Result Q2FY20 Analysis

Q2FY20 turned out to be a moderate small cap space. For the listed one-time special charge at Bharati quarter for Inc. on the universe (~3,000 companies), topline Airtel and Vodafone-Idea. Excluding operational front even as tax cuts de-grew 1.1% YoY while bottomline this, the aggregate bottomline aided profit growth. India Inc. declined by 16.6% YoY. Large caps increased by 7.7% YoY. However, the earnings have witnessed headwinds bottomline decline is attributed to expectations continue for a strong given the liquidity tightness, weak revival in FY21. In the long term, the consumer sentiment, slowdown in government’s focus to maintain fiscal government spending and global prudence (and thereby attract foreign trade issues. Weakness was seen capital to at least partially fund the in auto, metals & energy sector, Most Nifty 50 huge infrastructure development whereas sectors like financials and projects) is commendable and would select consumer companies reported companies either likely result in better times for healthy performance. The migration met or surpassed industrials and building material to lower tax rates saw one-time estimates in the companies. This could have a positive Deferred Tax Asset (DTA) markdown spill-over effect on the economy and impact, which crimped the Q2 July-September corporate sector. performance for several companies, earnings season Most Nifty 50 companies either notably among private sector banks. met or surpassed estimates in the At the aggregate level, large caps after two straight July-September earnings season continued to outperform midcap and quarters of muted after two straight quarters of muted small caps in these challenging times. performance. performance. Operating income of Despite tax rate benefits, profitability nearly half of the Nifty 50 constituents was still muted in the midcap and met estimates and around a third

December 2019 INSIGHT 32 surpassed analyst expectations, data compiled by Nifty 50 Companies – Beat or Miss Bloomberg showed. Only 11 companies missed the 30 consensus forecast. The Nifty companies are reviewed 25 24 24 25 23 22 23 23 based on their operating income and excludes one-offs, 21 19 19 20 including the impact of corporate tax rate cuts. Among 20 18 18 16 15 15 16 the Nifty 50 companies the aggregate revenue decline by 15 13 13 13 11 12 11 0.5% while PBT shows a degrowth of 19.9% and net profit 9 10 10 decline by 10.5%, but ex BFSI net profit shows a degrowth 10 7 of 24.7% with PBT degrowth of 42.2%. Further Nifty 50 5 companies ex shows a growth of 2.6% in PBT 0 and 14.5% in net profit. The divergence between the PBT and net profit performance can largely be attributed to the corporate tax rate cut. However, it must also be noted that Q2FY18 Q3FY18 Q4FY18 Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20 not all companies have shifted to the new tax regime. Beat Estimate In Line With Estimate Missed Estimate Source: Bloomberg

Q2 Earnings Heat Map Nifty 50 Companies Hero M&M Maruti Tata ICICI Bajaj HDFC SBI MotoCorp Suzuki Motors Bank Finance HCL Tech Tech Bharti Eicher UltraTech L&T ITC Mahindra Infratel Motors Cement HUL Asian Britannia Nestle ONGC NTPC Ltd. Power IndusInd HDFC Kotak Paints Grid Bank Bank Bank Bajaj Zee Ent. JSW Steel Hindalco Vedanta Sun Adani Bharti UPL Finserv Pharma Ports Airtel Titan RIL GAIL Indian Oil BPCL TCS Dr. Grasim Reddy's

Beat Estimate In Line With Estimate Missed Estimate Source: Bloomberg

On the sectoral front, in the auto subdued realisations both in ferrous domestic business while foreign space, lower volumes and negative and non-ferrous sector driven by markets was stable as the benefit operating leverage impacted margins lower prices amid global uncertainty. from lower price erosion and stable- for the sector. In the banking space, In the pharma space, companies to-increasing market share was set the operating performance was demonstrated strong growth from off by disappointing new launch healthy amid steady state gross NPA performance. in the system at ~10% of advances In FY20 (April 2019 – November 2019) (flat QoQ). In the cement space, In FY20 (April – FIIs were the net buyer of Rs. 41,432 higher prices and cost optimisation cr in the equity segment. For the boosted earnings of cement makers. November 2019) month of October & November 2019, In the FMCG space, volume growth FIIs were the net FIIs were net buyer of Rs. 32,509 cr came in lower at ~5-6% YoY, and during Q2FY20 they were the net operating margins improved for most buyer of Rs. 41,432 seller of Rs. 22,463 cr while DIIs were companies on the back of benign the net buyers of Rs. 54,110 cr in FY20 input costs. In IT space companies cr in the equity (April 2019 – November 2019). For reported better than expected results, segment. For the the month of October & November indicating an improving demand 2019, DIIs were net seller of Rs. 4,449 environment. Q2FY20 performance month of October cr and during Q2FY20 they were the and management commentaries & November 2019, net buyers of Rs. 53,819 cr. India also by IT companies indicate signs of remained a favoured destination for improving demand environment FIIs were net investment, FDI inflow is US$ 16.33 and healthy deal pipelines. In buyer of Rs. 32,509 billion in Q1FY20 against US$ 12.75 metal & mining space, operational billion in Q1FY19. performance was impacted by cr

33 INSIGHT December 2019 CNX 500 (Excluding Banks, NBFC & Oil Companies)

(In Rs. Cr.) Q2FY18 Q3FY18 Q4FY18 Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20 Net Sales 937058 967895 1064587 1082141 1142979 1108575 1178108 1131873 1142526 Growth (YoY) 4% 6% 7% 17% 22% 15% 11% 5% 0% Growth (QoQ) 1% 3% 10% 2% 6% -3% 6% -4% 1% Operating Expenses 775108 798646 884422 894943 949670 921521 980851 931379 954768 Growth (YoY) 3% 4% 6% 15% 23% 15% 11% 4% 1% Growth (QoQ) -1% 3% 11% 1% 6% -3% 6% -5% 3% % of Sales 83% 83% 83% 83% 83% 83% 83% 82% 84% Operating Profit 161950 169249 180165 187198 193310 187053 197258 200494 187757 Growth (YoY) 12% 15% 11% 27% 19% 11% 9% 7% -3% Growth (QoQ) 10% 5% 6% 4% 3% -3% 5% 2% -6% OPM 17% 17% 17% 17% 17% 17% 17% 18% 16% Depreciation 21146 19422 25760 19059 23388 22829 30108 22486 25146 Growth (YoY) -8% 3% 11% -9% 11% 18% 17% 18% 8% Growth (QoQ) 1% -8% 33% -26% 23% -2% 32% -25% 12% Interest 40460 42216 44568 46432 47994 47344 49441 54470 56670 Growth (YoY) 6% 10% 7% 20% 19% 12% 11% 17% 18% Growth (QoQ) 4% 4% 6% 4% 3% -1% 4% 10% 4% Other Income 34038 33359 35034 39233 41092 37386 39485 46328 46921 Growth (YoY) 4% 2% 7% 20% 21% 12% 13% 18% 14% Growth (QoQ) 4% -2% 5% 12% 5% -9% 6% 17% 1% Adj Profit 79051 82528 91559 84923 79085 62284 83001 82700 90671 Growth (YoY) 9% 20% 24% 23% 0% -25% -9% -3% 15% Growth (QoQ) 14% 4% 11% -7% -7% -21% 33% 0% 10% NPM 8% 9% 9% 8% 7% 6% 7% 7% 8%

Source: AceEquity, PL-Profit to Loss and LP=Loss to Profit; Adjusted for Bharti Airtel and

