9 August 2019

Market snapshot Today’s top research idea Motilal Oswal values your support in the : Defies slowdown; Raise earnings; Upgrade to BUY Asiamoney Brokers Poll 2019 for Research,  Sales and Trading team. We request your ballot. Consol. revenue increased 24% YoY in 1QFY20, exceeding our estimate by 11%, led by strong 47% growth in UCP segment. As a result of a higher effective tax rate (32% v/s our estimate of 27%) and higher losses in JVs, net profit increased at relatively low rate of 6% YoY to INR1.9b (in-line). Equities - India Close Chg .% CYTD.%  According to management, industry growth stood at 36% for the quarter. Sensex 37,327 1.7 3.5 Against the backdrop of slowing consumption in the economy, this validates Nifty-50 11,032 1.6 1.6 that the strong summers is the primary driver for AC purchases. Nifty-M 100 15,795 0.7 -11.6  With lower-than-expected channel inventory, we do see some scope for price Equities-Global Close Chg .% CYTD.% S&P 500 2,938 1.9 17.2 hikes to offset the import duty pressure. However, this is not our base-case Nasdaq 8,039 2.2 21.2 scenario, as competitors can still be irrational and operate at lower-than- FTSE 100 7,286 1.2 8.3 optimal margins in a hunt for market share. DAX 11,845 1.7 12.2  We raise our adj. consol. earnings estimate by 2%/6% for FY20/21, led Hang Seng 10,042 0.5 -0.8 entirely by UCP segment. We continue valuing UCP at a target multiple of 35x Nikkei 225 20,593 0.4 2.9 Commodities Close Chg .% CYTD.% FY21E EPS. Our TP now stands at INR700. At CMP, the stock trades at multiple Brent (US$/Bbl) 58 0.8 8.2 of 28x for core UCP business. We upgrade the stock to Buy. Gold ($/OZ) 1,501 0.0 17.0 Cu (US$/MT) 5,776 1.7 -2.9 Almn (US$/MT) 1,749 2.0 -6.1 Research covered Currency Close Chg .% CYTD.% Cos/Sector Key Highlights USD/INR 70.7 -0.3 1.3 Voltas Defies slowdown; Raise earnings; Upgrade to BUY USD/EUR 1.1 -0.2 -2.5 USD/JPY 106.1 -0.2 -3.3 EcoScope Is food inflation really so low? YIELD (%) Close 1MChg CYTDchg UltraTech Cement Healthy pricing drives margin expansion 10 Yrs G-Sec 6.4 0.03 -1.0 Petronet LNG Lower spot LNG prices, summer demand boost volumes 10 Yrs AAA Corp 7.7 0.03 -0.8 Lupin US/Japan impressive, delivering well on product/geographical mix Flows (USD b) 8-Aug MTD CYTD US led earnings growth despite regulatory hurdles at few sites FIIs -0.06 -1.22 8.25 DIIs 0.04 1.19 3.00 Margins surprise, weak sales growth likely to persist Volumes (INRb) 8-Aug MTD* CYTD* Earnings to cash flow conversion declines Cash 373 372 359 Cummins India Miss on all fronts; hurt by weakness in higher-margin exports biz F&O 27,724 16,954 11,525 Other Updates TRCL | TTCH | HMN | ENDU | HEXW | PHNX | JKLC | ICEM | ENIL | LIC Note: *Average

Chart of the Day: EcoScope (Is food inflation really so low?) Inflation in ‘cereals & products’ has diverged sharply and suddenly… …as is the case in ‘vegetables’, which is a highly volatile item

Source: CSO, DCA, CEIC, MOFSL Research Team ([email protected])

Investors are advised to refer through important disclosures made at the last page of the Research Report.

Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital. In the news today

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Suzlon offers to repay ₹8,500 NCLT clears consolidation of 13 Videocon units' insolvency cr to settle stressed debt The National Company Law Tribunal gave the go-ahead on Thursday The troubled wind-turbine maker for consolidating the insolvency proceedings of 13 VideoconNSE -3.33 Suzlon Energy offered to repay % group firms into a single process. The landmark move is expected about ₹8,500 crore ($1.2 billion) to quicken Videocon’s insolvency resolution and could pave the way to lenders as part of a bad-debt- for faster processing of other bankruptcy cases involving multiple resolution plan, people with entities that are part of one corporate group, legal experts said… knowledge of the matter said…

3 4

Coffee Day to sell IT park in DHFL says it may default on Bengaluru to reduce debt near-term payments burden Dewan Housing Finance A little over a week after the Corporation on Thursday said it death of Café Coffee Day may not meet its upcoming founder V.G. Siddhartha, the payment obligations in the board of Coffee Day Enterprises ‘immediate future’, even as it Ltd (CDEL), the holding company 5 remains in discussions with lenders of Coffee Day group firms, over a resolution plan… NCLAT adjourns hearing of decided on Thursday to sell the group’s 90-acre technology park IL&FS case till Sept 5 in Bengaluru to reduce CDEL’s The National Company Law debt burden… Appellate Tribunal (NCLAT) has adjourned the hearing of the IL&FS case till September 5. Justice SJ Mukhopadhyay said there has been no progress 6 7 despite the process going on for

over 300 days… RBI panel moots extended First quarter e-auction hours for strong forex market premiums for up 66% In a bid to develop a deep and Coal India managed to fetch liquid onshore foreign exchange premiums ranging between 33 market, a Reserve per cent and 66 per cent over its (RBI) panel has recommended that notified price for different onshore market hours may be categories of auction sale during suitably extended to match the the quarter ended June 2019… flexibility provided by the offshore market…

9 August 2019 2

8 August 2019 1QFY20 Results Update | Sector: Capital Goods

Voltas

BSE SENSEX S&P CNX 37,327 11,032 CMP: INR598 TP: INR700(17%) Upgrade to Buy Bloomberg VOLT IN Defies slowdown; Raise earnings; Upgrade to BUY Equity Shares (m) 331  M.Cap.(INRb)/(USDb) 197.8 / 2.8 Operating performance exceeds expectations: Consol. revenue increased 52-Week Range (INR) 662 / 471 24% YoY in 1QFY20, exceeding our estimate by 11%, led by strong 47% 1, 6, 12 Rel. Per (%) 4/10/2 growth in UCP segment. As a result of a higher effective tax rate (32% v/s 12M Avg Val (INR M) 872 our estimate of 27%) and higher losses in JVs, net profit increased at Free float (%) 69.7 relatively low rate of 6% YoY to INR1.9b (in-line).

 Strong summer trumps consumption slowdown: According to Financials & Valuations (INR b) management, industry growth stood at 36% for the quarter. Against the Y/E Mar 2019 2020E 2021E Net Sales 71.2 79.7 88.0 backdrop of slowing consumption in the economy, this validates that the EBITDA 6.1 8.2 9.7 strong summers is the primary driver for AC purchases. UCP segment sales PAT 5.2 6.2 7.5 grew 47% YoY, leading to an expansion in market share (at 24.1% for 1QFY20 EPS (INR) 15.7 18.7 22.8 and 25.3% for Jun’19 v/s 23.7% in FY19 and 23.5% in 1QFY19). We note that Gr. (%) -9.2 19.0 21.9 even after normalizing for the impact of the delayed summer season, UCP BV/Sh (INR) 124.2 137.5 154.8 growth stands strong at 22% for VOLT in 1HCY19. RoE (%) 13.0 14.3 15.6  RoCE (%) 14.2 15.6 17.0 Inventory levels lower than normal, channel refilling to drive growth: P/E (x) 38.1 32.0 26.2 Capital employed for UCP segment turned negative in 1QFY20. Moreover, P/BV (x) 4.8 4.3 3.9 management mentioned that even distributors have run out of inventory and generated good cash flows during the summer season. This augers well Estimate change for UCP revenue visibility going into the next season as well into 4QFY20 as TP change channel refilling itself can drive revenue growth. We model in UCP revenue Rating change growth of 26%/15% in FY20/21. The ask rate for FY20 stands at 13% and may

surprise on upside given the favorable base in the fourth quarter.  Scope for price hikes emerges, though not our base-case scenario: Even though the summer season surprised positively, the surge was skewed toward 1QFY20 rather than the desired 4QFY19. Coupled with high inventory from last season, this restricted industry wide price hikes as liquidation of inventory was a priority. With lower-than-expected channel inventory, we do see some scope for price hikes to offset the import duty pressure. However, this is not our base-case scenario, as competitors can still be irrational and operate at lower-than-optimal margins in a hunt for market share. We are positively surprised with the PBIT margin expansion (+60bp YoY) in UCP segment. This is attributable purely to operating leverage as there were no price hikes and import duty and exchange rate pressure increased Sep’18 onward. We expect VOLT to attain EBIT margin of 13% in FY21, still below the average of 14% over FY14-18.  EMP biz to cater to opportunities in domestic market: EMP revenue declined 5% YoY in 1QFY20, in line with our estimate. Management is optimistic on the ordering environment, especially in the domestic market, and is looking to cater to new growth areas of the solar and water industry. We have modeled in modest 3% CAGR in EMP revenue over FY19-21 owing to a strong base of FY19 (+27%). We expect EBIT margin to be stable at current 8%.

9 August 2019 3

 Upgrading to Buy with TP of INR700: We raise our adj. consol. earnings estimate by 2%/6% for FY20/21, led entirely by UCP segment. We continue valuing UCP at a target multiple of 35x FY21E EPS. Our TP now stands at INR700. At CMP, the stock trades at multiple of 28x for core UCP business. We upgrade the stock to Buy.

Quarterly performance (Consolidated) (INR Million) FY19 FY20E FY19 FY20E FY20 Var.

Y/E March 1Q 2Q 3Q 4Q 1Q 2QE 3QE 4QE 1QE Vs Est

Sales 21,481 14,214 14,918 20,628 26,540 14,811 15,672 22,642 71,241 79,665 23,869 11% Change (%) 10.5 37.1 8.5 0.7 23.6 4.2 5.1 9.8 11.2 11.8 11.1

EBITDA 2,432 1,085 1,157 1,443 2,912 1,123 1,282 2,872 6,117 8,189 2,600 12% Change (%) 16.7 26.7 -2.5 -43.0 19.7 3.5 10.8 99.0 -7.7 33.9 6.9

As of % Sales 11.3 7.6 7.8 7.0 11.0 7.6 8.2 12.7 8.6 10.3 10.9

Depreciation 59 60 62 59 77 80 80 86 240 323 65

Interest 27 64 132 106 44 70 100 116 330 330 30

Other Income 282 461 548 572 433 500 570 597 1,863 2,100 290

Extra-ordinary Items 0 0 -118 0 -301 -118 -301 0

PBT 2,627 1,423 1,393 1,849 2,923 1,473 1,672 3,267 7,292 9,335 2,795 5% Tax 762 331 304 239 1,046 413 468 868 1,635 2,794 755

Effective Tax Rate (%) 29.0 23.2 20.1 12.9 32.4 28.0 28.0 26.6 22.1 29.0 27.0

Share of profit of associates/JV's (26) (58) (279) (215) (225) (110) (160) (165) (578) (660) (30)

Reported PAT 1,839 1,035 809 1,396 1,652 951 1,043 2,234 5,079 5,880 2,011 -18% Change (%) -0.9 8.5 -19.4 -27.5 -10.2 -8.1 29.0 60.0 -11.3 15.8 9.3

Adj PAT 1,839 1,035 927 1,396 1,953 951 1,043 2,234 5,197 6,182 2,011 -3% Change (%) 0.2 8.5 -7.7 -28.1 6.2 -8.1 12.6 60.0 -9.1 19.0 9.3

9 August 2019 4

8 August 2019

ECOSCOPE

The Economy Observer

Is food inflation really so low? Comparison of daily food prices with CPI data suggests uncomforting divergence

 Retail inflation based on the headline consumer price index (CPI) has averaged 3.6% in the past three years with the highest monthly reading coming in at 5.2%. The subdued retail inflation can be attributed to food items (with 39.1% weight), which witnessed an average inflation of only ~1.5% during the corresponding period. This trend has continued unabated in 1HCY19. However, a comparison of food inflation in the CPI basket with that of food prices published by the Department of Consumer Affairs (DCA) on daily basis suggests massive divergence for the first time since 2013. While food inflation in CPI stood at 2.3% YoY in Jun’19 and averaged 0.4% in 1HCY19, daily prices suggest food inflation of ~8% YoY in May-June 2019 and an average inflation of 4.4% in 1HCY19.  Further details suggest that ‘cereals’ and ‘vegetables’ explain most of the divergence between the two sources of food inflation, while inflation in ‘pulses’, ‘eggs’, ‘oil & fats’, ‘sugar’ and ‘meat & fish’ is similar. The divergence is most prominent in ‘rice’ among cereals; while non-primary items such as brinjal, garlic, green chilly and cauliflower account for it among vegetables. Inflation in major vegetables like potato, tomato and onion are in line with each other.  Notwithstanding these perplexing developments, we expect RBI to cut policy rates one more time in Oct’19 supported by subdued inflation and even weaker growth in 1QFY20. However, such sudden and major divergence between two sources of food inflation is a concern and worthy of attention. In case, food inflation is 7-8% instead of the reported 2.3%, the headline inflation would be under-reported by as much as 2pp. If so, the case for further monetary easing will weaken substantially, and thus, this matter needs careful scrutiny.

While food inflation in CPI India’s headline inflation has averaged 3.6% in the past three years with the highest stood at 2.3% YoY in Jun’19 monthly reading of 5.2%. The subdued retail inflation can be attributed to food and averaged 0.4% in items (with 39.1% weight), which witnessed an average inflation of only ~1.5% 1HCY19, daily prices suggest during the corresponding period. This trend has continued unabated in 1HCY19. food inflation of ~8% YoY in However, a comparison of food inflation in the CPI basket with that of food prices May-June 2019 and an average inflation of 4.4% in published by the Department of Consumer Affairs (DCA) on daily basis suggests 1HCY19. massive divergence for the first time since 2013. While food inflation in CPI stood at 2.3% YoY in Jun’19 and averaged 0.4% in 1HCY19, daily prices suggest food inflation of ~8% YoY in May-June 2019 and an average inflation of 4.4% in 1HCY19 (Exhibit 1).

Exhibit 1: Official food inflation has diverged from daily food prices suddenly since the start of 2019 24 Based on daily prices CPI: Food

16

8

0 (% YoY) (8) Jul-13 Jul-14 Jul-15 Jul-16 Jul-17 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Oct-13 Oct-14 Oct-15 Oct-16 Oct-17 Apr-14 Apr-15 Apr-16 Apr-17 Feb-19 Aug-18 Nov-18 May-19 May-18 Source: Central Statistics Office (CSO), Department of Consumer Affairs (DCA), CEIC, MOFSL

9 August 2019 5

8 August 2019 1QFY20 Results Update | Sector: Cement

Ultratech Cement

BSE SENSEX S&P CNX 37,327 11,032 CMP: INR4,232 TP: INR5,010(+18%) Buy Bloomberg UTCEM IN Healthy pricing drives margin expansion Equity Shares (m) 274  M.Cap.(INRb)/(USDb) 1162.2 / 16.5 Moderate volume growth amid healthy realizations: Consolidated volumes 52-Week Range (INR) 4904 / 3264 (including white cement) grew 2% YoY to 18.8mt in 1QFY20. Realizations 1, 6, 12 Rel. Per (%) -2/17/1 grew 10% YoY. Net sales grew 13% YoY (-7% QoQ) to INR102b (v/s est. of 12M Avg Val (INR M) 1745 INR90b). Cost/t remained flat YoY. Thus, EBITDA/t increased 57% QoQ to Free float (%) 38.3 INR1,444/t. Consequently, EBITDA increased 60% YoY to INR27b (v/s est. of Financials & Valuations (INR b) INR20b), with margin expanding 7.9pp YoY and 5.2pp QoQ to 26.6%. Due to Y/E Mar 2019 2020E 2021E Sales 373.8 442.8 520.7 adoption of IND-AS116, EBITDA for the quarter was higher by INR434m. PAT EBITDA 67.9 95.7 110.9 was up 91% YoY to INR12b. NP 24.3 36.7 47.1  Management commentary: (1) Industry utilization for 1QFY20 stood at 67% Adj EPS (INR) 88.7 127.2 163.2 EPS Gr. (%) -11.5 43.5 28.3 while volumes declined 3-4% YoY. (2) Industry should record a growth of 6% BV/Sh (INR) 1,034 1,373 1,544 in FY20. While demand has witnessed a slowdown in 1HFY20, it should RoE (%) 8.9 11.1 11.8 revive in 2HFY20. (3) Sand mining issues are prevalent in Andhra Pradesh, RoCE (%) 7.3 8.7 9.5 P/E (x) 47.7 33.3 25.9 and . (4) On an all-India level, current prices are 3% P/BV (x) 4.1 3.1 2.7 lower than 1QFY20 average. EV/EBITDA (x) 20.3 14.5 12.1  Enhanced pricing power aided by aggressive capacity growth: Driven by an EV/Ton (USD) 195 171 161 inorganic growth strategy, UTCEM has expanded its capacity by 65% since Estimate change FY17 to 109.4mt (including Century), 23% of all India capacity. We believe TP change this has provided it significant pricing power, particularly in Central and Rating change

West India where it will have ~40% market share once the Century acquisition is completed. We forecast a 28% CAGR in EBITDA and 36% CAGR in EPS in FY19-21E, driven by 14% CAGR in volume and better margins. Supported by financial leverage, UTCEM is also one of the biggest beneficiaries of higher pricing. While pricing and margins are expected to decline sequentially in the current quarter, we attribute this in a large part to seasonality. The company trades at 14.5x/12x EV on FY20/FY21 EBITDA. We value UTCEM at 14x FY 21 EV/EBITDA and arrive at a Target Price of INR 5,010. Buy.

Quarterly Performance (CONSOL) (INR Million)

FY19 FY20 FY19 FY20E 1Q 2Q 3Q 4Q 1Q 2QE 3QE 4QE Sales (m ton) 18.34 16.58 19.24 22.26 18.76 17.50 23.43 26.25 76.43 84.43 YoY Change (%) 28.8 18.3 13.9 14.4 2.3 5.5 21.8 17.9 18.3 10.5 Blended Realn.(INR/ton) 4,919 5,008 4,853 4,899 5,425 5,192 5,046 5,027 4,891 5,153 YoY Change (%) -2.7 1.2 2.2 2.6 10.3 3.7 4.0 2.6 2.0 5.4 QoQ Change (%) 3.0 1.8 -3.1 1.0 10.7 -4.3 -2.8 -0.4 Net Sales 90,215 83,033 93,369 1,09,052 1,01,776 90,836 1,18,219 1,31,962 3,73,792 4,42,794 YoY Change (%) 25.3 19.7 16.4 17.4 12.8 9.4 26.6 21.0 20.7 18.5 EBITDA 16,904 13,118 14,535 23,325 27,083 20,235 22,354 26,009 67,881 95,680 Margins (%) 18.7 15.8 15.6 21.4 26.6 22.3 18.9 19.7 18.2 21.6 Depreciation 5,067 5,357 5,499 5,475 5,993 6,168 6,336 8,994 21,398 27,491 Interest 3,485 3,539 4,119 4,343 4,412 4,340 4,540 3,890 15,486 17,182 Other Income 729 1,347 1,045 1,261 1,312 1,090 1,090 944 4,381 4,436 PBT 9,081 5,569 5,962 14,768 17,990 10,817 12,568 14,070 35,378 55,444 Tax Rate (%) 30.5 32.5 31.2 31.3 22.0 35.0 35.0 33.8 31.3 34.0 Reported PAT 6,312 3,758 4,100 10,143 14,027 7,031 8,169 9,316 24,311 36,593 Minority Interest -8 -11 -32 12 -1 -40 -40 -49 -39 -130 Adj PAT 6,320 3,769 4,132 10,131 12,078 7,071 8,209 9,365 24,350 36,723 YoY Change (%) -37.5 -29.0 -19.3 15.5 91.1 87.6 98.7 -7.6 -17.8 50.8

9 August 2019 6

8 August 2019 1QFY20 Results Update | Sector: Oil & Gas

Petronet LNG

BSE SENSEX S&P CNX 37,327 11,032 CMP: INR239 TP: INR305 (+27%) Buy Bloomberg PLNG IN Lower spot LNG prices, summer demand boost volumes Equity Shares (m) 1,500 PLNG reported 1QFY20 results based on Ind-AS 116. Reported EBIDTA came in 17% M.Cap.(INRb)/(USDb) 358.9 / 5.1 52-Week Range (INR) 255 / 200 higher than our estimate at INR10.2b (+10% YoY), led by lower other expenditure 1, 6, 12 Rel. Per (%) 3/4/7 under the new accounting standards. Depreciation stood at INR1.9b (+86% YoY) 12M Avg Val (INR M) 685 and interest cost at INR1.0b (~3-4x). Reported PBT of INR8.4b was in line with our Free float (%) 50.0 estimate. Adjusting for Ind-AS loss of INR516m, PBT was 3% above our estimate at

Financials & Valuations(INR b) INR8.9b. PAT was in line with our estimate at INR5.6b (-5% YoY, +27% QoQ). st Y/E March 2019 2020E 2021E  Ind-AS 116: PLNG adopted Ind-AS 116 from 1 Apr’19, which resulted in total Sales 384.0 421.0 510.4 EBITDA impact of INR1,050m, with depreciation impact of INR860m and EBITDA 32.9 41.7 48.6 interest cost impact of INR820m. Other income saw an impact of INR110m. Adj. PAT 21.6 24.0 29.0 The impact of Ind-AS is expected to be negative until 2024-25, post which it will Adj. EPS (INR) 14.4 16.0 19.3 EPS Gr. (%) 3.7 11.4 20.8 turn positive for the profit & loss statement. We have adjusted our model for BV/Sh.(INR) 67.1 71.9 77.7 the same, with an EPS cut of ~11/8% for FY20/21. RoE (%) 21.8 23.0 25.9  Total volumes for the quarter were ~3% higher than estimate at 226tbtu RoCE (%) 21.5 21.4 21.6 (+3% YoY). Throughput volumes were at ~217tbtu at Dahej and ~9tbtu at Payout (%) 68.0 70.0 70.0 . Gail’s Dabhol terminal is impacted by the lack of break water facility Valuation P/E (x) 16.7 15.0 12.4 (during raining season) and its temporary closure has boosted service volumes P/BV (x) 3.6 3.3 3.1 for Dahej, reducing its dependence on spot volume sales. However, the EV/EBITDA (x) 10.0 7.7 6.3 company expects utilization to come down post 3QFY20, when the Dabhol Div. Yield (%) 3.8 3.9 4.7 terminal comes back on stream. Also during the quarter, robust summer power demand, along with lower spot LNG prices, led to an increase in power sector

Estimate change gas consumption. TP change  Dahej: Long-term (LT) contract at Dahej stood at ~100tbtu (v/s 112tbtu in Rating change 1QFY19 and flat QoQ), while spot/short-term volumes were flat YoY at 5tbtu. Third-party volumes increased to 112tbtu (+15% YoY, +23% QoQ). Utilization at Dahej stood at 114% (v/s 113% in 1QFY19 and 104% in 4QFY19). Additional capacity of 2.5mmt at Dahej came online from 25th Jun’19.  Kochi: Long-term contract at Kochi increased to 7tbtu (v/s 6tbtu in 1QFY19 and flat QoQ). Utilization at Kochi was up to 14% (v/s 10% in 1QFY19 and 11% in 4QFY19).  Re-gas tariff charges were ~USD0.7/mmbtu at Dahej and ~USD1.5/mmbtu at Kochi, led by a 5% yearly tariff hike taken by the company. However, PLNG expects the Kochi tariff to come down as utilization increases.  Annual capex guidance for the next three years stands ~INR7-8b. PLNG plans to set up two more tanks (capex: INR13b) at Dahej (increasing throughput to ~19.5mtpa) and build a Jetty (capex: INR10b) over the next 2-3 years. Valuation and view  Factoring in the aforementioned volume positives, we expect total volume growth of ~7% to 17.8mmtpa in FY20 and ~9% to 19.5mmtpa in FY21 with improved utilization at both Dahej and Kochi.  We expect EBITDA growth of ~27%/16% in FY20/21. The stock trades at 15.0x FY20E EPS of INR16.0. We value PLNG on DCF (WACC: 12.0%, TGR: 3%) to arrive at a fair value of INR305, implying an upside of 27%. Reiterate Buy.

