BULLS BEARS - India Valuations Handbook - 20140107_MOSL

8/11/2019 BULLS BEARS - India Valuations Handbook - 20140107_MOSL

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January 2014


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About the productAs the tagline suggests,BULLS & BEARS is ahandbook on valuations inIndia. Every month it will

cover: Valuations of Indianmarkets vis--vis globalmarkets

Current valuation ofcompanies in varioussectors

Sectors which arecurrently valued atpremium/discount totheir historical long-period averages

2

SummaryIndian Equities: Markets hit life-time high in Dec-13; 9% return for CY13

Dec-13 saw Indian markets hitting its life-time high of 21,484 and ended the year at 21,171. Atclosing, the BSE Sensex PE at 14.4x is at 6% discount to LPA (12-month forward).

Indian markets gave 9% returns for CY13, however, a sharp currency depreciation led to a

negative 3% return in USD terms.

Sector highlights: Technology, Telecom and Healthcare are top performers Best performing sectors of CY13 were Technology (+60%; trades at avg), followed by Telecom

(+26%; EV/EBITDA valuations at 27% discount to its avg) and Healthcare (+23%; trades at avg). Real Estate (-32%), PSU Banks (-26%) and Cement (-14%) were the worst performing sectors.

Dec-13 performance: Mid-caps continue to outperform; Capital Goods,Metals, Real Estate also see positive returns

During Dec, Mid-caps delivered 6% returns with breadth being the best. 80% of the universedelivered positive returns. Top performers were OBC (23%), CESC (22%), Bajaj Finance (12%),Thermax (11%), Cummins (11%).

Most cyclicals gave positive returns during Dec. Capital Goods, Metals and Real Estate areoutperforming Nifty for 3-5 months consecutively now.

Nifty-50 highlights: 31 companies are at discount to their averages Companies with significant discount to their averages are: IDFC (-52%), NMDC (-44%), CairnIndia (-40%), NTPC (-37%), Tata Motors (-33%), Power Grid (-29%), Coal India (-20%).

Companies at huge valuation premium to their averages: Asian Paints (+42%), ITC (+38%), Lupin(+29%), HUL (+22%), Bajaj Auto (+19%).

Research & Database Teams ([email protected])

BULLS & BEARS | January 2014


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NOTES: Prices as on 31 Dec 2013

BULL icon:Sectors tradingat premium to historicaverages

BEAR icon:Sectors tradingat discount to historicaverages

Valuations are on12-month forward basisunless otherwisementioned

Sector valuations arebased on MOSL coveragecompanies

Global equities datasourced from Bloomberg.Sensex valuations basedon MOSL estimates

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ContentsGlobal Equities: Performance and valuation snapshot

Indian Equities: Key valuation metrics

Sensex and Nifty performance

Nifty companies valuations

Sector highlights: Overview and specific sector valuationsAUTOBANKS / FINANCIALSCAPITAL GOODS

CEMENTCONSUMERHEALTHCAREMEDIAMETALSOIL & GAS

REAL ESTATERETAILTECHNOLOGYTELECOMUTILITIES



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Mkt Cap(USD T)

YTD Chg(%)

CY13 /FY14

CY14 /FY15

CY13 /FY14

CY14 /FY15

CY13 /FY14

CY14 /FY15

CY13 /FY14

CY14 /FY15

Japan 4.6 57 21.0 18.4 31 32 1.7 1.6 8.3 8.9Taiwan 0.9 12 17.0 14.8 6 6 1.6 1.6 9.7 11.0

US 21.7 30 16.8 15.2 4 9 2.6 2.4 15.3 15.5

Indonesia 0.3 -1 14.7 12.7 -8 -9 2.7 2.4 18.1 18.5

UK 3.9 14 14.1 12.8 -13 -8 1.9 1.7 13.3 13.5

Brazil 1.0 -15 13.7 10.4 -15 -25 1.0 1.0 7.3 9.1

Korea 1.2 1 12.1 9.5 -24 -32 1.2 1.0 9.5 10.9

MSCI EM 7.6 -5 11.8 10.5 -27 -25 1.5 1.4 12.7 13.0

China 3.4 -7 9.3 8.2 -42 -41 1.3 1.1 13.7 13.8

Russia 0.6 -4 4.9 5.2 -70 -63 0.6 0.6 13.0 11.5

India 1.1 9 16.1 13.9 2.6 2.3 16.1 16.4

PE (x) PB (x) RoE (%)Prem / Disc to India

PE (%)

4

Global equities: India at a premium to most EMs

Sensex v/s Other Markets

Indian equities are trading at ~14x FY15E earnings; at a premium to most other EMs.

Japan is the only country trading at significant premium to India; US and Taiwan also trade at marginal premium.

Among BRIC countries, only Indian markets have given positive YTD returns.

Indias RoE remains superior to most EMs - an important differentiator for valuation premium.

Source: Bloomberg/MOSL



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Global equities: however at discount to long period average

Source: Bloomberg, 12 month forward valuation.

Mkt cap appreciation in 10 Year (x)

Indian markets continue to trade at discount to its long period average; Developed economies of UK and US tradeat premium; amongst BRICs, only Brazil trades at premium to LPA.

Indias contribution to World Market cap is at 1.8%, marginally below its long period average.

Indias market cap appreciated 4.1x in last 10 years; however it has lagged other EMs.

Developed economies trading at premium to LPA

India's Contribution to World Market cap (%)


Country Current LPA Prem/Disc (%)UK 14.1 11.4 23.8Brazil 13.7 11.6 17.7Taiwan 17.0 14.9 14.3US 16.8 14.9 13.0Indonesia 14.7 13.7 7.3MSCI EM 11.8 11.4 3.5India 14.4 15.4 -6.1Japan 21.0 22.5 -6.6Korea 10.1 10.8 -6.7Russia 4.9 6.6 -26.0China 9.3 16.4 -43.3

PE (x) 6.6 6.3

4.54.1 3.9 3.7

2.21.7 1.6 1.5

C h i n a

I n d o n e s i a

B r a z i l

I n d i a

R u s s i a

S o u t h

K o r e a

T a i w a n

U n i t e

d

K i n g d o m

U n i t e d

S t a t e s

J a p a n

0.7

3.0 3.3

1.8

0.50

1.25

2.00

2.75

3.50

D e c - 0 3

J u n - 0

4

N o v - 0 4

A p r - 0 5

S e p - 0

5

F e b

- 0 6

A u g - 0 6

J a n - 0

7

J u n - 0

7

N o v - 0 7

A p r - 0 8

O c t - 0

8

M a r - 0

9

A u g - 0 9

J a n - 1

0

J u n - 1

0

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M a y - 1

1

O c t - 1

1

M a r - 1

2

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J a n - 1

3

J u l - 1 3

D e c - 1 3

India's Contribution to World Mcap (%)

Average of 2%


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Indian Equities: Valuations below average; ROEs marginally above historic lows BSE Sensex PE at 14.4x is at 6% discount to averages; PB at 2.4x is at 12% discount to its averages.

Sensex RoE at 16.4% is below the long period average of 19.4%.