Sectoral performance from 33% enabled the auto companies at 69.0 lakh units represented a review to post a much lower decline in PAT yearly and sequential decline of 18.1% Auto & Auto ancillary Sector as compared to fall in operating and 5.2%, respectively, dragged by As expected, Q2FY20 was a hard profit. Q2FY20 total industry volumes the domestic space which is down quarter for automobile companies by 21.6% YoY, 7.1% QoQ to 56.5 lakh with decline in performance on units while exports performance all front. Volume growth across The decline in was better with growth of 2.4% YoY, 4.7% QoQ to 12.5 lakh units. Domestic automotive categories (2W, PV and corporate tax to CV) fell due to weak retail demand PV volumes in Q2FY20 dropped by and high channel inventory along 25.2% from 33% 28.7% YoY to 6.2 lakh units, led by with slowing economic growth and enabled the auto 37.2% YoY decline in passenger car increased cost of ownership (due volumes. UV volumes were down by to safety norms and mandatory companies to post 3.0% YoY. The 2-Ws declined by 20.5% insurance). While companies across a much lower YoY domestically to 46.8 lakh units the board suffered revenue declines, with motorcycles down by 21.6%, softer raw material prices (lagged decline in PAT scooters down by 17.1% & mopeds pass through of steel, lead, crude as compared to down by 30.8%. Domestic CV segment derivatives) provided relief to gross was down by 35.0% YoY to 1.7 lakh margins in most cases, although fall in operating units (M&HCV came off by 52.6%, negative operating leverage pinched. profit. LCV declined by 23.4%). 3-W segment The decline in corporate tax to 25.2% dropped 6.1% YoY domestically.

December 2019 INSIGHT 34 In the OEM space TVS Motors, Bajaj with revenues (down 16.7% YoY) and Trend in Volumes (‘000 Auto and were positive PAT (down 10.4% YoY). Bajaj Auto units) surprises whilst (volumes down 12.4% YoY) delivered Volumes Q2 YoY QoQ was below estimate. PV bellwether better than expected operating (units) FY20 (%) (%) Maruti registered 30.2% YoY volume performance due to better than decline to 3.4 lakh units, with net expected ASP growth and strong cost Hero 1,691,420 -20.7% -8.2% MotoCorp sales dropping 24.3% YoY as a result. focus. EBITDA margins printed 9.5% - a Bajaj Auto 1,173,591 -12.4% -5.9% Among ancillaries, Timken was the multi-year low, with PAT down TVS 885,832 -18.6% -4.0% big positive surprise while Mahindra 39.4% YoY. Tata Motors delivered a Motors CIE and Schaeffler India was a big strong Q2FY20 with lower adjusted miss. registered steep Maruti 338,317 -30.2% -15.0% after-tax loss impacted by improved Suzuki 25% YoY decline in net sales, with profitability in JLR business. Although margins down 54 bps QoQ at 25.4% Mahin- 191,390 -16.3% -12.2% domestic business suffered on dra & and PAT aided by lower tax, higher negative operating leverage in CV Mahindra other income. Motherson Sumi segment. Ashok Leyland lagged the continued to face pressure in both Eicher 166,589 -20.7% -9.3% rest of the OEMs as core M&HCV Motors Europe and domestic markets along segment volumes dropped 56% YoY. with higher start up costs at SMP’s Tata 128,953 -1.0% 0.0% While revenues surprised positively Motors Greenfield plants impacting margins. tracking ASP beat, margins undershot ( JLR) Battery maker Exide’s performance expectations. M&M reported decline was relatively healthy. Revenue Tata 104,831 -45.0% -23.8% in standalone revenue (auto volumes Motors decline was limited to 4% YoY while down 20.6%, tractor volumes down (S/A) margins dipped 60 bps QoQ. Apollo 8%) with margins unchanged while Ashok 28,938 -44.3% -26.9% Tyres’ revenues were down 6.4% YoY PAT boosted by dividend income. Leyland (dragged by 10.8% drop in India) and Market leader in 2-W segment, margins were largely unchanged QoQ Escorts 19,750 -6.1% -6.2% Hero MotoCorp did well to hold on to 10.8%. Force 6,397 -3.4% 4.7% to margins sequentially at 14.5%, Motors

Aggregate EBITDA Margin (%) Segment-wise Margin (%) 16 16

15 14

14 12 13 10 12 8 11 6 10 9 4 8 2 0 2W PVs CVs Q2FY16 Q3FY16 Q4FY16 Q1FY17 Q2FY17 Q3FY17 Q4FY17 Q1FY18 Q2FY18 Q3FY18 Q4FY18 Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20 Aggregate (excl JLR) Aggregate (incl JLR) Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20 Source: Company, Industry Report Source: Company, Industry Report

35 INSIGHT December 2019 Auto & Auto ancillary Companies

Company (Rs Cr) Net YoY QoQ Operating YoY QoQ OPM Net YoY QoQ NPM Sales % % Profit % % % Profit % % % Tata Motors Ltd. 71981 17% 10% 6127 114% -13% 9% -1095 Loss PL -2% Mahindra & Mahindra Ltd. 25431 -2% 6% 3578 4% 8% 14% 1339 121% NM 5% India Ltd. 22444 14% 32% 3433 67% 113% 15% 2241 64% 66% 10% Ltd. 15105 -10% -5% 1211 3% -2% 8% 469 38% 8% 3% Hero MotoCorp Ltd. 9168 12% 20% 1396 19% 22% 15% 969 -22% 11% 11% Bajaj Auto Ltd. 8036 4% 4% 1413 18% 11% 18% 1152 13% -18% 14% Ashok Leyland Ltd. 7621 16% 94% 829 -20% 263% 11% 528 93% NM 7% TVS Motor Company Ltd. 5467 9% 10% 609 9% 6% 11% 224 47% -14% 4% Ltd. 4257 -2% 7% 467 -2% 8% 11% 146 3% 76% 3% MRF Ltd. 3947 -12% -2% 566 -8% 2% 14% 278 2% 22% 7% Ltd. 3633 -1% -4% 306 -19% -26% 8% 214 32% -13% 6% Bosch Ltd. 3165 14% 37% 597 24% 77% 19% 420 50% 73% 13% Bharat Forge Ltd. 2597 12% 21% 517 26% 55% 20% 254 43% 19% 10% Ltd. 2408 1% 10% 729 19% 35% 30% 472 9% -16% 20% Amara Raja Batteries Ltd. 1753 -3% 3% 237 -15% -19% 13% 120 -15% -45% 7% Cummins India Ltd. 1497 11% 13% 251 66% 63% 17% 189 55% 26% 13% Ltd. 1311 9% 21% 321 20% 18% 24% 210 19% -29% 16% Total 189822 8% 12% 22588 32% 14% 12% 8130 134% 20% 4% Source: AceEquity, PL-Profit to Loss and LP=Loss to Profit

