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Research Team ([email protected])

April 2014

India Strategy

INDIA POWER LEAGUE 2014INDIA POWER LEAGUE 2014

INDIA

GDP FY14 4.8%CAD 1.7%Trade Deficit 7.7%IIP growth 0.1%10 yr GSec 9%Fiscal deficit 4.6%

To WIN 272 from 543INR 60EPS growth 12%FII inflows $13.7bDII outflows $8.9bSensex PE 14.7x

NDA

Probables

Contents

1. Automobiles 2-13Ashok Leyland 5Bajaj Auto 6Eicher Motors 7Exide Industries 8Hero MotoCorp 9Mahindra & Mahindra 10Maruti Suzuki India 11Tata Motors 12TVS Motor 13

2. Capital Goods 14-25ABB 18BHEL 19Crompton Greaves 20Cummins India 21Havells India 22Larsen & Toubro 23Siemens 24Thermax 25

3. Cement 26-37ACC 30Ambuja Cement 31Birla Corporation 32Grasim Industries 33India Cements 34Jaiprakash Associates 35Shree Cement 36UltraTech Cement 37

4. Consumer 38-53Asian Paints 41Britannia Industries 42Colgate Palmolive 43Dabur India 44GSK Consumer 45Godrej Consumer Products 46Hindustan Unilever 47ITC 48Marico 49Nestle India 50Pidilite Industries 51Radico Khaitan 52United Spirits 53

5a. Financials - Banks 54-74Axis Bank 59Bank of Baroda 60Bank of India 61Canara Bank 62Federal Bank 63HDFC Bank 64ICICI Bank 65Indian Bank 66IndusInd Bank 67ING Vysya Bank 68Kotak Mahindra Bank 69Oriental Bank 70Punjab National Bank 71State Bank of India 72

Union Bank 73Yes Bank 74

5b. Financials - NBFC 75-84Bajaj Finance 77HDFC 78IDFC 79LIC Housing Finance 80M & M Financial Services 81Power Finance Corporation 82Rural Electricfication 83Shriram Transport 84

6. Healthcare 85-104Alembic Pharma 91Biocon 92Cadila Healthcare 93Cipla 94Divi ’s Laboratories 95Dr Reddy ’s Labs. 96GSK Pharma 97Glenmark Pharma 98IPCA Laboratories 99Lupin 100Ranbaxy Labs. 101Sanofi India 102Sun Pharmaceuticals 103Torrent Pharma 104

7. Media 105-115D B Corp 109Dish TV 110HT Media 111Jagran Prakashan 112PVR 113Sun TV Network 114Zee Entertainment 115

8. Metals 116-128Hindalco 120Hindustan Zinc 121Jindal Steel & Power 122JSW Steel 123Nalco 124NMDC 125Sesa Goa 126SAIL 127Tata Steel 128

9. Oil & Gas 129-144BPCL 133Cairn India 134GAIL 135Gujarat State Petronet 136HPCL 137IOC 138Indraprastha Gas 139MRPL 140Oil India 141ONGC 142

Petronet LNG 143Reliance Industries 144

10. Real Estate 145-158DLF 150Godrej Properties 151Indiabulls Real Estate 152Jaypee Infratech 153Mahindra Lifespaces 154Oberoi Realty 155Phoenix Mills 156Prestige Estate Projects 157Sobha Developers 158

11. Retail 159-165Future Retail 162Jubilant Food 163Shoppers Stop 164Titan Company 165

12. Technology 166-180Cognizant Technology 170HCL Technologies 171Hex aware Technologies 172Infosys 173KPIT Technologies 174Mindtree 175MphasiS 176Persistent Systems 177TCS 178Tech Mahindra 179Wipro 180

13. Telecom 181-189Bharti Airtel 186Bharti Infratel 187Idea Cellular 188Reliance Communication 189

14. Utilities 190-203CESC 194Coal India 195Jaiprakash Power Ventures 196JSW Energy 197NHPC 198NTPC 199Power Grid Corp. 200PTC India 201Reliance Infrastructure 202Tata Po wer 203

15. Others 204-213Arvind 204Bata India 205Castrol India 206Gujarat Pipavav Port 207Just Dial 208Kaveri Seeds 209Sintex Industries 210Symphony 211UPL 212V-Guard Industries 213

Note: All stock prices and indices for Section C as on 31 March 2014, unless otherwise stated

Section A: India Strategy - India Power League 2014 ............................................................... A1-77

Section B: 4QFY14 Highlights & Ready Reckoner ..................................................................... B1-12

Section C: Sectors & Companies .............................................................................................. C1-213

Investors are advised to refer through disclosures made at the end of the Research Report.

A–1April 2014

India Strategy | India Power League 2014

BSE Sensex: 22,386 S&P CNX: 6,704

India Power League 2014Elections outcome and macro improvement to drive market returns

4QFY14 PREVIEW | Dollar earnings remain key; domestics bottoming out:Earnings rebound sustained albeit at a slower pace; Sensex PAT up 13%4QFY14 earnings for Sensex will grow 13% YoY, continuing the trend of last couple ofquarters. Weak currency will be the key driver of YoY earnings growth in 4Q. With this,we expect FY14 Sensex EPS to grow 12% to INR1,331, a 1% upgrade from INR1,317estimated in our 3QFY14 Preview and 3% upgrade from lows.� We expect MOSL Universe of 148 companies (excluding RMs) to report aggregate

4QFY14 PAT growth of 10% YoY, lower than 15% YoY witnessed in 3QFY14.� 4QFY14 trends mimic 9MFY14 with non-cyclical and global-facing sectors

outperforming their cyclical and domestic-facing counterparts.� Significant divergence in earnings exists within sectors. For e.g., ABB, Siemens’

PAT will grow, but BHEL’s will de-grow. Eicher and Tata Motors PAT will grow, butTVS and M&M PAT will de-grow.

� Margins have bottomed out and is showing signs of recovery. Sales rebound innext few quarters should further aid operating leverage.

� Expect Sensex 4QFY14 PAT to grow 13% YoY, third consecutive quarter of double digitgrowth following negative growth in 1QFY14. Top PAT growth companies are: TCS(+49%), Dr. Reddy’s Labs (+39%), Wipro (+33%), HDFC Bank (25%) and Sun Pharma(+23%). The top 5 PAT de-growth companies are expected to be largely cyclicals:BHEL (-46% YoY), SBI (-17%), Hindalco (-16%), M&M (-9%) and Maruti (-7%).

India Strategy

Expect 4QFY14 Sensex PAT growth in double digit; but still lower than LPA of 17%

ECONOMY | Gradual recovery underway; election to alter the pace� India has been seeing early signs of improvement in various macroeconomic

parameters. The twin deficit problems have been addressed with FY14 CADexpected at a 6-year low. Fiscal deficit has been put firmly on a consolidation pathdespite a revenue constrained scenario emerging from a low growth scenario.

A–2April 2014


� Various measures taken by UPA-II in the last 12 months have led to a gradualimprovement in the industrial outlook. We believe these events would add 50bp+to GDP growth in FY15. Inflation which was the biggest irritant for RBI/Governmentfor the last four years now seems to be finally coming under control.

� Elections 2014 are expected to provide a positive outcome with opinion pollsindicating a NDA-led Government. This can have a significant impact on thesentiments towards capital flows, business and consumer confidence. While itwould be a mammoth task requiring several big measures to push GDP growthback in to the desired range of 7%+, the first six months can see sentiments playinga significant role, particularly reflecting in capital flows.

� In this note, we explain the recovery in various macroeconomic parameters andhow sentiment-led capital flows can positively impact some of these outcomes.

FY14 fiscal deficit is lowest in six years CAD/GDP to remain within sustainable Falling inflation would create roomlimits in FY15 to cut rates

ELECTIONS | India Power League 2014 – Let the bugle blow: BJP-led NDAcould get 250+ seats as per latest opinion polls� India is on the cusp of what promises to be one of the most definitive moments in

more than a decade. The most-awaited and important elections in the world’slargest democracy will begin on April 7 to decide the fate of 1.2b+ population. Thecounting of votes would be conducted on May 16th (Friday). The 16th Lok Sabhaelections assume significance as India could be on the cusp of a change whichcould redefine its landscape for the next decade.

� As the world’s biggest democracy goes to polls, it is a spectacle unlike any other, amammoth juggernaut that encompasses all and grips the attention of not just theentire nation, but the world at large. Recent opinion polls have indicated that BJPled NDA are within a striking distance of a majority, an outcome that will be wellcheered by the markets.

� We have been regularly covering our views on various election related topics inour India Politics thematic titled MANDATE 2014. As India goes to poll, we presentto you the likely outcome of elections as projected by the opinion polls, alongwith a glimpse of the achievements of NDA during their 1999-2004 regime.

Refer to our India Politicsthematic titled Mandate2014 - Volume 4

http://ftp.motilaloswal.com/emailer/Research/INDIAN POLITICS-20140407-MOSL-SU-24PG.pdf

A–3April 2014


MARKETS | Excitement - Yes; Euphoria - Not yet: Euphoria is reflected invaluations, which are below averages� Indian markets have rallied by 9% in the last two months breaking the range of the

past six years. BSE Sensex closed at 22,386, all time high. This has also been aidedby inflows of more than USD4b by FIIs in 4QFY14 which was driven by expectationsof a stable government post elections.

� Even though beaten down sectors have rallied in past couple of months, mostsectors are still trading at significantly low valuations at the bottom of their earningscycle. Thus, while index levels are at life-time high, market valuations are stillbelow historical averages at 14.7x.

� We believe that there are already trends of improvement in economic growth andcorporate profitability; currency and inflation has been kept under control, fiscaldeficit has also improved. We believe that a likely BJP-led NDA government couldprovide a fillip to the economic growth and corporate profit trajectory, whichcould aid further re-rating of the markets.

NDA's strong momentum has continuously led to surge in seats Vote share percentage for NDA expected to be highest ever!

Sensex valuations remain subdued despite markets at high

14.72.4

CORPORATE INDIA | Many sectors are poised well to leverage growth cycle� Over the last 3 years, as the economy went through a downcycle, several domestic

facing sectors got severely impacted. While a downcycle brings pressure on growth,margins and earnings, many managements use this period to consolidate / get morecost efficient. Several top Indian companies have worked hard to minimize theimpact of this downcycle; infact are ending this phase with a position of strength. Inthis section, we highlight few of these names, which also feature as our top allocationin the Model portfolio (namely ICICI Bank, Maruti, L&T, ACC etc).

A–4April 2014


Sens

ex P

E R

ange

(x)

STRATEGY: Navin Agarwal ([email protected]) | Rajat Rajgarhia ([email protected])

STRATEGY: Ashish Gupta | ECONOMIST: Dipankar Mitra

Sources of exhibits in this section include RBI, CMIE, Bloomberg, IMF, UN, Rogers International, Industry, Companies, and MOSL database

� As the growth cycle recovers, this will also have a positive impact on sectors,where the cyclicality plays a big role in the earnings momentum. These sectorsearnings are directed co-related to the underlying economic growth and has seenthe pain during the last 3 years. We are positive on these companies, where themomentum is likely to turn positive in FY15 (namely SBI, BHEL, ONGC etc).

� Lastly, we highlight the impact of changes from domestic business environmenton few of the export facing sectors. These companies had benefitted significantlyduring this phase of currency depreciation from 45 to 61, and are likely to consolidateas the currency shows signs of stability to positive bias.

VALUATIONS | Growth recovery in earnings to drive market returns: Cyclicalsto outperform on moderate recovery� Indian markets have delivered healthy 15% CAGR returns over the past 11 years

from FY04 to FY14. This period encompasses two big cycles: (i) Upcycle - FY04 toFY08 and (ii) Downcycle - FY09 to FY14. Our analysis of these two cycles presents uswith interesting facts.

� The phase of Upcycle was characterized by GDP growth moving from 4.0% in FY03to 9.3% in FY08. Cyclicals were huge outperformers to Sensex with Capital Goodsoutperforming Sensex by 3.2x, Metals by 1.8x, Utilities and Oil & Gas by 1.5x.Consumer, Healthcare and Technology were underperformers delivering merelyhalf the Sensex returns.

� Interestingly, Financials was the only sector which outperformed the Sensex inboth the cycles. Of this, Private Banks outperformed by 2.6x in Upcycle and 1.4x inthe Downcycle.

� Downcycle (FY09-FY14) saw GDP rates falling sharply from 9.3% in FY08, 6.7% inFY09 to merely 4.8% in FY14. During this period, Consumer sector was the bestoutperforming sector with 2.6x market returns driven by healthy earnings. Globalnon-cyclicals like Healthcare and Technology outperformed Sensex by 2.2x and1.9x respectively. Utilities, Metals and Telecom underperformed the Sensex bymore than half.

� In this backdrop, we present our Model portfolio to leverage the next cycle. Our topbets are ICICI Bank/SBI, Maruti/Tata Motors, L&T, ACC/Shree Cement, ONGC/BPCL.

Sensex levels at different valuations2 Year CAGR (%)

EPS CAGR (%) 12 15 18

EPS FY14 1,331 1,670 1,760 1,852

Sensex Return (%)

12x -29 -10 -6 -1

15x -11 12 18 24

18x 7 34 42 49

Sensex Values

Current (14.7x) 22,386 24,516 25,837 27,187

12x 15,967 20,040 21,120 22,224

15x 19,959 25,050 26,400 27,780

18x 23,951 30,060 31,680 33,336

A–5April 2014


4QFY14 PREVIEW Dollar earnings remain key; domestics bottoming outEarnings rebound sustained albeit at a slower pace; Sensex PAT up 13%

4QFY14 earnings for Sensex will grow 13% YoY, continuing the trend of last couple of quarters.Weak currency will be the key driver of YoY earnings growth in 4Q. With this, we expect FY14Sensex EPS to grow 12% to INR1,331, a 1% upgrade from INR1,317 estimated in our 3QFY14Preview and 3% upgrade from lows.� We expect MOSL Universe of 148 companies (excluding RMs) to report aggregate 4QFY14

PAT growth of 10% YoY, lower than 15% YoY witnessed in 3QFY14.� 4QFY14 trends mimic 9MFY14 with non-cyclical and global-facing sectors outperforming

their cyclical and domestic-facing counterparts.� Significant divergence in earnings exists within sectors. For e.g., ABB, Siemens' PAT will

grow, but BHEL's will de-grow. Eicher and Tata Motors PAT will grow, but TVS and M&MPAT will de-grow.

� Margins have bottomed out and is showing signs of recovery. Sales rebound in next fewquarters should further aid operating leverage.

� Expect Sensex 4QFY14 PAT to grow 13% YoY, third consecutive quarter of double digitgrowth following negative growth in 1QFY14. Top PAT growth companies are: TCS (+49%),Dr. Reddy's Labs (+39%), Wipro (+33%), HDFC Bank (25%) and Sun Pharma (+23%). The top5 PAT de-growth companies are expected to be largely cyclicals: BHEL (-46% YoY), SBI(-17%), Hindalco (-16%), M&M (-9%) and Maruti (-7%).

INR appreciated QoQ, but down 14% YoY Domestic 2Ws volume growth YoY (%)

Macro-economic business environmentThe macro-economic backdrop for 4QFY14 has remained adverse for most domesticbusinesses with muted IIP and no improvement in the investment climate.

INR appreciated marginally QoQ, but YoY depreciation of 14% will continue to be atailwind, favoring specific global-facing sectors. We expect INR to strengthen in FY15,which is likely to act as a headwind for global-facing sectors. The impact of INRstrengthening versus USD should start manifesting from 2QFY15 onwards.

Going forward, we expect domestic-facing sectors to benefit from a positive outcomeof 2014 general election and ensuing business-friendly economic policies. Some earlysigns of improvements in macro-economic climate are visible in recent businessexpectation index and consumer confidence surveys. This is also reflected in ourexpectations of improving consumer demand represented by 2-wheeler sales volumein FY15.

14% INR depreciation YoY

USD/INR

A–6April 2014


Expect 4QFY14 aggregate PAT to grow 10% YoY; Sales growth at 12%We expect MOSL Universe of 148 companies (excluding RMs i.e. 3 major oil refining &marketing companies IOC, BPCL, HPCL) to report aggregate 4QFY14 sales growth of12% YoY. The double digit growth in sales continues for the third consecutive quarterled by Technology, Oil & Gas (ex RMs), Healthcare and Private Banks.

EBITDA margins have bottomed out. Expect 4QFY14 EBITDA margin at 19.9% slightlylower than long-period average of 20.5%. The margins have shown continuousimprovement in last four quarters. We expect expansion in EBITDA margins to continueon the back of expected rebound in sales growth in next few quarters thereby aidingthe operating leverage.

Companies within MOSL coverage universe are expected to report aggregate 4QFY14PAT growth of 10% YoY. This is lower than 15% YoY witnessed in 3QFY14 and the long-period average of 14%. However, we expect substantial improvement in PAT growthnext year given a lower base in 1HFY14 (PAT growth of 0% and 8% in first two quarters,respectively) and expected economic recovery in 2HFY15.

4QFY14 results reflect a weak performance by cyclical sectors on the back of mutedeconomic and investment environment, supported by strong performance by non-cyclical sectors.� Technology, Telecom, Healthcare and Media are expected to report >20% of PAT

growth. Private Banks, Consumer and Utilities are expected to report >10% PATgrowth.

� Capital Goods and PSU Banks are expected to report significant decline in PATgrowth. Other cyclical sectors such as Auto, Metal, Cement and Real Estate areexpected to report near flat PAT growth.

� While the overall Financials sector is expected to de-grow with -0.5% PAT growth,Private Banks and NBFCs are expected to perform better clocking 13% and 14%PAT growth, respectively. PSU Banks are expected to report an aggregate 22%decline in PAT.

4QFY14 mirrors 9MFY14 with exception of Cement, Real Estate and Auto

A–7April 2014


4QFY14 performance of MOSL Universe by sector: Non-cyclicals outperform cyclicalsSECTOR Sales EBITDA Net Profit PAT Delta EBITDA Margins

Mar-14 Var % Var % Mar-14 Var % Var % Mar-14 Var % Var % Sh. % Sh.% Mar-14 Chg bp

YoY QoQ YoY QoQ YoY QoQ

High growth sectors 3,126 20 3 637 22 1 360 32 -2 37 97 20 31

Telecom (4) 376 11 2 124 19 3 23 146 41 2 15 33 201

Technology (10) 634 27 1 168 40 1 126 32 -2 13 34 26 253

Oil Excl. RMs (9) 1,836 20 4 278 14 2 169 26 -4 17 40 15 -84

Healthcare (14) 240 20 0 56 26 -4 37 21 -5 4 7 23 127

Media (7) 40 14 -5 11 19 -6 5 20 -11 1 1 28 120

Med/Low growth sectors 2,779 9 6 821 11 13 440 8 16 45 38 30 74

NBFC (8) 99 20 9 94 17 11 63 14 12 6 9 95 -216

Private Banks (8) 158 14 4 139 18 4 82 13 3 8 11 88 274

Consumer (13) 340 12 1 69 14 -2 48 12 -5 5 6 20 28

Utilities (10) 618 3 6 204 11 26 119 10 33 12 12 33 241

Real Estate (9) 52 -6 4 17 -10 9 6 5 12 1 0 33 -144

Cement (8) 210 9 21 42 9 58 21 2 119 2 0 20 8

Others (10) 84 10 5 15 17 5 8 1 1 1 0 18 103

Metals (9) 1,217 10 5 240 8 11 93 0 17 9 0 20 -39

PAT de-growth sectors 1,909 6 10 415 2 9 182 -15 11 19 -35 22 -95

Auto (9) 1,066 8 2 147 15 -2 74 -1 -7 8 -1 14 77

Retail (4) 64 8 4 6 9 -2 2 -2 1 0 0 9 11

PSU Banks (8) 305 15 5 199 1 5 65 -22 11 7 -20 65 -915

Capital Goods (8) 475 -3 40 64 -18 79 40 -24 72 4 -14 13 -239

MOSL Excl. RMs (148) 7,813 12 6 1873 12 8 982 10 8 100 100 24 1

Sensex (30) 5,304 14 5 1179 12 7 631 13 6 22 -23

4QFY14 PAT growth in double digit; but still lower than LPA of 14%

4QFY14 sales growth same as previous two quarters; well below the LPA of 20%

A–8April 2014


4QFY14 EBITDA margin (Ex Financials & RMs) at 19.9%; have bottomed out, shows signs of recovery

4QFY14 PAT margin (Ex Financials & RMs) at 10.7%; showing signs of recovery, improving for third consecutive quarter

Companies reporting PAT de-growth second lowest in the last 11 quartersThe distribution of PAT growth across sectors continues to improve.� 32% of 148 companies in MOSL Universe are expected to report PAT de-growth.

This is lowest level in the last 10 quarters.� 41% of companies are expected to report >15% PAT growth, highest in past 5

quarters (same as 2QFY14).� However, companies with >15% PAT growth contributed only 39% to the aggregate

PAT which is among the lowest observed in several quarters.

PAT distribution improving; Percent of companies reporting de-growth is lowest in last 7 quarters

A–9April 2014


Significant divergence within sectorsOur analysis of sectors baskets within MOSL Universe indicates significant intra-sectordivergence in expected earnings growth. This observation is across all sectors exceptConsumers where all companies are expected to report positive albeit varying growthrates.

Significant divergence observed in expected PAT within companies across all sectors

PAT growth negative PAT growth positive

Utilities

Technology

Oil & gas

Metals

Healthcare

Financials-NBFCs

Financials-PSUs

Private Banks

Consumers

Cements

Capital goods

Auto

A–10April 2014


Consider the following divergent PAT performance across sectors:� Within Oil & Gas, GAIL and ONGC's PAT will grow at >50%, while Gujarat state

Petronet and Petronet LNG will de-grow at >-40%.� Within Metal, JSW Steel (+33%) and NMDC (+17%) will grow; while JSPL (-47%),

Hindustan Zinc (-19%) and Hindalco (-16%) will de-grow.� Within NBFCs, LIC Housing (+23%) and Bajaj Finance (+30%) will grow; while M&M

Financials (-22%) and Shriram Finance (-16%) will de-grow.� Within Capital Goods, ABB (+29%), Siemens (+55%) and Crompton Greaves (+93%)

will grow; while BHEL (-46%) and Thermax (-9%) de-grow.� Within Autos, Eicher (+13%), Tata Motors (+6%) and Bajaj Auto (+6%) will grow;

while TVS Motor (-14%), M&M (-9%) will de-grow.

Expect Sensex PAT growth of 13% YoY; cyclical-non-cyclical divide clearly visible� Based on our bottom-up estimates of the 30 constituent companies, Sensex 4QFY14

PAT is expected to grow 13% YoY versus 19% witnessed in 3QFY14. This is the thirdconsecutive quarter of double digit growth following a negative growth in 1QFY14.However, PAT growth is expected to lag long-period average of 17%, which hasbeen the case for 10 out of 12 previous quarters.

� The cyclical-non-cyclical divide is also clearly visible in Sensex with non-cyclicalsstraddling 8 out of top 10 PAT growth companies and all bottom 10 companiesbeing cyclical in nature.

� Nearly half of the constituent companies are expected to report double digitgrowth albeit many benefit from lower base in same quarter of previous year.

� Top PAT growth companies are: TCS (+49%), Dr. Reddy's Labs (+39%), Wipro (+33%),HDFC Bank (25%) and Sun Pharma (+23%).

� Top 5 PAT de-growth companies are expected to be largely cyclicals: BHEL (-46%),State Bank (-17%), Hindalco (-16%), Mahindra & Mahindra (-9%) and Maruti (-7%).

� We expect continued strong sales growth for Sensex at 14% broadly in line withprevious two quarters, but below its LPA (21%). Sensex sales growth has beenbelow its LPA for 9 out of previous 10 quarters. EBIDTA growth is expected at 12%versus 18% observed in 3QFY14.

� EBIDTA margins are expected to increase by 34bps YoY to 22.2% which the highestlevel in last 10 quarters. PAT margins are expected to marginally increase to 11.9%from 11.8% in 3QFY14.

Expect 4QFY14 Sensex PAT growth in double digit; but still lower than LPA of 17%

A–11April 2014


Expect 4QFY14 Sensex sales growth in double digit; but significantly lower than LPA of 21%

Sensex Companies 4QFY14E performance (INR b)Company Sales EBITDA PAT PAT Contb. EBITDA margin

Mar-14 Var % YoY Mar-14 Var % YoY Mar-14 Var % YoY (%)Growth (%) Mar-14 Var (bp)

High PAT Growth 1,315 14 433 26 228 51 36 108 33 314

Tata Power 101 12 28 49 11 748 2 14 27 681

GAIL 165 33 26 129 14 134 2 11 16 661

Bharti Airtel 223 14 72 19 11 119 2 9 32 143

ONGC 210 -2 111 8 52 54 8 26 53 463

TCS 217 32 68 45 54 49 8 25 31 277

Dr Reddy’ s Labs 35 6 9 31 5 39 1 2 26 479

Wipro 117 21 25 44 21 33 3 7 21 336

HDFC Bank 50 16 40 36 24 25 4 7 81 1164

Sun Pharma 39 35 15 34 11 23 2 3 39 -28

NTPC 158 -4 40 3 24 16 4 5 25 163

Med/Low PAT Growth 3,206 18 581 11 329 6 52 25 18 -115

ITC 93 13 31 16 22 14 3 4 34 82

ICICI Bank 44 15 44 22 26 12 4 4 101 628

Axis Bank 31 15 29 3 17 11 3 2 94 -1094

HDFC 23 14 24 12 17 10 3 2 105 -200

Infosys 130 25 36 30 26 9 4 3 28 114

Larsen & Toubro 198 10 25 10 17 8 3 2 12 5

Cipla 26 32 5 19 3 7 0 0 19 -196

Tata Motors 655 17 98 26 42 6 7 4 15 107

Bajaj Auto 49 2 10 17 8 6 1 1 20 257

Hind. Unilever 70 8 11 8 8 6 1 1 15 2

Sesa Sterlite 194 3 70 4 15 5 2 1 36 13

Tata Steel 413 19 45 3 9 3 1 0 11 -171

Reliance Inds. 1,078 28 79 1 57 1 9 1 7 -196

Coal India 203 2 75 4 62 0 10 0 37 67

Negative PAT Growth 783 -1 165 -9 75 -24 12 -34 21 -167

Hero Motocorp 64 5 6 6 5 -7 1 -1 10 10

Maruti Suzuki 125 -2 15 0 9 -7 1 -1 12 28

Mahindra & Mahindra 93 -7 13 -12 8 -9 1 -1 14 -67

Hindalco 220 6 23 11 7 -16 1 -2 11 46

State Bank 131 18 78 1 27 -17 4 -8 60 -1024

BHEL 151 -20 29 -37 18 -46 3 -21 19 -529

Sensex (30) 5,304 14 1,179 12 631 13 100 100 22 -23

Note: For Financials, Sales represents Net Interest Income, and EBITDA represents Operating Profit

A–12April 2014


4QFY14 Sensex EBITDA margin at 22.2%; appears to have bottomed out, showing signs of recovery

Nifty and the dollar divide: Another quarter of high impact� In 4QFY14, INR appreciated considerably against dollar from the lows, following a

period of sharp depreciation (2QFY14) and relative stability (3QFY14). Even thoughINR is at its 8 month high, on a YoY basis INR is down 14%, aiding growth ofexporters.

� We classified the 50 Nifty companies into (1) USD-denominated and (2) Others.The USD-denominated Nifty includes Technology, Healthcare, Metals, Oil & Gas(Reliance, Cairn) and Tata Motors' JLR operations and this now constitutes ~42% ofthe total Nifty earnings.

� USD-denominated Nifty is expected to clock aggregate PAT growth of 23% YoY,whereas others are likely to see a mere 4% PAT growth. Sales growth for USD-denominated Nifty will be 25% versus 3% for others.

� We expect the YoY currency impact to benefit the USD-denominated Universe foranother quarter. Post this, an appreciating INR and the base effect (weak INR inFY14 versus FY15) would curb the currency driven PAT growth of such sectors from2QFY15 onwards.

Nifty - USD sales growth continues to grow EBITDA growth (%)

A–13April 2014


PAT growth (%) EBITDA margin (%)

Full year FY14: Aggregate PAT to grow 6%� FY14 will continue to witness strong performance by non-cyclical sectors and a

continued weak performance by the cyclical counterparts. While Technology,Telecom, Healthcare, Media, Private Banks and Consumer sectors are expectedto report PAT growth, cyclical sectors such as Capital Goods, PSU Banks, Cementand Real Estate will report significant de-growth.

� We expect MOSL Universe of 161 companies (ex RMs) to report aggregate FY14PAT growth of 6% YoY same as observed in FY13, dragged by:� Maiden de-growth in Financials (-3%), a heavyweight sector accounting for

26% of FY13 aggregate PAT.� Sharp de-growth in Capital Goods (-28%), Cement (-34%) and Metals (-5%;

de-growing for third consecutive year), and lower growth in Utilities (2%).� Muted sales growth: We expect sales growth for MOSL Universe (Ex RM and

Financials) to remain relatively muted at 11%, same as in FY13.� Easing pressure on EBITDA margins: Pressure on EBITDA margins appears to be

easing out. Aggregate EBITDA margins are expected to be up 86bp YoY. 8 out of 13sectors are expected to report increase in EBITDA margins. Interestingly, all ofthese sectors (Auto, Consumer, Healthcare, Metals, Technology, Telecom, Utilitiesand Others) will report increase in EBITDA margins higher than the aggregateincrease reported - showing the breadth of margin improvement.

� Sensex leaders and laggards: Top 5 PAT growth companies are Tata Steel (+2048%)Tata Power (+80%), Dr Reddy's (+59%), Sun Pharma (+53%) and Tata Motors (+42%).Top 5 PAT de-growth companies are expected to be largely cyclicals: BHEL (-46%), Sesa Sterlite (-31%), Hindalco (-30%), State Bank (-25%) and Larsen & Toubro(-19%).

A–14April 2014


Overall sectoral trends in 4QFY14 earnings� In Consumers, all companies will report PAT growth. However, the PAT growth will

be slowest in last 20 quarters at 11.5%.� In Private Banks, 8 out of 10 companies in MOSL Universe will report PAT growth,

however, the growth will be second lowest in last 20 quarters.� Capital Goods' PAT continues to de-grow for the seventh consecutive quarter.� Cement will reverse the trend of continuous PAT de-growth for last five quarters

by registering a marginal growth of 2%.� Only two companies are expected to de-grow PAT in each of Private Banks, NBFCs,

Healthcare, Technology, Media and Capital Goods. In contrast, in PSU Banks andReal Estate, only one and two companies are expected post PAT growth,respectively.

FY14 Annual performance - MOSL Universe (INR b)Company Sales EBITDA EBIDTA Margin (%) PAT

FY14E Chg. (%) FY14E Chg. (%) FY14E Chg. (bp) FY14E Chg. (%)

High PAT growth 9,622 17 2,064 25 21 141 1,033 29

Telecom (4) 1,448 11 477 20 33 254 71 58

Healthcare (14) 964 20 234 20 24 9 149 31

Technology (10) 2,456 27 644 32 26 105 481 29

Auto (9) 4,270 13 605 25 14 133 279 23

Others (10) 317 14 56 21 18 99 30 20

Media (8) 167 17 48 16 29 -15 23 20

Medium PAT growth 11,902 11 2,152 8 18 -43 1,291 8

Consumer (13) 1,314 10 272 13 21 38 190 14

Oil & Gas (13) 17,592 7 1,473 8 8 10 794 11

Excl. RMs (10) 8,364 13 1,223 8 15 -64 703 9

Utilities (10) 2,071 3 642 6 31 106 389 2

Retail (3) 153 11 14 4 9 -67 9 1

Low PAT growth/de-growth 9,832 7 3,159 5 32 -65 1,379 -8

Financials (31) 2,500 14 1,889 9 76 -340 880 -3

Private Banks (10) 641 18 556 23 87 322 329 19

NBFC (9) 365 23 345 21 94 -199 227 17

PSU Banks (12) 1,494 10 989 -1 66 -719 324 -25

Metals (9) 4,541 8 864 9 19 22 306 -5

Real Estate (9) 221 13 75 6 34 -236 24 -18

Capital Goods (8) 1,459 -2 146 -18 10 -208 96 -28

Cement (13) 1,112 0 184 -22 17 -461 73 -34

MOSL Excl. RMs (161) 31,356 11 7,375 11 24 -9 3,703 6

MOSL (164) 40,584 9 7,625 11 19 31 3,794 6

Sensex (30) 10,806 13 2,259 21 21 137 1,165 15

Nifty (50) 12,381 15 2,605 21 21 105 1,355 15

A–15April 2014


AUTOS� 4QFY14 PAT growth for our Automobile Universe is expected to be flat. 2Ws PAT

growth expected to drop from 10% in 3QFY14 to flat due to inventory loss onexcise duty reduction coupled with continued pressure on margins led by weakmacro-economic environment.

� AL and TTMT S/A business would continue to report losses driven by weakness involumes coupled with high discounting pressure. While TTMT is expected to report6% growth in consolidated PAT despite continued losses in S/A business, MSIL andM&M are expected to report decline.

� Overall, PAT growth for 4Ws also expected to be flat.

Other sectorhighlights

2Ws PAT growth to decline on inventory loss on excise duty cut JLR continues to form dominant share of Auto PAT

CAPITAL GOODS� For 4QFY14, we expect Revenues, EBITDA, PAT to decrease 4%, 20%, 26%,

respectively. Overall, we expect revenue growth of 10% each from L&T and Havells.We model 20% YoY revenue de-growth in BHEL considering the slower pace ofproject execution. We also model 4% revenue de-growth in Thermax.

� Slower pace of project execution will lead to lower operating leverage, leading to20% YoY decrease in EBITDA for 4QFY14. We expect ABB to report 28% EBITDAgrowth, as its efforts towards localization based on their guiding principles of "InCountry - For Country" have started showing results.

� Key triggers to be keenly watched would include i) guidance given by L&T for FY15order inflows, ii) margins at which BHEL has bagged orders worth INR122b in 4QFY14under a constrained environment, iii) volume pick up in Cummins India ahead ofCPCB 2 norms implementation, iv) margin profile in ABB's power systems businesswhich saw maximum increase in EBIT margins in 4QCY13, and v) order inflows ofThermax from its domestic customers, which had severely dipped in 2QFY14.

Capital Goods PAT continue to de-grow

PAT growth YoY (%)

A–16April 2014


CEMENT� Expect all north based players to post strong QoQ growth realizations and

profitability on the back of sharp rise in cement prices in north, central, east andGujarat market.

� Southern players to witness decline in profitability, and likely PAT losses due toweak price momentum in 4QFY14.

Cement will witness PAT growth after 5 quarters of consecutive decline

CONSUMER� 4QFY14 performance will remain subdued given the continued moderation in

volume growth, rising competition, weak pricing growth and higher tax rates.� We expect Consumers to post 12% sales growth and 12% PAT growth in 4QFY14.� Select raw materials have seen substantial price increase YoY, posing threat to

gross margins in a slowing consumption environment.� We expect management commentaries to remain soft and in some cases even get

more pessimistic for FY15 guidance.

Consumer PAT growth slows down

PAT growth YoY (%)

PAT growth YoY (%)

A–17April 2014


FINANCIALS� State-owned banks: Earnings are expected to decline (19%) on a YoY basis driven

by higher credit cost and MTM provisions. However, incremental contribution fromtop-line growth is expected to improve (NII growth expected to be 16%+ YoY postseven quarters). 4Q is seasonally best quarter for recovery and coupled with saleof loans to ARCs headline stress loans could be contained - key trend to be watched.

� Private Banks: On back of moderation in loan growth and peak NIMs, NII growth isexpected to moderate (14% YoY). Opex flexibility is expected to compensate forhigher credit cost and earnings growth is expected to be 13% YoY. HDFCB PAT growthis expected to be highest among peers at 25% YoY.

Healthy PAT growth for Private Banks; YoY decline in PAT for PSU Banks to continue (INR b)

HEALTHCARE� Expect a strong quarter, led by strong growth in US generics and emerging markets

which will offset the slowing revenue growth in India (due to new pricing policy).� EBITDA margins likely to expand 120bp YoY, primarily driven by i) ~14% YoY

depreciation in INR and ii) improving sales mix. Dr. Reddy's, Ranbaxy and Bioconare also expected to benefit from low-base effect.

� Further, INR has appreciated 2% QoQ; hence, there could be a marginal MTM gainon forex liabilities. However, expect sector PAT to grow 20% YoY, slower than EBITDAgrowth of 27% due to higher taxes.

� Key outperformers are expected to be Dr. Reddy's, Ranbaxy, Glenmark, IPCA Labs,Biocon and Alembic Pharma. GSK Pharma's operations may continue to be impactedby supply-chain related issues, while Sanofi India may continue its high growthmomentum, driven by exports and products exiting DPCO-1995.

Healthcare PAT continues its double digit growth

PAT growth YoY (%)

A–18April 2014


METALS� Indian metal companies' aggregate revenue is expected to grow +5% QoQ driven

by 4% growth in steel deliveries, 1% improvement in steel realization, and 7%increase in zinc prices.

� Aggregate EBITDA is expected to increase 12% QoQ helped by strongerperformance of Tata Steel, SAIL, NMDC and SSLT. Aggregate adjusted PAT is expectedto increase 23% QoQ.

� NMDC is likely to post historically highest ever quarterly deliveries and profithelped by demand and slurry pipeline.

� JSPL's EBITDA will be hurt by shut downs of blast furnaces and power plants duringthe quarter. Nalco's performance is likely to remain muted due to weak LME.

EBITDA to increase 12% QoQ

TELECOM� Sharp rebound at PAT level would be led by a strong 14-25% YoY EBITDA growth for

wireless operators.� While YoY wireless traffic growth of 4-6% for GSM incumbents would be lowest

historically, a 6-9% YoY improvement in revenue per minute would support sharpPAT growth.

Telecom will witness strong growth led by improvement in RPM

PAT growth YoY (%)

A–19April 2014


UTILITIES� We expect utility companies in our coverage to report aggregate 4QFY14 revenue

growth of 3% YoY and PAT growth of 10% YoY. PAT growth is driven mainly by TataPower given benefit of compensatory tariff hike. Also, we expect NTPC PAT growthat 17% led by higher PAF and PLF.

� Key draggers are Reliance Infrastructure (down 40% YoY) owing to lower EPCrevenues, while JSW energy PAT is expected to be muted (down 29% YoY) led bylower generation and merchant realistion.

� CESC and Powergrid are expected to report flat PAT growth of 4% and 5% YoY,respectively.

A–20April 2014


Intra-sector 4QFY14 earnings divergence (%)Sectors Sector +30% Growth 15-30% growth 0-15% growth -ve earnings Earnings

Growth (%) growth (%) momentum

High growth sectors

Telecom 146 RCOM: LP, BHARTI: 119,

BHIN: 42, IDEA: 40

Technology 32 TCS: 49, HCLT: 41, HEXW: 28, TECHM: 26, INFO: 9 KPIT: -3

PSYS: 36, WPRO: 33 MTCL: 18

Oil & Gas 26 MRPL: LP IGL: 24 OINL: 14, CAIR: 12, GUJS: -14,

(Ex Rms) GAIL: 134, ONGC: 54 RIL: 1 PLNG: -46

Healthcare 21 TRP: 51, SANL: 49, SUNP: 23, DIVI: 22, GNP: 11, CIPLA: 7 GLXO: -13,

BIOS: 41, ALPM: 40, LPC: 21, RBXY: 21 CDH: -19

DRRD: 39

Media 20 JAGP: 71 Z: 29, DBCL: 13, PVRL: PL,

HTML: 22 SUNTV: 2 DITV: Loss

Medium/Low growth sectors

NBFC 14 BAF: 30, POWF: 24 HDFC: 10, SHTF: -16,

LICHF: 23 IDFC: 0 MMFS: -22

Banks-Private 13 HDFCB: 25, YES: 14, ICICIBC: 12, FB: -8,

IIB: 19 AXSB: 11, VYSB: 1 KMB: -18

Consumer 12 MRCO: 32 RDCK: 20, DABUR: 19, ITC: 14, NEST: 11,

APNT: 16, SKB: 16 CLGT/PIDI/HUVR: 6,

GCPL: 4, BRIT/UNSP: 2

Uti l i t ies 10 TPWR: 748 NTPC: 16 PWGR: 5,CESC: 4, JSW: -29,

PTCIN: 2, RELI: -40,

COAL/NHPC: 0 JPVL: Loss

Real Estate 5 DLFU: LP PHNX: 11, JPIN: -12, SOBHA: -20

PEPL: 4 GPL: -25, IBREL: -36,

OBER: -47, MLIFE: -53

Cement 2 BCORP: 34 SRCM: 22, ACC: 20, GRASIM: 2 UTCEM: -9,

ACEM: 16 JPA: -22, ICEM: PL

Metals 0.4 SAIL: 119, NMDC: 17 SSLT: 5, HNDL: -16, HZ: -19,

JSTL: 33 TATA: 3 JSP: -47, NACL: -51

PAT degrowth sectors

Autos -1 EIM: 13, TTMT: 6, HMCL/MSIL: -7,

BJAUT: 6 MM: -9, TVSL: -14,

EXID: -22AL: PL

Retai l -2 SHOP: 21 JUBI: 5 TTAN: -4,

FRL: Loss

Banks - PSU -22 BoB: 11, INBK: -15, SBIN: -17,

BOI: -21, OBC: -24,

PNB: -30, CBK: -43

UNBK: -55

Capital Goods -24 CRG: 243, ABB: 29 LT: 8, HAVL: 8, TMX: -9,

SIEM: 55 KKC: 0 BHEL: -46

Earnings momentum: Represents number of companies in each of the growth brackets; PL: Profit to Loss; LP: Loss to Profit

4000

4 3 1

3 1 23

5 4 22

2 221

0 3 22

0 2 24

1 062

1 331

2 142

0630

0 1 21

2 1 23

0 071

1 1 35

1 4 08

1

A–21April 2014


FY15/16 ESTIMATES Expect rebound led by domestic sectorsExpect FY15/FY16 growth of 15-16%; Sensex FY14 EPS upgraded to 12% growth

� Aggregate PAT of MOSL Universe to grow 6% in FY14; Expect rebound in FY15 to 15% andin FY16 to 16% led by domestic sectors.

� The rebound expectation is partly driven by positive mandate in Election 2014 and ensuingfavorable investment policies of the new government. Sales growth of 11% in FY13 andFY14 is expected to moderate to 9% in FY15 before bouncing back to 11% in FY16.

� Sensex EPS to grow 12% in FY14 to INR1,331, a 1% upgrade from INR1,317 estimated inJan-14 and 3% upgrade since Oct-13. Expect Sensex EPS to accelerate to 15% growth inFY15 (to INR1,525) and a further to 18% in FY16 (to INR1,793).

� FY14 Sensex EPS upgrade of 1% is driven by Oil & gas and Utilities sector. Prominentupgrades include ONGC, Tata Power, NTPC, GAIL and Reliance. Top downgrades includeBharti Airtel, Coal India and Tata Steel.

Expect significant increase in FY15/FY16 PAT growth to 15% - 16%In FY15 and FY16, we expect the aggregate PAT growth to rebound to 15% and 16%,respectively, largely led by a bounce back in all sectors that underperformed in FY14(primarily domestic-facing). The rebound is likely to be driven by expected favorableelection results in May-14 and positive decisions on domestic investment friendlypolicies by the new government.

Expected FY14 PAT growth muted at 6%, but to growsignificantly in FY15/16 Sales growth to remain subdued

FY15/16 sector earnings: Some interesting observations� FINANCIALS: The sector which reported its maiden de-growth of 3% in FY14, should

see a rebound in PAT growth to 15% in FY15 and 16% in FY16. The growth reboundis expected on the back of expected easing credit cost pressure on PSU Banks.

� TELECOM: Easing competitive pressure would cause Telecom sector's earnings torebound in FY14 and FY15 after a four consecutive years of PAT decline. We expectthe sector to report 58% and 65% PAT growth in FY14 and FY15, respectively.

A–22April 2014


� AUTO: The rebound in FY14 PAT (23% growth estimate), is expected to continue inFY15 with 13%. While Tata Motors, M&M and Maruti led FY14 PAT growth; BajajAuto, Hero and Maruti are expected to contribute significantly to FY15 PAT growthprimarily driven by i) reviving volume growth, ii) no royalty burden for HeroMotoCorp, and iii) Full benefit of INR benefits in Maruti's earnings.

� CEMENT: Even after a sharp recovery in 4QFY14 (2% YoY), Cement is expected tode-grow 34% in FY14 owing to weak performance in 9MFY14 (-36%). However, webelieve that Cement would benefit from higher relizations and profitability onthe back of increase in prices in key markets. We expect the sector to grow 38% inFY15 and 32% in FY16.

� HEALTHCARE and TECHNOLOGY: Both these sectors grew at a healthy growth rateof 29%-31% in FY14 largely on the back of weaker INR. We expect the growth rateto ease in FY15 to 14-16% owing to a strengthened INR; especially in 2HFY15 owingto the base effect of weakened INR in 2HFY14.

� CAPITAL GOODS: Capital Goods' PAT de-grew significantly in FY14 (-29%) driven bydeclining earnings of the heavyweights BHEL and Larsen & Toubro. We expectLarsen & Toubro to lead a rebound in the earnings of the sector in FY15.

FY14-16 PAT CAGR of 15% will be driven by Financials, Technology, Auto and Telecom - MOSL Universe (INR b)Sector (No of Companies) EBIDTA EBIDTA Margin EBIDTA PAT Gr./ PAT

Sales Sale Gr./ (INR b) Margin Delta CAGR PAT CAGR delta(INR b) CAGR (%) (%) (bp) (%) (INR b) (%) (%)

FY14E FY14E FY15E FY16E (FY14 FY14E FY14E FY15E FY16E (FY14 FY14E FY15E FY16E (FY14 FY14-16) -16) -16) -16

High PAT CAGR (>20%) 9,147 9 11 17 14 1,606 17.6 84 42 18 606 24 30 27 30Telecom (4) 1,448 11 10 9 10 477 32.9 143 59 13 71 65 24 43 6Cement (13) 1,112 0 14 14 14 184 16.6 205 152 26 73 38 32 35 5Real Estate (9) 221 13 11 13 12 75 34.1 308 117 19 24 43 27 34 2Media (8) 167 17 14 15 14 48 28.5 88 125 19 23 22 32 27 1Auto (9) 4,270 13 13 23 18 605 14.2 31 38 20 279 13 33 23 12Others (10) 317 14 15 15 15 56 17.6 70 58 19 30 22 23 23 1Retail (3) 153 11 17 19 18 14 9.4 31 36 22 9 18 23 21 0Capital Goods (8) 1,459 -2 4 13 8 146 10.0 38 91 15 96 8 32 20 3Medium PAT CAGR (10-20%) 11,775 14 12 12 12 3,904 33.2 71 57 14 2,005 16 14 15 54Healthcare (14) 964 20 13 14 14 234 24.3 158 21 18 149 16 19 18 5Consumer (13) 1,314 10 15 15 15 272 20.7 33 12 16 190 18 16 17 6Technology (10) 2,456 27 12 15 13 644 26.2 -35 10 13 481 14 16 15 13Financials (31) 2,500 14 15 15 15 1,889 75.6 0 14 15 880 15 16 15 24 Private Banks (10) 641 18 17 19 18 556 86.7 -55 -27 17 329 17 17 17 10 PSU Banks (12) 1,494 10 14 14 14 989 66.2 12 0 14 324 16 15 16 9 NBFC (9) 365 23 13 14 14 345 94.4 13 52 14 227 12 15 13 5Metals (9) 4,541 8 10 7 8 864 19.0 90 23 11 306 19 4 12 6Low PAT CAGR (up to 10%) 10,435 11 4 4 4 1,865 17.9 94 140 11 1,092 8 9 8 16Oil & Gas (13) 17,592 7 2 3 2 1,473 8.4 85 61 11 794 10 8 9 12 Excl. RMs (10) 8,364 13 3 2 3 1,223 14.6 107 124 10 703 9 8 8 10Utilities (10) 2,071 3 9 9 9 642 31.0 -34 127 11 389 5 12 9 6MOSL Excl. RMs (161) 31,356 11 9 11 10 7,375 23.5 97 81 14 3,703 15 16 15 100MOSL (164) 40,584 9 7 9 8 7,625 18.8 117 90 14 3,794 15 16 15 NASensex (30) 10,806 13 8 12 10 2,259 20.9 109 83 15 1,165 15 18 16 NANifty (50) 12,381 15 8 12 10 2,605 21.0 111 80 15 1,355 14 17 16 NA

A–23April 2014


Financials, Technology and Auto contributes 50% to theFY14-16 PAT delta Sector-wise PAT CAGR (%)

FY14-16 Sensex EPS CAGR at 16%Our estimates of aggregated earnings of Sensex constituents suggest Sensex EPS CAGRof 16% over FY14-16. This is significantly higher than 8% CAGR witnessed during FY08-14. A significant part of EPS growth in FY15 would be driven by rebound in earnings ofcompanies that have delivered negative growth in FY14, namely State Bank (EPS down-31%), Larsen & Toubro (EPS down -19%) and Sesa Sterlite (EPS down -31%).

A clear mandate in Elections 2014 and favorable domestic investment policies wouldfurther aid growth rates in 2HFY15.

Sensex EPS: Expect rebound in FY14-16 with 16% CAGR versus 8% CAGR during FY08-14

A–24April 2014


Sensex performance: Expect FY14-16 PAT CAGR of 16%Sales EBIDTA EBITDA PAT PAT Contbn

Sales (INR b) CAGR Margin (%) CAGR (INR b) PAT YoY (%) CAGR Delta

Company FY14 FY15 FY16 % FY14 FY15 FY16 % FY14 FY15 FY16 FY14 FY15 FY16 % %

High PAT Growth (20%+) 5,170 5,708 6,256 10 27 28 29 16 424 553 666 -4 30 20 25 33

Bharti Airtel 858 943 1,023 9 32 34 34 12 29 52 66 28 79 26 50 5

Sesa Sterlite 712 823 893 12 36 36 35 10 52 73 74 -31 39 1 19 3

Hero MotoCorp 250 276 319 13 10 13 14 32 21 28 35 -1 34 24 29 2

Tata Steel 1,475 1,528 1,550 3 11 12 12 10 33 43 55 2,048 32 27 30 3

Larsen & Toubro 564 637 735 14 11 12 12 17 40 51 62 -19 28 22 25 3

HDFC Bank 185 223 274 22 79 82 83 25 85 107 133 27 25 25 25 7

Maruti Suzuki 448 508 584 14 12 13 14 23 29 37 47 21 25 29 27 2

State Bank 678 770 879 14 58 60 62 18 135 163 194 -25 20 19 20 8

Medium PAT Gr. (10-20%) 9,888 10,446 11,213 6 22 23 24 13 1,314 1,492 1,689 15 14 13 13 51

ITC 333 382 438 15 37 37 37 15 86 101 116 16 17 15 16 4

Infosys 503 550 629 12 27 27 28 14 104 121 141 11 16 17 17 5

Sun Pharma 164 187 231 19 44 43 43 18 47 54 62 53 16 13 15 2

HDFC 71 81 94 15 106 106 107 16 54 62 72 12 15 16 15 2

Bajaj Auto 201 226 261 14 21 21 21 15 33 38 44 8 14 17 16 2

Cipla 102 116 130 13 22 22 23 16 14 16 19 25 14 19 16 1

ICICI Bank 165 190 223 16 100 99 96 14 97 111 127 17 14 14 14 4

Reliance Inds. 4,028 3,917 3,917 -1 8 9 10 11 219 249 267 4 14 7 10 6

TCS 820 951 1,108 16 31 30 30 14 192 218 254 37 14 17 15 9

Axis Bank 118 137 159 16 94 90 91 14 61 69 80 18 14 16 15 3

Hindalco 863 990 1,072 11 10 11 11 20 23 26 23 -30 13 -9 2 0

Wipro 434 491 555 13 22 22 23 14 77 86 101 25 13 17 15 3

ONGC 1,808 1,911 2,037 6 34 34 37 12 271 301 339 12 11 12 12 9

Hind. Unilever 279 317 361 14 16 16 16 14 35 39 44 8 10 12 11 1

Low PAT Gr. (<10%) 5,634 6,119 7,190 13 18 17 17 12 576 579 696 8 0 20 10 16

Dr Reddy’s Labs 132 149 165 12 25 24 25 12 22 24 27 59 9 12 11 1

Coal India 691 729 779 6 27 27 28 8 169 180 193 -5 7 7 7 3

M&M 740 810 938 13 13 13 14 17 44 47 61 21 5 31 17 2

Tata Motors 2,330 2,633 3,366 20 16 16 16 19 147 153 212 42 4 39 20 9

Tata Power 87 92 97 5 29 31 29 6 17 17 17 80 4 1 2 0

NTPC 665 714 756 7 26 23 26 6 98 96 111 9 -2 15 6 2

GAIL 593 664 729 11 13 11 10 -1 45 39 39 11 -12 -1 -7 -1

BHEL 396 326 359 -5 12 10 13 0 35 24 37 -46 -33 56 2 0

Sensex (PAT free float) 20,692 22,273 24,659 9 22 23 24 14 1,165 1,336 1,570 12 15 18 16 100

FY14 Sensex EPS upgrade by 1%, FY15 Sensex EPS marginally up 0.4%Sensex EPS for FY14 has seen an upgrade of 1%, now expected to grow 12% to 1,331.The top upgrade drivers have been ONGC, Tata Power, NTPC, GAIL and RelianceIndustries. Top downgrades include Bharti Airtel, Coal India and Tata Steel.

We have also upgraded FY15 sensex EPS by 0.4% and FY16 Sensex EPS by 1.5%. Keyupgrades in FY15 are NTPC, Coal India and Bharti Airtel.

A–25April 2014


1% upgrade in FY14 Sensex EPS since December 2013

Stock-wise contribution to growth in FY14E Sensex EPS (INR)

Sensex companies FY14E EPS Upgrade/Downgrade in last 3 months (%)

A–26April 2014


0.4% upgrade in FY15 Sensex EPS and 1.5% upgrade in FY16 Sensex EPS since December 2013

Sensex companies FY15E EPS Upgrade/Downgrade in last 3 months (%)

Stock-wise contribution to growth in FY15E Sensex EPS (INR)

A–27April 2014


Gradual recovery underway; election to alter the pace

� India has been seeing early signs of improvement in various macroeconomic parameters.The twin deficit problems have been addressed with FY14 CAD expected at a 6-year low.Fiscal deficit has been put firmly on a consolidation path despite a revenue constrainedscenario emerging from a low growth scenario.

� Various measures taken by UPA-II in the last 12 months have led to a gradual improvementin the industrial outlook. We believe these events would add 50bp+ to GDP growth in FY15.Inflation which was the biggest irritant for RBI/Government for the last four years nowseems to be finally coming under control.

� Elections 2014 are expected to provide a positive outcome with opinion polls indicating aNDA-led Government. This can have a significant impact on the sentiments towards capitalflows, business and consumer confidence. While it would be a mammoth task requiringseveral big measures to push GDP growth back in to the desired range of 7%+, the first sixmonths can see sentiments playing a significant role, particularly reflecting in capital flows.

� In this note, we explain the recovery in various macroeconomic parameters and howsentiment-led capital flows can positively impact some of these outcomes.

ECONOMY

� Early signs of recovery in the economy� India underwent a massive crisis of currency during FY13 and 1HFY14. Since then,

change in Governorship at RBI has seen special measures to attract capital flows.Restrictions on gold also proved to be effective in bringing down the trade deficit.CAD has already corrected to the lowest in nearly five years (19 quarters).

� Thus, India which had become one of the most vulnerable among emerging marketeconomies, turned around quickly with an improvement in CAD/GDP ratio thatwas brought down to more sustainable levels of 1.7%, ahead of some of its peergroup EMs.

� Lower CAD as well as higher capital flows has starkly altered the direction of INRfrom a sharply depreciating one to that of an appreciating outlook.

Lowest CAD in nearly five years helps stabilize the INR INR volatility reduced after new Governor takes office

A–28April 2014


� A derived benefit of INR stability has been lower inflationary pressures fromimported prices.

� This has been further helped by stable oil prices despite some disquiet on thegeopolitical front.

� Relatively benign international commodity prices also helped moderation in prices.� This has helped consumer inflation that for long hovered around double digit

level to finally come down to ~8% levels. On the other hand, WPI too has moderatedbelow 5%, a level earlier considered as the tolerable limit by RBI.

� Fiscal consolidation too is progressing as per the revised medium term frameworkwith FY14 fiscal deficit to GDP ratio at 4.6%, a six year low. Diesel deregulation hashelped reduce the subsidy bill sharply. Lower deficit has aided the disinflationaryprocess while boosting confidence.

Both wholesale and consumer inflation is lower Food inflation has subsided

Oil prices have remained stable Other international commodity prices have remained benign

India ranked with one of the worst CAD/GDP amongstEMs a year back Since then the ratio has improved to sustainable levels

A–29April 2014


Corporate sector performance is showing some signs of growth improvement� Corporate sector revenue and profit growth has recovered from the low reached

during 1QFY14.� This has been accompanied by an improvement in the sentiment indicators.

Assessment of business expectation has turned around in the 4QFY14 accordingto RBI. Similarly, consumer confidence too has turned for better.

� Latest RBI survey also shows that the order book position of the corporate arerecovering along with some depletion of inventories.

� While concerns over credit cost remains, incremental stressed loan creation isdecelerating.

FY14 fiscal deficit is lowest in six years in a revenueconstrained environment Diesel deregulation has helped reduce the subsidy bill

Order books of construction and capital goods industry haveSome recovery in the order book (YoY %) shown strong momentum recently

Sensex EBITDA margin has recovered from the bottom

A–30April 2014


Sensex sales growth has stabilized and is expected to rebound 2HFY15

Sensex PAT growth returning to double digit, we expect a reversal to LPA in FY15

Credit quality concerns seemed past their trough Assessment of Business Expectations have turned up

Consumer sentiments too show an upturn

A–31April 2014


� Many of measures by UPA-II are yet to bear fruits� In the last one year or so, the government has taken various measures that are yet

to bear fruits.� Most of these measures concentrated on removing sectoral bottlenecks that had

come up on the way of implementation of various key projects.� In particular, the mechanism set up by the Cabinet Committee on Investment has

proved to be particularly helpful in addressing bottlenecks that have plaguedinvestments in large scale projects.

� Approval mechanism for environment and forest clearance and that for miningwere the focus areas that have seen significant easing in recent times. Blanketrelaxations have been granted in certain cases, e.g., linear projects including roads,gas pipes, railway lines, etc.

� Finally, the disinvestment code has been cracked too for the last two years despitedifficult market conditions.

Significant progress in removing sectoral bottleneckSector Measures

Mining 25%/50% brownfield expansion for coal production

Power New bidding documents issued. Bids are being invited by DISCOMs .

Compensatory tariff given for select private sector projects.

FRP for DISCOMs was approved and key loss making States have adopted the

same.

Integration of Southern grid with rest of India

Oil and gas Petrol price deregulated in June 2010

Phased de-regulation by INR0.5/ltr monthly price hike

LPG subsidized cylinder restricted to 12 per year

PDS Kerosene targetting supply, shift to cash transfer in medium term

Approved gas pricing of ~USD8.4/mmbtu (2x of current price)

Eased procedural issues for upstream E&P development

Roads De-linked forest and environment clearance

Relaxed environmental norms for linear projects

According secured status for debt for BOT assets

Complete equity disinvestment allowed by promoters

Ports De-regulated port tariffs for future projects

Approval for more than 100mt capacity addition

The CCI mechanism has improved the project clearance related governanceMinistry/Department No. of projects Amount (INRb)

Stuck Cleared Total Stuck Cleared Total

Power 80 90 170 5,507 3,970 9,476

Steel 45 4 49 4,673 258 4,932

Petroleum and Natural Gas 36 9 45 3,431 180 3,611

Coal 36 24 60 227 118 344

Mines 6 2 8 344 70 414

Road Transport and Highways 28 7 35 428 96 524

Rai lways 20 4 24 367 84 451

Others 37 11 48 1,280 347 1,627

Grand Total 288 151 439 16,256 5,123 21,380

A–32April 2014


While more projects are still being dropped, projects underimplementation has seen an upturn (INR b) Disinvestment process has seen positive momentum

Company FY13 Company FY14

NTPC 115 Axis bank 56

NMDC 60 IOCL 53

OIL 31 CPSE-ETF 30

SAIL 15 NHPC 21

HCL 8 BHEL 19

NALCO 6 PGCIL 16

Others 4 Others 13

Total 240 Total 214

� Can the new government accelerate the recovery process?As we articulated in the earlier section, a gradual recovery is underway, In this sectionwe show how a positive election outcome can impact the sentiments and flows, inturn providing a nudge to the key macro-economic variables. While this may play outin the first six months of new government assuming office, in the following periodreform measures would have to be initiated to sustain the momentum.� Thus while the GDP growth at present is at a low ebb, signs of incipient recovery is

visible and the incumbent government has laid a few groundwork that provides areasonable backdrop for the new government to accelerate the process of growthrecovery.

� The biggest catalyst in this regard would be the improvement in investmentclimate that can potentially attract a huge amount of capital inflow, in turn causinga few ripples across several macroeconomic variables.

� Given the build-up of equity and debt/FII flows, coupled with FDI acting on top ofan already corrected CAD/GDP, can potentially lead to sharp appreciation in INR.

� This might see phases when INR would rule above its par value in real term (asmeasured by the real effective exchange rate, REER). While this would pose apolicy dilemma, RBI may well chose an in between solution with absorbing largeamount of excess flows while at the same time letting the exchange rate appreciatesomewhat, as a self correcting mechanism for external balance.

� A derived benefit of somewhat hands off approach to exchange rate would be toexert a downward pressure on the exchange rate.

� In the normal case, barring possibilities of adverse monsoon development, thiswould take the CPI inflation lower than the trajectory set out by RBI creatingheadroom for rate cut during the middle of FY15.

A–33April 2014


CAD/GDP to remain within sustainable limits in FY15 Capital flows set to recover in FY15

This may result in large BoP surplus Surge in capital flow can cause sharp appreciation in INR

RBI can also rebuild forex reserves enhancing confidence ofINR may see some phases of overvaluation investors

A–34April 2014


Appreciating INR can lead to WPI core inflation falling to near zero Falling inflation would create room to cut rates

� Another source of downward pressure on interest rates can come from absorptionof forex reserves that releases liquidity in to the domestic system.

� Such liquidity glut is also a function of the magnitude of the influx of capital thatis received. Consequently, money supply and other banking indicators wouldreceive a boost too. Depending upon the extent of capital flows, bank creditgrowth can expand at any rate between 20% and 30%.

� The higher availability of money at easier rate as well as easing capital constraintcould provide a fillip to the investments.

� Low capacity utilization and near zero base of industrial production for the lastthree years provides a low base for sharp recovery.

� Thus, while GDP growth for FY15 may see a moderate recovery of 5.5%, FY16 GDPgrowth may accelerate to 6.5-7% levels once the full impact of the measurestaken by the incumbent and the new government fructifies.

Money and credit growth would Deposits and credit growth may Higher capital and credit flow can pushaccelerate with higher capital flows surprise on the upside (%) GDP growth higher especially in FY16 (%)

A–35April 2014


How the flows in the initial months can improve economic parameters

Low capacity utilization levels provides opportunity Very low IIP growth of last three years to provide afor upturn favorable base

Revival ofcapitalsflows

BoPsurplus

INRappreciates

Inflationdips

Interestrate

declines

Moneyand credit

flowimproves

GDPgrowth

recovers

A–36April 2014


India Power League 2014 – Let the bugle blowBJP-led NDA could get 250+ seats as per latest opinion polls

� India is on the cusp of what promises to be one of the most definitive moments in morethan a decade. The most-awaited and important elections in the world’s largest democracywill begin on April 7 to decide the fate of 1.2b+ population. The counting of votes wouldbe conducted on May 16th (Friday). The 16th Lok Sabha elections assume significance asIndia could be on the cusp of a change which could redefine its landscape for the nextdecade.

� As the world’s biggest democracy goes to polls, it is a spectacle unlike any other, a mammothjuggernaut that encompasses all and grips the attention of not just the entire nation, butthe world at large.

� We have been regularly covering our views on various election related topics in our IndiaPolitics thematic titled MANDATE 2014. As India goes to poll, we present to you the likelyoutcome of elections as projected by the opinion polls, along with a glimpse of theachievements of NDA during their 1999-2004 regime.

ELECTIONS

Elections to be held in nine phases for various states/UTs 420 out of 543 constituencies would vote during the four daysspread out across April to early May of April, viz., 10th, 17th, 24th and 30th

General Elections 2014 – A grand spectacle� The winds of change have been blowing for some time now and the 16th Lok Sabha

elections represent the hopes, dreams and aspirations of a country looking tomake a big impression in every avenue. It’s an interesting time in India when dailysoundbytes from key leaders and high octane spectacles fill up the media andpublic space.

� As India kicks off the general elections, the race to the Lok Sabha has never beenso keenly followed and analysed.

� Voting would take place in nine phases from April 7 to May 12, 2014. The countingof votes would take place on May 16, 2014 (Friday).

� Simultaneously, Assembly elections for Andhra Pradesh, Odisha, Sikkim andArunachal Pradesh would also take place coinciding with the General elections inthese states.

� Total number of voters is ~814m compared to 717m in 2009. This marks an increaseof ~100m voters or 14%. There has been a remarkable increase in the enrollmentof electors in the age group of 18 to 19 years. Over 23m electors are in this agegroup. Electors in the age group of 18 to 19 years now constitute 2.88% of totalelectors, against 0.75% in 2009.

Refer to the recent India PoliticsVolume 4 and Volume 3

http://ftp.motilaloswal.com/emailer/Research/INDIAN POLITICS-20140407-MOSL-SU-24PG.pdf

http://ftp.motilaloswal.com/emailer/Research/INDIA POLITICS-20140319-MOSL-VOL3-PG028.pdf

A–37April 2014


NDA's strong momentum has continuously led to surge in seats Latest opinion polls project NDA to bag 240-260 seats

Estimated seats of regional parties (average of latest polls) Vote share percentage for NDA expected to be highest ever!

BJP building on the momentum; expected to bag 250+ seatsParty LokSabha Avg Swing CNN IBN & CSDS C-Voter ABP News-Nielsen NDTV Hansa

Curr. of polls Jul13 Oct13 Jan14 Feb14 Mar14 Jul13 Oct13 Jan14 Feb14 Jan14 Feb14 Mar14 Feb14 Mar14

UPA 228 119 -109 153 138 117 129 117 136 117 103 101 101 92 119 129 123Congress 206 98 -108 135 120 100 102 100 119 102 91 89 81 73 91 106 104Congress-all ies 22 21 -1 18 18 17 27 17 17 15 12 12 20 19 28 23 19

NDA 133 252 119 176 191 221 222 256 156 186 212 227 226 236 240 229 259BJP 116 212 96 161 175 201 203 212 131 162 188 202 210 217 209 195 214BJP allies 17 40 23 15 16 20 19 44 25 24 24 25 16 19 31 34 45

Others 182 172 -10 214 214 205 192 170 251 240 228 215 216 215 184 185 161Total 543 543 0 543 543 543 543 543 543 543 543 543 543 543 543 543 543

Opinion polls suggests NDA momentum peaking at the right time� The last leg of opinion polls suggest BJP-led NDA to win 250+ seats in Mar-14, way

ahead of the first opinion poll in Jul-13 which projected 176 seats. BJP, itself, is expectedto bag more than 200 seats as per the latest polls, its highest ever! Ever since the firstpolls , subsequent polls have continuously consolidated NDA's expected seats.

� UPA, on the other hand, has been consistently losing ground with merely 119seats expected in the 2014 elections. Congress is likely to record its worstperformance ever with less than 100 seats.

� Opinion polls, in our view, should be considered a guiding factor to gauge themomentum in favour of a party. Subsequent opinion polls clearly suggest that BJPled NDA has a strong momentum in its favour.

� Non-UPA and non-NDA parties seem to be holding a key share of national votebank, and expected to bag 172 seats. The big regional players are likely to be TMCwith 27 seats, AIADMK with 21, Left with 16, BJD with 16 seats and SP with 13 seats.

Note: Mar-14 projections for CNN-IBN & CSDS and ABP News-Nielsen includes TDP seats as predicted by these polls conductedbefore the announcement of the alliance. NDTV Hansa Research already included TDP in the NDA alliance

A–38April 2014


Bihar (40): Huge set-back expected for ruling JD(U); NDA likely to win bigIndia Today Times Now NDTV

Parties 2009 Avg of CNN-IBN-CSDS Cvoter ABP News-Nielsen Cvoter Hansa

polls Jan-14 Feb-14 Mar-14 Jan-14 Jan-14 Feb-14 Mar-14 Feb-14 Feb-14 Mar-14

BJP + LJP 12 23 20 26 25 22 24 21 21 22 23 21

Congress + RJD 6 11 10 8 10 13 7 7 12 13 11 12

JDU 20 5 10 6 4 4 6 9 6 5 5 6

Others 2 1 0 0 1 1 3 3 1 0 1 1

Total 40 40 40 40 40 40 40 40 40 40 40 40

Uttar Pradesh (80): BJP's road to Delhi begins with UPIndia Today- Times Now NDTV

Parties 2009 Avg of CNN-IBN-CSDS Cvoter ABP News-Nielsen Cvoter Hansapolls Jul-13 Jan-14 Feb-14 Mar-14 Jan-14 Jan-14 Feb-14 Mar-14 Feb-14 Feb-14 Mar-14

BJP 10 46 31 45 45 46 30 35 40 38 34 40 53BSP 20 12 16 13 11 13 24 15 13 17 21 15 7Congress 21 8 13 11 7 6 4 12 11 11 4 12 7SP 23 13 19 4 14 14 20 14 14 12 20 13 13Others 6 1 1 7 3 1 2 4 2 2 1 0 0Total 80 80 80 80 80 80 80 80 80 80 80 80 80

Maharashtra (48): Another big state where NDA is likely to reap huge benefitsIndia Today ABP News- Times Now NDTV

Parties 2009 Avg of CNN-IBN-CSDS CVoter Nielsen CVoter Hansa

polls Jan-14 Feb-14 Mar-14 Jan-14 Feb-14 Mar-14 Feb-14 Feb-14 Mar-14

NDA 20 31 24 26 27 28 28 31 30 33 36

UPA 25 14 16 19 19 14 14 13 13 12 10

Others 3 3 8 3 2 6 6 4 5 3 2

Grand Total 48 48 48 48 48 48 48 48 48 48 48

Post-poll alliances remain the key� The sheer size and diversity of the country requires, above all, that political power

is coalitional in nature.� With all opinion polls pointing towards NDA gaining lead with 240-260 seats, the

balance seats will have to be attained by post-poll alliances. In all Lok Sabhaelections till date, if a party has secured more than 200 seats, there has neverbeen an instance of the majority party not forming the government.

� Markets will be enthused if the total seats in a ruling alliance post 2014 election iswell above 200 seats which will provide stability to the government through itstenure.

� As seen in the table below, most of the political parties have avoided any pre-pollalliances this year. Also, most of these parties have no affiliation to any nationalparty. Amongst the parties which have not had any pre-poll alliance till date, barringthe Left Front and Biju Janata Dal, all other political parties have aligned with bothUPA or NDA in the past elections.

� Left Front and SP (due to ideological differences) and Nitish Kumar led JD(U) (dueto differences with the nomination of NDA prime ministerial candidate NarendraModi) may unlikely join NDA. The remaining parties may be open to joining NDAdepending on the number of seats bagged by BJP.

A–39April 2014


*Have provided outside support to UPA; Indicates pre-poll alliance with NDA; Indicates pre-poll alliance with UPA

Past alliances of major regional partiesPolitical States Opinion Lok Sabha seats Past alliance with

party polls 1999 2004 2009 NDA Congress/UPA

SP * Uttar Pradesh 13 26 36 23

BSP * Uttar Pradesh 12 14 19 21

Left Front West Bengal, Kerela 16 37 53 20 Yes

JD(U) Bihar 5 21 8 20 Yes

TMC West Bengal 27 8 1 19 Yes Yes

DMK Tamil Nadu 11 12 16 18 Yes Yes

BJD Odisha 16 10 11 14 Yes

SHS Maharashtra 15 12 11 Yes

NCP Maharashtra 8 9 9 Yes

AIADMK Tamil Nadu 21 10 0 9 Yes Yes

TDP Andhra Pradesh 13 29 5 6 Yes

RLD Uttar Pradesh 2 3 5 Yes Yes

RJD Bihar 7 24 4 Yes

SAD Punjab 2 8 4 Yes

JD(S) Karnataka 1 3 3 Yes

JKN Jammu & Kashmir 4 2 3 Yes Yes

TRS Andhra Pradesh 7 0 5 2 Yes Yes

PMK Tamil Nadu 5 6 0 Yes Yes

Three unique features of 2014 electionsI. Rising voter participation� Past history suggests that people come out to vote enthusiastically when there is

a burning issue. At the last count, the voter turnout ratio stood at 58% during 2009general elections.

� However, there is a lot of variation in voter participation amongst the states.While 13 states had more than 70% turnout ratio, it was very low for some keystates like Bihar, Uttar Pradesh, Gujarat, Rajasthan and Maharashtra (states whereNDA is expected to sweep elections).

� Since 2009 General Elections, voter participation has jumped significantly duringthe Assembly Elections and stand highest since 1980s.

People come forward to vote when they feel strong about an issue

Voter turnout (%)

A–40April 2014


Thirteen states had more than 70% voter turnout in 2009 while some of the bigger states had very low voter turnout (%)

Sharp increase in voter turnout in recent state elections

II. Rising population of new voters� India is the largest democracy in the world. During 2014 general elections total

number of voters are ~814m.� This figure has been growing (with spikes reflecting change in voting age, etc.).

However, 2014 stands out as one of the highest addition of new voters.� 2014 General Elections would see the largest addition of 102m new voters, of

which 23m voters are in the age group of 18 to 19 years. To put the figure inperspective, the total votes polled in favour of Congress and BJP in 2009 electionswas 119m and 78m, respectively.

Total no. of voters to exceed 800m during 2014 elections

A–41April 2014


Number of new voters in 2014 elections would be comparableOne of the highest additions to the voter percentage (YoY, %) to the total votes secured by the majority parties in 2009

III. Three issues – development, inflation and corruption dominated 2014poll campaigning� Surveys have indicated that economic factors have dominated 2014 elections.� Three issues, viz., development, inflation and corruption dominated the poll issues.� In a survey conducted by CNN-IBN, among the 16 major states, development ranked

as the top issue for 8 states. This was followed by inflation, which ranked topmostin the minds of people in 6 states.

� While corruption ranked as top issue only in case of two states (Delhi and MadhyaPradesh), it featured prominently in the list of issues for all states.

� Unemployment too featured as one of the top five issues.

Development, corruption and inflation dominated the poll issues during 2014 General ElectionWest Bengal Issues (%)

Development 19

Inflation 11

Unemployment 5

Condition of roads 4

Supply of drinking water 3

Jharkhand Issues (%)

Inflation 34

Development 14

Unemployment 13

Corruption 11

Education 3

Maharashtra Issues (%)

Development 20

Corruption 19

Inflation 16

Unemployment 5

Farmers problems 5

Uttar Pradesh Issues (%)

Development 20

Inflation 17

Corruption 17

Unemployment 8

Road condition 5

Odisha Issues (%)

Development 25

Inflation 12

Corruption 11

Vote for Modi 5

Unemployment 3

Tamil Nadu Issues (%)

Inflation 20

Power supply 13

Corruption 12

Unemployment 5

Water supply 4

Chhattisgarh Issues (%)

Inflation 16

Development 13

Unemployment 10

Corruption 6

Drinking water 3

Rajasthan Issues (%)

Drinking water 13

Corruption 12

Inflation 11

Unemployment 9

Development 9

Bihar Issues (%)

Inflation 29

Development & economy 20

Unemployment 15

Corruption 7

Electricity supply 6

Kerala Issues (%)

Inflation 55

Corruption 8

Development 4

Environment 3

Drinking water 2

Madhya Pradesh Issues (%)

Corruption 23

Inflation 15

Unemployment 15

Development 9

Drinking water 6

Punjab Issues (%)

Development 20

Inflation 17

Corruption 15

Unemployment 9

Poverty 2

Assam Issues (%)

Development 23

Corruption 8

Transport 4

Inflation 3

Unemployment 3

Karnataka Issues (%)

Development 19

Inflation 10

Corruption 7

Drinking water 4

Road condition 4

Gujarat Issues (%)

Inflation 38

Corruption 12

Unemployment 12

Development 6

Drinking water 4

Delhi Issues (%)

Corruption 20

Development 13

Water supply 5

Unemployment 5

A–42April 2014


NDA during 1999-2004 created a growth conducive policy environment� Markets are excited and riding high driven by the expectations of positive election

outcome of a BJP-led NDA government.� In this backdrop, it would be pertinent to note the landmark measures taken by

the NDA government during their previous regime. The previous term of NDA wasduring 1998-2004; the period when for the first time in India’s history, a non-Congress government was at the helm of affairs for the full five year term.

� We take a closer look at the eight big bang initiatives which the NDA governmentundertook during the previous stint that subsequently paved the way for a newgrowth pattern.

Growth recovered (%) Inflation moderated (%)

� Highways: Golden quadrilateral changed the way India travels and transports goods.NDA built 25,000 km of 4/6 lane highways @11/km per day, compared to 11km/year of previous 50 years.

� Power: Electricity Act 2003 was enacted, which de-licensed generation, introducedcompetitive bidding framework, merchant capacity and laid macro framework forrechristening the power sector. CERC was set up. Capacity addition reached ~20GW/pa now, compared to earlier run rate of 4-5GW/pa.

� Telecom: In 1999, the NDA government brought a fresh policy - the New TelecomPolicy 1999 (NTP-99). This allowed licensees to migrate from a Fixed Licence FeeRegime to a Revenue Share arrangement with effect from August 1, 1999. NDAsuccessfully conducted auction for the fourth cellular operator licence in 2001 for17 of the 21 circles.

Higher saving/investment rate (%) Higher forex reserves lower rates (USD b)

(%)

Refer to the recent IndiaPolitics Volume 2

http://ftp.motilaloswal.com/emailer/Research/INDIA POLITICS-20140226-MOSL-VOL2-PG022.pdf

A–43April 2014


� Banking: NPA norms were tightened, Securitisation and Reconstruction of FinancialAssets and Enforcement of Security Interest (SARFAESI) Act, 2002 was introduced,which inter alia provided for enforcement of security interest for realization ofdues without the intervention of courts or tribunals. Also, Corporate DebtRestructuring (CDR) was introduced. Measures were initiated for theestablishment of a Credit Information Bureau (India) Ltd (CIBIL). CRAR requirementwas enhanced to 9% from 8% earlier. To infuse competition in the sector, twobanking licences were issued (Kotak Bank, Yes Bank). FDI limit in private sectorbanks under the automatic route was enhanced to 49% and further to 74%.

Strategic sale gave a big push to PSU disinvestment

� Disinvestment and PSUs: NDA government gave a fillip to the privatization processwith the first strategic sale. Also, it turned around many PSUs with their combinedturnover increasing by 48%, net profits by 19%, contribution to exchequer 30%and dividend by 67% over FY99-04.

� Energy security: Government decided to build 5mt of strategic oil reserve.Contracts for eight coal bed methane gas blocks signed. INR100b invested to scaleup refineries to improve fuel quality. Indian oil sector moved from a controlledregime to a partly decontrolled one, which led to private player participationacross the value chain. New Exploration and Licensing Policy (NELP) wasannounced. Refinery sector delicensed - FY97-04 witnessed significant investmentsby private players in refining and marketing (Reliance, Essar, Shell, MRPL).

Health of banking sector improved (%) A more conducive interest rate regime was ushered in (%)

16

85

2

18

5

A–44April 2014


� FRBM Act: The Fiscal Responsibility and Budget Management Act, 2003 (FRBMA)was enacted to reduce the fiscal deficit within 3% of GDP by 2008. Significant restraintswere placed on states as well that were required to put in their own version of FRBMAct.

Low oil prices and reform kept oil subsidy low

FRBM brought fiscal house in order State Govts. were more compliant of respective Fiscal Acts

Nuclear test! NDA also conducted the nuclear tests amid widespread national andinternational criticism. However, this was followed by more peace initiatives — nofirst use of nuclear weapon, no use against non-nuclear countries etc. The sanctionsthat followed were slowly lifted and India proved a point to be counted among thebig league.

Election events have led to big market moves over the last decade� Markets have started to get excited in the last two months and are at a high building

on a positive election outcome of a stable government.� As seen below, markets have typically rallied prior to the elections in anticipation

of a stable government. Market reactions post elections are influenced by whetherthe majority government has the required number of seats to form the governmentand whether results have come in line with the expectations. Having said that thetrends in markets on the run-up to elections have persisted in the three monthsfollowing the election results.

� As witnessed in the 2009 elections, a strong majority had brought about marketswings as wide as ~30% in three months.

A–45April 2014


Decisive and expected mandate has resulted in markets giving healthy returns post elections1999 elections 2004 elections

2009 elections 2014 elections

A–46April 2014


MARKETS: Excitement - Yes; Euphoria - Not yetEuphoria is reflected in valuations, which are below averages

� Indian markets have rallied by 9% in the last two months breaking the range ofthe past six years. BSE Sensex closed at 22,386, all time high. This has also beenaided by inflows of more than USD4b by FIIs in 4QFY14 which was driven byexpectations of a stable government post elections.

� Even though beaten down sectors have rallied in past couple of months, mostsectors are still trading at significantly low valuations at the bottom of theirearnings cycle. Thus, while index levels are at life-time high, market valuationsare still below historical averages at 14.7x.

� We believe that there are already trends of improvement in economic growthand corporate profitability; currency and inflation has been kept under control,fiscal deficit has also improved. We believe that a likely BJP-led NDA governmentcould provide a fillip to the economic growth and corporate profit trajectory,which could aid further re-rating of the markets.

Indian equities finally cross 2008 highs� Indian markets ended FY14 at a life-time high delivering 18% returns during FY14.

This was aided by 9% returns during the last two months driven by the expectedpositive election outcome of a strong market friendly government.

Markets at life-time high; however merely 7% higher than Jan-08 peak; delivered 9% returns in last two months

� During this pre-election rally, many of the underperforming sectors of the last sixyears posted healthy returns. However, these sectors still remain massiveunderperformers over six years with valuations and earnings of these sectorssignificantly below their historic averages.

� Barring Capital Goods with 33% returns, none of these beaten down sectors haveoutperformed Sensex during FY14, despite their impressive performance in4QFY14. The other top performing sectors of FY14 were Auto (+33%), Technology(28%) and Healthcare (26%). The worst performing sectors were Real Estate (-18%), Retail (-4%) and PSU Banks (-1%).

Market have well consolidated for 6 years

Pre election rally in 2014 has led the

market to new high

A–47April 2014


� Sensex stock performance in FY14: Barring Hindalco (+55% returns) whichwitnessed a bounce-back, the next top 5 Sensex stocks have built on their gains ofprevious years. The Auto pack of Maruti, Tata Motors and Hero Motocorp delivered54%, 48% and 47% return respectively in FY14. This was followed by the Healthcarepack of Dr Reddy’s (+45%)and Sun Pharma (+40%).

� Beaten down PSU pack continued to be worst performers with NTPC (-16%), SBI (-7%) and Coal India (-7%) delivering negative returns in FY14. Tata Power was alsoa laggard with -12% returns.

Sectoral performance for 4QFY14 (%) Sectoral performance for FY14 (%)

Sensex stock performance for 4QFY14 (%) Sensex stock performance for FY14 (%)

A–48April 2014


Markets at high; valuations below average� Even though the Indian markets have scaled to new highs, valuations of Indian

markets are still quite reasonable and far from euphoric levels.� Sensex trades at 14.7x which is below the historical average of 15x and well below

the highs of ~21x in Jan-08 and 24.6x in Dec-07.

Sensex valuations remain subdued despite markets at high

FIIs continue to repose their faith; DIIs remain elusive� The election induced rally saw FIIs pumping in USD4b in March 2014 month alone

taking the cumulative inflows during FY14 to USD13.7b. Infact, FIIs have beenconsistent net buyers in Indian equities (except global meltdown of FY09) for theentire decade. The high amount of inflows saw FII ownership as a proportion offree float of Sensex at its life-time high at 49.2%.

� However, DIIs pulled out USD2.0b in March 2104 alone and continued to be netsellers in Indian equities for the fourth consecutive year with USD26.6b outflowsfrom FY11-FY14. DII ownership as a proportion of free float of Sensex continued toremain low at 23.4%.

FIIs have pumped USD96b in past 5 years (USD b) DIIs see continued outflows for fourth consecutive year

14.72.4

Cumulative outflowsof USD26.6b

A–49April 2014


Earnings and valuation, both to move in tandem� Markets have been range bound during the last six years and touched the highs a

few times during the period. Every time markets have come to these peaks,earnings have consistently been higher than the previous occassions.

� The past two years have been the worst for corporate earnings which saw twoconsecutive years of single-digit earnings growth for the first-time in more than adecade. This was mainly led by poor earnings for cyclicals like Capital Goods,Cement, PSU Banks, Metals and Utilities. Some of these sectors saw de-growth inearnings for two consecutive years. Accordingly, corporate profit/GDP ratiodropped to a decadal low of 4.2%.

� With expectations of a moderate economic recovery, corporate profit/GDP is likelyto move closer to historical averages of 5.6%.

� Market capitalisation/GDP at 66%, is slightly below its historic average of 69% andway below the peak of 103% in FY08.

Pre-election rally saw massive FII inflows; DII continue to be net sellers

FII share in India at life-time high; DII at six year’s low

Corporate profits/GDP at decadal low (%) Market cap/GDP slightly below historical averages (%)

Average of 5.6%

A–50April 2014


CORPORATE INDIA Many sectors are poised well to leverage growth cycle

� Over the last 3 years, as the economy went through a downcycle, several domestic facingsectors got severely impacted. While a downcycle brings pressure on growth, marginsand earnings, many managements use this period to consolidate / get more cost efficient.Several top Indian companies have worked hard to minimize the impact of this downcycle;infact are ending this phase with a position of strength. In this section, we highlight fewof these names, which also feature as our top allocation in the Model portfolio (namelyICICI Bank, Maruti, L&T, ACC etc).

� As the growth cycle recovers, this will also have a positive impact on sectors, where thecyclicality plays a big role in the earnings momentum. These sectors earnings are directlyco-related to the underlying economic growth and has seen the pain during the last 3years. We are positive on these companies, where the momentum is likely to turnpositive in FY15 (namely SBI, BHEL, ONGC etc).

� Lastly, we highlight the impact of changes from domestic business environment on few ofthe export facing sectors. These companies had benefitted significantly during this phaseof currency depreciation from 45 to 61, and are likely to consolidate as the currencyshows signs of stability to positive bias.

AUTOLast three years of economic slowdown had led to significant contraction in volumes(7.8% decline in CVs and 1.5% decline in PVs) for the Indian auto industry. However,we are seeing signs of bottoming out and are positive on volume recovery for theauto industry, driven by:� Stable fuel prices� Peaking interest rates� Boost from favorable general elections verdict would accelerate recovery process

We present below two segments, PVs and CVs, which we believe will benefit themost from the economic recovery.

A] PVs:Maruti Suzuki - Moving from defensive to challenger; waiting to zoomin the up-cycle

How is MSIL challenging?� Aggressive product launch pipeline, with ~14 launches in 5 years� Celerio AMT addresses unmet needs of customers, receiving strong customer

response with bookings over 32,000 since launch in Feb-14� Launching compact SUV, challenging M&M/Ford in UV segment� Launching mid-end sedan Ciaz and new SX4, challenging Honda and Hyundai� MSIL has emerged stronger during the current downturn, with a market share

recovery of ~350bp to 42% over FY12-14.� It is well-prepared for an eventual demand pick-up, with adequate capacities,

strong marketing network and equally exciting new products pipeline, with ~14launches lined up over next five years.

A–51April 2014


Profitability upheld well despite negative forex and operating leverage; bothheadwinds to turn into tailwinds� On the path of volume recovery, a favorable election verdict would improve

consumer sentiments, which could accelerate the recovery pace and enable fasterrealization of pent-up demand.

� Despite bottom of the cycle volumes, increased competitive intensity and negativeoperating leverage, MSIL’s earnings remained flat during FY10-14.

� MSIL would benefit from a) volume recovery, b) reductions in discounts, c) potentialstrengthening of INR and d) operating leverage.

Maruti to emerge as challenger now, through aggressive product launches

FY14 margin expansion is reflection of favorable Fx; future margin expansion to be driven by localization, with further expansionpossible through discount reduction and Fx

Earnings to enter new trajectory; valuations to catch up� MSIL’s EPS historically has moved in spurts. We expect EPS to move to a new range

of ~INR150, from the current ~INR90, and estimate ~27% CAGR over FY14-16.� The stock should trade at a premium to average PE (14x) for ~27% EPS CAGR over

FY14-16E, with further scope of upgrades.� Building sensitivity for a strong growth in FY16, our target price could see an

upgrade to INR3,043 (upside of 54%).

R&D

exp

.

A–52April 2014


B] CVs: Recovery assured; pace needs to be monitored

Recent trends indicate volumes bottoming out…� Freight rates have increased by 10% since January 2014.� Increasing clarity on lifting of iron ore mining ban, especially in Goa, by 2HFY15.� Fuel price hike to be limited, as oil prices are stable and INR under control.� Our economist expects IIP growth at 4%/6% in FY15/16, from nil growth in FY14.� Our interactions with industry participants – financiers, fleet operators and dealers

indicate that the worst seems to be over in the CV industry and expect a recoveryfrom 2HFY15. 4QFY14 has seen a positive momentum in volumes; financing optionsare also getting better.

MSIL stock should trade at premium to average PE of 14x, forDespite weak volumes, EPS has remained stable over FY10-14 ~27% EPS CAGR over FY14-16E, with further scope of upgrades

…volume recovery would drive a sharp improvement in profitability…� Being cyclically deep, with high operating and financial leverage, CV players would

witness a strong recovery in financial performance.� From current levels of EBITDA breakeven, margins could return to 8-10% level

over next three years, driving a sharp recovery in earnings, FCF generation, balancesheet deleveraging and capital efficiency improvement.

EPS CAGR 26% -12% 39% -1% 25%

(INRsh)

14x

10x

M&HCV volumes have been in downcycle since FY08, Being deep cyclical, profitability of CV players have beenimpacted by weak economic activity under severe pressure in current downcycle

, RHS

A–53April 2014


…leading to significant re-rating of CV stocks� Ashok Leyland offers the best play on CV recovery as ~20% MHCV industry volume

CAGR could drive over 100% returns in the stock price.� TTMT’s S/A business contribution could double to ~15% or ~10% upgrade to SOTP.� For Eicher Motors, VECVs contribution could increase to 30% (from 25%) or an

upgrade of ~7% to SOTP.

AL: PB multiple expands during upcycle; currently trades at 45% discount to average PB

CAPITAL GOODS

L&T: unscathed by economic cycle; new levers of growth added� L&T has significantly increased its market share in both domestic (from 1.2-1.5%

of GFCF to 1.8-2% in FY14) and also Middle East (from 0.25% to 1.5-2% of projectawards). A significant part of the market share gains is led by entry into newsegments and geographies, and provides a strong base to capitalize on the nextleg of investment cycle. In construction business, L&T remained largely unscathedin the economic downturn, with core standalone RoEs (excluding investments insubsidiaries) maintained at a healthy level of 22% in FY14.

� L&T is futher leveraged to economic recovery, as the possibility of value unlockingin subsidiaries, particularly the infrastructure concession business could bemeaningful. The intent is “portfolio churn” and capturing the value accretion atinitial stages of the project lifecycle. Management is making efforts to improveconsolidated RoE from current levels of 15% to 20% over the next three years.

� Manufacturing businesses (like Shipyard, Power BTG, Forgings etc) also presentinteresting possibilities in the longer term. Many of these businesses are difficultto replicate and L&T is strongly positioned as a dominant player. L&T Realty has35msf of projects under development and could possibly aid in value unlocking.

� L&T has been associated with the defence program since 1988 and is among thelargest private sector companies in the business (non-vehicle category). It isassociated with ~125-130 products and several of these are under testing/limitedseries production stage and awaiting full scale production. Privatization of defenseis an important agenda for any incumbent government, in our view, and could bethe largest delta change in the growth profile of L&T.

A–54April 2014


Entry into new segments and geographies has led Earnings/margins remain resilient despiteto improved order intake (INR b) head winds to economic environment

Manufacturing businesses provide opportunities for a meaningful ramp-up

BHEL: Strong beneficiary of cyclical upturn; order intake to bounce back� For BHEL, BTB has nearly halved from peak levels of 4.3x in FY10 to 2.2x in FY13/

1HFY14. We expect the ratio to improve to 2.6x in end-FY14 and further to ~3x inFY15/16. This is driven by the possibility of increased order intake, particularly inthe power segment, from average levels of INR196b in FY12-14 to an average ofINR280b in FY15/16. Improvement in BTB is an important trend for a capital goodscompany and has ramifications on several components, including working capital,operating free cash flows and operating leverage.

� We expect BHEL’s EBIDTA margin to decline from 19.4% in FY13 to 10.3% in FY15Eand improve to 13.3% in FY16E. During this period, we expect contribution marginsto be maintained at 40-41%, and thus the expectations of margin expansion arelargely a function of the operating leverage, particularly staff costs (17% in FY16Ev/s 18.8% in FY15E) and provisions, including LDs (at 3.6% in FY16E v/s 7.1% inFY14E).

� For BHEL, a large part of the variation in reported net working capital is beingdriven by cyclical factors such as retention money (at ~200 days in FY14 v/s 55-60days in FY07-09) and customer advances (deteriorated from 63% of revenue inFY09 to 34% in FY13, but stable as a percentage of order book at 12-14%). While the

INR m FY12 FY13

Financial Performance

Revenues 36,538 34,710

Gross Profit 3,347 4,421

Gross Margins % 9.2% 12.7%

EBIDTA 614 1,038

EBIDTA % 1.7% 3.0%

Net Profit -196 -3,007

Fixed Asset Turn

Gross Fixed Assets 58,295 73,296

Fixed Asset Turn 0.6 0.5

MTM on forex debt

Forex Debt 10,742 12,237

MTM impact 148 478

% 1.4% 3.9%

A–55April 2014


core net working capital has been fairly stable at ~200 days, the reported numberhas been volatile from negative 24 days in FY09 to 188 days in FY14. We expect theabove cyclical factors to support improvement of NWC in FY15E/16E, therebyimproving free cash flows from ~INR16-19b in FY13/14 to ~INR75-88b in FY15E/16E.This will lead to a meaningful increase in net cash from INR63b in FY13 to INR174bin FY16E (~43% of current market cap).

� The key variable to watch out is the impact of Pay Commission in FY17 and couldbe an important swing factor. The key risk to our view is a delay in pick-up in utilitypower generation ordering cycle and also possibility of write-off of a large part ofretention money (~INR220b currently).

NWC impacted by cyclical factors of customer advances and Collections of retention money to lead to meaningfulretention money, while core NWC remains stable increase in cash balance (43% of mkt cap in FY16)

Expect BTB to improve from lows in FY13/14 EBITDA margins - a function of operating leverage

CEMENT

Sector growth severely impacted due to collapse in investment cycle� Deceleration in cement demand growth is led by sharp slowdown in execution.� Completion as a percentage of outstanding orders is down from 9-12% in FY05-09

to 2-5% in FY13-14.� Project additions have halved in govt. sector and turned negative in private sector.� Nonetheless, outstanding order book is at an all-time high with huge execution

backlog. This augurs well for robust recovery once execution takes off.

A–56April 2014


GDP multiplier has declined meaningfully (%) led by… … slowdown in all key segments, ex-rural housing (%)

Companies survived down-cycle efficiently; RoE at mid-cycle level despitelowest utilizations� Weak demand impacts pricing rationality and cost push adversely impacts margins

and RoE. However, RoEs stand at mid-cycle level despite utilization being at 25-year low. Thus, recovery in utilization will drive RoEs to a very strong level.

RoE is impacted due to lowest utilization, but still at reasonable level v/s previous down-cycles

Trend in projects outstanding, % completion and cement demand growth

A–57April 2014


Supply side dynamics gradually turn favorable� New capacity additions decelerating with estimated CAGR of 4% in FY14-17E v/s

~9% in FY10-14. Incremental demand to match incremental supply by FY16.� Higher-than-estimated demand growth (of 8%) would drive utilization and pricing

power faster.

Trend in 'incremental demand - incremental supply' and utilization (m tonnes)

ACC: preferred recovery play with cost saving levers� Pan-India presence and strong brand makes ACC one of the best proxies to the

recovery cycle.� Additionally, multiple cost saving levers aid potential upgrade of 20-25% in EBITDA/

ton in CY15-16. This would result in narrowing of profitability gap with large peersand in turn re-rating of EV/ton.

� With a strong balance sheet among peers, ACC offers comfort and growth potential.

Multiple cost savings levers to make efficient (INR/t) ACC offers strongest balance sheet and EPS CAGR

ACC’s EV/t is still at high discount to peers, aiding upside risk to its valuations (%)

A–58April 2014


Shree Cement: entry into big league with differentiated growth strategy� Shree Cement is strongly poised for the growth cycle with differentiated expansion

strategy.� Capacity of 21.6mt by FY15 and absolute EBITDA generation at par with large cap

peers (due to superior profitability) would further aid re-rating.� It has attained critical mass to grow capacity by 10-12% p.a., solely from internal

accruals, with sustainable operating cash flow of ~INR15b.

Steady expansion offers meaningful growth avenue in recovery cycle

Steady cash flow generation aids robust balance sheet and self-Consistently maintains superior EBITDA/t (INR) funded growth plan (INR b)

FINANCIALS

Gradual improvement in economy; several triggers post elections� The past three years have been one of the toughest period for Indian economy

over the last three decades.� Stubborn inflation and volatility in INR resulted in tight liquidity conditions and

high interest rate.� Moderating economic growth and fall in new investment demand led to significant

slowdown of loan growth and increase in stress levels in the system.� Stress loans percentage for state-owned banks increased by 3x+ in the last five

years.

A–59April 2014


State-owned banks: stress levels rise; ind growth moderates Sharp rise in stressed assets of infrastructure segment (%)

*FY14 numbers are calculated on basis of our coverage universe Source: RBI

State-owned banks: significant pressure on asset quality; upturn in economy could lead to better recoveries (INR b)

Source: RBI

Slowdown in new investments led to a sharp decline in loan growth (%)

37%

Source: RBI, CMIE

� Our economist expects gradual recovery in industrial growth and in turn GDPgrowth is expected to improve. Recent trend of inflation and INR is favorable forgradual reduction in interest rates.

� Over the last few quarters, NII growth of state-owned banks (top 6) has rebounded,while stress level have been contained.

� With gradual improvement in macro trend, financials will get an opportunity toimprove the loan growth and thus stress additions are expected to peak out.

� Favorable election event will lead to valuation re-rating and drive higher growthexpectations in due course.

A–60April 2014


Branch network up 2x+ in last four years; strong CASA gains Highest in decade RoEs, earnings growth of 25%+ intact

How to play the sectorHDFCB: unscathed by economic cycle; significant investments to buildfranchise; compounding machine� Branch network up 2x+ to 3,300+ and number of cities covered up 3x to 1,800+ over

last four years. Penetration in hinterland, rapid customer acquisition (opportunityto cross-sell), will enable the bank to continuously gain market share and keepCASA ratio above industry average.

� As branch network matures, operating leverage will kick in and aid profitability.Diversified loan portfolio and higher share of retail loans to help maintain best-in-class asset quality (currently net stress loans, including floating provisions is nil).

� HDFCB reported EPS CAGR of 25%+ over FY02-13 and we expect earningscompounding to continue at similar level over FY14-16. RoE is expected to be atdecadal high (24%) and internal accrual wlll ensure next 12-15 months’ growth.

Top 6 state-owned banks: NII growth rebounds, net stress loans stabilize (%)

SA MS: SA market share

ICICIBC: Highest RoE in worst cycle; opportunity to play for growth andvaluation expansion� Last five years have been a period of transformation for the bank : (1) it invested

heavily to create a strong branch network (largest among private financials), (2)CASA ratio improved significantly (40%+; 2x over last five years), (3) NIM of 3.3% -best in the history of bank and (4) healthy asset quality maintained.

� RoE is at a decadal high with strong capitalization (Tier I of 12.7%). Further,subsidiaries can be potential capital providers and near term equity dilution wouldnot be required.

PB (x)

A–61April 2014


Strong expansion, significant improvement in liability mix NIM at historical highs; asset quality managed well

Over last five years, ICICIBC has seen de-rating of multiple… Decadal high RoE, strong capitalization (%)

� ICICI’s stock price traded in range of INR1,000-1,200 over last five years. Steadyearnings growth during this phase has resulted in lower valuation multiples.

� Operating parameters are expected to remain strong led by structural changes.Continued expansion in physical network coupled with capital strength wouldenable ICICI to leverage on growth opportunities and further boost RoE. In ourview, ICICIBC is the best play on growth and valuation re-rating.

SBI: cyclicality impacted performance; best placed for economic recovery� Stress additions not only led to higher credit cost (average of 0.8% over FY11/14,

compared to 0.3% over FY05/10) but also impacted NIM negatively. Further,slowdown in fees and high opex (due to one-off provisioning) led to moderationin return ratios, and valuations at near lower end of historical average.

� However, enviable liability franchise (SA ratio of ~35%), strong capitalization (tierI of 10%+) and lowest net stress loans (6.7%) makes SBIN as best placed to benefitfrom an upturn in the economic cycle.

� Stress additions, core operating profitability and return ratios seem to havebottomed out in FY14 and we expect gradual improvement in the same. Initiativesby the new Chairman would lead to higher fees and decline in opex would aidprofitability. Our credit cost estimate remains high to factor ageing NPAs.

� Sensitivity of NIM and credit cost to return ratios are high. With a 10bp decline incredit cost and 10bp improvement in NIM, RoA/RoE will improve by 11bp/190bp+and earnings will see an upgrade of 18%.

1200

A–62April 2014


Stress additions impact NIM - expect to bottom out (%) RoE to show gradual improvement, valuation near lows

Best in the decade capitalization - strong liability franchise, a key

Sensitivity analysis suggests strong upside in earnings for every 10bp change in NIM and credit cost (INR)Base 10bp decline 10bp impro- Combined

Case in credit cost Change -vement in NIM Change Impact Change

FY15E FY16E FY15E FY16E FY15E FY16E FY15E FY16E FY15E FY16E FY15E FY16E FY15E FY16E

EPS 218 260 234 279 7.6 7.3 242 288 11.0 10.8 258 307 18.5 18.1

BV 2,065 2,277 2,079 2,306 0.7 1.3 2,085 2,320 1.0 1.9 2,098 2,349 1.6 3.2

ROA % 0.6 0.7 0.7 0.7 5.0 5.0 0.7 0.7 7.0 7.0 0.7 0.8 11.0 11.0

RoE % 11.5 12.4 12.2 13.2 79 75 12.6 13.5 115 110 13.4 14.2 193 183

, RHS

OIL & GASTime to position your portfolio for gains� Indian oil & gas sector has been heavily dependent on government policies which

have been ad-hoc and detrimental to the sector’s health.� While international oil prices saw an increased by USD83/bbl in the last decade,

domestic producers’ (ONGC/OINL) realization increased only by USD22/bbl, ledby ad-hoc subsidy burden.

� On the gas pricing front, while imported gas pricing increased from USD2.5/mmbtuto USD15/mmbtu, domestic producers pricing moved from USD2/mmbtu to onlyUSD4.2/mmbtu.

� Non-remunerative oil prices have already impacted ONGC/OINL’s productiongrowth and no new domestic gas is likely to flow unless remunerative gas pricingis provided.

A–63April 2014


Under recoveries burgeoned from Nil to INR1.6t ONGC net oil realization increased by just USD22/bbl v/s USD83/in the last decade bbl increase in international crude oil prices (USD/bbl)

� This has led to share of oil & gas sector’s profits in corporate sector PAT to halvefrom 40% in FY03 to 20% in FY14.

Diesel reforms set to cut under-recovery by half by FY16Last 12 months witnessed bold, unprecedented reformsPolicy Actions

Petrol Deregulated in June 2010

Diesel Allowed INR0.5/ltr monthly price hikes, set

to be deregulated in next 12 months

LPG Limited subsidized cylinders to 12 per

household per year

PDS Kerosene Targeted supply, shift to cash transfer in

medium term

Gas Pricing Approved new remunerative gas pricing to

~USD8.4/mmbtu (2x of current price)

Upstream (E&P) Eased procedural issues to fasten E&P

development

Developments in the sector during last 12-15 monthsLast 12 months witnessed unprecedented reforms in the sector, with backs to thewall. These reforms have the potential to address some of the chronic problems(under-recovery and remunerative gas pricing) of last decade comprehensively forthe first time.

Likely policy actions with positive elections outcomeA positive elections outcome (reform-oriented government) can change the courseof the sector and hasten policy reforms. We believe the new government could focuson the following:� Continuing monthly diesel price hikes to eliminate under recoveries.� Increase the gas price to make it remunerative for producers.� Provide conducive, predictable policy environment to encourage FDI in upstream

segment.

A–64April 2014


Diesel under-recovery is set to be eliminated in a natural way with monthly price hikes, INR/USDappreciation could hasten the diesel deregulation process (INR/ltr)

Higher gas price expected to usher significant investments and gas supply in IndiaUSD412b investment likely at gas price of USD12/mmbtu Government revenues could increase to USD298b

Undeveloped + Yet to be Found potential at 91 tcfResource / Reserve details Reserve (tcf)

Discovered Gas (1950 to 2012) - A 69

Produced till 2012 - B 24

Developed & Yet to be Produced - C 18

Developed D = (B + C) 42

Undeveloped E = (A - D) 27

“Yet to be Found” - F 64

Total Potential G = (E + F) 91

India gas potential of 91tcf contingent on gas pricing

How investors should position their Oil & Gas portfolio� On the run-up to elections, a clear distinction can be drawn between stocks that

will benefit from ongoing policy reforms and others that will not be impacted.� Ongoing reforms, in our view, will not only correct the anomalies of the last decade,

leading to normalization of profitability of oil PSUs but also be supported by range-bound oil price and INR/USD.

� Our top picks in the sector are ONGC/Oil India in upstream and BPCL in downstreamPSU space.

A–65April 2014


Buy ONGC/OINL: set for meaningful earnings growth in near term� For ONGC, a likely change in every single earnings driver indicates that the earnings

are set to increase meaningfully with only timing being a matter of debate.� Likely doubling of gas price, lowering of subsidy to give remunerative oil realization

will help drive earnings growth of ONGC.� We conservatively model gas price of USD6.3/mmbtu (only 50% pass through)

from FY15 in our base case scenario to model for a likely subsidy towards power/fertilizers. If the full gas price benefit is passed to ONGC, then our FY15E EPS willfurther increase by ~16%.

ONGC Cons EPS could increase 64% if upstream sharing is similar ONGC / OINL benefit most from the scheduled gas price hike,to FY14E (% terms) and 100% gas price hike is passed on we model only 50% pass through for ONGC/OINL

RIL: growth drivers still some time away; uncertainty led by non-core greenfield capex� Apart from the gas price hike, other sector reforms do not have a direct bearing on

RIL’s near term earnings; even in E&P where reforms could impact earningspositively, contribution will begin only FY18 onwards.

� Significant FCF generation in the core business and high capital base (~USD60b)pose major challenges for RIL with respect to efficient cash utilization andsustenance/improvement of RoCE.

� Over the next two to three years, RIL is set to spend USD25b-30b, increasing itscapital employed (CE) by ~40%. While the core business capex of USD13b is likelyto meaningfully increase its earnings from FY17 (3% consolidated EPS CAGR throughFY16 and 12% through FY17), we believe that return ratios (FY17E consolidatedRoE: ~13%) will be impacted by long gestation non-core capex.

E&P EBIT share (KG-D6 + PMT) in RIL is down to 8% and gas price RIL Cons CE break-up: RIL’s RoE’s to remain subdued led by capitalsensitivity is significantly lower than ONGC/OINL employed in non-core long gestation businesses

A–66April 2014


Will OMCs move from trading plays to structural investment plays?� Significant unpredictability in earnings of OMCs had made them uninvestable for

the last few years.� Ongoing reforms have the potential to transform OMCs to a structural investment

play in our view, for the following reasons:a Earnings predictability will improve and normalization of earnings will be a

key catalyst� Diesel deregulation to lower under-recovery significantly and subsidy

sharing is likely to be rationalized� Large savings in interest cost with freeing up of diesel related working

capital debtb) RoEs likely to move up from single digit to double digitsc) Inherent business triggers to increase profitability

� A INR0.5/ltr increase in diesel marketing margin will increase OMCsPBT by INR40b (@80n liters of India diesel consumption), which equals44% of combined OMCs PBT in FY13.

� BPCL is our top pick in OMCs due to its relatively strong balance sheet, operationalupsides through capacity additions/complexity improvement and E&P upsidepotential (key differentiator vis-à-vis HPCL and IOCL).

Consolidated RoE would fall in the interim before likely increase in FY17

Subsidy burden increased OMC’s debt by 4x in the last decade

A–67April 2014


Profitability diminished with RoE’s going down from healthy OMC’s profitability could increase significantlydouble digit digits to single digit just by normalization of profitability (INR)

TECHNOLOGY

Years of high currency volatility have witnessed de-linking of USD revenueand earnings growth…� Top tier aggregated USD revenue growth rates have come down from 33-42% over

FY05-08 to 10-18% over FY12-14E. During this period, the earnings growth too hasmoderated, by remained more volatile v/s the USD revenue growth.

� Earnings’ de-lineation from USD revenue growth is fairly stark, when we look atthe periods when YoY change in currency was in double digits. FY09-10 appears tobe an aberration to this trend, which resulted from very high forex losses in FY09on the hedges.

Over the longer term, the trend in earnings growth broadly maps USD revenue irrespective of currency

….and in those years currency/earnings dictated stock returns than USDrevenue growth� Between FY07 and FY08, INR rapidly appreciated to below 40/USD from ~45, and

during this period, earnings grew below USD revenues in every quarter and the ITindex too expectedly underperformed the broader index.

� Similarly, between FY12 and FY14, currency depreciated significantly from 45/USDto 62/USD and this period saw earnings outgrow USD revenues in all but one quarter.

� There is also a brief period of FY10-12 which counters the thesis as IT index outperformedthe market despite INR appreciating from 50/USD to ~45/USD fairly progressively.However, this was also the period when growth in revenues turned around sharplyfrom flattish to 20%+, beating all expectations and driving significant re-rating.

Currency chg. YoY (%)

A–68April 2014


Period of aberration – Stock outperformance despite INR appreciation� Over 4QFY09-3QFY11, INR appreciated from ~50/USD to INR44.8/USD, but this was

a period when the IT index outperformed the broader market, and even earningsdo better than USD revenue growth in the earlier quarters. However, even duringthis period, the broader market had nearly doubled, while even better returns inthe IT companies was characterized by sudden unanticipated turnaround indemand when the valuations were at bottomed

Period of fast INR appreciation - earnings grew below USD revenues every quarter; IT Index underperformed

Period of fast INR depreciation – earnings outgrew USD revenues every quarter, IT Index outperformed

Period of INR appreciation when IT index outperformed the Sensex

A–69April 2014


� If INR appreciates back to ~55/USD levels in the next couple of years, we see theearnings underperform USD revenue growth in every quarter, and the sector’sunderperformance to index in that event will be inevitable.

Expect consistent underperformance of earnings to USD revenues, if currency appreciates to~INR55 in 2 years

A–70April 2014


Growth recovery in earnings to drive market returnsCyclicals likely to outperform on moderate recovery

� Indian markets have delivered healthy 15% CAGR returns over the past 11 years fromFY04 to FY14. This period encompasses two big cycles: (i) Upcycle - FY04 to FY08 and (ii)Downcycle - FY09 to FY14. Our analysis of these two cycles presents us with interestingfacts.

� The phase of Upcycle was characterized by GDP growth moving from 4.0% in FY03 to 9.3%in FY08. Cyclicals were huge outperformers to Sensex with Capital Goods outperformingSensex by 3.2x, Metals by 1.8x, Utilities and Oil & Gas by 1.5x. Consumer, Healthcare andTechnology were underperformers delivering merely half the Sensex returns.

� Interestingly, Financials was the only sector which outperformed the Sensex in both thecycles. Of this, Private Banks outperformed by 2.6x in Upcycle and 1.4x in the Downcycle.

� Downcycle (FY09-FY14) saw GDP rates falling sharply from 9.3% in FY08, 6.7% in FY09 tomerely 4.8% in FY14. During this period, Consumer sector was the best outperformingsector with 2.6x market returns driven by healthy earnings. Global non-cyclicals likeHealthcare and Technology outperformed Sensex by 2.2x and 1.9x respectively. Utilities,Metals and Telecom underperformed the Sensex by more than half.

� In this backdrop, we present our Model portfolio to leverage the next cycle.

VALUATIONS

Upcycle (FY04-FY08): Sectoral performances indexed to Sensex

Downcycle (FY09-FY14): Sectoral performances indexed to Sensex

Capital Goods

Level of 3,081

A–71April 2014


Assessing impact of a post-election scenario on Sensex earningsDomestic sectors to have positive bias; USD-denominated to lag

� The importance of the outcome of the 2014 general election was clearly visible in thepre-election rally witnessed by the market during the last two months. The rally wasdriven by various opinion polls predicting a near decisive mandate for NDA, therebygenerating hopes of long pending reforms.

� While the election outcome will be known on May 16, its impact on various businesseswill be a function of the policies of the new government. This will surely lead to change inassumptions on various macro parameters, in turn driving changes in earnings estimatesand valuations.

� In this section, we assess what could be the likely impact on large caps in Sensex, if theelection outcome is favorable. We would like to re-iterate that any upcycle, mainly fromthe current lows of 4.8% GDP, will always surprise positively on the growth vs our currentestimates. The objective of the sensitivity analysis is to merely gauge the direction of thatchange.

SENSITIVITY

Key assumptions for the sensitivity analysis� GDP growth to improve to 6% in FY15 and 7% in FY16� Industrial production (IIP) growth to improve to 4% and 6% in FY15 and FY16,

respectively.� Lower CAD and higher capital flows to strengthen INR to 57 in FY15 & 55 in FY16,

from its current level of USD/INR60.

Sensex EPS/PAT sensitivitySensex EPS increases (+ 0.8%) in FY16 to INR1,807 in the optimistic case v/s base caseof INR1,793. However, there exist a huge disparity between the constituent companiesand sectors.� Banking (+ 8-30%), Capital Goods (+ 12-14%), Auto (+ 3-22%), Utilities (+ 3-7%) and

Consumer (+ 3-5%) would see an upgrade in FY16 EPS estimates in the post electionscenario, with the exception of a few companies.

� On the other hand, EPS of Healthcare, Technology and Metal companies wouldwitness downgrades:� Technology sector would see 14% downgrade in FY16 EPS� Healthcare companies would see 10-11% downgrade in FY16 EPS� Metals would see 26-44% downgrade in FY16 EPS

A–72April 2014


Sensex sensitivity analysisCurrent Current Revised Revised EPS upgrade/ Target

EPS EPS EPS EPS Gr. downgrade Price %(INR) Gr. (%) (INR) (%) (%) (INR) Upside

Company Sector FY15E FY16E FY15E FY16E FY15E FY16E FY15E FY16E FY15E FY16E Curr. Rev. Curr. Rev. Assumptions

Sensex USD-denominated

Tata Motors Automobiles 47 66 4 39 48 68 6 41 2 4 510 562 28 41 20% growth in CVs; better operating leverage

Cipla Healthcare 20 24 14 19 18 22 3 18 -10 -10 434 390 13 2

Dr Reddy’s Healthcare 141 159 9 12 127 141 -2 11 -10 -11 3,180 2,825 24 10 Lowered margin by 100-200bp on currency impact

Sun Pharma Healthcare 26 30 16 13 24 26 5 12 -10 -11 750 670 31 17

Hindalco Metals 13 11 13 -9 10 6 -8 -37 -19 -44 142 121 - -15

Sesa Sterlite Metals 25 25 39 1 22 18 22 -15 -12 -26 237 216 26 15

Tata Steel Metals 44 57 32 27 44 57 32 27 0 0 268 268 -32 -32

Reliance Ind. Oil & Gas 85 91 14 7 80 82 7 3 -6 -10 936 859 1 -8 Exchange rate appreciate to INR57 in FY15 and 55 in FY16

Infosys Technology 212 248 14 17 194 212 4 9 -8 -14 4,000 3,393 22 4

TCS Technology 111 130 14 17 102 111 4 10 -9 -14 2,350 2,003 10 -6 Exchange rate appreciate to INR57 in FY15 and 55 in FY16

Wipro Technology 35 41 13 17 32 35 2 11 -10 -14 630 529 16 -3

Sensex Others

Bajaj Auto Automobiles 130 152 14 17 123 137 8 11 -5 -10 2,280 2,050 10 -1

Hero Moto Automobiles 140 174 34 24 148 186 41 26 6 7 2,603 2,790 15 23

M&M Automobiles 78 102 5 31 81 105 9 30 4 3 1,169 1,210 19 23

Maruti Automobiles 121 156 25 29 145 190 49 32 19 22 2,491 3,043 26 54

Axis Bank Banking 148 172 14 16 155 186 19 20 5 8 1,728 2,200 18 51

HDFC Banking 40 47 15 16 40 47 15 16 0 0 1,000 1,000 13 13

HDFC Bank Banking 45 56 25 25 46 58 28 26 2 3 822 905 10 21

ICICI Bank Banking 96 110 14 14 102 122 21 20 6 11 1,427 1,585 15 27

SBI Banking 218 260 20 19 271 341 50 26 24 31 2,175 3,225 13 68

BHEL Capital Goods 10 15 -33 56 10 17 -31 69 3 12 210 266 7 35

L&T Capital Goods 55 67 28 22 58 77 34 33 4 14 1,238 1,610 -3 27

HUL Consumer 18 20 10 12 18 21 12 13 2 3 565 624 -6 3

ITC Consumer 13 15 17 15 13 16 20 18 2 5 400 437 13 24

GAIL Oil & Gas 31 31 -12 -1 29 28 -17 -3 -6 -8 379 354 1 -6

ONGC Oil & Gas 35 40 11 12 38 41 19 8 7 3 385 390 21 22

Bharti Airtel Telecom 13 16 77 26 16 19 112 24 20 18 398 420 25 32 Increased traffice growth 2-3%; currency benefit on INR debt

Coal India Uti l i t ies 28 31 7 7 30 32 11 7 4 3 292 310 1 8

NTPC Uti l it ies 12 13 -2 15 12 14 1 19 4 7 156 163 30 36

Tata Power Uti l i t ies 7 7 4 1 7 7 3 0 -1 -2 103 100 22 18

Sensex 1,525 1,793 15 18 1,537 1,807 16 18 1 1

Source: Company, MOSL

Rise in regional premiums, lower interest.rates, lower import

coal costs will offset drop in dollar linked sales

Increased volume growth ~5%; better margin on operating

leverage and currency movement

Loan book growth increase 3-6%; credit cost reduces 20-30bp

Increased domestic order execution 5-10%

1-2% increase in volume growth

Upstream subsidy share at 55% in FY16 (vs 60% earlier)

Increased coal volume est. 10-15m tons; Increased PLF 3-5%

A–73April 2014


Domestic facing sectors to benefit� Contribution of domestic facing sectors (non-USD denominated) to Sensex PAT

increases from current base case of 60% in FY16 to 64% in optimistic case for FY16,respectively.

