Usl ktk

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

Contents

Daily Alerts

Results, Change in Reco

Info Edge: Momentum slackens, growth drivers intact; upgrade to BUY

Company alerts

United Spirits: Significant savings possible on RMs; upgrading margin estimates

Sector alerts

Energy: Floored but may rise

INDIA DAILY January 21, 2015 India 20-Jan 1-day 1-mo 3-mo

Sensex 28,785 1.8 5.2 8.3

Nifty 8,696 1.7 5.7 9.7

Global/Regional indices

Dow Jones 17,515 0.0 (1.6) 5.4

Nasdaq Composite 4,655 0.4 (2.3) 5.3

FTSE 6,620 0.5 1.1 3.9

Nikkei 17,273 (0.5) (2.0) 16.7

Hang Seng 23,951 0.9 3.6 3.7

KOSPI 1,919 0.0 (0.6) 0.2

Value traded – India

Cash (NSE+BSE) 214 131 45

Derivatives (NSE) 1,919 3,285 2,560

Deri. open interest 2,318 2,454 2,146

Forex/money market

Change, basis points

20-Jan 1-day 1-mo 3-mo

Rs/US$ 61.8 3 (149) 65

10yr govt bond, % 7.8 2 (22) (70)

Net investment (US$ mn)

19-Jan MTD CYTD

FIIs 68 (13) 16,162

MFs 35 (402) 4,802

Top movers

Change, %

Best performers 20-Jan 1-day 1-mo 3-mo

LICHF IN Equity 490.5 (0.7) 16.0 46.9

UBBL IN Equity 942.9 (0.8) 16.4 39.4

AL IN Equity 61.1 1.0 20.8 38.2

KMB IN Equity 1395.7 0.4 12.9 37.7

YES IN Equity 858.4 4.0 17.8 37.6

Worst performers

GMRI IN Equity 16.9 0.0 0.3 (20.8)

RCOM IN Equity 80.6 1.3 (2.8) (20.7)

SSLT IN Equity 204.2 5.7 (2.0) (17.8)

JSTL IN Equity 1005.1 2.9 (4.9) (14.5)

RELI IN Equity 495.5 1.1 0.5 (14.4)

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

Recruitment—steady growth with some deterioration in business metrics

Revenues grew by a steady 19% yoy to `1.08 bn. While the number of unique paying

customers remained steady, there was some deterioration in job-seekers’ activity (muted resume

additions, modifications), hiring interest (single-digit growth in Naukri’s job index), and margin

(partly related to seasonal factors). Revenue growth is being primarily driven by mainstay sectors

(IT and financial services) and would get a fillip from manufacturing. Naukri’s significant share in

a growing market will support price increases. Further investments in new products should start

paying off for Info Edge over the next couple of years.

99acres—soft demand takes a toll; competition i business and cost metrics

99acres reported further growth moderation in 3QFY15 (up 20% yoy). This was led by a

combination of: (1) lack of new project launches in key markets, (2) fierce competition and

(3) loss of revenues from home owners (as other sites have started offering free listings for

owners). The growth moderation is less reflective of market potential (which remains large) and

more reflective of a large share of traffic-linked income. In a weak demand environment, cash-

rich competition is undercutting and increasing the cost of customer acquisitions.

3QFY15—higher spending on new businesses raises revenue growth threshold to sustain margins

Info Edge reported 18% revenue growth with the non-recruitment businesses dragging down

an otherwise steady 19% growth in recruitment. EBITDA margin of 24.6% was impacted by (1)

a sharp increase in staff costs (mainly related to 99acres and (2) higher advertising spends (a

response to stiff competition). Continued investment in new businesses led to a sharp fall in

margins in 9MFY15 despite strong 20% revenue growth and better revenue mix.

Estimates factor stricter assumptions for 99acres and Zomato

We revise our standalone EPS estimates to `13.0/18.2/26.4 from `12.7/18.1/27.6 over FY2015-

17, at lower 35% revenue CAGR and margin (10% EBITDA margin in FY2017E at 10% cost

CAGR) for 99acres. We value investment in Zomato at 30% discount to the recent transaction.

Info Edge (INFOE) Internet

Momentum slackens, growth drivers intact; upgrade to BUY. 3QFY15 reflects (1) a

sharp easing of growth in 99acres (soft demand, undercutting by cash-rich competition)

and (2) weakening business metrics in recruitment (moderating activity from job seekers

and companies). This weakness can continue, especially in real estate (where most of

revenue is traffic dependent). Growth drivers are intact for both sectors—for

recruitment these would be cyclical recovery, pricing uptick and new products, and for

real estate they would be concentrated in the top-four cities, mainly from developers.

Our revised SOTP target price of `960 (from `1,070) bakes in stricter assumptions for

99acres and Zomato. We upgrade to BUY from ADD after the recent price correction.

BUY

JANUARY 21, 2015

RESULT, CHANGE IN RECO.

Coverage view: Attractive

Price (`): 809

Target price (`): 960

BSE-30: 28,785

Info Edge

Stock data Forecasts/Valuations 2015 2016E 2017E

52-week range (Rs) (high,low) EPS (Rs) 10.1 15.4 23.3

Market Cap. (Rs bn) EPS growth (%) 22.5 53.5 50.5

Shareholding pattern (%) P/E (X) 80.4 52.4 34.8

Promoters 44.5 Sales (Rs bn) 6.9 8.6 11.0

FIIs 30.1 Net profits (Rs bn) 1.2 1.9 2.8

MFs 14.3 EBITDA (Rs bn) 1.0 1.8 3.1

Price performance (%) 1M 3M 12M EV/EBITDA (X) 86.9 47.4 26.4

Absolute (7.1) (3.4) 41.5 ROE (%) 11.1 12.0 16.9

Rel. to BSE-30 (10.1) (10.8) 5.4 Div. Yield (%) 0.4 0.7 1.0

Company data and valuation summary

1,015-468

97.2

Info Edge Internet

KOTAK INSTITUTIONAL EQUITIES RESEARCH 3

Exhibit 1: Weakness in top-line and margins covered by high investment income and strong other income (one-offs, QIP) Standalone financials of Info Edge, March fiscal year-ends (` mn)

Source: Company, Kotak Institutional Equities estimates

Increased pace of investment is possibly raising threshold for revenue growth

Info Edge reported weak results in terms of revenue (up 18% yoy; 4.6% below our

estimate) and margin (24.6%; impacted by continued investment in 99acres and high

advertising costs). For 9MFY15, it reported 19% yoy growth in sales and a sharp decline in

margin to 29.2% (expanded workforce to grow its loss-making, non-recruitment

businesses).

The key change is that it has increased the pace of its investments in its non-recruitment

business, which is increasing the threshold growth for the recruitment business, thereby

sustaining margins. This threshold was close to 20%, which is what the company achieved

in 9MFY15, though it was still not able to sustain margins.

Exhibit 2: Margin declined in 9MFY15, despite 20% revenue growth Revenue growth and EBITDA margin for Info Edge, March fiscal year-ends, 20111-9MFY15 (standalone)


Yoy growth Yoy growth

3QFY15 3QFY15E 3QFY14 2QFY15 vs est. yoy qoq 9MFY15 9MFY14 (%) FY2015E FY2014 (%)

Total operating income 1,457 1,527 1,234 1,476 (4.6) 18.1 (1.2) 4,382 3,671 19.4 5,999 5,059 18.6

Employee expenses (642) — (494) (603) 29.9 6.5 (1,834) (1,441) 27.2 (2,459) (1,966) 25.1

Network, Internet and Other direct charges (55) — (35) (46) 55.0 17.7 (141) (121) 15.9 (180) (160) 12.3

Administration and Other expenses (167) — (133) (181) 25.8 (7.8) (507) (396) 28.2 (744) (603) 23.4

Advertising and Promotion cost (231) — (149) (223) 55.2 3.3 (622) (485) 28.3 (822) (663) 24.1

Operating expenses (1,094) (1,039) (811) (1,053) 35.0 3.9 (3,104) (2,443) 27.0 (4,205) (3,391) 24.0

EBITDA 364 489 423 423 (25.6) (14.1) (14.0) 1,279 1,228 4.1 1,794 1,668 7.6

Other income 256 136 95 110 87.4 170.5 132.6 494 326 51.7 686 433 58.6

PBDIT 619 625 518 532 (1.0) 19.6 16.3 1,773 1,554 14.1 2,480 2,100 18.1

Financial charges (8) (8) (6) (7) - 20.4 5.6 (22) (18) 21.8 (30) (25) 21.5

Depreciation (48) (45) (39) (46) 5.8 22.0 2.6 (138) (118) 16.5 (187) (174) 7.5

Pre-tax profit 564 573 472 479 (1.5) 19.4 17.8 1,614 1,418 13.8 2,264 1,902 19.0

Taxation (178) (183) (150) (147) (3.1) 18.2 21.1 (497) (443) 12.1 (702) (591) 18.7

PAT (recurring) 386 389 322 332 (0.8) 20.0 16.3 1,117 975 14.6 1,562 1,311 19.1

Exceptional items — — — — NA NA NA — (26) — (26) NA

Reported PAT 386 389 322 332 (0.8) 20.0 16.3 1,117 949 17.7 1,562 1,285 21.5

Key ratios (%)

Direct cost of sales 47.8 42.9 44.0 45.1 42.6 44.0 42.0

Fixed cost of sales 27.3 22.8 27.4 25.8 24.0 26.1 25.0

EBITDA margin 24.9 32.0 34.3 28.6 29.2 33.4 29.9 33.0

PAT margin 26.5 25.5 26.1 22.5 25.5 26.6 26.0 25.9

Tax rate 31.5 32.0 31.8 30.6 30.8 31.3 31.0 31.1

% change

34.0

38.3

34.3 33.0 29.2

0

10

20

30

40

50

0

10

20

30

40

50

2011

2012

2013

2014

9M

FY15

(%)(%) Revenue growth (LHS) Margin (RHS)

Internet Info Edge

4 KOTAK INSTITUTIONAL EQUITIES RESEARCH

Recruitment— steady growth with some deterioration in business metrics

Revenues grew by a steady 19% yoy to `1.08 bn. While the number of unique-paying

customers was steady, there was some deterioration in job-seekers’ activity (muted resume

additions, modifications), hiring interest (single-digit growth in Naukri’s job index), and

margins (partly related to seasonal factors). The revenue growth was driven mainly by

mainstay sectors (IT and financial services) and will get a fillip from manufacturing. Naukri’s

significant share in a growing market is expected to support price increases and investments

in new products are expected to pay off for Info Edge over the next couple of years.

Exhibit 3: Growth in Job Speak Index has weakened in 3QFY15 Yoy growth in Naukri's Job Speak Index, March fiscal year-ends, 1Q11-3Q15 (%)

Source: Company, Kotak Institutional Equities

Exhibit 4: Excluding financial services, most sectors saw muted growth in hiring interest Segmental yoy growth in Naukri's Job Speak Index in 2QFY15, March fiscal year-end (%)

Source: Naukri's Job Speak Index, Kotak Institutional Equities

30

24

19

14

17

1314

13

68 7

1114

1113 14

17

20

7

0

5

10

15

20

25

30

35

1Q

FY11

2Q

FY11

3Q

FY11

4Q

FY11

1Q

FY12

2Q

FY12

3Q

FY12

4Q

FY12

1Q

FY13

2Q

FY13

3Q

FY13

4Q

FY13

1Q

FY14

2Q

FY14

3Q

FY14

4Q

FY14

1Q

FY15

2Q

FY15

3Q

FY15

(%)

Services business

Manufacturing-domestic

Manufacturing-export

8 6

(2) (2)

23

7 3

(6)

1 4

(40)

(20)

0

20

40

60

IT- Sof

twar

e

BPO

and IT

eS

Const

ruct

ion a

nd

Engin

eering

Auto

and a

nci

llary

serv

ices

Ban

kin

g a

nd F

inan

cial

Serv

ices

Oil

and G

as

Tele

com

Insu

rance

Cap

ital G

oods

Pharm

a &

Bio

tech

(%)

Info Edge Internet


Exhibit 5: Recruitment revenues have grown steadily… Recruitment sales trajectory for Info Edge, March fiscal year-ends, 2010-3QFY15


Exhibit 6:…though margins have declined Recruitment margin trajectory for Info Edge, March fiscal year-ends, 2010-3QFY15


Exhibit 7: Sharp decline in additions in 3QFY15 Average number of resumes added daily, March fiscal year-ends, 2007-3QFY15 ('000)


Real estate—competition outspends and takes away share

99acres reported growth moderation in 3QFY15 (up 20% yoy; was up 32% yoy in 2QFY15).

This was led by (1) lack of new project launches in Delhi (accounts for a third of sales),

(2) increased competition from peers (magicbricks gains significant market share) and (3) loss

of revenue from home owners (other sites offer owners free listings). The company has likely

increased advertising spends. Market potential is large as business is concentrated in the

top-eight cities (60-70% of revenues). Developers (new homes) support most of the

revenue.

10

24 28

24 21

28 27

20

27

19

12 10 4

8 8 11

14 16 18 19

(20)

0

20

40

60

0

200

400

600

800

1000

1200

1Q

FY10

3Q

FY10

1Q

FY11

3Q

FY11

1Q

FY12

3Q

FY12

1Q

FY13

3Q

FY13

1Q

FY14

3Q

FY14

1Q

FY15

3Q

FY15

(%)(Rs mn) Recruitment sales

39 38 44 44 42

46 49 44

49 49 51 55

50 50 47 49 50 51 49 52 52 51 49

(20)

0

20

40

60

—

100

200

300

400

500

1Q

FY10

3Q

FY10

1Q

FY11

3Q

FY11

1Q

FY12

3Q

FY12

1Q

FY13

3Q

FY13

1Q

FY14

3Q

FY14

1Q

FY15

3Q

FY15

(%)(Rs mn) Recruitment EBITDA

109 9

11 1112 12

14

17

14

10

12 1211 11

13 13

1011

12 1211

9

13

1110

12 121110

1112

13

9

0

2

4

6

8

10

12

14

16

18

1Q

07

3Q

07

1Q

08

3Q

08

2Q

09

4Q

09

2Q

10

4Q

10

2Q

11

4Q

11

2Q

12

4Q

12

2Q

13

4Q

13

2Q

14

4Q

14

2Q

15

Average number of resumes added daily in '000

Internet Info Edge


Exhibit 8: Non-recruitment revenue growth moderated… Non-recruitment sales trajectory for Info Edge, March fiscal year-ends, 2010-3QFY15


Exhibit 9: … and losses increased Non-recruitment margin trajectory for Info Edge, March fiscal year-ends, 2010-3QFY15


Zomato—focus on expanding business; delay in breaking even less relevant

Urbanspoon, a stepping stone to US market. The recent acquisition of Urbanspoon

gives Zomato a foothold in the US (where Urbanspoon is number two). Zomato has learnt

from the tough experience in the UK, where it found it difficult to expand organically. It

also comes at an attractive cost, discounting inherent weaknesses in Urbanspoon’s

business—(1) revenues limited to Google ads, (3) flattening traffic growth, (3) limited

management bandwidth and (4) not being the market leader in the US (in a “winner-

takes-all” business). In terms of business, Urbanspoon serves three million unique

monthly visitors or 1/12 of Zomato’s user base. Its valuation of US$52 mn needs to be

seen in this context (versus US$670 mn valuation of Zomato based on the recent

transaction).