Banking Sector growth was higher for private banks expanded by 4bps YoY to 3.7%. PSBs Banks witnessed a mixed Q2FY20. at 19% YoY even though deposits of have seen expansion in NIM due to While retail banks reported healthy Yes Bank came off by 6%. Meanwhile faster growth in low cost deposits earnings, large corporate banks deposit growth for public banks CASA. Gross slippage ratio across were impacted by one-time Deferred remained muted on YoY basis at the banking universe decreased to Tax Assets (DTA) write-downs. 6.0%. The credit-deposit ratio for 3.2% due to lower slippages in both Reduction in corporate tax rate all banks decreased by 70 bps QoQ PSBs and Private Banks. Recovery & will see lower tax burden from Q3, to 77.3% whereas for private sector up gradation amid PSBs improved but several players (mostly private banks it decreased by 53 bps QoQ to sequentially but Private Banks banks) took a markdown in Deferred 90%. The C-D Ratio of public sector remained muted. Net Slippages ratio Tax Assets (DTA), which impacted banks decreased by 90 bps QoQ to decreased to 1.8%. profitability to an extent during the 72.6% on account of faster growth It is expected that amid measures quarter. Most PSU banks opted to rate in deposits than advances during by the government and RBI to boost defer the migration to lower tax rate, the period. The NIM for public banks liquidity in the system and support partly due to presence of DTA on expanded by 20 bps YoY to 2.6%. growth, the environment is likely to the balance sheet and partly as they Whereas the NIM for Private Banks remain challenging for banks both move ahead with the consolidation from core revenue and credit cost (mandated by the government). perspective. Q2FY20 earnings reflect Banks reported slowdown in the weakness in the underlying loan growth led by moderation in Banks witnessed lending environment and addition of corporate lending, which reflects the a mixed Q2FY20. new names to the stressed pool has weak economic environment; retail resulted in asset quality deterioration loan growth, however, remained While retail banks in few banks. In 3QFY20, there could steady. Private Banks continued to reported healthy be rise in slippages led by NBFC/ gain market share at the expense corporate but with resolution of of public banks. In a mega move earnings, large large steel account and possibility towards consolidation, the GOI of resolution in some power/other has announced the merger of 10 corporate banks accounts is likely to keep asset PSBs into 4 entities thus the total were impacted by quality ratios contained. Slowdown PSBs reduced to 12 from 27 in 2017. in the economy and risk aversion Advances growth for all banks stood one-time Deferred indicate the nature and quantum of at 7.7% YoY during Q2FY20 with Tax Assets (DTA) fresh NPA accretion and will be a key private banks growing at a faster monitorable for banks. pace of 14% YoY as compared to 5% write-downs. YoY growth in public banks. Deposit

December 2019 INSIGHT 36 Trend in deposit growth (% YoY) Trend in advances growth (% YoY) 25% 25%

20% 20%

15% 15%

10% 10%

5% 5%

0% 0% Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20 Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20

PSBs Private Overall PSBs Private Overall Source: Company. AceEquity, News Article, Industry Report Source: Company. AceEquity, News Article, Industry Report

Trend in Gross NPA ratio (%) Trend in NIM (%) 16.0% 3.8%

14.0% 3.6% 3.4% 12.0% 3.2% 10.0% 3.0% 8.0% 2.8% 2.6% 6.0% 2.4% 4.0% 2.2% 2.0% 2.0% Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20 Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20

GNPA% PSBs GNPA% Private GNPA% PSBs Private Overall Source: Company. AceEquity, News Article, Industry Report Source: Company. AceEquity, News Article, Industry Report

Banks Company (Rs Cr) NII YoY QoQ Net YoY QoQ NIM GNPA NNPA CAR Profit (%) (%) (%) (%) State 24600 18% 7% 3012 219% 30% 3.2 7.2 2.8 13.6 HDFC Bank Ltd. 13515 15% 2% 6345 27% 14% 4.3 1.4 0.4 17.5 ICICI Bank Ltd. 8057 26% 4% 655 -28% -66% 3.6 6.9 1.7 16.1 7028 56% 8% 737 73% 4% 2.8 10.3 3.9 13.0 Axis Bank Ltd. 6102 17% 4% -112 PL PL 3.6 5.0 2.0 18.2 4264 7% 3% 507 LP -50% 2.4 16.8 7.7 14.1 Bank Of India 3860 32% 11% 266 LP 10% 3.4 16.3 5.9 14.1 Ltd. 3350 25% 6% 1724 51% 27% 4.6 2.3 0.9 18.2 3130 -5% -3% 365 22% 11% 2.2 8.7 5.2 14.0 IndusInd Bank Ltd. 2910 32% 2% 1383 50% -3% 4.1 2.2 1.1 14.7 2906 17% 15% -1194 PL PL 2.4 15.2 7.0 15.1 Yes Bank Ltd. 2186 -10% -4% -600 PL PL 2.7 7.4 4.4 16.3 1891 13% 6% 134 -115% 13% 2.8 19.9 7.9 13.0 1863 8% 4% 359 139% -2% 2.9 7.2 3.5 14.5 Syndicate Bank 1739 11% -3% 251 LP LP 3.1 11.5 6.0 13.8 Andhra Bank 1694 -2% 3% 70 LP 36% 3.2 16.9 6.0 13.6 IDBI Bank Ltd. 1631 25% 12% -3459 Loss Loss 2.3 29.4 6.0 12.0 Ltd. 1529 42% 8% 972 99% 39% 8.2 1.8 0.6 25.1 Oriental Bank Of Commerce 1456 15% 6% 126 24% 12% 2.6 12.5 5.9 14.0 IDFC First Bank Ltd. 1363 202% 16% -680 Loss Loss 3.4 2.6 1.2 14.7 Corporation Bank 1334 -8% 3% 130 26% 26% 3.0 15.4 5.6 12.3 Allahabad Bank 1276 11% -17% -2114 Loss PL 2.2 19.1 6.0 10.9 UCO Bank 1266 31% -5% -892 Loss Loss 2.5 21.9 7.3 11.4 1204 0% -7% -2254 Loss Loss 1.9 20.0 9.8 11.9 The Ltd. 1124 10% -3% 417 57% 8% 3.0 3.1 1.6 14.0 Bank Of 1073 7% 8% 115 325% 41% 2.8 16.9 5.5 11.8 RBL Bank Ltd. 869 46% 6% 54 -73% -80% 4.4 2.6 1.6 11.9 United Bank of India 773 75% 6% 124 LP 18% 2.9 15.5 7.9 14.8 AU Small Finance Bank Ltd. 452 41% 14% 172 88% -10% 5.3 2.0 1.1 17.9 Ltd. 412 3% -1% 194 15% 4% 4.0 3.4 1.9 15.5 Total 104856 19% 4% 6807 LP -48% Source: AceEquity, PL-Profit to Loss and LP=Loss to Profit

37 INSIGHT December 2019 Cement Sector the north region witnessing positive decline in realizations and negative The cement sector reported growth of +4-5% YoY, while demand operating leverage on lower volumes. in East and South regions fell 3-4% yet another strong quarter Commentaries from most companies YoY followed by declines in West and led by realisation growth and highlight an expectation of pickup Central. Government data suggests OPM expansion, while demand in H2FY20 as construction season volume growth remained sluggish environment remained muted begins after a prolonged monsoon during the quarter with cement (volume down 2% YoY) due to heavy which was followed by festive season production remaining broadly flat monsoon causing floods in several but at a slower pace on the back YoY in Q2FY20 at 77.4 MT. states in the country and a general of recent measures announced slowdown in the economy. While All cement companies saw significant by government to boost liquidity, volume growth was muted, average growth in their operating profit increase infrastructure spend. realization grew ~6% YoY and down on the back of a favourable pricing All-India demand growth is expected ~3% QoQ, primarily led by healthy scenario and softening of two major to be restricted to 2-3% for FY20E. prices in Gujarat, North and Central costs – power & fuel and freight. Although marginal, companies India. All-India average cement price Among large Caps, ACC, and Shree have started to increase prices in Q2FY20 grew ~4% YoY, led by ~11% cement reported EBITDA beat post the festive season however, YoY price increase in North India, while Ultratech came inline. Among sustainability of the same will have ~8% in West (primarily in Gujarat) midcaps JK Cement, JK Lakshmi, Birla to be monitored. Industry, however, and ~6% in Central India. Prices in Corp reported EBITDA beat while is likely to benefit from lower fuel South and East India were down by Orient, India Cement came lower and logistics costs, as energy prices ~1% YoY each. During Q2 Industry than estimates. Most companies saw (oil/pet coke/coal) have been on a demand declined 2-3% YoY, with only EBITDA/T decline QoQ owing to downtrend