12-month forward Sensex P/E (x) 12-month forward Sensex P/B (x)

12-month forward Sensex RoE (%) Indias market cap to GDP (%)


24.6

10.7

14.4

7

12

17

22

27

D e c - 0

3

D e c - 0

4

D e c - 0

5

D e c - 0

6

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7

D e c - 0

8

D e c - 0

9

D e c - 1

0

D e c - 1

1

D e c - 1

2

D e c - 1

3

10 Year Avg: 15.4x

4.2

1.6

2.4

1.3

2.0

2.8

3.5

4.3

D e c - 0

3

D e c - 0

4

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6

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8

D e c - 0

9

D e c - 1

0

D e c - 1

1

D e c - 1

2

D e c - 1

3

10 Year Avg: 2.7x

24.2

15.8

16.4

15.0

17.5

20.0

22.5

25.0

D e c - 0 3

D e c - 0 4

D e c - 0 5

D e c - 0 6

D e c - 0 7

D e c - 0 8

D e c - 0 9

D e c - 1 0

D e c - 1 1

D e c - 1 2

D e c - 1 3

10 Year Avg: 19.4%

23

4252

82 83

103

55

95 88

6964 62

F Y 0 3

F Y 0 4

F Y 0 5

F Y 0 6

F Y 0 7

F Y 0 8

F Y 0 9

F Y 1 0

F Y 1 1

F Y 1 2

F Y 1 3

F Y 1 4 E

Average of 69% forthe period


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Indian Equities: Auto, Healthcare, Technology, Telecom, are top growing sectors

Auto, Healthcare, Telecom and Technology have healthy PAT growth for FY14 in the Sensex universe.

Financials should see a rebound in earnings in FY15, after a flat FY14 due to high credit cost.

Metals to see accelerated earnings growth during FY15, after 2 years of decline.

Healthcare and Technology is expected to see healthy PAT growth in FY14, with FY15 seeing relative moderation.

Telecom will report the highest earnings growth over FY14-15, post a long-period of downcycle.

Capital Goods is expected to continue PAT de-growth in FY15.

Consumer to witness moderate growth over FY14-15 due to slowdown in volumes.


Weight Mcap

Sector (%) (USD b) FY13 FY14E FY15E FY13 FY14E FY15E FY13 FY14E FY15E FY13 FY14E FY15EAuto 11.1 53 -5.4 28.3 13.0 15.3 11.9 10.5 3.9 3.1 2.5 25.7 26.3 24.1Banking & Financial 26.0 95 21.7 0.1 17.7 13.7 13.7 11.6 2.2 1.9 1.7 16.4 14.2 15.0Capital Goods 5.7 23 -1.5 -34.2 -4.8 12.4 18.8 19.7 2.4 2.2 2.0 19.3 11.6 10.2Consumer 12.3 61 22.3 12.3 14.9 35.4 31.5 27.4 15.0 13.3 12.0 42.5 42.4 43.9Healthcare 5.4 31 21.3 40.5 15.3 33.7 24.0 20.8 6.2 5.3 4.3 18.2 22.1 20.6Metals 3.9 20 -21.7 25.8 21.1 13.2 10.5 8.7 0.9 0.8 0.8 6.9 7.9 8.9Oil & Gas 12.1 94 -0.9 4.2 14.9 11.8 11.3 9.8 1.6 1.5 1.3 13.8 13.0 13.5Technology 17.8 123 22.0 26.0 15.0 25.8 20.5 17.8 7.0 5.8 4.7 27.0 28.3 26.5Telecom 2.2 21 -46.6 57.6 74.8 58.0 36.8 21.1 2.6 2.2 2.0 4.5 5.9 9.4Utilties 3.5 51 5.1 4.1 10.3 11.7 11.2 10.2 2.3 2.1 1.9 19.4 18.4 18.5Sensex 100 574 5.4 11.2 15.3 17.9 16.1 13.9 2.9 2.6 2.3 16.5 16.1 16.4 # for Sensex we have taken EPS Growth; Sensex numbers are free float adjusted.

PAT Growth (%) # PE (x) PB (x) ROE (%)


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Sensex performance: TCS, Sun Pharma & Infosys lead the pack


Best & worst performers in Sensex for CY13 (%)

Indian markets ended 2013with returns of 9%, wherethe entire gains were madein 4QCY13. However, a sharpcurrency depreciation led toa negative 3% returns inUSD terms.

Technology was bestperforming sector in CY13with 60% returns, followedby Telecom (+26%) andHealthcare (+23%).

Real Estate (-32%), PSUBanks (-26%) and Utilities(-15%) were topunderperformers.

Best 6 stocks that performedwere beneficiaries of rupeeweakness. TCS was best

performing stock, with 72%return.

PSUs were worst performersled by SBI (-26%), BHEL(-23%) and Coal India (-18%).

Best and worst performing sectors in CY13 (%)


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Nifty performance: Technology/Mid-caps/Metals outperform in Dec

Sectoral performance relative to Nifty

Dec-13 saw Nifty hitting its life-time high of 6,414 and delivering 2% MoM return. Nifty has given 7% returns during CY13.

Technology was the top performing sector with 6% returns relative to Nifty. Most cyclicals gave positive returns during Dec.Capital Goods, Metals and Real Estate are outperforming Nifty for 3-5 months consecutively.

Mid-caps continued its outperformance for the second consecutive month outperforming the Nifty by 4%.

Consumer, Telecom and Cement were the top underperformers in Dec. These sectors also saw their 3rd consecutive monthof underperformance relative to Nifty.



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Nifty: 31 companies trade at discount to long term averages


Name Sector Current 10 Yr Avg Prem/Disc (%) Current 10 Yr Avg Current 10 Yr Avg Prem/Disc (%) Current 10 Yr AvgCipla Healthcare 19.7 21.0 -7 36 37 2.8 3.8 -26 20 42Dr Reddy s Labs Healthcare 22.0 37.7 -42 53 146 4.7 3.3 44 100 21Lupin Healthcare 22.9 17.8 29 59 16 5.1 4.1 24 118 53Ranbaxy Labs Healthcare 32.8 42.6 -23 127 178 4.0 5.2 -24 70 94Sun Pharma Healthcare 22.8 20.1 13 58 31 5.6 4.5 26 138 64Hindalco Metals 9.2 8.5 8 -36 -45 1.0 1.7 -40 -57 -37JSPL Metals 9.0 9.6 -7 -38 -37 1.0 3.2 -67 -55 19NMDC Metals 8.3 15.0 -44 -42 -2 1.7 4.8 -65 -28 78Sesa Sterl i te Metals 8.8 6.6 33 -39 -57 1.4 2.2 -37 -41 -17Tata Steel Metals 9.3 10.5 -11 -35 -32 1.6 2.4 -34 -34 -13BPCL Oil & Gas 9.2 12.8 -28 -36 -16 1.3 1.3 -2 -46 -52Cairn India Oil & Gas 5.6 9.3 -40 -61 -39 1.0 1.2 -20 -59 -55GAIL Oil & Gas 11.4 11.3 1 -21 -26 1.5 2.1 -27 -36 -23ONGC Oil & Gas 8.4 9.8 -14 -42 -36 1.4 2.1 -35 -42 -23

