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ICICI Securities – Retail Equity Research MOMENTUM PICK Top Picks September 24, 2019
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Top Picks
September 24, 2019
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Top Picks
Company CMP Target Stoploss Upside
L&T 1412 1740 1270 23.2%
SBI 302 400 260 32.5%
Axis Bank 680 865 620 27.2%
Tata Steel 370 450 320 21.6%
ITC 238 320 220 34.5%
Ultratech Cement 4270 5500 3750 28.8%
Bajaj Finserv 7777 8800 6580 13.2%
Hero MotoCorp 2860 3330 2500 16.4%
HDFC Bank 1200 1400 1070 16.7%
M&M 570 660 500 15.8%
Asian Paints 1670 1950 1460 16.8%
Company CMP Target Stop loss Upside
Abbot India 10660 11850 8500 11.2%
Kansai Nerolac 502 555 445 10.6%
Bata India 1648 1870 1470 13.5%
Ramco Cement 753 1020 675 35.5%
PVR 1763 2080 1550 18.0%
M&M Finance 360 425 295 18.1%
Supreme Industries 1175 1345 1075 14.5%
Pidilite Industries 1435 1625 1330 13.2%
VST Industries 3700 4600 3400 24.3%
Bharat Forge 445 515 375 15.7%
Company CMP Target Stop loss Upside
Inox Leisure 315 400 250 27.0%
Sagar Cement 550 960 260 74.5%
KSB 686 810 620 18.1%
Timken India 753 940 320 24.8%
Goodyear 975 1135 220 16.4%
DCB 209 260 180 24.4%
EIH 175 225 140 28.6%
Sanofi 5986 8060 2500 34.6%
TCI Express 650 750 615 15.4%
Large Cap Mid Cap Small Cap
Like a bolt from the blue, the government today announced a reduction in the corporate tax rate from ~34% to 25.17% thereby
fulfilling its key agenda of implementing the Direct tax Code (DTC). This is a massive trigger for revving up growth and, more
importantly, resurrecting sentiments that were down in the dumps. The immediate benefit is increased cash flows to Corporate India
that will be either channelised into debt reduction or incremental investments in increasing capacity. Also, taxing new production
facilities (that come up by 2023) at 15% will enable attraction of global capital and spur a beleaguered investment cycle.
Our back of the envelope analysis of Nifty earnings suggests an EPS upgrade of 6% each for FY20E and FY21E. We now expect Nifty
EPS to grow at a CAGR of 20.3% in FY19-21E vs. 16.9% earlier. However, from a granular perspective, sectors like banking and
FMCG are expected to grow at a CAGR of 48.2% and 18%, respectively, vs. earlier CAGR of 42.2% and 12.2%. On the flip side,
sectors like IT and pharma are not expected to see any upgrades on account of existing lower tax rates, which is making the Nifty
EPS upgrade optically look to be in single digit.
Please find below the key stock picks
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Large Cap Top Picks
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Top Picks…
Tata Steel CMP : | 370 Target Price: | 450
• For FY19, the effective tax rate of Tata Steel
(standalone operations) was ~35%, which implies
~980 bps benefit on the tax rate on implementation of
the new tax rate
• We remain positive on Tata Steel as it is poised to
benefit from increasing share of domestic business in
its overall consolidated operations, thereby aiding
overall operating margins
(| crore) FY19 FY20E FY21E
Net Sales 86987.9 92403.8 103270.7
EBITDA 8498.6 9010.2 10243.5
EBITDA Margins (%) 9.8 9.8 9.9
Net Profit 6677.9 7766.6 8471.9
EV/EBITDA (x) 23.6 22.1 19.4
P/E (x) 28.9 24.3 22.3
ROE (%) 12.1 11.9 12.9
ROCE (%) 16.6 15.4 16.5
UltraTech Cement CMP : | 4,270 Target Price: | 5,500
• The effective tax rate of UltraTech Cement is ~31-
32%, which implies ~600 bps benefit on the tax rate
