Edelweiss - Focus 12 February 2017

Sandeep Raina Research Analyst +91 (22) 4088 6033 sandeep.raina@edelweissfin.com

2

Product description and Investment Objective

Product description: The portfolio seeks to achieve capital appreciation by predominantly investing in high-growth

companies

Top down approach by selecting the themes and sectors based on house view

Identify the best companies in selected sectors and themes

Stick to investment philosophy principles for stock selection

Investment objective: Generate market outperformance over benchmark and comparable diversified Mutual Funds

Take calculated risk

Focus on identifying top 12 stocks from investment universe

Constantly look for ideas to generate better risk adjusted returns

3

Core Investment Philosophy

Our Stock Ideas are backed by thorough Research and Analysis

Our Core Investment Philosophy

and Approach

Leadership position in sector Market Share, Fragmented Industry Bargaining power of the Industry

Strong Earnings Visibility Can we predict earnings for next 2-3 years Revenue growth, RoE, RoCE, Cash flow, Du-Pont

Moat Around Business How different is the company Edge, Entry barrier, competition, pricing power

Opportunity Size How big the sector can be (3x, 4x....) Is there a saturation in the Industry

Corporate governance Management background matters Avoid aggressive accounting policies

Strong Management Credentials Track record of past decisions Comments v/s delivery etc.

4

Product risk profile and Strategy

Risk Profile

High

Medium

Low

Risk/Return Low Medium High

Product Strategy

Maximum 12 stock portfolio

Flexible sector and market cap allocation

Monthly portfolio review

No stock and sector limits

5

Why Focus 12

Leverages Edelweiss’s Stock Picking Acumen

Ensures an evergreen portfolio through active guidance

Stringent stock selection process on model portfolio stocks

Focus on capital preservation first then capture upside

Investment committee to monitor stringent Quality standards

6

Model Holdings

Major Holdings

Name Weight(%)

Tata Motors Ltd 8.33%

State Bank of India Ltd 8.33%

Sun Pharma Industries Ltd.

8.33%

United Spirits 8.33%

Balance Portfolio

(8 Stocks) 50.08%

17%

25%

17%

17%

8%

8%

8%

Pharmaceuticals

Consumption

BFSI

Auto

Cement

Media

Infra

Sector Composition

25%

75%

Mid Cap

Large Cap

Value Composition

7

Portfolio Performance

1 Month 3 Months 6 Months 1 Year 2 Years* 3 Years* SI**

Focus 12 11.5% -5.1% -1.8% 13.3% 6.0% 27.0% 26.1%

Nifty 50 4.6% -0.9% -0.9% 13.2% -1.4% 12.0% 10.2%

Performance as on 31st January, 2017

Performance Focus 12 - CAGR

* CAGR ** CAGR since Inception - 2nd February 2012

13.3%

6.0%

27.0% 25.1%

13.2%

-1.4%

12.0%

9.1%

1 year 2 year 3 year 4 year

Focus 12 NIFTY

8

Focus-12 Portfolio Performance

Edelweiss Focus-12 NAV: At INR 319 vs Nifty NAV of INR 162

Edelweiss Focus-12 have delivered a CAGR return of 26% since inception as against Nifty CAGR return of 10%, translating into an outperformance of 16% (p.a)

On an annualized basis (last 12 months), Focus-12 have delivered a return of 13% per annum as against Nifty return of 13%.

80

130

180

230

280

330

380

Ma

r-1

2

Ma

y-1

2

Ju

l-12

Se

p-1

2

No

v-1

2

Ja

n-1

3

Ma

r-13

Ma

y-1

3

Ju

l-1

3

Se

p-1

3

No

v-1

3

Ja

n-1

4

Ma

r-1

4

Ma

y-1

4

Ju

l-1

4

Se

p-1

4

No

v-1

4

Ja

n-1

5

Ma

r-1

5

Ma

y-1

5

Ju

l-15

Se

p-1

5

No

v-1

5

Ja

n-1

6

Ma

r-1

6

Ma

y-1

6

Ju

l-16

Se

p-1

6

No

v-1

6

Ja

n-1

7

Daily Portfolio NAV Daily Benchmark NAV (NIFTY)