Reliance Inds. Oil & Gas 11.0 12.2 -10 -24 -20 1.2 1.6 -26 -48 -39DLF Real Estate 36.9 37.2 -1 156 142 1.0 2.3 -55 -56 -14HCL Technologies Technology 14.4 14.4 0 0 -6 4.0 3.0 33 70 11Infosys Technology 16.6 19.4 -15 15 27 3.7 5.7 -36 56 112TCS Technology 20.3 18.1 12 41 18 6.8 6.3 8 189 133Wipro Technology 16.4 16.9 -3 13 10 3.7 4.1 -11 56 53Bharti Airtel Telecom 23.5 23.6 0 63 54 1.9 3.4 -44 -19 24Coal India Uti l i ties 9.7 12.1 -20 -33 -21 3.0 4.3 -31 26 60NTPC Util i ties 10.5 16.7 -37 -27 9 1.2 2.1 -41 -48 -23Power Grid Corp. Uti l i ties 10.1 14.4 -29 -30 -6 1.4 2.0 -31 -41 -26Tata Power Uti l i ties 25.4 19.0 34 76 24 1.7 2.1 -22 -30 -21Sensex 14.4 15.4 -6 2.4 2.7 -13

PE (x) Relative to Sensex P/E (%) PB (x) Relative to Sensex P/B (%)


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Company Current 10 Yr Avg Prem/Disc (%) Current 10 Yr Avg Current 10 Yr Avg Prem/Disc (%) Current 10 Yr Avg MoM YTDOriental Bank 5.5 6.5 -15 -62 -58 0.5 1.0 -49 -79 -64 23 -34CESC 8.3 9.0 -8 -43 -42 0.9 1.1 -17 -61 -59 22 46J & K Bank 5.9 6.9 -14 -59 -55 1.1 1.0 8 -54 -63 18 11Bajaj Finance 9.1 16.0 -43 -37 4 1.7 1.0 64 -27 -61 12 19Cummins India 19.6 17.5 12 36 14 4.8 4.6 3 102 72 11 -7

Thermax 25.0 18.2 37 73 18 3.7 4.5 -18 57 67 11 16H P C L 11.4 12.7 -10 -21 -18 0.6 1.0 -42 -76 -64 10 -18Ipca Labs. 16.2 12.3 32 12 -20 4.0 2.6 56 71 -5 9 39ING Vysya Bank 15.0 12.8 18 4 -17 1.5 1.3 19 -36 -53 7 16Exide Inds. 16.6 16.0 3 15 4 2.5 3.1 -19 7 15 7 -15Eicher Motors 25.4 12.4 106 76 -20 5.8 2.1 180 147 -23 6 71LIC Housing Fin. 7.9 7.9 0 -45 -49 1.3 1.4 -7 -44 -48 5 -25Britannia Inds. 25.9 21.7 20 80 41 12.0 6.8 75 407 152 5 84Havells India 18.9 17.4 9 31 14 4.7 4.1 16 100 50 5 24PTC India 8.2 18.3 -55 -43 19 0.8 1.6 -49 -66 -42 3 -10Crompton Greaves 16.2 20.1 -19 12 31 2.2 4.4 -50 -6 62 3 11PVR 26.5 45.0 -41 83 193 3.4 2.0 69 43 -26 3 129Torrent Pharma. 15.6 12.8 22 8 -17 3.8 3.2 18 62 19 3 30JP Associates 27.2 30.1 -10 89 96 0.9 1.9 -54 -64 -31 1 -44Natl . Aluminium 12.0 15.9 -25 -17 4 0.8 1.8 -57 -67 -34 1 -23India Cements 22.4 15.0 49 55 -2 0.5 1.3 -65 -81 -52 0 -34Indbull .RealEst. 6.0 20.2 -70 -58 32 0.4 0.8 -51 -83 -69 -1 -8South Ind.Bank 5.7 6.5 -13 -60 -57 0.8 0.8 -7 -67 -69 -1 -25Phoenix Mills 23.6 43.3 -45 64 182 1.7 3.1 -45 -27 15 -2 -12Sobha Developers 11.3 18.5 -39 -21 21 1.3 2.3 -45 -46 -15 -5 -18Petronet LNG 11.0 11.0 0 -24 -28 1.7 2.8 -41 -30 4 -8 -22

PE (x) Relative to Sensex P/E (%) PB (x) Relative to Sensex P/B (%) Price Chg (%)

12

Midcap: Breadth the best in Dec-13; however 71% stocks still trade at discount During Dec, Mid-caps delivered 6% returns. The breadth was the best with 4/5th of the stocks delivering positive returns.

Top mid-cap performers in Dec-13 are Oriental Bank (23%), CESC (22%), J&K Bank (18%), Bajaj Finance (12%), Thermax(11%), Cummins (11%) and HPCL (10%). However, except Thermax and Cummins all of them are trading at discount.

For CY13, top outperformers were PVR (129%), Britannia (84%), Eicher Motors (71%), CESC (46%) and IPCA Labs (39%).

These stocks trade at premium to their long period averages, except CESC. Underperformers for CY13 were JP Associates (-44%), India Cements (-34%), South India Bank (-25%), LIC Housing Finance(-25%) and Nalco (-23%)


h hl h


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Current 10 Yr Avg Prem/Disc (%) Current 10 Yr Avg Current 10 Yr Avg Prem/Disc (%) Current 10 Yr AvgAuto 11.4 11.8 -3.6 -21 -23 2.7 3.0 -10.9 13 11Banks - Private 12.9 15.1 -14.8 -11 -3 2.2 2.3 -3.4 -7 -16Banks - PSU 6.3 7.0 -9.7 -56 -54 0.7 1.1 -40.4 -71 -58NBFC 9.7 11.1 -12.4 -33 -30 1.9 2.1 -10.1 -19 -22Capital Goods 22.0 19.9 10.6 52 27 2.5 4.4 -42.8 7 58Cement 16.9 13.1 29.1 17 -13 1.8 2.4 -23.3 -23 -13Consumer 30.0 23.8 26.0 108 57 10.4 8.1 28.2 342 208Healthcare 22.4 21.9 1.9 55 46 4.6 4.2 9.3 96 60Media 20.3 21.1 -3.6 41 35 4.0 3.5 13.1 68 28Metals 9.2 9.2 0.1 -36 -41 1.0 1.8 -45.7 -59 -35Oil & Gas 9.3 11.0 -15.4 -35 -28 1.2 1.8 -30.8 -48 -34Real Estate 22.7 19.8 14.7 57 24 0.9 1.3 -28.9 -60 -53Retail 25.2 28.7 -12.1 75 84 5.9 4.3 35.8 149 60Technology 17.4 17.0 2.3 21 13 4.7 5.1 -8.9 98 89Telecom 20.3 21.5 -5.3 41 41 1.9 2.6 -26.8 -21 -7Utili ties 10.5 14.1 -26.1 -28 -10 1.2 1.7 -31.5 -51 -38

PB (x)Sector

Relative to SensexP/E (%)

Relative to SensexP/B (%)

PE (x)

13

Sector highlights: Cyclicals at 30%+ disc to long avg, but see earnings recovery in FY15

Private Banks have lesser asset quality and growth concerns. Thus, while Pvt Banks trade in-line with PB average (-3%), PSUBanks trade at significant discount (-40%).

Capital Goods, Metals and Real Estate are at 29-46% discount to 10-yr PB average. However, earnings recovery in FY15results in them trading above historic PE average.