on implementation of the new tax rate
• We remain positive on the overall cement space and
among large cap cement stocks, Ultratech Cement is
poised for strong grow with the improving utilisation
and improving balance sheet strength
Key Financials FY19 FY20E FY21E
Net Sales 35704 41448 48183
EBITDA 6520 8909 10593
EBITDA (%) 18.3 21.5 22.0
PAT 2456 4208 5187
EPS (|) 89.5 153.3 189.0
EV/EBITDA 18.9 13.4 10.9
EV/t ($) 218.4 174.6 170.1
RoNW (%) 8.8 13.2 14.2
RoCE (%) 9.7 13.3 15.3
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Top Picks…
L&T CMP : | 1412 Target Price: | 1740
Asian Paints CMP : | 1670 Target Price: | 1950
• The effective tax rate of L&T (standalone) is ~29% (on
current tax basis), which is likely to translate into a
benefit of about ~550 bps post implementation of the
new tax rate, leading to an earnings upgrade of 4-4.5%
on FY20-FY21E each
• We remain positive on overall capital goods space led
by L&T, which is poised to be the biggest beneficiary
of any revival in private sector capex across sectors
• The effective tax rate of Asian paints is ~33%, which
implies ~800 bps benefit on the tax rate on
implementation of the new tax rate
• We remain positive on the overall paint industry as it is
poised to benefit from strong decorative volume
growth and its lean balance sheet
(| crore) FY19 FY20E FY21E
Net Sales 19341.5 22445.4 26033.9
EBITDA 3762.1 4442.4 5299.6
EBITDA Margins (%) 19.5 19.8 20.4
Net Profit 2208.0 2901.9 3553.7
EPS (|) 23.0 30.3 37.1
EV/EBITDA (x) 42.3 35.7 29.9
P/E (x) 72.5 55.2 45.1
ROE (%) 23.2 26.9 27.8
ROCE (%) 30.4 31.9 33.0
| crore FY19 FY20E FY21E
Net Sales 86,988 92,404 103,271
EBITDA 8,499 9,010 10,243
EBITDA Margin (%) 9.8 9.8 9.9
Adj. Net Profit 6,677.9 8,112.5 8,937.3
EV / EBITDA (x) 24.0 22.5 19.7
P/E (x) 29.4 24.2 22.0
RoE (%) 12.7 14.1 14.2
RoCE (%) 11.8 11.4 12.1
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Top Picks…
Hero MotoCorp CMP: | 2,860 Target Price: | 3,330
• For Hero MotoCorp, effective tax rate in FY19 was 32.4%.
Henceforth, building in the tax rate change (from 32.4% to
25.2%), our PAT estimates get revised upward by 12% for
both FY20E & FY21E
• Given the market leadership of Hero MotoCorp in the
domestic 2-W market place, cash rich balance sheet,
healthy dividend yield of ~3%; we assign a BUY rating on
the stock. We value Hero Motocorp at | 3,330 i.e. 17x P/E
on FY21E EPS of | 196/share
Mahindra & Mahindra (M&M) CMP: | 570 Target Price: | 660
• On standalone basis, effective tax rate for M&M was at
24.2% in FY19. We, however, had built in 30% tax rate for
FY20E & FY21E, going forward. Revising the same to 25.2%
leads to 8% upgradation in our PAT estimates for FY21E
• M&M is the market leader in the domestic farm equipment
space. We upgrade the stock to BUY, valuing the company
at | 660 on SOTP basis, valuing the base business at 6x
EV/EBITDA, 1x book value to investment in MVML & assign
30% holdco discount to its other investments
(| crore) FY19 FY20E FY21E
Net Sales 33650.5 33154.1 37726.3
EBITDA 4930.1 4835.1 5279.6
EBITDA Margins (%) 14.6 14.6 14.0
Net Profit 3384.6 4174.1 3914.0
EV/EBITDA (x) 10.7 10.6 9.5
P/E (x) 16.9 15.5 14.6
ROE (%) 26.3 24.8 23.4
ROCE (%) 37.1 31.1 30.2
(| crore) FY19 FY20E FY21E
Net Sales 53614.0 55380.3 61459.9
EBITDA 6639.6 6966.0 6883.9
EBITDA Margins (%) 12.4 12.6 11.2
Net Profit 4796.1 5469.5 4251.0
EPS (|) 38.6 44.0 34.2
EV/EBITDA (x) 10.0 9.4 9.4
P/E (x) 14.8 13.0 16.7