Breakeven delayed. Info Edge had expected the Zomato business to break even at a top

line of `400-500 mn. This is in contrast to the current losses at projected topline of `800-

900 mn in FY2015E. It believes Zomato will leverage its recent acquisitions to cross-sell

products and establish a presence in new markets. Presently most of the revenues of the

portal come from India and the UAE.

Revise SOTP to reflect weakness in margin assumptions for 99acres

We revise our standalone business estimates reflect lower margin assumptions for 99acres to

`13.0/18.2/26.2 from `12.7/18.1/27.8 over FY2015-17E. We revise our target price to `960

(28X FY2017E cash-stripped standalone EPS, 3X book for investments and 1X cash) from

`1,070. We assume higher discount for Zomato.

31 29 33

47 45 50

34 33

43

35 41 39

35 36 42

33 32 33

25

17

0

15

30

45

60

75

—

100

200

300

400

500

1Q

FY10

3Q

FY10

1Q

FY11

3Q

FY11

1Q

FY12

3Q

FY12

1Q

FY13

3Q

FY13

1Q

FY14

3Q

FY14

1Q

FY15

3Q

FY15

(%)(mn)Other verticals

(51)

(36)

(44)

(24)(23)

(48)

(21)

(6)

(16)

(25)

(17)(15)

(22)(23)

(15)(15)

(29)

(7)(10)

(22)

(11)

(30)

(44)

(60)

(45)

(30)

(15)

0

(200.0)

(160.0)

(120.0)

(80.0)

(40.0)

0.0

1Q

FY10

3Q

FY10

1Q

FY11

3Q

FY11

1Q

FY12

3Q

FY12

1Q

FY13

3Q

FY13

1Q

FY14

3Q

FY14

1Q

FY15

3Q

FY15

(%)(mn) Other verticals EBITDA

Info Edge Internet


Exhibit10: Key assumptions for Info Edge, March fiscal year-ends, 2014-17E (` mn)


Exhibit 11: SOTP valuation of Info Edge


2014 2015E 2016E 2017E 2015E 2016E 2017E 2015E 2016E 2017E

Total

Sales 5,059 5,999 7,436 9,452 6,110 7,706 9,932 (1.8) (3.5) (4.8)

Sales growth (%) 15.7 18.6 23.9 27.1 20.8 26.1 28.9

EBITDA 1,668 1,794 2,566 3,822 1,983 2,874 4,427 (9.5) (10.7) (13.7)

EBITDA margin (%) 33.0 29.9 34.5 40.4 32.5 37.3 44.6

EPS (Rs) 12.0 13.0 18.2 25.8 12.7 18.1 27.8 2.6 0.5 (7.3)

EPS growth (%) (0.3) 8.5 39.9 41.5 5.7 42.8 53.5

Recruitment

Sales 3,713 4,364 5,319 6,606 4,364 5,319 6,606 0.0 0.0 0.0

Growth (%) 10.0 17.5 21.9 24.2 17.5 21.9 24.2

EBITDA 1,879 2,247 2,819 3,567 2,269 2,926 3,766 (1.0) (3.6) (5.3)

EBTDA margin (%) 50.6 51.5 53.0 54.0 52.0 55.0 57.0

Jeevansaathi

Sales 360 396 457 553 416 480 581 (4.8) (4.8) (4.8)

Growth (%) 11.5 10.0 15.5 21.0 15.5 15.5 21.0

EBITDA (67) (48) (34) 0 (42) (36) 0 14.3 (4.8) NA

EBTDA margin (%) (18.6) (12.0) (7.5) 0.0 (10.0) (7.5) 0.0

99 acres

Sales 758 955 1,304 1,848 1,035 1,536 2,282 (7.7) (15.2) (19.0)

Growth (%) 47.5 26.0 36.5 41.8 36.5 48.5 48.5

EBITDA (48) (334) (130) 277 (155) 77 685 NA NA (59.5)

EBTDA margin (%) (6.3) (35.0) (10.0) 15.0 (15.0) 5.0 30.0

Others

Sales 228 285 356 445 296 370 463 (3.8) (3.8) (3.8)

Sales growth (%) 42 25 25 25 30 25 25

EBITDA (96) (71) (89) (22) (89) (93) (23) (19.9) (3.8) (3.8)

EBITDA margin (%) (42.3) (25.0) (25.0) (5.0) (30.0) (25.0) (5.0)

New estimates Old estimates % revision

Value Multiple Valuation Stake Valuation of stake Per share value

Parameter (Rs mn) (X) Valuation basis (Rs mn) (%) (Rs mn) (Rs)

Standalone business

ex-99 acres

2017E earnings (ex

interest income)2,231 28.0 P/E discounted to Dec-2016 62,473 100 60,593 505

99acres

30% discount to recent peer

transaction multiples (30X

FY2015E sales) 20,057 100 20,057 167

Zomato

30% discount to recent

transaction value 28,140 50 14,070 117

Other investments 2014 book 5,325 3.0 P/B 15,974 38 6,022 50

QIP issue + cash

2016E cash+financial

investments 13,780 1.01X cash

13,780 100 13,780 115

Total 955

Internet Info Edge


Exhibit 12: Summary financials for Info Edge (consolidated), March fiscal year-ends, 2009-17E (` mn)


2009 2010 2011 2012 2013 2014 2015E 2016E 2017E

Profit model

Total operating income 2,458 2,371 3,224 3,920 4,723 5,672 6,889 8,592 10,956

Operating expenses (1,796) (1,745) (2,390) (2,736) (3,513) (4,706) (5,914) (6,836) (7,891)

EBITDA 662 626 834 1,183 1,210 966 974 1,756 3,065

Other income 279 307 274 395 475 502 762 953 1,042

PBDIT 941 932 1,108 1,578 1,685 1,468 1,737 2,709 4,107

Financial charges (17) (20) (23) (22) (28) (30) (33) (33) (33)

Depreciation (71) (65) (80) (83) (118) (212) (193) (215) (215)

Pre-tax profit 853 848 1,005 1,473 1,540 1,227 1,511 2,461 3,859

Taxation (270) (318) (400) (529) (528) (591) (484) (787) (1,235)

Recurring PAT 570 559 581 1,043 1,153 923 1,207 1,853 2,788

Recurring EPS 5.2 5.1 5.3 9.5 10.6 8.4 10.1 15.4 23.3

Balance sheet

Equity share capital 273 273 546 546 1,092 1,092 1,199 1,199 1,199

Reserves & surplus 2,980 3,474 3,805 4,726 4,993 5,628 13,879 14,657 16,015

Minority interest — — 16 (25) 105 1,392 1,571 1,750 1,915

Shareholders funds 3,252 3,746 4,367 5,247 6,189 8,112 16,649 17,607 19,129

Total source of funds 3,256 3,753 4,374 5,250 6,194 8,116 16,649 17,607 19,149

Net fixed assets 385 363 741 643 1,620 1,588 1,588 1,673 1,758

Investments 183 1,141 2,628 3,152 2,614 5,380 7,220 7,220 7,220

Cash balances 3,221 2,791 2,076 2,855 3,466 3,072 9,905 11,360 13,709

Net current assets excluding cash (552) (577) (1,130) (1,441) (1,551) (1,987) (2,127) (2,709) (3,602)

Total application of funds 3,256 3,753 4,374 5,250 6,194 8,116 16,649 17,607 19,149

Cash flow statement

Operating profit before working capital changes 671 615 708 1,049 1,157 877 1,253 1,922 2,873

Change in working capital/ other adjustments (295) 24 553 311 110 436 140 582 893

Cash flow from operating activites 375 639 1,261 1,361 1,267 1,313 1,394 2,503 3,765

Fixed assets (75) (43) (457) 14 (1,095) (180) (193) (300) (300)

Investments 2,471 (959) (1,486) (525) 538 (2,766) (1,840) — —

Cash (used)/ realised in investing activities 2,396 (1,001) (1,944) (510) (557) (2,946) (2,033) (300) (300)

Free cash flow 2,771 (362) (683) 850 710 (1,633) (639) 2,203 3,465

Dividend paid (24) (24) (48) (127) (127) (319) (494) (759) (1,142)

Interest charges (17) (20) (23) (22) (28) (30) (33) (33) (33)

Cash (used)/realised in financing activities (17) (44) (34) (180) — 996 7,293 (928) (1,280)

Cash generated/ utilised 2,735 (430) (714) 779 611 (395) 6,833 1,455 2,350

Cash at beginning of year 486 3,221 2,791 2,076 2,855 3,466 3,072 9,905 11,360

Cash at end of year 3,221 2,791 2,076 2,855 3,467 3,072 9,905 11,360 13,709


UNSP’s RM costs are very high: significant scope for improvement exists

UNSP’s RM cost in FY2014 at `596 per case is very high and indicates a lot of inefficiencies in

the RM procurement process. As per our estimates, UNSP’s RM cost per case should not have

been more than ~`490 per case in FY2014, had the procurement process been efficient. Hence,

ideally UNSP should have made gross margins to the tune of ~50% in FY2014 versus reported

gross margins of 40%. Even tier-2 liquor companies like Radico Khaitan and Tilaknagar make

gross margins in the vicinity of 40% in their IMFL business (actual basis grossing up for tie-up

sales) at realizations in the range of `640-680 per case. UNSP’s gross margins should be

materially higher given higher realizations (net sales per case in FY2014) to the tune of `810 per

case. UNSP reporting similar gross margins as tier-2 liquor companies points towards

‘inefficiencies’ in RM procurement.

EBITDA margin should ideally have been closer to `150 versus `70 reported in FY2014

In our view, in case the RM procurement process would have been efficient in FY2014, savings

in the range of `70-80 per case (assuming 5% error in our costing data) could have been

achieved. Hence, reported EBITDA margins in FY2014 would have been `140-150 versus

reported margins of `70 per case.

We bake in full realization of RM cost efficiencies in our FY2017E numbers

We expect that the impact of cost rationalization being undertaken by Diageo should gradually

start reflecting in better margins in the coming quarters and bake in full efficiencies in our

FY2017E numbers. Time would be required (1) for due diligence of cost structure and

implementation of efficiencies and (2) as previous procurement contracts expire and new

contracts are signed. We are now modelling `170 per case margins in FY2017E versus `135

earlier. We have also reduced our volume estimates to reflect the premiumization strategy being

followed by the company. We are modelling volume growth of 5% CAGR in FY2016-17E. Our

new estimate of FY2017E EBITDA is higher by 11% versus earlier. Retain BUY with a revised target

price of `4,000 (`3,200 earlier) at 25X Dec 2016E EBITDA (multiples are unchanged from before).

United Spirits (UNSP) Consumer Products

Significant savings possible on RMs; upgrading margin estimates. Our analysis of

UNSP’s RM costs reveals significant ‘inefficiencies’. As per our estimates, gains of

`70-80 per case are possible on the margins front as Diageo goes about rationalizing

the cost structure. Margins would take time to recover as (1) some of the RMs could be

tied through long-term contracts and (2) execution of rationalization measures could

take time. We bake in full efficiency gains in our FY2017E numbers. We have raised our

earning estimates led by higher (`170 versus `135 earlier) margins in FY2017E. Retain

BUY with a revised TP of `4,000.

BUY

JANUARY 21, 2015

UPDATE

Coverage view: Neutral

Price (`): 3,365

Target price (`): 4,000

BSE-30: 28,785

United Spirits

Stock data Forecasts/Valuations 2015 2016E 2017E

52-week range (Rs) (high,low) EPS (Rs) 23.6 68.6 96.5

Market Cap. (Rs bn) EPS growth (%) 363.1 191.1 40.6

Shareholding pattern (%) P/E (X) 142.7 49.0 34.9

Promoters 58.9 Sales (Rs bn) 93.7 103.6 113.1

FIIs 23.7 Net profits (Rs bn) 3.4 10.0 14.0

MFs 3.9 EBITDA (Rs bn) 10.7 18.3 23.4

Price performance (%) 1M 3M 12M EV/EBITDA (X) 48.3 27.6 21.2

Absolute 21.5 31.6 24.4 ROE (%) 11.1 28.1 30.5

Rel. to BSE-30 15.6 20.9 (8.3) Div. Yield (%) 0.1 0.2 0.3

Company data and valuation summary

3,448-2,225

489.0

Consumer Products United Spirits


UNSP’s RM costs have significant scope for improvement

UNSP’s RM cost in FY2014 at `596 per case is very high and indicates inefficiencies in the

RM procurement process. As per our estimates, UNSP’s RM cost per case should not have

been more than ~`490 per case in FY2014, had the procurement process been efficient.

Hence, ideally UNSP should have made gross margins to the tune of 50% in FY2014 versus

reported gross margins of 40%. Even tier-2 liquor companies like Radico Khaitan and

Tilaknagar make gross margins (actual basis grossing up for tie-up sales) in the vicinity of

40% in their IMFL business at realizations in the range of `640-680 per case. UNSP’s gross

margins should be materially superior given higher realizations (net sales per case in FY2014)

to the tune of `810 per case. Hence, UNSP reporting similar gross margins as tier-2 liquor

companies points towards ‘inefficiencies’ in RM procurement.

Exhibit 1: RM cost of UNSP has significant scope for improvement Calculation of RM cost of UNSP in FY2014 (Rs per case)

Notes: (a) We have assumed that 30% of total volumes of 120.7 mn cases in FY2014 were outsourced.


In the exhibits below, we have tried to calculate RM cost for UNSP in FY2014 on a bottom-

up basis to arrive at the difference between ideal and reported RM cost per case. We have

broken down RM cost into three elements: (1) extra-neutral alcohol or ENA, (2) packaging

and (3) cost of blend. We have calculated RM cost separately for an economy brand and a

premium brand and then arrived at the ideal cost per case for UNSP after accounting for

reported mix in FY2014. Estimates of cost of bottles, caps, labels, etc. are based on the

inputs we have gathered across a number of industry meetings. Our calculations are

presented below.

