it. The information contained in the research reports may have been taken from trade and statistical services and other sources, which PCIL believe is reliable. PhillipCapital (India) Pvt. Ltd. or any of its group/associate/affiliate companies do not guarantee that such information is accurate or complete and it should not be relied upon as such. Any opinions expressed reflect judgments at this date and are subject to change without notice.

Important: These disclosures and disclaimers must be read in conjunction with the research report of which it forms part. Receipt and use of the research report is subject to all aspects of these disclosures and disclaimers. Additional information about the issuers and securities discussed in this research report is available on request.

Certifications: The research analyst(s) who prepared this research report hereby certifies that the views expressed in this research report accurately reflect the research analyst’s personal views about all of the subject issuers and/or securities, that the analyst(s) have no known conflict of interest and no part of the research analyst’s compensation was, is, or will be, directly or indirectly, related to the specific views or recommendations contained in this research report.

Additional Disclosures of Interest: Unless specifically mentioned in Point No. 9 below: 1. The Research Analyst(s), PCIL, or its associates or relatives of the Research Analyst does not have any financial interest in the company(ies) covered in

this report. 2. The Research Analyst, PCIL or its associates or relatives of the Research Analyst affiliates collectively do not hold more than 1% of the securities of the

company (ies)covered in this report as of the end of the month immediately preceding the distribution of the research report. 3. The Research Analyst, his/her associate, his/her relative, and PCIL, do not have any other material conflict of interest at the time of publication of this

research report. 4. The Research Analyst, PCIL, and its associates have not received compensation for investment banking or merchant banking or brokerage services or for

any other products or services from the company(ies) covered in this report, in the past twelve months. 5. The Research Analyst, PCIL or its associates have not managed or co-managed in the previous twelve months, a private or public offering of securities for

the company (ies) covered in this report. 6. PCIL or its associates have not received compensation or other benefits from the company(ies) covered in this report or from any third party, in

connection with the research report. 7. The Research Analyst has not served as an Officer, Director, or employee of the company (ies) covered in the Research report. 8. The Research Analyst and PCIL has not been engaged in market making activity for the company(ies) covered in the Research report. 9. Details of PCIL, Research Analyst and its associates pertaining to the companies covered in the Research report:

Sr. no. Particulars Yes/No

1 Whether compensation has been received from the company(ies) covered in the Research report in the past 12 months for investment banking transaction by PCIL

No

2 Whether Research Analyst, PCIL or its associates or relatives of the Research Analyst affiliates collectively hold more than 1% of the company(ies) covered in the Research report

No

3 Whether compensation has been received by PCIL or its associates from the company(ies) covered in the Research report No

4 PCIL or its affiliates have managed or co-managed in the previous twelve months a private or public offering of securities for the company(ies) covered in the Research report

No

5 Research Analyst, his associate, PCIL or its associates have received compensation for investment banking or merchant banking or brokerage services or for any other products or services from the company(ies) covered in the Research report, in the last twelve months

No

Independence: PhillipCapital (India) Pvt. Ltd. has not had an investment banking relationship with, and has not received any compensation for investment banking services from, the subject issuers in the past twelve (12) months, and PhillipCapital (India) Pvt. Ltd does not anticipate receiving or intend to seek compensation for investment banking services from the subject issuers in the next three (3) months. PhillipCapital (India) Pvt. Ltd is not a market maker in the securities mentioned in this research report, although it, or its affiliates/employees, may have positions in, purchase or sell, or be materially interested in any of the securities covered in the report.

Suitability and Risks: This research report is for informational purposes only and is not tailored to the specific investment objectives, financial situation or particular requirements of any individual recipient hereof. Certain securities may give rise to substantial risks and may not be suitable for certain investors. Each investor must make its own determination as to the appropriateness of any securities referred to in this research report based upon the legal, tax and accounting considerations applicable to such investor and its own investment objectives or strategy, its financial situation and its investing experience. The value of any security may be positively or adversely affected by changes in foreign exchange or interest rates, as well as by other financial, economic, or political factors. Past performance is not necessarily indicative of future performance or results.