ROE (%) 14.1 11.6 10.3
ROCE (%) 17.3 14.7 13.2
* For M&M, financials are for Standalone operations
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Top Picks…
State Bank of India CMP: | 302 Target Price: | 400
• The normal tax rate earlier used to remain close to ~34-
35%, Going ahead, building in the tax rate change (from
32.4% to 25.5%), our PAT estimates for FY20E & FY21E is
revised upward by ~12-13%
• Going ahead, we remain positive on trajectory of credit
growth led by slew of measures taken by government &
RBI. Accordingly, we maintain our BUY rating with a target
price of | 400 valuing bank at 1.4x FY21EABV and add | 91
for subsidiary post 10% holding company discount
Axis Bank CMP: | 680 Target Price: | 865
• The normal tax rate earlier used to remain close to ~34-
35%, Going ahead, building in the tax rate change (from
32.4% to 25.5%), our PAT estimates for FY20E & FY21E are
revised upward by ~12-13%
• With focus on offering loans with higher risk weighted
return, credit growth is expected to pick up to 17% CAGR
for FY19-21E. We continue to maintain our positive stance
on stock with BUY recommendation and assign target price
of | 865, valuing the bank at 2.4x FY21E ABV and | 35 for
subsidiary post holding company discount
(| Bn) FY19 FY20E FY21E
NII 883 1005 1175
PPP 539 675 823
PAT 9 255 342
ABV (|) 140.4 187.9 221.0
P/E 321 12 9
P/ABV 2.2 2.2 2.2
RoA 0.02 0.7 0.8
RoE 0.5 12.1 13.8
(| crore) FY19 FY20E FY21
NII 21707 24615 29278
PPP 19004 23024 28676
PAT 5697 8994 14064
ABV (|) 219.4 302.6 345.7
P/E 33.0 23.0 14.7
P/ABV 3.3 2.4 2.1
RoA 0.8 1.0 1.4
RoE 8.7 10.9 13.5
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Top Picks…
Bajaj Finserv CMP: | 7777 Target Price: | 8800
• The effective tax rate of Bajaj Finserv is ~32-33%, which
implies ~750 bps benefit on the tax rate on implementation
of the new tax rate
• We continue to remain positive on lending as well as
insurance business. Given the cut in corporate tax rate,
earnings estimates are revised upwards by ~13% in FY20-
21E. Therefore, we upgrade our target to | 8800 and rating
from HOLD to BUY
HDFC Bank CMP: | 1200 Target Price: | 1400
• Normal tax rate earlier used to remain close to ~34-35%,
Going ahead, building in the tax rate change (from 32.4% to
25.5%), our PAT estimates for FY20E & FY21E is revised
upward by ~14%
• Going ahead, a slew of measures by RBI & government
coupled with arrival of festive season is expected to speed
up banks credit growth in coming quarters. Accordingly, We
upgrade our rating from HOLD to BUY with a target price of
| 1400 valuing it at 3.7x FY21ABV including | 75 per share
for HDB Financial Services
(| crore) FY19 FY20E FY21E
Revenue 42,608.2 50,830.4 61,713.3
PBT 8,069.5 10,035.6 12,917.1
PAT 3133.5 4554.3 5887.6
EPS (|) 196.9 286.2 370.0
BV (|) 1497.3 1781.7 2150.0
P/E 36.7 25.3 19.6
P/BV 4.8 4.1 3.4
RoA 1.6 1.9 2.0
RoE 14.1 17.5 18.8
(| crore) FY19 FY20E FY21
NII 4,82,431 5,74,865 6,79,496
PPP 3,97,496 4,78,222 5,61,780
PAT 2,10,781 2,90,317 3,46,397
ABV (|) 267.1 308.3 358.7
P/E 59.2 43.0 36.0
P/ABV 8.6 7.4 6.4
RoA 1.8 2.2 2.2
RoE 16.5 18.1 18.6
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Top Picks…
ITC CMP : | 238 Target Price: | 320
• With implementation of new tax rates, ITC is set to
benefit to the tune of ~780 bps on implementation of
new tax rates, as its effective tax rate is ~33%
• GST Council in its meeting announced no increase in
cess for cigarette companies, which is positive for ITC.