9 August 2019 7

Standalone - Quarterly earnings model (INR Million) Y/E March FY19 FY20 FY19 FY20E FY20 Var. v/s 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1QE Est. Net Sales 91,692 1,07,453 1,00,977 83,832 86,134 1,05,536 1,07,188 1,22,114 3,83,954 4,20,973 1,02,437 -16% YoY Change (%) 42.5 38.3 30.2 -2.9 -6.1 -1.8 6.2 45.7 25.5 9.6 11.7 Total Expenditure 82,347 98,616 92,497 77,560 75,895 95,428 96,959 1,10,979 3,51,020 3,79,261 93,699 -19% EBITDA 9,344 8,837 8,481 6,272 10,239 10,108 10,230 11,135 32,935 41,713 8,738 17% Margins (%) 10.2 8.2 8.4 7.5 11.9 9.6 9.5 9.1 8.6 9.9 8.5 Depreciation 1,022 1,037 1,037 1,016 1,899 1,866 1,866 1,768 4,112 7,398 1,059 79% Interest 300 249 215 225 1,005 959 996 851 989 3,810 83 1114% Other Income 990 1,115 884 1,514 1,044 1,327 1,369 1,620 4,503 5,360 1,012 3% PBT before EO expense 9,012 8,666 8,113 6,545 8,379 8,611 8,737 10,137 32,336 35,864 8,607 -3% PBT 9,012 8,666 8,113 6,545 8,379 8,611 8,737 10,137 32,336 35,864 8,607 -3% Tax 3,142 3,037 2,460 2,143 2,777 2,842 2,883 3,345 10,782 11,847 2,906 -4% Rate (%) 34.9 35.0 30.3 32.7 33.1 33.0 33.0 33.0 33.3 33.0 33.8 Adj PAT 5,870 5,629 5,653 4,402 5,603 5,769 5,854 6,792 21,554 24,018 5,701 -2% YoY Change (%) 34.1 -4.4 6.9 -15.8 -4.5 2.5 3.6 54.3 3.7 11.4 -2.9 Margins (%) 6.4 5.2 5.6 5.3 6.5 5.5 5.5 5.6 5.6 5.7 5.6 Key Assumptions Regas volume (Tbtu) 97 88 84 91 113 85 85 83 360 366 86 6% Sales volume (Tbtu) 123 129 118 114 113 143 144 154 484 554 134 -15% Total Volumes (Tbtu) 220.2 217.0 202.0 205.1 226.0 228.1 229.4 237.2 844.3 920.6 219.9 3% E: MOFSL Estimates

9 August 2019 8

8 August 2019 1QFY20 Results Update | Sector: Healthcare

Lupin

BSE SENSEX S&P CNX 37,327 11,032 CMP: INR761 TP: INR885 (+16%) Buy Bloomberg LPC IN US/Japan impressive, delivering well on product/geographical mix Equity Shares (m) 452  Sales up across segments barring API: Revenue grew 15% YoY to INR44b M.Cap.(INRb)/(USDb) 344.5 / 4.9 52-Week Range (INR) 986 / 697 (our estimate: INR44.8b). US sales increased 29% YoY to USD218m (39% of 1, 6, 12 Rel. Per (%) 5/-10/-6 sales), while Japan sales were up 18.2% YoY to INR5.9b (14% of sales) led by 12M Avg Val (INR M) 1915 strong volumes traction. Domestic formulation (DF) sales grew 9.7% YoY to Free float (%) 53.0 INR13b (30% of sales), mainly led by prescription business (+12.3% YoY).

Financials & Valuations (INR b) RoW sales too increased 6.8% YoY (10% of sales). However, API sales Y/E Mar 2019 2020E 2021E declined 2.6% YoY to INR3.5b. Net Sales 165.1 179.0 200.0  Exclusive sales in US/better geographical mix keep margins at elevated EBITDA 28.8 34.7 39.6 level: Gross margin expanded 240bp YoY to 65%, largely due to a superior PAT 10.5 13.3 18.6 product mix. This, along with lower employee cost/R&D spend (-160bp/- EPS (INR) 23.3 29.4 41.1 120bp YoY), led to EBITDA margin improvement of 110bp YoY to 19.5% (our Gr. (%) -27.1 26.2 39.8 estimate: 20.5%), partly offset by higher other expenses (+330bp YoY). BV/Sh (INR) 303.7 322.6 353.8 RoE (%) 7.7 9.4 12.1 EBITDA was up 21.5% YoY to INR8.6b (our estimate: INR9.2b). However, RoCE (%) 4.0 6.8 8.8 higher other income and lower tax rate led to relatively high adj. PAT growth P/E (x) 32.7 25.9 18.5 of 49% YoY to INR3b. P/BV (x) 2.5 2.4 2.2  Concall highlights: (a) LPC is awaiting feedback from the USFDA on g-Proair, which might delay the approval for the same. (2) Traction in levothyroxine Estimate change

TP change would improve in 2HFY20 based on capacity ramp-up and approval for Rating change additional dosage. (3) There have been queries from European regulatory

authority on Etanercept, which might delay the approval to 4QFY20/1QFY21. (4) LPC is working on resolving one of the key regulatory issues related to out-of-specification (OOS) and would take about six months to resolve the same.  Valuation and view: We cut our EPS estimate by 12%/7% to INR29/INR40 for FY20/21 to factor in the delay in approvals/gradual ramp-up in key products in US, lower trade generics business in DF and a higher effective tax rate. We continue valuing LPC at 21x 12M forward earnings to arrive at a TP of INR885. We remain positive on LPC on the back of its good limited- competition ANDA pipeline and outperformance in branded DF. Maintain Buy. Update on sites under regulatory hurdles would be a key monitorable over the medium term.

9 August 2019 9

Quarterly Performance (Consolidated) (INR m) Y/E March FY19 FY20E FY19 FY20E % Var 1Q 2Q 3Q 4Q 1Q 2QE 3QE 4QE 1QE Net Sales 38,559 39,511 42,946 44,063 44,184 43,181 44,131 47,543 1,65,079 1,79,039 44,872 -1.5 YoY Change (%) -0.4 0.0 8.0 9.2 14.6 9.3 2.8 7.9 4.5 8.5 16.4 Total Expenditure 31,481 34,014 36,023 34,760 35,582 35,149 35,790 37,784 1,36,279 1,44,305 35,673 EBITDA 7,079 5,496 6,922 9,303 8,602 8,032 8,341 9,759 28,800 34,734 9,199 -6.5 Margins (%) 18.4 13.9 16.1 21.1 19.5 18.6 18.9 20.5 17.4 19.4 20.5 Depreciation 2,590 2,655 2,798 2,808 3,171 3,150 3,175 3,014 10,850 12,509 2,820 Interest 687 738 798 855 856 865 870 880 3,078 3,471 865 Other Income 34 2,307 434 865 722 790 820 868 3,640 3,200 750 EO Exp/(Inc) 0 0 2,819 558 0 0 0 0 3,400 0 0 PBT 3,836 4,410 942 5,947 5,297 4,807 5,116 6,733 15,112 21,953 6,264 -15.4 Tax 1,811 1,729 2,478 2,998 2,280 1,875 1,944 2,463 9,017 8,562 2,255 Rate (%) 47.2 39.2 263.0 50.4 43.0 39.0 38.0 36.6 59.7 39.0 36.0 Minority Interest -4 21 -18 53 -13 -10 40 58 52 75 21 Reported PAT 2,028 2,660 -1,517 2,896 3,031 2,942 3,132 4,212 6,029 13,316 3,988 -24.0 Adj PAT 2,028 2,660 2,633 3,225 3,031 2,942 3,132 4,212 10,546 13,316 3,988 -24.0 YoY Change (%) -43.4 -41.5 2.2 -13.9 49.4 10.6 18.9 30.6 -27.1 26.2 96.6 Margins (%) 5.3 6.7 6.1 7.3 6.9 6.8 7.1 8.9 6.4 7.4 8.9

9 August 2019 10

8 August 2019 1QFY20 Results Update | Sector: Healthcare

Aurobindo Pharma

BSE SENSEX S&P CNX 37,327 11,032 CMP: INR598 TP: INR720 (+20%) Buy Bloomberg ARBP IN US led earnings growth despite regulatory hurdles at few sites Equity Shares (m) 586  Revenue growth led by the US: 1QFY20 sales at INR54.4b (v/s est. INR52.2b) M.Cap.(INRb)/(USDb) 350.4 / 5 was up 28% YoY, largely led by US formulation sales at INR26.8b (USD390m, 52-Week Range (INR) 838 / 537 1, 6, 12 Rel. Per (%) 3/-24/-1 49.4% of sales), which were up 42.3% YoY. EU sales came in at INR13.9b 12M Avg Val (INR M) 2305 (+16% YoY, 25.6% of sales); emerging market sales at INR3.1b were up 22% Free float (%) 48.1 YoY. ARV sales at INR3.2b doubled YoY while API sales dipped 2% YoY to INR7.3b, mainly due to 12% YoY decline in Betalactum. Financials & Valuations (INR b)  Superior product mix expands margins: Gross margin (GM) stood at 57.8%, Y/E Mar FY19 FY20E FY21E up 270bp YoY/ 130bp QoQ, mainly driven by good product mix and overall Net Sales 195.6 241.8 290.8 EBITDA 40.2 51.0 63.1 good geographical mix. EBITDA margin was up 280bp YoY to 21% (v/s est. PAT 25.3 28.9 36.4 20%), due to improved GM and lower other expenses (down 90bp YoY as % EPS (INR) 43.2 49.4 62.1 of sales). EBITDA at INR11.5b (v/s est. INR10.4b) was up 47% YoY. Forex gain Gr. (%) 1.1 14.4 25.8 for the quarter was INR48m. There is an exceptional expense of INR127m as BV/Sh (INR) 237.1 284.0 343.6 acquisition related cost. Adj. PAT came in at INR6.4b (v/s est. INR6.2b) and RoE (%) 19.8 19.0 19.8 was up 25% YoY. RoCE (%) 14.4 12.9 13.3  Key concall highlights: (1) ARBP would complete corrective and preventive P/E (x) 13.9 12.1 9.6 action (CAPA) related to ‘site under warning letter’ by end-CY19. (2) ARBP P/BV (x) 2.5 2.1 1.7 has provided response/periodic updates related to observations at Unit 3.

Estimate change About 5-6 products are pending for approval from this site. (3) It has guided TP change for ~40 launches over the remaining 9MFY20. (4) Auromedic sales were Rating change stable YoY at USD67m. (5) ARBP has maintained its guidance of USD150- 200m debt reduction in FY20.  Valuation view: We lower our EPS estimate for FY20/FY21 by 8%/2% to factor in the delay in closure of the Sandoz transaction. We roll our price target on 11x (unchanged) 12M forward earnings to INR720 (unchanged). We remain positive on ARBP on the back of a healthy ANDA pipeline and limited erosion in base business. However, regulatory issues remain a hangover for the stock over the near term. Maintain Buy.

Quarterly performance (Consolidated) (INR Million) Y/E March FY19 FY20E FY19 FY20E FY20E 1Q 2Q 3Q 4Q 1Q 2QE 3QE 4QE 1QE vs Est Net Sales 42,503 47,514 52,697 52,923 54,446 54,863 65,181 67,266 1,95,636 2,41,756 52,159 4.4% YoY Change (%) 15.5 7.1 21.5 30.7 28.1 15.5 23.7 27.1 18.6 23.6 22.7 EBITDA 7,792 10,260 10,864 11,304 11,464 11,631 13,623 14,293 40,219 51,010 10,380 10.4% Margins (%) 18.3 21.6 20.6 21.4 21.1 21.2 20.9 21.2 20.6 21.1 19.9 Depreciation 1,545 1,637 1,631 1,866 2,409 2,500 3,100 3,533 6,680 11,541 1,950 Interest 295 354 477 501 499 650 950 864 1,627 2,963 520 Other Income 437 263 134 323 110 150 190 250 1,157 700 250 PBT before EO expense 6,389 8,532 8,891 9,259 8,666 8,631 9,763 10,146 33,070 37,206 8,160 Forex loss/(gain) 682 397 -505 28 -48 0 0 0 603 -48 0 Exceptional (expenses)/income -268 -250 -1,062 -127 -1,581 -127 PBT 5,707 7,866 9,145 8,169 8,587 8,631 9,763 10,146 30,887 37,127 8,160 Tax 1,155 1,754 2,048 2,311 2,278 2,028 2,245 1,831 7,269 8,382 1,958 Rate (%) 20.2 22.3 22.4 28.3 26.5 23.5 23.0 18.0 23.5 22.6 24.0 Minority Interest -3 -2 -26 4 -47 -20 -18 30 -29 -55 -15 Reported PAT 4,555 6,114 7,123 5,854 6,357 6,623 7,535 8,285 23,647 28,800 6,216 2.3% Adj PAT 5,095 6,632 6,925 6,636 6,415 6,623 7,535 8,285 25,288 28,890 6,216 3.2% YoY Change (%) -2.8 -15.1 5.5 22.6 25.9 -0.1 8.8 24.8 1.1 14.4 22.0 Margins (%) 12.0 14.0 13.1 12.5 11.8 12.1 11.6 12.3 12.9 11.9 11.9

9 August 2019 11

8 August 2019 1QFY20 Results Update | Sector: Consumer

Page Inds.

BSE SENSEX S&P CNX 37,327 11,032 CMP: INR 18,477 TP: INR19,110(+3%) Neutral Bloomberg PAG IN Margins surprise, weak sales growth likely to persist Equity Shares (m) 11  M.Cap.(INRb)/(USDb) 206.1 / 2.9 1QFY20 sales grew 2.4% YoY to INR8.4b (in line with est.). Overall volume 52-Week Range (INR) 36062 / 17622 declined 2.4% YoY (v/s est. flat growth). EBITDA declined 1.4% to INR1.9b (v/s 1, 6, 12 Rel. Per (%) -3/-24/-37 est. INR1.6b) and Adj. PAT declined 11.1% to INR1.1b (v/s est. INR1.05b). 12M Avg Val (INR M) 1160  Gross margin was up 10bp YoY to 55.1%. EBITDA margin was down sharp 90bp Free float (%) 51.7 YoY to 22.4%, as employee costs as % of sales were up 220bp YoY, offset by Financials & Valuations (INR b) other expenses, which were down 120bp. Adjusting for Ind-AS 116 impact, Y/E Mar 2019 2020E 2021E EBITDA margins were actually down 200bp YoY on comparable basis. Net Sales 28.5 31.0 35.7  Key conference call highlights: (1) Quarter to date growth in 2QFY20 is not too EBITDA 6.2 6.9 8.1 different from 1QFY20. (2) Demand slowdown witnessed across categories. (3) PAT 3.9 4.2 5.0 EPS (INR) 353.2 373.2 449.0 After a spike up towards end-FY19; inventory days have returned to FY18 levels Gr. (%) 13.5 5.7 20.3 of around 80 days. (4) Management stated that it intends to increase MBO BV/Sh (INR) 694.8 788.9 878.1 reach sharply in the current year (currently around 55,000). EBOs currently RoE (%) 50.8 47.3 51.1 contribute 16-17% to sales RoCE (%) 45.6 48.8 52.6  Valuation and view: Weak topline growth visibility leads to a reduction of P/E (x) 52.3 49.5 41.2 EV/EBITDA (x) 33.5 29.7 25.1 3.3%/3.4% in FY20/FY21 EPS. While working capital improvement (after the spike up in FY19) and another interim dividend declared are welcome steps,

Estimate change growth still remains a concern given (a) prevailing trade liquidity crunch, (b)

TP change off-take not having completely recovered yet after GST, and (c) increasing Rating change threat of competition for the first time in the form of Van Heusen. Despite correction of ~50% from peak, the stock is not cheap at 41.2x FY21EPS. Nevertheless, it is also true that two of these factors inhibiting earnings are unlikely to be structural. Maintain Neutral with a target price of INR19,110 (40x June 2021 EPS).

