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1QFY18 Results Preview
Exhibit 1: Material revisions to estimates and valuations ahead of the earnings season (more than 5%)
Change in EPS estimates
New EPS estimates (%) Valuations
Company (%) Stance
FY18E FY19E FY18E FY19E New Old Change (%)
Engineers India 5.9 7.7 (18) (12) 125 120 4 SELL
BHEL 6.4 5.6 (16) (40) 116 128 (9.3) SELL
Revenue decline due to incremental competition in US base business and GST-related de-stocking
in the Indian business
Healthcare Unchanged
EBITDA margins to decline by 285bps YoY largely due to pricing pressure in US and higher R&D
spends
Slowing advertising revenue momentum for broadcasters
Media Consolidation to result in scale benefits for DTH Unchanged
Recovering advertising revenue for print media companies
With de-stocking behind us, coal offtake to witness 7% CAGR in FY17-20E vs 2% in FY17
Metals/Mining Unchanged
Recovery in e-auction realisations and coking coal price hike to drive 5% realisation growth
Stress in loan growth and asset quality to persist, but a full-fledged recovery remains elusive
NBFCs Upwards
(earlier expected to happen over FY18-19).
OMCs to be negatively impacted by inventory losses which would result in lower GRM QoQ
GAIL would witness a healthy quarter due to benefits of better LPG realisations and lower gas
Oil and Gas Unchanged
prices
CGD companies will benefit from rupee-depreciation-led gross margin expansion
In a seasonally strong quarter, expect muted growth given macro uncertainties in the USA
Technology Downwards
QoQ compression in margins should be higher than expected due to INR appreciation
Recovery in incumbents revenue as Jios discounts reduce in 2HFY18
Telecom Unchanged
Delayed consolidation among towercos and tenancy exits due to telco consolidation
Marginal uptick in power demand
Utilities Announcement of new FSAs Unchanged
Dearth of new PPAs
Source: Ambit Capital research
Bharat Electronics
(BHE IN) Best-in-class DPSU in a high-growth segment with strong supply chain and manufacturing footprint
12 EVM orders likely to result in 20%+ revenue growth, well ahead of mid-teen Street expectations
CMP: Rs170 Valuations of 22x FY18E EPS are punchy but should sustain
TP: Rs190
Petronet LNG Expect ~8% volume growth rate at Dahej terminal over FY17-20; take or pay improves visibility of
(PLNG IN) growth
20 Kochi terminal utilisation to increase to ~40% from FY20 aided by completion of Kochi-Mangalore
CMP: Rs217 pipeline
TP: Rs260 Valuation of 13x FY19 EPS is attractive for RoE of ~25% and FCF yield crossing 6%
Idea Cellular
(IDEA IN) 15% YoY revenue growth in 2HFY18E due to reduced discounts from Jio
27 Calibrated withdrawal of weak operators from several circles resulting in 14% FY19E subscriber growth
CMP: Rs83 Valuation of 7.8x FY19E EV/EBITDA doesnt factor in synergy benefits from merger with Vodafone
TP: Rs105
Torrent Pharma Not a US generic story; early focus on branded generics provides consistent 15% revenue/profit growth
(TRP IN) Improvement in execution (MR productivity) in the Indian business would result in higher-than-IPM
22 growth
CMP: Rs1,296 Approval cycle in Brazil to improve aiding >15% revenue growth
TP: Rs1,523 As Dahej capacity utilisation improves, expect operating leverage to lead to margin expansion
Motilal Oswal
(MOFS IN) MOFSs brokerage, AMC and HFC businesses are firing all cylinders given cyclical/structural tailwinds
13 RoE is improving structurally due to capital allocation to housing finance and asset management
CMP: Rs1,100 Current valuation at 20x FY19 PE is reasonable in light of the 49% EPS CAGR
TP: Rs1,250
JSW Energy
(JSW IN) Vijayanagar is highly likely to sign a PPA with Karnataka in FY18
34 Fuel cost should reduce by 60paise over FY17-19 led by domestic coal blending.
CMP: Rs64 JSWE multiple (1x FY18 P/B) should re-rate to 1.2x (NTPCs multiple) once Vijayanagar signs a PPA
TP: Rs86
Trent
(TRENT IN) 10% SSG in Westside along with 20-store openings in FY18E
13 Reduction in losses in Star over FY18-19 to Rs602mn
CMP: Rs249 Improvement in Zaras margins over FY18/19
TP: Rs281
DB Corp
(DBCL IN) Market-share gains and improving ad revenue growth (9% over FY18-19E vs 3% over FY15-17)
28 Increased shareholder payout to be Rs3.4bn in FY19E, up from Rs2bn in FY16
CMP: Rs383 Attractive valuation (15x FY19E P/E) based on 24% FY19E RoCE and 13% FY17-19E EPS CAGR
TP: Rs490
PVR
(PVRL IN) Visibility on 40-50 ready-to-open screens in FY18
12 Implementation of GST from 2QFY18
CMP: Rs 1,412 Improving share of ancillary revenues by 400bps over FY17-20E
TP: Rs1,594
Greaves Cotton
16% revenue CAGR over FY17-19 led by growth in after-market, auto engines, agri-equipment
(GRV IN) 150bps margin improvement over FY17-19 led by higher share of after-market business
19
CMP: Rs161 Valuation of 16.7x FY18E P/E is attractive given FY18E RoE/FCF yield of 24%/3.8%; 20% EPS CAGR
over FY17-19E.
TP: Rs194
Bajaj Electricals
With the stabilisation of TOC, we expect consumer revenue to grow at 9% over FY17-19 vs 11%
(BJE IN) decline in FY17
18
CMP: Rs330 TOC stabilising to aid 130bps margin expansion over FY17-FY19
The profitability in E&P business should sustain given improved processes
TP: Rs384
Orient Cement Volume growth in AP/Telangana to drive 15% volume CAGR over the next two years
(ORCMNT IN) Pricing recovery in Maharashtra and AP/Telangana to drive increase in EBITDA/tonne from
23 ~Rs350/tonne in FY17 to ~Rs700/tonne in FY18E
CMP: Rs154 At 10x FY18 EV/EBITDA, the stock trades at the lower end of the mid-cap peer range of 9-14x due to
TP: Rs190 the overhang of the Jaypee acquisition
GAIL
Fate of US volumes is still uncertain as we believe current spot LNG prices are well below landed costs
(GAIL IN) for the US contract volumes. This is not built into our fair value as ascertaining the exact quantum of
2
CMP Rs359 losses is difficult but every US$1/mmbtu loss implies a 20% loss in EBITDA
Valuation of 2x P/B for RoE of 10-11% factors in all the future positives
TP Rs353
Interglobe Aviation
Expect flattish yields coupled with lower utilisations to result in 8%/11% decline in EBIT/PAT respectively
(INDIGO IN) in FY18 vs FY17
30
CMP: Rs1,245 17-19% domestic capacity CAGR to keep unitary profitability under pressure over the next 2-3 years
The stock trades at FY18 EV/EBITDAR of 11x, higher than European/American peer average of 6-7x
TP: Rs870
Cipla
Ciplas concentrated bets on inhalers have not materialised due to gaps in R&D
(CIPLA IN) Late in developing complex generics and establishing front-end presence in key markets
25
CMP: Rs545 Lack of investments in long-term growth drivers and issues with top management churn
FY19E PE at 19.5x as compared to 17-18x of peers is unjustified due to inferior return ratios
TP: Rs410
Punjab National Bank
Very high quantum of bad loans at 19% would keep credit costs high.
