sainathinvestment.comsainathinvestment.com/.../10/indiastrategy050913.pdf · contents 1....

Research Team

([email protected])Trilemma!thethethethethe

October 2013

India Strategy

Contents

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

2. Capital Goods 14-24ABB 17BHEL 18Crompton Greaves 19Cummins India 20Havells India 21Larsen & Toubro 22Siemens 23Thermax 24

3. Cement 25-36ACC 29Ambuja Cement 30Birla Corporation 31Grasim Industries 32India Cements 33Jaiprakash Associates 34Shree Cement 35UltraTech Cement 36

4. Consumer 37-52Asian Paints 40Britannia Industries 41Colgate Palmolive 42Dabur India 43GSK Consumer 44Godrej Consumer Products 45Hindustan Unilever 46ITC 47Marico 48Nestle India 49Pidilite Industries 50Radico Khaitan 51United Spirits 52

5a. Financials - Banks 53-74Axis 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 71

State Bank 72Union 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 85-102Biocon 90Cadila Healthcare 91Cipla 92Divi’s Laboratories 93Dr Reddy’s Labs. 94GSK Pharma 95Glenmark Pharma 96IPCA Laboratories 97Lupin 98Ranbaxy Labs. 99Sanofi India 100Sun Pharmaceuticals 101Torrent Pharma 102

7. Media 103-113D B Corp 107Dish TV 108HT Media 109Jagran Prakashan 110PVR 111Sun TV Network 112Zee Entertainment 113

8. Metals 114-125Hindalco 117Hindustan Zinc 118Jindal Steel & Power 119JSW Steel 120Nalco 121NMDC 122Sesa Goa 123SAIL 124Tata Steel 125

9. Oil & Gas 126-141BPCL 130Cairn India 131GAIL 132Gujarat State Petronet 133HPCL 134IOC 135Indraprastha Gas 136MRPL 137Oil India 138

ONGC 139Petronet LNG 140Reliance Industries 141

10. Real Estate 142-154Anant Raj Industries 147DLF 148Jaypee Infratech 149Mahindra Lifespaces 150Oberoi Realty 151Phoenix Mills 152Prestige Estate Projects 153Unitech 154

11. Retail 155-161Future Retail 158Jubilant Food 159Shoppers Stop 160Titan Industries 161

12. Technology 162-176Cognizant Technology 166HCL Technologies 168Hexaware Technologies 169Infosys 170KPIT Cummins 171Mindtree 172MphasiS 173Persistent Systems 173TCS 174Tech Mahindra 175Wipro 176

13. Telecom 177-186Bharti Airtel 183Bharti Infratel 184Idea Cellular 185Reliance Communication 186

14. Utilities 187-200CESC 191Coal India 192Jaiprakash Power Ventures 193JSW Energy 194NHPC 195NTPC 196Power Grid Corp. 197PTC India 198Reliance Infrastructure 199Tata Power 200

15. Others 201-206Bata India 201Castrol India 202Multi Commodity Exchange 203Sintex Industries 204United Phosphorus 205V-Guard Industries 206

Note: All stock prices and indices for Section C as on 27 September 2013, unless otherwise stated

Section A: India Strategy - The Trilemma! ................................................................................. A1-56

Section B: 2QFY14 Highlights & Ready Reckoner ..................................................................... B1-12

Section C: Sectors & Companies .............................................................................................. C1-206

A–1October 2013

India Strategy | The Trilemma!

BSE Sensex: 19,727 S&P CNX: 5,833

The TrilemmaINR direction | Elections outcome | Sector preferences

INDIAN EQUITIES: CY13 YTD return are flat, zero returns over 6 years 2013 has been a year of flat markets. The 10-year CAGR up to 2012 is 19%, (2003-

2013: 13%) despite a flat markets for the last 6 years. Over the last 4 quarters,

markets have been very range-bound.

Technology, Telecom, Healthcare, Cement continue to be top performers for 2013.

At 19,400, the BSE Sensex P/E is at 8% discount to LPA (12-month forward) and

Sensex P/B at 17% discount to LPA (12-month forward).

Market cap to GDP at 56% is well below the averages and is closer to the lows of

last decade.

FIIs continue to be buyers in 2013YTD worth USD13.4b; however DIIs are big sellers

to the tune of USD 8.3b.

2QFY14 PREVIEW: The dollar divide | Aggregate PAT up 3%; Nifty USD-denominated PAT up 19%, others down 5% We expect MOSL Universe of 140 companies (ex RMs) to report aggregate 2QFY14

PAT growth of 3% YoY. This is an improvement over 2% YoY de-growth seen in 1QFY14.

2HFY14 performance is expected to be even better with PAT growth of 11-12% YoY.

The sharp 13% YoY depreciation of the INR vis-à-vis the USD is expected to boost PAT

growth of USD-denominated sectors such as Technology, Healthcare and Metals.

Within Nifty, USD-denominated companies' PAT is expected to grow 19% YoY,

whereas others' PAT is expected to decline 5% YoY.

Expect Sensex 2QFY14 PAT to grow 5% YoY.

Within Sensex, top 5 PAT growth companies are: Tata Steel (loss to profit), Maruti

(+110% YoY), Dr Reddy's (+39%), Sun Pharma (+36%) and TCS (+30%). Top 5 PAT de-

growth companies: BHEL (-57% YoY), Bharti (-54%), State Bank (-35%), Tata Power

(-34%) and Jindal Steel (-31%).

FY14/15 Sensex EPS is downgraded 3-4% (from Jun-13 estimates).

FY13-15 Sensex EPS CAGR stands at 11% v/s 14% a quarter ago.

India Strategy

FY08-13 EPS CAGR at 7%; expect rebound in FY13-15

216 236 272348

450 523

718833 820 834

1,0241,123

1,1901,289

1,476

FY01

FY02

FY03

FY04

FY05

FY06

FY07

FY08

FY09

FY10

FY11

FY12

FY13

FY14

E

FY15

E

FY01-13A: 15% CAGR

FY01-15E: 15% CAGR

FY01-08:

21% CAGR

FY08-13:

7% CAGR

FY13-15E:

11% CAGR

A–2October 2013


ELECTIONS: The game-changing juggernaut | Forthcoming State electionsmay well be a gauge of the national mood State elections - gauge of national mood: During Nov-Dec'13, assembly elections

will be held in 5 states of Rajasthan, Madhya Pradesh, Chattisgarh, Delhi and

Mizoram aggregating 73 of 543 Lok Sabha seats (13% of total seats). The assembly

elections assume significance because the results could be a referendum for the

General elections highlighting the national mood.

Decoding the election trends: Our analysis of elections led us to some interesting

findings and perspectives:

Seat share can be disproportionate to vote share: The data on seats won

percentage to vote share percentage suggests that parties have won less seats

in a particular year despite its vote share remaining the same. This suggests

that the margin of victory is slender in many seats (more than 35% seats were

won with less than 5% margin victory in 2009 general elections).

Higher voter turnout – an indicator of a change in government?: The past 10

general election trends suggest that a voter turnout of 60% or above has

resulted in a change in government (barring 1984 which Congress won due to

sympathy wave on assassination of former Prime Minister, Ms. Indira Gandhi).

What could be the odds of an NDA government: Based on the opinion polls and

predictions, odds favor anti-incumbency. We analyse possible scenario which could

drive an NDA government. Association with allies and their performance remains

a key monitor to watch.

Markets - build-up pre-elections; sharp reactions post elections: Markets sees

some build-up prior to the elections. However, it witnesses sharp reactions post

the election results. Normally, a decisive voting in favour of a party is positively

2QFY14 performance of MOSL Universe by sector – Seculars do, cyclicals undoSECTOR Sales EBITDA PAT PAT Delta EBITDA Margins

(no. of companies) Sep-13 YoY % Sep-13 YoY % Sep-13 YoY % Share % Share % Sep-13 YoY bp

High growth sectors 3,350 16 798 22 444 16 55 264 23.8 111

Technology (9) 504 31 140 39 98 29 12 92 27.8 154

Health Care (13) 227 24 52 20 34 17 4 21 22.7 -83

Media (7) 39 17 11 19 5 15 1 3 29.3 48

NBFC (8) 85 21 80 19 52 14 6 27 94.3 -217

Consumer (13) 324 12 69 15 46 13 6 23 21.2 58

Metals (9) 1,143 11 216 18 90 13 11 44 18.9 102

Private Banks (8) 143 19 116 17 66 12 8 30 80.5 -138

Auto (8) 885 14 115 26 53 11 7 23 13.0 121

Med/Low growth sectors 628 5 160 5 89 8 11 29 25.4 2

Retail (4) 62 -1 6 -3 2 9 0 1 9.4 -19

Utilities (10) 567 5 154 5 87 8 11 28 27.2 -7

PAT de-growth sectors 2,928 10 638 0 277 -14 34 -193 21.8 -213

Oil Excl. RMs (9) 1,758 15 276 6 170 -1 21 -10 15.7 -134

Real Estate (8) 45 11 16 7 6 -6 1 -2 36.3 -156

Telecom (4) 353 9 111 11 12 -7 2 -4 31.4 72

Cement (8) 166 -1 30 -20 14 -31 2 -26 18.1 -442

Capital Goods (8) 333 -5 32 -22 18 -32 2 -36 9.5 -215

PSU Banks (8) 274 6 173 -6 56 -33 7 -115 63.3 -850

Others (6) 52 11 9 8 4 -2 0 0 16.6 -50

MOSL Excl. RMs (140) 6,958 12 1,604 10 815 3 100 100 23.0 -40

Sensex (30) 4,777 12 986 12 509 5 NA NA 20.6 6

A–3October 2013


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

ECONOMIST: Dipankar Mitra ([email protected])

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

perceived by the markets, whereas a fractured government witnesses negative

reactions.

ECONOMY: Three events to watch out for in 2HFY13 | Stable INR, decliningfood inflation and uncertain government financeOur views on three important events that for Indian economy in 2HFY14 are as under.

Sharp improvement in CAD to define INR path

Expect CAD to correct sharply to 2.9% of GDP in FY14 (4.8% in FY13)

Government/RBI measures (e.g. gold import curbs) have started yielding results

Expect INR to stabilize at 62/USD levels

Food inflation to fall on good monsoon

FY14 monsoon 6% above normal; the best since FY08

Foodgrain production should see a record of 265m tons (+4% YoY)

CPI Inflation to ease to 8% by Mar-14 v/s 10.4% a year ago

Measures to achieve fiscal deficit targets bunched up

Diesel price hike, disinvestments, spectrum sale have got bunched up in 2HFY14

Expect revenue shortfall of INR638b requiring matching expenditure cuts

Our FY14E GDP growth of 4.5% factors in slowdown in government expenditure.

MARKET OUTLOOK & MODEL PORTFOLIONifty remains range-bound due to external and domestic factors

Nifty has largely remained range-bound with -3% returns YTDCY13, while Sensex

was flat, led by concerns of significant slowdown in domestic economy.

Corporate earnings growth at 7-8% remains well below the long term averages;

divergence between domestic and export oriented businesses is at a decade high.

Stable currency and elections will be key triggers

Change in RBI governor along with delayed tapering of QE has brought stability to

the currency. This should help to ease some of the recent monetary tightening

steps. Good monsoons should bring down the inflation and rejuvenate the rural

economy with more disposable income in the hands of the rural consumers.

In 3QFY14, various important state elections will be viewed as a proxy to the

General elections in 2014. This will be an important catalyst for the market.

Divergence in market valuations

The market breadth has worsened with huge divergence in sector valuations. At

one end of the valuations are global cyclicals like Metals, Oil & Gas and domestic

cyclicals like Capital Goods, Real Estate, PSU Banks which are trading significantly

below historic averages; some of them at historic lows.

At the other end, is the Consumer sector trading at close to all time high valuations.

Also, some sectors look attractive with current valuations close to their historical

averages like Technology and Healthcare.

Divergence is not only observed sector-wise; but even in terms of heavyweight

and mid-cap/small-cap stocks. While CNX Nifty has remained nearly flat (-3%

returns), mid-caps and small-caps have given -18% and -26% returns, respectively.

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A–7October 2013


2QFY14 PREVIEW The dollar divideAggregate PAT up 3%; Nifty USD-denominated PAT up 19%, others down 5%

� We expect MOSL Universe of 140 companies (ex RMs) to report aggregate 2QFY14 PATgrowth of 3% YoY. This is an improvement over 2% YoY de-growth seen in 1QFY14.2HFY14 performance is expected to be even better with PAT growth of 11-12% YoY.

� The sharp 13% YoY depreciation of the INR vis-à-vis the USD is expected to boost PATgrowth of USD-denominated sectors such as Technology, Healthcare and Metals.

� Within Nifty, USD-denominated companies' PAT is expected to grow 19% YoY, whereasothers' PAT is expected to decline 5% YoY.

� Expect Sensex 2QFY14 PAT to grow 5% YoY.� Within Sensex, top 5 PAT growth companies are: Tata Steel (loss to profit), Maruti (+110%

YoY), Dr Reddy's (+39%), Sun Pharma (+36%) and TCS (+30%). Top 5 PAT de-growthcompanies: BHEL (-57% YoY), Bharti (-54%), State Bank (-35%), Tata Power (-34%) andJindal Steel (-31%).

Expect 2QFY14 Aggregate PAT to grow 3% YoYWe expect MOSL Universe of 140 companies (excluding RMs i.e. 3 major oil refining &marketing companies IOC, BPCL, HPCL) to report aggregate 2QFY14 PAT growth of 3%YoY. This is an improvement over 2% YoY de-growth seen in 1QFY14.

2HFY14 performance is expected to be even better with PAT growth of 11-12% YoY,inching towards the long-period average of 15%

Expect 2QFY14 PAT to grow 3% YoY; fifth consecutive quarter of PAT growth below LPA

In terms of September quarter growth, the 3% YoY PAT growth of Sep- 2013 is thelowest in the last 8 years, barring the global crisis quarter of Sep-2009. PAT margin hashit an all-time low on the back of higher interest costs and MTM forex losses.

On the positive side, some financial metrics like Sales growth and EBITDA growth areshowing initial signs of things turning better. 2QFY14 sales growth is expected to be12% v/s 4% in 1QFY14. This is expected to improve further in 2HFY14.

Likewise, 2QFY14 EBITDA growth at 10% YoY is much better than 5% YoY in 1QFY14.2HFY14 EBITDA growth is expected to be even higher at 15%.

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Mar

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June

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Sep-

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Mar

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MOSL Universe Comparable Universe PAT Growth ex RMs MOSL Universe

Quarterly PAT growth

LPA : 15%

Global crisisquarters

A–8October 2013


Sep-2013 Sales and PAT growth is the lowest in the last seven September quarters ex global crisis

Sep-13 quarter sales growth should improve to 12% YoY from 4% in previous quarter;growth in next two quarters is expected to be 13-15%

Sep-13 quarter EBITDA growth at 10% YoY is higher than 5% of Jun-13 quarter;2H should be even better

38 39

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21

Sep-07 Se p-08 Sep-09 Sep -10 Sep-11 Sep-12 Sep -13E

MOSL Universe

2Q Sales growth

LPA: 21%

2Q amidst

global crisis

34

26

-9

27

31112

Sep-07 Sep -08 Se p-09 Sep-10 Sep-11 Sep -12 Sep -13E

MOSL Universe

2Q PAT growth

LPA: 15%

2Q amidst

global crisis

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Mar

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June

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Sep-

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MOSL Universe Comparable Universe Sales Growth ex RMs (%)


MOSL UniverseQuarterly Sales growth

LPA : 21%

37 35 3525

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42

31 26 23

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32

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MOSL Universe Comparable Universe EBITDA Growth


MOSL UniverseQuarterly EBITDA growth

LPA : 18%

A–9October 2013


Sep-13 EBITDA margin (ex RMs and Financials) at 19.1%; below LPA for several quarters now

Sep-13 PAT margin (ex RMs and Financials) at 10%; below LPA for several quarters now

PAT distribution also showing early signs of improvementThe distribution of PAT growth of India Inc is marginally improving on two fronts -1. Firstly, percentage of companies reporting PAT de-growth seems to be bottoming

out, down from a peak of 42% in Mar-2013 to an expected 38% in Sep-2013 andfurther lower to 26% and 32% in the next two quarters.

2. At the same time, percentage of companies reporting PAT growth higher than 30%seems to be rebounding after the bottom of 19% in the Jun-2013 quarter.

PAT distribution improving; fewer companies reporting PAT de-growth

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FY09 FY10 FY11 FY12 FY13 FY14E

MOSL Universe PAT Margin LPA: 11.6%

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06

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>30% >15-30% >0-15% <0% Ex RMs (%)Earnings Growth

PAT Growth Ex RMs (%)

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4QE

FY09 FY10 FY11 FY12 FY13 FY14E

MOSL Universe EBITDA Margin LPA: 20.5%

A–10October 2013


Sector and company analysis: The dollar divideAnalyzing the Sep-13 results by sector clearly suggests the significant role of the strongdollar and weak rupee.� During the quarter ending Sep-13, the INR depreciated a sharp 13% YoY (11% QoQ)

vis-à-vis the USD. This is expected to significantly boost the performance of USD-denominated sectors such as Technology, Healthcare and Metals.

� Auto sector PAT growth (11% YoY) is also well above the aggregate (3% YoY) on theback of USD-denominated sales and PAT of JLR in Tata Motors (PAT up 27% YoY).

� Over and above the dollar divide, the "seculars v/s cyclicals" theme of the precedingtwo quarters is expected to play out in the Sep-13 quarter as well. Secular sectorslike Consumer, Media, Retail and Telecom should clock far superior PAT growthcompared to their cyclical counterparts such as Capital Goods, Cement and RealEstate.

� The Financials sector overall is expected to report PAT de-growth of 7% YoY.However, the relatively more secular sub-sectors of NBFCs (PAT +14% YoY) andPrivate Banks (PAT +12% YoY) are likely to deliver much superior performancethan the cyclically vulnerable PSU Banks (PAT -33% YoY).

2QFY14 performance of MOSL Universe by sector – Seculars do, cyclicals undoSECTOR Sales EBITDA PAT PAT Delta EBITDA Margins

(no. of companies) Sep-13 YoY % Sep-13 YoY % Sep-13 YoY % Share % Share % Sep-13 YoY bp

High growth sectors 3,350 16 798 22 444 16 55 264 23.8 111

Technology (9) 504 31 140 39 98 29 12 92 27.8 154

Health Care (13) 227 24 52 20 34 17 4 21 22.7 -83

Media (7) 39 17 11 19 5 15 1 3 29.3 48

NBFC (8) 85 21 80 19 52 14 6 27 94.3 -217

Consumer (13) 324 12 69 15 46 13 6 23 21.2 58

Metals (9) 1,143 11 216 18 90 13 11 44 18.9 102

Private Banks (8) 143 19 116 17 66 12 8 30 80.5 -138

Auto (8) 885 14 115 26 53 11 7 23 13.0 121

Med/Low growth sectors 628 5 160 5 89 8 11 29 25.4 2

Retail (4) 62 -1 6 -3 2 9 0 1 9.4 -19

Utilities (10) 567 5 154 5 87 8 11 28 27.2 -7

PAT de-growth sectors 2,928 10 638 0 277 -14 34 -193 21.8 -213

Oil Excl. RMs (9) 1,758 15 276 6 170 -1 21 -10 15.7 -134

Real Estate (8) 45 11 16 7 6 -6 1 -2 36.3 -156

Telecom (4) 353 9 111 11 12 -7 2 -4 31.4 72

Cement (8) 166 -1 30 -20 14 -31 2 -26 18.1 -442

Capital Goods (8) 333 -5 32 -22 18 -32 2 -36 9.5 -215

PSU Banks (8) 274 6 173 -6 56 -33 7 -115 63.3 -850

Others (6) 52 11 9 8 4 -2 0 0 16.6 -50

MOSL Excl. RMs (140) 6,958 12 1,604 10 815 3 100 100 23.0 -40

Sensex (30) 4,777 12 986 12 509 5 NA NA 20.6 6

A–11October 2013


INR depreciated 13% YoY v/s the USD ... ... and 11% QoQ

The twin theme of "dollar divide" and "secular-cyclical" finds expression in virtuallyevery dissection of the Sep-2013 results -� Sales growth: Expect Technology, Healthcare, Media, Auto and Consumer to grow

sales higher than aggregate� EBITDA Margin, growth: The only sectors which are expected to expand EBITDA

margin are Technology, Auto, Metals, Telecom, Consumer and Media. These verysectors lead EBITDA growth. Interestingly, Healthcare margins are expected toshrink 83bp. This is mainly due to companies who have no or relatively low shareof USD revenues, viz, Glaxo, Sanofi and Cipla. Excluding these 3 companies,Healthcare margins actually improve 13bp YoY.

� PAT growth and contribution to growth: Technology sector (PAT + 26% YoY) accountsfor as high as 95% of the estimated incremental PAT over Sep-2012 quarter. PrivateBanks, NBFC, Auto and Consumer are also high positive contributing sectorswhereas PSU Banks, Capital Goods and Cement are major drags on aggregate PAT.

Sales growth by sector (%): USD-denominated businesses lead EBITDA Margin delta by sector (bp): Technology tops again

62.6

68.8

59.5

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55.254.2 54.2

55.9

62.2

Sep -12 Dec-12 Mar-12 Jun-13 Sep-13

2QFY14 USD-INR average

62.1, down 11% QoQ

A–12October 2013


EBITDA growth by sector (%): USD and secular plays dominate PAT growth by sector (%): A near encore of EBITDA growth

Contribution to 2QFY14 PAT growth by sector (%) Sector-mix of 2QFY14 PAT (%)

Other sector highlights

Overall� Expect Technology, Healthcare and Consumer to clock their highest ever sector

PAT in a quarter. Media should clock its highest ever September quarter PAT ofINR5.4b, which is close to its all-time high quarterly PAT of INR5.6b in 1QFY14.

� For some sectors - Oi l & Gas (ex RMs), Metals, Utilities and Cement - quarterly PATrun rate is stuck in a band.

� Consumer and Retail are the only two sectors where all companies are expectedto clock positive PAT growth. Cement has the dubious distinction of all companieslikely to report PAT de-growth.

Automobiles� PAT growth of 11% YoY is primarily led by 27% YoY growth in Tata Motors PAT on the

back of JLR. Ex Tata Motors, sector PAT is flat, dragged down by M&M (-13% YoY)and Ashok Leyland (profit to loss).

� Maruti 's profits remain volatile; expect 110% YoY growth in PAT in Sep-2013 quarter.

Capital Goods� Expect second successive quarter of 32% PAT de-growth YoY primarily given 57%

expected PAT de-growth for BHEL.� BHEL's performance is expected to remain weak for the rest of FY14; however,

some companies like Crompton, ABB and Siemens could post PAT growth in 2HFY14given base effect of FY13.

3926

20 19 18 15 11 106 5 5

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Sep-

12

Dec-

12

Mar

-13

June

-13

Sep-

13E

Dec-

13E

Mar

-14E

B ajaj Auto

M&M

PAT growth YoY (%)

PAT growth divergence

Oil & Gas PAT stagnating

21

12 11 118 7 7 6 6 4

2 2 2 1 1 0

Oil

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Oil & Gas ex RMs Qtr PAT (INR b)

A–13October 2013


Technology, Consumer, Healthcare to clock all-time high quarterlyPAT; Media highest ever Sep quarter PAT

Cement� All Cement companies are expected to clock PAT de-growth.� However, Sep-2013 quarter may well see the worst behind for the sector. Some

demand revival in the following quarters coupled with low base of 2HFY13 maysee 2HFY14 PAT bounce back to positive YoY growth.

Consumer� All Consumer companies are expected to clock positive PAT growth.� Aggregate PAT growth of 13% YoY is contingent on performance of ITC (+14% YoY)

and HUL (+7% YoY), which together account for almost two-thirds of sector PAT.

Financials� Expect first ever quarter of YoY PAT de-growth led by 33% de-growth in PSU Banks'

PAT on the back of higher NPA provisions and MTM losses on their securitiesportfolio.

� Within Financials, the private and the public sector present a study in contrast.Among Private Banks and NBFCs, only one company in each sub-sector is expectedto see PAT de-growth - Federal Bank and IDFC. Against this, among PSU banks, onlyone company is likely to report positive PAT growth, viz, Bank of Baroda.

� Expect NBFCs led by PFC and REC to report a strong 14% PAT growth despite anadverse business environment. HDFC will report mere 5% growth due to highbase of sale of investment gains in 2QFY13.

Technology Sector Quarterly PAT (INR b)

54.465.0 67.4 73.9 76.2

97.9

85.680.576.1

Sep-

11

Dec

-11

Mar

-12

Jun-

12

Sep-

12

Dec

-12

Mar

-13

Jun-

13

Sep-

13E

Consumer Sector Quarterly PAT (INR b)

35.5

38.036.4

39.6 40.8

46.3

44.342.9

44.8

Sep-

11

Dec

-11

Mar

-12

Jun-

12

Sep-

12

Dec

-12

Mar

-13

Jun-

13

Sep-

13E

Healthcare Sector Quarterly PAT (INR b)

23.0 21.824.4 23.1

29.3

34.433.333.3

26.8

Sep-

11

Dec

-11

Mar

-12

Jun-

12

Sep-

12

Dec

-12

Mar

-13

Jun-

13

Sep-

13E

Media Sector September Quarter PAT (INR b)

0.9

3.1

4.1 4.3 4.65.4

Sep-

08

Sep-

09

Sep-

10

Sep-

11

Sep-

12

Sep-

13E

4638

32

48

-30

28-14

39

1HFY

13

2HFY

13

1HFY

14

2HFY

14

Ce ment PAT (INR b )Yo Y (%)

Cement: The worst over?

A–14October 2013


Sharp 33% YoY dip in PSU Banks' PAT … … to lead to first ever YoY PAT de-growth for Financials

Only one company each in Pvt Banks and NBFC to see PAT de-growth; in contrast, only one PSU Bank to see PAT growth

46 53 58 55 58 68 72 69 66

38 37 41 42 45 47 55 52 52

75 84102 92 83 82

83 8756

Sep-

11

Dec

-11

Mar

-12

Jun-

12

Sep-

12

Dec

-12

Mar

-13

Jun-

13

Sep-

13E

Private Banks NBFC PSU Banks Financials PAT growth YoY (%)

13.4 10.3

51.1

36.5

17.6 13.74.9

10.5

-7.3

Sep-

11

Dec

-11

Mar

-12

Jun-

12

Sep-

12

Dec

-12

Mar

-13

Jun-

13

Sep-

13E

Pvt Banks 2QFY14 PAT growth

3

6

6

16

20

22

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4

5

21

23

23

32

37

-10IDFC

STF

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PFC

REC

M&M Fin

Ba jaj

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PSU B anks 2QFY14 PAT growth

-47

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-35

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69

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SBI

PNB

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Metals� Metals PAT is expected to grow at a reasonably healthy 13% YoY on the back of

profit rebound in Tata Steel, Nalco, and SAIL.� Steel companies are expected to have a good quarter led by ~20% volume growth

on low base.� Non-ferrous companies are expected to benefit from higher rupee realization on

the back of weak INR.

Telecom� Telecom PAT is expected to decline 7% YoY despite 11% YoY growth in EBITDA on

the back of improving RPM.� Bharti is a major drag on sector PAT. Despite 8% EBITDA growth, PAT is expected to

decline 54% YoY on the back of MTM forex losses. Ex Bharti, sector PAT is expectedclock 47% growth, the highest across sectors.

� Idea is expected to follow up its 100%+ PAT growth in 1QFY14 with 80% growth in2Q.

� Profit growth momentum for the sector is expected to be sustained in 2HFY14 andFY15.

A–15October 2013


Nifty and the dollar divideWe classified the 50 Nifty companies into (1) USD-denominated and (2) Others. TheUSD-denominated Nifty includes Technology, Healthcare, Metals, Oi l & Gas (Reliance,Cairn) and Tata Motors' JLR operations. The key findings are as under -� USD-denominated Nifty is expected to clock aggregate PAT growth of 19% YoY,

whereas others are likely to see PAT de-growth of 5%.� USD-denominated Nifty's Sales growth has been consistently higher than others,

but the gap is expected to widen sharply in Sep-2013 quarter on the back of 13%YoY depreciation in the INR.

� Interestingly however, such a steep depreciation of the rupee is not expected tolead to a major boost in EBITDA margins (Sep-2013 USD-denominated EBITDAmargins are expected to be up only 50bp YoY). This implies that the weak INR hassignificantly helped cushion cost pressures and/or increase volume growth onthe back of lower USD selling prices to customers.

� EBITDA and PAT growth of both USD-denominated and others mirrors Sales growth.� For USD-denominated Nifty, PAT growth is broadly in line with EBITDA growth. For

non-USD Nifty, PAT growth is lower than EBITDA growth due to (1) higher interestcost, and (2) MTM forex losses.

Nifty - USD sales growth poised to sky-rocket … … but no major impact on margins

16131 2

61 2

17

2421

25

3027

19 1 81 5

9 83

2 0 1 9

25

2017 16

181 5

8 1 0

3 3

77435

June

-11

Sep-

11

Dec

-11

Mar

-12

June

-12

Sep-

12

Dec

-12

Mar

-13

June

-13

Sep-

13E

Dec

-13E

Mar

-14E

T ota l N i fty Com pa ni e s $ D e n omi n a te dOthe rs

23 .42 3. 22 2.62 3.524 .022 .922 .923 .52 4. 02 3.42 4.62 4.9

17 .3 16 .8 1 5.4 1 5. 0 15 .3 15 .4 15 .0 16 .7 1 6.0 1 5.9 1 6. 2 16 .0

31 .53 1. 230 .63 1.630 .830 .930 .732 .332 .231 .532 .33 2.8

June

-11

Sep-

11

Dec

-11

Mar

-12

June

-12

Sep-

12

Dec

-12

Mar

-13

June

-13

Sep-

13E

Dec

-13E

Mar

-14E

T ota l N i fty Comp a ni e s $ D e nom i na te dOthe rs

EBITDA growth in line with sales growth for USD & non-USD Expect USD PAT growth to be much higher than non-USD

16 3

131410

67410

16813

4

16 16

8

658

15

-1

20

2824

8

19

69

14

26

984113

Jun

e-11

Sep-

11

Dec

-11

Mar

-12

Jun

e-12

Sep-

12

Dec

-12

Mar

-13

Jun

e-13

Sep-

13E

Dec

-13E

Mar

-14E

T ota l Ni fty Comp a ni e s $ D e n omi na te dOthe rs

10104

-30

8717

26

1517 99

28

1825

19

96

21

5108

1

24

37

25

61

-5-11

-3

7-1

11

June

-11

Sep-

11

Dec

-11

Ma

r-12

June

-12

Sep-

12

Dec

-12

Ma

r-13

June

-13

Sep

-13E

Dec

-13E

Mar

-14E

T ota l Ni fty Com pa ni e s $ D eno mi na te dOth ers

Expect Sensex PAT growth of 5% YoY� Based on bottom-up estimates of its 30 constituent companies, Sensex 2QFY14

PAT is expected to grow 5% YoY.� This is a recovery of sorts from the -4% YoY recorded in 1QFY14. The growth is

expected to further improve in 2H to 11%. Sti ll, for several quarters now, SensexPAT growth has remained below the LPA of 15%.

A–16October 2013


� The top 5 PAT growth companies are expected to be: Tata Steel (loss to profit),Maruti (+110% YoY), Dr Reddy's (+39%), Sun Pharma (+36%) and TCS (+30%).

� The top 5 PAT de-growth companies are expected to be: BHEL (-57% YoY), Bharti(-54%), State Bank (-35%), Tata Power (-34%) and Jindal Steel (-31%).

Expect 2QFY14 Sensex PAT growth of 5% YoY, 6th successive quarter below LPA of 15%

31 3043

33 3026

17 1925 23

-7-15

20

44

26 2722

-2

12 156

29

14

3 72

-4

11 115

-25-21

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q

FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14E

LPA: 15%

Sensex Companies 2QFY14E Performance (INR b)Company Sales EBITDA PAT PAT Contbn EBITDA margin

Sep-13 Var % YoY Sep-13 Var % YoY Sep-13 Var % YoY (%) Delta Gr. (%) Sep-13 Var (bp)

High PAT Growth (8) 1,472 16 278 32 138 38 28 38 180 19 226Tata Steel 369 8 37 58 4 LP 1 8 36 10 314Maruti Suzuki 101 21 10 90 5 110 1 3 12 10 349Dr Reddy’ s Labs 34 21 8 24 5 39 1 1 6 23 63Sun Pharma 35 42 14 38 10 36 2 3 13 40 -100TCS 208 33 65 47 46 30 9 11 50 31 290HDFC Bank 45 20 33 27 20 28 4 4 20 73 412Tata Motors 537 24 75 41 26 27 5 6 26 14 171NTPC 145 -10 37 -13 22 17 5 3 16 25 -75

Med/Low PAT Growth (10) 962 13 367 16 216 7 44 15 71 38 101ITC 81 12 31 14 21 14 4 3 12 38 80Infosys 127 29 36 24 27 12 5 3 13 28 -126Coal India 157 8 32 13 33 7 7 2 11 21 96Hind. Unilever 68 8 11 12 9 7 2 1 3 16 52Sesa Goa 197 14 71 17 24 7 5 2 7 36 102Bajaj Auto 47 -5 10 6 8 6 2 0 2 21 220ICICI Bank 39 15 35 10 21 6 4 1 5 91 -391ONGC 229 16 124 21 62 5 13 3 15 54 207HDFC 16 17 17 7 12 5 2 1 3 105 -946

Negative PAT Growth (12) 2,235 9 320 -4 136 -19 28 -32 -151 14 -204Hero Motocorp 57 10 5 19 4 -1 1 0 0 10 71Larsen & Toubro 141 7 14 1 9 -5 2 0 -2 10 -65Reliance Inds. 1,015 12 74 -4 53 -1 11 0 -2 7 -122Cipla 27 31 6 7 4 -7 1 0 -1 23 -522GAIL 132 16 15 10 9 -9 2 -1 -4 12 -59Mahindra & Mahindra 84 -9 11 -18 8 -13 2 -1 -6 12 -137Hindalco 225 14 24 9 8 -14 2 -1 -6 11 -44Bharti Airtel 209 8 64 8 3 -54 1 -4 -18 31 19JSPL 49 5 14 -15 6 -31 1 -3 -13 30 -683Tata Power 97 26 15 2 1 -34 0 -1 -3 16 -374State Bank 117 6 65 -11 24 -35 5 -13 -60 56 -1124BHEL 82 -21 11 -43 5 -57 1 -7 -34 13 -515

Sensex (29) 4,668 12 964 12 490 5 100 21 100 21 -1Note: For Financials, Sales represents Net Interest Income, and EBITDA represents Operating Profit

A–17October 2013


Intra-sector 2QFY14 earnings divergence (%)Sectors Sector +30% Growth 15-30% growth 0-15% growth -ve earnings Earnings

Growth (%) growth (%) momentum

High growth sectors

Technology 29 Tech Mahindra: 59%, TCS: 30% Infosys: 12%, MphasiS: -3%

HCL Tech: 54% Persistent Sys.: 9%

Health Care 17 Cadila: 75%, Dr Reddy’s: Glenmark: 26%, Sanofi India: 13%, Cipla: -7%,

39%, Sun Pharma: 36%, Torrent Pharma: 15%, Biocon: 7% Ranbaxy Labs: -19%,

Divis Labs: 33% Lupin: 15% IPCA Labs.: -20%

Media 15 PVR: 61% DB Corp: 21%, Zee Ent.: 14%, HT Media: -41%,

Sun TV: 21% Jagran Prak.: 9% Dish TV: Loss

NBFC 14 LIC Housing: 37%, M&M Financial: 23%, HDFC: 5%, Shriram IDFC: -10%

Bajaj Finance: 32% REC.: 23%,PFC: 21% Transport Fin: 4%

Metals 14 SAIL: 85%, Hind. Zinc: 12%, Hindalco: -14%,

Tata Steel: LP JSW Steel: 10%, NMDC: -19%,

Sesa Goa: 7% JSPL: -31%

Consumer 13 United Spirits: 125%, Godrej ITC: 14%,Dabur: 13%,

Britannia: 69%, Consumer: 18%, Nestle: 12%, Asian

Radico Khaitan: 33% Marico: 18% Paints: 9%, HUL: 7%

Banks - Private 12 HDFC Bank: 28%, Axis Bank: 6%, Federal Bank: -24%

Kotak Bank: 22%, ICICI Bank : 6%,

IndusInd Bank: 20%, Yes Bank: 3%

Autos 11 Maruti Suzuki: 110%, Tata Motors: 27%, Bajaj Auto: 6% HeroM.: -1%, M&M:

Eicher Motors: 35% Exide Inds.: 26% -13%, AshokL: PL

Medium/Low growth sectors

Retai l 9 Shopper ’s Stop: 64%, Jub. Foodworks: 11%,

Future Retail: 39% Titan Industries: 6%

Uti l i t ies 8 JSW Energy: 55% NTPC: 17%, Power Grid: 12%, Tata Power: -34%,

NHPC: 16% Coal India: 7%, PTC India: -46%

CESC: 4%

PAT degrowth sectors

Oil & Gas -1 Cairn India: 50%, ONGC: 5% Oil India: -2%,

(Ex RMs) MRPL: LP GAIL: -9%, RIL: -1%

Real Estate -6 Prestige Estates: 62% Phoenix Mills: 10%, DLF: -2%,

Unitech: 1% Oberoi Realty: -21%

Teleco m -7 Idea Cellular: 80%, Rel iance Bharti

Bharti Infratel: 38% Comm: 5% Airtel: -54%

Cement -31 SRCM: -64%, ACEM:

-38%, UTCEM: -28%,

ACC:-26%,Grasim:-1%

Capital Goods -32 ABB: 69% Crompton Have l l s L&T: -5%, Thermax:

Greaves: 24% India: 7% -20%, BHEL: -57%

Banks - PSU -33 Bank of India: 69% PNB: -22%, SBI: -35%,

BoB:-39%,UNBK:-47%

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

5121

4 3 42

1 2 22

2 3 12

0333

3 2 08

2 2 31

0 4 13

2 0 02

1 2 43

1 070

1 151

00

80

1520

2 0 11

2 0

61

A–18October 2013


FY14/15 ESTIMATES Earnings slowdown, downgrades persistFY14/15 Sensex EPS cut 3%/4%; expect FY13-15 Sensex EPS CAGR of 11%

� Aggregate PAT to grow 6% in FY14; expect rebound in FY15 to 14%. FY13-15 AggregatePAT CAGR works out to 10%.

� FY14 Sensex EPS is downgraded 3% (from Jun-13 estimates) to 1,289. SBI, Reliance, CoalIndia, ICICI Bank and Hindalco are the major contributors.

� FY15 Sensex EPS is downgraded 4% (from Jun-13 estimates) to 1,476. 5 companies -ONGC, SBI, ICICI Bank, Coal India, and M&M - account for more than 100% of the downgrade.

� FY13-15 Sensex EPS CAGR stands at 11% v/s 14% a quarter ago.

Aggregate PAT to grow 6% in FY14; expect rebound in FY15 to 14%Based on bottom-up estimates, we expect MOSL Universe of 159 companies (ex RMs)to report aggregate FY14 PAT growth of 6% YoY. Growth is dragged down by two majorfactors -� First ever de-growth in Financials (-3%), a heavyweight sector accounting for 25%

of FY13 Aggregate PAT; and� 6% growth in Oil & Gas (ex RMs), which has the second highest share of FY13

Aggregate PAT (18%).

Excluding Financials and Oil & Gas, FY14 PAT growth is a reasonable 11%. In FY15,aggregate PAT growth is expected to rebound to 14%, largely led by a bounce back inthese very two sectors.

Expected FY14 PAT growth muted at 6% … … led by F inancials' first ever PAT de-growth

Expect FY13-15 Aggregate PAT CAGR of 10%FY13-15 aggregate PAT CAGR works out to 10%. 50% of the FY13-15 PAT delta comesfrom just 3 sectors - Technology, Oil & Gas and Financials. Besides these, FY15 numbersare also contingent on (1) sustained high profit growth in Telecom (11% of FY13-15 PATdelta), and (2) a sharp upswing in Auto (10% of FY13-15 PAT delta on the back ofexpected 23% PAT growth in FY15).

MOSL ex RMs PAT growth (%)

44

32

611

26

14

5

14

6

FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14E FY15E

Financials Sector PAT growth (%)

24

47

2521 20 18 15 15

-3

FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14E FY15E

First ever PAT

de-growth for

the sector

A–19October 2013


PAT delta (FY13-15): % share20 1614

11 10 8 8 74 2 2 1 0

-4

Tech

nolo

gy

Oil

ex R

Ms

Fina

ncia

ls

Tele

com

Auto

Util

ities

Cons

umer

Hea

lthCa

reM

etal

s

Cem

ent

Real

Esta

teM

edia

Reta

il

Cap.

Goo

ds

50% of FY13-15 PAT delta comes from just 3 sectors FY14 sectorwise PAT share; FY15 share remains almost- Technology, Oil & Gas, Financials the same

FY14/15 Estimates: Expect 10% PAT CAGR over FY13-15Sales Gr./ EBIDTA Margin EBIDTA PAT PAT Gr. / PAT

Sales CAGR EBIDTA Margin Delta CAGR (INR CAGR delta

Sector (INR b) (%) (INR b) (%) (bp) (%) b) (%) FY13-15

(No of Companies) FY13 FY14E FY15E FY13-15 FY13E FY13 FY14E FY15E (FY13-15) FY13 FY14E FY15E FY13-15 Sh. (%)

High PAT CAGR (>20%) 2,456 14 12 13 708 28.8 85 114 17 211 31 35 33 21Telecom (4) 1,306 11 9 10 397 30.4 193 154 16 45 66 70 68 11Media (8) 143 17 14 16 41 28.7 20 81 18 19 20 25 23 1Health Care (13) 791 17 15 16 193 24.4 -63 96 17 112 26 19 22 7Real Estate (11) 216 22 14 18 77 35.7 81 66 20 36 13 32 22 2Medium PAT CAGR (10-20%) 6,963 16 14 15 1,226 17.6 85 -5 18 785 17 17 17 37Technology (10) 1,940 25 12 18 489 25.2 93 -73 18 383 24 13 18 20Consumer (13) 1,182 14 15 15 242 20.5 45 22 16 168 15 18 16 8Retail (3) 137 20 18 19 14 10.1 -43 40 19 9 13 19 16 0Auto (8) 3,702 12 14 13 480 13.0 55 35 17 226 8 23 15 10Low PAT CAGR (up to 10%) 18,575 10 7 8 4,678 25.2 -53 160 11 2,526 1 11 6 41 Excl. RMs (10) 7,407 14 2 8 1,122 15.2 -88 176 11 643 6 13 9 16Oil & Gas (13) 16,501 11 0 5 1,356 8.2 -40 133 11 715 5 16 10 20Cement (15) 1,194 4 14 9 242 20.2 -117 149 10 110 -7 26 8 2Utilities (10) 2,015 7 14 10 605 30.0 66 -1 12 383 5 11 8 8Financials (31) 2,197 11 16 13 1,735 79.0 -268 80 12 904 -3 15 6 14 Private Banks (10) 541 16 18 17 452 83.5 24 48 17 278 9 17 13 10 PSU Banks (12) 1,359 7 15 11 997 73.4 -491 92 8 432 -19 13 -4 -5 NBFC (9) 296 20 16 18 286 96.4 -124 43 17 193 15 15 15 8Metals (9) 4,194 9 7 8 787 18.8 84 -3 10 351 8 0 4 4Capital Goods (8) 1,569 -1 3 1 188 12.0 -96 -77 -7 134 -21 0 -11 -4Others (6) 211 10 11 10 37 17.6 -8 56 12 22 -1 19 9 1MOSL Excl. RMs (159) 28,205 12 9 10 6,649 23.6 -12 105 13 3,545 6 14 10 100Sensex (30) 9,728 12 8 10 1,930 19.8 6 101 13 1,038 7 15 11 NANifty (50) 11,087 11 8 10 2,285 20.6 1 104 12 1,231 6 14 10 NA

FY14/15 Sector earnings: Interesting observations� TELECOM: After four consecutive years of PAT decline, easing competitive pressure

should cause Telecom sector profits to rebound sharply in FY14 and FY15 withgrowth rates of 66-70% per annum.

� AUTO - TWO-WHEELERS: After negative growth in FY13 and likely muted growthof 6% in FY14, two-wheeler PAT should see a bounce back in FY15 on the back of:(1) Healthy monsoon reviving volume growth, especially in rural India,(2) No royalty burden for Hero MotoCorp, and(3) Full benefit of weak INR reflecting in Bajaj Auto's profits from exports.

FY14 PAT Share (%)23

18

1211 10

6 5 4 3 3 2 2

Fina

ncia

ls

Oil

ex R

Ms

Tech

nolo

gy

Util

itie

s

Met

als

Auto

Cons

umer

Hea

lthca

re

Cap.

Goo

ds

Cem

ent

Tele

com

Oth

ers

A–20October 2013


� CEMENT: Like Autos, even Cement would benefit from expected higher ruraldemand in FY15 on the back of good monsoon led higher rural GDP growth. Thisshould help the sector reverse the muted PAT performance of the preceding yearsi.e. 3% growth in FY13 and 7% de-growth in FY14.

� HEALTHCARE v/s TECHNOLOGY: In FY14, both Healthcare and Technology sectorsare expected to clock similar healthy growth rates of 24-26%, on the back of weakINR. Going forward, our numbers do not factor in further weakening of the INR.Still, Healthcare PAT is expected to grow 19% in FY15 whereas Technology PAT isexpected to grow at a much lower 13%.

110 103

129

107

81

10892

103

-10 -7

26

3

31

-25

17

FY08 FY09 FY10 FY11 FY12 FY13 FY14E FY15E

Cement PAT (INR b ) Growth (%)

TELECOM: Expect sharp PAT recovery on easing competition 2-W: FY15 PAT to rise on higher volumes, no royalty for Hero

5256

70

5546

40 2519

14

-6

8

FY10 FY11 FY12 FY13 FY14E FY15E

2-W PAT (B ajaj+Hero ) (INR b) Growth (%)

126

74

45

6790

151157

133

70

-40

18

66

-33-25

-4


Telecom PAT (INR b) Growth (%)

CEMENT: Demand revival, pricing discipline to aid PAT rebound TECH v/s HEALTHCARE FY15 PAT: Healthcare to outgrow Tech

2118 17 19

2724

13

-7

19

49

18 2026

19

FY09 FY10 FY11 FY12 FY13 FY14E FY15E

Techno logy Hea l thcare

PAT growth (%)

FY14 Sensex EPS cut 3% led by SBIOver the last 3 months, Sensex EPS for FY14 has seen a downgrade of 3% from 1,327 to1,289. More than half the downgrade is attributable to one single company, StateBank of India. Reliance Industries, Coal India, ICICI Bank and Hindalco are the othermajor contributors to the downgrade. The top 5 companies which are expected stemthe tide are all dollar plays - Wipro, Tata Motors/JLR, Infosys, TCS and Sun Pharma.

A–21October 2013


3% cut in FY14 Sensex EPS since June 2013

SBI accounts for over half the INR37 cut in FY14 Sensex EPS Positive contributors to FY14 Sensex EPS are all dollar plays

Hindalco, JSPL lead downgrades in FY14 despite weak INR Companies with USD revenues see upgrades in FY14 EPS

FY15 Sensex EPS cut 4% led by 3 PSUsOver the last 3 months, Sensex EPS for FY15 has seen a downgrade or 4% from 1,536 to1,476. 5 companies - ONGC, SBI, ICICI Bank, Coal India, and M&M - account for morethan 100% of the downgrade. The dollar earners are likely to continue to their damagecontrol act even in FY15.

1,431 1,387 1,395 1,389 1,368 1,327

1,289

11

8

14 14 1416 16

Mar 12 Ju ne 12 Se p 12 De c 12 Mar 13 June 13 Sep 13

FY14 EPS (INR) FY14 EPS Gro wth Yo Y (%)

7

5 54

2

Wipro TataMotors

Infos ys TCS Su nPha rma

To p 5 Co ntributo rs to FY14 Se nse x EPS (INR )

-31-27

-24-20 -19

Hin dalco JSPL SBI Tata Po wer Maruti

Top 5 FY14 EPS Downgrades (%)

14 1412 11

7

TataMotors

SunPharma

Cipla Infos ys Wipro

Top 5 FY14 EPS Up grad es (%)

�19

�6 �6 �5 �4

SBI Rel ianceInds

Coa l �India ICICI�Bank Hindalco

Bottom�5�Contributors�to�FY14�EPS�(INR)

A–22October 2013


4% cut in FY15 Sensex EPS since June 2013

3 PSUs - ONGC, SBI, Coal India - lead FY15 Sensex EPS cut Dollar plays remain positive contributors to FY15 Sensex EPS

4 of the top 5 downgrades are common to both FY14, FY15 Dollar plays continue their earnings upgrade into FY15 as well

FY13-15 Sensex EPS CAGR at 11%Post the FY14 and FY15 downgrades, Sensex EPS CAGR for FY13-15 stands lower at 11%v/s 14% a quarter ago. Just five stocks in two sectors - Technology (TCS, Infosys, Wipro)and Oil & Gas (ONGC, Reliance) - account for almost half the incremental PAT, FY15over FY13.

98

76

4

Infos ys Wipro Ses a�Goa TCS SunPharma

Top�5�Contributors �to�FY15�EPS�(INR)

19 19

16

118

SunPharma

Infos ys Sesa �Goa Cipla Wipro

Top�5�FY15�EPS�Upgrades �(%)

1,573 1,573 1,573 1,573

14 14 1416

Dec�12 Mar�13 June�13 Sep�13

FY15�EPS�(INR) FY15�EPS�Growth�YoY�(%)

�23�21

�8�6 �5

ONGC SBI ICICIBank

CoalIndia

Rel ianceInds

Bottom�5�Contributors �to�FY15�EPS�(INR)

�26 �26

�22 �21�18

Tata�Power Hindalco SBI JSPL M&M

Top�5�FY15�EPS�Downgrades �(%)

A–23October 2013


Sensex Perfomance: Expect FY13-15 PAT CAGR of 11%Sales Sales EBIDTA EBITDA PAT PAT PAT Contbn

(INR b) CAGR Margin (%) CAGR (INR b) YoY (%) CAGR to DeltaCompany FY13 FY14 FY15 % FY13 FY14 FY15 % FY13 FY14 FY15 FY13 FY14 FY15 % %

High PAT Growth (6) 3,252 3,737 4,025 11 22.2 24.5 25.7 20 283 394 478 6 39 21 30 44Tata Steel 1,347 1,470 1,473 5 9.1 11.1 11.1 15 2 33 31 -92 2,042 -4 353 7Bharti Airtel 769 853 921 9 30.2 31.9 33.6 15 23 30 55 -47 33 81 55 7Sun Pharma 112 156 180 26 43.0 42.2 41.2 24 31 45 51 31 46 14 29 5HDFC Bank 158 188 229 20 72.3 75.6 78.9 26 67 86 106 30 28 24 26 9TCS 630 817 931 22 28.7 30.2 28.8 22 139 178 204 31 28 15 21 14Hero MotoCorp 236 253 293 11 9.5 10.6 13.1 31 21 22 31 -11 4 38 20 2Medium PAT Growth (12) 6,817 7,725 8,711 13 22.9 22.7 23.4 14 845 927 1,103 4 10 19 14 57Cipla 83 106 122 21 26.5 23.3 22.4 11 13 16 18 11 28 12 19 1Dr Reddy ’s Labs 116 136 151 14 21.3 21.1 22.0 16 15 18 21 22 19 19 19 1ITC 299 340 390 14 35.5 36.6 36.4 16 74 85 100 20 15 16 16 6Tata Motors 1,888 2,251 2,588 17 14.1 14.9 14.7 20 103 116 138 -18 12 19 16 8Wipro 374 434 474 13 20.8 22.6 22.1 16 72 86 94 15 19 10 14 5Infosys 404 499 552 17 28.6 27.5 27.8 15 94 107 123 13 13 16 14 6HDFC 62 74 85 18 108.7 105.7 105.8 16 48 56 63 18 15 14 14 3M&M 687 743 825 10 13.3 12.2 12.9 8 36 41 48 19 12 16 14 2ONGC 1,614 1,812 1,976 11 33.4 32.2 35.6 14 242 247 314 -7 2 27 14 16Bajaj Auto 200 208 238 9 18.2 20.1 20.3 15 30 34 39 -2 11 16 14 2Maruti Suzuki 442 449 508 7 9.6 10.2 11.0 15 24 24 31 44 -1 28 12 1NTPC 647 674 801 11 26.5 24.3 23.9 6 92 98 114 15 7 17 11 5Low PAT Growth (12) 8,668 9,357 9,796 6 19.7 18.7 19.9 7 1,020 949 1,017 7 -7 7 0 -1ICICI Bank 139 157 182 14 95.2 94.4 93.5 13 83 87 97 29 4 12 8 3Hind. Unilever 258 287 327 12 15.5 15.8 15.7 13 33 35 38 28 7 8 7 1Reliance Inds. 3,603 4,007 3,879 4 8.5 7.6 8.7 5 210 216 236 5 3 9 6 6Coal India 683 727 773 6 26.5 28.3 28.1 10 177 187 198 9 6 6 6 5Sesa Goa 712 750 841 9 35.1 37.3 34.7 8 106 103 106 4 -3 3 0 0Larsen & Toubro 609 658 738 10 10.5 10.2 10.0 7 49 40 48 3 -18 17 -2 0Hindalco 802 888 995 11 10.0 10.5 11.5 19 32 29 31 -4 -11 7 -2 0GAIL 473 531 610 14 13.3 11.8 11.5 6 40 37 37 10 -9 0 -5 -1State Bank 612 650 748 11 67.3 59.7 63.2 7 179 141 162 17 -21 15 -5 -4Tata Power 96 105 115 10 21.2 23.0 21.7 11 9 7 8 -48 -22 13 -6 0JSPL 198 202 274 18 33.2 29.9 29.8 11 35 26 30 -14 -27 18 -7 -1BHEL 484 394 315 -19 19.4 16.9 12.8 -34 66 41 25 -5 -37 -40 -38 -9Sensex (PAT free float) 18,737 20,819 22,533 10 21.3 21.2 22.3 12 1,038 1,111 1,272 6 7 15 11 100

FY08-13 EPS CAGR at 7%; expect rebound in FY13-15

216 236 272 348450 523

718833 820 834

1,0241,123 1,190 1,289

1,476

FY01

FY02

FY03

FY04

FY05

FY06

FY07

FY08

FY09

FY10

FY11

FY12

FY13

FY14

E

FY15

E

FY01-13A: 15% CAGR

FY01-15E: 15% CAGR

FY01-08:

21% CAGR

FY08-13:

7% CAGR

FY13-15E:11% CAGR

A–24October 2013


FY14/15 company earnings: Key observations� INFOSYS v/s TCS: Our estimates suggest that in FY15 PAT growth of Infosys and TCS

should converge to 15-16%. However, TCS trades at over 30% premium valuationcompared to Infosys.

� BHARTI AIRTEL: Bharti is poised to reverse three successive years of PAT de-growthin FY14 and FY15.

� HERO MOTOCORP: Expect 38% jump in FY15 earnings on the back of (1) higherrural volumes, and (2) no burden of royalty to Honda, Japan.

� TATA MOTORS: Expect reversal of FY13 PAT decline in the next two years led by (1)strong performance by JLR overseas, and (2) recovery in domestic vehicle demand.Trades at single digit P/E.

� ONGC: If the expected oil sector reforms come through, ONGC's subsidy sharingburden should significantly ease in FY15 and drive PAT growth.

� HINDUSTAN UNILEVER: Expect single-digit PAT growth in each of the two yearsFY14 and FY15. Yet, the stock continues to enjoy rich valuation (35x FY15E EPS).

INFY V/S TCS: PAT growth to converge, but TCS at premium BHARTI: Poised to reverse 3 years of PAT de-growth

30 4 11 22 13 13 163 34 26 23 31 28 15

-20-9

-29

25 3433


Infy TCS TCS Valn. Prem. (%)PAT Growth (%)

67 85 90 60 43 23 5530

23

14 1322

30

49

24

43


PAT (INR B) PE (x)

HERO MOTO: Higher volumes, zero royalty to fuel FY15 PAT TATA MOTORS: Expect to recover from FY13 PAT de-growth

10 13 22 20 24 21 3122

14

17 1716

1517

13

19


PAT (INR B) PE (x)

ONGC: Profit recovery contingent on oil sector reforms HIND. UNILEVER: Rich valuations but single-digit PAT growth

207 198 194 210 260 242 314247

10

8

11

9

1212

710


PAT (INR B ) PE (x)

1725 21 21 26

33 3835

29

2125

3035

303538


PAT (INR B) PE (x)

91

126103

138116

15

�21

21

9 7 8 89

29

12�P/E


PAT�(INR�B) PE�(x)

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A–26October 2013


While import of oil continue to rise that of gold and non-oil-non-gold declines

FY14 CAD to correct sharply to 2.9% of GDP� Trade in services on the other hand have seen higher surplus by USD1.6b per

month during YTDFY14 so far compared with no growth during YTDFY13.� This was entirely due to a pick up in services exports while imports remained

static.� While data would be available with a lag, reports suggest a pick up in remittances

as well.� All these factors together can reduce India's current account deficit (CAD) to only

USD51b from USD88b in FY14. This implies that vis-à-vis USD22b of CAD in 1QFY14the CAD in the remaining quarters would come down dramatically below USD10b.

� As a percentage of GDP this means a sharp correction of CAD to only 2.9% in FY14from 4.8% in FY13.

� A seasonal pick up in gold imports, higher oil prices and uncertainties of INRadversely affecting exporters are the risk factors to this scenario.

Services surplus is higher than YTD levels by USD1b a month

0

2

4

5

7

Apr Ma y Ju n Jul Aug Sep Oct Nov Dec Ja n Feb Mar

FY12 FY13 FY14Services surplus

Trend (Non-oi l-non-gold imports)

Falling imports and export uptick resulted in reduced trade deficit for the last three months

0

2

4

6

8

Apr-

11

Jul-1

1

Oct

-11

Jan-

12

Apr-

12

Jul-1

2

Oct

-12

Jan-

13

Apr-

13

Jul-1

3

GoldTre nd (Gold imp orts)

6

9

12

15

18

Apr-

11

Jul-1

1

Oct

-11

Jan-

12

Apr-

12

Jul-1

2

Oct

-12

Jan-

13

Apr-

13

Jul-1

3

Oi l ImportsTre nd (Oi l imports )

1820

21

2324

Apr

-11

Jul-1

1

Oct

-11

Jan-

12

Apr

-12

Jul-1

2

Oct

-12

Jan-

13

Apr

-13

Jul-1

3

No n-oi l -non -goldTren(No n-oi l -non -gold imports )

-25-20-15-10

-50

Apr-

10

Sep-

10

Feb-

11

Jul-1

1

Dec

-11

May

-12

Oct

-12

Mar

-13

Aug

-13

Trade bala nceTrend (Tra de b alance)

10

16

22

28

34

Apr-

10

Sep-

10

Feb-

11

Jul-

11

Dec-

11

May

-12

Oct

-12

Mar

-13

Aug-

13

Expo rtsTre nd (Exports)

20

28

36

44

52

Apr-

10

Sep-

10

Feb-

11

Jul-

11

Dec-

11

May

-12

Oct

-12

Mar

-13

Aug-

13

Imports Trend (Impo rts)

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A–35October 2013


The game-changing juggernautForthcoming State elections may well be a gauge of the national mood

� State elections - gauge of national mood: During Nov-Dec'13, assembly electionswill be held in 5 states of Rajasthan, Madhya Pradesh, Chattisgarh, Delhi andMizoram aggregating 73 of 543 Lok Sabha seats (13% of total seats). The assemblyelections assume significance because the results could be a referendum for theGeneral elections highlighting the national mood.

� Decoding the election trends: Our analysis of elections led us to some interestingfindings and perspectives:A. Seat share can be disproportionate to vote share: The data on seats won

percentage to vote share percentage suggests that parties have won less seatsin a particular year despite its vote share remaining the same. This suggeststhat the margin of victory is slender in many seats (more than 35% seats werewon with less than 5% margin victory in 2009 general elections).

B. Higher voter turnout – an indicator of a change in government?: The past 10general election trends suggest that a voter turnout of 60% or above hasresulted in a change in government (barring 1984 which Congress won due tosympathy wave on assassination of former Prime Minister, Ms. Indira Gandhi).

� What could be the odds of an NDA government: Based on the opinion polls andpredictions, odds favor anti-incumbency. We analyse possible scenario whichcould drive an NDA government. Association with allies and their performanceremains a key monitor to watch.

� Markets - build-up pre-elections; sharp reactions post elections: Markets seessome build-up prior to the elections. However, it witnesses sharp reactions postthe election results. Normally, a decisive voting in favour of a party is positivelyperceived by the markets, whereas a fractured government witnesses negativereactions.

State elections – gauge of national mood� The second innings of UPA has been marred by corruption scandals, decadal low

growth, inflation, currency depreciation, etc hurting investor confidence andcreating uncertainty in the mind of the corporates.

� With Lok Sabha elections due in the next 7 months, assembly elections during thisinterim period are keenly awaited since they may act as a referendum to thegeneral elections to suggest the political mood of the nation.

� There are 5 state elections before the General elections in April-May 2014 –Rajasthan, Madhya Pradesh, Chattisgarh, Delhi and Mizoram. These states comprise13% of the Lok Sabha seats (73 out of 543 seats).

� The state elections are important, since in 4 of these states (except Mizoram),Congress and BJP are the only two dominant parties. Thus, the outcome of theseassembly elections will likely reflect the national mood.

#1

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A–39October 2013


4323 13 15 30 14

33

2115 22

50

24

13

28 55 31

10

19

11 28 18 3210

43

Seatswon %(1999)

Votespol le d %

(1999)

Sea tswon %(2004)

Vo tesp ol led %

(2004)

Se atswo n %(2009)

Votespol led %

(2009)

B JP Jan ata Da l (United )R ash triya Jana ta Dal Othe rs

Note: Brackets indicates state seats weightage in total Lok Sabha seats

AP (8%): Congress vote share ranged from 39-43%, MP (5%): Congress seat share has consistently remainedhowever, seat share moved from 12%-79% lower than vote share before catching up in 2009

Bihar (7%): Winners' vote share is always lower than Rajasthan (5%): Congress vote share ranged from 41-47%seat share indicating fractured mandate however, seat share swung from 16% in 2004 to 80% in 2009

� Margin of victory: Our above thesis that parties win seats based on slender marginis elucidated through the exhibit below. We observe that barring 2004, 36% of theseats are won with victory margins of less than 5%. The chart below indicates thedecisive voting in 2004, wherein almost half of the seats were won with victorymargins of more than 10%.

More than one-third seats won with less than 5% margin

6447

84

49

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16

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Seatswon %(1999)

Votess hare %

(1999)

Se atswo n %(2004)

Votessh are %(2004)

Seatswon %(2009)

Vote ss hare %

(2009)

BJP Congress Oth ers

7347

86

48 55 43

28

44

14

3441

40

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Sea tswon %(1999)

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(1999)

Seatswon %(2004)

Votespol led %

(2004)

Sea tswon %(2009)

Vo tesp ol led %

(2009)

BJP Co ngre ss Others

1243

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79

39

69

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33

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25

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36

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(2009)

Congress Telugu�Desam Others

36 36 28 36

25 2423

27

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37

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A–48October 2013


Telecom EV/EBITDA valuations at 22% discount to historicaverages despite significant run Cement EV/EBITDA valuations slip below historical averages

Metals at 63% discount to market PB and less than 1x PB PSU Banks at historic lows of 0.6x P/B

Healthcare valuations attractive at historical averages Technology close to historical average; still upside left

Presenting sensitivity on top ideas� We present our views on few top ideas, where underlying business is seeing an

improvement in fundamentals.

� Several of these stocks are likely earning upgrade candidates, and are also tradingat attractive valuations. Our Model Portfolio has a positive bias towards thesenames.

6.8

8.7

5.0

8.0

11.0

14.0

17.0

Sep�

03

Jul�0

4

May

�05

Mar

�06

Jan�

07

Nov

�07

Sep�

08

Jul�0

9

May

�10

Mar

�11

Jan�

12

Nov

�12

Sep�

13

Tele co m Sector EV/EB DITA (x) 10 Yr Avg (x)

7.1

7.6

3.0

5.5

8.0

10.5

13.0

Sep�

03

Jul�0

4

May

�05

Mar

�06

Jan�

07

Nov

�07

Sep�

08

Jul�0

9

May

�10

Mar

�11

Jan�

12

Nov

�12

Sep�

13

Cement EV/EBDITA (x) 10 Yr Avg (x)

0.81.8

0.0

1.3

2.5

3.8

5.0

Sep�

03

Jul�0

4

May

�05

Mar

�06

Jan�

07

Nov

�07

Sep�

08

Jul�0

9

May

�10

Mar

�11

Jan�

12

Nov

�12

Sep�

13

Me tals P/B (x) 10 Yr Avg (x)

0.6

1.2

0.3

0.8

1.3

1.8

2.3Se

p�03

Jul�0

4

May

�05

Mar

�06

Jan�

07

Nov

�07

Sep�

08

Jul�0

9

May

�10

Mar

�11

Jan�

12

Nov

�12

Sep�

13

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

22.3

21.9

14

18

22

26

30

Sep�

03

Jul�

04

May

�05

Mar

�06

Jan�

07

Nov

�07

Sep�

08

Jul�

09

May

�10

Mar

�11

Jan�

12

Nov

�12

Sep�

13

Heal thcare�P/E�(x) 10�Yr�Avg�(x)

16.016.9

7

12

17

22

27

Sep�

03

Jul�

04

May

�05

Mar

�06

Jan�

07

Nov

�07

Sep�

08

Jul�

09

May

�10

Mar

�11

Jan�

12

Nov

�12

Sep�

13

Technology�P/E�(x) 10�Yr�Avg�(x)

A–49October 2013


33.0%

28.2%

26.5%

1.8%

1.0%

2.0%1.1%0.2%0.6%

2.0%

1QFY

14EB

ITD

A %

Util

: +5.

3pp

to 7

4.8%

Op.

lev f

rom

grow

th

Ons

iteef

fort

s red

nby

1%

to29

%

Wag

e hi

kes

& IN

R de

pn.

FY15

exi

tm

argi

n(%

)

Util

incr

to78

%�8

0%

Pyra

mid

adju

stm

ent

by 1

0pp

Ons

ite e

ff.

redn

by

10%

FY15

aspi

red

exit

mar

gin

216

237

245

Our FY15EPS@12%

rev gr.

Impl iedEPS@12% revgr. & 34%ma rgins

Impl iedEPS@15% revgr. & 34%ma rgins

Infosys: Revival in progressWhat went wrong?� Revenue growth declined over FY11-13 (from 25.7% in FY11 to 5.8% in FY13) due

to focus on high end work at the expense of traditional, scale business.� Margins fell from 32.6% in FY11 to 28.6% in FY13 (despite currency depreciating

by 20%) led by lower growth and utilization (78.2% in FY11 to 70.7% in FY13)� Inflexibility in pricing and resistance to new deal structuring

What's changing?� Management structure change - Return of Mr N R Narayana Murthy� Focus back on growing traditional business amidst improved sentiment among

US clients� Proactively exercising levers of utilization, onsite costs and pyramid to revive

margins

What will this result in?� Revenue: FY13-15 USD revenue CAGR to 11.6% (closer to industry) as deal signings

improve (USD1.6b in 3 quarters)� Margins: 170bp expansion in operating margin from bottom (1QFY14-26.5%), led

by: [1] leverage from growth, [2] exercising cost efficiencies [3] favorable currency.� Valuations: Results in 22% upside at 17x FY15E.

Margin escalator: Current margins to our estimate to optimistic scenario in FY15 EPS estimates at various scenarios

Valuation multiples will move higher with high marginsLowest EBITDA margins with low growth and better growth

Based on optimistic scenario

32% 32% 31% 33% 35% 33% 32% 29%

44%35% 35% 12% 3% 26% 16% 6%

FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13

EBITDA % USD re v Gr

Avg PE = 18.5

Avg Gr=12.7

6

11

16

21

26

Jun-

08

Mar

-09

Dec

-09

Sep-

10

Jun-

11

Mar

-12

Dec

-12

Sep-

13

-10%

0%

10%

20%

30%

P/E - LHS (x) YoY gr - R HS (USD rev)

High margin

Low margin

Avg Gr = 11.5

Avg PE = 14.1

A–50October 2013


ICICI Bank: Measured growth with focus on RoE enhancementWhat went wrong?� Significant tightening by RBI led to concerns over growth, asset quality (especially

corporate sector) and earnings (higher pressure on margins and fees)� Lack of resolution for the structural issues faced by infrastructure sector, especially

power. Post consolidation phase, ICICIBC grew its domestic corporate portfolioat a CAGR 52% over FY10/12, led by power (CAGR 45% over FY10/12).

What's changing?� Rapid branch network expansion will keep share of granular retail liabilities high

in the balance sheet ensuring stability to margins.� Recent efforts to resove issues in infrastructure segment should ease some of

the concerns raised.� Subsidiaries are now self-sufficient and can provide capital support to banking

business. With the healthy return ratios and capital from subsidiaries ICICIBC issufficiently capitalized till FY16.

What will this result in?� Confidence on core earnings parameters (like margins, granularity of fees, ability

to manage asset quality shocks if any) remains high.� Return ratio to remain superior with Core ROA of 1.5%+. RoE will largely be a

function of growth opportunities in the system.� Improvement in subsidiaries profitability to ensure consolidated PAT growth

higher than standalone PAT growth. Management is targeting RoE of 18% overthe next few years. Thus, there will be dilution free growth for 2-3 years.

Strong capitalization increasing leverage to boost RoE (%) NIM at decadal high and credit cost contained (%)

Sustainability of return ratios to lead to re-rating of multiples Branch expansion to benefit - retail deposit and loan opportunities

9.2 7.4 11.8 11.8 14.4 13.2 12.7 12.8

12.811.5

9.69.1

9.9

13.412.1

14.8

FY06

FY07

FY08

FY09

FY10

FY11

FY12

FY13

T ier I R oE

2.5 2.5 2.7 3.0 3.1 3.22.72.22.02.0

1.7

0.4 0.50.8 0.9

0.7 0.81.2

1.0

2.2

FY06

FY07

FY08

FY09

FY10

FY11

FY12

FY13

FY14

E

FY15

E

NIM Credi t Cost

1.4

1.8

1.5

0.4

1.2

1.9

2.7

3.4

Sep-

06

Nov

-07

Jan-

09

Mar

-10

May

-11

Jul-1

2

Sep-

13

0.8

1.1

1.3

1.6

1.8P/B (x) Avg(x) RoA (RHS, %)

30.7 30.829.329.829.626.318.816.012.512.7

614

755 1,

262

1,41

9

1,70

7 2,52

9

2,75

2

3,10

0

3,35

0

3,60

0

FY06

FY07

FY08

FY09

FY10

FY11

FY12

FY13

FY14

E

FY15

E

SA ra tio (%)B ranches

A–51October 2013


-18-24 -21

-17 -17 -17 -17

-1 -3

5 4 2

373735

333637404142403738

FY05

FY06

FY07

FY08

FY09

FY10

FY11

FY12

FY13

FY14

E

FY15

E

FY16

E

Mob i le RPM growth (%)India & SA EB ITDA margin (%)

Bharti: Structural changes in industry to drive profitabilityWhat went wrong?� RPM declined from 53 paisa in FY10 to 42 paisa in FY13� EBITDA margin declined from 40% in FY10 to 30% in FY13, with African business

performance continuing to disappoint� Cash outlay of INR123b for 3G spectrum; data penetration also disappointed� INR depreciation led to a cumulative reported forex loss of INR 12b from FY11-13

What's changing?� Improving pricing discipline and profitability focus across operators (4% RPM

increase in 1QFY14). Africa business performance also expected to stabilize� Decreasing competitive intensity from challengers due to regulatory/balance

sheet/cash flow issues� Accommodative regulatory stance leading to correction in spectrum reserve prices

(cut by 37% / 62% for 1800 MHz/900 MHz). Increased policy visibi lity to spur M&A.

What will this result in?� Revenue: CAGR of 9% over FY13-16 led by traffic CAGR of 7% and RPM CAGR of 4%� Margins: 336 bp improvement in EBITDA margins from FY13-15 led by RPM

improvement� Valuations: Results in 37% upside based on 9x FY15E EV/EBITDA for India, 6x

FY15E EV/EBITDA for Africa business, 15% disc to market value for stake in BhartiInfratel and INR188b (INR49/share) for potential spectrum liability

Bharti: EV/EBITDA band chart

6.4

4

7

10

13

16

Apr

-06

Dec-

06

Aug-

07

Apr

-08

Dec-

08

Aug-

09

Apr

-10

Dec-

10

Aug-

11

Apr

-12

Dec-

12

Aug-

13

Bharti: Earnings sensitivity to RPMFY14E FY15E

Wireless traffic (b minutes) 1,032 1,100

Wireless RPM (p) 44.4 46.2

Consolidated Revenue (INR b) 853 921

Consolidated EBITDA (INR b) 272 309

Con solidated PAT (INR b) 30 55

Incremental revenue for 1p higher RPM (INR b) 10.3 11.0

Incremental EBITDA for 1p higher RPM (INR b) 7.2 7.7

Potential EBITDA upgrade for 1p higher RPM 2.7% 2.5%

Incremental PAT for 1p RPM increase (INR b) 5.3 5.4

Potential PAT upgrade for 1p higher RPM 17% 10%

46

11

18

22 24

16

11

68

14

21

FY05

FY06

FY07

FY08

FY09

FY10

FY11

FY12

FY13

FY14

E

FY15

E

FY16

E

Peak of 14.5x

Median of 8.8x

Bottom of 6.2x

Please refer to our detailedreport in June 2013

YoY Mobile RPM decline and India EBITDA margin (%) Earnings per share (INR)

A–52October 2013


12.0 12.0 14.0

9.5 15.5 15.56.0

9.0 9.0

9.03.0

3.030.5

39.5

47.5

Curre nt 2015E 2017E

Mu mba i Kochi B ina NRL To tal (mmt)

BPCL: Transition from a downstream to integrated playerWhat went wrong?� Benefits of reforms in Jan 2013 (diesel price hikes, shift to cash subsidy in LPG/

Kerosene and limiting LPG cylinders) were scuttled by INR depreciation.� Relook at the refinery transfer pricing added to uncertainties in refining

profitability.

What's changing?� Diesel price hikes had brought some demand growth moderation in sale volumes

and is positive in short term from under recoveries perspective.� Despite skepticism, government has stuck to its monthly diesel price hikes.� Benchmark deals in BPCL's Mozambique imply at least 30% higher valuation than

our base case� Expect positive reserve announcement from the SEAL basin drilling in Brazil and

FID at Mozambique.

What will this result in?� Diesel reforms to reduce under recoveries by 40% to INR960b by FY15 over FY13.� FID in Mozambique could significantly reduce the execution risk for the block.� SEAL basin (Brazil) reserve announcement would increase TP by INR50/sh

Silver lining led by E&P successes, valuing conservatively at USD1.8b (invested USD1.1b), at 30% discount to benchmarkCountry Successes Reserves announced by company Comments

Mozambique 13 35-65 tcf We value the block at USD3.5/boe, assumingrecoverable reserves of 45 tcf, and start of prodn from 2019

Brazil 8 150-200mmbbl (includes only We value the block at USD10/boe, assuming recoverableWahoo discovery, reserves not reserves of 200mmbbl, and start of prodn from 2018

decared yet for SEAL discoveries)

Refining capacity set to increase by 1.6x…. ….deregulated era could increase marketing profitability

Expect overall under recovery to reduce 40% by FY15 (INR b) BPCL investment value on the rise led by E&P upsides

FY15 EPS

34.8

41.9

53.7

65.6

1.2 1.5 2 2.5

0

100

200

300

400

500

Mar-09 Feb -10 Fe b-11 Fe b-12 Fe b-13

Investment & E&P value B PCL stock price

Our basecase

Marketing margin on auto fuels (INR/ltr)

Mar-14E

DieselReformsGolfinho

DiscoveryWahooDiscovery

BarquentineDiscovery

Petrol De-regulation

LagostaDiscovery

Orca

Discovery

329 145 303552 600 700 650260

410

8291,000 678

310713

(9)

56

67

10

960

1,378

1,610

1,385

461

7801,033


Ups tream Govern men t OMC's Total

Please refer to our detailedreport in October 2013

A–53October 2013


Hindalco: At an inflexion pointWhat went wrong?� Lured by natural resources like coal and bauxite, nearly USD6b has been invested

in projects in India.� Delay in start-up coal mines due to regulatory hurdles led to ballooning of debt

and CWIP.� Execution of project has also been slower.

What's changing?� Mahan coal block cleared the major hurdle of MoEF clearance. Cabinet committee

on investment looking to expedite projects, which may benefit coal blocks forMahan and Aditya smelter.

� Cost pressures have eased due to cooling of input prices.� INR/USD depreciation has come as a relief to rising operating costs in last 4-5

years.

What will this result in?� Margins of Indian smelting business will expand due to easing of cost pressure

and favourable exchange rate.� Utkal Alumina has already started production resulting in additional cash flows.� Peaking of CapEx cycle will drive equity value.

EPS sensitivity� Depreciation of INR/USD exchange rate by INR1 results in 7% upside in FY15 EPS.� USD100/ton improvement in aluminum prices results in 15% upside in FY15 EPS.

FCF turning positive as HNDL exit capex cycle (INR b) Operating cashflows are poised for rapid growth (INR b)

Deleveraging to lead to equity value accretion SOTP Valuation (INR b)FY14E FY15E FY16E FY17E

EBITDA 93 115 134 162EV/EBTIDAx 5.5 5.5 5.5 5.5Target EV 514 632 738 891Net Debt 483 473 435 367EQ = (EV-net Debt) 31 159 303 525A. INR/share(EQ) 15 77 147 254CWIP 279 162 75 34B. INR/share (CWIP) 135 79 36 17C. discount factor (%) 12 12 12 12D. Investments (quoted) 48 48 48 48E. INR/share (investments) 23 23 23 23F.discount factor (%) 20 20 20 20TP (A+B*(1-C%)+E*(1-F%)) 152 165 197 287

-17 -49 -89

10

114

88

42716265

7943272829 202450

97119125

FY07

FY08

FY09

FY10

FY11

FY12

FY13

FY14

FY15

FY16

FY17

F ree Cas h flows Cap Ex

3454 43 49 62 76

30

107 93 112134

69

149125

106

838569

554046

40

FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17

After work ing ca pi tal

B efore wo rking capi ta l

3.2 4.12.3 2.7

4.26.0 5.2

4.1 3.2 2.3

152 165197

287

0.0

2.0

4.0

6.0

8.0

FY08

FY09

FY10

FY11

FY12

FY13

FY14

FY15

FY16

FY17

Ratio

(x)

0

80

160

240

320

INR/

shar

e

Net Deb t /EBITDA Equity valu e (RHS)

Please refer to our detailedreport in September 2013

A–54October 2013


Hero MotoCorp: Defending its turfWhat went wrong?� Economic slowdown coupled with poor monsoon impacted FY13/1HFY14 growth

for the 2W industry with 3%/1% growth (v/s decadal average of 12% growth).� Increasing competitive pressures, with HMSI on expansion spree (product portfolio,

distribution and capacity), taking away large part of incremental volumes.� No new product launches since Nov-12, during which HMSI had 5 launches.� Margin erosion of 740bp to trough in FY13 of 9.5% and no EPS growth.

What's changing?� Product life cycle turning favorable, with 7-8 product actions lined-up from start

of festive season to 1HFY14 (product upgrades/refreshes in 2HFY14 and newproduct launch in 1HFY15).

� Entry in multiple new export markets can improve overall growth by ~3%. We areestimating export volumes of ~0.23m units in FY14 v/s mgmt guidance of 0.35m units.

� Royalty would stop from Jun-14, resulting in annual savings of ~INR8b or ~320bpat EBITDA level.

� Cost cutting initiatives to result in net 2-3pp improvement in margins startingfrom 3QFY14, with full benefit reflecting in FY16.

Levers to profitabilityBase Case FY14E FY15E FY16E

Volume Growth (%) 5.0 13.4 13.4

Adj EBITDA Margins (%) 10.6 13.1 13.8

EPS (INR) 110.4 152.8 179.2

TP (@ 16x) 2,444 2,866

Cost cutting initiatives: Base case 100bp savings in FY16

Adj EBITDA Margins (%) 10.6 14.6 16.1

EPS (INR) 110.4 169.0 207.0

EPS Upgrades (%) 10.6 15.5

TP (@ 16x PE) 2,704 3,312

EPS to grow at 27% CAGR, after 4 years of muted EPS Dividends to increase with rise in surplus cash

What will this result in?� Significant margin recovery led by savings on a) royalty of 3.2pp from 2QFY15 and

b) cost cutting initiatives. We are modeling in for margin improvement of 4.3ppover FY13-16E to 13.8%.

� Very attractive EPS growth of 27% CAGR over FY14-16E, based on our estimatesand over 32% based on mgmts targeted cost savings.

EBITDA Margins to improve meaningfully from FY15

16.9 11.8 11.0 10.6 13.1 13.8

9.5

1313

5

1517

24

-3

FY10 FY11 FY12 FY13 FY14E FY15E FY16E

EBITDA Ma rgins (%) Vol Gr (%)

48 64 112 101 119 106 110 153 179

11.213.1

18.117.716.2

18.1

14.213.014.5

FY08 FY09 FY10 FY11 FY12 FY13 FY14E FY15E FY16E

EPS Impl ied PE (x)

289 153 117 175 190 235 306

7570656045

105110

FY10 FY11 FY12 FY13 FY14E FY15E FY16E

Cas h (INR /s h) DPS (INR /s h)

A–55October 2013


ACC: Synergy benefits to drive profitabilityWhat went wrong?� Weak demand-supply hurts sector uti lization to 73% (-11pp since FY10), & pricing

power.� Severe cost escalations in RM, power and freight cost (11% CAGR in cost/ton over

CY10-12)� Recent pricing weakness adds further pressure.� Volume growth tapered to 1.6% YoY in CY12 and negative 1.8% YoY in 1HCY13� EBITDA margin contracted 2.4pp over CY10-12 to 17.7% (est. 14.6% in CY13E).

What's changing?� ACEM's acquiring 50.01% stake in ACC would unleash ~INR4.5b p.a of synergy

benefits over 2 years.� It also offers regional pricing power and volume synergies due to consolidation.

What will this result in?� Gradual cost savings up to INR160-170/ton due to synergy benefits over next 2-3

years� EPS accretion of 4%/9% in CY14/15 (assuming 20%/50% of synergies to percolate)� INR5/bag of better pricing would translate into 12.6% EPS accretion.

EPS sensitivity� 1% Change in pricing/volume would change CY14E EPS by 5.4%/1%� Synergy benefit to aid 5-9% accretion in CY13-14 EPS� INR10/bag of better pricing over synergies to aid ~35% accretion in CY14-15 EPS.

Industry's actual utilization much higher than reported EPS expected to grow strongly (INR)

Levers to profitabilityBase Case CY13E CY14E CY15E

EBITDA/ton (INR) with synergy * 656 764 935

Change in EBITDA/ton (INR) 35 82

EPS with synergy (INR) 69 93

EPS accretion (%) 5 10

Fair value (INR/Sh) 1,313 1,484

Pricing power: Base case +INR10/bag price in CY14/CY15/CY16

Price higher by INR5/bag v/s est

EBITDA/ton (INR) 656 864 1,035

EPS with synergy & higher realn (INR) 79 103

EPS accretion (%) 20 22

Fair value (INR/Sh) 1,446 1,616

Trading at significant discount to replacement cost

58 85 52 60 69 56 66 84

16.2 16.9 17.713.1 14.0

16.8

30.026.0

CY08 CY09 CY10 CY11 CY12 CY13E CY14E CY15E

EPS Ro E (%)

78 82 84 86 92 95 90 86 75 70 71 69 66 67 70

75

77 76

78

83

87

91 91

89

83 85

82

80 80

83


Re ported Uti l (%) Actu al Uti l (%)

217

93

30

10

70

130

190

250

Jul-0

1

Apr-

02Ja

n-03

Sep-

03Ju

n-04

Feb-

05N

ov-0

5

Jul-0

6

Apr-

07D

ec-0

7Se

p-08

May

-09

Feb-

10N

ov-1

0Ju

l-11

Apr-

12

Dec

-12

Sep-

13

EV/ton (USD) Max Avg Min

A–56October 2013


Sector / Portfolio Picks BSE-100 MOSL Wt Wt relative to BSE-100 Sector StanceFinancials 23.6 24.0 0.4 NeutralPrivate 13.2 12 -1.2 Neutral

ICICI Bank 4.4 5 0.6 BuyHDFC Bank 4.9 4 -0.9 NeutralAxis Bank 1.4 3 1.6 Buy

NBFCs 6.8 8 1.2 OverweightHDFC 5.1 4 -1.1 BuyLIC Housing 0.2 2 1.8 BuyIDFC 0.5 2 1.5 Buy

PSU 3.7 4 0.3 NeutralSBI 1.9 2 0.1 BuyBOB 0.4 2 1.6 Buy

Energy 11.2 13.0 1.8 OverweightReliance Inds. 6.3 5 -0.3 NeutralONGC 2.5 5 1.5 BuyBPCL 0.4 3 2.6 Buy

In formation Technology 15.0 13.0 -2.0 NeutralInfosys 6.4 7 0.6 BuyTCS 4.9 3 -1.9 NeutralTech Mahindra 0.9 3 2.1 Buy

Healthcare 6.2 8.0 1.8 OverweightDr Reddy's 1.3 3 1.7 BuyLupin 0.9 3 2.1 BuyDivi's Lab 0.3 2 1.7 Buy

Consumer / Retail 16.5 8.0 -8.5 UnderweightITC 8.2 4 -4.2 NeutralMarico 0.0 2 2.0 BuyUnited Spirits 1.1 2 0.9 Buy

Automobiles 7.8 7.0 -0.8 NeutralTata Motors 2.7 3 0.3 BuyBajaj Auto 1.2 2 0.8 BuyHero Motocorp 0.9 2 1.1 Buy

Infrastructure & Related sectors 7.4 7.0 -1.4 NeutralLarsen & Toubro 2.8 4 1.2 BuyACC 0.5 3 1.5 Buy

Telecom 2.7 5.0 2.3 OverweightBharti Airtel 1.7 3 1.3 BuyIdea Cellular 0.6 2 1.4 Buy

Metals 3.3 4.0 0.7 NeutralNMDC 0.4 2 1.6 BuyHindalco 0.6 2 1.4 Buy

Utilities 4.6 3.0 -1.6 UnderweightNTPC 1.3 3 1.7 Buy

Others 1.7 8.0 7.3 OverweightOberoi Realty 0.0 1 1.0 BuyYes Bank 0.3 1 0.7 BuyJust Dial 0.0 1 1.0 BuyEicher Motors 0.0 1 1.0 BuyBata 0.0 1 1.0 BuyShree Cement 0.0 1 1.0 BuyPrestige Estates 0.0 1 1.0 BuySUN TV 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 27 September 2013, unless otherwise stated.

September 2013 Results Preview

October 2013

MOSL Universe:2QFY14 Highlights

&Ready Reckoner

B–2October 2013

MOSL Universe

MOSL Universe: 2QFY14 aggregate performance highlights (Ex RMs)Quarter-wise sales growth (% YoY) Quarter-wise net profit growth (% YoY)

Sectoral sales growth - quarter ended September 2013 (%)

Sectoral EBITDA growth - quarter ended September 2013 (%)

Sectoral net profit growth - quarter ended September 2013 (%)

13%

9%

4%

12%

Dec-12 Mar-13 June-13 Sep-13E

9%

3%

-2%

3%

Dec-12 Mar-13 June-13 Sep-13E

31.224.3

16.7 14.6 14.4 12.2 12.1 12.0 11.5 11.3 8.65.2

-0.7 -1.3-4.8

Tech

nolo

gy

Hea

lth

Care

Med

ia

Oil

Ex. R

Ms

Aut

o

MO

SL E

x.R

Ms

Cons

umer

Fina

ncia

ls

Rea

lEs

tate

Met

als

Tele

com

Uti

litie

s

Cem

ent

Ret

ail

Cap

Goo

ds

38.926.1

19.9 18.6 17.7 15.2 11.1 10.3 5.6 4.9 4.9

-3.3

-20.2 -22.4

6.9

Tech

nolo

gy

Aut

o

Hea

lth

Care

Med

ia

Met

als

Cons

umer

Tele

com

MO

SL E

x.R

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tate

Oil

Ex. R

Ms

Fina

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ls

Uti

litie

s

Ret

ail

Cem

ent

Cap

Goo

ds

28.517.2 15.1 13.4 13.0 11.5 8.6 8.4

-1.3-7.0 -7.3

-32.0-31.1

-5.9

3.0

Tech

nolo

gy

Hea

lth

Care

Med

ia

Cons

umer

Met

als

Aut

o

Ret

ail

Uti

litie

s

MO

SL E

x.R

Ms

Oil

Ex. R

Ms

Rea

lEs

tate

Tele

com

Fina

ncia

ls

Cem

ent

Cap

Goo

ds

B–3October 2013

MOSL Universe

Top 10 by sales growth (%) Worst 10 by sales growth (%)

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 September 2013)

Source: MOSL

90 83

65 60 5848 47 44 43 41

Mar

uti S

uzuk

i

Bri

tann

ia

Pres

tige

Esta

tes

AB

B

Tata

Ste

el

HCL

Tech

nolo

gies TC

S

Tech

Mah

indr

a

KPIT

Tec

h.

Tata

Mot

ors

-79 -77 -76 -75

-47 -47-43 -43 -41

-35

Siem

ens

Ash

okLe

ylan

d

MCX

MR

PL

Bir

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rpor

atio

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83

4238 36 35 34 33 32 32 31

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-27 -25 -23 -21 -20-17

-10 -10 -10

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MCX

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110

90 85 80 7569 69 69 64

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-70 -67 -64-59 -57 -55

-47 -46 -44 -41

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ank

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B–4October 2013

MOSL Universe

Valuations - MOSL universeSector P/E EV/EBITDA P/BV RoE Div. PAT

(x) (x) (x) (%) yld (%) CAGR

(No. of companies) FY13 FY14E FY15E FY13 FY14E FY15E FY13 FY14E FY15E FY13 FY14E FY15E FY13 FY13-15Auto (8) 14.4 13.3 10.8 7.0 5.7 4.7 3.5 2.9 2.4 24.2 21.8 22.2 1.4 15.3Capital Goods (8) 12.7 16.0 16.0 8.3 9.3 9.0 2.3 2.1 1.8 17.7 12.8 12.0 1.8 -10.8Cement (15) 14.5 15.6 12.4 8.8 8.0 6.4 1.9 1.7 1.6 12.9 10.9 12.4 1.3 8.3Consumer (13) 39.7 34.5 29.4 27.1 23.0 19.5 13.0 11.5 10.0 32.8 33.2 34.2 1.4 16.3Financials (31) 9.0 9.3 8.1 NM NM NM 1.5 1.3 1.2 16.5 14.0 14.4 2.6 5.7

Private Banks (10) 14.5 13.2 11.2 NM NM NM 2.5 2.1 1.9 17.2 16.0 16.5 1.5 13.4PSU Banks (12) 4.6 5.7 5.0 NM NM NM 0.7 0.6 0.6 14.9 10.8 11.2 4.7 -4.3NBFC (9) 11.2 9.7 8.4 NM NM NM 2.2 1.9 1.7 20.1 19.6 19.6 2.6 14.9

Health Care (13) 30.5 24.3 20.5 17.4 15.4 12.6 5.9 5.1 4.3 19.3 21.1 20.6 0.6 22.1Media (8) 28.8 24.0 19.1 13.7 11.4 9.4 4.9 4.4 3.9 17.1 18.4 20.3 1.4 22.7Metals (9) 8.0 7.3 7.4 5.8 5.5 5.1 0.9 0.9 0.8 11.9 12.1 11.1 2.8 4.0Oil & Gas (13) 10.3 9.8 8.5 6.2 5.8 4.8 1.4 1.3 1.2 13.4 12.8 13.4 2.6 10.4

Excl. RMs (10) 10.2 9.7 8.6 5.5 5.2 4.4 1.5 1.3 1.2 14.6 13.9 14.1 2.5 9.4Real Estate (11) 14.7 13.0 9.9 13.1 10.3 8.6 0.6 0.6 0.6 4.2 4.5 5.6 1.5 22.0Retail (3) 34.6 30.8 25.8 21.6 19.3 15.7 10.2 8.2 6.6 29.3 26.5 25.4 0.7 15.8Technology (10) 20.9 16.9 14.9 15.3 11.6 10.3 5.7 4.7 3.8 27.5 27.9 25.9 1.3 18.3Telecom (4) 55.4 33.5 19.7 9.1 7.7 6.3 2.2 2.0 1.7 4.0 6.1 9.5 0.5 67.7Utilities (10) 11.5 10.9 9.9 8.6 8.0 7.2 1.8 1.7 1.6 16.0 15.2 15.5 3.8 7.9Others (6) 14.4 14.5 12.2 9.5 8.5 7.3 3.0 2.7 2.5 21.2 18.8 19.7 2.2 8.6MOSL (162) 14.3 13.4 11.7 N.M N.M N.M 2.2 2.0 1.8 15.5 14.7 15.1 1.9 10.5MOSL Excl. RMs (159) 14.3 13.5 11.8 N.M N.M N.M 2.3 2.0 1.8 15.8 14.9 15.3 1.9 10.3Sensex (30) 16.6 15.3 13.4 N.M N.M N.M 2.7 2.4 2.2 16.6 15.8 16.1 1.6 10.7Nifty (50) 15.8 14.5 12.7 N.M N.M N.M 2.5 2.3 2.0 16.0 15.6 15.8 1.6 10.1N.M. - Not Meaningful. Source: MOSL

Annual performance - MOSL universe (INR Billion)Sales EBITDA Net Profit

FY13 FY14E FY15E Chg.# Chg.@ FY13 FY14E FY15E Chg.# Chg.@ FY13 FY14E FY15E Chg.# Chg.@

(%) (%) (%) (%) (%) (%)Auto (8) 3,702 4,152 4,753 13.0 12.2 480 561 659 13.0 16.9 226 244 300 -6.7 7.9Capital Goods (8) 1,569 1,547 1,598 5.0 -1.4 188 170 163 -6.9 -9.3 134 107 107 -7.5 -20.6Cement (15) 1,194 1,237 1,410 11.9 3.7 242 236 290 8.6 -2.3 110 103 129 3.4 -6.8Consumer (13) 1,182 1,346 1,553 16.5 13.8 242 282 329 18.3 16.3 168 193 227 21.1 14.9Financials (31) 2,197 2,436 2,826 13.5 10.9 1,735 1,858 2,178 12.3 7.1 904 877 1,009 14.8 -3.0

Private Banks (10) 541 626 739 24.4 15.7 452 524 622 25.2 16.1 278 304 357 26.8 9.5PSU Banks (12) 1,359 1,454 1,675 7.4 6.9 997 995 1,162 4.1 -0.2 432 351 396 4.1 -18.9NBFC (9) 296 355 412 26.6 20.0 286 338 394 26.0 18.4 193 222 255 26.6 14.8

Health Care (13) 791 927 1,065 24.3 17.2 193 221 264 26.0 14.2 112 140 166 20.1 25.5Media (8) 143 168 191 12.6 17.3 41 48 57 8.7 18.1 19 23 29 11.4 20.2Metals (9) 4,194 4,582 4,893 2.1 9.3 787 898 958 -3.0 14.2 351 381 380 -8.6 8.4Oil & Gas (13) 16,501 18,241 18,256 13.2 10.5 1,356 1,426 1,671 -6.3 5.2 715 753 871 -9.4 5.3

Excl. RMs (10) 7,407 8,436 8,618 12.2 13.9 1,122 1,204 1,382 -5.3 7.3 643 680 769 -1.6 5.8Real Estate (11) 216 263 299 -4.6 21.6 77 96 111 -11.7 24.4 36 40 53 -24.0 12.8Retail (3) 137 166 196 16.9 20.4 14 16 20 18.8 15.2 9 10 12 16.1 12.5Technology (10) 1,940 2,418 2,697 27.7 24.6 489 632 685 26.5 29.2 383 473 535 27.1 23.6Telecom (4) 1,306 1,444 1,574 8.2 10.5 397 467 533 2.3 17.6 45 74 126 -33.3 65.6Utilities (10) 2,015 2,163 2,457 7.5 7.3 605 663 753 17.4 9.7 383 403 446 8.8 5.2Others (6) 211 232 258 16.4 10.1 37 41 47 8.5 9.6 22 22 26 7.7 -0.6MOSL (162) 37,300 41321 44025 11.8 10.8 6,883 7615 8718 6.3 10.6 3,617 3843 4417 3.4 6.2Excl.RMs (159) 28,205 31517 34388 11.1 11.7 6,649 7393 8429 7.1 11.2 3,545 3770 4315 5.4 6.4Sensex (30) 9,728 10,870 11,774 13.3 11.7 1,930 2,163 2,462 10.9 12.1 1,038 1,111 1,272 9.9 7.0Nifty (50) 11,087 12,340 13,346 9.1 11.3 2,285 2,544 2,891 10.0 11.3 1,231 1,311 1,494 14.4 6.5# Growth FY13 over FY12; @ Growth FY14 over FY13;For Banks : Sales = Net Interest Income, EBITDA = Operating Profits; Note: Sensex & Nifty Numbers are Free Float.

B–5October 2013

MOSL Universe

Ready reckoner: quarterly performance(INR Million) CMP Rating Sales EBITDA Net Profit

(INR) Sep.13 Var. Var. Sep.13 Var. Var. Sep.13 Var. Var.

