03-Aug-2021 Morning India 20210803 Mosl Mi Pg042

3 August 2021
Motilal Oswal values your support in the Today’s top research theme
Asiamoney Brokers Poll 2021 for India
Research, Sales, Corporate Access and India Strategy: 1QFY22 interim earnings review; In-line;
Trading team. We request your ballot.
management commentaries indicate recovery is setting in
 108 MOFSL Universe and 31 Nifty companies have announced their results as of
31st July’21. Companies that have reported earnings thus far comprise (a) 62% of
est. PAT for the MOFSL Universe, (b) 68% of est. PAT for the Nifty, (c) 56% of
India's market capitalization, and (d) 77% of the Nifty 50 index weight.
Market snapshot  The 1QFY22 earnings season has been in-line, benefitting from the lower base of
1QFY21, as lockdowns in 1QFY22 were localized and less stringent v/s 1QFY21.
Equities - India Close Chg .% CYTD.% Nifty profits for the 31 companies that have posted their results have grown 70%
Sensex 52,951 0.7 10.9 YoY (v/s exp. 64% growth). On the other hand, for the 108 companies in the
Nifty-50 15,885 0.8 13.6
Nifty-M 100 28,250 1.6 35.5
MOFSL Universe, profit growth stood at 71% YoY (v/s exp. 70% growth). Among
Equities-Global Close Chg .% CYTD.% the sectors, Cement, Metals, Healthcare, and O&G have outperformed; Autos,
S&P 500 4,387 -0.2 16.8 NBFC, and Capital Goods have underperformed; and the performances of IT,
Nasdaq 14,681 0.1 13.9 Consumer, and Private Banks have been in line with expectations.
FTSE 100 7,082 0.7 9.6
 Key drivers of 1QFY22 performance: [1] IT – This sector has reported one of the
DAX 15,569 0.2 13.5
Hang Seng 9,337 1.1 -13.1 best sequential performances, led by strong sequential revenue growth of 4.5%
Nikkei 225 27,781 1.8 1.2 (USD) and the highest ever deal pipeline, providing earnings visibility going
Commodities Close Chg .% CYTD.% forward. [2] Cement – Strong price realization and better cost control have driven
Brent (US$/Bbl) 73 -2.7 43.4 performance in this sector. The volume decline in northern/central India was
Gold ($/OZ) 1,813 0.0 -4.5
Cu (US$/MT) 9,675 -0.3 24.9
lower than expected vis-à-vis southern India, which had stricter lockdowns. [3]
Almn (US$/MT) 2,613 0.6 32.4 Autos – High RM inflation and operating deleverage have impacted most of the
Currency Close Chg .% CYTD.% results in 1QFY22. OEMs (MSIL, BJAUT, TTMT, and TVS) have reported a
USD/INR 74.3 -0.1 1.8 commodity cost impact of 3–4pp QoQ.
USD/EUR 1.2 0.0 -2.8
USD/JPY 109.3 -0.4 5.9
YIELD (%) Close 1MChg CYTD chg Research covered
10 Yrs G-Sec 6.2 -0.01 0.3
10 Yrs AAA Corp 6.9 0.19 0.3 Cos/Sector Key Highlights
Flows (USD b) 2-Aug MTD CY21 1QFY22 interim earnings review; In-line; management
India Strategy
FIIs -0.21 -1.57 6.72 commentaries indicate recovery is setting in
DIIs 0.20 2.28 1.64 Core operating profit in-line; commentary suggests healthy
Volumes (INRb) 2-Aug MTD* YTD* HDFC
recovery from second wave impact
Cash 720 720 773 NTPC Profits in-line, aided by other income
F&O 28,580 28,580 44,708
Britannia Industries Sales momentum healthy; ICD reduction a significant positive
Note: *Average
P I Industries | Cholaman.Inv.& Fn | Varun Beverages | Emami |
Other Notes
Vinati Organics | Castrol India |RBL Bank | K E C Intl. | Automobiles
Chart of the Day: India Strategy (1QFY22 interim earnings review)

Nifty companies’ PAT YoY change (%) – 24 stocks have posted YoY growth
Research Team (Gautam.Duggad@MotilalOswal.com)

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
Kindly click on textbox for the detailed news link
1 2
India's unemployment rate Forging industry seeks PMO’s intervention over high steel prices
drops to 13.3% in Q2 from all- The forging industry has sought the intervention of the Prime Minister’s
time high of 20.9% in Q1 Office to save them from another crisis arising from the steep rise in
Unemployment rate in India in the steel prices which has hit the already pandemic-ravaged sector hard. The
second quarter of 2020-21 cooled forging industry comprises 85 per cent of MSMEs and directly employs
down to 13.3% after touching an over 3 lakh, with an equal number employed indirectly, making it the
all-time high of 20.9% during the second largest in the world after China. Steel prices have jumped by 25-
first quarter which witnessed 30 per cent in the past six months, putting the forging industry at serious
nationwide lockdown to contain risk, the Association of Indian Forging Industry said on Monday…
the spread of the pandemic. The
unemployment rate had stood at
8.4% in the corresponding…
3 4
India defers sale of state-run Record exports in July, 33 per
banks to next year cent of $400 billion FY22 aim
India’s plan to sell two state-
controlled lenders may get
met
Led by petroleum products, gems
5
deferred to next financial year as and jewellery, and engineering India's services exports at
the government is yet to seek goods, India’s exports rose 47.9% USD 19.72 billion in June:
parliament’s nod for changes in on-year to a record $35.17 billion in RBI data
laws required to start the July. Preliminary data released by India's services exports increased
transaction, according to people the government showed that 24.1 per cent month-on-month to
familiar with the matter. The India’s merchandise exports in July USD 19.72 billion in June 2021,
Finance Ministry hasn’t finalized were an increase of 34% over July the Reserve Bank of India said on
modalities to seek approval from 2019. Imports were at the second Monday. The exports stood at
lawmakers for the sale,… highest at $46.4 billion,… USD 17.35 billion in May and USD
17.54 billion in April. The RBI
further said imports in June were
6 7 valued at USD 11.14 billion, up
24.8 per cent on sequential basis.
Adani Wilmar files DRHP for Hiring activity rises 11 per The imports stood at USD 10.23
billion in May and USD 9.89
4,500-cr IPO cent in Apr-Jun; IT, financial
billion in the previous month…
Adani Wilmar Ltd (AWL), the services, BPO/ITeS drive
equal joint venture between demand: Survey
Adani Enterprises Ltd and Overall recruitment activity
Wilmar International Ltd and the witnessed an 11 per cent growth
owner of the Fortune brand of during April-June, as the job
edible oils, on Monday filed the market began showing signs of
draft red herring prospectus recovery from the COVID-19
(DRHP) for its proposed initial second wave, says a survey.
public offering (IPO), Adani According to the Indeed India
group flagship company… Hiring Tracker,…
3 August 2021 2
1QFY22 2 August 2021
India Strategy
BSE Sensex: 52,951 S&P CNX: 15,885
Motilal Oswal values your support 1QFY22 interim earnings review

in the Asiamoney Brokers Poll 2021
for India Research, Sales, Corporate In-line; management commentaries indicate recovery is setting in
Access and Trading team.