� Change in contribution of domestic facing sectors to Sensex PAT growth in theoptimistic post election case is even more dramatic. Its contribution increasesfrom 60% in current base case to 72% in optimistic case.

Sensex sensitivity: Sectoral breakdownCont. to Cont. to Cont. to Cont. to Revised Change

PAT PAT Revised Revised PAT Current PAT PAT in PAT

(%) Gr. (%) PAT (%) Gr. (%) (INR B) (INR B) (%)

Sector FY15E FY16E FY15E FY16E FY15E FY16E FY15E FY16E FY15E FY16E FY15E FY16E FY15E FY16E

Automobiles 11 13 9 23 12 14 11 25 301 398 312 417 4 5

Banking 20 20 25 22 21 22 38 31 512 606 563 690 10 14

Capital Goods 3 3 0 6 3 4 1 8 74 99 77 112 4 13

Consumer 5 5 6 5 5 5 6 6 140 159 143 166 2 4

Healthcare 4 4 4 3 3 3 1 3 94 108 85 96 -10 -11

Metals 5 5 11 2 5 4 6 -1 142 152 128 123 -10 -19

Oil & Gas 22 21 18 13 22 20 18 7 590 645 598 628 1 -3

Technology 16 16 17 17 15 14 5 9 425 496 388 426 -9 -14

Telecom 2 2 7 3 2 3 10 4 52 66 63 78 20 18

Uti l it ies 11 11 3 7 11 11 6 8 293 321 303 334 3 4

Sensex 100 100 100 100 100 100 100 100 2,624 3,050 2,659 3,068 1 1

USD Denominated 41 40 44 40 37 36 18 28 1,064 1,235 991 1,104 -7 -11

Others 59 60 56 60 63 64 82 72 1,560 1,815 1,668 1,964 7 8

Sensitivity of FY16 EPS and EPS growth of Sensex constituents� Companies with high positive delta in EPS growth (optimistic post election case

versus base case) are BHEL (+13pp), L&T (+11pp), SBI (+6pp) and ICICI Bank (+6pp).� Companies that will see negative delta in the optimistic post election case would

include Hindalco (-27pp), Sesa Sterlite (-16pp), Infosys (-8pp), TCS (-7pp), andBajaj auto and Wipro (-5pp each).

� Top 5 companies to see upgrade in the EPS estimates (optimistic post electioncase versus current base case) would be: SBI (+31%), Maruti (+22%), Bharti Airtel(+18%), L&T (+14%) and BHEL (+12%).

� Top 5 companies to see downgrade in the EPS estimates would be: Hindalco (-44%), Sesa Sterlite (-26%), Infosys (-14%), TCS (-14%) and Wipro (+14%).

A–74April 2014


Sensitivity in target priceAs a result of the EPS upgrades/downgrades, we are likely to see significant changesin the target price of many Sensex constituents in an optimistic post election scenario.Top 5 companies in order of upside in target price in the optimistic scenario would be:� SBI (68% upside from current price versus 13% upside in current target price).� Maruti (54% upside from current price versus 26% upside in current target price).� Tata Motors (41% upside from current price versus 28% upside in current target

price).� NTPC (36% upside from current price versus 30% upside in current target price).� Axis Bank (21% upside from current price versus 18% upside in current target

price).

FY16E EPS current growth and delta sensitivity (%) FY16E EPS revised vs current upgrade/downgrade (%)

A–75April 2014


Sensitivity on target price

Favourable election outcome to bring valuation re-ratingAs seen above, a positive election outcome will result in earnings estimates beingrevised for domestic sectors. However, the target prices for most of the companies inthe sectors will see bigger revisions as even the valuation multiples get re-rated incase of favorable election outcome. Our analysis depicts there are large changes inthe valuation multiples for sectors in an upcycle and downcycle.

Cyclicals like Capital Goods have traded at PE of 43x during the best of times whereasduring the worst times they have traded as low as 8x. Oil & Gas have traded at highs of20x and at lows of ~7x and currently trade at 10x (10% discount to historic averages).Private Banks and NBFCs are trading near their 10-year P/B average. A favorableelection outcome can lead to re-rating of such sectors.

A–76April 2014


Sensex risk-reward is favorable, irrespective of election outcomeCorporate sector earnings are expected to grow at 15% CAGR over FY14-16. This willbring the growth rates at long term averages, after growing at 8% for the last six years.This will become an important support for market valuations, to also trade at averages.Assuming no change in multiples from current levels, market returns should mirrorthe earnings growth.

However, a positive outcome of the upcoming election results can lead to a morebusiness friendly environment and revival in domestic demand. This will help toupgrade the earnings growth for Corporate India over the next few years. Historically,high periods of growth have always seen above average valuations, which creates abull market. As earnings growth revives to over 15%, valuations will also tend to tradeabove average.

In case of a slower growth at 12% (due to any volatility in growth cycle), even if themarkets were to trade at its low end of valuation band of 12x, downside is very limited.Risk-reward is favorable for investors at the current market levels.

Sensex levels at different valuations2 Year CAGR (%)

EPS CAGR (%) 12 15 18

EPS FY14 1,331 1,670 1,760 1,852

Sensex Return (%)

12x -29 -10 -6 -1

15x -11 12 18 24

18x 7 34 42 49

Sensex Values

Current (14.7x) 22,386 24,516 25,837 27,187

12x 15,967 20,040 21,120 22,224

15x 19,959 25,050 26,400 27,780

18x 23,951 30,060 31,680 33,336

Sectoral valuations across the ten-year period 2004-2014Prem/Disc to Earning Prem/Disc to

PE (x) 10 Year PE (x) 10 Year (%) CAGR (%) PB (x) 10 Year PB (x) 10 Year (%)

Sector Current Avg Max Min Avg Max Min FY04-14 FY14-16 Curr. Avg Max Min Avg Max Min

Auto 12.3 11.9 27.8 6.0 3.5 -55.6 105.8 22.4 22.8 2.8 3.0 4.4 1.5 -6.0 -36.3 91.2

Banks - Private 13.6 15.1 30.6 8.1 -9.6 -55.4 69.4 25.0 17.0 2.4 2.3 3.8 1.0 5.1 -36.5 131.8

Banks - PSU 7.2 7.0 10.6 3.9 2.9 -32.3 83.1 9.2 15.5 0.7 1.1 1.9 0.5 -34.3 -60.0 39.4

NBFC 10.3 11.2 22.4 4.0 -8.4 -54.1 158.2 20.0 13.1 2.0 2.1 3.9 0.8 -6.7 -49.1 166.3

Capital Goods 24.9 20.0 43.4 8.3 24.3 -42.5 201.1 17.7 19.6 2.9 4.4 11.0 1.6 -33.7 -73.3 83.8

Cement 18.5 13.2 22.8 4.4 39.4 -18.9 319.8 18.2 34.8 2.1 2.4 4.5 0.9 -12.2 -54.1 130.0

Consumer 30.8 24.1 34.3 14.5 27.9 -10.3 111.7 15.3 17.1 10.8 8.2 11.6 4.7 30.9 -6.9 129.4

Healthcare 21.3 21.8 28.7 16.0 -2.4 -25.9 33.3 19.3 17.7 4.4 4.2 6.0 2.3 5.0 -26.5 91.4

Media 20.0 21.3 43.0 10.4 -6.1 -53.6 91.0 24.8 26.7 3.9 3.6 6.4 1.4 9.8 -39.2 182.3

Metals 8.9 9.3 17.1 3.1 -4.3 -47.9 189.5 14.4 11.5 1.0 1.8 4.4 0.6 -45.7 -78.1 63.2

Oil & Gas 9.9 11.0 20.3 6.9 -10.0 -51.4 43.3 10.4 8.8 1.3 1.7 2.9 1.1 -25.4 -54.5 13.7

Real Estate 26.4 20.8 49.0 0.4 27.0 -46.2 5866.8 41.2 34.4 1.0 1.4 6.9 0.1 -26.3 -85.6 978.1

Retai l 22.2 28.7 60.6 8.9 -22.8 -63.4 149.3 35.4 20.8 3.8 4.3 7.3 1.6 -11.2 -47.9 136.2

Technology 16.6 16.9 25.5 7.7 -1.9 -34.7 115.0 25.7 15.3 4.4 5.1 8.6 2.2 -14.8 -48.9 101.3

Telecom 19.9 22.2 51.1 9.1 -10.6 -61.1 118.8 34.0 42.9 1.8 2.5 5.6 1.3 -30.0 -68.6 34.6

Uti l i t ies 10.5 14.3 29.3 2.0 -26.2 -64.0 434.4 13.9 8.8 1.1 1.7 3.7 0.2 -33.8 -69.8 362.8

Sens

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(x)

A–77April 2014


Sector / Portfolio Picks BSE-100 MOSL Wt Wt relative to BSE-100 Sector StanceFinancials 26.3 28.0 1.7 OverweightPrivate 15.0 14 -1.0 Neutral

ICICI Bank 5.3 7 1.7 BuyHDFC Bank 5.3 5 -0.3 BuyIndusInd Bank 0.8 2 1.2 Buy

NBFCs 7.4 7 -0.4 NeutralHDFC 5.1 3 -2.1 BuyShriram Transport 0.5 2 1.5 BuyLIC Housing 0.3 2 1.7 Buy

PSU 3.9 7 3.1 OverweightSBI 2.4 4 1.6 BuyPNB 0.4 3 2.6 Buy

Cap Goods, Infra & Cement 9.3 12.0 2.7 OverweightLarsen & Toubro 3.9 5 1.1 BuyACC 0.5 3 2.5 BuyBHEL 0.6 2 1.4 BuyShree Cement 0.0 2 2.0 Buy

Technology 14.4 12.0 -2.4 NeutralInfosys 5.9 6 0.1 BuyTCS 4.6 3 -1.6 NeutralTech Mahindra 1.0 3 2.0 Buy

Auto 8.1 10.0 1.9 OverweightTata Motors 2.8 4 1.2 BuyMaruti 1.0 4 3.0 BuyHero MotoCorp 1.1 2 0.9 Buy

Energy 11.0 9.0 -2.0 UnderweightONGC 2.5 4 1.5 BuyReliance Inds. 6.1 3 -3.1 NeutralBPCL 0.5 2 1.5 Buy

Healthcare 5.4 7.0 1.6 OverweightSun Pharma 1.7 3 1.3 BuyLupin 0.8 2 1.2 BuyDivi's Lab 0.3 2 1.7 Buy

Consumer / Retail 13.6 5.0 -8.6 UnderweightITC 7.2 5 -2.2 Buy

Metals 4.3 3.0 -1.3 UnderweightSesa Sterlite 0.9 2 1.1 BuyNMDC 0.4 1 0.6 Buy

Telecom 2.2 2.0 -0.2 NeutralBharti Airtel 1.4 2 0.6 Buy

Utilities 3.8 2.0 -1.8 UnderweightNTPC 0.9 2 1.1 Buy

Others 1.6 10.0 8.4 OverweightSobha Developers 0.0 1 1.0 BuyPVR 0.0 1 1.0 BuyTVS Motors 0.0 1 1.0 BuyGujarat Pipavav 0.0 1 1.0 BuyBata 0.0 1 1.0 BuyCrompton Greaves 0.2 1 0.8 BuyAshok Leyland 0.1 1 0.9 NeutralDB Corp 0.0 1 1.0 BuyKaveri Seeds 0.0 1 1.0 BuyOBC 0.0 1 1.0 Buy

Cash 0.0 0.0 0.00Total 100.0 100.0

MOSL modelportfolio

Note: In our quarterly performance tables, our four-quarter numbers may not always add up to the full-year

numbers. This is because of differences in classification of account heads in the company’s quarterly and

annual results or because of differences in the way we classify account heads as opposed to the company.

All stock prices and indices as on 31 March 2014, unless otherwise stated.

March 2014 Results Preview

April 2014

MOSL Universe:4QFY14 Highlights

&Ready Reckoner

B–2April 2014

MOSL Universe

MOSL Universe: 4QFY14 aggregate performance highlights (Ex RMs)Quarter-wise sales growth (% YoY) Quarter-wise net profit growth (% YoY)

Sectoral sales growth - quarter ended March 2014 (%)

Sectoral EBITDA growth - quarter ended March 2014 (%)

Sectoral net profit growth - quarter ended March 2014 (%)

3.7%

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B–3April 2014

MOSL Universe

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Top 10 by EBITDA growth (%) Worst 10 by EBITDA growth (%)

Top 10 by net profit growth (%) Worst 10 by net profit growth (%)

Corporate Scoreboard (quarter ended March 2014)

Source: MOSL

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B–4April 2014

MOSL Universe

Valuations - MOSL universeSector P/E EV/EBITDA P/BV RoE Div. PAT

(x) (x) (x) (%) yld (%) CAGR

(No. of companies) FY14E FY15E FY16E FY14E FY15E FY16E FY14E FY15E FY16E FY14E FY15E FY16E FY14E FY14-16Auto (9) 14.0 12.4 9.3 6.4 5.4 4.1 3.4 2.8 2.2 24.0 22.5 24.2 1.2 22.8Capital Goods (8) 26.9 24.9 18.8 16.5 14.9 11.4 3.2 2.9 2.6 11.7 11.7 14.1 1.2 19.6Cement (13) 26.1 18.9 14.3 11.8 9.2 7.1 2.2 2.0 1.8 8.3 10.6 12.7 1.0 34.8Consumer (13) 36.3 30.7 26.4 24.7 20.9 17.9 12.1 10.8 9.6 33.4 35.0 36.2 1.5 17.1Financials (31) 11.8 10.2 8.8 N.M N.M N.M 1.6 1.5 1.3 13.9 14.3 14.8 2.1 15.5

Private Banks (10) 15.9 13.6 11.6 N.M N.M N.M 2.7 2.4 2.1 17.3 17.6 18.1 1.5 17.0PSU Banks (12) 7.9 6.8 5.9 N.M N.M N.M 0.8 0.7 0.6 9.8 10.4 11.0 2.8 15.5NBFC (9) 11.4 10.2 8.9 N.M N.M N.M 2.3 2.0 1.7 20.1 19.5 19.5 2.6 13.1

Healthcare (14) 24.6 21.2 17.8 15.7 12.8 10.8 5.4 4.5 3.7 22.1 21.0 20.6 0.7 17.7Media (8) 26.4 21.6 16.4 12.7 10.6 8.6 4.8 4.3 3.7 18.3 19.8 22.6 1.4 26.7Metals (9) 10.6 8.9 8.5 6.2 5.3 4.8 1.0 1.0 0.9 9.9 10.8 10.4 2.6 11.5Oil & Gas (13) 10.7 9.8 9.1 6.7 5.7 5.2 1.4 1.3 1.2 13.4 13.3 13.0 2.3 8.8

Excl. RMs (10) 10.5 9.7 9.0 6.0 5.4 4.9 1.5 1.4 1.2 14.3 14.0 13.6 2.3 8.2Real Estate (9) 25.9 18.2 14.4 13.4 10.9 9.2 1.1 1.0 1.0 4.1 5.7 7.0 1.5 34.4Retail (3) 36.9 31.1 25.3 23.2 19.7 15.7 8.9 7.3 6.0 24.2 23.6 23.8 0.7 20.8Technology (10) 18.8 16.5 14.2 13.0 11.3 9.5 5.3 4.3 3.6 28.2 26.3 25.2 1.4 15.3Telecom (4) 33.6 20.3 16.4 7.9 6.5 5.9 1.9 1.8 1.7 5.8 8.9 10.1 0.6 42.9Utilities (10) 10.6 10.1 9.0 8.1 7.7 6.9 1.7 1.5 1.4 15.7 15.3 15.8 6.3 8.8Others (10) 20.2 16.5 13.4 11.9 10.0 8.3 3.8 3.4 2.9 19.0 20.4 21.4 1.2 22.8MOSL (164) 15.5 13.5 11.7 N.M N.M N.M 2.3 2.0 1.8 14.7 15.1 15.6 2.0 15.2MOSL Excl. RMs (161) 15.6 13.6 11.7 N.M N.M N.M 2.3 2.1 1.9 14.9 15.3 15.8 2.0 15.2Sensex (30) 16.8 14.7 12.5 N.M N.M N.M 2.7 2.4 2.1 16.1 16.3 16.9 1.6 16.1Nifty (50) 16.6 14.5 12.4 N.M N.M N.M 2.6 2.3 2.1 15.9 16.1 16.7 1.6 15.5N.M. - Not Meaningful. Source: MOSL

Annual performance - MOSL universe (INR Billion)Sales EBITDA Net Profit

FY14E FY15E FY16E Chg. YoY (%) FY14E FY15E FY16E Chg. YoY (%) FY14E FY15E FY16E Chg. YoY (%)

FY14 FY15 FY16 FY14 FY15 FY16 FY14 FY15 FY16Auto 4,270 4,816 5,911 13 13 23 605 697 878 25 15 26 279 316 421 23 13 33Capital Goods 1,459 1,510 1,712 -2 4 13 146 157 194 -18 7 23 96 104 137 -28 8 32Cement 1,112 1,271 1,452 0 14 14 184 237 293 -22 28 24 73 101 134 -34 38 32Consumer 1,314 1,510 1,738 10 15 15 272 318 368 13 17 16 190 224 260 14 18 16Financials 2,500 2,865 3,293 14 15 15 1,889 2,165 2,493 9 15 15 880 1,012 1,173 -3 15 16

Pvt Banks 641 749 888 18 17 19 556 646 763 23 16 18 329 384 451 19 17 17PSU Banks 1,494 1,703 1,933 10 14 14 989 1,129 1,282 -1 14 14 324 376 432 -25 16 15NBFC 365 413 472 23 13 14 345 391 449 21 13 15 227 253 290 17 12 15

Healthcare 964 1,093 1,244 20 13 14 234 283 325 20 21 15 149 173 206 31 16 19Media 167 191 219 17 14 15 48 56 67 16 18 20 23 28 37 20 22 32Metals 4,541 4,982 5,314 8 10 7 864 992 1,071 9 15 8 306 365 380 -5 19 4Oil & Gas 17,592 17,869 18,400 7 2 3 1,473 1,647 1,808 8 12 10 794 871 940 11 10 8

Excl. RMs 8,364 8,611 8,813 13 3 2 1,223 1,351 1,492 8 11 10 703 766 824 9 9 8Real Estate 221 246 278 13 11 13 75 91 107 6 21 17 24 35 44 -18 43 27Retai l 153 178 212 11 17 19 14 17 21 4 21 23 9 11 13 1 18 23Technology 2,456 2,751 3,156 27 12 15 644 712 820 32 11 15 481 550 639 29 14 16Telecom 1,448 1,595 1,737 11 10 9 477 548 607 20 15 11 71 117 145 58 65 24Uti l it ies 2,071 2,263 2,462 3 9 9 642 694 786 6 8 13 389 410 460 2 5 12Others 317 364 420 14 15 15 56 67 79 21 19 19 30 36 45 20 22 23MOSL (164) 40,584 43,505 47,548 9 7 9 7,625 8,683 9,918 11 14 14 3,794 4,354 5,035 6 15 16Excl.RMs (161) 31,356 34,246 37,960 11 9 11 7,375 8,387 9,602 11 14 14 3,703 4,249 4,919 6 15 16Sensex (30) 10,806 11,672 13,037 13 8 12 2,259 2,567 2,976 21 14 16 1,165 1,336 1,570 15 15 18Nifty (50) 12,381 13,362 14,907 15 8 12 2,605 2,961 3,421 21 14 16 1,355 1,549 1,809 15 14 17For Banks : Sales = Net Interest Income, EBITDA = Operating Profits; Note: Sensex & Nifty Numbers are Free Float.

B–5April 2014

MOSL Universe

Ready reckoner: quarterly performance(INR Million) CMP Rating Sales EBITDA Net Profit

(INR) Mar.14 Var. Var. Mar.14 Var. Var. Mar.14 Var. Var.

31.3.14 % YoY % QoQ % YoY % QoQ % YoY % QoQ

AutomobilesAshok Leyland 24 Neutral 27,241 -26.9 39.5 613 -69.1 LP -1,200 PL LossBajaj Auto 2,078 Buy 48,650 2.5 -5.2 9,824 17.4 -13.5 8,101 5.8 -10.4Eicher Motors 5,956 Buy 18,901 9.6 12.5 1,874 9.9 12.5 1,107 13.1 15.1Exide Inds. 121 Neutral 13,712 -10.9 5.4 1,664 -18.6 16.7 1,146 -21.8 47.8Hero Motocorp 2,273 Buy 63,512 4.6 -7.2 6,174 5.6 -5.6 5,368 -6.5 2.3Mahindra & Mahindra 981 Buy 92,625 -7.2 -9.6 12,696 -11.5 -17.2 8,168 -8.9 -18.3Maruti Suzuki 1,971 Buy 124,649 -2.2 14.4 14,971 0.1 10.5 9,108 -7.4 33.7Tata Motors 398 Buy 654,776 16.9 2.5 98,246 25.9 -1.2 41,781 6.4 -14.8TVS Motor 97 Buy 21,680 24.0 5.4 1,151 22.8 -6.7 635 -14.5 -7.7Sector Aggregate 1,065,745 8.4 2.5 147,214 14.8 -1.6 74,214 -0.9 -7.3

Capital GoodsABB 850 Neutral 19,547 -0.8 -11.3 1,358 27.5 -9.1 547 28.6 -6.2BHEL 197 Buy 151,386 -19.7 78.9 29,352 -36.9 197.7 17,628 -45.6 153.7Crompton Greaves 160 Buy 37,593 11.0 12.2 2,094 168.8 25.3 867 242.9 39.7Cummins India 596 Buy 11,239 -2.6 9.9 1,924 -0.7 -2.6 1,496 0.2 1.6Havells India 930 Neutral 12,801 9.5 8.1 1,621 11.0 -0.7 1,159 7.8 -2.2Larsen & Toubro 1,273 Buy 198,388 9.7 37.9 24,795 10.2 48.0 17,266 8.1 51.9Siemens 773 Se l l 29,868 1.1 24.8 1,240 -25.0 -6.6 466 55.2 -28.5Thermax 748 Buy 14,158 -3.6 39.7 1,432 -14.4 57.6 1,051 -8.9 57.6Sector Aggregate 474,980 -3.1 39.6 63,816 -17.7 79.2 40,478 -23.7 72.3

CementACC 1,392 Buy 32,611 12.0 21.1 5,473 22.5 108.4 3,749 20.0 77.1Ambuja Cements 201 UR 27,898 9.6 27.3 6,059 18.4 109.7 4,224 16.0 89.0Birla Corporation 290 Buy 8,395 26.1 18.3 1,359 105.0 354.5 976 34.3 510.1Grasim Industries 2,887 Buy 13,802 0.3 -5.2 1,841 -14.0 -5.4 2,174 2.2 75.1India Cements 61 Neutral 11,172 -6.2 7.8 734 -56.3 -49.2 -602 PL PLJaiprakash Associates 54 Buy 41,850 8.3 33.4 9,834 15.6 36.8 932 -21.9 LPShree Cement 5,638 Buy 16,287 14.0 23.7 5,024 23.9 86.5 3,331 21.5 181.6Ultratech Cement 2,189 Neutral 58,273 8.1 21.7 11,775 -1.8 54.1 6,621 -8.8 79.1Sector Aggregate 210,290 8.6 21.4 42,099 9.0 57.5 21,404 1.5 119.5

ConsumerAsian Paints 547 Neutral 31,361 15.6 -8.1 4,475 19.8 -10.1 2,904 15.7 -11.8Britannia 843 Buy 16,834 13.2 4.3 1,364 17.5 1.0 898 2.2 -6.8Colgate 1,373 Neutral 9,269 14.2 4.9 1,837 8.9 22.1 1,305 5.9 15.5Dabur 180 Buy 17,912 17.0 -5.9 2,978 19.7 1.8 2,380 18.7 -2.3Godrej Consumer 852 Neutral 20,530 19.7 3.7 3,106 12.9 1.1 2,131 3.8 9.0GSK Consumer 4,309 Neutral 10,855 15.5 29.4 2,008 17.6 243.2 1,808 15.6 126.7Hind. Unilever 604 Se l l 69,841 8.0 -3.3 10,513 8.2 -14.3 8,256 5.7 -13.5ITC 353 Buy 93,343 13.0 7.0 31,355 15.9 -4.5 21,941 13.8 -8.0Marico 210 Buy 10,745 7.7 -10.3 1,382 16.2 -30.7 954 32.0 -29.5Nestle 5,008 Neutral 24,536 9.1 8.9 5,643 6.0 20.7 3,457 11.0 19.3Pidilite Inds. 305 Neutral 8,922 17.3 -7.5 1,499 20.1 -3.1 1,012 5.9 -5.9Radico Khaitan 145 Buy 3,868 16.7 -1.0 537 33.1 -2.4 201 20.5 -10.9United Spirits 2,641 Neutral 21,850 6.2 -4.1 2,027 1.7 -1.5 791 1.8 0.3Sector Aggregate 339,866 12.1 0.9 68,725 13.7 -2.3 48,038 11.5 -4.5UR: Under Review

PULL OUT

B–6April 2014

MOSL Universe

Ready reckoner: quarterly performance

HealthcareAlembic Pharma 284 Buy 4,922 30.2 1.3 960 46.4 -6.1 613 40.3 -7.1Biocon 424 Neutral 7,099 12.6 1.4 1,597 52.0 -4.9 946 41.5 -9.9Cadila Health 1,026 Buy 19,151 18.8 2.3 3,410 19.1 15.5 2,116 -19.4 12.1Cipla 384 Neutral 25,931 31.8 0.5 4,890 19.4 4.6 2,855 6.7 0.4Divis Labs 1,369 Buy 7,795 20.0 13.4 3,118 24.4 9.1 2,223 22.3 1.5Dr Reddy’ s Labs 2,561 Buy 34,830 6.0 -1.4 8,882 30.5 -9.0 5,427 38.5 -4.6Glenmark Pharma 566 Buy 15,568 20.6 -2.4 3,179 30.0 -11.8 1,647 10.8 -22.7GSK Pharma 2,574 Neutral 6,724 6.4 6.6 1,459 -10.4 30.7 1,490 -12.7 37.3IPCA Labs. 845 Buy 8,085 20.4 -2.9 1,929 35.5 -11.3 1,353 79.3 -2.8Lupin 936 Buy 28,156 19.4 -1.6 5,560 14.9 -14.4 3,630 21.0 -10.0Ranbaxy Labs 365 Se l l 27,308 11.6 -5.6 2,400 31.5 -7.8 1,021 20.5 -14.9Sanofi India 3,002 Neutral 4,080 12.4 -11.5 731 56.2 -16.5 662 49.5 -20.0Sun Pharma 573 Buy 39,278 35.0 2.5 15,144 34.0 -6.1 11,231 22.9 -10.8Torrent Pharma 524 Buy 10,963 25.9 8.0 2,516 14.4 17.0 1,793 50.6 13.5Sector Aggregate 239,889 19.6 0.0 55,773 26.4 -4.0 37,007 20.5 -5.5

MediaD B Corp 308 Buy 4,615 15.9 -10.9 1,094 16.6 -29.5 624 13.0 -33.9Dish TV 52 Buy 6,187 11.4 1.0 1,552 29.3 14.5 -205 Loss LossHT Media 93 Neutral 5,495 9.8 -5.5 783 9.1 -17.4 487 21.6 -27.6Jagran Prakashan 103 Buy 4,327 26.2 -4.6 828 53.3 -23.6 483 70.7 -27.0PVR 468 Buy 2,987 22.0 -11.4 248 50.8 -49.7 -118 PL PLSun TV 402 Buy 5,142 8.8 1.2 3,761 7.9 1.1 1,809 1.9 -2.6Zee Entertainment 272 Neutral 11,049 14.6 -7.0 3,047 25.8 4.8 2,308 28.6 8.1Sector Aggregate 39,804 14.4 -5.2 11,314 19.5 -6.2 5,388 20.4 -10.6

MetalsHindalco 142 Buy 220,356 6.3 -2.9 23,349 11.2 15.0 7,493 -16.5 88.6Hindustan Zinc 128 Buy 33,841 -13.4 -1.9 17,823 -15.8 -2.3 17,565 -19.5 2.0JSPL 292 Neutral 53,689 -4.9 -0.2 15,304 -9.4 -10.0 4,527 -47.4 -19.4JSW Steel 1,036 Se l l 117,467 26.4 -1.8 23,600 39.0 2.5 7,352 32.5 3.9Nalco 40 Buy 17,340 -7.1 5.5 1,887 -55.2 -7.6 1,207 -51.0 -7.9NMDC 139 Buy 37,737 17.8 33.7 24,904 15.5 30.9 20,167 16.6 28.7SAIL 71 Se l l 128,898 4.5 12.5 18,006 99.2 59.1 10,587 118.6 104.5Sesa Sterlite 188 Buy 194,363 3.2 0.1 69,862 3.6 6.4 14,519 5.4 -18.1Tata Steel 394 Se l l 412,839 19.1 12.4 44,974 2.9 12.3 9,131 3.3 81.6Sector Aggregate 1,216,530 10.1 5.3 239,709 8.0 10.6 92,548 0.4 17.4

OthersArvind 174 Buy 17,041 21.2 -4.0 2,528 24.7 -0.6 871 15.0 -15.1Bata India 1,139 Buy 5,150 13.5 -7.1 757 20.6 -24.0 476 24.1 -19.5Castrol India 311 Neutral 8,366 7.1 3.8 1,792 6.4 6.0 1,303 4.8 3.2Gujarat Pipavav 88 Buy 1,432 15.0 -1.4 697 22.4 -16.5 462 30.7 -23.8Just Dial 1,554 Buy 1,218 23.9 1.6 374 36.9 12.1 302 41.3 1.5Kaveri Seed 639 Buy 814 10.0 -38.6 150 17.5 -60.8 120 21.6 -67.0Sintex Inds. 43 Neutral 14,103 0.6 1.6 2,431 28.7 -0.6 938 -42.3 5.6Symphony 736 Buy 1,159 32.0 0.6 332 21.7 7.1 259 43.8 4.9UPL 184 Buy 30,735 9.0 16.1 5,808 8.1 24.9 3,210 3.1 22.5V-Guard Inds 465 Buy 3,973 4.9 12.6 361 81.2 24.1 207 132.1 18.3Sector Aggregate 83,990 10.1 4.5 15,231 16.8 5.2 8,149 1.1 0.9PL: Profit to Loss; LP: Loss to Profit; UR: Under Review

(INR Million) CMP Rating Sales EBITDA Net Profit



PULL OUT

B–7April 2014

MOSL Universe


Oil & GasBPCL 460 Buy 645,555 -2.6 -0.3 46,508 -29.0 LP 25,671 -46.5 LPCairn India 333 Buy 49,927 14.4 -0.1 38,064 16.8 3.1 28,734 12.1 -0.4GAIL 376 Neutral 165,326 33.2 3.5 26,065 129.3 16.8 14,186 133.9 6.3Gujarat State Petronet 69 Neutral 2,374 -33.9 -2.7 2,048 -37.3 -0.4 967 -40.1 10.7HPCL 310 Buy 529,103 -13.6 -4.5 47,118 -53.7 LP 35,297 -54.0 LPIOC 279 Buy 1,309,773 2.0 11.6 115,440 -30.1 LP 81,756 -43.7 LPIndraprastha Gas 298 Neutral 10,009 13.5 -3.8 2,109 14.1 8.6 1,034 23.8 15.6MRPL 48 Neutral 184,590 -0.6 -1.0 5,214 265.1 LP 5,034 LP LPOil India 482 Buy 25,171 5.9 -3.4 11,422 29.7 -2.2 8,740 14.3 -3.2ONGC 319 Buy 209,984 -1.8 1.2 110,762 7.6 -9.3 52,136 53.9 -23.7Petronet LNG 137 Buy 110,494 30.5 17.8 3,578 -17.6 2.3 1,335 -45.5 -1.5Reliance Inds. 930 Neutral 1,078,122 28.0 4.1 79,089 1.1 3.8 56,521 1.1 2.6Sector Aggregate 4,320,427 5.6 4.2 487,416 -15.6 95.9 311,409 -22.8 126.6Excl. RMs 1,835,996 20.0 3.6 278,351 13.7 1.5 168,686 26.5 -3.8

Real EstateDLF 177 Buy 20,282 -8.9 -1.5 6,686 -7.9 9.3 1,615 LP 11.1Godrej Properties 213 Neutral 3,007 -3.6 24.3 904 -8.1 5.9 400 -24.9 7.0Indiabulls Real Estate 55 Buy 4,255 3.2 -5.4 1,183 -13.8 5.7 331 -36.2 16.7Jaypee Infratech 21 Buy 10,366 8.2 4.9 3,999 -5.6 12.0 1,312 -11.7 29.7Mahindra Lifespace 366 Buy 696 -31.9 21.0 76 -55.6 236.6 108 -53.5 -35.3Oberoi Realty 217 Buy 1,871 -38.4 9.7 1,053 -40.8 17.3 772 -46.9 13.4Phoenix Mills 247 Buy 781 8.1 3.3 520 8.6 4.6 400 10.9 5.8Prestige Estates 172 Buy 5,414 -3.3 25.8 1,450 9.8 9.9 925 3.9 14.9Sobha Developers 374 Buy 5,357 -8.7 -1.6 1,459 -10.3 -2.1 560 -19.6 -4.0Sector Aggregate 52,028 -6.0 3.7 17,331 -9.9 9.1 6,422 4.8 12.0

RetailFuture Retail 82 UR 24,352 4.2 4.8 1,980 11.2 -12.7 -74 Loss LossJubilant Foodworks 1,067 Se l l 4,606 25.9 0.9 737 20.3 9.3 342 4.7 1.9Shopper's Stop 385 Neutral 7,311 17.0 2.7 460 20.1 -12.6 184 21.4 6.2Titan Company 262 Neutral 27,375 5.6 3.3 2,525 2.5 6.6 1,771 -4.3 -0.5Sector Aggregate 63,645 7.5 3.6 5,702 8.8 -2.3 2,223 -2.3 1.2

TechnologyHCL Technologies 1,391 Buy 84,195 31.1 2.9 21,520 52.0 1.3 14,403 41.4 -3.7Hexaware Tech. 151 Neutral 6,265 23.4 1.1 1,378 40.8 -1.2 1,015 28.0 -1.6Infosys 3,279 Buy 130,162 24.5 -0.1 35,961 29.9 -0.7 26,211 9.5 -8.8KPIT Tech. 161 Buy 6,966 22.2 2.8 1,042 3.1 0.0 497 -2.9 -18.2Mindtree 1,319 Neutral 8,181 33.6 3.5 1,617 39.1 4.9 928 17.6 4.9MphasiS 404 Neutral 10,197 NA NA 1,753 NA NA 1,363 NA NAPersistent Systems 1,048 Buy 4,532 35.7 4.7 1,236 48.8 3.3 706 36.0 9.9TCS 2,128 Neutral 217,475 32.4 2.1 67,712 45.3 1.3 53,548 48.9 0.8Tech Mahindra 1,795 Buy 49,996 32.7 2.1 10,684 38.5 -6.0 5,926 26.1 -7.7Wipro 543 Buy 116,523 21.3 3.4 24,616 44.2 7.9 20,904 32.7 3.8Sector Aggregate 634,492 26.6 1.1 167,519 40.0 0.7 125,501 32.2 -2.3

TelecomBharti Airtel 319 Buy 222,539 13.6 1.4 72,051 18.9 1.6 11,127 118.8 82.4Bharti Infratel 204 Neutral 28,142 5.3 3.0 11,365 13.1 0.7 4,070 41.7 -0.8Idea Cellular 138 Buy 69,387 14.5 4.9 21,866 25.0 6.4 5,381 40.1 15.0Reliance Comm 129 Neutral 55,441 2.6 2.6 19,005 13.9 3.0 2,493 LP 71.5Sector Aggregate 375,509 11.4 2.4 124,287 18.6 2.5 23,072 146.3 41.2




B–8April 2014

MOSL Universe


(INR Million) CMP Rating Net Interest Income Operating Profit Net Profit



FinancialsPrivate BanksAxis Bank 1,460 Buy 30,600 14.8 2.5 28,802 2.9 10.1 17,251 10.9 7.5Federal Bank 96 Buy 5,673 18.2 4.0 3,941 6.7 10.7 2,045 -7.9 -11.1HDFC Bank 749 Buy 49,881 16.1 7.6 40,214 35.7 3.4 23,632 25.0 1.6ICICI Bank 1,245 Buy 43,604 14.6 2.5 44,059 22.2 -0.7 25,875 12.3 2.2IndusInd Bank 501 Buy 7,571 14.5 3.7 6,759 24.4 4.4 3,650 18.7 5.2ING Vysya Bank 628 Buy 4,486 5.9 7.8 3,025 6.4 10.3 1,717 0.8 2.6Kotak Mahindra Bank 778 Neutral 9,427 4.3 3.3 6,011 -8.0 2.8 3,573 -18.1 5.1Yes Bank 414 Buy 6,911 8.3 3.9 6,661 5.1 8.4 4,125 13.9 -0.8Pvt Banking Sector Aggregate 158,152 14.0 4.4 139,473 17.7 3.9 81,866 13.0 2.8PSU BanksBank of Baroda 721 Buy 32,797 16.5 7.3 23,077 7.6 5.8 11,390 10.7 8.7Bank of India 229 Neutral 29,223 18.0 7.5 21,914 5.6 2.2 5,992 -20.8 2.3Canara Bank 264 Neutral 23,711 13.4 6.5 17,106 0.8 7.5 4,105 -43.4 0.3Indian Bank 115 Buy 11,031 -0.4 1.1 6,608 17.1 4.5 2,471 -15.4 -6.6Oriental Bank 223 Buy 12,777 5.3 3.8 9,761 3.1 13.7 2,338 -24.1 4.2Punjab National Bank 744 Buy 43,997 16.4 4.2 28,956 1.5 7.2 7,952 -29.7 5.3State Bank 1,918 Buy 130,541 17.8 3.3 78,045 0.6 2.4 27,359 -17.1 22.4Union Bank 137 Neutral 20,618 4.2 5.0 13,103 -22.2 3.9 3,533 -55.2 1.3PSU Banking Sector Aggregate 304,694 14.8 4.5 198,572 0.7 4.6 65,140 -21.8 11.0NBFCBajaj Finance 1,790 Buy 6,865 35.7 3.9 4,025 42.0 7.5 2,136 30.4 10.0HDFC 884 Buy 22,584 14.0 28.2 23,772 11.9 33.3 17,115 10.0 33.9IDFC 122 Buy 6,560 2.0 -1.2 8,129 -5.3 12.4 5,258 0.0 5.0LIC Housing Fin 236 Buy 5,386 16.9 17.7 5,045 22.2 12.4 3,892 23.1 19.2M & M Financial 252 Neutral 7,525 13.5 11.2 4,989 6.8 16.2 2,475 -22.3 50.8Power Finance Corp 193 Neutral 22,950 33.0 6.2 22,738 33.1 6.5 15,913 23.6 2.3Rural Electric. Corp. 229 Neutral 18,073 28.3 -0.4 18,278 27.7 -0.2 12,864 33.5 0.0Shriram Transport Fin. 763 Buy 9,400 5.2 0.6 7,218 -3.2 -0.8 2,991 -15.8 -0.8NBFC Bkg. Sector Aggregate 99,342 19.9 8.8 94,194 17.3 11.4 62,644 14.2 11.7Financials Sector Aggregate 562,188 15.5 5.2 432,239 9.1 5.8 209,650 -0.5 7.8




UtilitiesCESC 500 Buy 18,396 21.6 52.4 5,080 11.2 73.4 2,661 4.0 148.7Coal India 288 Neutral 202,609 1.8 19.7 74,837 3.7 82.4 61,832 0.3 58.3Jaiprakash Power 14 Buy 5,318 42.0 8.0 2,925 78.7 5.8 -1,342 Loss LossJSW Energy 59 Neutral 24,995 8.6 16.2 8,143 2.3 1.8 2,369 -28.5 6.9NHPC 19 Neutral 12,857 16.9 14.4 7,401 22.3 18.7 2,859 -0.1 10.3NTPC 120 Buy 157,942 -4.1 -15.9 40,062 2.6 -13.5 24,061 16.5 -19.5Power Grid Corp. 105 Buy 38,029 12.7 3.2 32,095 13.4 3.4 11,454 4.8 9.9PTC India 68 Buy 29,746 35.3 8.1 392 -23.4 -66.1 386 2.4 -55.4Reliance Infrastructure 435 Buy 27,711 -29.3 9.3 5,461 6.5 6.1 3,580 -40.2 -2.8Tata Power 85 Neutral 100,845 11.6 15.9 27,585 48.7 54.4 11,341 748.0 608.0Sector Aggregate 618,447 2.8 6.0 203,981 10.9 25.5 119,201 9.7 32.6PL: Profit to Loss; LP: Loss to Profit; UR = Under Review

PULL OUT

B–9April 2014

MOSL Universe

Ready reckoner: valuationsCMP (INR) Rating EPS (INR) P/E (x) EV/EBITDA (x) RoE (%)

31.3.14 FY14E FY15E FY16E FY14E FY15E FY16E FY14E FY15E FY16E FY14E FY15E FY16E

AutomobilesAshok Leyland 24 Neutral -2.2 -0.2 1.0 -10.8 -129.5 24.8 191.0 12.5 7.5 -13.6 -1.2 6.2Bajaj Auto 2,078 Buy 113.7 130.1 152.0 18.3 16.0 13.7 12.2 10.2 8.3 37.8 36.3 35.6Eicher Motors 5,956 Buy 145.9 220.9 331.0 40.8 27.0 18.0 20.9 14.3 9.1 20.7 26.3 31.4Exide Inds. 121 Neutral 5.5 6.6 7.6 21.9 18.4 15.9 10.9 9.3 7.9 12.6 13.7 14.2Hero Motocorp 2,273 Buy 104.7 140.1 173.6 21.7 16.2 13.1 16.6 11.7 9.0 39.1 44.2 44.2Mahindra & Mah. 981 Buy 73.7 77.7 101.5 13.3 12.6 9.7 6.3 5.6 4.5 20.8 18.0 18.1Maruti Suzuki 1,971 Buy 97.1 121.3 156.1 20.3 16.2 12.6 9.8 7.5 5.6 13.7 15.1 16.7Tata Motors 398 Buy 45.6 47.4 65.8 8.7 8.4 6.1 4.0 3.5 2.5 33.1 26.1 27.8TVS Motor 97 Buy 5.3 7.9 10.0 18.5 12.4 9.8 11.0 7.8 6.0 19.0 24.2 25.7Sector Aggregate 14.0 12.4 9.3 6.4 5.4 4.1 24.0 22.5 24.2Capital GoodsABB 850 Neutral 8.3 14.3 20.3 101.8 59.6 42.0 38.9 28.1 21.9 6.7 11.0 14.5BHEL 197 Buy 14.4 9.6 15.0 13.7 20.4 13.1 8.9 10.9 6.4 11.1 7.1 10.4Crompton Greaves 160 Buy 4.2 8.9 11.8 37.6 18.0 13.5 17.1 11.9 9.5 7.3 15.3 18.9Cummins India 596 Buy 21.9 25.0 30.8 27.2 23.8 19.3 21.6 19.2 15.3 24.2 25.5 28.5Havells India 930 Neutral 41.6 45.4 51.8 22.3 20.5 18.0 15.6 12.6 10.9 29.0 26.5 25.6Larsen & Toubro 1,273 Buy 43.1 55.2 67.2 29.5 23.1 18.9 17.2 14.0 11.8 14.0 14.3 15.0Siemens 773 Se l l 7.1 13.3 19.9 108.1 58.0 38.8 42.5 28.3 20.8 6.1 11.0 15.3Thermax 748 Buy 22.5 29.0 39.0 33.2 25.8 19.1 19.4 15.0 11.7 13.7 16.0 19.2Sector Aggregate 26.9 24.9 18.8 16.5 14.9 11.4 11.7 11.7 14.1CementACC 1,392 Buy 48.5 68.6 89.6 28.7 20.3 15.5 17.0 11.7 9.0 12.0 16.0 19.2Ambuja Cements 201 UR 6.8 8.7 10.8 29.6 23.2 18.7 17.5 13.9 11.3 11.5 13.8 16.1Birla Corporation 290 Buy 26.1 41.1 52.7 11.1 7.1 5.5 6.3 4.1 2.8 7.8 11.2 13.0Grasim Industries 2,887 Buy 248.7 294.6 339.9 11.6 9.8 8.5 5.2 4.1 3.0 10.5 11.2 11.6India Cements 61 Neutral -2.2 3.9 8.0 -27.6 15.6 7.6 9.7 6.7 5.2 -1.6 2.8 5.4J P Associates 54 Buy 0.5 1.8 3.8 107.8 30.3 14.1 9.7 8.9 7.3 0.8 2.8 5.9Shree Cement 5,638 Buy 295.5 342.7 429.9 19.1 16.5 13.1 12.5 10.3 7.7 21.5 18.6 19.1Ultratech Cement 2,189 Neutral 71.8 95.8 115.2 30.5 22.8 19.0 16.9 13.4 10.7 12.3 14.6 15.4Dalmia Bharat 254 Buy -10.0 -12.9 11.4 -25.4 -19.8 22.3 17.6 10.6 6.7 -2.7 -3.6 3.2J K Cements 240 Buy 8.2 14.9 34.9 29.5 16.1 6.9 11.2 7.3 5.4 3.4 5.9 12.9JK Lakshmi Cem. 111 Buy 8.8 10.7 11.2 12.7 10.4 10.0 9.1 7.4 5.4 8.0 9.1 9.0Ramco Cements 215 Buy 3.7 12.0 17.4 57.6 17.9 12.3 15.3 9.5 7.3 3.7 11.6 15.2Prism Cement 38 Buy -3.8 -0.3 4.6 -10.1 -148.9 8.3 27.3 9.8 4.8 -18.2 -1.3 22.3Sector Aggregate 26.1 18.9 14.3 11.8 9.2 7.1 8.3 10.6 12.7ConsumerAsian Paints 547 Neutral 12.7 15.5 18.6 42.9 35.2 29.4 27.6 23.2 19.4 31.4 32.4 32.8Britannia 843 Buy 30.8 36.6 43.3 27.4 23.0 19.5 18.5 15.1 12.5 47.3 45.5 43.9Colgate 1,373 Neutral 35.5 43.6 52.0 38.7 31.5 26.4 27.8 21.6 17.6 88.0 96.3 101.5Dabur 180 Buy 5.3 6.4 7.5 34.0 28.0 24.0 27.1 22.0 18.8 34.6 34.8 33.7Godrej Consumer 852 Neutral 21.6 27.0 33.3 39.5 31.5 25.6 26.7 21.9 18.1 20.8 22.7 23.7GSK Consumer 4,309 Neutral 119.6 140.8 165.9 36.0 30.6 26.0 33.7 26.7 22.1 31.3 31.0 30.8Hind. Unilever 604 Se l l 16.4 18.0 20.2 36.8 33.5 29.9 27.9 24.4 21.0 61.3 57.5 55.6ITC 353 Buy 11.0 12.9 14.8 32.2 27.4 23.8 21.8 18.7 16.3 37.9 40.6 43.0Marico 210 Buy 7.6 8.4 9.9 27.4 25.1 21.1 18.3 15.3 12.6 29.4 25.0 24.4Nestle 5,008 Neutral 121.9 143.5 168.8 41.1 34.9 29.7 24.2 20.5 17.7 57.0 53.4 54.9Pidilite Inds. 305 Neutral 9.3 11.4 13.5 32.7 26.8 22.7 20.8 17.1 14.2 23.4 24.2 23.9Radico Khaitan 145 Buy 7.6 9.4 11.2 19.0 15.5 12.9 11.8 9.9 8.5 12.7 14.0 14.8United Spirits 2,641 Neutral 25.4 42.6 56.0 103.9 62.0 47.2 41.3 32.9 27.4 4.4 7.2 8.9Sector Aggregate 36.3 30.7 26.4 24.7 20.9 17.9 33.4 35.0 36.2

PULL OUT

B–10April 2014

MOSL Universe



HealthcareAlembic Pharma 284 Buy 12.5 17.3 23.1 22.7 16.4 12.3 16.9 13.4 10.5 40.8 43.7 44.6Biocon 424 Neutral 19.8 21.8 25.4 21.4 19.5 16.7 11.9 10.9 9.2 13.4 13.5 14.3Cadila Health 1,026 Buy 38.1 46.3 56.2 27.0 22.2 18.3 19.8 16.0 13.0 24.0 24.2 24.4Cipla 384 Neutral 17.8 20.4 24.2 21.5 18.8 15.8 13.5 11.2 9.4 14.0 14.1 14.6Divis Labs 1,369 Buy 61.9 71.8 88.5 22.1 19.1 15.5 16.8 13.5 10.8 29.9 29.3 30.8Dr Reddy’ s Labs 2,561 Buy 129.7 141.5 158.9 19.7 18.1 16.1 13.6 11.9 10.3 23.6 21.1 19.8Glenmark Pharma 566 Buy 23.6 29.1 35.3 24.0 19.4 16.0 13.8 12.0 10.1 19.1 19.5 19.5GSK Pharma 2,574 Neutral 56.2 69.9 87.5 45.8 36.8 29.4 39.7 29.5 22.1 23.6 28.7 34.3IPCA Labs. 845 Buy 37.7 51.8 64.0 22.4 16.3 13.2 13.7 11.2 9.2 27.3 29.8 29.1Lupin 936 Buy 32.1 42.9 49.8 29.1 21.8 18.8 15.9 13.3 11.2 24.1 25.3 23.8Ranbaxy Labs 365 Se l l 11.9 8.8 18.9 30.6 41.7 19.3 18.2 7.9 12.2 -26.9 33.5 16.3Sanofi India 3,002 Neutral 104.1 129.3 151.4 28.8 23.2 19.8 22.4 18.2 15.0 17.9 19.7 20.0Sun Pharma 573 Buy 22.6 26.2 29.8 25.4 21.8 19.3 15.5 13.4 10.2 28.9 27.2 23.6Torrent Pharma 524 Buy 35.4 34.7 41.1 14.8 15.1 12.7 10.3 10.2 8.4 36.3 28.5 28.1Sector Aggregate 24.6 21.2 17.8 15.7 12.8 10.8 22.1 21.0 20.6

MediaD B Corp 308 Buy 16.0 19.0 22.6 19.3 16.2 13.6 11.1 9.4 7.9 26.8 28.3 29.6Dish TV 52 Buy -1.0 -1.0 0.6 -52.8 -49.8 86.5 11.5 9.9 7.4 NA NA NAHindustan Media 136 Buy 15.2 16.9 19.1 9.0 8.1 7.1 3.8 3.1 2.1 19.7 18.2 17.2HT Media 93 Neutral 7.8 8.0 8.9 11.9 11.6 10.5 5.4 4.8 4.0 10.1 9.3 9.3Jagran Prakashan 103 Buy 6.3 8.0 9.6 16.3 12.9 10.7 9.3 7.8 6.4 20.0 22.4 23.4PVR 468 Buy 12.8 18.8 33.2 36.7 24.8 14.1 11.6 8.9 6.4 7.7 10.4 16.3Sun TV 402 Buy 17.4 21.4 26.4 23.1 18.8 15.2 10.6 8.8 7.5 22.3 24.7 27.8Zee Entertainment 272 Neutral 9.5 11.7 15.0 28.6 23.2 18.1 21.0 16.7 12.9 21.4 22.6 24.5Sector Aggregate 26.4 21.6 16.4 12.7 10.6 8.6 18.3 19.8 22.6

MetalsHindalco 142 Buy 11.0 12.5 11.4 12.9 11.3 12.5 9.4 7.3 6.4 10.5 11.0 9.1Hindustan Zinc 128 Buy 16.0 17.6 17.2 8.0 7.3 7.4 4.0 3.1 2.4 19.4 18.3 15.7JSPL 292 Neutral 24.7 28.2 35.4 11.8 10.3 8.2 9.4 7.8 6.0 11.0 11.7 12.7JSW Steel 1,036 Se l l 49.2 65.3 55.3 21.0 15.9 18.7 7.1 7.0 6.6 6.8 9.3 7.4Nalco 40 Buy 2.3 3.2 2.9 17.3 12.4 13.6 6.0 3.6 3.7 4.9 6.6 5.9NMDC 139 Buy 16.3 17.7 18.1 8.5 7.9 7.7 4.4 4.1 4.0 22.9 21.7 21.3SAIL 71 Se l l 6.1 7.1 7.3 11.7 10.0 9.7 10.0 8.2 7.5 5.9 6.5 6.3Sesa Sterlite 188 Buy 17.6 24.6 24.8 10.7 7.6 7.6 3.8 3.1 2.7 7.3 9.3 8.7Tata Steel 394 Se l l 33.7 44.3 56.5 11.7 8.9 7.0 7.0 6.3 5.8 15.0 17.6 19.1Sector Aggregate 10.6 8.9 8.5 6.2 5.3 4.8 9.9 10.8 10.4

OthersArvind 174 Buy 13.4 17.1 22.9 12.9 10.2 7.6 7.7 6.4 5.2 14.5 16.2 18.7Bata India 1,139 Buy 30.8 39.3 48.2 37.0 29.0 23.6 21.9 17.6 14.2 25.6 26.7 26.4Castrol India 311 Neutral 10.0 11.0 12.1 31.2 28.2 25.6 21.9 19.5 17.2 71.4 70.4 81.4Gujarat Pipavav 88 Buy 3.6 5.0 7.0 24.2 17.7 12.5 16.6 12.4 9.7 13.4 16.1 20.2Just Dial 1,554 Buy 16.7 22.7 29.5 93.3 68.5 52.7 72.4 52.1 39.0 25.3 29.1 31.6Kaveri Seed 639 Buy 31.9 42.5 56.2 20.0 15.0 11.4 18.3 13.0 9.3 50.8 46.5 43.7Sintex Inds. 43 Neutral 9.5 10.1 12.7 4.6 4.3 3.4 5.5 5.7 4.9 9.4 9.1 10.4Symphony 736 Buy 25.8 33.8 43.3 28.5 21.8 17.0 22.1 16.4 12.5 36.7 39.3 40.6UPL 184 Buy 22.0 26.8 31.6 8.4 6.9 5.8 5.2 4.2 3.5 19.0 19.8 19.7V-Guard Inds 465 Buy 23.5 31.7 39.3 19.8 14.7 11.8 12.3 9.4 7.6 24.3 27.1 27.4Sector Aggregate 20.2 16.5 13.4 11.9 10.0 8.3 19.0 20.4 21.4

PULL OUT

B–11April 2014

MOSL Universe



Oil & GasBPCL 460 Buy 36.4 37.5 41.9 12.7 12.3 11.0 8.0 7.5 6.7 14.9 14.0 14.2Cairn India 333 Buy 64.2 57.7 52.1 5.2 5.8 6.4 2.9 2.6 2.5 23.3 17.9 14.4Chennai Petroleum 69 Buy -19.9 24.5 29.6 -3.5 2.8 2.3 14.6 5.5 4.5 -15.7 19.7 20.8GAIL 376 Neutral 35.3 31.1 30.7 10.6 12.1 12.2 7.6 8.1 7.8 18.6 13.7 12.4Guj. State Petronet 69 Neutral 7.5 8.7 9.6 9.2 8.0 7.2 4.5 4.2 3.7 13.6 13.9 13.7HPCL 310 Buy 19.3 21.0 27.4 16.1 14.7 11.3 12.9 8.9 7.3 4.7 5.0 6.2Indraprastha Gas 298 Neutral 26.6 28.8 31.5 11.2 10.3 9.5 5.1 4.4 3.8 22.8 20.8 19.5IOC 279 Buy 23.9 29.1 31.7 11.7 9.6 8.8 10.6 7.1 6.3 8.9 10.2 10.3MRPL 48 Neutral 0.2 5.8 8.0 222.2 8.2 5.9 12.9 4.4 3.4 0.6 14.8 18.0Oil India 482 Buy 54.7 59.3 70.2 8.8 8.1 6.9 5.4 4.9 3.7 16.3 15.9 17.0ONGC 319 Buy 31.7 35.2 39.6 10.0 9.1 8.1 4.3 4.0 3.5 17.0 16.9 17.1Petronet LNG 137 Buy 9.0 10.0 12.3 15.2 13.6 11.1 8.0 7.5 6.1 14.3 14.2 15.5Reliance Inds. 930 Neutral 75.0 85.1 91.1 12.4 10.9 10.2 9.9 8.6 8.5 11.6 12.0 11.6Sector Aggregate 10.7 9.8 9.1 6.7 5.7 5.2 13.4 13.3 13.0Ex RMS 10.5 9.7 9.0 6.0 5.4 4.9 14.3 14.0 13.6

Real EstateDLF 177 Buy 3.4 4.0 5.3 52.6 44.0 33.3 18.2 16.5 14.7 2.1 2.4 3.1Godrej Properties 213 Neutral 7.6 8.6 10.7 28.1 24.9 19.9 20.9 16.1 13.3 8.2 7.3 8.5Indiabulls Real Est. 55 Buy 5.1 9.8 14.4 10.7 5.6 3.8 7.6 6.4 3.8 3.2 5.6 7.9Jaypee Infratech 21 Buy 3.0 4.5 4.3 7.1 4.7 5.0 7.1 5.9 6.1 6.6 9.4 8.3Mahindra Lifespace 366 Buy 22.5 22.1 36.5 16.2 16.6 10.0 14.8 14.6 8.7 6.7 6.3 9.5Oberoi Realty 217 Buy 9.5 19.6 23.5 22.8 11.1 9.2 16.0 7.0 5.6 7.3 13.7 14.5Phoenix Mills 247 Buy 5.9 10.8 20.4 41.7 22.8 12.1 12.0 8.8 6.5 4.7 8.1 13.4Prestige Estates 172 Buy 9.5 11.7 14.8 18.2 14.8 11.7 12.0 9.8 8.0 11.0 12.1 13.4Sobha Developers 374 Buy 22.5 26.1 31.9 16.6 14.3 11.7 8.7 7.9 6.7 10.0 10.9 12.3Sector Aggregate 25.9 18.2 14.4 13.4 10.9 9.2 4.1 5.7 7.0

RetailJubi. Foodworks 1,067 Se l l 20.7 26.6 35.5 51.5 40.1 30.1 25.1 19.0 14.0 23.7 23.4 23.8Shopper's Stop 385 Neutral 5.8 9.1 11.8 65.8 42.3 32.7 20.0 15.9 13.1 6.7 9.6 11.3Titan Company 262 Neutral 8.2 9.3 11.2 32.2 28.2 23.4 23.1 20.6 16.7 29.4 27.2 26.6Sector Aggregate 36.9 31.1 25.3 23.2 19.7 15.7 24.2 23.6 23.8

TechnologyHCL Technologies 1,391 Buy 82.8 96.2 109.0 16.8 14.4 12.8 10.6 9.5 8.1 39.7 35.3 31.4Hexaware Tech. 151 Neutral 12.6 13.5 15.1 11.9 11.2 10.0 7.6 7.2 6.5 31.6 30.8 29.0Infosys 3,279 Buy 185.8 211.6 247.5 17.6 15.5 13.2 11.7 10.1 8.2 23.9 25.5 25.2KPIT Tech. 161 Buy 12.0 15.2 19.4 13.4 10.6 8.3 7.3 5.6 4.0 20.6 21.5 22.1Mindtree 1,319 Neutral 106.3 124.7 144.0 12.4 10.6 9.2 8.9 7.2 5.7 30.4 28.6 26.2MphasiS 404 Neutral 50.7 39.8 45.3 11.3 10.2 8.9 6.2 7.8 7.0 15.7 15.8 16.9Persistent Systems 1,048 Buy 63.2 77.1 99.2 16.6 13.6 10.6 8.5 7.1 5.4 22.8 23.3 24.7TCS 2,128 Neutral 97.9 111.3 129.8 21.7 19.1 16.4 16.0 13.7 11.6 41.2 37.1 34.5Tech Mahindra 1,795 Buy 120.1 142.3 167.6 14.9 12.6 10.7 9.0 7.8 6.3 38.1 31.8 28.7Wipro 543 Buy 31.2 35.2 41.0 17.4 15.4 13.2 12.7 10.9 9.2 24.7 23.5 23.1Sector Aggregate 18.8 16.5 14.2 13.0 11.3 9.5 28.2 26.3 25.2

TelecommunicationBharti Airtel 319 Buy 7.4 13.1 16.5 43.1 24.4 19.4 7.3 5.9 5.3 4.9 7.9 9.2Bharti Infratel 204 Neutral 7.7 8.8 10.3 26.5 23.1 19.7 9.4 8.6 7.9 8.3 9.1 10.2Idea Cellular 138 Buy 5.8 8.2 8.0 23.8 16.7 17.3 8.0 6.5 6.8 12.4 15.4 13.2Reliance Comm 129 Neutral 3.9 10.2 16.1 33.3 12.6 8.0 9.2 7.1 5.9 2.7 7.0 10.2Sector Aggregate 33.6 20.3 16.4 7.9 6.5 5.9 5.8 8.9 10.1

B–12April 2014

MOSL Universe

CMP (INR) Rating EPS (INR) P/E (x) P/BV (x) RoE (%)


Private BanksAxis Bank 1,460 Buy 130.4 148.0 171.6 11.2 9.9 8.5 1.8 1.6 1.4 17.1 16.9 17.0Federal Bank 96 Buy 9.0 10.3 12.2 10.7 9.2 7.9 1.2 1.1 1.0 11.5 12.1 12.9HDFC Bank 749 Buy 35.8 44.8 56.0 20.9 16.7 13.4 4.2 3.5 2.9 21.6 22.8 23.8ICICI Bank 1,245 Buy 84.5 96.3 109.9 14.7 12.9 11.3 2.0 1.8 1.6 15.4 15.7 15.7IndusInd Bank 501 Buy 26.3 31.4 37.4 19.1 16.0 13.4 3.1 2.7 2.3 17.2 17.8 18.3ING Vysya Bank 628 Buy 37.4 41.7 47.4 16.8 15.1 13.2 1.7 1.5 1.4 12.1 10.7 11.1J&K Bank 1,537 Buy 244.4 257.2 278.4 6.3 6.0 5.5 1.3 1.1 1.0 22.4 20.1 18.9Kotak Mah. Bank 778 Neutral 32.7 37.1 42.3 23.8 21.0 18.4 3.3 2.9 2.5 14.9 14.6 14.4South Indian Bank 22 Neutral 3.8 4.1 4.5 5.8 5.5 5.0 0.9 0.8 0.7 16.8 15.7 15.3Yes Bank 414 Buy 44.6 50.8 58.1 9.3 8.1 7.1 2.1 1.7 1.4 24.8 23.3 22.1Private Bank Aggregate 15.9 13.6 11.6 2.7 2.4 2.1 17.3 17.6 18.1PSU BanksAndhra Bank 64 Neutral 7.5 8.5 9.1 8.6 7.5 7.1 0.4 0.4 0.4 5.2 5.7 5.8Bank of Baroda 721 Buy 105.0 106.1 113.2 6.9 6.8 6.4 0.9 0.8 0.8 14.4 13.1 12.7Bank of India 229 Neutral 43.1 49.9 55.5 5.3 4.6 4.1 0.6 0.6 0.5 12.1 12.6 12.7Canara Bank 264 Neutral 48.5 52.6 60.9 5.4 5.0 4.3 0.5 0.5 0.4 9.6 9.8 10.5Corporation Bank 277 Neutral 38.8 47.1 55.3 7.1 5.9 5.0 0.5 0.4 0.4 6.6 7.5 8.3Dena Bank 61 Neutral 15.3 14.7 15.4 4.0 4.1 3.9 0.4 0.4 0.3 10.5 9.3 9.0IDBI Bank 65 Neutral 4.4 5.3 6.0 14.8 12.4 10.9 0.5 0.5 0.5 3.5 3.9 4.3Indian Bank 115 Buy 24.4 27.9 31.9 4.7 4.1 3.6 0.5 0.4 0.4 10.4 11.0 11.5Oriental Bank 223 Buy 35.4 41.3 46.3 6.3 5.4 4.8 0.5 0.5 0.4 8.4 9.1 9.5Punjab Nat. Bank 744 Buy 92.0 115.3 129.7 8.1 6.5 5.7 0.8 0.7 0.7 10.2 11.6 11.9State Bank 1,918 Buy 180.9 217.9 260.2 10.6 8.8 7.4 1.0 0.9 0.8 10.7 11.5 12.4Union Bank 137 Neutral 23.2 27.2 31.3 5.9 5.0 4.4 0.5 0.5 0.4 9.0 10.0 10.6PSU Bank Aggregate 7.9 6.8 5.9 0.8 0.7 0.6 9.8 10.4 11.0NBFCBajaj Finance 1,790 Buy 150.8 177.2 211.7 11.9 10.1 8.5 2.2 1.9 1.6 20.4 20.3 20.5Dewan Housing 220 Buy 44.2 54.1 64.6 5.0 4.1 3.4 0.8 0.7 0.6 16.3 17.2 17.7HDFC 884 Buy 35.1 40.2 46.5 25.2 22.0 19.0 4.9 4.4 4.0 25.6 25.3 25.1IDFC 122 Buy 13.6 14.8 16.4 9.0 8.3 7.4 1.2 1.1 1.0 14.3 13.9 14.0LIC Housing Fin 236 Buy 24.2 29.0 34.4 9.8 8.1 6.9 1.6 1.4 1.2 17.4 18.0 18.5M & M Financial 252 Neutral 14.6 16.9 19.4 17.2 14.9 13.0 2.8 2.5 2.2 17.3 17.6 17.7Power Finance Corp 193 Neutral 43.9 47.5 52.4 4.4 4.1 3.7 0.9 0.8 0.7 22.0 20.5 19.4Rural Electric. Corp. 229 Neutral 48.2 53.6 63.4 4.7 4.3 3.6 1.1 0.9 0.8 24.5 22.9 22.8Shriram Trans.Fin. 763 Buy 60.4 61.6 69.5 12.6 12.4 11.0 2.0 1.8 1.6 16.4 14.5 14.4NBFC Aggregate 11.4 10.2 8.9 2.3 2.0 1.7 20.1 19.5 19.5Financials Sector Aggregate 11.8 10.2 8.8 1.6 1.5 1.3 13.9 14.3 14.8



UtilitiesCESC 500 Buy 53.8 57.1 62.0 9.3 8.8 8.1 5.5 5.2 4.6 12.2 11.7 11.4Coal India 288 Neutral 26.7 28.5 30.6 10.8 10.1 9.4 7.1 6.7 5.8 27.9 26.0 24.5Jaiprakash Power 14 Buy 0.5 1.6 4.0 27.1 8.8 3.6 15.6 7.2 4.7 2.4 7.5 17.7JSW Energy 59 Neutral 6.7 5.7 5.2 8.9 10.4 11.4 5.7 6.0 6.0 16.9 13.1 11.0NHPC 19 Neutral 2.1 2.4 2.8 9.1 8.0 6.8 8.4 7.4 7.0 7.7 8.8 8.6NTPC 120 Buy 11.9 11.6 13.4 10.1 10.3 8.9 7.9 8.6 7.7 11.8 10.8 11.8Power Grid Corp. 105 Buy 8.1 9.4 11.8 12.9 11.2 8.9 10.2 9.7 8.6 14.0 13.6 15.4PTC India 68 Buy 10.5 9.7 10.3 6.4 7.0 6.6 4.2 4.4 3.5 9.0 7.2 7.5Reliance Infra. 435 Buy 55.0 54.4 60.7 7.9 8.0 7.2 0.5 0.8 0.4 7.3 6.8 7.1Tata Power 85 Neutral 7.0 7.3 7.3 12.2 11.7 11.6 10.9 9.2 9.0 7.4 9.2 8.7Sector Aggregate 10.6 10.1 9.0 8.1 7.7 6.9 15.7 15.3 15.8UR = Under Review

Note: In our quarterly performance tables, our four-quarter numbers may not always add up to the full-year

numbers. This is because of differences in classification of account heads in the company’s quarterly and

annual results or because of differences in the way we classify account heads as opposed to the company.

All stock prices and indices as on 31 March 2014, unless otherwise stated.

BSE Sensex: 22,386 S&P CNX: 6,704

March 2014 Results Preview

April 2014 C–1

Sectors & Companies

C–2April 2014

March 2014 Results Preview | Sector: Automobiles

Underlying demand remains weak, though two-wheeler shows recovery signs; tractorgrowth remains healthy, CV demand bottoming out: Considering the slowdown ineconomic activity and consequent weakness in consumer and business sentiments,the underlying demand environment remains weak. However, better farm incomeand strong growth in scooters are driving recovery in two-wheelers, while tractorgrowth continues to remain strong. Freight rates have moved up sharply in 4QFY14,since last two years, indicating bottoming out of CV cycle.

4QFY14E margins to remain largely stable: Inventory loss due to excise duty cutwould dilute the benefits of operating leverage (due to seasonality). Overall, weexpect EBITDA margin for our auto coverage universe (excluding JLR) to remainlargely stable both YoY and QoQ.

Bajaj Auto would witness YoY improvement of 250bp (on favorable currency);sequentially, margins would decline by 190bp due to weaker product mix. Tata Motorsand Ashok Leyland would see sequential improvement in operating performanceon seasonally higher volumes and cost reduction measures.

Expected improvement in economic activity, post elections, a key catalyst for demandrecovery: Economic activity is expected to improve on the back of projects clearancegaining pace and clarity on the political front attracting investment activity fromfence sitters. Better economic outlook and consequent improvement in businessand consumer sentiments would be the key catalyst for demand recovery and re-rating.

Valuation and view: Demand environment and changing competitive landscape inthe auto sector would be the key determinants of stocks’ performance. Prefer MarutiSuzuki (expected demand recovery coupled with margin expansion), Hero MotoCorp(product lifecycle turning favorable coupled with cost management benefits) inlarge caps and TVS Motor (new launches and exports to continue to drive growth)and Eicher Motors (continued momentum in Royal Enfield and market share gainsin CVs) in mid caps.

Jinesh Gandhi ([email protected]) / Chirag Jain ([email protected])

Automobiles

Expected quarterly performance summary (INR Million)CMP Rating Sales EBITDA Net Profit


31.3.14 % YoY % QoQ % YoY % QoQ % YoY % QoQAshok Leyland 24 Neutral 27,241 -26.9 39.5 613 -69.1 LP -1,200 PL LossBajaj Auto 2,078 Buy 48,650 2.5 -5.2 9,824 17.4 -13.5 8,101 5.8 -10.4Eicher Motors 5,956 Buy 18,901 9.6 12.5 1,874 9.9 12.5 1,107 13.1 15.1Exide Inds. 121 Neutral 13,712 -10.9 5.4 1,664 -18.6 16.7 1,146 -21.8 47.8Hero Motocorp 2,273 Buy 63,512 4.6 -7.2 6,174 5.6 -5.6 5,368 -6.5 2.3Mahindra & Mahindra 981 Buy 92,625 -7.2 -9.6 12,696 -11.5 -17.2 8,168 -8.9 -18.3Maruti Suzuki 1,971 Buy 124,649 -2.2 14.4 14,971 0.1 10.5 9,108 -7.4 33.7Tata Motors 398 Buy 654,776 16.9 2.5 98,246 25.9 -1.2 41,781 6.4 -14.8TVS Motor 97 Buy 21,680 24.0 5.4 1,151 22.8 -6.7 635 -14.5 -7.7Sector Aggregate 1,065,745 8.4 2.5 147,214 14.8 -1.6 74,214 -0.9 -7.3

Companies Covered

Ashok Leyland

Bajaj Auto

Eicher Motors

Exide Industries

Hero MotoCorp

Mahindra & Mahindra

Maruti Suzuki India

Tata Motors

TVS Motor

C–3April 2014


Volume snapshot for 4QFY14 ('000 units)4QFY14 4QFY13 YoY (%) 3QFY14 QoQ (%) FY14 FY13 YoY (%)

Two wheelers 4,198 3,862 8.7 4,454 -5.8 16,662 15,714 6.0

Three wheelers 203 214 -5.1 210 -3.4 830 842 -1.4

Passenger cars 614 651 -5.7 627 -2.0 2,323 2,399 -3.2

UVs & MPVs 192 217 -11.7 197 -2.4 747 760 -1.7

Total PVs 806 869 -7.2 824 -2.1 3,070 3,159 -2.8

M&HCV 71 75 -4.7 44 60.6 231 288 -19.6

LCV 150 160 -6.2 118 26.6 528 585 -9.7

Total CVs 221 235 -5.7 163 35.9 760 873 -13.0

Total 5,428 5,179 4.8 5,650 -3.9 21,322 20,587 3.6

Source: SIAM, MOSL

Trend in segment-wise EBITDA margins (%) Commodity cost (index)

13.9

9.4

6.8- 9.4

9.8

12.7

10.3

7.5

12.5

10.2

6.8

12.4

10.6

2.6

- 12.3

4.1

13.6

13.7

-4.5

12.8

12.7

-0.5

13.2

12.9

2.0

14.2

13.5

2.0

2W Cars CVs

3QFY12 4QFY12 1QFY13 2QFY13 3QFY13

4QFY13 1QFY14 2QFY14 3QFY14 4QFY14

100

100

100

92

117

106

100

92

124

107

88

97 111

98

79

97

119

99

82

108 12

8

108

81

105

132

103

79

98

119

99

69

100

Steel (HRC) Lead Aluminium Rubber

1QFY13 2QFY13 3QFY13 4QFY13

1QFY14 2QFY14 3QFY14 4QFY14

Trend in key currencies v/s INR Trend in EBITDA margins (%)

80

105

130

155

180

Jun-

09Se

p-09

Dec

-09

Mar

-10

Jun-

10Se

p-10

Dec

-10

Mar

-11

Jun-

11Se

p-11

Dec

-11

Mar

-12

Jun-

12Se

p-12

Dec

-12

Mar

-13

Jun-

13Se

p-13

Dec

-13

Mar

-14

USD Euro GBP JPY

6

9

12

15

18

1QFY

102Q

FY10

3QFY

104Q

FY10

1QFY

112Q

FY11

3QFY

114Q

FY11

1QFY

122Q

FY12

3QFY

124Q

FY12

1QFY

132Q

FY13

3QFY

134Q

FY13

1QFY

142Q

FY14

3QFY

144Q

FY14

Aggregate Aggregate (incl JLR)

HDFC Bank's Base rate trend Trend in fuel prices

7.0

8.0

9.0

10.0

11.0

Oct

-10

Mar

-11

Aug

-11

Jan-

12

Jun-

12

Nov

-12

Apr

-13

Sep-

13

Feb-

14

HDFC Bank Base Rate

Source: Bloomberg

24

38

52

66

80

Mar

-07

Sep-

07

Mar

-08

Sep-

08

Mar

-09

Sep-

09

Mar

-10

Sep-

10

Mar

-11

Sep-

11

Mar

-12

Sep-

12

Mar

-13

Sep-

13

Mar

-14

Petrol (INR/ltr) Dies el (INR/l tr)

C–4April 2014


Revised EPS Estimates (INR)EPS FY14E FY15E FY16E

Rev Old Chg (%) Rev Old Chg (%) Rev Old Chg (%)

Bajaj Auto 113.7 112.9 0.7 130.1 133.7 -2.7 152.0 158.5 -4.1

Hero MotoCorp 104.7 105.1 -0.3 140.1 143.6 -2.4 173.6 176.6 -1.7

TVS Motor 5.3 5.6 -5.1 7.9 7.9 -0.6 10.0 9.9 0.2

Maruti * 97.1 96.0 1.2 121.3 116.9 3.8 156.1 155.1 0.6

M&M * 73.7 74.9 -1.6 77.7 83.5 -7.0 101.5 103.8 -2.2

Tata Motors * # 45.6 43.9 3.7 47.4 44.0 7.6 65.8 62.3 5.7

Ashok Leyland -2.2 -2.1 NA -0.2 -0.2 -20.7 1.0 0.5 93.4

Eicher Motors * 145.9 132.5 10.1 220.9 195.7 12.9 331.0 259.7 27.5

Exide Industries 5.5 5.7 -3.1 6.6 6.4 2.9 7.6 7.3 3.9

*Consolidated

Trend in key financialsVolumes (‘000 units) EBITDA margins (%) Adj PAT (INR M)

4QFY14 YoY (%) QoQ (%) 4QFY14 YoY (bp) QoQ (bp) 4QFY14 YoY (%) QoQ (%)

BJAUT 927 -5.5 -6.7 20.2 260.0 -190.0 8,101 5.8 -10.4

HMCL* 1,559 2.2 -7.2 9.7 10.0 20.0 5,368 -6.5 2.3

TVS Motor 547 7.5 5.4 5.3 -10.0 -70.0 635 -14.5 -7.7

MSIL 327 -5.0 13.3 12.0 140.0 -40.0 8,983 -27.5 31.9

MM 184 -5.7 -11.0 13.7 -70.0 -130.0 8,168 -8.9 -18.3

TTMT (S/A) 131 -33.3 0.4 -1.4 -510.0 290.0 -6,688 115.1 NA

TTMT (Cons) 15.0 110.0 -60.0 41,781 6.4 -14.8

Ashok Leyland 25 -29.0 33.6 2.3 -310.0 720.0 -1,200 NA NA

Eicher Motors 9.9 0.0 0.0 1,107 13.1 15.1

Exide Industries 12.1 -120.0 120.0 1,146 -21.8 47.8

*Normalized for royalty adjusted

Relative Performance-3m (%) Relative Performance-1Yr (%)

Comparative valuationCMP (INR) Rating EPS (INR) P/E (x) EV/EBITDA (x) RoE (%)


AutomobilesAshok Leyland 24 Neutral -2.2 -0.2 1.0 n.a. n.a. 24.8 191.0 12.5 7.5 -13.6 -1.2 6.2Bajaj Auto 2,078 Buy 113.7 130.1 152.0 18.3 16.0 13.7 12.2 10.2 8.3 37.8 36.3 35.6Eicher Motors 5,956 Buy 145.9 220.9 331.0 40.8 27.0 18.0 20.9 14.3 9.1 20.7 26.3 31.4Exide Inds. 121 Neutral 5.5 6.6 7.6 21.9 18.4 15.9 10.9 9.3 7.9 12.6 13.7 14.2Hero Motocorp 2,273 Buy 104.7 140.1 173.6 21.7 16.2 13.1 16.6 11.7 9.0 39.1 44.2 44.2Mahindra & Mah. 981 Buy 73.7 77.7 101.5 13.3 12.6 9.7 6.3 5.6 4.5 20.8 18.0 18.1Maruti Suzuki 1,971 Buy 97.1 121.3 156.1 20.3 16.2 12.6 9.8 7.5 5.6 13.7 15.1 16.7Tata Motors 398 Buy 45.6 47.4 65.8 8.7 8.4 6.1 4.0 3.5 2.5 33.1 26.1 27.8TVS Motor 97 Buy 5.3 7.9 10.0 18.5 12.4 9.8 11.0 7.8 6.0 19.0 24.2 25.7Sector Aggregate 14.0 12.4 9.3 6.4 5.4 4.1 24.0 22.5 24.2

90

95

100

105

110

Dec

-13

Jan-

14

Feb-

14

Mar

-14

Sensex IndexMOSL Automobi les Index

90

105

120

135

150

Mar

-13

Jun-

13

Sep-

13

Dec

-13

Mar

-14

Sens ex IndexMOSL Automobi les Index

C–5April 2014


Ashok LeylandCMP: INR24 Neutral� Expect volumes to decline 29% YoY (+33.6% QoQ) led by continued

weakness in economic activity and consequent pressure on CVdemand.

� MHCVs volumes are expected to decline by 29% YoY (on the back of23% decline last year). Sequentially, MHCV volumes are expected toimprove by 57% (strong quarter seasonally).

� LCV (Dost, Stile) volumes are also expected to decline by 11% YoY (+27%QoQ) to 9,784 units.

� EBITDA margin is expected to be 2.3% YoY (v/s -5% in 3QFY14 and 5.3%in 4QFY13).

� Expect to report a PBT profit of INR0.4b (v/s PBT loss of INR1.91b in3QFY14).

� In March 2014, ALL sold 5m shares in IndusInd Bank worth INR2.4b toraise funds.

Key issues to watch out� Current demand environment and discounting trend, plant and

channel inventory for MHCVs.� Industry growth, market share guidance for MHCVs and LCVs for FY15.� Pantnagar volume guidance, RM cost outlook and margin guidance

for FY15.� Capex and investment guidance, and divestment plans for FY15.

Quarterly Performance (INR Million)Y/E March FY13 FY14 FY13 FY14E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Total Volumes (nos) 27,487 29,840 22,666 34,627 21,721 23,110 18,393 24,581 114,620 87,305

Growth (%) 42.6 25.0 -2.2 -4.9 -21.0 -22.6 -18.9 -29.0 11.6 -23.8

Realizations ('000) 1,094 1,105 1,050 1,077 1,088 1,103 1,062 1,108 1,089 1,099

Change (%) -16.1 -15.4 -16.2 -9.1 -0.5 -0.1 1.1 2.9 -13.4 0.9

Net Sales 30,074 32,960 23,805 37,285 23,638 25,496 19,532 27,241 124,812 95,907

Change (%) 19.7 5.8 -18.0 -13.5 -21.4 -22.6 -17.9 -26.9 -3.4 -23.2

RM/Sales (%) 72.8 72.8 71.9 75.8 75.5 76.3 79.7 77.0 73.1 77.0

Staff / Sales (%) 8.9 8.0 11.0 7.6 10.9 10.0 12.3 9.8 8.6 10.6

Oth. Exp./ Sales (%) 10.3 9.1 12.8 11.4 12.6 11.5 13.0 10.9 11.3 11.9

EBITDA 2,407 3,341 1,023 1,983 233 563 -969 613 8,765 440

EBITDA Margins (%) 8.0 10.1 4.3 5.3 1.0 2.2 -5.0 2.3 7.0 0.5

Other Income 129 239 141 115 123 231 154 162 624 670

Interest 834 1,036 1,071 828 1,007 1,244 1,153 1,426 3,769 4,830

Depreciation 893 984 931 1,000 952 901 883 937 3,808 3,673

PBT before EO Exp 810 1,559 -838 271 -1,603 -1,351 -2,851 -1,588 1,812 -7,393

EO Exp/(Inc) 0 0 -1,563 -1,344 65 -438 -923 -2,000 -2,896 -3,296

PBT 810 1,559 725 1,614 -1,669 -914 -1,928 412 4,707 -4,097

Tax 140 133 -17 114 -251 -663 -256 -387 370 -1,557

Effective Tax Rate (%) 17.3 8.5 -2.3 7.1 15.0 72.6 13.3 -94.0 7.9 38.0

Rep. PAT 670 1,426 741 1,500 -1,418 -251 -1,672 800 4,337 -2,540

Change (%) -22.3 -7.5 10.8 -42.0 -311.6 -117.6 -325.5 -46.7 -33.0 -158.6

Adj. PAT 670 1,426 -858 251 -1,362 -371 -2,473 -1,200 1,669 -5,836

Change (%) -22.3 -7.5 -228.2 -90.2 -303.3 -126.0 188.3 -577.3 -74.2 n.a.

E: MOSL Estimates

Financials & Valuation (INR b)Y/E March 2013 2014E 2015E 2016ESa les 124.8 95.9 116.5 147.3

EBITDA 8.8 0.4 6.5 10.4

NP 1.6 -5.8 -0.5 2.5

Adj. EPS (INR) 0.5 -2.2 -0.2 1.0

EPS Gr. (%) -77.0 NA NA NA

BV/Sh. (INR) 16.7 15.6 15.1 15.5

RoE (%) 3.3 -13.6 -1.2 6.2

RoCE (%) 6.5 -2.7 3.5 7.5

Payout (%) 110.8 -9.1 -109.3 52.4

Valuations

P/E (x) 43.7 -10.8 -129.5 24.8

P/BV (x) 1.4 1.5 1.6 1.5

EV/EBITDA (x) 11.4 234.3 15.7 9.7

Div. Yield (%) 2.5 0.8 0.8 2.1

Bloomberg AL IN

Equity Shares (m) 2,660.7

M. Cap. (INR b)/(USD b) 63 / 1

52-Week Range (INR) 25 / 12

1,6,12 Rel Perf. (%) 45 / 41 / -11

C–6April 2014


Bajaj Auto� Expect 4QFY14E volumes to decline 5.5% YoY (-6.7% QoQ) to 0.92m

units. Demand continues to remain weak in the domestic segment.However, exports have recovered over the last few months.

� We expect realizations to improve 1.6% QoQ (+8.5% YoY), led by pricingaction of INR2,000/unit in January 2014 in domestic motorcyclesegment and higher share of 3W exports.

� EBITDA margin to decline 190bp QoQ (+260bp YoY) to 20.2% driven byunfavorable mix on higher share of Discover M (100cc motorcycle),higher advertisement spends, partially offset by increase in share of3W volumes (from 10.7% to 11.9%).

� Expect PAT to rise 5.8% YoY (-10.4% QoQ) to INR8.1b.� We downgrade FY15E/FY16E EPS by 2.7%/4.1% as we cut our volume

and margin assumptions on continued weakness in demand,particularly in the domestic business.

Key issues to watch out� Update on demand environment at the retail level, channel

inventory.� Details on new launches, update on forex hedges on exports for FY15/

FY16.� Update on RE60 launch timeline (for export and domestic market),

volume and margin guidance.


1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Volumes ('000 units) 1,079.0 1,049.2 1,127.7 981.2 979.3 961.3 993.7 927.0 4,237.2 3,861

Growth YoY (%) -1.3 -9.9 4.9 -3.5 -9.2 -8.4 -11.9 -5.5 (2.6) (8.9)

Realization (INR/unit) 45,095 47,392 47,996 48,372 50,150 53,831 51,638 52,478 47,195 52,008

Growth YoY (%) 4.7 6.4 3.5 2.1 11.2 13.6 7.6 8.5 5.1 10.2

Net Sales 48,657 49,724 54,127 47,465 49,111 51,749 51,312 48,650 199,973 200,822

Change (%) 3.4 -4.1 8.6 -4.5 0.9 4.1 -5.2 -6.0 2.4 0.4

RM/Sales % 72.1 71.8 72.4 71.8 69.4 67.0 69.5 68.8 72.0 68.7

Staff cost/Sales % 3.3 3.1 2.9 3.5 3.7 3.5 3.6 3.9 3.2 3.7

Oth. Exp./Sales % 6.9 7.0 6.2 7.6 8.8 7.8 5.2 7.5 6.9 7.3

EBITDA 8,717 9,152 10,118 8,366 9,067 11,320 11,352 9,824 36,353 41,562

Growth YoY (%) 3.8 -6.2 2.8 -4.2 4.0 23.7 12.2 14.6 -2.3 14.3

EBITDA Margins (%) 17.9 18.4 18.7 17.6 18.5 21.9 22.1 20.2 18.2 20.7

Other Income 1,820 1,667 2,032 2,436 1,756 1,242 2,218 2,308 7,955 7,524

Interest 0 2 1 2 1 0 2 10 5 13

Depreciation 352 410 411 466 444 443 460 465 1,640 1,811

PBT 10,184 10,407 11,738 10,334 10,378 12,118 13,109 11,657 42,662 47,262

Tax 3,000 3,000 3,550 2,676 3,002 3,746 4,063 3,557 12,227 14,368

Effective Tax Rate (%) 29.5 28.8 30.2 25.9 28.9 30.9 31.0 30.5 28.7 30.4

Adj. PAT 7,184 7,407 8,187 7,658 7,377 8,372 9,045 8,101 30,436 32,894

Change (%) 1.0 (6.2) (1.8) 0.9 2.7 13.0 10.5 5.8 -2.0 8.1

E: MOSL Estimates

CMP: INR2,078 Buy

Financials & Valuation (INR b)Y/E March 2013 2014E 2015E 2016E

Sa les 200.0 200.8 225.7 260.5

EBITDA 36.4 41.6 47.3 55.3

NP 30.4 32.9 37.6 44.0

Adj. EPS (INR) 105.2 113.7 130.1 152.0

EPS Gr. (%) (2.0) 8.1 14.4 16.9

BV/Sh. (INR) 273.1 328.3 388.6 465.0

RoE (%) 43.7 37.8 36.3 35.6

RoCE (%) 59.8 53.1 50.9 49.6

Payout (%) 49.7 51.5 53.6 49.7

Valuations

P/E (x) 19.8 18.3 16.0 13.7

P/BV (x) 7.6 6.3 5.3 4.5

EV/EBITDA (x) 14.6 12.2 10.2 8.3

Div. Yield (%) 2.2 2.4 2.9 3.1

Bloomberg BJAUT IN

Equity Shares (m) 289.4

M. Cap. (INR b)/(USD b) 601 / 10

52-Week Range (INR) 2,194 / 1,658

1,6,12 Rel Perf. (%) 1 / -11 / -3

C–7April 2014


Eicher Motors� With higher production and continued demand momentum, Royal

Enfield’s volumes are expected to improve by 76% YoY (+11% QoQ).Expect margins to remain strong at 20.4%.

� Expect VECV volumes to decline by 27% YoY (+12% QoQ) due toweakness in economic activity and consequent lower freight trafficmovement. VECV margins are expected to decline 290bp YoY (+20bpQoQ) to 5.1% due to ramp-up in MDEP (engine export project), lowervolumes and continued pressure on discounts.

� Expect 10% YoY (+13% QoQ) growth in consolidated sales. Cons. marginsare expected to remain flat both sequentially and YoY. ConsolidatedPAT (after minority) to grow by 13% YoY (+15% QoQ) to INR1.1b.

� Company plans to sell 290,000 units in CY14 (v/s 178,000 units in CY13)in the Royal Enfield division. While the CV business remains weak,signs of bottoming out are visible.

Key issues to watch out� Ramp-up of MDEP, update on commissioning/launch of bus body plant

and new HCV range.� Update on current CV demand trends, discount levels and channel

inventory.� New launches and timelines under Royal Enfield business.

Quarterly Performance (Consolidated) (INR Million)Y/E December CY13 CY14E CY13 CY14E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q

Net Op Income 17,243 16,699 16,834 16,795 18,901 20,349 22,932 25,580 68,098 87,762

Growth (%) 1.7 5.4 13.5 1.6 9.6 21.9 36.2 52.3 6.6 453.7

EBITDA 1,705 1,662 1,572 1,666 1,874 2,036 2,775 3,427 7,132 10,113

EBITDA Margins (%) 9.9 10.0 9.3 9.9 9.9 10.0 12.1 13.4 10.5 35.9

Change (%) -5.4 19.2 41.2 41.2 9.9 22.5 76.5 105.8 29.9 624.9

Depreciation 275 296 336 394 415 455 490 510 1,300 1,870

Other income 444 211 153 145 250 225 280 725 953 1,480

Interest cost 6 12 23 38 21 21 21 18 79 81

PBT before EO item 1,868 1,565 1,366 1,379 1,688 1,785 2,544 3,624 6,706 9,641

PBT after EO item 1,868 1,565 1,893 1,379 1,688 1,785 2,544 3,624 6,706 9,641

Effective tax rate (%) 28.9 19.6 23.1 12.1 24.4 24.5 24.2 27.4 21.7 25.5

PAT 1,328 1,258 1,456 1,212 1,276 1,349 1,928 2,631 5,254 7,183

Minority interest 348 335 382 250 168 172 353 517 1,314 1,210.2

Recurring PAT 979 923 857 962 1,107 1,177 1,575 2,114 3,939 5,973

Growth (%) -10.6 21.7 29.9 32.4 13.1 27.5 83.6 119.7 21.5 51.6

Standalone (Royal Enfield)

Royal Enfield (units) 34,737 40,040 48,240 55,101 61,268 67,029 75,900 85,538 178,118 289,735

Growth (%) 45.3 45.5 60.6 72.4 76.4 67.4 57.3 55.2 57.0 952.9

Net Realizations (INR/unit) 95,299 93,911 94,857 96,176 96,398 96,531 96,664 96,615 93,895 96,562

Change - QoQ (%) 3.2 -1.5 1.0 1.4 0.2 0.1 0.1 -0.1 2.0

VECV (derived)

Total CV Volumes 12,529 11,027 9,428 8,193 9,187 9,799 10,723 11,445 41,176 112,590

Growth (%) -12.7 -8.2 -12.6 -30.2 -26.7 -11.1 13.7 39.7 -15.8 837.0

Net Realizations (INR '000/unit) 1,099 1,152 1,277 1,384 1,398 1,401 1,440 1,466 1,260 522

Change - QoQ (%) -3.4 4.8 10.9 8.4 1.0 0.2 2.8 1.8 16.5 -58.6

E: MOSL Estimates

CMP: INR5,956 Buy

Financials & Valuation (INR b)Y/E December 2013 2014E 2015E 2016E

Net Income 68.1 87.8 116.3 148.8

EBITDA 7.1 10.1 15.4 20.8

Net Profit 3.9 6.0 9.0 11.8

Adj. EPS (INR) 145.9 220.9 331.0 435.2

EPS Gr. (%) 21.5 51.4 49.8 31.5

BV/Sh. (INR) 760 918 1,188 1,554

RoE (%) 20.7 26.3 31.4 31.7

RoCE (%) 21.8 26.7 34.7 36.7

Payout (%) 0.5 0.6 0.7 0.8

Valuations

P/E (x) 40.8 27.0 18.0 13.7

P/BV (x) 7.8 6.5 5.0 3.8

EV/EBITDA (x) 28.2 17.5 11.4 8.0

Div. Yield (%) 0.5 0.6 0.7 0.8

Bloomberg EIM IN


M. Cap. (INR b)/(USD b) 161 / 3

52-Week Range (INR) 6,150 / 2,512

1,6,12 Rel Perf. (%) 11 / 53 / 115

C–8April 2014


Exide Industries� Expect 11% YoY decline in revenue at INR13.7b (+5.4% QoQ), driven by

continued weakness in OE and industrial demand, while growth inreplacement demand also tapers off.

� EBITDA margin is expected to decline 120bp YoY (+120bp QoQ) to12.1%. Average lead cost has remained largely stable QoQ.

� PAT is expected to decline by 21.8% YoY (+47.8% QoQ) to INR1.14b.

� We upgrade FY15E/FY16E EPS by 2.9%/3.9% on the assumedimprovement in OE and industrial demand, based on the expectationof an improvement in economic outlook.

Key issues to watch out� Update on demand environment for OEMs, auto replacement and

industrial battery segment.� Outlook on RM cost trend, recent pricing action and currency hedges,

if any.� Update on capacity expansion plans across product segments.

CMP: INR121 NeutralBloomberg EXID IN


M. Cap. (INR b)/(USD b) 103 / 2


1,6,12 Rel Perf. (%) 3 / -22 / -25


1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Net Sales 15,511 15,168 14,622 15,382 16,263 14,280 13,014 13,712 60,718 57,269

Growth YoY (%) 24.8 29.1 17.0 6.4 4.9 -5.9 -11.0 -10.9 18.9 -5.7

Other Operating Income 25 45 10 30 11 41 25 22 55 100

(Inc.)/Dec in stock -796 -974 -1,063 1,473 -1,567 1,136 -748 0 -1,360 0

Net Raw Materials 10,910 11,045 10,898 8,863 12,032 8,240 9,234 8,906 41,748 37,232

RM (%) 65.1 66.2 67.2 67.1 64.3 65.5 65.1 64.8 66.5 64.9

Employee Cost (%) 5.4 5.9 5.8 5.8 5.8 6.0 6.9 6.7 5.7 6.3

Other Exp. (%) 14.5 15.5 15.7 13.8 13.8 14.5 17.1 16.4 14.8 15.4

EBITDA 2,328 1,882 1,647 2,044 2,624 2,012 1,426 1,664 7,899 7,726

EBITDA Margin (%) 15.0 12.4 11.3 13.3 16.1 14.0 10.9 12.1 13.0 13.5

Change (%) 4.6 108.5 -0.5 -4.0 12.7 6.9 -13.4 -18.6 14.8 -2.2

Non-Operating Income 147 125 121 304 62 37 49 351 704 499

Interest 14 10 11 8 4 5 4 8 42 20

Depreciation 276 282 289 288 300 313 317 322 1,135 1,252

PBT after EO Exp 2,185 1,716 1,469 2,053 2,383 1,731 1,155 1,686 7,427 6,953

Tax 665 514 428 588 795 546 380 540 2,195 2,260


Adj. PAT 1,520 1,202 1,041 1,465 1,588 1,185 775 1,146 5,232 4,694

Change (%) -6.8 135.0 -0.2 2.8 4.5 -1.5 -25.5 -21.8 13.4 -10.3

E: MOSL Estimates

Financials & Valuation (INR b)Y/E March 2013 2014E 2015E 2016ENet Sales 60.7 57.3 64.0 72.3

EBITDA 7.8 7.7 8.8 10.0

Adj. PAT 5.2 4.7 5.6 6.4

Adj. EPS (INR) 6.2 5.5 6.6 7.6

EPS Growth (%) 13.4 (10.2) 19.3 15.1

BV/Share (INR) 40.3 43.8 48.0 53.2

RoE (%) 15.3 12.6 13.7 14.2

RoCE (%) 21.2 18.2 19.3 20.0

Payout (%) 26.0 31.7 30.4 26.4

Valuations

P/E (x) 19.7 21.9 18.4 15.9

P/BV (x) 3.0 2.8 2.5 2.3

EV/EBITDA (x) 10.9 10.9 9.3 7.9

Div. Yield (%) 1.3 1.4 1.7 1.7

C–9April 2014


Hero MotoCorp� Expect Hero Moto’s (HMCL) 4QFY14E volumes to rise 2.2% YoY (-7.2%

QoQ) to 1.56m units.

� We expect realizations to remain largely flat sequentially at INR40,736/unit. We note that Hero Moto would bear ~30% of the channelinventory loss on excise duty reduction.

� Margins (adjusted for royalty amortization) to improve 10bp YoY (+20bpQoQ) to 9.7% as pressure on volumes and consequent marketingspends offset benefits from cost reduction measures.

� Expect PAT to decline 6.5% YoY (+2.3% QoQ) to INR5.4b.

Key issues to watch out� Update on demand environment at the retail level, channel

inventory.� Guidance on export plans, new launches together with timelines.


1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Total Volumes ('000 nos) 1,642 1,333 1,573 1,525 1,559 1,416 1,681 1,559 6,074 6,215

Growth YoY (%) 7.4 -13.7 -1.0 -3.0 -5.1 6.3 6.9 2.2 -2.6 2.3

Net Realization 37,799 38,649 39,102 39,810 39,300 40,223 40,727 40,736 38,828 40,256

Growth YoY (%) 2.6 3.2 3.9 5.0 4.0 4.1 4.2 2.3 3.6 3.7

Net Sales 62,078 51,512 61,513 60,725 61,268 56,965 68,459 63,512 235,827 250,204

Change (%) 10.1 -10.9 2.8 1.8 -1.3 10.6 11.3 4.6 0.9 6.1

Total Cost 53,104 44,683 54,090 52,960 52,443 48,935 59,788 55,225 204,836 216,391

RM Cost (% sales) 74.1 73.2 74.5 73.1 72.7 71.9 73.0 72.2 73.8 72.5

Staff Cost (% sales) 3.3 3.7 3.2 3.7 3.6 4.0 3.6 3.9 3.5 3.8

Other Exp (% sales) 8.1 9.8 10.2 10.4 9.3 10.0 10.8 10.8 9.6 10.2

EBITDA 8,974 6,829 7,423 7,765 8,825 8,029 8,671 8,287 30,991 33,813

EBITDA Margins (%) 14.5 13.3 12.1 12.8 14.4 14.1 12.7 13.0 13.1 13.5

Adj. EBITDA Margins (%) 10.7 9.0 8.7 9.6 11.1 10.0 9.6 9.7 9.5 10.1

Other Income 1,439 1,356 1,264 1,778 1,449 1,452 1,266 1,885 5,838 6,052

Interest 29 30 30 31 30 30 30 31 119 120

Depreciation 3,035 2,895 2,832 2,655 2,744 2,869 2,732 2,757 11,418 11,102

PBT 7,349 5,261 5,826 6,857 7,502 6,583 7,174 7,384 25,292 28,643

Tax 1,194 855 947 1,115 2,016 1,769 1,928 2,017 4,110 7,729


Adj. PAT 6,155 4,406 4,879 5,742 5,486 4,814 5,247 5,368 21,182 20,914

Growth (%) 10.3 -27.0 -20.4 -4.9 -10.9 9.3 7.5 -6.5 -9.5 -1.3

E: MOSL Estimates

CMP: INR2,273 Buy


EBITDA 31.0 33.8 37.2 43.9

NP 21.2 20.9 28.0 34.7

Adj. EPS (INR) 106.1 104.7 140.1 173.6

EPS Gr. (%) (10.9) (1.3) 33.8 23.9

BV/Sh. (INR) 250.7 285.0 349.6 436.0

RoE (%) 45.6 39.1 44.2 44.2

RoCE (%) 43.6 50.2 58.2 59.3

Payout (%) 65.1 65.9 53.3 49.7

Valuations

P/E (x) 21.4 21.7 16.2 13.1

P/BV (x) 9.1 8.0 6.5 5.2

EV/EBITDA (x) 13.5 12.4 11.0 9.0

Div. Yield (%) 2.6 2.6 2.9 3.3

Bloomberg HMCL IN


M. Cap. (INR b)/(USD b) 454 / 8

52-Week Range (INR) 2,298 / 1,434

1,6,12 Rel Perf. (%) 10 / -2 / 29

C–10April 2014


Mahindra & Mahindra� While M&M continues to face pressure on UV business led by weak

industry demand and higher competitive pressures, growth in tractorscontinue to remain strong.

� We expect auto volumes to decline 13% YoY (flat QoQ), while tractorvolumes are expected to grow by 15% YoY (down 27% QoQ due toseasonality). Overall volumes are expected to decline by 6% YoY (-10% QoQ).

� Expect M&M (including MVML) to report revenue decline of 7.2% YoY(-9.6% QoQ) to INR92.6b.

� EBITDA margin (including MVML) to decline 130bp QoQ on lowervolumes, adverse mix (lower tractor share) coupled with higherdiscounting pressure.

� Adjusted PAT is estimated at INR8.1b (-8.9% YoY).

Key issues to watch out� Update on post festive retail demand environment for auto and

tractor division; plant and channel inventory.� Considering the competitive launches in FY15/FY16, guidance on auto

volumes and margins.� Guidance for FY15 tractor volumes.� Update on Ssangyong business and financial performance.

Quarterly Performance (incl. MVML) (INR Million)Y/E March FY13 FY14 FY13 FY14E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Total Volumes (nos) 182,149 188,412 209,266 195,528 194,962 175,799 207,097 184,358 775,358 763,104

Growth YoY (%) 14.4 10.4 14.2 0.1 7.0 -6.7 -1.0 -5.7 10.0 -1.6

Net Realization 487,431 491,082 489,452 510,569 497,564 492,631 494,533 502,417 494,696 496,199

Growth YoY (%) 14.9 14.9 9.2 9.4 2.1 0.3 1.0 -1.6 11.1 0.3

Net Op. Income 88,785 92,526 102,426 99,831 97,006 86,604 102,416 92,625 383,566 378,651

Growth YoY (%) 31.5 26.8 24.7 9.5 9.3 -6.4 0.0 -7.2 22.2 -1.3

RM Cost (% of sales) 71.5 71.0 72.0 71.1 70.2 68.5 69.0 69.0 71.4 69.2

Staff (% of sales) 5.4 5.5 5.2 4.8 5.5 6.2 5.7 6.2 5.2 5.9

Oth. Exp. (% of Sales) 9.2 9.7 9.3 9.7 9.9 10.8 10.3 10.7 9.5 10.5

EBITDA 12,350 12,797 13,795 14,352 14,008 12,544 15,325 12,696 53,293 54,573

EBITDA Margins (%) 13.9 13.8 13.5 14.4 14.4 14.5 15.0 13.7 13.9 14.4

Other income 662 3,260 758 1,017 972 3,628 975 1,189 5,697 6,765

Interest 714 741 725 784 759 892 883 877 2,964 3,411

Depreciation 1,800 2,045 2,054 2,279 2,080 2,244 2,235 2,315 8,178 8,875

PBT 10,498 13,272 11,774 13,211 12,141 13,036 13,182 10,694 48,754 49,053

Tax 2,713 3,491 2,625 3,581 3,045 2,759 3,181 2,526 12,410 11,510


Reported PAT 7,785 9,781 9,149 9,630 9,097 10,276 10,001 8,168 36,344 37,542

Change (%) 25.9 28.4 29.6 5.7 16.9 5.1 9.3 -15.2 21.3 3.3

Adj PAT 7,785 9,781 9,149 8,970 9,097 10,276 10,001 8,168 36,344 37,542

Change (%) 25.9 28.4 35.1 11.7 16.9 5.1 9.3 -8.9 24.8 3.3

E: MOSL Estimates

CMP: INR981 Buy


EBITDA 47.1 49.6 52.3 62.4

NP (incl. MVML) 36.3 37.5 37.5 44.8

Adj. EPS (INR) 60.7 62.7 62.7 74.8

EPS Gr. (%) 24.8 3.3 (0.1) 19.3

Cons. EPS (INR) 60.9 73.7 77.7 101.5

BV/Share (INR) 248.3 295.8 342.3 399.8

RoE (%) 22.4 20.8 18.0 18.1

RoCE (%) 23.2 22.0 20.3 20.9

Payout (%) 26.6 26.7 28.3 24.0

Valuations

P/E (x) 16.2 15.6 15.6 13.1

Cons. P/E (x) 16.1 13.3 12.6 9.7

P/BV (x) 3.9 3.3 2.9 2.5

EV/EBITDA (x) 7.4 11.5 10.9 8.9

Div. Yield (%) 1.3 1.4 1.5 1.5

* Incl. MVML

Bloomberg MM IN


M. Cap. (INR b)/(USD b) 604 / 10

52-Week Range (INR) 1,054 / 742

1,6,12 Rel Perf. (%) -5 / 3 / -5

C–11April 2014


Maruti Suzuki India� Our quarterly estimates for 4QFY14E are including SPIL merger. Hence,

YoY performance is strictly not comparable.

� Expect volumes to decline 5% YoY (+13.3% QoQ) led by a sharp declinein export volumes.

� While consumer sentiments remain weak, new model launch (Celerio)has helped to maintain domestic volumes YoY. Celerio AMT variantscommand a wait list of four to five months.

� Expect margins to decline by 40bp to 12% QoQ as impact of INR1.5b oninventory loss, post excise duty cut, offsets benefits from operatingleverage.

Key issues to watch out

� Update on retail demand scenario, channel inventory, discountingtrends and new launches.

� Guidance on FY15 volume growth, margins, forex hedges, localizationefforts.


1Q 2Q 3Q 4Q* 1Q 2Q 3Q 4QE

Total Volumes (nos) 295,899 230,376 301,453 343,756 266,434 275,586 288,151 326,599 1,171,484 1,156,770

Change (%) 5.1 -8.7 25.9 -4.6 -10.0 19.6 -4.4 -5.0 3.3 -1.3

Realizations (INR/car) 355,839 350,302 363,471 370,930 375,144 370,550 368,546 373,687 363,749 371,995

Change (%) 21.3 19.5 15.7 16.4 5.4 5.8 1.4 0.7 18.8 2.3

Net Op. Revenues 107,782 83,054 112,003 127,510 102,373 104,681 108,938 124,649 435,879 440,641

Change (%) 27.5 8.2 44.9 8.7 -5.0 26.0 -2.7 -2.2 22.5 253.5

RM Cost (% of Sales) 77.8 79.6 78.4 72.0 71.9 69.4 71.6 72.0 74.7 71.3

Staff Cost (% of Sales) 2.1 2.7 2.2 2.7 2.9 3.6 2.8 2.7 2.5 3.0

Other exp. (% of Sales) 12.8 11.6 11.5 13.6 13.8 14.4 13.2 13.3 13.1 13.7

EBITDA 7,864 5,086 8,913 14,961 11,662 13,214 13,548 14,971 42,296 53,395

EBITDA Margins (%) 7.3 6.1 8.0 11.2 11.4 12.6 12.4 12.0 9.7 12.1

Change (%) -3.0 15.4 121.0 74.3 48.3 159.8 52.0 0.1 68.3 256.7

Non-Operating Income 1,123 1,563 1,886 3,240 2,043 1,010 1,170 3,277 8,124 7,500

Interest 332 380 459 526 442 434 448 482 1,898 1,806

Gross Profit 8,655 6,269 10,340 17,675 13,262 13,791 14,269 17,766 48,522 59,088

Depreciation 3,399 3,470 3,583 4,900 4,802 4,992 5,414 5,604 18,612 20,811

PBT 5,256 2,798 6,756 12,775 8,461 8,799 8,856 12,163 29,910 38,278

Tax 1,018 524 1,743 2,938 2,145 2,097 2,044 3,054 5,989 9,340


PAT 4,239 2,275 5,013 9,837 6,316 6,702 6,811 9,108 23,921 28,938

Adjusted PAT 4,239 2,275 5,013 9,837 6,316 6,702 6,811 9,108 23,921 28,938

Change (%) -22.8 -5.4 143.8 53.7 49.0 194.7 35.9 -7.4 46.3 21.0

E:MOSL Estimates; * Including SPIL Merger

CMP: INR1,971 Buy


EBITDA 42.3 53.4 66.3 81.8

Adj. PAT 23.9 28.9 36.7 47.2

Con.adj.EPS(INR) 80.2 97.1 121.3 156.1

EPS Growth (%) 37.8 21.1 24.9 28.7

BV/Share (INR) 615.0 698.0 801.9 935.9

RoE (%) 12.9 13.7 15.1 16.7

RoCE (%) 15.5 17.4 19.2 21.2

Payout (%) 10.1 11.5 12.4 12.2

Valuations

P/E (x) 24.6 20.3 16.2 12.6

P/CE (x) 13.9 11.9 9.7 7.9

EV/EBITDA (x) 12.6 9.9 7.5 5.6

Div. Yield (%) 0.4 0.6 0.8 1.0

Bloomberg MSIL IN


M. Cap. (INR b)/(USD b) 596 / 10

52-Week Range (INR) 1,976 / 1,217

1,6,12 Rel Perf. (%) 18 / 30 / 35

C–12April 2014


Tata Motors� JLR volumes expected to grow 4.1% YoY driven largely by Land Rover,

as Jaguar has stabilized on as benefit of multiple variant launches lastyear are in the base.

� EBITDA margin to improve by 20bp YoY (-80bp QoQ) on higher volumesand stronger mix (higher Range Rover/Sport).

� Standalone volumes to decline 33.3% YoY led by 40%/9% YoY declinein CVs/PVs respectively. Within CVs, MHCVs are expected to decline18.2% (despite lower base), while LCVs to decline by 31% as retailfinanciers become cautious. Standalone margins to remain weak at -1.4% (v/s 3.6% in 4QFY13, -4.3% in 3QFY14).

� Expect 16.9% YoY (+2.5% QoQ) rise in TTMT’s consolidated revenue.Consolidated margin to rise 110bp YoY (-60bp QoQ). Expect consolidatedPAT to rise by 6.4% YoY (-14.8% QoQ) to INR41b led by strong JLRperformance, partially offset by higher standalone loss.

� We upgrade FY14E/15E consolidated EPS by 7.6%/5.7% led by upgradesin JLR on better margins (richer product mix).

Key issues to watch out� Current JLR demand trends and outlook, particularly China and US.� Order book for new Range Rover/Sport and their ramp-up schedule.� Current capacity, details on new capacity addition.� Update on forex hedges, particularly for JLR operations.� FY15 volume guidance, channel inventory, discount trends.

Quarterly Performance (Consolidated) (INR Million)Y/E March FY13 FY14 FY13 FY14E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

JLR vols. (units) 83,452 77,442 94,828 116,345 90,620 101,931 116,357 121,105 372,067 430,013

Growth (%) 34.5 13.9 9.9 18.6 8.6 31.6 22.7 4.1

JLR EBITDA (%) 14.5 14.8 14.0 16.9 16.5 17.8 17.9 17.1 15.2 17.4

S/A vol. (units) 190,783 223,665 203,852 196,370 153,172 151,466 130,337 130,898 809,503 565,873

Growth (%) -3.5 5.8 -11.9 -31.3 -19.7 -32.3 -36.1 -33.3 -12.3 -30.1

S/A EBITDA (%) 7.3 5.9 2.2 3.6 2.3 2.0 -4.3 -1.4 4.8 -0.2

Total Op Income 433,236 434,029 460,895 560,016 467,847 568,823 638,768 654,776 1,888,176 2,330,214

Growth (%) 30.1 19.9 1.8 10.0 8.0 31.1 38.6 16.9 14.0 23.4

EBITDA 57,548 53,336 56,573 78,015 62,192 86,351 99,485 98,246 245,473 346,274

EBITDA Margins (%) 13.3 12.3 12.3 13.9 13.3 15.2 15.6 15.0 13.0 14.9

Depreciation 15,659 15,944 20,700 23,391 23,477 27,293 28,527 30,161 75,693 109,457

Other Income 2,386 2,068 1,886 1,775 1,823 2,321 1,575 1,442 8,115 7,160

Interest Expenses 8,044 8,474 9,344 9,670 9,482 11,117 10,012 10,500 35,533 41,112

PBT before EO Exp 36,232 30,987 28,416 46,729 31,056 50,262 62,521 59,027 142,362 202,865

EO Exp/(Inc) 4,405 101 1,735 -215 1,786 2,738 1,243 0 6,027 5,768

PBT after EO Exp 31,826 30,886 26,681 46,943 29,270 47,524 61,277 59,027 136,335 197,097

Tax rate (%) 27.3 32.0 38.7 18.8 39.8 25.1 21.4 28.7 27.7 27.2

PAT 23,138 21,010 16,362 38,116 17,628 35,590 48,191 42,077 98,625 143,486

Minority Interest -276 -230 -152 -178 -198 -106 -85 -354 -837 -743

Share in profit of Associate -414 -32 67 1,517 -169 -65 -58 58 1,138 -234

Adj PAT 25,651 20,816 17,341 39,280 18,337 37,469 49,026 41,781 103,286 146,708

Growth (%) 25.2 (7.3) (50.9) -11.5 -28.5 80.0 182.7 6.4 -17.7 42.0

E: MOSL Estimates

CMP: INR398 Buy

Financials & Valuation (INR b)Y/E March 2013 2014E 2015E 2016ENet Sales 1,888 2,330 2,633 3,366

EBITDA 245.7 346.2 410.9 524.8

NP 103.3 146.7 152.6 211.8

Adj. EPS (INR) 32.1 45.6 47.4 65.8

EPS Gr. (%) (17.7) 42.0 4.0 38.8

BV/Sh. (INR) 118.0 158.9 204.5 268.4

RoE (%) 29.4 33.1 26.1 27.8

RoCE (%) 23.4 27.3 24.4 27.3

Payout (%) 7.2 5.1 7.4 5.3

Valuations

P/E (x) 12.4 8.7 8.4 6.1

P/BV (x) 3.4 2.5 1.9 1.5

EV/EBITDA (x) 5.7 3.9 3.5 2.5

Div. Yield (%) 0.5 0.5 0.8 0.8

Bloomberg TTMT IN


M. Cap. (INR b)/(USD b) 1,282 / 21


1,6,12 Rel Perf. (%) -10 / 4 / 29

C–13April 2014


Quarterly Performance (standalone) (INR Million)Y/E March FY13 FY14 FY13 FY14E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Volumes (units) 519,160 485,999 518,496 509,210 494,494 506,617 519,308 547,252 2,032,865 2,067,671

Growth (%) (3.2) (19.6) (2.1) (4.1) (4.8) 4.2 0.2 7.5 (7.6) 1.7

Realization (INR/unit) 35,623 35,234 34,701 34,334 35,596 39,248 39,622 39,617 34,972 38,566

Growth (%) 9.4 6.9 3.5 11.4 (0.1) 11.4 14.2 15.4 7.7 10.3

Net Sales 18,494 17,124 17,992 17,483 17,602 19,884 20,576 21,680 71,093 79,742

Growth (%) 5.9 (14.0) 1.3 6.8 (4.8) 16.1 14.4 24.0 (0.6) 12.2

RM (%) 73.6 72.8 72.0 71.0 71.1 71.2 71.0 71.8 72.4 71.3

Emp cost (%) 5.5 6.3 5.8 5.3 6.4 5.9 6.0 5.7 5.7 6.0

Other exp (%) 15.1 15.0 16.3 18.3 16.8 17.0 17.0 17.1 16.1 17.0

EBITDA 1,075 1,011 1,067 938 989 1,171 1,234 1,151 4,090 4,545

EBITDA margin (%) 5.8% 5.9% 5.9% 5.4% 5.6% 5.9% 6.0% 5.3% 6% 5.7%

Interest 155 152 118 56 65 52 53 54 480 224

Depreciation 310 320 328 347 314 314 327 336 1,304 1,291

Other Income 51 43 49 96 81 77 78 72 238 308

PBT before EO Exp 661 582 670 631 691 882 932 834 2,544 3,337

EO Exp 0 0 -8 916 0 -303 0 908 -303

PBT after EO Exp 661 582 678 -285 691 1185 932 834 1,636 3,640

Total Tax 150 130 146 50 172 296 244 199 476 910

Tax rate (%) 22.7 22.3 21.5 -17.6 24.9 25.0 26.1 23.8 29.1 25.0

Reported PAT 511 452 532 -335 519 888 688 635 1,160 2,730

Adjusted PAT 511 452 526 743 519 661 688 635 1,804 2,503

E: MOSL Estimates

TVS MotorCMP: INR97 Buy� Expect TVS Motor's (TVSL) volumes to rise 7.5% YoY (+5.4% QoQ) to

547,252 units. Volume growth has been driven by a robust 38% YoYgrowth in scooter portfolio.

� However, margins would be impacted by ~70bp QoQ (down 10bp YoY)to 5.3% due to ~INR150m inventory loss on reduction in excise duty.Our channel interactions indicate that TVSL has compensated dealersfor ~75% of the inventory loss. Excluding this impact, margins wouldremain flat QoQ at 6%.

� Jupiter scooters have received a strong response from customers andcontinue to command a waiting period in major markets.

� Production ramp-up in scooters, launch of new Scooty and Star City in1QFY15 coupled with the re-launch of Victor motorcycle (executivemotorcycle segment) would continue to drive a healthy volumegrowth.

Key issues to watch out� Update on new launches together with timelines.� Regional demand scenario, particularly in southern region, given its

high exposure.


EBITDA 4.1 4.5 6.1 7.4

Adj. PAT 1.8 2.5 3.7 4.7

EPS (INR) 3.8 5.3 7.9 10.0

EPS Gr. (%) -27.3 38.3 49.2 26.8

BV/Sh (INR) 25.8 29.8 35.3 42.3

RoE (%) 15.1 19.0 24.2 25.7

RoCE (%) 15.7 19.2 25.4 28.1

Payout (%) 56.5 30.5 29.8 29.3

Valuations

P/E (x) 25.6 18.5 12.4 9.8

P/BV (x) 3.8 3.3 2.8 2.3

EV/EBITDA (x) 12.8 11.0 7.8 6.0

Div. Yield (%) 1.2 1.5 2.1 2.6

Bloomberg TVSL IN




1,6,12 Rel Perf. (%) 7 / 149 / 181

C–14April 2014

March 2014 Results Preview | Sector: Capital Goods

Satyam Agarwal ([email protected]) / Nirav Vasa ([email protected])

Global recovery, increased competitiveness supporting Products business: Favorablecurrency movements have increased the competitiveness of Indian manufacturingand created opportunities for export-led business models. Several Capital Goodscompanies have indicated that exports have shown a meaningful uptick; this is despitesharp volatility in the currencies of emerging markets like LatAm, Africa and SE Asiancountries, which import from India. Revenues of Global Industrial players also suggestthat the pace of revenue decline has moderated. The CY14 outlook reflects cautiousoptimism, suggesting possibility of gradual recovery in the global investment cycle.

