ValueGuide November 2020

Intelligent Investing Regular Features Products & Services Trader’s Edge

Stock Idea Report Card PMS Technical View Stock Updates Earnings Guide MF Picks Currencies Viewpoints Advisory F&O Insights Sector Updates

For Private Circulation only www.sharekhan.com Come one, come all There’s something for everyone at Sharekhan Classroom

Whether you’re a trader, an investor or a complete newbie who has recently opened an account with Sharekhan, there’s a module designed especially for you.

Explore the module of your choice

I am a Beginner I am an Online Trader I am an Investor I am a Trader

3 Reasons to be a Classroom regular It’s completely online Attend the sessions from anywhere you want, all you need is an internet connection

Take your pick Choose from a variety of courses from customised categories

Learn it live Get a feel of the markets and how they work by attending the sessions during market hours

Register today

Registered Oce: Sharekhan Limited, 10th Floor, Beta Building, Lodha iThink Techno Campus, O€. JVLR, Opp. Kanjurmarg Railway Station, Kanjurmarg (East), Mumbai – 400042, Maharashtra. Tel: 022 - 61150000. Sharekhan Ltd.: SEBI Regn. Nos.: BSE / NSE / MSEI (CASH / F&O / CD) / MCX - Commodity: INZ000171337; DP: NSDL/CD- SL-IN-DP-365-2018; PMS: INP000005786; Mutual Fund: ARN 20669; Research Analyst: INH000006183; Compliance O¤cer: Mr. Joby John Meledan; Tel: 022-61150000; email id: [email protected]; For any queries or grievances kindly email [email protected] or contact: [email protected] Disclaimer: Client should read the Risk Disclosure Document issued by SEBI & relevant exchanges and the T&C on www.sharekhan.com; Investment in securities market are subject to market risks, read all the related documents carefully before investing. CONTENTS

From the Editor’s Desk EQUITY The markets began October FUNDAMENTALS on a tepid note amid rising uncertainty. A second wave REGULAR FEATURES of COVID-19 cases around Diwali Picks 08 Report Card 04 the world, fresh lockdowns Stock Update 16 Earnings Guide 56 and volatility in the run-up Sector Update 41 to the US elections, put the brakes on the market spirits. However, the spirits are TECHNICALS DERIVATIVES pretty high now. Fortunately, Nifty 46 View 47 it has been the culmination of global and domestic factors that have enabled Nifty to surpass the physiologically important 12,000 level. ... 07 ADVISORY DESK DERIVATIVES MID Trades 51 Derivatives Ideas 51 PMS DESK ProPrime–Prime Picks 50 CURRENCY FUNDAMENTALS USD-INR 48 GBP-INR 48 EUR-INR 48 JPY-INR 48

TECHNICALS MUTUAL FUND DESK 52 USD-INR 49 GBP-INR 49 EUR-INR 49 JPY-INR 49

Registered Office: Sharekhan Limited, 10th Floor, Beta Building, Lodha iThink Techno Campus, Off. JVLR, Opp. Kanjurmarg Railway Station, Kanjurmarg (East), Mumbai – 400042, Maharashtra. Tel: 022–61150000. Sharekhan Ltd.: SEBI Regn. Nos.: BSE / NSE / MSEI (CASH / F&O / CD) / MCX–Commodity: INZ000171337; DP: NSDL/CDSL-IN-DP-365-2018; PMS: INP000005786; Mutual Fund: ARN 20669; Research Analyst: INH000006183; For any complaints email at [email protected]. Disclaimer: Client should read the Risk Disclosure Document issued by SEBI & relevant exchanges and the T&C on www.sharekhan.com; Investment in securities market are subject to market risks, read all the related documents carefully before investing. Disclaimer: This document has been prepared by Sharekhan Ltd. (SHAREKHAN) and is intended for use only by the person or entity to which it is addressed to. This Document may contain confidential and/or privileged material and is not for any type of circulation and any review, retransmission, or any other use is strictly prohibited. This Document is subject to changes without prior notice. This document does not constitute an offer to sell or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. Though disseminated to all customers who are due to receive the same, not all customers may receive this report at the same time. SHAREKHAN will not treat recipients as customers by virtue of their receiving this report. The information contained herein is obtained from publicly available data or other sources believed to be reliable and SHAREKHAN has not independently verified the accuracy and completeness of the said data and hence it should not be relied upon as such. While we would endeavour to update the information herein on reasonable basis, SHAREKHAN, its subsidiaries and associated compa- nies, their directors and employees (“SHAREKHAN and affiliates”) are under no obligation to update or keep the information current. Also, there may be regulatory, compliance, or other reasons that may prevent SHAREKHAN and affiliates from doing so. This document is prepared for assistance only and is not intended to be and must not alone be taken as the basis for an investment decision. Recipients of this report should also be aware that past performance is not necessarily a guide to future performance and value of investments can go down as well. The user assumes the entire risk of any use made of this information. Each recipient of this document should make such investigations as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in this document (including the merits and risks involved), and should consult its own advisors to determine the merits and risks of such an investment. The investment discussed or views expressed may not be suitable for all investors. We do not undertake to advise youdisclaimer as to any change of our views. Affiliates of Sharekhan may have issued other reports that are inconsistent with and reach different conclusions from the information presented in this report. This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject SHAREKHAN and affiliates to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction. The analyst certifies that the analyst has not dealt or traded directly or indirectly in securities of the company and that all of the views expressed in this document accurately reflect his or her personal views about the subject company or companies and its or their securities and do not necessarily reflect those of SHAREKHAN. The analyst further certifies that neither he or its associates or his relatives has any direct or indirect financial interest nor have actual or beneficial ownership of 1% or more in the securities of the company at the end of the month immediately preceding the date of publication of the research report nor have any material conflict of interest nor has served as officer, director or employee or engaged in market making activity of the company. Further, the analyst has also not been a part of the team which has managed or co-managed the public offerings of the company and no part of the analyst’s compensation was, is or will be, directly or indirectly related to specific recommendations or views expressed in this document. Sharekhan Limited or its associates or analysts have not received any compensation for investment banking, merchant banking, brokerage services or any compensation or other benefits from the subject company or from third party in the past twelve months in connection with the research report. Either SHAREKHAN or its affiliates or its directors or employees / representatives / clients or their relatives may have position(s), make market, act as principal or engage in transactions of purchase or sell of securities, from time to time or may be materially interested in any of the securities or related securities referred to in this report and they may have used the information set forth herein before publication. SHAREKHAN may from time to time solicit from, or perform investment banking, or other services for, any company mentioned herein. Without limiting any of the foregoing, in no event shall SHAREKHAN, any of its affiliates or any third party involved in, or related to, computing or compiling the information have any liability for any damages of any kind. Compliance Officer: Mr. Joby John Meledan; Tel: 022-61150000; email id: [email protected]; For any queries or grievances kindly email [email protected] or contact: [email protected] JuneNovember 2017 2020 3 Sharekhan ValueGuide REPORT CARD EQUITY FUNDAMENTALS

STOCK IDEAS STANDING (AS ON NOVEMBER 03, 2020) CURRENT PRICE AS ON PRICE 52 WEEK ABSOLUTE PERFORMANCE RELATIVE TO SENSEX COMPANY RECO 03-NOV-2020 TARGET HIGH LOW 1M 3M 6M 12M 1M 3M 6M 12M Autos Amara Raja Batteries Buy 782 950 829 350 4.1 9.9 41.4 18.8 0.7 2.9 11.4 18.9 Apollo Tyres Buy 143 175 182 74 6.0 24.0 60.9 -23.0 2.6 16.1 26.7 -22.9 Ashok Leyland Buy 84 98 88 34 11.6 69.2 69.9 11.5 8.0 58.4 33.8 11.6 Bajaj Auto Buy 2916 3500 3315 1793 -1.3 -1.8 19.5 -9.2 -4.4 -8.1 -5.9 -9.1 Balkrishna Industries Buy 1350 1800 1515 678 -7.0 1.8 53.3 55.9 -9.9 -4.7 20.8 56.1 Bosch Buy 11826 15970 17137 7874 -11.7 -7.4 19.1 -25.0 -14.5 -13.3 -6.2 -24.9 Hero MotoCorp Buy 2940 3450 3394 1475 -6.0 8.6 46.9 11.2 -9.0 1.7 15.7 11.3 M&M Buy 596 750 666 246 -1.9 -1.1 66.9 1.6 -5.0 -7.5 31.5 1.7 Maruti Suzuki Buy 6915 8000 7566 4002 1.4 8.7 41.4 -6.8 -1.8 1.8 11.4 -6.7 Schaeffler India Buy 3648 4500 4950 3044 0.4 0.6 8.3 -13.8 -2.8 -5.8 -14.7 -13.7 Sundram Fasteners Buy 424 575 533 249 0.9 4.8 43.2 -9.0 -2.4 -1.9 12.8 -8.9 TVS Motor Buy 465 470 499 240 -1.7 16.6 49.6 2.2 -4.8 9.1 17.9 2.3 BSE Auto Index 17732 18980 10141 -1.4 6.5 42.6 -4.5 -4.5 -0.3 12.4 -4.4 Agri/Specialy Chemical Atul Limited Buy 6034 6725 7021 3257 0.1 16.4 30.3 41.8 -3.1 9.0 2.6 42.0 New Idea Coromandel International Buy 734 1000 838 444 -4.2 -6.0 29.0 58.2 -7.2 -12.0 1.6 58.4 PI Industries Buy 2229 2450 2359 974 10.5 21.7 47.3 61.0 7.0 13.9 16.0 61.1 SRF Limited Buy 4394 5830 5130 2492 6.4 15.3 20.7 49.9 3.0 7.9 -4.9 50.1 Sudarshan Chemicals Buy 442 567 538 286 -7.0 2.5 9.7 8.4 -10.0 -4.0 -13.6 8.5 UPL Buy 417 632 615 240 -17.7 -9.7 8.1 -29.8 -20.3 -15.4 -14.9 -29.7 Banks & Financials Axis Bank Buy 534 595 766 285 20.2 24.5 32.6 -28.0 16.4 16.6 4.5 -28.0 Bajaj Finance Buy 3491 3800 4923 1783 3.3 7.9 67.8 -15.2 0.0 1.0 32.2 -15.1 Bajaj Finserv Buy 5743 7500 10297 3986 -2.3 -6.8 20.5 -34.1 -5.4 -12.8 -5.1 -34.0 Bank of Baroda Hold 45 56 108 36 8.3 -3.2 -1.9 -55.8 4.8 -9.4 -22.7 -55.8 Bank of India Hold 39 45 80 30 -3.2 -19.2 16.9 -44.7 -6.3 -24.4 -7.9 -44.6 City Union Bank Buy 158 532 249 110 9.5 34.7 16.7 -25.7 6.0 26.1 -8.0 -25.6 Federal Bank Buy 54 62 97 36 5.3 2.3 21.5 -39.4 1.9 -4.2 -4.3 -39.4 HDFC Buy 2131 2400 2500 1473 19.4 19.8 23.6 -2.3 15.5 12.1 -2.6 -2.2 HDFC Bank Buy 1248 1500 1310 739 12.0 19.9 35.2 0.9 8.4 12.2 6.5 1.0 ICICI Bank Buy 444 525 552 269 19.1 26.5 31.3 -5.5 15.2 18.5 3.5 -5.5 Kotak Mahindra Bank Buy 1593 1730 1768 1000 21.2 20.3 24.7 1.5 17.3 12.7 -1.8 1.6 LIC Housing Finance Hold 302 345 486 186 10.0 17.2 16.7 -28.2 6.5 9.7 -8.1 -28.1 LT Finance Holding Buy 65 80 134 46 2.4 7.2 12.0 -32.9 -0.8 0.3 -11.8 -32.8 Max Financial Buy 602 750 645 280 -1.5 11.7 30.2 38.5 -4.7 4.6 2.5 38.7 Nippon Life India AMC Buy 275 345 453 201 1.5 4.6 16.2 -20.5 -1.7 -2.1 -8.5 -20.4 Punjab National Bank Hold 28 31 68 26 -1.8 -14.7 -8.1 -59.2 -4.9 -20.2 -27.6 -59.2 SBI Buy 205 280 351 150 8.5 6.8 14.5 -34.8 5.0 0.0 -9.8 -34.8 BSE Bank Index 29448 37193 18430 15.8 20.7 29.8 -13.9 12.1 13.0 2.3 -13.9 Insurance HDFC Life Buy 599 671 648 339 4.1 -2.5 25.0 1.0 0.8 -8.8 -1.6 1.1 ICICI Pru Life Buy 410 532 538 222 -2.5 -9.7 4.7 -19.8 -5.7 -15.4 -17.6 -19.7 ICICI Lombard Buy 1227 1510 1440 806 -2.2 -9.1 1.8 -7.2 -5.3 -14.9 -19.8 -7.1 Consumer Goods Asian Paints New Idea Buy 2155 2475 2247 1432 6.3 25.7 28.6 20.7 2.9 17.7 1.3 20.8 Britannia Buy 3406 4200 4015 2101 -11.0 -10.8 10.1 5.2 -13.9 -16.5 -13.2 5.3 Colgate-Palmolive (India) Buy 1489 1735 1611 1065 2.6 3.5 7.7 -4.1 -0.7 -3.1 -15.2 -4.0 Dabur India Buy 515 605 536 385 -0.9 1.7 10.0 12.1 -4.1 -4.8 -13.4 12.2 Emami Buy 380 440 407 141 8.4 58.7 101.5 15.4 4.9 48.6 58.8 15.5 Godrej Consumer Products Buy 669 850 772 425 -11.1 -3.4 27.2 -7.3 -14.0 -9.5 0.2 -7.2 Hindustan Unilever Buy 2059 2550 2614 1756 -2.5 -6.3 -1.1 -4.6 -5.6 -12.3 -22.1 -4.5 ITC Buy 170 250 266 135 0.5 -12.1 -2.3 -34.7 -2.7 -17.8 -23.0 -34.6

November 2020 4 Sharekhan ValueGuide EQUITY FUNDAMENTALS REPORT CARD

STOCK IDEAS STANDING (AS ON NOVEMBER 03, 2020) CURRENT PRICE AS ON PRICE 52 WEEK ABSOLUTE PERFORMANCE RELATIVE TO SENSEX COMPANY RECO 03-NOV-2020 TARGET HIGH LOW 1M 3M 6M 12M 1M 3M 6M 12M Jyothy Laboratories Buy 131 170 185 86 -11.7 -0.4 20.0 -25.8 -14.5 -6.7 -5.5 -25.7 Marico Buy 371 420 383 234 -1.6 0.9 30.4 1.5 -4.7 -5.6 2.7 1.6 Nestle India New Idea Buy 16795 19055 18301 12589 4.7 1.3 -3.8 13.3 1.4 -5.2 -24.2 13.5 New Idea Tata Consumer Products Ltd Buy 490 630 592 214 -2.7 8.8 46.2 59.8 -5.9 1.9 15.2 60.0 Zydus Wellness Buy 1762 2300 1950 1070 -3.8 3.4 34.9 4.2 -6.9 -3.2 6.3 4.3 BSE FMCG Index 10943 12141 8491 -1.8 -4.6 5.7 -10.5 -5.0 -10.7 -16.7 -10.5 IT / IT services Birlasoft Buy 181 222 211 48 -11.7 47.5 162.5 170.6 -14.5 38.1 106.8 170.8 HCL Technologies Buy 814 980 911 376 -1.1 17.6 58.2 -29.5 -4.3 10.1 24.6 -29.5 Infosys Buy 1062 1350 1185 511 1.3 11.8 57.6 49.8 -1.9 4.6 24.2 49.9 L&T Infotech Buy 2938 3500 3515 1208 13.6 20.0 90.0 77.0 10.0 12.3 49.7 77.2 New Idea L&T Technology services Buy 1634 2030 1879 995 2.8 7.6 37.3 8.9 -0.5 0.7 8.1 9.0 Mastek Limited Buy 870 1040 949 170 -3.0 42.3 273.2 158.0 -6.1 33.2 194.0 158.2 Persistent Systems Buy 1115 1450 1390 420 -16.0 17.3 140.6 86.4 -18.7 9.8 89.6 86.6 Tata Consultancy Services Buy 2633 3150 2885 1504 -2.7 17.1 36.5 20.0 -5.9 9.6 7.5 20.1 New Idea Tech Mahindra Buy 809 1000 888 470 -3.8 23.9 61.0 5.1 -6.9 16.0 26.8 5.2 Wipro Buy 336 450 382 160 0.5 19.4 76.5 30.9 -2.7 11.8 39.0 31.0 BSE IT Index 20889 22809 10937 -0.4 16.0 54.4 35.4 -3.6 8.6 21.6 35.5 Telecom and New Media Bharti Airtel Buy 455 710 612 351 7.1 -17.2 -14.6 20.2 3.7 -22.5 -32.7 20.3 Info Edge (India) Buy 3551 3650 3784 1580 1.8 11.0 42.0 40.5 -1.4 3.9 11.9 40.6 Capital goods / Power Bharat Electronics Buy 89 135 118 56 -7.0 -10.7 32.5 -25.1 -9.9 -16.4 4.4 -25.0 CESC Buy 567 825 786 366 -8.5 1.9 -10.0 -31.3 -11.5 -4.6 -29.1 -31.3 Cummins India Buy 446 606 653 282 -2.7 11.0 19.8 -18.3 -5.8 3.9 -5.6 -18.3 Dixon Technologies Buy 9513 11000 10600 2799 7.5 19.6 107.4 215.0 4.0 11.9 63.4 215.3 Finolex Cable Buy 273 360 430 165 -5.5 1.3 12.4 -28.9 -8.5 -5.2 -11.5 -28.8 Greaves Cotton Hold 67 75 148 66 -10.6 -17.7 -11.8 -51.0 -13.4 -23.0 -30.5 -51.0 Kalpataru Power Transmission Buy 253 325 476 170 4.9 9.9 15.5 -42.4 1.6 2.9 -9.0 -42.3 KEC International Buy 325 435 359 155 -5.5 19.5 62.5 18.7 -8.5 11.9 28.0 18.9 KEI Industries Buy 328 452 582 208 -4.5 -8.1 17.3 -42.2 -7.6 -14.0 -7.6 -42.1 NTPC Buy 86 123 125 74 1.8 0.2 -6.0 -28.8 -1.4 -6.2 -26.0 -28.7 Polycab India Buy 929 1060 1180 572 12.8 10.6 34.2 9.2 9.2 3.5 5.7 9.3 Ratnamani Metals and Tubes Buy 1249 1480 1384 716 -1.1 13.2 42.6 27.1 -4.2 6.0 12.3 27.3 Thermax Hold 755 865 1132 644 4.3 2.9 7.3 -34.6 1.0 -3.7 -15.5 -34.5 Triveni Turbine Buy 69 85 115 46 -3.0 7.8 0.3 -35.0 -6.1 1.0 -21.0 -34.9 V-Guard Industries Buy 171 211 255 149 2.0 4.6 0.1 -30.8 -1.2 -2.1 -21.1 -30.7 BSE Power Index 1742 2057 1275 4.9 13.3 20.4 -12.3 1.6 6.1 -5.2 -12.2 BSE Capital Goods Index 14362 18390 9499 3.7 11.4 24.0 -23.2 0.4 4.2 -2.3 -23.1 Infra / real estate JMC Projects Buy 47 62 114 30 -6.8 2.1 20.7 -55.1 -9.8 -4.5 -4.9 -55.1 Larsen & Toubro Buy 948 1300 1459 661 5.7 2.6 11.4 -34.7 2.3 -4.0 -12.2 -34.7 PNC Infratech Buy 170 213 215 81 5.6 27.9 40.5 -0.1 2.2 19.7 10.6 0.0 Sadbhav Engineering Buy 47 75 142 23 -12.5 5.2 -5.3 -65.9 -15.3 -1.5 -25.4 -65.8 CNX Infra Index 3110 3392 2073 0.8 -1.8 16.6 -6.0 -2.4 -8.1 -8.1 -5.9 BSE Real estate Index 1814 2565 1259 6.2 14.2 34.3 -12.2 2.8 6.9 5.8 -12.1 Oil & gas Bharat Petroleum Corporation Buy 351 495 550 252 -0.8 -14.1 1.0 -32.8 -4.0 -19.6 -20.5 -32.7 Gujarat Gas Buy 296 400 335 189 -5.0 -4.6 17.6 43.7 -8.1 -10.7 -7.3 43.9 Hindustan Petroleum Corporation Buy 186 260 303 155 5.7 -13.6 -10.6 -41.8 2.3 -19.1 -29.6 -41.7 Indian Oil CorporationNew Idea Buy 78 115 140 71 3.4 -10.3 -2.3 -43.8 0.1 -16.1 -23.0 -43.7 Mahanagar Gas Buy 814 1380 1247 666 -4.8 -16.0 -13.6 -16.8 -7.8 -21.4 -31.9 -16.7

November 2020 5 Sharekhan ValueGuide REPORT CARD EQUITY FUNDAMENTALS

STOCK IDEAS STANDING (AS ON NOVEMBER 03, 2020) CURRENT PRICE AS ON PRICE 52 WEEK ABSOLUTE PERFORMANCE RELATIVE TO SENSEX COMPANY RECO 03-NOV-2020 TARGET HIGH LOW 1M 3M 6M 12M 1M 3M 6M 12M Oil India Ltd Hold 84 100 173 66 -2.7 -10.7 -10.8 -50.9 -5.8 -16.4 -29.8 -50.8 Petronet LNG Buy 225 300 286 171 -0.5 -8.9 -2.6 -21.1 -3.7 -14.7 -23.3 -21.0 Reliance Ind Buy 1849 2400 2369 868 -16.4 -14.0 28.8 26.9 -19.0 -19.5 1.5 27.0 BSE Oil and gas Index 11804 15537 8724 -3.7 -10.1 1.8 -24.7 -6.7 -15.9 -19.8 -24.6 Pharmaceuticals Aurobindo Pharma Buy 770 975 968 281 -8.7 -10.9 17.9 61.2 -11.7 -16.6 -7.1 61.3 Biocon Buy 407 495 478 236 -11.3 -1.6 13.7 54.3 -14.1 -7.9 -10.4 54.5 Cadila Healthcare Buy 437 530 451 213 5.6 8.6 32.4 81.2 2.2 1.6 4.3 81.4 Cipla Buy 760 950 829 357 -2.5 6.4 24.1 62.4 -5.6 -0.4 -2.2 62.5 Divi's Labs Buy 3089 3800 3388 1627 -1.2 14.8 35.1 77.9 -4.4 7.5 6.4 78.1 Granules Buy 373 475 407 115 -1.9 23.3 130.2 202.0 -5.0 15.5 81.3 202.3 IPCA Lab Buy 2316 2365 2456 1005 7.8 16.5 43.5 130.6 4.4 9.1 13.1 130.9 Laurus Labs Buy 291 385 345 62 -1.4 -71.2 -40.4 -22.0 -4.5 -73.0 -53.1 -21.9 Lupin Hold 937 1040 1122 505 -9.8 -0.4 11.4 23.3 -12.7 -6.8 -12.2 23.4 Shilpa Medicare Buy 420 570 692 240 -23.4 -28.6 14.5 32.9 -25.8 -33.2 -9.8 33.0 Solara Active Pharma Sciences Buy 1104 1371 1310 367 3.8 29.6 100.9 165.4 0.5 21.3 58.3 165.7 Strides Pharma Sciences Buy 654 864 765 271 -9.8 39.8 49.7 62.0 -12.7 30.9 17.9 62.2 Sun Pharmaceutical Industries Buy 485 612 565 315 -7.3 -8.2 4.3 10.8 -10.2 -14.1 -17.8 10.9 Torrent Pharma Hold 2577 2871 3040 1619 -8.8 -8.9 8.5 42.4 -11.7 -14.7 -14.5 42.6 BSE Health Care Index 19344 20689 10948 -4.1 3.8 25.9 45.2 -7.2 -2.8 -0.8 45.4 Building materials APL Apollo Tubes Buy 3189 3750 3291 1025 10.3 59.7 143.9 111.6 6.7 49.5 92.1 111.8 Astral Poly Technik Buy 1125 1420 1312 748 -6.0 18.7 21.0 3.3 -9.0 11.1 -4.7 3.4 Century Plyboards (India) Buy 179 193 197 95 2.3 36.5 53.8 3.8 -0.9 27.7 21.1 3.9 Grasim New Idea Hold 791 ** 837 380 5.3 26.6 64.9 0.9 2.0 18.5 29.9 1.0 JK Lakshmi Cement Buy 282 372 389 180 7.7 -5.7 45.1 -8.3 4.2 -11.7 14.3 -8.2 Kajaria Ceramics New Idea Buy 574 675 599 295 5.1 41.2 61.8 3.7 1.8 32.2 27.5 3.8 Pidilite Industries Buy 1566 1875 1710 1186 8.3 16.6 10.2 11.9 4.8 9.2 -13.2 12.0 Shree Cement Buy 21894 23453 25341 15500 8.7 1.4 17.5 9.4 5.3 -5.1 -7.4 9.5 Supreme Industries Limited Buy 1466 1725 1500 791 7.0 12.9 48.4 25.4 3.6 5.7 16.9 25.5 The Ramco Cements Buy 828 955 883 457 10.9 20.6 61.1 2.9 7.3 12.8 26.9 3.0 UltraTech Cement Buy 4550 5500 4753 2913 12.4 13.7 35.9 7.4 8.8 6.4 7.1 7.5 Discretionary ABFRL Buy 152 191 281 96 15.3 24.7 39.8 -28.6 11.6 16.8 10.1 -28.6 Arvind@ Buy 33 43 54 19 -2.6 12.7 42.4 -39.4 -5.7 5.5 12.2 -39.4 Inox Leisure Buy 259 320 511 158 -9.9 9.7 25.4 -32.5 -12.7 2.6 -1.2 -32.4 Relaxo Footwear # Buy 685 825 830 493 1.7 11.8 12.9 21.4 -1.5 4.6 -11.1 21.5 The Indian Hotels Company Buy 96 118 158 62 -4.7 25.2 32.5 -36.8 -7.7 17.2 4.3 -36.7 Titan Company Limited Buy 1201 1350 1341 720 0.5 11.7 34.7 -7.6 -2.7 4.6 6.1 -7.5 Wonderla Holidays Hold 159 174 293 105 -4.0 15.6 25.0 -44.1 -7.1 8.3 -1.5 -44.0 Diversified / Miscellaneous Bajaj Holdings Buy 2301 3345 3949 1472 -5.3 -11.4 21.5 -37.9 -8.3 -17.0 -4.3 -37.8 Gateway Distriparks Buy 93 110 138 71 -3.9 11.1 7.3 2.8 -7.0 4.0 -15.5 2.9 JSW Steel Buy 314 375 337 133 8.6 37.9 92.1 25.8 5.1 29.1 51.4 25.9 Mahindra Logistics Buy 364 432 458 199 3.4 21.8 40.9 -1.4 0.1 14.1 11.0 -1.3 TCI Express Buy 791 950 950 491 -1.5 12.4 11.2 2.7 -4.6 5.2 -12.4 2.8 BSE500 Index 15395 16158 9758 1.8 6.8 27.7 -0.4 -1.5 0.0 0.6 -0.3 CNX500 Index 9696 10175 6152 1.9 6.8 27.6 -0.4 -1.4 0.0 0.5 -0.3 CNXMCAP Index 17255 18496 10750 0.9 10.3 33.7 2.3 -2.4 3.3 5.3 2.4

@ Reco price adjusted for demerger # Reco price adjusted for bonus ^ Reco price adjusted for stock split * Price targets will be reviewed after we get further clarity on operations from companies post Q4FY2020 result announcements.

November 2020 6 Sharekhan ValueGuide From the Editor’s Desk

In a festive mood

The markets began October on a tepid note amid rising uncertainty. A second wave of COVID-19 cases around the world, fresh lockdowns and volatility in the run-up to the US elections, put the brakes on the market spirits. However, the spirits are pretty high now. Fortunately, it has been the culmination of global and domestic factors that have enabled Nifty to surpass the physiologically important 12,000 level. Benchmark indices stand within striking distance of all- time high levels now.

Globally, sentiments are boosted by another gush of liquidity with a follow-up round of quantitative easing in the UK and easing of logjam on a further fiscal stimulus in the US post the elections. The results of the US polls itself, though unexpected, have turned out to be positive for equities. Though the Democrats (Joe Biden) have won the tight race to the White House, the Republicans have gained a majority in the Senate and block the unhealthy tax hikes on corporates and other socialist policies of the Democrats. Additional fiscal stimulus is likely to be a consensus move by both sides, while the US Federal Reserve maintains a dovish stance irrespective of the government at helm.

Meanwhile, Pfizer’s announcement that its COVID-19 vaccine would be able to prevent roughly 90% of people from contracting the disease has definitely come as a shot on in the arm for markets globally and in India too.

Domestically, macro-economic data points have been quite encouraging lately and the result season reflects better-than-expected recovery trend across various sectors. Apart from the continued healthy results from the pharma, IT Services, chemicals and certain consumer segments, the highlight of the result season is the easing of asset quality issues in leading banks and financial companies.

Macro data also looks promising, with manufacturing activity zooming to a 10-year high. The Nikkei Manufacturing PMI rose to 58.9 in October from 56.8 a month ago, the highest level since May 2010. The PMI for the Services sector has also moved to positive territory after a long time. Other indicators like GST collections of over Rs. 1 trillion, automobile sales, rising electricity and railway freight traffic indicate a healthy economic recovery. It remains to be seen if the growth figures are sustainable or are an aberration driven by pent-up demand, inventory built-up ahead of the festive season.

Certainly, all is not well. There are challenges in terms of huge government borrowings and global economy being supported by regular doses of liquidity injections. Most importantly, valuations are paunchy now even taking into account that worst is over and recovery could be stronger than earlier anticipated. However, there is still value in certain pockets of the markets. The phase of easy money is behind us and investors would need to carefully pick and choose companies keeping the risk in mind. You could refer to our carefully selected 12 quality companies showcased by our research team for investment in this Diwali season.

Happy Diwali and Season’s Greetings! From the Editor’s Desk From the Editor’s

November 2020 7 Sharekhan ValueGuide DIWALI PICKS 2020 EQUITY FUNDAMENTALS

Sharekhan Diwali Picks - Consistent track record

Return (%) Company Diwali Picks vs. Diwali Picks vs. Diwali Picks Nifty CNX Midcap Nifty CNX Midcap 2015 18 8.2 á 20.1 â

2016 38 14.7 á 15.8 á

2017 4 3 á -11 á

2018 8 10 -5.7 á

2019 6.6 2.9 á 8.9 â

á - Outperformance â - Underperformance

Sharekhan Diwali Picks 2020 (Samvat 2077)

EPS/BV (Rs.) PER /PBV (x) RoE (%) Company CMP (Rs.) FY21E FY22E FY21E FY22E FY21E FY22E

Amber Enterprises 2,197 15.7 42.5 - 51.7 3.9 8.7

APL Apollo 3,101 116.3 161.7 26.7 19.2 19.7 23.2

Asian Paints 2,219 28 35.5 79.1 62.6 24.8 27.3

Bharti Airtel 451 1.9 14.7 - 30.7 1.4 9.9

HDFC Life 587 117.7 140.1 5 4.2 17.2 17.5

Info Edge (India) 3,612 26.7 39.2 - 92.1 12.8 16.3

IPCA Labs 2,350 75.6 94.5 31.1 24.9 23.4 23.2

Kotak Mahindra Bank 1,571 327.2 364.4 4.8 4.3 9.7 10.6

L&T 935 53.5 67.9 17.5 13.8 10.2 11.3

SRF 4,446 164 211 27.1 21.1 17.9 19.3

Tata Consumer Products 491 9.6 11.9 51.1 41.4 7.3 8.1

Tech Mahindra 806 46.8 54 17.2 14.9 17.9 18.6

Note – BV and PV figures are for banks and financial services companies CMP is as on October 29, 2020 Source: Sharekhan estimates

November 2020 8 Sharekhan ValueGuide EQUITY FUNDAMENTALS DIWALI PICKS 2020

Amber Enterprises Industry: Capital Goods Reco Price: Rs. 2,197

Š Amber has emerged as a market leader (in volume terms ) in the Indian room air-conditioner (RAC) original 3R MATRIX + = - equipment manufacturing/ original design manufacturing (OEM/ODM) industry with 70.7% in RAC OEM/ODM industry and 24.4% market share in the overall RAC market in FY2020 RS ü Š Amber has strong growth tailwinds as RAC sales volumes in India are projected to clock a 13.7% CAGR over RQ ü FY2020-FY2025 while RAC OEM/ODM would record a 19.5% CAGR led by rising disposable incomes, urbanisation, lower RAC penetration (8%), extreme climatic conditions and rising construction activities RV ü Š The government recently banned imports of air conditioners with refrigerants which was amended from free to prohibited category providing opportunities for players like Amber in both completely-built units and component + Positive = Neutral - Negative sourcing Š With a unique scalable and sustainable business model, we expect Amber to clock a 32%/54%/87% CAGR in STOCK DATA Revenue/EBITDA/PAT over FY2021E-FY2023E led by enhanced capacity, increased product offerings and Market Cap (Rs. cr) 7,401 customer penetration coupled with healthy demand outlook for the electronic outsourcing industry. 52-wk High-Low (Rs.) 2,545/911 Š Key risks: Slowing demand in key categories, delay in launch of new products and increase in raw-material prices would act as key risks to earning estimates in the near to medium term. NSE Volumes 1.9 lakh BSE code: 540902 Valuation summary Rs cr Particulars FY19 FY20 FY21E FY22E FY23E NSE code: AMBER Revenue 2,752 3,963 3,196 4,275 5,562 Promoter’s share (%) 44 OPM (%) 7.7 7.8 5.5 6.9 8.1 Adjusted PAT 94 158 53 143 246 % y-o-y growth 50.3 69.1 -66.7 171.7 71.4 Adjusted EPS (Rs.) 29.8 50.4 15.7 42.5 72.9 STOCK PERFORMANCE P/E (x) 68.5 40.5 - 51.7 28.0 (%) 6m 12m P/B (x) 6.5 5.7 4.4 4.0 3.5 EV/EBIDTA (x) 31.0 21.4 39.1 23.3 15.7 Absolute 61 125 RoNW (%) 10.0 15.0 3.9 8.7 13.4 Relative to Sensex 24 124 RoCE (%) 13.5 15.8 6.0 10.4 15.3 Source: Sharekhan estimates

APL Apollo Tubes Industry: Metals Reco Price: Rs. 3,101

Š APL Apollo Tubes (APL) is India’s largest structural tubes manufacturer with a market share of 50% (up from 40% 3R MATRIX + = - in FY2020). The company has consistently expanded its capacity from 53,000 tonnes per annum (tpa) in FY2006 to 2.6 mtpa in FY2020 through the organic and inorganic route. The company has distribution network of 800 and RS ü over 50,000 retailers. RQ ü Š Domestic structural steel tubes demand is expected to clock a 10% CAGR over FY2021E-FY2024E. APL’s management is focused to expand market share would result in to 16% volume CAGR over FY2021E-FY2023E (well RV ü above the expectation of industry growth of 10%). + Positive = Neutral - Negative Š Rise in share of high-margin products, cost rationalisation and higher operating leverage would expand EBITDA margin sharply to Rs. 3,761/tonnes in FY2023E (versus Rs. 2,923/tonnes in FY2020). STOCK DATA Š A superior growth outlook (expect EBITDA/PAT to register 25%/34% EBITDA/PAT CAGR over FY2021E-FY2023E), Market Cap (Rs. cr) 7,730 robust RoE of 23-25%, and strong balance sheet make it a strong re-rating candidate. 52-wk High-Low (Rs.) 3,199/1,025 Š Key risks: Delayed recovery in demand from construction and infrastructure projects and a substantial rise in steel prices could hurt earnings outlook. Any rise in competition could impact volume growth. NSE Volumes 0.8 lakh BSE code: 533758 Valuation summary Rs cr Particulars FY19 FY20 FY21E FY22E FY23E NSE code: APLAPOLLO Revenue 7,152 7,723 7,819 9,284 11,077 Promoter’s share (%) 39.5 OPM (%) 5.5 6.2 6.9 7.4 7.6 Adjusted PAT 148 256 289 402 517 % y-o-y growth -6.3 72.7 13.0 39.0 28.5 Adjusted EPS (Rs.) 62.2 102.9 116.3 161.7 207.7 STOCK PERFORMANCE P/E (x) 50.4 30.5 26.7 19.2 15.1 (%) 6m 12m P/B (x) 8.1 5.7 4.9 4.1 3.4 EV/EBIDTA (x) 21.5 17.8 14.5 10.9 8.5 Absolute 117 110 RoNW (%) 16.5 22.1 19.7 23.2 24.7 Relative to Sensex 99 110 RoCE (%) 19.5 19.3 18.2 22.4 25.3 Source: Sharekhan estimates

November 2020 9 Sharekhan ValueGuide DIWALI PICKS 2020 EQUITY FUNDAMENTALS

Asian Paints Industry: Consumer goods Reco Price: Rs. 2,219

Š With a strong distribution reach of over 65,000 dealers/over 6,00,000 retailers across India, Asian Paints (APL) 3R MATRIX + = - is market leader in the decorative paints segment with a 55% market share. Decorative paints forms ~85% of the overall domestic market, which is makes it a consistent play among peers. RS ü

Š Consumer shifting to trusted brand in post-pandemic era; rapid urbanisation, sustained innovation with high RQ ü quality products and uptick in rural demand will help Asian paints to deliver consistent volume growth of high single digit to low double digit in the near term RV ü

Š Management’s vision is to become a top player in the home décor space. Through organic/ inorganic initiatives, + Positive = Neutral - Negative the company ventured into bathroom fittings and modular kitchen space. It has recently introduced products in home furnishing, furniture and lighting products to expand its portfolio. STOCK DATA Š With a sturdy balance sheet, consistent cash flows and cheery dividends, APL remains one of the better picks Market Cap (Rs. cr) 2,12,884 among consumer players with a ~14% earning CAGR over FY20-23E. The stock is trading at 52x its FY2023E. 52-wk High-Low (Rs.) 2,233/1,432 Š Key risks: Slowing demand in key categories, delay in launch of new products and increase in raw-material prices would act as a key risk to earning estimates in the near to medium term. NSE Volumes 26.6 lakh BSE code: 500820 Valuation summary Rs cr Particulars FY19 FY20 FY21E FY22E FY23E NSE code: ASIANPAINT Revenue 19,248 20,211 19,428 23,477 27,030 Promoter’s share (%) 57.8 OPM (%) 19.6 20.6 21.3 21.8 22.5 Adjusted PAT 2,214.0 2,779.0 2,690.0 3,403.0 4,090.0 % y-o-y growth 9.2 25.5 -3.2 26.5 20.2 Adjusted EPS (Rs.) 23.1 29.0 28.0 35.5 42.6 STOCK PERFORMANCE P/E (x) 96.2 76.6 79.1 62.6 52.1 (%) 6m 12m P/B (x) 22.5 21.0 18.4 16.0 13.5 EV/EBIDTA (x) 53.2 47.6 48.2 39.1 32.8 Absolute 25.5 1.9 RoNW (%) 24.8 28.4 24.8 27.3 28.1 Relative to Sensex 4 2.2 RoCE (%) 22.1 22.2 19.7 21.8 22.5 Source: Sharekhan estimates

Bharti Airtel Industry: Telecom services Reco Price: Rs. 451

Š Bharti Airtel is India’s second-largest telecom player, with a diversified strategic non-telecom business (homes, 3R MATRIX + = - enterprise and DTH), strong digital capabilities and robust network coverage. It has a stake in Bharti Infratel and also has a presence in Africa. RS ü

Š We believe Bharti is well-positioned given a favourable market structure (moving towards a two-player market) RQ ü and continued weakness in Vodafone Idea (losing market share). Bharti is expected to hugely benefit from consolidation in the sector, given increasing ARPU and a low smartphone mix. RV ü