Operating parameters Company Volume (m ton) Realization (INR/ton) EBITDA (INR/ton) Q2FY20 YoY (%) QoQ (%) Q2FY20 YoY (Rs.) QoQ Q2FY20 YoY (Rs.) QoQ (Rs.) (Rs.) UltraTech 17.8 13.2% -0.5% 5414 4.3% -5.0% 1079 38.2% -28.8% ACC 6.4 -1.7% -10.6% 5380 4.7% -4.6% 865 27.7% -20.5% 5.7 1.1% -6.6% 4,915 7.2% -1.3% 1,481 60.7% 0.1% Ambuja Cement 5.2 -4.2% -10.1% 4894 6.4% -2.3% 848 28.6% -29.7% Dalmia Bharat 4.5 8.2% -1.8% 5095 -1.5% -10.1% 1075 12.4% -27.2% Birla Corp 3.2 18.5% -12.1% 5084 -6.3% -1.8% 975 41.9% -7.7% India Cement 3.0 -1.1% -8.6% 4,828 9.1% 2.8% 795 56.7% 37.8% Ramco Cement 2.7 10.3% 0.9% 4,708 1.9% -5.7% 1,084 8.3% -18.6% J K Cements 2.3 14.4% -9.1% 5,701 2.7% -1.9% 1,320 76.4% 19.5% JK Lakshmi Cem. 2.1 -3.3% -11.6% 4,541 13.6% 1.6% 722 67.7% -1.0% Prism Cement 1.3 -5.5% -18.5% 4492 3.4% -3.6% 610 4.4% -45.0% Orient Cement 1.2 -17.3% -17.9% 4153 11.1% -8.8% 433 81.5% -56.3% Sanghi Industries 0.5 -27.1% -24.8% 4521 15.0% -0.8% 820 56.5% -25.1% Source: Company, News Article, Industry Report

Aggregate Volume Realisation & EBITDA per Ton 75 25 6000 20.3 70 20 5000 15.7 65 13.3 13.9 12.7 15 4000 5235 4932

11.2 4846 4813 4788 4751 4731 4678 10.1 4669 60 10 3000 55 2000

5 1,260 983 920

50 888 866

0.1 832 765 745 -1.1 731 1000 45 0 48 55 63 61 55 61 70 63 56 0 40 -5 Q2FY18 Q3FY18 Q4FY18 Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20 Q2FY18 Q3FY18 Q4FY18 Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20 Aggregate Vol (Mn Ton) Volume growth (% y-o-y) Realisation (Rs. / Ton) Aggregate EBITDA (Rs. / Ton) Source: Company, Industry Report Source: Company, Industry Report

December 2019 INSIGHT 38 Cement Companies

Company (Rs Cr) Net YoY QoQ Operating YoY QoQ OPM Net YoY QoQ NPM Sales % % Profit % % % Profit % % % Ultratech Cement Ltd. 9620 4% -5% 1918 35% -29% 20% 579 63% -52% 6% Ltd. 6078 1% -14% 999 24% -33% 16% 529 35% -36% 9% ACC Ltd. 3528 3% -15% 557 26% -29% 16% 300 45% -34% 8% Shree Cement Ltd. 3004 5% -9% 875 57% -8% 29% 313 391% -18% 10% Dalmia Bharat Ltd. 2236 7% -12% 471 35% -30% 21% 36 1100% -76% 2% The Ramco Cements Ltd. 1324 11% -5% 300 18% -17% 23% 170 44% -12% 13% JK Cement Ltd. 1318 12% -5% 256 45% -17% 19% 80 60% -40% 6% The India Cements Ltd. 1269 -11% -15% 150 -3% -38% 12% 6 LP -92% 0% JK Lakshmi Cement Ltd. 1012 6% -11% 178 84% -15% 18% 50 LP -7% 5% HIL Ltd. 586 42% -23% 49 -11% -48% 8% 31 160% -23% 5% Heidelberg Cement India Ltd. 522 7% -11% 123 5% -22% 24% 58 16% -26% 11% Orient Cement Ltd. 515 -8% -25% 54 50% -64% 10% -8 Loss PL -1% Star Cement Ltd. 382 6% -17% 64 -6% -43% 17% 45 19% -46% 12% Sagar Cements Ltd. 265 3% -23% 42 101% -46% 16% 5 LP -83% 2% Ramco Industries Ltd. 221 -3% -32% 23 -15% -49% 10% 28 11% 52% 13% Sanghi Industries Ltd. 205 -16% -25% 37 14% -44% 18% 6 217% -84% 3% Total 32086 4% -11% 6096 32% -28% 19% 2228 74% -42% 7% Source: AceEquity, PL-Profit to Loss and LP=Loss to Profit

FMCG Sector Food & Beverages companies like outperformed in consumer staples Consumer staples’ volume growth Nestle however witnessed pressure by recording double digit growth in decelerated slightly in Q2FY20 on on margins as milk and its derivatives domestic sales led by volumes and account of overall consumption saw sharp increase in prices. mix improvement. HUL, despite slowdown (average volume growth a high base delivered 5% volume During Q2FY20, sales performance down to 4.5% YoY from 5.9% YoY in growth. GCPL posted a sequential of majority of the FMCG companies Q1FY20). Rural growth has slowed improvement in volume growth to was broadly in line with expectations. down further is now growing at 7% in Q2FY20 from 5% in 1QFY20 Earnings growth during the quarter 0.5x its urban counterpart (down in its domestic business. was driven by corporate tax rate cut. from ~1.0x in Q1FY20 and 1.1x in however, negatively surprised with Within consumer companies, Asian Q4FY19). Consumer companies deterioration in volume growth to 1% Paints and Nestle were one of the indicated deterioration in demand YoY volume growth. ITC continued better performers in a challenging particularly in the rural markets to record modest volume growth environment, primarily in terms of due to unfavorable sentiment and (3%YoY). volume growth. posted liquidity issues in the trade channel. the most resilient performance Managements of consumer goods On the international front, companies recording high double digit growth companies are building hopes on having large presence in geographies in decorative volumes. Nestle India demand revival in another two to such as Africa and Middle East have three quarters banking on some of witnessed lower growth, while the initiatives undertaken by the companies having presence in South government to improve the liquidity East Asian countries did well during During Q2FY20, environment in domestic markets. the quarter. Benign input prices sales performance Delayed monsoon should help better and benefits of low price inventory agri production due to Rabi season of raw material aided consumer of majority of the because of retention of moisture goods companies to post better gross FMCG companies providing some relief to the rural margins on a YoY basis. Wheat and economy. Although volume growth Barley prices are up by 8.3% and 9.1% was broadly in line seems to have bottomed out for YoY respectively. SMP prices are firm with expectations. some segments and festival season is and are up 34% YoY. Palm oil prices showing improved trends. However, have bounced back and are up 14.8% Earnings growth sustaining the growth post festive YoY (11.9% QoQ). Mentha prices are during the quarter season will be the key factor to watch cooling down and are down 24.3% out for. Increasing food inflation YoY (1.2% QoQ). Majority of the was driven by and monsoons are positive for rural companies, primarily HPC (home and corporate tax rate demand, slowdown in real estate and personal care) and paint companies crop damage due to unseasonal rains witnessed gross margin expansion cut. is negative. due to benign raw material cost.