We believe the stable taxation policy would continue
in FY20, which should help in positive volume growth
for ITC
• GST cut on hotels charging | 1,001-7,500 per room
per night from 18% to 12% and above | 7,500 a night
from 28% to 18% would positively impact hotels
segment of the company
(| crore) FY19 FY20E FY21E
Net Sales 44432.7 49069.1 53698.1
EBITDA 17305.5 19366.3 21399.2
EBITDA Margins (%) 38.9 39.5 39.9
Net Profit 12464.3 15346.5 17147.3
EV/EBITDA (x) 16.5 14.7 13.2
P/E (x) 23.2 18.8 16.9
ROE (%) 21.5 24.3 24.1
ROCE (%) 30.8 31.9 31.7
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Midcap Top picks
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Top Picks…
Bata India CMP : | 1648 Target Price: | 1870
• The effective tax rate of Bata India is ~31%, which
implies ~600 bps benefit on the tax rate on
implementation of the new tax rate
• We expect Bata’s revenue to grow at a sustained pace
driven by strong expansion in non metro cities
(franchise model). Also, scaling up of premium
products (currently at ~50%) and controlled
operational cost structure are key triggers for steady
margin expansion
(| crore) FY19 FY20E FY21
Net Sales 2928.4 3302.6 3780.9
EBITDA 477.3 578.0 695.7
EBITDA Margins (%) 16.3 17.5 18.4
Net Profit 329.7 440.8 533.6
EV/EBITDA (x) 43.2 35.3 29.0
P/E (x) 65.1 48.7 40.2
ROE (%) 18.9 21.3 22.5
ROCE (%) 23.7 24.6 26.0
Ramco Cements CMP : | 753 Target Price: | 1,020
• The effective tax rate of Ramco Cements was ~30%.
Thus, the implementation of the new tax rates would
reduce by 500 bps
• While we were already bullish on the performance of
Ramco Cements, the corporate rate cuts instill higher
confidence on the company with PAT expected to
grow between FY19-21E at 26.7% CAGR
Key Financials FY19 FY20E FY21E
Net Sales 5146 5832 6810
EBITDA 1037 1402 1665
EBITDA (%) 20.1 24.0 24.4
PAT 506 702 812
EPS (|) 21 30 34
EV/EBITDA 17.2 13.1 10.7
EV/Tonne ($) 178 157 145
RoNW 11.7 14.5 15.0
RoCE 8.1 10.1 11.3
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Top Picks…
M&M Financial CMP: | 360 Target Price: | 425
• The effective tax rate of M&M Finance for FY19 was at ~34-
35%, which implies ~800-900 bps benefit on the tax rate on
implementation of the new tax rate
• Led by strong management guidance with widespread
presence in the rural region and adequate risk management
continues to provide comfort. With the recent tax sops by
the government expected to add ~15% to FY20E & FY21E
PAT. Accordingly, we maintain our BUY recommendation
and upgrade our target price to | 425 (earlier | 360) valuing
core auto business at 2.4x FY21E ABV
(| crore) FY19 FY20E FY21E
NII 4778 5785 6762
PPP 3018 3763 4393
PAT 1556 1759 2397
ABV (|) 124.1 126.2 162.1
P/E 14.7 13.0 9.9
P/ABV 3.0 3.0 2.3
RoA 2.6 2.5 2.9
RoE 15.2 14.9 16.7
VST Industries CMP : | 3700 Target Price: | 4600
• Implementation of new tax rates would result in 780
bps benefit for VST Industries as its effective tax rate is
~33%
• With no increase in cess for cigarette companies in
GST Council meeting, we expect stable taxation
regime to continue in FY20, which should propel
volume growth for the company
(| crore) FY19 FY20E FY21
Net Sales 1097.6 1259.6 1362.5
EBITDA 353.1 417.6 450.1
EBITDA Margins (%) 32.2 33.2 33.0
Net Profit 226.8 298.1 325.1
EPS (|) 146.90 193.09 210.53
EV/EBITDA (x) 16.0 13.4 12.4
P/E (x) 25.2 19.2 17.6
ROE (%) 34.2 38.1 36.5
ROCE (%) 51.4 50.7 48.6
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Top Picks…
Abbott India CMP : | 10660 Target Price: | 11850
• The effective tax rate of Abbott India is in the range of
35-36%, which implies ~10% benefit on
implementation of the new tax rate
• We are positive on domestic pharma MNCs due to
strong growth in top brands and capability of new
launches (including innovative launches) besides
strong balance sheet and non-existent corporate
governance concerns
| crore FY19 FY20E FY21E
Revenues 3678.6 4147.8 4685.9
EBITDA 604.7 684.4 796.6
EBITDA Margins (%) 16.4 16.5 17.0
Net Profit 450.3 611.3 719.4
EPS (|) 211.9 287.7 338.5
PE (x) 50.3 37.1 31.5
Bharat Forge CMP: | 445 Target Price: | 515
• For FY19, tax rate at Bharat Forge was at 35.2%, making it
one of the biggest beneficiaries of cut in corporate tax rate
in auto ancillary space. Revising the tax rate leads to 15%
upward revision in our PAT estimates for FY20E & FY21E.