9

Returns since Inception and for January 2017

-13%

-38%

143%

53%

-34%

26%

-6%

23%

8%

58%

-1%

14%

-50% 0% 50% 100% 150% 200%

Aditya Birla Fashion Retail

United Spirits

Dalmia Bharat Ltd

Tata Motors

Sun Pharma

Zee Ent

State Bank of India

Strides Arcolab

Bank of Baroda

Maruti

Larsen & Toubro

Crompton Greaves Cons

Electrical

Return Since inception

9%

3%

36%

9%

8%

7%

-6%

8%

0%

12%

11%

31%

5%

-10% 0% 10% 20% 30% 40%

Aditya Birla Fashion Retail

Strides Arcolab

Dalmia Bharat Ltd

TATA MOTORS

Bank of Baroda

Larsen & Toubro

State Bank of India

Zee Ent

Sun Pharma

United Spirits

Maruti

Crompton Greaves Cons …

NIFTY

Return for the month

10

Coverage Stocks

(in crs) P/E EV/EBITDA ROCE (%)

Stock M.Cap FY17E FY18E FY17E FY18E FY17E FY18E

KNR Constructions Ltd 2639 19.5 18.2 18.0 15.5 15.0 14.9

PNC Infratech Ltd 2719 14.8 14.2 16.6 13.0 12.5 13.6

JMC Projects (India) Ltd 741 11.2 9.9 11.9 11.1 15.0 15.0

Cholamandalam Investment 16048 22.9 19.2 - - - -

Intellect Design Arena Ltd 1432 -89 715.8 (72.1) 124.5 -3.0 1.0

Finolex industries 6093 21.7 17.4 13.7 11.4 32.5 38.7

Kewal Kiran Clothing Ltd 2152 31.2 24.7 20.6 16.1 24.0 25.7

Siyaram Silk Mills Ltd 1340 14.6 12.4 8.9 8.1 16.0 17.0

Indian Terrain Ltd 559 22 16.4 11.4 8.9 17.0 18.0

Aditya Birla Fashion & Retail Ltd 11487 182 85.7 27.5 21.3 8.0 11.0

Crompton Greaves Consumer Electricals Ltd 12093 38.0 31.4 23.6 20.1 50.5 49.8

Alembic Pharmaceuticals Limited 10463 25.2 21.5 16.6 14.4 29.5 29.2

Natco Pharmaceutical Ltd 11713 21.9 26.1 15.8 17.5 41.8 28.3

Biocon Ltd 20377 38.4 33.6 23.7 20.3 9.8 10.6

Hester Biosciences Ltd 653 23.8 16.3 15.4 11.4 24.5 28.1

Strides Arcolab 9664 21.4 17.6 13.8 12.1 10.1 11.1

Poly Medicure 2016 36.7 - 20.6 - 24.4 –

Madras Cements Limited 17002 29.8 24.4 16.7 14.9 18.1 20.9

Star Ferro & Cement Ltd 2133 15.0 8.1 7.0 5.1 14.8 22.6

Dalmia Bharat Ltd 16705 38.8 25.8 13.5 11.5 10.7 12.8

Sagar Cement Ltd 1287 15 12.1 10.6 9.1 13.2 14.7

Vinati Organics Limited 3833 27.4 24.1 17.0 14.8 32.0 30.0

SRF Ltd 9779 19.9 17.2 11.5 10.2 12.5 13.7

Sudarshan Chemical Industries Ltd 2450 23.6 18.0 13.2 10.2 19.2 21.2

Indo Count Industries Ltd 3612 12.0 10.8 7.6 6.7 41.5 37.1

Tata Communications 20596 260.7 128.7 10.0 9.2 8.0 10.0

NIIT Ltd 1221 13.0 9.6 13.3 10.1 10.0 18.6

Jamna Auto 1505 14.3 12.1 7.3 6.3 34.1 34.9

Precision Camshafts Ltd 1432 17.0 14.8 9.1 7.6 26.0 25.0

Bharat Forge Ltd 22628 40.6 26.3 18.8 14.6 13.0 18.0

Voltamp Transformers Ltd 984 18.6 13.7 18.2 12.3 15.4 20.6

Transformers & Rectifiers India Ltd 556 37.0 14.2 10.5 7.2 10.7 15.4

Indian Hotels Co Ltd 10956 64.1 27.3 21.6 14.7 6.0 10.0

Quick Heal 1,877 28.1 21.1 13.9 10.5 16.0 20.0

11

Edelweiss Focus-12 Deletion History

Exit Date (Beginning Of the Month)