Domestic investment cycle: Expect slow incremental change: While the initial phaseof the domestic investment cycle slowdown was impacted by policy logjams, thecurrent phase is accentuated by demand slowdown. This is an increasingly worryingtrend, as project viability across industries has been impacted. Projects completed(as a percentage of projects under implementation) have touched abysmally lowlevels of 3.4%, given constrained economic viability and this has impacted the virtuouscycle of cash flow generation in the system. This is a key constraint, as the initialround of demand improvement will be catered to by fast tracking slow moving /stalled projects.

Of the INR1,456b of gross project additions in 3QFY14, CMIE data indicate that theshare of private sector is just INR189b, the lowest since 2004. On a TTM basis, theshare of government sector has increased to 70% of gross project additions, thuscompleting a full circle.

Industrial/Power Products reported strong revenue growth in 3QFY14: In 3QFY14,revenues of Industrial Products (12% YoY growth for 13 uncovered companies) andPower Products (24% YoY growth for six uncovered companies) surprised positively.We believe that the growth, which came after 6-8 quarters of decline, was supportedby exports and also base effect. This is an important trend, in our opinion.

TTM order finalizations up 18% YoY; in positive territory for first time post 2011: Orderfinalization during the period March 2013 to March 2014 was INR1.9t, up 18% YoY. Thisis important, as growth returned to positive territory for the first time post 2011, alsopartly supported by base effect. Order awards on a TTM basis have inched upwardsfrom a low of INR1.4t in June 2013 to INR1.9t currently. In March 2014, INR243b of



31.3.14 % YoY % QoQ % YoY % QoQ % YoY % QoQABB 850 Neutral 19,547 -0.8 -11.3 1,358 27.5 -9.1 547 28.6 -6.2BHEL 197 Buy 151,386 -19.7 78.9 29,352 -36.9 197.7 17,628 -45.6 153.7Crompton Greaves 160 Buy 37,593 11.0 12.2 2,094 168.8 25.3 867 242.9 39.7Cummins India 596 Buy 11,239 -2.6 9.9 1,924 -0.7 -2.6 1,496 0.2 1.6Havells India 930 Neutral 12,801 9.5 8.1 1,621 11.0 -0.7 1,159 7.8 -2.2Larsen & Toubro 1,273 Buy 198,388 9.7 37.9 24,795 10.2 48.0 17,266 8.1 51.9Siemens 773 Se l l 29,868 1.1 24.8 1,240 -25.0 -6.6 466 55.2 -28.5Thermax 748 Buy 14,158 -3.6 39.7 1,432 -14.4 57.6 1,051 -8.9 57.6Sector Aggregate 474,980 -3.1 39.6 63,816 -17.7 79.2 40,478 -23.7 72.3

Capital GoodsCompanies Covered

ABB

BHEL

Crompton Greaves

Cummins India

Havells India

Larsen & Toubro

Siemens

Thermax

C–15April 2014


orders were finalized. Order awards grew 90% YoY and is partly suppported by baseeffect.

Profitability to remain under pressure; focus shifts to fixed cost absorption: Revenuesacross our Capital Goods coverage universe remained flat in 3QFY14. We model 4% de-growth in 4QFY14. PAT for our Capital Goods coverage universe decreased 12% YoY in3QFY14 while we model 26% YoY de-growth in 4QFY14. Major de-growth in our PATestimates is a reflection of slower pace of project execution across multiple industries.Order inflows for the quarter from state-owned units (PSUs) is expected to reducesignificantly, as the model code of conduct would be applicable ahead of Lok Sabhaelections. With private sector capex showing no signs of improvement, we expectmaximum order finalization to accrue from exports.

Sector strategy: LT, TMX, KKC are top picks: We believe that the initial round of projectawards may well be a winner's curse. This is because PSU capex is characterized bytender-based bidding, elongated working capital cycles and continued execution delays.In this environment, we focus on two key groups: (1) mid-value product companies(both Industrial and Power Products), given early / mid-cycle characteristics; they arealso beneficiaries of increasing exports, and (2) slow moving / stalled projects, whichnow form a meaningful part of projects under implementation. LT, TMX and KKC remainour top picks. ABB is a strong play on the macro environment.

EBITDA margins to remain under pressure on YoY basis Revenue growth to remained flat on YoY basis in 3QFY14

Book to Bill ratio remains stagnant at 2.4x Pace of order finalization remains weak



C–16April 2014


Slowdown in bearings sales highlights consumption slowdown


Order Finalization 12 MMA basis (INR b) Order wins led by mid sized players


Projects completed at abysmally low levels, as economic Outstanding project investments (% YoY): Phases of investmentviability remains poor, impacting cash generation cycle cycle slowdown

Source: CMIE, MOSL

C–17April 2014


Relative Performance - 3m (%) Relative Performance-1Yr (%)


31.3.14 FY14E FY15E FY16E FY14E FY15E FY16E FY14E FY15E FY16E FY14E FY15E FY16ECapital GoodsABB 850 Neutral 8.3 14.3 20.3 101.8 59.6 42.0 38.9 28.1 21.9 6.7 11.0 14.5BHEL 197 Buy 14.4 9.6 15.0 13.7 20.4 13.1 8.9 10.9 6.4 11.1 7.1 10.4Crompton Greaves 160 Buy 4.2 8.9 11.8 37.6 18.0 13.5 17.1 11.9 9.5 7.3 15.3 18.9Cummins India 596 Buy 21.9 25.0 30.8 27.2 23.8 19.3 21.6 19.2 15.3 24.2 25.5 28.5Havells India 930 Neutral 41.6 45.4 51.8 22.3 20.5 18.0 15.6 12.6 10.9 29.0 26.5 25.6Larsen & Toubro 1,273 Buy 43.1 55.2 67.2 29.5 23.1 18.9 17.2 14.0 11.8 14.0 14.3 15.0Siemens 773 Se l l 7.1 13.3 19.9 108.1 58.0 38.8 42.5 28.3 20.8 6.1 11.0 15.3Thermax 748 Buy 22.5 29.0 39.0 33.2 25.8 19.1 19.4 15.0 11.7 13.7 16.0 19.2Sector Aggregate 26.9 24.9 18.8 16.5 14.9 11.4 11.7 11.7 14.1

85

95

105

115

125

Dec

-13

Jan-

14

Feb-

14

Mar

-14

Sensex IndexMOSL Capi ta l Goods Index

65

85

105

125

145

Mar

-13

Jun-

13

Sep-

13

Dec

-13

Mar

-14

Sensex IndexMOSL Capi ta l Goods Index

C–18April 2014


ABBCMP: INR850 Under review� ABB commissioned the Gas Insulated Switchgear / Plug & Switch

System and Distribution Transformer factory in 4QCY13 (at a capex ofINR2.5b). Increased localization will improve its competitivepositioning.

� Exports have increased from INR5b in 2010 to INR9b in 2012 and arelikely to increase to INR15b in 2015. Also, the contribution of servicebusinesses to revenues has increased from 10% in 2010 to 12% in 2012,and target is 18% in 2015. Both these businesses entail improvedmargins (CY13 operational EBITDA: 6.9%). The management has statedthat margins on exports are higher than on domestic revenues. Theservice segment enjoys high double-digit margins.

� ABB had recently won orders worth INR3.1b from PowerGrid for supplyof 26 power transformers of 80MVA and 11 shunt reactors of 110MVA.

Key issues to watch out� Process Automation and Power Systems had reported strong

improvement in EBIT margin in 4QCY13. Process Automation EBITmargin had increased from -0.2% in 4QCY12 to 10.3% in 4QCY13, whilePower Systems EBIT had improved to 7.8% in 4QCY13 from -1.6%. Themargin expansion was largely led by reorientation of the Projectsbusiness and also lower provisions on legacy projects. Sustenance ofthe trend will be an important monitorable.

� ABB's direct raw material costs decreased from ~75% of sales in CY11to 69% in 4QCY13, given various measures like cost rationalization,efficiency improvement, design to cost, etc. The management hadstated that just 50% of the journey has been achieved, and hence, RMcosts will also be a key monitorable.

Financials & Valuation (INR b)Y/E December 2012 2013 2014E 2015ENet Sales 75.7 77.2 82.6 90.4

EBITDA 3.4 4.7 6.5 8.1

Adj PAT 1.4 1.7 3.0 4.3

Adj EPS (INR) 6.5 8.3 14.3 20.3

EPS Gr (%) -25.5 28.7 70.8 42.0

BV/Sh (INR) 122.6 126.4 134.0 144.9

RoE (%) 5.4 6.7 11.0 14.5

RoCE (%) 5.7 7.4 10.8 14.0

Payout (%) 53.8 41.5 40.0 40.0

Valuations

P/E (x) 118.1 70.3 59.6 42.0

P/BV (x) 6.2 4.6 6.3 5.9

EV/EBITDA (x) 48.8 27.1 28.1 21.9

Div. Yield (%) 0.5 0.6 0.8 1.1

Bloomberg ABB IN


M. Cap. (INR b)/(USD b) 180 / 3


1,6,12 Rel Perf. (%) 13 / 41 / 55

Quarterly Performance (INR Million)Y/E December CY13 CY14E CY13 CY14E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q

Sales 19,700 17,512 17,859 22,039 19,547 18,916 20,586 23,533 75,650 82,582

Change (%) 10.0 (7.0) (1.3) 5.8 (0.8) (4.0) 17.6 31.8 1.2 31.3

EBITDA 1,065 1,079 1,054 1,495 1,365 1,408 1,625 2,163 3,365 6,561

Change (%) 9.2 1.8 58.8 124.4 28.2 32.2 50.6 105.1 -7.0 12.5

As % of Sales 5.4 6.2 5.9 6.8 7.0 7.4 7.9 9.2 4.4 7.9

Adjusted EBITDA (%) * 6.5 6.3 6.2 7.9 6.9 - - - 5.1 -

Depreciation 246 260 257 270 290 300 310 324 941 1224

Interest 198 256 270 288 290 260 220 230 432 1,000

Other Income 14 38 9 7 15 20 25 13 71 73

PBT 636 601 537 944 800 868 1,120 1,622 2,062 4,410

Tax 210 205 180 360 248 269 347 503 688 1,367


Repoted PAT 426 396 356 583 552 599 773 1,119 1,374 3,043

Adj. PAT 426 396 356 583 552 599 773 1,119 1,374 3,043

Change (%) -10.7 -23.3 66.9 247.8 29.8 40.7 95.2 214.0 -25.5 -14.2

Order Intake 15,310 17,310 17,620 16,660 16,687 18,277 19,071 25,428 63,339 79,464

Order Book 82,290 82,350 82,520 77,090 74,231 73,592 72,077 68,273 77,090 68,273

BTB (x) 1.1 1.1 1.1 1.0 1.0 0.9 0.9 0.8 1.0 0.8

E: MOSL Estimates; * As reported by ABB

C–19April 2014


BHELCMP: INR197 Buy� BHEL has announced receipt of INR30b of boiler orders from NTPC for

the 1.6GW Darlipalli project. This order was initially part of the bulktender process, and the project award was delayed due to landacquisition issues / BGR opting out of supply of turbines, etc. Post there-bid, Toshiba-JSW JV has emerged as the L1 bidder for supply ofturbines and the boiler orders have now been awarded to BHEL.

� In 4QFY14, BHEL has till date received aggregate project awards ofINR122b comprising of: (1) 1,980MW NTPC North Karanpura (EPC,INR80b), (2) 1,600MW NTPC Darlipalli (Boilers, INR30b), (3) hydropowerprojects in Punjab / J&K (INR13b), etc. In addition, BHEL has emergedas L1 in (1) 1,320MW Ennore SEZ (EPC, INR78b) (2) 6X196MW PranhitaLift Irrigation (INR25b-30b), etc.

� BHEL's order intake in 9MFY14 was INR112b; hence, strong projectawards of ~INR122b in 4QFY14 assume importance. BHEL's order intakehad declined from a peak of ~INR600b in FY10/FY11 to ~INR270b inFY12/FY13. For FY14, we model order intake of INR260b.

Key issues to watch out� BHEL's outstanding debtors are worth INR394b (including ~INR210b of

retention money), likely to be released once the project is testedand commissioned.

� Insights shared on growth prospects related to Industrial businesseslike Metro Rail, Power Transmission, Railways and Defense.

� Trend in provisions towards contractual obligations, doubtful debtsand liquidated damages.


EBITDA 93.9 47.2 33.7 47.6

Adj PAT 65.5 35.1 23.6 36.7

EPS (INR) 26.8 14.4 9.6 15.0

EPS Gr. (%) (4.9) (46.4) (32.9) 55.6

BV/Sh. (INR) 124.4 133.3 139.6 149.3

RoE (%) 23.5 11.1 7.1 10.4

RoCE (%) 24.5 11.4 7.3 10.7

Payout (%) 20.0 30.0 30.0 30.0

Valuations

P/E (x) 7.0 13.1 19.5 12.6

P/BV (x) 1.5 1.4 1.3 1.3

EV/EBITDA (x) 4.2 8.4 10.2 5.9

Div Yield (%) 2.9 2.2 1.5 2.4

Consolidated

Bloomberg BHEL IN


M. Cap. (INR b)/(USD b) 482 / 8


1,6,12 Rel Perf. (%) 12 / 28 / -8


1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Sales (Net) 83,262 103,996 100,417 188,502 63,526 88,190 84,624 151,386 476,177 387,725

Change (%) 16.9 1.0 -4.8 -2.2 -23.7 -15.2 -15.7 -19.7 0.8 -18.6

EBITDA 12,022 18,995 16,341 46,512 3,886 4,119 9,859 29,352 93,894 47,216

As a % Sales 14.4 18.3 16.3 24.7 6.1 4.7 11.7 19.4 19.7 12.2

Adjusted EBITDA 12,022 18,995 16,341 46,512 3,886 6,033 9,859 29,352 93,894 47,216

Change (%) 41.0 12.0 -12.6 -3.2 -67.7 -68.2 -39.7 -36.9 -3.3 -49.7

As a % Sales 14.2 18.0 16.0 24.2 6.0 6.7 11.7 19.4 19.7 12.2

Interest 55 259 509 405 278 247 323 359 1,253 1,206

Depreciation 2,284 2,163 2,200 2,889 2,308 2,387 2,416 2,405 9,534 9,516

Other Income 3,663 1,307 3,324 2,924 5,385 4,979 2,908 293 11,217 13,565

PBT 13,346 17,880 16,955 46,142 6,685 6,465 10,028 26,880 94,324 50,058

Tax 4,137 5,135 5,139 13,766 2,031 1,905 3,080 9,253 28,177 16,269


Reported PAT 9,209 12,745 11,816 32,375 4,654 4,560 6,948 17,628 66,148 33,789

Change (%) 12.9 -9.7 -17.5 -4.2 -49.5 -64.2 -41.2 -45.6 -6.0 -48.9

Adj. PAT 9,209 12,745 11,816 32,375 4,654 5,899 6,948 17,628 65,537 35,129

Change (%) 12.9 -0.9 -17.5 -3.6 -49.5 -53.7 -41.2 -45.6 -4.9 -46.4

Order intake 55,900 31,530 19,500 209,570 14,690 30,010 67,624 147,329 316,500 263,989

Order book (INR b) 1,330 1,223 1,137 1,152 1,086 1,023 1,006 1,012 1,152 1,012

BTB (x) 2.7 2.5 2.4 2.4 2.4 2.3 2.4 2.6 2.4 2.6

E: MOSL Estimates

C–20April 2014


Quarterly performance (Consolidated) (INR Million)Y/E March FY13 FY14 FY13 FY14E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Sales (Net) 28,111 29,242 29,718 33,873 31,572 32,049 33,520 37,593 120,944 134,734

Change (%) 15.3 8.1 -1.9 10.1 12.3 9.6 12.8 11.0 77.0 11.4

EBITDA 1,668 1,365 20 779 1,448 1,613 1,671 2,094 3,832 6,826

Change (%) -8.3 -39.6 -98.9 -63.4 -13.2 18.2 168.8 -48.6 78.1

Adjusted EBITDA 1,793 1,490 850 779 1,448 1,613 1,671 2,094 4,912 6,826

As of % Sales (Adj) 6.4 5.1 2.9 2.3 4.6 5.0 5.0 5.6 4.1 5.1

Depreciation 466 544 566 453 527 662 719 636 2,029 2,544

Interest 99 190 213 208 201 193 267 315 709 977

Other Income 192 208 304 51 353 326 404 281 754 1,364

EO Income/(Exp) 0 0 1,207 0 0 0 0 0 1,207 0

PBT 1,294 838 -1,662 169 1,072 1,083 1,089 1,424 640 4,669

Tax 445 414 228 -78 464 506 493 575 1,009 2,038

Effective Tax Rate (%) 34.4 49.4 -13.7 -45.9 43.3 46.7 45.3 40.4 157.5 43.7

Minority interest -9.6 4.2 -1.4 -5.7 7.5 -6.4 -24.5 -17.2 -7.3 -40.6

Reported PAT 859 420 -1,888 253 601 584 620 867 -361 2,671

Adjusted PAT 984 545 149 253 601 584 620 867 1,926 2,671

Change (%) 23.8 (53.3) (80.7) (74.8) (38.9) 7.1 317.1 242.9 (51.5) 38.7

Order book 91,720 94,000 92,320 91,250 97,700 97,430 100,740 103,147 91,250 103,147

Order Intake 27,170 25,750 22,570 29,830 24,410 22,500 26,240 33,000 105,450 33,000

BTB (x) 0.8 1.0 0.8 1.0 0.8 1.0 0.8 0.8 0.8 0.8

E: MOSL Estimates

Crompton GreavesCMP: INR160 Buy� CRG recently bagged an order for supply of 684MVA transformers from

the state utility of Paraguay at a value of USD13m. These transformerswill be manufactured in India and margins will be comparativelybetter.

� Media articles suggest that KKR had recently invested USD100m inAvantha Group Holdings. Earlier, KKR had invested USD125m in twotranches in Avantha Power. This fund infusion had led to lowerpromoter pledge at 54% in 3QFY14 v/s 68.3% in 2QFY14.

� Order intake in overseas subsidiaries was supported by Automationbusiness (intake at INR6.2b in 9MFY14). This business has high operatingleverage, with contribution margins at ~50%. CRG has participated in10 such projects globally, and this business could be an importantdriver.

Key issues to watch out� Performance of overseas subsidiaries, which just managed EBITDA

breakeven in 9MFY14 and reported PAT loss of INR667m-747m/quarter. The losses largely pertain to Canada and US systemsoperations, and we expect PAT loss to decline to INR563m in 4QFY14.

� Performance of the European operations (Belgium / Hungary) is a keymonitorable, as revenues have been largely stable despite theincreased production levels. During 3QFY14, Belgium just achievedbreakeven, and performance was impacted by delayed deliveries.

� Management commentary on plans to set up the greenfield transformerfactory at Baroda.


EBITDA 3.8 6.8 9.9 12.4

Adj PAT 1.9 2.6 5.5 7.4

EPS(INR) 3.1 4.2 8.9 11.8

EPS Gr. (%) (48.4) 38.7 109.3 33.3

BV/Sh. (INR) 55.5 57.8 57.1 66.7

RoE (%) (1.0) 7.3 15.3 18.9

RoCE (%) 2.8 5.9 11.5 14.2

Payout (%) 20.1 20.0 20.0 20.0

Valuations

P/E (x) 52.3 37.7 18.0 13.5

P/BV (x) 2.0 2.8 2.8 2.4

EV/EBITDA (x) 20.7 16.3 11.0 8.7

Div Yield (%) 0.8 0.9 1.0 1.2

Consolidated

Bloomberg CRG IN


M. Cap. (INR b)/(USD b) 101 / 2


1,6,12 Rel Perf. (%) 18 / 70 / 52

C–21April 2014


Quarterly Performance (Standalone) (INR Million)Y/E March FY13 FY14 FY13 FY14E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Sales 12,588 10,869 10,895 11,543 10,493 9,327 10,230 11,239 45,894 41,289

Change (%) 21.8 -0.3 13.2 10.9 -16.6 -14.2 -6.1 -2.6 11.5 -10.0

EBITDA 2,325 1,999 2,086 1,939 1,756 1,526 1,976 1,924 8,349 7,182

Change (%) 33.7 13.6 29.4 -0.5 -24.5 -23.6 -5.3 -0.7 19.7 -14.0

As of % Sales 18.5 18.4 19.1 16.8 16.7 16.4 19.3 17.1 18.2 17.4

Depreciation 114 117 118 124 117 131 133 138 473 520

Interest 14 13 9 11 12 9 10 9 46 40

Other Income 385 338 661 824 668 558 236 287 2,067 1,750

Extra-ordinary Items 0 0 475 0 0 0 0 0 616 0

PBT 2,583 2,207 3,096 2,628 2,294 1,944 2,069 2,065 10,513 8,372

Tax 777 598 755 742 632 496 597 569 2,872 2,294


Reported PAT 1,806 1,609 2,341 1,886 1,662 1,448 1,472 1,496 7,641 6,078

Change (%) 1.9 25.2 66.1 30.4 -8.0 -10.0 -37.1 -20.7 29.2 (20.5)

Adjusted PAT 1,806 1,609 1,817 1,494 1,662 1,448 1,472 1,496 6,606 6,078

Change (%) 32.7 25.2 28.9 3.3 (8.0) (10.0) (19.0) 0.2 20.1 (8.0)

Operational Details

Domestic Sales 8,210 7,650 8,223 8,320 7,550 6,118 7,186 7,519 32,400 -1,769

Change (%) 10.1 (0.5) 21.3 20.2 (8.0) (20.0) (12.6) (9.6) 12.5 (12.5)

Exports 4,210 3,030 2,490 2,960 2,737 3,020 2,820 3,456 12,690 12,056

Change (%) 52.4 0.7 (5.9) (10.0) (35.0) (0.3) 13.3 16.7 8.3 (5.0)

E: MOSL Estimates

Cummins IndiaCMP: INR596 Buy� Implementation of CPCB-2 for diesel gensets till 800kw is expected

from June-July 2014. We expect KKC to be a key beneficiary, as itsproducts are already certified, according to our channel checks. Also,KKC has attempted value engineering to comply with the norms (likeafter treatment plant, etc), which could improve its costcompetitiveness.

� Domestic LHP and Recon business should witness strong inflexionpoint post CPCB-II implantation. We expect nationwide launch of LHPproducts in mid-FY15. Also, MHP genset exports (160-330kva) shouldcommence in mid-FY15.

� Pig iron prices declined 3% QoQ in 4QFY14, and should support marginswith a time lag.

Key issues to watch out� Extent of pre-buying, given possibilities of a 15-20% price increase in

DG sets. Our channel checks indicate that dealers have startedformally informing customers about CPCB-2 implementation andconversion of inquiries into firm orders has been encouraging (withdealers reporting 25-50% success rate across regions). The interactionsalso suggest that the inventory in the chain remains at 1-1.5 months,which is manageable. We model domestic powergen revenues for4QFY14 at INR3.4b v/s INR3b in 3QFY14.

� Trend in exports, particularly Urja gensets (LHP series engines), whichhad witnessed strong deliveries of telecom gensets in 4QFY14. Wemodel Urja genset revenues at INR1b in 4QFY14 (up 12% QoQ).


EBITDA 8.3 7.2 8.1 10.0

Adj PAT 6.6 6.1 6.9 8.5

EPS (INR) 23.8 21.9 25.0 30.8

EPS Gr. (%) 20.1 (8.0) 14.2 23.2

BV/Sh. (INR) 87.3 94.0 102.1 114.2

RoE (%) 29.7 24.2 25.5 28.5

RoCE (%) 29.8 24.3 25.7 28.7

Payout (%) 58.9 69.4 67.8 60.7

Valuations

P/E (x) 25.0 27.2 23.8 19.3

P/BV (x) 6.8 6.3 5.8 5.2

EV/EBITDA (x) 14.8 21.7 19.3 15.3

Div Yield (%) 2.5 2.2 2.4 2.7

Bloomberg KKC IN


M. Cap. (INR b)/(USD b) 165 / 3


1,6,12 Rel Perf. (%) 12 / 32 / 1

C–22April 2014



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Sales 10,328 9,642 10,584 11,696 10,513 11,740 11,844 12,801 42,250 46,898

Change (%) 25.4 13.4 17.8 11.7 1.8 21.8 11.9 9.5 16.9 11.0

Adj EBITDA 1,281 1,192 1,399 1,460 1,411 1,690 1,633 1,621 5,331 6,354

Change (%) 44.1 9.5 15.2 2.1 10.1 41.8 16.7 11.0 17.0 19.2

Adj EBITDA margin (%) 12.4 12.4 13.2 12.5 13.4 14.4 13.8 12.7 12.6 13.5

Depreciation 118 159 146 156 156 159 161 171 579 647

Interest 102 99 58 26 56 61 85 58 286 260

Other Income 28 20 15 34 32 78 107 63 96 280

PBT 1,004 1,054 1,173 1,342 1,154 1,554 1,559 1,455 4,571 5,722

Tax 204 185 227 243 207 296 345 296 858 1,144


Reported PAT 800 870 947 1,099 947 1,257 1,215 1,159 3,713 4,578

Change (%) 23.5 23.8 20.0 20.0 18.3 44.6 28.3 5.5 21.3 23.3

Adj PAT 880 789 976 1,075 1,029 1,253 1,185 1,159 3,720 4,626

Change (%) 55.5 6.5 17.6 5.3 16.9 58.9 21.4 7.8 21.8 24.3

E: MOSL Estimates

Havells IndiaCMP: INR930 Buy� Media articles indicate plans of listing Sylvania on London Stock

Exchange, and the intent is to raise funds to possibly financeacquisitions and business expanision.

� HAVL has launched priming monoblock pumps in March 2014. Pumpswould be manufactured at Neemarana (capex INR500m). There areplans to expand the initial capacity of 10,000units/month to25,000units/month by incurring additional capex of INR500m. Fanshave also been launched under the Standard brand.

� In its Switchgear segment, HAVL has launched Metalica and MetalicaDivine Series in the premium segment.

Key issues to watch out� Demand for Cables & Wires in the domestic market might be under

pressure, considering the slower pace of project execution in thereal estate industry.

� Electrical Consumer Durables (comprising of fans and consumerappliances) revenue growth declined to just 1.7% in 3QFY14. Growthrates have been impacted by poor consumer sentiment, both in fansand appliances.

� Sylvania reported a strong turnaround in 3QFY14, with Europeanbusiness margins at 10.2% (up 220bp YoY).


EBITDA 6.7 7.7 9.3 10.5

Adj PAT 4.3 5.2 5.7 6.5

Adj EPS (INR) 34.4 41.6 45.4 51.8

EPS Gr. (%) 1.0 20.9 9.2 13.9

BV/Share (INR) 115.6 143.6 171.5 202.1

RoE (%) 29.8 29.0 26.5 25.6

RoCE (%) 21.4 22.3 21.1 21.5

Payout (%) 28.3 27.3 38.6 40.8

Valuations

P/E (x) 27.0 22.3 20.5 18.0

P/BV (x) 8.0 6.5 5.4 4.6

EV/EBITDA (x) 11.9 15.6 12.6 10.9

Div Yield (%) 0.8 1.0 1.6 1.9

Consolidated

Bloomberg HAVL IN


M. Cap. (INR b)/(USD b) 116 / 2


1,6,12 Rel Perf. (%) 15 / 31 / 25

C–23April 2014


Larsen & ToubroCMP: INR1,273 Buy� L&T IDPL (LT's 97.5% subsidiary) has received FIPB approval for FDI of

INR10b from CPP Investment Board (USRE III) Inc (subsidiary of CanadaPension Plan). In December 2013, L&T IDPL had sought FIPB approvalfor the initial infusion of INR10b, followed by a second tranche ofINR10b (or higher amount as agreed upon) after 12 months from thedate of the initial investment.

� During 4QFY14, LT has announced order inflows of INR163b, includingthe following: (1) Transportation Infra (largely roads): INR70b includingINR52b in Oman / Qatar; (2) Buildings and Factories: INR40b, (3) Watersegment: INR25b, (4) Power T&D: INR15b, (5) Hydrocarbons: INR10b.

Key issues to watch out� Net working capital at the end of 3QFY14 deteriorated to 21.3%, and

was marginally above the 15-20% expectations band. The deteriorationwas led by lower advances and tight liquidity conditions, necessitatingsupport to vendors.

� Management's commentary and guidance on expectations of orderinflows in FY15, particularly given expectations of a gradual recoveryin the domestic market and also large tenders opening in GCC nations.

� There has been an uptick in domestic revenue growth to 8% in 9MFY14(v/s 3.7% in FY13) and tapering down of the overseas business growthto 18% YoY given the base effect (v/s 97% YoY in FY13). Also E&C marginexpanded to 12% (up 78bp YoY) in 3QFY14.


EBITDA 54.2 62.3 75.0 85.8

Adj PAT * 49.3 39.8 50.9 62.0

EPS (INR)* 53.4 43.1 55.2 67.2

EPS Gr. (%) 2.8 -19.3 28.0 21.8

BV/Sh (INR) 315.7 351.2 392.2 440.5

RoE (%) 14.4 14.0 14.3 15.0

RoCE (%) 12.9 12.0 12.4 13.1

Payout (%) 27.9 27.8 26.9 26.9

Valuations

P/E (x)* 18.3 29.5 23.1 18.9

P/BV (x) 3.1 3.6 3.2 2.9

EV/EBITDA (x) 17.0 19.2 15.9 13.6

Div Yield (%) 1.3 1.0 1.1 1.3

* Consolidated

Bloomberg LT IN


M. Cap. (INR b)/(USD b) 1,175 / 20

52-Week Range (INR) 1,301 / 678

1,6,12 Rel Perf. (%) 9 / 46 / 21


1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Net Sales 119,554 131,952 128,693 180,804 98,239 123,084 143,875 198,388 515,709 563,586

Change (%) 11.8 9.7 9.3

EBITDA 10,847 14,054 12,583 21,255 8,917 11,857 16,748 24,795 54,187 62,317

Change (%) 33.1 16.7 15.0

Margin (%) 9.1 10.7 9.8 11.8 9.1 9.6 11.6 12.5 10.5 11.1

Adjusted EBIDTA 12,447 14,054 13,833 22,505 9,997 12,857 16,748 24,795 56,187 64,397

Change (%) 21.1 10.2 14.6

Adjusted Margin (%) 10.4 10.7 10.7 11.8 10.2 10.4 11.6 12.5 11.1 11.4

Depreciation 1,919 2,040 1,779 1,969 1,868 1,926 1,992 1,999 7,277 7,785

Interest 2,284 2,350 2,338 2,634 2,424 2,379 2,909 3,189 9,548 10,900

Other Income 6,081 3,294 5,595 3,933 4,871 4,656 4,468 4,448 19,417 18,443

Extraordinary Inc/(Exp) -383 2,672 0 188 0 0 1,044 0 2,479 1,044

Reported PBT 12,341 15,630 14,061 20,773 9,496 12,208 17,360 24,056 59,258 63,119

Tax 3,705 4,257 3,929 4,673 2,852 3,562 4,953 6,790 15,413 18,157


Reported PAT 8,636 11,373 10,132 16,099 6,643 8,646 12,407 17,266 43,845 44,962

Adjusted PAT 10,025 9,151 9,307 15,977 7,399 9,346 11,363 17,266 41,862 45,374

Change (%) 22.1 8.1 8.4

Adj PAT (excl Subs Dividend) 7,105 8,521 8,367 14,617 5,199 7,056 9,163 16,456 36,012 37,874

Change (%) 9.5 12.6 5.2

Order Intake (INR b) 196 210 180 279 224 233 217 180 815 854

Order book (INR b) 1,531 1,585 1,515 1,448 1,553 1,650 1,712 1,694 1,448 1,712

BTB (x) 2.8 2.8 2.7 2.6 2.9 3.1 3.1 - 2.6 3.0

E: MOSL Estimates

C–24April 2014


Quarterly Performance (Standalone) (INR Million)Y/E September FY13 FY14 FY13 FY14E

1Q 2Q 3Q 4Q 1Q 2QE 3QE 4QE

Total Revenues 24,962 29,556 26,420 32,589 23,939 29,868 26,225 32,229 113,527 112,262

Change (%) -0.2 -26.4 -12.5 -3.4 -4.1 1.1 -0.7 -1.1 -5.6 -1.1

EBITDA 1,556 754 276 1,753 1,490 1,240 1,365 2,001 4,207 6,096

As % of Revenues 6.2 2.6 1.0 5.4 6.2 4.2 5.2 6.2 3.7 5.4

Operational EBIDTA 1,841 1,654 1,630 1,905 1,327 1,240 1,365 2,001 6,905 6,096

As % of Revenues 7.4 5.6 6.2 5.8 5.5 4.2 5.2 6.2 6.1 5.4

Depreciation 588 610 626 678 564 685 690 903 2,502 2,841

Interest Income -87 -84 -39 21 -17 -60 -80 -93 -189 -250

Other Income 69 125 26 134 76 200 230 244 345 750

Extra-ordinary Items 0 0 338 -523 0 0 0 0 -325 0

PBT 951 185 -701 1,752 985 695 825 1,250 1,537 3,755

Tax 314 -115 -213 260 334 229 272 404 246 1,239

Effective Tax Rate (%) 33.0 -62.3 30.4 14.9 33.9 33.0 33.0 32.3 16.0 33.0

Reported PAT 636 300 -488 1,492 651 466 553 846 1,290 2,516

Adjusted PAT 636 300 -218 1,073 651 466 553 846 1,680 2,516

Change (%) 5.8 -91.1 -141.1 162.2 2.3 55.2 -353.6 -21.1 -80.1 49.8

Order Intake (INR b) 20 28 26 35 20 34 20 52 102 110

Order book (INR b) 132 130 130 133 129 133 127 146 137 133

BTB (x) 1.0 1.1 1.2 1.2 1.2 1.2 1.1 1.3 1.2 1.2

E: MOSL Estimates; Adj EBITDA: Adjusted for change in project revenues and cost estimates

SiemensCMP: INR773 Neutral� SIEM had approved acquisition of 100% equity shares of Siemens Rail

Automation Private Limited from Siemens International Holdings BV(Netherlands) and Siemens AG (Germany) for INR550m. Since FY06,SIEM has acquired 8 businesses from its parent at a total cost of INR4.1band 18.9m shares.

� SIEM is developing a Center of Excellence in Industrial Automation atMS University's Faculty of Technology & Engineering in Gujarat; theMoU was signed in September 2013 and is expected to be operationalin June 2014. The capex is estimated at INR850m.

� The management has reiterated focus on SMART products, which aredesigned, developed and manufactured in India. Also, the focus is onimproving the quality of order book.

Key issues to watch out� Revenues have been showing a moderating trend, impacted by

execution constraints. We expect revenues to grow 1.2% YoY afterreporting 4% de-growth in 1QFY14.

� EBITDA margins are under pressure, as the pace of project executioncontinues to be slow. Healthcare business reported losses of INR327min 1QFY14 (negative EBIT margins of 13.1% v/s EBIT margins of 2.9% inFY13). Given the high import content, the business was impacted byadverse currency movements.

� Working capital is stretched, mainly because of increase in debtordays. Net working capital days at the end of 4QFY13 were at 49 v/s 32at the end of 4QFY12.

Financials & Valuation (INR b)Y/E September 2013 2014E 2015E 2016ENet Sales 113.5 112.3 124.3 143.5

EBITDA 4.2 6.1 9.2 12.6

Adj PAT 1.7 2.5 4.7 7.0

Adj EPS (INR) 4.8 7.1 13.3 19.9

EPS Gr (%) -67.7 49.7 86.4 49.5

BV/Sh. (INR) 114.5 118.1 124.8 134.8

RoE (%) 4.2 6.1 11.0 15.3

RoCE (%) 5.1 7.3 12.5 17.3

Payout (%) 124.0 49.7 49.7 49.7

Valuations

P/E (x) 142.9 95.4 51.2 34.2

P/BV (x) 6.0 5.8 5.5 5.1

EV/EBITDA (x) 54.6 36.1 24.1 17.7

Div. Yield (%) 0.7 0.4 0.8 1.2

Bloomberg SIEM IN


M. Cap. (INR b)/(USD b) 275 / 5


1,6,12 Rel Perf. (%) 19 / 46 / 22

C–25April 2014



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Sales 9,835 11,924 10,468 14,682 8,628 10,433 10,138 14,158 46,909 43,356

Change (%) -5.8 -8.5 -17.5 -13.0 -12.3 -12.5 -3.2 -3.6 -11.6 -7.6

EBITDA 964 1,218 1,119 1,672 814 937 908 1,432 5,071 4,091

Change (%) -15.1 -13.3 -18.0 -9.7 -15.5 -23.1 -18.8 -14.4 -13.1 -19.3

As of % Sales 9.8 10.2 10.7 11.4 9.4 9.0 9.0 10.1 10.8 9.4

Depreciation 132 139 133 145 142 140 147 154 549 583

Interest 37 34 20 5 8 19 23 50 96 100

Other Income 187 274 124 244 81 75 229 295 730 681

PBT 981 1,318 1,090 1,767 745 853 968 1,523 5,156 4,088

Tax 309 407 326 614 243 551 301 472 1,657 1,267


Reported PAT 672 911 764 1,153 503 302 666 1,051 3,500 2,821

Adj PAT 672 911 764 1,153 503 592 666 1,051 3,500 2,821

Change (%) (15.9) (10.4) (20.1) (11.2) (25.2) (35.0) (12.7) (8.9) (14.0) (19.4)

Order Book 44,740 44,120 46,490 43,358 55,300 53,080 56,990 52,370 43,358 52,370

Order Intake 12,580 11,620 12,840 11,550 21,230 7,680 13,650 9,097 48,590 51,657

BTB (x) 0.9 0.9 0.9 1.2 1.2 1.2 1.3 1.2 0.9 1.2

E: MOSL Estimates

ThermaxCMP: INR748 Buy� Pace of project execution is likely to remain challenging under the

constrained environment. We expect Energy segment revenues to bestable YoY (9MFY14 de-growth of 13% YoY) and down 2.2% inEnvironment segment (9MFY14 de-growth of 2% YoY).

� The management has stated that there is improvement in orderinflows from Middle Eastern countries, South East Asia and Africa.

Key issues to watch out� Pace of order inflow from domestic customers is expected to be muted.

Order inflow of INR13.7b in 3QFY14 (v/s run rate of INR7.7b/quarterin 1HFY14 excluding INR13.5b order from RIL) was supported by fewlarge projects like Reliance HRSG / PSU refinery order, etc.

� Environment segment margins in 3QFY14 declined to 2.3% (v/s 10.1%in 3QFY13), led by project losses in the Water segment. Themanagement stated that losses will continue in 4QFY14 as well, butthe quantum will be lower. We model EBIT margin at 4.6% in 4QFY14(v/s 11.8% in 4QFY13).

� Revenues in 3QFY14 were also impacted because of shutdown inMundra SEZ, where four boilers were being assembled for exports.Combined value of these boilers is INR1.3b, and we understand thatthe shipments have happened in 4QFY14. This could boost execution.


EBITDA 5.0 4.3 5.5 6.9

Adj PAT 3.2 2.7 3.5 4.7

EPS (INR) 27.0 22.5 29.0 39.0

EPS Gr. (%) (20.2) (16.7) 28.8 34.7

BV/Sh. (INR) 160 174 194 220

RoE (%) 18.4 13.7 16.0 19.2

RoCE (%) 14.8 11.6 14.2 17.3

Payout (%) 30.3 36.4 32.3 33.0

Valuations

P/E (X) 20.2 33.2 25.8 19.2

P/BV (X) 3.4 4.3 3.9 3.4

EV/EBITDA (X) 12.3 19.4 15.0 11.7

Div Yield (%) 1.3 0.9 1.1 1.5

Bloomberg TMX IN




1,6,12 Rel Perf. (%) 1 / 12 / 13

C–26April 2014

March 2014 Results Preview | Sector: Cement



31.3.14 % YoY % QoQ % YoY % QoQ % YoY % QoQACC 1,392 Buy 32,611 12.0 21.1 5,473 22.5 108.4 3,749 20.0 77.1Ambuja Cements 201 UR 27,898 9.6 27.3 6,059 18.4 109.7 4,224 16.0 89.0Birla Corporation 290 Buy 8,395 26.1 18.3 1,359 105.0 354.5 976 34.3 510.1Grasim Industries 2,887 Buy 13,802 0.3 -5.2 1,841 -14.0 -5.4 2,174 2.2 75.1India Cements 61 Neutral 11,172 -6.2 7.8 734 -56.3 -49.2 -602 PL PLJaiprakash Associates 54 Buy 41,850 8.3 33.4 9,834 15.6 36.8 932 -21.9 LPShree Cement 5,638 Buy 16,287 14.0 23.7 5,024 23.9 86.5 3,331 21.5 181.6Ultratech Cement 2,189 Neutral 58,273 8.1 21.7 11,775 -1.8 54.1 6,621 -8.8 79.1Sector Aggregate 210,290 8.6 21.4 42,099 9.0 57.5 21,404 1.5 119.5

Jinesh K Gandhi ([email protected]) / Sandipan Pal ([email protected])

Demand showing signs of recovery with ~5% growth in MOSL UniverseCement demand showed signs of recovery in 4QFY14, especially in February andMarch, driven by strong rural housing demand and partial resolution of sand miningissue. We estimate growth of 5.3% YoY (+15.5 QoQ) in 4QFY14 and ~2.7% for FY14 forMOSL universe. As a result, capacity utilization would witness seasonal improvementto ~79% (+10pp QoQ), although still declines 4pp YoY. Our interaction with dealersacross regions highlights a possible demand recovery in 2HFY15, driven by newgovernment.

Seasonal pricing recovery, except South; blended increase of estimated atINR10/bag QoQDemand recovery and supply side constraints in North India (closure of Binani plantand temporary closure of ACEM's HP plant), triggered significant cement price recoveryacross markets (except South India). Overall we estimate weighted average nationalprices to increase by INR10/bag QoQ (+INR3/bag YoY) in 4QFY14. This includes specifictrends of (a) ~INR25/bag QoQ increase in North and Central, (b) ~INR20/bag increasein east, (c) INR10/bag increase in west and (d) ~INR20/bag decline in south. We arefactoring in for YoY INR15/bag) and INR12.5/bag increase in realizations in FY15 andFY16 respectively, on back of ~INR5/bag decline in FY14.

Profitability to recover QoQ driven by pricing and operating leverage,however Southern players to be worse-offProfitability is expected to recover from lows of 3QFY14 by ~INR222/ton to ~INR796/ton (+INR15/ton YoY) driven by pricing recovery and operating leverage. While playersfocused on North, East and Central markets will benefit significantly from sharp pricingrecovery, South based players will see impact on profitability due to weak pricing. Weestimate EBITDA/ton at INR876/1,020 for FY15/FY16 respectively, as against ~INR691/ton in FY14E.

Valuation and viewOur earnings estimates have seen upgrades across players (except South focused) onaccount of higher than pricing recovery in North, East and Central markets, benefitting

CementCompanies Covered

ACC

Ambuja Cements

Birla Corporation

Grasim Industries

India Cements

Jaiprakash Associates

Shree Cement

UltraTech Cement

C–27April 2014


Demand growth flattish YoY in a seasonally strong quarter MOSL cement universe volumes to grow 1% YoY (+3% QoQ)

Source: Company/MOSL

Source: CMA/MOSL

Utilizations fails to improve in a seasonally strong quarters Trend in average quarterly cement price remains weak (INR/bag)

SRCM the most with ~16%, whereas ACC and ACEM has seen ~3% upgrades and UTCEM~1% downgrade. While demand recovery is expected to be gradual, slowing capacityaddition coupled with higher capex and opex cost would support cement prices andprofitability going forward. Recovery in demand would be critical for operating andstock performance. In large-caps we prefer ACC and Shree Cement, whereas in mid-caps we prefer Dalmia Bharat, The Ramco Cement and JK Lakshmi Cement.

Source: CMA/MOSL

Realization to improve marginally QoQ as suggested by Weaker realizations, cost push and weak operating leverage toprice trend keep Profitability under pressure

60%

70%

80%

90%

100%

2QFY

093Q

FY09

4QFY

091Q

FY10

2QFY

103Q

FY10

4QFY

101Q

FY11

2QFY

113Q

FY11

4QFY

111Q

FY12

2QFY

123Q

FY12

4QFY

121Q

FY13

2QFY

133Q

FY13

4QFY

131Q

FY14

2QFY

143Q

FY14

4QFY

14E

C–28April 2014


Trend in key financial parametersNet Sales (INR m) EBITDA Margins (%) Net Profit (INR m)

4QFY14 YoY (%) QoQ (%) 4QFY14 YoY (BP) QoQ (BP) 4QFY14 YoY (INR) QoQ (INR)ACC 32,611 12.0 21.1 17.6 230 790 3,749 20.0 77.1Ambuja Cement 27,898 9.6 27.3 21.7 160 850 4,224 16.0 89.0UltraTech 58,206 8.0 21.6 18.7 -350 280 5,990 -17.5 62.0Birla Corp 8,395 26.1 18.3 16.2 620 1,200 976 34.3 510.1India Cement 11,172 -6.2 7.8 6.6 -750 -740 -602 -328.7 -14,442.9Shree Cement 16,287 14.0 23.7 30.8 250 1,040 3,331 21.5 181.6Dalmia Bharat 7,066 -7.3 4.2 6.8 -1,030 -780 -521 -240.4 321.4J K Cements 8,379 9.0 24.3 15.3 -190 440 468 -16.6 317.6JK Lakshmi Cem. 6,092 13.7 21.2 20.7 290 810 633 29.3 349.6Madras Cement 9,106 -1.8 8.1 16.4 -130 150 -240 -137.4 -193.7Orient Paper 4,133 3.3 21.4 12.0 -550 -240 223 -38.1 -2.5Prism Cement 13,961 1.8 22.2 9.3 190 950 -18 -112.6 -97.1Sector Agg. 203,307 7.6 20.2 17.8 -70 500 18,213 -10.4 94.0

Recent correction makes valuations attractive (FY12)

Trend in key operating parametersVolume (m tons) Realization (INR/ton) EBITDA (INR/ton)

4QFY14 YoY (%) QoQ (%) 4QFY14 YoY (BP) QoQ (BP) 4QFY14 YoY (%) QoQ (%)ACC 6.7 4.0 14.1 4,607 337 300 811 124 372Ambuja Cement 6.2 4.0 17.1 4,502 231 360 978 119 432UltraTech 11.8 6.0 18.2 4,867 91 141 912 -151 157Birla Corp 1.9 12.7 6.5 4,028 447 448 792 284 513India Cement 2.7 -3.0 17.3 4,079 -142 -350 273 -332 -357Shree Cement 3.8 15.1 9.1 3,980 482 550 1,276 871 560Dalmia Bharat 1.8 6.0 14.4 3,800 -622 -454 269 -505 -367J K Cements 1.8 4.2 16.5 4,690 205 291 717 -55 240JK Lakshmi Cem. 1.5 8.0 8.9 3,941 197 402 815 150 369Madras Cement 2.3 2.3 16.2 4,174 -151 -280 299 -441 -320Orient Paper 1.2 4.4 21.3 3,455 -36 1 416 -198 -83Prism Cement 1.4 -0.6 23.6 4,356 347 530 561 11 614Sector Agg. 43.0 5.3 15.5 4,433 150 203 796 15 222

Source: Company, MOSLRevised EPS estimates (INR)

FY15E/CY14E FY16E/CY15E

Rev Old Chg (%) Rev Old Chg (%)

ACC 68.6 66.8 2.6 89.6 88.1 1.7

Ambuja Cement 8.7 8.4 3.4 10.8 10.5 2.5

UltraTech 93.3 94.8 -1.6 112.7 114.1 -1.3

Birla Corp 41.1 39.0 5.3 52.7 52.6 0.2

India Cement 3.9 3.7 5.8 8.0 8.0 -0.1

Shree Cement 342.7 295.0 16.2 429.9 380.1 13.1

C–29April 2014


85

95

105

115

125

Dec

-13

Jan-

14

Feb-

14

Mar

-14

Sensex IndexMOSL Cement Index


31.3.14 FY14E FY15E FY16E FY14E FY15E FY16E FY14E FY15E FY16E FY14E FY15E FY16ECementACC 1,392 Buy 48.5 68.6 89.6 28.7 20.3 15.5 17.0 11.7 9.0 12.0 16.0 19.2Ambuja Cements 201 UR 6.8 8.7 10.8 29.6 23.2 18.7 17.5 13.9 11.3 11.5 13.8 16.1Birla Corporation 290 Buy 26.1 41.1 52.7 11.1 7.1 5.5 6.3 4.1 2.8 7.8 11.2 13.0Grasim Industries 2,887 Buy 248.7 294.6 339.9 11.6 9.8 8.5 5.2 4.1 3.0 10.5 11.2 11.6India Cements 61 Neutral -2.2 3.9 8.0 -27.6 15.6 7.6 9.7 6.7 5.2 -1.6 2.8 5.4J P Associates 54 Buy 0.5 1.8 3.8 107.8 30.3 14.1 9.7 8.9 7.3 0.8 2.8 5.9Shree Cement 5,638 Buy 295.5 342.7 429.9 19.1 16.5 13.1 12.5 10.3 7.7 21.5 18.6 19.1Ultratech Cement 2,189 Neutral 71.8 95.8 115.2 30.5 22.8 19.0 16.9 13.4 10.7 12.3 14.6 15.4Dalmia Bharat 254 Buy -10.0 -12.9 11.4 -25.4 -19.8 22.3 17.6 10.6 6.7 -2.7 -3.6 3.2J K Cements 240 Buy 8.2 14.9 34.9 29.5 16.1 6.9 11.2 7.3 5.4 3.4 5.9 12.9JK Lakshmi Cem. 111 Buy 8.8 10.7 11.2 12.7 10.4 10.0 9.1 7.4 5.4 8.0 9.1 9.0Ramco Cements 215 Buy 3.7 12.0 17.4 57.6 17.9 12.3 15.3 9.5 7.3 3.7 11.6 15.2Prism Cement 38 Buy -3.8 -0.3 4.6 -10.1 -148.9 8.3 27.3 9.8 4.8 -18.2 -1.3 22.3Sector Aggregate 26.1 18.9 14.3 11.8 9.2 7.1 8.3 10.6 12.7

Relative Performance - 3m (%) Relative Performance-1Yr (%)

70

85

100

115

130

Mar

-13

Jun-

13

Sep-

13

Dec

-13

Mar

-14

Sensex IndexMOSL Cement Index

C–30April 2014


Quarterly Performance (Standalone) (INR Million)Y/E December CY13 CY14E CY13 CY14E

1Q 2Q 3Q 4Q* 1Q 2Q 3Q 4Q

Cement Sales (m ton) 6.42 6.12 5.54 5.85 6.68 6.61 5.71 6.13 23.9 25.13

YoY Change (%) -4.5 1.2 2.6 -1.5 4.0 8.0 3.0 4.9 -0.7 5.0

Cement Realization 4,269 4,298 4,235 4,307 4,607 4,707 4,507 4,607 4,278 4,610

YoY Change (%) 0.9 -5.7 -5.9 3.4 7.9 9.5 6.4 7.0 -1.8 7.8

QoQ Change (%) 2.5 0.7 -1.5 1.7 7.0 2.2 -4.2 2.2

Net Sales 29,111 27,952 25,087 26,934 32,611 32,963 27,570 30,113 109,084 123,256

YoY Change (%) 2.4 1.4 3.2 -13.1 12.0 17.9 9.9 11.8 -2.0 13.0

EBITDA 4,468 4,335 2,254 2,626 5,473 6,360 3,817 4,011 13,683 19,660

Margins (%) 15.3 15.5 9.0 9.8 16.8 19.3 13.8 13.3 12.5 16.0

Depreciation 1,383 1,387 1,444 1,526 1,550 1,575 1,575 1,596 5,740 6,296

Interest 108 179 110 120 113 113 113 113 517 450

Other Income 1,205 908 1,023 1,438 1,325 925 1,050 1,450 4,573 4,750

PBT before EO Item 4,182 3,677 1,722 2,419 5,135 5,597 3,179 3,752 12,000 17,664

PBT after EO Item 5,861 3,677 1,722 3,178 5,135 5,597 3,179 3,752 14,437 17,664

Tax 1,484 1,086 514 396 1,386 1,511 858 1,013 3,479 4,769

Rate (%) 25.3 29.5 29.8 12.5 27.0 27.0 27.0 27.0 24.1 27.0

Reported PAT 4,377 2,591 1,208 2,781 3,749 4,086 2,321 2,739 10,958 12,895

Adjusted PAT 3,124 2,591 1,208 2,117 3,749 4,086 2,321 2,739 9,108 12,895

Margins (%) 10.7 9.3 4.8 7.9 11.5 12.4 8.4 9.1 8.3 10.5

YoY Change (%) -19.1 -38.0 -51.4 -11.5 20.0 57.7 92.1 29.4 -29.5 41.6

E: MOSL Estimates; * Merger of RMC business from 4QCY12

ACCCMP: INR1,392 Buy� Dispatches in 1QCY14 are estimated to grow 4% YoY (+14% QoQ) to

6.68mt. Average realizations are expected to grow 7% QoQ (+8% YoY)to INR4,607/ton.

� Revenue is expected to grow by 12% YoY (+21% QoQ) to INR32.6b.EBITDA margins are expected at 16.8%, 7pp QoQ (+1.5pp YoY), due to(a) strong realizations growth, and (b) benefit of operating leverage.EBITDA/ton is estimated at INR411 (+INR372 QoQ, +INR123 YoY).

� PAT would grow 20% YoY (+77% QoQ) to INR3.75b.� We are raising our EPS estimates (ex synergies) by 2.6%/1.7% for CY14/

CY15 to INR68.6 and INR89.6 respectively, to factor in for weakerrealizations volume, and higher cost.

� The stock trades at 15.5x CY15E EPS, 8.7x EV/EBITDA and USD108/ton.Maintain Buy with target price of INR1,555 (CY15E USD120/ton)

Key issues to watch out� Volume growth recovery and outlook.� Cement pricing outlook and sustainability.� Progress in ongoing capex for Jamul expansion of 5MT.� Update of synergies and other guided cost saving measures.

Financials & Valuation (INR b)Y/E December 2012 2013 2014E 2015ESa les 111.3 109.1 123.3 140.4

EBITDA 19.7 13.7 19.7 25.4

NP 12.9 9.1 12.9 16.8

Adj. EPS (INR) 68.7 48.5 68.6 89.6

EPS Gr. (%) 14.1 -29.4 41.4 30.6

BV/Sh (INR) 392.9 416.1 444.0 487.1

RoE (%) 17.7 12.0 16.0 19.2

RoCE (%) 23.5 15.3 20.8 25.4

Payout (%) 61.8 60.2 59.3 51.9

Valuations

P/E (x) 20.2 28.7 20.3 15.5

P/BV (x) 3.5 3.3 3.1 2.9

EV/EBITDA (x) 11.5 16.3 10.6 8.7

EV/Ton (USD) 123.6 121.5 113.6 108.1

Bloomberg ACC IN


M. Cap. (INR b)/(USD b) 262 / 4

52-Week Range (INR) 1,399 / 912

1,6,12 Rel Perf. (%) 20 / 10 / 1

C–31April 2014



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q

Sales Volume (m ton)* 5.96 5.46 4.89 5.29 6.20 5.73 5.03 5.50 21.60 22.46

YoY Change (%) -3.6 -3.1 2.0 -1.8 4.0 5.0 3.0 4.0 -1.8 4.0

Realization (INR/ton) 4,271 4,297 4,103 4,142 4,502 4,602 4,402 4,510 4,207 4,507

YoY Change (%) 0.3 -5.7 -9.2 -3.5 5.4 7.1 7.3 8.9 -4.4 7.1

QoQ Change (%) -0.5 0.6 -4.5 0.9 8.7 2.2 -4.3 2.5

Net Sales 25,448 23,457 20,049 21,913 27,898 26,376 22,152 24,816 90,868 101,242

YoY Change (%) -3.3 -8.6 -7.4 -5.3 9.6 12.4 10.5 13.2 46.1 43.1

EBITDA 5,118 4,920 2,554 2,890 6,059 5,743 3,484 4,348 15,482 19,635

Margins (%) 20.1 21.0 12.7 13.2 21.7 21.8 15.7 17.5 17.0 19.4

Depreciation 1,204 1,223 1,246 1,228 1,300 1,300 1,350 1,422 4,901 5,372

Interest 132 171 178 169 125 125 125 150 651 525

Other Income 1,339 1,051 940 1,019 1,400 1,200 1,100 1,500 4,349 5,200


Extraordinary Inc/(Exp) 1,741 0 481 1,046 0 0 0 0 3,269 0

PBT after EO Exp/(Inc) 6,862 4,578 2,551 3,558 6,034 5,518 3,109 4,276 17,549 18,937

Tax 1,983 1,336 891 393 1,810 1,600 902 1,274 4,603 5,587

Rate (%) 28.9 29.2 34.9 11.0 30.0 29.0 29.0 29.8 26.2 29.5

Reported Profit 4,879 3,242 1,660 3,165 4,224 3,918 2,208 3,002 12,946 13,351

Adj PAT 3,641 3,242 1,346 2,234 4,224 3,918 2,208 3,002 10,464 13,351

YoY Change (%) -28.3 -30.9 -60.1 -2.8 16.0 20.8 64.0 34.3 -32.2 27.6

E: MOSL Estimates

Ambuja CementsCMP: INR201 Neutral� Dispatches in 1QCY14 are estimated to grow 4% YoY (+17% QoQ) to

6.2mt. Average realizations are expected to improve by 8.7% QoQ(+5.4% YoY) to INR4,502/ton. Revenue is estimated at INR27.9b (+9.6%YoY, +27% QoQ).

� EBITDA margins are expected to improve by 4.3pp YoY (+1.5pp QoQ) to17.5%, impacted by higher realizations, and benefits from operatingleverage. EBITDA/ton is estimated at ~IN978/ton (+INR432/ton QoQ,and +INR119/ton YoY).

� Adj PAT estimated to improve by 16% YoY (+89% QoQ) to INR4.2b.

� We are cutting our EPS estimates (ex synergies) by 3.4%/2.5% for CY14/CY15 to factor in for better realizations.

� The stock trades at 18.7x CY15E EPS, 10.7x EV/EBITDA and USD145/ton.Maintain Neutral with target price of INR206 (CY15E USD130/ton).

Key issues to watch out� Volume growth recovery and outlook.� Cement pricing outlook and sustainability.� Progress in ongoing mining land acquisition and capex in Nagaur

(Rajasthan) plant of 4.5MT.


EBITDA 24.7 15.5 19.6 24.1

NP 15.4 10.5 13.4 16.6

Adj. EPS (INR) 10.0 6.8 8.7 10.8

EPS Gr. (%) 22.4 -32.2 27.6 24.5

BV/Sh. (INR) 56.9 61.2 64.6 69.5

RoE (%) 18.3 11.5 13.8 16.1

RoCE (%) 27.6 16.3 20.0 23.2

Payout (%) 49.8 49.9 60.5 54.0

Valuations

P/E (x) 20.1 29.6 23.2 18.7

P/BV (x) 3.5 3.3 3.1 2.9

EV/EBITDA (x) 10.8 17.3 13.6 10.7

EV/Ton (USD) 159.1 155.5 150.8 145.2

Bloomberg ACEM IN


M. Cap. (INR b)/(USD b) 311 / 5


1,6,12 Rel Perf. (%) 14 / -6 / -3

C–32April 2014



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Cement Sales (m ton) 1.63 1.58 1.55 1.71 1.87 1.85 1.81 1.92 6.47 7.45

YoY Change (%) 7.1 11.7 11.9 4.6 14.8 17.3 16.5 12.7 8.5 15.3

Cement Realization 4,021 3,934 3,784 3,581 3,864 3,541 3,579 4,028 3,827 3,757

YoY Change (%) 17.8 25.2 8.1 -0.9 -3.9 -10.0 -5.4 12.5 12.0 -1.8

QoQ Change (%) 11.3 -2.2 -3.8 -5.4 7.9 -8.3 1.1 12.5

Net Sales 6,580 6,274 6,126 6,658 7,720 7,107 7,098 8,395 25,638 30,321

YoY Change (%) 18.1 24.2 14.7 2.4 17.3 13.3 15.9 26.1 14.1 18.3

EBITDA 1,258 1,102 514 663 668 585 299 1,359 3,536 2,911

Margins (%) 19.1 17.6 8.4 10.0 8.7 8.2 4.2 16.2 13.8 9.6

Depreciation 235 252 285 272 302 311 319 330 1,044 1,263

Interest 237 141 171 99 207 249 202 241 649 899

Other Income 346 347 270 701 367 422 323 372 1,663 1,485

Profit before Tax 1,132 1,056 328 992 525 448 101 1,160 3,507 2,235

Tax 284 254 6 265 66 32 -59 185 809 223

Rate (%) 25.1 24.0 1.7 26.8 12.5 7.1 -58.0 15.9 23.1 10.0

PAT 847 802 322 726 460 416 160 976 2,698 2,011

Margins (%) 12.9 12.8 5.3 10.9 6.0 5.9 2.3 11.6 10.5 6.6

YoY Change (%) -24.3 206.8 -26.3 26.4 -45.7 -48.2 -50.4 34.3 12.8 -25.5

E: MOSL Estimates

Birla CorporationCMP: INR290 Buy� 4QFY14 volumes are estimated to grow 13% YoY (+6.5% QoQ) to 1.92mt,

on low base of last year when mining ban was implied. Averagerealizations are expected to increase by 12.5% YoY (+12.5% QoQ) toINR3,591/ton.

� EBITDA margins are expected to grow by 6.2pp YoY (12pp QoQ) to16.2%, impacted by higher realizations and benefit of operatingleverage. EBITDA/ton (including non cement business) is estimatedto improve by ~INR541/ton QoQ (+318/ton YoY) to INR706/ton.

� PAT estimated to grow 34% YoY to INR976m.� We are cutting our FY15/16 EPS estimates by 5%/0.2% to factor in better

realizations.� The stock trades at 7.1x FY16E EPS, 3.8x EV/EBITDA and USD29.5/ton.

Maintain Buy with target price of INR395 (FY16E EV/ton of USD 40).

Key issues to watch out� Volume growth recovery and outlook.� Cement pricing outlook and sustainability.� Timeline over clarity on Rajasthan Mining permission.


EBITDA 3.1 3.5 2.9 4.4

NP 2.4 2.7 2.0 3.2

Adj. EPS (INR) 31.1 35.0 26.1 41.1

EPS Gr. (%) -25.2 12.8 -25.5 57.2

BV/Sh. (INR) 291.3 318.2 334.9 365.5

RoE (%) 10.7 11.0 7.8 11.2

RoCE (%) 11.3 10.7 7.3 11.1

Payout (%) 22.6 24.9 35.8 25.5

Valuations

P/E (x) 9.3 8.3 11.1 7.1

P/BV (x) 1.0 0.9 0.9 0.8

EV/EBITDA (x) 4.3 4.7 6.0 3.8

EV/Ton (USD) 29.1 30.1 31.3 29.5

Bloomberg BCORP IN




1,6,12 Rel Perf. (%) 17 / 27 / 0

C–33April 2014



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

VSF Volume (ton) 77,013 85,312 78,579 95,161 77,518 93,025 97,049 105,169 336,065 372,761

YoY Change (%) 40.4 8.0 0.5 0.3 0.7 9.0 23.5 10.5 9.5 10.9

VSF Realization (INR/ton) 128,024 126,656 121,668 119,150 116,501 121,590 121,590 120,512 123,678 120,228

YoY Change (%) -16.0 1.6 -5.3 -1.8 -9.0 -4.0 -0.1 1.1 -4.5 -2.8

QoQ Change (%) 5.5 -1.1 -3.9 -2.1 -2.2 4.4 0.0 -0.9

Net Sales 12,390 13,453 12,157 13,765 11,489 14,055 14,558 13,802 51,814 53,904

YoY Change (%) 21.0 10.5 -2.2 -1.1 -7.3 4.5 19.8 0.3 6.3 4.0

EBITDA 2,953 2,898 2,154 2,141 2,025 2,613 1,945 1,841 10,145 8,423

Margins (%) 23.8 21.5 17.7 15.6 17.6 18.6 13.4 13.3 19.6 15.6

Depreciation 360 386 395 451 484 530 547 581 1,592 2,142

Interest 61 78 107 145 78 95 134 147 391 453

Other Income 844 2,106 951 1,181 958 2,213 492 1,338 5,082 5,000

PBT before EO Items 3,376 4,540 2,603 2,726 2,420 4,201 1,757 2,450 13,245 10,828

Extraordinary Inc/(Exp) 0 0 0 2,044 8 184 27 0 2,044 219

PBT after EO Items 3,376 4,540 2,603 4,770 2,429 4,385 1,783 2,450 15,289 11,047

Tax 647 712 623 1,046 167 250 522 276 3,029 1,215

Rate (%) 19.2 15.7 24.0 21.9 6.9 5.7 29.3 11.3 19.8 11.0

Reported PAT 2,729 3,827 1,980 3,724 2,261 4,135 1,261 2,174 12,260 9,831

Adj. PAT 2,729 3,827 1,980 2,128 2,254 3,962 1,242 2,174 10,621 9,637

YoY Change (%) -13.1 11.0 -27.9 -12.6 -17.4 3.5 -37.3 2.2 -9.8 -9.3

E: MOSL Estimates

Grasim IndustriesCMP: INR2,887 Buy� VSF volumes are estimated to grow 11% YoY (8% QoQ) to 105,169 tons.

VSF realizations are estimated to decline by ~INR1/kg QoQ, YoYINR120.5/kg.

� We are assuming price/kg of INR122/124 for FY15/16.

� Standalone EBITDA margins are estimated to remain stable QoQ (-2.3pp YoY) to 13.3% YoY.

� EBITDA is estimated to de-grow by 14% YoY (-5.4% QoQ) to INR1.8b,translating into PAT of INR2.2b - growth of 2.2% YoY.

� The stock trades at 8.5x FY15E consolidated EPS, 4.4x FY15E EV/EBITDAand USD91/ton. Maintain Buy with target price of INR3,540 (FY16-basedSOTP).

Key issues to watch out� Outlook on VSF business and strategy to utilize upcoming capacities

(~47% capacity growth).� Cement business outlook on demand and pricing, and status of

capacity addition.


EBITDA 56.6 46.9 58.3 71.3

Adj. PAT 36.7 29.3 36.2 43.7

Adj. EPS (INR) 291.3 248.7 294.6 339.9

EPS Gr. (%) -3.6 -14.6 18.5 15.4

BV/Sh. (INR) 2,142 2,361 2,624 2,932

RoE (%) 13.6 10.5 11.2 11.6

RoCE (%) 18.5 14.3 16.1 18.5

Payout (%) 9.0 11.8 10.8 9.4

Valuations

P/E (x) 9.9 11.6 9.8 8.5

P/BV (x) 1.3 1.2 1.1 1.0

EV/EBITDA (x) 6.7 7.5 6.1 4.4

EV/Ton (USD) 116.8 98.2 90.4 91.4

Bloomberg GRASIM IN


M. Cap. (INR b)/(USD b) 265 / 4

52-Week Range (INR) 3,159 / 2,121

1,6,12 Rel Perf. (%) 8 / -7 / -16

C–34April 2014



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Sales Dispatches (m ton) 2.38 2.51 2.42 2.78 2.65 2.44 2.29 2.69 10.06 10.08

YoY Change (%) 2.9 3.5 10.8 6.7 11.3 -2.9 -5.2 -3.0 5.6 0.2

Realization (INR/ton) 4,464 4,355 4,364 4,221 4,188 4,116 4,429 4,079 4,360 4,196

YoY Change (%) 7.6 3.1 2.9 -0.6 -6.2 -5.5 1.5 -3.4 3.4 -3.8

QoQ Change (%) 5.1 -2.4 0.2 -3.3 -0.8 -1.7 7.6 -7.9

Net Sales 12,014 11,227 10,824 11,906 12,384 10,859 10,365 11,172 45,970 44,780

YoY Change (%) 13.7 3.1 15.0 6.7 3.1 -3.3 -4.2 -6.2 9.4 -2.6

Total Expenditure 9,237 9,176 8,897 10,228 10,473 9,584 8,922 10,438 37,537 39,417

EBITDA 2,777 2,051 1,927 1,679 1,910 1,276 1,444 734 8,433 5,363

Margins (%) 23.1 18.3 17.8 14.1 15.4 11.7 13.9 6.6 18.3 12.0

Depreciation 692 699 708 720 680 682 686 713 2,818 2,760

Interest 949 667 822 638 999 988 773 895 3,078 3,653

Other Income 37 32 34 84 25 80 19 86 186 210

PBT before EO expense 1,173 717 431 404 257 -314 4 -787 2,724 -840

PBT 973 717 431 404 257 -314 4 -787 2,524 -840

Tax 353 226 169 141 89 -89 0 -185 888 (185)

Rate (%) 36.2 31.5 39.3 34.8 34.6 28.3 0.0 23.5 35.2 22.0

Reported PAT 621 491 261 263 168 -225 4 -602 1,636 -655

Adj PAT 748 491 261 263 168 -225 4 -602 1,765 -655

YoY Change (%) -26.7 -29.6 -53.6 -59.4 -77.5 -145.9 -98.4 -328.7 -40.5 -137.1

Margins (%) 6.2 4.4 2.4 2.2 1.4 -2.1 0.0 -5.4 3.8 -1.5

E: MOSL Estimates

India CementsCMP: INR61 Neutral� India Cement's volumes are expected to de-grow by 3% YoY (17% QoQ)

to 2.69mt. Weaker pricing environment south to result in -3.4% YoY (-7.9% QOQ) change in realizations to INR4,079/ton.

� EBITDA is estimated at INR734m (-56% YoY and -49% QoQ) and EBITDAmargin to decline by 7.3pp QoQ (-7.5pp YoY) to 6.6%, translating intonet loss of INR602m.

� Pure Cement's EBITDA/ton is estimated to decline by ~IN352/ton QoQ(-329 YoY) to INR273/ton.

� Valuations stood at 7.6x FY16E EPS, 4.7x FY15E EBITDA and USD52/ton.Maintain Neutral with target price of INR67 (FY16E EV/ton of USD53).

Key issues to watch out� Demand and pricing outlook, especially in South India.� Expected timeline and potential cost savings from captive coal block

in Indonesia and AP power plant.� Timeline and capex plan over TN expansion of 2.6 MT.


EBITDA 8.4 5.4 7.5 9.2

NP 1.8 -0.7 1.1 2.2

Adj. EPS (INR) 5.8 -2.2 3.9 8.0

EPS Gr. (%) -31.3 -137.9 -276.5 106.1

BV/Sh (INR) 133.1 129.8 131.1 134.9

RoE (%) 4.3 -1.6 2.8 5.4

RoCE (%) 8.4 3.9 6.7 8.9

Payout (%) 43.6 -54.8 63.9 48.1

Valuations

P/E (x) 10.5 -27.6 15.6 7.6

P/BV (x) 0.5 0.5 0.5 0.5

EV/EBITDA (x) 5.1 8.9 6.2 4.7

EV/Ton (USD) 54.1 57.2 55.3 52.4

Bloomberg ICEM IN




1,6,12 Rel Perf. (%) 4 / 4 / -46

C–35April 2014


Nalin Bhatt ([email protected])


1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Sales 29,636 29,825 33,984 38,642 33,149 31,761 31,378 41,850 132,087 138,137

Change (%) -6.9 -4.8 2.8 -4.9 11.9 6.5 -7.7 8.3 4.6

EBITDA 7,713 7,711 7,625 8,507 7,847 7,904 7,189 9,834 31,755 32,774

Change (%) -0.2 3.1 -6.5 -16.6 1.7 2.5 -5.7 15.6 3.2

As of % Sales 26.0 25.9 22.4 22.0 23.7 24.9 22.9 23.5 24.0 23.7

Depreciation 1,763 1,778 1,813 1,908 1,943 1,962 1,968 1,975 7,261 7,848

Interest 4,653 4,544 5,327 5,490 5,900 6,542 7,515 7,435 20,114 27,391

Other Income 731 448 1,176 679 371 1,245 441 536 3,034 2,594

Extra-ordinary income 9 33 8 43 93 3,952

PBT 2,037 1,870 1,670 1,831 4,327 656 -1,854 961 7,507 4,080

Tax 649 590 561 596 982 -206 -968 30 2,495 -163

Effective Tax Rate (%) 31.8 31.6 33.6 32.5 22.7 -31.4 52.2 3.1 33.2 -4.0

Reported PAT 1,388 1,280 1,109 1,235 3,345 862 -886 932 5,013 4,243

Adj PAT 1,379 1,280 1,101 1,192 207 862 -886 932 4,920 1,105

Change (%) 28.7 -0.5 -45.9 -57.3 -85.0 -32.7 -180.4 -21.9 -77.5

Cement Business

Volumes (m ton) 3.59 3.25 3.71 3.95 3.61 3.39 3.30 4.20 14.50 14.50

Revenues (INR m) 15,629 13,719 14,747 16,363 15,393 13,633 13,711 19,551 60,459 62,288

Realization (INR/t) 4,354 4,221 3,971 4,147 4,264 4,021 4,155 4,655 4,170 4,296

E: MOSL Estimates, *Change (% YoY) is not comparable due to Jaypee Cement de-merger

Jaiprakash AssociatesCMP: INR54 Buy� In 3QFY14, we expect Jaiprakash Associates (JPA) to post revenues of

INR42b, EBITDA of INR9.8b and net profit of INR932m.� In cement business we have assumed a realization of INR4655/ton

v/s INR4155/ton sequentially. We have estimated a volume of4.20mton up 6.5% YoY.

� EPC division's revenues expected at INR15.8b (up 3% YoY) and EBITmargin of 19%, flat YoY.

� JPA has recently divested its 74% stake in Bokaro unit (JV with SAIL) toDalmia cements at an EV of INR9b. Earlier, it had divested 4.8mton ofGujarat based capacity to Ultratech for INR38b.

� JPA is committed to bring its consolidated debt by INR250b over next2 years and divestment of cement and power assets are in the directionto de-leverage.

� We expect JPA to post standalone net profit of INR1.1b in FY14E (down78% YoY) and INR3.9b in FY15E (up 256% YoY). The stock trades at areported PER of 30.3x FY15E.

Key issues to watch out� Cement realizations and cost� Update on further disinvestment.� EPC division profitability and visibility on revenues/order book.� Ramp-up in real estate division, revenue recognition.


EBITDA 33.3 32.8 35.2 39.6

NP 4.9 1.1 3.9 8.4

Adj. EPS (INR) 2.3 0.5 1.8 3.8

EPS Gr. (%) -52.9 -77.9 256.3 114.1

BV/Sh. (INR) 60.1 61.9 63.2 66.2

RoE (%) 3.9 0.8 2.8 5.9

RoCE (%) 7.5 7.0 7.7 9.0

Payout (%) 22.8 5.9 22.8 22.8

Valuations

P/E (x) 23.8 107.8 30.3 14.1

P/BV (x) 0.9 0.9 0.8 0.8

EV/ EBITDA (x) 10.5 9.7 8.9 7.3

Div. Yield (%) 0.8 0.2 0.7 1.4

Bloomberg JPA IN


M. Cap. (INR b)/(USD b) 119 / 2


1,6,12 Rel Perf. (%) 22 / 38 / -37

C–36April 2014


Shree CementCMP: INR5,638 Buy� We expect cement volumes to grow 15% YoY (+9.1% QoQ) to 3.75mt

(including clinker) and realizations are expected to grow 14% QoQ (-16% YoY) to INR3,980/ton.

� Merchant power sale is estimated at 400m units (v/s 722m units YoYand 409m QoQ) at ~INR3.4/unit (v/s INR3.38 QoQ and INR4.0 YoY).

� Strong realizations and QoQ stable cost trend to lead to Cementbusiness profitability at INR1,276/ton (+IN560/ton QoQ and +INR234/ton QoQ).

� Power EBITDA contribution estimated at INR240m (v/s INR660m YoY/INR234m QoQ). Adjusted PAT seen at INR3.33b (v/s INR1.2b QoQ v/sINR2.7b YoY).

� We are raising our FY15/16 EPS estimates by 16%/13% to factor in higherrealizations.

� Valuations at 13.1x FY15E EPS, 7.7x FY15E EBITDA and USD120/ton.Maintain Buy with TP of INR6,100 (FY15 E EV/ton USD135).

Key issues to watch out� Volume and pricing outlook for North India.� Pet-coke price trend and update on any forward agreements for

Merchant Power.� Update on planned expansion and progress in capex plans.

Financials & Valuation (INR b)Y/E June 2013 2014E 2015E 2016ESa les 55.7 57.5 66.1 76.4

EBITDA 15.4 14.7 18.0 21.8

NP 10.0 9.2 9.4 11.5

Adj EPS (INR) 314.9 295.5 342.7 429.9

EPS Growth (%) 14.8 -6.2 16.0 25.5

BV/Share (Rs) 1,103 1,338 1,579 1,874

RoE (%) 30.6 21.5 18.6 19.1

RoCE (%) 28.1 21.5 21.2 22.1

Payout (%) 8.1 10.7 11.2 10.6

Valuations

P/E (x) 17.9 19.1 16.5 13.1

P/BV (x) 5.1 4.2 3.6 3.0

EV/EBITDA (x) 11.8 12.5 10.3 7.7

EV/Ton (USD) 168.6 143.1 126.2 120.0

Bloomberg SRCM IN


M. Cap. (INR b)/(USD b) 196 / 3

52-Week Range (INR) 5,700 / 3,413

1,6,12 Rel Perf. (%) 15 / 22 / 20

Quarterly Performance (INR Million)Y/E June FY13 FY14 FY13 FY14E

1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QE

Sales Dispat. (m ton) 3.04 3.00 3.26 3.17 3.26 3.44 3.75 3.38 12.46 13.83

YoY Change (%) 22.4 5.2 -6.2 -6.0 7.2 14.7 15.1 6.8 -16.2 11.0

Realization (INR/Ton) 3,815 3,724 3,498 3,578 3,334 3,430 3,980 4,081 3,628 3,716

YoY Change (%) 12.2 4.1 -1.7 -4.6 -12.6 -7.9 13.8 14.1 3.4 2.4

QoQ Change (%) 1.7 -2.4 -6.1 2.3 -6.8 2.9 16.0 2.5

Net Sales 12,964 14,281 14,281 14,414 12,475 13,170 16,287 15,611 55,671 57,543

YoY Change (%) 52.2 19.4 0.3 0.4 -3.8 -7.8 14.0 8.3 -4.0 3.4

EBITDA 3,902 3,717 4,054 3,800 2,494 2,694 5,024 4,516 15,378 14,728

Margins (%) 30.1 26.0 28.4 26.4 20.0 20.5 30.8 28.9 27.6 25.6

Depreciation 942 818 1,265 1,332 1,139 1,156 1,250 1,397 4,356 4,941

Interest 543 563 447 378 312 309 400 480 1,931 1,502

Other Income 328 323 576 913 740 111 400 650 2,114 1,900

PBT before EO Exp 2,745 2,659 2,918 3,003 1,783 1,339 3,774 3,288 11,205 10,185

Extra-Ord Expense 10 120 1 0 11 32 0 -42 11 0

PBT 2,736 2,539 2,917 3,002 1,773 1,308 3,774 3,330 11,194 10,185

Tax 454 365 176 159 50 153 443 377 1,155 1,024

Rate (%) 16.6 14.4 6.0 5.3 2.8 11.7 11.8 11.3 10.3 10.1

Reported PAT 2,281 2,174 2,741 2,843 1,722 1,155 3,331 2,953 10,040 9,161

Adj PAT 2,289 2,277 2,741 2,843 1,732 1,183 3,331 2,916 10,049 9,161

YoY Change (%) 438.0 284.6 85.2 -19.1 -24.3 -48.0 21.5 2.5 59.6 -8.8

E: MOSL Estimates

C–37April 2014



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Sales (m ton) 10.33 9.29 9.94 11.13 10.09 9.23 9.98 11.58 40.7 40.9

YoY Change (%) 4.8 0.7 -1.7 -3.6 -2.3 -0.6 0.4 4.1 -0.2 0.6

Grey Cement Realn.(INR/ton) * 4,121 4,219 4,050 4,011 4,120 3,973 3,936 4,189 4,102 4,062

YoY Change (%) 9.9 20.4 7.8 3.0 0.0 -5.8 -2.8 4.4 9.8 -1.0

QoQ Change (%) 5.8 2.4 -4.0 -1.0 2.7 -3.6 -0.9 6.4

Net Sales 50,719 46,994 48,574 53,892 49,575 45,021 47,864 58,273 200,179 200,733

YoY Change (%) 16.6 20.3 6.4 1.0 -2.3 -4.2 -1.5 8.1 10.2 0.3

EBITDA 12,897 10,052 10,243 11,993 10,491 6,597 7,641 11,775 45,185 36,504

Margins (%) 25.4 21.4 21.1 22.3 21.2 14.7 16.0 20.2 22.6 18.2

Depreciation 2,281 2,325 2,388 2,460 2,521 2,573 2,645 2,709 9,454 10,447

Interest 498 600 521 478 660 888 905 952 2,097 3,405

Other Income 869 706 1,212 1,833 1,882 574 996 1,048 4,620 4,500

PBT 10,987 7,834 8,545 10,888 9,192 3,711 5,088 9,162 38,254 27,153

Tax 3,203 2,334 2,537 3,626 2,466 1,070 1,391 2,541 11,700 7,467

Rate (%) 29.2 29.8 29.7 33.3 26.8 28.8 27.3 27.7 30.6 27.5

Reported PAT 7,784 5,500 6,008 7,262 6,726 2,641 3,698 6,621 26,554 19,686

Adj PAT 7,784 5,500 6,008 7,262 6,726 2,641 3,698 6,621 26,554 19,686

YoY Change (%) 14.0 97.2 5.5 -15.8 -13.6 -52.0 -38.5 -8.8 10.7 -25.9

E: MOSL Estimates; * Grey cement realization is our estimate

UltraTech CementCMP: INR2,189 Neutral


EBITDA 45.2 36.5 46.6 56.2

NP 26.6 19.7 26.3 31.6

Adj EPS (INR) 96.8 71.8 95.8 115.2

EPS Growth (%) 10.4 -25.9 33.5 20.3

BV/Share (INR) 555.7 615.8 697.6 795.5

RoE (%) 18.9 12.3 14.6 15.4

RoCE (%) 21.4 14.4 16.9 18.8

Payout (%) 10.9 16.3 14.6 15.1

Valuations

P/E (x) 22.6 30.5 22.8 19.0

P/BV (x) 3.9 3.6 3.1 2.8

EV/EBITDA (x) 12.5 16.1 12.7 10.5

EV/Ton (USD) 183.7 165.7 159.6 159.3

Bloomberg UTCEM IN


M. Cap. (INR b)/(USD b) 600 / 10

52-Week Range (INR) 2,194 / 1,405

1,6,12 Rel Perf. (%) 13 / 5 / -2

� Cement volumes are estimated to grow 4.1%YoY (+16% QoQ) to11.58mt. Realizations are estimated to grow by 6.4% YoY (4.4% YoY) toINR4,189/ton. Its supplementary business of white cement and RMCare estimated to grow 11% and 1% YoY (respectively) in volume and2.5% YoY in realizations.

� Strong realizations coupled with sequentially stable cost would resultinto EBITDA/ton of INR912/ton (+INR157/ton QoQ, -INR151/ton YoY).EBITDA margin would improve by 2.7pp QoQ (-3.6pp YoY) to 18.7%.

� EBITDA is estimated to de-grow 9% YoY (+43% QoQ) to INR10.9b,translating into PAT de-growth of 17.5% YoY (+62% QoQ) to INR6.0b.

� The stock trades at 19x FY16E EPS, 10.5x FY16E EV/EBITDA and USD159/ton. Maintain Neutral with TP of INR2,229 (FY16E EV/ton of USD150).

Key issues to watch out� Volume growth recovery and outlook.� Cement pricing outlook and sustainability .� Progress and timeline over JPA deal.� Update on financial performance of Star Cement, UAE.

C–38April 2014

March 2014 Results Preview | Sector: Consumer



31.3.14 % YoY % QoQ % YoY % QoQ % YoY % QoQAsian Paints 547 Neutral 31,361 15.6 -8.1 4,475 19.8 -10.1 2,904 15.7 -11.8Britannia 843 Buy 16,834 13.2 4.3 1,364 17.5 1.0 898 2.2 -6.8Colgate 1,373 Neutral 9,269 14.2 4.9 1,837 8.9 22.1 1,305 5.9 15.5Dabur 180 Buy 17,912 17.0 -5.9 2,978 19.7 1.8 2,380 18.7 -2.3Godrej Consumer 852 Neutral 20,530 19.7 3.7 3,106 12.9 1.1 2,131 3.8 9.0GSK Consumer 4,309 Neutral 10,855 15.5 29.4 2,008 17.6 243.2 1,808 15.6 126.7Hind. Unilever 604 S e l l 69,841 8.0 -3.3 10,513 8.2 -14.3 8,256 5.7 -13.5ITC 353 Buy 93,343 13.0 7.0 31,355 15.9 -4.5 21,941 13.8 -8.0Marico 210 Buy 10,745 7.7 -10.3 1,382 16.2 -30.7 954 32.0 -29.5Nestle 5,008 Neutral 24,536 9.1 8.9 5,643 6.0 20.7 3,457 11.0 19.3Pidilite Inds. 305 Neutral 8,922 17.3 -7.5 1,499 20.1 -3.1 1,012 5.9 -5.9Radico Khaitan 145 Buy 3,868 16.7 -1.0 537 33.1 -2.4 201 20.5 -10.9United Spirits 2,641 Neutral 21,850 6.2 -4.1 2,027 1.7 -1.5 791 1.8 0.3Sector Aggregate 339,866 12.1 0.9 68,725 13.7 -2.3 48,038 11.5 -4.5

Expect 12% sales growth, 11.5% PAT growth for our Consumer coverageWe expect our Consumer coverage universe to post 12% revenue growth and 11.5%PAT growth in 4QFY14. Low double-digit sales growth reflects the continued impact ofweak macros and challenging consumption environment for Staples. EBITDA is likelyto grow 13.7%, with 30bp margin expansion. We expect ITC to post 13% sales growth(1% cigarette volume decline) and 13.8% PAT growth. Hindustan Unilever's sales arelikely to grow 8% (volume growth of ~3%), with flattish EBITDA margin.

Consumption growth remains weak; divergence between Staples andDiscretionaryOur channel checks and management interactions indicate further moderation inmarket growth, especially in the Home and Personal Care categories. Rural-urbangrowth gap continues to narrow for the sector, though some companies with low ruralsalience are outperforming urban growth. Discretionary categories like Paints remainan exception and have seen healthy momentum. While prospects of El Nino andconsequent poor monsoon could keep sentiment weak, we believe that the monsoonis no longer as relevant for consumption growth. This was evident in 2009 and 2013,when the trajectory of Consumer sector growth was not impacted by drought andgood monsoons, respectively.

Input costs turning inflationary; price hikes in select categoriesThe input cost scenario was mixed, with inflation in copra and palm oil, and correctionin select edible oil, sugar and wheat prices. We note selective pricing actions byHindustan Unilever, Asian Paints, Marico, ITC and Dabur to pass on the impact of rawmaterial cost inflation. Hindustan Unilever raised prices in Soaps to pass on the impactof higher palm oil prices. We expect gross margin expansion for Asian Paints, Britannia,Dabur and Godrej Consumer Products. Consumer companies are likely to continuetheir high advertising and promotion spends to drive volumes in a scenario of slowing

Gautam Duggad ([email protected]) / Manish Poddar ([email protected])

ConsumerCompanies Covered

Asian Paints

Britannia Industries

Colgate Palmolive

Dabur India

GSK Consumer

Godrej Consumer Products

Hindustan Unilever

ITC

Marico

Nestle India

Pidilite Industries

Radico Khaitan

United Spirits

C–39April 2014


4QFY14 volume growth expectationsQuarter Ending Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14

Asian Paints 15.0 12.0 18.0 -2.0 5.0 13.0 2.0 10.0 12.0 7.0 10.0

Colgate (Toothpaste) 15.0 15.0 14.0 13.0 11.0 8.0 11.0 11.0 9.0 11.0 10.0

Dabur 10.0 10.8 12.4 12.0 10.5 9.5 12.0 9.0 10.7 9.0 10.0

Godrej Consumer

Soaps 19.0 20.0 17.0 24.0 6.0 2.0 4.0 7.0 4.0 6.0 4.0

GSK Consumer 8.0 12.0 7.0 7.4 4.5 6.0 8.0 7.0 10.0 11.0 8.0

Hindustan Unilever 9.8 9.1 10.0 9.0 7.0 5.0 6.0 4.0 5.0 4.0 3.0

ITC (cigarette) 7.5 5.0 5.5 1.5 0.5 1.5 2.5 -2.0 -2.0 -2.0 -1.0

Marico

Parachute 10.0 13.0 11.1 18.0 9.0 6.0 5.0 4.0 1.0 2.0 5.0

Hair Oil 26.0 20.0 17.5 25.0 20.0 30.0 24.0 16.0 15.0 8.0 10.0

Saffola 11.0 15.0 3.3 12.0 6.0 4.0 5.0 10.0 7.0 9.0 7.0

Radico Khaitan 12.3 9.7 10.5 6.8 9.9 8.2 7.2 7.6 7.2 7.6 7.0

United Spirits 8.0 0.7 5.1 1.9 -1.0 7.0 3.8 0.2 -1.1 -3.7 0.0


Relative Performance-3m (%)

Relative Performance-1Yr (%)

consumption. Due to drop in non-Consumer GRPs, media inflation is relatively benign,according to Hindustan Uni lever. Competitive intensity remains high in HPC categories.

Downside risks to earnings estimates for FY15Slowdown in Consumer sales in the last few quarters has resulted in earnings cut formost of our universe. Lower base of FY14 should aid performance, going forward. Webuild in modest recovery in our FY15 estimates. Continued weak disposable incometrend and adverse macro environment constitute downside risks.

No change in our pecking order; prefer stocks with catalysts to offsetslowdownGiven the challenging terrain of low volume growth and continued moderation inoverall consumption spending, we prefer stocks with inbuilt resilience (ITC), specialcatalyst (Dabur - distribution expansion) or turnaround potential (Britannia - marginsstill have room for expansion). Revival in urban consumption, a theme articulated byDabur and Paints companies could be beneficial for Nestle, Marico and GodrejConsumer. Spike in input costs, further deterioration of volume growth and rise incompetitive intensity are key risks and monitorables.

Impact of input price changesInput Price Trend (Y-o-Y) Unit CMP (INR) 12m change % Impact Companies

LAB Up INR/Kg 130 7.4 Negative HUL

Soda Ash Sideways INR/50Kg 1,240 16.6 Negative HUL

Palm Fatty Acid UP USD/MT 790 49.0 Negative HUL, Godrej Consumer

Palm Oil UP MYR/MT 2,751 17.7 Negative Britannia, Nestle, HUL, ITC

HDPE Up INR/Kg 112 21.0 Negative All Companies

Sugar Down INR/Qtl 3,320 -2.6 Positive Britannia, Nestle, GSK Consumer

Titanium Dioxide Up INR/Kg 250 15.0 Negative Asian Paints

Copra Up INR/Qtl 9,100 107.8 Negative Marico


95

105

115

125

Mar

-13

Jun-

13

Sep-

13

Dec-

13

Mar

-14

Sens ex Inde xMOSL Cons umer Index

96

99

102

105

108

Dec-

13

Jan-

14

Feb-

14

Mar

-14

Sens ex Inde xMOSL Cons umer Index

C–40April 2014


PFAD prices up 10% QoQ LAB prices up 16% YoY


31.3.14 FY14E FY15E FY16E FY14E FY15E FY16E FY14E FY15E FY16E FY14E FY15E FY16EConsumerAsian Paints 547 Neutral 12.7 15.5 18.6 42.9 35.2 29.4 27.6 23.2 19.4 31.4 32.4 32.8Britannia 843 Buy 30.8 36.6 43.3 27.4 23.0 19.5 18.5 15.1 12.5 47.3 45.5 43.9Colgate 1,373 Neutral 35.5 43.6 52.0 38.7 31.5 26.4 27.8 21.6 17.6 88.0 96.3 101.5Dabur 180 Buy 5.3 6.4 7.5 34.0 28.0 24.0 27.1 22.0 18.8 34.6 34.8 33.7Godrej Consumer 852 Neutral 21.6 27.0 33.3 39.5 31.5 25.6 26.7 21.9 18.1 20.8 22.7 23.7GSK Consumer 4,309 Neutral 119.6 140.8 165.9 36.0 30.6 26.0 33.7 26.7 22.1 31.3 31.0 30.8Hind. Unilever 604 S e l l 16.4 18.0 20.2 36.8 33.5 29.9 27.9 24.4 21.0 61.3 57.5 55.6ITC 353 Buy 11.0 12.9 14.8 32.2 27.4 23.8 21.8 18.7 16.3 37.9 40.6 43.0Marico 210 Buy 7.6 8.4 9.9 27.4 25.1 21.1 18.3 15.3 12.6 29.4 25.0 24.4Nestle 5,008 Neutral 121.9 143.5 168.8 41.1 34.9 29.7 24.2 20.5 17.7 57.0 53.4 54.9Pidilite Inds. 305 Neutral 9.3 11.4 13.5 32.7 26.8 22.7 20.8 17.1 14.2 23.4 24.2 23.9Radico Khaitan 145 Buy 7.6 9.4 11.2 19.0 15.5 12.9 11.8 9.9 8.5 12.7 14.0 14.8United Spirits 2,641 Neutral 25.4 42.6 56.0 103.9 62.0 47.2 41.3 32.9 27.4 4.4 7.2 8.9Sector Aggregate 36.3 30.7 26.4 24.7 20.9 17.9 33.4 35.0 36.2

New launches during 4QFY14Company Brand Category

Emami Fair and Handsome Instant Face Wash Face WashGodrej Consumer Products Good Knight Xpress Household Insecticides

Hindustan Unilever Heads and Shoulders Men ShampooITC Yippee! Tricolor Pasta Foods

L'oreal Six Oil Nourish Hair OilMarico Livon Hair Colour

Perfetti Van Melle Stop Not Stixz Snacks

Copra prices up ~70% YoY Sugar prices benign

Source: Companies, MOSL

PFAD price s (INR /MT)

47,314

38,261

29,861

44,43839,498

32,888

Mar

-11

Jun-

11

Sep-

11

Dec

-11

Mar

-12

Jun-

12

Sep-

12

Dec

-12

Mar

-13

Jun-

13

Sep-

13

Dec

-13

Mar

-14

LAB Price s (INR /Kg)130.1

138.1

121

114111113109

10284868490

8676M

ar-0

9Ju

n-09

Sep-

09D

ec-0

9M

ar-1

0Ju

n-10

Sep-

10D

ec-1

0M

ar-1

1Ju

n-11

Sep-

11D

ec-1

1M

ar-1

2Ju

n-12

Sep-

12D

ec-1

2M

ar-1

3Ju

n-13

Sep-

13D

ec-1

3M

ar-1

4

1,500

3,500

5,500

7,500

Jun-

08Se

p-08

Dec

-08

Mar

-09

Jun-

09Se

p-09

Dec

-09

Mar

-10

Jun-

10Se

p-10

Dec

-10

Mar

-11

Jun-

11Se

p-11

Dec

-11

Mar

-12

Jun-

12Se

p-12

Dec

-12

Mar

-13

Jun-

13Se

p-13

Dec

-13

Mar

-14

Copra price (INR/qu intal ) Suga r Prices

3,3453,388

3,250

2,400

2,800

3,200

3,600

4,000

May

-11

Aug

-11

Nov

-11

Feb-

12

May

-12

Jul-1

2

Oct

-12

Jan-

13

Apr-1

3

Jul-1

3

Sep-

13

Dec

-13

Mar

-14

C–41April 2014



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Volume Growth (%) * -2.0 5.0 13.0 2.0 10.0 12.0 7.0 10.0 8.0 11.0

Net Sales 25,373 26,124 30,339 27,137 28,185 30,841 34,126 31,361 109,006 127,890

Change (%) 12.4 16.4 18.6 6.9 11.1 18.1 12.5 15.6 13.6 17.3

Raw Material/PM 14,838 15,714 18,133 15,523 16,138 17,665 20,379 18,621 64,209 73,812

Gross Profit 10,535 10,410 12,205 11,614 12,048 13,176 13,747 12,740 44,796 54,078

Gross Margin (%) 41.5 39.8 40.2 42.8 42.7 42.7 40.3 40.6 41.1 42.3

Operating Expenses 6,156 6,797 7,257 7,878 7,627 8,374 8,767 8,265 28,123 34,642

% of Sales 24.3 26.0 23.9 29.0 27.1 27.2 25.7 26.4 25.8 27.1

EBITDA 4,379 3,613 4,948 3,735 4,421 4,802 4,980 4,475 16,673 19,436

Margin (%) 17.3 13.8 16.3 13.8 15.7 15.6 14.6 14.3 15.3 15.2

Change (%) 12.7 14.0 24.6 -0.5 1.0 32.9 0.6 19.8 12.8 16.6

Interest 109 122 79 58 86 120 100 95 367 576

Depreciation 334 357 366 489 599 603 633 656 1,546 2,058

Other Income 326 421 465 577 503 760 694 774 1,791 2,170

PBT 4,262 3,555 4,969 3,766 4,239 4,839 4,941 4,498 16,552 18,972

Tax 1,273 1,041 1,466 1,178 1,390 1,449 1,540 1,538 4,957 6,062


PAT before Minority 2,989 2,514 3,503 2,589 2,850 3,390 3,401 2,960 11,595 12,910

Minority Interest 106 122 151 78 98 122 107 55 456 501

Adjusted PAT 2,884 2,392 3,352 2,511 2,752 3,268 3,294 2,904 11,139 12,409

Change (%) 9.5 14.6 30.5 -3.2 -4.6 36.7 -1.8 15.7 12.7 11.4

E: MOSL Estimates

CMP: INR547 Neutral� We expect APNT's revenue to grow 15.6% to INR31.4b in 4QFY14, with

domestic Decorative Paint volumes growing ~10%. Low base shouldhelp performance; APNT had delivered ~2% volume growth and 7%revenue growth in 4QFY13.

� Our channel checks indicate improved demand environment forDecorative Paints, especially in urban markets, while Industrials Paintsdemand still remains subdued.

� Pricing growth during the quarter was 6%.� Expect moderate 50bp expansion in operating margin to 14.3%, aided

by an exceptionally low base (4QFY13 margins were the lowest in fouryears).

� International business is likely to report mixed performance, withcontinued weakness in the Carribbean offset to an extent by theMiddle East and Asia.

� We estimate PAT growth at 15.7% (in 4QFY13, PAT had declined 3%).� The stock trades at 34.2x FY15E EPS of INR15.5. Neutral.

Key issues to watch out� Comments on volume growth trends and demand scenario in urban.

and rural geographies.� Outlook on raw material scenario.� Update on Sleek integration and near-term strategy.

Financials & Valuation (INR b)Y/E March 2013 2014E 2015E 2016ES a l e s 109.0 124.5 144.8 169.1

EBITDA 16.7 18.7 22.0 26.1

Adj. PAT 11.1 12.2 14.9 17.8

Adj. EPS (INR) 11.6 12.7 15.5 18.6

EPS Gr. (%) 12.7 9.7 22.0 19.6

B V/Sh.(INR) 34.9 40.6 48.0 56.6

RoE (%) 33.3 31.4 32.4 32.8

RoCE (%) 44.2 42.4 42.6 43.3

Payout (%) 41.5 47.1 45.0 45.7

Valuations

P/E (x) 45.8 41.7 34.2 28.6

P/BV (x) 15.2 13.1 11.1 9.4

EV/EBITDA (x) 30.2 26.9 22.6 18.8

Div. Yield (%) 1.1 1.3 1.5 1.9

Bloomberg APNT IN


M. Cap. (INR b)/(USD b) 524 / 9


1,6,12 Rel Perf. (%) 10 / 3 / -8

Asian Paints

C–42April 2014



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Net Sales 12,216 14,028 14,533 14,866 14,034 15,945 16,144 16,834 55,644 62,957

YoY Change (%) 10.8 8.7 16.5 13.5 14.9 13.7 11.1 13.2 12.4 13.1

COGS 7,575 9,042 9,192 9,369 8,374 9,666 9,885 10,434 35,184 38,360

Gross Profit 4,642 4,986 5,341 5,497 5,660 6,278 6,259 6,400 20,459 24,598

Margins (%) 38.0 35.5 36.8 37.0 40.3 39.4 38.8 38.0 36.8 39.1

Other Exp 3,991 4,379 4,559 4,337 4,492 4,902 4,909 5,036 17,255 19,339

% of Sales 32.7 31.2 31.4 29.2 32.0 30.7 30.4 29.9 31.0 30.7

Total Exp 11,566 13,422 13,752 13,706 12,867 14,568 14,794 15,470 52,440 57,698

EBITDA 651 606 782 1,161 1,168 1,377 1,350 1,364 3,204 5,259

Margins (%) 5.3 4.3 5.4 7.8 8.3 8.6 8.4 8.1 5.8 8.4

YoY Growth (%) 37.6 -17.6 -4.2 70.6 79.5 127.0 72.8 17.5 18.5 64.1

Depreciation 130 143 149 149 153 157 160 167 571 637

Interest 95 88 91 104 34 11 6 45 377 96

Other Income 179 266 257 369 267 199 192 149 1,066 808

PBT 605 642 797 1,277 1,249 1,408 1,377 1,301 3,322 5,335

Tax 170 186 228 399 386 451 414 403 983 1,654

Rate (%) 28.1 29.0 28.6 31.2 30.9 32.0 30.0 31.0 29.6 31.0

Adjusted PAT 435 456 570 878 863 957 963 898 2,339 3,681

YoY Change (%) 4.0 -4.8 5.3 65.7 98.6 109.8 69.1 2.2 18.9 57.4

E: MOSL Estimates

CMP: INR843 Buy� We expect BRIT to post sales of INR16.8b, a growth of 13% YoY. Volume

growth base is likely to remain in the 4-6% band, as the discretionaryProcessed Foods category remains under pressure. BRIT's initiative toextend distribution and split its distribution model in certain urbanmarkets can provide an additional catalyst at the margin.

� We estimate 30bp YoY EBITDA margin expansion to 8.1%, driven byhigher gross margins and overhead cost savings, but offset by higherad spends targeted at driving volume growth in a weak economicenvironment.

� After four quarters of low base, 4QFY14 will catch up with comparablemargins in the base quarter. Hence, the extent of margin expansionshould be lower, in our view.

� The stock trades at 23x FY15E EPS. Buy.

Key issues to watch out� Volume growth in Biscuits.� Outlook on raw material scenario.� Performance of subsidiaries.


EBITDA 3.2 5.3 6.3 7.4

Adj. PAT 2.3 3.7 4.4 5.2

Adj. EPS (INR) 19.6 30.8 36.6 43.3

EPS Gr. (%) 39.3 57.4 18.8 18.4

B V/Sh.(INR) 52.2 65.1 80.5 98.6

RoE (%) 37.5 47.3 45.5 43.9

RoCE (%) 60.4 70.5 64.5 68.6

Payout (%) 52.9 50.0 50.0 50.0

Valuations

P/E (x) 43.0 27.3 23.0 19.4

P/BV (x) 16.1 12.9 10.5 8.5

EV/EBITDA (x) 30.6 18.4 15.1 12.5

Div. Yield (%) 1.2 1.8 2.2 2.6

Bloomberg BRIT IN


M. Cap. (INR b)/(USD b) 101 / 2


1,6,12 Rel Perf. (%) -11 / -13 / 42

Britannia Industries

C–43April 2014



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Toothpaste Volume Gr (%) 11.0 11.0 8.0 11.0 11.0 9.0 11.0 10.0 10.3 10.0

Net Sales 7,361 7,738 7,627 8,116 8,446 8,957 8,840 9,269 30,841 35,512

YoY Change (%) 20.5 17.7 13.9 18.3 14.7 15.8 15.9 14.2 17.5 15.1

COGS 2,997 3,238 3,045 3,222 3,283 3,621 3,458 3,483 12,502 13,845

Gross Profit 4,364 4,499 4,582 4,894 5,164 5,336 5,382 5,786 18,339 21,667

Gross Margin (%) 59.3 58.1 60.1 60.3 61.1 59.6 60.9 62.4 59.5 61.0

Other operating Expenses 2,939 2,928 3,294 3,407 3,662 3,923 3,948 4,022 12,568 15,555

% to sales 39.9 37.8 43.2 42.0 43.4 43.8 44.7 43.4 40.8 43.8

Other operating Income 200 187 211 200 151 50 71 74 797 346

EBITDA 1,625 1,758 1,499 1,687 1,653 1,463 1,505 1,837 6,568 6,459

Margins (%) 21.5 22.2 19.1 20.3 19.2 16.2 16.9 19.7 20.8 18.0

YoY Growth (%) 21.7 28.2 2.4 -0.7 1.7 -16.8 0.4 8.9 13.5 358.7

Depreciation 105 106 113 113 117 117 121 146 437 500

Interest 0 0 0 0 0 0 0 5 0 5

Financial other Income 112 149 117 121 171 130 162 122 499 586

PBT 1,632 1,801 1,504 1,695 1,707 1,477 1,547 1,809 6,630 6,539

Tax 457 350 393 463 409 382 418 504 1,663 1,713

Rate (%) 28.0 19.4 26.1 27.3 24.0 25.8 27.0 27.9 25.1 26.2

Adj PAT 1,174 1,451 1,111 1,232 1,297 1,095 1,129 1,305 4,968 4,827

YoY Change (%) 16.9 34.9 -3.9 -5.8 10.5 -24.5 1.7 5.9 11.3 -2.8

E: MOSL Estimates

CMP: INR1,373 Neutral� We expect sales to grow 14.2% to INR9.3b; Toothpaste volume growth

would be 10%, with industry panel data indicating moderation ingrowth rate for the Oral Care category.

� We expect 60bp contraction in EBITDA margin to 19.7% on the back ofhigher ad spends. We note that P&G's launch has not had any materialimpact on CLGT's shares yet. However, we expect P&G to takecorrective measures in FY15 with a possible re-launch.

� The stock trades at 31x FY15E EPS. Neutral.

Key issues to watch out� Volume growth in Toothpaste; market share movement.� Given the narrowing of rural-urban growth rates for the Consumer

sector, any material deviance from trend volume growth forToothpaste category will be interesting to monitor.

� Ad spends and competitive intensity in Toothpaste.


EBITDA 6.6 6.5 8.2 10.0

Adj. PAT 5.0 4.8 5.9 7.1

Adj. EPS (INR) 36.5 35.5 43.6 52.0

EPS Gr. (%) 11.3 -2.8 22.9 19.3

B V/Sh.(INR) 38.1 42.5 48.0 54.5

RoE (%) 108.4 88.0 96.3 101.5

RoCE (%) 108.5 88.1 96.4 101.5

Payout (%) 70.0 75.0 75.0 75.0

Valuations

P/E (x) 37.1 38.1 31.0 26.0

P/BV (x) 35.6 31.8 28.2 24.8

EV/EBITDA (x) 27.1 27.4 21.3 17.4

Div. Yield (%) 1.9 2.0 2.4 2.9

Bloomberg CLGT IN


M. Cap. (INR b)/(USD b) 187 / 3

52-Week Range (INR) 1,555 / 1,190

1,6,12 Rel Perf. (%) -1 / -5 / -9

Colgate Palmolive

C–44April 2014



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Volume Growth (%) 12.0 10.5 9.5 12.0 9.0 10.7 9.0 10.0 10.0 10.0

Net Sales 14,620 15,226 16,307 15,311 16,511 17,488 19,043 17,912 61,464 70,954

YoY Change (%) 21.4 20.6 12.3 12.3 12.9 14.9 16.8 17.0 16.3 15.4

Total Exp 12,576 12,674 13,740 12,708 14,156 14,250 16,117 14,934 51,698 59,457

EBITDA 2,044 2,552 2,567 2,487 2,355 3,238 2,925 2,978 9,650 11,496

Margins (%) 14.0 16.8 15.7 16.2 14.3 18.5 15.4 16.6 15.7 16.2

YoY Growth (%) 14.9 5.5 13.4 11.2 15.2 26.9 14.0 19.7 11.2 3.2

Depreciation 267 196 234 151 287 236 255 278 847 1,056

Interest 213 149 78 150 133 200 72 121 589 525

Other Income 356 292 327 340 420 280 390 407 1,316 1,497

PBT 1,921 2,500 2,582 2,527 2,355 3,083 2,988 2,987 9,530 11,412

Tax 378 464 478 507 484 579 546 605 1,826 2,214

Rate (%) 19.7 18.6 18.5 20.1 20.6 18.8 18.3 20.3 19.2 19.4

Minority Interest 2 13 -6 15 10 6 -7 2 24 11

Adjusted PAT 1,541 2,023 2,111 2,005 1,860 2,498 2,435 2,380 7,680 9,187

YoY Change (%) 20.6 16.4 22.2 17.6 20.7 23.5 15.3 18.7 19.3 19.6

E: MOSL Estimates

CMP: INR180 Buy� We expect DABUR's sales to grow 17% to INR17.9b, led by ~10%

domestic organic volume growth. Unlike muted commentaries fromother Staples companies, DABUR is still guiding 8-10% volume growthfor FY15.

� Project CORE (extending urban chemist reach) should help achieveincremental growth in a challenging consumption backdrop.

� We expect 40bp margin expansion to 16.6%, led by operating leveragein International business. We expect ad-spends to remain in the 14-14.5% band.

� PAT is likely to grow 18.7% to INR2.38b.

� The stock trades at 29x FY15E EPS of INR6.4. Buy.

Key issues to watch out� Domestic volume growth and outlook on rural demand.� Update on Project CORE.� Performance of the Hair Oil portfolio - Hair Oil has been a weak link in

recent quarters; DABUR has introduced new variants to supportvolume growth.

� Progress on International business margins and performance of newlaunches.


EBITDA 9.7 11.5 14.0 16.1

Adj. PAT 7.7 9.2 11.2 13.0

Adj. EPS (INR) 4.4 5.3 6.4 7.5

EPS Gr. (%) 19.3 19.6 21.7 16.5

B V/Sh.(INR) 12.6 15.3 18.5 22.2

RoE (%) 35.0 34.6 34.8 33.7

RoCE (%) 36.3 37.8 38.8 40.0

Payout (%) 40.6 42.7 42.7 42.7

Valuations

P/E (x) 42.2 35.3 29.0 24.9

P/BV (x) 14.7 12.2 10.1 8.4

EV/EBITDA (x) 33.7 28.1 22.8 19.5

Div. Yield (%) 1.0 1.2 1.5 1.7

Bloomberg DABUR IN


M. Cap. (INR b)/(USD b) 313 / 5


1,6,12 Rel Perf. (%) -2 / -10 / 12

Dabur India

C–45April 2014



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q

MFD Volume Growth (%) 8.0 7.0 10.0 11.0 8.0 9.0 8.0 7.0 7.5 8.0

Net Sales 9,399 8,529 9,719 8,391 10,855 9,894 11,177 9,686 36,038 41,612

YoY Change (%) 15.6 16.9 17.4 18.3 15.5 16.0 15.0 15.4 17.0 15.5

Total Exp 7,691 7,343 8,221 7,806 8,847 8,410 9,333 8,852 31,060 35,442

EBITDA 1,708 1,187 1,499 585 2,008 1,484 1,844 834 4,978 6,170

Margins (%) 18.2 13.9 15.4 7.0 18.5 15.0 16.5 8.6 13.8 14.8

YoY Change (%) 5.6 7.2 6.7 14.8 17.6 25.1 23.0 42.5 7.3 7.3

Depreciation 107 122 116 112 130 134 138 147 457 549

Interest 1 2 1 4 1 1 1 1 9 4

Other Income 680 759 855 744 782 805 829 870 3,038 3,286

PBT 2,279 1,822 2,237 1,213 2,659 2,154 2,535 1,556 7,551 8,903

Tax 715 623 768 416 851 737 836 557 2,521 2,981

Rate (%) 31.4 34.2 34.3 34.3 32.0 34.2 33.0 35.8 33.4 33.5

Adj PAT 1,564 1,200 1,469 797 1,808 1,417 1,698 999 5,031 5,923

YoY Change (%) 18.5 12.5 14.3 14.5 15.6 18.2 15.6 25.2 15.2 17.7

E: MOSL Estimates

CMP: INR4,309 Neutral� We expect SKB to report net sales of INR10.9b, up 15.5%, driven by 8%

volume growth.

� While the overall consumption environment remains sluggish, SKB'sstrategy of driving its LUP portfolio and innovation in core productbasket should help maintain volume growth.

� We expect 30bp EBITDA margin expansion to 18.5%, primarily drivenby low base. PAT is estimated to grow 15.6%.

� The stock trades at 30.5x CY14E EPS. Neutral.

Key issues to watch out� MFD volume growth.� Outlook on market growth and raw material environment.� Performance of non-MFD portfolio.

Financials & Valuation (INR b)Y/E December 2012 2013 2014E 2015ES a l e s 30.8 36.0 41.6 48.2

EBITDA 4.6 5.0 6.2 7.3

Adj. PAT 4.4 5.0 5.9 7.0

Adj. EPS (INR) 103.9 119.6 140.8 165.9

EPS Gr. (%) 23.0 15.2 17.7 17.8

B V/Sh.(INR) 322.1 382.7 454.3 538.7

RoE (%) 32.2 31.3 31.0 30.8

RoCE (%) 53.4 52.6 52.4 51.3

Payout (%) 49.1 49.1 49.1 49.1

Valuations

P/E (x) 41.1 36.1 30.5 25.9

P/BV (x) 13.4 11.2 9.5 8.0

EV/EBITDA (x) 28.0 33.6 26.6 22.1

Div. Yield (%) 1.0 1.2 1.4 1.6

Bloomberg SKB IN


M. Cap. (INR b)/(USD b) 181 / 3

52-Week Range (INR) 6,020 / 3,645

1,6,12 Rel Perf. (%) -7 / -16 / -16

GlaxoSmithKline Consumer

C–46April 2014



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Net Sales 13,886 15,953 16,938 17,155 17,203 19,574 19,789 20,530 63,908 77,095

YoY Change (%) 39.2 34.5 26.0 29.7 23.9 22.7 16.8 19.7 31.7 20.6

EBITDA 1,988 2,440 2,806 2,752 2,208 2,954 3,071 3,106 9,985 11,339

Margins (%) 14.3 15.3 16.6 16.0 12.8 15.1 15.5 15.1 15.6 14.7

YoY Growth (%) 39.3 18.0 5.8 11.5 11.0 21.1 9.5 12.9 16.0 13.6

Depreciation 199 206 205 160 221 244 225 205 770 895

Interest 164 200 189 222 240 257 307 294 775 1,098

Other Income 181 194 188 281 178 172 207 323 844 880

Forex gain / (loss) -176 -76 -27 -48 -154 -63 -30 248 -328 0

PBT 1,630 2,151 2,574 2,602 1,769 2,562 2,716 3,178 8,957 10,225

Tax 192 476 674 531 338 470 558 864 1,792 2,230

Rate (%) 11.8 22.1 26.2 20.4 19.1 18.3 20.6 27.2 20.0 21.8

Minority Int 213 83 178 19 126 142 202 183 493 653

Adj PAT 1,225 1,593 1,722 2,052 1,305 1,950 1,956 2,131 6,672 7,342

YoY Change (%) 22.2 24.8 3.1 22.4 6.5 22.4 13.6 3.8 26.7 10.0

E: MOSL Estimates

CMP: INR852 Neutral� We expect GCPL's revenue to grow 19.7% to INR20.5b. Continued

momentum in Hair Colors, recovery from the weak 3QFY14performance in Home Insecticides and price hikes in Soaps shoulddrive growth. We expect the Soaps business to post low single-digitvolume growth; category volumes have declined in the last 4-5months.

� Indonesia should continue to report double-digit constant currencyrevenue growth, aided by recent price hikes to pass on cost inflation.

� We expect momentum to continue in Hair Colors. However, Garnierhas introduced its Black Naturals variant at INR39 and Marico has alsoentered the category. Rising competitive intensity in a nascent stagecategory may aid the category growth but a short-term impact onmargins is possible.

� We estimate 90bp contraction in operating margin to 15.1%. GCPL hastaken 4% price hike in its Soaps portfolio to pass on palm oil priceinflation. Higher ad spends and mix deterioration due to lower growthin Household Insecticides will impact margins.

� The stock trades at 32.6x FY15E EPS of INR27. Neutral.

Key issues to watch out� Volume growth trend in Soaps.� Comments on growth outlook for Household Insecticides.� International business outlook - margin guidance for LatAm, timelines

of stake increase in Darling.


EBITDA 10.0 11.3 13.8 16.5

Adj. PAT 6.7 7.3 9.2 11.3

Adj. EPS (INR) 19.6 21.6 27.0 33.3

EPS Gr. (%) 26.7 10.0 25.3 23.2

B V/Sh.(INR) 93.8 103.6 119.0 140.6

RoE (%) 20.9 20.8 22.7 23.7

RoCE (%) 24.8 25.7 28.1 29.8

Payout (%) 40.8 46.4 37.0 30.0

Valuations

P/E (x) 44.9 40.8 32.6 26.4

P/BV (x) 9.4 8.5 7.4 6.3

EV/EBITDA (x) 31.3 27.6 22.7 18.7

Div. Yield (%) 0.9 1.1 1.1 1.1

Bloomberg GCPL IN


M. Cap. (INR b)/(USD b) 290 / 5


1,6,12 Rel Perf. (%) 2 / -14 / -10

Godrej Consumer Products

C–47April 2014



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Volume Growth (%) 9.0 7.0 5.0 6.0 4.0 5.0 4.0 3.0 8.0 5.0

S&D EBIT Margin (%) 12.2 14.3 12.4 12.0 13.4 14.3 12.4 12.0 12.5 12.5

PP EBIT Margin (%) 25.8 24.2 28.3 25.8 26.8 24.2 28.3 25.8 25.3 25.3

Net Sales (incl service inc) 63,788 63,108 66,548 64,658 68,090 68,926 72,234 69,841 258,102 279,092

YoY Change (%) 14.1 12.5 11.7 12.1 6.7 9.2 8.5 8.0 16.7 8.1

COGS 33,677 32,695 34,191 34,326 34,828 34,699 36,601 36,718 134,888 142,846

Gross Profit 30,110 30,414 32,357 30,333 33,262 34,227 35,633 33,123 123,214 136,246

Margin (%) 47.2 48.2 48.6 46.9 48.9 49.7 49.3 47.4 47.7 48.8

Operating Exp 20,446 20,646 21,470 20,615 22,406 23,374 23,365 22,610 83,176 91,755

% to sales 32.1 32.7 32.3 31.9 32.9 33.9 32.3 32.4 32.2 32.9

EBITDA 9,664 9,767 10,888 9,718 10,856 10,853 12,268 10,513 40,037 44,491

YoY Change (%) 28.1 18.2 12.2 16.6 12.3 11.1 12.7 8.2 21.6 11.1

Margins (%) 15.2 15.5 16.4 15.0 15.9 15.7 17.0 15.1 15.5 15.9

Depreciation 576 577 593 614 664 639 644 703 2,360 2,651

Interest 53 63 75 60 62 63 182 73 251 380

Other Income 2,186 1,488 1,337 1,058 1,768 1,510 1,427 1,168 6,069 5,872

PBT 11,221 10,615 11,557 10,102 11,897 11,661 12,868 10,905 43,495 47,332

Tax 2,676 2,556 2,827 2,293 3,046 2,831 3,321 2,649 11,888 11,847

Rate (%) 23.8 24.1 24.5 22.7 25.6 24.3 25.8 24.3 27.3 25.0

Adjusted PAT 8,546 8,059 8,730 7,808 8,851 8,830 9,547 8,256 33,143 35,485

YoY Change (%) 47.7 22.9 14.5 17.7 3.6 9.6 9.4 5.7 24.6 7.1

E: MOSL Estimates

CMP: INR604 Sell� We expect HUVR to post 3% volume growth and 8% revenue growth.

