11June 2020_India_Daily - Kotak Securities

For Private Circulation Only. FOR IMPORTANT INFORMATION ABOUT KOTAK SECURITIES’ RATING SYSTEM AND OTHER DISCLOSURES. REFER TO THE END OF THIS MATERIAL.

Contents

Special Reports

Strategy

Strategy: Opening economies, closing opportunities, Part 2

Economic conditions will improve from bottom levels; question is how

much

Stock prices in several sectors back to February 2020 levels; even higher in a

few sectors

FY2022E revenue, volume and PAT numbers down from pre-Covid-19 levels

A rather skewed market; limited insights from top-down valuations

Daily Alerts

Results

Hero Motocorp: One-offs impact operating performance

4QFY20 EBITDA margin dented by a few one-offs

Cost-saving program and RM tailwinds to support operating margins in

FY2021E

Dhanuka Agritech: Robust results

4QFY20 results boosted by strong growth in revenues and higher margins

Raise FY2021-22 EPS estimates; retain SELL with a revised fair value of

Rs535

Results, Change in Reco

TeamLease Services: Upgrade to ADD

Temporary staffing: decent performance in a challenging environment

HR services segment: remains under pressure

Specialized staffing: should see decent momentum in FY2021 also

Upgrade to ADD with a new FV of Rs1,875

INDIA DAILY June 11, 2020 India 10-Jun 1-day 1-mo 3-mo

Sensex 34,247 0.9 8.5 (4.1)

Nifty 10,116 0.7 9.5 (3.3)

Global/Regional indices

Dow Jones 26,990 (1.0) 11.4 14.6

Nasdaq Composite 10,020 0.7 9.0 26.0

FTSE 6,329 (0.1) 6.6 7.7

Nikkei 22,809 (1.4) 11.9 17.5

Hang Seng 25,050 (0.0) 1.8 (0.7)

KOSPI 2,186 (0.4) 13.0 14.6

Value traded – India

Cash (NSE+BSE) 558 606 558

Derivatives (NSE) 16,709 5,841 11,75

8

Deri. open interest 3,145 2,104 3,364

Forex/money market

Change, basis points

10-Jun 1-day 1-mo 3-mo

Rs/US$ 75.5 (11) (45) 131

10yr govt bond, % 6.3 (1) (9) (21)

Net investment (US$ mn)

9-Jun MTD CYTD

FIIs 63 2,800 (2,114)

MFs (159) (365) 4,968

Top movers

Change, %

Best performers 10-Jun 1-day 1-mo 3-mo

ARBP IN Equity 797 2.8 19.9 77.0

GNP IN Equity 401 (0.1) 19.8 55.1

CIPLA IN Equity 643 0.5 9.7 54.5

LPC IN Equity 928 1.0 9.3 45.3

CDH IN Equity 369 2.5 12.4 43.0

Worst performers

MMFS IN Equity 154 (2.0) (2.2) (52.4)

IIB IN Equity 500 7.7 15.3 (41.5)

BAF IN Equity 2,436 (0.3) 20.9 (39.6)

BJFIN IN Equity 5,223 (1.7) 14.6 (36.7)

EDEL IN Equity 45 (0.7) 12.3 (33.8)

[email protected]: +91 22 6218 6427

For Private Circulation Only. FOR IMPORTANT INFORMATION ABOUT KOTAK SECURITIES’ RATING SYSTEM AND OTHER DISCLOSURES, REFER TO THE END OF THIS MATERIAL.

Economic conditions will improve from bottom levels; question is how much

We make two (somewhat obvious) points about the economic recovery—(1) demand for most

goods and services will bounce back from depressed levels of April-May 2020, the period of

strict lockdown in India; there is limited reason to get excited about the same and (2) demand

for most goods and services in FY2022 will be likely lower than pre-Covid-19 estimates for

FY2022 even assuming a smooth recovery in the economy. We rule out a quick discovery of a

vaccine against Covid-19 and a large fiscal stimulus that can result in faster recovery in demand.

Stock prices in several sectors back to February 2020 levels; even higher in a few sectors

A simple analysis of pre-Covid-19 and current stock prices and FY2022E earnings/book (see

Exhibit 1) shows that stocks in consumer staples, pharmaceuticals and telecom (including RIL)

sectors are trading near or above their pre-Covid-19 prices while financials stocks are trading

significantly below their pre-Covid-19 levels. We would be the first to concede that 1-2 years of

lower earnings/cash flows are not very material for ‘fair’ values of stocks (unless business

models are impaired significantly) but the sharp rebound in stock prices in several sectors is

interesting. The market is rightly concerned about potential increase in NPLs and credit costs for

financials but seems less worried about weak demand conditions extending into FY2022 too.

FY2022E revenue, volume and PAT numbers down from pre-Covid-19 levels

We have cut our FY2022E volume/revenue assumptions and net profit estimates for most stocks

under our coverage given the risks to demand across sectors. Our aggregate net profits for the

Nifty-50 Index is down 20% from February 14, 2020 levels (roughly pre-Covid-19 period). In

particular, we have seen sharp cuts in the case of automobiles, banks and diversified financials,

commodities and modest cuts in the case of consumer staples sectors. Exhibit 2 compares the

pre-Covid-19 and current FY2022E volume, revenues, EBITDA, net profits and book value

estimates of the Nifty-50 stocks. We ignore FY2021E numbers for most sectors given significant

disruption to both demand and supply in 1QFY21.

A rather skewed market; limited insights from top-down valuations

As discussed in our June 7, 2020 report, the financials sector has dragged down the Indian

market’s performance over the past three months (see Exhibit 3) while other large-cap. stocks in

the consumer staples and discretionary, pharmaceuticals and telecom sectors are near or above

their pre-Covid-19 levels (see Exhibit 4). Thus, overall market valuations may have little relevance

given the skewed performance and valuations of sectors. Nonetheless, we show the valuation

of the Indian market on our usual metrics in Exhibit 5 and growth in net profits and breakdown

of net profits of the Nifty-50 Index by sectors in Exhibits 6-7.

Strategy Market

Opening economies, closing opportunities, Part 2. Near-term data on demand

recovery, capacity utilization and labor issues in consumption-related sectors may help

in getting a better handle on earnings. However, stock prices are already trading near

pre-Covid-19 levels despite downgrades to F2022E EPS. Near-term data may be more

relevant for financials stocks in terms of assessing the eventual level of NPLs and credit

costs as value exists in financials stocks assuming the situation ‘normalizes’ rapidly.

INDIA

JUNE 11, 2020

UPDATE

BSE-30: 34,247

QUICK NUMBERS

Nifty-50 Index up

9% in the past one

month, down 3% in

the past three

Nifty-50 Index net

profits to decline

2.2% in FY2021,

grow 33% in

FY2022

Nifty-50 Index is

trading at 21.5X

FY2021E ‘EPS’ and

16.2X FY2022E ‘EPS’

Sanjeev Prasad

Sunita Baldawa

Anindya Bhowmik


Strategy India

KOTAK INSTITUTIONAL EQUITIES RESEARCH 3

Changes to recommended large-cap. model portfolio

Exhibit 8 is our recommended large-cap. model portfolio. We remove Hero Motocorp (200

bps) from the portfolio and allocate 50-100 bps each to AXSB (100 bps to 530 bps now),

Bharti Airtel (50 bps to 380 bps) and HDFC (50 bps to 920 bps). HMCL stock has done quite

well in the past two months (+15%) and is now trading above our 12-month forward fair

value. We are facing a dearth of investment ideas currently given the run-up in stock prices

versus plentiful ideas in March-April.

Exhibit 9 is our recommended mid-cap. model portfolio.

Exhibit 1: Stocks in automobiles (2-W), consumer staples, IT, pharmaceuticals and telecom sectors are trading near or above their pre-

Covid prices Pre-Covid-19 (February 14, 2020) and current stock prices and FY2022 multiples of Nifty-50 stocks

Source: Bloomberg, Companies, Kotak Institutional Equities estimates

Company Sector Pre-Covid Current Pre-Covid Current Pre-Covid Current Pre-Covid Current Pre-Covid Current

Bajaj Auto Automobiles & Components 3,146 2,717 14.7 14.3 3.0 3.3 214 190 1,052 828

Eicher Motors Automobiles & Components 18,704 17,090 18.7 17.5 4.1 3.8 999 979 4,573 4,555

Hero Motocorp Automobiles & Components 2,357 2,292 12.4 13.7 2.8 2.8 191 168 853 818

Mahindra & Mahindra Automobiles & Components 523 474 11.6 11.7 1.3 1.2 45 41 408 397

Maruti Suzuki Automobiles & Components 6,914 5,676 23.3 25.1 3.4 3.1 296 226 2,040 1,860

Tata Motors Automobiles & Components 169 111 9.3 17.4 0.9 0.7 18 6 197 153

Axis Bank Banks 737 427 11.9 10.2 2.0 1.4 62 42 369 315

HDFC Bank Banks 1,219 992 18.3 19.1 3.0 2.6 67 52 401 381

ICICI Bank Banks 546 353 14.4 12.4 2.5 1.7 38 28 222 210

IndusInd Bank Banks 1,176 500 9.8 6.8 1.7 0.9 121 73 700 547

State Bank of India Banks 319 188 5.8 6.2 1.0 0.8 55 30 307 249

Bajaj Finance Diversified Financials 4,782 2,436 29.3 19.4 5.8 3.4 163 126 824 708

Bajaj Finserv Diversified Financials 9,691 5,223 20.4 13.3 3.3 2.1 475 392 2,928 2,483

HDFC Diversified Financials 2,402 1,809 28.3 24.3 4.0 3.1 85 74 600 588

L&T Capital Goods 1,295 947 15.0 13.6 2.3 1.8 86 69 569 528

Asian Paints Commodity Chemicals 1,877 1,636 46.4 40.4 13.4 11.7 40 40 140 140

Grasim Industries Construction Materials 743 615 8.3 6.8 0.7 0.6 90 90 1,069 1,063

Shree Cement Construction Materials 24,394 21,513 32.3 33.9 5.1 4.9 755 634 4,752 4,355

Ultratech Cement Construction Materials 4,434 3,792 22.0 18.7 2.7 2.3 202 203 1,641 1,647

Britannia Industries Consumer Staples 3,097 3,377 39.4 41.1 11.0 12.5 79 82 282 271

Hindustan Unilever Consumer Staples 2,255 2,120 48.5 47.9 34.9 11.0 47 44 65 193

ITC Consumer Staples 208 199 15.0 16.0 3.5 3.7 14 12 59 54

Nestle India Consumer Staples 16,356 16,535 58.9 58.5 54.6 55.7 278 282 299 297

NTPC Electric Utilities 113 98 7.3 6.3 0.8 0.7 15 15 137 137

Power Grid Electric Utilities 184 170 7.2 6.7 1.2 1.1 25 25 153 153

UPL Fertilizers & Agricultural Chemicals 592 425 12.9 11.9 2.2 1.6 46 36 271 262

GAIL (India) Gas Utilities 123 98 8.2 8.6 1.1 0.9 15 11 114 114

HCL Technologies IT Services 622 579 13.0 13.5 2.6 2.4 48 43 241 239

Infosys IT Services 786 716 16.6 17.7 4.6 4.1 47 41 170 175

TCS IT Services 2,184 2,109 20.9 22.9 7.3 8.0 104 92 301 265

Tech Mahindra IT Services 834 591 13.3 12.3 2.5 2.0 63 48 331 293

Wipro IT Services 243 217 11.7 12.7 2.0 1.8 21 17 124 118

Zee Entertainment Enterprises Media 239 190 11.4 11.7 1.9 1.6 21 16 126 116

Hindalco Industries Metals & Mining 194 147 6.9 7.4 0.6 0.5 28 20 329 306

JSW Steel Metals & Mining 289 191 10.1 12.9 1.5 1.2 29 15 195 163

Tata Steel Metals & Mining 435 324 4.8 4.5 0.6 0.5 91 71 749 608

Vedanta Metals & Mining 141 106 7.0 8.6 0.9 0.7 20 12 163 144

BPCL Oil, Gas & Consumable Fuels 476 379 13.4 11.5 2.1 1.9 36 33 230 198

Coal India Oil, Gas & Consumable Fuels 175 141 6.3 5.9 2.4 2.4 28 24 72 58

IOCL Oil, Gas & Consumable Fuels 115 90 7.4 5.8 0.9 0.7 16 16 135 135

ONGC Oil, Gas & Consumable Fuels 103 88 5.2 12.3 0.5 0.4 20 7 224 204

Reliance Industries Oil, Gas & Consumable Fuels 1,474 1,572 13.7 16.3 1.6 1.7 107 96 903 917

Cipla Pharmaceuticals 446 643 13.6 20.1 1.8 2.6 33 32 253 244

Dr Reddy's Laboratories Pharmaceuticals 3,304 4,113 17.9 21.9 2.8 3.4 185 188 1,190 1,212

Sun Pharmaceuticals Pharmaceuticals 419 499 16.7 20.8 1.8 2.2 25 24 232 226

Titan Company Retailing 1,293 977 43.2 46.7 11.3 10.0 30 21 115 97

Bharti Airtel Telecommunication Services 565 567 42.0 39.2 3.7 3.8 13 14 153 148

Bharti Infratel Telecommunication Services 235 233 13.3 13.2 2.7 3.1 18 18 86 74

Adani Ports and SEZ Transportation 367 347 13.0 15.2 2.2 2.2 28 23 169 160

Nifty-50 Index 12,113 10,116 15.2 16.1 2.2 2.1 796 628 5,506 4,853

Price/Share (Rs) P/E (X) P/B (X) EPS (Rs) BPS (Rs)

India Strategy

4 KOTAK INSTITUTIONAL EQUITIES RESEARCH

Exhibit 2: We have cut net profit of the Nifty-50 Index by 20% from pre-Covid-19 levels Pre-Covid-19 and current FY2022E volume, revenues, EBITDA, net profits and net worth estimates of the Nifty-50 stocks

Source: Bloomberg, Companies, Kotak Institutional Equities estimates

Exhibit 3: Financials sector has dragged down the performance of the Nifty-50 index since the Covid outbreak (1,261 points out of 2,066

point drop in the index) Contribution of companies to return of Nifty-50 Index from pre-Covid levels (February 14, 2020-June 9, 2020)

Source: Bloomberg, Kotak Institutional Equities

Volume/other

Company assumptions (units) Volume Revenues EBITDA PAT Net worth Volume Revenues EBITDA PAT Net worth Revenues EBITDA PAT Net worth

Bajaj Auto Two-wheelers ('000) 2,412 386,085 64,855 61,936 304,410 2,135 334,381 58,880 54,974 239,574 (13) (9) (11) (21)

Eicher Motors Two-wheelers ('000) 807 119,037 28,708 27,180 124,476 811 118,214 27,988 26,645 123,998 (1) (3) (2) (0)

Hero Motocorp Motorcycles ('000) 6,268 360,170 50,066 38,106 170,472 6,137 322,117 45,127 33,520 163,358 (11) (10) (12) (4)

Mahindra & Mahindra PVs ('000) 217 598,250 80,454 51,523 464,495 185 527,675 75,141 46,234 451,277 (12) (7) (10) (3)

Maruti Suzuki Four-wheelers ('000) 1,816 971,632 127,846 89,561 616,135 1,557 819,695 99,703 68,335 562,012 (16) (22) (24) (9)

Tata Motors CVs+PVs ('000) 532 3,154,976 402,967 69,464 707,942 493 2,943,310 337,913 24,514 587,253 (7) (16) (65) (17)

Axis Bank LLP (Rs mn) 58,065 502,820 — 173,769 1,118,130 99,582 460,232 — 117,918 1,030,313 (8) — (32) (8)

HDFC Bank LLP (Rs mn) 131,841 999,441 — 363,799 2,197,851 166,732 927,585 — 284,967 2,133,414 (7) — (22) (3)

ICICI Bank LLP (Rs mn) 67,199 661,744 — 243,627 1,440,166 86,623 592,830 — 183,890 1,430,609 (10) — (25) (1)

IndusInd Bank LLP (Rs mn) 30,395 269,343 — 85,843 485,502 38,036 207,511 — 50,652 404,156 (23) — (41) (17)

State Bank of India LLP (Rs mn) 305,258 1,813,633 — 490,814 3,303,552 407,216 1,625,981 — 269,366 2,804,840 (10) — (45) (15)

Bajaj Finance — 263,749 — 97,755 494,471 — 204,431 — 75,340 424,516 (22) — (23) (14)

Bajaj Finserv — 627,488 — 75,557 465,893 — 481,921 — 62,307 395,135 (23) — (18) (15)

HDFC — 214,067 — 146,145 1,038,742 — 200,932 — 128,740 1,018,284 (6) — (12) (2)

L&T — 1,922,182 238,162 121,242 797,582 — 1,625,449 184,082 97,296 740,109 (15) (23) (20) (7)

Asian Paints — 265,347 56,647 38,815 133,949 — 265,347 56,647 38,815 133,949 — — — —

Grasim Industries VSF volume ('000 tons) 670 1,165,674 265,605 59,160 702,631 670 1,156,598 265,662 59,168 698,630 (1) 0 0 (1)

Shree Cement Volume (mn tons) 33.9 171,701 53,670 27,259 171,440 28.0 138,746 45,515 22,865 157,112 (19) (15) (16) (8)

Ultratech Cement Volume (mn tons) 94.9 612,505 127,426 58,198 473,502 84.6 514,235 122,541 58,508 475,304 (16) (4) 1 0

Britannia Industries — 143,962 23,930 18,677 67,826 — 145,059 25,656 19,556 65,083 1 7 5 (4)

Hindustan Unilever — 507,540 137,748 100,454 136,075 — 500,098 142,931 103,712 453,101 (1) 4 3 233

ITC — 537,212 210,401 170,829 730,149 — 491,453 189,214 153,768 665,178 (9) (10) (10) (9)

Nestle India — 154,338 36,765 26,783 28,867 — 155,254 38,320 27,235 28,605 1 4 2 (1)

NTPC — 1,354,373 369,319 153,055 1,359,413 — 1,355,720 370,665 153,272 1,359,660 0 0 0 0

Power Grid — 438,941 385,173 133,377 802,261 — 438,941 385,173 133,377 802,262 — — — —

UPL — 406,534 91,267 35,008 207,477 — 407,563 82,568 27,274 200,361 0 (10) (22) (3)

GAIL (India) — 846,186 99,513 67,158 514,404 — 749,513 80,233 51,534 513,328 (11) (19) (23) (0)

HCL Technologies — 858,376 197,365 130,380 653,042 — 768,139 177,426 116,480 649,099 (11) (10) (11) (1)

Infosys — 1,117,540 283,171 201,532 721,521 — 995,325 242,461 171,963 742,248 (11) (14) (15) 3

TCS — 1,914,462 519,831 391,476 1,128,616 — 1,707,702 451,654 345,062 993,402 (11) (13) (12) (12)

Tech Mahindra — 469,247 82,701 55,037 290,771 — 398,066 64,224 42,248 258,098 (15) (22) (23) (11)

Wipro — 693,233 147,027 118,029 724,438 — 621,621 124,208 97,471 672,881 (10) (16) (17) (7)

Zee Entertainment Enterprises — 100,022 29,196 20,129 121,299 — 89,382 24,176 15,605 111,146 (11) (17) (22) (8)

Hindalco Industries Aluminum (mn tons) 1.3 1,388,895 162,323 62,406 732,433 1.3 1,293,489 135,723 44,082 679,915 (7) (16) (29) (7)

JSW Steel Steel (mn tons) 19.3 968,633 207,638 69,053 468,492 17.0 826,985 151,482 35,647 390,623 (15) (27) (48) (17)

Tata Steel Steel (mn tons) 18.4 1,676,397 278,433 111,912 858,468 18.4 1,643,298 246,070 87,424 743,831 (2) (12) (22) (13)

Vedanta Aluminum (mn tons) 2.0 1,005,447 251,339 74,589 605,179 2.0 894,448 203,834 45,850 535,606 (11) (19) (39) (11)

BPCL — 2,948,721 123,740 69,849 453,079 — 2,229,861 121,089 64,881 389,847 (24) (2) (7) (14)

Coal India Coal (mn tons) 627 1,062,679 182,226 170,594 441,511 596 999,426 151,846 145,899 356,146 (6) (17) (14) (19)

IOCL — 5,150,635 323,262 142,683 1,236,443 — 5,150,635 323,262 142,683 1,236,443 — — — (0)

ONGC — 2,080,900 705,501 247,685 2,822,728 — 1,676,919 446,078 90,103 2,570,471 (19) (37) (64) (9)

Reliance Industries — 7,519,377 1,329,046 637,111 5,353,215 — 6,448,773 1,204,868 570,068 5,431,849 (14) (9) (11) 1

Cipla — 202,195 44,903 26,492 204,247 — 197,780 43,995 25,837 196,471 (2) (2) (2) (4)

Dr Reddy's Laboratories — 207,946 51,261 30,631 197,487 — 217,655 54,911 31,175 201,112 5 7 2 2