We request your ballot.
 108 MOFSL Universe and 31 Nifty companies have announced their results as of 31st
July’21. Companies that have reported earnings thus far comprise (a) 62% of est. PAT
for the MOFSL Universe, (b) 68% of est. PAT for the Nifty, (c) 56% of India's market
capitalization, and (d) 77% of the Nifty 50 index weight.
 The 1QFY22 earnings season has been in-line, benefitting from the lower base of
Refer to our June’21 1QFY21, as lockdowns in 1QFY22 were localized and less stringent v/s 1QFY21. Nifty
Quarter Preview profits for the 31 companies that have posted their results have grown 70% YoY (v/s
exp. 64% growth). On the other hand, for the 108 companies in the MOFSL Universe,
profit growth stood at 71% YoY (v/s exp. 70% growth). Among the sectors, Cement,
Metals, Healthcare, and O&G have outperformed; Autos, NBFC, and Capital Goods have
underperformed; and the performances of IT, Consumer, and Private Banks have been
in line with expectations. 25 companies from our Coverage Universe have seen
downgrades of >5%, while 22 have seen upgrades of >5%, leading to a 1:1 downgrade
to upgrade ratio.
 Marginal downward revision in Nifty EPS: Nifty EPS for FY22E/FY23E has seen a
marginal 1.1%/0.7% downgrade to INR725/INR862 (from INR733/INR868). 70% of the
FY22 downgrade has been driven by Tata Motors.
 Key drivers of 1QFY22 performance: [1] IT – This sector has reported one of the best
sequential performances, led by strong sequential revenue growth of 4.5% (USD) and
the highest ever deal pipeline, providing earnings visibility going forward. Management
commentaries have indicated a strong tech spending environment with an elevated
focus on cloud migration / digital transformation deals. [2] Cement – Strong price
realization and better cost control have driven performance in this sector. The volume
decline in northern/central India was lower than expected vis-à-vis southern India,
which had stricter lockdowns. [3] Autos – High RM inflation and operating deleverage
have impacted most of the results in 1QFY22. OEMs (MSIL, BJAUT, TTMT, and TVS) have
reported a commodity cost impact of 3–4pp QoQ.
 KEY SECTORAL INSIGHTS: [1] Technology: 1QFY22 marks the fourth quarter of robust
QoQ revenue growth; 8 of 13 companies have beaten our earnings expectations. Strong
demand has led to one of the highest ever headcount additions of 71k in 1Q in recent
history. [2] Cement: Cement companies’ earnings have been aided by strong price
realizations. Companies have offset higher power, fuel, and freight costs with higher
price realization and cost control. [3] Consumer: Most companies have reported
double-digit sales growth, albeit on a soft base, as companies were better prepared to
deal with the lockdowns. The performances of APNT, JUBI, UNSP, and UBBL have been
particularly robust despite the limitations. [4] Banks: Fresh slippage from the Retail
segment has impacted most private banks, although the impact on asset quality has
been less severe than that seen during the first wave. Banks, however, are carrying
additional provision buffers, which should limit the impact on credit cost.
Key 1QFY22 result highlights
 Nifty: Sales/EBITDA/PBT/PAT has come in at 48%/32%/70%/70% YoY (v/s est.
45%/29%/63%/64% YoY). 12 of 31 companies have beaten our PAT expectations, while
11 have missed.
3 August 2021 3
Refer to our 1QFY22  MOFSL Universe: Sales/EBITDA/PBT/PAT growth stands at 48%/40%/74%/71% YoY (v/s
Ownership analysis report est. 45%/36%/71%/70% YoY).
 The earnings downgrade/upgrade ratio is almost even at 1:1. 25 MOFSL Universe
companies have reported downgrades of more than 5% (of which 18 companies have
seen downgrades of more than 10%), while 22 have posted upgrades of more than 5%
v/s our FY22 estimates.
 Among the Nifty constituents, UltraTech Cement, Asian Paints, ICICI Bank, IndusInd
Bank, Sun Pharma, JSW Steel, IOC, Reliance Industries, Tech Mahindra, and Wipro have
exceeded our profit estimates. On the flip side, Bajaj Auto, Maruti Suzuki, Tata Motors,
L&T, ITC, Nestlé, SBI Life, Bajaj Finance, and Dr Reddy’s have missed our expectations.
 At the sector level within the MOFSL Universe, Retail, Cement, Consumer Durables,
Metals, and Oil & Gas have seen earnings upgrades of 10%, 6%, 5%, 5%, and 3%,
respectively. On the contrary, Automobiles, NBFC, Life Insurance, Utilities, Consumer
and Private Banks have seen earnings downgrades.
 View: After a strong FY21, earnings for FY22 have begun on a healthy note. 1QFY22
earnings are progressing in-line thus far. The damage from the second COVID wave and
the consequent lockdowns in April’21/May’21 has been much lesser than that from the
1QFY21 national lockdown. Management commentaries across the board suggest an
improved demand environment post June’21, led by the easing of restrictions, lower
active COVID-19 cases, and a pickup in vaccinations. However, the impact of rising
commodity costs and, in general, higher inflation is reflected in the P&L. Asset quality in
Financials has expectedly weakened sequentially. We estimate corporate earnings to
continue to recover, as the underlying economy opens up, with progressively higher
vaccination trends. That said, the Nifty now trades at 12M forward P/E of 20.5x and P/B
of 3x, above LPA. Thus, the risk-reward is relatively less lucrative in the near term. We
remain OW on BFSI, IT, Metals, Cement, and Capital Goods; Neutral on Consumer,
Auto, and Healthcare; and UW on Telecom, Energy, and Utilities.
Key sectoral trends from 1QFY22 earnings

 Technology: 1QFY22 has seen one of the best quarterly performances by Indian
IT services companies, with sequential revenue growth of 4.5% (USD).
Moreover, mid-tier IT companies have reported the highest ever growth
(aggregate growth >6%) during the quarter. Most companies have reported
moderately strong deal wins, with one of the highest ever pipelines, which
offers visibility on growth going forward. Furthermore, after a long gap, IT
services companies have started indicating pricing as a lever for specific skill
sets, which is very encouraging. Management commentaries have also
highlighted a strong tech spending environment, with a high focus on cloud
migration / digital transformation deals. The cumulative EBIT margin for our IT
Services Universe has dipped 80bps QoQ on account of wage hikes, employee
additions, and ramp-ups in deal wins. However, on a YoY basis, margins are still
up 120bps on account of lower travel expenses, increased offshoring, and
relatively higher utilization. The total headcount additions for 1Q stand at 71k –
the highest increase in recent history, despite a higher base. This provides
further assurance on sustained growth momentum in our IT Services Universe.