Consumer demand has worsened sequentially across categories. Thiscoupled with high base (4QFY13 had 100bp beneficial impact ofinventory filling ahead of transporters' strike).

� HUVR has taken price hikes in Soaps to pass on palm oil inflation.However, pricing anniversary in Beverages will offset realizationgrowth further (3QFY14 already saw muted revenue growth). PP isexpected to see muted performance - Fair & Lovely (F&L) relaunch iswitnessing encouraging response but the base quarter had 10% extrapromotion.

� Operating margins are likely to stay flat at 15.1%. Elevated competitiveintensity in Oral Care would keep advertising and promotion spendshigh. However, we note that media inflation is relatively benign dueto pressure on prices post decline in non-Consumer GRPs.

� We expect EBITDA and PAT to grow at a subdued 8.2% and 5.7%,respectively. The stock trades at 33.1x FY15E EPS of INR18. Sell .

Key issues to watch out� Comments on volume growth and consumer demand environment.� Competitive intensity and comments on F&L/Skin Care business.


EBITDA 40.0 44.5 50.3 57.8

Adj. PAT 32.9 35.5 39.0 43.7

Adj. EPS (INR) 15.2 16.4 18.0 20.2

EPS Gr. (%) 26.9 7.8 9.8 12.1

B V/Sh.(INR) 21.5 26.8 31.3 36.3

RoE (%) 70.9 61.3 57.5 55.6

RoCE (%) 94.2 82.4 79.2 78.6

Payout (%) 55.8 57.9 63.8 64.3

Valuations

P/E (x) 39.2 36.4 33.1 29.5

P/BV (x) 27.8 22.3 19.0 16.4

EV/EBITDA (x) 30.9 27.5 24.1 20.7

Div. Yield (%) 1.4 1.6 1.9 2.2

Bloomberg HUVR IN


M. Cap. (INR b)/(USD b) 1,305 / 22


1,6,12 Rel Perf. (%) 4 / -19 / 11

Hindustan Unilever

C–48April 2014


Quarterly Performance INR MillionY/E March FY13 FY14 FY13 FY14E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Cigarette Vol Gr (%) 1.5 0.5 1.5 2.5 -2.0 -4.0 -2.0 -1.0 1.5 -2.0

Cigarette-net EBIT Margin (%) 57.5 61.4 61.1 58.3 63.4 64.8 62.5 60.0 59.6 60.3

Non Cigarette FMCG Loss -388 -303 -240 119 -189 -127 104 150 -813 810

Net Sales 67,065 72,263 77,107 82,574 74,107 78,625 87,269 93,343 299,013 333,344

YoY Change (%) 14.6 18.6 22.8 18.8 10.5 8.8 13.2 13.0 18.9 11.5

Total Exp 43,313 45,371 48,524 55,511 46,194 48,446 54,426 61,989 192,738 211,054

EBITDA 23,752 26,893 28,583 27,063 27,913 30,179 32,843 31,355 106,275 122,290

Growth (%) 21.3 21.0 20.0 18.9 17.5 12.2 14.9 15.9 20.1 15.1

Margins (%) 35.4 37.2 37.1 32.8 37.7 38.4 37.6 33.6 35.5 36.7

Depreciation 1,948 1,889 2,052 2,067 2,153 2,209 2,259 2,184 7,956 8,805

Interest 138 233 252 243 170 21 91 171 865 453

Other Income 1,699 1,840 3,293 2,540 2,032 2,462 3,911 3,049 9,387 11,454

PBT 23,366 26,611 29,572 27,293 27,622 30,412 34,403 32,049 106,842 124,486

Tax 7,344 8,247 9,053 8,014 8,709 9,436 10,550 10,108 32,658 38,803

Rate (%) 31.4 31.0 30.6 29.4 31.5 31.0 30.7 31.5 30.6 31.2

Adj PAT 16,021 18,364 20,519 19,280 18,913 20,976 23,853 21,941 74,184 85,684

YoY Change (%) 20.2 21.3 20.6 19.4 18.1 14.2 16.3 13.8 20.4 15.5

E: MOSL Estimates

CMP: INR353 Buy� We expect ITC to post cigarette volume decline of 1%. This will be a

sequential improvement over the 2% volume decline in 3Q.� Two consecutive years of 15% plus price hikes coupled with weak

consumption environment is impacting cigarette volumes in our view.� We expect net sales to grow 13% to INR93.3b, which is healthy in the

current context of weak growth rates of HPC categories.� Margins should expand 80bp to 33.6%, led by Cigarettes and improving

profitability in FMCG-Others. Cigarette margins will be supported by~20% average price hike implemented post budget.

� We expect FMCG-Others to post ~15% revenue growth, impacted byStaples slowdown and high base (26% growth in 4QFY13).

� PAT would grow 13.8% to INR21.9b.� The stock trades at 26.9x FY15E EPS of INR12.9. Buy ; ITC is our top pick

in the Consumer sector.

Key issues to watch out� Cigarette volume trends and update on 64mm segment.� Demand outlook in FMCG categories and segment profitability.� Sustenance of profitability in FMCG-Others portfolio.� Signs of pick-up in Hotels business.


EBITDA 106.3 122.3 141.3 161.4

Adj. PAT 61.6 74.2 85.7 100.7

Adj. EPS (INR) 9.5 11.0 12.9 14.8

EPS Gr. (%) 20.4 15.5 17.5 15.0

B V/Sh.(INR) 26.3 28.9 31.7 34.4

RoE (%) 36.1 37.9 40.6 43.0

RoCE (%) 50.2 53.3 57.0 60.7

Payout (%) 76.1 76.1 78.4 81.9

Valuations

P/E (x) 36.5 31.7 26.9 23.4

P/BV (x) 13.2 12.0 10.9 10.1

EV/EBITDA (x) 24.2 20.9 17.9 15.5

Div. Yield (%) 1.8 2.1 2.5 3.0

Bloomberg ITC IN


M. Cap. (INR b)/(USD b) 2,801 / 47


1,6,12 Rel Perf. (%) 2 / -12 / -5

ITC

C–49April 2014



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Domestic organic vol gr (%) 14.0 10.0 9.0 8.0 10.0 4.0 3.0 4.0 11.0 6.0

Net Sales 12,672 11,559 11,640 9,973 13,797 11,154 11,984 10,745 45,843 47,679

YoY Change (%) 21.7 19.5 10.9 9.7 8.9 -3.5 3.0 7.7 15.5 4.0

COGS 6,469 5,639 5,582 4,410 6,710 5,594 6,206 5,208 22,099 23,718

Gross Profit 6,203 5,920 6,058 5,563 7,086 5,560 5,778 5,537 23,744 23,960

Gross margin (%) 48.9 51.2 52.0 55.8 51.4 49.8 48.2 51.5 51.8 50.3

Other Expenditure 4,364 4,435 4,444 4,373 4,816 3,905 3,783 4,154 17,616 16,659

% to Sales 34.4 38.4 38.2 43.9 34.9 35.0 31.6 38.7 38.4 34.9

EBITDA 1,839 1,486 1,614 1,189 2,270 1,655 1,995 1,382 6,128 7,301

Margins (%) 14.5 12.9 13.9 11.9 16.5 14.8 16.6 12.9 13.4 15.3

YoY Change (%) 47.0 28.6 30.6 9.3 23.5 11.4 23.6 16.2 29.6 19.2

Depreciation 193 225 195 253 206 168 207 199 866 780

Interest 135 180 140 113 121 104 73 83 569 381

Other Income 150 101 127 115 167 158 204 159 494 687

PBT 1,660 1,182 1,406 938 2,109 1,541 1,918 1,259 5,186 6,828

Tax 403 293 360 189 512 431 501 266 1,245 1,710

Rate (%) 24.2 24.8 25.6 20.1 24.3 27.9 26.1 21.1 24.0 25.0


Adjusted PAT 1,258 859 1,023 723 1,553 1,059 1,354 954 3,862 4,919

YoY Change (%) 48.0 9.7 16.1 1.2 23.5 23.3 32.3 32.0 21.1 27.4

E: MOSL Estimates

CMP: INR210 Buy� We expect sales growth of 7.7% to INR10.7b, driven by price hikes in

Coconut Oil portfolio and optically impacted by Kaya demerger. MRCOis likely to report subdued volume growth, as Parachute volumeswould be impacted by price hikes and Saffola volumes would beimpacted by slowdown in discretionary demand. Bangladeshperformance should see sequential uptick after a dismal 3Q due topolitical disturbances.

� Copra prices are up 85% YoY and 15% QoQ. MRCO has taken price hikesin Parachute and Saffola. Sunflower, rice bran and kardi oil prices arebenign (down YoY) while packaging costs are up 20-22% YoY.

� We estimate gross margin decline of 430bp and EBITDA marginexpansion of 100bp due to margin improvement in Internationalbusiness, and cut in ad spends.

� We expect PAT growth of 32%, aided by low base (flattish PAT in4QFY13).

� The stock trades at 25x FY15E EPS of INR8.4. Buy.

Key issues to watch out� Comments on volume growth trends in key categories.� Raw material outlook.� Margin expansion in International business.


EBITDA 6.1 7.3 8.4 10.0

Adj. PAT 3.9 4.9 5.4 6.4

Adj. EPS (INR) 6.0 7.6 8.4 9.9

EPS Gr. (%) 15.6 27.4 9.4 18.9

B V/Sh.(INR) 30.5 26.0 33.4 40.8

RoE (%) 19.6 29.4 25.0 24.4

RoCE (%) 28.9 39.5 37.2 36.8

Payout (%) 12.5 10.5 9.6 22.1

Valuations

P/E (x) 34.8 27.4 25.0 21.0

P/BV (x) 6.8 8.0 6.3 5.1

EV/EBITDA (x) 22.5 18.2 15.3 12.5

Div. Yield (%) 0.4 0.4 0.4 1.1

Bloomberg MRCO IN


M. Cap. (INR b)/(USD b) 135 / 2


1,6,12 Rel Perf. (%) -7 / -20 / -20

Marico

C–50April 2014



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q

Net Sales 22,481 22,132 23,483 22,523 24,536 25,371 26,937 27,563 92,076 104,407

YoY Change (%) 9.8 11.4 11.0 4.6 9.1 14.6 14.7 22.4 10.9 13.4

COGS 10,158 10,004 10,568 10,494 11,164 11,569 12,366 12,532 41,671 47,631

Gross Profit 12,323 12,128 12,915 12,029 13,372 13,802 14,571 15,031 50,406 56,776

Margin (%) 54.8 54.8 55.0 53.4 54.5 54.4 54.1 54.5 54.7 54.4

Operating Exp 6,997 7,248 7,992 7,353 7,729 8,322 8,889 9,077 29,817 34,017

EBITDA 5,326 4,880 4,923 4,676 5,643 5,480 5,682 5,954 20,589 22,760

Margins (%) 23.7 22.0 21.0 20.8 23.0 21.6 21.1 21.6 22.4 21.8

YoY Growth (%) 16.5 13.8 11.0 -5.7 6.0 12.3 15.4 27.3 12.8 10.5

Depreciation 821 887 835 757 862 888 933 971 3,446 3,654

Interest 79 85 100 101 80 75 75 73 350 303

Other income 200 249 348 426 383 364 371 420 1,029 1,538

PBT 4,626 4,157 4,336 4,244 5,084 4,881 5,046 5,330 17,821 20,341

Tax 1,512 1,334 1,416 1,347 1,627 1,562 1,615 1,706 5,792 6,509

Rate (%) 32.7 32.1 32.7 31.7 32.0 32.0 32.0 32.0 32.5 32.0

Adjusted PAT 3,114 2,823 2,920 2,897 3,457 3,319 3,431 3,625 12,029 13,832

YoY Change (%) 7.9 16.5 11.0 -1.5 11 17.6 17.5 25.1 10.6 15.0

E: MOSL Estimates

CMP: INR5,008 Neutral� We expect NEST to report 9.1% growth in net sales to INR24.5b

primarily driven by favorable pricing. Our channel checks indicatethat volume growth in core categories remains sluggish.

� EBITDA margin is likely to decline 70bp to 23%, impacted by highermilk prices.

� We expect PAT to grow 11% to INR3.45b.

� Lower base of CY13 can provide a good platform for sales recovery inCY14. However, underlying recovery in volume growth will be afunction improvement in the macroeconomic scenario and consumersentiment.

� The stock trades at 35.8x CY14E EPS. Neutral.

Key issues to watch out� Volume performance and management commentary around portfolio

rationalization.� Strategic focus area of the new CEO.

Financials & Valuation (INR b)Y/E December 2012 2013 2014E 2015ES a l e s 83.0 90.6 104.4 119.1

EBITDA 18.3 19.8 22.5 25.9

Adj. PAT 11.0 11.8 13.5 15.8

Adj. EPS (INR) 114.1 121.9 140.1 164.1

EPS Gr. (%) 9.9 6.8 14.9 17.2

B V/Sh.(INR) 186.5 251.1 283.4 320.6

RoE (%) 71.6 57.0 52.4 54.3

RoCE (%) 59.6 55.3 58.1 64.3

Payout (%) 49.4 45.3 74.0 74.5

Valuations

P/E (x) 43.9 41.1 35.8 30.5

P/BV (x) 26.8 19.9 17.7 15.6

EV/EBITDA (x) 26.7 24.2 20.8 17.8

Div. Yield (%) 1.0 1.0 1.8 2.5

Bloomberg NEST IN


M. Cap. (INR b)/(USD b) 483 / 8

52-Week Range (INR) 5,865 / 4,410

1,6,12 Rel Perf. (%) -3 / -19 / -10

Nestle India

C–51April 2014



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Sales 9,125 8,209 8,376 7,608 10,148 9,912 9,649 8,922 33,317 38,631

Change (%) 18.8 16.0 21.6 16.7 11.2 20.7 15.2 17.3 18.3 16.0

Gross Profit 4,087 3,680 3,808 3,645 4,681 4,426 4,363 4,099 15,219 17,569

Gross Margin (%) 44.8 44.8 45.5 47.9 46.1 44.6 45.2 45.9 45.7 45.5


% of sales 23.9 26.9 27.4 31.5 24.1 26.0 29.2 29.1 27.3 27.0

EBITDA 1,907 1,468 1,514 1,248 2,240 1,846 1,547 1,499 6,136 7,132

EBITDA Margin (%) 20.9 17.9 18.1 16.4 22.1 18.6 16.0 16.8 18.4 18.5

Change (%) 25.4 14.5 27.3 30.2 17.5 25.8 2.2 20.1 24.0 16.2

Depreciation 124 128 141 139 153 168 181 132 532 634

Interest 91 18 -24 36 36 38 32 56 122 161

Other Income 139 121 164 235 90 87 70 116 659 362

PBT 1,831 1,443 1,560 1,307 2,140 1,727 1,404 1,427 6,141 6,698

Tax 498 325 413 352 595 470 329 415 1,588 1,809


Adj PAT 1,333 1,117 1,147 956 1,546 1,257 1,075 1,012 4,553 4,890

Change (%) 23.6 29.3 32.6 27.6 16.0 12.5 -6.3 5.9 28.0 7.4

E: MOSL Estimates

CMP: INR305 Neutral� We expect PIDI to post 17.3% revenue growth, led by double-digit

volume growth in the Consumer and Bazaar segments, while IndustrialChemicals remains sluggish.

� Our dealer checks suggest continued healthy demand for theConsumer and Bazaar segments.

� EBITDA margin should expand 40bp to 16.8%.

� We expect 5.9% growth in PAT to INR1b (high base impact; base quarterprofit growth of 27.6%).

� The stock trades at 26.8x FY15E EPS of INR11.4. Neutral.

Key issues to watch out� Volume growth in Fevicol.� Outlook on Industrial & Construction Chemicals segment.� Progress on Elastomer project, if any.


EBITDA 6.1 7.1 8.5 10.0

Adj. PAT 4.6 4.9 6.0 7.1

Adj. EPS (INR) 8.7 9.3 11.4 13.5

EPS Gr. (%) 24.0 7.4 22.1 18.1

B V/Sh.(INR) 34.0 39.8 47.0 56.2

RoE (%) 25.5 23.4 24.2 23.9

RoCE (%) 31.8 30.9 32.6 32.4

Payout (%) 35.5 37.6 37.0 31.3

Valuations

P/E (x) 35.1 32.7 26.8 22.7

P/BV (x) 9.0 7.7 6.5 5.4

EV/EBITDA (x) 25.0 21.2 17.5 14.5

Div. Yield (%) 0.8 1.0 1.2 1.2

Bloomberg PIDI IN


M. Cap. (INR b)/(USD b) 157 / 3


1,6,12 Rel Perf. (%) 1 / 5 / -3

Pidilite Industries

C–52April 2014



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Net sales 3,038 2,970 3,260 3,315 3,573 3,521 3,909 3,868 12,584 14,871

YoY Change (%) 2.1 13.9 8.1 16.8 17.6 18.5 19.9 16.7 10.0 18.2

Total Expenses 2,514 2,479 2,762 2,911 2,963 2,957 3,358 3,331 10,664 12,609

EBITDA 524 491 498 403 611 564 550 537 1,920 2,263

Margins (%) 17.3 16.5 15.3 12.2 17.1 16.0 14.1 13.9 15.3 16.2

YoY Change (%) 22.4 10.7 11.7 1.5 16.5 14.9 10.4 33.1 17.9

Depreciation 90 85 90 88 95 97 99 108 353 398

Interest 168 172 178 182 204 198 222 217 701 841

Other Income 62 84 85 74 85 89 90 74 304 338

PBT 328 318 315 207 396 358 320 286 1,170 1,361

Tax 75 110 95 40 90 78 94 85 320 347

Rate (%) 22.9 34.6 30.1 19.3 22.7 21.8 29.4 29.6 27.3 25.5

Adjusted PAT 253 208 220 167 306 280 226 201 850 1,014

YoY Change (%) 21.8 40.4 -6.8 -1.4 21.2 35.0 2.6 20.5 11.6 19.3

E: MOSL Estimates

CMP: INR145 Buy� We expect RDCK to post 16.7% revenue growth to INR3.9b, led by 7%

volume growth.

� The premium segment should continue to grow at a faster pace, aidedby up-trading.

� Trade situation in Tamil Nadu remains fluid and will continue to hitthe branded IMFL players in 4Q, despite comparable base.

� We expect margin expansion of 170bp to 13.9% owing to scale benefits.

� We forecast PAT growth of 20.5% on a depressed base (1.4% PAT declinein base quarter).

� The stock trades at 15.6x FY15E EPS of INR9.4. Buy .

Key issues to watch out� Price hikes received during the quarter, if any.� ENA price trend and outlook.� Comments around potential stake sale.


EBITDA 1.9 2.3 2.7 3.1

Adj. PAT 0.9 1.0 1.2 1.5

Adj. EPS (INR) 6.4 7.6 9.4 11.2

EPS Gr. (%) 6.3 19.3 22.9 19.7

B V/Sh.(INR) 57.0 63.3 71.0 80.3

RoE (%) 11.7 12.7 14.0 14.8

RoCE (%) 9.9 10.4 11.7 12.9

Payout (%) 17.6 17.6 17.6 17.6

Valuations

P/E (x) 22.8 19.1 15.6 13.0

P/BV (x) 2.6 2.3 2.1 1.8

EV/EBITDA (x) 13.9 12.2 10.2 8.8

Div. Yield (%) 1.0 0.8 1.0 1.2

Bloomberg RDCK IN




1,6,12 Rel Perf. (%) -11 / -7 / -7

Radico Khaitan

C–53April 2014



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Volume Growth (%) 2 -1 7 4 0 -1 -3.7 0 3 3

ENA Price/Case 151 159 172 176 171 180 189 193 165 173

Net Sales 20,573 22,207 21,740 20,577 21,924 20,387 22,784 21,850 85,097 86,944

YoY Change (%) 6.3 24.0 11.3 10.5 6.6 -8.2 4.8 6.2 12.8 2.2

Total Exp 17,223 19,676 19,281 18,584 19,142 18,334 20,727 19,823 74,763 78,025

EBITDA 3,350 2,531 2,459 1,993 2,782 2,053 2,058 2,027 10,334 8,919

Margins (%) 16.3 11.4 11.3 9.7 12.7 10.1 9.0 9.3 12.1 10.3

Depreciation 162 188 173 195 195 168 183 196 718 742

Interest 1,656 1,700 1,636 1,570 1,595 1,364 1,505 1,457 6,562 5,920

PBT from operations 1,532 643 651 228 992 521 370 374 3,054 2,257

Other income 607 -48 608 836 781 891 731 826 2,002 3,229

PBT 2,139 595 1,258 1,065 1,773 1,412 1,101 1,199 5,056 5,486

Tax 689 202 453 288 592 470 313 408 1,632 1,783

Rate (%) 32.2 34.0 36.0 27.1 33.4 33.3 28.4 34.1 32.3 32.5

PAT 1,450 393 806 777 1,181 943 788 791 3,424 3,703

YoY Change (%) 5.9 -75.3 64.6 878.1 -18.5 140.1 -2.2 1.8 278.0 8.1

Extraordinary inc/(Exp) 0 0 0 -217 0 0 -139 0 -217 0

Reported PAT 1,450 393 806 560 1,181 943 649 791 3,208 3,703

E: MOSL Estimates

CMP: INR2,641 Neutral� We expect UNSP to post 6% revenue growth to INR21.9b in 4QFY14,

led by flattish volume growth.

� RM prices remain inflationary, and with elections round the corner,liquor manufacturers are not getting price hikes from stategovernments.

� We expect margin contraction of 40bp to 9.3%. We also expect thenew management to increase brand investments in the premiumportfolio.

� PAT would be flattish at INR791m. QoQ debt movement and workingcapital changes will, however, be key monitorables.

Key issues to watch out� Volume growth.� Commentary on Tamil Nadu and legal issues surrounding UB stake

sale to Diageo.� ENA price trend and outlook.� Movement in net debt and update on W&M stake sale.


EBITDA 12.6 11.0 13.6 16.4

Adj. PAT 1.7 3.7 6.2 8.1

Adj. EPS (INR) 13.9 25.4 42.6 56.0

EPS Gr. (%) 7.3 83.3 67.5 31.5

B V/Sh.(INR) 402.7 572.7 594.2 627.7

RoE (%) 3.4 4.4 7.2 8.9

RoCE (%) 10.1 7.8 9.9 11.3

Payout (%) 28.8 17.7 11.7 8.9

Valuations

P/E (x) 193.0 105.3 62.8 47.8

P/BV (x) 6.6 4.7 4.5 4.3

EV/EBITDA (x) 34.2 38.2 30.4 25.3

Div. Yield (%) 0.1 0.2 0.2 0.2

Bloomberg UNSP IN


M. Cap. (INR b)/(USD b) 384 / 6

52-Week Range (INR) 2,816 / 1,708

1,6,12 Rel Perf. (%) 5 / -11 / 20

United Spirits

C–54April 2014

March 2014 Results Preview | Sector: Financials - Banks

Financials – BanksCompanies Covered

Axis Bank

Bank of Baroda

Bank of India

Canara Bank

HDFC Bank

Federal Bank

ICICI Bank

Indian Bank

IndusInd Bank

ING Vysya

Kotak Mahindra Bank

Oriental Bank

Punjab National Bank

State Bank

Union Bank

Yes Bank

Economy is witnessing signs of stabilization, with growth bottoming out, INR andinflation coming under control and CAD improving. Government's effort to kick startthe investment cycle and corporate deleveraging, which is under way, point at gradualimprovement in loan growth and better asset quality. However, a stable governmentat the center, post elections, is a key

Stocks under our coverage have moved up ~22%, though private banks are still tradingat PBV multiple of LPA and state-owned banks at a discount of 33% over LPA.Improvement in economic environment and a stable government could lead to stock'sre-rating. Improved visibility on growth, healthy core operations and return ratios,top managements' continuity, lower asset quality issues, adequate capitalization,strengthening liability franchise and low hanging fruits (ability to capture marketshare from state-owned banks due to superior service) among others will maintainprivate banks' premium valuation. We remain selective with our top picks beingICICIBC, HDFCB and SBIN.

Alpesh Mehta ([email protected]) / Sohail Halai ([email protected])

CMP Rating Net Interest Income Operating Profit Net Profit



Financials - BanksPrivate BanksAxis Bank 1,460 Buy 30,600 14.8 2.5 28,802 2.9 10.1 17,251 10.9 7.5Federal Bank 96 Buy 5,673 18.2 4.0 3,941 6.7 10.7 2,045 -7.9 -11.1HDFC Bank 749 Buy 49,881 16.1 7.6 40,214 35.7 3.4 23,632 25.0 1.6ICICI Bank 1,245 Buy 43,604 14.6 2.5 44,059 22.2 -0.7 25,875 12.3 2.2IndusInd Bank 501 Buy 7,571 14.5 3.7 6,759 24.4 4.4 3,650 18.7 5.2ING Vysya Bank 628 Buy 4,486 5.9 7.8 3,025 6.4 10.3 1,717 0.8 2.6Kotak Mahindra Bank 778 Neutral 9,427 4.3 3.3 6,011 -8.0 2.8 3,573 -18.1 5.1Yes Bank 414 Buy 6,911 8.3 3.9 6,661 5.1 8.4 4,125 13.9 -0.8Pvt Banking Sector Aggregate 158,152 14.0 4.4 139,473 17.7 3.9 81,866 13.0 2.8PSU BanksBank of Baroda 721 Buy 32,797 16.5 7.3 23,077 7.6 5.8 11,390 10.7 8.7Bank of India 229 Neutral 29,223 18.0 7.5 21,914 5.6 2.2 5,992 -20.8 2.3Canara Bank 264 Neutral 23,711 13.4 6.5 17,106 0.8 7.5 4,105 -43.4 0.3Indian Bank 115 Buy 11,031 -0.4 1.1 6,608 17.1 4.5 2,471 -15.4 -6.6Oriental Bank 223 Buy 12,777 5.3 3.8 9,761 3.1 13.7 2,338 -24.1 4.2Punjab National Bank 744 Buy 43,997 16.4 4.2 28,956 1.5 7.2 7,952 -29.7 5.3State Bank 1,918 Buy 130,541 17.8 3.3 78,045 0.6 2.4 27,359 -17.1 22.4Union Bank 137 Neutral 20,618 4.2 5.0 13,103 -22.2 3.9 3,533 -55.2 1.3PSU Banking Sector Aggregate 304,694 14.8 4.5 198,572 0.7 4.6 65,140 -21.8 11.0

Expected quarterly performance summary (INR Million)

C–55April 2014


Margins to be stable/decline marginally in 4QFY14NIMs are expected to be stable for most banks as liquidity condition has eased andshort terms rates have remained steady. 6M/12M CD rates on an average basis for4QFY14 are stable/lower compared to 9.2/9.2% in 3QFY14 and 10.2/9.8% in 2QFY14.Further, FCNR (B) deposits raised by banks would provide cushion to cost of funds andhelp NIMs. NII growth for state-owned banks is expected to be at 16%+ YoY (+6%QoQ), whi le private banks' growth to be at 14% YoY (4%+ QoQ) led by moderation inloan growth and NIMs.

Deposit growth outpaces loan growth; overall growth mutedFor the fortnight-ended March 21, 2014, loans/deposits grew by 14.3%/14.6% YoY.While 4Q is a seasonally strong period, sequential growth is expected to be moderateon account of (1) INR appreciation resulting in growth moderation in internationalportfolio, (2) higher base of FCNR(B) product embedded in 3Q numbers and (3) cautiousapproach adopted by banks in lending to corporates etc. Growth drivers are expectedto be SME and retail segment, with past driven sanctions continuing to help growth inpower segment (+17% YoY for February 2014). We factor loan and deposit growth of14% and 13% respectively.

Delinquency to remain high, sales to ARCs to contain GNPAEconomic indicators reflect a gradual recovery. However, we continue to model highslippages as it would take at least two to three quarters for slippages to subsidesignificantly. Seasonality of slippages/recoveries, sale of loans to ARCs and upgrades/recoveries from few large/mid-corporate accounts (via restructuring) could drive apositive surprise on headline GNPAs. Sequentially, net slippage ratio (for state-ownedbanks) is expected to decline to 1.4% in 4QFY14, compared to 2.1% in 3QFY14. Retailfocused banks are likely to be better placed (most private sector banks) and exceptCV segment, we expect asset quality to remain healthy.

CDR references - cumulative pipeline of 0.8% of loansBased on our interactions with CDR cell, in 4Q loans worth ~INR410b (32 cases) wererestructured (on account of acceleration in the process), of which one account aloneformed INR110b (shipping). While incremental restructuring is expected to be at anelevated level, restatement of restructured pool (exclusion of loans restructuredonly due to change in date of commencement of operations) may contain the increasein restructured loans. Pipeline for restructuring under CDR stood at INR460b (0.8% ofloans). However, incremental referrals to CDR in 4Q declined to INR220b (17 cases) ascompared to INR450b (25 cases) which is a positive and improvement in economicgrowth remains critical for receding the flow of restructuring.

MTM and NPA provisioning to continue to dent profitability of PSU BanksDichotomy of easing liquidity and inflationary pressures has led to flattening of yieldcurve from being inverted. Since end-December 2013, G-sec yields have remainedstubborn. Thus, banks' MTM position is unlikely to be altered significantly andinvestment depreciation will remain high for PSU banks. This coupled with high creditcost wi ll keep overall provisioning high. However, RBI's leeway to use one-third ofcounter cyclical provision for NPA provision (not factored in our estimates) will providerelief to P&L, especially for state-owned banks. Overall, while PPP growth is expectedto be 2.7% YoY, PAT is expected to decline by 18.6% YoY. For private banks, credit cost

We factor loan anddeposit growth of 14%

and 13% respectively

State-owned banks areguiding for flat to

declining stressed assets,while private banks guide

for an increase inrestructuring

Our interation suggest,referrals to CDR declineQoQ which is a positive

No material change inMTM requirement on

investments

Aging NPAs to keepcredit cost high.

Expectation of QoQdecline in net slippages

C–56April 2014


is expected to be stable/increase and for certain banks, IIB and FB, investmentdepreciation will keep provisions high.

Sector strategy: not out of the woods yet, remain selectiveEconomy is witnessing signs of stabilization, with growth bottoming out, INR andinflation coming under control and CAD improving. Government's effort to kick startthe investment cycle and corporate deleveraging, which is under way, point at gradualimprovement in loan growth and better asset quality. However, a stable governmentat the center, post elections, is a key

Our interactions with banks' management indicate fresh impairment has peakedthough would remain at a high level for next two quarters. Increased recovery effortsand sale of loans to ARCs will help contain headline stressed assets numbers. Policyreforms by the new government will be critical as it could materially alter the outlookon growth and asset quality.

Despite the recent rally in stocks, valuations for state-owned banks are below LPAand for private banks near LPA. We remain selective and prefer banks with strongcapitalization (risk of dilution low) and liability franchise (emerge stronger in theupturn of economy), managements stability, P&L strength (to absorb credit cost risk),levered to interest rate reversal cycle (earnings cushion) and those who haverecognized stress upfront (risk of setback remains low). Top picks are ICICIBC, HDFCB,and SBIN.

Top picks are ICICIBC,HDFCB and SBIN

Roll over target price to FY16Upside BV TP (INR) RoA RoE

CMP on New Reco (INR) Old New (%) (%)

(INR) TP (%) FY15 FY16 FY15 FY16 FY15 FY16 FY15 FY16

Private Banks

ICICIBC* 1,245 15 Buy 574 651 1,263 1,427 1.7 1.7 15.7 15.7

HDFCB# 749 10 Buy 214 257 822 822 2.0 2.1 22.8 23.8

AXSB 1,460 18 Buy 937 1,080 1,405 1,728 1.7 1.7 16.9 17.0

KMB* 778 6 Neutral 272 313 720 821 1.7 1.7 13.3 13.4

YES 414 24 Buy 239 286 478 515 1.5 1.5 23.3 22.1

IIB 501 14 Buy 189 220 529 572 1.7 1.7 17.8 18.3

VYSB 628 7 Buy 409 449 654 673 1.2 1.2 10.7 11.1

FB 96 25 Buy 90 99 108 119 1.0 1.1 12.1 12.9

J&KBK 1,537 23 Buy 1,375 1,577 1,649 1,893 1.5 1.4 20.1 18.9

SIB 22 26 Buy 27 31 22 28 0.9 0.9 15.7 15.3

PSU Banks

SBIN# 1,918 13 Buy 2,069 2,281 2,175 2,175 0.7 0.7 10.9 11.9

PNB 744 22 Buy 1,036 1,135 725 908 0.7 0.7 11.6 11.9

BOI 229 0 Neutral 416 458 208 229 0.5 0.5 12.6 12.7

BOB 721 17 Buy 850 936 680 843 0.7 0.6 13.1 12.7

CBK 264 14 Neutral 556 602 222 301 0.4 0.4 9.8 10.5

UNBK 137 12 Neutral 284 308 114 154 0.4 0.4 10.0 10.6

OBC 223 35 Buy 467 503 234 302 0.5 0.5 9.1 9.5

INBK 115 26 Buy 266 291 106 146 0.6 0.6 11.0 11.5

CRPBK 277 -1 Neutral 644 688 258 275 0.3 0.3 7.5 8.3

ANDB 64 0 Neutral 153 159 61 64 0.3 0.3 5.7 5.8

DBNK 61 16 Neutral 164 177 66 71 0.4 0.4 9.3 9.0

IDBI 65 10 Neutral 138 143 55 71 0.2 0.2 3.9 4.3

* ICICIBC, KMB and SBIN are valued on FY16 SOTP Basis; # No change in TP for SBIN and HDFCB as target price already on FY16

C–57April 2014


3.14 3.31

3.39

3.29

3.08

3.00

2.99

2.88

2.80

2.81

2.81

2.79

3.41 3.50

3.55 3.64

3.58 3.68

3.70 3.77

3.77 3.84

3.80

3.78

1QFY

12

2QFY

12

3QFY

12

4QFY

12

1QFY

13

2QFY

13

3QFY

13

4QFY

13

1QFY

14

2QFY

14

3QFY

14

4QFY

14E

PSU PrivateNet S l ippage R atio (%)

1.7

3.1

2.0

1.1

2.7 2.7

2.0

1.1

1.9 2.1

1.4

3.3

1QFY

12

2QFY

12

3QFY

12

4QFY

12

1QFY

13

2QFY

13

3QFY

13

4QFY

13

1QFY

14

2QFY

14

3QFY

14

4QFY

14E

7.0

8.5

10.0

11.5

1 Yr 2 Yr 5 Yr 10 Yr

28-Jun -13 18-Jul -13 31-Jul -13

30-Sep-13 30-Dec-13 28-Mar-14

7

8

9

10

11

12

Jan-

13

Feb-

13

Mar

-13

Apr-

13

May

-13

Jun-

13

Jul-1

3

Aug-

13

Sep-

13

Oct

-13

Dec-

13

Jan-

14

Feb-

14

Mar

-14

6 Month 12 Month

46.4

47.1

49.9

52.1

54.9

56.3

58.3

61.0

62.3

64.1

64.7

69.0

70.9

73.6

75.0

75.5

76.1

77.4

17.5

14.4

13.8

14.8 15.9

15.7

15.8

14.6

13.2

11.013

.9

13.5

17.0

15.9

16.8

14.4

15.0 18

.5

1QFY

11

2QFY

11

3QFY

11

4QFY

11

1QFY

12

2QFY

12

3QFY

12

4QFY

12

1QFY

13

2QFY

13

3QFY

13

4QFY

13

1QFY

14

2QFY

14

3QFY

14

Jan-

14

Feb-

14

Mar

-14

Depos i ts (INR t) Chg YoY (%)

Loan growth remains moderate (%)... ... so does deposit growth (%)

Net slippages for state-owned banks to decline NIMs are expected to be stable (%)


CD rates: Interest rates begin to cool off Yield curve flattens but settled at high level (%)

34.1

34.3

37.7

39.4

40.9

41.5

43.7

46.9

47.6

48.1

50.3

53.5

54.2

56.7

57.6

57.9

58.6

60.1

21.9

19.2 24

.5

21.5

19.5

16.5

15.9

15.1

13.9

13.7 17

.814

.5

14.7

14.3

14.318

.7

16.020

.0

1QFY

11

2QFY

11

3QFY

11

4QFY

11

1QFY

12

2QFY

12

3QFY

12

4QFY

12

1QFY

13

2QFY

13

3QFY

13

4QFY

13

1QFY

14

2QFY

143Q

FY14

Jan-

14

Feb-

14

Mar

-14

Loa ns (INR t) Chg Yo Y (%)

C–58April 2014


Comparative valuationCMP (INR) Rating EPS (INR) P/E (x) P/BV (x) RoE (%)


Financials - Banks

Private BanksAxis Bank 1,460 Buy 130.4 148.0 171.6 11.2 9.9 8.5 1.8 1.6 1.4 17.1 16.9 17.0Federal Bank 96 Buy 9.0 10.3 12.2 10.7 9.2 7.9 1.2 1.1 1.0 11.5 12.1 12.9HDFC Bank 749 Buy 35.8 44.8 56.0 20.9 16.7 13.4 4.2 3.5 2.9 21.6 22.8 23.8ICICI Bank * 1,245 Buy 84.5 96.3 109.9 12.3 10.6 9.0 2.1 1.8 1.5 15.4 15.7 15.7IndusInd Bank 501 Buy 26.3 31.4 37.4 19.1 16.0 13.4 3.1 2.7 2.3 17.2 17.8 18.3ING Vysya Bank 628 Buy 37.4 41.7 47.4 16.8 15.1 13.2 1.7 1.5 1.4 12.1 10.7 11.1J&K Bank 1,537 Buy 244.4 257.2 278.4 6.3 6.0 5.5 1.3 1.1 1.0 22.4 20.1 18.9Kotak Mah. Bank 778 Neutral 32.7 37.1 42.3 23.8 21.0 18.4 3.3 2.9 2.5 14.9 14.6 14.4South Indian Bank 22 Buy 3.8 4.1 4.5 5.7 5.4 4.9 0.9 0.8 0.7 16.8 15.7 15.3Yes Bank 414 Buy 44.6 50.8 58.1 9.3 8.1 7.1 2.1 1.7 1.4 24.8 23.3 22.1Private Bank Aggregate 15.9 13.6 11.6 2.7 2.4 2.1 17.3 17.6 18.1PSU BanksAndhra Bank 64 Neutral 7.5 8.5 9.1 8.6 7.5 7.1 0.4 0.4 0.4 5.2 5.7 5.8Bank of Baroda 721 Buy 105.0 106.1 113.2 6.9 6.8 6.4 0.9 0.8 0.8 14.4 13.1 12.7Bank of India 229 Neutral 43.1 49.9 55.5 5.3 4.6 4.1 0.6 0.6 0.5 12.1 12.6 12.7Canara Bank 264 Neutral 48.5 52.6 60.9 5.4 5.0 4.3 0.5 0.5 0.4 9.6 9.8 10.5Corporation Bank 277 Neutral 38.8 47.1 55.3 7.1 5.9 5.0 0.5 0.4 0.4 6.6 7.5 8.3Dena Bank 61 Neutral 15.3 14.7 15.4 4.0 4.1 3.9 0.4 0.4 0.3 10.5 9.3 9.0IDBI Bank 65 Neutral 4.4 5.3 6.0 14.8 12.4 10.9 0.5 0.5 0.5 3.5 3.9 4.3Indian Bank 115 Buy 24.4 27.9 31.9 4.7 4.1 3.6 0.5 0.4 0.4 10.4 11.0 11.5Oriental Bank 223 Buy 35.4 41.3 46.3 6.3 5.4 4.8 0.5 0.5 0.4 8.4 9.1 9.5Punjab Nat. Bank 744 Buy 92.0 115.3 129.7 8.1 6.5 5.7 0.8 0.7 0.7 10.2 11.6 11.9State Bank 1,918 Buy 180.9 217.9 260.2 10.1 8.4 7.0 1.0 0.9 0.8 10.2 10.9 11.9Union Bank 137 Neutral 23.2 27.2 31.3 5.9 5.0 4.4 0.5 0.5 0.4 9.0 10.0 10.6PSU Bank Aggregate 7.9 6.8 5.9 0.8 0.7 0.6 9.8 10.4 11.0


70

85

100

115

130

Mar-13 Jun-13 Sep-13 Dec-13 Ma r-14

Sens ex IndexMOSL F in ancials Index

80

90

100

110

120

Dec-13 Jan -14 Feb -14 Ma r-14

Sens ex Ind exMOSL F inan cia ls In dex

* adjusted for investments in subsidiaries

C–59April 2014



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Interest Income 64,829 66,872 69,649 70,476 72,778 76,090 77,891 81,630 271,826 308,389

Interest Expense 43,030 43,603 44,701 43,829 44,126 46,723 48,051 51,030 175,163 189,930

Net Interest Income 21,799 23,269 24,948 26,647 28,652 29,367 29,840 30,600 96,663 118,459

% Change (Y-o-Y) 26.4 15.9 16.6 24.2 31.4 26.2 19.6 14.8 20.6 22.5

Other Income 13,355 15,931 16,154 20,072 17,813 17,661 16,444 19,141 65,511 71,059

Net Income 35,154 39,200 41,102 46,718 46,465 47,028 46,284 49,741 162,174 189,519


Operating Profit 19,637 21,783 23,615 27,997 28,436 27,498 26,150 28,802 93,031 110,886

% Change (Y-o-Y) 26.0 22.7 14.7 37.4 44.8 26.2 10.7 2.9 25.2 19.2

Other Provisions 2,588 5,094 3,868 5,954 7,123 6,875 2,025 2,781 17,504 18,803

Profit before Tax 17,048 16,688 19,747 22,044 21,313 20,623 24,125 26,021 75,527 92,082

Tax Provisions 5,513 5,453 6,275 6,492 7,224 7,000 8,084 8,770 23,733 31,078

Net Profit 11,535 11,235 13,472 15,552 14,089 13,623 16,041 17,251 51,794 61,004

% Change (Y-o-Y) 22.4 22.1 22.2 21.8 22.1 21.3 19.1 10.9 22.1 17.8

Operating Parameters

NIM (Reported,%) 3.4 3.5 3.6 3.7 3.9 3.8 3.7 3.5

NIM (Cal, %) 3.3 3.5 3.6 3.5 3.7 3.7 3.6 3.5 3.3 3.5

Deposit Growth (%) 21.3 21.2 17.2 14.8 7.1 8.4 7.3 14.0 14.8 14.0

Loan Growth (%) 29.8 22.9 20.7 16.0 15.8 16.9 17.8 15.0 16.0 15.0

CD Ratio (%) 76.9 73.1 73.4 78.0 83.1 78.8 80.6 78.7 78.0 78.7

Core CASA ratio (%) 36.0 36.2 35.8 36.0 38.9 39.4 38.0 36.0

Asset Quality

OSRL (INR b) 38.3 40.7 42.6 43.7 42.1 48.1 55.0 43.7

OSRL (%) 2.2 2.4 2.4 2.2 2.1 2.4 2.6 2.2

Gross NPA (INR b) 20.9 21.9 22.8 23.9 24.9 27.3 30.1 32.4 23.9 32.4

Gross NPA (on customer assets, %) 1.1 1.1 1.1 1.1 1.1 1.2 1.3 1.3 1.1 1.3

E: MOSL Estimates

Axis BankCMP: INR1,460 Buy� Loan growth is expected to be in line with industry average at ~15%

YoY. However, led by PSL build-up, sequential growth is expected tobe strong at 7%+.

� NIM is expected to moderate by 10bp+ QoQ to ~3.6%, as share of lowyielding PSL loans is expected to go up.

� Fee income growth is expected to be sub 10% YoY as (1) retail fees(outsourcing of ATM network not yet reflected in base year) remainmuted and (2) environment is not conducive for corporate fees.

� Stress creation in large/mid-corporate segment is expected tocontinue. We factor a slippage ratio of ~1.4% (v/s 1.3% in 3QFY14) andflat credit cost of 0.6% (v/s 0.6% in 3QFY14) for 4QFY14E.

� PPP growth YoY is expected to be flat but a decline in provisioningexpense (bank had created a contingency buffer of INR3.8b in 4QFY13)is expected to translate into earnings growth of 11%+ YoY.

Key issues to watch out� At end-3QFY14, management had guided for gross stress additions of

INR57-60b for FY14, implying gross stress additions of INR14-17b for4QFY14. Performance versus guidance and expectation for FY15.

� Growth in retail business.


NII 96.7 118.5 137.2 158.6

OP 93.0 110.9 124.0 144.5

NP 51.8 61.0 69.3 80.3

NIM (%) 3.3 3.5 3.5 3.5

EPS (INR) 110.7 130.4 148.0 171.6

EPS Gr. (%) 7.8 17.8 13.5 15.9

BV/Sh. (INR) 699.9 813.0 936.6 1,079.9

ABV/Sh. (INR) 690.1 800.3 920.8 1,060.8

RoE (%) 18.5 17.1 16.9 17.0

RoA (%) 1.7 1.7 1.7 1.7

Payout (%) 19.1 19.2 19.2 19.2

Valuations

P/E(X) 13.2 11.2 9.9 8.5

P/BV (X) 2.1 1.8 1.6 1.4

P/ABV (X) 2.1 1.8 1.6 1.4

Div. Yield (%) 1.2 1.5 1.7 1.9

Bloomberg AXSB IN


M. Cap. (INR b)/(USD b) 685 / 11

52-Week Range (INR) 1,549 / 764

1,6,12 Rel Perf. (%) 9 / 29 / -7

C–60April 2014



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Interest Income 85,576 87,226 88,449 90,716 94,869 94,735 96,907 101,260 351,967 387,771



% Change (YoY) 21.8 11.5 7.0 0.6 3.3 1.1 7.6 16.5 9.7 7.1

Other Income 7,708 8,283 8,406 11,909 12,306 9,739 9,321 11,321 36,306 42,686

Net Income 35,689 36,906 36,815 40,049 41,197 38,687 39,892 44,118 149,459 163,893



% Change (YoY) 23.2 11.4 -13.6 5.1 8.7 -11.0 -2.7 7.6 4.9 0.4



Tax Provisions 2,081 4,223 2,026 -4,825 2,503 801 3,722 2,902 3,505 9,928

Net Profit 11,389 13,014 10,116 10,289 11,679 11,681 10,478 11,390 44,807 45,229

% Change (YoY) 10.3 11.6 -21.6 -32.2 2.5 -10.2 3.6 10.7 -10.5 0.9


NIM (Reported, %) 2.7 2.7 2.7 2.5 2.4 2.3 2.4 2.7

NIM (Calculated, %) 2.6 2.6 2.5 2.3 2.2 2.2 2.3 2.3 2.4 2.2

Deposit Growth (%) 22.3 24.0 18.8 23.1 22.0 18.8 21.5 14.0 23.1 14.0

Loan Growth (%) 23.0 22.2 14.8 14.2 12.4 16.3 17.7 15.0 14.2 15.0

CASA Ratio (%) 32.2 31.8 32.2 30.4 31.2 32.7 32.3 31.6

Tax Rate (%) 15.4 24.5 16.7 -88.3 17.7 6.4 26.2 20.3 7.3 18.0

Asset Quality

OSRL (INR b) 179.8 195.8 205.0 200.1 207.2 215.3 211.7 200.1

OSRL (%) 6.3 6.7 6.8 6.1 6.4 6.3 6.0 6.1

Gross NPA (%) 1.8 2.0 2.4 2.4 3.0 3.2 3.3 3.3 2.4 3.3

E: MOSL Estimates

Bank of BarodaCMP: INR721 Buy

Financials & Valuation (INR b)Y/E March 2013 2014E 2015E 2016ENII 113.2 121.2 142.1 161.0

OP 90.0 90.3 105.4 117.9

NP 44.8 45.2 45.7 48.7

NIM (%) 2.4 2.2 2.3 2.3

EPS (INR) 106.0 105.0 106.1 113.2

EPS Gr. (%) -12.7 -1.0 1.0 6.7

BV/Sh. (INR) 707.3 768.2 849.5 936.3

ABV/Sh. (INR) 642.8 669.0 735.5 829.9

ROE (%) 16.1 14.4 13.1 12.7

ROA (%) 0.9 0.8 0.7 0.6

Div. Payout (%) 27.4 23.2 23.2 23.2

Valuations

P/E(X) 6.8 6.9 6.8 6.4

P/BV (X) 1.0 0.9 0.8 0.8

P/ABV (X) 1.1 1.1 1.0 0.9

Div. Yield (%) 3.0 2.9 2.9 3.1

� Loan and deposit each is expected to grow 7% QoQ and ~14% YoY (inline with industry) respectively.

� NIM is expected to improve ~5bp to 2.3%, led by containment of costof funds and supported by FCNR (B) deposits raised in 3QFY14.

� Fee income growth picked up in 3QFY14 and we expect the trend toremain healthy. We factor fee income growth of 13% YoY.

� We estimate net slippage ratio and credit cost to be stable QoQ at1.4% and 90bp+ respectively. In 3QFY14, the bank had restructuredloans of INR12.1b. Post 3Q earnings, management had guided for lowertrend in slippages and fresh restructuring in the coming quarters.

� Provisioning expense (YoY) is expected to be significantly lower onaccount of (1) absence of one-off provision on depreciation oninvestment (INR2.1b) and better asset quality trends. However, thiswould partially be negated by higher tax rate of 20%, compared to taxwrite-back of INR4.8b in 4QFY13.

Key issues to watch out� Outlook on asset quality and restructuring - management has guided

for an improvement in asset quality.� Domestic CD ratio is at 70%, below industry average, and

improvement in the same could cushion NIMs.

Bloomberg BOB IN


M. Cap. (INR b)/(USD b) 310 / 5


1,6,12 Rel Perf. (%) 25 / 31 / -12

C–61April 2014



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Interest Income 77,092 80,055 80,227 81,716 85,412 92,393 97,692 103,126 319,089 378,623



% Change (Y-o-Y) 11.0 15.3 11.7 -1.0 24.1 15.1 17.8 18.0 8.5 18.6

Other Income 8,409 8,941 9,371 10,939 11,808 11,003 10,971 10,714 37,660 44,496

Net Income 28,844 30,901 32,456 35,700 37,178 36,274 38,162 39,937 127,900 151,551



% Change (Y-o-Y) 19.9 19.5 7.2 3.0 30.3 13.4 15.5 5.6 11.4 15.5



Tax Provisions 3,139 1 1,365 -1,921 5,217 2,484 1,544 2,631 2,584 11,876

Net Profit 8,875 3,019 8,035 7,566 9,642 6,218 5,858 5,992 27,493 27,710

% Change (Y-o-Y) 71.5 -38.5 12.2 -20.6 8.6 106.0 -27.1 -20.8 2.7 0.8


NIM (Reported, %) 2.3 2.4 2.4 2.5 2.5 2.3 2.4 2.5

NIM (Cal, %) 2.3 2.4 2.5 2.5 2.3 2.2 2.2 2.3 2.3 2.3

Deposit Growth (%) 15.7 11.2 13.6 20.0 22.4 29.9 30.1 27.0 20.0 27.0

Loan Growth (%) 22.9 20.0 20.3 16.5 17.1 29.4 27.2 26.9 16.5 26.9

CASA Ratio (Reported, %) 32.0 32.8 33.8 32.8 31.4 30.4 31.0 32.8

Tax Rate (%) 26.1 0.0 14.5 -34.0 35.1 28.5 20.9 30.5 8.6 30.0

Asset Quality

OSRL (INR b) 175.7 178.5 181.4 176.4 162.3 175.0 163.9 176.4

OSRL (%) 6.6 6.9 6.5 6.0 5.2 5.2 4.6 6.0

Gross NPA (INR b) 67.5 89.0 86.3 87.7 94.1 98.8 100.2 104.3 87.7 104.3

Gross NPA (%) 2.6 3.4 3.1 3.0 3.0 2.9 2.8 2.8 3.0 2.8

E: MOSL Estimates

Bank of IndiaCMP: INR229 Neutral� Business growth is expected to remain strong, with both loans and

deposits growing by 27% YoY.

� NIM is expected to improve marginally to 2.4%.

� Factored investment depreciation of INR1.4b as the bank is expectedto recognize MTM provisions (amortized over three quarters at end-3QFY14) on domestic portfolio.

� While slippages are expected to remain high, sale of loans to ARCsand upgrades of loans on account of restructuring would help containnet slippages. We factor net slippages of 1% and conservatively buildcredit cost of 0.9%.

� Operating profit is expected to grow by 6% YoY. However, led by ahigher tax rate of 30% (v/s write-backs in 4QFY13), profit is expectedto decline 21% YoY.

Key issues to watch out� Asset quality performance has been volatile over last few quarters;

outlook on restructuring and sale to ARCs remains a key.� Business growth is expected to remain strong. However, with lower

capitalization, outlook on loan growth is vital.


NII 90.2 107.1 127.2 144.5

OP 74.6 86.2 96.5 106.2

NP 27.5 27.7 32.1 35.7

NIM (%) 2.3 2.3 2.2 2.2

EPS (INR) 46.1 43.1 49.9 55.5

EPS Gr. (%) -1.1 -6.5 15.7 11.4

ROE (%) 13.6 12.1 12.6 12.7

ROA (%) 0.7 0.5 0.5 0.5

BV/Sh. (INR) 362 378 416 458

ABV/Sh. (INR) 298 321 361 409

Div. Payout (%) 29.4 24.4 24.4 24.4

Valuations

P/E(X) 5.0 5.3 4.6 4.1

P/BV (X) 0.6 0.6 0.6 0.5

P/ABV (X) 0.8 0.7 0.6 0.6

Div. Yield (%) 4.4 4.0 4.6 5.1

Bloomberg BOI IN


M. Cap. (INR b)/(USD b) 147 / 2


1,6,12 Rel Perf. (%) 28 / 29 / -43

C–62April 2014



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Interest Income 84,729 85,955 85,445 84,651 92,696 96,545 100,839 106,577 340,779 396,656



% Change (Y-o-Y) 4.2 -0.2 3.6 2.5 8.0 12.0 12.0 13.4 2.5 11.4

Other Income 6,926 6,081 8,458 10,065 12,383 7,730 8,514 9,774 31,530 38,401

Net Income 25,362 25,649 28,338 30,971 32,294 29,642 30,784 33,484 110,320 126,204



% Change (Y-o-Y) 9.7 -19.9 -2.8 13.9 36.2 11.1 4.9 0.8 -0.9 12.5



Tax Provisions 2,000 2,000 1,800 2,200 1,900 1,250 1,300 1,321 8,000 5,771

Net Profit 7,752 6,610 7,105 7,254 7,921 6,259 4,093 4,105 28,721 22,379

% Change (Y-o-Y) 6.8 -22.4 -18.9 -12.5 2.2 -5.3 -42.4 -43.4 -12.5 -22.1


NIM (Cal, %) 2.1 2.2 2.3 2.3 2.0 2.2 2.1 2.1 2.2 2.1

Deposit Growth (%) 11.5 7.7 3.1 8.8 14.2 16.3 26.2 23.0 8.8 23.0

Loan Growth (%) 4.9 -1.0 0.3 4.2 10.8 30.3 31.8 27.0 4.2 27.0

CD Ratio (%) 67.4 64.1 67.4 68.1 65.4 71.8 70.4 70.3 68.1 70.3

CASA Ratio (%) 23.3 24.8 25.1 24.2 23.1 24.3 23.1 24.2

Tax Rate (%) 20.5 23.2 20.2 23.3 19.3 16.6 24.1 24.3 21.8 20.5

Asset Quality

OSRL (INR b) 129.6 137.7 133.8 159.0 172.7 180.5 184.5 159.0

OSRL (%) 5.7 6.4 6.1 6.6 6.9 6.4 6.4 6.6

Gross NPA (INR b) 45.0 56.1 60.9 62.6 73.3 74.8 80.7 84.3 62.6 84.3

Gross NPA (%) 2.0 2.6 2.8 2.6 2.9 2.6 2.8 2.7 2.6 2.7

E: MOSL Estimates

Canara BankCMP: INR264 Neutral� Aggressive loan growth of 27% YoY at cost of profitability is a concern.

Deposit growth to be healthy at 23% YoY.

� We expect NIM to be stable QoQ at 2.1% on an increase in base rate by25bp to 10.2%.

� In line with the pick-up in balance sheet growth, fee income growth isexpected to be healthy at 22% YoY. However, overall non-interestincome is expected to be flat, led by lower trading gains.

� Model net slippage ratio of 1.3%, compared to 1.9% in 3QFY14, andcredit cost is expected to remain high at 0.6%+.

� As interest rates have stabilized at levels similar to 3QFY14,provisioning on the investment book is assumed to dent earnings.

Key issues to watch out� Outlook on restructuring and sale to ARCs.� Capital consumption is faster-than-expected due to lower

profitability and strong growth. Outlook on business growth andcapital raising plans are key factors.


OP 58.9 66.2 74.4 85.0

NP 28.7 22.4 24.3 28.1

NIM (%) 2.2 2.1 2.0 2.0

EPS (INR) 64.8 48.5 52.6 60.9

EPS Gr. (%) -12.5 -25.2 8.5 15.7

BV/Sh. (INR) 513 515 556 602

ABV/Sh. (INR) 436 413 442 477

ROE (%) 13.3 9.6 9.8 10.5

ROA (%) 0.7 0.5 0.4 0.4

Div. Payout (%) 23.3 23.2 23.2 23.2

Valuations

P/E(X) 4.1 5.4 5.0 4.3

P/BV (X) 0.5 0.5 0.5 0.4

P/ABV (X) 0.6 0.6 0.6 0.6

Div. Yield (%) 4.9 3.7 4.0 4.6

Bloomberg CBK IN


M. Cap. (INR b)/(USD b) 122 / 2


1,6,12 Rel Perf. (%) 16 / 4 / -50

C–63April 2014



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Interest Income 15,367 15,256 15,218 15,835 16,533 17,144 17,397 18,448 61,676 69,521



% Change (YoY) 6.9 6.6 -5.8 -2.3 3.7 8.4 9.7 18.2 1.1 9.9

Other Income 1,243 1,394 2,039 1,969 2,158 1,434 1,563 1,823 6,644 6,978

Net Income 6,160 6,453 7,012 6,766 7,254 6,918 7,018 7,496 26,391 28,686



% Change (YoY) -2.1 -3.2 -5.9 -0.8 15.6 1.2 -9.7 6.7 -3.1 3.1

Other Provisions 628 305 744 982 2,451 110 73 977 2,658 3,611


Tax Provisions 934 1,041 1,088 494 498 1,171 1,185 919 3,556 3,773

Net Profit 1,904 2,151 2,108 2,219 1,057 2,258 2,301 2,045 8,382 7,661

% Change (YoY) 30.2 12.5 4.4 -6.6 -44.5 5.0 9.2 -7.9 7.9 -8.6


NIM (Reported,%) 3.4 3.6 3.5 3.1 3.1 3.3 3.2 3.4

NIM (Cal, %) 3.4 3.6 3.4 3.1 3.1 3.3 3.3 3.2 3.2 3.1

Deposit Growth (%) 17.8 4.8 10.4 17.7 12.7 14.7 11.9 7.5 17.7 7.5

Loan Growth (%) 19.0 8.0 18.9 16.8 8.5 16.3 5.4 2.0 16.8 2.0

CD Ratio (%) 75.2 73.3 76.5 76.5 72.4 74.3 72.1 72.6 76.5 72.6

CASA Ratio (%) 28.4 28.7 29.2 26.9 29.0 30.7 30.4 26.9

Asset Quality

Gross NPA (INR b) 14.1 14.4 15.6 15.5 14.8 14.7 12.0 12.7 15.5 12.7

Gross NPA (%) 3.6 3.8 3.9 3.4 3.5 3.4 2.8 2.8 3.4 2.8

E: MOSL Estimates

Federal BankCMP: INR96 Buy� Consolidation of balance sheet is expected to continue, with YoY loan

growth to be sub 5%. This would primarily be driven by moderation incorporate loan segment.

� Improvement in liability profile and growth in better yielding SMEsegment would provide support to NIM, even as the bank builds itsPSL book. Hence, we factor moderate decline in NIM of ~5bp QoQ.

� Fee income growth is expected to be strong at ~20% YoY.� Over the last couple of quarters, bank has delivered better-than-

expected asset quality performance. While retail and SME slippagesare expected to be contained, corporate segment may lead to higherdelinquency and needs to be watched. Sale of loans to ARCs may helpcontain GNPA increase.

� While PBT is expected to grow by ~10%, higher tax rate expectation of31% (v/s 18% in 4QFY13) will translate into lower profitability (declineof 8% YoY).

Key issues to watch out� Outlook on asset quality in the corporate segment. Sale of loans to

ARCs.� Strategy on balance sheet growth, with consolidation in corporate

segment now largely over.


NII 19.7 21.7 24.7 28.9

OP 14.6 15.0 17.2 20.1

NP 8.4 7.7 8.8 10.4

NIM (%) 3.2 3.1 3.1 3.2

EPS (INR) 9.8 9.0 10.3 12.2

EPS Gr. (%) 7.9 -8.6 15.4 17.6

BV/Sh. (INR) 74.4 81.5 89.6 99.2

ABV/Sh. (INR) 71.1 78.5 86.0 95.2

ROE (%) 13.9 11.5 12.1 12.9

ROA (%) 1.3 1.0 1.0 1.1

Payout (%) 21.3 20.9 20.9 20.9

Valuations

P/E(X) 9.7 10.7 9.2 7.9

P/BV (X) 1.3 1.2 1.1 1.0

P/ABV (X) 1.3 1.2 1.1 1.0

Div. Yield (%) 1.9 1.7 1.9 2.3

Bloomberg FB IN




1,6,12 Rel Perf. (%) 19 / 52 / -19

C–64April 2014



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Interest Income 81,757 86,748 88,904 93,239 96,630 100,933 105,907 111,156 350,649 414,626



% Change (Y-o-Y) 28.2 31.8 27.8 20.6 21.0 15.3 16.4 16.1 22.7 17.1

Other Income 16,494 14,718 19,277 18,036 19,256 18,444 21,483 23,537 68,526 82,719

Net Income 53,018 53,537 59,094 60,989 63,443 63,209 67,830 73,418 226,637 267,900



% Change (Y-o-Y) 31.6 25.5 31.3 17.3 23.6 26.9 24.6 35.7 21.7 27.8



Tax Provisions 6,762 7,184 8,573 7,723 9,351 10,184 11,734 11,625 30,249 42,895

Net Profit 14,174 15,600 18,591 18,898 18,439 19,823 23,257 23,632 67,257 85,150

% Change (Y-o-Y) 30.6 30.1 30.0 30.1 30.1 27.1 25.1 25.0 30.2 26.6


NIM (Reported,%)* 4.6 4.4 4.1 4.3 4.6 4.3 4.2 4.4

NIM (Cal, %)# 4.8 4.9 4.7 4.9 4.8 4.8 4.6 4.7 4.8 4.7

Deposit Growth (%) 22.0 18.8 22.2 20.1 17.8 14.2 22.9 19.0 20.1 19.0

Loan Growth (%) 21.5 22.9 24.3 22.7 21.2 16.0 22.9 23.0 22.7 23.0

CASA Ratio (%) 46.0 46.4 45.4 47.4 44.7 45.0 41.1 47.4 42.4

Tax Rate (%) 32.3 31.5 31.6 29.0 33.6 33.9 33.5 33.0 31.0 33.5

Asset Quality

OSRL (INR b) 2.1 2.3 2.4 4.8 5.2 5.4 5.9 4.8

OSRL (%) 0.1 0.1 0.1 0.2 0.2 0.2 0.2 0.2

Gross NPA (%) 1.0 0.9 1.0 1.0 1.0 1.1 1.0 1.1 1.0 1.1

E: MOSL Estimates; * Reported on total assets; # Cal. on interest earning assets

HDFC BankCMP: INR749 Buy� On the back of healthy retail business, HDFCB is expected to deliver

loan growth of 23% YoY. Deposit growth is expected to be aboveindustry average of ~19% YoY.

� NIM is expected to be stable QoQ and YoY at 4.2% (driven by benefitof FCNR (B) deposits in 3QFY14). Hence, NII is expected to grow ~8%QoQ and 16% YoY.

� Fee income growth is expected to be in low teens. However, bettertrading gains and strong traction in forex will help the bank to reportnon-interest income growth of 30%+.

� Asset quality is expected to be one of the best in the industry, althoughstress in few segments of retail loans may increase, which needs tobe watched. We build provisions of INR4.9b v/s INR3b in 4QFY13.

� Containment of cost is expected to keep PPP growth strong at 36% YoYand earnings are expected to grow by 25%+ YoY.

Key issues to watch out� Commentary on retail portfolio, which has been deteriorating amid a

slowdown in economy. Maintaining asset quality performance willbe the key.

� Branch expansion strategy.


NII 158.1 185.2 223.0 273.7

OP 114.3 146.0 182.2 227.4

NP 67.3 85.2 106.6 133.1

NIM (%) 4.8 4.7 4.7 4.7

EPS (INR) 28.3 35.8 44.8 56.0

EPS Gr. (%) 28.4 26.6 25.1 25.0

BV/Sh. (INR) 152.1 179.5 213.9 256.8

ABV/Sh. (INR) 150.7 177.4 209.9 251.6

RoE (%) 20.3 21.6 22.8 23.8

RoA (%) 1.8 2.0 2.0 2.1

Payout (%) 22.8 23.4 23.4 23.4

Valuations

P/E(X) 26.5 20.9 16.7 13.4

P/BV (X) 4.9 4.2 3.5 2.9

P/ABV (X) 5.0 4.2 3.6 3.0

Div. Yield (%) 0.7 1.0 1.2 1.5

Bloomberg HDFCB IN


M. Cap. (INR b)/(USD b) 1793 / 30


1,6,12 Rel Perf. (%) 6 / 11 / 1

C–65April 2014


ICICI BankCMP: INR1,245 Buy


1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Interest Income 95,457 100,263 101,383 103,653 104,207 108,133 114,550 117,452 400,756 444,341



% Change (YoY) 32.4 34.5 29.0 22.5 19.7 19.9 21.6 14.6 29.2 18.8

Other Income 18,799 20,430 22,146 22,082 24,843 21,665 28,010 27,500 83,457 102,018

Net Income 50,729 54,142 57,136 60,114 63,048 62,100 70,561 71,103 222,121 266,812



% Change (YoY) 32.0 35.7 28.5 15.8 29.3 21.8 28.6 22.2 27.1 25.4



Tax Provisions 6,684 7,293 8,335 8,400 9,468 9,110 12,122 10,573 30,712 41,273

Net Profit 18,151 19,561 22,502 23,041 22,742 23,521 25,322 25,875 83,255 97,460

% Change (YoY) 36.3 30.1 30.2 21.2 25.3 20.2 12.5 12.3 28.8 17.1


NIM (Reported,%) 3.0 3.0 3.1 3.3 3.3 3.3 3.3 3.3

NIM (Cal, %) 2.9 3.0 3.0 3.2 3.1 3.3 3.3 3.3 3.0 3.3*

Deposit Growth (%) 16.1 14.8 9.9 14.5 8.7 9.8 10.7 9.7 14.5 9.7

Loan Growth (%) 21.6 17.6 16.5 14.4 12.3 15.5 16.0 17.3 14.4 17.3

CASA Ratio (%) 39.1 37.5 37.4 38.1 39.0 40.3 39.1 38.1

Asset Quality

OSRL (INR b) 41.7 44.5 45.8 53.2 59.2 68.3 86.0 53.2

OSRL (%) 1.6 1.6 1.6 1.8 2.0 2.1 2.6 1.8

Gross NPA (INR b) 98.2 100.4 97.6 96.1 100.1 100.3 104.0 107.7 96.1 107.7

Gross NPA (%) 3.5 3.5 3.3 3.2 3.2 3.1 3.1 3.1 3.2 3.1

E: MOSL Estimates; * Based on average quarterly numbers

� Loan growth is expected to remain healthy at 17%+ YoY driven by stronggrowth in international portfolio (partially led by depreciation of INRon a YoY basis).

� Margins are expected to be stable QoQ at ~3.3% (flat YoY). Thus, NIIgrowth is expected to be 15%+ YoY (+2% QoQ).

� Fee income growth is expected to be in the mid teens as the lowerbase of corporate fees catches up and traction in retail fees improves.

� We expect the creation of stressed assets to increase in 4QFY14E drivenby restructuring of loans (in line with management guidance). Wefactor credit cost of 85bp v/s 80bp in 3QFY14 and 65bp in 4QFY13.

� Operating profit growth is expected to be healthy at 22%+ YoY, drivenby better contribution of non-interest income and cost containment.However, earnings growth is expected to moderate at 12% YoY, led byan increase in provisioning requirement. Maintain Buy.

Key issues to watch out� Outlook on asset quality and restructuring pipeline for FY15.� Guidance on: (1) growth in domestic loan portfolio, especially retail,

(2) NIM guidance and (3) opex growth - has been one of the drivers ofprofitability in recent quarters.


OP 132.0 165.5 187.6 214.5

NP 83.3 97.5 111.1 126.7

NIM (%) 3.0 3.2 3.3 3.4

EPS (INR) 72 84 96 110

EPS Gr (%) 28.7 17.1 14.0 14.0

BV/Sh (INR)* 459 506 574 651

ABV/Sh (INR)* 446 487.3 548.1 620.8

RoE (%) 14.8 15.4 15.7 15.7

RoA (%) 1.6 1.7 1.7 1.7

Div. Payout (%) 32.2 34.8 34.8 34.8

Valuations

AP/E (x) 14.7 12.3 10.6 9.0

AP/BV (x) 2.3 2.1 1.8 1.5

AP/ABV (x) 2.4 2.1 1.9 1.6

Div. Yield (%) 1.6 2.0 2.3 2.6* BV adj for invt in susbdiaries, Prices adjfor sub value

Bloomberg ICICIBC IN


M. Cap. (INR b)/(USD b) 1,438 / 24

52-Week Range (INR) 1,273 / 759

1,6,12 Rel Perf. (%) 13 / 25 / 0

C–66April 2014



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Interest Income 33,738 34,104 35,465 35,620 36,658 38,013 38,698 40,380 138,926 153,749



% Change (Y-o-Y) 12.0 -1.3 -2.3 2.3 -4.9 -2.4 -4.6 -0.4 2.4 -3.1

Other Income 2,227 3,645 2,402 4,605 5,297 2,769 2,426 3,506 12,879 13,998

Net Income 13,759 14,848 13,837 15,678 16,265 13,706 13,332 14,537 58,122 57,839



% Change (Y-o-Y) 7.6 -1.4 -17.9 -29.2 2.3 -22.3 -15.5 17.1 2.9 -0.5


Profit before Tax 6,945 7,063 3,365 888 4,912 4,807 3,943 3,531 18,262 17,194

Tax Provisions 2,328 2,096 59 -2,032 1,738 1,749 1,298 1,061 2,451 5,846

Net Profit 4,617 4,967 3,306 2,919 3,174 3,058 2,645 2,471 15,811 11,348

% Change (Y-o-Y) 13.5 6.0 -37.1 -15.5 -31.3 -38.4 -20.0 -15.4 -9.5 -28.2


NIM (Rep, %) 3.3 3.1 3.1 2.9 2.7 2.6 2.7 3.1 2.7

NIM (Cal, %) 3.5 3.3 3.2 3.0 2.9 2.8 2.7 2.6 3.2 2.7

Deposit Growth (%) 15.0 12.9 13.5 17.5 17.8 16.4 16.6 16.0 17.5 16.0

Loan Growth (%) 13.8 10.8 13.6 17.5 16.3 15.6 12.3 13.0 17.5 13.0

CD Ratio (%) 73.9 73.0 74.0 75.5 73.0 72.5 71.2 73.3 75.5 73.3

CASA Ratio (%) 29.3 29.0 28.3 27.6 26.9 28.0 27.9 27.6

Tax Rate (%) 33.5 29.7 1.8 -228.9 35.4 36.4 32.9 30.0 13.4 34.0

Asset Quality

Gross NPA (INR b) 15.5 19.8 31.8 35.7 37.2 41.8 38.3 42.9 35.7 42.9

Gross NPA (%) 1.7 2.1 3.2 3.3 3.4 3.8 3.4 3.6 3.3 3.6

E: MOSL Estimates

Indian BankCMP: INR115 Buy� Business growth is expected to be in line with industry average, with

YoY loan and deposit growth of 13% and 16% respectively.� Declining trend in NIM is expected to continue as yields are likely to

be under pressure. We model a 5bp QoQ decline.� Slippages are expected to be at a high level, as economic environment

continues to be challenging. Further, continued restructuring in largeand mid-corporate segment would add stress on balance sheet.

� Employee expenses have been very volatile over the past few quarters.While we have factored a sequential growth of 12%, it is expected todecline 30%+ YoY (4QFY13 had a one-off provision for pensions ofINR3.9b).

� We factor tax rate of 30%, compared to tax write-back of INR2b in4QFY13. While PBT is expected to increase 4x, PAT is expected todecline 15% YoY. Maintain Buy.

Key issues to watch out� Asset quality has been very volatile. Outlook on the same will be

vital for future performance.� Business growth on the back of strong capital availability would be a

key factor.


OP 30.6 28.6 32.8 36.1

NP 15.8 11.3 13.0 14.8

NIM (%) 3.2 2.7 2.7 2.7

EPS (INR) 36.8 24.4 27.9 31.9

EPS Gr. (%) -9.5 -33.6 14.3 14.4

BV/Sh. (INR) 242.9 243.8 265.9 291.0

ABV/Sh (INR) 207 204 216 238

RoE (%) 15.6 10.4 11.0 11.5

RoA (%) 1.0 0.6 0.6 0.6

Div. Payout (%) 20.8 23.8 23.2 23.2

Valuations

P/E (x) 3.1 4.7 4.1 3.6

P/ BV (x) 0.5 0.5 0.4 0.4

P/ABV (x) 0.6 0.6 0.5 0.5

Div. Yield (%) 5.7 4.3 4.8 5.5

Bloomberg INBK IN




1,6,12 Rel Perf. (%) 25 / 55 / -52

C–67April 2014



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Interest Income 16,320 17,279 18,005 18,228 19,122 20,186 21,435 21,907 69,832 82,650

Interest Expense 11,479 12,182 12,227 11,615 12,327 13,186 14,134 14,337 47,504 53,985Net Interest Income 4,841 5,097 5,778 6,612 6,795 6,999 7,301 7,571 22,329 28,666

% Change (YoY) 24.1 21.6 34.2 42.4 40.4 37.3 26.4 14.5 31.0 28.4Other Income 3,188 3,205 3,558 3,679 4,706 4,167 4,803 5,121 13,630 18,797

Net Income 8,029 8,302 9,336 10,291 11,501 11,167 12,104 12,691 35,958 47,462Operating Expenses 3,989 4,104 4,614 4,857 5,085 5,288 5,630 5,933 17,564 21,935

Operating Profit 4,040 4,198 4,722 5,435 6,416 5,879 6,474 6,759 18,395 25,528% Change (YoY) 29.6 26.1 35.2 43.4 58.8 40.0 37.1 24.4 34.0 38.8

Other Provisions 535 491 787 819 1,321 889 1,262 1,273 2,631 4,743Profit before Tax 3,505 3,708 3,935 4,616 5,095 4,991 5,212 5,486 15,764 20,784

Tax Provisions 1,143 1,205 1,262 1,542 1,747 1,688 1,743 1,836 5,152 7,015Net Profit 2,363 2,503 2,673 3,074 3,348 3,302 3,469 3,650 10,612 13,770

% Change (YoY) 31.1 29.6 29.8 37.6 41.7 32.0 29.8 18.7 32.2 29.8Operating Parameters

NIM (Reported,%) 3.2 3.3 3.5 3.7 3.7 3.7 3.7 3.4NIM (Cal, %) 3.3 3.3 3.6 3.7 3.7 3.7 3.7 3.6 3.7 3.9

Deposit Growth (%) 27.8 24.5 26.0 27.7 23.5 11.1 10.1 10.0 27.7 10.0Loan Growth (%) 31.2 30.8 30.8 26.4 27.3 24.2 23.7 23.0 26.4 23.0

CD Ratio (%) 82.6 82.5 83.0 81.9 85.2 92.3 93.3 91.6 81.9 93.3CASA Ratio (%) 27.9 28.0 28.7 29.3 30.0 31.8 32.2 29.3

Tax Rate (%) 32.6 32.5 32.1 33.4 34.3 33.8 33.4 33.5 32.7 33.8Asset Quality

OSRL (INR b) 0.9 0.7 1.1 1.3 1.3 1.5 1.6 1.3OSRL (%) 0.2 0.2 0.3 0.3 0.3 0.3 0.3 0.3

Gross NPA (INR b) 3.7 4.1 4.2 4.6 5.1 5.5 6.3 7.4 4.6 7.4Gross NPA (%) 1.0 1.0 1.0 1.0 1.1 1.1 1.2 1.3 1.0 1.3

E: MOSL Estimates; Quarterly calculated margins based on total assets, yearly on interest earning assets

IndusInd BankCMP: INR501 Buy� Led by challenges in CV/CE segment, the bank has pruned its growth

in this segment. However, strong growth in new focused segments(LAP and car loans) is compensating for the same. In corporatesegment, growth is expected to be driven by working capital. Overallloan growth is expected to be above industry average at 23% YoY.

� Margins are expected to moderate by 10bp QoQ to ~3.5%, as costpressure continues.

� Fee income growth factored at ~28% YoY, primarily driven by tractionin forex related and investment banking fees.

� Slippages are expected to rise but wi ll be manageable. NNPApercentage is expected to be contained below 40bp v/s 31bp in 3QFY14.

� As G-sec yields have been largely stable compared to end-3QFY14,the bank is expected to provide INR350-400m on account of MTM,which will keep provisioning expenses high.

Key issues to watch out� Branch expansion strategy.� Fee income performance.� Outlook on asset quality, with expectations building up on gradual

turnaround in CV/CE space.


OP 18.4 25.5 30.6 36.7

NP 10.6 13.8 16.5 19.6

NIM (%) 3.7 3.9 3.9 3.9

EPS (INR) 20.3 26.3 31.4 37.4

EPS Gr. (%) 18.3 29.4 19.5 19.2

BV/Sh. (INR) 141.9 163.2 189.1 220.0

ABV/Sh. (INR) 140.2 160.8 185.8 215.8

RoE (%) 17.8 17.2 17.8 18.3

RoA (%) 1.6 1.7 1.7 1.7

Payout (%) 20.3 17.5 17.5 17.5

Valuations

P/E (X) 24.7 19.1 16.0 13.4

P/BV (X) 3.5 3.1 2.7 2.3

P/ABV (X) 3.6 3.1 2.7 2.3

Div. Yield (%) 0.6 0.8 0.9 1.1

Bloomberg IIB IN


M. Cap. (INR b)/(USD b) 263 / 4


1,6,12 Rel Perf. (%) 20 / 20 / 5

C–68April 2014



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Interest Income 11,714 11,976 12,389 12,537 13,086 13,173 12,733 13,094 48,616 52,085



% Change (Y-o-Y) 31.0 21.5 24.5 32.7 23.9 19.4 3.3 5.9 27.3 12.5

Other Income 1,710 1,689 1,866 2,004 2,445 1,847 2,146 2,337 7,269 8,774

Net Income 5,142 5,377 5,895 6,241 6,699 6,250 6,307 6,823 22,655 26,079



% Change (Y-o-Y) 48.1 20.2 24.6 29.0 50.3 21.4 4.2 6.4 29.3 18.9

Other Provisions 267 64 246 336 681 181 230 465 912 1,557


Tax Provisions 607 710 764 804 837 820 839 843 2,885 3,340

Net Profit 1,301 1,502 1,623 1,703 1,751 1,763 1,673 1,717 6,130 6,905

% Change (Y-o-Y) 38.4 30.2 35.8 33.7 34.6 17.4 3.1 0.8 34.3 12.6


NIM (Reported,%) 3.3 3.5 3.6 3.7 3.6 3.5 3.4 3.5

NIM (Cal, %) 3.3 3.4 3.6 3.5 3.4 3.5 3.3 3.4 3.4 3.4*

Deposit Growth (%) 14.6 17.8 19.1 17.4 14.1 10.7 3.4 3.0 17.4 3.0

Loan Growth (%) 22.8 20.8 20.2 10.6 13.0 9.4 7.8 15.0 10.6 15.0

CD Ratio (%) 81.5 83.0 83.8 76.9 80.7 82.1 87.4 85.8 76.9 85.8

CASA Ratio (%) 33.3 32.8 31.7 32.5 30.2 32.5 34.7 32.5

Asset Quality

Gross NPA (INR b) 5.9 5.8 5.7 5.7 5.9 5.7 5.8 7.4 5.7 7.4

Gross NPA (%) 2.0 1.9 1.8 1.8 1.8 1.7 1.7 2.0 1.8 2.0

Net NPA (%) 0.19 0.13 0.05 0.03 0.19 0.19 0.21 0.20 0.03 0.20

E: MOSL Estimates; * Based on average quarterly numbers

ING Vysya BankCMP: INR628 Buy� On a sequential basis, loan growth is expected to be ~7%, while on a

YoY basis, it is expected to be in line with industry at 15%.� While build-up of PSL will pressurize NIM, absence of one-off interest

income reversal on restructured loans (negative impact of 20bp in3QFY14) wi ll provide cushion. We factor NIM to improve by ~10bpQoQ in 4QFY14.

� Fee income (ex-forex) is expected to grow by 10% YoY. Forex incomeis expected to be strong and help overall non-interest income.

� Asset quality performance is expected to be manageable, thoughpressure may increase in SME/mid-corporate segment.

� Model provision expense of INR465m v/s INR230m in 3QFY14 andINR336m in 4QFY13, to provide a buffer for credit cost.

Key issues to watch out� Loan growth guidance and outlook on wholesale banking (share in

overall loans have declined from 43% in FY12 to 35% in 3QFY14) andbusiness banking (gaining share in overall loans).

� Low cost deposit growth has been moderate. Strategy on branchexpansion and SA deposits mobilization is a key.

� Emerging asset quality trends in SME and mid-corporate segment.


NII 15.4 17.3 20.2 23.0

OP 9.9 11.8 13.9 16.0

NP 6.1 6.9 7.7 8.8

NIM (%) 3.2 3.1 3.2 3.2

EPS (INR) 39.6 37.4 41.7 47.4

EPS Gr. (%) 30.2 -5.6 11.7 13.6

BV/Sh. (INR) 292.1 373.9 408.9 448.5

ABV/Sh. (INR) 291.7 371.2 403.7 438.6

RoE (%) 14.6 12.1 10.7 11.1

RoA (%) 1.2 1.2 1.2 1.2

Payout (%) 16.1 16.2 16.2 16.2

Valuations

P/E(X) 15.9 16.8 15.1 13.2

P/BV (X) 2.1 1.7 1.5 1.4

P/ABV (X) 2.2 1.7 1.6 1.4

Div. Yield (%) 0.9 0.8 0.9 1.1

Bloomberg VYSB IN


M. Cap. (INR b)/(USD b) 118 / 2


1,6,12 Rel Perf. (%) 9 / 2 / -6

C–69April 2014


KMB Group: Earnings Trends (INR Million)Y/E March FY13 FY14 FY13 FY14E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Kotak Bank (Standalone) 2,824 2,804 3,617 4,362 4,028 3,525 3,400 3,573 13,607 14,526

Kotak Prime 940 1,140 1,050 1,190 1,170 1,250 1,230 1,300 4,307 4,950

Kotak Mah. Investments 40 160 80 50 40 110 110 111 336 371

Lending Business 3,804 4,104 4,747 5,602 5,238 4,885 4,740 4,984 18,250 19,847

YoY Growth (%) 9.0 16.3 23.9 40.1 37.7 19.0 -0.1 -11.0 22.9 8.8

Kotak Securities 230 400 380 130 310 400 460 419 1,145 1,589

Kotak Mah. Capital Co. 60 40 20 40 40 -20 70 33 167 123

Capital Market Business 290 440 400 170 350 380 530 452 1,312 1,712

YoY Growth (%) 20.8 76.0 42.9 -69.1 20.7 -13.6 32.5 166.1 -0.4 30.5

Intl. Subsidiaries -50 80 50 -10 -100 10 90 50 60 50

Kotak Mah. AMC & Trustee Co. 40 -50 110 20 70 170 120 120 35 480

Kotak Investment Advisors 80 90 60 80 10 40 70 80 307 200

Asset Management Business 70 120 220 90 -20 220 280 250 401 730

YoY Growth (%) -58.8 50.0 266.7 -43.8 -128.6 83.3 27.3 177.8 -0.8 81.9

Consol. PAT excluding Kotak Life 4,164 4,664 5,367 5,862 5,568 5,485 5,550 5,686 19,964 22,289

YoY Growth (%) 6.8 20.8 28.7 24.5 33.7 17.6 3.4 -3.0 20.4 11.7

Kotak OM Life Insurance 320 470 530 580 710 440 600 530 1,900 2,280

Consolidation Adjust. -50 -112 -125 214 -3 -96 -240 200 21 -150

Consol. PAT Including Kotak Life 4,435 5,022 5,772 6,656 6,275 5,829 5,910 6,416 21,885 24,419

YoY Growth (%) 6.6 16.0 24.6 27.8 41.5 16.1 2.4 -3.6 19.4 11.6

E: MOSL Estimates

Kotak Mahindra BankCMP: INR778 NeutralLending business� Profit from the lending business is expected to decline by 10%+ YoY,

led by standalone bank (expect PAT decline of ~18% YoY). Kotak Prime'sPAT is expected to grow ~10% YoY.

� For the standalone bank, we expect loan growth to be moderate at12% YoY and PAT to decline with high MTM provisions.

�� Margins are expected to decline QoQ. Credit cost (including standardasset provisioning) expected to be ~35bp (30bp in 4QFY13).

� Deposit growth is expected to be at 14% YoY.Capital Market and Asset Management business� On a YoY basis, profitability of Kotak Securities is expected to be strong

as base of 4QFY13 had an exceptional expense booked of INR300m.Adjusted for this, PAT is expected to decline marginally.

� In the Asset Management business, profitability is expected to remainstable sequentially. Overall contribution of capital market and assetmanagement business would continue to be low at near 10%.

Key issues to watch out� Asset quality trends in the CV segment.� Amid the challenging economic environment, KMB has significantly

moderated its loan growth. With capitalization of 17.9% (Tier I), bankis positioned to participate in the recovery. Outlook on growth is akey.

Financials & Valuation (Standalone, INR b)Y/E March 2013 2014E 2015E 2016E

NII 32.1 37.0 41.0 47.5

OP 21.6 25.7 28.2 32.4

NP 13.6 14.5 16.7 19.1

NIM (%) 4.6 4.6 4.6 4.7

EPS (INR) 29.3 32.7 37.1 42.3

EPS Gr. (%) 18.5 11.6 13.4 13.9

Cons. BV. (INR) 204.3 236.0 272.0 313.0

Cons. RoE (%) 15.5 14.9 14.6 14.4

RoA (%) 1.8 1.7 1.7 1.7

Payout (%) 2.8 2.9 2.9 2.9

Valuations

P/E(X) (Cons.) 26.5 23.8 21.0 18.4

P/BV (X) (Cons.) 3.8 3.3 2.9 2.5

P/ABV (X) (Cons.) 3.9 3.4 2.9 2.6

Div. Yield (%) 0.1 0.1 0.1 0.1

Bloomberg KMB IN


M. Cap. (INR b)/(USD b) 598 / 10


1,6,12 Rel Perf. (%) 8 / -1 / 1

C–70April 2014



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Interest Income 42,872 44,146 44,687 45,343 47,177 46,758 47,232 49,526 177,048 190,693



% Change (YoY) 10.6 16.9 5.7 13.6 16.1 10.7 2.2 5.3 11.5 8.4

Other Income 4,084 4,068 3,778 4,617 5,381 3,119 3,408 5,063 16,547 16,971

Net Income 15,343 15,639 15,822 16,755 18,451 15,928 15,712 17,840 63,559 67,931



% Change (YoY) 11.9 21.5 12.0 25.5 21.4 -10.4 -7.3 3.1 17.5 1.5



Tax Provisions 1,730 1,592 -39 -1,202 2,022 232 730 751 2,081 3,734

Net Profit 3,914 3,022 3,264 3,079 3,534 2,514 2,243 2,338 13,279 10,629

% Change (YoY) 10.4 80.2 -7.9 16.2 -9.7 -16.8 -31.3 -24.1 16.3 -20.0


NIM (Rep, %) 2.8 2.8 2.8 2.8 2.9 2.8 2.7 2.8

NIM (Cal,%) 2.7 2.7 2.7 2.7 2.8 2.7 2.6 2.5 2.7 2.6

Deposit Growth (%) 9.4 9.8 7.9 12.8 11.5 6.7 8.3 11.0 12.8 11.0

Loan Growth (%) 16.0 12.5 11.7 15.2 12.4 9.2 8.4 10.0 15.2 10.0

CD Ratio (%) 71.3 71.8 72.7 73.3 71.8 73.3 72.7 72.7 73.3 72.7

CASA Ratio (%) 24.0 24.1 23.9 23.9 23.5 24.5 24.2 23.9

Tax Rate (%) 30.7 34.5 -1.2 -64.0 36.4 8.4 24.6 24.3 13.5 26.0

Asset Quality

OSRL (INR b) 105.7 109.4 109.9 99.4 102.7 94.1 96.9 99.4

OSRL (%) 9.3 9.2 8.9 7.6 8.0 7.3 7.2 7.6

Gross NPA (INR b) 33.8 34.7 36.9 41.8 43.0 48.9 51.8 55.2 41.8 55.2

Gross NPA (%) 3.0 2.9 3.0 3.2 3.4 3.8 3.9 3.9 3.2 3.9

Oriental Bank of CommerceCMP: INR223 Buy� Bank is cautiously growing its balance sheet. Hence, loan and deposit

growth each is expected to be lower than industry at 10% YoY.� Margins are expected to moderate QoQ to 2.7%. Moderate loan growth

and ~15bp YoY decline in NIM will keep NII growth low at 5% YoY.� Pressure on asset quality is expected to continue. Hence, factor net

slippage ratio of 2.3% (stable QoQ). Sale of loans to ARCs may howeverhelp contain headline GNPA. We build credit cost of 1.2% v/s 0.9% in3QFY14.

� Post 3QFY14 earnings, bank had guided for a restructuring pipeline ofINR11b, which is expected to translate into rising proportion ofrestructured loans.

� Increase in provisions is expected to be driven by high provisioningfrom depreciation on investments and increase in provision on taxes,with the creation of DTL, in turn resulting in lower earnings (declineof 24% YoY).

Key issues to watch out� Outlook on restructuring pipeline and sale of assets to ARCs.� Business growth outlook and de-bulking of liability franchise.� Deduction of DTL from reserves in accordance with RBI guidelines.


OP 36.9 37.5 41.4 44.5

NP 13.3 10.6 12.4 13.9

NIM (%) 2.7 2.6 2.6 2.5

EPS (INR) 45.5 35.4 41.3 46.3

EPS Growth (%) 16.3 -22.1 16.6 12.1

BV/Sh. (INR) 414.7 435.7 467.4 502.9

ABV/Sh. (INR) 350 345 364 390

RoE (%) 11.5 8.4 9.1 9.5

RoA (%) 0.7 0.5 0.5 0.5

Div. Payout (%) 23.4 23.2 23.2 23.2

Valuations

P/E (x) 4.9 6.3 5.4 4.8

P/BV (x) 0.5 0.5 0.5 0.4

P/ABV (x) 0.6 0.6 0.6 0.6

Div. Yield (%) 4.1 3.2 3.7 4.2

Bloomberg OBC IN




1,6,12 Rel Perf. (%) 27 / 38 / -30

C–71April 2014



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Interest Income 105,540 104,280 105,273 103,788 104,045 107,335 109,839 115,686 418,933 436,905



% Change (YoY) 18.5 5.6 5.5 14.2 5.8 10.1 13.1 16.4 10.8 11.4

Other Income 11,680 9,072 9,720 11,740 13,421 8,993 9,384 10,527 42,159 42,326

Net Income 48,611 45,548 47,038 49,527 52,496 49,149 51,596 54,524 190,724 207,764



% Change (YoY) 14.8 0.2 0.2 -2.9 4.7 0.1 0.8 1.5 2.8 1.8



Tax Provisions 5,627 3,935 5,747 2,423 6,320 1,306 3,569 3,772 17,741 14,967

Net Profit 12,457 10,656 13,056 11,317 12,753 5,055 7,554 7,952 47,477 33,314

% Change (YoY) 12.7 -11.6 13.5 -20.5 2.4 -52.6 -42.1 -29.7 -2.8 -29.8


NIM (Rep, %) 3.6 3.5 3.5 3.5 3.5 3.5 3.6 3.5

NIM (Cal, %) 3.5 3.4 3.4 3.4 3.5 3.5 3.6 3.5 3.4 3.4

Deposit Growth (%) 18.9 17.3 8.2 3.2 3.0 1.2 9.0 14.5 3.2 14.5

Loan Growth (%) 21.2 18.4 13.2 5.1 3.6 6.5 9.7 14.0 5.1 14.0

CD Ratio (%) 76.4 73.5 77.1 78.8 76.9 77.4 77.5 78.5 78.8 78.5

CASA Ratio (%) 35.6 37.0 38.4 40.9 39.6 40.7 40.4 40.9

Tax Rate (%) 31.1 27.0 30.6 17.6 33.1 20.5 32.1 32.2 27.2 31.0

Asset Quality

OSRL (INR b) 240.5 259.0 285.3 305.3 319.1 348.2 312.9 305.3

OSRL (%) 8.2 8.8 9.6 9.9 10.5 11.1 9.6 9.9

Gross NPA (INR b) 99.9 140.2 140.0 134.7 150.9 165.3 166.0 169.7 134.7 169.7

Gross NPA (%) 3.3 4.7 4.6 4.3 4.8 5.1 5.0 4.7 4.3 4.7

Punjab National BankCMP: INR744 Buy� Loan growth is expected to improve QoQ (+8%) as the strategy of

consolidation of balance sheet is now behind. On a YoY basis, loangrowth is also expected to be 14%.

� NIM is expected moderate marginally to ~3.5% as focus of themanagement to grow in low yielding segments (top corporate andsecured retail) will impact overall yields.

� Fee income growth is expected to be at 17% YoY, with a pick-up in bothforex income and CEBs.

� Asset quality has remained volatile, with significant improvement in3QFY14. While management is confident of continuation of theimproving trend, we remain cautious and factor net slippage ratio of1.8% v/s 0.6% in 3QFY14.

� Higher provisioning, mainly due to provisions on depreciation oninvestment, and increase in taxes is expected to impact earnings.

Key issues to watch out� Management strategy: (1) balance sheet growth, (2) liability mix and

(3) asset quality management.� Pipeline of restructured loans and sale of loans to ARCs.


OP 109.1 111.1 122.4 139.1

NP 47.5 33.3 41.8 46.9

NIM (%) 3.4 3.4 3.3 3.2

EPS (INR) 134.3 92.0 115.3 129.7

EPS Gr. (%) -6.7 -31.5 25.3 12.5

BV/Sh. (INR) 884.1 947.51,035.9 1,135.4

ABV/Sh. (INR) 751.0 791.5 860.5 960.6

ROE (%) 16.5 10.2 11.6 11.9

ROA (%) 1.0 0.6 0.7 0.7

Div. Payout (%) 23.3 23.2 23.2 23.2

Valuations

P/E(X) 5.5 8.1 6.5 5.7

P/BV (X) 0.8 0.8 0.7 0.7

P/ABV (X) 1.0 0.9 0.9 0.8

Div. Yield (%) 3.6 2.5 3.1 3.5

Bloomberg PNB IN


M. Cap. (INR b)/(USD b) 269 / 4


1,6,12 Rel Perf. (%) 29 / 46 / -15

C–72April 2014



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Interest Income 289,148 296,256 303,654 307,883 317,649 339,015 348,705 370,059 1,196,571 1,375,427



% Change (YoY) 14.6 4.9 -3.0 -4.4 4.0 10.9 13.1 17.8 2.4 11.5

Other Income 35,007 33,279 36,267 55,426 44,277 33,386 41,903 56,375 160,348 175,941

Net Income 146,176 143,204 148,030 166,251 159,862 155,292 168,308 186,916 603,661 670,378



% Change (YoY) 12.9 -1.6 7.3 -19.1 -7.6 -14.2 -2.2 0.6 -1.6 -5.8



Tax Provisions 19,688 18,699 17,268 2,804 14,443 9,079 12,345 12,814 58,459 48,682

Net Profit 37,516 36,581 33,961 32,992 32,411 23,750 22,343 27,359 141,050 105,864

% Change (YoY) 136.9 30.2 4.1 -18.5 -13.6 -35.1 -34.2 -17.1 20.5 -24.9


NIM (Reported, %) 3.6 3.3 3.3 3.2 3.2 3.2 3.2 3.3

NIM (Cal, %) 3.7 3.4 3.4 3.2 3.2 3.3 3.3 3.2 3.3 3.1

Deposit Growth (%) 16.1 16.5 15.6 15.2 14.0 14.0 16.7 18.0 15.2 18.0

Loan Growth (%) 18.9 17.2 15.6 20.5 15.7 19.0 17.5 16.0 20.5 16.0

CASA Ratio (%) 46.1 45.0 45.5 46.5 44.7 43.6 43.9 46.5

Tax Rate (%) 34.4 33.8 33.7 7.8 30.8 27.7 35.6 31.9 29.3 31.5

Asset Quality

OSRL (INR b) 164 219 238 322 330 392 394 322

OSRL (%) 1.8 2.4 2.4 3.1 3.1 3.6 3.4 3.1

Gross NPA (INR b) 472 492 535 512 609 642 678 689 512 689

Gross NPA (%) 5.0 5.2 5.3 4.8 5.6 5.6 5.7 5.5 4.8 5.5

E: MOSL Estimates

State Bank of IndiaCMP: INR1,918 Buy� Loan growth is expected to be in line with industry at 16%+ YoY, while

deposit growth is expected to pick up to ~18%.� Expect NIM to improve by ~5bp QoQ to 3.2%. An increase in 20bp base

rate in 4Q would help NIMs.� Fee income growth is expected to be moderate at 4% YoY.� Seasonally, 4Q is better in terms of recovery, with performance of

agriculture segment expected to be better. Hence, overall net slippageratio is expected to decline to 1.4% (3.5% in 3QFY14). Credit costestimates remain conservative at 90bp.

� Higher tax rate of 32% v/s 8% in 4QFY13 is expected to impact earningsgrowth.

� Excluding subsidiaries, the stock trades at 0.9x FY15E consolidated BV(adjusted for value of insurance) and 8.4X FY15E EPS.

Key issues to watch out� Execution of business strategy as guided by the management in last

quarter's analyst meet.� Performance relating to asset quality (post 3QFY14 earnings,

managment had guided for restructuring of INR100b) and sale of assetsto ARCs.


OP 310.8 292.9 345.9 407.1

NP 141.0 105.9 127.9 152.5

NIM (%) 3.3 3.1 3.1 3.0

EPS (INR) 262 181 218 260

EPS Gr. (%) 14.6 -30.9 20.5 19.4

BV (INR) 1,769 1,887 2,065 2,277

ABV (INR) 1,475 1,416 1,520 1,699

RoE (%) 15.9 10.2 10.9 11.9

RoA (%) 1.0 0.6 0.7 0.7

Div. Payout (%) 18.5 18.6 18.5 18.5

Valuations

Cons. P/E (x) 7.0 10.1 8.4 7.0

Cons. P/BV (x) 1.0 1.0 0.9 0.8

Cons P/ABV (x) 1.2 1.3 1.2 1.1

Div. Yield (%) 2.2 1.5 1.8 2.1

Bloomberg SBIN IN


M. Cap. (INR b)/(USD b) 1,312 / 22

52-Week Range (INR) 2,469 / 1,453

1,6,12 Rel Perf. (%) 19 / 3 / -26

C–73April 2014



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Interest Income 60,699 61,098 63,199 66,251 68,573 72,711 75,503 78,782 251,247 295,569



% Change (YoY) 14.6 11.4 9.9 8.7 4.8 5.6 3.8 4.2 11.0 4.6

Other Income 4,912 5,458 6,395 8,755 7,563 6,112 6,799 7,593 25,520 28,066

Net Income 23,129 23,960 25,310 28,550 26,654 25,656 26,434 28,211 100,949 106,955



% Change (YoY) 8.7 5.6 5.8 5.4 11.4 -3.7 -7.1 -22.2 6.3 -6.7



Tax Provisions 2,370 2,310 1,986 2,397 1,700 801 3,023 1,720 9,063 7,243

Net Profit 5,116 5,546 3,024 7,894 5,602 2,081 3,489 3,533 21,579 14,706

% Change (YoY) 10.2 57.3 53.5 2.1 9.5 -62.5 15.4 -55.2 20.7 -31.9


NIM (Reported,%) 3.0 3.0 3.0 2.9 2.6 2.5 2.5 3.0

NIM (Cal, %) 3.0 3.0 2.9 2.8 2.5 2.5 2.4 2.4 2.8 2.4

Deposit Growth (%) 11.5 15.6 16.6 18.3 22.3 27.0 19.1 19.0 18.3 19.0

Loan Growth (%) 19.1 19.4 21.3 17.0 16.0 25.7 20.0 15.0 17.0 15.0

CD Ratio (%) 78.3 78.1 79.4 80.3 74.6 77.2 79.5 77.5 80.3 77.5

CASA Ratio (%) 30.9 30.5 31.3 31.0 29.1 28.3 28.8 31.0

Tax Rate (%) 31.7 29.4 39.6 23.3 23.3 27.8 46.4 32.7 29.6 33.0

Asset Quality

Gross NPA (INR b) 65.4 64.7 63.8 63.1 70.9 80.6 87.8 91.2 63.1 91.2

Gross NPA (%) 3.8 3.7 3.4 3.0 3.5 3.6 3.9 3.8 3.0 3.8

E: MOSL Estimates

Union Bank of IndiaCMP: INR137 Neutral� Loan growth is expected to slow down amid the challenging

environment to 15% YoY, though deposit growth will be at 19% YoY.� While pressure on cost of funds has increased, lower dependence on

bulk borrowings will help the bank to contain cost of funds. Hence,factored flat NIM of 2.5% (on an already lower base).

� Fee income growth is expected to be in mid teens.� Stress creation is expected to moderate. Hence, we factor net slippage

ratio of 1.2% and credit cost of 0.8% for 4QFY14E. Sale of loans to ARCsmay help contain GNPA/improve profitability.

� Restructured loans portfolio would continue to rise. At end-3QFY14,management had given the guidance of additional restructuring ofINR18b+ in 4Q.

� Higher provisioning and tax rate (33% v/s 24% in 4QFY13) to impactearnings negatively.

Key issues to watch out� Asset quality performance .� CASA ratio and margins are on a continuous decline. Trends and efforts.

to improve the same need to be watched.


NII 75.4 78.9 91.3 104.7

OP 55.8 52.1 57.9 64.0

NP 21.6 14.7 17.3 19.8

NIM (%) 2.8 2.4 2.4 2.4

EPS (INR) 36.0 23.2 27.2 31.3

EPS Gr. (%) 11.5 -35.6 17.6 14.9

BV/Sh. (INR) 262.9 263.2 284.1 308.1

ABV/Sh. (INR) 224 205 213 232

RoE (%) 15.0 9.0 10.0 10.6

RoA (%) 0.7 0.4 0.4 0.4

Div. Payout (%) 25.8 23.2 23.2 23.2

Valuations

P/E(X) 3.8 5.9 5.0 4.4

P/BV (X) 0.5 0.5 0.5 0.4

P/ABV (X) 0.6 0.7 0.6 0.6

Div. Yield (%) 5.8 3.4 4.0 4.6

Bloomberg UNBK IN




1,6,12 Rel Perf. (%) 27 / 9 / -56

C–74April 2014



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Interest Income 18,863 19,864 21,336 22,877 23,979 25,013 25,141 26,188 82,940 100,321



% Change (Y-o-Y) 33.3 35.9 36.7 42.4 39.6 28.2 13.9 8.3 37.3 21.1

Other Income 2,881 2,768 3,132 3,794 4,421 4,461 3,879 4,547 12,574 17,308

Net Income 7,603 8,009 8,975 10,175 11,012 11,182 10,533 11,458 34,762 44,185



% Change (Y-o-Y) 41.4 25.6 41.3 47.3 47.9 47.1 9.1 5.1 39.1 24.8

Other Provisions 300 317 567 975 970 1,791 133 737 2,160 3,631


Tax Provisions 1,395 1,469 1,645 1,742 1,821 1,626 1,858 1,799 6,251 7,105

Net Profit 2,901 3,061 3,423 3,622 4,008 3,711 4,156 4,125 13,007 16,001

% Change (Y-o-Y) 34.3 30.2 34.7 33.2 38.2 21.3 21.4 13.9 33.1 23.0


NIM (Reported,%) 2.8 2.9 3.0 3.0 3.0 2.9 2.9 2.9

NIM (Cal, %) 2.8 2.9 3.1 3.0 2.9 3.0 3.0 2.9 2.8 2.8

Deposit Growth (%) 15.2 18.6 20.2 36.2 29.9 29.2 20.7 12.5 36.2 12.5

Loan Growth (%) 16.4 22.9 22.3 23.7 24.3 13.6 14.7 15.0 23.7 15.0

Customer assets growth (%) 32.4 32.5 27.4 30.9 24.2 13.8 14.4 30.9

CD Ratio (%) 76.7 80.4 77.8 70.2 73.4 70.6 73.9 71.8 70.2 71.8

CASA Ratio (%) 16.3 17.3 18.3 18.9 20.2 20.4 20.9 18.9 21.1

Asset Quality

Gross NPA (INR b) 1.1 1.0 0.8 0.9 1.0 1.3 2.0 2.4 0.9 2.4

Gross NPA (%) 0.3 0.2 0.2 0.2 0.2 0.3 0.4 0.4 0.2 0.4

E: MOSL Estimates

Yes BankCMP: INR414 Buy� Loan and deposit growth is expected to be in line with industry at 15%

and 13% respectively.

� NIM is expected to decline marginally QoQ as cost pressure continues.

� Fee income growth (ex-financial markets) is expected to moderate,led by expected muted performance of financial advisory stream.Transaction and branch banking fees are expected to be healthy.

� YES has been able to maintain asset quality performance despitechallenging macro-economic environment. We expect this trend tocontinue.

� We expect PPP growth of 5% YoY and PAT growth of 14% YoY.

Key issues to watch out� Rollout of branch network.� Capital raising plans.� Outlook on asset quality.


NII 22.2 26.9 31.0 37.1

OP 21.4 26.7 29.9 35.4

NP 13.0 16.0 18.2 20.9

NIM (%) 2.8 2.8 2.9 3.0

EPS (INR) 36.3 44.6 50.8 58.1

EPS Gr. (%) 31.0 23.0 13.9 14.4

BV/Sh. (INR) 161.9 198.0 239.0 286.0

ABV/Sh. (INR) 161.8 197.1 236.1 281.3

RoE (%) 24.8 24.8 23.3 22.1

RoA (%) 1.5 1.5 1.5 1.5

Div. Payout (%) 19.2 19.1 19.1 19.1

Valuations

P/E(X) 11.4 9.3 8.1 7.1

P/BV (X) 2.6 2.1 1.7 1.4

P/ABV (X) 2.6 2.1 1.8 1.5

Div. Yield (%) 1.5 1.8 2.0 2.3

Bloomberg YES IN


M. Cap. (INR b)/(USD b) 149 / 2


1,6,12 Rel Perf. (%) 30 / 28 / -22

C–75April 2014

March 2014 Results Preview | Sector: Financials - NBFC

Financials – NBFCCompanies Covered

Bajaj Finance

HDFC

IDFC

LIC Housing Fin

M & M Financial

Power Finance Corp

Rural Electric. Corp.

Shriram Transport F in.

Growth rates to remain healthy; asset quality - a key monitorableThe performance of retail NBFCs (barring SHTF and MMFS) is expected to remainhealthy, led by strong loan growth (+18% YoY), stable margins and better collections(in line with seasonal trends). Improving macro-economic environment, stableliquidity conditions and interest rates etc led to a sharp rally in stocks. Incrementaldata points are indicating to bottoming out of the CV cycle; however, disruption inwinter crops (in interiors of India) due to unseasonal rains/hail storm is a concern.Further, the election period is also likely to impact collections.

We roll over our target prices to FY16; we retain Neutral rating on MMFS, RECL andPOWF and Buy on SHTF, BAF, HDFC, LICHF. We have placed IDFC Under Review due touncertainty relating to its banking plan. SHTF, HDFC and LICHF are our top picks amongNBFCs.

Housing finance companies: 4QFY14 is likely to remain a steady quarter, as growth inindividual loans remains buoyant and asset quality healthy. We expect overall loangrowth for HDFC and LICHF to remain healthy at +18%. Margins are likely to improveon a sequential basis (seasonal trend). No major regulatory changes were announcedduring the quarter. HDFC remains our preferred pick; we also like LICHF on valuation.

Infrastructure finance companies: Infrastructure sector continues to remain in a fragilestate, although over past few months, government has cleared projects worth overINR2t, which will have a positive impact on the sector but with a lag. While the reformsinitiated on discoms have started to bear results and is a relief for PSU NBFCs like RECLand POWF, fuel availability remains the most critical issue for power sector and aresolution is still not in sight.

Sunesh Khanna ([email protected]) / Alpesh Mehta ([email protected])

CMP Rating Net Interest Income Operating Profit Net Profit



Financials - NBFCBajaj Finance 1,790 Buy 6,865 35.7 3.9 4,025 42.0 7.5 2,136 30.4 10.0HDFC 884 Buy 22,584 14.0 28.2 23,772 11.9 33.3 17,115 10.0 33.9IDFC 122 UR 6,560 2.0 -1.2 8,129 -5.3 12.4 5,258 0.0 5.0LIC Housing Fin 236 Buy 5,386 16.9 17.7 5,045 22.2 12.4 3,892 23.1 19.2M & M Financial 252 Neutral 7,525 13.5 11.2 4,989 6.8 16.2 2,475 -22.3 50.8Power Finance Corp 193 Neutral 22,950 33.0 6.2 22,738 33.1 6.5 15,913 23.6 2.3Rural Electric. Corp. 229 Neutral 18,073 28.3 -0.4 18,278 27.7 -0.2 12,864 33.5 0.0Shriram Transport Fin. 763 Buy 9,400 5.2 0.6 7,218 -3.2 -0.8 2,991 -15.8 -0.8NBFC Bkg. Sector Aggregate 99,342 19.9 8.8 94,194 17.3 11.4 62,644 14.2 11.7


C–76April 2014


Comparative valuationCMP (INR) Rating EPS (INR) P/E (x) P/BV (x) RoE (%)


Financials - NBFCBajaj Finance 1,790 Buy 150.8 177.2 211.7 11.9 10.1 8.5 2.2 1.9 1.6 20.4 20.3 20.5Dewan Housing 220 Buy 44.2 54.1 64.6 5.0 4.1 3.4 0.8 0.7 0.6 16.3 17.2 17.7HDFC 884 Buy 35.1 40.2 46.5 25.2 22.0 19.0 4.9 4.4 4.0 25.6 25.3 25.1IDFC 122 UR 13.6 14.8 16.4 9.0 8.3 7.4 1.2 1.1 1.0 14.3 13.9 14.0LIC Housing Fin 236 Buy 24.2 29.0 34.4 9.8 8.1 6.9 1.6 1.4 1.2 17.4 18.0 18.5M & M Financial 252 Neutral 14.6 16.9 19.4 17.2 14.9 13.0 2.8 2.5 2.2 17.3 17.6 17.7Power Finance Corp 193 Neutral 43.9 47.5 52.4 4.4 4.1 3.7 0.9 0.8 0.7 22.0 20.5 19.4Rural Electric. Corp. 229 Neutral 48.2 53.6 63.4 4.7 4.3 3.6 1.1 0.9 0.8 24.5 22.9 22.8Shriram Trans. Fin. 763 Buy 60.4 61.6 69.5 12.6 12.4 11.0 2.0 1.8 1.6 16.4 14.5 14.4NBFC Aggregate 11.4 10.2 8.9 2.3 2.0 1.7 20.1 19.5 19.5


70

85

100

115

130

Mar-13 Jun-13 Sep-13 Dec-13 Mar-14

Sens ex IndexMOSL Financia ls Index

80

90

100

110

120

Dec-13 Jan-14 Feb-14 Mar-14

Sensex IndexMOSL Financia ls Index

Among infrastructure finance companies, we expect growth to remain healthy forRECL and POWF at +20%. However, growth rate for IDFC is likely to remain flat on a YoYbasis. Margins are likely to moderate during the quarter. While large accounts areunlikely to fall into NPA category, asset quality will remain a key monitorable in thecurrent environment.

Asset finance companies: Retail asset finance companies (AFCs) delivered strongperformance both in terms of growth and asset quality in the current cycle. AmongAFCs under our coverage, we expect BAF to report healthy AUM growth and stableasset quality led by its multi-product strategy. While SHTF is likely to deliver lowergrowth due to underlying stress in the CV segment, margins are likely to remain flat;asset quality will remain a key monitorable. While MMFS has performed impressivelyduring this cycle, continued challenges in South India and unusual rains/hail storm ininterior India could impact collections and asset quality. MMFS is likely to deliver 20%AUM growth (compared to +30% delivered since the last 16 quarters). Asset qualityperformance is also likely to be below trend as GNPA may not improve more than 20-30bp (v/s average improvement of 120bp witnessed since the last seven years). SHTFis our preferred pick in this segment.

C–77April 2014



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Income from operations 6,670 6,858 7,917 7,803 8,837 8,742 10,274 10,557 29,248 38,411

Other Operating Income 343 497 333 520 446 875 429 583 1,689 2,333

Operating Income 7,013 7,355 8,250 8,323 9,283 9,617 10,703 11,141 30,937 40,744

YoY Growth (%) 56.0 49.6 36.9 34.5 32.4 30.7 29.7 33.9 37.5 31.7

Interest expenses 2,636 2,947 3,209 3,265 3,314 3,821 4,097 4,276 12,057 15,508

Net Income 4,377 4,408 5,041 5,058 5,969 5,796 6,607 6,865 18,880 25,236

YoY Growth (%) 41.6 35.9 26.6 31.4 36.4 31.5 31.1 35.7 26.4 33.7

Other income 18 11 36 112 41 23 116 61 177 241

Total Income 4,394 4,419 5,077 5,170 6,010 5,819 6,722 6,925 19,057 25,477



YoY Growth (%) 41.2 40.9 35.1 40.6 38.8 25.2 29.9 42.0 25.6 34.1

Provisions and Cont. 320 534 513 450 639 523 795 763 1,818 2,719


Tax Provisions 677 616 762 746 911 857 1,007 1,126 2,803 3,901

Net Profit 1,387 1,287 1,608 1,638 1,757 1,670 1,941 2,136 5,913 7,506

YoY Growth (%) 73.1 37.3 32.2 56.7 26.7 29.8 20.8 30.4 45.5 26.9

Loan Growth (%) 60.5 52.6 41.3 35.4 32.8 29.0 32.2 36.0 36.3 36.0

Cost to Income Ratio (%) 45.9 45.0 43.5 46.2 45.3 47.8 45.1 42.2 45.1 45.0

Tax Rate (%) 32.8 32.4 32.1 31.3 34.1 33.9 34.2 33.5 33.5 34.9

E: MOSL Estimates

Bajaj FinanceCMP: INR1,790 Buy� Bajaj Finance continues to ride high on its diversification strategy.

Healthy growth momentum in the consumer and SME segments willdrive +35% YoY AUM growth.

� Margins are likely to remain stable YoY at 11.8%.

� We expect NII to grow at 36% YoY and 12% QoQ.

� Asset quality is expected to remain stable. As in December 2013,GNPAs were 1.15% and NNPAs were 0.23%.

� We expect provisions of INR1.1b v/s INR746m during 3QFY13 and INR1bduring the last quarter.

� We expect net profit to grow at 30% YoY to INR2.1b.

� The stock trades at 1.9x FY15E and 1.6x FY16E BV. Maintain Buy.

Key issues to watch out� Business growth momentum as the company has been growing its

AUMs at 30%+ rate for the past 16 quarters.� Margin trends.� Asset quality trends in CE and two-wheeler business.


PPP 10.5 14.1 17.3 21.4

PAT 5.9 7.5 8.8 10.5

EPS (INR) 119 151 177 212

EPS Gr. (%) 21 27 18 19

BV/Share (INR) 676 801 947 1,121

RoA on AUM (%) 3.8 3.6 3.2 3.1

RoE (%) 21.9 20.4 20.3 20.5

Payout (%) 12.6 14.0 14.0 14.0

Valuations

P/E (x) 15.1 11.9 10.1 8.5

P/BV (x) 2.6 2.2 1.9 1.6

Div. Yield (%) 0.8 1.3 1.5 1.8

Bloomberg BAF IN



52-Week Range (INR) 1,823 / 966

1,6,12 Rel Perf. (%) 8 / 38 / 36

C–78April 2014



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Interest Income 46,924 49,273 50,604 54,207 52,844 56,245 58,418 64,938 200,695 232,445



YoY Change (%) 19.1 11.5 24.5 13.6 16.6 27.1 14.5 14.0 18.5 15.2

Profit on Sale of Inv. 202 941 963 1,049 0 868 346 692 3,156 1,906

Other operating income 2,223 2,480 853 1,405 2,726 2,347 1,434 1,760 7,274 8,266

Net Operating Income 15,467 17,281 17,206 22,263 17,933 19,003 19,400 25,036 72,216 81,372

YoY Change (%) 18.8 17.3 18.3 14.4 15.9 12.3 12.8 12.5 16.9 12.7

Other Income 74 78 84 116 80 80 111 103 351 375

Total Income 15,541 17,358 17,290 22,379 18,013 19,083 19,511 25,139 72,567 81,747


Pre Provisioning Profit 14,199 15,881 15,851 21,247 16,378 17,363 17,827 23,772 67,178 75,340

YoY Change (%) 19.0 17.2 17.6 14.9 15.3 12.3 12.5 11.9 16.9 12.1

Provisions 400 400 400 250 300 150 250 280 1,450 980

PBT (Excl Exceptional) 13,799 15,481 15,451 20,997 16,078 17,213 17,577 23,492 65,728 74,360

PBT Ex Invest. profits 13,597 14,540 14,488 19,948 16,078 16,346 17,231 22,800 62,573 72,455

YoY Change (%) 17.3 16.2 16.8 14.3 18.2 18.5 18.9 14.3 16.0 15.8

PBT 13,799 15,481 15,451 20,997 16,078 17,213 17,577 23,492 65,728 74,360

YoY Change (%) 17.4 15.7 16.3 15.1 16.5 13.5 13.8 11.9 16.0 13.1

Provision for Tax 3,780 3,970 4,050 5,445 4,350 4,550 4,800 6,377 17,245 20,077

PAT 10,019 11,511 11,401 15,552 11,728 12,663 12,777 17,115 48,483 54,283

YoY Change (%) 18.6 18.6 16.2 17.3 17.1 11.0 12.1 10.0 17.6 12.0

E: MOSL Estimates

HDFCCMP: INR884 Buy� HDFC's loan growth (net of sell-downs) is likely to remain healthy at

+18% YoY and 4.5% QoQ.� Spreads should largely be stable at 2.3% levels. HDFC has not changed

home loan rates during the quarter.� Non-interest income is likely to remain flat on a YoY basis.� Asset quality has remained healthy over the past several quarters and

the trend is likely to continue. In 3QFY14, GNPAs were 0.77% on a 90-day overdue basis.