Sun Pharmaceuticals — 387,650 97,184 60,467 557,739 — 377,614 90,825 57,867 543,917 (3) (7) (4) (2)

Titan Company — 316,066 39,384 26,611 101,661 — 237,553 28,855 18,592 86,503 (25) (27) (30) (15)

Bharti Airtel — 1,124,354 554,341 73,389 832,373 — 1,156,032 574,113 78,869 805,450 3 4 7 (3)

Bharti Infratel — 156,073 65,479 32,855 158,793 — 157,494 79,063 32,694 137,616 1 21 (0) (13)

Adani Ports and SEZ — 177,685 108,133 57,328 343,278 — 153,508 93,763 46,275 324,960 (14) (13) (19) (5)

Nifty-50 Index 51,491,977 8,634,006 5,965,071 39,002,578 46,376,557 7,667,884 4,784,058 36,979,838 (10) (11) (20) (5)

Pre-covid Current Change (%)

(350)

(300)

(250)

(200)

(150)

(100)

(50)

-

50

100

RIL

IN

DRR

D IN

CIP

LA IN

SU

NP IN

BR

IT IN

NEST

IN

BH

AR

TI IN

HM

CL

IN

BH

IN IN

SRC

M IN

AD

SEZ IN

EIM

IN

PW

GR IN

Z IN

WPR

O IN

GA

IL IN

MM

IN

ON

GC

IN

BJA

UT

IN

GRA

SIM

IN

HC

LT IN

CO

AL

IN

IOC

L IN

NTPC

IN

VED

L IN

UTC

EM

IN

HN

DL

IN

BPC

L IN

TA

TA IN

ITC

IN

UPLL

IN

JSTL

IN

TTM

T IN

APN

T IN

HU

VR IN

TC

S IN

TTA

N IN

TEC

HM

IN

MSIL

IN

INFO

IN

BJF

IN IN

LT IN

IIB IN

KM

B IN

SBIN

IN

BA

F IN

AX

SB IN

HD

FCB IN

HD

FC IN

ICIC

IBC

IN

Index points

Strategy India


Exhibit 4: About half the Nifty-50 stocks now offer less than 10% upside to our 12-month fair valuation; many of the rest are

conglomerates and financials Valuation summary of Nifty-50 Index stocks, March fiscal year-ends, 2019E-21E

Source: Bloomberg, Kotak Institutional Equities estimates

Price Fair Value Upside

2020 2021E 2022E 2020 2021E 2022E (Rs) (Rs) (%) 1-mo 3-mo 1-Year CYTD

Cipla 33.5 24.2 20.1 16.4 13.6 11.3 643 650 1 9 51 16 35

Reliance Industries 23.6 22.6 16.3 14.2 13.0 9.4 1,572 1,700 8 2 42 20 5

Dr Reddy's Laboratories 23.4 27.9 21.9 14 15.5 12.1 4,113 3,100 (25) 3 34 56 43

Sun Pharmaceuticals 29.8 26.0 20.8 16 13.7 11.2 499 480 (4) 6 27 24 15

Hero Motocorp 14.4 18.7 13.7 9.4 11.2 7.8 2,292 2,500 9 17 17 (16) (6)

ONGC 5.7 694.6 12.3 3.1 6.6 4.3 88 60 (32) 16 18 (46) (31)

Bharti Airtel NM 100.2 39.2 10.9 8.5 6.9 567 690 22 7 14 56 24

Britannia Industries 57.4 44.7 41.1 44 34 31 3,377 3,300 (2) 13 13 13 12

ITC 17.4 17.7 16.0 12 13 11.2 199 255 28 26 12 (29) (16)

Bharti Infratel 14.1 14.1 13.2 6 5.6 5.3 233 185 (20) 34 10 (17) (8)

Vedanta 16.2 19.3 8.6 4.6 6.0 4.5 106 120 13 37 12 (36) (30)

Bajaj Auto 15.4 17.2 14.3 12 13 10 2,717 3,000 10 12 6 (9) (15)

Adani Ports and SEZ 14.5 18.4 15.2 12 12.1 10.3 347 385 11 22 8 (19) (5)

HCL Technologies 14.2 15.2 13.5 8.8 8.9 7.7 579 570 (2) 12 7 6 2

Tata Motors NM (5.6) 17.4 4.8 5.9 3.6 111 130 17 37 5 (33) (40)

TCS 24.5 25.5 22.9 17.7 18.3 16.3 2,109 1,705 (19) 11 7 (4) (2)

Mahindra & Mahindra 14.7 14.9 11.7 9.2 9.0 7.2 474 625 32 22 2 (27) (11)

Nestle India 80.9 68.7 58.5 56 46.4 40.4 16,535 16,000 (3) (7) 3 44 12

Tata Steel (36.4) 53.9 4.5 8.2 8.3 4.7 324 430 33 19 1 (33) (31)

Infosys 18.4 19.8 17.7 13 13 11 716 700 (2) 6 2 (5) (2)

Wipro 13.1 13.7 12.7 7.8 7.9 7.0 217 195 (10) 18 1 (27) (12)

GAIL (India) 8.6 10.0 8.6 6.2 7.1 6.1 98 150 53 7 (2) (36) (19)

Hindalco Industries 6.9 14.2 7.4 5.0 6.6 4.8 147 225 53 25 2 (26) (32)

Hindustan Unilever 67.9 60.2 47.9 51 42 34 2,120 2,300 9 1 (0) 14 10

Zee Entertainment Enterprises 10.6 14.5 11.7 7.1 8.9 6.9 190 145 (24) 26 (2) (43) (35)

Grasim Industries 8.3 8.6 6.8 4.9 4.2 3.3 615 865 41 26 (3) (30) (17)

Shree Cement 49.4 60.5 33.9 20.9 24 16 21,513 15,500 (28) 15 (2) 4 6

NTPC 8.0 6.8 6.3 9.2 7.7 6.2 98 150 53 13 (5) (27) (18)

Eicher Motors 22.2 22.9 17.5 17 16 13 17,090 19,500 14 23 (4) (15) (24)

Power Grid 8.4 7.4 6.7 6.8 6.4 6.0 170 235 38 7 (6) (12) (11)

Ultratech Cement 28.5 32.7 18.7 14 14.1 9.3 3,792 4,000 5 15 (7) (18) (6)

Coal India 5.4 6.2 5.9 4.7 5.3 4.6 141 230 63 9 (11) (46) (33)

Maruti Suzuki 30.3 42.6 25.1 18 21 12.4 5,676 4,300 (24) 22 (8) (19) (23)

IOCL 9.4 5.9 5.8 5.1 4.4 4.2 90 130 45 21 (10) (44) (28)

BPCL 26.4 14.8 11.5 17.2 10.7 9.0 379 440 16 17 (11) (3) (23)

HDFC Bank 20.7 20.7 19.1 — — — 992 1,050 6 7 (10) (19) (22)

Asian Paints 56.5 47.8 40.4 36 31 27 1,636 1,825 12 4 (12) 15 (8)

HDFC 17.6 27.9 24.3 — — — 1,809 2,150 19 7 (11) (18) (25)

L&T 14.9 23.7 13.6 16 18 13 947 1,200 27 16 (14) (38) (27)

UPL 18.3 14.0 11.9 8 7.5 6.6 425 350 (18) 17 (17) (37) (27)

Tech Mahindra 12.9 16.7 12.3 7.9 8.3 6.4 591 630 7 10 (16) (23) (23)

JSW Steel 18.9 (540.2) 12.9 9 11.3 6.9 191 180 (6) 13 (17) (28) (29)

Titan Company 58.1 94.6 46.7 35 52 30 977 1,215 24 17 (19) (23) (18)

Kotak Mahindra Bank 29.7 32.2 25.4 — — — 1,332 1,400 5 9 (16) (11) (21)

ICICI Bank 28.8 14.0 12.4 — — — 353 470 33 5 (23) (15) (34)

State Bank of India NM 7.6 6.2 — — — 188 340 81 13 (26) (45) (44)

Axis Bank 74.1 11.9 10.2 — — — 427 600 40 12 (31) (47) (43)

Bajaj Finserv 24.7 22.0 13.3 — — — 5,223 7,000 34 14 (36) (37) (44)

Bajaj Finance 23.5 37.2 19.4 — — — 2,436 2,600 7 20 (40) (31) (42)

IndusInd Bank 7.8 18.3 6.8 — — — 500 600 20 13 (45) (68) (67)

Nifty-50 Index 21.2 21.4 16.1 11.0 11.2 8.8 10,116 11,750 16 9.3 (3.2) (15.2) (16.9)

Notes:

(a) We use consensus numbers for Kotak Mahindra Bank.

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

India Strategy


Exhibit 5: Nifty-50 Index is trading at fair valuations 1-year rolling forward P/E, P/B, ROE, EV/EBITDA and M3 growth rate adjusted valuations for Nifty-50 Index

Source: Companies, Kotak Institutional Equities estimates

Exhibit 6: We expect earnings of the Nifty-50 Index to decline 2.1% in FY2021 and grow 33% in FY2022 Valuation summary of Nifty-50 sectors (full-float basis), March fiscal year-ends, 2020E-22E (based on current constituents)


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Yield gap (%) Earnings yields (%)

10-y G-sec yields (%)

Mcap. Adj. mcap.

(US$ bn) (US$ bn) 2020 2021E 2022E 2020 2021E 2022E 2020 2021E 2022E 2020 2021E 2022E 2020 2021E 2022E 2020 2021E 2022E

Automobiles & Components 58 31 (20) (46) 178 26 48 17.4 9.3 10.3 6.7 2.3 2.3 2.1 1.8 1.5 1.8 8.9 4.7 11.9

Banks 180 137 56 34 19 21 16.0 13.5 — — — 1.9 1.7 1.6 0.0 0.8 0.9 8.9 10.9 11.7

Capital Goods 18 15 3.3 (37) 74 14.9 23.7 13.7 16 18 13.1 2.3 2.0 1.8 1.9 1.6 2.3 15.5 8.2 13.1

Commodity Chemicals 21 10 29 18 18 57 48 40 36 31 27 14.7 13.1 11.7 0.9 1.1 1.3 26.0 27.4 29.0

Construction Materials 30 17 33 (9) 51 22 24 16.2 9.1 8.5 6.4 2.0 1.9 1.7 0.5 0.6 0.6 9.2 7.7 10.6

Consumer Staples 130 57 13.5 8.3 16.0 41 37 32 29 27 23 12.7 8.5 8.1 1.8 2.3 2.7 31.2 22.7 25.1

Diversified Financials 72 54 62 (31) 41 20 29 20.4 — — — 3.2 3.3 3.0 0.8 0.8 1.0 16.1 11.6 14.5

Electric Utilities 25 11 8.0 15.3 9.4 8.2 7.1 6.5 7.9 7.0 6.1 1.0 0.9 0.9 3.9 4.5 5.0 12.6 13.3 13.3

Fertilizers & Agricultural Chemicals 4 3 23 30 18 18.3 14.0 11.9 8.5 7.5 6.6 2.0 1.8 1.6 1.4 1.8 2.2 10.9 12.9 13.6

Gas Utilities 6 2 (18) (14) 17 8.6 10.0 8.6 6.2 7.1 6.1 1.0 0.9 0.9 6.6 4.1 4.6 11.3 9.2 10.0

IT Services 189 81 4.4 (6.7) 12 19 21 18.5 13.3 13.6 12.1 5.1 4.7 4.3 2.5 2.9 3.5 26.5 22.5 23.3

Media 2 2 8.6 (27) 24 10.6 14.5 11.7 7.1 8.9 6.9 1.9 1.8 1.6 2.4 2.9 2.9 17.8 12.3 14.0

Metals & Mining 21 11 (71) (42) 327 18.1 31 7.3 6.4 7.8 5.1 0.7 0.7 0.7 2.2 4.2 3.3 3.9 2.3 9.1

Oil, Gas & Consumable Fuels 172 81 (22) (13.9) 36 15.0 17.4 12.8 8.8 9.7 7.3 1.5 1.4 1.3 2.3 2.1 2.4 9.8 8.1 10.2

Pharmaceuticals 32 18 20 8.4 25 28 26 20.9 15 14.2 11.5 3.1 2.8 2.5 1.1 0.7 0.9 11.1 10.9 12.2

Retailing 11 5 (0.2) (38.6) 103 58 95 47 35 52 29.7 13.0 11.8 10.0 0.4 0.3 0.6 22.4 12.5 21.5

Telecommunication Services 47 18 (539) NM 82 NM 57 32 10.0 8.1 6.7 3.9 3.9 3.7 0.9 1.8 1.8 (0.6) 6.8 11.8

Transportation 9 4 20 (21) 21 14.5 18.4 15.2 12.2 12.1 10.3 2.7 2.5 2.2 3.7 1.1 1.0 19.0 13.3 14.2

Nifty-50 Index 1,026 558 (0.9) (2.2) 33 21 22 16.2 11.0 11.2 8.8 2.5 2.3 2.1 1.6 1.9 2.2 11.7 10.6 12.9

Nifty-50 Index (ex-energy) 854 466 7.9 1.4 32 23 23 17.1 11.9 11.8 9.4 2.8 2.6 2.4 1.5 1.8 2.1 12.4 11.6 14.0

Nifty-50 Index (ex-banks) 846 420 (7.9) (9.8) 37 21 23 16.9 11.0 11.2 8.8 2.6 2.5 2.3 1.9 2.1 2.4 12.5 10.5 13.3

Notes:

(a) We use consensus numbers for Kotak Mahindra Bank.

RoE (%)Earnings growth (%) PER (X) EV/EBITDA (X) Price/BV (X) Div. yield (%)

Strategy India


Exhibit 7: Banks, metals & mining and oil, gas & consumable fuels sectors to drive incremental profits of the Nifty-50 Index in FY2019-22E;

downside risks to earnings exist though Break-up of net profits of the Nifty-50 Index across sectors, March fiscal year-ends, 2015-22 (based on current constituents)

Source: Kotak Institutional Equities estimates

2015 2016 2017 2018 2019 2020 2021E 2022E 2020 2021E 2022E (Rs bn) (%) (Rs bn) (%)

Automobiles & Components 272 311 292 288 211 168 92 254 5 3 5 (77) 94 163 14

Tata Motors 142 140 94 68 (18) (28) (76) 25 (1) (2) 1 (47) 58 100 8

Banks 468 459 461 278 405 633 849 1,010 17 24 21 216 (265) 161 14

ICICI Bank 113 97 98 68 34 79 163 184 2 5 4 83 (102) 21 2

State Bank of India 131 100 105 (65) 9 145 220 269 4 6 6 75 (92) 50 4

Capital Goods 33 41 59 72 86 89 56 97 2 2 2 (33) 40 41 3

Commodity Chemicals 14 18 19 21 22 28 33 39 1 1 1 5 (6) 6 1

Construction Materials 54 76 92 70 78 103 93 141 3 3 3 (10) 12 47 4

Consumer Staples 151 152 163 183 213 242 262 304 7 7 6 20 (25) 42 4

Diversified Financials 85 103 118 161 168 274 189 266 7 5 6 (84) 103 77 6

Electric Utilities 148 121 177 186 210 227 262 287 6 7 6 35 (43) 25 2

Fertilizers & Agricultural Chemicals 11 9 18 20 14 18 23 27 0 1 1 5 (7) 4 0

Gas Utilities 33 22 38 46 63 52 44 52 1 1 1 (7) 9 7 1

IT Services 505 553 604 610 706 737 688 773 20 19 16 (49) 61 85 7

Media 10 10 13 14 16 17 13 16 0 0 0 (5) 6 3 0

Metals & Mining 90 9 168 273 292 86 50 213 2 1 4 (36) 44 163 14

Tata Steel 0 (19) 40 80 104 (10) 7 87 (0) 0 2 18 (22) 80 7

Oil, Gas & Consumable Fuels 650 744 948 917 1,103 865 744 1,014 23 21 21 (120) 148 269 23

Coal India 137 143 93 70 175 160 140 146 4 4 3 (19) 24 5 0

ONGC 189 174 217 223 296 194 2 90 5 0 2 (192) 235 89 7

Reliance Industries 236 253 299 350 391 396 412 570 11 11 12 16 (20) 158 13

Pharmaceuticals 83 91 92 58 71 85 92 115 2 3 2 7 (9) 23 2

Retailing 8 7 8 11 15 15 9 19 0 0 0 (6) 7 9 1

Telecommunication Services 80 63 61 44 (1) (6) 61 112 (0) 2 2 67 (83) 50 4

Transportation 12 29 39 38 41 49 38 46 1 1 1 (10) 13 8 1

Nifty-50 Index 2,707 2,818 3,369 3,292 3,713 3,681 3,600 4,784 100 100 100 (82) 100 1,184 100

Nifty-50 change (%) (4.7) 4.1 19.5 (2.3) 12.8 (0.9) (2.2) 32.9

Nifty-50 EPS (FF) 398 384 439 449 480 477 474 628

Incremental profits

Net profits (Rs bn) Contribution (%) 2021E 2022E

India Strategy


Exhibit 8: We recommend large-cap. stocks in automobiles & components, banks, consumer staples and telecommunication services KIE large-cap. model portfolio


Exhibit 9: Large value in many mid-cap. stocks KIE mid-cap. model portfolio


Price (Rs) KIE weight Price (Rs) KIE weight

Company 10-Jun-20 (%) 10-Jun-20 (%)

Automobiles & Components Insurance

Bajaj Auto 2,717 2.0 ICICI Prudential Life 397 2.0

Mahindra & Mahindra 474 2.5 SBI Life Insurance 742 1.8

Automobiles & Components 4.5 Insurance 3.8

Banks IT Services

Axis Bank 427 5.3 HCL Technologies 579 3.1

HDFC Bank 992 8.3 Infosys 716 7.8

ICICI Bank 353 9.5 IT Services 10.9

State Bank of India 188 3.0 Metals & Mining

Banks 26.1 Hindalco Industries 147 2.3

Capital Goods Tata Steel 324 2.2

L&T 947 2.8 Metals & Mining 4.5

Capital Goods 2.8 Oil, Gas & Consumable Fuels

Consumer Staples Reliance Industries 1,572 12.1

Britannia Industries 3,377 2.0 Oil, Gas & Consumable Fuels 12.1

Colgate-Palmolive (India) 1,356 1.8 Pharmaceuticals

ITC 199 2.0 Cipla 643 2.0

Hindustan Unilever 2,120 2.9 Pharmaceuticals 2.0

United Breweries 1,010 2.1 Real Estate

United Spirits 608 2.2 DLF 157 1.8

Consumer Staples 12.9 Real Estate 1.8

Diversified Financials Retailing

HDFC 1,809 9.2 Titan Company 977 1.8

Diversified Financials 9.2 Retailing 1.8

Gas Utilities Telecommunication Services

GAIL (India) 98 1.8 Bharti Airtel 567 3.8

Gas Utilities 1.8 Bharti Infratel 233 2.0

Telecommunication Services 5.8

BSE-30 34,247 100

Fair

Price Value Upside EPS (Rs)

Company Sector Rating (Rs) (Rs) (%) (Rs bn) (US$ mn) 2020 2021E 2022E 2020 2021E 2022E 2020 2021E 2022E 2020 2021E 2022E

Apollo Hospitals Health Care Services BUY 1,356 1,820 34 189 2,497 24 23 49 57 59 28 5.3 5.1 4.6 10 9 17

Ashok Leyland Automobiles & Components BUY 53 90 71 155 2,048 1 1 5 55 42 10 1.8 1.8 1.6 3 4 16

CESC Electric Utilities BUY 627 820 31 83 1,100 84 101 114 7 6 6 0.6 0.6 0.5 9 10 10

Cholamandalam Diversified Financials BUY 156 265 70 128 1,689 13 12 19 12 13 8 1.7 1.6 1.3 15 12 16

Escorts Automobiles & Components BUY 942 1,000 6 84 1,528 55 51 65 17 18 14 2.4 1.9 1.7 14 10 12

Equitas Holdings Banks BUY 51 100 98 17 228 6 6 10 8 8 5 0.7 0.6 0.6 8 7 10

Federal Bank Banks BUY 50 80 61 99 1,313 8 6 7 6 8 7 0.7 0.7 0.7 11 8 9

Jubilant Foodworks Hotels & Restaurants ADD 1,707 1,750 3 225 2,981 24 9 30 72 192 56 20.0 19.6 15.1 26 10 30

Kalpataru Power Transmission Capital Goods BUY 213 470 120 33 437 25 25 39 8 8 5 1.0 0.9 0.8 12 11 15

Kansai Nerolac Commodity Chemicals BUY 393 450 14 212 2,805 10 6 13 40 69 31 5.6 5.4 4.9 15 8 17

Max Financial Services Insurance ADD 483 550 14 130 1,724 10 10 28 48 47 17 — — — 13 15 40

Narayana Hrudayalaya Health Care Services BUY 295 380 29 60 798 4 3 11 74 98 28 5.2 4.9 4.2 7 5 16

Petronet LNG Gas Utilities BUY 253 300 19 380 5,024 17 18 22 15 14 11 3.4 3.2 2.9 24 23 27

Prestige Estates Projects Real Estate ADD 190 410 115 76 1,011 14 14 14 14 14 13 1.4 1.3 1.2 11 10 9

PVR Media BUY 1,005 1,625 62 52 683 33 (33) 59 31 (31) 17 2.7 3.0 2.6 11 (9) 16

Shriram City Union Finance Diversified Financials BUY 693 1,975 185 46 605 171 182 204 4 4 3 0.7 0.6 0.5 16 15 15

SRF Speciality Chemicals ADD 3,644 3,800 4 209 2,772 138 151 197 26 24 18 4.2 3.7 3.1 17 16 18

Shriram Transport Diversified Financials BUY 635 1,100 73 144 1,907 132 93 131 5 7 5 0.8 0.7 0.7 18 11 14

Thermax Capital Goods BUY 720 870 21 86 1,136 24 29 36 30 25 20 2.5 2.4 2.2 9 10 11

Varun Beverages Consumer Staples BUY 621 800 29 179 2,373 16 14 29 38 43 21 5.4 4.7 3.9 18 12 20

Mkt cap. PER (X) PBR (X) RoE (%)


4QFY20 EBITDA margin dented by a few one-offs

HMCL reported 4QFY20 EBITDA of Rs6.6 bn (down 38% yoy), which was 1% below our

estimates due to (1) higher-than-expected other expenses and (2) negative Rs1.8 bn impact

from a few one-offs. The company highlighted that 4QFY20 EBITDA got impacted due to (1)

Rs1.1 bn negative impact on account of higher discounts given to dealers (Rs10,000-Rs15,000

per vehicle) to clear off BS-IV inventories, (2) Rs0.37 bn impact from higher provision for fiscal

benefit of Neemrana plant (part of other operating income) and (3) the remaining Rs0.33 bn

impact related to write-off of BS-IV finished goods inventory. Revenues declined by 21% yoy led

by (1) 21% yoy volume decline due to subdued industry demand environment and (2) the

impact from a few one-offs mentioned above, which was partly offset by 6% yoy increase in

ASPs due to price hikes related to safety norms and higher mix of BS-VI vehicles in 4QFY20.