27.09.13 % YoY % QoQ % YoY % QoQ % YoY % QoQ

AutomobilesAshok Leyland 15 Neutral 27,348 -17.0 15.7 769 -77.0 230.4 -822 PL LossBajaj Auto 1,992 Buy 47,252 -5.0 -3.8 9,734 6.4 7.4 7,851 6.0 6.4Eicher Motors 3,539 Buy 15,746 6.2 -5.7 1,452 30.4 -12.6 891 35.0 -3.4Exide Inds. 132 Neutral 16,514 8.9 1.6 2,394 27.2 -8.7 1,514 26.0 -4.5Hero Motocorp 2,048 Buy 56,782 10.2 -7.3 5,494 18.9 -19.3 4,367 -0.9 -20.4Mahindra & Mahindra 844 Buy 84,430 -8.7 -13.0 10,523 -17.8 -24.9 8,470 -13.4 -6.9Maruti Suzuki 1,368 Buy 100,528 21.0 -1.8 9,667 90.1 -17.1 4,775 109.9 -24.4Tata Motors 340 Buy 536,575 23.6 14.7 75,120 40.8 20.8 26,436 27.0 44.2Sector Aggregate 885,176 14.4 6.1 115,153 26.1 6.4 53,483 11.5 12.0

Capital GoodsABB 551 Neutral 18,719 3.5 7.5 1,062 60.0 -3.5 361 68.9 -10.6BHEL 144 Neutral 82,437 -20.7 29.8 10,810 -43.1 178.2 5,496 -56.9 18.1Crompton Greaves 89 Buy 34,078 16.5 7.9 1,496 0.4 3.3 679 24.4 12.9Cummins India 409 Buy 9,850 -9.4 -6.1 1,523 -23.8 -13.2 1,293 -19.8 -22.2Havells India 633 Neutral 10,250 6.3 -2.5 1,221 2.5 -13.4 846 7.3 -17.8Larsen & Toubro 817 Buy 141,358 7.1 12.6 14,136 0.6 19.8 8,687 -5.1 4.5Siemens 480 Neutral 25,436 -24.6 -3.7 206 -79.3 -84.0 -149 PL LossThermax 590 Buy 10,715 -10.1 24.2 1,066 -12.4 31.0 726 -20.3 44.5Sector Aggregate 332,844 -4.8 13.2 31,520 -22.4 34.1 17,938 -32.0 7.5

CementACC 1,101 Buy 24,719 1.7 -11.6 3,088 -26.7 -28.8 1,840 -26.0 -29.0Ambuja Cements 184 Neutral 19,904 -8.0 -15.1 3,239 -42.9 -34.2 2,099 -37.7 -35.3Birla Corporation 207 Buy 6,754 7.6 -12.5 579 -47.4 -13.3 365 -54.5 -20.7Grasim Industries 2,678 Buy 12,779 -4.2 11.2 2,445 -15.6 20.8 3,791 -1.0 67.6India Cements 51 Neutral 11,406 1.6 -7.9 1,866 -9.0 -2.3 149 -69.7 -11.5Jaiprakash Associates 37 Buy 33,377 11.9 0.7 8,112 5.2 3.4 804 -37.2 287.7Shree Cement 4,004 Buy 11,898 -10.1 -17.5 2,538 -35.4 -33.1 830 -63.7 -70.8Ultratech Cement 1,826 Buy 44,866 -4.5 -9.5 8,180 -18.6 -22.0 3,934 -28.5 -41.5Sector Aggregate 165,702 -0.7 -8.0 30,048 -20.2 -16.5 13,811 -31.1 -25.3

ConsumerAsian Paints 471 Neutral 29,863 14.2 6.0 4,241 17.4 -4.0 2,604 8.9 -5.4Britannia 775 Buy 15,852 13.0 12.9 1,110 83.0 -5.0 768 68.5 -10.9Colgate 1,233 Neutral 8,859 14.5 4.9 1,893 7.7 14.5 1,465 1.0 12.9Dabur 170 Buy 17,083 12.2 3.5 3,024 14.3 28.4 2,293 13.4 23.3Godrej Consumer 832 Neutral 19,303 21.0 12.2 2,896 18.7 31.2 1,881 18.1 44.2GSK Consumer 4,238 Neutral 9,709 17.3 13.8 1,689 20.3 42.4 1,443 12.3 20.3Hind. Unilever 621 Se l l 68,157 8.0 0.1 10,905 11.6 0.5 8,628 7.1 -2.5ITC 349 Neutral 80,938 12.0 9.2 30,756 14.4 10.2 20,900 13.8 10.5Marico 220 Buy 12,779 10.6 -7.4 1,687 14.2 -25.7 1,013 18.0 -34.8Nestle 5,097 Neutral 24,057 13.7 8.7 5,052 13.9 5.9 2,944 11.9 8.5Pidilite Inds. 253 Neutral 9,358 14.0 -7.8 1,684 14.8 -24.8 1,184 5.9 -23.4Radico Khaitan 128 Buy 3,333 12.2 -6.7 573 16.7 -6.1 293 32.6 -4.4United Spirits 2,621 Buy 24,428 10.0 11.4 3,053 20.6 9.8 884 125.2 -25.2Sector Aggregate 323,717 12.1 5.6 68,563 15.2 6.4 46,300 13.4 4.4

PULL OUT

B–6October 2013

MOSL Universe

Ready reckoner: quarterly performance

HealthcareBiocon 334 Neutral 7,338 23.9 5.6 1,534 31.6 4.9 959 7.1 2.6Cadila Health 693 Buy 17,326 11.9 5.8 2,973 28.9 4.0 1,665 75.1 -14.9Cipla 433 Neutral 27,040 31.5 9.7 6,245 7.2 -7.5 4,103 -6.6 -13.6Divis Labs 984 Buy 5,494 16.2 6.5 2,109 14.2 7.6 1,566 32.7 -10.4Dr Reddy’ s Labs 2,411 Buy 33,615 20.8 20.5 7,732 24.2 54.4 4,859 39.3 48.4Glenmark Pharma 523 Buy 15,192 24.5 22.7 3,000 27.0 21.3 1,800 26.4 39.9GSK Pharma 2,414 Buy 7,054 5.5 10.8 1,546 -22.3 36.0 1,308 -20.1 37.6IPCA Labs. 695 Buy 9,097 17.9 12.9 2,097 17.3 22.6 1,003 -19.8 39.8Lupin 853 Buy 27,042 22.1 17.2 5,124 17.3 12.7 3,168 15.0 -4.9Ranbaxy Labs 334 Neutral 29,909 26.5 11.5 3,027 4.1 15.3 1,663 -19.1 27.8Sanofi India 2,558 Neutral 4,380 10.4 6.8 716 -11.0 15.0 581 13.3 13.5Sun Pharma 590 Buy 34,561 41.6 5.2 13,740 38.2 0.0 10,476 35.6 -6.8Torrent Pharma 439 Buy 9,424 21.3 1.3 1,810 16.5 -3.7 1,235 15.1 -4.3Sector Aggregate 227,471 24.3 11.5 51,653 19.9 10.4 34,387 17.2 3.3

MediaD B Corp 252 Buy 4,334 14.5 -3.6 1,058 23.0 -20.3 590 21.4 -22.5Dish TV 50 Buy 5,908 10.7 2.1 1,515 -2.7 24.5 -198 Loss LossHT Media 87 Neutral 5,154 0.9 -4.7 445 -21.2 -42.8 196 -41.1 -58.7Jagran Prakashan 82 Buy 4,095 27.1 -0.9 911 16.5 -10.6 529 8.7 -8.5PVR 470 Buy 3,556 99.6 6.1 693 114.4 16.8 262 60.9 58.5Sun TV 401 Buy 5,026 16.0 -16.5 3,805 15.6 7.6 1,828 20.5 11.2Zee Entertainment 238 Neutral 10,551 10.6 8.4 2,907 33.5 -0.3 2,145 14.3 -4.5Sector Aggregate 38,624 16.7 -0.8 11,334 18.6 -0.5 5,351 15.1 -3.9

MetalsHindalco 114 Buy 225,222 13.7 14.0 24,017 9.2 29.0 8,155 -13.5 91.8Hindustan Zinc 131 Buy 34,041 18.8 14.1 16,796 16.4 11.7 17,318 12.5 8.8JSPL 237 Neutral 48,919 5.1 7.7 14,486 -14.6 -3.8 6,213 -30.8 -10.5JSW Steel 732 Se l l 104,363 17.6 11.5 19,414 27.3 11.0 5,605 9.6 19.9Nalco 32 Buy 15,184 -5.6 -2.7 2,334 LP 52.6 1,692 3439.9 6.0NMDC 126 Buy 25,103 -3.9 -12.6 15,200 -21.4 -20.2 13,556 -19.2 -13.8SAIL 51 Se l l 124,425 15.0 21.2 15,427 39.1 59.5 9,257 85.3 75.7Sesa Sterlite 183 Buy 196,875 13.6 38.7 71,339 16.9 22.2 24,182 6.8 1.2Tata Steel 288 Se l l 369,030 8.1 12.5 36,553 58.2 -0.9 3,646 LP -67.5Sector Aggregate 1,143,162 11.3 16.2 215,566 17.7 12.4 89,623 13.0 0.2

OthersBata India 851 Buy 4,809 13.5 -16.0 604 18.4 -37.1 370 15.5 -40.2Castrol India 311 Neutral 7,527 4.3 -12.4 1,422 17.0 -25.4 1,017 18.7 -24.0MCX 402 Buy 682 -48.0 -44.5 196 -76.0 -69.0 270 -66.8 -55.0Sintex Inds. 21 Buy 12,047 0.5 6.8 1,748 -4.4 8.6 795 3.0 58.0United Phosphorous 143 Buy 22,952 23.7 -6.5 4,294 31.7 -6.0 1,432 19.6 -32.6V-Guard Inds 486 Buy 3,605 15.0 -11.7 294 -2.1 -5.1 159 -11.5 -9.8Sector Aggregate 51,621 11.2 -6.9 8,557 7.9 -14.3 4,044 -2.4 -24.6PL: Profit to Loss; LP: Loss to Profit

(INR Million) CMP Rating Sales EBITDA Net Profit



PULL OUT

B–7October 2013

MOSL Universe


Oil & GasBPCL 329 Buy 628,031 10.5 7.0 12,470 -70.3 37.7 3,743 -92.6 149.0Cairn India 318 Buy 50,949 14.7 25.4 39,607 14.8 31.6 34,775 49.8 11.2GAIL 326 Neutral 131,709 15.9 2.5 15,223 10.3 4.0 8,931 -9.4 10.5Gujarat State Petronet 52 Neutral 2,810 2.9 -5.1 2,538 0.7 -5.7 1,268 -4.5 0.4HPCL 190 Buy 596,881 23.2 15.3 13,266 -41.0 LP 4,443 -80.9 LPIOC 211 Buy 1,215,928 14.9 10.3 30,304 -66.6 LP 18,020 -81.3 LPIndraprastha Gas 276 Neutral 10,041 17.5 11.4 1,821 -11.6 -5.4 807 -18.7 -7.6MRPL 33 Neutral 188,626 15.7 23.6 2,902 -74.9 72.5 -2,185 PL LossOil India 454 Buy 25,526 6.3 28.9 11,633 1.4 66.9 9,339 -2.2 53.3ONGC 275 Buy 229,313 15.9 19.3 123,784 20.5 47.4 62,053 5.2 54.5Petronet LNG 123 Buy 104,000 37.8 23.2 3,894 -24.9 -2.1 1,988 -36.8 -11.8Reliance Inds. 840 Neutral 1,014,562 12.3 15.8 74,174 -3.7 4.8 53,395 -0.7 -0.2Sector Aggregate 4,198,376 15.2 13.1 331,616 -20.3 61.8 196,577 -42.6 107.1Excl. RMs 1,757,536 14.6 16.6 275,575 5.6 27.2 170,372 -1.3 22.6

Real EstateAnant Raj Inds 42 Buy 1,009 -26.5 26.1 424 -40.9 45.6 296 -41.1 52.4DLF 132 Buy 20,537 0.7 -11.3 7,722 3.5 -15.7 1,362 -1.7 -24.8Jaypee Infratech 16 Buy 9,590 36.1 24.7 4,446 24.0 32.6 1,656 -8.5 104.4Mahindra Lifespace 406 Buy 868 3.6 29.6 139 -7.7 49.2 235 -25.1 49.3Oberoi Realty 166 Buy 1,980 -23.2 -9.3 1,150 -23.1 -13.9 986 -20.7 -3.1Phoenix Mills 237 Buy 746 12.2 6.8 492 12.3 3.7 362 9.7 -13.4Prestige Estates 123 Buy 4,419 83.0 -11.3 1,193 64.6 -7.4 739 61.8 -14.7Unitech 16 Buy 6,230 15.4 8.8 885 8.1 17.6 711 0.7 13.1Sector Aggregate 45,378 11.5 -1.1 16,450 6.9 -1.7 6,349 -5.9 7.5

RetailFuture Retail 71 UR 24,365 -20.4 8.0 2,071 -21.8 8.9 41 39.1 LPJubilant Foodworks 1,173 Se l l 4,345 27.0 9.6 717 22.2 7.5 359 10.9 5.5Shopper's Stop 356 Neutral 6,868 18.5 27.9 364 25.2 55.9 105 63.6 351.5Titan Industries 235 Neutral 26,174 15.0 -15.8 2,670 7.0 9.0 1,905 5.7 4.4Sector Aggregate 61,752 -1.3 -1.9 5,822 -3.3 10.9 2,409 8.6 15.7

TechnologyHCL Technologies 1,071 Buy 79,037 29.8 13.8 19,690 48.2 21.9 13,333 54.3 11.3Hexaware Tech. 129 Neutral 6,194 22.0 15.4 1,492 35.9 17.2 1,167 38.9 19.2Infosys 3,006 Buy 127,385 29.2 13.1 35,502 23.6 19.0 26,558 12.1 11.9KPIT Tech. 131 Neutral 7,087 24.9 15.6 1,355 43.4 39.4 771 89.6 28.2Mindtree 1,186 Neutral 7,613 27.7 17.5 1,612 22.2 35.4 1,077 49.2 -20.5MphasiS 428 Se l l 17,656 35.2 14.7 3,538 31.1 26.4 2,022 -3.4 5.0Persistent Systems 619 Buy 4,155 27.1 16.3 931 4.6 19.8 489 9.4 -14.4TCS 1,947 Neutral 207,982 33.1 15.6 65,151 46.7 26.4 45,803 30.4 20.7Tech Mahindra 1,306 Buy 46,535 32.1 13.4 10,886 43.8 25.9 6,699 58.6 2.6Wipro 475 Buy 109,044 NA 12.1 22,273 NA 26.2 18,435 NA 13.6Sector Aggregate (ex Wipro) 503,645 31.2 14.5 140,157 38.9 23.9 97,918 28.5 14.3

TelecomBharti Airtel 325 Buy 209,143 7.8 3.2 64,406 8.5 -1.6 3,350 -53.5 -51.4Bharti Infratel 159 Neutral 26,670 4.4 1.7 10,338 7.9 -2.0 3,428 38.4 -4.1Idea Cellular 172 Buy 63,353 19.2 -3.1 19,175 34.8 -8.7 4,309 79.6 -11.7Reliance Comm 151 Neutral 53,458 2.8 -1.2 16,735 2.2 -1.6 1,383 4.6 6.1Sector Aggregate 352,624 8.6 1.2 110,654 11.1 -3.0 12,470 -7.0 -25.1




UR = Under Review

B–8October 2013

MOSL Universe


CMP Rating Net Interest Income Operating Profit Net Profit



FinancialsPrivate BanksAxis Bank 1,031 Buy 27,802 19.5 -3.0 23,782 9.2 -16.4 11,958 6.4 -15.1Federal Bank 298 Buy 5,013 -0.9 -1.6 3,348 -4.3 -16.4 1,633 -24.1 54.6HDFC Bank 610 Neutral 44,851 20.2 1.5 32,753 27.4 -0.9 19,915 27.7 8.0ICICI Bank 923 Buy 38,736 14.9 1.4 35,178 10.2 -7.8 20,684 5.7 -9.1IndusInd Bank 377 Buy 6,823 33.9 0.4 5,494 30.9 -14.4 3,005 20.1 -10.2ING Vysya Bank 510 Buy 4,567 23.8 7.4 3,052 34.1 -6.6 1,739 15.8 -0.7Kotak Mahindra Bank 682 Neutral 9,178 21.1 0.1 6,044 25.3 -22.4 3,426 22.2 -15.0Yes Bank 305 Buy 6,524 24.5 -1.0 5,889 21.5 -13.4 3,165 3.4 -21.0Pvt Bkg.Sector Aggregate 143,494 18.6 0.4 115,540 16.6 -9.7 65,525 12.2 -5.7PSU BanksBank of Baroda 501 Buy 28,615 0.0 -1.0 20,394 -14.0 -16.3 7,956 -38.9 -31.9Bank of India 163 Neutral 25,787 17.4 1.6 18,630 0.5 -14.6 5,101 69.0 -47.1Canara Bank 225 Neutral 20,488 4.7 2.9 14,225 11.0 -25.1 3,709 -43.9 -53.2Indian Bank 70 Buy 11,097 -0.9 1.2 7,064 -22.2 -17.8 2,026 -59.2 -36.2Oriental Bank 150 Buy 12,912 11.6 -1.2 9,316 1.1 -14.4 2,410 -20.2 -31.8Punjab National Bank 478 Buy 39,378 7.9 0.8 26,493 4.6 -10.9 8,259 -22.5 -35.2State Bank 1,642 Buy 116,796 6.4 1.5 65,133 -11.4 -13.7 23,798 -34.9 -26.6Union Bank 115 Neutral 18,920 2.3 -0.9 12,121 -4.8 -14.1 2,959 -46.6 -47.2PSU Bkg. Sector Aggregate 273,991 6.3 0.9 173,376 -6.3 -15.0 56,219 -32.6 -35.2NBFCBajaj Finance 1,177 Buy 5,830 32.3 -2.3 3,308 35.8 0.0 1,702 32.2 -3.2HDFC 783 Buy 16,192 16.8 6.5 17,022 7.2 3.9 12,103 5.1 3.2IDFC 89 Buy 6,868 6.8 0.1 7,543 3.9 -14.2 4,288 -9.8 -22.6LIC Housing Fin 192 Buy 4,607 30.3 1.3 4,356 28.4 -1.3 3,326 36.8 7.1M & M Financial 257 Buy 6,602 25.5 7.1 4,669 28.8 12.2 2,302 22.7 20.4Power Finance Corp 133 Neutral 18,499 25.4 -4.7 18,235 25.2 -5.0 12,776 21.2 0.4Rural Electric. Corp. 195 Neutral 16,545 29.2 -0.9 16,711 29.0 -1.8 11,825 22.6 -1.1Shriram Transport Fin. 574 Buy 9,383 8.1 4.0 7,826 9.9 6.5 3,520 4.3 3.2NBFC Bkg. Sector Aggregate 84,526 21.2 0.8 79,671 18.5 -1.2 51,842 14.1 -0.6Financials Sector Aggregate 502,012 12.0 0.7 368,588 4.9 -10.6 173,586 -7.3 -16.7




UtilitiesCESC 336 Buy 14,675 9.2 2.2 3,265 5.0 1.7 1,411 3.8 7.7Coal India 307 Neutral 156,744 7.6 -4.8 32,285 12.8 -18.4 33,050 7.4 -11.5Jaiprakash Power 16 Buy 10,134 11.9 28.9 8,591 5.9 46.0 3,325 -9.2 182.1JSW Energy 46 Neutral 21,963 5.8 -9.7 8,028 39.2 -13.0 2,510 55.4 -38.9NHPC 20 Neutral 18,312 3.3 13.1 12,512 4.0 16.9 8,455 16.3 18.1NTPC 148 Buy 144,566 -10.3 -7.4 36,803 -12.9 -13.7 22,167 17.5 -4.7Power Grid Corp. 99 Buy 37,413 21.2 2.0 32,479 21.7 2.6 11,327 12.5 -1.2PTC India 46 Buy 31,146 11.5 12.4 300 -47.3 -11.8 242 -45.7 -17.3Reliance Infrastructure 393 Buy 35,018 0.0 6.8 4,425 -2.4 0.6 3,137 -24.3 -16.2Tata Power 82 Neutral 96,643 25.5 3.5 15,330 1.6 -25.8 1,369 -33.6 26.6Sector Aggregate 566,615 5.2 -1.3 154,017 4.9 -8.5 86,992 8.4 -4.4PL: Profit to Loss; LP: Loss to Profit; UR = Under Review

PULL OUT

B–9October 2013

MOSL Universe

Ready reckoner: valuationsCMP (INR) Rating EPS (INR) P/E (x) EV/EBITDA (x) RoE (%)

27.09.13 FY13 FY14E FY15E FY13 FY14E FY15E FY13 FY14E FY15E FY13 FY14E FY15E

AutomobilesAshok Leyland 15 Neutral 0.6 -1.2 0.6 24.0 -12.1 24.5 6.8 17.1 5.9 3.9 -7.4 3.6Bajaj Auto 1,992 Buy 105.2 117.2 135.6 18.9 17.0 14.7 14.0 11.5 9.5 43.7 38.7 37.2Eicher Motors 3,539 Buy 120.1 146.4 180.1 29.5 24.2 19.7 16.1 12.4 9.2 20.8 22.3 23.3Exide Inds. 132 Neutral 6.2 7.7 8.9 21.5 17.2 14.8 12.1 9.2 7.8 15.3 16.7 17.0Hero Motocorp 2,048 Buy 106.1 110.4 152.8 19.3 18.5 13.4 16.7 13.8 9.5 45.6 41.2 47.7Mahindra & Mah. 844 Buy 60.9 68.3 79.4 13.9 12.4 10.6 5.5 5.4 4.5 22.4 19.8 18.5Maruti Suzuki 1,368 Buy 80.2 79.1 101.2 17.1 17.3 13.5 8.2 7.5 5.7 12.9 11.4 13.2Tata Motors 340 Buy 32.1 35.9 42.8 10.6 9.5 7.9 5.1 3.9 3.2 27.4 23.9 22.4Sector Aggregate 14.4 13.3 10.8 7.0 5.7 4.7 24.2 21.8 22.2Capital GoodsABB 551 Neutral 6.5 8.2 11.5 84.9 66.8 47.9 35.3 25.9 21.4 5.4 6.6 8.8BHEL 144 Neutral 26.8 16.9 10.2 5.4 8.5 14.1 3.0 4.6 5.0 23.5 13.0 7.3Crompton Greaves 89 Buy 3.0 5.6 8.3 29.8 15.9 10.7 18.3 10.2 7.5 -1.0 9.6 13.8Cummins India 409 Buy 23.8 21.7 24.7 17.1 18.8 16.5 12.4 14.8 12.7 29.7 24.0 25.3Havells India 633 Neutral 34.4 35.5 39.3 18.4 17.8 16.1 12.6 12.2 10.1 29.8 25.5 23.5Larsen & Toubro 817 Buy 53.4 43.8 51.5 15.3 18.7 15.9 10.4 10.1 9.1 16.2 14.6 14.4Siemens 480 Neutral 0.8 7.6 20.2 565.7 63.6 23.7 64.5 25.9 12.3 0.8 6.6 16.6Thermax 590 Buy 27.0 26.2 31.3 21.8 22.5 18.8 13.4 13.0 10.7 18.4 15.9 17.4Sector Aggregate 12.7 16.0 16.0 8.3 9.3 9.0 17.7 12.8 12.0CementACC 1,101 Buy 68.7 55.7 65.5 16.0 19.8 16.8 8.9 10.7 9.1 17.7 13.1 14.0Ambuja Cements 184 Neutral 10.0 8.0 9.3 18.4 22.9 19.8 10.0 13.4 11.7 18.3 13.6 14.7Birla Corporation 207 Buy 35.0 34.7 44.8 5.9 6.0 4.6 3.4 3.2 1.9 11.0 10.1 11.9Grasim Industries 2,678 Buy 278.7 322.7 379.7 9.6 8.3 7.1 4.2 3.7 2.8 13.0 13.3 13.6India Cements 51 Neutral 5.8 3.2 6.6 8.7 15.9 7.7 5.4 5.7 4.8 4.3 2.4 4.7J P Associates 37 Buy 2.3 2.7 4.4 16.2 13.7 8.4 15.6 7.4 6.6 3.9 4.3 6.7Shree Cement 4,004 Buy 314.9 277.0 321.1 12.7 14.5 12.5 8.1 8.1 7.1 30.6 17.4 17.4Ultratech Cement 1,826 Buy 96.8 96.1 110.9 18.9 19.0 16.5 11.1 11.2 9.4 18.9 16.1 16.1Century Textiles 250 Neutral -3.7 -12.5 -5.7 -67.3 -20.0 -43.5 14.7 17.3 11.3 -1.9 -6.7 -3.4Dalmia Bharat 126 Buy 24.3 20.2 24.5 5.2 6.2 5.2 5.8 6.5 4.8 6.6 5.2 6.1J K Cements 188 Buy 33.0 26.7 43.9 5.7 7.0 4.3 3.9 6.1 4.2 14.4 10.7 15.6JK Lakshmi Cem. 71 Buy 16.0 9.1 11.3 4.4 7.8 6.3 4.2 7.0 5.8 15.4 8.2 9.6Madras Cement 180 Buy 17.0 14.8 21.8 10.6 12.1 8.2 7.1 7.2 5.0 18.3 14.1 18.2Orient Paper 8 Buy 5.4 5.2 7.3 1.5 1.5 1.1 2.9 3.7 4.3 9.7 8.9 11.7Prism Cement 28 Neutral -1.2 -1.8 2.9 -23.4 -16.1 9.6 12.8 14.7 5.4 -5.4 -8.6 14.5Sector Aggregate 14.5 15.6 12.4 8.8 8.0 6.4 12.9 10.9 12.4ConsumerAsian Paints 471 Neutral 11.6 12.4 15.2 40.6 38.1 31.0 26.7 23.6 19.8 33.3 30.7 32.1Britannia 775 Buy 19.6 27.1 32.0 39.6 28.6 24.2 28.1 19.7 16.2 37.5 42.6 41.5Colgate 1,233 Neutral 36.5 40.8 46.1 33.8 30.2 26.7 24.6 21.8 18.3 108.4 97.6 92.5Dabur 170 Buy 4.4 5.4 6.5 38.6 31.4 26.1 29.7 24.1 20.3 35.1 35.3 35.1Godrej Consumer 832 Neutral 19.6 24.7 30.5 42.4 33.7 27.3 29.6 23.5 19.5 20.9 23.2 24.3GSK Consumer 4,238 Neutral 98.3 119.1 139.8 43.1 35.6 30.3 35.7 31.7 25.0 30.5 31.1 30.8Hind. Unilever 621 Se l l 15.3 16.4 17.7 40.5 37.9 35.1 32.2 28.1 24.7 71.4 61.3 57.1ITC 349 Neutral 9.5 10.9 12.7 36.8 31.9 27.4 24.3 20.7 17.9 36.1 37.8 39.8Marico 220 Buy 6.0 7.5 8.6 36.6 29.4 25.6 23.6 19.1 15.8 19.6 20.1 19.2Nestle 5,097 Neutral 114.1 123.1 150.2 44.7 41.4 33.9 27.2 24.2 20.2 71.6 58.0 56.7Pidilite Inds. 253 Neutral 8.5 9.7 11.7 29.9 26.2 21.6 19.9 16.7 13.7 24.9 24.1 24.6Radico Khaitan 128 Buy 6.7 8.0 10.7 19.1 16.0 12.0 11.7 10.1 8.2 12.3 13.3 15.7United Spirits 2,621 Buy 29.6 41.1 66.0 88.6 63.7 39.7 35.5 29.4 21.5 4.3 6.6 9.7Sector Aggregate 39.7 34.5 29.4 27.1 23.0 19.5 32.8 33.2 34.2

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B–10October 2013

MOSL Universe



HealthcareBiocon 334 Neutral 16.4 18.8 21.1 20.4 17.8 15.8 10.4 9.6 8.5 12.1 12.8 13.1Cadila Health 693 Buy 31.9 35.8 41.4 21.7 19.3 16.7 14.5 13.5 11.5 23.7 22.8 22.3Cipla 433 Neutral 15.8 20.2 22.6 27.3 21.4 19.2 15.1 13.5 12.0 14.1 15.6 15.0Divis Labs 984 Buy 45.4 54.8 66.5 21.7 18.0 14.8 15.6 12.9 10.1 26.0 26.7 27.7Dr Reddy’ s Labs 2,411 Buy 90.2 107.1 127.0 26.7 22.5 19.0 16.9 14.5 12.3 20.7 20.3 19.9Glenmark Pharma 523 Buy 18.4 25.4 31.9 28.4 20.6 16.4 15.5 13.3 11.2 18.1 20.5 21.1GSK Pharma 2,414 Buy 80.0 62.5 79.1 30.2 38.6 30.5 23.2 30.9 23.1 33.7 25.1 29.9IPCA Labs. 695 Buy 25.7 31.8 51.0 27.1 21.9 13.6 14.8 12.5 9.4 23.1 23.4 30.2Lupin 853 Buy 23.1 31.5 41.9 36.9 27.1 20.3 19.4 15.9 13.1 22.5 23.8 25.4Ranbaxy Labs 334 Neutral 13.0 13.0 12.9 25.7 25.7 25.8 7.4 13.8 7.5 31.4 -4.7 28.2Sanofi India 2,558 Neutral 76.7 87.3 105.5 33.3 29.3 24.2 23.4 22.1 18.1 14.8 15.6 17.2Sun Pharma 590 Buy 14.7 21.6 24.7 40.0 27.4 23.9 24.0 17.4 15.0 22.5 27.9 26.4Torrent Pharma 439 Buy 27.8 29.8 34.1 15.8 14.7 12.9 10.8 10.1 8.8 35.8 30.8 28.3Sector Aggregate 30.5 24.3 20.5 17.4 15.4 12.6 19.3 21.1 20.6

MediaD B Corp 252 Buy 11.9 15.3 18.6 21.2 16.5 13.6 12.4 9.3 7.9 22.3 25.7 27.7Dish TV 50 Buy -1.2 -0.9 -0.2 -42.7 -58.9 -289.8 10.9 10.1 8.1 NA NA NAHindustan Media 111 Buy 11.5 14.1 16.3 9.7 7.9 6.8 4.6 3.0 2.0 17.9 18.5 17.9HT Media 87 Neutral 7.1 5.7 6.0 12.3 15.4 14.6 5.9 6.3 5.5 10.1 7.4 7.2Jagran Prakashan 82 Buy 4.7 6.4 7.7 17.6 12.8 10.7 10.1 7.6 6.5 17.5 20.4 21.5PVR 470 Buy 11.2 15.4 24.2 41.8 30.6 19.4 20.9 10.7 8.4 9.6 9.3 13.3Sun TV 401 Buy 17.3 19.5 24.1 23.1 20.6 16.6 11.2 9.6 8.0 23.6 24.1 26.7Zee Entertainment 238 Neutral 7.5 9.2 11.0 31.5 26.0 21.7 23.2 18.7 15.4 19.6 20.7 21.4Sector Aggregate 28.8 24.0 19.1 13.7 11.4 9.4 17.1 18.4 20.3

MetalsHindalco 114 Buy 17.0 14.0 15.0 6.7 8.1 7.6 8.9 7.7 6.2 18.0 13.1 12.5Hindustan Zinc 131 Buy 16.4 16.7 16.4 8.0 7.8 8.0 5.2 4.2 3.5 23.4 20.2 17.1JSPL 237 Neutral 37.2 27.3 32.3 6.4 8.7 7.3 7.1 8.4 6.1 17.7 12.0 13.3JSW Steel 732 Se l l 49.7 65.5 71.4 14.7 11.2 10.3 7.2 6.6 6.3 6.6 9.1 10.1Nalco 32 Buy 2.3 3.3 3.3 13.9 9.8 9.9 3.6 3.5 3.0 5.0 6.9 6.6NMDC 126 Buy 16.7 15.7 16.0 7.5 8.0 7.8 3.7 3.9 3.8 26.8 22.2 19.6SAIL 51 Se l l 5.7 8.2 5.5 8.9 6.2 9.2 7.4 7.5 8.1 5.8 8.0 5.1Sesa Sterlite 183 Buy 35.9 34.7 35.8 5.1 5.3 5.1 4.1 3.8 3.5 14.4 13.5 13.0Tata Steel 288 Se l l 1.6 33.6 32.2 183.5 8.6 8.9 7.2 6.0 6.3 0.7 14.9 13.1Sector Aggregate 8.0 7.3 7.4 5.8 5.5 5.1 11.9 12.1 11.1

OthersBata India 851 Buy 26.8 30.7 38.5 31.8 27.7 22.1 19.2 16.6 13.4 27.1 25.6 26.5Castrol India 311 Neutral 9.0 9.7 10.9 34.4 32.1 28.5 25.0 23.1 20.1 83.8 71.4 71.3MCX 402 Buy 54.9 29.4 29.9 7.3 13.7 13.5 5.7 11.3 11.7 26.0 12.7 12.3Sintex Inds. 21 Buy 13.3 9.9 11.3 1.6 2.1 1.9 4.4 4.2 3.5 14.3 9.8 10.1United Phosphorous 143 Buy 18.1 21.0 25.2 7.9 6.8 5.7 4.8 3.8 3.1 18.2 18.5 19.0V-Guard Inds 486 Buy 21.1 29.1 39.1 23.1 16.7 12.4 14.6 10.5 8.0 26.7 29.4 31.1Sector Aggregate 14.4 14.5 12.2 9.5 8.5 7.3 21.2 18.8 19.7

PULL OUT

B–11October 2013

MOSL Universe



Oil & GasBPCL 329 Buy 26.0 28.2 34.8 12.6 11.7 9.4 7.6 7.2 6.4 11.5 11.6 13.2Cairn India 318 Buy 63.1 65.6 55.2 5.0 4.8 5.8 3.3 2.5 2.5 24.8 23.8 17.2Chennai Petroleum 56 Buy -118.6 -2.3 30.2 -0.5 -24.6 1.9 -7.0 11.0 5.2 -60.7 -1.7 20.8GAIL 326 Neutral 31.7 28.9 28.8 10.3 11.3 11.3 8.0 8.8 7.8 17.5 14.4 13.1Guj. State Petronet 52 Neutral 9.6 9.0 9.2 5.4 5.7 5.6 3.6 3.0 3.0 19.9 16.1 14.4HPCL 190 Buy 26.7 16.3 26.3 7.1 11.7 7.2 9.9 9.8 8.0 6.7 4.0 6.2Indraprastha Gas 276 Neutral 25.3 26.4 31.6 10.9 10.4 8.7 5.5 5.0 4.0 26.0 22.6 22.7IOC 211 Buy 18.3 19.5 28.0 11.5 10.9 7.5 10.3 10.7 6.7 7.2 7.3 9.9MRPL 33 Neutral -4.3 1.3 6.8 -7.7 25.9 4.9 14.4 6.2 3.5 -11.1 3.4 16.9Oil India 454 Buy 59.7 60.1 68.9 7.6 7.6 6.6 3.8 3.6 2.9 19.4 17.8 18.2ONGC 275 Buy 28.3 28.9 36.7 9.7 9.5 7.5 3.8 3.5 2.8 16.8 15.6 17.8Petronet LNG 123 Buy 15.3 10.6 12.9 8.0 11.6 9.5 5.8 6.6 5.7 28.8 16.7 17.7Reliance Inds. 840 Neutral 71.9 74.0 80.6 11.7 11.4 10.4 8.5 8.9 8.0 12.3 11.5 11.4Sector Aggregate 10.3 9.8 8.5 6.2 5.8 4.8 13.4 12.8 13.4Ex RMS 10.2 9.7 8.6 5.5 5.2 4.4 14.6 13.9 14.1

Real EstateAnant Raj Inds 42 Buy 3.6 4.7 5.5 11.6 8.9 7.6 16.2 11.4 9.9 2.7 3.5 4.0DLF 132 Buy 4.2 4.5 6.5 31.4 29.2 20.2 17.7 13.1 11.6 2.6 2.8 3.9Godrej Properties 346 Neutral 17.7 21.4 32.8 19.5 16.2 10.6 14.7 14.3 9.6 9.6 11.2 15.3HDIL 37 UR 1.7 6.8 8.9 21.3 5.5 4.2 8.0 9.8 7.7 0.7 2.7 3.4Indiabulls Real Est. 55 Buy 4.1 6.9 13.8 13.3 7.9 4.0 7.5 6.4 4.0 2.5 4.4 7.9Jaypee Infratech 16 Buy 5.0 6.3 6.2 3.2 2.5 2.6 6.8 4.6 4.6 11.6 13.4 11.8Mahindra Lifespace 406 Buy 34.6 31.6 41.3 11.7 12.8 9.8 10.2 13.0 10.7 10.9 9.2 10.8Oberoi Realty 166 Buy 15.4 16.8 22.0 10.8 9.9 7.6 7.2 6.1 4.2 12.8 12.5 14.6Phoenix Mills 237 Buy 5.8 7.0 13.5 40.8 33.8 17.6 21.1 12.3 9.4 4.8 5.5 9.9Prestige Estates 123 Buy 8.2 10.2 13.3 15.0 12.0 9.2 11.0 8.8 6.7 10.4 11.7 13.4Unitech 16 Buy 0.8 1.2 1.5 20.3 13.0 10.9 29.8 23.3 18.9 1.8 2.8 3.3Sector Aggregate 14.7 13.0 9.9 13.1 10.3 8.6 4.2 4.5 5.6

RetailJubi. Foodworks 1,173 Se l l 20.9 24.7 34.3 56.1 47.5 34.2 29.6 23.5 16.7 31.2 26.9 27.2Shopper's Stop 356 Neutral 4.9 7.0 10.6 73.2 51.0 33.6 22.7 18.6 14.1 5.9 7.9 10.9Titan Industries 235 Neutral 8.2 9.0 10.1 28.7 26.2 23.2 19.5 18.3 15.6 42.5 31.7 28.6Sector Aggregate 34.6 30.8 25.8 21.6 19.3 15.7 29.3 26.5 25.4

TechnologyHCL Technologies 1,071 Buy 57.0 76.7 85.2 18.8 14.0 12.6 12.4 9.0 8.1 32.2 37.4 32.4Hexaware Tech. 129 Neutral 10.9 13.8 14.9 11.8 9.3 8.6 8.3 6.3 5.5 30.1 33.4 32.3Infosys 3,006 Buy 164.9 186.5 215.5 18.2 16.1 14.0 12.8 10.3 8.7 25.7 24.4 25.8KPIT Tech. 131 Neutral 10.6 15.9 17.5 12.4 8.2 7.5 6.4 4.3 4.0 22.7 26.0 24.6Mindtree 1,186 Neutral 81.7 118.8 130.8 14.5 10.0 9.1 9.8 7.3 5.7 25.8 33.2 28.1MphasiS 428 Se l l 37.5 35.9 42.4 11.4 11.9 10.1 8.9 8.9 7.3 19.1 16.9 18.7Persistent Systems 619 Buy 46.9 57.7 66.8 13.2 10.7 9.3 6.2 4.9 4.3 20.2 20.9 20.4TCS 1,947 Neutral 71.2 91.0 104.2 27.3 21.4 18.7 20.7 15.0 13.4 37.8 38.7 35.2Tech Mahindra 1,306 Buy 93.2 122.8 131.1 14.0 10.6 10.0 8.8 6.6 6.0 32.6 33.9 28.5Wipro 475 Buy 25.0 30.9 34.0 19.0 15.4 14.0 13.8 10.6 9.6 25.3 27.6 25.5Sector Aggregate 20.9 16.9 14.9 15.3 11.6 10.3 27.5 27.9 25.9

TelecommunicationBharti Airtel 325 Buy 6.0 7.7 13.7 54.2 42.4 23.7 8.1 7.1 5.8 4.2 5.2 8.4Bharti Infratel 159 Neutral 5.6 7.4 9.9 28.6 21.5 16.2 8.7 7.9 7.0 6.3 8.0 10.3Idea Cellular 172 Buy 3.1 6.0 8.9 56.4 28.8 19.3 11.7 8.2 6.5 7.4 12.8 16.6Reliance Comm 151 Neutral 0.9 4.9 11.2 160.3 31.0 13.5 10.6 9.3 7.4 0.6 3.4 7.5Sector Aggregate 55.4 33.5 19.7 9.1 7.7 6.3 4.0 6.1 9.5

B–12October 2013

MOSL Universe

CMP (INR) Rating EPS (INR) P/E (x) P/BV (x) RoE (%)


Private BanksAxis Bank 1,031 Buy 110.7 114.4 132.0 9.3 9.0 7.8 1.5 1.3 1.1 18.5 15.2 15.4Federal Bank 298 Buy 49.0 36.1 47.2 6.1 8.3 6.3 0.8 0.7 0.7 13.9 9.3 11.3HDFC Bank 610 Neutral 28.3 36.1 44.7 21.6 16.9 13.6 4.0 3.4 2.8 20.3 21.7 22.7ICICI Bank 923 Buy 72.2 75.0 84.4 12.8 12.3 10.9 2.0 1.8 1.6 14.8 12.8 12.8IndusInd Bank 377 Buy 20.3 23.9 28.4 18.6 15.7 13.3 2.7 2.3 2.0 17.8 15.8 16.4ING Vysya Bank 510 Buy 39.6 37.4 42.9 12.9 13.6 11.9 1.7 1.4 1.2 14.6 12.1 10.9J&K Bank 1,129 Buy 217.5 211.2 234.6 5.2 5.3 4.8 1.1 1.0 0.8 23.6 19.5 18.8Kotak Mah. Bank 682 Neutral 29.3 32.0 36.7 23.3 21.3 18.6 3.3 2.9 2.5 15.5 14.6 14.5South Indian Bank 20 Neutral 3.8 3.8 4.1 5.3 5.3 4.9 0.9 0.8 0.7 20.5 16.5 15.6Yes Bank 305 Buy 36.3 37.8 45.9 8.4 8.1 6.6 1.9 1.6 1.3 24.8 21.3 21.8Pvt. Bank Aggregate 14.5 13.2 11.2 2.5 2.1 1.9 17.2 16.0 16.5PSU BanksAndhra Bank 53 Neutral 23.0 16.4 17.6 2.3 3.2 3.0 0.4 0.3 0.3 16.2 10.5 10.4Bank of Baroda 501 Buy 106.0 85.7 93.5 4.7 5.8 5.4 0.7 0.6 0.6 16.1 11.6 11.5Bank of India 163 Neutral 46.1 44.6 48.2 3.5 3.7 3.4 0.5 0.4 0.4 13.6 11.7 11.6Canara Bank 225 Neutral 64.8 46.6 53.6 3.5 4.8 4.2 0.4 0.4 0.4 13.3 8.8 9.4Corporation Bank 245 Neutral 93.8 86.6 93.7 2.6 2.8 2.6 0.4 0.4 0.3 16.1 13.2 12.9Dena Bank 47 Neutral 23.1 18.8 20.8 2.0 2.5 2.3 0.3 0.3 0.3 17.6 12.7 12.7IDBI Bank 60 Neutral 14.1 14.1 15.7 4.2 4.2 3.8 0.4 0.4 0.4 10.2 9.4 9.8Indian Bank 70 Buy 36.8 25.5 29.5 1.9 2.7 2.4 0.3 0.3 0.2 15.6 9.7 10.3Oriental Bank 150 Buy 45.5 37.2 42.7 3.3 4.0 3.5 0.4 0.3 0.3 11.5 8.7 9.3Punjab Nat. Bank 478 Buy 134.3 113.3 129.4 3.6 4.2 3.7 0.5 0.5 0.4 16.5 12.2 12.7State Bank 1,642 Buy 261.9 206.1 236.8 6.3 8.0 6.9 0.9 0.8 0.8 16.5 11.7 12.2Union Bank 115 Neutral 36.0 27.4 31.5 3.2 4.2 3.7 0.4 0.4 0.4 15.0 10.0 10.6PSU Bank Aggregate 4.6 5.7 5.0 0.7 0.6 0.6 14.9 10.8 11.2NBFCBajaj Finance 1,177 Buy 118.8 146.1 181.1 9.9 8.1 6.5 1.7 1.5 1.2 21.9 19.8 20.8Dewan Housing 104 Buy 35.2 44.2 54.1 3.0 2.4 1.9 0.4 0.4 0.3 17.1 16.3 17.2HDFC 783 Buy 31.4 35.9 40.9 25.0 21.8 19.1 4.8 4.3 3.9 23.8 25.6 25.7IDFC 89 Buy 12.1 13.0 14.9 7.3 6.8 5.9 1.0 0.9 0.8 14.1 13.7 14.1LIC Housing Fin 192 Buy 20.3 24.2 29.6 9.5 7.9 6.5 1.5 1.3 1.1 16.8 17.4 18.4M & M Financial 257 Buy 15.7 17.8 22.5 16.4 14.5 11.4 3.3 2.8 2.4 23.4 20.7 22.4Power Finance Corp 133 Neutral 34.3 38.8 42.7 3.9 3.4 3.1 0.7 0.6 0.5 20.1 19.6 18.7Rural Electric. Corp. 195 Neutral 38.7 46.4 53.8 5.0 4.2 3.6 1.1 0.9 0.8 23.6 23.7 23.1Shriram Transport 574 Buy 64.7 69.7 80.0 8.9 8.2 7.2 1.8 1.5 1.3 20.6 18.3 17.9NBFC Aggregate 11.2 9.7 8.4 2.2 1.9 1.7 20.1 19.6 19.6Sector Aggregate 9.0 9.3 8.1 1.5 1.3 1.2 16.5 14.0 14.4



UtilitiesCESC 336 Buy 49.2 53.2 56.8 6.8 6.3 5.9 4.9 4.2 3.9 12.3 12.1 11.6Coal India 307 Neutral 28.0 29.6 31.4 11.0 10.4 9.8 7.3 6.3 5.9 28.4 25.7 24.0Jaiprakash Power 16 Buy 1.3 1.4 2.3 12.5 11.2 7.0 13.9 12.6 6.8 6.3 6.3 10.1JSW Energy 46 Neutral 6.5 7.7 6.9 7.1 5.9 6.6 5.7 4.8 4.6 17.8 19.2 15.5NHPC 20 Neutral 1.8 1.9 2.0 11.3 10.7 10.1 8.2 9.1 7.8 7.4 7.4 7.5NTPC 148 Buy 11.1 11.9 13.8 13.3 12.5 10.7 9.1 9.7 8.6 12.0 11.8 12.7Power Grid Corp. 99 Buy 8.9 8.7 10.5 11.1 11.4 9.4 10.6 9.4 8.6 16.6 15.0 15.0PTC India 46 Buy 6.7 6.8 6.8 6.8 6.7 6.7 5.9 7.1 6.5 5.6 3.6 4.2Reliance Infra. 393 Buy 65.2 50.5 55.5 6.0 7.8 7.1 0.6 -1.4 -1.3 10.4 6.5 6.8Tata Power 82 Neutral 3.9 3.0 3.4 21.0 26.8 23.7 14.1 10.4 9.7 8.1 8.0 8.2Sector Aggregate 11.5 10.9 9.9 8.6 8.0 7.2 16.0 15.2 15.5UR = 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 27 September 2013, unless otherwise stated.

BSE Sensex: 19,727 S&P CNX: 5,833

September 2013 Results Preview

October 2013 C–1

Sectors & Companies

C–2October 2013

September 2013 Results Preview | Sector: Automobiles

Expected quarterly performance summary (INR Million)CMP Rating Sales EBITDA Net Profit


27.09.13 % YoY % QoQ % YoY % QoQ % YoY % QoQAshok Leyland 15 Neutral 27,348 -17.0 15.7 769 -77.0 230.4 -822 PL LossBajaj Auto 1,992 Buy 47,252 -5.0 -3.8 9,734 6.4 7.4 7,851 6.0 6.4Eicher Motors 3,539 Buy 15,746 6.2 -5.7 1,452 30.4 -12.6 891 35.0 -3.4Exide Inds. 132 Neutral 16,514 8.9 1.6 2,394 27.2 -8.7 1,514 26.0 -4.5Hero Motocorp 2,048 Buy 56,782 10.2 -7.3 5,494 18.9 -19.3 4,367 -0.9 -20.4Mahindra & Mahindra 844 Buy 84,430 -8.7 -13.0 10,523 -17.8 -24.9 8,470 -13.4 -6.9Maruti Suzuki 1,368 Buy 100,528 21.0 -1.8 9,667 90.1 -17.1 4,775 109.9 -24.4Tata Motors 340 Buy 536,575 23.6 14.7 75,120 40.8 20.8 26,436 27.0 44.2Sector Aggregate 885,176 14.4 6.1 115,153 26.1 6.4 53,483 11.5 12.0

Demand remains weak; however festive-led buying and good monsoon providehope: Considering the slowdown in economic activity and consequent weakness inconsumer and business sentiments, demand continues to remain weak across autosegments. MHCVs and cars have been the worst impacted. However, tractor volumescontinue to remain healthy (though growth moderated in 2Q post strong 1Q) onfavorable monsoon and high farm income. Two-wheelers are showing early signs ofrecovery led by favorable monsoon and consequent strong demand from ruralmarkets.

2QFY14 margins to decline YoY on lower volumes and consequent high discounts:EBITDA margins for our auto coverage universe (excluding JLR) is expected to decline40bp YoY (-100bp QoQ) on continued demand weakness and consequent highdiscounting pressure. While two-wheeler players (Bajaj, Hero and Royal Enfield)are expected to report YoY improvement in margins, M&M, Tata Motors (S/A) andAshok Leyland would report a decline. MSIL would report YoY margin improvementdue to a low base (labor issues last year) and SPIL merger benefit, while on a QoQbasis, margins would decline 180bp due to higher discounts and weaker mix (lowerdiesel share). JLR expected to show strong margins of 16.9% (+40bp QoQ).

Easing of macro headwinds to be key catalyst for demand recovery: With theexpectation of an increase in rural incomes due to favorable monsoon coupled withelection spending-led improvement in macro-economic factors, we hope for a better2H for the auto sector. Over the long term, easing macro headwinds such as lowerinterest rates and higher economic growth would be the key driver for volumegrowth, profitability and in turn for re-rating.

Valuation and view: Considering the current weakness in demand environment andslower-than-earlier-anticipated economic recovery, we downgrade the volumegrowth/earnings estimates across companies.

Our estimates for Bajaj Auto have been lowered by 8.2%/8.7% for FY14E/15E largelyreflecting continued weakness in domestic business, partially offset by favorableINR/USD. For Maruti, our estimates are lowered by 8.7%/9.5% for FY14E/15E to factor

Jinesh Gandhi ([email protected]) / Chirag Jain ([email protected])

AutomobilesCompanies Covered

Ashok Leyland

Bajaj Auto

Eicher Motors

Exide Industries

Hero MotoCorp

Mahindra & Mahindra

Maruti Suzuki India

Tata Motors

C–3October 2013


the persistent weakness in demand and consequent pressure on margins due to highdiscounts, weak mix (lower diesel share) coupled with adverse currency. Due tocontinued weakness in UV demand, we lower M&M's consolidated FY14E/15E EPS by4.4%/11.4%.

Demand environment and changing competitive landscape in the auto sector wouldbe key determinants of stocks' performance. We are hopeful of a demand recovery in2HFY14 driven by festive season and benefit of favorable monsoon. Prefer Tata Motorsand Hero MotoCorp in large caps, and Eicher Motors in mid caps.

Volume snapshot for 2QFY14 ('000 units)2QFY14E 2QFY13 YoY (%) 1QFY14 QoQ (%) 1HFY14 1HFY13 YoY (%)

Two wheelers 4,018 3,739 7.4 3,947 1.8 7,964 7,782 2.3

Three wheelers 204 216 -5.4 203 0.7 407 387 5.1

Passenger cars 571 540 5.8 627 -8.9 1,131 1,142 -1.0

UVs & MPVs 149 169 -11.6 177 -15.7 326 333 -1.9

Total PVs 721 709 1.7 804 -10.4 1,457 1,475 -1.2

M&HCV 79 80 -1.0 60 32.4 139 151 -7.7

LCV 145 146 -0.2 124 17.5 269 278 -3.2

Total CVs 225 226 -0.5 184 22.3 408 429 -4.8

Total 5,167 4,890 5.7 5,137 0.6 10,237 10,072 1.6

Source: SIAM, MOSL

Trend in industry volumes

Source: Company, MOSL

Revised EPS estimates (INR)EPS FY14E FY15E

Rev Old Chg (%) Rev Old Chg (%)Bajaj Auto 117.2 127.7 -8.2 135.6 148.6 -8.7Hero MotoCorp 110.4 111.6 -1.1 152.8 153.5 -0.5Maruti * 79.1 86.7 -8.7 101.2 111.9 -9.5M&M * 68.3 71.5 -4.4 79.4 89.6 -11.4Tata Motors * 35.9 32.8 9.7 42.8 40.0 7.0Ashok Leyland -1.2 -0.4 177.5 0.6 1.1 -43.4Eicher Motors * 146.4 145.5 0.6 180.1 180.1 0.0Exide Industries 7.7 7.8 -1.2 8.9 8.9 0.9* Consolidated

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C–4October 2013


Commodity cost (Index) Trend in movement of various currencies (Indexed)

Trend in EBITDA margins (%) Trend in segment-wise EBITDA margins (%)


Trend in HDFC Bank's base rate Trend in petrol and diesel prices

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Source: Bloomberg, MOSL

C–5October 2013


Comparative valuationCMP (INR) Rating EPS (INR) P/E (x) EV/EBITDA (x) RoE (%)


AutomobilesAshok Leyland 15 Neutral 0.6 -1.2 0.6 24.0 -12.1 24.5 6.8 17.1 5.9 3.9 -7.4 3.6Bajaj Auto 1,992 Buy 105.2 117.2 135.6 18.9 17.0 14.7 14.0 11.5 9.5 43.7 38.7 37.2Eicher Motors 3,539 Buy 120.1 146.4 180.1 29.5 24.2 19.7 16.1 12.4 9.2 20.8 22.3 23.3Exide Inds. 132 Neutral 6.2 7.7 8.9 21.5 17.2 14.8 12.1 9.2 7.8 15.3 16.7 17.0Hero Motocorp 2,048 Buy 106.1 110.4 152.8 19.3 18.5 13.4 16.7 13.8 9.5 45.6 41.2 47.7Mahindra & Mah. 844 Buy 60.9 68.3 79.4 13.9 12.4 10.6 5.5 5.4 4.5 22.4 19.8 18.5Maruti Suzuki 1,368 Buy 80.2 79.1 101.2 17.1 17.3 13.5 8.2 7.5 5.7 12.9 11.4 13.2Tata Motors 340 Buy 32.1 35.9 42.8 10.6 9.5 7.9 5.1 3.9 3.2 27.4 23.9 22.4Sector Aggregate 14.4 13.3 10.8 7.0 5.7 4.7 24.2 21.8 22.2

Trend in key financialsVolumes (‘000 units) EBITDA Margins (%) Adj PAT (INR M)

2Q YoY QoQ 2Q YoY QoQ 2Q YoY QoQ

FY14 (%) (%) FY14 (bp) (bp) FY14 (%) (%)

BJAUT 914 -12.9 -6.7 20.6 220.0 210.0 7,851 6.0 6.4

HMCL* 1,438 7.9 -7.8 9.7 70.0 -140.0 4,367 -0.9 -20.4

MSIL 266 15.3 -0.3 9.6 350.0 -180.0 4,775 109.9 -24.4

MM 173 -7.9 -11.0 12.5 -140.0 -200.0 8,470 -13.4 -6.9

TTMT (S/A) 154 -31.0 0.8 1.8 -410.0 -50.0 -5,997 -155.4 -170.8

TTMT (Cons) 14.0 170.0 70.0 26,436 27.0 44.2

Ashok Leyland 25 -17.7 13.0 2.8 -730.0 180.0 -822 -157.6 NA

Eicher Motors 9.9 240.0 60.0 1,157 75.2 29.8

Exide Industries 14.5 210.0 420.0 1,514 26.0 -4.5

Aggregate 2,969 -2.8 -6.5 9.3 -30 -100 19,801 -46.2 -45.4

*Normalized; **Aggregate includes Tata Motor’s standalone performance only

Relative Performance-3m (%) Relative Performance-1Yr (%)

95

100

105

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115

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Dec

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Mar

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Sensex IndexMOSL Automobi les Index

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100

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Jul-

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13Sens ex IndexMOSL Automobi les Index

C–6October 2013


Quarterly Performance (INR Million)Y/E March FY13 FY14 FY13 FY14E

1Q 2Q 3Q 4Q 1Q 2QE 3QE 4QE

Total Volumes (nos) 27,487 29,840 22,666 34,627 21,721 24,555 21,283 34,380 114,620 101,439

Growth (%) 42.6 25.0 -2.2 -4.9 -21.0 -17.7 -6.1 -0.7 11.6 -11.5

Realizations ('000) 1,094 1,105 1,050 1,077 1,088 1,114 1,110 1,131 1,089 1,119

Change (%) -16.1 -15.4 -16.2 -9.1 -0.5 0.8 5.7 5.1 -13.4 2.8

Net Sales 30,074 32,960 23,805 37,285 23,638 27,348 23,619 38,897 124,812 113,502

Change (%) 19.7 5.8 -18.0 -13.5 -21.4 -17.0 -0.8 4.3 -3.4 -9.1

RM/Sales % 72.8 72.8 71.9 75.8 75.5 75.0 75.0 75.0 73.1 75.1

Staff / sales % 8.9 8.0 11.0 7.6 10.9 9.7 11.6 8.5 8.6 9.9

Oth. Exp./ Sales % 10.3 9.1 12.8 11.4 12.6 12.5 12.0 11.2 11.3 12.0

EBITDA 2,407 3,341 1,023 1,983 233 769 320 2,047 8,765 3,368

EBITDA Margins (%) 8.0 10.1 4.3 5.3 1.0 2.8 1.4 5.3 7.0 3.0

Other Income 129 239 141 115 123 240 150 157 624 670

Interest 834 1,036 1,071 828 1,007 1,000 1,000 931 3,769 3,938

Depreciation 893 984 931 1,000 952 975 1,000 1,059 3,808 3,985

PBT before EO Exp 810 1,559 -838 271 -1,603 -966 -1,530 215 1,812 -3,885

EO Exp/(Inc) 0 0 -1,563 -1,344 65 0 0 0 -2,896 65

PBT 810 1,559 725 1,614 -1,669 -966 -1,530 215 4,707 -3,950

Tax 140 133 -17 114 -251 -145 -229 33 370 -592

Effective Tax Rate (%) 17.3 8.5 -2.3 7.1 15.0 15.0 15.0 15.3 7.9 15.0

Rep. PAT 670 1,426 741 1,500 -1,418 -822 -1,300 182 4,337 -3,357

Change (%) -22.3 -7.5 10.8 -42.0 -311.6 -157.6 -275.4 -87.9 -33.0 -177.4

Adj. PAT 670 1,426 -858 251 -1,362 -822 -1,300 182 1,669 -3,302

Change (%) -22.3 -7.5 -228.2 -90.2 -303.3 -157.6 51.6 -27.7 -74.2 -297.8

E: MOSL Estimates

Ashok LeylandCMP: INR15 Neutral� Expect volumes to decline 17.7% YoY (+13% QoQ) on continued

weakness in industrial activity and slowdown in consumption spends.� MHCVs volumes are expected to report a decline of 18.4% YoY (+16%

QoQ) to 17,275 units, while LCV (Dost) volumes are expected to declineby 16% YoY (+6.7% QoQ) to 7,280 units.

� Margins expected to fall 730bp YoY to 2.8% (+180bp QoQ) on lowervolumes and higher discounting pressure. Sequentially, margins areexpected to improve on better volumes. Company has undertaken apricing action of INR20,000/unit in Aug 2013.

� Expect to report a loss of INR822m (v/s profit of INR1,426m in 2QFY13)on lower volumes and weak margins.

� ALL has guided for 10% decline in MHCV industry for FY14. Companyhas recently launched a new vehicle under ICV segment called Boss.

� We lower FY14E/15E EPS on continued weakness in CV industry andconsequent margin pressure.

Key issues to watch out� Current demand environment and discounting trend, plant and

channel inventory for MHCVs.� Industry growth, market share guidance for FY14.� Pantnagar volume, RM cost and margin guidance for FY14.� Capex and investment guidance and divestment plans for FY14.

Financials & Valuation (INR b)Y/E March 2012 2013 2014E 2015E

Sa les 129.0 124.8 113.5 137.7

EBITDA 13.2 8.8 3.4 9.5

NP 6.3 1.7 (3.3) 1.6

Adj. EPS (INR) 2.4 0.6 (1.2) 0.6

EPS Gr. (%) (0.8) (73.3) (297.8) (149.5)

BV/Sh. (INR) 15.8 16.7 16.7 17.1

RoE (%) 15.3 3.9 (7.4) 3.6

RoCE (%) 13.4 6.5 0.1 6.2

Payout (%) 42.5 95.6 (16.1) 162.9

Valuations

P/E (x) 6.4 24.0 (12.1) 24.5

P/BV (x) 1.0 0.9 0.9 0.9

EV/EBITDA (x) 5.0 8.8 23.0 8.1

Div. Yield (%) 6.6 4.0 1.3 6.6

Bloomberg AL IN

Equity Shares (m) 2,660.7

M. Cap. (INR b)/(USD b) 40 / 1

52-Week Range (INR) 29 / 12

1,6,12 Rel Perf. (%) 11 / -36 / -43

C–7October 2013




Volumes ('000 units) 1,079.0 1,049.2 1,127.7 981.2 979.3 913.5 1,061.3 1,045.1 4,237.2 3,999.2

Change (%) -1.3 -9.9 4.9 -3.5 -9.2 -12.9 -5.9 6.5 (2.6) (5.6)

Realization (INR/unit) 45,095 47,392 47,996 48,372 50,150 51,725 52,918 52,684 47,195 51,907

Change (%) 4.7 6.4 3.5 2.1 11.2 9.1 10.3 8.9 5.1 10.0

Net Sales 48,657 49,724 54,127 47,465 49,111 47,252 56,160 55,061 199,973 207,584

Change (%) 3.4 -4.1 8.6 -4.5 0.9 -5.0 3.8 16.5 2.4 3.8

Total Cost 39,940 40,572 44,010 39,099 40,044 37,518 44,519 43,836 163,620 166,538

(Inc)/Dec in Stock 1,156 -902 0 0 622 0 0 0 0 622

Raw Materials 33,925 36,589 39,211 34,088 33,445 32,368 38,469 37,707 144,066 142,610

Staff Cost 1,604 1,532 1,592 1,666 1,837 1,800 1,950 2,087 6,395 7,674

Other Expenditure 3,362 3,479 3,360 3,588 4,322 3,500 4,250 4,183 13,788 16,255

EBITDA 8,717 9,152 10,118 8,366 9,067 9,734 11,640 11,226 36,353 41,046

EBITDA Margins (%) 17.9 18.4 18.7 17.6 18.5 20.6 20.7 20.4 18.2 19.8

Change (%) 3.8 -6.2 2.8 -4.2 4.0 6.4 15.1 15.7 -2.3 12.9

Other Income 1,820 1,667 2,032 2,436 1,756 1,806 2,000 2,450 7,955 8,012

Interest 0 2 1 2 1 3 2 7 5 13

Depreciation 352 410 411 466 444 480 480 512 1,640 1,916

PBT 10,184 10,407 11,738 10,334 10,378 11,057 13,158 13,157 42,662 47,130

Effective Tax Rate (%) 29.5 28.8 30.2 25.9 28.9 29.0 29.0 29.1 28.7 29.4

Adj. PAT 7,184 7,407 8,187 7,658 7,377 7,851 9,342 9,333 30,436 33,903

Change (%) 1.0 (6.2) (1.8) 0.9 2.7 6.0 14.1 21.9 -2.0 11.4

E: MOSL Estimates

Bajaj AutoCMP: INR1,992 Buy� Expect 2QFY14 volumes to decline 12.9% YoY (-6.7% QoQ) to 0.92m

units as weak consumer sentiments impacts sales.

� EBITDA margins to improve 220bp YoY (+210bp QoQ) to 20.6% led byfavorable export realizations (USD/INR hedged at 59 levels v/s INR55.5for 1Q and INR49.5/USD in FY13), partially offset by lower volumes,weaker mix (lower 3W share), price cuts in Nigeria/Sri Lanka effectiveAug 2013 and higher marketing spend.

� Expect PAT to rise 6% YoY (+6.4% QoQ) to INR7.85b, in line with EBITDArise.

� We lower FY14E/FY15E EPS by 8.2%/8.7% as we cut our FY14E volumeassumptions on continued weakness in macro-economic environmentand consequent slower economic recovery, coupled with partial pass-thru of favorable Fx hedges to revive export demand.

Key issues to watch out� Update on festive retail demand environment and channel inventory.� Revised guidance for FY14 volume and margins, new launches, update

on forex hedges on exports for FY14/FY15.� Update on RE60 launch timeline (for export and domestic market),

volume and margin guidance.


Sa les 195.3 200.0 207.6 237.6

EBITDA 37.2 36.4 41.7 48.2

NP 31.1 30.4 33.9 39.3

Adj. EPS (INR) 107.4 105.2 117.2 135.6

EPS Gr. (%) 18.8 (2.0) 11.4 15.8

BV/Sh. (INR) 208.8 273.1 331.7 397.7

RoE (%) 56.7 43.7 38.7 37.2

RoCE (%) 73.0 59.8 53.3 51.4

Payout (%) 48.7 49.7 49.9 51.4

Valuations

P/E (x) 18.6 18.9 17.0 14.7

P/BV (x) 9.5 7.3 6.0 5.0

EV/EBITDA (x) 13.8 14.0 11.5 9.5

Div. Yield (%) 2.3 2.3 2.5 3.0

Bloomberg BJAUT IN

Equity Shares (m) 289.4

M. Cap. (INR b)/(USD b) 576 / 9

52-Week Range (INR) 2,229 / 1,658

1,6,12 Rel Perf. (%) 6 / 6 / 4

C–8October 2013


Quarterly Performance (INR Million)Y/E December CY12 CY13 CY12 CY13E

1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QE

Net Op Income 16,950 15,850 14,831 16,536 17,243 16,699 15,746 20,186 63,899 69,874

Growth (%) 21.7 22.1 2.2 4.7 1.7 5.4 6.2 22.1 11.6 9.4

EBITDA 1,802 1,395 1,114 1,180 1,705 1,662 1,452 1,991 5,490 6,810

EBITDA Margins (%) 10.6 8.8 7.5 7.1 9.9 10.0 9.2 9.9 8.6 9.7

Depreciation 177 187 213 245 275 296 330 368 822 1,269

Other income 543 306 246 271 444 211 270 292 1,366 1,218

Interest cost 9 9 12 10 6 12 11 8 38 37

PBT after EO item 2,160 1,506 1,135 1,196 1,868 1,565 1,381 1,907 5,997 6,721

Effective tax rate (%) 24.3 25.3 17.4 12.1 28.9 19.6 20.7 20.9 20.8 22.8

PAT 1,634 1,125 937 1,052 1,328 1,258 1,095 1,509 4,749 5,189

Minority interest 539 366 277 324 348 335 203 352 1,506 1,238

Recurring PAT 1,096 759 660 727 979 923 891 1,157 3,243 3,951

Growth (%) 49.5 -0.6 -10.5 -14.9 -10.6 21.7 35.0 59.1 5.0 21.8

Standalone (Royal Enfield)

Royal Enfield (units) 23,899 27,519 30,046 31,968 34,737 40,040 48,295 57,008 113,432 180,078

Net Realizations (INR/unit) 92,083 92,162 91,476 92,345 95,299 93,911 94,430 94,223 92,015 94,418

Change - YoY (%) 4.5 3.1 2.0 2.8 3.5 1.9 3.2 2.0 3.0 2.5

EBITDA Margins (%) 13.9 15.3 15.1 11.5 17.7 17.8 17.9 17.5 13.9 17.7

VECV (derived)

Total CV Volumes 14,346 12,016 10,791 11,735 12,529 11,027 9,424 10,596 48,888 43,575

Growth (%) 13.0 9.0 -14.1 -8.1 -12.7 -8.2 -12.7 -9.7 -0.3 -10.9

Net Realizations (INR '000/unit) 1,019 1,098 1,108 1,138 1,099 1,152 1,171 1,381 1,081 1,197

Change - YoY (%) 4.9 7.9 10.6 3.9 7.9 4.9 5.6 21.4 5.8 17.4

EBITDA Margins (%) 10.1 7.6 5.8 6.2 8.0 7.6 5.6 7.3 7.6 7.2

E: MOSL Estimates

Eicher MotorsCMP: INR3,539 Buy� With higher production and continued demand momentum, Royal

Enfield's (RE) volumes are expected to improve 61% YoY (+21% QoQ).Expect standalone margins at 17.8% (+280bp YoY, +10bp QoQ) led byhigher volumes and efficiencies of the new plant.

� Expect VECV's volumes to decline by 12.7% YoY (-14.5% QoQ). However,VECV is expected to outperform CV industry, given its high exposureto buses and LMD segment. VECV's margins are expected to decline10bp YoY (-200bp QoQ) due to ramp-up in MDEP (engine project).

� Expect 6.2% YoY (-5.7% QoQ) growth in consolidated sales. Consolidatedmargins expected to improve 170bp QoQ (-70bp YoY) to 10%.Consolidated PAT (after minority) to remain flat at INR891m, as higherprofits from Royal Enfield would offset weakness in VECV.

� RE plans to sell 175,000/250,000 units in CY13/CY14. However, the CVbusiness remains weak, with no signs of stability yet.

Key issues to watch out� Update on key projects slated to commence operations in CY13 viz a)

medium duty engine project, b) bus body plant and c) new HCV range.� Update on CV demand trends, discount levels and channel inventory.� New launches and timelines under Royal Enfield business.

Financials & Valuation (INR b)Y/E December 2012 2013E 2014E 2015E

Net Income 63.9 69.9 88.4 109.4

EBITDA 5.5 6.8 8.7 12.1

Net Profit 3.2 4.0 4.9 6.6

Adj. EPS (INR) 120.1 146.4 180.1 242.8

EPS Gr. (%) 5.0 21.8 23.0 34.8

BV/Sh. (INR) 603.6 708.2 839.8 1,023.8

RoE (%) 20.8 22.3 23.3 26.1

RoCE (%) 23.0 22.5 23.6 28.5

Payout (%) 0.6 0.7 0.8 1.0

Valuations

P/E (x) 29.5 24.2 19.7 14.6

P/BV (x) 5.9 5.0 4.2 3.5

EV/EBITDA (x) 24.4 16.5 11.9 8.3

Div. Yield (%) 0.6 0.7 0.8 1.0

Bloomberg EIM IN



52-Week Range (INR) 3,980 / 2,205

1,6,12 Rel Perf. (%) -2 / 34 / 52

C–9October 2013


Exide IndustriesCMP: INR132 Neutral� Expect revenue growth of 8.9% YoY (+1.6% QoQ) to INR16.5b.

� EBITDA margins expected to improve 210bp YoY (-160bp QoQ).Sequential decline in margins is due to INR/USD depreciation, weakerproduct mix (lower share of inventor battery due to seasonality)partially offset by price hike implemented in Aug 2013 and Sept 2013.

� PAT expected to grow by 26% YoY (-4.5% QoQ) to INR1.5b.

Key issues to watch out� Update on demand environment for 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.

Bloomberg EXID IN


M. Cap. (INR b)/(USD b) 112 / 2


1,6,12 Rel Perf. (%) -4 / -3 / -17



Net Sales 15,521 15,168 14,622 15,382 16,261 16,514 16,337 16,967 60,718 66,079

Change (%) 24.8 29.1 17.0 6.4 4.8 8.9 11.7 10.3 18.9 8.8

RM/Sales % 65.1 66.2 67.2 67.1 64.3 65.5 64.5 64.7 66.5 64.8

Employee Cost (% of sales) 5.4 5.9 5.8 5.8 5.8 5.8 6.0 5.8 5.7 5.8

Other Exp. (% of Sales) 14.5 15.5 15.7 13.8 13.8 14.3 14.3 14.3 14.8 14.2

EBITDA 2,321 1,882 1,647 2,044 2,622 2,394 2,497 2,586 7,899 10,099

As a % of Sales 14.9 12.4 11.3 13.3 16.1 14.5 15.3 15.3 13.0 15.3

Change (%) 4.3 108.5 -0.5 -4.0 13.0 27.2 51.6 26.5 14.8 27.8

Non-Operating Income 157 125 121 304 62 100 135 318 704 615

Interest 14 10 11 8 4 5 5 6 42 20

Depreciation 276 282 289 288 300 310 320 291 1,135 1,222

PBT 2,187 1,716 1,469 2,053 2,381 2,179 2,306 2,607 7,427 9,472

Tax 665 514 428 588 795 665 703 794 2,195 2,957


Rep. PAT 1,522 1,202 1,041 1,465 1,586 1,514 1,603 1,813 5,232 6,516

Change (%) -6.7 135.0 -0.2 2.8 4.2 26.0 54.0 23.8 13.4 24.5

Adj. PAT 1,522 1,202 1,041 1,465 1,586 1,514 1,603 1,813 5,232 6,516

Change (%) -6.7 135.0 -0.2 2.8 4.2 26.0 54.0 23.8 13.4 24.5

E: MOSL Estimates

Financials & Valuation (INR b)Y/E March 2012 2013 2014E 2015ENet Sales 51.1 60.7 66.1 76.4

EBITDA 6.8 7.8 10.1 11.5

Adj. PAT 4.6 5.2 6.5 7.6

Adj. EPS (INR) 5.4 6.2 7.7 8.9

EPS Growth (%) (27.4) 13.4 24.6 16.6

BV/Share (INR) 36.0 40.3 45.9 52.5

RoE (%) 15.1 15.3 16.7 17.0

RoCE (%) 20.3 21.2 23.6 23.8

Payout (%) 27.6 26.0 22.8 22.4

Valuations

P/E (x) 24.3 21.5 17.2 14.8

P/BV (x) 3.7 3.3 2.9 2.5

EV/EBITDA (x) 14.1 12.1 9.2 7.8

Div. Yield (%) 1.1 1.2 1.3 1.5

C–10October 2013




Total Volumes ('000nos) 1,642 1,333 1,573 1,525 1,559 1,438 1,695 1,688 6,074 6,380

Change (%) 7.4 -13.7 -1.0 -3.0 -5.1 7.9 7.7 10.7 -2.6 5.0

Net Realization 37,799 38,649 39,102 39,810 39,300 39,500 39,700 40,091 38,828 39,660

Change (%) 2.6 3.2 3.9 5.0 4.0 2.2 1.5 0.7 3.6 2.1

Net Sales 62,078 51,512 61,513 60,725 61,268 56,782 67,291 67,683 235,827 253,025

Change (%) 10.1 -10.9 2.8 1.8 -1.3 10.2 9.4 11.5 0.9 7.3

RM Cost (% sales) 74.1 73.2 74.5 73.1 72.7 73.1 73.0 73.2 73.8 73.0

Staff Cost (% sales) 3.3 3.7 3.2 3.7 3.6 3.9 3.5 3.7 3.5 3.7

Other Exp (% sales) 8.1 9.8 10.2 10.4 9.3 9.6 9.4 9.4 9.6 9.4

EBITDA 8,974 6,829 7,423 7,765 8,825 7,614 9,504 9,319 30,991 35,261

EBITDA Margins (%) 14.5 13.3 12.1 12.8 14.4 13.4 14.1 13.8 13.1 13.9

Adj. EBITDA Margins (%) 10.7 9.0 8.7 9.6 11.1 9.7 11.0 10.7 9.5 10.6

Other Income 1,439 1,356 1,264 1,778 1,449 1,200 1,650 2,024 5,838 6,324

Interest 29 30 30 31 30 32 31 33 119 125

Depreciation 3,035 2,895 2,832 2,655 2,744 2,880 2,903 3,045 11,418 11,572

PBT 7,349 5,261 5,826 6,857 7,502 5,902 8,220 8,265 25,292 29,888

Tax 1,194 855 947 1,115 2,016 1,534 2,137 2,146 4,110 7,834


PAT 6,155 4,406 4,879 5,742 5,486 4,367 6,083 6,118 21,182 22,054

Adj. PAT 6,155 4,406 4,879 5,742 5,486 4,367 6,083 6,118 21,182 22,054

Change (%) 10.3 -27.0 -20.4 -4.9 -10.9 -0.9 24.7 6.6 -9.5 4.1

E: MOSL Estimates

Hero MotoCorpCMP: INR2,048 Buy� Expect 2QFY14 volumes to rise 7.9% YoY (-7.8% QoQ) to 1.56m units.

1Q witnessed healthy sales due to strong demand during the marriageseason and benefit from healthy rabi crop harvest.

� Adjusted margins to improve 70bp YoY (-140bp QoQ) to 9.7% onadverse JPY/USD movement (vendors import with a quarter lag) andlower volumes.

� Demand environment for Hero MotoCorp has stabilized over the lastfew months and with good monsoon, outlook for 2H looks strong. Weestimate a volume growth of 5%/13.4% for Hero for FY14E/15Erespectively.

� We downgrade FY14E/FY15E EPS by 1.1%/0.5% as we moderate ourmargin assumption on adverse INR/USD movement.

Key issues to watch out� Update on festive retail demand environment and channel inventory.� Guidance on FY14 volume growth and margins, update on export

plans and new launches together with timelines.

Financials & Valuation (INR b)Y/E March 2012 2013 2014E 2015ESa les 233.7 235.8 253.0 292.9

EBITDA 34.1 31.0 35.3 40.2

NP 23.8 21.2 22.1 30.5

Adj. EPS (INR) 119.1 106.1 110.4 152.8

EPS Gr. (%) 18.4 (10.9) 4.1 38.3

BV/Sh. (INR) 214.8 250.7 284.9 356.3

RoE (%) 65.6 45.6 41.2 47.7

RoCE (%) 49.9 43.6 52.4 62.6

Payout (%) 43.5 65.1 67.7 52.7

Valuations

P/E (x) 16.8 18.8 18.1 13.1

P/BV (x) 9.3 8.0 7.0 5.6

EV/EBITDA (x) 11.0 11.7 10.2 8.8

Div. Yield (%) 2.3 3.0 3.3 3.5

Bloomberg HMCL IN


M. Cap. (INR b)/(USD b) 409 / 7

52-Week Range (INR) 2,128 / 1,434

1,6,12 Rel Perf. (%) -2 / 28 / 3

C–11October 2013


Quarterly Performance (incl. MVML) (INR Million)Y/E March FY13 FY14 FY13 FY14E


Total Volumes (nos) 182,149 188,412 209,266 195,528 194,962 171,897 208,664 206,556 775,358 782,079

Growth YoY (%) 14.4 10.4 14.2 0.1 7.0 -8.8 -0.3 5.6 10.0 0.9

Net Realization 487,431 491,082 489,452 510,569 497,564 486,701 483,816 470,797 494,696 484,439

Growth YoY (%) 14.9 14.9 9.2 9.4 2.1 -0.9 -1.2 -7.8 11.1 -2.1

Gross Sales 99,377 104,607 114,466 112,407 107,043 94,833 114,434 113,145 430,856 429,456

Less: Excise 10,592 12,081 12,040 12,576 10,037 11,171 13,480 15,899 47,290 50,587

Excise (%) 11.9 13.1 11.8 12.6 10.3 13.4 13.4 16.3 12.3 13.4

Net Sales 88,785 92,526 102,426 99,831 97,006 83,662 100,955 97,246 383,566 378,869

Growth YoY (%) 31.5 26.8 24.7 9.5 9.3 -9.6 -1.4 -2.6 22.2 -1.2

Total Cost 76,435 79,729 88,631 85,478 82,998 73,284 87,121 84,383 330,273 327,786

EBITDA 12,350 12,797 13,795 14,352 14,008 10,379 13,834 12,863 53,293 51,084

EBITDA Margins (%) 13.9 13.8 13.5 14.4 14.4 12.4 13.7 13.2 13.9 13.5

Change (%) 27.9 33.2 26.5 30.1 13.4 -18.9 0.3 -10.4 28.1

Other income 662 3,260 758 1,017 972 3,560 860 835 5,697 6,227

PBT 10,498 13,272 11,774 13,211 12,141 11,004 11,604 10,410 48,754 45,159

Tax 2,713 3,491 2,625 3,581 3,045 2,643 2,788 2,373 12,410 10,848


Reported PAT 7,785 9,781 9,149 9,630 9,097 8,360 8,817 8,037 36,344 34,311

Change (%) 25.9 28.4 29.6 5.7 16.9 -14.5 -3.6 -16.5 21.3 -5.6

Adj PAT 7,785 9,781 9,149 8,941 9,097 8,360 8,817 8,037 36,344 34,311

Change (%) 25.9 28.4 35.1 11.4 16.9 -14.5 -3.6 -10.1 25.8 -5.6

E: MOSL Estimates

Mahindra & MahindraCMP: INR844 Buy� While M&M continues to face pressure on UV business led by

correction in fuel price disparity and higher competitive pressures,growth in tractors has also moderated after strong 1Q. We expect autobusiness to report a decline of 15.4%, while tractor volumes areexpected to grow by 9.8%.

� Expect M&M to report revenue decline of 9.6% YoY (-13.8% QoQ) dueto sharp decline in auto volumes.

� EBITDA margin (incl. MVML) to decline 200bp QoQ (-140bp YoY) led bylower volumes, higher discounts (in autos) and lower share of highmargin tractor volumes.

� Adjusted PAT estimated at INR8.4b (-14.5% YoY, -8% QoQ).

Key issues to watch out� Update on current retail demand environment for auto and tractor

division; plant and channel inventory.� Considering competitive launches in CY13, FY14 guidance on auto

volumes and margins.� Guidance for FY14 tractor volumes (current guidance of 10-12% for

FY14 industry growth).� Update on Ssangyong business and financial performance.


EBITDA 37.7 47.1 48.4 53.6

NP* 28.9 36.3 34.3 36.7

Adj. EPS (INR)* 48.3 60.7 57.3 61.4

EPS Gr. (%)* 12.2 25.8 (5.6) 7.0

Cons. EPS (INR) 51.2 60.9 68.3 79.4

BV/Share (INR) 206 248 292 340

RoE (%) 23.0 22.4 19.8 18.5

RoCE (%) 23.1 23.2 21.3 20.7

Payout (%) 29.7 26.6 28.2 27.7

Valuations

P/E (x) 17.5 13.9 14.7 13.8

Cons. P/E (x) 17.1 14.3 12.8 11.0

P/BV (x) 4.1 3.4 2.9 2.5

EV/EBITDA (x) - 7.2 6.8 5.5

Div. Yield (%) - 1.5 1.6 1.7

* Incl. MVML

Bloomberg MM IN


M. Cap. (INR b)/(USD b) 505 / 8

52-Week Range (INR) 1,026 / 742

1,6,12 Rel Perf. (%) -3 / -7 / -7

C–12October 2013



1Q 2Q 3Q 4Q* 1Q 2QE 3QE 4QE

Total Volumes (nos) 295,899 230,376 301,453 343,756 266,434 275,586 302,500 309,894 1,171,484 1,154,414

Change (%) 5.1 -8.7 25.9 -4.6 -10.0 19.6 0.3 -9.9 3.3 -1.5

Realizations (INR/car) 355,839 350,302 363,471 379,812 375,144 369,191 371,625 377,699 363,749 373,487

Change (%) 21.3 19.5 15.7 19.1 5.4 5.4 2.2 -0.6 18.8 2.7

Net Sales 105,292 80,701 109,570 130,563 99,951 101,744 112,417 117,047 426,126 431,158

Change (%) 26.9 8.5 44.5 13.3 -5.1 26.1 2.6 -10.4 22.2 1.2

Other Operating Income 2,489 2,353 2,434 2,478 2,422 2,500 2,700 2,594 9,753 10,217

Net Op. Revenues 107,782 83,054 112,003 133,040 102,373 104,244 115,117 119,641 435,879 441,375

Change (%) 27.5 8.2 44.9 13.4 -5.0 25.5 2.8 -10.1 22.5 1.3

RM Cost (% of Sales) 77.8 79.6 78.4 65.6 71.9 73.3 74.3 74.4 74.7 73.5

Staff Cost (% of Sales) 2.1 2.8 2.2 2.9 2.9 2.9 2.8 2.9 2.5 2.8

Other exp. (% of Sales) 12.8 11.4 11.5 16.4 13.8 14.1 13.2 12.6 13.1 13.4

EBITDA 7,864 5,085 8,913 19,996 11,662 10,135 11,247 12,197 42,296 45,240

EBITDA Margins (%) 7.3 6.1 8.0 15.0 11.4 9.7 9.8 10.2 9.7 10.2

Change (%) -3.0 15.4 121.0 132.9 48.3 99.3 26.2 -39.0 68.3 7.0

Non-Operating Income 1,123 1,563 1,886 3,990 2,043 2,100 2,386 2,871 8,124 9,400

Interest 332 380 459 726 442 500 515 558 1,898 2,015

Depreciation 3,399 3,470 3,583 8,159 4,802 4,900 5,750 5,855 18,612 21,307

PBT 5,256 2,798 6,756 15,101 8,461 6,835 7,368 8,654 29,910 31,318

Tax 1,018 524 1,743 2,705 2,145 1,709 1,842 2,134 5,989 7,830


PAT 4,239 2,274 5,013 12,396 6,316 5,126 5,526 6,520 23,921 23,489

Adjusted PAT 4,239 2,274 5,013 12,396 6,316 5,126 5,526 6,520 23,921 23,489

Change (%) -22.8 -5.4 143.8 93.7 49.0 125.4 10.2 -47.4 46.3 -1.8

E:MOSL Estimates; * Including SPIL Merger

Maruti Suzuki IndiaCMP: INR1,368 Buy� Our quarterly estimates for 2QFY14 include SPIL's merger; hence, YoY

performance is strictly not comparable.

� Expect volumes to improve 15.3% YoY (flat QoQ) on a lower base (laborissues related production constraints last year). Realizations toimprove 5.4% YoY (-1.6% QoQ). Sequential decline in realizations isdue to higher discounts and weak product mix (higher petrol share).

� Expect margins to improve 350bp YoY on a low base. Sequentially,margins would fall by 180bp on higher discounts and lower share ofdiesel vehicles.

� We downgrade FY14E/15E EPS by 8.7%/9.5% as we moderate our marginassumption on continued increase in discounts and adverse currencymovement.

Key issues to watch out

� Update on festive demand scenario, channel inventory, discountingtrends and new launches.

� Guidance on FY14 volume growth, margins, forex hedges, localizationefforts.


EBITDA 25.1 42.3 45.2 56.0

Adj. PAT 16.4 23.9 23.5 30.6

Con.adj.EPS(INR) 58.2 80.2 79.1 101.2

EPS Growth (%) (35.9) 37.8 (1.4) 27.9

BV/Share (INR) 525.7 615.0 679.9 767.2

RoE (%) 10.8 12.9 11.4 13.2

RoCE (%) 13.2 15.5 14.9 16.8

Payout (%) 13.3 10.1 14.1 11.9

Valuations

P/E (x) 23.5 17.1 17.3 13.5

P/CE (x) 2.6 9.1 8.6 7.1

EV/EBITDA (x) 11.9 7.7 7.0 5.2

Div. Yield (%) 0.6 0.6 0.9 0.9

Bloomberg MSIL IN


M. Cap. (INR b)/(USD b) 413 / 7

52-Week Range (INR) 1,773 / 1,217

1,6,12 Rel Perf. (%) -1 / 2 / -3

C–13October 2013


Quarterly Performance (Consolidated) (INR Million)Y/E March FY13 FY14 FY13 FY14E


Total Op Income 433,236 434,029 460,895 560,016 467,847 536,575 572,175 674,385 1,888,176 2,250,982

Growth (%) 30.1 19.9 1.8 10.0 8.0 23.6 24.1 20.4 14.0 19.2

EBITDA 57,548 53,336 56,573 78,015 62,192 75,120 78,674 98,398 245,473 314,384

EBITDA Margins (%) 13.3 12.3 12.3 13.9 13.3 14.0 13.8 14.6 13.0 14.0

Depreciation 15,659 15,944 20,700 23,391 23,477 29,477 30,000 32,765 75,693 115,718

Other Income 2,386 2,068 1,886 1,775 1,823 1,750 1,500 1,341 8,115 6,414

Interest Expenses 8,044 8,474 9,344 9,670 9,482 9,500 9,500 9,354 35,533 37,837

PBT before EO Exp 36,232 30,987 28,416 46,729 31,056 37,894 40,674 57,619 142,362 167,243

EO Exp/(Inc) 4,405 101 1,735 -215 1,786 0 0 0 6,027 0

PBT after EO Exp 31,826 30,886 26,681 46,943 29,270 37,894 40,674 57,619 136,335 167,243

Tax rate (%) 27.3 32.0 38.7 18.8 39.8 30.0 30.0 28.9 27.7 31.0

PAT 23,138 21,010 16,362 38,116 17,628 26,526 28,472 40,968 98,625 115,380

Minority Interest -276 -230 -152 -178 -198 -250 -175 -134 -837 -757

Share in profit of Associate -414 -32 67 1,517 -169 160 190 859 1,138 1,040

Adj PAT 25,651 20,816 17,341 39,280 18,337 26,436 28,487 41,693 103,286 115,663

Growth (%) 25.2 (7.3) (50.9) -11.5 (28.5) 27.0 64.3 6.1 -17.7 12.0

JLR EBITDA Margins (%) 14.5 14.8 14.0 16.9 16.5 16.9 16.5 17.3 15.2 16.8

S/A EBITDA Margins (%) 7.3 5.9 2.2 3.6 2.3 1.8 2.7 3.9 4.8 2.7

E: MOSL Estimates

Tata MotorsCMP: INR340 Buy� JLR volumes expected to grow 29% YoY (+10.4% QoQ) driven by strong

growth in Jaguar due to variant launches (smaller engines, AWD andXF sportsbrake) and ramp-up of new Range Rover/Range Rover Sport.

� EBITDA margins to improve 40bp QoQ on higher volumes and strongermix (higher Range Rover/Sport).

� Standalone volumes to decline 31% YoY (+1% QoQ) led by 21.4%/50.1%YoY decline in CVs/PVs respectively. Within CVs, MHCVs expected toreport a decline of 31% (despite lower base), while LCVs to decline by17%. Standalone margins to remain weak at 1.8% (-50bp QoQ, -410bpYoY) on lower volumes and higher discounting pressures.

� Expect 23.6% YoY (+14.7% QoQ) rise in TTMT's consolidated revenue.Consolidated margins to improve 170bp YoY (+70bp QoQ). Expectconsolidated PAT to rise by 27% YoY (+44.2% QoQ) to INR26.4b led bystrong JLR performance, translation gains partially offset by higherstandalone loss.

� We upgrade FY14E/15E consolidated EPS by 9.7%/7% led by upgradesin JLR partially and Fx translation gains offset by higher losses in S/A.

Key issues to watch out� Current JLR demand trends and outlook for FY14, particularly China

and the US.� Order book for new Range Rover and Range Rover Sport and their

ramp-up schedule.� Update on Fx hedges, particularly for JLR operations.� FY14 volume guidance for MHCVs and PVs, channel inventory, discount

trends.

Financials & Valuation (INR b)Y/E March 2012 2013 2014E 2015ENet Sales 1,657 1,888 2,251 2,588

EBITDA 237.0 265.7 335.9 380.8

NP 125.6 103.3 115.7 137.9

Adj. EPS (INR) 39.0 32.1 35.9 42.8

EPS Gr. (%) 38.5 (17.7) 12.0 19.2

BV/Sh. (INR) 103.0 118.0 150.5 191.6

RoE (%) 38.4 27.4 23.9 22.4

RoCE (%) 24.1 21.7 22.2 22.2

Payout (%) 11.7 7.2 6.5 8.1

Valuations

P/E (x) 8.6 10.5 9.3 7.8

P/BV (x) 3.3 2.8 2.2 1.8

EV/EBITDA (x) 5.3 5.0 3.8 3.2

Div. Yield (%) 1.2 0.6 0.6 0.9

Bloomberg TTMT IN


M. Cap. (INR b)/(USD b) 1,094 / 18


1,6,12 Rel Perf. (%) 7 / 21 / 25

C–14October 2013

September 2013 Results Preview | Sector: Capital Goods

Satyam Agarwal ([email protected]) / Nirav Vasa ([email protected])

No respite from tardy pace of project execution: 1QFY14 witnessed sharp decelerationin the pace of project execution. Slowdown was also witnessed in smaller segmentsof the industry. In 2QFY14, the full scale impact of RBI's liquidity tightening measuresis likely to be evident. In 1QFY14 post results conference calls, several companies hadinformed that they were forced to stop work on certain project sites due to delayedpayments from customers. With further liquidity tightening, we expect increase inpile up of retention money, leading to increased debtors and stretched working capital.(BHEL: 1QFY14 debtors ~INR40b, of which retention money was INR22b).

Mega projects fail to get response, IDPL does cherry picking: Considering the strongsectoral headwinds and ongoing issues with existing projects, developers' appetitefor mega projects is at its nadir. 2QFY14 witnessed annulment of RFQ for the 4,000MWOrissa UMPP, which would be re-bid along with Cheyyur UMPP in Tamil Nadu on DFBOTbasis as per revised bidding norms. In all, three mega projects - two UMPPs of 4,000MWeach in Orissa and Tamil Nadu, and the Elevated Rail Corridor Project betweenChurchgate and Virar in Mumbai (estimated value: INR210b) have invited EoIs fromdevelopers. However, positive impact of lower competitive intensity was seen interms of L&T IDPL getting quality projects at higher IRRs (L2 price 12% higher). L&TIDPL was able to bag its first power transmission line project from NTPC for its Kudgipower plant for a consideration of INR13.5b with an annuity of INR1.96b for a periodof 35 years, representing an IRR of 19-21%. L&T IDPL also bagged another road projectfrom the Orissa government, in which it should be able to get an IRR of 19-21%.(Project details: two-lane to four-lane, 165km, project value INR14.5b, concession 30years, and DSCR of 1.3x).

Maintain Neutral rating on sector: For 2QFY14, we expect 5% YoY de-growth acrossour Capital Goods coverage universe, with 23% YoY decline in EBITDA and 32% YoYdecrease in PAT. BHEL is likely to report subdued performance in 2QFY14, as well. Weexpect 21% YoY decline in revenues, with 43% YoY decrease in EBITDA and 57% YoYdrop in PAT. Cummins India is likely to gain relative to its peers because of itsmanufacturing operations in India, which have given an edge over other MNC peers.Unlike 1QFY14, Havells is unlikely to be impacted by strong base effect in its Fansbusiness. We expect 6% YoY increase in revenues, with 3% YoY de-growth in PAT.



27.09.13 % YoY % QoQ % YoY % QoQ % YoY % QoQABB 551 Neutral 18,719 3.5 7.5 1,062 60.0 -3.5 361 68.9 -10.6BHEL 144 Neutral 82,437 -20.7 29.8 10,810 -43.1 178.2 5,496 -56.9 18.1Crompton Greaves 89 Buy 34,078 16.5 7.9 1,496 0.4 3.3 679 24.4 12.9Cummins India 409 Buy 9,850 -9.4 -6.1 1,523 -23.8 -13.2 1,293 -19.8 -22.2Havells India 633 Neutral 10,250 6.3 -2.5 1,221 2.5 -13.4 846 7.3 -17.8Larsen & Toubro 817 Buy 141,358 7.1 12.6 14,136 0.6 19.8 8,687 -5.1 4.5Siemens 480 Neutral 25,436 -24.6 -3.7 206 -79.3 -84.0 -149 PL LossThermax 590 Buy 10,715 -10.1 24.2 1,066 -12.4 31.0 726 -20.3 44.5Sector Aggregate 332,844 -4.8 13.2 31,520 -22.4 34.1 17,938 -32.0 7.5

Capital GoodsCompanies Covered

ABB

BHEL

Crompton Greaves

Cummins India

Havells India

Larsen & Toubro

Siemens

Thermax

C–15October 2013


Expect muted domestic order inflows in 2QFY14, as well

Domestic project execution impacted in constrained environment


Impact of INR depreciation is likely to be most evident in the results of Siemens andABB because of their dependence on imported raw materials. Thermax's domesticorder inflow is expected to be hit in 2QFY14, given the constrained environment.However, strong order inflows of INR21.5b in 1QFY14 would help the company meetour order inflow expectation of INR55b. We remain Neutral on the sector. Our toppicks are Larsen and Toubro, Crompton Greaves, and Thermax.


5340

1325

46 4122

-2-1

9 -723

649

20-1

620

-22 -1

2

-56

36-1

5-1

895

3

-2

1QFY

08

3QFY

08

1QFY

09

3QFY

09

1QFY

10

3QFY

10

1QFY

11

3QFY

11

1QFY

12

3QFY

12

1QFY

13

3QFY

13

1QFY

14

Order intake YoY %

8.5

8.7 9.6 11

.58.

2 9.1

10.6 11

.98.

9 9.7

10.2

10.5

8.4

8.5 9.1 12

.18.

37.

97.

8 11.0

6.1

11.7

12.1 13

.5 15.4

11.6 13

.4 16.1

16.5

13.3

14.3

15.2

15.8

12.0

12.2

13.0

17.7

10.9 12

.111

.215

.87.

6

1QFY

092Q

FY09

3QFY

094Q

FY09

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

14

Net Profi t Margin (%) EBITDA Margin (%)

2051

.421

96.3

2232

.023

40.1

2494

.027

04.9

2888

.330

07.5

3170

.531

99.4

3396

.534

05.4

3471

.833

80.6

3227

.833

18.4

3289

.132

60.9

3168

.732

41.5

2.7 2.8

2.6 2.7 2.8 3.

03.

03.

03.

12.

92.

92.

92.

82.

62.

42.

42.

32.

32.

2 2.3

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

Order book (INR bn) BTB (x)

Eng Sector (revenue growth %)

32.3

29.5 33

.221

.631

.432

.532

.7 39.5

38.0

35.1

32.2

19.1

31.3

28.8

19.7

26.8

8.9

7.3

4.7

24.7

16.0

24.0 30

.415

.115

.3 17.7

16.3 19

.515

.06.

22.

91.

2-4

.0

1QFY

06

3QFY

06

1QFY

07

3QFY

07

1QFY

08

3QFY

08

1QFY

09

3QFY

09

1QFY

10

3QFY

10

1QFY

11

3QFY

11

1QFY

12

3QFY

12

1QFY

13

3QFY

13

1QFY

14

Relative Performance - 3m (%) Relative Performance-1Yr (%)

70

80

90

100

110

Jun-13 Jul -13 Aug-13 Sep-13

Sensex IndexMOSL Capi ta l Goods Index

55

70

85

100

115

Sep-12 Dec-12 Mar-13 Jun-13 Sep-13

Sensex IndexMOSL Capi ta l Goods Index

C–16October 2013



27.09.13 FY13 FY14E FY15E FY13 FY14E FY15E FY13 FY14E FY15E FY13 FY14E FY15ECapital GoodsABB 551 Neutral 6.5 8.2 11.5 84.9 66.8 47.9 35.3 25.9 21.4 5.4 6.6 8.8BHEL 144 Neutral 26.8 16.9 10.2 5.4 8.5 14.1 3.0 4.6 5.0 23.5 13.0 7.3Crompton Greaves 89 Buy 3.0 5.6 8.3 29.8 15.9 10.7 18.3 10.2 7.5 -1.0 9.6 13.8Cummins India 409 Buy 23.8 21.7 24.7 17.1 18.8 16.5 12.4 14.8 12.7 29.7 24.0 25.3Havells India 633 Neutral 34.4 35.5 39.3 18.4 17.8 16.1 12.6 12.2 10.1 29.8 25.5 23.5Larsen & Toubro 817 Buy 53.4 43.8 51.5 15.3 18.7 15.9 10.4 10.1 9.1 16.2 14.6 14.4Siemens 480 Neutral 0.8 7.6 20.2 565.7 63.6 23.7 64.5 25.9 12.3 0.8 6.6 16.6Thermax 590 Buy 27.0 26.2 31.3 21.8 22.5 18.8 13.4 13.0 10.7 18.4 15.9 17.4Sector Aggregate 12.7 16.0 16.0 8.3 9.3 9.0 17.7 12.8 12.0

C–17October 2013


ABBCMP: INR551 Neutral� Though we expect gradual improvement, profitability will remain

muted, particularly in Project businesses, impacted by highercompetitive intensity, slower execution and low margin fixed pricecontracts. Also, the benefit of softening commodity prices has largelybeen negated by INR depreciation - 40% of the raw materialconsumption is imported, largely from parent.

� The order book currently stands at INR82.3b, down 9% YoY. ABB hasnot received any meaningful large order in the last 12 months. Weexpect order intake to grow 12% in CY13 over a low base.

� There are signs of increasing pressure on working capital due totightening liquidity conditions; long cycle businesses in Power Systemsand Process Automation have high contractual retention. Debt hasgrown from INR3.3b to INR5b in December 2012 and correction is likelyto take some time.

Key issues to watch out� In 2QCY13, the project business had reported positive EBIT; watch for

sustainability of the same.� Order intake during the quarter, particularly large projects, as demand

environment is tough.� Profit margins are likely to be impacted by adverse currency

movement (INR depreciation). Imports constitute ~39% of materialconsumption. While Power Products benefit from a depreciating INR,given increased share of exports, Discrete and Process Automationsegments are impacted due to higher share of imports.

Financials & Valuation (INR b)Y/E December 2012 2013E 2014E 2015ENet Sales 75.7 76.9 82.3 92.4

EBITDA 3.4 4.7 5.7 6.8

Adj PAT 1.4 1.7 2.4 3.4

Adj EPS (INR) 6.5 8.2 11.5 16.0

EPS Gr (%) -25.5 27.1 39.4 39.0

BV/Sh (INR) 122.6 127.0 134.6 145.0

RoE (%) 5.4 6.6 8.8 11.4

RoCE (%) 5.7 7.1 8.8 10.1

Payout (%) 53.8 40.0 30.0 30.0

Valuations

P/E (x) 127.4 66.8 47.9 34.5

P/BV (x) 6.7 4.3 4.1 3.8

EV/EBITDA (x) 52.6 25.9 21.4 17.5

Div. Yield (%) 0.4 0.7 0.7 1.0

Bloomberg ABB IN


M. Cap. (INR b)/(USD b) 117 / 2


1,6,12 Rel Perf. (%) 7 / 8 / -36



Sales 17,903 18,838 18,086 20,823 19,700 17,416 18,719 21,070 75,650 76,906

Change (%) (0.3) 10.0 3.7 (5.3) 10.0 (7.5) 3.5 1.2 1.2 1.7

EBITDA 975 1,060 664 666 1,065 1,100 1,062 1,473 3,365 4,700

Change (%) -4.0 24.0 -0.4 -38.4 9.2 3.8 60.0 121.2 -7.0 39.7

As % of Sales 5.4 5.6 3.7 3.2 5.4 6.3 5.7 7.0 4.4 6.1

Adjusted EBITDA (%) 6.2 4.6 4.3 5.2 5.4 6.3 5.1

Depreciation 223 231 240 246 246 259 264 327 941 1097

Interest 54 77 117 185 198 266 275 312 432 1,050

Other Income 19 14 10 28 14 38 20 2 71 74

PBT 716 766 316 263 636 612 543 837 2,062 2,627

Tax 240 250 102 96 210 209 182 280 688 881


Repoted PAT 476 516 214 168 426 403 361 557 1,374 1,747

Adj. PAT 476 516 214 168 426 403 361 557 1,374 1,747

Change (%) -20.0 33.2 -3.6 -73.8 -10.7 -21.9 68.9 232.1 -25.5 27.1

Order Intake 16,320 20,450 16,800 15,790 15,310 17,310 20,160 24,904 69,660 77,684

Order Book 90,280 91,892 90,606 86,720 82,290 82,350 82,272 82,265 86,720 82,265

BTB (x) 1.2 1.2 1.2 1.1 1.1 1.1 1.1 1.1 1.1

E: MOSL Estimates

C–18October 2013


BHELCMP: INR144 Neutral� Recovery in the pace of project execution is likely to remain sluggish

in 2QFY14 because of multiple headwinds like lack of clarity on fuelavailability, shrinking peak demand deficit (as a result of lower growthrates), etc. We understand that ~20% of BHEL's order book, largelyfrom the private sector, is non-moving / slow-moving in nature. Thus,we expect revenues to decline 21% in 2QFY14, similar to the 24%decline in 1QFY14.

� EBITDA margin had declined to a historical low of 6% in 1QFY14, whichwas also an aberration. However, we expect margins to remain underpressure, given poor fixed cost absorption. We estimate EBITDAmargin at 13.1% (down 490bp YoY) for 2QFY14.

� Order inflow for 1QFY14 was just INR14.7b (down 73% YoY), whichincluded orders for equipment like electrostatic precipitators, solarpower projects, etc. Considering the strong sector headwinds, weexpect the pace of order inflows to remain under pressure in 2QFY14,as well. Larsen and Toubro (LT) has emerged as L1 in Malwa 1,320MWproject, and competition remains intense.

Key issues to watch out� Order intake remains impacted, both for Power and Industry

segments.� Release of retention money (INR220b at the end of 1QFY14 from

debtors of ~INR400b on FY13 revenue base of INR502b).


EBITDA 99.1 93.9 66.6 40.3

Adj PAT 68.9 65.5 41.3 24.9

EPS (INR) 28.2 26.8 16.9 10.2

EPS Gr. (%) 21.7 (4.9) (37.0) (39.6)

BV/Sh. (INR) 103.7 124.4 135.3 141.9

RoE (%) 30.3 23.5 13.0 7.3

RoCE (%) 33.0 24.5 13.7 8.0

Payout (%) 22.3 20.0 30.0 30.0

Valuations

P/E (x) 11.5 5.4 8.5 14.1

P/BV (x) 3.1 1.2 1.1 1.0

EV/EBITDA (x) 7.3 3.0 4.6 5.0

Div Yield (%) 4.4 3.8 3.5 2.1

Consolidated

Bloomberg BHEL IN


M. Cap. (INR b)/(USD b) 352 / 6


1,6,12 Rel Perf. (%) 19 / -23 / -48



Sales (Net) 83,262 103,996 100,417 188,502 63,526 82,437 86,002 153,678 476,177 385,643

Change (%) 16.9 1.0 -4.8 -2.2 -23.7 -20.7 -14.4 -18.5 0.8 -19.0

EBITDA 12,022 18,995 16,341 46,512 3,886 10,810 12,586 39,289 93,894 66,571

As a % Sales 14.4 18.3 16.3 24.7 6.1 13.1 14.6 25.6 19.7 17.3

Adjusted EBITDA 12,022 18,995 16,341 46,512 3,886 10,810 12,586 39,289 93,894 66,571

Change (%) 41.0 12.0 -12.6 -3.2 -67.7 -43.1 -23.0 -15.5 -3.3 -29.1

As a % Sales 14.2 18.0 16.3 24.7 6.1 13.1 14.6 25.6 19.7 17.3

Interest 55 259 509 405 278 678 714 1,186 1,253 2,855

Depreciation 2,284 2,163 2,200 2,889 2,308 2,336 2,376 3,637 9,534 10,657

Other Income 3,663 1,307 3,324 2,924 5,385 1,250 1,100 330 11,217 8,065

PBT 13,346 17,880 16,955 46,142 6,685 9,046 10,597 34,796 94,324 61,124

Tax 4,137 5,135 5,139 13,766 2,031 2,940 3,444 11,436 28,177 19,851


Reported PAT 9,209 12,745 11,816 32,375 4,654 6,106 7,153 23,360 66,148 41,273

Change (%) 12.9 -9.7 -17.5 -4.2 -49.5 -52.1 -39.5 -27.8 -6.0 -37.6

Adj. PAT 9,209 12,745 11,816 32,375 4,654 5,496 6,542 22,750 65,537 40,663

Change (%) 12.9 -0.9 -17.5 -3.6 -49.5 -56.9 -44.6 -29.7 -4.9 -38.0

Order intake 55,900 31,530 19,500 209,570 14,690 50,000 75,000 124,479 316,500 264,169

Order book (INRb) 1,330 1,223 1,137 1,152 1,086 1,054 1,043 1,014 1,152 1,014

BTB (x) 2.7 2.5 2.4 2.4 2.4 2.4 2.4 2.6 2.4 2.6

E: MOSL Estimates

C–19October 2013


Quarterly performance (Consolidated) (INR Million)Y/E March FY13 FY14 FY13 FY14E


Sales (Net) 28,111 29,242 29,718 33,873 31,572 34,078 34,233 37,591 120,944 137,474

Change (%) 15.3 8.1 -1.9 10.1 12.3 16.5 15.2 11.0 77.0 13.7

EBITDA 1,668 1,365 20 779 1,448 1,496 1,878 2,218 3,832 7,039

Change (%) -8.3 -39.6 -98.9 -63.4 -13.2 9.6 184.7 -48.6 83.7

Adjusted EBITDA 1,793 1,490 850 779 1,448 1,496 1,878 2,218 4,912 7,039

As of % Sales (Adj) 6.4 5.1 2.9 2.3 4.6 4.4 5.5 5.9 4.1 5.1

Depreciation 466 544 566 453 527 590 605 596 2,029 2,318

Interest 99 190 213 208 201 325 325 343 709 1,110

Other Income 192 208 304 51 353 280 335 276 754 1,160

EO Income/(Exp) 0 0 1,207 0 0 0 0 0 1,207 0

PBT 1,294 838 -1,662 169 1,072 861 1,283 1,555 640 4,771

Tax 445 414 228 -78 464 192 285 262 1,009 1,203

Effective Tax Rate (%) 34.4 49.4 -13.7 -45.9 43.3 22.3 22.2 16.8 157.5 25.2

Minority interest -9.6 4.2 -1.4 -5.7 7.5 -10.0 -10.0 -27.5 -7.3 -40.0

Reported PAT 859 420 -1,888 253 601 679 1,008 1,321 -361 3,608

Adjusted PAT 984 545 149 253 601 679 1,008 1,321 1,926 3,608

Change (%) 23.8 (53.3) (80.7) (74.8) (38.9) 24.4 578.1 422.7 (51.5) 87.4

Order book 91,720 94,000 92,320 91,250 97,700 89,729 91,496 93,905 91,250 93,905

Order Intake 27,170 25,750 22,570 29,830 24,410 25,000 29,000 33,000 105,450 33,000

BTB (x) 0.8 1.0 0.8 1.0 0.8 0.7 0.7 0.7 0.8 0.7

E: MOSL Estimates

Crompton GreavesCMP: INR89 Buy� We expect standalone revenues to grow just 2.3% in 2QFY14, impacted

by expectations of 5% YoY decline in Industrial business and muted3% growth in Power segment. EBITDA margin is likely to be 7.6% (down120bp QoQ), impacted by poor cost absorption.

� We expect overseas operations to turn around in 2Q (EBITDA marginat 1.1%). In EUR terms, revenue growth would be 10% YoY (in INRterms, growth would be 36% YoY). In 1QFY14, EBITDA was -0.6%,impacted by (1) lower capacity utilization of just 65% in Belgium, and(2) EUR3m-4m revenue impact in Hungary due to floods. Weunderstand that utilization rates in Belgium have improved. Canadalosses are expected to be maintained at INR300m in 2QFY14 (similarQoQ).

� In the domestic Power segment, order intake is likely to be robust,driven by pick-up in ordering from SEBs. Revenues in Consumerbusiness had bounced back in 1QFY14 to 21% YoY and sustainability ofthe same would be watched for.

Key issues to watch out� Losses in Canada, which stood at INR300m in 1QFY14. Also, liquidated

damages are an important swing factor.� Margins in Belgium and Hungary, given that production in 2QFY14 is

expected to be at optimum levels.� Margins in exports, particularly from Kanjurmarg transformer factory.

The company will be a key beneficiary of the INR depreciation.


EBITDA 8.0 3.8 7.0 9.5

Adj PAT 3.7 1.9 3.6 5.3

EPS(INR) 5.8 3.0 5.6 8.3

EPS Gr. (%) (59.7) (48.4) 87.3 48.1

BV/Sh. (INR) 56.3 55.5 60.2 59.6

RoE (%) 10.7 (1.0) 9.6 13.8

RoCE (%) 9.8 2.8 8.0 10.8

Payout (%) 20.7 20.1 20.0 20.0

Valuations

P/E (x) 15.3 29.7 15.8 10.7

P/BV (x) 3.0 1.6 1.5 1.5

EV/EBITDA (x) 13.6 16.9 9.3 6.5

Div Yield (%) 1.6 1.3 1.3 1.4

Consolidated

Bloomberg CRG IN




1,6,12 Rel Perf. (%) 1 / -9 / -35

C–20October 2013


Quarterly Performance (Standalone) (INR Million)Y/E March FY13 FY14 FY13 FY14E


Sales 12,588 10,869 10,895 11,543 10,493 9,850 10,700 11,108 45,894 42,151

Change (%) 21.8 -0.3 13.2 10.9 -16.6 -9.4 -1.8 -3.8 11.5 -8.2

EBITDA 2,325 1,999 2,086 1,939 1,756 1,523 1,887 1,845 8,349 7,011

Change (%) 33.7 13.6 29.4 -0.5 -24.5 -23.8 -9.5 -4.8 19.7 -16.0

As of % Sales 18.5 18.4 19.1 16.8 16.7 15.5 17.6 16.6 18.2 16.6

Depreciation 114 117 118 124 117 125 140 183 473 565

Interest 14 13 9 11 12 15 15 18 46 60

Other Income 385 338 661 824 668 400 550 364 2,067 1,982

Extra-ordinary Items 0 0 475 0 0 0 0 0 616 0

PBT 2,583 2,207 3,096 2,628 2,294 1,783 2,282 2,008 10,513 8,368

Tax 777 596 755 742 632 490 650 570 2,872 2,343


Reported PAT 1,806 1,611 2,341 1,886 1,662 1,293 1,632 1,439 7,641 6,025

Change (%) 1.9 25.3 66.1 30.4 -8.0 -19.8 -30.3 -23.7 29.2 (21.2)

Adjusted PAT 1,806 1,611 1,817 1,494 1,662 1,293 1,632 1,439 6,606 6,025

Change (%) 32.7 25.3 28.9 3.3 (8.0) (19.8) (10.2) (3.7) 20.1 (8.8)

Operational Details

Domestic Sales 8,210 7,650 8,223 8,320 7,550 6,275 7,750 7,409 32,400 -1,769

Change (%) 10.1 (0.5) 21.3 20.2 (8.0) (18.0) (5.8) (10.9) 12.5 (9.8)

Exports 4,210 3,030 2,490 2,960 2,737 3,350 2,750 3,446 12,690 12,056

Change (%) 52.4 0.7 (5.9) (10.0) (35.0) 10.6 10.4 16.4 8.3 (5.0)

E: MOSL Estimates

Cummins IndiaCMP: INR409 Buy� Domestic powergen demand had declined 25% in 1QFY14; we expect

~33% decline in 2QFY14. This is on the back of a strong 27% demandgrowth in FY13. The demand decline is led by improved poweravailability, tight liquidity conditions, etc.

� Export revenues had declined 34% in 1QFY14, led by high base effect,particularly for the high horsepower (HHP) segment. In 2QFY14, weexpect export revenues to improve 11% YoY.

� Pig iron prices have been largely stable QoQ and are down ~16% YoY.Based on our channel checks, we understand that HHP engines havewitnessed price increases of 5-10% in the last two months, given thecurrency volatility. For KKC, we expect raw material costs to decline to62.1% in 2QFY14 from 62.4% in 1QFY14. However, EBITDA margin islikely to decline to 15.5% (down 130bp QoQ), led by poor operatingleverage.

Key issues to watch out� KKC's genset original equipment manufacturers (GOEMs) have tied

up with L&T Finance for financing purchases, which should lead tomarket share gains.

� HHP exports are showing signs of bottoming out and demand recoveryin US could be positive.

� Producer pricing arrangement has been revised, and now the currencyreset is every year v/s the earlier practice of reset post three years.


EBITDA 7.0 8.3 7.0 8.1

Adj PAT 5.5 6.6 6.0 6.9

EPS (INR) 19.8 23.8 21.7 24.7

EPS Gr. (%) (6.9) 20.1 (8.8) 13.8

BV/Sh. (INR) 73.5 87.3 93.8 101.6

RoE (%) 28.8 29.7 24.0 25.3

RoCE (%) 28.8 29.8 24.2 25.5

Payout (%) 64.2 58.9 70.0 68.6

Valuations

P/E (x) 20.6 17.1 18.8 16.5

P/BV (x) 5.6 4.7 4.4 4.0

EV/EBITDA (x) 16.3 14.8 14.8 12.8

Div Yield (%) 2.5 2.5 3.2 3.5

Bloomberg KKC IN


M. Cap. (INR b)/(USD b) 113 / 2


1,6,12 Rel Perf. (%) -4 / -23 / -23

C–21October 2013




Sales 10,328 9,642 10,584 11,696 10,513 10,250 11,600 12,983 42,250 45,346

Change (%) 25.4 13.4 17.8 11.7 1.8 6.3 9.6 11.0 16.9 7.3

Adj EBITDA 1,281 1,192 1,399 1,460 1,411 1,221 1,412 1,624 5,331 5,591

Change (%) 44.1 9.5 15.2 2.1 10.1 2.5 0.9 11.2 17.0 4.9

Adj EBITDA margin (%) 12.4 12.4 13.2 12.5 13.4 11.9 12.2 12.5 12.6 12.3

Depreciation 118 159 146 156 156 165 168 176 579 665

Interest 102 99 58 26 56 25 25 19 286 125

Other Income 28 20 15 34 32 40 45 83 96 200

PBT 1,004 1,054 1,173 1,342 1,154 1,071 1,264 1,513 4,571 5,002

Tax 204 185 227 243 207 225 265 253 858 950


Reported PAT 800 870 947 1,099 947 846 998 1,260 3,713 4,051

Change (%) 23.5 23.8 20.0 20.0 18.3 -2.7 5.5 14.7 21.3 9.1

Adj PAT 880 789 976 1,075 1,029 846 998 1,260 3,720 4,134

Change (%) 55.5 6.5 17.6 5.3 16.9 7.3 2.3 17.2 21.8 11.1

E: MOSL Estimates

Havells IndiaCMP: INR633 Buy� Sharp decline in standalone revenue growth to just 2% YoY in 1QFY14

was a negative surprise; Consumer business growth was just 7% YoY.In 2QFY14, we expect growth in Consumer business to remain subduedat 10-11%, as consumption demand has weakened further and theslowdown is more pronounced in the 'premium' category. Reportedrevenue should grow 6% YoY.

� We expect EBITDA margin to decline to 11.9% in 2QFY14, down 45bp,largely a result of volatile input costs, given the sharp currencymovements. While we understand that part of the cost increases havebeen passed on, margins could be impacted due to timing differences.

� For Sylvania, Europe is showing signs of stabilization, with revenuedecline of just 1% YoY in 1QFY14. Macro data points suggest some pick-up in construction spending. However, LatAm is impacted by sharpcurrency volatility, particularly in Brazil and Argentina.

Key issues to watch out� 'Price-volume' trade-off in domestic market, particularly given the

increased competitive intensity in specific segments.� Revenue growth in Fans business, which was largely flat in 1QFY14.

Revenues from Reo and financial targets post the launch of pumps.� Margins in LatAm, given the sharp currency volatility in few countries.


EBITDA 6.6 6.7 6.7 7.7

Adj PAT 4.3 4.3 4.4 4.9

Adj EPS (INR) 34.1 34.4 35.5 39.3

EPS Gr. (%) 64.6 1.0 3.1 10.7

BV/Share (INR) 76.6 99.2 139.3 166.9

RoE (%) 44.5 29.8 25.5 23.5

RoCE (%) 26.4 21.4 19.9 19.2

Payout (%) 25.5 28.3 30.7 29.8

Valuations

P/E (x) 18.6 18.4 17.8 16.1

P/BV (x) 8.3 6.4 4.5 3.8

EV/EBITDA (x) 8.9 11.9 12.2 10.1

Div Yield (%) 1.0 1.2 1.4 1.6

Consolidated

Bloomberg HAVL IN




1,6,12 Rel Perf. (%) -6 / -7 / -4

C–22October 2013


Larsen & ToubroCMP: INR817 Buy�� Larsen and Toubro (LT) has announced order intake of INR239b in

2QFY14, including INR82b from Riyadh Metro and INR20b from BathinahExpressway in Oman. Domestic orders were constrained at INR121bv/s an average of INR160b in the last two quarters. Given the tightliquidity conditions, volume of orders bagged is still commendable.

� Overseas projects are likely to contribute 25% of the intake in FY14.Large Infrastructure projects under bidding include: Doha MetroProject (Phase-2), Etihad Rail, Water Infrastructure, Highways /Interchanges, Power T&D, etc. LT is favorably positioned in few largetenders (also gleaned from media articles): Malwa EPC 1,320MW, NTPCTanda 1,320MW Boiler, Power T&D in Qatar, few road projects in ME,Fertilizer project in India, etc.

� We expect EBITDA margin to decline by 70bp in 2QFY14. However, asthe share of domestic revenue increases during the year, margins arelikely to improve in 2H.

Key issues to watch out� Revision in FY14 guidance: We believe that while order intake growth

guidance could be maintained at 20% (supported by overseasprojects), achieving revenue (+15%) and margin (flat) guidance wouldbe challenging.

� Net working capital continues to be under pressure due to tighteningliquidity and increased vendor support in a tough market.

� Asset monetization plans and attempt to correct the capital structure.