However, given the demand-led supply pressure in the lateral job market,
attrition in most of the companies has increased by more than 200bps
sequentially. We have seen an increase in guidance from some of the IT
companies. However, we believe that none of them are reflecting the growth
3 August 2021 4
momentum for FY22 and would revise their guidance through the course of the
year. We are confident that the sector would report growth in the high teens for
FY22. We have upgraded our earnings estimates for most of the tier 2 IT
companies by 3–15% for FY22/FY23 as we build in higher growth rates. Tier 1 IT
firms have seen downgrades in their estimates (barring Wipro and TechM) on
some moderations in margins – led by increasing supply pressures in the
industry and elevated operating metrics.
 Banks: While fresh slippage has spiked across banks, sluggish disbursements
have further resulted in muted trends in loan growth, particularly in Retail.
Although, deposit growth remains healthy. NII growth has been subdued, with
margins exhibiting mixed trends, impacted by weak loan growth, interest
reversals, and higher liquidity. Most banks have reported higher slippage driven
by Retail – AXSB/IIB/ICICBC saw ~84%/85%/94% slippage from the Retail
segment. However, while banks have reported sequential deterioration in their
asset quality ratios, the impact has been curtailed and much lower v/s the first
wave. Therefore, the GNPA ratio has increased in the range of 15–31bp across
banks. We expect gradual recovery in the growth momentum as economic
activity recovers. Collection efficiencies have also shown steady improvement
over Jun–Jul'21 and would help moderate the slippage run-rate, largely from
2HFY22. The restructuring book also remains controlled. Banks are carrying
additional provision buffers, which should limit the impact on credit cost. We
largely maintain our earnings estimate (+/-5% change) and maintain our
preference for ICICIBC and SBIN.
 NBFCs: Barring Shriram Transport, all other vehicle financiers have reported
sharp QoQ decline in new business volumes. After the deterioration witnessed
in May’21, collection efficiencies improved sharply for all lenders in Jun’21. The
quarterly repayment rate in 1QFY22 has moderated from the trend rate due to
the lockdowns and high delinquencies, leading to a lower loan-book run-off.
MMFS and CIFC have reported a fair share of restructuring (outstanding
between 3.5–5.0%), while restructuring has been minimal in SHTF (<1%
restructuring). Asset quality pains have also been more pronounced for MMFS
and CIFC relative to SHTF. Stress has also been seen in the 2W/3W Auto Finance
segment of Bajaj Finance. MSME lending has been impacted in 1QFY22 and
would recover to normal levels by Sep’21. Among the large HFCs, LICHF has seen
moderation in disbursements and loan-book growth. Asset quality pains have
been particularly pronounced for LICHF across product segments (including
Individual Home Loans). Affordable housing financiers have also resorted to
restructuring during the quarter, and the outstanding restructured pool for
them stands at 0.7–1.2%. While deterioration has been observed in the 1+dpd
metrics reported by the financiers, it is not alarming as such, especially
considering the sharp improvement seen in collection efficiencies in the second
half of Jun’21. Continuing decline in incremental cost of borrowings has led to
lower blended cost of funds; with no major yield pressure, this has translated
into stable to improving margins. The asset quality impact from the second
COVID wave has been the key monitorable, and some NBFCs have reported QoQ
decline in PCR on their Stage 3 assets. 1Q credit costs suggest FY22 credit costs
are likely to be higher than earlier estimated. However, it is reasonable to
3 August 2021 5
expect steady improvement in asset quality over the remainder of the fiscal
year. HDFC, CIFC, and MUTH remain our top picks.
 Consumer: Among the results declared thus far, consumer companies have
delivered sales growth either above or in line with our expectations. None have
posted a miss. APNT, ITC, BRIT, UNSP, UBBL, and JYL have delivered sales beats,
while HUVR, NEST, MRCO, CLGT, and JUBI have delivered in-line sales
performances. All of the companies have reported double-digit sales growth,
albeit on a soft base (due to COVID-led lockdowns). With the second COVID
wave impacting both rural and urban markets in 1QFY22, the consequent
lockdowns and somber consumer sentiment have halted the strong recovery
trend of the previous two quarters. While demand for essentials has remained
intact, discretionaries have been affected amid reduced consumer mobility due
to the lockdowns. Nevertheless, the companies are much better prepared to
handle the disruption this year vis-à-vis last year. The performances of APNT,
JUBI, UNSP, and UBBL have been particularly robust despite the limitations.
With high commodity inflation during the quarter, most companies’ gross
margins have contracted despite some price hikes taken. Additionally, the
revival of ad spends means there has been considerable pressure on EBITDA
margins. This has been partially offset by cost savings undertaken in the
previous quarters due to COVID. With the number of COVID cases steadily
dwindling as well as focused vaccination drives, the managements are optimistic
about recovery trends and the upcoming festive season. With the better-than-
sales performance observed, we have raised our earnings estimates for some of
the companies. However, commodity inflation trends lead us to maintain or cut
our earnings estimates for the other companies.
 Auto: RM cost inflation and operating deleverage have impacted most of the
results in 1QFY22. OEMs (MSIL, BJAUT, TTMT, and TVS) have reported a
commodity cost impact of 3–4pp QoQ, partially offset by price hikes (of 1–2%)
and cost-cutting initiatives. As a result, gross margins (ex-JLR) have contracted
35bp and EBITDA margins (ex-JLR) 370bp sequentially. Most of the OEMs’
commentaries have been focused on demand revival from Jun’21. The
resumption of economic activities pan-India, aided by vaccinations drives and
normal monsoons, would support demand recovery for Autos. PVs continue to
remain in a sweet spot due to the order books. Currently, domestic 2W demand
is seeing slow recovery; however, it is expected to improve with the upcoming
festive season. 2W exports would sustain the momentum. Commodity cost
pressure is likely to remain elevated for 2QFY22, but would normalize from
2HFY22. OEMs are walking a thin line with passing on the increase in costs as
price increases and managing the current demand situation.
 Cement: 1QFY22 results have been impressive thus far on the margin front, led
by strong realization and better cost control. Sequential volume de-growth has
been lower than expected in companies with high exposure to northern/central
India. On the other hand, volume decline in companies with high exposure to
southern India has been higher than expected. Among the companies that have
reported thus far, ACC / Ambuja / UltraTech / JK Lakshmi has stood out, clocking
EBITDA growth of 50–67% YoY on higher realization and strong cost control.
Volume de-growth has been slower v/s our estimates. However, players with
3 August 2021 6
higher exposure to the southern region (Dalmia Bharat and The Ramco
Cements) have reported higher sequential volume decline of 25–35% due to
more stringent lockdowns in the region, thus missing our EBITDA estimate of
10–19%. Hence, aggregate EBITDA growth of 52% YoY has been driven by a) 43%
YoY volume growth, driven by lower-than-anticipated sequential decline in
volumes in the eastern, central, and northern regions, b) ~3% YoY realization
growth on strong pricing across regions, and c) beats on margins, driven by
higher realization and continued cost control – partially offset by negative
operating leverage, higher power and fuel costs, and freight costs. Cash flow
generation has been impacted by (a) 21% QoQ decline in volumes due to the
second wave of the pandemic and (b) inventory buildup, as companies have
positioned themselves for the monsoons. However, the deleveraging has
continued as UltraTech has reduced its net debt by INR7b to INR59.8b; Dalmia
has reduced its gross debt by INR4.8b and is virtually a net-debt-free company
(with net debt of just INR2.3b at 1QFY22-end).