39 INSIGHT December 2019 FMCG Players Quarterly Volume Growth (%)

Companies Q2FY18 Q3FY18 Q4FY18 Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20 Asian Paints 9.0 7.5 10.5 12.0 11.0 24.0 10.0 20.0 16.0 Bajaj Consumer 5.1 5.2 5.9 8.7 0.1 7.0 5.5 4.7 0.0 8.0 8.0 13.0 15.0 15.0 19.0 10.5 12.0 13.0 Big Bazaar 13.8 13.1 11.0 10.1 9.4 10.1 13.6 8.1 NA Britannia 6.0 13.0 13.0 13.0 12.0 7.0 7.0 3.0 3.0 Colgate (0.9) 12.0 4.0 3.0 5.5 7.0 5.0 4.0 4.0 7.2 13.0 7.7 21.0 8.1 12.4 4.3 9.6 4.8 (Domestic) 10.0 6.0 9.0 18.0 (4.0) 3.5 2.0 0.1 1.0 FRL 10.2 10.4 6.0 3.6 5.9 5.9 11.2 8.3 4.6 Godrej Consumer (Domestic) 10.0 18.0 6.0 14.0 5.0 1.0 1.0 5.0 7.0 GSK Consumer 2.5 17.0 8.0 12.8 13.7 9.6 6.5 5.4 3.6 4.0 11.0 11.0 12.0 10.0 10.0 7.0 5.0 5.0 ITC (Cigarettes) (7.0) (5.0) (2.5) 1.5 6.0 7.5 7.5 3.0 2.5 Jubilant (Dominos) 5.5 17.8 26.5 26.5 20.5 14.6 6.0 4.1 4.9 Jyothy Labs 3.5 11.5 11.4 18.5 4.4 6.1 6.0 5.6 8.3 Kansai Nerolac 18.0 14.5 14.5 15.0 9.0 15.0 4.0 10.0 1.0 Marico - Domestic 8.0 9.4 1.0 12.4 6.0 5.0 8.0 6.0 1.0 Marico - Parachute 12.0 15.0 (5.0) 9.0 8.0 9.0 6.0 9.0 (1.0) Marico - Saffola 3.0 0.1 (1.0) 10.0 5.0 2.0 18.0 3.0 1.0 Marico - Value added hair oils 12.0 8.0 11.0 15.0 5.0 7.0 1.0 7.0 0.0 Nestle India 8.9 18.0 6.9 11.5 15.3 11.5 9.3 12.3 9.0 Pidilite 15.0 23.0 14.0 20.2 11.0 13.0 4.0 6.3 0.6 Titan: 49.0 6.0 6.0 (3.0) 24.0 34.0 15.0 6.0 (14.0) United breweries 11.0 12.0 24.0 12.0 17.0 16.0 7.5 5.0 6.0 - P&A 2.0 (3.0) 15.0 13.0 15.0 12.1 7.0 8.4 3.0 United Spirits (16.0) (14.2) (1.4) 1.1 - 3.8 1.0 6.0 1.0

Source: Company, News Article, Industry Report

December 2019 INSIGHT 40 FMCG Companies

Company (Rs Cr) Net YoY QoQ Operating YoY QoQ OPM Net YoY QoQ NPM Sales % % Profit % % % Profit % % % ITC Ltd. 12867 6% 2% 4842 9% -2% 38% 4174 37% 21% 32% Hindustan Unilever Ltd. 10105 6% -2% 2508 21% -8% 25% 1818 23% 1% 18% United Spirits Ltd. 7300 2% 0% 408 -5% -17% 6% 159 -28% -13% 2% United Breweries Ltd. 3589 8% -24% 192 -39% -42% 5% 115 -29% -30% 3% Nestle India Ltd. 3216 9% 7% 751 4% 8% 23% 595 33% 36% 19% Ltd. 3049 6% 13% 492 8% 25% 16% 403 33% 62% 13% Ltd. 2630 -1% 12% 572 18% 26% 22% 414 -28% 2% 16% . 2629 4% -8% 151 2% -48% 6% 306 371% 235% 12% Dabur India Ltd. 2212 4% -3% 490 9% 7% 22% 403 7% 11% 18% Ltd. 1851 17% 9% 120 -15% -16% 6% 102 5% 44% 6% Tata Global Beverages Ltd. 1834 4% -3% 235 41% -11% 13% 143 15% -4% 8% Marico Ltd. 1829 0% -16% 353 16% -23% 19% 252 17% -20% 14% Glaxosmithkline Consumer 1345 6% 13% 396 12% 41% 29% 345 25% 39% 26% Healthcare Ltd. Colgate-Palmolive (India) Ltd. 1222 5% 13% 323 -2% 8% 26% 244 24% 44% 20% Future Consumer Ltd. 1121 11% 7% 39 55% 9% 3% -5 PL Loss 0% Avanti Feeds Ltd. 1064 41% -3% 129 79% -6% 12% 127 133% 25% 12% Jubilant FoodWorks Ltd. 998 12% 5% 234 60% 7% 23% 73 -3% 2% 7% KRBL Ltd. 890 -29% -27% 166 -29% -30% 19% 113 -28% -17% 13% Procter & Gamble Hygiene & 852 8% 34% 182 -13% 181% 21% 137 -5% 125% 16% Health Care Ltd. Godfrey Phillips India Ltd. 751 13% -11% 142 18% -30% 19% 114 57% -4% 15% Emami Ltd. 660 5% 2% 193 3% 44% 29% 97 17% 143% 15% Jyothy Labs Ltd. 475 9% 12% 79 11% 20% 17% 54 16% 43% 11% Gillette India Ltd. 462 1% 0% 98 -8% 226% 21% 62 -5% 35% 13% Zydus Wellness Ltd. 326 136% -47% 20 -47% -83% 6% -12 PL -115% -4% Total 63277 6% -1% 13115 9% -3% 21% 10232 23% 17% 16%

Source: AceEquity, PL-Profit to Loss and LP=Loss to Profit

Information Technology Sector and it reported 5.7% YoY growth vs down to 10.9% in Q2FY20 from 18.2% Q2 turned out to be a better than 1.9% in Q1. Moreover, the growth in Q2FY19. rates in Infosys and HCL Tech were expected quarter with 4 of the top 5 Companies in the tier-1 pack companies in the tier-1 pack (barring aided by full quarter consolidation performed better than expectations TCS) reporting revenue numbers of Stater and IBM products business on margins too, notably Tech that exceeded expectations, despite respectively. Even while the two key Mahindra and HCL Tech. Barring growing macro noise. The top five sectors, BFSI and Retail reported TCS, which reported qoq margin Indian IT companies reported moderate growth, robust growth in decline, all others reported sequential constant currency (CC) revenue the other sectors, more than made margin improvement ranging from growth of 1.1-6% QoQ. up for this miss. Revenue growth 40 to 300 bps qoq. Re tailwind, beat estimates on all fronts due to moderated for companies with lower visa costs and normalisation strong performance in the enterprise exposure to capital markets and of salary hike of last quarter helped segment. Infosys, Wipro and HCL select European banks. In retail, margins. In the tier-II pack, while Tech reported broadly in-line results, the spending has been impacted Cyient missed expectations with while TCS missed estimates. Revenue by global trade war issues. In the just 40 bps margin improvement, growth on c/c YoY comparison was tier-2 pack, NIIT Tech continued its NIIT Tech reported adjusted margin robust for Infosys at 11.4% and 20.5% strong momentum with YoY growth improvement of 120bps qoq. While for HCLT, while it decelerated to rate of ~14%, but others like L&T L&T Infotech margins declined on single digit for TCS to 8.4% from Technology, Cyient and Hexaware the back of wage hike impact. 10.6% in Q1. YoY revenue growth missed expectations. YoY growth metrics improved for TechM too, rates of tier-II companies slowed Also, deal wins for the quarter