� We model provisions of INR280m v/s INR250m seen in 4QFY13.

� The stock trades at 4.4x FY15E AP/ABV and 17.7x FY15E AP/AEPS (priceadjusted for value of other businesses and book value adjusted forinvestments made in those businesses). Maintain Buy.

Key issues to watch out� Loan growth and movement in spreads (on individual loans).� Asset quality trends; progress in recovery of a corporate account that

became NPL during 1QFY14.� Loam Mix.


PPP 67.2 75.3 86.4 100.6

PAT 48.5 54.3 62.2 71.9

Adj. EPS (INR) 26.2 29.8 34.3 39.8

EPS Gr. (%) 15.3 14.0 14.9 15.9

BV/Sh (INR) 161.7 180.5 199.5 221.8

ABV/Sh (INR) 108.5 127.1 146.1 168.4

RoAA (%) 2.7 2.6 2.5 2.5

Core RoE (%) 23.8 25.6 25.3 25.1

Payout (%) 46.6 46.4 46.4 46.4

Valuations

AP/E (x) 26.0 21.7 17.7 15.3

P/BV (x) 5.5 4.9 4.4 4.0

AP/ABV (x) 6.3 5.1 4.2 3.6

Div. Yield (%) 1.4 1.6 1.8 2.1

Bloomberg HDFC IN


M. Cap. (INR b)/(USD b) 1,367 / 23


1,6,12 Rel Perf. (%) 2 / 0 / -12

C–79April 2014



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

NII 6,190 6,430 6,590 6,430 6,860 6,860 6,640 6,560 25,640 26,920

% Change (YoY) 28 29 23 10 11 7 1 2 22 5

- Infra Loans 5,550 5,960 6,110 6,030 6,310 6,420 6,100 6,035 23,650 24,865

- Treasury 640 470 480 400 550 440 540 525 1,990 2,055

Other operating income 1,492 1,568 1,646 2,412 2,715 1,061 1,126 1,913 7,118 6,814

- Asset management 640 690 870 890 930 1,040 1,010 1,137 3,090 4,117

- IB and Broking 90 210 80 400 130 80 190 153 780 553

- Fixed Income 120 190 300 570 1,390 (180) (300) 280 1,180 1,190

- Loan related/others 642 478 396 552 265 121 226 343 2,068 955

Principal investments 20 490 70 1,290 630 960 760 1,064 1,870 1,850

Other Income 14 16 59 9 6 6 22 17 98 50

Net Income 7,716 8,504 8,365 10,141 10,211 8,886 8,548 9,553 34,726 37,198

% Change (YoY) 8 (19) (6) 23 32 4 2 (6) (0) 7


Operating profit 6,556 7,263 7,032 8,581 8,826 7,512 7,233 8,129 29,432 31,700

% Change (YoY) 10 (21) (8) 27 35 3 3 (5) (0) 8

Provisions 1,026 305 518 1,647 592 501 365 660 3,496 2,117

PBT 5,530 6,957 6,514 6,934 8,234 7,011 6,868 7,469 25,936 29,583

Tax 1,713 2,188 1,965 1,646 2,627 2,099 1,811 2,175 7,511 8,712

PAT 3,817 4,770 4,549 5,289 5,607 4,912 5,057 5,294 18,425 20,870

Less: Consol Adjustments 19 13 (2) 32 34 44 50 36 62 165

Consol PAT 3,798 4,757 4,551 5,257 5,573 4,868 5,007 5,258 18,362 20,705

% Change (YoY) 21 (9) 19 57 47 2 10 0 18 13

E: MOSL Estimates

IDFCCMP: INR122 Under Review� IDFC has consciously moderated the loan growth in the wake of

infrastructure slowdownt. Loan growth is expected to remain flat QoQand decline 5% YoY.

� We expect margins to remain flat on a YoY basis, translating into sub1% YoY growth in NII.

� Revenue from Investment Banking and Broking business is expectedto improve sequentially, given the increased activity levels in capitalmarkets. Loan related and other fee income is expected to increasesequentially to INR340m.

� Cost to income ratio on a 12-month rolling basis is likely to remainstable at 15%.

� Asset quality is expected to remain stable. We model provisions ofINR660m, against INR592m in 4QFY13 and INR365m in last quarter.

� The stock trades at 1.1x FY15E and 1x FY16E ABV. Under Review.

Key issues to watch out� Loan growth guidance in the wake of likely improvement in macro

environment.� Movement in spreads and asset quality trends. Business plan relating to banking license


PPP 29.4 31.7 34.7 38.8

Cons. PAT 18.4 20.7 22.3 24.9

EPS (INR) 12.1 13.6 14.8 16.4

EPS Gr. (%) 18.0 12.5 8.2 11.4

BV/Share (INR) 90.3 100.5 111.4 123.7

ABV/Share (INR) 81.3 91.4 102.4 114.6

RoAA (%) 2.9 3.1 3.2 3.3

Core RoE (%) 15.1 16.4 15.8 15.6

Payout (%) 25.0 25.6 25.6 25.6

Valuations

P/E (x) 10.1 9.0 8.3 7.4

P/BV (x) 1.4 1.2 1.1 1.0

P/ABV (x) 1.3 1.1 0.9 0.8

Div. Yield (%) 2.1 2.5 2.7 3.0

* Adj for value of subs

Bloomberg IDFC IN


M. Cap. (INR b)/(USD b) 185 / 3


1,6,12 Rel Perf. (%) 24 / 23 / -34

C–80April 2014



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Interest Income 17,179 18,081 19,050 20,281 21,303 22,237 23,120 24,911 74,591 91,570



YoY Growth (%) -2.9 5.8 13.5 24.3 29.7 28.2 23.8 16.9 10.3 24.1

Fees and other income 494 537 500 466 477 787 644 693 1,998 2,601

Net Income 3,999 4,073 4,196 5,074 5,024 5,321 5,221 6,079 17,343 21,645

YoY Growth (%) -5.0 4.0 10.6 17.5 25.6 30.7 24.4 19.8 6.8 24.8

Operating Expenses 521 679 673 946 613 744 733 1,034 2,819 3,123


YoY Growth (%) -8.2 1.2 8.0 19.2 26.8 34.9 27.4 22.2 4.7 27.5

Provisions and Cont. 436 69 319 -35 171 341 -75 -222 789 215


Tax Provisions 766 894 843 1,002 1,135 1,136 1,297 1,375 3,504 4,943

Net Profit 2,277 2,430 2,362 3,162 3,105 3,101 3,266 3,892 10,232 13,364

YoY Growth (%) -11.2 147.0 -22.7 24.7 36.3 27.6 38.2 23.1 11.9 30.6

Loan Growth (%) 24.1 23.2 23.8 23.4 22.1 20.4 18.9 16.5 23.4 16.5

Borrowings Growth (%) 23.7 24.2 22.1 22.6 22.6 20.6 20.3 18.0 22.6 18.0


Tax Rate (%) 25.2 26.9 26.3 24.1 26.8 26.8 28.4 26.1 25.5 27.0

E: MOSL Estimates

LIC Housing FinanceCMP: INR236 Buy� LICHF's loan growth is likely to moderate to 16.5% YoY on the back of

continued decline in corporate loans segment.� Individual loan segment is likely to grow by +17% YoY and 5% QoQ,

while developer segment is expected to remain flat QoQ. Share ofbuilder loan is likely to fall below 3% of overall book.

� We expect margins to improve QoQ at 2.4% and remain falt on YoYbasis. During the quarter, LICHF has not made changes in rates despitecompetitive pressures.

� Asset quality is likely to remain stable. We model provisioning reversalof INR220m on account of provisioning release for teaser loans (v/sprovisioning reversal of INR75m in 3QFY14)


Key issues to watch out� Asset quality in the developer category, outlook on performance in

developer portfolio.� Margin trends; LICHF has been disappointing on the margin front for

the past few quarters. Margins bounced back in the last quarter;however, sustaining/improving margins will be key.

� Overall asset quality trends.


PPP 14.5 18.5 21.4 25.0

Adj. PAT 10.2 12.2 14.7 17.4

Adj. EPS (INR) 20.3 24.2 29.0 34.4

EPS Gr. (%) 2.2 19.2 20.2 18.5

BV/Sh (INR) 128.3 149.3 172.6 200.1

RoAA (%) 1.5 1.5 1.5 1.5

RoE (%) 16.8 17.4 18.0 18.5

Payout (%) 21.7 20.9 20.9 20.9

Valuations

P/E (x) 11.6 9.8 8.1 6.9

P/BV (x) 1.8 1.6 1.4 1.2

Div. Yield (%) 1.6 2.0 2.3 2.7

Bloomberg LICHF IN


M. Cap. (INR b)/(USD b) 119 / 2


1,6,12 Rel Perf. (%) 8 / 10 / -14

C–81April 2014



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE


Other Income 39 135 53 153 60 96 53 91 533 300

Total income 8,390 9,292 10,009 11,256 10,985 12,127 12,711 13,902 38,947 49,726

YoY Growth (%) 49.8 43.9 35.0 32.9 30.9 30.5 27.0 23.5 39.4 27.7


Net Income 4,916 5,394 5,665 6,784 6,224 6,875 6,820 7,615 22,759 27,533



YoY Growth (%) 56.6 51.8 35.6 31.2 28.1 27.6 13.2 6.8 41.7 17.8

Provisions 854 836 815 329 1,252 1,262 1,796 1,232 2,833 5,542


Tax Provisions 784 914 975 1,160 995 1,151 854 1,282 3,833 4,283

Net Profit 1,610 1,876 2,002 3,184 1,912 2,212 1,641 2,475 8,674 8,241

YoY Growth (%) 57.6 38.4 29.4 39.9 18.7 17.9 -18.0 -22.3 39.9 -5.0

AUM growth (%) 39.3 35.6 32.1 35.1 34.8 30.2 27.1 21.9 35.1 21.9

Borrowings growth (%) 44.8 38.9 34.5 35.1 36.8 30.0 33.3 30.7 35.1 30.7


Provisions/Operating Profits (%) 26.3 23.1 21.5 7.0 30.1 27.3 41.9 24.7 18.5 30.7

Tax Rate (%) 32.8 32.7 32.8 26.7 34.2 34.2 34.2 34.1 30.6 34.2

E: MOSL Estimates; We have not included EO inc. of INR154m in 4QFY13 for presentation purpose; According taxes have been adj.

M & M Financial ServicesCMP: INR252 Neutral� MMFS' AUM growth is likely to moderate to +21% YoY and 2.5% QoQ

on the back of +10% sequential decline in disbursements.

� Margins are likely to decline 90bp on a YoY basis to 9.6%; during thelast quarter, margins stood at 9.5%

� Asset quality is unlikely to show substantial improvement. GNPAs arelikely to improve 20-30bp to 4.5% v/s average 120bp averageimprovement witnessed in 4Q since last seven years.

� Asset quality pressure will lead to higher provisions of INR1.2b v/sINR330m during 4QFY13 and INR1.8b during the last quarter.

� The stock trades at 2.5x FY15E and 2.2x FY16E BV. Maintain Neutral.

Key issues to watch out� Asset quality trends given the issues during last quarter.� Margin trends as the company raised lending rates during the quarter. � AUM growth and guidance.


PPP 15.3 18.1 21.4 24.4

PAT 8.7 8.2 9.5 10.9

EPS (INR) 15.7 14.6 16.9 19.4

EPS Gr. (%) 29.8 -6.6 15.6 14.7

BV/Share (INR) 79.1 89.7 102.2 116.5

ABV/Share (INR) 76.1 83.4 91.9 102.5

RoA on AUM (%) 3.9 2.9 2.8 2.7

RoE (%) 23.4 17.3 17.6 17.7

Payout (%) 27.1 27.5 26.3 26.3

Valuations

P/E (x) 16.1 17.2 14.9 13.0

P/BV (x) 3.2 2.8 2.5 2.2

P/ABV (x) 3.3 3.0 2.7 2.5

Div. Yield (%) 1.4 1.4 1.5 1.7

Bloomberg MMFS IN


M. Cap. (INR b)/(USD b) 142 / 2


1,6,12 Rel Perf. (%) -5 / -18 / 11

C–82April 2014




Interest Income 39,000 41,300 44,190 45,920 49,590 52,230 54,180 56,842 170,410 212,842



YoY Gr (%) 40.8 36.6 53.0 40.4 39.4 43.1 28.8 33.0 52.7 35.7

Other Income 90 160 90 250 100 220 140 272 590 732

Net Operational Income 14,030 14,910 16,870 17,510 19,530 21,330 21,750 23,221 63,320 85,831

YoY Gr (%) 36.9 37.0 50.5 36.6 39.2 43.1 28.9 32.6 40.2 35.6

Exchange gain/(loss) -770 -240 -460 90 -1,070 -1,350 -290 -540 -1,380 -3,250

Total Net Income 13,260 14,670 16,410 17,600 18,460 19,980 21,460 22,681 61,940 82,581

YoY Gr (%) 39.6 151.2 6.4 35.2 39.2 36.2 30.8 28.9 41.5 33.3

Operating Expenses 286 351 389 426 319 721 402 483 1,450 1,925

YoY Gr (%) 5.8 6.2 34.0 4.1 11.8 105.6 3.4 13.5 12.1 32.7


YoY Gr (%) 40.6 159.9 5.9 36.2 39.8 34.5 31.4 29.3 42.4 33.3

Provisions 20 -30 900 -90 910 1,370 510 648 800 3,438

PBT 12,954 14,350 15,122 17,264 17,231 17,889 20,548 21,550 59,690 77,219

Tax 3,240 3,978 3,940 4,320 5,230 5,159 5,206 6,026 15,478 21,621

Tax Rate (%) 25.0 27.7 26.1 25.0 30.4 28.8 25.3 28.0 25.9 28.0

PAT 9,714 10,372 11,182 12,944 12,001 12,730 15,343 15,524 44,212 55,597

YoY Gr (%) 41.6 147.5 0.9 57.9 23.5 22.7 37.2 19.9 45.8 25.8

Adjusted PAT (For Forex) 10,292 10,545 11,522 12,877 12,746 13,691 15,559 15,913 45,235 57,909

YoY Gr (%) 38.6 31.4 45.6 59.9 23.8 29.8 35.0 23.6 44.0 28.0

E:MOSL Estimates; Quarterly and annual numbers would not match due to differences in classification

Power Finance CorporationCMP: INR193 Neutral� Loan growth is expected to remain healthy at +18% YoY. On a sequential

basis, loans and borrowings are expected to grow by 7% and 8%respectively.

� NII is expected to grow at a healthy 30% YoY on the back of healthyloan growth.

� We expect MTM loss of INR500m during the quarter, compared with again of INR290m loss incurred in 3QFY14.

� We expect NIM to remain flat at 4.75% QoQ.� Barring a couple of accounts, asset quality at large remained healthy.

However, it will be a key monitorable due to issues related to powersetor.

� The stock trades at 0.8x FY15E and 0.7x FY16E BV. Maintain Neutral.

Key issues to watch out� Growth trends and asset quality performance against the backdrop

of challenges in fuel linkages issues affecting power generationcompanies.

� Movement in spreads and yields on assets.� Disbursements to SEBs for transnational finance.


PPP 60.5 80.7 92.5 102.9

Adj. PAT 45.2 57.9 62.7 69.2

Adj. EPS (INR) 34.3 43.9 47.5 52.4

EPS Gr. (%) 43.4 28.1 8.2 10.3

BV/Share (INR) 183.9 214.5 249.9 289.1

Adj. RoAA (%) 3.1 3.2 3.0 2.8

RoE (%) 20.1 22.0 20.5 19.4

Payout (%) 24.2 27.3 23.2 23.2

Valuations

P/E (x) 5.6 4.4 4.1 3.7

P/BV (x) 1.1 0.9 0.8 0.7

Div. Yield (%) 3.6 5.1 4.8 5.3

Bloomberg POWF IN


M. Cap. (INR b)/(USD b) 255 / 4


1,6,12 Rel Perf. (%) 12 / 32 / -12

C–83April 2014



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Interest Income 29,968 32,405 35,014 35,522 39,141 41,672 43,290 45,310 132,910 169,412



YoY Gr (%) 28.1 34.8 42.3 38.0 43.3 36.2 26.9 28.3 36.0 33.9

Other Operational Income 717 514 322 726 675 432 440 714 2,279 2,261

Net Operational Income 12,372 13,316 14,626 14,813 17,377 17,864 18,591 18,787 55,126 73,047

YoY Gr (%) 30.4 36.1 41.0 37.1 40.5 34.2 27.1 26.8 39.2 32.5

Other Income -133 79 -34 112 -374 -815 -478 -659 23 -2,325

Total Net Income 12,239 13,394 14,591 14,925 17,004 17,049 18,114 18,129 55,149 70,722

YoY Gr (%) 27.2 52.3 27.9 36.3 38.9 27.3 24.1 21.5 35.2 28.2

Operating Expenses 456 585 507 656 564 514 599 716 2,203 2,393

YoY Gr (%) 8.7 34.2 -34.9 -2.2 23.8 -12.1 18.3 9.2 -5.3 8.7

% to Income 3.7 4.4 3.5 4.4 3.3 3.0 3.3 4.0 4.0 3.4


YoY Gr % 28.0 53.2 32.5 38.8 39.5 29.1 24.4 22.0 37.7 29.1

Op. Profit adj. forex gain /loss 12,158 12,949 14,305 14,310 17,020 17,488 18,315 18,278 53,721 71,101

YoY Gr (%) 31.0 34.7 46.5 38.4 40.0 35.1 28.0 27.7 37.8 32.4

Provisions 0 0 250 1,057 560 340 754 589 1,307 2,244

PBT 11,784 12,809 13,835 13,212 15,880 16,194 16,760 16,823 51,640 66,085

YoY Gr (%) 31.6 53.2 33.2 29.0 34.8 26.4 21.1 27.3 36.1 28.0

Tax 3,016 3,270 3,568 3,609 4,343 5,088 4,484 4,590 13,463 18,504

Tax Rate (%) 25.6 25.5 25.8 27.3 27.3 31.4 26.8 27.3 26.1 28.0

PAT 8,767 9,539 10,267 9,603 11,537 11,107 12,277 12,234 38,176 47,581

YoY Gr (%) 32.5 52.8 33.4 25.9 31.6 16.4 19.6 27.4 35.5 24.6

Adjusted PAT 9,046 9,643 10,430 9,633 11,958 11,761 12,863 12,864 38,752 49,445

YoY Gr (%) 35.6 34.3 47.9 25.5 32.2 22.0 23.3 33.5 35.6 27.6

E:MOSL Estimates; Quarterly and annual numbers would not match due to differences in classification

Rural Electrification CorpCMP: INR229 Neutral� Loan growth is expected to remain healthy at +17% YoY and +4.5%

QoQ.� RECL's margins have stood at 4.94% in 3QFY14 (highest in the last four

years). This was led by an improvement in yields, while it alsomaintained a tight leash on cost of funds. For 4QFY14, we factor 10bpmoderation in margins.

� We factor forex MTM loss of INR860m v/s INR800m in 3QFY14.� Barring couple of accounts, asset quality at large remained healthy,

though it will remain a key monitorable due to issues in power sectorenvironment. We model provisions of INR590m during the quarter.


Key issues to watch out� Growth trends and asset quality performance against the backdrop

of challenging macro environment.� Movement in spreads and yields on assets.� Disbursements to SEBs for transnational finance.


PPP 52.9 68.3 75.3 88.7

PAT 38.2 47.6 53.0 62.6

EPS (INR) 38.7 48.2 53.6 63.4

EPS Gr. (%) 35.4 24.6 11.3 18.1

BV/Share (INR) 178.2 214.4 254.7 302.2

RoAA (%) 3.3 3.5 3.3 3.4

RoE (%) 23.6 24.5 22.9 22.8

Payout (%) 24.9 24.9 24.9 24.9

Valuations

P/E (x) 5.9 4.7 4.3 3.6

P/BV (x) 1.3 1.1 0.9 0.8

Div. Yield (%) 3.6 4.5 5.0 6.0

Bloomberg RECL IN


M. Cap. (INR b)/(USD b) 226 / 4


1,6,12 Rel Perf. (%) 12 / 6 / -9

C–84April 2014


Quaterly Performance (INR Million)Y/E March FY13 FY14 FY13 FY14E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Interest Income 8,876 10,946 12,046 13,104 13,856 15,598 16,832 17,419 45,028 63,705

Interest expenses 6,173 6,859 7,350 8,057 8,692 9,809 10,405 10,967 28,439 39,873


YoY Growth (%) 1.8 16.0 51.0 74.1 91.1 41.6 36.9 27.9 36.1 43.7

Securitization income 5,323 4,590 4,252 3,892 3,859 3,262 2,919 2,948 18,057 12,988

Net Income (Incl. Securitization) 8,025 8,678 8,947 8,939 9,022 9,051 9,347 9,400 34,645 36,820

YoY Growth (%) 2.6 4.0 11.3 11.0 12.4 4.3 4.5 5.2 7.4 6.3

Fees and Other Income 702 314 300 569 1,084 529 379 364 1,885 2,356

Net Operating Income 8,727 8,991 9,247 9,508 10,106 9,580 9,726 9,763 36,530 39,176

YoY Growth (%) 5.2 4.5 11.0 14.4 15.8 6.6 5.2 2.7 8.9 7.2



YoY Growth (%) 2.5 4.4 12.1 14.2 12.1 3.5 0.4 -3.2 8.5 2.8

Provisions 2,026 2,106 2,126 2,193 2,764 2,643 3,008 2,937 8,508 11,352


Tax Provisions 1,543 1,638 1,662 1,713 1,435 1,457 1,254 1,290 6,556 5,436

Net Profit 3,219 3,376 3,460 3,552 3,410 3,268 3,014 2,991 13,606 12,683

YoY Growth (%) -7.3 12.7 14.3 15.3 6.0 -3.2 -12.9 -15.8 8.2 -6.8

AUM Growth (%) 13.3 15.8 18.6 23.5 25.2 22.0 14.7 9.1 23.5 9.1

Disbursement Growth (%) 12.2 28.6 42.0 54.6 47.9 17.5 -7.7 -6.3 34.6 10.0

Securitization Inc. / Net Inc. (%) 61.0 51.1 46.0 40.9 38.2 34.0 30.0 30.2 49.4 33.2


Tax Rate (%) 32.4 32.7 32.5 32.5 29.6 30.8 29.4 30.1 32.5 30.0

E: MOSL Estimates; * Quaterly nos and full year nos will not tally due to different way of reporting financial nos

Shriram Transport FinanceCMP: INR763 Buy� AUMs likely to grow at 9%/1.5% YoY/QoQ. We expect disbursements

to decline 6% YoY and increase 12% QoQ.

� Calculated margins on AUM are expected to remain flat sequentiallyat 6.9%. Hence, NII (including securitization income) should grow 5%YoY.

� Recent interactions indicate collection efficiencies have improved;however asset quality continues to be a key monitorable.

� We have factored higher provisions of INR3b v/s INR2.2b in 4QFY13and INR2.6b reported during the last quarter.

� The stock trades at 1.8x FY15E and 1.6x FY16E consolidated BV. MaintainBuy.

Key issues to watch out� Business growth, momentum and management commentary on the

same.� Cost of borrowings.� Asset quality trends

Financials & Valuation (INR b)Y/E March 2013 2014E 2015E 2016ENet Inc. 34.6 36.8 39.8 44.7

PPP 28.7 29.5 31.1 34.4

PAT 13.6 12.7 12.8 14.4

Cons.PAT 14.6 13.7 13.9 15.7

EPS (INR) 60.0 55.9 56.4 63.5

EPS Gr. (%) 7.9 -6.8 0.8 12.7

Cons. EPS (INR) 64.7 60.4 61.6 69.5

Cons. EPS Gr. (%) 11.9 -6.6 2.0 12.7

BV/Share (INR) 317.1 365.5 414.3 469.2

Conso. BV (INR) 323.0 375.9 429.9 490.8

RoA on AUM (%) 2.6 2.1 2.0 2.0

RoE (%) 20.6 16.4 14.5 14.4

Payout (%) 13.6 13.3 13.3 13.3

Valuations

P/Cons. EPS (x) 11.8 12.6 12.4 11.0

P/Cons. BV (x) 2.4 2.0 1.8 1.6

Div. Yield (%) 0.9 0.8 0.8 1.0

Bloomberg SHTF IN


M. Cap. (INR b)/(USD b) 173 / 3


1,6,12 Rel Perf. (%) 23 / 18 / -9

C–85April 2014

March 2014 Results Preview | Sector: Healthcare

Expected quarterly performance summary (INR million)CMP Rating Sales EBITDA Net Profit


31.3.14 % YoY % QoQ % YoY % QoQ % YoY % QoQAlembic Pharma 284 Buy 4,922 30.2 1.3 960 46.4 -6.1 613 40.3 -7.1Biocon 424 Neutral 7,099 12.6 1.4 1,597 52.0 -4.9 946 41.5 -9.9Cadila Health 1,026 Buy 19,151 18.8 2.3 3,410 19.1 15.5 2,116 -19.4 12.1Cipla 384 Neutral 25,931 31.8 0.5 4,890 19.4 4.6 2,855 6.7 0.4Divis Labs 1,369 Buy 7,795 20.0 13.4 3,118 24.4 9.1 2,223 22.3 1.5Dr Reddy’ s Labs 2,561 Buy 34,830 6.0 -1.4 8,882 30.5 -9.0 5,427 38.5 -4.6Glenmark Pharma 566 Buy 15,568 20.6 -2.4 3,179 30.0 -11.8 1,647 10.8 -22.7GSK Pharma 2,574 Neutral 6,724 6.4 6.6 1,459 -10.4 30.7 1,490 -12.7 37.3IPCA Labs. 845 Buy 8,085 20.4 -2.9 1,929 35.5 -11.3 1,353 79.3 -2.8Lupin 936 Buy 28,156 19.4 -1.6 5,560 14.9 -14.4 3,630 21.0 -10.0Ranbaxy Labs 365 Se l l 27,308 11.6 -5.6 2,400 31.5 -7.8 1,021 20.5 -14.9Sanofi India 3,002 Neutral 4,080 12.4 -11.5 731 56.2 -16.5 662 49.5 -20.0Sun Pharma 573 Buy 39,278 35.0 2.5 15,144 34.0 -6.1 11,231 22.9 -10.8Torrent Pharma 524 Buy 10,963 25.9 8.0 2,516 14.4 17.0 1,793 50.6 13.5Sector Aggregate 239,889 19.6 0.0 55,773 26.4 -4.0 37,007 20.5 -5.5

Alok Dalal ([email protected]) / Hardick Bora ([email protected])

Aggregate EBITDA to grow 26% on strong operational performance byDr Reddy's, Ranbaxy, Glenmark, IPCA Labs, Biocon and Alembic PharmaFor 4QFY14, we expect sales growth of 20% YoY and EBITDA growth of 26% YoY forour Healthcare Universe (excluding one-offs). Adjusted PAT is likely to grow 20%YoY slower than EBITDA growth, mainly due to higher taxes for most companies.Strong operational performance would be driven by continued foreign currencybenefits along with low base effect for certain companies.

EBITDA growth would be mainly led by strong performance by Dr Reddy's, Ranbaxy,Glenmark, IPCA Labs and Alembic Pharma. Growth for Dr Reddy's, Glenmark andAlembic Pharma would be driven by increased contribution from recently launchedproducts in the US and better sales mix. Ranbaxy is likely to report high growth onan abnormally low base of 1QCY13, which was impacted by gLipitor recall and highconsent decree related costs. Biocon too is likely to report robust EBITDA growth ona low base. Among MNCs, Sanofi India may report healthy operational performance,aided by strong growth in exports and uptick in the domestic formulations business.GSK Pharma may continue to report YoY decline in EBITDA due to supply chain-related issues and impact of price controls.

At the macro level, we expect operating performance for the rest of our universe toyet again benefit from favorable currency. Marginal QoQ appreciation in the INRagainst the USD may lead to material MTM gains on loans/derivatives. However,adjusted PAT is likely to grow 20%, slower than EBITDA due to higher tax rate.

HealthcareCompanies Covered

Alembic Pharma

Biocon

Cadila Healthcare

Cipla

Divi’s Laboratories

Dr Reddy’s Labs.

GSK Pharma

Glenmark Pharma

IPCA Laboratories

Lupin

Ranbaxy Labs.

Sanofi India

Sun Pharmaceuticals

Torrent Pharma

Note: Historic numbers exclude upside from one-off opportunities

C–86April 2014


Core 4QFY14 performance: Key highlightsWe expect Dr Reddy's, Ranbaxy, Glenmark, IPCA Labs, Biocon and Alembic Pharma torecord strong operational performance. We attribute the following company-specificreasons for this performance:1. Dr Reddy's: We expect Dr Reddy's to report strong growth of 31% in core EBITDA.

This would be driven by robust 40% growth in core US business, in turn aided byrecent launches like gDacogen, gReclast and gVidaza. Strong growth is likely inRussia, too. We expect core EBITDA margin to expand 480bp YoY to 25.5%.

2. Ranbaxy: Ranbaxy would witness a sharp increase in EBITDA on an abnormally lowbase. The company's operations in 1QCY13 (quarter ending March 2013) wereimpacted by gLipitor recall and high consent decree related expenses. With steadycontribution from Absorica, Ranbaxy is likely to report a healthy quarter on thislow base, despite loss of sales from the Taonsa ban.

3. Glenmark: We expect Glenmark's 4QFY14 performance to be driven by corerevenue growth of 21% YoY, primarily led by US generics. Core EBITDA growth of30% would be faster than revenue growth due to operating leverage benefits andimproving sales mix.

4. IPCA Labs is likely to continue its growth momentum, aided by 24% growth inexport formulations. Improving sales mix aided by higher contribution frombranded formulations is expected to result in 270bp YoY EBITDA margin expansion.

5. Biocon: We expect Biocon to witness strong operational performance, primarilydue to base effect. In 4QFY13, the company had faced a slowdown in its Insulinbusiness and paid bonuses, which led to EBITDA margin decline of 860bp YoY.

6. Alembic Pharma: Alembic is likely to report 30% revenue growth, driven byincreasing contribution from recent launches in the US generic market. EBITDA islikely to grow 46% YoY, driven by improving sales mix.

7. MNCs: We expect GSK Pharma's operating performance to continue to be impactedby supply chain related issues. Sanofi India may report healthy operationalperformance, aided by strong growth in exports and uptick in the domesticformulations business.

Sector viewGenerics� Emerging markets to help improve profitability gradually from FY14.� New launches imperative for driving growth in core US business.� Differentiation becoming imperative - low competition/patent challenge products,

brands, NCE research will be key differentiators.

4QFY14E aggregates excluding one-offsHealthcare Universe YoY Growth (%) EBITDA Margin Net Profit Margin

Aggregates Sales EBITDA Adj PAT Mar-14 Mar-13 Chg. (BP) Mar-14 Mar-13 Chg. (BP)

MNC Pharma 8.6 4.5 -0.8 20.3 21.1 -80 19.7 21.6 -187

Big 5 Generics 19.9 27.8 23.4 23.7 22.3 145 15.5 15.1 44

CRAMS 20.0 24.4 22.3 40.0 38.6 141 28.5 28.0 53

Second Tier generics 20.6 27.7 18.2 20.7 19.5 115 12.9 13.1 -26

Sector Aggregate 19.6 26.5 20.4 23.2 22.0 127 15.4 15.3 11

Note: Above numbers exclude one-offs to facilitate comparison of core operations. Big-5

Generics include Sun, Ranbaxy, Cipla, Dr Reddy's and Lupin.

C–87April 2014


� Increasing MNC interest in Generics space - may lead to large acquisitions/supplyarrangements with Indian companies.

� Top picks: Dr Reddy's, Lupin, Sun Pharma, IPCA Labs and Alembic Pharma.

CRAMS (Contract Research & Manufacturing Services)� Favorable macro trends: India is on the threshold of significant opportunity, given

the optimum combination of strong chemistry & regulatory skills and low-costs.� Top picks: Divi's Laboratories.

MNC Pharma� Portfolio realignment in favor of lifestyle products to drive growth in medium-to-

long term.� Branded generics, patented products and in-licensing to drive long-term growth.� Parent's commitment to listed entity is imperative.� Short-term adverse impact likely from the new pharma policy.

Key developmentsThe major developments during the quarter were enforcement actions imposed bythe US FDA on Ranbaxy and Sun Pharma.1. Ranbaxy's Taonsa plant banned from producing and selling APIs in US

With this ban, none of Ranbaxy's Indian facilities is qualified to supply products tothe US and the entire US business would now be driven by its US facility, OhmLabs. Taonsa has been subjected to certain terms of the consent decree signed byRanbaxy in January 2012.

The management clarified that only 10-12% of its US sales are dependent on APIsmade at Taonsa. Ranbaxy has de-risked its US portfolio by shifting API source forkey products to third parties.

However, with the inclusion of another facility in the consent decree, the cost ofremediation is likely to continue increasing in the near future. We believe thiswill make it difficult for Ranbaxy to achieve industry-average operating marginsin the next two-three years.

2. Import alert on Sun Pharma's Karkhadi plantOn 12 March 2014, the US FDA imposed an import alert on Sun Pharma's Karkhadiplant, which is engaged in manufacturing both APIs and formulations.

The FDA action followed an inspection in November 2013, which resulted inissuance of Form 483 S, the details of which are not available in the public domainat the moment.

The management indicated that the plant is a dedicated facility for cephalosporins.While Sun is working towards resolving the issue, it does not envisage anysignificant financial impact due to the alert.

C–88April 2014


Key launches in the US - hits and misses4QFY14 saw some interesting developments in terms of generic launches in the US.Lupin was able to launch gNiaspan with some exclusivity. Alembic and Torrent Pharmawere among of the few players to receive approval for gMicardis HCT. On the otherhand, Ranbaxy's exclusive copy of generic Diovan and Valcyte continue to be out ofsight.

Hits and missesGeneric Brand US sales

name equivalent Indication (USD m) Competition

Hits Niacin Niaspan CVS 1,120 Teva (launched),

4 other filers

Telmisartan Micardis CVS 254 Mylan (launched)

Hydrochlorothiazide HCT

Miss Valsartan Diovan Anti-hypertensive 1,900 NA

Valgancyclovir Valcyte Cytomegalovirus 400 NA

Infections

Source: MOSL Research

� HitsLupin was second to launch generic NiaspanThis product generated annual US sales of ~USD1b for its innovator, Abbott. Teva wasFTF and launched on 20 September 2013; there is no authorized generic in the market.Lupin's management indicated that their settlement with Abbott will restrict thegeneric competition for 100 days from launch.

Other known para IV players are Sun Pharma (tentative approval), Zydus Cadila, Mylanand Sandoz. They are likely to launch by the end of June 2014.

We expect Lupin to generate USD34m of sales and USD20m of PAT from this launchover the limited competition period. We added INR3/share to our target price tomodel for this upside.

Torrent Pharma and Alembic Pharma launched Micardis HCTMicardis HCT generated ~USD230m in sales prior to generic entry for its innovator,Boehringer Ingelheim. Mylan also received approval along with Torrent and Alembic,while Watson (now Actavis) has tentative approval.

We note that the patent no 6358986 on Micardis HCT, listed on the orange book,expires in January 2020. However, these players received ANDA approval, as theywere not sued by the innovator upon ANDA filing. Hence, we believe this patentprovides an entry barrier for subsequent generic competition.

We expect Torrent and Alembic to generate USD18m/USD10m in sales/PAT over thenext 12 months from this product. The upside could be lower if incremental competitionenters sooner than expected.

C–89April 2014


Currency movement (INR/USD)

Source: Bloomberg

� MissesRanbaxy's generic Diovan still out of sight…While the street was hopeful after dismissal of Mylan's pleas for revoking Ranbaxy'sexclusivity and allowing another generic player in the market, Ranbaxy's exclusivecopy is already late by a year. Despite the recent issuance of import alert on Mohali,the management continues to maintain that Ranbaxy still holds exclusive marketingrights for 180 days and is confident of monetizing it.

Diovan generates USD1.9b in US sales for Novartis. If successfully launched, we expectthis opportunity to generate one-off sales of ~USD100m for Ranbaxy over theexclusivity period. We also expect Novartis to introduce an authorized generic versionthrough its generic unit, Sandoz.

…and generic Valcyte seems to be delayedThe launch of another FTF opportunity for Ranbaxy, generic Valcyte, also seems to bedelayed. The company received tentative approval from the US FDA on 24 June 2008,while litigation with Roche was still ongoing. Subsequent to a win in lower court,Ranbaxy settled with Roche to launch the authorized generic (AG) version of Valcytesometime in March 2013.

Valcyte generates ~USD300m in US sales for Roche. On successful launch, we expectthis opportunity to generate one-off sales of ~USD19m for Ranbaxy over the exclusivityperiod. Since Ranbaxy's is the AG, it will be the only generic player in the market.

INR depreciation to aid sales, marginal MTM gain on forex liabilitiesOn an average, the INR has depreciated against the USD by 14% during 4QFY14 ascompared with 4QFY13. We expect companies with largely unhedged net exports torealize the benefit of favorable currency at the EBITDA level. Companies that arelikely to benefit the most include: (1) Alembic Pharma, (2) Biocon, (3) Cadila, (4) Cipla,(5) Divi's Labs, (6) IPCA, and (7) Dr Reddy's.

On a sequential quarter basis, the INR has appreciated against the USD by 2%. Weexpect companies with large forex debt and derivative exposures to report someMTM gains during the quarter. Companies with large forex liabilities are: (1) Ranbaxy,(2) IPCA, (3) Cadila, and (4) Glenmark.

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C–90April 2014




HealthcareAlembic Pharma 284 Buy 12.5 17.3 23.1 22.7 16.4 12.3 16.9 13.4 10.5 40.8 43.7 44.6Biocon 424 Neutral 19.8 21.8 25.4 21.4 19.5 16.7 11.9 10.9 9.2 13.4 13.5 14.3Cadila Health 1,026 Buy 38.1 46.3 56.2 27.0 22.2 18.3 19.8 16.0 13.0 24.0 24.2 24.4Cipla 384 Neutral 17.8 20.4 24.2 21.5 18.8 15.8 13.5 11.2 9.4 14.0 14.1 14.6Divis Labs 1,369 Buy 61.9 71.8 88.5 22.1 19.1 15.5 16.8 13.5 10.8 29.9 29.3 30.8Dr Reddy’ s Labs 2,561 Buy 129.7 141.5 158.9 19.7 18.1 16.1 13.6 11.9 10.3 23.6 21.1 19.8Glenmark Pharma 566 Buy 23.6 29.1 35.3 24.0 19.4 16.0 13.8 12.0 10.1 19.1 19.5 19.5GSK Pharma 2,574 Neutral 56.2 69.9 87.5 45.8 36.8 29.4 39.7 29.5 22.1 23.6 28.7 34.3IPCA Labs. 845 Buy 37.7 51.8 64.0 22.4 16.3 13.2 13.7 11.2 9.2 27.3 29.8 29.1Lupin 936 Buy 32.1 42.9 49.8 29.1 21.8 18.8 15.9 13.3 11.2 24.1 25.3 23.8Ranbaxy Labs 365 Se l l 11.9 8.8 18.9 30.6 41.7 19.3 18.2 7.9 12.2 -26.9 33.5 16.3Sanofi India 3,002 Neutral 104.1 129.3 151.4 28.8 23.2 19.8 22.4 18.2 15.0 17.9 19.7 20.0Sun Pharma 573 Buy 22.6 26.2 29.8 25.4 21.8 19.3 15.5 13.4 10.2 28.9 27.2 23.6Torrent Pharma 524 Buy 35.4 34.7 41.1 14.8 15.1 12.7 10.3 10.2 8.4 36.3 28.5 28.1Sector Aggregate 24.6 21.2 17.8 15.7 12.8 10.8 22.1 21.0 20.6


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C–91April 2014



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Net Sales 3,666 4,069 3,693 3,781 4,272 4,864 4,857 4,922 15,208 18,914

YoY Change (%) 6.7 2.2 -3.4 10.4 16.5 19.5 31.5 30.2 3.7 24.4


EBITDA 523 647 694 656 715 927 1,022 960 2,520 3,624

Margins (%) 14.3 15.9 18.8 17.3 16.7 19.1 21.1 19.5 16.6 19.2

Depreciation 87 88 89 86 95 99 101 105 350 400

Interest 57 31 39 18 15 26 35 40 146 115

Other Income 2 2 34 1 0 2 2 2 39 6

PBT 381 530 601 552 605 805 888 817 2,063 3,115

Tax 73 105 118 115 139 189 229 204 411 760

Rate (%) 19.1 19.8 19.7 20.9 22.9 23.4 25.8 25.0 19.9 24.4

Reported PAT 308 425 483 437 466 616 659 613 1,652 2,355

Adj PAT 308 425 483 437 466 616 659 613 1,652 2,355

YoY Change (%) 11.9 11.7 9.1 114.9 51.3 45.1 36.6 40.3 27.0 42.5

Margins (%) 8.4 10.4 13.1 11.5 10.9 12.7 13.6 12.4 10.9 12.4

E: MOSL Estimates

Alembic PharmaCMP: INR284 Buy� We expect ALPM's sales to grow 30% YoY to INR4.9b, led by 100% growth

in International generics. Domestic formulations business is likely toreport 13% YoY growth, while total APIs are expected to report a mutedgrowth of 5%.

� EBITDA is likely to grow 46% YoY to INR960m, with EBITDA marginexpanding 220bp to 19.5%, aided by recently launched products in theUS generic market.

� We expect adjusted PAT to grow just 40% YoY to INR613m, slower thanEBITDA due to higher taxes.

� We believe ALPM has a focused management team in place and hasstepped into its next phase of high growth. The strong improvementin operational performance over the last few quarters, we believe, isbut an undertone of this transformation.

� Business mix is likely to improve further, with higher contributionfrom US generics and specialty therapies in India, while low-marginAPIs and acute therapies may continue to face slowdown.

� The stock trades at 22.7x FY14E and 16.4x FY15E earnings. MaintainBuy.

Key issues to watch out� Upside from Micardis HCT launch.� Outlook for domestic formulations and US generics business.


EBITDA 2.5 3.6 4.7 6.1

NP 1.7 2.4 3.3 4.3

EPS (INR) 8.8 12.5 17.3 23.1

EPS Gr. (%) 27.0 42.5 38.7 33.1

BV/Sh. (INR) 26.7 34.5 44.8 58.5

RoE (%) 36.8 40.8 43.7 44.6

RoCE (%) 32.0 43.5 47.9 51.3

Payout (%) 25.7 23.6 33.4 37.5

Valuations

P/E (x) 32.4 22.7 16.4 12.3

P/BV (x) 10.6 8.2 6.3 4.9

EV/EBITDA (x) 21.9 15.1 11.5 8.7

Div. Yield (%) 0.4 0.5 0.9 1.4

Bloomberg ALPM IN




1,6,12 Rel Perf. (%) 0 / 88 / 154

C–92April 2014


Consolidated Quarterly Performance (INR Million)Y/E March FY13 FY14 FY13 FY14E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Net Sales 5,709 5,924 6,342 6,302 6,948 7,339 7,000 7,099 24,277 28,386

YoY Change (%) 29.2 16.5 22.6 3.3 21.7 23.9 10.4 12.6 18.5 16.9


EBITDA 1,169 1,165 1,417 1,051 1,462 1,689 1,680 1,597 4,854 6,428

Margins (%) 20.5 19.7 22.3 16.7 21.0 23.0 24.0 22.5 20.0 22.6

Depreciation 427 446 461 459 483 500 510 520 1,793 2,013

Interest 32 11 29 9 4 3 0 0 81 7

Other Income 217 495 253 2,207 284 187 190 200 3,123 861

PBT 927 1,203 1,180 2,790 1,259 1,373 1,360 1,277 6,102 5,269

Tax 137 304 253 281 297 319 260 281 975 1,157

Rate (%) 14.8 25.3 21.4 10.1 23.6 23.2 19.1 22.0 16.0 22.0


PAT 788 896 917 669 935 1,023 1,050 946 5,089 3,954

YoY Change (%) 12.0 4.6 8.1 92.7 18.7 14.2 14.5 41.5 50.4 -22.3

Margins (%) 13.8 15.1 14.5 10.6 13.5 13.9 15.0 13.3 21.0 13.9

Licensing income 139 0 88 20 76 34 40 40 246 190

YoY Change (%) -0.7 - -69.9 -95.7 -45.3 - -54.5 100.0 -80.6 -22.8

Contract research 1,224 1,291 1,397 1,659 1,546 1,881 1,830 2,069 5,572 7,326

YoY Change (%) 39.1 39.1 24.7 40.6 26.3 45.7 31.0 24.7 35.9 31.5

E: MOSL Estimates; Note - Quarterly nos will not add up to full-year nos due to restatements

BioconCMP: INR424 Neutral� We expect BIOS' sales to grow 13% YoY to INR7.1b, led by 25% growth

in the CRO division. The Biopharma division is likely to grow 8%.� We estimate licensing income at INR40m (INR19m in 4QFY13).� EBITDA is likely to grow 52% YoY to INR1.6b on a low base, with EBITDA

margin up 580bp to 22.5%. BIOS had reported subdued performancein 4QFY13, impacted by slowdown in its insulin business and highbonuses paid to employees.

� We expect adjusted PAT to grow just 42% YoY to INR946m, slower thanEBITDA due to higher taxes.

� Key growth drivers for FY14/15 will be: (1) traction in insulin initiativein RoW, (2) ramp-up in CRO division, (3) contribution from immuno-suppressant supplies, and (4) branded formulations. However, highR&D costs and capex will put pressure on profitability and return ratios.

� The stock trades at 21.4x FY14E and 19.5x FY15E earnings. Option valuesfor the future include separate listing of Contract Research businessand potential out-licensing of the Oral Insulin NCE by BMS. Returnratios are likely to remain subdued, with both RoE and RoCE in the13-14% range over FY13-15. Maintain Neutral.

Key issues to watch out� Update on initiatives to out-license Anti-CD6.� Progress on product registration for Rh-Insulin in Europe/US.� Ramp up in Contract Services business.


EBITDA 4.9 6.4 7.4 8.9

Net Profit 3.3 4.0 4.4 5.1

Adj. EPS (INR) 16.4 19.8 21.8 25.4

EPS Gr. (%) -3.4 20.9 10.1 16.9

BV/Sh. (INR) 134.7 147.5 161.6 178.2

RoE (%) 12.1 13.4 13.5 14.3

RoCE (%) 17.8 13.7 13.3 13.8

Payout (%) 34.5 35.1 35.1 35.1

Valuations

P/E (x) 25.9 21.4 19.5 16.7

P/BV (x) 3.1 2.9 2.6 2.4

EV/EBITDA (x) 15.4 11.9 10.9 9.2

Div. Yield (%) 1.8 1.4 1.5 1.8

Bloomberg BIOS IN




1,6,12 Rel Perf. (%) -14 / 10 / 36

C–93April 2014


� We expect CDH's 4QFY14 revenue to grow 19% YoY to INR19.2b, led by68% YoY growth in US formulations. Total export formulations isexpected to grow 47% YoY to INR9.7b, while domestic formulations islikely to grow 5% YoY to INR6b, impacted by the New Drug Policy.

� We expect EBITDA to grow 19% YoY to INR3.4b. EBITDA margin is likelyto be flat YoY, but up 200bp QoQ, aided by improving sales mix in theUS.

� Adjusted PAT is likely to decline 19% YoY to INR2.1b due to highertaxes compared to tax credit in 4QFY13.

� While FY14 continues to be a year of consolidation for CDH, we believepressure on margins would start easing, as new drug approvals startcoming through for key markets.

� We believe CDH has made investments in the right areas and willunlock value at the appropriate time. We expect FY15 to be a year ofrecovery for CDH.

� We estimate 21% EPS CAGR over FY13-16, with stable RoCE/RoE at~18%/~24%.

� The stock trades at 27x FY14E and 22.2x FY15E EPS. Maintain Buy.

Key issues to watch out� Update on US launches from the Moraiya facility.� Progress on improvement in balance sheet.


1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Net Revenues 15,486 15,476 16,041 16,119 16,371 17,468 18,717 19,151 63,581 71,707

YoY Change (%) 24.3 24.3 16.0 15.3 5.7 12.9 16.7 18.8 20.8 12.8


EBITDA 3,116 2,306 2,550 2,864 2,858 2,605 2,953 3,410 11,257 11,826

Margins (%) 20.1 14.9 15.9 17.8 17.5 14.9 15.8 17.8 17.7 16.5

Depreciation 434 432 496 466 466 518 496 500 1,828 1,979

Interest 572 405 479 316 278 319 301 300 1,686 1,199

Other Income 553 65 171 87 125 248 239 125 370 737

PBT after EO Income 2,663 1,533 1,746 2,170 2,239 2,017 2,360 2,736 8,112 9,352

Tax 654 494 630 -583 203 101 408 520 1,195 1,232

Rate (%) 24.5 32.2 36.1 -26.9 9.1 5.0 17.3 19.0 14.7 13.2

Min. Int/Adj on Consol 61 88 86 128 80 82 92 100 364 354

Reported PAT 1,948 951 1,029 2,625 1,956 1,834 1,860 2,116 6,553 7,765

Adj PAT 1,948 951 1,029 2,625 1,956 1,834 1,888 2,116 6,553 7,796

YoY Change (%) 39.4 -5.7 -29.9 47.0 0.4 92.9 83.5 -19.4 15.8 19.0

Margins (%) 12.6 6.1 6.4 16.3 11.9 10.5 10.1 11.0 10.3 10.9

Adj PAT incl one-offs 1,948 951 1,029 2,625 1,956 1,834 1,888 2,116 6,553 7,796

Domestic formulation sales 5,818 6,018 5,699 5,708 6,252 6,263 5,883 5,993 23,232 24,391

YoY Change (%) 27.2 28.0 21.4 14.4 7.5 4.1 3.2 5.0 22.6 5.0

US sales 3,592 3,674 3,920 3,882 3,874 4,730 6,316 6,510.0 15,068 21,430

YoY Change (%) 50.1 19.7 14.1 9.9 7.9 28.7 61.1 67.7 21.2 42.2

E: MOSL Estimates

Cadila HealthcareCMP: INR1,026 Buy


EBITDA 11.3 11.8 14.5 17.6

Net Profit 6.5 7.8 9.5 11.5

Adj. EPS (INR) 31.9 38.1 46.3 56.2

EPS Gr. (%) 15.5 19.3 21.5 21.4

BV/Sh. (INR) 143.8 172.9 208.9 251.9

RoE (%) 23.7 24.0 24.2 24.4

RoCE (%) 17.9 17.4 19.1 21.4

Payout (%) 30.5 22.6 21.2 22.6

Valuations

P/E (x) 32.2 27.0 22.2 18.3

P/BV (x) 7.1 5.9 4.9 4.1

EV/EBITDA (x) 20.5 19.8 16.0 13.0

Div. Yield (%) 0.7 0.7 0.8 1.1

Bloomberg CDH IN


M. Cap. (INR b)/(USD b) 210 / 4

52-Week Range (INR) 1,079 / 631

1,6,12 Rel Perf. (%) -7 / 35 / 20

C–94April 2014


� CIPLA's revenue for 4QFY14 is likely to grow 32% YoY to INR25.9b.

� The domestic formulations business is expected to grow 14% YoY toINR8.9b, despite the impact from the new pricing policy. Exportformulations revenue would grow 46% YoY to INR16.5b due toconsolidation of Cipla Medpro.

� EBITDA is likely to grow 19% YoY to INR4.9b, with EBITDA margincontracting by 190bp YoY to 18.9% on account of higher employee andR&D cost.

� We expect adjusted PAT to grow 7% YoY to INR2.8b, on account ofhigher interest costs and depreciation, as well as lower other income.

� We believe that the coming quarters will be challenging due to (1)impact on sales/profits due to the Drug Pricing Policy, and (2)increasing pressure on profitability due to ongoing business transition.

� The stock trades at 21.5x FY14E and 18.8x FY15E earnings. MaintainNeutral.

Key issues to watch out� Update on launch of inhalers in Europe.� Improvement in profitability at Cipla Medpro.


1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Net Revenues 19,581 21,918 20,705 19,667 24,639 25,124 25,808 25,931 82,793 101,503

YoY Change (%) 23.0 23.3 17.8 5.4 25.8 14.6 24.6 31.8 97.0 93.9


EBITDA 5,397 6,770 4,930 4,095 6,754 5,642 4,673 4,890 21,979 21,960

Margins (%) 27.6 30.9 23.8 20.8 27.4 22.5 18.1 18.9 26.5 21.6

Depreciation 729 740 780 783 789 914 912 925 3,305 3,540

Interest 11 54 93 176 408 450 333 400 276 1,590

Other Income 531 641 535 585 691 756 524 344 1,323 2,316


Tax 1,182 1,618 1,203 1,045 1,500 1,358 987 977 5,443 4,821

Rate (%) 22.8 24.4 26.2 28.1 24.0 27.0 25.0 25.0 27.6 25.2


Reported PAT 4,006 5,000 3,389 2,676 4,749 3,581 2,843 2,855 15,449 14,324

Adj PAT 2,632 3,536 3,389 2,676 4,749 3,581 2,843 2,855 11,440 14,324

YoY Change (%) 3.9 14.5 25.6 -1.9 80.4 1.3 -16.1 6.7 1.7 25.2

Margins (%) 13 16 16 14 19 14 11 11 14 14

Domestic formulation sales 9,388 9,332 9,241 7,780 11,039 10,398 10,443 8,883 35,892 40,763

YoY Change (%) 30 14 9 8 18 11 13 14 16 14

Export formulations 8,101 10,389 9,692 9,536 10,344 12,190 13,520 14,570 37,718 50,620

E: MOSL Estimates

CiplaCMP: INR384 Neutral


EBITDA 22.0 22.0 25.8 29.6

Net Profit 11.4 14.3 16.4 19.4

Adj. EPS (INR) 14.2 17.8 20.4 24.2

EPS Gr. (%) 4.7 25.2 14.3 18.8

BV/Sh. (INR) 112.2 127.3 145.0 166.4

RoE (%) 12.7 14.0 14.1 14.6

RoCE (%) 19.4 17.6 17.8 18.6

Payout (%) 12.1 13.1 11.5 9.7

Valuations

P/E (x) 26.9 21.5 18.8 15.8

P/BV (x) 3.4 3.0 2.6 2.3

EV/EBITDA (x) 14.4 14.5 12.3 10.6

Div. Yield (%) 0.5 0.5 0.5 0.5

Bloomberg CIPLA IN


M. Cap. (INR b)/(USD b) 308 / 5


1,6,12 Rel Perf. (%) -6 / -27 / -18

C–95April 2014



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Net Op Revenue 4,684 4,726 5,333 6,496 5,159 5,659 6,874 7,795 21,399 25,487

YoY Change (%) 30.6 33.5 28.6 -8.2 10.1 19.7 28.9 20.0 15.1 19.1


EBITDA 1,904 1,846 1,813 2,507 1,959 2,477 2,859 3,118 8,102 10,413

Margins (%) 40.7 39.1 34.0 38.6 38.0 43.8 41.6 40.0 37.9 40.9

Depreciation 175 188 204 203 209 225 233 250 769 917

Interest 4 3 4 6 4 4 4 4 18 15

Other Income 418 -112 234 93 547 376 98 100 497 1,121

PBT 2,143 1,544 1,838 2,391 2,293 2,624 2,721 2,965 7,812 10,602

Tax 469 364 396 573 546 574 531 741 1,792 2,392

Rate (%) 21.9 23.6 21.5 23.9 23.8 21.9 19.5 25.0 22.9 22.6

Reported PAT 1,674 1,180 1,442 1,818 1,747 2,049 2,190 2,223 6,020 8,210

Adj PAT 1,674 1,180 1,442 1,818 1,747 2,049 2,190 2,223 6,020 8,210

YoY Change (%) 63.2 11.2 17.7 -15.3 4.4 73.7 51.8 22.3 12.9 36.4

Margins (%) 35.7 25.0 27.0 28.0 33.9 36.2 31.9 28.5 28.1 32.2

CCS Revenues 2,148 2,268 2,507 3,118 2,476 2,716 3,231 3,646 10,272 12,070

YoY Change (%) 22.2 37.5 36.9 -15.3 15.3 19.7 28.9 16.9 15.1 17.5

Carotenoid Revenues 210 250 185 265 280 330 330 514 910 1,454

YoY Change (%) 50.0 4.2 -7.5 15.2 33.3 32.0 78.4 94.1 12.3 59.8

E: MOSL Estimates;

Divi's LaboratoriesCMP: INR1,369 Buy� DIVI is likely to post 20% YoY increase in 4QFY14 revenue to INR7.8b on

increased capacity utilization at the new SEZ unit and favorable currencyimpact. Growth would be driven by both CCS and API business.

� EBITDA is likely to grow 24% YoY to INR3.1b on the back of 14% YoYdepreciation of the INR v/s the USD. EBITDA margin is likely to expand140bp YoY to 40%.

� We expect PAT to grow 22% YoY to INR2.2b, largely in line withoperational performance. There was a forex loss of INR98m in 4QFY13,included in other expenses.

� DIVI expects FY14 revenue to grow 20% (15-20% guided earlier), withFY15 revenue growing 20-25% (earlier guidance maintained). Capacityutilization at DSN SEZ would continue to ramp up, aided by FDAapproval of the remaining three blocks.

� The power shortage issue has been resolved and will aid marginexpansion. The management expects to maintain at least 40% EBITDAmargin in FY15.

� The stock trades at 22.1x FY14E and 19.1x FY15E earnings. Buy.

Key issues to watch out� Ramp-up at Vizag SEZ and timeline for its US FDA inspection.


EBITDA 8.1 10.4 12.7 15.5

Net Profit 6.0 8.2 9.5 11.8

Adj. EPS (INR) 45.4 61.9 71.8 88.5

EPS Gr. (%) 12.9 36.4 16.1 23.3

BV/Sh. (INR) 188.4 225.5 265.0 309.2

RoE (%) 26.0 29.9 29.3 30.8

RoCE (%) 33.1 38.2 37.2 39.3

Payout (%) 38.7 40.0 45.0 50.0

Valuations

P/E (x) 30.2 22.1 19.1 15.5

P/BV (x) 7.3 6.1 5.2 4.4

EV/EBITDA (x) 22.4 17.4 14.3 11.6

Div. Yield (%) 1.1 1.5 2.0 2.8

Bloomberg DIVI IN


M. Cap. (INR b)/(USD b) 182 / 3

52-Week Range (INR) 1,459 / 905

1,6,12 Rel Perf. (%) -10 / 26 / 20

C–96April 2014


� We expect DRRD to post 6% YoY growth in core revenue (no one-offs)for 4QFY14 to INR34.8b. Reported sales growth is likely to be 4%.

� Growth would be led by 40% YoY growth in core US revenue and 24%YoY growth in Russia/CIS. Domestic formulations is expected to grow10% YoY, while PSAI may decline 37% YoY on a high base.

� Core EBITDA is expected to grow 30% YoY to INR8.9b, driven byimproving product mix in the US base business and strong growth inRussia. Consequently, we expect core EBITDA margin to expand 480bpYoY. Growth on reported basis is likely to be 24%.

� Adjusted PAT is expected to grow 39% YoY to INR5.4b, faster thanEBITDA growth mainly due to lower taxes.

� While there is uncertainty revolving around timely FDA approvals,the recently launched limited competition injectable products andpipeline of 62 pending ANDAs is expected to support growth in the USover the medium term.

� The stock trades at 19.7x FY14E and 18.1x FY15E core earnings. MaintainBuy.

Key issues to watch out� View on pipeline for products in the US.� FY15 outlook for both generics and PSAI businesses.

Quarterly Performance - IFRS (INR Million)Y/E March FY13 FY14 FY13 FY14E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Gross Sales 25,406 28,809 28,651 33,400 28,449 33,575 35,338 34,830 116,266 132,191

YoY Change (%) 28.4 27.0 3.5 25.6 12.0 16.5 23.3 4.3 20.2 13.7


EBITDA 4,996 6,909 5,674 7,185 5,398 8,456 9,762 8,882 24,763 32,497

Margins (%) 19.7 24.0 19.8 21.5 19.0 25.2 27.6 25.5 21.3 24.6

Amortization 1,296 2,064 1,382 1,495 1,603 1,733 1,793 1,893 6,237 7,022

Other Income 25 796 168 531 342 972 735 445 3,151 2,494


Tax 365 1,567 827 2,141 528 792 2,521 2,007 4,900 5,848

Rate (%) 9.8 27.8 18.5 34.4 12.8 10.3 29.0 27.0 22.6 20.9

Net Profit 3,360 4,074 3,633 5,711 3,609 6,903 6,183 5,427 16,777 22,121

One-off/low-competition PAT in US 715 586 0 1,793 335 0 0 0 3,095 335

Adjusted PAT 2,645 3,488 3,633 3,918 3,273 6,903 5,686 5,427 13,682 21,786

YoY Change (%) 17.5 29.9 71.4 46.6 23.8 97.9 56.5 38.5 40.7 59.2

Margins (%) 10.4 12.1 12.7 11.7 11.5 20.6 16.1 15.6 11.8 16.5

US Sales 7,920 9,270 9,243 11,413 10,871 13,244 16,223 15,190 37,846 55,528

YoY Change (%) 37.6 47.4 -16.8 30.7 37.3 42.9 75.5 33.1 18.7 46.7

Branded formualtion sales 8,968 9,056 9,654 9,323 9,459 11,543 11,311 10,935 37,001 43,248

YoY Change (%) 32.8 17.1 24.6 18.5 5.5 27.5 17.2 17.3 22.9 16.9

E: MOSL Estimates

Dr Reddy's LaboratoriesCMP: INR2,561 Buy


EBITDA 24.8 32.5 36.3 40.5

Net Profit 13.7 21.8 23.8 26.7

Adj. EPS (INR) 81.5 129.7 141.5 158.9

EPS Gr. (%) 10.1 59.2 9.0 12.3

BV/Sh. (INR) 435.4 550.8 669.7 803.8

RoE (%) 18.7 23.6 21.1 19.8

RoCE (%) 17.2 19.7 20.5 20.5

Payout (%) 16.3 17.2 17.6 17.6

Valuations

P/E (x) 31.4 19.7 18.1 16.1

P/BV (x) 5.9 4.6 3.8 3.2

EV/EBITDA (x) 17.9 13.4 11.8 10.2

Div. Yield (%) 0.5 0.8 0.8 0.9

Bloomberg DRRD IN


M. Cap. (INR b)/(USD b) 436 / 7

52-Week Range (INR) 2,940 / 1,733

1,6,12 Rel Perf. (%) -18 / -8 / 26

C–97April 2014



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q

Net Sales 6,321 6,369 6,205 6,306 6,724 6,864 7,144 7,284 25,202 28,017

YoY Change (%) 1.5 -2.3 -7.2 -4.0 6.4 7.8 15.1 15.5 -3.1 11.2


EBITDA 1,629 1,137 1,080 1,116 1,459 1,549 1,778 1,982 4,961 6,768

Margins (%) 25.8 17.9 17.4 17.7 21.7 22.6 24.9 27.2 19.7 24.2

Depreciation 42 50 50 58 47 46 46 45 199 183

Other Income 817 454 455 544 811 487 484 471 2,269 2,253

PBT before EO Expense 2,404 1,541 1,485 1,603 2,223 1,990 2,216 2,408 7,032 8,839

Tax 698 590 468 518 734 657 731 795 2,274 2,917

Rate (%) 29.1 38.3 31.5 32.3 33.0 33.0 33.0 33.0 32.3 33.0

Adjusted PAT 1,706 951 1,017 1,085 1,490 1,334 1,485 1,614 4,758 5,922

YoY Change (%) -8.1 -44.0 -37.8 -31.3 -12.7 40.3 46.0 48.8 -29.7 24.5

Margins (%) 27.0 14.9 16.4 17.2 22.2 19.4 20.8 22.2 18.9 21.1

Extra-Ord Expense 16 -201 8 -84 0 0 0 0 371 0

Reported PAT 1,690 1,151 1,010 1,169 1,490 1,334 1,485 1,614 4,387 5,922

E: MOSL Estimates

GlaxoSmithKline PharmaceuticalsCMP: INR2,574 Neutral� We expect GLXO to report 6% YoY growth in sales to INR6.7b, impacted

by the lower volume offtake during the quarter due to supply chainrelated constraints and impact of price controls on key products.

� EBITDA is likely to decline 10% YoY to INR1.46b, with EBITDA margindown 410bp YoY to 21.7%. Profitability will continue to be impactedby supply chain related issues highlighted in CY13 and price revisionstaken due to the policy.

� We expect adjusted PAT to decline 13% YoY to INR1.5b in 1QCY14, inline with EBITDA decline, due to subdued operational performance.

� GLXO deserves premium valuations due to strong parentage (givingaccess to large product pipeline), brand-building ability and likelypositioning in post patent era. It is one of the few companies, withthe ability to drive reasonable growth without any major capitalrequirement, leading to high RoCE of 45-50%.

� Though the ongoing issues affecting GLXO's performance aretemporary, we believe the business will take another 12 months tonormalize. We expect near-term challenges for the company andbelieve normalcy will only return in CY15.

� The stock trades at 36.8x CY14E and 29.4x CY15E EPS. Maintain Neutral.

Key issues to watch out� Update on supply chain issues.� Impact of Drug Price Control Order (DPCO) 2013.


EBITDA 7.9 5.0 6.8 9.0

Net Profit 6.8 4.8 5.9 7.4

Adj. EPS (INR) 79.9 56.2 69.9 87.5

EPS Gr. (%) 7.3 -29.7 24.5 25.2

BV/Sh. (INR) 237.3 238.1 243.8 255.4

RoE (%) 33.7 23.6 28.7 34.3

RoCE (%) 49.4 34.8 42.7 51.1

Payout (%) 71.3 101.5 89.7 84.7

Valuations

P/E (x) 32.2 45.8 36.8 29.4

P/BV (x) 10.8 10.8 10.6 10.1

EV/EBITDA (x) 24.9 39.7 29.5 22.1

Div. Yield (%) 1.9 1.9 2.1 2.5

Bloomberg GLXO IN


M. Cap. (INR b)/(USD b) 218 / 4

52-Week Range (INR) 3,054 / 2,153

1,6,12 Rel Perf. (%) -22 / -10 / -1

C–98April 2014


� We expect GNP to post 21% YoY growth in core revenue (excludingone-offs and R&D income) for 4QFY14 to INR15.6b, led primarily byhigh growth in the US generics business and APIs. Reported sales isexpected to grow 20% YoY to INR16b.

� The branded business is likely to grow 14% YoY, while the genericsegment is expected to grow 22%. We model in licensing income ofINR248 for mPGES-1 inhibitors in 4QFY14 (nil in 4QFY13).

� Core EBITDA is likely to grow 30% YoY to INR3.2b, with core EBITDAmargin up 150bp YoY, driven by better sales mix. Reported EBITDA isexpected to be INR3.6b, up 32% YoY.

� Adjusted PAT is expected at INR1.65b, up 11% YoY, lower than EBITDAmainly due to higher depreciation costs and taxes. Reported PAT islikely to grow 17% YoY.

� We expect GNP to gradually reduce its net debt over FY14-16, resultingin improvement in D/E from 1x in FY13 to 0.5x by FY16. We also expectgradual improvement in return ratios.

� The stock trades at 24x FY14E and 19.4x FY15E EPS. Maintain Buy.

Key issues to watch out� Product pipeline for US.� Update on free-cash flow generation and debt repayment schedule.

Quarterly performance (INR Million)Y/E March FY13 FY14 FY13 FY14E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Net Revenues (Core) 10,404 12,552 13,813 13,355 12,379 14,630 16,012 15,993 50,123 59,014

YoY Change (%) 19.8 18.9 34.0 25.3 19.0 16.6 15.9 19.8 24.7 17.7

EBITDA 2,198 2,560 3,158 2,694 2,474 3,153 3,644 3,550 10,610 12,822

Margins (%) 21.1 20.4 22.9 20.2 20.0 21.6 22.8 22.2 21.2 21.7

Depreciation 275 321 356 318 349 605 611 625 1,270 2,190

Interest 380 384 400 436 464 485 473 485 1,600 1,907

Other Income -521 219 95 -196 37 138 56 50 -403 281

PBT 1,022 2,074 2,497 1,744 1,698 2,201 2,617 2,490 7,337 9,006

Tax 218 477 366 46 392 628 474 498 1,107 1,992

Rate (%) 21.3 23.0 14.7 2.6 23.1 28.5 18.1 20.0 15.1 22.1

Reported PAT (incl one-offs) 804 1,597 2,131 1,698 1,306 1,573 2,143 1,992 6,230 7,014

Minority Interest 21 30 1 30 19 30 -19 25 83 55

Adj PAT (excl one-offs) 506 1,424 1,575 1,486 1,287 1,437 2,130 1,647 4,992 6,500

YoY Change (%) -53.6 91.3 1,980.5 564.8 154.1 0.9 35.3 10.8 54.0 30.2

Margins (%) 4.9 11.3 11.4 11.1 10.4 9.8 13.3 10.3 10.0 11.0

US Sales 3,924 4,307 4,365 4,291 4,470 5,579 5,214 5,253 16,887 20,514

YoY Change (%) 56.2 43.5 36.8 24.9 13.9 29.5 19.4 22.4 39.1 21.5

E: MOSL Estimates

Glenmark PharmaceuticalsCMP: INR566 Buy


EBITDA 10.6 12.8 14.8 17.5

Net Profit 5.0 6.4 7.9 9.6

Adj. EPS (INR) 18.4 23.6 29.1 35.3

EPS Gr. (%) 54.0 28.2 23.2 21.4

BV/Sh. (INR) 102.0 123.7 149.3 181.1

RoE (%) 18.1 19.1 19.5 19.5

RoCE (%) 16.1 17.3 19.0 20.6

Payout (%) 10.2 9.0 12.0 9.9

Valuations

P/E (x) 30.7 24.0 19.4 16.0

P/BV (x) 5.5 4.6 3.8 3.1

EV/EBITDA (x) 16.6 13.8 12.0 10.1

Div. Yield (%) 0.4 0.4 0.5 0.5

Bloomberg GNP IN


M. Cap. (INR b)/(USD b) 153 / 3


1,6,12 Rel Perf. (%) -7 / -9 / 3

C–99April 2014



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE


YoY Change (%) 19.7 23.7 14.0 19.7 27.0 9.8 18.8 20.4 19.3 17.1

EBITDA 1,329 1,788 1,584 1,423 1,710 2,345 2,173 1,929 6,232 8,157

Margins (%) 21.0 23.2 22.6 21.2 21.2 27.7 26.1 23.9 22.2 24.8

Depreciation 199 209 216 216 241 252 256 265 867 1,014

Interest 95 89 74 55 71 57 54 55 334 238

Other Income -470 155 -146 103 -435 -346 30 195 -488 -556

PBT 565 1,646 1,148 1,255 963 1,690 1,893 1,804 4,543 6,349

Tax 135 395 269 501 245 396 502 451 1,299 1,593

Rate (%) 23.9 24.0 23.4 39.9 25.4 23.4 26.5 25.0 28.6 25.1

Reported PAT 430 1,251 879 754 718 1,295 1,391 1,353 3,243 4,756

Adj PAT 430 1,251 879 754 718 1,295 1,391 1,353 3,243 4,756

YoY Change (%) -30.3 60.5 37.5 -1.5 67.0 3.5 58.3 79.3 17.4 46.6

Margins (%) 6.8 16.2 12.5 11.2 8.9 15.3 16.7 16.7 11.5 14.4

Domestic formulation 2,242 2,628 2,127 1,784 2,504 2,762 2,463 2,057 8,781 9,786

YoY Change (%) 18.6 14.6 13.4 20.8 11.7 5.1 15.8 15.3 16.6 11.4

Export formualtions 2,245 3,392 3,175 3,131 3,300 3,626 3,818 3,939 11,942 14,683

YoY Change (%) 8.7 30.2 9.5 30.8 47.0 6.9 20.3 25.8 19.9 23.0

E: MOSL Estimates

IPCA LaboratoriesCMP: INR845 Buy� We expect IPCA's 4QFY14 revenue to grow 20% YoY to INR8.1b, led by

26% growth in export formulations. Domestic formulations is expectedto grow 15% YoY, while total API sales is likely to grow 19% YoY.

� EBITDA is likely to grow 36% YoY to INR1.9b, aided by 270bp YoYexpansion in EBITDA margin to 23.9%. This would be driven by highercontribution from international branded formulations.

� We expect adjusted PAT to grow 79% YoY to INR1.35b, boosted byhigher other income and lower tax outgo.

� We expect significant ramp-up in IPCA's international formulationsrevenue, led by 24% CAGR in export formulations and 33% CAGR in USbusiness over FY13-16. Domestic formulations growth is likely to bemaintained at 15-16%.

� We expect IPCA to clock EPS CAGR of 30% over FY13-16 on the back of20% revenue CAGR, aided by 300bp EBITDA margin expansion andreversal of MTM losses.

� The stock trades at 22.4x FY14E EPS and 16.3x FY15E EPS. Maintain Buy.

Key issues to watch out� Ramp up at recently approved Indore SEZ for US.� Outlook for institutional tender business after FY14.


EBITDA 6.2 8.2 9.9 11.9

Net Profit 3.2 4.8 6.5 8.1

Adj. EPS (INR) 25.7 37.7 51.8 64.0

EPS Gr. (%) 17.4 46.6 37.3 23.7

BV/Sh. (INR) 123.1 153.3 194.7 245.9

RoE (%) 23.1 27.3 29.8 29.1

RoCE (%) 25.2 28.7 32.4 33.2

Payout (%) 18.1 20.0 20.0 20.0

Valuations

P/E (x) 32.9 22.4 16.3 13.2

P/BV (x) 6.9 5.5 4.3 3.4

EV/EBITDA (x) 17.8 13.7 11.2 9.2

Div. Yield (%) 0.6 0.9 1.2 1.5

Bloomberg IPCA IN


M. Cap. (INR b)/(USD b) 107 / 2


1,6,12 Rel Perf. (%) -11 / 3 / 42

C–100April 2014



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Net Sales 22,192 22,393 24,659 25,374 24,207 26,315 29,830 30,893 94,617 111,244

YoY Change (%) 43.8 28.6 37.6 34.7 9.1 17.5 21.0 21.8 37.9 17.6


EBITDA 4,230 4,545 5,698 6,103 5,340 6,232 7,343 7,476 20,576 26,391

Margins (%) 19.1 20.3 23.1 24.1 22.1 23.7 24.6 24.2 21.7 23.7

Depreciation 654 690 688 1,290 624 606 637 675 3,322 2,542

Interest 101 101 77 133 54 49 42 54 410 199

Other Income 582 657 617 547 565 1,178 714 390 2,403 2,847

PBT 4,058 4,412 5,550 5,227 5,226 6,755 7,379 7,137 19,247 26,497

Tax 1,208 1,438 2,116 1,080 2,172 2,582 2,542 1,784 5,842 9,079

Rate (%) 29.8 32.6 38.1 20.7 41.6 38.2 34.4 25.0 30.4 34.3

Reported PAT 2,850 2,974 3,434 4,148 4,055 4,173 4,837 5,353 13,405 18,418

EO Exp/(Inc) 0 0 0 0 -1,000 0 0 0 0 -1,000


Recurring PAT 1,783 2,753 2,812 3,000 3,331 3,383 4,035 3,630 10,348 14,379

YoY Change (%) -15.1 3.2 12.5 262.1 86.8 22.9 43.5 21.0 46.7 39.0

Margins (%) 8.0 12.3 11.4 11.8 13.8 12.9 13.5 11.8 10.9 12.9

Advanced mkt formulations 11,826 11,745 14,646 14,875 13,917 14,183 17,948 18,737 53,100 63,478

YoY Change (%) 68.6 34.6 57.5 37.2 17.7 20.8 22.5 26.0 48.0 19.5

Emerging mkt formulations 8,049 8,256 7,660 8,063 7,861 9,270 8,909 9,476 32,027 35,516

YoY Change (%) 27.4 23.0 15.4 35.0 -2.3 12.3 16.3 17.5 24.9 10.9

E: MOSL Estimates; Quarterly nos will not add up to full year nos due to restatement of past quarters

� We expect Lupin's 4QFY14 revenue to grow 22% YoY to INR30.9b, drivenmainly by 28% YoY growth in advance market formulations. Domesticformulations is likely to grow 14% YoY, while RoW markets are expectedto grow 26%.

� Core revenue excluding one-off upside from generic Tricor, Trizivirand Niaspan is likely to grow 19% YoY to INR28.2b.

� EBITDA is likely to grow 23% YoY to INR7.5b, with EBITDA margin likelyto remain flat YoY on a high base of 4QFY13. Core EBITDA is expectedto be INR5.6b, with core EBITDA margin shrinking 80bp YoY to 19.7%.

� We expect adjusted PAT to grow 21% YoY to INR3.6b, while reportedPAT would be up 29% YoY at INR5.3b.

� Key growth drivers for FY15/16 will be the strong product pipeline forthe US, including higher contribution from oral contraceptives.

� While India formulations will see a slowdown in FY14, impacted bythe New Pricing Policy, we expect growth to rebound to historicallevels of 18-20% in FY15.

� The stock trades at 29.1x FY14E and 21.8x FY15E EPS. Maintain Buy.

Key issues to watch out� Outlook on future launches in the US.� Revival in constant currency sales growth in I'rom.� Outlook on domestic formulations business post DPCO 2013.

LupinCMP: INR936 Buy


EBITDA 20.0 26.4 31.1 35.9

Net Profit 10.3 14.4 19.2 22.3

Adj. EPS (INR) 23.1 32.1 42.9 49.8

EPS Gr. (%) 30.4 39.0 33.4 16.2

BV/Sh. (INR) 116.3 150.9 188.0 231.0

RoE (%) 22.5 24.1 25.3 23.8

RoCE (%) 33.3 38.1 35.0 33.6

Payout (%) 15.6 14.2 15.7 15.8

Valuations

P/E (x) 40.5 29.1 21.8 18.8

P/BV (x) 8.0 6.2 5.0 4.1

EV/EBITDA (x) 21.3 15.9 13.3 11.2

Div. Yield (%) 0.4 0.5 0.6 0.7

Bloomberg LPC IN


M. Cap. (INR b)/(USD b) 419 / 7

52-Week Range (INR) 1,003 / 606

1,6,12 Rel Perf. (%) -12 / -6 / 30

C–101April 2014


Quarterly performance (INR Million)Y/E March CY12 FY14 CY12 FY14E

2Q 3Q 4Q 1Q 2Q 3QE 4Q 5QE

Net Income 32,284 26,910 27,112 25,005 26,834 28,016 28,940 27,308 124,597 136,249

YoY Change (%) 54.2 28.4 -28.5 -33.9 -16.9 4.1 6.7 9.2 22.6 9.4

EBITDA 5,113 3,495 811 1,906 2,625 1,938 2,602 2,400 19,379 11,616

Margins (%) 15.8 13.0 3.0 7.6 9.8 6.9 9.0 8.8 15.6 8.5

Depreciation 783 816 805 797 763 849 915 910 3,202 4,234

Interest 484 389 537 512 488 503 543 510 1,796 2,556

Other Income -2,972 1,890 -335 255 -1,378 -297 -209 350 340 -1,279

PBT before EO Expense 874 4,179 -865 852 -3 289 935 1,330 14,721 3,547

Extra-Ord Expense 5,993 -3,933 3,657 -818 4,863 4,202 1,539 -665 2,272 9,121

PBT after EO Expense -5,119 8,112 -4,522 1,670 -4,866 -3,913 -603 1,995 12,449 -5,574

Tax 683 542 340 353 311 570 981 399 2,939 2,614

Rate (%) -13.3 6.7 -7.5 21.1 -6.4 -14.6 -162.6 20.0 23.6 -46.9

Reported PAT -5,802 7,571 -4,863 1,317 -5,177 -4,483 -1,585 1,595 9,510 -8,188


Reported PAT (incl one-offs) -5,857 7,542 -4,924 1,258 -5,241 -4,542 -1,589 1,539 9,228 -8,430

Adj PAT (excl. one-offs) 2,709 2,064 -45 847 1,337 644 1,200 1,021 8,539 5,050

YoY Change (%) 156.7 27.4 -101.2 -77.8 -50.6 -68.8 0.0 20.5 4.8 -40.9

Margins (%) 8.4 7.7 -0.2 3.4 5.0 2.3 4.1 3.7 6.9 3.7

Adj PAT incl one-offs 4,043 2,349 810 847 1,337 644 1,200 1,021 12,721 7,740

US Sales (USD m) 254 155 136 110 138 126 147 132 946 385

YoY Change (%) 167.4 84.2 -64.8 -72.5 -45.8 -18.8 7.6 -3.4 31.4 -59.3

India formulation sales 5,541 5,829 5,418 5,427 5,426 5,748 5,794 5,765 22,073 24,832

YoY Change (%) 14.9 13.0 -0.4 10.3 -2.1 -1.4 6.9 6.4 11.6 12.5

E: MOSL Estimates; Reporting period changed to March ending; FY14E figures are 15 months

Ranbaxy LaboratoriesCMP: INR365 Sell� We expect RBXY to post 9% YoY growth in sales for 5QFY14 to INR27.3b,

impacted by slowdown in India, Europe and Africa. Excluding upsidefrom gActos, core sales would grow 12% YoY.

� EBITDA is likely to grow 26% YoY to INR2.4b, on an abnormally lowbase of 1QCY13, which was impacted by gLipitor recall and high consentdecree related costs. Similarly, growth in core EBITDA is expected tobe ~31%, with core EBITDA margin up 130bp YoY.

� We expect reported PAT at INR1.5b, up 22% YoY. PAT, adjusted for foreximpact and FTFs, is likely to grow 21% YoY to INR1b.

� We believe the outlook for RBXY remains challenging, as quality /compliance issues have impacted its operations and will weigh oninvestor confidence.

� It is imperative for RBXY to improve core business margins, as one-offs have started waning off.

� The stock trades at 26.6x FY14E and 36.2x FY15E EPS. We maintain Sell.

Key issues to watch out� Timeline for resolving US FDA issues under the consent decree.� Improvement in core EBITDA margin.� Launch timeline for gDiovan, gValcyte and gNexium.

Financials & Valuation (INR b)Y/E March 2012 2014E 2015E 2016ESales* 124.6 136.2 133.8 132.6

EBITDA* 19.4 11.6 24.5 15.9

Adj. PAT 8.5 5.1 3.7 8.0

Rep. EPS (INR)* 30.2 -19.9 34.5 18.9

Adj. EPS (INR) 20.2 11.9 8.8 18.9

EPS Gr. (%) 4.8 -40.9 -26.7 115.8

BV/Sh. (INR) 96.4 74.1 102.7 116.0

RoE (%) 31.4 -26.9 33.5 16.3

RoCE (%) 21.0 10.3 22.3 12.7

Payout (%) 0.0 19.6 66.8 31.0

Valuations

P/E (x) 15.7 26.6 36.2 16.8

P/BV (x) 3.3 4.3 3.1 2.7

EV/EBITDA (x) 9.8 16.7 14.6 10.9

Div. Yield (%) 0.0 0.6 1.6 1.6

* FY14E figures are 15 months

Bloomberg RBXY IN


M. Cap. (INR b)/(USD b) 154 / 3


1,6,12 Rel Perf. (%) -6 / -5 / -36

C–102April 2014


� We expect SANL's revenue to grow 13% YoY in 1QCY14 to INR4.1b, ledby the domestic formulations business and export sales.

� EBITDA is likely to grow 56% YoY to INR732m on a low base of 1QCY13.EBITDA margin would be 17.9% v/s 12.9% in 1QCY13.

� We expect PAT to grow 45% YoY to INR624m. Growth is likely to beslower than EBITDA due to higher depreciation and amortization.

� SANL’s operational performance has witnessed a significant ramp upin 2HCY13. We attribute this to (a) strong export led growth in CY13,(b) discontinuation of loss making rural initiative Prayas (annual lossof INR300-320m) and (c) complete reorganization in terms ofadvertising spend and field force of the acquired OTC business ofUniversal Healthcare. In addition, only one key product from SANL’sportfolio (Clexane) was impacted by the new DPCO.

� We believe SANL is witnessing a phase of a change in margin profileled by a) pricing benefit under new DPCO based on WPI and b)discontinuation of some loss making projects which hurt margins inthe past.

� The stock trades at 23.2x CY14E and 19.8x CY15E EPS. Maintain Neutral.

Key issues to watch out� Amortization of goodwill and brands acquired from Universal

Medicare.� Impact of Drug Price Control Order (DPCO), 2013.� Clarity on growth in export formulations.


1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q

Net Sales 3,629 4,100 4,725 4,611 4,084 4,667 5,445 5,251 17,065 19,448

YoY Change (%) 12.5 9.6 19.1 15.1 12.5 13.8 15.2 13.9 14.2 14.0


EBITDA 468 623 997 867 732 810 1,031 933 2,955 3,507

Margins (%) 12.9 15.2 21.1 18.8 17.9 17.4 18.9 17.8 17.3 18.0

Depreciation 223 227 234 239 251 256 256 261 923 1,025

Interest 3 1 0 0 1 1 1 1 4 4

Other Income 414 396 402 391 471 453 462 426 1,603 1,811

PBT before EO Items 656 791 1,165 1,019 951 1,006 1,236 1,096 3,631 4,288

Extra-Ord Expense 0 0 0 -254 0 0 0 0 -254 0

PBT after EO Items 656 791 1,165 1,273 951 1,006 1,236 1,096 3,885 4,288

Tax 213 279 396 345 309 332 395 357 1,233 1,394

Effective tax Rate (%) 32.5 35.3 34.0 33.9 32.5 33.0 32.0 32.6 31.7 32.5

Reported PAT 443 512 769 928 642 674 840 739 2,652 2,895

Adj PAT 443 512 769 674 642 674 840 739 2,398 2,895

YoY Change (%) 10.5 26.4 49.9 50.4 44.9 31.6 9.3 9.6 26.6 20.7

Margins (%) 12.2 12.5 16.3 14.6 15.7 14.4 15.4 14.1 14.1 14.9

E: MOSL Estimates

Sanofi IndiaCMP: INR3,002 Neutral


EBITDA 2.3 3.0 3.5 4.1

Net Profit 1.8 2.4 3.0 3.5

Adj. EPS (INR) 76.7 104.1 129.3 151.4

EPS Gr. (%) -7.6 35.7 24.2 17.1

BV/Sh. (INR) 518.0 580.3 657.4 756.6

RoE (%) 14.8 17.9 19.7 20.0

RoCE (%) 21.5 26.3 28.3 28.9

Payout (%) 50.0 45.3 40.4 34.5

Valuations

P/E (x) 39.1 28.8 23.2 19.8

P/BV (x) 5.8 5.2 4.6 4.0

EV/EBITDA (x) 27.8 22.4 18.2 15.0

Div. Yield (%) 1.1 1.5 1.5 1.5

Bloomberg SANL IN



52-Week Range (INR) 3,100 / 2,280

1,6,12 Rel Perf. (%) 5 / -1 / -3

C–103April 2014


� We expect SUNP to post 43% YoY growth in sales to INR44b, driven by55% growth in US revenue on account of URL and DUSA Pharmaconsolidation and traction in base business. Domestic formulations isexpected to grow 21% YoY, while RoW markets are likely to grow 36%.Core sales are likely to grow 35% YoY to INR39.2b.

� EBITDA is likely to grow 50% YoY to INR18.9b. We expect EBITDA marginto expand 200bp YoY to 43%, aided primarily by Doxil and Cymbaltaone-off sales. Core EBITDA margin would decline 20bp YoY to 38.6%,with core EBITDA at INR15.1b.

� We expect reported PAT to grow 39% YoY to INR14.1b, slower thanEBITDA due to higher tax outgo. Adjusted PAT is likely to be 23% higherat INR11.2b.

� We believe the US will continue to be the core earnings driver forSUNP along with support from India and RoW markets. Although Taroplayed a key role in shaping SUNP's US performance over the last twoyears, its own pipeline continues to grow over 20% annually.

� The stock trades at 25.4x FY14E and 21.8x FY15E core EPS. Buy.

Key issues to watch out� Outlook on competitive landscape for Taro's products.� Sustainability of price increases at URL Pharma.

Sun PharmaceuticalsCMP: INR573 Buy


EBITDA 48.4 72.3 80.6 100.0

Rep. PAT 29.8 30.3 60.8 79.5

Rep.EPS (INR) 14.4 14.6 29.3 38.4

Core PAT 30.5 46.8 54.4 61.6

Core EPS (INR) 14.8 22.6 26.2 29.8

EPS Gr. (%) 31.3 53.1 16.2 13.4

BV/Sh. (INR) 72.4 84.0 109.2 142.9

RoE (%) 22.5 28.9 27.2 23.6

RoCE (%) 31.5 29.4 41.3 40.5

Payout (%) 17.5 19.4 12.5 11.2

Valuations

P/E (x) 38.9 25.4 21.8 19.3

P/BV (x) 7.9 6.8 5.2 4.0

EV/EBITDA (x) 15.3 15.3 15.3 15.3

Div. Yield (%) 0.7 0.7 0.7 0.7

Bloomberg SUNP IN


M. Cap. (INR b)/(USD b) 1,188 / 20


1,6,12 Rel Perf. (%) -17 / -19 / 21


1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Net Revenues 26,581 26,572 28,520 30,715 34,822 41,921 42,866 44,031 112,389 163,639

YoY Change (%) 62.5 40.3 33.0 31.8 31.0 57.8 50.3 43.4 40.4 45.6


EBITDA 12,169 11,684 12,611 12,599 15,306 18,284 19,751 18,946 49,062 72,287

Margins (%) 45.8 44.0 44.2 41.0 44.0 43.6 46.1 43.0 43.7 44.2

Depreciation 801 829 844 887 978 1,005 1,050 1,100 3,362 4,133

Net Other Income -231 1,476 936 1,102 735 1,079 1,535 1,175 3,284 4,524

PBT before EO Exp 11,136 12,331 12,703 12,814 15,063 18,358 20,236 19,021 48,984 72,678

EO Exp/(Inc) 0 5,771 0 0 25,174 0 0 0 5,771 25,174

PBT 11,136 6,561 12,703 12,814 -10,111 18,358 20,236 19,021 43,214 47,504

Tax 1,925 2,139 2,369 1,773 1,511 2,760 2,438 3,234 8,205 9,942

Rate (%) 17.3 17.3 18.6 13.8 10.0 15.0 12.0 17.0 16.8 13.7

Profit after Tax 9,211 4,422 10,335 11,041 -11,622 15,598 17,798 15,788 35,009 37,562

Share of Minority Partner 1,256 1,161 1,521 925 1,139 1,975 2,487 1,705 4,863 7,306

Reported PAT 7,956 3,261 8,814 10,116 -12,761 13,623 15,311 14,083 30,146 30,256

One-off upsides 2,276 1,303 812 976 1,145 1,938 2,722 2,852 5,367 8,656

Adj Net Profit 5,679 7,728 8,002 9,140 11,269 11,686 12,589 11,231 30,550 46,774

YoY Change (%) 29.5 41.7 31.0 25.6 98.4 51.2 57.3 22.9 31.5 53.1

Margins (%) 21.4 29.1 28.1 29.8 32.4 27.9 29.4 25.5 27.2 28.6

US Sales 15,411 13,301 14,946 17,879 20,314 25,880 26,789 27,635 61,538 100,618

YoY Change (%) 147.8 66.5 43.7 76.9 31.8 94.6 79.2 54.6 77.3 63.5

Taro Sales 7,751 7,084 8,856 7,209 7,441 11,421 11,786 10,208 30,899 40,856

YoY Change (%) 0.0 32.7 40.7 9.8 -4.0 61.2 33.1 41.6 39.6 32.2

E: MOSL Estimates; Qtr. no. don’t match with annual no. because of reinstatement of financials; Est. include one-off upsides.

C–104April 2014


� We expect TRP to post 26% YoY growth in 4QFY14 sales to INR11b overa high base, led by strong growth in all markets outside India, exceptBrazil. We expect domestic formulations to grow 13% YoY to INR2.5b.In Brazil, growth would be moderate, due to slower launches in thebranded generic space.

� EBITDA is likely to grow 14% YoY to INR2.5b, with EBITDA margindeclining 240bp YoY on a high base.

� We expect adjusted PAT to grow 51% YoY to INR1.8b on a low base of4QFY13, which was impacted by exceptional expense of INR370m.

� Over the last six years, TRP has delivered 30.5% EPS CAGR, thoughcapital employed CAGR was just 17.5%. RoCE has increased from 14.5%in FY05 to 35.7% in FY13.

� We believe that current valuations do not reflect the improvement inbusiness profitability (ex Europe), scale-up of international operations,and TRP's strong positioning in domestic formulations, particularly inchronic therapeutic segments.


Key issues to watch out� Sustained recovery in domestic formulations / consolidation of Elder

pharma portfolio.� Performance of Brazilian operations amidst market pressures.� Outlook for US business.

Torrent PharmaCMP: INR524 Buy


EBITDA 6.9 8.5 10.5 12.5

Net Profit 4.7 6.0 5.9 7.0

Adj. EPS (INR) 27.8 35.4 34.7 41.1

EPS Gr. (%) 43.2 27.4 -2.0 18.5

BV/Sh. (INR) 84.9 110.4 132.9 159.6

RoE (%) 35.8 36.3 28.5 28.1

RoCE (%) 33.5 32.9 24.3 21.4

Payout (%) 52.2 34.4 35.1 35.1

Valuations

P/E (x) 18.8 14.8 15.1 12.7

P/BV (x) 6.2 4.7 3.9 3.3

EV/EBITDA (x) 12.9 10.3 10.2 8.4

Div. Yield (%) 4.4 2.0 2.0 2.4

Bloomberg TRP IN




1,6,12 Rel Perf. (%) -12 / 4 / 32


1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE


YoY Change (%) 18.4 12.1 14.8 29.2 26.7 26.9 27.3 25.9 19.1 26.3

EBITDA 1,560 1,443 1,612 2,200 2,080 1,790 2,150 2,516 6,930 8,536

Margins (%) 20.3 18.8 20.2 25.3 21.4 18.4 21.2 22.9 21.6 21.0

Depreciation 201 203 204 220 210 220 210 225 830 865

Interest 94 80 67 100 80 150 160 150 340 540

Other Income 140 123 89 80 80 100 100 100 430 380


Extra-Ord Expense 0 -110 0 370 -200 -60 0 0 370 -260

PBT after EO Expense 1,404 1,394 1,429 1,590 2,070 1,580 1,880 2,241 5,820 7,771

Tax 374 309 309 480 380 390 300 448 1,470 1,518

Rate (%) 26.6 24.1 21.6 24.5 20.3 25.7 16.0 20.0 23.7 20.2

Reported PAT 1,030 1,085 1,121 1,110 1,690 1,190 1,580 1,793 4,350 6,253

Minority Interest 12 12 -3 0 0 0 0 0 20 0

Adj PAT 1,019 963 1,123 1,190 1,290 1,070 1,580 1,793 4,705 5,993

YoY Change (%) 14.1 -3.7 35.0 112.6 26.7 11.2 40.7 50.6 43.2 27.4

Margins (%) 13.3 12.6 14.1 13.7 13.3 11.0 15.6 16.4 14.6 14.8

Dom. formulations sales 2,778 2,710 2,586 2,180 3,120 2,970 2,970 2,463 10,240 11,523

YoY Change (%) 13.5 14.7 12.7 9.8 12.3 9.6 14.9 13.0 12.7 12.5

Intl. formulations sales 4,212 4,362 4,490 5,260 5,390 5,720 6,390 7,700 18,340 25,200

YoY Change (%) 33.3 13.5 14.2 34.1 28.0 31.1 42.3 46.4 23.8 37.4

E: MOSL Estimates

C–105April 2014

March 2014 Results Preview | Sector: Media

Shobhit Khare ([email protected])

Expected quarterly performance summary (INR million)CMP Rating Sales EBITDA Net Profit


31.3.14 % YoY % QoQ % YoY % QoQ % YoY % QoQD B Corp 308 Buy 4,615 15.9 -10.9 1,094 16.6 -29.5 624 13.0 -33.9Dish TV 52 Buy 6,187 11.4 1.0 1,552 29.3 14.5 -205 Loss LossHT Media 93 Neutral 5,495 9.8 -5.5 783 9.1 -17.4 487 21.6 -27.6Jagran Prakashan 103 Buy 4,327 26.2 -4.6 828 53.3 -23.6 483 70.7 -27.0PVR 468 Buy 2,987 22.0 -11.4 248 50.8 -49.7 -118 PL PLSun TV 402 Buy 5,142 8.8 1.2 3,761 7.9 1.1 1,809 1.9 -2.6Zee Entertainment 272 Neutral 11,049 14.6 -7.0 3,047 25.8 4.8 2,308 28.6 8.1Sector Aggregate 39,804 14.4 -5.2 11,314 19.5 -6.2 5,388 20.4 -10.6

Abbreviations and acronymsGEC: General entertainment

channel

DTH: direct to home

Advertising: Expect strong double digit growthWe expect strong double digit ad revenue growth of 12-22% for all media companiesbarring Sun TV which has been impacted by YoY correction in the ad inventory due toTRAI regulation. While ad growth is expected to be particularly strong at ~20% forJagran Prakashan and HMVL (on a low base), growth momentum is likely to remainstrong at 15/16% for Zee/DB Corp. For HT English, we expect ad growth to improve to8% YoY (vs 6% YoY in 3QFY14).

26% YoY earnings growth expected for media universeZee is expected to report 29% YoY earnings growth, helped by steady core performanceas well as decline in sports loss. In contrast, PAT for Sun TV is likely to remain flat, inline with flat ad revenues. For Dish TV, we expect net loss to decline by ~50% YoY ledby a strong 29% EBITDA growth. Among print companies, while Jagran Prakashan isexpected to report ~70% growth on a low base, HT Media and DB Corp are likely topost PAT growth of 22% and 13% respectively.

DTH: Industry subscriber additions to decline QoQWe expect DTH subscriber additions to decline QoQ led by seasonality. We model~0.35m gross additions for Dish TV during the quarter as compared to ~0.4m in 3QFY14.

Hiccups in digitization process continueThere have been hiccups in the phase I implementation as cable subscribers are yetto fully transition to "addressable" systems. MSOs have initiated package wise billingand collection in phase-1 markets and expect the same to be inline by the beginningof the 2QFY15.

Digitization remains a strong theme for broadcasting; earnings revivalcontinues for regional printOur industry interactions suggest that ad environment is likely to remain stable. Printmedia sector continues to post earnings recovery led by yield improvement focus forregional print and cost management. Digitization remains a strong theme forbroadcasting and distribution stocks as government has been committed to thetimelines.

MediaCompanies Covered

D B Corp

Dish TV

H T Media

Jagran Prakashan

PVR

Sun TV Network

Zee Entertainment

C–106April 2014


Media: Quarterly financials1QFY13 2QFY13 3QFY13 4QFY13 1QFY14 2QFY14 3QFY14 4QFY14E YoY (%) QoQ (%)

Advertisement Revenue (INR b)

ZEEL 4.5 5.3 5.1 4.8 5.3 5.8 6.8 5.5 15 -19

Sun TV 2.8 2.8 3.3 3.1 3.1 2.7 3.0 3.0 0 1

Dish TV NM NM NM NM NM NM NM NM NM NM

DB Corp 2.7 2.6 3.2 2.8 3.3 3.1 3.8 3.2 16 -14

Jagran Prakashan 2.2 2.2 2.4 2.3 2.9 2.8 3.2 3.0 32 -6

HT Media 3.7 3.6 4.1 3.8 4.1 3.9 4.5 4.2 12 -6

HMVL 1.2 1.1 1.2 1.1 1.3 1.3 1.4 1.3 22 -2

Subscription Revenue (INR b)

ZEEL 3.6 3.9 4.1 4.5 4.2 4.6 4.6 4.9 9 8

Sun TV 1.5 1.5 1.6 1.6 1.8 1.9 2.0 2.1 25 3

Dish TV 4.6 4.7 4.9 5.0 5.3 5.4 5.5 5.6 12 1

DB Corp 0.7 0.7 0.7 0.7 0.8 0.8 0.8 0.8 15 1


HT Media 0.5 0.6 0.6 0.6 0.6 0.6 0.7 0.6 9 -6

HMVL 0.4 0.4 0.4 0.4 0.4 0.4 0.5 0.4 7 -6

Total Revenue (INR b)

ZEEL 8.4 9.5 9.4 9.6 9.7 11.0 11.9 11.0 15 -7

Sun TV 4.3 4.3 4.9 4.7 6.0 4.7 5.1 5.1 9 1

Dish TV 5.2 5.3 5.6 5.6 5.8 5.9 6.1 6.2 11 1

DB Corp 3.8 3.8 4.4 4.0 4.5 4.4 5.2 4.6 16 -11


HT Media 4.9 5.1 5.5 5.0 5.4 5.3 5.8 5.5 10 -5

HMVL 1.6 1.6 1.6 1.6 1.8 1.8 1.9 1.8 18 -3

EBITDA (INR b)

ZEEL 2.3 2.2 2.6 2.4 2.9 3.1 2.9 3.0 26 5

Sun TV 3.2 3.3 3.8 3.5 3.5 3.4 3.7 3.8 8 1

Dish TV 1.6 1.6 1.4 1.2 1.2 1.5 1.4 1.6 29 15

DB Corp 0.76 0.86 1.19 0.94 1.33 1.08 1.55 1.09 17 -29


HT Media 0.67 0.57 0.87 0.72 0.78 0.64 0.95 0.78 9 -17

HMVL 0.28 0.29 0.29 0.29 0.40 0.41 0.37 0.37 24 -1

EBITDA Margin (%)

ZEEL 27.7 22.8 27.8 25.1 30.0 28.2 24.5 27.6 245bp 312bp

Sun TV 75.9 75.9 77.5 73.7 58.8 72.4 73.2 73.1 -61bp -5bp

Dish TV 29.9 29.2 24.7 21.6 21.0 25.0 22.1 25.1 347bp 297bp

DB Corp 20.3 22.7 27.2 23.6 29.6 24.6 29.9 23.7 13bp -622bp

Jagran Prakashan 24.8 24.3 26.1 15.8 24.7 22.2 23.9 19.1 339bp -474bp

HT Media 13.7 11.1 16.0 14.3 14.4 12.0 16.3 14.2 -10bp -206bp

HMVL 17.7 18.0 17.6 18.9 22.0 23.2 19.6 20.0 109bp 45bp

Adj. PAT (INR b)

ZEEL 1.58 1.88 1.94 1.80 2.25 2.36 2.14 2.31 29 8

Sun TV 1.64 1.52 1.90 1.78 1.64 1.56 1.86 1.81 2 -3

Dish TV -0.32 -0.21 -0.45 -0.44 -0.30 -0.16 -0.38 -0.20 -53 -46

DB Corp 0.44 0.49 0.71 0.55 0.76 0.60 0.94 0.62 13 -34


HT Media 0.41 0.33 0.53 0.40 0.48 0.21 0.67 0.49 22 -28

HMVL 0.21 0.22 0.21 0.23 0.30 0.25 0.29 0.27 20 -5

* Consolidated numbers from 1QFY14. Not comparable with previous quarters Source: Company, MOSL

C–107April 2014


13 15 17 26 32 36 39 41 44 46 48 51 55 57 59 612421191187

1.0 1.2

3.12.0 2.1 2.2 1.8 2.2 2.5 2.7

3.52.9

2.33.4

2.0 2.2 2.53.6

2.0 2.4 1.8

5.6

1QFY

09

2QFY

09

3QFY

09

4QFY

09

1QFY

10

2QFY

10

3QFY

10

4QFY

10

1QFY

11

2QFY

11

3QFY

11

4QFY

11

1QFY

12

2QFY

12

3QFY

12

4QFY

12

1QFY

13

2QFY

13

3QFY

13

4QFY

13

1QFY

14

2QFY

14

DTH s ubs cribers (m) Quarterly subs criber adds (m)

4QFY14 ad revenue growth (YoY, %)

4QFY14 subscription/circulation revenue growth (YoY, %)

Newsprint prices have started softening (USD/MT)

Industry DTH subscriber base and additions trend


20

15 16

12

0

JagranPrakashan

ZEEL DB Corp HT Media Sun TV

25

15 1412

9 9

Sun TV DB Corp JagranPrakashan

Dis h TV ZEEL HT Media

15,000

22,000

29,000

36,000

43,000

Jan-

08

May

-08

Sep-

08

Jan-

09

Jun-

09

Oct

-09

Feb-

10

Jun-

10

Oct

-10

Feb-

11

Jul-

11

Nov

-11

Mar

-12

Jul-

12

Dec

-12

Apr

-13

Aug

-13

200

350

500

650

800News print price INR (LHS) Newsprint price - USD (RHS)

C–108April 2014



31.3.14 FY14E FY15E FY16E FY14E FY15E FY16E FY14E FY15E FY16E FY14E FY15E FY16EMediaD B Corp 308 Buy 16.0 19.0 22.6 19.3 16.2 13.6 11.1 9.4 7.9 26.8 28.3 29.6Dish TV 52 Buy -1.0 -1.0 0.6 -52.8 -49.8 86.5 11.5 9.9 7.4 NA NA NAHindustan Media 136 Buy 15.2 16.9 19.1 9.0 8.1 7.1 3.8 3.1 2.1 19.7 18.2 17.2HT Media 93 Neutral 7.8 8.0 8.9 11.9 11.6 10.5 5.4 4.8 4.0 10.1 9.3 9.3Jagran Prakashan 103 Buy 6.3 8.0 9.6 16.3 12.9 10.7 9.3 7.8 6.4 20.0 22.4 23.4PVR 468 Buy 12.8 18.8 33.2 36.7 24.8 14.1 11.6 8.9 6.4 7.7 10.4 16.3Sun TV 402 Buy 17.4 21.4 26.4 23.1 18.8 15.2 10.6 8.8 7.5 22.3 24.7 27.8Zee Entertainment 272 Neutral 9.5 11.7 15.0 28.6 23.2 18.1 21.0 16.7 12.9 21.4 22.6 24.5Sector Aggregate 26.4 21.6 16.4 12.7 10.6 8.6 18.3 19.8 22.6


92

96

100

104

108

Dec

-13

Jan-

14

Feb-

14

Mar

-14

Sensex IndexMOSL Media Index

95

105

115

125

Mar

-13

Jun-

13

Sep-

13

Dec

-13

Mar

-14

Sensex IndexMOSL Media Index

C–109April 2014



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Sales 3,770 3,784 4,389 3,981 4,494 4,380 5,182 4,615 15,923 18,671

YoY (%) 6.6 6.9 11.0 10.4 19.2 15.8 18.1 15.9 8.8 17.3


EBITDA 765 861 1,192 939 1,328 1,077 1,551 1,094 3,760 5,051

YoY (%) -23.8 11.6 17.1 24.0 73.7 25.1 30.2 16.6 5.9 34.3

EBITDA margin (%) 20.3 22.7 27.2 23.6 29.6 24.6 29.9 23.7 23.6 27.1

Depreciation 135 143 151 151 158 159 161 163 581 640

Interest 17 19 19 22 25 23 13 18 80 79

Other Income 46 38 38 92 45 39 74 45 213 202

PBT 658 736 1,060 858 1,191 934 1,451 959 3,313 4,534

Tax 222 251 352 307 430 332 506 335 1,132 1,604


PAT 436 486 708 551 761 602 945 624 2,181 2,930

Minority Interest 0 0 2 -1 0 0 0 0 0 0

Adj PAT 437 486 706 552 761 602 945 624 2,181 2,931

YoY (%) -28.5 20.7 27.6 21.7 74.3 23.8 33.8 13.0 7.9 34.3

Revenue break-up (INR m)

Ad revenue (print) 2,701 2,636 3,184 2,779 3,253 3,099 3,751 3,230 11,300 13,333

Circulation revenue 656 698 729 731 767 796 830 842 2,814 3,235

Radio 140 153 191 183 172 175 238 222 667 806

Event management 46 40 9 31 15 18 11 12 126 55

Others 227 257 276 257 288 292 352 309 1,017 1,241

Total revenue 3,770 3,784 4,389 3,981 4,494 4,380 5,182 4,615 15,923 18,671

E: MOSL Estimates

D B CorpCMP: INR308 Buy� We expect print advertising revenue to grow ~16% YoY to INR3.23b.

YoY ad growth would be impacted by ~5% due to lower governmentadvertising in March 2014 due to 'model code of conduct'implementation. Government contributed ~15% to ad revenue for DBCorp in 4QFY13.

� We expect circulation revenue to grow 16% YoY to INR0.84b.

� DB's aggregate revenue is likely to increase 16% YoY to INR4.62b.

� We estimate 4QFY14 EBITDA of INR1.09b, up 17% YoY. We expect EBITDAmargin to remain flat YoY at 23.7%.

� Net profit is expected at INR0.62b, up 13% YoY.

� The stock trades at a P/E of 16.2x FY15 and 13.6x FY16. Buy.

Key issues to watch out� YoY ad growth (we expect 16%), EBITDA margin (we expect 23.7%).


EBITDA 3.76 5.05 5.77 6.70

Adj. Net Profit 2.18 2.93 3.49 4.15

Adj. EPS (INR) 11.9 16.0 19.0 22.6

Adj. EPS Gr. (%) 7.9 34.3 19.1 18.8

BV/Sh (INR) 56.2 63.3 71.4 81.2

RoE (%) 22.3 26.8 28.3 29.6

RoCE (%) 18.0 22.3 24.0 25.6

Div. Payout (%) 53.7 55.7 57.0 57.0

Valuations

P/E (x) 25.9 19.3 16.2 13.6

P/BV (x) 5.5 4.9 4.3 3.8

EV/EBITDA (x) 15.1 11.1 9.4 7.9

Div. Yield (%) 1.8 2.5 3.0 3.6

Bloomberg DBCL IN




1,6,12 Rel Perf. (%) -3 / 10 / 17

C–110April 2014



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Sales 5,200 5,336 5,578 5,554 5,784 5,926 6,128 6,187 21,668 24,025

YoY Change (%) 12.9 10.7 13.7 5.9 11.2 11.1 9.9 11.4 10.7 10.9

Operating expenses 3,644 3,779 4,201 4,354 4,567 4,447 4,773 4,635 15,873 18,422

EBITDA 1,556 1,557 1,377 1,200 1,217 1,479 1,355 1,552 5,795 5,603

YoY Change (%) 38.7 27.9 14.6 -16.7 -21.8 -5.0 -1.6 29.3 16.3 -3.3

EBITDA margin (%) 29.9 29.2 24.7 21.6 21.0 25.0 22.1 25.1 26.7 23.3

Depreciation 1,512 1,533 1,713 1,450 1,444 1,504 1,534 1,567 6,276 6,049

Interest 473 317 288 344 354 345 301 287 1,284 1,288

Other Income 106 80 175 157 277 211 97 97 512 682

PBT -324 -213 -449 -436 -304 -160 -382 -205 -1,252 -1,051

Adjusted net profit -324 -213 -449 -436 -304 -160 -382 -205 -1,252 -1,051

YoY Change (%) 76.8 -56.3 4.4 -11.0 -6.0 -24.9 -14.7 -53.1 -21.2 -16.0

Net Subs (m) 9.8 10.0 10.5 10.7 10.9 11.0 11.3 11.4 10.7 11.4

ARPU (INR/month) 156 159 160 157 167 165 166 166 157 164

Revenue break-up (INR m)

Subscription revenue 4,556 4,729 4,943 5,001 5,280 5,370 5,529 5,607 19,228 21,786

Lease rentals 460 430 380 320 300 260 210 200 1,597 970

Others 184 177 255 233 203 296 389 380 843 1,269

Total revenue 5,200 5,336 5,578 5,554 5,784 5,926 6,128 6,187 21,668 24,025

E: MOSL Estimates

Dish TVCMP: INR52 Buy� We expect DITV's revenue to increase 11% YoY and 1% QoQ to INR6.19b.

� Subscription revenue is expected to increase 1% QoQ to INR5.61b.

� We expect gross additions of 0.35m and net additions of 0.15m.

� EBITDA margin is expected to increase 300bp QoQ to 25.1% largely onlower content and advertising costs.

� Net loss is expected to decline by 46% QoQ to INR205m.

� The stock trades at EV/EBITDA of 9.9x FY15 and 7.4x FY16. Buy.

Key issues to watch out� Quarterly gross adds (we expect 0.35m), ARPU (we expect INR166),

and EBIDTA margin (we expect 25.1%).


EBITDA 5.8 5.6 6.5 8.2

Adj. NP -1.3 -1.1 -1.1 0.6

Adj. EPS (INR) -1.2 -1.0 -1.0 0.6

Adj. EPS Gr. (%) NA NA NA NA

BV/Sh (INR) -1.5 -2.4 -3.5 -2.9

RoE (%) NA NA NA NA

RoCE (%) 1.2 -2.0 -6.3 21.8

Div. Payout (%) NA NA NA NA

Valuations

P/E (x) NA NA NA 86.5

P/BV (x) NA NA NA NA

EV/EBITDA (x) 11.3 11.4 9.9 7.4

EV/Sub (INR) 6,079 5,610 4,951 4,315

Bloomberg DITV IN




1,6,12 Rel Perf. (%) 0 / -12 / -41

C–111April 2014



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Revenue 4,899 5,107 5,470 5,005 5,409 5,347 5,813 5,495 20,482 22,064

YoY (%) -1.4 3.6 3.9 1.3 10.4 4.7 6.3 9.8 1.9 7.7


EBITDA 669 565 875 718 779 644 948 783 2,826 3,153

YoY (%) -25.9 -20.7 12.6 49.3 16.5 13.9 8.4 9.1 -1.6 11.6

EBITDA margin (%) 13.7 11.1 16.0 14.3 14.4 12.0 16.3 14.2 13.8 14.3

Depreciation 220 242 220 232 219 223 200 231 914 873

Interest 103 98 110 135 137 174 164 139 446 614

Other Income 209 244 238 247 276 570 357 356 938 1,559

PBT 555 469 783 597 699 816 941 769 2,404 3,224

Tax 129 107 222 167 183 177 193 220 624 774


PAT 426 362 562 430 516 639 747 549 1,780 2,450

Minority Interest 19 29 34 29 41 57 74 61 111

Reported PAT 407 333 528 401 475 582 673 487 1,669 2,218

Adj PAT 407 333 528 401 475 207 673 487 1,669 1,843

YoY (%) -21.0 -24.0 9.5 82.5 16.7 -37.7 27.6 21.6 1 10

Ad revenue growth (%) -3 -2 2 1 10 6 9 12 0 9

-English -6 -3 -3 3 8 4 6 8 -2 7

-Hindi 5 1 15 -3 14 11 16 22 5 16

Circulation revenue growth (%) 8 11 12 19 16 14 18 9 13 14

-English -3 1 6 27 25 11 18 14 7 17

-Hindi 13 16 15 16 12 15 18 7 15 13

E: MOSL Estimates

H T MediaCMP: INR93 Neutral� We expect HT Media to post revenue of INR5.5b, up 10% YoY.

� We expect ad revenue to grow 12% YoY to INR4.25b.

� We expect circulation revenue to increase 9% YoY to INR0.63b.

� EBITDA margin is expected to remain flat YoY at 14.2%.

� Net profit is expected to grow 22% YoY to INR0.49b.

� The stock trades at a P/E of 11.6x FY14 and 10.5x FY16. Neutral.

Key issues to watch out� YoY English ad growth (we expect 8% YoY growth), Hind ad growth (we

expect 22% YoY growth), EBITDA margin (we expect 14.2%).


EBITDA 2.8 3.2 3.2 3.4

Adj. Net Profit 1.7 1.8 1.9 2.1

Adj. EPS (INR) 7.1 7.8 8.0 8.9

Adj. EPS Gr. (%) 2.5 9.9 2.2 10.8

BV/Sh (INR) 74.0 82.0 90.5 99.8

RoE (%) 10.1 10.1 9.3 9.3

RoCE (%) 10.0 11.8 10.6 10.7

Div. Payout (%) 6.5 7.5 8.2 8.2

Valuations

P/E (x) 13.0 11.9 11.6 10.5

P/BV (x) 1.3 1.13 1.0 0.9

EV/EBITDA (x) 6.3 5.4 4.8 4.0

Div. Yield (%) 0.4 0.8 0.7 0.8

Bloomberg HTML IN




1,6,12 Rel Perf. (%) 14 / -10 / -28

C–112April 2014


Quarterly Performance (Consolidated from 1QFY14) (INR Million)Y/E March FY13* FY14# FY13 FY14E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Sales 3,175 3,221 3,489 3,428 4,131 4,137 4,537 4,327 13,314 17,132

YoY (%) 4.2 5.5 7.7 10.4 30.1 28.4 30.0 26.2 7.0 28.7


EBITDA 788 782 911 540 1,019 918 1,084 828 3,021 3,850

YoY (%) -3.9 -1.1 7.0 -18.0 29.3 17.5 19.0 53.3 -3.2 27.4

EBITDA margin (%) 24.8 24.3 26.1 15.8 24.7 22.2 23.9 19.1 22.7 22.5

Depreciation 148 161 166 185 181 190 198 201 660 769

Interest 76 59 77 65 71 78 95 80 278 324

Other Income -7 133 -9 109 -12 -55 75 84 225 91

PBT 557 694 659 398 755 595 866 632 2,308 2,848

Tax 0 0 0 -4 177 139 204 149 -4 669

Effective Tax Rate (%) 0.0 0.0 0.0 -1.1 23.5 23.3 23.6 23.6 (0.2) 23.5

Adjusted net profit 390 486 461 283 578 456 662 483 1,620 2,179

YoY (%) -21.5 6.2 11.6 -34.0 48.1 -6.2 43.6 70.7 -17.3 34.5

Key Metrics

Ad revenue growth (YoY, %) 8 4 7 8 31 29 34 32 4 14

Circulation revenue growth (YoY,%) 10 9 12 21 35 35 34 21 13 19

RM/Sales (%) 36 34 34 36 34 36 36 36 35 29

E: MOSL Estimates; * Standalone # consolidated, Nai Duniya financials included from 4QFY13 onwards

Jagran PrakashanCMP: INR103 Buy� Jagran's financials will not be comparable on a YoY basis.

� We expect advertising revenue to grow 32% YoY to INR3b on reportedbasis. On a like to like basis we expect ad revenue growth at 20%

� We expect circulation revenue to grow 21% YoY to INR0.92b on areported basis.

� Jagran's aggregate revenue is likely to increase 26% YoY to INR4.33b.

� We estimate 4QFY14 EBITDA of INR0.83b. We expect EBITDA margin of19%.

� Adjusted earnings are expected at INR0.48b, up 20% YoY.