Calculation of packaging cost

As per our calculations, the cost of packaging for an economy and a prestige brand should

be in the vicinity of `200 and `430, respectively. We have used the following assumptions:

Exhibit 2: Calculation of packaging cost for an economy brand

of IMFL

Source: Kotak Institutional Equities

Exhibit 3: Calculation of packaging cost for prestige and above

category brands of IMFL


Total RM cost (Rs mn) 50,392

Total number of in-house cases (mn cases) 84

RM cost per case (Rs per case) 596

Cost of new bottle (Rs) 3.2

Cost of old bottle (Rs) 1.6

New: Old mix (%) 50

Cost of label (Rs) 0.5

Cost of cap (Rs) 0.75

Cost of bottles (Rs per case) 120

Cost of label (Rs per case) 25

Cost of cap (Rs per case) 37.5

Cost of carton (Rs per case) 18

Total cost of packaging (Rs per case) 201

Cost of new bottle (Rs) 20

New: Old mix (%) 100

Cost of label (Rs per bottle) 1

Cost of cap (Rs per bottle) 5

Cost of monocarton (Rs per bottle) 8

Cost of bottles (Rs per case) 240

Cost of label (Rs per case) 12

Cost of cap (Rs per case) 60

Cost of monocarton (Rs per case) 96

Cost of carton (Rs per case) 25

Total cost of packaging (Rs per case) 433

United Spirits Consumer Products


Economy brand

We have assumed new and old bottle mix of 50:50 and cost of packaging at `201 per

case for economy brands. Our calculation is conservative as:

We have assumed that all economy volumes are sold in 180 ml SKUs in which packaging

cost is higher, as higher number (50 versus 12 in case of 750 ml SKU) of labels and

caps are required. Since a reasonable proportion of 750 ml SKU is there in the bottling

mix of an economy brand, in our view, our estimate of cost is conservative and actual

packaging cost of an economy brand would likely be lower versus our estimate.

Some low end economy brands are even sold in pouches and tamper-proof packs in

which cost of packaging is substantially lower versus our calculations.

Prestige and above category brands

We have assumed that in prestige and above brands, all bottles are new and a bottle

costs `20 per piece. As per our understanding, cost of bottle would be in the range of

`15-16 per 750 ml bottle for the lower end (brand like McDowell’s No 1) of prestige and

above category and cost per bottle at the higher end of the spectrum (for a brands like

Antiquity) would be in the range of `25-30 per 750 ml bottle. Since McDowell’s No 1

accounts for almost 70% of volumes of UNSP in the prestige and above category, our

cost assumption is conservative.

Calculation of total cost per case for an economy and a prestige brand

As per our calculations, total cost per case for an economy and prestige and above category

brand is to the tune of `377 and `679, respectively. We have made the following

assumptions.

Exhibit 4: Calculation of total cost per case of an economy brand

in FY2014


Exhibit 5: Calculation of cost per case of a prestige and above

brand in FY2014


We have assumed cost of blend at `12 and `82 per case for economy and prestige brands,

respectively. While our estimate in case of an economy brand is based on our conversations

with various companies in the sector, our estimate of cost of blend in case of UNSP is based

on management inputs and details disclosed in the annual report of UNSP. We take comfort

from the fact:

As per our understanding, UNSP’s cost of blend in FY2014 was to the tune of `2.7 bn.

Since most of the imported blend was bought from W&M, this cost is reflected under

related party transactions in the annual report. We have assumed that the entire

imported blend is consumed in the prestige and above category.

Pernod India’s (PI) total expense in foreign currency in FY2014 was to the tune of `3.4

bn, as per the annual report. This expense would include cost of blend (accounting for

bulk of this expense) as well as cost of import of global brands of PI. Given this data

point, in our view, our estimate of UNSP’s blend cost is fair as:

Cost of ENA (Rs per litre) 43.5

ENA required per case at 42% (ml) 3,780

Cost of ENA (Rs per case) 164

Cost of packaging (Rs per case) 201

Cost of blend (Rs per case) 12

Total cost (Rs per case) 377

Cost of ENA (Rs per litre) 43.5

ENA required per case at 42% (ml) 3,780

Cost of ENA (Rs per case) 164

Cost of packaging (Rs per case) 433

Cost of blend (Rs per case) 82

Total cost (Rs per case) 679



PI’s volumes in FY2014 at ~31 mn cases were similar to UNSP’s 33 mn cases in the

prestige and above category.

PI’s portfolio in prestige and above category is superior versus UNSP as almost 50% of

total volumes of PI are contributed by Royal Stag, which is a higher-priced brand (`650

for 750 ml bottle in Mumbai) versus 70% contribution from McDowell’s No 1 in case

of UNSP, which is priced in the vicinity of ~`500.

Even if we assume that the entire expense of Radico on malt/malt scotch/grain/grape

spirits of `113.7 mn in FY2014 is on account of blending for premium volumes (3.7 mn

cases), it would amount to `31 per case.

Exhibit 6: Calculation of ideal cost per case for UNSP in FY2014

Notes: (a) We have assumed that manufacturing of only economy brands is outsourced to tie-up units.


We expect efficiencies of `70-80 per case (on FY2014 cost structure) to be

realized as RM costs are rationalized by Diageo

We expect UNSP to realize `70-80 per case of efficiencies on the RM cost base of FY2014,

as RM costs are rationalized by Diageo in the coming years. We are indirectly implying that

had UNSP’s RM cost structure been efficient in FY2014, it would have made EBITDA per case

in the range of `140-150 versus reported margin of `70 per case in FY2014.

We expect that cost rationalization measures being undertaken by Diageo should gradually

start reflecting in better margins in the coming quarters. We have baked in full efficiencies in

our FY2017E numbers. In our view, cost rationalization would be a comprehensive exercise

requiring due diligence of existing cost structure, followed with execution of remedial

measures and hence would be time consuming. Also, some of the RM procurement

contracts could be long term in nature and hence savings would be realized only on expiry

of existing contracts.

We have increased our margin estimate for FY2017E to `170 per case from `135 per case

earlier. We have used the following assumptions:

We have used base margin in FY2014E, which captures full efficiencies of the business

model at `140 per case.

We have assumed that EBITDA per case would increase 3% every year on account of

inflation or price hikes as consumer companies typically tend to maintain their % margins

in the long term.

We have assumed 3% mix benefits every year on account of premiumization. We have

assumed that 40% of premiumization benefits will flow to EBITDA level every year. We

have made this assumption based on our understanding of the cost structure of liquor

business and inputs we have received in our industry meetings.

Total volumes (mn cases) 120

Prestige and above category volumes (mn cases) 33

Regular and below category volumes (mn cases) 87

In house volumes (mn cases) 90

Prestige and above (mn cases) 33

Regular and below (mn cases) 57

Cost of economy brand (Rs per case) 377

Cost of prestige and above brand (Rs per case) 679

Economy:prestige ratio 63

Blended cost per case (Rs) 488

United Spirits Consumer Products


As per our calculations, UNSP’s margins could possibly improve to a range of `180-190 per

case in FY2017E, assuming all efficiencies are realized in the P&L. However, we are assuming

that UNSP will increase investments into branding and operations, which would take away

~`20 per case (implying `2.7 bn of additional investments into branding and improvement

of operations) of these efficiencies. Hence, we have kept our margin assumption in FY2017E

at ~`170 per case.

Exhibit 7: Possible build-up of margins for UNSP assuming current inefficiencies are ironed out by

FY2017E Calculation of FY2017E EBITDA margin in an ideal scenario for UNSP (Rs per case)

Source: Kotak Institutional Equities estimates

Assumptions

Exhibit 8: Our assumptions for UNSP, March fiscal year-ends, 2008-17E


Change in earnings

We have increased our earning estimates for FY2017E led by higher margin assumptions, as

explained earlier. We have reduced our volume estimates for FY2016/17E to align our

estimates with the premiumization strategy of the company. We now expect volumes to

grow at a CAGR of 5% in FY2016-17E, after 3% growth in FY2015E.

Exhibit 9: We assume that bulk of possible efficiencies in RM cost structure of UNSP would be realized in FY2017: raising our estimates on

account of that Change in estimates for UNSP, March fiscal year-ends (Rs mn)


2014 2015E 2016E 2017E

Reported net sales per case 812 885 965 1,052

Reported margins 71

RM cost inefficiencies 69

Margin assuming efficient operations 140.0 153.9 169.2 185.8

Impact of inflation (%) 3 3 3

Addition to margins on account of inflation 4.2 4.6 5.1

Impact of price/mix (%) 6 6 6

Impact of premiumisation (%) 3 3 3

Flow-through of premiumisation to EBITDA (%) 40 40 40

Additional EBITDA on account of premiumization 9.7 10.6 11.6

74

88

100

112120 124 121 124

131 137

-

20

40

60

80

100

120

140

160

180

0

20

40

60

80

100

120

140

160

2008 2009 2010 2011 2012 2013 2014 2015E 2016E 2017E

Volumes (mn cases) EBITDA per case (Rs) (RHS)

New Old % chng New Old % chng New Old % chng

Revenues (Rs mn) 93,710 97,900 (4) 103,610 111,135 (7) 113,077 124,548 (10)

EBITDA (Rs mn) 10,651 10,976 (3) 18,258 18,144 1 23,405 20,921 11

PAT (Rs mn) (adj.) 3,426 3,590 (5) 9,971 9,775 2 14,019 12,149 13

EPS (Rs) (adj.) 23.6 24.8 (5) 68.8 67.4 2 96.7 83.8 13

2015E 2016E 2017E



Valuation

Exhibit 10: We value UNSP at Rs4,000 per share Valuation table for UNSP, Dec 2016 basis, March fiscal year-ends (Rs mn)


Exhibit 11: Summary financials: United Spirits Profit and loss model, cash flow statement and balance sheet for UNSP, consolidated, March fiscal year-ends (Rs mn)


Dec-16 EBITDA (Rs mn) 22,118

EV/EBITDA 25

EV (Rs mn) 561,809

Net debt (Rs mn) 9,083

Value of assets that could be sold 15,340

Equity value (Rs mn) 568,067

No. of shares (mn) 145.3

Per share equity value 3,910

2010 2011 2012 2013 2014 2015E 2016E 2017E

Profit model

Net revenues 63,999 74,734 92,446 104,986 106,154 93,710 103,610 113,077

EBITDA 11,498 11,620 11,184 13,183 9,856 10,651 18,258 23,405

Other income 591 2,068 2,508 1,563 6,859 1,427 1,754 1,880

Interest expense (6,187) (5,575) (8,757) (9,849) (13,226) (5,496) (3,682) (2,842)

Depreciation (950) (1,023) (1,474) (1,784) (2,026) (1,469) (1,448) (1,518)

Pretax profits 4,952 7,090 3,461 3,113 1,463 5,113 14,882 20,924

Extraordinaries (3,253) 1,246 (108) (2,383) (43,589) (2,000) — —

Tax (1,932) (2,652) (1,481) (1,781) (2,762) (1,687) (4,911) (6,905)

Net income (232) 5,683 1,872 (1,050) (44,888) 1,426 9,971 14,019

Adj. PAT 3,021 4,437 1,980 1,332 (1,299) 3,426 9,971 14,019

Adj. earnings per share (Rs) 20.8 30.6 13.7 9.2 (9.0) 23.6 68.8 96.7

Balance sheet

Total shareholder equity 37,287 41,339 46,618 47,873 30,323 31,149 39,896 52,028

Total borrowings 58,504 67,107 84,446 84,076 84,276 39,784 31,292 23,071

Deferred tax liability (715) (325) (592) (589) (967) (966) (967) (967)

Minority interest 85 175 146 111 7 7 7 7

Total liabilities and equity 95,162 108,295 130,617 131,470 113,640 69,975 70,228 74,140

Net fixed assets 18,194 20,690 28,212 27,957 29,081 14,339 14,329 14,385

Goodwill 42,444 44,320 51,674 52,045 29,019 13,019 13,019 13,019

Investments 1,265 1,544 2,358 2,179 2,380 2,380 2,380 2,380

Cash 7,686 6,370 3,632 2,816 7,047 13,719 15,390 16,262

Net current assets 25,572 35,371 44,740 46,472 46,112 26,518 25,111 28,094

Total assets 95,162 108,295 130,617 131,470 113,640 69,975 70,228 74,140

Free cash flow

Operating cash flow, excl. working capital 8,644 7,263 4,184 2,301 (921) 3,468 9,665 13,658

Working capital changes (4,741) (11,211) (5,036) 7,523 (14,146) 4,930 1,407 (2,984)

Capital expenditure (2,586) (3,519) (6,195) (1,506) (2,288) (1,726) (1,438) (1,574)

Free cash flow 1,317 (7,467) (7,047) 8,318 (17,354) 6,672 9,634 9,100

Ratios

EBITDA Margin(%) 18.0 15.5 12.1 12.6 9.3 11.4 17.6 20.7

RoAE (%) 7.1 8.0 1.2 1.4 12.2 8.0 24.8 27.8

RoACE (%) 6.8 6.5 4.7 3.7 4.5 6.7 16.1 20.3


Moderate reduction in rigs deployed in the shale regions of the US over the past two months

The weekly rig count data disclosed by Baker Hughes suggests a moderate reduction in rigs

deployed in the US over the past two months, reflecting reduction in drilling activities in the

shale regions after the recent sharp correction in global oil prices, which has deteriorated the

economics for US shale players. We expect reduction in rig deployment to continue in the near

term given lower crude prices, which will result in moderation of growth in US shale oil

production—essential to provide a balance to the global oil supply-demand. Exhibits 1-3 show

(1) 11-15% reduction in rigs deployed in key shale regions of Eagle Ford, Permian and Williston,

(2) 9% reduction in rigs deployed in horizontal drilling activities and (3) 13% reduction in rigs

deployed in oil wells, over the past two months. Exhibit 4 shows that rigs deployed in the US

shale regions had declined significantly in 1HCY09 after a sharp decline in global oil prices; we

expect a similar reduction over the next few months.

Canadian crude price have fallen to cash cost of oil sands production

We also see the possibility of curtailment of oil sands production in the near term and note that

Western Canada Select crude price has declined to US$34/bbl (see Exhibit 5), near the direct

cash cost of production of US$31-34/bbl for oil sands (Suncor’s guidance). We note that oil

sands contribute to about 2 mn b/d of crude oil production. Exhibit 6 shows Suncor’s cash cost

of production (ex-royalty) has been around US$40/bbl.