• With conscious efforts on reducing its dependence on the
CV cycle through new age businesses like Al die casting
and EV components, Bharat Forge is near its lower end of
valuation band, making it an attractive buy. We value the
company at | 515 using SOTP valuation technique
(| crore) FY19 FY20E FY21
Net Sales 10145.7 10105.7 10001.9
EBITDA 2055.6 1991.8 2038.3
EBITDA Margins (%) 20.3 19.7 20.4
Net Profit 1032.6 1096.2 1159.6
EPS (|) 22.2 23.5 24.9
EV/EBITDA (x) 11.5 11.5 10.8
P/E (x) 20.1 18.9 17.9
ROE (%) 17.9 16.0 16.3
ROCE (%) 19.1 17.6 16.9
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Top Picks…
PVR CMP : | 1763 Target Price: | 2080
• The effective tax rate of Inox Leisure is ~33%+ which
implies ~750-800 bps benefit on the tax rate on
implementation of the new tax rate
• PVR being a sector leader is poised to benefit from
strong content performance and overall robust traction
(| crore) FY19 FY20E FY21E
Net Sales 3,086 3,613 4,069
EBITDA 586 1,189 1,372
EBITDA Margins (%) 19.0 32.9 33.7
Net Profit 183 119 195
EV/EBITDA (x) 16.2 11.3 9.8
P/E (x) 45 69.5 42.3
ROE (%) 14.8 14.4 19.3
ROCE (%) 13.8 10.2 12.0
Kansai Nerolac CMP : | 502 Target Price: | 555
• The effective tax rate of Kansai Nerolac is ~33%,
which implies ~800 bps benefit on the tax rate on
implementation of the new tax rate
• We remain positive on overall paint industry as it is
poised to benefit from strong decorative volume
growth and its lean balance sheet
(| crore) FY19 FY20E FY21
Net Sales 5138.9 5696.5 6921.5
EBITDA 742.0 849.7 1060.6
EBITDA Margins (%) 14.3 14.8 15.2
Net Profit 467.3 591.3 735.9
EPS (|) 8.7 11.0 13.7
EV/EBITDA (x) 31.0 27.0 22.0
P/E (x) 55.7 44.0 35.4
ROE (%) 13.6 14.8 16.0
ROCE (%) 20.2 21.8 23.8
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Top Picks…
Supreme Industries CMP : | 1175 Target Price: | 1345
• The effective tax rate of Supreme Industries is ~33%
which implies ~800 bps benefit on the tax rate on
implementation of the new tax rate
• We remain positive on Supreme Industries as it is
poised to benefit from various government initiatives
coupled with its lean balance sheet
Pidilite Industries CMP : | 1435 Target Price: | 1625
• The effective tax rate of Pidilite Industries is ~30%,
which implies ~500 bps benefit on the tax rate on
implementation of the new tax rate
• We remain positive on Pidilite considering its
leadership position in the adhesive segment and lean
balance sheet. We believe, tax cut would help revival
in demand thus strong volume growth going forward
(| crore) FY19 FY20E FY21E
Net Sales 5612.0 6263.2 7211.9
EBITDA 784.6 903.8 1078.5
EBITDA Margins (%) 14.0 14.4 15.0
Net Profit 448.6 550.5 660.7
EV/EBITDA (x) 19.7 17.0 14.2
P/E (x) 34.2 27.9 23.2
ROE (%) 18.7 23.2 23.7
ROCE (%) 25.0 27.2 28.4
(| crore) FY19 FY20E FY21E
Net Sales 7078.7 8129.4 9411.7
EBITDA 1368.3 1803.7 2162.7
EBITDA Margins (%) 19.3 22.2 23.0
Net Profit 928.4 1319.9 1599.5
EV/EBITDA (x) 51.8 39.0 32.3
P/E (x) 77.6 54.6 45.1
ROE (%) 22.7 26.9 27.3
ROCE (%) 29.6 33.6 34.5
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Small cap Top picks
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Top Picks…