EBITDA margin came in at 10.6% (-300 bps yoy, -420 bps qoq), which was 40 bps below our

estimates. Adjusted for one-offs, the company would have reported EBITDA margin of 13.5%.

On per vehicle basis (adjusted for one-offs), the company’s gross profit per vehicle increased by

11% yoy to Rs15,275 and EBITDA per vehicle increased by 8% yoy to Rs6,481. Sequential

decline in gross margins can be attributed to the higher mix of BS-VI vehicles (50% in 4QFY20

versus nil in 3QFY20). Reported PAT was Rs6.2 bn (-15% yoy), 34% higher than our estimates

due to a lower tax rate.

Cost-saving program and RM tailwinds to support operating margins in FY2021E

Given gradual unlocking of the economy as well as gradual pick-up in capacity utilization (due

to multiple headwinds in terms of labor shortage and possibility of supply-chain disruptions), we

expect HMCL’s volumes to decline by 20% yoy in FY2021E. We expect HMCL’s volumes to

(1) decline by 80% yoy in 1QFY21 and 30% yoy in 2QFY21 and (2) grow by 4-5% yoy in

3QFY21 and 50% yoy in 4QFY21. However, we expect demand to recover in FY2022E with

21% yoy increase in volumes. We believe our volume assumptions are conservative given our

FY2022E volume forecast is still below FY2020 levels and we see an upside risk to our volume

assumptions if rural demand recovers swiftly. However, we expect operating margins to remain

firm led by (1) further savings from LEAP program – target to save 100 bps in FY2020 (50 bps

cost savings already achieved in FY2019), (2) softer RM prices and (3) control on overhead costs.

Hero Motocorp (HMCL) Automobiles & Components

One-offs impact operating performance. HMCL reported 4QFY20 EBITDA of Rs6.6 bn

(-38% yoy), impacted by (1) 21% yoy decline in volumes and (2) -Rs1.8 bn impact from

a few one-offs. Adjusted for one-offs, the company reported EBITDA margin of 13.5%

(flat yoy) in 4QFY20 led by material cost-reduction benefits despite steep volume decline.

We expect HMCL volume recovery to be the fastest among peers (given higher mix of

rural segment). We expect EBITDA margin to remain firm on (1) further cost savings

from LEAP program and (2) RM tailwinds. Retain ADD; FV Rs2,500 (from Rs2,150).

ADD

JUNE 10, 2020

RESULT

Sector view: Neutral

CMP (`): 2,292

Fair Value (`): 2,500

BSE-30: 34,247

Hitesh Goel

Rishi Vora

Hero Motocorp

Stock data Forecasts/valuations 2020 2021E 2022E

52-week range (Rs) (high,low) EPS (Rs) 159.2 122.8 167.8

Mcap (bn) (Rs/US$) EPS growth (%) (6.1) (22.8) 36.6

ADTV-3M (mn) (Rs/US$) P/E (X) 15.0 19.4 14.2

Shareholding pattern (%) P/B (X) 3.4 3.2 2.9

Promoters 34.6 EV/EBITDA (X) 9.9 11.7 8.2

FIIs 34.3 RoE (%) 23.6 16.8 21.4

MFs/BFIs Div. yield (%) 4.1 3.3 4.2

Price performance (%) 1M 3M 12M Sales (Rs bn) 288 263 322

Absolute 22 22 (13) EBITDA (Rs bn) 40 33 45

Rel. to BSE-30 13 28 2 Net profits (Rs bn) 32 25 34

3,023-1,475

477/6.4

8/10.3

3,742/50


Automobiles & Components Hero Motocorp


Cut FY2021E EPS estimates by 12%; maintain ADD

We have cut our FY2021E EPS estimates by 12% led by 15% cut in our volume estimates,

partly offset by 80 bps improvement in EBITDA margin assumptions. However, we have

increased our FY2022E EPS estimates by 3% led by 180 bps improvement in EBITDA margin

assumptions, partly offset by 6% cut in our volume assumptions. We are quite impressed by

the company’s ability to cut costs in a challenging environment and we bake in the cost-

reduction efforts in our estimates to raise our margin assumptions. HMCL has maintained its

market share in the domestic motorcycle segment over the past six years despite concerns of

escalating competition from Bajaj Auto. Maintain ADD with a revised fair value of Rs2,500

(from Rs2,150 earlier), valuing the company at 14X June 2022E core EPS (from 13X March

2022E core EPS) + Rs442 of cash/cash equivalent (includes investment of Rs68 per share in

Ather Energy and Hero Fincorp).

Key takeaways from the conference call

No guidance on FY2021E volume outlook. The company did not give any volume

guidance for FY2021E citing uncertain environment. However, the company indicated

that 90% of the dealerships have opened and 100% of the production facilities and

vendors have restarted their production. The company also highlighted retail sales have

picked up (faster than the company’s expectations) with improvement in conversion rate;

however, Gujarat and Maharashtra regions have been subdued due to higher number of

Covid-19 cases. As per early indicators seen by the company, rural and semi-urban areas

have been performing better than urban areas in terms of retail off-take. As per

company, many of the dealerships have reached 70-80% of the pre-Covid levels in terms

of demand. The company expects production ramp-up to be gradual. The company has

reduced dealer inventory levels by 0.55 mn units in FY2020 (from FY2019 March-end

levels) and the company is sitting on lowest inventory levels. The company has clocked in

positive retails in 4QFY20 and servicing income for the dealerships have almost reached

pre-Covid levels. In 4QFY20, 50% of the sales were derived from BS-VI models and the

remaining 50% of the sales were derived from BS-IV models.

The company increased prices of all its models in May 2020 in order to increase dealer

margins. The company will be launching Xtreme 160 in next couple of weeks. Also,

Xpulse has been doing well (especially in Southern region) and the company expects to

gain market share in the premium motorcycle segment. The company also expects its

scooter portfolio to do well led by Maestro Edge, Destini and Pleasure +. The company

highlighted that Pleasure+ has been very-well accepted pan-India, which augurs well for

the company.

Spare revenues for the company stood at Rs7.5 bn in 4QFY20 versus Rs8 bn in 3QFY20.

For FY2020, spare revenues stood at Rs29 bn (+2% yoy).

Overall financing for the company stood at 43% in FY2020. Out of total financing, Hero

Fincorp financing share is 46% (versus 41% in FY2019). Hero Fincorp book grew by 20%

yoy in 4QFY20. Hero Fincorp has ample liquidity (the company raised funds in 4QFY20)

and was profitable in 4QFY20 and FY2020. The company also highlighted that they are

not facing any issues related to financing of two-wheelers.

For FY2020, the company reported revenue of Rs288.4 bn (-14% yoy) led by (1) 18% yoy

decline in volumes and (2) 5% yoy increase in ASPs. Decline in volumes was led by (1)

15% yoy decline in the domestic bike segment, (2) 44% yoy decline in the domestic

scooter segment and (3) 14% yoy decline in the exports segment. EBITDA margin came in

at 13.7% (-100 bps yoy) due to negative operating leverage partly offset by 100 bps

expansion in gross margins due to lower RM prices. Adjusted net profit came in at Rs31.8 bn

(-6% yoy), due to 20% yoy decline in EBITDA partly offset by lower tax rate. The company

generated free cash flow of Rs40.3 bn in FY2020 (versus Rs525 mn in FY2019) led by

Hero Motocorp Automobiles & Components


(1) higher cash flow generation from operations and (2) improvement in working capital

cycle. Debtor days for the company had declined by 10 days in FY2020 mainly led by

clearing-off BS-IV inventories, which resulted in lower receivables from the dealers. The

company incurred capex of Rs13.6 bn in FY2020. The board recommended final dividend

of Rs25 per share in 4QFY20. This dividend together with the interim dividend of Rs65

per share aggregates to a total dividend of Rs90 per share in FY2020.

Other key points. (1) The company has guided capex of Rs600 mn in FY2021E (from Rs1

bn earlier) with no cut in R&D spend, (2) rural mix stood at 50% for the company, (3) the

company expects the RM basket to remain soft in the near term and (4) precious metals

form 4-5% of the overall RM basket.

Exhibit 1: 4QFY20 EBITDA was broadly in line with our estimates Hero MotoCorp interim results, March fiscal year-ends (Rs mn)

Source: Company, Kotak Institutional Equities estimates

(% chg.)

4QFY20 4QFY20E 4QFY19 3QFY20 4QFY20E 4QFY19 3QFY20 FY2020 FY2019Yoy chg (%) FY2021E FY2020

Volumes (units) 1,334,511 1,334,511 1,781,250 1,540,876 (25.1) (13.4) 6,409,719 7,819,151 (18.0) 5,127,775 6,409,719 (20.0)

Net realisations (Rs/vehicle) 46,747 45,407 44,266 45,407 2.9 5.6 2.9 44,988 43,036 4.5 51,376 44,988 14.2

Net sales 62,384 60,597 78,850 69,967 2.9 (20.9) (10.8) 288,361 336,505 (14.3) 263,446 288,361 (8.6)

Inc/dec in stock (2,600) — (1,029) 970 1,698 284 — 1,698

Raw materials (40,599) (42,000) (53,356) (47,568) 2.9 (20.6) (7.3) (198,672) (233,461) (14.9) (183,310) (198,672)

Staff costs (4,354) (4,462) (4,473) (4,697) (2.4) (2.7) (7.3) (18,417) (17,302) 6.4 (18,281) (18,417)

Other expenses (8,231) (7,454) (9,298) (8,282) 10.4 (11.5) (0.6) (33,390) (36,725) (9.1) (28,746) (33,390)

Total expenses (55,785) (53,917) (68,156) (59,578) 3.5 (18.2) (6.4) (248,781) (287,205) (13.4) (230,337) (248,781)

EBITDA 6,599 6,680 10,693 10,390 (1.2) (38.3) (36.5) 39,580 49,301 (19.7) 33,109 39,580 (16.3)

Other income 1,695 1,700 1,642 1,822 (0.3) 3.2 (7.0) 7,783 6,913 12.6 8,442 7,783

Interest expense (net) (41) (70) (22) (59) (220) (86) (100) (220)

Depreciation expense (1,747) (2,035) (1,502) (2,037) (14.2) 16.3 (14.2) (8,180) (6,020) (8,478) (8,180)

Exceptional expense — — — — 6,774 — — 6,774

Profit before tax 6,506 6,275 10,811 10,115 3.7 (39.8) (35.7) 45,737 50,107 (8.7) 32,973 45,737 (27.9)

Tax expense (299) (1,632) (3,508) (1,311) (81.7) (91.5) (77.2) (9,404) (16,259) (42.2) (8,441) (9,404)

Reported PAT 6,207 4,644 7,303 8,804 33.7 (15.0) (29.5) 36,333 33,849 7.3 24,532 36,333

Adj. net profit 6,207 4,644 7,303 8,804 33.7 (15.0) (29.5) 31,794 33,849 (6.1) 24,532 31,794 (22.8)

Adj. EPS 31.1 23.2 36.6 44.1 33.7 (15.0) (29.5) 159.2 169.5 (6.1) 122.8 159.2 (22.8)

Ratios (%)

Raw material cost to net sales 69.2 69.3 69.0 66.6 68.3 69.3 69.6 68.3

Staff cost to net sales 7.0 7.4 5.7 6.7 6.4 5.1 6.9 6.4

Other expenses to net sales 13.2 12.3 11.8 11.8 11.6 10.9 10.9 11.6

EBITDA margin (%) 10.6 11.0 13.6 14.8 13.7 14.7 12.6 13.7

No of shares 199.8 199.8 199.8 199.8 199.8 199.8 199.8 199.8

Tax rate (%) 4.6 26.0 32.4 13.0 20.6 32.4 25.6 20.6

Gross profit per vehicle (Rs/unit) 14,376 13,935 13,734 15,166 3.2 4.7 (5.2) 14,258 13,215 15,628 14,258

EBITDA per vehicle (Rs/unit) 4,945 5,006 6,003 6,743 (1.2) (17.6) (26.7) 6,175 6,305 6,457 6,175

Volume break up (units)

Economy 482,841 526,326 484,246 (8.3) (0.3) 2,050,974 2,170,851 (5.5)

Executive 749,932 1,036,909 906,437 (27.7) (17.3) 3,737,687 4,678,984 (20.1)

Premium 1,077 6,995 12,097 (84.6) (91.1) 40,121 43,767 (8.3)

Domestic motorcycle 1,233,850 1,570,230 1,402,780 (21.4) (12.0) 5,828,782 6,893,602 (15.4) 4,663,026 5,828,782 (20.0)

Domestic scooters 51,100 153,650 102,211 (66.7) (50.0) 402,676 719,087 (44.0) 322,141 402,676 (20.0)

Exports 49,561 57,370 35,877 (13.6) 38.1 178,261 208,056 (14.3) 142,609 178,261 (20.0)

Total volumes 1,334,511 1,781,250 1,540,868 (25.1) (13.4) 6,409,719 7,820,745 (18.0) 5,127,775 6,409,719 (20.0)

Volume mix (%)

Economy 36.2 29.5 31.4 32.0 27.8

Executive 56.2 58.2 58.8 58.3 59.8

Premium 0.1 0.4 0.8 0.6 0.6

Domestic motorcycle 92.5 88.2 91.0 90.9 88.1 90.9 90.9

Domestic scooters 3.8 8.6 6.6 6.3 9.2 6.3 6.3

Exports 3.7 3.2 2.3 2.8 2.7 2.8 2.8

Total volumes 100.0 100.0 100.0 100.0 100.0 100.0 100.0

Yoy chg (%)

Automobiles & Components Hero Motocorp


Exhibit 2: EBITDA per vehicle stood at Rs4,945 (-17% yoy) in 4QFY20 Hero Motocorp’s quarterly EBITDA per vehicle, March fiscal year-ends, 2016-20 (Rs per unit)

Source: Company, Kotak Institutional Equities

Exhibit 3: We cut our FY2021E EPS estimates by 12% on lower volume assumptions partly offset by increase in EBITDA margin assumption Earnings estimates revision, March fiscal year-ends, 2020-22E (Rs mn, units)


Exhibit 4: Hero’s market share in the scooter segment increased by 320 bps on yoy basis in 4QFY20 Market share across two-wheeler segments, March fiscal year-ends, 4QFY17-4QFY20 (%)

Source: SIAM, Kotak Institutional Equities

6,332

6,957 6,690

6,910 7,048 7,507

7,326

5,904

6,991 7,1966,775

6,847

6,543 6,461

6,141 6,003

6,283

6,510 6,743

4,945

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

1Q

FY16

2Q

FY16

3Q

FY16

4Q

FY16

1Q

FY17

2Q

FY17

3Q

FY17

4Q

FY17

1Q

FY18

2Q

FY18

3Q

FY18

4Q

FY18

1Q

FY19

2Q

FY19

3Q

FY19

4Q

FY19

1Q

FY20

2Q

FY20

3Q

FY20

4Q

FY20

2020 2021E 2022E 2021E 2022E 2021E 2022E

Volumes (units) 6,409,719 5,127,775 6,206,268 6,031,554 6,611,930 (15.0) (6.1)

Average net realization 44,988 51,376 51,902 50,897 52,151 0.9 (0.5)

Net sales 288,361 263,446 322,117 306,989 344,816 (14.2) (6.6)

EBITDA 39,580 33,109 45,127 36,089 41,945 (8.3) 7.6

EBITDA per vehicle 6,175 6,457 7,271 5,983 6,344

EBITDA margin (%) 13.7 12.6 14.0 11.8 12.2

Adjusted net profit 31,794 24,532 33,520 27,860 32,678 (11.9) 2.6

EPS 159.2 122.8 167.8 139.5 163.6 (11.9) 2.6

New estimates Old estimates change (%)

4QFY17 1QFY18 2QFY18 3QFY18 4QFY18 1QFY19 2QFY19 3QFY19 4QFY19 1QFY20 2QFY20 3QFY20 4QFY20

Economy bike

Bajaj Auto 25.5 25.3 32.0 31.8 24.1 31.8 37.2 37.4 33.8 33.4 32.4 36.1 25.7

Hero Motocorp 65.3 59.8 56.0 56.5 65.8 58.1 52.7 53.1 60.3 60.6 61.9 59.0 69.3

Executive bike

Bajaj Auto 5.0 3.8 3.0 2.8 5.2 3.0 2.1 1.7 1.2 1.1 0.6 0.3 0.0

Hero Motocorp 72.9 69.3 69.0 69.6 69.6 71.0 72.0 72.3 73.5 69.1 68.3 72.8 75.4

HMSI 19.5 24.2 24.1 23.8 22.4 23.7 22.8 20.7 19.2 23.9 26.2 22.8 22.7

Premium bike

Bajaj Auto 31.5 26.1 31.3 28.3 28.3 28.3 30.0 33.1 38.5 36.7 35.7 37.9 39.4

Hero Motocorp 5.0 3.8 3.0 1.9 1.2 1.2 1.5 1.9 0.9 1.3 2.5 1.9 0.2

HMSI 12.8 15.9 14.5 11.8 13.9 16.0 14.9 11.6 8.6 12.8 13.9 8.5 8.2

Royal Enfield 27.8 26.3 25.0 31.3 28.7 25.5 24.2 25.8 24.5 22.4 22.9 27.1 27.3

Total bike segment

Bajaj Auto 16.1 14.0 16.9 16.4 15.3 16.3 18.6 20.4 20.0 18.4 17.9 20.0 17.8

Hero Motocorp 54.7 52.4 50.5 50.8 52.4 51.3 50.4 49.8 51.4 50.9 51.4 51.8 54.6

HMSI 13.4 16.5 15.7 14.7 15.0 15.8 14.4 12.2 11.0 14.7 15.7 12.5 12.0

Scooter segment

HMSI 55.9 59.1 58.2 53.9 55.7 61.2 55.3 51.2 50.4 56.4 58.0 55.9 60.2

Hero Motocorp 12.7 12.7 12.1 14.3 13.8 10.4 10.4 11.1 11.2 7.3 9.1 7.6 4.6

TVS 16.4 15.1 16.4 17.2 16.8 15.1 19.1 21.5 18.7 18.6 20.9 19.7 14.0

Hero Motocorp Automobiles & Components


Exhibit 5: We expect Hero Motocorp’s volumes to grow at 3% CAGR over 2020-23E Hero MotoCorp volumes estimates, March fiscal year-ends, 2013-23E (mn units, %)


Exhibit 6: We expect Hero Motocorp’s EPS to grow at 7% CAGR over 2020-23E Hero MotoCorp profit model, balance sheet and cash flow model, March fiscal year-ends, 2013-23E (Rs mn)


2013 2014 2015 2016 2017 2018 2019 2020 2021E 2022E 2023E

Motorcycles 5,499,245 5,538,291 5,799,695 5,735,854 5,834,260 6,677,207 7,080,787 5,990,349 4,792,279 5,770,123 6,457,507