EBITDA 62.6 63.9 67.3 73.6

Adj PAT * 47.7 49.3 40.4 47.5

EPS (INR)* 52.0 53.4 43.8 51.5

EPS Gr. (%) 11.9 2.8 -18.0 17.5

BV/Sh (INR) 274.6 315.7 349.4 387.1

RoE (%) 18.0 16.2 14.6 14.4

RoCE (%) 14.3 14.4 12.5 12.5

Payout (%) 25.0 24.9 32.9 32.3

Valuations

P/E (x)* 18.5 18.3 18.7 15.9

P/BV (x) 3.5 3.1 2.3 2.1

EV/EBITDA (x) 14.3 14.4 11.9 11.0

Div Yield (%) 1.1 1.3 1.7 1.9

* Consolidated

Bloomberg LT IN


M. Cap. (INR b)/(USD b) 755 / 12

52-Week Range (INR) 1,146 / 678

1,6,12 Rel Perf. (%) 6 / -15 / -29



Net Sales 119,554 131,952 154,294 202,938 125,551 141,358 168,315 223,106 608,733 658,329

Change (%) 26.1 17.4 10.3 9.9 5.0 7.1 9.1 9.9 14.5 8.1

EBITDA 10,847 14,054 14,620 24,509 10,715 14,136 17,252 25,171 64,071 67,274

Change (%) -3.7 15.5 6.9 -1.5 -1.2 0.6 18.0 2.7 2.0 5.0

Margin (%) 9.1 10.7 9.5 12.1 8.5 10.0 10.3 11.3 10.5 10.2

Adjusted EBITDA 12,447 14,054 15,870 25,759 11,795 14,136 17,252 25,171 66,071 67,274

Change (%) 10.5 15.5 1.2 -4.2 -5.2 0.6 8.7 -2.3 1.9 1.8

Adjusted Margin (%) 10.4 10.7 10.3 12.1 9.4 10.0 10.3 11.3 11.0 10.4

Depreciation 1,919 2,040 2,004 2,222 2,103 2,150 2,250 2,286 8,185 8,789

Interest 2,284 2,350 2,380 2,810 2,453 2,750 3,000 3,297 9,824 11,500

Other Income 6,081 3,294 5,431 3,744 4,726 3,000 3,500 5,217 18,509 16,443

Extraordinary Inc/(Exp) -383 2,672 0 187 0 0 0 0 2,475 0

Reported PBT 12,341 15,630 15,668 23,408 10,885 12,236 15,502 24,804 67,046 63,428

Tax 3,705 4,257 4,450 5,528 3,325 3,548 4,496 5,726 17,940 17,125


Reported PAT 8,636 11,373 11,218 17,880 7,560 8,687 11,007 19,079 49,106 46,302

Adjusted PAT 10,025 9,151 10,393 17,758 8,316 8,687 11,007 19,079 47,327 47,058

Change (%) 34.4 14.6 -7.8 -1.5 -17.0 -5.1 5.9 7.4 5.6 -0.6

Order Intake 196 210 195 279 252 250 200 190 880 891

Order book (INR b) 1,531 1,585 1,623 1,536 1,654 1,761 1,791 1,756 1,536 1,756

BTB (x) 2.8 2.8 2.7 2.5 2.7 2.8 2.8 2.7 2.5 2.7

E: MOSL Estimates; MTM Forex loss in 3QFY12 of INR2b

C–23October 2013


Quarterly Performance (Standalone) (INR Million)Y/E September FY12 FY13 FY12 FY13E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Total Revenues 25,004 40,171 30,186 33,752 24,962 29,556 26,426 25,436 129,199 106,380

Change (%) -3.1 28.7 8.5 -4.6 -0.2 -26.4 -12.5 -24.6 7.4 -17.7

EBITDA 1,132 5,445 1,298 995 1,556 754 -62 206 8,913 2,455

As % of Revenues 4.5 13.6 4.3 2.9 6.2 2.6 -0.2 0.8 6.9 2.3

Adjusted EBITDA 1,132 3,336 1,298 995 1,841 1,654 1,292 206 8,913

As % of Revenues 4.5 8.3 4.3 2.9 7.4 5.6 4.9 0.8 6.9

Depreciation 445 487 519 559 588 610 626 382 2,010 2,206

Interest Income -30 -76 -122 -66 -87 -84 -39 -340 -269 -550

Other Income 235 120 126 69 125 26 180 575 400

Extra-ordinary Items 551 240 1,208 0 0 0 0 1,999 0

PBT 893 5,432 1,018 1,704 951 185 -701 -335 9,208 99

Tax 291 1,444 175 -154 314 -115 -213 -186 1,777 -200

Effective Tax Rate (%) 32.6 26.6 17.2 -9.1 33.0 -62.3 30.4 55.5 19.3 -202.6

Reported PAT 602 3,988 843 1,858 636 300 -488 -149 7,431 299

Adjusted PAT 602 3,361 530 409 636 300 -488 -149 5,032 299

Change (%) -74.7 22.5 -65.7 -77.0 5.8 -91.1 -192.1 -136.5 -40.5 -94.1

Order Intake (INR b) 28 18 27 29 20 28 26 36 102 111

Order book (INR b) 140 126 124 137 132 130 130 142 137 142

BTB (x) 1.2 1.0 1.0 1.1 1.0 1.1 1.2 1.4 1.1 1.3

E: MOSL Estimates; Adj EBITDA: Adjusted for change in project revenues and cost estimates

SiemensCMP: INR480 Neutral� We expect revenues to decline 25% YoY in 4QFY13, impacted by delays

in offtake by customers, sluggish industrial capex and depletion oforder book (BTB at just 1.1x) because of macro headwinds.

� Profit margins have been impacted by cost escalations. We expectmargins to remain under pressure due to pricing pressure and slowerexecution in the Power business. In 3QFY13, the company madeprovisions on projects (for cost/time overruns) of INR1,354m; we havenot factored in these provisions as exceptional, as they pertain tonormal business operations.

� Weak INR would have a negative impact on profit margins, as rawmaterial imports are ~40% of revenues.

Key issues to watch out� EBITDA margin would be a key factor to watch for. SIEM's earnings

have historically been volatile, impacted by multiple factors.� Order intake had surprised positively in 2QFY13, supported by few

large orders; sustainability of the same would be a key positive. SIEMhas bagged various orders from Delhi Metro Rail Corporation in4QFY13, which could be an important contributor.

� Segmental working capital appears to be under pressure and wouldbe closely watched due to tightening liquidity.

� Profit margins are likely to be adversely impacted by unfavorablecurrency movement (INR depreciation).

Financials & Valuation (INR b)Y/E September 2012 2013E 2014E 2015ENet Sales 129.2 106.4 107.8 125.3

EBITDA 8.9 2.5 5.8 12.6

Adj PAT 5.0 0.3 2.7 7.1

Adj EPS (INR) 14.8 0.8 7.6 20.2

EPS Gr (%) -40.5 -94.3 789.9 168.0

BV/Sh. (INR) 116.4 113.0 116.8 127.0

RoE (%) 12.9 0.8 6.6 16.6

RoCE (%) 14.3 5.4 7.6 18.4

Payout (%) 48.8 49.7 49.7 49.7

Valuations

P/E (x) 32.5 565.7 63.6 23.7

P/BV (x) 4.1 4.2 4.1 3.8

EV/EBITDA (x) 17.4 62.9 25.2 12.0

Div. Yield (%) 0.8 0.1 0.7 1.8

Bloomberg SIEM IN


M. Cap. (INR b)/(USD b) 169 / 3


1,6,12 Rel Perf. (%) -1 / -17 / -38

C–24October 2013




Sales 9,835 11,924 10,468 14,682 8,628 10,715 11,059 15,788 46,909 46,189

Change (%) -5.8 -8.5 -17.5 -13.0 -12.3 -10.1 5.6 7.5 -11.6 -1.5

EBITDA 964 1,218 1,119 1,672 814 1,066 1,048 1,813 5,071 4,742

Change (%) -15.1 -13.3 -18.0 -9.7 -15.5 -12.4 -6.3 8.4 -13.1 -6.5

As of % Sales 9.8 10.2 10.7 11.4 9.4 10.0 9.5 11.5 10.8 10.3

Depreciation 132 139 133 145 142 146 152 167 549 607

Interest 37 34 20 5 8 23 25 44 96 100

Other Income 187 274 124 244 81 150 200 245 730 677

PBT 981 1,318 1,090 1,767 745 1,048 1,072 1,847 5,156 4,711

Tax 309 407 326 614 243 322 329 567 1,657 1,446


Reported PAT 672 911 764 1,153 503 726 743 1,280 3,500 3,265

Adj PAT 672 911 764 1,153 503 726 743 1,280 3,500 3,265

Change (%) -15.9 -10.4 -20.1 -11.2 -25.2 -20.3 -2.8 11.0 -14.0 -6.7

Order Book 44,740 44,120 46,490 43,358 55,300 53,735 56,224 54,001 43,358 54,001

Order Intake 12,580 11,620 12,840 11,550 21,230 9,150 13,548 11,963 48,590 55,890

BTB (x) 0.9 0.9 0.9 1.2 1.2 1.2 1.2 1.2 0.9 1.2

E: MOSL Estimates

ThermaxCMP: INR590 Buy� The domestic ordering environment remains muted, particularly given

the tight liquidity conditions. In 1QFY14, excluding the Reliance order,domestic order intake was just INR5.2b and compares with an averageof INR9b-11b/quarter during April-December 2012.

� Execution is likely to remain constrained, particularly for the Energybusiness. In 2QFY14, we expect Energy business revenues to decline12% YoY and Environment business revenues by 4% YoY.

� Increasing exports is a priority across businesses. The Chairpersonstated in the recent issue of Fireside, "We have to continue to focuson the export market and try and make up for the shortfalls in domesticorder bookings".

� Consolidated PAT has been impacted by losses in subsidiaries (down21% in FY13). However, in 1QFY14, subsidiaries reported PAT of INR27m(after seven consecutive quarters of losses), largely driven byimproved performance in Danstoker and lower losses in Chinisesubsidiaries (expect PAT breakeven by the end of FY14).

Key issues to watch out� Order intake remains constrained, also for standard products. Exports

are an important focus area and increasing trend will be a positive.� Subsidiaries' profit had shown signs of improvement in 1QFY14.� EBITDA margins have been outperforming expectations despite

decline in sales, benefiting from softening commodity prices andcost efficiency measures. However, maintaining these at currentlevels would be challenging.


EBITDA 5.9 5.0 4.9 5.9

Adj PAT 4.0 3.2 3.1 3.7

EPS (INR) 33.9 27.0 26.2 31.3

EPS Gr. (%) 5.7 (20.2) (2.9) 19.5

BV/Sh. (INR) 139.9 160.0 175.8 191.9

RoE (%) 27.4 18.4 15.9 17.4

RoCE (%) 22.9 14.8 13.3 15.3

Payout (%) 20.7 25.9 34.3 41.5

Valuations

P/E (X) 15.1 20.2 22.5 18.8

P/BV (X) 3.7 3.4 3.4 3.1

EV/EBITDA (X) 9.2 12.3 13.0 10.7

Div Yield (%) 1.4 1.3 1.5 2.2

Bloomberg TMX IN




1,6,12 Rel Perf. (%) -4 / -1 / 0

C–25October 2013

September 2013 Results Preview | Sector: Cement



27.09.13 % YoY % QoQ % YoY % QoQ % YoY % QoQACC 1,101 Buy 24,719 1.7 -11.6 3,088 -26.7 -28.8 1,840 -26.0 -29.0Ambuja Cements 184 Neutral 19,904 -8.0 -15.1 3,239 -42.9 -34.2 2,099 -37.7 -35.3Birla Corporation 207 Buy 6,754 7.6 -12.5 579 -47.4 -13.3 365 -54.5 -20.7Grasim Industries 2,678 Buy 12,779 -4.2 11.2 2,445 -15.6 20.8 3,791 -1.0 67.6India Cements 51 Neutral 11,406 1.6 -7.9 1,866 -9.0 -2.3 149 -69.7 -11.5Jaiprakash Associates 37 Buy 33,377 11.9 0.7 8,112 5.2 3.4 804 -37.2 287.7Shree Cement 4,004 Buy 11,898 -10.1 -17.5 2,538 -35.4 -33.1 830 -63.7 -70.8Ultratech Cement 1,826 Buy 44,866 -4.5 -9.5 8,180 -18.6 -22.0 3,934 -28.5 -41.5Sector Aggregate 165,702 -0.7 -8.0 30,048 -20.2 -16.5 13,811 -31.1 -25.3

Jinesh K Gandhi ([email protected]) / Sandipan Pal ([email protected])

Demand continues to remain weak, utilization falls to lowest levelsCement demand growth is expected to remain sluggish in 2QFY14, impacted bycontinued weakness in housing and infrastructure vertical and seasonal impact ofmonsoon. We estimate growth of 1.3% YoY (-8% QoQ) in 2QFY14 and ~3% for FY14.Capacity utilization is expected to decline YoY (-3pp YoY/9% QoQ) at 66% - lowestlevels in last 13 years. Our interactions with dealers across regions highlight limitedvisibility in near term demand recovery, although they are hopeful of election impactto play out in favor of demand uptick in 2HFY14, resulting in 5% volume growth.

Prices have been volatile in 2QFY14; net decline of INR4/bag QoQWeak demand resulted in weaker pricing by ~INR4/bag QoQ (-INR18/bag YoY). Priceshave been volatile over quarters, with upticks in July and slides in August, followedby a sharp rise in second half of September. This includes specific trends of (a) INR14/bag QoQ decline in north, (b) INR9/bag decline in east, (c) INR3/bag decline in westand (d) INR2-4/bag increase in central and south. We factor for YoY stability and INR10/bag YoY increase in realizations in FY14 and FY15 respectively.

Weaker demand and price to exert pressure on profitabilityProfitability is expected to be under pressure in 2QFY14, as lower realizations andnegative operating leverage will be a drag. We estimate EBITDA at ~INR686 (-INR6/bagQoQ, -INR15/bag YoY for pure cement players). We expect cost pressures from higherdiesel prices and negative operating leverage, impact of which would be diluted bysoft energy prices. On the back of moderation in cost push and potential demandrecovery in 2HFY14, we estimate EBITDA/ton at INR884/998 for FY14/FY15 respectively,based on ~INR7.5/INR10 per bag QoQ price increases.

Valuation and viewWe revise the realizations improvement assumption for FY14/15 at INR0/10 per bagYoY (v/s earlier estimate of -INR3/15 per bag) to factor (1) relatively lower-than-expected price decline in 2QFY14 (hence, upgrade in FY14 realizations) and (2) weakerdemand revival visibility (thus, downgrade FY15 realizations). This downgrades ourFY15 EPS estimates by 12-14% for ACC/ACEM/UTCEM/SRCM and ~3.5% for Grasim.

CementCompanies Covered

ACC

Ambuja Cements

Birla Corporation

Grasim Industries

India Cements

Jaiprakash Associates

Shree Cement

UltraTech Cement

C–26October 2013


Demand growth flattish YoY in a seasonally strong quarter …utilization to decline YoY due to unusually weak demand

Source: Company/MOSL

Source: CMA/MOSL

MOSL cement universe volumes to grow 1.3% YoY (-8% QoQ) Trend in average quarterly cement price (INR/bag)

Source: CMA/MOSL

Realization to moderate sequentially as suggested by Weaker realizations coupled with negative operating leverageprice trend to dent profitability

While demand recovery is expected to be gradual, slowing capacity addition coupledwith higher capex and opex cost would support cement prices and profitability, goingforward. Recovery in demand would be critical for operations and stock's performance.In large caps, we prefer ACC and Shree Cement, while in mid caps we prefer BirlaCorp, Madras Cement and Dalmia Bharat.

60%

70%

80%

90%

100%

2QFY

09

4QFY

09

2QFY

10

4QFY

10

2QFY

11

4QFY

11

2QFY

12

4QFY

12

2QFY

13

4QFY

13

2QFY

14E

50 46 49 55 53 48 51 58 51 56 64 59 57 67 61 5554 54

2.64.9

3.3 2.7

12.210.8

9.4 9.36.9

4.03.2

6.0

0.9

6.1

10.2 9.0 9.8

5.6

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

14E

Despatches (MT) Growth (%)

272

331

295

303

270 29

5262

320

282 30

0

264

261

322

283 29

3

265

286

259

316

275 28

9

262

281

245

307

272

294

264

287

277

North Eas t West South Centra l NationalAverage


3,77

13,

747

3,40

1

3,44

9

3,65

4

3,27

9

3,49

0

3,89

9

4,04

93,

853

4,14

6

4,22

1

4,47

1

4,50

5

4,32

8

4,31

6

4,30

9

4,27

4

1QFY

10

2QFY

10

3QFY

10

4QFY

10

1QFY

11

2QFY

11

3QFY

11

4QFY

11

1QFY

122Q

FY12

3QFY

12

4QFY

12

1QFY

13

2QFY

13

3QFY

13

4QFY

13

1QFY

14

2QFY

14E

Rea l i zation (INR/ton)

1,31

01,

216

828

878

925

593 92

7

1,03

1

614 85

5

1,00

4

1,15

7

988

797

835

804

686

394

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

14E

EBITDA (INR/ton)

7.9

8.3

8.5

6.4

3.6 4.3

4.0

9.4 10

.4 13.8

8.3

2.7

2.0

-2.2 0.

7 1.315

.813

.412

.411

.4

-3

2

7

12

17

3QFY

094Q

FY09

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

0

10

20

30

40

50

Volumes (MT) - RHS Volume growth (%)

C–27October 2013


Trend in key operating parametersVolume (m tons) Realization (INR/ton) EBITDA (INR/ton)

2QFY14 YoY (%) QoQ (%) 2QFY14 YoY (BP) QoQ (BP) 2QFY14 YoY (%) QoQ (%)

ACC 24,719 1.7 -11.6 12.5 -480 -300 1,840 -26.0 -29.0Ambuja Cement 19,904 -8.0 -15.1 16.3 -990 -470 2,099 -37.7 -35.3UltraTech 44,866 -4.5 -9.5 18.2 -320 -290 3,934 -28.5 -41.5Birla Corp 6,754 7.6 -12.5 8.6 -900 -10 365 -54.5 -20.7India Cement 11,406 1.6 -7.9 16.4 -190 90 149 -69.7 -11.5Shree Cement 11,898 -10.1 -17.5 21.3 -840 -500 830 -63.7 -70.8Dalmia Bharat 7,357 9.7 4.2 16.1 -970 190 256 -63.2 -27.4J K Cements 6,903 -3.1 5.0 13.7 -450 -20 233 -56.9 -24.4JK Lakshmi Cem. 4,194 -14.4 -8.2 10.2 -1,260 -520 -14 -102.8 -109.1Madras Cement 9,669 -3.3 0.7 14.8 200 190 757 -43.1 9.9Orient Paper 3,418 -3.7 -8.2 11.6 -850 -750 167 -54.4 -55.3Prism Cement 11,272 6.1 -0.3 2.8 -30 -30 -342 7.1 -28.4Sector Agg. 162,360 -2.5 -9.0 14.9 -520 -250 10,272 -43.1 -41.1

Recent correction makes valuations attractive (FY12)

Trend in key financial parametersNet Sales (INR m) EBITDA Margins (%) Net Profit (INR m)

2QFY14 YoY (%) QoQ (%) 2QFY14 YoY (Rs) QoQ (Rs) 2QFY14 YoY (INR) QoQ (INR)

ACC 5.5 1.5 -10.4 4,218 -284 -80 556 -224 -145Ambuja Cement 4.8 0.0 -12.3 4,157 -364 -140 677 -508 -225UltraTech 9.1 -2.5 -10.2 4,879 -110 32 889 -178 -136Birla Corp 1.7 7.0 -10.3 4,010 24 -100 495 -303 -120India Cement 2.6 3.7 -1.6 4,258 -97 70 716 -100 -5Shree Cement 3.1 2.0 -2.1 3,438 -464 -140 724 -461 -209Dalmia Bharat 1.6 10.0 1.5 4,309 -103 50 731 -444 105J K Cements 1.5 -2.2 4.0 4,621 -45 43 633 -215 -3JK Lakshmi Cem. 1.2 -3.0 -4.1 3,585 -479 -160 366 -559 -210Madras Cement 2.1 3.0 -5.1 4,365 -270 60 840 -443 125Orient Paper 1.0 1.0 -7.4 3,454 -169 -30 402 -328 -266Prism Cement 1.1 20.0 -17.7 3,659 -318 100 124 -52 -60Sector Agg. 35.2 1.3 -8.0 4,274 -232 -35 686 -302 -118


Revised EPS estimates (INR)FY14E/CY13E FY15E/CY14E

Rev Old Chg (%) Rev Old Chg (%)

ACC 55.7 53.8 3.5 65.5 76.0 -13.7

Ambuja Cement 8.0 8.3 -2.7 9.3 10.8 -14.2

Grasim 322.7 313.6 2.9 379.7 367.1 3.4

UltraTech 96.1 99.9 -3.8 110.9 126.5 -12.3

Birla Corp 34.7 35.3 -1.8 44.8 50.2 -10.7

India Cement 3.2 4.1 -22.5 6.6 9.0 -26.3

Shree Cement 277.0 280.7 -1.3 321.1 365.3 -12.1

Ambuja

Gras im

UltraTech

Birla Corp

India CementShreeACC

0

50

100

150

200

0% 6% 12% 18% 24% 30% 36% 42% 48%

RoCE (%)

EV (

USD

/Ton

) Replacement Cost a t USD140/ton

C–28October 2013



27.09.13 FY13 FY14E FY15E FY13 FY14E FY15E FY13 FY14E FY15E FY13 FY14E FY15ECementACC 1,101 Buy 68.7 55.7 65.5 16.0 19.8 16.8 8.9 10.7 9.1 17.7 13.1 14.0Ambuja Cements 184 Neutral 10.0 8.0 9.3 18.4 22.9 19.8 10.0 13.4 11.7 18.3 13.6 14.7Birla Corporation 207 Buy 35.0 34.7 44.8 5.9 6.0 4.6 3.4 3.2 1.9 11.0 10.1 11.9Grasim Industries 2,678 Buy 278.7 322.7 379.7 9.6 8.3 7.1 4.2 3.7 2.8 13.0 13.3 13.6India Cements 51 Neutral 5.8 3.2 6.6 8.7 15.9 7.7 5.4 5.7 4.8 4.3 2.4 4.7J P Associates 37 Buy 2.3 2.7 4.4 16.2 13.7 8.4 15.6 7.4 6.6 3.9 4.3 6.7Shree Cement 4,004 Buy 314.9 277.0 321.1 12.7 14.5 12.5 8.1 8.1 7.1 30.6 17.4 17.4Ultratech Cement 1,826 Buy 96.8 96.1 110.9 18.9 19.0 16.5 11.1 11.2 9.4 18.9 16.1 16.1Century Textiles 250 Neutral -3.7 -12.5 -5.7 -67.3 -20.0 -43.5 14.7 17.3 11.3 -1.9 -6.7 -3.4Dalmia Bharat 126 Buy 24.3 20.2 24.5 5.2 6.2 5.2 5.8 6.5 4.8 6.6 5.2 6.1J K Cements 188 Buy 33.0 26.7 43.9 5.7 7.0 4.3 3.9 6.1 4.2 14.4 10.7 15.6JK Lakshmi Cem. 71 Buy 16.0 9.1 11.3 4.4 7.8 6.3 4.2 7.0 5.8 15.4 8.2 9.6Madras Cement 180 Buy 17.0 14.8 21.8 10.6 12.1 8.2 7.1 7.2 5.0 18.3 14.1 18.2Prism Cement 28 Neutral -1.2 -1.8 2.9 -23.4 -16.1 9.6 12.8 14.7 5.4 -5.4 -8.6 14.5Sector Aggregate 14.5 15.6 12.4 8.8 8.0 6.4 12.9 10.9 12.4

Relative Performance - 3m (%) Relative Performance-1Yr (%)

60

75

90

105

120


Sensex IndexMOSL Cement Index

70

80

90

100

110


Sensex IndexMOSL Cement Index

C–29October 2013


Quarterly Performance (Standalone) (INR Million)Y/E December CY12 CY13 CY12 CY13E

1Q 2Q 3Q 4Q* 1Q 2Q 3QE 4QE

Cement Sales (m ton) 6.72 6.05 5.40 5.94 6.42 6.12 5.48 6.09 24.11 24.11

YoY Change (%) 9.1 2.0 -5.1 -0.2 -4.5 1.2 1.5 2.5 1.6 0.0

Cement Realization 4,231 4,558 4,502 4,166 4,269 4,298 4,218 4,371 4,358 4,291

YoY Change (%) 8.7 12.5 19.1 -0.8 0.9 -5.7 -6.3 4.9 9.7 -1.5

QoQ Change (%) 0.7 7.7 -1.2 -7.5 2.5 0.7 -1.9 3.6

Net Sales 28,430 27,576 24,310 30,989 29,111 27,952 24,719 28,620 111,305 110,402

YoY Change (%) 18.5 14.8 13.1 24.0 2.4 1.4 1.7 -7.6 18.0 -0.8

EBITDA 5,988 6,306 4,215 3,172 4,468 4,335 3,088 3,924 19,681 15,814

Margins (%) 21.1 22.9 17.3 10.2 15.3 15.5 12.5 13.7 17.7 14.3

Depreciation 1,305 1,356 1,352 1,575 1,383 1,387 1,415 1,483 5,589 5,668

Interest 316 301 257 273 108 179 150 113 1,147 550

Other Income 1,121 1,360 975 1,468 1,205 908 1,050 1,687 4,923 4,850

PBT before EO Item 5,487 6,009 3,581 2,792 4,182 3,677 2,573 4,014 17,869 14,446

PBT after EO Item 2,134 6,009 3,581 2,792 5,861 3,677 2,573 4,014 14,515 16,124

Tax 580 1,829 1,094 400 1,484 1,086 733 1,131 3,903 4,434

Rate (%) 27.2 30.4 30.6 14.3 25.3 29.5 28.5 28.2 26.9 27.5

Reported PAT 1,554 4,179 2,487 2,392 4,377 2,591 1,840 2,883 10,612 11,690

Adjusted PAT 3,859 4,179 2,487 2,392 3,124 2,591 1,840 2,883 12,918 10,473

Margins (%) 13.6 15.2 10.2 7.7 10.7 9.3 7.4 10.1 11.6 9.5

YoY Change (%) 10.1 24.2 48.4 -15.2 -19.1 -38.0 -26.0 20.5 11.9 -18.9

E: MOSL Estimates; * Merger of RMC business from 4QCY12

ACCCMP: INR1,101 Buy� Dispatches in 3QCY14 are estimated to grow 1.5% YoY (-10% QoQ) to

5.48mt. Average realizations are expected to decline by 2% QoQ(-6.3% YoY) to INR4,218/ton.

� Revenue is expected to de-grow by 12% QoQ (1.7% YoY) to INR24.7b.� EBITDA margin is expected to compress by 4.8pp YoY (-3pp QoQ) to

12.5% due to (a) lower realizations growth, (b) negative operatingleverage and (c) consolidation of loss-making RMC business in 4QCY14.EBITDA/ton is estimated to decline by ~INR224/ton YoY (-INR145/tonYoY) to INR556/ton.

� PAT would decline 26% YoY (-29% QoQ) to INR1.84b.� We upgrade the EPS estimates by 6.1%/3% for CY13E/CY14E to INR57.1

and INR78.2 respectively to factor better realizations.� The stock trades at 14.2x CY14E EPS, 6.7x EV/EBITDA and USD77/ton.

Upgrade to Buy from Neutral.

Key issues to watch out� Volume growth recovery and outlook.� Cement pricing outlook and sustainability, considering recent

volatility (prices were down in July-August followed by sharp uptickin September-end).

� Progress in ongoing capex for Jamul expansion of 5mt.

Financials & Valuation (INR b)Y/E December 2012 2013E 2014E 2015ESa les 111.3 110.4 123.0 140.7

EBITDA 19.7 15.8 18.7 23.6

NP 12.9 10.5 12.3 15.8

Adj. EPS (INR) 68.7 55.8 65.5 83.8

EPS Gr. (%) 14.1 -18.8 17.4 28.0

BV/Sh (INR) 393 455 480 517

RoE (%) 17.7 13.1 14.0 16.8

RoCE (%) 17.4 11.8 13.4 16.8

Payout (%) 61.8 61.1 62.1 55.4

Valuations

P/E (x) 16.0 19.8 16.8 13.1

P/BV (x) 2.8 2.4 2.3 2.1

EV/EBITDA (x) 8.8 10.2 8.0 7.0

EV/Ton (x) 90 84 79 78

Bloomberg ACC IN


M. Cap. (INR b)/(USD b) 207 / 3

52-Week Range (INR) 1,515 / 912

1,6,12 Rel Perf. (%) 7 / -10 / -30

C–30October 2013




Sales Volume (m ton)* 6.18 5.63 4.79 5.39 5.96 5.46 4.79 5.56 21.99 21.77

YoY Change (%) 9.6 6.5 -0.4 -5.6 -3.6 -3.1 0.0 3.3 2.5 -1.0

Realization (INR/ton) 4,257 4,556 4,521 4,293 4,271 4,297 4,157 4,312 4,400 4,263

YoY Change (%) 8.5 10.7 20.3 5.2 0.3 -5.7 -8.0 0.4 11.0 -3.1

QoQ Change (%) 4.4 7.0 -0.8 -5.0 -0.5 0.6 -3.3 3.7

Net Sales 26,315 25,660 21,645 23,133 25,448 23,457 19,904 23,990 96,749 92,800

YoY Change (%) 18.9 17.9 19.8 -0.7 -3.3 -8.6 -8.0 3.7 13.8 49.2

EBITDA 7,470 7,223 5,673 4,282 5,118 4,920 3,239 5,030 24,675 18,307

Margins (%) 28.4 28.2 26.2 18.5 20.1 21.0 16.3 21.0 25.5 19.7

Depreciation 1,209 1,215 1,373 1,576 1,204 1,223 1,300 1,340 5,373 5,068

Interest 168 180 166 243 132 171 135 144 757 582

Other Income 1,122 908 939 1,100 1,339 1,051 1,150 1,260 4,042 4,800


Extraordinary Inc/(Exp) -2,791 0 -499 -279 1,741 0 0 0 -3,570 1,741

PBT after EO Exp/(Inc) 4,424 6,736 4,575 3,284 6,862 4,578 2,954 4,805 19,018 19,199

Tax 1,301 2,047 1,535 1,164 1,983 1,336 855 1,385 6,048 5,559

Rate (%) 29.4 30.4 33.6 35.5 28.9 29.2 29.0 28.8 31.8 29.0

Reported Profit 3,122 4,689 3,040 2,120 4,879 3,242 2,099 3,420 12,971 13,640

Adj PAT 5,075 4,689 3,371 2,300 3,641 3,242 2,099 3,420 15,435 12,403

YoY Change (%) 24.5 34.9 96.6 -28.8 -28.3 -30.9 -37.7 48.7 23.0 -19.6

E: MOSL Estimates

Ambuja CementsCMP: INR184 Buy� Dispatches in 3QCY13 are estimated to grow 0% YoY (-12% QoQ) to

4.79mt. Average realizations are expected to decline by 3.3% QoQ (-8% YoY) to INR4,157/ton.

� EBITDA margin is expected to decline by 9.9pp YoY (-4.7pp QoQ) to16.3%, impacted by lower realizations and negative operating leverage.EBITDA/ton is estimated at ~INR677/ton (-INR225/ton QoQ, and -INR508/ton YoY).

� PAT estimated to decline 38% YoY (-35% QoQ) to INR2.1b.

� The stock trades at 17.5x CY14E EPS, 10x EV/EBITDA and USD130/ton.Maintain Buy with a target price of INR174 (9x CY14E EV/EBITDA).


volatility (prices were down in July-August, followed by a sharp uptickin September-end).

� Progress in ongoing mining land acquisition and capex in Nagaur(Rajasthan) plant of 4.5mt.


EBITDA 24.7 18.3 20.9 25.3

NP 15.4 12.4 14.4 17.7

Adj. EPS (INR) 10.0 8.0 9.3 11.5

EPS Gr. (%) 22.4 -19.6 15.7 23.6

BV/Sh. (INR) 56.9 61.1 65.2 70.9

RoE (%) 18.3 13.6 14.7 16.9

RoCE (%) 27.6 19.7 21.2 24.2

Payout (%) 49.8 52.6 56.3 50.6

Valuations

P/E (x) 18.4 22.9 19.8 16.0

P/BV (x) 3.2 3.0 2.8 2.6

EV/EBITDA (x) 9.7 13.2 11.4 9.0

EV/Ton (USD) 138 135 129 123

Bloomberg ACEM IN


M. Cap. (INR b)/(USD b) 284 / 5


1,6,12 Rel Perf. (%) 6 / 2 / -15

C–31October 2013




Cement Sales (m ton) 1.61 1.57 1.57 1.59 1.88 1.68 1.64 1.65 6.47 6.86

YoY Change (%) 5.6 11.4 12.9 -2.6 17.0 7.0 5.0 3.7 8.5 6.0

Cement Realization 4,079 3,946 3,750 3,847 3,845 3,725 3,875 4,087 3,827 3,881

YoY Change (%) 19.5 25.6 7.1 6.5 -5.7 -5.6 3.3 6.2 12.0 1.4

QoQ Change (%) 12.9 -3.2 -5.0 2.6 0.0 -3.1 4.0 5.5

Net Sales 6,580 6,274 6,126 6,658 7,720 6,754 6,902 7,236 25,638 28,611

YoY Change (%) 18.1 24.2 14.7 2.4 17.3 7.6 12.7 8.7 14.1 11.6

EBITDA 1,258 1,102 514 663 668 579 924 1,303 3,536 3,474

Margins (%) 19.1 17.6 8.4 10.0 8.7 8.6 13.4 18.0 13.8 12.1

Depreciation 235 252 285 272 302 300 300 303 1,044 1,205

Interest 237 141 171 99 207 200 200 206 649 813

Other Income 346 347 270 701 367 350 400 570 1,663 1,688

Profit before Tax 1,132 1,056 328 992 525 429 824 1,365 3,507 3,144

Tax 284 254 6 265 66 64 124 218 809 472

Rate (%) 25.1 24.0 1.7 26.8 12.5 15.0 15.0 16.0 23.1 15.0

PAT 847 802 322 726 460 365 700 1,147 2,698 2,672

Margins (%) 12.9 12.8 5.3 10.9 6.0 5.4 10.1 15.9 10.5 9.3

YoY Change (%) -24.3 206.8 -26.3 26.4 -45.7 -54.5 117.4 58.0 12.8 -1.0

E: MOSL Estimates

Birla CorporationCMP: INR207 Buy� 2QFY14 volumes are estimated to grow 7% YoY (-10.3% QoQ) to 1.68mt,

on a low base of last year, when the mining ban was imposed. Averagerealizations are expected to decline by 3.1% QoQ (-5.6% QoQ) toINR3,725/ton.

� EBITDA margin is expected to decline by 9pp YoY (stable QoQ) to 8.6%,impacted by lower realizations and YoY higher cost. EBITDA/ton isestimated to decline by ~INR12/ton QoQ (-INR356/ton QoQ) to INR344/ton.

� PAT is estimated to decline 55% YoY (-21% QoQ) to INR365m.� We upgrade FY14E/15E EPS estimates by 2.2%/6.3% to factor lower

volume but better realizations.� The stock trades at 3.9x FY15E EPS, 1.3x EV/EBITDA and USD13/ton.

Maintain Buy with a target price of INR400 (4x FY15E EV/EBITDA).


volatility (prices were down in July-August, followed by a sharp uptickin September-end).

� Status of mining ban at Rajasthan plant and any contingency plans.


EBITDA 3.1 3.5 3.5 4.8

NP 2.4 2.7 2.7 3.5

Adj. EPS (INR) 31.1 35.0 34.7 44.8

EPS Gr. (%) -25.2 12.8 -1.0 29.2

BV/Sh. (INR) 291.3 318.2 343.5 377.8

RoE (%) 10.7 11.0 10.1 11.9

RoCE (%) 11.3 10.8 9.9 12.7

Payout (%) 22.6 24.9 27.0 23.3

Valuations

P/E (x) 6.6 5.9 6.0 4.6

P/BV (x) 0.7 0.6 0.6 0.5

EV/EBITDA (x) 2.3 2.8 2.9 1.7

EV/Ton (x) 15 17 17 14

Bloomberg BCORP IN




1,6,12 Rel Perf. (%) -9 / -20 / -19

C–32October 2013




VSF Volume (ton) 77,013 85,312 78,579 95,161 77,518 88,899 85,343 103,835 336,065 355,594

YoY Change (%) 40.4 8.0 0.5 0.3 0.7 4.2 8.6 9.1 9.5 5.8

VSF Realization (INR/ton) 128,024 126,656 121,668 119,150 116,501 118,501 118,501 118,852 123,678 118,378

YoY Change (%) -16.0 1.6 -5.3 -1.8 -9.0 -6.4 -2.6 -0.2 -4.5 -4.3

QoQ Change (%) 5.5 -1.1 -3.9 -2.1 -2.2 1.7 0.0 0.3

Net Sales 12,390 13,345 12,157 13,765 11,489 12,779 12,494 14,354 51,814 51,116

YoY Change (%) 21.0 9.6 -2.2 -1.1 -7.3 -4.2 2.8 4.3 6.3 -1.3

EBITDA 2,953 2,898 2,154 2,141 2,024 2,445 2,350 2,748 10,145 9,567

Margins (%) 23.8 21.7 17.7 15.6 17.6 19.1 18.8 19.1 19.6 18.7

Depreciation 360 386 395 451 484 500 650 658 1,592 2,292

Interest 61 78 107 145 78 125 175 205 391 583

Other Income 844 2,106 951 1,181 959 2,300 1,050 1,191 5,082 5,500

PBT before EO Items 3,376 4,540 2,603 2,726 2,420 4,120 2,575 3,077 13,245 12,192

Extraordinary Inc/(Exp) 0 0 0 2,044 0 0 0 0 2,044 0

PBT after EO Items 3,376 4,540 2,603 4,770 2,420 4,120 2,575 3,077 15,289 12,192

Tax 647 712 623 1,046 159 330 206 281 3,029 975

Rate (%) 19.2 15.7 24.0 21.9 6.6 8.0 8.0 9.1 19.8 8.0

Reported PAT 2,729 3,827 1,980 3,724 2,261 3,791 2,369 2,796 12,260 11,217

Adj. PAT 2,729 3,827 1,980 2,128 2,261 3,791 2,369 2,796 10,621 11,217

YoY Change (%) -13.1 11.0 -27.9 -12.6 -17.2 -1.0 19.7 31.4 -9.8 5.6

E: MOSL Estimates

Grasim IndustriesCMP: INR2,678 Buy� VSF volumes are estimated to grow 4.2% YoY (14.6% QoQ) to 88,899

tons, impacted by uncertain global economic outlook. VSF realizationsare estimated to improve by ~INR2/kg QoQ, down INR8/kg YoY, toINR118.5/kg.

� This is due to the price increase taken in VSF segment in August 2013,as import parity price has gone up in line with INR depreciation. Weassume price/kg of INR118/120 for FY14E/15E.

� Standalone EBITDA margin is estimated to improve by 150bp QoQ (-2.6pp YoY) to 19.1% YoY.

� EBITDA is estimated to de-grow by 15.6% YoY (+20.8% QoQ) toINR2.44b, translating into PAT of INR3.8b - de-growth of 1% YoY (+68%QoQ).

� The stock trades at 7.2x FY15E consolidated EPS, 4.6x FY15E EV/EBITDAand USD78/ton. Maintain Buy with a target price of INR3,557 (FY15ESOTP-based).

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 53.2 56.6 59.0 75.4

Adj. PAT 35.3 35.6 39.7 47.5

Adj. EPS (INR) 288.6 278.7 322.7 379.7

EPS Gr. (%) 16.2 -3.4 15.8 17.7

BV/Sh. (INR) 1,861 2,142 2,435 2,783

RoE (%) 15.5 13.0 13.3 13.6

RoCE (%) 21.4 18.1 18.0 20.9

Payout (%) 9.0 9.4 9.1 8.4

Valuations

P/E (x) 9.3 9.6 8.3 7.1

P/BV (x) 1.4 1.3 1.1 1.0

EV/EBITDA (x) 5.7 6.2 5.4 4.1

EV/Ton (USD) 90 102 78 67

Bloomberg GRASIM IN


M. Cap. (INR b)/(USD b) 246 / 4

52-Week Range (INR) 3,511 / 2,121

1,6,12 Rel Perf. (%) 9 / -9 / -24

C–33October 2013




Sales Dispatches (m ton) 2.38 2.51 2.42 2.78 2.65 2.61 2.42 2.77 10.06 10.44

YoY Change (%) 2.9 3.5 10.8 6.7 11.3 3.7 -0.2 -0.1 5.6 3.9

Realization (INR/ton) 4,464 4,355 4,364 4,221 4,188 4,258 4,408 4,609 4,360 4,368

YoY Change (%) 7.6 3.1 2.9 -0.6 -6.2 -2.2 1.0 9.2 3.4 0.2

QoQ Change (%) 5.1 -2.4 0.2 -3.3 -0.8 1.7 3.5 4.6

Net Sales 12,014 11,227 10,824 11,906 12,384 11,406 10,955 12,947 45,970 47,691

YoY Change (%) 13.7 3.1 15.0 6.7 3.1 1.6 1.2 8.7 9.4 3.7

Total Expenditure 9,237 9,176 8,897 10,228 10,473 9,540 9,063 10,516 37,537 39,592

EBITDA 2,777 2,051 1,927 1,679 1,910 1,866 1,892 2,432 8,433 8,099

Margins (%) 23.1 18.3 17.8 14.1 15.4 16.4 17.3 18.8 18.3 17.0

Depreciation 692 699 708 720 680 730 750 780 2,818 2,940

Interest 949 667 822 638 999 950 950 947 3,078 3,846

Other Income 37 32 34 84 25 40 40 95 186 200

PBT before EO expense 1,173 717 431 404 257 226 232 799 2,724 1,514

PBT 973 717 431 404 257 226 232 799 2,524 1,514

Tax 353 226 169 141 89 77 79 271 888 516

Rate (%) 36.2 31.5 39.3 34.8 34.6 34.1 34.1 33.9 35.2 34.1

Reported PAT 621 491 261 263 168 149 153 528 1,636 998

Adj PAT 748 491 261 263 168 149 153 528 1,765 998

YoY Change (%) -26.7 -29.6 -53.6 -59.4 -77.5 -69.7 -41.5 100.6 -40.5 -43.4

Margins (%) 6.2 4.4 2.4 2.2 1.4 1.3 1.4 4.1 3.8 2.1

E: MOSL Estimates

India CementsCMP: INR51 Neutral� India Cements' volumes are expected to grow by 3.7% YoY (-2% QoQ)

to 2.61mt. Better pricing environment (strong uptick in Andhra Pradesh)to result in 1.7% QoQ (-2.2% YoY) growth in realizations to INR4,258/ton. We estimate revenue of ~INR70m from IPL (v/s INR52m in 2QFY13).

� EBITDA is estimated at INR1.9b (-9% YoY and -2% QoQ) and EBITDAmargin to improve by 1pp QoQ (-1.9pp YoY) to 16.4%, translating intoPAT de-growth of 70% YoY (-11% QoQ) to INR149m.

� Pure Cement's EBITDA/ton is estimated to increase by ~INR122/tonQoQ (-INR77/ton YoY) to INR694/ton.

� We downgrade FY14E EPS estimates by 4.5% and upgrade FY15E by8.4% to INR3.9/INR9.7, led by lower volume but better realizationsgrowth.

� Valuations stand at 4.6x FY15E EPS, 3.6x FY15E EBITDA and USD43/ton.Maintain Neutral with a target price of INR44 (3.5x FY15E EV/EBITDA).

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.� Roadmap for stake increase in Trinetra (Rajasthan plant).


EBITDA 9.0 8.4 8.1 9.0

NP 3.0 1.8 1.0 1.9

Adj. EPS (INR) 8.5 5.8 3.2 6.6

EPS Gr. (%) 266.2 -31.3 -45.3 107.7

BV/Sh (INR) 132.1 133.1 134.0 137.5

RoE (%) 7.3 4.3 2.4 4.7

RoCE (%) 10.1 8.4 7.4 8.4

Payout (%) 24.5 43.6 72.0 45.8

Valuations

P/E (x) 6.0 8.7 15.9 7.7

P/BV (x) 0.4 0.4 0.4 0.4

EV/EBITDA (x) 4.5 4.8 5.4 4.5

EV/Ton (USD) 45 49 49 46

Bloomberg ICEM IN




1,6,12 Rel Perf. (%) -3 / -44 / -54

C–34October 2013


Nalin Bhatt ([email protected])/Aditya Bahety ([email protected])



Sales 29,636 29,825 33,984 38,642 33,149 33,377 39,419 43,963 132,087 149,907

Change (%) -6.9 -4.8 2.8 -4.9 11.9 11.9 16.0 13.8 13.5

EBITDA 7,713 7,711 7,625 8,507 7,847 8,112 9,655 11,996 31,755 37,610

Change (%) -0.2 3.1 -6.5 -16.6 1.7 5.2 26.6 41.0 18.4

As of % Sales 26.0 25.9 22.4 22.0 23.7 24.3 24.5 27.3 24.0 25.1

Depreciation 1,763 1,778 1,813 1,908 1,943 1,950 1,950 2,006 7,261 7,848

Interest 4,653 4,544 5,327 5,490 5,900 5,900 5,900 5,972 20,114 23,672

Other Income 731 448 1,176 679 371 950 1,075 1,202 3,034 3,598

Extra-ordinary income 9 33 8 43 93 3,952

PBT 2,037 1,870 1,670 1,831 4,327 1,212 2,880 5,220 7,507 13,639

Tax 649 590 561 596 982 408 970 2,232 2,495 4,592


Reported PAT 1,388 1,280 1,109 1,235 3,345 804 1,911 2,988 5,013 9,047

Adj PAT 1,379 1,280 1,101 1,192 207 804 1,911 2,988 4,920 5,910

Change (%) 28.7 -0.5 -45.9 -57.3 -85.0 -37.2 73.5 150.6 20.1

Cement Business

Volumes (m ton) 3.59 3.25 3.71 3.95 3.61 3.35 4.15 4.39 14.50 15.50

Revenues (INR m) 15,629 13,719 14,747 16,363 15,393 14,117 18,319 20,695 60,459 68,524

Realization (INR/t) 4,354 4,221 3,971 4,147 4,264 4,214 4,414 4,714 4,170 4,421

E: MOSL Estimates, *Change (% YoY) is not comparable due to Jaypee Cement de-merger

Jaiprakash AssociatesCMP: INR37 Buy� In 2QFY14E, we expect JPA to post revenue of INR33.4b, EBITDA of

INR8.1b and net profit of INR804m.� In cement business, we have assumed a realization of INR4,214/ton

v/s INR4,264/ton sequentially. We have estimated volumes of 3.35mt,up 3% YoY.

� EPC division's revenue is expected at INR13.5b (up 5% YoY) and EBITmargin of 25% v/s 34.2% YoY.

� JPA recently sold its 4.8mt of Gujarat-based capacity to Ultratech forINR38b. Consideration involves takeover of INR36.5b of debt in JaypeeCement (100% subsidiary of JPA) and INR1.5b equity issuance.

� As per media report, JPA is also considering to sell its Himachal-basedcement capacity and hydro assets in Jaiprakash Power.

� We expect JPA to post standalone net profit of INR5.9b in FY14E (up20% YoY) and INR9.7b in FY15E (up 63.4% YoY). The stock trades at areported PER of 8.4x FY15E.

Key issues to watch out� Cement realizations and cost.� Update on further disinvestment.� EPC division's profitability and visibility on revenue/order book.� Ramp-up in real estate division, revenue recognition.


EBITDA 34.4 33.3 37.6 40.9

NP 10.2 4.9 5.9 9.7

Adj. EPS (INR) 4.8 2.3 2.7 4.4

EPS Gr. (%) 37.5 -52.9 17.9 63.4

BV/Sh. (INR) 57.9 60.1 63.5 66.9

RoE (%) 9.4 3.9 4.3 6.7

RoCE (%) 9.3 7.5 8.4 9.3

Payout (%) 22.7 22.8 14.9 22.8

Valuations

P/E (x) 7.6 16.2 13.7 8.4

P/BV (x) 0.6 0.6 0.6 0.5

EV/ EBITDA (x) 8.1 9.4 7.4 6.6

Div. Yield (%) 2.6 1.2 1.5 2.4

Bloomberg JPA IN




1,6,12 Rel Perf. (%) 2 / -49 / -61

C–35October 2013


Shree CementCMP: INR4,004 Buy� We expect cement volumes to grow 2% YoY (-2.1% QoQ) to 3.1mt

(including clinker) and realizations are expected to decline by 2.9%QoQ (-11.9% YoY) to INR3,438/ton.

� Merchant power sale is estimated at 325m units (v/s 307m units YoYand 795m QoQ) at ~INR3.8/unit (v/s INR3.88 QoQ and INR3.97 YoY).

� Realizations de-growth and QoQ increase in cost trend, due to negativeoperating leverage, led to cement business profitability at INR724/ton (-INR209/ton QoQ and -INR461/ton QoQ).

� Power EBITDA contribution estimated at INR293m (v/s INR326m YoY/INR840m QoQ). Adjusted PAT seen at INR0.83b (v/s INR2.3b YoY v/sINR2.8b QoQ).

� Valuations at 11.4x FY15E EPS, 6.6x FY15E EBITDA and USD76/ton.Maintain Buy with a target price of INR5,400 (FY15E SOTP-based).

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 cement capacity addition and capex plans.

Financials & Valuation (INR b)Y/E June 2012 2013 2014E 2015ESa les 47.8 55.7 59.1 67.4

EBITDA 13.9 15.4 15.4 17.8

NP 5.7 10.0 7.3 8.4

Adj EPS (INR) 274.4 314.9 277.0 321.1

EPS Growth (%) 37.1 14.8 -12.0 15.9

BV/Share (Rs) 785 1,103 1,283 1,495

RoE (%) 24.0 30.6 17.4 17.4

RoCE (%) 19.6 28.1 20.4 21.3

Payout (%) 14.5 8.1 13.5 12.5

Valuations

P/E (x) 14.6 12.7 14.5 12.5

P/BV (x) 5.1 3.6 3.1 2.7

EV/EBITDA (x) 9.1 8.1 8.1 7.1

EV/Ton (USD) 120 97 79 73

Bloomberg SRCM IN


M. Cap. (INR b)/(USD b) 139 / 2

52-Week Range (INR) 5,210 / 3,413

1,6,12 Rel Perf. (%) 1 / -6 / 0



Sales Dispat. (m ton) 3.04 3.00 3.26 3.17 3.10 3.15 3.48 3.36 12.46 13.09

YoY Change (%) 22.4 5.2 -6.2 -6.0 2.0 5.0 7.0 6.0 -16.2 5.1

Realization (INR/Ton) 3,902 3,724 3,498 3,578 3,438 3,608 3,833 3,886 3,628 3,699

YoY Change (%) 14.7 4.1 -1.7 -4.6 -11.9 -3.1 9.6 8.6 3.4 1.9

QoQ Change (%) 4.1 -4.6 -6.1 2.3 -3.9 4.9 6.2 1.4

Net Sales 13,230 14,281 14,281 14,414 11,898 14,557 16,305 16,367 55,671 59,127

YoY Change (%) 55.3 19.4 0.3 0.4 -10.1 1.9 14.2 13.5 -4.0 6.2

EBITDA 3,930 3,717 4,054 3,796 2,538 3,548 4,756 4,543 15,378 15,385

Margins (%) 29.7 26.0 28.4 26.3 21.3 24.4 29.2 27.8 27.6 26.0

Depreciation 942 818 1,265 1,332 1,450 1,550 1,600 1,988 4,356 6,588

Interest 543 563 447 378 450 500 525 531 1,931 2,006

Other Income 300 323 576 916 350 400 500 750 2,114 2,000

PBT before EO Exp 2,745 2,659 2,918 3,003 988 1,898 3,131 2,774 11,205 8,791

Extra-Ord Expense 10 120 1 0 0 0 0 0 11 0

PBT 2,736 2,539 2,917 3,002 988 1,898 3,131 2,774 11,194 8,791

Tax 454 365 176 159 158 304 501 576 1,155 1,538

Rate (%) 16.6 14.4 6.0 5.3 16.0 16.0 16.0 20.8 10.3 17.5

Reported PAT 2,281 2,174 2,741 2,843 830 1,594 2,630 2,198 10,040 7,253

Adj PAT 2,289 2,277 2,741 2,843 830 1,594 2,630 2,198 10,049 7,253

YoY Change (%) 438.0 284.6 85.2 -19.1 -63.7 -30.0 -4.1 -22.7 59.6 -27.8

E: MOSL Estimates

C–36October 2013


Quarterly Performance (INR Million)

Y/E March FY13 FY14 FY13 FY14E


Sales (m ton) 10.33 9.29 9.94 11.13 10.09 9.06 10.36 11.60 40.65 41.11

YoY Change (%) 4.8 0.7 -1.7 -3.6 -2.3 -2.5 4.2 4.2 -0.2 1.1

Grey Cement Realn.(INR/ton) * 4,121 4,219 4,050 4,011 4,120 4,050 4,220 4,419 4,102 4,215

YoY Change (%) 9.9 20.4 7.8 3.0 0.0 -4.0 4.2 10.2 9.8 2.8

QoQ Change (%) 5.8 2.4 -4.0 -1.0 2.7 -1.7 4.2 4.7

Net Sales 50,719 46,994 48,574 53,892 49,575 44,866 52,553 61,451 200,179 208,445

YoY Change (%) 16.6 20.3 6.4 1.0 -2.3 -4.5 8.2 14.0 10.2 4.1

EBITDA 12,897 10,052 10,243 11,993 10,491 8,180 11,641 15,279 45,185 45,591

Margins (%) 25.4 21.4 21.1 22.3 21.2 18.2 22.2 24.9 22.6 21.9

Depreciation 2,281 2,325 2,388 2,460 2,521 2,791 2,850 3,065 9,454 11,227

Interest 498 600 521 478 660 700 750 775 2,097 2,885

Other Income 869 706 1,212 1,833 1,882 700 1,000 1,018 4,620 4,600

PBT 10,987 7,834 8,545 10,888 9,192 5,389 9,041 12,457 38,254 36,079

Tax 3,203 2,334 2,537 3,626 2,466 1,455 2,441 3,379 11,700 9,741

Rate (%) 29.2 29.8 29.7 33.3 26.8 27.0 27.0 27.1 30.6 27.0

Reported PAT 7,784 5,500 6,008 7,262 6,726 3,934 6,600 9,077 26,554 26,338

Adj PAT 7,784 5,500 6,008 7,262 6,726 3,934 6,600 9,077 26,554 26,338

YoY Change (%) 14.0 97.2 5.5 -15.8 -13.6 -28.5 9.9 25.0 10.7 -0.8

E: MOSL Estimates; * Grey cement realization is our estimate

UltraTech CementCMP: INR1,826 Buy


Sa les 181.7 200.2 208.4 235.5

EBITDA 40.0 45.2 45.6 54.3

NP 24.1 26.6 26.3 30.4

Adj EPS (INR) 87.8 96.8 96.1 110.9

EPS Growth (%) 71.4 10.4 -0.8 15.4

BV/Share (INR) 469.2 555.7 640.0 736.9

RoE (%) 20.5 18.9 16.1 16.1

RoCE (%) 23.5 21.4 18.1 19.6

Payout (%) 10.4 10.9 12.2 12.6

Valuations

P/E (x) 20.8 18.9 19.0 16.5

P/BV (x) 3.9 3.3 2.9 2.5

EV/EBITDA (x) 12.1 10.3 10.5 8.8

EV/Ton (USD) 157 145 127 121

Bloomberg UTCEM IN


M. Cap. (INR b)/(USD b) 500 / 8

52-Week Range (INR) 2,075 / 1,405

1,6,12 Rel Perf. (%) 7 / -7 / -13

Cement volumes are estimated to grow -2.5% YoY (-10% QoQ) to

9.06mt. Realizations are estimated to decline by 1.7% QoQ (-4% YoY)

to INR4,050/ton. Its supplementary business of white cement and RMC

are estimated to grow 5% and -5% YoY respectively in volume and

5.6% YoY in realizations.

Realizations decline coupled with sequential cost push (4.4% QoQ)

led by negative operating leverage and higher employee costs would

result in an impact on EBITDA/ton of INR889/ton (-INR136/ton QoQ, -

INR178/ton YoY). EBITDA margin would decline 3pp QoQ (-3.2pp YoY)

to 18.2%.

EBITDA is estimated to de-grow 19% YoY (-22% QoQ) to INR8.2b,

translating into PAT de-growth of 28% YoY (-42% QoQ) to INR3.9b.

We upgrade the EPS estimates for FY14E/15E by 1.4%/3% to INR101.2/

INR130.2 respectively.

The stock trades at 13.4x FY15E EPS, 7.3x FY15E EV/EBITDA and USD114/

ton. Maintain Buy with a target price of INR2,130 (9x FY15E EV/EBITDA).


Volume growth recovery and outlook.

Cement pricing outlook and sustainability, considering recent

volatility (prices were down in July-August, followed by a sharp uptick

in September-end).

Update on capacity addition of 10.2mt, which is slated to commission

in 1HFY14. Progress and timeline over JPA deal.

Update on financial performance of Star Cement, UAE.

C–37October 2013

September 2013 Results Preview | Sector: Consumer



27.09.13 % YoY % QoQ % YoY % QoQ % YoY % QoQAsian Paints 471 Neutral 29,863 14.2 6.0 4,241 17.4 -4.0 2,604 8.9 -5.4Britannia 775 Buy 15,852 13.0 12.9 1,110 83.0 -5.0 768 68.5 -10.9Colgate 1,233 Neutral 8,859 14.5 4.9 1,893 7.7 14.5 1,465 1.0 12.9Dabur 170 Buy 17,083 12.2 3.5 3,024 14.3 28.4 2,293 13.4 23.3Godrej Consumer 832 Neutral 19,303 21.0 12.2 2,896 18.7 31.2 1,881 18.1 44.2GSK Consumer 4,238 Neutral 9,709 17.3 13.8 1,689 20.3 42.4 1,443 12.3 20.3Hind. Unilever 621 Se l l 68,157 8.0 0.1 10,905 11.6 0.5 8,628 7.1 -2.5ITC 349 Neutral 80,938 12.0 9.2 30,756 14.4 10.2 20,900 13.8 10.5Marico 220 Buy 12,779 10.6 -7.4 1,687 14.2 -25.7 1,013 18.0 -34.8Nestle 5,097 Neutral 24,057 13.7 8.7 5,052 13.9 5.9 2,944 11.9 8.5Pidilite Inds. 253 Neutral 9,358 14.0 -7.8 1,684 14.8 -24.8 1,184 5.9 -23.4Radico Khaitan 128 Buy 3,333 12.2 -6.7 573 16.7 -6.1 293 32.6 -4.4United Spirits 2,621 Buy 24,428 10.0 11.4 3,053 20.6 9.8 884 125.2 -25.2Sector Aggregate 323,717 12.1 5.6 68,563 15.2 6.4 46,300 13.4 4.4

Sales to grow 12%, PAT to grow 13% - similar to 1QFY14We expect our Consumer coverage universe to post 12.1% revenue growth and 13.4%PAT growth in 2QFY14. EBITDA is likely to grow 15.2%, with 60bp margin expansion, ledby Hindustan Unilever (HUVR), ITC, Asian Paints (APNT), GSK Consumer (SKB) andBritannia (BRIT). We expect ITC to post 12% sales growth (~3% cigarette volumedecline) and 14% PAT growth. HUVR's sales are likely to grow 8% (volume growth of~5%), with EBITDA margin expanding 50bp to 16%.

Growth has not picked up; rural markets to continue outperformingOur recent interactions with 14 Consumer/Retail companies indicate that demand forstaples has not picked up yet. We expect volume growth for most of our Staplesuniverse to remain broadly similar to 1QFY14 levels. Rural growth will continue tooutperform urban, in our view. Good monsoons provide some respite for ruralconsumption in 2H, post the harvesting season. Premiumization, the overarchingtheme of the Consumer sector, has weakened and virtually halted, expect in the OralCare category.

2Q gross margins to sustain; currency depreciation impact to be visible 3Qonwards While the underlying commodity price movements have not been dramatic, the INRdepreciation led raw material inflation leads to downside risks ahead to gross margins.Required price hikes have not been initiated yet and we expect the same to commencesoon. HUVR, APNT, Pidilite (PIDI) and Dabur have relatively higher exposure toimported raw material. Companies have selectively withdrawn promotions and arelooking at cutting ad spends to buffer the impact of input cost inflation. We expectHUVR, ITC and BRIT to post margin expansion. Colgate is likely to report margin declinedue to high promotional activity after P&G's Oral B launch.

Gautam Duggad ([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–38October 2013


2QFY14 volume growth expectationsQuarter Ending Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13

Asian Paints 15.0 15.0 12.0 18.0 -2.0 5.0 13.0 3.0 10.0 10.0

Colgate (Toothpaste) 14.0 15.0 15.0 14.0 13.0 11.0 8.0 11.0 11.0 10.0

Dabur 8.6 10.0 10.8 12.4 12.0 10.5 9.5 12.0 9.0 8.0

Godrej Consumer

Soaps 9.0 19.0 20.0 17.0 22.0 6.0 2.0 4.0 7.0 5.0

GSK Consumer 14.0 8.0 12.0 7.0 7.4 4.5 6.0 8.0 7.0 7.0

Hindustan Unilever 8.3 9.8 9.1 10.0 9.0 7.0 5.0 6.3 4.0 5.0

ITC (cigarette) 8.0 7.5 5.0 5.5 1.5 0.5 1.5 2.5 -1.5 -3.0

Marico

Parachute 10.0 10.0 13.0 11.1 18.0 9.0 6.0 5.0 4.0 6.0

Hair Oil 32.0 26.0 20.0 17.5 25.0 20.0 30.0 24.0 16.0 15.0

Saffola 15.0 11.0 15.0 3.3 12.0 6.0 4.0 5.0 10.0 10.0

Radico Khaitan 12.3 9.7 10.5 6.8 8.2 7.8 6.5 7.4 7.6 7.0

United Spirits 15.4 8.0 0.7 5.1 1.9 -1.0 7.0 3.8 0.2 5.0


Relative Performance-3m (%)

Relative Performance-1Yr (%)

New launches continue selectivelyP&G entered toothpastes with the launch of Oral B. HUVR re-launched Fair & Lovelywith white color after several quarters of weak performance. Marvella Slim RO purifiersand Rin Pink Bar are some of HUVR's other innovations. Dabur launched Vatika EnrichedCoconut Oil with Hibiscus. Godrej Consumer (GCPL) launched Good Knight Fast Card, apaper-based household insecticide.

Little to choose from: Weak demand, margin headwinds and expensivevaluations The Consumer sector faces two key risks ahead: (a) continued weak volume growth,given poor macroeconomic parameters, and (b) risks to margins from INR depreciation,led raw material inflation and reluctance to implement price hikes, given volumegrowth implications. While the progress of monsoons has been good, the benefitswill be visible only in 2H and may not completely offset the weakness in urbandemand, in our view. We are also not too enthused with the street's expectation ofelection stimulus for rural consumption (75% of budgeted fiscal deficit target hasalready been reached in five months). This coupled with multi-year high valuationsfor the sector makes choice difficult. We continue to prefer niche plays with strongpricing power and greater visibility on earnings growth. Dabur and Marico remain ourtop picks in the sector. In the large caps, we prefer ITC. Probability of earningsdowngrade is higher than upgrade in the sector - Colgate, GCPL, UNSP, APNT haveearnings downgrade risks.

Impact of input price changesInput Price Trend (Y-o-Y) Unit CMP (INR) 12m change % Impact Companies

LAB Up INR/Kg 138.1 18.0 Negative HUL

Soda Ash Down INR/50Kg 1055 -7.5 Positive HUL

Palm Fatty Acid Down US$/MT 659 -3.2 Positive HUL, Godrej Consumer

Palm Oil Up MYR/MT 2320 9.7 Negative Britannia, Nestle, HUL, ITC

HDPE Up INR/Kg 106 14.0 Negative All Companies

Sugar Down INR/Qtl 3127.5 -17.3 Positive Britannia, Nestle, GSK Consumer

Titanium Dioxide Up INR/Kg 272 8.8 Negative Asian Paints

Copra Up INR/Qtl 6100 51.6 Negative Marico


9095

100105

110

Jun-

13

Jul-

13

Aug

-13

Sep-

13

Sensex IndexMOSL Cons umer Index

90

105

120

135

Sep-

12

Dec

-12

Mar

-13

Jun-

13

Sep-

13

Sensex IndexMOSL Cons umer Index

C–39October 2013


Palm Fatty Acid (INR/ton) LAB prices (INR/kg)


27.09.13 FY13 FY14E FY15E FY13 FY14E FY15E FY13 FY14E FY15E FY13 FY14E FY15EConsumerAsian Paints 471 Neutral 11.6 12.4 15.2 40.6 38.1 31.0 26.7 23.6 19.8 33.3 30.7 32.1Britannia 775 Buy 19.6 27.1 32.0 39.6 28.6 24.2 28.1 19.7 16.2 37.5 42.6 41.5Colgate 1,233 Neutral 36.5 40.8 46.1 33.8 30.2 26.7 24.6 21.8 18.3 108.4 97.6 92.5Dabur 170 Buy 4.4 5.4 6.5 38.6 31.4 26.1 29.7 24.1 20.3 35.1 35.3 35.1Godrej Consumer 832 Neutral 19.6 24.7 30.5 42.4 33.7 27.3 29.6 23.5 19.5 20.9 23.2 24.3GSK Consumer 4,238 Neutral 98.3 119.1 139.8 43.1 35.6 30.3 35.7 31.7 25.0 30.5 31.1 30.8Hind. Unilever 621 Se l l 15.3 16.4 17.7 40.5 37.9 35.1 32.2 28.1 24.7 71.4 61.3 57.1ITC 349 Neutral 9.5 10.9 12.7 36.8 31.9 27.4 24.3 20.7 17.9 36.1 37.8 39.8Marico 220 Buy 6.0 7.5 8.6 36.6 29.4 25.6 23.6 19.1 15.8 19.6 20.1 19.2Nestle 5,097 Neutral 114.1 123.1 150.2 44.7 41.4 33.9 27.2 24.2 20.2 71.6 58.0 56.7Pidilite Inds. 253 Neutral 8.5 9.7 11.7 29.9 26.2 21.6 19.9 16.7 13.7 24.9 24.1 24.6Radico Khaitan 128 Buy 6.7 8.0 10.7 19.1 16.0 12.0 11.7 10.1 8.2 12.3 13.3 15.7United Spirits 2,621 Buy 29.6 41.1 66.0 88.6 63.7 39.7 35.5 29.4 21.5 4.3 6.6 9.7Sector Aggregate 39.7 34.5 29.4 27.1 23.0 19.5 32.8 33.2 34.2

New launches during 2QFY14Company Brand Category

HUL F&L Skin Care

HUL Rin Pink Bar Detergents

HUL Marvella Slim RO purifier Water Purifier

Dabur Vatika Enriched Coconut Oil Hair Oils

Dabur Oxylife Men Craeme Bleach Male Grooming

Colgate Colgate SlimSoft Toothbrush

GCPL Good knight Fast Card Home Insecticides


41,170

44,171

32,441

46,363

43,025

46,704

20,000

30,000

40,000

50,000

60,000

70,000

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

138

121

114111113

109

10284868490

86

76

Mar

�09

Jun�

09Se

p�09

Dec

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Mar

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Jun�

10Se

p�10

Dec

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Jun�

11Se

p�11

Dec

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Jun�

12Se

p�12

Dec

�12

Mar

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Jun�

13Se

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Copra prices (INR/Qtl) Sugar prices (INR/Qtl)

Source: Companies, MOSL

5,950

3,800

7,075

3,200

1,500

3,500

5,500

7,500

Jan�08M

ay�08Sep�08Jan�09M





ay�13Sep�13

3,135

3,895

3,220

3,383

2,400

2,800

3,200

3,600

4,000

Nov

�10

Feb�

11

May

�11

Aug

�11

Nov

�11

Jan�

12

Apr

�12

Jul�

12

Oct

�12

Jan�

13

Mar

�13

Jun�

13

Sep�

13

C–40October 2013




Volume Growth % -2.0 5.0 13.0 2.0 10.0 10.0 9.0 10.0 8.0 8.0

Net Sales 25,373 26,160 30,371 27,137 28,183 29,863 35,133 32,297 109,041 125,476

Change (%) 12.4 16.5 18.7 6.9 11.1 14.2 15.7 19.0 13.6 15.1

Raw Material/PM 14,838 15,714 18,133 15,523 16,138 17,560 20,377 18,285 64,209 72,360

Gross Profit 10,535 10,445 12,238 11,614 12,045 12,304 14,756 14,012 44,832 53,117

Gross Margin (%) 41.5 39.9 40.3 42.8 42.7 41.2 42.0 43.4 41.1 42.3

Operating Expenses 6,156 6,834 7,292 7,878 7,627 8,063 8,818 9,797 28,160 34,306

% of Sales 24.3 26.1 24.0 29.0 27.1 27.0 25.1 30.3 25.8 27.3

EBITDA 4,379 3,612 4,947 3,735 4,418 4,241 5,938 4,215 16,672 18,811

Margin (%) 17.3 13.8 16.3 13.8 15.7 14.2 16.9 13.0 15.3 15.0

Change (%) 12.7 14.0 24.6 -0.5 0.9 17.4 20.0 12.8 12.8 12.8

Interest 109 122 79 58 86 160 140 191 367 576

Depreciation 334 357 366 489 599 510 520 424 1,546 2,053

Other Income 326 422 467 577 506 465 514 495 1,793 1,978

PBT 4,262 3,555 4,969 3,766 4,239 4,035 5,791 4,095 16,552 18,160

Tax 1,273 1,041 1,466 1,178 1,390 1,291 1,853 1,268 4,957 5,803


PAT before Minority 2,989 2,514 3,503 2,589 2,850 2,744 3,938 2,826 11,595 12,358

Minority Interest 106 122 151 78 98 140 155 110 456 503

Adjusted PAT 2,884 2,392 3,352 2,511 2,752 2,604 3,783 2,716 11,139 11,855

Change (%) 9.5 14.6 30.5 -3.2 -4.6 8.9 12.8 8.2 12.7 6.4

E: MOSL Estimates

CMP: INR471 Neutral� We expect Asian Paints (APNT) to post 14% revenue growth to

INR29.9b in 2QFY14, with 8-10% volume growth in domestic decorativepaints.

� Inventory build-up ahead of price hikes should boost volume growth,in our view.

� APNT has taken ~4% price hike in YTD FY14 to pass on the impact of INRdepreciation led raw material cost inflation.

� We expect margin expansion of 40bp to 14.2%, as the benefit of lowcost inventory is available in 2QFY14. We expect the currency impacton margins to manifest 3Q onwards.

� Power issues at the Khandala plant are in the process of beingaddressed and could help defray overheads over larger base as capacityutilization improves.

� We estimate PAT growth for 2QFY14 at 9%.� The stock trades at 27.5x FY15E EPS of INR15.2. Neutral.

Key issues to watch out� Update on Sleek integration� Comments on volume growth trends and demand scenario� Outlook on raw material scenario


EBITDA 15.1 16.7 18.8 22.2

Adj. PAT 9.9 11.1 11.9 14.6

Adj. EPS (INR) 10.3 11.6 12.4 15.2

EPS Gr. (%) 17.3 12.7 6.4 22.8

BV/Sh.(INR) 28.7 34.9 40.2 47.2

RoE (%) 36.0 33.3 30.7 32.1

RoCE (%) 47.8 44.2 42.2 42.7

Payout (%) 38.8 41.6 48.5 46.1

Valuations

P/E (x) 40.5 36.0 33.8 27.5

P/BV (x) 14.6 12.0 10.4 8.8

EV/EBITDA (x) 25.9 23.6 20.9 17.5

Div. Yield (%) 1.1 1.4 16.8 19.6

Bloomberg APNT IN


M. Cap. (INR b)/(USD b) 452 / 7


1,6,12 Rel Perf. (%) 5 / -9 / 16

Asian Paints

C–41October 2013




Net Sales 12,216 14,028 14,533 14,866 14,034 15,852 16,568 16,798 55,644 63,252

YoY Change (%) 10.8 8.7 16.5 13.5 14.9 13.0 14.0 13.0 12.4 13.7

COGS 7,575 9,042 9,192 9,369 8,374 9,987 10,272 10,647 35,184 39,279

Gross Profit 4,642 4,986 5,341 5,497 5,660 5,865 6,296 6,151 20,459 23,972

Margins (%) 38.0 35.5 36.8 37.0 40.3 37.0 38.0 36.6 36.8 37.9

Other Exp 3,991 4,379 4,559 4,337 4,492 4,755 5,169 5,007 17,255 19,424

% of Sales 32.7 31.2 31.4 29.2 32.0 30.0 31.2 29.8 31.0 30.7

Total Exp 11,566 13,422 13,752 13,706 12,867 14,742 15,441 15,654 52,440 58,704

EBITDA 651 606 782 1,161 1,168 1,110 1,127 1,144 3,204 4,548

Margins (%) 5.3 4.3 5.4 7.8 8.3 7.0 6.8 6.8 5.8 7.2

YoY Growth (%) 37.6 -17.6 -4.2 70.6 79.5 83.0 44.1 -1.4 18.5 41.9

Depreciation 130 143 149 149 153 157 164 163 571 637

Interest 95 88 91 104 34 25 24 13 377 96

Other Income 179 266 257 369 267 170 180 191 1,066 808

PBT 605 642 797 1,277 1,249 1,098 1,119 1,159 3,322 4,624

Tax 170 186 228 399 386 329 336 336 983 1,387

Rate (%) 28.1 29.0 28.6 31.2 30.9 30.0 30.0 29.0 29.6 30.0

Adjusted PAT 435 456 570 878 863 768 783 822 2,339 3,237

YoY Change (%) 4.0 -4.8 5.3 65.7 98.6 68.5 37.5 -6.4 18.9 38.4

E: MOSL Estimates

CMP: INR775 Buy� We expect Britannia (BRIT) to post sales of INR15.9b, a growth of ~13%

YoY. Volume growth would be 5-6%, aided by lower base.

� We estimate 270bp EBITDA margin expansion to 7%, driven by bettercontrol on overheads and conversion costs.

� BRIT is least impacted by INR depreciation, as less than 20% of its rawmaterial basket is USD-linked.

� According to the management, overall volume growth for the industryhas come off by two-third in 12 months.

� BRIT is one of the few stocks in our universe where we see strongprobability of earnings upgrade, driven by sustained marginexpansion. The stock trades at 22x FY15E EPS. Buy.

Key issues to watch out� Volume growth in biscuits� Outlook on raw material scenario� Comments on growth in non-biscuits portfolio


EBITDA 2.6 3.2 4.5 5.4

Adj. PAT 1.7 2.3 3.2 3.8

Adj. EPS (INR) 14.1 19.6 27.1 32.0

EPS Gr. (%) 29.5 39.3 38.4 18.0

BV/Sh.(INR) 43.5 52.2 63.6 77.0

RoE (%) 32.3 37.5 42.6 41.5

RoCE (%) 34.5 60.4 63.7 58.7

Payout (%) 60.5 52.9 50.0 50.0

Valuations

P/E (x) 50.0 35.9 25.9 22.0

P/BV (x) 16.1 13.5 11.1 9.1

EV/EBITDA (x) 31.7 25.4 17.8 14.6

Div. Yield (%) 1.2 1.5 1.9 2.3

Bloomberg BRIT IN




1,6,12 Rel Perf. (%) 3 / 43 / 56

Britannia Industries

C–42October 2013




Toothpaste Volume Gr % 11.0 11.0 8.0 11.0 11.0 10.0 10.0 9.0 10.3 10.0

Net Sales 7,361 7,738 7,627 8,116 8,446 8,859 8,763 9,367 30,841 35,435

YoY Change (%) 20.5 17.7 13.9 18.3 14.7 14.5 14.9 15.4 17.5 14.9

COGS 2,997 3,238 3,045 3,222 3,283 3,676 3,435 3,722 12,502 14,116

Gross Profit 4,364 4,499 4,582 4,894 5,164 5,182 5,328 5,645 18,339 21,319

Gross Margin (%) 59.3 58.1 60.1 60.3 61.1 58.5 60.8 60.3 59.5 60.2

Other operating Expenses 2,939 2,928 3,294 3,407 3,662 3,499 3,724 3,932 12,568 14,817

% to sales 39.9 37.8 43.2 42.0 43.4 39.5 42.5 42.0 40.8 41.8

Other operating Income 200 187 211 200 151 210 230 319 797 909

EBITDA 1,625 1,758 1,499 1,687 1,653 1,893 1,834 2,032 6,568 7,411

Margins (%) 21.5 22.2 19.1 20.3 19.2 20.9 20.4 21.0 20.8 20.4

YoY Growth (%) 21.7 28.2 2.4 -0.7 1.7 7.7 22.3 20.5 #DIV/0! 426.4

Depreciation 105 106 113 113 117 119 127 122 437 485

Interest 0 0 0 0 0 1 1 2 0 5

Financial other Income 112 149 117 121 171 180 152 97 499 600

PBT 1,632 1,801 1,504 1,695 1,707 1,953 1,857 2,005 6,630 7,522

Tax 457 350 393 463 409 488 505 567 1,663 1,970

Rate (%) 28.0 19.4 26.1 27.3 24.0 25.0 27.2 28.3 25.1 26.2

Adj PAT 1,174 1,451 1,111 1,232 1,297 1,465 1,352 1,438 4,968 5,552

YoY Change (%) 16.9 34.9 -3.9 -5.8 10.5 1.0 21.8 16.7 11.3 11.8

E: MOSL Estimates

CMP: INR1,233 Neutral� We expect sales growth of 15% YoY to INR8.85b; toothpaste volume

growth is estimated at 10%.

� We expect 130bp contraction in EBITDA margin to 20.9% on account ofhigher ad spends due to product launches and heightenedpromotional activity post P&G's Oral B launch.

� Lower tax rate in the base quarter (19.4% in 2QFY13 v/s estimated 25%in 2QFY14) would result in flat PAT.

� P&G's Oral B launch has not generated much response as yet in themarket. However, competitive intensity has stepped up further.

� The stock trades at 27.4x FY15E EPS. Neutral.

Key issues to watch out� Volume growth in Toothpastes� Market share trends in Toothpastes


EBITDA 5.8 6.6 7.4 8.8

Adj. PAT 4.5 5.0 5.6 6.3

Adj. EPS (INR) 32.8 36.5 40.8 46.1

EPS Gr. (%) 10.9 11.3 11.8 12.9

BV/Sh.(INR) 31.2 38.1 45.6 54.1

RoE (%) 109.4 108.4 97.6 92.5

RoCE (%) 110.1 108.5 97.7 92.6

Payout (%) 78.0 70.0 70.0 70.0

Valuations

P/E (x) 38.5 34.6 31.0 27.4

P/BV (x) 40.5 33.2 27.7 23.4

EV/EBITDA (x) 28.9 25.2 22.3 18.7

Div. Yield (%) 2.0 2.1 2.3 2.6

Bloomberg CLGT IN


M. Cap. (INR b)/(USD b) 168 / 3

52-Week Range (INR) 1,580 / 1,170

1,6,12 Rel Perf. (%) -8 / -6 / -3

Colgate Palmolive

C–43October 2013




Volume Growth (%) 12.0 10.5 9.5 12.0 9.0 8.0 10.0 12.0 10.0 10.0

Net Sales 14,620 15,226 16,307 15,311 16,511 17,083 19,379 18,803 61,464 71,776

YoY Change (%) 21.4 20.6 12.3 12.3 12.9 12.2 18.8 22.8 16.3 16.8

Total Exp 12,576 12,582 13,615 12,708 14,156 14,059 16,027 15,387 51,463 59,629

EBITDA 2,044 2,644 2,693 2,603 2,355 3,024 3,353 3,416 10,001 12,147

Margins (%) 14.0 17.4 16.5 17.0 14.3 17.7 17.3 18.2 16.3 16.9

YoY Growth (%) 14.9 9.3 19.0 16.4 15.2 14.3 24.5 31.2 15.2 4.0

Depreciation 267 270 305 282 287 278 314 278 1,124 1,158

Interest 213 149 78 150 133 150 80 137 589 500

Other Income 356 275 273 355 420 324 319 390 1,242 1,454

PBT 1,921 2,500 2,582 2,527 2,355 2,919 3,277 3,392 9,530 11,943

Tax 378 464 478 507 484 613 688 726 1,826 2,511

Rate (%) 19.7 18.6 18.5 20.1 20.6 21.0 21.0 21.4 19.2 21.0

Minority Interest 2 13 -6 0 10 13 -6 -6 24 11

Adjusted PAT 1,541 2,023 2,111 2,020 1,860 2,293 2,595 2,672 7,680 9,421

YoY Change (%) 20.6 16.4 22.2 18.4 20.7 13.4 22.9 32.3 19.3 22.7

E: MOSL Estimates

CMP: INR170 Buy� We expect sales to grow 12.2% to INR17.1b, led by 8-9% domestic

organic volume growth.

� Dabur's rural growth would continue to outperform urban growth, inour view. In our recent interaction, the management had indicatedthat rural markets are growing twice as fast as the urban markets.

� INR depreciation puts the earlier margin expansion guidance of 100bpat risk. We expect weighted average ~5% price hikes and reduction inad spends to protect margins.

� We estimate marginal 30bp operating margin expansion to 17.7%, ledby improvement in international margins. Dabur has recently launchedVatika Enriched Coconut Oil with Hibiscus in South India.

� We expect PAT growth of 13.4% to INR2.29b.

� The stock trades at 26.1x FY15E EPS of INR6.5. Buy.

Key issues to watch out� Domestic volume growth and outlook on rural demand� International business outlook� Competitive intensity in Hair Oils


EBITDA 8.7 10.0 12.1 14.2

Adj. PAT 6.4 7.7 9.4 11.3

Adj. EPS (INR) 3.7 4.4 5.4 6.5

EPS Gr. (%) 13.2 19.3 22.7 20.4

BV/Sh.(INR) 9.9 12.6 15.3 18.6

RoE (%) 37.4 35.1 35.3 35.1

RoCE (%) 30.0 38.1 40.7 40.8

Payout (%) 37.6 40.2 42.7 42.7

Valuations

P/E (x) 46.0 38.6 31.4 26.1

P/BV (x) 17.2 13.5 11.1 9.1

EV/EBITDA (x) 35.1 29.7 24.2 20.3

Div. Yield (%) 0.8 1.0 1.4 1.6

Bloomberg DABUR IN


M. Cap. (INR b)/(USD b) 296 / 5


1,6,12 Rel Perf. (%) -2 / 19 / 31

Dabur India

C–44October 2013




MFD Volume Growth (%) 7.0 7.4 6.0 6.0 8.0 7.0 7.0 8.0 7.0 7.5

Net Sales 8,130 7,297 8,275 7,091 9,399 8,529 9,709 8,322 30,794 35,959

YoY Change (%) 14.5 11.7 14.9 17.8 15.6 16.9 17.3 17.4 14.7 16.8

Total Exp 6,514 6,191 6,871 6,581 7,691 7,343 8,019 7,697 26,156 30,750

EBITDA 1,617 1,107 1,405 510 1,708 1,187 1,689 625 4,638 5,209

Margins (%) 20.3 15.2 17.0 7.2 18.2 13.9 17.4 7.5 15.1 14.5

YoY Change (%) 11.3 12.3 19.1 -17.3 5.6 7.2 20.3 22.6 9.5 12.3

Depreciation 119 86 77 79 107 122 170 178 361 577

Interest 12 8 3 1 1 2 10 32 24 45

Other Income 479 572 578 606 680 759 728 775 2,234 2,942

PBT 1,964 1,585 1,903 1,035 2,279 1,822 2,237 1,189 6,487 7,528

Tax 645 519 617 338 715 623 794 389 2,119 2,520

Rate (%) 32.8 32.8 32.4 32.7 31.4 34.2 35.5 32.7 32.7 33.5

Adj PAT 1,320 1,066 1,286 697 1,564 1,200 1,443 801 4,368 5,008

YoY Change (%) 19.3 29.3 24.8 17.9 18.5 12.5 12.3 15.0 23.0 14.7

E: MOSL Estimates

CMP: INR4,238 Neutral� We expect GSK Consumer to report net sales of INR9.7b, up 17.3% YoY,

led by 7% volume growth, similar to 2QCY13.

� We estimate 40bp EBITDA margin expansion to 17.4% on account ofprice hikes.

� Despite higher tax rates, we estimate 14% growth in PAT.

� The stock trades at 30.3x CY14E EPS. Neutral.

Key issues to watch out� MFD volume growth� Outlook on market growth and raw material environment� Comments on Noodles strategy

Financials & Valuation (INR b)Y/E December 2011 2012 2013E 2014ESa les 26.9 30.8 36.0 41.6

EBITDA 4.2 4.6 5.2 6.5

Adj. PAT 3.6 4.1 5.0 5.9

Adj. EPS (INR) 84.5 98.3 119.1 139.8

EPS Gr. (%) 18.4 16.4 21.1 17.4

BV/Sh.(INR) 272.1 322.1 382.7 453.8

RoE (%) 31.0 30.5 31.1 30.8

RoCE (%) 55.6 54.6 54.2 53.6

Payout (%) 48.2 49.1 49.1 49.1

Valuations

P/E (x) 50.2 40.5 35.6 30.3

P/BV (x) 15.6 13.2 11.1 9.3

EV/EBITDA (x) 32.2 27.5 31.7 25.0

Div. Yield (%) 0.8 1.0 1.2 1.4

Bloomberg SKB IN


M. Cap. (INR b)/(USD b) 178 / 3

52-Week Range (INR) 6,020 / 2,875

1,6,12 Rel Perf. (%) -4 / -4 / 39

GlaxoSmithKline Consumer

C–45October 2013




Net Sales 13,886 15,953 16,913 17,155 17,203 19,303 21,141 20,679 63,908 78,327

YoY Change (%) 39.2 34.5 25.8 29.7 23.9 21.0 25.0 20.5 31.7 22.6

EBITDA 1,988 2,440 2,806 2,752 2,208 2,896 3,700 3,745 9,985 12,547

Margins (%) 14.3 15.3 16.6 16.0 12.8 15.0 17.5 18.1 15.6 16.0

YoY Growth (%) 39.3 18.0 5.8 11.5 11.0 18.7 31.9 36.1 16.0 25.7

Depreciation 199 206 205 160 221 240 220 214 770 895

Interest 164 200 189 222 240 206 194 141 775 782

Other Income 181 194 188 281 178 194 188 319 844 880

Forex gain / (loss) -176 -76 -27 -48 -154 0 0 154 -328 0

PBT 1,630 2,151 2,574 2,602 1,769 2,644 3,474 3,863 8,957 11,750

Tax 192 476 674 531 338 642 844 783 1,792 2,607

Rate (%) 11.8 22.1 26.2 20.4 19.1 24.3 24.3 20.3 20.0 22.2

Minority Int 213 83 178 19 126 120 178 310 493 735

Adj PAT 1,225 1,593 1,722 2,052 1,305 1,881 2,452 2,770 6,672 8,408

YoY Change (%) 22.2 24.8 3.1 22.4 6.5 18.1 42.4 35.0 26.7 26.0

E: MOSL Estimates

CMP: INR832 Neutral� We expect GCPL to post 21% revenue growth to INR19.3b in 2QFY14,

led by strong momentum in domestic Household Insecticides and HairColors. Darling Phase II and Soft & Genteel should provide inorganicboost for the quarter.

� Indonesia should see some QoQ recovery. However, full recoverywould be visible only from the beginning of 3QFY14.

� We expect 30bp margin contraction to 15% due to higher brand spends.Benefits of low cost palm oil inventory would be eroded by higher adspends.

� INR depreciation impact in P&L would be reflected due to MTM on (a)palm oil payables, and (b) interest cost. Impact on forex loans wouldbe capitalized. We expect PAT growth of 18% to INR1.9b. However, inour estimates, we do not build in forex losses.

� The stock trades at 28.1x FY15E EPS of INR30.5. Neutral.

Key issues to watch out� Comments on volume growth trend in Soaps and sustenance of

turnaround witnessed in Hair Colors� Outlook on raw material scenario� International business (Africa and Latin America) outlook


EBITDA 8.6 10.0 12.5 15.0

Adj. PAT 5.3 6.7 8.4 10.4

Adj. EPS (INR) 15.5 19.6 24.7 30.5

EPS Gr. (%) 5.7 26.7 26.0 23.3

BV/Sh.(INR) 82.7 93.7 106.7 125.5

RoE (%) 18.7 20.9 23.2 24.3

RoCE (%) 20.7 24.8 28.4 30.2

Payout (%) 29.7 40.8 40.5 32.8

Valuations

P/E (x) 55.4 43.7 34.7 28.1

P/BV (x) 10.4 9.1 8.0 6.8

EV/EBITDA (x) 35.4 30.5 24.2 20.1

Div. Yield (%) 0.5 0.9 1.2 1.2

Bloomberg GCPL IN


M. Cap. (INR b)/(USD b) 283 / 5


1,6,12 Rel Perf. (%) -8 / 2 / 18

Godrej Consumer Products

C–46October 2013




Volume Growth (%) 9.0 7.0 5.0 6.0 4.0 5.0 8.0 8.0 8.0 7.0

S&D EBIT Margin (%) 12.2 14.3 12.4 12.0 13.4 14.5 12.0 11.8 12.5 13.0

PP EBIT Margin (%) 25.8 24.2 28.3 25.8 26.8 24.6 28.0 26.0 25.3 26..0

Net Sales (incl service inc) 63,788 63,108 66,548 64,658 68,090 68,157 75,200 75,847 258,102 287,293

YoY Change (%) 14.1 12.5 11.7 12.1 6.7 8.0 13.0 17.3 16.7 11.3

COGS 33,677 32,695 34,191 34,326 34,828 34,760 38,201 40,132 134,888 147,921

Gross Profit 30,110 30,414 32,357 30,333 33,262 33,397 36,998 35,715 123,214 139,372

Margin % 47.2 48.2 48.6 46.9 48.9 49.0 49.2 47.1 47.7 48.5

Operating Exp 20,446 20,646 21,470 20,615 22,406 22,492 24,440 24,571 83,176 93,909

% to sales 32.1 32.7 32.3 31.9 32.9 33.0 32.5 32.4 32.2 32.7

EBITDA 9,664 9,767 10,888 9,718 10,856 10,905 12,558 11,144 40,037 45,463

YoY Change (%) 28.1 18.2 12.2 16.6 12.3 11.6 15.3 14.7 21.6 13.6

Margins (%) 15.2 15.5 16.4 15.0 15.9 16.0 16.7 14.7 15.5 15.8

Depreciation 576 577 593 614 664 646 664 677 2,360 2,651

Interest 53 63 75 60 62 38 45 5 251 150

Other Income 2,186 1,488 1,337 1,058 1,768 1,517 1,203 1,010 6,069 5,498

PBT 11,221 10,615 11,557 10,102 11,897 11,738 13,053 11,473 43,495 48,160

Tax 2,676 2,556 2,827 2,293 3,046 3,111 3,459 3,113 11,653 12,729

Rate (%) 23.8 24.1 24.5 22.7 25.6 26.5 26.5 27.1 26.8 26.4

Adjusted PAT 8,546 8,059 8,730 7,808 8,851 8,628 9,594 8,359 33,143 35,432

YoY Change (%) 47.7 22.9 14.5 17.7 3.6 7.1 9.9 7.1 24.6 6.9

E: MOSL Estimates

CMP: INR621 Sell� We expect HUVR to post 5% volume growth and 8% revenue growth.

Consumer demand remains subdued, though it has not deterioratedQoQ.

� We expect 50bp EBITDA margin expansion to 16%, led by higher grossmargins. However, we note that the time lag in passing on the impactof raw material inflation can put 2HFY14 margins at risk.

� Promotional intensity remains high in Detergents and Oral Care.However, it is coming off selectively in Soaps. Skin Care revenue basewill ease (Fair & Lovely, F&L re-launched in 1QFY13) in 2QFY14. HUVRhas re-launched F&L in white color.

� This coupled with higher tax rate (up ~240bps) to restrict PAT growthto 7% in our view. However it has lowered its tax rate guidance to24.5-25% vs. earlier 26-27%.

� The stock trades at 35.1x FY15E EPS of INR17.7. Sell.

Key issues to watch out� Comments on volume growth and consumer demand environment� Pricing environment, given pressure on gross margins from INR

depreciation


EBITDA 32.9 40.0 45.5 51.3

Adj. PAT 25.9 33.1 35.4 38.2

Adj. EPS (INR) 12.0 15.3 16.4 17.7

EPS Gr. (%) 23.4 27.8 6.9 7.9

BV/Sh.(INR) 16.3 21.5 26.8 31.0

RoE (%) 73.8 71.4 61.3 57.1

RoCE (%) 95.4 94.2 83.5 81.2

Payout (%) 62.5 55.4 58.0 65.0

Valuations

P/E (x) 51.8 40.5 37.9 35.1

P/BV (x) 38.2 28.9 23.2 20.0

EV/EBITDA (x) 39.7 32.2 28.1 24.7

Div. Yield (%) 1.2 1.4 1.5 1.9

Bloomberg HUVR IN


M. Cap. (INR b)/(USD b) 1,342 / 22


1,6,12 Rel Perf. (%) -5 / 28 / 10

Hindustan Unilever

C–47October 2013


Quarterly Performance INR MillionY/E March FY13 FY14 FY13 FY14E


Cigarette Vol Gr (%) 1.5 0.5 1.5 2.5 -2.0 -3.0 2.0 3.0 1.5 0.5

Cigarette-net EBIT Margin (%) 57.5 61.4 61.1 58.3 63.4 62.2 61.8 59.0 59.6 60.3

Non Cigarette FMCG Loss -388 -303 -240 119 -189 -120 230 250 -813 810

Net Sales 67,065 72,266 77,121 82,574 74,107 80,938 88,304 96,202 299,013 339,550

YoY Change (%) 14.6 18.7 22.8 18.8 10.5 12.0 14.5 16.5 18.9 13.6

Total Exp 43,313 45,383 48,543 55,511 46,194 50,181 54,748 64,232 192,738 215,356

EBITDA 23,752 26,883 28,578 27,063 27,913 30,756 33,555 31,970 106,275 124,195

Growth (%) 21.3 21.0 20.0 18.9 17.5 14.4 17.4 18.1 20.1 16.9

Margins (%) 35.4 37.2 37.1 32.8 37.7 38.0 38.0 33.2 35.5 36.6

Depreciation 1,948 1,889 2,052 2,067 2,153 2,077 2,257 2,317 7,956 8,805

Interest 138 233 252 243 170 198 214 199 865 780

Other Income 1,699 1,850 3,298 2,540 2,032 2,164 3,694 3,033 9,387 10,923

PBT 23,366 26,611 29,572 27,293 27,622 30,645 34,778 32,488 106,842 125,533

Tax 7,344 8,247 9,053 8,014 8,709 9,745 11,025 10,554 32,658 40,033

Rate (%) 31.4 31.0 30.6 29.4 31.5 31.8 31.7 32.5 30.6 31.9

Adj PAT 16,021 18,364 20,519 19,280 18,913 20,900 23,753 21,933 74,184 85,500

YoY Change (%) 20.2 21.3 20.6 19.4 18.1 13.8 15.8 13.8 20.4 15.3

E: MOSL Estimates

CMP: INR349 Neutral� We expect ITC to post 2.5-3% volume decline in Cigarettes. Traction in

64mm Cigarettes is compensating for the decline in the 69mm segment,in our view.

� Net sales are likely to grow 12% to INR80.9b.

� We expect margin expansion of 80bp to 38%, led by Cigarettes, whereITC has taken 17-18% price hike YTD. One more round of price hike islikely in Gold Flake Premium and Gold Flake.

� Non-Cigarette FMCG sales growth would moderate to 17-18%. We buildin EBIT loss of INR120m.

� We estimate 13.8% PAT growth to INR20.9b.

� The stock trades at 27.4x FY15E EPS of INR12.7. Neutral.

Key issues to watch out� Cigarette volume trend post the price hikes and update on 64mm

segment� Demand outlook for FMCG-Others� Profitability in FMCG-Others portfolio� Signs of pick-up in Hotels business


EBITDA 88.5 106.3 124.2 142.1

Adj. PAT 49.9 61.6 74.2 85.5

Adj. EPS (INR) 7.9 9.5 10.9 12.7

EPS Gr. (%) 22.3 20.4 15.3 16.5

BV/Sh.(INR) 24.0 26.3 28.9 32.0

RoE (%) 32.8 36.1 37.8 39.8

RoCE (%) 45.4 50.2 53.9 56.1

Payout (%) 66.7 76.1 76.1 76.1

Valuations

P/E (x) 44.5 36.6 31.9 27.4

P/BV (x) 14.5 13.3 12.1 10.9

EV/EBITDA (x) 29.5 24.3 20.7 17.9

Div. Yield (%) 1.3 1.8 2.0 2.4

Bloomberg ITC IN


M. Cap. (INR b)/(USD b) 2,700 / 43


1,6,12 Rel Perf. (%) 8 / 8 / 25

ITC

C–48October 2013




Domestic organic vol gr (%) 14.0 10.0 9.0 8.0 10.0 10.0 12.0 12.0 11.0

Net Sales 12,672 11,559 11,640 9,973 13,797 12,779 13,403 12,000 45,843 51,949

YoY Change (%) 21.7 19.5 10.9 9.7 8.9 10.6 15.1 20.3 15.5 13.3

COGS 6,469 5,606 5,587 4,410 6,710 6,262 6,701 5,644 22,073 25,288

Gross Profit 6,203 5,953 6,053 5,563 7,086 6,517 6,701 6,356 23,771 26,661

Gross margin (%) 48.9 51.5 52.0 55.8 51.4 51.0 50.0 53.0 51.9 51.3

Other Expenditure 4,364 4,476 4,433 4,373 4,816 4,831 4,959 4,718 17,646 19,324

% to Sales 34.4 38.7 38.1 43.9 34.9 37.8 37.0 39.3 38.5 37.2

EBITDA 1,839 1,477 1,620 1,189 2,270 1,687 1,742 1,638 6,125 7,337

Margins (%) 14.5 12.8 13.9 11.9 16.5 13.2 13.0 13.6 13.4 14.1

YoY Change (%) 47.0 27.8 31.1 9.3 23.5 14.2 7.6 37.7 29.5 19.8

Depreciation 193 225 195 253 206 258 224 287 866 975

Interest 135 145 146 113 121 145 146 164 540 576

Other Income 150 75 127 115 167 98 159 221 468 644

PBT 1,660 1,182 1,406 938 2,109 1,381 1,531 1,408 5,186 6,429

Tax 403 293 360 189 512 338 367 331 1,245 1,549

Rate (%) 24.2 24.8 25.6 20.1 24.3 24.5 24.0 23.5 24.0 24.1

Minority Interest 0 30 -23 26 44 30 -23 26 79 -76

Adjusted PAT 1,258 859 1,068 723 1,553 1,013 1,186 1,051 3,862 4,804

YoY Change (%) 48.0 9.7 21.2 1.2 23.5 18.0 11.0 45.4 21.1 24.4

E: MOSL Estimates

CMP: INR220 Buy� We expect sales growth of 10.6% to INR12.8b, led by ~10% domestic

organic volume growth. We expect Parachute, Saffola and value-addedhair oils to post 6%, 10% and 15% volume growth, respectively.

� International business should post 15% revenue growth, in our view.

� We estimate a gross margin decline of 50bp, as copra prices areincreasing. Also, MRCO has taken selective price cuts in Parachuteand Saffola to drive volume growth.

� MRCO has guided 250-300bp YoY international margin expansion.

� Expect PAT growth of 18%.


Key issues to watch out� Comments on volume growth trends in key categories� Performance of Paras brand� Recovery in Middle East business� Management comments on Kaya and input cost outlook


EBITDA 4.7 6.1 7.3 8.6

Adj. PAT 3.2 3.9 4.8 5.5

Adj. EPS (INR) 5.2 6.0 7.5 8.6

EPS Gr. (%) 34.2 15.6 24.4 14.9

BV/Sh.(INR) 18.6 30.5 37.1 44.7

RoE (%) 28.0 19.6 20.1 19.2

RoCE (%) 30.5 28.8 30.0 29.9

Payout (%) 13.5 12.5 10.7 9.3

Valuations

P/E (x) 42.3 36.6 29.4 25.6

P/BV (x) 11.8 7.2 5.9 4.9

EV/EBITDA (x) 29.2 23.6 19.1 15.8

Div. Yield (%) 0.3 0.3 0.4 0.4

Bloomberg MRCO IN


M. Cap. (INR b)/(USD b) 141 / 2


1,6,12 Rel Perf. (%) -4 / -1 / 4

Marico

C–49October 2013




Net Sales 20,475 19,866 21,156 21,526 22,481 22,132 24,057 24,936 83,023 93,605

YoY Change (%) 13.1 12.7 7.8 10.1 9.8 11.4 13.7 15.8 10.8 12.7

COGS 9,384 9,024 9,712 9,644 10,158 10,004 10,994 11,410 37,764 42,565

Gross Profit 11,091 10,842 11,444 11,882 12,323 12,128 13,063 13,526 45,259 51,040

Margin (%) 54.2 54.6 54.1 55.2 54.8 54.8 54.3 54.2 54.5 54.5

Operating Exp 6,647 6,554 7,010 6,926 7,113 7,357 8,011 8,198 27,136 30,679

EBITDA 4,444 4,288 4,434 4,957 5,210 4,771 5,052 5,328 18,122 20,361

Margins (%) 21.7 21.6 21.0 23.0 23.2 21.6 21.0 21.4 21.8 21.8

YoY Growth (%) 15.3 24.5 8.1 20.1 17.2 11.3 13.9 7.5 18.1 12.4

Depreciation 528 673 735 835 821 887 845 800 2,772 3,354

Interest 23 220 44 99 79 85 80 106 387 350

Other income 136 113 173 211 200 249 197 132 633 778

PBT 4,029 3,507 3,827 4,233 4,510 4,048 4,323 4,554 15,597 17,435

Tax 1,272 1,085 1,197 1,293 1,581 1,334 1,379 1,270 4,847 5,564

Rate (%) 31.6 30.9 31.3 30.5 35.1 33.0 31.9 27.9 31.1 31.9

Adjusted PAT 2,757 2,423 2,630 2,940 2,929 2,714 2,944 3,285 10,750 11,871

YoY Change (%) 5.0 10.3 -2.0 9.7 6.2 12.0 11.9 11.7 7.4 10.4

E: MOSL Estimates

CMP: INR5,097 Neutral� We expect Nestle India (NEST) to report net sales of INR24b, up 13.7%

YoY on a low base; we expect growth to be price-led.

� Our channel checks indicate that discretionary consumption andprocessed foods offtake remains soft.

� We estimate flat EBITDA margin at 21%.

� PAT would grow 12% to INR2.94b on account of higher capital costsand tax rates.

� Recovery in volume growth remains a key factor to monitor, as webelieve stock performance will hinge on the same.

� The stock trades at 36.3x CY14E EPS. Neutral.

Key issues to watch out� Volume growth� Performance of new launches


EBITDA 15.4 18.3 20.4 23.9

Adj. PAT 10.0 11.0 11.9 14.5

Adj. EPS (INR) 103.8 114.1 123.1 150.2

EPS Gr. (%) 19.6 9.9 7.9 22.0

BV/Sh.(INR) 132.1 186.5 238.4 291.3

RoE (%) 94.0 71.6 58.0 56.7

RoCE (%) 88.3 59.6 55.9 62.3

Payout (%) 54.3 49.4 54.9 62.0

Valuations

P/E (x) 52.5 47.8 44.3 36.3

P/BV (x) 41.2 29.2 22.9 18.7

EV/EBITDA (x) 34.6 29.0 25.8 21.6

Div. Yield (%) 0.9 0.9 1.1 1.5

Bloomberg NEST IN


M. Cap. (INR b)/(USD b) 491 / 8

52-Week Range (INR) 5,865 / 4,306

1,6,12 Rel Perf. (%) -2 / 6 / 12

Nestle India

C–50October 2013




Sales 9,125 8,209 8,376 7,608 10,148 9,358 9,799 8,916 33,317 38,222

Change (%) 18.8 16.0 21.6 16.7 11.2 14.0 17.0 17.2 18.3 14.7

Gross Profit 4,087 3,680 3,770 3,645 4,681 4,164 4,400 4,139 15,182 17,385

Gross Margin % 44.8 44.8 45.0 47.9 46.1 44.5 44.9 46.4 45.6 45.5


% of sales 23.9 26.9 26.9 31.5 24.1 26.5 26.5 30.2 27.2 26.7

EBITDA 1,907 1,468 1,514 1,248 2,240 1,684 1,803 1,449 6,136 7,176

EBITDA Margin % 20.9 17.9 18.1 16.4 22.1 18.0 18.4 16.3 18.4 18.8

Change (%) 25.4 14.5 27.3 30.2 17.5 14.8 19.1 16.1 24.0 17.0

Depreciation 124 128 141 139 153 151 167 163 532 634

Interest 91 18 86 36 36 16 82 95 232 229

Other Income 139 121 164 235 90 138 186 334 659 748

PBT 1,831 1,443 1,450 1,307 2,140 1,655 1,741 1,525 6,031 7,062

Tax 498 325 413 352 595 472 496 435 1,588 1,997


Adj PAT 1,333 1,117 1,037 956 1,546 1,184 1,245 1,090 4,443 5,064

Change (%) 23.6 29.3 19.9 27.6 16.0 5.9 20.0 14.1 24.9 14.0

E: MOSL Estimates

CMP: INR253 Neutral� We expect Pidilite Industries (PIDI) to post 14% revenue growth, led

by high single-digit volume growth in the Consumer and Bazaarsegments. Growth in Industrial Chemicals will continue to be muted,in our view.

� Continued weak macro environment would put further pressure onPIDI's revenues.

� EBITDA margins would remain flat YoY at 18%.� INR depreciation led raw material inflation would adversely impact

margins.� PAT growth is likely to be muted at 6% due to lower tax rate of 22.5%

in base quarter.� Uncertainty regarding the synthetic elastomer project continues and

the company is yet to take a call on the project implementation.� The stock trades at 21.6x FY15E EPS of INR11.7. We see downside risks

to our earnings estimate.

Key issues to watch out� Volume growth in Fevicol� Performance of Construction Chemicals business� Outlook on Industrial segment� Progress on Elastomer project, if any


EBITDA 4.9 6.1 7.2 8.5

Adj. PAT 3.6 4.4 5.1 6.1

Adj. EPS (INR) 7.0 8.5 9.7 11.7

EPS Gr. (%) 7.8 21.0 14.0 21.4

BV/Sh.(INR) 26.6 34.0 40.2 47.7

RoE (%) 26.3 24.9 24.1 24.6

RoCE (%) 29.0 31.8 32.6 33.1

Payout (%) 36.0 35.5 36.3 35.9

Valuations

P/E (x) 36.2 29.9 26.2 21.6

P/BV (x) 9.5 7.4 6.3 5.3

EV/EBITDA (x) 25.3 20.6 17.3 14.3

Div. Yield (%) 0.8 1.0 1.2 1.4

Bloomberg PIDI IN


M. Cap. (INR b)/(USD b) 128 / 2


1,6,12 Rel Perf. (%) 2 / -8 / 20

Pidilite Industries

C–51October 2013




Net sales 3,038 2,970 3,260 3,315 3,573 3,333 3,652 3,556 12,584 14,114

YoY Change (%) 2.1 13.9 8.1 16.8 17.6 12.2 12.0 7.3 10.0 12.2

Total Expenses 2,514 2,479 2,760 2,911 2,963 2,760 3,060 3,032 10,597 11,814

EBITDA 524 491 501 403 611 573 592 524 1,987 2,300

Margins (%) 17.3 16.5 15.4 12.2 17.1 17.2 16.2 14.7 15.8 16.2

YoY Change (%) 22.4 10.7 12.1 1.5 16.5 16.7 18.2 30.0 15.8

Depreciation 90 85 90 88 95 100 106 122 353 423

Interest 168 159 216 182 204 151 206 153 726 714

Other Income 62 84 85 74 85 91 92 71 304 338

PBT 328 331 279 207 396 412 371 320 1,211 1,500

Tax 75 110 95 40 90 119 108 118 320 435

Rate (%) 22.9 33.3 34.1 19.3 22.7 29.0 29.0 36.8 26.4 29.0

Adjusted PAT 253 221 184 167 306 293 264 203 891 1,065

YoY Change (%) 21.8 49.1 -22.3 -1.4 21.2 32.6 43.4 21.2 17.0 19.5

E: MOSL Estimates

CMP: INR128 Buy� We expect Radico Khaitan (RDCK) to post 12% revenue growth to

INR3.3b in 2QFY14, led by 7% volume growth.

� We expect premiumization trend to continue, with double-digitgrowth in premium portfolio.

� EBITDA margin would expand 70bp to 17.2%, led by higher grossmargins and better control on overheads.


Key issues to watch out� Trade issues in Tamil Nadu� ENA price trend and outlook


EBITDA 1.7 2.0 2.3 2.8

Adj. PAT 0.8 0.9 1.1 1.4

Adj. EPS (INR) 6.0 6.7 8.0 10.7

EPS Gr. (%) 10.9 11.5 19.5 33.0

BV/Sh.(INR) 52.4 57.0 63.6 72.4

RoE (%) 11.3 12.3 13.3 15.7

RoCE (%) 9.9 10.3 11.2 13.3

Payout (%) 15.4 17.6 17.6 17.6

Valuations

P/E (x) 16.6 14.9 12.5 9.4

P/BV (x) 1.9 1.8 1.6 1.4

EV/EBITDA (x) 11.4 10.4 9.0 7.2

Div. Yield (%) 1.2 1.6 1.2 1.6

Bloomberg RDCK IN




1,6,12 Rel Perf. (%) 1 / -6 / 1

Radico Khaitan

C–52October 2013




Volume Growth % 2 -1 7 4 0.2 5 6 6 3 5

ENA Price/Case 151 159 172 176 171 173 175 175 165 173

Net Sales 20,573 22,207 21,740 20,577 21,924 24,428 24,784 24,075 85,097 95,210

YoY Change (%) 6.3 24.0 11.3 10.5 6.6 10.0 14.0 17.0 12.8 11.9

Total Exp 17,223 19,676 19,281 18,584 19,142 21,374 21,438 20,911 74,763 82,865

EBITDA 3,350 2,531 2,459 1,993 2,782 3,053 3,346 3,165 10,334 12,346

Margins (%) 16.3 11.4 11.3 9.7 12.7 12.5 13.5 13.1 12.1 13.0

Depreciation 162 188 173 195 195 244 225 240 718 904

Interest 1,656 1,700 1,636 1,570 1,595 1,649 1,586 1,545 6,562 6,375

PBT from operations 1,532 643 651 228 992 1,160 1,534 1,380 3,054 5,066

Other income 607 -48 608 836 781 180 170 212 2,002 1,343

PBT 2,139 595 1,258 1,065 1,773 1,340 1,704 1,592 5,056 6,409

Tax 689 202 453 288 592 455 579 552 1,632 2,179

Rate (%) 32.2 34.0 36.0 27.1 33.4 34.0 34.0 34.7 32.3 34.0

PAT 1,450 393 806 777 1,181 884 1,125 1,040 3,424 4,230

YoY Change (%) 5.9 -75.3 64.6 878.1 -18.5 125.2 39.6 33.9 278.0 23.5

Extraordinary Inc/(Exp) 0 0 0 -217 0 0 0 0 -217 0

Reported PAT 1,450 393 806 560 1,181 884 1,125 1,040 3,208 4,230

E: MOSL Estimates

CMP: INR2,621 Buy� We expect United Spirits (UNSP) to post 10% revenue growth to

INR24.4b in 2QFY14, led by 5% volume growth. Lower base (volumedecline of 1% in 2QFY13) should aid performance, though the TamilNadu issue continues.

� The premium segment would grow at a faster pace, aided byup-trading.

� We expect margin expansion of 110bp to 12.5%.