 Metals: Only JSW Steel, Hindustan Zinc, and Vedanta have thus far reported
results among the steel/non-ferrous companies. Steel volumes have been weak,
as expected, due to local lockdowns impacting demand and congestion at ports
limiting exports. However, the realization growth (+20% QoQ) reported by JSW
Steel came in higher than expected. JSW Steel has reported a 9%/15% beat on
our EBITDA/PAT estimates, with 22%/38% QoQ growth to INR102.7b/INR59.0b.
EBITDA/t, on the other hand, has jumped 33% QoQ to a record-high of
INR26,291/t. However, deleveraging has been restricted by an increase in
working capital and higher capex spending. On the non-ferrous front, while
Hindustan Zinc has reported in-line results, its profitability has been impacted by
a lower volume off-take and cost inflation. Vedanta has also reported in-line
results. However, VEDL’s Aluminum segment has been the standout with
record-high margins of 945/t (+36% QoQ). We expect other steel companies and
aluminum companies to also report strong margins. The near-term outlook for
the sector remains strong, driven by higher prices of steel and base metals such
as aluminum and zinc.
In-line performances; commentaries getting better

 Aggregate performance for MOFSL Universe: Sales/EBITDA/PBT/PAT growth
stands at 48%/40%/74%/71% YoY (v/s est. 45%/36%/71%/70% YoY).
 Top companies that have beaten MOSL estimates: UltraTech Cement, Asian
Paints, ICICI Bank, Sun Pharma, JSW Steel, IOC, Reliance Industries, Tech
Mahindra, and Wipro.
 Top companies that have missed MOSL estimates: Bajaj Auto, Maruti Suzuki,
Tata Motors, L&T, ITC, Nestlé, SBI Life, Bajaj Finance, and Dr Reddy’s .
 Top FY22E upgrades: IOC (22%), JSW Steel (13%), UltraTech Cement (6%), Wipro
(6%), and Sun Pharma (5%).
 Top FY22E downgrades: Tata Motors (-77%), Maruti (-13%), Bajaj Finance (-
11%), SBI Life (-8%), and Axis Bank (-5%).
3 August 2021 7
3 August 2021
1QFY22 Results Update | Sector: Financials
HDFC
Estimate change CMP: INR2,462 TP: INR3,290 (+34%) Buy
TP change
Rating change
Core operating profit in-line; commentary suggests healthy
recovery from second wave impact
Motilal Oswal values your support in the
 HDFC’s core PBT grew 12% YoY to INR32.2b (5% beat). NII (ex-assignment
Research, Sales, Corporate Access and income) at INR41.3b was 2% above our estimate. On the other hand,
Trading team. We request your ballot. provisions at INR6.9b were lower than our est. of INR8b. Better-than-expected
MTM gains on investment led to an 11% beat on reported PAT (down 6% QoQ
/ 2% YoY).
 Strong disbursement growth (on a low base) of 181% YoY, stable QoQ spreads
at 2.3%, 26bp QoQ deterioration in GNPA to 2.24%, and an increase of 30bp
Bloomberg HDFC IN QoQ in Stage 2 assets were some of the operational highlights for the quarter.
Equity Shares (m) 1,721
 We increase our FY22E/FY23E estimates by 7–8%, factoring in higher NII and
M.Cap.(INRb)/(USDb) 4446.3 / 59.8
non-core income. We expect HDFC to report core RoA/RoE of 2%/13% over
52-Week Range (INR) 2895 / 1623
1, 6, 12 Rel. Per (%) -1/-14/-3 FY22–23E. Reiterate Buy, with SOTP-based TP of INR3,290 (FY23E SOTP-
12M Avg Val (INR M) 9955 based).
Disbursements recover sharply over Jun–Jul’21; loan mix largely stable
Financials & Valuations (INR b)  The recovery in disbursements was much stronger than expected at the
Y/E March 2021 2022E 2023E start of the second COVID wave. July’21 disbursements were the third
Core PPoP 146.5 170.9 191.6 highest ever and the highest ever in a non-quarter month-end. Overall
Adj. PAT 106.9 127.8 144.2
individual AUM grew 2% QoQ / 14% YoY to INR4.5t. The share of individual
Adj. EPS (INR) 54.5 63.7 71.6
loans was up ~100bp QoQ to 78.3% (the highest ever).
EPS Gr. (%) 10.8 16.9 12.4
609.3 656.3 709.7
 Non-Individual segment AUM declined ~4% QoQ and ~9% YoY. Growth in
BV/Sh. (INR)
ABV/Sh. (INR) 475.9 522.9 576.3 this segment was partially impacted by pre-payments in LRD due to the
Core RoA (%) 1.9 2.0 2.0 listing of REITs, leading to a run-off of AUM. Also, because construction
Core RoE (%) 12.7 12.8 13.0 activity was impacted during the lockdowns, even the disbursements in
Payout (%) 40.0 44.1 44.1 construction finance suffered in 1QFY22. Overall AUM grew +1% QoQ / 8%
Valuation YoY to INR5.74t.
AP/E (x) 23.5 17.4 12.6  The company assigned loans worth INR55b during the quarter v/s INR14b
P/BV (x) 4.0 3.8 3.5
YoY. The corresponding assignment income stood at INR2.7b (v/s INR4.4b
AP/ABV (x) 2.7 2.1 1.6
QoQ and INR1.8b YoY).
Div. Yield (%) 0.9 1.2 1.3
GNPLs at 2.24% | Stage 2 loans up QoQ | Restructuring under RBI OTR
Shareholding pattern (%) 2.0 at 15bp of AUM
As On Jun-21 Mar-21 Jun-20  The overall GNPL ratio increased 26bp QoQ to 2.24%. This was more
Promoter 0.0 0.0 0.0 pronounced for the individual book, which saw 38bp QoQ deterioration in
DII 16.6 16.3 18.5 GNPA. However, the corporate book witnessed just a 10bp increase in the
FII 72.2 72.8 70.2 GNPL ratio to 4.87%.
Others 11.2 10.9 11.3  Stage 2 loans increased 30bp QoQ to 6.64% on some proactive downgrades
FII Includes depository receipts
and restructured advances classified under Stage 2. On a YoY basis, Stage 2
was up 133bp.
 During the quarter, the company restructured loans worth INR7.78b
(15bp of AUM). ~62% of the restructured advances is from the Non-
Individual segment and largely pertains to just one account, which forms
~50bp of AUM.
 The company continues to maintain elevated provisions. The total buffer
stands at ~2.64% of loans.
 In Jul’21, for the Individual Lending business, collection efficiency (CE)
stood at 98.3% v/s 98.0% in Mar’21.
3 August 2021 8
Healthy margins; lower liquidity on balance sheet reduces negative carry
 Overall spreads were sequentially stable at 2.3%; reported NIMs improved 20bp
QoQ to 3.7%, while calculated NIMs were stable. The average daily balance in
liquid funds was INR152b in 1Q v/s INR157b QoQ.