Š Greater 2G to 4G upgrades, digital strategies, greater postpaid subscribers and bundling of other services (DTH + Positive = Neutral - Negative and broadband) would help Airtel drive ARPU. Digital strategies have been helping the company to acquire quality customers, increase wallet share, reduce churn rate and eliminate waste. STOCK DATA Š We remain positive on Bharti, considering its strong EBITDA performance, continued growth in 4G subscriber base Market Cap (Rs. cr) 2,45,937 and potential improvement in free cash flows. 52-wk High-Low (Rs.) 611/350 Š Key risks: Increasing competition could keep up the pressure on realisations. Any slowdown in data volume growth could affect revenue growth. NSE Volumes 231.1 lakh BSE code: 532454 Valuation summary Rs cr Particulars FY19 FY20 FY21E FY22E FY23E NSE code: BHARTIARTL Revenue 80,780 87,539 1,03,582 1,18,150 1,26,219 Promoter’s share (%) 56.2 OPM (%) 32 41.7 45.8 48.5 52.8 Adjusted PAT -3,977 -3,630 1,048 8,008 12,898 % y-o-y growth NM NM NM NM 61.1 Adjusted EPS (Rs.) -10.0 -7.0 1.9 14.7 23.7 STOCK PERFORMANCE P/E (x) NM NM - 30.7 19.1 (%) 6m 12m P/B (x) 3.4 3.2 3.9 2.7 1.5 EV/EBIDTA (x) 13.9 9.2 7.8 6.0 4.9 Absolute -7.1 25.4 RoNW (%) NM NM 1.4 9.9 9.9 Relative to Sensex -31.4 25.2 RoCE (%) 2.4 4.5 8.6 12.2 13.2 Source: Sharekhan estimates

November 2020 10 Sharekhan ValueGuide EQUITY FUNDAMENTALS DIWALI PICKS 2020

HDFC Life Industry: Bank & Finance Reco Price: Rs. 587

Š HDFC Life (HLIC) is the leading life insurance player, promoted by HDFC Ltd (50.14% stake). HLIC offers a wide and 3R MATRIX + = - balanced range of individual and group insurance solutions for protection, pension, savings, investment etc. HLIC has a pan-India reach with over 400 branches and stable partnerships with new age tie-ups and partnerships, RS ü including with HDFC Bank. RQ ü Š The enviable combination of brand + distribution supplemented by product and technological innovations, make it one of best Insurance franchises in India. RV ü

Š The insurance sector has a huge growth potential in India, due to factors like a large protection gap, the expanding + Positive = Neutral - Negative per capita income etc. Capable players like HLIC, armed with right mix of products, services and distribution mix are likely to gain disproportionally from it. STOCK DATA Š The stock trades at a valuation of 4.1x/3.4x its FY2022E/FY2023E EVPS. A well-diversified product bouquet (no segment contributing more than 30% of the APE), strong brand image and strong metrics make HLIC attractive. Market Cap (Rs. cr) 1,18,371 Š Key risks: A slowdown in business operations and higher slippages/bond downgrades due to economic weakness 52-wk High-Low (Rs.) 648/339 may impact earnings outlook. NSE Volumes 40.6 lakh

BSE code: 540777

Valuation summary Rs cr NSE code: HDFCLIFE Particulars FY19 FY20 FY21E FY22E FY23E Promoter’s share (%) 60.4 EV 18,301 20,650 23,748 28,260 33,629 New Business Margins (%) 24.6 25.9 23 24 24 Net worth 5,660 6,992 7,981 9,129 10,335 PAT 1,278 1,295 1,373 1,594 1,676 STOCK PERFORMANCE P/BV (x) 20.4 16.5 14.4 12.6 11.1 (%) 6m 12m P/EPS (x) 90.2 89 83.9 72.3 68.7 P/EV (x) 6.3 5.6 5 4.2 3.4 Absolute 12.9 -6.1 ROE (%) 22.6 18.5 17.2 17.5 16.2 Relative to Sensex -14.8 -9.9 ROA (%) 1 1 0.9 0.9 0.8 Source: Sharekhan estimates

Info Edge Industry: Internet & New media Reco Price: Rs. 3,612

Š Info Edge is India’s largest listed Internet technology player, operating in online recruitment, real estate, matrimony 3R MATRIX + = - and other businesses. It also invests in start-ups and has been successfully aiding growth of companies such as Zomato and Policybazaar. RS ü

Š The COVID-19 outbreak has created a shift in consumer behaviour, which would drive significant online adoption RQ ü across categories (insurance, food delivery, e-commerce, gaming, online education and tele-medicines). Despite a slowdown, business momentum at Zomato and PolicyBazaar remains stable. RV ü

Š With its dominant market share and strong cash-flow generation capabilities, any slowdown in the economy would + Positive = Neutral - Negative provide the company an opportunity to gain market share among close peers. STOCK DATA Š With the recent QIP, Info Edge has a cash balance of Rs. 33 billion that would be largely used for big-ticket M&As in one of its operating businesses. Market Cap (Rs. cr) 46,439

Š Key risks: Intense competition from both international and domestic players in the recruitment business could 52-wk High-Low (Rs.) 3,784/1,580 affect the growth trajectory and margins of the recruitment business. NSE Volumes 4.8 lakh BSE code: 532777 Valuation summary Rs cr Particulars FY19 FY20 FY21E FY22E FY23E NSE code: NAUKRI Revenue 1,098 1,272 1,162 1,566 1,847 Promoter’s share (%) 38.5 OPM (%) 31.1 31.6 37.4 40.9 42.2 Adjusted PAT 315 328 343 504 607 % y-o-y growth 15.1 4.4 4.4 46.8 20.4 Adjusted EPS (Rs.) 25.6 26.7 26.7 39.2 47.2 STOCK PERFORMANCE P/E (x) 140.7 134.8 134.9 92.1 76.3 (%) 6m 12m P/B (x) 18.9 18.1 17.2 14.9 12.8 EV/EBIDTA (x) 127.5 107.7 105.6 71.6 58.6 Absolute 45.7 45.3 RoNW (%) 13.6 13.5 12.8 16.3 16.8 Relative to Sensex 23.7 45.6 RoCE (%) 18.6 17.9 17 21.5 22.3 Source: Sharekhan estimates

November 2020 11 Sharekhan ValueGuide DIWALI PICKS 2020 EQUITY FUNDAMENTALS

Ipca Labs Industry: Pharmaceuticals Reco Price: Rs. 2,350

Š Ipca Labs (Ipca) is a fully-integrated Indian pharmaceutical company, manufacturing more than 350 formulations 3R MATRIX + = - and 80 APIs for various therapeutic segments. Ipca is a therapy leader in India in the anti-malarial segment. The company has consistent financial record with revenues and PAT clocking a 13% and 60% CAGR over FY2016-2020 RS ü (OPM improved remarkably from 11.5% in FY2016 to 19% in FY2020). RQ ü Š Ipca sees a double-digit growth trajectory to sustain for both API and Formulations segment. Ipca is witnessing strong demand traction in the API segment and is implementing de-bottlenecking to ease out the capacity RV ü constraints, which would drive growth over the next two years. + Positive = Neutral - Negative Š The formulations business to is expected to grow at a healthy pace. The domestic formulations segment too is expected to improve. IPCA sees margin expansion in FY2021, to be driven by favorable mix, operating leverage STOCK DATA and lower costs. Market Cap (Rs. cr) 29,798 Š Strong revenue growth and margin expansion, almost near-nil remedial costs, a sturdy balance sheet and healthy return ratios augur well for Ipca. Sales and PAT are expected to grow by 18% /41% CAGR for FY2020-FY2022. 52-wk High-Low (Rs.) 2,455/967 Š Key risks: Regulatory risk including delay in regulatory clearance of Pithampur and Pipariya plants NSE Volumes 3.6 lakh BSE code: 524494 Valuation summary Rs cr Particulars FY19 FY20 FY21E FY22E FY23E NSE code: IPCALAB Revenue 3,284 3,773 4,649 5,473 6,452 Promoter’s share (%) 46.07 OPM (%) 13.8 18.3 19.5 24.2 25.2 Adjusted PAT 239 442 603 953 1192 % y-o-y growth 23.1 84.7 36.5 58.0 25.0 Adjusted EPS (Rs.) 19.0 35.1 47.8 75.6 94.5 STOCK PERFORMANCE P/E (x) 123.8 67.0 49.1 31.1 24.9 (%) 6m 12m P/B (x) 11.0 9.5 8.2 6.5 5.1 EV/EBIDTA (x) 66.4 43.3 33.2 22.4 17.7 Absolute 47.7 139 RoNW (%) 9.5 15.3 18.1 23.4 23.2 Relative to Sensex 26.2 138 RoCE (%) 9.1 15.4 18.6 24.6 25.3 Source: Sharekhan estimates

Kotak Mahindra Bank Industry: Bank & Finance Reco Price: Rs. 1,571

Š Kotak Mahindra Bank is one of India’s leading financial services conglomerates. The group has a wide distribution 3R MATRIX + = - network through branches and franchisees across India and offers a wide range of financial services including commercial banking, stock broking, mutual funds, insurance, investment banking, etc. RS ü

Š Improving liability profile augurs well for long-term sustainability; CASA ratio of ~57% (highest among peers) RQ ü indicates the strength of bank’s liability franchise. Going forward, bank is to shift focus on growth which augurs well. RV ü

Š KMB has been able to consistently grow and gain market share in advances as well as its deposits in last 5 years. + Positive = Neutral - Negative This is despite maintaining a cautious stance (a key differentiator) of the bank’s quality of management which has been able to side-step and calibrate its sector wise growth much ahead of the industry. STOCK DATA

Š KMB’s strong operating metrics, prudent and agile leadership team, well capitalized balance sheet, as well as the Market Cap (Rs. cr) 3,10,973 quality of its subsidiaries (formidable players in own segments) provide long-term value. The recent capital issue, 52-wk High-Low (Rs.) 1,740/1,000 provides the bank with wherewithal to pursue inorganic opportunities as well. NSE Volumes 50.4 lakh

Š Key risks: A prolonged lockdown and consequent rise in NPAs can pose risks to profitability BSE code: 500247

Valuation summary Rs cr NSE code: KOTAKBANK Particulars FY19 FY20 FY21E FY22E FY23E Promoter’s share (%) 26.05 NII 11,259 13,500 13,966 15,008 16,511 PPoP 8,348 10,021 10,335 11,369 12,792 PAT 4,865 5,947 6,064 7,388 8,133 EPS (Rs) 25.5 30.9 31.8 38.8 42.7 STOCK PERFORMANCE BVPS (Rs) 224.7 256.2 327.2 364.4 405.4 (%) 6m 12m PE (x) 61.6 50.9 49.3 40.5 36.8 P/B (x) 7.0 6.1 4.8 4.3 3.9 Absolute 8.6 -11.1 RoE (%) 11.3 12.1 9.7 10.6 10.5 Relative to Sensex -17.9 -13.4 RoA (%) 1.6 1.7 1.4 1.5 1.5 Source: Sharekhan estimates

November 2020 12 Sharekhan ValueGuide EQUITY FUNDAMENTALS DIWALI PICKS 2020

Larsen & Toubro Industry: Capital Goods Reco Price: Rs. 935

Š Larsen and Toubro (L&T) is a best-in-class EPC company, and dominates the domestic EPC market along with 3R MATRIX + = - consistent revenue growth, large room to grow in absolute revenue terms, business diversification, and operating profitability and an early beneficiary to benefit from the revival in the capex cycle RS ü

Š The company remains at the forefront to reap benefits from the recently-announced Atma Nirbhar Bharat scheme RQ ü from the government with its diversified businesses across sectors like defence, infrastructure (roads, railways, metros, DRC), heavy engineering, IT (digitalisation). RV ü

Š Order inflow pipeline remains robust and provides healthy visibility for bagging orders ahead. It also remains + Positive = Neutral - Negative focussed to divest its non-core assets which will enhance the balance sheet and aid the RoCE expansion further. Š L&T is better poised to ride any uncertainties owing to multiple levers such as strong business model, diversified STOCK DATA order book, and healthy balance sheet. We expect L&T revenues and PAT to clock a CAGR of 11% and 22% over Market Cap (Rs. cr) 1,31,221 CY2021-23E. 52-wk High-Low (Rs.) 1,491/661 Š Key risks: Slowdown in domestic macro-economic environment or weakness in international capital investment can affect business outlook and earnings growth. NSE Volumes 56.9 lakh BSE code: 500150 Valuation summary Rs cr Particulars FY19 FY20 FY21E FY22E FY23E NSE code: LT Revenue 1,35,220 1,45,452 1,43,897 1,62,247 1,76,053 Promoter’s share (%) 0 OPM (%) 11.3 11.2 11 11.5 11.8 Adjusted PAT 8,905 9,549 7,502 9,519 11,257 % y-o-y growth 22.9 7.2 -21.4 26.9 18.3 Adjusted EPS (Rs.) 63.4 68.0 53.5 67.9 80.3 STOCK PERFORMANCE P/E (x) 14.7 13.8 17.5 13.8 11.6 (%) 6m 12m P/B (x) 2.1 2.0 1.6 1.5 1.4 EV/EBIDTA (x) 13.0 12.7 13.1 11.1 10.2 Absolute -17 -27 RoNW (%) 14.2 13.8 10.2 11.3 12.4 Relative to Sensex -20 -32 RoCE (%) 7.5 7.3 6.6 7.7 8.4 Source: Sharekhan estimates

SRF Limited Industry: Speciality Chemm Reco Price: Rs. 4,446

Š SRF is chemical-based multi-business entity that manufactures industrial and specialty intermediates. The 3R MATRIX + = - company’s diversified businesses cover Technical Textiles, Chemicals (fluorochemicals and specialty chemicals) and packaging films. The company has 11 manufacturing plants in India, two in Thailand, one in South Africa and RS ü an upcoming facility in Hungary. RQ ü Š The company is expected to deliver healthy growth in the chemical business led by the opportunities created by the China Plus one strategy adopted by global players coupled with government thrust on Aatma Nirbhar Bharat RV ü initiative so as to reduce import dependence and be self-reliant. = - Š SRF’s focus to expand share of speciality chemicals and add niche products in the chemicals segment and value- + Positive Neutral Negative added products In packaging film business to bodes well for margins. Š Calibrated expansion in the right segments (chemicals and packaging films) will help the company deliver a STOCK DATA healthy revenue/PAT CAGR of 16%/22.6% over FY2020-23E. The company’s balance sheet is likely to strengthen Market Cap (Rs. cr) 26,339 further despite expansion plans as strong cash-flow generation to support capex. 52-wk High-Low (Rs.) 4,550/2,492 Š Key risks: Slowdown in off-take from user industries and concerns over product price correction can impact revenue growth. Input cost price volatility might hit margins. NSE Volumes 2.7 lakh BSE code: 503806 Valuation summary Rs cr Particulars FY19 FY20 FY21E FY22E FY23E NSE code: SRF Revenue 7,100 7,209 7,943 9,821 11,263 Promoter’s share (%) 52.3 OPM (%) 18.3 20.2 22.3 22.4 22.5 Adjusted PAT 614 812 960 1,234 1,495 % y-o-y growth 33.2 32.1 18.2 28.6 21.1 Adjusted EPS (Rs.) 105.0 138.8 164.0 211.0 255.5 STOCK PERFORMANCE P/E (x) 42.3 32.0 27.1 21.1 17.4 (%) 6m 12m P/B (x) 6.3 5.3 4.5 3.7 3.1 EV/EBIDTA (x) 22.4 19.9 16.3 12.9 11.2 Absolute 20 59 RoNW (%) 3.4 1.7 11.9 13.0 14.6 Relative to Sensex 2 60 RoCE (%) 2.7 8.5 10.8 12.9 14.7 Source: Sharekhan estimates

November 2020 13 Sharekhan ValueGuide DIWALI PICKS 2020 EQUITY FUNDAMENTALS

Tata Consumer Products Industry: Consumer Goods Reco Price: Rs. 491

Š Tata Consumer Products (TCPL) is one of largest player in the branded tea space in domestic and international 3R MATRIX + = - markets such as Europe and Canada. With the merger of Tata Chemicals’ consumer business, it has become a household name in India with strong portfolio of brands in branded tea, salt and pulses. RS ü Š The merger of Tata Chemical’s consumer business brings a lot of synergistic benefits in the form of expansion of product portfolio, scale-up in distribution reach and rise in contribution of domestic business to 60%. These RQ ü synergies provide a large scope to achieve sustainable growth in the coming years (along with margin expansion RV ü of 2-3% over the next 2-3 years). Š In-the-Kitchen segment is worth Rs. 21 lakh crore in India. Post the COVID-19 outbreak, consumers increasingly + Positive = Neutral - Negative preferred home cooked food and are shifting to branded products, which augurs well for TCPL from long term perspective. STOCK DATA Š The integration of TCL’s consumer business with TCPL heightens sustainable revenue and PAT growth visibility owing to multiple growth levers. We expect consolidated revenue and PAT to grow at CAGR of 12% and 20% over Market Cap (Rs. cr) 45,262 FY2020-23E. 52-wk High-Low (Rs.) 592/214 Š Key risks: Slowdown in the domestic consumption; heightened competition from new players and spike in the key input prices would act as a key risk to our earnings estimates in the near term. NSE Volumes 50.0 lakh BSE code: 500800 Valuation summary Rs cr Particulars FY19 FY20 FY21E FY22E FY23E NSE code: TATACONSUM Revenue 7,252 9,637 10,758 11,910 13,195 Promoter’s share (%) 34.7 OPM (%) 10.8 13.4 14.8 15.1 15.5 Adjusted PAT 479 661 887 1,093 1,264 % y-o-y growth -16.0 37.9 34.2 23.2 15.7 Adjusted EPS (Rs.) 5.2 7.2 9.6 11.9 13.7 STOCK PERFORMANCE P/E (x) 64.7 68.5 51.1 41.4 35.8 (%) 6m 12m P/B (x) 4.2 3.3 3.1 3.0 2.9 EV/EBIDTA (x) 38.0 33.6 26.9 23.4 20.2 Absolute 38.7 72.4 RoNW (%) 6.9 7.0 7.3 8.1 8.8 Relative to Sensex 17.3 72.6 RoCE (%) 8.8 9.0 8.8 10.0 11.0 Source: Sharekhan estimates * Estimates are including financials of Tata Chemicals’ consumer biz

Tech Mahindra Industry: IT & ITeS Reco Price: Rs. 806

Š Tech Mahindra (TechM) is India’s fifth-largest IT outsourcing company. Over the past decade, Tech Mahindra has 3R MATRIX + = - successfully transformed from a telecom-focused player to a company with a wide portfolio of differentiated offerings in the enterprise segment. RS ü

Š TechM is well-placed to capitalise opportunities from three mega-trends i.e 5G, connected devices and telecom- RQ ü media convergence, given its early investments in network capabilities, investments in IPs, platforms and partnerships to develop an ecosystem play. RV ü

Š Management expects double-digit growth over next couple of years on the back of anticipated growth in enterprise + Positive = Neutral - Negative segment, potential 5G opportunities and strong deal wins Š We prefer TechM on the back of anticipated improvement in growth in enterprise segment, 5G opportunity and STOCK DATA scope for a rise in margins. We expect TechM’s USD revenue/earnings to clock a CAGR of 10.5%/15.5% over Market Cap (Rs. cr) 77,883 FY2021-FY23E. 52-wk High-Low (Rs.) 887/470 Š Key risks: Any hostile development with respect to the current visa regime would affect employee expenses. Further, a delay in pick-up of 5G-related spends would affect revenue estimates. NSE Volumes 55.5 lakh BSE code: 532755 Valuation summary Rs cr Particulars FY19 FY20 FY21E FY22E FY23E NSE code: TECHM Revenue 34,742 36,867 38,103 42,231 46,559 Promoter’s share (%) 35.8 OPM (%) 18.2 15.5 17 17.5 17.9 Adjusted PAT 4,297 4,250 4,117 4,749 5,495 % y-o-y growth 13.1 -1.1 -3.1 15.3 15.7 Adjusted EPS (Rs.) 47.7 45.9 46.8 54.0 62.5 STOCK PERFORMANCE P/E (x) 16.9 17.6 17.2 14.9 12.9 (%) 6m 12m P/B (x) 3.5 3.2 2.9 2.6 2.3 EV/EBIDTA (x) 11.0 12.4 10.7 8.9 7.5 Absolute 62 16.8 RoNW (%) 22.0 19.2 17.9 18.6 19.3 Relative to Sensex 34.3 12.6 RoCE (%) 24.0 20.5 18.8 20.1 21.2 Source: Sharekhan estimates

November 2020 14 Sharekhan ValueGuide EQUITY FUNDAMENTALS DIWALI PICKS 2020

Understanding the Sharekhan 3R Matrix Right Sector Positive Strong industry fundamentals (favorable demand-supply scenario, consistent industry growth), increasing investments, higher entry barrier, and favorable government policies Neutral Stagnancy in the industry growth due to macro factors and lower incremental investments by Government/private companies Negative Unable to recover from low in the stable economic environment, adverse government policies affecting the business fundamentals and global challenges (currency headwinds and unfavorable policies implemented by global industrial institutions) and any significant increase in commodity prices affecting profitability. Right Quality Positive Sector leader, Strong management bandwidth, Strong financial track-record, Healthy Balance sheet/cash flows, differentiated product/service portfolio and Good corporate governance. Neutral Macro slowdown affecting near term growth profile, Untoward events such as natural calamities resulting in near term uncertainty, Company specific events such as factory shutdown, lack of positive triggers/events in near term, raw material price movement turning unfavourable Negative Weakening growth trend led by led by external/internal factors, reshuffling of key management personal, questionable corporate governance, high commodity prices/weak realisation environment resulting in margin pressure and detoriating balance sheet Right Valuation Positive Strong earnings growth expectation and improving return ratios but valuations are trading at discount to industry leaders/historical average multiples, Expansion in valuation multiple due to expected outperformance amongst its peers and Industry up-cycle with conducive business environment. Neutral Trading at par to historical valuations and having limited scope of expansion in valuation multiples. Negative Trading at premium valuations but earnings outlook are weak; Emergence of roadblocks such as corporate governance issue, adverse government policies and bleak global macro environment etc warranting for lower than historical valuation multiple. Source: Sharekhan Research

November 2020 15 Sharekhan ValueGuide Stock Update EQUITY FUNDAMENTALS

Price Target/ Upside Recommendation Reco Price Date Company Report Type (%) (Rs.) Latest Chg Latest Chg Oct 05, 2020 Emami Limited Stock Update BUY  351 440 

Summary • We re-iterate our Buy rating on Emami with a PT of Rs. 440; receding risk of promoter pledging and better growth prospects make Emami a better pick in mid-cap FMCG space with discounted valuations of 21x FY22E earnings. • Promoters’ pledging has reduced to 47% from 95% in Q1FY2021; Group aims to reduce pledging by selling non-core assets (hospitals and real-estate property) in another 8-10 months. • Sustained demand for health and immunity products and recovery in rural demand will help Q2 performance be sequentially better with a rise in margins due to benign raw material prices. Revenues likely to grow by 0-2%: OPM to expand by 268 bps in Q2FY2021. • Strong traction in new products, focus on enhancing distribution reach and recovery in rural demand are key growth drivers in the near to medium term.

Read report–https://www.sharekhan.com/MediaGalary/StockIdea/Emami-Oct05_2020_3R.pdf

Oct 07, 2020 Tata Consultancy Services Stock Update BUY  2,737 3,150 

Summary • We maintain our Buy rating on TCS with a revised PT of Rs. 3,150, given its differentiated positioning and deep relationships with large global enterprises. • TCS impressed with strong recovery in revenue growth and margin expansion; deal signings remained strong at $8.6 billion (including Phoenix deal of $2.5 billion). • Management indicated that this is the start of the first phase of a multi-year technology transformation cycle given emergence of a new operating model, large adoption of cloud and acceleration of technology spends by customers. • We expect TCS’ revenue and earnings to clock a 11%/13% CAGR over FY2021-23E; we prefer TCS on account of its full-service business model, early investments in digital capabilities and higher payout policy.

Read report–https://www.sharekhan.com/MediaGalary/StockIdea/TCS_Oct07_2020.pdf

Oct 09, 2020 Apollo Tyres Ltd. Stock Update BUY  138 160 

Summary • We retain a Buy rating on Apollo Tyres Ltd (Apollo) with revised PT of Rs. 160; Strong 23% earnings CAGR likely over FY20-23. • Demand has recovered significantly in both India and Europe led by Government Unlock measuresand increased preference for personal transport. Apollo expected to post flat revenues in Q2FY21 as compared to 34% drop in Q1; FY22 likely to witness strong recovery. • Employee restructuring at Vredestein and cost-control measures to improve margins in Europe; Apollo aims for 14-15% margins from 9-10% currently. • We rollover our multiple to FY23 earnings. With a pick-up in earnings and tapering of the capex cycle, Apollo is expected to be FCFF positive from FY23. P/E of 9.4x FY23 earnings is lower than long-term historical average of 11x.

Read report–https://www.sharekhan.com/MediaGalary/Newsletter/Investoreye.pdf#page=2&zoom=100,0,0

Š Upgrade  Š No change  Š Downgrade  Š Note: The arrow indicates change in call and price target, if any, vis-à-vis the previous report

November 2020 16 Sharekhan ValueGuide EQUITY FUNDAMENTALS Stock Update

Price Target/ Upside Recommendation Reco Price Date Company Report Type (%) (Rs.) Latest Chg Latest Chg Oct 12, 2020 GNA Axles Limited Viewpoint POSITIVE  246 32-35% 

Summary • We re-initiate viewpoint coverage on GNA Axles (GNA) with a positive view and upside potential of 32-35%. • Demand has improved with Q2 topline drop narrowing significantly to 13% (68% drop in Q1).The domestic market grew strongly by 40%, driven by strong tractor sales; exports decline narrowed to 33% due to pick up in USA and Europe CV market due to unlock measures. • We expect strong recovery in FY2022, driven by normalisation of economic activities. GNA to continue gaining market share in CV export due to low-cost advantage and established product quality; foray in SUV business to provide incremental opportunity. • Return ratios expected to improve significantly, driven by demand improvement, minimal capex, and reduction in debt. P/E of 7.9x its FY2023 earnings is lower than long-term historical average of 13x.

Read report–https://www.sharekhan.com/MediaGalary/Equity/GNA-Oct12_2020_3R.pdf

Oct 13, 2020 Wipro Stock Update BUY  376 450 

Summary • We upgrade Wipro from Hold to Buy with a revised PT of Rs. 450 as demand is improving across its large verticals. • Q2 performance was in-line on revenue and margin front; CC revenue grew 2% q-o-q, while EBIT margin for IT services expanded 14 bps q-o-q to 19.2%; cash conversion remained strong. • Wipro provided better-than-expected growth guidance of 1.5-3.5% q-o-q for Q3FY2021E; management expects growth momentum in BFSI to continue, while energy & utilities and technology verticals would recover in Q3. • Although new CEO has a challenging task to get Wipro back to industry-level growth trajectory, we expect revenue growth to exceed historical levels in FY2022E/FY2023E.

Read report–https://www.sharekhan.com/MediaGalary/StockIdea/Wipro-3R-Oct13_2020.pdf

Oct 14, 2020 Infosys Stock Update BUY  1,136 1,350 

Summary • We maintain our Buy rating on Infosys with a revised price target of Rs. 1,350 as we expect company to clock industry-leading growth in the next couple of years. • Q2 was another stellar quarter, with revenue and margin significantly beating estimates, along with strong deal TCVs, account expansion, and strong FCF generation; EBIT margin improved 268 bps q-o-q to 25.3%. • Infosys raised revenue growth guidance to 2-3% in CC terms from 0-2% earlier and surprised us with better-than-expected upward revision in operating margin guidance to 23-24% (from 21-23% earlier) for FY2021. • We believe that scaling up digital services, higher automation, increasing offshore revenue and pyramid rationalisation would help Infosys to partially offset costs that would return post normalcy.

Read report–https://www.sharekhan.com/MediaGalary/StockIdea/Infosys_3R-Oct14_2020.pdf

November 2020 17 Sharekhan ValueGuide Stock Update EQUITY FUNDAMENTALS

Price Target/ Upside Recommendation Reco Price Date Company Report Type (%) (Rs.) Latest Chg Latest Chg Oct 14, 2020 The Ramco Cements Limited Stock Update BUY  770 955 

Summary • We maintain Buy on The Ramco Cements (Ramco) with a revised PT of Rs. 955. • Cement prices in the southern region for October remain up 16% compared to April 2020, maintaining May 2020 levels. EBITDA/tonne to rise despite weak Q2 demand. • Capacity expansion plan of Rs. 3,500 crore is progressing well. Commissioned 1MTPA Odisha GU in October. Standalone D/E ratio is expected to reduce from 0.6x in FY2020 to 0.2x in FY2022E despite capacity expansions. • Ramco to benefit from the expected improvement in cement demand from Q3FY2021 and favourable cement pricing scenario in the key South Indian market.

Read report–https://www.sharekhan.com/MediaGalary/StockIdea/Ramco_Cement_3R-Oct14_2020.pdf

Oct 15, 2020 Tata Elxsi Limited Viewpoint POSITIVE  1,464 20% 

Summary • We stay Positive on Tata Elxsi Limited (TEL) and expect an 18% upside, given strong earnings growth potential over FY2020- FY2023E. • Beat on all fronts; Constant currency revenue grew by 6.9% q-o-q, led by strong growth in its key business segments; EBITDA margin improved by 429 bps q-o-q to 27.4%; demand recovery is faster than anticipated earlier. • 2HFY2021 is expected to be better compared to 1HFY2021, led by strong deal pipeline, ramp-up of deals won earlier, vendor consolidation opportunities, and continued strong traction in non-automotive verticals. • Management’s guidance of 22%-24% on PBT margin surprised us positively; key levers for margin sustainability are–(1) continued reduced travel and administration expenses, (2) WFH efficiencies, (3) higher offshoring, and (4) better cost control.

Read report–https://www.sharekhan.com/MediaGalary/Equity/TataElxsi_3R-Oct15_2020.pdf

Oct 16, 2020 HDFC Bank Stock Update BUY  1,199 1,500 

Summary • We retain our Buy rating on the stock with a revised price target (PT) of Rs. 1,500. • HDFC Bank’s Q2FY2021 results were strong with operational performance in line with expectations, and asset quality improved on a q-o-q basis, results indicated a revert to normalcy. • Management commentary was positive and indicated a bright long-term outlook. Collection trends were encouraging, with demand resolutions (collections efficiency) at ~95% in September 2020 and 97% in October 2020. • HDFC Bank currently trades at 2.9x/2.5x its FY2022E/FY2023E book value per share (BVPS). We have introduced FY2023E estimates in this note. We expect HDFC Bank’s business quality and franchise strength will help it tide over near-term challenges.

Read report–https://www.sharekhan.com/MediaGalary/StockIdea/HDFC-3R-Oct16_2020.pdf

November 2020 18 Sharekhan ValueGuide EQUITY FUNDAMENTALS Stock Update

Price Target/ Upside Recommendation Reco Price Date Company Report Type (%) (Rs.) Latest Chg Latest Chg Oct 16, 2020 HCL Technologies Stock Update BUY  827 980 

Summary • We stick to our Buy rating on HCL Technologies (HCL Tech) with a revised PT of Rs. 980. • Q2 performance was strong, with numbers beating estimates on all fronts; EBIT margin expanded by 108 bps q-o-q to 21.6% (highest over last 22 quarters); deal signings, deal pipeline and FCF generation remained strong. • The management provided revenue growth guidance of 1.5%–2.5% q-o-q for Q3 and Q4 of FY2021, translating to a growth of 0-0.7%. Increased margin guidance to 20-21% from its earlier guided band of 19.5-20.5%. • Strong order bookings, healthy deal pipeline and consolidation opportunities in both Infra and application modernisation spend of clients are expected to drive the company’s growth going forward.

Read report–https://www.sharekhan.com/MediaGalary/StockIdea/HCL-3R-Oct16_2020.pdf

Oct 16, 2020 Federal Bank Stock Update BUY  52 62 

Summary • Q2 FY21 results were encouraging, with in-line operating performance and record high NII and PPOP; however high provisions (due to COVID-19) impacted PAT. • Net interest margin expanded to 3.13% (best in last 4 quarters); CASA ratio rose to 33.68% and income growth was strong. As a result, cost-to-income (C/I) ratio declined to 46.72%. • Federal Bank is available at a reasonable valuation of 0.6x/0.56x FY22E/FY23E BVPS. We believe asset quality outlook has improved incrementally (collection efficiency at 95% during September), even though these are still early days. We have introduced FY23E estimates in this note. • We maintain our Buy rating on the stock with a revised price target (PT) of Rs. 62.

Read report–https://www.sharekhan.com/MediaGalary/StockIdea/FederalBank-3R-Oct16_2020.pdf

Oct 19, 2020 L&T Technology Services Stock Update BUY  1,751 2,030 

Summary • We maintain a Buy on L&T Technology Services (LTTS) with a revised PT of Rs. 2,030, given its strong position in fast growing ERD space. • Q2 numbers beat estimates on all fronts, with solid deal TCVs, robust deal pipeline and strong FCF generation; EBIT margin improved 161 bps q-o-q to 13.7% in Q2FY2021, exceeding expectations. • The management guided for a decline of 7-8% in US Dollar revenues as against a 9-10% drop expected earlier for FY2021, translating a 3.4-4.8% q-o-q growth for the remaining quarters of FY2021; EBIT margin likely to improve, led by higher utilisation, better revenue mix and operational efficiencies. • We expect LTTS’ revenue and earnings to clock a CAGR of 13% and 20% over FY2021-23E, led by strong deal wins, strong account mining activities and higher demand for digital and leading-edge technologies.

Read report–https://www.sharekhan.com/MediaGalary/StockIdea/LTTS-3R-Oct19_2020.pdf

November 2020 19 Sharekhan ValueGuide Stock Update EQUITY FUNDAMENTALS

Price Target/ Upside Recommendation Reco Price Date Company Report Type (%) (Rs.) Latest Chg Latest Chg Oct 19, 2020 HDFC Life Insurance Stock Update BUY  574 671 

Summary • We recommend Buy on HDFC Life Insurance (HLIC) with price target of Rs. 671; we expect HLIC to deliver ~24% VNB margins over the next 2-3 years (on a normalised basis). • HLIC’s results came largely in line with expectations for Q2FY2021, indicating steady recovery from the impact of COVID-19. • The insurance sector’s growth potential is huge in India; factors like large protection gap, retiral needs, expanding per capita income etc are key long-term growth drivers. We believe strong players such as HLIC are likely to gain disproportionally from the opportunity. • The stock is at a valuation of 4.1x/3.4x its FY2022E/FY2023E EVPS. Well-diversified product bouquet (no segment contributing more than 30% of the APE), strong brand image and strong metrics make HLIC attractive.

Read report–https://www.sharekhan.com/MediaGalary/StockIdea/HDFCLife-Oct19_2020.pdf

Oct 20, 2020 Hindustan Unilever Stock Update BUY  2,172 2,550 

Summary • Core business volume growth stood at 1%, slightly lower than our expectation of 1-2%. About 80% of portfolio (largely essentials) registered 10% volume-led growth. • Higher tea and palm oil prices dragged down gross margins by 145 bps; lower ad spends resulted in a 28 bps improvement in OPM to 25.1% (matching our expectation of 25.4%). • The foods business (excluding GSK Consumers’ merger) grew by 19%, beauty and personal care (BPC) posted flat sales, recovered from a 12% decline in revenue in Q1FY2021. • We broadly maintain our earnings estimates for FY2021/22/23; sustained strong rural demand and synergistic benefits from GSK Consumers’ merger would drive up earnings in the near term; retain Buy with an unchanged PT of Rs. 2,550.

Read report–https://www.sharekhan.com/MediaGalary/StockIdea/HUL-3R-Oct20_2020.pdf

Oct 20, 2020 Britannia Industries Stock Update BUY  3,552 4,200 

Summary • Domestic sales volume grew by 9% in Q2FY2021, lower than ours as well as the street’s expectation of 12-13%; August volume growth stood at low single-digits but improved close to double digits in September. • Adjacencies continue to perform well with rusk and cheese clocking strong double-digit growth; lower milk prices aided good profitability of dairy segment. • Product launches, capacity additions in key states, improving penetration in regional markets and sustained growth in adjacencies will be key revenue growth drivers in the near term. Input cost inflation is expected to be marginal. • The stock is trading at 42x/36x FY2022/23E EPS; given its focus on becoming a large snacking company and sustained OPM expansion, we maintain a Buy rating with an unchanged PT of Rs. 4,200.

Read report–https://www.sharekhan.com/MediaGalary/StockIdea/Britannia-3R-Oct20_2020.pdf

November 2020 20 Sharekhan ValueGuide EQUITY FUNDAMENTALS Stock Update

Price Target/ Upside Recommendation Reco Price Date Company Report Type (%) (Rs.) Latest Chg Latest Chg Oct 20, 2020 Granules India Limited Stock Update BUY  392 475 

Summary • We retain a Buy rating on Granules with a revised PT of Rs 475. • Q2FY2021 was yet another quarter of stellar performance with sales and PAT growing sturdily by 22.7% and 70.8% YoY respectively. Results were ahead of estimates. • Tapping new geographies, strong product pipeline, growth in existing core molecules & capacity expansion to drive sales growth. Favorable mix, benefits of operating leverage accruing would lead to OPM expansion. • Strong earnings visibility, a sturdy balance sheet and healthy return ratios augur well and could result in multiple re-rating for the stock.

Read report–https://www.sharekhan.com/MediaGalary/StockIdea/Granules-3R-Oct20_2020.pdf

Oct 20, 2020 Kajaria Ceramics Limited Stock Update BUY  575 675 

Summary • We recommend Buy on Kajaria Ceramics with a PT of Rs. 675, considering healthy business outlook leading to 26% CAGR in net earnings over FY2021E-FY2023E. • Strong outperformance on all fronts, led by volumes reverting to pre-COVID levels as seen in last year and strong rise in OPM. • Management highlights healthy revenue and OPM outlook for H2FY2021. Key growth triggers such as GST, export opportunities for Morbi players, and low gas prices likely to sustain. Management to scale bathware business over the next three years. • Kajaria saw strong surge in net cash position and reduction in working capital.

Read report -https://www.sharekhan.com/MediaGalary/StockIdea/Kajaria_Ceramics-3R-Oct20_2020.pdf

Oct 21, 2020 Bajaj Finance Stock Update BUY  3,233 3,800 

Summary • Bajaj Finance Limited’s (BFL) Q2FY2021 results were mixed with operational numbers in line, sequentially improving asset quality is a positive; but higher provisions (taken on prudent basis for Stage 1 and 2 loans) depressed PAT performance. • Management commentary on growth and asset-quality outlook for the near term continues to be cautious. • BFL is available at 4.7x/3.9x its FY2022E/FY2023E BVPS. We have introduced FY2023E estimates in this note and fine-tuned our estimates for FY2021E and FY2022E. • We maintain our Buy rating on the stock with an unchanged price target (PT) of Rs. 3,800.

Read report–https://www.sharekhan.com/MediaGalary/StockIdea/BajajFinance-3R-Oct21_2020.pdf

Oct 21, 2020 UltraTech Cement Stock Update BUY  4,630 5,500 

Summary • We maintain Buy on UltraTech Cement (UltraTech) with a revised PT of Rs. 5,500, expecting strong rural demand to sustain, expected pick up in infrastructure execution and healthy pricing discipline. • In Q2FY2021, UltraTech displayed outstanding performance led by higher than expected volume growth, rise in OPM and reduction in net debt. • Rise in pet coke prices is expected to get replicated with cheaper imported coal limiting the impact on profitability going ahead. • FY2022 expected to be a strong year in terms of volume growth which along with limited capacity addition is expected to maintain a healthy pricing discipline trend in the industry benefitting UltraTech.