(PNB IN) Poor capital position (tier-1 of 8.8%) limits growth opportunity to offset high credit costs.
25
CMP: Rs151 Trading at a valuation of 0.8x FY18E BVPS, along with ~5.7% RoE for FY17-18E, the stock seems to be
expensive.
TP: Rs113
M&M Finance
Improvement in growth and asset quality will be muted as full-fledged rural economy remains elusive.
(MMFS IN) 26 MMFSs RoE will be restricted to 16% in this up-cycle versus the peak of 22% in the previous up-cycles.
CMP: Rs363 Earnings disappointments (18% over FY18-19) will test premium cross-cycle valuations at ~2.7x one-
year forward P/B.
TP: Rs268
Crompton Consumer
(Crompton IN) Most exposed to EESLs pricing disruption in fans as ~60% of EBIT comes from fans
39 Diversification into small appliances and retail lighting not an easy ride
CMP: Rs225 Trading at 43x/39x FY18/FY19 P/E in line with Havells despite latter being a diversified franchise
TP: Rs138
Bata India
Low volume growth poses risk to revenue growth of 11% in FY18E
(BATA IN) Higher marketing efforts to drive higher A&P spends (by 25-50bps); higher K-scheme commissions
35
CMP: Rs572 Reversion to store expansions despite threat of e-commerce will continue to inflate fixed costs (35% of
sales); valuations remain rich at 32x FY19E EPS given the same
TP: Rs370
Jubilant FoodWorks
FY18E SSG to be capped at 5% given higher competition; gross margin to dip for higher cheese cost
(JUBI IN) Delayed ramp-up of new stores from 2.5 years to 3 years given sub-optimal operating metrics
26
CMP: Rs1,100 SSG no longer a key earnings variable as pricing correction affects gross margins; stock remains rich at
54x FY19E EPS
TP: Rs809
Rallis
Continuing weak competitive positioning given lack of a differentiated product portfolio/execution
(RALI IN) Streets optimism on Metahelix margins (inherent nature of portfolio) and potential success in agri CSM
20
CMP: Rs224 business (competing generics business/long gestation) may not play out
Continuing weak competitive positioning given lack of a differentiated product portfolio/execution
TP: Rs180
FY18E EPS
(Rs) Ambit Consensus
Ashok Leyland 4.93 4.91
Bajaj Auto 149 146
Hero MotoCorp 184 190
Maruti Suzuki 253 278
M&M 70.6 67.2
Tata Motors 27.3 37.3
Eicher Motor 772 815
TVS Motor 16.7 15.5
Amara Raja Batteries 33.3 33.4
Exide Industries 9.46 9.33
Mahindra CIE 10.5 12.0
Balkrishna Ind. 80.6 86.0
Endurance Tech. 30.8 29.7
Suprajit Engg 10.2 10.8
Source: Ambit Capital research
Ashok Leyland
YoY revenue growth should be impacted by MHCV volume decline of 17%
Sales (Rsmn) 38,710 42,588 66,179 -9% -42% offset by price hikes. Revenues should decline sharply on a QoQ basis due
to 48% decline in MHCV volumes (seasonal factors and weak demand).
EBITDA (Rsmn) 3,471 4,763 7,299 -27% -52% YoY and QoQ margin decline due to higher material costs and lower
EBITDA margin (%) 9.0% 11.2% 11.0% (222) (206) volumes.
PBT (Rsmn) 2,021 3,658 5,885 -45% -66% Net earnings decline faster than EBITDA due to fixed nature of
depreciation/interest expenses. 4QFY17 tax expense was lower due to tax
PAT (Rsmn) 1,435 2,411 8,041 -40% -82% benefit from Hinduja Foundries merger.
Bajaj Auto
YoY revenue decline led by 11% decline in volumes, offset by price hikes.
Sales 54,239 57,948 47,950 -6% 13%
QoQ revenue growth led largely by volume growth.
Hero MotoCorp
YoY revenue growth led by 6% growth in volumes and price hikes. QoQ
Sales 80,618 73,989 69,152 9% 17%
revenue growth led by 14% volume growth
EBITDA (Rsmn) 12,965 12,301 9,576 5% 35% YoY margin decline due to higher material costs. QoQ margin helped by
EBITDA margin (%) 16.1% 16.6% 13.8% (54) 223 operating leverage benefits and discounts in 4QFY17 to clear BS-III stock.
PBT (Rsmn) 17,521 28,722 52,463 -39% -67% Rising depreciation and stable interest costs amidst falling EBITDA to result
PAT 12,131 25,599 43,766 -53% -72% in a sharp decline in PBT/PAT
Eicher Motor
YoY/QoQ revenue growth driven by 25%/3% respectively growth in Royal
Sales 19,660 15,557 18,881 26% 4%
Enfield volumes
EBITDA (Rsmn) 6,238 4,702 5,848 33% 7%
EBITDA margin expansion driven by higher volumes
EBITDA margin (%) 31.7% 30.2% 31.0% 151 76
PBT (Rsmn) 6,352 4,769 5,956 33% 7%
PBT growth in line with EBITDA. PAT (post share of profit in VECV) to witness
PAT (Rsmn) (after slower growth than PBT due to lower YoY/QoQ profit at VECV
4,700 3,763 4,594 25% 2%
share of VECV)
PBT (Rsmn) 2,915 2,475 2,367 18% 23% Increase in EBITDA amidst stable depreciation expenses and falling interest
expenses to result in higher growth in PBT/PAT. QoQ PAT growth further
PAT 1,941 1,620 1,375 20% 41% helped by lower tax rate
Mahindra CIE
YoY revenue growth helped largely by consolidation of Bill Forge. QoQ
Sales 13,796 13,721 13,645 1% 1% revenue growth driven by higher volumes at standalone (M&M's tractor
volumes higher QoQ).
EBITDA (Rsmn) 1,582 1,533 1,680 3% -6% YoY EBITDA margin driven by margin expansion at European subsidiaries as
EBITDA margin (%) 11.5% 11.2% 12.3% 30 (84) transition costs related to Jeco plant diminish.
PBT (Rsmn) 899 865 996 4% -10% PBT to largely track EBITDA level performance. One-time favourable tax
PAT 662 715 731 -7% -9% impacts in YoY/QoQ base to impact net earnings trend.
Exide Industries
YoY growth largely driven by price hikes taken since 2HFY17; YoY volume
growth expected to be impacted due to dealer-destocking prior to GST
Sales 21,116 20,111 19,757 5% 7%
implementation. QoQ growth led by price hikes and seasonal factors
(higher inverter battery sales).
EBITDA (Rsmn) 3,174 3,150 2,621 1% 21% YoY EBITDA margin impacted by price hikes not fully offsetting lead price
increase. QoQ margin improvement driven by the full effect of price hikes,
EBITDA margin (%) 15.0% 15.7% 13.3% (63) 177 some softening in lead price and favourable mix (higher inventor battery
sales)
PBT (Rsmn) 2,807 2,784 2,292 1% 22%
Net earnings performance to largely reflect the trends at the EBITDA level.