 While individual spreads were stable QoQ at 1.93%, non-individual spreads
improved to 3.32% (v/s 3.22% for FY21).
 Total borrowings were largely flat at INR4.4t. The share of deposits in total
borrowings inched up ~105bp QoQ to ~35.1%. Total deposits were up ~2% QoQ
to INR1.54t.
Highlights from management commentary

 ECLGS of INR13.9b was disbursed up to Jun’21. Many of these loans are
classified as Stage 2. It received applications worth INR2.66b (~5bp of AUM)
under ECLGS 3.0.
 HDFC is optimistic about reducing credit costs in the coming years, driven by
provision reversals/write-backs on customer accounts, where it has
conservatively made provisions.
 All collection efforts are now online, and currently, there are restrictions on
resorting to legal means through SARFAESI.
Other highlights
 The average size of individual loans disbursed in 1QFY22 stood at INR3.09m
(INR2.95m in FY21). An uptick was seen in the average ticket size and was
attributable to demand for higher end properties, especially in metro cities.
 In 1QFY22, ~33%/14% of home loans approved in volume/value terms was to
customers from the Economically Weaker Sections (EWS) and Low Income
Groups (LIG). Average home loans to the EWS/LIG segment stood at
INR1.11m/INR1.93m.
 CAR remains healthy at 22.0%, with Tier I of 21.3%. RWA declined marginally to
INR3.97t (v/s INR4.0t in 4QFY21) on account of a higher proportion of individual
loans in the mix.
Valuation and view

1QFY22 was a decent quarter on the operational front, despite the impact on
disbursements in Apr/May’21. Disbursements picked up MoM in Jun/Jul’21, far
exceeding YoY levels. With declining cost of funds and a reduction in excess liquidity
on the balance sheet, margins should be stable despite pressure on retail lending
yield due to continued aggression from banks in the Mortgage space. Reported CE
trends in Jul’21 were encouraging and better v/s Mar’21 levels. With provisions
>GNPLs, we believe the company has made more-than-adequate provisions for any
potential asset quality slippage in the ensuing quarters. We increase our core
PBT/PAT estimate for FY22/FY23E by 7–8% to factor in higher NII and fee income.
We expect HDFC to report core RoA/RoE of 2%/13% over FY22–23E. Reiterate Buy,
with SOTP-based TP of INR3,290 (FY23E SOTP-based).
3 August 2021 9
HDFC: Quarterly Performance INR b
Y/E March FY21 FY22E 1Q v/s Exp
FY21 FY22E
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q FY22E (%)
Interest Income 112 110 108 106 106 110 113 116 436 445 107 0
Interest Expense 78 74 68 66 65 67 69 71 286 271 66 -2
Net Interest Income 33 36 40 40 41 43 44 45 150 173 40 2
YoY Change (%) 9.7 22.1 24.6 13.7 23.7 18.6 10.1 12.2 17.4 15.8 20.9
Assignment Income 2 2 4 4 3 3 4 4 12 14 3 -14
NII (including assignment income) 35 38 44 45 44 46 48 49 162 187 43 1
YoY Change (%) 5.4 17.0 30.5 18.1 24.8 22.3 8.4 10.5 17.8 15.8 23.4
Other Operating Income 0 1 1 1 1 1 1 1 3 3 1
Core Income 36 38 45 46 45 47 49 50 164 190 44 1
YoY Change (%) 4.9 17.1 29.9 17.3 24.9 21.7 8.5 10.4 17.4 15.6 23.7
Operating Expenses 4 4 5 5 6 5 4 5 18 19 5 3
YoY Change (%) 3.8 -3.5 39.9 41.1 38.9 37.8 -21.1 -9.1 20.0 7.5 35.5
Core Operating profits 32 35 39 41 39 42 44 46 146 171 39 1
YoY Change (%) 5.0 19.8 28.6 14.9 23.1 20.0 12.5 12.7 17.0 16.7 22.2
Provisions 3 4 6 7 7 6 6 5 20 24 8
Core PBT 29 30 34 33 32 36 39 41 126 147 31 5
YoY Change (%) 6.4 14.9 20.9 19.0 12.0 17.5 16.1 21.5 15.4 16.9 7.0
Profit on Sale of Inv./MTM on Inv. 13 2 4 5 7 2 2 2 24 11 3
Dividend income 3 3 0 1 0 5 4 3 7 12 0
One off expense/Prov -9 0 0 0 0 0 0 0 -9 0 0
Other Income 0 0 0 0 0 0 0 0 0 0 0
PBT 36 35 38 39 39 42 44 45 148 171 34 15
YoY Change (%) -9.5 -22.0 -59.0 45.7 8.3 19.7 18.6 14.9 -27.2 15.4 -6.2
Provision for Tax 6 7 8 7 9 8 8 9 28 34 7 34
PAT 31 29 29 32 30 34 36 36 120 137 27 11
YoY Change (%) -4.7 -27.6 -65.1 42.4 -1.7 19.3 23.2 14.6 -32.3 13.7 -11.3
E: MOFSL Estimates
3 August 2021 10
2 August 2021
1QFY22 Results Update | Sector: Utilities
NTPC
Estimate change CMP: INR118 TP: INR140 (+19%) Buy
TP change
Rating change
Profits in-line, aided by other income
To see steady growth, led by capacity additions; maintain Buy
Asiamoney Brokers Poll 2021 for India  NTPC’s 1QFY22 results highlight a steady performance – given the
Research, Sales, Corporate Access and regulated business and aided by other income. S/A adj. PAT (excl. FC u/r)
was broadly flat YoY at INR33.1b.
 NTPC has set a RE capacity target of 60GW by 2032. While this may seem
ambitious (implying 5–5.5GW p.a. of RE additions over the next 11 years),
the co. has taken steps to improve its renewable footprint. ~3GW of
Bloomberg NTPC IN renewable capacities are under construction and expected to be
Equity Shares (m) 9,895 commissioned over the next two years. Even as the co. gradually scales up
M.Cap.(INRb)/(USDb) 1142.3 / 15.4 its renewables journey, we expect continued capitalization for its thermal
52-Week Range (INR) 122 / 78
1, 6, 12 Rel. Per (%) 0/19/-5
projects to drive 12% growth in regulated equity over FY21–23E. Maintain
12M Avg Val (INR M) 2881 Buy, with DCF-based TP of INR140.
Profits aided by other income
Financials & Valuations (INR b)  Adj. for one-offs, NTPC's S/A PAT (excl. FC u/r) was broadly flat YoY at
Y/E MARCH 2021 2022E 2023E
INR33.1b (our estimate: INR33.7b) on the back of higher other income.
Sales 1,134 1,248 1,344
EBITDA 358.8 392.1 429.9 Other income at S/A was up 35% YoY to INR7.6b (estimate: INR5.1b) and
Adj. PAT 152.0 154.9 170.4 was boosted by dividends of INR3b from subs and JVs. LPS was lower at
EBITDA Margin (%) 31.6 31.4 32.0 INR2.65b v/s INR4.73b in the previous year. Adjusted for the dividends
Cons. Adj. EPS (INR) 15.7 16.0 17.6
from subs and JVs, PAT nos. (excl. FC u/r) would be INR30.6b.