Quarterly Performance (INR Million) Y/E MARCH FY19 FY20 FY19 FY20E FY20 Var. 1Q 2Q 3Q 4Q 1Q 2QE 3QE 4QE 1QE (%) Net Sales 8,153 6,908 7,383 6,079 8,350 7,633 8,011 7,032 28,522 31,026 8,397 -0.6% YoY change (%) 17.0 10.4 18.9 -0.1 2.4 10.5 8.5 15.7 11.8 8.8 3.0 Gross Profit 4,481 3,994 4,215 3,866 4,598 4,427 4,566 4,466 16,555 18,057 4,618 Gross margin (%) 55.0 57.8 57.1 63.6 55.1 58.0 57.0 63.5 58.0 58.2 55.0 Other Expenditure 2,588 2,566 2,562 2,669 2,731 2,748 2,844 2,852 10,385 11,175 2,981 % to sales 31.7 37.1 34.7 43.9 32.7 36.0 35.5 40.6 36.4 36.0 35.5 EBITDA 1,893 1,428 1,653 1,197 1,866 1,679 1,722 1,614 6,170 6,882 1,637 14.0% Margins (%) 23.2 20.7 22.4 19.7 22.4 22.0 21.5 23.0 21.6 22.2 19.5 YoY change 38.0 11.4 28.3 -18.5 -1.4 17.6 4.2 34.9 14.0 11.5 -13.5 Depreciation 72 77 82 80 140 137 142 139 311 557 90 Interest 40 40 41 41 83 81 82 82 161 328 30 Other Income 72 108 95 87 55 84 85 86 362 310 79 PBT 1,852 1,420 1,625 1,163 1,699 1,546 1,583 1,480 6,060 6,307 1,597 6.4% Tax 608 494 606 413 592 526 538 489 2,121 2,145 543 Rate (%) 32.8 34.8 37.3 35.5 34.8 34.0 34.0 33.0 35.0 34.0 34.0 PAT 1,244 926 1,019 750 1,107 1,020 1,045 991 3,939 4,163 1,054 5.0% YoY change (%) 44.8 10.5 22.2 -20.4 -11.1 10.1 2.5 32.2 13.4 5.7 -15.3 E: MOFSL Estimates

9 August 2019 12

9 August 2019

Annual Report Threadbare

ASHOK LEYLAND FY19 Ashok Leyland’s (AL) FY19 annual report analysis highlights the The ART of annual report analysis company’s muted standalone operating performance with EBITDA up a  Earning to cash flow mere 5.8% to INR31.4b. Capitalization of expenses (to intangibles) conversion ratio declined to increased to INR2.9b, 11.2% of PBT (FY18: INR1.3b, 5.4% of PBT). Lower 6% due to rising working tax rate (at 21%) due to unabsorbed tax losses of three wholly-owned capital intensity.  Receivables increased by subsidiaries (JV with Nissan till Nov’16) amalgamated during earlier years 165% to INR25.1b. helped PAT increase 15.5% to INR19.8b. Earnings to cash flow conversion  Capitalization of expenses to intangibles increased (Pre-tax CFO to EBITDA) declined to 6% on account of rising working from INR1.3b (5.4% of PBT) to INR2.9b (11.2% of capital requirements. Cash conversion cycle increased to -25 days (FY18: PBT). -64 days) on the back of increasing receivables (by 18 days)/inventory (by  Performance of HLF improved; losses of other subsidiary increased from INR0.9b to INR1.5b. 12 days) and decreasing payables (by 8 days). Subsidiaries’ aggregate

performance improved primarily on the back of superior performance by Stock Info Hinduja Leyland Finance (HLF), which reported 79% YoY increase in PAT Bloomberg AL IN to INR3.0b. Performance of other subsidiaries remains a drag with Equity Shares (m) 2,927 aggregate loss increasing from INR0.9b in FY18 to INR1.5b in FY19. Inter- M.Cap.(INRb)/(USDb) 179.5 / 2.5 corporate deposits of INR7.4b (FY18: INR5.8b) were given from the 52-Week Range (INR) 135 / 61 standalone book and recovered in the same year; of this, INR1.5b (FY18: 1, 6, 12 Rel. Per (%) -23/-30/-46 INR2.7b) pertains to Hinduja Energy (Group Company). 12M Avg Val (INR M) 2345  Muted operating performance; capitalization of expenses on a Free float (%) 48.9 rise: Standalone revenue grew 10% YoY to INR290.5b on the back of higher volumes. However, EBITDA margins contracted Shareholding pattern (%) 40bp to 10.8% on rising raw material costs. Capitalisation of As On Jun-19 Mar-19 Jun-18 expenses increased to INR2.9b (v/s INR1.3b in FY18), primarily Promoter 51.1 51.1 51.1 on account of investments in R&D for BS-VI engines and modular DII 11.0 10.1 10.2 platform. Intangible assets under development increased to FII 18.8 19.1 23.5 Others INR3.9b (FY18: INR1.9b). 19.1 19.7 15.1 FII Includes depository receipts  Steep decline in earnings to cash flow conversion ratio: AL’s standalone earnings to cash conversion ratio declined to 6% in Auditor’s name FY19 (FY18: 205%) due to an increase in working capital Price Waterhouse & CO intensity, primarily on account of an increase in (a) receivables Research analyst by 165% YoY to INR25.1b -partially due to higher growth in STU business where receivable days are higher, (b) inventory by 53% Sandeep Ashok Gupta ([email protected]); +91 22 39825544 to INR26.9b on the back of inventory build-up due to

deceleration in demand in 2HFY19, and (c) balance with tax Umesh Jain authorities by 81% to INR10.0b. This led to a decline in cash ([email protected]); +91 22 7193 4221

conversion days from negative 64 days to negative 25 days, Mohit Baheti mainly due to (a) an increase in receivable days from 13 days to ([email protected]); +91 22 3846 2492 31 days, (b) increase in inventory days from 35 days to 47 days, and (c) decrease in payable days from 97 days to 89 days. Consequently, operating cash flow turned negative at INR3.6b v/s INR56.4b in FY18.  HLF’s performance continues to improve; other subsidiaries remain a drag: Hinduja Leyland Finance’s consol. revenue grew 29.6% to INR27.2b, leading to an increase in PAT from INR1.7b to INR3.0b. However, performance of other subsidiaries continued deteriorating. Overall, revenue of such companies remained muted at INR26.8b (FY18: INR26.9b), while overall loss increased from INR0.9 in FY18 to INR1.5b in FY19. Goodwill stood at INR11.2b (11% of net worth), of which, INR4.3b pertains to HLF.

9 August 2019 13

8 August 2019 1QFY20 Results Update | Sector: Capital Goods

Cummins India

BSE SENSEX S&P CNX 37,327 11,032 CMP: INR603 TP: INR695 (+15%) BUY Bloomberg KKC IN Miss on all fronts; hurt by weakness in higher-margin exports biz Equity Shares (m) 277  M.Cap.(INRb)/(USDb) 167 / 2.4 Op. performance below expectations: KKC missed our expectations on all 52-Week Range (INR) 885 / 587 fronts. Revenue growth was tepid at 1% YoY (our estimate: 10%) in 1QFY20 1, 6, 12 Rel. Per (%) -16/-22/-10 due to a decline in exports (-26% YoY). De-growth in the higher-margin 12M Avg Val (INR M) 424 export business dragged the overall margin to its lowest level in a decade at Free float (%) 49.0 11.3%. Thus, EBITDA declined 30% YoY to INR1.5b (35% miss). Adj. PAT was

down 23% YoY to INR1.4b (25% miss). Financials & Valuations(INR b)  The root cause – weak demand trends in overseas markets: The decline in Y/E Mar 2019 2020E 2021E Net Sales 56.6 60.4 68.6 exports is attributable to weak demand in the key markets of Africa, the EBITDA 8.6 8.1 9.7 Middle East and Asia. LHP exports declined 39% YoY to INR1.3b, while HHP PAT 7.2 6.9 8.0 exports were down 10% YoY to INR1.7b. Domestic business grew robustly by EPS (INR) 26.1 24.8 28.9 16% YoY to INR9.9b, led by strong growth in Power Generation (+9% YoY) Gr. (%) 10.8 -4.9 16.4 and Industrial (+39% YoY) segments. Distribution & Services segment BV/Sh (INR) 149.0 159.0 170.7 RoE (%) 17.8 16.1 17.5 delivered moderate growth of 8% YoY to INR3.5b. However, management RoCE (%) 16.9 15.3 16.6 has lowered its domestic revenue growth guidance to 8-10% from 12-15% P/E (x) 23.1 24.3 20.9 earlier owing to the ongoing economic slowdown. This implies residual P/BV (x) 4.0 3.8 3.5 growth of 6-9% in the remaining nine months of FY20.  Margins – no relief in sight given weak exports outlook: Operating margin

Estimate change shrank 490bp YoY to 11.3% in 1QFY20 on account of a weak revenue mix

TP change (25% exports revenue v/s 34% in 1QFY19). Also, INR movement adversely Rating change impacted the margin by 100bp. With global markets expected to remain soft and low visibility in the key markets of Africa and South America, management expects exports to decline 12-15% in FY20 (v/s guidance of flat-to-negative growth at the start of the year). To factor in the potential adverse revenue mix in FY20, we have scaled down our margin estimates by 170bp for FY20 (13.4% v/s 15.2% earlier).  Lowering earnings estimate and TP; maintaining Buy on cheap valuations: We cut our earnings estimate by 13%/11% for FY20/21 to factor in (a) the pressure on margins, given intense competition in the domestic business and (b) the weak exports outlook. We scale down our TP to INR695 as we assign a target multiple of 24x FY21E EPS. At CMP, the stock trades at FY20/21E P/E of 24x/21x. We maintain Buy given cheap valuations.

9 August 2019 14

KKC: Quarterly Performance (Standalone) (INR Million) FY19 FY20E FY19 FY20E Vs Est. Var. Y/E March 1Q 2Q 3Q 4Q 1Q 2QE 3QE 4QE 1QE (%) Sales 13,280 14,869 15,038 13,404 13,430 15,636 16,373 14,950 56,590 60,387 14,620 -8.1% Change (%) -1.0 28.9 11.0 8.7 1.1 5.2 8.9 11.5 11.3 6.7 10.1 EBITDA 2,147 2,509 2,267 1,718 1,514 2,142 2,292 1,998 8,641 8,116 2,325 -34.9% Change (%) 9.9 49.8 15.3 -0.7 -29.5 -14.6 1.1 16.3 24.0 10.4 8.3 As of % Sales 16.2 16.9 15.1 12.8 11.3 13.7 14.0 13.4 15.3 13.4 15.9 Depreciation 271 274 279 280 291 295 295 298 1,103 1,179 292 Interest 36 40 41 45 52 40 42 28 162 162 38 Other Income 696 785 755 692 769 790 770 717 2,928 3,046 714 PBT 2,536 2,980 2,702 2,085 1,940 2,597 2,725 2,388 10,304 9,820 2,709 -28.4% Tax 706 865 831 676 525 779 818 824 3,078 2,946 813 Effective Tax Rate (%) 27.8 29.0 30.8 32.4 27.1 30.0 30.0 34.5 29.9 30.0 30.0 Adjusted PAT 1,830 2,116 1,871 1,409 1,415 1,818 1,908 1,564 7,226 6,874 1,896 -25.4% Change (%) 10.2 38.4 8.7 (12.6) (22.7) (14.1) 2.0 11.0 10.8 (4.9) 3.6 Extra-ordinary Income (net) ------Reported PAT 1,830 2,116 1,871 1,409 1,415 1,818 1,908 1,564 7,226 6,874 1,896 -25.4% Change (%) (17.6) 38.4 8.7 (12.6) (22.7) (14.1) 2.0 11.0 2.0 (4.9) 3.6

9 August 2019 15

08 August 2019 1QFY20 Results Update | Sector: Cement

The Ramco Cement

BSE SENSEX S&P CNX 37,327 11,032 CMP: INR735 TP: INR740 (+1%) Downgrade to Neutral Bloomberg TRCL IN Margins seen moderating; downgrading to Neutral Equity Shares (m) 236  M.Cap.(INRb)/(USDb) 173 / 2.4 Volume growth moderates; better realizations drive margins: Volumes 52-Week Range (INR) 845 / 546 increased 3.4% YoY to 2.7mt in 1QFY20. Cement realizations were up 10% 1, 6, 12 Rel. Per (%) -2/18/12 YoY at INR4,989/ton. Consequently, revenue grew 14% YoY to INR13.7b (our 12M Avg Val (INR M) 226 estimate: INR12.2b) in the quarter. Blended EBITDA/t increased 42% YoY to Free float (%) 57.3 INR1,277, with cost/t increasing by 2% YoY to INR3,791. Power EBITDA stood

at INR162m, resulting in cement EBITDA/t of INR1,217. EBITDA grew 47% Financials & Valuations (INR b) Y/E Mar 2019 2020E 2021E YoY to INR3.5b (our estimate: INR2.6b), with the margin expanding 6pp YoY Net Sales 51.2 57.5 65.0 to 25.2%. PAT was up 54% YoY to INR1.9b (our estimate: INR1.4b). EBITDA 10.1 12.6 14.5  Key highlights from management interaction: (1) Coal and pet coke prices PAT 5.2 6.4 7.2 softened in 1QFY20. (2) Fuel mix – pet coke usage was reduced to 42% in the EPS (INR) 21.9 27.2 30.7 quarter v/s 62% in the year-ago period. Gr. (%) -8.7 24.4 12.8  What is changing? BV/Sh (INR) 189.3 213.0 240.2  RoE (%) 12.1 13.5 13.5 Demand slowing down in core south market: TRCL, which sells ~70% of RoCE (%) 10.0 10.9 10.4 its volumes in the south market, is likely to witness a slowdown in P/E (x) 33.8 27.1 24.1 dispatches in the region. After recording 20% growth in FY19, the P/BV (x) 3.9 3.5 3.1 company is now faced with weakening demand in south. With a new EV/EBITDA (x) 17.6 14.4 13.7 government elected in Andhra Pradesh, several projects are being EV/Ton (USD) 153 132 145 cancelled. Moreover, issues related to sand mining ban have also

cropped up in the state. Against this backdrop, we expect AP/ Estimate change volumes to remain flat in FY20. Separately, is faced with TP change Rating change severe water crisis, which has affected construction activities in the

region. While demand from is expected revive after being impacted by floods, we note that the sales contribution from the state for TRCL is only ~10%.  East realization trends not so promising: TRCL’s commissioning of three new grinding units in east will help the company to strengthen its presence in the region. However, we see a likelihood of pricing pressure in east over the medium term owing to significant capacity addition. East will witness maximum capacity addition (~26mnt or ~30% over the next two years) amongst any region, though we note that most of these are only grinding units and not necessarily backed by clinker. Moreover, prices in the region – after increasing by ~INR40-50/bag in April and May’19 – have corrected by ~INR20-25/bag since then. Valuation and view – Downgrading to Neutral: We are downgrading TRCL to Neutral with a target price of INR740. After 22% appreciation over the past six months, the stock trades at 13.7x FY21E EV/EBITDA, which is ~10% premium to its past five-year average. On an asset valuation basis, it trades at ~USD145/t, which also indicates a marginal premium to its past five-year average. Moreover, pricing in its key regions of south and east have also fallen sharply over the past three months, underperforming the rest of the country. This, in our view, will likely impact its margins adversely in the subsequent quarters.

9 August 2019 16

Quarterly Performance (INR Million) Y/E March FY19 FY20 FY19 FY20E 1Q 2Q 3Q 4Q 1Q 2QE 3QE 4QE

Sales Dispatches (m ton) 2.61 2.47 2.75 3.29 2.70 2.42 2.88 3.85 11.12 11.86 YoY Change (%) 21.6 14.7 20.8 20.2 3.4 -2.0 5.0 17.0 19.5 6.6 Realization (INR/ton) 4,537 4,622 4,392 4,640 4,989 4,689 4,729 4,756 4,549 4,789 YoY Change (%) -1.5 -3.4 -4.7 1.5 10.0 1.4 7.7 2.5 -1.9 5.3 QoQ Change (%) -0.8 1.9 -5.0 5.6 7.5 -6.0 0.9 0.6 Net Sales 12,046 11,806 12,074 15,293 13,698 11,746 13,651 18,366 51,220 57,461 YoY Change (%) 18.5 11.0 14.6 22.2 13.7 -0.5 13.1 20.1 16.8 12.2 EBITDA 2,350 2,442 2,110 3,220 3,452 2,401 2,745 4,024 10,123 12,622 Margins (%) 19.5 20.7 17.5 21.1 25.2 20.4 20.1 21.9 19.8 22.0 Depreciation 735 728 756 767 758 825 850 926 2,985 3,359 Interest 114 131 135 128 135 160 160 210 509 665 Other Income 202 88 96 142 223 100 100 137 527 560 PBT before EO expense 1,703 1,671 1,315 2,467 2,782 1,515 1,835 3,026 7,156 9,158 Extra-Ord expense 0 63 0 30 0 0 0 0 93 0 PBT 1,703 1,608 1,315 2,437 2,782 1,515 1,835 3,026 7,063 9,158 Tax 453 464 304 783 862 455 551 880 2,004 2,747 Rate (%) 26.6 28.8 23.1 32.1 31.0 30.0 30.0 29.1 28.4 30.0 Reported PAT 1,250 1,145 1,011 1,654 1,920 1,061 1,285 2,145 5,059 6,410 Adj PAT 1,250 1,208 1,011 1,684 1,920 1,061 1,285 2,145 5,152 6,410 YoY Change (%) -19.8 -24.9 -8.4 22.5 53.6 -12.2 27.1 27.4 -8.7 24.4 Margins (%) 10.4 10.2 8.4 11.0 14.0 9.0 9.4 11.7 10.1 11.2 E: MOFSL Estimates

9 August 2019 17

8 August 2019 1QFY20 Results Update | Sector: Chemicals

Tata Chemicals

BSE SENSEX S&P CNX 37,327 11,032 CMP: INR565 TP: INR703(+24%) Buy Bloomberg TTCH IN Largely in line driven by US/Africa Equity Shares (m) 255 M.Cap.(INRb)/(USDb) 143.9 / 2 Europe remains weak 52-Week Range (INR) 782 / 548  Largely in-line revenue/EBITDA: Revenue grew 6% YoY to INR29b (our 1, 6, 12 Rel. Per (%) -1/-7/-14 estimate: INR31b) in 1QFY20. EBITDA rose 21% YoY to INR5.9b (our 12M Avg Val (INR M) 508 estimate: INR5.6b), with the margin expanding 260bp YoY to 20.4% (our Free float (%) 69.4 estimate: 18.1%). On a like-to-like basis, EBITDA was up 17% YoY to INR5.7b Financials & Valuations (INR b) (adj. for Ind-AS 116). Adj. PAT grew 1% YoY to INR2,166m (our estimate: Y/E Mar 2019 2020E 2021E INR2,345m). Net Sales 113.0 121.6 136.2  Improvement across geographies barring Europe: US and Africa contributed EBITDA 21.0 24.5 28.0 90% of incremental EBITDA of INR1,014m in 1QFY20. In the US, EBITDA/mt PAT 10.9 11.3 13.3 was up 37% YoY to USD50 (realizations improved 6% YoY to USD225/mt) and EPS (INR) 42.9 44.2 52.3 sales volume increased 1% YoY. In Africa, EBITDA/mt stood at USD36 versus Gr. (%) -10.8 3.1 18.3 a loss of USD33 in the year-ago period, despite realizations declining 13% BV/Sh (INR) 484.3 512.9 549.8 YoY to USD224/mt. The improvement was driven by 44% volume growth, RoE (%) 9.3 8.9 9.8 RoCE (%) 7.3 7.3 8.0 lower input cost and a favorable base (1QFY19 had higher cost related to P/E (x) 13.2 12.8 10.8 shut down and siltation due to heavy rains). Europe was subdued, with P/BV (x) 1.2 1.1 1.0 EBITDA/mt declining 60% YoY to GBP18 due to higher RM and energy costs. EV/EBITDA (x) 9.2 7.9 6.7 Consumer segment revenue grew 13% YoY (pulses and spices grew 45%) with EBIT margins contracting 420bp to 14.6%. However, adjusting for one Estimate change time expense of INR100m during the quarter; EBIT margin contracted 210bp TP change Rating change to 16.7%.

 Valuation and view: We expect US and Africa soda ash businesses to continue delivering a healthy performance owing to lower input cost. This, along with a likely improvement in European biz, strengthens the company’s overall growth prospects. We largely maintain our estimates of revenue/EBITDA/PAT CAGR of 10%/16%/10% over FY19-21. We value the stock on an SOTP basis and arrive at a target price of INR703 (implied EV/EBITDA of 7.9x). Maintain Buy.

Consolidated - Qtly Earning Model (INR M) Y/E March FY19 FY20 FY19 FY20E FY20 Var 1Q 2Q 3Q 4Q 1Q 2QE 3QE 4QE 1QE % Net Sales 27,444 29,607 28,319 27,594 28,969 32,967 30,404 29,234 112,963 121,575 30,977 -6 YoY Change (%) 11.9 10.1 10.0 8.0 5.6 11.4 7.4 5.9 10.0 7.6 12.9 Total Expenditure 22,535 23,586 23,606 22,285 23,046 26,064 24,866 23,124 92,013 97,101 25,362 EBITDA 4,910 6,020 4,712 5,309 5,923 6,903 5,538 6,110 20,951 24,474 5,615 5 Margins (%) 17.9 20.3 16.6 19.2 20.4 20.9 18.2 20.9 18.5 20.1 18.1 Depreciation 1,351 1,417 1,441 1,505 1,635 1,739 1,789 1,794 5,714 6,957 1,475 Interest 887 921 972 851 944 931 977 931 3,631 3,784 880 Other Income 1,064 1,233 961 859 879 800 800 825 4,116 3,303 800 PBT before EO expense 3,735 4,916 3,260 3,811 4,223 5,033 3,571 4,209 15,722 17,037 4,060 4 Extra-Ord expense 0 0 275 -979 80 0 0 0 -703 80 0 PBT 3,735 4,916 2,985 4,790 4,143 5,033 3,571 4,209 16,425 16,957 4,060 2 Tax 1,258 1,199 716 296 1,301 1,233 857 589 3,469 3,981 1,360 Rate (%) 33.7 24.4 24.0 6.2 31.4 24.5 24.0 14.0 21.1 23.5 33.5 MI & Profit/Loss of Asso. Cos. 338 499 74 407 756 524 78 427 1,317 1,784 354 Reported PAT 2,140 3,217 2,195 4,087 2,086 3,276 2,636 3,193 11,639 11,191 2,345 -11 Adj PAT 2,140 3,217 2,470 3,108 2,166 3,276 2,636 3,193 10,936 11,271 2,345 -8 YoY Change (%) 23.9 24.6 -49.2 0.4 1.2 1.8 6.7 2.7 -10.8 3.1 9.6 Margins (%) 7.8 10.9 8.7 11.3 7.5 9.9 8.7 10.9 9.7 9.3 7.6 Profits from Discontinued Operations(DO) -80 0 0 0 311 0 0 0 -79.8 311.1 0

9 August 2019 18

8 August 2019 1QFY20 Results Update | Sector: Consumer

Emami

BSE SENSEX S&P CNX 37,327 11,032 CMP: INR312 TP: INR390 (+25%) Buy Bloomberg HMN IN Ad spend reduction and other income boosts PAT; weak domestic growth persists Equity Shares (m) 454  Consolidated net sales grew 5.6% YoY to INR6.5b (in-line). Domestic sales M.Cap.(INRb)/(USDb) 141.7 / 2 grew a tad (2% YoY) with flat volumes, while International business grew 34% 52-Week Range (INR) 586 / 246 1, 6, 12 Rel. Per (%) 8/-21/-44 YoY. Cons. EBITDA grew 11.4% YoY to INR1.3b (v/s est. INR1.1b). Cons. PAT 12M Avg Val (INR M) 364 before amortization was up 18.1% YoY to INR1b (v/s est. INR747m). Free float (%) 47.3  Domestic business saw flat volumes for the quarter. Within domestic, Kesh

Financials & Valuations (INR b) King sales grew a strong 30% YoY, Navratna grew 4% YoY and 7 Oils in One Y/E Mar 2019 2020E 2021E grew 31% YoY; Pain management declined 6% YoY, Male grooming declined 7% Net Sales 26.9 29.6 33.4 YoY, BoroPlus declined 7% YoY and Healthcare range declined 3% YoY. EBITDA 7.3 8.1 9.1  Gross margins were down sharply (-210bp YoY to 64.2%) in 1QFY20. EBITDA PAT 5.5 6.0 6.9 margin expanded 110bp YoY to 20.7% (v/s est. 17.2%), as increase in employee EPS (INR) 12.2 13.2 15.3 Gr. (%) 0.2 8.4 15.8 costs (+50bp YoY) was offset by lower other expenses to sales (-30bp YoY) and BV/Sh (INR) 45.7 51.6 53.9 ad spends as % of sales (-330bp YoY). Absolute ad spends declined 9.5% YoY to RoE (%) 27.0 27.1 28.9 INR1.3b. RoCE (%) 28.4 31.7 34.2  Concall highlights: (1) Rural growth was a meager 1% for the quarter v/s 2.3% P/E (x) 25.7 23.7 20.4 urban growth. (2) Management remains optimistic about the remainder of the P/BV (x) 6.8 6.0 5.8 year given the strategic initiatives that it has undertaken. Estimate change  Valuation & View: While beat on profits in 1QFY20 leads to a marginal TP change earnings upgrade, underlying numbers on domestic growth were weak and are Rating change likely to remain so. Worryingly there was a decline in sales for most key segments, barring Kesh King. So long as growth prospects, even off the low base of recent years remains uncertain, we believe earnings growth will remain muted. PAT has actually declined for the past three years. Valuations are, however, inexpensive at 20.4x. Maintain Buy as well as target price of INR390 (25x Jun’ 21 EPS).