Read report–https://www.sharekhan.com/MediaGalary/StockIdea/UltraTech_3R-Oct21_2020.pdf

November 2020 21 Sharekhan ValueGuide Stock Update EQUITY FUNDAMENTALS

Price Target/ Upside Recommendation Reco Price Date Company Report Type (%) (Rs.) Latest Chg Latest Chg Oct 21, 2020 Larsen & Toubro Infotech Stock Update BUY  3,095 3,500 

Summary • We stick to our Buy rating on L&T Infotech (LTI) with a PT of Rs. 3,500, on expectation of industry-leading growth momentum post COVID-19. • Q2 numbers beat expectations on all fronts, along with a robust deal pipeline and strong OCF generation; margin improvement remained impressive. Both the digital and core business grew 18.4% and 6.3% y-o-y. • Management indicated that Q3FY2021 revenue would surpass revenue seen in Q4FY2020; we believe that the company would comfortably beat guidance given prudent client mining, continued growth in top account and superior execution. • Consistency in deal wins, must-have logos and prudent client mining would help company outperform peers over the next few years. We expect LTI’s USD revenue/earnings to clock a CAGR of 15%/18% over FY2020-FY23E.

Read report–https://www.sharekhan.com/MediaGalary/StockIdea/LTI-3R-Oct21_2020.pdf

Oct 21, 2020 Colgate Palmolive (India) Stock Update BUY  1,425 1,735 

Summary • Q2FY2021 revenue grew by 5.2% (after a decline of 4% in Q1FY2021), with toothpaste & toothbrush category volumes growing by mid-to-high single digit. • Gross margins improved by 339 bps to 68.1%. This, along with lower advertisement spends drove up OPM by 541 bps to 31.8%. • Both the toothpaste and toothbrush categories have recovered. The Naturals category is performing well with high single-digit growth. • We have increased our earnings estimates by 6-7% for FY21E/22E/23E to factor in better-than-expected OPM. We recommend a Buy on the stock with price target of Rs. 1,735.

Read report–https://www.sharekhan.com/MediaGalary/StockIdea/Colgate-3R-Oct21_2020.pdf

Oct 22, 2020 Bajaj Finserv Stock Update BUY  5,899 7,500 

Summary • Bajaj Finserv’s (BFS; holding company) results for Q2FY2021 were mixed; Income from operations came above estimates, but PAT declined by 19.9% y-o-y (below estimates).. • Lending business, Bajaj Finance Limited’s (BFL) Q2FY2021 results were mixed. Operational numbers were in-line with estimates and asset quality improved sequentially. • However, higher provisions (taken on prudent basis for Stage 1 and 2 loans) due to upfronting of provisions impacted PAT. • Insurance subsidiary, BAGIC posted strong results, (helped by lower claims) in motor OD; BALIC’s PAT declined (due to higher new business strain; absence of capital gains seen in Q2FY2020); but healthy APE growth is encouraging. • The ~40% holding company discount to Bajaj Finserv’s valuations make risk return attractive. We maintain our Buy rating with an unchanged SOTP-based PT of Rs. 7,500.

Read report–https://www.sharekhan.com/MediaGalary/StockIdea/BajajFinserv-3R-Oct22_2020.pdf

November 2020 22 Sharekhan ValueGuide EQUITY FUNDAMENTALS Stock Update

Price Target/ Upside Recommendation Reco Price Date Company Report Type (%) (Rs.) Latest Chg Latest Chg Oct 22, 2020 Bajaj Auto Stock Update BUY  3,009 3,500 

Summary • We maintain Buy rating on Bajaj Auto (Bajaj) with unchanged PT of Rs 3,500. Demand is improving in both domestic as well as export markets. • Q2FY21 operating results were ahead of estimates as margins improved on a y-o-y basis despite a fall in the topline. Cost control measures and better forex realisations boosted margins. • Bajaj is expected to continue gaining market share in exports (driven by enhanced distribution network) and domestic market (driven by a premiumization trend and new launches). • Price hikes, better mix and cost control measures to offset increase in input costs. Margins to remain at 17-18% level. Valuations at 14.8x FY23 earnings are lower than long term historical average.

Read report–https://www.sharekhan.com/MediaGalary/StockIdea/BajajAuto-3R-Oct22_2020.pdf

Oct 22, 2020 Asian Paints Limited Stock Update BUY  2,100 2,475 

Summary • Asian Paints Limited (APL) registered healthy performance. Revenue grew by 6%; OPM improving by 474 bps to 23.6% and strong growth of 36% at PBT level. • Volume growth in the domestic decorative business stood at 11%, ahead of our and street expectation of 7%-8%. • The stock is currently trading at 59.2x/49.3x its FY2022/23E EPS. Leadership position in the domestic decorative paint industry, sturdy balance sheet, and good dividend pay-out will keep valuations at premium level. • We have fine-tuned our earnings estimates to factor better-than-expected performance. We retain our Buy recommendation with a revised PT of Rs. 2,475.

Read report–https://www.sharekhan.com/MediaGalary/StockIdea/AsianPaints-3R-Oct22_2020.pdf

Oct 22, 2020 Bajaj Holdings & Investment Stock Update BUY  2,304 3,345 

Summary • We retain Buy recommendation on Bajaj Holdings and Investment (BHIL) with an unchanged PT of Rs. 3,345. • Q2FY21 results were hit by lower profitability of associate firms Bajaj Finserv (BFS) and Bajaj Auto Ltd (BAL). • We maintain Buy on BFS with a PT of Rs. 7,500. Lending arm Bajaj Finance Limited (BFL) is well-capitalised with a conservative leverage and both the insurance arms Bajaj Allianz Life Insurance (BALIC) and Bajaj Allianz General Insurance (BAGIC) have healthy solvency ratios and strong operating metrics, and strong structural tailwinds to provide long-term growth opportunities. • We maintain a Buy on another associate company Bajaj Auto (BAL) with a PT of Rs 3,500. BAL is seeing a recovery in both domestic and export markets and is expected to continue outperforming the industry.

Read report–https://www.sharekhan.com/MediaGalary/StockIdea/BajajHoldings-3R-Oct22_2020.pdf

November 2020 23 Sharekhan ValueGuide Stock Update EQUITY FUNDAMENTALS

Price Target/ Upside Recommendation Reco Price Date Company Report Type (%) (Rs.) Latest Chg Latest Chg Oct 23, 2020 Nestle India Limited Stock Update BUY  15,863 19,055 

Summary • Nestle India’s (Nestle’s) revenues grew by 10% y-o-y to Rs. 3,525.4 crore in Q3CY2020; domestic sales grew by 10.2% y-o-y (improving from 2.6% in Q2CY2020). • Boosted by in-house demand, brands like Maggi Noodles & Sauces, Kit Kat, Munch, Nescafe Classic and Sunrise registered double-digit growth in Q3CY2020. • Rising in-house consumption, sustained new launches and expansion in distribution network remains key growth driver in the near to medium term. • Stock currently trades at 51x its CY2022E EPS. We maintain our Buy recommendation on the stock with unchanged PT of Rs. 19,055.

Read report–https://www.sharekhan.com/MediaGalary/StockIdea/Nestle_3R-Oct23_2020.pdf

Oct 23, 2020 Tech Mahindra Stock Update BUY  848 1,000 

Summary • We maintain our Buy rating on Tech Mahindra (TechM) with a revised PT of Rs. 1000. • Performance was better than expected on all parameters. TechM impressed with strong margin expansion, healthy FCF generation and pickup in deal TCVs. • Management expects double digit growth over next couple of years on the back of anticipated growth in enterprise segment, potential 5G opportunities and strong deal wins. • TechM is well placed to benefit from the expansion of 5G value chain across networks and IT services; expect TechM’s USD revenue/earnings to clock a CAGR of 10.5%/15.5% over FY2021-FY23E.

Read report–https://www.sharekhan.com/MediaGalary/StockIdea/TechM-3R-Oct23_2020.pdf

Oct 23, 2020 JSW Steel Limited Stock Update BUY  321 375 

Summary • JSW Steel’s consolidated EBITDA at Rs. 4,186 crore (up 85% y-o-y) was significantly above our estimates, led by higher-than- expected EBITDA/tonne at Rs. 10,087/tonne (up 59% y-o-y) and strong sales volume at 4.2mt (up 16.6% y-o-y). • Management has maintained FY2021E sales volume guidance of 15mt, which implies 5% y-o-y growth in H1FY2021E. Capacity expansion at Dolvi plant (undergoing 5mtpa capacity expansion) is on track to get commissioned by Q4FY2021. • Higher steel price (revision in contractual steel price for the auto sector from October), improving revenue mix (with higher domestic sales), higher operating leverage, and volume growth from Dolvi expansion to drive 27% PAT CAGR over FY2020- FY2023E. • We recommend Buy on JSW Steel with a PT of Rs. 375, given strong earnings growth outlook, decent RoE of 15%, and reasonable valuation of 6.6x its FY22E and 6x its FY23E EV/EBITDA, given an early recovery in the steel profitability cycle.

Read report–https://www.sharekhan.com/MediaGalary/StockIdea/JSWSteel-3R-Oct23_2020.pdf

November 2020 24 Sharekhan ValueGuide EQUITY FUNDAMENTALS Stock Update

Price Target/ Upside Recommendation Reco Price Date Company Report Type (%) (Rs.) Latest Chg Latest Chg Oct 23, 2020 ICICI Lombard General Insurance Stock Update BUY  1,258 1,510 

Summary • ICICI Lombard General Insurance (ILGI) reported strong Q2FY2021 results, better-than -expected operational performance, along with lower claim ratios and combined ratios further sweetening the performance. • Performance was strong on the cost aspect, with combined ratio (lower is better) at 99.7% (same as Q1FY2021, was 100.4% in FY2020). Solvency ratio has improved further to 2.74x in Q2 FY2020 as against 2.17x in March, which is positive. • ILGI trades at 32.9x/26.8x its FY2022E/FY2023E EPS and its long-term business fundamentals have remained steady even during times of crisis. • We recommend Buy on ILGI with a price target of Rs. 1,510.

Read report–https://www.sharekhan.com/MediaGalary/StockIdea/ICICILombard-3R-Oct23_2020.pdf

Oct 23, 2020 Biocon Stock Update BUY  417 495 

Summary • Q2FY2021 was a soft quarter for Biocon. Revenues from operations grew by 11% y-o-y to Rs 1,745 crore. Adjusted PAT rose by 10.3% y-o-y to Rs. 173.8 crore. • Improving traction in existing biosimilars, likely pick up in Semglee, geographical expansion are the key growth drivers for Biologics segment. • Biocon has retained its guidance for $1 billion in revenues from the biologics segment by FY2022. The generics business too is expected to grow at a healthy pace driven largely by formulations. • Possible listing of Biocon Bilogics provides value unlocking opportunity. We retain Buy recommendation on the stock with a revised PT of Rs. 495.

Read report–https://www.sharekhan.com/MediaGalary/StockIdea/Biocon-3R-Oct23_2020.pdf

Oct 23, 2020 Atul Limited Stock Update BUY  6,118 6,725 

Summary • Atul Limited’s (Atul) Q2FY2021 performance was impressive with 7.9% and 106 bps beat in revenue and EBITDA margin, respectively, at Rs. 1,002 crore (down 4.2% y-o-y but much lower than our expectation of 8.3% y-o-y decline) and 26.1% (up 460 bps y-o-y; up 204 bps q-o-q). • Revenue beat was driven by better-than-expected revenue from life science chemicals at Rs. 348 crore (up 5.3% y-o-y) due to recovery in domestic revenue; margin beat was led by better margin for performance and other chemicals segment (EBIT margin up 411bps y-o-y to 23.1%). • Atul is well placed to benefit from structural revenue growth drivers such as higher domestic demand, rising exports, and import substitution for specialty chemical. Hence, we expect revenue/EBITDA/PAT CAGR of 14%/17%/16% over FY2021E-FY2023E. • We recommend Buy on Atul with a PT of Rs. 6,725, given robust earnings growth outlook and strong balance sheet (nil debt) with RoE of ~18%. The stock trades at 23.8x its FY2022E EPS and 21.4x its FY2023E EPS.

Read report–https://www.sharekhan.com/MediaGalary/StockIdea/Atul-3R-Oct23_2020.pdf

November 2020 25 Sharekhan ValueGuide Stock Update EQUITY FUNDAMENTALS

Price Target/ Upside Recommendation Reco Price Date Company Report Type (%) (Rs.) Latest Chg Latest Chg Oct 23, 2020 L&T Finance Holding Stock Update BUY  65 80 

Summary • L&T Finance Holdings (LTFH) posted encouraging results, largely in line with expectations. Operational numbers, better asset quality (lowest-ever GS3) and guidance to finally start to reduce liquidity surplus are key positives. • LTFH reported a pick-up across business, especially in rural and infrastructure along with improving collection efficiency, though not yet at normalized levels. • Asset quality improved, GS3 reduced to 5.19% (from 5.24% in Q1FY21) and NS3 reduced to 1.67% (from 1.71% in Q1 FY21); PCR stayed at 69%. • LTFH is available at 0.7x/0.6x its FY2022E/FY2023E BVPS; we recommend Buy on LTFH with price target of Rs. 80.

Read report–https://www.sharekhan.com/MediaGalary/StockIdea/LnTFinance_3R-Oct23_2020.pdf

Oct 23, 2020 Polycab India Limited Stock Update BUY  883 1,060 

Summary • We recommend Buy on Polycab India Limited (Polycab) with a PT of Rs. 1,060, given healthy net earnings growth outlook over FY2021E-FY2023E along with attractive valuation. • The company reported strong outperformance on OPM and net profit along with double digit y-o-y growth in FMEG and strong improvement in EBIT. Adjusting for tax write back in Q2FY2020, net profit would have risen by 31% y-o-y. • Expect H2 to be better than H1 as FMEG continues to witness double-digit growth and C&W sees improvement with rising infrastructure investments. We expect margins to be aided by various cost initiatives undertaken. • Polycab’s strong balance sheet and net cash position provide comfort in the present environment.

Read report–https://www.sharekhan.com/MediaGalary/StockIdea/Polycab-3R-Oct23_2020.pdf

Oct 26, 2020 Kotak Mahindra Bank Stock Update BUY  1,416 1,730 

Summary • Kotak Mahindra Bank (KMB) Q2FY21 numbers were strong with operational numbers beating expectations, stable asset quality (on a proforma basis) which were positives. • Even on a proforma basis, GNPA would have been 2.70% and NNPA would have been at 0.74%; stable from Q1 levels), indicating better outlook. • Management indicated a shift of gears, to have higher focus on advances growth; with improving outlook (collection efficiency (for September at ~95%) is positive. • We value standalone bank at ~3.9x its FY2023E book value and its subsidiaries at ~Rs. 360 per share. We recommend a Buy on KMB with an SOTP based price target (PT) of Rs 1730.

Read report–https://www.sharekhan.com/MediaGalary/StockIdea/KotakMahindraBank-3R-Oct26_2020.pdf

November 2020 26 Sharekhan ValueGuide EQUITY FUNDAMENTALS Stock Update

Price Target/ Upside Recommendation Reco Price Date Company Report Type (%) (Rs.) Latest Chg Latest Chg Oct 26, 2020 Persistent Systems Limited Stock Update BUY  1,187 1,450 

Summary • We retain our Buy rating on Persistent Systems Limited (PSL) with a revised PT of Rs. 1,450, as we expect strong earnings growth over FY2021-23E. • Q2 numbers beat estimates on all fronts; deal signings remained strong for all verticals; we believe appointment of Mr. Sandeep Kalra as CEO is a positive given his proven track record. • Management remains optimistic that Alliance business would return to growth trajectory on the back of cross-selling opportunities; targets annual revenue of over $1 billion over next 4 years. • Cash & cash equivalents account for 19% of its current market-cap; expect USD revenue/earnings to clock a CAGR of 13%/20% over FY2021-FY23E, led by strong deal wins, cross-selling opportunities & margin expansion.

Read report–https://www.sharekhan.com/MediaGalary/StockIdea/PersistentSystem-3R-Oct26_2020.pdf

Oct 26, 2020 Torrent Pharmaceuticals Limited Stock Update HOLD  2,654 2,871 

Summary • We retain Hold recommendation on the stock of Torrent Pharma (Torrent) with a revised PT of Rs 2871. • Torrent reported a mixed performance for the quarter with results missing estimates. Revenues were flat YoY, while PAT grew 27% backed by OPM expansion. • Outlook for the India business is healthy and Torrent looks to outperform the industry growth. Other markets such as US are under stress, while Europe performance is likely to improve, though over medium term. • USFDA response on resolution for Dahej & Indrad is awaited. Rich valuation and recent run up in stock prices leaves limited upside.

Read report–https://www.sharekhan.com/MediaGalary/StockIdea/Torrent_Pharma-3R-Oct26_2020.pdf

Oct 26, 2020 Sudarshan Chemical Industries Limited Stock Update BUY  470 567 

Summary • Sudarshan Chemical Industries Limited (SCIL) reported better-than-expected recovery in revenue at Rs. 429 crore (up 1% y-o-y versus our expectation of 4.9% y-o-y drop), led by better performance in the domestic business. EBITDA margin was in-line at 15.4% (up 75 bps y-o-y). • Strong recovery was seen in August-September in the domestic business (up 70% q-o-q) across products especially for coating, plastic, and inks; exports demand remained healthy. Utilisation rate also recovered to 85%-90%. • Long-term growth outlook intact, given capex plan of Rs. 585 crore over FY2020-FY2022E to augment capacities. Thus, we expect EBITDA/PAT to register a CAGR of 20%/25% over FY2021E-FY2023E. • We recommend Buy on SCIL with a PT of Rs. 567, given its dominant position (fourth largest player globally), double-digit earnings growth outlook, and strong RoE of 22%. The stock is trading at 17.1x FY23E EPS.

Read report–https://www.sharekhan.com/MediaGalary/StockIdea/Sudarshan_Chem-3R-Oct26_2020.pdf

November 2020 27 Sharekhan ValueGuide Stock Update EQUITY FUNDAMENTALS

Price Target/ Upside Recommendation Reco Price Date Company Report Type (%) (Rs.) Latest Chg Latest Chg Oct 27, 2020 ICICI Prudential Life Insurance Stock Update BUY  412 532 

Summary • ICICI Prudential Life Insurance (IPRU) posted strong results, indicating an encouraging recovery in topline, while VNB margins and APE growth improved q-o-q. • Annualized premium equivalent (APE), at Rs. 1,465 crore grew by 78% q-o-q; VNB margins improved to 27.4% (from 24.4% for Q1FY2021), hinting at an improving outlook. • We find the insurance space attractive, given a long runway for growth and believe that players with strong balance sheets and business metrics would be able to tide over the crisis. • We recommend a Buy rating on the stock with a price target of Rs. 532.

Read report–https://www.sharekhan.com/MediaGalary/StockIdea/ICICI_Prud_Life-3R-Oct27_2020.pdf

Oct 27, 2020 Sanofi India Stock Update BUY  8,384 9,249 

Summary • We retain a Buy recommendation for Sanofi India (Sanofi) with an PT of Rs 9249. • Sanofi reported a mixed performance for Q3CY2020, though numbers are not comparable with the previous quarters. Revenues declined 11.9% YoY to Rs 687 crore, Adjusted PAT declined 19.8% to Rs 133 crore. • Higher Share of Chronic, which provides a stable stream of revenues coupled with sustained traction from the top brands and margin expansion, due to favorable mix, to lead to double digit earnings growth over CY2019-CY2022E. • Better growth prospects, low exposure to regulated markets, strong balance sheet, healthy cashflows, would continue to support premium valuations.

Read report–https://www.sharekhan.com/MediaGalary/StockIdea/Sanofi-3R-Oct27_2020.pdf

Oct 27, 2020 Nippon Life India Asset Management Stock Update BUY  273 345 

Summary • Nippon Life India Asset Management’s (NAM’s) Q2FY2021 results were encouraging with ahead of expectations operational numbers, helped by cost control and stable AUMs. • The AUM decline trend seen in Q1 was arrested, which is encouraging. With MNC ownership, there is more stability and can result in improved global funds flow for NAM. • We have fine-tuned our estimates for FY2021E and FY2022E and introduce FY2023E estimates in this note. • We maintain our Buy rating on the stock with a PT of Rs. 345.

Read report–https://www.sharekhan.com/MediaGalary/StockIdea/NipponLife-3R-Oct27_2020.pdf

November 2020 28 Sharekhan ValueGuide EQUITY FUNDAMENTALS Stock Update

Price Target/ Upside Recommendation Reco Price Date Company Report Type (%) (Rs.) Latest Chg Latest Chg Oct 27, 2020 Amara Raja Batteries Limited Stock Update BUY  789 950 

Summary • Amara Raja Batteries Ltd (Amara) Q2FY21 results were better than estimates across parameters. Topline growth recovered to 14% yoy as both auto and industrial demand recovered; margins improved on operating leverage. • Amara is expected to continue outpacing organized lead acid battery industry driven by new automotive OEM client addition and enhancing distribution reach in aftermarket. Telecom and UPS too have huge growth potential. • Operating leverage and cost control measures would lead to margins remaining at higher end of historical band of 14-17%. • Amara is a debt free company with healthy return ratios. Have raised earnings estimates for both FY21, FY22 on better Q2 results. Have also introduced FY23 earnings. P/E of 15.8x FY23 earnings is lower than long term historical average. Recommend Buy with revised PT of Rs 950.

Read report–https://www.sharekhan.com/MediaGalary/StockIdea/Amara_Raja_3R-Oct27_2020.pdf

Oct 28, 2020 Bharti Airtel Stock Update BUY  451 710 

Summary • We maintain our Buy rating on Bharti Airtel with an unchanged price target (PT) of Rs. 710, given favourable market structure and continued weakness in Vodafone Idea. • Beat on revenue and margin fronts; ARPU improvement surprised positively, led by strong net 4G subscriber additions; growth was broad-based across portfolio, though star segment was India wireless business (EBITDA grew 12.8% q-o-q). • Digital capabilities have been helping Bharti to acquire quality customers, increase wallet share, reduce churn rate and strip out waste from the business; digital services though partnership to aid growth going ahead. • We remain positive on Bharti, considering its strong EBITDA performance, continued growth in the number of 4G subscribers and potential improvement in free cash flows; recent correction in stock price increased the valuation gap with Reliance Jio.

Read report–https://www.sharekhan.com/MediaGalary/StockIdea/Bharti_Airtel_3R-Oct28_2020.pdf

Oct 28, 2020 Axis Bank Stock Update BUY  505 595 

Summary • Q2FY2020 numbers were strong with operating results beating expectations and asset quality (even on normalized pro-forma basis) improving with better NIMs q-o-q. • Axis Bank is well-capitalised with a strong CRAR (CET1 of 15.4%); and its digital prowess, improving business traction across segments, near-normal collection efficiency and business strengths indicate an improving outlook. • Axis Bank trades at 1.4x / 1.3x FY2022E / FY2023E book value per share; we have fine-tuned FY2021E and FY2022E earnings estimates and introduce FY2023E estimates. • We maintain our Buy rating on the stock with a revised price target (PT) of Rs. 595.

Read report–https://www.sharekhan.com/MediaGalary/StockIdea/Axis_Bank_3R-Oct28_2020.pdf

November 2020 29 Sharekhan ValueGuide Stock Update EQUITY FUNDAMENTALS

Price Target/ Upside Recommendation Reco Price Date Company Report Type (%) (Rs.) Latest Chg Latest Chg Oct 28, 2020 Titan Company Limited Stock Update BUY  1,218 1,350 

Summary • Titan’s standalone business recovered to 89% (consolidated recovered to 98%) with the jewellery business growing by 9% in Q2FY2021; watches and eyewear business recoveredto 56% and 61%, respectively. • Consolidated OPM declined 433 bps to 6.9%, affected by hedging loss and lower operating leverge. Operating profit was down 40% to Rs. 313 crore. • Higher demand during the festive season and improving wedding demand will help Titan post sustained recovery in the jewellery business going ahead. • We have fine-tuned our estimates for FY2021 to factor in lower-than-expected OPM. We have maintained them for FY2022/ FY2023E. We maintain Buy with a revised PT of Rs. 1,350.

Read report–https://www.sharekhan.com/MediaGalary/StockIdea/Titan_3R-Oct28_2020.pdf

Oct 28, 2020 Marico Stock Update BUY  363 420 

Summary • Q2FY2021 performance was largely in line with expectations as revenues grew by ~9% while OPM improved marginally by 26 bps to 19.6% (as gross margins slumped by 163 bps). • Domestic sales volumes grew by 11% in Q2FY2021 (as against a 14% decline in volumes in Q1FY2021), led by a 10% volume growth in Parachute rigid packs, 4% volume growth in value-added hair oils (VAHO) portfolio and a 20% volume growth in Saffola edible oil. • Parachute rigid packs to maintain 5-7% volume growth, while Saffola edible oil would achieve low-teens volume growth in the near to medium term. Though higher copra prices would impact gross margins in the near term, operating efficiencies would help mitigate impact on OPM. • We have broadly maintained our earnings estimates for FY2021/22/23E. We retain a Buy on the stock with an unchanged price target of Rs. 420.

Read report–https://www.sharekhan.com/MediaGalary/StockIdea/Marico-3R-Oct28_2020.pdf

Oct 28, 2020 Supreme Industries Stock Update BUY  1,459 1,725 

Summary • We retain Buy on Supreme Industries with a revised PT of Rs. 1725, revising our FY2021E-FY2023E earnings estimates upwards and considering strong net earnings growth over FY2021E-FY2023E. • The company reported strong outperformance in revenues, OPM and net profitability in Q2FY2021. Cash surplus further improves. • October till date continued to see y-o-y growth across all business verticals. The company remains optimistic on rural, tier III, tier IV economies along with demand generation from the affordable housing segment. • SIL is one of the fastest to recover in post lock-down era in the building material space. The company will focus on appointing distributors, addition of products and deeper penetration.

Read report–https://www.sharekhan.com/MediaGalary/StockIdea/Supreme_Ind-3R-Oct28_2020.pdf

November 2020 30 Sharekhan ValueGuide EQUITY FUNDAMENTALS Stock Update

Price Target/ Upside Recommendation Reco Price Date Company Report Type (%) (Rs.) Latest Chg Latest Chg Oct 28, 2020 APL Apollo Tubes Limited Stock Update BUY  3,135 3,750 

Summary • APL Apollo Tubes Limited (APL) reported strong Q2FY21 with 29% beat in operating profit at Rs. 169 crore (up 134.9% y-o-y) led by higher-than-expected EBITDA/tonne of Rs. 3,514/tonne (up 77.7% y-o-y). Volume growth was robust at 32.2% y-o-y to 481kt (in-line with estimates). • APL’s market share improved to 50% (from 40% in FY2020), led by focus on rural market and net working capital cycle reduced by 7 days (from 25 days in FY20). Strong FCF generation over FY21E-FY22E would help APL to become debt free. • Industry-leading volume growth (expect 16% CAGR over FY21E-FY23E) and margin expansion to help APL to report EBITDA/PAT CAGR of 25%/34% over FY2021E-FY2023E. • Strong double-digit earnings growth outlook led by market share gain, RoE of 23%-25%, and management’s focus to strengthen B/S would act as a key re-rating catalyst for APL. Hence, we recommend Buy on APL with a PT of Rs. 3,750.

Read report–https://www.sharekhan.com/MediaGalary/StockIdea/APL_Apollo_3R-Oct28_2020.pdf

Oct 28, 2020 Castrol India Limited Viewpoint POSITIVE  116 20-22% 

Summary • Castrol India’s (Castrol) Q3CY20 results were strong with a sharp 29%/62% beat in revenue/EBITDA at Rs. 883 crore/Rs. 288 crore, up 4%/17.9% y-o-y. • The beat was led by higher-than-expected volume of 47 mn litres (up 6.3% y-o-y versus expectation of a 10% y-o-y volume decline) and OPM of 32.6% (up 384bps y-o-y and 1321bps q-o-q) given an improvement in gross margins. • Sharp recovery in lubricant demand over July-September given revival in demand from two-wheelers, gradual pick-up in four- wheelers. Margin to remain healthy but it will be difficult to maintain at Q3CY20 level given increase in base oil prices. • Attractive valuation of 12.7x CY22E EPS (close to decade low valuation) despite strong cash position, FCF/dividend yields of 8%/6% and RoE of ~52-56%. We stay Positive view on Castrol and expect a 20-22% upside.

Read report–https://www.sharekhan.com/MediaGalary/Equity/Castrol-Oct28_2020.pdf

Oct 28, 2020 RBL Bank Viewpoint NEUTRAL  176 8-10% 

Summary • RBL Bank posted weak Q2FY2021 results. The bank’s operational results were below expectations with stable asset quality (on proforma basis, normalised), but overall business outlook continues to be beset with uncertainties. • The bank had indicated its cautious view on segments such as credit cards and MSME and has accordingly taken corrective steps; yet the credit risk outlook is still uncertain. • RBL Bank currently trades at 0.8x/0.7x its FY2022E/FY2023E book value per share, which is reasonable. We have fine tuned our estimates for FY2021E and FY2022E and introduced FY2023E estimates. • We remain Neutral and expect 8%-10% upside.

Read report–https://www.sharekhan.com/MediaGalary/Equity/RBL_Bank-Oct28_2020.pdf

November 2020 31 Sharekhan ValueGuide Stock Update EQUITY FUNDAMENTALS

Price Target/ Upside Recommendation Reco Price Date Company Report Type (%) (Rs.) Latest Chg Latest Chg Oct 28, 2020 KPR Mill Limited Viewpoint POSITIVE  718 18-20% 

Summary • Q2FY2021 numbers were mixed as consolidated revenues grew by 16.6% to Rs. 941.9 crore, while OPM decreased by 106 bps to 20.1% (as gross margins fell by 356 bps). • Garment production recovered to 26 million pieces from 15 million pieces in Q1FY2021; Company plans to expand capacity by 42 million pieces p.a. by incurring capex of Rs. 250 crore. • Balance sheet strength visible as cash balance grew by Rs. 88 crore to Rs. 250 crore and debt (including working capital loans) reduced by Rs. 375.8 crore to Rs. 441.5 crore. • We broadly maintain our earnings estimates for FY2021/22/23; stock is currently trading at 9.5x its FY2023E EPS; we stay Positive on the stock and expect a 16-18% upside.

Read report–https://www.sharekhan.com/MediaGalary/Equity/KPR_Mill_3R-Oct28_2020.pdf

Oct 28, 2020 Alicon Castalloy Viewpoint POSITIVE  314 32-35% 

Summary • Q2 operating results were in line with estimates. Revenue decline narrowed driven by recovery in demand; while OPM drop narrowed as soft commodity prices and better mix offset negative operating leverage. • Domestic demand is recovering with further improvement expected in festives. FY22 to witness strong recovery driven by normalisation of economic activities. • Execution of recent multi year order wins provide strong growth visibility. Margin improvement due to operating leverage, better mix and cost control measures to result in 43% earnings CAGR over FY20-23. • We have retained our earnings estimates. Maintain positive view with upside of 32-35%.

Read report–https://www.sharekhan.com/MediaGalary/Equity/Alicon-Oct28_2020.pdf

Oct 29, 2020 Maruti Suzuki India Stock Update BUY  7,114 8,000 

Summary • Maruti Suzuki’s (Maruti) Q2FY2021 results missed estimates, driven by lower-than-expected margins. Increased commodity prices and unfavourable INR/JPY movement impacted margins. • Festive outlook is strong with the company posting strong double-digit growth in deliveries and bookings in Navratra-Dusherra season. We expect strong recovery from FY22 driven by normalisation of economic activity. • Operating leverage, cost-control measures, and lower discounting would drive margin improvement going ahead; expect margins to reach historical levels of 12-13% in FY23. • P/E of 24.7x FY23 earnings is close to historical average but given early recovery cycle, multiples can expand above averages. We retain Buy rating on the stock with an unchanged PT of Rs. 8,000.

Read report–https://www.sharekhan.com/MediaGalary/StockIdea/Maruti-3R-Oct29_2020.pdf

November 2020 32 Sharekhan ValueGuide EQUITY FUNDAMENTALS Stock Update

Price Target/ Upside Recommendation Reco Price Date Company Report Type (%) (Rs.) Latest Chg Latest Chg Oct 29, 2020 L&T Stock Update BUY  935 1,300 

Summary • We maintain our Buy rating on Larsen and Toubro (L&T) with a revised PT of Rs. 1,300, considering undemanding valuation for core business and healthy fundamentals. • Q2FY2021 operational numbers remained decent despite tough environment and broadly met estimates. Company booked gain of Rs. 8,146 crore from E&A divestment and booked impairment loss of Rs. 3732 crore. • Revenues to improve in coming quarters. Q2 order intake was healthy q-o-q and is expected to improve in H2FY2021. Order prospects pipeline strong at Rs. 6 lakh crore along with healthy current order backlog. • Proceeds from E&A divestment to be used in paring debt, investing in services business, Hyderabad Metro restructuring and special dividend payout.

Read report–https://www.sharekhan.com/MediaGalary/StockIdea/LnT-3R-Oct29_2020.pdf

Oct 29, 2020 Hero MotoCorp Limited Stock Update BUY  2,893 3,450 

Summary • We raise our target price on Hero Motocorp (Hero) to Rs 3,450 as we rollover to FY23 earnings. • Hero Q2FY2021 results were in line with street expectations. Net sales and EBIDTA grew 24% and 17% y-o-y respectively. • Hero is witnessing improvement in demand with retail sales reaching 96% of last year level in initial part of the festive season. Company expects further improvement in festives and has ramped up production. We expect strong recovery from FY22 driven by normalisation of economic activities. • Operating leverage, price hikes, and cost saving under the leap programme would result in margin improvement. We expect Hero to reach its historical margin range of 15%-16%.

Read report–https://www.sharekhan.com/MediaGalary/StockIdea/HeroMotocorp-3R-Oct29_2020.pdf

Oct 29, 2020 PI Industries Stock Update BUY  2,164 2,450 

Summary • Q2FY21 results were strong as revenues and EBITDA margin beat estimates by 12.4% and 269 bps, respectively, rising to Rs1,158 crore (up 27.6% y-o-y) and 24.2% (up 298bps y-o-y). • Revenue beat was driven by strong out-performance in domestic business (33% y-o-y growth) and exports (25% y-o-y increase). Gross margin expansion and higher operating leverage led by sharp improvement in EBITDA margin. • Robust order book position of $1.5 billion in CSM business and decent growth in domestic market bodes well for sustained strong revenue growth for PI Industries. Management maintained its FY2021E growth guidance of 20%. • Focus on acquisition in high RoCE business of Pharma and specialty chemicals would boost yield on QIP funds and improve margin and return profile of PI Industries in the coming years. Hence, we maintain our Buy on PI Industries with revised PT of Rs. 2,450.

Read report–https://www.sharekhan.com/MediaGalary/StockIdea/PI_Ind_3R-Oct29_2020.pdf

November 2020 33 Sharekhan ValueGuide Stock Update EQUITY FUNDAMENTALS

Price Target/ Upside Recommendation Reco Price Date Company Report Type (%) (Rs.) Latest Chg Latest Chg Oct 29, 2020 TVS Motors Limited Stock Update BUY  422 470 

Summary • TVS Motors Limited’s (TVSM) Q2FY2021 results were higher than our as well as consensus estimates, driven by better-than- expected margin performance. • TVSM is witnessing strong recovery in domestic demand with retail sales turning positive in the initial festive days. Export demand has picked up strongly with strong double-digit growth reported in September 2020. • Margins improvement is expected to sustain given cost control measures and operating leverage. TVSM is expected to remain the fastest growing two-wheeler (2W) company with strong 20% earnings CAGR over FY2020-FY2023. • We retain our Buy rating on the stock with an unchanged price target (PT) of Rs. 470.

Read report–https://www.sharekhan.com/MediaGalary/StockIdea/TVSMotor-3R-Oct29_2020.pdf

Oct 29, 2020 V-Guard Industries Limited Stock Update BUY  168 211 

Summary • We retain Buy on V-Guard Industries Limited (V-Guard) with an unchanged PT of Rs. 211, considering its reasonable valuations and improving business operations. • V-Guard reported flat revenues with stable operating margins in line with estimates. Higher tax rate in Q2FY21 vs Q2FY20 and lower other income led to 12.7% decline in net profit. • Management expects to get back on to the growth path with rebound in business environment and expects revenue to remain flat y-o-y in FY21 and cost saving measures initiated would aid margin expansion in H2FY21. • The company’s strong balance sheet, cash flow and reputed brand along with strong business fundamentals provide comfort in the present environment.

Read report–https://www.sharekhan.com/MediaGalary/StockIdea/V-Guard-3R-Oct29_2020.pdf

Oct 29, 2020 Strides Pharma Sciences Stock Update BUY  673 864 

Summary • We retain Buy recommendation on Strides Pharma Science (Strides) with a PT of Rs 864. • Q2FY2021 was a soft quarter for Strides. The results missed estimates. Revenues grew 11% YoY to Rs 793 crore while the adjusted PAT at Rs 44 crore declined by 9%. • Strtides expects a marked improvement in its performance in 2HFY2021 as compared to 1HFY2021, driven by a sturdy growth across segments of regulated and emerging markets. • Despite of a soft 1HFY21, Strides had retained its US revenue guidance of $230mn -$250 mn for FY21. Strong growth prospects and earnings visibility, sturdy balance sheet and healthy return ratios would support multiple re-ratings.

Read report–https://www.sharekhan.com/MediaGalary/StockIdea/StridesPharma-3R-Oct29_2020.pdf

November 2020 34 Sharekhan ValueGuide EQUITY FUNDAMENTALS Stock Update

Price Target/ Upside Recommendation Reco Price Date Company Report Type (%) (Rs.) Latest Chg Latest Chg Oct 29, 2020 Gateway Distriparks Limited Stock Update BUY  90 110 

Summary • We maintain a Buy on Gateway Distriparks Limited (GDL) with an unchanged SOTP-based PT of Rs. 110 due to attractive valuations and an improving growth and profitability outlook for its key verticals. • Q2FY2021, GDL reported lower-than-expected revenues while OPM remained broadly in-line. Net profit gets affected due to higher effective tax rate. Amalgamation exercise to be completed in 8-10 months. • GDL continues to focus on de-leveraging post funds raised through rights issue. Company planning capex in rail segment by setting up two ICDs at an outlay of Rs. 140 crore over three years. • Snowman Logistics is eyeing potential opportunities for transporting COVID vaccines (once launched domestically). To go ahead with capacity expansion at four locations.

Read report–https://www.sharekhan.com/MediaGalary/StockIdea/Gateway-3R-Oct29_2020.pdf

Oct 29, 2020 Bank of Baroda Stock Update HOLD  43 56 

Summary • Q2FY21 numbers were strong with better-than-expected operational performance, sequential asset quality improved along with margins expansion. • quality improved sequentially even on a proforma basis (normalized) with GNPA / NNPA at 9.33% / 2.67% from 9.39% / 2.83% in Q1 FY21; PCR at 85%. Asset quality faces uncertainties and will be a key monitorable. • BoB currently trades at 0.27x / 0.26x FY2022E/FY2023E BVPS. We fine-tuned FY2021E and FY2022E estimates and introduce FY2023E estimates. • We maintain our Hold rating on BoB with an unchanged PT of Rs. 56.

Read report–https://www.sharekhan.com/MediaGalary/StockIdea/BoB-3R-Oct29_2020.pdf

Oct 29, 2020 Carborundum Universal Limited Viewpoint POSITIVE  268 29-31% 

Summary • We maintain positive view on Carborundum Universal Limited (CUMI) considering its reasonable valuations and expect a 29- 31% upside. • Q2 was an operationally strong quarter with a 410 bps y-o-y rise in OPM that led to a 34% y-o-y net profit growth, sharply ahead of our estimates. • Focus on cost efficiencies and automation with a gradual uptick in economy should aid growth and support earnings. • Company has strong operating cash flow generation, which ensures to meet capex requirement without leverage and a consistent dividend paying record.