� PAT would more than double to INR884m (PAT had declined 75% in2QFY13).

� The stock trades at 39.7x FY15E EPS of INR66. Buy.

Key issues to watch out� Trade issues in Tamil Nadu� ENA price trend and outlook� Debt reduction� Updates on Diageo integration


EBITDA 11.9 12.6 14.5 19.6

Adj. PAT 2.4 3.6 6.0 9.6

Adj. EPS (INR) 19.5 29.6 41.1 66.0

EPS Gr. (%) -30.9 51.4 39.1 60.5

BV/Sh.(INR) 397.9 693.3 620.4 681.3

RoE (%) 4.9 4.3 6.6 9.7

RoCE (%) 8.3 8.4 9.8 13.1

Payout (%) 15.4 13.5 10.9 0.7

Valuations

P/E (x) 134.2 88.6 63.7 39.7

P/BV (x) 6.6 3.8 4.2 3.8

EV/EBITDA (x) 35.7 31.3 26.8 19.5

Div. Yield (%) 0.1 0.2 0.2 0.0

Bloomberg UNSP IN


M. Cap. (INR b)/(USD b) 381 / 6

52-Week Range (INR) 2,815 / 990

1,6,12 Rel Perf. (%) 14 / 33 / 99

United Spirits

C–53October 2013

September 2013 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

A quarter marked by significant volatility and sharp earnings downgradesAt the financial year's beginning, supportive growth and inflation dynamics paved

the way for further monetary easing, which could have ensured better growth and

asset quality for banks in 2HFY14. However, two important events (from July 15, 2013,

RBI tightened liquidity and inverted the yield curve, and on September 20 attempts

were made to flatten the yield curve at a higher level) during the quarter led to

significant volatility and earnings downgrades for financials. RBI's future course of

action is largely macro economic data dependent and on events in external markets.

In our view, in the short term, inflation and INR are likely to be major factors influencing

the monetary action. Thus, interest rates are likely to remain high, which will have an

impact on growth and asset quality and resultantly earnings of financial stocks.

In this uncertain environment, we remain selective and prefer banks with strong

capitalization (risk of dilution low) and liability franchise (emerge stronger in the

upturn of economy), management stability, P&L strength (to absorb credit cost risk)

and those who have recognized stress upfront (risk of setback remains low). We

downgrade UNBK from Under review to Neutral and CBK to Neutral from Buy. Top

picks are: ICICIBC and Bank of Baroda. Preferred beta names are YES, OBC and AXSB.

Alpesh Mehta ([email protected]) / Sohail Halai ([email protected])




Financials - Banks

Private Banks

Axis Bank 1,031 Buy 27,802 19.5 -3.0 23,782 9.2 -16.4 11,958 6.4 -15.1

Federal Bank 298 Buy 5,013 -0.9 -1.6 3,348 -4.3 -16.4 1,633 -24.1 54.6

HDFC Bank 610 Neutral 44,851 20.2 1.5 32,753 27.4 -0.9 19,915 27.7 8.0

ICICI Bank 923 Buy 38,736 14.9 1.4 35,178 10.2 -7.8 20,684 5.7 -9.1

IndusInd Bank 377 Buy 6,823 33.9 0.4 5,494 30.9 -14.4 3,005 20.1 -10.2

ING Vysya Bank 510 Buy 4,567 23.8 7.4 3,052 34.1 -6.6 1,739 15.8 -0.7

Kotak Mahindra Bank* 682 Neutral 9,178 21.1 0.1 6,044 25.3 -22.4 3,426 22.2 -15.0

Yes Bank 305 Buy 6,524 24.5 -1.0 5,889 21.5 -13.4 3,165 3.4 -21.0

Pvt Bkg.Sector Aggregate 143,494 18.6 0.4 115,540 16.6 -9.7 65,525 12.2 -5.7

PSU Banks

Bank of Baroda 501 Buy 28,615 0.0 -1.0 20,394 -14.0 -16.3 7,956 -38.9 -31.9

Bank of India 163 Neutral 25,787 17.4 1.6 18,630 0.5 -14.6 5,101 69.0 -47.1

Canara Bank 225 Neutral 20,488 4.7 2.9 14,225 11.0 -25.1 3,709 -43.9 -53.2

Indian Bank 70 Buy 11,097 -0.9 1.2 7,064 -22.2 -17.8 2,026 -59.2 -36.2

Oriental Bank 150 Buy 12,912 11.6 -1.2 9,316 1.1 -14.4 2,410 -20.2 -31.8

Punjab National Bank 478 Buy 39,378 7.9 0.8 26,493 4.6 -10.9 8,259 -22.5 -35.2

State Bank 1,642 Buy 116,796 6.4 1.5 65,133 -11.4 -13.7 23,798 -34.9 -26.6

Union Bank 115 Neutral 18,920 2.3 -0.9 12,121 -4.8 -14.1 2,959 -46.6 -47.2

PSU Bkg. Sector Aggregate 273,991 6.3 0.9 173,376 -6.3 -15.0 56,219 -32.6 -35.2

Expected quarterly performance summary (INR Million)

*Standalone

C–54October 2013


Outlook on 2QFY14 earnings - levers for profitability are lessNIMs are expected to be flat/decline marginally, despite sharp rise in cost of funds asthe bankers enjoyed strong pricing power in the quarter. Though loan growth haspicked up, non SLR investments are expected to moderate. Thus, customer asset growthis likely to be the trend witnessed so far. Incremental stress additions are expected tobe in line with the guidance given during 1Q results. However, banks' guidance for 2H/full year is expected to worsen. Forex income is expected to be strong (especially forbanks with higher foreign operations) due to significant volatility in forex markets.While net investment gain is expected to be significantly lower/negative, exactamount of losses on investment portfolio is difficult to quantify. Some of the problemfaced are a) Amount of portfolio transferred to HTM during the quarter b) Withinavailable portfolio non interest sensitive AFS portfolio like Treasury bills, Cash mgmtbills etc c) exact cut of yield on portfolio d) excess SLR held in the portfolio and e) backto back hedging used on the interest sensitive portfolio like swaps etc.

Hence, for 2QFY14, we expect NII/operating profit growth of 10%/2% YoY, while PAT isexpected to be lower by 14%+ YoY. Higher margins pressure, weak fees, opex, sharpfall in QoQ trading gains and asset quality pressures will significantly pressurizeearnings of state-owned banks. For 2QFY14, we expect state-owned banks to reportNII growth of 6%, though operating profit and PAT is expected to decline by ~6% and33% YoY respectively. Private banks on the other hand are expected to suffer fromlower net trading gains and weak fees. While pressure on revenue drivers hasincreased, flexibility on the opex side will help earnings of private banks, in our view.We expect private banks to report NII/operating profit/profit growth of 19%/17%/12%YoY for 2QFY14.

Margins to be stable in 2QFY14, but expect moderation in 2HLed by significant liquidity tightness (CD ratio at lifetime high of 78%), banks have apricing power in the system, indicated by an increase in base rates (up 25bp for privateand roll back of the cut in the quarter by state-owned banks). Further, our discussionswith banks suggest that spreads over base rate for incremental lending has risen andincremental net slippages are likely to be lower QoQ due to seasonal factors. Thus,

A quarter marred by significant earnings downgradesIn 2QFY14 preview, we have downgraded the estimates for our coverage universe by7-11% to factor lower net trading gains, lower margins (~10bp lower than what wasexpected earlier) and higher credit cost (increase of 5-7bp). While the impact is likelyto be felt across the board, state-owned banks are expected to be impacted the most(downgrade of 9/15% over FY14E/15E), while private banks are likely to sail throughwith less dent on earnings (6/8% over FY14E/15E).

Financials: Earnings downgrade led by increased risk in the system (INR b) Aggregate Private Banks Aggregate State-owned Banks Aggregate Banks

Old Est. New Est. Chg (%) Old Est. New Est. Chg (%) Old Est. New Est. Chg (%)

FY14 FY15 FY14 FY15 FY14 FY15 FY14 FY15 FY14 FY15 FY14 FY15 FY14 FY15 FY14 FY15 FY14 FY15

NII 601 722 586 693 -2.5 -4.0 1,136 1,318 1,110 1,277 -2.3 -3.1 1,738 2,040 1,696 1,970 -2.4 -3.4

PPP 514 625 496 591 -3.5 -5.5 776 920 749 876 -3.5 -4.8 1,290 1,545 1,245 1,466 -3.5 -5.1

PAT 298 359 280 330 -6.1 -8.1 298 363 273 311 -8.5 -14.5 596 722 553 641 -7.3 -11.3

Source: MOSL

C–55October 2013


NIMs are likely to be flat/decline marginally in 2Q despite a) rise in cost of funds, b)higher CRR maintenance impact (from 70% on an average daily basis to 99%) and c)lower arbitrage opportunities due to RBI move of addressing liquidity requirementsfrom MSF window v/s LAF earlier and sharp rise in MSF spread over Repo to 300bp (onSeptember 20 reduced to 200bp) v/s 100bp earlier. Banks with excess liquidity onbalance sheet like CBK, BOI and BOB can surprise positively by increasing the CD ratio.

In 2HFY14, we expect moderation in margins as a) cost of funds will hit margins, b)bond markets volatility likely to reduce, leading to large corporate shifting to bondmarkets again, c) corporates realigning their funding requirements with a changedscenario and d) expected high net slippages/restructuring in 2H. Positive surpriseshowever can come from a) higher retail liabilities growth and b) change in liquiditystance by RBI.

2Q - Sharp improvement in loan growth; macro challenges will keep businessgrowth low in 2HFor the fortnight ended September 20, 2013, loans/deposits each grew by 18%/14%YoY and on a sequential basis were up 1.1%/3.8% respectively. Over the last five to sixfortnights, loan growth has picked up from 14% to 18% due to shifting of fundingrequirement by corporates from bond market (on sharp rise in rates) to traditionalbank funding (as base rate remains low). With the all-time high CD ratio of 78% andcontinued tightness in liquidity, we expect an increase in lending/deposits rates.Thus, loan growth is expected to moderate and expect some pick-up in deposit growthas real interest rates becomes positive. Sequential depreciation of 4/5% in INR mayhelp banks with higher proportion of international portfolio (BoB, BoI and ICICIBC) toreport better growth rates.

Sanctions pipeline narrows down; more reforms needed to instill confidenceGiven that investment pick-up has a direct correlation with other segments of economy,it remains critical for the Government to speed up the reforms process, fasterimplementation of reforms already announced and remove supply side constraints.Our interactions with bankers suggest that new project proposals are not yet pickingup. However, business sentiments, after showing some improvement in 1Q, haveweakened in 2Q. Even if new sanctions were to take place, actual disbursements willtake 6-9 months. Till then working capital, retail and agriculture are likely to be thekey growth drivers. We expect a moderate growth of 13-14% over FY13-15E.

RBI actions led to delay in recovery and change in outlook for asset qualityIn 1QFY14, looking at the macro scenario, we expected an improvement in asset qualityfrom 2HFY14. However, post RBI's actions and continued sharp depreciation in INR,we expect stress levels to remain high at least till end-FY14. We factor a net slippageratio (for state-owned banks) of 2% in 2QFY14, compared to 3.3% in 1QFY14. 1Q isseasonally the worst quarter for banks, and with the expectation of recovery fromagriculture segment, we expect net slippages (at high levels) to be lower. Retail focusedbanks are likely to be better placed (most private sector banks). However, unlike thepast, retail delinquency has started to increase. Thus, NPAs are expected to rise in thissegment too but will remain manageable.

C–56October 2013


Restructuring would continue - CDR references, a key indicatorLag impact of the cases (amounting to INR700b+ (1.2% of loans)) referred in 1HCY13will be felt in 2QFY14 as some of them get approvals during the quarter. Further, ourchannel checks suggest that incremental flow in CDR and in bilateral remains high in2QFY14 as well. SEBs restructuring under the FRP has further been delayed and isexpected to take place in 3QFY14. Provisioning would also be higher led by (1) increasein provision requirement on standard restructured loans (0.75% to be spread overfour quarters of FY14), (2) incremental restructuring would attract provisions of 5%and (3) net slippages to remain elevated. In 2HFY14, we expect additional provisioningrequirement for the un-hedged forex exposures of corporates.

Trading gains: From expected earnings driver in 1QFY14 to a drag in 2QFY14RBI's actions led to sharp volatility in bond markets. 1/5/10-year G-sec yields toucheda peak of 11.7/9.7/9.2% from a low of 7.6/7.7/7.4% in 2QFY14, before settling at 9.3/8.8/8.7% as on September 30. Significant volatility in yields during the quarter may helpbanks with strong treasury desks to report decent profits. Further, significant volatilityin currency markets will also help banks to report strong forex revenue in the quarter.

As a one-off measure, RBI allowed banks to transfer investment portfolio from AFS toHTM and amortize the MTM losses on AFS portfolio if any, over the next three quarters.Higher impact expected for PNB, SBIN, CBK, OBC, AXSB and YES.

Other earnings drivers: Fees well factored; pension liabilities unascertainable� Moderate economic growth, lower capex etc will keep corporate fees under

pressure. RBI's strict stance on retail products will also keep retail fees undercheck.

� Moderation in revenue for private banks may be partially compensated by flexibleopex structure.

� Situation remains grim for state-owned banks on the opex front as it largelyremains fixed. Further, adoption of LIC's new mortality table will exert pressureon earnings.

Sector strategy: Uncertain environment; remain selective� The policy stance to contain inflationary expectation in the medium term and

protect INR in the near term will keep interest rates higher in the system, thusdelaying growth revival. Higher interest rates, with moderating economic growth,will keep pressure on business growth and asset quality of Indian financials. State-owned banks to be more impacted due to high share of corporate business.

� From uncertain policy stance of inverted yield curve (negative for financials), themove towards flattening curve is positive from earnings perspective (especiallyon margins), in our view. However, RBI's stance is contingent on various domesticand external developments, which if required can be reverted. Thus, the overallmacro environment is likely to remain uncertain for financials.

� Considering the current tightness in liquidity, high CD ratio of 78% and increasingdeposit/credit gap, interest rates, in both retail liability and lending side, shouldrise. Private banks have already increased the base rates by 20-25bp and some

C–57October 2013


Loan growth picks up in 2QFY14... …deposit growth remains moderate

Net slippage ratio to decline but still high (%) Referrals to CDR remain high


Shift in yield curve in 2QFY14 (%) Short-term rates have eased marginally

PSU banks increased it by 10-25bp. If the current tightness continues, then there isa possibility of further 25bp hike in lending rates over three to six months.

� In this current uncertainty, we remain selective and prefer banks with strongcapitalization (risk of dilution low) and liability franchise (emerge stronger in theupturn of economy), management stability, P&L strength (to absorb credit costrisk), levered to interest rate reversal cycle (earnings cushion) and those whohave recognized stress upfront (risk of setback remains low). Top picks: ICICIBCand Bank of Baroda. Preferred beta names are YES, OBC and AXSB.

202

226

679

916

205

210

313

394

189

3149

87

41 33 25 31 27

130

FY10

FY11

FY12

FY13

1QFY

13

2QFY

13

3QFY

13

4QFY

13

1QFY

14

Agg. Debt (INR b) No. of Cases Recd.

7

8

9

10

1 Year 2 Year 5 Year 10 year

30-Jun-13 15-Jul -13 18-Jul -13

20-Sep-13 30-Sep-13

Net Sl ippage Ratio

1.7

3.1

2.0

1.1

2.7 2.7

2.0

1.1

3.3

2.0

1QFY

12

2QFY

12

3QFY

12

4QFY

12

1QFY

13

2QFY

13

3QFY

13

4QFY

13

1QFY

14

2QFY

14E

7

8

9

10

11

12

Jun-

12

Sep-

12

Nov

-12

Feb-

13

Apr

-13

Jun-

13

Sep-

13

6 Month (%) 12 Month (%)

40.3

41.2

42.7

44.9

46.4

47.1

49.9

52.1

54.9

56.3

58.3

61.0

62.3

64.1

64.8

69.0

70.9

71.8

13.2

14.1

13.8

11.113

.9

13.5

14.417

.0

17.5

18.5

15.9

16.8

14.4

15.017

.217

.7

19.822

.01Q

FY10

2QFY

10

3QFY

104Q

FY10

1QFY

11

2QFY

11

3QFY

11

4QFY

11

1QFY

122Q

FY12

3QFY

12

4QFY

12

1QFY

13

2QFY

13

3QFY

134Q

FY13

1QFY

14

20-S

ep

Depos i ts (INR t) Chg YoY (%)

28.0

28.7

30.2

34.1

34.3

37.7

39.4

40.9

47.6

48.1

50.3

53.5

54.2

56.2

46.9

43.7

41.5

32.4

16.2

12.7

13.8 17

.1

19.2

20.0

16.0 18

.7

16.5

15.9

15.1

13.9

13.7 17

.9

19.5

21.5

24.5

21.9

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

20-S

ep

Loans (INR t) Chg YoY (%)

C–58October 2013


Comparative valuationCMP (INR) Rating EPS (INR) P/E (x) P/BV (x) RoE (%)


Financials - Banks

Private BanksAxis Bank 1,031 Buy 110.7 114.4 132.0 9.3 9.0 7.8 1.5 1.3 1.1 18.5 15.2 15.4Federal Bank 298 Buy 49.0 36.1 47.2 6.1 8.3 6.3 0.8 0.7 0.7 13.9 9.3 11.3HDFC Bank 610 Neutral 28.3 36.1 44.7 21.6 16.9 13.6 4.0 3.4 2.8 20.3 21.7 22.7ICICI Bank 923 Buy 72.2 75.0 84.4 12.8 12.3 10.9 2.0 1.8 1.6 14.8 12.8 12.8IndusInd Bank 377 Buy 20.3 23.9 28.4 18.6 15.7 13.3 2.7 2.3 2.0 17.8 15.8 16.4ING Vysya Bank 510 Buy 39.6 37.4 42.9 12.9 13.6 11.9 1.7 1.4 1.2 14.6 12.1 10.9J&K Bank 1,129 Buy 217.5 211.2 234.6 5.2 5.3 4.8 1.1 1.0 0.8 23.6 19.5 18.8Kotak Mah. Bank 682 Neutral 29.3 32.0 36.7 23.3 21.3 18.6 3.3 2.9 2.5 15.5 14.6 14.5South Indian Bank 20 Neutral 3.8 3.8 4.1 5.3 5.3 4.9 0.9 0.8 0.7 20.5 16.5 15.6Yes Bank 305 Buy 36.3 37.8 45.9 8.4 8.1 6.6 1.9 1.6 1.3 24.8 21.3 21.8Pvt. Bank Aggregate 14.5 13.2 11.2 2.5 2.1 1.9 17.2 16.0 16.5PSU BanksAndhra Bank 53 Neutral 23.0 16.4 17.6 2.3 3.2 3.0 0.4 0.3 0.3 16.2 10.5 10.4Bank of Baroda 501 Buy 106.0 85.7 93.5 4.7 5.8 5.4 0.7 0.6 0.6 16.1 11.6 11.5Bank of India 163 Neutral 46.1 44.6 48.2 3.5 3.7 3.4 0.5 0.4 0.4 13.6 11.7 11.6Canara Bank 225 Neutral 64.8 46.6 53.6 3.5 4.8 4.2 0.4 0.4 0.4 13.3 8.8 9.4Corporation Bank 245 Neutral 93.8 86.6 93.7 2.6 2.8 2.6 0.4 0.4 0.3 16.1 13.2 12.9Dena Bank 47 Neutral 23.1 18.8 20.8 2.0 2.5 2.3 0.3 0.3 0.3 17.6 12.7 12.7IDBI Bank 60 Neutral 14.1 14.1 15.7 4.2 4.2 3.8 0.4 0.4 0.4 10.2 9.4 9.8Indian Bank 70 Buy 36.8 25.5 29.5 1.9 2.7 2.4 0.3 0.3 0.2 15.6 9.7 10.3Oriental Bank 150 Buy 45.5 37.2 42.7 3.3 4.0 3.5 0.4 0.3 0.3 11.5 8.7 9.3Punjab Nat. Bank 478 Buy 134.3 113.3 129.4 3.6 4.2 3.7 0.5 0.5 0.4 16.5 12.2 12.7State Bank 1,642 Buy 261.9 206.1 236.8 6.3 8.0 6.9 0.9 0.8 0.8 16.5 11.7 12.2Union Bank 115 Neutral 36.0 27.4 31.5 3.2 4.2 3.7 0.4 0.4 0.4 15.0 10.0 10.6PSU Bank Aggregate 4.6 5.7 5.0 0.7 0.6 0.6 14.9 10.8 11.2


75

85

95

105

115


Sensex IndexMOSL Financia ls Index

70

80

90

100

110



C–59October 2013




Interest Income 64,829 66,872 69,649 70,476 72,778 74,135 76,766 80,913 271,826 304,592

Interest Expense 43,030 43,603 44,701 43,829 44,126 46,332 49,576 53,444 175,163 193,478

Net Interest Income 21,799 23,269 24,948 26,647 28,652 27,802 27,190 27,469 96,663 111,113

% Change (Y-o-Y) 26.4 15.9 16.6 24.2 31.4 19.5 9.0 3.1 20.6 14.9

Other Income 13,355 15,931 16,154 20,072 17,813 16,001 18,351 22,152 65,511 74,317

Net Income 35,154 39,200 41,102 46,718 46,465 43,803 45,541 49,621 162,174 185,431


Operating Profit 19,637 21,783 23,615 27,997 28,436 23,782 24,852 28,275 93,031 105,345

% Change (Y-o-Y) 26.0 22.7 14.7 37.4 44.8 9.2 5.2 1.0 25.2 13.2

Other Provisions 2,588 5,094 3,868 5,954 7,123 6,066 5,841 6,385 17,504 25,414

Profit before Tax 17,048 16,688 19,747 22,044 21,313 17,716 19,011 21,890 75,527 79,931

Tax Provisions 5,513 5,453 6,275 6,492 7,224 5,758 6,179 7,217 23,733 26,377

Net Profit 11,535 11,235 13,472 15,552 14,089 11,958 12,833 14,673 51,794 53,553

% Change (Y-o-Y) 22.4 22.1 22.2 21.8 22.1 6.4 -4.7 -5.6 22.1 3.4

Operating Parameters

NIM (Reported,%) 3.4 3.5 3.6 3.7 3.9 3.5

NIM (Cal, %) 3.3 3.5 3.6 3.5 3.7 3.6 3.4 3.2 3.3 3.3

Deposit Growth (%) 21.3 21.2 17.2 14.8 7.1 5.2 6.5 14.0 14.8 14.0

Loan Growth (%) 29.8 22.9 20.7 16.0 15.8 18.6 18.2 15.0 16.0 15.0

CD Ratio (%) 76.9 73.1 73.4 78.0 83.1 82.3 81.5 78.7 78.0 78.7

CASA Ratio (%) 39.1 40.5 40.0 44.4 42.4 44.4

Asset Quality

OSRL (INR b) 38.3 40.7 42.6 43.7 42.1 43.7

OSRL (%) 2.2 2.4 2.4 2.2 2.1 2.2

Gross NPA (INR b) 20.9 21.9 22.8 23.9 24.9 27.8 31.1 35.7 23.9 35.7

Gross NPA (on customer assets, %) 1.1 1.1 1.1 1.1 1.1 1.2 1.3 1.4 1.1 1.4

E: MOSL Estimates

Axis BankCMP: INR1,031 Buy� Loan growth is expected to remain healthy at 18%+ YoY. However,

deposit growth is expected to be lower at 5% YoY. Low deposit growthis partially on account of capital infusion benefits - bank utilized it byreducing bulk deposits proportion in 1QFY14.

� Margins are expected to moderate by ~10bp to 3.75%, as high bulkdeposit rate and waning impact of capital raised will increase pressureon cost of funds.

� Fee income growth expected to be sub 10%, led by muted corporatefees and slowdown in retail fees. Net investment gain is likely to benegligible led by limited opportunity to book trading gains and MTMexpected on AFS portfolio.

� Factoring slippage ratio of 1.7% (v/s 1.6% in 1QFY14) and credit cost of1% (v/s 1.2% in 1QFY14) for 2QFY14E. Overall, we lower the earningsestimate by 8/10% for FY14E/15E, to factor lower risk adjusted NIMs.Maintain Buy.

Key issues to watch for� Impact on trading income (net of MTM) - due to steep rise in yields.� Bulk deposit proportion and cost of funds movement.� Growth in retail business, traction in SA deposits and asset quality.

Financials & Valuation (INR b)Y/E March 2012 2013 2014E 2015ENII 80.2 96.7 111.1 127.9

OP 74.3 93.0 105.3 121.0

NP 42.4 51.8 53.6 61.7

NIM (%) 3.3 3.3 3.3 3.3

EPS (INR) 102.7 110.7 114.4 132.0

EPS Gr. (%) 24.4 7.8 3.4 15.3

BV/Sh. (INR) 547.4 699.9 795.5 905.6

ABV/Sh. (INR) 18.2 690.1 782.8 892.1

RoE (%) 20.3 18.5 15.2 15.4

RoA (%) 1.6 1.7 1.5 1.5

Payout (%) 18.2 19.1 19.2 19.2

Valuations

P/E(X) 9.3 9.0 7.8

P/BV (X) 1.5 1.3 1.1

P/ABV (X) 1.5 1.3 1.2

Div. Yield (%) 1.7 1.8 2.1

Bloomberg AXSB IN


M. Cap. (INR b)/(USD b) 482 / 8


1,6,12 Rel Perf. (%) 8 / -25 / -15

C–60October 2013




Interest Income 85,576 87,226 88,449 90,716 94,869 96,242 99,283 105,739 351,967 396,134



% Change (YoY) 21.8 11.5 7.0 0.6 3.3 0.0 4.3 7.8 9.7 3.8

Other Income 7,708 8,283 8,406 11,909 12,306 8,861 9,463 11,073 36,306 41,702

Net Income 35,689 36,906 36,815 40,049 41,197 37,475 39,089 41,402 149,459 159,163



% Change (YoY) 23.2 11.4 -13.6 5.1 8.7 -14.0 -5.7 4.3 4.9 -1.9



Tax Provisions 2,081 4,223 2,026 -4,825 2,503 1,866 2,000 2,121 3,505 8,490

Net Profit 11,389 13,014 10,116 10,289 11,679 7,956 8,255 8,301 44,807 36,194

% Change (YoY) 10.3 11.6 -21.6 -32.2 2.5 -38.9 -18.4 -19.3 -10.5 -19.2


NIM (Reported, %) 2.7 2.7 2.7 2.5 2.4 2.7

NIM (Calculated, %) 2.6 2.6 2.5 2.3 2.2 2.2 2.2 2.2 2.4 2.1

Deposit Growth (%) 22.3 24.0 18.8 23.1 22.0 19.0 21.8 12.0 23.1 12.0

Loan Growth (%) 23.0 22.2 14.8 14.2 12.4 14.4 16.1 13.0 14.2 13.0

CASA Ratio (%) 32.2 31.8 32.2 30.4 31.2 31.6

Tax Rate (%) 15.4 24.5 16.7 -88.3 17.7 19.0 19.5 20.3 7.3 19.0

Asset Quality

OSRL (INR B) 179.8 195.8 205.0 200.1 207.2 200.1

OSRL (%) 6.3 6.7 6.8 6.1 6.4 6.1

Gross NPA (INR B) 53.2 58.8 73.2 79.8 97.6 108.0 117.0 122.9 79.8 122.9

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: INR501 Buy


OP 85.8 90.0 88.3 101.9

NP 50.1 44.8 36.2 39.5

NIM (%) 2.8 2.4 2.1 2.2

EPS (INR) 121 106 86 94

EPS Gr. (%) 12.4 -12.7 -19.2 9.2

BV/Sh. (INR) 621 707 775 848

ABV/Sh. (INR) 597 643 651 693

ROE (%) 22.1 16.1 11.6 11.5

ROA (%) 1.2 0.9 0.6 0.6

Div. Payout (%) 16.2 27.4 23.2 23.2

Valuations

P/E(X) 4.7 5.8 5.4

P/BV (X) 0.7 0.6 0.6

P/ABV (X) 0.8 0.8 0.7

Div. Yield (%) 4.3 3.4 3.7

� Loans and deposits are expected to grow 14% YoY and 19% YoYrespectively. This would partially be helped by currency depreciation,which would translate into strong growth in international portfolio(formed 31% of overall business).

� NIM is expected to be stable at 2.4%.� Fee income growth is expected to be ~7%. Factored net investment

loss of INR500m v/s investment gains of INR2.9b in 1QFY14.� Factored net slippage ratio of 2.3% and credit cost of 85bp. Further,

fresh restructuring is expected to remain high (INR23b was done in1QFY14).

� Flat NII growth, sharp increase in both operating and provisioningexpense is expected to drag PAT lower by 39% YoY to INR8b.

� Overall, we lower the earnings estimate by 12/20% for FY14E/15E, tofactor lower NIMs and loan growth. Upgrade to Buy.

Key issues to watch for� Outlook on asset quality and restructuring - management had in the

past indicated that 2QFY14 would be the last quarter of high slippages,which is expected to decline in 2HFY14.

Bloomberg BOB IN


M. Cap. (INR b)/(USD b) 212 / 3


1,6,12 Rel Perf. (%) -1 / -31 / -42

C–61October 2013




Interest Income 77,092 80,055 80,227 81,716 85,412 88,305 91,452 94,550 319,089 359,720



% Change (Y-o-Y) 11.0 15.3 11.7 -1.0 24.1 17.4 15.0 10.0 8.5 16.3

Other Income 8,409 8,941 9,371 10,939 11,808 8,848 9,048 10,675 37,660 40,379

Net Income 28,844 30,901 32,456 35,700 37,178 34,635 35,585 37,921 127,900 145,319



% Change (Y-o-Y) 19.9 19.5 7.2 3.0 30.3 0.5 3.6 -0.1 11.4 7.8



Tax Provisions 3,139 1 1,365 -1,921 5,217 2,186 2,347 2,759 2,584 12,509

Net Profit 8,875 3,019 8,035 7,566 9,642 5,101 5,476 6,362 27,493 26,581

% Change (Y-o-Y) 71.5 -38.5 12.2 -20.6 8.6 69.0 -31.8 -15.9 2.7 -3.3


NIM (Reported, %) 2.3 2.4 2.4 2.5 2.5 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 27.8 24.3 17.0 20.0 17.0

Loan Growth (%) 22.9 20.0 20.3 16.5 17.1 23.3 17.4 16.8 16.5 16.8

CASA Ratio (Reported, %) 32.0 32.8 33.8 32.8 31.4 32.8

Tax Rate (%) 26.1 0.0 14.5 -34.0 35.1 30.0 30.0 30.2 8.6 32.0

Asset Quality

OSRL (INR b) 175.7 178.5 181.4 163.5 162.3 163.5

OSRL (%) 6.6 6.9 6.5 5.6 5.2 5.6

Gross NPA (INR b) 67.5 89.0 86.3 87.7 94.1 102.0 110.2 116.3 87.7 116.3

Gross NPA (%) 2.6 3.4 3.1 3.0 3.0 3.2 3.3 3.4 3.0 3.4

E: MOSL Estimates

Bank of IndiaCMP: INR163 Neutral� Loans and deposits growth is expected to be 23% YoY and 28% YoY,

partially aided by currency depreciation, which is expected to translateinto strong growth in international portfolio (formed 27% of overallbusiness at end-1QFY14).

� NIM is expected to moderate by 10bp+ to 2.4%. Factored netinvestment loss of INR1b, compared to a gain of INR1.6b in 2QFY13and INR6b in 1QFY14.

� Slippages are expected to be high; we have factored a slippage ratioof 2.9% and credit cost of 1%.

� Sequentially, PAT is expected to decline 48%+. However, on a lowerbase of 2QFY13, PAT growth is expected to be strong at 69% YoY.

� Overall, we lower the earnings estimate by 8% for FY14E, to factor inlower NIMs and higher credit cost. Maintain Neutral.

Key issues to watch for� Asset quality performance has been volatile over the last few

quarters. Outlook on slippages and restructuring pipeline.� AFS as a proportion of overall investment is at 35%. Hence, net

investment gains could lead to divergence in profitability.


OP 66.9 74.6 80.4 92.3

NP 26.8 27.5 26.6 28.7

NIM (%) 2.5 2.3 2.3 2.4

EPS (INR) 47 46.1 44.6 48.2

EPS Gr. (%) 2.5 -1.1 -3.3 8.1

ROE (%) 15.6 13.6 11.7 11.6

ROA (%) 0.7 0.7 0.5 0.5

BV/Sh. (INR) 327 362 396 433

ABV/Sh. (INR) 285 298 307 332

Div.Payout (%) 20.2 29.4 24.4 24.4

Valuations

P/E(X) 3.5 3.7 3.4

P/BV (X) 0.5 0.4 0.4

P/ABV (X) 0.5 0.5 0.5

Div. Yield (%) 6.1 5.7 6.2

Bloomberg BOI IN




1,6,12 Rel Perf. (%) 9 / -51 / -53

C–62October 2013




Interest Income 84,729 85,955 85,445 84,651 92,696 94,001 95,351 98,201 340,779 380,248



% Change (Y-o-Y) 4.2 -0.2 3.6 2.5 8.0 4.7 6.2 2.6 2.5 5.3

Other Income 6,926 6,081 8,458 10,065 12,383 7,691 8,006 8,694 31,530 36,774

Net Income 25,362 25,649 28,338 30,971 32,294 28,179 29,109 30,153 110,320 119,735



% Change (Y-o-Y) 9.7 -19.9 -2.8 13.9 36.2 11.0 -6.6 -11.7 -0.9 5.9



Tax Provisions 2,000 2,000 1,800 2,200 1,900 927 1,033 1,297 8,000 5,158

Net Profit 7,752 6,610 7,105 7,254 7,921 3,709 4,134 4,869 28,721 20,632

% Change (Y-o-Y) 6.8 -22.4 -18.9 -12.5 2.2 -43.9 -41.8 -32.9 -12.5 -28.2


NIM (Cal, %) 2.1 2.2 2.3 2.3 2.0 2.0 2.0 2.0 2.2 2.3

Deposit Growth (%) 11.5 7.7 3.1 8.8 14.2 14.6 20.3 13.0 8.8 13.0

Loan Growth (%) 4.9 -1.0 0.3 4.2 10.8 19.9 23.2 16.0 4.2 16.0

CD Ratio (%) 67.4 64.1 67.4 68.1 65.4 67.0 69.0 69.9 68.1 69.9

CASA Ratio (%) 23.3 24.8 25.1 24.2 23.1 24.2

Tax Rate (%) 20.5 23.2 20.2 23.3 19.3 20.0 20.0 21.0 21.8 20.0

Asset Quality

OSRL (INR b) 129.6 137.7 133.8 159.0 181.8 159.0

OSRL (%) 5.7 6.4 6.1 6.6 7.3 6.6

Gross NPA (INR b) 45.0 56.1 60.9 62.6 73.3 79.7 85.0 88.6 62.6 88.6

Gross NPA (%) 2.0 2.6 2.8 2.6 2.9 3.1 3.1 3.2 2.6 3.2

E: MOSL Estimates

Canara BankCMP: INR225 Neutral� Low CD ratio (65%) to help NIMs, hence, expect it to be stable QoQ.� High proportion of AFS portfolio (52% of investment coupled with

duration of 3.8 years) at end-1QFY14 coupled with rise in G-sec yieldsis expected to drag earnings. Factored net investment loss of INR3.2b.

� Modeled a slippage ratio of 3% v/s 4.8% in 1QFY14.� Restructuring is expected to add pressure on overall asset quality. At

end-1QFY14, management had guided for further restructuring ofINR40b, of which INR30b was on account of SEBs.

� Overall, we lower the earnings estimate by 15/31% for FY14E/15E, tofactor lower NIMs and higher provisions (credit cost and MTM loss).

� CBK is highly levered to systemic interest rate and with expectationof rates being elevated, benefit on NIMs and treasury gains may notplay out. Elevated stress creation and ageing of the portfolio will keepcredit cost and earnings under pressure. Hence, downgrade to Neutral.

Key issues to watch for� CBK is highly levered to interest rate, which could not only impact

NIM, but also translate into high MTM losses and weak earnings.� Slippages and restructuring. Proportion of infrastructure loans is

highest among peers, which could add pressure on asset quality.


OP 59.4 58.9 62.4 71.1

NP 32.8 28.7 20.6 23.8

NIM (%) 2.4 2.2 2.0 2.1

EPS (INR) 74 65 47 54

EPS Gr. (%) -18.5 -12.5 -28.2 15.2

BV/Sh. (INR) 464 513 550 592

ABV/Sh. (INR) 414 436 435 449

ROE (%) 17.1 13.3 8.8 9.4

ROA (%) 0.9 0.7 0.5 0.5

Div. Payout (%) 17.2 23.3 23.2 23.2

Valuations

P/E(X) 3.5 4.8 4.2

P/BV (X) 0.4 0.4 0.4

P/ABV (X) 0.5 0.5 0.5

Div. Yield (%) 5.8 4.1 4.8

Bloomberg CBK IN


M. Cap. (INR b)/(USD b) 100 / 2


1,6,12 Rel Perf. (%) 2 / -46 / -54

C–63October 2013




Interest Income 15,367 15,256 15,218 15,835 16,533 16,792 17,393 18,291 61,676 69,009



% Change (YoY) 6.9 6.6 -5.8 -2.3 3.7 -0.9 2.2 11.1 1.1 3.9

Other Income 1,243 1,394 2,039 1,969 2,158 1,682 1,717 1,893 6,644 7,451

Net Income 6,160 6,453 7,012 6,766 7,254 6,695 6,800 7,225 26,391 27,974



% Change (YoY) -2.1 -3.2 -5.9 -0.8 15.6 -4.3 -16.1 -4.7 -3.1 -2.9

Other Provisions 628 305 744 982 2,451 946 849 862 2,658 5,108


Tax Provisions 934 1,041 1,088 494 498 769 786 851 3,556 2,902

Net Profit 1,904 2,151 2,108 2,219 1,057 1,633 1,669 1,809 8,382 6,168

% Change (YoY) 30.2 12.5 4.4 -6.6 -44.5 -24.1 -20.8 -18.5 7.9 -26.4


NIM (Reported,%) 3.4 3.6 3.5 3.1 3.1 3.4

NIM (Cal, %) 3.4 3.6 3.4 3.1 3.1 3.0 3.0 2.9 3.2 2.9

Deposit Growth (%) 17.8 4.8 10.4 17.7 12.7 18.6 20.6 16.0 17.7 16.0

Loan Growth (%) 19.0 8.0 18.9 16.8 8.5 17.1 14.1 14.0 16.8 14.0

CD Ratio (%) 75.2 73.3 76.5 76.5 72.4 72.4 72.4 75.2 76.5 75.2

CASA Ratio (%) 28.4 29.0 29.5 26.9 29.0 26.9

Asset Quality

Gross NPA (INR b) 14.1 14.4 15.6 15.5 14.8 16.2 17.1 17.6 15.5 17.6

Gross NPA (%) 3.6 3.8 3.9 3.4 3.5 3.7 3.7 3.4 3.4 3.4

E: MOSL Estimates

Federal BankCMP: INR298 Buy� Business growth is expected to be marginally above industry average,

with loan and deposit growth at 17% YoY and 19% YoY respectively.� Systemic interest rates have risen. However, lower dependence on

bulk deposits and expected NRI flows (NRI SA deposits as well) willkeep overall increase in cost of funds under check. Nevertheless, weexpect NIM to decline by 5bp+ and to be near 3.1%.

� Fee income growth is expected to be at 18%. Modeled net investmentloss of INR50m v/s gain of INR922m in 1QFY14.

� While slippages in retail and SME are showing signs of stability/improvement, corporate slippages continue to keep the asset qualityvolatile. Hence, factored a net slippage ratio of 1.7%.

� Overall, we lower the earnings estimate by 15/8% for FY14E/15E, tofactor lower margins. Maintain Buy.

Key issues to watch for� Slippages in corporate segment and update on a large government

account, which was expected to be recovered.� Liability profile improved in 1QFY14 as the bank reduced its

proportion of bulk business in 1QFY14. Medium term strategy in termsof loan growth and liability mix.


OP 15.1 14.6 14.2 16.8

NP 7.8 8.4 6.2 8.1

NIM (%) 3.8 3.2 2.9 2.9

EPS (INR) 45.4 49.0 36.1 47.2

EPS Gr. (%) 32.3 7.9 -26.4 31.0

BV/Sh. (INR) 333.3 371.8 400.2 437.5

ABV/Sh. (INR) 326.0 355.4 377.8 412.0

ROE (%) 14.4 13.9 9.3 11.3

ROA (%) 1.4 1.3 0.8 0.9

Payout (%) 23.0 21.3 20.9 20.9

Valuations

P/E(X) 6.1 8.3 6.3

P/BV (X) 0.8 0.7 0.7

P/ABV (X) 0.8 0.8 0.7

Div. Yield (%) 3.0 2.2 2.9

Bloomberg FB IN




1,6,12 Rel Perf. (%) 2 / -43 / -38

C–64October 2013




Interest Income 81,757 85,247 88,904 93,239 96,630 99,129 104,686 110,381 350,649 410,826



% Change (Y-o-Y) 28.2 26.7 27.8 20.6 21.0 20.2 21.1 18.7 22.7 19.1

Other Income 16,494 13,451 19,277 18,036 19,256 17,405 20,565 21,372 68,526 78,599

Net Income 53,018 50,768 59,094 60,989 63,443 62,256 68,802 72,337 226,637 266,839



% Change (Y-o-Y) 31.6 21.0 31.3 17.3 23.6 27.4 19.9 31.6 21.7 24.5



Tax Provisions 6,762 7,184 8,573 7,723 9,351 9,589 10,681 10,750 30,249 40,371

Net Profit 14,174 15,600 18,591 18,898 18,439 19,915 23,499 23,936 67,257 85,788

% Change (Y-o-Y) 30.6 30.1 30.0 30.1 30.1 27.7 26.4 26.7 30.2 27.6


NIM (Reported,%)* 4.6 4.2 4.1 4.3 4.6 4.3

NIM (Cal, %)# 4.8 4.7 4.7 4.9 4.8 4.7 4.8 4.8 4.8 4.7

Deposit Growth (%) 22.0 18.8 22.2 20.1 17.8 17.3 20.0 20.0 20.1 20.0

Loan Growth (%) 21.5 22.9 24.3 22.7 21.2 18.3 19.2 22.0 22.7 22.0

CASA Ratio (%) 46.0 46.4 45.4 47.4 44.7 47.4 46.7

Tax Rate (%) 32.3 31.5 31.6 29.0 33.6 32.5 31.3 31.0 31.0 32.0

Asset Quality

OSRL (%) 0.1 0.1 0.1 0.2 0.2 0.2

Gross NPA (INR B) 20.9 21.3 24.3 23.3 27.2 31.7 37.1 41.4 23.3 41.4

Gross NPA (%) 1.0 0.2 1.0 1.0 1.0 1.1 1.3 1.4 1.0 1.4

E: MOSL Estimates; * Reported on total assets; # Cal. on interest earning assets

HDFC BankCMP: INR610 Neutral� On the back of buoyant retail demand, HDFCB is expected to deliver

healthy loan growth of 18%+ YoY. Deposit growth is also expected tobe in line with loan growth at ~17% YoY.

� Margins are expected to moderate by 10bp+ QoQ but will remainsteady on a YoY basis. Resultantly, NII growth is expected to be ~2%QoQ and 20% YoY.

� Ex-forex, fee income growth is expected to remain healthy at ~17%.However, contribution from trading income is expected to benegligible.

� Asset quality is expected to remain healthy, though stress in fewsegments of retail loans has increased, which needs to be watched.

� Hence, we build provisions of INR3.2b, compared to INR3b (whichalso included INR750m for floating provisions) in 2QFY13. Neutral.

Key issues to watch for� Commentary on retail portfolio, which has been holding out strongly

amid a slowdown in economy.� Branch expansion has been strong in the last couple of years;

continuation of strategy would be positive.


OP 93.9 114.3 142.2 180.4

NP 51.7 67.3 85.8 106.5

NIM (%) 4.8 4.8 4.7 4.7

EPS (INR) 22.0 28.3 36.1 44.7

EPS Gr. (%) 30.4 28.4 27.6 24.1

BV/Sh. (INR) 127.4 152.1 179.7 214.1

ABV/Sh. (INR) 126.4 150.7 175.7 207.8

RoE (%) 18.7 20.3 21.7 22.7

RoA (%) 1.7 1.8 2.0 2.0

Payout (%) 22.8 22.8 23.4 23.4

Valuations

P/E(X) 21.6 16.9 13.6

P/BV (X) 4.0 3.4 2.8

P/ABV (X) 4.0 3.5 2.9

Div. Yield (%) 0.9 1.2 1.5

Bloomberg HDFCB IN


M. Cap. (INR b)/(USD b) 1,431 / 23


1,6,12 Rel Perf. (%) -1 / -7 / -9

C–65October 2013


ICICI BankCMP: INR923 Buy



Interest Income 95,457 100,263 101,383 103,653 104,207 108,038 110,980 111,112 400,756 434,337



% Change (YoY) 32.4 34.5 29.0 22.5 19.7 14.9 13.2 5.3 29.2 12.9

Other Income 18,799 20,430 22,146 22,082 24,843 21,598 23,797 24,868 83,457 95,106

Net Income 50,729 54,142 57,136 60,114 63,048 60,334 63,395 64,919 222,121 251,697



% Change (YoY) 32.0 35.7 28.5 15.8 29.3 10.2 6.0 5.1 27.1 12.0



Tax Provisions 6,684 7,293 8,335 8,400 9,468 8,245 8,510 8,701 30,712 34,923

Net Profit 18,151 19,561 22,502 23,041 22,742 20,684 21,349 21,773 83,255 86,548

% Change (YoY) 36.3 30.1 30.2 21.2 25.3 5.7 -5.1 -5.5 28.8 4.0


NIM (Reported,%) 3.0 3.0 3.1 3.3 3.3 3.3

NIM (Cal, %) 2.9 3.0 3.0 3.2 3.1 3.1 3.1 3.1 3.2 3.1

Deposit Growth (%) 16.1 14.8 9.9 14.5 8.7 7.6 11.0 10.5 14.5 10.5

Loan Growth (%) 21.6 17.6 16.5 14.4 12.3 13.9 12.6 13.4 14.4 13.4

CASA Ratio (%) 39.1 37.5 37.4 38.1 39.0 38.1

Tax Rate (%) 26.9 27.2 27.0 26.7 29.4 28.5 28.5 28.6 26.7 28.6

Asset Quality

OSRL (INR b) 41.7 41.6 45.6 53.2 59.2 53.2

OSRL (%) 1.6 1.5 1.6 1.8 2.0 1.8

Gross NPA (INR b) 98.2 100.4 97.6 96.1 100.1 104.1 108.1 110.7 96.1 110.7

Gross NPA (%) 3.5 3.5 3.3 3.2 3.2 3.2 3.3 3.3 3.2 3.3

� On a YoY basis, loan and deposit growth is expected to be belowindustry average at 14% and 8% respectively. Growth in internationalportfolio is also likely to remain moderate despite the currencydepreciation (forms 27% of overall loans).

� Margins are expected to remain stable at ~3.3%.� Fee income growth is expected to be in the high single digit. While

net investment gain is expected to be negative (v/s INR1.7b in 2QFY13),higher contribution from dividend income would help overall non-interest income to grow by 5%+ YoY.

� Bank's asset quality has been holding fairly well over the past fewquarters and we expect it to continue, given the benign asset qualityin retail segment. At end-1QFY14, the bank had guided for furtherrestructuring (under CDR) of INR10-12b.

� Overall, we lower the earnings estimate by 6/10% for FY14E/15E, tofactor lower risk adjusted margins. Maintain Buy.

Key issues to watch for� Domestic loan growth and traction in retail portfolio.� While performance in asset quality has been strong, moderation in

economic growth may lead to higher-than-expected restructuring.


OP 103.9 132.0 147.8 169.8

NP 64.7 83.3 86.5 97.4

NIM (%) 2.7 3.0 3.1 3.2

EPS (INR) 56 72 75 84

EPS Gr (%) 25.4 28.7 4.0 12.5

BV/Sh (INR)* 409 459 512 571

ABV/Sh (INR)* 397 446 494 545

RoE (%) 12.8 14.8 12.8 12.8

RoA (%) 1.4 1.6 1.5 1.5

Div. Payout (%) 34.1 32.2 34.2 34.8

Valuations

AP/E (x) 10.2 9.5 8.2

AP/BV (x) 1.6 1.4 1.2

AP/ABV (x) 1.7 1.4 1.3

Div. Yield (%) 2.2 2.4 2.7* BV adjusted for investment in susbdiaries,Prices adj for sub value

Bloomberg ICICIBC IN


M. Cap. (INR b)/(USD b) 1,064 / 17

52-Week Range (INR) 1,237 / 759

1,6,12 Rel Perf. (%) 5 / -16 / -19

C–66October 2013




Interest Income 33,738 34,104 35,465 35,620 36,658 37,750 38,965 40,702 138,926 154,075



% Change (Y-o-Y) 12.0 -1.3 -2.3 2.3 -4.9 -0.9 -1.1 8.7 2.4 0.4

Other Income 2,227 3,645 2,402 4,605 5,297 3,227 3,421 3,860 12,879 15,804

Net Income 13,759 14,848 13,837 15,678 16,265 14,324 14,733 15,900 58,122 61,221



% Change (Y-o-Y) 7.6 -1.4 -17.9 -29.2 2.3 -22.2 -2.5 46.1 2.9 5.3


Profit before Tax 6,945 7,063 3,365 888 4,912 2,853 3,593 4,530 18,262 15,890

Tax Provisions 2,328 2,096 59 -2,032 1,738 827 1,042 1,319 2,451 4,926

Net Profit 4,617 4,967 3,306 2,919 3,174 2,026 2,551 3,211 15,811 10,964

% Change (Y-o-Y) 13.5 6.0 -37.1 -15.5 -31.3 -59.2 -22.8 10.0 -9.5 -30.7


NIM (Rep, %) 3.3 3.1 3.1 2.9 2.7 3.1 2.7

NIM (Cal, %) 3.5 3.3 3.2 3.0 2.9 2.8 2.8 2.8 3.2 2.8

Deposit Growth (%) 15.0 12.9 13.5 17.5 17.8 16.9 16.9 16.0 17.5 16.0

Loan Growth (%) 13.8 10.8 13.6 17.5 16.3 18.1 17.6 15.0 17.5 15.0

CD Ratio (%) 73.9 73.0 74.0 75.5 73.0 73.7 74.4 74.6 75.5 74.6

CASA Ratio (%) 29.3 29.0 28.3 27.6 26.9 27.6

Tax Rate (%) 33.5 29.7 1.8 -228.9 35.4 29.0 29.0 29.1 13.4 31.0

Asset Quality

Gross NPA (INR b) 15.5 19.8 31.8 35.7 37.2 40.1 43.2 46.8 35.7 46.8

Gross NPA (%) 1.7 2.1 3.2 3.3 3.4 3.5 3.7 3.8 3.3 3.8

E: MOSL Estimates

Indian BankCMP: INR70 Buy� Business growth is expected to be marginally above industry average,

with loan and deposit growth of 18% and 17% respectively.� Declining trend in NIM is expected to continue, led by an increase in

cost of funds. Hence, we model a 5bp QoQ decline.� Slippages are expected to be at a high level, as economic environment

continues to be challenging. Factor net slippage ratio of 2% and creditcost of 85bp. Further, continued restructuring in large and mid-corporate segment would add stress on the balance sheet.

� At end-1QFY14, AFS investments as a proportion of overall investmentsstood at 36%, which could translate into MTM loss. We model netinvestment loss of INR750m v/s a gain of INR2.6b in 1QFY14.

� Led by weak core income and higher provisioning expense, PAT isexpected to be INR2b v/s INR5b in 2QFY13.

� Overall, we lower the earnings estimate by 17/15% for FY14E/15E, tofactor higher provisions. Maintain Buy.

Key issues to watch for� Asset quality has been very volatile. Improvement in the same and

outlook would be a key for future performance.� Improvement in core operations (NIMs and fees).


OP 34.6 30.6 31.2 34.6

NP 17.5 15.8 11.0 12.7

NIM (%) 3.6 3.2 2.8 2.8

EPS (INR) 41 37 26 29

EPS Gr. (%) 1.9 -9.5 -30.7 15.5

BV/Sh. (INR) 215 243 262 285

ABV/Sh (INR) 197 207 211 227

RoE (%) 19.8 15.6 9.7 10.3

RoA (%) 1.3 1.0 0.6 0.6

Div. Payout (%) 21.4 20.8 23.8 20.9

Valuations

P/E (x) 1.9 2.7 2.4

P/ BV (x) 0.3 0.3 0.2

P/ABV (x) 0.3 0.3 0.3

Div. Yield (%) 9.5 7.5 7.6

Bloomberg INBK IN




1,6,12 Rel Perf. (%) -6 / -65 / -69

C–67October 2013




Interest Income 16,320 17,279 18,005 18,228 19,122 20,013 21,054 21,708 69,832 81,897



% Change (YoY) 24.1 21.6 34.2 42.4 40.4 33.9 19.0 6.1 31.0 23.2

Other Income 3,188 3,205 3,558 3,679 4,706 4,116 4,336 4,715 13,630 17,874

Net Income 8,029 8,302 9,336 10,291 11,501 10,939 11,210 11,733 35,958 45,384



% Change (YoY) 29.6 26.1 35.2 43.4 58.8 30.9 14.8 3.5 34.0 24.8

Other Provisions 535 491 787 819 1,321 975 875 909 2,631 4,080


Tax Provisions 1,143 1,205 1,262 1,542 1,747 1,514 1,523 1,587 5,152 6,371

Net Profit 2,363 2,503 2,673 3,074 3,348 3,005 3,023 3,129 10,612 12,505

% Change (YoY) 31.1 29.6 29.8 37.6 41.7 20.1 13.1 1.8 32.2 17.8


NIM (Reported,%) 3.2 3.3 3.5 3.7 3.7 3.4

NIM (Cal, %) 3.3 3.3 3.6 3.7 3.7 3.7 3.5 3.3 3.7 3.7

Deposit Growth (%) 27.8 24.5 26.0 27.7 23.5 24.7 23.5 19.0 27.7 19.0

Loan Growth (%) 31.2 30.8 30.8 26.4 27.3 27.5 24.4 22.0 26.4 22.0

CD Ratio (%) 82.6 82.5 83.0 81.9 85.2 84.4 83.6 84.0 81.9 83.6

CASA Ratio (%) 27.9 28.0 28.7 29.3 30.0 29.3

Tax Rate (%) 32.6 32.5 32.1 33.4 34.3 33.5 33.5 33.7 32.7 33.8

Asset Quality

OSRL (INR b) 0.9 0.7 1.1 1.3 1.3 1.3

OSRL (%) 0.2 0.2 0.3 0.3 0.3 0.3

Gross NPA (INR b) 3.7 4.1 4.2 4.6 5.1 5.8 6.7 7.7 4.6 7.7

Gross NPA (%) 1.0 1.0 1.0 1.0 1.1 1.1 1.3 1.4 1.0 1.4

E: MOSL Estimates; Quarterly calculated margins based on total assets, yearly on interest earning assets

IndusInd BankCMP: INR377 Buy� Though growth in commercial vehicle finance portfolio is likely to

moderate on the back of slower demand, introduction of new productswill drive growth in the consumer finance portfolio. In the corporatesegment, growth is expected to be driven by working capital. Loangrowth is expected to be above industry average at 27% YoY.

� Margins are expected to decline by 5-7bp to ~3.6%.� Fee income growth is expected to be healthy at ~25% YoY. While there

may be some MTM losses, strong growth in forex income is expectedto contain the impact on PBT.

� Amid a slowdown in CV segment, IIB's asset quality performanceremains healthy. However, we may see delinquencies and freshrestructuring inching up.

� We lower our earnings estimate by 10/13% for FY14E/15E, to factorlower NIMs. Maintain Buy.

Key issues to watch for� Growth strategy, traction in new products and fee-based income.� Additions to saving bank accounts and traction in SA deposits.� Outlook on asset quality, especially on CV portfolio (given the

slowdown in the industry).


OP 13.7 18.4 23.0 27.8

NP 8.0 10.6 12.5 14.9

NIM (%) 3.6 3.7 3.7 3.8

EPS (INR) 17.2 20.3 23.9 28.4

EPS Gr. (%) 38.5 18.3 17.8 18.8

BV/Sh. (INR) 96.7 141.9 161.6 185.1

ABV/Sh. (INR) 17.8 140.2 159.6 181.6

RoE (%) 19.2 17.8 15.8 16.4

RoA (%) 1.6 1.6 1.6 1.6

Payout (%) 14.9 20.3 17.5 17.5

Valuations

P/E (X) 18.6 15.7 13.3

P/BV (X) 2.7 2.3 2.0

P/ABV (X) 2.7 2.4 2.1

Div. Yield (%) 0.8 1.0 1.1

Bloomberg IIB IN


M. Cap. (INR b)/(USD b) 197 / 3


1,6,12 Rel Perf. (%) -1 / -12 / 4

C–68October 2013




Interest Income 11,714 11,976 12,389 12,537 13,086 13,487 14,041 14,568 48,616 55,182



% Change (Y-o-Y) 31.0 21.5 24.5 32.7 23.9 23.8 13.8 9.5 27.3 17.3

Other Income 1,710 1,689 1,866 2,004 2,445 1,935 2,020 2,293 7,269 8,693

Net Income 5,142 5,377 5,895 6,241 6,699 6,502 6,606 6,934 22,655 26,740



% Change (Y-o-Y) 48.1 20.2 24.6 29.0 50.3 34.1 12.8 8.1 29.3 24.6

Other Provisions 267 64 246 336 681 475 450 527 912 2,133


Tax Provisions 607 710 764 804 837 837 819 832 2,885 3,325

Net Profit 1,301 1,502 1,623 1,703 1,751 1,739 1,701 1,715 6,130 6,906

% Change (Y-o-Y) 38.4 30.2 35.8 33.7 34.6 15.8 4.8 0.7 34.3 12.7


NIM (Reported,%) 3.3 3.5 3.6 3.7 3.6 3.5

NIM (Cal, %) 3.3 3.4 3.6 3.5 3.4 3.6 3.4 3.3 3.4 3.5

Deposit Growth (%) 14.6 17.8 19.1 17.4 14.1 17.7 17.4 14.0 17.4 14.0

Loan Growth (%) 22.8 20.8 20.2 10.6 13.0 15.5 15.3 18.0 10.6 18.0

CD Ratio (%) 81.5 83.1 83.8 76.9 80.7 81.5 82.3 79.6 76.9 79.6

CASA Ratio (%) 33.3 32.8 31.7 32.5 30.2 32.5

Tax Rate (%) 31.8 32.1 32.0 32.1 32.3 32.5 32.5 32.7 32.0 32.5

Asset Quality

Gross NPA (INR B) 5.9 5.8 5.7 5.7 5.9 6.6 7.4 8.5 5.7 8.5

Gross NPA (%) 2.0 1.9 1.8 1.8 1.8 1.9 2.0 2.2 1.8 2.2

Net NPA (%) 0.2 0.1 0.1 0.0 0.2 0.2 0.3 0.3 0.0 0.3

ING Vysya BankCMP: INR510 Buy� NIM is expected to improve sequentially by ~20bp, led by the benefit

of capital raised of INR18.4b at end-1QFY14. Thus, NII is expected togrow 24% YoY.

� Fee income growth is expected to be lower than the balance sheetgrowth at ~11% YoY.

� While VYSB has surprised positively over the quarters, in 1QFY14, assetquality came under pressure (slippage ratio of 2.1% v/s 0.7% in FY13).Hence, it would be a key matrix to watch.

� Modeled provision expense of INR475m v/s INR681m in 1QFY14 andINR64m in 2QFY13 to provide buffer for credit cost and MTM loss.

� The stock trades at 1.4x FY14E and 1.2x FY15E BV, and 13.6x FY14E and11.9x FY15E EPS. Maintain Buy.

Key issues to watch for� NIM would benefit in 2QFY14 from the recently raised capital.

However, outlook on core NIM would be important.� Demonstration of operating leverage and performance and outlook

on asset quality remain critical.� Over the past few quarters, SA deposit growth has been in low single

digits - improvement in the same would be a positive.


OP 7.7 9.9 12.4 14.7

NP 4.6 6.1 6.9 7.9

NIM (%) 3.0 3.2 3.2 3.2

EPS (INR) 30.4 39.6 37.4 42.9

EPS Gr. (%) 15.4 30.2 -5.6 14.9

BV/Sh. (INR) 258.2 292.1 375.3 411.3

ABV/Sh. (INR) 2.0 291.7 370.6 403.1

RoE (%) 14.3 14.6 12.1 10.9

RoA (%) 1.1 1.2 1.2 1.1

Payout (%) 17.5 16.1 16.2 16.2

Valuations

P/E(X) 12.9 13.6 11.9

P/BV (X) 1.7 1.4 1.2

P/ABV (X) 1.7 1.4 1.3

Div. Yield (%) 1.1 1.0 1.2

Bloomberg VYSB IN




1,6,12 Rel Perf. (%) 6 / -13 / 22

C–69October 2013


KMB Group: Earnings Trends (INR Million)Y/E March FY13 FY14 FY13 FY14E


Kotak Bank (Standalone) 2,824 2,804 3,617 4,362 4,028 3,426 3,678 3,736 13,607 14,868

Kotak Prime 940 1,140 1,050 1,190 1,170 1,112 1,156 1,167 4,307 4,604

Kotak Mah. Investments 40 160 80 50 40 55 70 84 336 249

Lending Business 3,804 4,104 4,747 5,602 5,238 4,592 4,904 4,987 18,250 19,721

YoY Growth (%) 9.0 16.3 23.9 40.1 37.7 11.9 3.3 -11.0 22.9 8.1

Kotak Securities 230 400 380 130 310 302 317 337 1,145 1,267

Kotak Mah. Capital Co. 60 40 20 40 40 50 50 64 167 204

Capital Market Business 290 440 400 170 350 352 367 401 1,312 1,471

YoY Growth (%) 20.8 76.0 42.9 -69.1 20.7 -19.9 -8.2 135.8 -0.4 12.1

Intl. Subsidiaries -50 80 50 -10 -100 30 30 40 60 0

Kotak Mah. AMC & Trustee Co. 40 -50 110 20 70 70 70 76 35 286

Kotak Investment Advisors 80 90 60 80 10 70 80 90 307 250

Asset Management Business 70 120 220 90 -20 170 180 206 401 536

YoY Growth (%) -58.8 50.0 266.7 -43.8 -128.6 41.7 -18.2 128.8 -0.8 33.5

Consol. PAT excluding Kotak Life 4,164 4,664 5,367 5,862 5,568 5,114 5,452 5,594 19,964 21,728

YoY Growth (%) 6.8 20.8 28.7 24.5 33.7 9.7 1.6 -4.6 20.4 8.8

Kotak OM Life Insurance 320 470 530 580 710 600 550 515 1,900 2,375

Consolidation Adjust. -50 -110 -130 220 -10 -50 -50 -90 21 -200

Consol. PAT Including Kotak Life 4,434 5,024 5,767 6,662 6,268 5,664 5,952 6,019 21,885 23,903

YoY Growth (%) 6.6 16.0 24.5 27.9 41.4 12.7 3.2 -9.7 19.4 9.2

E: MOSL Estimates

Kotak Mahindra BankCMP: INR682 NeutralLending business� Profit from the lending business is expected to moderate to ~12% YoY,

led by the moderation in profitability for standalone bank and YoYdecline in earnings for Kotak Prime and Kotak Investments.

� For the standalone bank, we expect loan and PAT growth of ~17% YoYand 22% YoY respectively. Margins are expected to moderate by 10bp+QoQ and credit cost (including standard asset provisioning) to be ~70bp(stable YoY).

Capital Market and Asset Management business� We expect PAT from capital market related businesses to be flat QoQ.

However, it is expected to be lower by 20% on a YoY basis.� In the asset management business, profitability is expected to improve

42% YoY. Though, overall contribution to PAT from this segment wouldcontinue to remain low at ~3%.

� The stock trades at 18.6x FY15E EPS and 2.5x FY15E BV. Maintain Neutral.

Key issues to watch for� Business growth and CASA trends.� Asset quality trends, especially in the CV segment.

Financials & Valuation (Standalone, INR b)Y/E March 2012 2013 2014E 2015ENII 25.1 32.1 37.7 44.4

OP 16.6 21.6 26.7 30.9

NP 10.9 13.6 14.9 17.3

NIM (%) 4.6 4.6 4.4 4.4

EPS (INR) 24.7 29.3 32.0 36.7

EPS Gr. (%) 16.3 18.5 9.2 14.6

Cons. BV. (INR) 174.2 204.3 235.3 271.0

Cons. ROE (%) 15.4 15.5 14.6 14.5

ROA (%) 1.9 1.8 1.6 1.6

Payout (%) 2.8 2.8 2.9 2.9

Valuations

P/E(X) (Cons.) 23.3 21.3 18.6

P/BV (X) (Cons.) 3.3 2.9 2.5

P/ABV (X) (Cons.) 3.4 3.0 2.6

Div. Yield (%) 0.1 0.1 0.1

Bloomberg KMB IN


M. Cap. (INR b)/(USD b) 523 / 8


1,6,12 Rel Perf. (%) 2 / 0 / 0

C–70October 2013




Interest Income 42,872 44,146 44,687 45,343 47,177 48,353 49,838 51,454 177,048 196,822



% Change (YoY) 10.6 16.9 5.7 13.6 16.1 11.6 9.1 12.7 11.5 12.3

Other Income 4,084 4,068 3,778 4,617 5,381 3,893 4,186 4,953 16,547 18,412

Net Income 15,343 15,639 15,822 16,755 18,451 16,805 17,330 18,634 63,559 71,220



% Change (YoY) 11.9 21.5 12.0 25.5 21.4 1.1 4.4 10.0 17.5 9.1



Tax Provisions 1,730 1,592 -39 -1,202 2,022 680 432 484 2,081 3,618

Net Profit 3,914 3,022 3,264 3,079 3,534 2,410 2,451 2,460 13,279 10,855

% Change (YoY) 10.4 80.2 -7.9 16.2 -9.7 -20.2 -24.9 -20.1 16.3 -18.3


NIM (Rep, %) 2.8 2.8 2.8 2.8 2.9 2.8

NIM (Cal,%) 2.7 2.7 2.7 2.7 2.8 2.8 2.7 2.7 2.7 2.6

Deposit Growth (%) 9.4 9.8 7.9 12.8 11.5 10.6 12.1 14.0 12.8 14.0

Loan Growth (%) 16.0 12.5 11.7 15.2 12.4 10.9 10.9 13.1 15.2 13.1

CD Ratio (%) 71.3 71.8 72.7 73.3 71.8 71.8 71.8 72.7 73.3 72.7

CASA Ratio (%) 24.0 24.1 23.9 23.9 23.5 23.9

Tax Rate (%) 30.7 34.5 -1.2 -64.0 36.4 22.0 15.0 16.5 13.5 25.0

Asset Quality

OSRL (INR b) 105.7 109.4 109.9 99.4 102.7 99.4

OSRL (%) 9.3 9.2 8.9 7.6 8.0 7.6

Gross NPA (INR b) 33.8 34.7 36.9 41.8 43.0 45.1 47.4 48.8 41.8 48.8

Gross NPA (%) 3.0 2.9 3.0 3.2 3.4 3.4 3.5 3.3 3.2 3.3

Oriental Bank of CommerceCMP: INR150 Buy� Loan and deposit growth each is expected to be lower than the industry

average at 11% YoY.� Expect pressure on cost of funds to translate into lower NIM - building

6-7bp of sequential decline.� Asset quality is expected to remain under pressure. Hence, factored a

net slippage ratio of 1.8% v/s 1.3% in 1QFY14 and credit cost of 1.2%v/s 1.1% in 1QFY14.

� At end-1QFY14, AFS as a proportion of overall investment stood at42%, with a duration of 4.5 years. And with an increase in G-sec yields,we factor a net investment loss of INR100m v/s gain of INR1.7b in1QFY14.

� Overall, we lower the earnings estimate by 8/13% for FY14E/15E tofactor lower margins and loan growth. Maintain Buy.

Key issues to watch for� Balance sheet growth and outlook on NIM.� Pipeline of restructuring and outlook on SEBs restructuring.� Tax rate: In 1QFY14, bank made higher tax provisions and effective

tax rate stood at 36%. Currently, we factor a tax rate of 22%.


OP 31.4 36.9 40.3 45.4

NP 11.4 13.3 10.9 12.4

NIM (%) 2.7 2.7 2.6 2.6

EPS (INR) 39 46 37 43

EPS Growth (%) -24.0 16.3 -18.3 14.7

BV/Sh. (INR) 380 415 443 476

ABV/Sh. (INR) 325 350 368 401

RoE (%) 10.7 11.5 8.7 9.3

RoA (%) 0.7 0.7 0.5 0.5

Div. Payout (%) 23.4 23.4 23.2 23.2

Valuations

P/E (x) 3.3 4.0 3.5

P/BV (x) 0.4 0.3 0.3

P/ABV (x) 0.4 0.4 0.4

Div. Yield (%) 6.1 5.0 5.7

Bloomberg OBC IN




1,6,12 Rel Perf. (%) 7 / -45 / -55

C–71October 2013




Interest Income 105,540 104,211 105,288 103,788 104,045 106,947 109,886 113,743 418,933 434,622



% Change (YoY) 18.5 5.7 5.6 14.2 5.8 7.9 8.0 11.1 10.8 8.2

Other Income 11,680 9,054 9,705 11,740 13,421 10,078 10,547 11,024 42,159 45,071

Net Income 48,611 45,548 47,038 49,527 52,496 49,456 50,874 53,007 190,724 205,832



% Change (YoY) 14.8 0.2 0.2 -2.9 4.7 4.6 1.2 -1.2 2.8 2.2



Tax Provisions 5,627 3,935 5,747 2,423 6,320 4,068 4,523 4,808 17,741 19,718

Net Profit 12,457 10,656 13,056 11,317 12,753 8,259 9,183 9,839 47,477 40,034

% Change (YoY) 12.7 -11.6 13.5 -20.5 2.4 -22.5 -29.7 -13.1 -2.8 -15.7


NIM (Rep, %) 3.6 3.5 3.5 3.5 3.5 3.5

NIM (Cal, %) 3.5 3.4 3.4 3.4 3.5 3.4 3.4 3.4 3.4 3.4

Deposit Growth (%) 18.9 17.3 8.2 3.2 3.0 2.0 10.2 14.0 3.2 14.0

Loan Growth (%) 21.2 18.4 13.2 5.1 3.6 7.6 11.0 12.0 5.1 12.0

CD Ratio (%) 76.4 73.5 77.1 78.8 76.9 77.6 77.6 77.5 78.8 77.5

CASA Ratio (%) 35.6 37.0 38.4 40.9 39.6 40.9

Tax Rate (%) 31.1 27.0 30.6 17.6 33.1 33.0 33.0 32.8 27.2 33.0

Asset Quality

OSRL (INR B) 240.5 259.0 285.3 305.3 319.1 305.3

OSRL (%) 8.2 8.8 9.6 9.9 10.5 9.9

Gross NPA (INR B) 99.9 140.2 140.0 134.7 150.9 165.4 179.9 194.7 134.7 194.7

Gross NPA (%) 3.3 4.7 4.6 4.3 4.8 5.1 5.3 5.5 4.3 5.5

Punjab National BankCMP: INR478 Buy� Business growth is expected to be low amid management's focus on

consolidation, with loan and deposit growth of 8% YoY and 2% YoY.� NIM is expected to be stable QoQ at ~3.5%, led by an improvement in

liability profile over the past few quarters.� At end-1QFY14, the bank had 35% of portfolio in AFS, with a duration

of 4.7 years. And due to an increase in G-sec yields, we model a netinvestment loss of INR1.2b v/s investment gain of INR1.9b in 1QFY14.

� Net slippage ratio is likely to decline from the levels of 1QFY14, whichis seasonally a weak quarter. Also, there was a large corporate accountof INR16.6b (i.e. 45%+ of overall slippages) that slipped into NPA. Wefactor a net slippage ratio of 1% v/s 3.3% in 1QFY14. Further,restructuring would keep the stress high.

� Overall, we lower the earnings estimate by 10/13% for FY14E/15E, tofactor lower NIMs, MTM loss and increase in credit cost. Maintain Buy.

Key issues to watch for� Management strategy: (1) consolidation of balance sheet, (2)

proportion of bulk deposits and CASA ratio and (3) asset qualitymanagement.

� Pipeline of restructured loans.


OP 106.1 109.1 111.5 125.9

NP 48.8 47.5 40.0 45.7

NIM (%) 3.5 3.4 3.4 3.3

EPS (INR) 144 134 113 129

EPS Gr. (%) 2.9 -6.7 -15.7 14.2

BV/Sh. (INR) 777 884 971 1,070

ABV/Sh. (INR) 692 751 759 813

ROE (%) 21.1 16.5 12.2 12.7

ROA (%) 1.2 1.0 0.8 0.8

Div. Payout (%) 17.7 23.3 23.2 23.2

Valuations

P/E(X) 3.6 4.2 3.7

P/BV (X) 0.5 0.5 0.4

P/ABV (X) 0.6 0.6 0.6

Div. Yield (%) 5.7 4.7 5.4

Bloomberg PNB IN


M. Cap. (INR b)/(USD b) 169 / 3


1,6,12 Rel Perf. (%) -6 / -38 / -49

C–72October 2013




Interest Income 289,225 296,068 303,436 307,842 317,183 327,789 334,314 340,114 1,196,571 1,319,400



% Change (YoY) 14.7 4.7 -3.2 -4.4 3.5 6.4 5.5 7.9 2.4 5.8

Other Income 34,931 33,466 36,485 55,467 44,743 35,843 35,918 53,912 160,348 170,416

Net Income 146,177 143,205 148,030 166,251 159,862 152,639 153,641 173,441 603,661 639,583



% Change (YoY) 12.9 -1.6 7.3 -19.1 -7.6 -11.4 -16.8 1.6 -1.6 -8.5



Tax Provisions 19,688 18,699 17,268 2,804 14,443 10,692 10,724 14,129 58,459 49,988

Net Profit 37,516 36,581 33,961 32,992 32,411 23,798 23,870 31,186 141,050 111,264

% Change (YoY) 136.9 30.2 4.1 -18.5 -13.6 -34.9 -29.7 -5.5 20.5 -21.1


NIM (Reported, %) 3.6 3.3 3.3 3.2 3.2 3.3

NIM (Cal, %) 3.7 3.4 3.4 3.2 3.2 3.1 3.0 3.0 3.3 3.0

Deposit Growth (%) 16.1 16.5 15.6 15.2 14.0 14.2 15.3 15.0 15.2 15.0

Loan Growth (%) 18.9 17.2 15.6 20.5 15.7 20.2 18.4 15.0 20.5 15.0

Domestic CD Ratio (%) 77.8 76.6 79.2 82.4 78.8 82.4

CASA Ratio (%) 46.1 45.0 45.5 46.5 44.7 46.5

Tax Rate (%) 34.4 33.8 33.7 7.8 30.8 31.0 31.0 31.2 29.3 31.0

Asset Quality

OSRL (INR B) 164 219 238 322 330 322

OSRL (%) 1.8 2.4 2.4 3.1 3.1 3.1

Gross NPA (INR B) 472 492 535 512 609 641 678 706 512 706

Gross NPA (%) 5.0 5.2 5.3 4.8 5.6 5.6 5.7 5.7 4.8 5.7

State Bank of IndiaCMP: INR1,642 Buy� Loan growth is expected to be strong at 20%+ YoY, while deposit growth

is expected to be lower at ~14%.� Expect the downward trajectory in NIM to continue. Modeled NIM

decline of ~10bp QoQ (down 35bp YoY); hence, NII is expected to growby 6% YoY.

� Factored net investment loss of INR1b, compared to a gain of INR6.7bin 1QFY14 and INR4.9b in 2QFY13, thus dragging earnings lower.

� On a sequential basis, net slippages (on a high base) are expected todecline, with expectation of both lower gross slippages and higherrecoveries and upgrades (predominantly led by agriculture segment).We factor a net slippage ratio of 1.8% and credit cost of 90bp.

� Hence, we expect PAT to decline 35% YoY and be at INR23.8b.� Overall, we lower the earnings estimate by 4/11% for FY14E/15E, to

factor higher credit cost. Maintain Buy.

Key issues to watch for� Mr Pratip Chaudhuri retired as Chairman in September 2013. Strategy

of new management and outlook on margin, asset quality and loangrowth in FY14 would be critical.


OP 315.7 310.8 284.3 346.2

NP 117.1 141.0 111.3 128.8

NIM (%) 3.8 3.3 3.0 3.0

EPS (INR) 229 262 206 237

EPS Gr. (%) 35.9 14.6 -21.3 14.9

Cons.BV (INR) 1,541 1,769 1,937 2,130

Cons.ABV (INR) 1,321 1,475 1,474 1,604

RoE (%) 16.0 15.9 11.2 11.8

RoA (%) 0.9 1.0 0.7 0.7

Div. Payout (%) 17.8 18.5 18.7 18.6

Valuations

Cons. P/E (x) 5.9 7.5 6.6

Cons. P/BV (x) 0.9 0.8 0.7

Cons P/ABV (x) 1.1 1.1 1.0

Div. Yield (%) 2.5 2.0 2.3

Bloomberg SBIN IN


M. Cap. (INR b)/(USD b) 1,123 / 18

52-Week Range (INR) 2,550 / 1,453

1,6,12 Rel Perf. (%) -2 / -26 / -33

C–73October 2013




Interest Income 60,699 61,098 63,199 66,251 68,573 69,886 71,920 75,591 251,247 285,969



% Change (YoY) 14.6 11.4 9.9 8.7 4.8 2.3 0.0 -2.1 11.0 1.2

Other Income 4,912 5,458 6,395 8,755 7,563 5,630 6,436 7,314 25,520 26,943

Net Income 23,129 23,960 25,310 28,550 26,654 24,550 25,351 26,696 100,949 103,250



% Change (YoY) 8.7 5.6 5.8 5.4 11.4 -4.8 -9.5 -25.9 6.3 -8.6



Tax Provisions 2,370 2,310 1,986 2,397 1,700 1,151 1,734 1,816 9,063 6,401

Net Profit 5,116 5,546 3,024 7,894 5,602 2,959 4,045 3,853 21,579 16,459

% Change (YoY) 10.2 57.3 53.5 2.1 9.5 -46.6 33.8 -51.2 20.7 -23.7


NIM (Reported,%) 3.0 3.0 3.0 2.9 2.6 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 23.7 20.4 15.0 18.3 15.0

Loan Growth (%) 19.1 19.4 21.3 17.0 16.0 17.1 14.4 12.0 17.0 12.0

CD Ratio (%) 78.3 78.1 79.4 80.3 74.6 73.6 75.0 78.0 80.3 78.0

CASA Ratio (%) 30.9 30.5 31.3 31.0 29.1 31.0

Tax Rate (%) 31.7 29.4 39.6 23.3 23.3 28.0 30.0 32.0 29.6 28.0

Asset Quality

Gross NPA (INR b) 65.4 64.7 63.8 63.1 70.9 75.9 81.1 87.6 63.1 87.6

Gross NPA (%) 3.8 3.7 3.4 3.0 3.5 3.7 3.8 3.7 3.0 3.7

E: MOSL Estimates

Union Bank of IndiaCMP: INR115 Neutral� While pressure on cost of funds has increased, lower interest income

reversals QoQ would provide a cushion. Hence, factored NIM declineof 5bp (on an already lower base).

� Net investment loss is expected to be INR500m v/s a gain of INR1.7bin 1QFY14 and INR1.2b in 2QFY13.

� Asset quality has been volatile over the past few quarters and giventhe emerging challenges in macro-economic environment, we factora net slippage ratio of 1.8% and credit cost of 0.8%.

� Restructured loans portfolio would continue to rise. At end-1QFY14,bank had given a guidance of INR50b, of which INR23b was on accountof SEBs (implementation of which may get delayed to 3QFY14).

� Overall, we lower the earnings estimate by 12/18% for FY14E/15E, tofacor lower NIMs and higher provisions. Sustained pressure on assetquality (higher restructuring guidance), low capitalization andmanagement change in Nov-12 will remain as a overhang on the stock.Downgrade to Neutral from Under Review.

Key issues to watch for� Asset quality outlook.� Guidance of 2.9% NIM given at end-1QFY14 seems optimistic and

there may be a downward revision in the same.


OP 27.1 55.8 51.0 58.5

NP 17.9 21.6 16.5 18.9

NIM (%) 3.0 2.8 2.4 2.5

EPS (INR) 32 36 27 31

EPS Gr. (%) -18.5 11.5 -23.8 14.9

BV/Sh. (INR) 236 263 284 308

ABV/Sh. (INR) 197 224 222 226

RoE (%) 14.8 15.0 10.0 10.6

RoA (%) 0.7 0.7 0.5 0.5

Div. Payout (%) 28.8 25.8 23.2 23.2

Valuations

P/E(X) 3.2 4.2 3.7

P/BV (X) 0.4 0.4 0.4

P/ABV (X) 0.5 0.5 0.5

Div. Yield (%) 6.9 4.8 5.5

Bloomberg UNBK IN




1,6,12 Rel Perf. (%) -2 / -52 / -50

C–74October 2013




Interest Income 18,863 19,864 21,336 22,877 23,979 25,129 26,366 27,547 82,940 103,021



% Change (Y-o-Y) 33.3 35.9 36.7 42.4 39.6 24.5 12.1 10.7 37.3 20.5

Other Income 2,881 2,768 3,132 3,794 4,421 3,733 3,633 3,790 12,574 15,576

Net Income 7,603 8,009 8,975 10,175 11,012 10,257 10,185 10,855 34,762 42,308



% Change (Y-o-Y) 41.4 25.6 41.3 47.3 47.9 21.5 4.0 -7.3 39.1 14.0

Other Provisions 300 317 567 975 970 1,200 1,200 1,121 2,160 4,491


Tax Provisions 1,395 1,469 1,645 1,742 1,821 1,524 1,491 1,542 6,251 6,378

Net Profit 2,901 3,061 3,423 3,622 4,008 3,165 3,167 3,211 13,007 13,552

% Change (Y-o-Y) 34.3 30.2 34.7 33.2 38.2 3.4 -7.5 -11.3 33.1 4.2


NIM (Reported,%) 2.8 2.9 3.0 3.0 3.0 2.9

NIM (Cal, %) 2.8 2.9 3.1 3.0 2.9 2.9 2.8 2.8 2.8 2.8

Deposit Growth (%) 15.2 18.6 20.2 36.2 29.9 31.0 28.8 14.0 36.2 14.0

Loan Growth (%) 16.4 22.9 22.3 23.7 24.3 19.7 20.4 18.0 23.7 18.0

Customer assets growth (%) 32.4 32.5 27.4 30.9 24.2 30.9

CD Ratio (%) 76.7 80.4 77.8 70.2 73.4 73.4 72.7 72.7 70.2 72.7

CASA Ratio (%) 16.3 17.3 18.3 18.9 20.2 18.9 24.1

Asset Quality

Gross NPA (INR B) 1.1 1.0 0.8 0.9 1.0 1.6 2.3 3.2 0.9 3.2

Gross NPA (%) 0.3 0.2 0.2 0.2 0.2 0.3 0.4 0.6 0.2 0.6

E: MOSL Estimates

Yes BankCMP: INR305 Buy� Loan and deposit growth is expected to be above industry average at

~20% YoY and 30%+ YoY respectively.� While higher dependence on bulk deposits is expected to increase

the cost of funds, increase in base rate by 25bp would provide a cushionand help the bank maintain NIM at ~2.9%.

� Some MTM is expected on corporate bond portfolio (in provisionsline). However, gains from swap (in non-interest income line) thatthe bank entered into, is expected to provide a cushion to earnings.

� Growth in fee income, ex-financial markets, is expected to be 19/20%.� YES continues to demonstrate strong asset quality performance even

as the economic environment continues to pose challenges. We expectthe healthy trend to continue.

� Overall, we lower the earnings estimate by 12/10% for FY14E/15E, tofactor lower risk adjusted margins. Maintain Buy.

Key issues to watch for� Outlook on NIM and positioning of investment portfolio.� Roll out branch network and continuation of the same would be

important for building its retail business (especially SA deposits).� Capital raising plans.


OP 15.4 21.4 24.4 29.2

NP 9.8 13.0 13.6 16.5

NIM (%) 2.7 2.8 2.8 2.8

EPS (INR) 28 36.3 37.8 45.9

EPS Gr. (%) 32.1 31.0 4.2 21.6

BV/Sh. (INR) 132 162 192 230

ABV/Sh. (INR) 132 162 192 228

RoE (%) 23.1 24.8 21.3 21.8

RoA (%) 1.5 1.5 1.3 1.3

Div. Payout (%) 16.8 19.2 19.1 19.1

Valuations

P/E(X) 8.4 8.1 6.6

P/BV (X) 1.9 1.6 1.3

P/ABV (X) 1.9 1.6 1.3

Div. Yield (%) 2.0 2.0 2.5

Bloomberg YES IN


M. Cap. (INR b)/(USD b) 109 / 2


1,6,12 Rel Perf. (%) 19 / -34 / -26

C–75October 2013

September 2013 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 to remain healthy; margins and asset quality, a key monitorableThe performance of retail NBFCs (HFCs and AFCs) is expected to remain strong, led by

healthy loan growth (+20%) and stable asset quality outlook (though incremental

data points show some weakness). Margins are likely to moderate/remain stable

despite recent spike in cost of wholesale funds as companies have utilised excess

liqudity on balance sheet and have also raised lending rates during the quarter. While

competition from banks in the retail financing space is intensifying, growth outlook

remains healthy, led by the buoyancy in semi urban and rural economy, market share

gain, loan mix change, unique customer base and expanding branch network. Within

the NBFC space, we continue to like HDFC, IDFC, BAF and MMFS.

The new RBI Governor has indicated to issue new banking licences by January 2014;

among NBFCs under our coverage, Shriram Transport Finance Company, Bajaj Finance

and IDFC are strong contenders for the same.

Housing finance companies: For housing finance companies (HFCs), 2QFY14 is likely

to remain a steady quarter, as growth in individual loans remains buoyant and asset

quality remains healthy. We expect overall loan growth for HDFC and LIC Housing

Finance (LICHF) to remain healthy at +20%. Margins are likely to remain stable/

marginally moderate on a sequential basis. No major regulatory changes were

announced during the quarter. HDFC remains our preferred pick; we also like LICHF

on valuation however margin pressure likely to persist.

Infrastructure finance companies: Infrastructure sector continues to remain in a fragile

state. Over the past few months, Government cleared projects worth over INR1t,

which is good for the sector and will have a positive impact but with a lag. Fuel

availability remains the most critical issue for power sector and resolution is still not

in sight. Among infrastructure finance companies, we expect growth to remain healthy

for REC and PFC at +20%; however, growth rate for IDFC is likely to moderate at sub

10%. Margins are likely to be under pressure due to spike in cost of funds. While no

Sunesh Khanna ([email protected]) / Alpesh Mehta ([email protected])




Financials - NBFC

Bajaj Finance 1,177 Buy 5,830 32.3 -2.3 3,308 35.8 0.0 1,702 32.2 -3.2

HDFC 783 Buy 16,192 16.8 6.5 17,022 7.2 3.9 12,103 5.1 3.2

IDFC 89 Buy 6,868 6.8 0.1 7,543 3.9 -14.2 4,288 -9.8 -22.6

LIC Housing Fin 192 Buy 4,607 30.3 1.3 4,356 28.4 -1.3 3,326 36.8 7.1

M & M Financial 257 Buy 6,602 25.5 7.1 4,669 28.8 12.2 2,302 22.7 20.4

Power Finance Corp 133 Neutral 18,499 25.4 -4.7 18,235 25.2 -5.0 12,776 21.2 0.4

Rural Electric. Corp. 195 Neutral 16,545 29.2 -0.9 16,711 29.0 -1.8 11,825 22.6 -1.1

Shriram Transport Fin. 574 Buy 9,383 8.1 4.0 7,826 9.9 6.5 3,520 4.3 3.2

NBFC Bkg. Sector Aggregate 84,526 21.2 0.8 79,671 18.5 -1.2 51,842 14.1 -0.6


C–76October 2013


large accounts are likely to fall into NPA category, however delayed power/infrastructure reforms continues to remin overhang on the asset quality will remain akey monitorable in the current environment. In light of above issues and slow progresson the power sector reforms we downgrade REC/PFC to Neutral.

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 both MMFS and Bajaj Finance to report healthygrowth in AUM led by good monsoon and continued buoyancy in rural India. SHTFdelivered healthy growth in the previous three quarters despite the sluggish CV sales;however, such high growth is concerning, given the stress in the CV segment andincreasing delinquency levels. Margins are likely to moderate sequentially due toincrease in wholesale funding costs. Asset quality will remain a key monitorable,given the continued stress on CV/UV/tractors/car sales. BAF is our prefered pick inthis segment

Comparative valuationCMP (INR) Rating EPS (INR) P/E (x) P/BV (x) RoE (%)


Financials - NBFCBajaj Finance 1,177 Buy 118.8 146.1 181.1 9.9 8.1 6.5 1.7 1.5 1.2 21.9 19.8 20.8Dewan Housing 104 Buy 35.2 44.2 54.1 3.0 2.4 1.9 0.4 0.4 0.3 17.1 16.3 17.2HDFC 783 Buy 31.4 35.9 40.9 25.0 21.8 19.1 4.8 4.3 3.9 23.8 25.6 25.7IDFC 89 Buy 12.1 13.0 14.9 7.3 6.8 5.9 1.0 0.9 0.8 14.1 13.7 14.1LIC Housing Fin 192 Buy 20.3 24.2 29.6 9.5 7.9 6.5 1.5 1.3 1.1 16.8 17.4 18.4M & M Financial 257 Buy 15.7 17.8 22.5 16.4 14.5 11.4 3.3 2.8 2.4 23.4 20.7 22.4Power Finance Corp 133 Neutral 34.3 38.8 42.7 3.9 3.4 3.1 0.7 0.6 0.5 20.1 19.6 18.7Rural Electric. Corp. 195 Neutral 38.7 46.4 53.8 5.0 4.2 3.6 1.1 0.9 0.8 23.6 23.7 23.1Shriram Transport 574 Buy 64.7 69.7 80.0 8.9 8.2 7.2 1.8 1.5 1.3 20.6 18.3 17.9NBFC Aggregate 11.2 9.7 8.4 2.2 1.9 1.7 20.1 19.6 19.6


75

85

95

105

115



70

80

90

100

110



C–77October 2013




Interest Income 7,013 7,355 8,250 8,323 9,283 9,376 10,032 10,105 29,248 36,932



YoY Growth (%) 21.2 31.9 54.7 36.4 36.4 32.3 26.5 21.8 23.5 30.7

Fees and other income 494 537 500 466 477 500 550 596 1,998 2,123

Net Income 4,871 4,945 5,541 5,524 6,446 6,330 6,930 6,756 19,189 24,597

YoY Growth (%) 15.7 26.3 46.0 27.9 32.3 28.0 25.1 22.3 18.2 28.2



YoY Growth (%) -24.5 -11.7 2.6 -8.0 30.9 27.1 26.9 27.4 -23.1 30.8

Provisions and Cont. 320 534 513 450 639 730 800 941 1,818 3,110


Tax Provisions 677 616 762 746 911 877 999 715 2,803 3,501

Net Profit 1,864 1,813 2,072 1,992 2,193 2,160 2,447 2,404 5,913 7,272

YoY Growth (%) -27.3 84.3 -32.2 -21.4 17.7 19.1 18.1 20.7 45.5 23.0

Adj PAT (Post Tax) 1,387 1,287 1,608 1,638 1,757 1,702 1,939 1,874 5,913 7,272

YoY Growth (%) -45.9 -49.1 -28.8 -35.4 26.7 32.2 20.6 14.4 45.5 23.0

Loan Growth (%) 61.2 57.7 47.3 36.3 34.6 32.1 27.7 30.0 36.3 30.0

Cost to Income Ratio (%) 41.3 40.1 39.6 42.3 41.9 40.5 38.7 39.9 44.4 43.3

Tax Rate (%) 26.6 25.4 26.9 27.2 29.4 28.9 29.0 22.9 31.7 32.3

E: MOSL Estimates

Bajaj FinanceCMP: INR1,177 Buy� Bajaj Finance continues to ride high on its diversification strategy and

strong focus.� Healthy growth momentum continues in consumer and SME

segments. Loan book is expected to grow at a at 28% YoY.� Margins are likely to moderate during this quarter due to spike in cost

of funds; in the last quarter, margins stood at 12.9%.� We expect NII to grow at 32% YoY and flat QoQ.� Asset quality is expected to remain stable. As in June 2013, GNPAs

were 1.14% and NNPAs were 0.25%.� We expect provisions of INR730m v/s INR534m during 2QFY13 and

INR639m during the last quarter.� The stock trades at 1.5x FY14E and 1.2x FY15E BV. Maintain Buy.

Key issues to watch for� Business growth momentum, as the company has been growing its

AUMs at 25%+ for the past 12 quarters.� Margin trends, as the wholesale cost of funds increased during the

quarter.� Asset quality trends in CE and two-wheeler business.


PPP 7.6 10.5 13.9 17.4

PAT 4.1 5.9 7.3 9.0

EPS (INR) 98.4 118.8 146.1 181.1

EPS Gr. (%) 45.9 20.8 23.0 23.9

BV/Share (INR) 487 676 797 946

RoA on AUM (%) 3.8 3.8 3.6 3.5

RoE (%) 24.0 21.9 19.8 20.8

Payout (%) 12.2 15.0 15.0 15.0

Valuations

P/E (x) 12.0 9.9 8.0 6.5

P/BV (x) 2.4 1.7 1.5 1.2

Div. Yield (%) 1.0 1.3 1.9 2.3

* Adj for value of subs

Bloomberg BAF IN



52-Week Range (INR) 1,591 / 966

1,6,12 Rel Perf. (%) 3 / -3 / -3

C–78October 2013




Interest Income 46,924 49,273 50,604 54,207 52,844 55,616 59,105 61,665 200,695 229,231



YoY Change (%) 19.1 11.5 24.5 13.6 16.6 16.8 17.6 22.4 18.5 19.3

Profit on Sale of Inv. 202 941 963 1,049 0 0 800 856 3,156 1,656

Other operating income 2,223 2,480 853 1,405 2,726 2,350 1,650 1,752 7,274 8,478

Net Operating Income 15,467 17,281 17,206 22,263 17,933 18,542 20,554 26,844 72,216 83,874

YoY Change (%) 18.8 17.3 18.3 14.4 15.9 7.3 19.5 20.6 16.9 16.1

Other Income 74 78 84 116 80 90 90 90 351 350

Total Income 15,541 17,358 17,290 22,379 18,013 18,632 20,644 26,934 72,567 84,224


Pre Provisioning Profit 14,199 15,881 15,851 21,247 16,378 17,022 19,009 25,520 67,178 77,929

YoY Change (%) 19.0 17.2 17.6 14.9 15.3 7.2 19.9 20.1 16.9 16.0

Provisions 400 400 400 250 300 442 465 658 1,450 1,865

PBT 13,799 15,481 15,451 20,997 16,078 16,580 18,544 24,862 65,728 76,064

YoY Change (%) 17.4 15.7 16.3 15.1 16.5 7.1 20.0 18.4 16.0 15.7

Provision for Tax 3,780 3,970 4,050 5,445 4,350 4,477 5,007 6,704 17,245 20,537

PAT 10,019 11,511 11,401 15,552 11,728 12,103 13,537 18,158 48,483 55,527

YoY Change (%) 18.6 18.6 16.2 17.3 17.1 5.1 18.7 16.8 17.6 14.5

E: MOSL Estimates

HDFCCMP: INR783 Buy� HDFC's loan growth (net of sell-downs) is likely to remain healthy at

~19.8% YoY and 5% QoQ.

� Spreads should largely be stable at ~2.3% levels as the company hasutilised excess liqudity on balance sheet; furthur HDFC has also retail& corporate lending rates by 25/100bp during the quarter.

� NII is likely to remain strong at INR16.2b, registering a growth of 16.8%YoY.

� Non-interest income is likely to de-grow 30% YoY and 13% QoQ as weestimate zero gains on sale of investments during the quarter.

� Asset quality has remained healthy over the past several quarters andthe trend is likely to continue. In 1QFY14, GNPAs were 0.77% on 90-days overdue basis.

� The stock trades at 4.2x FY14E AP/ABV and 3.3x FY15E AP/AEPS (priceadjusted for value of other businesses and book value adjusted forinvestments made in those businesses). Maintain Buy.

Key issues to watch for� Loan growth and movement in spreads (on individual loans).� Asset quality trends; progress on the recovery of a corporate account

that became NPL during 1QFY14.� Spreads movement in the wake of increased wholesale rates.


PPP 57.5 67.2 77.9 90.4

PAT 41.2 48.5 55.5 63.3

Adj. EPS (INR) 22.7 26.2 30.3 34.7

EPS Gr. (%) 19.8 15.3 15.9 14.3

BV/Share (INR) 129 162 181 200

ABV / Share (INR)100 109 128 147

RoAA (%) 2.7 2.7 2.6 2.5

Core RoE (%) 22.3 23.8 25.6 25.7

Payout (%) 45.8 46.6 46.4 46.4

Valuations

AP/E (x) 26.0 21.6 17.5 14.0

P/BV (x) 6.1 4.8 4.3 3.9

AP/ABV (x) 5.9 5.2 4.2 3.3

Div. Yield (%) 1.4 1.6 1.8 2.1

Bloomberg HDFC IN


M. Cap. (INR b)/(USD b) 1,210 / 19


1,6,12 Rel Perf. (%) 4 / -10 / -3

C–79October 2013




NII 6,220 6,430 6,560 6,430 6,860 6,868 7,005 7,153 25,640 27,887

% Change (YoY) 28.8 29.1 22.4 9.9 10.3 6.8 6.8 11.2 22.0 8.8

- Infra Loans 5,550 5,960 6,110 6,030 6,310 6,387 6,515 6,652 23,650 25,865

- Treasury 670 470 450 400 550 481 490 501 1,990 2,022

Fees 1,462 1,568 1,676 2,412 2,679 1,600 1,980 2,327 7,118 8,586

- Asset management 640 690 870 890 930 725 800 944 3,090 3,399

- IB and Broking 90 210 80 400 130 145 150 169 780 594

- Fixed Income 120 190 300 570 1,390 200 300 300 1,180 2,190

- Loan related/others 612 478 426 552 229 530 730 915 2,068 2,403

Principal investments 20 490 70 1,290 630 500 625 709 1,870 1,850

Other Income 14 16 59 9 6 0 0 0 98 6

Net Income 7,716 8,504 8,365 10,141 10,174 8,968 9,610 10,190 34,726 38,943

% Change (YoY) 8.3 (18.6) (6.0) 22.7 31.9 5.5 14.9 0.5 (0.0) 12.1



% Change (YoY) 9.6 (20.5) (7.9) 26.9 34.1 3.9 15.7 0.6 (0.3) 12.5

Provisions 1,026 305 518 1,647 592 1,200 1,000 1,089 3,496 3,881

PBT 5,530 6,957 6,514 6,934 8,198 6,343 7,135 7,544 25,936 29,221

Tax 1,713 2,188 1,965 1,646 2,627 2,030 2,283 2,409 7,511 9,349

PAT 3,817 4,770 4,549 5,289 5,571 4,313 4,852 5,136 18,425 19,872

Less: Consol Adjustments 19 13 (2) 32 34 25 25 16 62 100

Consol PAT 3,798 4,757 4,551 5,257 5,537 4,288 4,827 5,120 18,362 19,772

% Change (YoY) 21.1 (9.3) 19.4 57.0 45.8 (9.8) 6.1 (2.6) 18.2 7.7

E: MOSL Estimates

IDFCCMP: INR89 Buy� IDFC has consciously moderated loan growth in the wake of uncertain

macro environment. Loan growth is expected at 2.5% QoQ and 9% YoY.� We expect margins to contract 10bp on a QoQ basis, translating into

~5.4% QoQ and 23.4% YoY growth in NII.� Revenue from Investment Banking and Broking business is expected

to decline sequentially, given the subdued activity levels in capitalmarkets. However, we expect revenue from Asset Management toimprove marginally YoY. Loan related and other fee income too isexpected to increase sequentially YoY to INR530m.

� Cost to income ratio on a 12-month rolling basis is likely to remainstable at 15.3%.

� Asset quality is expected to remain stable. We model provisions ofINR1.2b, against INR305m in 2QFY13 and INR592m during last quarter.

� The stock trades at 0.9x FY14 P/BV and 0.8x FY15E P/BV. Buy.

Key issues to watch for� Loan growth guidance, given the uncertain macro environment.� Movement in spreads in the wake of increase in wholesale cost of

funds.� Asset quality trends.


PPP 24.6 29.4 33.1 37.1

Cons. PAT 15.5 18.4 19.8 22.6

EPS (INR) 10.3 12.1 13.0 14.9

EPS Gr. (%) 17.1 18.0 7.6 14.5

BV/Share (INR) 81 90 100 111

ABV/Share (INR) 73 81 91 102

RoAA (%) 2.9 2.9 2.7 2.8

Core RoE (%) 16.2 15.1 15.7 16.0

Payout (%) 25.2 26.2 26.9 26.9

Valuations

P/E (x) 8.7 7.3 6.8 6.0

P/BV (x) 1.1 1.0 0.9 0.8

P/ABV (x) 0.9 0.8 0.7 0.7

Div. Yield (%) 2.6 2.9 3.2 3.7

* Adj for value of subs

Bloomberg IDFC IN


M. Cap. (INR b)/(USD b) 135 / 2


1,6,12 Rel Perf. (%) 2 / -43 / -49

C–80October 2013




Interest Income 17,179 18,081 19,050 20,281 21,303 22,368 23,350 24,924 74,591 91,945



YoY Growth (%) -2.9 5.8 13.5 24.3 29.7 30.3 27.2 9.9 10.3 23.3

Fees and other income 494 537 500 466 477 500 550 596 1,998 2,123

Net Income 3,999 4,073 4,196 5,074 5,024 5,107 5,251 5,662 17,343 21,044

YoY Growth (%) -5.0 4.0 10.6 17.5 25.6 25.4 25.1 11.6 6.8 21.3

Operating Expenses 521 679 673 946 613 751 822 1,033 2,819 3,219


YoY Growth (%) -8.2 1.2 8.0 19.2 26.8 28.4 25.7 12.1 4.7 22.7

Provisions and Cont. 436 69 319 -35 171 -200 -225 -261 789 -515


Tax Provisions 766 894 843 1,002 1,135 1,230 1,257 1,330 3,504 4,952

Net Profit 2,277 2,430 2,362 3,162 3,105 3,326 3,398 3,560 10,232 13,389

YoY Growth (%) -11.2 147.0 -22.7 24.7 36.3 36.8 43.8 12.6 11.9 30.9

Adj PAT (Post Tax) 2,277 2,430 2,362 3,162 3,105 3,326 3,398 3,560 10,232 12,221

YoY Growth (%) -11.2 -3.8 4.6 24.7 36.3 36.8 43.8 12.6 2.2 19.4

Loan Growth (%) 24.1 23.2 23.8 23.4 22.1 22.5 22.9 22.0 23.4 22.0

Borrowings Growth (%) 23.7 24.2 22.1 22.6 22.6 20.6 23.0 23.6 22.6 23.6


Tax Rate (%) 25.2 26.9 26.3 24.1 26.8 27.0 27.0 27.2 25.5 27.0

E: MOSL Estimates

LIC Housing FinanceCMP: INR192 Buy� LICHF's loan growth is likely to remain healthy at 22% YoY on the back

of buoyant demand in the individual loans segment.

� Individual loans segment is likely to grow by 23% YoY and 6% QoQ,while the developer segment is expected to grow by 4% QoQ. Shareof builder loan is likely to fall below 3% of overall book.

� We expect margins to expand by ~15bp YoY (re-pricing of the teaserrate loans), which would provide cushion to margins.

� Asset quality is likely to remain stable. We model provisioning reversalof ~INR200m (v/s provisioning of INR171m in 1QFY14); the reversalwould be on account of provisioning release for teaser loans.

� The stock trades at 1.3x FY14E and 1.1x FY15E BV. Maintain Buy.

Key issues to watch for� Asset quality in the developer category; outlook on performance in

the developer portfolio.� Margin trends; LICHF has been disappointing on the margin front for

past few quarters. Margins bounced back last quarter; however,sustaining/improving the margins will be key.

� Overall asset quality trends.


PPP 13.9 14.5 17.8 21.8

Adj. PAT 10.0 10.2 12.2 14.9

Adj. EPS (INR) 19.8 20.3 24.2 29.6

EPS Gr. (%) -8.4 2.2 19.4 22.3

BV/Sh (INR) 112.5 128.3 149.3 173.1

RoAA (%) 1.8 1.5 1.5 1.4

RoE (%) 20.3 16.8 17.4 18.4

Payout (%) 19.9 21.7 20.9 20.9

Valuations

P/E (x) 10.6 9.5 7.9 6.5

P/BV (x) 1.7 1.5 1.3 1.1

Div. Yield (%) 1.9 2.0 2.5 2.8

Bloomberg LICHF IN




1,6,12 Rel Perf. (%) 7 / -19 / -36

C–81October 2013




Operating Income 8,351 9,157 9,956 11,103 10,925 11,744 12,684 14,050 38,413 49,402

Other Income 39 135 53 153 60 150 100 139 533 450

Total income 8,390 9,292 10,009 11,256 10,985 11,894 12,784 14,189 38,947 49,852

YoY Growth (%) 49.8 43.9 35.0 32.9 30.9 28.0 27.7 26.1 39.4 28.0


Net Income 4,916 5,394 5,665 6,784 6,224 6,752 7,320 8,517 22,759 28,813



YoY Growth (%) 56.6 51.8 35.6 31.2 28.1 28.8 31.3 28.0 41.7 29.0

Provisions 854 836 815 329 1,252 1,150 1,000 1,110 2,833 4,512


Tax Provisions 784 914 975 1,160 995 1,218 1,377 1,681 3,833 5,271

Net Profit 1,610 1,876 2,002 3,184 1,912 2,302 2,603 3,190 8,674 10,008

YoY Growth (%) 57.6 38.4 29.4 39.9 18.7 22.7 30.0 0.2 39.9 15.4

AUM growth (%) 39.3 35.6 32.0 35.1 34.8 31.2 28.8 28.8 35.1 28.8

Borrowings growth (%) 44.8 38.9 34.5 35.1 36.8 23.2 21.5 32.3 35.1 32.3


Provisions/Operating Profits (%) 26.3 23.1 21.5 7.0 30.1 24.6 20.1 18.6 18.5 22.8

Tax Rate (%) 32.8 32.7 32.8 26.7 34.2 34.6 34.6 34.5 30.6 34.5

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: INR257 Buy� MMFS continues to ride high on its multi-product strategy and strong

rural focus. Healthy growth momentum in the car segments is likelyto sustain on the back of festive season . AUMs expected to grow at ahealthy pace at 30% levels.

� Margins are likely to remain flat during this quarter; despite rise incost of funds as the company has raised lending rates during the quarterwhich is likely to cushion margins

� We expect NII to grow at 35% YoY and flat QoQ.

� Asset quality is expected to remain stable. As in June 2013, GNPAswere 4.2% and NNPAs were at 1.9%.

� We expect provisions of INR1.15b v/s INR836m during 2QFY13 andINR1.25b during last quarter.

� The stock trades at 3x FY14E and 2.6x FY15E BV. Maintain Buy.

Key issues to watch for� Business growth momentum, as the company has been growing its

AUMs at 30%+ rate for the past 10 quarters.� Margin trends, as the wholesale cost of funds increased during the

quarter.� Asset quality trends, given continued weakness in car sales.


PPP 10.8 15.3 19.8 25.3

PAT 6.2 8.7 10.0 12.7

EPS (INR) 12.1 15.7 17.8 22.5

EPS Gr. (%) 33.6 29.8 13.4 26.6

BV/Share (INR) 57.5 79.1 92.2 108.8

ABV/Share (INR) 18.3 76.1 86.7 100.1

RoA on AUM (%) 3.8 3.9 3.4 3.3

RoE (%) 22.8 23.4 20.7 22.4

Payout (%) 27.1 27.1 26.3 26.3

Valuations

P/E (x) 21.3 16.4 14.5 11.4

P/BV (x) 4.5 3.2 2.8 2.4

P/ABV (x) 4.6 3.4 3.0 2.6

Div. Yield (%) 1.1 1.4 1.6 2.0

Bloomberg MMFS IN


M. Cap. (INR b)/(USD b) 145 / 2


1,6,12 Rel Perf. (%) 3 / 28 / 37

C–82October 2013




Interest Income 39,000 41,300 44,190 45,920 49,590 49,888 50,237 51,886 170,410 201,601



YoY Gr % 40.8 36.6 53.0 40.4 39.2 25.4 4.8 9.3 52.7 18.6

Other Income 90 160 90 250 100 130 140 212 590 582

Net Operational Income 14,030 14,910 16,870 17,510 19,509 18,629 17,733 19,082 63,320 74,953

YoY Gr % 36.9 37.0 50.5 36.6 39.1 24.9 5.1 9.0 40.2 18.4

Exchange gain/(loss) -770 -240 -460 90 -1,070 -1,200 -650 -580 -1,380 -3,500

Total Net Income 13,260 14,670 16,410 17,600 18,439 17,429 17,083 18,502 61,940 71,453

YoY Gr % 39.6 151.2 6.4 35.2 39.1 18.8 4.1 5.1 41.5 15.4

Operating Expenses 286 351 389 426 319 394 359 593 1,450 1,665

YoY Gr % 5.8 6.2 34.0 4.1 11.8 12.4 -7.7 39.2 12.1 14.8

% to Income 2.2 2.4 2.4 2.4 1.7 2.3 2.1 3.2 2.3 2.3


YoY Gr % 40.6 159.9 5.9 36.2 39.7 19.0 4.4 4.3 42.4 15.4

Provisions 20 -30 900 -90 910 1,200 700 732 800 3,542

PBT 12,954 14,350 15,122 17,264 17,210 15,835 16,024 17,177 59,690 66,246

Tax 3,240 3,978 3,940 4,320 5,230 3,959 4,006 4,360 15,478 17,555

Tax Rate % 25.0 27.7 26.1 25.0 30.4 25.0 25.0 25.4 25.9 26.5

PAT 9,714 10,372 11,182 12,944 11,980 11,876 12,018 12,816 44,212 48,691

YoY Gr % 41.6 147.5 0.9 57.9 23.3 14.5 7.5 -1.0 45.8 10.1

Adjusted PAT (For Forex) 10,292 10,545 11,522 12,877 12,725 12,776 12,506 13,249 45,235 51,256

YoY Gr % 38.6 31.4 45.6 59.9 23.6 21.2 8.5 2.9 44.0 13.3

E:MOSL Estimates; Quarterly and annual numbers would not match due to differences in classification

Power Finance CorporationCMP: INR133 Neutral� Loan growth is expected to remain healthy at ~23% YoY. On a sequential

basis, loans and borrowings are expected to grow by ~4% and ~5%respectively.