Domestic 5,362,730 5,425,118 5,679,634 5,603,136 5,693,681 6,499,051 6,893,602 5,828,782 4,663,026 5,595,631 6,265,566

< 125 cc 5,165,222 5,278,537 5,553,921 5,497,840 5,595,382 6,427,773 6,849,749 5,788,661 4,630,929 5,557,115 6,223,968

> 125 cc 197,508 146,581 125,713 105,296 98,299 71,278 43,853 40,121 32,097 38,516 41,597

Exports 136,515 113,173 120,061 132,718 140,579 178,156 187,185 161,567 129,254 174,492 191,942

< 125 cc 122,015 99,946 95,364 101,039 119,532 139,786 153,714 125,178 100,142 135,192 148,711

> 125 cc 14,500 13,227 24,697 31,679 21,047 38,370 33,471 36,389 29,111 39,300 43,230

Scooters 574,336 707,604 832,008 896,298 829,786 909,986 739,958 419,370 335,496 436,145 457,952

Domestic 549,808 690,079 752,052 818,777 789,974 883,667 719,087 402,676 322,141 418,783 439,722

Exports 24,528 17,525 79,956 77,521 39,812 26,319 20,871 16,694 13,355 17,362 18,230

Total 2-wheelers 6,073,581 6,245,895 6,631,703 6,632,152 6,664,046 7,587,193 7,820,745 6,409,719 5,127,775 6,206,268 6,915,459

Growth (yoy %)

Motorcycles (4.9) 0.7 4.7 (1.1) 1.7 14.4 6.0 (15.4) (20.0) 20.4 11.9

Domestic (5.1) 1.2 4.7 (1.3) 1.6 14.1 6.1 (15.4) (20.0) 20.0 12.0

< 125 cc (2.9) 2.2 5.2 (1.0) 1.8 14.9 6.6 (13.0) (20.0) 20.0 12.0

> 125 cc (40.3) (25.8) (14.2) (16.2) (6.6) (27.5) (38.5) (10.0) (20.0) 20.0 8.0

Exports 6.2 (17.1) 6.1 10.5 5.9 26.7 5.1 (13.7) (20.0) 35.0 10.0

< 125 cc 6.7 (18.1) (4.6) 6.0 18.3 16.9 10.0 (20.0) (20.0) 35.0 10.0

> 125 cc 1.8 (8.8) 86.7 28.3 (33.6) 82.3 (12.8) (20.0) (20.0) 35.0 10.0

Scooters 26.1 23.2 17.6 7.7 (7.4) 9.7 (18.7) (43.3) (20.0) 30.0 5.0

Domestic 31.5 25.5 9.0 8.9 (3.5) 11.9 (18.6) (45.0) (20.0) 30.0 5.0

Exports (34.3) (28.6) 356.2 (3.0) (48.6) (33.9) (20.7) (40.0) (20.0) 30.0 5.0

Total 2-wheelers (2.6) 2.8 6.2 0.0 0.5 13.9 3.1 (18.0) (20.0) 21.0 11.4

2013 2014 2015 2016 2017 2018 2019 2020 2021E 2022E 2023E

Profit model (Rs mn)

Net sales 237,681 252,755 275,853 284,427 285,071 322,352 336,505 288,361 263,446 322,117 367,271

EBITDA 24,002 27,129 33,568 44,550 46,414 52,849 49,301 39,580 33,109 45,127 52,617

Other income 3,984 4,464 4,735 4,224 5,158 5,211 6,913 7,783 8,442 8,865 9,515

Interest (119) (118) (111) (49) (61) (63) (86) (220) (100) (40) —

Depreciation (2,575) (2,802) (3,354) (4,376) (4,927) (5,556) (6,020) (8,180) (8,478) (8,898) (9,318)

Profit before tax 25,292 28,673 34,839 44,349 46,585 52,442 50,107 38,963 32,973 45,054 52,813

Current tax (4,869) (9,966) (9,432) (9,609) (10,821) (14,470) (16,010) (10,841) (8,441) (11,534) (13,520)

Deferred tax 759 2,384 — (3,138) (1,993) (999) (248) 1,437 — — —

Net profit 21,182 21,091 23,856 31,602 33,771 36,974 33,849 36,333 24,532 33,520 39,293

Earnings per share (Rs) 106.1 105.6 119.5 154.5 169.1 185.1 169.5 159.2 122.8 167.8 196.7

Balance sheet (Rs mn)

Equity 50,062 55,999 65,413 88,344 101,113 117,689 128,571 141,364 149,950 163,358 179,075

Deferred tax liability 1,324 (1,060) (735) 2,225 4,143 5,117 5,365 3,928 3,928 3,928 3,928

Total Borrowings — — — — — — — — — — —

Current liabilities 42,008 44,730 39,490 34,936 41,686 44,583 42,476 42,201 35,951 41,844 46,473

Total liabilities 96,417 99,913 104,482 125,505 146,943 167,388 176,412 187,493 189,830 209,131 229,477

Net fixed assets 31,331 30,974 36,252 41,898 48,606 49,729 51,604 60,439 57,961 56,063 53,745

Investments 36,238 40,888 31,541 45,810 58,899 75,252 59,686 82,227 85,227 95,227 105,227

Cash 1,810 1,175 1,593 1,314 1,367 1,413 1,365 2,419 3,043 11,349 19,564

Other current assets 27,037 26,877 35,096 36,484 38,070 40,993 63,757 42,410 43,600 46,493 50,943

Total assets 96,417 99,913 104,482 125,505 146,943 167,388 176,412 187,493 189,830 209,131 229,477

Free cash flow (Rs mn)

Operating cash flow excl. working capital 26,777 29,089 25,859 34,719 36,287 38,208 28,979 42,074 24,668 33,594 39,096

Working capital changes (7,872) 545 (3,359) 3,772 3,993 1,601 (19,189) 12,027 (7,439) 3,000 179

Capital expenditure (6,004) (9,328) (11,530) (14,604) (11,491) (7,992) (9,179) (13,586) (6,000) (7,000) (7,000)

Free cash flow 12,900 20,307 10,970 23,888 28,790 31,816 611 40,515 11,228 29,593 32,276

Ratios

Gross profit per vehicle (Rs/unit) 10,489 11,280 11,809 13,771 14,210 13,708 13,212 14,258 15,628 16,150 16,642

EBITDA per vehicle (Rs/unit) 3,952 4,343 5,062 6,717 6,965 6,966 6,304 6,175 6,457 7,271 7,609

Gross margin (%) 26.8 27.9 28.4 32.1 33.2 32.3 30.7 31.7 30.4 31.1 31.3

EBITDA margin (%) 10.1 10.7 12.2 15.7 16.3 16.4 14.7 13.7 12.6 14.0 14.3

PAT margin (%) 8.9 8.3 8.6 11.1 11.8 11.5 10.1 12.6 9.3 10.4 10.7

Book Value (Rs/share) 257 275 324 454 527 615 671 727 770 837 916

RoAE (%) 44.0 39.7 39.9 40.7 34.5 32.4 26.4 26.0 16.4 20.9 22.4

RoACE (%) 235.8 120.3 79.9 63.1 65.9 64.2 54.1 49.2 37.0 29.0 45.3


4QFY20 results boosted by strong growth in revenues and higher margins

Dhanuka delivered 18% yoy growth in revenues to Rs2.3 bn in 4QFY20 led by higher

realization and volumes amid spillover from a strong Rabi season. Gross margins increased by

~80 bps yoy and ~770 bps qoq to 42.8% benefiting from—(1) improvement in product mix

and (2) moderation in input costs. EBITDA increased 39% yoy to Rs458 mn, with margins

increasing by ~300 bps yoy to 20.1%, led by curtailment of distribution expenses and operating

leverage. Net income jumped 46% yoy to Rs390 mn (EPS of Rs8.2) led by reduction in effective

tax rate to 22.5%. In FY2020, EBITDA increased 19% to Rs1.74 bn driven by 11% growth in

revenues and lower operating costs; net income increased 26% to Rs1.42 bn (EPS of Rs29.7).

Optimistic outlook for FY2021. The management indicated that placements in 1QFY21 are

progressing at a good pace, growing at double-digits over previous year. Revenue is

expected to grow by healthy double-digits during FY2021 underpinned by (1) forecast of a

normal monsoon season, (2) benign reservoir levels and soil moisture content and (3) likely

increase in acreages. The company anticipates EBITDA margins to rise by ~100 bps in FY2021

due to (1) recent moderation in costs of key inputs amid resumption of supplies from China

and (2) cost-curtailment measures undertaken by the company.

New product launches. The company has launched two new products in 1QFY21—(1) a

pre-emergent weed herbicide for soybean and ground nuts and (2) a cotton herbicide; it is

planning to launch two new grape herbicides in the near term. The management indicated a

total revenue potential of around Rs5 bn from five new products launched during FY2020

and another two launched in 1QFY21.

Limited impact from pesticides ban. The company expects limited impact from the

potential ban of pesticides listed in the recent draft order, given availability of alternatives for

its key products. The company expects the ban to be limited to ~4-5 products with high

levels of toxicity out of 27 formulations proposed to be banned in the draft notification.

Raise FY2021-22 EPS estimates; retain SELL with a revised fair value of Rs535

We raise EPS estimates to Rs34.9 (+15%) in FY2021 and Rs38.2 (+14%) in FY2022 factoring in

(1) higher revenue growth, (2) modestly higher margins and (3) other minor changes. We retain

SELL with a revised fair value of Rs535 (Rs470 earlier) at 14X FY2022E EPS, as we find the risk-

reward balance unfavorable post the recent sharp rally in the stock amid near-term optimism.

Dhanuka Agritech (DAGRI) Fertilizers & Agricultural Chemicals

Robust results. Dhanuka’s 4QFY20 results were well ahead of our estimates driven by

a strong growth during Rabi season. The management remained optimistic on FY2021,

taking comfort from the forecast of a normal monsoon and benign input prices. We

raise our FY2021-22 EPS estimates by 14-15% and FV to Rs535 (Rs470 earlier) factoring

in higher revenue growth and margins. We find the risk-reward unfavorable post the

recent sharp rally in the stock, which already prices in near-term optimism. SELL stays.

SELL

JUNE 11, 2020

RESULT

Sector view: Attractive

CMP (`): 631

Fair Value (`): 535

BSE-30: 34,247

Tarun Lakhotia

Hemang Khanna

Dhanuka Agritech



Mcap (bn) (Rs/US$) EPS growth (%) 25.7 17.4 9.5

ADTV-3M (mn) (Rs/US$) P/E (X) 21.2 18.1 16.5



FIIs 0.0 RoE (%) 21.0 23.0 24.0



Absolute 42 50 62 EBITDA (Rs bn) 2 2 2

Rel. to BSE-30 31 56 89 Net profits (Rs bn) 1 2 2

653-261

31/0.4

12.5/0.1

24/0


Dhanuka Agritech Fertilizers & Agricultural Chemicals


Exhibit 1: Interim results of Dhanuka, March fiscal year-ends (Rs mn)


Exhibit 2: Dhanuka has launched two new products in 1QFY21 List of new products launched by Dhanuka


4QFY20 4QFY20E 4QFY19 3QFY20 Est. Yoy Qoq FY2020 FY2019 (% chg.) FY2021E

Sales 2,276 2,028 1,927 2,715 12 18 (16) 11,201 10,058 11 12,869

Raw material cost (1,301) (1,239) (1,118) (1,761) 5 16 (26) (7,117) (6,167) 15 (8,177)

Employee cost (242) (250) (237) (264) (3) 2 (9) (1,052) (1,047) 1 (1,136)

Other expenses (276) (213) (242) (346) 29 14 (20) (1,297) (1,385) (6) (1,477)

EBITDA 458 326 330 343 41 39 33 1,735 1,460 19 2,078

Other income 87 70 64 78 251 212 305

Interest cost (4) (5) (3) (4) (16) (9) (16)

Depreciation and amortization (37) (47) (30) (42) (164) (123) (182)

Profit before tax 503 344 361 376 46 39 34 1,806 1,539 17 2,185

Extraordinaries — — — — — — —

Tax expense (113) (89) (93) (100) (392) (414) (525)

Net income 390 254 268 277 53 46 41 1,415 1,126 26 1,661

Adjusted net income 390 254 268 277 53 46 41 1,415 1,126 26 1,661

Adjusted EPS (Rs) 8.2 5.3 5.5 5.6 53 50 45 29.7 23.7 26 34.9

Key metrics (%)

Gross margins 42.8 38.9 42.0 35.1 36.5 38.7 36.5

EBITDA margins 20.1 16.1 17.1 12.6 15.5 14.5 16.2

Effective tax rate 22.5 26.0 25.9 26.5 21.7 26.9 24.0

(% chg.)

2015 2016 2017 2018 2019

Sakura - 9(3) herbicide Cover - co-marketed insecticide Maxx-soy - 9(3) herbicide D-ONE - 9(3) insecticide Foster - 9(4) insecticide

Mortar - 9(3) insecticide Dhanwarsha - nutrient Conika - 9(3) fungicide Markar Super- 9(4) insecticide Spectrum - 9(4) fungicide

Sempra - 9(3) herbicide Dozo - 9(4) herbicide Fujiita - 9(3) fungicide Dumil 10% SL - 9(4) herbicide Dhanutop Super - 9(4) herbicide

Pager - 9(4) insecticide Thiram - 9(4) fungicide Hi-Dice Super - co-marketed fungicide Godiwa Super - 9(4) fungicide

Oxykill - 9(4) insecticide Goldy - 9(4) fungicide Bullon - 9(4) insecticide Godiwa - 9(4) fungicide

Aashito - 9(4) insecticide Fenox 1000 - 9(4) herbicide

Delight - 9(4) fungicide Domar - 9(4) insecticide

Foster - 9(3) miticide Suelo - soil conditioner

FY2020 1QFY21

Kempa - 9(4) herbicide Cotton herbicide

Apply - 9(4) insecticide Soyabean and groundnut herbicide

Largo - 9(4) insecticide

Bio-nutrient

Fertilizers & Agricultural Chemicals Dhanuka Agritech


Exhibit 3: List of formulations used by Dhanuka, proposed to be banned as per recent draft order


Exhibit 4: Dhanuka’s valuations versus peers, March fiscal year-ends, 2020-22E

Source: Bloomberg, Kotak Institutional Equities estimates

Formulation Dhanuka's products

Atrazine Dhanuzine

Butachlor Dhanuchlor, Don mix

2,4-D Weedmar-80, Amine ester

Dimethoate Tafgor

Mancozeb Multiple products

Monocrotophos Monodhan

Oxyfluorfen Oxykill

Pendimethalin Dhanustomp

Sulfosulfuron Sultop

Price Market cap. P/E (X) EV/EBITDA (X)

(LC) (US$ mn) FY2020 FY2021E FY2022E FY2020 FY2021E FY2022E

Bayer CropScience 5,400 3,212 41.8 40.2 36.0 31.9 28.8 25.4

Dhanuka Agritech 631 398 21.2 18.1 16.5 16.9 14.1 12.7

Godrej Agrovet 399 1,014 34.5 30.9 23.4 20.0 16.4 12.8

Rallis India 244 627 26.9 23.0 17.2 18.4 15.8 12.0

UPL 425 4,298 18.3 14.0 11.9 8.5 7.5 6.6

Dhanuka Agritech Fertilizers & Agricultural Chemicals


Exhibit 5: Consolidated profit model, balance sheet and cash flow statement, March fiscal year-ends, 2016-23E (Rs mn)


2016 2017 2018 2019 2020 2021E 2022E 2023E

Profit model (Rs mn)

Sales 8,288 8,732 9,626 10,058 11,201 12,869 13,894 15,002

EBITDA 1,398 1,690 1,661 1,460 1,735 2,078 2,299 2,557

Other income 125 152 160 212 251 305 337 381

Interest (11) (11) (9) (9) (16) (16) (17) (18)

Depreciation (59) (148) (142) (123) (164) (182) (195) (210)

Profit before tax 1,453 1,682 1,670 1,540 1,806 2,185 2,425 2,710

Extraordinary items — — — — — — — —

Tax expense (380) (488) (408) (414) (392) (525) (606) (678)

PAT 1,073 1,194 1,262 1,126 1,415 1,661 1,819 2,033

EPS (adjusted) 21.5 23.9 25.7 23.7 29.7 34.9 38.2 42.7

Balance sheet (Rs mn)

Equity 4,804 5,199 6,334 6,422 7,076 7,396 7,746 8,138

Total borrowings 77 79 47 222 80 80 80 80

Deferred tax liability/minority interest 83 116 133 122 53 53 53 53

Current liabilities and provisions 1,602 1,738 1,713 1,587 2,113 2,428 2,621 2,830

Total liabilites 6,566 7,131 8,227 8,353 9,322 9,957 10,500 11,101

Net fixed assets 1,334 1,383 1,310 1,179 1,211 1,143 1,088 1,041

Investments 432 468 895 898 991 991 991 991

Cash and cash equivalents 511 217 1,039 318 860 726 811 903

Other current assets and miscellaneous 4,289 5,063 4,983 5,958 6,259 7,096 7,610 8,166

Total assets 6,567 7,131 8,227 8,353 9,322 9,957 10,500 11,101

Free cash flow (Rs mn)

Operating cash flow 1,079 1,258 1,318 1,003 1,447 1,538 1,676 1,862

Working capital changes 307 (638) 58 (969) 158 (522) (321) (347)

Capital expenditure (271) (193) (69) (47) (104) (114) (139) (164)

Free cash flow 1,115 427 1,307 (13) 1,501 902 1,216 1,351

Ratios

EBITDA margin (%) 16.9 19.3 17.3 14.5 15.5 16.2 16.5 17.0

Net debt/equity (X) (0.1) (0.0) (0.2) (0.0) (0.1) (0.1) (0.1) (0.1)

Book value (Rs/share) 96 104 129 135 149 155 163 171

ROAE (%) 22.0 21.7 19.8 15.2 18.0 19.7 20.7 22.0

ROACE (%) 21.5 20.3 20.3 14.3 18.6 20.2 21.2 22.7


Temporary staffing: decent performance in a challenging environment

Staffing segment had a decent 4Q performance, with core associate headcount increasing by

4.7% yoy to ~161k. TeamLease witnessed improvement in PAPM (per person average monthly

mark-up) in 4QFY20, which increased by 5% yoy primarily on account of higher contribution

from mid-tier accounts. EBITDA margin for the segment rebounded sequentially on account of

higher PAPM as well as cost cuts. Company expects e-commerce, logistics, FMCG, essential

retail to recover first post-covid, with manufacturing and BFSI to recover in 2HFY21.

HR services segment: remains under pressure

HR services segment reported another quarter of loss on account of provisioning against expected

shortfall in collections from corporates. This segment comprises the company’s training business

which provides services to corporates and government. Surprisingly, collections from government

have improved off late and the provisioning is against corporate receivables. Overall, compared

to EBITDA of Rs83 mn in FY2019, this segment swung to a sizeable loss of Rs88 mn in FY2020,

and accounted for the relatively flat overall EBITDA performance of the company.

Specialized staffing: should see decent momentum in FY2021 also

Specialized staffing business had a stable performance. Revenue growth of 34% yoy was aided

by contributions made by E-centric and IMSI, both of which provide staffing and related services

to IT sector and may see some tailwinds from the current demand for improved IT

infrastructure, BPM and related services. Further, TeamLease has been gaining share in staffing

services to captive IT development centers, which augurs well for its FY2021 pipeline.

Upgrade to ADD with a new FV of Rs1,875

Sharp stock price performance as well as our view that TeamLease can continue to enjoy

Section 80JJAA tax benefits longer than the earlier assumed time limit of FY2025 are the key

reasons for our upgrade. Several state-wide labor law relaxations also augur well. We revise

down our FY2021-22 EPS estimates by 35-40% as we incorporate a weak FY2020 as well as

covid impact on staffing and demand for other services. Upgrade to ADD with a revised FV of

Rs1,875.

TeamLease Services (TEAM) Commercial & Professional Services

Upgrade to ADD. We upgrade TeamLease to ADD from SELL following a sharp

correction in stock price and a more favorable outlook on Section 80JJAA tax benefit.

4QFY20 performance was weaker than expected due to Rs60 mn of provisions taken in

the HR services and IT staffing segments. Covid will certainly impact TeamLease’s

business and we thus revise down our FY2021/22 PAT estimates by 41/35%. Upgrade

to ADD with a revised SoTP-based FV of Rs1,875 (Rs2,300 earlier).

ADD

JUNE 11, 2020

RESULT, CHANGE IN RECO.