IEA estimates an increase in call on OPEC crude to nearly 30 mn b/d in 2HCY15

IEA’s supply-demand forecasts suggest an increase in call on OPEC crude production to nearly

30 mn b/d in 2HCY15, after a recent cut in non-OPEC production estimates (see Exhibit 7). We

expect moderation of growth in non-OPEC crude supply, which may increase the call on OPEC

crude. Ongoing issues in Libya and build-up of China’s strategic reserves may also help in

reducing excess barrels in the near term. Media articles suggest that crude oil production in

Libya declined to 0.2 mn b/d currently from 0.9 mn b/d in October 2014. China’s crude imports

increased sharply to 7.2 mn b/d in December 2014 versus an average of 6.2 mn b/d in CY2014,

presumably reflecting a build-up in strategic reserves.

Upstream stocks and GAIL are discounting recovery in crude prices to US$60-70/bbl

We see recovery in oil prices to US$60-70/bbl as the sweet spot for upstream companies and

GAIL, as it will provide some comfort regarding their profitability. However, current stock prices

are discounting a higher crude price scenario, in our view. Exhibit 8 shows that these stocks

have corrected modestly compared to a rather sharp decline in crude prices. Exhibit 9 shows our

FY2016 EPS estimates of ONGC, OIL, Cairn and GAIL at various levels of crude oil prices. ONGC

and OIL stocks trade at 10.6X and 8.5X FY2016E EPS, assuming Dated Brent crude price of

US$60/bbl and nil burden of subsidy. GAIL trades at 13.4X FY2016E EPS assuming Dated Brent

crude price of US$70/bbl and nil subsidies. Exhibit 10 shows our fair valuation of Cairn India at

various crude prices; the current stock price discounts US$74/bbl of Dated Brent crude price,

assuming 1.5 bn bbls of gross recoverable reserves from the Rajasthan block.

Energy India

Floored but may rise. We believe global crude oil prices are unlikely to fall further as

we see near-term curtailment in production of high-cost shale oil in the US and oil

sands in Canada, which may reduce the current excess supply. IEA’s current supply-

demand estimates also suggest the call on OPEC crude will increase to nearly 30 mn b/d

(current production quota) in 2HCY15. We see recovery in oil prices to US$60-70/bbl

over the next 12 months; however, the stocks are already discounting that.

CAUTIOUS

JANUARY 21, 2015

UPDATE

BSE-30: 28,785

QUICK NUMBERS

11-15% fall in rig

count in US shale

basins over the past

two months

Canadian crude

trades at US$34/bbl,

near cash cost of

production

IEA expects call on

OPEC crude to

increase to ~30 mn

b/d in 2HCY15

India Energy


Exhibit 1: The number of rigs deployed in key shale-oil producing basins has declined in recent weeks Weekly rig count in key shale-oil producing basins in the US, January 2014-January 2015 (units)

Source: Baker Hughes, Kotak Institutional Equities

Exhibit 2: The number of rigs deployed in horizontal drilling has declined in recent weeks Weekly rig count by type of drilling, January 2014-January 2015 (units)


-

100

200

300

400

500

600

700

800

900

1,000

1,100

Jan-1

4

Feb-1

4

Mar-

14

Apr-

14

May-

14

Jun-1

4

Jul-14

Aug-1

4

Sep-1

4

Oct

-14

Nov-

14

Dec

-14

Jan-1

5

Eagle Ford Permian Williston

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

2,200

Jan-1

4

Feb-1

4

Mar-

14

Apr-

14

May-

14

Jun-1

4

Jul-14

Aug-1

4

Sep-1

4

Oct

-14

Nov-

14

Dec

-14

Jan-1

5

Directional Vertical Horizontal

Energy India


Exhibit 3: The number of rigs deployed in oil wells has fallen in recent weeks Weekly rig count across oil and gas wells, January 2014-January 2015 (units)


Exhibit 4: The number of rigs deployed in the US shale regions fell significantly in 1HCY09 after a

correction in crude prices; we expect a similar reduction over the next few months Monthly rig count in the US shale regions versus crude price (units, US$/bbl)

Source: EIA, Kotak Institutional Equities

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

2,200

Jan-1

4

Feb-1

4

Mar-

14

Apr-

14

May-

14

Jun-1

4

Jul-14

Aug-1

4

Sep-1

4

Oct

-14

Nov-

14

Dec

-14

Jan-1

5

Gas Oil

-

20

40

60

80

100

120

140

160

-

150

300

450

600

750

900

1,050

1,200

1,350

1,500

Jan-0

7

May-

07

Sep-0

7

Jan-0

8

May-

08

Sep-0

8

Jan-0

9

May-

09

Sep-0

9

Jan-1

0

May-

10

Sep-1

0

Jan-1

1

May-

11

Sep-1

1

Jan-1

2

May-

12

Sep-1

2

Jan-1

3

May-

13

Sep-1

3

Jan-1

4

May-

14

Sep-1

4

US shale rig count [LHS] Dated Brent (US$/bbl) [RHS]

India Energy


Exhibit 5: Canadian oil sands crude trades at a significant discount to WTI and Dated Brent WTI, Western Canada Select and Dated Brent, September 2014-January 2015 (US$/bbl)

Source: Bloomberg, Kotak Institutional Equities

Exhibit 6: Direct cost of crude oil production from Suncor oil sands is US$35-40/bbl Direct cost of crude oil production from Suncor oil sands, calendar year-ends, 2003-14YTD (US$/bbl)


0

20

40

60

80

100

120

Sep-1

4

Oct

-14

Nov-

14

Dec

-14

Jan-1

5

WTI Western Canada crude Dated Brent

8 10

16

21

25

36 33

38

42 41 40 36

-

10

20

30

40

50

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 9M14

Direct cost of production

(US$/bbl)

Energy India


Exhibit 7: IEA estimates an increase in call on OPEC crude to nearly 30 mn b/d in 2HCY15 IEA's quarterly supply-demand forecast, 2014-15

Source: IEA, Kotak Institutional Equities estimates

Exhibit 8: A modest correction in stocks compared to a sharp decline in oil prices Dated Brent versus upstream stocks and GAIL, September 2014-January 2015 (%)

Source: Bloomberg, Kotak Institutional Equities

1QCY14 2QCY14 3QCY14 4QCY14 CY2014 1QCY15 2QCY15 3QCY15 4QCY15 CY2015

Demand (mn b/d)

Total demand 91.7 91.6 93.1 93.4 92.4 92.5 92.5 94.0 94.4 93.3

Yoy growth 1.1 0.3 0.5 0.6 0.6 0.8 0.9 0.9 1.0 0.9

Supply (mn b/d)

Non-OPEC 55.7 56.4 56.8 57.3 56.6 57.1 57.4 57.4 58.0 57.5

Yoy growth 1.9 2.3 2.0 1.5 2.0 1.4 1.0 0.6 0.7 0.9

OPEC

Crude 30.0 30.1 30.5 30.5 30.3 28.8 28.4 29.9 29.7 29.1

NGLs 6.3 6.4 6.5 6.5 6.4 6.6 6.7 6.7 6.7 6.7

Total OPEC 36.3 36.5 37.0 37.0 36.7 35.4 35.1 36.6 36.4 35.8

Total supply 92.0 92.9 93.8 94.3 93.3 92.5 92.5 94.0 94.4 93.3

Total stock change 0.4 1.3 0.7 0.9 0.8

40

50

60

70

80

90

100

110

120

Sep-1

4

Oct

-14

Oct

-14

Nov-

14

Dec

-14

ONGC OIL Cairn India GAIL Dated Brent

India Energy


Exhibit 9: Stocks are discounting US$60-70/bbl of crude price Earnings sensitivity to crude prices, March fiscal year-end, 2016E


Exhibit 10: Cairn India stock is discounting US$74/bbl of crude price Crude price discounted at various levels of stock price of Cairn


Dated Brent crude price (US$/bbl) 50 60 70

Fuel subsidies (Rs bn) 129 249 395

ONGC

Assuming 40% burden on upstream

Net realizations (US$/bbl) 46 51 55

EPS (Rs) 20 27 33

Assuming nil subsidies on upstream


EPS (Rs) 24 33 42

OIL

Assuming 40% burden on upstream


EPS (Rs) 42 51 58

Assuming nil subsidies on upstream


EPS (Rs) 48 63 78

Cairn

EPS (Rs) 14 22 29

GAIL (a)

EPS (Rs) 21 27 33

Notes:

(a) We assume nil subsidy burden on GAIL.

Stock price Crude price discounted

(Rs/share) (US$/bbl)

315 93

300 90

285 86

270 82

255 79

240 76

225 72

210 69

195 65

180 62

165 58

Notes:

(a) Long-term exchange rate assumption of Rs65/US$.

(b) We assume 2% inflation in oil price in the long term.

In

dia

Da

ily S

um

ma

ry - Ja

nu

ary

21

, 201

5

21

K

OTA

K IN

STIT

UTIO

NA

L EQ

UIT

IES R

ESEA

RC

H

December 2014: Results calendar

Mon Tue Wed Thu Fri Sat Sun

19-Jan 20-Jan 21-Jan 22-Jan 23-Jan 24-Jan

GRUH BASF INGVYSYA BANK BIOCON BHARAT ELECTRONICS CITY UNION BANK

INDIABULL HOUSING FINANCE HINDUSTAN MEDIA VENTURES ITC CAIRN COLGATE-PALMOLIVE GATI

HINDUSTAN UNILVR IGARASHI L&T FINANCE DISH TV COROMANDEL PERSISTENT

HINDUSTAN ZINC KIRLOSKAR OIL RAYMOND MASTEK EDELWEISS Shriram Transport

MINDTREE KOTAK BANK ZEE ENTERTAINMENT MUTHOOTFIN ULTRATECH CEMENT TATA COFFEE

NAUKRI RALLIS POLARIS WABCO INDIA United Spirits

TATASPONGE SOUTHBANK PRESTIGE

HFCL ZEEMEDIA

26-Jan 27-Jan 28-Jan 29-Jan 30-Jan 31-Jan

AMARAJABAT ABAN ASHOK LEY ADANIENT GRASIM INDUSTRIES

CHENN PETRO Adani Port and SEZ ASIAN PAINT ANDHRABANK TORNT POWER

CHOLA FINANCE Adani Pow er Carborundum Universal BANK BARODA

GODREJ PROP HAVELLS DR REDDY BERGER PAINT

GSFC JUST DIAL HCC DABUR

IDEA JYOTHY LAB HDFC HCL TECH

KARNATAKA BANK Pidilite Industries IDFC ICICI BANK

MARUTI RANBAXY LABORATORIES KARURVYSYA JSW STEEL

TITAN STATE BANK OF BIKANER Sesa Sterlite MAHINDRA LIFESPACE

UNION BANK TORRENT PHARMACEUTICALS SHRIRAM CITY MONSANTO

SKSMICRO SHOPER STOP

TRENT SIEMENS

SSLT

SUN TV

TATA GLOBAL

TECH MAHINDRA

TERMAX

2-Feb 3-Feb 4-Feb 5-Feb 6-Feb 7-Feb

GICHSGFIN ACC Bharti Airtel GODREJ CONSUMER Apollo Tyres GIPCL

BRITANNIA CENTRALBK Balaji Tele JK CEMENT

Britannia Industries GUJARAT PIPAVAV PORT LTD CHAMBL FERT

DEEPAK FERT Magma Fincorp Tata Steel

GlaxoSmithKline Consumer NOVARTIND TATACHEM

GSKCONS TATA POWER

HERO MOTO

LUPIN

PFC

PNB

SHREE CEMENT

TBZ

TVSMOTOR


AURO LAB ABB GODREJIND GILLETTE MPHASIS

CARE RATING Mahindra & Mahindra

MOTHERSUMI


AMBUJA CEMENTS

Source: BSE, Kotak Institutional Equities

K

OTA

K IN

STIT

UTIO

NA

L EQ

UIT

IES R

ESEA

RC

H

22

In

dia

Da

ily S

um

ma

ry - Ja

nu

ary

21

, 201

5

Ind

ia D

aily

Su

mm

ary

- Jan

uary

21

, 201

5

Kotak Institutional Equities: Valuation summary of KIE Universe stocks

Target O/S

Price (Rs) price Upside Mkt cap. shares EPS (Rs) EPS growth (%) PER (X) EV/EBITDA (X) ADVT-3mo

Company Rating 20-Jan-15 (Rs) (%) (Rs mn) (US$ mn) (mn) 2015E 2016E 2017E 2015E 2016E 2017E 2015E 2016E 2017E 2015E 2016E 2017E 2015E 2016E 2017E 2015E 2016E 2017E 2015E 2016E 2017E (US$ mn)

Automobiles

Amara Raja Batteries SELL 837 550 (34.3) 142,953 2,315 171 24.4 29.9 35.4 13.6 22.5 18.4 34.2 28.0 23.6 20.7 17.2 14.9 8.5 6.9 5.6 0.6 0.7 0.8 27.4 27.2 26.3 4.2

Apollo Tyres BUY 235 250 6.3 119,748 1,939 509 22.1 23.6 24.8 4.2 6.4 5.4 10.6 10.0 9.5 6.0 6.1 5.9 2.1 1.8 1.5 0.4 0.4 0.4 22.0 19.3 17.1 12.3

Ashok Leyland SELL 61 40 (34.5) 173,883 2,816 2,848 0.4 1.9 2.7 121.2 401.7 42.0 160.7 32.0 22.6 23.2 14.8 12.1 3.3 3.1 2.9 — 1.4 2.0 2.2 10.0 13.5 16.9

Bajaj Auto ADD 2,404 2,650 10.2 695,711 11,266 289 110.5 135.0 156.4 (1.4) 22.2 15.9 21.8 17.8 15.4 15.4 13.7 12.2 6.2 5.2 4.4 1.8 2.2 2.6 30.6 31.6 31.0 15.9

Bharat Forge SELL 1,008 630 (37.5) 234,727 3,801 237 29.5 35.9 42.2 40.5 21.7 17.3 34.2 28.1 23.9 17.6 15.1 13.3 7.4 6.1 5.1 0.6 0.7 0.8 23.7 23.9 23.4 14.6

Eicher Motors SELL 15,491 9,000 (41.9) 419,872 6,799 27 238.0 380.8 483.2 63.3 60.0 26.9 65.1 40.7 32.1 36.5 23.6 18.8 16.0 11.8 8.8 0.2 0.2 0.2 27.5 33.4 31.4 13.3