Sagar Cement CMP : | 550 Target Price: | 960
• The effective tax rate of Sagar Cement in the last two
years was above 35%. Thus the corporate tax cuts will
have a significant reduction in the tax expenses of the
company
• Owing to higher tax rates paid by the company, we
believe that Sagar Cement’s PAT would increase by
~180% CAGR over FY19-21E. Thus we continue to
remain positive on the company
EIH Ltd CMP : | 175 Target Price: | 225
• EIH Ltd used to have an effective rate between 35% to
37%. With the implementation of the new tax rates,
the company’s tax rates are expected to reduce by
~1000 to 1200 bps
• With a double whammy of GST rate cut for the hotels
space and corporate tax rate cut as well, EIH Limited
remains our top pick in the premium hotels space in
the mid-cap category
Key Financials FY19 FY20E FY21E
Sales 1217.6 1359.2 1512.9
EBITDA 149.4 222.0 255.1
EBITDA (%) 12.3 16.3 16.9
PAT 13.6 63.0 111.5
EPS (|) 6.7 30.9 54.7
EV/EBITDA 10.7 7.9 7.3
EV/Tonne ($) 50.4 50.8 54.0
RoNW 1.6 6.4 9.4
RoCE 6.4 9.7 9.9
Key Financials FY19 FY20E FY21E
Net Sales 1811 1809 2046
EBITDA 406 373 461
EBITDA (%) 22.4 20.6 22.5
PAT 193 191 256
EPS (|) 3.4 3.3 4.5
EV/EBITDA 23.2 25.1 20.2
D/E 0.2 0.1 0.1
RoNW (%) 6.4 6.2 7.8
RoCE (%) 9.2 8.3 10.4
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1818
Top Picks…
TCI Express CMP : | 650 Target Price: | 750
• TCI Express estimated tax rate is ~35%, which implies
~900 bps benefit on the tax rate on implementation of
the new tax rate
• Low leverage, a robust growth trajectory and high core
return ratios (FY21E RoCE at 38% and a 2% FCF yield),
position TCIEL as one of the preferred picks in the
logistics space
(| crore) FY19 FY20E FY21
Net Sales 1023.8 1177.4 1389.3
EBITDA 119.0 141.3 173.7
EBITDA Margins (%) 11.6 12.0 12.5
Net Profit 72.9 98.4 123.0
EPS (|) 19.0 25.7 32.1
EV/EBITDA (x) 20.7 17.4 13.9
P/E (x) 33.9 25.1 20.1
ROE (%) 30.7 31.9 30.4
ROCE (%) 42.3 39.5 36.9
DCB Bank CMP: | 209 Target Price: | 260
• The effective tax rate of DCB for FY19 was ~35% which
implies ~900-950 bps benefit on the tax rate on
implementation of the new tax rate. RoA improvement of
10-15bps is expect on account of tax cut
• Focus on risk adjusted growth, steady margins and
improvement in CI ratio are expected to lead to an
improvement in earnings. Incrementally, benefits of tax cut
is expected to boost earnings by ~12-13% in FY20E &
FY21E respectively. Accordingly we maintain our Buy rating
with a price target of | 260 valuing it at 2.2x FY21ABV
(| crore) FY19 FY20E FY21E
NII 1149.2 1340.0 1634.6
PPP 646.5 761.1 936.7
PAT 325.4 436.0 560.1
ABV (|) 87.5 99.7 117.0
P/E 18.5 13.8 10.7
P/ABV 2.2 2.0 1.7
RoA 1.0 1.1 1.2
RoE 12.1 14.4 15.8
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1919
Top Picks…
Inox Leisure CMP : | 315 Target Price: | 400
• The effective tax rate of Inox Leisure is ~32-33%
which implies ~750 bps benefit on the tax rate on
implementation of the new tax rate
• We remain positive on overall multiplex space and
Inox as it is poised to benefit from strong content
performance and its lean balance sheet.