Consol. Quarterly performance (INR Million) Y/E MARCH FY19 FY20 FY19 FY20E FY20 Var. 1Q 2Q 3Q 4Q 1Q 2QE 3QE 4QE 1QE (%) Domestic volume growth (%) 18.0 -4.0 3.5 0.0 0.0 8.0 6.0 12.0 4.4 6.5 0.0 Net Sales 6,144 6,280 8,109 6,396 6,486 6,996 8,936 7,200 26,929 29,618 6,451 0.5% YoY change (%) 16.2 0.0 7.1 3.7 5.6 11.4 10.2 12.6 6.4 10.0 5.0 Gross Profit 4,071 4,308 5,432 3,889 4,162 4,679 6,138 4,631 17,699 19,610 4,049 2.8% Gross margin (%) 66.3 68.6 67.0 60.8 64.2 66.9 68.7 64.3 65.7 66.2 62.8 EBITDA 1,204 1,894 2,666 1,547 1,341 1,952 2,928 1,837 7,255 8,058 1,107 21.2% Margins (%) 19.6 30.2 32.9 24.2 20.7 27.9 32.8 25.5 26.9 27.2 17.2 YoY change 50.2 -5.9 0.7 -10.7 11.4 3.1 9.8 18.7 0.8 11.1 -10.4 Depreciation 230 202 178 160 204 204 204 209 768 820 207 Interest 46 44 62 62 44 26 19 7 214 95 11 Other Income 50 31 55 173 115 93 72 75 366 355 23 PBT 980 1,680 2,482 1,498 1,209 1,816 2,777 1,697 6,639 7,498 911 32.7% Tax 103 240 401 280 177 363 555 404 1,060 1,500 164 Rate (%) 10.5 14.3 16.2 18.7 14.6 20.0 20.0 23.8 16.0 20.0 18.0 PAT before Amortization 879 1,440 2,086 1,225 1,039 1,457 2,225 1,293 5,517 6,013 747 39.0% YoY change (%) 45.3 -8.8 -0.9 1.3 18.1 1.1 6.7 5.6 0.2 9.0 -15.0 Reported PAT 267 827 1,378 562 393 849 1,617 725 3,032 3,583 147 166.8% E: MOFSL Estimates

9 August 2019 19

8 August 2019 1QFY20 Results Update | Sector: Automobiles

Endurance Technologies

BSE SENSEX S&P CNX 37,327 11,032 CMP: INR743 TP: INR1,100 (+35%) Buy Bloomberg ENDU IN Outperformance continues; Withdraws plans of foray into 2W tyres Equity Shares (m) 141  Consol. net revenues were flat YoY to INR18.6b (v/s est. of INR19.7b). PAT M.Cap.(INRb)/(USDb) 104.5 / 1.5 52-Week Range (INR) 1574 / 743 grew 8% to INR1.3b (v/s est. of INR1.2b). Performance was boosted by 1, 6, 12 Rel. Per (%) -22/-43/-48 incentives of ~INR229m in India business. 12M Avg Val (INR M) 96  India business: S/A revenues were flat YoY to INR13.1b (v/s est. of Free float (%) 25.0 INR13.9b). EBITDA margins came in at 15.1% (v/s est. of 14%), an expansion of 160bp YoY (-40bp QoQ). Beat on margins was driven by INR229m (or Financials & Valuations (INR b) 170bp) incentive, adjusted for which, margins would be below our Y/E Mar 2019 2020E 2021E estimates. EBITDA grew 11.5% to INR2b (v/s est. of INR1.8b). S/A PAT grew Net Sales 75.1 78.8 88.7 EBITDA 11.3 12.1 13.9 9% YoY to INR981m (v/s est. of INR892m). PAT 5.1 5.3 6.3  EU business revenues were flat YoY to INR5.5b (v/s est. INR5.8b). In EUR EPS (INR) 36.2 37.4 44.5 terms, revenues grew ~3%. EBITDA margins expanded 40bp YoY (-340bp Gr. (%) 24.5 3.5 18.7 QoQ) to 17.5% (v/s est. of 18.4%). EBITDA grew just 2% YoY to INR958m (v/s BV/Sh (INR) 182.3 210.1 241.2 est. of INR1.1b). Lower depreciation boosted adj. PAT growth to 6% YoY at RoE (%) 21.5 19.1 19.7 RoCE (%) 18.0 16.6 17.9 INR365m (v/s est. of INR307m). P/E (x) 20.5 19.8 16.7  Withdraws plans to foray into 2W tyre business: ENDU’s board had given P/BV (x) 4.1 3.5 3.1 an in-principle approval for investment of ~INR1.8b for setting-up ~10,000 units/day 2W tyre capacity. However, later based on feedback from the

Estimate change investing community, it withdrew this plan.

TP change  Key highlights from earnings call: (a) Entering aluminum forging business Rating change with capex of ~INR350m to manufacture components for inverted front forks (currently imported). At a later stage, it also plans to make components for EVs. Manufacturing would start by Jun’20 and is projected to have peak revenues of ~INR1.3b in three years. (b) Entered into tie-up with KTM for transfer of latest and advanced technology for suspensions. ENDU would invest EUR4m over two years as equity stake in KTM Industries and KTM would transfer technology free of cost to ENDU. (c) Won new business worth ~INR1.9b from HMSI, Kia, HMCL, TVS & Getrag, with SOP from 3QFY20. TVS has given orders for 2W front forks and 3W brakes (initial order for disc brakes). (d) Hyundai & Kia are currently contributing ~INR1b to revenues, which should ramp up to ~INR3b by FY21.  Valuation and view: We have lowered our EPS estimates by ~7%/4% for FY20/FY21 to factor in weaker 2W volumes, EU PV volumes and adverse EUR-INR. ENDU offers strong growth potential driven by newer products and technology. We believe it is the best proxy play on India’s 2W industry growth, as it should continue to outperform 2W volume growth through sustained increase in content and cross-selling. Even the EU business is expected to outperform underlying industry growth due to increasing wallet share of customers. We are lowering our P/E multiple from 27x to 24x to factor in the increasing risk from EVs to its aluminum die-casting business. Maintain Buy, with a TP of IN1,100/share.

9 August 2019 20

Consolidated - Quarterly (INR Million) Y/E March FY19 FY20 FY19 FY20 FY20 Var INR m 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q (%) Net Sales 18,604 19,367 18,130 19,004 18,619 19,755 21,173 19,268 75,105 78,814 19,775 -5.8 YoY Change (%) 23.6 23.2 17.8 9.5 0.1 2.0 16.8 1.4 18.2 4.9 6.3 RM Cost (% of sales) 58.6 59.7 58.4 54.9 55.6 56.8 58.4 56.8 57.9 56.9 58.3 -270bp Staff Cost (% of sales) 8.9 8.0 9.2 8.6 9.6 9.0 8.6 9.8 8.7 9.2 8.7 100bp Other Exp. (% of sales) 17.9 17.8 18.4 19.4 19.0 18.7 18.4 18.2 18.4 18.5 19.0 0bp EBITDA 2,714 2,798 2,530 3,246 2,941 3,147 3,082 2,940 11,288 12,111 2,864 2.7 Margins (%) 14.6 14.4 14.0 17.1 15.8 15.9 14.6 15.3 15.0 15.4 14.5 130bp Depreciation 820 921 936 1,085 927 1,022 1,060 1,284 3,762 4,293 1,100 Interest 59 55 75 68 58 60 66 56 257 240 57 Other Income 41 80 93 56 68 70 80 60 270 278 70 PBT after EO 1,876 1,902 1,404 2,149 2,496 2,135 2,036 1,659 7,331 8,327 1,777 40.5 Eff. Tax Rate (%) 33.6 34.2 31.2 30.8 33.7 33.1 33.0 31.6 32.5 32.9 32.5 120bp Adj. PAT 1,246 1,252 1,109 1,486 1,343 1,428 1,365 1,135 5,091 5,267 1,199 11.9 YoY Change (%) 29.1 25.6 15.8 27.7 7.8 14.1 23.1 -23.7 24.5 3.5 -3.7 E: MOFSL Estimates

9 August 2019 21

8 August 2019 2QCY19 Results Update | Sector: Technology

Hexaware Technologies

BSE SENSEX S&P CNX 37,327 11,032 CMP: INR367 TP: INR370 (+1%) Neutral Bloomberg HEXW IN Traction in organic growth moderated by client specific issues Equity Shares (m) 302  Operations in line with margin levers in place: 2QCY19 CC revenue grew M.Cap.(INRb)/(USDb) 109.4 / 1.5 52-Week Range (INR) 502 / 295 5.0% QoQ (13% YoY), in line with our estimate. ~2pp contribution from 1, 6, 12 Rel. Per (%) 7/1/-22 Mobiquitity acquisition added on to ~3% QoQ CC (12% YoY CC) organic 12M Avg Val (INR M) 677 growth. GPM increased 220bp QoQ to 32.4%, (beat of 170bp), which was Free float (%) 37.5 led by higher realization in acquired entity, offshore mix shift and higher utilization. Adjusting for the one-time transaction cost of INR170m, EBIT Financials & Valuations (INR b) margins stood at 14.6% (100bp ahead of our estimate). PAT increased 9.2% Y/E Dec 2018 2019E 2020E QoQ to INR1,512m, in line with our estimate. Higher depreciation during the Net Sales 46.5 55.9 67.6 quarter was offset by lower ETR (18% v/s expectation of 20%). ETR is EBITDA 7.3 8.7 11.1 PAT 5.8 6.6 8.0 expected to sustain current low levels in the future. EPS (INR) 19.3 20.9 24.7  Reduction in top clients revenues led by deal completion and one client Gr. (%) 16.5 8.4 17.7 ramp-down: During the quarter, revenue from top-5 clients declined 6.3% BV/Sh (INR) 79.7 89.8 107.4 QoQ, partially due to the completion of an IMS project in the M&C vertical RoE (%) 26.5 24.8 25.0 of a single APAC client. This led to decline in IMS revenue by 8.1% QoQ. RoCE (%) 24.7 25.6 26.5 Secondly, work in one of the largest BFS customer in the mortgage segment P/E (x) 19.2 17.7 15.0 started to ramp down due to changed outsourcing priorities after the P/BV (x) 4.7 4.1 3.5 appointment of new CEO. HEXW expects material reduction in spends with this client over the next couple of quarters. Estimate change  Valuation view: While revenue growth was in line, we expect organic TP change Rating change growth to taper off on account of client specific issues in the BFSI space. For

the same reason, we have reduced our revenue growth estimates by 90bp/120bp for CY19/CY20. While margins should inch up in the near future, structural concerns remain amid high attrition and ever-tightening US supply. Our net income estimates are affected by moderation in revenue, slight increase in margins (in the current quarter) and reduction in ETR to 18-19% going forward. Consequently, we have increased our EPS estimate by 3.7%/2.5% for CY19/CY20. Our price target of INR370 discounts forward earnings by 15x. Maintain Neutral.

Quarterly Performance (Indian GAAP) (INR Million) Y/E Dec CY18 CY19E CY18E CY19E Est. Var. (% 1Q 2Q 3Q 4Q 1Q 2QE 3QE 4QE 1QCY19 / bp) Revenue (USD m) 162.2 168.3 171.1 176.1 180.0 188.5 211.2 220.0 678 800 189.0 -0.3 QoQ (%) 3.9 3.8 1.7 2.9 2.2 4.7 12.0 4.1 11.6 18.0 5.0 -26bp Revenue (INR m) 10,490 11,367 12,096 12,524 12,640 13,083 14,784 15,397 46,477 55,904 13,145 -0.5 YoY (%) 9.2 15.6 21.8 24.6 20.5 15.1 22.2 22.9 17.9 20.3 15.6 -55bp GPM (%) 32.9 31.8 32.8 31.6 30.2 32.4 32.1 31.7 32.2 31.6 30.7 166bp SGA (%) 17.4 16.2 16.0 16.3 15.3 17.5 15.8 15.8 16.5 16.1 16.0 148bp EBITDA 1,626 1,773 2,023 1,913 1,887 1,947 2,410 2,444 7,335 8,688 1,933 1393bp EBITDA Margin (%) 15.5 15.6 16.7 15.3 14.9 14.9 16.3 15.9 15.8 15.5 14.7 18bp EBIT Margin (%) 14.1 14.0 15.4 14.0 13.8 13.3 14.9 14.5 14.4 14.1 13.6 -27bp Other income 204 327 264 -215 -42 99 99 24 580 180 107 -7.6 ETR (%) 20.0 20.0 19.1 19.9 18.4 17.9 18.5 18.5 19.7 18.3 20.0 PAT 1,343 1,534 1,722 1,234 1,385 1,512 1,873 1,834 5,833 6,604 1,514 -0.1 QoQ (%) 10.9 14.2 12.3 -28.3 12.2 9.2 23.9 -2.1 9.3 -14bp YoY (%) 17.9 25.3 21.3 1.9 3.1 -1.4 8.8 48.6 16.8 13.2 -1.3 -13bp EPS (INR) 4.5 5.1 5.7 4.1 4.6 5.0 6.2 6.1 19.3 20.9 5.0 Headcount 14,619 15,357 16,050 16,205 16,492 18,294 20,385 21,152 16,205 21,152 16,975 7.8 Utilization (%) 81.3 78.2 79.0 78.7 79.0 80.7 81.5 81.5 80.9 83.5 81.5 -80bp Attrition (%) 13.4 14.4 15.7 17.0 18.2 18.2 0.0 0.0 0.0 Offshore rev. (%) 34.6 34.8 35.1 36.1 36.6 37.0 38.9 39.4 35.2 38.1 38.8 -184bp E: MOFSL Estimates

9 August 2019 22

8 August 2019 1QFY20 Results Update | Sector: Real Estate

Phoenix Mills

BSE SENSEX S&P CNX 37,327 11,032 CMP: INR645 TP: INR750 (+16%) Buy Bloomberg PHNX IN Residential business drives; Big beat Equity Shares (m) 153  Core portfolio PAT grows 40% YoY: 1QFY20 revenue grew 49% YoY to M.Cap.(INRb)/(USDb) 98.9 / 1.4 INR6,150m (v/s est. of INR4,447m). The beat was primarily driven by lopsided 52-Week Range (INR) 701 / 492 1, 6, 12 Rel. Per (%) 6/8/1 revenue growth in the residential segment driven by revenue recognition of 12M Avg Val (INR M) 63 ‘One West Tower 6’. EBITDA margin expanded 30bp YoY to 47.6% Free float (%) 37.3 (v/s est. of 51.5%). Its core portfolio comprising retail malls, commercial and

Financials & Valuations (INR b) hospitality reported revenue of INR4,079m (in line with est. of INR4,124m). INR b FY19 FY20E FY21E PAT rose 2x YoY to INR1,304m (higher than our est. of INR708m). The Sales 19.8 21.0 24.1 residential business contributed INR496m to 1QFY20 PAT, compared to EBITDA 9.9 10.6 12.1 contribution of INR21m in the year-ago period. Excluding the contribution NP 3.8 4.1 4.8 from the residential business, PAT from the core portfolio of retail, EPS (Rs) 25.0 27.0 31.1 EPS Growth (%) 57.8 8.3 15.1 hospitality and commercial offices came in at INR808m, up 40% YoY. BV/Share (INR) 227.0 249.9 276.3  Short-term moderation in retail consumption: Retail consumption increased P/E (x) 25.8 23.8 20.7 5% YoY to INR17,815m in 1QFY20. Retail rental income was up 7% YoY in P/BV (x) 2.8 2.6 2.3 1QFY20 to INR2,596m. Retail EBITDA came in at INR2,556m, up 8% YoY. EV/EBITDA (x) 13.8 12.8 10.8 Consumption growth moderated at (HSP) to -1% YoY due EV/Sales (x) 6.9 6.4 5.4 RoE (%) 12.1 11.3 11.8 to refurbishment work undertaken by two key tenants (PVR and Lifestyle). RoCE (%) 10.3 9.8 10.3 Also, tenant churn resulted in sluggish growth temporarily, dragging footfalls.

 Concall highlights: (1) Most segments witnessed 9-18% growth in Estimate change consumption, except the electronics segment, which witnessed a decline. (2) TP change Rating change Capex for additional FSI at HSP was estimated at ~INR11b; however, the

proposed reduction in prices of premiums may lead to savings of INR3b.  Valuation view: We believe that PHNX provides a unique way to play India’s retail growth story due to (a) strong track record of execution, (b) scalability as reflected in its line-up of five new under-construction malls, and (c) robust cash generation. We value PHNX’s retail assets on DCF-based NAV approach, assuming a cap rate of 8.5% (HSP - 8%) and a discount rate of 13.5%. We maintain Buy with an SOTP-based TP of INR750 (upside of 16%).