41 INSIGHT December 2019 continued to remain encouraging 5,700 in 1H, 8% YoY increase. Attrition on the back of softness on capital and companies maintained strong also moderated for most companies. markets and European banking commentary on the deal pipeline. side. In addition, challenges in The management of most IT TCS signed deals worth US$ 6.4bn European auto linger for some. companies continues to have a in Total Contract Value (TCV), up Companies also sounded cautious on cautious stance on the banking and 31% YoY. Infosys reported deal wins the manufacturing space, specially financial services segment, mainly with a TCV of US$ 2.85 bn, up 40% in Europe and retail due to global YoY. H1 TCV was up 77% yoy. HCLT’s trade war issues. On the positive deal TCV in Q2 was better than that side, the commentary is positive for in Q1. TechM reported TCV of ~US$ Q2 turned out to communication and life sciences. On 1.5 bn, up 171% YoY. TCV included the back of robust outlook and deal large AT&T deal signing of ~US$ 1 be a better than wins Infosys has raised the FY20 CC bn. Digital deals continued to form expected quarter revenue growth guidance to 9%-10% a major part of companies’ deal from 8.5%-10% and maintained its pipeline and strong growth in digital with 4 of the top EBIT margin band of 21-23%. HCLT business aided the overall growth 5 companies has guided for CC revenue growth rate of companies. Digital business of 15-17% (10-11% organic), and grew upwards of ~20% YoY and in the tier-1 maintained its EBIT Margin guidance contributes to more than ~35% of pack (barring to 18.5- 19.5% for FY20. Wipro 3QFY20 revenue for majority companies. guidance implies revenue growth TCS) reporting of 0.8-2.8% QoQ. Negative surprise Hiring momentum also picked up was seen in Hexaware (17-18% YoY pace with TCS adding 14,000 net new revenue numbers CC in CY20) & LTTS (10% USD hires over 12,000 in Q1. Hiring picked that exceeded for FY20). However, weakness in up in Infosys with 7,400+ net adds certain pockets of capital markets after a muted Q1 addition of just ~900 expectations, & European banks, auto and retail employees. Net headcount of tier-1 despite growing coupled with higher localisation, high pack increased by ~64,400 in 1HFY20 attrition & client specific challenges vs ~54,640 in 1HFY19, an 18% YoY macro noise. is expected to keep revenue growth & increase. Tier-II saw net hiring of margins in FY20E under check.

Quarterly Revenue of Tier-1 Companies (USD Mn.)

Q2FY18 Q3FY18 Q4FY18 Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20 Infosys 2,728.0 2,755.0 2,805.0 2,831.0 2,921.0 2,987.0 3,060.0 3,131.0 3,210.0 QoQ (%) 2.9 1.0 1.8 0.9 3.2 2.3 2.4 2.3 2.5 TCS 4,739.0 4,787.0 4,972.0 5,051.0 5,215.0 5,250.0 5,397.0 5,485.0 5,517.0 QoQ (%) 3.2 1.0 3.9 1.6 3.2 0.7 2.8 1.6 0.6 Wipro 2,013.5 2,013.0 2,062.0 2,026.5 2,041.2 2,046.5 2,075.5 2,038.8 2,048.9 QoQ (%) 2.1 - 2.4 -1.7 0.7 0.3 1.4 -1.8 0.5 HCL Tech 1,928.0 1,987.5 2,038.0 2,054.5 2,098.6 2,201.5 2,277.8 2,363.6 2,485.6 QoQ (%) 2.3 3.1 2.5 0.8 2.1 4.9 3.5 3.8 5.2 Tech M 1,179.2 1,209.1 1,244.3 1,224.1 1,218.2 1,260.8 1,267.5 1,247.1 1,287.2 QoQ (%) 3.6 2.5 2.9 -1.6 -0.5 3.5 0.5 -1.6 3.2 Total 12,587.7 12,751.6 13,121.3 13,187.1 13,494.0 13,745.8 14,077.8 14,265.5 14,548.7 QoQ (%) 2.9 1.3 2.9 0.5 2.3 1.9 2.4 1.3 2.0 Source: Company, News Article, Industry Report

Digital revenue (as a % of total revenue)

Company Q2FY18 Q3FY18 Q4FY18 Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20 Infosys 25.2 26.1 26.8 28.4 31.0 31.5 33.8 35.7 38.3 TCS 19.7 22.1 23.8 25.0 28.1 30.1 31.0 32.2 33.2 Wipro 24.1 25.1 26.7 28.0 31.3 33.2 35.0 37.4 39.6 HCL Tech NA NA NA 26.6 27.9 29.0 29.5 29.7 33.0 Tech M NA NA 27.0 27.0 31.0 33.0 34.1 36.0 39.0 L&T Infotech 32.0 33.0 33.0 34.0 37.0 37.0 38.0 38.9 40.3 Source: Company, News Article, Industry Report

December 2019 INSIGHT 42 Deal Wins (USD Mn.)

Company Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20 TCS 4,900 5,100 6,200 5,700 6400.0 Infosys 2,029 1,570 1,568 2,714 2847.0 Tech M 550 440 408 475 1490.0

Source: Company, News Article, Industry Report

Revenue Growth (%) Net Addition &Attrition Rates 7.0 16,000 25% 21.00% 6.0 14,000 19.40% 17.00% 16.90% 20% 6.0 12,000 5.0 5.2 10,000 4.0 11.60% 15% 4.1 8,000 3.0 10% 3.3 3.2 6,000 2.0 2.5 4,000 5% 1.0 2,000 0.0 0.6 1.1 0.5 7,457 14,097 6,603 3,223 5,749

0.0 0 0% TCS TCS Wipro Wipro Tech M Infosys Tech M Infosys HCL Tech HCL Tech CC QoQ (%) $ revenue QoQ (%) Net Addition (LHS) Attrition (RHS) Source: Company, News Article, Industry Report Source: Company, News Article, Industry Report

Information Technology Companies

Company (Rs Cr) Net YoY QoQ Operating YoY QoQ OPM Net YoY QoQ NPM Sales % % Profit % % % Profit % % % Tata Consultancy Services 38977 6% 2% 10225 -1% 2% 26% 8058 2% -1% 21% Ltd. Infosys Ltd. 22629 10% 4% 5639 5% 9% 25% 4037 -2% 6% 18% HCL Technologies Ltd. 17527 18% 7% 4259 23% 19% 24% 2711 7% 22% 15% Wipro Ltd. 15131 4% 2% 3096 30% 5% 20% 2562 36% 7% 17% Tech Mahindra Ltd. 9070 5% 5% 1501 -7% 14% 17% 1111 4% 16% 12% Larsen & Toubro Infotech 2571 10% 3% 466 -3% 2% 18% 360 -10% 1% 14% Ltd. Ltd. 2158 13% 5% 405 22% 8% 19% 273 1% 3% 13% Ltd. 1914 9% 4% 248 -8% 35% 13% 135 -35% 46% 7% Hexaware Technologies Ltd. 1481 22% 13% 238 18% 12% 16% 184 7% 21% 12% L&T Technology Services Ltd. 1402 11% 4% 283 24% 4% 20% 206 8% 1% 15% Oracle Financial Services 1162 -4% -9% 518 4% -16% 45% 359 2% -5% 31% Software Ltd. Cyient Ltd. 1159 -2% 6% 160 -1% 12% 14% 97 -23% 8% 8% Zensar Technologies Ltd. 1072 11% 0% 150 22% 3% 14% 83 -13% 9% 8% NIIT Technologies Ltd. 1039 14% 8% 192 17% 38% 18% 125 7% 39% 12% Firstsource Solutions Ltd. 985 3% 1% 132 0% -20% 13% 67 -27% -26% 7% Persistent Systems Ltd. 885 6% 6% 122 -15% 1% 14% 86 -2% 4% 10% Sonata Software Ltd. 703 19% -20% 90 22% 1% 13% 72 16% 8% 10% Tata Elxsi Ltd. 386 -4% 7% 70 -34% 1% 18% 50 -39% 2% 13% Intellect Design Arena Ltd. 327 -14% -5% -6 PL PL -2% -16 PL PL -5% Just Dial Ltd. 243 10% 1% 67 17% 5% 28% 77 59% 34% 32% InfibeamAvenues Ltd. 168 -41% -9% 40 46% 6% 24% 12 61% -11% 7% Total 120988 8% 3% 27897 7% 7% 23% 20650 4% 5% 17%