� NII is expected to grow at a healthy 25% YoY on the back of healthyloan growth. Margins are likely to moderate QoQ.

� We expect MTM loss of INR1.2b during the quarter, compared with again of INR1.1b loss incurred in 1QFY14.

� We expect NIMs to remain moderate at 4.4%, compared to 4.7%reported during 1QFY14.

� Barring a couple of accounts, asset quality by large remained healthy,though it will remain a key monitorable, given the uncertain macroenvironment and issues related to fuel linkages.

� The stock trades at 0.63x FY14E and 0.55x FY15E BV. We are downgradingour rating from Buy to Neutral.

Key issues to watch for� Growth trends and asset quality performance, against the backdrop

of challenging fuel linkage issues.� Movement in spreads and yields on assets.� Overall disbursements trends and disbursements to SEBs for

transitional finance.� Forex loss due to sharp depreciation in INR.


PPP 42.5 60.5 69.8 79.0

Adj. PAT 31.5 45.2 51.3 56.3

Adj. EPS (INR) 23.9 34.3 38.8 42.7

EPS Gr. (%) 3.9 43.4 13.3 9.9

BV/Share (INR) 157.5 183.9 211.8 243.7

Adj. RoAA (%) 2.7 3.1 2.8 2.6

RoE (%) 17.5 20.1 19.6 18.7

Payout (%) 30.3 24.2 24.4 23.5

Valuations

P/E (x) 5.6 3.9 3.4 3.1

P/BV (x) 0.8 0.7 0.6 0.5

Div. Yield (%) 4.5 5.3 5.8 6.4

Bloomberg POWF IN


M. Cap. (INR b)/(USD b) 176 / 3


1,6,12 Rel Perf. (%) 16 / -31 / -36

C–83October 2013




Interest Income 29,968 32,405 35,014 35,522 39,141 40,315 41,524 42,892 132,910 163,872



YoY Gr (%) 28.1 34.8 42.3 38.0 43.3 29.2 17.5 19.0 36.0 26.5

Other Operational Income 717 514 322 726 675 600 600 671 2,279 2,546

Net Operational Income 12,372 13,316 14,626 14,813 17,377 17,145 17,414 17,440 55,126 69,375

YoY Gr (%) 30.4 36.1 41.0 37.1 40.5 28.8 19.1 17.7 39.2 25.8

Other Income -133 79 -34 112 -374 -475 -375 -302 23 -1,525

Total Net Income 12,239 13,394 14,591 14,925 17,004 16,670 17,039 17,138 55,149 67,850

YoY Gr (%) 27.2 52.3 27.9 36.3 38.9 24.5 16.8 14.8 35.2 23.0

Operating Expenses 456 585 507 656 564 659 726 656 2,203 2,605

YoY Gr (%) 8.7 34.2 -34.9 -2.2 23.8 12.7 43.3 -0.1 -5.3 18.2

% to Income 3.7 4.4 3.5 4.4 3.3 4.0 4.3 3.8 4.0 3.8


YoY Gr % 28.0 53.2 32.5 38.8 39.5 25.0 15.8 15.5 37.7 23.2

Op. Profit adj. forex gain /loss 12,158 12,949 14,305 14,310 17,020 16,711 16,913 17,002 53,721 67,645

YoY Gr (%) 31.0 34.7 46.5 38.4 40.0 29.0 18.2 18.8 37.8 25.9

Provisions 0 0 250 1,057 560 400 450 574 1,307 1,984

PBT 11,784 12,809 13,835 13,212 15,880 15,611 15,863 15,909 51,640 63,262

YoY Gr (%) 31.6 53.2 33.2 29.0 34.8 21.9 14.7 20.4 36.1 22.5

Tax 3,016 3,270 3,568 3,609 4,343 4,293 4,362 4,399 13,463 17,397

Tax Rate (%) 25.6 25.5 25.8 27.3 27.3 27.5 27.5 27.7 26.1 27.5

PAT 8,767 9,539 10,267 9,603 11,537 11,318 11,500 11,510 38,176 45,865

YoY Gr (%) 32.5 52.8 33.4 25.9 31.6 18.6 12.0 19.9 35.5 20.1

Adjusted PAT 9,046 9,643 10,430 9,633 11,958 11,825 11,935 11,886 38,752 47,605

YoY Gr (%) 35.6 34.3 47.9 25.5 32.2 22.6 14.4 23.4 35.6 22.8

E:MOSL Estimates; Quarterly and annual numbers would not match due to differences in classification

Rural Electrification CorpCMP: INR195 Neutral� Loan growth is expected to remain healthy at 20%+ levels. We model

a loan growth of ~24% YoY and ~4% QoQ.� RECL's margins have stood at 4.96% (highest in last four years). This

was led by an improvement in yields, while it also maintained a tightleash on cost of funds. However, in the current quarter, we expectmargins to moderate and decline 25bp sequentially to 4.88%.

� We factor forex MTM loss of INR700m for 2QFY14.� Barring a couple of accounts, asset quality by large remained healthy,

though it will remain a key monitorable, given the uncertain macroenvironment. We model provisions of INR400m during the quarter.

� The stock trades at 0.9x FY14E and 0.8x FY15E BV. We are downgradingour rating from Buy to Neutral.

Key issues to watch for� Growth trends and asset quality performance against the backdrop

of challenging macro environment.� Movement in spreads and yield on assets.� Overall disbursement trends and disbursements to SEBs for

transitional finance.� Forex loss due to sharp depreciation in INR.


PPP 38.5 52.9 65.2 75.4

PAT 28.2 38.2 45.9 53.1

EPS (INR) 28.6 38.7 46.4 53.8

EPS Gr. (%) 10.1 35.4 20.1 15.8

BV/Share (INR) 149.2 178.2 213.1 253.5

RoAA (%) 3.0 3.3 3.4 3.3

RoE (%) 20.5 23.6 23.7 23.1

Payout (%) 30.5 24.9 24.9 24.9

Valuations

P/E (x) 6.8 5.0 4.2 3.6

P/BV (x) 1.3 1.1 0.9 0.8

Div. Yield (%) 3.8 4.3 5.1 5.9

Bloomberg RECL IN


M. Cap. (INR b)/(USD b) 193 / 3


1,6,12 Rel Perf. (%) 4 / -11 / -16

C–84October 2013


Quaterly Performance (INR Million)Y/E March FY13 FY14 FY13 FY14E


Interest Income 8,876 10,946 12,046 13,104 13,856 15,380 16,379 16,625 45,028 62,240

Interest expenses 6,173 6,859 7,350 8,057 8,692 9,562 9,848 10,084 28,439 38,187


YoY Growth (%) 1.8 16.0 51.0 74.1 91.1 42.3 39.1 29.6 36.1 45.0

Securitization income 5,323 4,590 4,252 3,892 3,859 3,565 3,408 3,860 18,057 14,692

Net Income (Incl. Securitization) 8,025 8,678 8,947 8,939 9,022 9,383 9,939 10,401 34,645 38,746

YoY Growth (%) 2.6 4.0 11.3 11.0 12.4 8.1 11.1 16.4 7.4 11.8

Fees and Other Income 702 314 300 569 825 725 725 741 1,885 3,016

Net Operating Income 8,727 8,991 9,247 9,508 9,848 10,108 10,664 11,142 36,530 41,762

YoY Growth (%) 5.2 4.5 11.0 14.4 12.8 12.4 15.3 17.2 8.9 14.3



YoY Growth (%) 2.5 4.4 12.1 14.2 8.3 9.9 14.9 15.9 8.5 12.1

Provisions 2,026 2,106 2,126 2,193 2,503 2,725 3,025 3,196 8,508 11,449


Tax Provisions 1,543 1,638 1,662 1,713 1,435 1,581 1,671 1,730 6,556 6,417

Net Profit 3,219 3,376 3,460 3,552 3,411 3,520 3,634 3,719 13,606 14,284

YoY Growth (%) -7.3 12.7 14.3 15.3 6.0 4.3 5.0 4.7 8.2 5.0

AUM Growth (%) 13.3 15.8 18.6 23.5 25.2 26.1 25.9 24.0 23.5 24.0

Disbursement Growth (%) 12.2 28.6 42.0 54.6 47.9 31.3 18.1 10.2 34.6 25.0

Securitization Inc. / Net Inc. (%) 61.0 51.1 46.0 40.9 39.2 35.3 32.0 34.6 49.4 35.2


Tax Rate (%) 32.4 32.7 32.5 32.5 29.6 31.0 31.5 31.7 32.5 31.0

E: MOSL Estimates; * Quaterly nos and full year nos will not tally due to different way of reporting financial nos

Shriram Transport FinanceCMP: INR574 Buy� SHTF's asset growth improved in FY13. We expect company's AUM

growth to remain healthy at ~22%/3% YoY/QoQ. We estimatedisbursements growth to remain muted at 4% YoY and stable QoQ.

� Sequentially, disbursements may see some decline as they grewsharply by 48%/3% YoY/QoQ in 1QFY14. We model AUM growth of 6%QoQ at INR556b.

� Margins are expected to moderate 10bp sequentially. Thus, NII (incl.securitization income) should grow 8% YoY.

� Given the uncertain macro environment and slowdown in CV sales,asset quality continues to be a key monitorable.

� We have factored higher provisions of INR2.6b v/s INR2.5b in 1QFY13and INR2.1b in 2QFY13.

� The stock trades at 1.5x FY14E and 1.3x FY15E BV. Maintain Buy.

Key issues to watch for� Business growth; pick-up in growth was observed during last two

quarters and management's commentary on the same.� Movement in borrowing costs.� Asset quality trends, given the sluggish CV sales.

Financials & Valuation (INR b)Y/E March 2012 2013 2014E 2015ENet Inc. 32.3 34.6 38.7 45.6

PPP 26.4 28.7 32.1 37.4

PAT 12.6 13.6 14.3 16.3

Cons.PAT 13.1 14.6 15.8 18.1

EPS (INR) 55.6 60.0 63.0 72.1

EPS Gr. (%) 4.5 7.9 5.0 14.5

Cons. EPS (INR) 57.8 64.7 69.7 80.0

Cons. EPS Gr. (%) 9.9 11.9 7.8 14.8

BV/Share (INR) 264.8 317.1 371.6 433.9

Cons. BV (INR) 266.5 323.0 384.2 454.5

RoA on AUM (%) 2.8 2.6 2.3 2.3

RoE (%) 23.1 20.6 18.3 17.9

Payout (%) 13.6 13.6 13.3 13.3

Valuations

P/Cons. EPS (x) 9.9 8.9 8.2 7.2

P/Cons. BV (x) 2.2 1.8 1.5 1.3

Div. Yield (%) 1.1 1.2 1.3 1.4

Bloomberg SHTF IN


M. Cap. (INR b)/(USD b) 130 / 2


1,6,12 Rel Perf. (%) 5 / -22 / -11

C–85October 2013

September 2013 Results Preview | Sector: Healthcare

Expected quarterly performance summary (INR million)CMP Rating Sales EBITDA Net Profit


27.09.13 % YoY % QoQ % YoY % QoQ % YoY % QoQBiocon 334 Neutral 7,338 23.9 5.6 1,534 31.6 4.9 959 7.1 2.6Cadila Health 693 Buy 17,326 11.9 5.8 2,973 28.9 4.0 1,665 75.1 -14.9Cipla 433 Neutral 27,040 31.5 9.7 6,245 7.2 -7.5 4,103 -6.6 -13.6Divis Labs 984 Buy 5,494 16.2 6.5 2,109 14.2 7.6 1,566 32.7 -10.4Dr Reddy’ s Labs 2,411 Buy 33,615 20.8 20.5 7,732 24.2 54.4 4,859 39.3 48.4Glenmark Pharma 523 Buy 15,192 24.5 22.7 3,000 27.0 21.3 1,800 26.4 39.9GSK Pharma 2,414 Buy 7,054 5.5 10.8 1,546 -22.3 36.0 1,308 -20.1 37.6IPCA Labs. 695 Buy 9,097 17.9 12.9 2,097 17.3 22.6 1,003 -19.8 39.8Lupin 853 Buy 27,042 22.1 17.2 5,124 17.3 12.7 3,168 15.0 -4.9Ranbaxy Labs 334 Neutral 29,909 26.5 11.5 3,027 4.1 15.3 1,663 -19.1 27.8Sanofi India 2,558 Neutral 4,380 10.4 6.8 716 -11.0 15.0 581 13.3 13.5Sun Pharma 590 Buy 34,561 41.6 5.2 13,740 38.2 0.0 10,476 35.6 -6.8Torrent Pharma 439 Buy 9,424 21.3 1.3 1,810 16.5 -3.7 1,235 15.1 -4.3Sector Aggregate 227,471 24.3 11.5 51,653 19.9 10.4 34,387 17.2 3.3

Alok Dalal ([email protected]) / Hardick Bora ([email protected])

EBITDA to grow 19% YoY on strong operational performance by SunPharma, Dr Reddy's, Glenmark and CadilaFor 2QFY14, we expect revenue growth of 24% YoY and EBITDA growth of 19% YoY forHealthcare Universe (excluding one-offs). Adjusted PAT is likely to grow 16% YoY.

EBITDA growth would be mainly led by strong performance by Sun Pharma, DrReddy's, Glenmark and Cadila. For Sun Pharma, growth would be driven byconsolidation of URL and DUSA Pharma. For Dr Reddy's and Glenmark, it would bedriven by new launches and better sales mix. Cadila would witness strong EBITDAgrowth over a low base of 2QFY13.

EBITDA growth would be lower than revenue growth due to subdued operationalperformance from Cipla and Ranbaxy on account of deteriorating profitability in thebase business and other cost pressures. GSK Pharma may continue to report YoYdecline in EBITDA due to supply chain related issues, while Sanofi India will sufferfrom high base effect. At the macro level, we expect operating performance for therest of our Healthcare Universe to benefit from favorable currency.

HealthcareCompanies Covered

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

2QFY14E aggregates, excluding one-offsHealthcare Universe YoY Growth (%) EBITDA Margin Net Profit Margin

Aggregates Sales EBITDA Adj PAT Sep-13 Sep-12 Chg.(bp) Sep-13 Sep-12 Chg.(bp)

MNC Pharma 7.3 -19.0 -12.1 19.8 26.2 -645 16.5 20.2 -366

Big 4 Generics 29.1 21.5 17.3 24.3 25.8 -153 16.6 18.3 -166

CRAMS 16.2 14.2 32.7 38.4 39.1 -68 28.5 25.0 354

Second Tier generics 19.9 22.1 17.8 19.4 19.0 34 11.5 11.7 -21

Sector Aggregate 23.9 18.7 15.9 22.5 23.5 -99 15.0 16.0 -103

Note: Above numbers exclude one-offs to facilitate comparison of core operations. Big-4

Generics include Ranbaxy, Cipla, Dr Reddy's and Sun.

C–86October 2013


Adjusted PAT growth at 16% would be lower than EBITDA growth, mainly because ofMTM losses on forex loans and derivatives in 2QFY14 vis-à-vis gains reported in 2QFY13.

Core 2QFY14 performance: HighlightsSun Pharma, Dr Reddy's, Glenmark and Cadila to record strong operationalperformanceWe expect Sun Pharma, Dr Reddy's, Glenmark and Cadila to record strong EBITDAgrowth for 2QFY14. We attribute the following company-specific reasons for thisperformance:1. Sun Pharma: We expect Sun Pharma to report 33% growth in 2QFY14, driven by

consolidation of URL and DUSA Pharma, and strong growth in US base businessand RoW markets. We believe that Taro's declining profitability will be offset byfaster than expected turnaround at URL and DUSA Pharma.

2. Dr Reddy's: We expect Dr Reddy's to report strong growth of 24% in core EBITDA.This will be driven by a robust 43% growth in US base business, in turn aided byincreasing market share in recent product launches like gDacogen and gReclast.Russia is also expected to report strong growth. Consequently, we expect coreEBITDA margin to expand 60bp YoY to 23%.

3. Glenmark: Glenmark's performance would be driven by 24.5% YoY revenue growth,led by US generics and growth in SRM branded formulations. EBITDA growth of27% would be faster than revenue growth primarily due to improving sales mixand increasing contribution from recent launches in the US generic market.

4. Cadila: Cadila Healthcare is likely to report EBITDA growth of 29% on the back of anabnormally low base. In 2QFY13, the company had reported its lowest gross marginsince 2QFY06, impacted by ANVISA strike in Brazil, flat growth in US, while fixedoverheads impacted operational performance. We estimate EBITDA margin at17.2% v/s 14.9% in 2QFY13.

5. We expect Ranbaxy Labs and Cipla to report subdued operational performancedue to deteriorating profitability in the base business and rising cost pressures.

6. MNCs: We expect GSK Pharma's operating performance to continue to be impactedby supply chain related issues, which we believe will take time to normalize.Sanofi India could witness decline in EBITDA margin, mainly due to high baseeffect.

Expect no fireworks from CRAMS companiesDivi's Labs is the only CRAMS company in our universe. We expect Divi's Labs to reportsubdued EBITDA growth, impacted by high power costs and fixed overheads at newSEZ unit.

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.� Increasing MNC interest in Generics space - may lead to large acquisitions/supply

arrangements with Indian companies.� Top picks: Dr Reddy's, Lupin, Sun Pharma and IPCA Labs.

C–87October 2013


CRAMS (Contract Research & Manufacturing Services)� Favorable macro trends: India on the threshold of significant opportunity, given

the optimum combination of strong chemistry and regulatory skills, and low costs.� Inventory de-stocking impacted performance over 2010-2012; expect healthy

performance in FY14.� Top pick: 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 proposed New Pharma Policy.� Top pick: GlaxoSmithKline Pharmaceuticals.

Key developmentsThe major development during the quarter was the FDA alert for Ranbaxy.

Ranbaxy Labs' Mohali plant received import alert and fell under consent decree� Ranbaxy Labs (RBXY) received an import alert for its Mohali plant on 13 September

2013. The alert was for two separate locations at Mohali Phase-III Industrial Areaand SEZ Unit-I. Subsequently, the FDA ordered that the facility be subject to certainterms of consent decree entered by Ranbaxy in January 2012.

� The Mohali facility was approved by USFDA, WHO, ANVISA (Brazil) and TGA(Australia) in CY10. RBXY was supplying only exhibit batches to the US; hence, thefinancial impact on current sales is zero. There are 16-18 ANDAs filed from theMohali plant awaiting approval. These will be impacted until the FDA issues areresolved.

� We note that this development has occurred despite the company spending almostfive years in resolving quality compliance issues raised by the FDA in 2008. Thiscould weigh heavily on investor confidence in particular, as these issues comeunder the leadership of the new management.

Key launches in US - hits and misses2QFY14 saw some interesting developments in terms of generic launches in the US.While Sun Pharma and Dr Reddy's were able to capitalize on key product launches,Ranbaxy's exclusive copies of generic Diovan and Valcyte continue to be out of sight.

Hits and missesGeneric Brand US sales

name equivalent Indication (USD m) Competition

Hits Repagl inide Prandin Anti-diabetic 200 None

Azacitidine Vidaza Oncology 380 Sandoz (AG)

Miss Valsartan Diovan Anti-hypertensive 1900 NA

Valgancyclovir Valcyte Cytomegalovirus Infections 400 NA

Source: MOSL Research

C–88October 2013


HitsSun Pharma launches generic Prandin in US� Sun Pharma (SUNP) received FDA approval for launching its generic version of

Novo Nordisk's Prandin (Repaglinide 1mg & 2mg tablet). Prandin generatesUSD200m in sales annually.

� After long-winding patent litigation, Sun Pharma won a favorable ruling in June2013 from a US court, allowing it to launch its generic copy of Prandin, should itreceive FDA approval for the same. SUNP is the sole FTF filer and will enjoy 180-day exclusivity. Other known filers include Mylan, Actavis, Paddock and AurobindoPharma, and will enter the market post SUNP's exclusivity.

� We estimate one-off sales of ~USD50m, with PAT of USD35m from this launch, tobe realized during the exclusivity. Since this is a non-recurring opportunity, wehave assigned INR2/share to our DCF estimate for one-off opportunities.

Dr Reddy's monetizes generic Vidaza� Dr Reddy's (DRRD) received final USFDA approval for generic Vidaza (injectable

product) for the US market. The product currently generates annual revenues of~USD380m for its innovator, Celgene.

� All the patents on the product have expired, but there has been no generic entrytill date. DRRD will launch this product in few weeks. There are seven DMF filersincluding DRRD, of which we believe 3-4 may enter the market eventually. Ourinteractions suggest that it is difficult to manufacture Vidaza and there is arequirement of PK study at actual MDS points, which can present some challenge.Hence, the upside from this launch is more sustainable in nature.

� Limited competition presents a high margin opportunity in the foreseeable future.We believe this drug can generate sales of USD25m annually, with PAT of USD15m.While the addition to EPS was marginal, it reaffirms DRRD's capability to identifyand monetize such opportunities at a time when USFDA has intensified itsvigilance.

MissesRanbaxy's generic Diovan still out of sight� While the street was hopeful after dismissal of Mylan's pleas for revoking

Ranbaxy's exclusivity and allowing another generic player in the market, Ranbaxy'sexclusive copy is already late by a year. Despite the recent issuance of import alerton Mohali, the management continues to maintain that it still holds exclusivemarketing rights for 180 days and is confident of monetizing it.

� Diovan generates USD1.9b in sales from the US for Novartis. If successfullylaunched, we expect this opportunity to generate one-off sales of ~USD100m forRanbaxy over the exclusivity period. We also expect Novartis to introduce anauthorized generic version through its generics unit, Sandoz.

Generic Valcyte also seems to be delayed� Another FTF opportunity for Ranbaxy, generic Valcyte, also seems to be delayed.

The company received tentative approval from USFDA on 24 June 2008, while thelitigation with Roche was still ongoing. Subsequent to a win in lower court, Ranbaxysettled with Roche to launch the authorized generic (AG) version of Valcytesometime in March 2013.

C–89October 2013




HealthcareBiocon 334 Neutral 16.4 18.8 21.1 20.4 17.8 15.8 10.4 9.6 8.5 12.1 12.8 13.1Cadila Health 693 Buy 31.9 35.8 41.4 21.7 19.3 16.7 14.5 13.5 11.5 23.7 22.8 22.3Cipla 433 Neutral 15.8 20.2 22.6 27.3 21.4 19.2 15.1 13.5 12.0 14.1 15.6 15.0Divis Labs 984 Buy 45.4 54.8 66.5 21.7 18.0 14.8 15.6 12.9 10.1 26.0 26.7 27.7Dr Reddy’ s Labs 2,411 Buy 90.2 107.1 127.0 26.7 22.5 19.0 16.9 14.5 12.3 20.7 20.3 19.9Glenmark Pharma 523 Buy 18.4 25.4 31.9 28.4 20.6 16.4 15.5 13.3 11.2 18.1 20.5 21.1GSK Pharma 2,414 Buy 80.0 62.5 79.1 30.2 38.6 30.5 23.2 30.9 23.1 33.7 25.1 29.9IPCA Labs. 695 Buy 25.7 31.8 51.0 27.1 21.9 13.6 14.8 12.5 9.4 23.1 23.4 30.2Lupin 853 Buy 23.1 31.5 41.9 36.9 27.1 20.3 19.4 15.9 13.1 22.5 23.8 25.4Ranbaxy Labs 334 Neutral 13.0 13.0 12.9 25.7 25.7 25.8 7.4 13.8 7.5 31.4 -4.7 28.2Sanofi India 2,558 Neutral 76.7 87.3 105.5 33.3 29.3 24.2 23.4 22.1 18.1 14.8 15.6 17.2Sun Pharma 590 Buy 14.7 21.6 24.7 40.0 27.4 23.9 24.0 17.4 15.0 22.5 27.9 26.4Torrent Pharma 439 Buy 27.8 29.8 34.1 15.8 14.7 12.9 10.8 10.1 8.8 35.8 30.8 28.3Sector Aggregate 30.5 24.3 20.5 17.4 15.4 12.6 19.3 21.1 20.6


Currency movement (INR/USD)

Source: Bloomberg

� Valcyte generates ~USD300m in US sales for Roche. On successful launch, we expectthis opportunity to generate one-off sales of ~USD19m for Ranbaxy over theexclusivity period. Since Ranbaxy is the AG, it will be the only generic player in themarket.

INR depreciation to aid sales, but higher MTM losses to limit benefit forsomeIn 2QFY14, the average USD/INR rate was ~12.5% lower than in 2QFY13. We expectcompanies with largely un-hedged net exports to realize the benefit of favorablecurrency at EBITDA level. Companies that are likely to benefit include: (1) Biocon, (2)Cipla, (3) Divi's Labs, and (4) Dr Reddy's.

At the same time, the QoQ INR depreciation has been ~5%. We expect companieswith large forex debt and derivative exposure to report higher MTM losses, offsettingthe benefit at PAT level. Companies likely to be impacted are: (1) Ranbaxy, (2) IPCA,(3) Cadila, and (4) Glenmark.

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C–90October 2013


Consolidated Quarterly Performance (INR Million)Y/E March FY13 FY14 FY13 FY14E


Net Sales 5,767 5,924 6,342 6,244 6,948 7,338 7,550 7,510 24,853 29,346

YoY Change (%) 30.6 16.5 22.6 2.3 20.5 23.9 19.1 20.3 19.1 18.1


EBITDA 1,227 1,165 1,417 1,045 1,462 1,534 1,570 1,607 5,430 6,174

Margins (%) 21.3 19.7 22.3 16.7 21.0 20.9 20.8 21.4 21.8 21.0

Depreciation 427 446 461 459 483 486 496 518 1,793 1,982

Interest 32 11 29 9 4 25 25 46 81 100

Other Income 159 495 253 1,639 284 227 222 193 2,546 926

PBT 927 1,203 1,180 2,215 1,259 1,250 1,272 1,236 6,101 5,017

Tax 137 304 253 281 297 265 261 331 975 1,154

Rate (%) 14.8 25.3 21.4 12.7 23.6 21.2 20.5 26.8 16.0 23.0


PAT 788 896 917 1,911 935 959 984 879 5,088 3,757

YoY Change (%) 12.5 4.6 26.4 73.7 18.7 7.1 7.3 -54.0 50.3 -26.2

Margins (%) 13.7 15.1 14.5 30.6 13.5 13.1 13.0 11.7 20.5 12.8

Licensing income 139 0 88 19 76 153 152 226 1,386 900

YoY Change (%) -0.7 -100.0 -69.9 -95.9 -45.3 0.0 0.0 0.0 0.0 -35.1

Contract research 1,224 1,291 1,397 1,660 1,546 1,755 1,860 1,859 26 659

YoY Change (%) 39.1 39.1 24.7 40.7 26.3 36.0 33.2 12.0 0.0 2,469.0

E: MOSL Estimates; Note - Quarterly nos will not add up to full-year nos due to restatements

BioconCMP: INR334 Neutral� We expect Biocon's sales to grow 24% YoY to INR7.34b, led by 36%

growth in CRO division. Biopharma division is likely to grow 17% YoY.� We expect licensing income at INR153m (nil in 2QFY13).� EBITDA is likely to grow 32% YoY to INR1.53b and EBITDA margin would

expand by 120bp to 20.9% due to superior sales mix and favorablecurrency.

� We expect adjusted PAT to grow just 7% YoY to INR959m due to baseeffect (high other income on 2QFY13).

� Key growth drivers for FY14/15 would 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 long-term capex would put pressure on near-termprofitability and return ratios.

� The stock trades at 17.6x FY14E and 15.7 x 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 the 13-14% 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 5.2 5.4 6.2 7.4

Net Profit 3.4 3.3 3.8 4.2

Adj. EPS (INR) 16.9 16.4 18.8 21.1

EPS Gr. (%) -7.6 -3.4 14.9 12.2

BV/Sh. (INR) 113.6 134.7 146.9 160.6

RoE (%) 14.9 12.1 12.8 13.1

RoCE (%) 13.0 17.8 13.4 13.7

Payout (%) 34.3 34.5 35.1 35.1

Valuations

P/E (x) 19.6 20.2 17.6 15.7

P/BV (x) 2.9 2.5 2.3 2.1

EV/EBITDA (x) 11.2 10.3 9.5 8.4

Div. Yield (%) 1.5 2.3 1.7 1.9

Bloomberg BIOS IN




1,6,12 Rel Perf. (%) -12 / 17 / 15

C–91October 2013




Net Revenues 15,486 15,476 16,041 16,119 16,371 17,326 18,451 19,015 63,581 71,162

YoY Change (%) 24.3 24.3 16.0 15.3 5.7 11.9 15.0 18.0 20.8 11.9


EBITDA 3,116 2,306 2,550 2,864 2,858 2,973 3,186 3,388 11,257 12,405

Margins (%) 20.1 14.9 15.9 17.8 17.5 17.2 17.3 17.8 17.7 17.4

Depreciation 434 432 496 466 466 480 500 520 1,828 1,966

Interest 572 405 479 316 278 387 387 387 1,686 1,439

Other Income 553 65 171 87 125 100 100 90 370 415

PBT after EO Income 2,663 1,533 1,746 2,170 2,239 2,206 2,399 2,571 8,112 9,415

Tax 654 494 630 -583 203 441 480 527 1,195 1,651

Rate (%) 24.5 32.2 36.1 -26.9 9.1 20.0 20.0 20.5 14.7 17.5

Min. Int/Adj on Consol 61 88 86 128 80 100 100 150 364 430

Reported PAT 1,948 951 1,029 2,625 1,956 1,665 1,819 1,894 6,553 7,334

Adj PAT 1,948 951 1,029 2,625 1,956 1,665 1,819 1,894 6,553 7,334

YoY Change (%) 39.4 -5.7 -29.9 47.0 0.4 75.1 76.8 -27.8 15.8 11.9

Margins (%) 12.6 6.1 6.4 16.3 11.9 9.6 9.9 10.0 10.3 10.3

Adj PAT incl one-offs 1,948 951 1,029 2,625 1,956 1,665 1,819 1,894 6,553 7,334

Domestic formulation sales 5,818 6,018 5,699 5,708 6,252 6,199 6,269 6,279 23,232 24,916

YoY Change (%) 27.2 28.0 21.4 14.4 7.5 3.0 10.0 10.0 22.6 7.3

E: MOSL Estimates

Cadila HealthcareCMP: INR693 Buy� We expect Cadila Healthcare's (CDH) 2QFY14 revenues to grow 12%

YoY to INR17.3b, led by 21% YoY growth in US formulations. Total exportformulations would grow 20% YoY to INR8.55b. Domestic formulationswould grow 3% YoY to INR6.2b, impacted by the New Drug Policy.

� We expect EBITDA to grow 29% YoY to INR2.97b on a low base. Thecompany had witnessed de-growth in Brazil while fixed overheadsimpacted operational performance in 2QFY13.

� Adjusted PAT is expected to grow 75% YoY to INR1.66b, aided by lowertaxes and lower forex losses compared to 2QFY13.

� 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 14% EPS CAGR for FY13-15, with stable RoCE/RoE at ~18%/~24% over the next two years.

� The stock trades at 19.3x FY14E and 16.7x FY15E EPS. Maintain Buy.

Key issues to watch out� Update on US launches from the Moraiya facility� Progress on improvement in balance sheet.


EBITDA 10.8 11.3 12.4 14.4

Net Profit 5.7 6.5 7.3 8.5

Adj. EPS (INR) 27.6 31.9 35.8 41.4

EPS Gr. (%) -10.6 15.5 12.2 15.6

BV/Sh. (INR) 125.7 143.8 170.0 200.6

RoE (%) 27.5 23.7 22.8 22.3

RoCE (%) 22.9 17.9 17.6 18.6

Payout (%) 27.1 30.5 25.3 24.8

Valuations

P/E (x) 25.1 21.7 19.3 16.7

P/BV (x) 5.5 4.8 4.1 3.5

EV/EBITDA (x) 14.6 14.5 13.5 11.5

Div. Yield (%) 0.9 1.0 1.3 1.6

Bloomberg CDH IN


M. Cap. (INR b)/(USD b) 142 / 2


1,6,12 Rel Perf. (%) -4 / -11 / -24

C–92October 2013




Net Revenues 19,581 21,918 20,705 19,667 24,639 27,040 27,767 26,691 82,793 106,136

YoY Change (%) 23.0 23.3 17.8 5.4 25.8 23.4 34.1 35.7 97.0 102.8


EBITDA 5,397 6,770 4,930 4,095 6,754 6,245 6,095 5,636 21,979 24,730

Margins (%) 27.6 30.9 23.8 20.8 27.4 23.1 22.0 21.1 26.5 23.3

Depreciation 729 740 780 783 789 850 900 1,177 3,305 3,716

Interest 11 54 93 176 408 300 250 180 276 1,138

Other Income 531 641 535 585 691 450 420 239 1,323 1,800


Tax 1,182 1,618 1,203 1,045 1,500 1,442 1,341 1,136 5,443 5,419

Rate (%) 22.8 24.4 26.2 28.1 24.0 26.0 25.0 25.2 27.6 25.0

Reported PAT 4,006 5,000 3,389 2,676 4,749 4,103 4,024 3,381 15,449 16,257

Adj PAT 3,055 4,392 3,389 2,676 4,749 4,103 4,024 3,381 12,719 16,257

YoY Change (%) 20.6 42.1 25.6 -1.9 55.5 -6.6 18.7 26.4 13.0 27.8

Margins (%) 15.6 20.0 16.4 13.6 19.3 15.2 14.5 12.7 15.4 15.3

Domestic formulation sales 9,388 9,332 9,241 7,780 11,039 10,303 10,266 8,951 35,892 40,560

YoY Change (%) 30.4 13.7 9.3 8.3 17.6 10.4 11.1 15.0 15.6 13.0

Other operating income 408 460 398 605 1,792 550 575 701 1,871 3,618

YoY Change (%) -0.7 -0.5 -14.5 21.4 339.1 19.6 44.5 16.0 8.1 93.4

E: MOSL Estimates

CiplaCMP: INR433 Neutral� Cipla's core revenue for 2QFY14 is likely to grow 23% YoY to INR27b.

Growth in core sales (adjusted for Lexapro in 2QFY13) will be 31%.� The domestic formulations business is expected to grow 10% YoY to

INR10.3b due to the impact of the pricing policy. Export formulationssales would grow 38% YoY to INR14.3b due to consolidation of CiplaMedpro.

� EBITDA is likely to decline 8% YoY to INR6.2b, with EBITDA marginexpected to contract to 23.1% on account of higher employee andR&D costs. Core EBITDA growth would be 7%.

� We expect adjusted PAT to decline 7% YoY to INR4.1b, on account ofhigher interest costs and lower other income.

� The coming quarters will be challenging for Cipla due to the impact ofthe new pricing policy and increasing pressure on profitability due torising manpower, R&D and interest costs.

� This is also evident in the 14-15% organic growth guidance for FY14,despite 26% growth in 1Q alone. As such, we expect some moderationin growth and profitability over the coming quarters.

� Stock trades at 21.6x FY14E and 19.3x FY15E earnings. Maintain Neutral.

Key issues to watch out� Update on launch of inhalers in Europe� Impact of Cipla Medpro consolidation.


EBITDA 16.6 22.0 24.7 27.3

Net Profit 10.9 12.7 16.3 18.2

Adj. EPS (INR) 13.6 15.8 20.2 22.6

EPS Gr. (%) 13.9 16.4 27.8 11.7

BV/Sh. (INR) 95.0 112.2 130.1 150.4

RoE (%) 14.3 14.1 15.6 15.0

RoCE (%) 18.0 19.4 19.2 18.9

Payout (%) 14.3 12.1 17.3 20.7

Valuations

P/E (x) 32.1 27.6 21.6 19.3

P/BV (x) 4.6 3.9 3.4 2.9

EV/EBITDA (x) 21.1 16.3 14.6 13.1

Div. Yield (%) 0.4 0.5 0.7 0.9

Bloomberg CIPLA IN


M. Cap. (INR b)/(USD b) 348 / 6


1,6,12 Rel Perf. (%) -1 / 9 / 10

C–93October 2013




Net Op Revenue 4,684 4,726 5,333 6,496 5,159 5,494 6,173 7,866 21,399 24,692

YoY Change (%) 30.6 33.5 28.6 -8.2 10.1 16.2 15.7 21.1 15.1 15.4


EBITDA 1,904 1,846 1,813 2,507 1,959 2,109 2,408 3,080 8,102 9,556

Margins (%) 40.7 39.1 34.0 38.6 38.0 38.4 39.0 39.2 37.9 38.7

Depreciation 175 188 204 203 209 215 230 303 769 958

Interest 4 3 4 6 4 7 8 8 18 27

Other Income 418 -112 234 93 547 147 149 152 497 995

PBT 2,143 1,544 1,838 2,391 2,293 2,034 2,319 2,920 7,812 9,566

Tax 469 364 396 573 546 468 557 725 1,792 2,296

Rate (%) 21.9 23.6 21.5 23.9 23.8 23.0 24.0 24.8 22.9 24.0

Reported PAT 1,674 1,180 1,442 1,818 1,747 1,566 1,763 2,194 6,020 7,270

Adj PAT 1,674 1,180 1,442 1,818 1,747 1,566 1,763 2,194 6,020 7,270

YoY Change (%) 63.2 11.2 17.7 -15.3 4.4 32.7 22.2 20.7 12.9 20.8

Margins (%) 35.7 25.0 27.0 28.0 33.9 28.5 28.6 27.9 28.1 29.4

CCS Revenues 2,148 2,268 2,507 3,118 2,476 2,637 2,901 3,695 10,272 11,710

YoY Change (%) 22.2 37.5 36.9 -15.3 15.3 16.2 15.7 18.5 15.1 14.0

Carotenoid Revenues 210 250 185 265 280 325 241 488 910 1,333

YoY Change (%) 50.0 4.2 -7.5 15.2 33.3 30.0 30.0 84.0 12.3 46.5

E: MOSL Estimates;

Divi's LaboratoriesCMP: INR984 Buy� Divi's Laboratories (DIVI) is likely to post 16% YoY growth in 2QFY14

revenue to INR5.49b largely on account of and favorable currencymovement. Growth would be driven by both CCS and API businesses.

� We expect EBITDA to grow 14% YoY to INR2.1b, impacted by highermaterial and employee cost. EBITDA margin would contract 70bp YoY.

� We expect PAT to grow 33% YoY to INR1.56b, mainly due to higherother income. There was a forex loss of INR208m in 2QFY13.

� For FY14, DIVI expects sales growth to be in line with FY13 (i.e. 15%),as capacity utilization would ramp up significantly only after FDAapproval of the remaining three blocks at the DSN SEZ (expected in2HFY14). The new units at Vizag are expected to be inspected by USFDAin 2HFY14.

� While operational performance for 1HFY14 could be subdued, this ismainly due to delayed FDA inspection for the new SEZ units (nowexpected in 2HFY14 instead of 2HFY13 earlier).

� The stock trades at 17.8x FY14E and 14.7x FY15E earnings. MaintainBuy.

Key issues to watch out� Ramp-up at Vizag SEZ and timeline for USFDA inspection� Impact of subsiding power cost (in Andhra Pradesh) on profitability.


EBITDA 6.8 8.1 9.6 11.9

Net Profit 5.3 6.0 7.3 8.8

Adj. EPS (INR) 40.2 45.4 54.8 66.5

EPS Gr. (%) 24.1 12.9 20.8 21.3

BV/Sh. (INR) 160.6 188.4 221.3 257.8

RoE (%) 27.1 26.0 26.7 27.7

RoCE (%) 34.1 33.1 34.9 35.7

Payout (%) 37.6 38.7 40.0 45.0

Valuations

P/E (x) 24.3 21.5 17.8 14.7

P/BV (x) 6.1 5.2 4.4 3.8

EV/EBITDA (x) 19.0 16.0 13.5 10.8

Div. Yield (%) 1.3 1.5 1.9 2.6

Bloomberg DIVI IN


M. Cap. (INR b)/(USD b) 131 / 2

52-Week Range (INR) 1,233 / 905

1,6,12 Rel Perf. (%) -4 / -5 / -14

C–94October 2013


� We expect Dr Reddy's Laboratories (DRRD) to post 17% YoY growth inrevenue (no one-off this quarter) for 2QFY14 to INR33.61b. Growth incore sales will be 21% YoY.

� Growth would be led by 43% YoY growth in core US revenue and 24%YoY growth in the Russia/CIS. Domestic formulations would grow 4%YoY, while PSAI would grow 9% YoY. Reported sales growth, adjustedfor Geodon contribution in 2QFY13, would be 17%.

� Core EBITDA would grow 24% YoY to INR7.73b, driven by improvingproduct mix in the US business and strong growth in Russia. We expectcore EBITDA margin to expand by 60bp YoY. EBITDA growth on reportedbasis would be 12% YoY.

� Adjusted PAT would be INR4.86b, up 39% YoY - higher than the growthin EBITDA due to lower amortization and tax expense. We expectreported PAT (incl. one-off contributions) to grow 19% YoY.

� While there is uncertainty revolving around timely FDA approvals,recently launched limited competition products like gDacogen,gReclast injections and pipeline of 65 pending ANDAs will supportgrowth in the US over the medium term.

� The stock trades at 22.5x FY14E and 19x FY15E core earnings. Buy.

Key issues to watch out� View on pipeline for products in the US� FY14-15 outlook for both generics and PSAI businesses.

Quarterly Performance - IFRS (INR Million)Y/E March FY13 FY14 FY13 FY14E


Gross Sales 25,406 28,809 28,651 33,400 28,449 33,615 34,914 39,018 116,266 135,997

YoY Change (%) 28.4 27.0 3.5 25.6 12.0 16.7 21.9 16.8 20.2 17.0


EBITDA 4,996 6,909 5,674 7,185 5,398 7,732 7,437 8,194 24,763 28,760

Margins (%) 19.7 24.0 19.8 21.5 19.0 23.0 21.3 21.0 21.3 21.1

Amortization 1,296 2,064 1,382 1,495 1,603 1,653 1,703 1,753 6,237 6,712

Other Income 25 796 168 2,162 342 273 273 409 3,151 1,296


Tax 365 1,567 827 2,141 528 1,493 1,412 1,596 4,900 5,028

Rate (%) 9.8 27.8 18.5 27.3 12.8 23.5 23.5 23.3 22.6 21.5

Net Profit 3,360 4,074 3,633 5,711 3,609 4,859 4,595 5,254 16,777 18,316

One-off/low-competition PAT in US 715 586 0 325 335 0 0 0 1,627 335

Adjusted PAT 2,645 3,488 3,633 5,386 3,273 4,859 4,595 5,254 15,150 17,981

YoY Change (%) 17.5 29.9 71.4 101.5 23.8 39.3 26.5 -2.5 55.7 18.7

Margins (%) 10.4 12.1 12.7 16.1 11.5 14.5 13.2 13.5 13.0 13.2

US Sales 7,920 9,270 9,243 11,413 10,871 11,875 12,710 13,950 37,846 49,406

YoY Change (%) 37.6 47.4 -16.8 30.7 37.3 28.1 37.5 22.2 18.7 30.5

Branded formualtion sales 8,968 9,056 9,654 9,323 9,459 10,372 11,382 11,027 37,001 42,239

YoY Change (%) 32.8 17.1 24.6 18.5 5.5 14.5 17.9 18.3 22.9 14.2

E: MOSL Estimates; Note-Estimates do not include one-off upsides.

Dr Reddy's LaboratoriesCMP: INR2,411 Buy


EBITDA 23.7 24.8 28.8 33.2

Net Profit 12.4 15.1 18.0 21.3

Adj. EPS (INR) 74.0 90.2 107.1 127.0

EPS Gr. (%) 12.0 21.9 18.7 18.6

BV/Sh. (INR) 342.1 435.4 528.2 638.9

RoE (%) 21.6 20.7 20.3 19.9

RoCE (%) 19.7 17.2 18.0 18.4

Payout (%) 18.2 16.3 14.9 12.8

Valuations

P/E (x) 32.6 26.7 22.5 19.0

P/BV (x) 7.0 5.5 4.6 3.8

EV/EBITDA (x) 17.6 16.9 14.5 12.3

Div. Yield (%) 0.6 0.6 0.6 0.6

Bloomberg DRRD IN


M. Cap. (INR b)/(USD b) 405 / 6

52-Week Range (INR) 2,472 / 1,617

1,6,12 Rel Perf. (%) 2 / 32 / 42

C–95October 2013




Net Sales 6,228 6,520 6,685 6,567 6,321 6,369 7,054 6,993 25,999 26,796

YoY Change (%) 3.3 16.1 10.0 16.0 1.5 -2.3 5.5 6.5 11.2 3.1


EBITDA 1,957 2,028 1,989 1,914 1,629 1,137 1,546 1,617 7,888 5,987

Margins (%) 31.4 31.1 29.8 29.1 25.8 17.9 21.9 23.1 30.3 22.3

Depreciation 41 43 48 46 42 50 50 53 178 194

Interest 0 0 0 3 0 0 0 0 3 0

Other Income 804 479 479 477 817 454 434 315 2,239 2,020

PBT before EO Expense 2,720 2,464 2,419 2,341 2,404 1,541 1,930 1,879 9,944 7,812

Tax 863 768 783 762 698 590 623 605 3,176 2,516

Rate (%) 31.7 31.2 32.4 32.5 29.1 38.3 32.3 32.2 31.9 32.2

Adjusted PAT 1,857 1,696 1,636 1,579 1,706 951 1,308 1,274 6,769 5,297

YoY Change (%) -0.3 11.8 12.1 7.2 -8.1 -44.0 -20.1 -19.3 7.2 -21.7

Margins (%) 29.8 26.0 24.5 24.1 27.0 14.9 18.5 18.2 26.0 19.8

Extra-Ord Expense 628 61 113 198 16 -201 -185 -185 999 371

Reported PAT 1,229 1,635 1,523 1,382 1,690 1,151 1,493 1,459 5,769 4,925

E: MOSL Estimates

GlaxoSmithKline PharmaceuticalsCMP: INR2,414 Buy� We expect GlaxoSmithKline Pharmaceuticals (GLXO) to post 6% YoY

growth in 3QCY13 sales to INR7.05b.

� EBITDA is likely to decline by 22% YoY to INR1.55b. EBITDA margin isexpected to decline 7.9% to 21.9%, which we believe will be impactedby supply chain related issues highlighted in 1QCY13.

� We expect adjusted PAT to decline 20% YoY to INR1.31b in 3QCY13, inline with EBITDA decline, due to subdued operational performance.

� Performance for 1QCY13 was impacted by supply chain related issues,some of which were expected to get resolved by 3QCY13. While someof these factors are temporary in nature, we believe the normalizationin margins will be gradual.

� 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 with theability to drive reasonable growth without any major capitalrequirement, leading to high RoCE of 45-50%.

� The stock trades at 38.7x CY13E and 30.6x CY14E EPS. Maintain Buy.

Key issues to watch out� Impact of normalization of supply chain issues� Impact of Drug Price Control Order (DPCO), 2013� Update on new launches.


EBITDA 7.4 7.9 6.0 8.0

Net Profit 6.3 6.8 5.3 6.7

Adj. EPS (INR) 74.5 80.0 62.5 79.1

EPS Gr. (%) 8.6 7.3 -21.8 26.5

BV/Sh. (INR) 226.7 237.3 249.3 264.8

RoE (%) 32.9 33.7 25.1 29.9

RoCE (%) 47.9 49.4 36.9 44.5

Payout (%) 68.8 71.3 82.1 79.3

Valuations

P/E (x) 32.5 30.3 38.7 30.6

P/BV (x) 10.7 10.2 9.7 9.1

EV/EBITDA (x) 24.6 23.3 30.9 23.1

Div. Yield (%) 1.9 2.1 1.9 2.3

Bloomberg GLXO IN


M. Cap. (INR b)/(USD b) 204 / 3

52-Week Range (INR) 2,899 / 1,931

1,6,12 Rel Perf. (%) -3 / 6 / 17

C–96October 2013


� We expect Glenmark Pharmaceuticals (GNP) to post 24.5% YoY growthin core revenue (excluding one-offs and R&D income) for 2QFY14 toINR15.19b. Growth on reported basis would be 21% YoY.

� Growth would be led by strong performance in branded SRM and USgenerics. The branded business is likely to grow 19% YoY. We do notexpect any R&D licensing income for the quarter (nil in 2QFY13).

� Core EBITDA is likely to grow 27% YoY to INR3b, while core EBITDAmargin is expected to increase by 30bp YoY. Repored EBITDA wouldgrow 17% YoY.

� GNP is likely to report adjusted PAT of INR1.8b, up 26% YoY, in line withoperational performance. There was forex gain of INR150m in 2QFY13.We do not expect any significant impact in 2QFY14, as GNP hastransferred its forex loans to its subsidiaries.

� We expect GNP to gradually reduce its net debt over FY14-15, resultingin improvement in D/E from 1x in FY13 to 0.6x by FY15.

� RoCE is likely to improve from 16% in FY13 to 21% in FY15 and RoE from18% to 22%.


Key issues to watch out� Approvals for US� Update on free cash flow generation and debt repayment schedule� Timeline for reporting clinical data for NCE pipeline.

Quarterly performance (INR Million)Y/E March FY13 FY14 FY13 FY14E


Net Revenues (Core) 10,404 12,552 13,813 13,355 12,379 15,192 15,887 16,637 50,123 60,095

YoY Change (%) 19.8 18.9 34.0 25.3 19.0 21.0 15.0 24.6 24.7 19.9

EBITDA 2,198 2,560 3,158 2,694 2,474 3,000 3,118 3,425 10,610 12,018

Margins (%) 21.1 20.4 22.9 20.2 20.0 19.7 19.6 20.6 21.2 20.0

Depreciation 275 321 356 318 349 336 353 346 1,270 1,384

Interest 380 384 400 436 464 479 489 563 1,600 1,995

Other Income -521 219 95 -196 37 41 43 47 -403 168

PBT 1,022 2,074 2,497 1,744 1,698 2,226 2,319 2,564 7,337 8,807

Tax 218 477 366 46 392 401 371 509 1,107 1,673

Rate (%) 21.3 23.0 14.7 2.6 23.1 18.0 16.0 19.9 15.1 19.0

Reported PAT (incl one-offs) 804 1,597 2,130 1,698 1,306 1,825 1,948 2,055 6,230 7,134


Adj PAT (excl one-offs) 506 1,424 1,575 1,486 1,287 1,800 1,882 1,902 4,992 6,871

YoY Change (%) -53.6 91.3 1,972.1 565.9 154.1 26.4 19.5 27.9 53.9 37.6

Margins (%) 4.9 11.3 11.4 11.1 10.4 11.9 11.8 11.4 10.0 11.4

US Sales 3,924 4,307 4,365 4,291 4,470 5,305 5,411 6,034 16,887 21,219

YoY Change (%) 56.2 43.5 36.8 24.9 13.9 23.2 24.0 40.6 39.1 25.6

Note: 2Q, 3Q, 4Q numbers are not comparable due to shift to IFRS accounting. 1Q numbers are comparable as per IFRS;

Estimates include one-off upsides.

Glenmark PharmaceuticalsCMP: INR523 Buy


EBITDA 9.9 10.6 12.0 14.1

Net Profit 3.2 5.0 6.9 8.6

Adj. EPS (INR) 12.0 18.4 25.4 31.9

EPS Gr. (%) -8.6 53.9 37.6 25.8

BV/Sh. (INR) 88.8 102.0 123.9 151.1

RoE (%) 13.5 18.1 20.5 21.1

RoCE (%) 11.4 16.1 18.5 19.9

Payout (%) 13.6 10.2 13.3 14.5

Valuations

P/E (x) 43.6 28.3 20.6 16.4

P/BV (x) 5.9 5.1 4.2 3.5

EV/EBITDA (x) 16.4 15.5 13.3 11.2

Div. Yield (%) 0.4 0.4 0.6 0.8

Bloomberg GNP IN


M. Cap. (INR b)/(USD b) 142 / 2


1,6,12 Rel Perf. (%) -12 / 8 / 18

C–97October 2013





YoY Change (%) 19.7 23.7 14.0 19.7 27.0 17.9 16.6 17.3 19.3 18.0

EBITDA 1,329 1,788 1,584 1,423 1,710 2,097 1,844 1,831 6,232 7,482

Margins (%) 21.0 23.2 22.6 21.2 21.2 23.1 22.6 23.2 22.2 22.5

Depreciation 199 209 216 216 241 244 249 304 867 1,038

Interest 95 89 74 55 71 91 82 112 334 356

Other Income -470 155 -146 103 -435 -446 51 19 -488 -812

PBT 565 1,646 1,148 1,255 963 1,316 1,564 1,434 4,543 5,276

Tax 135 395 269 501 245 312 391 318 1,299 1,266

Rate (%) 23.9 24.0 23.4 39.9 25.4 23.8 25.0 22.2 28.6 24.0

Reported PAT 430 1,251 879 754 718 1,003 1,173 1,116 3,243 4,009

Adj PAT 430 1,251 879 754 718 1,003 1,173 1,116 3,243 4,009

YoY Change (%) -30.3 60.5 37.5 -1.5 67.0 -19.8 33.4 47.9 17.4 23.6

Margins (%) 6.8 16.2 12.5 11.2 8.9 11.0 14.4 14.2 11.5 12.1

Domestic formulation 2,242 2,628 2,127 1,784 2,504 2,853 2,553 2,101 8,781 10,010

YoY Change (%) 18.6 14.6 13.4 20.8 11.7 8.6 20.0 17.8 16.6 14.0

Export formualtions 2,245 3,392 3,175 3,131 3,300 4,359 3,758 3,615 11,942 15,031

YoY Change (%) 8.7 30.2 9.5 30.8 47.0 28.5 18.4 15.5 19.9 25.9

E: MOSL Estimates

IPCA LaboratoriesCMP: INR695 Buy� We expect Ipca Laboratories' (IPCA) 2QFY14 revenue to grow 18% YoY

to INR9.1b, led mainly by 29% growth in export formulations. Domesticformulations would grow 9% YoY, while total API sales would grow13% YoY.

� EBITDA is likely to grow 17% YoY to INR2.1b, with a minor 10bp declinein EBITDA margin to 23.1%.

� Despite healthy operational performance, we expect adjusted PAT todecline 20% YoY to INR1b, impacted by higher INR depreciation andMTM loss on forex loans.

� We expect significant ramp-up in IPCA's international formulationsrevenue, led by 30% CAGR in export formulations and 70% CAGR in USbusiness over FY13-15. Domestic formulations growth is likely to bemaintained at 15%.

� We expect IPCA to clock EPS CAGR of 40% over FY13-15 on the back of21% revenue CAGR, aided by 170bp EBITDA margin expansion.


Key issues to watch out� Ramp-up at recently approved Indore SEZ for US� Outlook for institutional tender business after FY14.


EBITDA 5.1 6.2 7.5 9.8

Net Profit 2.8 3.2 4.0 6.4

Adj. EPS (INR) 21.9 25.7 31.8 51.0

EPS Gr. (%) 4.7 17.4 23.6 60.6

BV/Sh. (INR) 99.4 123.1 148.5 189.3

RoE (%) 24.0 23.1 23.4 30.2

RoCE (%) 24.1 25.2 24.9 32.8

Payout (%) 17.0 18.1 20.0 20.0

Valuations

P/E (x) 31.8 27.1 21.9 13.6

P/BV (x) 7.0 5.7 4.7 3.7

EV/EBITDA (x) 18.1 14.8 12.5 9.4

Div. Yield (%) 0.5 0.7 0.9 1.5

Bloomberg IPCA IN




1,6,12 Rel Perf. (%) 1 / 27 / 40

C–98October 2013


� We expect Lupin's (LPC) 2QFY14 core revenues to grow 22% YoY toINR27.04b, driven mainly by 29% YoY growth in advance marketformulations (excluding one-off US sales). Domestic formulations areexpected to grow 13% YoY.

� Reported revenue would include one-off upside from generic Tricorand is expected at INR28.17b, up 26% YoY.

� Core EBITDA is likely to grow 17% YoY to INR5.12b, with core EBITDAmargin declining 80bp YoY to 18.9% impacted by increased competitionin Antara and generic Tricor. Reported EBITDA is expected to beINR5.92b, with reported EBITDA margin at 21%.

� We estimate adjusted PAT at INR3.17b, up 15% YoY, impacted mainlyby lower other income. Reported PAT would be INR3.9b, up 32% YoY.

� Key growth drivers for FY14/15 will be the strong product pipeline forthe US, including higher contribution from oral contraceptives.

� While India formulations would see a slowdown in FY14, impacted bythe New Pricing Policy, we expect growth to rebound to historicallevels of 18-20% in FY15.


Key issues to watch out� Outlook on future launches in the US� Revival in constant currency sales growth in I'rom.



Net Sales 22,192 22,393 24,659 25,374 24,207 28,174 29,972 30,230 94,617 112,582

YoY Change (%) 43.8 28.6 37.6 34.7 9.1 25.8 21.5 19.1 37.9 19.0


EBITDA 4,230 4,545 5,698 6,103 5,340 5,917 6,474 6,499 20,576 24,230

Margins (%) 19.1 20.3 23.1 24.1 22.1 21.0 21.6 21.5 21.7 21.5

Depreciation 654 690 688 1,290 624 650 700 750 3,322 2,724

Interest 101 101 77 133 54 54 54 54 410 216

Other Income 582 657 617 547 565 390 390 390 2,403 1,735

PBT 4,058 4,412 5,550 5,227 5,226 5,603 6,110 6,085 19,247 23,024

Tax 1,208 1,438 2,116 1,080 2,172 1,681 1,527 1,527 5,842 6,907

Rate (%) 29.8 32.6 38.1 20.7 41.6 30.0 25.0 25.1 30.4 30.0

Reported PAT 2,850 2,974 3,434 4,148 4,055 3,922 4,582 4,558 13,405 17,117

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 3,168 3,818 3,783 10,348 14,100

YoY Change (%) -15.1 3.2 12.5 262.1 86.8 15.0 35.8 26.1 46.7 36.3

Margins (%) 8.0 12.3 11.4 11.8 13.8 11.2 12.7 12.5 10.9 12.5

Advanced mkt formulations 11,826 11,745 14,646 14,875 13,917 15,909 18,081 17,694 53,100 63,759

YoY Change (%) 68.6 34.6 57.5 37.2 17.7 35.5 23.5 19.0 48.0 20.1

Emerging mkt formulations 8,049 8,256 7,660 8,063 7,861 9,754 9,420 9,978 32,027 37,012

YoY Change (%) 27.4 23.0 15.4 35.0 -2.3 18.1 23.0 23.7 24.9 15.6

E: MOSL Estimates; Quarterly nos will not add up to full year nos due to restatement of past quarters

LupinCMP: INR853 Buy


EBITDA 11.8 20.0 24.2 28.9

Net Profit 7.9 10.3 14.1 18.8

Adj. EPS (INR) 17.7 23.1 31.5 41.9

EPS Gr. (%) -8.8 30.4 36.3 33.1

BV/Sh. (INR) 89.9 116.3 148.0 182.9

RoE (%) 21.7 22.5 23.8 25.4

RoCE (%) 24.6 33.3 33.5 33.1

Payout (%) 20.0 15.6 18.4 21.9

Valuations

PP/E (x) 48.1 36.9 27.1 20.3

P/BV (x) 9.5 7.3 5.8 4.7

EV/EBITDA (x) 33.3 19.4 15.9 13.1

Div. Yield (%) 0.4 0.5 0.7 0.9

Bloomberg LPC IN


M. Cap. (INR b)/(USD b) 382 / 6


1,6,12 Rel Perf. (%) 3 / 31 / 37

C–99October 2013


Quarterly performance (INR Million)Y/E December CY12 CY13 CY12 CY13E


Net Income 37,868 32,284 26,910 27,112 25,005 26,834 29,909 34,046 124,597 115,794

YoY Change (%) 73.6 54.2 28.4 -28.5 -34.0 -16.9 11.1 25.6 22.6 -7.1

EBITDA 9,552 5,113 3,495 811 1,906 2,625 3,027 5,935 19,379 13,493

Margins (%) 25.2 15.8 13.0 3.0 7.6 9.8 10.1 17.4 15.6 11.7

Depreciation 798 783 816 805 797 763 800 830 3,202 3,187

Interest 377 484 389 537 512 488 500 510 1,796 2,012

Other Income 1,556 -2,972 1,889 -334 254 -1,378 -1,228 604 340 -1,747

PBT before EO Expense 9,933 874 4,178 -865 851 -3 500 5,199 14,721 6,547

Extra-Ord Expense -4,050 5,993 -3,933 3,657 -818 4,863 2,604 -420 2,272 6,229

PBT after EO Expense 13,983 -5,119 8,112 -4,522 1,669 -4,866 -2,104 5,619 12,449 319

Tax 1,374 683 542 340 353 311 110 1,144 2,939 1,916

Rate (%) 9.8 -13.3 6.7 -7.5 21.1 -6.4 -5.2 20.4 23.6 601.1

Reported PAT 12,609 -5,802 7,570 -4,862 1,316 -5,177 -2,214 4,475 9,510 -1,597


Reported PAT (incl one-offs) 12,468 -5,857 7,542 -4,924 1,257 -5,241 -2,254 4,435 9,228 -1,800

Adj PAT (excl. one-offs) 2,039 1,447 2,055 -45 904 1,302 1,663 1,627 5,496 5,496

YoY Change (%) 18.3 37.1 26.9 -102.9 -55.7 -10.0 -19.1 0.0 -7.7 0.0

Margins (%) 5.4 4.5 7.6 -0.2 3.6 4.9 5.6 4.8 4.4 4.7

US Sales (USD m) 399 254 155 136 110 138 145 217 946 385

YoY Change (%) 156.7 167.4 84.2 -64.8 -72.5 -45.8 -6.3 58.9 31.4 -59.3

India formulation sales 4,922 5,541 5,829 5,418 5,427 5,426 5,995 5,743 22,073 24,832

YoY Change (%) 13.0 14.9 13.0 -0.4 10.3 -2.1 2.9 6.0 11.6 12.5

E: MOSL Estimates; Estimates include upside from FTF opportunities

Ranbaxy LaboratoriesCMP: INR334 Neutral� We expect Ranbaxy Laboratories (RBXY) to post 26% YoY growth in

core sales for 3QCY13 to INR29.91b, driven by strong 80% growth incore US sales over a low base of 3QCY12. Reported sales is expected togrow 11% YoY.

� Core EBITDA is likely to grow just 4% YoY to INR3.03b, mainly due todeteriorating profitability in the base business and higher R&D andremediation costs related to USFDA. Core EBITDA margin would shrink220bp YoY to 10.1%.

� We expect adjusted PAT to decline 19% YoY to INR1.66b mainly due tolower other income and higher interest costs.

� RBXY had reported a forex gain of INR1.24b above EBITDA in 3QCY12,against which we expect forex loss of INR1.58b in 3QCY13.

� There was also a forex gain of INR3.93b in extraordinary expenses,against which we expect a loss of INR2.6b in 3QCY13.

� 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 the company to improve corebusiness margins, as one-offs have started waning off.

� The stock trades at 22x FY14E and 22.1x FY15E EPS. Maintain Neutral.

Key issues to watch out� Timeline for resolving USFDA issues under the consent decree� Improvement in core EBITDA margin.


EBITDA 17.0 19.4 13.5 23.2

Net Profit 6.0 5.5 5.5 5.5

Rep. EPS (INR) 30.2 -4.3 33.0

Adj. EPS (INR) 14.1 13.0 13.0 12.9

EPS Gr. (%) 25.9 -7.7 0.0 -0.4

BV/Sh. (INR) 67.8 96.4 89.8 116.9

RoE (%) 31.4 -4.7 28.2

RoCE (%) 20.9 21.0 12.6 19.7

Payout (%) -3.4 0.0 -62.0 17.7

Valuations

P/E (x) 20.3 22.0 22.0 22.1

P/BV (x) 4.9 3.0 3.2 2.4

EV/EBITDA (x) 0.0 7.4 13.8 7.5

Div. Yield (%) 0.0 0.0 0.7 1.7

Bloomberg RBXY IN


M. Cap. (INR b)/(USD b) 141 / 2


1,6,12 Rel Perf. (%) -22 / -29 / -43

C–100October 2013




Net Sales 3,225 3,741 3,966 4,007 3,629 4,100 4,380 4,450 14,939 16,559

YoY Change (%) 16.7 23.5 26.8 18.6 12.5 9.6 10.4 11.1 21.5 10.8


EBITDA 492 522 805 507 468 623 716 671 2,335 2,478

Margins (%) 15.3 14.0 20.3 12.7 12.9 15.2 16.4 15.1 15.6 15.0

Depreciation 183 186 307 223 223 227 235 254 907 938

Interest 4 4 3 3 3 1 3 4 14 10

Other Income 289 267 266 382 414 396 388 294 1,204 1,492

PBT 594 599 761 663 656 791 867 708 2,617 3,023

Tax 193 194 248 215 213 279 286 233 722 1,011

Effective tax Rate (%) 32.5 32.4 32.6 32.4 32.5 35.3 33.0 32.9 27.6 33.5

Reported PAT 401 405 513 448 443 512 581 475 1,895 2,011

Adj PAT 401 405 513 448 443 512 581 475 1,895 2,011

YoY Change (%) -20.8 -18.5 -6.4 24.3 10.5 26.4 13.3 6.1 -0.9 6.2

Margins (%) 12.4 10.8 12.9 11.2 12.2 12.5 13.3 10.7 12.7 12.1

Domestic sales 2,765 3,040 3,288 3,315 3,169 3,344 3,617 3,519 12,408 13,649

YoY Change (%) 24.5 24.6 27.7 18.9 14.6 10.0 10.0 6.2 23.8 10.0

E: MOSL Estimates

Sanofi IndiaCMP: INR2,558 Neutral� We expect Sanofi India's (SANL) revenues to grow 10% YoY in 3QCY13

to INR4.38b, led by the domestic formulations business.

� EBITDA is likely to decline 11% YoY to INR716m on a high base of3QCY12. EBITDA margin would stand at 16.4% v/s 20.3% in 3QCY12.

� We expect PAT to grow 13% YoY to INR581m, despite subduedoperational performance, due to lower depreciation (highamortization charges in 3QCY12) and higher other income.

� SANL's profitability has declined significantly in the last six years, withEBITDA margin declining from 25% in CY06 to 15.6% in CY12, mainlyimpacted by discontinuation of Rabipur sales in the domestic marketand acquisition of Universal Healthcare in 2011.

� RoE has declined from 28.6% to 14.8% over CY06-12.

� We believe the stock price performance is likely to remain muteduntil clarity emerges on future growth drivers.

� The stock trades at 29.3x FY14E and 24.2x FY15E 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.


EBITDA 1.8 2.3 2.5 2.9

Net Profit 1.9 1.8 2.0 2.4

Adj. EPS (INR) 83.0 76.7 87.3 105.5

EPS Gr. (%) 23.3 -7.6 13.9 20.8

BV/Sh. (INR) 479.7 518.0 559.0 612.3

RoE (%) 17.3 14.8 15.6 17.2

RoCE (%) 25.3 21.5 23.0 25.0

Payout (%) 46.0 50.0 53.1 49.5

Valuations

P/E (x) 30.8 33.3 29.3 24.2

P/BV (x) 5.3 4.9 4.6 4.2

EV/EBITDA (x) 32.1 23.4 22.1 18.1

Div. Yield (%) 1.3 1.3 1.6 1.8

Bloomberg SANL IN



52-Week Range (INR) 2,899 / 2,060

1,6,12 Rel Perf. (%) -5 / -6 / 6

C–101October 2013


� We expect Sun Pharmaceuticals (SUNP) to post 39% YoY growth incore revenues to INR33.94b. Growth will be mainly driven byconsolidation of URL and DUSA Pharma, and traction in US basebusiness, while domestic formulations will report flat growth YoY. Weexpect reported sales to grow 42% to INR37.8b.

� Core EBITDA is likely to grow 33% YoY to INR13.24b. Core EBITDA marginwould contract 180bp YoY to 39% in 2QFY13, impacted by fallingprofitability from Taro. Reported EBITDA is expected to grow 40% toINR16.32b.

� We expect adjusted PAT to grow 31% YoY to INR10.1b. Reported PAT islikely to be significantly higher at INR12.41b due to Protonix-relatedprovisioning in 2QFY13.

� We believe that the US market will remain the core earnings driver forSUNP, along with support from India and RoW markets.

� While India formulations will see a slowdown in FY14, impacted bythe New Pricing Policy, we expect growth to rebound to historicallevels of 16-18% in FY15.

� The stock trades at 27.4x FY14E and 23.9x 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: INR590 Buy

Financials & Valuation (INR b)Y/E March 2012* 2013 2014E 2015ESa les 80.1 112.4 156.4 179.6

EBITDA 31.9 48.4 66.0 74.1

Reported PAT 25.9 29.8 26.0 56.8

Reported EPS (INR)12.5 14.4 12.5 27.4

Core PAT 25.9 30.5 44.6 51.1

Core EPS (INR) 12.5 14.8 21.6 24.7

EPS Gr. (%) 42.7 31.3 46.1 14.4

BV/Sh. (INR) 58.7 72.4 81.9 105.2

RoE (%) 21.5 22.5 27.9 26.4

RoCE (%) 30.4 31.5 25.5 38.7

Payout (%) 17.2 17.5 23.9 13.9

Valuations

P/E (x) 47.1 40.0 27.4 23.9

P/BV (x) 10.0 8.1 7.2 5.6

EV/EBITDA (x) 36.6 15.3 15.3 15.3

Div. Yield (%) 0.4 0.7 0.7 0.7

*Including Para-IV/one-off upsides

Bloomberg SUNP IN


M. Cap. (INR b)/(USD b) 1,221 / 20


1,6,12 Rel Perf. (%) 9 / 39 / 68



Net Revenues 26,581 26,572 28,520 30,715 34,822 37,790 42,168 41,593 112,389 156,374

YoY Change (%) 62.5 40.3 33.0 31.8 31.0 42.2 47.9 35.4 40.4 39.1


EBITDA 12,169 11,684 12,611 12,599 15,306 16,324 17,171 17,187 49,062 65,988

Margins (%) 45.8 44.0 44.2 41.0 44.0 43.2 40.7 41.3 43.7 42.2

Depreciation 801 829 844 887 978 1,000 1,050 1,080 3,362 4,108

Net Other Income -231 1,476 936 1,102 735 836 986 1,036 3,284 3,593

PBT before EO Exp 11,136 12,331 12,703 12,814 15,063 16,160 17,107 17,143 48,984 65,473

EO Exp/(Inc) 0 5,836 0 0 25,174 0 0 0 5,836 25,174

PBT 11,136 6,495 12,703 12,814 -10,111 16,160 17,107 17,143 43,149 40,299

Tax 1,925 2,139 2,369 1,773 1,511 2,633 2,790 2,913 8,205 9,847

Rate (%) 17.3 17.3 18.6 13.8 10.0 16.3 16.3 17.0 16.8 15.0

Profit after Tax 9,211 4,356 10,335 11,041 -11,622 13,526 14,317 14,230 34,944 30,452

Share of Minority Partner 1,256 1,161 1,521 925 1,139 1,113 1,062 1,161 4,863 4,476

Reported PAT 7,956 3,195 8,814 10,116 -12,761 12,414 13,255 13,069 30,081 25,976

One-off upsides 2,276 1,303 812 976 1,174 1,938 1,907 1,488 5,367 6,506

Adj Net Profit 5,679 7,728 8,002 9,140 11,239 10,476 11,348 11,581 30,550 44,644

YoY Change (%) 29.5 41.7 31.0 25.6 97.9 35.6 41.8 26.7 31.5 46.1

Margins (%) 21.4 29.1 28.1 29.8 32.3 27.7 26.9 27.8 27.2 28.5

US Sales 15,411 13,301 14,946 17,879 20,314 17,673 18,126 15,908 59,238 59,946

YoY Change (%) 147.8 66.5 43.7 76.9 31.8 32.9 21.3 -11.0 70.6 1.2

E: MOSL Estimates; Quarterly no. don’t match with annual no. because of reinstatement of financials; Estimates include one-offupsides.

C–102October 2013


� We expect Torrent Pharmaceuticals (TRP) to post 21% YoY growth in2QFY14 sales to INR9.42b, led by strong growth in all markets outsideIndia except Brazil. Domestic formulations would grow 8% YoY toINR3.1b, while Brazil would continue to witness slowdown.

� EBITDA is likely to grow 16.5% YoY to INR1.81b, with EBITDA margindeclining 100bp YoY.

� Adjusted PAT would be INR1.23b, up 15% YoY.

� Over the last six years, TRP has delivered 30.5% EPS CAGR, even ascapital 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� Outlook on Brazilian operations for FY14-15� Sustained recovery in domestic formulations� Impact of Drug Price Control Order (DPCO), 2013.




YoY Change (%) 18.4 13.7 14.8 29.2 21.3 21.3 21.4 13.5 19.1 19.2

EBITDA 1,560 1,553 1,612 2,200 1,880 1,810 1,854 1,809 6,930 7,353

Margins (%) 20.3 20.0 20.2 25.3 20.2 19.2 19.1 18.3 21.6 19.2

Depreciation 201 203 204 220 210 221 229 238 830 898

Interest 94 80 67 100 80 85 90 99 340 354

Other Income 140 123 89 80 80 100 130 140 430 450


Extra-Ord Expense 0 0 0 370 -200 0 0 0 370 -200

PBT after EO Expense 1,404 1,394 1,429 1,590 1,870 1,604 1,665 1,612 5,820 6,751

Tax 374 309 309 480 380 369 383 375 1,470 1,507

Rate (%) 26.6 22.2 21.6 24.5 22.8 23.0 23.0 23.3 23.7 23.0

Reported PAT 1,030 1,085 1,121 1,110 1,490 1,235 1,282 1,237 4,350 5,244

Minority Interest 12 12 -3 0 0 0 0 0 20 0

Adj PAT 1,019 1,073 1,123 1,480 1,290 1,235 1,282 1,237 4,705 5,044

YoY Change (%) 14.1 7.3 35.0 164.4 26.7 15.1 14.1 -16.4 43.1 7.2

Margins (%) 13.3 13.8 14.1 17.0 13.9 13.1 13.2 12.5 14.6 13.2

Dom. formulations sales 2,778 2,710 2,586 2,180 3,120 2,927 2,922 2,420 10,240 11,389

YoY Change (%) 13.5 14.7 12.7 9.8 12.3 8.0 13.0 11.0 12.7 11.2

Intl. formulations sales 4,212 4,362 4,490 5,260 5,390 5,518 5,686 6,128 18,340 22,722

YoY Change (%) 33.3 13.5 14.2 34.1 28.0 26.5 26.6 16.5 23.8 23.9

E: MOSL Estimates

Torrent PharmaCMP: INR439 Buy


EBITDA 5.2 6.9 7.4 8.4

Net Profit 3.3 4.7 5.0 5.8

Adj. EPS (INR) 19.4 27.8 29.8 34.1

EPS Gr. (%) 21.7 43.1 7.2 14.4

BV/Sh. (INR) 70.5 84.9 108.5 132.6

RoE (%) 29.7 35.8 30.8 28.3

RoCE (%) 28.8 33.5 29.6 28.7

Payout (%) 29.2 52.3 28.1 29.3

Valuations

P/E (x) 22.6 15.8 14.7 12.9

P/BV (x) 6.2 5.2 4.0 3.3

EV/EBITDA (x) 14.1 10.8 10.1 8.8

Div. Yield (%) 1.9 5.2 1.7 1.9

Bloomberg TRP IN




1,6,12 Rel Perf. (%) 0 / 22 / 21

C–103October 2013

September 2013 Results Preview | Sector: Media

Shobhit Khare ([email protected]) / Anil Shenoy ([email protected])

Expected quarterly performance summary (INR million)CMP Rating Sales EBITDA Net Profit


27.09.13 % YoY % QoQ % YoY % QoQ % YoY % QoQD B Corp 252 Buy 4,334 14.5 -3.6 1,058 23.0 -20.3 590 21.4 -22.5Dish TV 50 Buy 5,908 10.7 2.1 1,515 -2.7 24.5 -198 Loss LossHT Media 87 Neutral 5,154 0.9 -4.7 445 -21.2 -42.8 196 -41.1 -58.7Jagran Prakashan 82 Buy 4,095 27.1 -0.9 911 16.5 -10.6 529 8.7 -8.5PVR 470 Buy 3,556 99.6 6.1 693 114.4 16.8 262 60.9 58.5Sun TV 401 Buy 5,026 16.0 -16.5 3,805 15.6 7.6 1,828 20.5 11.2Zee Entertainment 238 Neutral 10,551 10.6 8.4 2,907 33.5 -0.3 2,145 14.3 -4.5Sector Aggregate 38,624 16.7 -0.8 11,334 18.6 -0.5 5,351 15.1 -3.9

Abbreviations and acronymsGEC: General entertainment

channel

DTH: direct to home

Ad environment challengingThe ad environment is likely to remain challenging due to the slowing economy. In2QFY14, we expect Zee/Sun TV to clock 10/13% YoY ad growth (including broadcastrevenue for Sun TV). We expect our print universe ad growth to be impacted due tobulk of the "shraadh" season falling in 2QFY14 against 3Q last year. Regional printcompanies are likely to post double-digit ad growth, though ad growth would remainunder pressure for English language publications. We expect DB Corp/Jagran/HT Mediato post ad growth of 16/10/12%.

Expect strong earnings growth for Sun TV/DB CorpWe expect Sun TV/DB Corp to report the highest YoY PAT growth at ~21%, followed byZee. Zee's adjusted PAT is likely to grow 14% YoY. Dish TV's net loss would decline~35% QoQ, driven by EBITDA margin expansion. HT Media's PAT is likely to decline41% YoY due to muted ad growth and newsprint price inflation caused by INRdepreciation.

DTH: Subscriber additions to remain largely flat QoQWe expect DTH subscriber additions to remain largely flat QoQ due to lack of catalystsduring 2QFY14. We expect Dish TV to add 0.4m subscribers on a gross basis in 2QFY14.

Hiccups in digitization process continueThere have been hiccups in the phase-I implementation, as cable subscribers are yetto fully transition to "addressable" systems. The regulator, TRAI has given directionsto MSOs/LCOs operating in phase-I to implement "subscriber management system"to maintain subscriber details and their choice of services. The last date for collectionof customer application forms from digital cable subscribers in phase-II has beenextended to 15 November 2013 from 20 September 2013.

Digitization remains a strong theme for broadcasting; earnings revivalcontinues for printOur industry interactions suggest that the ad environment is likely to remainchallenging for the rest of FY14. The print media sector continues to post earningsrecovery, led by yield improvement focus for regional print and cost management.Digitization remains a strong theme for broadcasting and distribution stocks, as thegovernment has remained committed to the timelines.

MediaCompanies Covered

D B Corp

Dish TV

H T Media

Jagran Prakashan

PVR

Sun TV Network

Zee Entertainment

C–104October 2013


Media: Quarterly financials FY12 FY13 FY14 YoY QoQ

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2QE (%) (%)

Advertisement Revenue (INR b)

ZEEL 3.8 3.9 4.0 4.2 4.5 5.3 5.1 4.8 5.3 5.8 10 10

Sun TV 2.7 2.7 2.9 2.8 2.8 2.8 3.3 3.1 3.1 3.2 13 1

Dish TV NM NM NM NM NM NM NM NM NM NM NM NM

DB Corp 2.7 2.6 2.9 2.5 2.7 2.6 3.2 2.8 3.3 3.1 16 -6

Jagran Prakashan* 2.0 2.1 2.2 2.1 2.2 2.2 2.4 2.3 2.9 2.8 29 -2

HT Media 3.8 3.7 4.1 3.7 3.7 3.6 4.1 3.8 4.1 3.8 4 -7

HMVL 1.1 1.1 1.0 1.1 1.2 1.1 1.2 1.1 1.3 1.3 12 -3

Subscription Revenue (INR b)

ZEEL 3.1 2.9 3.3 4.0 3.6 3.9 4.1 4.5 4.2 4.5 13 6

Sun TV 1.6 1.4 1.4 1.4 1.5 1.5 1.6 1.6 1.8 1.8 22 4

Dish TV 3.9 4.1 4.3 4.3 4.6 4.7 4.9 5.0 5.3 5.4 14 3

DB Corp 0.6 0.6 0.6 0.6 0.7 0.7 0.7 0.7 0.8 0.8 14 4

Jagran Prakashan* 0.6 0.6 0.6 0.6 0.6 0.7 0.7 0.8 0.9 0.9 30 1

HT Media 0.5 0.5 0.5 0.5 0.5 0.6 0.6 0.6 0.6 0.64 13 5

HMVL 0.3 0.3 0.3 0.3 0.4 0.4 0.4 0.4 0.4 0.4 12 3

Total Revenue (INR b)

ZEEL 7.0 7.2 7.5 8.7 8.4 9.5 9.4 9.6 9.7 10.6 11 8

Sun TV 4.5 4.5 4.3 4.3 4.3 4.3 4.9 4.7 6.0 5.0 16 -16

Dish TV 4.6 4.8 4.9 5.2 5.2 5.3 5.6 5.6 5.8 5.9 11 2

DB Corp 3.5 3.5 4.0 3.6 3.8 3.8 4.4 4.0 4.5 4.3 15 -4


HT Media 5.0 4.9 5.3 4.9 4.9 5.1 5.5 5.0 5.4 5.2 1 -5

HMVL 1.5 1.5 1.4 1.6 1.6 1.6 1.6 1.6 1.8 1.8 12 -1

EBITDA (INR b)

ZEEL 1.6 2.1 2.2 1.6 2.3 2.2 2.6 2.4 2.9 2.9 34 0

Sun TV 3.7 3.7 3.4 3.3 3.2 3.3 3.8 3.5 3.5 3.8 16 8

Dish TV 1.1 1.2 1.2 1.4 1.6 1.6 1.4 1.2 1.2 1.5 -3 24

DB Corp 1.00 0.77 1.02 0.76 0.76 0.86 1.19 0.94 1.33 1.06 23 -20


HT Media 0.90 0.71 0.78 0.48 0.67 0.57 0.87 0.72 0.78 0.45 -21 -43

HMVL 0.27 0.31 0.17 0.21 0.28 0.29 0.29 0.29 0.40 0.35 23 -11

EBITDA Margin (%)

ZEEL 22.3 28.9 28.6 18.4 27.7 22.8 27.8 25.1 30.0 27.5 472bp -240bp

Sun TV 80.6 81.0 80.2 76.9 75.9 75.9 77.5 73.7 58.8 75.7 -23bp 1693bp

Dish TV 24.4 25.2 24.5 27.5 29.9 29.2 24.7 21.6 21.0 25.6 -354bp 460bp

DB Corp 28.4 21.8 25.7 21.0 20.3 22.7 27.2 23.6 29.6 24.4 167bp -514bp

Jagran Prakashan* 26.9 25.9 26.3 21.2 24.8 24.3 26.1 15.8 24.7 22.3 -199bp -240bp

HT Media 18.2 14.4 14.8 9.7 13.7 11.1 16.0 14.3 14.4 8.6 -242bp -576bp

HMVL 18.1 20.3 11.7 13.7 17.7 18.0 17.6 18.9 22.0 19.8 179bp -227bp

Adj. PAT (INR b)

ZEEL 1.34 1.56 1.39 1.42 1.58 1.88 1.94 1.80 2.25 2.14 14 -5

Sun TV 1.88 1.80 1.68 1.59 1.64 1.52 1.90 1.78 1.64 1.83 21 11

Dish TV -0.18 -0.49 -0.43 -0.49 -0.32 -0.21 -0.45 -0.44 -0.30 -0.20 -7 -35

DB Corp 0.61 0.40 0.55 0.45 0.44 0.49 0.71 0.55 0.76 0.59 21 -22


HT Media 0.52 0.44 0.48 0.22 0.41 0.33 0.53 0.40 0.48 0.20 -41 -59

HMVL 0.19 0.22 0.11 0.14 0.21 0.22 0.21 0.23 0.30 0.26 21 -13

* Consolidated numbers from 1QFY14. Not comparable with previous quarters Source: Company, MOSL

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C–106October 2013



27.09.13 FY13 FY14E FY15E FY13 FY14E FY15E FY13 FY14E FY15E FY13 FY14E FY15EMediaD B Corp 252 Buy 11.9 15.3 18.6 21.2 16.5 13.6 12.4 9.3 7.9 22.3 25.7 27.7Dish TV 50 Buy -1.2 -0.9 -0.2 -42.7 -58.9 -289.8 10.9 10.1 8.1 NA NA NAHindustan Media 111 Buy 11.5 14.1 16.3 9.7 7.9 6.8 4.6 3.0 2.0 17.9 18.5 17.9HT Media 87 Neutral 7.1 5.7 6.0 12.3 15.4 14.6 5.9 6.3 5.5 10.1 7.4 7.2Jagran Prakashan 82 Buy 4.7 6.4 7.7 17.6 12.8 10.7 10.1 7.6 6.5 17.5 20.4 21.5PVR 470 Buy 11.2 15.4 24.2 41.8 30.6 19.4 20.9 10.7 8.4 9.6 9.3 13.3Sun TV 401 Buy 17.3 19.5 24.1 23.1 20.6 16.6 11.2 9.6 8.0 23.6 24.1 26.7Zee Entertainment 238 Neutral 7.5 9.2 11.0 31.5 26.0 21.7 23.2 18.7 15.4 19.6 20.7 21.4Sector Aggregate 28.8 24.0 19.1 13.7 11.4 9.4 17.1 18.4 20.3


94

96

98

100

102

104

Jun-

13

Jul-

13

Aug

-13

Sep-

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Sensex IndexMOSL Media Index

90

95

100105

110

115

120

Sep-

12

Dec

-12

Mar

-13

Jun-

13

Sep-

13

Sens ex IndexMOSL Media Index

C–107October 2013




Sales 3,770 3,784 4,389 3,981 4,494 4,334 5,030 4,540 15,923 18,398

YoY (%) 6.6 6.9 11.0 10.4 19.2 14.5 14.6 14.0 8.8 15.5


EBITDA 765 861 1,192 939 1,328 1,058 1,398 1,143 3,760 4,927

YoY (%) -23.8 11.6 17.1 24.0 73.7 23.0 17.3 21.7 5.9 31.0

EBITDA margin (%) 20.3 22.7 27.2 23.6 29.6 24.4 27.8 25.2 23.6 26.8

Depreciation 135 143 151 151 158 159 160 164 581 640

Interest 17 19 19 22 25 26 26 26 80 102

Other Income 46 38 38 92 45 50 55 65 213 214

PBT 658 736 1,060 858 1,191 923 1,267 1,018 3,313 4,398

Tax 222 251 352 307 430 334 458 368 1,132 1,589


Adj PAT 437 486 706 552 761 590 809 650 2,181 2,810

YoY (%) -28.5 20.7 27.6 21.7 74.3 21.4 14.6 17.7 7.9 28.8

Revenue break-up (INR m)

Ad revenue (print) 2,701 2,636 3,184 2,779 3,253 3,058 3,662 3,200 11,300 13,173

Circulation revenue 656 698 729 731 767 796 831 833 2,814 3,227

Radio 140 153 191 183 172 179 214 202 667 766

Event management 46 40 9 31 15 16 16 16 126 63

Others 227 257 276 257 288 286 308 288 1,017 1,169

Total revenue 3,770 3,784 4,389 3,981 4,494 4,334 5,030 4,540 15,923 18,398

E: MOSL Estimates

D B CorpCMP: INR252 Buy� We expect print advertising revenues to grow 16% YoY to INR3.06b.

� Circulation revenues are likely to grow 14% YoY to INR0.8b.

� We expect aggregate revenues to increase 15% YoY to INR4.33b.

� We estimate EBITDA at INR1.06b, up 23% YoY. EBITDA margin shouldexpand ~170bp YoY to 24.4%.

� Net profit is likely to grow 21% YoY to INR0.59b.

� The stock trades at 16.6x FY14E and 13.7x FY15E EPS. Buy.

Key issues to watch out� YoY ad growth (we expect 16%)� EBITDA margin (we expect 24.4%)


EBITDA 3.55 3.76 4.93 5.63

Adj. Net Profit 2.02 2.18 2.81 3.40

Adj. EPS (INR) 11.0 11.9 15.3 18.6

Adj. EPS Gr. (%) -12.3 7.9 28.8 21.1

BV/Sh (INR) 50.7 56.2 63.0 70.9

RoE (%) 23.0 22.3 25.7 27.7

RoCE (%) 18.1 18.0 21.6 23.6

Div. Payout (%) 52.7 53.7 55.7 57.0

Valuations

P/E (x) 23.0 21.3 16.6 13.7

P/BV (x) 5.0 4.5 4.0 3.6

EV/EBITDA (x) 13.3 12.5 9.3 7.9

Div. Yield (%) 2.0 2.2 2.9 3.6

Bloomberg DBCL IN




1,6,12 Rel Perf. (%) -3 / 7 / 21

C–108October 2013




Sales 5,200 5,336 5,578 5,554 5,784 5,908 6,123 6,466 21,668 24,280

YoY Change (%) 12.9 10.7 13.7 5.9 11.2 10.7 9.8 16.4 10.7 12.1

Operating expenses 3,644 3,779 4,201 4,354 4,567 4,393 4,650 4,663 15,873 18,273

EBITDA 1,556 1,557 1,377 1,200 1,217 1,515 1,473 1,802 5,795 6,007

YoY Change (%) 38.7 27.9 14.6 -16.7 -21.8 -2.7 6.9 50.2 16.3 3.7

EBITDA margin (%) 29.9 29.2 24.7 21.6 21.0 25.6 24.1 27.9 26.7 24.7

Depreciation 1,512 1,533 1,713 1,450 1,444 1,499 1,556 1,629 6,276 6,127

Interest 473 317 288 344 354 308 265 233 1,284 1,274

Other Income 106 80 175 157 277 94 70 45 512 486

PBT -324 -213 -449 -436 -304 -198 -278 -15 -1,252 -908

Adjusted net profit -324 -213 -449 -436 -304 -198 -278 -15 -1,252 -908

YoY Change (%) 76.8 -56.3 4.4 -11.0 -6.0 -6.9 -38.1 -96.6 -21.2 -27.5

Net Subs (m) 9.8 10.0 10.5 10.7 10.9 11.1 11.5 11.7 10.7 11.7

ARPU (INR/month) 156 159 160 157 165 164 167 169 157 166

Revenue break-up (INR m)

Subscription revenue 4,556 4,729 4,943 5,001 5,280 5,415 5,644 5,978 19,228 22,316

Lease rentals 460 430 380 320 300 285 271 290 1,597 1,145

Others 184 177 255 233 204 208 208 199 843 818

Total revenue 5,200 5,336 5,578 5,554 5,784 5,908 6,123 6,466 21,668 24,280

E: MOSL Estimates

Dish TVCMP: INR50 Buy� We expect revenues to grow 11% YoY and 2% QoQ to INR5.9b.

� Subscription revenues are likely to increase 3% QoQ to INR5.4b.

� We expect gross additions of 0.4m and net additions of 0.15m.

� EBITDA margin should expand 460bp QoQ to 25.6% largely due to lowercontent costs.

� Net loss is expected to decline 35% QoQ to INR198m.

� The stock trades at an EV/EBITDA of 10.1x FY14E and 8.1x FY15E. Buy.

Key issues to watch out� Quarterly gross additions (we expect 0.4m)� ARPU (we expect INR164)� EBITDA margin (we expect 25.6%)


EBITDA 5.0 5.8 6.0 7.3

Adj. Net Profit -1.6 -1.3 -0.9 -0.2

Adj. EPS (INR) -1.5 -1.2 -0.9 -0.2

Adj. EPS Gr. (%) NA NA NA NA

BV/Sh (INR) -0.9 -1.5 -2.3 -2.5

RoE (%) NA NA NA NA

RoCE (%) NA 1.2 -0.9 6.4

Div. Payout (%) NA NA NA NA

Valuations

P/E (x) NA NA NA NA

P/BV (x) NA NA NA NA

EV/EBITDA (x) 12.4 10.9 10.1 8.1

EV/Sub (INR) 6,435 5,891 5,169 4,517

Bloomberg DITV IN




1,6,12 Rel Perf. (%) 9 / -30 / -45

C–109October 2013




Revenue 4,899 5,107 5,470 5,005 5,409 5,154 5,890 5,542 20,482 21,994

YoY (%) -1.4 3.6 3.9 1.3 10.4 0.9 7.7 10.7 1.9 7.4


EBITDA 669 565 875 718 779 445 799 453 2,826 2,476

YoY (%) -25.9 -20.7 12.6 49.3 16.5 -21.2 -8.7 -36.9 -1.6 -12.4

EBITDA margin (%) 13.7 11.1 16.0 14.3 14.4 8.6 13.6 8.2 13.8 11.3

Depreciation 220 242 220 232 219 223 231 238 914 911

Interest 103 98 110 135 137 88 100 98 446 423

Other Income 209 244 238 247 276 220 225 241 938 962

PBT 555 469 783 597 699 354 693 359 2,404 2,105

Tax 129 107 222 167 183 99 195 101 624 577


PAT 426 362 562 430 516 255 498 259 1,780 1,528

Minority Interest 19 29 34 29 41 59 58 37 111

Reported PAT 407 333 528 401 475 196 440 221 1,669 1,332

Adj PAT 407 333 528 401 475 196 440 221 1,669 1,332

YoY (%) -21.0 -24.0 9.5 82.5 16.7 -41.1 -16.6 -44.8 1 -20

Ad revenue growth (%) -3 -2 2 1 10 4 9 10 0 8

-English -6 -3 -3 3 8 1 6 8 -2 6

-Hindi 5 1 15 -3 14 12 16 16 5 14

Circulation revenue growth (%) 8 11 12 19 16 13 11 12 13 13

-English -3 1 6 27 25 15 10 10 7 14

-Hindi 13 16 15 16 12 12 12 12 15 12

E: MOSL Estimates

H T MediaCMP: INR87 Neutral� We expect revenues to grow 1% YoY to INR5.15b.

� Ad revenues are likely to grow 4% YoY to INR3.80b.

� We expect circulation revenues to increase 13% YoY to INR0.64b.

� EBITDA margin should contract 242bp YoY to 8.6% due to newsprintprice inflation, led by INR depreciation.

� Net profit is likely to decline 41% YoY to INR0.20b.

� The stock trades at 15.6x FY14E and 14.8x FY15E EPS. Neutral.

Key issues to watch out� English ad growth (we expect 1% YoY growth)� Hindi ad growth (we expect 12% YoY growth)� EBITDA margin (we expect 8.6%)


EBITDA 2.85 2.83 2.48 2.56

Adj. Net Profit 1.64 1.68 1.33 1.40

Adj. EPS (INR) 7.0 7.1 5.7 6.0

Adj. EPS Gr. (%) -9.5 2.5 -20.6 5.3

BV/Sh (INR) 67.4 74.0 80.0 86.5

RoE (%) 10.9 10.1 7.4 7.2

RoCE (%) 10.4 10.0 8.4 8.8

Div. Payout (%) 6.7 6.5 7.5 8.2

Valuations

P/E (x) 12.7 12.4 15.6 14.8

P/BV (x) 1.3 1.2 1.1 1.0

EV/EBITDA (x) 6.1 5.9 6.4 5.6

Div. Yield (%) 0.5 0.5 0.5 0.6

Bloomberg HTML IN




1,6,12 Rel Perf. (%) -14 / -20 / -11

C–110October 2013


Quarterly Performance (Consolidated from 1QFY14) (INR Million)Y/E March FY13 FY14 FY13 FY14E


Sales 3,175 3,221 3,489 3,428 4,131 4,097 4,475 4,287 13,314 16,990

YoY (%) 4.2 5.5 7.7 10.4 30.1 27.2 28.3 25.1 7.0 27.6


EBITDA 788 782 911 540 1,019 913 1,118 869 3,021 3,920

YoY (%) -3.9 -1.1 7.0 -18.0 29.3 16.8 22.8 60.9 -3.2 29.7

EBITDA margin (%) 24.8 24.3 26.1 15.8 24.7 22.3 25.0 20.3 22.7 23.1

Depreciation 148 161 166 185 181 188 196 205 660 770

Interest 76 59 77 65 71 72 73 70 278 286

Other Income -7 133 -9 109 -12 40 79 80 225 187

PBT 557 694 659 398 755 693 929 673 2,308 3,051

Tax 0 0 0 -4 177 163 218 158 -4 717

Effective Tax Rate (%) 0.0 0.0 0.0 -1.1 23.5 23.5 23.5 23.5 (0.2) 23.5

Reported net profit 557 694 659 402 578 530 711 515 2,313 2,334

Extra-ordinary item 167 208 198 119 0 0 0 0 693 0

Adjusted net profit 390 486 461 283 578 530 711 515 1,620 2,334

YoY (%) -21.5 6.2 11.6 -34.0 48.1 9.0 54.2 82.1 -17.3 44.1

Key Metrics

Ad revenue growth (YoY, %) 8 4 7 8 31 29 33 31 4 14

Circulation revenue growth (YoY,%) 10 9 12 21 35 30 25 15 13 19

RM/Sales (%) 36 34 34 36 34 35 36 36 35 29

E: MOSL Estimates

Jagran PrakashanCMP: INR82 Buy� Quarterly financials will not be comparable on a YoY basis due to

inclusion of 'Nai Duniya'.

� We expect advertising revenues to grow 29% YoY to INR2.84b onreported basis. On a like to like basis, we expect ad revenue growth tobe 10% YoY.

� We expect circulation revenues to grow 30% YoY to INR0.87b on areported basis. On a like to like basis, we expect circulation revenuegrowth of 13% YoY.

� Aggregate revenues are likely to increase 27% YoY to INR4.10b.

� We estimate EBITDA at INR0.91b, up 17% YoY, and EBITDA margin at22.3%.

� Adjusted earnings should grow 9% YoY to INR0.53b, despiteconsolidation of 'Nai Duniya'.


Key issues to watch out� YoY ad growth (we expect 29% including ad revenues of Nai Duniya)� EBITDA margin (we expect 22.3%)


EBITDA 3.17 2.96 3.92 4.63

Adj. Net Profit 1.78 1.47 2.14 2.67

Adj. EPS (INR) 5.6 4.7 6.8 8.5

Adj. EPS Gr. (%) -18.3 -17.3 44.8 25.2

BV/Sh (INR) 23.8 29.5 33.9 38.9

RoE (%) 24.5 17.5 21.3 23.2

RoCE (%) 15.5 18.8 16.4 16.9

Div. Payout (%) 72.6 50.2 43.3 41.5

Valuations

P/E (x) 14.7 17.8 12.3 9.8

P/BV (x) 3.5 2.8 2.4 2.1

EV/EBITDA (x) 9.5 9.8 7.1 5.7

Div. Yield (%) 4.2 2.4 3.0 3.6

Bloomberg JAGP IN




1,6,12 Rel Perf. (%) -12 / -16 / -16

C–111October 2013


PVRCMP: INR470 Buy� We expect PVR to report revenues of INR3.5b for 2QFY14, marking a

growth of 100% due to consolidation of Cinemax with PVR. We expectfootfalls of 16.6m, with average ticket price (ATP) at INR175 and spendper head (SPH) of INR55.5 on food and beverages (F&B).

� EBITDA margin is likely to expand 150bp YoY to 19.5%, primarily onaccount higher growth in F&B and advertisement revenues, andsynergies from Cinemax acquisition.

� Due to higher margins and Cinemax consolidation, we expect PAT togrow 60% YoY.

� The stock trades at an EV of 10.6x FY14E and 8.3x FY15E EBITDA.Maintain Buy.

Key issues to watch out for�� Growth in footfalls�� New screen openings�� Synergies with Cinemax


EBITDA 0.8 1.2 2.3 2.9

NP 0.3 0.4 0.6 1.0

EPS (INR) 9.8 11.2 15.4 24.2

EPS Growth (%) 225.4 14.7 36.6 57.5

BV/Share (INR) 109.3 162.2 171.2 191.9

RoE (%) 8.1 9.6 9.3 13.3

RoCE (%) 10.4 7.8 12.2 15.1

Valuations

P/E (x) 47.6 41.6 30.4 19.3

P/BV (x) 4.3 2.9 2.7 2.4

EV/EBITDA (x) 26.7 21.1 10.6 8.3

EV/Sales (x) 3.9 3.1 1.7 1.4

Bloomberg PVRL IN




1,6,12 Rel Perf. (%) 12 / 50 / 145

Niket Shah ([email protected])



Net Sales 1,799 1,782 2,024 2,448 3,352 3,556 3,913 3,444 8,053 14,274

YoY Change (%) 53.3 28.1 43.2 108.0 86.0 100.0 93.0 41.0 55.7 77.2


EBITDA 338 323 343 164 594 693 771 276 1,169 2,337

Margins (%) 18.8 18.2 17.0 6.7 17.7 19.5 19.7 8.0 14.5 16.4

Depreciation 179 89 118 175 182 213 211 207 560 824

Interest 47 52 92 176 194 178 203 207 368 794

Other Income 8 52 11 19 21 25 30 36 91 113

PBT before EO expense 120 235 145 -167 238 327 386 -102 332 833

Extra-Ord expense 0 0 33 0 41 0 0 0 -12 0

PBT 120 235 111 -167 197 327 386 -102 320 833

Tax 42 73 56 -294 57 65 89 -20 (124) 208

Rate (%) 34.8 31.0 50.0 176 29.1 20.0 23.0 20.0 -38.7 25.0

Min. Int. & Profit/Loss of Asso. Cos. -3 -1 2 3 4 0 0 0 2 0

Reported PAT 81 163 53 124 136 262 297 -82 445 625

YoY Change (%) 37.1 14.8 -22.4 105 61 326 -166 0.9 0.4

Margins (%) 4.5 9.1 2.6 5.1 4.1 7.4 7.6 -2.4 5.5 4.4

E: MOSL Estimates

C–112October 2013




Revenue 4,258 4,333 4,859 4,727 6,019 5,026 5,641 5,400 18,176 22,086

YoY (%) -6.2 -4.0 14.3 10.7 41.4 16.0 16.1 14.2 3.4 21.5

EBITDA 3,230 3,290 3,763 3,486 3,537 3,805 4,369 4,062 13,769 15,773

YoY (%) -11.7 -10.0 10.3 6.2 9.5 15.6 16.1 16.5 -1.7 14.6

As of % Sales 75.9 75.9 77.5 73.7 58.8 75.7 77.5 75.2 75.8 71.4

Depreciation and Amortization 933 1,138 1,044 1,017 1,174 1,174 1,291 1,162 4,132 4,801

Interest 2 5 17 24 7 10 14 17 48 48

Other Income 132 96 106 216 134 141 148 238 550 660

PBT 2,427 2,243 2,808 2,661 2,489 2,761 3,212 3,122 10,139 11,584

Tax 784 726 910 886 845 933 1,086 1,052 3,306 3,915


Reported PAT 1,643 1,517 1,899 1,775 1,644 1,828 2,126 2,070 6,833 7,669

Adj PAT 1,643 1,517 1,899 1,775 1,644 1,828 2,126 2,070 6,833 7,669

YoY (%) -12.4 -15.8 13.1 11.6 0.1 20.5 12.0 16.6 -1.6 12.2

Revenue Breakup (INR m)

Advertising and Broadcast 2,800 2,810 3,270 3,050 3,140 3,161 3,679 3,451 11,930 13,431

International 260 260 260 260 290 300 303 303 1,040 1,196

DTH 890 900 945 1,000 1,060 1,071 1,087 1,111 3,735 4,329

Domestic Cable 300 340 370 380 420 466 473 485 1,390 1,844

Films and Others 8 23 14 37 1,109 28 100 50 81 1,287

Total 4,258 4,333 4,859 4,727 6,019 5,026 5,641 5,400 18,176 22,086

E: MOSL Estimates; * 1QFY14 includes IPL revenue of INR985.4m and IPL EBITDA loss of INR307.9m

Sun TV NetworkCMP: INR401 Buy� We expect revenues to increase 16% YoY to INR5b.

� Advertising and broadcasting revenues are likely to grow 13% YoY toINR3.16b.

� We expect total subscription revenues (domestic + international) togrow 22% YoY to INR1.84b.

� EBITDA is likely to grow 16% YoY to INR3.8b.

� PAT would grow 21% YoY to INR1.83b.


Key issues to watch out� YoY ad growth (we expect 16%)� QoQ subscription growth (we expect 4%)


EBITDA 14.0 13.8 15.8 18.6

Adj. Net Profit 6.9 6.8 7.7 9.5

Adj. EPS (INR) 17.6 17.3 19.5 24.1

Adj. EPS Gr. (%) -10.0 -1.6 12.2 24.0

BV/Sh (INR) 67.1 73.4 80.7 90.4

RoE (%) 26.3 23.6 24.1 26.7

RoCE (%) 51.2 45.3 47.5 50.6

Div. Payout (%) 53.9 54.8 54.0 51.8

Valuations

P/E (x) 22.7 23.1 20.5 16.6

P/BV (x) 6.0 5.4 5.0 4.4

EV/EBITDA (x) 11.0 11.2 9.6 7.9

Div. Yield (%) 2.4 2.4 2.6 3.1

Bloomberg SUNTV IN


M. Cap. (INR b)/(USD b) 158 / 3


1,6,12 Rel Perf. (%) -3 / -2 / 12

C–113October 2013




Advertsing Revenue 4,472 5,281 5,094 4,792 5,301 5,809 6,113 5,840 19,639 23,063

Subscription Revenue 3,641 3,950 4,098 4,546 4,241 4,474 4,724 4,935 16,234 18,374

Other Sales and Services 317 305 197 305 191 268 201 301 1,123 960

Net Sales 8,430 9,536 9,388 9,643 9,733 10,551 11,037 11,077 36,997 42,397

Change (%) 20.7 32.7 24.4 11.0 15.5 10.6 17.6 14.9 21.7 14.6

Prog, Transmission & Direct Exp 3,757 4,791 4,185 4,669 4,108 4,845 4,737 5,642 17,401 19,333

Staff Cost 888 873 895 835 956 975 985 989 3,491 3,906

Selling and Other Exp 1,453 1,695 1,697 1,716 1,754 1,824 1,897 1,970 6,561 7,444

EBITDA 2,332 2,177 2,611 2,423 2,915 2,907 3,418 2,475 9,544 11,715

Change (%) 49.5 4.9 20.9 51.5 25.0 33.5 30.9 2.2 29.0 22.7

As of % Sales 27.7 22.8 27.8 25.1 30.0 27.5 31.0 22.3 25.8 27.6

Depreciation 99 96 90 115 87 100 106 111 399 403

Finance cost 18 23 16 29 22 22 22 21 86 87

Other Income 301 260 360 538 722 385 388 392 1,459 1,886

PBT 2,517 2,318 2,865 2,817 3,528 3,170 3,678 2,736 10,517 13,111

Tax 947 444 933 1,014 1,289 1,027 1,192 884 3,338 4,392


PAT 1,570 1,874 1,933 1,803 2,239 2,143 2,486 1,851 7,179 8,719

Minority Interest/Associates -12 -2 -8 8 -8 -2 -3 -3 -15 -15

Adj PAT after Minority Interest 1,582 1,876 1,941 1,795 2,246 2,145 2,489 1,854 7,194 8,734

Change (%) 18.3 20.3 39.3 26.3 42.0 14.3 28.3 3.3 26.0 21.4

Subscription revenue (INR m)

Domestic 2,504 2,808 2,962 3,374 3,168 3,356 3,554 3,728 11,648 13,806

International 1,137 1,141 1,136 1,172 1,073 1,118 1,170 1,207 4,586 4,569

Total Subscription revenue 3,641 3,949 4,098 4,546 4,241 4,474 4,724 4,935 16,234 18,374

E: MOSL Estimates

Zee Entertainment EnterprisesCMP: INR238 Neutral� We expect advertising revenues to grow 10% YoY to INR5.8b.

� We estimate subscription revenue growth at 13% YoY to INR4.47b.

� EBITDA margin is likely to expand 470bp YoY to 27.5%.

� Adjusted PAT is expected to increase 14% YoY to INR2.14b.

� The stock trades at 26.1x FY14E and 21.7x FY15E EPS. Neutral.

Key issues to watch out� YoY ad growth (we expect 10%)� Sports loss (we expect INR350m)


EBITDA 7.4 9.5 11.7 14.0

Adj. Net Profit 5.7 7.2 8.7 10.5

Adj. EPS (INR) 5.9 7.5 9.2 11.0

Adj. EPS Gr. (%) -1.4 27.9 21.4 20.0

BV/Sh (INR) 35.8 41.0 47.5 55.2

RoE (%) 17.5 19.6 20.7 21.4

RoCE (%) 25.5 29.1 31.5 31.8

Div. Payout (%) 24.3 26.6 25.0 25.0

Valuations

P/E (x) 40.4 31.6 26.1 21.7

P/BV (x) 6.8 6.0 5.1 4.4

EV/EBITDA (x) 29.4 22.5 18.1 14.9

Div. Yield (%) 0.6 0.8 1.0 1.2

Bloomberg Z IN


M. Cap. (INR b)/(USD b) 227 / 4


1,6,12 Rel Perf. (%) -5 / 8 / 23

C–114October 2013

September 2013 Results Preview | Sector: Metals



27.09.13 % YoY % QoQ % YoY % QoQ % YoY % QoQHindalco 114 Buy 225,222 13.7 14.0 24,017 9.2 29.0 8,155 -13.5 91.8Hindustan Zinc 131 Buy 34,041 18.8 14.1 16,796 16.4 11.7 17,318 12.5 8.8JSPL 237 Neutral 48,919 5.1 7.7 14,486 -14.6 -3.8 6,213 -30.8 -10.5JSW Steel 732 Se l l 104,363 17.6 11.5 19,414 27.3 11.0 5,605 9.6 19.9Nalco 32 Buy 15,184 -5.6 -2.7 2,334 LP 52.6 1,692 3439.9 6.0NMDC 126 Buy 25,103 -3.9 -12.6 15,200 -21.4 -20.2 13,556 -19.2 -13.8SAIL 51 Se l l 124,425 15.0 21.2 15,427 39.1 59.5 9,257 85.3 75.7Sesa Sterlite 183 Buy 196,875 13.6 38.7 71,339 16.9 22.2 24,182 6.8 1.2Tata Steel 288 Se l l 369,030 8.1 12.5 36,553 58.2 -0.9 3,646 LP -67.5Sector Aggregate 1,143,162 11.3 16.2 215,566 17.7 12.4 89,623 13.0 0.2

Sanjay Jain ([email protected]) / Pavas Pethia ([email protected])

Ferrous

Steel prices flat/marginally lower in most regions, except North AmericaAverage steel prices were flat/marginally negative in most regions, except NorthAmerica, where prices increased 10% QoQ. HRC prices declined QoQ in CIS (down 2%)and Europe (down 2%), while prices in China and Turkey were flat QoQ. However, ironore prices showed an uptrend, increasing 6% QoQ to USD134/t, while coking coalprices were flat QoQ at USD142/t. Indian steel prices were also weak, with pricesdeclining 1-3% QoQ despite depreciating rupee. However, current prices are higherthan the 2QFY14 average due to the price hike taken by producers in September.