Sector view: Cautious

CMP (`): 1,726

Fair Value (`): 1,875

BSE-30: 34,247

Garima Mishra

Shubhangi Nigam

TeamLease Services



Mcap (bn) (Rs/US$) EPS growth (%) (64.3) 143.7 36.4

ADTV-3M (mn) (Rs/US$) P/E (X) 84.4 34.6 25.4



FIIs 40.8 RoE (%) 6.3 13.9 16.2



Absolute 11 (26) (40) EBITDA (Rs bn) 1 1 1

Rel. to BSE-30 2 (23) (30) Net profits (Rs bn) 0 1 1

3,200-1,415

30/0.4

9.4/1.5

35/0


TeamLease Services Commercial & Professional Services


Exhibit 1: Meaningful miss in 4QFY20 performance Quarterly results snapshot of TeamLease, March fiscal year-ends


4QFY20 contained additional provisioning of Rs60-65 mn in the HR services and IT

segments. There is also a large unallocated cost element which contains some regular

provisioning; against this other income which contains certain reversals of earlier

provisioning is also high.

Exhibit 2: Yoy margin compression led primarily by the HR services segment Segmental revenue and margin snapshot of TeamLease, March fiscal year-ends (Rs mn)


Yoy growth

4QFY20 4QFY20E 4QFY19 3QFY20 KIE yoy qoq FY2020 FY2019 (%) FY2021E

Revenue from operations 13,303 12,687 11,634 13,514 4.9 14.3 (1.6) 52,007 44,476 16.9 53,671

Employee benefits expense (12,615) (11,979) (10,961) (12,818) 5.3 15.1 (1.6) (49,365) (41,972) 17.6 (51,130)

Other expenses (488) (450) (415) (421) 8.5 17.6 16.0 (1,692) (1,560) 8.4 (1,371)

Total Expenses (13,104) (12,429) (11,377) (13,239) 5.4 15.2 (1.0) (51,056) (43,532) 17.3 (52,501)

EBITDA 199 258 257 275 (22.7) (22.5) (27.5) 951 944 0.7 1,170

Finance Costs (37) (29) (14) (29) 26.8 156.1 27.6 (123) (52) (63)

Depreciation and amortization expense (83) (76) (25) (76) 8.9 235.4 8.9 (286) (105) (362)

Other income 147 70 52 73 110.0 182.8 102.0 308 181 70.8 107

PBT 227 223 270 243 1.7 (16.1) (6.6) 851 968 (12.1) 852

Tax expense (518) — (8) 16 na na na (480) 16 —

Net profit (294) 223 260 255 (232.1) (213.1) (215.5) 371 984 (62.3) 852

Operational metrics

Number of associate employees 161,365 164,095 154,095 167,216 161,365 154,095 155,000

Number of NETAP apprentices 50,620 51,000 56,169 52,388 50,620 56,169 57,292

Number of specialized associates 8,015 7,000 5,947 8,396 8,015 5,947 8,585

Total associates and trainees 220,000 222,095 216,211 228,000 (0.9) 1.8 (3.5) 220,000 216,211 1.8 220,877

Mark-up per general staffing associate per month 748 725 714 751 3.2 4.8 (0.4) 742 726 2.2 727

Key ratios (%)

Employee cost as proportion of sales 94.8 94.4 94.2 94.8 94.9 94.4 95.3

Other cost as proportion of sales 3.7 3.5 3.6 3.1 3.3 3.5 2.6

EBITDA margin 1.5 2.0 2.2 2.0 1.8 2.1 2.2

Tax rate (228.5) 0.0 -2.9 6.7 (56.4) 1.7 0.0

Segmental performance

Revenues

Staffing and allied services 11,954 11,284 10,565 12,161 13.2 (1.7) 46,813 40,115 16.7

Specialized staffing services 1,065 1,154 794 1,046 34.1 1.8 4,098 3,092 32.5

Other HR services 284 250 275 306 3.2 (7.3) 1,097 1,269 (13.6)

Total operating income 13,303 12,687 11,634 13,514 14.3 (1.6) 52,007 44,476 16.9

EBIT

Staffing and allied services 252 — 242 196 3.9 28.5 878 781 12.3

Specialized staffing services 71 — 48 77 48.8 (7.8) 273 209 30.5

Other HR services (39) — 15 6 (361) (772.3) (100) 77

Unallocated (23) — (23) (12) 3 100.2 (97) (51)

Total 260 — 282 267 (7.8) (2.5) 953 1,016

Less: finance costs (37) — (14) (29) 156.1 27.6 (123) (52)

PBT 224 — 268 238 (16.6) (6.2) 830 964

Change (%)

Yoy growth

1QFY18 2QFY18 3QFY18 4QFY18 1QFY19 2QFY19 3QFY19 4QFY19 1QFY20 2QFY20 3QFY20 4QFY20 (%)

Revenues

Staffing and allied services 8,165 8,350 8,404 8,830 9,161 9,773 10,617 10,565 11,306 11,392 12,161 11,954 13

Specialized staffing services 246 268 587 728 750 756 792 794 982 1,005 1,046 1,065 34

Other HR services 118 137 190 217 303 377 314 275 224 282 306 284 3

Total 8,530 8,756 9,181 9,775 10,213 10,907 11,723 11,634 12,512 12,679 13,514 13,303 14

EBITDA

Staffing and allied services 133 144 176 162 156 184 221 247 234 208 197 265 7

Specialized staffing services 31 38 59 52 53 55 45 49 63 63 76 65 33

Other HR services 8 (3) 7 27 24 40 3 16 (62) (2) 6 (30) (288)

Unallocated (42) (28) (62) (17) (32) (39) (23) (57) (8) (39) (9) (100) 75

Total 130 151 180 224 201 240 246 255 227 230 270 200 (22)

EBITDA margin (%)

Staffing and allied services 1.6 1.7 2.1 1.8 1.7 1.9 2.1 2.3 2.1 1.8 1.6 2.2 -12 bps

Specialized staffing services 12.6 14.2 10.1 7.1 7.1 7.3 5.7 6.2 6.4 6.3 7.3 6.1 -7 bps

Other HR services 6.8 (2.2) 3.7 12.4 7.9 10.6 1.0 5.8 (27.7) (0.7) 2.0 (10.6) -1638 bps

Total 1.5 1.7 2.0 2.3 2.0 2.2 2.1 2.2 1.8 1.8 2.0 1.5 -69 bps

Commercial & Professional Services TeamLease Services


Key takeaways from results conference call

Staffing segment. This segment reported a 16.5% yoy growth in FY2020, EBITDA

margin came in at 1.9%. Improved hiring mix (17% hiring from company’s site) will lead

to lower costs and better control on closing vacancies. From March 2020, lack of

revenues due to reduction in headcount was observed. Select few customers have been

given discounts in the form of credits on specific requests. Funding exposure remains at

~13%. 1QFY20 is expected to see 15-20% reduction in headcount. Sustained headcount

and cost rationalization will continue for 1-2 quarters. From 2QFY20 onwards, phased

recovery progress is expected in some industries; company to focus more on its top 15

industries. Agriculture has largely remained unaffected, chemicals industry to make a

rebound, e-commerce and essentials retail in non-mall spaces to see demand. Logistics,

manufacturing and energy sectors are also expected to revive in 2HFY20.

NETAP. Headcount reduction witnessed in NETAP business as well. Overall ~7,500

reduction in headcount happened in March 2020.

HR segment. Provision of Rs40 mn taken against corporate receivables driven by a few

corporates facing challenge of headcount reduction and non-performance issues. No

write off on government receivables (Rs200 mn of collections from government in last 45

days).

Specialized staffing. This segment has remained steady through the crisis. IT staffing

showed 61% yoy growth. The company has conservatively taken provision of Rs25 mn

due to collections related uncertainty. Expect 9% margin in steady state for IT staffing

business. IMSI business will stay steady at 11-12% margins. Specialized staffing segment

will be seeing stable demand over FY2021.

Telecom staffing. Margins came in at 2.8%. Telecom staffing has stayed flat in

revenues, profit and margins over FY2020. The company had earlier indicated of exiting

lower margin projects, the effect of which will play out in the current year. The company

expects this sector to be stable and to maintain steady margins at 3-4% going forward.

Regulatory developments. Four labor codes on wages, social security, working

conditions etc. will subsume a lot of individual acts and laws. State governments are

proactively trying to simplify labor laws as they want to generate employment in this

migrant crisis that has arisen during Covid.

PF trust. Unrealized MTM gains of Rs780 mn in PF trust due to improved demand of

state government bonds over the past few months which the company has invested in.

The company does not expect any further write-offs from investments in the PF trust.



Exhibit 3: Associate employee count sees a reduction of ~6k in 4Q Associate employee count for TeamLease, March fiscal year-ends (#, 000)


Exhibit 4: Apprentice addition dips in 4QFY20 on high attrition Cumulative apprentice count and net additions (#, 000)


10

1

10

5

10

9

10

9

114

115 124

126

130

128

131

132

138

14

5 153

154

16

1

16

5

16

7

16

1

70

80

90

100

110

120

130

140

150

160

170

180

1Q

FY1

6

2Q

FY1

6

3Q

FY1

6

4Q

FY1

6

1Q

FY1

7

2Q

FY1

7

3Q

FY1

7

4Q

FY1

7

1Q

FY1

8

2Q

FY1

8

3Q

FY1

8

4Q

FY1

8

1Q

FY1

9

2Q

FY1

9

3Q

FY1

9

4Q

FY1

9

1Q

FY2

0

2Q

FY2

0

3Q

FY2

0

4Q

FY2

0

(#, 000) Associate employee count (#)

(8)

(6)

(4)

(2)

-

2

4

6

8

10

-

10

20

30

40

50

60

70

1Q

FY1

6

2Q

FY1

6

3Q

FY1

6

4Q

FY1

6

1Q

FY1

7

2Q

FY1

7

3Q

FY1

7

4Q

FY1

7

1Q

FY1

8

2Q

FY1

8

3Q

FY1

8

4Q

FY1

8

1Q

FY1

9

2Q

FY1

9

3Q

FY1

9

4Q

FY1

9

1Q

FY2

0

2Q

FY2

0

3Q

FY2

0

4Q

FY2

0

(#, 000)(#, 000) Cumulative apprentice count (#, LHS) Quarterly net addition (#, RHS)



Exhibit 5: Core employee productivity has remained flattish Associates and trainees handled per core staffing employee, March fiscal year-ends


Earnings cut to incorporate Covid-19 impact

We cut both volume and margin assumptions for the temporary staffing segment as we

believe clients will defer hiring decisions and PAPMs will come under pressure. In a price

sensitive industry, price hikes are difficult to take, and hence we are not assuming any major

increase in PAPMs in FY2022 also.

FY2020 EPS cut is primarily to align our numbers with the company’s FY2020 performance,

which has been weak on account of lower NETAP headcount addition, loss of a few

contracts in 3QFY20 as well as provisions taken in 4QFY20.

Further, we have also increased debtor days estimate for the company for FY2021 as we

expect some delay in payments from customers. TeamLease has not had any major write-

offs in the past. It also limits its exposure to client payments by following a collect-and-pay

model, wherein they pay the associate only after receiving payment for the month from the

client. More than 80% of associates of TeamLease work on this model, and hence there is

some comfort to TeamLease’s receivables position.

Exhibit 6: Details of estimate changes, March fiscal year-ends


160

180

200

220

240

260

280

300

80

100

120

140

160

180

200

220

240

1Q

FY1

7

2Q

FY1

7

3Q

FY1

7

4Q

FY1

7

1Q

FY1

8

2Q

FY1

8

3Q

FY1

8

4Q

FY1

8

1Q

FY1

9

2Q

FY1

9

3Q

FY1

9

4Q

FY1

9

1Q

FY2

0

2Q

FY2

0

3Q

FY2

0

4Q

FY2

0

(#)(#, '000) Associate+trainee count (#, LHS)

Associates+trainees handled per core staffing employee (#, RHS)

2021E 2022E 2021E 2022E 2021E 2022E

Total

Sales (Rs mn) 53,671 60,458 66,333 78,664 (19.1) (23.1)

Sales growth (%) 3.2 12.6 18.9 18.6

EBITDA (Rs mn) 1,170 1,452 1,636 2,055 (28.5) (29.3)

EBITDA margin (%) 2.2 2.4 2.5 2.6

EBIT (Rs mn) 808 1,081 1,315 1,684 (38.6) (35.8)

PBT (Rs mn) 852 1,162 1,515 1,987 (43.7) (41.5)

Tax rate (%) — — — 3.2

Net Profit (Rs mn) 852 1,162 1,515 1,923 (43.7) (39.6)

EPS (Rs) 49.9 68.0 88.6 112.5 (43.7) (39.6)

EPS growth (%) 144 36 30 27

New estimates Old estimates % revision



Exhibit 7: Modest growth assumptions in FY2021 Key segmental assumptions for TeamLease, March fiscal year-ends (Rs mn)


SoTP-based fair value of Rs1,875

We roll forward our SoTP-based fair value to March 2022. Our FV however gets revised

down to Rs1,875 from Rs2,300 earlier as we incorporate the near-term earnings cut into the

FV calculation, and also incorporate a deterioration in working capital on account of higher

debtor days expected in FY2021. Our cut in FV would have been higher, but for the nil tax

rate assumption on account of sustained Section 80JJAA benefits that we assume till

FY2030. Note this is the only benefit that companies can avail of under the new income tax

act. Further, this act has no sunset clause as of now; hence our assumption that the

company can avail it till FY2030 instead of FY2025 earlier.

Exhibit 8: SOTP based target price of Rs1,875/share

Source: Kotak Institutional Equities

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021E 2022E 2023E

Total

Revenues 6,868 9,258 12,507 15,296 20,071 25,049 30,413 36,241 44,476 52,007 53,671 60,458 71,344

Revenue growth (%) 34.8 35.1 22.3 31.2 24.8 21.4 19.2 22.7 16.9 3.2 12.6 18.0

EBITDA (390) (207) (111) 120 241 258 370 688 944 951 1,170 1,452 1,766

EBITDA margin (%) (5.7) (2.2) (0.9) 0.8 1.2 1.0 1.2 1.9 2.1 1.8 2.2 2.4 2.5

Diluted EPS (Rs) (33) (11) (3) 12 20 16 34 43 57 20 50 68 92

EPS growth (%) NA NA NA NA 73 (21) 112 28 33 (64) 144 36 35

Temporary staffing

Number of associate employees (period end) 49,820 61,021 72,491 82,067 94,647 108,860 126,463 132,323 154,095 160,614 155,000 165,850 187,411

Growth in associate employee count (%) 14 22 19 13 15 15 16 5 16 4 (3) 7 13

Number of associate employees (average) 105,852 119,867 130,226 147,417 153,137 147,500 157,825 178,342

Growth in associate employee count (%) 417 518 553 603 653 13 9 13 4 (4) 7 13

Per employee monthly fee (Rs) 417 518 553 603 653 682 661 744 726 742 727 742 749

Growth in per employee fee (%) 24 7 9 8 4 (3) 12 (2) 2 (2) 2 1

Revenues 6,533 9,006 12,236 15,026 19,731 24,640 29,212 33,343 39,536 46,499 47,802 53,664 63,609

Revenue growth (%) 38 36 23 31 25 19 14 19 18 3 12 19

EBITDA 61 140 167 205 201 275 286 409 521 722 742 887 1,114

EBITDA margin (%) 0.9 1.6 1.4 1.4 1.0 1.1 1.0 1.2 1.3 1.6 1.6 1.7 1.8

Apprentice staffing

Average employees billed in the year — — — — — 11,000 23,439 43,052 56,169 57,292 57,292 65,886 75,769

Per employee monthly fee (Rs) — — — — — 530 530 530 530 531 550 550 550

Revenues — — — — — 42 97 180 274 314 323 354 416

Revenue growth (%) — — — — — — 131 85 53 15 3 10 17

EBITDA — — — — — 4 19 68 137 160 129 177 208

EBITDA margin (%) 10 20 38 50 51 40 50 50

Specialized staffing

Revenues — — — — — — 1,599 1,829 3,092 4,100 4,413 4,841 5,297

Revenue growth (%) 14 69 33 8 10 9

EBITDA — — — — — — 169 180 202 267 316 361 411

EBITDA margin (%) 11 10 7 7 7 7 8

Others

Revenues 335 252 271 271 339 367 597 890 1,575 1,094 1,133 1,599 2,022

Revenue growth (%) (25) 8 (0) 25 8 62 49 77 (31) 4 41 27

EBITDA (451) (347) (278) (85) 40 (22) (3) 39 83 (71) (16) 26 34

EBITDA margin (%) (135) (138) (102) (31) 12 (6) (0) 4 5 (6) (1) 2 2

Description Rs/share

DCF-based valuation of general and IT staffing businesses 1,632

Valuation of Evolve (telecom vertical staffing) at 7X EV/EBITDA 133

Valuation of Schoolguru at 1X invested capital 8

Net debt (cash) as of March 2022 - (4) (101)

SOTP based target price 1,873



Exhibit 9: Consolidated income statement, balance sheet and cash flow, March fiscal year-ends, 2011-23E (Rs mn)


2011 2012 2013 2014 2015 2016 2017 2018 2019 2020E 2021E 2022E 2023E

Income statement

Total operating income 6,868 9,258 12,507 15,296 20,071 25,049 30,413 36,241 44,476 52,007 53,671 60,458 71,344

Associate employee expenses (6,351) (8,627) (11,755) (14,432) (18,990) (23,773) (28,643) (33,833) (40,903) (48,121) (49,744) (55,806) (65,889)

Gross profit 518 632 752 865 1,081 1,276 1,770 2,408 3,573 3,887 3,928 4,652 5,456

EBITDA (390) (207) (111) 120 241 258 370 688 944 951 1,170 1,452 1,766

Depreciation (66) (38) (36) (19) (27) (30) (61) (92) (105) (286) (362) (371) (381)

EBIT (456) (245) (147) 101 213 228 309 596 839 665 808 1,081 1,385

Other income 115 83 110 79 114 154 217 156 181 308 107 150 262

Financial charges (2) (3) (5) (2) (1) (4) (11) (25) (52) (123) (63) (69) (76)

Pre-tax profit (343) (165) (43) 178 326 378 515 728 968 851 852 1,162 1,572

Taxation — — — — (18) (130) 61 9 16 (480) — — —

Net income (recurring) (343) (165) (43) 178 308 248 576 737 984 371 852 1,162 1,572

Exceptional items (53) — — — — — — — — — — — —

Net income (reported) (395) (165) (43) 178 308 248 576 737 980 350 852 1,162 1,572

Weighted average number of shares (mn) 12 15 15 15 15 16 17 17 17 17 17 17 17

EPS (Rs) (33.2) (10.8) (2.8) 11.6 20.1 15.9 33.7 43.1 57.3 20.5 49.9 68.0 91.9

Balance sheet

Equity share capital 4 5 5 5 5 171 171 171 171 171 171 171 171

Reserves & surplus 215 1,042 1,005 1,183 1,483 2,945 3,493 4,246 5,220 5,550 6,402 7,565 9,136

Shareholders funds 219 1,047 1,010 1,188 1,488 3,116 3,663 4,417 5,391 5,721 6,573 7,736 9,307

Loan funds 29 81 121 8 — 194 11 73 106 762 522 574 631

Total source of funds 247 1,127 1,131 1,197 1,488 3,309 3,686 4,490 5,497 6,958 7,570 8,784 10,413

Net fixed assets 211 195 107 107 95 111 1,069 1,378 1,578 2,360 2,065 1,769 1,471

Investments — 0 0 0 0 0 103 593 414 253 253 253 253

Cash balances 180 822 780 847 1,147 2,590 1,602 1,424 1,230 970 507 2,296 3,962

Current assets 574 952 1,355 1,478 1,827 3,039 3,224 4,045 5,384 5,959 7,507 7,959 9,393

Inventories 15 9 5 2 2 2 — — — — — — —

Sundry debtors 345 543 618 595 813 1,205 1,729 2,235 2,643 2,959 4,411 4,472 5,278

Other current assets 76 114 340 367 498 1,054 1,062 1,283 2,064 2,324 2,398 2,701 3,188

Loans and advances 139 286 392 515 514 778 433 527 676 676 698 786 927

Current liabilities and provisions 718 842 1,112 1,236 1,638 2,476 3,091 4,371 5,398 5,595 5,774 6,504 7,675

Total application of funds 247 1,127 1,131 1,197 1,488 3,309 3,686 4,490 5,497 6,958 7,570 8,784 10,413

Cash flow statement

Operating cash flow before WCchanges (390) (207) (111) 120 222 45 351 137 160 404 1,170 1,452 1,766

Change in working capital/ other adjustments 144 (255) (133) 1 53 (150) (19) 656 (285) (307) (1,369) 278 (262)

Capital expenditure (408) (21) 51 (19) (15) (74) (896) (814) (4) (900) (68) (75) (82)

Free cash flow (654) (483) (193) 103 261 (178) (563) (22) (129) (803) (267) 1,655 1,422


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March 2020: Results calendar

Source: NSE, Kotak Institutional Equities

Mon Tue Wed Thu Fri Sat Sun

8-Jun 9-Jun 10-Jun 11-Jun 12-Jun 13-Jun 14-Jun

GSPL Gujarat Pipavav Port Dhanuka Agritech IIFL Wealth Castrol India BHEL

PVR Hero Motocorp Indian Hotels Co. Shriram City Union Finance Eicher Motors Dalmia Bharat