Source: AceEquity, PL-Profit to Loss and LP=Loss to Profit

43 INSIGHT December 2019 Metal & Mining Sector spreads, weak demand and planned (MT) while European operations Overall for Q2FY20, the metal sector’s summer shutdowns. However, post reported steel sales of 2.3 MT. operational performance was marked monsoons, the pick-up in economic Standalone Indian operations by subdued realisations both in activity and steps taken by the reported adjusted EBITDA/tonne of ferrous and non-ferrous sector. government to spur investment are Rs. 11200/tonne. European operations The subdued results were driven by expected to result in better H2FY20. reported EBITDA/tonne of US$10/ lower prices amid global uncertainty, tonne. JSW Steel reported earnings Most non-ferrous prices remained weak demand in India, and lower below estimates due to steeper than subdued during Q2FY20 with the volumes. Heavy monsoon, liquidity expected fall in domestic realisations average price of zinc at US$2353/ issues and the weakness in the and losses of overseas subsidiaries. tonne, down 7.3% YoY & 14.7% QoQ. automobile sector impacted domestic While Hindalco’s Indian operations Average price of copper was at steel demand registering a growth reported a mixed set of Q2FY20, its US$5808/tonne, down 5.1% YoY, 5.0% of mere 3.8% in Q2FY20 compared to subsidiary Novelis again surprised QoQ. Average aluminium prices were demand growth of 6.9% in Q1FY20. positively with a healthy operational at US$1765/tonne, down 14.1% YoY, This led EBITDA/tonne of domestic performance. For Q2FY20, Hindalco’s 1.6% QoQ. Lead was an exception steel companies to slide to multi- subsidiary Novelis reported an in metals as it reported average quarter lows. Tata Steel, JSW Steel, adjusted EBITDA of US$374 million prices at US$2029/tonne, a 7.8% QoQ Jindal Steel and SAIL reported ~Rs. (EBITDA/tonne at US$448/tonne). increase and 3.2% YoY decline. 1,200-2,400/t contraction in margins ’s earnings were in Q2FY20, with JSW Steel reporting For Q2FY20, Tata Steel reported a below estimates due to lower than the highest contraction. EBITDA/t steady operational performance. expected Lead/Silver volumes. at remained weak Standalone operations reported at USD10/t due to a fall in steel sales volume of 3.0 million tonnes

Volume trend Q2FY20 Q2FY20E Q2FY19 Q1FY20 YoY Growth % QoQ Growth % Shipments (mt) Tata Steel 3.1 3.1 3.2 3.1 -2.9 -0.4 Tata Steel BSL 1.0 0.9 1.1 0.9 -8.6 21.2 JSPL 1.3 1.3 1.3 1.4 3.9 -7 JSW Steel 3.6 3.7 4.0 3.8 -9.1 -4 SAIL 3.1 3.4 3.5 3.2 -9.5 -3.1 Vedanta Aluminium (kt) 481 482 489 480 -1.6 0.2 Iron ore 1.4 0.5 0.3 1.2 366.7 16.7 Zinc (kt) 57 66 21 46 171.4 23.9 Lead (kt) 11 7 8 11 37.5 - Hindalco Aluminium (kt) 328 329 326 320 0.6 2.5 Copper (kt) 82 85 79 82 3.8 - Hindustan Zinc Zinc (kt) 168 166 161 172 4.3 -2.4 Lead (kt) 44 46 49 48 -10.4 -8.5 Silver (tonnes) 135 154 161 155 -16.3 -13.1 Coal India 122 123 137 153 -10.9 -20.2 NMDC 5.8 5.8 6.6 8.7 -11.4 -33

EBITDA/ton trend Q2FY20 Q2FY20E Q2FY19 Q1FY20 YoY Growth % QoQ Growth % Tata Steel- standalone 11,264 9,819 18,856 12,764 -40.3 -11.8 Tata Steel BSL 4,988 6,077 10,320 9,101 -51.7 -45.2 JSPL- (Steel only) 8,769 7,885 10,477 10,808 -16.3 -18.9 JSW Steel- standalone 6,472 7,290 12,126 9,936 -46.6 -34.9 SAIL 1,374 2,982 6,796 4,869 -79.8 -71.8 Vedanta- Aluminium -28 52 144 64 -119.4 -143.8 Hindalco-Aluminium 229 229 326 202 -29.6 13.4

December 2019 INSIGHT 44 Steel EBITDA (Rs. / ton) Steel realizations (‘000 Rs. / ton)

Source: Industry Report Source: Industry Report

Metal & Mining Companies

Company (Rs Cr) Net YoY QoQ Operating YoY QoQ OPM Net YoY QoQ NPM Sales % % Profit % % % Profit % % % Tata Steel Ltd. 34579 -15% -4% 3820 -57% -29% 11% 3280 8% 405% 9% Ltd. 29657 -9% -1% 3631 -10% 5% 12% 973 -33% -8% 3% Vedanta Ltd. 21958 -3% 3% 4423 -14% -15% 20% 2731 44% 40% 12% Coal India Ltd. 20383 -7% -18% 3611 -16% -45% 18% 3524 14% -24% 17% JSW Steel Ltd. 17572 -18% -11% 2731 -44% -27% 16% 2551 22% 148% 15% Ltd. 14129 -16% -5% 1167 -51% -27% 8% -354 PL PL -3% Jindal Steel & Power Ltd. 8939 -10% -19% 1642 -26% -24% 18% -399 PL Loss -4% Hindustan Zinc Ltd. 4511 -6% -10% 2117 -9% -15% 47% 2081 15% 18% 46% National Aluminium Company 2364 -22% 13% 32 -96% -85% 1% -28 PL PL -1% Ltd. Ltd. 2263 5% 11% 292 50% 46% 13% 103 17% 1% 5% NMDC Ltd. 2242 -8% -31% 1058 -16% -43% 47% 702 10% -40% 31% APL Apollo Tubes Ltd. 1647 -3% -20% 72 -17% -42% 4% 60 124% 15% 4% Ratnamani Metals & Tubes 610 -16% 4% 117 0% 13% 19% 76 10% 22% 13% Ltd. Ltd. 288 -39% -5% 115 -13% 23% 40% 19 -45% -8% 7% MOIL Ltd. 253 -29% -10% 83 -43% -25% 33% 89 -16% -2% 35% Total 161395 -11% -7% 24911 -33% -25% 15% 15408 -2% 22% 10%

Source: AceEquity, PL-Profit to Loss and LP=Loss to Profit

Pharmaceuticals Sector reported sequential strong growth Torrent Pharma domestic slowed to After an in-line Q1, Q2FY20 further mainly due to product related 6%, mainly pricing-led, US was weak lent a degree of stability as results opportunities. Most of the other on regulatory concerns. Lupin’s US were largely in-line on the revenue geographies have reported decent weak after competition in gRanexa front and margins were ahead of growth on the back of volume and flat Solosec, domestic posted expectations for most companies. gains and new launches. About 846 good growth. Dr. Reddy’s one-offs Domestic business was strong for ANDAs are pending for approval on boosted performance in the US but both acute and chronic therapies aggregate basis; it has been stable delay in key products gNuvaring and mainly due to seasonality benefit and QoQ. Lupin/ Cadila/ Aurobindo gCopaxone led to dent in earnings. price hikes across portfolios while had maximum ANDAs pending for ’s US declined QoQ US business was also stable as the approval at the end of the quarter. due to non-recurrence of one-time benefit from lower price erosion and supply opportunity, specialty sales Cipla’s branded domestic formulation stable-to-increasing market share remained flat. ’s grew 13% YoY, domestic Gx resumed was set off by disappointing new high-teens sales growth precipitated after recalibration, US remained launch performance. Price erosion flat PAT growth while regulatory weak due to lack of launches and in the US market has stabilized in concerns and Sandoz FTC approval non-recurrence of gSensipar. the mid-single digits. API segment overhang hogged limelight.