Company Name Buy Price Exit Price Return

Jun-12 Tata Steel 471.0 397.9 -15.5%

Sep-12 Glenmark Pharmaceuticals 297.7 426.6 43.3%

Oct-12 Yes Bank 336.2 394.2 17.3%

Oct-12 City Union Bank 37.1 46.1 24.2%

Oct-12 HCL Technologies 437.9 581.2 32.7%

Oct-12 Eros International 204.7 161.6 -21.1%

Oct-12 Bajaj Auto 1610.8 1810.4 12.4%

Oct-12 GSK Consumer 2664.0 3008.5 12.9%

Feb-13 Supreme Industries 282.9 304.1 7.5%

Feb-13 Coromondel international 269.7 227.1 -15.8%

Feb-13 Amara Raja Batteris 221.7 300.6 35.6%

Feb-13 Gateway Distiparks 145.9 134.8 -7.6%

May-13 Astral Poly Technik 120.0 153.9 28.3%

May-13 RAMCO Cement 243.4 242.5 -0.4%

Jul-13 Glenmark Pharmaceuticals 499.8 575.4 15.1%

Jul-13 Lupin 705.6 777.2 10.1%

Jul-13 WABCO India 1605.4 1678.1 4.5%

Jul-13 J&K Bank 161.6 129.8 -19.7%

Aug-13 Bharat Forge 224.2 196.5 -12.4%

Aug-13 Development Credit Bank 48.2 44.3 -8.0%

Sep-13 V-Guard 466.3 507.8 8.9%

Nov-13 KPIT Cummins 130.3 142.3 9.2%

Nov-13 ITC 300.7 328.1 9.1%

Jan-14 Maruti Suzuki 1358.0 1764.0 29.9%

Jan-14 Sobha Developers 301.4 320.2 6.2%

Jan-14 RAMCO Cement 176.2 188.1 6.8%

Apr-14 Lupin 835.0 945.1 13.2%

May-14 Ipca Labs 822.0 760.6 -7.5%

Exit Date (Beginning Of the Month)

Company Name Buy Price Exit Price Return

May-14 Wipro 451.0 494.7 9.7%

May-14 Pidilite 255.0 323.9 27.0%

May-14 Infosys 3561.0 2924.5 -17.9%

Aug-14 United Spirits 2499.1 2380.3 -4.8%

Jan-15 Hindalco 156.0 158.0 1.3%

Mar-15 Mindtree 725.0 1411.0 94.6%

May-15 Biocon Ltd 473.0 453.9 -4%

May-15 Zee Entertainment Ltd 228.0 320.9 41%

May-15 Bharat Forge Ltd 472 1254 166%

Aug-15 Bosch Ltd 19736 25387 29%

Sep-15 Motherson Sumi Systems Ltd 122 251 106%

Oct-15 Maruti Suzuki 3726 4365 17%

Dec-15 Coal India 345 328 -5%

Dec-15 Larsen & Toubro 903 1295 30%

Jan-16 ICICI Bank Ltd 212 210 -0.9%

Jan-16 Solar Industries Ltd. 1462 3145 115.1%

May-16 SRF 975 1260 29.2%

November-16 Infosys Ltd 1109 922 -17%

November-16 Repco Home Finance 359 594 65%

12

Edelweiss Focus-12

S.No Stock Name CMP (INR)

Mkt Cap (INR Crs)

P/E (X) EV/EBITDA (X) /

Price/BV ROE (%)