EPS Gr. (%) 13.6 1.9 10.0
BV/Sh. (INR) 129.7 137.5 145.4  Commercial capacity was up 25MW QoQ to 64.5GW, led by the
Ratios commercialization of solar capacities.
Net D:E 1.6 1.5 1.4  FC under-recoveries stood at INR1.9b (v/s est. INR1.8b and INR2.25b in the
RoE (%) 12.4 12.0 12.4
previous year). FC under-recoveries were led by Simhadri (INR1.1b) and
RoCE (%) 7.4 7.0 7.5
Payout (%) 39.2 43.8 48.4 Rihand (INR0.5b). Plant availability factors at coal-based plants were
Valuations marginally down YoY to 93.7% (v/s 95.8% in the previous year).
P/E (x) 7.5 7.4 6.7  PLF at coal-based plants rose to 69.7% (v/s 58.2% in the previous year). PLF
P/BV (x) 0.9 0.9 0.8
incentives stood at INR1.7b v/s INR1.4b in the previous year.
EV/EBITDA(x) 8.8 7.9 7.2
Div. Yield (%) 5.2 5.9 7.2  Reported S/A PAT was up 27% YoY to INR31.5b. The jump in reported nos.
is attributable to the impact of INR8b in rebates in the previous year.
Shareholding pattern (%)  Profit from JVs was higher at INR2b (v/s INR1.3b in the previous year), led
As On Jun-21 Mar-21 Jun-20 by better profits at Meja.
Promoter 51.1 51.1 51.0  At the consolidated level, reported profits were up 17% YoY to INR34.5b,
DII 33.0 34.1 34.7
while adjusted profits would be down 5% YoY to INR34.6b.
FII 13.1 11.9 11.4
 Profit for THDC was lower at INR0.48b (v/s INR1.25b in the previous year)
Others 2.8 2.9 2.9
FII Includes depository receipts due to lower water availability. Profits at NEEPCO were higher at INR1.2b
(v/s <INR0.1b in the previous year) due to the commissioning of Kameng.
 S/A receivables declined 28% YoY to INR189b (68 days of sales v/s 99days in
the previous year).
Management commentary highlights
 NTPC is focused on transitioning to renewables and plans to spearhead new
technologies such as green hydrogen. It is undertaking a pilot project at
Vindhyanchal for green hydrogen, with potential cost of <USD3/kg.
3 August 2021 11
 The co. is also exploring opportunities for power distribution and manufacturing
methanol from CO2. It would compete in the bid for the privatization of the
Chandigarh DISCOM.
 The co. plans to reach RE capacity of 15GW by FY24 and 60GW by 2032.
Upcoming bids in the market, along with tie-ups for solar parks / UMREPP would
provide the basis for growth.
 NTPC is looking to monetize its a) renewables subsidiary and b) NVVN (power
trading sub) over the next 18 months – it has commenced work on the same.
Valuations remain attractive; reiterate Buy
 NTPC plans to reach RE capacity of 60GW by 2032. While this seems ambitious,
the co. has taken steps on improving its renewable footprint. The co. has
emerged as the lowest bidder for 1.9GW of competitively bid out renewable
projects, and ~3GW of renewable capacities are under construction.
 Even as the co. gradually scales up its renewables journey, we expect continued
capitalization for its thermal projects to drive 12% growth in regulated equity
over FY21–23E. Receivables have reduced significantly as money from PFC-REC
has come through and power demand continues to recover. The stock trades
attractively at FY23E P/BV of 0.8x and dividend yield of 7%. Maintain Buy, with
DCF-based Target Price of INR140/share.
Quarterly Performance (standalone) – INR b

Y/E March FY21 FY22E FY21 FY22 FY22 var.
1Q 2Q 3Q 4Q 1Q 2QE 3QE 4QE 1QE (%)
Sales 242.6 250.2 254.3 262.7 268.3 296.0 292.3 263.1 1,010 1,120 273.6 -2
Change (%) -1.8 5.9 1.3 -9.7 10.6 18.3 14.9 0.1 -1.5 10.9 12.8
EBITDA 85.5 75.3 82.9 62.2 82.3 84.3 87.7 82.0 305.8 336.3 90.3 -9
Depreciation 25.3 25.3 25.6 28.0 26.8 27.7 28.0 26.6 104.1 109.1 28.2
Interest 20.8 17.7 20.1 15.9 19.9 18.7 21.2 24.4 74.6 84.2 22.7
Other income 5.7 13.5 7.6 16.7 7.6 4.6 5.2 4.7 43.5 22.1 5.1 49
Exceptional -8.0 -5.6 0.0 0.0 0.0 0.0 0.0 0.0 -13.6 0.0 0.0
PBT 37.0 40.1 44.8 35.0 43.3 42.5 43.7 35.6 156.9 165.1 44.5 -3
Tax 12.3 5.1 11.7 -9.8 11.8 10.7 11.0 1.1 19.3 34.7 11.2
PAT 24.7 35.0 33.2 44.8 31.5 31.8 32.7 34.4 137.7 130.4 33.3 -6
Change (%) -5.1 7.4 10.7 257.6 27.3 -9.3 -1.5 -23.1 36.2 -5.3 34.8
Adj. PAT (excl. FC u/r) 33.2 41.6 33.7 38.6 33.1 32.2 33.1 33.8 147.0 132.1 33.7 -2
Change (%) 22.7 19.7 16.1 17.0 -0.4 -22.5 -1.8 -12.4 18.8 -10.1 1.5
Source: MOFSL, Company
3 August 2021 12
2 August 2021
1QFY22 Results Update | Sector: Consumer
Britannia Industries
TP change
Rating change
Sales momentum healthy; ICD reduction a significant positive
 Britannia Industries (BRIT) reported flat sales and volume growth YoY in
Asiamoney Brokers Poll 2021 for India 1QFY22, despite an extremely high base of ~27% sales growth (and 21%
Research, Sales, Corporate Access and volume growth), well ahead of expectations. Importantly, it achieved this
despite no major pantry loading during the second COVID wave lockdowns.
 While margins were below expectations – leading to in-line EBITDA and PAT,
despite a significant sales beat – the outlook is better going forward, with
calibrated price increases.
 The key positive in the post-results call was the announcement of a sharp
Bloomberg BRIT IN
Equity Shares (m) 240
reduction in group inter-corporate deposits (ICDs) to INR4.7b at end-Jun’21
M.Cap.(INRb)/(USDb) 843.9 / 11.4 from INR7.9b in Mar’21 – these levels were last seen in FY18. Given that
52-Week Range (INR) 3990 / 3306 higher group ICD levels were a significant overhang on the stock, such a
1, 6, 12 Rel. Per (%) -2/-6/-49 sharp reduction, if sustained, would lead to a re-rating.
12M Avg Val (INR M) 2393  The stock trades at inexpensive multiples of 39.7x FY23E EPS, a significant
discount to the domestic Staples peer average – despite BRIT’s superior
Financials & Valuations (INR b) earnings track record, a stronger potential for topline and earnings growth,
Y/E March 2021 2022E 2023E and significantly higher RoE levels (over 40%). Maintain BUY.