PAT 1,965 1,961 1,651 0% 19%
M&M
YoY/QoQ revenue growth largely driven by 13%/68% growth in tractor
Sales 112,684 105,247 106,121 7% 6%
volumes offset by 4% YoY and 15% QoQ decline in auto volumes
EBITDA (Rsmn) 15,496 14,885 12,368 4% 25% YoY margin to be impacted due to higher material costs. QoQ margin to
EBITDA margin (%) 13.8% 14.1% 11.7% (39) 210 expand due to higher mix of more profitable tractors
The consolidated net profit for private banks in our coverage universe is likely to grow
by 17% YoY, while PSU banks net profit would grow faster on a very low base (62%
QoQ). Sequentially, consolidated RoA should remain unchanged at ~0.87%. New
private sector banks are expected to deliver an average RoA of 1.3% compared with
PSU banks ~0.26%. We are SELLers on all banks as we see material downward risks
to earnings estimates from the impact of crackdown on the informal economy and
real estate weakness as the economic activity unravels in the next 6-12 months. We
see the major downside risks for Kotak Mahindra Bank (KMB IN, US$28.2bn, TP
Rs584, 39% downside) and Punjab National Bank (PNB IN, US$4.5bn, TP Rs113, 25%
downside).
KKC trades at a punchy multiple of 32x FY18E P/E, a ~40% premium to its
historical average. KKCs P/E multiple has been re-rated by 65% since the
commissioning of Phaltan export facility in 4QFY14. However, we believe investor
excitement may plummet, as they learn that this export opportunity is only transient
due to shift in manufacturing from the UK plant to India.
Based on limited consensus data, our 1QFY18 earnings estimates are higher than Dalmia Cement 23.3 19.8
consensus for Dalmia and ACC and lower for UltraTech and Shree. Shree Cement 101.8 109.3
Orient Cement 1.9 n.a.
Recommendations
In this weak demand environment (FY18E demand growth of 5-6% at best), we expect
regional players to outperform the pan-India players (trading at 30-50% premium to FY18E EPS
regional players), as pan-India players are likely to surrender market share to chase (Rs) Ambit Consensus
pricing. Orient Cement is our top BUY idea as we expect a sharp recovery in volume UltraTech 121.4 110.4
and pricing in the existing business. However, the stock may remain under pressure Ambuja 5.8 6.2
until visibility on funding and profitability of the acquisition improves. We reiterate
SELL on both UltraTech and Shree, but prefer Shree over UltraTech as it offers ACC 51.3 43.8
superior volume as well as pricing growth. We maintain SELL on Ambuja and ACC. Dalmia Cement 86.9 73.4
Between the two, Ambuja offers superior pricing growth given its exposure to North Shree Cement 483 482
and West markets. Orient Cement 6.4 4.9
Source: Ambit Capital research
Company name Jun-17 Jun-16 Mar-17 YoY (%) QoQ (%) Comments
ACC
Cement dispatches (mn
6.4 6.1 6.6 5 (3)
tonnes)
Cement Realisation
4,563 4,267 4,265 7 7 Expect volumes for ACC to grow by 5% YoY,
(Rs/tonne)
driven by ramp-up at new capacities in East
Sales (Rs mn) 29,323 26,115 28,147 12 4 India (Jamul and Sindri). Realisations should
EBITDA (Rs mn) 5,811 4,566 4,161 27 40 rise by 7% QoQ, driven by price hikes of 5-
9% in South and East India. We expect
EBITDA margin (%) 19.8 17.5 14.8 233 503 EBITDA/tn to rise to ~Rs904/tonne vs
EBITDA (Rs/tonne) 904 746 631 21 43 Rs631/tonne in 1QCY17, mainly driven by
the strong 7% realisation growth.
PBT (Rs mn) 4,311 3,185 2,617 35 65
PAT (Rs mn) 3,448 2,378 2,115 45 63
Dalmia Cement
Cement dispatches (mn
4.1 3.8 4.6 8 (11)
tonnes)
Cement Realisation
5,090 4,727 4,802 8 6 On a consolidated basis, we expect 8% YoY
(Rs/tonne)
volume growth driven by ramp up at
Sales (Rs mn) 20,671 17,775 21,850 16 (5) Gulbarga and strong volume growth in East
EBITDA (Rs mn) 5,759 5,084 5,517 13 4 India. Realisations for Dalmia should rise by
6% QoQ driven by strong price hikes in West,
EBITDA margin (%) 27.9 28.6 25.2 (74) 261 East and South India. EBITDA/tonne is likely
EBITDA (Rs/tonne) 1,418 1,352 1,212 5 17 to rise to ~Rs1,418/tonne, mainly due to
higher realisations.
PBT (Rs mn) 2,959 2,100 2,724 41 9
PAT (Rs mn) 2,067 940 1,841 120 12
Shree Cement
Cement dispatches (mn
5.6 5.1 5.9 9 (6)
tonnes)
We expect Shree to report 9% YoY volume
Cement Realisation
3,959 3,907 3,771 1 5 growth, mainly due to rising share of volumes
(Rs/tonne)
in East India. We factor in 5% QoQ increase
Sales (Rs mn) 23,508 21,987 23,803 7 (1) in realisations (lower than India average of
EBITDA (Rs mn) 5,933 7,309 5,112 (19) 16 ~7%), due to price increase in North India
(5% average) and 10% in East India.
EBITDA margin (%) 25.2 33.2 21.5 (800) 376 Sequentially, higher realisations are likely to
EBITDA (Rs/tonne) 1,022 1,279 818 (20) 25 result in increase in EBITDA/tonne to
Rs1,022/tonne from ~Rs818/tonne in the
PBT (Rs mn) 3,733 6,471 3,199 (42) 17 previous quarter.
PAT (Rs mn) 3,547 5,077 3,045 (30) 16
Orient Cement
Cement dispatches (mt) 1.53 1.39 1.73 10 (11)
Cement Realisation We expect Orient to report above-industry
3,794 3,126 3,449 21 10 volume growth (10% YoY) due to ramp-up of
(Rs/tonne)
Gulbarga plant and rising volumes from
Sales (Rs mn) 5,813 4,371 5,967 33 (3)
AP/Telangana and Karnataka. Amongst our
EBITDA (Rs mn) 1,115 404 755 176 48 coverage, we expect realisation growth to be
the highest for Orient Cement, given price
EBITDA margin (%) 19.2 9.3 12.7 993 652
hikes of ~10-15% in Maharashtra and AP.
EBITDA (Rs/tonne) 728 290 437 151 67 Strong realisation growth is likely to result in
EBITDA/tonne recovering to Rs728/tonne
PBT (Rs mn) 485 (145) 148 (435) 227
from Rs437/tonne in 4QFY17.