Consolidated - Quarterly Earning Model (INR Million) Y/E March FY19 FY20E FY19E FY20E FY20E Var (%) 1Q 2Q 3Q 4Q 1Q 2QE 3QE 4QE 1QE Gross Sales 4,132 4,047 4,404 7,232 6,150 4,606 4,876 5,375 19,816 21,007 4,447 38% YoY Change (%) 4.4 9.2 5.7 65.6 48.9 13.8 10.7 -25.7 22.3 6.0 7.6 Total Expenditure 2,178 2,066 2,180 3,461 3,223 2,280 2,389 2,580 9,885 10,472 2,157 49% EBITDA 1,953 1,981 2,225 3,771 2,927 2,326 2,487 2,795 9,931 10,535 2,290 28% Margins (%) 47.3 49.0 50.5 52.1 47.6 50.5 51.0 52.0 50.1 50.1 51.5 Depreciation 499 506 523 514 507 525 530 615 2,042 2,177 630 Interest 846 917 917 826 871 890 900 840 3,506 3,501 825 6% Other Income 170 183 170 329 154 230 250 298 851 932 175 PBT before EO expense 778 740 955 2,761 1,703 1,141 1,307 1,638 5,234 5,789 1,011 Extra-Ord expense 0 0 0 -481 0 0 0 0 -481 0 0 PBT 778 740 955 3,242 1,703 1,141 1,307 1,638 5,715 5,789 1,011 Tax 235 179 175 510 234 240 327 360 1,099 1,161 283 Rate (%) 30.2 24.1 18.3 15.7 13.8 21.0 25.0 22.0 19.2 20.1 28.0 MI & P/L of Asso. Cos. -54 -58 72 448 165 32 35 256 407 488 20 Reported PAT 597 620 708 2,284 1,304 870 945 1,022 4,210 4,140 708 84% Adj PAT 597 620 708 1,879 1,304 870 945 1,022 3,821 4,140 708 84% YoY Change (%) 40.3 48.5 8.5 103.0 118.3 40.2 33.5 -45.6 57.8 8.4 18.5 Margins (%) 14.5 15.3 16.1 26.0 21.2 18.9 19.4 19.0 19.3 19.7 15.9 E: MOSL Estimates

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8 August 2019 1QFY20 Results Update | Sector: Cement

J K Lakshmi Cement

BSE SENSEX S&P CNX 37,327 11,033 CMP: INR330 TP: INR410 (+24%) Buy Bloomberg JKLC IN Healthy realizations drive margins Equity Shares (m) 118  Volumes increase a meager 2% YoY while realizations grow 11%YoY: 1QFY20 M.Cap.(INRb)/(USDb) 39.1 / 0.5 52-Week Range (INR) 387 / 250 total volumes (cement+ clinker) increased 2% YoY to 2.33mt. While cement 1, 6, 12 Rel. Per (%) 6/28/-15 sales were up 11% YoY, clinker sales declined 60% YoY. Realizations grew 11% 12M Avg Val (INR M) 27 to INR4,472/t. Revenue was up 13% YoY to INR10.4b (est. INR8.8b). EBITDA/t Free float (%) 54.1 increased 78%YoY to INR729/t (est. INR512/t) due to higher realization. Financials & Valuations (INR b) EBITDA increased 81% YoY to INR1.7b (higher than est. INR1.1b), with margins 2019 2020E 2021E Y/E Mar at 16.3% (+6.13pp YoY; +5.1pp QoQ). Exceptional Item of INR302m for Net Sales 38.8 42.7 46.7 EBITDA 4.1 5.6 6.4 1QFY20 represents diminution in the value of Capital Work-in-Progress; this is PAT 0.8 1.7 2.2 due to the impairment in the carrying cost of an asset under construction at EPS (INR) 6.8 14.2 18.9 the company's Durg Cement Plan. Tax rate stood at 35% v/s 9.4% in the year Gr. (%) -8.7 110.7 33.0 BV/Sh (INR) 129.4 139.9 157.6 ago period. Adj. PAT increased 5x YoY to INR696m (est. INR247m). RoE (%) 5.3 10.6 12.7  Management commentary: (1) 20MW Thermal Power plant in Durg has been RoCE (%) 7.3 9.3 11.2 commissioned. (2) Orissa GU is likely to be commissioned by 2QFY20. Trial run P/E (x) 49.2 23.3 17.5 P/BV (x) 2.6 2.4 2.1 will start in the first week of October. (3) The company will repay INR2b of debt EV/EBITDA (x) 10.0 7.3 5.8 in FY20; capex for the year is INR750-800m. (4) Other expenses for 1QFY20 EV/Ton (USD) 47 44 40 includes INR200m consultancy fee to BCG and another INR50-60m donation. Estimate change The company has hired BCG for cost improvement in logistics. (5) JKLC is gaining TP change market share in Rajasthan and Gujarat due to the launch of new brands Rating change

 Valuation and view: Company plans to reduce clinker sales in the future and increase the percentage of blended sales. This should bode well for margins. JKLC has also been focusing on deleveraging the balance sheet; it has repaid INR2b debt in FY19 and will reduce debt further by INR2b in FY20.We largely maintain our FY21 EPS estimates and value JKLC at 7x FY’21 EBITDA and arrive at TP of INR410. Maintain Buy.

Quarterly performance (INR Million) Y/E March FY19 FY20 FY19 FY20E 1Q 2Q 3Q 4Q 1Q 2QE 3QE 4QE Sales Dispatches (m ton) 2.29 2.13 2.31 2.94 2.33 2.13 2.42 3.12 9.66 10.00 YoY Change (%) 0.1 13.0 9.2 32.0 1.9 0.0 5.0 6.0 13.4 3.5 Realization (INR/ton) 4,038 4,003 4,056 3,983 4,472 4,222 4,242 4,171 4,019 4,269 YoY Change (%) 2.4 -3.0 2.2 -1.0 10.7 5.5 4.6 4.7 0.4 6.2 QoQ Change (%) 0.4 -0.9 1.3 -1.8 12.3 -5.6 0.5 -1.7 Net Sales 9,234 8,514 9,350 11,725 10,419 8,979 10,266 13,018 38,823 42,682 YoY Change (%) 2.5 9.6 11.7 30.7 12.8 5.5 9.8 11.0 13.8 9.9 EBITDA 939 916 983 1,312 1,698 900 1,235 1,783 4,150 5,616 Margins (%) 10.2 10.8 10.5 11.2 16.3 10.0 12.0 13.7 10.7 13.2 Depreciation 446 452 451 446 453 462 462 476 1,794 1,853 Interest 451 493 471 458 399 400 400 400 1,874 1,599 Other Income 110 150 137 166 59 80 80 33 563 252 PBT before EO expense 152 121 198 574 905 118 453 940 1,044 2,416 Extra-Ord expense 0 0 0 0 302 0 0 0 0 302 PBT 152 121 198 574 603 118 453 940 1,044 2,114 Tax 14 43 50 142 209 35 159 337 249 740 Rate (%) 9.4 35.4 25.4 24.7 34.6 30.0 35.0 35.9 23.8 35.0 Reported PAT 137 78 148 433 394 82 294 603 796 1,374 Adj PAT 137 78 148 433 696 82 294 603 796 1,676 YoY Change (%) (51) (41) 72 17 406 6 100 39 (9) 111 Margins (%) 1.5 0.9 1.6 3.7 6.7 0.9 2.9 4.6 2.0 3.9

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8 August 2019 1QFY20 Results Update | Sector: Cement

India Cements

BSE SENSEX S&P CNX 37,327 11,032 CMP: INR87 TP: INR90 (+4%) Neutral Bloomberg ICEM IN Strong margin delivery with healthy realizations Equity Shares (m) 308 M.Cap.(INRb)/(USDb) 26.9 / 0.4  Volumes decline, but robust prices drive realizations…: Volumes declined 52-Week Range (INR) 128 / 75 1% YoY to 3.0mt in 1QFY20. Blended realizations were up 9% YoY to 1, 6, 12 Rel. Per (%) -6/7/-24 INR4,828/t due to healthy prices in the focus markets. Thus, net sales were 12M Avg Val (INR M) 651 Free float (%) 71.8 up 8% YoY to INR14.7b (our estimate: INR14.3b).  …and in turn strong profitability: Blended EBITDA/t was up 57% YoY to Financials & Valuations (INR b) INR795, as higher cost/t (+3% YoY) was offset by healthy realizations. EBITDA Y/E Mar 2019 2020E 2021E Net Sales 56.3 59.8 64.7 was up 55% YoY to INR2.4b (our estimate: INR1.9b). Margins expanded 5pp EBITDA 6.4 8.4 9.1 YoY to 16.5%, while PAT rose 3x YoY to INR722m (our estimate: INR396m). PAT 0.7 1.9 2.3  Key concall takeaways: (1) Cement demand in south is estimated to have EPS (INR) 2.3 6.2 7.3 Gr. (%) -31.0 176.4 17.6 grown 3% YoY in 1QFY20. (2) Demand trended lower post elections in BV/Sh (INR) 169.1 174.1 180.2 Andhra Pradesh due to cancellation of various projects. Demand outlook in RoE (%) 1.3 3.6 4.1 Telangana appears positive. (3) Demand in east should pick up post RoCE (%) 3.7 4.7 5.0 monsoon. (4) ICEM incurred capex of INR800m in 1QFY20. (4) Net debt P/E (x) 38.7 14.0 11.9 P/BV (x) 0.5 0.5 0.5 stood at INR34.7b as of Jun’19. Debt increased marginally by INR1.1b in EV/EBITDA (x) 9.5 6.5 5.6 1QFY20. (5) Trade constitutes 65% of ICEM’s sales mix. EV/Ton (USD) 55 50 46  Maintain Neutral: With 15.5mt capacity, ICEM has a good brand recall, Estimate change market share and offers a healthy play on a price recovery in south India. TP change However, high investments in the non-cement businesses, elevated debt

Rating change levels and subdued return ratios have kept valuation at a discount. We largely maintain our estimates and value ICEM at 6x FY21E EV/EBITDA to arrive at a target price of INR90. Maintain Neutral.

Quarterly Performance (Standalone) (INR M) Y/E March FY19 FY20 FY19 FY20E 1Q 2Q 3Q 4Q 1Q 2QE 3QE 4QE Sales Dispatches (m ton) 3.08 3.08 2.96 3.33 3.04 3.08 3.11 3.53 12.44 12.75 YoY Change (%) 16 14 9 8 -1 0 5 6 11.4 2.5 Realization (INR/ton) 4,425 4,508 4,450 4,697 4,828 4,606 4,639 4,684 4,524 4,689 YoY Change (%) -8.9 -4.0 0.0 3.8 9.1 2.2 4.3 -0.3 -2.2 3.6 QoQ Change (%) -2.2 1.9 -1.3 5.5 2.8 -4.6 0.7 1.0 Net Sales 13,607 13,871 13,163 15,640 14,688 14,173 14,410 16,516 56,280 59,786 YoY Change (%) 5.5 9.4 8.5 11.9 7.9 2.2 9.5 5.6 8.9 6.2 EBITDA 1,561 1,548 1,349 1,922 2,420 1,802 1,852 2,359 6,379 8,433 Margins (%) 11.5 11.2 10.2 12.3 16.5 12.7 12.9 14.3 11.3 14.1 Depreciation 616 617 632 648 599 610 620 644 2,513 2,473 Interest 733 954 728 827 799 820 820 840 3,242 3,279 Other Income 55 38 43 174 32 35 35 40 310 142 PBT before EO expense 267 14 31 622 1,054 407 447 915 934 2,823 Extra-Ord expense 0 0 0 0 0 0 0 0 PBT 267 14 31 622 1,054 407 447 915 934 2,823 Tax 57 0 0 183 331 130 143 298 240 903 Rate (%) 21.2 0.0 0.0 29.5 31.5 32.0 32.0 32.6 25.7 32.0 Reported PAT 210 14 31 439 722 277 304 616 694 1,919 Adj PAT 210 14 31 439 722 277 304 616 694 1,919 YoY Change (%) -20.5 -94.0 -79.5 24.3 243.5 1,836.4 871.3 40.6 -31.0 176.4 Margins (%) 1.5 0.1 0.2 2.8 4.9 2.0 2.1 3.7 1.2 3.2

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8 August 2019 1QFY20 Results Update | Sector: Media

Entertainment Network India

BSE SENSEX S&P CNX 36,691 10,856 CMP: INR388 TP: INR500(+29%) Buy Bloomberg ENIL IN Earnings pressure evident; expect Non-FCT to bring solace Equity Shares (m) 48  Solution biz safeguards revenue growth albeit at lower profitability: For M.Cap.(INRb)/(USDb) 18.5 / 0.3 52-Week Range (INR) 751 / 362 1QFY20, ENIL echoed the dismal performance of the media industry in 1, 6, 12 Rel. Per (%) -1/-31/-45 general and the radio industry in particular. Revenue growth of 8.2% YoY (to 12M Avg Val (INR M) 5 INR1.4b) garnered crucial support from Non-FCT (Solutions) business (+42% Free float (%) 28.9 YoY) at a time when Radio segment growth was flattish at 1% YoY. In Radio, increasing cost along with the low 11.6% margin in the 21 new stations of Financials & Valuations (INR b) Phase III pushed the segmental EBITDA margin lower to 19% from the Y/E Mar 2019 2020E 2021E historical levels of 25-30%. Moreover, Non-FCT margin remained inherently Net Sales 6.2 6.8 7.7 EBITDA 1.4 1.9 2.3 low at 19%. As a result, overall EBITDA margin shrank to 18.6%, with EBITDA PAT 0.5 0.6 0.9 declining 14% YoY to INR244m (on a pre-Ind-AS basis). PAT was down 11% EPS (INR) 10.9 12.8 18.7 YoY to INR64m in the quarter. Gr. (%) 60.2 17.7 46.3  Concall highlights: (1) Ad revenue is likely to pick up pace in 2HFY20. (2) ENIL BV/Sh (INR) 195.6 207.2 224.8 maintained the EBITDA growth guidance of 12-15% for FY20, although the RoE (%) 5.7 6.4 8.7 composition may change with a higher share from the solutions business. (3) RoCE (%) 4.9 6.9 8.9 P/E (x) 35.5 30.1 20.6 Batch 1/2 stations’ capacity is expected to reach 75%+/65% over time. (4) P/BV (x) 2.0 1.9 1.7 According to IRS, industry listenership increased 8.3%, with Radio Mirchi’s EV/EBITDA (x) 13.0 9.7 7.4 listenership rising by 14% to 45m/month.  Expect revenue/EBITDA CAGR of 15%/28% over FY19-21: ENIL has done

Estimate change well to mitigate the risk from Radio’s declining share and the weak market

TP change conditions, generating 28% revenue from Non-FCT. Moreover, management Rating change has exuded confidence in capitalizing on growth opportunities and improving the learning curve, which is likely to translate into a margins improvement. However, it indicated that the weak ad market may exert pressure on revenues over the near term. Subsequently, we cut our FY20/21 revenue estimate by 5% and EBITDA estimate by 10-15% (on a pre-Ind-AS 116 basis), given the fixed cost nature. We expect EBITDA growth of 14%/22% for FY20/21 on a pre Ind-AS 116 basis. Potential gains from the acquisition of three TV Today radio stations (pending approvals) could provide further upside, in our view.  Valuation view: We cut our TP to INR500 (prior: INR589), assigning 10x to FY21E EBITDA, to factor in the cut in our earnings estimates. A revival in earnings from 2HFY20 will remain a key monitorable and also a factor that can fortify our positive stance on the company. Maintain Buy.

9 August 2019 26

Standalone - Quarterly Earning Model (INR m) Y/E March FY19 FY20 FY19 FY20E FY20 Est 1Q 2Q 3Q 4Q 1Q 2QE 3QE 4QE 1QE var (%) Net Sales 1,216 1,225 2,009 1,755 1,316 1,350 2,196 1,964 6,205 6,825 1,363 -3.5 YoY Change (%) 16.4 -2.2 35.9 10.1 8.2 10.2 9.3 11.9 15.5 10.0 12.1 Total Expenditure 932 952 1,605 1,317 985 1,013 1,535 1,348 4,807 4,880 1,050 -6.2 EBITDA 284 273 404 437 330 337 661 616 1,398 1,945 313 5.6 Margins (%) 23.3 22.3 20.1 24.9 25.1 25.0 30.1 31.4 22.5 28.5 23.0 215bps Depreciation 152 166 174 180 241 244 244 248 671 978 161 Net Interest cost -18 -22 -27 -43 46 46 46 46 -110 186 -27 Other Income 0 0 0 0 31 29 29 27 0 117 0 #DIV/0! PBT before EO expense 150 130 257 300 74 76 400 349 837 898 180 -58.6 Extra-Ord expense 0 0 0 0 0 0 0 0 0 0 0 PBT 150 130 257 300 74 76 400 349 837 898 180 -58.6 Tax 58 40 97 102 26 24 128 109 297 287 58 Rate (%) 38.5 31.1 37.8 34.0 35.1 32.0 32.0 31.3 32.0 35.1 32.0 Reported PAT 92 89 160 198 48 51 272 239 539 611 122 -60.5 Adj PAT 72 89 160 198 48 51 272 239 519 611 122 -60.5 YoY Change (%) 331.4 50.1 22.2 69.2 -32.7 -42.6 70.3 20.9 60.2 17.7 41.9 Margins (%) 5.9 7.3 7.9 11.3 3.7 3.8 12.4 12.2 8.4 8.9 7.5 -380bps

9 August 2019 27

8 August 2019 Sector:Sector: Financials-Banks

Life Insurance

LIC launches new term insurance plan: Competitive intensity to increase; Pricing for private insurers still fares better  Overall, the Protection business has grown at a rapid rate with private insurers significantly benefitting from the same. HDFC Life/IPRU Life grew their protection APE at 79%/67% CAGR over FY17-19, while growth at SBI Life was relatively modest at 25% CAGR over the same period.  Protection business mix in total APE, thus, increased to 18%/14.6%/11.2% for HDFC Life/IPRU Life/SBI Life.  The total protection market in India stood at INR125b during FY19 (Source: IPRU quarterly results presentation), and thus, corresponds to ~6% of total un- weighted new business premium. This highlights the huge under-penetration in this segment, which should result in continued growth momentum across top insurers.  Though the collective share of private players’ new business premiums within the industry stood at 34% during FY19, the share of the top three private insurers in the high growth Protection segment stands at a robust ~62%.  So far, LIC has been completely inactive in the Pure Protection segment and has been focusing on its main traditional business. The pricing of its discontinued pure term plan (Jeevan Amulya) has also been very uncompetitive, which enabled private players to steadily gain market share in this segment.  LIC’s new term insurance plan ‘Jeevan Amar’ offers life cover at competitive pricing. Though the revised rates are still higher than those offered by other private insurers, the difference has now narrowed significantly and should enable LIC to attract some business in the Individual term segment. However, we expect limited impact on growth/margin trajectory of major private insurers, given (i) the huge under-penetration in the segment and still competitive pricing for private players, (ii) large number of banca tie-ups that private insurers have, which enables healthy growth in the Credit Life business, and (iii) distribution model for LIC, which is still oriented to sell traditional business through its vast agency network.

Protection APE growth across major insurers Protection mix across major insurers Protection APE Growth FY17-19 Protection 1QFY20 1QFY20 1QFY19 1QFY20 (INRb) YoY (%) CAGR (%) mix (%) (total APE) (On NBP) HDFC Life 1.9 3.1 64% 79% HDFC Life 18.0% 26.0% IPRU Life 1.1 2.1 88% 67% IPRU Life 14.6% NA SBI Life 0.6 2.1 250% 25% SBI Life 11.2% 13.7% Source: Company, MOFSL Source: Company, MOFSL

Comparison of term plan across major life insurers Term Protection Age (20yrs) Age (30yrs) Age (40yrs) Insurer Claim settled Yearly Premium Yearly Premium Yearly Premium IPRU Life 98.6 5,385 6,174 10,226 HDFC Life 99.0 6,656 7,566 12,307 SBI Life 98.6 5,540 6,230 9,860

LIC (Jeevan Amar) 98.0 8,080 9,280 16,065 Source: Company, MOSL

9 August 2019 28

In conversation

1. GODREJ CONSUMER : EXPECT VOLUME GROWTH FOR THE INDUSTRY TO IMPROVE GOING AHEAD; Vivek Gambhir, MD and CEO  Expect volume growth for the industry to improve going forward due to efforts being taken to improve liquidity in the market.  June was definitely much stronger than April and May. Definitely feel that things have bottomed down and going forward given the actions that company is planning along with new innovations focus, things should be much better in the quarters ahead as far as India is concerned.  Internationally company delivered a constant currency growth of 9 percent. Indonesia has been steady, though slightly below expectations. Africa had some challenges, but the team is taking lots of corrective actions to get growth back into double digits.  For insecticides, have already taken some price cuts in certain parts of India. Will keep on evaluating it. On the soap segment, have already taken enough pricing cuts. On the hair colour side, do not expect too many pricing actions. However, in insecticides, certainly, will evaluate and see how the demand environment pans out.

2. VINATI ORGANICS : Q1 NUMBERS ARE IN LINE WITH Q4 OF FY19; Vinati Mutreja, CEO  See a growth because one of the largest customers for IBB had restarted their plant last year after closing it down for a year. So, in IBB, there is a jump year on year. In ATBS also, there is a jump because last year company was still ramping up ATBS. As of today, company is running at close to 100% capacity for ATBS.  There is going to be a slight slowdown in ibuprofen demand in the second half mostly owing to slow down in China. Company actually exports IBB to China, where a few large manufacturers of ibuprofen are located and their plants have been closed because of environmental crackdown. They are expected to start towards the Q3.  The ATBS capacity expansion is a bit delayed. Company expects to start the plant by October. Will add about 14,000 tonnes extra capacity of ATBS and expect to achieve about 25% of that in FY20, then 50% in FY21 and 75-80% by FY22. The overall revenue expectation from that plant is about Rs 250-300 crore at maximum capacity utilisation.  For company to keep growing, need to add new products. In fact, company is setting up a plant to make four different types of butylphenol. Will be the only manufacturer of these products in India.  Butylphenol is relatively lower margin product compared to existing products because company compete with imports there. Also with ATBS expansion going on stream, will target customers with slightly lower price realisations whom company is not servicing right now. The blended margin will come down to that is what company have been seeing. Last year, did about 40% EBITDA margins. Going forward, 30% to 35% is sustainable.

9 August 2019 29

From the think tank

1. THE SLUMP THAT THREATENS TO HOLD THE ECONOMY TO RANSOM  Early development economists made three important arguments about the trajectory of developing countries. First, economic growth is held back by low domestic savings in these countries. Second, the inability to export means that there is not enough foreign exchange to fund the import of capital goods needed for rapid industrialization. Third, countries facing these two structural constraints will need to absorb foreign savings to keep their economic engines running. There is a faint whiff of these themes in some of our recent economic debates about the decline in the domestic savings rate, new-age export pessimism and the quest to float a sovereign bond in the international market to fund the fiscal deficit. The Indian savings rate has declined by nearly seven percentage points since the North Atlantic financial crisis of 2008. The decline has been particularly sharp in recent years. The financial savings of households has also fallen as a percentage of gross domestic product, and the combined borrowing of the Union government, state governments and public sector entities such as the Food Corporation of India is already absorbing almost the entire flow of household financial savings. Given the domestic savings constraint, the proposed sovereign bond is a risky gambit to fund the fiscal deficit from foreign savings

2. MAKING THE $5-TRILLION TARGET POSSIBLE  After a decisive mandate, India’s new government has settled down to work quickly to address several intricate problems being faced by the economy. As a precursor to the Budget, the Prime Minister has set a medium-term target of making India a five-trillion dollar economy in the next five years, starting a debate on whether it is feasible. According to the pessimists, the target looks ambitious.  However, the optimists feel that the target is achievable, provided suitable measures are taken well in time. Let us understand the challenges before the policymakers to reach the target in five years.  India’s nominal GDP at current market prices was ₹190.1 trillion in 2018-19. This works out to about $2.7 trillion at the exchange rate of ₹69.17 per US dollar prevailing on March 29, 2019. To become five-trillion dollar economy in five years, India’s nominal GDP must grow at least at 12.7 per cent compounded annually, with an underlying assumption of the rupee-dollar rate remaining stable around the same level. The expected growth numbers for the current and the next two years are taken from the Budget documents. For 2022-23 and 2023-24, the numbers are assumed optimistically. And so, India’s GDP in 2023- 24 is tantalisingly close to five-trillion dollar at the current exchange rate.