Sales 131.4 139.4 158.5
Sales Gr. (%) 13.2 6.1 13.8 Flat sales healthy given extraordinary base; lower margins lead to
EBITDA 25.1 23.9 29.1 in-line EBITDA and PAT
Margins (%) 19.1 17.1 18.3  BRIT’s consolidated sales were flat YoY at INR34b (est. INR31.1b) in
Adj. PAT 18.5 17.2 21.3 1QFY22. Consolidated EBITDA declined 22.8% YoY to INR5.5b (in-line).
Adj. EPS (INR) 76.8 71.4 88.3
Consolidated PBT fell 28% YoY to INR5.3b (in-line). Consolidated adjusted
EPS Gr. (%) 31.0 -7.1 23.7
147.3 198.3 216.0
PAT declined 28.7% YoY to INR3.9b (in-line).
BV/Sh.(INR)
Ratios  Growth in the base business volume came in at 1% in 1QFY22 (est. -10%).
RoE (%) 46.5 41.3 42.6  The consolidated gross margin contracted 300bp YoY to 38.7%.
RoCE (%) 29.2 26.0 28.5  Higher staff costs (+10bp YoY) and other expenses (+160bp YoY) resulted in
Payout (%) 80.0 80.0 80.0 a 470bp YoY contraction in the EBITDA margin to 16.3% (est. 17.5%).
Valuations
P/E (x) 45.6 49.1 39.7 Highlights from management commentary
P/BV (x) 23.8 17.7 16.2  It continued to gain market share in 1QFY22 as well.
EV/EBITDA (x) 33.3 34.3 28.1  While wheat and sugar costs showed a flattish / marginally declining trend,
Div. Yield (%) 1.8 1.6 2.0
sharp inflation in milk, palm oil, and packaging costs led to inflationary
pressure of 6–7% on the overall material cost basket.
Shareholding pattern (%)
As On Jun-21 Mar-21 Jun-20  While the management was cautious of price increases in a volatile demand
Promoter 50.6 50.6 50.6 environment, it is now starting to take calibrated increases.
DII 11.2 11.2 12.7  Margin improvement would continue consistently YoY. The sharp increase
FII 18.4 18.0 14.7 in FY21 was an exception.
Others 19.9 20.3 22.1  50:50 Potazos was launched in the Northeast region to a good response and
FII Includes depository receipts would soon be rolled out pan-India within the next 3–4 months.
Valuation and view
 Changes to the model have resulted in a ~6% reduction to our FY22 EPS
estimates on account of near-term margin pressure. Our FY23E estimates
remain unchanged.
3 August 2021 13
 As highlighted in our upgrade note, the base would be far less challenging in
subsequent quarters, and the longer term opportunity is extremely attractive.
 The stock trades at an inexpensive valuation of 39.7x FY23E given a) ~31% EPS
growth in FY21, b) a strong track record of ~20%/27% EPS growth in the
preceding 5/10 years ended FY20, c) one of the best-of-breed structural growth
opportunities in the sector, and d) best-of-breed RoE of over 40%. This is at a
substantial discount to its historical three-/five-year average of 46x/48x and
average domestic Staples peer valuations. Maintain BUY, with TP of
INR4,370/share, targeting 46x Sep’23E EPS (three year historical average).
Consol. Quarterly Performance (INR m)

Y/E March FY21 FY22 FY21 FY22E FY22 Variance
1Q 2Q 3Q 4Q 1Q 2QE 3QE 4QE 1QE (%)
Base business volume growth (%) 21.0 9.0 3.0 8.0 1.0 4.0 9.0 8.0 10.0 3.9 -10.0
Net Sales 34,207 34,191 31,656 31,308 34,035 35,559 35,138 34,631 1,31,361 1,39,363 31,128 9.3
YoY change (%) 26.7 12.1 6.1 9.2 -0.5 4.0 11.0 10.6 13.2 6.1 -9.0
Gross Profit 14,248 14,540 13,642 12,671 13,170 14,401 14,758 14,975 55,100 57,304 12,763
Margins (%) 41.7 42.5 43.1 40.5 38.7 40.5 42.0 43.2 41.9 41.1 41.0
EBITDA 7,169 6,754 6,115 5,054 5,538 5,926 6,158 6,242 25,093 23,864 5,463 1.4
Margins (%) 21.0 19.8 19.3 16.1 16.3 16.7 17.5 18.0 19.1 17.1 17.5
YoY growth (%) 81.7 37.2 21.8 11.3 -22.8 -12.3 0.7 23.5 36.1 -4.9 -23.8
Depreciation 480 485 486 528 491 520 540 571 1,979 2,121 530
Interest 256 298 318 237 342 400 450 728 1,109 1,920 350
Other Income 937 735 826 632 605 800 850 899 3,129 3,153 700
PBT 7,370 6,706 6,137 4,921 5,310 5,806 6,018 5,842 25,134 22,976 5,283 0.5
Tax 1,944 1,750 1,611 1,326 1,442 1,463 1,517 1,362 6,630 5,783 1,331
Rate (%) 26.4 26.1 26.2 26.9 27.2 25.2 25.2 23.3 26.4 25.2 25.2
Adjusted PAT 5,427 4,956 4,526 3,595 3,868 4,343 4,502 4,480 18,504 17,193 3,951 (2.1)
YoY change (%) 105.4 22.7 22.5 -3.5 -28.7 -12.4 -0.5 24.6 31.2 -7.1 -27.2
E: MOFSL Estimates
3 August 2021 14
3 August 2021
1QFY22 Results Update | Sector: Agri
PI Industries
TP change
Rating change Broadening its horizon with API acquisition
Earning below estimates, but strong show on high base
 PI Industries (PI)’s operating performance during the quarter was impacted
Research, Sales, Corporate Access and by one-time expenses pertaining to (i) COVID management, (ii) consulting
fees, and (iii) other costs related to various strategic projects. Thus, despite
this, the company reported EBITDA growth of 9% on the high base of last
year.
 PI acquired the Active Pharma Ingredient (API) business division of lnd Swift
Laboratories Limited (ISLL) for INR15.3b, thereby marking its foray into the
Bloomberg PI IN
Pharma segment. The API business of ISLL has a diversified portfolio of 20+
products, with a leadership position (global Top 5) in several of them, and a
M.Cap.(INRb)/(USDb) 503.5 / 6.8
good R&D product pipeline. The acquisition is the right fit for PI considering
52-Week Range (INR) 3355 / 1780
1, 6, 12 Rel. Per (%) 9/54/48
the quality of the asset, approvals of the facility, current product portfolio,
12M Avg Val (INR M) 1029 and pipeline of products. Thus, PI could leverage its knowledge in process
chemistry and its operating efficiency to expand into the Pharma space. On
Financials & Valuations (INR b)
an FY21 basis, PI has acquired at EV/EBITDA of 7.6x and PE of 17.8x (v/s
Y/E Mar 2021 2022E 2023E 68.3x for PI).