PAT (Rs mn) 388 (76) 165 (613) 135
Source: Company, Ambit Capital research
FY18E EPS
(Rs) Ambit Consensus
Titan 11.6 11.5
Trent 2.2 NA
Bata India 15.3 15.5
Jubilant Foodworks 14.7 17.4
Arvind 17.4 15.6
Aditya Birla Fashion 1.0 1.8
Page Industries 321.8 300.3
PVR 36.7 35.9
Wonderla Holidays 10.1 11.9
Source: Ambit Capital research
Bata India
Sales (Rs mn) 7,399 6,743 5,980 10% 24% Revenues to grow by 10% due to a favourable base
EBITDA (Rs mn) 784 821 567 -5% 44% Margin contraction due to lower gross margin given advancement
EBITDA margin (%) 10.6% 12.2% 9.5% of EoSS
Stock Performance
Consumer Staples 3-month
(%) Rel to
Channel checks suggest during second half of June, wholesale supply chains Absolute
Sensex
stopped/slowed operation in the run-up to the GST. We believe this Britannia 9 5
disruption is transient in nature and any impact of destocking during the
Colgate 11 6
quarter will recover in subsequent quarters. In 1QFY18, FMCG/Paints should
Dabur (0) (5)
report 1%/10% sales growth. FMCG companies should report 3.5% YoY
volume decline. Paint companies will largely remain resilient to disruption GCPL 5 1
and report 5% YoY volume growth given its lower dependency on the GSK Consumer 2 (3)
wholesale channel. Alcobev companies should report ~4% revenue decline Marico 16 11
due to Supreme Courts ban on sale of alcohol within 500m from highways.
Nestle 2 (3)
FMCG companies gross margins should expand by 10-30bps YoY. EBITDA
ITC 13 8
margins would expand further by ~40 YoY as A&P spends remain subdued.
Paint companies will record EBITDA margin contraction of ~100bps YoY due Asian Paints 8 3
to input cost headwinds. FMCG/Paints/Alcobev should report 4%/4%/13% YoY Berger Paints 5 (0)
increase in PAT. United Spirits (14) (19)
FMCG companies to report 1% sales growth; ~3% volume decline United Breweries (2) (7)
Our channel checks suggest wholesale supply chain stopped/slowed its operation in
the last 15-20 days in June. In the FMCG sector, companies with larger wholesale
Jun17E Quarterly EPS
dependency will underperform compared to its peers. We believe urban wholesale
channel will witness larger impact due to destocking vs rural wholesale channel. Company Ambit Consensus
However, any destocking in 1QFY18 will lead to subsequent up-stocking in the Britannia 19.7 19.6
coming quarter. During the quarter, the sector will report 3% YoY volume decline. Colgate 4.6 5.6
However, price hike by most of the companies will lead to a revenue growth of ~1%
Dabur 1.6 1.8
YoY. Gross margin should expand by 10-30bps for most of the companies (except
Marico to report 150bps contraction as its raw material index is +16% YoY). However, GCPL 8.1 6.1
the sector EBITDA margin should expand further by ~40bps YoY due to lower A&P GSK Consumer 38.6 40.3
spends (down 45bps YoY) resulting to PAT growth of 3.5% YoY. Marico 2.2 2.2
Paint companies remain largely resilient to supply chain disruption Nestle 27.8 31.5
ITC 2.1 2.4
Paint companies have lower dependency on the wholesale channel given their
superior dealer network. Hence, we believe paint companies will be less disrupted Asian Paints 6.0 6.7
due to supply chain disruption in the run-up to the GST. We expect paint companies Berger Paints 1.2 1.2
to report volume growth of ~5% during the quarter. Paint companies revenue should United Spirits 5.9 10.0
grow by ~10% YoY due to volume growth and cumulative price hike of ~5% taken in United Breweries 5.3 NA
Feb17 and May17. We expect gross margin to contract by 55bps ~YoY due to input
cost headwinds. EBITDA margin should contract further by ~100bps YoY resulting in
PAT growth of only ~5% YoY.
FY18E EPS
Alcobev companies impacted due Supreme Court ban
Company Ambit Consensus
Alcobev companies should report a revenue decline of ~4% YoY due to Supreme Britannia 81.5 87.9
Courts ban on sale of alcohol within 500m of National and State Highways. Despite Colgate 25.1 25.3
adverse SC ruling and franchising of popular brands, we believe United Spirits will
Dabur 8.3 8.5
report a revenue decline of only ~2% YoY. This is due to improvement in system and
processes implemented over the years. Increasing contribution of Prestige and above GCPL 20.7 44.8
brands in revenue should result in operating margin expansion of ~90bps YoY. GSK Consumer 172.1 187.4
United Breweries revenue should decline by 6% YoY. United Breweries gross/EBITDA Marico 7.0 7.3
margin should contract by 50/20bps YoY due to lower operating leverage. Nestle 120.6 137.4
ITC 10.6 9.8
Asian Paints 21.4 23.6
Berger Paints 4.9 5.5
United Spirits 33.3 N/A
United Breweries 9.8 N/A
Source: Bloomberg, Ambit Capital research
Exhibit 16: FMCG/Paints companies should report 1.5%/10% YoY revenue growth; Alcobev revenue to decline by 4% YoY
YoY Change in YoY Change in A&P YoY Change in
Revenue growth (%)
Company Gross Margin spends as % of sales EBITDA Margin
1QFY18E 4QFY17 1QFY17 bps bps bps
FMCG
Britannia 5.0% 5.2% 9.4% 20 NA 50
Colgate -1.5% 2.2% 8.8% 30 20 20
Dabur -4.0% -4.7% 2.4% 10 (50) 30
GCPL 4.0% 12.1% 6.8% 20 (40) 50
GSK Consumer -1.3% 2.3% -5.2% 30 (50) 50
HUL 1.0% 6.4% 3.6% 20 (50) 50
Marico 5.0% 2.4% 0.2% (150) (100) 20
Nestle 2.0% 9.1% 16.1% 30 NA 50
ITC 3.2% 14.0% 9.8% 30 NA 60
Average 1.5% 5.4% 5.8% 4 (45) 42
Paints
Asian Paints 10.5% 7.8% 9.1% (60) NA (110)
Berger Paints 10.0% 8.2% 10.5% (50) NA (90)
Average 10.3% 8.0% 9.8% (55) NA (100)
AlcoBev
United Spirits -2.0% -0.9% 9.3% 30 NA 90
United Breweries -6.0% -8.2% 7.5% (50) NA (20)
Average -4.0% -4.6% 8.4% (10) NA 35
Source: Ambit Capital research
Key recommendations: Valuations across the space are punchy. In our recent VA Tech Wabag (3.4) (8.2)
thematic, Locked and Loaded, we highlighted that we expect valuations to sustain. Techno Electric (1.8) (6.6)
Revenue growth led by higher Government ordering has not yet fully materialised.