Titan Company MRPL Mahanagar Gas Hindalco Industries Grasim Industries

TeamLease Services Shriram Transport Mahindra & Mahindra PNB Housing Finance

Tata Communications


Ashoka Buildcon HPCL Cummins India Thermax LIC Housing Finance

Indraprastha Gas Ipca Laboratories J K Cement Oil India

Narayana Hrudayalaya Natco Pharma The Ramco Cement

Pfizer Pidilite Industries

Tata Motors


Apollo Hospitals Asian Paints PFC Ashok Leyland

Aster DM Healthcare Container Corporation

Berger Paints Endurance Technologies

29-Jun 30-Jun 1-Jul 2-Jul 3-Jul 4-Jul 5-Jul

Bharat Electronics


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Kotak Institutional Equities: Valuation summary of KIE Universe stocks

Source: Company, Bloomberg, Kotak Institutional Equities estimates

Fair O/S ADVT

Price (Rs) Value Upside Mkt cap. shares EPS (Rs) EPS growth (%) P/E (X) EV/EBITDA (X) 3mo

Company Rating 10-Jun-20 (Rs) (%) (Rs bn) (US$ bn) (mn) 2020 2021E 2022E 2020 2021E 2022E 2020 2021E 2022E 2020 2021E 2022E 2020 2021E 2022E 2020 2021E 2022E 2020 2021E 2022E (US$ mn)

Automobiles & Components

Amara Raja Batteries REDUCE 662 620 (6) 113 1.5 171 39 33 41 36.7 (14.8) 25.4 17 20.1 16.0 10.2 10.6 8.6 3.1 2.8 2.5 18.9 14.6 16.3 1.7 1.2 1.6 10.4

Apollo Tyres BUY 106 110 4 60 0.8 572 8.3 2.3 8.7 (41.9) (72.0) 273.3 12.7 45.4 12.2 6.2 6.5 4.7 0.6 0.6 0.6 4.8 1.4 4.9 2.8 1.3 2.5 10.5

Ashok Leyland BUY 53 90 71 155 2.0 2,936 1.0 1.2 5.1 (86.2) 29.3 309.3 54.8 42.3 10.3 14.8 12.6 5.2 1.8 1.8 1.6 3.4 4.3 16.2 0.6 0.7 2.9 29

Bajaj Auto BUY 2,717 3,000 10 786 10 289 176 158 190 15.0 (10.1) 20.0 15.4 17.2 14.3 12.3 13.0 10.3 3.9 3.6 3.3 24 22 24 4.4 3.5 4.2 31

Balkrishna Industries SELL 1,148 1,030 (10) 222 2.9 193 50 53 59 25.6 6.0 11.4 23.0 21.7 19.5 15.3 12.5 10.8 4.3 3.9 3.5 19.6 18.7 18.7 1.7 1.9 2.1 10.9

Bharat Forge SELL 354 365 3 165 2.2 466 13 16 22 (41.6) 21.6 40.4 27.3 22.5 16.0 14.4 12.6 9.9 2.9 2.7 2.4 10.9 12.4 15.8 1.6 1.7 1.7 14.2

CEAT BUY 937 940 0 38 0.5 40 63 60 78 1.9 (4.6) 30.7 15.0 15.7 12.0 7.8 7.9 6.9 1.3 1.2 1.1 8.9 8.0 9.8 1.3 1.3 1.3 2.0

Eicher Motors ADD 17,090 19,500 14 467 6.2 27 770 747 979 (5.6) (2.9) 31.0 22.2 22.9 17.5 17.2 16.3 13.0 5.3 4.5 3.8 26 21 23 0.2 — — 51

Endurance Technologies BUY 839 850 1 118 1.6 141 40 40 50 11.3 (1.6) 26.3 21 21.1 16.7 10.1 9.5 7.7 3.9 3.4 2.9 18.6 15.9 17.2 0.7 0.8 1.0 2.5

Escorts BUY 942 1,000 6 84 1.5 89 55 51 65 0.4 (5.9) 27.1 17.2 18.3 14.4 11.9 10.9 8.1 2.4 1.9 1.7 14.0 10.5 12.0 0.3 0.8 1.0 36

Exide Industries SELL 158 150 (5) 135 1.8 850 10.0 7.5 9.1 10.3 (24.3) 20.2 15.9 21.0 17.5 9.7 11.3 9.7 2.1 2.0 1.9 13.8 9.9 11.2 2.6 2.2 2.2 6.8

Hero Motocorp ADD 2,292 2,500 9 458 6.1 200 159 123 168 (6.1) (22.8) 36.6 14.4 18.7 13.7 9.4 11.2 7.8 3.2 3.1 2.8 24 16.8 21 4.2 3.5 4.4 50

Mahindra CIE Automotive BUY 103 100 (3) 39 0.5 378 9.4 5.9 9.6 (34.9) (37.7) 63.3 10.9 17.5 10.7 5.3 7.2 4.9 0.8 0.8 0.7 8.0 4.7 7.2 — — — 0.2

Mahindra & Mahindra BUY 474 625 32 589 7.8 1,138 32 32 41 (32.5) (1.1) 27.9 14.7 14.9 11.7 9.2 9.0 7.2 1.4 1.3 1.2 9.9 9.0 10.7 1.4 1.3 1.7 39

Maruti Suzuki SELL 5,676 4,300 (24) 1,714 22.7 302 187 133 226 (24.7) (28.8) 69.8 30 43 25 18.5 21.1 12.4 3.5 3.4 3.1 11.9 8.1 12.7 1.1 0.8 1.0 130

Motherson Sumi Systems ADD 95 110 16 299 4.0 3,158 3.7 1.9 6.0 (27.5) (47.6) 211.3 25.5 48.8 15.7 7.1 8.8 4.6 2.7 2.6 2.2 10.5 5.4 15.2 1.6 1.4 1.8 29

MRF SELL 63,796 62,000 (3) 271 3.6 4 2,523 2,915 3,674 (5.4) 15.5 26.0 25 21.9 17.4 10.3 9.5 7.5 2.3 2.1 1.9 9.4 9.9 11.2 0.1 0.1 0.1 10.6

Schaeffler India SELL 3,511 3,200 (9) 110 1.5 31 118 109 142 (18.3) (7.7) 31.0 30 32 25 16.0 16.9 13.1 3.7 3.4 3.0 13.0 10.9 12.8 — — — 0.5

SKF ADD 1,491 1,550 4 74 1.0 49 58 52 65 (10.7) (10.8) 25.6 26 29 23 19.3 22.0 16.8 3.9 4.8 4.1 15.2 16.9 18.2 0.8 7.3 0.7 0.9

Tata Motors BUY 111 130 17 401 4.9 3,598 (7.9) (19.7) 6.4 (46.3) (149.9) 132.4 NM NM 17.4 4.8 5.9 3.6 0.7 0.8 0.7 NM NM 4.3 — — — 84

Timken SELL 911 825 (9) 69 0.9 75 31 32 39 57.4 3.8 20.9 29 28 23 18.5 16.1 13.1 4.4 3.8 3.3 16.1 14.4 15.1 0.1 0.1 0.1 0.6

TVS Motor SELL 344 220 (36) 163 2.2 475 13.0 9.1 15.0 (7.9) (30.1) 65.6 26 38 23 13.3 15.1 11.0 4.5 4.3 3.8 17.7 11.6 17.5 1.0 1.1 1.1 16.0

Varroc Engineering BUY 165 540 227 22 0.3 135 15 29 46 (54.0) 88.2 58.7 10.8 5.7 3.6 4.4 3.1 2.1 0.7 0.6 0.5 6.4 10.9 15.0 — — — 0.7

Automobiles & Components Neutral 6,550 86.7 (21.8) (32.8) 120.8 24.9 37.1 16.8 9.5 10.3 6.8 2.3 2.2 2.0 9.4 6.0 12.1 1.6 1.4 1.7 566

Banks

AU Small Finance Bank SELL 487 515 6 149 2.0 304 22.2 16.3 23.5 69.9 (26.4) 44.0 22 30 21 — — — 3.5 3.2 2.8 17.9 10.7 13.7 0.0 — — 7.8

Axis Bank BUY 427 600 40 1,206 16.0 2,822 5.8 36 42 (68.3) 523.2 16.3 74 11.9 10.2 — — — 1.5 1.5 1.4 2.1 11.4 12.0 0.0 1.3 1.5 230

Bandhan Bank ADD 269 270 0 433 5.7 1,610 18.1 18.4 19.3 10.9 1.6 4.7 14.8 14.6 13.9 — — — 2.9 2.4 2.1 22.1 17.8 15.8 0.0 0.0 0.0 48

Bank of Baroda ADD 47 105 123 217 2.9 4,582 0.8 23.4 27 (50.0) 2,763.0 13.9 57 2.0 1.8 — — — 0.5 0.4 0.4 0.7 15.5 15.6 0.3 10.0 11.3 23

City Union Bank ADD 134 240 79 99 1.3 735 10.0 11.8 13.5 8.1 17.3 14.3 13 11.4 10.0 — — — 2.0 1.7 1.5 14.4 15.0 15.2 1.3 1.6 1.8 3.3

DCB Bank BUY 73 150 104 23 0.3 310 10.9 10.7 11.6 3.6 (1.9) 9.0 6.7 6.9 6.3 — — — 0.8 0.7 0.6 11.2 10.0 9.9 0.0 1.5 1.6 2.6

Equitas Holdings BUY 51 100 98 17 0.2 342 6.1 6.0 9.7 (4.3) (1.1) 61.6 8.3 8.4 5.2 — — — 0.7 0.6 0.6 7.8 7.1 10.5 — — — 10.3

Federal Bank BUY 50 80 61 99 1.3 1,993 7.7 6.1 6.9 23.6 (21.1) 13.0 6.4 8.2 7.2 — — — 0.7 0.7 0.7 10.9 8.1 8.6 0.0 2.7 3.1 18.9

HDFC Bank BUY 992 1,050 6 5,442 72.0 5,483 48 48 52 23.7 0.1 8.4 21 21 19 — — — 3.2 2.9 2.6 16.4 14.5 14.1 0.0 0.9 1.0 291

ICICI Bank BUY 353 470 33 2,286 30.3 6,474 12.3 25 28 134.9 105.3 13.0 29 14.0 12.4 — — — 2.1 1.9 1.7 7.1 13.3 13.5 0.0 1.4 1.6 248

IndusInd Bank ADD 500 600 20 347 4.6 694 64 27 73 16.3 (57.1) 167.0 8 18.3 6.8 — — — 1.0 1.0 0.9 14.9 5.4 13.3 0.0 0.8 2.2 175

Karur Vysya Bank BUY 27 80 196 22 0.3 799 3.4 7 13 27.2 104.1 95.1 8 4.0 2.0 — — — 0.4 0.4 0.3 4.1 8.0 14.5 3.1 6.6 12.8 0.4

Punjab National Bank NR 34 — — 319 4.2 4,604 2 6 10 110.2 149.0 80.1 15 6.2 3.4 — — — 0.7 0.5 0.4 2.4 7.0 10.2 0.0 0.0 0.0 14.1

RBL Bank BUY 164 270 64 84 1.1 509 9.9 11 20 (51.1) 8.2 84.0 17 15.3 8.3 — — — 0.9 0.8 0.8 5.6 5.1 8.8 0.0 0.9 1.6 63

State Bank of India BUY 188 340 81 1,675 22.2 8,925 16 25 30 1,580.3 51.6 22.7 12 7.6 6.2 — — — 1.0 0.8 0.8 6.4 9.0 10.1 0.0 0.1 0.1 200

Ujjivan Financial Services BUY 212 490 132 26 0.3 121 26.9 34 44 117.0 24.9 31.6 8 6.3 4.8 — — — 1.2 1.0 0.9 15.7 17.0 19.3 1.5 2.0 2.8 12.3

Ujjivan Small Finance Bank BUY 31 37 21 53 0.7 1,728 2 2 2 38.5 (5.6) (1.9) 16 16.9 17.2 — — — 1.8 1.8 1.7 14.0 10.0 9.2 1.3 1.2 1.2 0.0

Union Bank RS 29 — — 188 2.5 3,423 0 11 15 101.2 5,126.7 36.8 143 2.7 2.0 — — — 0.4 0.3 0.3 0.2 13.2 13.2 0.0 5.5 7.5 1.8

Banks Attractive 13,216 174.9 72.6 114.2 29.8 26 12.3 9.5 1.4 1.2 1.1 5.4 9.8 11.4 0.0 1.1 1.3 1,402

P/B (X) RoE (%) Dividend yield (%)


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Fair O/S ADVT



Building Products

Astral Poly Technik SELL 902 765 (15) 136 1.8 151 16.4 18 25 25.6 11.7 37.7 55 49 36 30.7 27.1 20.1 9.1 7.7 6.5 17.8 17.0 19.8 0.1 0.2 0.3 1.5

Building Products Cautious 136 1.8 26.6 11.7 37.7 55 49 36 30.7 27.1 20.1 9.0 7.7 6.5 16.5 15.8 18.2 0.1 0.2 0.3 1.5

Capital goods

ABB SELL 830 795 (4) 176 2.3 212 18 14 21 46.3 (19.1) 46.5 47 59 40 30.1 36.9 24.2 5.0 4.8 4.5 9.9 8.4 11.6 0.6 0.8 0.9 1.7

Ashoka Buildcon BUY 53 155 192 15 0.2 281 12.9 11.9 13.2 8.6 (7.9) 11.2 4.1 4.5 4.0 4.1 3.8 3.3 0.6 0.5 0.5 15.3 12.6 12.7 3.8 3.5 3.9 0.6

Bharat Electronics BUY 73 113 54 179 2.4 2,437 6.2 7.5 7.0 (20.2) 20.9 (6.9) 11.9 9.8 10.6 7.0 6.0 5.7 1.8 1.7 1.5 15.7 17.6 15.2 3.7 4.5 4.2 14.9

BHEL REDUCE 31 41 32 109 1.4 3,482 2.7 2.6 3.8 (24.0) (2.6) 48.7 11.8 12.1 8.1 3.6 3.7 2.9 0.3 0.3 0.3 2.9 2.8 4.1 4.1 3.7 4.9 17.7

Carborundum Universal ADD 245 285 16 46 0.6 189 14.4 13.7 15.9 9.9 (4.7) 16.0 17.0 17.9 15.4 11.1 10.3 8.5 2.5 2.3 2.0 15.2 13.3 13.9 1.1 1.1 1.2 0.3

Cochin Shipyard BUY 269 615 129 35 0.5 132 48 56 50 30.6 17.6 (10.8) 5.6 4.8 5.4 (0.5) 0.3 1.7 0.9 0.8 0.7 17.7 18.3 14.6 4.4 5.2 5.0 1.3

Cummins India BUY 391 520 33 108 1.4 277 26 26 29 (0.2) (2.6) 12.2 14.9 15.3 13.6 14.3 14.3 12.7 2.5 2.3 2.2 17.2 15.8 16.8 3.4 3.3 3.7 8.9

Dilip Buildcon BUY 279 495 78 38 0.5 137 30 27 45 (45.3) (10.8) 64.8 9.2 10.3 6.2 4.4 5.0 3.1 1.1 1.0 0.8 12.2 9.8 14.2 0.2 0.2 0.3 1.2

IRB Infrastructure BUY 67 154 131 23 0.3 351 22 16 16 (7.1) (29.8) 3.8 3.0 4.2 4.1 5.5 6.5 6.4 0.3 0.3 0.3 11.9 7.7 7.5 4.1 3.7 2.2 1.2

Kalpataru Power Transmission BUY 213 470 120 33 0.4 153 25 25 39 (16.4) 0.1 53.3 8.4 8.4 5.5 3.8 3.8 3.2 1.0 0.9 0.8 12.0 11.1 15.2 1.5 1.5 2.1 1.4

KEC International BUY 245 342 39 63 0.8 257 22.0 25 31 16.3 13.4 24.4 11.1 9.8 7.9 6.6 6.1 4.9 2.3 1.9 1.6 22 21 22 1.4 1.1 1.4 1.7

L&T BUY 947 1,200 27 1,329 17.6 1,403 63 40 69 3.3 (37.1) 73.8 14.9 24 13.6 15.8 18.0 13.1 2.3 2.0 1.8 15.8 8.9 13.7 1.9 1.6 2.3 78

Sadbhav Engineering BUY 45 137 202 8 0.1 172 7.2 11.7 13.6 (33.4) 61.1 16.3 6.3 3.9 3.3 4.9 2.7 2.3 0.4 0.3 0.3 5.9 9.0 9.6 — — — 0.3

Siemens SELL 1,102 1,000 (9) 392 5.2 356 26 33 38 (14.9) 28.2 14.7 42 33 29 28.1 21.7 19.1 4.1 3.8 3.5 9.9 11.8 12.5 0.7 0.8 1.0 28

Thermax BUY 720 870 21 86 1.1 113 24 29 36 (33.9) 18.5 24.8 30 25 20.0 18.1 19.6 15.6 18.1 19.6 15.6 8.8 9.9 11.5 1.0 1.2 1.4 1.7

Capital goods Neutral 2,641 35.0 (4.7) (16.6) 39.0 15.4 18.4 13.3 1.8 1.6 1.5 11.7 8.8 11.3 1.9 1.8 2.2 1,402

Commercial & Professional Services

SIS REDUCE 373 405 8 55 0.7 149 15 16 20 5.0 3.8 25.7 25 24 18.9 11.4 11.5 10.0 4.0 3.5 2.9 17.1 15.6 16.8 1.0 0.2 0.3 0.4

TeamLease Services ADD 1,726 1,875 9 30 0.4 17 20 50 68 (64.3) 143.7 36.4 84 35 25 30.8 25.2 19.1 5.2 4.5 3.8 6.3 13.9 16.2 — — — 0.5

Commercial & Professional Services Cautious 84 1.1 (16.7) 22.6 28.6 32 26 21 14.4 14.0 11.8 4.3 3.7 3.2 13.3 14.1 15.4 0.7 0.1 0.2 0.8

Commodity Chemicals

Asian Paints REDUCE 1,636 1,825 12 1,569 20.8 959 28.9 34.2 40.5 28.5 18.2 18.3 57 48 40 35.8 31.2 26.8 14.7 13.1 11.7 27 29 31 0.9 1.1 1.3 70

Berger Paints SELL 495 430 (13) 480 6.4 971 7.5 8.6 10.2 46.6 14.6 19.1 66 58 48 42.5 36.3 30.7 16.7 14.4 12.3 27 27 28 0.6 0.6 0.8 10.8

Kansai Nerolac BUY 393 450 14 212 2.8 539 9.9 5.7 12.5 14.6 (42.6) 120.1 40 69 31 26.5 41.1 20.6 5.6 5.4 4.9 14.8 8.0 16.5 0.8 0.8 1.1 1.8

Tata Chemicals ADD 312 320 3 79 1.1 255 31.7 31.0 37.5 (26.2) (2.1) 21.0 9.8 10.0 8.3 4.7 4.7 3.9 0.6 0.6 0.6 6.4 6.0 7.0 3.5 3.5 4.2 7.5

Commodity Chemicals Neutral 2,341 31.0 14.9 7.6 24.8 48 45 36 28.5 26.5 21.8 7.7 7.2 6.6 16.0 16.0 18.3 0.9 1.0 1.3 90

Construction Materials

ACC BUY 1,275 1,400 10 239 3.2 188 72.3 52.3 72.7 35.8 (27.7) 39.2 17.6 24 17.5 8.1 10.4 7.7 2.1 2.0 1.9 12.3 8.3 11.1 1.1 2.0 2.9 24

Ambuja Cements BUY 192 190 (1) 381 5.0 1,986 10.6 7.5 10.7 49.1 (29.5) 43.3 18.2 26 18.0 6.3 8.4 5.8 1.6 1.5 1.4 9.0 6.0 8.1 0.8 0.8 0.8 13.9

Dalmia Bharat BUY 565 1,000 77 107 1.4 192 17.2 11.4 30.2 8.6 (34.0) 165.0 33 50 18.7 5.9 5.9 4.4 1.0 1.0 0.9 3.1 2.0 5.1 — — — 2.3

Grasim Industries BUY 615 865 41 404 5.4 657 74.4 71.4 90.1 18.9 (4.0) 26.1 8.3 8.6 6.8 4.9 4.2 3.3 0.7 0.6 0.6 8.4 7.5 8.8 1.1 1.1 1.1 21

J K Cement BUY 1,170 1,500 28 90 1.2 77 82.3 78.6 115.5 141.3 (4.5) 46.9 14.2 14.9 10.1 8.8 8.2 6.5 2.8 2.4 2.0 21 17.3 21 0.9 0.9 0.9 1.4

JK Lakshmi Cement BUY 246 275 12 29 0.4 118 23.5 10.7 23.3 478.2 (54.5) 118.0 10.5 23 10.6 4.9 6.4 4.4 1.7 1.6 1.4 17.4 7.2 14.3 1.0 0.7 1.4 1.2