Exide Industries REDUCE 180 160 (11.1) 152,915 2,476 850 7.1 8.9 10.3 24.2 24.9 15.9 25.3 20.2 17.5 15.8 13.0 11.4 3.7 3.3 2.9 1.4 1.4 1.4 15.5 17.4 17.9 7.4

Hero Motocorp BUY 2,829 3,650 29.0 564,846 9,147 200 146.2 195.5 230.6 38.4 33.8 18.0 19.4 14.5 12.3 15.0 11.2 9.9 8.3 6.8 5.5 2.6 3.5 4.1 47.0 51.6 49.7 32.5

Mahindra CIE Automotive BUY 234 280 19.6 75,581 1,224 323 1.2 5.0 9.6 (63.1) 305.0 90.5 188.9 46.6 24.5 19.3 14.0 10.3 5.4 4.8 4.0 — — — 2.9 10.9 17.9 2.3

Mahindra & Mahindra REDUCE 1,325 1,275 (3.8) 823,103 13,329 562 58.7 63.4 79.1 (14.3) 7.9 24.8 22.6 20.9 16.8 17.7 16.7 13.6 4.2 3.9 3.5 0.5 0.7 1.3 18.9 19.3 22.1 20.9

Maruti Suzuki BUY 3,606 4,000 10.9 1,089,165 17,637 302 117.2 189.4 249.5 27.2 61.6 31.7 30.8 19.0 14.4 17.8 12.0 9.3 4.6 4.0 3.3 0.8 1.3 1.7 15.9 22.4 25.0 17.7

Motherson Sumi Systems REDUCE 451 370 (17.9) 397,303 6,434 882 9.7 15.5 22.6 (4.2) 59.2 45.7 46.3 29.1 20.0 15.0 10.9 8.0 10.6 7.8 5.6 0.6 1.0 1.5 25.6 30.9 32.6 15.7

Tata Motors BUY 559 680 21.6 1,677,623 27,166 3,218 51.9 69.1 79.6 11.6 33.1 15.2 10.8 8.1 7.0 5.1 4.2 3.6 2.2 1.7 1.4 — — — 22.6 23.8 21.8 39.8

WABCO India ADD 5,133 4,900 (4.5) 97,355 1,577 19 72.7 130.4 159.9 25.3 79.5 22.6 70.6 39.4 32.1 43.3 25.1 20.5 11.2 9.3 7.7 0.2 0.6 0.8 17.0 25.9 26.3 0.6

Automobiles Attractive 6,664,783 107,925 12.7 34.1 19.9 19.4 14.5 12.1 10.2 8.2 7.0 3.9 3.2 2.6 0.7 1.0 1.3 20.1 22.2 21.9 214.0

Banks/Financial Institutions

Axis Bank ADD 551 550 (0.3) 1,303,396 21,106 2,349 31.7 35.8 41.1 19.9 12.7 14.9 17.4 15.4 13.4 — — — 2.9 2.5 2.2 1.0 1.1 1.3 18.1 17.7 17.6 32.2

Bajaj Finserv ADD 1,322 1,410 6.7 210,356 3,406 159 103.3 115.5 129.6 7.2 11.8 12.2 12.8 11.4 10.2 — — — 2.1 1.8 1.5 1.0 1.0 1.0 17.1 16.9 16.2 2.1

Bank of Baroda ADD 1,087 1,050 (3.4) 466,688 7,557 431 111.0 133.9 167.4 5.3 20.7 25.0 9.8 8.1 6.5 — — — 1.2 1.1 1.0 2.1 2.5 3.1 13.0 14.1 15.8 18.3

Bank of India ADD 297 320 7.7 190,784 3,089 643 58.6 65.7 89.9 38.0 12.1 36.8 5.1 4.5 3.3 — — — 0.6 0.5 0.5 2.3 2.6 3.6 13.5 13.5 16.2 17.1

Cholamandalam ADD 500 500 (0.1) 71,873 1,164 155 27.3 36.2 44.0 6.6 32.6 21.6 18.3 13.8 11.4 — — — 2.5 2.2 1.9 0.9 1.1 1.4 15.8 16.8 17.8 1.5

City Union Bank ADD 95 105 10.0 56,905 921 589 7.2 7.9 9.0 13.0 9.3 14.0 13.2 12.1 10.6 — — — 2.1 1.8 1.6 1.2 1.3 1.5 17.9 16.0 16.0 1.2

DCB Bank BUY 118 140 18.5 33,258 539 281 6.5 7.9 9.7 7.1 22.1 23.0 18.2 14.9 12.2 — — — 2.1 1.8 1.6 - - - 13.8 13.5 14.5 3.2

Dewan Housing Finance BUY 480 540 12.4 61,804 1,001 128 50.5 58.6 67.9 21.9 15.9 15.9 9.5 8.2 7.1 — — — 1.5 1.3 1.1 1.2 1.4 1.6 16.8 16.9 16.9 8.5

Federal Bank BUY 145 160 10.5 123,947 2,007 855 11.5 13.4 15.8 17.5 16.5 17.9 12.6 10.8 9.1 — — — 1.6 1.4 1.3 1.6 1.9 2.2 13.4 14.1 14.9 8.7

HDFC ADD 1,252 1,210 (3.3) 1,967,504 31,860 1,561 41.3 48.1 56.9 18.4 16.4 18.4 30.3 26.0 22.0 — — — 6.8 6.1 5.4 1.4 1.6 1.9 21.8 22.6 23.7 39.6

HDFC Bank ADD 1,021 1,000 (2.1) 2,468,052 39,966 2,399 43.1 51.7 60.4 22.0 19.8 16.9 23.7 19.8 16.9 — — — 4.8 4.0 3.4 0.8 1.0 1.1 21.8 22.0 21.7 29.8

ICICI Bank BUY 368 400 8.8 2,130,013 34,492 5,775 19.0 22.3 26.0 12.0 17.2 16.7 19.3 16.5 14.1 — — — 2.6 2.4 2.2 1.6 1.8 2.1 14.3 15.2 16.1 65.8

IDFC BUY 171 200 16.7 272,698 4,416 1,585 10.1 9.1 11.9 (16.0) (10.3) 31.8 17.0 18.9 14.4 — — — 1.6 1.5 1.3 1.1 0.5 0.6 10.0 8.1 9.8 17.0

IIFL Holdings BUY 171 175 2.3 52,393 848 296 14.0 16.5 19.2 49.3 17.5 16.7 12.2 10.4 8.9 — — — 2.0 1.8 1.6 2.1 2.5 2.9 18.5 19.1 19.6 0.4

IndusInd Bank ADD 840 870 3.5 444,644 7,200 526 34.0 42.0 48.6 26.8 23.7 15.6 24.7 20.0 17.3 — — — 4.2 3.6 3.0 0.5 0.7 0.8 19.3 19.9 19.5 11.5

J&K Bank REDUCE 154 135 (12.4) 74,729 1,210 485 7.3 10.0 11.5 (70.1) 37.6 14.7 21.1 15.4 13.4 — — — 1.2 1.2 1.1 1.0 1.3 1.5 6.0 7.9 8.5 1.9

Karur Vysya Bank BUY 600 620 3.3 72,536 1,175 121 48.0 65.0 77.1 19.8 35.4 18.6 12.5 9.2 7.8 — — — 1.7 1.5 1.3 2.0 2.7 3.2 15.1 16.9 17.7 1.3

L&T Finance Holdings ADD 69 80 16.5 118,041 1,911 1,718 4.9 5.6 6.9 42.9 13.6 22.1 13.9 12.2 10.0 — — — 1.9 1.6 1.4 2.2 1.2 1.2 13.9 14.2 15.3 5.2

LIC Housing Finance ADD 490 470 (4.2) 247,512 4,008 505 30.6 36.7 43.7 17.2 20.1 19.0 16.0 13.4 11.2 — — — 3.0 2.6 2.2 1.1 1.3 1.5 18.9 19.5 19.8 25.1

Magma Fincorp ADD 110 135 23.2 20,856 338 190 9.5 12.0 13.5 32.3 26.5 13.0 11.6 9.1 8.1 — — — 1.3 1.1 1.0 1.4 1.7 1.9 11.2 13.3 13.8 0.2

Mahindra & Mahindra Financial SELL 275 260 (5.6) 156,666 2,537 564 15.3 18.5 23.2 (2.8) 21.2 25.2 18.0 14.9 11.9 — — — 2.7 2.4 2.1 1.3 1.6 2.0 15.9 17.1 18.8 7.5

Max India ADD 418 450 7.6 111,407 1,804 266 7.8 10.5 13.9 48.1 35.9 31.9 53.9 39.6 30.1 — — — 3.1 2.7 2.3 1.3 1.7 2.3 6.3 7.3 8.2 3.3

Muthoot Finance BUY 217 235 8.4 86,244 1,397 397 18.3 22.5 27.7 (12.9) 23.1 23.2 11.9 9.6 7.8 — — — 1.7 1.5 1.3 2.5 3.1 3.8 15.4 16.4 18.1 1.1

Oriental Bank of Commerce ADD 329 300 (8.7) 98,545 1,596 300 42.5 51.4 61.5 11.8 20.9 19.8 7.7 6.4 5.3 — — — 0.7 0.6 0.6 2.6 3.1 3.7 9.2 10.3 11.4 10.3

PFC ADD 290 330 13.9 382,548 6,195 1,319 45.2 43.4 45.4 10.2 (4.1) 4.6 6.4 6.7 6.4 — — — 1.2 1.1 0.9 3.4 3.3 3.4 20.2 16.9 15.6 14.6

Punjab National Bank REDUCE 209 180 (14.0) 378,816 6,134 1,810 24.8 28.6 33.0 34.2 15.4 15.4 8.4 7.3 6.3 — — — 1.0 1.0 0.9 6.4 7.4 8.5 12.7 13.9 15.3 20.0

Rural Electrification Corp. ADD 322 350 8.7 317,814 5,146 987 55.1 54.0 55.4 16.1 (2.0) 2.6 5.8 6.0 5.8 — — — 1.3 1.1 1.0 3.4 3.6 3.7 23.7 19.6 17.5 15.4

Shriram City Union Finance REDUCE 2,050 1,550 (24.4) 135,106 2,188 66 89.7 113.9 131.8 4.1 26.9 15.8 22.8 18.0 15.6 — — — 3.2 2.8 2.4 0.5 0.6 0.7 16.6 16.5 16.6 1.2

Shriram Transport ADD 1,124 1,150 2.3 255,084 4,131 223 63.6 82.4 99.8 12.3 29.5 21.2 17.7 13.6 11.3 — — — 2.7 2.3 2.0 0.8 1.0 1.2 16.0 18.0 18.7 13.2

SKS Microfinance ADD 460 400 (13.1) 58,033 940 126 16.4 20.2 27.4 154.2 23.0 35.3 28.0 22.8 16.8 — — — 5.4 4.4 3.5 - - - 27.2 21.4 23.1 16.7

State Bank of India ADD 318 330 3.7 2,375,222 38,463 7,466 18.8 21.6 26.9 28.8 15.2 24.1 16.9 14.7 11.8 — — — 1.8 1.7 1.5 1.0 1.0 1.1 11.3 11.9 13.3 90.9

YES Bank ADD 858 800 (6.8) 358,151 5,800 414 48.1 53.4 63.7 7.2 11.1 19.2 17.9 16.1 13.5 — — — 3.0 2.6 2.3 1.0 1.1 1.3 21.2 17.6 18.2 34.4

Banks/Financial Institutions Attractive 15,471,412 250,534 18.2 14.5 18.4 15.6 13.7 11.5 2.2 2.0 1.8 1.4 1.6 1.9 14.2 14.6 15.3 552.3

Price/BV (X) Dividend yield (%) RoE (%)

Source: Company, Bloomberg, Kotak Institutional Equities estimates

In

dia

Da

ily S

um

ma

ry - Ja

nu

ary

21

, 201

5

23

K

OTA

K IN

STIT

UTIO

NA

L EQ

UIT

IES R

ESEA

RC

H


Target O/S



Cement

ACC SELL 1,544 1,280 (17.1) 289,935 4,695 188 50.4 68.8 90.5 7.6 36.6 31.5 30.7 22.4 17.1 17.4 12.1 9.0 3.4 3.1 2.7 1.5 1.5 1.5 11.6 14.6 17.1 8.3

Ambuja Cements SELL 247 205 (17.1) 383,097 6,204 1,522 9.1 11.5 14.3 35.2 26.3 23.5 27.0 21.4 17.3 17.2 13.6 10.6 3.5 3.3 2.8 1.2 1.4 1.6 13.3 15.7 17.4 6.2

Grasim Industries ADD 3,692 3,590 (2.8) 339,065 5,491 92 203.9 260.2 355.0 (4.0) 27.6 36.4 18.1 14.2 10.4 7.3 5.2 3.5 1.5 1.3 1.2 1.0 1.0 1.0 8.4 9.9 12.2 4.2

India Cements REDUCE 102 100 (1.7) 31,255 506 307 2.8 6.2 12.8 224.0 126.9 104.4 37.0 16.3 8.0 8.5 7.0 5.6 0.8 0.8 0.8 2.7 2.6 2.6 2.2 5.0 9.8 4.6

Shree Cement SELL 10,500 6,400 (39.0) 365,791 5,923 35 255.1 374.3 480.5 8.1 46.7 28.4 41.2 28.1 21.9 20.6 15.5 12.5 6.9 5.6 4.6 0.2 0.2 0.2 18.0 22.1 23.1 1.6

UltraTech Cement SELL 3,096 2,300 (25.7) 849,677 13,759 274 81.6 103.4 141.7 9.2 26.7 37.1 38.0 29.9 21.9 20.3 15.0 11.5 4.5 3.9 3.4 0.3 0.3 0.3 12.4 14.0 16.6 10.5

Cement Cautious 2,258,821 36,578 11.4 31.7 33.9 30.4 23.1 17.3 14.7 11.0 8.3 3.2 2.9 2.5 0.8 0.8 0.8 10.5 12.5 14.6 35.5

Consumer products

Asian Paints REDUCE 839 750 (10.6) 804,959 13,035 959 16.4 21.9 24.9 27.7 33.7 13.9 51.3 38.4 33.7 32.5 24.1 21.2 16.6 13.3 10.9 0.8 0.9 1.1 35.3 38.4 35.5 20.5