Read report–https://www.sharekhan.com/MediaGalary/Equity/Carborundum-Oct29_2020.pdf

November 2020 35 Sharekhan ValueGuide Stock Update EQUITY FUNDAMENTALS

Price Target/ Upside Recommendation Reco Price Date Company Report Type (%) (Rs.) Latest Chg Latest Chg Oct 30, 2020 Reliance Industries Limited Stock Update BUY  2,054 2,400 

Summary • Consolidated operating profit of Rs. 18,945 crore (up 12.3% q-o-q) slightly below our estimate but beat street expectations led by a beat in petchem EBIT margin of 16.6% and higher retail EBITDA of Rs. 2,009 crore (up 86% q-o-q). • Performance of digital services business was largely in-line, clocking an EBITDA of Rs. 8,345 crore (up 6.9% q-o-q) and ARPU of Rs. 145 (versus Rs140 in Q1FY21) while GRM disappointed at $5.7/bbl (down 10% q-o-q and below ours and street’s estimates). • We expect strong CAGR of 19% in PAT over FY21E-FY23E led by a rise in EBITDA share of digital services and retail businesses (at 49.6% in Q2FY21 vs. 41.1% in Q1FY21). A strong balance sheet (net cash of Rs. 10,256 crore) to provide muscle for inorganic growth. • We maintain our Buy rating on RIL with unchanged SoTP based PT of Rs. 2,400. Further value unlocking in digital and retail (post recent stake sale deals) would add value to shareholders return over coming years.

Read report–https://www.sharekhan.com/MediaGalary/StockIdea/RIL-3R-Oct30_2020.pdf

Oct 30, 2020 ICICI Bank Stock Update BUY  393 525 

Summary • ICICI Bank posted strong results for Q2FY2021, with operating performance better than expectations, improvement in collections efficiency (m-o-m) and q-o-q improved asset quality, even on proforma basis. • Improving collection efficiency, with strong traction in core fee income (up by 49% q-o-q); retail portfolio up by 12.8% y-o-y and 6.2% q-o-q, indicates improving business activity. Healthy pick up in ROE at 13.2% (from 8.9% in Q1FY2021) with higher CRAR at 18.5% (up 250 bps from Q1FY2021) make a strong quarter. • is available at 1.7x/1.5x its FY2022E/FY2023E BVPS, but adjusting for subsidiaries, it is at ~1.2x its FY2023E BVPS. • We maintain Buy rating with a revised SOTP-based PT of Rs. 525.

Read report–https://www.sharekhan.com/MediaGalary/StockIdea/ICICI_Bank-3R-Oct30_2020.pdf

Oct 30, 2020 Dixon Technologies Limited Stock Update BUY  9,317 11,000 

Summary • We recommend Buy on Dixon Technologies (Dixon) with a price target of Rs. 11,000, as we see further room for upside considering strong net earnings growth outlook over FY2021E-FY2023E. • Strong beat on operational performance as OPM rise on a y-o-y basis for almost all verticals. Overall, average capacity utilisation at 75%-80% for Q2. • Gearing up on scaling mobile vertical with approval of PLI scheme. Talks at final stages with three large customers in addition to the current anchor brand. • Capacity expansion in LED TVs, batons, down lighters, and washing machines on track. Upbeat on increasing overall ODM share as the mobile vertical achieves scale.

Read report–https://www.sharekhan.com/MediaGalary/StockIdea/Dixon-3R-Oct30_2020.pdf

November 2020 36 Sharekhan ValueGuide EQUITY FUNDAMENTALS Stock Update

Price Target/ Upside Recommendation Reco Price Date Company Report Type (%) (Rs.) Latest Chg Latest Chg Oct 30, 2020 Solara Active Pharma Sciences Stock Update BUY  1,138 1,371 

Summary • We retain our Buy recommendation on Solara Active Pharma Sciences (Solara) with a revised PT of Rs. 1,371. • Solara has delivered its best-ever quarterly performance, with the sales and PAT staging a sturdy growth of 13% and 96% yoy respectively. • The company is witnessing improved demand traction across its segment and geographies and has revised upwards its FY2021 Revenue and EBITDA growth guidance to 30%+ and 40%+ respectively. It also expects 2HFY2021 to be stronger than 1HFY21. • Strong growth prospects, better earnings visibility, healthy balance sheet, and improving return ratios would support multiple expansion.

Read report–https://www.sharekhan.com/MediaGalary/StockIdea/Solara-3R-Oct30_2020.pdf

Oct 30, 2020 UPL Limited Stock Update BUY  453 632 

Summary • UPL reported better-than-expected revenue growth of 14.4% to Rs. 8,939 crore (5.4% ahead of our estimate) driven by growth across regions. EBITDA margin of 20.2% (up 54bps y-o-y) lagged our estimates, given pricing pressures and unfavorable forex movement in Latin America. . • H2FY2021 to be strong for the US, Europe and Latin America, led by good agronomics; margins to expand led by price hikes in Latin America and growth in high-margin regions of US and Europe. • Company aims to reduce debt by $700-750 million and targets a net debt-equity ratio of 2x by March 2021. Management reiterated revenue and EBITDA growth guidance of 6-8% and 10-12%, respectively, for FY2021. • We expect PAT CAGR of 16% over FY2020-FY2023E, which would help generate cumulative FCF of Rs. 12,584 crore over FY2021E-FY2023E and help deleverage balance sheet). We retain Buy on UPL with an unchanged PT of Rs. 632.

Read report–https://www.sharekhan.com/MediaGalary/StockIdea/UPL-3R-Oct30_2020.pdf

Oct 30, 2020 Mastek Limited Stock Update BUY  863 1,040 

Summary • We recommend a Buy rating on Mastek Limited with a price target (PT) of Rs. 1,040 as risk-reward balance remains favourable. • Company delivered a strong set of numbers in Q2FY21, led by strong growth in both the UK and US businesses and accelerated growth in the Oracle services business; EBITDA margin expanded by 348 bps q-o-q to 21.1%; order-booking grew 22% q-o-q. • Management expects H2FY2021 to be better than H1FY2021, led by a strong order book, continued growth in UK government projects and higher demand for cloud-related services; Evosys order-book was up by over 65% y-o-y. • The stock is trading at a reasonable valuation of 10x its FY2023E EPS; net cash represents 21% of its current market capitalisation.

Read report–https://www.sharekhan.com/MediaGalary/StockIdea/Mastek-3R-Oct30_2020.pdf

November 2020 37 Sharekhan ValueGuide Stock Update EQUITY FUNDAMENTALS

Price Target/ Upside Recommendation Reco Price Date Company Report Type (%) (Rs.) Latest Chg Latest Chg Oct 30, 2020 Laurus Labs Limited Stock Update BUY  319 385 

Summary • Q2FY2021 was yet another quarter of stellar performance for Laurus Labs (Laurus) with results beating estimates on all parameters. Sales grew 60% yoy while adjusted PAT jumped 331% yoy. • The formulations business is witnessing elevated traction, which is expected to sustain going ahead. Also Laurus is expanding its formulations capacities by 80% over FY21&FY22 to support growth. • and API segments are on track for a double digit growth. Operating leverage, favorable mix to support OPM expansion. • Strong growth prospects, visibility on earnings, healthy balance sheet and return ratios are key positives We retain a Buy recommendation with a revised PT of Rs 385.

Read report–https://www.sharekhan.com/MediaGalary/StockIdea/Laurus-3R-Oct30_2020.pdf

Oct 30, 2020 Bharat Petroleum Corporation Limited Stock Update BUY  354 495 

Summary • Q2FY2021 adjusted operating profit at Rs. 4,485 crore/ Rs. 2,581 crore, up 101%/46% y-o-y) was above ours and the street’s estimates due to higher-than-expected inventory gains at Rs. 2,453 crore, better volumes and lower interest costs. • sharp beat in reported GRM at $5.8/bbl (up 71.6% y-o-y) led by refinery inventory gains of $4.3/bbl; derived blended marketing EBITDA margin declined by 17% q-o-q to Rs. 3,565/tonne (below our estimate). • The recent recovery in auto fuel volumes, above-average marketing margin and lower interest costs offers earnings visibility over FY2021E-FY2023E. We do not expect inventory gains in Q3FY21 as oil price has stabilised at $40/bbl. • The recent 15% decline in stock price due to delay in disinvestment process provides an entry opportunity given potential for re-rating as privatization could align valuation to global peers. Hence, we recommend Buy on BPCL with PT of Rs495.

Read report–https://www.sharekhan.com/MediaGalary/StockIdea/BPCL-3R-Oct30_2020.pdf

Oct 30, 2020 Schaeffler India Limited Stock Update BUY  3,764 4,500 

Summary • Schaeffler India (Schaeffler) Q3CY20 results beat estimates driven by better than expected operating performance. • Demand is recovering with pick-up in economic activities. Management stated recovery is better than expectations and expects growth n Q4CY20 as well. • Increased content per vehicle due to BS6 emission norms, strong growth in wind and railway business, new product introductions in aftermarket to continue to drive growth. • Schaeffler with its strong technological parentage and its established relationship with global OEM would provide growth opportunities. Company is debt free with healthy return ratios. We recommend Buy with TP of Rs 4,500.

Read report–https://www.sharekhan.com/MediaGalary/StockIdea/Schaeffler-3R-Oct30_2020.pdf

November 2020 38 Sharekhan ValueGuide EQUITY FUNDAMENTALS Stock Update

Price Target/ Upside Recommendation Reco Price Date Company Report Type (%) (Rs.) Latest Chg Latest Chg Oct 30, 2020 Cummins India Stock Update BUY  434 606 

Summary • We recommend Buy on Cummins India (Cummins) with a PT of Rs606, given high net earnings growth trajectory over FY2021E- FY2023E and discounted valuations. • The company reported strong outperformance on OPM led by favorable mix , cost reduction measures and pricing impact. Export revenues rise 18% y-o-y while domestic revenues declined 22% y-o-y. • Company is witnessing m-o-m and q-o-q recoveries pretty much in every segment. However, management remains cautiously optimistic and refrained from giving revenue guidance for FY2021 • Considering revival in its net earnings growth trajectory (23% CAGR) over FY2021E-FY2023E, strong balance sheet and steady cash flow generation, we remain optimistic on the company.

Read report–https://www.sharekhan.com/MediaGalary/StockIdea/Cummins-3R-Oct30_2020.pdf

Oct 30, 2020 Arvind Limited Stock Update BUY  34 43 

Summary • Q2FY2021 revenue growth recovered to ~66%, q-o-q better due to healthy export demand and a q-o-q improvement in domestic demand. • Denim, woven and garment volumes recovered to 80%, 60% and 66%, respectively, of the corresponding quarter. Advanced material division (AMD) is back to pre-COVID levels. • Cost-saving measures to aid better margins in FY2022 coupled with higher margins from AMD. Arvind to strengthen balance sheet by further reducing debt of ~Rs. 100 crore. • We maintain our Buy rating on stock with an unchanged PT of Rs. 43 as it trades at discounted valuation of 4.5x its FY2023E earnings and 3.5x its FY2023E EV/EBITDA (at a discount of ~30% since its listing last year).

Read report–https://www.sharekhan.com/MediaGalary/StockIdea/Arvind-Oct30_2020.pdf

Oct 30, 2020 IndusInd Bank Viewpoint POSITIVE  586 20-22% 

Summary • IndusInd Bank (IIB) posted mixed numbers for Q2FY2021 with above expectation operational performance and asset quality improving on a sequential basis (reported as well as normalised); however, elevated provisions and sequential margin contractions were dampeners. • Collections efficiency (CE) has been recovering, overall vehicles CE was at 94.3% and MFI collections were 91% for September (93% for October). • Asset-quality performance improved, as GNPA%/NNPA% declined q-o-q to 2.21%/0.52% in Q2FY2021. IIB currently trades at 1.0x/0.9x its FY2022E/FY2023E book value, which is reasonable. • We remain Positive and expect an upside potential of 20%-22%.

Read report–https://www.sharekhan.com/MediaGalary/Equity/IndusInd-Oct30_2020.pdf

November 2020 39 Sharekhan ValueGuide Stock Update EQUITY FUNDAMENTALS

Price Target/ Upside Recommendation Reco Price Date Company Report Type (%) (Rs.) Latest Chg Latest Chg Oct 30, 2020 Welspun India Limited Viewpoint POSITIVE  70 28-30% 

Summary • Revenue grew by 8.2% y-o-y in Q2FY2021, driven by 6% growth in the home textile market while the flooring segment’s revenue increased to Rs. 77 crore. Terry towel and bed linen volumes grew by 13% each. • Welspun expects to enhance bed linen and terry towel capacity by 20% each and rug capacity by 100% over the next 3-4 quarters, which will help in improving revenue. • Relatively benign cotton prices, higher contribution from branded products (currently 20%), and increased scale of the flooring business would help OPM to improve to ~20%. • With a stable capital allocation policy, focus on strengthening balance sheet, and recovery in the home textile market, Welspun is set to report an earnings CAGR of 15.6% over FY2020-FY2023E. We maintain our Positive view on the stock with a 28%-30% upside.

Read report–https://www.sharekhan.com/MediaGalary/Equity/Welspun-Oct30_2020.pdf

Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a position in the companies mentioned in the article.

November 2020 40 Sharekhan ValueGuide EQUITY FUNDAMENTALS SECTOR UPDATE

Sector View Date Sector Report Type Latest Chg Oct 01, 2020 Automobiles Sector Update Positive 

Summary • September 2020 was the second consecutive month of y-o-y growth for automotive companies (excluding CV). A pick-up in economic activities after the government’s unlocking measures, channel inventory filling ahead of the festive season and increasing preference for personal transportation boosted volumes. September sales for the automotive segments were marginally better than estimates. • 2W sales grew 12% yoy while Passenger vehicle segment volumes grew 29% yoy. • The decline in the CV segment narrowed to 2% y-o-y. Tractor segment volumes grew 15% yoy. • We expect automotive volumes (excluding CV) to sustain growth momentum witnessed in August 2020. We retain Positive view on the sector. Preferred picks: Hero MotoCorp, Bajaj Auto, and M&M in OEM. Balkrishna Industries, Mayur Uniquoters, Bosch, Schaeffler, Suprajit Engineering in ancillaries.

Read report–https://www.sharekhan.com/MediaGalary/Equity/Auto_Monthly_Review-Oct01_2020.pdf

Oct 05, 2020 Q2FY2021 IT Results Preview Sector Update Positive 

Summary • Tier-I IT companies are expected to return to their sequential growth trajectory of 1.5-3.8% q-o-q in constant currency terms during Q2FY2021, led by strong execution and improving demand in leading verticals. • Margins to remain stable or expand on a q-o-q basis, led by revenue growth, better cost control, and cross-currency tailwind. These tailwinds would be partially offset by rupee appreciation. • We expect acceleration of global outsourcing spending over the next few years, led by higher adoption of cloud, emergence of new operating models, and increasing core modernisation. • We stay Positive on the IT sector. CNX IT Index has outperformed the broader markets by 25% in the past three months; Preferred picks: Infosys, HCL Tech, Tech M, L&T Infotech, L&T Tech, and Birlasoft.

Read report–https://www.sharekhan.com/MediaGalary/Equity/Q2FY2021_IT_Results_Preview_Oct05_2020.pdf

Oct 06, 2020 Q2FY2021 Oil & Gas Results Preview Sector Update Positive 

Summary • In Q2FY2021, OMCs are expected to report healthy numbers led by inventory gains and recovery in volumes. Upstream PSUs, however, would clock weak numbers y-o-y given lower oil & gas realisations and volumes. • CGD volumes set to recover to 66%70%/101% of pre-COVID level for MGL/IGL/Gujarat Gas on easing of lockdown, while margin would also expand given benefit of operating leverage. • We stay positive on OMCs and gas companies; earnings outlook for OMCs stays robust on higher marketing margins, inventory gains and a sharp volume recovery. For CGD players, structural volume growth and margin drivers hold key; earnings to normalise to pre-COVID levels in FY22E. • Preferred picks–Reliance Industries, Mahanagar Gas, Gujarat Gas, IGL and Petronet LNG.

Read report–https://www.sharekhan.com/MediaGalary/Equity/Q2FY2021_OilGas_Preview_Oct06_2020.pdf

Š Upgrade  Š No change  Š Downgrade  Š Note: The arrow indicates change in call and price target, if any, vis-à-vis the previous report

November 2020 41 Sharekhan ValueGuide SECTOR UPDATE EQUITY FUNDAMENTALS

Sector View Date Sector Report Type Latest Chg Oct 07, 2020 Q2FY2021 Automobiles Results Preview Sector Update Positive 

Summary • After a washout in Q1FY21, Q2FY21 is expected to be a healthy quarter with 4% y-o-y topline growth expected for auto universe (ex-TAMO). Volumes have recovered due to strong rural sentiments, pick-up in economic activities due to unlock measures, increased preference for personal transportation and pent up demand. • OPM is expected to improve 70 bps y-o-y on account of operating leverage. Gross profit margins are expected to be stable as benefits of soft commodity prices are offset by pricing pressures due to BS6 emission norm transition. • Outlook for festive season is positive. FY22 is likely to witness strong recovery driven by pent up demand and normalisation of economic activities. • We retain Positive view on the sector. Preferred picks: Hero MotoCorp, Bajaj Auto, and M&M in OEM. Balkrishna Industries, Mayur Uniquoters, Bosch, Schaeffler, Suprajit Engineering in ancillaries.

Read report–https://www.sharekhan.com/MediaGalary/Equity/Q2FY2021_Auto_Results_Preview_Oct07_2020.pdf

Oct 07, 2020 Q2FY2021 Banking and Financial Services Results Preview Sector Update Positive 

Summary • Q2FY2021 for the BFSI sector will be influenced by regulatory and environmental factors; focus will be on management commentary rather than earnings performance. • Most banks and NBFCs saw a pick up in disbursements, collections, better funding access, and decline in cost of funds on a sequential basis but normalisation may take longer. • We retain preference for private banks, select NBFCs and are positive about the insurance space. • Preferred Picks: ICICI Bank, SBI, HDFC Bank, HDFC Life, Kotak Mahindra Bank, and ICICI Prudential.

Read report–https://www.sharekhan.com/MediaGalary/Equity/Q2FY2021_BFSI_Results_Preview_Oct07_2020.pdf

Oct 07, 2020 Q2FY2021 Consumer Goods Results Preview Sector Update Positive 

Summary • With operations recovering to pre-COVID levels and most markets opening up, consumer goods companies are expected to clock a 2-8% revenue growth (10-14% for food companies) in Q2FY2021. • Raw material prices remain benign and would benefit most companies under our coverage; despite increase in input price efficiencies, stringent media spends and better revenue mix would help OPM to remain stable for HUL, GCPL, TCPL and Marico. • Rural demand exceeds urban demand, market share gains from smaller players and new launches would drive growth in the near term. • Preferred Picks–We like companies with strong brands in essential categories, strong cash flows and good dividend payout– Asian Paints, HUL, Nestle India, Dabur India, Tata Consumer Products and Godrej Consumer Products.

Read report–https://www.sharekhan.com/MediaGalary/Equity/Q2FY2021_ConsumerGoods_Results_Preview_Oct07_2020.pdf

November 2020 42 Sharekhan ValueGuide EQUITY FUNDAMENTALS SECTOR UPDATE

Sector View Date Sector Report Type Latest Chg Oct 08, 2020 Q2FY2021 Pharmaceuticals Results Preview Sector Update Positive 

Summary • Pharmaceutical companies are expected to a report healthy performance for Q2FY2021 after a phenomenal show in the preceding quarter Q1FY21. • Pharmaceutical companies in Sharekhan’s our universe are expected to clock a revenue growth of 7.6% y-o-y, while the earnings are expected to grow by a sturdy 14.5% y-o-y. • Improved growth prospects in export and domestic markets, easing of regulatory pressures and a focus on specialty / complex products in addition to emerging opportunities in the API space would be key growth drivers. • Preferred Picks: Aurobindo, Cipla, Divis Laboratories, Laurus Labs, Granules, Sanofi India, Abbott India, Strides Pharma Science, Shilpa Medicare.

Read report–https://www.sharekhan.com/MediaGalary/Equity/Q2FY2021_Pharma_ResultsPreview-Oct08_2020.pdf

Oct 08, 2020 Q2FY2021 Capital Goods & Engineering Results Preview Sector Update Positive 

Summary • Gradual return to normalcy in business operations for companies in the capital goods sector and easing of the lockdown norms have led to many companies nearing pre-COVID-level operations with an improvement in execution and production. • Consumer goods/electrical-based companies are witnessing a recovery in sales after being impacted in the lockdown; demand is further expected to pick-up as the festive season nears. • Key monitorables going ahead are outlook on ordering activity/execution and working capital intensity for project-based companies and demand recovery across different regions for consumer durables/electricals companies. • Among project-based companies, we prefer L&T, Bharat Electronics, Honeywell Automation India, Carborundum Universal, Cummins India, KEC while in the consumer durables space we prefer Polycab, Dixon Technologies, Amber Enterprises and KEI Industries.

Read report–https://www.sharekhan.com/MediaGalary/Equity/Q2FY2021_CapitalGoods_ResultsPreview-Oct08_2020.pdf

Oct 08, 2020 Q2FY2021 Consumer Discretionary Results Preview Sector Update Neutral 

Summary • Q2FY2021 will be another wash-out quarter for branded apparel, retail and entertainment companies while QSRs, footwear and top jewelers will see a good recovery with gradual opening of stores. Revenue to decline by 10-90% for our universe. • Higher fixed costs and lower sales would lower operating leverage, which will hit profitability of most companies. There will be sequential improvement for companies such as Titan, Jubilant Foodworks and Relaxo Footwears. • For footwear and QSR companies, business would normalise earlier by Q3, whereas branded apparel and retail companies will see a full recovery by Q4 driven by festive/wedding demand. Overall, consumer discretionary companies are likely to bounce back in FY2022. • Preferred picks–We stay selective; prefer Trent, Jubilant Foodworks, Bata India and Relaxo Footwears.

Read report–https://www.sharekhan.com/MediaGalary/Equity/Q2FY2021_ConsumerDisc_ResultsPreview-Oct08_2020.pdf

November 2020 43 Sharekhan ValueGuide SECTOR UPDATE EQUITY FUNDAMENTALS

Sector View Date Sector Report Type Latest Chg Oct 08, 2020 Q2FY2021 Cement/Infrastructure/Building Material Results Preview Sector Update Positive  Summary • The cement, infrastructure,and building material segments are expected to positively surprise on the demand front in Q2FY2021 seen in the context of the impact COVID-19 had on Q1FY2021 earnings. • The cement sector is expected to benefit from operating leverage as demand sees uptick.Infrastructure is likely to be affected by labour availability and monsoons. Building materials players are expected to see sharp sequential improvement as revenue picks up.. • We expect all three sectors to see healthy pick-up in business post the monsoon season, as execution of projects picks up followed by a strong bounceback in FY2022. • We stay Positive on the sector.Preferred picks- UltraTech, Shree Cement, The Ramco Cements, JK Lakshmi Cement, KNR Construction, PNC Infratech, Century Plyboards, and Pidilite Industries.

Read report–https://www.sharekhan.com/MediaGalary/Equity/Q2FY2021_Cement_Infra_ResultsPreview-Oct08_2020.pdf

Oct 08, 2020 Q2FY2021 Agri Inputs and Speciality Chemicals Results Preview Sector Update Positive 

Summary • Good monsoon and higher Kharif plantation to lead to healthy demand for agri-inputs. Large players like UPL/PI Industries to gain market share and see margin expansion. • Specialty chemical on recovery path but industrial chemicals players are yet to reach pre-COVID levels. Benign input prices and better product mix would help sector report resilient margins. • Outlook for agri-input space is positive as demand would remain strong in Rabi season led by a good monsoon. Rising domestic demand and import substitution present strong opportunity for specialty chemicals. Strong earnings outlook & favourable policies to aid sector re-rating. • Preferred Picks: UPL, Coromandel International, PI Industries, Aarti Industries, SRF and Sudarshan Chemical.

Read report–https://www.sharekhan.com/MediaGalary/Equity/Q2FY2021_Agri_Input-ResultsPreview-Oct08_2020.pdf

Oct 08, 2020 Life Insurance Sector Update Positive 

Summary • September business figures for life insurers indicate a strong revival in new business premium and return to normalcy for the sector. • The overall sector grew by 26.5% y-o-y, while Private Insurers clocked a 20.1 % y-o-y rise, wherein large players like HDFC Life, ICICI Life outperformed the market in total first-year premium for September 2020. Performance indicating a healthy traction in monthly numbers for life insurance segment. • We find the insurance space attractive given a long runway for growth and believe that players with a strong balance sheet and business metrics would be able to tide over the crisis. • Investment Picks – We like Bajaj Finserv (holding company of Bajaj Allianz Life), HDFC Life, ICICI Prudential, and Max Financial as we find these companies to have a strong balance sheet with healthy operating metrics, which would enable them to be better placed to tide over medium-term challenges.

Read report–https://www.sharekhan.com/MediaGalary/Equity/LifeInsurance-Oct08_2020.pdf

November 2020 44 Sharekhan ValueGuide EQUITY FUNDAMENTALS SECTOR UPDATE

Sector View Date Sector Report Type Latest Chg Oct 27, 2020 Automobiles Sector Update Positive 

Summary • October is likely to be the second consecutive month of y-o-y growth for automotive companies (excluding CV). • Pick-up in economic activities post the government’s unlock measures, pent up demand, increased preference for personal transport, and channel filling ahead of the festive season to boost volumes. • In Initial festive period of Navratri and Dusherra, while passenger vehicle retails have grown in double-digits y-o-y, two-wheeler sales have been lower by about 6-7%. Retail automotive demand in the entire festive season spanning October to mid- November would be the key monitorable. After two consecutive years of a decline, we expect strong double-digit growth in FY22 as economic activities normalise. We retain Positive view on the sector. • Preferred Picks–M&M, Hero Motocorp, Bajaj Auto in OEM; Balkrishna Industries, Mayur Uniquoters, Bosch, Schaeffler, Suprajit Engineering in ancillary space.

Read report–https://www.sharekhan.com/MediaGalary/Equity/Auto_Monthly_Preview-Oct27_2020.pdf

Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a position in the companies mentioned in the article.

November 2020 45 Sharekhan ValueGuide TREND & VIEW EQUITY TECHNICALS

Marching north

Daily view A fresh rally originated in October from the 200 DMA that took Nifty to the 12000 mark The index had a short-term consolidation at that level, which took the form of a sideways channel Recently, the channel broke out on the upside with a breakaway gap. The price breakout was being accompanied by the daily momentum indicator The daily momentum indicator triggered bullish crossover near the equilibrium line & started a new cycle on the upside. The daily Bollinger Bands are expanding, which is assisting price action on the way up

Weekly view

The Nifty had a sharp decline in September Selling pressure was absorbed near the key weekly moving averages Thereon, the index took off sharply & crossed the August high of 11794. In terms of the Fibonacci retracement, the Nifty crossed 78.6% retracement of the Jan-March decline. After having surpassed these crucial hurdles, the Nifty has recently surpassed the all time high of 12430 and has entered uncharted territory As the rally has started from the strong support zone, it is likely to sustain at the highs

Monthly view

The Nifty had a pretty sharp rise from March’s low of 7511. The index posted a negative monthly close in September after three consecutive positive months October started on positive note though the index witnessed consolidation in the second half With the start of November, the Nifty has resumed the larger uptrend and is showing signs of extension on the upside

Medium Term Trend Support / Index Target Trend Reversal Resistance Nifty 13350 á 11700 11700 / 13350

November 2020 46 Sharekhan ValueGuide EQUITY DERIVATIVES MONTHLY VIEW

Sharp run-up backed by strong long build-up

In the October series, after starting the expiry with a very Top five stock futures with the highest open interest in low open interest of just 83 lakh shares, the Nifty saw the current series are: a sharp pull back from 10800 levels to around 12000. OPEN INTEREST FUTURES However, at the end despite some selling pressure, the (Rs. Cr) index still closed the October contract with significant gain of around 8%. Majority of the upmove in Nifty was backed RELIANCE 6,615.00 by significant long addition as month-on-month the open ICICIBANK 6,147.71 interest in Nifty increased by 26%. However, we feel that HDFC 5,962.69 the rollover of 77.45% versus the three-month average of 76.05%, were mixed as rollover cost was negative by HDFCBANK 5,255.59 2 points, but a majority of the positions rolled over were BHARTIARTL 4,529.09 on the longer side. On the other hand, the Bank Nifty Source: Sharekhan outperformed the Nifty as it closed with a spectacular gain of 17% with a 5% fall in open interest indicating short Top five stock options with the highest open interest in covering in the index. Rollover in the Bank Nifty was bit on the current series are: the lower side at 73.59% vs 3 Month average of 77.42%. . OPEN INTEREST OPTIONS Barring the last week of October, FII action in the equity (Rs. Cr) cash market has been positive throughout the October RELIANCE 8,294.15 series, they were net buyers of around Rs. 15,048 crore and SBIN 2,865.45 so far in November, they have already bought Rs. 23,575 crore. However, in the derivatives segment also, they are BAJFINANCE 2,449.15 quite positive as they are net buyers in Index Futures with ICICIBANK 2,204.85 around 75000 contracts and there long-to-short ratio is also a bit on the higher side at 75%. HDFCBANK 1,991.82 Source: Sharekhan MARKET WIDE VS NIFTY ROLLOVER ACTIVITY: Nifty Market Wide 100.00% 90.00% View for November series: 80.00% 70.00% On the options front, in the November monthly expiry 12000 60.00% PE is the highest in terms of open interest with ~32.78 lakh 50.00% 40.00% 91.94% shares. On the call side, the build-up is quite scattered, the 90.46% 89.89% 88.82% 87.85% 86.69% 81.59% 81.13% 80.60% 79.92% 78.93% 77.91% 77.59% 75.67% 30.00% 75.30% 71.29%

62.12% highest open interest is at 13000 CE with 18.36 lakh shares.

20.00% 55.19% 10.00% Put-call Ratio (PCR) in November series has been 0.00% Jul Jun Apr Sep Aug

May continuously trading on the higher side currently at around Rollover highlights: 1.71. On the other hand, post the big event of US Elections The Nifty Futures began the NOVEMBER series with an and Bihar elections, the volatility index has cooled off open interest at 1.05 crore shares versus 0.84 crore shares significantly from around 26% it came down to 21%. Seeing in open interest. the above data with high PCR and with FIIs holding overt The NOVEMBER series started with Rs.98,189 crore versus positions on the long side especially in index futures, we Rs. 90,264 crore in stock futures, Rs. 12,305 crore versus Rs. 9,096 crore in Nifty futures & Rs.126,614 crore versus feel the market would take a pause and can see some Rs. 117,755 crore in index options and Rs.27,518 crore profit-booking till 12300-12400 levels. However, one can versus 25,044 crore in stock options. think to re-enter with a target of 12800. Nifty NOVEMBER month rollover is at 77.45% versus 70.63%. Bank Nifty NOVEMBER month rollover is at 73.59% versus 79.05% Market-wide rollover is at 92.85% versus 92.51%..

November 2020 47 Sharekhan ValueGuide MONTHLY VIEW CURRENCY FUNDAMENTALS

Currencies: Euro slips as ECB hints at further stimulus Key points CURRENCY LEVELS IN OCTOBER (IN RS.) India’s CPI inflation accelerated by 7.34% in September as compared to 6.69% in August Currency High Low Close % Monthly Change India’s industrial production data showed factory output contracted by 8% USDINR 74.16 73.03 74.10 0.47 in August from -10.4% in July 2020 IMF projects world GDP to contract by 4.4% in 2020 as compared to EURINR 87.46 85.72 86.94 0.51 -5.2% June forecast. GBPINR 96.86 93.90 96.26 1.69 IMF expects India GDP to contract by 10.3% in FY21 compared to -4.5% in June forecast. JPYINR 71.09 68.96 71.08 1.83 US Advance GDP data showed economy expanded by 33.1% in Q3 CY20 as compared to a contraction of 31.4% in Q2CY20. Spot INR Movement in October Spot INR Movement in October USDINR JPYINR EURINR GBPINR 74.2 71 87.5 97 87.3 74 96.5 87.1 73.8 70.5 86.9 96 73.6 86.7 95.5 70 86.5 73.4 86.3 95 69.5 86.1 73.2 94.5 85.9 94 73 69 85.7 85.5 93.5 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 ------20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 ------Oct Oct Oct Oct Oct Oct Oct Oct Oct Oct Oct Oct Oct Oct Oct ------Oct Oct Oct Oct Oct Oct Oct Oct Oct Oct Oct Oct Oct Oct Oct ------29 27 25 23 21 19 17 15 13 11 09 07 05 03 01 29 27 25 23 21 19 17 15 13 11 09 07 05 03 01 USD-INR: CMP–Rs. 74.20 Indian Rupee depreciated by 0.47% in the previous month on a strong US Dollar. Further, the rupee slipped on disappointing macroeconomic data and worries over economic recovery due to rising Coronavirus cases. India’s CPI inflation remained above the mid-point of the RBI’s target range of 2-6%. India’s industrial production data showed that factory output contracted for 6 consecutive months. Additionally, RBI projected India’s real GDP to contract by 9.5% in 2020-21 with risk tilted to the downside. The IMF expects India’s GDP to contract by 10.3% in FY2021 as compared to -4.5% in the June forecast. The World Bank slashed India’s GDP growth forecast to -9.6% in 2020-21 from the June forecast of -3.2%. Outlook: The Indian Rupee is expected to trade with negative bias amid worries over an economic recovery due to mounting Coronavirus cases across the globe. Additionally, expectation of disappointing macroeconomic data will hurt the Rupee. CPI inflation is likely to remain above the mid-point of RBI’s target range of 2-6%. Uncertainty over U.S election outcome faded after Democrat Joe Biden secured more than 270 electoral votes but still all eyes will be on who wins control of the Senate, as investors are worried that if there is divided government than it will be difficult for passing any legislation. Additionally, market will remain cautious ahead of outcome of Bihar election. The expected trading range in near term is 73.0-75.50. EUR-INR: CMP–Rs. (87.75) Euro depreciated by 0.63% in the previous month on a strong US Dollar and disappointing economic data from the Euro area. Further, the Euro slipped lips on concerns over rising Coronavirus cases in the continent. European governments are reintroducing restrictions to curb the spread of the virus. Furthermore, Euro slipped as the European Central Bank (ECB) signaled further monetary easing in December. Outlook: The Euro is expected to trade with a negative bias amid disappointing economic data from the Euro Area and ongoing concerns over rising Coronavirus cases in Europe. Governments in European countries are reintroducing restrictions to curb the spread of COVID-19, which has made traders worried over the Eurozone’s economic recovery. The ECB has signaled further monetary easing in December. Additionally, the EU expects the euro area’s economy to contract by 7.8% in 2020 as compared to -8.7% predicted in July and by 4.2% in 2021 versus 6.1% predicted in July. The expected trading range in the near term is 85.70-88.30. GBP-INR: CMP Rs. 97.80 The British pound appreciated by 0.19% in October as trade talks between EU and UK resumed again. Further, it gained strength on hopes that deal may be reached before deadline. However, a sharp upside was capped by a strong US Dollar and disappointing economic data. Additionally, market sentiments were fragile ahead of US presidential election and ongoing concern over a surge in Coronavirus cases in the US and Europe. Outlook: The Pound is expected to trade with a negative bias on disappointing economic data from country and worries over economic recovery due to rising Coronavirus cases across the globe. Further, traders fear that new COVID-19 restrictions in UK may add pressure on economy. UK Prime Minister Boris Johnson had announced a lockdown across England till December 2. Additionally, traders will remain cautious ahead of outcome of trade talk between UK and EU Brexit negotiators as significant differences remain in number of areas. Furthermore, the Bank of England increased its bond buying program by 150 billion pounds. The BoE expects economy to shrink by 11% in 2020 as compared to -9.5% forecasted in August. Expected trading range for the Pound in the near term is 96.0-99.50. JPY-INR: CMP Rs. 70.78 The Yen appreciated by 0.76% in the previous month as safe-haven demand increased on rising worries over a global economic recovery and concern over rising Coronavirus cases in Europe and the US. Further, Market sentiments were hurt on uncertainty ahead of the US Presidential election and dwindling hopes for an aid bill before the election. Outlook: The Japanese Yen is expected to trade with positive bias as safe-haven demand may increase on worries over an economic recovery due to mounting coronavirus cases across globe and many countries in Europe are tightening COVID-19 restrictions as numbers surge. Uncertainty over U.S election outcome faded after Democrat Joe Biden secured more than 270 electoral votes but still all eyes will be on who wins Senate, as investor are worried that if there is divided government than it will be difficult for passing any legislation. Additionally, investors will remain cautious ahead of updates on Brexit trade talks between EU and UK and G20 meeting. Expected trading range in near- term is 69.60-72.50. CMP as on November 05, 2020

November 2020 48 Sharekhan ValueGuide CURRENCY TECHNICALS TREND & VIEW

USD-INR: Trendline holds the key GBPINR: Range Bound The USD-INR witnessed a sharp pullback in the last fortnight In October, the GBPINR pair witnessed a decent pullback after of October enabling it to close on a positive note for the second a deep cut in September. The pair traded within 98.38-93.25 and consecutive month. closed around the highs for the month. On the monthly charts, we can observe that the pair has managed to The pair has been broadly trading in the range 99.32-91.71 since hold on to the rising support trendline and stage a pullback. On the past six months. We expect the pair to breakout of this range on the weekly charts, the pair has managed to close above the key moving upside. The monthly momentum indicator has a positive crossover, averages, which indicates strength and is a positive sign. which is a bullish sign for the pair. The monthly Bollinger Bands are expanding, which indicates that The weekly as well as the monthly momentum indicator has a the positive price action is likely to continue. Also, the pair is trading positive crossover which is a Bullish sign for the pair. above the key monthly moving averages, which indicates strength. Considering the above factors, we believe that the pair is likely to We expect the pair to trade with a positive bias during October continue with trade with a positive bias and target levels of 77, which and target levels of 100.70, where resistance in the form of a falling is the previous swing high. Beyond that it has potential to stretch trendline is placed. Beyond that it has potential to stretch higher higher till 78.00. Reversal of the bullish stance is placed at a close till 105.29. Reversal of the bullish stance is placed at a close below below 72.40. 93.25.

JPY-INR: Breakout on the cards EUR-INR: Role Reversal at Play During October, JPYINR witnessed a sustained buying interest from In October, EURINR witnessed buying interest and the pair managed the lower boundary (69.00) of the broad trading range (69.00-72.00) to close on a positive note after two months of a negative close. within which it has been trading since past six months. On the monthly charts, we can observe that the pair has found We continue to believe that this is a consolidation after the sharp run support in the range of 86.20-85.50. The range which was acting as up it witnessed in March. The consolidation was sideways in nature a resistance zone earlier is now acting as a support zone as per the and now is likely to breakout. principle of role reversal. The monthly momentum indicator has a positive crossover and The Higher Top Higher Bottom formation is intact on the monthly prices are trading above the key monthly moving averages. Both are timeframe, which indicates uptrend. Also, the monthly momentum indicating strength. indicator has a positive crossover, which is a Bullish sign. On the upside, we expect the pair to target levels of 75.00 which is arrived at by adding the consolidation range (72-69=3) to the We expect the pair to continue with the positive momentum and breakout level (72). Beyond that it has potential to stretch higher till target a level of 92.00 which is the previous swing high. Reversal of 76.6, which is the upper end of the channel. Reversal of the bullish the Bullish stance is placed at a close below 85.50. stance is placed at a close below 69.00.