Bharat Electronics is our top pick since we expect the company to surprise positively on
Jun17E Quarterly EPS
revenue growth in FY18E. Avoid companies that have high expectations baked in, in
terms of either order inflows (Engineers India) or execution (NBCC). Company Ambit Consensus
Larsen & Toubro 7.9 NA
Power Grid Corp 4.0 NA
Bharat Electronics (0.1) NA
AIA Engineering 12.6 NA
Engineers India NA NA
Sadbhav Engineering 2.9 NA
VA Tech Wabag 13.9 NA
Techno Electric 4.5 NA
NBCC 0.6 NA
Source: Ambit Capital research
FY18E EPS
Company Ambit Consensus
Larsen & Toubro 68 71
Power Grid Corp 17 17
Bharat Electronics 8 7
NBCC 5 5
AIA Engineering 56 52
Engineers India 7 6
Sadbhav Engineering 7 5
VA Tech Wabag 14 34
Ashoka Buildcon 5 10
Techno Electric 20 21
Source: Ambit Capital research
PBT (Rs mn) 499 489 2% 716 -30% Higher interest cost squares off the benefits from the increase in
PAT (Rs mn) 499 487 2% 682 -27% revenue
VA Tech Wabag
Execution pace to remain healthy due to strong order book; growth
Sales (Rs mn) 6,673 5,803 15% 11,317 -41%
expected to accelerate through FY18E
EBITDA (Rs mn) 300 275 9% 1,317 -77%
Margin expansion will not come through in 1QFY18
EBITDA margin (%) 4.5% 4.7% -20 bps 11.6% -710 bps
PBT (Rs mn) 159 119 33% 1,108 -86%
PAT (Rs mn) 105 40 161% 781 -87%
Techno Electric (Consolidated)
EPC business to grow by 10%; wind business revenues may decline
Sales (Rs mn) 2,928 2,709 8% 3,619 -19%
due to lower output (part business was sold) and lower PLFs
EBITDA (Rs mn) 668 712 -6% 544 23% Margins should decline due to change in revenue mix; revenue from
EBITDA margin (%) 22.8% 26.3% -340 bps 15.0% 780 bps energy division to decline by 25% YoY
PBT (Rs mn) 610 569 7% 662 -8% Interest cost to reduce due to asset sales-led debt pare; tax incidence,
PAT (Rs mn) 507 484 5% 333 52% however, could be higher
Engineers India
We cut our core earnings estimates in Engineers India for FY18E/ FY19E by 8-19%.
The cut is especially sharp for FY18E led by sharp cuts to execution pace of projects.
We had factored in execution of the Vizag LSTK to start in 1QFY18 that is unlikely.
This has led to sharp cuts in our LSTK revenue estimates for FY18E by 20-37% for the
next two years. Margine stimates are cut for FY18E for the core PMC segment to 27%
since ramp up in PMC revenue (despite being higher than management guidance) is
lower than our initial expectations.
However, we increase our TP by 4% mainly driven by a roll-over and increasing
pipeline of orders. Cut of near term estimates doesnt threaten the earnings and
simply delays it and therefore doesnt impact our DCF driven TP materially.
Whilst we are positive on hydrocarbon capex outlook, we remain SELLers on EIL. The
current valuation of 20x FY19E core EP factors in all potential upsides from a
burgeoning Rs3tn+ refinery expansion programme including the Maharashtra
Greenfield. Even after factoring in all potential upsdides, we do not expect the
companys core profits to exceed Rs6bn by FY21E and the stock already trades at 13x
of this potential profit, a punchy valuation for a company that is prone to cyclical
downturns.
Exhibit 21: Revisions ahead of the earnings season
Rs mn New Estimates Old Estimates Change in Estimates
Particulars FY18E FY19E FY18E FY19E FY18E FY19E
Order book 116,151 165,290 98,032 108,613 18% 52%
YoY growth (%) 49.6% 42.3% 25.8% 10.8% 2380bps 3150bps
Consultancy segment 51,712 64,140 48,351 51,841 7% 24%
LSTK segment 64,440 101,150 49,681 56,772 NA NA
Order flow 59,377 79,782 45,803 45,803 30% 74%
YoY growth (%) 4.0% 34.4% -14.5% 0.0% 1850bps 3440bps
Consultancy Segment 25,259 30,311 22,850 22,850 11% 33%
LSTK segment 34,118 49,471 22,953 22,953 49% 116%
Revenues 20,845 30,643 25,671 35,222 -19% -13%
YoY growth (%) 41% 47% 89% 37% -4860bps 980bps
Consultancy segment 13,756 17,882 14,341 19,360 -4% -8%
YoY growth (%) 15% 30% 30% 35% -1500bps -500bps
LSTK segment 7,089 12,761 11,330 15,862 -37% -20%
YoY growth (%) 150% 80% 350% 40% -20000bps 4000bps
Employee costs 7,526 9,407 7,490 10,486 0% -10%
YoY growth (%) 0% 25% 15% 40% -1500bps -1500bps
EBITDA 3,608 5,446 4,401 5,897 -18% -8%
EBITDA margin 17.3% 17.8% 17.1% 16.7% 20bps 100bps
Net depreciation 247 278 256 286 -4% -3%
EBIT margin (%) 16.1% 16.9% 16.1% 15.9% 0bps 90bps
Consultancy Segment 26.9% 30.8% 30.5% 30.5% -360bps 20bps
LSTK segment 7.0% 7.0% 7.0% 7.0% 0bps 0bps
Other Income 2,638 2,677 3,136 3,289 -16% -19%
PBT before EO 5,999 7,845 7,281 8,899 -18% -12%
Adjusted PAT 3,959 5,178 4,805 5,874 -18% -12%
EPS (Rs.) 5.9 7.7 7.1 8.7 -18% -12%
Core EPS (Rs.) 3.3 5.1 4.1 5.5 -19% -8%
Source: Company, Ambit Capital research
Auto financers and SME financers: Whilst growth and asset quality trends have Bajaj Finance 43.3 44.6
stabilised for these lenders, a full-fledged recovery remains elusive. Our growth and MOFS 40.1 40.1
credit cost assumptions continue to be more conservative than the Street (which is CIFC 55.9 57.1
building in the pre-demonetisation narrative of full-fledged recovery in growth and HDFC 50.7 52.4
asset quality); reflecting in our FY18 EPS estimates being 6-18% below the Streets
(highest for MMFS). With lofty valuations not leaving any room for negative surprises
despite structural negatives, such as increasing formalisation of economy (GST,
demonetisation) and ongoing market-share loss in prime segments, we continue to be
sellers on this space. We are SELLers on all NBFC stocks in our coverage. Our high
conviction SELL is MMFS.
Housing Finance: HFC stocks have sharply re-rated over the past six months on
expectations that the Governments affordable housing measures will boost earnings
growth. But loan growth and profitability of the sector have been under pressure over
FY13-17 (both down by 5 percentage points) despite rising share of higher yielding
and riskier LAP/developer loans. Moreover, pressure on growth/profitability will persist
given: (i) slowdown in growth due to increasing competition from banks and
moderating growth in real estate prices; (ii) recent pricing cuts by banks on home
loans, which will hit NIMs in FY18-19E; (iii) further rise in credit cost (increasing over
the past two years) due to the rising share of riskier loans. Peak valuations of 5x one-
year forward PB (73% above historical average and 60-70% above NBFCs/pvt banks)
dont factor in the headwinds. Remain SELLers on HDFC Ltd and LICHF and are ~5%
below the Street on the FY18 EPS owing to lower growth and margin assumptions.