Bajaj Corp. BUY 420 495 17.8 61,994 1,004 148 14.9 19.0 22.3 23.6 27.4 17.7 28.3 22.2 18.8 24.8 18.8 14.9 12.6 10.7 8.9 2.7 2.0 2.6 43.3 52.1 51.5 2.7

Britannia Industries BUY 1,921 2,050 6.7 230,348 3,730 120 48.3 61.0 70.8 46.5 26.1 16.2 39.7 31.5 27.1 25.5 20.2 17.3 17.9 13.2 10.2 0.8 1.0 1.2 55.6 48.2 42.4 4.7

Colgate-Palmolive (India) ADD 1,926 1,970 2.3 261,922 4,241 136 42.2 51.0 60.3 16.9 20.9 18.2 45.7 37.8 32.0 31.2 25.2 20.8 40.2 35.8 31.7 1.7 1.9 2.3 91.7 100.2 105.2 5.9

Dabur India ADD 254 260 2.3 446,418 7,229 1,744 6.1 7.8 9.0 18.0 26.6 15.3 41.5 32.7 28.4 32.7 25.8 22.0 13.4 10.9 8.9 0.9 1.1 1.3 35.9 36.7 34.5 5.2

GlaxoSmithKline Consumer REDUCE 5,672 5,800 2.3 238,543 3,863 42 142.1 166.7 192.6 (11.5) 17.4 15.5 39.9 34.0 29.4 29.7 24.0 20.1 11.0 9.3 8.0 0.9 1.1 1.3 30.0 29.7 29.2 1.1

Godrej Consumer Products REDUCE 1,082 960 (11.3) 368,343 5,965 340 26.1 32.7 38.3 17.0 25.3 16.8 41.4 33.0 28.3 27.9 22.1 18.5 8.3 7.1 6.1 0.6 0.7 0.9 21.7 23.2 23.2 2.8

Hindustan Unilever REDUCE 895 800 (10.7) 1,937,066 31,368 2,163 18.1 21.4 23.8 10.1 18.0 11.5 49.5 41.9 37.6 36.1 29.5 26.0 47.8 40.6 35.1 1.6 1.7 1.9 106.9 104.7 100.2 20.4

ITC ADD 371 410 10.5 2,967,106 48,047 8,096 12.2 14.1 16.1 14.1 15.4 14.4 30.4 26.4 23.1 20.0 17.0 14.5 10.3 9.2 8.2 2.0 2.2 2.6 31.8 33.0 36.1 43.2

Jubilant Foodworks SELL 1,382 1,100 (20.4) 90,605 1,467 66 18.0 25.8 36.2 17.4 43.2 40.3 76.8 53.6 38.2 35.0 25.1 18.1 13.6 10.9 8.5 — — 0.1 19.5 22.6 25.2 5.8

Jyothy Laboratories REDUCE 274 250 (8.7) 49,555 802 181 9.5 11.6 15.2 102.4 22.2 30.2 28.8 23.5 18.1 26.7 19.0 16.1 6.1 5.3 5.1 1.1 1.3 1.5 22.3 24.1 28.8 0.9

Marico BUY 351 370 5.4 226,458 3,667 645 9.2 11.9 13.6 16.1 30.3 14.0 38.3 29.4 25.8 25.4 19.5 16.8 12.8 9.9 7.9 0.7 0.9 1.1 37.8 38.0 34.2 7.0

Nestle India REDUCE 7,075 5,950 (15.9) 682,093 11,045 96 121.9 159.4 185.9 6.5 30.8 16.6 58.0 44.4 38.1 32.8 25.9 23.2 22.8 17.8 14.4 0.7 0.9 1.1 46.0 46.9 43.4 2.6

Page Industries SELL 11,601 7,500 (35.4) 129,399 2,095 11 180.6 223.2 273.6 31.0 23.6 22.6 64.2 52.0 42.4 40.2 32.6 26.6 33.0 24.4 17.8 0.7 0.7 0.7 59.2 54.0 48.6 3.0

Pidilite Industries ADD 579 540 (6.7) 296,678 4,804 513 11.4 15.7 18.3 27.7 38.1 16.9 50.9 36.9 31.6 34.6 24.7 20.7 12.8 10.5 8.8 0.6 0.8 1.0 27.3 31.4 30.3 4.0

Speciality Restaurants REDUCE 187 175 (6.4) 8,783 142 47 2.6 4.0 6.3 (34.8) 53.6 55.8 71.3 46.4 29.8 24.3 16.6 11.5 2.8 2.6 2.4 0.5 0.5 0.7 4.0 5.8 8.4 0.3

Tata Global Beverages REDUCE 156 160 2.3 96,687 1,566 631 6.5 7.7 8.8 18.3 18.1 15.0 24.1 20.4 17.7 12.4 10.9 9.5 1.6 1.5 1.5 1.4 1.6 1.9 6.9 7.8 8.5 6.2

Titan Company REDUCE 394 350 (11.1) 349,433 5,658 888 9.4 11.1 13.0 11.1 18.4 16.8 42.0 35.5 30.4 28.6 22.7 19.4 11.4 9.6 8.2 0.7 1.0 1.3 29.7 29.4 29.2 6.6

United Breweries SELL 943 650 (31.1) 249,308 4,037 264 10.1 13.6 17.4 18.1 34.0 28.7 93.2 69.6 54.1 38.1 31.8 26.6 13.5 11.6 9.9 0.2 0.2 0.3 15.0 17.9 19.7 3.4

United Spirits BUY 3,365 4,000 18.9 489,028 7,919 145 23.6 68.6 96.5 363.1 191.1 40.6 142.7 49.0 34.9 48.3 27.6 21.2 15.7 12.3 9.4 0.1 0.2 0.3 11.1 28.1 30.5 14.3

Consumer products Neutral 9,984,725 161,686 17.7 23.7 16.4 41.5 33.6 28.9 27.5 22.1 18.8 13.5 11.6 9.9 1.3 1.5 1.7 32.6 34.5 34.5 160.5

Energy

Aban Offshore RS 507 — — 28,851 467 57 99.6 106.8 110.5 18.8 7.2 3.5 5.1 4.8 4.6 6.7 6.2 5.9 0.6 0.5 0.5 1.4 1.2 1.2 12.3 11.4 10.7 15.6

Bharat Petroleum ADD 648 800 23.5 468,306 7,583 723 44.2 56.3 58.8 (21.2) 27.3 4.4 14.6 11.5 11.0 7.6 6.1 5.9 2.2 1.9 1.7 2.1 2.6 2.7 15.6 17.9 16.7 19.4

Cairn India REDUCE 240 255 6.4 449,116 7,273 1,875 40.4 28.6 25.8 (38.0) (29.1) (9.8) 5.9 8.4 9.3 4.3 5.3 4.5 0.7 0.7 0.7 3.4 2.5 2.5 12.8 8.6 7.3 11.4

Castrol India SELL 500 300 (39.9) 247,033 4,000 495 10.0 11.4 12.6 (0.2) 14.3 10.5 50.2 43.9 39.7 33.3 29.1 26.2 46.0 43.7 41.5 1.6 1.8 2.0 76.5 102.1 107.3 4.0

GAIL (India) ADD 431 460 6.6 547,158 8,860 1,268 27.8 26.9 34.4 (14.9) (3.2) 27.9 15.5 16.0 12.5 11.0 10.2 8.0 1.9 1.8 1.6 1.9 2.0 2.8 12.5 11.3 13.4 14.4

GSPL ADD 122 105 (13.9) 68,636 1,111 563 7.5 8.7 10.0 0.9 15.5 15.3 16.2 14.0 12.2 7.6 6.7 5.8 1.9 1.7 1.6 1.2 2.1 3.3 12.1 12.7 13.6 3.6

Hindustan Petroleum REDUCE 565 540 (4.4) 191,341 3,098 339 46.3 57.8 58.2 (9.6) 24.9 0.7 12.2 9.8 9.7 10.2 7.4 6.6 1.2 1.1 1.0 2.5 3.1 3.1 10.1 11.8 11.0 19.5

Indian Oil Corporation ADD 337 375 11.4 817,613 13,240 2,428 16.2 34.1 37.0 (33.2) 110.5 8.6 20.8 9.9 9.1 11.1 5.8 4.9 1.2 1.1 1.0 1.8 3.3 3.6 5.8 11.5 11.5 7.8

Oil & Natural Gas Corporation ADD 350 365 4.2 2,996,988 48,531 8,556 28.8 33.0 38.4 (7.4) 14.8 16.4 12.2 10.6 9.1 5.2 4.4 3.8 1.6 1.5 1.4 2.9 3.6 4.1 13.6 14.5 15.5 30.5

Oil India ADD 537 615 14.5 322,900 5,229 601 49.5 58.3 65.3 (0.3) 18.0 12.0 10.9 9.2 8.2 7.1 5.7 5.1 1.5 1.3 1.2 3.7 4.5 5.0 13.8 15.2 15.7 4.0

Petronet LNG REDUCE 196 190 (2.9) 146,813 2,377 750 10.9 12.5 15.4 14.8 14.9 23.0 18.0 15.6 12.7 9.9 9.2 7.6 2.6 2.3 2.1 1.1 1.7 2.3 15.4 15.9 17.4 5.1

Reliance Industries ADD 903 1,000 10.7 2,653,175 42,964 3,233 68.4 73.4 87.4 0.6 7.3 19.1 13.2 12.3 10.3 10.2 9.3 6.4 1.4 1.2 1.1 1.0 1.1 1.4 10.7 10.5 11.4 51.9

Energy Cautious 8,937,930 144,735 (12.2) 13.1 13.9 12.5 11.0 9.7 7.5 6.4 5.2 1.4 1.3 1.2 2.1 2.6 3.0 11.3 11.8 12.3 187.1



K

OTA

K IN

STIT

UTIO

NA

L EQ

UIT

IES R

ESEA

RC

H

24

In

dia

Da

ily S

um

ma

ry - Ja

nu

ary

21

, 201

5

Ind

ia D

aily

Su

mm

ary

- Jan

uary

21

, 201

5


Target O/S



Industrials

ABB SELL 1,274 700 (45.1) 270,035 4,373 212 11.6 24.0 32.2 38.6 107.4 34.3 110.2 53.1 39.5 58.8 33.5 26.4 9.5 8.3 7.0 0.3 0.3 0.3 8.9 16.7 19.2 2.5

Bharat Heavy Electricals SELL 281 200 (28.9) 688,388 11,147 2,448 11.6 13.7 15.9 (18.1) 18.0 16.6 24.3 20.6 17.6 16.0 12.4 9.3 2.0 1.8 1.7 0.9 1.0 1.2 8.3 9.2 10.0 21.2

Crompton Greaves BUY 193 210 8.8 120,962 1,959 627 5.7 9.2 13.1 45.7 61.3 42.5 34.0 21.1 14.8 17.0 12.3 9.2 3.1 2.6 2.3 0.7 0.8 0.9 9.4 13.4 16.3 19.4

Cummins India REDUCE 885 720 (18.7) 245,405 3,974 277 26.7 32.6 43.7 25.3 21.9 34.2 33.1 27.2 20.3 30.2 21.6 15.8 8.3 7.1 6.0 1.3 1.5 2.0 26.7 28.1 32.0 3.0

Kalpataru Power Transmission ADD 233 200 (14.2) 35,772 579 153 9.9 8.7 11.6 24.3 (12.4) 33.3 23.5 26.9 20.2 9.1 7.7 6.7 1.6 1.5 1.4 0.6 0.6 0.6 7.0 5.8 7.4 2.0

KEC International ADD 92 115 25.7 23,524 381 257 4.5 8.5 12.1 37.6 87.6 41.8 20.1 10.7 7.6 7.9 6.1 4.9 1.6 1.5 1.3 1.1 2.2 3.1 8.9 14.5 18.2 0.7

Larsen & Toubro ADD 1,630 1,650 1.3 1,513,606 24,510 927 40.7 58.6 78.8 (16.3) 43.8 34.4 40.0 27.8 20.7 20.6 15.8 13.5 3.9 3.6 3.2 1— 1— 1— 10.4 13.5 16.2 43.4

Siemens SELL 953 600 (37.0) 339,364 5,495 356 17.8 24.3 29.9 104.7 36.2 23.1 53.5 39.2 31.9 30.3 23.2 18.7 7.5 6.7 5.9 0.6 0.8 0.9 14.3 18.0 19.6 5.2

Thermax REDUCE 1,061 850 (19.9) 126,472 2,048 119 22.7 33.5 45.9 10.1 47.5 36.8 46.7 31.7 23.1 32.5 20.9 14.8 5.8 5.2 4.5 0.8 1.0 1.3 12.8 17.2 20.8 1.0

Voltas REDUCE 254 260 2.4 83,979 1,360 331 8.7 12.0 14.2 16.9 38.4 18.6 29.2 21.1 17.8 24.0 15.7 12.9 4.1 3.7 3.2 0.9 1.4 1.7 14.9 18.5 19.4 11.4

Industrials Neutral 3,447,506 55,827 (5.8) 35.7 29.0 36.6 27.0 20.9 21.0 15.9 13.2 3.6 3.3 2.9 0.8 0.9 1.2 9.8 12.2 14.1 109.9

Infrastructure

Adani Port and SEZ REDUCE 331 300 (9.2) 684,152 11,079 2,084 12.0 16.5 21.2 43.4 37.8 28.7 27.6 20.0 15.6 17.3 13.3 10.7 5.8 4.7 3.8 0.6 0.7 0.9 24.2 25.9 26.8 13.4

Container Corporation REDUCE 1,388 1,330 (4.2) 270,644 4,383 195 48.9 55.4 70.4 (3.1) 13.2 27.0 28.4 25.1 19.7 19.4 16.3 12.5 3.5 3.2 2.9 0.8 0.9 1.2 13.0 13.4 15.3 2.5

Gujarat Pipavav Port REDUCE 201 200 (0.5) 97,196 1,574 483 7.1 9.7 12.6 94.6 37.3 30.3 28.5 20.7 15.9 24.3 17.8 13.6 5.6 4.4 3.4 — — — 21.7 23.6 24.0 4.6

IRB Infrastructure REDUCE 254 210 (17.2) 84,271 1,365 332 13.3 15.3 20.9 (3.8) 15.4 36.4 19.1 16.5 12.1 8.9 7.8 7.7 2.2 2.0 1.8 1.6 1.6 1.6 11.9 12.7 15.5 11.7

Sadbhav Engineering buy 259 275 6.3 44,352 718 171 8.3 9.3 10.9 24.6 12.1 17.6 31.2 27.8 23.7 15.9 13.1 11.5 3.2 2.9 2.6 — — — 12.1 10.8 11.4 1.1