Key issues to watch out� YoY ad growth (we expect 20%, EBITDA margin (we expect 19%).


EBITDA 3.0 3.9 4.5 5.1

Adj. Net Profit 1.5 2.0 2.5 3.0

Adj. EPS (INR) 4.7 6.3 8.0 9.6

Adj. EPS Gr. (%) -17.3 35.2 26.7 20.1

BV/Sh (INR) 29.5 33.4 37.9 44.0

RoE (%) 17.5 20.0 22.4 23.4

RoCE (%) 18.8 15.6 16.4 17.6

Div. payout (%) 50.2 46.4 43.9 36.6

Valuations

P/E (x) 22.1 16.3 12.9 10.7

P/BV (x) 3.5 3.1 2.7 2.3

EV/EBITDA (x) 11.9 8.9 7.4 6.1

Div. Yield (%) 1.9 2.4 2.9 2.9

Bloomberg JAGP IN




1,6,12 Rel Perf. (%) 9 / 10 / -8

C–113April 2014


PVRCMP: INR468 Buy� We expect revenue to grow 22% YoY (decline 11.4% QoQ) to INR2,987m

in 4QFY14. We estimate footfalls at 13m, ATP at INR180 and F&B SPH atINR56. While 4Q is a seasonally weak quarter, 4QFY14 would haveseen higher footfalls due to good movie content (Queen and RaginiMMS).

� EBITDA margin is likely to expand 160bp YoY (shrink 630bp QoQ) to8.3%, aided by synergies from Cinemax acquisition. We expect PAT tode-grow 201.2% YoY (decline 183.5% QoQ) to a loss of INR118m.

� The stock is trading at an EV of 8.9x FY15E and 6.4x FY16E EBITDA. Wemaintain Buy, with a target price of INR635 (8x FY16E EV/EBITDA).

Key issues to watch out�� Content pipeline for next year.�� Footfalls growth and SSG in FY15.�� New screen addition for FY15.


EBITDA 1.2 2.1 2.7 3.6

NP 0.4 0.5 0.8 1.4

EPS (INR) 11.2 12.8 18.8 33.2

EPS Gr (%) 14.7 13.6 47.6 76.5

BV/Sh (INR) 162.2 173.3 189.2 218.4

RoE (%) 9.6 7.7 10.4 16.3

RoCE (%) 7.8 10.7 14.3 19.5

Div. Payout (%) 10.4 18.2 15.4 12.2

Valuations

P/E (x) 41.6 36.7 24.8 14.1

P/BV (x) 2.9 2.7 2.5 2.1

EV/EBITDA (x) 21.2 11.6 8.9 6.4

Div Yield (%) 0.3 0.7 0.8 1.2

Bloomberg PVRL IN




1,6,12 Rel Perf. (%) -18 / -20 / 35

Niket Shah ([email protected]) / Atul Mehra ([email protected])


1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Net Sales 1,799 1,927 1,999 2,448 3,352 3,658 3,373 2,987 8,053 13,424

YoY Change (%) 53.3 0.6 41.5 108.0 86.3 89.8 68.7 22.0 55.7 66.7


EBITDA 338 366 343 164 594 748 493 248 1,169 2,084

Margins (%) 18.8 19.0 17.2 6.7 17.7 20.4 14.6 8.3 14.5 17.5

Depreciation 179 89 118 175 182 209 209 194 560 816

Interest 47 52 92 176 194 210 207 179 368 804

Other Income 8 9 11 19 21 13 21 25 91 113

PBT before EO expense 120 234 145 -167 238 342 99 -100 332 577

Extra-Ord expense 0 0 13 41 23 0 0 -12 0

PBT 120 234 145 -180 197 319 99 -100 320 577

Tax 42 73 56 -294 57 42 -41 18 (124) 58

Rate (%) 34.8 31.1 38.5 163.5 29.1 13.2 -41.1 -17.9 -38.7 10.0

MI & Profit/Loss of Asso. Cos. -3 -1 2 3 4 -1 3 0 2 0

Reported PAT 76 162 91 117 143 275 142 -118 445 519

Adj PAT 81 162 87 104 165 298 137 -118 459 519

YoY Change (%) -51.2 14.1 -3.9 89 70 55 -201 0.9 0.2

Margins (%) 4.2 8.4 4.6 4.8 4.3 7.5 4.2 -4.0 5.5 3.9

E: MOSL Estimates

C–114April 2014



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Revenue 4,258 4,333 4,859 4,727 6,019 4,664 5,083 5,142 18,176 20,908

YoY (%) -6.2 -4.0 14.3 10.7 41.4 7.6 4.6 8.8 3.4 15.0

EBITDA 3,230 3,290 3,763 3,486 3,537 3,377 3,720 3,761 13,769 14,394

YoY (%) -11.7 -10.0 10.3 6.2 9.5 2.6 -1.1 7.9 -1.7 4.5

As of % Sales 75.9 75.9 77.5 73.7 58.8 72.4 73.2 73.1 75.8 68.8

Depreciation and Amortization 933 1,138 1,044 1,017 1,174 1,176 1,061 1,200 4,132 4,610

Interest 2 5 17 24 7 9 23 18 48 57

Other Income 132 96 106 216 134 378 149 200 550 861

PBT 2,427 2,243 2,808 2,661 2,489 2,570 2,785 2,743 10,139 10,588

Tax 784 726 910 886 845 879 927 934 3,306 3,585


Reported PAT 1,643 1,517 1,899 1,775 1,644 1,692 1,858 1,809 6,833 7,003

Adj PAT 1,643 1,517 1,899 1,775 1,644 1,560 1,858 1,809 6,833 6,871

YoY (%) -12.4 -15.8 13.1 11.6 0.1 2.9 -2.2 1.9 -1.6 0.6

Revenue Breakup (INR m)

Advertising and Broadcast 2,800 2,810 3,270 3,050 3,140 2,683 3,030 3,045 11,930 11,898

International 260 260 260 260 290 323 330 338 1,040 1,281

DTH 890 900 945 1,000 1,060 1,084 1,130 1,150 3,735 4,424

Domestic Cable 300 340 370 380 420 492 540 566 1,390 2,019

Films and Others 8 23 14 37 1,109 82 53 43 81 1,287

Total 4,258 4,333 4,859 4,727 6,019 4,664 5,083 5,142 18,176 20,908

E: MOSL Estimates; *1QFY14/2QFY14 includes IPL revenue of INR985.4m/INR54.2m and IPL EBITDA loss of INR307.9m/INR30.9m

Sun TV NetworkCMP: INR402 Buy� We expect Sun TV's revenue to increase 9% YoY to INR5.1b.

� Advertising and broadcasting revenue is expected to remain flat YoYat INR3.05b.

� We expect total subscription revenue (domestic + international) togrow 25% YoY to INR2.05b.

� Sun TV's EBITDA is estimated to grow 8% YoY to INR3.76b.

� PAT is expected grow 2% YoY to INR1.81b.


Key issues to watch out� YoY ad growth (we expect flat), QoQ subscription growth (we expect

3% growth).


EBITDA 13.8 14.4 17.0 19.6

Adj. Net Profit 6.8 6.9 8.4 10.4

Adj. EPS (INR) 17.3 17.4 21.4 26.4

Adj. EPS Gr. (%) -1.6 0.5 22.5 23.6

BV/Sh (INR) 73.4 79.6 86.5 95.0

RoE (%) 23.6 22.3 24.7 27.8

RoCE (%) 45.3 44.5 48.2 51.1

Div. Payout (%) 54.8 56.3 58.5 58.8

Valuations

P/E (x) 23.2 23.1 18.8 15.2

P/BV (x) 5.5 5.1 4.6 4.2

EV/EBITDA (x) 11.2 10.6 8.8 7.5

Div. Yield (%) 2.4 2.5 3.1 3.9

Bloomberg SUNTV IN


M. Cap. (INR b)/(USD b) 158 / 3


1,6,12 Rel Perf. (%) 2 / -13 / -16

C–115April 2014



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Advertsing Revenue 4,472 5,281 5,094 4,792 5,301 5,833 6,843 5,511 19,639 23,488

Growth (%) 18 34 29 15 19 10 34 15 24.0 19.6

Subscription Revenue 3,641 3,950 4,098 4,546 4,241 4,581 4,565 4,939 16,234 18,326

Growth (%) 19 36 26 13 16 16 11 9 22.6 12.9

Other Sales and Services 317 305 197 305 191 599 476 600 1,123 1,865

Net Sales 8,430 9,536 9,388 9,643 9,733 11,013 11,884 11,049 36,997 43,679

Change (%) 20.7 32.7 24.4 11.0 15.5 15.5 26.6 14.6 21.7 18.1

Prog, Transmission & Direct Exp 3,757 4,791 4,185 4,669 4,108 5,041 6,095 5,095 17,401 20,339

Staff Cost 888 873 895 835 956 992 959 946 3,491 3,853

Selling and Other Exp 1,453 1,695 1,697 1,716 1,754 1,875 1,923 1,961 6,561 7,513

EBITDA 2,332 2,177 2,611 2,423 2,915 3,105 2,907 3,047 9,544 11,974

Change (%) 49.5 4.9 20.9 51.5 25.0 42.6 11.3 25.8 29.0 25.5

As of % Sales 27.7 22.8 27.8 25.1 30.0 28.2 24.5 27.6 25.8 27.4

Depreciation 99 96 90 115 87 91 135 113 399 425

Finance cost 18 23 16 29 22 34 32 34 86 122

Other Income 301 260 360 538 722 549 380 525 1,459 2,176

PBT 2,517 2,318 2,865 2,817 3,528 3,529 3,121 3,425 10,517 13,603

Tax 947 444 933 1,014 1,289 1,166 985 1,116 3,338 4,557


PAT 1,570 1,874 1,933 1,803 2,239 2,363 2,136 2,308 7,179 9,046

Minority Interest/Associates -12 -2 -8 8 -8 0 0 0 -15 -8

Adj PAT after Minority Interest 1,582 1,876 1,941 1,795 2,246 2,363 2,136 2,308 7,194 9,054

Change (%) 18.3 20.3 39.3 26.3 42.0 25.9 10.1 28.6 26.0 25.9

Subscription revenue (INR m)

Domestic 2,504 2,808 2,962 3,374 3,168 3,350 3,322 3,734 11,648 13,574

International 1,137 1,141 1,136 1,172 1,073 1,231 1,243 1,205 4,586 4,752

Total Subscription revenue 3,641 3,949 4,098 4,546 4,241 4,581 4,565 4,939 16,234 18,326

E: MOSL Estimates

Zee Entertainment EnterprisesCMP: INR272 Neutral� We expect advertising revenue to increase 15% YoY to INR 5.5b.

� We estimate subscription revenue growth of 9% YoY to INR4.9b.

� EBITDA margin is expected to increase 250bp YoY to 27.6%.

� Adj PAT is expected to increase 28% YoY to INR2.31b.

� The stock trades at a P/E of 23.2x FY15 and 18.1x FY16. Neutral.

Key issues to watch out� YoY ad growth (we expect 15%), sports loss (we expect INR 100m).


EBITDA 9.5 12.0 14.8 18.8

Adj. Net Profit 7.2 9.1 11.2 14.3

Adj. EPS (INR) 7.5 9.5 11.7 15.0

Adj. EPS Gr. (%) 27.9 25.9 23.3 28.0

BV/Sh (INR) 41.0 47.7 56.0 66.6

RoE (%) 19.6 21.4 22.6 24.5

RoCE (%) 29.1 32.7 33.6 36.3

Div. Payout (%) 26.6 25.0 25.0 25.0

Valuations

P/E (x) 36.0 28.6 23.2 18.1

P/BV (x) 6.8 5.8 4.9 4.1

EV/EBITDA (x) 25.8 20.3 16.1 12.5

Div. Yield (%) 0.7 0.9 1.1 1.4

Bloomberg Z IN


M. Cap. (INR b)/(USD b) 259 / 4


1,6,12 Rel Perf. (%) -5 / 3 / 10

C–116April 2014

March 2014 Results Preview | Sector: Metals



31.3.14 % YoY % QoQ % YoY % QoQ % YoY % QoQHindalco 142 Buy 220,356 6.3 -2.9 23,349 11.2 15.0 7,493 -16.5 88.6Hindustan Zinc 128 Buy 33,841 -13.4 -1.9 17,823 -15.8 -2.3 17,565 -19.5 2.0JSPL 292 Neutral 53,689 -4.9 -0.2 15,304 -9.4 -10.0 4,527 -47.4 -19.4JSW Steel 1,036 S e l l 117,467 26.4 -1.8 23,600 39.0 2.5 7,352 32.5 3.9Nalco 40 Buy 17,340 -7.1 5.5 1,887 -55.2 -7.6 1,207 -51.0 -7.9NMDC 139 Buy 37,737 17.8 33.7 24,904 15.5 30.9 20,167 16.6 28.7SAIL 71 S e l l 128,898 4.5 12.5 18,006 99.2 59.1 10,587 118.6 104.5Sesa Sterlite 188 Buy 194,363 3.2 0.1 69,862 3.6 6.4 14,519 5.4 -18.1Tata Steel 394 S e l l 412,839 19.1 12.4 44,974 2.9 12.3 9,131 3.3 81.6Sector Aggregate 1,216,530 10.1 5.3 239,709 8.0 10.6 92,548 0.4 17.4

Sanjay Jain ([email protected])

FerrousExpect QoQ improvement in marginsIndian steel demand remained subdued during 4QFY14. The apparent consumptionfor 11MFY14 (April to February) increased by just 0.6% YoY to 67.2mt. Steel demandde-grew in January but recovered in February 2014.

India: apparent steel consumption growth (%)

MetalsCompanies Covered

Hindalco

Hindustan Zinc

Jindal Steel & Power

JSW Steel

Nalco

NMDC

Sesa Sterlite

SAIL

Tata Steel

Source: JPC

Factors like slowdown of investment cycle, tight government finances, tight bankcredit to steel sectors, high leverage have led to lengthening of credit cycle andslowdown in steel demand. Nonetheless, the demand/supply equation has beenlittle better in 4QFY14 due to seasonal factors, compared to the situation in 2Q and3QFY14. Production issues at Bhushan Steel, JSPL (blast furnace shutdown in February2014), Essar Steel, delays at SAIL's project and pickup in exports from JSW Steel overlast six to eight months eased pressure on supply. India, turned a net exporter of steelduring 3QFY14, is witnessing net exports disappearing in February 2014.

-8 -5

4

-4 -2 0

2 0 1 3 1 2 1

-10

-5

0

5

10

Feb-

13

Mar

-13

Apr-

13

May

-13

Jun-

13

Jul-1

3

Aug

-13

Sep-

13

Oct

-13

Nov

-13

Dec

-13

Jan-

14

Feb-

14

Appa rent Cons umption growth 12m Moving Avg. growth

C–117April 2014


India: net exports (kt) have started to come off

Source: JPC

Although overall demand growth was subdued, the pricing scenario was little betterdue to improvement in sentiments and supply side issues.

India: import parity HRC prices (INR/t) have weakened India: long product (TMT) prices (INR/t) too have softened butdue to appreciation of INR/USD rate the average is higher by INR1,365 QoQ in 4QFY14

Source: MOSL Source: Steelmint

Europe: spreads (USD/t) between raw material basket and HRCEurope: steel prices have been trending down during 4QFY14 have been healthy due to sharper fall in inputs

Source: Bloomberg

Indian steel producers, Tata Steel and SAIL, are likely to report QoQ improvement indispatches. On the other hand, JSW Steel's dispatches may witness a mild decline asthe tailwind of exports has been tapering off. Jindal Steel and Power's steel productionwas affected due to a shutdown of blast furnaces. We expect margins to improve QoQfor Indian steel producers aided by better average realization and some benefit incoking coal costs.

-355

-516

-138

-395

-34-130

21

-252-369-403

-25 -26

-207

17107

-6

-138-144-161

105 48137

287

Apr-

12

May

-12

Jun-

12

Jul-1

2

Aug

-12

Sep-

12

Oct

-12

Nov

-12

Dec

-12

Jan-

13

Feb-

13

Mar

-13

Apr-

13

May

-13

Jun-

13

Jul-1

3

Aug

-13

Sep-

13

Oct

-13

Nov

-13

Dec

-13

Jan-

14

Feb-

14

31,000

34,000

37,000

40,000

43,000

Mar

-13

Apr-1

3

May

-13

Jun-

13

Jul-1

3

Aug

-13

Sep-

13

Oct

-13

Nov

-13

Dec

-13

Jan-

14

Feb-

14

Mar

-14

HR C Mumbai

31,000

32,500

34,000

35,500

37,000M

ar-1

3

Apr-1

3

May

-13

Jun-

13

Jul-1

3

Aug

-13

Sep-

13

Oct

-13

Nov

-13

Dec

-13

Jan-

14

Feb-

14

Mar

-14

TMT (Mu mba i )

400

440

480

520

560

Mar

-12

May

-12

Jul-1

2

Sep-

12

Nov

-12

Jan-

13

Mar

-13

May

-13

Jul-1

3

Sep-

13

Nov

-13

Jan-

14

Mar

-14

North Euro pe HR C So uth Europ e HRC

180

235

290

345

400

Mar

-10

Jun-

10

Sep-

10

Dec

-10

Mar

-11

Jun-

11

Sep-

11

Dec

-11

Mar

-12

Jun-

12

Sep-

12D

ec-1

2

Mar

-13

Jun-

13

Sep-

13

Dec

-13

Mar

-14

So uth Europ e

C–118April 2014


Non-ferrous

Copper, zinc business margins to be stronger

Stronger premiums largely offset by weaker LMEAluminum average prices on LME declined further by 3% QoQ to USD1,709/t in 4QFY14on the back of negative sentiments. However, average spot premiums (Singapore)improved 17% QoQ to USD217/t. Hence, total aluminum prices were down by only 1%in USD and INR as the average exchange rate was stable at 62. We expect costs toremain largely stable. Thus, the margins of primary smelting should largely be stable.

Quarterly average prices (USD/TON)Quarter Aluminium Premium Aluminium total price Alumina

Avg. QoQ YoY Avg. QoQ YoY Avg. QoQ YoY Avg. QoQ YoY

4QFY14 1,709 -3% -15% 217 17% 21% 1,925 -1% -12% 329 2% -4%

3QFY14 1,768 -1% -11% 185 0% 6% 1,953 -1% -10% 323 1% -1%

2QFY14 1,780 -3% -7% 186 3% 4% 1,966 -2% -6% 318 -3% 1%

1QFY14 1,834 -8% -7% 180 1% 28% 2,014 -8% -5% 327 -4% 3%

4QFY13 2,002 0% -8% 179 3% 80% 2,181 0% -4% 341 5% 8%

3QFY13 1,997 4% -4% 174 -3% 99% 2,171 4% 0% 326 3% -1%

2QFY13 1,918 -3% -20% 179 27% 105% 2,097 -1% -16% 316 0% -15%

1QFY13 1,978 -9% -24% 141 42% 62% 2,119 -7% -21% 317 0% -22%

Source: LME

Zinc average prices on LME increased 7% QoQ to USD2,035/t. On the other hand, leadprices were stable at USD2,111/t. Silver prices were marginally lower by 2% QoQ. Weexpect zinc, lead and silver business of HZL thereby SSLT should report better margins.However, production at HZL is likely to be lower on a QoQ basis. SSLT's zinc-internationalbusiness is expected to report better volumes and earnings.

Quarterly average prices (USD/TON)Quarter Zinc Copper Lead Silver (Rs/kg)

Avg. QoQ YoY Avg. QoQ YoY Avg. QoQ YoY Avg. QoQ YoY

4QFY14 2,035 7% 0% 7,088 -1% -11% 2,111 0% -8% 45,109 -2% -19%

3QFY14 1,906 3% -2% 7,153 1% -10% 2,111 0% -4% 46,099 0% -23%

2QFY14 1,859 1% -1% 7,073 -1% -8% 2,101 2% 6% 46,077 3% -17%

1QFY14 1,840 -9% -5% 7,147 -10% -9% 2,053 -11% 4% 44,837 -20% -18%

4QFY13 2,032 4% 0% 7,931 0% -5% 2,301 5% 10% 55,927 -7% 1%

3QFY13 1,946 3% 3% 7,908 3% 6% 2,198 11% 11% 59,949 8% 11%

2QFY13 1,885 -2% -15% 7,705 -2% -14% 1,974 0% -20% 55,755 2% -5%

1QFY13 1,927 -5% -14% 7,869 -5% -14% 1,973 -6% -23% 54,406 -2% -5%

Source: LME

C–119April 2014



31.3.14 FY14E FY15E FY16E FY14E FY15E FY16E FY14E FY15E FY16E FY14E FY15E FY16EMetalsHindalco 142 Buy 11.0 12.5 11.4 12.9 11.3 12.5 9.4 7.3 6.4 10.5 11.0 9.1Hindustan Zinc 128 Buy 16.0 17.6 17.2 8.0 7.3 7.4 4.0 3.1 2.4 19.4 18.3 15.7JSPL 292 Neutral 24.7 28.2 35.4 11.8 10.3 8.2 9.4 7.8 6.0 11.0 11.7 12.7JSW Steel 1,036 S e l l 49.2 65.3 55.3 21.0 15.9 18.7 7.1 7.0 6.6 6.8 9.3 7.4Nalco 40 Buy 2.3 3.2 2.9 17.3 12.4 13.6 6.0 3.6 3.7 4.9 6.6 5.9NMDC 139 Buy 16.3 17.7 18.1 8.5 7.9 7.7 4.4 4.1 4.0 22.9 21.7 21.3SAIL 71 S e l l 6.1 7.1 7.3 11.7 10.0 9.7 10.0 8.2 7.5 5.9 6.5 6.3Sesa Sterlite 188 Buy 17.6 24.6 24.8 10.7 7.6 7.6 3.8 3.1 2.7 7.3 9.3 8.7Tata Steel 394 S e l l 33.7 44.3 56.5 11.7 8.9 7.0 7.0 6.3 5.8 15.0 17.6 19.1Sector Aggregate 10.6 8.9 8.5 6.2 5.3 4.8 9.9 10.8 10.4

Relative performance-3m (%) Relative performance-1Yr (%)

Stronger copper TcRc should help both SSLT and Hindalco post strong numbers in4QFY14.

Copper TcRc (USc/lb) is the strongest in last 4 years

Source: SSLT

10

14

18

22

26

1QFY

10

2QFY

10

3QFY

10

4QFY

10

1QFY

11

2QFY

11

3QFY

11

4QFY

11

1QFY

12

2QFY

12

3QFY

12

4QFY

12

1QFY

13

2QFY

13

3QFY

13

4QFY

13

1QFY

14

2QFY

14

3QFY

14

4QFY

14

80

90

100

110

Dec-

13

Jan-

14

Feb-

14

Mar

-14

Sen sex Ind exMOSL Metals Ind ex

60

80

100

120

140M

ar-1

3

Jun-

13

Sep-

13

Dec

-13

Mar

-14

Sense x IndexMOSL Me tals Index

C–120April 2014



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Alumina (Production, kt) 335 328 326 330 348 334 355 359 1,319 1,396

Aluminium (sales, kt) 124 127 135 147 130 132 151 140 532 553

Copper (sales, kt) 71 73 82 84 68 77 85 85 310 315

Net Sales 60,279 61,635 68,717 69,938 58,379 63,049 72,732 73,783 260,569 267,943

Change (YoY %) 0.0 -1.7 3.4 -8.5 -3.2 2.3 5.8 5.5 -2.0 2.8

EBITDA 4,631 5,153 5,821 6,432 4,785 5,398 6,295 5,760 22,037 22,239

Change (YoY %) -46.6 -23.0 -18.6 -25.6 3.3 4.8 8.2 -10.4 -29.3 0.9

EBITDA - Aluminium 3,415 2,609 3,110 3,388 3,515 2,550 2,838 2,603 12,523 11,506

EBITDA-Copper 1,216 2,544 2,711 3,044 1,270 2,848 3,457 3,157 9,515 10,733

Interest 815 279 1,690 1,577 1,487 1,832 1,652 1,487 4,360 6,458

Depreciation 1,705 1,728 1,884 1,726 1,831 1,964 1,998 1,934 7,042 7,726

Other Income 1,714 1,324 1,741 2,312 2,249 2,798 2,042 2,015 7,091 9,104

PBT (after EO item) 5,126 4,471 5,428 5,442 5,746 4,401 4,688 4,355 20,466 17,160

Total Tax 878 882 1,093 621 1,005 830 1,347 982 3,474 4,164

% Tax 23.0 19.7 27.4 11.4 27.0 18.9 28.7 22.5 17.0 24.3

Adjusted PAT 2,948 3,589 2,895 4,820 2,711 3,571 3,340 3,373 14,252 12,995

Change (YoY %) -54.2 -28.6 -35.8 -24.7 -8.0 -0.5 15.4 -30.0 -36.3 -8.8

Novelis Shipments (kt) 722 719 647 698 708 718 721 749 2,786 2,896

Novelis adj. EBITDA (USDm) 259 277 185 240 218 228 203 261 961 910

Consolidated Financials

Net Sales 200,233 198,122 196,259 207,306 197,328 217,866 226,997 220,356 801,928 862,660

EBITDA 20,221 21,996 17,400 21,004 18,421 20,986 20,310 23,349 80,584 83,009

Consolidated adj. PAT 7,864 9,431 4,811 8,970 4,091 5,633 3,973 7,493 32,485 22,758

E: MOSL Estimates

HindalcoCMP: INR142 Buy� Net sales to increase 1% QoQ: We expect net sales to increase 1% QoQ

(up 5% YoY) to INR74b due to higher sales volumes in both aluminumand copper segments. Aluminum sales volume is expected to increase2% QoQ, while copper sales volume is likely to be flat QoQ. We expectNovelis' shipments to increase 4% QoQ to 749kt, while EBITDA/t isexpected to increase 24% QoQ to USD348/t.

� Standalone EBITDA to decrease 8% QoQ: We expect standalone EBITDAto decrease 8% QoQ to INR5.8b, due to lower aluminum sales volume.

� Maintain Buy: HNDL is at an inflexion point as operating cash flowsare poised for rapid growth and as benefits of USD8b investmentshave begun. Margins of aluminum business should expand, driven bydeclining cost of production. Novelis' free cash flows will also improvein FY15 as it exits the capex cycle. Reiterate Buy.

Key issues to watch out� Mahan coal block is critical to drive profitability of its 359ktpa Mahan

smelter.

Financials & Valuation (INR b)Y/E March 2013 2014E 2015E 2016ES a l e s 801.9 862.7 989.6 1,071.9

EBITDA 80.6 83.0 109.4 119.3

NP 32.5 22.8 25.8 23.5

Adj. EPS (INR) 17.0 11.0 12.5 11.4

EPS Gr(%) -4.4 -35.0 13.5 -9.2

BV/Sh. (INR) 101 109 119 129

RoE (%) 18.0 10.5 11.0 9.1

RoCE (%) 5.8 4.6 6.3 6.5

Payout (%) 9.7 14.9 13.1 14.4

Valuations

P/E (x) 8.4 12.9 11.3 12.5

P/BV 1.4 1.3 1.2 1.1

EV/EBITDA (x) 9.3 9.4 7.3 6.4

Div. Yield (%) 1.0 1.0 1.0 1.0

Bloomberg HNDL IN


M. Cap. (INR b)/(USD b) 293 / 5


1,6,12 Rel Perf. (%) 29 / 11 / 36

C–121April 2014



Production (integrated) 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Zn refined (000 tons) 157 153 168 181 173 195 196 181 659 746

Pb refined (000 tons) 27 23 20 32 27 29 25 25 102 106

Silver (tons) 79 80 62 100 86 92 81 80 321 339

Net Sales 27,477 28,655 31,780 39,087 29,842 35,591 34,501 33,841 126,998 133,774

Change (YoY %) -3.5 8.7 14.0 24.7 8.6 24.2 8.6 -13.4 11.4 5.3

EBITDA 14,286 14,431 14,940 21,160 15,031 18,834 18,238 17,823 64,816 69,925

As % of Net Sales 52.0 50.4 47.0 54.1 50.4 52.9 52.9 52.7 51.0 52.3

Interest 129 -21 75 108 109 80 100 100 291 390

Depreciation 1,734 1,746 1,772 1,219 1,843 1,865 2,097 2,118 6,470 7,923

Other Income 5,743 5,398 5,063 4,118 5,403 2,669 4,240 4,819 20,322 17,130

PBT (before EO item) 18,166 18,104 18,156 23,951 18,481 19,558 20,280 20,424 78,377 78,743

Extra-ordinary Income 0 0 0 -175 795 -612 0 0 -175 0

PBT (after EO item) 18,166 18,104 18,156 23,776 19,275 18,946 20,280 20,424 78,201 78,743

Total Tax 2,353 2,706 2,031 2,117 2,671 2,544 3,053 2,859 9,206 11,127

% Tax 13.0 14.9 11.2 8.9 13.9 13.4 15.1 14.0 11.8 14.1

Reported PAT 15,813 15,398 16,125 21,658 16,605 16,403 17,227 17,565 68,995 67,616

Adjusted PAT 15,813 15,398 16,125 21,818 15,920 16,932 17,227 17,565 69,149 67,616

Change (YoY %) 5.5 12.9 26.1 53.7 0.7 10.0 6.8 -19.5 24.4 -2.2

Avg LME Zinc (USD/T) 1,927 1,885 1,946 2,032 1,840 1,859 1,897 2,031 1,948 1,907

Avg LME Lead (USD/T) 1,973 1,974 2,198 2,301 2,053 2,101 2,105 2,106 2,112 2,091

Silver (USD/oz) 27.8 28.1 31.1 29.6 21.5 19.7 19.7 20.5 29.3 20.6

E: MOSL Estimates

Hindustan ZincCMP: INR128 Buy� Net sales to decline 2% QoQ due to lower volumes: We expect net

sales to decrease 2% QoQ (-13% YoY) to INR34b on mine and smelterproduction. Realizations are expected to be higher. LME zinc priceshave increased 7% QoQ, while lead prices have been flat QoQ. Silverprices increased 4% QoQ. We expect mine metal production of 210kt,while integrated lead/zinc production is likely to be 206kt.

� EBITDA to decrease 2% QoQ: We expect EBITDA to decrease 2% QoQto INR17.8b (-16% YoY) due to lower volumes. Integrated si lverproduction (inclusive of captive consumption) is expected to be 80t(down 20% YoY). We have cut 4QFY14 adjusted PAT by 3% to INR17.6band FY14 EPS by 1% to INR16.2.

� Maintain Buy: HZ has guided for 900kt of MIC production in FY14 and335t of silver. We model 889kt of MIC production and 339t of integratedsilver production for FY14. We expect EBITDA to post 4% CAGR overFY14E-16E on higher sales volumes. The stock trades at attractive EV/EBITDA and P/BV valuations. Maintain Buy .

Key issues to watch out� Mine production guidance has been cut from 1mt to 900kt for FY14

due to a change in mine plan in greater long term interest. HZ maystill miss the revised guidance for the year. We need to watch FY15guidance.


EBITDA 64.8 69.9 73.9 76.0

NP 69.1 67.6 74.2 72.9

Adj. EPS (INR) 16.4 16.0 17.6 17.2

EPS Gr(%) 24.4 -2.2 9.7 -1.8

BV/Sh. (INR) 76 89 103 116

RoE (%) 23.4 19.4 18.3 15.7

RoCE (%) 25.6 21.8 20.7 18.9

Payout (%) 22.2 22.7 20.7 21.0

Valuations

P/E (x) 7.8 8.0 7.3 7.4

P/BV 1.7 1.4 1.2 1.1

EV/EBITDA (x) 5.1 4.0 3.1 2.4

Div. Yield (%) 2.4 2.4 2.4 2.4

Bloomberg HZ IN


M. Cap. (INR b)/(USD b) 542 / 9


1,6,12 Rel Perf. (%) 4 / -19 / -13

C–122April 2014


Jindal Steel & PowerCMP: INR292 Neutral� Net sales to increase 6% QoQ: We expect steel sales to increase 5%

QoQ (-12% YoY) to 801t. We expect standalone EBITDA to decrease12% QoQ to INR10.6b.

� Jindal Power's sales volume to decline 9% QoQ: PLF for 1,000mw waslow at 67% in January due to demand and maintenance. PLF improvedin February to 88%, while March PLF is expected to be 100%. Tamnar-2 power sales from unit-1 have been delayed due to connectivity issueswith southern grid. We expect PAT to increase 15% QoQ to INR3b.

� Maintain Neutral: Valuations are not demanding though headwindsstill remain. Stock is trading at FY15E P/BV of 1.1x. We value JSP atINR276 based on SOTP. Maintain Neutral.

Key issues to watch out� Supreme Court's decision on coalgate and its likely impact on Utkal

B1 coal block of JSPL.

� Commissioning of coal gasification, DRI and steel melt shop.

� Ongoing Odisha government's investigation on Sarda mines.

� Performance of captive power plants.

� Transmission line connectivity to southern grid. This will help JindalPower to sell output from Tamnar-2 project to Tamil Nadu.


EBITDA 65.7 62.9 78.4 96.7

Adj. PAT 34.8 22.6 25.8 32.4

Adj. EPS (INR) 37.2 24.7 28.2 35.4

EPS Gr(%) -14.2 -33.7 14.3 25.5

BV/Sh. (INR) 227 221 261 296

RoE (%) 17.7 11.0 11.7 12.7

RoCE (%) 12.3 9.1 10.0 11.7

Payout (%) 4.4 8.3 7.3 5.8

Valuations

P/E (x) 7.8 11.8 10.3 8.2

P/BV 1.3 1.3 1.1 1.0

EV/EBITDA (x) 7.9 9.4 7.8 6.0

Div. Yield (%) 0.5 0.7 0.7 0.7

Bloomberg JSP IN


M. Cap. (INR b)/(USD b) 267 / 4


1,6,12 Rel Perf. (%) 16 / 8 / -35


Sales volume 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Steel (000 tons) 561 639 734 909 665 740 765 801 2,843 2,829

Pellets (000 tons) 395 436 623 658 551 639 525 517 2,112 3,949

CPP (M kwh) 584 547 603 517 384 116 300 476 2,251 1,381

Net Sales 33,311 35,890 38,209 42,137 34,252 36,556 37,767 39,860 149,547 148,435

Change (YoY %) 31.8 7.7 15.8 1.0 2.8 1.9 -1.2 -5.4 12.2 -0.7


EBITDA 10,377 12,607 12,781 11,363 10,477 10,833 12,098 10,686 47,127 44,094

Change (YoY %) 7.7 6.2 22.3 -13.2 1.0 -14.1 -5.3 -6.0 4.6 -6.4

As % of Net Sales 31.2 35.1 33.4 27.0 30.6 29.6 32.0 26.8 31.5 29.7

Interest 2,186 1,779 2,876 2,369 2,318 3,337 3,667 3,887 9,209 13,208

Depreciation 2,372 2,489 2,543 3,081 3,036 3,036 2,985 3,205 10,485 12,263

Other Income 122 74 39 1,358 63 56 9 1,526 1,593 1,653


Extra-ordinary Income -5,741 0 0 -1,000 -2,000 -1,000 0 0 -6,741 -3,000

PBT (after EO item) 201 8,413 7,401 6,271 3,185 3,516 5,456 5,119 22,285 17,276

Total Tax 76 2,591 2,196 1,496 796 950 1,800 1,433 6,360 4,979

% Tax 38.1 30.8 29.7 23.9 25.0 27.0 33.0 28.0 28.5 28.8

Reported PAT 124 5,822 5,205 4,774 2,389 2,567 3,656 3,686 15,926 12,297

Adjusted PAT 4,602 5,822 5,205 5,774 4,389 3,567 3,656 3,686 21,404 15,297

JPL PAT 3,144 2,603 2,558 2,822 3,217 3,006 2,666 3,079 11,126 11,967

Adj consol PAT 9,594 8,973 8,673 8,602 6,943 5,521 5,615 4,527 34,842 22,606

E: MOSL Estimates

C–123April 2014



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Sales ('000 tons) 2,109 2,170 2,170 2,430 2,550 3,130 3,080 3,000 8,879 11,760

Realization (INR per ton) 42,853 40,880 38,214 38,234 36,699 36,695 38,846 39,156 39,973 37,887

Net Sales 90,376 88,709 82,924 92,909 93,582 114,857 119,645 117,467 354,918 445,550

EBITDA 17,728 15,252 13,136 16,973 17,491 22,340 23,032 23,600 63,088 86,463

As % of Net Sales 19.6 17.2 15.8 18.3 18.7 19.4 19.3 20.1 17.8 19.4

EBITDA (INR per ton) 8,406 7,028 6,053 6,985 6,859 7,137 7,478 7,867 7,105 7,352

EBITDA (USD per ton) 155 127 112 129 122 115 121 127 130 121

Interest 4,067 4,208 4,546 4,425 6,418 6,890 7,192 7,264 17,245 27,763

Depreciation 4,678 4,812 4,975 5,274 6,439 6,852 6,904 7,042 19,739 27,237

Other Income 723 783 566 537 723 1,208 607 613 2,609 3,150

PBT (before EO Item) 9,706 7,015 4,181 7,811 5,357 9,806 9,543 9,907 28,713 34,612

EO Items -5,921 4,224 -3,274 1,299 -8,529 -8,394 0 0 -3,672 -16,923

PBT (after EO Item) 3,786 11,239 907 9,110 -3,173 1,412 9,543 9,907 25,041 17,689

Total Tax 1,096 3,016 -460 3,377 -965 400 3,021 1,981 7,029 4,438

% Tax 28.9 26.8 -50.7 37.1 30.4 28.3 31.7 20.0 28.1 25.1

Reported PAT 2,690 8,223 1,367 5,732 -2,208 1,013 6,521 7,925 18,012 13,252

Adjusted PAT 6,912 4,976 2,938 5,549 3,943 7,276 7,079 7,352 20,374 25,651

Change (YoY %) 21.0 -17.0 -69.4 -0.8 -43.0 46.2 141.0 32.5 -24.2 25.9

Consolidated adj PAT 4,091 2,468 586 3,136 1,637 3,386 3,334 3,546 10,280 11,904

E: MOSL Estimates; Note: JSW Ispat is excluded until 4QFY13

JSW SteelCMP: INR1,036 Sell


EBITDA 65.0 91.2 90.8 90.1

Adj. PAT 11.1 11.9 15.8 13.4

Adj. EPS (INR) 49.7 49.2 65.3 55.3

EPS Gr(%) -25.3 -0.9 32.5 -15.3

BV/Sh. (INR) 765 678 730 773

RoE (%) 6.6 6.8 9.3 7.4

RoCE (%) 8.4 10.9 9.4 8.6

Payout (%) 25.9 53.3 17.3 20.3

Valuations

P/E (x) 20.8 21.0 15.9 18.7

P/BV 1.4 1.5 1.4 1.3

EV/EBITDA (x) 8.0 7.1 7.0 6.6

Div. Yield (%) 1.0 1.0 1.0 1.0

Note: JSW Ispat included in FY14 and FY15

Bloomberg JSTL IN


M. Cap. (INR b)/(USD b) 250 / 4

52-Week Range (INR) 1,047 / 452

1,6,12 Rel Perf. (%) 12 / 26 / 36

� Standalone (S/A) revenue to decline 2% QoQ: Steel sales are expectedto decline 3% QoQ as strong export market had boosted overallvolumes in 3QFY14. We expect steel realization to inch up by 1% dueto firm steel prices.

� S/A EBITDA to increase 2% QoQ: We expect JSTL's standalone EBITDAto increase 2% QoQ to INR23.6b on better margins. We estimateEBITDA/ton to increase 5% QoQ to INR7,867/t, benefiting fromweakening coking coal prices and firm steel prices.

� Maintain Sell: JSTL has been able to sustain margins despite a weakdemand scenario. Operating costs remain low due to high level ofoperating efficiencies. Ballooning debt and working capital remain apoint of concern. The stock trades at an expensive 15.9x FY15E EPS andan EV of 7x FY15E EBITDA. Maintain Sell .

Key issues to watch out� Progress in pelletization, coking coal plant at Dolvi site. These units

were planned to be commissioned in 4QFY14.

� Gas availability for its DRI unit at Dolvi.

� Downstream investment at Vijay Nagar.

C–124April 2014



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Aluminium Sales ('000 tons) 102 101 102 98 85 75 78 80 403 318

Alumina Sales ('000 tons) 253 190 220 320 283 374 313 368 983 1,338

Avg LME Aluminium (USD/ton) 1,978 1,918 1,997 2,008 1,834 1,780 1,770 1,707 1,975 1,773

NSR premiums (USD/ton) 275 319 316 324 327 314 327 376 309 332

Alumina Exports (USD/ton) 343 323 328 341 325 316 313 307 334 315

Net Sales 17,481 16,083 16,928 18,673 15,606 17,382 16,439 17,340 69,165 66,766

Change (YoY %) -0.8 -0.3 16.7 4.6 -10.7 8.1 -2.9 -7.1 4.6 -3.5

EBITDA 3,042 -16 1,827 4,216 1,530 2,677 2,043 1,887 9,069 8,137

As % of Net Sales 17.4 -0.1 10.8 22.6 9.8 15.4 12.4 10.9 13.1 12.2

Interest 32 41 2 0 0 0 0 0 75 0

Depreciation 1,224 1,239 1,231 1,361 1,245 1,286 1,308 1,314 5,054 5,152

Other Income 1,403 1,391 1,127 1,190 1,787 1,228 1,208 1,202 5,111 5,425

PBT 3,190 95 1,720 4,046 2,072 2,619 1,943 1,774 9,050 8,409

Total Tax 959 47 531 1,585 476 827 633 568 3,122 2,504

% Tax 30.1 49.5 30.9 39.2 23.0 31.6 32.6 32.0 34.5 29.8

Reported PAT 2,231 48 1,189 2,460 1,597 1,792 1,310 1,207 5,928 5,906

Adjusted PAT 2,231 48 1,189 2,460 1,597 1,792 1,310 1,207 5,928 5,906

E: MOSL Esitmates

NalcoCMP: INR40 Buy� Net sales to increase 5% QoQ: We expect net sales to increase 5% QoQ

(down 7% YoY) to INR17.3b due to higher alumina volumes. Aluminumsales volume is likely to increase 3% QoQ to 80kt. Aluminum realizationis expected to decrease 1% QoQ, while alumina realization is expectedto decrease 2% QoQ to INR19,050/t.

� EBITDA to decrease 8% QoQ: We expect EBITDA to decrease 8% QoQto INR1.9b due to lower metal prices.

� Power cost to remain high till Utkal coal block commissioning; maintainBuy: NACL has a strong balance sheet, with cash surplus of ~INR50bpost capex. Potential upsides from Utkal-E block, further expansionof the alumina refinery and peaking of labor cost as older employeesretire over the next three to five years are long term positives.Maintain Buy.

Key issues to watch out� Utkal coal block remains the key to company's future profitability. It

has received stage I forest clearance so far.� Status of investment in NPCIL JV. It will be investing INR8.95b for a

26% stake in the venture.� Aluminum production has been affected due to constraints in supply

of linkage coal from MCL and lower LME prices. NACL is operating at25-30% lower capacity and the trend is likely to continue due to weakLME and lower linkage coal supply.


EBITDA 9.1 8.1 11.6 10.5

NP 5.9 5.9 8.2 7.5

Adj. EPS (INR) 2.3 2.3 3.2 2.9

EPS Gr(%) -31.5 -0.4 39.3 -8.7

BV/Sh. (INR) 46 47 49 50

RoE (%) 5.0 4.9 6.6 5.9

RoCE (%) 7.2 6.5 9.1 8.1

Payout (%) 63.6 63.8 45.8 50.2

Valuations

P/E (x) 17.2 17.3 12.4 13.6

P/BV 0.9 0.8 0.8 0.8

EV/EBITDA (x) 5.8 6.0 3.6 3.7

Div. Yield (%) 3.2 3.2 3.2 3.2

Bloomberg NACL IN


M. Cap. (INR b)/(USD b) 102 / 2


1,6,12 Rel Perf. (%) 15 / 6 / 1

C–125April 2014



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Production (m tons) 6.9 5.4 5.4 9.6 6.9 5.9 7.3 9.4 27.2 29.6

Sales (m tons) 6.9 5.9 5.3 8.2 7.3 6.5 7.3 9.4 26.3 30.5

Avg Dom. Realisation (USD/t) 76 75 67 68 67 53 58 59 72 59

Avg Dom. Realisation (INR/t) 4,102 4,130 3,630 3,680 3,735 3,290 3,580 3,680 3,898 3,588

Lumps % (production) 37 39 36 34 37 34 36 36 36 36

Net Sales 28,404 26,120 20,477 32,043 28,706 24,799 28,232 37,737 107,043 119,474

Change (QoQ %) 9.5 -8.0 -21.6 56.5 -10.4 -13.6 13.8 33.7 23.5


EBITDA 23,020 19,349 13,913 21,556 19,052 14,936 19,028 24,904 77,838 77,920

As % of Net Sales 81.0 74.1 67.9 67.3 66.4 60.2 67.4 66.0 72.7 65.2

EBITDA per ton (USD) 62 60 48 48 47 37 42 43 54 42

EBITDA per ton (INR/t) 3,358 3,305 2,612 2,616 2,627 2,296 2,591 2,649 2,963 2,555

Interest 0 0 0 132 0 0 0 0 0 0

Depreciation 328 332 339 387 364 348 362 371 1,385 1,444

Other Income 5,521 5,831 5,563 5,474 5,209 5,384 5,077 5,124 22,389 20,793

PBT (after EO Item) 28,214 24,848 19,137 22,453 23,897 19,972 23,743 29,657 94,783 97,270

Total Tax 9,154 8,062 6,209 7,804 8,176 6,788 8,070 9,490 31,228 32,524

% Tax 32.4 32.4 32.4 34.8 34.2 34.0 34.0 32.0 32.9 33.4

Reported PAT 19,060 16,786 12,928 14,650 15,722 13,184 15,673 20,167 63,556 64,745

Adjusted PAT 19,060 16,786 12,928 17,297 15,722 13,184 15,673 20,167 66,277 64,745

E: MOSL Esitmates

NMDCCMP: INR139 Buy� Iron ore sales to increase 14% YoY: We expect standalone net sales to

increase 18% YoY (up 34% QoQ) to INR37.7b due to higher realizationand iron ore sales volume. We expect iron ore sales volume to increase14% YoY (up 28% QoQ) to 9.4mt. NMDC achieved iron ore sales of6.3mt in the first two months of the quarter aided by start of slurrypipeline. Iron ore realization is likely to increase 3% QoQ to INR3,680/ton due to price hikes taken by NMDC in December and February.Lumps percentage is expected to be 36% in 4QFY14E.

� EBITDA to increase 16% YoY: We expect EBITDA to increase 16% YoY toINR24.9b due to higher realization and volumes.

� Iron ore tonnage to post CAGR of 9% over FY13-16E: We continue tobelieve that iron ore supply is getting tighter in India, which willimprove the pricing power for iron ore fines. We expect NMDC todeliver ~9% volume CAGR during FY13-16E. The stock trades at 1.7xFY15E BV and at an EV of 4.1x FY15E EBITDA. With 70% of the book incash and dividend yield of ~7%, valuations are compelling. Buy .

Key issues to watch out� Progress on steel plant project.� Uninterrupted operations of Essar Steel's slurry pipeline.� Socio-political activities in Chhattisgarh.� Operations of pellet plant in Karnataka.


EBITDA 77.8 77.9 83.7 87.3

Adj. PAT 66.3 64.7 70.0 71.7

Adj. EPS (INR) 16.7 16.3 17.7 18.1

EPS Gr(%) -9.2 -2.3 8.1 2.5

BV/Sh. (INR) 69 75 81 86

RoE (%) 26.8 22.9 21.7 21.3

RoCE (%) 26.7 22.8 21.7 21.3

Payout (%) 51.1 64.5 66.3 71.1

Valuations

P/E (x) 8.3 8.5 7.9 7.7

P/BV 2.0 1.9 1.7 1.6

EV/EBITDA (x) 4.4 4.4 4.1 4.0

Div. Yield (%) 5.0 6.5 7.2 7.9

Bloomberg NMDC IN


M. Cap. (INR b)/(USD b) 553 / 9


1,6,12 Rel Perf. (%) 4 / 0 / -17

C–126April 2014



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Net Sales 184,639 177,909 170,751 188,339 143,610 180,260 194,140 194,363 717,800 712,373

Change (YoY %) -22.2 1.3 13.7 3.2 -0.8

EBITDA 68,007 62,221 58,454 67,450 54,790 69,550 65,650 69,862 252,320 259,852

As % of Net Sales 36.8 35.0 34.2 35.8 38.2 38.6 33.8 35.9 35.2 36.5

Interest 9,761 25,310 15,554 19,391 15,710 14,730 15,300 16,750 46,640 62,490

D & A 12,294 12,403 12,919 16,264 18,870 20,520 20,930 23,343 75,680 83,663

Other Income 5,443 8,613 9,924 5,462 6,680 4,870 3,900 7,537 29,530 22,987


Extra-ordinary Income -1,644 2,756 -1,106 -2,094 0 1,730 820 -405 150 2,145

PBT (after EO item) 49,751 35,877 38,798 35,163 26,890 40,900 34,140 36,900 159,680 138,830

Total Tax 4,309 4,694 4,074 4,262 3,100 5,010 -1,390 4,276 10,240 10,996

% Tax 8.7 13.1 10.5 12.1 11.5 12.2 -4.1 11.6 6.4 7.9

Reported PAT 45,442 31,183 34,725 30,901 23,790 35,890 35,530 32,625 146,250 127,835

Minority interest 21,933 15,786 19,327 19,216 17,790 20,140 16,980 18,510 73,730 73,420

Adjusted PAT 25,153 12,641 16,503 13,779 6,000 14,020 17,730 14,519 72,520 52,269

Change (YoY %) -76.1 10.9 7.4 5.4 -27.9

E: MOSL Estimates; Please note that these consolidated numbers for previous quarters are based on proforma estimates.

Sesa SterliteCMP: INR188 Neutral� Net sales to remain flat QoQ: Volumes are likely to remain largely

unchanged QoQ in copper, aluminum and power segment. Zinc Indiavolumes will decline marginally, while zinc international wi ll do betterdue to recovery from breakdown. Oil volumes will ramp up further.Although some iron ore is sold in e-auction in Goa, the revenue maynot yet be recognized.

� EBITDA to increase 6% QoQ: Stronger TcRc, zinc prices, higher oilvolumes will drive 6% EBITDA growth. Although PBT will increase 8%QoQ due to higher EBITDA and other income, yet adjusted PAT is likelyto decrease 18% QoQ to INR14.5b due to higher tax rate. 4QFY14adjusted PAT is cut sharply from INR20b to INR14.5b and FY14 EPS is cut10.5% to INR17.6 due to lower zinc production, lower average foraluminum LME, no QoQ improvement of power PLF and disappointingsales of iron ore in e-auction.

� Maintain Buy: Assuming LME price of USD2,000/t for aluminum andzinc and USD2,100/t for lead in FY15. Our SOTP-based valuation worksout to INR232/share. Maintain Buy .

* Please note that these consolidated numbers for previous quarters(up to 4QFY13) are on proforma estimates

Key issues to watch out� Tax provisioning on standalone basis.� If sales of iron ore in Goa e-auction get recognized in revenue.� Status of Balco's coal mine and restoration of factory permission for

the expansion project.� Progress of TSPL project and management's view on commissioning

of 1.25mtpa smelter.


EBITDA (attrib.) 174.9 172.8 210.1 226.7

NP 75.6 52.3 72.9 73.6

Adj. EPS (INR) 25.5 17.6 24.6 24.8

EPS Gr(%) -17.8 -25.5 -3.5 40.9

BV/Sh. (INR) 88 120 150 175

RoE (%) 11.6 7.3 9.3 8.7

RoCE (%) 12.9 11.0 11.8 11.8

Payout (%) 16.1 23.2 16.7 21.2

Valuations

P/E (x) 7.4 10.7 7.6 7.6

P/BV 0.8 0.7 0.7 0.6

EV/EBITDA (x) 5.6 5.7 4.4 3.8

Div. Yield (%) 1.9 1.9 1.9 2.4

Note: Sesa-Sterlite merged entity basis;

* attributable

Bloomberg SSLT IN


M. Cap. (INR b)/(USD b) 557 / 9


1,6,12 Rel Perf. (%) 0 / -12 / 2

C–127April 2014



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Production (m tons) 3.0 3.2 3.1 3.1 3.2 3.3 3.1 3.4 12.4 13.0

Change (YoY %) -0.5 2.3 1.7 -6.1 5.6 2.8 3.0 8.1 -0.8 4.9

Sales (m tons) 2.50 2.62 2.75 3.20 2.6 3.0 3.0 3.3 11.1 11.9

Change (YoY %) -9.1 -8.2 5.8 4.8 15.3 7.8 3.1 -2.9 7.5

Realization (INR per ton) 43,110 41,362 38,800 38,533 39,190 38,260 38,647 39,060 40,302 38,783

Change (YoY %) 5.9 5.3 -8.7 -9.9 -9.1 -7.5 -0.4 1.4 -2.5 -3.8

Net Sales 107,775 108,202 106,701 123,304 102,679 115,355 114,587 128,898 445,983 461,519

Change (%) -3.7 -3.4 -3.4 -9.9 -4.7 6.6 7.4 4.5 -5.4 3.5

EBITDA 15,153 11,093 11,384 9,039 9,673 8,669 11,320 18,006 46,669 47,667

Change (YoY %) 15.5 -16.4 -28.0 -51.7 -36.2 -21.9 -0.6 99.2 -23.4 2.1

EBITDA per ton (INR) 6,061 4,241 4,140 2,825 3,692 2,875 3,818 5,456 4,217 4,006

EBITDA per ton (USD) 112 77 76 52 66 46 62 88 77 66

Interest 1,249 1,862 2,220 2,145 1,918 2,165 2,468 2,510 7,476 9,061

Depreciation 4,018 4,026 4,049 1,838 3,929 3,988 4,087 4,393 13,932 16,397

Other Income 2,785 2,255 2,209 2,178 2,262 1,527 2,088 1,065 9,426 6,942

PBT (after EO Inc.) 10,101 7,879 7,016 7,398 5,209 13,924 7,052 12,168 32,394 38,353

Total Tax 3,137 2,448 2,173 2,944 700 2,121 1,726 1,582 10,701 6,128

% Tax 31.1 31.1 31.0 39.8 13.4 15.2 24.5 13.0 33.0 16.0

Reported PAT 6,964 5,431 4,843 4,454 4,509 11,804 5,326 10,587 21,693 32,225

Adjusted PAT 8,485 4,996 4,904 4,844 5,270 3,427 5,176 10,587 23,228 24,494

Change (YoY %) 1.2 -50.2 -55.4 -43.2 -37.9 -31.4 5.5 118.6 -37.5 5.4

E: MOSL Estimates

Steel Authority of IndiaCMP: INR71 Sell� Net sales to increase 5% YoY due to higher volumes: We expect net

sales to increase 5% YoY (+12% QoQ) to INR129b due to higher salesvolumes. SAIL sold 1.14mt in January. We expect sales volumes toincrease 3% YoY to 3.3mt. Realization is expected to increase 1.4% YoY(up 1% QoQ) to INR39,060/t.

� Margins to improve 43% QoQ to USD88/t: We expect EBITDA/t toincrease 43% QoQ to USD88/t due to higher realization and reductionin coking coal prices and lower provisioning for wages.

� INR720b capex benefits to accrue slowly, maintain Sell: We expectearnings to grow 16.7% in FY15 aided by 8.4% growth in volumes. Fullbenefits of the INR720b capex will accrue gradually due to delays inexecution. The stock still appears at expensive valuation. MaintainSell.

Key issues to watch out� BOF commissioning at ISP and RSP will be critical for volume ramp-up

in FY14 and FY15.


EBITDA 51.2 51.7 69.8 83.6

NP 24.8 25.2 29.4 30.3

Adj. EPS (INR) 6.0 6.1 7.1 7.3

EPS Gr(%) -34.1 1.5 16.7 3.0

BV/Sh. (INR) 101 106 112 119

RoE (%) 6.1 5.9 6.5 6.3

RoCE (%) 7.2 5.7 6.1 6.2

Payout (%) 41.5 29.5 16.4 16.0

Valuations

P/E (x) 11.9 11.7 10.0 9.7

P/BV 0.7 0.7 0.6 0.6

EV/EBITDA (x) 9.3 10.0 8.2 7.5

Div. Yield (%) 2.8 2.8 1.4 1.4

Bloomberg SAIL IN


M. Cap. (INR b)/(USD b) 295 / 5


1,6,12 Rel Perf. (%) 22 / 28 / -4

C–128April 2014



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Steel Sales ('000 tons) 1,590 1,730 1,887 2,279 2,005 2,038 2,066 2,170 7,486 8,279

Avg Seg.Realn. (INR/tss) 51,530 48,459 45,387 44,394 44,719 44,742 45,011 45,260 47,099 44,939

Net Sales 89,080 91,506 93,703 107,705 94,554 99,210 101,434 104,628 381,994 399,826

EBITDA 29,768 25,162 25,262 33,040 28,343 29,379 29,359 31,909 113,232 118,991

(% of Net Sales) 33.4 27.5 27.0 30.7 30.0 29.6 28.9 30.5 29.6 29.8

Steel EBITDA(INR/tss) 17,419 13,327 12,360 14,061 13,493 13,284 13,010 13,901 14,314 13,554

Steel EBITDA(USD/tss) 321 241 228 259 241 214 210 224 263 224

Interest 4,544 4,539 5,090 4,594 4,664 4,366 4,529 4,665 18,768 18,224

Depreciation 3,544 3,913 4,339 4,608 4,596 5,510 4,565 4,610 16,404 19,281

Other Income 1,519 2,397 357 4,747 1,442 3,257 2,648 4,771 9,020 12,118

PBT (after EO Inc.) 21,229 19,203 16,190 21,744 20,525 22,760 22,913 27,405 78,366 93,603

Total Tax 7,663 5,695 5,726 8,652 6,964 7,173 7,726 9,044 27,736 30,906

% Tax 36.1 29.7 35.4 39.8 33.9 31.5 33.7 33.0 35.4 33.0

Reported PAT 13,566 13,508 10,464 13,092 13,561 15,587 15,188 18,361 50,630 62,697

Adjusted PAT 15,536 13,412 10,464 19,933 13,561 15,587 15,188 18,361 59,345 62,697

Consolidated Financials

Net Sales 338,212 341,327 321,071 346,505 328,048 366,449 367,358 412,839 1,347,115 1,474,694

EBITDA 36,003 23,101 22,389 43,689 36,880 37,054 40,065 44,974 123,212 158,973

Rep. PAT (before MI & asso.) 5,170 -4,133 -7,886 -66,775 11,423 9,510 4,995 9,433 -73,624 35,179

Adj. PAT (after MI & asso) 7,949 -4,066 -7,433 8,843 11,213 9,168 5,028 9,131 3,323 34,540

TSE Sales (000 tons) 3,210 3,420 3,020 3,420 3,140 3,460 3,190 4,000 13,070 13,790

TSE EBITDA(USD/tss) 36 -2 -26 33 44 26 43 46 11 40

E: MOSL Estimates; tss=ton of steel sales

Tata SteelCMP: INR394 Sell� Tata Steel India (TSI): We expect net revenue to increase 3% QoQ

(down 3% YoY) to INR105b due to 5% QoQ (-5% YoY) increase in salesvolume. We expect EBITDA to increase 9% QoQ to INR32b and EBITDA/ton to increase 7% QoQ to INR13,901/t due to higher realization andsome gains on costs.

� TSE and others: We expect Tata Steel Europe (TSE) and othersubsidiaries to report EBITDA/t of USD42 due to the benefit of highervolumes. We expect steel shipments to increase 16% QoQ (+17% YoY)to 5mt.

� Maintain Sell: The stock trades at 8.9x FY15E EPS and an EV of 6.3xFY15E EBITDA. Maintain Sell .

Key issues to watch out� TSE was expected to liquidate inventories, with 17% YoY growth in

sales volumes to 4mt.� Progress of iron ore production in Canada.� Free cash flow generation at TSE.� Net debt level had risen sharply in 3QFY14. With liquidation of

inventories, net debt level is expected to decline.

Financials & Valuation (INR b)Y/E March 2013 2014E 2015E 2016ES a l e s 1,347 1,475 1,528 1,550

EBITDA 123.2 159.0 178.6 191.8

Adj. PAT 1.5 32.7 43.1 54.9

Adj. EPS (INR) 1.6 33.7 44.3 56.5

EPS Gr(%) -91.62,048.2 31.6 27.5

BV/Sh. (INR) 217 233 271 320

RoE (%) 0.7 15.0 17.6 19.1

RoCE (%) 6.6 9.0 10.0 10.5

Payout (%) -12.3 25.8 19.6 17.6

Valuations

P/E (x) 251.0 11.7 8.9 7.0

P/BV 1.8 1.7 1.5 1.2

EV/EBITDA (x) 8.0 7.0 6.3 5.8

Div. Yield (%) 2.0 2.0 2.0 2.3

Bloomberg TATA IN


M. Cap. (INR b)/(USD b) 383 / 6


1,6,12 Rel Perf. (%) 8 / 29 / 7

C–129April 2014

March 2014 Results Preview | Sector: Oil & Gas

Singapore GRM up 45% QoQ to USD6.2/bbl in 4QFY14, Petchem margin trend mixed:Sharp QoQ jump in Reuters Singapore GRM was driven by increased cracks of gasoline,naphtha, FO and partially of middle distillates helped by refinery shutdowns. Brentcrude was down 2% QoQ and 5% MoM to average USD107.7/bbl in 4QFY14 led byreceding winter demand. Arab L-H differential increased by USD0.4/bbl, but Brent-Dubai increased USD0.7/bbl. While, the polymer spreads over Naphtha were up 8-11%in PE/PP; integrated polyester margins were down 7-9%.

Reforms largely on track, sector profitability to move towards normalization: Sectorreforms in forms of monthly diesel rice hikes and likely doubling of gas price in FY15are largely on track and expect their resumption post elections. Our base case estimatesfactor in ~50% reduction in under recoveries by FY16E to INR881b from INR1.6t in FY13and any sharp appreciation in INR USD will further lower our under recoveries estimate.

Largely flat subsidy on QoQ basis and gains in diesel neutralized by higher LPG losses:We estimate largely flat (+3% QoQ) subsidy at INR409b as the benefits of lower diesellosses are neutralized by higher LPG losses driven by higher international prices. Onthe subsidy sharing front, similar to previous years, clarity will emerge for full yearsubsidy in 4Q. For FY14, we model OMC's subsidy sharing at ~2% (INR21b), upstream at66% (INR645b) and the rest 33% (INR749b) to be shared by the government. Anyvariation in this will impact our 4QFY14 estimates for oil PSU's (except GAIL, where itssubsidy is capped at INR14b - already shared in 1HFY14).

Valuation and view: TO watch out for RIL's update on key projects and Cairn's ramp-up/exploration. We are positive on oil PSU's led by (a) new gas price regime in FY15and (b) likely diesel deregulation in 12-15 months. We prefer ONGC/OINL in upstream(significant earnings growth opportunity) and BPCL in OMC's (strong balance sheetand E&P potential). Maintain Neutral on GAIL due to headwinds for gas availability.Expect any fall in spot LNG prices to benefit PLNG. Maintain Buy on Cairn India for itsattractive valuation and Neutral on RIL as the next earnings growth is still some timeaway when its new core-business/E&P projects commission from FY17.

Harshad Borawake ([email protected])

Oil & GasCompanies Covered

BPCL

Cairn India

GAIL

Gujarat State Petronet

HPCL

IOC

Indraprastha Gas

MRPL

Oil India

ONGC

Petronet LNG

Reliance Industries



31.3.14 % YoY % QoQ % YoY % QoQ % YoY % QoQBPCL 460 Buy 645,555 -2.6 -0.3 46,508 -29.0 LP 25,671 -46.5 LPCairn India 333 Buy 49,927 14.4 -0.1 38,064 16.8 3.1 28,734 12.1 -0.4GAIL 376 Neutral 165,326 33.2 3.5 26,065 129.3 16.8 14,186 133.9 6.3Gujarat State Petronet 69 Neutral 2,374 -33.9 -2.7 2,048 -37.3 -0.4 967 -40.1 10.7HPCL 310 Buy 529,103 -13.6 -4.5 47,118 -53.7 LP 35,297 -54.0 LPIOC 279 Buy 1,309,773 2.0 11.6 115,440 -30.1 LP 81,756 -43.7 LPIndraprastha Gas 298 Neutral 10,009 13.5 -3.8 2,109 14.1 8.6 1,034 23.8 15.6MRPL 48 Neutral 184,590 -0.6 -1.0 5,214 265.1 LP 5,034 LP LPOil India 482 Buy 25,171 5.9 -3.4 11,422 29.7 -2.2 8,740 14.3 -3.2ONGC 319 Buy 209,984 -1.8 1.2 110,762 7.6 -9.3 52,136 53.9 -23.7Petronet LNG 137 Buy 110,494 30.5 17.8 3,578 -17.6 2.3 1,335 -45.5 -1.5Reliance Inds. 930 Neutral 1,078,122 28.0 4.1 79,089 1.1 3.8 56,521 1.1 2.6Sector Aggregate 4,320,427 5.6 4.2 487,416 -15.6 95.9 311,409 -22.8 126.6Excl. RMs 1,835,996 20.0 3.6 278,351 13.7 1.5 168,686 26.5 -3.8

C–130April 2014


Brent Crude price was down 2% QoQ and 5% YoY (USD/bbl) Brent-WTI spread widens QoQ to USD14/bbl in 4QFY14 (USD/bbl)

GRM up 45% QoQ; crude weaker on QoQ and YoY basis

Singapore GRM up 45% QoQ to USD6.2/bbl in 4QFY14 (USD/bbl) Gasoline cracks increased meaningfully during 4QFY14 (USD/bbl)

Our key assumptions

� Our crude price assumption for FY14/15/16 is USD108/105/

105bbl and USD100/bbl over long term.

� We expect regional benchmark Singapore Reuters GRM

to remain in the USD6-8/bbl range for the near term.

Arab L-H differential higher QoQ in 4QFY14 (USD/bbl)

Source: Reuters, Bloomberg, MOSL

Polymer spreads over Naphtha increase (INR/kg) POY/PSF spreads continue their decline in 4QFY14 (INR/kg)

C–131April 2014


Polymer spreads over Naphtha improve, but Polyester margins continued their decline in 4QFY14 (INR/kg)(RIL Basic prices - INR/kg) Simple Spreads Int.Spreads

PE PP PVC POY PSF PE PP PVC POY PSF

4QFY12 83.4 84.1 56.2 91.7 96.4 31.4 32.1 4.2 50.5 55.2

1QFY13 91.9 92.1 61.8 92.4 95.8 43.3 43.5 13.3 54.0 57.4

2QFY13 91.2 91.9 63.5 93.8 96.2 40.3 41.0 12.6 53.3 55.7

3QFY13 89.4 92.2 62.0 94.0 98.3 37.9 40.7 10.6 53.2 57.5

4QFY13 93.0 97.9 63.5 97.3 101.4 40.6 45.4 11.1 55.8 59.9

1QFY14 92.5 95.9 63.3 95.0 96.3 44.3 47.7 15.2 56.9 58.1

2QFY14 104.4 109.7 72.8 107.2 107.9 46.6 51.9 15.0 61.4 62.1

3QFY14 107.6 109.8 72.3 103.4 106.0 48.4 50.6 13.1 56.3 58.9

4QFY14 112.3 113.0 74.3 97.9 100.9 53.9 54.6 15.9 51.4 54.4

QoQ (%) 4.4 2.9 2.8 -5.3 -4.8 11.5 7.9 21.8 -8.7 -7.6

YoY (%) 20.8 15.5 17.1 0.6 -0.5 32.8 20.1 43.7 -7.9 -9.2

Source: Bloomberg/MOSL

4QFY14 under-recoveries est. at INR409b; we model upstream share at INR645b in FY14/15(INR b) FY11 FY12 FY13 9MFY14 4QFY14E FY14E FY15E FY16E

Fx Rate (INR/USD) 45.6 47.9 54.5 60.1 62.0 60.6 60.0 60.0

Brent (USD/bbl) 86 114 111 108 108 108 105 105

Product-wise Gross Under recoveries (INR b)

Petrol 27 0 0 0 0 0 0 0

Diese l 348 819 915 476 160 636 195 145

Kerosene 200 278 296 224 86 310 276 256

LPG 205 284 399 306 163 469 507 479

Total 780 1,385 1,610 1,006 409 1,415 978 881

Sharing of Gross Under recoveries (INR b)

Government 410 829 1,000 358 391 749 319 339

Upstream 303 552 600 480 165 645 645 528

OMC's 67 0 10 169 (147) 21 15 13

Total 780 1,385 1,610 1,006 409 1,415 978 881

Sharing of Gross Under recoveries (%)

Government 53 60 62 36 96 53 33 39

Upstream 39 40 37 48 40 46 66 60

OMC's 9 0 1 17 (36) 2 2 2

Total 100 100 100 100 100 100 100 100Source: Bloomberg, MOSL



Petrol and diesel price difference (INR/ltr) Diesel under recoveries decline to INR5.9/ltr (INR/ltr)


95

100

105

110

115

Dec

-13

Jan-

14

Feb-

14

Mar

-14

Sensex IndexMOSL Oi l & Gas Index

85

95

105

115

125

Mar

-13

Jun-

13

Sep-

13

Dec

-13

Mar

-14

Sensex IndexMOSL Oi l & Gas Index

C–132April 2014


ONGC's net realization estimated at USD40/bbl GAIL transmission volumes under pressure (mmscmd)


Expect RIL premium to Singapore GRM at USD2.8/bbl (USD/bbl) Cairn's Rajasthan gross production likely to average 191kbpd




Oil & GasBPCL 460 Buy 36.4 37.5 41.9 12.7 12.3 11.0 8.0 7.5 6.7 14.9 14.0 14.2Cairn India 333 Buy 64.2 57.7 52.1 5.2 5.8 6.4 2.9 2.6 2.5 23.3 17.9 14.4Chennai Petroleum 69 Buy -19.9 24.5 29.6 -3.5 2.8 2.3 14.6 5.5 4.5 -15.7 19.7 20.8GAIL 376 Neutral 35.3 31.1 30.7 10.6 12.1 12.2 7.6 8.1 7.8 18.6 13.7 12.4Guj. State Petronet 69 Neutral 7.5 8.7 9.6 9.2 8.0 7.2 4.5 4.2 3.7 13.6 13.9 13.7HPCL 310 Buy 19.3 21.0 27.4 16.1 14.7 11.3 12.9 8.9 7.3 4.7 5.0 6.2Indraprastha Gas 298 Neutral 26.6 28.8 31.5 11.2 10.3 9.5 5.1 4.4 3.8 22.8 20.8 19.5IOC 279 Buy 23.9 29.1 31.7 11.7 9.6 8.8 10.6 7.1 6.3 8.9 10.2 10.3MRPL 48 Neutral 0.2 5.8 8.0 222.2 8.2 5.9 12.9 4.4 3.4 0.6 14.8 18.0Oil India 482 Buy 54.7 59.3 70.2 8.8 8.1 6.9 5.4 4.9 3.7 16.3 15.9 17.0ONGC 319 Buy 31.7 35.2 39.6 10.0 9.1 8.1 4.3 4.0 3.5 17.0 16.9 17.1Petronet LNG 137 Buy 9.0 10.0 12.3 15.2 13.6 11.1 8.0 7.5 6.1 14.3 14.2 15.5Reliance Inds. 930 Neutral 75.0 85.1 91.1 12.4 10.9 10.2 9.9 8.6 8.5 11.6 12.0 11.6Sector Aggregate 10.7 9.8 9.1 6.7 5.7 5.2 13.4 13.3 13.0Ex RMS 10.5 9.7 9.0 6.0 5.4 4.9 14.3 14.0 13.6

C–133April 2014



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Net Sales 545,227 568,595 623,398 662,820 587,053 617,574 647,342 645,555 2,400,041 2,497,524

Change (%) 18.2 34.5 6.0 2.5 7.7 8.6 3.8 -2.6 13.3 4.1

EBITDA -81,757 41,932 22,584 65,527 9,054 16,806 -9,492 46,508 48,287 62,876

% of Sales -15.0 7.4 3.6 9.9 1.5 2.7 -1.5 7.2 2.0 2.5

Depreciation 4,801 3,983 4,657 5,820 5,305 5,382 5,592 5,830 19,261 22,109

Interest 5,205 4,117 5,758 3,172 5,253 3,244 3,045 3,068 18,252 14,611

Other Income 3,395 16,516 4,307 5,366 3,695 4,839 2,842 1,244 29,583 12,620

PBT -88,368 50,348 16,476 61,901 2,191 13,020 -15,288 38,853 40,357 38,776

Tax 0 0 0 13,928 688 3,708 -4,399 13,183 13,928 13,180

Tax rate (%) 0.0 0.0 0.0 22.5 31.4 28.5 28.8 33.9 34.5 34.0

PAT -88,368 50,348 16,476 47,973 1,503 9,311 -10,889 25,671 26,429 25,596

Change (%) nm nm -47.5 21.1 nm -81.5 nm -46.5 101.6 -3.2

Adj. PAT -88,368 50,348 16,476 47,973 1,503 9,311 -10,889 25,671 26,429 25,596

Adj. EPS (INR) -122.2 69.6 22.8 66.4 2.1 12.9 -15.1 35.5 36.6 35.4

Key Assumption (INR b)

Gross under recovery 116 90 94 90 61 88 99 96 390 344

Upstream sharing 37 36 36 60 37 42 40 39 168 157

Govt. sharing 0 72 60 87 19 44 25 93 219 181

Net Under/(Over) recovery 80 -18 -2 -57 5 2 34 -36 2 6

As a % of Gross 68.5 nm nm nm 8.9 2.4 34.5 nm 0.6 1.7

E: MOSL Estimates

BPCLCMP: INR460 Buy� Quarterly profitability (BPCL, HPCL, IOC) of the OMC's more depends

on the subsidy sharing, which is ad-hoc, than on businessfundamentals. While our 4QFY14 estimates assume some subsidysharing, final picture will only be clear nearer to the results whengovernment finalized the subsidy sharing for FY14.

� We model marginal sharing by OMC's for FY14 (2% /INR21b), with therest being shared by upstream (46% / INR645b) and the government(53% / INR749b). For FY15 / FY16 we model OMC's share at ~2%, withthe rest being shared by upstream and the government.

� 4QFY14 gross under-recoveries are largely flat QoQ with benefit oflower diesel under recoveries (led by price hikes) neutralized by higherLPG under recoveries (led by higher international LPG prices).

� We peg refinery throughput at 5.8mmt for 4QFY14, flat QoQ and v/s5.6mmt in 3QFY14.

� We expect BPCL to report net profit of INR25.7b in 4QFY14, v/s INR48bin 4QFY13 and loss of INR10.9b in 3QFY14.

� BPCL trades at 12.3x FY15E EPS and adjusted for investments at 0.7xFY15E BV. E&P upsides from Mozambique and Brazil are the keymedium-term triggers for BPCL. Buy.

Key issues to watch out� (a) Subsidy sharing, (b) GRM and (c) forex changes.

Financials & Valuation (INR b)Y/E March 2013 2014E 2015E 2016ESa les 2,422 2,636 2,595 2,753

EBITDA 66.7 75.8 72.2 73.9

Adj. PAT 18.8 26.3 27.1 30.3

Adj. EPS (INR) 26.0 36.4 37.5 41.9

EPS Gr. (%) 140.9 39.9 3.2 11.7

BV/Sh.(INR) 232 256 281 308

RoE (%) 11.5 14.9 14.0 14.2

RoCE (%) 8.3 9.2 8.3 8.5

Payout* (%) 35.2 35.4 35.1 33.5

Valuations

P/E (x) 17.7 12.7 12.3 11.0

P/BV (x) 2.0 1.8 1.6 1.5

EV/EBITDA (x) 9.7 8.0 7.5 6.7

Div. Yield (%) 2.4 2.3 2.4 2.6

*Based on standalone

Bloomberg BPCL IN


M. Cap. (INR b)/(USD b) 333 / 6


1,6,12 Rel Perf. (%) 16 / 24 / 3

C–134April 2014



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Net Sales 44,400 44,431 42,776 43,634 40,629 46,499 50,000 49,927 175,241 187,056

Change (%) 19.6 67.5 38.1 19.5 -8.5 4.7 16.9 14.4 33.6 6.7

EBITDA 34,921 34,516 32,862 32,582 30,099 35,325 36,922 38,064 134,880 140,409

Exploration w/off 352 262 277 3,657 1,001 513 1,003 1,332 4,549 3,848

D,D&A 4,373 4,515 4,824 4,747 5,193 5,465 5,948 6,148 18,459 22,755

Interest 295 188 52 152 105 110 91 94 687 400

Other Income (Net) 964 2,226 1,819 2,219 1,251 1,109 1,403 1,718 7,228 5,481

Forex Fluctuations 8,663 -7,858 2,357 -28 6,820 4,292 -1,290 -2,239 3,134 7,582

PBT 39,528 23,918 31,884 26,218 31,871 34,637 29,992 29,969 121,548 126,469

Tax 1,271 697 323 582 599 787 1,152 1,234 2,872 3,772

Tax rate* (%) 4.1 2.2 1.1 2.2 2.4 2.6 3.7 3.8 2.4 3.2

Adj. PAT 38,257 23,222 31,561 25,636 31,272 33,851 28,840 28,734 118,676 122,698

YoY Change (%) 40.3 204.3 39.5 17.3 -18.3 45.8 -8.6 12.1 49.5 3.4

Merger arrangement gain 1,888 1,888 0

PAT 38,257 23,222 33,449 25,636 31,272 33,851 28,840 28,734 120,564 122,698

Adj. EPS (INR) 20.0 12.2 16.5 13.4 16.4 17.7 15.1 15.0 62.1 64.2

Key Assumptions and Cain's share in production (kboepd)

Exchange rate (INR/USD) 54.2 55.5 54.2 54.2 55.9 62.5 62.0 62.0 54.5 60.6

Brent Price (USD/bbl) 108.7 110.0 110.0 113.5 102.8 110.6 109.2 108.0 107.7 107.7

Ravva & Cambay Prodn 10.2 9.2 9.1 8.6 10.6 10.0 10.4 10.2 9.3 10.3

Rajasthan Prodn 117.0 120.3 119.0 118.0 121.0 122.8 130.5 133.7 118.6 127.0

Total 127.2 129.4 128.1 126.6 131.6 132.9 140.8 143.9 127.8 137.3

E: MOSL Estimates; * Excluding forex fluctuations, includes MAT credit.

Cairn IndiaCMP: INR333 Buy� We expect Cairn India's 4QFY14 Rajasthan production to increase to

191 kbpd from 186 kbpd in 3QFY14 and 169kbpd in 4QFY13.� We expect Cairn India to report net sales of INR50b (flat QoQ and v/s

INR43.6b in 4QFY13). Despite ~2% increase in the Rajasthan production,net sales are largely flat as we expect Rajasthan realization to be lowerQoQ led by higher discount to Brent. We estimate EBITDA at INR38bv/s INR32.5b in 4QFY13 and INR37b in 3QFY14.

� We expect other income to increase led by higher cash balance. Weestimate forex loss (~3% INR USD appreciation) of INR2.2b v/s marginalloss of INR28m in 4QFY13 and loss of INR1.3b in 3QFY14.

� We model in Brent crude price of USD108/105/105/bbl in FY14/15/16and long-term price of USD100/bbl, and take a quality discount forCairn India of 12.5%.

� The stock currently trades at 5.8x FY16E EPS of INR58. Maintain Buy.

Key issues to watch out� In the medium-term (a) Progress on buy-back program (b) Production

ramp-up and (c) reserve updates with ongoing 100 well explorationprogram at Rajasthan. With increasing cash balance on the balancesheet, clarity on the utilization will be positive.

� During the quarter a) net realization, (b) forex fluctuations andguidance or production ramp-up and reserve upgrades.


EBITDA 134.9 140.4 142.5 130.6

Adj. PAT 119.2 122.7 110.3 99.5

Adj. EPS (INR) 63.1 64.2 57.7 52.1

EPS Gr. (%) 51.7 1.8 -10.1 -9.8

BV/Sh.(INR) 250 300 343 382

RoE (%) 24.8 23.3 17.9 14.4

RoCE (%) 24.5 22.5 19.2 15.5

Payout (%) 21.6 23.4 23.4 23.4

Valuations

P/E (x) 5.3 5.2 5.8 6.4

P/BV (x) 1.3 1.1 1.0 0.9

EV/EBITDA (x) 3.6 2.9 2.6 2.5

Div. Yield (%) 3.5 3.8 3.5 3.1

Bloomberg CAIR IN


M. Cap. (INR b)/(USD b) 636 / 11


1,6,12 Rel Perf. (%) -3 / -11 / 3

C–135April 2014



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QENet Sales 110,886 113,612 124,743 124,086 128,556 139,446 159,806 165,326 473,327 593,134

Change (%) 25.0 17.1 10.8 18.7 15.9 22.7 28.1 33.2 17.5 25.3EBITDA 18,991 13,803 19,722 11,367 14,642 14,055 22,317 26,065 63,882 77,078

% of Net Sales 17.1 12.1 15.8 9.2 11.4 10.1 14.0 15.8 13.5 13.0Depreciation 2,169 2,491 2,424 2,726 2,808 2,888 3,008 3,052 9,809 11,756Interest 588 261 552 549 612 1,082 913 1,341 1,950 3,947Other Income 612 2,685 1,841 3,317 1,018 2,798 2,661 1,027 8,455 7,505Extraordinary item* 0 0 0 0 0 0 3,450 0 3,450PBT 16,846 13,736 18,587 11,409 12,241 12,883 24,507 22,699 60,578 72,329Tax 5,508 3,882 5,738 5,227 4,159 3,726 7,713 8,514 20,356 24,111

Rate (%) 32.7 28.3 30.9 45.8 34.0 28.9 31.5 37.5 33.6 33.3Adj PAT 11,338 9,854 12,849 6,065 8,082 9,157 13,345 14,186 40,105 44,769

Change (%) 15.1 -10.0 32.6 68.0 -28.7 -7.1 3.9 133.9 17.6 11.6EPS (INR) 8.9 7.8 10.1 4.8 6.4 7.2 10.5 11.2 31.6 35.3Key AssumptionsGas Trans. volume (mmsmd) 110 106 105 99 99 95 96 96 105 97Petchem sales ('000MT) 66 101 128 132 121 108 109 110 427 448Segmental EBIT Breakup (INR m)TransmissionNatural Gas 5,673 6,049 6,195 406 5,538 5,762 4,112 4,253 18,323 19,665LPG 709 -489 133 620 550 426 597 477 973 2,050Natural Gas Trading 4,956 2,447 2,986 3,469 3,025 4,870 5,054 4,533 13,858 17,482Petrochemicals 1,958 4,182 4,395 4,716 4,383 3,909 3,356 3,879 15,250 15,527LPG & Liq.HC (pre-subsidy) 11,373 8,521 12,063 10,799 6,891 4,707 7,624 10,845 42,756 30,068Unallocated; GAILTEL 81 69 -834 -338 -255 17 292 250 -1,022 304Total 24,751 20,779 24,939 19,671 20,132 19,691 21,035 24,238 90,139 85,096Less: Subsidy -7,000 -7,857 -6,143 -5,872 -7,000 -6,987 -13 0 -26,872 -14,000Total 17,751 12,922 18,796 13,799 13,132 12,704 21,022 24,238 63,268 71,096E: MOSL Estimates

GAIL (India)CMP: INR376 Neutral� We expect GAIL to report PAT of INR14.2b (up 134%YoY and 6% QoQ).

We expect GAIL's subsidy sharing at nil in 4QFY14 v/s INR5.9b in 4QFY13and nil in 3QFY14. GAIL's subsidy sharing has been provisionally cappedat INR14b for FY14.

� Subsidy sharing assumption: For FY14/FY15/FY16, we model upstreamsharing at INR645/645/528b. For GAIL we have assumed a sharing ofINR14/14/12b in FY14/15/16 v/s INR26.9b in FY13

� We model gas transmission volumes at 96mmscmd, flat QoQ and v/s99.5mmscmd in 3QFY13. Segmental EBIT (pre-subsidy) is expected toincrease by 15% QoQ and 23% YoY.

� GAIL trades at 9.8x FY16E EPS of INR30.7. Though we like themanagement's strategy to build network to enable gas sourcing, weremain Neutral due to medium-term earnings concern led by likelyunder-utilization of its new network on account of headwinds toincremental gas availability.

Key issues to watch out� a) Subsidy sharing, b) Transmission volumes and c) cost of natural gas

for consumption in LPG and petrochemicals segment.


EBITDA 62.8 77.1 73.4 75.7

Adj. PAT 40.2 44.8 39.5 38.9

Adj. EPS (INR) 31.7 35.3 31.1 30.7

EPS Gr. (%) 10.1 11.3 -11.9 -1.3

BV/Sh.(INR) 191 217 237 257

RoE (%) 17.5 18.6 13.7 12.4

RoCE (%) 19.4 18.5 14.7 14.3

Payout (%) 35.2 32.4 34.9 34.9

Valuations

P/E (x) 9.5 8.6 9.7 9.8

P/BV (x) 1.6 1.4 1.3 1.2

EV/EBITDA (x) 7.8 6.9 7.3 7.1

Div. Yield (%) 2.6 2.9 2.4 2.4

Bloomberg GAIL IN


M. Cap. (INR b)/(USD b) 477 / 8


1,6,12 Rel Perf. (%) -4 / 0 / -1

C–136April 2014


Quarterly Performance (INR Milllion)Y/E March FY13 FY14 FY13 FY14E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Net Sales 2,676 2,732 2,606 3,590 2,961 2,770 2,439 2,374 11,603 10,543

Change (%) -5.9 -2.7 -4.9 29.9 10.6 1.4 -6.4 -33.9 4.0 -9.1

EBITDA 2,465 2,520 2,338 3,268 2,691 2,508 2,057 2,048 10,591 9,304

% of Net Sales 92.1 92.2 89.7 91.0 90.9 90.6 84.4 86.3 91.3 88.3

Change (%) -5.9 -2.5 -7.1 29.7 9.2 -0.5 -12.0 -37.3 3.4 -12.1

Depreciation 439 464 478 480 458 470 462 502 1,861 1,891

Interest 317 316 314 315 380 367 353 366 1,263 1,465

Other Income 176 226 230 158 139 141 151 152 790 582

PBT 1,884 1,966 1,776 2,630 1,992 1,812 1,394 1,331 8,257 6,530

Tax 636 638 586 1,015 729 671 520 365 2,876 2,286

Rate (%) 33.7 32.5 33.0 38.6 36.6 37.1 37.3 27.4 34.8 35.0

PAT 1,248 1,328 1,190 1,615 1,263 1,141 873 967 5,381 4,245

Change (%) -9 3 -6 25 1 -14 -27 -40 3 -21

EPS (INR) 2.2 2.4 2.1 2.9 2.2 2.0 1.6 1.7 9.6 7.5

Transmission Vol. (mmscmd) 31.1 28.6 27.3 22.2 22.1 21.2 20.2 20.2 27.3 20.9

Implied tariff (INR/mscm) 903 993 1,043 1,768 1,411 1,365 1,291 1,253 1,135 1,330

E: MOSL Estimates

Gujarat State PetronetCMP: INR69 Neutral� We expect GSPL to report net sales of INR2.4b and PAT of INR967mb

(down 40% YoY and up 11% QoQ).

� We build flat QoQ gas transmission volumes at 20.2mmscmd in 4QFY14(v/s 22.2mmscmd in 4QFY13), with no increase in domestic volumesas well as constraints on LNG imports due to high spot prices.

� GSPL has won all 3 bids for cross -country pipelines conducted byPNGRB last year. We await clarity on the timelines and other detailsregarding these pipelines.

� We build gas transmission volumes of 23/26mmscmd in FY14 and FY15and model average tariff at INR1,275/mscm. The stock trades at 7.2xFY16E EPS of INR9.6. Maintain Neutral.

Key issues to watch out� a) Transmission volumes, and� b) Tariff.


EBITDA 10.6 9.3 9.8 10.6

Adj. PAT 5.4 4.2 4.9 5.4

Adj. EPS (INR) 9.6 7.5 8.7 9.6

EPS Gr. (%) 3.1 -21.1 15.1 11.0

BV/Sh.(INR) 52 59 66 75

RoE (%) 19.9 13.6 13.9 13.7

RoCE (%) 22.3 16.1 16.1 16.1

Payout (%) 12.6 12.2 15.5 13.5

Valuations

P/E (x) 7.2 9.2 8.0 7.2

P/BV (x) 1.3 1.2 1.0 0.9

EV/EBITDA (x) 4.5 4.5 4.2 3.7

Div. Yield (%) 1.4 1.4 1.4 1.4

Bloomberg GUJS IN




1,6,12 Rel Perf. (%) 14 / 11 / -15

C–137April 2014



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Net Sales 440,765 484,639 527,510 612,379 517,639 518,602 553,945 529,103 2,065,294 2,119,289

Change (%) 8.0 30.9 10.1 16.9 17.4 7.0 5.0 -13.6 15.9 2.6

EBITDA -88,759 22,480 3,877 101,826 -6,879 10,142 -9,912 47,118 39,424 40,469

% of Net Sales -20.1 4.6 0.7 16.6 -1.3 2.0 -1.8 8.9 2 2

Change (%) nm nm -89.1 86.3 nm -54.9 nm -53.7 -246.7 -2.6

Depreciation 4,544 4,910 4,947 4,914 5,100 5,426 5,566 5,934 19,315 22,026

Interest 5,492 3,899 6,135 2,852 4,668 3,962 4,432 4,626 18,377 17,687

Other income 2,524 3,419 2,446 3,910 2,042 2,435 2,570 1,994 12,300 9,040

Exceptional Item 3,784 6,181 6,229 -15,479 0 0 0 0 714 0

PBT -92,488 23,271 1,471 82,492 -14,605 3,189 -17,339 38,551 14,746 9,796

Tax 0 0 0 5,699 0 0 0 3,254 5,699 3,254

Rate (%) 0.0 0.0 0.0 6.9 0.0 0.0 0.0 8.4 38.6 33.2

PAT -92,488 23,271 1,471 76,793 -14,605 3,189 -17,339 35,297 9,047 6,542

Change (%) nm nm -94.6 65.8 nm -86.3 nm -54.0 -0.7 -27.7

Adj. EPS (INR) -272.8 68.6 4.3 226.5 -43.1 9.4 -51.1 104.1 26.7 19.3

Key Assumptions (INR b)

Gross under recovery 107 83 87 85 58 82 92 95 362 328


Govt. subsidy 0 67 55 126 18 41 23 91 248 174

Net Under recovery 73 -17 -2 -52 5 2 32 -35 2 4

Net Sharing (%) 69 nm nm nm 9 2 35 nm nm nm

E: MOSL Estimates; * 1QFY14 net sales includes receivables from ONGC

HPCLCMP: INR310 Buy� Quarterly profitability (BPCL, HPCL, IOC) of the OMC's more depends

on the subsidy sharing, which is ad-hoc, than on businessfundamentals. While our 4QFy14 estimates assume some subsidysharing, final picture will only be clear nearer to the results whengovernment finalized the subsidy sharing for FY14.



� We peg refinery throughput at 4.3mmt for 4QFY14, flat QoQ and v/s3.8mmt in 3QFY14. QoQ increase is led by higher throughputassumption at Vizag which was impacted earlier due to fire incident.

� We expect HPCL to report net profit of INR35.3b in 4QFY14, v/s INR78bin 4QFY13 and loss of INR17.3b in 3QFY14.

� HPCL trades at 11.3x FY16E EPS and at 0.7x FY16E BV. Buy.



EBITDA 39.4 40.5 40.8 41.7

Adj. PAT 9.0 6.5 7.1 9.3

Adj. EPS (INR) 26.7 19.3 21.0 27.4

EPS Gr. (%) -0.7 -27.7 9.0 30.3

BV/Sh.(INR) 405 417 431 449

RoE (%) 6.7 4.7 5.0 6.2

RoCE (%) 6.8 5.5 5.5 6.2

Payout (%) 37.3 35.2 35.0 35.0

Valuations

P/E (x) 11.6 16.1 14.7 11.3

P/BV (x) 0.8 0.7 0.7 0.7

EV/EBITDA (x) 9.1 6.7 6.9 5.3

Div. Yield (%) 2.7 1.9 2.0 2.6

Bloomberg HPCL IN


M. Cap. (INR b)/(USD b) 105 / 2


1,6,12 Rel Perf. (%) 11 / 46 / -10

C–138April 2014



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Net Sales 966,028 1,057,913 1,152,767 1,284,497 1,102,332 1,098,595 1,174,152 1,309,773 4,461,204 4,684,851

Change (%) -4.1 18.7 0.1 0.6 14.1 3.8 1.9 2.0 3.1 5.0

EBITDA -202,360 90,627 51,310 165,205 -13,994 31,224 -5,983 115,440 104,782 126,686

% of Net Sales -20.9 8.6 4.5 12.9 -1.3 2.8 -0.5 8.8 2.3 2.7

Change (%) nm nm -52.2 17.7 nm -65.5 nm -30.1 -38.3 20.9

Depreciation 12,775 12,865 13,243 13,128 13,858 14,342 14,535 14,998 52,010 57,733

Interest 18,491 15,108 16,726 13,766 14,702 13,542 12,619 12,646 64,092 53,509

Other Income 9,117 33,460 11,978 13,244 11,621 13,500 23,524 10,335 67,798 58,980

PBT -224,510 96,113 33,320 151,554 -30,932 16,839 -9,614 98,131 56,478 74,424

Tax 0 0 0 6,426 0 0 0 16,375 6,426 16,375

Rate (%) nm 0.0 0.0 4.2 nm 0.0 nm 16.7 11.4 22.0

Adj. PAT -224,510 96,113 33,320 145,128 -30,932 16,839 -9,614 81,756 50,053 58,049

Change (%) nm nm -61.5 2.1 nm -82.5 nm -43.7 -57.1 16.0

PAT -224,510 96,113 33,320 145,128 -30,932 16,839 -9,614 81,756 50,053 58,049

Adj. EPS (INR) -92.5 39.6 13.7 59.8 -12.7 6.9 -4.0 33.7 20.6 23.9

Gross under recovery (INR b) 255 204 212 187 136 183 206 218 858 743


Govt. sharing 0 161 135 237 43 92 52 207 533 393

Net Under recovery 175 -38 -4 -127 12 4 72 -77 5 11

E: MOSL Estimates

Indian Oil CorporationCMP: INR279 Buy� Quarterly profitability (BPCL, HPCL, IOC) of the OMC's more depends

on the subsidy sharing, which is ad-hoc, than on businessfundamentals. While our 4QFy14 estimates assume some subsidysharing, final picture will only be clear nearer to the results whengovernment finalized the subsidy sharing for FY14.



� We peg refinery throughput at 13mmt for 4QFY14, flat QoQ and v/s13.8mmt in 3QFY14.

� We expect IOCL to report net profit of INR81.8b in 4QFY14, v/s INR145bin 4QFY13 and loss of INR9.6b in 3QFY14.

� IOCL trades attractively at 8.8x FY16E EPS and at 0.9x FY16E BV. Buy.



EBITDA 127.4 133.7 183.3 200.2

Adj. PAT 44.5 58.0 70.7 76.9

Adj. EPS (INR) 18.3 23.9 29.1 31.7

EPS Gr. (%) -62.7 30.5 21.8 8.8

BV/Sh.(INR) 261 277 297 318

RoE (%) 7.2 8.9 10.2 10.3

RoCE (%) 7.6 7.4 10.3 11.1

Payout (%) 35.2 34.3 34.0 35.0

Valuations

P/E (x) 15.2 11.7 9.6 8.8

P/BV (x) 1.1 1.0 0.9 0.9

EV/EBITDA (x) 10.5 9.5 6.3 5.6

Div. Yield (%) 2.2 2.5 2.9 3.2

Bloomberg IOCL IN


M. Cap. (INR b)/(USD b) 677 / 11


1,6,12 Rel Perf. (%) 6 / 19 / -20

C–139April 2014



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Net Sales 7,602 8,546 8,694 8,818 9,015 10,090 10,404 10,009 33,661 39,518

Change (%) 41.7 43.2 31.4 22.4 18.6 18.1 19.7 13.5 33.8 17.4

EBITDA 1,793 2,060 1,871 1,848 1,924 2,001 1,942 2,109 7,572 7,976

EBITDA (INR/scm) 5.6 6.1 5.5 5.5 5.7 5.7 5.6 5.7 5.6 5.7

% of Net Sales 23.6 24.1 21.5 21.0 21.3 19.8 18.7 21.1 22.5 20.2

Change (%) 13.9 30.9 25.7 9.7 7.3 -2.9 3.8 14.1 19.8 5.3

Depreciation 427 477 474 489 532 548 558 563 1,867 2,201

Interest 155 140 141 125 128 98 119 122 562 467

Other Income 36 39 26 38 51 49 80 108 138 286

PBT 1,247 1,482 1,282 1,272 1,315 1,404 1,345 1,531 5,282 5,594

Tax 396 489 418 437 442 476 450 496 1,741 1,864

Rate (%) 31.8 33.0 32.6 34.3 33.6 33.9 33.5 32.4 33.0 33.3

PAT 850 992 863 835 873 928 895 1,034 3,541 3,729

PAT (INR/scm) 2.6 2.9 2.5 2.5 2.6 2.6 2.6 2.8 2.6 2.6

Change (%) 6.2 28.5 24.9 3.4 2.6 -6.5 3.6 23.8 15.3 5.3

EPS (INR) 6.1 7.1 6.2 6.0 6.2 6.6 6.4 7.4 25.3 26.6

Gas Volumes (mmscmd)

CNG 2.67 2.80 2.80 2.77 2.77 2.87 2.80 2.94 2.76 2.84

PNG 0.88 0.88 0.91 0.98 0.95 0.97 0.97 1.15 0.91 1.01

Total 3.55 3.69 3.71 3.74 3.71 3.84 3.77 4.09 3.67 3.85

E: MOSL Estimates

Indraprastha GasCMP: INR298 Neutral� We expect IGL to report 4QFY14 volume of 4.1mmscmd and PAT of

INR1b (up 24% YoY and 16% QoQ).� In February 2014, petroleum ministry announced 100% domestic gas

allocation to CNG/PNG consumption, thereby eliminating the LNGpurchases. This is a big positive for CGD players and resulted in INR15/kg price reduction in New Delhi, and would also boost volumes in theshort term.

� The benefit of increase in domestic gas allocation to 100% will bepartly negated by the scheduled domestic gas price hike as perRangarajan Committee formula.

� We expect 4QFY14 CNG volumes to grow 6% YoY to 2.9mmscmd andPNG volumes to grow 13% YoY to 1.1mmscmd.

� The stock trades at 9.5x FY16E EPS of INR31.5. Post the High Courtquashing PNGRB's tariff cut order, PNGRB has now approachedSupreme Court and the hearing is still on. We maintain our rating atNeutral due to lack of clarity in predicting earnings for IGL and wouldawait the Supreme Court decision.

Key issues to watch out� (a) EBITDA margin, (b) Sales volume and (c) Supreme court verdict in

case against PNGRB.� IGL's volume growth has averaged lower at 6% in the last 4 quarters

with ~4% in CNG (75% of total volumes) and 12% in PNG v/s FY08-12average of ~20%. We model in total volumes of 4.2/4.5 mmscmd inFY15/FY16.


EBITDA 7.6 8.0 8.5 9.2

Adj. PAT 3.5 3.7 4.0 4.4

Adj. EPS (INR) 25.3 26.6 28.8 31.5

EPS Gr. (%) 15.3 5.3 8.1 9.3

BV/Sh.(INR) 107 127 149 174

RoE (%) 26.0 22.8 20.8 19.5

RoCE (%) 32.4 29.0 26.7 25.4

Payout (%) 21.7 18.8 20.8 19.1

Valuations

P/E (x) 11.8 11.2 10.3 9.5

P/BV (x) 2.8 2.3 2.0 1.7

EV/EBITDA (x) 5.9 5.1 4.4 3.8

Div. Yield (%) 1.8 1.7 2.0 2.0

Bloomberg IGL IN




1,6,12 Rel Perf. (%) 11 / -5 / -11

C–140April 2014



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Net Sales 128,099 163,101 179,921 185,795 152,659 187,623 186,547 184,590 656,915 711,419

Change (%) -4.2 39.8 39.1 17.3 19.2 15.0 3.7 -0.6 22.1 8.3

EBITDA -6,476 11,569 1,774 1,428 1,683 7,305 -2,585 5,214 8,294 11,617

% of Net Sales nm 7.1 1.0 0.8 1.1 3.9 -1.4 2.8 1.3 1.6

Change (%) nm 1,435 -41 -82 nm nm nm nm -39.9 40.1

Depreciation -1,375 -1,456 -1,550 -1,663 -1,688 -1,761 -1,845 -1,866 -6,044 -7,159

Interest -1,102 -701 -777 -706 -779 -926 -928 -940 -3,286 -3,573

Other Income 495 369 192 105 293 335 1,005 678 1,160 2,310

PBT b/f forex/exceptional -8,458 9,781 -362 -836 -491 4,953 -4,353 3,086 125 3,195

Forex gain/(loss) -6,490 2,836 -2,570 856 -5,166 -2,495 1,889 2,011 -5,368 -3,761

Exceptional items 0 30 0 445 1,118 0 0 0 475 1,118

PBT -14,948 12,647 -2,932 465 -4,539 2,458 -2,464 5,097 -4,769 552

Tax -257 -796 -664 -1,095 0 -100 -13 -63 -2,812 -177

Rate (%) nm 6.3 nm 235.7 nm 4.1 -0.5 1.2 nm 32.0

PAT -15,206 11,851 -3,596 -630 -4,539 2,358 -2,477 5,034 -7,580 375

Change (%) nm 4,811.4 nm nm nm -80.1 nm nm nm -104.9

EPS (INR) -8.7 6.8 -2.1 -0.4 -2.6 1.3 -1.4 2.9 -4.3 0.2

GRM (USD/bbl) -4.2 9.2 1.9 2.0 2.9 5.0 -0.6 3.4 2.5 2.7

Throughput (mmt) 2.9 3.6 3.8 4.1 3.3 3.7 3.8 3.7 14.4 14.5

E: MOSL Estimates

MRPLCMP: INR48 Neutral� We expect MRPL to report 4QFY14 PAT at INR5b (v/s loss of INR630m in

4QFY13 and loss of INR2.5b in 3QFY14).

� EBITDA is expected at INR5.2b (v/s INR1.4b in 4QFY13 and EBITDA lossof INR2.6b in 3QFY14). Regional benchmark Reuters Singapore GRM isup 45% QoQ to USD6.2/bbl from USD4.3/bbl led by higher gasoline, FOan cracks coupled with sustained diesel cracks.

� On the operational front, we expect refinery throughput at 3.7mmt.

� To watchout on the commissioning schedule of the expanded capacityin FY15E, that is likely to improve margin profile for MRPL.

� For MRPL, we model in GRM of USD5.3/5.9//bbl for FY15/FY16. Thestock trades at FY16E P/E of 5.9x and at EV/EBITDA of 3.1x. MaintainNeutral.

Key issues to watch out� a) GRM, b) Forex fluctuations, c) Inventory changes.� Medium-term GRM outlook continues to be subdued due to over

capacity and sluggish global demand. Expect GRM to be subdued(occasional spurts) due to occasional bunching up of shutdowns.


EBITDA 8.4 11.6 30.7 34.9

Adj. PAT -8.0 0.4 10.2 14.1

Adj. EPS (INR) -4.3 0.2 5.8 8.0

EPS Gr. (%) nm -104.72,623.5 37.7

BV/Sh.(INR) 37 37 42 48

RoE (%) -11.1 0.6 14.8 18.0

RoCE (%) -0.2 3.1 19.6 23.6

Payout (%) 0.0 0.0 24.1 23.3

Valuations

P/E (x) -11.0 222.2 8.2 5.9

P/BV (x) 1.3 1.3 1.1 1.0

EV/EBITDA (x) 16.3 12.3 4.1 3.1

Div. Yield (%) - 0.0 2.5 3.4

Bloomberg MRPL IN




1,6,12 Rel Perf. (%) 18 / 26 / -23

C–141April 2014


Quarterly Performance (Standalone) (INR Billion)Y/E March FY13 FY14 FY13 FY14E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QENet Sales 23.3 24.0 24.1 23.8 19.8 27.1 26.1 25.2 95.3 98.2

Change (%) 2.0 -26.6 -3.3 38.2 -15.1 13.0 8.0 5.9 -2.5 3.1EBITDA 11.0 11.5 11.2 8.8 7.0 13.3 11.7 11.4 42.5 43.4

% of Net Sales 47.0 47.8 46.6 37.1 35.2 49.0 44.8 45.4 44.6 44.2Change (%) -12.2 -29.2 -15.7 82.6 -36.4 15.8 3.8 29.7 287.6 2.0

D,D&A 2.0 2.6 2.2 2.4 2.7 4.7 2.2 2.3 9.2 11.8Interest 0.0 0.0 0.0 0.0 0.0 0.0 0.3 0.3 0.0 0.6OI (incl. Oper. other inc) 4.8 5.2 4.9 4.6 4.7 4.7 4.5 4.4 19.6 18.2PBT 13.8 14.1 13.9 11.0 9.0 13.3 13.6 13.2 52.8 49.1Tax 4.5 4.6 4.5 3.4 2.9 4.3 4.6 4.5 16.9 16.2

Rate (%) 32.5 32.4 32.4 30.7 32.2 32.2 33.6 33.8 32.1 33.0PAT 9.3 9.5 9.4 7.6 6.1 9.0 9.0 8.7 35.9 32.9

Change (%) 9.5 -16.2 -7.3 71.9 -34.5 -5.3 -4.0 14.3 4.1 -8.3Adj. PAT 9.3 9.5 9.4 7.6 6.1 9.0 9.0 8.7 35.9 32.9Adj. EPS (INR) 15.5 15.9 15.6 12.7 10.1 15.0 15.0 14.5 59.7 54.7Key Assumptions (USD/bbl)Exchange rate (INR/USD) 54.2 55.2 54.2 54.4 56.0 62.5 62.0 61.9 54.5 60.6Gross Oil Realization 109.8 108.6 108.6 111.4 101.9 108.3 108.1 106.3 109.6 106.2Subsidy 56.0 56.0 56.0 56.0 56.0 56.0 56.0 59.4 56.0 56.9Net Oil Realization 53.8 52.6 52.6 55.4 45.9 52.3 52.1 46.9 53.6 49.3Subsidy (INR b) 20.2 20.8 19.5 18.5 19.8 22.3 21.7 20.7 78.9 84.6E: MOSL Estimates

Oil IndiaCMP: INR482 Buy� We expect Oil India to report PAT of INR8.7b (v/s INR7.6b in 4QFY13

and INR9.0b in 3QFY14). OINL's subsidy sharing has been ad-hoc atUSD56/bbl for 9MFY14.

� We estimate EBITDA at INR11.4b (up 30% YoY and down 2% QoQ). Weestimate gross realization at USD106/bbl v/s USD111 in 4QFY13 andUSD108 in 3QFY14 and net realization at USD47/bbl v/s USD55.4/bbl in4QFY13 and USD52.1/bbl in 3QFY14.

� Subsidy sharing assumption: For FY15/FY16, we model upstreamsharing at INR645/528b, and Oil India's share at 13.2% of upstream. Wemodel Oil India to share at INR20.7b in 4QFY14.

� The stock trades at 6.9x FY16E EPS of INR70.2. We remain positive onOil India due to ongoing diesel reforms and scheduled gas price hikethat will drive the earnings. Valuations attractive. Buy.

Key issues to watch out� (a) Subsidy sharing, (b) DD&A charges, and (c) Oil & Gas production

volumes.� Our Brent price assumption is USD108/105/105/bbl for FY14/15/16 and

at USD100/bbl for long term.


EBITDA 42.5 43.4 47.6 60.7

Adj. PAT 35.9 32.9 35.7 42.2

Adj. EPS (INR) 59.7 54.7 59.3 70.2

EPS Gr. (%) 4.1 -8.3 8.4 18.3

BV/Sh.(INR) 320 354 391 435

RoE (%) 19.4 16.3 15.9 17.0

RoCE (%) 26.0 19.2 17.4 18.9

Payout (%) 58.2 37.3 37.3 37.3

Valuations

P/E (x) 8.1 8.8 8.1 6.9

P/BV (x) 1.5 1.4 1.2 1.1

EV/EBITDA (x) 4.2 5.4 4.9 3.7

Div. Yield (%) 6.2 3.7 3.9 4.6

Bloomberg OINL IN


M. Cap. (INR b)/(USD b) 290 / 5


1,6,12 Rel Perf. (%) 0 / -7 / -25

C–142April 2014


Quaterly performance (Standalone) (INR Billion)Y/E March FY13 FY14 FY13 FY14E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Net Sales 200.8 197.9 209.9 213.9 192.2 223.1 207.4 210.0 822.5 832.7

Change (%) 24.0 -12.5 15.8 13.7 -4.3 12.8 -1.2 -1.8 8.6 1.2

EBITDA 110.4 102.7 112.4 102.9 84.0 120.0 122.1 110.8 428.4 436.9

% of Net Sales 55.0 51.9 53.5 48.1 43.7 53.8 58.9 52.7 52.1 52.5

Change (%) 19.1 -27.5 5.4 -6.9 -23.9 16.8 8.7 7.6 -5.1 295.8

D,D & A 32.0 37.3 44.1 71.3 39.0 45.0 44.0 51.2 184.6 179.2

Other Income 11.3 20.0 13.9 16.9 12.9 15.9 27.7 15.6 62.0 72.0

PBT 89.4 85.4 82.1 48.5 57.8 90.9 105.8 75.1 305.4 329.7

Tax 28.6 26.4 26.5 14.6 17.7 30.3 34.6 23.0 96.2 105.5

Rate (%) 32.0 30.9 32.2 30.2 30.6 33.3 32.7 30.6 31.5 32.0

PAT 60.8 59.0 55.6 33.9 40.2 60.6 71.3 52.1 209.3 224.2

Adjusted PAT 60.8 59.0 55.6 33.9 40.2 60.6 68.3 52.1 209.3 221.2

Change (%) 48.4 -31.8 20.0 -40.0 -33.9 2.8 22.8 53.9 -9.1 5.7

Adj. EPS (INR) 7.1 6.9 6.5 4.0 4.7 7.1 8.0 6.1 24.5 25.9

Key Assumptions (USD/bbl)

Fx rate (INR/USD) 54.2 55.2 54.2 54.4 55.9 62.5 62.0 62.0 54.5 60.6

Gross Oil Realization 109.9 109.9 110.2 114.0 102.9 109.0 108.2 108.1 111.0 107.0

Subsidy 63.3 63.1 62.2 63.1 62.7 64.2 62.2 67.7 62.9 64.2

Net Oil Realization 46.6 46.8 48.0 50.9 40.2 44.8 46.0 40.4 48.1 42.9

Subsidy (INR b) 123.5 123.3 124.3 123.1 126.2 138.0 137.6 140.8 494.2 542.6

E: MOSL Estimates

ONGCCMP: INR319 Buy� We expect ONGC to report adjusted PAT of INR52b (v/s INR33.9b in

4QFY13 and adj. PAT of INR68.3b in 3QFY14). ONGC's subsidy sharinghas been ad-hoc at USD56/bbl for 9MFY14, similar to FY13.

� We estimate EBITDA at INR111b (v/s INR103b in 4QFY13 and INR122bin 3QFY14).

� We estimate gross realization at USD108/bbl v/s USD114 in 4QFY13 andUSD108 in 3QFY14, and net realization at USD40/bbl v/s USD50.9/bblin 4QFY13 and USD46/bbl in 3QFY14.

� Subsidy sharing assumption: For FY15/FY16, we model upstreamsharing at INR645/528b, and ONGC's share at 84.6% of upstream. Weexpect ONGC to share INR141b in 4QFY14.

� Our Brent price assumption is USD108/105/105/bbl for FY14/15/16 andat USD100/bbl for long term. The stock trades at 8.1x FY16E consolidatedEPS of INR39.6b. We remain positive on ONGC due to ongoing dieselreforms, scheduled gas price hike and likely production increase inFY15 that will drive the earnings. Maintain Buy.

Key issues to watch out� (a) Subsidy sharing,� (b) DD&A charges, and� (c) Oil & Gas production volumes.


EBITDA 549 608 654 758

Adj. PAT 240 272 304 343

Adj. EPS (INR) 28.3 31.7 35.2 39.6

EPS Gr. (%) (8.8) 13.2 12.0 12.6

BV/Sh.(INR) 178 198 219 244

RoE (%) 16.8 17.0 16.9 17.1

RoCE (%) 15.2 14.9 14.5 14.8

Payout (%) 45.4 38.6 39.8 38.4

Valuations

P/E (x) 11.3 10.0 9.1 8.1

P/BV (x) 1.8 1.6 1.5 1.3

EV/EBITDA (x) 4.8 4.3 4.0 3.5

Div. Yield (%) 3.0 3.3 3.8 4.1

Bloomberg ONGC IN


M. Cap. (INR b)/(USD b) 2,727 / 46


1,6,12 Rel Perf. (%) 3 / 3 / -17

C–143April 2014



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Net Sales 70,304 75,484 84,228 84,656 84,442 94,935 93,821 110,494 314,672 383,692

Change (%) 52.1 40.6 33.1 32.8 20.1 25.8 11.4 30.5 38.6 21.9

EBITDA 4,571 5,182 5,289 4,344 3,978 3,639 3,499 3,578 19,385 14,695

% of Net Sales 6.5 6.9 6.3 5.1 4.7 3.8 3.7 3.2 6.2 3.8

Change (%) 4.3 15.6 4.1 18.8 -13.0 -29.8 -33.8 -17.6 10.1 -24.2

Depreciation 459 467 472 468 467 597 1,017 1,031 1,866 3,112

Interest 329 317 291 247 240 386 783 793 1,184 2,203

Other Income 266 248 149 203 152 161 216 223 865 753

PBT 4,048 4,646 4,675 3,831 3,423 2,818 1,916 1,978 17,200 10,134

Tax 1,340 1,500 1,490 1,380 1,170 1,000 560 643 5,710 3,373

Rate (%) 33.1 32.3 31.9 36.0 34.2 35.5 29.2 32.5 33.2 33.3

PAT 2,708 3,146 3,185 2,451 2,253 1,818 1,356 1,335 11,490 6,761

Change (%) 5.5 20.8 7.8 0.0 -16.8 -42.2 -57.4 -45.5 8.7 -41.2

EPS (INR) 3.6 4.2 4.2 3.3 3.0 2.4 1.8 1.8 15.3 9.0

Dahej Gas Volume (TBTU) 127.2 135.0 140.6 122.0 129.5 122.8 120.2 125.2 524.8 497.7

Dahej Gas Volumes (mmt) 2.5 2.7 2.8 2.4 2.6 2.4 2.4 2.5 10.4 9.9

Kochi Gas Volumes (mmt) 0.0 0.0 0.0 0.0 0.0 0.1

Avg. Dahej Regas (INR/mmbtu) 44.9 49.1 47.6 45.3 41.8 41.2 39.8 42.4 46.7 41.3

E: MOSL Estimates

Petronet LNGCMP: INR137 Buy� We expect Petronet to report 4QFY14 PAT of INR1.4b (down 46% YoY

and 2% QoQ) primarily due to Kochi plant's depreciation and interestburden post commissioning of the plant in August -13. We estimateEBITDA at INR3.6b (down 18% YoY and up 2% QoQ).

� We have built in LNG volumes at 2.5mmt in 4QFY14.

� The stock trades at 11.1x FY16E consolidated EPS of INR12.3. Valuationsreasonable. Buy.

Key issues to watch out� (a) ramp-up at Kochi Kochi terminal (b) Spot volumes, and (c)

Marketing margin on spot volumes.� Petronet LNG earnings are largely protected due to take-or-pay

contracts with the offtakers. Early completion of Kochi-Mangalore-Bangalore pipeline and lower spot prices would provide earningsupside.


EBITDA 18.4 14.7 17.6 21.4

Adj. PAT 11.5 6.8 7.5 9.2

Adj. EPS (INR) 15.3 9.0 10.0 12.3

EPS Gr. (%) 4.9 -41.2 11.4 22.6

BV/Sh.(INR) 59.3 66.4 74.5 84.4

RoE (%) 28.8 14.3 14.2 15.5

RoCE (%) 24.1 15.8 16.3 17.8

Payout (%) 19.1 21.1 19.9 19.9

Valuations

P/E (x) 8.9 15.2 13.6 11.1

P/BV (x) 2.3 2.1 1.8 1.6

EV/EBITDA (x) 6.6 8.2 7.7 6.3

Div. Yield (%) 1.8 1.2 1.2 1.5

Bloomberg PLNG IN


M. Cap. (INR b)/(USD b) 103 / 2


1,6,12 Rel Perf. (%) 7 / 0 / -18

C–144April 2014


Quarterly Performance (Standalone) (INR Billion)Y/E March FY13 FY14 FY13 FY14E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QENet Sales 918.8 903.4 938.9 842.0 876.5 1,037.6 1,035.2 1,078.1 3,602.9 4,027.4

Change (%) 13.4 15.0 10.3 -1.2 -4.6 14.9 10.3 28.0 9.2 11.8EBITDA 67.5 77.1 83.7 78.3 70.8 78.5 76.2 79.1 307.9 304.5

% of Net Sales 7.3 8.5 8.9 9.3 8.1 7.6 7.4 7.3 8.5 30.3Change (%) -32.0 -21.7 14.9 19.2 4.9 1.9 -9.0 1.1 -8.4 -1.1

Depreciation 24.3 22.8 24.6 22.4 21.4 22.3 21.4 21.5 94.7 86.6Interest 7.8 7.4 8.1 7.1 8.1 8.1 7.9 8.1 30.4 32.1Other Income 19.0 21.1 17.4 22.4 25.4 20.6 23.1 22.1 80.0 91.1PBT 54.3 68.0 68.5 71.2 66.6 68.7 69.9 71.6 262.8 276.9Tax 9.6 14.3 13.5 15.3 13.1 13.8 14.8 15.1 52.8 56.8

Rate (%) 17.7 21.0 19.7 21.5 19.7 20.1 21.2 21.1 20.1 20.5Adj. PAT 44.7 53.8 55.0 55.9 53.5 54.9 55.1 56.5 210.0 220.1

Change (%) -21.0 -5.7 23.9 31.9 19.7 2.1 0.2 1.1 4.8 4.8Adj. EPS (INR) 15.3 18.4 18.8 19.1 18.3 18.8 18.9 19.3 71.6 75.3Key Assumptions (USD/bbl)Fx Rate (INR/USD) 54.2 55.5 54.2 54.2 56.0 62.1 62.0 62.0 54.5 60.5KG-D6 Gas Price (USD/mmbtu) 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.2Brent Price (USD/bbl) 109 110 110 114 103 111 110 110 111 109RIL GRM 7.6 9.5 9.6 10.1 8.4 7.7 7.6 9.0 9.2 8.2Singapore GRM 6.7 9.1 6.5 8.7 6.6 5.4 4.3 6.2 7.8 5.6Premium/(disc) to Singapore 0.9 0.4 3.1 1.4 1.8 2.3 3.3 2.8 1.4 2.6KG-D6 Gas Prodn (mmscmd) 33.0 28.5 24.0 19.2 14.8 14.0 12.4 14.0 26.2 13.8Segmental EBIT Breakup (INRb)Refining 21.5 35.4 36.2 35.2 29.5 31.7 31.4 38.4 128.3 131.0Petrochemicals 17.6 17.4 19.4 19.0 18.9 25.0 21.2 20.7 73.3 85.9E&P 9.7 8.7 5.9 4.6 3.5 3.6 5.4 4.3 28.9 16.8Others 0.0 0.1 0.8 0.5 0.8 0.4 0.9 0.0 1.3 2.2Total 48.8 61.6 62.2 59.2 52.8 60.8 59.0 63.4 230.5 233.7E: MOSL Estimates; Segmental EBIT includes non-interest other income

Reliance IndustriesCMP: INR930 Neutral� We estimate RIL to report 4QFY14 GRM at USD9/bbl v/s USD10.1/bbl in

4QFY13 and USD7.6/bbl in 3QFY13. On the petchem front we expectlargely flat EBIT on QoQ basis as gains on polymer are neutralized bydismal performance in the polyester segment.