Sanofi India CMP : | 5986 Target Price: | 8060
• The effective tax rate of Sanofi India is in the range of
35-38% which implies 10-12% benefit on
implementation of the new tax rate.
• We are positive on domestic pharma MNCs due to
strong growth in top brands and capability of new
launches (including innovative launches) besides
strong balance sheet and non-existent corporate
governance concerns
| crore CY18 CY19E CY20E
Revenues 2770.8 3064.5 3079.7
EBITDA 623.5 689.6 723.7
EBITDA Margins (%) 22.5 22.5 23.5
Net Profit 378.1 489.9 530.4
EPS (|) 164.2 212.7 230.3
PE (x) 36.5 28.1 26.0
(| crore) FY19 FY20E FY21E
Net Sales 1692 1976 2306
EBITDA 308 605 732
EBITDA Margins (%) 18.2 30.6 31.8
Net Profit 133 123 182
EV/EBITDA (x) 11.0 9.4 7.9
P/E (x) 24.7 26.8 18.1
ROE (%) 14.2 16.5 19.7
ROCE (%) 19.6 11.1 13.0
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2020
Top Picks…
Timken CMP : | 753 Target Price: | 940
• Timken currently has effective tax rate of ~33-33.5%
which translates into ~800 bps benefit on the tax rate
leading to earnings upgrade of around ~12.5% for FY
20-21E each
• The company is a decent proxy on the railway capex &
recovery on the private investment cycle. Integration
of ABC bearings will further improve margin profile
and aid profitability
KSB Ltd CMP : | 686 Target Price: | 810
• The effective tax rate of KSB Ltd is ~34-36% which
implies ~900 bps benefit on the tax rate leading to
earnings upgrade of ~13% for FY 20-21E each
• Upgradation of capex by refineries to comply with
emission control norms in the industrial space. In the
medium term, capex in nuclear segment will further
add to business visibility
(| Crore) CY18 CY19E CY20E
Net Sales 1,093.1 1,275.7 1,424.5
EBITDA 128.4 151.9 183.0
EBITDA margin (%) 11.7 11.9 12.8
Net Profit 71.6 106.4 130.6
EV/EBITDA (x) 17.9 15.1 12.5
P/E (x) 33.4 22.4 18.3
RoE (%) 9.4 12.7 13.8
RoCE (%) 11.1 12.6 14.4
(| Crore) FY19 FY20E FY21E
Net Sales 1,664.4 1,822.0 2,062.9
EBITDA 288.6 337.1 391.9
EBITDA margin (%) 17.3 18.5 19.0
Net Profit 148.6 211.2 244.8
EV/EBITDA (x) 17.7 14.7 12.2
P/E (x) 38.1 26.8 23.1
RoE (%) 11.1 13.7 13.8
RoCE (%) 15.7 17.2 17.4
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Top Picks…
Goodyear India CMP: | 975 Target Price: | 1,135
• For FY19, tax rate at Goodyear India stood at 35%, thereby
making it a key beneficiary of reduction in corporate tax rate.
Building in 25.2% tax rate for FY20E & FY21E, our PAT
estimates gets upgraded by ~13% going forward.
• Goodyear is a market leader in the domestic farm equipment
tyre space and possess one of the best B/S amongst its peers.
With decline in domestic rubber prices as well as upgradation
in earning estimates we upgrade the stock to BUY. We value
Goodyear at | 1,135 i.e. 20x FY21E EPS of | 56.7/share
(| crore) FY19 FY20E FY21E
Net Sales 1911.9 1720.7 1858.4
EBITDA 164.5 154.9 176.5
EBITDA Margins (%) 8.6 9.0 9.5
Net Profit 102.1 113.6 130.9
EPS (|) 44.2 49.2 56.7
P/E (x) 21.2 19.0 16.5
ROE (%) 11.8 12.0 12.6
ROIC (%) 42.6 38.7 45.4
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Pankaj Pandey Head – Research [email protected]
ICICI Direct Research Desk,
ICICI Securities Limited,
1st Floor, Akruti Trade Centre,
Road No 7, MIDC
Andheri (East)
Mumbai – 400 093
7
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Disclaimer
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