Consumer remains at significant premium to its PE average (+26%) and is likely to see volume moderation. Cement EV/EBITDA valuations is at 9% premium to its historical average. Recovery expectation in FY15 results in EV/EBITDAabove average despite poor expected 3QFY14 performance.

Telecom trades at 27% discount to EV/EBITDA average. Post passive consolidation and RPMs improving, strong growth isexpected in the sector in FY15.


A


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-21-23

-50

-25

0

25

50

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Relative to Sensex PE (%)

14

Auto: 2Ws, tractors well placed; UVs, CVs continue to face pressure

Auto sector PE trades at marginal discountof 4% to its average PE. With expectedincrease in rural incomes due tofavourable monsoon, coupled withelection spending led macro environmentimprovement, the sector looks attractivelyplaced.

Hero Motocorp is at attractive valuations;earnings momentum to continue in4QFY14/FY15.

M&M trades at 2% premium to itsaverage; though tractors will drive growth,UVs will continue to face pressure.

Sector Performance CY13

Auto +7%


11.411.8

3

10

17

24

31

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Auto Sector P/E (x) 10 Yr Avg (x)

2.73.0

1.0

2.0

3.0

4.0

5.0

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Auto Sector P/B (x) 10 Yr Avg (x)

1311

-20

-5

10

25

40

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Relative to Sensex PB (%)

Company Current 10 Yr Avg Prem/Disc (%) Current 10 Yr Avg Current 10 Yr Avg Prem/Disc (%) Current 10 Yr AvgAshok Leyland - 15.3 - - 0 1.0 3.4 -70 -57 24

Bajaj Auto 14.8 12.4 19 3 -19 5.1 5.5 -8 115 104Eicher Motors 25.4 12.4 106 76 -20 5.8 2.1 180 147 -23Exide Inds. 16.6 16.0 3 15 4 2.5 3.1 -19 7 15Hero Motocorp 14.4 14.5 0 0 -6 6.1 6.7 -10 157 149M & M 11.4 11.2 2 -21 -27 2.8 3.0 -7 20 13Maruti Suzuki 15.7 14.7 7 9 -4 2.3 2.5 -9 -4 -8Tata Motors 7.9 11.8 -33 -45 -23 1.9 2.9 -33 -18 7

Relative to Sensex P/E (%) Relative to Sensex P/B (%)PE (x) PB (x)

B k P i t HDFC B k ICICI B k i l di i l l d


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-40

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15

Banks Private: HDFC Bank, ICICI Bank at marginal discount; attractively placed

Private banks are trading at theirhistorical average PB and 3% discount tomarket PB.

HDFC Bank and ICICI Bank look

attractively placed at 3% and 8% discountto long period PB average. Good growthin retail business will continue to drivetheir performance.

Yes Bank and Axis Bank trade at bigdiscounts of 33%/30% respectively to itsPB averages; IndusInd trades at hugepremium of 21% (highest in the sector).


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Private Banks P/E (x) 10 Yr Avg (x)

2.22.3

1.0

1.8

2.5

3.3

4.0

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Private Banks P/B (x) 10 Yr Avg (x)

-7-16

-40

-28

-16

-4

8

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Company Current 10 Yr Avg Prem/Disc (%) Current 10 Yr Avg Current 10 Yr Avg Prem/Disc (%) Current 10 Yr AvgAxis Bank 9.2 12.5 -27 -36 -18 1.4 2.1 -30 -39 -24Federal Bank 9.1 7.5 21 -37 -51 1.0 0.9 5 -59 -66HDFC Bank 15.7 20.9 -25 9 36 3.2 3.3 -3 38 23

ICICI Bank 12.1 16.9 -28 -16 10 1.6 1.8 -8 -31 -34IndusInd Bank 14.6 17.2 -15 1 12 2.3 1.9 21 -2 -29ING Vysya Bank 15.0 12.8 18 4 -17 1.5 1.3 19 -36 -53J & K Bank 5.9 6.9 -14 -59 -55 1.1 1.0 8 -54 -63Kotak Mah. Bank 19.9 17.5 14 38 14 2.8 2.5 9 17 -6South Ind.Bank 5.7 6.5 -13 -60 -57 0.8 0.8 -7 -67 -69Yes Bank 7.7 14.2 -46 -47 -7 1.6 2.4 -33 -31 -10



Private Banks +1%

Banks PSU: V l ti t 40% di t t 71% di t t k t PB


16/32

-56-54

-75

-65

-55

-45

-35

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16

Banks PSU: Valuations at 40% discount to avg; 71% discount to market PB

PSU banks trade at 40% discount to itshistorical PB and 71% discount to marketPB.

All PSU banks, except SBI and BOB, trade

at significant discount to historicalaverage PB multiples. All stocks trade at60%+ discount relative to market PB

Recovery in macro-economicenvironment is critical for the sector torecover from these low valuations. Stresscreation is expected to remain high.


PSU Banks -26%


6.37.0

3

5

7

9

11

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PSU Banks P/E (x) 10 Yr Avg (x)

0.7

1.1

0.30.8

1.3

1.8

2.3

D e c - 0 3

D e c - 0 4

D e c - 0 5

D e c - 0 6

D e c - 0 7

D e c - 0 8

D e c - 0 9

D e c - 1 0

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D e c - 1 3

PSU Banks P/B (x) 10 Yr Avg (x)

-71

-58

-80-70

-60

-50

-40

D e c - 0 3

D e c - 0 4

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Company Current 10 Yr Avg Prem/Disc (%) Current 10 Yr Avg Current 10 Yr Avg Prem/Disc (%) Current 10 Yr AvgAndhra Bank 4.4 5.9 -26 -70 -61 0.4 1.0 -63 -84 -63Bank of Baroda 6.1 6.7 -9 -57 -56 0.8 1.0 -27 -68 -61Bank of India 4.9 6.8 -27 -66 -56 0.6 1.1 -46 -76 -61Canara Bank 5.2 5.6 -8 -64 -63 0.5 1.0 -50 -80 -64

Corporation Bank 4.0 6.5 -38 -72 -58 0.4 1.0 -62 -84 -64Dena Bank 3.8 5.3 -28 -74 -66 0.4 0.7 -48 -84 -74IDBI Bank 5.5 8.8 -38 -62 -43 0.4 0.9 -53 -83 -68Indian Bank 3.8 5.0 -23 -73 -68 0.4 0.8 -51 -83 -69Oriental Bank 5.5 6.5 -15 -62 -58 0.5 1.0 -49 -79 -64Punjab Natl.Bank 5.4 6.3 -13 -62 -59 0.6 1.1 -45 -74 -59St Bk of India 7.8 8.7 -11 -46 -43 0.9 1.2 -30 -64 -55Union Bank (I) 4.7 5.8 -20 -68 -62 0.4 1.0 -57 -81 -62


NBFC:MMFS B j j Fi t i t g d t t g t i d g th


17/32

-33-30

-80

-60

-40

-20

0

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17

NBFC:MMFS, Bajaj Finance at premium to average due to strong sustained growth

NBFCs trade at a discount of 10% to itshistorical PB averages; however 19%discount to Sensex PB.