Orient Cement BUY 61 55 (9) 12 0.2 205 4.2 2.5 5.4 82.1 (41.2) 117.3 14.3 24 11.2 6.3 7.2 5.3 1.1 1.1 1.0 8.0 4.5 9.5 1.2 3.3 3.3 0.6

Shree Cement REDUCE 21,513 15,500 (28) 776 10.3 36 435.2 355.3 633.7 34.6 (18.3) 78.3 49 61 34 20.9 23.9 16.4 6.0 5.6 4.9 13.9 9.6 15.5 0.5 0.5 0.5 19.2

UltraTech Cement BUY 3,792 4,000 5 1,095 14.5 289 132.9 115.8 202.7 45.2 (12.8) 75.0 29 33 18.7 13.6 14.1 9.3 2.8 2.6 2.3 10.5 8.2 13.1 0.3 0.4 0.5 36

Construction Materials Cautious 3,135 41.5 39.3 (15.3) 51.8 21 25 16.2 8.5 8.4 6.3 1.9 1.8 1.6 9.2 7.3 10.1 0.6 0.7 0.8 121



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Consumer Durables & Apparel

Crompton Greaves Consumer SELL 237 185 (22) 149 2.0 627 7.9 5.7 7.9 33.1 (28.2) 38.5 30 42 30 25 32 23 10.1 8.0 6.7 39 21 24 0.0 0.0 1.1 3.4

Havells India SELL 558 475 (15) 349 4.6 626 11.8 8.7 13.8 (6.6) (26.1) 58.5 47 64 41 33 42 27 8.1 7.6 6.8 17.3 12.2 17.7 1.8 0.5 0.9 18.6

Page Industries REDUCE 19,368 15,250 (21) 216 2.9 11 327 273 389 (7.4) (16.5) 42.3 59 71 50 38 44 34 24.9 21.4 17.5 44 32 39 0.8 0.7 1.0 10.4

Polycab ADD 763 725 (5) 114 1.5 149 52 40 51 53.2 (21.7) 27.0 14.8 18.9 14.9 10 12 10 3.0 2.6 2.3 23 14.6 16.2 0.7 0.5 0.7 2.7

TCNS Clothing Co. ADD 395 380 (4) 24 0.3 65 11 10 16 (47.7) (7.0) 62.8 36 39 24 12 13 9.2 3.9 3.7 3.3 11.0 9.7 14.6 - - - 0.2

Vardhman Textiles ADD 740 1,000 35 43 0.6 56 92 120 130 (28.9) 30.0 8.5 8.0 6.2 5.7 6.1 4.7 4.1 0.7 0.7 0.6 9.0 11.0 11.0 4.1 4.1 4.1 0.3

Voltas SELL 553 440 (20) 183 2.4 331 16.2 10.3 17.8 3.4 (36.5) 73.0 34 54 31 28 51 26 4.3 4.1 3.7 12.8 7.7 12.5 0.7 0.5 0.8 19.8

Whirlpool SELL 2,061 1,540 (25) 261 3.5 127 40 26 47 24.8 (34.0) 78.5 51 78 44 35 54 31 10.3 9.5 8.6 22 12.7 21 0.4 0.4 0.9 2.2

Consumer Durables & Apparel Cautious 1,339 17.7 4.7 (19.4) 34 42 29 22 27 19 5.6 5.1 16.8 12.3 15.6 1.0 0.6 58

Consumer Staples

Bajaj Consumer Care BUY 154 280 82 23 0.3 148 15.3 15.8 17.7 1.6 3.3 12.1 10.1 9.8 8.7 7.7 7.4 6.5 4.4 3.9 3.4 46 42 42 6.5 7.1 7.8 0.8

Britannia Industries REDUCE 3,377 3,300 (2) 812 10.7 240 59 76 82 22.1 28.4 8.6 57 45 41 44 34 31 18.4 15.6 12.5 32 37 33 1.0 0.8 1.0 41

Colgate-Palmolive (India) ADD 1,356 1,450 7 369 4.9 272 28 30 36 5.9 7.4 19.7 48 45 37 30.3 28.4 24.3 23.1 23.0 21.8 51 52 60 2.1 2.1 2.6 21

Dabur India REDUCE 462 400 (13) 816 10.8 1,767 8.6 9.3 10.6 6.1 7.6 13.9 54 50 44 45 40 34 12.4 11.4 10.5 25 24 25 0.6 1.3 1.5 23

Godrej Consumer Products BUY 633 615 (3) 647 8.6 1,022 13.8 14.8 18.6 (4.8) 7.7 25.2 46 43 34 31 29 23 8.2 7.3 6.6 18.6 18.1 20 0.9 1.2 1.5 17.2

Hindustan Unilever ADD 2,120 2,300 9 4,976 65.9 2,160 31 35 44 10.9 12.8 25.7 68 60 48 51 42 34 57.0 11.5 11.0 86 32 23 1.2 1.5 1.9 242

ITC BUY 199 255 28 2,447 32.4 12,300 11.5 11.3 12.5 12.8 (1.8) 10.8 17.4 17.7 16.0 11.8 12.6 11.2 3.9 3.8 3.7 22 21 23 3.3 5.0 5.6 80

Jyothy Laboratories ADD 117 135 15 43 0.6 367 4.7 5.2 5.7 (15.5) 11.0 8.2 25 22 21 18.2 15.0 14.0 3.5 3.3 3.2 13.6 15.3 15.7 2.6 3.0 3.4 0.6

Marico BUY 336 350 4 434 5.7 1,290 8.1 8.2 9.4 12.4 1.5 13.7 41 41 36 29 28 25 14.3 13.6 12.9 35 34 37 1.9 2.1 2.4 16.7

Nestle India REDUCE 16,535 16,000 (3) 1,594 21.1 96 204 241 282 22.6 17.9 17.3 81 69 59 56 46 40 82.5 67.4 55.7 70 108 104 2.1 1.2 1.4 41

Tata Consumer Products ADD 385 385 0 352 4.7 922 8.0 8.2 10.9 13.9 2.9 33.2 48 47 35 26 24 20 2.6 2.5 2.4 6.9 5.4 6.9 0.7 0.9 1.1 26

United Breweries ADD 1,010 1,430 42 267 3.5 264 17.9 25.5 32.6 (15.8) 42.2 27.8 56 40 31 29 21 18 7.5 6.4 5.4 14.0 17.4 18.9 0.2 0.3 0.5 10.7

United Spirits ADD 608 620 2 442 5.9 727 11.5 9.3 14.8 21.7 (19.4) 59.9 53 66 41 30 36 26 11.0 9.4 7.7 23 15.5 21 0.0 0.0 0.0 34

Varun Beverages BUY 621 800 29 179 2.4 289 16.2 14.4 29.1 51.9 (11.3) 102.1 38 43 21 15 15 10 5.4 4.7 3.9 17.6 11.7 20 0.1 0.2 0.3 2.6

Consumer Staples Cautious 13,402 177.4 12.6 7.4 18.8 42 39 33 29 27 23 10.9 8.1 7.6 26 21 23 1.6 2.0 2.3 557

Diversified Financials

Bajaj Finance BUY 2,436 2,600 7 1,465 19.4 600 104 66 126 50 (37) 92 24 37 19.4 — — — 4.5 4.1 3.4 20 11.5 19.3 0.4 0.3 0.5 305

Bajaj Finserv BUY 5,223 7,000 34 831 11.0 159 212 238 392 5 12 65 25 22 13.3 — — — 2.7 2.4 2.1 12.2 11.6 16.9 0.3 0.3 0.3 72

Cholamandalam BUY 156 265 70 128 1.7 820 12.8 12.1 18.7 (15) (5.8) 54.3 12.1 12.9 8.3 — — — 1.7 1.6 1.3 14.7 11.5 15.7 1.1 0.9 1.3 23

HDFC BUY 1,809 2,150 19 3,134 41.5 1,732 103 65 74 80.1 (37) 14.6 17.6 28 24 — — — 3.6 3.4 3.1 22 12.5 13.2 1.2 1.3 1.4 195

IIFL Wealth REDUCE 1,000 1,200 20 87 1.2 85 34.0 35.9 58.2 (25) 5.8 62.1 29 28 17.2 — — — 2.9 2.8 2.7 9.9 10.3 16.2 2.5 2.3 3.8 0.3

L&T Finance Holdings ADD 63 85 35 126 1.7 2,005 8 5 9 (24.1) (38) 72.6 7.4 12.0 6.9 — — — 0.9 0.8 0.7 14.7 7.0 11.3 3.0 2.3 2.6 15.8

LIC Housing Finance ADD 266 475 78 134 1.8 505 53.2 72.1 83.1 16 35.6 15.2 5.0 3.7 3.2 — — — 0.8 0.7 0.6 15.4 18.2 18.1 3.3 4.5 5.2 21

Muthoot Finance ADD 971 900 (7) 389 5.2 401 72 66 77 46.9 (8) 16.9 13.4 14.7 12.5 — — — 3.3 2.8 2.4 27 21 21 1.8 1.6 1.9 24

PNB Housing Finance NR 200 — — 34 0.4 169 66.9 77.6 88.6 (6) 16.0 14.2 3.0 2.6 2.3 — — — 0.4 0.4 0.3 14.1 14.6 14.8 3.7 4.3 4.9 1.7

Shriram City Union Finance BUY 693 1,975 185 46 0.6 66 171 182 204 13.9 6 12.3 4.1 3.8 3.4 — — — 0.7 0.6 0.5 16.4 15.2 15.0 3.1 3.3 3.7 0.3

Shriram Transport BUY 635 1,100 73 144 1.9 227 132.2 93.2 130.7 17 (29.5) 40.2 4.8 6.8 4.9 — — — 0.8 0.7 0.7 17.6 11.0 13.9 2.9 2.2 3.1 50

Diversified Financials Neutral 6,614 87.6 35.1 (21.3) 36.0 15.8 20 14.8 2.4 2.4 2.1 15.4 11.9 14.4 1.1 1.1 1.3 731



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Price (Rs) Value Upside shares 3mo


Electric Utilities

CESC BUY 627 820 31 83 1.1 133 84 101 114 (7) 19.9 12.3 7.4 6.2 5.5 5.8 5.2 4.7 0.6 0.6 0.5 8.9 9.9 10.3 1.9 2.0 2.0 5.9

JSW Energy BUY 47 65 38 78 1.0 1,640 6.3 5.3 5.2 49 (17) (1.8) 7.5 8.9 9.1 4.7 4.4 3.8 0.7 0.6 0.6 8.9 7.2 6.6 — — — 1.3

NHPC ADD 20 27 35 201 2.7 10,045 3.4 3.4 3.7 34.3 2 6.8 5.9 5.8 5.4 5.5 5.9 5.4 0.6 0.6 0.6 10.8 10.5 10.6 8.5 7.7 8.3 2.4

NTPC BUY 98 150 53 971 12.9 9,895 12.3 14.4 15.5 9.4 16.9 7.9 8.0 6.8 6.3 9.2 7.7 6.2 0.8 0.8 0.7 10.9 11.8 11.7 3.8 4.4 4.7 28

Power Grid BUY 170 235 38 890 11.8 5,232 20.2 23 25 6 13.5 11.1 8.4 7.4 6.7 6.8 6.4 6.0 1.4 1.2 1.1 17.0 17.4 17.5 4.2 4.7 5.2 36

Tata Power BUY 43 55 29 116 1.5 2,705 4.4 4.9 6.5 110 11 31.8 9.6 8.6 6.6 7.2 6.3 5.7 0.6 0.6 0.5 6.9 7.1 8.7 — — — 14.1

Electric Utilities Attractive 2,338 30.9 13.0 12.6 9.9 7.9 7.0 6.4 0.9 0.8 0.8 11.5 12.0 12.1 3.9 4.3 4.7 88

Fertilizers & Agricultural Chemicals

Bayer Cropscience SELL 5,400 3,400 (37) 243 3.2 45 129.3 134.2 149.9 64.7 3.8 11.7 42 40 36 32 29 25 9.4 7.9 6.7 24 21 20 0.5 0.5 0.6 1.8

Dhanuka Agritech SELL 631 535 (15) 30 0.4 48 29.7 34.9 38.2 25.7 17.4 9.5 21.2 18.1 16.5 16.9 14.1 12.7 4.2 4.1 3.9 21 23 24 3.8 4.5 4.9 0.3

Godrej Agrovet SELL 399 375 (6) 77 1.0 192 11.5 12.9 17.0 0.8 11.8 32 35 31 23 20 16 13 3.4 3.2 2.9 10.4 10.7 12.9 1.4 1.1 1.5 1.0

Rallis India ADD 244 230 (6) 47 0.6 195 9.0 10.6 14.2 7.4 17.1 33.7 26.9 23.0 17.2 18.4 15.8 12.0 3.4 3.0 2.7 13.1 13.9 16.5 1.0 1.1 1.2 2.1

UPL SELL 425 350 (18) 325 4.3 765 23.2 30.3 35.7 22.7 30.4 17.8 18 14.0 11.9 8.5 7.5 6.6 2.0 1.8 1.6 11.5 13.5 14.3 1.4 1.8 2.2 39

Fertilizers & Agricultural Chemicals Attractive 947 12.5 26.7 22.5 18.8 28 23 19.1 13.1 11.5 9.9 3.7 3.3 2.9 13.2 14.4 15.2 1.0 1.2 1.4 48

Gas Utilities

GAIL (India) BUY 98 150 53 442 5.9 4,510 11.5 9.8 11.4 (17.9) (14.5) 16.7 8.6 10.0 8.6 6.2 7.1 6.1 1.0 0.9 0.9 11.5 9.4 10.4 6.6 4.1 4.6 21

GSPL SELL 225 210 (7) 127 1.7 564 17.2 12.8 11.8 21.9 (25.7) (7.6) 13.1 17.6 19.1 6.1 7.4 7.6 1.9 1.7 1.6 15.5 10.2 8.7 0.9 0.9 1.0 2.1

Indraprastha Gas SELL 466 380 (18) 326 4.3 700 16.7 17.4 20.7 39.2 4.2 18.5 27.8 26.7 22.5 21.0 19.8 16.5 6.6 5.7 4.9 26 23 23 0.8 0.9 1.2 23

Mahanagar Gas ADD 994 1,300 31 98 1.3 99 76.8 84.0 89.4 36.7 9.4 6.5 12.9 11.8 11.1 8.3 7.3 6.5 3.5 3.0 2.6 29 27 25 3.3 3.8 4.5 10.3

Petronet LNG BUY 253 300 19 380 5.0 1,500 16.8 17.8 22.3 11.7 6.1 25.3 15.1 14.2 11.3 8.7 8.1 6.6 3.4 3.2 2.9 24 23 27 4.0 4.5 6.1 11.0

Gas Utilities Attractive 1,373 18.2 (1.4) (6.8) 16.6 13.0 13.9 11.9 8.4 8.8 7.5 1.9 1.8 1.7 14.9 12.9 13.9 3.7 3.1 3.9 68

Health Care Services

Apollo Hospitals BUY 1,356 1,820 34 189 2.5 139 23.6 23 49 39 (2) 112 57.4 58.5 27.6 14.4 16.2 11.9 5.3 5.1 4.6 9.6 8.9 17.4 0.6 0.7 1.4 22

Aster DM Healthcare NR 102 — — 51 0.7 505 6.9 8.8 10.6 4 27.5 21 14.8 11.6 9.6 6.1 5.2 4.5 1.9 1.6 1.4 13.3 15.0 15.8 — — — 0.5

Dr Lal Pathlabs SELL 1,636 1,180 (28) 136 1.8 83 27.1 26.1 37.7 13.4 (3.5) 44.5 60.5 62.7 43.4 37.5 38.7 27.1 13.2 11.5 9.7 23 19.6 24 0.5 0.5 0.7 3.9

HCG BUY 121 140 16 11 0.1 89 (7.7) (6.4) (1.8) (128) 16 72 NM NM NM 9.6 8.1 5.4 2.2 1.8 1.9 NM NM NM — — — 0.7

Metropolis Healthcare SELL 1,415 1,240 (12) 72 0.9 50 29.2 28.9 40.0 22.0 (1.2) 39 48.4 49.0 35.3 29.8 29.0 21.4 13.6 11.6 9.6 31 26 30 0.5 0.6 0.8 5.7

Narayana Hrudayalaya BUY 295 380 29 60 0.8 204 4.0 3.0 10.6 37.6 (24) 250 74.1 97.5 27.8 18.8 19.8 11.7 5.2 4.9 4.2 7.3 5.2 16.2 — — — 0.9

Health Care Services Attractive 519 6.9 15 4 75 48.8 47.2 26.9 14.8 14.7 11.2 5.5 4.8 4.2 11.2 10.1 15.7 0.4 0.5 0.8 34

Hotels & Restaurants

Jubilant Foodworks ADD 1,707 1,750 3 225 3.0 132 24 9 30 (2) (62.3) 240 72.4 192.0 56.4 24.9 32.5 19.6 20.0 19.6 15.1 26 10.3 30 0.4 0.2 0.6 36

Lemon Tree Hotels BUY 26 38 44 21 0.3 790 -0.1 -0.9 0.6 (118) (655) 161 NM NM 47.5 14.8 30.4 11.8 2.5 2.8 2.7 NM NM 5.7 — 0.0 0.8 0.7

Hotels & Restaurants Attractive 246 3.3 (18) (85) 868 81.3 532.4 55.0 22.8 32.2 17.9 12.6 12.9 10.8 15.5 2.4 19.6 0.3 0.2 0.6 36

Insurance

HDFC Life Insurance ADD 502 530 6 1,013 13.4 2,009 6.4 3.7 5.6 1.4 (42.4) 50.5 77.8 135.0 90 — — — 14.4 13.8 12.9 20 10.4 14.8 0.0 0.2 0.3 50

ICICI Lombard SELL 1,318 875 (34) 599 7.9 454 26.3 30.8 35.7 14 17 16 50.2 42.8 37 — — — 9.8 8.1 6.9 21 21 20 0.3 0.2 0.5 12.1

ICICI Prudential Life BUY 397 475 20 570 7.5 1,436 7.4 9.7 12.2 (6) 30.8 25.5 53.4 40.9 33 — — — 7.6 6.6 5.7 14.8 17.2 18.7 0.2 0.4 0.0 18.9

Max Financial Services ADD 483 550 14 130 1.7 270 10.1 10.3 28.1 452 2 173 47.8 46.8 17.2 — — — — — — 12.7 14.5 40 0.0 0.2 1.4 13.0

SBI Life Insurance BUY 742 1,000 35 742 9.8 1,000 14.2 14.9 15.6 7.2 4.9 4.5 52.2 49.7 48 — — — 9.3 8.0 7.0 18.4 17.3 15.8 0.0 0.3 0.3 15.9

Insurance Attractive 3,054 40.4 8.4 2.7 32.3 58.2 56.7 43 9.9 8.7 7.1 17.0 15.3 16.6 0.0 0.2 0.2 110

Mkt cap. EPS (Rs) EPS growth (%) P/E (X) EV/EBITDA (X) P/B (X) RoE (%) Dividend yield (%)


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Internet Software & Services

Info Edge SELL 2,747 2,130 (22) 337 4.5 122.0 27.4 20.5 37.6 6.2 (25.4) 83.6 100.2 134.3 73.1 81.3 118.9 59.1 12.9 12.1 10.8 13.6 9.3 15.6 0.3 0.2 0.3 15.0

Just Dial REDUCE 397 420 6 26 0.3 64.9 42.0 24.3 33.0 31.4 (42.2) 35.9 9.5 16.4 12.1 3.9 9.1 5.3 2.0 2.1 1.8 24 12.2 16.1 0.0 0.0 0.0 18.1

Internet Software & Services Attractive 362 4.8 16.3 (34.2) 65.7 59.7 90.7 54.7 49.6 81.4 44.9 9.3 9.2 8.1 15.6 10.1 14.8 0.3 0.2 0.3 33

IT Services

HCL Technologies ADD 579 570 (2) 1,570 20.8 2,710 40.8 38.1 42.9 11.4 (6.6) 12.5 14.2 15.2 13.5 8.8 8.9 7.7 3.2 2.7 2.4 24 19.5 19.0 0.9 1.8 2.4 40

Hexaware Technologies REDUCE 321 260 (19) 96 1.3 302 21.2 18.8 21.1 9.9 (11.2) 12.2 15.1 17.1 15.2 11.0 10.9 9.4 3.5 3.1 2.8 25 19.2 19.2 2.6 1.9 3.1 3.2

Infosys BUY 716 700 (2) 3,049 40.4 4,256 38.9 36.2 40.5 10.0 (7.1) 12.0 18.4 19.8 17.7 12.9 12.9 11.5 4.7 4.4 4.1 25 23 24 2.4 3.6 4.2 106

L&T Infotech ADD 1,887 1,850 (2) 329 4.3 175 86.6 83.5 101.0 0 (3.6) 21.0 21.8 22.6 18.7 15.4 14.9 13.0 6.1 5.4 4.6 30 25 26 1.4 1.7 1.9 3.4