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3. POPULISM TAKES ASIA  The rise of populism across the West in recent years has been the subject of countless discussions, and for good reason: populists’ misguided policies often have severely adverse political and economic consequences. Now, those risks are coming to Asia. There is no straightforward definition of populism. It may be ideological, economic, social, or cultural. It may reflect left-wing or right-wing views. And it is often interpreted in a country-specific context. But populism’s various iterations tend to share common features. Populist parties are typically led by a charismatic individual, who pits “the corrupt elite” and “outsiders” against “the people,” whose true will the populist purports to represent. This approach is most effective at times when the public is deeply frustrated with established leaders or political parties, owing to deepening economic and social disparities, rising insecurity, or overt corruption. Once in power, however, populists end up making matters much worse. For starters, they frequently undermine the fundamental institutions of representative democracy, including the systems of checks and balances that restrain institutional excesses and prevent abuses of power. They claim that these institutions impede their ability to serve “the people.”

9 August 2019 31

Click excel icon for detailed Valuation snapshot valuation guide

CMP TP % Upside EPS (INR) EPS Gr. YoY (%) P/E (x) P/B (x) ROE (%) Company Reco (INR) (INR) Downside FY19 FY20E FY21E FY19 FY20E FY21E FY20E FY21E FY20E FY21E FY20E FY21E Automobiles Amara Raja Buy 645 715 11 28.3 30.6 34.5 2.6 8.2 12.7 21.1 18.7 3.0 2.7 14.9 15.1 Ashok Ley. Buy 64 95 49 6.9 4.5 4.4 16.4 -35.1 -2.1 14.2 14.5 2.1 2.0 15.3 14.2 Neutral 2706 2900 7 165.4 165.1 180.5 9.3 -0.2 9.3 16.4 15.0 3.3 3.0 20.9 20.7 Buy 418 556 33 22.2 23.2 25.6 20.3 4.8 10.1 18.0 16.3 3.2 2.8 18.9 18.3 Bosch Neutral 14392 17214 20 541.9 523.6 636.5 15.3 -3.4 21.6 27.5 22.6 5.4 4.7 18.2 22.2 CEAT Buy 851 989 16 66.9 52.6 66.5 4.6 -21.4 26.3 16.2 12.8 1.2 1.1 7.5 8.8 Eicher Mot. Buy 16800 19000 13 813.9 732 861 1.8 -10.1 17.6 23.0 19.5 4.5 3.9 20.8 21.3 Endurance Tech. Buy 743 1100 48 36.2 37.4 44.5 24.5 3.3 19.0 19.8 16.7 3.6 3.1 19.2 19.8 Escorts Neutral 482 520 8 53.2 48.0 47.3 34.7 -9.8 -1.4 10.0 10.2 1.4 1.2 14.9 13.0 Exide Ind Buy 180 228 26 9.1 10.0 11.1 10.6 10.4 10.7 18.0 16.3 2.4 2.1 13.1 13.2 Hero Moto Neutral 2588 2525 -2 169.5 156.3 170.4 -8.5 -7.8 9.0 16.6 15.2 3.8 3.5 23.5 23.7 M&M Buy 540 650 20 42.7 40.2 41.6 4.1 -5.9 3.4 13.4 13.0 1.7 1.5 12.6 10.6 Mahindra CIE Buy 175 262 50 14.5 15.2 17.5 48.6 4.8 15.4 11.5 10.0 1.4 1.2 12.6 12.8 Buy 5903 6950 18 247.7 227.2 287.8 -7.1 -8.3 26.7 26.0 20.5 3.7 3.5 13.8 16.4 Motherson Sumi Buy 98 150 53 5.1 5.5 7.3 -5.2 7.6 32.8 17.9 13.5 2.7 2.4 15.2 18.7 Neutral 124 146 18 -4.4 10.1 15.3 PL LP 51.5 12.3 8.1 0.7 0.6 5.6 7.9 TVS Motor Neutral 380 425 12 14.1 16.5 20.2 1.1 16.8 22.5 23.1 18.8 4.6 3.9 21.6 22.4 Aggregate -21.1 9.9 18.5 18.2 15.4 2.4 2.2 13.3 14.4 Banks - Private AU Small Finance Buy 669 760 14 13.2 18.6 25.8 28.9 41 38.4 35.9 26.0 5.0 4.2 15.9 17.7 Buy 660 825 25 18.2 33.1 48.7 1,538.1 82 47.2 19.9 13.5 2.2 1.9 12.0 15.4 DCB Bank Neutral 194 225 16 10.5 12.1 15.5 32.0 15.3 27.8 16.0 12.5 1.8 1.6 12.3 13.9 Equitas Hold. Buy 106 140 32 5.2 9.1 12.0 1,186.6 75.6 32.4 11.7 8.8 1.3 1.2 11.9 14.0 Buy 87 125 43 6.3 8.0 10.2 32.2 27.8 27.1 10.9 8.6 1.2 1.1 11.5 13.3 HDFC Bank Buy 2236 2750 23 79.3 92.8 112.1 16.9 17.0 20.8 24.1 19.9 3.6 3.2 15.9 16.9 ICICI Bank Buy 415 520 25 5.2 20.5 27.1 -52.8 292.8 32.0 20.2 15.3 2.3 2.1 12.0 14.4 IndusInd Buy 1415 1830 29 54.9 91.7 120.2 -8.8 67.1 31.1 15.4 11.8 2.6 2.2 18.6 20.1 Kotak Mah. Bk Neutral 1504 1400 -7 37.7 44.2 53.8 16.0 17.1 21.7 34.0 28.0 4.3 3.8 13.2 14.3 RBL Bank Buy 367 640 74 20.3 24.3 31.3 34.3 19.8 28.4 15.1 11.8 1.9 1.4 13.0 14.3 South Indian Buy 12 18 55 1.4 2.0 2.6 -26.2 49.4 26.3 5.7 4.5 0.4 0.4 6.8 8.1 Aggregate 16.7 53.4 29.5 22.3 17.2 3.0 2.6 13.4 15.2 Banks - PSU BOB Buy 100 145 45 1.6 11.6 22.0 LP 606.9 90.8 8.7 4.5 0.6 0.5 6.4 12.0 BOI Neutral 69 90 31 -24.6 -0.8 8.1 Loss Loss LP NM 8.5 0.4 0.4 -0.5 4.7 Canara Neutral 228 278 22 4.7 28.9 30.7 LP 519.5 6.0 7.9 7.4 0.5 0.5 5.9 6.0 Indian Bk Buy 195 250 28 6.7 21.0 41.5 -74.4 212.8 98.1 9.3 4.7 0.5 0.5 6.0 11.0 PNB Neutral 67 75 13 -27.1 6.6 9.3 Loss LP 42 10 7.1 0.7 0.6 6.6 8.6 SBI Buy 294 380 29 2.6 29.1 33.5 LP 1,028 15.3 10.1 8.8 1.1 1.0 11.7 12.0 Union Bk Neutral 64 80 24 -20.1 -2.9 1.9 Loss Loss LP NM 34.0 0.5 0.5 -2.1 1.4 Aggregate Loss LP 41 11 7.6 0.8 0.7 7.2 9.3 NBFCs Aditya Birla Cap Buy 88 110 25 4.0 4.5 5.6 25.7 13.8 23.6 19.6 15.8 2.0 1.7 10.9 11.8 Bajaj Fin. Neutral 3336 3550 6 69.3 88.3 109.0 59.6 27.5 23.5 37.8 30.6 8.0 6.5 23.2 23.3 Cholaman.Inv.&F Buy 271 315 16 15.2 18.3 20.0 21.7 20.8 9.4 14.8 13.5 2.8 2.4 21.0 19.2 n HDFC Buy 2181 2600 19 41.9 45.9 52.0 38.7 9.5 13.2 47.5 42.0 4.5 4.0 13.3 13.5 HDFC Life Insur. Buy 523 535 2 6.3 7.3 8.8 14.6 15.2 20.1 71.6 59.6 4.7 3.9 21.9 19.8 ICICI Pru Life Buy 393 475 21 8.0 8.5 9.4 -29.5 7.3 9.9 46.0 41.9 2.2 1.9 17.3 17.6 Under Indiabulls Hsg 444 - 95.9 80.7 86.4 5.0 -15.9 7.1 5.5 5.1 1.0 1.0 19.9 19.5 Review Indostar Capital Buy 301 525 74 26.1 35.5 50.3 2.5 35.9 41.9 8.5 6.0 0.8 0.7 10.3 12.9 L&T Fin Holdings Buy 99 140 41 11.2 12.7 14.8 64.8 13.6 16.7 7.8 6.7 1.2 1.1 17.1 17.2 LIC Hsg Fin Buy 489 580 19 48.1 53.1 61.4 21.4 10.3 15.8 9.2 8.0 1.3 1.2 15.5 15.9 MAS Financial Buy 596 745 25 27.8 31.7 36.7 47.1 13.8 15.9 18.8 16.2 3.2 2.8 19.0 19.0

9 August 2019 32

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CMP TP % Upside EPS (INR) EPS Gr. YoY (%) P/E (x) P/B (x) ROE (%) Company Reco (INR) (INR) Downside FY19 FY20E FY21E FY19 FY20E FY21E FY20E FY21E FY20E FY21E FY20E FY21E M&M Fin. Buy 301 400 33 25.3 25.3 27.9 53.9 0.0 10.0 11.9 10.8 1.6 1.4 14.1 13.9 Muthoot Fin Neutral 636 600 -6 49.2 55.9 63.4 10.8 13.5 13.4 11.4 10.0 2.4 2.0 22.4 21.8 PNB Housing Buy 708 850 20 71.1 73.0 81.2 40.9 2.5 11.3 9.7 8.7 1.4 1.2 15.5 15.1 Repco Home Buy 303 500 65 38.4 43.3 43.1 16.6 12.8 -0.5 7.0 7.0 1.1 0.9 16.5 16.3 Shriram City Buy 1417 1900 34 149.9 160.6 182.6 48.7 7.2 13.7 8.8 7.8 1.3 1.1 15.4 15.3 Union Shriram Trans. Buy 1003 1300 30 113.0 116.5 129.8 4.2 3.1 11.4 8.6 7.7 1.3 1.1 15.7 15.3 Aggregate 28.7 8.8 14.7 22.1 19.2 3.1 2.8 14.3 14.3 Capital Goods ABB Sell 1396 1240 -11 12.0 18.3 22.5 12.7 52.9 22.5 76.1 62.2 6.5 5.8 8.6 9.3 Bharat Elec. Buy 97 130 34 7.9 7.5 8.2 37.7 -5.1 9.6 12.9 11.8 2.4 2.1 18.3 17.9 BHEL Neutral 58 74 27 3.5 3.9 4.4 58.9 11.8 11.6 14.9 13.3 0.6 0.6 4.3 4.7 Blue Star Neutral 741 770 4 19.5 24.4 31.0 34.7 25.6 26.6 30.3 23.9 6.8 5.6 22.4 23.3 CG Cons. Elec. Buy 228 270 19 6.0 7.4 9.0 15.5 24.0 21.9 30.8 25.2 10.4 8.4 37.6 36.9 Cummins Buy 603 695 15 26.1 24.8 28.9 10.8 -4.9 16.5 24.3 20.9 3.8 3.5 16.1 17.5 Engineers India Buy 98 145 48 5.9 6.5 7.5 -8.4 10.4 15.3 15.1 13.1 2.6 2.4 17.1 18.0 GE T&D Neutral 152 180 19 8.3 5.6 7.1 10.8 -32.4 26.7 27.0 21.3 2.6 2.4 9.8 11.6 Neutral 657 700 7 12.7 14.2 17.5 12.9 12.2 23.2 46.3 37.6 8.5 7.5 18.5 19.8 K E C Intl Buy 290 430 48 18.9 23.7 28.6 5.7 25.2 21.0 12.2 10.1 2.5 2.1 20.6 20.4 L&T Buy 1360 1790 32 61.4 74.3 93.2 18.7 21.0 25.5 18.3 14.6 2.7 2.4 15.8 17.6 Buy 1149 1290 12 25.1 32.6 34.1 27.1 30.0 4.4 35.2 33.7 4.5 4.1 13.3 12.7 Solar Ind Neutral 1113 1190 7 28.9 33.6 42.5 18.6 16.1 26.6 33.2 26.2 6.8 5.6 22.3 23.5 Thermax Buy 1093 1206 10 27.2 30.4 38.9 32.4 12.0 27.8 35.9 28.1 3.8 3.4 10.9 12.8 Va Tech Wab. Neutral 280 331 18 23.1 25.4 33.1 -9.5 10.0 30.4 11.0 8.4 1.3 1.2 12.4 14.4 Voltas Buy 598 700 17 15.7 18.7 22.8 -9.2 19.0 21.9 32.0 26.2 4.3 3.9 14.3 15.6 Aggregate 19.7 16.4 20.7 22.0 18.3 2.9 2.6 13.0 14.2 Cement Ambuja Cem. Neutral 206 225 9 6.3 7.4 8.2 2.0 17.7 10.5 28.0 25.3 1.9 1.8 6.9 7.4 ACC Buy 1549 2040 32 57.3 74.4 91.0 22.1 29.9 22.3 20.8 17.0 2.5 2.3 12.6 14.0 Birla Corp. Buy 599 780 30 33.2 51.1 67.4 53.6 53.9 31.8 11.7 8.9 1.0 0.9 8.5 10.3 Dalmia Bhar. Buy 1009 1270 26 15.6 23.2 31.8 13.3 48.4 37.0 43.5 31.7 1.8 1.7 4.2 5.5 Grasim Inds. Neutral 737 836 13 71.3 83.8 97.1 50.6 17.6 15.9 8.8 7.6 1.1 1.0 5.6 5.9 India Cem Neutral 87 90 4 2.3 6.2 7.3 -31.0 175.1 17.7 14.0 11.9 0.5 0.5 3.6 4.1 J K Cements Buy 972 1160 19 34.1 50.0 51.1 -19.8 46.6 2.2 19.4 19.0 2.5 2.2 13.5 12.4 JK Lakshmi Ce Buy 330 410 24 6.8 14.2 18.9 -8.7 110.1 33.1 23.3 17.5 2.4 2.1 10.6 12.7 Ramco Cem Neutral 735 740 1 21.9 27.2 30.7 -8.7 24.4 12.9 27.1 24.1 3.5 3.1 13.5 13.5 Orient Cem Buy 92 125 36 2.3 7.2 8.1 7.5 211.1 12 12.8 11.3 1.6 1.4 13.2 13.2 Prism Johnson Buy 82 110 33 3.1 3.7 4.0 123.4 19.6 8.0 22.1 20.4 3.2 2.8 15.4 14.6 Sanghi Inds. Buy 56 75 33 2.0 3.3 3.1 -44.9 58.7 -4.5 17.3 18.1 0.8 0.7 4.8 4.4 Under Shree Cem 20132 - 362.2 350.5 508.4 -6.1 -3.2 45.1 57.4 39.6 6.6 5.8 12.1 15.6 Review Ultratech Buy 4232 5010 18 88.7 127.2 163.2 -11.5 43.4 28.3 33.3 25.9 3.1 2.6 11.1 11.8 Aggregate 13.2 29.1 22.4 22.2 18.1 2.2 2.1 10.0 11.3 Consumer Sell 1566 1230 -21 23.1 25.3 29.9 9.1 9.5 18.3 62.0 52.4 14.5 13.2 24.4 26.4 Britannia Buy 2579 3410 32 48.1 58.0 68.5 15.1 20.6 18.1 44.4 37.6 13.8 13.4 31.8 36.1 Colgate Buy 1210 1400 16 27.4 29.6 34.1 8.8 8.0 15.3 40.9 35.5 23.8 25.8 56.9 69.8 Neutral 436 425 -2 8.5 9.1 10.3 9.0 7.9 12.2 47.7 42.5 12.2 11.3 27.1 27.6 Buy 312 390 25 12.2 13.2 15.3 0.2 8.6 15.9 23.7 20.4 6.0 5.8 27.1 28.9 Future Consumer Buy 28 58 106 -0.1 0.5 1.4 Loss LP 187.6 57.4 20.0 4.3 3.6 7.8 19.6 Godrej Cons. Neutral 642 620 -3 15.1 15.8 18.6 7.2 5.0 17.6 40.5 34.5 8.5 8.2 21.7 24.3 GSK Cons. Neutral 7736 7670 -1 216.1 250.0 275.2 29.8 15.7 10.1 30.9 28.1 7.0 6.3 24.1 23.7 HUL Buy 1803 1970 9 28.9 33.1 39.1 18.2 14.5 18.0 54.4 46.1 49.1 48.2 91.9 105.5 ITC Neutral 258 290 13 10.2 10.7 11.9 14.8 5.2 10.9 24.1 21.7 5.1 4.7 21.8 22.5 Jyothy Lab Neutral 158 170 7 5.4 6.0 7.4 10.5 11.3 23.5 26.4 21.4 4.2 3.9 16.1 18.9