M&M Financial and Bajaj Finance are the

only stocks trading at premium to itsaverage driven by sustained stronggrowth and better asset quality.

HDFC and LIC Housing Finance trades at10% and 7% discount to its average PB.

All Infra NBFCs are at a 33-53% discountto PB averages; will continue too seestress on both quality of assets and costof liabilities.


NBFC -8%


9.711.1

0

7

14

21

28

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NBFC P/E (x) 10 Yr Avg (x)

1.92.1

0.0

1.0

2.0

3.0

4.0

D e c - 0 3

D e c - 0 4

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NBFC P/B (x) 10 Yr Avg (x)

-19-22

-75

-50

-25

0

25

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Company Current 10 Yr Avg Prem/Disc (%) Current 10 Yr Avg Current 10 Yr Avg Prem/Disc (%) Current 10 Yr AvgBajaj Finance 9.1 16.0 -43 -37 4 1.7 1.0 64 -27 -61

H D F C 20.5 22.0 -7 42 43 4.1 4.6 -10 74 68I D F C 7.7 16.1 -52 -46 5 1.0 2.2 -53 -57 -20LIC Housing Fin. 7.9 7.9 0 -45 -49 1.3 1.4 -7 -44 -48M & M Financial 15.8 10.7 48 9 -30 3.1 1.9 62 31 -30Power Fin.Corpn. 3.8 8.8 -57 -74 -43 0.7 1.4 -50 -70 -48Rural Elec.Corp. 4.3 6.8 -37 -70 -56 0.9 1.4 -33 -62 -50Shriram Trans. 9.4 8.8 7 -35 -43 1.6 1.9 -16 -33 -31


Capital Goods: PE at 3 yr high at 22x on improved earnings visibility


18/32

52

27

-30

0

30

60

90

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18

Capital Goods: PE at 3-yr high at 22x on improved earnings visibility

With earnings de-growth bottoming inFY14, PE is at 22x, its 3-yr high and 11%premium to average. However, the sectoris trading at 43% discount to its historicalPB average.

All companies now trade at premium totheir PE averages except CromptonGreaves (-19%), ABB (-8%) and BHEL (-7%).

BHEL and Crompton Greaves trade at50%+ discount to historical PB average.

Cummins and Havells are the most valuedstocks which are trading above average onboth PE and PB basis.


Capital Goods -6%


22.019.9

7

17

27

37

47

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Capital Goods P/E (x) 10 Yr Avg (x)

2.54.4

0.0

3.0

6.0

9.0

12.0

D e c - 0 3

D e c - 0 4

D e c - 0 5

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Capital Goods P/B (x) 10 Yr Avg (x)

758

-50

15

80

145

210

D e c - 0 3

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Company Current 10 Yr Avg Prem/Disc (%) Current 10 Yr Avg Current 10 Yr Avg Prem/Disc (%) Current 10 Yr AvgA B B 60.3 65.6 -8 318 327 5.2 6.8 -23 120 150B H E L 16.3 17.5 -7 13 14 1.3 4.2 -70 -46 55Crompton Greaves 16.2 20.1 -19 12 31 2.2 4.4 -50 -6 62Cummins India 19.6 17.5 12 36 14 4.8 4.6 3 102 72Havells India 18.9 17.4 9 31 14 4.7 4.1 16 100 50Larsen & Toubro 21.3 20.5 4 48 34 2.8 4.3 -34 19 58Siemens 50.1 41.9 20 248 173 5.4 8.4 -36 129 211Thermax 25.0 18.2 37 73 18 3.7 4.5 -18 57 67


Cement: EV/EBITDA marginally above average; expect recovery in FY15


19/32

17-13

-75

-45

-15

15

45

75

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19

Cement: EV/EBITDA marginally above average; expect recovery in FY15EV/EBITDA valuations is at 9% premiumto its historical average. Recoveryexpectation in FY15 results in EV/EBITDAvaluations above average despite poorexpected 3QFY14 performance.


Cement -14%


16.913.1

3

8

13

18

23

28

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Cement P/E (x) 10 Yr Avg (x)

1.82.4

0.5

1.8

3.0

4.3

5.5

D e c - 0 3

D e c - 0 4

D e c - 0 5

D e c - 0 6

D e c - 0 7

D e c - 0 8

D e c - 0 9

D e c - 1 0

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Cement P/B (x) 10 Yr Avg (x)

-23-13

-50

-25

0

25

50

D e c - 0 3

D e c - 0 4

D e c - 0 5

D e c - 0 6

D e c - 0 7

D e c - 0 8

D e c - 0 9

D e c - 1 0

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D e c - 1 2

D e c - 1 3


8.57.8

3.0

5.5

8.0

10.5

13.0

D e c - 0 3

D e c - 0 4

D e c - 0 5

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Ce ment EV/EBDITA ( x) 10 Yr Avg (x)

Company Current 10 Yr Avg Prem/Disc (%) Current 10 Yr Avg Current 10 Yr Avg Prem/Disc (%) Current 10 Yr AvgACC 22.7 15.3 48 57 0 2.9 2.9 -1 24 9Ambuja Cem. 17.2 15.3 13 19 -1 2.6 3.0 -14 9 10

Birla Corpn. 6.4 6.7 -4 -56 -56 0.7 1.7 -58 -70 -38Grasim Inds 9.1 7.6 21 -37 -51 1.1 1.5 -28 -55 -46India Cements 22.4 15.0 49 55 -2 0.5 1.3 -65 -81 -52JP Associates 27.2 30.1 -10 89 96 0.9 1.9 -54 -64 -31Shree Cement 14.7 14.0 5 2 -9 3.0 3.3 -9 27 21UltraTech Cem. 20.1 12.8 58 39 -17 2.6 2.9 -11 11 8


Consumer: Trades at premium; earnings to continue to see moderation


20/32

10857

-10

28

66

104

142

180

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20

Consumer: Trades at premium; earnings to continue to see moderation

Consumer sector trades at high multiples.Every company (except Radico Khaitan) isat a big premium; GCPL at 43%, AsianPaints at 42%, Pidilite at 40% and ITC at38%.

The sector premium over Sensex is alsohigh with most companies trading at100%+ premium to Sensex PE.

We expect the sector premium tocontract in FY15 with demand slowdownand earnings moderation.


Consumer +11%


30.023.8

10

17

24

31

38

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Consumer P/E (x) 10 Yr Avg (x)

10.48.1

4.0

6.0

8.0

10.0

12.0

D e c - 0 3

D e c - 0 4

D e c - 0 5

D e c - 0 6

D e c - 0 7

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Consumer P/B (x) 10 Yr Avg (x)

342

208

80

160

240

320

400

D e c - 0 3

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Company Current 10 Yr Avg Prem/Disc (%) Current 10 Yr Avg Current 10 Yr Avg Prem/Disc (%) Current 10 Yr AvgAsian Paints 32.2 22.6 42 123 47 10.5 8.1 29 346 200Bri tannia Inds. 25.9 21.7 20 80 41 12.0 6.8 75 407 152Colgate-Palm. 31.7 24.2 31 120 58 26.5 22.5 18 1023 732Dabur India 27.5 23.7 16 91 54 9.6 8.6 12 307 218GlaxoSmith C H L 31.7 19.6 62 120 28 9.8 5.5 79 314 101Godrej Consumer 30.6 21.4 43 112 40 7.2 14.6 -51 205 441Hind. Unilever 32.5 26.7 22 125 74 19.0 20.4 -7 704 655ITC 29.6 21.4 38 105 40 10.4 6.4 63 340 136Marico 26.4 22.1 19 83 44 6.9 7.5 -8 193 178Nestle India 35.2 28.2 25 144 84 18.1 22.5 -20 666 731Pidil i te Inds. 25.2 18.1 40 75 18 6.2 4.5 37 164 67Radico Khaitan 14.4 25.9 -45 0 69 2.0 3.4 -41 -14 27United Spiri ts 55.2 46.4 19 283 203 4.3 3.3 33 84 20


Healthcare: In line with averages; US generics to drive earnings momentum


21/32

5546

0

30

60

90

120

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21

Healthcare: In line with averages; US generics to drive earnings momentum

Healthcare sector is trading at 22.4x inline with its historical averages.