Infrastructure Cautious 1,180,615 19,118 26.4 29.3 28.9 27.0 20.9 16.2 15.8 12.5 10.4 4.5 3.8 3.2 0.6 0.7 0.9 16.5 18.2 19.6 33.4

Infrastructure

Info Edge BUY 807 960 18.9 97,038 1,571 120 10.1 15.4 23.3 22.5 53.5 50.5 80.2 52.3 34.7 86.7 47.3 26.3 6.4 6.1 5.6 0.4 0.7 1.0 11.1 12.0 16.9 2.2

Just Dial ADD 1,541 1,650 7.1 108,462 1,756 70 20.6 28.6 51.7 20.0 38.5 81.0 74.7 53.9 29.8 57.1 38.7 19.4 17.4 14.6 11.3 0.5 0.6 1.2 25.1 29.5 42.9 8.0

Internet Attractive 205,501 3,328 26.2 45.3 66.4 77.4 53.3 32.0 67.6 42.2 22.0 9.7 8.8 7.7 0.5 0.7 1.1 12.5 16.6 24.0 10.3

Media

DB Corp. ADD 405 425 4.9 74,370 1,204 183 18.4 23.2 27.2 10.4 25.9 17.1 22.0 17.4 14.9 12.3 10.0 8.5 5.7 5.0 4.4 2.2 2.7 3.5 27.7 30.7 31.5 0.2

DishTV ADD 70 70 0.4 74,281 1,203 1,065 (0.1) 1.4 3.2 93.5 1,516.7 135.4 (730.0) 51.5 21.9 11.6 9.4 7.2 4.5 4.5 4.5 — — — (0.6) 8.7 20.4 4.2

Jagran Prakashan ADD 135 150 10.9 44,215 716 311 7.7 9.7 11.5 2.6 26.1 18.5 17.6 13.9 11.7 9.6 8.0 6.8 4.0 3.6 3.2 3.0 3.7 4.4 23.8 27.1 28.7 0.6

Sun TV Network ADD 410 385 (6.0) 161,456 2,615 394 20.2 22.7 26.5 6.2 12.7 16.6 20.3 18.0 15.5 12.9 11.3 9.4 4.7 4.3 3.9 2.5 3.0 3.5 24.4 25.0 26.4 6.4

Zee Entertainment Enterprises ADD 391 375 (4.0) 375,247 6,077 960 8.6 10.4 12.8 (6.8) 21.4 23.4 45.6 37.6 30.5 26.8 22.6 18.7 7.2 6.5 5.8 1.1 1.4 1.7 16.5 18.2 20.2 18.6

Media Neutral 729,570 11,814 8.5 26.6 25.5 33.4 26.4 21.0 16.6 14.0 11.6 5.8 5.3 4.8 1.3 1.7 2.0 17.3 20.0 22.8 30.1

Metals & Mining

Coal India ADD 382 360 (5.8) 2,414,746 39,103 6,316 22.5 28.1 23.7 (5.9) 24.7 (15.5) 17.0 13.6 16.1 10.4 9.0 10.0 4.8 4.2 3.8 3.0 3.7 3.2 29.8 32.8 24.6 16.8

Hindalco Industries REDUCE 145 165 14.0 298,803 4,839 2,065 16.3 16.6 20.4 31.0 1.9 22.5 8.9 8.7 7.1 7.7 6.3 5.4 0.7 0.6 0.6 1.0 1.0 1.0 8.0 7.6 8.7 22.1

Hindustan Zinc BUY 162 205 26.6 684,079 11,078 4,225 19.6 21.5 22.9 18.9 9.6 6.7 8.3 7.5 7.1 5.1 3.7 2.7 1.6 1.3 1.2 2.2 2.2 2.2 20.3 19.0 17.5 3.8

Jindal Steel and Power REDUCE 155 160 3.0 142,130 2,302 915 15.9 21.6 25.6 (23.8) 35.9 18.6 9.8 7.2 6.1 8.1 6.2 5.6 0.7 0.6 0.6 1.2 1.2 1.2 6.6 8.9 9.7 18.9

JSW Steel BUY 1,005 1,490 48.2 242,955 3,934 242 111.0 140.2 160.0 67.8 26.3 14.1 9.1 7.2 6.3 5.6 5.0 4.4 1.0 0.9 0.8 1.2 1.2 1.2 11.6 13.1 13.3 9.9

National Aluminium Co. SELL 48 56 17.8 122,548 1,984 2,577 5.0 5.1 5.4 88.9 2.4 6.7 9.6 9.3 8.8 3.7 3.5 2.9 0.9 0.9 0.8 3.2 3.2 2.1 10.2 9.8 9.7 1.4

NMDC ADD 141 185 31.5 557,836 9,033 3,965 18.4 18.5 17.5 15.3 0.5 (5.6) 7.6 7.6 8.1 4.1 4.3 4.3 1.7 1.5 1.4 6.0 6.0 6.0 23.1 21.0 18.2 7.0

Sesa Sterlite BUY 204 250 22.5 605,241 9,801 2,965 21.3 17.4 21.6 25.9 (18.6) 24.3 9.6 11.8 9.5 5.4 5.2 4.1 0.8 0.7 0.7 1.6 1.6 1.6 8.4 6.5 7.7 17.7

Tata Steel REDUCE 402 495 23.1 390,429 6,322 971 38.9 45.6 56.2 4.4 17.0 23.4 10.3 8.8 7.2 6.4 6.1 5.5 0.9 0.8 0.7 2.0 2.0 2.0 8.9 9.7 11.0 35.6

Metals & Mining Cautious 5,458,766 88,396 11.1 10.6 2.7 11.2 10.1 9.9 6.6 5.9 5.2 1.6 1.4 1.3 2.7 3.1 2.8 13.9 14.0 13.1 133.1

Pharmaceutical

Biocon SELL 429 360 (16.1) 85,780 1,389 200 20.6 21.8 23.4 (0.5) 5.7 7.6 20.8 19.7 18.3 13.0 11.9 10.7 2.7 2.5 2.3 1.7 1.8 1.9 13.1 13.2 13.0 6.5

Cipla BUY 662 680 2.8 531,373 8,605 803 17.3 24.2 32.3 0.3 39.5 33.4 38.2 27.4 20.5 22.3 17.2 12.8 4.8 4.2 3.6 0.5 0.8 1.0 13.1 16.3 18.9 17.7

Dr Reddy's Laboratories ADD 3,306 3,175 (4.0) 563,071 9,118 170 135.2 141.6 154.6 7.5 4.7 9.2 24.5 23.3 21.4 16.1 14.7 12.9 5.1 4.3 3.7 0.6 0.6 0.7 22.8 19.9 18.5 18.4

Lupin BUY 1,476 1,600 8.4 662,902 10,735 450 53.9 59.5 71.0 32.1 10.4 19.2 27.4 24.8 20.8 16.7 14.7 12.0 7.3 5.9 4.7 0.5 0.6 0.7 30.2 26.3 25.1 11.6

Sun Pharmaceuticals SELL 872 790 (9.4) 1,806,624 29,255 2,072 31.2 34.0 37.9 13.2 8.7 11.5 27.9 25.7 23.0 20.4 17.1 15.3 7.4 5.9 4.8 0.8 1.0 1.1 30.1 25.4 22.9 30.1

Pharmaceuticals Neutral 3,649,750 59,102 13.1 11.5 15.4 28.1 25.2 21.8 18.8 16.1 13.6 6.2 5.1 4.3 0.7 0.8 1.0 22.1 20.3 19.5 84.3



In

dia

Da

ily S

um

ma

ry - Ja

nu

ary

21

, 201

5

25

K

OTA

K IN

STIT

UTIO

NA

L EQ

UIT

IES R

ESEA

RC

H


Target O/S



Real Estate

DLF BUY 146 210 44.2 259,538 4,203 1,781 2.9 4.1 6.0 (21.0) 42.0 48.5 50.8 35.8 24.1 15.7 13.6 9.7 0.9 0.9 0.9 2.0 1.4 1.4 1.8 2.5 3.6 30.1

Godrej Properties REDUCE 269 225 (16.5) 53,695 869 198 9.7 11.2 17.4 20.7 14.9 56.4 27.7 24.1 15.4 22.1 13.9 9.0 2.8 2.5 2.2 0.7 0.9 0.9 10.3 10.9 15.4 1.1

Oberoi Realty BUY 280 325 15.9 92,020 1,490 328 8.9 24.9 54.9 (6.1) 179.7 120.8 31.5 11.3 5.1 8.2 4.6 3.3 2.0 1.7 1.3 0.7 0.7 0.7 6.5 16.4 29.0 1.3

Prestige Estates Projects REDUCE 279 240 (14.0) 104,700 1,695 375 11.2 15.8 14.8 8.5 40.4 (6.0) 24.9 17.7 18.8 14.0 10.7 9.9 2.6 2.3 2.1 0.4 0.4 0.4 12.1 14.0 11.7 1.3

Sobha ADD 501 540 7.8 49,120 795 98 23.0 36.2 67.1 (3.9) 57.2 85.3 21.7 13.8 7.5 10.4 8.0 5.1 2.0 1.8 1.5 1.4 1.4 1.4 9.6 13.8 21.9 1.6

Sunteck Realty ADD 219 410 87.2 13,790 223 60 10.7 81.2 88.8 (57.4) 656.7 9.3 20.4 2.7 2.5 21.5 2.4 1.1 1.9 1.1 0.8 5.0 5.0 — 9.7 52.7 37.5 0.3

Real Estate Attractive 572,862 9,277 (8.5) 87.7 55.5 33.6 17.9 11.5 13.9 9.5 7.2 1.3 1.3 1.2 1.1 1.1 1.0 4.0 7.1 10.0 35.6

Technology

HCL Technologies REDUCE 1,672 1,575 (5.8) 1,174,470 19,019 707 101.8 108.1 120.2 12.9 6.2 11.1 16.4 15.5 13.9 11.6 10.4 8.8 4.6 3.7 3.1 1.4 1.7 1.8 31.1 26.6 24.2 24.4

Hexaware Technologies SELL 215 195 (9.4) 64,774 1,049 302 11.1 13.4 15.6 (12.4) 20.7 16.9 19.4 16.1 13.8 13.0 11.1 9.5 6.8 6.1 5.4 4.1 3.7 4.4 31.0 39.8 41.5 6.8

Infosys ADD 2,124 2,350 10.6 2,439,585 39,505 1,143 108.4 123.1 146.0 14.0 13.6 18.5 19.6 17.2 14.6 14.0 11.8 9.6 4.7 4.0 3.4 1.7 1.9 2.2 25.7 25.0 25.3 112.2

Mindtree ADD 1,356 1,425 5.1 113,527 1,838 84 65.6 76.2 89.1 22.3 16.1 16.9 20.7 17.8 15.2 14.6 12.0 9.8 5.6 4.6 3.8 1.2 1.4 1.6 30.1 28.4 27.2 3.9

Mphasis SELL 369 400 8.3 77,605 1,257 210 33.0 34.4 37.9 124.5 4.2 10.2 11.2 10.7 9.7 6.0 5.5 4.8 1.4 1.4 1.3 4.5 4.7 5.1 13.2 13.0 13.6 0.5

TCS ADD 2,500 2,700 8.0 4,897,701 79,310 1,959 107.8 122.9 145.5 10.4 14.0 18.4 23.2 20.3 17.2 17.1 14.3 11.9 7.8 6.5 5.5 2.4 2.0 2.3 35.8 35.0 34.6 46.1

Tech Mahindra ADD 2,802 3,000 7.1 672,417 10,889 214 136.6 168.6 199.0 6.7 23.4 18.0 20.5 16.6 14.1 14.5 11.7 9.7 5.2 4.2 3.3 0.9 1.1 0.7 28.4 28.0 26.4 23.2

Wipro ADD 590 650 10.1 1,457,537 23,602 2,467 34.4 38.4 44.8 8.8 11.5 16.6 17.1 15.4 13.2 11.5 9.9 8.1 3.6 3.1 2.6 1.5 1.7 1.7 22.7 21.5 21.4 17.2

Technology Attractive 10,897,616 176,469 12.0 12.9 17.1 20.3 18.0 15.3 14.5 12.3 10.2 5.4 4.6 3.8 1.9 1.8 2.1 26.8 25.4 25.0 234.2

Telecom

Bharti Airtel BUY 355 430 21.2 1,418,677 22,973 3,997 15.5 17.1 21.1 85.8 10.2 24.0 22.9 20.8 16.8 6.8 6.0 5.3 2.2 2.0 1.9 0.6 1.0 1.5 9.9 10.1 11.7 27.0

Bharti Infratel REDUCE 358 270 (24.6) 676,818 10,960 1,889 11.2 13.0 15.7 38.9 16.3 20.7 32.1 27.6 22.9 13.4 11.8 10.2 3.8 3.8 3.7 3.1 2.7 3.3 11.8 13.8 16.3 6.3

IDEA BUY 158 192 21.6 567,863 9,196 3,595 8.4 9.5 9.4 41.3 13.5 (0.7) 18.8 16.6 16.7 8.5 7.1 6.2 2.5 2.2 2.0 0.4 0.5 0.6 15.2 13.9 12.3 11.3

Reliance Communications SELL 81 90 11.7 193,626 3,135 2,467 3.5 5.3 8.8 8.8 50.0 66.8 22.8 15.2 9.1 6.5 6.1 5.2 0.6 0.6 0.5 — — — 2.8 3.8 6.0 10.4

Tata Communications ADD 424 435 2.5 120,897 1,958 285 3.4 7.5 12.6 171.9 122.3 69.3 126.3 56.8 33.6 7.4 6.7 5.9 8.1 7.0 5.7 1.1 1.3 1.5 8.3 13.2 18.8 4.1

Telecom Cautious 2,977,882 48,222 63.4 15.8 22.1 24.3 21.0 17.2 7.7 6.8 5.9 2.1 2.0 1.8 1.1 1.2 1.6 8.7 9.4 10.7 59.1

Utilities

Adani Power SELL 47 36 (22.7) 133,688 2,165 2,872 (6.9) (4.2) (4.3) (577.9) 38.1 (0.6) (6.8) (11.0) (10.9) 10.7 9.3 9.8 2.8 3.8 5.8 — — — (34.9) (29.5) (42.2) 3.2