9 August 2019 33

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CMP TP % Upside EPS (INR) EPS Gr. YoY (%) P/E (x) P/B (x) ROE (%) Company Reco (INR) (INR) Downside FY19 FY20E FY21E FY19 FY20E FY21E FY20E FY21E FY20E FY21E FY20E FY21E Buy 383 430 12 7.2 8.7 10.4 14.3 20.4 19.7 44.1 36.9 13.3 11.7 33.4 33.8 Nestle Neutral 11844 10800 -9 178.6 195.4 223.2 27.5 9.4 14.2 60.6 53.1 57.9 57.6 66.7 108.8 Page Inds Neutral 18477 19110 3 353.2 373.2 449.0 13.5 5.7 20.3 49.5 41.2 23.4 21.0 47.3 51.1 Parag Milk Foods Buy 176 255 45 15.7 16.5 20.2 51.5 4.7 22.4 10.7 8.7 1.6 1.4 15.6 16.8 Pidilite Ind. Neutral 1329 1220 -8 18.6 22.6 25.7 -2.0 21.5 13.9 58.9 51.7 13.7 11.7 25.2 24.3 P&G Hygiene Neutral 10294 10380 1 131.9 166.2 207.6 14.5 26.0 24.9 61.9 49.6 30.2 25.4 52.8 55.7 United Brew Neutral 1366 1520 11 21.3 23.9 29.3 42.8 12.1 22.6 57.2 46.7 9.7 8.2 18.3 19.1 Buy 598 700 17 9.3 12.3 16.6 38.1 31.9 34.9 48.6 36.1 11.6 8.8 23.9 24.3 Aggregate 15.4 10.7 15.7 40.7 35.2 11.5 10.6 28.1 30.0 Healthcare Alembic Phar Neutral 530 575 9 31.0 30.6 31.9 41.6 -1.4 4.2 17.3 16.6 3.2 2.7 19.3 17.4 Alkem Lab Buy 1718 2100 22 63.8 76.3 104.7 8.4 19.6 37.2 22.5 16.4 3.3 2.9 15.7 18.9 Buy 956 1120 17 44.4 48.6 56.0 -16.1 9.5 15.0 19.7 17.1 3.2 2.8 17.7 17.5 Aurobindo Buy 598 720 20 43.2 49.4 62.1 1.1 14.5 25.7 12.1 9.6 2.1 1.7 19.0 19.8 Neutral 231 255 10 6.2 8.5 10.2 99.6 37.1 19.6 27.2 22.8 4.1 3.6 15.8 16.8 Cadila Buy 235 290 24 18.3 17.5 19.1 4.3 -4.3 9.1 13.4 12.3 2.0 1.8 16.2 15.6 Neutral 503 500 -1 18.7 21.5 25.1 -3.1 14.8 16.9 23.4 20.0 2.4 2.2 10.2 10.8 Divis Lab Neutral 1651 1590 -4 50.0 58.6 69.1 55.0 17.1 17.9 28.2 23.9 5.5 4.6 20.8 21.0 Dr Reddy’s Neutral 2573 2620 2 105.2 120.1 130.5 62.6 14.2 8.6 21.4 19.7 2.6 2.3 13.0 12.3 Glenmark Neutral 426 525 23 25.9 28.9 34.6 -9.0 11.5 19.7 14.7 12.3 1.9 1.7 13.7 14.5 Granules Buy 97 140 44 9.2 11.0 12.8 76.5 19.4 16.3 8.8 7.6 1.4 1.3 17.3 17.9 GSK Pharma Neutral 1209 1290 7 24.6 28.1 31.4 25.2 14.3 11.8 43.0 38.4 9.2 8.6 21.3 22.4 IPCA Labs Buy 942 1145 22 37.1 45.4 54.5 95.7 22.2 20.0 20.8 17.3 3.3 2.8 17.0 17.6 Jubilant Life Buy 436 610 40 57.5 58.0 65.8 26.1 0.9 13.5 7.5 6.6 1.2 1.0 17.3 16.8 Laurus Labs Buy 328 365 11 10.4 13.0 21.9 -34.5 25.6 67.7 25.2 15.0 2.0 1.8 8.5 12.8 Lupin Buy 761 900 18 23.3 33.1 43.0 -27.1 42.2 29.6 23.0 17.7 2.3 2.1 10.5 12.5 India Buy 6041 6930 15 165.5 176.9 200.9 16.8 6.9 13.6 34.2 30.1 5.8 5.2 16.9 17.4 Shilpa Medicare Buy 353 410 16 11.8 16.7 20.4 -8.2 41.6 22.2 21.1 17.3 2.2 1.9 10.6 11.7 Strides Pharma Buy 424 480 13 6.9 24.5 36.3 -39.2 257.9 48.1 17.3 11.7 1.4 1.2 8.0 11.1 Buy 426 465 9 15.1 17.7 20.8 12.2 17.6 17.4 24.0 20.5 2.3 2.1 9.9 10.7 Torrent Pharma Neutral 1712 1480 -14 42.7 51.7 70.8 -7.1 21.0 37.0 33.1 24.2 5.5 4.8 17.4 21.1 Aggregate 11.9 17.2 18.5 20.7 17.4 2.7 2.4 13.1 13.8 Infrastructure Ashoka Buildcon Buy 124 175 41 11.9 13.0 15.4 40.6 9.1 19.1 9.6 8.0 1.4 1.2 15.3 15.9 IRB Infra Neutral 95 106 12 24.2 21.0 13.0 1.2 -13.0 -38.3 4.5 7.3 0.5 0.5 11.1 6.4 KNR Buy 257 335 30 18.9 16.2 19.2 -2.4 -14.2 18.7 15.9 13.4 2.2 1.9 15.0 15.3 Constructions Sadbhav Buy 130 195 50 10.8 11.0 13.1 -15.7 1.3 19.3 11.8 9.9 1.0 0.9 8.9 9.7 Engineering Aggregate 8.4 9.2 1.0 0.9 11.4 9.5 Logistics Allcargo Logistics Buy 96 139 45 9.7 10.5 12.6 33.6 8.5 19.8 9.1 7.6 1.0 0.9 12.2 12.9 Concor Buy 483 625 30 19.9 16.6 19.6 14.9 -16.6 18.1 29.0 24.6 2.7 2.6 9.6 10.7 Aggregate 14.9 -15.3 19.2 24.4 20.5 2.3 2.1 9.3 10.4 Media D B Corp Buy 157 210 34 15.7 17.6 20.9 -11.1 12.3 18.7 8.9 7.5 1.5 1.4 16.4 18.2 Ent.Network Buy 383 500 30 10.9 12.8 18.7 60.2 17.6 46.1 30.1 20.7 1.9 1.7 6.4 8.7 Jagran Prak. Buy 69 105 52 8.8 8.8 13.0 -8.7 0.5 46.7 7.8 5.3 1.0 0.9 13.5 17.9 Music Broadcast Buy 40 65 61 2.2 2.2 3.2 22.9 -1.0 44.7 18.3 12.6 1.7 1.5 9.6 12.5 PVR Buy 1500 2050 37 37.9 18.7 36.3 41.9 -50.5 93.5 80.1 41.4 4.7 4.3 6.5 10.8 Sun TV Buy 452 637 41 35.4 40.3 45.5 27.6 14.0 12.8 11.2 9.9 2.8 2.3 26.7 25.3 Zee Ent. Neutral 332 390 17 16.4 18.8 22.1 12.7 14.4 17.8 17.7 15.0 3.1 2.6 18.0 18.9 Aggregate 1.5 15.0 14.0 14.6 12.8 2.3 2.3 15.8 18.2 Metals Hindalco Buy 181 244 35 24.7 20.9 22.7 30.9 -15.4 8.8 8.7 8.0 0.9 0.8 11.3 11.1

9 August 2019 34

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CMP TP % Upside EPS (INR) EPS Gr. YoY (%) P/E (x) P/B (x) ROE (%) Company Reco (INR) (INR) Downside FY19 FY20E FY21E FY19 FY20E FY21E FY20E FY21E FY20E FY21E FY20E FY21E Hind. Zinc Neutral 212 216 2 18.8 18.9 20.1 -10.8 0.3 6.2 11.2 10.6 2.3 2.1 22.2 20.8 JSPL Buy 100 227 127 11.5 -7.8 0.6 LP PL LP NM 160.4 0.3 0.3 -2.4 0.2 JSW Steel Buy 222 298 34 31.8 18.4 30.4 32.4 -42.3 65.3 12.1 7.3 1.4 1.2 12.1 17.6 Nalco Buy 44 63 44 9.2 5.1 5.3 79.9 -44.7 4.5 8.6 8.3 0.8 0.7 9.2 9.2 NMDC Buy 102 138 35 15.6 12.6 13.4 19.2 -19.6 7.0 8.1 7.6 1.1 1.1 14.4 14.6 SAIL Neutral 39 49 26 6.3 4.9 5.5 2,344.1 -21 10.3 7.9 7.1 0.4 0.4 5.0 5.3 Vedanta Neutral 139 150 8 18.1 13.5 15.1 -11.0 -25.3 11.4 10.2 9.2 0.8 0.8 7.9 8.4 Neutral 367 422 15 88.6 44.9 67.0 27.3 -49.3 49.1 8.2 5.5 0.6 0.6 8.0 11.1 Aggregate 24.1 -30.9 24.7 10.2 8.2 0.9 0.8 8.7 10.0 Oil & Gas Aegis Logistics Buy 193 255 32 6.6 9.9 11.8 11.9 49.7 19.1 19.4 16.3 4.0 3.4 22.4 22.6 BPCL Buy 343 477 39 43.4 44.7 55.5 -12.9 3.1 24.1 7.7 6.2 1.6 1.4 21.4 23.5 Buy 118 153 30 7.2 7.6 7.7 2.4 6.4 0.7 15.4 15.3 9.0 8.2 61.4 56.2 GAIL Neutral 122 174 43 14.0 14.9 15.5 38.4 6.1 3.9 8.2 7.9 1.1 1.0 14.5 13.8 Neutral 185 175 -5 6.3 11.2 8.7 47.4 79.0 -22.4 16.5 21.3 4.5 3.9 30.8 19.7 Gujarat St. Pet. Neutral 219 210 -4 14.1 15.6 15.2 18.9 10.6 -2.4 14.1 14.4 1.9 1.7 14.4 12.5 HPCL Buy 250 295 18 43.9 36.8 47.0 -7.3 -16.3 27.9 6.8 5.3 1.1 1.0 17.5 20.2 IOC Buy 131 195 49 18.8 14.1 19.6 -23.7 -25.1 39.1 9.3 6.7 1.0 0.9 11.2 14.6 IGL Neutral 312 328 5 11.2 13.0 14.6 19.1 16.0 12.3 23.9 21.3 4.6 3.9 20.4 19.8 Neutral 822 889 8 55.3 57.6 59.2 14.3 4.1 2.9 14.3 13.9 3.0 2.7 22.2 20.3 MRPL Neutral 52 63 20 1.9 3.5 9.1 -84.8 77.7 164.3 15.2 5.7 0.8 0.7 5.5 13.5 Buy 151 242 61 32.0 28.7 30.1 35.6 -10.5 5.0 5.3 5.0 0.6 0.5 11.3 11.2 ONGC Buy 131 197 50 27.1 27.8 28.8 34.4 2.3 3.8 4.7 4.5 0.7 0.6 15.6 14.8 PLNG Buy 239 305 27 14.4 16.0 19.3 3.7 11.3 20.6 15.0 12.4 3.3 3.1 23.0 25.9 Reliance Ind. Neutral 1152 1400 22 67.2 75.3 83.4 10.4 12.1 10.7 15.3 13.8 1.6 1.4 11.0 11.0 Aggregate 6.0 1.6 13.5 10.2 9.0 1.3 1.2 12.7 13.1 Retail Avenue Sell 1430 1215 -15 14.5 18.8 24.7 11.9 29.8 31.5 76.2 58.0 13.2 10.8 19.0 20.5 Supermarts Aditya Birla Buy 207 240 16 1.6 3.0 4.6 156.7 82.3 54.7 68.9 44.5 9.6 7.9 15.0 19.5 Fashion Future Lifestyle Buy 430 575 34 8.6 10.1 14.0 30.1 17.8 38.1 42.3 30.7 4.1 3.7 10.1 12.7 Future Retail Buy 418 550 32 14.6 15.6 16.6 19.1 7.0 6.2 26.7 25.2 4.5 3.8 18.5 16.5 Jubilant Food. Neutral 1155 1250 8 24.1 26.9 30.6 62.0 11.7 13.7 42.9 37.7 13.3 11.6 30.9 30.7 Shoppers Stop Neutral 386 418 8 7.8 12.7 15.8 -36.3 63.2 24.1 30.4 24.5 3.2 2.8 11.0 12.1 Spencers Retail Buy 65 175 170 0.1 0.4 0.7 LP 388.7 89.2 164.7 87.0 3.4 3.3 2.1 3.9 Buy 1045 1210 16 15.7 18.6 24.2 24.0 18.5 30.1 56.3 43.2 15.1 12.7 27.0 31.9 Buy 434 470 8 2.9 4.0 5.8 11.6 35.7 47.5 109.4 74.2 5.3 4.9 6.0 6.9 V-Mart Retail Neutral 1844 2000 8 39.5 35.1 44.7 -8.0 -11.2 27.3 52.6 41.3 7.1 6.0 14.4 15.8 Aggregate 22.8 21.3 27.2 56.1 44.1 9.7 8.3 17.3 18.8 Technology Cyient Buy 443 650 47 43.4 44.4 49.7 13.4 2.5 11.8 10.0 8.9 1.7 1.6 17.4 17.7 HCL Tech. Neutral 1088 1150 6 73.6 74.3 86.4 17.6 0.9 16.4 14.7 12.6 3.1 2.8 22.6 23.7 Hexaware Neutral 367 370 1 19.3 20.9 24.7 16.5 8.1 18.2 17.7 15.0 4.1 3.5 24.8 25.0 Buy 789 840 6 35.4 37.6 44.0 9.3 6.1 17.0 21.0 18.0 5.5 5.1 25.6 29.6 L & T Infotech Neutral 1625 1700 5 86.6 86.2 100.4 30.6 -0.5 16.5 18.9 16.2 4.7 3.9 27.6 26.2 Neutral 747 750 0 44.8 40.0 50.3 53.1 -10.6 25.5 18.7 14.9 3.5 3.1 20.2 21.9 Buy 962 1120 16 56.1 64.2 72.1 27.4 14.5 12.2 15.0 13.3 3.1 2.6 22.5 22.6 NIIT Tech Neutral 1274 1420 11 66.2 76.6 88.7 45.3 15.7 15.8 16.6 14.4 3.3 2.9 21.3 21.6 Persistent Sys Buy 536 750 40 44.0 45.4 56.4 8.9 3.1 24.4 11.8 9.5 1.8 1.6 14.9 17.4 TCS Neutral 2259 2100 -7 83.5 88.5 100.2 26.4 6.1 13.2 25.5 22.5 9.5 9.0 36.7 40.9 Tech Mah Buy 681 770 13 48.2 47.1 55.1 12.8 -2.2 17.0 14.4 12.3 2.7 2.4 19.6 20.9 Neutral 266 270 2 14.8 16.6 18.1 10.1 12.0 9.1 16.1 14.7 3.1 2.9 17.7 20.4 Zensar Tech Buy 216 285 32 14.4 15.8 19.1 40.4 10.0 21.0 13.7 11.3 2.2 1.9 17.2 18.2 Aggregate 14.7 2.0 14.5 21.3 18.6 5.7 5.2 26.6 28.0

9 August 2019 35

Click excel icon for detailed Valuation snapshot valuation guide

CMP TP % Upside EPS (INR) EPS Gr. YoY (%) P/E (x) P/B (x) ROE (%) Company Reco (INR) (INR) Downside FY19 FY20E FY21E FY19 FY20E FY21E FY20E FY21E FY20E FY21E FY20E FY21E Telecom Buy 372 420 13 -8.8 -7.2 -1.9 PL Loss Loss NM NM 2.1 2.1 -4.6 -1.1 Bharti Infratel Neutral 250 290 16 13.6 17.0 16.8 -0.3 24.7 -0.7 14.7 14.8 3.2 3.2 21.7 21.6 Buy 6 12 113 -18.5 -5.5 -5.1 Loss Loss Loss NM NM 0.2 0.3 -24.6 -23.9 Tata Comm Neutral 470 525 12 -2.2 7.0 20.7 PL LP 193.7 66.7 22.7 710.4 22.0 -246 188.0 Aggregate Loss Loss Loss -16 -21.9 1.5 1.6 -9.3 -7.5 Utiltites Coal India Buy 212 310 46 28.3 28.4 30.1 47.9 0.0 6.1 7.5 7.0 4.3 3.8 57.7 53.9 CESC Buy 754 911 21 88.9 91.1 98.9 43.1 2.5 8.5 8.3 7.6 1.0 0.9 12.9 12.7 JSW Energy Neutral 70 75 7 4.2 4.8 5.7 40.2 12.6 18.4 14.7 12.4 0.9 0.9 6.5 7.4 NHPC Neutral 23 27 20 2.2 2.5 2.6 -10.8 15.1 2.5 9.0 8.8 0.7 0.7 8.0 7.9 NTPC Buy 125 170 36 11.9 13.7 15.4 33.3 15.3 12.8 9.1 8.1 1.0 1.0 11.8 12.3 Power Grid Buy 203 242 19 19.2 20.6 22.6 16.0 7.3 10.0 9.9 9.0 1.6 1.5 17.3 17.1 Buy 293 351 20 18.7 21.7 28.3 -4.6 16.3 30.2 13.5 10.3 1.4 1.3 11.2 13.3 Neutral 58 64 11 2.1 4.1 4.8 -60.5 92.3 19.2 14.2 11.9 0.9 0.9 6.4 7.3 Aggregate 30.5 6.9 9.0 8.6 7.9 1.5 1.4 17.2 17.2 Others Brigade Enterpr. Buy 272 316 16 17.5 14.4 13.7 62.0 -17.7 -5.0 18.9 19.9 1.6 1.4 8.6 7.6 BSE Buy 470 650 38 38.1 35.2 43.9 -12.4 -7.4 24.7 13.3 10.7 0.9 0.9 6.5 8.2 Coromandel Intl Buy 364 475 31 25.2 26.4 29.8 6.5 5.0 12.7 13.8 12.2 2.7 2.4 21.3 20.7 Delta Corp Buy 157 304 93 7.2 8.7 10.1 23.8 21.4 16.6 18.1 15.5 2.0 1.8 11.5 12.0 Indian Hotels Buy 141 178 26 2.4 3.0 4.1 257.4 25.9 38.8 47.5 34.2 3.6 3.3 7.9 10.2 Interglobe Neutral 1519 1410 -7 4.1 88.0 100.7 -93.0 2,070 14 17 15.1 7.8 7.2 46.8 49.4 Neutral 2175 2000 -8 23.0 31.9 39.0 54.2 38.8 22.3 68.3 55.8 10.1 8.8 15.8 17.0 Gateway Distr. Buy 101 151 49 12.9 7.2 9.5 -7.2 -44.5 31.7 14.1 10.7 0.8 0.8 5.8 7.3 Buy 439 522 19 12.5 12.5 17.3 10.9 -0.2 38.0 35.1 25.5 4.7 4.2 14.0 17.6 Kaveri Seed Buy 446 629 41 34.4 38.7 41.9 7.7 12.3 8.4 11.5 10.6 2.5 2.2 22.9 22.2 Lemon Tree Hotel Buy 53 75 42 0.7 0.8 1.9 271.9 15.8 140.6 67.5 28.1 3.0 2.7 5.5 10.3 MCX Buy 816 990 21 28.7 32.0 39.5 35.2 11.5 23.7 25.5 20.7 3.0 2.8 11.9 13.8 Navneet Buy 103 135 31 6.7 8.2 9.7 22.5 22.2 18.5 12.6 10.7 2.5 2.1 21.6 21.6 Education Buy 552 650 18 22.5 29.2 32.2 78.1 29.9 10.3 18.9 17.1 2.2 2.0 12.5 12.3 Phoenix Mills Buy 645 750 16 25.0 27.0 31.1 57.8 8.1 15.2 23.8 20.7 2.6 2.3 11.3 11.8 Quess Corp Neutral 462 500 8 17.5 22.1 32.7 -19.8 26.5 47.9 20.9 14.1 1.7 1.5 11.2 14.6 PI Inds. Buy 1107 1265 14 29.7 36.8 46.8 11.6 23.8 27.0 30.1 23.7 5.7 4.7 20.4 21.9 Piramal Enterp. Buy 1729 2400 39 73.7 102.9 127.3 -5.2 39.5 23.7 16.8 13.6 1.3 1.2 7.9 9.2 SRF Buy 2902 3500 21 113.7 150.9 195.9 60.0 32.7 29.8 19.2 14.8 3.5 2.9 19.6 21.2 S H Kelkar Buy 113 169 49 6.1 7.5 9.4 -13.7 22.7 25.1 15.1 12.1 1.8 1.6 12.2 14.3 Buy 565 703 24 42.9 44.2 52.3 -10.8 3.0 18.3 12.8 10.8 1.1 1.0 8.9 9.8 Team Lease Serv. Buy 2676 3350 25 57.2 71.8 108.5 32.9 25.5 51.2 37.3 24.7 6.9 5.4 20.4 24.6 Trident Buy 57 69 22 8.4 9.5 9.9 71.2 13.6 4.3 6.0 5.7 0.9 0.8 15.3 14.7 UPL Neutral 533 630 18 28.8 39.8 45.2 -1.3 38.4 13.4 13.4 11.8 2.5 2.2 19.7 19.6

9 August 2019 36

MOSL Universe stock performance

Company 1 Day (%) 1M (%) 12M (%) Company 1 Day (%) 1M (%) 12M (%) Automobiles BHEL 1.1 -13.6 -20.8 Amara Raja Batt. 0.1 1.5 -21.0 Blue Star 6.2 -1.7 8.4 Ashok Leyland 3.9 -24.9 -49.4 CG Cons. Elec. -0.2 -1.7 -13.4 Bajaj Auto 4.0 -2.7 1.8 Cummins -7.7 -20.0 -11.3 Bharat Forge 2.8 -7.0 -34.7 Engineers India 1.0 -9.2 -26.5 Bosch 2.9 -9.9 -24.8 GE T&D 7.2 -33.6 -45.9 CEAT 2.5 -6.0 -39.1 Havells 1.9 -12.1 -3.6 2.2 -11.8 -38.9 K E C Intl -1.0 -10.1 -6.2 Endurance Tech. -20.0 -26.9 -49.5 L&T 0.0 -8.7 4.8 Escorts 4.7 -7.5 -45.0 Siemens 4.4 -7.9 13.2 Exide Inds. 1.5 -9.5 -36.8 Solar Ind 2.1 -4.0 -12.5 Hero Motocorp 3.3 8.7 -21.5 Thermax 4.1 7.1 -4.4 M & M 4.1 -15.1 -41.9 Va Tech Wab. 3.3 -7.4 -26.2 Mahindra CIE -1.0 -21.2 -32.2 Voltas -1.3 -0.9 0.7 Maruti Suzuki 2.1 -2.2 -35.9 Cement Motherson Sumi 0.8 -16.8 -51.7 Ambuja Cem. 0.7 0.5 -10.4 Tata Motors 5.6 -19.9 -51.4 ACC -0.5 3.3 0.8 TVS Motor Co. 3.0 -7.5 -28.6 Birla Corp. 1.1 2.3 -24.9 Banks - Private Dalmia Bhar. 0.0 2.3 AU Small Fin. Bank 0.7 -1.7 2.7 Grasim Inds. -0.1 -16.9 -27.1 Axis Bank 0.0 -15.7 10.7 India Cem -0.6 -9.0 -25.8 DCB Bank 2.4 -13.3 17.3 J K Cements 0.0 -1.2 24.6 Equitas Holdings 0.9 -9.8 -27.2 JK Lakshmi Ce -0.7 -0.6 2.7 Federal Bank 0.6 -16.9 -1.0 Ramco Cem -0.5 -3.4 11.0 HDFC Bank 2.3 -7.2 4.6 Orient Cem 1.0 -10.0 -23.9 ICICI Bank 1.5 -2.7 30.3 Prism Johnson -1.0 -10.9 -20.5 IndusInd Bank -0.8 -4.1 -29.3 Sanghi Inds. 0.3 -9.1 -35.7 Kotak Mah. Bank 1.9 1.9 16.6 Shree Cem -0.2 -3.3 16.9 RBL Bank 1.2 -41.4 -35.7 Ultratech -2.6 -3.6 -0.2 South Ind.Bank -0.6 -9.9 -35.3 Consumer Banks - PSU Asian Paints 0.5 16.9 9.9 BOB 2.5 -19.6 -32.6 Britannia 1.5 -7.3 -18.1 BOI 3.1 -18.6 -26.8 Colgate 0.8 3.1 5.4 Canara 1.0 -15.5 -21.0 Dabur 1.2 8.6 -2.1 Indian Bk -2.2 -19.3 -45.1 Emami 1.4 3.5 -45.7 PNB 3.9 -8.6 -17.3 Future Consumer 0.4 -29.4 -39.6 SBI 1.5 -17.2 -4.6 Godrej Cons. 1.3 -1.5 -26.0 Union Bk 1.0 -16.7 -24.4 GSK Cons. 1.2 0.9 14.6 NBFCs HUL 1.4 2.8 2.8 Aditya Birla Cap 3.2 -1.2 -41.1 ITC 1.6 -7.1 -14.2 Bajaj Fin. 2.1 -2.3 18.7 Jyothy Lab 1.5 -3.3 -28.4 Cholaman.Inv.&Fn -0.7 -1.8 -6.8 Marico 1.2 3.3 6.0 HDFC 0.2 -3.5 10.1 Nestle 0.6 0.4 10.0 HDFC Life Insur. 0.8 12.9 11.8 Page Inds 0.5 -7.3 -38.9 Indiabulls Hsg -0.3 -35.5 -67.6 Parag Milk -3.2 -31.8 -44.2 Indostar Capital 0.0 -14.4 -39.7 Pidilite Ind. 3.1 10.6 18.6 L&T Fin.Holdings 3.4 -17.9 -43.0 P&G Hygiene -1.4 -5.6 -2.9 LIC Hsg Fin -0.9 -11.2 -12.6 United Brew -1.8 -0.6 17.5 M&M Fin. 1.8 -22.6 -39.6 United Spirits -0.4 3.1 -1.2 Muthoot Fin 1.4 5.6 51.6 Healthcare MAS Financial Serv. -1.5 2.7 4.5 Alembic Phar 2.1 -1.5 -12.4 ICICI Pru Life -1.2 3.0 -4.7 Alkem Lab 0.5 -3.0 -19.6 PNB Housing 0.6 -10.2 -45.4 Ajanta Pharma -1.0 3.5 -19.3 Repco Home 1.5 -18.9 -49.9 Aurobindo 7.7 1.9 -2.2 Shriram City Union -1.0 -4.7 -27.0 Biocon 2.7 -3.9 -18.4 Shriram Trans. 0.5 -2.9 -29.7 Cadila 3.4 4.5 -37.5 Capital Goods Cipla -3.0 -6.6 -20.5 ABB 0.4 -6.0 15.2 Divis Lab 1.1 4.8 46.3 Bharat Elec. 2.3 -4.1 -19.8 Dr Reddy’s 0.7 -0.9 14.5