Lupin and Ipca Labs trades at a premiumof 29-32% to its historical PE averages.

We expect earnings momentum tocontinue for these companies driven bystrong US generics demand growth.

Dr Reddys , Lupin, Sun Pharma andRanbaxy currently trade at 50%+premium to Sensex PE.


Healthcare +23%


22.421.9

14

18

22

26

30

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Healthcare P/E (x) 10 Yr Avg (x)

4.64.2

2.0

3.0

4.0

5.0

6.0

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D e c - 0 4

D e c - 0 5

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Healthcare P/B (x) 10 Yr Avg (x)

9660

-20

20

60

100

140

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Company Current 10 Yr Avg Prem/Disc (%) Current 10 Yr Avg Current 10 Yr Avg Prem/Disc (%) Current 10 Yr AvgBiocon 21.2 15.9 33 47 4 2.9 2.4 24 23 -13Cadila Health. 21.0 18.1 16 46 18 4.2 4.3 -2 79 59Cipla 19.7 21.0 -7 36 37 2.8 3.8 -26 20 42Divi 's Lab. 18.8 16.3 15 31 6 4.9 4.5 9 106 65Dr Reddy's Labs 22.0 37.7 -42 53 146 4.7 3.3 44 100 21

Glaxosmit Pharma 43.7 25.5 71 203 66 12.1 7.5 61 413 178Glenmark Pharma. 19.3 36.7 -47 34 139 3.8 4.6 -18 61 72Ipca Labs. 16.2 12.3 32 12 -20 4.0 2.6 56 71 -5Lupin 22.9 17.8 29 59 16 5.1 4.1 24 118 53Ranbaxy Labs. 32.8 42.6 -23 127 178 4.0 5.2 -24 70 94Sanofi India 23.8 20.3 17 65 32 4.3 4.1 6 84 52Sun Pharma.Inds. 22.8 20.1 13 58 31 5.6 4.5 26 138 64Torrent Pharma. 15.6 12.8 22 8 -17 3.8 3.2 18 62 19


Media: Trades marginally below average; ad growth to slow


22/32

4135

-50

0

50

100

150

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22

Media: Trades marginally below average; ad growth to slowMedia trades at a marginal discount of 4% to its historical average PE. Regulatoryad cap may impact earnings for 4QFY14.

Zee is the only stock to trade above itshistorical PE averages (+20%) driven bystrong earnings growth.

PVR is at significant discount to itshistorical PE average, but at premium toits PB average. With synergies of Cinemaxacquisition kicking-in, the stock may seestrong earnings in FY15.

Print media trades at 40%+ discount to itshistorical average.


Media +6%


20.3

21.1

7

17

27

37

47

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D e c - 1 3

Media P/E (x) 10 Yr Avg (x)

4.0

3.5

0.0

2.0

4.0

6.0

8.0

D e c - 0 3

D e c - 0 4

D e c - 0 5

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D e c - 0 7

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D e c - 1 3

Media P/B (x) 10 Yr Avg (x)

68

28

-50

0

50

100

150

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Company Current 10 Yr Avg Prem/Disc (%) Current 10 Yr Avg Current 10 Yr Avg Prem/Disc (%) Current 10 Yr AvgH T Media 10.0 28.6 -65 -31 86 0.9 2.7 -67 -62 -1Jagran Prakashan 11.5 19.7 -42 -20 29 2.4 4.1 -40 3 50PVR 26.5 45.0 -41 83 193 3.4 2.0 69 43 -26Sun TV Network 17.8 24.5 -27 23 59 4.4 5.9 -25 87 117Zee Entertainmen 25.1 21.0 20 74 37 5.1 3.1 63 116 16


Metals: PB at disc to avg, however PE in-line; expect double-digit FY15 growth


23/32

-36-41

-80

-60

-40

-20

0

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23

Metals: PB at disc to avg, however PE in line; expect double digit FY15 growthMetals trade at 1.0x PB, 46% discount toits historical average. However, the sectortrades at its PE average reflecting double-digit FY15 earnings growth after 3 years.

EV/EBIDTA valuations was at 5.5x, whichis 5% discount to its historical average.

All companies in the sector trade atpremium to PE average except NALCO(-25%), NMDC (-44%), Tata Steel (-11%)and Jindal Steel (-7%) .

All PSU metal stocks trade at 50%+discount to its historical PB averages.


Metals -10%


9.29.2

0

5

10

15

20

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Metals P/E (x) 10 Yr Avg (x)

1.01.8

0.0

1.3

2.5

3.8

5.0

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D e c - 0 4

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D e c - 0 7

D e c - 0 8

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Metals P/B (x) 10 Yr Avg (x)

-59

-35

-80

-55

-30

-5

20

D e c - 0 3

D e c - 0 4

D e c - 0 5

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Company Current 10 Yr Avg Prem/Disc (%) Current 10 Yr Avg Current 10 Yr Avg Prem/Disc (%) Current 10 Yr AvgHind.Zinc 7.7 7.1 9 -46 -54 1.3 1.9 -30 -44 -30Hindalco Inds. 9.2 8.5 8 -36 -45 1.0 1.7 -40 -57 -37Jindal Steel 9.0 9.6 -7 -38 -37 1.0 3.2 -67 -55 19

JSW Steel 18.5 11.0 68 28 -28 1.4 1.2 16 -39 -54Natl. Aluminium 12.0 15.9 -25 -17 4 0.8 1.8 -57 -67 -34NMDC 8.3 15.0 -44 -42 -2 1.7 4.8 -65 -28 78S A I L 10.8 9.4 15 -25 -39 0.7 1.7 -61 -72 -39Sesa Sterli te 8.8 6.6 33 -39 -57 1.4 2.2 -37 -41 -17Tata Steel 9.3 10.5 -11 -35 -32 1.6 2.4 -34 -34 -13


Oil & Gas: PB valuations continues to trade at decadal low


24/32

-35

-28

-45

-37

-29

-21

-13

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24

Oil & Gas sectors PB at 1.2x is at its all-time low valuations. PE relative to Sensexis at -35% v/s historical average of -28%,while PB relative to Sensex is at -48% v/shistorical average of -34%.

Petronet LNG and GAIL (India) are theonly companies to trade at their historicaverages PE, remaining trade at discount.