(INR) (INR Cr) FY17E FY18E FY17E FY18E FY17E FY18E

1. Aditya Birla Fashion and Retail Ltd 150 11,557 167.2 78.6 25.5 19.8 6.0 13.0

2. Crompton Greaves Consumer Electrical Ltd. 191 11,993 38.8 31.9 23.4 20.1 96.5 74.8

3. Dalmia Bharat Ltd. 1,839 16,350 38.1 25.2 13.2 10.9 9.5 12.9

4. Bank of Baroda Ltd 165 38,053 15.4 9.2 2.3 1.5 6.6 10.3

5. Larsen & Toubro Ltd. 1,446 1,34,930 26.7 21.9 8.2 7.4 10.3 11.5

6. Maruti Suzuki India Ltd. 5,894 1,78,054 23.3 19.3 14.6 11.7 25.3 25.0

7. Tata Motors Ltd. 524 1,68,097 9.7 8.5 4.0 3.2 20.1 18.8

8. State Bank of India 260 2,07,590 14.4 11.5 2.1 1.5 9.3 10.9

9. Strides Arcolabs Ltd. 1,096 9,795 26.6 19.9 27.1 22.7 11.8 14.0

10. Sun Pharma Industries Ltd. 632 1,51,988 17.8 15.2 12.2 9.8 24.3 23.4

11. United Spirits Ltd. 2,179 31,660 69.5 44.5 34.1 25.9 22.5 27.3

12. Zee Entertainment Enterprises Ltd. 489 46,978 39.9 30.4 24.9 19.2 28.0 27.1

For Bank of Baroda Ltd numbers are in Price/BV

CMP updated as on 31st January 2017

13

Disclaimer

Edelweiss Broking Limited (“EBL” or “Research Entity”) is regulated by the Securities and Exchange Board of India (“SEBI”) and is licensed to carry on the business of broking, depository services and related activities. The business of EBL and its Associates (list available on www.edelweissfin.com) are organized around five broad business groups – Credit including Housing and SME Finance, Commodities, Financial Markets, Asset Management and Life Insurance. Broking services offered by Edelweiss Broking Limited under SEBI Registration No.: INZ000005231; Name of the Compliance Officer: Mr. Dhirendra Rautela, Email ID: complianceofficer.ebl@edelweissfin.com Corporate Office: Edelweiss House, Off CST Road, Kalina, Mumbai - 400098; Tel. (022) 4009 4400/ 4088 5757/4088 6278 Disclosures under the provisions of SEBI (Research Analysts) Regulations 2014 (Regulations) Edelweiss Broking Limited ("EBL" or "Research Entity") is regulated by the Securities and Exchange Board of India ("SEBI") and is licensed to carry on the business of broking, depository services and related activities. The business of EBL and its associates are organized around five broad business groups – Credit including Housing and SME Finance, Commodities, Financial Markets, Asset Management and Life Insurance. There were no instances of non-compliance by EBL on any matter related to the capital markets, resulting in significant and material disciplinary action during the last three years. This research report has been prepared and distributed by Edelweiss Broking Limited ("Edelweiss") in the capacity of a Research Analyst as per Regulation 22(1) of SEBI (Research Analysts) Regulations 2014 having SEBI Registration No.INH000000172 This Report has been prepared by Edelweiss Broking Limited in the capacity of a Research Analyst having SEBI Registration No.INH000000172 and distributed as per SEBI (Research Analysts) Regulations 2014. This report does not constitute an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. The information contained herein is from publicly available data or other sources believed to be reliable. This report is provided for assistance only and is not intended to be and must not alone be taken as the basis for an investment decision. The user assumes the entire risk of any use made of this information. Each recipient of this report should make such investigation as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in this document (including the merits and risks involved), and should consult his own advisors to determine the merits and risks of such investment. The investment discussed or views expressed may not be suitable for all investors. This information is strictly confidential and is being furnished to you solely for your information. This information should not be reproduced or redistributed or passed on directly or indirectly in any form to any other person or published, copied, in whole or in part, for any purpose. This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject EBL and associates / group companies to any registration or licensing requirements within such jurisdiction. The distribution of this report in certain jurisdictions may be restricted by law, and persons in whose possession this report comes, should observe, any such restrictions. The information given in this report is as of the date of this report and there can be no assurance that future results or events will be consistent with this information. This information is subject to change without any prior notice. EBL reserves the right to make modifications and alterations to this statement as may be required from time to time. EBL or any of its associates / group companies shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. EBL is committed to providing independent and transparent recommendation to its clients. Neither EBL nor any of its associates, group companies, directors, employees, agents or representatives shall be liable for any damages whether direct, indirect, special or consequential including loss of revenue or lost profits that may arise from or in connection with the use of the information. Our proprietary trading and investment businesses may make investment decisions that are inconsistent with the recommendations expressed herein. Past performance is not necessarily a guide to future performance .The disclosures of interest statements incorporated in this report are provided solely to enhance the transparency and should not be treated as endorsement of the views expressed in the report. The information provided in these reports remains, unless otherwise stated, the copyright of EBL. All layout, design, original artwork, concepts and other Intellectual Properties, remains the property and copyright of EBL and may not be used in any form or for any purpose whatsoever by any party without the express written permission of the copyright holders. EBL shall not be liable for any delay or any other interruption which may occur in presenting the data due to any reason including network (Internet) reasons or snags in the system, break down of the system or any other equipment, server breakdown, maintenance shutdown, breakdown of communication services or inability of the EBL to present the data. In no event shall EBL be liable for any damages, including without limitation direct or indirect, special, incidental, or consequential damages, losses or expenses arising in connection with the data presented by the EBL through this report. We offer our research services to clients as well as our prospects. Though this report is disseminated to all the customers simultaneously, not all customers may receive this report at the same time. We will not treat recipients as customers by virtue of their receiving this report. EBL and its