9 August 2019 37 MOSL Universe stock performance

Company 1 Day (%) 1M (%) 12M (%) Company 1 Day (%) 1M (%) 12M (%) Glenmark 2.9 -2.4 -27.4 Future Retail 2.5 -10.2 -19.7 Granules 4.1 2.3 -6.1 Jubilant Food -0.4 -7.3 -23.0 GSK Pharma -0.4 2.2 -26.6 Spencer's Retail -1.6 -28.4 IPCA Labs 1.2 -0.1 18.5 Shoppers St. 2.5 -21.0 -31.1 Jubilant Life 2.0 -9.8 -41.4 Titan Co. 1.5 -16.6 11.7 Laurus Labs 1.6 -3.3 -25.5 Trent -1.0 1.5 21.3 Lupin -2.6 3.7 -7.8 V-Mart Retail -0.4 -14.1 -32.5 Sanofi India 1.1 4.0 -1.9 Technology Shilpa Medicare -0.4 3.0 -10.4 Cyient -0.9 -15.8 -33.4 Strides Pharma 1.9 13.9 2.2 HCL Tech. 6.4 4.8 12.8 Sun Pharma 1.1 16.1 -25.5 Hexaware 2.7 2.5 -23.0 Torrent Pharma 0.7 12.0 0.0 Infosys 1.7 10.0 15.8 Infrastructure L&T Infotech 1.5 -0.5 -5.2 Ashoka Buildcon -2.2 -6.1 -15.2 Mindtree 0.2 -2.8 -22.0 IRB Infra.Devl. -0.2 3.5 -51.4 Mphasis -0.3 -0.5 -16.4 KNR Construct. 0.1 -7.2 12.1 NIIT Tech 2.8 -3.0 -1.4 Sadbhav Engg. -1.4 -36.0 -53.0 Persistent Sys 1.3 -12.6 -36.6 Logistics TCS 2.0 3.8 14.4 Allcargo Logist. -1.4 -3.8 -21.1 Tech Mah 0.9 0.0 4.1 Concor -0.2 -12.8 -6.4 Wipro 1.3 -0.4 27.4 Gateway Distr. -0.6 -9.0 -25.8 Zensar Tech -0.4 -14.8 -5.5 Media Telecom D B Corp 1.6 -16.3 -36.6 Bharti Airtel 1.8 4.4 5.4 Ent.Network -1.1 -7.1 -47.1 Bharti Infra. 1.9 -4.7 -14.0 Jagran Prak. 1.6 -34.5 -41.1 Idea Cellular 5.6 -51.0 -83.1 Music Broadcast 0.6 -30.0 -37.9 Tata Comm 1.0 3.5 -19.2 PVR 2.0 -7.3 20.5 Utiltites Sun TV 1.9 -4.2 -44.8 Coal India 2.8 -8.9 -23.3 Zee Ent. 1.3 -0.6 -37.1 CESC 1.3 -1.9 4.3 Metals JSW Energy -0.1 0.0 4.1 Hindalco 2.6 -8.4 -18.0 NHPC Ltd 1.1 -5.6 -8.0 Hind. Zinc 1.9 -7.4 -26.4 NTPC 1.4 -3.8 -5.4 JSPL -2.2 -25.9 -53.8 Power Grid 2.1 0.7 7.0 JSW Steel 4.5 -15.3 -35.2 Tata Power -2.1 -15.4 -16.8 Nalco 1.5 -8.4 -35.1 Torrent Power -0.6 -0.4 27.3 NMDC 0.4 -4.6 -9.9 Others SAIL -0.6 -16.3 -51.0 Brigade Enterpr. -0.2 0.6 42.6 Vedanta 1.4 -14.4 -38.4 BSE 0.2 -21.5 -40.8 Tata Steel -3.8 -21.5 -36.4 Coromandel Intl 1.8 -10.8 -16.3 Oil & Gas Delta Corp 4.7 -6.8 -41.1 Aegis Logistics -0.1 -8.9 -22.2 Godrej Agrovet 2.2 -11.0 -32.3 BPCL 3.6 -4.9 -11.5 Indian Hotels 1.1 -4.7 11.5 Castrol India -1.2 -6.4 -26.1 Interglobe 1.3 -3.3 47.8 GAIL 0.0 -19.3 -35.3 Info Edge 0.9 -3.1 47.6 Gujarat Gas 1.3 14.8 19.7 Kaveri Seed 4.7 -3.7 -24.9 Gujarat St. Pet. 1.0 20.0 8.2 Lemon Tree Hotel -7.1 -19.7 -36.0 HPCL 2.4 -11.6 -11.3 MCX 0.7 -0.1 -6.6 IOC 1.4 -9.2 -21.1 Navneet Educat. 0.8 -3.0 -11.9 IGL 0.5 5.0 6.9 Oberoi Realty 0.4 -0.3 15.0 Mahanagar Gas 1.5 3.6 -13.7 Phoenix Mills 1.0 5.0 -0.1 MRPL -0.9 -11.0 -34.8 PI Inds. 2.3 -1.6 42.9 Oil India -0.4 -9.8 -30.1 Piramal Enterp. 3.3 -9.9 -39.8 ONGC 0.3 -14.1 -23.8 Quess Corp 0.3 8.9 -54.8 PLNG 1.7 -2.6 5.3 SRF 0.7 0.7 56.6 Reliance Ind. 3.9 -8.0 -5.4 S H Kelkar 1.6 -12.2 -42.6 Retail Tata Chemicals 0.1 -4.6 -15.9 Aditya Bir. Fas. 2.4 -1.6 15.5 Team Lease Serv. -0.4 -10.9 7.5 Avenue Super. -0.2 3.0 -12.2 Trident 1.3 -5.5 -10.8 Future Lifestyle 0.9 -9.8 -2.9 UPL 0.3 -19.6 23.6

9 August 2019 38 THEMATIC/STRATEGY RESEARCH GALLERY REPORT GALLERY RECENT INITIATING COVERAGE REPORTS DIFFERENTIATED PRODUCT GALLERY Explanation of Investment Rating Investment Rating Expected return (over 12-month) BUY >=15% SELL < - 10% NEUTRAL > - 10 % to 15% UNDER REVIEW Rating may undergo a change NOT RATED We have forward looking estimates for the stock but we refrain from assigning recommendation *In case the recommendation given by the Research Analyst is inconsistent with the investment rating legend for a continuous period of 30 days, the Research Analyst shall within following 30 days take appropriate measures to make the recommendation consistent with the investment rating legend. Disclosures: The following Disclosures are being made in compliance with the SEBI Research Analyst Regulations 2014 (herein after referred to as the Regulations).

Motilal Oswal Financial Services Ltd. (MOFSL) is a SEBI Registered Research Analyst having registration no. INH000000412. MOFSL, the Research Entity (RE) as defined in the Regulations, is engaged in the business of providing Stock broking services, Investment Advisory Services, Depository participant services & distribution of various financial products. MOFSL is a subsidiary company of Passionate Investment Management Pvt. Ltd.. (PIMPL). MOFSL is a listed public company, the details in respect of which are available on www.motilaloswal.com. MOFSL (erstwhile Motilal Oswal Securities Limited - MOSL) is registered with the Securities & Exchange Board of India (SEBI) and is a registered Trading Member with National Stock Exchange of India Ltd. (NSE) and Limited (BSE), Multi Commodity Exchange of India Limited (MCX) and National Commodity & Derivatives Exchange Limited (NCDEX) for its stock broking activities & is Depository participant with Central Depository Services Limited (CDSL) National Securities Depository Limited (NSDL),NERL, COMRIS and CCRL and is member of Association of Mutual Funds of India (AMFI) for distribution of financial products and Insurance Regulatory & Development Authority of India (IRDA) as Corporate Agent for insurance products. Details of associate entities of Motilal Oswal Financial Services Limited are available on the website at http://onlinereports.motilaloswal.com/Dormant/documents/Associate%20Details.pdf

Details of pending Enquiry Proceedings of Motilal Oswal Financial Services Limited are available on the website at https://galaxy.motilaloswal.com/ResearchAnalyst/PublishViewLitigation.aspx

MOFSL, it’s associates, Research Analyst or their relative may have any financial interest in the subject company. MOFSL and/or its associates and/or Research Analyst may have actual/beneficial ownership of 1% or more securities in the subject company in the past 12 months. MOFSL and its associate company(ies), their directors and Research Analyst and their relatives may; (a) from time to time, have a long or short position in, act as principal in, and buy or sell the securities or derivatives thereof of companies mentioned herein. (b) be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies) or may have any other potential conflict of interests with respect to any recommendation and other related information and opinions.; however the same shall have no bearing whatsoever on the specific recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the associates of MOFSL even though there might exist an inherent conflict of interest in some of the stocks mentioned in the research report. Research Analyst may have served as director/officer, etc. in the subject company in the past 12 months. MOFSL and/or its associates may have received any compensation from the subject company in the past 12 months.

In the past 12 months , MOFSL or any of its associates may have: a) managed or co-managed public offering of securities from subject company of this research report, b) received compensation for investment banking or merchant banking or brokerage services from subject company of this research report, c) received compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company of this research report. d) Subject Company may have been a client of MOFSL or its associates in the past 12 months.

MOFSL and it’s associates have not received any compensation or other benefits from the subject company or third party in connection with the research report. To enhance transparency, MOFSL has incorporated a Disclosure of Interest Statement in this document. This should, however, not be treated as endorsement of the views expressed in the report. MOFSL and / or its affiliates do and seek to do business including investment banking with companies covered in its research reports. As a result, the recipients of this report should be aware that MOFSL may have a potential conflict of interest that may affect the objectivity of this report. Compensation of Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions. Above disclosures include beneficial holdings lying in demat account of MOFSL which are opened for proprietary investments only. While calculating beneficial holdings, It does not consider demat accounts which are opened in name of MOFSL for other purposes (i.e holding client securities, collaterals, error trades etc.). MOFSL also earns DP income from clients which are not considered in above disclosures. Above disclosures include beneficial holdings lying in demat account of MOFSL which are opened for proprietary investments only. While calculating beneficial holdings, It does not consider demat accounts which are opened in name of MOFSL for other purposes (i.e holding client securities, collaterals, error trades etc.). MOFSL also earns DP income from clients which are not considered in above disclosures.

Terms & Conditions: This report has been prepared by MOFSL and is meant for sole use by the recipient and not for circulation. The report and information contained herein is strictly confidential and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of MOFSL. The report is based on the facts, figures and information that are considered true, correct, reliable and accurate. The intent of this report is not recommendatory in nature. The information is obtained from publicly available media or other sources believed to be reliable. Such information has not been independently verified and no guaranty, representation of warranty, express or implied, is made as to its accuracy, completeness or correctness. All such information and opinions are subject to change without notice. The report is prepared solely for informational purpose and does not constitute an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments for the clients. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. MOFSL will not treat recipients as customers by virtue of their receiving this report. Analyst Certification The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the research analyst(s) was, is, or will be directly or indirectly related to the specific recommendations and views expressed by research analyst(s) in this report.

Disclosure of Interest Statement Companies where there is interest Analyst ownership of the stock No A graph of daily closing prices of securities is available at www.nseindia.com, www.bseindia.com. Research Analyst views on Subject Company may vary based on Fundamental research and Technical Research. Proprietary trading desk of MOFSL or its associates maintains arm’s length distance with Research Team as all the activities are segregated from MOFSL research activity and therefore it can have an independent view with regards to subject company for which Research Team have expressed their views.

Regional Disclosures (outside India) This report is not directed or intended for distribution to or use by any person or entity resident in a state, country or any jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject MOFSL & its group companies to registration or licensing requirements within such jurisdictions.

For Hong Kong: This report is distributed in Hong Kong by Motilal Oswal capital Markets (Hong Kong) Private Limited, a licensed corporation (CE AYY-301) licensed and regulated by the Hong Kong Securities and Futures Commission (SFC) pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) “SFO”. As per SEBI (Research Analyst Regulations) 2014 Motilal Oswal Financial Services Limited(SEBI Reg No. INH000000412) has an agreement with Motilal Oswal capital Markets (Hong Kong) Private Limited for distribution of research report in Hong Kong. This report is intended for distribution only to “Professional Investors” as defined in Part I of Schedule 1 to SFO. Any investment or investment activity to which this document relates is only available to professional investor and will be engaged only with professional investors.” Nothing here is an offer or solicitation of these securities, products and services in any jurisdiction where their offer or sale is not qualified or exempt from registration. The Indian Analyst(s) who compile this report is/are not located in Hong Kong & are not conducting Research Analysis in Hong Kong.

For U.S: Motilal Oswal Financial Services Limited (MOFSL) is not a registered broker - dealer under the U.S. Securities Exchange Act of 1934, as amended (the"1934 act") and under applicable state laws in the United States. In addition MOFSL is not a registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers Act" and together with the 1934 Act, the "Acts), and under applicable state laws in the United States. Accordingly, in the absence of specific exemption under the Acts, any brokerage and investment services provided by MOFSL, including the products and services described herein are not available to or intended for U.S. persons. This report is intended for distribution only to "Major Institutional Investors" as defined by Rule 15a- 6(b)(4) of the Exchange Act and interpretations thereof by SEC (henceforth referred to as "major institutional investors"). This document must not be acted on or relied on by persons who are not major institutional investors. Any investment or investment activity to which this document relates is only available to major institutional investors and will be engaged in only with major institutional investors. In reliance on the exemption from registration provided by Rule 15a-6 of the U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act") and interpretations thereof by the U.S. Securities and Exchange Commission ("SEC") in order to conduct business with Institutional Investors based in the U.S., MOFSL has entered into a chaperoning agreement with a U.S. registered broker-dealer, Motilal Oswal Securities International Private Limited. ("MOSIPL"). Any business interaction pursuant to this report will have to be executed within the provisions of this chaperoning agreement.

The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S. registered broker-dealer, MOSIPL, and therefore, may not be subject to NASD rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public appearances and trading securities held by a research analyst account.

For Singapore: In Singapore, this report is being distributed by Motilal Oswal Capital Markets Singapore Pte Ltd (“MOCMSPL”) (Co.Reg. NO. 201129401Z) which is a holder of a capital markets services license and an exempt financial adviser in Singapore, as per the approved agreement under Paragraph 9 of Third Schedule of Securities and Futures Act (CAP 289) and Paragraph 11 of First Schedule of Financial Advisors Act (CAP 110) provided to MOCMSPL by Monetary Authority of Singapore. Persons in Singapore should contact MOCMSPL in respect of any matter arising from, or in connection with this report/publication/communication. This report is distributed solely to persons who qualify as “Institutional Investors”, of which some of whom may consist of "accredited" institutional investors as defined in section 4A(1) of the Securities and Futures Act, Chapter 289 of Singapore (“the SFA”). Accordingly, if a Singapore person is not or ceases to be such an institutional investor, such Singapore Person must immediately discontinue any use of this Report and inform MOCMSPL.

Disclaimer: The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent. This report and information herein is solely for informational purpose and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances. The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. 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. Certain transactions -including those involving futures, options, another derivative products as well as non- investment grade securities - involve substantial risk and are not suitable for all investors. No representation or warranty, express or implied, is made as to the accuracy, completeness or fairness of the information and opinions contained in this document. The Disclosures of Interest Statement incorporated in this document is provided solely to enhance the transparency and should not be treated as endorsement of the views expressed in the report. This information is subject to change without any prior notice. The Company reserves the right to make modifications and alternations to this statement as may be required from time to time without any prior approval. MOFSL, its associates, their directors and the employees may from time to time, effect or have effected an own account transaction in, or deal as principal or agent in or for the securities mentioned in this document. They may perform or seek to perform investment banking or other services for, or solicit investment banking or other business from, any company referred to in this report. Each of these entities functions as a separate, distinct and independent of each other. The recipient should take this into account before interpreting the document. This report has been prepared on the basis of information that is already available in publicly accessible media or developed through analysis of MOFSL. The views expressed are those of the analyst, and the Company may or may not subscribe to all the views expressed therein. This document is being supplied to you solely for your information and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or published, copied, in whole or in part, for any purpose. 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 MOFSL 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. Neither the Firm, not its directors, employees, agents or representatives shall be liable for any damages whether direct or indirect, incidental, special or consequential including lost revenue or lost profits that may arise from or in connection with the use of the information. The person accessing this information specifically agrees to exempt MOFSL or any of its affiliates or employees from, any and all responsibility/liability arising from such misuse and agrees not to hold MOFSL or any of its affiliates or employees responsible for any such misuse and further agrees to hold MOFSL or any of its affiliates or employees free and harmless from all losses, costs, damages, expenses that may be suffered by the person accessing this information due to any errors and delays.

Registered Office Address: Motilal Oswal Tower, Rahimtullah Sayani Road, Opposite Parel ST Depot, Prabhadevi, -400025; Tel No.: 022 71934200/ 022-71934263; Website www.motilaloswal.com. CIN No.: L67190MH2005PLC153397.Correspondence Office Address: Palm Spring Centre, 2nd Floor, Palm Court Complex, New Link Road, Malad(West), Mumbai- 400 064. Tel No: 022 7188 1000. Registration Nos.: Motilal Oswal Financial Services Limited (MOFSL)*: INZ000158836(BSE/NSE/MCX/NCDEX); CDSL and NSDL: IN-DP-16-2015; Research Analyst: INH000000412. AMFI: ARN - 146822; Investment Adviser: INA000007100; Insurance Corporate Agent: CA0579 ;PMS:INP000006712. Motilal Oswal Asset Management Company Ltd. (MOAMC): PMS (Registration No.: INP000000670); PMS and Mutual Funds are offered through MOAMC which is group company of MOFSL. Motilal Oswal Wealth Management Ltd. (MOWML): PMS (Registration No.: INP000004409) is offered through MOWML, which is a group company of MOFSL. Motilal Oswal Financial Services Limited is a distributor of Mutual Funds, PMS, Fixed Deposit, Bond, NCDs,Insurance Products and IPOs.Real Estate is offered through Motilal Oswal Real Estate Investment Advisors II Pvt. Ltd. which is a group company of MOFSL. Private Equity is offered through Motilal Oswal Private Equity Investment Advisors Pvt. Ltd which is a group company of MOFSL. Research & Advisory services is backed by proper research. Please read the Risk Disclosure Document prescribed by the Stock Exchanges carefully before investing. There is no assurance or guarantee of the returns. Investment in securities market is subject to market risk, read all the related documents carefully before investing. Details of Compliance Officer: Name: Neeraj Agarwal, Email ID: [email protected], Contact No.:022-71881085.

* MOSL has been amalgamated with Motilal Oswal Financial Services Limited (MOFSL) w.e.f August 21, 2018 pursuant to order dated July 30, 2018 issued by Hon'ble National Company Law Tribunal, Mumbai Bench.

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