Mindtree REDUCE 909 760 (16) 150 2.0 165 38.3 46.9 55.3 (16) 22 18 23.7 19.4 16.4 12.5 10.8 9.1 4.7 4.1 3.5 19.5 23 23 3.3 1.5 1.8 12.4

Mphasis REDUCE 895 750 (16) 167 2.2 187 63.5 56.2 62.2 13 (11.5) 10.6 14.1 15.9 14.4 9.4 10.0 8.8 2.9 2.7 2.5 21 17.4 17.9 3.9 3.9 3.9 4.4

TCS REDUCE 2,109 1,705 (19) 7,913 104.7 3,752 86.2 82.6 92.0 4 (4.2) 11.3 24.5 25.5 22.9 17.7 18.3 16.3 9.2 8.6 8.0 36 35 36 3.2 3.1 3.5 118

Tech Mahindra BUY 591 630 7 514 6.8 880 45.9 35.4 48.0 (3.9) (22.8) 35.6 12.9 16.7 12.3 7.9 8.3 6.4 2.4 2.2 2.0 19.2 13.8 17.2 2.6 2.6 2.9 37

Wipro REDUCE 217 195 (10) 1,240 16.4 5,848 16.6 15.8 17.1 11.1 (5.0) 8.3 13.1 13.7 12.7 7.8 7.9 7.0 2.3 2.0 1.8 17.3 15.1 14.9 0.7 0.9 3.9 19.8

IT Services Cautious 15,028 198.9 4.3 (6.5) 12.6 19.3 20.7 18.4 13.3 13.6 12.0 5.1 4.6 4.3 26 22 23 2.5 2.8 3.5 345

Media

DB Corp. REDUCE 74 135 83 13 0.2 175 18.0 18.7 18.6 14.6 4.1 (0.5) 4.1 3.9 4.0 1.9 1.7 1.7 0.7 0.7 0.7 16.9 17.4 17.4 17.0 20.4 23.1 0.2

Jagran Prakashan REDUCE 40 35 (13) 11 0.1 281 7.0 3.3 7.0 (20.9) (52) NA 5.8 12.0 NA 1.8 2.3 NA 0.6 0.6 NA 10.3 4.9 9.9 11.2 5.0 12.5 0.2

PVR BUY 1,005 1,625 62 52 0.7 51 32.7 -32.7 59.3 (24) (200) 281 30.7 NM 16.9 9.7 31.8 7.2 2.7 3.0 2.6 10.7 NM 16.2 0.3 (0.3) 0.6 37

Sun TV Network REDUCE 386 525 36 152 2.0 394 37.8 41.4 43.8 4 9.5 5.7 10.2 9.3 8.8 7.0 6.2 5.7 2.5 2.3 2.1 26 26 25 5.2 5.8 6.3 13.7

Zee Entertainment Enterprises REDUCE 190 145 (24) 182 2.4 960 17.9 13.1 16.2 8.6 (27.1) 24.4 10.6 14.5 11.7 7.1 8.9 6.9 1.9 1.8 1.6 18.5 12.6 14.6 2.4 2.9 2.9 52

Media Attractive 410 5.4 3.6 (19.2) 30.9 10.5 13.1 10.0 6.5 7.6 5.7 1.9 1.8 1.7 18.3 14.1 17.1 3.9 4.2 4.8 103

Metals & Mining

Hindalco Industries BUY 147 225 53 330 4.4 2,224 21.3 10.3 19.8 (13.6) (51.6) 92 6.9 14.2 7.4 5.0 6.6 4.8 0.5 0.5 0.5 7.9 3.6 6.7 0.8 0.8 0.8 29

Hindustan Zinc BUY 172 215 25 727 9.6 4,225 16.1 11.5 15.3 (14.5) (28.4) 32.7 10.7 14.9 11.2 5.8 7.5 5.7 1.8 2.2 2.2 18.4 13.2 19.4 9.6 6.7 8.9 2.1

Jindal Steel and Power BUY 142 200 41 145 1.9 1,020 (7.7) (9.0) 14.6 (343) (18) 262 NM NM 9.7 6.4 7.5 5.0 0.5 0.5 0.4 NM NM 4.7 — — — 34

JSW Steel ADD 191 180 (6) 462 6.1 2,402 10.1 (0.4) 14.8 (68.3) (104) 4,298.7 18.9 NM 12.9 8.9 11.3 6.9 1.3 1.3 1.2 6.8 NM 9.5 1.1 1.1 1.1 30

National Aluminium Co. SELL 32 24 (26) 60 0.8 1,866 0.4 0.3 1.8 (95) (23) 430.1 75.4 97.9 18.5 7.4 10.1 7.0 0.6 0.6 0.6 0.8 0.6 3.1 2.5 1.0 5.4 5.0

NMDC ADD 90 105 17 275 3.6 3,062 15.5 11.7 10.6 5.2 (24.7) (9) 5.8 7.7 8.5 3.9 5.1 5.7 1.0 0.9 0.9 17.7 12.5 10.7 8.6 6.5 5.9 7.8

Tata Steel BUY 324 430 33 368 4.9 1,146 (8.9) 6.0 71.4 (110) 167 1,088 NM 53.9 4.5 8.2 8.3 4.7 0.6 0.6 0.5 NM 1.1 12.4 3.1 3.1 3.1 65

Vedanta BUY 106 120 13 394 5.2 3,717 6.5 5.5 12.3 (57) (16) 125.0 16.2 19.3 8.6 4.6 6.0 4.5 0.7 0.8 0.7 4.2 3.8 8.7 3.7 11.5 8.0 43

Metals & Mining Attractive 2,762 36.6 (54.9) (35.3) 161.2 14.2 22.0 8.4 6.1 7.5 5.2 0.8 0.9 0.8 5.9 3.9 9.6 4.6 4.8 4.9 38



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Oil, Gas & Consumable Fuels

BPCL BUY 379 440 16 822 10.9 1,967 14 26 33 (60.4) 78.8 28.4 26.4 14.8 11.5 17.2 10.7 9.0 2.2 2.1 1.9 8.1 14.7 17.4 4.4 3.4 4.4 48.2

Coal India BUY 141 230 63 867 11.5 6,163 26 23 24 (8) (12.1) 3.9 5.4 6.2 5.9 4.7 5.3 4.6 2.7 2.6 2.4 55.1 43.2 42.3 10.7 14.2 14.2 24.6

HPCL BUY 208 250 20 317 4.2 1,524 23 26 26 (43.2) 16.9 0.2 9.2 7.9 7.9 8.7 8.7 8.8 1.1 1.0 0.9 11.8 12.9 12.0 4.3 5.1 5.1 21.5

IOCL BUY 90 130 45 847 11.2 9,181 9.5 15.2 15.5 (46.9) 59.7 2.0 9.4 5.9 5.8 5.1 4.4 4.2 0.7 0.7 0.7 7.9 12.1 11.8 5.7 8.5 8.6 20.8

Oil India SELL 94 70 (26) 102 1.3 1,084 21 1 7 (32) (93.9) 418.0 4.5 74.6 14.4 2.2 6.9 4.8 0.4 0.4 0.3 7.9 0.5 2.4 9.6 0.5 2.8 3.4

ONGC SELL 88 60 (32) 1,110 14.7 12,580 15 0 7 (35) (99.2) 5,537.4 5.7 694.6 12.3 3.1 6.6 4.3 0.4 0.5 0.4 8.0 0.1 3.6 7.9 0.8 3.4 35.1

Oil, Gas & Consumable Fuels Attractive 13,383 177.2 (23.0) (14.3) 34.4 14.5 17.0 12.6 8.7 9.6 7.3 1.4 1.4 1.3 9.8 8.0 10.0 2.4 2.1 2.4 628.0

Pharmaceuticals

Aurobindo Pharma REDUCE 797 730 (8) 467 6.2 586 48 51 56 19.3 6 8.8 16.5 15.5 14.3 10.0 9.4 8.3 2.8 2.4 2.1 16.8 15.5 14.8 0.4 0.9 1.1 67.5

Biocon SELL 390 210 (46) 468 6.2 1,202 6.2 7.9 9.5 2 27 20.3 63 49 41 29.2 22.0 18.1 6.3 5.8 5.2 10.6 11.7 12.7 0.2 0.7 0.9 38.7

Cipla BUY 643 650 1 518 6.9 806 19.2 27 32 1.1 39 20 34 24.2 20.1 16.4 13.6 11.3 3.2 2.9 2.6 9.9 12.2 13.2 1.2 0.8 0.9 70.9

Dr Reddy's Laboratories SELL 4,113 3,100 (25) 683 9.0 166 176 147 188 76 (16) 27.5 23 27.9 21.9 13.5 15.5 12.1 4.4 3.9 3.4 13.9 13.9 15.5 0.6 0.6 0.8 65.1

Laurus Labs ADD 482 540 12 52 0.7 107 23.9 34.7 38 117.9 45 10 20 13.9 12.7 11.0 8.8 7.4 2.9 2.4 2.0 15.3 17.3 16.0 (1—) — — 8.7

Lupin ADD 928 900 (3) 421 5.6 450 22 32 46 3.6 46 44 43 29 20.3 16.6 12.9 9.5 3.3 3.0 2.7 7.4 10.4 13.3 0.7 0.5 0.7 45.8

Sun Pharmaceuticals ADD 499 480 (4) 1,198 15.9 2,406 16.7 19.2 24 3.8 15 25 30 26 20.8 15.8 13.7 11.2 2.7 2.4 2.2 9.3 9.4 11.2 1.4 0.8 1.0 88.0

Torrent Pharmaceuticals REDUCE 2,459 2,350 (4) 416 5.5 169 57 70 86 22.6 22 22 43 35 29 20.4 17.6 15.1 8.6 7.4 6.3 20.1 21.2 22.2 1.7 1.0 1.2 28.6

Pharmaceuticals Neutral 4,222 55.9 18.9 13 23 30 26 21.3 15.5 13.9 11.4 3.5 3.2 2.8 11.9 12.1 13.2 0.9 0.7 0.9 413.3

Real Estate

Brigade Enterprises BUY 131 280 114 27 0.4 204 8.3 10 18 (29) 17 82 15.7 13.4 7.4 11.6 7.8 4.8 1.2 1.1 1.0 7.7 8.5 14.1 1.9 1.9 1.9 0.5

DLF BUY 157 200 28 388 5.1 2,475 (2.4) 5.0 8.7 (140) 310 74 NM 31.4 18.1 37.3 43.3 25.1 1.1 1.1 1.1 NM 3.6 6.0 - 1.3 1.3 21.2

Embassy Office Parks REIT ADD 375 400 7 289 3.8 772 9.9 12.3 14.1 110 24 15 38 31 27 18.4 17.2 15.8 1.3 1.4 1.5 3.4 4.4 5.4 6.5 7.1 7.9 3.2

Godrej Properties SELL 828 610 (26) 209 2.8 252 10.7 10.9 17.7 (2.7) 2 62.2 77 76 47 64.8 121.7 110.6 4.3 4.1 3.8 7.4 5.6 8.4 — — — 5.7

Oberoi Realty ADD 388 575 48 141 1.9 364 22 34 38 (4.0) 55.5 12 18.0 11.5 10.3 16.6 10.0 8.5 1.6 1.4 1.3 9.4 13.1 13.1 0.5 0.5 0.5 3.3

Prestige Estates Projects ADD 190 410 115 76 1.0 378 13.9 13.9 14 59.9 (0) 2 14 14 13.4 6.6 6.3 5.9 1.4 1.3 1.2 11.3 10.1 9.5 0.8 0.8 0.8 1.8

Sobha BUY 223 465 108 21 0.3 95 30 35 44 (5) 19.4 22.9 7.5 6.3 5.1 5.0 3.9 3.6 0.9 0.8 0.7 12.1 13.1 14.4 3.1 3.1 3.1 1.3

Sunteck Realty BUY 172 320 86 25 0.3 140 12.2 11.3 25 (24.6) (7) 118 14 15.1 6.9 12.4 13.5 5.4 0.8 0.8 0.7 5.9 5.2 10.5 0.6 0.6 0.6 0.7

Real Estate Neutral 1,177 15.6 (37.9) 106.3 37.0 49 24 17.5 16.8 14.7 11.9 1.4 1.4 1.3 2.9 5.8 7.6 1.8 2.4 2.6 37.6

Retailing

Aditya Birla Fashion and Retail BUY 129 150 16 100 1.3 773 (2.1) (4.2) 2.7 (151.4) (96.4) 165.1 NM NM 47 10.3 13.5 8.1 9.2 13.1 10.3 NM NM 24.3 — — — 3.6

Avenue Supermarts SELL 2,387 1,480 (38) 1,546 20.5 628 21.0 22 39 45.1 5.8 74.1 114 108 62 71 72 42 13.5 12.4 10.3 15.8 12.2 18.2 — — — 14.2

Titan Company BUY 977 1,215 24 868 11.5 888 16.8 10 21 (0.2) (38.6) 102.8 58 95 47 35 52 30 13.0 11.8 10.0 23.4 13.1 23.3 0.4 0.3 0.6 56.5

Retailing Cautious 2,514 33.3 (2.8) (23.2) 125.3 95 124 55 43 53 31 13.3 12.2 10.2 14.0 9.9 18.6 0.1 0.1 0.2 74.4

Speciality Chemicals

Castrol India BUY 127 180 42 125 1.7 989 8.4 9.4 10.1 16.8 12.0 8.2 15.2 13.5 12.5 10.0 9.0 8.3 9.2 8.1 7.2 65.3 63.5 60.9 4.3 5.9 6.5 2.4

Pidilite Industries REDUCE 1,455 1,425 (2) 739 9.8 508 24.8 28 33 40.1 14.0 17.2 59 51 44 43 38 32 15.0 12.8 10.9 27.9 26.9 26.9 0.6 0.7 0.8 20.0

S H Kelkar and Company BUY 74 95 29 10 0.1 141 4.6 4.6 6.2 (24.3) (1.0) 35.8 15.9 16.1 11.8 8.3 8.0 6.3 1.3 1.2 1.1 7.8 7.6 9.8 2.7 1.4 2.4 1.0

SRF ADD 3,644 3,800 4 209 2.8 57 138 151 197 23.5 9.2 30.9 26.4 24.2 18.5 16.4 14.1 11.2 4.2 3.7 3.1 17.5 16.3 18.2 0.4 0.4 0.5 14.1

Speciality Chemicals Neutral 1,084 14.4 26.0 11.8 18.6 37 33 27.7 24.5 21.6 18.3 9.0 7.8 6.7 24.5 23.7 24.2 1.0 1.2 1.4 37.5



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Telecommunication Services

Bharti Airtel BUY 567 690 22 3,094 41.0 5,455 (6.7) 5.7 14.5 NM NM NM NM 100.2 39.2 10.9 8.5 6.9 4.0 4.0 3.8 NM 4.0 10.0 0.4 1.1 1.1 176.0

Bharti Infratel BUY 233 185 (20) 430 5.7 1,850 16.5 16.5 17.7 25.7 0.2 6.9 14.1 14.1 13.2 5.9 5.6 5.3 3.2 3.2 3.1 21.7 22.5 23.9 4.6 6.9 7.3 25.7

Vodafone Idea RS 11 — — 312 4.1 28,736 (22.3) (4.0) (6.2) NM NM NM NM NM NM 22.1 10.8 9.9 1.4 2.7 (5.0) NM NM NM — — — 51

Tata Communications BUY 468 425 (9) 133 1.8 285 10.0 7.9 15.1 46.6 (21.2) 90.1 46.6 59.1 31.1 7.5 7.6 6.4 553.8 55.7 20.4 NM 171 96.1 1.6 1.6 1.6 1.3

Telecommunication Services Cautious 3,969 52.5 NM 65.2 51.6 NM NM NM 11.4 8.6 7.3 3.5 3.9 4.5 NM NM NM 0.8 1.6 1.6 253.5

Transportation

Adani Ports and SEZ BUY 347 385 11 704 9.3 2,032 23.9 18.8 22.8 19.7 (21.4) 21.2 14.5 18.4 15.2 12.2 12.1 10.3 2.7 2.5 2.2 19.4 14.1 15.1 3.7 1.1 1.0 22.6

Container Corp. BUY 410 400 (2) 250 3.3 609 16.6 19.3 24.3 1.5 16.5 26.0 25 21 17 13.3 11.8 9.3 2.4 2.2 2.1 9.7 10.9 12.9 0.6 2.0 2.5 10.5

Gateway Distriparks BUY 90 135 50 10 0.1 109 4.2 (0.4) 5.1 (37.5) (108.6) 1,491.1 21.3 NM 17.8 7.1 8.7 6.3 0.7 0.7 0.7 3.5 NM 4.1 3.3 3.3 3.3 0.2

GMR Infrastructure BUY 21 26 23 128 1.7 6,036 (3.1) (1.8) (0.8) (25.4) 40.9 55.9 NM NM NM 16.2 18.9 16.9 (4.8) (7.6) (5.9) 106.6 55.8 25.2 — — — 4.1

Gujarat Pipavav Port BUY 72 106 49 35 0.5 483 6.0 4.5 5.8 42.2 (25.1) 28.0 11.8 15.8 12.3 6.3 6.7 5.8 1.7 1.7 1.7 14.2 10.5 13.5 7.8 5.9 7.6 0.4

InterGlobe Aviation SELL 1,036 925 (11) 398 5.3 383 (6.5) (189.9) 66.4 (258.9) (2,828.8) 135.0 NM NM 15.6 4.9 (9.7) 2.4 6.8 (148.3) 2.4 NM NM 253.3 (0.0) 0.0 0.0 45

Mahindra Logistics ADD 308 275 (11) 22 0.3 71 8.9 5.9 10.3 (29.0) (34.2) 75.8 35 53 30 14.2 16.3 11.5 4.0 3.8 3.5 12.2 7.5 12.2 — — — 0.3

Transportation Attractive 1,547 20.5 1.6 (180.1) 355.1 37 NM 18.2 10.9 19.0 8.2 3.6 3.7 3.2 9.6 NM 17.6 2.0 1.0 1.1 83

KIE universe 104,393 1381.8 (6.9) 8.2 39.2 25 22.7 16.3 11.4 11.7 9.1 2.4 2.2 2.0 9.8 9.7 12.4 1.6 1.8 2.1

Notes:

(a) We have used adjusted book values for banking companies.

(b) 2020 means calendar year 2019, similarly for 2021 and 2022 for these particular companies.

(c) Exchange rate (Rs/US$)= 75.55


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Ratings and other definitions/identifiers

Definitions of ratings

BUY. We expect this stock to deliver more than 15% returns over the next 12 months.

ADD. We expect this stock to deliver 5-15% returns over the next 12 months.

REDUCE. We expect this stock to deliver -5-+5% returns over the next 12 months.

SELL. We expect this stock to deliver <-5% returns over the next 12 months.

Our Fair Value estimates are also on a 12-month horizon basis.

Our Ratings System does not take into account short-term volatility in stock prices related to movements in the market. Hence, a particular Rating may not

strictly be in accordance with the Rating System at all times.

Other definitions

Coverage view. The coverage view represents each analyst’s overall fundamental outlook on the Sector. The coverage view will consist of one of the following

designations: Attractive, Neutral, Cautious.

Other ratings/identifiers

NR = Not Rated. The investment rating and fair value, if any, have been suspended temporarily. Such suspension is in compliance with applicable regulation(s)

and/or Kotak Securities policies in circumstances when Kotak Securities or its affiliates is acting in an advisory capacity in a merger or strategic transaction

involving this company and in certain other circumstances.

CS = Coverage Suspended. Kotak Securities has suspended coverage of this company.

NC = Not Covered. Kotak Securities does not cover this company.

RS = Rating Suspended. Kotak Securities Research has suspended the investment rating and fair value, if any, for this stock, because there is not a sufficient

fundamental basis for determining an investment rating or fair value. The previous investment rating and fair value, if any, are no longer in effect for this stock

and should not be relied upon.

NA = Not Available or Not Applicable. The information is not available for display or is not applicable.

NM = Not Meaningful. The information is not meaningful and is therefore excluded.

Kotak Institutional Equities Research coverage universeDistribution of ratings/investment banking relationships

Source: Kotak Institutional Equities As of March 31, 2020

Percentage of companies covered by Kotak Institutional

Equities, within the specified category.

* The above categories are defined as follows: Buy = We

expect this stock to deliver more than 15% returns over the next

12 months; Add = We expect this stock to deliver 5-15% returns

over the next 12 months; Reduce = We expect this stock to

deliver -5-+5% returns over the next 12 months; Sell = We

expect this stock to deliver less than -5% returns over the next

12 months. Our target prices are also on a 12-month horizon

basis. These ratings are used illustratively to comply with

applicable regulations. As of 31/03/2020 Kotak Institutional

Equities Investment Research had investment ratings on 204

equity securities.

Percentage of companies within each category for which Kotak

Institutional Equities and or its affiliates has provided

investment banking services within the previous 12 months.47.1%

23.0%

12.7%

17.2%

3.9%2.0%

0.0% 1.5%

0%

10%

20%

30%

40%

50%

60%

70%

BUY ADD REDUCE SELL

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