Currency View Reversal Supports Resistances Target USD-INR UP 72.40 73.47 / 72.95 74.95 / 76.20 78.00 EUR-INR UP 85.50 86.40 / 85.80 89.46 / 91.00 92.00 GBP-INR UP 93.25 96.10 / 94.50 99.00 / 100.70 105.29 JYP-INR UP 69.00 70.30 / 69.00 72.83 / 75.00 76.60

November 2020 49 Sharekhan ValueGuide PMS FUNDS PMS DESK

PRIME PICKS STRATEGY

OVERVIEW Prime Picks Portfolio Performance (as of October 2020) Prime Picks is a multi-cap discretionary PMS scheme. It aims to outperform the BSE 200 & CNX Mid Cap 100 indices across Duration Prime Picks* BSE 200 market cycles. 1 Month 1.6% 2.7% Scheme comprises two folios, Quality and Alpha, with a distinct investing 3 Month 4.1% 5.5% style to offer. 6 Month 14.1% 18.6% Based on the client risk profile allocation between conservative /moderate / aggressive. 1 Year -2.6% -1.5% It’s a long only fund. 2 Year 4.3% 10.6% *Note: Net of Quarterly AMC Fees INVESTMENT STRATEGY *Note: Returns mentioned are TWRR method Right mix of two different strategies with a high standard of management and corporate governance through in-depth research Disclaimer: Returns are based on a client’s returns since by experienced in-house fundamental research team. inception and may be different from those depicted in the risk disclosure document. Aims to leverage on investment opportunities in structural growth sectors through Quality folio whereas the allocation to more aggressive Alpha folio would add to superior outperformance across Top 5 Stocks – Prime Picks QUALITY market cycles. 1 ASIAN PAINTS Maintain judicious mix between Quality and Alpha through dynamic 2 HDFC BANK investment strategy and providing flexibility to investors to make changes to allocations between the two folios once every year. 3 ICICI BANK 4 HDFC LIFE PRICING & PRODUCT FEATURES 5 RELIANCE INDUSTRIES

Minimum investment of Rs.50 lakh Top 5 Stocks – Prime Picks ALPHA Charges 1 BATA INDIA ¾ 2% per annum (plus taxes); AMC fee charged every quarter. 2 DIVIS LAB ¾ 0.5% brokerage on every trade executed. 3 MAHANAGAR GAS ¾ 20% profit sharing after the 18% hurdle is crossed at the end of 4 MAYUR UNIQUOTERS every fiscal (with higher watermark basis). 5 TATA CONSUMER

32.5% 18.6%

14.1%

20.0% 10.6%

9.8% 5.5% 7.0% 4.1% 4.3% 2.7% 1.6% 2.7% 3.2% -0.5% -2.3% -1.4% -0.3%

1 Month 1 Month3 Month 3 Month 6 Month 6 Month 1 Year1 Year 2 Year2 Year -1.5% -2.6% Prime Picks PMS BSE 200

November 2020 50 Sharekhan ValueGuide ADVISORY DESK MONTHLY PERFORMANCE

Advisory Products and Services The Advisory Desk is a central desk consisting of a Mumbai- Advisory Products & Services based expert team that runs various sample model portfolios for illustrative purposes only for clients of all profiles, be they traders or investors. These products are different from Sharekhan research-based TdTrader technical and fundamental offerings as these essentially Investor try to capture the trading opportunities in stocks where momentum is expected before or after some event including Acti ona ble Ideas MID Derivative Sharekhan Intraday Calls the announcement of results or where some news/event is Pre Market Action (Cash) probable. Derivative Calls Derivative Idea (Opt) Advisory products are ideal for those who do not have time to (Fut+Opt) either monitor the market tick by tick or shift through pages of Stocks In Technical Derivative News view view research for data or pour over complex charts to catch a trend. However, all these products require perfect discipline and money management. For Investor

ACTIONABLE IDEAS These calls focus on generating absolute returns over a timeframe of 6-12 months and have a favourable risk-reward ratio. Stocks are closely tracked based on regular interaction with companies’ management to stay abreast of the business outlook. For details about the product, please write to us at [email protected].

For traders INTRADAY CALLS These are technical analysis calls. Calls will be generated in the cash segment and closed before the end of the trading day. These calls have pre-defined stop loss, targets. For details of the product, please write to us at advisory@sharekhan. com. DERIVATIVE CALLS These calls are based on the analysis of open interest, implied volatility and put-call ratio in the derivatives market. It is a leveraged product and ideal for aggressive traders. These calls have a pre-defined stop loss, target, timeframe and quantity to be executed. For more details on this product, please write to us at [email protected]. DERIVATIVE IDEA FUTURES Calls are in (stocks & index) futures segment, based on an analysis of open interest, implied volatility and the put-call ratio in the derivatives market. It is a leveraged product and ideal for aggressive traders. These calls have pre-defined stop loss, targets, timeframe and quantity to be executed. For more details on this product, please write to us at derivative@ sharekhan.com. SHAREKHAN PRE-MARKET ACTION This report gives us stocks in news, with likely the price effect which is valid for a day. The report has different sections– Stocks in News, Events, Technical View and Derivative View alongwith positive and negative bias stocks. The report is valid for a day, for more details please write to us on [email protected].

Report Card

Product Intraday Calls (Cash) Derivative Calls Derivative Idea Future and Strategy Month October 20 CY 20 October 20 CY 20 October 20 CY 20 No. of calls 59 315 63 604 3 73 Profit booked 36 185 36 322 3 41 Stop loss hit 23 130 27 288 0 32 Strike rate (%) 61% 59% 57% 53% 100% 56%

November 2020 51 Sharekhan ValueGuide MF PICKS MUTUAL FUNDS DESK Sharekhan mutual fund Finder November 2020 Top Equity Fund Picks Data as on October 01, 2020 Absolute % Compounded Annualised % (Point to Point) (Point to Point) Scheme Name *Riskometer NAV (Rs.) Since 6 Months 1 yr 3 yrs 5 yrs Inception Large Cap Funds Axis Bluechip Fund - Growth Moderately High 31 24.2 0.7 9.5 10.6 11.2 Mirae Asset Large Cap Fund - Reg - Growth Moderately High 52 38.6 3.4 5.5 10.1 14.1 BNP Paribas Large Cap Fund - Growth Moderately High 94 29.0 0.6 5.5 7.2 15.0 Kotak Bluechip Fund - Reg - Growth Moderately High 245 38.3 4.4 5.4 7.5 18.6 UTI Mastershare Unit Scheme - Growth Moderately High 125 35.3 3.4 5.3 7.1 14.9 HSBC Large Cap Equity Fund - Growth Moderately High 213 33.5 1.0 3.7 8.1 18.7 ICICI Prudential Bluechip Fund - Growth Moderately High 41 35.3 -1.4 3.3 8.0 12.2 Large & Mid Cap Fund Invesco India Growth Opportunities Fund - Growth Moderately High 35 34.6 2.7 5.6 9.0 10.1 Canara Robeco Emerging Equities - Growth Moderately High 101 38.6 11.9 5.0 10.7 16.0 Kotak Equity Opportunities Fund - Reg - Growth Moderately High 126 36.4 7.2 4.6 9.1 17.1 Sundaram Large and Mid Cap Fund - Reg - Growth Moderately High 34 34.7 -2.7 4.2 8.6 9.4 SBI Large & Midcap Fund - Growth Moderately High 217 35.2 0.8 3.1 6.9 13.4 Principal Emerging Bluechip Fund - Growth Moderately High 109 38.4 8.6 2.6 10.2 22.3 DSP Equity Opportunities Fund - Reg - Growth Moderately High 221 34.9 -0.1 2.3 8.7 16.4 IDFC Core Equity Fund - Reg - Growth Moderately High 44 41.1 1.6 1.2 7.8 10.2 Mid Cap Fund Axis Midcap Fund - Growth Moderately High 43 33.1 14.0 11.6 10.7 16.3 Invesco India Mid Cap Fund - Growth Moderately High 54 39.5 16.0 6.8 9.8 13.3 DSP Midcap Fund - Reg - Growth Moderately High 62 42.7 16.1 5.8 11.8 14.0 Kotak Emerging Equity Fund - Reg - Growth Moderately High 41 42.5 9.8 3.6 9.5 11.1 Edelweiss Mid Cap Fund - Growth High 29 44.0 11.8 3.6 8.0 8.6 Nippon India Growth Fund - Growth Moderately High 1168 43.7 9.7 3.5 8.0 21.0 BNP Paribas Mid Cap Fund - Growth High 35 37.2 12.8 0.9 6.6 9.0 Small Cap Fund Axis Small Cap Fund - Reg - Growth Moderately High 33 39.7 11.0 9.2 11.4 19.2 Kotak Small Cap Fund - Reg - Growth Moderately High 80 54.2 15.5 3.2 8.8 14.2 HDFC Small Cap Fund - Growth Moderately High 39 48.9 0.1 0.3 8.3 11.4 ICICI Prudential Smallcap Fund - Ret - Growth Moderately High 26 47.8 7.1 0.1 6.0 7.7 L&T Emerging Businesses Fund - Reg - Growth High 22 48.6 0.0 -3.4 8.6 13.3 Focused Fund SBI Focused Equity Fund - Growth Moderately High 145 23.3 0.6 6.7 10.0 18.1 Axis Focused 25 Fund - Growth Moderately High 30 31.4 1.4 6.7 11.2 14.1 Principal Focused Multicap Fund - Growth Moderately High 68 28.1 6.6 5.8 8.5 13.7 Sundaram Select Focus - Reg - Growth Moderately High 180 31.3 -0.2 5.2 8.0 17.2 Motilal Oswal Focused 25 Fund - Reg - Growth Moderately High 23 29.0 1.1 4.4 7.7 12.1 Aditya Birla Sun Life Focused Equity Fund - Growth Moderately High 59 34.2 1.5 2.4 7.1 12.7 Multi Cap Funds Canara Robeco Equity Diversified Fund - Growth Moderately High 146 34.2 9.3 8.1 9.4 17.0 DSP Equity Fund - Reg - Growth Moderately High 41 29.9 0.5 5.1 9.0 11.2 Edelweiss Multi-Cap Fund - Reg - Growth Moderately High 14 32.5 -0.7 3.6 7.8 6.5 Invesco India Multicap Fund - Growth Moderately High 48 36.0 4.7 1.5 6.6 13.3 Principal Multi Cap Growth Fund - Growth Moderately High 138 34.6 2.7 1.0 8.4 14.1

November 2020 52 Sharekhan ValueGuide MUTUAL FUNDS DESK MF PICKS

Data as on October 01, 2020 Absolute % Compounded Annualised % (Point to Point) (Point to Point) Scheme Name *Riskometer NAV (Rs.) Since 6 Months 1 yr 3 yrs 5 yrs Inception Value & Contra Funds Invesco India Contra Fund - Growth Moderately High 49 40.4 7.0 6.4 10.4 12.6 Kotak India EQ Contra Fund - Reg - Growth Moderately High 53 39.0 1.1 5.6 9.0 11.6 UTI Value Opportunities Fund - Growth Moderately High 63 38.5 5.6 4.6 6.4 12.8 HDFC Capital Builder Value Fund - Growth Moderately High 270 41.8 -1.1 0.5 6.8 13.1 Tata Equity P/E Fund - Reg - Growth Moderately High 133 40.0 1.4 0.4 9.9 17.3 ELSS Canara Robeco Equity Tax Saver Fund - Growth Moderately High 73 38.6 12.5 9.6 10.1 18.6 Mirae Asset Tax Saver Fund - Reg - Growth Moderately High 19 44.1 9.6 7.8 -- 14.6 Axis Long Term Equity Fund - Growth Moderately High 47 26.7 1.0 6.8 9.0 15.5 Invesco India Tax Plan - Growth Moderately High 54 36.0 6.2 6.3 8.7 13.0 Kotak Tax Saver Fund - Reg - Growth Moderately High 46 36.3 4.3 4.7 8.2 10.7 BNP Paribas Long Term Equity Fund - Growth Moderately High 41 30.6 3.5 4.0 6.7 10.0 Aditya Birla Sun Life Tax Relief 96 - Growth Moderately High 32 31.9 6.0 3.5 8.5 9.7 DSP Tax Saver Fund - Growth Moderately High 49 35.5 -0.8 3.1 9.0 12.2 Thematic/Sector Funds Aditya Birla Sun Life India GenNext Fund - Growth High 86 29.8 0.4 5.1 10.0 15.3 ICICI Prudential Banking and Financial Services Fund - Retail - Growth High 51 28.0 -19.1 -4.7 6.8 14.3 Aditya Birla Sun Life Banking and Financial Services Fund - Reg - High 23 27.2 -18.8 -5.7 7.0 12.9 Growth DSP Natural Resources & New Energy Fund - Reg - Gth High 28 32.7 -9.5 -6.8 11.3 8.6 L&T Infrastructure Fund - Reg - Growth High 13 25.0 -15.0 -7.9 4.2 1.9 BNP Paribas Equity schemes Absolute Compounded Annualised % % (Point to Scheme (Point to Point) Scheme name *Riskometer Category Point) Since 6 Months 1 yr 3 yrs 5 yrs Inception Aggressive BNP Paribas Substantial Equity Hybrid Fund - Reg - Growth Moderately High 21.4 4.7 7.1 -- 7.6 Hybrid BNP Paribas Large Cap Fund - Growth Moderately High Large Cap 29.0 0.6 5.5 7.2 15.0 BNP Paribas Long Term Equity Fund - Growth Moderately High ELSS 30.6 3.5 4.0 6.7 10.0 BNP Paribas Mid Cap Fund - Growth High Mid Cap 37.2 12.8 0.9 6.6 9.0 BNP Paribas Multi Cap Fund - Growth Moderately High Multi Cap 28.1 -2.1 0.0 5.7 10.7 BNP Paribas Focused 25 Equity Fund - Reg - Growth Moderately High Focused 26.9 -0.7 -- -- -1.0 BNP Paribas India Consumption Fund - Reg - Growth High Thematic 23.7 6.1 -- -- 12.9

*The Riskometer will indicate five levels of risk – low (principal at low risk), moderately low (principal at moderately low risk), moderate (principal at moderate risk), moderately high (principal at moderately high risk) and high (principal at high risk).

Every individual has a different investment requirement, which depends on his financial goals and risk-taking capacities. We at Sharekhan first understand the individual’s investment objectives and risk- taking capacity, and then recommend a suitable portfolio. So, we suggest that you get in touch with our Mutual Fund Advisor before investing in the best funds.n Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a postition in the mutual funds mentioned in the article.

November 2020 53 Sharekhan ValueGuide MF PICKS MUTUAL FUNDS DESK Sharekhan mutual fund Finder N ovember 2020 Top SIP Fund Picks (*invested on 1st day of every month) Data as on October 01, 2020 SIP INVST (Monthly Rs. 1,000)* 1 year 3 years 5 Year Total amount invested 12,000 36,000 60000 Present Compounded Present Compounded Present Compounded Scheme Name *Riskometer NAV (Rs.) Value annualised value annualised value annualised (Rs.) return (%) (Rs.) return (%) (Rs.) return (%) Large Cap Fund Axis Bluechip Fund - Growth Moderately High 31 12,558 10.4 40,182 7.7 77,369 10.4 BNP Paribas Large Cap Fund - Growth Moderately High 94 12,593 11.0 39,068 5.7 71,353 7.1 Kotak Bluechip Fund - Reg - Growth Moderately High 245 12,951 17.9 39,066 5.7 71,029 6.9 Mirae Asset Large Cap Fund - Reg - Growth Moderately High 52 12,902 16.9 38,660 5.0 73,270 8.2 UTI Mastershare Unit Scheme - Growth Moderately High 125 12,810 15.1 38,268 4.2 70,061 6.3 HSBC Large Cap Equity Fund - Growth Moderately High 213 12,639 11.9 37,769 3.3 69,557 6.0 ICICI Prudential Bluechip Fund - Growth Moderately High 41 12,577 10.7 36,941 1.8 68,416 5.4 Large & Mid Cap Fund Mirae Asset Emerging Bluechip Fund - Growth Moderately High 59 13,263 23.9 40,987 9.1 79,389 11.5 Canara Robeco Emerging Equities - Growth Moderately High 101 13,267 24.0 39,584 6.6 74,691 9.0 Kotak Equity Opportunities Fund - Reg - Growth Moderately High 126 12,914 17.2 39,171 5.9 72,372 7.7 Invesco India Growth Opportunities Fund - Moderately High 35 12,856 16.0 38,504 4.7 72,740 7.9 Growth Principal Emerging Bluechip Fund - Growth Moderately High 109 13,112 21.0 38,353 4.4 71,731 7.3 DSP Equity Opportunities Fund - Reg - Growth Moderately High 221 12,552 10.2 37,146 2.2 68,481 5.4 Sundaram Large and Mid Cap Fund - Reg - Moderately High 34 12,548 10.2 36,946 1.8 69,497 6.0 Growth SBI Large & Midcap Fund - Growth Moderately High 217 12,625 11.6 36,881 1.7 67,392 4.7 Mid Cap Fund Axis Midcap Fund - Growth Moderately High 43 13,314 24.9 42,629 11.9 81,688 12.7 DSP Midcap Fund - Reg - Growth Moderately High 62 13,574 30.1 41,225 9.5 76,193 9.8 Invesco India Mid Cap Fund - Growth Moderately High 54 13,484 28.3 40,633 8.5 75,235 9.3 Kotak Emerging Equity Fund - Reg - Growth Moderately High 41 13,301 24.7 39,181 5.9 71,791 7.3 BNP Paribas Mid Cap Fund - Growth High 35 13,309 24.9 38,992 5.6 69,108 5.8 Edelweiss Mid Cap Fund - Growth High 29 13,510 28.8 38,949 5.5 71,297 7.1 Nippon India Growth Fund - Growth Moderately High 1168 13,354 25.8 38,936 5.4 71,005 6.9 Small Cap Fund Axis Small Cap Fund - Reg - Growth Moderately High 33 13,416 27.0 42,425 11.6 78,888 11.2 Kotak Small Cap Fund - Reg - Growth Moderately High 80 14,180 42.4 40,610 8.4 72,236 7.6 SBI Small Cap Fund - Growth Moderately High 59 13,854 35.8 40,568 8.4 78,735 11.2 Nippon India Small Cap Fund - Growth Moderately High 42 14,150 41.8 38,846 5.3 72,514 7.8 ICICI Prudential Smallcap Fund - Ret - Growth Moderately High 26 13,705 32.8 38,212 4.1 66,751 4.4 HDFC Small Cap Fund - Growth Moderately High 38 13,513 28.9 35,016 -1.9 65,676 3.7 L&T Emerging Businesses Fund - Reg - Growth High 22 13,472 28.1 34,710 -2.5 64,551 3.0

November 2020 54 Sharekhan ValueGuide MUTUAL FUNDS DESK MF PICKS

(*invested on 1st day of every month) Data as on October 01, 2020 SIP INVST (Monthly Rs. 1,000)* 1 year 3 years 5 Year Total amount invested 12,000 36,000 60000 Present Compounded Present Compounded Present Compounded Scheme Name *Riskometer NAV (Rs.) Value annualised value annualised value annualised (Rs.) return (%) (Rs.) return (%) (Rs.) return (%) Focused Fund Axis Focused 25 Fund - Growth Moderately High 30 12,673 12.5 39,070 5.7 75,613 9.5 Principal Focused Multicap Fund - Growth Moderately High 68 12,674 12.6 39,068 5.7 72,003 7.5 Motilal Oswal Focused 25 Fund - Reg - Growth Moderately High 23 12,550 10.2 38,743 5.1 71,265 7.0 SBI Focused Equity Fund - Growth Moderately High 145 12,264 4.9 38,050 3.8 72,463 7.7 Sundaram Select Focus - Reg - Growth Moderately High 180 12,418 7.7 37,704 3.2 70,878 6.8 Aditya Birla Sun Life Focused Equity Fund - Moderately High 59 12,588 10.9 37,352 2.5 67,850 5.0 Growth Multi Cap Funds Canara Robeco Equity Diversified Fund - Moderately High 146 13,081 20.4 40,635 8.5 76,556 10.0 Growth DSP Equity Fund - Reg - Growth Moderately High 41 12,521 9.7 38,563 4.8 71,763 7.3 Invesco India Multicap Fund - Growth Moderately High 48 12,873 16.4 37,079 2.0 67,016 4.5 Edelweiss Multi-Cap Fund - Reg - Growth Moderately High 14 12,645 12.0 36,727 1.4 68,967 5.7 Principal Multi Cap Growth Fund - Growth Moderately High 138 12,739 13.8 36,172 0.3 67,285 4.7 Value & Contra Funds Invesco India Contra Fund - Growth Moderately High 49 12,996 18.7 38,480 4.6 73,275 8.2 UTI Value Opportunities Fund - Growth Moderately High 63 12,885 16.6 38,315 4.3 69,421 6.0 Kotak India EQ Contra Fund - Reg - Growth Moderately High 53 12,858 16.1 38,136 4.0 72,080 7.5 Tata Equity P/E Fund - Reg - Growth Moderately High 133 12,910 17.1 36,754 1.4 68,546 5.4 HDFC Capital Builder Value Fund - Growth Moderately High 270 12,906 17.0 35,341 -1.3 64,604 3.0 Tax-saving funds (ELSS) Canara Robeco Equity Tax Saver Fund - Moderately High 73 13,447 27.6 41,875 10.6 78,329 10.9 Growth BNP Paribas Long Term Equity Fund - Growth Moderately High 41 12,758 14.2 38,987 5.5 70,537 6.6 Invesco India Tax Plan - Growth Moderately High 54 12,963 18.1 38,955 5.5 72,715 7.9 Axis Long Term Equity Fund - Growth Moderately High 47 12,498 9.2 38,855 5.3 73,464 8.3 Kotak Tax Saver Fund - Reg - Growth Moderately High 45 12,871 16.3 38,818 5.2 71,431 7.1 DSP Tax Saver Fund - Growth Moderately High 49 12,587 10.9 37,721 3.2 69,578 6.1 Aditya Birla Sun Life Tax Relief 96 - Growth Moderately High 32 12,774 14.5 37,534 2.9 69,917 6.3 ICICI Prudential Long Term Equity Fund (Tax Moderately High 358 12,422 7.8 36,242 0.5 65,633 3.7 Saving) - Reg - Growth

*The Riskometer will indicate five levels of risk – low (principal at low risk), moderately low (principal at moderately low risk), moderate (principal at moderate risk), moderately high (principal at moderately high risk) and high (principal at high risk).

Every individual has a different investment requirement, which depends on his financial goals and risk-taking capacities. We at Sharekhan first understand the individual’s investment objectives and risk- taking capacity, and then recommend a suitable portfolio. So, we suggest that you get in touch with our Mutual Fund Advisor before investing in the best funds.n

Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a postition in the mutual funds mentioned in the article.

November 2020 55 Sharekhan ValueGuide EARNINGS GUIDE EQUITY FUNDAMENTALS

Sharekhan Earnings Guide Prices as on November 03, 2020 CMP Sales Net profit EPS (%) EPS PE (x) RoCE (%) RoNW (%) DPS Div Company (Rs) FY20 FY21E FY22E FY20 FY21E FY22E FY20 FY21E FY22E growth FY20 FY21E FY22E FY21E FY22E FY21E FY22E Rs. Yld(%)

Autos

Amara Raja Batteries 782 6,839.5 6,906.7 7,877.7 660.8 620.1 745.9 38.7 36.3 43.7 6% 20.2 21.6 17.9 18.7 20.1 14.6 15.7 11.0 1.4

Apollo Tyres 143 16,327.0 15,969.4 18,054.9 442.2 401.5 704.2 7.7 7.0 11.1 20% 18.6 20.4 12.9 3.9 5.3 3.9 6.0 3.0 2.1

Ashok Leyland 84 17,467.5 12,848.4 19,241.3 395.3 (215.7) 626.7 1.3 -0.7 2.1 27% 64.5 - 39.9 - 7.7 - 8.7 3.1 3.7

Bajaj Auto 2,916 29,918.7 26,417.3 32,191.3 5,100.0 4,112.6 5,139.7 176.3 142.2 177.7 0% 16.5 20.5 16.4 24.2 27.2 18.8 20.8 120.0 4.1 New Idea Balkrishna Industries 1,350 4,897.5 5,610.2 6,476.8 945.0 1,098.7 1,351.8 48.9 56.8 69.9 20% 27.6 23.8 19.3 21.4 22.8 18.7 19.6 20.0 1.5

Bosch 11,826 9,841.6 8,355.7 11,519.9 1,301.3 971.3 1,421.8 441.3 329.4 482.1 5% 26.8 35.9 24.5 10.5 16.5 9.7 12.7 105.0 0.9

HERO MOTOCORP 2,940 28,836.1 28,211.9 33,477.3 3,178.7 2,670.3 3,459.7 159.2 133.7 173.2 4% 18.5 22.0 17.0 23.1 28.2 17.9 21.7 90.0 3.1

M&M 596 44,865.5 43,728.2 53,982.5 3,550.9 3,475.6 4,688.5 28.6 28.0 37.7 15% 20.8 21.3 15.8 11.1 13.7 8.8 11.0 8.5 1.4

Maruti Suzuki 6,915 75,610.6 66,605.7 80,686.8 5,650.6 5,257.9 7,274.4 187.1 174.1 240.8 13% 37.0 39.7 28.7 10.9 14.9 9.2 12.8 60.0 0.9

Schaeffler India 3,648 4,360.6 3,636.3 4,485.4 367.6 263.0 392.3 117.6 84.1 125.5 3% 31.0 43.4 29.1 11.5 15.8 8.4 11.6 65.0 1.8

Sundram Fasteners 424 3,723.2 3,306.9 4,172.0 324.9 220.2 366.5 15.5 10.5 17.4 6% 27.4 40.4 24.4 10.8 15.9 10.2 15.2 4.1 1.0

TVS Motor 465 16,423.3 14,994.3 18,469.1 624.6 408.7 863.1 13.1 8.6 18.2 18% 35.5 54.1 25.6 11.9 19.9 10.5 19.1 3.5 0.8

Agri/Specialy Chemical

Atul Limited 6,034 4,093.1 3,875.7 4,527.0 666.5 628.9 763.2 224.5 211.9 257.2 7% 26.9 28.5 23.5 22.7 23.4 18.2 18.6 27.5 0.5 New Idea Coromandel International 734 13,136.7 14,877.3 16,179.1 1,065.0 1,382.8 1,530.5 36.3 47.2 52.2 20% 20.2 15.5 14.0 29.9 29.6 28.8 26.2 12.0 1.6

PI Industries 2,229 3,366.5 4,252.5 5,257.1 455.8 637.1 806.8 33.1 43.5 55.0 29% 67.4 51.3 40.5 19.3 17.9 16.9 15.0 4.0 0.2

SRF Limited 4,394 7,209.4 7,929.8 9,803.5 1,019.0 1,017.5 1,266.8 138.8 173.9 216.5 25% 31.7 25.3 20.3 16.5 19.3 18.8 19.6 14.0 0.3

Sudarshan Chemicals 442 1,708.2 1,759.4 2,164.1 131.2 120.6 160.3 18.9 17.4 23.2 11% 23.3 25.3 19.1 14.6 15.9 19.0 22.1 6.3 1.4

UPL 417 35,756.0 38,080.1 41,126.6 2,399.0 2,878.8 3,386.8 31.4 37.6 44.3 19% 13.3 11.1 9.4 10.3 11.9 16.6 17.2 6.0 1.4

Banks & Financials

Axis Bank 534 25,206.0 24,934.0 27,330.0 1,627.0 5,485.0 8,819.0 5.8 19.4 31.3 132% 92.1 27.5 17.1 - - 6.1 9.0 0.0 0.0

Bajaj Finance 3,491 16,901.0 18,409.0 21,455.0 5,264.0 5,497.0 8,071.0 87.7 91.6 134.5 24% 39.8 38.1 26.0 - - 15.8 19.8 10.0 0.3

Bajaj Finserv 5,743 54,351.0 64,015.0 79,925.0 3,369.0 4,091.0 5,496.0 212.0 257.0 345.0 28% 27.1 22.3 16.6 - - - - 5.0 0.1

Bank of Baroda 45 27,451.3 30,762.8 33,329.0 546.2 1,608.0 2,246.0 1.2 3.5 4.9 102% 37.5 12.9 9.2 - - 2.2 3.0 0.0 0.0

Bank of India 39 15,399.0 14,568.0 15,906.0 (2,929.0) 1,998.0 2,318.0 -9.4 6.1 7.1 - - 6.5 5.6 - - 4.4 4.9 0.0 0.0

City Union Bank 158 1,675.0 1,802.0 1,907.0 476.0 487.0 708.0 6.5 6.6 9.6 22% 24.4 23.8 16.4 - - 8.8 11.7 0.0 0.0

Federal Bank 54 4,648.0 5,111.5 5,866.7 1,542.8 1,431.9 1,850.7 7.7 7.6 9.6 12% 6.9 7.0 5.6 - - 9.5 11.4 0.0 0.0

HDFC 2,131 15,194.0 11,716.0 12,523.0 17,770.0 10,994.0 11,303.0 102.9 61.3 63.0 -22% 20.7 34.8 33.8 - - 10.9 10.9 21.0 1.0

HDFC Bank 1,248 56,186.0 69,271.0 79,025.0 26,257.0 30,955.0 39,163.0 48.0 56.2 71.2 22% 26.0 22.2 17.5 - - 18.2 17.7 2.5 0.2

ICICI Bank 444 33,267.0 34,647.0 38,264.0 7,931.0 13,931.0 17,248.0 12.3 20.8 25.8 45% 36.1 21.4 17.2 - - 10.7 11.4 1.5 0.3

Kotak Mahindra Bank 1,593 13,500.0 13,966.0 15,008.0 5,947.0 6,064.0 7,388.0 30.9 31.8 38.8 12% 51.6 50.1 41.1 - - 9.7 10.6 0.0 0.0

LIC Housing Finance 302 4,689.0 4,391.0 4,837.0 2,401.8 1,926.0 2,277.7 47.6 38.1 45.1 -3% 6.4 7.9 6.7 - - 10.9 11.8 8.0 2.6

LT Finance Holding 65 5,731.0 5,341.0 5,606.0 1,702.0 1,713.0 1,961.0 8.5 8.6 9.8 7% 7.6 7.5 6.6 - - 10.6 11.0 0.0 0.0

Max Financial 602 16,183.0 18,523.0 21,270.0 269.0 305.0 345.0 10.0 11.2 12.8 13% 60.2 53.8 47.1 - - - - 0.0 0.0

Nippon Life India AMC 275 1,131.7 1,512.9 1,739.8 415.8 588.6 661.0 6.8 9.6 10.8 26% 40.4 28.6 25.4 - - 20.0 21.8 0.0 0.0

Punjab National Bank 28 17,438.0 23,918.0 27,538.0 336.0 1,450.0 2,604.0 0.5 1.5 2.8 137% 55.6 18.5 9.9 - - 2.0 3.1 0.0 0.0

SBI 205 98,085.0 1,08,444.0 1,22,075.0 14,488.0 15,656.0 21,553.0 16.2 17.5 24.2 22% 12.6 11.7 8.5 - - 6.6 8.5 0.0 0.0

Insurance

HDFC Life 599 32,707.0 36,304.8 42,113.5 1,295.0 1,373.3 1,594.2 6.4 6.8 7.9 11% 93.5 88.0 75.8 - - 17.2 17.5 0.0 0.0

ICICI Pru Life 410 33,430.0 35,070.0 36,910.0 1,069.0 1,196.0 1,316.0 7.4 8.3 9.2 12% 55.3 49.3 44.5 - - 15.1 14.7 0.0 0.0

ICICI Lombard 1,227 13,313.0 13,845.5 15,922.3 1,194.0 1,445.0 1,662.0 26.3 31.8 36.6 18% 46.7 38.6 33.5 - - 20.0 19.7 0.0 0.0

Consumer Goods

New Idea Asian Paints 2,155 20,211.3 19,428.3 23,477.2 2,779.1 2,689.9 3,402.6 29.0 28.0 35.5 11% 74.4 76.8 60.7 19.7 21.8 24.8 27.3 12.0 0.6

Britannia 3,406 11,599.6 13,370.6 14,950.6 1,410.2 1,821.4 2,048.0 58.6 75.7 85.2 21% 58.1 45.0 40.0 42.0 45.4 43.9 45.6 50.0 1.5

Colgate-Palmolive (India) 1,489 4,525.1 4,695.0 5,099.8 816.5 863.3 954.2 30.0 31.7 35.1 8% 49.6 46.9 42.4 69.8 77.0 55.1 61.2 28.0 1.9

Dabur India 515 8,703.6 9,291.7 10,935.7 1,528.0 1,679.0 2,049.5 8.6 9.5 11.6 16% 59.7 54.3 44.5 26.9 29.2 23.7 24.8 3.3 0.6

November 2020 56 Sharekhan ValueGuide EQUITY FUNDAMENTALS EARNINGS GUIDE

CMP Sales Net profit EPS (%) EPS PE (x) RoCE (%) RoNW (%) DPS Div Company (Rs) FY20 FY21E FY22E FY20 FY21E FY22E FY20 FY21E FY22E growth FY20 FY21E FY22E FY21E FY22E FY21E FY22E Rs. Yld(%)

Emami 380 2,840.8 2,839.6 3,275.8 596.4 616.2 749.0 13.1 13.6 16.5 12% 28.9 28.0 23.0 35.9 38.7 27.1 30.1 5.0 1.3

Godrej Consumer Products 669 9,910.8 10,737.7 11,846.2 1,462.0 1,739.5 2,009.7 14.3 17.0 19.7 17% 46.7 39.3 34.0 18.0 19.5 21.0 21.9 8.0 1.2

Hindustan Unilever 2,059 38,785.0 45,464.9 50,964.5 6,885.8 8,440.2 10,639.4 31.9 35.9 45.3 19% 64.6 57.3 45.5 39.1 28.5 29.8 21.5 26.0 1.3

ITC 170 46,807.3 43,182.4 50,285.4 15,170.4 12,400.5 15,157.2 12.4 10.2 12.4 0% 13.7 16.7 13.7 20.1 25.5 19.5 23.8 10.2 6.0

Jyothy Laboratories 131 1,711.2 1,868.3 2,114.2 159.4 196.9 237.7 4.3 5.4 6.5 22% 30.1 24.3 20.2 13.8 14.9 15.3 16.7 2.0 1.5

Marico 371 7,315.0 7,504.6 8,500.8 1,069.3 1,114.2 1,369.0 8.3 8.6 10.6 13% 44.8 43.0 35.0 40.9 44.2 33.9 34.7 3.8 1.0

New Idea Nestle India 16,795 12,369.0 13,264.4 14,962.5 1,970.0 2,215.9 2,611.2 204.3 229.8 270.8 15% 82.2 73.1 62.0 59.8 60.0 102.1 91.9 342.0 2.0 New Idea Tata Consumer Products Ltd 490 9,637.4 10,874.6 11,847.3 660.7 919.1 1,107.6 7.2 10.0 12.0 29% 68.3 49.1 40.7 9.1 10.1 7.5 8.2 2.7 0.6

Zydus Wellness 1,762 1,766.8 1,731.5 1,973.9 185.9 193.0 302.8 28.9 30.0 47.1 28% 61.0 58.6 37.4 5.6 6.6 4.7 6.3 5.0 0.3

IT / IT services

Birlasoft 181 3,291.0 3,594.2 4,022.2 224.3 287.3 368.1 8.1 10.2 13.0 27% 22.4 17.7 13.8 18.7 20.7 14.5 16.7 2.0 1.1

HCL Technologies 814 70,678.0 74,958.5 83,482.7 11,061.0 12,332.5 13,419.0 40.8 45.5 49.5 10% 20.0 17.9 16.5 24.9 24.8 22.7 22.1 8.0 1.0

Infosys 1,062 90,791.0 98,912.9 1,09,441.1 16,594.0 18,607.6 20,273.4 39.0 43.7 47.8 11% 27.3 24.3 22.2 34.9 35.0 26.7 26.2 17.5 1.6

L&T Infotech 2,938 10,878.6 12,407.2 14,428.4 1,520.5 1,792.0 2,141.0 86.6 101.8 121.6 19% 33.9 28.9 24.1 36.9 35.3 29.8 29.1 28.0 1.0 New Idea L&T Technology services 1,634 5,619.1 5,447.5 6,107.5 818.6 731.0 900.3 77.7 69.3 85.4 5% 21.0 23.6 19.1 21.9 23.9 24.3 25.5 21.0 1.3

Mastek Limited 870 1,071.5 1,655.3 1,910.3 132.9 190.1 220.6 42.9 64.8 75.2 32% 20.3 13.4 11.6 19.5 20.2 22.1 21.7 8.0 0.9

Persistent Systems 1,115 3,565.8 4,132.6 4,626.4 340.3 421.1 517.6 44.4 55.1 67.7 24% 25.1 20.2 16.5 22.2 24.9 16.8 18.8 12.0 1.1

Tata Consultancy Services 2,633 1,56,949.0 1,61,505.6 1,79,041.6 32,340.0 32,895.3 37,225.5 86.2 87.7 99.2 7% 30.5 30.0 26.5 42.4 44.4 38.0 40.4 73.0 2.8

New Idea Tech Mahindra 809 36,867.7 38,103.9 42,231.4 4,250.5 4,117.8 4,749.9 45.9 46.8 54.0 9% 17.6 17.3 15.0 18.8 20.1 17.9 18.6 15.0 1.9

Wipro 336 61,023.2 61,320.3 65,942.8 9,721.8 9,935.3 10,573.1 16.6 17.4 18.5 5% 20.2 19.3 18.1 15.7 15.8 16.3 15.9 1.0 0.3

Telecom and New Media

Bharti Airtel 455 87,539.0 1,03,581.8 1,18,150.4 (3,630.4) 1,048.7 8,008.5 -7.0 1.9 14.7 - - 236.3 30.9 8.6 12.2 1.4 9.9 2.5 0.5

Info Edge (India) 3,551 1,272.7 1,162.4 1,566.9 328.9 343.5 504.2 26.7 26.7 39.2 21% 132.9 132.9 90.6 17.0 21.5 12.8 16.3 6.0 0.2

Cap goods / Power

CESC 567 7,836.0 7,662.9 8,798.4 918.0 822.0 1,041.9 68.9 61.7 78.2 7% 8.2 9.2 7.3 6.9 8.4 8.0 9.6 20.0 3.5

Cummins India 446 5,158.0 4,587.0 5,198.0 643.0 488.0 628.0 23.2 17.6 22.6 -1% 19.2 25.4 19.8 14.1 17.7 11.6 14.6 14.0 3.1

Dixon Technologies 9,513 4,400.0 5,492.0 8,883.0 119.0 152.0 285.0 103.0 131.1 246.3 55% 92.4 72.6 38.6 30.2 41.2 24.6 34.3 4.0 0.0

Finolex cable 273 2,877.3 2,497.5 2,850.5 402.5 268.0 330.1 26.3 17.5 21.6 -9% 10.4 15.6 12.6 12.7 14.4 11.8 14.6 5.5 2.0

Greaves Cotton 67 1,911.0 1,759.0 2,032.0 122.6 91.3 126.6 5.4 4.0 5.5 1% 12.4 16.7 12.1 16.8 24.4 14.1 20.9 4.0 6.0

Kalpataru Power Transmission 253 7,904.0 8,295.0 9,161.0 463.0 458.0 559.0 30.0 29.6 36.1 10% 8.4 8.5 7.0 17.0 17.9 12.2 13.2 3.5 1.4

KEC International 325 11,965.4 12,474.0 13,471.0 565.5 579.0 675.0 22.0 22.5 26.2 9% 14.8 14.5 12.4 20.3 20.3 18.8 18.6 3.4 1.0

KEI Industries 328 4,884.0 4,210.0 4,937.0 243.0 249.0 319.0 27.2 27.8 35.6 14% 12.1 11.8 9.2 20.0 21.3 14.3 15.6 1.5 0.5

NTPC 86 97,700.4 1,11,428.2 1,23,305.6 12,173.5 12,071.4 15,326.4 12.3 12.2 15.5 12% 7.0 7.0 5.5 8.5 9.9 10.3 12.4 3.2 3.7

Polycab India 929 8,830.0 8,304.0 9,570.0 766.0 639.0 798.0 54.2 42.9 53.6 -1% 17.1 21.7 17.3 21.2 22.4 15.5 16.9 7.0 0.8

Ratnamani Metals and Tubes 1,249 2,583.1 2,246.7 2,830.0 307.5 215.2 302.0 65.8 46.1 64.6 -1% 19.0 27.1 19.3 12.8 16.5 12.0 14.9 12.0 1.0