45 INSIGHT December 2019 Aggregate US Sales (USD Bn) Aggregate Domestic Formulation Sales (Rs. Bn.) 2.0 25 150.0 30 20 145.0 1.9 25 15 140.0 1.8 20 10 135.0 1.7 5 130.0 15 0 125.0 1.6 10 -5 120.0 1.5 5 -10 115.0 1.4 -15 110.0 0 Q2FY18 Q3FY18 Q4FY18 Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20 Q2FY18 Q3FY18 Q4FY18 Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20

US sales (USD Bn) YoY growth (%) Domestic Formulation sales (Rs. Bn.) YoY growth (%) Source: Company, Industry Report Source: Company, Industry Report

US growth trend (%) Domestic growth trend (%) 20.0% 17.0% 17.4% 18.0% 15.9% 15.2% 16.0% 14.0% 11.5% 12.0% 10.2% 9.5% 9.4% 10.0% 8.0% 6.1% 6.0% 4.0% 2.0%

0.0%

IPCA Cipla Lupin Sun Cadila Indoco Torrent Pharma Pharma Glenmark Dr. Reddy's Source: Company, Industry Report Source: Company, Industry Report

Pharmaceuticals Companies Company (Rs Cr) Net YoY QoQ Operating YoY QoQ OPM Net YoY QoQ NPM Sales % % Profit % % % Profit % % % Sun Pharmaceutical Industries Ltd. 8123 17% -3% 1790 17% -7% 22% 1167 840% LP 14% Aurobindo Pharma Ltd. 5600 18% 3% 1140 16% -1% 20% 639 5% 1% 11% Dr. Reddys Laboratories Ltd. 4813 26% 25% 1064 40% 43% 22% 1095 116% 66% 23% Cipla Ltd. 4396 10% 10% 910 30% 1% 21% 480 31% 2% 11% Lupin Ltd. 4360 10% -1% 731 33% -15% 17% -124 PL PL -3% Piramal Enterprises Ltd. 3604 15% 3% 2254 36% 7% 63% 458 13% 21% 13% Ltd. 3367 14% -4% 626 -9% -1% 19% 83 -80% -74% 2% Ltd. 2815 9% 21% 450 2% 32% 16% 256 -38% 134% 9% Jubilant Life Sciences Ltd. 2266 0% 4% 468 4% 8% 21% 249 19% 35% 11% Ltd. 2264 18% 22% 453 24% 71% 20% 381 46% 103% 17% Ltd. 2005 6% -1% 541 14% 0% 27% 244 36% 13% 12% Ltd. 1572 19% 7% 403 19% -8% 26% 263 -30% 12% 17% Divis Laboratories Ltd. 1446 9% 24% 491 -6% 27% 34% 357 -12% 31% 25% Ltd. 1284 27% 19% 266 53% 34% 21% 195 63% 49% 15% Ltd. 1241 10% 31% 346 14% 54% 28% 250 25% 110% 20% Abbott India Ltd. 1055 8% 6% 204 5% 17% 19% 178 30% 52% 17% Glaxosmithkline Pharmaceuticals Ltd. 882 8% 12% 194 18% 17% 22% 503 399% 343% 57% Sanofi India Ltd. 779 5% 4% 176 -6% 11% 23% 127 6% 30% 16% Ltd. 643 18% 5% 178 7% 5% 28% 116 -7% 2% 18% Pfizer Ltd. 567 9% 4% 164 27% -1% 29% 154 61% 37% 27% Ltd. 486 -11% -1% 134 -39% -30% 28% 118 -35% -18% 24% Syngene International Ltd. 465 11% 10% 136 7% 14% 29% 128 64% 78% 28% Eris Lifesciences Ltd. 285 8% 4% 110 9% 5% 39% 93 8% 10% 33% Astrazeneca Pharma India Ltd. 208 29% 2% 34 127% -6% 16% 14 58% -33% 7% Total 54524 14% 6% 13260 18% 7% 24% 7425 35% 13% 14% Source: AceEquity, PL-Profit to Loss and LP=Loss to Profit

December 2019 INSIGHT 46 Telecom Sector respect to 4G capacity addition and and spectrum usage charges (SUC). Q2FY20 results were a mixed bag as expansion vis-à-vis peers. Accounting for the same, Bharti provided for Rs. 28,450 crore, which Vodafone Idea continued to struggle Q2FY20’s resilient operational included provision for licence fee but Airtel reported a steady quarter numbers were overshadowed by the (Rs. 16815 crore) and SUC (Rs. 11,635 with improvement in topline and Supreme Court’s verdict on AGR crore) payable. The company has EBITDA while Reliance Jio continues definition of including non-telecom also mentioned the total liability its momentum with growth in revenue for calculating license fees revenue and steady ARPU. Even provided for ~Rs. 34260 towards AGR on subscriber base, pressure was issue, which is their expected payout. largely seen in Vodafone Idea while Vodafone Idea provided Rs. 25678 new operators continued to lead the Q2FY20’s resilient crore towards license fee and SUC pack. Vodafone Idea continued to lose operational payable. The company has estimated subscriber with net loss of 1 crore AGR liability of Rs. 44150 crore, which customers during the quarter and numbers were includes license fee of Rs. 27610 crore resultant overall subscriber base at overshadowed and SUC of Rs. 16540 crore. While 37.3 crore while ARPU at Rs. 107 down they need to pay the outstanding 1% QoQ. Bharti Airtel subscriber base by the Supreme amount in 3 months’ time, the was largely stable with net addition Court’s verdict on companies are hopeful of some relief of 60 lakh subscribers and subscriber to be granted by the Government in base of the company now stands AGR definition of the form of waiver of interest and at 32.6 crore with ARPU of Rs. 128, including non- penalty, or extended payment period down 0.8% QoQ. Jio’s subscriber base after initial 2-year moratorium or was at 35.5 crore and net subscriber telecom revenue reduction of license fee (from 8% to addition was at 2.4 crore while ARPU for calculating 5%). In lieu of this unprecedented fell to Rs. 120 from Rs. 122 QoQ. The development and impending financial mobile broadband addition continues license fees and strain on their balance sheets, both to remain strong for RJIO and spectrum usage Bharti and Idea have announced Bharti Airtel, while Vodafone Idea that they will be taking price hikes still lags behind due to the ongoing charges (SUC). starting December 2019. network integration and the lag with

Total subscribers (crore) May-19 Market Jun-19 Market Jul-19 Market Aug-19 Market Sep-19 Market Share Share Share Share Share (%) (%) (%) (%) (%) Bharti 32.0 27.6 32.0 27.5 32.9 28.1 32.8 28 32.6 27.7 Vodafone Idea 38.8 33.4 38.3 32.9 38.0 32.5 37.5 32 37.3 31.7 RJIO 32.3 27.8 33.1 28.4 34.0 29.1 34.8 29.7 35.5 30.3 Industry 116.2 116.5 116.8 117.1 117.4

Operator-wise ARPU (Rs.)

Source: Company, News Article, Industry Report

Telecom Companies

Company (Rs Cr) Net YoY QoQ Operating YoY QoQ OPM Net YoY QoQ NPM Sales % % Profit % % % Profit % % % Bharti Airtel Ltd. 21131 5% 2% 8837 44% 7% 42% -23146 PL Loss -110% Vodafone Idea Ltd. 10844 42% -4% 3347 625% -8% 31% -51051 Loss Loss -471% Total 31975 15% 0% 12184 85% 2% 38% -74197 Loss Loss -232% Source: AceEquity, PL-Profit to Loss and LP=Loss to Profit

47 INSIGHT December 2019