CESC ADD 725 695 (4.1) 96,084 1,556 133 28.1 55.5 70.4 (28.5) 97.2 27.0 25.8 13.1 10.3 11.3 8.0 7.2 1.1 1.1 1.0 1.0 1.0 1.1 4.6 8.4 9.9 5.3

JSW Energy SELL 110 73 (33.6) 180,324 2,920 1,640 9.5 9.2 8.0 37.8 (3.8) (12.4) 11.6 12.0 13.7 6.9 6.4 6.6 2.2 1.9 1.6 — — — 21.2 16.9 12.8 6.0

NHPC REDUCE 19 22 15.2 211,450 3,424 11,071 1.6 1.9 2.0 (1.1) 21.4 2.2 12.1 10.0 9.8 8.7 7.5 7.6 0.7 0.7 0.7 2.2 2.6 2.7 6.0 7.0 6.8 1.8

NTPC REDUCE 143 140 (2.0) 1,177,865 19,074 8,245 10.7 13.1 14.8 (16.7) 22.5 13.6 13.4 10.9 9.6 11.3 8.7 7.2 1.3 1.2 1.1 2.2 2.7 3.1 9.9 11.3 11.9 11.9

Power Grid BUY 147 160 8.5 771,136 12,487 5,232 9.8 12.4 15.6 14.0 26.4 25.8 15.0 11.9 9.4 10.6 9.4 8.0 2.0 1.8 1.6 2.0 2.6 3.2 14.3 16.3 18.4 8.9

Reliance Power SELL 62 62 (0.7) 175,180 2,837 2,805 3.7 4.1 6.2 (11.9) 11.5 50.5 16.9 15.1 10.1 21.3 10.9 8.2 0.9 0.8 0.7 — — — 5.2 5.5 7.7 8.1

Tata Power ADD 82 96 16.9 222,050 3,596 2,800 1.5 4.4 5.6 (28.3) 187.7 27.7 53.4 18.6 14.5 8.2 6.7 6.0 1.6 1.5 1.4 1.5 1.5 1.5 3.2 8.5 10.1 5.1

Utilities Cautious 2,967,776 48,058 (13.9) 33.3 18.0 17.3 13.0 11.0 10.6 8.6 7.6 1.4 1.3 1.2 1.7 2.1 2.4 8.0 9.9 10.8 50.3

Others

Carborundum Universal ADD 175 200 14.2 32,928 533 188 5.9 11.3 14.4 20.6 92.6 27.4 29.8 15.5 12.1 13.0 8.6 6.9 2.8 2.4 2.1 0.9 1.3 1.6 9.6 16.8 18.7 0.4

Coromandel International SELL 302 210 (30.5) 86,394 1,399 283 16.5 18.6 21.6 36.7 13.1 16.0 18.4 16.2 14.0 10.4 9.4 8.3 3.3 2.9 2.5 1.5 1.5 1.5 19.1 18.8 18.9 1.1

Godrej Industries ADD 311 345 11.0 104,393 1,690 331 14.6 18.0 20.2 48.6 22.7 12.2 21.2 17.3 15.4 18.5 13.2 9.3 3.3 2.8 2.4 0.6 0.6 0.6 16.5 17.4 16.8 2.0

Havells India ADD 271 310 14.3 169,424 2,744 624 9.0 11.2 13.2 12.8 24.5 17.7 30.1 24.2 20.5 18.5 14.8 12.5 8.7 7.4 6.2 1.2 1.6 1.9 31.2 33.1 32.8 14.3

Jaiprakash Associates RS 27 — — 64,947 1,052 2,432 1.1 4.5 4.5 120.0 306.6 (0.1) 24.0 5.9 5.9 12.2 9.3 9.0 0.6 0.5 0.5 0.0 0.0 0.0 2.5 9.0 8.5 16.9

Rallis India BUY 229 230 0.4 44,543 721 194 9.1 11.5 14.5 16.7 26.1 25.8 25.1 19.9 15.8 14.8 11.5 9.1 5.3 4.4 3.7 1.1 1.1 1.2 22.8 24.3 25.3 1.0

Tata Chemicals BUY 445 520 16.9 113,303 1,835 255 32.0 41.0 46.7 110.1 28.0 13.9 13.9 10.8 9.5 7.4 6.2 5.3 1.9 1.7 1.5 2.2 2.2 2.2 14.1 16.3 16.5 4.4

UPL ADD 371 370 (0.4) 159,162 2,577 429 27.7 32.9 37.5 13.7 19.1 13.7 13.4 11.3 9.9 7.9 7.0 6.0 2.6 2.2 1.9 1.2 1.3 1.5 20.7 20.9 20.2 10.5

Others 775,094 12,551 153.7 42.8 12.6 19.0 13.3 11.8 11.4 9.2 8.2 2.3 2.0 1.8 1.2 1.3 1.4 12.1 15.3 15.3 50.5

KIE universe 76,180,609 1,233,618 8.2 18.2 16.7 18.9 16.0 13.7 11.2 9.4 8.0 2.7 2.4 2.2 1.5 1.7 1.9 14.3 15.1 15.7

KIE universe (ex-energy) 67,242,679 1,088,883 13.9 19.3 17.3 20.3 17.0 14.5 12.2 10.2 8.8 3.1 2.7 2.4 1.4 1.6 1.8 15.1 16.1 16.7

Notes:

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

(b) 2015 means calendar year 2014, similarly for 2016 and 2017 for these particular companies.

(c) Exchange rate (Rs/US$)= 61.75

Price/BV (X) RoE (%)Dividend yield (%)


Ind

ia D

aily

Su

mm

ary

- Jan

uary

21

, 201

5


Ratings and other definitions/identifiers

Definitions of ratings

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

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

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

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

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

Other definitions

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

designations: Attractive, Neutral, Cautious.

Other ratings/identifiers

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

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

involving this company and in certain other circumstances.

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

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

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

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

and should not be relied upon.

NA = Not Available or Not Applicable. The information is not available for display or is not applicable.

NM = Not Meaningful. The information is not meaningful and is therefore excluded.

Kotak Institutional Equities Research coverage universeDistribution of ratings/investment banking relationships

Source: Kotak Institutional Equities As of September 30, 2014

Percentage of companies covered by Kotak Institutional

Equities, w ithin the specified category.

Percentage of companies w ithin each category for which

Kotak Institutional Equities and or its affiliates has provided

investment banking serv ices w ithin the previous 12 months.

* The above categories are defined as follows: Buy = We

expect this stock to deliver more than 15% returns over the

next 12 months; Add = We expect this stock to deliver 5-

15% returns over the next 12 months; Reduce = We expect

this stock to deliver -5-+5% returns over the next 12 months;

Sell = We expect this stock to deliver less than -5% returns

over the next 12 months. Our target prices are also on a 12-

month horizon basis. These ratings are used illustratively to

comply w ith applicable regulations. As of 30/09/2014 Kotak

Institutional Equities Investment Research had investment

ratings on 154 equity securities.

22.1%

36.4%

22.1%19.5%

4.5% 4.5%1.9% 0.6%

0%

10%

20%

30%

40%

50%

60%

70%

BUY ADD REDUCE SELL

Corporate Office Overseas Offices

Kotak Securities Ltd.

27 BKC, Plot No. C-27, “G Block”

Bandra Kurla Complex, Bandra (E)

Mumbai 400 051, India

Tel: +91-22-43360000

Kotak Mahindra (UK) Ltd

8th Floor, Portsoken House

155-157 Minories

London EC3N 1LS

Tel: +44-20-7977-6900

Kotak Mahindra Inc

50 Main Street, Ste. 890

Westchester Financial Centre

White Plains, New York 10606

Tel:+1-914-997-6120

Copyright 2015 Kotak Institutional Equities (Kotak Securities Limited). All rights reserved.

1. Note that the research analysts contributing to this report may not be registered/qualified as research analysts with FINRA; and

2. Such research analysts may not be associated persons of Kotak Mahindra Inc and therefore, may not be subject to NASD Rule 2711 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.

3. Any U.S. recipients of the research who wish to effect transactions in any security covered by the report should do so with or through Kotak Mahindra Inc and (ii) any transactions in the securities covered by the research by U.S. recipients must be effected only through Kotak Mahindra Inc at [email protected].

Kotak Securities Limited and its affiliates are a full-service, integrated investment banking, investment management, brokerage and financing group. We along with our affiliates are leading underwriter of securities and participants in virtually all securities trading markets in India. We and our affiliates have investment banking and other business relationships with a significant percentage of the companies covered by our Investment Research Department. Our research professionals provide important input into our investment banking and other business selection processes. Investors should assume that Kotak Securities Limited and/or its affiliates are seeking or will seek investment banking or other business from the company or companies that are the subject of this material and that the research professionals who were involved in preparing this material may participate in the solicitation of such business. Our research professionals are paid in part based on the profitability of Kotak Securities Limited, which include earnings from investment banking and other business. Kotak Securities Limited generally prohibits its analysts, persons reporting to analysts, and members of their households from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover. Additionally, Kotak Securities Limited generally prohibits its analysts and persons reporting to analysts from serving as an officer, director, or advisory board member of any companies that the analysts cover. Our salespeople, traders, and other professionals 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 of the foregoing, among other things, may give rise to real or potential conflicts of interest. Additionally, other important information regarding our relationships with the company or companies that are the subject of this material is provided herein.

This material should not be construed as an offer to sell or the solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. We are not soliciting any action based on this material. It is for the general information of clients of Kotak Securities Limited. It does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. Before acting on any advice or recommendation in this material, clients should consider whether it is suitable for their particular circumstances and, if necessary, seek professional advice. The price and value of the investments referred to in this material and the income from them may go down as well as up, and investors may realize losses on any investments. Past performance is not a guide for future performance, future returns are not guaranteed and a loss of original capital may occur. Kotak Securities Limited does not provide tax advise to its clients, and all investors are strongly advised to consult with their tax advisers regarding any potential investment.

Certain transactions -including those involving futures, options, and other derivatives as well as non-investment-grade securities - give rise to substantial risk and are not suitable for all investors. The material is based on information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied on as such. Opinions expressed are our current opinions as of the date appearing on this material only. We endeavor to update on a reasonable basis the information discussed in this material, but regulatory, compliance, or other reasons may prevent us from doing so. We and our affiliates, officers, directors, and employees, including persons involved in the preparation or issuance of this material, may from time to time have “long” or “short” positions in, act as principal in, and buy or sell the securities or derivatives thereof of companies mentioned herein. Kotak Securities Limited and its non US affiliates may, to the extent permissible under applicable laws, have acted on or used this research to the extent that it relates to non US issuers, prior to or immediately following its publication. Foreign currency denominated securities are subject to fluctuations in exchange rates that could have an adverse effect on the value or price of or income derived from the investment. In addition, investors in securities such as ADRs, the value of which are influenced by foreign currencies affectively assume currency risk. In addition options involve risks and are not suitable for all investors. Please ensure that you have read and understood the current derivatives risk disclosure document before entering into any derivative transactions.

Kotak Securities Limited established in 1994, is a subsidiary of Kotak Mahindra Bank Limited. Kotak Securities is one of India’s largest brokerage and distribution house.

Kotak Securities Limited is a corporate trading and clearing member of Bombay Stock Exchange Limited (BSE), National Stock Exchange of India Limited (NSE), MCX Stock Exchange Limited (MCX-SX), United Stock Exchange of India Limited (USEIL) and a dealer of the OTC Exchange of India (OTCEI). Our businesses include stock broking, services rendered in connection with distribution of primary market issues and financial products like mutual funds and fixed deposits, depository services and Portfolio Management.

Kotak Securities Limited is also a depository participant with National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL).Kotak Securities Limited is also registered with Insurance Regulatory and Development Authority as Corporate Agent for Kotak Mahindra Old Mutual Life Insurance Limited and is also a Mutual Fund Advisor registered with Association of Mutual Funds in India (AMFI)

We hereby declare that our activities were neither suspended nor we have defaulted with any stock exchange authority with whom we are registered in last five years. However SEBI, Exchanges and Depositories have conducted the routine inspection and based on their observations have issued advise letters or levied minor penalty on KSL for certain operational deviations. We have not been debarred from doing business by any Stock Exchange / SEBI or any other authorities; nor has our certificate of registration been cancelled by SEBI at any point of time.

We offer our research services to primarily institutional investors and their employees, directors, fund managers, advisors who are registered with us

Details of Associates are available on our website ie www.kotak.com

Research Analyst has not served as an officer, director or employee of Subject Company. We or our associates have received compensation from the subject company in the past 12 months. We or our associates have managed or co-managed public offering of securities for the subject company in the past 12 months. We or our associates have received compensation for investment banking or merchant banking or brokerage services from the subject company in the past 12 months. We or our associates 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 12 months. We or our associates have received any compensation or other benefits from the subject company or third party in connection with the research report.

Research Analyst or his/her relative’s may have financial interest in the subject company. Kotak Securities Limited or its associates have financial interest in the subject company. Research Analyst or his/her relatives does not have actual/beneficial ownership of 1% or more securities of the subject company at the end of the month immediately preceding the date of publication of Research Report: Kotak Securities Limited does not have actual/beneficial ownership of 1% or more securities of the subject company at the end of the month immediately preceding the date of publication of Research Report. Associates of Kotak Securities Limited may have actual/beneficial ownership of 1% or more securities of the subject company at the end of the month immediately preceding the date of publication of Research Report. Subject Company has been client during twelve months preceding the date of distribution of the research report.

A graph of daily closing prices of securities is available at www.nseindia.com and http://economictimes.indiatimes.com/markets/stocks/stock-quotes. (Choose a company from the list on the browser and select the “three years” icon in the price chart).

Kotak Securities Limited. Registered Office: 27 BKC, C 27, G Block, Bandra Kurla Complex, Bandra (E), Mumbai 400051. CIN: U99999MH1994PLC134051, Telephone No.: +22 43360000, Fax No.: +22 67132430. Website: www.kotak.com. SEBI Registration No: NSE INB/INF/INE 230808130, BSE INB 010808153/INF 011133230, OTCINB 200808136, MCXSX INE 260808130/INB 260808135/INF 260808135, AMFI ARN 0164 and PMS INP000000258. NSDL: IN-DP-NSDL-23-97. CDSL: IN-DP-CDSL-158-2001. Compliance Officer Details: Mr. Sandeep Chordia. Call: 022- 6605 6825 or Email: [email protected]

mailto:[email protected]

http://www.kotak.com/

http://www.nseindia.com/

http://economictimes.indiatimes.com/markets/stocks/stock-quotes

http://www.kotak.com/

mailto:[email protected]

Presentations & Public Speaking

Usl ktk