Thermax 755 5,731.3 4,732.0 5,575.0 212.5 207.0 327.0 18.9 18.4 29.0 24% 40.0 41.1 26.1 9.7 15.7 7.4 12.2 7.0 0.9

Triveni Turbine 69 817.9 723.8 825.4 121.8 114.0 127.0 3.8 3.5 3.9 2% 18.3 19.6 17.6 23.1 22.2 18.1 17.0 0.5 0.7

V-Guard Industries 171 2,482.0 2,488.0 2,786.0 185.2 173.0 218.0 4.3 4.0 5.1 9% 39.6 42.8 33.5 21.6 24.1 16.2 17.9 0.9 0.5

Infra / real estate

JMC Projects 47 3,713.0 3,855.0 4,372.0 158.0 106.0 151.0 9.4 6.3 9.0 -2% 5.0 7.5 5.2 15.4 17.7 10.4 13.2 0.7 1.5

Larsen & Toubro 948 1,45,452.4 1,43,897.0 1,62,247.0 9,549.0 7,502.0 9,519.0 68.0 53.5 67.9 0% 13.9 17.7 14.0 6.6 7.7 10.2 11.3 18.0 1.9

PNC Infratech 170 4,877.9 4,611.3 5,244.1 349.6 299.4 352.2 13.6 11.7 13.7 0% 12.5 14.6 12.4 13.0 13.3 11.1 11.7 0.5 0.3

Sadbhav Engineering 47 2,251.7 2,378.4 3,208.0 68.1 63.2 152.3 4.0 3.7 8.9 49% 11.7 12.7 5.3 4.7 7.1 3.0 6.9 1.0 2.1

Oil & gas

Bharat Petroleum Corporation 351 2,84,383.0 1,94,778.7 2,62,529.4 3,764.0 6,629.3 6,198.6 19.1 33.7 31.5 28% 18.3 10.4 11.1 15.8 14.4 19.4 17.2 16.5 4.7

Gujarat Gas 296 10,300.3 9,650.4 12,297.8 909.5 1,125.4 1,161.2 13.2 16.3 16.9 13% 22.4 18.1 17.5 25.6 23.1 30.1 25.2 1.3 0.4

Hindustan Petroleum Corporation 186 2,67,599.8 1,82,234.8 2,19,560.0 2,092.1 6,546.7 6,049.0 13.7 43.0 39.7 70% 13.5 4.3 4.7 15.1 13.6 21.3 17.8 9.8 5.2

Indian Oil Corporation 78 4,86,256.5 4,54,380.5 5,28,162.4 9,987.2 14,530.7 14,720.6 10.6 15.4 15.6 21% 7.4 5.1 5.0 11.2 10.5 14.9 14.1 4.7 6.0

November 2020 57 Sharekhan ValueGuide EARNINGS GUIDE EQUITY FUNDAMENTALS

CMP Sales Net profit EPS (%) EPS PE (x) RoCE (%) RoNW (%) DPS Div Company (Rs) FY20 FY21E FY22E FY20 FY21E FY22E FY20 FY21E FY22E growth FY20 FY21E FY22E FY21E FY22E FY21E FY22E Rs. Yld(%) New Idea Mahanagar Gas 814 2,972.1 2,303.5 2,944.7 737.1 585.9 848.3 74.6 59.3 85.9 7% 10.9 13.7 9.5 23.6 30.7 18.9 24.4 35.0 4.3

Oil India Ltd 84 12,128.5 7,864.9 10,249.8 3,207.8 1,052.0 1,822.2 29.6 9.7 16.8 -25% 2.8 8.7 5.1 5.7 8.4 4.3 7.2 10.6 12.6

Petronet LNG 225 35,452.0 26,324.9 34,804.2 2,852.4 2,768.5 3,423.1 19.0 18.5 22.8 10% 11.8 12.2 9.9 24.2 28.5 24.7 29.1 12.6 5.6

Reliance Ind 1,849 5,96,743.0 5,26,950.4 6,21,195.7 44,324.0 45,715.0 63,302.1 74.9 77.2 93.6 12% 24.7 23.9 19.8 9.5 11.5 8.6 10.0 6.5 0.4

Pharmaceuticals

Aurobindo Pharma 770 23,098.0 25,050.9 27,328.5 2,913.2 3,289.0 3,571.0 49.7 56.1 61.0 11% 15.5 13.7 12.6 19.5 19.5 17.9 16.6 3.0 0.4

Biocon 407 6,367.2 8,165.5 10,163.5 680.7 1,161.7 1,560.8 5.7 9.7 13.0 51% 71.7 42.0 31.3 12.3 15.8 14.9 16.8 0.0 0.0

Cadila Healthcare 437 14,253.1 15,207.3 16,477.6 1,511.4 1,865.3 2,110.9 14.8 18.2 20.6 18% 29.6 24.0 21.2 12.7 13.6 15.9 15.9 3.5 0.8

Cipla 760 17,132.0 18,714.4 20,838.1 1,499.5 2,343.9 2,801.8 19.2 29.1 34.8 35% 39.6 26.1 21.9 16.3 17.5 13.9 14.6 4.0 0.5

Divi's Labs 3,089 5,394.4 6,795.2 8,554.1 1,294.5 1,919.6 2,506.5 48.8 72.3 94.4 39% 63.3 42.7 32.7 27.9 29.1 21.7 22.8 16.0 0.5

Granules 373 2,598.6 3,244.1 3,803.3 329.7 553.2 641.1 13.3 22.4 25.9 39% 27.9 16.7 14.4 24.4 25.0 23.7 22.1 1.0 0.3

IPCA Lab 2,316 4,648.7 5,473.1 6,451.9 603.6 953.7 1,192.4 47.8 75.6 94.5 41% 48.4 30.6 24.5 24.6 25.3 23.4 23.2 5.0 0.2

Laurus Labs 291 2,831.7 4,011.9 4,745.7 255.3 635.5 787.0 4.8 11.9 14.8 76% 60.7 24.4 19.7 25.7 25.5 26.4 24.7 2.5 0.9

Lupin 937 15,374.8 15,712.6 17,353.2 352.6 1,247.0 1,611.1 7.8 27.5 35.6 114% 120.1 34.0 26.3 10.1 12.0 9.0 10.5 6.0 0.6

Shilpa Medicare 420 907.9 1,015.3 1,184.8 156.9 178.1 220.0 19.2 21.8 27.0 18% 21.8 19.2 15.6 11.8 13.1 11.9 12.9 1.0 0.2

Solara Active Pharma Sciences 1,104 1,321.8 1,705.1 2,007.4 114.5 215.4 253.5 32.3 60.7 71.5 49% 34.2 18.2 15.4 16.3 16.7 16.6 16.4 2.0 0.2

Strides Pharma Sciences 654 2,752.0 3,341.4 3,819.3 139.9 281.2 405.5 15.6 31.4 45.3 70% 41.9 20.8 14.5 10.7 12.8 11.7 12.9 14.0 2.1

Sun Pharmaceutical Industries 485 32,837.5 35,878.1 38,919.7 4,025.6 5,532.7 6,564.3 16.8 23.1 27.4 28% 28.9 21.0 17.7 12.7 12.7 11.9 12.5 4.0 0.8

Torrent Pharma 2,577 7,780.0 8,442.3 9,349.1 1,025.0 1,247.0 1,466.6 60.3 73.4 86.3 20% 42.7 35.1 29.9 17.3 18.6 23.3 22.7 32.0 1.2

Building materials

APL Apollo Tubes 3,189 7,723.2 7,819.2 9,283.6 256.0 289.2 402.0 102.9 116.3 161.7 25% 31.0 27.4 19.7 18.2 22.4 19.7 23.2 0.0 0.0

Astral Poly Technik 1,125 2,577.9 2,581.9 3,153.0 247.9 257.4 349.8 16.4 17.0 23.2 19% 68.5 66.0 48.5 19.1 22.3 15.8 18.3 1.0 0.1

Century Plyboards (India) 179 2,317.0 1,831.9 2,094.8 208.8 135.4 181.9 9.4 6.1 8.2 -7% 19.1 29.4 21.9 9.9 12.2 9.6 12.3 1.0 0.6

Grasim 791 18,609.4 16,624.2 19,533.1 1,266.7 397.7 1,115.2 19.3 6.0 17.0 -6% 41.1 130.8 46.7 0.9 2.5 1.0 2.8 4.0 0.5

New Idea JK Lakshmi Cement 282 4,043.5 3,514.8 3,908.1 235.2 185.8 227.1 22.6 15.8 19.3 -7% 12.5 17.8 14.6 9.8 10.6 10.3 11.4 2.5 0.9

Kajaria Ceramics 574 2,808.0 2,465.6 2,920.7 255.3 224.0 300.4 16.1 14.1 18.9 8% 35.8 40.8 30.4 12.5 15.0 12.5 15.1 3.0 0.5

New Idea Pidilite Industries 1,566 7,294.5 6,597.9 8,241.1 1,177.2 995.8 1,364.9 23.2 19.6 26.9 8% 67.6 79.9 58.3 17.9 20.7 20.9 24.4 2.3 0.1

Shree Cement 21,894 11,904.0 11,149.0 12,901.3 1,570.2 1,355.7 1,726.5 435.2 375.7 478.5 5% 50.3 58.3 45.8 9.9 11.3 10.1 11.7 110.0 0.5

Supreme Industries limited 1,466 5,512.0 5,274.8 6,433.5 467.4 438.5 597.3 36.8 34.5 47.0 13% 39.8 42.4 31.2 18.8 22.4 16.0 19.1 14.0 1.0

The Ramco Cements 828 5,368.4 5,340.7 6,501.4 601.1 678.9 917.8 25.5 28.8 39.0 24% 32.4 28.7 21.3 8.1 9.9 13.0 15.4 2.5 0.3

UltraTech Cement 4,550 40,649.2 38,877.5 42,884.8 3,652.2 3,713.9 4,252.3 126.5 128.7 147.3 8% 36.0 35.4 30.9 8.1 8.7 9.3 9.7 13.0 0.3

Discretionary

ABFRL 152 8,742.5 5,325.3 7,914.7 (38.9) (686.7) (72.7) -0.5 -8.4 -0.8 - - - - - 2.3 - - 0.0 0.0

Arvind* 33 7,369.0 5,067.1 7,055.7 128.1 14.7 140.0 4.9 0.6 5.4 6% 6.8 58.5 6.1 3.1 5.8 0.5 5.1 0.0 0.0

Inox Leisure 259 1,897.4 651.3 1,919.4 83.9 (223.1) 89.9 8.5 -21.7 8.7 1% 30.5 - 29.7 - 10.0 - 18.4 1.0 0.4

Relaxo Footwear # 685 2,410.5 2,220.9 2,856.2 226.3 230.8 321.4 9.1 9.3 12.9 19% 75.2 73.7 52.9 23.1 28.2 16.9 20.2 1.3 0.2

The Indian Hotels Company 96 4,463.1 1,431.1 2,163.8 318.0 (643.7) (357.7) 2.8 -5.5 -2.9 - 34.6 ------0.5 0.5

Titan Company Limited 1,201 21,051.5 18,714.9 25,319.5 1,519.2 1,024.3 2,053.6 17.0 11.5 23.1 17% 70.5 104.1 51.9 17.0 29.8 14.6 25.2 4.0 0.3

Wonderla Holidays 159 270.9 33.2 118.0 45.9 (53.6) (13.5) 8.1 -9.5 -2.4 - 19.6 ------1.8 1.1

Diversified / Miscellaneous

Bajaj Holdings 2,301 ------32.5 1.4

Bharat Electronics 89 12,968.0 13,438.0 14,614.0 1,824.0 1,691.0 1,818.0 7.5 6.9 7.5 0% 11.9 13.0 11.9 14.3 13.9 16.1 15.9 1.4 1.6

Gateway Distriparks 93 1,237.2 1,124.3 1,246.1 50.7 54.9 62.0 4.1 4.4 5.0 11% 23.0 21.3 18.8 7.2 7.4 4.0 4.3 4.5 4.8

JSW Steel 314 73,326.0 72,937.0 83,038.8 3,919.0 3,725.0 6,857.7 16.3 15.5 28.5 32% 19.3 20.3 11.1 10.0 13.5 9.4 15.1 2.0 0.6

Mahindra Logistics 364 3,471.1 3,176.5 3,635.5 55.1 39.5 63.5 7.7 5.5 8.9 7% 47.2 65.9 41.0 8.6 11.7 7.0 10.3 1.5 0.4

TCI Express 791 1,032.0 894.7 1,045.5 89.1 90.8 105.9 23.3 23.7 27.6 9% 34.0 33.3 28.6 23.5 22.9 24.5 23.7 1.0 0.1

Note: Grasim- Changed reporting to standalone financial numbers

November 2020 58 Sharekhan ValueGuide EQUITY FUNDAMENTALS EARNINGS GUIDE

Remarks Automobiles Apollo Tyres (ATL) • Q2FY2021 results were beat ours as well as the street’s estimates, driven by strong operating performance. Domestic demand recovered strongly in Q2 and is expected to improve further. Apollo is gaining market share gains in the replacement segment, driven by restrictions on imports and network expansion in rural areas. OEM sales are also improving with the company witnessing growth in September. With the festive season and further improvement in economic activities, Apollo expects domestic demand to accelerate to double-digit growth in H2FY2021. The company is targeting marginal growth in FY21 in the domestic market as against a 19% drop in H1FY21, indicating robust double- digit growth in H2. FY2022 is likely to witness strong double-digit growth, driven by normalisation of economic activities. Profitability is expected to improve, driven by restructuring in Europe and cost- control measures. We expect a strong 26% earnings CAGR over FY2020-FY2023. Valuations are lower than long-term historical average multiples. Hence, we retain our Buy recommendation on the stock. Ashok Leyland • Q2FY2021 operating results were above estimates driven by better-than-expected realisations due to increased proportion of heavy trucks, increased defence and aftermarket revenues. ALL expects CV demand to continue to recover with the opening up of the economy due to government’s Unlocking measures. The CV industry’s volume decline narrowed to 20% in Q2FY2021 as compared to 85% y-o-y drop in Q1FY2021. ALL expects the CV industry to grow in both Q3FY2021 and Q4FY2021. We expect strong recovery from FY2022, as economic activity normalises. Moreover, ALL is focusing on boosting CV exports (by introducing new products and expanding the network) and increasing revenue from the aftermarket (driven by increased digitisation and network enhancement) and defence segment (through the government’s Atmanirbhar Bharat push). The government is also finalising a scrappage scheme for automotive sector. An incentive based scrappage scheme (providing incentives on new truck purchase in lieu of scrapping old trucks) would significantly boost demand and would be positive. At CMP, the stock is trading at 9x its FY2023 EV/EBIDTA as compared to long-term historical average of 12x. Multiples are likely to get re-rated, as we enter an upcycle. Hence, we retain our Buy rating on the stock. Bajaj Auto • Bajaj Auto is the second-largest domestic motorcycle manufacturer and largest exporter of motorcycles from India. Q2FY21 operating results were ahead of estimates driven by better realisations and margins. Bajaj is witnessing recovery in exports with overseas operations reaching 90- 95% of pre-COVID sales driven by opening up of economies and increased preference for personal transportation. Bajaj expects motorcycle exports to improve further and expects growth in both Q3FY21 and Q4FY21. Bajaj aims to continue outpacing industry in international operations driven by increased distribution reach. Demand in the domestic motorcycle industry is also improving with sales reaching flat volumes at start of festive season as compared to a 10-12% drop in September 2020. Bajaj expects the trend of premiumisation to continue in domestic two-wheeler industry, which would help it to gain market share. Three-wheeler volumes are also improving month-on-month as the government is unlocking the economy. Moreover, Bajaj is aiming to protect its margins as rising input costs are offset by price hikes, a better product mix and cost control measures and we expect margins to remain in 17-18% range. With Bajaj taking full prices hikes in export markets to offset withdrawal of MEIS export incentives, the overhang of its impact on profitability is over. The company has a strong balance sheet and healthy cash balance. Valuation multiples are lower than long-term historical average. We retain our Buy recommendation on the stock.

November 2020 59 Sharekhan ValueGuide EARNINGS GUIDE EQUITY FUNDAMENTALS

Balkrishna Industries • Balkrishna Industries Ltd (BKT) is largest exporter of off-highway tyres from India. Q2FY21 results beat ours as well as the street’s expectations across parameters. BKT posted highest ever quarterly volumes of 61,224 MT (growth of 36% y-o-y). Strong agricultural demand across geographies and market share gains led to robust volume growth. Operating margins improved by 540 bps y-o-y to 32.8% driven by soft commodity prices, operating leverage due to strong topline growth and a better product mix. Given strong Q2 volume performance, BKT raised its FY21 volume guidance to marginal growth as compared to flat volumes expected earlier. BKT is expected to continue gaining market share driven by product launches and an entry in new geographies. We expect strong double- digit growth to resume from FY22 driven by a pick-up in economic growth and continued market share gains. Higher margins are expected to sustain driven by operating leverage, better mix and favourable Euro-INR movement. BKT has strong balance sheet (debt-free at net level) and robust return ratios with RoE of 17-20% and ROCE of 18-23%. We retain a Buy rating on the stock Hero MotoCorp • Hero MotoCorp (Hero) is the market leader in the domestic two-wheeler industry. Q2FY2021 results were in line with street expectations. Hero is witnessing demand improvement with retail sales in the initial part of the festive season reaching 96% of last year as compared to 90% in September 2020. Hero expects further improvement as we approach the main festival of Diwali. The company has raised production in anticipation of higher demand. Hero has been producing about 30,000 units per day for the past 10 consecutive days. The company expects demand to hold up post the festive season as well given an improvement in economic activities and strong farm sentiments. We expect a strong recovery in FY2022, driven by normalisation of economic activities. Operating leverage, price hikes, and cost saving under the leap programme would result in margin improvement. We expect Hero to reach its historical margins of 15-16%. Hero is a debt-free company with strong reserves. Valuations are lower than long-term historical averages. Hence, we retain our Buy rating on the stock. M&M • Mahindra & Mahindra (M&M) is the market leader in tractors and light commercial vehicles with a market share of ~40%. The company is also India’s leading sports utility vehicle (SUV) manufacturer with market share of ~20%. Due to strong farm sentiments, M&M expects tractor demand to remain robust and expects the industry to grow in FY2021. Moreover, M&M is likely to gain market share in tractors due to a better outlook in regions, where it has a higher market share. M&M’s automotive segment is also recovering due to robust rural sentiments, increased preference for personal transport, and dealer inventory filling with the onset of the festive season. In August and September 2020, utility vehicles and light commercial vehicles witnessed marginal growth y-o-y. A tighter capital allocation strategy (of nil fund infusion in businesses with an unclear path to profitability) will continue and M&M is evaluating performance of its other international subsidiaries (recently M&M has decided against additional fund infusion in Ssangyong and Genze). With a good outlook for core business and a prudent capital allocation policy, M&M’s multiples are likely to get re-rated. Hence, we retain our Buy rating on the stock. Maruti Suzuki • Maruti Suzuki India Limited (MSIL) is India’s largest passenger vehicle (PV) manufacturer with the company holding a strong 51% market share. Q2FY2021 results missed estimates, driven by lower- than expected margins. Higher commodity prices and an unfavourable INR/JPY movement impacted margins. MSIL stated that festive demand is strong with the initial festive period of Navratri, seeing a 27% y-o-y growth in deliveries. Bookings also grew in strong double digits, indicating strong demand in the remainder of the festive season. We expect strong recovery from FY2022, driven by normalisation of economic activities and pent-up demand. With cost-control initiatives, operating leverage, and lower discounts, we expect margins to improve going ahead. We expect margins to reach the historical average of 12-13% by FY2023. Hence, we retain our Buy recommendation on the stock.

November 2020 60 Sharekhan ValueGuide EQUITY FUNDAMENTALS EARNINGS GUIDE

TVS Motor • TVS Motor Limited (TVSM) is India’s fourth largest two-wheeler manufacturer present in the scooters segment. Q2FY2021 results were higher than our as well as consensus estimates, driven by better- than-expected margin performance. Healthy growth in revenues coupled with cost control measures led to margin improvement. Demand in domestic market has improved, driven by strong rural sentiments and increased preference for personal transport. Initial festive sales have turned positive with marginal growth on a y-o-y basis. TVSM expects to continue outpacing the industry, driven by product launches and an enhanced distribution network. Exports have picked up strongly, growing by 19% y-o-y in September 2020, driven by a recovery in key markets and tapping of new geographies. Margin improvement is expected to sustain given cost-control initiatives and benefits of operating leverage. TVSM is expected to remain the fastest growing two-wheeler company with a strong 20% earnings CAGR over FY2020-FY2023. Valuations are below the long-term historical average. Hence, we retain our Buy recommendation on the stock. Amara Raja Batteries • Amara is a flagship company of the Amara Raja Group. Amara is a strong competitor in the lead acid storage batteries duopoly market catering to the needs of both industrial as well as the automotive space. Q2FY2021 results were above expectations across parameters. Revenues grew strongly 14% y-o-y with a healthy recovery across segments. Operating margins rose to a five-year high of 17.6% driven by operating leverage. Going ahead, Amara Raja is expected to continue outpacing the organised lead-acid battery industry driven by addition of new automotive OEM clients as well as product launches and a wider reach in the automotive aftermarket. The company is enhancing the automotive battery capacity from 29 million units to 34 million units by the end of FY2021. Key segments such as telecom and UPS have recovered strongly and have huge growth potential going ahead driven by increasing data usage and increased digitalisation. Margins are expected to remain at higher end of historical band of 14-17% driven by operating leverage and cost-control measures. We recommend Buy on the stock. Bosch • Bosch Limited (part of Bosch Group GmBH) is a leading supplier of technology and services in the areas of mobility solutions, industrial technology, consumer goods, and energy and building technology. Q2FY2021 operating results were below estimates on account of lower margins. Inability to fully pass on BS-VI cost increases, adverse forex movement, and higher share of traded products impacted margins. Going ahead, Bosch has a strong order book, given the festive season and expects double- digit growth in Q3FY2021. FY2022 is likely to witness strong recovery, driven by normalisation of economic activity and pent-up demand, given automotive demand would witness downturn for two consecutive years of FY2020 and FY2021. The company’s order book of Rs. 18,500 crore for BS-VI products is likely to be executed over the next five to six years, which provides healthy growth visibility going ahead. Increasing localisation of BS-VI components, benefits from investments in transformation and restructuring projects (Bosch has invested about Rs. 1,300 crore in these projects) coupled with operating leverage (due to strong recovery in volumes) would result in margin improvement. Bosch is well prepared to tap on emerging opportunities in electrification and connected vehicles with strong technological support from its parent, Robert Bosch GmbH. We recommend a Buy on the stock. Schaeffler • Schaeffler India Ltd (Schaeffler) is manufacturer of ball, roller and wheel bearings (sold under FAG brand), engine and transmission components (sold under INA brand) and clutch systems and dual mass flywheels (sold under brand LuK). Q3CY20 results beat estimates driven by better than expected operating performance. Revenues grew 8% y-o-y driven by recovery in both the automotive and industrial segment. Operating margins improved 310 bps y-o-y to 16.9%. The management stated that recovery in demand has been swift and better than expectations. It expects Q4CY20 also to register growth driven by onset of festivities and further pick up in economy. Automotive OEM business would benefit from increased content per vehicle while Industrial OEM business is witnessing good traction in wind and railway space due to new product and customer additions. Schaeffler recently introduced lubricants in the aftermarket space and would continue to add new products to drive growth. With the parent identifying the Indian unit as supplier to Asia Pacific region, the export potential is huge. Operating leverage and increased localisation would drive earnings. Schaeffler’s strong technological parentage and established relationship with global OEM clients would continue to provide growth opportunities. Schaeffler is a debt free company with healthy return ratios (ROCE and ROIC) in excess of 15%. We recommend a Buy on the stock.

November 2020 61 Sharekhan ValueGuide EARNINGS GUIDE EQUITY FUNDAMENTALS

Sundram Fasteners • Sundram Fasteners Limited (SFL) is a global leader in manufacturing critical, high precision component for automotive, infrastructure, windmill and aviation sectors and is one of the leading manufacturers of fasteners. SFL Q2 results were ahead of estimates. Revenues recovered to Pre-COVID levels; SFL posted record high margins of 21% driven by soft commodity prices and cost control measures. SFL is expecting further pick up in the demand and is increasing production to three shifts in its factories. SFL expects the festive season coupled with increase in the industrial activity to lead to continued better performance going ahead. With normalization of economic activities, we expect strong recovery in FY22. SFL would continue to focus on launching value-added products. SFL has recently introduced transmission products and is also working on hybrid electric vehicle products which would boost revenues and further reduce dependence on the traditional fastener business. SFL is likely to witness increased share of business with clients driven by new product introductions, relatively low-cost advantage and stringent quality norms. We recommend Buy on the stock. Agri/Specialty Chemicals UPL • UPL is a global leader in agricultural solutions and has a healthy mix of high-value crops and high- growth geographies. The company has manufacturing facilities across 48 locations (earlier 34) and is present across more than 138 countries. The management is eyeing revenue growth of 6-8%, EBITDA growth of 10%-12%, and net debt-equity ratio of 2x during FY2021E. Long-term investors can consider accumulating the stock, owing to its reasonable valuation and further strengthening of balance sheet led by deleveraging. Coromandel • We like Coromandel International owing to its leadership position in key businesses led by high International backward integration through joint ventures for sourcing of key raw materials and strong distribution reach. The company is likely to speed up investments in the high-growth crop protection business, which is expected to enhance profitability. Encouraging progress of the monsoon season and MSP hike for kharif and Rabi crop bode well for a healthy demand off-take of the company’s products. We believe Coromandel would generate revenue and earnings CAGR of 11.0% and 17.5%, respectively, over FY2020-FY2022E, led by increased share of non-subsidy business. We maintain our Buy rating on the stock. PI Industries • Incorporated in 1947, PI Industries focuses on developing complex chemistry solutions in the agri- science space. Demand environment remains encouraging in both domestic (normal monsoon) and export markets (order book of $1.5 billion), guidance for over 20% growth in each; capex guidance of Rs. 550-600 crore remains for FY2021E. Funds raised via QIP would be deployed in 5-6 quarters and meet inorganic growth aspirations, which will aid diversification as well. Moreover, export opportunities are expected to increase multifold, as global MNCs and innovators would consider partnering with Indian players over China. We reiterate our Buy rating on the stock. Atul Limited • Atul intends to expand capacities in a calibrated manner without relying on external borrowings. Moreover, significant opportunities are expected to arise from a medium to long-term perspective as global players shift their manufacturing base and vendor base outside China. Future growth is expected to be driven by improved utilisation levels backed by a strong demand outlook along with positive pricing tailwinds and operating leverage. The company turned debt-free in FY2018 and return ratios are expected to head north (after a gap of four years) on account of improved profitability (largely due to ease in input cost pressure) and strong free cash-flow generation. This gives the company ample scope to explore organic and inorganic growth opportunities further SRF Limited • SRF’s capex intensity is focused on the specialty chemical business (50-60% of the planned capex of Rs. 1,500-1,800 crore over the next three years to be spent on expansion of specialty chemicals), which would help increase share of high-growth specialty chemicals in overall business mix and drive re-rating of SRF. Robust growth earnings growth outlook (expect a 23% PAT CAGR over FY2021E- FY202E), strong return ratio (RoE/RoCE of 20%/21%), and strong cash flows (to support growth plan) keep us constructive on the medium to long-term growth prospects of SRF

November 2020 62 Sharekhan ValueGuide EQUITY FUNDAMENTALS EARNINGS GUIDE

Sudarshan Chemicals • Sudarshan Chemicals Industries Limited’s (SCIL) dominant market share (a 35% share in the Indian pigment market and the fourth largest player globally), de-focus of global players, SCIL’s consistent focus to augment capacity (capex plan of Rs. 585 crore over FY2020-FY202E), and likely increase in share of high-margin products (new capex to focus on specialty chemicals) would help SCIL beat industry growth rates on a sustained basis. Hence, we expect strong revenue/EBITDA/PAT CAGR of 19%/20%/25% over FY2021E-FY2023E along with a high RoE of 22%. SCIL is investing in the right areas for building capabilities and richer client engagements, which is expected to create a long-term moat in a booming industry. Banks & Financials Axis Bank • Axis Bank is the third-largest private sector bank, with a well-diversified loan book with strengths in both the retail and corporate segments. The bank’s liability profile has improved, which would help keep margins healthy. Business restructuring along the lines of incremental lending to higher-rated corporate segments, focus on quality retail and mid-market groups are steps in the right direction, which will augment sustainability and profitability. However, in the medium term, as COVID-19 poses challenges to credit growth and asset quality of the banking sector, we expect banks with strong balance sheets and capital position better placed to recover once the business environment normalises. Going forward, the bank’s strategic investment in the insurance space will further add strategic value. The bank has a strong market position across most digital payment products. Bajaj Finance • Bajaj Finance, a subsidiary of Bajaj Finserv, is a leading NBFC with well-diversified and strong asset quality. The company has its assets spread across products, viz. loans for consumer durables, two- wheelers, and three-wheelers, loans to small and medium enterprises (SMEs), mortgage loans, and commercial loans. The company’s strong loan growth, asset quality, and provisioning set Bajaj Finance’s performance among the best in the system. However, in the medium term, COVID-19 poses challenges to credit growth and asset quality of NBFCs. We expect NBFCs with strong balance sheets and capital position likely to recover faster, once the business environment normalises. Bajaj Finserv • Bajaj Finserv is a financial conglomerate with subsidiaries in the financing, life insurance, and general insurance segments. We expect its subsidiary, Bajaj Finance Limited (BFL), to continue with calibrated growth and sustainable profitability and margins (for the long term), which will be the key support for present valuations of Bajaj Finserv. Bajaj Allianz General Insurance Company (BAGIC) is expected to continue its healthy operating metrics and profitability going ahead. BALIC is focusing well on strengthening its distribution channel and protection business, but profitability will depend on the pace and segment of new business growth. The COVID-19-led lockdown is expected to put the economy under severe financial strain and the resultant ratings downgrades are likely to put pressure on corporate bond valuations as well. Insurers would be sensitive to bond downgrades; and if market volatility persists, investment portfolios and investment earnings may be impacted as well. However, given the strong balance sheet of its subsidiaries, companies such as Bajaj Finserv are expected to tide over medium-term challenges. Bank of Baroda • Bank of Baroda has over 9,400 branches across India and abroad along with a diversified products and services portfolio and strong client relationships. Business growth as well as profitability and asset-quality improvement is gradual but in the desired direction. Two other PSU banks have been merged with Bank of Baroda, which will add to its business reach and strength. Notwithstanding the synergies that will accrue over the long run, we believe near-term challenges in terms of asset quality and integration issues of the merged entity may mute medium-term performance. Moreover, in the medium term, COVID-19 impact poses challenges for credit growth and asset quality of the banking sector, including Bank of Baroda. Bank of India • Bank of India (BOI), established in 1906, is one of the largest PSU banks in the country. The Mumbai- based bank has a strong presence in Western and Eastern regions. The bank has over 5,100 branches and 5,800 ATMs across India. The government holds a ~89% stake in the bank. Operating performance and earnings have been affected by a sharp rise in non-performing assets (NPAs). However, going forward, credit traction is expected to start over time as the bank has exited the prompt corrective action (PCA) framework. However, in the medium term, the COVID-19 impact poses challenges for credit growth and asset quality of the banking sector, including Bank of India. As several segments are undergoing stress and weak credit demand, we expect credit growth and margins for BOI to likely be muted for the medium term.

November 2020 63 Sharekhan ValueGuide EARNINGS GUIDE EQUITY FUNDAMENTALS

Federal Bank • Federal Bank is among the better-performing old private-sector banks in India with a strong presence in South India, especially Kerala. We believe the bank’s is growing in a desirable direction and the accompanying vectors indicate sustainability and quality. We believe incremental loans to better- rated borrowers, fewer additions to the stressed asset pool, and high provision coverage are positives, but asset-quality performance will continue to be a key monitorable for the medium term as COVID-19 will pose challenges for credit growth and asset quality of the banking sector. HDFC • HDFC Limited (HDFC) is among the top-performing housing finance companies in the country having deep roots in the retail segment. Despite general slowdown in credit growth, HDFC continues to report strong growth in advances with stable margins. Aided by a strong business franchise, best-in- class credit ratings, and impeccable asset quality, HDFC is a safe long-term bet with a scope for value creation led by steady business growth. However, in the medium term, COVID-19 poses challenges for the credit growth and asset quality of the financial sector, including HDFC. We expect NBFCs with a strong balance sheet and capital position likely to recover faster, once business environment normalises. HDFC Bank • HDFC Bank is among India’s top-ranking lenders with a strong hold in the retail segment. Despite the general slowdown in credit growth, the bank continued to report better-than-industry growth in advances (mainly from retail products) and a strong retail liability base. Higher margins as compared to peers, a strong branch network, and better asset quality make HDFC Bank a safe bet with scope for expansion in valuation multiples. COVID-19 poses challenges for credit growth and asset quality of the banking sector in the medium term, including the bank. We expect banks with strong balance sheets and capital position to recover faster once the business environment normalises. ICICI Bank • ICICI Bank is one of India’s top three-largest private sector banks with over 5,200 branches. The bank has made inroads into the retail loan segment and has significantly improved its liability franchise. We believe the company’s strong capital adequacy and a wide branch network will help support business growth in the long run. The bank appears to be well-positioned to benefit from reduction in competitive intensity from NBFCs and other banks, which face challenges of their own. However, in the medium term, COVID-19 poses challenges to credit growth and asset quality of the banking sector, including ICICI Bank. We expect banks with a strong balance sheet and capital position better placed to recover once the business environment normalises. LIC Housing • LIC Housing Finance is one of the largest mortgage financiers in India and is promoted by Life Insurance Corporation of India. With over 282 marketing offices, the company has one of the strongest distribution networks to support business expansion. Though falling interest rates and a strong parent bode well for NBFCs, we believe increasing competitive pressures may keep NIM range bound in the near to medium term. Uncertainties in the builder loan segment and weak economic conditions warrant caution due to asset-quality concerns. Recoveries in retail and developer book and loan growth momentum in the next few quarters would be key monitorables. In the medium term, COVID-19 poses challenges for credit growth and asset quality of the financial sector, including LIC Housing. We expect NBFCs with a strong balance sheet and capital position likely to recover faster, once the business environment normalises. Max Financial Services • Max Life Insurance is owned by Max Financial Services (MFS) and is among the leading private sector insurers that has gained critical mass and enjoys the best operating parameters in the industry. MFS is effectively building an attractive insurance franchise characterised by a multi-channel distribution network built upon a conservatively underwritten insurance business. The deal with Axis Bank will provide clarity to the bancassurance relationship and is a long-term positive for MFS. Management has reiterated its strategy to achieve a balanced product mix and focus on non-par savings with the protection segment, which will be margin-accretive. COVID-19-led lockdown is expected to put the economy under severe financial strain and the resultant rating downgrades are likely to put pressure on corporate bond valuations as well. Insurance companies would be sensitive to bond downgrades, and if market volatility persists, investment portfolios and investment earnings may also be impacted.

November 2020 64 Sharekhan ValueGuide EQUITY FUNDAMENTALS EARNINGS GUIDE

PNB • Punjab National Bank (PNB) has a strong liability mix in the banking space, with low-cost deposits constituting over 40% of its total deposits. PNB has done a significant amount of business and process enhancement/upgradation to mitigate operational and credit risks after the fraud, but so far asset-quality improvement has been subdued. Further development in resolution/recovery of NCLT exposures as well stress in the SME segment warrant a cautious approach. Risks of chunky slippages/haircuts are present in the near term. Moreover, in the medium term, COVID-19 impact poses challenges for credit growth and asset quality of the banking sector, including the bank, and will be a key monitorable. SBI • State Bank of India (SBI) is India’s largest bank. The successful merger of associate banks and value unlocking from the insurance business could provide further upside. While the bank is favourably placed in terms of liability base and operating profit is better than peers, asset quality is also improving, aided by strong resolution/recoveries. SBI’s strong balance sheet coupled with an enviable reach and business strength make it a strong business franchise, which is well-placed to gain market share as well as quality clients in the medium to long term. However, in the medium term, COVID-19 poses challenges for credit growth and asset quality of the banking sector, including the bank. SBI’s status as the market maker in terms of domestic interest rates places it at an advantage to other PSU bank peers, providing a cushion to margins. City Union Bank • CUBK is an old private sector bank. The bank has been focused on lending to MSME, retail/wholesale trade with granular asset profile including providing short-term and long-term loans to the agricultural sector. The bank has strong position in South India, with ~90% of branches in South India and ~70% in Tamil Nadu and ~71% of business coming from the state. The bank’s gross loan book constitutes ~63% working capital loans of the total book. CUBK has a comfortable capital position with CRAR of 17.36%, of which Tier-1 constitutes 16.29%. HDFC Life • HDFC Life is a leading long-term life insurance solutions provider. The company offers a range of individual and group insurance solutions that meet various customer needs such as protection, pension, savings, investment, and health. HLIC continues to benefit from its increased presence across the country. The company has a wide reach with 400+ branches and additional distribution touch points through several new tie-ups and partnerships, including own sister concern bank. The company also has 270+ partnerships, comprising traditional partners such as NBFCs, MFIs and SFBs, and includes more than 40 new ecosystem partners. The company has a strong base of financial consultants as well. ICICI Lombard General • ICICI Lombard General Insurance (ILGI) is the fourth largest non-life insurer and the largest private- Insurance sector non-life insurer in India. The company offers customers a comprehensive and well-diversified range of products, including motor, crop, health, fire, personal accident, marine, engineering, and liability insurance. ILGI has over 250 offices and over 35,000 individual agents (including POS) and ~840 virtual offices. The company’s key distribution channels are direct sales, individual agents, corporate agents - banks, other corporate agents, brokers, MISPs and digital, through which it serves individual, corporate, and government customers. We believe the general insurance industry is an attractive space, which has a long runway for long-term growth. ILGI has demonstrated its strong underwriting, healthy solvency, and improving loss ratios, make it attractive for the long term. ICICI Prudential Life • ICICI Prudential Life Insurance (IPRU) is promoted by ICICI Bank Limited and has consistently been the Insurance top private sector life insurance companies in India on a Retail Weighted Received Premium (RWRP) basis. The company offers a wide array of products in the protection and savings category, which match the different life stage requirements of customers, enabling them to provide a financial safety net to their families as well as achieve their long-term financial goals We believe due to its strong brand image, pan-India bancassurance partnerships, strong metrics and diversifying business mix (focusing on more protection and retail business), IPRU is well placed on its growth trajectory for the long term. IPRU is well placed to capture and ride the strong growth potential that is present in the Indian life insurance industry.