� We expect average 4QFY14 KG-D6 volume of ~14mmscmd v/s12.4mmscmd in 3QFY14.

� We expect RIL to report PAT of INR56.5 v/s INR55.9b in 4QFY13 andINR55.1b in 3QFY14.

� RIL trades at 11.4x FY16E adjusted EPS of INR91.1. RIL's new refining/petchem projects likely to add to earnings from end-FY16/FY17, butmedium-term outlook on core business remain weak with RoEreaching sub-12%, maintain Neutral.

Key issues to watch out� (a) GRM,� (b) Petchem margin, and� (c) KG-D6 production.


EBITDA 308 305 353 376

Adj. PAT 210 219 249 267

Adj. EPS (INR) 71.9 75.0 85.1 91.1

EPS Gr. (%) 4.8 4.4 13.8 7.1

BV/Sh.(INR) 616 680 751 829

RoE (%) 12.3 11.6 12.0 11.6

RoCE (%) 11.6 11.0 11.5 11.2

Payout (%) 14.6 16.4 16.4 16.3

Valuations

P/E (x) 14.5 13.9 12.2 11.4

P/BV (x) 1.5 1.4 1.3 1.1

EV/EBITDA (x) 9.6 10.1 8.7 8.6

Div. Yield (%) 1.0 1.0 1.1 1.2

Bloomberg RIL IN


M. Cap. (INR b)/(USD b) 3,003 / 50


1,6,12 Rel Perf. (%) 10 / -2 / 1

C–145April 2014

March 2014 Results Preview | Sector: Real Estate



31.3.14 % YoY % QoQ % YoY % QoQ % YoY % QoQDLF 177 Buy 20,282 -8.9 -1.5 6,686 -7.9 9.3 1,615 LP 11.1Godrej Properties 213 Neutral 3,007 -3.6 24.3 904 -8.1 5.9 400 -24.9 7.0Indiabulls Real Estate 55 Buy 4,255 3.2 -5.4 1,183 -13.8 5.7 331 -36.2 16.7Jaypee Infratech 21 Buy 10,366 8.2 4.9 3,999 -5.6 12.0 1,312 -11.7 29.7Mahindra Lifespace 366 Buy 696 -31.9 21.0 76 -55.6 236.6 108 -53.5 -35.3Oberoi Realty 217 Buy 1,871 -38.4 9.7 1,053 -40.8 17.3 772 -46.9 13.4Phoenix Mills 247 Buy 781 8.1 3.3 520 8.6 4.6 400 10.9 5.8Prestige Estates 172 Buy 5,414 -3.3 25.8 1,450 9.8 9.9 925 3.9 14.9Sobha Developers 374 Buy 5,357 -8.7 -1.6 1,459 -10.3 -2.1 560 -19.6 -4.0Sector Aggregate 52,028 -6.0 3.7 17,331 -9.9 9.1 6,422 4.8 12.0

Sandipan Pal ([email protected])

Real EstateCompanies Covered

DLF

Godrej Properties

Indiabulls Real Estate

Jaypee Infratech

Mahindra Lifespaces

Oberoi Realty

Phoenix Mills

Prestige Estate Projects

Sobha Developers

Realty index beats broader index in 4QFY14� BSE Realty Index has outperformed the broader Index over late 4QFY14, largely

due to strong hope of better political and macroeconomic outcome drivingsentiment on these beaten down sector. Valuation gap of realty stocks werebridged partially led by recent run-ups, while further upside risks hinges onimprovement on ground activities, which is slow in most markets ahead ofelections.

� Cash flow strengths are improving due to rising discipline and conservativeness ofmanagements. But the recovery has been slow on account of headwinds and re-appurtenance of concerns over approvals, and slowdown in demand.

Physical markets sluggish as investors’ demand vanishes ahead of elections� Slowdown is visible across markets with investors driven NCR market being the

most adversely impacted. Bangalore continues to remain most resilient, whilewell-priced launches in Mumbai enjoyed good off-take

� Bangalore witnessed relatively lower launches in 4QFY14 with a few developersplanning big launches post elections. However recent launches of Sobha (at HosurRoad) witnessed good off-takes.

� Among Mumbai launches A few projects which have enjoyed very strong responsein recent times are Lodha Rise (Palava), Kalpataru Sunrise (Thane) etc due to theirvery attractive pricings. Godrej’s launch in Chembur (Central) also attracted healthydemand. However major contribution still coming from distant suburbs projectsviz. Thane, Dombivali, Vasai -Virar etc.

� Overall we expect a sequential improvement in presales in 4QFY14, albeit lowerYoY.

Prefer Cos poised in favorable operating cycle with eyes on revival bets� We continue to prefer companies which have reasonably cleared legacy inventories

and riding on new and strong operating cycles led by fresh launches, robustpresales, favorable market outlook and offers visibility of steady cash flow. Thisset of companies offer better resilience amidst uncertainties. Prestige, Sobhaand Phoenix remain our preferred bets.

C–146April 2014




80

90

100

110

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14

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Sensex IndexMOSL RealEs tateIndex

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7090

110

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-13

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Sens ex IndexMOSL Rea lEstateIndex

� However improvement in housing demand, which could be an early-to-mid cyclerevival play in the event of favorable elections outcome and improvement inmacro factors, should meaningfully benefits operations of select companies inunderperforming markets. We prefer on Oberoi, DLF and IBREL under this category.

Key expectations� In 4QFY14 Real estate universe is expected to post a revenue growth of -6% YoY

(up +3.7% QoQ), EBITDA growth of -9.9% YoY (+9.1% QoQ) and PAT growth of 4.8%YoY (+12% QoQ). We expect the Operating cash flow (OCF) and FCFE to improveYoY for across most developers.

Key issues to watch out� Status of planned launches and progress in approvals (Crucial for Oberoi, DLF,

Sobha, MLIFE, PHNX, Godrej etc)� Demand trend and pricing outlook across markets� Scale-up in execution reflected in improvement in revenue booking or cash

collections (DLF, UT)� Leasing velocity and managements’ outlook in commercial verticals (PEPL, Oberoi,

DLF)� Cash flow and trend in leverage (DLF, PHNX, Godrej)

Quarterly Trend in Presales value (INR b)Presales (INR b) FY13 FY14 9M

FY11 FY12 1Q 2Q 3Q 4Q FY13 1Q 2Q 3Q FY14

NCR Centric developers 149 137 24 29 24 25 102 34 12 13 59

DLF 59 53 6 6 13 13 38 24 7 6 38

Unitech 43 38 7 8 7 6 28 5 3 4 11

Anantraj 5 7 2 1 0 0 3 1 0 1 3

JPIN 41 39 9 13 4 6 32 4 2 2 8

Mumbai Centric developers 79 40 9 9 14 8 39 19 8 6 34

IBREL 48 19 6 6 12 6 30 16 6 5 27

HDIL 21 11 1 1 - - - 3 1 1 5

ORL 10 10 2 2 2 2 9 1 1 1 2

Bangalore Centric developers 31 45 18 16 17 19 70 19 21 18 58

Sobha 11 17 5 5 5 7 22 6 6 5 17

PEPL 14 21 10 8 8 5 31 10 11 9 30

Purva 7 7 3 2 4 7 17 3 4 4 10

Diversified 17 19 5 8 5 6 24 5 3 13

MAHLIFE 7 6 1 1 2 2 4 1 1 1 3

GPL 10 13 4 7 4 5 20 4 3 3 10


C–147April 2014


Quarterly trend in launch and presales Trend in presales value

Launch trend (msf) across key cities Pre-sales volume (msf) across cities highlight

Source: Liases Foras, MOSL

Presales trend (msf): YoY growth in South, NCR/Mumbai flat; QoQ growth seems robust onleanest 3Q� 4QCY13 Presales volume improves 14% YoY and 22%

QoQ. This first time in CY13, when a quarterlypresales grew YoY basis ( best 4Q in over CY10-13)

� Regional break-up suggest, this driven by strengthof southern and Pune market only

� Bangalore up 43% YoY, Chennai up 61%, Mumbai/NCR Flattish.

� Overall Pan India (RHS Chart) witnessed 7% YoYdecline in volume in CY13

Project launch trend (msf): No boost inseasonally strong period� Launch volume was weak - much lower than

historical seasonality� Comparing annual numbers, Bangalore was the

lone market to have CY13 launch volume higherthan CY12 (but 4QCY13 has seen lower launch inBangalore as well)

� Launch volume declined in Mumbai and NCR� Pan India (RHS Chart) showing a flattish YoY trend

in new launches in

C–148April 2014


Pre-sales value (INR b) across cities highlight MMR average prices are still high, but both time correction and10-15% off-the-book discount (Island City) are visible.

NCR pricing (especially Gurgaon) seems to have peaked out Bangalore witnessed sharpest rise and seems to have flattenedwith demand weakening out due sales of premium projects being slowing

Source: Liases Foras, MOSL

C–149April 2014



31.3.14 FY14E FY15E FY16E FY14E FY15E FY16E FY14E FY15E FY16E FY14E FY15E FY16EReal EstateDLF 177 Buy 3.4 4.0 5.3 52.6 44.0 33.3 18.2 16.5 14.7 2.1 2.4 3.1Godrej Properties 213 Neutral 7.6 8.6 10.7 28.1 24.9 19.9 20.9 16.1 13.3 8.2 7.3 8.5Indiabulls Real Est. 55 Buy 5.1 9.8 14.4 10.7 5.6 3.8 7.6 6.4 3.8 3.2 5.6 7.9Jaypee Infratech 21 Buy 3.0 4.5 4.3 7.1 4.7 5.0 7.1 5.9 6.1 6.6 9.4 8.3Mahindra Lifespace 366 Buy 22.5 22.1 36.5 16.2 16.6 10.0 14.8 14.6 8.7 6.7 6.3 9.5Oberoi Realty 217 Buy 9.5 19.6 23.5 22.8 11.1 9.2 16.0 7.0 5.6 7.3 13.7 14.5Phoenix Mills 247 Buy 5.9 10.8 20.4 41.7 22.8 12.1 12.0 8.8 6.5 4.7 8.1 13.4Prestige Estates 172 Buy 9.5 11.7 14.8 18.2 14.8 11.7 12.0 9.8 8.0 11.0 12.1 13.4Sobha Developers 374 Buy 22.5 26.1 31.9 16.6 14.3 11.7 8.7 7.9 6.7 10.0 10.9 12.3Sector Aggregate 25.9 18.2 14.4 13.4 10.9 9.2 4.1 5.7 7.0

Trends in commercial landscape across cities highlight� CY13 pan India demand (27msf) higher than supply (24 msf),

� However, in absolute term, demand is still weak and marginally down YoY. CY12 was 21% YoY de-growth over CY11.

� Bangalore remains best performing market with consistently higher (than MMR, NCR) volume and lowest vacancy level

� NCR volume moderated most (-16% YoY), Mumbai posted strong growth (+17% YoY). New supply in Mumbai almost halved,

thus improving vacancy level

4QCY11 1QCY12 2QCY12 3QCY12 4QCY12 1QCY13 2QCY13 3QCY13

Supply (msf)

NCR 1.0 0.7 1.7 1.1 1.3 0.8 1.3 1.7

Mumbai 2.7 0.5 2.7 1.6 1.5 1.0 0.1 0.4

Bangalore 1.7 0.7 2.3 0.7 0.7 0.6 2.8 2.4

Chennai 0.3 0.6 0.6 1.2 1.5 - 1.6 -

Pune 0.3 0.2 0.6 0.5 1.0 1.0 0.3 -

Hyderabad - 0.3 1.0 0.1 0.1 0.8 1.1 0.3

Kolkata - 0.2 0.2 0.5 0.2 0.3 0.1 0.7

India 6.0 3.1 9.1 5.7 6.3 4.5 7.2 5.5

Absorption (msf)

NCR 0.9 1.7 1.2 1.1 0.7 1.2 0.9 1.3

Mumbai 1.1 0.4 0.9 1.2 1.3 1.0 0.9 1.0

Bangalore 3.6 1.8 3.0 1.6 1.0 4.2 2.9 2.6

Chennai 0.7 0.7 0.8 1.4 0.9 0.9 1.1 0.9

Pune 0.5 0.3 0.4 0.4 0.3 0.4 0.6 0.7

Hyderabad 0.5 0.5 0.8 0.9 0.5 0.3 0.3 0.3

Kolkata 0.2 0.5 0.5 0.3 0.1 0.2 0.2 0.1

India 7.5 5.9 7.6 6.8 4.9 8.2 6.9 6.9

Vacancy (%)

NCR 31 30 30 31 32 31 32 31

Mumbai 23 23 23 22 22 22 21 20

Bangalore 15 14 13 14 13 13 14 16

Chennai 24 24 23 20 22 20 18 20

Pune 26 25 25 25 24 22 21 20

Hyderabad 10 10 10 8 11 11 13 11

Kolkata 18 15 14 17 18 18 18 20

India 22 22 21 20 21 20 20 20

Source: DTZ

C–150April 2014



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Sales 21,977 20,395 13,100 22,256 23,141 19,561 20,584 20,282 77,728 83,568

Change (%) (10.1) -19.5 -35.6 -15.0 5.3 -4.1 57.1 -8.9 -19.3 7.5

EBITDA 10,670 7,464 870 7,258 9,156 5,948 6,120 6,686 26,262 27,909

Change (%) -4.0 -36.4 -89.4 -9.0 -14.2 -20.3 603.2 -7.9 -32.7 6.3

As % of Sales 48.6 36.6 6.6 32.6 39.6 30.4 29.7 33 33.8 33.4

Depreciation 1,786 1,837 2,479 1,861 1,782 1,660 1,561 1,458 7,962 6,461

Interest 6,226 5,224 5,809 5,882 5,914 6,091 6,331 6,205 23,140 24,541

Other Income 1,311 1,173 9,812 932 1,391 2,685 5,318 3,835 13,229 13,229

PBT 3,970 1,575 2,395 118 2,909 1,680 -574 2,858 8,059 6,873

Tax 1,137 394 -84 -196 913 855 -1,925 1,395 1,251 1,237

Effective Tax Rate (%) 29 25.0 -3.5 -165.5 31.4 50.9 49 15.5 18.0

Reported PAT 2,928 1,385 2,848 -42 1,812 1,001 1,453 1,615 7,119 5,975

Adj. PAT 2,928 1,385 2,848 -42 1,812 1,001 1,453 1,615 7,119 5,975

Change (%) (18.3) (62.8) 10.2 (102.0) (38.1) (27.8) (49.0) LTP (40.7) (16.1)

Presales (msf) 1.3 1.6 2.3 2.0 1.8 0.9 0.6 0.9 7.2 4.4

Presales (INR b) 6.0 6.3 12.5 13.4 24.3 7.3 6.0 8.0 38.2 46.3

Realization (INR/sf) 4,638 3,914 5,435 6,679 13,425 8,022 9,836 8,502 5,299 10,592

Leasing (msf) 0.3 0.2 0.4 0.2 0.4 0.6 0.4 0.3 1.2 1.6

E: MOSL Estimates

DLFCMP: INR177 Buy


EBITDA 26.3 27.9 30.5 34.0

Adj PAT 7.1 6.0 7.1 9.4

EPS (INR) 4.2 3.4 4.0 5.3

EPS Gr. (%) -40.8 -19.9 19.6 32.1

BV/Sh. (INR) 152.9 156.5 158.2 161.1

RoE (%) 2.6 2.1 2.4 3.1

RoCE (%) 6.0 6.5 6.2 6.6

Payout (%) 55.8 69.7 58.3 44.1

Valuations

P/E (x) 42.2 52.6 44.0 33.3

P/BV (x) 1.2 1.1 1.1 1.1

EV/EBITDA (x) 19.7 17.1 16.0 14.3

Div. Yield (%) 1.1 1.1 1.1 1.1

� DLF to post moderate uptick in quarterly PAT, with likely impact ofAman resort transaction, and removal of Primerica insurance business(making INR1.2-1.3b of loss annually).

� Estimate revenue at INR20.3b (-9% YoY), EBITDA at INR6.7b (-8% YoY),assuming ~3.5pp QoQ uptick in margins at 33%. PAT is seen at INR1.6b(v/s loss in 4QFY13 and INR1.45b in 3QFY14)

� Slowdown in Gurgaon and lack of any major launches are likely tokeep overall presales subdued v/s YoY. We estimate presales of INR8.5-9b on the back of launch of plotted project in New Chandigarh andexisting inventories.

� Net cash flow situation to improve QoQ due to large divestmentproceeds of Aman Resort (INR22b) and refund of DDA project(INR6.8b), but core operational cash flow to remain subdued in absenceof slowdown in presales (core FCEF to continue negative). Overall weestimate for INR20b of QoQ debt reduction in 4QFY14.

� DLF trades at 33.3x FY16E EPS, 1.1x FY16E BV and 22% discount to ourNAV estimate of INR226. Maintain Buy.

Key issues to watch out� Guidance on launch plan and presales target of FY15-16� Commencement of Noida Mall, leasing and expected rentals� Trend in operating cash flow and clarity over any further divestment� Status of CMBS plan

Bloomberg DLFU IN


M. Cap. (INR b)/(USD b) 315 / 5


1,6,12 Rel Perf. (%) 19 / 22 / -44

C–151April 2014



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Total Revenue 2,261 2,327 2,664 3,119 2,016 3,065 2,420 3,007 10,371 10,507

Change (%) 73.1 66.9 77.9 -11.0 -10.9 31.7 -9.2 -3.6 34.7 1.3


Adm Exp 70 110 100 141 66 94 97 101 421 358

Construction Exp 1,764 1,425 1,780 1,946 1,492 2,101 1,409 1,937 6,916 6,939

Employee Cost 24 74 32 47 52 61 60 65 177 239

EBITDA 403 719 751 984 406 808 854 904 2,858 2,972

Change (%) 100 124 181 25 1 12 14 -8.1 80.9 4.0

As of % Sales 17.8 30.9 28.2 31.6 20.1 26.4 35.3 30.1 27.6 28.3

Depreciation 10 11 11 12 12 14 15 35 44 77

Interest 6 7 8 9 8 8 8 9 30 34

Other Income 67 4 14 20 427 139 120 84 104 770

PBT 454 705 746 983 812 925 950 945 2,889 3,632

Tax 196 215 233 271 299 319 347 306 916 1,271


PAT before MI 258 489 513 713 514 606 603 638 1,973 2,361

Reported PAT 172 326 355 532 395 343 374 400 1,384 1,511

Change (%) 70.6 67.5 24.0 33.7 130.1 5.1 5.3 -24.9 41.3 9.1

Presales (msf)** 0.7 1.1 0.6 0.5 0.5 0.4 0.4 0.4 2.9 1.7

Presales (INR b) 4.3 7.0 3.7 4.8 4.2 2.8 3.3 3.5 19.8 13.8

Realizations (INR/sf) 6,100 6,179 6,687 9,391 8,715 6,455 8,527 8,031 6,822 7,939

E MOSL Estimates; ** GPL's share

Godrej PropertiesCMP: INR213 Neutral


EBITDA 2.9 3.0 4.0 4.8

NP 1.4 1.5 1.7 2.1

EPS (INR) 8.9 7.6 8.6 10.7

EPS Gr. (%) 41.3 -14.5 12.9 25.1

BV/Sh (INR) 91.6 113.3 120.7 130.3

RoE (%) 9.6 8.2 7.3 8.5

RoCE (%) 8.6 9.2 8.5 9.5

Payout (%) 13.2 15.4 13.7 10.9

Valuations

P/E (x) 24.1 28.1 24.9 19.9

P/BV (x) 2.3 1.9 1.8 1.6

EV/EBITDA (x) 11.1 13.8 10.8 8.9

Div. Yield (%) 0.9 0.9 0.9 0.9

Bloomberg GPL IN




1,6,12 Rel Perf. (%) 22 / 9 / -32

� Godrej properties 4QFY14 revenues to de-grow 4% YoY to ~INR3b,EBITDA is expected at INR904m (margin at 30%, flat QoQ) and PAT tode-grow 25% YoY to INR400m.

� Recent launch in Chembur (Sahakar Nagar Phase I) has garnered decentresponse, along with encouraging response to its upcoming launchesin Pune and Panvel. We expect the launch activities with scale upfurther post elections.

� Commercial absorption in its legacy projects in Kolkata has seen someimprovement in 4QFY14. Overall presales across projects are expected~INR3.5b in 4QFY14.

� The stock trades at 6% discount to SOTP value of INR227/share, 19.9xFY16E EPS and 1.6x FY16E BV. Maintain Neutral.

Key issues to watch out� Progress in approvals in planned launches and demand momentum

in major markets� Leasing progress in BKC commercial� Trend in cash flow and leverage

C–152April 2014



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Sales 2,147 3,423 3,313 4,123 5,083 4,506 4,497 4,255 13,006 18,341

Change (%) -14.3 3.1 -7.1 -7.4 136.8 31.6 35.7 3.2 -6.5 41.0

EBITDA 791 1,209 1,314 1,372 1,467 1,687 1,119 1,183 4,686 5,457

Change (%) 52.9 17.9 27.4 29.7 85.4 39.5 -14.8 -13.8 21 16

As % of Sales 36.9 35.3 39.7 33.3 28.9 37.4 24.9 27.8 36 30

Depreciation 52 53 44 54 55 46 49 58 204 209

Interest 439 697 660 473 491 526 661 719 2,269 2,397

Other Income 72 83 200 103 165 201 129 125 457 620

PBT 372 542 810 947 1,087 1,316 538 531 2,671 3,472

Tax 85 177 309 345 385 452 235 177 916 1,250


Rep. PAT (Pre Min. and associates) 287 364 501 602 702 863 303 354 1,742 2,153

Change (%) -22.6 -5.1 22.6 7.4 144.4 136.9 -39.5 -41.3 5.1 23.6

Reported PAT 378 322 523 519 726 812 284 331 1,742 2,153

Change (%) 30 -18.2 25.3 -7.5 92 152 -46 -36 5 24

Presales (msf) 1.2 0.9 0.7 1.6 0.7 0.6 0.7 2.8 3.6

Presales (INR b) 12.1 12.0 5.9 15.9 6.4 4.8 5.9 30.0 33

Realizations (INR/sf) 10,202 13,419 8,153 10,205 9,333 7,778 8,029 10,702 9,179

E MOSL Estimates

Indiabulls Real EstateCMP: INR55 Buy


EBITDA 4.7 5.5 6.1 9.3

NP 1.7 2.2 3.9 5.8

EPS (INR) 4.1 5.1 9.8 14.4

EPS Gr. (%) 17.4 23.6 93.0 47.0

BV/Sh. (INR) 159.9 160.3 164.9 172.7

RoE (%) 2.5 3.2 5.6 7.9

RoCE (%) 5.1 6.3 6.6 9.8

Payout (%) 57.0 92.2 50.4 42.8

Valuations

P/E (x) 13.3 10.7 5.9 4.0

P/BV (x) 0.3 0.3 0.3 0.3

EV/EBITDA (x) 9.4 8.6 7.2 4.4

Div Yield (%) 3.7 7.3 7.3 9.2

Bloomberg IBREL IN




1,6,12 Rel Perf. (%) 9 / -14 / -19

� We expect revenue at INR4.3b (3% YoY), EBITDA at INR1.2b (-14% YoY)with margin of 28% and PAT of INR331m (-36% YoY).

� On the back of weaker momentum in most of its key market Gurgaon,Chennai and Mumbai, we expected no major seasonally benefit in4QFY14 with likely presales of INR5.5-6b. Cash flow to deteriorateowing to lower launch, with possible uptick in leverage.

� IBREL trades at 55% discount to NAV estimate of INR125 and 5.4xFY16EEPS and 0.3x FY16E BV. Maintain Buy with target price of INR90.

Key issues to watch out� Progress in planned launches in NCR, Chennai (delayed on approvals)� Cash flow and leverage guidance� Leasing at IPIT� Management guidance of dividend� Any management guidance of potential Buyback

C–153April 2014



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Cons. Cons.

Sales 6,783 7,047 9,331 9,582 7,692 7,966 9,878 10,366 32,743 35,902

Change (%) 9.9 -1.5 3.4 4.1 13.4 13.0 5.9 8.2 3.8 9.6

EBITDA 2,721 3,584 4,224 4,238 3,352 3,541 3,571 3,999 14,767 14,462

Change (%) -8.5 -8.9 -15.0 -2.7 23.2 -1.2 -15.5 -5.6 -10.5 -2.1

As of % Sales 40.1 50.9 45.3 44.2 43.6 44.4 36.1 38.6 45.1 40.3

Depreciation 6 35 54 55 86 67 30 59 149 241

Interest 98 1,323 2,259 2,435 2,315 2,212 2,265 2,346 6,115 9,138

Other Income 8 35 27 109 74 51 4 68 179 197

PBT 2,625 2,262 1,939 1,857 1,025 1,313 1,280 1,662 8,682 5,280

Tax 525 453 388 371 215 275 268 350 1,737 1,109


Reported PAT 2,099 1,810 1,551 1,485 810 1,038 1,012 1,312 6,945 4,172

Change (%) -11.7 -41.7 -60.5 -57.5 -61.4 -42.6 -34.7 -11.7 -46.2 -39.9

Adj PAT 2,099 1,810 1,551 1,485 810 1,038 1,012 1,312 6,945 4,172

Change (%) -11.7 -41.7 -60.5 -57.5 -61.4 -42.6 -34.7 -11.7 -46.2 -39.9

Presales (msf) 2.5 3.0 1.2 1.4 1.0 0.5 0.6 0.7 8.1 2.8

Presales (INR b) 9.3 13.4 4.3 5.7 4.0 1.8 2.4 2.8 32.7 11.0


E: MOSL Estimates

Jaypee InfratechCMP: INR21 Buy� We expect revenue at INR10.4b (+8% YoY), EBITDA at INR4b (-6%),

margin at 39%, and PAT at INR1.3b (-12% YoY).

� We have assumed INR4b of land revenue (from INR15b of divestmentconcluded in 1QFY14,), and INR430m of Expressway revenue (v/sIN380m in 3QFY14).

� Presales momentum is expected to remain subdued due to currentdynamics of Noida and Parcel 3. We maintain our FY14 presales atINR11b (implied INR2.8b in 4QFY14).

� Weakening operations and high leverage level have been keyconcerns. JPIN trades at 2.5x FY16E EPS, 0.4x FY16E BV. Maintain Buy.

Key issues to watch out� Traffic growth and toll revenue trend in expressway� Response to Parcel 3, Agra launches and overall market outlook� Any further divestment plan and deleveraging


EBITDA 14.8 14.5 17.2 17.2

Adj PAT 6.9 4.2 6.2 5.9

Adj EPS (INR) 5.0 3.0 4.5 4.3

EPS Gr. (%) -46.2 -39.9 49.5 -4.9

BV/Sh. (INR) 44.5 46.3 49.6 52.7

RoE (%) 11.6 6.6 9.4 8.3

RoCE (%) 10.9 10.1 11.6 11.0

Payout (%) 23.4 39.0 26.1 27.4

Valuations

P/E (x) 4.2 7.1 4.7 5.0

P/BV (x) 0.5 0.5 0.4 0.4

EV/EBITDA (x) 7.3 7.1 5.9 6.1

Div. Yield (%) 4.7 4.7 4.7 4.7

Bloomberg JPIN IN




1,6,12 Rel Perf. (%) 9 / 20 / -65

C–154April 2014



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Sales 1,209 1,294 1,259 3,621 1,761 1,962 1,436 1,505 7,383 6,664

Change (%) 45.6 51.6 14.1 -58.4 5.3 -9.7

EBITDA 354 395 328 1,342 517 493 434 421 2,419 1,864

As % of Sales 29.3 30.5 26.0 37.1 29.3 25.1 30.2 28.0 32.8 28.0

Change (%) 45.9 24.6 32.5 -68.6 26.4 -22.9

Depreciation 22 22 22 22 24 24 25 35 87 108

Interest 69 88 81 74 168 158 143 145 312 614

Other Income 66 151 61 63 70 114 125 94 342 403

PBT 329 437 286 1,309 395 425 391 335 2,361 1,545

Tax 146 188 80 385 132 201 88 104 799 525


PAT before minority 183 248 206 924 263 224 303 231 1,562 1,020

Change (%) 43.4 -10.0 46.7 -75.0 21.3 -34.7

Minority Interest -10 12 40 107 45 29 11 16 148 100

Reported PAT 193 236 167 817 218 195 292 215 1,414 920

Revenue from MWCs* 168 456 645 2,600 1,090 999 861 809 3,868 3,759

Operational performance

Sales volume (msf) 0.2 0.2 0.4 0.4 0.2 0.2 0.3 0.3 1.1 0.9

Sales value (INR b) 0.5 0.9 1.5 1.5 0.7 0.7 1.3 1.1 4.4 3.8


E: MOSL Estimates; *Revenue outside Standalone is largely contributed by Mahindra World City (MWC) Chennai and Jaipur

Mahindra LifespacesCMP: INR366 Buy� Mahindra Lifespaces' (MILFE) 4QFY14 consolidated revenues are

expected at INR1.5b (-58% YoY), margins at ~28%, EBITDA at INR421m(-69% YoY), while PAT at INR215m. Bloomdale IIA/C are the projectswith expectation of crossing revenue threshold by 4QFY14.

� Pre-sales at MLIFE's portfolio continue to remain muted in 4QFY14,with release of only Anthea (Pune) and Nova (Chennai) inventory.Among ongoing projects, demand at Nagpur is extremely sluggish;Hyderabad has been stable, while only small ticket products (INR3-5m) at Chennai and Pune are showing resilience. Costlier propositions— Aqualily and Iris — have been weak. We estimate presales at INR1.1bin 4QFY14.

� The stock trades at 22% discount to SOTP of INR470/share, 10x FY16EEPS and 0.9x FY16E BV.

Key issues to watch out� Progress in approvals in recent acquisitions� Byculla land divestment timeline� Trend in gearing level� Leasing progress in Jaipur DTA, and clarity on possible re-sizing� Progress of land acquisition in North Chennai SEZ.


EBITDA 2.4 1.9 1.9 3.1

Adj PAT 1.4 0.9 0.9 1.5

Adj EPS (INR) 34.6 22.5 22.1 36.5

EPS Growth (%) 18.7 -34.9 -1.9 65.1

BV/Share (INR) 316.9 334.9 352.3 386.2

RoE (%) 10.9 6.7 6.3 9.5

RoCE (%) 11.4 7.4 7.3 10.9

Payout (%) 18.4 28.2 28.8 17.2

Valuations

P/E (x) 10.6 16.2 16.6 10.0

P/BV (x) 1.2 1.1 1.0 0.9

EV/EBITDA (x) 9.6 14.8 14.6 8.7

Div. Yield (%) 1.4 1.4 1.4 1.4

Bloomberg MLIFE IN




1,6,12 Rel Perf. (%) -1 / -25 / -23

C–155April 2014


Consolidated Quarterly Performance (INR Million)Y/E March FY13 FY14 FY13 FY14E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Total Revenue 1,999 2,577 2,861 3,039 2,184 1,890 1,705 1,871 10,476 7,649

Change (%) 24.2 15.7 52.8 19.3 9.3 -26.7 -40.4 -38.4 27.0 -27.0

EBITDA 1,139 1,496 1,707 1,779 1,335 861 898 1,053 6,121 4,147

Change (%) 26.1 29.5 50.5 8.3 17.2 -42.5 -47.4 -40.8 26.6 -32.3

As of % Sales 57 58 60 59 61 46 53 56 58.4 54

Depreciation 70 71 71 72 69 68 68 77 285 281

Interest 1 1 1 1 1 1 1 1 4 0

Other Income 309 250 219 221 210 127 154 159 999 650

PBT 1,376 1,674 1,854 1,927 1,476 919 983 1,134 6,827 4,511

Tax 368 430 509 475 457 278 303 362 1,783 1,400


Reported PAT 1,008 1,244 1,345 1,452 1,018 642 681 772 5,045 3,112

Change (%) -4.7 11.6 31.7 1.1 1.0 -48.4 -49.4 -46.9 9.1 -38.3

Presales (msf) 0.1 0.1 0.1 0.1 0.05 0.04 0.03 0.03 0.5 0.1

Presales (INR b) 2.1 2.2 2.2 2.2 0.9 0.8 0.6 0.6 8.7 2.9


E: MOSL Estimates

Oberoi RealtyCMP: INR217 Buy� We expect another muted quarter operationally in 4QFY14, with

subdued presales run-rate, possibly a marginally better contributionfrom Esquire as revival in execution from mid-2QFY14 should improvebuyers' perception.

� Revenue is seen at INR1.9b (-32% YoY), EBITDA margin at 56%, andEBITDA at INR1.1b (-41% YoY). We estimate PAT of INR772m (-47% YoY).

� Acquisition of Borivali land parcel is a key development in the quarter.Clarity over launch and approval timeline would be a key managementguidance to watch out for.

� Due to absence of launch, declining customer collections, we expectthe cash balance to reduce further depending on pace of execution inEsquire and Oasis (also driven by advances to Borivali land payment)to ~INR2b.

� The stock trades attractively at 9.2x FY16E EPS, 1.3x FY16E BV, and at20% discount to our NAV estimate of INR270. Buy with a target price ofINR242.

Key issues to watch out� Sales momentum in Esquire (Goregaon) and Grande (Andheri).� Visibility on new launches (Mulund/JVLR/ Borivali).� Clarity over Oasis (Worli) launch and hotel tie up� Leasing visibility in Commerz II� Visibility on change in usage at JVLR project


EBITDA 6.1 4.1 9.1 10.8

Adj PAT 5.0 3.1 6.4 7.7

Adj EPS (INR) 15.4 9.5 19.6 23.5

EPS Growth (%) 9.1 -38.3 106.2 20.2

BV/Share (INR) 126.8 134.0 151.2 172.4

RoE (%) 12.8 7.3 13.7 14.5

RoCE (%) 17.3 10.5 19.8 21.0

Payout (%) 15.2 24.7 12.0 9.9

Valuations

P/E (x) 14.1 22.8 11.1 9.2

P/BV (x) 1.7 1.6 1.4 1.3

EV/EBITDA (x) 9.9 16.0 7.0 5.6

Div. Yield (%) 0.9 0.9 0.9 0.9

Bloomberg OBER IN




1,6,12 Rel Perf. (%) 8 / 12 / -35

C–156April 2014




Sales 626 665 693 722 698 707 756 781 4,699 12,778

Change (%) 17.0 23.4 20.1 20.3 11.5 6.4 9.0 8.1 19.1 171.9

EBITDA 394 438 474 479 475 479 497 520 2,632 5,796

Change (%) 19.3 31.4 27.0 31.8 20.4 9.2 4.9 8.6 24.5 120.2

As % of Sales 63 66 68 66 68 68 66 67 56.0 45.4

Depreciation 67 69 69 71 65 65 59 61 474 1,169

Interest 58 72 70 66 72 97 146 85 1,430 3,773

Other Income 143 156 126 140 215 172 197 156 521 529

PBT 413 454 461 483 553 488 489 530 1,248 1,382

Tax 107 123 120 122 135 123 111 130 428 456

Effective Tax Rate (%) 26 27 26 25 24 25 23 24 34.3 33.0

Adj. PAT 306 330 341 361 418 365 378 400 842 857

Change (%) 12.4 38.2 26.9 32.2 36.7 10.6 10.8 10.9 -20.3 1.9

E: MOSL Estimates

Phoenix MillsCMP: INR247 Buy� We expect High Street Phoenix's (HSP) 4QFY14 revenue at INR781m,

(8% YoY), EBITDA at INR520m (margin of 67%) and PAT of INR400m(11% YoY). We expect rentals to post 10-12% YoY growth to ~INR580, inline with growth in consumption. We model in for 11% rental CAGRover FY13-16 (v/s management expectation of 15% over FY13-18).

� Pune, Bangalore and Chennai market City malls have largely reachedthreshold trading density. The incremental leasing are happening at2-2.5x of average rentals. We expect Market city portfolio to continueposting 8-10% QoQ growth in total rentals in 4QFY14.

� The stock trades at a PER of 12x FY16E EPS, 1.6x FY16E BV and 15%discount to NAV of INR289. Buy with target price of INR260

Key issues to watch out� Sales momentum in Phase II projects in Market City� Response in Pune launch and progress in Bangalore Phase II

residential launch� Progress on ramp-up in recently-commenced malls� Improvement in operating cash flow which can lead to de-leveraging� Update on proposed stake purchases in market city projects


EBITDA 2.6 5.8 7.7 10.0

Adj PAT 0.8 0.9 1.6 3.0

EPS (INR) 5.8 5.9 10.8 20.4

EPS Growth (%) -20.3 1.9 83.1 88.7

BV/Share (INR) 122.1 125.7 134.2 152.3

RoE (%) 4.8 4.7 8.1 13.4

RoCE (%) 6.6 10.2 11.9 15.9

Payout (%) 40.3 39.5 21.6 11.4

Valuations

P/E (x) 42.5 41.7 22.8 12.1

P/BV (x) 2.0 2.0 1.8 1.6

EV/EBITDA (x) 21.7 12.0 8.8 6.5

Div. Yield (%) 0.8 0.8 0.8 0.8

Bloomberg PHNX IN




1,6,12 Rel Perf. (%) 2 / -7 / -26

C–157April 2014




Total Revenue 2,192 2,414 4,921 5,597 4,983 4,753 4,305 5,414 19,476 24,551

Change (%) -12 88.5 195 177 127 97 -13 -3.3 85.1 26.1

EBITDA 704 725 1,424 1,321 1,289 1,187 1,319 1,450 5,791 7,018

Change (%) 2.1 47.2 184.1 92.5 83.2 63.7 -7.4 9.8 95.2 21.2

As of % Sales 32.1 30.0 28.9 23.6 25.9 25.0 30.6 27 30 29

Depreciation 77 83 83 87 80 83 85 87 682 834

Interest 240 191 209 258 257 265 348 296 1,489 1,785

Other Income 272 195 195 278 310 288 295 267 636 665

PBT 659 647 1,328 1,253 1,263 1,126 1,180 1,334 4,256 5,063

Tax 166 190 407 363 396 350 375 409 1,314 1,595


Reported PAT 493 457 920 890 867 776 806 925 2,941 3,468

Adj PAT 493 457 920 890 867 776 806 925 2,860 3,318

Change (%) 35.3 73.9 227.9 132.6 75.8 69.9 -12.5 3.9 246.2 16.0

Presales (msf) 2.0 1.6 1.4 0.9 1.8 1.8 1.6 1.2 6.0 6.4

Presales (INR b) 10.1 8.2 7.5 5.4 10.2 10.7 9.4 7.3 31.2 37.6


Leasing (msf) 0.06 0.07 0.24 0.08 0.16 0.48 0.22 0.2 0.5 1.1

E: MOSL Estimates

Prestige Estate ProjectsCMP: INR172 Buy� P&L to strengthen as multiple projects to cross revenue threshold in

4QFY14 including Fern Residency, Mayberry and Glen Wood. Estimaterevenue at INR5.4b (-3% YoY), EBITDA at INR1.45b (margin 27%) andPAT INR925m (+4% YoY).

� Comfortably placed in meeting presales guidance of FY14, thecompany has launched no major project in 4QFY14, barring subsequentstock of Lakeside Habitat. Presales are likely to moderate ~INR7b in4QFY14. Major launches will be post elections.

� Will be missing annual rental exit run-rate guidance of INR3.5b, asthere are 3-4 months delay in commissioning of Hyderabad andMangalore malls, and slower leasing in commercial projects. Weestimate exit annualized rental will be ~INR3b in march-14 and INR3.5bin 1HFY15.

� The stock trades at 11.7x FY16E EPS, 1.6x FY16E BV, and at 12% discountto our NAV estimate of INR195. Buy with a target price of INR195

Key issues to watch out� Outlook of Bangalore residential market and leasing momentum� Annual guidance of FY15-16 on presales, launch and leasing� Execution progress in ongoing projects, collections, and movements

of debtors� Cash flow dynamics, land acquisition and debt movements


EBITDA 5.8 7.0 8.6 10.2

Adj PAT 2.9 3.3 4.1 5.2

Adj EPS (INR) 8.2 9.5 11.7 14.8

EPS Gr (%) 246.2 16.0 23.1 26.6

BV/Sh(INR) 78.4 86.4 96.7 110.1

RoE (%) 10.4 11.0 12.1 13.4

RoCE (%) 11.7 11.8 13.2 15.0

Payout (%) 17.2 14.8 12.0 9.3

Valuations

P/E (x) 21.1 18.2 14.8 11.7

P/BV (x) 2.2 2.0 1.8 1.6

EV/EBITDA (x) 14.0 12.0 9.8 8.0

Div. Yield (%) 0.7 0.7 0.7 0.7

Bloomberg PEPL IN




1,6,12 Rel Perf. (%) 24 / 31 / -13

C–158April 2014



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Sales 4,332 4,148 4,298 5,867 4,616 5,408 5,443 5,357 18,645 20,824

Change (%) 56 41 37 12 7 30 27 -9 32 12

EBITDA 1,198 1,285 1,374 1,626 1,390 1,433 1,490 1,459 5,483 5,772

Margin (%) 28 31 32 28 30 26.5 27.4 27.2 29.4 27.7

Depreciation 140 141 153 160 165 172 172 182 594 691

Interest 377 443 439 446 396 434 446 447 1,705 1,723

Other Income 16 14 15 11 14 37 12 17 55 80

PBT 697 715 797 1,031 843 864 884 847 3,239 3,438

Tax 247 214 271 336 342 298 301 288 1,068 1,229

Effective Tax Rate (%) 35 30 34 33 41 34 34 34 33 36

Net PAT 450 501 526 696 501 566 583 560 2,171 2,209

Reported PAT 450 501 526 696 501 566 583 560 2,172 2,210

Change (%) 69 42 4 -29 11 13 11 -20 5 2

Presales (msf) 0.8 0.9 0.9 1.1 0.9 1.0 0.7 0.9 3.8 3.5

Presales (INR b) 4.8 5.3 5.3 6.8 6.0 6.3 5.0 5.7 22.2 23.1


E: MOSL Estimates

Sobha DevelopersCMP: INR374 Buy� Revenue is expected at INR5.4b (-9% YoY), EBITDA at INR1.46b (margin

of 27%) and PAT at INR560m.

� New launches of ~3.5msf of projects in 4QFY14 in Hosur Road,Kanakapura Road, Coimbatore and Cochin to QoQ improve the presalesrun-rate closer to normalcy after a weak 3QFY14. However a majorportion of recent launches, being taken place in last week of March-14, is likely to benefit FY15 more. We are assuming INR5.7b of presalesin 4QFY14.

� The stock trades attractively at 11.7x FY16E EPS, 1.4x FY16E BV, and at17% discount to our NAV estimate of INR450. Buy with a target price ofINR450.

Key issues to watch out� Outlook of Bangalore residential market� Annual guidance of FY15-16 on presales, launch� Execution progress in ongoing projects, collections, and movements

of debtors� Cash flow dynamics, land acquisition and debt movements


EBITDA 5.5 5.8 6.3 7.3

Adj PAT 2.2 2.2 2.6 3.1

EPS (INR) 22.2 22.5 26.1 31.9

EPS Gr. (%) 5.5 1.7 15.7 22.1

BV/Sh (INR) 217.9 231.1 247.8 270.3

RoE (%) 10.5 10.0 10.9 12.3

RoCE (%) 14.5 14.1 14.8 16.1

Payout (%) 31.6 35.5 30.7 25.1

Valuations

P/E (x) 16.9 16.6 14.3 11.7

P/BV (x) 1.7 1.6 1.5 1.4

EV/EBITDA (x) 9.0 8.7 7.9 6.7

Div. Yield (%) 1.9 2.1 2.1 2.1

Bloomberg SOBHA IN




1,6,12 Rel Perf. (%) 22 / 17 / -12

C–159April 2014

March 2014 Results Preview | Sector: Retail



31.3.14 % YoY % QoQ % YoY % QoQ % YoY % QoQFuture Retail 82 UR 24,352 4.2 4.8 1,980 11.2 -12.7 -74 Loss LossJubilant Foodworks 1,067 Se l l 4,606 25.9 0.9 737 20.3 9.3 342 4.7 1.9Shopper's Stop 385 Neutral 7,311 17.0 2.7 460 20.1 -12.6 184 21.4 6.2Titan Company 262 Neutral 27,375 5.6 3.3 2,525 2.5 6.6 1,771 -4.3 -0.5Sector Aggregate 63,645 7.5 3.6 5,702 8.8 -2.3 2,223 -2.3 1.2

We expect our Retail universe (excluding Future Retail, which has undergonerestructuring) to post 9.6% sales growth, 7.6% EBITDA growth and flattish PAT. Subduedperformance of Titan's Jewelry business, regulatory softening in Jewelry industryand promotions-driven same store sales (SSS) growth for traditional retailers wouldbe the highlights of 4QFY14, in our view.

Consumer sentiment weak; no signs of recovery as yetThe Retail sector continues to be impacted by weak macro-led slowdown indiscretionary consumption. While there has been modest improvement in urbanconsumer sentiment, our management interactions do not suggest any meaningfulrecovery in SSS growth metrics as yet. Events and promotions-driven footfalls aside,underlying consumption remains weak even for traditional retailers. Jewelry retailerswould also witness weak consumer demand despite the wedding season, as goldprice decline in 1QFY14 had resulted in preponement of jewelry purchases. We expectJubilant Foodworks to post a muted quarter, though better QoQ, aided by weak base.

Space expansion plans unchanged; preparing ground for demand recoveryAmidst the challenging retail spending environment, space expansion has continuedunabated. Shoppers Stop opened two store during the quarter while we expectJubilant Foodworks to have opened ~42 stores (in line with its revised annual guidanceof 145 store openings). Titan has also guided unchanged expansion plans (100ksf inFY14), notwithstanding the near-term demand and regulatory challenges.

Regulatory easing in Jewelry; breather in a challenging demand backdropTwo major regulatory changes have occured as far as the Jewelry sector is concerned.The RBI has allowed five additional private banks to import gold under the 80:20scheme. Titan has received approval for higher hedging limits on domestic exchangesand also permission for hedging on overseas exchanges. Approval for internationalhedging is a key positive for Titan, as it reduces net borrowing cost (forward premiumon currency and gold). Besides, it enables Titan to adopt an optimal hedging mechanismand to protect its balance sheet against MTM fluctuations. Approval for more banks toimport gold would somewhat ease the supply situation and could also help reducethe price premium prevailing in the domestic gold market.

Gautam Duggad ([email protected]) / Manish Poddar ([email protected])

RetailCompanies Covered

Future Retail

Jubilant Foodworks

Shoppers Stop

Titan Company

C–160April 2014


Shoppers Stop: LTL sales growth has moderated Gold prices down 3.1% YoY and 1.9% QoQ

Sector is hostage to urban consumer sentimentSlowdown in discretionary consumption and persistent macroeconomic challengeskeeps us cautious on the Retail sector. While revival in urban consumer sentimentand consequent pick-up in retail spending is difficult to forecast, we prefer Titan, aswe believe it is a long-term play on aspiration-led lifestyle consumption, which is inturn driven by favorable demographics. Despite good long-term prospects, we maintainSell on Jubilant Foodworks, given rich valuations.

Relative performance-3m (%) Relative performance-1Yr (%)

Jubilant Foodworks' SSS growth has decelerated sharply (%)


-8

0

8

16

24

Mar

-10

Jun-

10

Sep-

10

Dec

-10

Mar

-11

Jun-

11

Sep-

11

Dec

-11

Mar

-12

Jun-

12

Sep-

12

Dec

-12

Mar

-13

Jun-

13

Sep-

13

Dec

-13

LTL Sa les Gr (%)

18.6%

28.4%

35.9%

28.2%32.3%

20.0%

12.2%8.0%

-2.1%-0.1%

-4.1%-6.3%1Q

FY12

2QFY

12

3QFY

12

4QFY

12

1QFY

13

2QFY

13

3QFY

13

4QFY

13

1QFY

14

2QFY

14

3QFY

14

4QFY

14-2.6

6.66.37.7

16.119.8

22.326.2

30.126.7

36.7

1QFY

12

2QFY

12

3QFY

12

4QFY

12

1QFY

13

2QFY

13

3QFY

13

4QFY

13

1QFY

14

2QFY

14

3QFY

14

92

96

100

104

108

Dec

-13

Jan-

14

Feb-

14

Mar

-14

Sensex IndexMOSL Reta i l Index

70

85

100

115

130

Mar

-13

Jun-

13

Sep-

13

Dec

-13

Mar

-14

Sensex IndexMOSL Reta i l Index

C–161April 2014


364 378 411 439489 515

602 632679

87 90 93 96 100 105 110 112 118 123 128 132 142

392465

552 576

3QFY

11

4QFY

11

1QFY

12

2QFY

12

3QFY

12

4QFY

12

1QFY

13

2QFY

13

3QFY

13

4QFY

13

1QFY

14

2QFY

14

3QFY

14

Stores Ci ties


31.3.14 FY14E FY15E FY16E FY14E FY15E FY16E FY14E FY15E FY16E FY14E FY15E FY16ERetailJubi. Foodworks 1,067 Se l l 20.7 26.6 35.5 51.5 40.1 30.1 25.1 19.0 14.0 23.7 23.4 23.8Shopper's Stop 385 Neutral 5.8 9.1 11.8 65.8 42.3 32.7 20.0 15.9 13.1 6.7 9.6 11.3Titan Company 262 Neutral 8.2 9.3 11.2 32.2 28.2 23.4 23.1 20.6 16.7 29.4 27.2 26.6Sector Aggregate 36.9 31.1 25.3 23.2 19.7 15.7 24.2 23.6 23.8

Area addition plans on trackShoppers Stop: One store added in 4QFY14 Jubilant Foodworks: Expect 42 stores to have been added in

4QFY14


38 41 4349 51 52 54 55 55

60 6165 67

910 10

12 12 12 12 12 1213

1415 15

Mar

-11

Jun-

11

Sep-

11

Dec

-11

Mar

-12

Jun-

12

Sep-

12

Dec

-12

Mar

-13

Jun-

13

Sep-

13

Dec

-13

Mar

-14

Shoppers Stop Hyperci ty

C–162April 2014


Quarterly Performance: Core Retailing (INR Million)Y/E December FY12 CY13 CY14

1Q 2Q 3Q 4Q 5Q 6Q 1Q 2Q 3Q 4Q 1QE

Net Sales 29,106 28,933 30,264 29,627 30,600 31,708 23,360 22,561 23,170 23,233 24,627

YoY Change (%) 12.8 4.9 7.6 3.6 5.1 9.6 -22.8 -23.9 -24.3 -26.7 5.4

Total Exp 26,583 26,321 27,488 26,864 27,953 28,929 21,580 20,659 21,120 20,964 22,337

EBITDA 2,523 2,612 2,776 2,763 2,647 2,779 1,780 1,901 2,050 2,269 2,290

Growth (%) 18.6 9.6 12.0 6.9 4.9 6.4 -35.9 -31.2 -22.6 -18.3 -24.0

Margins (%) 8.7 9.0 9.2 9.3 8.7 8.8 7.6 8.4 8.8 9.8 9.3

Depreciation 828 877 887 929 975 1,215 730 788 800 843 868

Interest 1,305 1,582 1,725 1,804 1,761 1,567 1,160 1,280 1,440 1,493 1,537

Other Income 79 40 16 28 132 69 30 60 60 80 80

PBT 468 193 180 58 44 66 -80 -107 -130 14 -35

Tax 138 58 60 19 14 22 -26 -40 -50 104 22

Rate (%) 29.5 30.1 33.3 33.0 33.0 33.0 33.0 37.5 38.5 762.0 -61.6

Adjusted PAT 330 135 120 39 29 44 -54 -67 -80 -91 -57

E: MOSL Estimates

Future RetailCMP: INR82 Under Review� 4QFY14 results will be comparable on a YoY basis.

� We expect sales of INR24.6b, up 5.4% YoY.

� Consumer sentiment has remained weak during the quarter. However,retailers have used events (Republic Day) and special days / weeks todrive offtake.

� We expect SSS growth of 3% in the Value segment. The Home divisionshould benefit from low base (decline of 4% in March 2013).

� We estimate EBITDA at INR2.3b (9.3% margin; up 170bp YoY, aided bylow base).

� Interest cost would increase 2% QoQ to INR1.5b.

� We expect PBT loss of INR35m.

� Our stock recommendation is Under Review.

Key issues to watch out� SSS performance - commentary on consumer demand.� Progress on debt reduction and inventory optimization.

Financials & Valuation (INR b)Y/E December 2011 2012* 2013 2014ESa les 110.1 180.2 124.2 158.0

EBITDA 9.6 16.1 10.9 14.5

Adj. PAT 1.9 0.7 -0.04 2.1

Adj. EPS (INR) 8.7 3.1 -0.2 9.3

EPS Gr. (%) 7.1 -64.3 -105.7 5,323.4

BV/Sh.(INR) 1.6 1.9 2.0 2.1

RoE (%) 0.0 0.0 0.0 0.0

RoCE (%) 12.1 12.0 13.2 9.5

Payout (%) 1.6 1.9 2.0 2.1

Valuations

P/E (x) 9.4 17.1 12.2 8.8

P/BV (x) 0.6 0.6 0.6 0.5

EV/EBITDA (x) 5.6 5.7 5.0 4.7

Div. Yield (%) 0.0 0.0 0.0 0.0

* 18 months, 2013 is calendar year

Bloomberg FRL IN




1,6,12 Rel Perf. (%) -4 / 0 / -64

C–163April 2014



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

No of Stores 489 515 552 576 602 632 679 721 576 721

LTL Growth (%) 22.3 19.8 16.1 7.7 6.3 6.6 -2.6 0.0 16.2 3.8

Net Sales 3,145 3,421 3,851 3,658 3,965 4,367 4,566 4,606 14,076 17,504

YoY Change (%) 45.0 42.3 39.0 29.3 26.1 27.6 18.5 25.9 38.4 24.4

Gross Profit 2,309 2,530 2,863 2,703 2,937 3,195 3,349 3,366 10,405 12,846

Gross Margin (%) 73.4 74.0 74.3 73.9 74.1 73.2 73.3 73.1 73.9 73.4

Other Expenses 1,736 1,943 2,192 2,091 2,270 2,542 2,675 2,629 7,961 10,116

EBITDA 573 587 672 612 667 653 674 737 2,444 2,730

EBITDA Growth % 36.3 34.5 30.3 20.7 16.4 11.3 0.3 20.3 30.0 11.7

Margins (%) 18.2 17.2 17.4 16.7 16.8 15.0 14.8 16.0 17.4 15.6

Depreciation 117 138 140 152 179 179 196 258 547 812

Interest 0 0 1 0 0 0 0 1 1 1

Other Income 19 20 20 20 22 24 24 29 78 99

PBT 475 468 551 480 510 498 502 507 1,974 2,016

Tax 152 145 174 153 170 165 166 164 623 665

Rate (%) 31.9 30.9 31.6 31.9 33.3 33.2 33.1 32.4 31.6 33.0

Adjusted PAT 323 323 377 327 340 332 336 342 1,351 1,351

YoY Change (%) 39.3 36.5 28.0 11.4 5.1 2.8 -10.9 4.7 26.0 0.0

E: MOSL Estimates

Jubilant FoodworksCMP: INR1,067 Sell� We expect 25.9% increase in sales to INR4.6b. For the quarter LTL sales

growth is expected to be flat.

� Discretionary spending remains weak due to poor consumer sentimentcoupled with higher inflation.

� We expect 70bp EBITDA margin contraction to 16% due to lowoperating leverage and costs related to Dunkin operations. However,we note that JUBI has withdrawn its 1-for-1 scheme (under which itwas offering one pizza free with every pizza purchased) in mid-November.

� We estimate 4.7% PAT growth for 4QFY14 to INR342m.

� We expect JUBI to add 42 stores during 4QFY14.

� The stock trades at 39.7x FY15E EPS of INR31.1. Sell.

Key issues to watch out

� Comments on (1) demand outlook for Quick Service Restaurants(QSRs) and Pizzas, and (2) competition in Home Delivery Pizza format.

� Performance of Dunkin Donuts and margin guidance.� Changes in expansion and capex strategy, if any.


EBITDA 2.4 2.7 3.6 4.7

Adj. PAT 1.3 1.4 1.7 2.3

Adj. EPS (INR) 20.1 20.7 26.6 35.5

EPS Gr. (%) 21.7 3.0 28.4 33.5

BV/Sh.(INR) 65.8 87.2 113.7 149.2

RoE (%) 30.5 23.7 23.4 23.8

RoCE (%) 42.1 33.1 32.8 33.8

Payout (%) 0.0 0.0 0.0 0.0

Valuations

P/E (x) 52.5 50.9 39.7 29.7

P/BV (x) 16.0 12.1 9.3 7.1

EV/EBITDA (x) 28.0 24.7 18.7 13.8

Div. Yield (%) 0.0 0.0 0.0 0.0

Bloomberg JUBI IN



52-Week Range (INR) 1,390 / 928

1,6,12 Rel Perf. (%) -3 / -23 / -33

C–164April 2014



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

LTL Sales Gr % 1.0 2.0 12.5 10.0 12.0 15.5 5.5 7.0 7.4 11.0

Deptt Stores 52 55 55 55 60 61 65 67 55 65

Net Sales 4,467 5,796 6,041 6,251 5,371 7,252 7,118 7,311 22,555 27,051

YoY Change (%) 13.7 16.5 20.4 15.6 20.2 25.1 17.8 17.0 16.7 19.9

Total Exp 4,330 5,505 5,588 5,868 5,137 6,854 6,592 6,852 21,291 25,434

EBITDA 138 291 453 383 234 398 526 460 1,264 1,617

Growth (%) -47.7 -24.9 9.6 5.4 69.4 36.7 16.2 20.1 -11.4 27.9

Margins (%) 3.1 5.0 7.5 6.1 4.3 5.5 7.4 6.3 5.6 6.0

Depreciation 120 142 120 125 133 167 140 142 507 582

Interest 77 77 86 79 98 98 115 127 319 438

Other Income 74 31 32 35 32 33 32 57 172 154

PBT 15 102 279 214 34 166 303 249 610 752

Tax 3 38 108 62 11 66 130 65 211 272

Rate (%) 17.9 37.1 38.7 29.1 32.2 40.1 42.8 25.9 34.6 36.1

Adjusted PAT 12 64 171 152 23 99 173 184 399 480

YoY Change (%) -89.3 -67.3 -11.4 10.4 86.1 55.2 1.4 21.4 -37.9 20.3

E: MOSL Estimates

Shoppers StopCMP: INR385 Neutral� We expect SHOP's sales to grow 17% to INR7.31b. Same store sales

(SSS) growth would be 7%, bolstered by good performance in Apparels,Leather and Footwear.

� EBITDA margin is likely to expand 20bp to 6.3%.

� HyperCITY should continue to report losses.

� The company has added two Shopper's Stop department stores during4QFY14.

� The stock trades at 41.7x FY15E standalone EPS. Maintain Neutral.

Key issues to watch out� Comments on SSS performance.� Margin outlook.� Changes in expansion strategy, if any.� Guidance on HyperCITY breakeven.


EBITDA 1.3 1.6 2.0 2.4

Adj. PAT 0.4 0.5 0.7 1.0

Adj. EPS (INR) 4.9 5.8 9.1 11.8

EPS Gr. (%) -37.9 20.3 55.6 29.3

BV/Sh.(INR) 82.5 87.3 94.8 103.8

RoE (%) 5.9 6.7 9.6 11.3

RoCE (%) 7.3 9.4 12.5 14.3

Payout (%) 13.6 15.0 15.0 20.0

Valuations

P/E (x) 78.0 64.9 41.7 32.2

P/BV (x) 4.6 4.3 4.0 3.7

EV/EBITDA (x) 25.2 19.8 15.7 12.9

Div. Yield (%) 0.2 0.2 0.4 0.6

Bloomberg SHOP IN




1,6,12 Rel Perf. (%) -5 / -9 / -24

C–165April 2014



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Net Sales 22,057 22,760 29,829 25,931 31,077 23,290 26,505 27,375 100,577 108,246

YoY Change (%) 9.2 8.6 23.2 14.8 40.9 2.3 -11.1 5.6 15.0 7.6

Total Exp 19,937 20,266 27,351 23,467 28,627 20,672 24,136 24,850 91,020 98,285

EBITDA 2,120 2,494 2,478 2,464 2,449 2,617 2,369 2,525 9,556 9,961

EBITDA Growth (%) 10.3 19.4 20.1 34.1 15.6 4.9 -4 2.5 29 4

Margins (%) 9.6 11.0 8.3 9.5 7.9 11.2 8.9 9.2 9.5 9.2

Depreciation 123 130 142 150 146 149 157 156 545 608

Interest 126 121 117 142 170 200 274 305 506 949

Other Income 252 238 571 496 382 304 514 453 1,558 1,653

PBT 2,123 2,481 2,791 2,669 2,515 2,573 2,452 2,517 10,062 10,057

Tax 561 679 752 819 691 706 673 746 2,811 2,816

Rate (%) 26.4 27.4 26.9 30.7 27.5 27.4 27.5 29.6 27.9 28.0

Adjusted PAT 1,561 1,801 2,039 1,850 1,825 1,867 1,779 1,771 7,252 7,241

YoY Change (%) 8.7 21.3 24.4 28.2 16.9 3.6 -12.8 -4.3 19.9 -0.1

E: MOSL Estimates

Titan CompanyCMP: INR262 Neutral� We expect TTAN to post sales growth of 5.6% to INR27.3b.

� Persistent weak consumer sentiment in discretionary categoriescoupled with regulatory challenges would impact performance of theJewelry business. Performance of the Watch business is also likely toremain weak.

� TTAN has seen a good season for Studded Jewelry due to promotions.However, demand for Plain Gold Jewelry has remained weak, thoughnot worse than 3QFY14. Additionally, TTAN has resumed coin sales.

� We estimate margin contraction of 30bp due to low operating leverage,promotions in Studded Jewelry and margin shrinkage in the Watchsegment.

� The stock trades at 28.2x FY15E EPS of INR9.3. Neutral.

Key issues to watch out� More clarity on international hedging and way forward for TTAN.

� Commentary on consumer demand outlook for core categories aswell as Fragrance and Helmets.

� Expansion plans.


EBITDA 10.1 10.0 11.7 14.1

Adj. PAT 7.3 7.2 8.3 10.0

Adj. EPS (INR) 8.2 8.2 9.3 11.2

EPS Gr. (%) 20.1 -0.3 14.1 20.5

BV/Sh.(INR) 22.1 27.7 34.2 42.1

RoE (%) 42.5 29.4 27.2 26.6

RoCE (%) 59.4 37.8 35.6 35.4

Payout (%) 30.0 30.0 30.0 30.0

Valuations

P/E (x) 32.0 32.1 28.2 23.4

P/BV (x) 11.8 9.5 7.7 6.2

EV/EBITDA (x) 21.9 23.1 20.6 16.7

Div. Yield (%) 0.9 0.9 1.1 1.3

Bloomberg TTAN IN


M. Cap. (INR b)/(USD b) 233 / 4


1,6,12 Rel Perf. (%) 2 / -2 / -17

C–166April 2014

March 2014 Results Preview | Sector: Technology


CMP Rating Sales EBITDA Net Profit


31.3.14 % YoY % QoQ % YoY % QoQ % YoY % QoQHCL Technologies 1,391 Buy 84,195 31.1 2.9 21,520 52.0 1.3 14,403 41.4 -3.7Hexaware Tech. 151 Neutral 6,265 23.4 1.1 1,378 40.8 -1.2 1,015 28.0 -1.6Infosys 3,279 Buy 130,162 24.5 -0.1 35,961 29.9 -0.7 26,211 9.5 -8.8KPIT Tech. 161 Buy 6,966 22.2 2.8 1,042 3.1 0.0 497 -2.9 -18.2Mindtree 1,319 Neutral 8,181 33.6 3.5 1,617 39.1 4.9 928 17.6 4.9MphasiS 404 Neutral 10,197 NA NA 1,753 NA NA 1,363 NA NAPersistent Systems 1,048 Buy 4,532 35.7 4.7 1,236 48.8 3.3 706 36.0 9.9TCS 2,128 Neutral 217,475 32.4 2.1 67,712 45.3 1.3 53,548 48.9 0.8Tech Mahindra 1,795 Buy 49,996 32.7 2.1 10,684 38.5 -6.0 5,926 26.1 -7.7Wipro 543 Buy 116,523 21.3 3.4 24,616 44.2 7.9 20,904 32.7 3.8Sector Aggregate 634,492 26.6 1.1 167,519 40.0 0.7 125,501 32.2 -2.3

Ashish Chopra ([email protected])/Siddharth Vora ([email protected])

Big guns' commentaries compound weak expectations: INFO cited concerns in theRetail vertical, compounded with ramp-downs in specific clients and delays in ramp-ups in other verticals too. TCS guided softly for 4QFY14, marred by India headwindsand Accenture triggered concerns around pricing. Recent INR appreciation is addingto concerns from the increased competitive intensity, in what remains a strong demandenvironment.

Expect polarized growth during the quarter; TECHM, HCLT to lead: We expect 0.3-3.1%USD revenue growth QoQ across the top five companies in 4QFY14E, led by HCLT (3.1%QoQ) and TECHM (2.3% QoQ, including the discontinuation of amortized revenue),while INFO may lag (estimate of 0.3% QoQ). Across tier II, we expect growth to be ledby PSYS (4.8% QoQ), on the back of IP-led revenue and Platforms, while KPIT is expectedto be at lower end of the guided band (2.9% QoQ). With average currency ratesrelatively stable, impact on revenues from cross currency movements should beinsignificant.

Margin headwinds at TECHM, stable outlook across peers: Given little movement inaverage currency rates during the quarter, we expect stable margins across the board.Partial wage hikes will have a slight impact on HCLT. TECHM is the only company withmargin headwinds during the quarter, emanating from wage hikes (~200bp impact)and discontinuation of amortized revenue (~50-60bp impact). We expect it to recoversome of that impact through efficiencies and report EBITDA margin at 21.4% (declineof 180bp QoQ).

Watch out for INFO guidance, pricing commentary by peers: Following the downgradein outlook over the near term, INFO's guidance for FY15 USD revenue growth will bekeenly watched. We expect INFO to start the year by guiding for 7-10% YoY growth inUSD revenues in FY15. Accenture's commentary stoked concerns on the pricingenvironment in traditional IT services. Watch out for top tier commentary on pricingpressure in vendor consolidation, deal renewals and Continental Europe. WPRO'sguidance, for what is a seasonally weak quarter for the company (1Q), will be a crucialindicator of the extent of turnaround in its revenue growth.

TechnologyCompanies Covered

Cognizant Technology

HCL Technologies

Hexaware Technologies

Infosys

KPIT Cummins

MindTree

MphasiS

Persistent Systems

TCS

Tech Mahindra

Wipro

C–167April 2014


Incremental Revenues QoQ - USD m

0

40

80

120

160

TCS Cognizant Infosys Wipro HCL Tech TechMahindra

4.8

1.32.9

3.8

-4

-2

0

2

4

6

1QFY

13

2QFY

13

3QFY

13

4QFY

13

1QFY

14

2QFY

14

3QFY

14

4QFY

14E

Pers istent System Hexaware KPIT Cummins Mindtree

2.4

0.3

2.73.13.0

2.3

-2

2

5

8

1QFY

13

2QFY

13

3QFY

13

4QFY

13

1QFY

14

2QFY

14

3QFY

14

4QFY

14E

TCS Infosys Wipro HCL Tech Cognizant Tech Mahindra

Only HCLT and Cognizant expected to have incremental revenues greater than last quarter

HCLT and TECHM will lead growth among tier I IT companies

Among tier II IT, we expect PSYS to grow fastest at 4.8% QoQ


Valuations and view: Given the healthy demand environment driven by improving USmacro and gradual opening up of Continental Europe, expectation of better volumeswill likely restrain a disruption in pricing. With the industry expected to grow faster inFY15 compared to FY14, currency poses a key risk to profits, going forward. We believetier I companies are better placed to curb the sensitivity of currency to earnings. Weprefer TECHM, INFO and HCLT. Among tier II, we prefer PSYS and KPIT.

Relative performance-3m (%)

Relative performance-1Yr (%)

9498

102106110

Dec

-13

Jan-

14

Feb-

14

Mar

-14

Sensex Index

MOSL Technology Index

80

100

120

140

160

Mar

-13

Jun-

13

Sep-

13

Dec

-13

Mar

-14

Sensex IndexMOSL Technology Index

C–168April 2014


EBITDA Margins across the top tier

31.1

27.625.623.6

20.321.4

16

20

24

28

32

4QFY

12

1QFY

13

2QFY

13

3QFY

13

4QFY

13

1QFY

14

2QFY

14

3QFY

14

4QFY

14E

TCS Infosys HCL Tech Wipro Cognizant Tech Mahindra

Aggregate top tier USD revenue growth estimated to be 2.1% QoQRevenues (USD m) Revenues (INR b)

Company 4QFY14E 4QFY13 YoY (%) 3QFY14 QoQ (%) 4QFY14E 4QFY13 YoY (%) 3QFY14 QoQ (%)

TCS 3,519 3,040 15.8 3,438 2.4 217 164 32.4 213 2.1

Infosys 2,106 1,938 8.7 2,100 0.3 130 105 24.5 130 -0.1

Wipro 1,723 1,585 8.7 1,678 2.7 117 96 21.3 113 3.4

HCLT 1,362 1,191 14.4 1,321 3.1 84 64 31.1 82 2.9

Tech Mahindra 809 698 15.9 791 2.3 31.8 24.0 32.5 30.0 5.8

Aggregate 9,520 8,452 12.6 9,329 2.1 580 453 28.0 568 2.2

EBITDA Margin (%) PAT (INR b)


TCS 31.1 28.4 280 31.4 -30 54 36 48.9 53 0.8

Infosys 27.6 26.5 110 27.8 -20 26 24 9.5 29 -8.8

Wipro 23.6 20.3 330 23.0 60 20 16 27.1 20 -0.6

HCLT 25.6 22.0 350 26.0 -40 14 10 41.4 15 -3.7

Tech Mahindra 21.4 20.5 90 23.2 -183 5.9 6 -2.0 6.4 -8.0

Aggregate 27.5 24.9 258 27.7 (20) 120 92 30.7 123 -2.7

Across tier II, growth will be lower at 2.6% QoQ and margins are expected to decline 40bp on aggregate basisRevenues (USD m) Revenues (INR b)


Persistent Systems 73 62 18.1 70 4.8 4.5 3.3 35.7 4.3 4.7

Hexaware 101 94 7.7 100 1.3 6.3 5.1 23.4 6.2 1.1

KPIT Cummins 113 106 6.9 110 2.9 7.0 5.7 22.2 6.8 2.8

Mindtree 132 113 16.8 127 3.8 8.2 6.1 33.6 7.9 3.5

Aggregate 419 375 11.9 408 2.9 26 20 28.2 25 2.7

EBITDA Margin (%) PAT (INR b)


Persistent Systems 27.3 24.9 240 27.7 -40 0.7 0.5 36 0.6 9.9

Hexaware 22.0 19.3 270 22.5 -50 1.0 0.8 28 1.0 -1.6

KPIT Cummins 15.0 17.7 -280 15.4 -40 0.6 0.5 14 0.6 -4.0

Mindtree 19.8 19.0 80 19.5 30 0.9 0.8 18 0.9 4.9

Aggregate 20.3 19.7 60 20.5 -20 3.2 2.6 24 3.2 2.1


TECHM to face headwinds from wage hikes and absence of amortized revenue

*EBITDA margin in USD for Cognizant Source: Company, MOSL

C–169April 2014


4QFY14 currency highlights (INR) Rates (INR) Change (QoQ, %)

USD EUR GBP AUD USD EUR GBP AUD

Average 61.8 84.6 102.2 55.4 -0.4 0.2 1.8 -3.8

Closing 59.9 82.3 99.7 55.3 -3.1 -3.2 -2.3 0.2

Source: Company, MOSL4QFY14 currency highlights (USD)

Rates (USD) Change (QoQ, %)

EUR GBP AUD EUR GBP AUD

Average 1.37 1.65 0.90 0.7 2.2 -3.3

Closing 1.38 1.67 0.93 0.4 0.6 3.9


Cross currencies: Assumed rates v/s actualsGuided at EUR GBP AUD INR/USD

I Infosys 1.37 1.66 0.89 61.81

Wipro 1.37 1.63 0.92 62.00

Actual (Average) 1.37 1.65 0.90 61.75

Change (%) EUR GBP AUD INR/USD Impact on USD revenue

Infosys -0.3 0.0 0.6 -0.1 0.02

Wipro 0.0 1.5 -2.5 -0.4 0.13

EPS estimates (INR): MOSL v/s Consensus 4QFY14 FY14 FY15 Upside/Downside to Consensus (%)

MOSL Consensus MOSL Consensus MOSL Consensus 4QFY14 FY14 FY15

Infosys 45.9 50.3 185.8 185.6 211.6 216.5 -8.8 0.1 -2.3

TCS 27.3 26.5 97.9 96.7 111.3 113.8 3.2 1.2 -2.2

Wipro 8.1 8.6 30.8 31.3 35.2 36.3 -5.4 -1.4 -3.1

HCL Tech 20.4 21.7 82.8 85.5 96.2 98.0 -6.2 -3.2 -1.8

Tech Mahindra 27.7 28.4 120.5 126.3 142.3 142.8 -2.6 -4.6 -0.3

Cognizant 0.55 0.56 2.4 2.4 3.0 2.8 -1.9 2.1 8.0

Persistent Systems 17.6 17.7 59.9 63.6 73.7 79.4 -0.3 -5.9 -7.2

Mindtree 23.5 22.9 106.3 108.5 124.7 117.0 2.8 -2.0 6.6

KPIT Cummins 2.9 3.3 12.4 13.1 15.2 16.2 -11.0 -5.6 -6.4

Hexaware 3.4 3.6 13.5 13.9 15.1 15.2 -7.0 -3.1 -0.8


Comparative valuation

CMP (INR) Rating EPS (INR) P/E (x) EV/EBITDA (x) RoE (%)

31.3.14 FY14E FY15E FY16E FY14E FY15E FY16E FY14E FY15E FY16E FY14E FY15E FY16ETechnologyHCL Technologies 1,391 Buy 82.8 96.2 109.0 16.8 14.4 12.8 10.6 9.5 8.1 39.7 35.3 31.4Hexaware Tech. 151 Neutral 12.6 13.5 15.1 11.9 11.2 10.0 7.6 7.2 6.5 31.6 30.8 29.0Infosys 3,279 Buy 185.8 211.6 247.5 17.6 15.5 13.2 11.7 10.1 8.2 23.9 25.5 25.2KPIT Tech. 161 Buy 12.0 15.2 19.4 13.4 10.6 8.3 7.3 5.6 4.0 20.6 21.5 22.1Mindtree 1,319 Neutral 106.3 124.7 144.0 12.4 10.6 9.2 8.9 7.2 5.7 30.4 28.6 26.2MphasiS 404 Neutral 50.7 39.8 45.3 11.3 10.2 8.9 6.2 7.8 7.0 15.7 15.8 16.9Persistent Systems 1,048 Buy 63.2 77.1 99.2 16.6 13.6 10.6 8.5 7.1 5.4 22.8 23.3 24.7TCS 2,128 Neutral 97.9 111.3 129.8 21.7 19.1 16.4 16.0 13.7 11.6 41.2 37.1 34.5Tech Mahindra 1,795 Buy 120.1 142.3 167.6 14.9 12.6 10.7 9.0 7.8 6.3 38.1 31.8 28.7Wipro 543 Buy 31.2 35.2 41.0 17.4 15.4 13.2 12.7 10.9 9.2 24.7 23.5 23.1Sector Aggregate 10 18.8 16.5 14.2 13.0 11.3 9.5 28.2 26.3 25.2

C–170April 2014


Quarterly Performance (US GAAP) (USD Million)Y/E December CY13 CY14E CY13 CY14E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q

Revenues 2,021 2,161 2,306 2,355 2,426 2,588 2,734 2,806 8,843 10,554

Q-o-Q Change (%) 3.7 7.0 6.7 2.2 3.0 6.7 5.7 2.6 20.4 19.3

Direct Expenses 1,200 1,272 1,382 1,411 1,462 1,537 1,633 1,681 5,265 6,313

SG&A 413 421 443 451 473 505 533 547 1,728 2,058

SG&A as % of Sales 20.4 19.5 19.2 19.1 19.5 19.5 19.5 19.5 19.5 19.5

EBITDA 408 469 480 494 492 546 567 577 1,850 2,182

Margins (%) 20.2 21.7 20.8 21.0 20.3 21.1 20.8 20.6 20.9 20.7

Other Income 11 -6 2 3 11 12 13 18 10 54

Depreciation 42 42 43 46 46 49 52 53 172 201

PBT bef. Extra-ordinary 377 420 439 451 457 509 529 541 1,688 2,036

Provision for Tax 93 120 120 127 121 135 140 143 459 539

Rate (%) 24.6 28.5 27.2 28.1 26.5 26.5 26.5 26.5 27.2 26.5

PAT before EO 284 300 320 324 336 374 388 398 1,229 1,496

Q-o-Q Change (%) 1.9 5.7 6.4 1.5 3.5 11.5 3.8 2.4 16.9 21.8

Headcount addition 6,000 1,600 2,100 5,000 7,468 7,997 8,524 5,330 14,700 29,100

Closing Headcount 162,700 164,300 166,400 171,400 178,800 186,700 195,100 200,500 171,400 200,500

Utilization (%) 67 70 75 74 73 75 76 74 72 74

E: MOSL Estimates

CognizantCMP: USD50 Not Rated� For 1QCY14, CTSH guided for at least USD2,420m in revenue, which

implies QoQ growth of 2.7%. We expect the company to marginallybeat 1QCY14 guidance and post revenue at USD2,426m, 3% QoQ growth.

� For CY14, it guided for full year revenue of 'at least' USD10.3b, implyingYoY growth of 'at least' 16.5%. Excluding the USD30m anticipatedincremental revenue from Equinox, organic revenue growth guidanceis 'at least' 16.1%. This implies a CQGR of 3.6% over the four quartersduring CY14.

� CTSH had upgraded its full year revenue guidance to at least 20.3% toUSD8,840m from at least 19% in CY13. We expect a similar trend for itthrough the course of the year and post revenue of USD10.5b in CY14.

� We expect EBITDA margin of 20.3% during the quarter, -70bp QoQ. OurSGA estimate is 19.5%, +40bp QoQ, due to the bonus given out duringthe quarter.

� We expect net income of USD336m, +3.5% QoQ, and net margin of13.8%, flat QoQ.

� The stock trades at 20.3x CY14E and 16.4x CY15E earnings. Not Rated.

Key issues to watch out� Commentary on pricing pressure post Accenture's results.� Expected gradual guidance upgrade with improved demand

environment.

Financials & Valuation (USD b)Y/E December 2012 2013 2014E 2015ESa les 7.3 8.8 10.6 12.4

EBITDA 1.5 1.9 2.2 2.7

PAT 1.1 1.2 1.5 1.8

EPS (INR) 1.7 2.0 2.4 3.0

EPS Gr. (%) 21.0 16.2 21.8 23.4

BV/Sh. (INR) 8.0 10.0 12.5 15.5

RoE (%) 23.9 22.4 21.7 21.6

RoCE (%) 28.9 29.0 27.5 27.2

Valuations

P/E (x) 28.7 24.7 20.3 16.4

P/BV (x) 6.2 4.9 4.0 3.2

EV/EBITDA (x) 18.3 14.5 11.7 9.0

Bloomberg CTSH US


M.Cap. (USD b) 30

52-Week Range (USD) 54 / 30

C–171April 2014


Quarterly Performance (US GAAP) (INR Million)Y/E June FY13 FY14 FY13 FY14E


Revenues 60,910 62,738 64,246 69,442 79,610 81,840 84,195 84,926 257,336 330,572

Q-o-Q Change (%) 2.9 3.0 2.4 8.1 14.6 2.8 2.9 0.9 22.4 28.5

EBITDA 13,288 13,945 14,156 16,147 20,930 21,250 21,520 20,860 57,536 84,560

Margins (%) 21.8 22.2 22.0 23.3 26.3 26.0 25.6 24.6 22.4 25.6

Other Income -253 154 887 782 -1,200 -470 -1,146 506 1,570 -2,310

PAT 8,642 9,444 10,189 11,975 14,160 14,950 14,403 15,164 40,250 58,678

Q-o-Q Change (%) 2.8 9.3 7.9 17.5 18.2 5.6 -3.7 5.3

Y-o-Y Change (%) 80.0 70.9 75.1 42.4 63.9 58.3 41.4 26.6 63.9 45.8

Diluted EPS (INR) 12.3 13.5 14.4 17.0 20.0 21.2 20.4 21.4 57.0 82.8

USD Revenues 1,114 1,154 1,191 1,228 1,270 1,321 1,362 1,415 4,687 5,369

Q-o-Q Change (%) 3.2 3.6 3.2 3.1 3.5 4.0 3.1 3.9 12.9 14.6

Gross Margin (%) 34.9 35.5 35.6 36.5 39.0 38.4 38.1 37.3 35.6 38.2

SGA (%) 13.0 13.2 13.6 13.3 12.7 12.5 12.6 12.8 13.3 12.6

Tax rate (%) 23.8 23.7 24.0 21.5 20.2 21.0 22.0 22.0 23.2 21.3

Net Employee additions 1,016 -141 -791 1,102 1,691 1,136 2,750 2,800 1,186 8,377

E: MOSL Estimates; After adjusting for ESOP charges

HCL TechnologiesCMP: INR1,391 Buy� We expect USD revenue growth of 3.1% QoQ at HCL Technologies to

USD1,362m. Growth in IMS is expected to remain strong, with ourestimate of 6.3% QoQ to USD473m. We expect software servicesrevenue of USD826m, + 1.4% QoQ.

� Our volume growth estimate in software services stands at 1.6% QoQ.In INR terms, we expect overall revenue growth of 2.9% QoQ toINR84.2b.

� EBITDA margin is estimated to decline 40bp QoQ to 25.6% as wagehikes were partially deferred last quarter (expected to have totalimpact of 60bp in 2HFY14).

� PAT estimate for the quarter is INR14,403m, -3.7% QoQ. We estimateforex losses of INR2.58b, which consists of INR1.58b of hedging lossand INR1b of translation loss due to appreciation of INR towards theend of the quarter.

� TPI suggested a positive outlook for broader market in 1HFY14, with astronger industry pipeline and global market increase of ~5%. Weexpect HCLT to continue its healthy deal signing momentum.


Key issues to watch out� TCV of deals signed during the quarter.� Growth in Software Services segment.� Commentary on margins in appreciating INR scenario.


EBITDA 57.5 84.6 89.5 100.0

PAT 40.3 58.7 68.7 78.3

EPS (INR) 57.0 82.8 96.2 109.0

EPS Gr. (%) 62.6 45.2 16.3 13.2

BV/Sh. (INR) 205.9 276.6 355.0 438.1

RoE (%) 32.2 39.7 35.3 30.5

RoCE (%) 29.1 33.7 30.5 27.8

Payout (%) 21.1 15.7 17.2 22.2

Valuations

P/E (x) 24.4 16.8 14.4 12.8

P/BV (x) 6.8 5.0 3.9 3.2

EV/EBITDA (x) 16.0 10.5 9.4 9.8

Div yld (%) 0.9 0.9 1.2 1.7

Bloomberg HCLT IN


M. Cap. (INR b)/(USD b) 982 / 16

52-Week Range (INR) 1,589 / 674

1,6,12 Rel Perf. (%) -18 / 12 / 56

C–172April 2014


Quarterly Performance (Indian GAAP) (USD Million)Y/E December CY13 CY14E CY13 CY14E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q

Revenues 5,077 5,366 6,211 6,200 6,265 6,329 6,535 6,741 22,854 25,870

Q-o-Q Change (%) 1.1 5.7 15.7 -0.2 1.1 1.0 3.3 3.1 17.3 13.2

Direct Cost 3,162 3,252 3,683 3,729 3,810 3,925 4,070 4,193 13,826 15,998

Other Operating Exps 936 841 1,050 1,077 1,078 1,082 1,111 1,146 3,904 4,417

Operating Profit 979 1,273 1,478 1,394 1,378 1,321 1,354 1,402 5,124 5,455

Margins (%) 19.3 23.7 23.8 22.5 22.0 20.9 20.7 20.8 22.4 21.1

Other Income 118 62 -120 -2 10 -25 47 53 58 84

Depreciation 93 94 98 101 103 104 100 102 386 409

PBT bef. Extra-ordinary 1,004 1,241 1,260 1,291 1,285 1,192 1,301 1,353 4,796 5,130

Provision for Tax 211 262 272 259 270 250 273 284 1,004 1,077

Rate (%) 21.0 21.1 21.6 20.1 21.0 21.0 21.0 21.0 20.9 21.0

Net Income bef. Extra-ordinary 793 979 988 1,032 1,015 941 1,028 1,069 3,792 4,053

Q-o-Q Change (%) 19.8 23.5 0.9 4.5 -1.6 -7.3 9.2 3.9 15.7 6.9

USD Revenues 94.1 94.8 98.8 100.1 101.4 105.5 108.9 112.3 388 428.1

Q-o-Q Change (%) 1.8 0.7 4.3 1.3 1.3 4.0 3.3 3.1 6.4 10.4

Diluted EPS - After EOI (INR) 2.6 3.3 3.3 3.4 3.4 3.1 3.4 3.5 12.6 13.5

E: MOSL Estimates

Hexaware TechnologiesCMP: INR151 Neutral

� We estimate revenue growth of 1.3% QoQ to USD101.4m. In INR terms,we expect revenue growth of 1.1% QoQ to INR6.3b.

� There were delays in client ramp-ups and few project completions fortop clients, which resulted in a weak 4QCY13, and is expected to havea spillover effect in 1QCY14 as well.

� We model EBITDA margin decline of 50bp QoQ to 22% in 1QCY14 dueto weak revenue growth, causing lower utilization. Also, we expectSGA to decrease by 20bp to 17.2%, from 17.4% in 4Q.

� Our PAT estimate for the quarter is INR1,015m, a decline of 1.6% QoQ.Our implied PAT margin estimate is 16.2%, -40bp QoQ.

� Large deals progression at HEXW had taken a hit over the past fewquarters. The deal pipeline had shrunk to two to three from four to sixlarge deals in 4QCY13. Large deal wins are critical for better CY14 overCY13.

� Barings acquired the promoters' stake in HEXW in 2QFY14 for amaximum of INR135 per share. Post which, the company hasdiscontinued giving any guidance on revenue and margins. HEXWsurprised positively in the last quarter by announcing a final dividendof INR8.5 but refrained from committing to a fixed dividend policy.

� The stock trades at 11.2x CY14E and 10x CY15E earnings. MaintainNeutral.

Key issues to watch out� Upgrades to Peoplesoft 9.2 among clients.� Large deal pipeline and traction.� Clarity on dividend policy going forward.


EBITDA 4.1 5.1 5.5 5.8

PAT 3.3 3.8 4.1 4.5

EPS (INR) 10.9 12.6 13.5 15.1

EPS Gr. (%) 22.2 15.6 6.9 11.8

BV/Sh. (INR) 40.3 39.9 47.7 56.4

RoE (%) 27.0 31.6 28.3 26.7

RoCE (%) 31.2 38.8 34.7 31.2

Payout (%) 48.7 85.8 43.4 4.0

Valuations

P/E (x) 13.8 11.9 11.2 10.0

P/BV (x) 3.8 3.8 3.2 2.7

EV/EBITDA (x) 8.6 6.5 6.2 5.5

Div yld (%) 3.6 7.4 4.0 4.3

Bloomberg HEXW IN




1,6,12 Rel Perf. (%) -12 / 2 / 58

C–173April 2014


Quarterly Performance (IFRS) (INR Million)Y/E March FY13 FY14 FY13 FY14E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Revenues 96,160 98,580 104,240 104,540 112,670 129,650 130,260 130,162 403,520 502,742

Q-o-Q Change (%) 8.6 2.5 5.7 0.3 7.8 15.1 0.5 -0.1 19.6 24.6

EBITDA 29,460 28,720 29,700 27,694 29,830 33,890 36,200 35,961 115,350 134,883

Margins (%) 30.6 29.1 28.5 26.5 26.5 26.1 27.8 27.6 28.6 26.8

Other Income 4,760 7,060 5,030 6,740 5,770 5,100 7,310 3,339 23,590 21,519

PAT 22,890 23,690 23,690 23,940 23,740 26,260 28,750 26,211 93,986 103,963

Q-o-Q Change (%) -1.2 3.5 0.0 1.1 -0.8 10.6 9.5 -8.8 13.0 10.6

Diluted EPS (INR) 40.1 41.5 41.5 41.9 41.5 42.1 50.3 45.9 164.9 185.8

USD Revenues 1,752 1,797 1,911 1,938 1,991 2,066 2,100 2,106 7,398 8,263

Q-o-Q Change (%) -1.1 2.6 6.3 1.4 2.7 3.8 1.6 0.3 5.8 11.7

Operating Metrics

Gross Margin (%) 42.2 40.9 39.8 37.9 37.9 37.9 38.9 38.8 40.1 38.2

SGA (%) 11.6 11.8 11.3 11.4 11.4 11.8 11.1 11.2 11.5 11.4

Tax rate (%) 27.8 28.3 25.5 23.7 26.8 26.4 27.9 27.0 26.3 27.2

Net Employee additions 1,157 2,610 1,508 1,419 575 2,964 -1,823 372 6,694 2,088

Utiliz. - excl. trainees (%) 71.6 73.3 73.2 73.9 75.9 77.8 78.0 76.8 73.0 77.1

Q-o-Q Volume Growth (%) 2.8 3.8 2.7 1.6 3.4 2.6 1.7 0.1 11.8 10.6

Q-o-Q Realization chg (%) (3.7) (0.2) 3.6 (0.2) (0.6) 1.2 (0.0) 0.1 (3.0) 0.4

E: MOSL Estimates

InfosysCMP: INR3,279 Buy� INFO lowered the outlook for 4QFY14 and early part of FY15, suggesting

that 4Q growth could be at the lower end of the guided band. INFO'sguidance of 11.5-12% YoY growth in annual USD revenue implied -0.4% to +1.4% QoQ growth in 4QFY14.

� Post the weakened growth outlook of FY14 given by management, weexpect USD revenue to be USD2,106m, 0.3% QoQ, implying FY14revenue growth of 11.7% to USD8,263m. We expect the company tostart the year by guiding for 7-10% growth.

� We expect the EBITDA margin to decline by 20bp QoQ to 27.6%, amidgrowth challenges during the quarter. INFO has been aggressive inaddressing cost optimization and we saw the initial signs in last quarter,with margins expanding 160bp. However, there could be someinvestments in S&M, if growth slows down.

� We expect overall utilization, including trainees, to decrease by 10bpQoQ to 74%, due to skill mismatch, causing delay in few project ramp-ups.

� We expect PAT to decline 8.8% QoQ to INR26.2b, led by forex lossesestimate of INR2.35b v/s a gain of INR1.2b in the last quarter.

� INFO trades at 15.4x FY15E and 13.2x FY16E earnings. Maintain Buy.

Key issues to watch out� Revenue guidance for FY15 and the trajectory of growth through the

year.� Deal signings in BITS segment and growth in the same.


EBITDA 115.4 134.9 148.5 174.5

PAT 94.0 104.0 120.9 141.4

EPS (INR)*] 164.9 185.8 211.6 247.5

EPS Gr. (%) 13.3 12.7 13.9 17.0

BV/Sh. (INR) 696.5 823.0 976.1 1,153.4

RoE (%) 25.7 23.9 25.5 25.2

RoCE (%) 28.4 28.0 26.2 26.3

Payout (%) 25.5 24.7 23.6 24.2

Valuations

P/E (x) 19.7 17.5 15.4 13.2

P/BV (x) 4.7 4.0 3.3 2.8

EV/EBITDA (x) 14.1 11.5 10.0 8.0

Div Yield (%) 1.3 1.4 1.5 1.8

Bloomberg INFO IN


M. Cap. (INR b)/(USD b) 1883 / 31

52-Week Range (INR) 3847 / 2190

1,6,12 Rel Perf. (%) -20 / -7 / -5

C–174April 2014


KPIT TechnologiesCMP: INR161 Buy


EBITDA 3.7 4.1 4.9 6.0

PAT 2.0 2.5 3.0 3.8

EPS (INR) 10.6 12.4 15.2 19.4

EPS Gr. (%) 31.5 17.6 22.3 27.7

BV/Sh. (INR) 53.3 63.4 78.5 97.9

RoE (%) 22.7 21.3 21.4 22.0

RoCE (%) 30.2 27.2 28.4 29.6

Payout (%) 9.5 8.1 9.9 7.7

Valuations

P/E (x) 15.2 13.0 10.6 8.3

P/BV (x) 3.0 2.5 2.0 1.6

EV/EBITDA (x) 7.9 7.2 5.5 3.9

Div yld (%) 0.6 0.6 0.9 0.9

Bloomberg KPIT IN


M. Cap. (INR b)/(USD b) 32 / 0.5


1,6,12 Rel Perf. (%) -11 / 8 / 48

� We expect USD revenues to grow 2.9% QoQ to USD113m post a weak3Q where revenues declined. In INR terms, we expect revenue growthof 2.8% QoQ to INR6.96b. This would imply 8.6% USD revenue growthin FY14, compared to 13.3-15.7% YoY growth guidance at the beginningof the year.

� The company expects SAP to turnaround in 4QFY14, and carry themomentum into FY15 too, on the back of ramp-ups in deal signings.Growth in SAP revenues could be in double digits next year.

� We expect EBITDA margins to decline by 40bp QoQ to 15%. Our SGAestimate for the quarter stands at 17.7%, 40bp QoQ. In absolute terms,SGA estimate is INR604m v/s INR588m in 3QFY14.

� Our PAT estimate for the quarter is INR820m, down 4% QoQ. PAT marginestimate is 8.4%, -60bp QoQ. Lower PAT QoQ is on account of forexloss estimate of INR41m.

� We expect KPIT to start the year by guiding for FY15 USD revenuegrowth of ~12%, or marginally below industry.


Key issues to watch out� FY15 full year revenue guidance.� Growth in top account (Cummins) and SAP.� Margin performance and outlook; commentary on cash conversion.


1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Revenues 5,383 5,672 5,633 5,699 6,132 7,028 6,779 6,966 22,386 26,906

QoQ Change (%) 42.1 5.4 4.7 1.2 7.6 14.6 (3.5) 2.8 50.3 20.2

Direct Expenses 3,506 3,703 3,706 3,725 4,200 4,665 4,555 4,693 14,640 18,112

SG&A 1,065 1,024 1,045 963 960 1,274 1,183 1,231 4,096 4,649

EBITDA 812 945 882 1,011 972 1,088 1,042 1,042 3,650 4,145

Margins (%) 15.1 16.7 15.7 17.7 15.9 15.5 15.4 15.0 16.3 15.4

Other Income 30 -191 77 -86 59 23 18 -15 -170 84

Depreciation 113 114 118 121 122 148 135 143 466 547

Interest 35 34 42 42 63 74 79 64 154 280

PBT bef. Extra-ordinary items 694 605 800 762 847 889 846 820 2,860 3,402


Rate (%) 26.6 31.6 22.8 27.1 29.0 24.9 28.2 28.8 26.8 27.7

PAT aft. Minority and EO 513 461 504 512 601 667 608 584 1,990 2,460

QoQ Change (%) 24.9 (10.0) (1.6) 1.5 17.5 11.0 (8.9) (4.0) 63.8 23.6

Diluted EPS (INR) 2.8 2.5 2.7 2.6 3.0 3.4 3.1 2.9 10.6 12.4

USD Revenues 98 103 103 106 109 112.2 109.7 113 410 444

QoQ Change (%) 33.5 5.5 0.0 2.0 3.1 3.1 (2.3) 2.9 33.6 8.1

Offshore util. (%) 74.1 74.7 72.9 74.1 73.4 72.9 71.3 70.8 73.9 72.1

Onsite util. (%) 94.7 94.5 92.8 94.3 94.2 92.4 88.1 88.5 94.1 90.7

E: MOSL Estimates

C–175April 2014



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Revenues 5,630 5,963 5,901 6,124 6,477 7,696 7,906 8,181 23,618 30,260

Q-o-Q Change (%) 23.3 5.9 -1.0 3.8 5.8 18.8 2.7 3.5 23.3 28.1

Direct Expenses 3,442 3,570 3,517 3,745 3,824 4,448 4,679 4,846 14,274 17,797

SGA 1,014 1,074 1,180 1,216 1,462 1,650 1,686 1,718 4,484 6,516


Margins (%) 20.9 22.1 20.4 19.0 18.4 20.8 19.5 19.8 20.6 19.7

Other Income 52 74 70 154 117 48 83 91 350 339

Forex Gain / (Loss) 86 -415 142 -153 618 200 -272 -294 -340 252

Depreciation & Amort. 159 159 151 155 181 197 208 207 624 793

Interest 3 4 2 1 1 2 1 1 10 5

PBT bef. Extra-ordinary 1,150 815 1,263 1,008 1,744 1,647 1,143 1,205 4,236 5,739

Provision for Tax 260 93 275 219 390 360 258 277 847 1,285

Rate (%) 22.6 11.4 21.8 21.7 22.4 21.9 22.6 23.0 20.0 22.4

Reported PAT 890 722 988 789 1,354 1,287 885 928 3,389 4,454

Q-o-Q Change (%) 63.3 -18.9 36.8 -20.1 71.6 -4.9 -31.2 4.9 55.1 31.4

USD Revenue 105.5 107.3 109.9 113.0 117.7 124.0 127.1 132.0 435.7 500.8

Q-o-Q Change (%) 4.1 1.7 2.5 2.8 4.2 5.4 2.5 3.8 8.2 14.9

Util including trainees (%) 68.9 71.7 71.4 69.6 69.6 65.9 67.4 69.5 70.4 68.1

E: MOSL Estimates

MindTreeCMP: INR1,319 Neutral� We model 4QFY14 revenue at USD132m, growth of 3.8% QoQ. The

company expects volatility to continue in HiTech (PES) vertical whilegrowth will be supported by services revenues

� In rupee terms, our growth estimate stands at INR8.18b, +3.5% QoQ.We expect realized INR to be higher for MTCL, due to MTCL's accountingpractice of taking prevailing dollar rate at the beginning of the monthfor the whole month. As bulk of the INR appreciation happened insecond half of March.

� Our estimate for EBITDA margin is 19.8%, down 30bp QoQ. Our SGAestimate for the quarter stands at 21%, down 30bp QoQ

� Our PAT estimate for the quarter is INR928m, which implies a PATmargin of 11.3%, up 10bps QoQ. We model INR294m of forex losses inthis quarter vs losses of INR272 in 3QFY14.

� MTCL has signed deals of TCV USD540 in last four quarters whichprovides good visibility for FY15 growth outlook.


Key issues to watch out� Performance and outlook of the Hi-tech vertical.� Deal wins during the quarter.� Outlook on FY15 expected revenue growth.� Traction in IMS.


EBITDA 4.9 5.9 7.0 8.2

PAT 3.4 4.5 5.2 6.0

EPS (INR) 81.7 106.3 124.7 144.0

EPS Gr. (%) 52.2 30.1 17.3 15.4

BV/Sh. (INR) 314.5 384.0 489.0 611.0

RoE (%) 25.8 30.4 28.6 26.2

RoCE (%) 37.0 34.9 33.1 31.2

Payout (%) 14.7 18.8 13.6 13.2

Valuations

P/E (x) 16.1 12.4 10.6 9.2

P/BV (x) 4.2 3.4 2.7 2.1

EV/EBITDA (x) 10.2 8.1 6.5 5.1

Div Yld (%) 0.9 1.5 1.3 1.4

Bloomberg MTCL IN



52-Week Range (INR) 1,725 / 783

1,6,12 Rel Perf. (%) -26 / -8 / 26

C–176April 2014


Mphasis - Quarterly Performance (INR Million)Y/E October FY13 5m FY14 FY13 5m

Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Mar-14E FY14E

Revenues 12,571 14,054 15,398 15,940 15,640 10,197 57,963 25,837

Q-o-Q Change (%) -5.4 11.8 9.6 3.5 -1.9 -34.8 8.2

Direct Expenses 9,052 10,168 11,136 11,602 11,232 7,336 41,958 18,568

Sales, Gen. & Admin. Exp. 1,191 1,468 1,463 1,548 1,772 1,109 5,670 2,881

Depreciation 378 350 365 353 294 192 1,446 486

Operating Profit 1,950 2,068 2,434 2,437 2,342 1,561 8,889 3,903

Margins (%) 15.5 14.7 15.8 15.3 15.0 15.3 15.3 15.1

Other Income 423 290 193 156 211 307 1,062 518

PBT bef. Extra-ordinary 2,373 2,358 2,627 2,593 2,553 1,868 9,951 4,421

Provision for Tax 529 593 701 691 683 504 2,514 1,187

Rate (%) 22.3 25.1 26.7 26.6 26.8 27.0 25.3 26.9

PAT bef. Extra-ordinary 1,844 1,765 1,926 1,902 1,870 1,363 7,437 3,233

Q-o-Q Change (%) -2.6 -4.3 9.1 -1.2 -1.7 9.4 -6.1

Diluted EPS (INR) 8.8 8.4 9.2 9.0 8.9 6.5 35.3 15.4

USD Revs 237 263 265 260 255 168.3 1,025 423

Q-o-Q Change (%) -6.0 11.0 1.0 -2.1 -1.9 -0.9 -1.1

HP Channel - USD m 122.0 119.7 109.5 103.5 95.0

Direct Channel - USD m 114.8 143.1 155.9 156.2 159.9

E: MOSL Estimates

MphasisCMP: INR404 Neutral� For 2QFY14, volumes in the HP channel are expected to decline by

5-6% QoQ as HP continues to lose market share and renewal deals.This follows 8.7% QoQ decline in constant currency in 1QFY14.

� We are modeling revenue of INR10.27b which includes hedge lossesof INR165m for 2QFY14. Excluding hedge losses USD revenues areexpected to be USD168m, -0.9 QoQ (normalized).

� We expect MPHL to have a flattish quarter as decline in HP revenuescontinue and we have modeled INR200m of revenue reversal ofreceivables outstanding from India Government.

� Mature market Direct channel is expected to remain flattish in volumeterms, even on the back of seasonal slowness in the previous quarter,due to lower working days in February and the two month quarterbeing normalized for comparison. Emerging market Direct Channel isexpected to grow by 15%-20% QoQ during the quarter as there will beno revenue reversals

� EBIT margin is expected to increase 50bp QoQ to 15.5%. We expectSG&A expense to go up by 10bp to 10.9%.

� We expect PAT to be INR1.36b, our PAT margin estimate is 13.4%, up140bp QoQ.

� The stock trades at 10.2x FY15E and 8.9x FY16E EPS. Maintain Neutral.

Key issues to watch out� Outlook for Digital Risk, large deal ramp ups.� Deal wins resulting from incremental investments in S&M.

Financials & Valuation (INR b)Y/E March Oct.13Mar.14E Mar.15E Mar.16ESa les 58.0 25.8 63.5 67.4

EBITDA 10.3 4.4 11.5 12.9

PAT 7.4 3.2 8.4 9.5

EPS (INR) 35.3 15.4 39.8 45.3

EPS Gr. (%)* -5.8 4.3 7.9 13.8

BV/Sh. (INR) 235 244 259 279

RoE (%)* 15.9 15.4 15.8 16.9

RoCE (%)* 17.4 16.7 17.7 18.4

Payout (%) 48.1 48.8 52.7 48.5

Valuations

P/E (x)* 11.4 11.0 10.2 8.9

P/BV (x) 1.7 1.7 1.6 1.4

EV/EBITDA (x)* 6.3 6.4 5.2 4.3

Div yld (%) 4.2 4.5 5.2 5.4

*Annualized values for 5m FY14E

Bloomberg MPHL IN




1,6,12 Rel Perf. (%) -2 / -23 / -16

C–177April 2014



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Revenues 3,007 3,269 3,330 3,340 3,573 4,324 4,328 4,532 12,945 16,756

Q-o-Q Change (%) 12.3 8.7 1.9 0.3 7.0 21.0 0.1 4.7 29.4 29.4

Direct Expenses 1,685 1,828 1,882 1,916 2,105 2,426 2,433 2,528 7,311 9,491

SG&A 515 551 624 593 691 776 698 768 2,283 2,932

EBITDA 807 890 824 831 777 1,122 1,197 1,236 3,352 4,333

Margins (%) 26.8 27.2 24.7 24.9 21.7 26.0 27.7 27.3 25.9 25.9

Other Income -47 -78 84 102 263 -24 -70 28 61 197

Depreciation 185 189 198 211 237 263 262 263 783 1,025

PBT bef. Extra-ordinary 575 623 710 722 803 835 865 1,001 2,630 3,504


Rate (%) 27.7 28.3 30.3 28.1 28.9 27.2 25.8 29.5 28.7 27.9

PAT aft. Minority and EO 416 446 495 519 571 608 642 706 1,876 2,527

Q-o-Q Change (%) -0.7 7.4 10.9 4.8 10.0 6.5 5.6 9.9 31.2 34.7

Diluted EPS (INR) 10.4 11.2 12.4 13.0 14.3 15.2 16.1 17.6 46.9 63.2

USD Revenues 54.9 60.1 60.8 62.1 63.0 68.5 69.9 73.3 237.8 274.8

Q-o-Q Change (%) 6.3 9.4 1.2 2.2 1.5 8.6 2.2 4.8 14.7 15.5

E: MOSL Estimates

Persistent SystemsCMP: INR1,048 Buy� We expect PSYS to grow its overall USD revenues by 4.8% QoQ to

USD73.3m. In Rupee terms, we expect revenues to grow to INR4.53b,+4.7%.

� 4Q is a seasonally strong period for IP revenue and this year is expectedto be no different. We expect IP-led revenue to report double digitQoQ growth to USD14.3m (15% QoQ).

� Linear business is expected to grow softer than the 3.8% QoQ growthin 3QFY14. This is primarily due to a ramp-down in an engagementwith a top 10 customer on completion of work. We estimate 2.7% QoQgrowth in linear business to USD59m.

� We expect EBITDA margin to decline 40bp QoQ to 27.3%. Growth in IP-led revenue will be a tailwind during the quarter for the company, butlow base for 3Q costs caused by write-backs of earlier bad debtprovisions will act as an offset.

� PSYS continues to see healthy traction in terms of deal pipeline andrevenues in its major geography US.

� Our PAT estimate for the quarter is INR706m, +9.9% QoQ. Tax rateassumed for the quarter is 29.5% v/s 25.8% in 3QFY14.


Key issues to watch out� Improvements from measures taken to grow Product Engineering

Services (PES) business (60% of revenues).� Commentary on potential of winning large deals.� Commentary on HPCA (Radia) renewals and overall IP revenues

expectation.


EBITDA 3.4 4.3 4.9 6.1

Adj. PAT 1.9 2.5 3.1 4.0

Adj. EPS (INR) 46.9 63.2 77.1 99.2

EPS Gr. (%) 31.2 34.7 22.0 28.7

BV/Sh.(INR) 262.1 308.9 371.9 455.3

RoE (%) 20.2 22.8 23.3 24.7

RoCE (%) 14.8 16.1 18.5 18.7

Payout (%) 19.2 22.2 18.2 16.1

Valuations

P/E (x) 22.3 16.6 13.6 10.6

P/BV (x) 4.0 3.4 2.8 2.3

EV/EBITDA (x) 11.0 8.2 6.9 5.2

Div. Yield (%) 0.9 1.3 1.3 1.5

Bloomberg PSYS IN



52-Week Range (INR) 1,220 / 477

1,6,12 Rel Perf. (%) -13 / 49 / 75

C–178April 2014


Quarterly Performance (IFRS) (INR Million)Y/E March FY13 FY14 FY13 FY14E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Revenues 148,687 156,208 160,699 164,301 179,871 209,772 212,940 217,475 629,895 820,058

Q-o-Q Change (%) 12.1 5.1 2.9 2.2 9.5 16.6 1.5 2.1 28.8 30.2

EBITDA 43,328 44,403 46,540 46,599 51,532 66,390 66,866 67,712 180,870 252,500

Margins (%) 29.1 28.4 29.0 28.4 28.6 31.6 31.4 31.1 28.7 30.8

Other Income 1,754 3,103 2,133 4,185 2,517 -427 6,729 6,550 11,174 15,369

PAT 32,806 35,121 35,518 35,969 37,962 47,018 53,140 53,548 139,413 191,668

Q-o-Q Change (%) 11.9 7.1 1.1 1.3 5.5 23.9 13.0 0.8 31.0 37.5

Diluted EPS (INR) 16.8 17.9 18.1 18.4 19.4 24.0 27.1 27.3 71.2 97.9

USD Revenues 2,728 2,853 2,948 3,040 3,165 3,337 3,438 3,519 11,568 13,458

Q-o-Q Change (%) 3.0 4.6 3.3 3.1 4.1 5.4 3.0 2.4 13.7 16.3

Operating Metrics

Gross Margin (%) 47.2 46.4 47.4 47.8 47.2 49.0 49.3 48.8 47.2 48.6

SGA (%) 18.1 18.0 18.4 19.4 18.6 17.3 17.9 17.6 18.5 17.8

Tax rate (%) 22.2 21.0 21.8 23.9 24.1 24.8 23.6 24.0 22.3 24.1

Util - excl. trainees (%) 81.3 81.6 81.7 82.0 82.7 83.4 84.3 83.7 81.7 83.5

Q-o-Q Volume Gr (%) 5.3 5.0 1.3 4.4 6.1 7.8 1.8 2.5 15.2 17.0

E: MOSL Estimates

Tata Consultancy ServicesCMP: INR2,128 Neutral� We expect TCS to grow its revenues in 4QFY14 by 2.4% QoQ to

USD3,519m. Outlook for overall constant currency revenue growth in4Q was lesser than that in 3Q (when revenues grew 2.1% CC). Crosscurrency is likely to have a negligible impact on overall USD revenuegrowth during the quarter

� In Rupee terms, we expect revenue growth of 2.1% QoQ to INR217.4b.4Q is a seasonally strong quarter for India geography, whereas, forTCS, India revenue is expected to decline sequentially in the fourthquarter of this year

� Reinvestments into the business are likely to be 30-40bp headwind tomargins during the quarter. We expect some operational efficiency in4Q similar to last quarter, and model flat EBIT margin QoQ at 29.7%.

� We expect positive other income of INR6.5b (v/s INR6.73bm in 3QFY14),driven by forex gain estimate of INR2.95b and interest and dividendincome of INR3.6b

� Our PAT estimate stands at INR53.5b, up 0.8% QoQ and implies PATmargin of 24.6%, -40bp QoQ. Effective tax rate assumption is 24%(+40bp QoQ).

� TCS' has reiterated its guidance of FY15 being better than FY14, andwe expect 17.7% USD revenue growth, v/s 16.3% in FY14.

� The stock trades at 19.1x FY15E and 16.3x FY16E. Maintain Neutral.Key issues to watch out� FY15 growth outlook and possible pricing pressure as indicated by

Accenture.� Roadmap on investments of currency gains to pull margin back to

~27%.

Financials & Valuation (INR b)Y/E March 2013 2014E 2015E 2016ESa les 629.9 820.1 951.2 1,107.8

EBITDA 180.9 252.5 284.5 327.9

PAT 139.4 191.7 218.1 254.3

EPS (INR) 71.2 97.9 111.3 129.8

EPS Gr. (%) 31.0 37.4 13.8 16.6

BV/Sh. (INR) 209.8 265.0 335.4 416.1

RoE (%) 37.8 41.2 37.1 34.5

RoCE (%) 43.8 49.5 44.5 41.1

Payout (%) 30.9 32.7 31.4 32.4

Valuations

P/E (x) 29.8 21.7 19.1 16.3

P/BV (x) 10.1 8.0 6.3 5.1

EV/EBITDA (x) 22.6 15.9 13.7 11.6

Div. yield (%) 1.0 1.5 1.6 2.0

Bloomberg TCS IN


M. Cap. (INR b)/(USD b) 4169 / 70

52-Week Range (INR) 2,384 / 1,364

1,6,12 Rel Perf. (%) -12 / -5 / 17

C–179April 2014


Tech MahindraCMP: INR1,795 Buy� We expect Tech Mahindra to grow its revenues by 2.3% QoQ to

USD809m, after including the impact from discontinuation ofamortization revenues, excluding which, USD revenue growth is ~3%.

� In Rupee terms, we expect revenue growth of 2.1% QoQ to INR49.9b.� TECHM faces margin headwinds of ~250-270bp from [1]Wage

hikes(250bps) and [2]discontinuation of restructuring fees(30 bps).There are multiple levers to offset the impact like: [1]strong quarterof Comviva [2]absence of transition cost and [3]room to increaseutilization. We model 21.6% EBITDA margin in 4QFY14 (-160bp QoQ)

� Our PAT estimate for the quarter is INR5.93b (after adjusting forrestructuring fees), decline of 7.7% QoQ. This implies PAT margin of11.9%, down 120bp QoQ, due to higher forex losses of INR1.53b. Ourother Income estimate is a loss of INR927m v/s loss of INR457 in 3QFY14

� TECHM trades at 12.6x FY15E and 10.7x FY16E. Maintain Buy.

Key issues to watch out� Deals TCV following USD220m deal signings last quarter.� FY15 growth outlook v/s NASSCOM and stable margins in constant

currency.� Large deals progress in the Enterprise business.

Financials & Valuation (INR b)*Y/E March 2013 2014E 2015E 2016ESa les 143.3 187.7 213.7 243.8

EBITDA 30.6 41.8 46.1 52.6

Adj. PAT 19.8 25.7 31.1 36.6

Adj. EPS (INR) 92.8 120.5 142.3 167.6

EPS Gr. (%) 31.8 29.8 18.1 17.8

BV/Sh.(INR) 320.0 403.1 525.2 675.5

RoE (%) 32.6 38.1 31.8 28.7

RoCE (%) 35.3 35.5 32.7 30.0

Payout (%) 5.9 8.3 9.8 10.1

Valuations

P/E (x) 19.3 14.9 12.6 10.7

P/BV (x) 5.6 4.5 3.4 2.7

EV/EBITDA (x) 11.1 7.9 7.0 5.6

Div. Yield (%) 0.3 0.6 0.8 0.9

* TECHM standalone

Bloomberg TECHM IN


M. Cap. (INR b)/(USD b) 417 / 7

52-Week Range (INR) 1,936 / 895

1,6,12 Rel Perf. (%) -10 / 19 / 51


1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Revenues 33,727 35,237 36,683 37,673 41,032 47,715 48,985 49,996 143,320 187,728

Q-o-Q Change (%) 4.5 4.1 2.7 8.9 16.3 2.7 2.1 31.0

Direct Cost 21,007 22,271 22,761 23,968 25,693 28,826 30,012 31,762 90,007 116,293

Other Operating Exps 5,328 5,397 5,965 5,992 6,694 7,779 7,610 7,549 22,682 29,632


Margins (%) 21.9 21.5 21.7 20.5 21.1 23.3 23.2 21.4 21.4 22.3

Other Income 1,129 -697 1,308 381 2,073 380 -457 -927 2,121 1,069

Interest 251 214 204 253 223 241 112 68 922 644

Depreciation 915 908 866 1,207 1,174 1,222 1,396 1,401 3,896 5,193

PBT bef. Extra-ordinary 7,355 5,750 8,195 6,634 9,321 10,027 9,398 8,288 27,934 37,034

Provision for Tax 1,911 1,176 1,931 1,461 2,328 2,840 2,530 2,155 6,479 9,853

Rate (%) 26.0 20.5 23.6 22.0 25.0 28.3 26.9 26.0 23.2 26.6

Minority Interest -40 -15 -109 -137 -130 -4 -111 -96 -301 -341

Net Income aft. EO & Restr. fees 5,069 4,224 2,880 6,041 6,528 6,848 6,422 5,926 18,214 25,724

Q-o-Q Change (%) 1.5 -16.7 -31.8 109.8 8.1 4.9 -6.2 -7.7 53.2 41.2

Diluted EPS (INR) 23.8 19.8 27.2 22.0 30.7 32.1 30.0 27.7 92.8 120.5

USD Revenues 615 644 675 698 724 758 791 809 2,633 3,082

Q-o-Q Change (%) 4.7 4.7 3.5 3.7 4.7 4.4 2.3 17.1

E: MOSL Estimates

C–180April 2014


Wipro Quarterly Performance (IFRS) (INR Million)Y/E March FY13 FY14 FY13 FY14E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Revenues 90,827 92,203 95,140 96,078 97,294 107,727 112,713 116,523 374,256 434,257

Q-o-Q Change (%) -8.0 1.5 3.2 1.0 1.3 10.7 4.6 3.4 17.4 16.0

EBIT 15,802 17,187 17,282 17,067 17,650 20,229 22,814 24,616 67,346 85,309

Margins (%) 17.4 18.6 18.2 17.8 18.1 18.8 20.2 21.1 18.0 19.6

Other Income 2,777 2,555 3,171 2,744 2,918 4,949 3,518 1,557 11,250 12,942

PAT 14,656 15,044 15,895 17,373 16,233 19,321 20,147 20,028 61,362 75,729

Q-o-Q Change (%) -1.0 2.6 5.7 9.3 -6.6 19.0 4.3 -0.6

Y-o-Y Change (%) 9.8 15.6 9.1 17.3 10.8 28.4 26.8 15.3 17.3 23.4

Diluted EPS (INR) 6.0 6.1 6.5 6.4 6.6 7.8 8.2 8.1 25.0 30.8

USD Revenues 1,515 1,541 1,577 1,585 1,588 1,631 1,678 1,723 6,218 6,621

Q-o-Q Change (%) -1.4 1.7 2.4 0.5 0.2 2.7 2.9 2.7 5.0 6.5

Gross Margin (%) 29.9 30.6 30.6 30.3 30.9 31.1 32.2 33.1 30.4 31.9

SGA (%) 12.5 12.0 12.5 12.5 12.8 12.3 12.0 12.0 12.4 12.3

IT Services EBIT (%)* 21.0 20.7 20.2 20.2 20.0 22.5 23.0 23.1 20.5 22.2

Tax rate (%) 20.6 23.5 21.9 20.1 20.7 22.9 23.0 23.0 21.5 22.5

Net Employee additions 2,632 2,017 2,336 2,907 1,469 -65 -814 3,765 9,892 4,355

Utilization-incl.trainees (%) 68.3 66.8 64.8 64.9 64.7 66.1 66.0 66.3 66.7 66.1

Offshore revenues (%) 46.2 46.6 46.2 46.6 46.1 45.8 45.9 46.4 37.4 46.2

Offshore revenues (%) 46.2 46.6 46.2 46.6 46.1 45.8 45.9 46.4 37.4 46.2

Rev Guidance (USDm) 1,520- 1,520- 1,560- 1,585- 1,575- 1,620- 1,660- 1,712-

1,550 1,550 1,590 1,630 1,610 1,650 1,690 1,745

E: MOSL Estimates

WiproCMP: INR543 Buy� Wipro had guided for 4Q revenue growth band of 2%-4% QoQ,

implying USD revenue of USD1,712m-1,745m.