Sources, Completeness and Accuracy: The material herein is based upon information obtained from sources that PCIPL and the research analyst believe to be reliable, but neither PCIPL nor the research analyst represents or guarantees that the information contained herein is accurate or complete and it should not be relied upon as such. Opinions expressed herein are current opinions as of the date appearing on this material, and are subject to change without notice. Furthermore, PCIPL is under no obligation to update or keep the information current. Without limiting any of the foregoing, in no event shall PCIL, any of its affiliates/employees or any third party involved in, or related to computing or compiling the information have any liability for any damages of any kind including but not limited to any direct or consequential loss or damage, however arising, from the use of this document.

Copyright: The copyright in this research report belongs exclusively to PCIPL. All rights are reserved. Any unauthorised use or disclosure is prohibited. No reprinting or reproduction, in whole or in part, is permitted without the PCIPL’s prior consent, except that a recipient may reprint it for internal circulation only and only if it is reprinted in its entirety.

Caution: Risk of loss in trading/investment can be substantial and even more than the amount / margin given by you. The recipient should carefully consider whether trading/investment is appropriate for the recipient in light of the recipient’s experience, objectives, financial resources and other relevant circumstances. PCIPL and any of its employees, directors, associates, group entities, or affiliates shall not be liable for losses, if any, incurred by the recipient. The recipient is further cautioned that trading/investments in financial markets are subject to market risks and are advised to seek trading/investment advice before investing. There is no guarantee/assurance as to returns or profits or capital protection or appreciation. PCIPL and any of its employees, directors, associates, group entities, affiliates are not inducing the recipient for trading/investing in the financial market(s). Trading/Investment decision is the sole responsibility of the recipient.

For U.S. persons only: This research report is a product of PhillipCapital (India) Pvt Ltd., which is the employer of the research analyst(s) who has prepared the research report. The research analyst(s) preparing the research report is/are resident outside the United States (U.S.) and are not associated persons of any U.S.-regulated broker-dealer and therefore the analyst(s) is/are not subject to supervision by a U.S. broker-dealer, and is/are not required to satisfy the regulatory licensing requirements of FINRA or required to otherwise comply with U.S. rules or regulations regarding, among other things, communications with a subject company, public appearances, and trading securities held by a research analyst account.

This report is intended for distribution by PhillipCapital (India) Pvt Ltd. only to "Major Institutional Investors" as defined by Rule 15a-6(b)(4) of the U.S. Securities and Exchange Act, 1934 (the Exchange Act) and interpretations thereof by the U.S. Securities and Exchange Commission (SEC) in reliance on Rule 15a 6(a)(2). If the recipient of this report is not a Major Institutional Investor as specified above, then it should not act upon this report and return the same to the sender. Further, this report may not be copied, duplicated, and/or transmitted onward to any U.S. person, which is not a Major Institutional Investor.

In reliance on the exemption from registration provided by Rule 15a-6 of the Exchange Act and interpretations thereof by the SEC in order to conduct certain business with Major Institutional Investors, PhillipCapital (India) Pvt Ltd. has entered into an agreement with a U.S. registered broker-dealer, Decker & Co, LLC.

Transactions in securities discussed in this research report should be effected through Decker & Co, LLC or another U.S. registered broker dealer. If Distribution is to Australian Investors

This report is produced by PhillipCapital (India) Pvt Ltd and is being distributed in Australia by Phillip Capital Limited (Australian Financial Services Licence No. 246827).

This report contains general securities advice and does not take into account your personal objectives, situation and needs. Please read the Disclosures and Disclaimers set out above. By receiving or reading this report, you agree to be bound by the terms and limitations set out above. Any failure to comply with these terms and limitations may constitute a violation of law. This report has been provided to you for personal use only and shall not be reproduced,

distributed or published by you in whole or in part, for any purpose. If you have received this report by mistake, please delete or destroy it, and notify the sender immediately.

PhillipCapital (India) Pvt. Ltd. Registered office: No. 1, 18th Floor, Urmi Estate, 95 Ganpatrao Kadam Marg, Lower Parel West, Mumbai 400013

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