November 2020 65 Sharekhan ValueGuide EARNINGS GUIDE EQUITY FUNDAMENTALS

Kotak Mahindra Bank • We believe Kotak Mahindra Bank (KMB) is an attractive business franchise, with a well-rounded products and services offering, shaping up well for the long term. Consistent performance across interest rate and asset cycles is a key differentiator and indicates the management’s quality and strength of the franchise. Its Subsidiaries are shaping up well and while at present, they are relatively small, we believe each one has strong business strengths and are well on way to be significant value contributor to the consolidated business in the long term. We find Kotak Mahindra Bank to be an attractive franchisee with a strong balance sheet, with pan India reach and healthy capitalization which will help it tide over the medium term challenges. L&T FINANCE • L&TFH is a financial holding company offering a focused range of financial products and services HOLDING across rural, housing, and wholesale finance sectors. LTFH has been strategically re-aligning its business mix, focusing on business where it has a clear competitive advantage and opportunity to scale. Benefitted by a strong parent and attractive credit ratings (LTFH is rated AAA), the company works at competitive rates, which are key support to its margins. Moreover, LTFH focuses on diversification of borrowings mix with the addition of new sources of borrowings, which are key for sustainability. Factors such as well-capitalised balance sheet, stable ratings, and provision buffer indicate that LTFH is well placed to ride over medium-term challenges. Nippon Life India AMC • Nippon Life India AMC (NAM) has maintained its position in the top five consistently over the years. The company has grown its MF AUM at ~17% CAGR in the last 5 years. NAM’s success on building a large distribution network despite not having a bank promoter entity is notable. NAM has a strong foothold in B30 cities (~20% of AUM), which has helped the AMC garner and improve its retail share, which in turn makes the customer segment more granular. We believe a granular book is more sustainable and sticky as compared to HNI and institutional flows. While in the medium term, due to uncertainties on growth and market performance due to the pandemic, we believe AUM growth and business mix may be impacted. We believe the company is well placed to ride over medium-term challenges. The buyout and subsequent re-branding by the MNC owner has stabilised the company and will enable NAM to leverage the parent’s network to improve its AUM in the long term. Consumer Goods Asian Paints • Asian Paints Limited (APL) leads the domestic paint industry with a 55% market share. Unlike peers, the company has de-risked its business model, deriving more than 85% of revenue coming from domestic decorative paints. The company has a strong brand portfolio straddling the pyramid. Asian Paints Limited (APL) registered strong all-round performance in Q2FY2021. The company maintained the momentum of double-digit volume growth achieved in June 2020 and registered volume growth of 11% in the domestic decorative paints business. With a focus on becoming a complete home decor play, the company has introduced products in home lightings, furnishings, and furniture. The company’s sanitising service business ‘San Assure’ is getting good response and is helping the company to promote its paint business. Considering strong traction for its products, the waterproofing segment can be a revenue contributor in the near to medium term. FY2021 will be affected by COVID-19, as social distancing will defer painting activities. If the virus continues to recede further, management is confident of improvement in the decorative paints volume growth trajectory. A sharp fall in crude oil prices led to a significant decline in key crude-linked input prices, which will help operating profit margin (OPM) to remain stable in FY2021 and expand in FY2022. APL’s leadership position in the domestic paints industry and better earnings visibility justify the premium valuation. We maintain our Buy recommendation on the stock. Britannia • Britannia is one of the largest domestic biscuit and snacking companies (it has climbed to the top of the domestic biscuit market, beating Parle) with a turnover of over Rs. 11,000 crore. Under the new leadership, the company has been able to leverage and monetise its strong brand and premium positioning in the biscuits and snacks segments. Q2FY2021 performance slightly missed ours as well as the street’s expectation with revenue growing by 12%. High single to low double- digit trends are expected to sustain in the current festive environment. The company expects strong growth momentum to sustain in the coming quarters with higher demand from in-house consumption, improvement in supply in key markets, market share gains from small players, and a strong recovery in rural demand. Correction in raw-material prices would help post better margins. Sustained products innovation, expanding distribution reach, entry into newer categories, and focus on cost efficiency will help the company maintain steady earnings growth in the medium term.

November 2020 66 Sharekhan ValueGuide EQUITY FUNDAMENTALS EARNINGS GUIDE

Colgate-Palmolive • Colgate-Palmolive (India) Colpal is a leading multi-national consumer products company, focused on (India) production and distribution of oral care and personal care products. Oral care contributes ~90% to the company’s turnover. Colpal delivered better-than-expected performance in Q2FY2021 with revenues growing by 5.2%; OPM expanding by 541 bps to 31.8% and adjusted PAT growing by 33%. While discretionary categories saw a recovery in sales, toothbrushes gained good traction in the domestic market. New launches in the Naturals space as well as under the Palmolive brand, including hand washes and hand sanitisers saw strong demand in the domestic market. Improving dental habits (both in the urban market and rural India), strong traction in Naturals category and sensitive toothpaste and other new launches will be some of the key revenue drivers in the near term. With gross margins expected to remain high, we expect OPM to remain high in the coming quarters (also supported by efficiencies). We recommend a Buy rating on the stock. Dabur India • Dabur is one of India’s leading FMCG companies with revenue of over Rs. 8,500 crore. The company operates in key consumer product categories such as hair care, oral care, health care and skin care based on Ayurveda. (Dabur) posted healthy performance in Q2FY2021, clocking revenue growth of 13.7%, as its domestic business grew by ~20%. Domestic volumes grew by ~17%, much better than ours as well as the street’s expectation. As expected, categories such as healthcare, OTC & ethicals, oral care and skin-care (together constituting 59% of total revenues) clocked strong double-digit revenue growth during the quarter. We expect categories such as Chyawanprash, honey and ethical products to achieve a large scale in the near to medium term. The foods business is expected to post a sequential recovery with out-of-home consumption expected to gain momentum in the coming quarters as lockdown norms have been eased. The company meanwhile, continues to gain market share in large categories such as oral care (by 90 bps), shampoos (by 80 bps) and beverages (by 170 bps), which augurs well from a long-term perspective. Strong traction in healthcare range of products, market share gains in oral care category, faster recovery in juices category due to higher in-house consumption and a strong recovery in rural demand are some of the key catalysts for near term growth. We recommend a Buy on the stock. Emami • Emami is one of the largest players in the domestic FMCG market with a strong presence in underpenetrated categories such as cooling oil, antiseptic creams, balm, and men’s fairness creams. Q2FY2021 results were beat ours as well as the street’s expectation with revenue and PAT growing by 11% and 31%, respectively. The management expects growth momentum to improve in H2 mainly on account 1) pipeline filling for winter products (started especially north and east) 2) healthcare continuing to get good traction and 3) strong growth in rural demand (stood at 20% in Q2). Further, a recovery in rural India (~55% of domestic sales) is supporting the overall domestic business performance. Benign input prices, reduction in advertisement cost, and stringent management of other cost elements would help the margin expansion to sustain in the coming quarters. The group’s exit from non-core businesses has helped promoters to reduce pledged share significantly from 95% earlier to 40% currently and plans to reduce it to zero over the next 8-10 months. We maintain our Buy recommendation on the stock. GCPL • Godrej Consumer Products Limited (GCPL) is a major player in the personal wash, hair colour, and household insecticide market segments in India. GCPL’s revenue grew by ~11% to Rs. 2,915.1 crore, in line with our expectation of Rs. 2,932.6 crore with 11% growth in the domestic business (volume growth of 5%) and good growth in other geographies. Around 83% of the global portfolio registered 17% growth. Domestic HI and soaps registered growth of ~4% and 18%, respectively, during the quarter, respectively. Management is confident of getting back to double-digit growth in the domestic HI category due to sustained strong demand in the secondary market due to increasing caution amongst domestic consumers (secondary sales growth for HI stood in low double digits). We expect soaps category’s growth to maintain steady growth momentum due to heightened demand for hygiene products. The hair colour category recovered to positive growth in October 2020. Thus, India business is expected to improve its growth trajectory in H2FY2021. Though key input prices (including palm oil) have risen, the company has taken prudent pricing action at the end of the quarter.

November 2020 67 Sharekhan ValueGuide EARNINGS GUIDE EQUITY FUNDAMENTALS

HUL • Hindustan Unilever Limited (HUL) is India’s largest fast-moving consumer goods (FMCG) company. Q2FY2021 performance was largely in line with expectation with revenue and PAT growth of 16% and 10%, respectively (OPM standing at 25.1%). Organic revenue growth stood at 3%, with a volume growth of 1% (recovering from 8% volume decline in Q1). About 80% of the domestic portfolio (health, hygiene and nutritional segments) continues to perform well and registered a 10% revenue growth in Q2 (largely a volume-led growth). With majority of the portfolio catering to essential categories, the strong direct distribution reach and new product launches (especially in the hygiene space) would help HUL see faster recovery post normalisation of the business environment. . Higher rural demand vis-a-vis urban demand, better penetration of nutritional portfolio and new products remain key revenue drivers in the near term. Higher input prices would continue to put pressure on margins. The company plans calibrated price hikes in key portfolios and aims to focus on cost efficiencies to mitigate the impact of higher input prices. HUL remains one of our top picks in the FMCG space. ITC • Q2FY2021 performance was disrupted by localised lockdowns in July-August 2020 having a significant impact on core cigarette business. South metros and large towns were affected by localised lockdown affecting cigarette sales. The FMCG business improved by 300 bps y-o-y to 9.7%. Cigarette sales normalised in June but affected by localised lockdowns from mid-July, they were badly hit in August. However, with receding cases and the economy getting slowly unlocked, sales are recovering m-o-m but are yet to reach pre-COVID levels. The non-cigarette FMCG business revenue growth is also boosted by opportunistic scale-up in categories such as sanitiser, Atta, hand wash, ready-to- cook food and disinfectant sprays/surface cleaners. However, some of the category growths would normalise in the post-COVID era. But higher margins would sustain due to a robust brand portfolio, higher operating leverage, product innovation and supply chain efficiencies. The hotels business will remain an underperformer in FY2021 (likely to see strong recovery in FY2022). ITC’s stock is trading at a stark discount to some of the large consumer goods stocks. With a favourable risk-reward ratio, we maintain our Buy recommendation on the stock. Jyothy Labs • Jyothy Laboratories Limited (JLL) is the market leader in the fabric whitener segment in India. JLL is largely a consumer staples company with 80-85% of its revenue coming from essential products such as detergents, dishwashing products, and personal wash items. Q2FY2021 numbers were largely in line with our expectations, as consolidated revenues and PAT grew by 6.2% and 12%, respectively. Domestic FMCG business grew by 7.6%, helping volumes rise by 8.5%, which is better than the 6% growth achieved in Q1FY2021. The essentials portfolio (constituting 80-85% of overall sales) continues to perform well. Driving sales through LUP, expanding reach (especially in rural markets) and focus on gaining strong traction to new product launches are near-term growth drivers. We believe that sustained demand in HI category, improved growth in personal care space and sustained product launches would help JLL post earnings CAGR of 21% over FY2020-23E. Management is confident of maintaining OPM at around 16%. In view of the long-term growth prospects and discounted valuations, we maintain our Buy rating on the stock. Marico • Marico is among India’s leading FMCG companies. Core brands such as Parachute and Saffola have a strong foothold in the market. consolidated revenues grew by ~9% in Q2FY2021 driven by an 11% volume growth in the domestic business and 7% constant currency growth in the international business. With improving consumer sentiments and supply chain operations reaching near pre-COVID levels, 95% of the company’s product portfolio returned to the growth track y-o-y. With a good recovery in the volume growth of core categories, strong traction to the new launches (especially in food category) and steady growth in the international business, Marico is expected to post 10-13% revenue growth over the next two years. Though rising input prices would put stress on margins, stringent cost-saving measures and prudent ad-spends would help in the mitigating the impact at OPM level. Thus, we expect OPM to sustain at ~20% in the near term and would gradually improve with stabilisation in the key input prices. Though FY2021 is expected to be a disruptive year, Marico is focusing on delivering double-digit revenue growth in the near to medium term by launching new products in health and hygiene categories, different distribution model for urban markets, and increased direct distribution in rural markets. A strong footing in the value-added hair oil segment and enhancing presence in less-penetrated categories such as premium hair care and male grooming would help the company to achieve good growth in the long run.

November 2020 68 Sharekhan ValueGuide EQUITY FUNDAMENTALS EARNINGS GUIDE

Nestle India • Nestle India Limited (Nestle) is the country’s largest food company with a wide presence in categories such as milk and milk powders, instant noodles, instant coffee, and infant cereals. The company’s prominent brands include Maggi, Nescafe, KitKat, and Cerelac. Nestle is also the market leader in seven out of eight categories and 85% of its domestic product portfolio. Strong position in key categories can be attributed to sustained product/variant launches under existing brands, enhanced distribution reach, and adequate brand-building and promotional activities. Q3CY2020 revenues grew by 10.2% y-o-y to Rs. 3,525.4 crore, in line with our expectation of Rs. 3,551.3 crore. The domestic business grew by 10.2% y-o-y, better than a 2.6% growth in Q2CY2020. Nestle is the largest food company with a strong portfolio of brands in the ready-to-cook/drinks space, which will help the company to achieve to good growth at a time when consumer habits are changing, with a greater preference for in-house food consumption. With its consistent track record and sturdy balance sheet and a stable growth outlook, Nestle is one of the better stocks among its large peers in the sector. Thus, we maintain a Buy rating on Nestle. Tata Consumer • Tata Consumer Products Limited (TCPL) is one of the largest consumer goods companies in India Products with strong presence in branded tea, salt, water and other staples. Integration of the Tata Chemicals’ consumer goods will bring a lot of synergistic benefits such as a combined distribution network catering to more than 200 million households, diversification into multiple product categories, robust innovation, and sustained revenue and cost synergies, which will help in driving sustainable growth in the long run. Tata Consumer Products’ expanded product portfolio (post the merger of Tata Chemicals’ consumer business), rising trend of in-house consumption in domestic and international markets, and expanding distribution reach aided the company to post strong operating performance in Q2FY2021. Market share gains in branded tea and salt segment, doubling of distribution reach, sustained higher in-house consumption and consistent product launches would be key growth levers for the domestic business. Increasing conversion from non-black tea to specialty tea would also drive growth in the international tea business. Scale-up in NourishCo, sustained double-digit growth in Tata Coffee and sequential improvement in out-of-home consumption will continue to add to revenues in the near to medium term. Benefit of completed processes such as integration of organisation structure and two-thirds of the distribution network will start flowing in from Q3, which will help mitigate the impact of higher raw material prices in the near term. However, the company aims to complete integration process before the scheduled time and reap large margin benefits of 200-300 bps over the next 2-3 years. We maintain our Buy recommendation on the stock. Zydus Wellness • Zydus Wellness Limited (ZWL) now has a product portfolio of brands such as EverYuth, Nutralite, and Sugar Free along with Glucon D and Complan after the acquisition of Heinz India. ZWL has a strong portfolio of leading brands, which are largely placed in low-penetrated categories. Q2FY2021 revenue grew by 5% y-o-y to Rs. 342 crore, almost in line with our expectation of Rs. 336.5 crore driven by leadership position and market share gains across key categories. The company has identified three growth pillars from a medium to long-term perspective 1) Driving synergistic benefits from acquisition of Heinz, 2) new products and 3) expanding its international footprint. Though FY2021 will be affected by COVID-19 pandemic, strong recovery is anticipated in FY2022. Except for palm oil, prices of other inputs have corrected from their highs and have remained benign in past few months. This would reduce pressure on margins in coming quarters. However, the company’s medium target is to achieve an OPM of ~20%. Stable working capital cycle and strong cash-generation ability would help ZWL in the current uncertain environment. In view of discounted valuations to peers, a stable balance sheet, negative working capital cycle and a strong brand portfolio, we maintain our Buy rating on the stock. IT/IT services Birlasoft • Birlasoft Limited (Birlasoft), a part of the CK Birla Group, has strong enterprise solutions capabilities and digital competencies, which would help it to capture opportunities in the enterprise digital space. Management remains confident that revenue growth would bounce back sequentially in Q3 and Q4 of FY2021 given reversal of discounts and ramp-up of deals. We believe that the company would deliver strong revenue growth in FY2022 led by strong deal wins, a healthy deal pipeline, strong execution capabilities and higher adoption of digital transformation by customers. Management expects EBITDA margin to reach 15% in Q1FY2022 from 13.9% currently. Focus on deepening relationship with existing large accounts, vertical sales structure, leveraging core and peripheral services and defined incentives of cross-sell/up-sell are expected to drive the revenue growth for the company going ahead.

November 2020 69 Sharekhan ValueGuide EARNINGS GUIDE EQUITY FUNDAMENTALS

HCL Tech • HCL Technologies (HCL Tech) has a leadership position in infrastructure management services (IMS) and engineering and research and development (ERD) space. HCL Tech provided revenue growth guidance in the range of 1.5-2.5% q-o-q for Q3 and Q4 of FY2021, translates to a growth of 0-0.7% (versus earlier guidance of negative 3.3% to negative 0.8% growth). It also increased margin guidance to 20-21% from its earlier guided band of 19.5-20.5%. HCL Tech continues to impress with (1) consistent large deal wins in core areas, (2) signs of wining consolidation deals with application components, and (3) improved digital competencies. HCL Tech’s strength in cloud infrastructure and capabilities in automation and security services would help the company to drive clients’ digital transformation journey. We believe HCL Tech’s infra and application capabilities are expected to drive its growth in this cloud adoption environment. Infosys • Infosys is India’s premier IT and ITeS company that provides business consulting, technology, engineering, and outsourcing services. The company expects its Pentagon agile digital service architecture to help address clients’ digital requirements. Infosys raised its revenue growth guidance to 2-3% in CC terms from 0-2% earlier and surprised with better-than-expected upward revision in operating margin guidance to 23-24% (versus 21-23% earlier) for FY2021, despite a wage hike (effective from January 1, 2021) and possibilities of higher furloughs. The management upgraded its revenue growth guidance on the back of strong performance in H1FY2021, solid deal wins, robust deal pipeline, acceleration of spends on digital transformation and improving demand environment in large verticals. Large deal wins remained strong at $3,145 million (up 80.3% q-o-q and 10.5% y-o-y), provide revenue visibility going ahead. We expect Infosys would deliver industry-leading numbers in FY2022E/FY2023E, led by continued large deal wins, enhanced digital capabilities (aided by organic investments, acquisitions and partnerships) and strong execution. L&T Infotech • Larsen & Toubro Infotech (LTI) is the sixth largest IT services company in India in terms of export revenue and is among the top-20 IT service providers globally. The management indicated that Q3FY2021 revenue would surpass revenue ($409.9 million) of Q4FY2020, translating a minimum q-o-q growth of 1.3%. We believe LTI would comfortably beat this guidance given new account opening, prudent client mining and a higher adoption of digital technology. The management I seeing strong demand across strategic themes - (1) operate to transform, (2) data-driven organisation, (3) experience transformation, and (4) digitising the core. A multitude of factors such as strong execution capabilities, a dynamic sales team, accelerating revenue contribution from its digital business, leverage of domain experience, solid top account mining and healthy deal wins have been helping LTI to outpace the average industry growth rate. L&T Technology • L&T Technology Services (LTTS) is the third-largest engineering services provider (ESP) in India and is Services well-diversified to capture digital engineering spending across verticals. Digital engineering spend is expected to report a 19% CAGR to $1.1 trillion by 2025, which would account for 53% of overall ERD spends. The management has guided for a decline of 7-8% in US Dollar revenues as against a 9-10% drop expected earlier for FY2021, translating a 3.4-4.8% q-o-q growth for the remaining quarters of FY2021. We believe LTTS is well-poised to deliver strong multi-year growth, led by leadership depth, broad client portfolio, multi-domain expertise and under-penetrated ERD outsourcing market. Mastek Limited • Mastek has created a consistent and predictable revenue stream from UK’s public sector over the past few years, thanks to introduction of Digital Outcomes and Specialists (DOS) framework by the UK government (replacement of Digital Services-2 framework in 2016). Mastek has started signing large deals under joint go-to-market strategy (with Evosys). The management indicated that significant demand for digital transformation and offshoring projects would offset the UK government’s budget constraints. Further, growth momentum in the Evosys business would continue on the back large opportunities in the cloud-migration space, strong order booking, a healthy deal pipeline, gaining market share from competitors and dedicated sales team to migrate customers from SAP to Oracle cloud. The management expects H2FY2021 to be better than H1FY2021 and the strong growth momentum would sustain in FY2022E.

November 2020 70 Sharekhan ValueGuide EQUITY FUNDAMENTALS EARNINGS GUIDE

Persistent Systems • Persistent Systems Limited (PSL) has proven expertise and a strong presence in newer technologies, strength to improve its IP base, and a decent margin profile, all of which set it apart from other mid-cap IT companies. PSL is focusing on development of Internet of Things (IoT) products and platforms, as it sees a significant traction from industrial machinery, SmartCity, healthcare, and smart agriculture verticals. Post a changed management, the company has been delivering strong performance especially in the technology services segment with new deal wins. We believe growth momentum in Technology Services (77% of total revenues) would continue in FY2022E led by large deal signings, new logo addition, prudent client mining strategy and a healthy deal pipeline. Alliance business is expected to improve in FY2022E as cloud adoption among clients would accelerate. We expect USD revenue/earnings to clock a CAGR of 13-20% over FY2021-FY23E, led by strong deal wins, cross- selling opportunities & margin expansion. TCS • Tata Consultancy Services (TCS) is among the pioneers in the IT services outsourcing businesses in India and is the largest IT services firm in the country. The management stated that demand recovery is slight faster than earlier expectations. It also pointed to the start of the first phase of a multi-year technology transformation cycle given emergence of new operating model, large adoption of cloud and acceleration of technology spends by customers. Given its deep domain expertise, contextual knowledge and ability to stitch together large multi-service deals delivered on the outcome pricing model, TCS is well-positioned to benefit from the acceleration of overall technology spends across the globe. Tech Mahindra • Tech Mahindra (Tech M) has successfully transformed itself from a telecom-focused player to one that offers a wide portfolio of differentiated offerings in the enterprise segment over the last decade. The company has improved its position in the enterprise business because of a calibrated approach with respect to acquisitions (in terms of deal size, digital capabilities and vertical exposure), better go-to-market strategy, and smart deal structuring with outcome-based approach. Management expects double digit growth over next couple of years on the back of anticipated growth in enterprise segment, potential 5G opportunities and strong deal wins. Management also indicated that it has levers to lend comfort on margin stability despite cost inflation and return of discretionary spends. Further, the rise of virtual workstation has created huge demands on robust communication networks, which has advanced the need for more robust 5G technologies, and this would lead to significant boost IT spends in the telecom space. Wipro • Wipro is among India’s top five IT companies. It resumed its guidance by providing a better-than- expected outlook of a 1.5-3.5% q-o-q revenue growth for Q3FY2021E. Secular growth in BFSI, communication and life-sciences verticals would continue in the medium term, while energy & utilities and technological verticals are expected to recover in Q3FY2021. Given acceleration in spending on cloud and cloud-related technologies, we believe growth trajectory of Wipro would improve in FY2022E and FY2023E from its historical levels. Capital Goods/Power Polycab India • Polycab is the market leader in the wires & cables (W&C) space with an extensive product portfolio and distribution reach coupled with accelerated growth in the FMEG space, which augurs well for growth visibility. The company’s market position and success are driven by its robust distribution network, wide range of product offerings, efficient supply chain management, and strong brand image. Revenue from the wires and cable segment has seen a decent 10.5% CAGR during FY2016- FY2019. Further, increasing market share of organised players, which grew from 61% in FY2014 to 66% in FY2018, is expected to touch 74% in FY2023E, which augurs well for the industry leader. Company is witnessing bounce back in domestic markets with improving business environment. Management has refrained from giving guidance in an uncertain environment but expects H2FY2021 to be better than H1FY2021. The company is on a healthy growth trajectory owing to its leadership position and a strong product portfolio both in wires and cables and FMEG businesses along with strong distribution and in-house manufacturing capabilities. Hence, we recommend Buy on the stock.

November 2020 71 Sharekhan ValueGuide EARNINGS GUIDE EQUITY FUNDAMENTALS

Dixon Technologies • Dixon is a leading manufacturer of products for key consumer durable brands in India and going ahead local manufacturing is expected to get a boost given the strong demand in the consumer electronics market in India. Dixon stands to benefit in the electronic outsourcing business with a leadership position in key business segments. The company’s Tirupati facility is expected to add a new dimension to growth prospects as it will foray into new business verticals, expand the product portfolio of its existing business verticals, and penetrate further into southern Indian market by forging an alliance with original equipment manufacturers (OEMs) and add them as clients. The expanded capacity in consumer electronics and home appliance coupled with a PLI scheme in mobile phones is likely to drive revenue growth momentum, while margin may expand due to economies of scale and automation in lighting. The company also generates higher return ratios as it operates on an asset- light model and has an efficient working capital cycle. Hence, we recommend a Buy on the stock. KEI Industries • KEI Industries (KEI) is among the top three organised players in the Indian W&C industry and an EPC player in the power T&D segment. KEI has a diversified business model with a significant presence in domestic and international markets. Over the years, the company has established its presence in the institutional space by developing the ability to offer various products across locations. KEI has a well-entrenched marketing presence across all states, which increases its ability to deliver products speedily from plants in North and West India. The company has created a presence in building specialized offerings to tap niche segments such as the shipping sector, oil & petroleum plants, etc. They are now looking at tapping several large realty brands and strengthening all- India presence by embarking on opening new warehouses across India. The retail segment comprises house wires (HW) and a part of low-tension cables (LT) sold through dealers with more focus on the segment. On the back of a growing dealer network and brand building initiatives (advertising, sponsoring), performance-linked schemes and dealer-electrician meets etc, we expect KEI to increase their retail presence further. Government initiatives such as ‘Housing for All by 2022’, affordable housing under ‘Pradhan Mantri Awas Yojana, etc, could boost growth in HW and LT cables segments. KEI’s diversified user industries, increased sales of high-margin EHV cables, higher export sales and improving traction on exports and low base of the wires business helped combat a weak macro environment with good growth prospects in FY2022. Hence, we recommend Buy on the stock. Ratnamani Metals • Ratnamani Metals and Tubes Limited (RMTL) is the largest stainless steel tube and pipe manufacturer in India. Q1 numbers were mixed numbers as revenue beat expectations at Rs. 578 crore, while OPM at 12.7% and PAT at Rs. 50 crore lagged expectations. The management has guided revenue of Rs. 2,000-2,400 crore (implying a revenue decline of 7%-23%, owing to slowdown in order inflows and delay in commissioning of additional capacity) and margin of 16-18% in FY2021E. Though FY2021E would be weak, we expect revenue growth to recover sharply in FY2022E, led by pent-up demand, pick-up in order inflows, and higher government spending on infrastructure schemes. However, new stainless-steel plant would enable the company to manufacture import substitute products, which would provide business visibility with entry into new areas (i.e., oil exploration) in export markets. We remain Positive on RMTL, led by its strong balance sheet, ability to generate superior return ratios, and capacity expansion programmes. Hence, we maintain our Buy rating on the stock. Cummins India • Cummins is a subsidiary of Cummins Inc, US – a global manufacturer of engines and other power generation products. The company comprises three businesses – Engine Business (serving the Construction and Compressor markets with Heavy, Medium and Light Duty engines), Power Systems Business (serving Mining, Marine, Rail, Oil and Gas, Defense, and Power Generation) and Distribution Business Cummins India is the largest standby genset player in India with leading market share in medium and large genset categories. The company has a strong technology/innovation track record, well supported by its parent, which helps it stay ahead of peers across changes in emission norms. The company’s diversified business presence across power generation, industrial BU, exports, and distribution contributes reasonable long-term growth prospects with healthy return/cash flow profile. While the recent drop in demand both domestic and exports market has posed near-term challenges reflecting in recent earnings downgrades and valuation de-rating, we believe that the stock offers favourable risk-reward for long-term investors, given vast product offerings, management’s focus on efficiency/cost, and a healthy potential scale from a pick-up in domestic infrastructure and global market. Considering a revival in its net earnings growth trajectory (23% CAGR) over FY2021E-FY2023E, strong balance sheet and steady cash flow generation, we remain constructive on the company and recommend Buy on the stock.

November 2020 72 Sharekhan ValueGuide EQUITY FUNDAMENTALS EARNINGS GUIDE

Finolex Cables • Finolex Cables, a leading manufacturer of power and communications cables, is set to benefit from improving demand for cables, its core business. The company is leveraging its brand strength to build a high-margin consumer product business. While the government’s focus on Housing for All by FY2022 is expected to drive demand for housing wires, slowdown in housing demand continues to affect performance of the electrical cables segment — 65% of the company’s total revenue constitutes housing wires. Further, ongoing government programmes (Bharat Net Phase II) are expected to improve broadband connectivity and related technologies will continue to drive growth for communication cables but due to the recent pandemic and government resources more routed towards the there might be delays in tendering for the same. Kalpataru Power • Kalpataru Power Transmission Limited (KPTL) is a leading EPC player in the power transmission and distribution space in India. Opportunities in this space are likely to grow significantly, thereby providing healthy growth visibility. Order book remains healthy. In the wake of the COVID-19 led lockdown, since mid-March 2020, the management expects FY2021 standalone revenue to grow between 5-10% y-o-y, KPTL has received Rs. 3,225 crore of order inflows on a YTD basis and is the L1 bidder in Rs. 2,400 crore and the management aims for Rs. 9,000-10,000 crore order inflows for FY2021. The management expects sales of its BOOT assets by FY2021 and is in talks with prospective buyers. Further, the management expects to be net debt-free on standalone by FY2021. The tendering pipeline remains healthy in railways, oil and gas in domestic markets and T&D tenders in international markets. The management remains confident of delivering a good performance in FY2021 despite challenges as most projects are operational now. Order inflow visibility remains healthy with the management guiding for Rs. 9,000-10,000 crore for FY2021 order inflows in railways, international T&D and oil & gas segments. The sector and stock have seen significant correction, which provides an attractive investment proposition. We expect FY2021 to be better for KPTL in terms of order intake, improving prospects for asset divestments, which will further deleverage the balance sheet. Hence, we maintain our Buy rating on the stock. KEC • KEC International is a global power transmission infrastructure EPC major. The company is present in the T&D, cables, railways, water, renewable (solar energy), and civil works verticals. Globally, the company has powered infrastructure development in more than 61 countries. KEC is a leader in power transmission EPC projects and has more than seven decades of experience. Over the years, it has grown through the organic as well as inorganic route. The opportunity size remains high in the non-T&D segment to provide enough opportunity to ramp up its total order outstanding for the business. KEC’s order book remains strong, providing strong revenue visibility and order inflow visibility remains healthy in international T&D and railways segments. After the unlocking after the pandemic, ordering activity is gradually gaining momentum with tendering visibility remaining healthy in railways, international T&D, and civil, with the company having bided for Rs. 30,000 crore-35,000 crore projects. In the railways segment, order momentum, which was slow, has gradually picked up and bids are expected to be awarded soon. Tendering pipeline remains healthy wherein KEC has quoted roughly of about Rs. 30,000 crore for projects in the last few months and will be quoting another Rs 25,000 crore worth of projects in next two months. In the railways and civil segment, execution is happening at a fast pace, while the order pipeline remains healthy. The company has L1 position in orders worth Rs. 3,485 crore. The management highlighted that it has been focusing on mechanisation and digitalisation, which is expected to help in cost optimisation and support margins in the long run. Given the healthy order backlog, order inflow visibility and KEC’s ability to ramp-up execution, we maintain our Buy rating on the stock

November 2020 73 Sharekhan ValueGuide EARNINGS GUIDE EQUITY FUNDAMENTALS

Thermax • Thermax provides solutions in the energy and environment space and the energy and environment businesses of Thermax are direct beneficiaries of the continuous rise in India Inc’s capex. During Q2FY21 Thermax’s overall performance remained weak led by poor performance from its energy vertical. The chemical segment fared well in execution, operational profitability and order booking. Weak order inflow, which was largely on expected lines, and lower execution during thesame period helped in lower depletion of the exit order backlog to 1.1x TTM consolidated revenue. Management sounded cautious on a short-term recovery in order tendering. Weak international order inflows and limited visibility for big ticket-size domestic deals expected to see lower order inflows in FY2021compared to FY2020. The management expects better ordering in its chemical business. Further enquiries pipeline remains positive in select sectors like food processing, chemical and pharma in domestic markets. Fresh project enquiries also witnessed from core sectors primarily metals, cement and power generation. The company expects better exports from the chemical division due to opportunities arising from pharma API factories (for boilers, water treatment etc.) and orders from international markets. Lower carry-forward order book along with lower capacity utilisation in most core user industries is likely to impact order inflows for FY2021. Additionally, weak order intake outlook during FY2021 may lead to further depletion of order book by the end of FY2021. Hence, order inflow during the current fiscal year would be the key monitorable for the company. The company is expected to return to normalcy by Q3FY2021. On a positive note, the management stated that all factories are operating at 80-100% utilisation levels and 100% manpower availability. Hence we retain our Hold rating on the stock. Triveni Turbines • Triveni Turbines Limited (TTL) is a market leader in 0-30 MW steam turbine segment. TTL is a market leader in the up to 30 MW steam turbine segment. The company has a strong aftermarket segment and overseas business, while the domestic market is showing distinct signs of pickup. The company has also formed a JV with GE for steam turbines of the 30-100 MW range, which is likely to grow in the ensuing years. TTL is a virtually debt-free company with a limited capex requirement and an efficient working capital cycle, reflected in very healthy return ratios. The business is bouncing back to normalcy after the unlocking down and the management indicated that enquiry levels remained healthy both in domestic and exports market. Newer opportunities in the oil & gas segment are gaining momentum and company has qualified from large number of customers. Further, the company is also seeing opportunities in combined cycle (uses to make power from gas) orders in the 30 MW category. Overall the situation is improving on the enquiry front with opportunities in the refurbishments and aftermarkets. Company’s strong margin profile, lean working capital, healthy cash flows & balance sheet and long term growth prospects (~diversification in new types of turbines) along with healthy enquiry pipeline both in domestic and exports provides confidence. Given its strong H1FY21 performance and expectation of cost control measures to sustain, we have revised our net earnings estimates upwardly improving margins and introduced FY2023E earnings estimates in this note. The stock is currently trading at 17.4x/15.1x FY22E/FY23Ewhich is at a discount to its long- term historical average. Hence we upgrade our holding rating to Buy V-Guard • V-Guard Industries is an established brand in the electrical and household goods space, particularly in South India. Over the years, the company has successfully ramped up its operations and network to become a multi-product company. V-Guard is an established brand in the electrical and household goods space, particularly in south India. Over the years, it has successfully ramped up its operations and network to become a multi-product company. The company has a strong presence in the southern region. and aggressively expanding in non-south markets and is particularly focusing on tier-II and III cities, where there is lot of pent-up demand for its products puts company in good stead with its competitors. After the easing of the lockdown, V-Guard is witnessing a near normal environment Demand recovery in non-metros and suburban regions has been faster compared to metros and tier-1 cities, which aided the company due to higher concentration in these regions. Hence, leaving aside April 2020, the company’s performance has been relatively strong. V-Guard has benefited from the faster pick up in rural markets. Going ahead company expects revenue to remain flat YoY in FY21, indicating ~20% y-o-y growth in H2FY21 and expects non-south growth to be 10% ahead of South for H2FY21, which will continue to increase Non-South revenue mix. Overall, the management is focusing on maintaining healthy cash position, cost rationalization and expediting digitisation. The company’s strong balance sheet, cash flows, and reputed brand along with robust business fundamentals will help it emerge stronger from the near-term weak environment. Hence, we continue to maintain Buy on the stock.

November 2020 74 Sharekhan ValueGuide EQUITY FUNDAMENTALS EARNINGS GUIDE

Infrastructure/Real Estate L&T • Larsen & Toubro (L&T), being the largest engineering and construction company in India, is a direct beneficiary of the domestic infrastructure capex cycle. L&T remains at the forefront to reap benefits from the recently announced Atmanirbhar Bharat scheme from the government of India with its diversified businesses across sectors such as defence, infrastructure (roads, railways, metros, and DRC), heavy engineering, and IT (digitalisation). The recent move from the Ministry of Defence, wherein the import embargo was placed for 101 defence items, will prove to be beneficial for L&T as it is already manufacturing more than 50% of the items stated in the first negative list of 101 items. The company has been focusing on defence manufacturing and has been ramping up operations (invested ~Rs. 8,000 crore) in the space over the last few year. Further, the government's announcement to create a domestic capital procurement budget of Rs. 52,000 crore with intention to scale-up allocation at a 15% CAGR over the next five years augurs well for the company. Further, the National Infrastructure Pipeline project formulated by the government is likely to lead to increased spends in critical areas. L&T is poised to capitalise on these opportunities. More than 95% of the company’s sites are operational and gradual improvement seen in labour force is expected to witness recovery in execution with improvement more evident from H2FY2021. Focus remains on improving productivity with new norms such as social distancing at workforce in place; however, the company is well-placed to overcome the current challenges and expects normalisation in the second half of FY2021. Order backlog remains diversified and healthy at ~Rs. 3,05,083 crore (2.2x its TTM revenue) in Q1FY2021. In the concluded quarter, management indicated that the order pipeline stood at Rs. 6.5 lakh crore, comprising Rs. 5.3 lakh crore of domestic orders and Rs. 1.2 lakh crore of international orders. We expect L&T to sail through a weak FY2021 as it is well placed to ride the current uncertainties owing to multiple levers such as strong business model, diversified order book, and healthy balance sheet, while it refurbishes its order book and maintains the liquidity position to bounce back in FY2022. Consequently, the steep correction in L&T’s stock price provides a favourable risk-reward ratio to investors (at a P/E of 17x/13x its FY2021E/FY2022E earnings). Hence, we maintain our Buy rating on the stock PNC Infratech • PNC is one of the best picks in the road development sector on account of its strong execution capabilities, healthy balance sheet, robust order book, and prudent capital management.PNC has in-house manufacturing capabilities providing it the ability to timely execute projects. The company’s strong order book along with expected order inflows during FY2021 is expected to lead to strong earnings bounce back in FY2022. The company is also looking at monetising its assets, which would further lighten its balance sheet and free up equity capital for future projects. We have a Buy rating on the stock. Sadbhav Engineering • Sadbhav Engineering Limited (SEL) is engaged in 1) EPC business for transport, mining, and irrigation Limited (SEL) sectors and 2) development of roads and highways on BOT basis through SIPL. SEL has a healthy order book of Rs. 9,753 crore (4.3x its FY2020 standalone revenue). The company has robust in- house integrated execution capabilities with qualified human resource and owned equipment. We expect the company to gradually return back to track with the execution of projects at advanced stage and reduction in leverage. Considering attractive valuation and improving fundamentals, we have maintained our Buy rating on the stock. JMC Projects • JMC is expected to be one of the beneficiaries of expected government spending on infrastructure over the next five years. Strong order backlog, is skewed towards the growing infrastructure and buildings and factories segments, which comprises over 80% of its order book. JMC has strong in- house execution capabilities, a quality standalone balance sheet and healthy return ratios. The company’s divestment of road BoT assets is a key positive, which will significantly deleverage its consolidated balance sheet and halt loss-funding from the standalone balance sheet. We have a Buy rating on the stock. Oil & Gas Oil India • Oil India has several hydrocarbon discoveries across reserve in Rajasthan and the northeastern regions of India. The company holds domestic 2P (proved and probable) reserves of 75 mmt for oil and 132 bcm for gas. Reserve-replacement ratio of the company is also healthy at 1.2x. However, the recent sharp decline in oil prices given weak demand due to COVID-19 and weak domestic gas price is a cause of concern for upstream PSUs. The company offers a high dividend yield.