All companies except BPCL and CairnIndia trade at 25%+ discount to itshistorical PB average. OMC are at 42-43%discount to PB average (except BPCL).


Oil & Gas +4%


9.3

11.0

5

9

13

17

21

D e c - 0 3

D e c - 0 4

D e c - 0 5

D e c - 0 6

D e c - 0 7

D e c - 0 8

D e c - 0 9

D e c - 1 0

D e c - 1 1

D e c - 1 2

D e c - 1 3

Oil & Gas P/E (x) 10 Yr Avg (x)

1.21.8

1.0

1.5

2.0

2.5

3.0

D e c - 0 3

D e c - 0 4

D e c - 0 5

D e c - 0 6

D e c - 0 7

D e c - 0 8

D e c - 0 9

D e c - 1 0

D e c - 1 1

D e c - 1 2

D e c - 1 3

Oil & Gas P/B (x) 10 Yr Avg (x)

-48

-34

-55

-45

-35

-25

-15

D e c - 0 3

D e c - 0 4

D e c - 0 5

D e c - 0 6

D e c - 0 7

D e c - 0 8

D e c - 0 9

D e c - 1 0

D e c - 1 1

D e c - 1 2

D e c - 1 3


Company Current 10 Yr Avg Prem/Disc (%) Current 10 Yr Avg Current 10 Yr Avg Prem/Disc (%) Current 10 Yr AvgB P C L 9.2 12.8 -28 -36 -16 1.3 1.3 -2 -46 -52C P C L 3.9 5.1 -24 -73 -67 0.5 1.0 -52 -79 -62Cairn India 5.6 9.3 -40 -61 -39 1.0 1.2 -20 -59 -55GAIL (India) 11.4 11.3 1 -21 -26 1.5 2.1 -27 -36 -23Guj.St.Petronet 6.9 14.3 -52 -52 -7 0.9 2.1 -55 -60 -24H P C L 11.4 12.7 -10 -21 -18 0.6 1.0 -42 -76 -64I O C L 8.6 10.3 -16 -40 -33 0.7 1.3 -43 -68 -52Indraprastha Gas 9.5 11.6 -18 -34 -24 1.9 3.0 -38 -21 12M R P L 8.4 13.7 -39 -42 -11 1.0 2.4 -57 -57 -13O N G C 8.4 9.8 -14 -42 -36 1.4 2.1 -35 -42 -23Petronet LNG 11.0 11.0 0 -24 -28 1.7 2.8 -41 -30 4Reliance Inds. 11.0 12.2 -10 -24 -20 1.2 1.6 -26 -48 -39


Real Estate: Trades at 0.9x BV; strong earnings recovery in FY15


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5724

-100

-25

50

125

200

D e c - 0 3

D e c - 0 4

D e c - 0 5

D e c - 0 6

D e c - 0 7

D e c - 0 8

D e c - 0 9

D e c - 1 0

D e c - 1 1

D e c - 1 2

D e c - 1 3


25

; g g y

Real Estate remains the worst performingsector during CY13 with more than 1/3 rd

market cap erosion.

Real estate trades at 60% discount tomarket PB.

DLF is the only company to trade at itshistorical PE average; rest trade at 40%+discount to PE average.

Sobha Developers and Phoenix Mills arethe only stocks with less than 50%discount to Sensex PB.


Real Estate -32%


22.7

19.8

0

12

24

36

48

D e c - 0 3

D e c - 0 4

D e c - 0 5

D e c - 0 6

D e c - 0 7

D e c - 0 8

D e c - 0 9

D e c - 1 0

D e c - 1 1

D e c - 1 2

D e c - 1 3

Real Estate P/E (x) 10 Yr Avg (x)

0.91.30.0

2.0

4.0

6.0

8.0

D e c - 0 3

D e c - 0 4

D e c - 0 5

D e c - 0 6

D e c - 0 7

D e c - 0 8

D e c - 0 9

D e c - 1 0

D e c - 1 1

D e c - 1 2

D e c - 1 3

Real Estate P/B (x) 10 Yr Avg (x)

-60-53

-100

-50

0

50

100

D e c - 0 3

D e c - 0 4

D e c - 0 5

D e c - 0 6

D e c - 0 7

D e c - 0 8

D e c - 0 9

D e c - 1 0

D e c - 1 1

D e c - 1 2

D e c - 1 3


Company Current 10 Yr Avg Prem/Disc (%) Current 10 Yr Avg Current 10 Yr Avg Prem/Disc (%) Current 10 Yr AvgDLF 36.9 37.2 -1 156 142 1.0 2.3 -55 -56 -14Indbull.RealEst. 6.0 20.2 -70 -58 32 0.4 0.8 -51 -83 -69

Mahindra Life. 14.1 28.8 -51 -2 88 1.1 1.7 -37 -53 -36Sobha Developers 11.3 18.5 -39 -21 21 1.3 2.3 -45 -46 -15Phoenix Mills 23.6 43.3 -45 64 182 1.7 3.1 -45 -27 15


Retail: Titan at 9% premium with headwinds continuing


26/32

75

84

-100

0

100

200

300

D e c - 0 3

D e c - 0 4

D e c - 0 5

D e c - 0 6

D e c - 0 7

D e c - 0 8

D e c - 0 9

D e c - 1 0

D e c - 1 1

D e c - 1 2

D e c - 1 3


26

p g

Retail sector trades at 12% discount tohistorical PE; however, on PB, it trades ata premium of 36%.

Retail has seen negative returns of 29%

during CY13.The government measures on import of gold has seen Titan Inds premium comedown to 9% to its average, while FutureRetail trades at a discount to 28% to itsaverage.


Retail -29%


25.228.7

0

17

34

51

68

D e c - 0 3

D e c - 0 4

D e c - 0 5

D e c - 0 6

D e c - 0 7

D e c - 0 8

D e c - 0 9

D e c - 1 0

D e c - 1 1

D e c - 1 2

D e c - 1 3

Retail P/E (x) 10 Yr Avg (x)

5.9

4.3

1.0

3.0

5.0

7.0

9.0

D e c - 0 3

D e c - 0 4

D e c - 0 5

D e c - 0 6

D e c - 0 7

D e c - 0 8

D e c - 0 9

D e c - 1 0

D e c - 1 1

D e c - 1 2

D e c - 1 3

Retail P/B (x) 10 Yr Avg (x)

149

60

-50

0

50

100

150

200

D e c - 0 3

D e c - 0 4

D e c - 0 5

D e c - 0 6

D e c - 0 7

D e c - 0 8

D e c - 0 9

D e c - 1 0

D e c - 1 1

D e c - 1 2

D e c - 1 3


Company Current 10 Yr Avg Prem/Disc (%) Current 10 Yr Avg Current 10 Yr Avg Prem/Disc (%) Current 10 Yr AvgFuture Retail 16.7 23.3 -28 16 52 1.0 1.6 -35 -56 -42Titan Inds. 24.6 22.5 9 71 47 7.0 8.4 -17 195 209


Technology: Best performing sector, however, trades in-line with averages


27/32

2113

-40

0

40

80

120

D e c - 0 3

D e c - 0 4

D e c - 0 5

D e c - 0 6

D e c - 0 7

D e c - 0 8

D e c - 0 9

D e c - 1 0

D e c - 1 1

D e c - 1 2

D e c - 1 3


27

Technology remains the top performingsector with 60% returns in CY13,however, it trades in-line its historical PEaverage at 17.4x.