Motilal Oswal Best play on financialisation of savings: Since FY13, savings
have been gradually shifting from physical to financial assets, owing to lacklustre
returns in real estate (since FY15) and gold (since FY13), buoyant stock markets and
declining inflation. Moreover, the demonetisation has expedited the financialisation of
savings with mutual fund inflows almost doubling on a YoY basis post-
demonetisation. This will aid in rapidly scaling up of MOFSs strongly positioned AMC
(31% AUM CAGR, FY17-20E) and with strong growth of affordable housing focused
HFC (55% loan book CAGR, FY17-20E). This will drive MOFSs EPS robustly with 36%
CAGR over FY17-20E. Our SOTP valuation values the company at Rs1,250 (25x/19x
core FY19-20E EPS), which could rerate further as inflows into equities continue and
Aspire HFC scales up. Note that we have upgraded our FY18/19 PAT estimates by
13/11% and target price by 18%, post factoring in stronger-than-expected equity
inflows in the AMC business (up 50% QoQ, refer the exhibits below). MOFS is our
high conviction BUY.
Exhibit 24: Equity inflows are trending towards their all-time highs
100
Rs bn
50
-50
Jan-06
Jul-06
Jan-07
Jul-07
Jan-08
Jul-08
Jan-09
Jul-09
Jan-10
Jul-10
Jan-11
Jul-11
Jan-12
Jul-12
Jan-13
Jul-13
Jan-14
Jul-14
Jan-15
Jul-15
Jan-16
Jul-16
Jan-17
Jul-17
Source: AMFI, Ambit Capital research
Based on limited consensus data, our 1QFY18 earnings estimate for Coal India is
higher than consensus.
Exhibit 29: Detailed Jun17E quarterly estimates
Company Jun'17E Jun'16 Mar'17 YoY (%) QoQ (%) Comments
Coal India
Sales (Rs mn) 198,674 177,961 224,239 12 (11) Coal India reported offtake of ~137mt in 1QFY18, up 3% YoY. Of
this we expect ~15% volumes to be sold in e-auction (13mt of regular
EBITDA (Rs mn) 40,251 37,483 35,608 7 13 e-auctions and another ~7mt in special auction for the power/non-
EBITDA margin (%) 20.3% 21.1% 15.9% -80 bps 438 bps power sectors). We expect blended e-auction realisations to increase
to Rs1,800/tn vs Rs1,611/tonne in 4QFY17 due to higher premiums
PBT (Rs mn) 49,551 46,293 42,784 7 16 in Apr-May and improved grade mix. Higher e-auction realisations
are likely to result in an 8% YoY increase in blended realisation. 3%
volume growth coupled with 8% realisation growth is likely to result in
PAT (Rs mn) 33,199 30,653 27,179 8 22 12% YoY revenue growth. However, higher revenues are likely to be
offset by higher employee costs (wage escalation) and hence, we
expect EBITDA/PAT to grow by 7%/8% respectively.
Source: Company, Ambit Capital research
Note: We drop our coverage on Tata Steel, SAIL, Nalco and Hindalco.
Infosys will lead the large IT space with revenue growth of 2.7% (organic cc, QoQ) vs TCS 35.5 33.7
2.5% for TCS, 2.4% for CTS and 1.5% for HCLT. Wipro and TechM will underperform Cognizant ($) 0.7 0.8
with revenue declines of 1.0% and 3.6% respectively. Among the mid-sized IT Infosys 14.9 15.8
companies, we expect Persistent to deliver growth of 4.2% vs 3.5% for Mindtree and Wipro 8.4 8.9
1.6% for LTI. We reckon cross-currency tailwind of 20-80bps across our coverage
HCLT 15.0 14.6
universe. Overall, BFSI is expected to post weak growth (1.5-2.0% QoQ) as the
regulatory easing proposed by the Trump administration hasnt yet taken off. While TechM 8.6 8.7
we expect flattish revenues from retail, healthcare revenues will decline (0-2% QoQ) Mindtree 6.5 6.3
because of uncertainty over Obamacare repeal. LTI 13.5 13.7
INR appreciation, the last nail in the coffin Persistent 8.9 9.6
eClerx 19.0 18.8
While wage hikes, visa costs and lower utilisation because of campus joinees make
1Q seasonally a soft quarter in terms of EBIT margins, INR appreciation added fuel to
the fire. In the large IT space, we factor in the highest margin hit for Wipro (130bps FY18E EPS
QoQ) followed by TCS (120bps) and Infosys (110bps). We have not considered the
(Rs) Ambit Consensu
impact of wage hikes for CTS and Infosys as media articles suggested that these
companies deferred wage hikes and promotions. Among the mid-sized Indian IT TCS 140.0 144.
companies, we expect LTI to witness the biggest hit on margins (190bps) followed by CTSH($) 2.6 3.
Persistent (150bps) and Mindtree (110bps). Infosys 64.0 67.
Cut in regulated RoE: We expect NTPCs regulated RoE to be cut by 250bps for
2019-24 to 13% due to: (a) 200bps fall in G-Sec yield; and (b) 50bps cut in spread
over G-Sec yield as Government wants to disincentivise fresh capacity additions.
NTPCs valuation at 1.2x FY18 P/B would de-rate as capacity addition growth would
plateau and RoE decline to 10%.
JSW Energy (JSW IN, 6M ADV US$7.5mn, BUY, TP Rs86/share, 34% upside)
Vijayanagar is highly likely to sign a PPA with Karnataka for supply from
FY19. Karnataka needs to open PPA bids as it has PPA shortfall of 1.4GW.
Vijayanagar is the best bet as it has fixed cost of 71p/unit vs Rs1.5-2.5/unit for
recently commissioned plants.
Fuel cost should reduce by 60paise led by: (i) 50% domestic coal blending;
JSWE may tie-up domestic coal under new coal linkage auction policy at Rs989/T and
(ii) decline in imported coal price in FY18E as China (48% of global
consumption) steps back on addition of new thermal capacity.
JSWE multiple (1x FY18 P/B) should re-rate once Vijayanagar signs a PPA.
Post PPA, merchant exposure would reduce to 10% from 29% currently. NTPC,
despite 11% FY18E RoE, trades at a much higher 1.2x FY18 P/B given NIL
merchant exposure.
APBT (Rs mn) (387) 849 (775) -146% -50% Trickle-down impact of lower EBITDA
APAT after accounting for share of profits from
APAT (Rs mn) 3,146 2,322 3,253 36% -3%
Indonesian mines
JSW Energy
Led by decline in Vijayanagar/Ratnagiri sales volume by
Sales (Rs mn) 23,858 24,500 18,621 -3% 28% 4%/29% YoY in 1QFY18 due to weak demand. This is
partly offset by 14% YoY growth in hydro volumes.