November 2020 75 Sharekhan ValueGuide EARNINGS GUIDE EQUITY FUNDAMENTALS

Petronet LNG • Petronet LNG is the largest LNG re-gasifier in India with 17.5 mmt LNG terminal at Dahej and 5 mmt LNG terminal at Kochi. The company’s Dahej terminal enjoys a competitive edge compared to other LNG import terminals, given its low tariff and long-term contracted volumes with use or pay clause. COVID-19 is expected to impact volumes temporarily; and Dahej terminal utilisation has already recovered to 100% with expectation of high utilisation to sustain given robust gas demand outlook supported by low LNG prices. Kochi terminal utilisation is also expected to improve with resolution of pipeline connectivity issues in southern India. Petronet LNG would be the key beneficiary of rising share of LNG in India’s overall gas consumption. The stock offers a healthy dividend yield. Reliance Industries • Reliance Industries Limited (RIL) is a diversified conglomerate with ~60% EBITDA contribution from the core business of refining and petrochemicals and ~35% from consumer businesses (retail and digital services). The long-term earnings growth outlook remains robust with potential improvement in the financial of digital services business (likely ARPU hike, ramp-up of recently launched fibre broadband services, and rollout of enterprise business and new commerce services) and continued strong growth for the retail business (although near-term earnings to get impacted due to COVID-19) supported by leveraging of the JioMart platform using WhatsApp. The company’s aim to increase the share of EBITDA from the consumer business to 50% would play a crucial role to tide over margin volatility in downstream margin due to COVID-19. RIL has a strong balance sheet as it has become virtually net debt free with monetisation of stake in Jio Platforms, a rights issue, and a fuel retail JV with BP. Potential listing of Jio and recent induction of strategic partners in the retail business could further unlock value from consumer-centric businesses and create long-term wealth for investors. Mahanagar Gas • Mahanagar Gas Limited (MGL) is a dominant CGD player in and around Mumbai, with gas sales volumes of 3 mmscmd in FY2020 with 73% volume derived from CNG and 14% from domestic PNG. The company’s long-term volume growth remains intact, given low gas penetration (CNG at 34% and domestic PNG at 38%), regulatory push for use of green fuels, and potential volume ramp-up at Raigad geographical area. Moreover, weak gas prices would aid margin expansion in MGL’s pricing power in CNG and domestic PNG. MGL’s balance sheet is strong with nil debt and robust free cash flow generation. However, open access regulation (still to be approved by the regulator) is likely to act as a near-term overhang on the stock. The stock offers healthy dividend yield. Pharmaceuticals Aurobindo Pharma • Aurobindo Pharma (Aurobindo) has a higher exposure (around 80%) to regulated markets of US and Europe. In the process, the company has built strong capabilities to cater to these markets. Unit 4 clearance by the USFDA offers better growth visibility. Aurobindo has a sturdy ecosystem in generics (vertically integrated model and lower product concentration) to withstand volatility in the US. Strong traction in the US and gradual pick up in other geographies would support topline growth, while steady margin improvement would result in double-digit earnings growth. Aurobindo’s sales and PAT are expected to report 9.2% and 11.5% CAGR, respectively, over FY2020-FY2023. This coupled with improving balance sheet strength bodes well. We upgrade our recommendation on Aurobindo to Buy from Hold and retain our PT of Rs. 975. Cadila • Cadila is favourably progressing in its efforts to build an alternative growth platform (NCE, Biologics, and Vaccines) that should start delivering over the long term and reduce the company’s dependence on limited competition assets in the US for its earnings growth. Cadila is expected to get in to a sweet spot with both its key markets – US and India – likely to witness improved growth traction. Stabilising price erosion in US markets along with a sturdy product pipeline with a focus on specialty and complex generics products would be the key positives. While in India, new launches, COVID-19 related opportunities, and strategic restructuring of business would fuel growth. The recent launch of pressurised Metered Dose Inhaler – Forglyn in India is also expected to be a key growth driver. Cadila is also developing a vaccine for COVID-19. If approved, the company could unlock sizeable growth opportunity. Given the strong growth prospects and earnings visibility, a strong balance sheet, and healthy return ratios would support multiple re-ratings. We retain our Buy recommendation on the stock.

November 2020 76 Sharekhan ValueGuide EQUITY FUNDAMENTALS EARNINGS GUIDE

Cipla • Cipla is a global pharmaceutical company with a geographically diversified presence. The company has a strong presence in the domestic formulations space. Management’s concentrated efforts to structure businesses across geographies for a long-term sustainable growth augur well. Cipla’s One-India strategy (wherein it merged all three business of prescription, trade generics, and consumer health to reap synergies) has played out well and would drive the growth momentum upwards. Sustained traction in chronics and market leadership position in therapies of respiratory, inhalation, and urology segments bode well. This coupled with likely recovery in the acute therapy and improvement in the hospital business would drive the India business. Expected traction in new launches in the US and a healthy pipeline would drive the revenues for the US business. The South Africa business is also expected to sustain the strong double-digit growth momentum. In addition, Cipla is expected to benefit from COVID-related opportunities in India as well as in emerging markets. We maintain our Buy recommendation on the stock. Divis Labs • Divis Laboratories is one of the leading players in the API space and is present in the CRAMS Laboratories segment. Divis is witnessing a strong demand environment across both the API as well as custom synthesis business. There are immense opportunities that have emerged for API players such as Divis, as companies world over look to tide over the pandemic. Further, ongoing capacity expansion plans, which are expected to be completed by FY2021, provide ample visibility to cater to the increase in demand. Moreover, the company has received clearance for the Kakinada plant (envisaged capex is Rs. 600 crore) and expects work to commence over the next 2-3 months. Backed by a sturdy project inflow for the custom synthesis business, Divis has announced a Rs. 400 crore capex so as to capitalise on the opportunity. The fact that the company has lined up substantial investments towards capacity expansions points towards strong growth visibility. We believe Divis could also benefit from its backward-integration initiatives and planned new product launches. We retain our Buy recommendation on the stock. IPCA Lab • IPCA is one of the leading formulations and API players present across major markets around the globe. IPCA is a leader in the anti-malarial space and is present in other therapy areas as well. The API segment has an immense growth opportunity in the days ahead, as company is witnessing strong demand traction in this segment and is implementing de-bottlenecking to ease out capacity constraints. This would fuel growth in the next two years and by FY2023, the Dewas capacity expansion would come on-stream and drive topline. The formulations business too is expected to grow at a healthy pace going ahead backed by a pick-up in the domestic as well as exports markets. Driven by a favourable mix, operating leverage and lower costs, operating margins are expected to improve to around 28% levels for FY2021 while going ahead the management has guided for OPM of 25-27%, higher than the 18-19% levels seen in the past two years. Collectively, strong revenue growth coupled with margin expansion augurs well for Ipca. We maintain our Buy recommendation on the stock. Lupin • Lupin is one of the leading pharmaceutical companies and is present in most markets globally. After establishing itself as a major player in the generic space, the company is making efforts to improve its presence in the specialty business. Going ahead, Lupin sees a gradual pick up in the US business, led by ramp up of Albuterol, Levothyroxin, growth in the base business and new launches. India business is expected to grow at a higher pace in H2FY21 v/s H1FY21 on a y-o-y basis as the company expects pick up in the anti-infective portfolio with the onset of the winter season while the chronics portfolio is expected to grow strongly. Lupin is also focusing on cost-control efforts and expects OPM to reach 18.5% by Q4FY2021 as compared to ~15% in H1FY2021. Resolution of USFDA issues at its plants (Goa, Pithampur – Unit-II, and Somerset) would be key watch out for as substantial no of fillings are linked to these plants and if successfully resolved, would lead to earnings upgrades. We retain our Hold recommendation on the stock.

November 2020 77 Sharekhan ValueGuide EARNINGS GUIDE EQUITY FUNDAMENTALS

Sun Pharma • India and US are the key markets for the company and constitute around 60% of the total topline. After four consecutive quarters of a decline, US revenue grew by 4% y-o-y for the quarter largely backed by improvement in the specialty business and growth in new product launches. The outlook for the US business has improved following a pick-up in the lucrative specialty business coupled with strong product pipeline, which would unfold going ahead. Moreover, price erosion is largely stable in the US generic business, which could also support growth. Domestic formulations business is on a strong footing backed by sturdy growth in the chronic segment while the performance of the acute segment has been weak. The management expects the same to improve going ahead as doctors return to outpatient departments and patient footfalls increase. Management sees the domestic formulations business to bounce back on account of new launches and gradual improvement in the prescriptions. Therefore, healthy growth outlook across both the key geographies and increasing penetration in other geographies would drive growth for Sun Pharma. Therefore, we upgrade our recommendation on the stock from Hold to Buy. Torrent Pharma • Torrent Pharma (Torrent) is a leading company present in the emerging as well as developed markets. Torrent has higher dependence on chronic therapies, which bodes well for the company. The company derives 55-60% of its sales collectively from India and Brazil markets. Torrent has outperformed the industry growth in both these markets and looks to sustain momentum backed by new launches, albeit over the medium to -long term. In its commentary, management mentioned that the patient footfalls are on an improving trend and now stand around 75-80% of pre COVID levels. However the adverse currency situation for Brazil, is expected to over weigh the healthy performance. The Europe (Germany) performance though is improving after a decline for 4 consecutive quarters, a meaningful revival is expected in FY2022 and onwards. Growth in the US is expected to be constrained due to price erosion and absence of new launches. Torrent has submitted responses to the USFDA for all its plants and is awaiting a response from the regulator Biocon • Biocon is a leading company manufacturing biosimilars in India and one of the few global companies to receive approvals for its products across the regulated markets of - US, EU, Japan and other developed market. Going ahead, Biocon expects the biologics segment to be a key growth driver. Operational hurdles (logistics issues) are likely to be resolved in the near term with operations expected to re-gain normalcy. Demand is expected to improve for existing biosimilars - Fulphila, Ogivri in the US as patient inflows are likely to improve. The same was adversely affected by the pandemic during the lockdown period. Further, recently-launched biosimilars - Insulin Glargine (Semglee) too is expected to gain traction going ahead. In addition to this, expanding geographical reach would support topline growth. Generic segment is also well placed to capitalise on the opportunities in the formulations segment, while the APIs are likely to stage a steady growth. Biocon is looking to launch Remdesivir in the Indian markets for COVID-19 patients. Further, a possible listing of its wholly- owned subsidiary - Biocon Biologics Limited provides a significant value-unlocking opportunity and this bodes well for the company. We retain Buy recommendation on the stock. Granules • Granules is a fully-integrated pharmaceutical company with presence across the API-PFI-FD value chain. The company is witnessing improved demand environment across its products. The core 5 molecules are likely to sustain the strong growth trajectory, as the company plans to tap new geographies of Europe, Canada and South Africa for growth. A strong product pipeline would add to the revenue growth. Granules has announced a capex wherein it plans to increase its capacities to cater to the increased demand. The new facility would be ready by Q3FY2022 and operations are expected to commence thereafter. We believe that new product launches in the US and augmented capacities will support the base business as well as emerging business. A changing mix (increasing share of high margin PFI and fixed dosage segment) and efficient manufacturing process coupled with better utilization of plants will aid profitability growth. We retain Buy recommendation on the stock

November 2020 78 Sharekhan ValueGuide EQUITY FUNDAMENTALS EARNINGS GUIDE

Laurus Labs • Laurus is a leading research-driven pharmaceutical company, working with nine of the world’s top 10 generic pharmaceutical companies in the world. Laurus sells APIs in 56 countries. Robust growth in the formulations business and emerging opportunities in the API space and a strong order book for the synthesis business, which will unfold over the near to medium term, provides ample growth visibility. Moreover, almost doubling of capacity, primarily to cater to the surge in demand for formulations augurs well and would substantially boost revenues. Laurus had revised its capex guidance upwards to Rs 1200 crore over FY2021 and FY2022, which provides ample visibility on growth going ahead. The other API business is also likely to grow on the back of new product launches. The generic API segment could also benefit from the emerging opportunities. Higher share of the formulations business would lead to improved product mix and would help margins expansion. The robust performance in the quarter points at a strong growth trajectory going ahead for the company. We retain Buy recommendation on the stock. Strides Pharma • Strides is well-positioned to benefit from the opportunities in the global pharmaceutical market. The Sciences company derives a higher share of revenues from regulated markets, especially the US. Healthy growth in the base business in the US and a strong product launch pipeline are expected to fuel growth for the segment. Strides has a strong product pipeline, which are approved but yet to be commercialised and offer sizeable market opportunities. Growth prospects in other regulated markets too are likely to be better led by product launches, increased market share, and portfolio optimization / maximisation. Emerging markets segment are expected to gain traction backed by a likely revival in institutional business and a strong growth in the Africa business. The company’s re-entry in the sterile injectables business offers new growth opportunities, which are likely to unfold over the medium term. We retain Buy recommendation on the stock Shilpa Medicare • Shilpa Medicare (SML) is one of the leading API and formulations manufacturers with strong capabilities in the therapeutic area of oncology. The company is also present in the non-oncology therapy areas and has recently forayed in into formulations, biologics, oral dissolving films, and transdermal patches. SML’s API and formulations segment have a healthy growth outlook. The API segment, which accounts for around half of the company’s revenue, is standing strong. An array of opportunities lies ahead for this segment, including the dual sourcing mandates from global players. This is complemented by expanded capacities with key regulatory approvals in place and a strong product pipeline, which would unfold going ahead. SML plans to commercialise 3-4 molecules per year in the API segment. The formulations business is also expected to grow at a steady pace, backed by growth in the base business. Erosion in the US business due to receipt of the warning letter is likely to be offset by growth in other areas/geography - entry in new areas of oncology/OTC products and increasing geographic reach - Europe (six filings awaiting approvals), foray into the domestic oncology formulations, and niche over-the-counter (OTC) markets. We believe SML’s strategy of building high-value oncology pipeline for regulated markets and foray into biosimilars/biologics would play out well and support growth. We retain Buy recommendation on the stock Solara Active Pharma • Solara is a pure play API manufacturer. Solara has proven capabilities to manufacture complex/ Sciences combination active pharmaceutical ingredients (APIs). There are immense opportunities that have opened up for API players such as Solara. The company is witnessing improved demand tractions across its customers and geographies. The base business is expected to grow because of robust demand environment, market share gains, and higher wallet share of existing customers. New product launches are expected to gain traction. Further, the company has strong product pipeline, which would unfold going ahead and would add to topline growth. Cost-control measures, operating leverage, and favourable mix would drive OPM expansion. Solara has commissioned phase I of Vizag Greenfield plant with commercial production likely in H2FY2021. Phase II of the facility is expected to be ready by the end of FY2021. Incremental capacities would support growth. Further, based on impressive Q2FY2021 performance, Solara has revised upwards its FY2021 revenue and EBITDA growth guidance to over 30% and over 40%, respectively. We retain Buy recommendation on the stock

November 2020 79 Sharekhan ValueGuide EARNINGS GUIDE EQUITY FUNDAMENTALS

Building Materials Grasim • Grasim has witnessed a steep rise in its stock price, led by increased market capitalisation of UltraTech, Aditya Birla Capital, and Vodafone Idea. Grasim’s standalone business may take time due to global and domestic disruption caused in user industries due to COVID-19 pandemic, which has led to capacity expansion plans to be put on hold while focusing on maintaining liquidity. We have revised market capitalisation for its financial and telecom entities, while Grasim’s SoTP value comprises our price target of UltraTech. However, we maintain our Hold rating on the stock, as little clarity has emerged for its standalone business and telecom investment, while investors can directly invest in UltraTech for the cement business. Kajaria Ceramics • Kajaria has seen a sharp improvement in operations and demand environment m-o-m during the easing of lockdowns in the domestic market. The company’s asset utilisation in Q2FY2021 was in excess of 90%, which was 78% and 26% in July and June, respectively. Further, anti-China sentiments in the US and European countries along with recent cut in gas prices by Gujarat state government have boosted exports for the Morbi cluster, which houses around 850 manufacturing units. This has led to improved pricing environment for organised players such as Kajaria. The company expects Q3FY2021 revenue to be the same as last year, while Q4FY2021 revenue is expected to grow by 10% y-o-y. Further, lower gas prices and overheads are expected to lead to 18% OPM for H2FY2021. We expect revenue/ operating profit/net profit to rise at a 15%/20%/26% CAGR over FY2021E-FY2023E. We have a Buy rating on the stock. Pidilite Industries • Pidilite is the market leader in adhesives and sealants, construction chemicals, hobby colours, and polymer emulsions industry in India. The company’s flagship brands - Fevicol and M-Seal have a market share of ~70% each in the domestic market. With a slew of new launches under existing brands and entry into consumer-centric categories, supported by adequate media activities, Pidilite has transitioned its target market from industrial users to consumers through effective communication, which has helped the company to register itself in customers’ minds. With construction activities gaining momentum in the rural and semi-urban markets, the consumer bazaar business is expected to post better performance in the coming quarters. International markets such as America, Middle East & Africa and Asia clocked a recovery. Further, Pidilite acquired an iconic adhesive brand, Araldite, by wholly acquiring Huntsman Advanced Materials Solutions Private Limited (HAMSPL), a subsidiary of Huntsman Group, US). Further, the expected increase in demand for adhesive products in global markets would add to overall revenue in FY2022 and FY2023. A fall in prices of key inputs, in line with the fall in crude oil prices, will support margins. A monopoly in the adhesives market, strong brand recognition and a sturdy balance sheet justify a premium valuation. We maintain our Buy recommendation on the stock. Shree Cement • . We believe Shree Cement should continue its industry outperformance during Q2FY2021, as was seen during Q1FY2021. The company’s grinding units at Pune (2.5 MT) and Cuttack (3 MT) are expected to be completed during Q3FY2021, which would further enhance its capacity from the current standalone capacity of 40.4 mtpa. The company would be doing capital expenditure of Rs. 1,000 crore during FY2021. Further capacity expansion plans would be decided by Q3FY2021. The company’s net profitability is also expected to be supported by higher other income (funds raised through QIP) and lower depreciation. We expect Shree Cement to outperform the industry’s growth over FY2021E-FY2023E, led by improving capacity utilisation and addition of newer capacities. Hence, we have a Buy rating on the stock. The Ramco Cements • The Ramco Cements, one of India’s most cost-efficient cement producers, will benefit from capacity additions carried out ahead of its peers in the southern region. Ramco has embarked upon capital expenditure plan of Rs. 3,500 crore to reach cement capacity of 20.79 mtpa. The expansion aims to strengthen its reach in Andhra Pradesh, West Bengal, and North Eastern states. However, the company may have to delay its expansion plan due to COVID-19 led disruption in the industry, which is expected to lead to low demand during FY2021. The company’s healthy balance sheet and its efficiency should aid in faster recovery in the growth path as normalcy returns. Hence, we have a Buy rating on the stock.

November 2020 80 Sharekhan ValueGuide EQUITY FUNDAMENTALS EARNINGS GUIDE

UltraTech Cement • UltraTech Cement is India’s largest cement company. The COVID-19 led pandemic is expected to affect cement demand in the near term due to stoppage of work at government infrastructure projects and housing projects. However, as normalcy returns, we expect gradual pick-up of government spending, while healthy pricing discipline in the industry along with lower key input costs should aid in maintaining profitability going ahead. The company is better placed in reviving its growth trajectory, considering its leadership position and timely capacity expansion. JK Lakshmi Cement • JK Lakshmi Cement (JKL) had undertaken capacity expansion plans of 8.6 MT since FY2015, trebling its capacity to 13.3 MT by FY2020. Moreover, JKL has been able to reduce its standalone net debt to equity at 0.7x in FY2020 from its peak of 1.5x in FY2015, which shows efficient capital management. The company has a brownfield expansion potential to reach 20 MT in a short time. Now, the company has two distinctive markets, i.e., the East and North West regions. JKL is currently trading at attractive valuation considering likely earnings bounce back from FY2022. Hence, we have a Buy rating on the stock. Supreme Industries • Supreme Industries is a leading manufacturer of plastic products with a significant presence across piping, packaging, industrial, and consumer segments. The company is well placed to enhance its market share as the COVID-19-led crisis resulted in consolidation of the plastic pipes industry (both PVC and CPVC). Moreover, a shift in business from unorganised to organised players has been seen owing to availability of raw materials (PVC resin) and liquidity issues. The imposition of anti-dumping duty on imports from China and Korea is also expected to help domestic manufacturers enhance volumes. Considering healthy demand prospects during FY2021-FY2022E, the company intends to incur capex of Rs. 350 crore to expand its capacities mainly in the piping segment and packaging film segment. We expect SIL to benefit from a medium to long-term perspective, given recovery in rural economy, affordable housing sector, and the new scheme for piped water connection – ‘Nal se Jal’. Given the positive demand outlook from the medium to long term perspective coupled with healthy cashflow generation and a strong balance sheet, we have a Buy rating on the stock. Century Plyboards • Century Plyboards is a leading player in the organised plywood industry with a market share of 25%. The company also has laminate, particle board, and medium-density fibre board (MDF) division having capacity of 600 cubic metres per day. The company like other building material players is likely to be affected by weak demand on account of country-wide lockdown led by COVID-19 pandemic. We believe the company is among the few organised players to benefit from lower input costs and is expected to recover at a faster pace once normalcy returns in the industry. Hence, we have a Buy rating on the stock. Astral Poly Technik • Astral is among the country’s leading manufacturers of plastic pipes used across industries. Astral has a market share of 25% in CVPC pipes and 5% in PVC pipes and is well placed to grab the significant growth opportunities unveiled by the government through its various schemes such as Housing for All by 2022, PMAY, Smart Cities Mission, AMRUT, HRIDAY, Har Ghar Jal by2024, Nal se Jal by 2024, and PMKSY. Astral is expected to perform well in the coming year as it continues to benefit from sustained rural demand along with pick up in infrastructure sector. The company has also been improving upon cash balance with tight monitoring of working capital. Telecom & New Media Info Edge (India) • Info Edge is India’s premier online classified company in the recruitment, matrimony, real estate, education, and related service sectors. Naukri.com is a quality play and is directly related to GDP growth and internet/mobile penetration. Overall billings during Q1FY2021 declined by 43.9% y-o-y to Rs. 188.6 crore, owing to slowdown in hiring and softness in the real estate business in the wake of COVID-19. This indicates revenue growth could be impacted in Q2 and Q3 of FY2021E. However, improvement in billings rate in telecom, IT, and retail, which are major contributors to its billings in the recruitment business and strong revival in traffic in its platforms would drive its billings going ahead. We have modeled strong revival of revenue growth (34.8% y-o-y) in FY2022E, given the recovery in economic activity, pent-up demand in new homes/resale, and increasing attrition rate. The investee companies, particularly Zomato and PolicyBazaar, have been progressing well in their respective businesses. We continue to derive comfort on Info Edge’s business strength, with leading market share in key businesses.

November 2020 81 Sharekhan ValueGuide EARNINGS GUIDE EQUITY FUNDAMENTALS

Bharti Airtel • Bharti Airtel (Bharti) is one of the leaders in the Indian mobile telephony space. Management continues to focus sharply on increasing retail ARPUs, non-mobile services (enterprise services), and value- added services (Airtel TV and music) to boost revenue and reduce the churn rate. Management has guided for ARPUs to move to Rs. 200 in the short term and Rs. 300 in the medium term. Besides tariff hikes, ARPU increase will be driven by increased share of 4G subscribers, segmentation price hike for premium users, and higher digitisation (bundling of multiple services such as home broadband, DTH, and mobility). Supreme Court recently directed telcos to pay 10% of AGR dues upfront by March 2021 and the balance over 10 years starting FY2022, which provided some breathing space to telecom players. We expect another round of increase in ARPU in the near term to support its cashflows. From a long-term perspective, explosive growth in the data segment, rapid network expansion, and growing reach will help Bharti emerge stronger. We have a Buy rating on the stock. Discretionary Consumption ABFRL • ABFRL is India’s largest pure-play fashion and retail entity with an elegant bouquet of leading fashion brands and retail formats supported by a pan-India distribution network with a combined retail footprint of 8 million square feet across 750 cities. ABFRL saw a ~45% recovery in revenue in Q2FY2021 with ~96% of the network becoming operational. The management expects business to gradually improve with m-o-m recovery in footfalls amid the festive season. Thus, the management expects a recovery of 70-80% by Q3 and complete recovery by Q4 driven by growth in both business verticals, lifestyle brands and Pantaloons. With large part of rent reduction already achieved in H1, operating costs might go up slightly in H2 though some of the savings are structural and likely to continue. The company enhanced its digital presence by adding new delivery channels and improving online assortment, which yielded a 3-5x growth in e-Commerce channel. The company added 100 new stores in Q2 and another 100 are in pipeline for in Q3. The company raised Rs. 1,500 crore by allotting 7.3 crore shares to Flipkart on a preferential basis, which along with a rights issue of Rs. 1,000 crore will help in debt reduction, thus strengthening the balance sheet. With footfalls expected to recover, the management expects a complete recovery in Q4FY2021 with revenues expected to grow back to pre-COVID levels. Strong traction in new launches, increase in contribution from private labels, share gains from unorganised players and increase in contribution from online sales are some of the near- term growth catalysts for the company. We recommend Buy on the stock. Arvind • Arvind demerged into three separate entities of Arvind (textile business), Arvind Fashion (branded and retail business), and Anup Engineering (engineering business) with an aim to unlock value for shareholders. Post the demerger, Arvind has become a textile hub present in segments such as denim, fabric, garments, and advanced material (AMD). Q2FY2021 revenues recovered to ~66%, better than ~32% recovery in Q1FY2021. . A ~78% recovery was witnessed in September. Denim, woven and garment volumes have recovered to 80%, 60% and 66%, respectively of the corresponding quarter, driven by healthy export demand. Advanced material division (AMD) revenue has fully recovered to pre-COVID levels. The denim segment has seen good growth in the exports markets. Management expects recovery in performance by Q3FY2021 with improvement in demand in the domestic market. Cost-savings measures helped the company reduce structural fixed costs by 15-20% that is expected to sustain. Faster recovery in the export market, good growth in garment sales volumes, and sustained growth in AMD business will help the company post good recovery in FY2022. The company has maintained its focus on strengthening its balance sheet by debt reduction and targets a ~Rs. 1,000 crore reduction over 18-30 months. Thus, we do not expect much stress due to near-term uncertainties. The recent correction in the stock has factored in near-term headwinds. We maintain our Buy rating on the stock.

November 2020 82 Sharekhan ValueGuide EQUITY FUNDAMENTALS EARNINGS GUIDE

Inox Leisure • Inox Leisure Limited (ILL), incorporated in 1999, is one of the largest multiplex operators in India. ILL currently operates 147 properties (626 screens and over 1.44 lakh seats) located in 68 cities across the country. The company accounts for 20% share of multiplex screens in India and ~11% share of domestic box office collections. The ILL mega show is supported by improving content quality in the Indian mainstream and regional cinema, with its movies regularly hitting the Rs. 100 crore or Rs. 200 crore box-office collection mark. With the closure of cinema halls, we expect a wash-out quarter for Q2FY2021. However, cost management remained robust amid shutdown of cinema; monthly cash burn was lowered by 25% to Rs. 11 crore-12 crore. FY2021 is going to be a washout year, owing to extended lockdown restrictions, risk of box office clashes in a short window, and subdued occupancy in H2FY2021. The board has approved the enabling resolution for fund raising up to Rs. 250 crore through the issuance of equity shares/other securities after the re-opening of cinema halls. Note that the central government has given its nod to multiplexes and cinema halls to reopen from October 15, 2020. Relaxo Footwear • Relaxo Footwear (Relaxo) is present in the fast-growing footwear category, where it caters to customers with its four top-of-the-mind recall brands, such as Hawaii, Sparx, Flite, and Schoolmate. Relaxo’s focus is on driving sales through distribution expansion (COCO and franchisee stores) and improving its brand presence. GST implementation has been a silver lining for the company, as it is witnessing a gradual shift of demand from the unorganised to organised market. The company is expected to enhance its current capacity, which will add to revenue growth. Relaxo posted strong numbers in Q2FY2021 with revenue recovering to 93%, driven by re-opening of malls/shopping complexes, restarting of offices and gradual resumption of out-of-home travel. Demand was skewed towards open-ended/value-for-money footwear which drove up volumes by 2%, but realisations declined by 9%. Though FY2021 is expected to be soft, we expect a strong recovery in FY2022 driven by market share gains from unorganised players, higher presence in e-Commerce channels and higher demand for value-for-money products. Lower per capita consumption in India, Relaxo’s lower penetration in South India market and sustained product additions remain long-term growth drivers. Benign input prices would support overall margins in FY2021, while this, along with prudent administrative costs and better realisations would help margin expansion to sustain in FY2022. This makes Relaxo one of our preferred picks in the discretionary consumption space. Titan Company • Titan is India’s largest specialty retail player, operating more than 1,600 stores spread across over 2 million sq. ft. in 279 towns having businesses in jewellery, watches, and eyewear. Revenue of Titan’s jewellery business reported a CAGR of 18% over FY2017-FY2020. Sustained launch of new collections, expansion in domestic footprint, shift of consumers to trusted brands, and strong growth in diamond jewellery remain the key growth pillars. The target is to achieve 2.5x sales and grab a 10% market share by FY2023. In the eyewear business, Titan’s focus is to build a strong customer base through a calibrated expansion plan and offer products at affordable prices. With the jewellery business expected to post sequential improvement and watches and eyewear business inching close to pre-COVID levels (likely to reach 70-75% in Q3FY2021 and full recovery by Q4FY2021), profitability would improve in the coming quarters. Market share gains from small jewelers and higher festive/ wedding demand would help the jewellery business to post good performance in the coming quarters. The watches and eyewear division has seen sequential improvement and would continue to benefit from higher sales through the online platform. Thus, strong recovery is anticipated in FY2022 with OPM coming back on track. An increase in scale of the watches and eyewear businesses along with expansion into tier-II and tier-III markets and continuous shift from non-branded to branded jewellery players would help Titan achieve consistent double-digit revenue growth and gradual improvement in margin in the long run. With a lean balance sheet and strong financial background, Titan is one of the best retail plays among peers.

November 2020 83 Sharekhan ValueGuide EARNINGS GUIDE EQUITY FUNDAMENTALS

The Indian Hotel • The Indian Hotel Company (IHCL) and its subsidiaries bring together a group of brands and Company businesses that offer a fusion of warm Indian hospitality and world-class service. IHCL saw a sequential improvement in Q2FY021 as revenues improved to Rs. 256.7 crore from Rs. 143.6 crore in Q1FY2021. Standalone occupancy ratio (OR) improved to 32.3% in Q2FY2021 from 20.5% in Q1FY2021 with a m-o-m improvement in occupancies. Average room rental (ARR) grew by 12%. The company’s RESET initiative is giving desired results with new initiatives (including Qmin and Hospitality@Home 2.0) contributing Rs. 135 crore, while also helping reduce rental costs by Rs. 92 crore and corporate overheads decreased by Rs. 43 crore in H1FY2021. With the domestic economy gradually opening up and lockdown norms easing, the management expects occupancy ratio to gradually improve in the coming quarters. The second half of a fiscal is one of the best periods for hotel industry in India. However, corporate travel is yet to revamp (it contributes ~15% to IHCL’s revenue). Thus, H2FY2021 is expected to be relatively muted, largely supported by uptick in domestic tourism. However, we expect FY2022 to see stark revival in performance (especially in the second half of year) with potential arrival of the COVID-19 vaccine over the next 6-8 months. The improvement in occupancies and the company’s cost-saving measures would result in better profitability in FY2022 and years ahead. IHCL, with strong room inventory and stable balance sheet, is a better play in the hospitability space with potential to gain market share in the near term. We recommend a Buy on the stock. Wonderla Holidays • Wonderla Holidays Limited (WHL) is the largest amusement park company in India with over a decade of successful and profitable operations. WHL’s Q1FY2021 numbers were affected due to non-operation of core assets (amusement parks in Bangalore, Kochi, and Hyderabad) as COVID-19 cases soared in India. However, if the pandemic normalises, parks are expected to open up in H2FY2021 at 40%-50% capacity. During the non-operational phase, WHL took few strategic initiatives such as opening of ‘Wonder Kitchen’ at a low capital expenditure of Rs. 50 lakh, customer engagement through digital platforms, and focus on reducing costs. Management is confident of domestic tourism recovering post normalisation of the situation and achieving higher footfalls in a stable economic environment (expects Bengaluru park footfalls to reach 1.25 million p.a. in the next 2-3 years). The company has acquired 61.87 acres for a new amusement park project in Chennai. The company has liquid assets of Rs. 110 crore, which will take care of near-term uncertainties during non-operational period. We expect FY2021 to remain sluggish for WHL, while a recovery might be seen in FY2022. Sustenance of growth in footfalls has to be keenly monitored in the coming quarters. Hence, we maintain our Hold recommendation on the stock. Diversified/Miscellaneous Bajaj Holdings • Bajaj Holdings & Investment Limited (BHIL, erstwhile Bajaj Auto) was demerged in December 2007, whereby its manufacturing business was transferred to the new Bajaj Auto Limited (BAL) and its strategic business consisting of the wind farm and financial services businesses was vested with Bajaj FinServ (BFS). All the businesses and properties, assets, investments, and liabilities of erstwhile BAL, other than the manufacturing and strategic ones, now remain with BHIL. BHIL is a primary investment company focusing on new business opportunities. Given the strategic nature of its investments [namely BAL and BFL (Bajaj Finserv Limited)], we have given a holding company discount to its equity investments. Liquid investments have been valued at cost. We retain our Buy recommendation on BHIL. Bharat Electronics • Bharat Electronics Limited (BEL) is a defence PSU, with strong manufacturing and R&D capabilities, good cost-control measures, growing indigenisation, and a strong balance sheet with improving return ratios. The company manufactures electronics, communication, and defence equipment and stands to benefit from enhanced budgetary outlay for strengthening and modernising India’s security. Further, the company is well positioned to capture incremental spends by the government on defence through the Make-in-India initiative. Q1FY2020 performance was adversely impacted owing to lower execution because of COVID-19 led crisis resulting in revenue, EBITDA, and PAT being lower by 21%/59%/75% y-o-y, respectively. Order intake increased by 72.2% y-o-y and 19.3% q-o-q to Rs. 3,419 crore, while order book remains healthy at Rs. 53,752 crore (4.2x its FY2020 revenue), which provides sustainable revenue visibility. A Memorandum of Understanding (MoU) with the Airport Authority of India is likely to create opportunities in the global civilian airport business. We reiterate our Buy rating on the stock.

November 2020 84 Sharekhan ValueGuide EQUITY FUNDAMENTALS EARNINGS GUIDE

Coromandel • We like Coromandel International owing to its leadership position in key businesses led by high International backward integration through joint ventures for sourcing of key raw materials and strong distribution reach. The company is likely to speed up investments in the high-growth crop protection business, which is expected to enhance profitability. Encouraging progress of the monsoon season and MSP hike for kharif and Rabi crop bode well for a healthy demand off-take of the company’s products. We believe Coromandel would generate revenue and earnings CAGR of 11.0% and 17.5%, respectively, over FY2020-FY2022E, led by increased share of non-subsidy business. We maintain our Buy rating on the stock. GDL • With its dominant presence in container freight station (CFS) and rail freight businesses, Gateway Distriparks Limited (GDL) has evolved as an integrated logistics player. The company’s CFS and rail verticals are expected to face a tough business environment on account of both global and domestic trade disruption caused by COVID-19 led pandemic. However, once normalcy returns along with commencement of dedicated freight corridor (DFC), the demand environment is expected to improve. Additionally due to comfort on valuation, we have a Buy rating on the stock. Mahindra Logistics • MLL is an integrated third-party logistics (3PL) service provider, specializing in supply chain management and people transport solutions. Founded more than a decade ago, MLL serves over 300 corporate customers across various industries like automobiles, engineering, consumer goods and e-commerce. The company pursues an asset-light business model under which assets necessary for its operations such as vehicles and warehouses are owned or provided by a large network of business partners on lease rentals, while MLL largely invests in logistics technology. With improving auto demand along with growth in its E-commerce, Consumer and Freight Forwarding business, the company is expected to improve its earnings growth trajectory. Hence, we recommend Buy on the stock. PI Industries • Incorporated in 1947, PI Industries focuses on developing complex chemistry solutions in the agri- science space. Demand environment remains encouraging in both domestic (normal monsoon) and export markets (order book of $1.5 billion), guidance for over 20% growth in each; capex guidance of Rs. 550 crore-600 crore remains for FY2021E. Funds raised via QIP to be deployed in 5-6 quarters and meet inorganic growth aspirations, which will aid diversification as well. Moreover, opportunities in the export market are expected to increase multifold, as global MNCs and innovators would consider Indian players as their preferred partners over China. We reiterate our Buy rating on the stock. TCI Express • TCI is a leading time-definite express distributor, with a network of 700 offices covering more than 40,000 locations. The company commenced operations in 1997 and has over two decades of industry experience. The company demerged from Transport Corporation of India in 2016 and was listed on December 15, 2016. The company offers services comprising surface, domestic and international air, e-commerce, priority, and reverse express services. TCI has over 3,000 plus workforce with 28 sorting centres. The company caters to sectors such as consumer electronics, retail, apparel and lifestyle, automobile, pharmaceuticals, engineering, e-commerce, energy/power, and telecommunications. TCI has a strong balance sheet, healthy cash flow-generation capacity and high return ratios. Hence, we recommend a Buy on the stock. UPL • UPL is a global leader in agricultural solutions and has a healthy mix of high-value crops and high- growth geographies. The company has manufacturing facilities across 48 locations (earlier 34) and is present across more than 138 countries. Management eyes revenue growth of 6%-8%, EBITDA growth of 10%-12%, and net debt-equity ratio of 2x during FY2021E. Long-term investors can consider accumulating the stock, owing to reasonable valuation and further strengthening of the balance sheet led by deleveraging.

November 2020 85 Sharekhan ValueGuide IT’S TIME TO MEET YOUR NEW BOSS. Say hello to yourself.

Give a missed call on 88809 06666 or write to [email protected]

Make the transition from an employee to an entrepreneur by partnering with Sharekhan, one of India’s leading financial services companies.

Stock Broking | Depository Services | Mutual Fund and IPO Distribution | Loan Against Securities | Trading and Investing Education | Value-added Products | Portfolio Management Service

Registered O ce: Sharekhan Limited, 10th Floor, Beta Building, Lodha iThink Techno Campus, O. JVLR, Opp. Kanjurmarg Railway Station, Kanjurmarg (East), Mumbai – 400042, Maharashtra. Tel: 022 - 61150000. Sharekhan Ltd.: SEBI Regn. Nos.: BSE / NSE / MSEI (CASH / F&O / CD) / MCX - Commodity: INZ000171337; DP: NSDL/CDSL-IN-DP-365-2018; PMS: INP000005786; Mutual Fund: ARN 20669; Research Analyst: INH000006183; Compliance O cer: Mr. Joby John Meledan; email id: [email protected]; Tel: 022-61150000; For any queries or grievances kindly email [email protected] or contact: [email protected]. Disclaimer: Client should read the Risk Disclosure Document issued by SEBI & relevant exchanges and the T&C on www.sharekhan.com; Investment in securities market are subject to market risks, read all the related documents carefully before investing. *Services through Sharekhan subsidiaries. App v2.1.1

THERE’S AN INVESTOR IN ALL OF US Learn how to take control of your investments It’s time for you to stop second - guessing the markets and work towards building a financially secure future. Take a step in the right direction with us, at Online Trading Academy. Learn simple, rule-based strategies that can help you make smarter investing decisions.

Attend a free Power Money Workshop 6 reasons you should meet us at Online Trading Academy

Gain insights into how professionals locate high reward, low risk, and high probability trading and investing opportunities

Get access to a patented strategy to know where professionals and institutions are buying and selling

Learn how markets really work and how institutions trade and control markets

Unlock the mystery to why most short term traders fail and longer term investors never achieve their financial goals

Identify the best stocks for long term investing

Get a 360 degree holistic approach to grow, protect, and manage your long term wealth manage your long term wealth

To register for the Workshop SMS PMW to 56677

Registered address: Online Trading Academy, 4th Floor, C-428, Phoneix Mills Compound, Lower Parel 400 013. ANYTIME IS A GOOD TIME TO INVEST IN ELSS

Benefits of investing in ELSS  Save tax up to Rs. 46,800 per year  Lowest lock-in period  Dual benefit of growth and investing  Potential to earn higher returns

Buy | Redeem | Transfer | SIP | Lump sum | ELSS

Registered O ce: Sharekhan Limited, 10th Floor, Beta Building, Lodha iThink Techno Campus, O. JVLR, Opp. Kanjurmarg Railway Station, Kanjurmarg (East), Mumbai - 400042, Maharashtra. Tel:022 - 61150000. Sharekhan Ltd.: SEBI Regn. Nos.: BSE / NSE / MSEI (CASH / F&O / CD) / MCX - Commodity: INZ000171337; DP: NSDL/CDSL-IN-DP-365-2018; PMS: INP000005786; Mutual Fund: ARN 20669; Research Analyst: INH000006183; For any complaints email at [email protected]. Compliance O cer: Mr. Joby John Meledan; email id: [email protected];Tel: 022-61150000. Disclaimer: Investment in securi- ties market are subject to market risks, read all the related documents carefully before investing. Client should read the Risk Disclosure Document issued by SEBI & relevant exchanges and the T&C on www.sharekhan.com before investing. Mutual Fund investment are subject to market risk. Read all the scheme related documents carefully before investing. For more details click here