MetalsCompanies Covered

Hindalco

Hindustan Zinc

Jindal Steel & Power

JSW Steel

Nalco

NMDC

Sesa Sterlite

SAIL

Tata Steel

Global steel prices were flat/marginally lower QoQ (USD/ton) Chinese steel prices were also flat QoQ (USD/ton)


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Feb�

13

Mar

�13

Apr

�13

May

�13

Jun�

13

Jul�1

3

Aug�

13

Sep�

13

CIF FOB

120

140

160

180Se

p�12

Nov

�12

Jan�

13

Apr�

13

Jun�

13

Sep�

13

Sp ot cokin g coa l (fob Austra l ia)

C–116October 2013


Base metals US spot premium (USD/ton)


Base metal prices decline 8-11% QoQ (Quarterly averageUSD/ton)Quarter Zinc Aluminium Copper Lead Alumina Silver (INR/kg)

Avg. QoQ YoY Avg. QoQ YoY Avg. QoQ YoY Avg. QoQ YoY Avg. QoQ YoY Avg. QoQ YoY(%) (%) (%) (%) (%) (%) (%) (%) (%) (%) (%) (%)

2QFY14 1,858 1 -1 1,780 -3 -7 7,069 -1 -8 2,102 2 6 318 -3 1 46,040 3 -171QFY14 1,840 -9 -5 1,834 -8 -7 7,147 -10 -9 2,053 -11 4 327 -4 3 44,837 -20 -184QFY13 2,032 4 0 2,002 0 -8 7,931 0 -5 2,301 5 10 341 5 8 55,927 -7 13QFY13 1,946 3 3 1,997 4 -4 7,908 3 6 2,198 11 11 326 3 -1 59,949 8 112QFY13 1,885 -2 -15 1,918 -3 -20 7,705 -2 -14 1,974 0 -20 316 0 -15 55,755 2 -51QFY13 1,927 -5 -14 1,978 -9 -24 7,869 -5 -14 1,973 -6 -23 317 0 -22 54,406 -2 -54QFY12 2,024 7 -15 2,175 4 -13 8,308 11 -14 2,093 6 -20 317 -4 -19 55,256 3 153QFY12 1,897 -15 -18 2,090 -13 -11 7,488 -17 -13 1,982 -19 -17 329 -12 -10 53,770 -9 352QFY12 2,223 -1 10 2,398 -8 15 8,982 -2 24 2,458 -4 21 372 -8 17 58,791 2 961QFY12 2,249 -6 12 2,598 4 24 9,137 -5 30 2,550 -2 31 404 4 21 57,430 20 1014QFY11 2,393 3 5 2,502 7 16 9,644 12 33 2,603 9 17 391 7 20 48,008 20 823QFY11 2,315 15 5 2,343 12 17 8,633 19 30 2,389 18 4 366 15 20 39,929 33 462QFY11 2,012 0 15 2,089 0 16 7,242 3 24 2,031 5 6 317 -5 18 29,948 5 281QFY11 2,017 -12 37 2,092 -3 41 7,013 -3 50 1,943 -12 29 335 3 61 28,557 8 30


27.09.13 FY13 FY14E FY15E FY13 FY14E FY15E FY13 FY14E FY15E FY13 FY14E FY15EMetalsHindalco 114 Buy 17.0 14.0 15.0 6.7 8.1 7.6 8.9 7.7 6.2 18.0 13.1 12.5Hindustan Zinc 131 Buy 16.4 16.7 16.4 8.0 7.8 8.0 5.2 4.2 3.5 23.4 20.2 17.1JSPL 237 Neutral 37.2 27.3 32.3 6.4 8.7 7.3 7.1 8.4 6.1 17.7 12.0 13.3JSW Steel 732 Se l l 49.7 65.5 71.4 14.7 11.2 10.3 7.2 6.6 6.3 6.6 9.1 10.1Nalco 32 Buy 2.3 3.3 3.3 13.9 9.8 9.9 3.6 3.5 3.0 5.0 6.9 6.6NMDC 126 Buy 16.7 15.7 16.0 7.5 8.0 7.8 3.7 3.9 3.8 26.8 22.2 19.6SAIL 51 Se l l 5.7 8.2 5.5 8.9 6.2 9.2 7.4 7.5 8.1 5.8 8.0 5.1Sesa Sterlite 183 Buy 35.9 34.7 35.8 5.1 5.3 5.1 4.1 3.8 3.5 14.4 13.5 13.0Tata Steel 288 Se l l 1.6 33.6 32.2 183.5 8.6 8.9 7.2 6.0 6.3 0.7 14.9 13.1Sector Aggregate 8.0 7.3 7.4 5.8 5.5 5.1 11.9 12.1 11.1

Relative performance-3m (%)

Relative performance-1Yr (%)

8095

110125140

Jun-

13

Jul-

13

Aug

-13

Sep-

13

Sensex IndexMOSL Metals Index

50658095

110

Sep-

12

Dec

-12

Mar

-13

Jun-

13

Sep-

13

Sensex IndexMOSL Meta ls Index

QoQ respectively. Base metals spot premiums have started correcting post indicationof warehousing rule changes by LME. However, INR realization of base metals will behigher due to 11% depreciation in INR against USD. We factor aluminum, zinc and leadprices of USD2,000/t, USD1,900/t and USD2,100/t in FY15. We believe that non-ferrouscompanies are structurally better placed than steel companies in terms of demandand pricing scenario in India. Hindalco is our top pick in the metal space.

40

105

170

235

300A

pr-0

7

Aug

-07

Dec

-07

Apr

-08

Aug

-08

Jan-

09

May

-09

Sep-

09

Jan-

10

May

-10

Sep-

10

Jan-

11

May

-11

Sep-

11

Jan-

12

May

-12

Sep-

12

Jan-

13

May

-13

Sep-

13

Aluminium Zinc Copper

C–117October 2013




Alumina (Production, kt) 335 328 326 330 348 351 355 359 1,319 1,413

Aluminium (sales, kt) 124 127 135 147 130 156 157 170 532 612

Copper (sales, kt) 71 73 82 84 68 85 85 85 310 323

Exchange USD/INR 54.2 55.2 54.2 54.3 56.0 62.5 62.0 62.0 54.5 60.6

Avg LME Aluminium (USD/T) 1,978 1,918 1,997 2,002 1,834 1,782 1,900 1,950 1,974 1,867

Net Sales 60,279 61,635 68,717 69,938 58,379 77,742 78,528 80,750 260,569 295,399

EBITDA 4,631 5,153 5,821 6,432 4,785 7,122 8,320 9,022 22,037 29,249

EBITDA - Aluminium 3,415 2,609 3,110 3,388 3,515 4,385 5,588 6,290 12,523 19,778

EBITDA-Copper 1,216 2,544 2,711 3,044 1,270 2,737 2,732 2,732 9,515 9,471

Interest 815 279 1,690 1,577 1,487 1,562 2,573 2,578 4,360 8,199

Depreciation 1,705 1,728 1,884 1,726 1,831 1,831 2,529 2,533 7,042 8,724

Other Income 1,714 1,324 1,741 2,312 2,249 2,439 2,265 2,089 7,091 9,042

PBT (before EO item) 3,826 4,471 3,988 5,442 3,716 6,169 5,483 6,001 17,726 21,368

Extra-ordinary Income 1,300 1,440 2,030 2,740

PBT (after EO item) 5,126 4,471 5,428 5,442 5,746 6,169 5,483 6,001 20,466 21,368

Total Tax 878 882 1,093 621 1,005 1,295 1,367 1,326 3,474 4,994

% Tax 23.0 19.7 27.4 11.4 27.0 21.0 24.9 22.1 17.0 23.4

Adjusted PAT 2,948 3,589 2,895 4,820 2,711 4,873 4,116 4,675 14,252 16,374

Novelis Shipments (kt) 722 719 647 698 708 729 701 758 2,786 2,896

Novelis adj. EBITDA (USDm) 259 277 185 240 218 244 231 258 961 951

Consolidated adj. PAT 7,864 9,431 4,811 8,970 4,253 8,155 6,718 8,456 32,485 28,927

E: MOSL Estimates

HindalcoCMP: INR114 Buy� Net sales to increase 33% QoQ: We expect net sales to increase 33%

QoQ (up 26% YoY) to INR78b due to higher realization in aluminumsegment and higher sales volumes in both aluminum and coppersegments. Aluminum sales volume is expected to increase 20% QoQ,while copper sales volume is likely to increase 25% QoQ. 1QFY14copper production was affected due to maintenance shutdown. HNDL'sblended realization for aluminum is likely to increase 6% QoQ toINR164,500/ton despite decline in LME prices on account of INRdepreciation. We expect Novelis' shipments to increase 3% QoQ to729kt, while operating margins are expected to increase 9% QoQ toUSD335/ton.

� Standalone EBITDA to increase 49% QoQ: We expect standalone EBITDAto increase 49% QoQ to INR7.1b due to higher aluminum and coppersales volume and better aluminum realization.

� Maintain Buy: Hindalco is at an inflexion point as operating cash flowsare poised for rapid growth, since benefits of USD8b investment havebegun. Margins of aluminum business should expand, driven bydeclining cost of production. Novelis' free cash flows will also improvein FY15 as it exits capex cycle. Reiterate Buy.

Key issues to watch out� Mahan coal block is critical to drive profitability of its 359ktpa Mahan

smelter. The coal block has received stage I forest clearance so far.


EBITDA 81.9 80.6 93.4 114.9

NP 34.0 32.5 28.9 31.0

Adj. EPS (INR) 17.7 17.0 14.0 15.0

EPS Gr(%) -2.9 -4.4 -17.4 7.1

BV/Sh. (INR) 88.3 100.7 113.2 126.5

RoE (%) 20.3 18.0 13.1 12.5

RoCE (%) 7.3 5.8 5.6 6.8

Payout (%) 9.9 9.7 11.7 10.9

Valuations

P/E (x) 6.4 6.7 8.1 7.6

P/BV 1.3 1.1 1.0 0.9

EV/EBITDA (x) 6.9 8.7 7.7 6.2

Div. Yield (%) 1.3 1.2 1.2 1.2

Bloomberg HNDL IN


M. Cap. (INR b)/(USD b) 235 / 4


1,6,12 Rel Perf. (%) 5 / 20 / -8

C–118October 2013




Zn (000 tons) 157 153 168 181 173 188 200 220 659 781

Pb (000 tons) 29 24 22 32 29 30 32 34 107 125

Silver (tons) 79 80 62 100 86 84 92 97 321 359

Net Sales 27,477 28,655 31,780 39,087 29,842 34,041 36,436 39,392 126,998 139,710

Change (YoY %) -3.5 8.7 14.0 24.7 8.6 18.8 14.6 0.8 11.4 10.0

EBITDA 14,286 14,431 14,940 21,160 15,031 16,796 18,047 19,493 64,816 69,366

As % of Net Sales 52.0 50.4 47.0 54.1 50.4 49.3 49.5 49.5 51.0 49.7

Interest 129 -21 75 108 109 109 109 109 291 438

Depreciation 1,734 1,746 1,772 1,219 1,843 1,862 1,880 1,899 6,470 7,485

Other Income 5,743 5,398 5,063 4,118 5,403 5,312 4,945 5,219 20,322 20,879


Extra-ordinary Income 0 0 0 -175 795 0 0 0 -175 0

PBT (after EO item) 18,166 18,104 18,156 23,776 19,275 20,137 21,002 22,703 78,201 82,323

Total Tax 2,353 2,706 2,031 2,117 2,671 2,819 2,940 3,178 9,206 11,609

% Tax 13.0 14.9 11.2 8.9 13.9 14.0 14.0 14.0 11.8 14.1

Reported PAT 15,813 15,398 16,125 21,658 16,605 17,318 18,062 19,525 68,995 70,714

Adjusted PAT 15,813 15,398 16,125 21,818 15,920 17,318 18,062 19,525 69,149 70,714

Change (YoY %) 5.5 12.9 26.1 53.7 0.7 12.5 12.0 -10.5 24.4 2.3

Avg LME Zinc (USD/T) 1,927 1,885 1,946 2,032 1,840 1,860 1,900 1,900 1,948 1,875

Avg LME Lead (USD/T) 1,973 1,974 2,198 2,301 2,053 2,105 2,100 2,100 2,112 2,089

Silver (USD/oz) 28 28 31 30 22 21 21 21 29 21

E: MOSL Estimates

Hindustan ZincCMP: INR131 Buy� Net sales to increase 14% QoQ on higher volumes: We expect net

sales to increase 14% QoQ (grow 19% YoY) to INR34b on higher salesvolume and realization. LME zinc and lead prices increased 1% and 2%QoQ respectively, while INR depreciation against USD will furtherboost prices. We expect mine metal production of 240kt, whileintegrated lead/zinc production is likely to be 220kt.

� EBITDA to increase 12% QoQ: We expect EBITDA to increase 12% QoQto INR16.8b (+16% YoY) due to higher volumes and realization.Integrated silver production is expected to be 84 tons.

� Maintain Buy: HZL has guided for 1mt of MIC production in FY14 alongwith 360 tons of saleable silver. We model 978kt of MIC productionand 359 tons of integrated silver production. We expect EBITDA topost 3% CAGR over FY13-15E on higher sales volume. The stock tradesat 8x FY15E EPS and at an EV of 3.5x FY15E EBITDA. Maintain Buy.

Key issues to watch out� Management has guided for a mine production (MIC basis) of 1mt in

FY14. Increase in production from Zawar and Kayar and further ramp-up at SK Mines will be critical to drive overall mine production.


EBITDA 60.7 64.8 69.4 69.2

NP 55.6 69.1 70.7 69.5

Adj. EPS (INR) 13.2 16.4 16.7 16.4

EPS Gr(%) 13.1 24.4 2.3 -1.7

BV/Sh. (INR) 63.6 76.4 89.5 102.3

RoE (%) 22.5 23.4 20.2 17.1

RoCE (%) 27.2 25.6 22.7 19.3

Payout (%) 21.5 22.2 21.7 22.1

Valuations

P/E (x) 9.9 8.0 7.8 8.0

P/BV 2.1 1.7 1.5 1.3

EV/EBITDA (x) 6.2 5.2 4.2 3.5

Div. Yield (%) 1.8 2.4 2.4 2.4

Bloomberg HZ IN


M. Cap. (INR b)/(USD b) 553 / 9


1,6,12 Rel Perf. (%) 4 / 3 / -6

C–119October 2013


Jindal Steel & PowerCMP: INR237 Neutral� Net sales to increase marginally: We expect standalone net sales to

increase 1% YoY (up 6% QoQ) to INR36.2b on higher sales volume.Steel sales volume would increase 3% YoY (down 1% QoQ) to 658kt.We expect pellet sales volume to increase 21% YoY (down 4% QoQ).Power sales are likely to grow 68% YoY (up 139% QoQ) to 919m units.We expect standalone EBITDA to decrease 10% QoQ to INR9.4b.

� Jindal Power's sales volume to decline 2% QoQ: Power sales volumeat Jindal Power is likely to decrease 2% QoQ (up 12% YoY) to 2b units,while the average rate is likely to remain flat at INR3.2/unit. PAT wouldgrow 4% QoQ to INR3.4b.

� Maintain Neutral: Valuations are not demanding although headwindsstill remain. Stock is trading at FY15E P/BV of 0.9x. We value the stockat INR238 based on SOTP. Maintain Neutral.

Key issues to watch out� Angul steel's melt shop is expected to be lit in August but it will take

couple of months for production to stabilize. Coal gasification andsponge iron unit is expected to start by December 2013. Also, the CPPat Angul will be fully commissioned in FY14. There is still no clarity onfinal signing of lease for the Utkal B1 coal block due to delay from thestate government side. The coal block is critical to derive profitabilityof Angul 1.6mtpa project.


EBITDA 68.9 65.7 60.3 81.6

Adj. PAT 40.6 34.8 25.6 30.2

Adj. EPS (INR) 43.4 37.2 27.3 32.3

EPS Gr(%) 8.1 -14.2 -26.6 18.2

BV/Sh. (INR) 193.7 227.3 227.9 256.4

RoE (%) 25.2 17.7 12.0 13.3

RoCE (%) 17.2 12.3 9.0 10.4

Payout (%) 3.8 4.4 7.5 6.4

Valuations

P/E (x) 5.5 6.4 8.7 7.3

P/BV 1.2 1.0 1.0 0.9

EV/EBITDA (x) 5.7 7.1 8.4 6.1

Div. Yield (%) 0.7 0.7 0.8 0.8

Bloomberg JSP IN


M. Cap. (INR b)/(USD b) 221 / 4


1,6,12 Rel Perf. (%) -7 / -37 / -51



Sales volume

Steel (000 tons) 561 639 734 909 665 658 705 869 2,843 2,897

Pellets (000 tons) 395 436 623 658 551 527 417 517 2,112 3,729

CPP (M kwh) 584 547 603 517 384 919 924 939 2,251 3,623

Jindal Power (M kwh) 2,015 1,746 1,651 1,999 2,000 1,955 2,016 2,037 7,411 7,984

Net Sales 33,311 35,890 38,209 42,137 34,252 36,170 37,162 42,494 149,547 150,079

EBITDA 10,377 12,607 12,781 11,363 10,477 9,436 9,638 10,501 47,127 40,052

As % of Net Sales 31.2 35.1 33.4 27.0 30.6 26.1 25.9 24.7 31.5 26.7

Interest 2,186 1,779 2,876 2,369 2,318 2,480 2,755 3,253 9,209 10,806

Depreciation 2,372 2,489 2,543 3,081 3,036 3,006 3,226 3,646 10,485 12,914

Other Income 122 74 39 1,358 63 85 223 1,526 1,593 1,896


Extra-ordinary Income -5,741 0 0 -1,000 -2,000 0 0 0 -6,741 -2,000

PBT (after EO item) 201 8,413 7,401 6,271 3,185 4,035 3,880 5,128 22,285 16,228

Total Tax 76 2,591 2,196 1,496 796 1,130 1,086 1,436 6,360 4,448

% Tax 38.1 30.8 29.7 23.9 25.0 28.0 28.0 28.0 28.5 27.4

Reported PAT 124 5,822 5,205 4,774 2,389 2,905 2,794 3,692 15,926 11,780

Adjusted PAT 4,602 5,822 5,205 5,774 4,389 2,905 2,794 3,692 21,404 13,780

JPL Power Sales (MU) 2,015 1,746 1,651 1,999 2,000 1,955 2,016 2,037 7,411 7,984

JPL PAT 3,144 2,603 2,558 2,822 3,217 3,356 3,491 3,537 11,126 13,600

Adj consol PAT 9,594 8,973 8,673 8,602 6,943 6,213 6,343 6,071 33,841 25,570

E: MOSL Estimates

C–120October 2013




Sales ('000 tons) 2,109 2,170 2,170 2,430 2,550 2,760 2,990 3,220 8,879 11,520

Realization (INR per ton) 42,853 40,880 38,214 38,234 36,699 37,813 37,510 37,200 39,973 37,316

Net Sales 90,376 88,709 82,924 92,909 93,582 104,363 112,155 119,784 354,918 429,883

EBITDA 17,728 15,252 13,136 16,973 17,491 19,414 19,774 23,502 63,088 80,182

As % of Net Sales 19.6 17.2 15.8 18.3 18.7 18.6 17.6 19.6 17.8 18.7

EBITDA (INR per ton) 8,406 7,028 6,053 6,985 6,859 7,034 6,613 7,299 7,105 6,960

EBITDA (USD per ton) 155 127 112 129 122 113 107 118 130 115

Interest 4,067 4,208 4,546 4,425 6,418 6,482 6,547 6,612 17,245 26,060

Depreciation 4,678 4,812 4,975 5,274 6,439 6,568 6,700 6,834 19,739 26,541

Other Income 723 783 566 537 723 730 737 744 2,609 2,934

PBT (before EO Item) 9,706 7,015 4,181 7,811 5,357 7,093 7,264 10,801 28,713 30,515

EO Items -5,921 4,224 -3,274 1,299 -8,529 0 0 0 -3,672 -8,529

PBT (after EO Item) 3,786 11,239 907 9,110 -3,173 7,093 7,264 10,801 25,041 21,986

Total Tax 1,096 3,016 -460 3,377 -965 1,419 1,453 2,160 7,029 4,067

% Tax 28.9 26.8 -50.7 37.1 30.4 20.0 20.0 20.0 28.1 18.5

Reported PAT 2,690 8,223 1,367 5,732 -2,208 5,675 5,811 8,641 18,012 17,919

Preference Dividend 70 70 70 70 70 70 70 70 279 279

Adjusted PAT 6,879 5,115 3,652 4,728 4,674 5,605 5,742 8,571 20,374 24,592

Consolidated adj PAT 3,997 3,393 620 2,270 1,232 3,824 3,966 6,800 10,280 15,822

E: MOSL Estimates; Note: JSW Ispat is excluded until 4QFY13

JSW SteelCMP: INR732 Sell� Standalone (S/A) revenue to increase 18% YoY: We expect standalone

net sales to increase 18% YoY to INR104b due to 27% increase involumes on account of merger with JSW Ispat. Average steel realizationwould fall 8% YoY (up 3% QoQ) to INR37,813/ton.

� S/A EBITDA to increase 27% YoY: We expect JSTL's EBITDA to increase27% YoY to INR19.4b. We expect EBITDA/ton to increase 3% QoQ toINR7,034 (USD113).

� Maintain Sell: JSW Steel has been able to sustain margins despite aweak demand scenario. Iron ore costs have not inched up much despitetight supply in Karnataka due to the export ban and weak demandfrom secondary steel producers. However, the uncertainty still remainsover stability in steel prices and relative pricing power in weak demandenvironment. Further, weaker INR/USD rate poses significant balancesheet challenges due to ~USD3b of forex debt. The stock trades at anexpensive 10.3x FY15E EPS and an EV of 6.3x FY15E EBITDA. Sell.

Key issues to watch out� Given that availability of iron ore remains critical in Karnataka, JSW's

FY14 and FY15 production guidance will be the key figure to watchout. It is targeting to produce 11.55mt of saleable steel and 12mt ofcrude steel in FY14.

� JSW is investing ~INR22b in the 55mw WHRB, railway siding, limecalcinations, 1mtpa coke oven plant and 4mtpa pellet plant for itsDolvi units. Turnaround in profitability of Dolvi units due to plantlevel integrations could provide upside to our estimates.


EBITDA 61.0 65.0 85.4 88.2

Adj. PAT 14.8 11.1 15.8 17.2

Adj. EPS (INR) 66.5 49.7 65.5 71.4

EPS Gr(%) -11.6 -25.3 31.7 9.0

BV/Sh. (INR) 738.2 764.8 679.8 738.3

RoE (%) 9.1 6.6 9.1 10.1

RoCE (%) 8.8 8.4 10.1 9.5

Payout (%) 27.1 25.9 25.5 15.8

Valuations

P/E (x) 11.0 14.7 11.2 10.3

P/BV 1.0 1.0 1.1 1.0

EV/EBITDA (x) 7.0 7.0 6.6 6.3

Div. Yield (%) 1.0 1.4 1.4 1.4

Note: JSW Ispat included in FY14 and FY15

Bloomberg JSTL IN


M. Cap. (INR b)/(USD b) 177 / 3


1,6,12 Rel Perf. (%) 32 / 4 / -7

C–121October 2013




Aluminium Prod. ('000 tons) 103 102 100 98 85 77 84 83 403 328

Aluminium Sales ('000 tons) 102 101 102 98 85 77 84 83 403 328

Alumina Sales ('000 tons) 253 190 220 320 283 284 329 356 983 1,251

Avg LME Aluminium (USD/ton) 1,978 1,918 1,997 2,008 1,834 1,782 1,900 1,950 1,975 1,867

Alumina Exports (USD/ton) 343 323 328 341 325 303 323 332 334 321

Net Sales 17,481 16,083 16,928 18,673 15,606 15,184 17,988 18,799 69,165 67,577


EBITDA 3,042 -16 1,827 4,216 1,530 2,334 3,547 4,151 9,069 11,562

As % of Net Sales 17.4 -0.1 10.8 22.6 9.8 15.4 19.7 22.1 13.1 17.1

Interest 32 41 2 0 0 0 0 0 75 0

Depreciation 1,224 1,239 1,231 1,361 1,245 1,251 1,257 1,263 5,054 5,016

Other Income 1,403 1,391 1,127 1,190 1,787 1,405 1,138 1,202 5,111 5,532

PBT 3,190 95 1,720 4,046 2,072 2,488 3,428 4,089 9,050 12,077

Total Tax 959 47 531 1,585 476 796 1,097 1,308 3,122 3,677

% Tax 30.1 49.5 30.9 39.2 23.0 32.0 32.0 32.0 34.5 30.4

Reported PAT 2,231 48 1,189 2,460 1,597 1,692 2,331 2,780 5,928 8,400

Adjusted PAT 2,231 48 1,189 2,460 1,597 1,692 2,331 2,780 5,928 8,400

E: MOSL Esitmates

NalcoCMP: INR32 Buy� Net sales to decrease 3% QoQ on lower volumes: We expect net sales

to decrease 3% QoQ (down 6% YoY) to INR15.2b on lower aluminumvolumes. Aluminum sales volume is likely to decline 9% QoQ to 77kt.Aluminum production has been affected due to constraints in supplyof linkage coal from MCL and lower LME prices. Nalco is operating at25-30% lower capacity and the trend is likely to continue due to weakLME prices and lower linkage coal supply. Aluminum realization isexpected to increase 6% QoQ, despite weak LME, due to INRdepreciation against USD. Similarly, alumina realization is expectedto increase 4% QoQ to INR18,934/t.

� EBITDA to increase 53% QoQ: We expect EBITDA to increase 53% QoQto INR2.3b due to higher realization in both aluminum and aluminasegments.

� Power cost to remain high till Utkal coal block commissioning; Buy:NACL has a strong balance sheet, with cash surplus of INR42b-50b postcapex. Potential upsides from the Utkal-E block, further expansion ofthe alumina refinery, weakening INR and peaking of labor cost as olderemployees retire over the next three to five years are long termpositives. We recently upgraded our stock rating to 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.� Progress on Panchpatmali bauxite mining lease renewal. Currently,

it is operating through a temporary one-year permit.� Status of investment in NPCIL JV. It will be investing INR8.95b for a

26% stake in the venture.


EBITDA 11.4 9.1 11.6 11.6

NP 8.7 5.9 8.4 8.4

Adj. EPS (INR) 3.4 2.3 3.3 3.3

EPS Gr(%) -19.2 -31.5 41.7 -0.2

BV/Sh. (INR) 45.5 46.3 48.1 49.9

RoE (%) 7.6 5.0 6.9 6.6

RoCE (%) 10.0 7.2 9.2 9.1

Payout (%) 48.9 63.6 44.9 45.0

Valuations

P/E (x) 9.5 13.9 9.8 9.9

P/BV 0.7 0.7 0.7 0.6

EV/EBITDA (x) 2.9 3.6 3.5 3.0

Div. Yield (%) 4.3 3.9 3.9 3.9

Bloomberg NACL IN




1,6,12 Rel Perf. (%) -3 / -8 / -43

C–122October 2013




Production (m tons) 6.9 5.4 5.4 9.6 6.9 6.2 7.6 8.3 27.2 29.0

Sales (m tons) 6.9 5.9 5.3 8.2 7.3 6.2 7.6 8.3 26.3 29.3

Avg Iron ore realization (USD/t) 76 80 70 71 70 65 63 62 75 65

Avg Iron ore realization (INR/t) 4,102 4,130 3,630 3,680 3,735 3,379 3,379 3,379 3,880 3,467

Lumps (%) 37 39 36 34 37 36 36 36 36 36

Net Sales 28,404 26,120 20,477 32,043 28,706 25,103 29,443 31,760 107,043 115,012

Change (YoY %) 2.1 -14.7 -27.4 23.5 1.1 -3.9 43.8 -0.9 -4.9 7.4

EBITDA 23,020 19,349 13,913 21,556 19,052 15,200 18,800 19,755 77,838 72,807

Change (YoY %) 2.1 -20.6 -38.5 9.0 -17.2 -21.4 35.1 -8.4 -12.8 -6.5

As % of Net Sales 81.0 74.1 67.9 67.3 66.4 60.6 63.9 62.2 72.7 63.3

EBITDA per ton (USD) 62 60 48 48 47 39 40 39 54 41

EBITDA per ton (INR/t) 3,358 3,305 2,612 2,616 2,627 2,452 2,477 2,395 2,963 2,486

Interest 0 0 0 132 0 0 0 0 0 0

Depreciation 328 332 339 387 364 373 382 391 1,385 1,509

Other Income 5,521 5,831 5,563 5,474 5,209 5,107 5,249 5,440 22,389 21,005

PBT (before EO Item) 28,214 24,848 19,137 26,511 23,897 19,935 23,667 24,804 98,841 92,303

Extra-ordinary Income -4,058 -4,058 0

PBT (after EO Item) 28,214 24,848 19,137 22,453 23,897 19,935 23,667 24,804 94,783 92,303

Total Tax 9,154 8,062 6,209 7,804 8,176 6,379 7,573 7,937 31,228 30,065

% Tax 32.4 32.4 32.4 34.8 34.2 32.0 32.0 32.0 32.9 32.6

Reported PAT 19,060 16,786 12,928 14,650 15,722 13,556 16,094 16,866 63,556 62,238

Adjusted PAT 19,060 16,786 12,928 17,297 15,722 13,556 16,094 16,866 66,277 62,238

Change (QoQ %) 13.7 -11.9 -23.0 33.8 -9.1 -13.8 18.7 4.8 0.6

Change (YoY %) 5.8 -14.5 -30.5 3.2 -17.5 -19.2 24.5 -2.5 -9.2 -6.1

E: MOSL Esitmates

NMDCCMP: INR126 Buy� Iron ore sales to decrease 4% YoY: We expect standalone net sales to

decrease 4% YoY (down 13% QoQ) to INR25.1b due to lower realization,despite higher iron ore sales volume. We expect iron ore sales volumeto increase 6% YoY (down 15% QoQ) to 6.2mt in a seasonally weakquarter. Iron ore realization is likely to decrease 10% QoQ to INR3,379/ton due to price correction taken by NMDC in July and August. Lumpspercentage is expected to be 36% in 2QFY14.

� EBITDA to decline 20% QoQ: We expect EBITDA to decrease 20% QoQto INR15.2b due to lower realization and volumes in a seasonally weakquarter.

� Sales volume to post CAGR of 10% over FY13-15E: 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 ~10% volume CAGR during FY13-15E. NMDC trades at 1.5x FY15EBV and at an EV of 3.8x FY15E EBITDA. With 70% of the book in cash anddividend yield of 5.6%, valuations are compelling. Reiterate Buy.

Key issues to watch out� NMDC's internal target of iron ore sales volume for FY14 is 30-32mt,

which is ~10% ahead of our estimates.


EBITDA 89.3 77.8 72.8 74.0

Adj. PAT 73.0 66.3 62.2 63.6

Adj. EPS (INR) 18.4 16.7 15.7 16.0

EPS Gr(%) 12.3 -9.2 -6.1 2.1

BV/Sh. (INR) 61.6 69.4 76.9 84.8

RoE (%) 31.6 26.8 22.2 19.6

RoCE (%) 31.5 26.7 22.1 19.6

Payout (%) 26.3 51.1 52.2 51.1

Valuations

P/E (x) 6.8 7.5 8.0 7.8

P/BV 2.0 1.8 1.6 1.5

EV/EBITDA (x) 3.3 3.7 3.9 3.8

Div. Yield (%) 3.6 5.6 5.6 5.6

Bloomberg NMDC IN


M. Cap. (INR b)/(USD b) 499 / 8


1,6,12 Rel Perf. (%) 2 / -13 / -40

C–123October 2013




Net Sales 183,529 173,381 171,000 183,943 141,909 196,875 203,110 207,683 711,852 749,577

EBITDA 66,457 61,050 57,349 65,016 58,385 71,339 73,149 76,864 249,872 279,738

As % of Net Sales 36.2 35.2 33.5 35.3 41.1 36.2 36.0 37.0 35.1 37.3

Interest 4,002 19,550 9,795 13,272 10,721 13,377 17,650 17,869 46,620 59,617

Depreciation 12,104 12,206 12,644 16,054 14,710 15,968 16,474 17,937 53,008 65,088

Other Income 7,961 11,129 12,442 7,980 12,373 7,959 12,799 9,923 39,511 43,054

PBT (before XO item) 58,312 40,423 47,352 43,670 45,328 49,953 51,825 50,981 189,756 198,086

Extra-ordinary gain (loss) 0 0 1,888 0 0 0 0 0 1,888 0

PBT (after XO item) 58,312 40,423 49,240 43,670 45,328 49,953 51,825 50,981 191,644 198,086

Total Tax 2,956 2,736 1,687 2,032 2,310 4,678 4,752 4,379 9,412 16,118

% Tax 5.1 6.8 3.4 4.7 5.1 9.4 9.2 8.6 4.9 8.1

Reported PAT 55,355 37,687 47,553 41,637 43,018 45,275 47,073 46,602 182,232 181,968

Less: Minority int. 21,365 15,040 18,723 18,290 19,124 21,093 19,482 19,514 73,417 79,212

Adjusted PAT 33,990 22,647 28,830 23,348 23,894 24,182 27,591 27,088 106,458 102,756

E: MOSL Estimates; * Please note that these consolidated numbers, including previous quarters, are on best effort basis estimates.

Numbers may differ from actuals due to complexity post Sesa-Sterlite merger.

Sesa SterliteCMP: INR183 Buy� Net sales to increase 39% QoQ: We expect consolidated net sales to

increase 39% QoQ due to resumption of copper refining operations atTuticorin smelter and higher realization in zinc/lead business.

� EBITDA to increase 22% QoQ: We expect consolidated EBITDA toincrease 22% QoQ to INR71.4b. Adj. PAT is likely to increase just 1%QoQ to INR24.2b due to higher tax rate, compared to earlier quarters.

� Maintain Buy: Assuming LME price of USD2,000/ton for aluminum,SD1,900/ton for zinc and USD2,100/ton for lead in FY15E, our SOTP-based valuation works out to INR213/share. Currently, the INR/USDrate is higher than our assumption of 60 for FY15E. While a weaker INRresults in ballooning of forex debt, there is greater gain in EBITDA forthe oil and zinc-lead-silver businesses. We maintain a Buy.

Key issues to watch out� Specific capex for Liberia is estimated at USD80-90/t of capacity, while

it is targeting to end FY14 with 2mtpa. However, given constraints incash flows post mining ban, it will be raising external funds for theproject.

� It is widely believed that the Indian Government needs to urgentlydivest in HZ and Balco so that the much-needed funds can be raisedto partially bridge the fiscal deficit and meet divestment targets. Webelieve delisting HZ and merging it with Sesa-Sterlite is perhaps thebest option in terms of capital efficiency — HZ's cash will becomefungible and available for servicing CAIR's acquisition debt.


EBITDA* 181.3 170.6 191.0 206.6

NP 102.2 106.5 102.8 106.1

Adj. EPS (INR) 34.5 35.9 34.7 35.8

EPS Gr(%) -29.1 15.8 0.5 -0.3

BV/Sh. (INR) 38.0 77.7 88.5 115.3

RoE (%) 16.4 14.4 13.5 13.0

RoCE (%) 25.2 22.3 13.2 12.9

Payout (%) 11.9 11.4 11.8 11.4

Valuations

P/E (x) 5.3 5.1 5.3 5.1

P/BV 0.7 0.7 0.7 0.6

EV/EBITDA (x) 5.3 6.1 5.6 4.9

Div. Yield (%) 1.9 1.9 1.9 1.9

Note: Sesa-Sterlite merged entity basis;

* attributable

Bloomberg SSLT IN


M. Cap. (INR b)/(USD b) 542 / 9


1,6,12 Rel Perf. (%) -1 / 13 / 1

C–124October 2013




Sales (m tons) 2.5 2.6 2.8 3.2 2.6 3.2 3.0 3.5 11.1 12.2

Change (YoY %) -9.1 -8.8 5.8 4.8 21.5 9.1 7.8 -3.1 10.7

Realization (INR per ton) 43,110 41,616 38,800 38,533 39,190 39,375 39,060 38,750 40,360 39,082

Change (YoY %) 5.9 5.9 -8.7 -9.9 -9.1 -5.4 0.7 0.6 -2.4 -3.2

Net Sales 107,775 108,202 106,701 123,304 102,679 124,425 117,180 133,688 445,983 477,972

Change (%) -3.7 -3.4 -3.4 -9.9 -4.7 15.0 9.8 8.4 -5.4 7.2

EBITDA 15,153 11,093 11,384 9,039 9,673 15,427 14,324 18,155 46,669 57,579

Change (YoY %) 15.5 -16.4 -28.0 -51.7 -36.2 39.1 25.8 100.9 -23.4 23.4

EBITDA per ton (INR) 6,061 4,267 4,140 2,825 3,692 4,882 4,775 5,262 4,223 4,708

EBITDA per ton (USD) 112 77 76 52 66 78 77 85 78 78

Interest 1,249 1,862 2,220 2,145 1,918 2,149 2,249 2,492 7,476 8,809

Depreciation 4,018 4,026 4,049 1,838 3,929 4,265 4,350 4,652 13,932 17,196

Other Income 2,785 2,255 2,209 2,178 2,262 1,628 1,561 1,498 9,426 6,948

PBT (after EO Inc.) 10,101 7,879 7,016 7,398 5,209 10,640 9,286 12,509 32,394 37,644

Total Tax 3,137 2,448 2,173 2,944 700 1,383 1,207 1,626 10,701 4,916

% Tax 31.1 31.1 31.0 39.8 13.4 13.0 13.0 13.0 33.0 13.1

Reported PAT 6,964 5,431 4,843 4,454 4,509 9,257 8,079 10,883 21,693 32,727

Adjusted PAT 8,485 4,996 4,904 4,844 5,270 9,257 8,079 10,883 23,228 33,491

Change (YoY %) 1.2 -50.2 -55.4 -43.2 -37.9 85.3 64.7 124.7 -37.5 44.2

E: MOSL Estimates

Steel Authority of IndiaCMP: INR51 Sell� Net sales to increase 15% YoY due to higher volumes: We expect net

sales to increase 15% YoY (up 21% QoQ) to INR124b due to higher salesvolumes. SAIL has already achieved 2.2mt of sales in the first twomonths of 2QFY14. We expect sales volumes to increase 22% YoY to3.2mt. Realization is expected to remain flat QoQ (decline 5% YoY) toINR39,375/ton.

� Margins to improve 18% QoQ to USD78/ton: We expect EBITDA/ton toincrease 18% QoQ to USD78/ton due to higher operating leverage onhigher sales volume. Other income would fall by 28% QoQ to INR1.6bas more cash will be deployed to support capex.

� INR720b capex benefits to accrue slowly; maintain Sell: We expectearnings to decline at 2% per annum over FY13-15E, despite 9% CAGRin volumes, due to SAIL's uncompetitive cost structure, executiondelays, decline in steel realization and poor operating efficiencies.The full benefits of INR720b capex will accrue gradually due to poorexecution. The stock still appears expensive at 9.2x FY15E EPS and anEV of 8.1x FY15E EBITDA. Maintain Sell.

Key issues to watch out� BOF commissioning at ISP and RSP will be critical for volume ramp-up

in FY14 and FY15.


EBITDA 64.0 50.5 61.7 62.1

NP 37.7 23.7 34.0 22.9

Adj. EPS (INR) 9.1 5.7 8.2 5.5

EPS Gr(%) -23.5 -37.1 43.4 -32.7

BV/Sh. (INR) 97.5 100.5 106.3 110.6

RoE (%) 9.7 5.8 8.0 5.1

RoCE (%) 10.6 7.1 7.0 5.3

Payout (%) 26.9 43.5 29.0 21.1

Valuations

P/E (x) 5.6 8.9 6.2 9.2

P/BV 0.5 0.5 0.5 0.5

EV/EBITDA (x) 5.0 7.4 7.5 8.1

Div. Yield (%) 3.9 3.9 3.9 2.0

Bloomberg SAIL IN


M. Cap. (INR b)/(USD b) 211 / 3


1,6,12 Rel Perf. (%) 4 / -23 / -47

C–125October 2013




Sales ('000 tons) 1,590 1,730 1,890 2,279 2,005 2,080 2,200 2,315 7,489 8,600

Change (YoY %) -0.2 5.0 16.5 28.9 26.1 20.2 16.4 1.6 12.9 14.8

Avg Seg.Realn. (INR/tss) 51,530 48,459 45,314 44,394 44,719 45,313 44,950 44,640 47,081 44,900

Net Sales 89,080 91,506 93,703 107,705 94,554 102,842 107,496 109,999 381,994 414,891

EBITDA 29,768 25,162 25,262 33,040 28,343 32,607 34,853 32,998 113,232 128,801

(% of Net Sales) 33.4 27.5 27.0 30.7 30.0 31.7 32.4 30.0 29.6 31.0

Steel EBITDA(INR/tss) 18,722 14,545 13,366 14,498 14,136 15,676 15,842 14,254 15,120 14,977

Steel EBITDA(USD/tss) 326 246 232 263 245 236 242 220 263 235

Interest 4,544 4,539 5,090 4,594 4,664 4,804 4,948 5,097 18,768 19,514

Depreciation 3,544 3,913 4,339 4,608 4,596 4,642 4,688 4,735 16,404 18,661

Other Income 1,519 2,397 357 4,747 1,442 2,409 359 4,771 9,020 8,981

PBT (after EO Inc.) 21,229 19,203 16,190 21,744 20,525 25,570 25,575 27,937 78,366 99,607

Total Tax 7,663 5,695 5,726 8,652 6,964 8,438 8,440 9,219 27,736 33,061

% Tax 36.1 29.7 35.4 39.8 33.9 33.0 33.0 33.0 35.4 33.2

Reported PAT 13,566 13,508 10,464 13,092 13,561 17,132 17,135 18,718 50,630 66,546

Adjusted PAT 15,536 13,412 10,464 19,933 13,561 17,132 17,135 18,718 59,345 66,546

Consolidated Financials

Net Sales 338,212 341,327 321,071 346,505 328,048 369,030 383,212 389,668 1,347,115 1,469,958

EBITDA 36,003 23,101 22,389 43,689 36,880 36,553 44,590 45,695 123,212 163,718

Rep. PAT (before MI & asso.) 5,170 -4,133 -7,886 -66,775 11,423 3,493 10,082 9,292 -73,624 34,114

Adj. PAT (after MI & asso) 7,949 -4,066 -7,433 8,843 11,213 3,646 10,175 9,407 3,323 34,441

TSE Sales (000 tons) 3,210 3,420 3,020 3,420 3,140 3,213 3,417 3,488 13,070 13,258

TSE EBITDA(USD/tss) 36 -2 -26 33 44 17 40 51 11 38

E: MOSL Estimates; tss=ton of steel sales

Tata SteelCMP: INR288 Sell� Tata Steel India (TSI): We expect net revenue to increase 12% YoY (up

9% QoQ) to INR103b due to higher sales volume. Steel volumes areexpected to increase 20% YoY (down 4% QoQ) to 2.1mt. Realization isexpected to increase 1% QoQ (decline 6% YoY). We expect EBITDA toincrease 15% QoQ to INR33b and EBITDA/ton to increase 10% QoQ toUSD236/ton.

� TSE and others: We expect Tata Steel Europe (TSE) and othersubsidiaries to report EBITDA/ton of USD15 in a seasonally weakquarter. We expect steel shipments to decrease 5% YoY (up 2% QoQ)to 4.1mt.

� Steel environment challenging, price outlook negative; maintain Sell:We expect steel environment to remain challenging due to a weakdemand scenario. We expect TSI margins to suppress further as loweriron ore prices will eat away certain captive iron benefits. TSE's capexprogram, despite insufficient cash flows, will be an additionaloverhang on the stock. The stock trades at 8.9x FY15E EPS and an EV of6.3x FY15E EBITDA. Maintain Sell.

Key issues to watch out� Funding of TSE modernization and upgradation program, as TSE's cash

flows are insufficient to support its capex.

Financials & Valuation (INR b)Y/E March 2012 2013 2014E 2015ESa les 1,329 1,347 1,470 1,473

EBITDA 124.2 123.2 163.7 164.2

Adj. PAT 18.1 1.5 32.6 31.2

Adj. EPS (INR) 18.6 1.6 33.6 32.2

EPS Gr(%) -70.1 -91.62,041.7 -4.3

BV/Sh. (INR) 260.2 217.3 233.8 256.3

RoE (%) 7.9 0.7 14.9 13.1

RoCE (%) 9.2 6.6 9.3 8.8

Payout (%) 27.6 -12.3 26.7 27.8

Valuations

P/E (x) 15.5 183.5 8.6 8.9

P/BV 1.1 1.3 1.2 1.1

EV/EBITDA (x) 6.5 7.2 6.0 6.3

Div. Yield (%) 4.2 2.8 2.8 2.8

Bloomberg TATA IN


M. Cap. (INR b)/(USD b) 280 / 4


1,6,12 Rel Perf. (%) -4 / -13 / -33

C–126October 2013

September 2013 Results Preview | Sector: Oil & Gas

INR depreciation to partly compensate for 15% QoQ fall in GRM; crude rises 7% QoQ:Strong crude prices in 2QFY14 (Brent average at USD110/bbl; +7% QoQ, flat YoY), ledby geo-political concerns in Syria and INR depreciation (average at INR62.5/USD, +12%YoY and QoQ) will benefit oil producers. Refinery margins will be under pressure,with Reuters Singapore GRM falling 15% QoQ to USD5.5/bbl, primarily driven by lowergasoline cracks (end of driving season in US and Europe) and lower fuel oil cracks.

Petchem spreads recover QoQ: Simple spreads over naphtha improved 4.9% and 8.7%QoQ for PE and PP, but decreased by a marginal 1.3% QoQ for PVC. However, led byhigher international prices and steep INR depreciation, the domestic premium tointernational prices reduced significantly in 2QFY14. During the quarter, polymerproducers (RIL and GAIL) also benefitted from full impact of increase in polymercustoms duty from 5% to 7.5% in May 2013.

Higher crude prices coupled with significant INR depreciation led to QoQ increase inunder-recoveries: We estimate 42% QoQ increase in under-recoveries to INR362b,led by almost doubling of diesel losses. We model upstream sharing similar to 1QFY14(subsidy at USD56/bbl) and expect the government to compensate INR200b in 2QFY14.However, on the back of higher retail selling prices for diesel and capping of LPGcylinders, the YoY growth softened (2% YTD for diesel and -3% YTD for LPG) and providedsome respite to ballooning under-recoveries. For FY14/FY15, we model upstreamsharing at INR700b/650b, downstream sharing at nil, and balance by the government.

Valuation and view: In event of likely deregulation over coming years, we preferONGC/OINL in upstream (significant earnings growth opportunity) and BPCL in OMC's(relatively strong balance sheet and E&P potential). Maintain Neutral on Gail Indiadue to headwinds for gas availability, however believe PLNG is available at attractivevaluation given its medium term earnings potential. Maintain Buy on Cairn India forits attractive valuation and Neutral on RIL as the next earnings growth is still sometime away when its new core-business/E&P projects commission from FY16/FY17.

Harshad Borawake ([email protected])/Kunal Gupta([email protected])

Oil & GasCompanies Covered

BPCL

Cairn India

GAIL

Gujarat State Petronet

HPCL

IOC

Indraprastha Gas

MRPL

Oil India

ONGC

Petronet LNG

Reliance Industries



27.09.13 % YoY % QoQ % YoY % QoQ % YoY % QoQBPCL 329 Buy 628,031 10.5 7.0 12,470 -70.3 37.7 3,743 -92.6 149.0Cairn India 318 Buy 50,949 14.7 25.4 39,607 14.8 31.6 34,775 49.8 11.2GAIL 326 Neutral 131,709 15.9 2.5 15,223 10.3 4.0 8,931 -9.4 10.5Gujarat State Petronet 52 Neutral 2,810 2.9 -5.1 2,538 0.7 -5.7 1,268 -4.5 0.4HPCL 190 Buy 596,881 23.2 15.3 13,266 -41.0 LP 4,443 -80.9 LPIOC 211 Buy 1,215,928 14.9 10.3 30,304 -66.6 LP 18,020 -81.3 LPIndraprastha Gas 276 Neutral 10,041 17.5 11.4 1,821 -11.6 -5.4 807 -18.7 -7.6MRPL 33 Neutral 188,626 15.7 23.6 2,902 -74.9 72.5 -2,185 PL LossOil India 454 Buy 25,526 6.3 28.9 11,633 1.4 66.9 9,339 -2.2 53.3ONGC 275 Buy 229,313 15.9 19.3 123,784 20.5 47.4 62,053 5.2 54.5Petronet LNG 123 Buy 104,000 37.8 23.2 3,894 -24.9 -2.1 1,988 -36.8 -11.8Reliance Inds. 840 Neutral 1,014,562 12.3 15.8 74,174 -3.7 4.8 53,395 -0.7 -0.2Sector Aggregate 4,198,376 15.2 13.1 331,616 -20.3 61.8 196,577 -42.6 107.1Excl. RMs 1,757,536 14.6 16.6 275,575 5.6 27.2 170,372 -1.3 22.6

C–127October 2013


Crude price was up 7% QoQ at USD110/bbl Brent-WTI spread halved QoQ to USD4/bbl in 2QFY14

GRM down 15% QoQ; crude up 7% QoQ; Arab L-H spread increases QoQ

Singapore GRM was down 15% QoQ to USD5.5/bbl in 2QFY14 Gasoline and FO cracks meaningfully down QoQ (USD/bbl)

Our key assumptions

� Our crude price assumptions for FY14/15/long-term are

USD108.5/105/100/bbl.

� We expect regional benchmark Singapore Reuters GRM

to remain in the USD7-9/bbl range for the near term.

� We model Singapore GRM at USD6.5/bbl in FY14.

Arab L-H differential higher QoQ in 2QFY14 (USD/bbl)

Source: Reuters, Bloomberg, MOSL

Polymer spreads increased QoQ in 2QFY14 (INR/kg) POY/PSF spreads also improved QoQ (INR/kg)

30

60

90

120

150

Sep-07 Sep-08 Sep-09 Sep-10 Se p-11 Se p-12 Se p-13

Brent cru de (month ly a ve rage )Brent cru de (q uarterly avera ge)

0

2

4

6

8

10

12

Sep-07 Sep-08 Sep -09 Sep-10 Sep-11 Sep-12 Sep -13

Arab L-H (month ly average)Arab L-H (quarterly a ve rage )

4

2.6

-40

-30

-20

-10

0

10

Sep-07 Se p-08 Sep-09 Sep-10 Se p-11 Sep-12 Sep-13

0

3

6

9

12

Se p-07 Sep-08 Sep-09 Sep-10 Se p-11 Sep-12 Se p-13

Singapo re GRM (Monthly Avg)Singapo re GRM (Qtr Avg)

9.7

-5.8

18.9 16.6

-10.0

-35.6-45

-20

5

30

Gas

olin

e

Nap

htha

LPG

Dies

el

Jet/

Kero

Fuel

Oil


20

30

40

50

60

2QFY

12

3QFY

12

4QFY

12

1QFY

13

2QFY

13

3QFY

13

4QFY

13

1QFY

14

2QFY

14

0

5

10

15

20PE PP PVC

45

55

65

75

2QFY

12

3QFY

12

4QFY

12

1QFY

13

2QFY

13

3QFY

13

4QFY

13

1QFY

14

2QFY

14

POY PSF

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C–129October 2013


ONGC's net realization estimated at USD48/bbl GAIL transmission volumes under pressure (mmscmd)


Expect RIL premium to Singapore GRM at USD2.3/bbl Cairn's Rajasthan production likely to average 180kbpd




Oil & GasBPCL 329 Buy 26.0 28.2 34.8 12.6 11.7 9.4 7.6 7.2 6.4 11.5 11.6 13.2Cairn India 318 Buy 63.1 65.6 55.2 5.0 4.8 5.8 3.3 2.5 2.5 24.8 23.8 17.2GAIL 326 Neutral 31.7 28.9 28.8 10.3 11.3 11.3 8.0 8.8 7.8 17.5 14.4 13.1Guj. State Petronet 52 Neutral 9.6 9.0 9.2 5.4 5.7 5.6 3.6 3.0 3.0 19.9 16.1 14.4HPCL 190 Buy 26.7 16.3 26.3 7.1 11.7 7.2 9.9 9.8 8.0 6.7 4.0 6.2Indraprastha Gas 276 Neutral 25.3 26.4 31.6 10.9 10.4 8.7 5.5 5.0 4.0 26.0 22.6 22.7IOC 211 Buy 18.3 19.5 28.0 11.5 10.9 7.5 10.3 10.7 6.7 7.2 7.3 9.9MRPL 33 Neutral -4.3 1.3 6.8 -7.7 25.9 4.9 14.4 6.2 3.5 -11.1 3.4 16.9Oil India 454 Buy 59.7 60.1 68.9 7.6 7.6 6.6 3.8 3.6 2.9 19.4 17.8 18.2ONGC 275 Buy 28.3 28.9 36.7 9.7 9.5 7.5 3.8 3.5 2.8 16.8 15.6 17.8Petronet LNG 123 Buy 15.3 10.6 12.9 8.0 11.6 9.5 5.8 6.6 5.7 28.8 16.7 17.7Reliance Inds. 840 Neutral 71.9 74.0 80.6 11.7 11.4 10.4 8.5 8.9 8.0 12.3 11.5 11.4Sector Aggregate 10.3 9.8 8.5 6.2 5.8 4.8 13.4 12.8 13.4Ex RMS 10.2 9.7 8.6 5.5 5.2 4.4 14.6 13.9 14.1

116 115 120 120 117 119 119 116 110 106 105 99 99 99

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2QE

FY11 FY12 FY13 FY14

Gas - Trans mi ss ion (mms cmd)

65 39 48 83 45 44 47 47 48 51 40

73 77 63 63 62 63

63

63

48

67

33

7024

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.8

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.1 108.

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9

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2

114.

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102.

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1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q

FY11 FY12 FY13 FY14

Net Rea l i zation Subs idy Burden Gross Rea l i zation

45

116 125 118 125 125 125138

167 172 170 169 173 180

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2QE

FY11 FY12 FY13 FY14

Rajas than Gros s Prodn (kbpd)

�4

2

8

14

20

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q

FY08 FY09 FY10 FY11 FY12 FY13 FY14

Premium/ (di scount) Singapore GRM RIL

C–130October 2013




Net Sales 545,227 568,595 623,398 662,820 587,053 628,031 676,743 635,631 2,400,041 2,527,457

Change (%) 18.2 34.5 6.0 2.5 7.7 10.5 8.6 -4.1 13.3 5.3

EBITDA -81,757 41,932 22,584 65,527 9,054 12,470 13,251 17,842 48,287 52,617

% of Sales -15.0 7.4 3.6 9.9 1.5 2.0 2.0 2.8 2.0 2.1

Depreciation 4,801 3,983 4,657 5,820 5,305 5,300 5,350 5,448 19,261 21,403

Interest 5,205 4,117 5,758 3,172 5,253 5,008 4,894 4,811 18,252 19,966

Other Income 3,395 16,516 4,307 5,366 3,695 3,778 3,778 4,005 29,583 15,256

PBT -88,368 50,348 16,476 61,901 2,191 5,940 6,785 11,588 40,357 26,504

Tax 0 0 0 13,928 688 2,197 2,510 3,614 13,928 9,009

Tax rate (%) 0.0 0.0 0.0 22.5 31.4 37.0 37.0 31.2 34.5 34.0

PAT -88,368 50,348 16,476 47,973 1,503 3,743 4,275 7,974 26,429 17,495

Change (%) nm nm -47.5 21.1 nm -92.6 -74.1 -83.4 101.6 -33.8

Adj. PAT -88,368 50,348 16,476 47,973 1,503 3,743 4,275 7,974 26,429 17,495

Adj. EPS -122.2 69.6 22.8 66.4 2.1 5.2 5.9 11.0 36.6 24.2

Key Assumption (INR b)

Gross under recovery 116 90 94 90 61 89 96 87 390 333

Upstream sharing 37 36 36 60 37 42 42 48 168 169

Govt. sharing 0 72 60 87 19 49 53 43 219 164

Net Under/(Over) recovery 80 -18 -2 -57 5 -2 1 -4 2 0

As a % of Gross 68.5 nm nm nm 8.9 nm 0.9 nm 0.6 0.1

E: MOSL Estimates

BPCLCMP: INR329 Buy� As in earlier quarters, profitability of OMCs (BPCL, HPCL, IOCL) would

depend more on subsidy sharing, which is ad-hoc, than on businessfundamentals. Government subsidy compensation typically comeswith a delay.

� 2QFY14 gross under-recoveries are up 42% QoQ due to the impact ofINR depreciation and increase in crude price.

� For FY14/FY15, we model OMCs' subsidy sharing at nil and upstreamsharing at INR700b/650b, with the government sharing the balance.

� We peg refinery throughput at 5.9mmt for 2QFY14 v/s 5.9mmt in2QFY13 and 5.6mmt in 1QFY14.

� We expect BPCL to report PAT of INR3.7b, led by our assumption ofINR200b subsidy sharing by the government in 2QFY14.

� BPCL trades at 9.5x FY15E EPS and 1.2x FY15E BV. E&P upsides fromMozambique and Brazil are the key medium-term triggers. Buy.

Key issues to watch out� (a) subsidy sharing, and

(b) GRM.


EBITDA 48 67 67 67

Adj. PAT 8 19 20 25

Adj. EPS (INR) 10.8 26.0 28.2 34.8

EPS Gr. (%) -52.2 140.9 8.2 23.5

BV/Sh.(INR) 220 233 252 276

RoE (%) 5.0 11.5 11.6 13.2

RoCE (%) 5.2 8.9 8.9 8.8

Payout* (%) 35.5 35.2 35.2 35.3

Valuations

P/E (x) 30.5 12.6 11.7 9.5

P/BV (x) 1.5 1.4 1.3 1.2

EV/EBITDA (x) 11.3 7.6 7.2 6.5

Div. Yield (%) 1.7 3.3 2.3 2.9

*Based on standalone

Bloomberg BPCL IN


M. Cap. (INR b)/(USD b) 238 / 4


1,6,12 Rel Perf. (%) 3 / -18 / -11

C–131October 2013




Net Sales 44,400 44,431 42,776 43,634 40,629 50,949 50,491 49,468 175,241 191,537

Change (%) 19.6 67.5 38.1 19.5 -8.5 14.7 18.0 13.4 33.6 9.3

EBITDA 34,921 34,516 32,862 32,582 30,099 39,607 38,800 37,226 134,880 145,731

Exploration w/off 352 262 277 3,657 1,001 1,500 1,820 2,889 4,549 7,209

D,D&A 4,373 4,515 4,824 4,747 5,193 5,932 6,097 6,471 18,459 23,692

Interest 295 188 52 152 105 110 115 121 687 450

Other Income (Net) 964 2,226 1,819 2,219 1,251 1,487 2,224 3,463 7,228 8,425

Forex Fluctuations 8,663 -7,858 2,357 -28 6,820 4,042 0 0 3,134 10,862

PBT 39,528 23,918 31,884 26,218 31,871 37,594 32,992 31,209 121,548 133,666

Tax 1,271 697 323 582 599 2,818 2,771 2,160 2,872 8,348

Tax rate* (%) 4.1 2.2 1.1 2.2 2.4 8.4 8.4 6.9 2.4 6.8

Adj. PAT 38,257 23,222 31,561 25,636 31,272 34,775 30,221 29,050 118,676 125,318

YoY Change (%) 40.3 204.3 39.5 17.3 -18.3 49.8 -4.2 13.3 49.5 5.6

Merger arrangement gain 1,888 1,888 0

PAT 38,257 23,222 33,449 25,636 31,272 34,775 30,221 29,050 120,564 125,318

Adj. EPS 20.0 12.2 16.5 13.4 16.4 18.2 15.8 15.2 62.1 65.6

Key Assumptions and Cain's share in production (kboepd)

Exchange rate (INR/USD) 54.2 55.5 54.2 54.2 56.0 62.5 62.0 61.9 54.5 60.6

Brent Price (USD/bbl) 108.7 110.0 110.0 113.5 102.8 111.0 110.0 110.2 108.5 108.5

Ravva & Cambay Prodn 10.2 9.2 9.1 8.6 10.6 10.6 10.6 10.6 9.3 10.6

Rajasthan Prodn 117.0 120.3 119.0 118.0 121.0 126.0 129.5 130.9 118.6 126.8

Total 127.2 129.4 128.1 126.6 131.6 136.6 140.1 141.5 127.8 137.5

E: MOSL Estimates; * Excluding forex fluctuations, includes MAT credit.

Cairn IndiaCMP: INR318 Buy� We expect Cairn India's 2QFY14 Rajasthan production to increase to

180kbpd from 173kbpd in 1QFY14, primarily led by ramp-up inproduction at Aishwariya and Bhagyam fields and total net sales of126kboepd (v/s 120kboepd in 2QFY13 and 121kboepd in 1QFY14).

� Net sales would be INR51b (v/s INR41b in 1QFY14), led by increase inaverage production at its Rajasthan block and INR depreciation. Weestimate EBITDA at INR39.6b v/s INR34.5b in 2QFY13 and INR30.1b in1QFY14.

� Other income is likely to increase, led by higher cash balance. Weestimate forex gain of INR4b v/s gain of INR6.8b in 1QFY14 due to ~4%INR depreciation during the quarter (INR/USD on 30 September 2013as compared to 30 June 2013).

� We model Brent crude price of USD108.5/105/100/bbl for FY14/15/long-term, and take a quality discount of 9% for Cairn India.

� Key operational factors to watch in the medium-term would be: (a)production ramp-up and (b) reserve updates, with ongoing 100-wellexploration program at Rajasthan. With increasing cash balance onthe balance sheet, clarity on its utilization will be positive.

� The stock currently trades at 5.8x FY15E EPS of INR55.2. Maintain Buy.

Key issues to watch out� (a) net realization, and (b) forex fluctuations.


EBITDA 108.1 134.9 145.7 130.9

Adj. PAT 92.9 119.2 125.3 105.4

Adj. EPS (INR) 41.6 63.1 65.6 55.2

EPS Gr. (%) 46.7 51.7 3.9 -15.9

BV/Sh.(INR) 253 250 302 342

RoE (%) 21.0 24.8 23.8 17.2

RoCE (%) 20.3 24.5 23.2 19.0

Payout (%) 0.0 21.6 23.4 23.4

Valuations

P/E (x) 7.6 5.0 4.8 5.8

P/BV (x) 1.3 1.3 1.1 0.9

EV/EBITDA (x) 4.9 3.4 2.5 2.5

Div. Yield (%) NA 3.6 4.1 3.5

Bloomberg CAIR IN


M. Cap. (INR b)/(USD b) 607 / 10


1,6,12 Rel Perf. (%) -7 / 12 / -9

C–132October 2013



1Q 2Q 3Q 4Q 1Q 2QE 3QE 4QENet Sales 110,886 113,612 124,743 124,086 128,556 131,709 134,008 137,219 473,327 531,492

Change (%) 25.0 17.1 10.8 18.7 15.9 15.9 7.4 10.6 17.5 12.3EBITDA 18,991 13,803 19,722 11,367 14,642 15,223 17,838 15,961 63,882 63,663

% of Net Sales 17.1 12.1 15.8 9.2 11.4 11.6 13.3 11.6 13.5 12.0Depreciation 2,169 2,491 2,424 2,726 2,808 2,898 2,948 3,011 9,809 11,665Interest 588 261 552 549 612 650 679 1,019 1,950 2,960Other Income 612 2,685 1,841 3,317 1,018 1,850 1,850 2,912 8,455 7,631PBT 16,846 13,736 18,587 11,409 12,241 13,525 16,061 14,843 60,578 56,669Tax 5,508 3,882 5,738 5,227 4,159 4,594 5,455 4,672 20,356 18,879

Rate (%) 32.7 28.3 30.9 45.8 34.0 34.0 34.0 31.5 33.6 33.3PAT 11,338 9,854 12,849 6,182 8,082 8,931 10,606 10,171 40,222 37,789

Change (%) 15.1 -10.0 17.7 27.9 -28.7 -9.4 -17.5 64.5 10.1 -6.0Adj PAT 11,338 9,854 12,849 6,065 8,082 8,931 10,606 10,170 40,105 37,788EPS (INR) 8.9 7.8 10.1 4.8 6.4 7.0 8.4 8.0 31.6 29.8Key AssumptionsGas Trans. volume (mmsmd) 110 106 105 99 99 99 100 100 105 100Petchem sales ('000MT) 66 101 128 132 121 115 115 117 427 468Segmental EBIT Breakup (INR m)TransmissionNatural Gas 5,673 6,049 6,195 406 5,538 5,453 5,298 5,496 18,323 21,786LPG 709 -489 133 620 550 527 546 453 973 2,077Natural Gas Trading 4,956 2,447 2,986 3,469 3,025 3,225 3,155 4,105 13,858 13,511Petrochemicals 1,958 4,182 4,395 4,716 4,383 5,002 4,700 4,925 15,250 19,010LPG & Liq.HC (pre-subsidy) 11,373 8,521 12,063 10,799 6,891 8,156 11,004 10,621 42,756 36,671Unallocated; GAILTEL 81 69 -834 -338 -255 0 0 0 -1,022 -255Total 24,751 20,779 24,939 19,671 20,132 22,363 24,704 25,601 90,139 92,800Less: Subsidy -7,000 -7,857 -6,143 -5,872 -7,000 -7,000 -7,000 -8,056 -26,872 -29,056Total 17,751 12,922 18,796 13,799 13,132 15,363 17,704 17,545 63,268 63,744E: MOSL Estimates

GAIL (India)CMP: INR326 Neutral� We expect GAIL to report PAT of INR9b (down 9% YoY; up 11% QoQ).

Subsidy sharing would be INR7b in 2QFY14 v/s INR7.9b in 2QFY13 andINR7b in 1QFY14. GAIL's subsidy sharing has been ad-hoc at INR7b forevery quarter in FY13.

� Subsidy sharing assumption: For FY14/FY15, we model upstreamsharing at INR700/650b. For GAIL, we have assumed a sharing of INR29bin FY14 v/s INR26.9b in FY13.

� We model gas transmission volumes at 99mmscmd v/s 106 in 2QFY13and 99.5 in 1QFY14. Segmental EBIT (pre-subsidy) is expected toincrease by 11% QoQ, led by petrochemicals and LPG segments.

� Adjusted for investments, the stock trades at 9.2x FY15E EPS of INR28.8.Though we like the management's strategy to build network to enablegas sourcing, we remain Neutral due to medium-term earningsconcern led by likely under-utilization of its new network on accountof headwinds to incremental 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 57.0 62.8 62.5 70.4

Adj. PAT 36.5 40.2 36.6 36.5

Adj. EPS (INR) 28.8 31.7 28.9 28.8

EPS Gr. (%) 2.6 10.1 -8.9 -0.3

BV/Sh.(INR) 170 191 210 229

RoE (%) 17.9 17.5 14.4 13.1

RoCE (%) 21.0 19.4 15.0 14.0

Payout (%) 35.1 35.2 34.9 34.9

Valuations

P/E (x) 9.2 8.4 9.2 9.2

P/BV (x) 1.6 1.4 1.3 1.2

EV/EBITDA (x) 7.9 7.2 8.1 7.3

Div. Yield (%) 2.6 2.8 2.6 2.6

Bloomberg GAIL IN


M. Cap. (INR b)/(USD b) 414 / 7


1,6,12 Rel Perf. (%) 2 / -2 / -21

C–133October 2013


Quarterly Performance (INR Milllion)Y/E March FY13 FY14 FY13 FY14E


Net Sales 2,676 2,732 2,606 3,590 2,961 2,810 2,780 2,862 11,603 11,413

Change (%) -5.9 -2.7 -4.9 29.9 10.6 2.9 6.7 -20.3 4.0 -1.6

EBITDA 2,465 2,520 2,338 3,268 2,691 2,538 2,510 2,530 10,591 10,269

% of Net Sales 92.1 92.2 89.7 91.0 90.9 90.3 90.3 88.4 91.3 90.0

% Change -5.9 -2.5 -7.1 29.7 9.2 0.7 7.3 -22.6 3.4 -3.0

Depreciation 439 464 478 480 458 480 510 515 1,861 1,963

Interest 317 316 314 315 380 380 380 399 1,263 1,539

Other Income 176 226 230 158 139 215 221 246 790 820

PBT 1,884 1,966 1,776 2,630 1,992 1,893 1,841 1,862 8,257 7,588

Tax 636 638 586 1,015 729 625 607 543 2,876 2,504

Rate (%) 33.7 32.5 33.0 38.6 36.6 33.0 33.0 29.1 34.8 33.0

PAT 1,248 1,328 1,190 1,615 1,263 1,268 1,233 1,319 5,381 5,084

Change (%) -9 3 -6 25 1 -4 4 -18 3 -6

EPS (INR) 2.2 2.4 2.1 2.9 2.2 2.3 2.2 2.3 9.6 9.0

Transmission Vol. (mmscmd) 31.1 28.6 27.3 22.2 22.1 22.0 22.0 22.7 27.3 22.2

Implied tariff (INR/mscm) 903 993 1,043 1,768 1,411 1,325 1,310 1,334 1,135 1,345

E: MOSL Estimates

Gujarat State PetronetCMP: INR52 Neutral� We expect GSPL to report net sales of INR2.8b and PAT of INR1.3b

(down 4% YoY and flat QoQ) in 1QFY14.

� We build lower gas transmission volumes at 22mmscmd in 2QFY14(v/s 28.6mmscmd in 2QFY13 and 22.1mmscmd in 1QFY14), led bydecline in KG-D6 production.

� GSPL has won all three 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 22.2mmscmd and model averagetariff at INR1,325/mscm in FY14. The stock trades at 5.5x FY15E EPS ofINR9.2. Maintain Neutral.

Key issues to watch out� (a) transmission volumes and� (b) tariff.


EBITDA 10.2 10.6 10.3 10.1

Adj. PAT 5.2 5.4 5.1 5.2

Adj. EPS (INR) 9.3 9.6 9.0 9.2

EPS Gr. (%) 3.1 3.1 -5.5 2.0

BV/Sh.(INR) 44 52 60 68

RoE (%) 23.3 19.9 16.1 14.4

RoCE (%) 23.6 22.2 18.1 16.7

Payout (%) 13.0 12.6 12.2 12.9

Valuations

P/E (x) 5.6 5.4 5.6 5.5

P/BV (x) 1.2 1.0 0.8 0.7

EV/EBITDA (x) 3.7 3.6 3.0 2.9

Div. Yield (%) 1.9 1.9 1.9 1.9

Bloomberg GUJS IN




1,6,12 Rel Perf. (%) -10 / -27 / -41

C–134October 2013




Net Sales 440,765 484,639 527,510 612,379 517,639 596,881 610,586 658,017 2,065,294 2,383,123

Change (%) 8.0 30.9 10.1 16.9 17.4 23.2 15.7 7.5 15.9 15.4

EBITDA -88,759 22,480 3,877 101,826 -6,879 13,266 12,439 16,732 39,424 35,559

% of Net Sales -20.1 4.6 0.7 16.6 -1.3 2.2 2.0 2.5 2 1

Change (%) nm nm -89.1 86.3 nm -41.0 220.8 -83.6 -246.7 10.9

Depreciation 4,544 4,910 4,947 4,914 5,100 5,218 5,789 5,890 19,315 21,997

Interest 5,492 3,899 6,135 2,852 4,668 4,559 4,484 4,260 18,377 17,969

Other income 2,524 3,419 2,446 3,910 2,042 3,163 3,663 3,825 12,300 12,692

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 6,653 5,829 10,408 14,746 8,284

Tax 0 0 0 5,699 0 2,210 1,936 -1,394 5,699 2,752

Rate (%) 0.0 0.0 0.0 6.9 0.0 33.2 33.2 nm 38.6 33.2

PAT -92,488 23,271 1,471 76,793 -14,605 4,443 3,892 11,802 9,047 5,532

Change (%) nm nm -94.6 65.8 nm -80.9 164.6 -84.6 -0.7 -38.9

Adj. EPS -272.8 68.6 4.3 226.5 -43.1 13.1 11.5 34.8 26.7 16.3

Key Assumptions (INR b)

Gross under recovery 107 83 87 85 58 83 91 82 362 315


Govt. subsidy 0 67 55 126 18 46 50 40 248 155

Net Under recovery 73 -17 -2 -52 5 -2 1 -3 2 0

Net Sharing (%) 69 nm nm nm 9 nm 1 nm nm nm

E: MOSL Estimates; * 1QFY14 net sales includes receivables from ONGC

HPCLCMP: INR190 Buy� As in earlier quarters, profitability of OMCs (BPCL, HPCL, IOCL) would


� 2QFY14 gross under-recoveries are up 42% QoQ, due to impact of INRdepreciation and increase in crude price.



� We expect HPCL to report PAT of INR4.4b in 2QFY14, led by ourassumption of INR200b subsidy sharing by the government in 2QFY14.

� HPCL trades at 7.2x FY15E EPS and 0.4x FY15E BV. We have a Buy ratingdue to our positive stance on diesel reforms and attractive valuations.

Key issues to watch out� (a) subsidy sharing, and� (b) GRM.


EBITDA 34.1 39.4 35.6 39.8

Adj. PAT 9.1 9.0 5.5 8.9

Adj. EPS (INR) 26.9 26.7 16.3 26.3

EPS Gr. (%) -40.8 -0.7 -38.9 61.4

BV/Sh.(INR) 387 404 414 432

RoE (%) 7.1 6.7 4.0 6.2

RoCE (%) 6.7 6.8 5.5 6.4

Payout (%) 37.0 37.3 35.1 35.1

Valuations

P/E (x) 7.1 7.1 11.6 7.2

P/BV (x) 0.5 0.5 0.5 0.4

EV/EBITDA (x) 8.4 8.1 7.6 6.1

Div. Yield (%) 4.5 4.5 2.6 4.2

Bloomberg HPCL IN




1,6,12 Rel Perf. (%) -3 / -38 / -44

C–135October 2013




Net Sales 966,028 1,057,913 1,152,767 1,284,497 1,102,332 1,215,928 1,321,307 1,353,265 4,461,204 4,992,832

Change (%) -4.1 18.7 0.1 0.6 14.1 14.9 14.6 5.4 3.1 11.9

Raw Material Consumed 583,006 433,753 571,328 462,966 534,835 622,943 641,723 638,262 2,051,053 2,437,762

Staff Cost 13,316 12,074 15,858 31,464 17,309 17,500 17,500 17,691 72,713 70,000

Finished Goods Purchase 490,231 460,076 451,893 573,810 464,835 522,289 597,589 616,001 1,976,009 2,200,714

Other Exp 81,835 61,384 62,377 51,052 99,347 22,892 24,036 27,869 256,648 174,144

EBITDA -202,360 90,627 51,310 165,205 -13,994 30,304 40,459 53,443 104,782 110,212

% of Net Sales -20.9 8.6 4.5 12.9 -1.3 2.5 3.1 3.9 2.3 2.2

% Change nm nm -52.2 17.7 nm -66.6 -21.1 -67.7 -38.3 5.2

Depreciation 12,775 12,865 13,243 13,128 13,858 14,000 14,000 14,019 52,010 55,877

Interest 18,491 15,108 16,726 13,766 14,702 13,426 13,406 13,406 64,092 54,941

Other Income 9,117 33,460 11,978 13,244 11,621 15,143 16,143 16,532 67,798 59,438

PBT -224,510 96,113 33,320 151,554 -30,932 18,020 29,195 42,549 56,478 58,832

Tax 0 0 0 6,426 0 0 5,839 7,104 6,426 12,943

Rate (%) nm 0.0 0.0 4.2 nm 0.0 20.0 16.7 11.4 22.0

Adj. PAT -224,510 96,113 33,320 145,128 -30,932 18,020 23,356 35,445 50,053 45,890

Change (%) nm nm -61.5 2.1 nm -81.3 -29.9 -75.6 -57.1 -8.3

PAT -224,510 96,113 33,320 145,128 -30,932 18,020 23,356 35,445 50,053 45,890

Adj. EPS -92.5 39.6 13.7 59.8 -12.7 7.4 9.6 14.6 20.6 18.9

Gross under recovery (INR b) 255 204 212 187 136 190 205 197 858 728


Govt. sharing 0 161 135 237 43 105 113 97 533 358

Net Under recovery 175 -38 -4 -127 12 -5 2 -9 5 0

E: MOSL Estimates

Indian Oil CorporationCMP: INR211 Buy� As in earlier quarters, profitability of OMCs (BPCL, HPCL, IOCL) would


� 2QFY14 gross under-recoveries are up 42% QoQ, due to the impact ofINR depreciation and increase in crude price.



� We expect IOCL to report a PAT of INR18b in 2QFY14, led by ourassumption of INR200b subsidy sharing by the government in 2QFY14.

� IOCL trades at an attractive 0.7x FY15E BV and 7.5x FY15E EPS. Buy.

Key issues to watch out� (a) subsidy sharing, and� (b) GRM.


EBITDA 180.3 127.4 119.3 182.2

Adj. PAT 119.3 44.5 47.3 68.0

Adj. EPS (INR) 49.2 18.3 19.5 28.0

EPS Gr. (%) 52.4 -62.7 6.3 43.9

BV/Sh.(INR) 249 261 274 292

RoE (%) 20.2 7.2 7.3 9.9

RoCE (%) 12.9 7.6 6.9 10.2

Payout (%) 10.2 33.8 30.8 28.5

Valuations

P/E (x) 4.3 11.5 10.8 7.5

P/BV (x) 0.8 0.8 0.8 0.7

EV/EBITDA (x) 6.7 9.2 9.5 5.9

Div. Yield (%) 2.4 2.9 2.8 3.8

Bloomberg IOCL IN


M. Cap. (INR b)/(USD b) 513 / 8


1,6,12 Rel Perf. (%) -8 / -30 / -21

C–136October 2013




Net Sales 7,602 8,546 8,694 8,818 9,015 10,041 11,127 11,138 33,661 41,321

Change (%) 41.7 43.2 31.4 22.4 18.6 17.5 28.0 26.3 33.8 22.8

EBITDA 1,793 2,060 1,871 1,848 1,924 1,821 2,205 2,107 7,572 8,057

EBITDA (INR/scm) 5.6 6.1 5.5 5.5 5.7 5.1 5.9 5.8 5.6 5.6

% of Net Sales 23.6 24.1 21.5 21.0 21.3 18.1 19.8 18.9 22.5 19.5

% Change 13.9 30.9 25.7 9.7 7.3 -11.6 17.9 14.0 19.8 6.4

Depreciation 427 477 474 489 532 537 557 586 1,867 2,212

Interest 155 140 141 125 128 125 125 122 562 500

Other Income 36 39 26 38 51 49 56 59 138 215

PBT 1,247 1,482 1,282 1,272 1,315 1,208 1,579 1,457 5,282 5,559

Tax 396 489 418 437 442 401 525 490 1,741 1,858

Rate (%) 31.8 33.0 32.6 34.3 33.6 33.2 33.2 33.6 33.0 33.4

PAT 850 992 863 835 873 807 1,055 967 3,541 3,701

PAT (INR/scm) 2.6 2.9 2.5 2.5 2.6 2.3 2.8 2.7 2.6 2.6

Change (%) 6.2 28.5 24.9 3.4 2.6 -18.7 22.2 15.7 15.3 4.5

EPS 6.1 7.1 6.2 6.0 6.2 5.8 7.5 6.9 25.3 26.4

Gas Volumes (mmscmd)

CNG 2.67 2.80 2.80 2.77 2.77 2.94 3.05 2.99 2.76 2.94

PNG 0.88 0.88 0.91 0.98 0.95 0.95 0.98 1.06 0.91 0.98

Total 3.55 3.69 3.71 3.74 3.71 3.89 4.03 4.05 3.67 3.92

E: MOSL Estimates

Indraprastha GasCMP: INR276 Neutral� We expect IGL to report volumes of 3.9mmscmd and PAT of INR807m

(down 8% YoY and 19% QoQ) for 2QFY14.

� Historically, owing to favorable economics vis-à-vis alternative fuels,IGL has been able to pass on any hike in its gas cost, thereby insulatingany impact on its EBITDA margin. However, with absence of KG-D6 gassupply, there is pressure on the company's margins, as it is sourcingmore expensive RLNG to meet demand.

� We expect 2QFY14 CNG volumes to grow 5% YoY to 2.9mmscmd andPNG volumes to grow 7% YoY to 1mmscmd.

� We model in total volumes of 3.9/4.3mmscmd in FY14/FY15. The stocktrades at 8.1x FY15E EPS of INR31.6.

� Post the High Court quashing PNGRB's tariff cut order, PNGRB has nowapproached the Supreme Court and the hearing is still on. MaintainNeutral.

Key issues to watch out� (a) EBITDA margin and� (b) Sales volumes.


EBITDA 6.3 7.6 8.1 9.2

Adj. PAT 3.1 3.5 3.7 4.4

Adj. EPS (INR) 21.9 25.3 26.4 31.6

EPS Gr. (%) 18.4 15.3 4.5 19.7

BV/Sh.(INR) 88 107 127 152

RoE (%) 27.5 26.0 22.6 22.7

RoCE (%) 33.2 32.4 29.1 29.0

Payout (%) 22.8 21.7 18.9 19.0

Valuations

P/E (x) 12.6 10.9 9.7 8.1

P/BV (x) 3.1 2.6 2.0 1.7

EV/EBITDA (x) 6.7 5.1 4.6 3.7

Div. Yield (%) 1.8 2.0 1.9 2.3

Bloomberg IGL IN




1,6,12 Rel Perf. (%) -7 / -4 / -1

C–137October 2013




Net Sales 128,099 163,101 179,921 185,795 152,659 188,626 214,510 213,204 656,915 768,999

Change (%) -4.2 39.8 39.1 17.3 19.2 15.7 19.2 14.8 22.1 17.1

Raw Material (incl. inv chg) 133,106 150,154 177,051 182,529 149,399 184,066 206,080 202,300 642,840 741,845

Staff Cost 421 568 459 397 502 520 525 500 1,846 2,047

Other Expenditure 1,048 809 637 1,441 1,076 1,138 1,442 1,425 3,935 5,081

EBITDA -6,476 11,569 1,774 1,428 1,683 2,902 6,463 8,979 8,294 20,027

% of Net Sales nm 7.1 1.0 0.8 1.1 1.5 3.0 4.2 1.3 2.6

% Change nm 1,435 -41 -82 nm nm nm nm -39.9 141.5

Depreciation -1,375 -1,456 -1,550 -1,663 -1,688 -1,700 -1,750 -2,359 -6,044 -7,497

Interest -1,102 -701 -777 -706 -779 -805 -850 -1,397 -3,286 -3,831

Other Income 495 369 192 105 293 350 485 536 1,160 1,664

PBT b/f forex/exceptional -8,458 9,781 -362 -836 -491 747 4,348 5,757 125 10,362

Forex gain/(loss) -6,490 2,836 -2,570 856 -5,166 -3,000 0 0 -5,368 -8,166

Exceptional items 0 30 0 445 1,118 0 0 0 475 1,118

PBT -14,948 12,647 -2,932 465 -4,539 -2,253 4,348 5,757 -4,769 3,313

Tax -257 -796 -664 -1,084 0 68 -652 -476 -2,801 -1,060

Rate (%) nm 6.3 nm 233.2 nm 3.0 15.0 8.3 nm 32.0

PAT -15,206 11,851 -3,596 -619 -4,539 -2,185 3,696 5,281 -7,569 2,253

Change (%) nm 4,811.4 nm nm nm -118.4 nm nm nm -129.8

EPS -8.7 6.8 -2.1 -0.4 -2.6 -1.2 2.1 3.0 -4.3 1.3

GRM (USD/bbl) -4.2 9.2 1.9 2.0 2.9 2.8 4.5 5.8 2.5 4.0

Throughput (mmt) 2.9 3.6 3.8 4.1 3.3 3.6 4.1 4.2 14.4 15.2

E: MOSL Estimates

MRPLCMP: INR33 Neutral� We expect MRPL to report a loss of INR2.2b (v/s profit of INR11.9b in

2QFY13 and loss of INR4.5b in 1QFY14) in 2QFY14.

� EBITDA is likely to be INR2.9b (v/s INR11.6b in 2QFY13 and INR1.7b in1QFY14). Regional benchmark Reuters Singapore GRM is down 15%QoQ to USD5.5/bbl from USD6.5/bbl due to decline in gasoline andfuel oil cracks.

� On the operational front, we expect refinery throughput at 3.6mmt.

� Medium-term GRM outlook continues to be subdued due toovercapacity and sluggish global demand. We expect GRM to bevolatile (occasional spurts) due to occasional bunching up ofshutdowns.

� For MRPL, we model in GRM of USD4/bbl for FY14 and USD5.5/bbl forFY15. The stock trades at 4.4x FY15E EPS and an EV of 3x FY15E EBITDA.Maintain Neutral.

Key issues to watch out� (a) GRM,� (b) Forex fluctuations and� (c) Inventory changes.


EBITDA 22.6 8.3 20.0 31.4

Adj. PAT 9.1 -7.6 2.3 11.9

Adj. EPS (INR) 5.2 -4.3 1.3 6.8

EPS Gr. (%) -22.8 nm -129.8 430.0

BV/Sh.(INR) 41 37 38 43

RoE (%) 13.2 -11.1 3.4 16.9

RoCE (%) 13.1 -0.3 5.5 20.3

Payout (%) 22.4 0.0 27.3 24.0

Valuations

P/E (x) 6.4 -7.7 25.9 4.4

P/BV (x) 0.8 0.9 0.9 0.7

EV/EBITDA (x) 4.1 13.5 5.8 3.0

Div. Yield (%) 3.0 - 0.9 4.7

Bloomberg MRPL IN




1,6,12 Rel Perf. (%) 3 / -38 / -51

C–138October 2013


Quarterly Performance (Standalone) (INR Billion)Y/E March FY13 FY14 FY13 FY14E

1Q 2Q 3Q 4Q 1Q 2QE 3QE 4QENet Sales 23.3 24.0 24.1 23.8 19.8 25.5 27.0 27.3 95.3 99.6

Change (%) 2.0 -26.6 -3.3 38.2 -15.1 6.3 11.8 15.0 -2.5 4.6EBITDA 11.0 11.5 11.2 8.8 7.0 11.6 12.6 13.5 42.5 44.7

% of Net Sales 47.0 47.8 46.6 37.1 35.2 45.6 46.7 49.5 44.6 44.9Change (%) -12.2 -29.2 -15.7 82.6 -36.4 1.4 12.1 53.5 287.6 5.3

D,D&A 2.0 2.6 2.2 2.4 2.7 2.7 2.7 3.2 9.2 11.2Interest 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.1OI (incl. Oper. other inc) 4.8 5.2 4.9 4.6 4.7 5.0 5.0 5.7 19.6 20.4PBT 13.8 14.1 13.9 11.0 9.0 13.9 15.0 16.0 52.8 53.9Tax 4.5 4.6 4.5 3.4 2.9 4.6 4.9 5.4 16.9 17.8

Rate (%) 32.5 32.4 32.4 30.7 32.2 33.0 33.0 33.5 32.1 33.0PAT 9.3 9.5 9.4 7.6 6.1 9.3 10.0 10.7 35.9 36.1

Change (%) 9.5 -16.2 -7.3 71.9 -34.5 -2.2 6.6 39.4 4.1 0.6Adj. PAT 9.3 9.5 9.4 7.6 6.1 9.3 10.0 10.7 35.9 36.1Adj. EPS (INR) 15.5 15.9 15.6 12.7 10.1 15.5 16.7 17.7 59.7 60.1Key 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 109.8 108.6 108.6 111.4 101.9 110.0 109.0 109.2 109.6 107.5Subsidy 56.0 56.0 56.0 56.0 56.0 56.0 55.0 64.5 56.0 57.9Net Oil Realization 53.8 52.6 52.6 55.4 45.9 54.0 54.0 44.7 53.6 49.6Subsidy (INR b) 20.2 20.8 19.5 18.5 19.8 23.3 23.2 27.4 78.9 93.7E: MOSL Estimates

Oil IndiaCMP: INR454 Buy� We expect OINL to report a PAT of INR9.3b (v/s INR9.5b in 2QFY13 and

INR6.1b in 1QFY14). OINL's subsidy sharing has been ad-hoc at USD56/bbl for FY13. Similar to FY13, we model subsidy sharing at USD56/bbluntil there is further clarity. The government has set up a committeeto look into the subsidy sharing mechanism and provide clarity overthe longer term.

� We estimate EBITDA at INR11.6b (flat YoY and up 67% QoQ). Weestimate gross realization at USD110/bbl v/s USD109/bbl in 2QFY13and USD102/bbl in 1QFY14, and net realization at USD54/bbl v/s USD53/bbl in 2QFY13 and USD46/bbl in 1QFY14.

� Subsidy sharing assumption: For FY14/15, we model upstream sharingat INR700/650b, and OINL's share at 13.4% of upstream. We modelOINL to share INR23.3b in 2QFY14.

� Our Brent price assumption is USD108.5/105/100/bbl for FY14/15/long-term. We model upstream sharing at INR700b/650b in FY14/15.

� The stock trades at 6.6x FY15E EPS of INR68.9. We remain positive onOINL due to recently announced diesel reforms, gas price hike andstrong operational foothold: (1) steady production growth, (2) highshare of oil in its reserves (55% in 1P and 62% in 2P), and (3) attractivevaluations (>40% discount to its global peers on EV/BOE, 1P basis).Buy.

Key issues to watch out� (a) subsidy sharing, (b) DD&A charges, and (c) oil & gas production

volumes.


EBITDA 46.9 42.5 44.7 52.8

Adj. PAT 34.5 35.9 36.1 41.4

Adj. EPS (INR) 57.3 59.7 60.1 68.9

EPS Gr. (%) 19.4 4.1 0.6 14.7

BV/Sh.(INR) 295 320 357 401

RoE (%) 20.7 19.4 17.8 18.2

RoCE (%) 27.7 26.0 23.6 24.4

Payout (%) 38.5 58.2 37.3 37.3

Valuations

P/E (x) 7.9 7.6 7.6 6.6

P/BV (x) 1.5 1.4 1.3 1.1

EV/EBITDA (x) 3.5 3.8 3.6 2.9

Div. Yield (%) 4.2 6.6 4.2 4.8

Bloomberg OINL IN


M. Cap. (INR b)/(USD b) 273 / 4


1,6,12 Rel Perf. (%) -7 / -16 / -11

C–139October 2013


Quaterly performance (Standalone) (INR Billion)Y/E March FY13 FY14 FY13 FY14E


Net Sales 200.8 197.9 209.9 213.9 192.2 229.3 228.9 214.3 822.5 864.7

Change (%) 24.0 -12.5 15.8 13.7 -4.3 15.9 9.1 0.2 8.6 5.1

EBITDA 110.4 102.7 112.4 102.9 84.0 123.8 123.1 108.8 428.4 439.6

% of Net Sales 55.0 51.9 53.5 48.1 43.7 54.0 53.8 50.8 52.1 50.8

D,D & A 32.0 37.3 44.1 71.3 39.0 44.4 52.9 55.6 184.6 191.9

Interest 0.3 0.0 0.0 0.0 0.0 0.1 0.1 0.1 0.3 0.2

Other Income 11.3 20.0 13.9 16.9 12.9 13.3 12.1 13.5 62.0 51.8

PBT 89.4 85.4 82.1 48.5 57.8 92.6 82.2 66.7 305.4 299.3

Tax 28.6 26.4 26.5 14.6 17.7 30.6 27.1 21.9 96.2 97.2

Rate (%) 32.0 30.9 32.2 30.2 30.6 33.0 32.9 32.8 31.5 32.5

PAT 60.8 59.0 55.6 33.9 40.2 62.1 55.1 44.8 209.3 202.1

Adjusted PAT 60.8 59.0 55.6 33.9 40.2 62.1 55.1 44.8 209.3 202.1

Change (%) 48.4 -31.8 20.0 -40.0 -33.9 5.2 -0.9 32.2 -9.1 -3.4

Adj. EPS 7.1 6.9 6.5 4.0 4.7 7.3 6.4 5.2 24.5 23.6

Key Assumptions (USD/bbl)

Fx rate (INR/USD) 54.2 55.2 54.2 54.4 56.0 62.5 62.0 61.9 54.5 60.6

Gross Oil Realization 109.9 109.9 110.2 114.0 102.9 111.0 110.0 110.2 111.0 108.5

Subsidy 63.3 63.1 62.2 63.1 62.7 63.3 63.0 74.0 62.9 65.7

Net Oil Realization 46.6 46.8 48.0 50.9 40.2 47.7 47.0 36.2 48.1 42.8

Subsidy (INR b) 123.5 123.3 124.3 123.1 126.2 141.9 141.9 167.3 494.2 577.2

E: MOSL Estimates

ONGCCMP: INR275 Buy� We expect ONGC to report adjusted PAT of INR62b (v/s INR59b in

2QFY13 and INR40.2b in 1QFY14). ONGC's subsidy sharing has been ad-hoc at USD56/bbl for FY13. Similar to FY13, we model subsidy sharingat USD56/bbl until there is further clarity. The government has set upa committee to look into the subsidy sharing mechanism and provideclarity over the longer term.

� We estimate EBITDA at INR124b (v/s INR103b in 2QFY13 and INR84b in1QFY14).

� We estimate gross realization at USD111/bbl v/s USD110/bbl in 2QFY13and USD103/bbl in 1QFY14, and net realization at USD47.7/bbl v/sUSD46.8/bbl in 2QFY13 and USD40.2/bbl in 1QFY14.

� Subsidy sharing assumption: For FY14/15, we model upstream sharingat INR700/650b, and ONGC's share at 82.5% of upstream. We expectONGC to share INR141.9b in 2QFY14.

� Our Brent price assumption is USD108.5/105/100/bbl for FY14/15/long-term. We model upstream sharing at INR700b/650b in FY14/15. Thestock trades at 7.5x FY15E consolidated EPS of INR36.7. Maintain Buy.

Key issues to watch out� (a) subsidy sharing,� (b) DD&A charges, and� (c) Oil & Gas production volumes.

Financials & Valuation (INR b)Y/E March 2012 2013 2014E 2015E Sales 1,464 1,614 1,812 1,976

EBITDA 577.7 539.6 583.7 702.8

Adj. PAT 263.1 239.9 248.9 317.4

Adj. EPS (INR) 30.4 28.3 28.9 36.7

EPS Gr. (%) 23.3 (8.8) 3.7 27.5

BV/Sh.(INR) 159 177 194 217

RoE (%) 20.7 16.8 15.6 17.8

RoCE (%) 19.4 15.6 14.8 16.9

Payout (%) 32.8 39.2 39.3 38.3

Valuations

P/E (x) 9.0 9.7 9.5 7.5

P/BV (x) 1.7 1.6 1.4 1.3

EV/EBITDA (x) 3.6 3.8 3.5 2.8

Div. Yield (%) 3.5 3.5 3.5 4.4

Bloomberg ONGC IN


M. Cap. (INR b)/(USD b) 2,348 / 38


1,6,12 Rel Perf. (%) -4 / -17 / -7

C–140October 2013




Net Sales 70,304 75,484 84,228 84,656 84,442 104,000 109,348 113,191 314,672 410,982

Change (%) 52.1 40.6 33.1 32.8 20.1 37.8 29.8 33.7 38.6 30.6

EBITDA 4,571 5,182 5,289 4,344 3,978 3,894 4,079 4,251 19,385 16,202

% of Net Sales 6.5 6.9 6.3 5.1 4.7 3.7 3.7 3.8 6.2 3.9

Change (%) 4.3 15.6 4.1 18.8 -13.0 -24.9 -22.9 -2.1 10.1 -16.4

Depreciation 459 467 472 468 467 742 1,016 1,018 1,866 3,243

Interest 329 317 291 247 240 432 621 627 1,184 1,920

Other Income 266 248 149 203 152 225 230 231 865 839

PBT 4,048 4,646 4,675 3,831 3,423 2,945 2,672 2,838 17,200 11,878

Tax 1,340 1,500 1,490 1,380 1,170 957 868 922 5,710 3,918

Rate (%) 33.1 32.3 31.9 36.0 34.2 32.5 32.5 32.5 33.2 33.0

PAT 2,708 3,146 3,185 2,451 2,253 1,988 1,804 1,916 11,490 7,960

Change (%) 5.5 20.8 7.8 0.0 -16.8 -36.8 -43.4 -21.8 8.7 -30.7

EPS (INR) 3.6 4.2 4.2 3.3 3.0 2.7 2.4 2.6 15.3 10.6

Dahej Gas Volume (TBTU) 127.2 135.0 140.6 122.0 129.5 130.8 135.8 136.8 524.8 533.0

Dahej Gas Volumes (mmt) 2.5 2.7 2.8 2.4 2.6 2.6 2.7 2.7 10.4 10.6

Kochi Gas Volumes (mmt)

Avg. Dahej Regas (INR/mmbtu) 44.9 49.1 47.6 45.3 41.8 40.8 41.2 43.3 46.7 41.8

E: MOSL Estimates

Petronet LNGCMP: INR123 Buy� We expect PLNG to report PAT of INR2b (down 37% YoY and 12% QoQ)

for 2QFY14. We estimate EBITDA at INR3.9b (down 25% YoY and 2%QoQ).

� We have built in LNG volumes at 2.6mmt in 2QFY14, flat QoQ. Wemodel 10.6mmtpa volumes in FY14 at Dahej, of which 7.5mmtpa wouldbe on long-term contract and 3.1mmtpa on short-term. We model in0.2mmt volumes from Kochi in FY14.

� We model 5% escalation in re-gasification tariff till FY15 and flatthereafter at Dahej.

� The stock trades at 9.5x FY15E consolidated EPS of INR12.9. Lower spotLNG prices and sale of ADB's stake are key near-term positives for thestock. Buy.

Key issues to watch out� (a) interest and depreciation charges for Kochi terminal,� (b) Spot volumes, and� (c) Marketing margin on spot volumes.


EBITDA 18.7 18.4 16.2 20.7

Adj. PAT 11.0 11.5 8.0 9.7

Adj. EPS (INR) 14.6 15.3 10.6 12.9

EPS Gr. (%) 76.8 4.9 -30.7 21.7

BV/Sh.(INR) 47 59 68 78

RoE (%) 35.3 28.8 16.7 17.7

RoCE (%) 27.2 24.1 17.5 19.7

Payout (%) 20.7 19.1 21.1 19.9

Valuations

P/E (x) 8.4 8.0 11.6 9.5

P/BV (x) 2.6 2.1 1.8 1.6

EV/EBITDA (x) 6.2 6.0 6.8 5.9

Div. Yield (%) 2.0 2.0 1.6 1.8

Bloomberg PLNG IN




1,6,12 Rel Perf. (%) -11 / -14 / -28

C–141October 2013


Quarterly Performance (Standalone) (INR Billion)Y/E March FY13 FY14 FY13 FY14E

1Q 2Q 3Q 4Q 1Q 2QE 3QE 4QENet Sales 918.8 903.4 938.9 842.0 876.5 1,014.6 1,020.1 1,095.7 3,602.9 4,006.8

Change (%) 13.4 15.0 10.3 -1.2 -4.6 12.3 8.7 30.1 9.2 11.2EBITDA 67.5 77.1 83.7 78.3 70.8 74.2 79.5 81.6 307.9 306.0

% of Net Sales 7.3 8.5 8.9 9.3 8.1 7.3 7.8 7.4 8.5 30.6Change (%) -32.0 -21.7 14.9 19.2 4.9 -3.7 -5.0 4.3 -8.4 -0.6

Depreciation 24.3 22.8 24.6 22.4 21.4 21.4 23.6 24.8 94.7 91.2Interest 7.8 7.4 8.1 7.1 8.1 8.1 8.2 8.4 30.4 32.9Other Income 19.0 21.1 17.4 22.4 25.4 22.1 22.1 21.7 80.0 91.3PBT 54.3 68.0 68.5 71.2 66.6 66.7 69.8 70.0 262.8 273.2Tax 9.6 14.3 13.5 15.3 13.1 13.3 15.0 15.4 52.8 56.9

Rate (%) 17.7 21.0 19.7 21.5 19.7 20.0 21.5 22.0 20.1 20.8PAT 44.7 53.8 55.0 55.9 53.5 53.4 54.8 54.6 210.0 216.3

Change (%) -21.0 -5.7 23.9 31.9 19.7 -0.7 -0.4 -2.3 4.8 3.0Adj. EPS (INR) 15.3 18.4 18.8 19.1 18.3 18.3 18.8 18.7 71.6 74.0Key Assumptions (USD/bbl)Fx Rate (INR/USD) 54.2 55.5 54.2 54.2 56.0 62.5 62.0 61.9 54.5 60.6Brent Price (USD/bbl) 109 110 110 114 103 111 110 110 111 109RIL GRM 7.6 9.5 9.6 10.1 8.4 7.8 8.8 9.0 9.2 8.5Singapore GRM 6.7 9.1 6.5 8.7 6.6 5.5 6.9 7.0 7.8 6.5Premium/(disc) to Singapore 0.9 0.4 3.1 1.4 1.8 2.3 1.9 2.0 1.4 2.0KG-D6 Gas Prodn (mmscmd) 33.0 28.5 24.0 19.2 14.8 13.5 12.5 12.0 26.2 13.2Segmental EBIT Breakup (INRb)Refining 21.5 35.4 36.2 35.2 29.5 29.0 35.8 35.7 128.3 130.0Petrochemicals 17.6 17.4 19.4 19.0 18.9 23.0 22.0 23.0 73.3 86.9E&P 9.7 8.7 5.9 4.6 3.5 4.2 4.0 3.6 28.9 15.3Others 0.0 0.1 0.8 0.5 0.8 0.1 0.1 0.3 1.3 1.3Total 48.8 61.6 62.2 59.2 52.8 56.3 61.9 62.5 230.5 232.1E: MOSL Estimates; EPS adjusted for treasury shares

Reliance IndustriesCMP: INR840 Neutral� We expect RIL to report GRM of USD7.8/bbl in 2QFY14 v/s USD8.4/bbl

in 1QFY14. Singapore GRM decreased 15% QoQ due to weak gasolineand fuel oil cracks. We also expect some recovery in petchem profits.

� We expect average 2QFY14 KG-D6 volume of 13.5mmscmd v/s14.8mmscmd in 1QFY14.

� We expect RIL to report PAT of INR53.4b (v/s INR53.8b in 2QFY13 andINR53.5b in 1QFY14).

� RIL trades at 11.5x FY15E adjusted EPS of INR80.6. RIL's new refining/petchem projects are likely to add to earnings from end-FY16/FY17,but medium-term outlook on core business remains weak, with RoEreaching sub-12%. Maintain Neutral.

Key issues to watch out� (a) GRM,� (b) Petchem margin, and� (c) KG-D6 production.


EBITDA 336.2 307.9 306.0 338.8

Adj. PAT 200.4 210.0 216.3 236.1

Adj. EPS (INR) 67.7 71.9 74.0 80.6

EPS Gr. (%) (1.2) 4.8 3.0 9.1

BV/Sh.(INR) 561 616 679 746

RoE (%) 13.0 12.3 11.5 11.4

RoCE (%) 12.1 11.6 11.0 11.0

Payout (%) 14.7 14.6 16.5 16.4

Valuations

P/E (x) 13.7 12.9 12.5 11.5

P/BV (x) 1.5 1.4 1.2 1.1

EV/EBITDA (x) 8.1 8.5 8.9 8.0

Div. Yield (%) 1.0 1.1 1.1 1.2

Bloomberg RIL IN


M. Cap. (INR b)/(USD b) 2,714 / 44


1,6,12 Rel Perf. (%) -5 / 4 / -5

C–142October 2013

September 2013 Results Preview | Sector: Real Estate



27.09.13 % YoY % QoQ % YoY % QoQ % YoY % QoQAnant Raj Inds 42 Buy 1,009 -26.5 26.1 424 -40.9 45.6 296 -41.1 52.4DLF 132 Buy 20,537 0.7 -11.3 7,722 3.5 -15.7 1,362 -1.7 -24.8Jaypee Infratech 16 Buy 9,590 36.1 24.7 4,446 24.0 32.6 1,656 -8.5 104.4Mahindra Lifespace 406 Buy 868 3.6 29.6 139 -7.7 49.2 235 -25.1 49.3Oberoi Realty 166 Buy 1,980 -23.2 -9.3 1,150 -23.1 -13.9 986 -20.7 -3.1Phoenix Mills 237 Buy 746 12.2 6.8 492 12.3 3.7 362 9.7 -13.4Prestige Estates 123 Buy 4,419 83.0 -11.3 1,193 64.6 -7.4 739 61.8 -14.7Unitech 16 Buy 6,230 15.4 8.8 885 8.1 17.6 711 0.7 13.1Sector Aggregate 45,378 11.5 -1.1 16,450 6.9 -1.7 6,349 -5.9 7.5

2QFY14 witnessed severe sectoral underperformance� BSE Realty index underperformed the broader index by ~22% in 2QFY14. As

uncertainties over macro and politico-economical outlook galore, the relativelyweaker dynamics of real estate sector garnered a hawkish reaction frominvestors, apprehensive on liquidity stress.

� Near-to-medium term risk continues to remain beyond comfort zone due toweakening demand, high inventory, stressed balance sheets and risk of defaults.

� Core operational strengths are improving due to rising discipline and conservativestrategies of managements. But the recovery has been slow due to weakness infundamental support.

Concerns to persist in near term� Price appreciations in recent past aid the risk of potential 10-20% contraction in

realizations. If it is in tandem with a decline in volumes as well, it could hurt themonetization plan of developers meaningfully and weaken the cash flow.

� Despite strategic discipline adopted by most developers, the improvement inoperational cash flow, liquidity and P&L would be slow and gradual over thecurrent base due to broader challenges.

� In a contracting demand scenario, (a) product proposition, (b) targeting rightcustomer segment, (c) brand and (d) attractive pricing would play a crucial roleto grab demand market share.

� Price correction is essential in select metros to boost demand, as rate-sensitivetheory is weak in the near term. Even if a rate cut happens, bearing of the sameover buyers' affordability is much less than the impact of price correction.

Prefer companies poised in favorable operating cycle� We prefer companies which have reasonably cleared their older inventories

and are riding on new and strong operating cycles, led by fresh launches, robustpre-sales and favorable market outlook.

� With downside risk to realizations and volumes hereon, cash flow certainty lieswith players with strong FY12-13 pre-sales and reasonably strong balance sheetto carry forward execution.

Sandipan Pal ([email protected])

Real EstateCompanies Covered

Anant Raj Industries

DLF

Jaypee Infratech

Mahindra Lifespaces

Oberoi Realty

Phoenix Mills

Prestige Estate Projects

Unitech

C–143October 2013


� While asset valuations (discount to NAV) are cheap for almost all, the relativestrengths in earnings visibility render comforts to select companies.

� We prefer Prestige, IBREL, DLF and Sobha.

Physical markets to witness seasonal weakness� 2QFY14 witnessed typical sequential weakness due to monsoon and non-preferred

buying season. New launches have been low across most developers after a strong1HCY13. Old inventory would be key drivers to pre-sales in the quarter.

� Southern markets (Bangalore and Chennai) are likely to post sequential declinein pre-sales, but maintain strengths YoY. Key launches include Sobha's premiumprojects in Yamlur, Bangalore (Palladian; INR8,500/sf), and Calicut (Bella Encosta;INR7,200/sf), and PEPL's launches of super premium villas Silver Spring, Chennai(@INR9,800/sf, ticket size of INR60m) and Royal Garden Phase II, Bangalore(1.69msf, @INR4,200/sf).

� Gurgaon witnessed limited fresh launches with DLF, Unitech, Anantraj etc notoffering new projects. Last major launches were Tata Housing's launch in DwarkaExpressway (@INR11/sf), DLF Crest (@INR15/sf) in Phase V. Upcoming launches ofIBREL, GPL, MLIFE are key to watch out.

� In Mumbai, approvals and launches have picked up, including some success inrecent launches (mostly in 1QFY14) like IBREL's Sky Forest, Sky, Lodha's Blue Moon(Central Mumbai), L&T's in Powai, Kalapataru's in Goregaon, Shaporji's in Kandivali,which have garnered a decent response with better pricing and/or subventionscheme (10-20% discount to market). Increasingly, projects are offering discounts,rent-free periods, 20:80 schemes (EMI waiver during construction period) etc.

Key expectations� In 2QFY14 Real estate universe is expected to post a revenue growth of 11.5% YoY

(down 1.1% QoQ), EBITDA growth of 6.9% YoY (down 1.7% QoQ) and PAT degrowthof 5.9% YoY (+7.5% QoQ). We expect the Operating cash flow (OCF) and FCFE toimprove YoY for across most developers.

Key issues to watch out� Status of planned launches and approvals (crucial for Oberoi, UT, MLIFE, PHNX,

Godrej etc).� Demand and pricing stability in hitherto performing markets (Bangalore, Chennai,

Pune).� 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).� New acquisitions and visibility on the same (Oberoi, MILFE, Godrej).� Cash flow and trend in leverage (DLF, PHNX, Godrej).� Project completion (JPIN,HDIL etc).