EBITDA (Rs mn) 9,767 11,173 5,869 -13% 66%
Led by 31% higher fuel cost on a YoY basis
EBITDA margin (%) 40.9% 45.6% 31.5% -470bps 940bps
APBT (Rs mn) 4,075 4,899 253 -17% 1514%
Trickle-down impact of lower EBITDA
APAT (Rs mn) 3,051 3,667 237 -17% 1186%
Torrent Power
Sales (Rs mn) 26,874 25,887 24,528 4% 10%
EBITDA (Rs mn) 5,487 5,198 6,963 6% -21% Led by higher fuel cost due to generation at Sugen
EBITDA margin (%) 20.4% 20.1% 28.4% 30bps -800bps
PBT (Rs mn) 586 580 2,054 1% -71% Expect PAT to remain flat given delay in awarding true-
PAT (Rs mn) 469 464 1,357 1% -65% up income for FY18
ADVT -
Reco Mcap CMP TP Upside EPS (`) P/E (x) P/B (x) EV/EBITDA (x) ROE (%)
Name 6m
($ mn) ($ mn) (`) (`) (%) FY17E FY18E FY19E FY18E FY19E FY18E FY19E FY18E FY19E FY18E FY19E
Consumer Goods/FMCG
ITC BUY 62,787 55.2 333 340 2 9 11 12 31 27 8.3 7.6 21 18 28 30
Godrej Consumer SELL 10,294 7.4 975 1,130 16 38 41 47 24 21 5.5 4.8 33 30 24 24
Nestle India * SELL 10,173 4.4 6,806 6,000 (12) 99 121 144 56 47 21.3 20.6 32 27 38 44
Dabur India BUY 8,298 7.7 304 330 9 7 8 10 37 31 9.6 8.4 31 26 28 29
Britannia Inds SELL 6,917 8.3 3,716 2,900 (22) 74 82 100 46 37 28.0 23.5 30 25 33 34
Marico Inds SELL 6,462 6.0 323 250 (23) 6 7 8 46 40 15.7 13.6 32 27 36 37
United Spirits BUY 5,944 22.1 2,638 2,575 (2) 22 34 49 78 54 14.8 11.6 35 28 21 24
Colgate Palmolive SELL 4,615 6.8 1,094 850 (22) 21 25 30 44 36 20.6 18.0 20 18 75 78
GSK Consumer SELL 3,569 1.4 5,473 4,950 (10) 156 232 263 24 21 6.6 5.9 21 19 30 30
United Breweries SELL 3,311 3.1 808 625 (23) 9 10 14 83 58 8.4 7.6 30 25 11 14
Hatsun Agro UR 1,504 0.2 637 UR N/A - - - - - - - - - - -
Consumer Discretionary
Titan SELL 7,388 13.8 537 442 (18) 9 12 13 46 40 10.5 9.2 31 27 24 24
Page Inds BUY 2,877 3.6 16,637 16,782 1 241 319 410 52 41 29.6 23.6 34 27 47 50
Aditya Birla Fashion BUY 2,114 1.8 177 190 7 0 1 3 176 70 12.9 10.9 30 23 8 17
Arvind SELL 1,490 10.2 372 313 (16) 10 17 21 21 18 2.1 1.9 10 9 10 12
Trent BUY 1,274 1.3 247 281 14 2 2 4 114 57 5.2 4.9 52 39 5 9
Bata India SELL 1,151 4.4 578 370 (36) 13 15 18 38 33 5.3 4.8 22 20 15 16
Jubilant Foodworks SELL 1,136 10.4 1,111 809 (27) 10 15 20 76 54 8.5 7.6 25 21 12 15
PVR BUY 1,033 5.0 1,425 1,774 24 21 37 54 39 26 6.1 5.2 16 12 16 21
Wonderla BUY 313 0.2 357 497 39 6 10 15 36 25 4.1 3.5 18 13 12 15
Eng, Construction & Infra
L&T SELL 25,068 45.2 1,732 1,400 (19) 65 68 77 25 22 3.0 2.8 19 17 12 13
Bharat Electronics BUY 5,981 13.4 173 190 10 7 8 9 23 20 4.4 3.9 17 15 20 21
NBCC SELL 2,864 5.5 205 135 (34) 4 5 7 41 28 9.6 8.2 33 22 25 32
AIA Engineering BUY 2,079 1.6 1,422 1,525 7 49 50 67 28 21 2.2 2.0 20 15 17 20
Engineers India SELL 1,638 8.6 157 120 (23) 5 7 9 22 18 3.7 3.6 17 13 17 20
Sadbhav BUY 790 0.7 297 335 13 0 7 11 45 27 3.0 2.8 9 8 7 11
Techno Electric BUY 679 0.6 383 415 8 17 22 27 18 14 3.3 2.8 13 11 20 21
Sadbhav Infra BUY 588 0.3 108 130 21 (6) (2) (0) N/A N/A 3.2 2.8 11 10 0 0
VA Tech UR 564 2.0 667 UR N/A - - - - - - - - - - -
Healthcare
Cadila Healthcare BUY 8,224 10.3 518 500 (3) 12 21 26 25 20 6.7 5.4 18 15 30 30
Lupin UR 8,052 28.0 1,150 UR N/A - - - - - - - - - - -
Dr. Reddy's Labs SELL 7,019 18.5 2,732 2,386 (13) 89 95 121 29 22 3.0 2.7 16 14 11 12
Cipla SELL 6,851 12.0 549 410 (25) 12 21 28 26 20 3.1 2.7 15 12 13 15
Torrent Pharma BUY 3,400 7.1 1,296 1,523 18 54 51 75 26 17 4.7 4.0 16 11 20 25
Ajanta Pharma SELL 2,098 4.9 1,538 1,418 (8) 57 55 73 28 21 6.9 5.5 19 15 28 29
ADVT -
Name Reco Mcap CMP TP Upside EPS (`) P/E (x) P/B (x) EV/EBITDA (x) ROE (%)
6m
($ mn) ($ mn) (`) (`) (%) FY17E FY18E FY19E FY18E FY19E FY18E FY19E FY18E FY19E FY18E FY19E
Home Building
Asian Paints SELL 16,771 16.6 1,128 860 (24) 20 21 25 53 45 13.1 12.0 35 30 26 28
Pidilite BUY 6,572 5.9 827 842 2 15 19 23 44 36 10.6 9.1 29 24 26 27
Havells SELL 4,599 10.1 475 429 (10) 10 12 14 39 35 8.1 7.2 25 21 22 22
Berger Paints SELL 3,784 2.8 251 200 (20) 5 5 6 51 41 11.3 9.9 31 26 24 26
Supreme Inds SELL 2,430 1.1 1,234 1,050 (15) 35 37 43 34 29 7.8 7.0 20 17 25 26
Crompton Consumer SELL 2,180 3.9 224 138 (38) 5 5 7 42 34 19.7 16.2 27 22 53 53
V-Guard SELL 1,197 3.1 182 113 (38) 4 4 5 41 34 10.0 8.2 30 25 27 27
Finolex Cables SELL 1,166 0.7 492 471 (4) 22 22 24 22 20 3.6 3.3 18 16 17 17
Century Ply BUY 992 1.1 288 268 (7) 9 9 13 31 21 7.0 5.5 16 12 26 29
Bajaj Electricals BUY 520 2.0 331 384 16 11 15 22 22 15 3.4 2.9 13 10 16 21
Media
Zee SELL 7,531 15.0 506 425 (16) 13 15 20 33 25 7.9 6.4 22 17 23 28
Dish TV BUY 1,339 8.7 81 102 25 1 1 2 97 51 14.9 11.5 11 9 17 25