Infosys trades at 16.6x, at its 20-monthhigh, due to healthy FY15 earningsgrowth. However, it still trades at 15%discount to its PE average.

Except TCS and HCL Tech, all other stockstrade at discount to historical PE average.

Tech Mahindra is at 21% discount to itsPE average with improved performance.


Technology +60%


17.417.0

7

12

17

22

27

D e c - 0 3

D e c - 0 4

D e c - 0 5

D e c - 0 6

D e c - 0 7

D e c - 0 8

D e c - 0 9

D e c - 1 0

D e c - 1 1

D e c - 1 2

D e c - 1 3

Technology P/E (x) 10 Yr Avg (x)

4.75.1

2.0

4.0

6.0

8.0

10.0

D e c - 0 3

D e c - 0 4

D e c - 0 5

D e c - 0 6

D e c - 0 7

D e c - 0 8

D e c - 0 9

D e c - 1 0

D e c - 1 1

D e c - 1 2

D e c - 1 3

Technology P/B (x) 10 Yr Avg (x)

9889

0

60

120

180

240

D e c - 0 3

D e c - 0 4

D e c - 0 5

D e c - 0 6

D e c - 0 7

D e c - 0 8

D e c - 0 9

D e c - 1 0

D e c - 1 1

D e c - 1 2

D e c - 1 3


Company Current 10 Yr Avg Prem/Disc (%) Current 10 Yr Avg Current 10 Yr Avg Prem/Disc (%) Current 10 Yr AvgHCL Technologies 14.4 14.4 0 0 -6 4.0 3.0 33 70 11Infosys 16.6 19.4 -15 15 27 3.7 5.7 -36 56 112

MphasiS 11.0 16.8 -35 -24 9 2.0 3.8 -47 -14 42TCS 20.3 18.1 12 41 18 6.8 6.3 8 189 133Tech Mahindra 12.8 16.2 -21 -11 6 3.6 4.4 -18 54 64Wipro 16.4 16.9 -3 13 10 3.7 4.1 -11 56 53


Telecom: EV/EBITDA at 27% discount; expect stunning FY15 earnings growth


28/32

41

41

-100

0

100

200

300

D e c - 0 3

D e c - 0 4

D e c - 0 5

D e c - 0 6

D e c - 0 7

D e c - 0 8

D e c - 0 9

D e c - 1 0

D e c - 1 1

D e c - 1 2

D e c - 1 3


28

Telecom PE trades at marginal discountto historical averages. With RPMsimproving and better outlook in thesector post passive consolidation, stronggrowth is expected in FY15.

On EV/EBITDA basis, the sector is at 27%discount to its historical average.


Telecom +26%


20.3

21.5

0

14

28

42

56

D e c - 0 3

D e c - 0 4

D e c - 0 5

D e c - 0 6

D e c - 0 7

D e c - 0 8

D e c - 0 9

D e c - 1 0

D e c - 1 1

D e c - 1 2

D e c - 1 3

Telecom P/E (x) 10 Yr Avg (x)

1.9

2.6

0.5

2.0

3.5

5.0

6.5

D e c - 0 3

D e c - 0 4

D e c - 0 5

D e c - 0 6

D e c - 0 7

D e c - 0 8

D e c - 0 9

D e c - 1 0

D e c - 1 1

D e c - 1 2

D e c - 1 3

Telecom P/B (x) 10 Yr Avg (x)

-21

-7

-50

-10

30

70

110

D e c - 0 3

D e c - 0 4

D e c - 0 5

D e c - 0 6

D e c - 0 7

D e c - 0 8

D e c - 0 9

D e c - 1 0

D e c - 1 1

D e c - 1 2

D e c - 1 3


6.3

8.6

5.0

8.0

11.0

14.0

17.0

D e c - 0 3

D e c - 0 4

D e c - 0 5

D e c - 0 6

D e c - 0 7

D e c - 0 8

D e c - 0 9

D e c - 1 0

D e c - 1 1

D e c - 1 2

D e c - 1 3

Telecom Sector EV/EBDITA (x)

Company Current 10 Yr Avg Prem/Disc (%) Current 10 Yr Avg Current 10 Yr Avg Prem/Disc (%) Current 10 Yr Avg

Bharti Airtel 23.5 23.6 0 63 54 1.9 3.4 -44 -19 24Idea Cellular 19.9 24.6 -19 38 60 3.0 2.0 48 27 -26Rel . Comm. 12.4 21.1 -41 -14 37 0.8 1.6 -46 -64 -41


Utilities: At significant discount on PBs


29/32

-28-10

-100

-50

0

50

100

D e c - 0 3

D e c - 0 4

D e c - 0 5

D e c - 0 6

D e c - 0 7

D e c - 0 8

D e c - 0 9

D e c - 1 0

D e c - 1 1

D e c - 1 2

D e c - 1 3


29

Utilities is trading at 1.2x PB, which is31% discount to historical average PB and51% discount to market PB.

NTPC is at 37-41%+ discount on PE/PBbasis; we expect double-digit growth.

Coal India is the only stock trading atpremium to its Sensex PB at 26%.

Tata Power is the only stock which tradesat a premium to its average PE at 34%.CESC is at attractively placed at 8%discount to its historic PE average.


Utilities -15%


10.514.1

0

8

16

24

32

D e c - 0 3

D e c - 0 4

D e c - 0 5

D e c - 0 6

D e c - 0 7

D e c - 0 8

D e c - 0 9

D e c - 1 0

D e c - 1 1

D e c - 1 2

D e c - 1 3

Utilities P/E (x) 10 Yr Avg (x)

1.21.7

0.0

1.0

2.0

3.0

4.0

D e c - 0 3

D e c - 0 4

D e c - 0 5

D e c - 0 6

D e c - 0 7

D e c - 0 8

D e c - 0 9

D e c - 1 0

D e c - 1 1

D e c - 1 2

D e c - 1 3

Utilities P/B (x) 10 Yr Avg (x)

-51

-38

-100-60

-20

20

60

D e c - 0 3

D e c - 0 4

D e c - 0 5

D e c - 0 6

D e c - 0 7

D e c - 0 8

D e c - 0 9

D e c - 1 0

D e c - 1 1

D e c - 1 2

D e c - 1 3


Company Current 10 Yr Avg Prem/Disc (%) Current 10 Yr Avg Current 10 Yr Avg Prem/Disc (%) Current 10 Yr AvgCoal India 9.7 12.1 -20 -33 -21 3.0 4.3 -31 26 60CESC 8.3 9.0 -8 -43 -42 0.9 1.1 -17 -61 -59NTPC 10.5 16.7 -37 -27 9 1.2 2.1 -41 -48 -23Power Grid Corpn 10.1 14.4 -29 -30 -6 1.4 2.0 -31 -41 -26PTC India 8.2 18.3 -55 -43 19 0.8 1.6 -49 -66 -42Rel iance Infra. 7.9 18.2 -56 -45 18 0.5 1.4 -63 -78 -47Tata Power Co. 25.4 19.0 34 76 24 1.7 2.1 -22 -30 -21



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Disclosures

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