60

75

90

105

Jun-

13

Jul-

13

Aug

-13

Sep-

13

Sensex IndexMOSL Real Estate Index

406080

100120

Sep-

12

Dec

-12

Mar

-13

Jun-

13

Sep-

13

Sensex IndexMOSL Real Estate Index

C–144October 2013


Quaterly sales trends (INR b)Presales (INR b) FY12 FY13 FY14

1Q 2Q 3Q 4Q FY12 1Q 2Q 3Q 4Q FY13 1Q

NCR Centric developers

DLF 11.1 6.3 11.1 24.3 52.8 6.0 6.3 12.5 13.4 38.2 24.3

Unitech 10.2 10.7 9.4 7.8 38.1 7.0 8.4 6.8 5.9 28.1 4.5

Anantraj 1.0 1.6 0.9 3.6 7.0 1.6 0.7 0.5 0.4 3.2 1.2

JPIN 5.7 5.8 16.4 11.0 38.9 9.3 13.4 4.0 5.7 32.4 4.0

Mumbai Centric developers

IBREL 3.8 4.9 4.5 6.3 19.5 6.0 6.1 12.0 5.9 30.0 15.9

HDIL 1.9 7.7 0.6 0.5 10.6 1.0 1.0 NA NA NA 2.5

ORL 2.6 2.3 1.8 2.8 9.5 2.1 2.2 2.2 2.2 8.7 0.9

Bangalore Centric developers

Sobha 3.0 4.9 4.5 5.0 17.4 4.8 5.3 5.3 6.8 22.2 6.0

PEPL 2.1 7.8 4.7 6.0 20.6 10.0 8.2 7.5 5.4 31.1 10.2

Purva 1.4 1.2 1.6 2.9 7.0 3.4 2.4 3.7 7.0 16.5 2.6

Diversified

MAHLIFE 1.7 0.8 3.0 0.6 6.0 0.5 0.9 1.5 1.5 4.4 0.7

GPL 2.3 2.2 2.0 6.4 12.8 4.4 7.0 4.0 4.9 20.3 4.2


Bank loans to developers stood at INR1.27t as in Mar-13 Home loans disbursement trend

Source: RBI, MOSL

Top 6 cities launches and sales trend (msf) Sales value (INR b) till June-13: New launches improve QoQ,but absorption velocity and average realization were stable QoQ. Hyderabad, Bangalore, Pune bestplaced in terms of inventory months

Source: Liases Foras/MOSL

Top 6 cities launch and presales trend (msf) Status of unsold stock (months)

0200400600800

1,0001,2001,400

Sep-05

Mar-06

Sep-06

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

-10

-5

0

5

10

15

20Loan (INR b) Growth (%)

4535

23 2114

29

Mum

bai

NCR

Ban

galo

re

Pune

Hyd

erab

ad

Chen

nai

104

74

103

7091 91

7284

97

53

98

127

83

116

69 77 75 63 69 60 5571 81 68 81 70 73 71

1QCY

102Q

CY10

3QCY

104Q

CY10

1QCY

112Q

CY11

3QCY

114Q

CY11

1QCY

122Q

CY12

3QCY

124Q

CY12

1QCY

132Q

CY13

La unch (ms f)Sa les (ms f)

232

227

248

250

227

243

217

225 29

4 335

297 35

527

0 349

338

221

150

200

250

300

350

400

3QCY

094Q

CY09

1QCY

102Q

CY10

3QCY

104Q

CY10

1QCY

112Q

CY11

3QCY

114Q

CY11

1QCY

122Q

CY12

3QCY

124Q

CY12

1QCY

132Q

CY13

2,500

3,000

3,500

4,000

4,500

5,000

Sa les value (INR b)Rea l i zations (INR/s f)

Disburs ement (INR b)

69 102

102 13

692 13

211

9 163

119 18

415

8 231

155 24

319

7 272

181 28

023

1 310

231 33

520

138

026

8

1Q20

082Q

2008

3Q20

084Q

2008

1Q20

092Q

2009

3Q20

094Q

2009

1Q20

102Q

2010

3Q20

104Q

2010

1Q20

112Q

2011

3Q20

114Q

2011

1Q20

122Q

2012

3Q20

124Q

2012

1Q20

132Q

2013

3Q20

134Q

2013

1Q20

14

C–145October 2013


New launches trend (msf) Sales trend Pricing trend

Mumbai: Approvals gain traction, new launches rise steadily; launches at discounted prices and favorablepayment scheme garnered good response; average realizations have seen time correction; absorptionvelocity has been reviving from a low base; inventory high but stable QoQ

NCR: Sales remain steady hitherto on the back of good number of recent launches in past 6-9 months;moderation in velocity and pricing visible in Dwarka Expressway projects; price rise in recent timesposes some risks going forward; Noida inventory high but stable QoQ

Bangalore: Outperformance prevails; inventory and prices rose but still manageable; sales velocity revivedin 2Q post a decline in the past couple of quarters (partly due to lower launches)

Source: Liases Foras/MOSL

Launch volume trend (msf) Sales performance trend Pricing trend

Launch volume trend (msf) Sales performance trend Pricing trend

1216

1227

16 1611 12

917

1114

1815 16

21

3QCY

094Q

CY09

1QCY

102Q

CY10

3QCY

104Q

CY10

1QCY

112Q

CY11

3QCY

114Q

CY11

1QCY

122Q

CY12

3QCY

124Q

CY12

1QCY

132Q

CY13

181312131211 9 8 9 8 9 1010 1010 9

8794

51

83

72

85

53

6750

57

79

80

71

62

64

93

3QCY

094Q

CY09

1QCY

102Q

CY10

3QCY

104Q

CY10

1QCY

112Q

CY11

3QCY

114Q

CY11

1QCY

122Q

CY12

3QCY

124Q

CY12

1QCY

132Q

CY13

Sa les vo lume (ms f)Sa les va lue (INR b)

2,0004,0006,0008,000

10,00012,00014,000

3QCY

094Q

CY09

1QCY

102Q

CY10

3QCY

104Q

CY10

1QCY

112Q

CY11

3QCY

114Q

CY11

1QCY

122Q

CY12

3QCY

124Q

CY12

1QCY

132Q

CY13

Avg. Quoted prices (INR/sf)Avg. sale s p rice s (INR/s f)

1119

5926

4930

50 4819

34 3217

40 4026

37

3QCY

094Q

CY09

1QCY

102Q

CY10

3QCY

104Q

CY10

1QCY

112Q

CY11

3QCY

114Q

CY11

1QCY

122Q

CY12

3QCY

124Q

CY12

1QCY

132Q

CY13

19232723262027221823312126202522

7091

6679

59

896962

93

124

82

112 10384

113

68

3QCY

094Q

CY09

1QCY

102Q

CY10

3QCY

104Q

CY10

1QCY

112Q

CY11

3QCY

114Q

CY11

1QCY

122Q

CY12

3QCY

124Q

CY12

1QCY

132Q

CY13

Sales vo lume (ms f)Sales va lue (INR b)

1,500

2,500

3,500

4,500

5,5003Q

CY09

4QCY

091Q

CY10

2QCY

103Q

CY10

4QCY

101Q

CY11

2QCY

113Q

CY11

4QCY

111Q

CY12

2QCY

123Q

CY12

4QCY

121Q

CY13

2QCY

13

Avg Quote d prices (INR/sf)Avg. s ales prices (INR/sf)

6834 30 30

2318 16 20 22 22

3018 17

12 9 13 1723

1QCY

092Q

CY09

3QCY

094Q

CY09

1QCY

102Q

CY10

3QCY

104Q

CY10

1QCY

112Q

CY11

3QCY

114Q

CY11

1QCY

122Q

CY12

3QCY

124Q

CY12

1QCY

132Q

CY13

8 8 8 1110 7 9 7 9 141116161210134

27

1223

303536

2333

2335

54

43

50

63

67

39

54

2QCY

093Q

CY09

4QCY

091Q

CY10

2QCY

103Q

CY10

4QCY

101Q

CY11

2QCY

113Q

CY11

4QCY

111Q

CY12

2QCY

123Q

CY12

4QCY

121Q

CY13

2QCY

13

Sales volume (msf)Sales value (INR b)

2,000

2,800

3,600

4,400

5,200

1QCY

09

3QCY

091Q

CY10

3QCY

101Q

CY11

3QCY

111Q

CY12

3QCY

12

1QCY

13

In ven tory ask prices (INR/sf)Sold p rice s (INR/sf)

C–146October 2013



27.09.13 FY13 FY14E FY15E FY13 FY14E FY15E FY13 FY14E FY15E FY13 FY14E FY15EReal EstateAnant Raj Inds 42 Buy 3.6 4.7 5.5 11.6 8.9 7.6 16.2 11.4 9.9 2.7 3.5 4.0DLF 132 Buy 4.2 4.5 6.5 31.4 29.2 20.2 17.7 13.1 11.6 2.6 2.8 3.9Godrej Properties 346 Neutral 17.7 21.4 32.8 19.5 16.2 10.6 14.7 14.3 9.6 9.6 11.2 15.3HDIL 37 UR 1.7 6.8 8.9 21.3 5.5 4.2 8.0 9.8 7.7 0.7 2.7 3.4Indiabulls Real Est. 55 Buy 4.1 6.9 13.8 13.3 7.9 4.0 7.5 6.4 4.0 2.5 4.4 7.9Jaypee Infratech 16 Buy 5.0 6.3 6.2 3.2 2.5 2.6 6.8 4.6 4.6 11.6 13.4 11.8Mahindra Lifespace 406 Buy 34.6 31.6 41.3 11.7 12.8 9.8 10.2 13.0 10.7 10.9 9.2 10.8Oberoi Realty 166 Buy 15.4 16.8 22.0 10.8 9.9 7.6 7.2 6.1 4.2 12.8 12.5 14.6Phoenix Mills 237 Buy 5.8 7.0 13.5 40.8 33.8 17.6 21.1 12.3 9.4 4.8 5.5 9.9Prestige Estates 123 Buy 8.2 10.2 13.3 15.0 12.0 9.2 11.0 8.8 6.7 10.4 11.7 13.4Unitech 16 Buy 0.8 1.2 1.5 20.3 13.0 10.9 29.8 23.3 18.9 1.8 2.8 3.3Sector Aggregate 14.7 13.0 9.9 13.1 10.3 8.6 4.2 4.5 5.6UR: Under Review

Overall leasing run-rate continues to weaken, with cautious sentiment, barring better resilience in Bangalore market.Overall vacancy level improved; absorption outpaces supply. Bangalore remains the better among bigger markets.

3QFY11 4QFY11 1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13

Supply (msf)

NCR 1.6 2.0 1.0 0.7 1.7 1.1 1.3 0.8

Mumbai 2.4 1.0 2.7 0.5 2.7 1.6 1.5 1.0

Bangalore 1.6 0.8 1.7 0.7 2.3 0.7 0.7 0.6

Chennai 0.8 - 0.3 0.6 0.6 1.2 1.5 -

Pune 0.6 0.6 0.3 0.2 0.6 0.5 1.0 1.0

Hyderabad - - - 0.3 1.0 0.1 0.1 0.8

Kolkata - 0.3 - 0.2 0.2 0.5 0.2 0.3

India 7.0 4.7 6.0 3.1 9.1 5.7 6.3 4.5

Absorption (msf)

NCR 1.0 1.6 0.9 1.7 1.2 1.1 0.7 1.2

Mumbai 1.0 1.2 1.1 0.4 0.9 1.2 1.3 1.0

Bangalore 2.4 3.0 3.6 1.8 3.0 1.6 1.0 4.2

Chennai 0.6 1.2 0.7 0.7 0.8 1.4 0.9 0.9

Pune 0.4 0.5 0.5 0.3 0.4 0.4 0.3 0.4

Hyderabad 0.6 0.4 0.5 0.5 0.8 0.9 0.5 0.3

Kolkata 1.4 0.5 0.2 0.5 0.5 0.3 0.1 0.2

India 7.4 8.4 7.5 5.9 7.6 6.8 4.9 8.2

Vacancy (%)

NCR 32 31 31 30 30 31 32 31

Mumbai 24 23 23 23 23 22 22 22

Bangalore 18 16 15 14 13 14 13 13

Chennai 27 25 24 24 23 20 22 20

Pune 28 26 26 25 25 25 24 22

Hyderabad 10 11 10 10 10 8 11 11

Kolkata 21 19 18 15 14 17 18 18

India 24 22 22 22 21 20 21 20

Source: DTZ

C–147October 2013




Total Sales 989 1,373 1,818 1,406 800 1,009 1,569 2,434 5,586 5,813

Change (%) 18.0 50.5 97.3 212.9 -19.1 -26.5 -13.7 73.1 79.3 4.1

Total Expenditure 488 656 1,058 1,778 509 585 1,052 1,614 3,981 3,760

EBITDA 501 717 760 -372 291 424 518 820 1,605 2,053

Change (%) 1.5 40.8 55.0 -286.8 -41.8 -41 -31.8 -320.4 -5.5 27.9

As of % Sales 51 52 42 -26 36 42 33 34 29 35

Depreciation 32 33 34 41 35 37 41 42 140 155

Interest 37 41 41 38 33 35 37 39 157 144

Other Income 44 41 42 39 41 45 50 44 166 179

PBT 475 683 727 -412 265 397 490 783 1,473 1,933

Tax 110 185 178 -64 63 101 127 211 409 503

Effective Tax Rate (%) 23 27 26 16 24 26 26 27 27.8 26.0

PAT before MI 354 499 549 -348 201 296 363 572 1,060 1,430

Change (%) 1.0 37.5 61.7 -403.8 -43.2 -40.7 -34.0 -264.4 -10.5 34.9

Reported PAT 355 502 548 -362 194 296 358 567 1,060 1,390

Change (%) 1.2 44.6 74.1 -396.6 -45.3 -41.1 -34.8 -256.6 -6.6 31.1

E MOSL Estimates

Anant Raj IndustriesCMP: INR42 Buy


EBITDA 1.7 1.6 2.1 2.4

Adj PAT 1.1 1.1 1.4 1.6

Adj EPS (INR) 3.8 3.6 4.7 5.5

EPS Growth (%) -32.5 -6.6 31.1 16.2

BV/Share (INR) 129.9 132.8 137.0 142.0

RoE (%) 3.1 2.7 3.5 4.0

RoCE (%) 3.6 3.1 3.8 4.4

Payout (%) 11.7 0.0 9.7 8.3

Valuations

P/E (x) 10.9 11.6 8.9 7.6

P/BV (x) 0.3 0.3 0.3 0.3

EV/EBITDA (x) 13.4 16.2 11.9 9.9

Div. Yield (%) 1.0 0.0 1.0 1.0

Bloomberg ARCP IN


M. Cap. (INR b)/(USD b) 12 / 0.2


1,6,12 Rel Perf. (%) -14 / -38 / -44

� 2QFY14 P&L to improve QoQ due to INR0.5b of land divestment inJune 2013, which is likely to contribute ~INR0.35b to EBITDA. However,cost escalations in key ongoing projects are likely to dent margins.Overall, we estimate 6pp QoQ uptick in EBITDA margin.

� EBITDA to de-grow -41% YoY to INR424m. Revenue is estimated atINR1b (-27% YoY), while PAT to decline 41% YoY to INR296m.

� Revenue from POCM projects and rentals to remain flat QoQ. Higheroperating time in Hotel Retreat (for the full quarter post renovation)may lead to moderate incremental revenue growth to INR184m YoY(INR11m QoQ). New leasing continues to be muted in Manesar andRai IT Park.

� Pre-sales momentum would remain dependent on Golf Course Roadprojects (across plots, villas and row houses), while QoQ pre-sales inNeemrana (140 unit) and Sector 91 project (16 unit) have beencomparatively better. ARCP plans to launch the Golf Course grouphousing project (2.6msf) during Diwali, which could accelerate pre-sales momentum.

� Core operations have been subdued, with disappointment in cashflow trends and rental assets. The stock trades at 7.6x FY15E EPS ofINR5.5 and 0.3x FY15E BV. Maintain Buy with a target price of INR60.

Key issues to watch for� Cash collections were disappointing so far. Any improvement would

be a key factor as the company is also acquiring new land.� Sales velocity in Golf Course Road project.� Any positive surprises on Bhagwandas and Hauz Khas monetization.

C–148October 2013




Sales 21,977 20,395 13,100 22,256 23,141 20,537 22,769 22,844 77,728 89,290

Change (%) (10.1) -19.5 -35.6 -15.0 5.3 0.7 73.8 2.6 -19.3 14.9


EBITDA 10,670 7,464 870 7,258 9,156 7,722 8,538 8,457 26,262 33,873

Change (%) -4.0 -36.4 -89.4 -9.0 -14.2 3.5 881.2 16.5 -32.7 29.0

As % of Sales 48.6 36.6 6.6 32.6 39.6 37.6 37.5 37.0 33.8 37.9

Depreciation 1,786 1,837 2,479 1,861 1,782 1,786 1,801 1,834 7,962 7,202

Interest 6,226 5,224 5,809 5,882 5,914 5,624 5,294 5,225 23,140 22,056

Other Income 1,311 1,173 9,812 932 1,391 1,345 1,399 1,245 13,229 5,380

PBT 3,970 1,575 2,395 118 2,909 1,656 2,843 2,644 8,059 9,993

Tax 1,137 394 -84 -196 913 414 711 661 1,251 2,698

Effective Tax Rate (%) 29 25.0 -3.5 -165.5 31.4 25 25.0 25.0 15.5 27.0

Reported PAT 2,928 1,385 2,848 -42 1,812 1,362 2,282 2,287 7,119 8,022

Adj. PAT 2,928 1,385 2,848 -42 1,812 1,362 2,282 2,287 7,119 8,022

Change (%) (18.3) (62.8) 10.2 (102.0) (38.1) (1.7) (19.9) LTP (40.7) 12.7

E: MOSL Estimates

DLFCMP: INR132 Buy


EBITDA 39.0 26.3 33.9 36.9

Adj PAT 11.8 7.1 8.0 11.6

EPS (INR) 7.1 4.2 4.5 6.5

EPS Gr. (%) -26.8 -40.8 7.6 44.7

BV/Sh. (INR) 150.9 152.9 158.5 154.9

RoE (%) 4.5 2.6 2.8 3.9

RoCE (%) 7.4 6.0 6.1 6.6

Payout (%) 33.1 55.8 51.9 35.9

Valuations

P/E (x) 18.6 31.4 29.2 20.2

P/BV (x) 0.9 0.9 0.8 0.9

EV/EBITDA (x) 11.5 16.8 12.4 11.3

Div. Yield (%) 1.5 1.5 1.5 1.5

� DLF's 2QFY14E revenue is estimated at INR20.5b (flat YoY), EBITDA atINR7.7b (+3.5% YoY) and PAT at INR1.36b (-2% YoY). EBITDA margin isestimated at 37.5% (-2pp QoQ).

� Launch of Camellia had resulted in strong revenue booking and marginexpansion in 1QFY14. Hence, we expect relatively lower incrementalpre-sales and execution in Camellia would lead to weaker revenuebooking and margin contraction in 2QFY14E.

� DLF had assumed INR0.77b of profit in 1QFY14 which pertains to oneof the wind mills transactions. Thus, 2Q EBITDA margin could getimpacted due to provisioning of remaining divestments.

� Post strong pre-sales in super luxury projects in 1QFY14, DLF is expectedto witness a decline in run-rate in 2Q (~INR7.5b), due to the absenceof new launches and lower pre-sales velocity in recent launches.

� Expect cash flow situation to improve QoQ, with receipt of balanceINR5.25b from wind mills' divestments, along with improvement incollections from super luxury projects. However, core FCFE wouldcontinue to remain negative.

� DLF trades at 20.2x FY15E EPS, 0.9x FY15E BV and ~50% discount to ourNAV estimate of INR270. Maintain Buy with a target price of INR230.

Key issues to watch for� Pre-sales and launch momentum; execution in line with

management's guidance.� Clarity on Aman Resort and other planned divestments.� Trend in FCFE and leverage, where management has guided for a

strong improvement in 2HFY14.

Bloomberg DLFU IN


M. Cap. (INR b)/(USD b) 235 / 4


1,6,12 Rel Perf. (%) -9 / -49 / -50

C–149October 2013



1Q 2Q 3Q 4Q 1Q 2QE 3QE 4QE Cons. Cons.

Sales 6,783 7,047 9,331 9,582 7,692 9,590 15,252 8,342 32,743 40,876

Change (%) 9.9 -1.5 3.4 4.1 13.4 36.1 63.4 -12.9 3.8 24.8


EBITDA 2,721 3,584 4,224 4,238 3,352 4,446 8,866 3,564 14,767 20,228

Change (%) -8.5 -8.9 -15.0 -2.7 23.2 24.0 109.9 -15.9 -10.5 37.0

As of % Sales 40.1 50.9 45.3 44.2 43.6 46.4 58.1 42.7 45.1 49.5

Depreciation 6 35 54 55 86 100 130 166 149 482

Interest 98 1,323 2,259 2,435 2,315 2,350 2,300 2,235 6,115 9,200

Other Income 8 35 27 109 74 100 125 224 179 523

PBT 2,625 2,262 1,939 1,857 1,025 2,096 6,561 1,387 8,682 11,069

Tax 525 453 388 371 215 440 1,378 292 1,737 2,324


Reported PAT 2,099 1,810 1,551 1,485 810 1,656 5,183 1,095 6,945 8,744

Change (%) -11.7 -41.7 -60.5 -57.5 -61.4 -8.5 234.2 -26.2 -46.2 25.9

Adj PAT 2,099 1,810 1,551 1,485 810 1,656 5,183 1,095 6,945 8,744

Change (%) -11.7 -41.7 -60.5 -57.5 -61.4 -8.5 234.2 -26.2 -46.2 25.9

E: MOSL Estimates

Jaypee InfratechCMP: INR16 Buy� We expect revenue at INR9.6b (+36% YoY), EBITDA at INR4.4b (+24%),

margin at 46.4% (+2.8pp QoQ) and PAT at INR1.7b (-8.5% YoY).� We have assumed INR3.75b of land revenue (from INR15b of

divestment concluded in 1QFY14), and INR335m of expresswayrevenue (v/s INR290m in 1QFY14).

� Pre-sales momentum is expected to remain subdued due to currentdynamics of Noida and Parcel 3. We maintain FY14E pre-sales estimateat INR24b (v/s 1QFY14 pre-sales of INR4b).

� Weakening operations and high leverage level have been keyconcerns. JPIN trades at 2.6x FY15E EPS, 0.3x FY14E BV. Maintain Buy.

Key issues to watch for� 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 16.5 14.8 20.2 19.9

Adj PAT 12.9 6.9 8.7 8.6

Adj EPS (INR) 9.3 5.0 6.3 6.2

EPS Gr. (%) -10.1 -46.2 25.9 -2.0

BV/Sh. (INR) 41.6 44.5 49.6 54.6

RoE (%) 24.5 11.6 13.4 11.8

RoCE (%) 13.8 10.9 13.9 13.1

Payout (%) 12.6 23.4 18.6 19.0

Valuations

P/E (x) 1.7 3.2 2.5 2.6

P/BV (x) 0.4 0.4 0.3 0.3

EV/EBITDA (x) 5.3 6.8 4.6 4.6

Div. Yield (%) 6.3 6.3 6.3 6.3

Bloomberg JPIN IN


M. Cap. (INR b)/(USD b) 22 / 0.4


1,6,12 Rel Perf. (%) -8 / -65 / -77

C–150October 2013




Sales 1,041 838 614 1,022 670 868 885 981 3,515 3,405

Change (%) 27.8 -10.6 -60.1 -27.0 -35.6 3.6 44.2 -3.9 -25.0 -3.1

Total Expenditure 723 688 524 850 577 729 726 825 2,784 2,858

EBITDA 319 151 91 172 93 139 159 156 731 547

As % of Sales 30.6 18.0 14.7 16.8 13.9 16.0 18.0 15.9 20.8 16.1

Change (%) 84.8 -41.7 -80.4 -46.1 -70.8 -7.7 76.1 -9.0 -39.6 -25.1

Depreciation 4 4 4 5 5 7 7 7 18 27

Interest 14 14 19 15 107 116 126 135 62 483

Other Income 134 301 133 140 237 311 234 237 707 1,019

Extra-ordinary 0 0 0 -1 0 0 0 -1 2 2

PBT 434 433 200 292 218 327 261 252 1,359 1,056

Tax 141 119 64 60 60 91 73 71 384 296


Reported PAT 293 314 136 232 158 235 188 181 975 760

Adj. PAT 293 314 136 232 158 235 188 181 975 760

Change (%) 71.5 -0.1 -65.7 -27.7 -46.2 -25.1 38.7 -22.2 -18.9 -22.0

E: MOSL Estimates; *Revenue outside Standalone is largely contributed by Mahindra World City (MWC) Chennai and Jaipur

Mahindra LifespacesCMP: INR406 Buy� Mahindra Lifespaces' (MILFE) 2QFY14E standalone revenue is

estimated to grow 3.6% YoY to ~INR868m. EBITDA is expected todecline 7.7% YoY to INR139m (margin at 16%, v/s 18% YoY and 14%QoQ) and PAT to de-grow 25% YoY to INR235m. We estimate AntheiaPhase I and Ashvita Phase II to commence revenue in 2QFY14E.

� In the absence of new launches, we expect pre-sales to remainsubdued and driven by Nagpur, Hyderabad and Chennai. While launchpipeline, post recent acquisitions, has been strong, it hinges onprogress in approvals. We estimate FY14E pre-sales at INR4.9b (v/sINR4.5b in FY14).

� The stock trades at 14% discount to our one-year forward SOTP valueof INR482/share, 9.8x FY15E EPS and 1.1x FY15E BV. Maintain Buy.

Key issues to watch for� Progress in approvals in recent acquisitions.� Trend in gearing level.� Leasing progress in Jaipur DTA and clarity on possible re-sizing.� Progress of land acquisition in North Chennai SEZ.


EBITDA 1.9 2.4 2.1 2.3

Adj PAT 1.2 1.4 1.3 1.7

Adj EPS (INR) 29.2 34.6 31.6 41.3

EPS Growth (%) 10.1 18.7 -8.8 30.6

BV/Share (INR) 283 317 344 382

RoE (%) 10.3 10.9 9.2 10.8

RoCE (%) 10.9 11.4 9.5 11.6

Payout (%) 22.8 18.4 20.7 15.8

Valuations

P/E (x) 13.9 11.7 12.8 9.8

P/BV (x) 1.4 1.3 1.2 1.1

EV/EBITDA (x) 11.4 10.2 13.0 10.7

Div. Yield (%) 1.2 1.2 1.2 1.2

Bloomberg MLIFE IN


M. Cap. (INR b)/(USD b) 17 / 0.3


1,6,12 Rel Perf. (%) -18 / 2 / 2

C–151October 2013




Total Revenue 1,999 2,577 2,861 3,039 2,184 1,980 2,156 5,659 10,476 11,980

Change (%) 24.2 15.7 52.8 19.3 9.3 -23.2 -24.6 86.2 27.0 14.4

Total Expenditure 860 1,081 1,155 1,260 849 830 906 2,611 4,355 5,196

Adm Exp 67 73 69 48 63 74 74 84 257 295

Construction Exp 697 910 987 1,122 689 646 722 2,403 3,715 4,460

Employee Cost 96 98 99 91 97 110 110 124 383 441

EBITDA 1,139 1,496 1,707 1,779 1,335 1,150 1,251 3,048 6,121 6,783

Change (%) 26.1 29.5 50.5 8.3 17.2 -23.1 -26.7 71.3 26.6 10.8

As of % Sales 57 58 60 59 61 58 58 54 58.4 57

Depreciation 70 71 71 72 69 88 88 108 285 353

Interest 1 1 1 1 1 1 1 1 4 0

Other Income 309 250 219 221 210 291 315 396 999 1,212

PBT 1,376 1,674 1,854 1,927 1,476 1,351 1,477 3,335 6,827 7,638

Tax 368 430 509 475 457 365 414 904 1,783 2,140


Reported PAT 1,008 1,244 1,345 1,452 1,018 986 1,063 2,431 5,045 5,498

Change (%) -4.7 11.6 31.7 1.1 1.0 -20.7 -20.9 67.5 9.1 9.0

E: MOSL Estimates

Oberoi RealtyCMP: INR166 Buy� We expect OBER's 2QFY14E revenue to degrow 23% YoY to INR2b,

EBITDA down 23% YoY to INR1.1b and PAT to de-grow 21% to INR1b,with EBITDA margin of 58%.

� Esquire has received IOD and is expected to witness revival inconstruction followed by revenue recognition by 4QFY14. Till then,Exquisite will continue to remain the key revenue driver, with noinventory left in completed projects at JVLR (Splendor and Grande).

� We expect sales volume to remain subdued in the absence of anymajor contribution of JVLR projects and weakening velocity at Esquire.While IOD at Esquire should improve buyers' sentiment hereon,2QFY14E is likely to remain muted.

Key issues to watch for� Sales momentum in Esquire (Goregaon) and Grande (Andheri).� Visibility on new launches (Mulund/Phase III of Exquisite).� Clarity over Oasis launch.� Leasing visibility in Commerz II.� Visibility on change in usage at JVLR project from commercial to

residential.� Visibility on new project acquisitions.


EBITDA 4.8 6.1 6.8 9.4

Adj PAT 4.6 5.0 5.5 7.2

Adj EPS (INR) 14.1 15.4 16.8 22.0

EPS Growth (%) -10.5 9.1 9.0 31.4

BV/Share (INR) 113.8 126.8 141.2 159.7

RoE (%) 13.1 12.8 12.5 14.6

RoCE (%) 17.1 17.3 17.3 20.5

Payout (%) 16.6 15.2 14.0 15.9

Valuations

P/E (x) 11.8 10.8 9.9 7.6

P/BV (x) 1.5 1.3 1.2 1.0

EV/EBITDA (x) 8.6 7.2 6.1 4.2

Div. Yield (%) 1.2 1.2 1.2 1.8

Bloomberg OBER IN




1,6,12 Rel Perf. (%) -9 / -40 / -44

C–152October 2013




Sales 626 665 693 722 698 746 746 793 4,699 10,970

Change (%) 17.0 23.4 20.1 20.3 11.5 12.2 7.6 9.9 19.1 133.4

EBITDA 394 438 474 479 475 492 500 532 2,632 4,822

Change (%) 19.3 31.4 27.0 31.8 20.4 12.3 5.4 11.1 24.5 83.2

As % of Sales 63 66 68 66 68 66 67 67 56.0 44.0

Depreciation 67 69 69 71 65 69 69 71 474 973

Interest 58 72 70 66 72 68 70 68 1,430 2,872

Other Income 143 156 126 140 215 130 125 130 521 529

PBT 413 454 461 483 553 485 486 522 1,248 1,507

Tax 107 123 120 122 135 123 120 134 428 497

Effective Tax Rate (%) 26 27 26 25 24 27 27 26 34.3 33.0

Adj. PAT 306 330 341 361 418 362 366 389 842 1,015

Change (%) 12.4 38.2 26.9 32.2 36.7 9.7 7.3 7.6 -20.3 20.6

E: MOSL Estimates

Phoenix MillsCMP: INR237 Buy� We expect High Street Phoenix's (HSP) 2QFY14E rentals at INR746m,

(12% YoY), EBITDA at INR492m (margin of 66%) and PAT of INR362m(9.7% YoY). The rental growth is led by a steady rise in revenue sharingcomponent (which stands at ~15%) and higher incremental rentals.We expect 11% CAGR in HSP rentals in FY14E.

� HSP Hotel, post termination of contract with Shangri La, is named asPalladium for the interim period, and is in an advanced stage ofnegotiation with a new hotel operator. The hotel is operating with 228rooms, with the expansion plan stalled briefly.

� Expect pre-sales in Phase II of market development to remainsubdued, with lower inventory under offer and sequential weaknessin markets. Launch of Pune residential is scheduled for pre-Diwali.

� It plans to launch ~4msf of residential projects over next 12 months,including Bangalore East (1msf), Phase II of Bangalore West (2msf),Pune (0.3msf) and last phase of Chennai (0.4msf).

� There has been an acquisition of the balance 3.3% stake from Horizonin Island Star in 2QFY14 (with o/f of ~INR87m).

� The stock trades at a PER of 17.6x FY15E EPS of INR13.5, 1.7x FY15E BVand 16% discount to its one-year forward NAV of INR282. MaintainBuy.

Key issues to watch for� Sales momentum in Phase II projects in Market City.� Progress on ramp-up in recently-commenced malls.� Improvement in operating cash flow, which can lead to de-leveraging.� Progress in proposed stake purchase in Market City projects.


EBITDA 2.1 2.6 4.8 6.1

Adj PAT 1.1 0.8 1.0 2.0

EPS (INR) 7.3 5.8 7.0 13.5

EPS Growth (%) 25.5 -20.3 20.6 92.4

BV/Share (INR) 118.1 122.1 126.8 136.7

RoE (%) 6.2 4.8 5.5 9.9

RoCE (%) 6.1 6.6 9.5 11.6

Payout (%) 32.1 40.3 33.4 26.0

Valuations

P/E (x) 32.5 40.8 33.8 17.6

P/BV (x) 2.0 1.9 1.9 1.7

EV/EBITDA (x) 23.7 21.1 12.3 9.4

Div. Yield (%) 0.8 0.8 0.8 1.3

Bloomberg PHNX IN




1,6,12 Rel Perf. (%) 6 / -16 / 16

C–153October 2013




Total Revenue 2,192 2,414 4,921 5,597 4,983 4,419 4,611 5,200 19,476 24,073

Change (%) -12 88.5 195 177 127 83.0 -6 -7 85.1 23.6


EBITDA 704 725 1,424 1,321 1,289 1,193 1,314 1,622 5,791 7,219

Change (%) 2.1 47.2 184.1 92.5 83.2 64.6 -7.7 22.8 95.2 24.7

As of % Sales 32.1 30.0 28.9 23.6 25.9 27.0 28.5 31.2 30 30

Depreciation 77 83 83 87 80 99 112 139 682 834

Interest 240 191 209 258 257 269 269 281 1,489 1,671

Other Income 272 195 195 278 310 246 252 240 636 676

PBT 659 647 1,328 1,253 1,263 1,072 1,185 1,441 4,256 5,390

Tax 166 190 407 363 396 332 367 442 1,314 1,671


Reported PAT 493 457 920 890 867 739 818 999 2,941 3,719

Change (%) 35.3 73.9 227.9 132.6 75.8 61.8 -11.2 12.2 246.2 24.8

E: MOSL Estimates

Prestige Estate ProjectsCMP: INR123 Buy� We expect P&L to maintain strengths, with INR4.4b of revenue

booking and margins of 27%, translating into EBITDA of INR1.2b (+65%YoY), and PAT of INR739m (+62% YoY).

� We expect key projects to commence and contribute to POCM revenuein 2QFY14E -- Royal Woods and Technopolish. QoQ decline is assumeddue to lower number of fresh projects commencing revenue.

� During 2QFY14, PEPL launched super premium villas Silver Spring,Chennai (@INR9,800/sf, ticket size of INR60m) and Royal Garden PhaseII, Bangalore (1.69msf, @INR4,200/sf). We estimate pre-sales of INR8-9b in 2QFY14E (v/s INR8.2b YoY and INR10.2b QoQ). We estimate FY14E/15E pre-sales at INR36/38b.

� Rentals are expected to increase by INR50-60m QoQ to INR6.3b due tohigher contribution from full quarter operations at Vijaya Mall (onemonth in 1QFY14) and Exora B3. Cessna Block 7 would commencerevenue from October 2013. Vijaya Mall is operating at 68% occupancy,with commencement of Satyam Cinema being awaited.

� The stock trades at 9.2x FY15E EPS, 1.2x FY15E BV and at 39% discountto our NAV estimate of INR202. Maintain Buy with a target price ofINR180.

Key issues to watch for� Outlook of Bangalore residential market and leasing.� Execution progress in ongoing projects, collections and movements

of debtors.� Cash flow dynamics, land acquisition and debt movements.


EBITDA 3.0 5.8 7.2 9.3

Adj PAT 0.8 2.9 3.6 4.7

Adj EPS (INR) 2.4 8.2 10.2 13.3

EPS Growth (%) -51.7 246.2 24.8 30.3

BV/Share (INR) 65.6 78.4 87.1 99.0

RoE (%) 3.8 10.4 11.7 13.4

RoCE (%) 6.6 11.7 12.5 15.1

Payout (%) 55.8 17.2 13.8 10.6

Valuations

P/E (x) 51.9 15.0 12.0 9.2

P/BV (x) 1.9 1.6 1.4 1.2

EV/EBITDA (x) 19.2 11.0 8.8 6.7

Div. Yield (%) 1.0 1.0 1.0 1.0

Bloomberg PEPL IN




1,6,12 Rel Perf. (%) -3 / -29 / -16

C–154October 2013




Sales 4,077 5,398 6,447 8,483 5,726 6,230 6,861 8,627 24,405 27,444

Change (%) -33.8 -13.8 26.8 26.3 40.4 15.4 6.4 1.7 0.8 12.4


EBITDA 547 818 1,107 797 752 885 1,098 1,511 3,270 4,245

Change (%) -54.3 -40.8 7.6 -1,567 37.4 8.1 -0.9 89.5 -0.3 29.8

As of % Sales 13.4 15.2 17.2 9.4 13.1 14.2 16.0 17.5 13.4 15.5

Depreciation 99 98 98 104 112 102 111 118 398 443

Interest 117 87 84 17 57 60 65 80 305 262

Other Income 345 340 346 857 251 283 273 283 1,888 1,090

Prior period adjustment -1 -268 0 269 3 0 0 1 0 0

PBT 677 973 1,272 1,533 834 1,006 1,195 1,596 4,454 4,630

Tax 261 240 415 463 264 342 406 562 1,378 1,574


Reported PAT 373 439 842 304 570 664 788 1,034 2,095 3,056

Change (%) -63.5 -53.3 46.4 -180.4 52.7 51.4 -6.3 240.1 -15.2 45.9

Adjusted PAT 374 707 841 1,070 629 711 840 1,086 3,130 3,262

Change (%) -62.0 -23.6 52.4 4,636 68.2 0.7 -0.1 1.4 31.9 4.2

UnitechCMP: INR16 Buy� We expect only a moderate growth in 2QFY14 P&L as execution

improvement has been subdued. We estimate revenue at INR6.2b(+15% YoY), EBITDA at INR0.9b (+8% YoY) and PAT at INR711m (+0.7%YoY). Margin is estimated at 14.2% (v/s 13.1% in 1QFY14).

� Focus on new launches has been low till date. It is preparing groundsto launch the luxury project Ivy Terraces in sector 70, Gurgaon, whichwould be the first major launch in the city after a long hiatus. It is alsoplanning to launch The Palm at Noida (Sector 117).

� Due to limited fresh launches and weakness in Noida market (whichhas been a key sales driver in FY13), we expect pre-sales to remainsubdued in 2QFY14E.

� UT trades at 60% discount to its one-year forward NAV estimate ofINR40 and 11.1x FY15E EPS and 0.4x FY14E BV. Maintain Buy.

Key issues to watch for� Sales momentum on the back of lesser new launches (estimate

INR21b in FY14E).� Progress in construction and delivery (company aims at INR4-4.5b/

qtr run-rate v/s INR3b currently), along with an improvement indebtor days.

� Cash flow health and repayment need.


EBITDA 3.3 3.3 4.2 5.1

Adj PAT 2.4 2.1 3.3 3.9

Adj. EPS (INR) 0.9 0.8 1.2 1.5

EPS Growth (%) -58.2 -11.7 55.7 19.3

BV/Share (INR) 37.8 35.2 36.1 45.6

RoE (%) 2.0 1.8 2.8 3.3

RoCE (%) 2.8 2.7 2.8 3.2

Payout (%) 0.0 0.0 12.8 10.7

Valuations

P/E (x) 18.2 20.7 13.3 11.1

P/BV (x) 0.4 0.5 0.5 0.4

EV/EBITDA (x) 29.4 30.9 24.2 19.6

Div. Yield (%) 0.0 0.0 0.9 0.9

Bloomberg UT IN




1,6,12 Rel Perf. (%) -11 / -36 / -39

C–155October 2013

September 2013 Results Preview | Sector: Retail



27.09.13 % YoY % QoQ % YoY % QoQ % YoY % QoQFuture Retail 71 UR 24,365 -20.4 8.0 2,071 -21.8 8.9 41 39.1 LPJubilant Foodworks 1,173 Se l l 4,345 27.0 9.6 717 22.2 7.5 359 10.9 5.5Shopper's Stop 356 Neutral 6,868 18.5 27.9 364 25.2 55.9 105 63.6 351.5Titan Industries 235 Neutral 26,174 15.0 -15.8 2,670 7.0 9.0 1,905 5.7 4.4Sector Aggregate 61,752 -1.3 -1.9 5,822 -3.3 10.9 2,409 8.6 15.7

For the quarter ended September 2013, we expect our Retail Universe to post flatsales and 3.3% EBITDA decline. Excluding Future Retail (FRL), which has undergonerestructuring, aggregate sales, EBITDA and PAT should grow 17%, 11% and 8.2%,respectively. Speciality retailers like Titan Industries (TTAN) and Jubilant Foodworks(JUBI) will continue to report subdued numbers due to pressure on discretionaryconsumption. For traditional retailers, we expect continuation of 8-10% same storesales (SSS) growth.

Demand remains mutedConsumer sentiment and footfalls remain subdued. The quarter saw IndependenceDay sale and end of season discount sale. Post the strong 67% volume growth in1QFY14, TTAN's Jewelry division should report single-digit volume growth in 2Q, asgold price has spiked. This coupled with supply issues post RBI's 20:80 guidelines hasexacerbated the situation on the ground. For JUBI, we expect 6-8% SSS growth,impacted by splitting of stores and weaker consumer sentiment. For FRL and ShoppersStop (SHOP), we expect high single-digit SSS growth.

Space expansion selectiveRetail space expansion continues. SHOP opened three stores and closed one duringthe quarter. We expect JUBI to have opened ~30 stores. We expect traditional retailersto continue expanding, notwithstanding the weak consumer sentiment, as theybelieve there could be shortage of quality retail space after three years.

Regulatory actions continue in Jewelry segmentRBI has continued with its regulatory onslaught on the Jewelry segment. It has linkedgold imports to exports and has introduced the 20:80 scheme, whereby 20% of theimported quantity will be earmarked for exports and the next import consignmentwill be permitted only after 75% of the earlier 20% quantity is actually exported. It hasalso withdrawn the Gold-On-Lease scheme. The cumulative impact of all this will bereflected in TTAN's return ratios, working capital and leverage, as its balance sheetturns net debt from net cash. Our ground level checks suggest supply issues forjewelers, widening of premium and rising price gap between branded and 'mom andpop' jewelers due to surge in smuggled quantities.

Gautam Duggad ([email protected])

RetailCompanies Covered

Future Retail

Jubilant Foodworks

Shoppers Stop

Titan Industries

C–156October 2013


Shoppers Stop - low base should drive 10% same store growth Gold prices down 4.1% YoY and up 7% QoQ

Jubilant Foodworks' LTL sales growth is weakening consistently


No imminent triggerThe Retail sector has been impacted by well entrenched slowdown in discretionaryconsumption. The situation has marginally changed in favor of traditional retailers v/s specialty retailers like TTAN and JUBI. Elongated discount season and low base arethe driving factors, in our view. We expect another subdued quarter with cautiouscommentaries. We have a Neutral rating on TTAN and SHOP, and a Sell rating on JUBI.For FRL, which has recently completed the listing of its newly crafted fashion entity,Future Lifestyle Fashion, our rating is Under Review.

Relative performance-3m (%) Relative performance-1Yr (%)

95

100

105

110

115

Jun-

13

Jul-

13

Aug

-13

Sep-

13

Sens ex IndexMOSL Reta i l Index

70

80

90

100

110

Sep-

12

Dec

-12

Mar

-13

Jun-

13

Sep-

13

Sens ex IndexMOSL Reta i l Index

22

12

2

16

21

13 14 7

11 -1

10

1

5

13

10

Dec

-09

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

LTL Sales Gr (%)

23.2%

38.5%35.6%

32.3%

20.0%

12.2%8.0%

36.0%

-6.3% -4.1%1Q

FY12

2QFY

12

3QFY

12

4QFY

12

1QFY

13

2QFY

13

3QFY

13

4QFY

13

1QFY

14

2QFY

14

6.37.7

16.119.8

22.326.2

30.126.7

36.733.2

4QFY

11

1QFY

12

2QFY

12

3QFY

12

4QFY

12

1QFY

13

2QFY

13

3QFY

13

4QFY

13

1QFY

14

C–157October 2013



27.09.13 FY13 FY14E FY15E FY13 FY14E FY15E FY13 FY14E FY15E FY13 FY14E FY15ERetailJubi. Foodworks 1,173 Se l l 20.9 24.7 34.3 56.1 47.5 34.2 29.6 23.5 16.7 31.2 26.9 27.2Shopper's Stop 356 Neutral 4.9 7.0 10.6 73.2 51.0 33.6 22.7 18.6 14.1 5.9 7.9 10.9Titan Industries 235 Neutral 8.2 9.0 10.1 28.7 26.2 23.2 19.5 18.3 15.6 42.5 31.7 28.6Sector Aggregate 34.6 30.8 25.8 21.6 19.3 15.7 29.3 26.5 25.4

Area addition plans on trackShoppers Stop Jubilant Foodworks


36 38 4143

49 51 52 54 55 5559

89

10 10

12 12 12 12 12 1213

Dec

-10

Mar

-11

Jun-

11

Sep-

11

Dec

-11

Mar

-12

Jun-

12

Sep-

12

Dec

-12

Mar

-13

Jun-

13

Shoppers Stop Hyperci ty

364 378 411 439489 515

602

87 90 93 96 100 105 110 112 118 123 128

576552465

392

3QFY

11

4QFY

11

1QFY

12

2QFY

12

3QFY

12

4QFY

12

1QFY

13

2QFY

13

3QFY

13

4QFY

13

1QFY

14

Stores Ci ties

C–158October 2013


Quarterly Performance: Core Retailing (INR Million)Y/E June FY12 CY13

1Q 2Q 3Q 4Q 5Q 6Q 1Q 2Q 3QE

Net Sales 29,106 28,933 30,264 29,627 30,600 31,708 23,360 22,561 24,365

YoY Change (%) 12.8 4.9 7.6 3.6 5.1 9.6 -22.8 -23.9 -20.4

Total Exp 26,583 26,321 27,488 26,864 27,953 28,929 21,580 20,659 22,294

EBITDA 2,523 2,612 2,776 2,763 2,647 2,779 1,780 1,901 2,071

Growth (%) 18.6 9.6 12.0 6.9 4.9 6.4 -35.9 -31.2 -21.8

Margins (%) 8.7 9.0 9.2 9.3 8.7 8.8 7.6 8.4 8.5

Depreciation 828 877 887 929 975 1,215 730 788 850

Interest 1,305 1,582 1,725 1,804 1,761 1,567 1,160 1,280 1,200

Other Income 79 40 16 28 132 69 30 60 40

PBT 468 193 180 58 44 66 -80 -107 61

Tax 138 58 60 19 14 22 -26 0 20

Rate (%) 29.5 30.1 33.3 33.0 33.0 33.0 33.0 33.0 33.0

Adjusted PAT 330 135 120 39 29 44 -54 -107 41

YoY Change (%) -22.8 -71.4 -76.2 -92.1 -90.6 -67.2 -144.6 -462.8 -

E: MOSL Estimates

Future RetailCMP: INR71 Under Review� For 3QCY13, reported results will include the numbers of only Future

Retail. The base quarter had numbers of Pantaloon, Brand Factory andCentral. Hence, the quarterly numbers will not be comparable.

� We expect Future Retail to report sales of INR24.4b.

� SSS growth in the value segment would be 7-8%.

� We estimate EBITDA at INR2.07b (8.5% margin).

� Interest cost would decline 53% QoQ to INR1.2b, as debt transfer ofPantaloon Retail format reflects in the numbers.

� Adjusted PAT would be INR41m.

� Our stock rating is Under Review. The demerger of Future LifestyleFashion is complete and the stock has listed recently.

Key issues to watch out� Same store sales (SSS) performance; commentary on consumer

demand� Clarity on debt and inventory strategy

Financials & Valuation (INR b)Y/E June 2009 2010 2011 2012*Sa les 63.4 89.3 110.1 122.5

EBITDA 6.5 8.2 9.6 11.0

Adj. PAT 1.2 1.7 1.9 1.1

Adj. EPS (INR) 6.5 8.2 8.7 4.8

EPS Gr. (%) -18.0 25.8 7.1 -45.2

BV/Sh.(INR) 119.4 136.1 140.1 139.5

RoE (%) 5.4 6.0 6.2 3.4

RoCE (%) 12.5 14.2 12.1 12.0

Payout (%) 10.2 9.8 10.3 25.0

Valuations

P/E (x) 13.9 11.0 10.3 18.8

P/BV (x) 0.8 0.7 0.6 0.6

EV/EBITDA (x) 5.9 4.7 5.8 5.9

Div. Yield (%) 0.7 0.9 1.0 1.3

* 18 months

Bloomberg FRL IN


M. Cap. (INR b)/(USD b) 16 / 0.3


1,6,12 Rel Perf. (%) -8 / -57 / -74

C–159October 2013




No of Stores 489 515 552 576 602 632 664 697 576 701

LTL Growth (%) 22.3 19.8 16.1 7.7 6.3 8.0 12.0 12.0 16.2 10.0

Net Sales 3,145 3,421 3,851 3,658 3,965 4,345 5,277 4,994 14,076 18,580

YoY Change (%) 45.0 42.3 39.0 29.3 26.1 27.0 37.0 36.5 38.4 32.0

Gross Profit 2,309 2,530 2,863 2,703 2,937 3,224 3,920 3,689 10,405 13,771

Gross Margin (%) 73.4 74.0 74.3 73.9 74.1 74.2 74.3 73.9 73.9 74.1

Other Expenses 1,736 1,943 2,192 2,091 2,270 2,507 3,039 2,891 7,961 10,707

% of Sales 55.2 56.8 56.9 57.2 57.3 57.7 57.6 57.9 56.6 57.6

EBITDA 573 587 672 612 667 717 881 799 2,444 3,064

EBITDA Growth (%) 36.3 34.5 30.3 20.7 16.4 22.2 31.2 30.4 30.0 25.4

Margins (%) 18.2 17.2 17.4 16.7 16.8 16.5 16.7 16.0 17.4 16.5

Depreciation 117 138 140 152 179 193 196 196 547 765

Interest 0 0 1 0 0 0 1 1 1 1

Other Income 19 20 20 20 22 24 25 28 78 100

PBT 475 468 551 480 510 548 709 630 1,974 2,397

Tax 152 145 174 153 170 189 245 199 623 803

Rate (%) 31.9 30.9 31.6 31.9 33.3 34.5 34.5 31.7 31.6 33.5

Adjusted PAT 323 323 377 327 340 359 465 431 1,351 1,594

YoY Change (%) 39.3 36.5 28.0 11.4 5.1 10.9 23.2 31.7 26.0 18.0

E: MOSL Estimates

Jubilant FoodworksCMP: INR1,173 Sell� We expect Jubilant Foodworks (JUBI) to report 27% increase in sales

to INR4.3b. LTL sales growth would be ~8%.

� Discretionary consumption remains weak and should impact quickservice restaurant (QSR) spends too.

� JUBI is likely to post 70bp contraction in EBITDA margin to 16.5% dueto higher promotions and Dunkin Donuts expansion costs.

� We estimate 11% PAT growth for 2QFY14 to INR359m.

� We expect JUBI to have added 30 stores in 2QFY14.

� The stock trades at 34.2x FY15E EPS of INR34.3 and does not reflect theslowdown and cyclicality of business model. Sell.


� Management comments on demand outlook� Performance of Dunkin Donuts� Changes in expansion and capex strategy, if any


EBITDA 1.9 2.4 3.1 4.2

Adj. PAT 1.1 1.4 1.6 2.2

Adj. EPS (INR) 16.6 20.9 24.7 34.3

EPS Gr. (%) 48.9 26.0 18.0 38.9

BV/Sh.(INR) 45.6 67.1 91.8 126.1

RoE (%) 36.4 31.2 26.9 27.2

RoCE (%) 48.9 42.8 38.2 38.7

Payout (%) 0.0 0.0 0.0 0.0

Valuations

P/E (x) 70.6 56.1 47.5 34.2

P/BV (x) 25.7 17.5 12.8 9.3

EV/EBITDA (x) 39.6 30.1 23.9 16.9

Div. Yield (%) 0.0 0.0 0.0 0.0

Bloomberg JUBI IN



52-Week Range (INR) 1,397 / 928

1,6,12 Rel Perf. (%) 0 / -10 / -19

C–160October 2013




LTL Sales Gr % 1.0 2.0 12.5 10.0 12.0 10.0 10.0 8.0 7.4 10.0

Deptt Stores 52 55 55 55 60 62 60 63 55 60

Net Sales 4,467 5,796 6,041 6,251 5,371 6,868 7,141 7,452 22,555 26,831

YoY Change (%) 13.7 16.5 20.4 15.6 20.2 18.5 18.2 19.2 16.7 19.0

Total Exp 4,330 5,505 5,588 5,868 5,137 6,504 6,605 6,972 21,291 25,218

EBITDA 138 291 453 383 234 364 536 481 1,264 1,614

Growth (%) -47.7 -24.9 9.6 5.4 69.4 25.2 18.3 25.5 -11.4 27.6

Margins (%) 3.1 5.0 7.5 6.1 4.3 5.3 7.5 6.4 5.6 6.0

Depreciation 120 142 120 125 133 145 122 116 507 517

Interest 77 77 86 79 98 91 101 117 319 408

Other Income 74 31 32 35 32 32 34 89 172 187

PBT 15 102 279 214 34 160 346 336 610 876

Tax 3 38 108 62 11 55 119 117 211 303

Rate (%) 17.9 37.1 38.7 29.1 32.2 34.5 34.5 34.9 34.6 34.6

Adjusted PAT 12 64 171 152 23 105 226 219 399 573

YoY Change (%) -89.3 -67.3 -11.4 10.4 86.1 63.6 32.5 44.1 -37.9 43.5

E: MOSL Estimates

Shoppers StopCMP: INR356 Neutral� We expect Shoppers Stop (SHOP) to report 18.5% increase in sales to

INR6.9b. SSS growth would be 10%, driven by low base of 2% growthin 2QFY13.

� We estimate EBITDA margin at 5.3%, still below the normal trend of 7-8%, but up 30bp YoY due to better operating leverage, led by higherSSS growth.

� Hypercity would remain a drag on consolidated profitability and postlosses.

� SHOP added three Shoppers Stop departmental stores and closed oneduring 2QFY14.

� The stock trades at 33x FY15E standalone EPS. Maintain Neutral.

Key issues to watch out� Comments on same store sales (SSS) performance� Comments on ensuing festive season demand


EBITDA 1.4 1.3 1.6 2.1

Adj. PAT 0.6 0.4 0.6 0.9

Adj. EPS (INR) 7.8 4.9 7.0 10.6

EPS Gr. (%) -14.5 -37.9 43.5 51.9

BV/Sh.(INR) 78.9 82.5 88.3 97.0

RoE (%) 9.9 5.9 7.9 10.9

RoCE (%) 11.0 7.3 9.9 13.1

Payout (%) 14.6 13.6 15.0 15.0

Valuations

P/E (x) 44.8 72.1 50.2 33.0

P/BV (x) 4.4 4.2 4.0 3.6

EV/EBITDA (x) 20.7 23.7 18.6 14.1

Div. Yield (%) 0.3 0.2 0.3 0.5

Bloomberg SHOP IN


M. Cap. (INR b)/(USD b) 29 / 0.5


1,6,12 Rel Perf. (%) -6 / -17 / -16

C–161October 2013




Net Sales 22,057 22,760 29,829 25,931 31,077 26,174 32,215 30,637 101,127 120,102

YoY Change (%) 9.2 8.6 23.2 14.8 40.9 15.0 8.0 18.1 15.6 18.8

Total Exp 19,937 20,266 27,351 23,467 28,627 23,426 29,219 27,608 91,020 108,880

EBITDA 2,120 2,494 2,478 2,464 2,449 2,748 2,996 3,028 10,116 11,222

EBITDA Growth (%) 10.3 19.4 20.1 34.1 16 10.2 20.9 22.9 37 11

Margins (%) 9.6 11.0 8.3 9.5 7.9 10.5 9.3 9.9 10.0 9.3

Depreciation 123 130 142 150 146 141 153 149 545 589

Interest 126 121 117 142 170 170 164 240 506 744

Other Income 252 238 571 496 382 250 628 178 1,008 1,439

PBT 2,123 2,481 2,791 2,669 2,515 2,688 3,307 2,817 10,072 11,328

Tax 561 679 752 819 691 726 893 627 2,811 2,936

Rate (%) 26.4 27.4 26.9 30.7 27.5 27.0 27.0 22.3 27.9 25.9

Adjusted PAT 1,561 1,801 2,039 1,850 1,825 1,962 2,414 2,190 7,262 8,391

YoY Change (%) 8.7 21.3 24.4 28.2 16.9 8.9 18.4 18.4 20.1 15.6

E: MOSL Estimates

Titan IndustriesCMP: INR235 Neutral� We expect Titan Industries (TTAN) to post sales of INR26.2b, up 15%

YoY.

� TTAN's Jewelry business is facing multiple challenges: (a) demandslowdown due to pressure on discretionary consumption, (b) supplyshortage due to 20:80 scheme, and (c) withdrawal of gold-on-leasescheme.

� After strong 67% volume growth in Jewelry in 1Q, we expect Jewelryvolumes to grow in single digits. However, TTAN has been pushingDiamond Jewelry, which should result in higher share of StuddedJewelry.

� We estimate margin decline of 50bp YoY, led by promotional offer onDiamond Jewelry and continued impact of INR depreciation on Watchmargins. PAT should grow 9% to INR1.96b.

� We expect the Watch segment to post a subdued quarter.

� The stock trades at 21x FY15E EPS of INR11.2. Neutral.

Key issues to watch out� Clarity on gold supply and exports strategy in Jewelry, if any� Hedging strategy� Changes in expansion strategy, if any


EBITDA 8.3 10.1 11.2 13.3

Adj. PAT 6.0 7.3 8.3 9.9

Adj. EPS (INR) 6.8 8.2 9.3 11.2

EPS Gr. (%) 40.5 20.1 13.9 19.8

BV/Sh.(INR) 16.3 22.1 28.5 36.3

RoE (%) 48.9 42.5 32.6 30.7

RoCE (%) 66.9 59.4 52.6 49.1

Payout (%) 30.1 30.0 30.0 30.0

Valuations

P/E (x) 34.5 28.7 25.2 21.0

P/BV (x) 14.4 10.6 8.2 6.5

EV/EBITDA (x) 23.9 19.5 17.1 14.0

Div. Yield (%) 0.9 1.0 1.2 1.4

Bloomberg TTAN IN


M. Cap. (INR b)/(USD b) 208 / 3


1,6,12 Rel Perf. (%) -4 / -13 / -14

C–162October 2013

September 2013 Results Preview | Sector: Technology


CMP Rating Sales EBITDA Net Profit


27.09.13 % YoY % QoQ % YoY % QoQ % YoY % QoQHCL Technologies 1,071 Buy 79,037 29.8 13.8 19,690 48.2 21.9 13,333 54.3 11.3Hexaware Tech. 129 Neutral 6,194 22.0 15.4 1,492 35.9 17.2 1,167 38.9 19.2Infosys 3,006 Buy 127,385 29.2 13.1 35,502 23.6 19.0 26,558 12.1 11.9KPIT Tech. 131 Neutral 7,087 24.9 15.6 1,355 43.4 39.4 771 89.6 28.2Mindtree 1,186 Neutral 7,613 27.7 17.5 1,612 22.2 35.4 1,077 49.2 -20.5MphasiS 428 Se l l 17,656 35.2 14.7 3,538 31.1 26.4 2,022 -3.4 5.0Persistent Systems 619 Buy 4,155 27.1 16.3 931 4.6 19.8 489 9.4 -14.4TCS 1,947 Neutral 207,982 33.1 15.6 65,151 46.7 26.4 45,803 30.4 20.7Tech Mahindra 1,306 Buy 46,535 32.1 13.4 10,886 43.8 25.9 6,699 58.6 2.6Wipro 475 Buy 109,044 NA 12.1 22,273 NA 26.2 18,435 NA 13.6Sector Aggregate 503,645 31.2 14.5 140,157 38.9 23.9 97,918 28.5 14.3

Ashish Chopra ([email protected])/Siddharth Vora ([email protected])

Currency to steal the show: While 2Q is a seasonally strong quarter for revenue growth,and 2QFY14 should pan out in line with seasonality, significant INR depreciation willdominate Technology companies' financial performance for the quarter. We expectaggregate EBITDA margin to expand 220bp QoQ for top-tier companies, with the rangebeing 140-270bp QoQ. Margin expansion would be the least for Infosys due to fullquarter impact of offshore wage hikes and the highest for TCS, as wage hikes wereabsorbed in 1Q.

Expect growth traction across the board: We expect no changes to the usual suspectswhen it comes to growth outperformance in 2QFY14. TCS (+4.9% QoQ including ALTI),and Cognizant (CTSH, +5.2% QoQ) would continue to lead the pack. Other companiesacross the top-tier are also expected to post decent growth ranging between 2-3%QoQ. In tier-II companies, we expect strong growth across the board (MTCL, PSYS,HEXW, KPIT).

Cross-currency headwinds from AUD and INR: Companies are likely to be impactednegatively (on USD revenue line) by depreciation in AUD (~8% QoQ) and INR (~10%+QoQ). Across the top-tier, we expect USD revenues to be impacted negatively by 50-100bp from depreciation in sequential average rates of AUD and INR v/s the USD.

Watch out for Infosys after a series of significant surprises, deal signings: The lastthree quarters kicked off the results calendar, with significant surprise at INFO, on thepositive side in 3QFY13 and 1QFY14 and negative in 4QFY13. NRN's return to the foldshould imply little likelihood of a stark negative surprise, given his recent commentary.TPI gave an outlook of healthy deal closures in the second half of calendar year, andthe sentiment in US has been improving. Deal signing activity across the board will bekeenly watched in company results.

TechnologyCompanies Covered

Cognizant Technology

HCL Technologies

Hexaware Technologies

Infosys

KPIT Cummins

MindTree

MphasiS

Persistent Systems

TCS

Tech Mahindra

Wipro

C–163October 2013


TCS and Cognizant will continue to be growth leaders

TCS and Wipro showing incremental revenue acceleration

Healthy growth across the board in tier-II companies


INFO, TECHM are our top picks: After a healthy run in valuations over the last fourmonths amid favorable currency, improving demand environment and recedingconcerns around Immigration Bill, we expect select companies to outperform. Weexpect INFO's recent deal signings and cost optimization efforts to drive a healthyfinancial performance. INFO is our top pick in the sector. We see re-rating potential atTECHM, as the merged entity guns stronger for deals. Our Neutral rating on TCS is onlydue to steep valuations. Among tier-II companies, we prefer PSYS for its strong businessmix and receding profitability concerns.

Relative performance-3m (%)

Relative performance-1Yr (%)

90

105

120

135

150

Jun-

13

Jul-

13

Aug

-13

Sep-

13

Sensex IndexMOSL Technology Index

95

110

125

140

155

Sep-

12

Dec

-12

Mar

-13

Jun-

13

Sep-

13

Sensex IndexMOSL Technology Index

4.9

2.42.4

3.05.2

-3

0

3

6

9

3QFY

12

4QFY

12

1QFY

13

2QFY

13

3QFY

13

4QFY

13

1QFY

14

2QFY

14E

TCS Infosys Wipro HCL Tech Cognizant

-50

0

50

100

150

200

TCS Infosys Wipro HCL Cognizant

2.8

5.5

4.54.2

4.3

-4

-1

3

7

10

1QFY13 2QFY13 3QFY13 4QFY13 1QFY14 2QFY14E

Tech Mahindra Pers is tent System Hexaware KPIT Cummins Mindtree

C–164October 2013


Aggregate top-tier USD revenue growth estimated at 3.4% QoQRevenues (USD m) Revenues (INR b)

Company 2QFY14E 2QFY13 YoY (%) 1QFY14 QoQ (%) 2QFY14E 2QFY13 YoY (%) 1QFY14 QoQ (%)

TCS 3,321 2,853 16.4 3,165 4.9 208 156 33.1 180 15.6

Infosys 2,038 1,797 13.4 1,991 2.4 127 99 29.2 113 13.1

Wipro 1,627 1,541 5.6 1,588 2.4 109 107 2.3 99 10.7

HCLT 1,265 1,114 13.5 1,228 3.0 79 61 29.8 69 13.8

Aggregate 8,250 7,304 13.0 7,972 3.5 523 422 24.0 461 13.7

EBITDA Margin (%) PAT (INR b)

Company 2QFY14E 2QFY13 YoY (%) 1QFY14 QoQ (%) 2QFY14E 2QFY13 YoY (%) 1QFY14 QoQ (%)

TCS 31.3 28.4 290 28.6 270 46 35 30.4 38 20.7

Infosys 27.9 29.1 -130 26.5 140 27 24 12.1 24 11.9

Wipro 22.6 20.1 260 20.5 220 18 16 14.5 16 13.6

HCLT 24.9 21.8 310 23.3 170 13 9 54.3 12 11.3

Aggregate 27.7 25.5 218 25.6 216 104 84 24.6 90 15.8

Across tier-II companies, margins are expected to improve on aggregate and growth is likely to be driven by better macroenvironment

Revenues (USD m) Revenues (INR b)

Company 2QFY14E 2QFY13 Yoy (%) 1QFY14 QoQ (%) 2QFY14E 2QFY13 Yoy (%) 1QFY14 QoQ (%)

Tech Mahindra 745 644 15.6 724 2.8 46.5 35.2 32.1 41.0 13.4

Persistent Systems 66 60 10.7 63 5.5 4.2 3.3 27.1 3.6 16.3

Mphasis 277 248 11.5 265 4.2 17.7 13.1 35.2 15.4 14.7

Hexaware 99 93 6.8 95 4.5 6.2 5.1 22.0 5.4 15.4

KPIT Cummins 113 103 9.6 109 4.2 7.1 5.7 24.9 6.1 15.6

Mindtree 123 107 14.5 118 4.3 7.6 6.0 27.7 6.5 17.5

Aggregate 1,423 1,256 13.3 1,374 3.6 89 68 30.7 78 14.4

EBITDA Margin (%) PAT (INR b)

Company 2QFY14E 2QFY13 Yoy (%) 1QFY14 QoQ (%) 2QFY14E 2QFY13 Yoy (%) 1QFY14 QoQ (%)

Tech Mahindra 23.4 21.5 191 21.1 232 6.7 6.5 3 5.1 32

Persistent Systems 22.4 27.2 -483 21.7 66 0.5 0.4 9 0.6 -14

Mphasis 17.9 17.6 31 15.8 206 2.0 2.1 -3 1.9 5

Hexaware 24.1 21.6 245 23.7 36 1.2 0.8 39 1.0 19

KPIT Cummins 19.1 16.7 246 15.9 326 0.8 0.4 86 0.6 28

Mindtree 21.2 22.1 -94 18.4 279 1.1 0.7 49 1.4 -20

Aggregate 21.8 20.7 110 19.6 216 12.2 11.0 11 10.5 16


Margins uptick driven by depreciating rupee

*EBITDA margins in USD for Cognizant Source: Company, MOSL

EBITDA Margins across the top tier

31.3%27.9%

24.9%22.6%21.8%

16%

21%

26%

31%

36%

3QFY

12

4QFY

12

1QFY

13

2QFY

13

3QFY

13

4QFY

13

1QFY

14

2QFY

14E

TCS Infosys HCL Tech Wipro Cognizant

C–165October 2013


2QFY14 Currency highlights (INR) Rates (INR) Change (QoQ, %)

USD EUR GBP AUD USD EUR GBP AUD

Average 62.1 82.2 96.3 56.9 10.9% 12.5% 12.3% 2.8%

Closing 62.4 84.6 101.1 58.3 5.4% 8.9% 11.7% 6.5%


2QFY14 Currency highlights (USD)Rates (USD) Change (QoQ, %)

EUR GBP AUD EUR GBP AUD

Average 1.33 1.55 0.92 1.5 1.0 -7.7

Closing 1.35 1.62 0.93 3.8 6.3 1.8


Cross currencies: Assumed rates v/s actualsGuided at EUR GBP AUD INR/USD

Infosys 1.30 1.52 0.91 59.39

Wipro 1.31 1.54 0.97 57.24

Actual (Average) 1.33 1.55 0.92 62.07

Change (%) EUR GBP AUD INR/USD Impact on USD revenue

Infosys 1.9 2.0 0.3 4.5 0.23

Wipro 1.2 0.7 -5.6 8.4 -0.58

EPS Estimates (INR) - MOSL v/s Consensus 2QFY14 FY14 FY15 Upside/Downside to Consensus (%)

MOSL Consensus MOSL Consensus MOSL Consensus 2QFY14 FY14 FY15

Infosys 46.5 43.1 186.5 178.3 215.5 200.4 7.9 4.6 7.6

TCS 23.4 21.9 91.0 88.9 104.2 102.5 6.8 2.3 1.7

Wipro 7.5 7.4 30.9 29.1 34.0 32.4 1.0 6.0 4.9

HCL Tech 18.9 15.4 76.7 72.0 85.2 80.5 22.6 6.5 5.8

Mphasis 9.6 10.2 35.9 41.0 42.4 43.3 -5.7 -12.4 -2.1

Tech Mahindra 31.5 36.3 122.8 121.5 131.1 129.1 -13.1 1.1 1.5

Cognizant 1.10 1.20 4.2 4.9 4.8 5.7 -8.5 -14.2 -15.1

Hexaware 3.9 4.3 13.8 13.5 14.9 14.3 -9.4 1.9 4.2

KPIT Cummins 3.9 3.6 15.9 14.3 17.5 16.1 8.2 11.6 8.4

Mindtree 25.8 26.2 118.8 96.5 130.8 104.4 -1.7 23.1 25.3

Persistent Systems 12.2 13.6 57.7 56.9 66.8 63.9 -10.3 1.3 4.5


Comparative valuation

CMP (INR) Rating EPS (INR) P/E (x) EV/EBITDA (x) RoE (%)

27.09.13 FY13 FY14E FY15E FY13 FY14E FY15E FY13 FY14E FY15E FY13 FY14E FY15ETechnologyHCL Technologies 1,071 Buy 57.0 76.7 85.2 18.8 14.0 12.6 12.4 9.0 8.1 32.2 37.4 32.4Hexaware Tech. 129 Neutral 10.9 13.8 14.9 11.8 9.3 8.6 8.3 6.3 5.5 30.1 33.4 32.3Infosys 3,006 Buy 164.9 186.5 215.5 18.2 16.1 14.0 12.8 10.3 8.7 25.7 24.4 25.8KPIT Tech. 131 Neutral 10.6 15.9 17.5 12.4 8.2 7.5 6.4 4.3 4.0 22.7 26.0 24.6Mindtree 1,186 Neutral 81.7 118.8 130.8 14.5 10.0 9.1 9.8 7.3 5.7 25.8 33.2 28.1MphasiS 428 Se l l 37.5 35.9 42.4 11.4 11.9 10.1 8.9 8.9 7.3 19.1 16.9 18.7Persistent Systems 619 Buy 46.9 57.7 66.8 13.2 10.7 9.3 6.2 4.9 4.3 20.2 20.9 20.4TCS 1,947 Neutral 71.2 91.0 104.2 27.3 21.4 18.7 20.7 15.0 13.4 37.8 38.7 35.2Tech Mahindra 1,306 Buy 93.2 122.8 131.1 14.0 10.6 10.0 8.8 6.6 6.0 32.6 33.9 28.5Wipro 475 Buy 25.0 30.9 34.0 19.0 15.4 14.0 13.8 10.6 9.6 25.3 27.6 25.5Sector Aggregate 20.9 16.9 14.9 15.3 11.6 10.3 27.5 27.9 25.9

C–166October 2013


Quarterly Performance (US GAAP) (USD Million)Y/E December CY12 CY13 CY12 CY13E


Revenues 1,711 1,795 1,892 1,948 2,021 2,161 2,274 2,355 7,346 8,812

Q-o-Q Change (%) 2.9 4.9 5.4 3.0 3.7 7.0 5.2 3.5 20.0 19.9

Direct Expenses 985 1,031 1,112 1,151 1,200 1,272 1,301 1,348 4,278 5,122

SG&A 374 397 385 402 413 421 478 495 1,558 1,806

SG&A as % of Sales 21.9 22.1 20.3 20.6 20.4 19.5 21.0 21.0 21.2 20.5

EBITDA 353 368 395 396 408 469 495 512 1,511 1,884

Margins (%) 20.6 20.5 20.9 20.3 20.2 21.7 21.8 21.7 20.6 21.4

Other Income 4 3 9 10 11 -6 12 12 26 28

Depreciation 35 36 39 39 42 42 44 46 149 173

PBT bef. Extra-ordinary 322 335 364 366 377 420 463 478 1,388 1,739

Provision for Tax 79 83 87 87 93 120 127 129 336 469

Rate (%) 24.4 24.8 24.0 23.8 24.6 28.5 27.5 27.0 24.2 27.0

PAT before EO 244 252 277 279 284 300 336 349 1,051 1,269

Q-o-Q Change (%) 7.3 3.4 9.9 0.7 1.9 5.7 11.7 4.0 19.0 20.7

Headcount addition 2,800 4,500 5,400 6,300 6,000 1,600 6,946 5,878 19,000 20,400

Closing Headcount 140,500 145,000 150,400 156,700 162,700 164,300 171,200 177,100 156,700 177,100

Utilization 67 68 70 68 67 70 72 72 68 70

E: MOSL Estimates

CognizantCMP: USD83 Not Rated� For 3QCY13, CTSH guided revenues of at least USD2,250m, implying

QoQ growth of 4.1%, having upgraded its full-year revenue guidanceto at least 19% from at least 17% earlier.

� We expect CTSH to beat its 3QCY13 guidance and post revenues ofUSD2,275m, up 5.2% QoQ.

� CTSH's full-year growth guidance implies 3.6% growth in 2H. With thecompany citing improved macro environment, reflected in our 3QCY13estimate, we expect it to beat even its revised guidance.

� With ~78% of revenues from North America, CTSH is likely to remainrelatively unscathed from the impact of cross-currency movements,compared to its top-tier Indian peers.

� We expect EBITDA margin of 21.8% for the quarter, up 10bp QoQ. OurSGA estimate is 21%, up 150bp QoQ due to wage hikes effective from1 July 2013.

� We expect net income of USD336m, up 11.7% QoQ, and net margin of14.8%, up 90bp QoQ.

� The stock trades at 8.8 CY13E and 10.3 CY14E earnings. Not Rated.

Key issues to watch out� Guidance for 4Q and expected revision of CY13 revenue guidance� Commentary on deal ramp-ups following weak outlook cited by

Accenture

Financials & Valuation (USD b)Y/E December 2011 2012 2013E 2014ESa les 6.1 7.3 8.8 10.3

EBITDA 1.3 1.5 1.9 2.1

PAT 0.9 1.1 1.3 1.5

EPS (INR) 2.9 3.5 4.2 4.8

EPS Gr. (%) 20.0 21.0 20.5 15.5

BV/Sh. (INR) 12.8 16.0 19.7 24.6

RoE (%) 23.4 23.9 23.4 21.7

RoCE (%) 28.6 28.9 29.8 27.1

Payout (%) 0.0 0.0 0.0 0.0

Valuations

P/E (x) 29.0 24.0 19.9 17.2

P/BV (x) 6.5 5.2 4.2 3.4

EV/EBITDA (x) 18.8 15.0 11.8 9.8

Div yld (%) 0.0 0.0 0.0 0.0

Bloomberg CTSH US


M.Cap. (USD b) 25

52-Week Range (USD) 84 / 61

C–167October 2013


Quarterly Performance (US GAAP) (INR Million)Y/E June FY13 FY14E FY13 FY14E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q

Revenues 60,910 62,738 64,246 69,442 79,037 81,502 83,907 83,467 257,336 327,913

Q-o-Q Change (%) 2.9 3.0 2.4 8.1 13.8 3.1 2.9 -0.5 22.4 27.4

EBITDA 13,288 13,945 14,156 16,147 19,690 19,046 19,726 19,015 57,536 77,477

Margins (%) 21.8 22.2 22.0 23.3 24.9 23.4 23.5 22.8 22.4 23.6

Other Income -253 154 887 782 -765 -351 683 437 1,570 1,570

PAT 8,642 9,444 10,189 11,975 13,333 13,107 14,401 13,644 53,583 58,049

Q-o-Q Change (%) 2.8 9.3 7.9 17.5 11.3 -1.7 9.9 -5.3

Y-o-Y Change (%) 80.0 70.9 75.1 42.4 54.3 38.8 41.3 13.9 118.2 8.3

Diluted EPS (INR) 12.3 13.5 14.4 17.0 18.9 18.5 20.3 19.2 57.0 76.7

USD Revenues 1,114 1,154 1,191 1,228 1,265 1,315 1,353 1,391 5,951 6,152

Q-o-Q Change (%) 3.2 3.6 3.2 3.1 3.0 4.0 2.9 2.8 43.3 3.4

Gross Margin (%) 34.9 35.5 35.6 36.5 37.8 36.5 36.6 35.9 35.6 36.7

SGA (%) 13.0 13.2 13.6 13.3 12.9 13.2 13.1 13.1 13.3 13.1

Tax rate (%) 23.8 23.7 24.0 21.5 22.0 22.0 22.0 22.0 23.2 22.0

Net Employee additions 1,016 -141 -791 1,102 2,950 1,850 2,600 2,300 1,186 9,700

Util. - incl. trainees (%) 74.2 75.6 79.0 80.6 81.0 80.5 81.0 81.0 78.6 81.1

Q-o-Q Vol Gr in s/w serv. (%) 2.5 0.4 0.4 1.4 2.6 2.9 1.7 2.2 7.5 7.8

Q-o-Q Realization change (%) -1.9 0.5 0.7 -0.8 -1.0 0.1 0.5 -0.1 -2.0 -0.9

Offshore revenues (%) 44.3 44.9 44.6 45.4 45.8 45.7 45.3 45.4 44.8 45.6

E: MOSL Estimates; After adjusting for ESOP charges

HCL TechnologiesCMP: INR1,071 Buy� We expect HCLT's revenues to grow 3% QoQ to USD1,265m. Traction in

IMS should be strong - we estimate 6.1% QoQ growth to USD410m. Weexpect Software Services revenue growth of 1.5% QoQ to USD800m.

� Cross-currency movements would have a negative impact of ~60bp.Our volume growth estimate for Software Services is 2.6% QoQ. InINR terms, we expect revenue growth of 13.8% QoQ to INR79.04b.

� While wage hikes to a section of the staff will be a 60bp headwind tomargins, we expect EBITDA margin to expand 160bp QoQ to 24.9%(after ESOP charges), owing to INR depreciation of ~10.5% QoQ.

� Our PAT estimate for the quarter is INR13,333m, up 11.3% QoQ. OurPAT margin estimate is 16.9% (after ESOP charges).

� HCLT announced deal signings with TCV of over USD1b+ in 4QFY13,taking total deals in FY13 to USD3b+. TPI has suggested that 2HCY13will see healthy deal closures, driving expectations of healthy dealsignings at HCLT.

� The stock trades at 14x FY14E and 12.6x FY15E EPS. Maintain Buy.

Key issues to watch out� TCV of deals signed during the quarter� Growth in Software Services segment� Growth in US after improved outlook (Europe outgrew US in last three

quarters)

Financials & Valuation (INR b)Y/E June 2012 2013 2014E 2015ESa les 210.3 257.3 327.9 360.8

EBITDA 39.4 57.5 77.5 81.4

PAT 24.6 40.3 54.5 61.0

EPS (INR) 35.1 57.0 76.7 85.2

EPS Gr. (%) 52.0 62.6 34.5 11.1

BV/Sh. (INR) 155.4 205.9 267.5 334.9

RoE (%) 25.6 32.2 37.4 32.4

RoCE (%) 21.2 29.1 32.2 28.8

Payout (%) 34.2 21.1 17.0 19.5

Valuations

P/E (x) 30.5 18.8 14.0 12.6

P/BV (x) 6.9 5.2 4.0 3.2

EV/EBITDA (x) 18.6 12.2 8.9 8.0

Div yld (%) 1.1 1.1 1.2 1.2

Bloomberg HCLT IN


M. Cap. (INR b)/(USD b) 756 / 12

52-Week Range (INR) 1,104 / 557

1,6,12 Rel Perf. (%) 3 / 30 / 79

C–168October 2013


Quarterly Performance (Indian GAAP) (USD Million)Y/E December CY12 CY13 CY12 CY13E


Revenues 4,383 5,001 5,075 5,023 5,077 5,366 6,194 6,410 19,482 23,046

Q-o-Q Change (%) 31.2 14.1 1.5 -1.0 1.1 5.7 15.4 3.5 34.3 18.3

Direct Cost 2,574 2,995 3,067 3,210 3,162 3,252 3,633 3,823 11,846 13,870

Other Operating Exps 827 859 910 966 936 841 1,068 1,106 3,562 3,951

Operating Profit 982 1,147 1,098 847 979 1,273 1,492 1,481 4,074 5,225

Margins (%) 22.4 22.9 21.6 16.9 19.3 23.7 24.1 23.1 20.9 22.7

Other Income 138 49 55 48 118 62 121 182 380 483

Depreciation 71 76 88 89 93 94 96 99 324 382

PBT bef. Extra-ordinary 1,049 1,120 1,065 806 1,004 1,241 1,516 1,565 4,130 5,326

Provision for Tax 165 230 225 144 211 262 349 361 764 1,183

Rate (%) 15.7 20.5 21.1 17.9 21.0 21.1 23.0 23.0 18.5 22.2

Net Income bef. Extra-ordinary 884 890 840 662 793 979 1,167 1,204 3,366 4,143

Q-o-Q Change (%) 0.2 0.7 -5.6 -21.2 19.8 23.5 19.2 3.2 26.2 23.1

USD Revenues 88.0 91.2 92.8 92.4 94.1 94.8 99.1 103.4 364 391.4

Q-o-Q Change (%) 4.6 3.6 1.8 -0.4 1.8 0.7 4.5 4.3 18.3 7.4

Diluted EPS - After EOI (INR) 2.9 3.0 2.8 2.3 2.6 3.3 3.9 4.0 10.9 13.8

E: MOSL Estimates

Hexaware TechnologiesCMP: INR129 Neutral

� For 3QCY13, HEXW had guided for USD revenue of USD98.1m-100m,implying QoQ growth of 3.5-5.5%. We estimate revenue growth of4.5% QoQ to USD99.1m, at the midpoint of the guided band. In INRterms, we expect revenue growth of 15.4% QoQ to INR6.19b.

� HEXW managed to more than recover its EBITDA margin shrinkagethat resulted from client-specific issues in 4QCY12. It had guided forgradual pick-up in margins in CY13.

� We saw a recovery of 240bp in 1QCY13 and another 440bp in 2QCY13.We model EBITDA margin uptick of 40bp QoQ to 24.1% in 3QCY13, aswage hikes become effective, offsetting most of the gains fromfavorable currency.

� Also, we expect SGA to revert to 17.3% of sales, up from 14.7% (thelowest ever) in 2Q.

� Our PAT estimate for the quarter is INR1,167m, up 19.2% QoQ, drivenprimarily by uptick in INR revenues. Our implied PAT margin estimateis 18.8%, up 60bp QoQ.

� HEXW had guided for a strong 2H, and we model 4.3% QoQ growth in4Q, taking full-year revenue growth to 7.4%. Barings recently acquiredthe promoters' stake in the company for a maximum of INR135/share,casting doubts on further upside in the stock.

� The stock trades at 9.3x CY13E and 8.6x CY14E earnings. Neutral.

Key issues to watch out� Outlook on strategy under the new promoters� Guidance for 4QCY13 and margin outlook� Peoplesoft implementation and large deals outlook


EBITDA 2.6 4.1 5.2 5.7

PAT 2.7 3.4 4.1 4.5

EPS (INR) 8.9 10.9 13.8 14.9

EPS Gr. (%) 319.3 22.2 26.3 8.5

BV/Sh. (INR) 34.4 40.3 42.3 50.0

RoE (%) 26.3 27.8 32.5 29.9

RoCE (%) 23.6 31.2 37.2 34.9

Payout (%) 43.9 48.7 35.4 33.9

Valuations

P/E (x) 14.4 11.8 9.3 8.6

P/BV (x) 3.8 3.2 3.0 2.6

EV/EBITDA (x) 12.8 8.4 6.3 5.6

Div yld (%) 3.1 4.2 3.9 4.0

Bloomberg HEXW IN




1,6,12 Rel Perf. (%) -9 / 47 / 1

C–169October 2013


Quarterly Performance (IFRS) (INR Million)Y/E March FY13 FY14 FY13 FY14E


Revenues 96,160 98,580 104,240 104,540 112,670 127,385 128,912 130,510 403,520 499,478

Q-o-Q Change (%) 8.6 2.5 5.7 0.3 7.8 13.1 1.2 1.2 19.6 23.8

EBITDA 29,460 28,720 29,700 27,694 29,830 35,502 35,766 36,263 115,570 137,361

Margins (%) 30.6 29.1 28.5 26.5 26.5 27.9 27.7 27.8 28.6 27.5

Other Income 4,760 7,060 5,030 6,740 5,770 3,914 5,041 5,771 23,590 20,496

PAT 22,890 23,690 23,690 23,940 23,740 26,558 27,679 28,573 94,206 106,549

Q-o-Q Change (%) -1.2 3.5 0.0 1.1 -0.8 11.9 4.2 3.2 13.3 13.1

Diluted EPS (INR) 40.1 41.5 41.5 41.9 41.6 46.5 48.5 50.0 164.9 186.5

USD Revenues 1,752 1,797 1,911 1,938 1,991 2,038 2,079 2,105 7,398 8,213

Q-o-Q Change (%) -1.1 2.6 6.3 1.4 2.7 2.4 2.0 1.2 5.8 11.0

Operating Metrics

Gross Margin (%) 42.2 40.9 39.8 37.9 37.9 38.5 38.5 38.5 40.1 38.4

SGA (%) 11.6 11.8 11.3 11.4 11.4 10.7 10.7 10.7 11.5 10.9

Tax rate (%) 27.8 28.3 25.5 23.7 26.8 26.5 26.5 26.5 26.3 26.6

Net Employee additions 1,157 2,610 1,508 1,419 575 1,709 3,231 2,634 6,694 8,149

Utiliz. - excl. trainees (%) 71.6 73.3 73.2 73.9 75.9 77.9 76.5 75.6 73.0 76.5

Q-o-Q Volume Growth (%) 2.8 3.8 2.7 1.6 2.4 2.1 1.4 5.3 0.0 0.0

Q-o-Q Realization chg (%) (3.7) (0.2) 3.6 (0.2) (0.1) (0.1) (0.1) 0.0 - -

E: MOSL Estimates

InfosysCMP: INR3,006 Buy� INFO's guidance of 6-10% growth in annual USD revenues implies

flattish CQGR to meet the mid-point and 1.45% CQGR to meet thehigher end of the guidance. We expect the company to beat the higherend of its implied revenue growth guidance for FY14.

� We expect overall revenues to grow 2.4% QoQ to USD2.04b. Thisincludes negative impact of 60bp from cross-currency, implying CCrevenue growth of 3% QoQ. In INR terms, we expect revenue growthof 13.1% QoQ to INR127.4b.

� EBITDA margin is likely to expand 140bp QoQ, as tailwinds from 10.4%QoQ depreciation in INR should be offset by ~200bp headwind fromoffshore wage hikes becoming effective during the quarter.

� INFO has been aggressive in addressing cost optimization, and weexpect some gains from the lower hanging fruits to show on marginsas well. We expect overall utilization including trainees to increase by60bp QoQ to 73%.

� We expect PAT to grow 11.9% QoQ to INR26.6b, led by higher marginsduring the quarter.

� The stock trades at 16.1x FY14E and 14x FY15E EPS. Maintain Buy.

Key issues to watch out� Revenue growth guidance for FY14� Deal signings in the BITS segment and growth in the same� Performance on margins� Pricing movement QoQ


EBITDA 107.2 115.6 137.4 153.3

PAT 83.2 94.2 106.5 123.1

EPS (INR) 145.5 164.9 186.5 215.5

EPS Gr. (%) 21.9 13.3 13.1 15.6

BV/Sh. (INR) 585.0 695.8 829.4 986.3

RoE (%) 28.0 25.7 24.4 25.8

RoCE (%) 32.9 28.5 28.6 27.1

Payout (%) 32.3 25.5 24.1 23.2

Valuations

P/E (x) 20.7 18.2 16.1 14.0

P/BV (x) 5.1 4.3 3.6 3.0

EV/EBITDA (x) 14.1 12.8 10.3 8.7

Div Yield (%) 1.6 1.4 1.5 1.7

Bloomberg INFO IN


M. Cap. (INR b)/(USD b) 1,718 / 28

52-Week Range (INR) 3,173 / 2,190

1,6,12 Rel Perf. (%) -11 / -1 / 12

C–170October 2013


KPIT CumminsCMP: INR131 Neutral


EBITDA 2.1 3.7 5.3 5.5

PAT 1.2 2.0 3.2 3.5

EPS (INR) 8.0 10.6 15.9 17.5

EPS Gr. (%) 41.4 31.5 51.0 9.6

BV/Sh. (INR) 39.0 53.3 68.9 73.0

RoE (%) 22.4 23.6 26.7 25.2

RoCE (%) 20.6 30.2 34.4 31.0

Payout (%) 8.7 9.5 6.3 8.6

Valuations

P/E (x) 16.3 12.4 8.2 7.5

P/BV (x) 3.3 2.5 1.9 1.8

EV/EBITDA (x) 12.1 6.4 4.3 4.0

Div yld (%) 0.5 0.8 0.8 1.1

Bloomberg KPIT IN


M. Cap. (INR b)/(USD b) 26 / 0.4


1,6,12 Rel Perf. (%) -8 / 31 / 0

� KPIT expects higher revenue growth in 2QFY14 than in 1Q (3.1% QoQ).We expect USD revenues to grow 4.2% QoQ to USD113.4m. In INRterms, we expect revenue growth of 15.6% QoQ to INR7.09b.

� With wage hikes already effective in 1Q, we expect margins to expandby 320bp QoQ to 19.1% owing to sharp INR depreciation. Our SGAestimate for the quarter is 15.5%, down 20bp QoQ. In absolute terms,our SGA estimate is INR1,099m v/s INR960m in 4QFY13.

� Our PAT estimate for the quarter is INR770.9m, up 28.2% QoQ. Our PATmargin estimate is 10.9%, up 110bp QoQ. PAT would be boosted byhigher margins, but partially offset by forex losses.

� KPIT has guided revenues of USD465m-475m for FY14, a growth of13.3-15.7%. We estimate FY14 revenues at USD465.3m, up 13.4%.

� The SAP segment is likely to boost revenues and margins in 2HFY14.Top account, Cummins should sustain its 1Q levels in the near term.The two contribute ~43% to KPIT's revenues.

� The stock trades at 8.2x FY14E and 7.5x FY15E EPS. Maintain Neutral.

Key issues to watch out� Growth in top account (Cummins) and SAP segment� Overall revenue guidance� Outlook on margins



Revenues 5,383 5,672 5,633 5,699 6,132 7,087 7,359 7,714 22,386 28,292

QoQ Change (%) 42.1 5.4 4.7 1.2 7.6 15.6 3.8 4.8 50.3 26.4

Direct Expenses 3,506 3,703 3,706 3,725 4,200 4,634 4,803 4,970 14,640 18,607

SG&A 1,065 1,024 1,045 963 960 1,099 1,141 1,196 4,096 4,395

EBITDA 812 945 882 1,011 972 1,355 1,415 1,548 3,650 5,290

Margins (%) 15.1 16.7 15.7 17.7 15.9 19.1 19.2 20.1 16.3 18.7

Other Income 30 -191 77 -86 59 -80 -41 -13 -170 -75

Depreciation 113 114 118 121 122 130 140 145 466 537

Interest 35 34 42 42 63 63 63 63 154 252

PBT bef. Extra-ordinary items 694 605 800 762 847 1,083 1,171 1,326 2,860 4,427


Rate (%) 26.6 31.6 22.8 27.1 29.0 28.8 28.8 28.8 26.8 28.8

PAT after MI 486 407 599 512 601 771 834 944 2,003 3,150

QoQ Change (%) 16.9 (16.8) 47.2 (19.3) 17.5 28.2 8.1 13.3 62.0 64.3

Extra-ordinary Items 27 55 -94 0 0 0 0 0 -13 0

PAT aft. Minority and EO 513 461 504 512 601 771 834 944 1,990 3,150

QoQ Change (%) 24.9 (10.0) (1.6) 1.5 17.5 28.2 8.1 13.3 63.8 58.3

Diluted EPS (INR) 2.8 2.5 2.7 2.6 3.0 3.9 4.2 4.8 10.6 15.9

USD Revenues 98 103 103 106 109 113.4 119 124 410 465

QoQ Change (%) 33.5 5.5 0.0 2.0 3.1 4.2 4.7 4.8 33.6 13.4

Offshore util. (%) 74.1 74.7 72.9 74.1 73.4 74.0 74.0 75.0 73.9 74.1

Onsite util. (%) 94.7 94.5 92.8 94.3 94.2 94.0 94.0 95.0 94.1 94.3

E: MOSL Estimates

C–171October 2013




Revenues 5,630 5,963 5,901 6,124 6,477 7,613 7,829 8,088 23,618 30,007

Q-o-Q Change (%) 23.3 5.9 -1.0 3.8 5.8 17.5 2.8 3.3 23.3 27.0

Direct Expenses 3,442 3,570 3,517 3,745 3,824 4,282 4,391 4,502 14,274 16,999

SGA 1,014 1,074 1,180 1,216 1,462 1,718 1,738 1,779 4,484 6,698


Margins (%) 20.9 22.1 20.4 19.0 18.4 21.2 21.7 22.3 20.6 21.0

Other Income 52 74 70 154 117 96 106 120 350 439

Forex Gain / (Loss) 86 -415 142 -153 618 -114 0 0 -340 504

Depreciation & Amort. 159 159 151 155 181 193 201 216 624 790

Interest 3 4 2 1 1 1 1 1 10 4

PBT bef. Extra-ordinary 1,150 815 1,263 1,008 1,744 1,399 1,604 1,710 4,236 6,458


Rate (%) 22.6 11.4 21.8 21.7 22.4 23.0 23.5 23.5 20.0 23.1

Reported PAT 890 722 988 789 1,354 1,077 1,227 1,308 3,389 4,966

Q-o-Q Change (%) 63.3 -18.9 36.8 -20.1 71.6 -20.5 14.0 6.6 55.1 46.5

USD Revenue 105.5 107.3 109.9 113.0 117.7 122.8 126.3 130.5 435.7 497.2

Q-o-Q Change (%) 4.1 1.7 2.5 2.8 4.2 4.3 2.8 3.3 8.2 14.1

Util including trainees (%) 68.9 71.7 71.4 69.6 69.6 71.0 69.0 70.0 70.4 69.9

E: MOSL Estimates

MindTreeCMP: INR1,186 Neutral� MTCL reiterated its guidance of growing 2QFY14 USD revenues at a

rate similar to 1Q. We model QoQ revenue growth of 4.3% toUSD122.8m. Despite significant traction in overall deals, the Hi-techvertical is likely to witness QoQ decline.

� In INR terms, our growth estimate stands at INR7.6b or 17.5% QoQ. Foraccounting, MTCL follows the practice of taking the USD/INR rateprevalent at the beginning of a month for the whole month. Inconsistently depreciating INR scenario of 2Q, the QoQ depreciation inaverage realized INR is greater for MTCL than for peers.

� We estimate EBITDA margin at 21.4%, up 280bp QoQ. We expectsignificant tailwinds from currency to be offset by wage hikes effectiveduring the quarter for ~65% of the salary base.

� Our PAT estimate for the quarter is INR1,076.9m, which implies PATmargin of 14.1%, well below the PAT margin of 20.9% in the previousquarter, which was inflated by INR618m worth of forex gains. We modelINR114m of forex losses in 2QFY14.

� MTCL had reiterated its confidence of improving its growth rate inFY14 v/s FY13. This confidence emanates from deal wins worthUSD256m in the last two quarters.

� The stock trades at 10x FY14E and 9.1 FY15E earnings. Neutral.

Key issues to watch out� Performance and outlook of the Hi-tech vertical� Deal wins on the back of strong couple of quarters� Margin outlook in a weak currency environment


EBITDA 2.9 4.9 6.3 7.4

PAT 2.2 3.4 5.0 5.5

EPS (INR) 53.7 81.7 118.8 130.8

EPS Gr. (%) 116.5 52.2 45.4 10.1

BV/Sh. (INR) 233.5 314.5 400.9 531.7

RoE (%) 25.2 25.8 33.2 28.1

RoCE (%) 25.6 37.0 36.8 33.1

Payout (%) 7.4 14.7 11.8 13.0

Valuations

P/E (x) 22.1 14.5 10.0 9.1

P/BV (x) 2.2 3.7 2.9 2.2

EV/EBITDA (x) 15.1 9.0 6.7 5.2

Div Yld (%) 0.3 1.0 1.2 1.4

Bloomberg MTCL IN



52-Week Range (INR) 1,216 / 635

1,6,12 Rel Perf. (%) 9 / 25 / 73

C–172October 2013


Mphasis - Quarterly Performance (INR Million)Y/E October FY12 FY13 FY12 FY13E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

Revenues 13,672 13,289 13,551 13,062 12,571 14,054 15,398 17,656 53,574 59,679

Q-o-Q Change (%) 5.7 -2.8 2.0 -3.6 -5.4 11.8 9.6 14.7 5.1 11.4

Direct Expenses 9,995 9,454 9,596 9,088 9,052 10,168 11,136 12,300 38,133 42,656

Sales, Gen. & Admin. Exp. 1,155 1,221 1,280 1,274 1,191 1,468 1,463 1,818 4,930 5,940


Margins (%) 18.4 19.7 19.7 20.7 18.5 17.2 18.2 20.0 19.6 18.6

Other Income 338 340 441 394 423 290 193 -422 1,513 484

Depreciation 468 455 415 407 378 350 365 385 1,745 1,478

PBT bef. Extra-ordinary 2,392 2,499 2,701 2,687 2,373 2,358 2,627 2,732 10,279 10,090

Provision for Tax 544 605 614 594 529 593 701 710 2,357 2,533

Rate (%) 22.7 24.2 22.7 22.1 22.3 25.1 26.7 26.0 22.9 25.1

PAT bef. Extra-ordinary 1,848 1,894 2,087 2,093 1,844 1,765 1,926 2,022 7,922 7,557

Q-o-Q Change (%) -5.1 2.5 10.2 0.3 -2.6 -4.3 9.1 5.0 -4.6 -4.6

Diluted EPS (INR) 8.8 9.0 9.9 9.9 8.8 8.4 9.2 9.6 37.5 35.9

USD Revs 271 266 252 248 237 263 265 276.6 1,036 1,042

Q-o-Q Change (%) -2.0 -1.8 -5.2 -1.6 -6.0 11.0 1.0 4.2 -7.4 0.5

E: MOSL Estimates

MphasisCMP: INR428 Sell� We expect MPHL's 4QFY13 revenues to grow 4.2% QoQ to USD276.6m,

driven by Digital Risk and mature market growth.� The company is likely to report healthy growth, as (1) headwinds of

reducing emerging markets business are behind, with exit from Indiabusiness completed last quarter, (2) the pace of decline in HP businesshas reduced, and (3) HP's overall contribution to total revenues hasdeclined substantially. Digital Risk continues to grow at a healthy rate,with annualized exit rate of USD170m, last quarter.

� In INR terms, we expect revenues at INR17.6b, up 14.7% QoQ. EBITDAmargin is likely to expand 180bp QoQ to 20%, primarily on account ofexit from low margin India business and currency benefit. In absoluteterms, we expect EBITDA to grow 26.4% QoQ to INR3.54b.

� We expect SG&A expense to increase by 90bp to 10.3% v/s 9.4% in3QFY13. We have assumed tax rate of 26% for the quarter.

� PAT is likely to grow 5% QoQ to INR2.02b. Our PAT margin estimate is11.5%, down 100bp QoQ due to incremental investments in S&M, asguided by the management.

� The stock trades at 11.9x FY13E and 10.1x FY14E EPS. Maintain Sell.

Key issues to watch out� Outlook for Digital Risk, HP Channel and Direct Channel� Margin outlook post currency benefit and incremental investments

in sales� Change in headcount and hiring outlook

Financials & Valuation (INR b)Y/E October 2011 2012 2013E 2014ESa les 51.0 53.6 59.7 68.6

EBITDA 9.9 10.5 11.1 13.3

PAT 8.3 7.9 7.6 8.9

EPS (INR) 39.3 37.5 35.9 42.4

EPS Gr. (%) -19.1 -4.6 -4.3 18.0

BV/Sh. (INR) 185.7 209.6 216.9 236.0

RoE (%) 23.1 19.1 16.9 18.7

RoCE (%) 22.2 19.6 18.9 21.1

Payout (%) 16.5 45.3 50.1 47.2

Valuations

P/E (x) 10.9 11.4 11.9 10.1

P/BV (x) 2.3 2.0 2.0 1.8

EV/EBITDA (x) 7.3 6.1 7.1 5.6

Div yld (%) 1.5 4.0 4.2 4.7

Bloomberg MPHL IN




1,6,12 Rel Perf. (%) -1 / 4 / 3

C–173October 2013




Revenues 3,007 3,269 3,330 3,340 3,573 4,155 4,391 4,679 12,945 16,798

Q-o-Q Change (%) 12.3 8.7 1.9 0.3 7.0 16.3 5.7 6.6 29.4 29.8

EBITDA 807 890 824 831 777 931 1,062 1,280 3,352 4,049

Margins (%) 26.8 27.2 24.7 24.9 21.7 22.4 24.2 27.3 25.9 24.1

Other Income -47 -78 84 102 263 7 -41 -31 61 198

Depreciation 185 189 198 211 237 245 248 251 783 981

PBT bef. Extra-ordinary 575 623 710 722 803 693 772 997 2,630 3,266

Provision for Tax 160 176 215 203 232 204 228 294 754 959

Rate (%) 27.7 28.3 30.3 28.1 28.9 29.5 29.5 29.5 28.7 29.4

PAT aft. Minority and EO 416 446 495 519 571 489 544 703 1,876 2,307

Q-o-Q Change (%) 2.4 7.4 10.9 4.8 10.0 -14.4 11.4 29.1 32.3 23.0

Diluted EPS (INR) 10.4 11.2 12.4 13.0 14.3 12.2 13.6 17.6 46.9 57.7

USD Revenues 54.9 60.1 60.8 62.1 63.0 66.5 70.8 75.5 237.8 275.8

Q-o-Q Change (%) 6.3 9.4 1.2 2.2 1.5 5.5 6.5 6.6 14.7 16.0

E: MOSL Estimates

Persistent SystemsCMP: INR619 Buy� We expect PSYS' USD revenues to grow 5.5% QoQ to USD66.5m and

INR revenues to grow 16.3% QoQ to INR4.15b.� Growth in Services as well as IP-led business is likely to be strong. We

expect Services revenues to grow 4% QoQ, and HPCA (Radia) revenuesto drive IP-led segment growth of 10.8% QoQ.

� EBITDA margin should expand 70bp QoQ to 22.4%. 500bp tailwind tomargins (~450bp from currency and 40-50bp on lower costs) should beoffset by ~350bp headwind (260-270bp offshore wages, 20-30bpcampus joinees, ~50bp on higher CSR, and 20-30bp on new facility inUS).

� Our PAT estimate for the quarter is INR488.6m, down from INR571m inthe previous quarter due to lower other income (INR7m v/s INR263min 1Q) on the back of forex losses.

� The stock trades at 10.7x FY14E and 9.3x FY15E earnings. Buy.

Key issues to watch out� Revenue growth outlook in IP and SMAC� Commentary on potential of winning large deals� Strategy on reinvestment of currency benefits� Commentary on HPCA (Radia) renewals


EBITDA 2.3 3.4 4.0 4.3

Adj. PAT 1.4 1.9 2.3 2.7

Adj. EPS (INR) 35.4 46.9 57.7 66.8

EPS Gr. (%) 3.8 32.4 23.0 15.8

BV/Sh.(INR) 216.4 262.1 306.8 366.1

RoE (%) 17.9 20.2 20.9 20.4

RoCE (%) 17.5 14.7 16.0 16.8

Payout (%) 49.3 19.2 20.8 21.0

Valuations

P/E (x) 17.5 13.2 10.7 9.3

P/BV (x) 2.9 2.4 2.0 1.7

EV/EBITDA (x) 8.9 6.0 4.7 4.1

Div. Yield (%) 1.0 1.5 1.9 2.3

Bloomberg PSYS IN


M. Cap. (INR b)/(USD b) 25 / 0.4


1,6,12 Rel Perf. (%) -2 / 10 / 44

C–174October 2013


Quarterly Performance (IFRS) (INR Million)Y/E March FY13 FY14 FY13 FY14E


Revenues 148,687 156,208 160,699 164,301 179,871 207,982 211,334 217,361 629,895 816,548

Q-o-Q Change (%) 12.1 5.1 2.9 2.2 9.5 15.6 1.6 2.9 28.8 29.6

EBITDA 43,328 44,403 46,540 46,599 51,532 65,151 64,355 65,554 180,870 246,592

Margins (%) 29.1 28.4 29.0 28.4 28.6 31.3 30.5 30.2 28.7 30.2

Other Income 1,754 3,103 2,133 4,185 2,517 -588 1,101 1,772 11,174 4,802

PAT 32,806 35,121 35,518 35,969 37,962 45,803 46,456 47,855 139,413 178,075

Q-o-Q Change (%) 11.9 7.1 1.1 1.3 5.5 20.7 1.4 3.0 31.0 27.7

Diluted EPS (INR) 16.8 17.9 18.1 18.4 19.4 23.4 23.7 24.5 71.2 91.0

USD Revenues 2,728 2,853 2,948 3,040 3,165 3,321 3,409 3,506 11,568 13,400

Q-o-Q Change (%) 3.0 4.6 3.3 3.1 4.1 4.9 2.6 2.9 13.7 15.8

Operating Metrics

Gross Margin (%) 47.2 46.4 47.4 47.8 47.2 48.7 48.2 48.0 47.2 48.0

SGA (%) 18.1 18.0 18.4 19.4 18.6 17.3 17.7 17.8 18.5 17.8

Tax rate (%) 22.2 21.0 21.8 23.9 24.1 24.0 24.0 24.0 22.3 24.0

Util - excl. trainees (%) 81.3 81.6 81.7 82.0 82.7 84.1 82.7 82.2 81.7 82.9

Q-o-Q Volume Gr (%) 5.2 5.0 1.2 4.4 6.1 6.8 2.0 2.2 15.2 19.1

E: MOSL Estimates

Tata Consultancy ServicesCMP: INR1,947 Neutral� We expect 2QFY14 revenues to grow 4.9% QoQ to USD3,321m, driven

by [1] ~5% organic revenue growth in CC terms, [2] ALTI contributionof 1.2%, and [3] negative cross-currency impact of -1% QoQ.

� In INR terms, we expect revenue growth of 15.6% QoQ to INR208b.� There will be marginal impact from promotions during the quarter,

along with integration of lower margin ALTI. Despite these, we expectEBITDA margin to expand 270bp QoQ to 31.3%.

� Our SGA assumption for the quarter is 17.3% (v/s 18.6% in 1QFY14).� We expect negative other income of -INR588m (v/s INR2.5b in 1QFY14),

driven by forex loss of INR2.5b during the quarter.� Our PAT estimate stands at INR45.8b, up 20.7% QoQ. PAT margin would

be 22%, up 90bp QoQ. We have assumed effective tax rate of 24%(similar to 1Q).

� TCS has maintained its guidance of beating Nasscom's growth guidanceof 12-14% for FY14.

� The stock trades at 21.4x FY14E and 18.7x FY15E EPS. Maintain Neutral,with a price target of INR2,000.

Key issues to watch out� Commentary on sustainable margins� Probability of higher growth due to reinvestment of currency gains� Deal signings


EBITDA 144.2 180.9 246.6 268.3

PAT 106.4 139.4 178.1 204.0

EPS (INR) 54.4 71.2 91.0 104.2

EPS Gr. (%) 22.5 31.0 27.7 14.6

BV/Sh. (INR) 166.7 209.8 260.7 331.0

RoE (%) 36.7 37.8 38.7 35.2

RoCE (%) 44.1 43.8 48.4 42.2

Payout (%) 46.0 30.9 33.0 27.8

Valuations

P/E (x) 35.8 27.3 21.4 18.7

P/BV (x) 11.7 9.3 7.5 5.9

EV/EBITDA (x) 26.3 20.7 15.0 42.2

Div. yield (%) 1.3 1.1 1.5 1.5

Bloomberg TCS IN


M. Cap. (INR b)/(USD b) 3,811 / 61

52-Week Range (INR) 2,076 / 1,198

1,6,12 Rel Perf. (%) -4 / 19 / 47

C–175October 2013


Tech MahindraCMP: INR1,306 Buy� We expect TECHM's revenues to grow 2.8% QoQ to USD745m, partially

aided (50bp) by one month of revenues from the acquisition ofComplex IT. Revenues from BT are likely to decline sequentially, withgrowth in all other major segments.

� In INR terms, we expect revenue growth of 13.4% QoQ to INR46.5b.� We expect EBITDA margin to expand by 230bp QoQ on account of INR

depreciation, following partial offset of tailwinds, with transition-related expenses at onsite.

� Our PAT estimate for the quarter is INR6.7b (after adjusting forrestructuring fees), up 2.6% QoQ. This implies PAT margin of 14.4%,down 150bp QoQ. 1Q PAT was boosted by INR1.4b forex gains.

� TECHM trades at 10.6x FY14E and 10x FY15E EPS. Maintain Buy, with aprice target of INR1,580 (12x FY15E EPS).