DB Corp. BUY 1,079 3.8 378 490 30 20 23 26 17 15 4.0 3.7 10 9 25 26
Hathway SELL 465 0.6 36 28 (23) (3) (2) (2) N/A N/A 4.8 6.8 9 7 (27) (34)
Metals & Mining
Coal India BUY 24,907 19.2 259 345 33 15 20 23 13 11 7.2 8.2 9 7 53 69
Oil & Gas
IOCL BUY 28,869 33.2 383 458 19 40 40 39 10 10 2.0 1.8 6 6 22 19
BPCL BUY 14,902 26.8 665 848 28 56 59 56 11 12 2.5 2.1 7 7 26 22
GAIL SELL 9,597 25.7 366 353 (4) 28 28 34 13 11 1.6 1.4 9 8 13 14
HPCL SELL 8,074 25.8 513 561 9 47 40 42 13 12 2.2 1.9 9 8 18 17
Petronet LNG BUY 5,111 20.4 220 260 18 11 12 15 18 15 3.6 3.0 11 9 22 23
Indraprastha Gas BUY 2,328 7.9 1,072 1,150 7 39 47 55 23 19 5.3 4.9 13 11 24 26
Gujarat State Petronet UR 1,499 2.0 172 UR N/A - - - - - - - - - - -
Mahanagar Gas SELL 1,498 2.5 978 860 (12) 41 45 48 22 20 4.8 4.2 13 12 24 22
Power Utilities
NTPC SELL 20,461 13.0 160 132 (18) 11 14 15 12 11 1.3 1.2 9 9 11 11
Power Grid Corporation SELL 17,143 18.1 211 210 (1) 15 17 19 13 11 2.0 1.8 9 8 17 17
Tata Power BUY 3,499 6.1 83 113 35 6 9 12 9 7 1.2 1.0 6 6 15 16
JSW Energy BUY 1,636 7.5 64 86 33 5 6 9 10 7 1.0 0.9 7 6 8 11
Torrent Power BUY 1,408 3.6 189 257 36 9 14 7 13 26 1.2 1.1 7 8 9 5
ADVT -
Reco Mcap CMP TP Upside EPS (`) P/E (x) P/B (x) EV/EBITDA (x) ROE (%)
Name 6m
($ mn) ($ mn) (`) (`) (%) FY17E FY18E FY19E FY18E FY19E FY18E FY19E FY18E FY19E FY18E FY19E
Software/Tech
TCS BUY 74,387 52.1 2,435 2,720 12 133 139 145 18 17 4.8 4.3 13 12 29 27
Cognizant SELL 39,439 4.4 67 41 (39) 3 3 3 20 23 3.4 2.9 12 13 18 14
Infosys BUY 34,083 61.1 957 1,100 15 63 61 60 16 16 3.5 3.2 12 12 21 21
Wipro SELL 20,238 13.2 268 204 (24) 17 17 17 16 16 2.5 2.5 10 10 16 16
HCL Tech SELL 18,798 23.9 850 770 (9) 60 63 46 14 18 3.1 2.8 10 14 24 22
Tech Mahindra SELL 5,809 22.4 384 360 (6) 32 32 29 12 13 1.8 1.7 8 8 16 14
L&T Infotech BUY 2,083 0.8 788 860 9 56 58 57 14 14 4.0 3.4 10 10 33 27
Mindtree SELL 1,381 4.7 530 440 (17) 25 30 32 18 17 6.4 5.9 10 9 19 18
Persistent Systems SELL 823 1.7 664 560 (16) 39 43 45 15 15 2.5 2.3 9 9 17 15
Eclerx SELL 804 0.5 1,302 1,250 (4) 86 81 92 16 14 2.9 2.4 10 9 20 17
Telecom
Bharti Airtel SELL 25,144 27.0 406 325 (20) 10 3 7 161 57 2.4 2.3 8 7 3 7
Bharti Infratel SELL 11,766 33.8 410 375 (9) 15 16 20 25 20 4.9 5.0 11 10 20 24
Idea Cellular BUY 4,875 38.2 87 105 21 (1) (5) (3) N/A N/A 1.4 1.4 8 8 (8) (4)
Banks/Financial Services
HDFC Bank SELL 66,906 56.2 1,677 1,235 (26) 57 66 78 25 21 4.2 3.6 N/A N/A 18 18
HDFC SELL 40,474 64.2 1,639 1,185 (28) 46 51 54 32 31 6.0 5.4 N/A N/A 18 17
SBI SELL 38,216 71.4 286 250 (12) 13 16 23 18 12 1.2 1.1 N/A N/A 7 9
ICICI Bank SELL 28,977 88.8 291 258 (11) 17 11 19 28 16 1.8 1.6 N/A N/A 7 11
Kotak Mahindra Bank SELL 28,565 34.5 968 584 (40) 27 31 37 31 26 4.1 3.6 N/A N/A 14 15
Axis Bank SELL 18,944 66.6 510 491 (4) 15 24 42 22 12 2.1 1.9 N/A N/A 10 16
IndusInd Bank SELL 14,479 26.2 1,560 1,219 (22) 48 57 69 27 23 4.0 3.5 N/A N/A 16 17
Bajaj Finance SELL 12,044 20.3 1,413 703 (50) 34 43 53 33 27 6.6 5.4 N/A N/A 22 22
Bank of Baroda SELL 5,952 29.0 167 181 9 6 17 24 10 7 1.0 0.9 N/A N/A 10 13
LIC HFC SELL 5,815 19.1 743 481 (35) 38 42 44 18 17 3.0 2.6 N/A N/A 19 17
Punjab National Bank SELL 5,056 27.0 153 113 (26) 6 8 13 18 12 0.8 0.7 N/A N/A 4 7
SHTF UR 3,713 12.1 1,056 UR NA - - - - - - - N/A N/A - -
Federal Bank SELL 3,446 17.9 115 66 (42) 5 5 7 21 17 1.8 1.7 N/A N/A 10 10
MMFS SELL 3,231 13.6 366 268 (27) 7 13 17 27 21 3.0 2.7 N/A N/A 11 13
RBL Bank SELL 3,110 16.2 533 375 (30) 12 13 19 40 29 3.6 3.3 N/A N/A 11 12
CIFC SELL 2,738 5.8 1,130 1,110 (2) 46 56 67 20 17 3.5 2.9 N/A N/A 19 19
Bank of India SELL 2,480 12.9 149 63 (57) (15) 7 18 20 8 0.6 0.6 N/A N/A 3 7
Motilal Oswal BUY 2,475 2.7 1,103 1,250 13 25 40 54 28 20 7.6 5.9 N/A N/A 23 23
SCUF UR 2,383 1.5 2,330 UR NA - - - - - - - N/A N/A - -
City Union Bank SELL 1,722 2.1 185 156 (16) 8 9 11 20 17 2.8 2.4 N/A N/A 15 16
Union Bank of India SELL 1,672 12.5 157 108 (31) 8 15 17 11 9 0.5 0.5 N/A N/A 5 5
Karur Vysya Bank SELL 1,345 3.1 144 93 (35) 10 9 11 16 13 1.6 1.5 N/A N/A 10 12
Equitas SELL 839 4.5 160 135 (16) 5 5 8 32 20 2.3 2.0 N/A N/A 1 2
South Indian Bank SELL 805 6.5 29 18 (36) 2 3 3 10 8 1.0 0.9 N/A N/A 11 12
Magma SELL 610 1.1 166 103 (38) 1 8 13 21 12 1.7 1.5 N/A N/A 9 13
Ujjivan Financial Services SELL 605 8.9 326 301 (8) 17 13 15 26 21 2.1 1.9 N/A N/A 2 2
Source: Bloomberg, Ambit Capital research, Note: N/A indicates Field Not Applicable, UR - Under Review *- December ending, #-June ending, All values for Cognizant are in US$
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