associates, officer, directors, and employees, research analyst (including relatives) worldwide may: (a) from time to time, have long or short positions in, and buy or sell the securities thereof, of company(ies), mentioned herein or (b) be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the subject company/company(ies) discussed herein or act as advisor or lender/borrower to such company(ies) or have other potential/material conflict of interest with respect to any recommendation and related information and opinions at the time of publication of research report or at the time of public appearance. EBL may have proprietary long/short position in the above mentioned scrip(s) and therefore should be considered as interested. The views provided herein are general in nature and do not consider risk appetite or investment objective of any particular investor; readers are requested to take independent professional advice before investing. This should not be construed as invitation or solicitation to do business with EBL. EBL or its associates may have received compensation from the subject company in the past 12 months. EBL or its associates may have managed or co-managed public offering of securities for the subject company in the past 12 months. EBL or its associates may have received compensation for investment banking or merchant banking or brokerage services from the subject company in the past 12 months. EBL or its associates may 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. EBL or its associates have not 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 or EBL’s associates may have financial interest in the subject company. EBL, its associates, research analyst and his/her relative may have other potential/material conflict of interest with respect to any recommendation and related information and opinions at the time of publication of research report or at the time of public appearance. Participants in foreign exchange transactions may incur risks arising from several factors, including the following: ( i) exchange rates can be volatile and are subject to large fluctuations; ( ii) the value of currencies may be affected by numerous market factors, including world and national economic, political and regulatory events, events in equity and debt markets and changes in interest rates; and (iii) currencies may be subject to devaluation or government imposed exchange controls which could affect the value of the currency. Investors in securities such as ADRs and Currency Derivatives, whose values are affected by the currency of an underlying security, effectively assume currency risk. Research analyst has served as an officer, director or employee of subject Company: No EBL has financial interest in the subject companies: No EBL’s Associates 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. Research analyst or his/her relative has 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: No EBL has 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: No Subject company may have been client during twelve months preceding the date of distribution of the research report. There were no instances of non-compliance by EBL on any matter related to the capital markets, resulting in significant and material disciplinary action during the last three years. A graph of daily closing prices of the securities is also available at www.nseindia.com Analyst Certification: The analyst for this report certifies that all of the views expressed in this report accurately reflect his or her personal views about the subject company or companies and its or their securities, and no part of his or her compensation was, is or will be, directly or indirectly related to specific recommendations or views expressed in this report. Additional Disclaimer for U.S. Persons Edelweiss is not a registered broker – dealer under the U.S. Securities Exchange Act of 1934, as amended (the“1934 act”) and under applicable state laws in the United States. In addition Edelweiss is not a registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers Act" and together with the 1934 Act, the "Acts), and under applicable state laws in the United States. Accordingly, in the absence of specific exemption under the Acts, any brokerage and investment services provided by Edelweiss, including the products and services described herein are not available to or intended for U.S. persons. This report does not constitute an offer or invitation to purchase or subscribe for any securities or solicitation of any investments or investment services and/or shall not be considered as an advertisement tool. "U.S. Persons" are generally defined as a natural person, residing in the United States or any entity organized or incorporated under the laws of the United States. US Citizens living abroad may also be deemed "US Persons" under certain rules. Transactions in securities discussed in this research report should be effected through Edelweiss Financial Services Inc. Additional Disclaimer for U.K. Persons The contents of this research report have not been approved by an authorised person within the meaning of the Financial Services and Markets Act 2000 ("FSMA"). In the United Kingdom, this research report is being distributed only to and is directed only at (a) persons who have professional experience in matters relating to investments falling within Article 19(5) of the FSMA (Financial Promotion) Order 2005 (the “Order”); (b) persons falling within Article 49(2)(a) to (d) of the Order (including high net worth companies and unincorporated associations); and (c) any other persons to whom it may otherwise lawfully be communicated (all such persons together being referred to as “relevant persons”). This research report must not be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which this research report relates is available only to relevant persons and will be engaged in only with relevant persons. Any person who is not a relevant person should not act or rely on this research report or any of its contents. This research report must not be distributed, published, reproduced or disclosed (in whole or in part) by recipients to any other person. Additional Disclaimer for Canadian Persons Edelweiss is not a registered adviser or dealer under applicable Canadian securities laws nor has it obtained an exemption from the adviser and/or dealer registration requirements under such law. Accordingly, any brokerage and investment services provided by Edelweiss, including the products and services described herein, are not available to or intended for Canadian persons. This research report and its respective contents do not constitute an offer or invitation to purchase or subscribe for any securities or solicitation of any investments or investment services.