Key issues to watch out� Commentary on large deals traction and success� Commentary on BT contract under re-negotiation� Large deals progress at Satyam

Financials & Valuation (INR b)*Y/E March 2012 2013 2014E 2015ESa les 54.9 143.3 182.3 198.3

EBITDA 9.2 30.6 40.3 41.1

Adj. PAT 9.3 19.8 26.1 27.9

Adj. EPS (INR) 70.4 93.2 122.8 131.1

EPS Gr. (%) 29.8 32.4 31.7 6.8

BV/Sh.(INR) 339.7 322.3 410.7 529.1

RoE (%) 26.0 32.6 33.9 28.5

RoCE (%) 14.3 35.3 33.7 28.6

Payout (%) 5.7 5.8 4.1 3.8

Valuations

P/E (x) 18.6 14.0 10.6 10.0

P/BV (x) 3.8 4.1 3.2 2.5

EV/EBITDA (x) 18.4 7.8 5.9 5.2

Div. Yield (%) 0.3 0.4 0.4 0.4

* TECHM standalone

Bloomberg TECHM IN


M. Cap. (INR b)/(USD b) 303 / 5

52-Week Range (INR) 1,434 / 865

1,6,12 Rel Perf. (%) -14 / 19 / 31



Revenues 33,727 35,237 36,683 37,673 41,032 46,535 47,100 47,594 143,320 182,261

Q-o-Q Change (%) 4.5 4.1 2.7 8.9 13.4 1.2 1.0 27.2

Direct Cost 21,007 22,271 22,761 23,968 25,693 27,971 28,293 29,999 90,007 111,957

Other Operating Exps 5,328 5,397 5,965 5,992 6,694 7,678 7,771 7,853 22,682 29,997


Margins (%) 21.9 21.5 21.7 20.5 21.1 23.4 23.4 20.5 21.4 22.1

Other Income 1,129 -697 1,308 381 2,073 188 25 609 2,121 2,895

Interest 251 214 204 253 223 224 224 224 922 895

Depreciation 915 908 866 1,207 1,174 1,297 1,283 1,269 3,896 5,022

PBT bef. Extra-ordinary 7,355 5,750 8,195 6,634 9,321 9,553 9,554 8,858 27,934 37,285

Provision for Tax 1,911 1,176 1,931 1,461 2,328 2,388 2,388 2,214 6,479 9,319

Rate (%) 26.0 20.5 23.6 22.0 25.0 25.0 25.0 25.0 23.2 25.0

Minority Interest -40 -15 -109 -137 -130 -130 -130 -130 -301 -520

Net Income bef. Extra-ordinary 5,404 4,559 6,155 5,036 6,863 7,034 7,035 6,513 21,154 27,446

Q-o-Q Change (%) -15.6 35.0 -18.2 36.3 2.5 0.0 -7.4 56.8 29.7

Adjust. for Restructuring item 335.0 335.0 335.0 335.0 335.0 335.0 335.0 335.0 1,340.0 1,340.0

Extra-ordinary items 0 0 -2,940 1,340 0 0 0 0 -1,600 0

Net Income aft. EO & Rest. fees 5,069 4,224 2,880 6,041 6,528 6,699 6,700 6,178 18,214 26,106

Q-o-Q Change (%) 1.5 -16.7 -31.8 109.8 8.1 2.6 0.0 -7.8 53.2 43.3

Diluted EPS (INR) 23.8 19.9 27.4 22.1 30.7 31.5 31.5 29.1 93.2 122.8

USD Revenues 615 644 675 698 724 745 760 768 2,633 2,996

Q-o-Q Change (%) 4.7 4.7 3.5 3.7 2.8 2.0 1.0 13.8

E: MOSL Estimates

C–176October 2013


Wipro Quarterly Performance (IFRS) (INR Million)Y/E March FY13 FY14 FY13 FY14E


Revenues 106,530 106,566 109,487 96,078 97,294 109,044 112,411 115,360 374,256 434,110

Q-o-Q Change (%) 7.9 0.0 2.7 -12.2 1.3 12.1 3.1 2.6 17.4 16.0

EBIT 18,722 18,587 18,700 17,067 17,650 22,273 23,569 24,699 67,346 88,190

Margins (%) 17.6 17.4 17.1 17.8 18.1 20.4 21.0 21.4 18.0 20.3

Other Income 1,223 2,662 3,402 2,744 2,918 1,778 2,227 3,189 11,250 10,111

PAT 15,802 16,106 17,164 17,373 16,233 18,435 19,779 21,389 61,362 75,835

Q-o-Q Change (%) 6.7 1.9 6.6 1.2 -6.6 13.6 7.3 8.1

Y-o-Y Change (%) 18.4 23.8 17.9 17.3 2.7 14.5 15.2 23.1 17.3 23.6

Diluted EPS (INR) 6.4 6.6 7.0 6.4 6.6 7.5 8.0 8.7 25.0 30.9

USD Revenues 1,515 1,541 1,577 1,585 1,588 1,627 1,663 1,698 6,218 6,576

Q-o-Q Change (%) -1.4 1.7 2.4 0.5 0.2 2.4 2.2 2.1 5.0 5.8

Gross Margin (%) 31.6 31.3 31.0 30.3 30.9 32.7 33.2 33.6 30.4 32.7

SGA (%) 14.0 13.9 13.9 12.5 12.8 12.3 12.3 12.2 12.4 12.4

IT Services EBIT (%) 21.0 20.7 20.2 20.2 20.0 22.1 22.8 23.4 20.5 22.1

Tax rate (%) 20.2 23.9 21.9 20.1 20.7 23.0 23.0 23.0 21.5 22.5

Net Employee additions 2,632 2,017 2,336 2,907 1,469 2,715 3,515 3,515 9,892 11,214

Utilization-incl.trainees (%) 69.5 67.5 65.0 65.1 64.7 66.1 66.0 66.0 66.7 65.7

Q-o-Q Volume Growth(%) 0.8 0.2 -1.0 2.5 0.9 3.4 1.7 1.8 4.2 6.3

Q-o-Q Realization Chg. (%) -2.2 1.5 3.3 -2.0 -0.7 -1.0 0.5 0.3 1.7 0.0

Offshore revenues (%) 46.2 46.6 46.2 46.6 46.1 46.3 46.2 46.3 46.2 46.1

Rev Guidance (USDm) 1,520- 1,520- 1,560- 1,585- 1,575- 1,620-

1,550 1,550 1,590 1,630 1,610 1,650

E: MOSL Estimates

WiproCMP: INR475 Buy� Wipro had guided 2-4% QoQ revenue growth for 2QFY14, implying

revenues of USD1,620m-1,650m.

� We model revenue growth at 3% QoQ in CC terms and at 2.4% inreported currency terms to USD1,627m.

� We expect SGA to be 12.3% (v/s 12.8% in 1Q) and EBIT margin to expand230bp QoQ to 20.4%.

� IT Services EBIT margin should expand 210bp QoQ to 22.1% on tailwindsfrom currency and some leverage from SGA, offsetting headwindsfrom wage hikes.

� Our PAT estimate for the quarter is INR18.4b, up 13.6% QoQ.

� We expect Wipro to sustain its performance for the next quarter aswell, and estimate 2-4% QoQ growth in CC terms.

� The stock trades at 15.4x FY14E and 14x FY15E earnings. Buy.

Key issues to watch out� Revenue growth guidance for 3QFY14� Commentary on margins and investment plans� Outlook on declining segments like Telecom OEMs and Hi-tech


EBITDA 74.1 83.7 98.2 104.8

PAT 62.5 72.0 85.8 94.2

EPS (INR) 21.3 25.0 30.9 34.0

EPS Gr. (%) -1.3 17.3 23.6 10.1

BV/Sh. (INR) 116.5 115.6 138.0 162.7

RoE (%) 23.8 25.3 27.6 25.5

RoCE (%) 20.2 21.9 25.8 24.1

Payout (%) 28.2 28.0 24.3 23.5

Valuations

P/E (x) 22.3 19.0 15.4 14.0

P/BV (x) 4.1 4.1 3.4 2.9

EV/EBITDA (x) 16.5 13.8 10.6 9.6

Div Yld (%) 1.3 1.5 1.6 1.7

Bloomberg WPRO IN


M. Cap. (INR b)/(USD b) 1,169 / 19


1,6,12 Rel Perf. (%) -5 / 4 / 20

C–177October 2013

September 2013 Results Preview | Sector: Telecom

Seasonal weakness - wireless traffic to decline ~3% QoQ: In 2QFY14, we expect averagewireless traffic (Bharti/Idea/RCom/Vodafone) to decline ~3% QoQ. At the aggregatelevel, 2Q traffic growth has historically declined by 6-7 percentage points as comparedto the average QoQ growth witnessed during the preceding three quarters (3Q-1Q).Based on the average traffic growth of 3% in the preceding three quarters (3QFY13-1QFY14), a 'normal' seasonal impact should result in ~3% decline in traffic at theaggregate level, in-line with our estimates.

Blended RPM to remain flat: Post 4-6% increase in 1QFY14, we expect voice RPM toremain flat QoQ on a blended basis. TRAI guidelines of reduction in SMS terminationcharges and double confirmation for VAS services are likely to impact "non-voicenon-data" revenues (9-10% of India wireless revenues for Bharti/Idea) but should beoffset by strong data revenue growth (~7% of wireless revenues for Bharti/Idea).

EBITDA margin to decline 150/190bp QoQ for Bharti/Idea: We expect 150-190bp EBITDAmargin decline for Bharti/Idea due to negative operating leverage. Our estimatesimply 7/9% QoQ domestic wireless EBIDTA decline for Bharti/Idea, in line with seasonalweakness.

Bharti Africa - expect performance to stabilize: Post disappointments during the pastfew quarters in the Africa business, led by regulatory/political uncertainties as wellas competitive action, we expect the performance to stabilize. We model 2/3% QoQgrowth in USD denominated revenues/EBITDA for Bharti Africa.

Subscriber additions remain muted; Aircel's net adds leadership surprises: Subscriberadditions in 2QFY14 remained positive but relatively muted, likely due to seasonalweakness as well as continued operator discipline towards increasing channelefficiencies. We note that Indian wireless subscriber base had declined by 71m duringthe period July 2012 to February 2013, led by stringent TRAI regulations on thesubscriber acquisition process, decline in industry level channel commissions, andfootprint reduction by challengers. Aircel added the highest subscribers for the secondstraight month in August. Given the recent RPM increase for wireless operators (4-6%QoQ in 1QFY14), we would watch for the net adds trend to ascertain whether Aircel'sstrong subscriber growth is driven by opening up of any pricing advantage.

Abbreviations and acronymsRPM: revenue per minute

TRAI: Telecom Regulatory

Authority of India

ARPU: average revenue per

user

MOU: minutes of use



27.09.13 % YoY % QoQ % YoY % QoQ % YoY % QoQBharti Airtel 325 Buy 209,143 7.8 3.2 64,406 8.5 -1.6 3,350 -53.5 -51.4Bharti Infratel 159 Neutral 26,670 4.4 1.7 10,338 7.9 -2.0 3,428 38.4 -4.1Idea Cellular 172 Buy 63,353 19.2 -3.1 19,175 34.8 -8.7 4,309 79.6 -11.7Reliance Comm 151 Neutral 53,458 2.8 -1.2 16,735 2.2 -1.6 1,383 4.6 6.1Sector Aggregate 352,624 8.6 1.2 110,654 11.1 -3.0 12,470 -7.0 -25.1

Shobhit Khare ([email protected]) / Anil Shenoy ([email protected])

TelecomCompanies Covered

Bharti Airtel

Bharti Infratel

Idea Cellular

Reliance Communication

C–178October 2013


Wireless subscriber net additions (m)

Industry subscriberadditions have stabilized

Sharp reserve price cut by TRAI re-confirms that policy regime turning accommodative;spectrum auction expected in January 2014; spectrum trading can accelerateconsolidation: Recent TRAI recommendations re-confirm our view of a moreaccommodative stance by the regulator. The Supreme Court mandated spectrumauction as well as auction for renewal of spectrum for two operators each in Delhi/Mumbai/Kolkata is likely to be scheduled in January 2014. TRAI has recommended~37%/62% cut in reserve price for 1800MHz/900MHz (for Delhi, Mumbai and Kolkata)to ~INR75b/INR33b. The reserve price is at the upper end of our spectrum valuationestimate of INR45b-75b. Also, TRAI has allowed spectrum trading, which can be asignificant reform and can accelerate the pace of industry consolidation, in our view.Assuming spectrum valuation at current reserve prices, our next four-year spectrumliability incorporated in current target prices (based on 75% of earlier reserve price)would decline for Bharti from ~INR188b (INR47/share) to ~INR142b (INR36/share) andfor Idea from ~INR129b (INR39/share) to ~INR118b (INR36/share).

Passive consolidation "in progress" - M&A to follow?: We believe incumbents couldbe gearing up to be natural consolidators post announcement of final policy on M&A(expected in October 2013), given (1) increased market maturity (2) funding/leverageconstraints for challengers, and (3) some gaps in incumbents' portfolio like 3G darkcircles and circles where their revenue market share is below 15% (especially Idea,with single-digit revenue market share in 8/22 circles).

Valuation and view: Over FY13-15, we expect 15/26/11% EBITDA CAGR for Bharti/Idea/RCom led by 6/10/4% traffic CAGR and 4-5% RPM CAGR in the India wireless business.We reiterate Buy on Bharti (trades at ~6.1x proportionate FY15E EV/EBITDA) and Idea(trades at ~6.5x FY15E EV/EBITDA), and Neutral on RCom (trades at ~7.4x FY15E EV/EBITDA).

Source: TRAI, MOSL

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C–180October 2013


Bharti: Non-voice contribution

Traditional VAS and SMSare likely to be under

pressure, offset bycontinued strong data

growth

Leverage remainsreasonable for Bharti/Idea, but alarming for

RCom

Idea: Non-voice contribution

Net Debt/EBITDA (FY13)

Net Debt/Equity (FY13)

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C–181October 2013


2QFY14: Summary Expectations

Wireless KPIs FY12 FY13 FY14 YoY QoQ

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2QE (%) (%)

EOP Wireless Subs (m)

Bharti (India) 169 173 176 181 187 186 182 188 191 193 4.0 1.3

I d e a 95 100 106 113 117 115 114 122 125 127 9.8 1.5

RCOM 143 147 150 153 155 135 119 123 126 128 -5.3 1.6

Vodafone - India 142 145 148 150 154 153 147 152 155 154 1.1 -0.4

AV. Wireless Subs (m)

Bharti (India) 166 171 174 178 184 187 184 185 190 192 2.9 1.3

I d e a 92 98 103 110 115 116 115 118 123 126 8.2 2.1

RCOM 139 145 149 152 154 145 127 121 124 127 -12.4 1.9

Vodafone - India 138 143 146 149 152 153 150 150 154 155 1.0 0.6

ARPU (INR/month)

Bharti (India) 190 183 187 189 185 177 185 193 200 190 7.4 -4.9

I d e a 160 155 159 160 156 148 158 167 174 164 10.7 -5.9

RCOM 103 101 100 99 98 102 119 128 129 125 23.0 -2.9

Vodafone - India 169 164 167 173 174 169 176 187 196 189 11.8 -3.6

MOU/Sub

Bharti (India) 445 423 419 431 433 417 435 455 455 433 3.9 -4.9

I d e a 391 364 369 379 379 359 384 406 398 374 4.3 -5.9

RCOM 233 227 224 227 228 236 271 291 283 275 16.3 -3.0

Vodafone India (reported) 308 297 303 318 324 313 329 344 346 334 6.4 -3.6

Vodafone India (adj) 411 396 405 424 433 418 438 459 461 445 6.4 -3.6

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 3.4 0.0

I d e a 40.9 42.6 43.1 42.2 41.2 41.2 41.1 41.1 43.7 43.7 6.1 0.0

RCOM 44.4 44.7 44.5 43.7 43.1 43.2 43.8 43.9 45.6 45.7 5.8 0.1

Vodafone India (reported) 54.8 55.2 55.0 54.4 53.6 53.9 53.6 54.3 56.6 56.6 5.0 0.0

Vodafone India (adj) 41.1 41.4 41.3 40.8 40.2 40.4 40.2 40.7 42.5 42.5 5.6 0.0

Wireless traffic (B min)

Bharti (India) 221 217 219 231 239 234 241 253 258 249 6.4 -3.5

I d e a 109 106 114 124 131 126 132 143 147 141 12.6 -4.0

RCOM 98 99 100 103 105 102 103 105 106 104 1.8 -1.2

Vodafone India (reported) 128 128 133 142 148 144 148 155 160 155 7.5 -3.0

Vodafone India (adj) 170 170 178 190 197 192 197 207 213 206 7.5 -3.0



85

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Sens ex Inde xMOSL Telecom Index

C–182October 2013


Quarterly F inancials (INR b) FY12 FY13 FY14 YoY QoQ

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2QE (%) (%)

Revenue

Bharti (ex Africa) 126.3 126.8 131.6 134.2 126.6 126.9 131.0 133.6 141.2 138.9 9.5 -1.6

Bharti (consolidated) 169.7 172.7 184.8 187.3 185.6 188.1 193.6 195.8 202.6 209.1 11.2 3.2

I d e a 45.2 46.2 50.3 53.7 55.0 53.1 55.8 60.6 65.4 63.4 19.2 -3.1

RCOM 53.0 50.4 50.5 53.1 53.2 52.0 53.0 54.1 54.1 53.5 2.8 -1.2

Vodafone - India (implied) 70.0 70.5 73.3 77.4 79.4 77.7 79.2 84.1 90.4 87.7 12.9 -3.0

EBITDA (INR b)

Bharti (ex Africa) 46.0 45.7 45.2 47.4 40.4 40.9 41.5 45.2 49.3 46.0 12.5 -6.6

Bharti (consolidated) 57.1 58.2 59.6 62.3 54.9 57.0 57.7 60.6 65.4 64.4 13.1 -1.6

I d e a 12.0 11.9 13.4 15.1 14.4 14.2 14.7 17.5 21.0 19.2 34.8 -8.7

RCOM 16.0 16.1 16.1 16.3 16.5 16.4 16.5 16.7 17.0 16.7 2.2 -1.6

EBITDA Margin (%)

Bharti (ex Africa) 36.4 36.1 34.4 35.3 31.9 32.3 31.6 33.9 34.9 33.1 88bp -178bp

Bharti (consolidated) 33.6 33.7 32.2 33.3 29.6 30.3 29.8 30.9 32.3 30.8 51bp -150bp

I d e a 26.6 25.7 26.7 28.1 26.1 26.8 26.4 28.9 32.1 30.3 350bp -187bp

RCOM# 30.2 31.8 31.9 30.7 31.0 31.5 31.2 30.9 31.4 31.3 -19bp -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 12.1 -13.1 -18.5

Bharti (consolidated) 12.2 10.3 10.1 10.1 7.6 7.2 2.8 5.1 6.9 3.4 -53.5 -51.4

I d e a 1.8 1.1 2.0 3.4 2.3 2.4 2.3 3.8 4.9 4.3 79.6 -11.7

RCOM 2.2 3.2 2.4 2.0 1.9 1.3 1.1 -2.4 1.3 1.4 4.6 6.1

EPS (INR)

Bharti 3.2 2.7 2.7 2.7 2.0 1.9 0.7 1.3 1.8 0.8 -55.9 -53.4

I d e a 0.5 0.3 0.6 0.7 0.7 0.7 0.7 0.9 1.4 1.3 79.3 -6.9

RCOM 1.1 1.6 1.2 1.0 0.9 0.6 0.6 -1.2 0.6 0.7 4.6 6.1

Capex (INR b)

Bharti (ex Africa) 24.7 20.6 7.8 11.0 26.5 25.5 12.0 18.8 12.6 20.6 -19.0 64.0

I d e a 10.4 11.0 9.0 8.4 4.1 9.7 6.5 13.3 4.3 5.1 -47.8 18.0

RCOM 3.6 3.5 3.6 4.3 3.7 4.2 4.2 3.4 2.5 3.1 -26.7 26.8

* 2QFY13 adjusted for one-time interconnect revenue of ~INR5.9b and one-time EBITDA of ~INR2.4b



TelecommunicationBharti Airtel 325 Buy 6.0 7.7 13.7 54.2 42.4 23.7 8.1 7.1 5.8 4.2 5.2 8.4Bharti Infratel 159 Neutral 5.6 7.4 9.9 28.6 21.5 16.2 8.7 7.9 7.0 6.3 8.0 10.3Idea Cellular 172 Buy 3.1 6.0 8.9 56.4 28.8 19.3 11.7 8.2 6.5 7.4 12.8 16.6Reliance Comm 151 Neutral 0.9 4.9 11.2 160.3 31.0 13.5 10.6 9.3 7.4 0.6 3.4 7.5Sector Aggregate 55.4 33.5 19.7 9.1 7.7 6.3 4.0 6.1 9.5

C–183October 2013




Revenue 185,601 193,999 193,624 195,821 202,639 209,143 216,734 224,461 769,045 852,977

YoY Growth (%) 9.3 12.3 4.8 4.6 9.2 7.8 11.9 14.6 7.6 10.9

EBITDA 54,856 59,369 57,749 60,605 65,449 64,406 68,582 73,454 232,579 271,891

YoY Growth (%) -3.9 2.1 -3.1 -2.8 19.3 8.5 18.8 21.2 -1.9 16.9

QoQ Growth (%) -12.0 8.2 -2.7 4.9 8.0 -1.6 6.5 7.1

Margin (%) 29.6 30.6 29.8 30.9 32.3 30.8 31.6 32.7 30.2 31.9

Net Finance Costs 7,367 9,250 12,310 11,157 11,676 13,037 10,006 9,762 40,085 44,481

Depreciation & Amortization 35,901 36,891 37,350 38,006 38,470 41,430 41,950 42,578 148,148 164,429


Income Tax Expense / (Income) 4,543 7,195 6,192 7,254 8,573 7,079 8,785 10,014 25,183 34,450

Profit after Tax 7,751 7,016 2,839 5,063 7,553 3,738 8,776 12,097 22,669 32,164

Minority interest -129 196 -2 23 -664 -388 -395 -395 88 -1,842

Reported Net Profit / (Loss) 7,622 7,212 2,836 5,086 6,889 3,350 8,380 11,702 22,757 30,322

YoY Growth (%) -37.3 -29.8 -72.0 -49.4 -9.6 -53.5 195.4 130.1 -46.6 33.2

Consolidated net debt (INR b) 656 612 585 586 593 674 648 631 586 631

India - Mobi le Traffic (B Min) 239 234 241 253 258 249 257 267 968 1,032

QoQ Growth (%) 3.7 -2.1 2.8 5.1 2.1 -3.5 3.0 4.0

India - Mobile RPM (p/min) 42.7 42.6 42.6 42.4 44.0 44.0 44.5 45.0 42.4 44.4

QoQ Growth (%) -2.6 -0.2 -0.1 -0.5 3.9 0.0 1.2 1.1

Africa - Revenue (USD m) 1,066 1,097 1,133 1,120 1,062 1,085 1,124 1,162 4,416 4,433

Africa - EBITDA (USD m) 275 298 300 285 283 291 306 313 1,157 1,193

Africa - EBITDA margin (%) 25.8 27.1 26.5 25.4 26.7 26.8 27.2 26.9 26.2 26.9

E: MOSL Estimates

Bharti AirtelCMP: INR325 Buy� We expect consolidated revenues to grow 8% YoY and 3% QoQ to

INR209.1b. India revenues would grow 5% YoY to INR139b while Africabusiness revenues would grow 2% QoQ to USD1.08b.

� Consolidated EBITDA margin is likely to decline by ~150bp. We expect~180bp QoQ EBITDA margin decline for the India business, largely dueto decline in traffic at flat RPM due to seasonal weakness.

� India mobile revenues would decline 3% QoQ to INR112b, due to 3.5%QoQ traffic decline and flat wireless RPM. We estimate EBITDA marginfor mobile business at 30.4%.

� After weak performance in 1QFY14 (revenue decline of 5%), Africabusiness is expected to post stronger results, with 2/3% revenue/EBITDA growth QoQ in USD terms. We estimate an ARPU of USD5.5 andsubscriber base of 67m.

� Consolidated net profit is likely to decline 54% YoY to INR3.4b. PAT forIndia & SA is expected to remain flat YoY.

� We have estimated a forex loss of INR 2.8b for Bharti for 2QFY14.� Bharti trades at proportionate EV/EBITDA of 7.6x FY14E and 6.1x FY15E.

Maintain Buy.

Key issues to watch out� QoQ mobile traffic growth in India business (we expect 3.5% decline),

forex loss (we have modeled INR 2.8b), African business financials(we have 2/3% revenue/EBITDA growth QoQ in USD terms.


EBITDA 237.1 232.6 271.9 309.4

Adj. Net Profit 42.6 22.8 30.3 54.7

Adj. EPS (INR) 11.2 6.0 7.7 13.7

Adj. EPS Gr. (%) -29.6 -46.6 27.9 78.7

BV/Sh (INR) 140.7 143.4 158.5 171.4

RoE (%) 8.1 4.2 5.2 8.4

RoCE (%) 6.2 4.3 5.0 6.2

Div. payout (%) 10.0 10.0 10.0 10.0

Valuations

P/E (x) 28.9 54.2 42.4 23.7

P/BV (x) 2.3 2.3 2.1 1.9

EV/EBITDA (x) 8.1 8.0 7.6 6.1

Div. Yield (%) 0.3 0.2 0.2 0.4

Bloomberg BHARTI IN


M. Cap. (INR b)/(USD b) 1,300 / 21


1,6,12 Rel Perf. (%) 1 / 7 / 18

C–184October 2013




Sales 24,165 25,555 26,264 26,736 26,220 26,670 27,172 27,682 102,720 107,744

YoY Change (%) 11.3 8.5 4.4 3.5 3.5 8.7 4.9


EBITDA 8,859 9,578 9,816 10,049 10,550 10,338 10,497 10,659 38,302 42,043

YoY Change (%) -16.7 19.1 7.9 6.9 6.1 8.2 9.8

EBITDA margin (%) 36.7 37.5 37.4 37.6 40.2 38.8 38.6 38.5 37.3 39.0

Depreciation 5,396 5,528 5,620 5,655 5,528 5,597 5,683 5,771 22,199 22,579

Interest 849 1,033 996 1,067 1,044 1,039 1,037 1,032 3,945 4,151

Other Income 543 646 569 1,369 1,469 1,484 1,487 1,502 3,127 5,942

PBT 3,157 3,663 3,769 4,696 5,447 5,186 5,264 5,358 15,285 21,254

Tax 1,023 1,186 1,228 1,845 1,871 1,758 1,784 1,811 5,282 7,225


Adjusted net profit 2,134 2,477 2,541 2,873 3,576 3,428 3,479 3,545 10,003 14,029

YoY Change (%) 34.3 67.6 38.4 36.9 23.4 33.2 40.3

Revenue mix

Rent revenue mix (%) 63 62 62 61 61 61 61 61 62 61

Energy & other reimbursements (%) 37 38 38 39 39 39 39 39 38 39

E: MOSL Estimates

Bharti InfratelCMP: INR159 Neutral� We expect revenue to grow 1.7% QoQ to INR26.7b.

� Revenue from rent is likely to grow 1.9% QoQ, while energy and otherreimbursements are likely to grow 1.5% QoQ.

� We expect EBITDA to decline 2% QoQ to INR10.34b due to one-offincome of INR193m in 1QFY14; proforma EBITDA is expected to remainlargely flat. EBITDA margin would decline ~150bp QoQ to 38.8%;however, profroma EBITDA margin is likely to improve by ~35bp.

� We expect 4.1% QoQ decline in reported PAT to INR3.43b. On a like-to-like basis, PAT is expected to increase 7% QoQ.

� Bharti Infratel trades at an EV/EBITDA of 6.9x FY14E and 6.1x FY15E.Neutral.

Key issues to watch out� EBITDA margin (we expect 38.8%), Rental revenue mix (we expect

61%).

Financials & Valuation (INR b)Y/E March 2013 2014E 2015ENet Sales 102.7 107.7 117.5

EBITDA 38.3 42.0 46.5

Adj. Net Profit 10.0 14.0 18.6

Adj. EPS (INR) 5.6 7.4 9.9

Adj. EPS Gr. (%) 29.6 33.0 32.9

BV/Sh (INR) 91.0 94.1 98.1

RoE (%) 6.3 8.0 10.3

RoCE (%) 5.6 7.0 8.6

Div. payout (%) 86.5 58.2 60.1

Valuations

P/E (x) 28.6 21.5 16.2

P/BV (x) 1.7 1.7 1.6

EV/EBITDA (x) 7.7 6.9 6.1

Div. Yield (%) 3.0 2.7 3.7

Bloomberg BHIN IN


M. Cap. (INR b)/(USD b) 301 / 5


1,6,12 Rel Perf. (%) 13/-15/-

C–185October 2013



1Q 2Q 3Q 4Q# 1Q# 2QE 3QE 4QE

Gross Revenue 55,037 53,140 55,785 60,614 65,388 63,353 65,841 69,213 224,578 263,794

YoY Growth (%) 21.7 15.0 10.9 12.9 18.8 19.2 18.0 14.2 14.9 17.5

QoQ Growth (%) 2.5 -3.4 5.0 8.7 7.9 -3.1 3.9 5.1

EBITDA 14,355 14,225 14,734 17,491 21,013 19,175 20,140 21,592 60,045 81,670

YoY Growth (%) 19.2 19.9 9.6 16.1 46.4 34.8 36.7 23.4 17.9 36.0

QoQ Growth (%) -4.8 -0.9 3.6 18.7 20.1 -8.7 5.0 7.2

Margin (%) 26.1 26.8 26.4 28.9 32.1 30.3 30.6 31.2 26.7 31.0




Income Tax Exp. / (Income) 1,019 1,136 1,196 2,313 2,572 2,320 2,710 3,144 5,664 10,746

Adj Net Profit / (Loss) 2,342 2,400 2,286 3,842 4,878 4,309 5,033 5,838 10,110 19,807

YoY Growth (%) 32.1 126.9 13.7 12.0 108.2 79.6 120.2 52.0 39.8 95.9

Margin (%) 4.3 4.5 4.1 6.3 7.5 6.8 7.6 8.4 4.5 7.5

Mobile ARPU (INR/month) 156 148 158 167 174 164 167 170 156 166

QoQ Growth (%) -2.5 -5.1 6.8 5.7 4.2 -5.9 1.7 2.1 -0.9 6.3

Mobile MOU/sub/month 379 359 384 406 398 374 377 375 376 379

QoQ Growth (%) 0.0 -5.3 7.0 5.7 -2.0 -5.9 0.6 -0.4 1.2 0.8

Mobi le Traffic (B Min) 131 126 132 143 147 141 146 150 532 584

QoQ Growth (%) 5.3 -4.0 5.2 8.5 2.8 -4.0 3.0 2.9 17.4 9.8

Mobile RPM (INR) 0.41 0.41 0.41 0.41 0.44 0.44 0.44 0.45 0.41 0.44

QoQ Growth (%) -2.5 0.2 -0.2 0.0 6.3 0.0 1.1 2.4 -2.1 5.5

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: INR172 Buy� Idea's consolidated revenues are likely to grow 19% YoY (decline 3%

QoQ) to INR63.4b.

� We expect Idea to report mobile traffic decline of 4% QoQ (13% growthYoY). We expect RPM to remain flat QoQ (6% growth YoY).

� ARPU is likely to decline 6% QoQ to INR164 (v/s 4% increase in 1QFY14).

� EBITDA margin would decline 190bp QoQ to 30.3%. EBITDA loss in newcircles is estimated at INR1.73b.

� Net profit is expected to decline 12% QoQ to INR4.3b.

� Idea trades at an EV/EBITDA of 8.2x FY14E and 6.5x FY15E. MaintainBuy.

Key issues to watch out� QoQ RPM trend (we expect RPM to remain flat), mobile traffic (We

expect 4% QoQ decline) & EBITDA loss in new circles (we expect INR1.73b).


EBITDA 50.9 60.0 81.7 95.6

Adj. Net Profit 7.2 10.1 19.8 29.6

Adj. EPS (INR) 2.2 3.1 6.0 8.9

Adj. EPS Gr. (%) -19.6 39.6 95.6 49.4

BV/Sh (INR) 39.5 43.6 49.8 57.7

RoE (%) 5.7 7.4 12.8 16.6

RoCE (%) 5.4 5.7 8.2 11.5

Div. Payout (%) 0.0 11.5 11.5 11.5

Valuations

P/E (x) 78.7 56.4 28.8 19.3

P/BV (x) 4.4 4.0 3.5 3.0

EV/EBITDA (x) 13.8 11.6 8.2 6.5

Div. Yield (%) 0.0 0.2 0.4 0.6

Bloomberg IDEA IN


M. Cap. (INR b)/(USD b) 571 / 9


1,6,12 Rel Perf. (%) 1 / 47 / 94

C–186October 2013




Gross Revenue 53,192 52,020 53,013 54,059 54,117 53,458 55,055 56,911 210,035 219,541

YoY Growth (%) 7.7 3.2 4.9 1.8 1.7 2.8 3.9 5.3 3.3 4.5

QoQ Growth (%) 0.2 -2.2 1.9 2.0 0.1 -1.2 3.0 3.4

EBITDA 16,502 16,382 16,533 16,684 17,012 16,735 18,014 19,376 66,101 71,137

YoY Growth (%) 3.0 2.1 2.6 2.2 3.1 2.2 9.0 16.1 2.5 7.6

QoQ Growth (%) 1.1 -0.7 0.9 0.9 2.0 -1.6 7.6 7.6

Margin (%) 31.0 31.5 31.2 30.9 31.4 31.3 32.7 34.0 31.5 32.4



Profit before Tax 1,875 1,323 1,142 -1,683 1,311 1,391 3,032 4,365 2,657 10,099

Income Tax Expense / (Income) -39 0 0 751 7 7 16 23 712 54

Adjusted Net Profit / (Loss) 1,914 1,323 1,142 -2,434 1,304 1,383 3,016 4,342 1,945 10,045

YoY Growth (%) -14.4 -59.0 -52.6 -220.7 -31.9 4.6 164.0 -278.4 -80.3 416.4

QoQ Growth (%) -5.1 -30.9 -13.6 -313.1 -153.6 6.1 118.0 43.9

Margin (%) 3.6 2.5 2.2 -4.5 2.4 2.6 5.5 7.6 0.9 4.6

Extraordinary Exp/Minority Interest 290 302 87 -5,461 220 250 250 250 -4,782 970

Reported Net Profit / (Loss) 1,624 1,021 1,055 3,027 1,084 1,133 2,766 4,092 6,727 9,075

Wireless ARPU (INR/month) 98 102 119 128 129 125 128 130 109 128

QoQ Growth (%) -1.0 3.8 16.6 7.5 1.1 -2.9 1.9 2.1 6.9 17.6

Wireless MOU/sub/month 228 236 271 291 283 275 276 277 251 278

QoQ Growth (%) 0.4 3.6 14.8 7.4 -2.7 -3.0 0.5 0.5 9.0 10.6

Wireless Traffic (B Min) 105 102 103 105 106 104 107 109 416 426

QoQ Growth (%) 1.8 -2.5 0.5 2.3 0.2 -1.2 2.2 2.4 4.1 2.4

Wireless RPM (INR) 0.43 0.43 0.44 0.44 0.46 0.46 0.46 0.47 0.43 0.46

QoQ Growth (%) -1.3 0.2 1.6 0.1 3.9 0.1 1.4 1.6 -1.8 6.3

E: MOSL Estimates

Reliance CommunicationsCMP: INR151 Neutral� We expect revenues to decline 1.2% QoQ to INR53.4b.

� After 4% RPM growth in 1QFY14, we expect RPM to remain flat atINR0.46.

� With lower impact of seasonality on RCom, wireless traffic decline islikely to be relatively lower at 1.2% to 104b minutes.

� Consolidated EBITDA is likely to decline 2% QoQ to INR16.7b.

� We expect RCom to report proforma PAT of INR1.38b.

� RCom trades at an EV/EBITDA of 9.3x FY14E and 7.4x FY15E. Neutral.

Key issues to watch out� RPM trend (we expect flat RPM), traffic growth (we expect 1.2%

decline).


EBITDA 64.5 66.1 71.1 81.4

Adj. Net Profit 9.9 1.9 10.0 23.1

Adj. EPS (INR) 4.8 0.9 4.9 11.2

Adj. EPS Gr. (%) -33.8 -80.3 416.4 130.3

BV/Sh (INR) 157.9 142.8 143.8 154.8

RoE (%) 2.9 0.6 3.4 7.5

RoCE (%) 2.7 3.3 3.8 5.6

Div. Payout (%) 6.5 9.0 6.6 2.8

Valuations

P/E (x) 31.6 160.5 31.1 13.5

P/BV (x) 1.0 1.1 1.1 1.0

EV/EBITDA (x) 10.4 10.6 9.3 7.4

Div. Yield (%) 0.2 0.2 0.2 0.2

Bloomberg RCOM IN


M. Cap. (INR b)/(USD b) 312 / 5


1,6,12 Rel Perf. (%) 25 / 169 / 131

C–187October 2013

September 2013 Results Preview | Sector: Utilities



27.09.13 % YoY % QoQ % YoY % QoQ % YoY % QoQCESC 336 Buy 14,675 9.2 2.2 3,265 5.0 1.7 1,411 3.8 7.7Coal India 307 Neutral 156,744 7.6 -4.8 32,285 12.8 -18.4 33,050 7.4 -11.5Jaiprakash Power 16 Buy 10,134 11.9 28.9 8,591 5.9 46.0 3,325 -9.2 182.1JSW Energy 46 Neutral 21,963 5.8 -9.7 8,028 39.2 -13.0 2,510 55.4 -38.9NHPC 20 Neutral 18,312 3.3 13.1 12,512 4.0 16.9 8,455 16.3 18.1NTPC 148 Buy 144,566 -10.3 -7.4 36,803 -12.9 -13.7 22,167 17.5 -4.7Power Grid Corp. 99 Buy 37,413 21.2 2.0 32,479 21.7 2.6 11,327 12.5 -1.2PTC India 46 Buy 31,146 11.5 12.4 300 -47.3 -11.8 242 -45.7 -17.3Reliance Infrastructure 393 Buy 35,018 0.0 6.8 4,425 -2.4 0.6 3,137 -24.3 -16.2Tata Power 82 Neutral 96,643 25.5 3.5 15,330 1.6 -25.8 1,369 -33.6 26.6Sector Aggregate 566,615 5.2 -1.3 154,017 4.9 -8.5 86,992 8.4 -4.4

We expect utility companies in our coverage to report aggregate 2QFY14 revenuegrowth of 5.2% YoY and PAT growth of 8.4% YoY. PAT growth would mainly be led byJSW Energy (55.4% on lower base), and PSUs NTPC, PGCIL and NHPC to grow by 17.5%,12.5% and 16.3% respectively led by benefits coming from new capacity additions.We expect Coal India's PAT to grow by 7.4% to INR33b. We estimate a decline in TataPower's PAT due to lower contribution from mining business, while PTC India's PAT isexpected to be lower due to tolling arrangement conversion to trading.

July/Aug 2013 generation grew by 6.4% YoY but PLF dips by 165bp: In July/Aug 2013, allIndia generation grew by 6.4% YoY, led by lower demand from SEBs. The overall PLFwas down by 165bp to 54.5% v/s 56.2% for the same period last year. Coal and lignite-based generation grew by 5.2% YoY but PLF was down by 560bp led by higher hydrogeneration, which impacted coal-based demand. Gas-based generation continued tode-grew (45% YoY) on account of decline in gas production in India. Hydro generationwas up by 35% YoY led by good monsoon, while nuclear generation grew by 15% YoY.Generation growth could be better in the second half led by elections.

Power deficit declines to 3.6% for July/August 2013; peak deficit for YTD FY14 alsodown to 6.3%: For July/August 2013, power demand has increased by 1.8% YoY andsupply increased by 8% YoY, leading to a deficit of 3.6% v/s 9.1% for the same periodlast year. Southern region registered significant improvement, with the deficit reducingto 4.8% from 14.3% last year. Substantial improvement is on account of lower demandled by good monsoon and reluctance of SEBs to buy high cost power. The deficit inwestern region has substantially lowered to 0.5% from 3.3%. Improvement in thewestern region is led by addition of large projects in the states of Madhya Pradesh,Gujarat and Maharashtra.

Imported coal prices remain weak, INR depreciation nullifies impact; ST (IEX) pricesdip to INR2/unit: Imported coal prices' average during the quarter stood at USD73/t v/

Nalin Bhatt ([email protected])/Aditya Bahety ([email protected])

UtilitiesCompanies Covered

CESC

Coal India

Jaiprakash Power Ventures

JSW Energy

NHPC

NTPC

Power Grid

PTC India

Reliance Infrastructure

Tata Power

C–188October 2013


s USD88/t YoY. Benefit to generators has been limited as the decline in prices wasoffset by depreciation in INR (14.3% to USD62.5/INR, v/s USD55/INR YoY). Short termprices in the day ahead market remained muted, with prices at INR2.3/unit for July2013 and INR2/unit for August 2013, while average prices for the quarter stood atINR2.4/unit. Short term forward contract prices dipped below ~INR4/unit.

Valuation and view: Power sector has begun to witness several initiatives by authoritiesto address concerns on SEBs, fuel supply pacts and PPAs. It would however take sometime for clarity on several issues to emerge. In this environment, we continue toprefer CPSUs which are relatively better positioned on these fronts.

July/Aug-13: All-India generation grew 6.4% YoY … Coal plant PLF dipped by 5.5ps YoY

Power demand grew by 1.8% in July/Aug-13 Base deficit declines in July/Aug-13 to 3.6%

ST prices slightly decline to 2.4 (INR/unit)... ...Forward ST price dip below INR4/unit

73 72 70 74 71 73 73 71 77 75 79 76 75 73 72 78 73 76 78 68 80 77 84 8078

76

149 9

5

14

8

2

8

24

68

2 24

63

57

-4

4 46

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3Al l India Generation (BUs) Gr (YoY, %)

40

55

70

85

100

Jul-

11A

ug-1

1Se

p-11

Oct

-11

Nov

-11

Dec

-11

Jan-

12Fe

b-12

Mar

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Apr

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3

Centre Sector State Sector Private Sector

83 8387

79 84 85 86 83 80 84 79 85 85 73 86

91

60

68

76

84

92

100

Apr

il

May

June July

Aug

Sept Oct

Nov

Dec Jan

Feb

Mar

-8%

0%

8%

16%FY14 FY13 Gr (%)

8

3446

2

5

8

11

14

Apr

May Jun

Jul

Aug

Sep

Oct

Nov

Dec Jan

Feb

Mar

FY14 FY12 FY13

5.3

3.1

2.3

3.6

3.1

2.9

4.6

3.4 3.5

3.5

3.2

2.7

2.4

3.1

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

4.4 4.4

3.8

4.8

Sep-

13

Oct

-13

Nov

-13

Dec

-13

Jan-

14

Feb-

14

Mar

-14

Apr

-14

May

-14

C–189October 2013





UtilitiesCESC 336 Buy 49.2 53.2 56.8 6.8 6.3 5.9 4.9 4.2 3.9 12.3 12.1 11.6Coal India 307 Neutral 28.0 29.6 31.4 11.0 10.4 9.8 7.3 6.3 5.9 28.4 25.7 24.0Jaiprakash Power 16 Buy 1.3 1.4 2.3 12.5 11.2 7.0 13.9 12.6 6.8 6.3 6.3 10.1JSW Energy 46 Neutral 6.5 7.7 6.9 7.1 5.9 6.6 5.7 4.8 4.6 17.8 19.2 15.5NHPC 20 Neutral 1.8 1.9 2.0 11.3 10.7 10.1 8.2 9.1 7.8 7.4 7.4 7.5NTPC 148 Buy 11.1 11.9 13.8 13.3 12.5 10.7 9.1 9.7 8.6 12.0 11.8 12.7Power Grid Corp. 99 Buy 8.9 8.7 10.5 11.1 11.4 9.4 10.6 9.4 8.6 16.6 15.0 15.0PTC India 46 Buy 6.7 6.8 6.8 6.8 6.7 6.7 5.9 7.1 6.5 5.6 3.6 4.2Reliance Infra. 393 Buy 65.2 50.5 55.5 6.0 7.8 7.1 0.6 -1.4 -1.3 10.4 6.5 6.8Tata Power 82 Neutral 3.9 3.0 3.4 21.0 26.8 23.7 14.1 10.4 9.7 8.1 8.0 8.2Sector Aggregate 11.5 10.9 9.9 8.6 8.0 7.2 16.0 15.2 15.5

85

90

95

100

105

Jun-

13

Jul-

13

Aug

-13

Sep-

13Sensex IndexMOSL Uti l i ties Index

70

80

90

100

110

Sep-12 Dec-12 Ma r-13 Jun-13 Sep-13

Sens ex IndexMOSL Uti l i ties Index

RB Index* prices decline substantially (USD/ton) INR declines to all-time low compared to USD

* 6,200Kcal, FoB South Africa Source: CEA, CERC and Bloomberg

91 88 104121121117107105 96 88 86 85 81 7350

75

100

125

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

-0.40

-0.15

0.10

0.35

0.60Avg RB Index (USD/ton) YoY QoQ

46 46 45 45 45 4651 50

55 55 54 54

63

57

36414651566166

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

-10%

-2%

6%

14%

22%

QoQ (%) YoY (%) INR/USD

C–190October 2013


Generation and PLFs of various plants

Capacity Aug-13 Aug-12 YTDFY14 YTDFY13

(MW)* Generation PLF (%) Generation PLF (%) Generation PLF (%) Generation PLF (%)

Adani Power

- Mundra 4,620 2,118.0 61.6 1,414.1 41.1 11,683.3 68.9 8,180.7 48.8

- Tirora 1,980 799.1 47.1 0.0 0.0 2,980.0 54.2 0.0 0.0

GVK

- JP 1 & 2 455 74.8 22.5 143.1 43.0 399.4 24.0 969.4 58.4

- Gautami 464 0.0 0.0 92.8 27.4 0.0 0.0 654.0 38.6

GMR

- Barge Mounted 570 0.0 0.0 38.1 23.7 137.0 6.6 275.5 34.3

- Chennai 200 52.3 35.8 46.7 32.0 316.8 43.4 249.9 34.2

- Vemagiri 370 0.0 0.0 70.4 26.1 177.5 13.1 658.3 48.7

JPL

- Chattisgarh 1,000 657.5 88.4 707.3 95.1 3,592.4 97.8 3,522.9 95.9

Rel Infra

- Dahanu 500 357.3 96.0 385.1 103.5 1,771.9 96.5 1,878.3 102.3

- Samalkot (AP) 220 39.4 24.5 58.8 36.6 213.6 26.6 409.3 51.0

- Goa 48 21.7 61.9 23.3 66.4 105.7 60.3 114.6 65.4

- Kochi 174 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Rel Power

- Rosa 1,200 707.7 79.3 649.2 72.7 3,364.1 76.3 3,160.5 71.7

Tata Power

- Trombay 1,580 817.2 46.2 817.3 65.0 3,378.4 55.7 4,214.9 69.2

- TISCO (Jamshedpur) 441 184.5 68.9 265.0 94.3 1,028.6 77.8 1,278.7 91.1

- Mundra UMPP 4,000 1,661.1 55.8 394.5 33.1 9,718.5 66.2 1,930.8 48.9

- Maithon 1,050 298.8 38.3 0.0 0.0 2,391.3 62.0 1,377.0 49.3

Torrent Power

- Existing 500 177.7 59.7 254.2 85.4 1,008.1 68.6 1,447.3 93.1

- Sugen 1,148 210.0 25.1 428.8 51.2 971.7 23.2 2,292.8 54.7

JSW Energy

- Rajwest 1,080 325.0 40.4 295.1 73.5 2,358.7 59.5 1,365.3 68.9

- Karnataka/Ratnagiri 2,060 1,232.7 80.4 1,401.6 91.5 6,409.8 84.7 7,157.5 94.6

CESC 1,285 811.7 84.9 814.6 85.2 4,049.3 85.8 4,070.6 86.3

Lanco Infratech

- Kondapali 716 108.6 20.8 202.9 38.8 651.4 24.9 1,309.0 50.1

- Amarkantak 600 159.6 35.8 293.5 65.7 896.3 40.8 1,357.1 61.6

- UPCL 1,200 226.3 25.3 331.9 31.2 2,689.1 61.0 1,836.5 74.6

- Anpara 1,200 503.4 56.4 239.6 26.8 2,553.2 57.9 1,474.8 33.5

KSK

- Wardha 1,140 285.6 58.1 227.0 56.5 1,308.9 63.4 1,495.8 75.4

Sterlite

- Jharsuguda 2,400 487.7 27.3 749.6 42.0 3,753.2 52.6 3,702.6 43.5

*Monitored capacity by CEA Source: CEA

C–191October 2013


Quarterly Performance (Standalone Numbers - excl Spencers Retail) (INR Million)Y/E March FY13 FY14 FY13 FY14E


Sales 14,200 13,440 10,400 15,130 14,360 14,675 13,063 17,264 52,420 58,487

Change (%) 20.0 8.3 0.8 9.7 1.1 9.2 25.6 14.1 14.1 11.6

EBITDA 2,900 3,110 2,660 4,570 3,210 3,265 3,040 5,025 13,240 14,540

Change (%) 8.6 19.6 24.9 5.8 10.7 5.0 14.3 10.0 14.4 9.8

As of % Sales 20.4 23.1 25.6 30.2 22.4 22.3 23.3 29.1 25.3 24.9

Depreciation 770 760 770 760 840 810 830 888 3,060 3,368

Interest 780 890 860 850 900 870 890 884 3,380 3,544

Other Income 210 240 240 240 190 200 200 235 930 825

PBT 1,560 1,700 1,270 3,200 1,660 1,785 1,520 3,487 7,730 8,452

Tax 310 340 260 640 350 374 319 729 1,550 1,772


Reported PAT 1,250 1,360 1,010 2,560 1,310 1,411 1,201 2,758 6,180 6,680

Adjusted PAT 1,250 1,360 1,010 2,560 1,310 1,411 1,201 2,758 6,180 6,680

Change (%) 12.5 19.3 36.5 2.0 4.8 3.8 18.9 7.7 12.4 8.1


Generation 2,430 2,426 2,067 1,792 2,404 2,400 2,104 1,962 8,715 8,870

Sa les 3,388 3,173 2,383 2,414 3,342 3,293 2,634 3,136 11,357 12,405

Realisation (INR/unit) 4.2 4.2 4.4 6.3 4.3 4.5 5.0 5.5 4.6 4.7

Overall PLF (Derived) (%) 90.6 90.4 77.0 66.8 89.6 89.5 78.4 73.1 81.2 82.7

E: MOSL Estimates

CESCCMP: INR336 Buy


EBITDA 10.8 12.5 13.7 14.3

Net Profit 5.5 6.2 6.7 7.1

Adj. EPS (INR) 44.1 49.2 53.2 56.8

EPS Gr. (%) 13.5 11.6 8.0 6.7

BV/Sh (INR) 386.6 416.4 463.9 515.0

RoE (%) 12.1 12.3 12.1 11.6

RoCE (%) 10.6 10.9 10.7 10.4

Payout (%) 11.3 14.2 13.2 14.1

Valuations

P/E (x) 7.6 6.8 6.3 5.9

P/BV (x) 0.9 0.8 0.7 0.7

EV/EBITDA (x) 5.4 5.2 4.5 4.1

Div. Yield (%) 1.5 2.1 2.1 2.4

Bloomberg CESC IN




1,6,12 Rel Perf. (%) 3 / 22 / -2

� We expect CESC to report PAT of INR1.4b, a growth of 3.8%, on accountof higher accretion to regulated assets, capitalized in FY13 and tariffhike in 4QFY13. We thus expect CESC to report revenue of INR14.7b(up 9.2% YoY), EBITDA of INR3.3b (up 5% YoY).

� We estimate generation of 2.4bu in 2QFY14 and sales of 3.3bu. PLF in2QFY14 is expected to be almost flat YoY.

� CESC has entered into an agreement with the Jharkhand StateElectricity Board (JSEB) for distribution franchise of Ranchi for a periodof 15 years. This is the first distribution franchise for CESC and weexpect CESC to do well on the back of its experience in distributionbusiness in KLA.

� Spencer has been consistently consolidating (closing less profitablestores) and it has plans to concentrate more on hyper stores.

� CESC has recently commissioned its mall in Kolkata. It would also earnthe rental income in the standalone entity. The full year impact ofrental income would be ~INR150m.

� We expect CESC to post standalone PAT (ex. Spencer) of INR6.7b inFY14E (up 8% YoY) and INR7.1b in FY15E (up 6.7% YoY).

Key issues to watch out� Performance of Spencer - same stores revenue growth, stores'

EBITDA.� Details on Ranchi distribution circle.� Details on commissioning of Chandrapur (expected to CoD in FY14).

C–192October 2013




Sales 165,006 145,725 173,250 199,046 164,724 156,744 185,696 220,292 683,027 727,455

Change (%) 13.8 10.8 12.9 2.5 -0.2 7.6 7.2 10.7 9.4 6.5

EBITDA 48,146 28,617 42,883 61,191 39,579 32,285 53,681 80,675 180,836 206,220

Change (%) -0.1 15.5 -5.6 61.6 -17.8 12.8 25.2 31.8 15.6 14.0

As of % Sales 29.2 19.6 24.8 30.7 24.0 20.6 28.9 36.6 26.5 28.3

Depreciation 5,356 3,872 4,204 4,698 4,757 4,850 4,750 4,957 18,130 19,313

Interest 126 102 96 127 74 150 180 203 452 608

Other Income 20,714 20,929 23,605 22,065 22,196 21,750 24,000 23,137 87,467 91,083

EO Income/(Expense) -103 -107 -2,849 0 -50 0 0 0 69 -50

PBT 63,275 45,464 59,338 78,431 56,894 49,035 72,751 98,652 249,790 277,332

Tax 18,582 14,703 18,387 24,508 19,585 15,985 23,717 31,224 76,227 90,511


Reported PAT 44,693 30,761 40,951 53,923 37,310 33,050 49,034 67,428 173,564 186,821

Adjusted PAT* 44,796 30,781 46,801 54,139 37,360 33,050 49,034 67,428 176,624 186,871

Change (%) 8.4 37.8 26.8 -10.5 -16.6 7.4 4.8 24.5 9.9 5.8

Key Operational metrics

Production 102.5 89.1 117.4 143.3 102.9 95.0 125.0 158.8 452.2 481.7

Sales/Offtake 113.0 101.7 120.5 130.0 115.3 108.0 130.0 138.4 465.2 491.7

Blended Realization (INR/ton)

- Regulated 1,267 1,281 1,232 1,403 1,296 1,325 1,300 1,491 1,298 1,358

- E-auction 2,562 2,460 2,941 2,308 2,140 2,250 2,250 2,218 2,544 2,212

- Washed Coal 2,315 2,092 2,491 2,264 2,117 2,200 2,200 2,213 2,300 2,186

- Own Consumption 3,023 2,626 2,703 2,759 2,810 2,850 2,850 2,927 2,781 2,848

E: MOSL Estimates; *Pre Exceptional

Coal IndiaCMP: INR307 Neutral


EBITDA 156.7 180.8 206.2 217.0

NP* 161.6 176.6 186.9 198.4

EPS (INR)* 25.6 28.0 29.6 31.4

EPS Gr. (%) 47.8 9.3 5.8 6.2

BV/Sh. (INR) 64.0 76.7 88.6 101.1

RoE (%)** 31.9 28.4 25.7 24.0

RoCE (%) 57.5 56.9 54.4 49.9

Payout (%) 50.1 50.1 50.1 50.1

Valuations

P/E (x) 12.0 11.0 10.4 9.8

P/BV (x) 4.8 4.0 3.5 3.0

EV/EBITDA (x) 8.7 7.3 6.3 5.9

Div. Yield (%) 3.3 4.6 4.8 5.1

*Adj. EPS, **RoE is adj.for OB reserves

accounts, as appplicable under IFRS

Bloomberg COAL IN


M. Cap. (INR b)/(USD b) 1,939 / 31


1,6,12 Rel Perf. (%) 8 / -5 / -20

� We expect COAL to report PAT of INR33b (up 7.4% YoY). For 2QFY14E,we expect dispatches to be ~108mt (up 7% YoY). We estimate CIL'sproduction in 2QFY14E at 95mt, up 6% YoY.

� RB Index has declined QoQ to USD73/ton, v/s USD81/ton in 1Q. For2QFY14E, currency has depreciated on a sequential basis from 57/USDto 62.5/USD. Hence, the lower coal prices were up to a large extentneutralized by the higher currency rates. Rupee deprecation thus actsas a cushion to e-auction realizations.

� The ACQ realization is expected to be higher in 2QFY14E YoY, as COALhad taken a tariff hike effective from mid-May to compensate for thedecline in e-auction realizations and beneficiated coal.

� Workers union has postponed its three-day strike to December 2013led by assurance by the management to facilitate further discussionwith the Government on OFS.

� We expect the company to report consolidated PAT of INR187b in FY14E(up 5.8% YoY) and INR198b in FY15E (up 6.2% YoY).

Key issues to watch out� Volume, realization trend for 2Q and guidance for FY14/15. E-auction

and ACQ mix guidance for FY14/15.� Clarity on OFS/buyback and special dividend.

C–193October 2013


Jaiprakash Power VenturesCMP: INR16 Buy


EBITDA 14.6 19.3 25.5 46.9

NP 4.0 3.8 4.2 6.7

EPS (INR) 1.4 1.3 1.4 2.3

EPS Gr. (%) 129.4 (6.1) 11.2 60.0

BV/Sh. (INR) 18.6 22.0 23.0 22.2

RoE (%) 7.5 6.3 6.3 10.1

RoCE (%) 6.1 5.9 6.3 9.9

Payout (%) - - - -

Valuations

P/E (x) 11.7 12.5 11.2 7.0

P/BV (x) 0.9 0.7 0.7 0.7

EV/EBITDA (x) 14.6 13.9 12.6 6.8

Div. Yield (%) - - - -

Bloomberg JPVL IN




1,6,12 Rel Perf. (%) 26 / -43 / -60



Sales 5,454 9,058 4,270 3,744 7,863 10,134 6,235 7,951 22,526 32,183

Change (%) 98.1 39.4 7.6 27.5 44.2 11.9 46.0 112.3 39.4 42.9

EBITDA 4,900 8,115 2,679 1,637 5,882 8,591 3,871 5,923 17,331 24,267

Change (%) 98.6 33.4 -25.0 -32.9 20.0 5.9 44.5 261.8 19.0 40.0

As of % Sales 89.9 89.6 62.7 43.7 74.8 84.8 62.1 74.5 76.9 75.4

Depreciation 674 774 960 831 1,082 1,135 1,350 1,543 3,239 5,110

Interest 2,278 2,885 2,874 2,946 3,506 3,500 3,650 3,980 10,983 14,636

Other Income 91 73 113 105 48 200 200 245 382 693

PBT 2,039 4,528 -1,043 -2,034 1,343 4,156 -929 645 3,491 5,214

Tax 210 868 -67 -811 414 831 100 295 200 1,640

Effective Tax Rate (%) 10.3 19.2 6.4 39.9 30.8 20.0 -10.8 45.7 5.7 31.4

Reported PAT 1,830 3,660 -976 -1,223 929 3,325 -1,029 350 3,292 3,574

Adjusted PAT (Pre Exceptional) 1,830 3,660 -976 -973 1,179 3,325 -829 350 3,542 3,824

Change (%) 162.9 30.4 -263.9 1,338.8 -35.6 -9.2 -15.0 -136.0 -11.7 8.0

Operational Details - Generation (MU)

Baspa 343 660 151 104 426 674 158 161 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 2,349 475 115 4,054 2,863

Bina 0 11 171 238 301 274 821 925 421 421

E: MOSL Estimates

� In 2QFY14E, we expect JPVL to post revenue of INR10.1b, up 11.9% YoY,EBITDA of INR8.6b, up 5.9% YoY and net profit of INR3.3b (down 9.2%YoY).

� We estimate generation from Karcham Wangtoo at 2.3bu, comparedto 2.1bu in 1QFY14. We estimate generation of Bina to remain mutedduring the quarter at 274mu led by lower demand from MPSEB.Vishnuprayag was not operational during the quarter.

� Nigrie (1.3gw) is expected to be commissioned during FY14 and Bara I(2gw) in FY15, providing delta in FY14/15 earnings.

� Amelia north mine is also expected to commission in 3QFY14.

� We expect JPVL to post consolidated net profit of INR4.2b in FY14E (up11% YoY) and INR6.7b in FY15E (up 60% YoY). The stock trades at areported PER of 7x FY15E.

Key issues to watch out� Clarity on offloading hydro assets.� Coal availability for Bina TPS (500mw).� Update on the clearance of Dongri Tal II coal mine.� Update on commissioning of Nigre (1.3gw) and Bara I (2gw).

C–194October 2013




Total Operating Income 21,915 20,765 23,652 23,010 24,310 21,963 25,315 26,672 89,343 98,669

Change (%) 72.2 108.4 33.7 10.6 10.9 5.8 7.0 15.9 46.0 10.4

EBITDA 5,834 5,769 8,370 7,959 9,226 8,028 9,419 8,553 27,932 35,227

Change (%) 48.4 388.2 139.5 35.6 58.1 39.2 12.5 7.5 92.9 26.1

Depreciation 1,697 1,605 1,572 1,741 2,008 2,250 2,350 2,432 6,615 9,040

Interest 2,426 2,281 2,364 2,557 2,747 2,950 3,100 3,333 9,628 12,130

Other Income 764 453 300 617 453 425 450 473 2,134 1,801

Extraordinary items 2,325 -925 610 -43 1,872 0 0 0 1,966 1,872

PBT 150 3,261 4,125 4,322 3,052 3,253 4,419 3,261 11,857 13,986

Tax 160 721 1,005 848 870 813 1,149 690 2,733 3,522


Reported PAT -10 2,540 3,120 3,474 2,182 2,440 3,270 2,571 9,124 10,464

Share of profit from Assoc 0 0 0 -117 -46 -55 -55 -44 -117 -200

Minority interest -44 -1 15 0 -5 -15 -25 -37 -29 -82

Exceptional Income/ (Expense) 1,915 -925 610 -43 1,872 0 0 0 1,556 1,872

Reported PAT (Post MI) 34 2,541 3,105 3,357 2,233 2,510 3,350 2,652 9,037 10,746

Adjusted PAT 1,949 1,615 3,715 3,314 4,105 2,510 3,350 2,652 10,592 12,617

Change (%) 43.0 n.a. n.a. 96.9 110.6 55.4 -9.8 -20.0 219.8 19.1

Operational Details

Sales Mix (MUs)

- Long Term 2,233 2,036 2,264 2,271 2,704 2,327 2,796 2,977 8,808 10,805

- Merchant 2,498 2,205 2,616 2,570 2,275 2,109 2,369 2,634 9,885 9,387

Realization (INR/unit)

- PPA 3.64 3.65 3.30 2.99 3.58 3.56 3.62 3.63 3.26 3.61

- Merchant 4.40 4.60 4.60 4.60 4.52 4.60 4.65 4.63 4.55 4.60

E: MOSL Estimates

JSW EnergyCMP: INR46 Neutral


EBITDA 14.5 27.9 35.2 32.2

NP 3.3 10.6 12.6 11.4

Adj. EPS (INR) 2.0 6.5 7.7 6.9

EPS Gr. (%) -60.6 219.7 19.1 -9.7

BV/Sh. (INR) 34.8 37.8 42.5 47.5

RoE (%) 5.8 17.8 19.2 15.5

RoCE (%) 6.4 14.4 15.9 14.5

Payout (%) 24.7 31.0 21.3 25.0

Valuations

P/E (x) 21.3 6.7 5.6 6.2

P/BV (x) 1.2 1.1 1.0 0.9

EV/EBITDA (x) 10.7 5.5 4.8 4.6

Div. yield (%) 1.2 4.7 3.8 4.0

Bloomberg JSW IN




1,6,12 Rel Perf. (%) 11 / -21 / -30

� We expect JSWEL to report consolidated revenue of INR22b (up 5.8%YoY) and PAT of INR2.5b, up 55% YoY on a lower base.

� We expect JSWEL to generate 4.8bu during 2QFY14, including coal andlignite capacity. The decline in generation is led by a decline inVijayanagar to 85% from 100% YoY; Ratnagiri PLF declined to 78% from90% YoY and lignite PLFs also declined substantially. Lower generationcould have been led by better hydro generation this year.

� We have assumed short term realization of INR4.6/unit, almost flatYoY. We expect fuel cost to be ~INR2.6/unit (coal-based) as coal mix ofSouth African and Indonesian coal changes during the quarter.

� We expect JSWEL to report consolidated PAT of INR12.6b in FY14E (up19% YoY) and INR11.4b in FY15E (down 9.7% YoY). Stock trades atreported P/E of 6.2x FY15E.

Key issues to watch out� ST realization, fuel mix and fuel cost for 2QFY14 and guidance for

FY14/15.� RajWest project: lignite mine clearance and tariff approval.� Capacity addition plan for the 12th Plan as none of the projects are

under construction.

C–195October 2013




Sales 14,218 17,725 10,104 10,994 16,194 18,312 10,205 11,174 53,066 55,884

Change (%) -3.3 -4.6 14.6 -23.8 13.9 3.3 1.0 1.6 -6.2 5.3

EBITDA 9,040 12,036 6,132 6,050 10,707 12,512 5,505 6,104 33,240 34,827

Change (%) -5.5 -9.4 61.9 -39.1 18.4 4.0 -10.2 0.9 -9.1 4.8

As of % Sales 63.6 67.9 60.7 55.0 66.1 68.3 53.9 54.6 62.6 62.3

Depreciation 2,218 2,532 2,390 2,546 2,760 2,650 2,625 2,470 9,693 10,505

Interest 798 1,047 989 1,020 1,160 1,100 1,200 1,261 3,854 4,721

Other Income 2,451 2,406 1,890 3,156 2,486 2,900 2,500 1,845 9,928 9,730

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 11,662 4,180 4,218 32,021 29,331

Tax 1,777 3,028 1,526 2,208 2,073 3,207 1,149 1,520 8,539 7,950


Reported PAT 6,698 7,834 3,118 5,833 7,199 8,455 3,030 2,697 23,482 21,381

Adjusted PAT 6,450 7,272 2,416 2,863 7,160 8,455 3,030 2,281 19,000 20,926

Change (%) 6.6 -6.4 -18.8 35.7 11.0 16.3 25.4 -20.3 0.6 10.1

Operational Details

Generation (MUs) 6,148 7,634 2,563 2,496 6,388 7,317 2,560 2,457 22,825 22,716

Increase/ (Decrease) (%) -2.2 10.0 -17.8 4.6 3.9 -4.2 -0.1 -1.6 22.2 -0.5

Installed Capacity (MW) 5,287 5,518 5,551 5,562 5,694 5,694 5,934 6,499 5,562 6,499

- Owned 3,767 3,998 4,031 4,042 4,174 4,294 4,414 4,979 4,042 4,979

- 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: INR20 Neutral


EBITDA 48.1 42.8 41.1 45.6

NP 25.2 24.5 26.0 27.7

Adj. EPS (INR) 1.8 1.8 1.9 2.0

EPS Gr. (%) 12.2 -1.5 5.2 6.2

BV/Sh. (INR) 23.3 24.7 25.7 26.7

RoE (%) 8.0 7.4 7.4 7.5

RoCE (%) 10.1 8.7 7.8 8.1

Payout (%) 29.4 29.8 42.5 42.4

Valuations

P/E (X) 11.1 11.3 10.7 10.1

P/BV (X) 0.9 0.8 0.8 0.7

EV/EBITDA (X) 7.5 8.2 9.1 7.8

Div. Yield (%) 3.5 3.0 3.9 4.2

Bloomberg NHPC IN


M. Cap. (INR b)/(USD b) 244 / 4


1,6,12 Rel Perf. (%) 11 / -5 / -2

� We expect NHPC to report 2QFY14E revenue of INR18.3b (up 3.3% YoY)and PAT of INR8.5b (up 16.3% YoY). We expect it to generate 7.3bu,compared to 7.6bu in 2QFY13 - a decline in generation is due to lowergeneration from plants impacted in the recent floods (mainlyDhauliganga 280mw).

� For FY14, NHPC is targeting to add 937mw of projects, while it hascommissioned TLDP III (132mw) during 1QFY14 and 2 units of URI II(120mw) in 2QFY14.

� In addition, Nimo Bazgo (45mw), 2 units of Uri-II (120mw) and ParbatiIII are also expected to be commissioned in FY14E.

� NHPC has guided for addition of only 164mw TLDP IV during FY15/16.However, given substantial delays in FY13 capacity addition and currentexpectation of ~937mw addition in FY14, we expect slippages incommissioning in FY14 to be passed on to FY15.

� We expect NHPC to report consolidated PAT of INR26b in FY14E (up5.9% YoY) and INR27.7b in FY15E (up 6.5% YoY). Stock trades at reportedP/E of 7.6x FY15E.

Key issues to watch out� Incentives for 2QFY14 and progress on projects impacted by floods.� Total capacity addition for FY14/15.� Status on Parbati II and Subhanshri lower project.

C–196October 2013




Sales 159,600 161,197 157,749 164,618 156,129 144,566 167,218 206,058 643,164 673,971

Change (%) 12.6 4.8 2.9 1.2 -2.2 -10.3 6.0 25.2 5.2 4.8

EBITDA 36,306 42,243 39,952 39,065 42,653 36,803 41,971 40,763 157,565 162,190

Change (%) 26.7 30.4 39.9 -5.0 17.5 -12.9 5.1 4.3 19.9 2.9

As of % Sales 22.7 26.2 25.3 23.7 27.3 25.5 25.1 19.8 24.5 24.1

Depreciation 7,602 7,865 8,288 10,213 9,423 10,500 10,500 11,391 33,968 41,815

Interest 4,994 3,035 5,304 5,912 6,174 6,000 6,100 6,233 19,244 24,507

Other Income 8,849 10,482 7,546 17,714 7,459 8,300 8,350 9,333 44,591 33,442

EO Inc./(Exp.) 16,841 0 0 0 0 16,841 0

PBT 32,559 41,825 33,907 57,495 34,514 28,603 33,721 32,472 165,786 129,310

Tax 7,573 10,402 7,940 13,679 9,244 6,436 7,587 6,155 39,592 29,422


Reported PAT 24,987 31,424 25,968 43,816 25,270 22,167 26,134 26,317 126,194 99,888

Adjusted PAT 24,093 18,869 22,069 22,054 23,263 22,167 26,134 26,317 91,885 97,881

Change (%) 26.7 27.5 6.7 -3.9 -3.4 17.5 18.4 19.3 15.3 6.5

Capacity

- NTPC 34,810 34,810 34,810 35,810 35,810 35,810 36,310 36,970 35,810 36,970

- JVs 4,364 4,364 4,864 5,364 5,364 5,364 5,864 6,059 5,364 6,059

Total 39,174 39,174 39,674 41,174 41,174 41,174 42,174 43,029 41,174 43,029

Addition 2,160 - 500 1,500 - - 1,000 855 4,160 1,855

E: MOSL Estimates; Adj profit based on the calculations provided by the management

NTPCCMP: INR148 Buy


EBITDA 140.4 171.1 163.6 191.2

NP 79.7 91.9 97.9 114.1

Adj EPS (INR) 9.7 11.1 11.9 13.8

EPS Gr. (%) 0.2 15.3 6.5 16.6

BV/Sh. (INR) 88.9 97.5 104.5 112.6

RoE (%) 11.3 12.0 11.8 12.7

RoCE (%) 12.0 14.3 10.9 11.6

Payout (%) 41.5 43.4 42.2 41.2

Valuations

P/E (x) 15.3 13.3 12.5 10.7

P/BV (x) 1.7 1.5 1.4 1.3

EV/EBITDA (x) 10.5 9.1 9.7 8.6

Div. Yield (%) 2.7 3.9 3.0 3.3

Bloomberg NTPC IN


M. Cap. (INR b)/(USD b) 1,219 / 20


1,6,12 Rel Perf. (%) 9 / -1 / -16

� We expect NTPC to report PAT of INR22.2b (up 17.5% YoY). The growthin profits is mainly led by the addition of new capacities.

� We expect company's generation to be flat YoY, mainly led by lowergeneration from the gas-based capacity at ~2.7bu, compared to 5bu in2QFY13, down 46% YoY. We estimate coal-based generation to growby 5%, leading to flattish generation growth during the quarter.

� For FY14, the capacity addition target stands at 1.8gw. However, in1HFY14, the capacity addition has been nil. NTPC commercializedVallur unit II (500mw in Aug 2013. The total commercialization targetfor FY14 is 1.5gw, of which 1gw has already been commercialized.

� Government has cleared the dues of Loharinag-pala hydro powerproject and paid INR5.4b to NTPC for the settlement of claim. Earlier,Lohariang-pala project was cancelled after initial investments madeby NTPC.

� We expect NTPC to report PAT of INR97.9b in FY14E (up 6.5% YoY) andINR114b in FY15E (up 16.6% YoY). Maintain Buy.

Key issues to watch out� Plant availability factor (PAF) for coal-based projects and generation

loss.� Guidance on capacity addition/commercialization for FY14E/15E.� Development on captive coal block development and jetty connecting

to Farakka and Kahalgaon projects.

C–197October 2013




Sales 28,883 30,858 33,617 33,738 36,665 37,413 38,284 42,140 127,095 154,502

Change (%) 31.1 36.3 36.3 8.8 26.9 21.2 13.9 24.9 26.6 21.6

EBITDA 24,646 26,693 29,231 28,311 31,657 32,479 33,315 37,016 108,880 134,466

Change (%) 33.6 40.6 39.0 8.7 28.4 21.7 14.0 30.7 29.9 23.5

As of % Sales 85.3 86.5 87.0 83.9 86.3 86.8 87.0 87.8 85.7 87.0

Depreciation 7,565 8,252 8,653 9,049 9,644 9,843 10,108 12,635 33,519 42,230

Interest 6,461 5,295 6,848 6,747 7,599 7,782 7,946 8,297 25,352 31,623

Other Income 920 1,570 1,286 2,417 803 1,100 1,300 1,423 6,193 4,626

Extraordinary Inc / (Exp) 0 -140 6 -117 60 0 0 0 -247 0

PBT 11,540 14,856 15,009 15,049 15,277 15,954 16,562 17,508 56,449 65,240

Tax 2,836 3,597 3,717 3,954 3,747 4,627 5,051 5,392 14,104 18,817


Reported PAT 8,705 11,259 11,291 11,094 11,531 11,327 11,511 12,116 42,345 46,424

Adjusted PAT (Pre Exceptional) 9,065 10,071 11,072 10,926 11,470 11,327 11,511 12,055 41,359 46,363

Change (%) 29.1 32.5 43.0 0.9 26.5 12.5 4.0 10.3 24.6 12.1

Operational Details

Capitalization 41,000 26,600 25,860 78,540 29,500 30,000 40,000 85,500 172,000 185,000

Regulated Equity 190,112 198,092 205,850 215,000 223,850 232,850 244,850 270,500 215,000 270,500

E: MOSL Estimates

Power Grid CorporationCMP: INR99 Buy


EBITDA 85.1 109.4 134.5 161.3

NP 33.2 41.4 46.4 56.0

EPS (INR) 7.2 8.9 8.9 10.7

EPS Gr. (%) 30.6 24.6 -0.8 20.9

BV/Sh. (INR ) 50.7 56.7 66.3 73.3

RoE (%) 14.8 16.6 15.2 15.4

RoCE (%) 9.2 9.3 9.1 9.3

Payout (%) 34.8 35.0 34.9 35.0

Valuations

P/E (x) 13.8 11.1 11.2 9.2

P/BV (x) 1.9 1.7 1.5 1.4

EV/EBITDA (x) 11.1 10.0 9.4 8.6

Div. Yield (%) 2.1 2.8 2.7 3.2

Bloomberg PWGR IN


M. Cap. (INR b)/(USD b) 527 / 8


1,6,12 Rel Perf. (%) -6 / -11 / -21

� We expect PWGR to report 2QFY14E PAT of INR11.4b (up 12.5% YoY).The growth in profit is mainly led by capitalization. In 2QFY14E, weexpect the company to capitalize INR30b, higher than INR26.6b in1QFY14. We expect capex of INR45b in 2QFY14E.

� PWGR has revised its capex target to INR1.1t from INR1t in the 12thPlan. For FY14E, we assume a capex of INR222b and capitalization atINR185b.

� We estimate consultancy revenue at INR1,200m and telecom revenueat INR700m. We expect contribution of ~INR700m to PBT fromconsultancy and telecom.

� Company has approved projects worth INR18b in 1HFY14 and hasawarded projects worth INR48.4b till August 2013. In FY13, PWGR hadapproved projects worth INR126b and had awarded projects worthINR161b.

� We expect the company to report PAT of INR46.4b in FY14E (up 22.1%YoY) and INR56b in FY15E (up 20.9% YoY). Stock trades at 9.4x FY15E EPSand 1.4x FY15E book value.

Key issues to watch out� Timelines for OFS + FPO.� Capitalization/capex for 2QFY14 and guidance for FY14/15.� Development in green energy projects.� Development in state JVs.

C–198October 2013




Sales 19,869 27,928 18,778 21,987 27,704 31,146 22,000 23,683 88,569 104,533

Change (%) -20.1 16.9 41.2 52.3 39.4 11.5 17.2 7.7

EBITDA 313 569 300 512 340 300 270 310 1,700 1,219

Change (%) -34.4 28.3 42.9 58.7 8.6 -47.3 -9.9 -39.5 17.0 -28.3

As of % Sales 1.6 2.0 1.6 2.3 1.2 1.0 1.2 1.3 1.9 1.2

Depreciation 10 10 11 11 11 11 11 13 42 46

Interest 1 4 4 0 4 3 2 1 9 10

Other Income 26 63 12 23 81 60 70 50 119 261

Extraordinary Income/(Expense) -23 0 0 7 3 0 0 0 -17 -3

PBT 304 619 297 530 410 346 327 345 1,785 1,428

Tax 98 173 79 147 114 104 98 42 497 358


Reported PAT 206 446 218 371 296 242 229 303 1,287 1,070

Adjusted PAT 229 446 218 377 293 242 229 303 1,270 1,066

Change (%) -49.4 25.4 129.2 26.2 27.8 -45.7 5.0 -19.8

Operational Details

Power Traded (MUs) 6,566 9,428 5,871 6,732 8,075 9,655 6,053 7,198 28,597 30,981

Growth (% YoY) -2.4 8.9 28.6 53.7 23.0 2.4 3.1 6.9 17.6 8.3

Adj Margins (Ps/Unit) 3.98 3.06 3.74 3.71 3.48 3.25 4.25 4.49 3.31 3.79

E: MOSL Estimates; % Change for FY13E not comparable given inclusion of tolling profits from 1QFY13 onwards

PTC IndiaCMP: INR46 Buy


EBITDA 1.5 1.7 1.2 1.1

NP 2.0 2.0 2.0 2.0

Adj. EPS (INR) 6.9 6.7 6.8 6.8

EPS Gr. (%) 22.9 -3.2 2.1 -0.4

BV/Sh. (INR) 76.3 78.6 79.5 81.4

RoE (%) 5.4 5.6 3.6 4.2

RoCE (%) 8.6 3.8 3.7 4.7

Payout (%) 45.0 45.0 65.7 45.0

Valuations

P/E (x) 6.6 6.8 6.7 6.7

P/BV (x) 0.6 0.6 0.6 0.6

EV/EBITDA (x) 9.0 5.9 7.1 6.5

Div. yield (%) 4.0 4.3 4.1 3.3

Bloomberg PTCIN IN


M. Cap. (INR b)/(USD b) 14 / 0.2


1,6,12 Rel Perf. (%) 0 / -28 / -39

� We expect PTCIN to report 2QFY14E revenue of INR31b (up 11.5% YoY)and PAT of INR242m (down 45.7% YoY). Decline in PAT is due toconversion of tolling arrangement into trading.

� In 2QFY14E, we expect PTC's volume at ~9.7bu (up 2.4% YoY). We expectadjusted trading margin ~paisa3.25/kwh.

� On Simhapuri/Meenaxi tolling business, we expect PTCIN to do salesvolume of 445mu and PBT spread of INR0.18/unit, compared to INR1.08/unit in 2QFY14E due to change in the arrangement.

� The conversion of tolling arrangement into trading business led tode-growth in profits YoY. However, it reduces the risk on PTCIN'sbalance sheet, which is positive in the long run.

� We expect the company to report consolidated PAT of INR2b in FY14E(up 2.1% YoY) and INR2b in FY15E (down 0.4% YoY). Stock trades atreported P/E of 6.7x FY15E.

Key issues to watch out� Trading volumes and margins for 2QFY14 and guidance for FY14/15.� Simhapuri and Meenakshi business volumes and PBT contribution.� Receipt of outstanding dues from Tamil Nadu and Uttar Pradesh

Discoms.� Guidance on commissioning of projects.

C–199October 2013




Sales 34,473 35,002 34,552 39,193 32,789 35,018 34,521 40,033 143,220 142,362

Change (%) -5.8 -11.4 -22.8 -31.6 -4.9 0.0 -0.1 2.1 -19.6 -0.6

EBITDA 4,598 4,535 4,898 5,126 4,401 4,425 4,367 4,869 19,158 18,062

Change (%) -33.9 -36.1 -24.9 -17.0 -4.3 -2.4 -10.8 -5.0 -28.4 -5.7

As of % Sales 13.3 13.0 14.2 13.1 13.4 12.6 12.7 12.2 13.4 12.7

Depreciation 1,130 922 980 888 828 1,000 1,000 1,154 3,921 3,982

Interest 1,902 1,980 2,055 1,902 2,172 2,100 2,100 2,125 8,794 8,496

Other Income 2,586 3,457 2,433 1,374 3,141 2,500 2,500 2,484 10,806 10,625

Exceptional item 4,183 0 0 0 0 0 4,183 0

PBT 4,152 5,090 8,480 3,710 4,542 3,825 3,767 4,073 21,432 16,208

Tax (incl contingencies) 882 949 1,887 -2,280 800 689 678 751 1,437 2,918

Effective Tax Rate (%) 21.2 18.6 22.2 -61.5 17.6 18.0 18.0 18.4 6.7 18.0

Reported PAT 3,270 4,141 6,594 5,990 3,742 3,137 3,089 3,323 19,995 13,291

PAT (Pre Exceptionals) 3,270 4,141 3,749 5,990 3,742 3,137 3,089 3,323 17,150 13,291

Change (%) 13.8 -15.5 -7.6 -7.5 14.4 -24.3 -17.6 -44.5 -12.6 -22.5

Operational Details - EPC Division

Revenues 17,749 19,184 19,260 23,049 16,537 17,803 17,874 21,326 79,243 73,540

EBITDA 3,031 2,836 3,050 3,533 2,312 1,780 1,877 1,776 16,114 7,746

Margin (%) 17.1 14.8 15.8 15.3 14.0 10.0 10.5 8.3 20.3 10.5

E: MOSL Estimates; Quarterly nos. are on standalone basis

Reliance InfrastructureCMP: INR393 Buy


EBITDA 25.7 19.2 18.1 18.8

NP 20.0 17.2 13.3 14.6

Adj. EPS(INR) 76.0 65.2 50.5 55.5

EPS Gr. (%) 88.2 -14.3 -22.5 9.9

BV/Sh. (INR) 686 769 793 840

ROE (%) 11.4 10.4 6.5 6.8

ROCE (%) 13.3 10.5 8.0 8.2

Payout (%) 8.9 11.2 14.9 15.2

Valuations

P/E (X) 5.2 6.0 7.8 7.1

P/BV (X) 0.6 0.5 0.5 0.5

EV/EBITDA (X) 0.5 0.6 -1.4 -1.3

Div. yield (%) 1.5 1.7 1.7 1.9

Bloomberg RELI IN


M. Cap. (INR b)/(USD b) 103 / 2


1,6,12 Rel Perf. (%) 9 / 16 / -34

� We expect RELI to report 2QFY14E revenue of INR35b, flat YoY, and PATof INR3.1b (down 24% YoY). During the quarter, we expect RELI to postEPC revenue of INR17.8b (v/s INR19.3b YoY).

� In the cement business, total capacity under development is 5mt paboth in Madhya Pradesh and Maharashtra. The grinding unit at Butiboriis commissioned.

� Metro 1 project's, in Mumbai, civil work is 100% completed.Commissioning is expected in 2HFY14. Company has sought a three-fold hike in the Mumbai Metro's tariff, led by escalation cost of ~INR20bin the project.

� In the Delhi metro, total investment is INR28b, including equity ofINR7b. RELI is confident of receiving the complete equity.

� EPC revenue in FY14E/15E may get impacted due to prolonged delayin large capacity projects of Chittrangi, Krishnapattnam and Tilaiya.

� We expect RELI to report standalone PAT of INR13.3b in FY14E (down22.5% YoY) and INR14.6b in FY15E (up 9.9% YoY). Stock trades atreported P/E of 7.5x FY15E.

Key issues to watch out� Performance of EPC division and order book position.� Performance of infrastructure business and development in projects

under construction.� Contribution from cement business.

C–200October 2013




Units Generated 4,259 4,272 3,873 3,366 3,897 4,387 3,977 3,933 15,770 16,195

Total Operating Income 22,841 25,198 25,491 22,143 26,075 27,868 26,309 25,049 95,673 105,301

Change (%) 18.9 29.3 13.2 -6.8 14.2 10.6 3.2 13.1 12.6 10.1

EBITDA 3,759 5,279 5,685 5,793 7,420 5,620 5,700 5,517 20,517 24,257

Change (%) -12.1 26.0 19.7 30.4 97.4 6.5 0.3 -4.8 16.2 18.2

As of % Sales 16.5 21.0 22.3 26.2 28.5 20.2 21.7 22.0 21.4 23.0

Depreciation 1,548 1,556 1,281 -744 1,360 1,400 1,450 1,457 3,641 5,667

Interest 1,386 1,643 1,788 1,965 2,363 2,300 2,325 2,338 6,783 9,326

Other Income 3,456 1,963 318 1,204 1,799 1,100 1,200 1,162 6,940 5,261

PBT 4,281 4,043 2,934 5,776 5,496 3,020 3,125 2,884 17,034 14,524

Tax 1,158 1,083 770 3,776 1,926 1,012 1,062 937 6,787 4,937


Reported PAT 3,123 2,960 2,164 2,000 3,570 2,008 2,062 1,947 10,247 9,587

Adjusted PAT 4,140 2,969 1,285 885 3,527 2,008 2,062 1,947 9,279 9,544

Change (%) 40.8 -18.8 -30.3 -61.4 -14.8 -32.3 60.5 119.9 -13.6 2.9

Consolidated Adjusted PAT 3,059 2,062 2,759 1,337 1,081 1,369 1,914 2,894 9,217 7,257

Change (%) -26.4 -53.4 -50.0 -62.0 -64.7 -33.6 -30.6 116.4 -47.7 -21.3

E: MOSL Estimates

Tata PowerCMP: INR82 Neutral


EBITDA 17.8 20.2 24.3 24.9

NP 17.6 9.2 7.2 8.2

Adj. EPS (INR) 7.4 3.9 3.0 3.4

EPS Gr. (%) 0.6 (47.7) (21.6) 13.0

BV/Sh. (INR) 47.3 49.1 51.8 54.9

RoE (%) 9.8 8.1 8.0 8.2

RoCE (%) 6.2 7.5 8.2 8.6

Payout (%) 39.9 27.6 33.2 32.3

Valuations

P/E (x) 11.0 21.0 26.8 23.7

P/BV (x) 1.7 1.7 1.6 1.5

EV/EBITDA (x) 14.6 14.1 10.4 9.7

Div. yield (%) 1.5 1.6 1.6 1.6

Bloomberg TPWR IN


M. Cap. (INR b)/(USD b) 194 / 3


1,6,12 Rel Perf. (%) 0 / -20 / -28

� We expect TPWR to report standalone PAT of INR2b (down 32.3% YoY)and consolidated PAT of INR1.4b (down 33.6% YoY).

� Generation from its 2,021mw (Mumbai region) capacity in July-Aug2013 stood at 1.8bu, down 22% YoY. Mundra UMPP generation for theperiod stood at 3.6bu and PLF stood at 59.5%. Maithon generationstood at 691mu at a PLF of 44.2%.

� TPWR has filed a petition with CERC seeking a tariff hike of ~paise67/unit for its Mundra project. The hearing of the same has beencompleted and CERC has ordered to form a committee involving allthe stakeholders. The committee has submitted its report to CERC;however, CERC has asked states to sign it with the approval fromrespective state cabinet, which may further delay the process.

� Global coal prices have declined sequentially to ~USD73 and currencyhas depreciated to INR62.5/USD in 2QFY14, compared to INR57/USD in1QFY14 thus nullifying the impact of coal price correction. Hence,contribution from KPC/Arutmin mines may remain muted. Highertranslation gain would however accrue.

� We expect TPWR to report consolidated PAT of INR7.2b in FY14E (down21.6% YoY) and INR8.2b in FY15E (down 13% YoY).

Key issues to watch out� Contribution/loss of Maithon/Mundra UMPP project.� Sales/realization for KPC/Arutmin mines and any downward revision

in volume growth/realization.

C–201October 2013



Bata IndiaCMP: INR851 Buy� We expect 2QCY13 revenue to grow 13.5% YoY to INR4.8b, driven by

8% same store sales growth (SSSG) and new store openings. Thecompany had guided addition of 100 stores in CY13, of which it hasopened 37 in 1HCY13.

� EBITDA margin is likely to increase 60bp YoY to 12.6%, primarily onaccount of lower base last year and improvement in gross margin.

� As a percentage of sales, we expect rent to increase from 13.2% in3QCY12 to 13.6% in 3QCY13. We believe that rent will peak out at ~14%as the company focuses on opening new stores on revenue sharingmodel.

� Driven by higher margins, we expect PAT growth to be 15.5% YoY.

� We cut our EPS estimates by 2.5% for CY13 and 3% for CY14, primarilyon account of lower than expected sales due to slowdown.

� The stock trades at 27.7x CY13E and 22.1x CY14E EPS. We value thecompany at 26x CY14E EPS of INR38.5. Our target price is INR1,001.Maintain Buy.

Key issues to watch out for�� Gross margin expansion�� New store openings�� Rent as a percentage of sales


EBITDA 2.7 3.1 3.8 4.5

NP 1.7 2.0 2.5 3.0

EPS (INR) 26.8 30.7 38.5 46.5

EPS Gr. (%) -33.4 14.7 25.3 20.8

BV/Sh.(INR) 108.8 131.4 159.4 193.2

RoE (%) 27.1 25.6 26.5 26.4

RoCE (%) 39.3 37.9 38.7 38.8

Payout (%) 26.4 27.1 27.4

Valuations

P/E (x) 31.7 27.7 22.1 18.3

P/BV (x) 7.8 6.5 5.3 4.4

EV/EBITDA (x) 18.3 15.8 12.7 10.3

Div. Yield (%) 0.8 1.1 1.3

Bloomberg BATA IN




1,6,12 Rel Perf. (%) -2 / 14 / -16



Net Sales 4,059 5,038 4,237 5,090 4,538 5,725 4,809 5,803 20,879 24,293

YoY Change (%) 29.9 16.5 13.8 18.0 11.8 13.6 13.5 14.0 13.3 16.3


EBITDA 598 831 510 805 628 961 604 934 3,128 3,777

Margins (%) 14.7 16.5 12.0 15.8 13.8 16.8 12.6 16.1 15.0 15.5

Depreciation 122 124 127 140 131 141 144 157 565 612

Interest 2 2 2 5 2 2 2 2 8 7

Other Income 60 67 97 76 69 78 91 113 361 451

PBT 534 773 478 734 564 895 549 889 2,915 3,609

Tax 174 247 158 226 180 276 179 289 942 1,135

Rate (%) 32.6 31.9 33.0 30.7 32.0 30.8 32.6 32.5 32.3 31.5

Reported PAT 360 527 320 509 384 619 370 600 1,974 2,474

Adj PAT 360 527 320 509 384 619 370 600 1,974 2,474

YoY Change (%) -67.1 28.4 5.3 13.0 6.6 17.6 15.5 17.9 15.0 25.3

Margins (%) 8.9 10.5 7.6 10.0 8.5 10.8 7.7 10.3 9.5 10.2

E: MOSL Estimates

C–202October 2013



Volumes (m litres) 52.6 56.7 46.1 48.5 50.1 54.1 47.2 54.6 203.9 206.0

Realizations (INR/ ltr) 149 150 156 156 156 159 159 159 153.0 164.8

Net Sales 7,817 8,513 7,213 7,580 7,814 8,588 7,527 8,686 31,209 32,614

YoY Change (%) 4.1 7.8 7.4 -1.5 0.0 0.9 4.3 14.6 4.7 4.5

Net Raw Material 4,590 4,974 4,334 4,345 4,429 4,638 4,333 5,039 16,894 18,439

Employee Expenses 265 339 310 370 335 385 378 402 1,284 1,500

Other Operating Expenses 1,394 1,506 1,354 1,200 1,366 1,659 1,394 1,589 5,520 6,008


EBITDA 1,568 1,694 1,215 1,665 1,684 1,906 1,422 1,656 6,142 6,668

YoY Change (%) -12.6 -13.4 -6.8 8.8 7.4 12.5 17.0 -0.5 -6.7 8.6

Margins (%) 20.1 19.9 16.8 22.0 21.6 22.2 18.9 19.1 19.7 20.4

Depreciation 60 60 66 80 71 73 74 76 266 294

Interest 7 3 1 10 5 3 4 6 21 18

Other Income 335 162 130 181 245 226 192 233 808 896


Extraordinary Inc/(Exp) 0 0 0 0 198 0 198

PBT 1,836 1,793 1,278 1,756 1,853 2,254 1,536 1,807 6,663 7,450

Tax 607 584 421 577 610 718 519 604 2,189 2,451

Rate* (%) 33.1 32.6 32.9 32.9 32.9 31.9 33.8 33.4 32.9 32.9

Reported PAT 1,229 1,209 857 1,179 1,243 1,536 1,017 1,203 4,474 4,999

Adj PAT 1,229 1,209 857 1,179 1,243 1,338 1,017 1,203 4,474 4,801

YoY Change (%) -10.0 -15.2 -9.9 10.4 1.1 10.7 18.7 2.0 -7.0 7.3

Margins (%) 15.72 14.20 11.88 15.6 15.9 15.6 13.51 13.85 14.3 14.7

E: MOSL Estimates


Castrol IndiaCMP: INR311 Neutral� We expect revenue to increase by 4.3% YoY to INR7.5b. We have

assumed a 2.3% volume growth on a YoY basis and realization growthof 2%.

� For CY13E, we have assumed 1% YoY volume increase and realizationgrowth of 8% YoY.

� EBITDA margin is likely to increase 210bp YoY to 18.9%, primarily drivenby higher realizations.

� We model net profit to increase by 18.7% YoY to INR1b.

� CSTRL trades at a P/E of 33/29.2 CY13E/CY14E earnings estimates. OurDCF-based target price for CSTRL is INR297/share. Though we remainpositive on the long term prospects of the company, given richvaluations, we have a Neutral rating.


EBITDA 6.6 6.2 6.7 7.7

Adj. PAT 4.8 4.5 4.8 5.4

Adj. EPS (INR) 9.8 9.0 9.7 10.9

EPS Gr. (%) -2 -8 9 13

BV/Sh.(INR) 12.2 13.1 14.1 14.0

RoE (%) 93.7 83.8 71.4 71.3

RoCE (%) 133.6 109.1 94.2 94.7

Payout (%) 89.7 96.7 90.1 101.2

Valuations

P/E (x) 31.7 34.4 33.0 29.2

P/BV (x) 25.5 23.7 22.7 22.9

EV/EBITDA (x) 22.6 24.0 22.7 19.7

Div. Yield (%) 2.4 2.4 2.4 3.1

Bloomberg CSTRL IN


M. Cap. (INR b)/(USD b) 154 / 2


1,6,12 Rel Perf. (%) -11 / -6 / -6

Harshad Borawake ([email protected])/Kunal Gupta([email protected])

C–203October 2013

Ashish Chopra ([email protected])/Siddharth Vora ([email protected])



Sales 1,230 1,310 1,246 1,207 1,228 682 653 698 4,935 3,261

Q-o-Q Gr. (%) -0.7 6.5 -4.9 -3.1 1.8 -44.5 -4.2 6.9 -6.2 -33.9

Staff Costs 78 78 68 66 80 72 67 67 340 245

Admin and other expenses 396 415 455 504 516 414 366 373 1,770 1,669

Depreciation 67 71 85 84 84 82 82 82 314 326

EBIT 689 746 638 552 548 114 139 176 2,510 1,021

Margins (%) 56.0 57.0 51.2 45.8 44.6 16.8 21.3 25.3 50.9 31.3

Other Income 233 338 372 484 285 260 271 276 1,355 1,062

PBT 921 1,084 1,010 1,036 834 375 410 453 3,865 2,083

Tax 274 270 252 269 232 104 114 126 1,065 583

Rate (%) 29.7 24.9 24.9 26.0 27.9 27.9 27.9 27.9 27.6 28.0

PAT 647 814 759 766 601 270 295 326 2,800 1,500

Q-o-Q Gr. (%) -19.1 25.7 -6.8 1.0 -21.5 -55.0 9.3 10.5 -2.2 -46.4

EPS (INR) 12.7 16.0 14.9 15.0 11.8 5.3 5.8 6.4 54.9 29.4

Total volumes (INR t) 36.4 39.3 37.0 36.1 37.5 20.9 19.9 21.4 148.8 99.7

Q-o-Q Gr. (%) 0.6 8.0 -5.8 -2.6 4.0 -44.4 -4.4 7.3

Y-o-Y Gr. (%) 8.4 -17.8 -3.6 -0.3 3.0 -42.7 -49.3 -42.2 -4.6 -33.0

E: MOSL Estimates

Multi Commodity ExchangeCMP: INR402 Buy� 2QFY14 is the first full quarter of impact of commodities transaction

tax (CTT), which has had a severe impact on volumes. In addition,there are uncertainties around the parent group FTECH and itssubsidiary NSEL, which seemingly impacted volumes in the last monthof the quarter.

� The value of total transactions at MCX during the quarter was ~INR21t,down ~47% YoY and 44% QoQ.

� We estimate no change in transaction yield, as a result of which ourrevenue estimate for the quarter is INR682m, down 48% YoY and 45%QoQ.

� Volumes in Gold declined by ~41% QoQ, in Silver by ~53% QoQ, inCopper by ~43% QoQ and in Crude Oil by ~36% QoQ.

� Our EBITDA margin estimate for the quarter is 28.8%, down 22.7ppQoQ, owing to strong operating leverage. Our absolute EBITDAestimate is down 69% QoQ and 76% YoY to INR196m.

� Our PAT estimate is INR375m, down 55% QoQ, and 67% YoY.� The stock trades at 13.7x FY14E and 13.5x FY15E EPS. Maintain Buy.

Key issues to watch for� Volumes, post imposition of CTT.� Volumes ramp-up at MCX-SX.


EBITDA 3.3 2.8 1.3 1.2

PAT 2.9 2.8 1.5 1.5

EPS (INR) 56.1 54.9 29.4 29.9

EPS Gr. (%) 65.6 -2.2 -46.4 1.6

BV/Sh. (INR) 195.5 226.8 237.7 248.5

RoE (% 31.0 26.0 12.7 12.3

RoCE (%) 24.8 24.8 12.2 11.9

Payout (%) 50.0 53.3 55.7 66.5

Valuations

P/E (x) 7.2 7.3 13.7 13.5

P/BV (x) 2.1 1.8 1.7 1.6

EV/ EBITDA (x) 2.5 2.9 5.4 5.3

Div. Yield (%) 7.0 7.3 4.1 4.9

Bloomberg MCX IN



52-Week Range (INR) 1,617 / 238

1,6,12 Rel Perf. (%) 15 / -56 / -74

September 2013 Results Preview | Sector: Diversified

C–204October 2013

Sandipan Pal ([email protected])



Operating Income 10,806 11,985 14,272 14,013 11,281 12,047 14,804 15,069 51,079 53,202

YoY Growth (%) -2.8 3.6 22.9 36.9 4.4 0.5 3.7 7.5 14.7 4.2

EBITDA 1,776 1,828 2,198 1,890 1,609 1,748 2,324 2,128 7,695 7,810

EBITDA Margin (%) 16.4 15.3 15.4 13.5 14.3 14.5 15.7 14.1 15.1 14.7

YoY Growth (%) -3.4 -13.6 9.6 -13.7 -13.2 -4.9 1.9 4.8 7.2 1.5

Depreciation 483 505 520 546 564 579 579 595 2,054 2,317

Interest 354 361 312 436 434 434 452 452 1,462 1,772

Other Income 42 64 36 456 87 84 87 85 596 343

Extraordinary items -289 -49 -450 -116 -37 -665 80 35 -903 -587

Profit before Tax 692 978 953 1,247 661 153 1,461 1,202 3,871 3,477

Tax Provisions 241 258 420 -250 201 31 292 289 669 813

Tax / PBT 25 25 30 -18 29 20 20 25 14.0 20.0

PAT before MI & Income from Assoc 451 721 533 1,497 460 123 1,168 913 3,202 2,664

Min. Int. and Profit from Associate 17 3 3 13 6 8 8 8 0 30

Consolidated PAT 468 723 536 1,510 466 130 1,176 920 3,238 2,634

Adj. Consolidated PAT 757 772 986 1,626 503 795 1,096 885 4,141 3,221

YoY Growth (%) -20.0 -21.6 43.2 79.0 -33.5 3.0 11.1 -45.5 17.2 -22.2

E: MOSL Estimates

September 2013 Results Preview | Sector: Diversified

Sintex IndustriesCMP: INR21 Buy� We expect SINT's 2QFY14E revenue to grow 0.5% YoY to INR12b, EBITDA

to de-grow 5% YoY to INR1.7b and Adjusted PAT to 3% to INR795m.Monolithic segment to post 25% YoY de-growth, while Prefab growthto moderate at 13% YoY (v/s 19% YoY in 1QFY14).

� Overseas, the automobile vertical is yet to show signs of animprovement, albeit growth in electrical and medical imagingsegments and recent acquisitions will render cushion. Currency benefitto bolster overseas business further. We estimate foreign compositesto grow 24% YoY.

� Domestic composites to post 11% YoY decline on the back of weaknessin automobile segment, thus denting Bright's performance.

� We assume a broadly flattish trend in QoQ margins in most verticals,and estimate overall margins at 14.5% (+0.2pp QoQ, -0.8pp YoY).Nonetheless, sharp INR depreciation is likely to dent reported PATseverely. We assume MTM forex loss of INR665m on its un-hedgedportion of FCCB (USD110m).

� The stock trades at FY15E P/E of 1.9x and EV/EBITDA of 3.5x. We valueSINT at INR30 and maintain a Buy.

Key issues to watch out� Outlook in monolithic business and improvement in working capital.� Stabilization in operations of recent acquisitions in Germany and

Poland, along with outlook on overseas composite business.� Cash flow health and scope for deleveraging.

Financials & Valuation (INR b)Y/E March 2012 2013 2014E 2015ENet sales 44.5 51.1 53.2 56.6

EBITDA 7.2 7.7 7.8 9.0

Adj. PAT 3.5 4.1 3.2 4.0

Adj EPS (INR) 13.0 13.3 9.9 11.3

EPS Gr. (%) -22.4 2.1 -25.3 13.5

BV/share (INR) 97.7 100.4 105.8 117.4

RoE (%) 14.0 14.3 9.8 10.1

RoCE (%) 11.0 10.3 8.9 9.0

Payout (%) 6.7 7.8 10.0 6.6

Valuations

P/E (x) 1.7 1.6 2.2 1.9

P/BV (x) 0.2 0.2 0.2 0.2

EV/EBITDA (x) 3.9 4.4 4.2 3.5

Div. Yield (%) 3.0 3.2 3.2 3.2

Bloomberg SINT IN




1,6,12 Rel Perf. (%) -3 / -59 / -74

C–205October 2013

Jinesh K Gandhi ([email protected])



Net Revenues 22,222 18,560 22,956 28,207 24,558 22,952 27,139 30,986 91,945 105,635

YoY Change (%) 19.8 4.8 20.2 32.3 10.5 23.7 18.2 9.8 19.9 14.9

EBITDA 3,944 3,261 4,042 5,372 4,566 4,294 5,099 6,291 16,618 20,250

Margins (%) 17.7 17.6 17.6 19.0 18.6 18.7 18.8 20.3 18.1 19.2

Depreciation 734 820 961 1,022 863 950 950 986 3,537 3,749

Interest 1,109 869 1,013 1,299 1,358 1,350 1,350 1,389 4,290 5,447

Other Income 275 262 280 183 265 230 300 140 1,000 935


Extra-Ord Expense 0 0 0 352 0 0 0 0 352 0

PBT after EO Expense 2,375 1,834 2,348 2,881 2,609 2,224 3,099 4,056 9,439 11,989

Tax 703 457 685 186 683 612 930 653 2,032 2,877

Rate (%) 29.6 24.9 29.2 6.5 26.2 27.5 30.0 16.1 21.5 24.0

Reported PAT 1,672 1,377 1,663 2,695 1,927 1,612 2,169 3,403 7,407 9,111

Income from Associate Co 357 -179 72 89 200 -180 70 80 339 170

Adjusted PAT 2,029 1,198 1,735 3,114 2,127 1,432 2,239 3,483 8,022 9,281

YoY Change (%) 10.1 68.0 52.9 38.0 4.8 19.6 29.1 11.8 36.2 15.7

Margins (%) 9.1 6.5 7.6 11.0 8.7 6.2 8.3 11.2 8.7 8.8

Market-mix

Domestic 6,220 4,910 4,010 2,910 7,690 6,191 4,754 3,476 18,050 22,111

YoY Change (%) 16.0 -13.7 5.2 24.9 23.6 26.1 18.6 19.5 5.0 22.5

% of sales 27.6 26.1 17.3 10.3 31.0 27.7 17.8 10.6 19.4 20.7

Exports 16,280 13,910 19,230 25,470 17,130 16,191 21,915 29,222 74,890 84,459

YoY Change (%) 20.7 13.5 23.4 33.2 5.2 16.4 14.0 14.7 23.9 12.8

% of sales 72.4 73.9 82.7 89.7 69.0 72.3 82.2 89.4 80.6 79.3

Total Sales (incl OI) 22,500 18,820 23,240 28,380 24,820 22,382 26,669 32,699 92,940 106,570

E: MOSL Estimates

September 2013 Results Preview | Sector: Agrochemicals

United PhosphorusCMP: INR143 Buy� We estimate United Phosphorus (UNTP) will report 23.7% YoY growth

in consolidated revenue to INR22.9b. We expect 26% growth indomestic revenue and 16% growth in international revenue.

� EBITDA margin is expected to improve by 110bp YoY to 18.7% due tofavorable forex and operating leverage, translating into EBITDAgrowth of 32% to INR4.3b.

� However, higher depreciation, interest cost and losses from associateto reduce PAT growth to 20% YoY to INR1.6b.

� Current valuations of 6.8x FY14E EPS and 5.7x EV/EBITDA are veryattractive. Maintain Buy with a target price of INR202 (8x FY15E EPS).

Key issues to watch for� Update on delayed start to season in the US.¢ Any revision in outlook for FY14, considering favorable climatic

patterns and weaker INR.¢ Status of integration of DVA Agro, Brazil and turnaround of Sipcam

Isagro, Brazil.


EBITDA 13.8 16.6 20.2 23.0

NP 5.9 8.0 9.3 11.2

Adj EPS (INR) 12.8 18.1 21.0 25.2

EPS Growth (%) 3.3 42.1 15.7 20.2

BV/Share (Rs) 90.4 105.0 121.8 142.9

RoE (%) 14.9 18.2 18.5 19.0

RoCE (%) 17.3 17.3 19.2 20.0

Payout (%) 22.5 17.5 19.9 16.9

Valuations

P/E (x) 11.2 7.9 6.8 5.7

P/BV (x) 1.6 1.4 1.2 1.0

EV/EBITDA (x) 6.4 5.4 4.4 3.6

Div. Yield (%) 1.8 1.8 2.5 2.5

Bloomberg UNTP IN




1,6,12 Rel Perf. (%) -9 / 17 / 5

C–206October 2013

September 2013 Results Preview | Sector: Electrical Goods

V-Guard IndustriesCMP: INR486 Buy� We expect 2QFY14 revenue to grow 15% YoY to INR3.6b, primarily due

to extended rains and improvement in power scenario in South India.However, strong rural demand should result in 26% YoY growth in2HFY14.

� EBITDA margin is likely to decline 140bp YoY to 8.2%, primarily onaccount of higher ad spends during the quarter and lower operatingleverage.

� Due to lower margins, we expect PAT to decline 12% YoY. However, weexpect growth to bounce back, as ad spends in 2HFY14 reduceconsiderably.

� We cut our EPS estimates by 3% for FY14 and 4.5% for FY15 to factor inlower growth due to slowdown and improvement in power situationin South India. The stock trades at 16.7x FY14E and 12.4x FY15E EPS.Maintain Buy with a revised target price of INR587.

Key issues to watch out for�� Decline in invertor sales due to improvement in power scenario�� Movement of copper prices�� Update on new housing wiring cable capacity


EBITDA 0.9 1.1 1.5 1.9

NP 0.5 0.6 0.9 1.2

EPS (iNR) 17.0 21.1 29.1 39.1

EPS Gr. (%) 27.0 23.8 38.2 34.3

BV/Sh (INR) 70.6 87.6 110.3 141.3

RoE (%) 26.6 26.7 29.4 31.1

RoCE (%) 27.3 27.4 31.0 35.4

Payout (%) 19.4 21.9 20.8

Valuations

P/E (x) 28.5 23.1 16.7 12.4

P/BV (x) 6.9 5.6 4.4 3.4

EV/EBITDA (x) 16.6 14.6 10.5 8.0

Div. Yield (%) 1.6 0.7 1.1 1.4

Bloomberg VGRD IN




1,6,12 Rel Perf. (%) -19 / 7 / 16




Net Sales 3,190 3,135 3,490 3,787 4,082 3,605 4,398 4,757 13,602 16,840

YoY Change (%) 32.8 48.2 41.5 38.5 28.0 15.0 26.0 25.6 40.0 23.8


EBITDA 343 300 257 199 309 294 429 476 1,099 1,509

Margins (%) 10.7 9.6 7.4 5.3 7.6 8.2 9.7 10.0 8.1 9.0

Depreciation 28 29 29 29 29 25 37 40 114 132

Interest 45 43 49 63 55 61 64 65 200 244

Other Income 5 11 15 5 11 10 10 10 36 42

PBT 276 239 194 113 237 218 338 381 822 1,175

Tax 69 59 40 24 60 59 88 95 193 305

Rate (%) 25.1 24.8 20.7 21.1 25.5 27.0 26.0 25.0 23.4 26.0

Reported PAT 207 180 153 89 176 159 250 285 629 869

Adj PAT 207 180 153 89 176 159 250 285 629 869

YoY Change (%) 67.3 162.9 23.2 -53.4 -14.6 -11.5 62.9 219.4 23.8 38.2

Margins (%) 6.5 5.7 4.4 2.4 4.3 4.4 5.7 6.0 4.6 5.2

E: MOSL Estimates

C–210July 2013

N O T E S


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