� We model revenue marginally below the midpoint at 2.7% QoQ, toUSD1,723m.

� We expect SGA to be flat at 12% and EBIT margin to expand 90bp QoQto 21.1%. We expect IT Services EBIT margin to expand by 10bp QoQ to23.1%.

� We expect Net employee additions of 3,765 (v/s a reduction of 814 in3QFY14)

� Our PAT estimate for the quarter is INR20.03b, a decrease of 0.6%QoQ, due to forex losses of INR1,127m. Our other income estimate isINR1.55b vs INR3.52b in 3QFY14.

� We expect Wipro to sustain its performance for the future quarters aswell, and guide for 2-4% QoQ growth in constant currency.


Key issues to watch out� Revenue growth guidance for 1QFY15.� Commentary on large deal wins and ramp up schedule.� Outlook on growth in Americas.


EBITDA 78.0 96.4 109.7 126.1

PAT 61.4 75.7 86.4 100.5

EPS (INR) 25.0 30.8 35.2 40.9

EPS Gr. (%) 17.3 23.4 14.1 16.3

BV/Sh. (INR) 115.6 136.5 162.3 191.6

RoE (%) 21.6 24.5 23.5 23.1

RoCE (%) 18.9 22.7 23.2 23.2

Payout (%) 28.0 25.9 22.7 24.4

Valuations

P/E (x) 21.7 17.6 15.4 13.3

P/BV (x) 4.7 4.0 3.3 2.8

EV/EBITDA (x) 15.9 12.6 10.8 9.1

Div Yld (%) 1.3 1.5 1.5 1.8

Bloomberg WPRO IN


M. Cap. (INR b)/(USD b) 1,338 / 22


1,6,12 Rel Perf. (%) -15 / -1 / 5

C–181April 2014

March 2014 Results Preview | Sector: Telecom

Expect seasonal uptick in traffic but YoY traffic growth likely to decelerate further:During 4QFY14 we expect average wireless traffic (Bharti/Idea/RCom/Vodafone) toincrease by ~4% QoQ as compared to ~2% QoQ increase in 3QFY14 and ~5% increase in4QFY13. On a YoY basis, traffic growth deceleration is likely to continue, with expectedgrowth of only ~4% YoY for wireless majors.

Blended RPM likely to increase by 0-1%QoQ: Post 6-9% RPM increase during 9MFY14(vs 4QFY13) for GSM incumbents, we expect RPM to improve by 0-1% QoQ. Our industryinteractions indicate certain circle level pricing disruptions during 4QFY14 which couldhave some adverse impact on voice RPM, particularly for Idea. However, we nowexpect renewed industry level initiatives to reduce discounts and improve voicerealizations.

EBITDA margin to improve QoQ for Bharti/Idea: We expect EBITDA margin for Indiabusiness to improve ~40bp QoQ for Bharti/Idea, led by operating leverage from strongtraffic growth. Bharti's overall margins would be impacted by likely normalization inthe enterprise segment.

Bharti Africa - Seasonal weakness to impact performance: Seasonal weakness is likelyto impact performance in Africa. We model flat revenue and 2% decline in EBITDA forBharti Africa on a QoQ basis. However PAT loss in Africa is expected to decline QoQdue to lower finance costs (one-off finance costs in 3QFY14). Our recent industryinteractions indicate a trend of industry consolidation and deceleration in pricingpressure in Africa, though likely market share loss in Nigeria is a concern for Bharti.

Subscriber additions normalizing: Subscriber additions seem to be normalizing at 5-7m/month since October 2013, post sharp decline in September 2013 due to change insubscriber reporting criteria by RCom. The run-rate implies growth in the industrysubscriber base of ~0.8% per month.

Next round of spectrum auction, 4G rollout plans key to watch-out: February spectrumauction concluded with aggressive uptake from incumbents, mostly for data spectrum.Key events to watch-out would be next round of spectrum auction, likely to bescheduled in 2HFY15 for the licences coming up for renewal in 2HFY16. 4G launch planof Reliance JIO as well as GSM incumbents, who have secured 1,800 contiguousspectrum across many circles, would also be critical given potential impact on the

Abbreviations and acronymsRPM: revenue per minute

TRAI: Telecom Regulatory

Authority of India

ARPU: average revenue per

user

MOU: minutes of use



31.3.14 % YoY % QoQ % YoY % QoQ % YoY % QoQBharti Airtel 319 Buy 222,539 13.6 1.4 72,051 18.9 1.6 11,127 118.8 82.4Bharti Infratel 204 Neutral 28,142 5.3 3.0 11,365 13.1 0.7 4,070 41.7 -0.8Idea Cellular 138 Buy 69,387 14.5 4.9 21,866 25.0 6.4 5,381 40.1 15.0Reliance Comm 129 Neutral 55,441 2.6 2.6 19,005 13.9 3.0 2,493 LP 71.5Sector Aggregate 375,509 11.4 2.4 124,287 18.6 2.5 23,072 146.3 41.2

Shobhit Khare ([email protected])

TelecomCompanies Covered

Bharti Airtel

Bharti Infratel

Idea Cellular

Reliance Communication

C–182April 2014


Wireless subscriber net additions (m)

Industry subscriberaddition have stabilized

capex intensity and data tariffs. Reliance JIO would have to launch services beforeMay 2015 in order to meet the roll-out obligations associated with its 2,300 bandspectrum.

Valuation and view: During FY14-16E, we expect 12/16/14% EBITDA CAGR for Bharti/Idea/RCom led by 7/9/5% traffic CAGR and 3% RPM CAGR in the India wireless business(including data). Reiterate Buy on Bharti (trades at ~6.2x proportionate FY15 EV/EBITDA)and Idea (trades at ~6.5x FY15 EV/EBITDA), and Neutral on RCom (trades at ~7.1x FY15EV/EBITDA).

Source: TRAI, MOSL

QoQ wireless traffic growth (%)

We expect wireless trafficto grow by 4-5% QoQ for

GSM incumbents

We expect blended RPMto remain flat QoQ

Trend in wireless RPM (INR)

19 20151311

7 7 8 83

10 82

85

-21

-5-2 -2

-14

-26

-2 -1

6-1

3 3 2 2

-6

5 6 5 779

20

Jan-

11Fe

b-11

Mar

-11

Apr-

11M

ay-1

1Ju

n-11

Jul-1

1A

ug-1

1Se

p-11

Oct

-11

Nov

-11

Dec

-11

Jan-

12Fe

b-12

Mar

-12

Apr-

12M

ay-1

2Ju

n-12

Jul-1

2A

ug-1

2Se

p-12

Oct

-12

Nov

-12

Dec

-12

Jan-

13Fe

b-13

Mar

-13

Apr-

13M

ay-1

3Ju

n-13

Jul-1

3A

ug-1

3Se

p-13

Oct

-13

Nov

-13

Dec

-13

Jan-

14

5 54 3

52 1

47

-2

79

5 58

3 4 53

1 13 2 1

2 1 0 1

7

0

47

4 35

3 24

-3-2

1

-2-4 -5

-3 -3-3

1QFY

12

2QFY

12

3QFY

12

4QFY

12

1QFY

13

2QFY

13

3QFY

13

4QFY

13

1QFY

14

2QFY

14

3QFY

14

4QFY

14E

B harti (In dia) Idea RCOM Vo dafone -India

-6

45.144.9

43.343.9

39

41

43

45

47

1QFY

12

2QFY

12

3QFY

12

4QFY

12

1QFY

13

2QFY

13

3QFY

13

4QFY

13

1QFY

14

2QFY

14

3QFY

14

4QFY

14E

Bharti Idea Vodafone�India RCOM

C–183April 2014


Aggregate traffic growthof 4% QoQ would be in

line with seasonalstrength

Aggregate traffic growth and RPM trend for wireless majors

*Bharti, Idea, RCom, Vodafone Source: TRAI, MOSL

Aggregate India wireless revenue growth (YoY, %)


85

90

95

100

105

Dec-

13

Jan-

14

Feb-

14

Mar

-14

Sens ex Inde xMOSL Telecom Inde x

90

105

120

135

150

Mar

-13

Jun-

13

Sep-

13

Dec

-13

Mar

-14

Sens ex Inde xMOSL Telecom Index

5

-1

3 4

-3

3

5

24

6

-4

2-11

1

-20

1

13

000-2

1QFY

12

2QFY

12

3QFY

12

4QFY

12

1QFY

13

2QFY

13

3QFY

13

4QFY

13

1QFY

14

2QFY

14

3QFY

14

4QFY

14E

QoQ traffi c growth (%) QoQ R PM gro wth (%)

13 14 15 15

11

86 7

12 12 1210

1QFY

12

2QFY

12

3QFY

12

4QFY

12

1QFY

13

2QFY

13

3QFY

13

4QFY

13

1QFY

14

2QFY

14

3QFY

14

4QFY

14E

C–184April 2014


4QFY14: Summary Expectations

Wireless KPIs FY12 FY13 FY14 YoY QoQ

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE (%) (%)

EOP Wireless Subs (m)

Bharti (India) 169 173 176 181 187 186 182 188 191 193 198 203 7.8 2.3

I d e a 95 100 106 113 117 115 114 122 125 127 129 133 9.4 3.4

RCOM 143 147 150 153 155 135 119 123 127 116 118 121 -1.7 2.0

Vodafone - India 142 145 148 150 154 153 147 152 155 156 160 166 9.0 3.5

Avg. Wireless Subs (m)

Bharti (India) 166 171 174 178 184 187 184 185 190 192 196 201 8.4 2.4

I d e a 92 98 103 110 115 116 115 118 123 126 128 131 11.1 2.3

RCOM 139 145 149 152 154 145 127 121 125 122 117 120 -0.9 2.0

Vodafone - India 138 143 146 149 152 153 150 150 154 155 158 163 8.9 3.3

ARPU (INR/month)

Bharti (India) 190 183 187 189 185 177 185 193 200 192 195 198 2.5 1.6

I d e a 160 155 159 160 156 148 158 167 174 164 169 174 4.2 3.0

RCOM 103 101 100 99 98 102 119 128 119 121 125 126 -1.6 0.3

Vodafone - India 169 164 167 173 174 169 176 187 196 191 193 194 3.9 0.7

MOU/Sub

Bharti (India) 445 423 419 431 433 417 435 455 455 437 434 439 -3.7 1.0

I d e a 391 364 369 379 379 359 384 406 398 368 376 388 -4.5 3.1

RCOM 233 227 224 227 228 236 271 291 282 277 288 287 -1.5 -0.5

Vodafone India (reported) 308 297 303 318 324 313 329 344 346 334 334 336 -2.3 0.7

Vodafone India (adj) 411 396 405 424 433 418 438 459 461 445 446 449 -2.3 0.7

Revenue per min (p)

Bharti (India) 42.8 43.2 44.6 43.8 42.7 42.6 42.6 42.4 44.0 44.0 44.8 45.1 6.4 0.5

I d e a 40.9 42.6 43.1 42.2 41.2 41.2 41.1 41.1 43.7 44.7 44.9 44.9 9.2 0.0

RCOM 44.4 44.7 44.5 43.7 43.1 43.2 43.8 43.9 42.0 43.5 43.5 43.9 0.0 0.8

Vodafone India (reported) 54.8 55.2 55.0 54.4 53.6 53.9 53.6 54.3 56.6 57.2 57.7 57.7 6.4 0.0

Vodafone India (adj) 41.1 41.4 41.3 40.8 40.2 40.4 40.2 40.7 42.5 42.9 43.3 43.3 6.4 0.0

Wireless traffic (B min)

Bharti (India) 221 217 219 231 239 234 241 253 258 251 255 264 4.3 3.5

I d e a 109 106 114 124 131 126 132 143 147 139 145 152 6.1 5.2

RCOM 98 99 100 103 105 102 103 105 106 102 102 103 -2.4 1.0

Vodafone India (reported) 128 128 133 142 148 144 148 155 160 156 158 165 6.4 4.0

Vodafone India (adj) 170 170 178 190 197 192 197 207 213 207 211 220 6.4 4.0


C–185April 2014


Quarterly F inancials (INR b) FY12 FY13 FY14 YoY QoQ

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE (%) (%)

Revenue

Bharti (ex Africa) 126 127 132 134 127 127 131 134 141 141 144 147 10.1 1.9

Bharti (consolidated) 170 173 185 187 186 188 194 196 203 213 219 223 13.6 1.4

I d e a 45 46 50 54 55 53 56 61 65 63 66 69 14.5 4.9

RCOM 53 50 51 53 53 52 53 54 54 54 54 55 2.6 2.6

Vodafone - India (implied) 70 70 73 77 79 78 79 84 90 89 91 95 13.1 4.0

EBITDA (INR b)

Bharti (ex Africa) 46.0 45.7 45.2 47.4 40.4 40.9 41.5 45.2 49.3 49.1 52.0 53.5 18.2 2.9

Bharti (consolidated) 57.1 58.2 59.6 62.3 54.9 57.0 57.7 60.6 65.4 68.3 70.9 72.1 18.9 1.6

I d e a 12.0 11.9 13.4 15.1 14.4 14.2 14.7 17.5 21.0 19.7 20.6 21.9 25.0 6.4

RCOM 16.0 16.1 16.1 16.3 16.5 16.4 16.5 16.7 17.0 18.9 18.5 19.0 13.9 3.0

EBITDA Margin (%)

Bharti (ex Africa) 36.4 36.1 34.4 35.3 31.9 32.3 31.6 33.9 34.9 34.8 36.0 36.3 248bp 37bp

Bharti (consolidated) 33.6 33.7 32.2 33.3 29.6 30.3 29.8 30.9 32.3 32.0 32.3 32.4 143bp 4bp

I d e a 26.6 25.7 26.7 28.1 26.1 26.8 26.4 28.9 32.1 31.2 31.1 31.5 266bp 43bp

RCOM 30.2 31.8 31.9 30.7 31.0 31.5 31.2 30.9 31.4 35.0 34.2 34.3 342bp 13bp

PAT (INR b)

Bharti (ex Africa) 15.2 14.5 12.7 13.5 15.8 13.9 8.9 10.8 14.8 14.0 19.4 20.3 87.5 5.0

Bharti (consolidated) 12.2 10.3 10.1 10.1 7.6 7.2 2.8 5.1 6.9 5.1 6.1 11.1 118.8 82.4

I d e a 1.8 1.1 2.0 3.4 2.3 2.4 2.3 3.8 4.9 4.5 4.7 5.4 40.1 15.0

RCOM 2.2 3.2 2.4 2.0 1.9 1.3 1.1 -2.4 1.3 2.7 1.5 2.5 -202.4 71.5

EPS (INR)

Bharti 3.2 2.7 2.7 2.7 2.0 1.9 0.7 1.3 1.8 1.3 1.5 2.8 107.8 82.4

I d e a 0.5 0.3 0.6 0.7 0.7 0.7 0.7 0.9 1.4 1.3 1.4 1.6 74.3 15.0

RCOM 1.1 1.6 1.2 1.0 0.9 0.6 0.6 -1.2 0.6 1.3 0.7 1.2 -202.4 71.5

Capex (INR b)

Bharti (ex Africa) 24.7 20.6 7.8 11.0 26.5 25.5 12.0 18.8 12.6 10.4 17.8 20.3 7.9 14.4

I d e a 10.4 11.0 9.0 8.4 4.1 9.7 6.5 13.3 4.3 8.8 10.2 14.0 5.4 37.2

RCOM 3.6 3.5 3.6 4.3 3.7 4.2 4.2 3.4 2.1 3.6 3.3 3.4 -0.6 3.7




TelecommunicationBharti Airtel 319 Buy 7.4 13.1 16.5 43.1 24.4 19.4 7.3 5.9 5.3 4.9 7.9 9.2Bharti Infratel 204 Neutral 7.7 8.8 10.3 26.5 23.1 19.7 9.4 8.6 7.9 8.3 9.1 10.2Idea Cellular 138 Buy 5.8 8.2 8.0 23.8 16.7 17.3 8.0 6.5 6.8 12.4 15.4 13.2Reliance Comm 129 Neutral 3.9 10.2 16.1 33.3 12.6 8.0 9.2 7.1 5.9 2.7 7.0 10.2Sector Aggregate 33.6 20.3 16.4 7.9 6.5 5.9 5.8 8.9 10.1

C–186April 2014



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Revenue 185,601 193,999 193,624 195,821 202,639 213,244 219,385 222,539 769,045 857,806

YoY Growth (%) 9.3 12.3 4.8 4.6 9.2 9.9 13.3 13.6 7.6 11.5

EBITDA 54,856 59,369 57,749 60,605 65,449 68,321 70,934 72,051 232,579 276,755

YoY Growth (%) -3.9 2.1 -3.1 -2.8 19.3 15.1 22.8 18.9 -1.9 19.0

QoQ Growth (%) -12.0 8.2 -2.7 4.9 8.0 4.4 3.8 1.6

Margin (%) 29.6 30.6 29.8 30.9 32.3 32.0 32.3 32.4 30.2 32.3

Net Finance Costs 7,367 9,250 12,310 11,157 11,676 16,111 10,682 9,674 40,085 48,143

Share of JV/associate /others 706 982 943 875 3,075 833 1,738 1,028 3,506 6,673

Depreciation & Amortization 35,901 36,891 37,350 38,006 38,470 39,394 39,188 39,890 148,148 156,943


Income Tax Expense / (Income) 4,543 7,195 6,192 7,254 9,685 8,635 16,569 12,012 25,183 46,900

Profit after Tax 7,751 7,016 2,839 5,063 8,693 5,015 6,233 11,502 22,669 31,443

Minority interest -129 196 -2 23 -1,804 106 -131 -375 88 -2,205

Reported Net Profit / (Loss) 7,622 7,212 2,836 5,086 6,889 5,120 6,101 11,127 22,757 29,238

YoY Growth (%) -37.3 -29.8 -72.0 -49.4 -9.6 -29.0 115.1 118.8 -46.6 28.5

Consolidated net debt (INR b) 656 612 585 586 593 620 582 750 586 750

India - Mobi le Traffic (B Min) 239 234 241 253 258 251 255 264 968 1,029

QoQ Growth (%) 3.7 -2.1 2.8 5.1 2.1 -2.7 1.5 3.5

India - Mobile RPM (p/min) 42.7 42.6 42.6 42.4 44.0 44.0 44.8 45.1 42.4 44.5

QoQ Growth (%) -2.6 -0.2 -0.1 -0.5 3.9 0.0 1.9 0.5

Africa - Revenue (USD m) 1,066 1,097 1,133 1,120 1,062 1,119 1,165 1,171 4,416 4,518

Africa - EBITDA (USD m) 275 298 300 285 283 301 300 294 1,157 1,178

Africa - EBITDA margin (%) 25.8 27.1 26.5 25.4 26.7 26.9 25.8 25.1 26.2 26.1

E: MOSL Estimates

Bharti AirtelCMP: INR319 Buy� We expect consolidated revenue to grow 14% YoY and 1.4% QoQ to

INR222.5b. We expect India revenue to grow 10% YoY to INR147b andAfrica business revenue to grow 5% YoY to USD1.17b.

� Consolidated EBITDA margin is expected to remain largely flat QoQ asincrease in the India mobile margins is likely to be offset by pressureon enterprise and Africa business margins.

� India mobile revenue is expected to grow 10% YoY to INR121b drivenby 4% YoY traffic growth (+3% QoQ) and YoY Wireless RPM growth of6% (+0.5% QoQ). EBITDA margin for mobile business is expected at34.5%, up 30bp QoQ.

� Seasonal weakness is likely to impact performance in Africa. We modelflat revenue and 2% decline in EBITDA for Bharti Africa on a QoQ basis.

� Cons. net profit is expected to increase 1.2x YoY and to INR11.1b.� We have assumed no forex gain or loss in our 4QFY14 estimates.� Bharti trades at proportionate EV/EBITDA of 6.2x FY15 and 5.6x FY16.

Maintain Buy.Key issues to watch out� RPM growth (we expect RPM to increase by 0.5% QoQ), mobile traffic

in India business (we expect 3% QoQ growth), forex loss (we havemodeled NIL), and Africa business financials (we expect 2% QoQEBITDA decline).


Net Sales 769.0 857.8 942.7 1,022.8

EBITDA 232.6 276.8 316.5 348.6

Adj. Net Profit 22.8 29.2 52.3 65.7

Adj. EPS (INR) 6.0 7.4 13.1 16.5

Adj. EPS Gr. (%) -46.6 23.3 76.9 25.7

BV/Sh (INR) 143.4 161.8 172.7 186.7

RoE (%) 4.2 4.9 7.9 9.2

RoCE (%) 4.3 4.9 6.0 6.1

Div. payout (%) 10 10 10 10

Valuations

P/E (x) 53.2 43.1 24.4 19.4

P/BV (x) 2.2 2.0 1.8 1.7

EV/EBITDA (x) 7.9 7.8 6.2 5.6

Div. Yield (%) 0.2 0.2 0.4 0.5

Bloomberg BHARTI IN


M. Cap. (INR b)/(USD b) 1275 / 21


1,6,12 Rel Perf. (%) 5 / -15 / -10

C–187April 2014



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Sales 24,165 25,555 26,264 26,736 26,220 26,837 27,311 28,142 102,720 108,510

YoY Change (%) 11.3 8.5 5.0 4.0 5.3 8.7 5.6


EBITDA 8,859 9,578 9,816 10,049 10,550 10,729 11,283 11,365 38,302 43,927

YoY Change (%) -16.7 19.1 12.0 14.9 13.1 8.2 14.7

EBITDA margin (%) 36.7 37.5 37.4 37.6 40.2 40.0 41.3 40.4 37.3 40.5

Depreciation 5,396 5,528 5,620 5,655 5,528 5,326 5,252 5,321 22,199 21,427

Interest 849 1,033 996 1,067 1,044 1,335 792 792 3,945 3,963

Other Income 543 646 569 1,369 1,469 569 917 1,018 3,127 3,973

PBT 3,157 3,663 3,769 4,696 5,447 4,637 6,156 6,269 15,285 22,509

Tax 1,023 1,186 1,228 1,845 1,871 1,863 2,051 2,199 5,282 7,984


Adjusted net profit 2,134 2,477 2,541 2,873 3,576 2,774 4,105 4,070 10,003 14,525

YoY Change (%) 34.3 67.6 12.0 61.6 41.7 33.2 45.2

Revenue mix

Rent revenue mix (%) 63 62 62 61 61 60 61 60 62 61

Energy & other reimbursements (%) 37 38 38 39 39 40 39 40 38 39

E: MOSL Estimates

Bharti InfratelCMP: INR204 Neutral� We expect revenue to grow 5% YoY to INR 28.1b.

� Revenue from rent is expected to grow by 2.3% QoQ while energy andother reimbursements are expected to grow by 4.1% QoQ.

� We expect EBITDA to grow by 1% QoQ to INR 11.37b. EBITDA margin isexpected to decline by ~90bp QoQ due to certain one-off items in3QFY14.

� We expect 42% YoY increase in reported PAT to INR 4.1b led by 13% YoYEBITDA growth.

� Bharti Infratel trades at an EV/EBITDA of 7.5x FY15 and 6.8x FY16.Neutral.

Key issues to watch out� Consolidated co-location additions (we expect ~3,400), trend in

consolidated sharing revenue per sharing operator (we expect 0.2%QoQ increase).

Bloomberg BHIN IN


M. Cap. (INR b)/(USD b) 385 / 6


1,6,12 Rel Perf. (%) 7 / 15 / -4


EBITDA 38.3 43.9 47.6 51.1

Adj. Net Profit 10.0 14.5 16.6 19.5

Adj. EPS (INR) 5.6 7.7 8.8 10.3

Adj. EPS Gr. (%) 29.6 37.7 14.5 17.3

BV/Sh (INR) 91.0 94.7 98.8 103.5

RoE (%) 6.3 8.3 9.1 10.2

RoCE (%) 5.6 7.0 7.5 8.3

Div. payout (%) 86.5 52.9 53.2 54.3

Valuations

P/E (x) 36.5 26.5 23.1 19.7

P/BV (x) 2.1 2.2 2.1 2.0

EV/EBITDA (x) 9.8 8.4 7.5 6.8

Div. Yield (%) 2.4 2.0 2.3 2.8

C–188April 2014



1Q 2Q 3Q 4Q# 1Q# 2Q 3Q 4QE

Gross Revenue 55,037 53,140 55,785 60,614 65,388 63,233 66,131 69,387 224,578 264,139

YoY Growth (%) 21.7 15.0 10.9 12.9 18.8 19.0 18.5 14.5 14.9 17.6

QoQ Growth (%) 2.5 -3.4 5.0 8.7 7.9 -3.3 4.6 4.9

EBITDA 14,355 14,225 14,734 17,491 21,013 19,715 20,557 21,866 60,045 82,900

YoY Growth (%) 19.2 19.9 9.6 16.1 46.4 38.6 39.5 25.0 17.9 38.1

QoQ Growth (%) -4.8 -0.9 3.6 18.7 20.1 -6.2 4.3 6.4

Margin (%) 26.1 26.8 26.4 28.9 32.1 31.2 31.1 31.5 26.7 31.4




Income Tax Exp. / (Income) 1,019 1,136 1,196 2,313 2,572 2,495 2,638 3,001 5,664 10,706

Adj Net Profit / (Loss) 2,342 2,400 2,286 3,842 4,878 4,476 4,678 5,381 10,110 19,162

YoY Growth (%) 32.1 126.9 13.7 12.0 108.2 86.5 104.6 40.1 39.8 89.5

Margin (%) 4.3 4.5 4.1 6.3 7.5 7.1 7.1 7.8 4.5 7.3

Mobile ARPU (INR/month) 156 148 158 167 174 164 169 174 156 168

QoQ Growth (%) -2.5 -5.1 6.8 5.7 4.2 -5.7 3.0 3.0 -0.9 7.8

Mobile MOU/sub/month 379 359 384 406 398 368 376 388 376 381

QoQ Growth (%) 0.0 -5.3 7.0 5.7 -2.0 -7.5 2.2 3.1 1.2 1.2

Mobi le Traffic (B Min) 131 126 132 143 147 139 145 152 532 581

QoQ Growth (%) 5.3 -4.0 5.2 8.5 2.8 -5.8 4.1 5.2 17.4 9.3

Mobile RPM (INR) 0.41 0.41 0.41 0.41 0.44 0.45 0.45 0.45 0.41 0.44

QoQ Growth (%) -2.5 0.2 -0.2 0.0 6.3 2.2 0.5 0.0 -2.1 6.6

E: MOSL Estimates; # Adjusted for one-off provision for licence and WPC charges of INR0.76b in 4QFY13 and INR0.25b in 1QFY14

Idea CellularCMP: INR138 Buy� Idea's consolidated revenue is expected to grow 14.5% YoY to INR69.4b

(5% QoQ growth).

� We expect Idea to report mobile traffic growth of 5% QoQ (6% YoY).We expect RPM to remain flat QoQ (9% growth YoY).

� ARPU is expected to increase 3% QoQ to INR174 (similar to 3QFY14).

� EBITDA margin is expected to improve 40bp QoQ to 31.5%. EBITDAloss in new circles is estimated at INR1.5b.

� Net profit is expected to increase 40% YoY and 15% QoQ to INR5.38b.

� Idea trades at an EV/EBITDA of 6.5x FY15 and 6.8x FY16. Maintain Buy .

Key issues to watch out� RPM trajectory (we expect RPM to remain flat QoQ), mobile traffic

(we expect 5% QoQ growth), and EBITDA loss in new circles (weexpect INR1.5b).


EBITDA 60.0 82.9 97.5 112.1

Adj. Net Profit 10.1 19.2 27.2 26.4

Adj. EPS (INR) 3.1 5.8 8.2 8.0

Adj. EPS Gr. (%) 39.6 89.2 42.1 -3.1

BV/Sh (INR) 43.6 49.6 56.8 63.8

RoE (%) 7.4 12.4 15.4 13.2

RoCE (%) 5.7 6.7 7.6 7.6

Div. Payout (%) 11.5 11.5 11.5 11.5

Valuations

P/E (x) 45.0 23.8 16.7 17.3

P/BV (x) 3.2 2.8 2.4 2.2

EV/EBITDA (x) 9.7 8.0 6.5 6.8

Div. Yield (%) 0.3 0.5 0.7 0.7

Bloomberg IDEA IN


M. Cap. (INR b)/(USD b) 456 / 8


1,6,12 Rel Perf. (%) 1 / -34 / 3

C–189April 2014



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Gross Revenue 53,192 52,020 53,013 54,059 54,116 53,942 54,034 55,441 210,035 217,533

YoY Growth (%) 7.7 3.2 4.9 1.8 1.7 3.7 1.9 2.6 3.3 3.6

QoQ Growth (%) 0.2 -2.2 1.9 2.0 0.1 -0.3 0.2 2.6

EBITDA 16,502 16,382 16,533 16,684 17,010 18,856 18,454 19,005 66,101 73,327

YoY Growth (%) 3.0 2.1 2.6 2.2 3.1 15.1 11.6 13.9 2.5 10.9

QoQ Growth (%) 1.1 -0.7 0.9 0.9 2.0 10.9 -2.1 3.0

Margin (%) 31.0 31.5 31.2 30.9 31.4 35.0 34.2 34.3 31.5 33.7



Profit before Tax 1,875 1,323 1,142 -1,683 1,309 2,733 1,484 2,544 2,657 8,072

Income Tax Expense / (Income) -39 0 0 751 7 12 30 51 712 100

Adjusted Net Profit / (Loss) 1,914 1,323 1,142 -2,434 1,302 2,721 1,454 2,493 1,945 7,972

YoY Growth (%) -14.4 -59.0 -52.6 -220.7 -32.0 105.7 27.2 -202.4 -80.3 309.8

Margin (%) 3.6 2.5 2.2 -4.5 2.4 5.0 2.7 4.5 0.9 3.7

Reported Net Profit / (Loss) 1,624 1,021 1,055 3,027 1,082 6,750 1,084 2,243 6,727 11,161

Wireless ARPU (INR/month) 98 102 119 128 119 121 125 126 109 121

QoQ Growth (%) -1.0 3.8 16.6 7.5 -7.1 1.7 3.9 0.3 6.9 10.9

Wireless MOU/sub/month 228 236 271 291 282 277 288 287 251 280

QoQ Growth (%) 0.4 3.6 14.8 7.4 -2.9 -1.8 3.8 -0.5 9.0 11.7

Wireless Traffic (B Min) 105 102 103 105 106 101 102 103 416 412

QoQ Growth (%) 1.8 -2.5 0.5 2.3 1.0 -4.9 0.7 1.0 4.1 -0.9

Wireless RPM (INR) 0.43 0.43 0.44 0.44 0.42 0.43 0.44 0.44 0.43 0.43

QoQ Growth (%) -1.3 0.2 1.6 0.1 -4.3 3.6 0.1 0.8 -1.8 -0.6

E: MOSL Estimates

Reliance CommunicationsCMP: INR129 Neutral� We expect revenue to grow 2.6% QoQ to INR 55.4b.

� We expect RPM to increase 1% QoQ to INR0.44.

� Wireless traffic is estimated to grow 1% QoQ 103b minutes. .

� Consolidated EBITDA is expected to grow 3% QoQ to INR19b.

� We expect RCom to report proforma PAT of INR2.5b.

� RCom trades at an EV/EBITDA of 7.1x FY15 and 5.9x FY16. Neutral.

Key issues to watch out� RPM trend (we expect +1% QoQ), traffic growth (we expect 1% QoQ).


EBITDA 66.1 73.3 86.5 95.3

Adj. Net Profit 1.9 8.0 21.0 33.2

Adj. EPS (INR) 0.9 3.9 10.2 16.1

Adj. EPS Gr. (%) -80.3 309.8 163.9 57.6

BV/Sh (INR) 142.8 140.1 150.0 165.8

RoE (%) 0.6 2.7 7.0 10.2

RoCE (%) 3.3 4.1 5.3 6.9

Div. Payout (%) 9.0 5.4 3.1 2.0

Valuations

P/E (x) 136.7 33.3 12.6 8.0

P/BV (x) 0.9 0.9 0.9 0.8

EV/EBITDA (x) 9.9 9.2 7.1 5.9

Div. Yield (%) 0.2 0.2 0.2 0.2

Bloomberg RCOM IN


M. Cap. (INR b)/(USD b) 266 / 4


1,6,12 Rel Perf. (%) 9 / -28 / 115

C–190April 2014

March 2014 Results Preview | Sector: Utilities



31.3.14 % YoY % QoQ % YoY % QoQ % YoY % QoQCESC 500 Buy 18,396 21.6 52.4 5,080 11.2 73.4 2,661 4.0 148.7Coal India 288 Neutral 202,609 1.8 19.7 74,837 3.7 82.4 61,832 0.3 58.3Jaiprakash Power 14 Buy 5,318 42.0 8.0 2,925 78.7 5.8 -1,342 Loss LossJSW Energy 59 Neutral 24,995 8.6 16.2 8,143 2.3 1.8 2,369 -28.5 6.9NHPC 19 Neutral 12,857 16.9 14.4 7,401 22.3 18.7 2,859 -0.1 10.3NTPC 120 Buy 157,942 -4.1 -15.9 40,062 2.6 -13.5 24,061 16.5 -19.5Power Grid Corp. 105 Buy 38,029 12.7 3.2 32,095 13.4 3.4 11,454 4.8 9.9PTC India 68 Buy 29,746 35.3 8.1 392 -23.4 -66.1 386 2.4 -55.4Reliance Infrastructure 435 Buy 27,711 -29.3 9.3 5,461 6.5 6.1 3,580 -40.2 -2.8Tata Po wer 85 Neutral 100,845 11.6 15.9 27,585 48.7 54.4 11,341 748.0 608.0Sector Aggregate 618,447 2.8 6.0 203,981 10.9 25.5 119,201 9.7 32.6

We expect utility companies in our coverage to report aggregate 4QFY14 revenue togrow by 3% YoY and PAT growth of 10% YoY. PAT growth is driven mainly by Tata Powergiven benefit of compensatory tariff hike. Also, we expect NTPC PAT growth at 17%led by higher PAF, PLF, etc. Key draggers are Reliance Infrastructure (down 40% YoY)owing to lower EPC revenues, while JSW energy PAT is expected to be muted (down29% YoY) led by lower generation and merchant realistion. CESC and Powergrid areexpected to report flat PAT growth of 4% and 5% YoY, respectively.

Generation/PLFs remains muted, Feb 2014 growth owing to base effect: In Jan/Feb-14, All India generation grew healthy at 13% YoY, but owing to higher growth in themonth of February 2014. For January 2014, the generation grew by mere 0.4% YoY,while February 2014 generation grew by 27% YoY. February 2014 generation (87BUs)compares favorably with average in 11mFY14 generation, but February 2013 generationwas very low at 68.3BUs. Trend for generation growth of March 2014 would thus becrucial to watch out. Overall PLF was up by 715bps to 57.5% v/s 50.4% for the sameperiod last year. Improvement is led by Nuclear (up 737bps) and Hydro power projects(up 500bps). Coal and lignite based generation grew by 30% YoY but PLF was down by217bps led by fuel supply issues and lower demand. Gas based generation grewmarginally (up 3% YoY). Hydro generation was up by 27%YoY.

Power deficit declines to ~4% for Jan/Feb-14, Peak deficit too remain low: Powerdemand has witnessed de-growth of 1% in January 2014, in-line with continued trendsince October 2013. However, the power demand grew by 7% YoY for the month ofFebruary 2014. However, it is due to low base (73BUs YoY) rather than pick-up indemand, as it compares favourably with demand number in February 2012 (78BUs).Power supply increased by 9% YoY leading to base deficit in the range of ~4% v/s 8.4%for the same period last year. Southern region registered significant improvementwith deficit reducing to 5.8% from 17% last year. Substantial improvement is on accountlower demand led by good monsoons and reluctance of SEB's to buy high cost power.

Imported coal prices marginally lower up QoQ, INR flat; ST (IEX) prices remain ataround INR3/unit: Imported coal prices average during the quarter stood at USD 79/tv/s USD85/t YoY and USD83/t QoQ. Post 3QFY14 increase, global coal prices have again


UtilitiesCompanies Covered

CESC

Coal India

Jaiprakash Po wer Ventures

JSW Energy

NHPC

NTPC

Power Grid

PTC India

Reliance Infrastructure

Tata Power

C–191April 2014


softened. There could be marginal benefit to importers as INR hold on to similarlevels of INR62/USD, flat QoQ. Short term price at IEX has remained muted and isranging below INR3/unit.

Valuation and view: Power sector has begun to witness several initiatives byauthorities to address concerns on SEBs, fuel supply pacts and PPAs. It would howevertake a while before clarity on several issues emerges. In this environment, we continueto prefer CPSUs which are relatively better positioned on these fronts.

Feb 2014 generation growth up due to low base Coal Plant PLF continue to remain muted

Power demand growth for Feb owing to low base Base deficit remains range bound at ~4%

Peak deficit too remain low ST prices remain muted, though up QoQ (INR/unit)

C–192April 2014





UtilitiesCESC 500 Buy 53.8 57.1 62.0 9.3 8.8 8.1 5.5 5.2 4.6 12.2 11.7 11.4Coal India 288 Neutral 26.7 28.5 30.6 10.8 10.1 9.4 7.1 6.7 5.8 27.9 26.0 24.5Jaiprakash Power 14 Buy 0.5 1.6 4.0 27.1 8.8 3.6 15.6 7.2 4.7 2.4 7.5 17.7JSW Energy 59 Neutral 6.7 5.7 5.2 8.9 10.4 11.4 5.7 6.0 6.0 16.9 13.1 11.0NHPC 19 Neutral 2.1 2.4 2.8 9.1 8.0 6.8 8.4 7.4 7.0 7.7 8.8 8.6NTPC 120 Buy 11.9 11.6 13.4 10.1 10.3 8.9 7.9 8.6 7.7 11.8 10.8 11.8Power Grid Corp. 105 Buy 8.1 9.4 11.8 12.9 11.2 8.9 10.2 9.7 8.6 14.0 13.6 15.4PTC India 68 Buy 10.5 9.7 10.3 6.4 7.0 6.6 4.2 4.4 3.5 9.0 7.2 7.5Reliance Infra. 435 Buy 55.0 54.4 60.7 7.9 8.0 7.2 0.5 0.8 0.4 7.3 6.8 7.1Tata Power 85 Neutral 7.0 7.3 7.3 12.2 11.7 11.6 10.9 9.2 9.0 7.4 9.2 8.7Sector Aggregate 10.6 10.1 9.0 8.1 7.7 6.9 15.7 15.3 15.8

RB Index* prices decline QoQ (USD/ton) INR remain range bound

* 6,000Kcal, FoB South Africa Source: CEA, CERC and Bloomberg

80

90

100

110

Dec-

13

Jan-

14

Feb-

14

Mar

-14

Sen sex Ind exMOSL Util i tie s In dex

80

90

100

110

120

Mar

-13

Jun-

13

Sep-

13

Dec-

13

Mar

-14

Sens ex Inde xMOSL Uti l i ties Inde x

C–193April 2014


Generation and PLFs of various plants

Capacity Feb-14 Feb-13 YTDFY14 YTDFY13

(MW)* Generation PLF (%) Generation PLF (%) Generation PLF (%) Generation PLF (%)

Adani Power

- Mundra 4,620 2,328.8 75.0 1,850.4 59.6 27,131.8 73.3 19,992.1 55.0

- Tirora 1,980 896.6 67.4 0.0 0.0 9,139.1 61.7 782.7 28.4

GVK

- JP 1 & 2 455 87.0 26.2 72.7 21.9 915.7 25.0 1,603.5 43.9

- Gautami 464 0.0 0.0 14.2 4.2 0.0 0.0 962.2 25.8

GMR

- Barge Mounted 570 221.1 53.1 0.0 0.0 1,095.0 23.9 393.0 22.2

- Chennai 200 70.8 48.5 52.1 35.7 707.7 44.1 545.0 33.9

- Vemagiri 370 0.0 0.0 9.8 3.6 177.8 59.8 927.3 31.2

JPL

- Chattisgarh 1,000 591.5 88.0 625.5 93.1 7,489.3 93.4 7,222.5 90.1

Rel Infra

- Dahanu 500 325.4 96.8 334.3 99.5 3,745.6 93.5 3,998.7 99.8

- Samalkot (AP) 220 34.2 21.3 37.5 23.3 461.5 26.1 671.2 38.0

- Goa 48 20.0 57.2 19.6 55.9 219.4 56.9 227.4 59.0

- Kochi 174 93.8 73.8 0.0 0.0 250.0 17.9 23.2 1.7

Rel Power

- Rosa 1,200 658.9 81.7 514.7 63.8 7,428.7 77.2 7,362.3 76.5

Tata Power

- Trombay 1,580 412.1 30.6 580.1 48.4 6,633.9 49.0 8,621.4 63.8

- TISCO (Jamshedpur) 441 173.1 71.6 82.8 34.2 2,181.8 75.6 2,505.5 83.9

- Mundra UMPP 4,000 2,322.7 86.4 1,981.9 92.2 21,760.8 67.9 10,096.1 75.3

- Maithon 1,050 485.1 68.8 452.5 64.1 5,743.8 68.2 4,251.0 58.4

Torrent Power

- Existing 500 181.4 67.5 185.1 68.5 2,450.6 76.4 2,765.4 82.4

- Sugen 1,148 189.8 22.7 169.1 20.2 2,071.3 22.5 3,967.3 43.1

JSW Energy

- Rajwest 1,080 24.7 3.4 330.5 72.5 4,104.8 47.4 3,312.5 73.9

- Karnataka/Ratnagiri 2,060 602.3 104.2 1,188.0 85.8 6,487.5 94.1 6,976.0 101.2

CESC 1,285 604.4 70.0 515.4 59.7 8,177.7 79.4 7,978.6 77.5

Lanco Infratech

- Kondapali 716 150.5 28.8 115.2 22.0 1,296.4 22.5 2,252.9 39.2

- Amarkantak 600 192.8 47.8 220.0 54.6 2,043.5 42.5 2,906.6 60.4

- UPCL 1,200 690.3 85.6 605.3 75.1 6,090.4 63.3 5,741.2 74.8

- Anpara 1,200 541.5 67.2 230.5 28.6 6,243.0 64.9 3,859.3 40.1

KSK

- Wardha 1,140 330.2 43.1 263.4 72.6 3,997.4 55.7 3,129.1 72.3

Sterlite

- Jharsuguda 2,400 582.4 36.1 694.4 43.1 7,634.1 39.7 7,494.2 39.6

*Monitored capacity by CEA Source: CEA

C–194April 2014


Quarterly Performance (Standalone Numbers - excl Spencers Retail) (INR Million)Y/E March FY13 FY14 FY13 FY14E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Sales 14,200 13,440 10,400 15,130 14,360 16,320 12,070 18,396 52,420 60,271

Change (%) 20.0 8.3 0.8 9.7 1.1 21.4 16.1 21.6 14.1 15.0

EBITDA 2,900 3,110 2,660 4,570 3,210 3,760 2,930 5,080 13,240 14,980

Change (%) 8.6 19.6 24.9 5.8 10.7 20.9 10.2 11.2 14.4 13.1

As of % Sales 20.4 23.1 25.6 30.2 22.4 23.0 24.3 27.6 25.3 24.9

Depreciation 770 760 770 760 840 840 850 899 3,060 3,429

Interest 780 890 860 850 900 1,030 990 1,027 3,380 3,947

Other Income 210 240 240 240 190 270 260 218 930 938

PBT 1,560 1,700 1,270 3,200 1,660 2,160 1,350 3,371 7,730 8,541

Tax 310 340 260 640 350 450 280 710 1,550 1,790


Reported PAT 1,250 1,360 1,010 2,560 1,310 1,710 1,070 2,661 6,180 6,751

Adjusted PAT 1,250 1,360 1,010 2,560 1,310 1,710 1,070 2,661 6,180 6,751

Change (%) 12.5 19.3 36.5 2.0 4.8 25.7 5.9 4.0 12.4 9.2


Generation 2,430 2,426 2,067 1,792 2,404 2,450 2,142 1,874 8,715 8,870

S a l e s 3,388 3,173 2,383 2,414 3,342 3,299 2,415 3,349 11,357 12,405

Realization (INR/unit) 4.2 4.2 4.4 6.3 4.3 4.9 5.0 5.5 4.6 4.9

Overall PLF (Derived) (%) 90.6 90.4 77.0 66.8 89.6 91.3 79.8 69.8 81.2 82.7

E: MOSL Estimates

CESCCMP: INR500 Buy


EBITDA 12.5 14.1 14.4 15.1

Net Profit 6.2 6.8 7.2 7.8

Adj. EPS (INR) 49.2 53.8 57.1 62.0

EPS Gr. (%) 11.6 9.2 6.3 8.6

BV/Sh (INR) 416.4 464.5 515.9 572.2

RoE (%) 12.3 12.2 11.7 11.4

RoCE (%) 10.9 11.1 10.6 10.5

Payout (%) 14.2 13.0 14.0 12.9

Valuations

P/E (x) 10.2 9.3 8.8 8.1

P/BV (x) 1.2 1.1 1.0 0.9

EV/EBITDA (x) 6.8 5.8 5.4 4.8

Div. Yield (%) 1.4 1.4 1.6 1.6

Bloomberg CESC IN




1,6,12 Rel Perf. (%) -2 / 33 / 70

� We expect CESC to report PAT of INR2.7b, a growth of 4%, on accountof higher accretion to regulated assets, and tariff hike approval. WestBengal Electricity Regulatory Commission (WBERC) has approved thetariff petition for FY14 and has allowed a hike of ~INR0.01/unit. This iseffective from January 2014 and the benefit of the same would beseen in 4QFY14. We thus expect CESC to report revenue of INR18.4b(up 22% YoY), EBITDA of INR5b (up 11% YoY).

� We estimate generation of 1.9BUs in 4QFY14 and sales of 3.3BU's. PLFin 4QFY14 is expected to be higher by ~300bps YoY.

� Spencer has been consistently consolidating (closing out lessprofitable stores) and has opened four new hyperstores and closeddown one superstore in 3QFY14. Area under operations increased to1.01msf from 0.92msf at the end of 2QFY14.

� CESC has synchronized one of its units at 600MW Dhariwal project andis selling infirm power. CoD will be announced shortly. 2nd unit forthe project is also likely to be synchronized by 1QFY15E.

� We expect CESC to post standalone PAT (ex Spencer) of INR6.8b inFY14E (up 9% YoY) and INR7.2b in FY15E (up 6% YoY).

Key issues to watch out� Performance of Spencer - Same stores revenue growth, stores EBIDTA.� Details on commissioning of Chandrapur.

C–195April 2014



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Sales 165,006 145,725 173,250 199,046 164,724 154,115 169,281 202,609 683,027 690,729

Change (%) 13.8 10.8 12.9 2.5 -0.2 5.8 -2.3 1.8 9.4 1.1

EBITDA 48,146 28,617 42,883 72,191 39,579 27,940 41,037 74,837 180,836 183,170

Change (%) -0.1 15.5 -5.6 90.7 -17.8 -2.4 -4.3 3.7 15.6 1.3

As of % Sales 29.2 19.6 24.8 36.3 24.0 18.1 24.2 36.9 26.5 26.5

Depreciation 5,356 3,872 4,204 4,698 4,757 4,949 4,417 4,879 18,130 19,002

Interest 126 102 96 127 74 80 96 149 452 399

Other Income 20,714 20,929 23,605 22,065 22,196 21,828 21,825 22,605 87,467 88,454

EO Income/(Expense) -103 -107 -2,849 216 -50 -91 -111 0 69 -50

PBT 63,275 45,464 59,338 78,647 56,894 44,647 58,237 92,414 249,790 252,172

Tax 18,582 14,703 18,387 24,508 19,585 14,124 19,297 30,582 76,227 83,587


Reported PAT 44,693 30,761 40,951 54,139 37,310 30,524 38,940 61,832 173,564 168,585

Adjusted PAT* 44,796 30,781 46,801 61,623 37,360 30,615 39,052 61,832 176,624 168,635

Change (%) 8.4 37.8 26.8 1.9 -16.6 -0.5 -16.6 0.3 9.9 -4.5

Key Operational metrics

Production 102.5 89.1 117.4 143.3 102.9 97.6 118.7 145.8 452.2 465.0

Sales/Offtake 113.0 101.7 120.5 130.0 115.3 109.1 117.2 130.5 465.2 472.0

Blended Realization (INR/ton)

- Regulated 1,267 1,281 1,232 1,403 1,296 1,262 1,275 1,440 1,298 1,323

- E-auction 2,562 2,460 2,941 2,308 2,140 2,220 2,232 2,224 2,544 2,205

- Washed Coal 2,315 2,092 2,491 2,264 2,117 2,327 2,430 2,255 2,300 2,282

- Own Consumption 3,023 2,626 2,703 2,759 2,810 1,816 2,773 2,704 2,781 2,501

E: MOSL Estimates; *Pre Exceptional

Coal IndiaCMP: INR288 Neutral


EBITDA 180.8 183.2 195.9 214.3

NP* 176.6 168.6 179.8 193.1

EPS (INR)* 28.0 26.7 28.5 30.6

EPS Gr. (%) 9.3 -4.5 6.6 7.4

BV/Sh. (INR) 76.7 67.4 78.8 91.1

RoE (%)** 28.4 27.9 26.0 24.5

RoCE (%) 56.9 56.9 59.2 54.6

Payout (%) 62.9 126.5 55.9 60.0

Valuations

P/E (x) 10.3 10.8 10.1 9.4

P/BV (x) 3.8 4.3 3.7 3.2

EV/EBITDA (x) 6.7 7.1 6.7 5.8

Div. Yield (%) 4.9 10.4 4.9 6.4

*Adj. EPS, **RoE is adj.for OB reserves

accounts, as appplicable under IFRS

Bloomberg COAL IN


M. Cap. (INR b)/(USD b) 1,818 / 30


1,6,12 Rel Perf. (%) 12 / -18 / -26

� We expect COAL to report 4QFY14 revenue of INR202.6b (up 2% YoY)and PAT of INR62b (flat YoY). For 4QFY14, we expect dispatch to be131m tons (flat YoY). We estimate CIL production in 4QFY14 at 146mtons up 2% YoY.

� RB Index has softened QoQ to USD79/ton, vs USD83/ton in 3Q - whichwas first ever improvement since 9 straight quarters of decline. For4QFY14, INR has remained flat QoQ at INR62. Hence the lower coalprices could have bearing on market linked realisation.

� The ACQ realization is expected to be higher in the 4QFY14 YoY, as CoalIndia may gain on account of grade mix and bonus for higher deliveryof coal than commitment under FSA.

� We expect COAL to report consolidated PAT of INR168.6b in FY14 (down5% YoY) and INR180b in FY15 (up 7% YoY). Stock trades at reported P/Eof 10.1x FY15E.

Key issues to watch out� Volume, realization trend and guidance for FY15. E-Auction and ACQ

mix guidance for FY15.� Modalities of coal import.� Gain on account of price increase, impact of loss due to grade slippages

and bonus component.

C–196April 2014


Jaiprakash Power VenturesCMP: INR14 Buy


EBITDA 19.3 20.4 44.6 61.2

NP 3.8 1.5 4.7 11.7

EPS (INR) 1.3 0.5 1.6 4.0

EPS Gr. (%) (6.1) (59.2) 208.5 146.9

BV/Sh. (INR) 22.0 22.1 20.6 24.2

RoE (%) 6.3 2.4 7.5 17.7

RoCE (%) 5.9 4.9 9.4 13.4

Payout (%) - - - -

Valuations

P/E (x) 11.1 27.1 8.8 3.6

P/BV (x) 0.6 0.6 0.7 0.6

EV/EBITDA (x) 13.6 15.6 7.2 4.7

Div. Yield (%) - - - -

Bloomberg JPVL IN




1,6,12 Rel Perf. (%) -21 / -23 / -64


1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Sales 5,454 9,058 4,270 3,744 7,863 9,692 4,924 5,318 22,526 27,797

Change (%) 98.1 39.4 7.6 27.5 44.2 7.0 15.3 42.0 39.4 23.4

EBITDA 4,900 8,115 2,679 1,637 5,882 7,610 2,766 2,925 17,331 19,183

Change (%) 98.6 33.4 -25.0 -32.9 20.0 -6.2 3.2 78.7 19.0 10.7

As of % Sales 89.9 89.6 62.7 43.7 74.8 78.5 56.2 55.0 76.9 69.0

Depreciation 674 774 960 831 1,082 1,075 1,073 1,134 3,239 4,364

Interest 2,278 2,885 2,874 2,946 3,506 3,574 3,601 3,673 10,983 14,353

Other Income 91 73 113 105 48 74 214 185 382 521

PBT 2,039 4,528 -1,043 -2,034 1,343 3,036 -1,694 -1,697 3,491 987

Tax 210 868 -67 -811 414 517 -166 -354 200 410


Reported PAT 1,830 3,660 -976 -1,223 929 2,519 -1,529 -1,342 3,292 577

Adjusted PAT (Pre Exceptional) 1,830 3,660 -976 -973 1,179 2,519 -1,529 -1,342 3,542 827

Change (%) 162.9 30.4 -263.9 1,338.8 -35.6 -31.2 56.6 38.0 -11.7 -76.7

Operational Details - Generation (MU)

B a s p a 343 660 151 104 426 650 179 85 1,258 915

Vishnuprayag 574 937 261 116 438 0 0 0 1,888 1,314

Karcham Wangtoo 1,191 2,154 467 242 1,528 2,279 569 267 4,054 2,863

Bina 0 11 171 238 301 319 509 667 421 421

E: MOSL Estimates

� In 4QFY14, we expect Jaiprakash Power (JPVL) to post revenues ofINR5.3b up 42% YoY, EBITDA of INR2.9b up 79% YoY and net loss ofINR1.3b (up 38% YoY).

� We estimate generation from Karcham Wangtoo at 267MU as comparedto 569BU in 3QFY14. We estimate generation of Bina during the quarterat 667MU, better than 509MUs achieved during 3QFY14. Vishnuprayagwas not operational during the quarter.

� JPVL has announced divestment of its 2 projects, viz. K Wangtoo andBaspa to TAQA led consortium at an EV of INR100b.

� Nigrie (1.3GW) is expected to be commissioned during 1QFY15 andBara I (2GW) in end FY15, providing delta in FY15/16 earnings.

� We expect JPVL to post net profit of INR1.5b in FY14E (down 60% YoY)and INR4.7b in FY15E (up 209% YoY). The stock trades at a reported PERof 8.8x FY15E.

Key issues to watch out� Coal availability for the Bina TPS (500MW).� Update about the clearance of Dongri tal II coal mine.� Update on commissioning of Nigre (1.3GW) and Bara I (2GW).

C–197April 2014



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Total Operating Income 21,915 20,765 23,652 23,010 24,718 20,246 21,505 24,995 89,343 91,465

Change (%) 72.2 108.4 33.7 10.6 12.8 -2.5 -9.1 8.6 46.0 2.4

EBITDA 5,834 5,769 8,370 7,959 9,226 8,378 7,995 8,143 27,932 33,744

Change (%) 48.4 388.2 139.5 35.6 58.1 45.2 -4.5 2.3 92.9 20.8

Depreciation 1,697 1,605 1,572 1,741 2,008 2,032 2,065 2,271 6,615 8,376

Interest 2,426 2,281 2,364 2,557 2,747 2,927 3,365 3,512 9,628 12,551

Other Income 764 453 300 617 453 549 472 675 2,134 2,150

Extraordinary items 2,325 -925 610 -43 1,872 1,675 183 0 1,966 3,730

PBT 150 3,261 4,125 4,322 3,052 2,293 2,855 3,034 11,857 11,236

Tax 160 721 1,005 848 870 569 753 591 2,733 2,783


Reported PAT -10 2,540 3,120 3,474 2,182 1,724 2,101 2,444 9,124 8,453

Share of profit from Assoc 0 0 0 -117 46 61 60 60 -117 227

Minority interest -44 -1 15 0 -5 37 9 15 -29 56

Exceptional Income/ (Expense) 1,915 -925 610 -43 1,872 685 183 0 1,556 2,740

Reported PAT (Post MI) 34 2,541 3,105 3,357 2,141 1,626 2,032 2,369 9,037 8,170

Adjusted PAT 1,949 1,615 3,715 3,314 4,013 2,311 2,215 2,369 10,592 10,910

Change (%) 43.0 n.a. n.a. 96.9 105.9 43.1 -40.4 -28.5 219.8 3.0

Operational Details

Sales Mix (MUs)

- Long Term 2,233 2,036 2,264 2,271 2,704 2,268 1,749 1,687 8,808 8,408

- Merchant 2,498 2,205 2,616 2,570 2,275 1,510 2,308 2,911 9,885 9,003

Realization (INR/unit) 4.56 4.81 4.77 4.67 4.88 5.26 5.22 5.37 4.70 5.17

- PPA 3.64 3.65 3.30 2.99 3.86 4.36 5.13 4.49 3.26 4.49

- Merchant 4.40 4.60 4.60 4.60 4.42 5.10 4.66 4.59 4.55 4.65

E: MOSL Estimates

JSW EnergyCMP: INR59 Neutral


EBITDA 27.9 33.7 29.2 26.2

NP 10.6 10.9 9.3 8.5

Adj. EPS (INR) 6.5 6.7 5.7 5.2

EPS Gr. (%) 219.7 3.0 -14.8 -8.7

BV/Sh. (INR) 37.8 41.4 45.5 49.2

RoE (%) 17.8 16.9 13.1 11.0

RoCE (%) 14.4 14.6 13.4 12.1

Payout (%) 31.0 18.7 25.0 25.0

Valuations

P/E (x) 9.2 8.9 10.4 11.4

P/BV (x) 1.6 1.4 1.3 1.2

EV/EBITDA (x) 6.5 5.8 6.1 6.1

Div. Yield (%) 3.4 2.1 2.4 2.2

Bloomberg JSW IN




1,6,12 Rel Perf. (%) 12 / 19 / -10

� We expect JSWEL to report consolidated revenue of INR25b (up 9%YoY) and PAT of INR2.37b, down 28% YoY.

� We expect JSWEL to generate 4.2BUs during 4QFY14 including coal andlignite capacity. De-growth in generation is primarily led by RajWestproject, while we also assume moderation in generation for Ratnagiriprojects.

� We have assumed short term realization of INR4.6/unit, almost flatYoY. We expect fuel cost to be ~ INR2.8/unit (coal based).

� Entire capacity of Rajwest project (1080MW) is now operational, afterthe project was closed down due to lack of fuel availability. This wason account of delay in obtaining the clearance for enhancing thecapacity of Kaprudi lignite mine.

� We expect JSWEL to report consolidated PAT of INR10.9b in FY14 (up3% YoY) and INR9.3b in FY15 (down 15% YoY). Stock trades at reportedP/E of 10.4x FY15E.

Key issues to watch out� ST realization, fuel mix and fuel cost for 4QFY14 and guidance for

FY15E.� RajWest project: lignite mine clearance.� Capacity addition, cash flow utilisation plan.

C–198April 2014



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Sales 14,218 17,725 10,104 10,994 16,194 16,500 11,234 12,857 53,066 56,785

Change (%) -3.3 -4.6 14.6 -23.8 13.9 -6.9 11.2 16.9 -6.2 7.0

EBITDA 9,040 12,036 6,132 6,050 10,707 10,187 6,237 7,401 33,240 34,533

Change (%) -5.5 -9.4 61.9 -39.1 18.4 -15.4 1.7 22.3 -9.1 3.9

As of % Sales 63.6 67.9 60.7 55.0 66.1 61.7 55.5 57.6 62.6 60.8

Depreciation 2,218 2,532 2,390 2,546 2,760 2,825 3,156 3,566 9,693 12,307

Interest 798 1,047 989 1,020 1,160 1,203 1,512 1,781 3,854 5,656

Other Income 2,451 2,406 1,890 3,156 2,486 3,002 2,736 2,637 9,928 10,861

EO Income/(Expense) 0 0 0 2,400 0 0 0 0 2,400 0

PBT 8,475 10,863 4,644 8,041 9,272 9,161 4,307 4,691 32,021 27,431

Tax 1,777 3,028 1,526 2,208 2,073 2,085 1,713 1,832 8,539 7,703


Reported PAT 6,698 7,834 3,118 5,833 7,199 7,076 2,594 2,859 23,482 19,728

Adjusted PAT 6,450 7,272 2,416 2,863 7,160 7,747 2,594 2,859 19,000 20,360

Change (%) 6.6 -6.4 -18.8 35.7 11.0 6.5 7.3 -0.1 0.6 7.2

Operational Details

Generation (MUs) 6,148 7,634 2,563 2,496 6,388 6,719 2,350 2,407 22,825 22,524

Increase/ (Decrease) (%) -2.2 10.0 -17.8 4.6 3.9 -12.0 -8.3 -3.6 22.2 -1.3

Installed Capacity (MW) 5,287 5,518 5,551 5,562 5,694 5,814 5,979 6,369 5,562 6,369

- Owned 3,767 3,998 4,031 4,042 4,174 4,294 4,459 4,849 4,042 4,849

- JV's 1,520 1,520 1,520 1,520 1,520 1,520 1,520 1,520 1,520 1,520

E: MOSL Estimates

NHPCCMP: INR19 Neutral


EBITDA 41.8 42.9 46.6 46.9

NP 23.6 26.3 29.9 30.9

Adj. EPS (INR) 1.7 2.1 2.4 2.8

EPS Gr. (%) -5.9 24.1 14.6 16.6

BV/Sh. (INR) 24.7 26.5 28.0 29.4

RoE (%) 7.0 7.7 8.8 8.6

RoCE (%) 8.5 8.2 9.0 9.0

Payout (%) 30.8 33.8 36.4 37.9

Valuations

P/E (X) 11.3 9.1 8.0 6.8

P/BV (X) 0.8 0.7 0.7 0.7

EV/EBITDA (X) 8.2 7.9 6.8 6.5

Div. Yield (%) 3.1 3.5 4.5 4.8

Bloomberg NHPC IN


M. Cap. (INR b)/(USD b) 235 / 4


1,6,12 Rel Perf. (%) 1 / -18 / -23

� We expect NHPC to report 4QFY14 revenue of INR12.9b (up 17% YoY)and PAT of INR2.9b (flat YoY). We expect NHPC to generate 2.4BUs ascompared to 2.5BUs in 4QFY13 - decline in generation is due to lowergeneration from plants impacted in the floods.

� For FY14, NHPC is targeting to add 937MW of projects, while it hascommissioned TLDP III (132MW), 4 units of URI II (240MW) and 3 unitsof Parbati stage III (390MW). Thus, capacity addition at 762MW ismarginally lower than guidance.

� NHPC has guided for addition of only 164MW TLDP IV during FY15/16.However, given substantial delays in FY13 capacity addition and lowerthan expected commissioning of ~937MW addition in FY14, we expectslippages to be passed on to FY15E.

� NHPC has completed buyback of INR23.7b, encompassing 10% of thepaid up capital of the company.

� We expect NHPC to report consolidated PAT of INR26.3b in FY14 (up24% YoY) and INR29.9b in FY15 (up 15% YoY). Stock trades at reportedP/E of 8x FY15E.

Key issues to watch out� Incentives for FY14E and progress on projects impacted by floods.� Total capacity addition for FY15E.� Status on Parbati II and Subhanshri lower project.

C–199April 2014



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Sales 159,600 161,197 157,749 164,618 156,129 162,723 187,794 157,942 643,164 664,587

Change (%) 12.6 4.8 2.9 1.2 -2.2 0.9 19.0 -4.1 5.2 3.3

EBITDA 36,306 42,243 39,952 39,065 42,653 41,088 46,301 40,062 157,565 170,103

Change (%) 26.7 30.4 39.9 -5.0 17.5 -2.7 15.9 2.6 19.9 8.0

As of % Sales 22.7 26.2 25.3 23.7 27.3 25.3 24.7 25.4 24.5 25.6

Depreciation 7,602 7,865 8,288 10,213 9,423 9,679 10,243 10,378 33,968 39,724

Interest 4,994 3,035 5,304 5,912 6,174 6,205 6,010 6,118 19,244 24,507

Other Income 8,849 10,482 7,546 17,714 7,459 7,871 7,747 8,090 44,591 31,168

EO Inc./(Exp.) 16,841 0 0 0 0 16,841 0

PBT 32,559 41,825 33,907 57,495 34,514 33,075 37,795 31,656 165,786 137,039

Tax 7,573 10,402 7,940 13,679 9,244 8,146 9,182 7,594 39,592 34,166


Reported PAT 24,987 31,424 25,968 43,816 25,270 24,929 28,613 24,061 126,194 102,873

Adjusted PAT 24,313 19,660 25,289 20,662 22,263 21,989 29,896 24,061 89,923 98,209

Change (%) 27.9 32.9 22.2 -10.0 -8.4 11.8 18.2 16.5 12.8 9.2

Capacity

- NTPC 34,810 34,810 34,810 35,810 35,810 35,810 36,970 36,970 35,810 36,970

- JVs 4,364 4,364 4,864 5,364 5,364 5,364 5,474 6,059 5,364 6,059

Total 39,174 39,174 39,674 41,174 41,174 41,174 42,444 43,029 41,174 43,029

Addition 2,160 - 500 1,500 - - 1,270 585 4,160 1,855

E: MOSL Estimates; Adj profit based on the calculations provided by the management

NTPCCMP: INR120 Buy


EBITDA 171.1 172.8 167.6 194.8

NP 89.9 98.2 95.9 110.6

Adj EPS (INR) 10.9 11.9 11.6 13.4

EPS Gr. (%) 12.8 9.2 -2.4 15.3

BV/Sh. (INR) 97.5 104.1 110.4 117.6

RoE (%) 11.7 11.8 10.8 11.8

RoCE (%) 14.3 11.4 10.0 10.7

Payout (%) 43.4 47.2 46.1 46.1

Valuations

P/E (x) 11.0 10.1 10.3 8.9

P/BV (x) 1.2 1.2 1.1 1.0

EV/EBITDA (x) 7.7 7.9 8.6 7.7

Div. Yield (%) 4.8 4.2 3.9 4.5

Bloomberg NTPC IN


M. Cap. (INR b)/(USD b) 989 / 17


1,6,12 Rel Perf. (%) 1 / -35 / -34

� We expect NTPC to report PAT of INR24b (up 17% YoY), the growth inthe profits is mainly led by the addition of the new capacities.

� We expect NTPC's generation to be up by 2% YoY, led down by lowergeneration from the gas based capacity at ~3.1BU as compared to3.7BU's YoY. We estimate coal based generation to grow 3% YoY.

� NTPC has achieved its capacity addition (1.8GW) and commercialisationtarget (2.5GW) for FY14E.

� NTPC's board has recently accorded investment approval to 1,980MWNorth Karanpura power project, to be setup at a cost of INR144b. Earlier,the board had approved investment in 1,600MW Darlipalli project too.

� NTPC has contested against the latest tariff regulation enunciated byCentral Electricity Regulatory Commission (CERC) in Delhi High court.Next hearing is due on 19th May 2014.

� We expect NTPC to report PAT of INR98.2b in FY14E (up 9% YoY) andINR96b in FY15E (down 2.4% YoY). Stock trades at reported P/E of 10.3xFY15E.

Key issues to watch out� Plant availability factor for coal based projects and generation loss.� Guidance on capacity addition/commercialization for FY15E� Development on captive coal block development.� Development on regulation, and impact.

C–200April 2014



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Sales 28,883 30,858 33,617 33,738 35,565 39,816 36,833 38,029 127,095 150,243

Change (%) 31.1 36.3 36.3 8.8 23.1 29.0 9.6 12.7 26.6 18.2

EBITDA 24,646 26,693 29,231 28,311 30,557 33,709 31,041 32,095 108,880 127,402

Change (%) 33.6 40.6 39.0 8.7 24.0 26.3 6.2 13.4 29.9 17.0

As of % Sales 85.3 86.5 87.0 83.9 85.9 84.7 84.3 84.4 85.7 84.8

Depreciation 7,565 8,252 8,653 9,049 9,644 9,660 9,903 10,332 33,519 39,538

Interest 6,461 5,295 6,848 6,747 7,599 8,014 7,874 8,137 25,352 31,623

Other Income 920 1,570 1,286 2,417 803 1,228 1,160 1,894 6,193 5,085

Extraordinary Inc / (Exp) 0 -140 6 -117 60 0 0 0 -247 0

PBT 11,540 14,856 15,009 15,049 14,177 17,263 14,425 15,521 56,449 61,326

Tax 2,836 3,597 3,717 3,954 3,747 4,815 3,995 4,071 14,104 16,628


Reported PAT 8,705 11,259 11,291 11,094 10,431 12,447 10,431 11,450 42,345 44,698

Adjusted PAT (Pre Exceptional) 9,065 10,071 11,072 10,926 10,370 10,296 10,421 11,454 41,359 42,541

Change (%) 29.1 32.5 43.0 0.9 14.4 2.2 -5.9 4.8 24.6 2.9

Operational Details

Capitalization 41,000 26,600 25,860 78,540 29,500 20,500 30,500 84,500 172,000 165,000

Regulated Equity 190,112 198,092 205,850 215,000 223,850 230,000 239,150 264,500 215,000 264,500

E: MOSL Estimates

Power Grid CorporationCMP: INR105 Buy


EBITDA 109.4 127.4 147.4 178.4

NP 41.4 42.5 49.2 61.5

EPS (INR) 8.9 8.1 9.4 11.8

EPS Gr. (%) 24.6 -9.0 15.6 25.2

BV/Sh. (INR ) 56.7 66.2 72.3 80.0

RoE (%) 16.6 14.0 13.6 15.4

RoCE (%) 9.3 8.8 8.6 9.2

Payout (%) 35.0 33.3 35.0 35.0

Valuations

P/E (x) 11.8 12.9 11.2 8.9

P/BV (x) 1.9 1.6 1.5 1.3

EV/EBITDA (x) 10.2 10.2 9.7 8.6

Div. Yield (%) 2.6 2.3 2.7 3.4

Bloomberg PWGR IN


M. Cap. (INR b)/(USD b) 550 / 9


1,6,12 Rel Perf. (%) 5 / -8 / -20

� We expect Power grid to report 4QFY14 PAT of INR11.5b (up 5% YoY).The growth in the profit is mainly lead by the capitalisation. In 4QFY14,we expect PWGR to capitalize INR84.5b. This is on the back of INR130bcapitalization announced by the company till mid-January 2014, whilewe assume capitalization of INR165b for FY14E.

� We estimate consultancy revenue at INR1.9b and telecom revenue atINR723m. We estimat e contribution of ~ INR1.3b to PBT fromconsultancy and telecom.

� PWGR has recently emerged as successful bidder for UnchaharTransmission project.

� PWGR's has raised INR53.2b through fresh issue of shares, which wouldenable it to meet equity funding requirement for projects underconstruction.

� We expect PWGR to report PAT of INR42.5b in FY14 (up 3% YoY) andINR49.2b in FY15E (up 16% YoY). Stock trades at 11.2x FY15 EPS and 1.5xFY15 BV.

Key issues to watch out� Capitalisation / capex guidance for FY15E.� Details on existing and recently won competitively bid projects.� Development on green energy projects, State JV's, etc.

C–201April 2014



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Power Traded (MUs) 6,566 9,428 5,871 6,732 8,068 10,450 8,236 7,570 28,597 34,324

Sales 19,869 27,928 18,778 21,987 27,704 31,402 27,515 29,746 88,569 116,366

Change (%) -20.1 16.9 41.2 52.3 39.4 12.4 46.5 35.3

EBITDA 313 569 300 512 340 679 1,156 392 1,700 2,567

Change (%) -34.4 28.3 42.9 58.7 8.6 19.2 285.8 -23.4 17.0 51.0

As of % Sales 1.6 2.0 1.6 2.3 1.2 2.2 4.2 1.3 1.9 2.2

Depreciation 10 10 11 11 11 11 10 15 42 46

Interest 1 4 4 0 4 3 2 1 9 10

Other Income 26 63 12 23 81 189 154 156 119 580

Extraordinary Income/(Expense) -23 0 0 7 3 1 42 0 -17 -46

PBT 304 619 297 530 410 854 1,339 533 1,785 3,137

Tax 98 173 79 147 114 235 432 146 497 927


Reported PAT 206 446 218 371 296 619 908 386 1,287 2,210

Adjusted PAT 229 446 218 377 293 618 866 386 1,270 2,163

Change (%) -49.4 25.4 129.2 26.2 27.8 38.7 297.0 2.4

Operational Details

Power Traded (MUs) 6,566 9,428 5,871 6,732 8,068 10,450 8,236 7,570 28,597 34,324

Growth (% YoY) -2.4 8.9 28.6 53.7 22.9 10.8 40.3 12.4 17.6 20.0

Adj Margins (Ps/Unit) 3.98 3.06 3.74 3.71 6.33 4.06 3.98 3.71 3.31 4.50

E: MOSL Estimates; % Change for FY13E not comparable given inclusion of tolling profits from 1QFY13 onwards

PTC IndiaCMP: INR68 Buy


EBITDA 1.7 2.6 1.9 1.9

NP* 2.0 3.1 2.9 3.1

Adj. EPS (INR) 6.7 10.5 9.7 10.3

EPS Gr. (%) -3.2 57.4 -8.5 6.8

BV/Sh. (INR) 78.6 84.0 87.4 91.1

RoE (%) 5.6 9.0 7.2 7.5

RoCE (%) 3.8 11.0 8.0 8.5

Payout (%) 45.0 25.4 45.0 45.0

Valuations

P/E (x) 10.1 6.4 7.0 6.6

P/BV (x) 0.9 0.8 0.8 0.7

EV/EBITDA (x) 9.7 4.2 4.4 3.5

Div. Yield (%) 2.9 2.7 4.1 4.5

Bloomberg PTCIN IN




1,6,12 Rel Perf. (%) 3 / 30 / -5

� We expect PTC India (PTCIN) to report 4QFY14 revenue of INR29.7b(up 35% YoY) and PAT of INR386m (up 2% YoY).

� In 4QFY14 we expect PTC's volume at ~7.6BUs (up 12% YoY). We expectadjusted trading margin ~Paisa3.7/kwh.

� On Simhapuri/Meenaxi tolling business, we expect PTC to do salesvolume of 533MUs and PBT spread of INR0.30/unit, flat QoQ.

� Higher rebate and surcharge income boosted the PAT in 9MFY14,particularly in 3QFY14, as it announced receipt of INR7.78b fromUPDISCOMs.

� We expect PTC to report consolidated PAT of INR3.1b in FY14E (up 57%YoY) and INR2.9b in FY15E (down 9% YoY). Stock trades at reported P/Eof 7x FY15E.

Key issues to watch out� Trading volumes and margin guidance for FY15E and commissioning

of projects.� Simhapuri and Meenakshi business volumes and PBT contribution.� Cash uti lization policy.

C–202April 2014



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Sales 34,473 35,002 34,552 39,193 32,789 28,318 25,363 27,711 143,220 114,182

Change (%) -5.8 -11.4 -22.8 -31.6 -4.9 -19.1 -26.6 -29.3 -19.6 -20.3

EBITDA 4,598 4,535 4,898 5,126 4,401 4,768 5,149 5,461 19,158 19,779

Change (%) -33.9 -36.1 -24.9 -17.0 -4.3 5.1 5.1 6.5 -28.4 3.2

As of % Sales 13.3 13.0 14.2 13.1 13.4 16.8 20.3 19.7 13.4 17.3

Depreciation 1,130 922 980 888 828 847 873 1,151 3,921 3,699

Interest 1,902 1,980 2,055 1,902 2,172 2,316 2,440 2,083 8,794 9,011

Other Income 2,586 3,457 2,433 1,374 3,141 3,004 3,027 2,542 10,806 11,713

Exceptional item 4,183 0 0 0 0 0 4,183 0

PBT 4,152 5,090 8,480 3,710 4,542 4,608 4,862 4,770 21,432 18,783

Tax (incl con tingencies) 882 949 1,887 -2,280 800 1,150 1,180 1,190 1,437 4,320

Effective Tax Rate (%) 21.2 18.6 22.2 -61.5 17.6 25.0 24.3 24.9 6.7 23.0

Reported PAT 3,270 4,141 6,594 5,990 3,742 3,458 3,682 3,580 19,995 14,463

PAT (Pre Exceptionals) 3,270 4,141 3,749 5,990 3,742 3,458 3,682 3,580 17,150 14,463

Change (%) 13.8 -15.5 -7.6 -7.5 14.4 -16.5 -1.8 -40.2 -12.6 -15.7

Operational Details - EPC Division

Revenues 17,749 19,184 19,260 23,049 16,537 12,375 8,254 10,212 79,243 47,378

EBIDTA 3,031 2,836 3,050 3,533 2,312 1,785 1,374 1,624 16,114 7,096

Margin (%) 17.1 14.8 15.8 15.3 14.0 14.4 16.6 15.9 20.3 15.0

E: MOSL Estimates; Quarterly nos. are on standalone basis

Reliance InfrastructureCMP: INR435 Buy


EBITDA 18.6 19.8 18.0 19.1

NP 17.2 14.5 14.3 16.0

Adj. EPS(INR) 65.2 55.0 54.4 60.7

EPS Gr. (%) -14.3 -15.7 -1.0 11.6

BV/Sh. (INR) 734 781 827 879

RoE (%) 10.7 7.3 6.8 7.1

RoCE (%) 10.7 9.2 8.5 8.8

Payout (%) 11.2 13.7 15.5 13.9

Valuations

P/E (X) 6.7 7.9 8.0 7.2

P/BV (X) 0.6 0.6 0.5 0.5

EV/EBITDA (X) -0.8 0.5 0.8 0.4

Div. Yield (%) 1.5 1.5 1.7 1.7

Bloomberg RELI IN


M. Cap. (INR b)/(USD b) 114 / 2


1,6,12 Rel Perf. (%) 14 / 2 / 15

� We expect Reliance Infrastructure (RELI) to report 4QFY14 revenue ofINR27.7b, down 29% YoY. This is attributable to lower revenue fromEPC division. During the quarter we expect RELI to post EPC revenueof INR10.2b (v/s INR23b YoY). PAT for the quarter is expected at INR3.6b(down 40% YoY).

� RELI announced commercial operation of its 10th road project recently,viz. Trichy-Karur in Tamil Nadu. This completes the commissioning ofall its six projects in Tamil Nadu.

� Similarly, it commissioned its 7th transmission line in Maharashtra, apart of 9 transmission project of Western Region System strengtheningscheme.

� It also begun operation at its first 5m tons cement plant in MadhyaPradesh (built at cost of INR30b). Annual contribution from the projectto the revenue is estimated at INR30b.

� The EPC revenues in FY14/15 may get impacted due to prolonged delayin the large capacity projects of Chittrangi, Krishnapattnam and Tilaiya.

� We expect RELI to report standalone PAT of INR14.5b in FY14 (down16% YoY) and INR14.3b in FY15 (down 1% YoY). Stock trades at reportedP/E of 8x FY15E.

Key issues to watch out� Performance of EPC division and order book position.� Performance of infrastructure business and development on projects

under construction/in operation.� Contribution from cement business.

C–203April 2014



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Units Generated 4,259 4,272 3,873 3,366 3,897 3,404 3,977 4,916 15,770 16,195

Total Operating Income 22,841 25,198 25,491 22,143 26,075 21,995 20,079 19,014 95,673 87,164

Change (%) 18.9 29.3 13.2 -6.8 14.2 -12.7 -21.2 -14.1 12.6 -8.9

EBITDA 3,759 5,279 5,685 5,793 7,420 6,023 7,118 4,667 20,517 25,228

Change (%) -12.1 26.0 19.7 30.4 97.4 14.1 25.2 -19.4 16.2 23.0

As of % Sales 16.5 21.0 22.3 26.2 28.5 27.4 35.4 24.5 21.4 28.9

Depreciation 1,548 1,556 1,281 -744 1,360 1,396 1,484 1,643 3,641 5,883

Interest 1,386 1,643 1,788 1,965 2,363 1,620 2,143 2,200 6,783 8,326

Other Income 3,456 1,963 318 1,204 1,799 463 -93 1,066 6,940 3,234

PBT 4,281 4,043 2,934 5,776 5,496 3,470 3,397 1,889 17,034 14,253

Tax 1,158 1,083 770 3,776 1,926 852 886 575 6,787 4,239


Reported PAT 3,123 2,960 2,164 2,000 3,570 2,618 2,511 1,315 10,247 10,014

Adjusted PAT 4,140 2,969 1,285 885 3,527 2,703 1,307 1,315 9,279 8,852

Change (%) 40.8 -18.8 -30.3 -61.4 -14.8 -9.0 1.8 48.5 -13.6 -4.6

Consolidated Adjusted PAT 3,059 2,062 2,759 1,337 1,081 2,525 1,602 11,341 9,217 16,548

Change (%) -26.4 -53.4 -50.0 -62.0 -64.7 22.4 -41.9 748.0 -47.7 79.5

E: MOSL Estimates

Tata PowerCMP: INR85 Neutral


EBITDA 20.2 25.2 28.5 28.1

NP 9.2 16.5 17.2 17.3

Adj. EPS (INR) 3.9 7.0 7.3 7.3

EPS Gr. (%) (47.7) 79.5 4.0 0.8

BV/Sh. (INR) 49.1 52.0 55.7 59.4

RoE (%) 8.1 7.4 9.2 8.7

RoCE (%) 7.5 8.5 10.2 9.6

Payout (%) 27.6 33.2 34.9 26.2

Valuations

P/E (x) 21.8 12.2 11.7 11.6

P/BV (x) 1.7 1.6 1.5 1.4

EV/EBITDA (x) 14.5 10.9 9.2 9.0

Div. Yield (%) 1.5 1.5 1.5 1.5

Bloomberg TPWR IN


M. Cap. (INR b)/(USD b) 201 / 3


1,6,12 Rel Perf. (%) 5 / -7 / -28

� We expect Tata Power (TPWR) to report standalone PAT of INR1.3b (up49% YoY) and consolidated PAT of INR11.3b (down 10% YoY), includingpast arrears/benefit from compensatory tariff.

� Generation from TPWR's 2,021MW (Mumbai region) capacity in Jan-Feb 2014 stood at 1.2BUs, down 13% YoY. Mundra UMPP generation forthe period stood at 4.6BUs and PLF stood at 82%. Maithon generationstood at 1.1BU at a PLF of 72%.

� Global coal prices have corrected since first improvement in price in3QFY14, after straight 9 quarters of decline. 4QFY14 RB Index has againsoftened to USD79/t, vs USD83/t in 3QFY14. Given INR has hold on tosimilar levels, lower coal price could help reduce fuel cost for MundraUMPP (pass through), but may impact profitability of miningcompanies.

� Compensatory tariff granted by CERC has been challenged by a NGOrecently in Delhi HC. 4 States (Maharashtra, Punjab, Haryana & Gujarat)are also in the proecss to appeal against the order.

� In the interim, TPWR has announced rights issue in the ratio 7:50 at aprice of INR60/sh.

� We expect TPWR to report consolidated PAT of INR16.5b in FY14E (up80% YoY) and INR17.2b in FY15E (up 4% YoY). Stock trades at reportedP/E of 11.7x FY15E.

Key issues to watch out� Contribution of Maithon/Mundra UMPP project.� Update on Mundra UMPP tariff revision case.� Sales / Realization for KPC/Arutmin mines.

C–204April 2014



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Net Sales 11,566 13,246 14,052 14,061 14,905 17,182 17,743 17,041 52,925 66,871

YoY Change (%) -4.5 5.6 16.3 12.3 28.9 29.7 26.3 21.2 7.5 26.4


EBITDA 1,291 1,647 1,909 2,027 2,029 2,328 2,543 2,528 6,874 9,429

Margins (%) 11.2 12.4 13.6 14.4 13.6 13.6 14.3 14.8 13.0 14.1

Depreciation 447 468 483 644 531 562 577 748 2,043 2,418

Interest 745 785 803 820 820 905 835 850 3,153 3,589

Other Income 217 250 137 203 187 186 99 91 806 562

PBT before EO expense 316 643 759 765 866 1,047 1,230 1,020 2,483 3,984

Extra-Ord expense 0 0 0 0 118 40 6 0 0 0

PBT 316 643 759 765 749 1,007 1,224 1,020 2,483 3,984

Tax -7 -6 7 8 76 111 206 153 3 518

Rate (%) -2.1 -0.9 0.9 1.1 10.1 11.0 16.8 15.0 0.1 13.0

Min. Int. & Profit/Loss of Asso. Cos. -2 1 -2 -1 -3 -4 -4 -4 -3 -3

Reported PAT 325 648 754 758 676 900 1,022 871 2,484 3,470

Adj PAT 325 648 754 758 782 936 1,027 871 2,484 3,470

YoY Change (%) -45.1 4.0 32.4 8.9 140.8 44.5 36.3 15.0 1.3 39.7

Margins (%) 2.8 4.9 5.4 5.4 5.2 5.4 5.8 5.1 4.7 5.2

E: MOSL Estimates

ArvindCMP: INR174 Buy� We expect ARVND’s revenue to grow 21.2% YoY (decline 4% QoQ) to

INR17,041m, driven primarily driven by Wovens, Brands and Retail.

� EBITDA margin is likely to grow 24.7% YoY (decline 0.6% QoQ) toINR2,528m.

� We expect PAT to de-grow 15% YoY (and 14.7% QoQ) to INR871m dueto higher tax this year.

� We upgrade our FY14E EBITDA estimate by 1.7% to INR9,429m and PATestimate by 10.6% to INR3,470m.

� The stock is trading at 5.9x FY15E and 4.7x FY16E EV/EBITDA. MaintainBuy.

Key issues to watch out� USD realization for exports.� Margin expansion in Brands and Retail.


EBITDA 6.9 9.3 11.7 14.5

NP 2.5 3.3 4.4 5.9

EPS (Rs) 9.6 12.6 17.1 22.9

EPS Gr. (%) 12.6 31.2 35.4 34.3

BV/Sh. (INR) 87.4 97.5 111.6 131.6

RoE (%) 11.6 13.7 16.3 18.9

RoCE (%) 12.7 14.4 16.4 18.8

Payout (%) 20.1 19.5 17.5 13.0

Valuations

P/E (x) 18.1 13.8 10.2 7.6

P/BV (x) 2.0 1.8 1.6 1.3

EV/EBITDA (x) 8.8 7.1 5.9 4.7

Div Yield (%) 1.0 1.2 1.5 1.5

Bloomberg ARVND IN




1,6,12 Rel Perf. (%) 5 / 107 / 105

March 2014 Results Preview | Sector: Textile

C–205April 2014



Bata IndiaCMP: INR1,139 Buy� We expect revenue to grow 13.5% YoY (decline 7.1% QoQ) to INR5,150m

in 1QCY14. Same store sales (SSS) growth is likely to sustain at ~9%.

� EBITDA is likely to grow 20.6% YoY (decline 24% QoQ) to INR757m.

� We expect PAT to grow 81.1% YoY (and 33.3% QoQ) to INR695m.

� The stock is trading at 29x CY14E and 23.6x CY15E EPS. Maintain Buy.

Key issues to watch out�� Stores added during the quarter.�� Impact of ad campaign on revenues.�� SSS growth.

Financials & Valuation (INR b)Y/E December 2012 2013E 2014E 2015ESa les 18.4 20.7 23.6 27.1

EBITDA 2.7 3.2 3.9 4.8

NP 1.7 2.0 2.5 3.1

EPS (INR) 26.8 30.8 39.3 48.2

EPS Gr. (%) -33.4 15.0 27.6 22.6

BV/Sh.(INR) 108.8 131.6 162.8 201.6

RoE (%) 27.1 25.6 26.7 26.4

RoCE (%) 39.3 38.1 39.0 38.9

Payout (%) 26.0 23.4 20.7 19.3

Valuations

P/E (x) 42.5 37.0 29.0 23.6

P/BV (x) 10.5 8.7 7.0 5.6

EV/EBITDA (x) 26.7 22.5 18.1 14.6

Div. Yield (%) 0.6 0.5 0.6 0.7

Bloomberg BATA IN



52-Week Range (INR) 1,157 / 700

1,6,12 Rel Perf. (%) 2 / 18 / 40


1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q

Net Sales 4,538 5,725 4,844 5,544 5,150 6,538 5,532 6,331 20,651 23,553

YoY Change (%) 11.8 13.6 14.3 8.9 13.5 14.2 14.2 14.2 12.1 14.1


EBITDA 628 961 633 997 757 1,157 830 1,190 3,218 3,938

Margins (%) 13.8 16.8 13.1 18.0 14.7 17.7 15.0 18.8 15.6 16.7

Depreciation 131 141 156 164 150 160 165 170 592 639

Interest 2 2 2 6 2 2 2 2 13 7

Other Income 69 78 89 78 90 90 100 110 313 394

PBT before EO expense 564 895 563 905 695 1,085 763 1,128 2,926 3,686


PBT 564 895 563 798 695 1,085 763 1,128 2,819 3,686

Tax 180 276 187 276 219 342 240 355 919 1,160

Rate (%) 32.0 30.8 33.2 34.6 32.6 31.5 31.5 31.5 32.6 31.5

Reported PAT 384 619 376 522 695 1,085 763 1,128 1,901 2,526

Adj PAT 384 619 376 591 476 743 523 773 1,973 2,526

YoY Change (%) 6.6 17.6 17.3 16.2 24.1 20.0 39.0 30.7 15.0 28.1

Margins (%) 8.5 10.8 7.8 10.7 9.2 11.4 9.4 12.2 9.6 10.7

E: MOSL Estimates

C–206April 2014


1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q

Volumes (m litres) 50.1 54.1 44.8 47.8 49.5 54.0 45.0 47.8 196.8 196.3

Realizations (INR/ ltr) 156 159 161 169 169 174 179 182 160.9 175.7

Net Sales 7,814 8,588 7,196 8,063 8,366 9,396 8,055 8,680 31,661 34,496

YoY Change (%) 0.0 0.9 -0.2 6.4 7.1 9.4 11.9 7.7 1.4 9.0

Net Raw Material 4,429 4,638 4,091 4,727 4,802 5,346 4,500 4,921 17,885 19,568

Employee Expenses 335 385 432 308 350 370 390 408 1,460 1,518

Other Operating Expenses 1,366 1,659 1,212 1,338 1,422 1,597 1,329 1,418 5,575 5,767


EBITDA 1,684 1,906 1,461 1,690 1,792 2,083 1,836 1,933 6,741 7,644

YoY Change (%) 7.4 12.5 20.2 1.5 6.4 9.3 25.7 14.4 9.8 13.4

Margins (%) 21.6 22.2 20.3 21.0 21.4 22.2 22.8 22.3 21.3 22.2

Depreciation 71 73 79 82 83 84 85 86 305 338

Interest 5 3 1 8 3 4 5 5 17 17

Other Income 245 226 197 303 250 185 210 305 971 950


Extraordinary Inc/(Exp) 198 30 228

PBT 1,853 2,254 1,608 1,903 1,956 2,180 1,956 2,146 7,618 8,237

Tax 610 718 563 641 653 737 665 729 2,532 2,784

Rate* (%) 32.9 31.9 35.0 33.7 33.4 33.8 34.0 34.0 33.2 33.8

Reported PAT 1,243 1,536 1,045 1,262 1,303 1,443 1,291 1,417 5,086 5,453

Adj. PAT 1,243 1,401 1,026 1,262 1,303 1,443 1,291 1,417 4,932 5,453

YoY Change (%) 1.1 15.9 19.7 7.0 4.8 3.0 25.9 12.3 10.2 10.6

Margins (%) 15.9 16.3 14.3 15.7 15.6 15.4 16.0 16.3 15.6 15.8

E: MOSL Estimates


Castrol IndiaCMP: INR311 Neutral� We estimate EBITDA margin at 21.4% v/s 21.6% in 1QCY13 and 21% in

4QCY13.

� We expect revenue to grow ~7% YoY, led by 8% increase in realization,partially compensated by 1% volume decline.

� We expect net profit to increase ~5% YoY to INR1.3b.

� The stock trades at 28.2x CY14E EPS. Our DCF-based target price isINR297. Though we remain positive on CSTRL's long term prospects,given rich valuations, we have a Neutral rating.


EBITDA 6.2 6.7 7.6 8.6

Adj. PAT 4.5 4.9 5.5 6.0

Adj. EPS (INR) 9.0 10.0 11.0 12.1

EPS Gr. (%) -7.7 10.2 10.6 10.1

BV/Sh.(INR) 13.1 15.2 11.9 13.5

RoE (%) 83.8 71.4 70.4 81.4

RoCE (%) 109.1 94.2 91.9 109.1

Payout (%) 96.7 79.4 84.6 86.4

Valuations

P/E (x) 34.3 31.2 28.2 25.6

P/BV (x) 23.7 20.4 26.1 23.0

EV/EBITDA (x) 24.0 21.9 19.5 17.2

Div. Yield (%) 2.4 2.3 2.6 2.9

Bloomberg CSTRL IN


M. Cap. (INR b)/(USD b) 154 / 3


1,6,12 Rel Perf. (%) 1 / -15 / -21

Harshad Borawake ([email protected])

C–207April 2014


1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q

Net Sales 1,245 1,220 1,263 1,452 1,432 1,493 1,627 1,833 5,179 6,385

YoY Change (%) 24.0 19.0 33.9 22.2 15.0 22.4 28.8 26.2 24.5 23.3

Total Expenditure 675 670 648 617 734 766 771 728 2,611 2,999

EBITDA 570 549 615 835 697 727 856 1,105 2,568 3,386

Margins (%) 45.8 45.0 48.7 57.5 48.7 48.7 52.6 60.3 49.6 53.0

Depreciation 140 151 149 168 170 170 172 172 608 684

Interest 95 95 98 87 90 115 140 156 374 501

Other Income 19 49 74 27 25 70 80 25 168 200

PBT before EO expense 354 352 442 607 462 512 624 801 1,754 2,400

Extra-Ord expense 0 0 0 -164 0 0 0 0 -164 0

PBT 354 352 442 771 462 512 624 801 1,918 2,400

Reported PAT 354 352 442 771 462 512 624 801 1,918 2,400

Adj PAT 354 352 442 607 462 512 624 801 1,754 2,400

YoY Change (%) 151.3 124.0 440.5 68.7 30.7 45.3 41.4 32.0 137.1 36.8

Margins (%) 28.4 28.9 35.0 41.8 32.3 34.3 38.4 43.7 33.9 37.6

E: MOSL Estimates

March 2014 Results Preview | Sector: Infrastructure

Gujarat Pipavav PortCMP: INR88 Buy� In 1QCY14, we expect Gujarat pipavav port (GPPL) to post revenues of

INR1.4b (up 15% YoY), EBITDA of INR697m (up 22% YoY) and net profitof INR462m (up 31% YoY).

� Revenue growth is driven by 15% volume growth in container andmarginal increase in realization. INR has remained stable during thequarter and thus, would not have any major impact on realization.Going forward however, appreciation in INR could put some pressureon realization.

� We estimate margin improvement of ~300bps, arising from volumegrowth given high fixed cost structure for container cargo. Also,contribution from liquid cargo too would aid gross margins.

� Introduction of a new service NMG, an India Middle-East serviceoperated jointly by Simatech, X-PRESS Feeders and OEL with the firstcall being on September 19, 2013 would aid volumes in CY14E/15E.

� Expert appraisal committee has reviewed expansion plans of GPPLand has given go ahead for expansion at the port.

� We expect GPPL to post standalone net profit of INR2.4b in CY14E (up37% YoY) and INR3.4b in CY15E (up 42% YoY). The stock trades at areported PER of 12.5x CY15E.

Key issues to watch out� Container volume growth and average realization.� Plan for capex, increase in capacity post approval of clearance.� Reefer volumes and contribution to revenues.


EBITDA 2.6 3.4 4.5 5.6

NP 1.8 2.4 3.4 3.3

EPS (INR) 3.6 5.0 7.0 6.7

EPS Gr. (%) 137.2 36.8 41.9 -4.2

BV/Sh (INR) 29.0 32.5 37.3 41.6

RoE (%) 13.4 16.1 20.2 17.1

RoCE (%) 13.2 16.0 18.7 19.7

Valuations

P/E (x) 24.2 17.7 12.5 13.0

P/BV (x) 3.0 2.7 2.4 2.1

EV/EBITDA (x) 16.9 12.6 9.9 8.3

Bloomberg GPPV IN




1,6,12 Rel Perf. (%) 20 / 77 / 57


C–208April 2014



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Net Sales 817 876 952 983 1,046 1,127 1,199 1,218 3,628 4,589

YoY Change (%) 28.0 28.6 25.9 23.9 38.4 26.5


EBITDA 250 247 238 273 363 352 333 374 1,008 1,422

Margins (%) 30.6 28.2 25.0 27.8 34.7 31.3 27.8 30.7 27.8 31.0

Depreciation 28 34 41 42 42 44 43 38 144 168

Other Income 19 18 35 64 73 87 111 130 135 400

PBT before EO expense 242 231 232 295 393 394 402 465 1,000 1,655

Extra-Ord expense 0 -15 0 0 0 0 0 0 -15 0

PBT 242 216 232 295 393 394 402 465 984 1,655

Tax 75 71 72 81 113 108 104 163 300 488

Rate (%) 31 33 31 28 29 27 26 35 30.4 29.5

Reported PAT 166 145 160 214 280 287 298 302 685 1,167

Adj PAT 166 155 160 214 280 287 298 302 700 1,167

YoY Adj PAT Change (%) - 68.5 84.9 85.7 41.3 38.8 66.7

Margins (%) 20.4 17.7 16.8 21.8 26.8 25.4 24.8 24.8 19.3 25.4

E: MOSL Estimates

Just DialCMP: INR1,554 Buy� We expect revenue to grow 23.9% YoY (and 1.6% QoQ) to INR1,218m,

largely driven by addition of 12,000 campaigns during the quarter.

� EBITDA margin would expand 290bp YoY (and 290bp QoQ) to 30.7%,primarily driven by lower employee cost and higher operatingleverage.

� PAT is likely to grow 41.3% YoY to INR302m, driven by higher margins.

Key issues to watch out� Progress in monetization of new launches (Search Plus) during the

quarter.� Guidance on one-time advertising expenditure for new launches.


EBITDA 1.0 1.4 2.0 2.6

NP 0.7 1.2 1.6 2.1

EPS (Rs) 10.1 16.7 22.7 29.5

EPS Growth (%) 6.3 65.0 36.0 30.1

BV/Share (Rs) 61.3 71.1 84.5 102.4

ROE (%) 26.3 25.3 29.1 31.6

RoCE (%) 37.5 35.8 41.2 44.6

Payout (%) 41.1 38.3 40.9 39.3

Valuations

P/E (x) 153.8 93.3 68.5 52.7

P/BV (x) 25.4 21.8 18.4 15.2

EV/EBITDA (x) 89.2 62.7 45.1 33.6

Div Yield (%) 0.3 0.5 0.7 0.8

Bloomberg JUST IN


M. Cap. (INR b)/(USD b) 109 / 2

52-Week Range (INR) 1,774 / 589

1,6,12 Rel Perf. (%) 3 / 68 / -


C–209April 2014



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Net Sales 4,795 637 941 740 7,361 1,032 1,326 814 7,108 10,548

YoY Change (%) 99.1 31.1 127.2 77.6 53.5 62.1 40.8 10.0 90.9 48.4

Total Expenditure 3,752 539 815 612 5,718 906 943 664 5,718 8,232

EBITDA 1,043 98 127 128 1,642 126 382 150 1,390 2,316

Margins (%) 21.7 15.4 13.4 17.2 22.3 12.2 28.8 18.4 19.6 22.0

Depreciation 28 25 27 31 37 39 43 43 110 159

Interest 5 1 7 2 1 9 0 0 15 4

Other Income 12 7 20 11 37 12 32 20 50 100

PBT before EO expense 1,022 79 113 106 1,642 90 371 127 1,315 2,253


PBT after EO expense 1,022 79 113 119 1,642 90 371 127 1,302 2,253

Tax 15 13 2 8 25 8 6 7 38 68

Rate (%) 1.5 16.4 1.8 6.6 1.5 9.2 1.5 5.2 2.9 3.0

MIt & Profit/Loss of Asso. Cos. 0 0 0 0 0 0 2 0 0 0

Reported PAT 1,007 66 111 111 1,617 81 364 120 1,264 2,186

Adj PAT 1,007 66 111 99 1,617 81 364 120 1,277 2,186

YoY Change (%) 92.0 27.9 285.0 299.0 60.6 23.2 228.0 8.0 99.7 72.9

Margins (%) 21.0 10.4 11.8 13.4 22.0 7.9 27.4 14.8 18.0 20.7

E: MOSL Estimates

Kaveri SeedsCMP: INR639 Buy� We expect revenue to grow 10% YoY (decline 38.6% QoQ) to INR814m

due to higher lint sales and strong corn season.

� Margins are likely to expand 120bp to 18.4%, driven by higher marginsin the corn and micro nutrients segments.

� We expect PAT to grow 8% YoY (decline 67% QoQ) to INR120m.

� The stock is trading at 15x FY15E and 11.4x FY16E EPS. Maintain Buy.

Key issues to watch out� Advances received for cotton sales.


EBITDA 1.4 2.3 3.1 4.1

NP 1.3 2.2 2.9 3.8

EPS (Rs) 18.5 31.9 42.5 56.2

EPS Growth (%) 100.7 72.4 33.2 32.1

BV/Share (Rs) 50.3 75.3 107.3 149.6

ROE (%) 43.3 50.8 46.5 43.7

RoCE (%) 43.0 52.1 48.8 45.9

Payout (%) 20.0 21.8 24.6 24.8

Valuations

P/E (x) 34.5 20.0 15.0 11.4

P/BV (x) 12.7 8.5 6.0 4.3

EV/EBITDA (x) 27.0 15.7 11.1 7.9

Div Yield (%) 0.5 0.9 1.4 1.9

Bloomberg KSCL IN




1,6,12 Rel Perf. (%) 10 / 104 / 148

March 2014 Results Preview | Sector: Agri

C–210April 2014

Sandipan Pal ([email protected])


1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE


YoY Growth (%) -2.8 3.6 22.9 36.9 4.4 13.9 -2.7 0.6 14.7 3.6

EBITDA 1,776 1,828 2,198 1,890 1,609 2,121 2,447 2,431 7,695 8,608

EBITDA Margin (%) 16.4 15.3 15.4 13.5 14.3 15.5 17.6 17.2 15.1 16.3

YoY Growth (%) -3.4 -13.6 9.6 -13.7 -13.2 1.8 14.4 27.9 7.2 11.9

Depreciation 483 505 520 546 564 572 595 720 2,054 2,451

Interest 354 361 312 436 434 476 441 479 1,462 1,831

Other Income 42 64 36 456 87 5 2 26 596 120

Extraordinary items -289 -49 -450 -116 -37 -84 -41 2 -903 -160

Profit before Tax 692 978 953 1,247 661 993 1,372 1,260 3,871 4,286

Tax Provisions 241 258 420 -250 201 269 535 328 669 1,334

Tax / PBT 25 25 30 -18 29 27 39 26 14.0 30.0

PAT before MI & Income from Assoc 451 721 533 1,497 460 724 836 932 3,202 2,952

Min. Int. and Profit from Associate 17 3 3 13 6 5 11 8 0 30

Consolidated PAT 468 723 536 1,510 466 729 847 940 3,238 2,922

Adj. Consolidated PAT 757 772 986 1,626 503 813 888 938 4,141 3,082

YoY Growth (%) -20.0 -21.6 43.2 79.0 -33.5 5.3 -10.0 -42.3 17.2 -25.6

E: MOSL Estimates

March 2014 Results Preview | Sector: Diversified

Sintex IndustriesCMP: INR43 Neutral� We expect Sintex's 4QFY14 revenues to grow 1% YoY to INR14.1b,

EBITDA to grow 28% YoY to INR2.4b and Adjusted PAT remain flat YoYto INR0.94b. We expect:

� Monolithic to post 19% YoY de-growth, margin 16% (Down 3% QoQ)

� Prefab to register a growth of 16% YoY, margins 25% (marginally lowerQoQ)

� Overseas composites to grow 12% YoY, margin 8.9% (partly driven bystabilization of acquisitions at Poland and Germany).

� Domestic composites to de-grow YoY (-8%), with margin of 17% (flatQoQ).

� The stock trades at FY16E P/E of 2.6x and EV/EBITDA of 0.3x. We valueSintex at INR43 (5x FY16E EV/EBITDA)

Key issues to watch out� Outlook in domestic business and improvement in working capital� Operating stabilization of recent acquisitions in Germany and Poland,

along with outlook on overseas composite business.

Financials & Valuation (INR b)Y/E March 2013 2014E 2015E 2016ENet sales 51.1 52.9 57.2 65.0

EBITDA 7.7 8.6 9.6 11.5

Adj. PAT 4.1 3.1 3.3 4.1

Adj EPS (INR) 13.3 9.5 10.1 12.7

EPS Gr. (%) 2.1 -28.5 6.4 25.5

BV/share (INR) 100.4 106.7 116.4 128.5

RoE (%) 14.3 9.4 9.1 10.4

RoCE (%) 10.3 9.4 9.2 9.9

Payout (%) 7.8 9.1 7.7 7.0

Valuations

P/E (x) 2.5 3.5 3.3 2.6

P/BV (x) 0.3 0.3 0.3 0.3

EV/EBITDA (x) 4.8 5.1 5.3 4.7

Div. Yield (%) 2.1 2.1 2.1 2.1

Bloomberg SINT IN




1,6,12 Rel Perf. (%) 21 / 95 / -25

C–211April 2014


Quarterly Performance (INR Million)Y/E June FY13 FY14 FY13 FY14E


Net Sales 275 877 878 1,144 721 1,152 1,159 1,339 3,174 4,371

YoY Change (%) -4.4 51.8 10.2 27.1 162.1 31.4 32.0 17.0 23.8 37.7


EBITDA 34 202 273 333 139 310 332 361 842 1,142

Margins (%) 12.5 23.0 31.1 29.1 19.2 26.9 28.7 27.0 26.5 26.1

Depreciation 4 3 3 3 3 3 3 3 13 12

Interest 1 0 1 3 0 0 0 0 5 0

Other Income -9 45 0 37 51 40 40 40 72 173

PBT 21 243 269 363 187 348 370 398 896 1,303

Tax 0 82 89 104 52 101 111 120 275 384

Rate (%) 0.0 33.6 33.1 28.7 27.9 29.0 30.0 30.0 30.7 29.4

Reported PAT 21 161 180 259 135 247 259 279 621 920

Adj PAT 21 161 180 259 135 247 259 279 621 920

YoY Change (%) -53.5 42.7 20.3 31.7 557.6 53.1 43.8 7.7 23.3 48.1

Margins (%) 7.5 18.4 20.5 22.6 18.7 21.4 22.3 20.8 19.6 21.0

E: MOSL Estimates

SymphonyCMP: INR736 Buy� We expect revenue to grow 32% YoY (and 0.6% QoQ) to INR1,159m,

led by 22% volume growth.

� EBITDA margin is likely to come off 240bp YoY to 28.7% due toadvancement of sales in 3QFY14.

� We expect PAT to grow 43.8% YoY (and 4.9% QoQ) to INR259m.

� The stock is trading at 21.8x FY15E and 17x FY16E EPS. Maintain Buy.

Key issues to watch out� Based on our channel checks, volume growth for the quarter could

post a positive surprise, given the intensity of the summer seasonand expectation of El Nino conditions.

� Revenue contribution from new products like Storm, I-Series andWindow Cooler should be watched, given that pricing and marginprofile of new products is significantly better.


EBITDA 0.8 1.1 1.5 1.9

NP 0.6 0.9 1.2 1.5

EPS (INR) 17.2 25.8 33.8 43.3

EPS Gr. (%) 13.2 50.2 31.2 27.9

BV/Sh (INR) 63.5 77.1 94.9 118.1

RoE (%) 29.2 36.7 39.3 40.6

RoCE (%) 43.9 52.4 56.2 58.1

Payout (%) 47.3 47.2 46.5

Valuations

P/E (x) 42.9 28.5 21.8 17.0

P/BV (x) 11.6 9.5 7.8 6.2

EV/EBITDA (x) 24.0 16.4 12.1 9.1

Div. Yield (%) 1.4 1.9 2.3

Bloomberg SYML IN




1,6,12 Rel Perf. (%) 26 / 126 / 85

March 2014 Results Preview | Sector: Consumer Durables

C–212April 2014

Jinesh K Gandhi ([email protected])


1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Net Revenues 22,222 18,560 22,956 28,207 24,558 23,316 26,469 30,735 91,945 105,078

YoY Change (%) 19.8 4.8 20.2 32.3 10.5 25.6 15.3 9.0 19.9 14.3

EBITDA 3,944 3,261 4,042 5,372 4,566 4,259 4,651 5,808 16,618 19,283

Margins (%) 17.7 17.6 17.6 19.0 18.6 18.3 17.6 18.9 18.1 18.4

Depreciation 734 820 961 1,022 863 968 1,043 1,050 3,537 3,925

Interest 1,109 869 1,013 1,299 1,358 1,212 1,095 1,100 4,290 4,766

Other Income 275 262 280 183 265 282 501 300 1,000 1,347


Extra-Ord Expense 0 0 0 352 0 199 397 0 352 596

PBT after EO Expense 2,375 1,834 2,348 2,881 2,609 2,162 2,615 3,958 9,439 11,343

Tax 703 457 685 186 683 578 521 828 2,032 2,609

Rate (%) 29.6 24.9 29.2 6.5 26.2 26.7 19.9 20.9 21.5 23.0

Reported PAT 1,672 1,377 1,663 2,695 1,927 1,584 2,094 3,130 7,407 8,734

Income from Associate Co 357 -179 72 89 200 -38 128 80 339 370

Adjusted PAT 2,029 1,198 1,735 3,114 2,127 1,745 2,619 3,210 8,022 9,563

YoY Change (%) 10.1 68.0 52.9 38.0 4.8 45.7 51.0 3.1 36.2 19.2

Margins (%) 9.1 6.5 7.6 11.0 8.7 7.5 9.9 10.4 8.7 9.1

Market-mix

Domestic 6,220 4,910 4,010 2,910 7,690 6,380 4,840 3,472 18,050 22,382

YoY Change (%) 16.0 -13.7 5.2 24.9 23.6 29.9 20.7 19.3 5.0 24.0

% of sales 27.6 26.1 17.3 10.3 31.0 27.0 17.9 11.2 19.4 21.0

Exports 16,280 13,910 19,230 25,470 17,130 17,220 22,130 27,563 74,890 84,043

YoY Change (%) 20.7 13.5 23.4 33.2 5.2 23.8 15.1 8.2 23.9 12.2

% of sales 72.4 73.9 82.7 89.7 69.0 73.0 82.1 88.8 80.6 79.0

Total Sales (incl OI) 22,500 18,820 23,240 28,380 24,820 23,600 26,970 31,035 92,940 106,425

E: MOSL Estimates

March 2014 Results Preview | Sector: Agrochemicals

UPLCMP: INR184 Buy� We expect UNTP to report 9% growth in consolidated revenue to

INR30.7b. While domestic revenue would grow 19%, internationalrevenue would grow 8%.

� EBITDA margin is likely to be flat at 18.9%, translating into EBITDAgrowth of 8% to INR5.8b. PAT would growth 3% to INR3.2b.

� UNTP has sold its 50% stake in Sipcam Agro for USD58.5m to the JVpartner. Divestment of this JV would free up ~INR3.5b, which webelieve would be used for further debt reduction. In our recentmeeting, the management had indicated its target to reduce grossdebt-to-equity from the current 0.8x to 0.3-0.4x.

� We upgrade our FY15/FY16 EPS estimates by 1.8% each to ~INR26.8/31.6, as we factor reduction in interest cost.

� The stock trades at 6.9x FY15E EPS and at an EV of 4.6x FY15E EBITDA.Valuations are attractive; Buy with a TP of INR268 (10x FY15E EPS).

Key issues to watch out� Update on season in US and Rabi crop in India.� Outlook for FY15, especially given the increasing probability of El Nino� Status of integration of DVA Agro, Brazil and expected margin

improvement in FY15.


EBITDA 16.6 19.3 22.4 25.0

NP 8.0 9.6 11.7 13.7

Adj EPS (INR) 18.1 22.0 26.8 31.6

EPS Growth (%) 42.1 21.2 21.9 17.8

BV/Share (Rs) 105.0 124.1 146.7 174.1

RoE (%) 18.2 19.0 19.8 19.7

RoCE (%) 17.3 18.1 19.5 20.5

Payout (%) 17.5 17.8 16.1 13.6

Valuations

P/E (x) 10.2 8.4 6.9 5.8

P/BV (x) 1.8 1.5 1.3 1.1

EV/EBITDA (x) 6.4 5.7 4.6 3.8

Div. Yield (%) 1.4 1.6 1.9 1.9

Bloomberg UPE IN




1,6,12 Rel Perf. (%) -5 / 12 / 38

C–213April 2014

March 2014 Results Preview | Sector: Electrical Goods

V-Guard IndustriesCMP: INR465 Buy� We expect revenue to grow 4.9% YoY (and 12.6% QoQ) to INR3,973m in

4QFY14. Inverters business could de-grow 30% YoY. We expect overallgrowth to be driven by Cables, Electric Water Heaters and Fans.

� EBITDA margin would expand 370bp YoY (and 75bp QoQ) to 9.6%,primarily due to lower ad spends during the quarter and lower base oflast year. 4QFY13 was impacted by one-offs like gratuity provison,additional discount on Inverters and scrapping due to shifting of SolarWater Heater plant.

� We estimate 20% growth for FY15, primarily driven by improvementin demand for Pumps and lower de-growth in Inverters. Also, withhotter summers, VGRD is set to benefit, as 65-70% of its products aresummer-facing in nature.

� We expect PAT to grow 132% YoY to INR207m, driven by significantmargin expansion.

� The stock is trading at 14.7x FY15E and 11.8x FY16E EPS. Maintain Buy.

Key issues to watch out�� Demand for Inverters, given improvement in power situation.�� Outlook on the Pumps segment.�� Movement in copper prices.


EBITDA 1.1 1.2 1.6 2.0

NP 0.6 0.7 0.9 1.2

EPS (iNR) 21.1 23.5 31.7 39.3

EPS Gr. (%) 23.8 11.3 35.2 24.1

BV/Sh (INR) 87.6 105.2 128.8 158.8

RoE (%) 26.7 24.3 27.1 27.4

RoCE (%) 27.4 26.1 31.3 34.4

Payout (%) 19.4 24.7 25.6 23.6

Valuations

P/E (x) 22.1 19.8 14.7 11.8

P/BV (x) 5.3 4.4 3.6 2.9

EV/EBITDA (x) 14.0 12.3 9.4 7.6

Div. Yield (%) 0.8 1.1 1.5 1.7

Bloomberg VGRD IN




1,6,12 Rel Perf. (%) 5 / -19 / -12



1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Net Sales 3,190 3,135 3,490 3,787 4,082 3,340 3,529 3,973 13,602 14,924

YoY Change (%) 32.8 48.2 41.5 38.5 28.0 6.6 1.1 4.9 40.0 9.7


EBITDA 343 300 257 199 309 271 291 361 1,099 1,233

Margins (%) 10.7 9.6 7.4 5.3 7.6 8.1 8.3 9.0 8.1 8.3

Depreciation 28 29 29 29 29 29 31 42 114 131

Interest 45 43 49 63 55 48 54 53 200 210

Other Income 5 11 15 5 11 11 12 11 36 42

PBT 276 239 194 113 237 205 218 277 822 933

Tax 69 59 40 24 60 60 43 70 193 233

Rate (%) 25.1 24.8 20.7 21.1 25.5 29.4 19.5 25.2 23.4 25.0

Reported PAT 207 180 153 89 176 145 175 207 629 700

Adj PAT 207 180 153 89 176 145 175 207 629 700

YoY Change (%) 67.3 162.9 23.2 -53.4 -14.6 -19.4 14.2 132.1 23.8 11.3

Margins (%) 6.5 5.7 4.4 2.4 4.3 4.3 5.0 5.2 4.6 4.7

E: MOSL Estimates

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Disclosure of Interest Statement Companies where there is interest1. Analyst ownership of the stock Sesa Sterlite2. Group/Directors ownership of the stock Birla Corporation, Cairn India, Eicher Motors, GSK Pharma, Gujarat Pipavav Port, Hero MotoCorp, HPCL, IOC, Marico,

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For U.K.This report is intended for distribution only to persons having professional experience in matters relating to investments as described in Article 19 of the Financial Services and Markets Act 2000 (FinancialPromotion) Order 2005 (referred to as "investment professionals"). This document must not be acted on or relied on by persons who are not investment professionals. Any investment or investment activity towhich this document relates is only available to investment professionals and will be engaged in only with such persons.

For U.S.Motilal Oswal Securities Limited (MOSL) 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 MOSL 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 statelaws in the United States. Accordingly, in the absence of specific exemption under the Acts, any brokerage and investment services provided by MOSL, including the products and services described herein arenot available to or intended for U.S. persons.

This report is intended for distribution only to “Major Institutional Investors” as defined by Rule 15a-6(b)(4) of the Exchange Act and interpretations thereof by SEC (henceforth referred to as “major institutionalinvestors”). This document must not be acted on or relied on by persons who are not major institutional investors. Any investment or investment activity to which this document relates is only available to majorinstitutional investors and will be engaged in only with major institutional investors. In reliance on the exemption from registration provided by Rule 15a-6 of the U.S. Securities Exchange Act of 1934, as amended(the “Exchange Act”) and interpretations thereof by the U.S. Securities and Exchange Commission (“SEC”) in order to conduct business with Institutional Investors based in the U.S., MOSL has entered intoa chaperoning agreement with a U.S. registered broker-dealer, Motilal Oswal Securities International Private Limited. (“MOSIPL”). Any business interaction pursuant to this report will have to be executed withinthe provisions of this chaperoning agreement.

The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S. registered broker-dealer, MOSIPL,and therefore, may not be subject to NASD rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public appearances and trading securities held by a research analyst account.

For SingaporeMotilal Oswal Capital Markets Singapore Pte Limited is acting as an exempt financial advisor under section 23(1)(f) of the Financial Advisers Act(FAA) read with regulation 17(1)(d) of the Financial AdvisorsRegulations and is a subsidiary of Motilal Oswal Securities Limited in India. This research is distributed in Singapore by Motilal Oswal Capital Markets Singapore Pte Limited and it is only directed in Singaporeto accredited investors, as defined in the Financial Advisers Regulations and the Securities and Futures Act (Chapter 289), as amended from time to time.In respect of any matter arising from or in connection with the research you could contact the following representatives of Motilal Oswal Capital Markets Singapore Pte Limited:Anosh Koppikar Kadambari BalachandranEmail : [email protected] Email : [email protected]: (+65) 68189232 Contact: (+65) 68189233 / 65249115

Office address: 21 (Suite 31), 16 Collyer Quay, Singapore 049318

Motilal Oswal Securities LtdMotilal Oswal Tower, Level 9, Sayani Road, Prabhadevi, Mumbai 400 025

Phone: +91 22 3982 5500 E-mail: [email protected]

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