Sales 45.8 55.8 75.0  We increase our earnings estimate for FY23E by 4%, factoring in the
EBITDA 10.1 12.8 18.3 acquisition based on the details currently available – which would be
PAT 7.4 9.6 13.1
revisited once there is more clarity on the same. Maintain Buy, with TP of
EBITDA (%) 22.1 22.9 24.3
EPS (INR) 48.6 63.2 86.0
INR3,720.
EPS Gr. (%) 61.7 30.2 36.1
BV/Sh. (INR) 351 408 488 CSM drives revenue growth; one-time cost dents EBITDA margin
Ratios  Revenue stood at INR11.9b (est. INR13.1b) in 1QFY22, up 13% YoY. EBITDA
Net D/E (0.4) (0.2) (0.2)
stood at INR2.5b (est. INR2.7b), up 9% YoY. The EBITDA margin contracted
RoE (%) 18.5 16.6 19.2
RoCE (%) 17.3 16.2 18.9 80bp YoY to 20.8% (est. 20.3%) on higher employee and other expenses.
Payout (%) 10.3 10.3 7.6 The gross margin stood at 43.8% (+170bp YoY) due to a change in the
Valuations product mix. Adjusted PAT was up 29% YoY to INR1,872m (est. INR2,100m).
P/E (x) 68.3 52.5 38.6  Overhead costs increased 26% YoY, largely due to one-time expenses
EV/EBITDA (x) 48.5 39.3 27.4
pertaining to COVID management and consulting fees and other costs
Div Yield (%) 0.2 0.2 0.2
FCF Yield (%) 0.3 (1.9) 0.7 pertaining to several strategic projects.
 CSM revenue increased 31% YoY (to INR8b) in 1QFY22, led by strong volume
Shareholding pattern (%) growth in key products.
Jun-20 Mar-20 Jun-19  Revenue for domestic Agrochemicals de-grew 13% YoY (to INR3.9b),
Promoter 51.4 51.4 51.4 impacted by a higher base and delayed monsoons.
DII 19.1 21.6 17.8  The order book stood at ~USD1.5b (flat QoQ), which provides higher
FII 11.8 12.2 14.1
visibility for sustainable growth over the next three years.
Others 17.7 14.8 16.7
Note: FII includes depository receipts
Highlights from management interaction
 Three new products were commercialized in CSM in 1QFY22 and >30 active
inquiries were made at different stages. Six new molecules are scheduled to
be commercialized in FY22. The commissioning of three new molecules is in
progress.
3 August 2021 15
 Product research efforts yield results: PI has got two promising leads – one for a
novel fungicide and another for a novel broad-spectrum insecticide, with sizable
potential market opportunity in progressing to the development phase. Both
have shown promising results in the initial evaluations. Currently, discussions
are underway with global innovators for the development partnership.
 Launches in the domestic business: Three new products are expected to be
launched in 2Q, which would strengthen its position in Rice, Cotton, and
Horticulture portfolio.
 Capex stood at INR710m for 1QFY22 and spend of INR3,500m is targeted for
FY22.
Valuation and view

 The company has levers in place to sustain the near-term growth momentum,
led by a) ramp-up in operations at two multi-purpose plants (MPP), which
commenced in FY21, and plans for one new MPP to be commercialized by
2QFY22; b) revenue from the Isagro acquisition; c) sustained growth momentum
in the CSM business on account of a strong (USD1.5b) order book, the increasing
pace of commercialization of new molecules, and sales buildup in existing
molecules; and d) product launches in the domestic market (three new launches
in 2QFY22) providing earnings visibility.
 PI acquired the API business division of lnd Swift Laboratories Limited (ISLL) for
INR15.3b, thereby marking its foray into the Pharma segment. The acquisition is
the right fit considering the quality of the asset, approvals of the facility, current
product portfolio, and pipeline of products. Thus, PI could quickly leverage its
knowledge in process chemistry and its operating efficiency to expand into the
Pharma space. On an FY21 basis, PI has acquired at EV/EBITDA of 7.6x and PE of
17.8x (v/s 68.3x for PI). We await further details on the scale-up of the
acquisition.
 The stock has traded at an average of 33x over the last three years on a one-
year forward basis. We ascribe 40x P/E after considering the strong growth
outlook for existing businesses and its acquisition in the Pharma segment –
which adds up to the opportunity size PI currently caters to, providing a long
runway for growth.
 We expect a revenue/EBITDA/PAT CAGR of 28%/34%/33% over FY21–23E.
 We increase our earnings estimates for FY23E by 4%, factoring in the acquisition
based on the details currently available – which would be revisited once there is
more clarity on the same. We value the stock at 40x Sept’23 EPS to arrive at TP
of INR3,720. Maintain Buy.
3 August 2021 16
Quarterly Earnings Model (INR m)
Y/E March FY21 FY22 FY21 FY22 FY22 Var
1Q 2Q 3Q 4Q 1Q 2QE 3QE 4QE 1QE (%)
Net Sales 10,601 11,577 11,621 11,971 11,938 13,958 13,436 16,461 45,770 55,793 13,076 -9
YoY Change (%) 40.6 27.6 36.7 40.0 12.6 20.6 15.6 37.5 36.0 21.9 23.3
Total Expenditure 8,309 8,776 8,866 9,697 9,449 10,611 10,259 12,713 35,648 43,033 10,421
EBITDA 2,292 2,801 2,755 2,274 2,489 3,346 3,177 3,748 10,122 12,760 2,655 -6
Margins (%) 21.6 24.2 23.7 19.0 20.8 24.0 23.6 22.8 22.1 22.9 20.3
Depreciation 427 433 440 448 487 465 500 735 1,748 2,187 455
Interest 96 76 66 44 34 45 45 45 282 169 45
Other Income 82 336 389 442 277 437 437 287 1,249 1,438 437
PBT before EO expense 1,851 2,628 2,638 2,224 2,245 3,273 3,069 3,256 9,341 11,843 2,592 -13
Extra-Ord expense 0 0 0 0 0 0 0 0 0 0 0
PBT 1,851 2,628 2,638 2,224 2,245 3,273 3,069 3,256 9,341 11,843 2,592
Tax 444 451 682 425 405 622 583 651 2,002 2,261 493
Rate (%) 24.0 17.2 25.9 19.1 18.0 19.0 19.0 20.0 21.4 19.1 19.0
Minority Interest & P/L of Asso. Cos. -48 1 2 1 -32 1 2 1 -44 -28 0
Reported PAT 1,455 2,176 1,954 1,798 1,872 2,650 2,484 2,603 7,383 9,610 2,100
Adj PAT 1,455 2,176 1,954 1,798 1,872 2,650 2,484 2,603 7,383 9,610 2,100 -11
YoY Change (%) 43.2 76.6 61.4 62.4 28.7 21.8 27.1 44.8 61.7 30.2 44.3
Margins (%) 13.7 18.8 16.8 15.0 15.7 19.0 18.5 15.8 16.1 17.2 16.1
Key Performance Indicators

Y/E March FY21 FY22 FY21 FY22
Particulars 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
CSM Revenue (INR m) 6,148 8,002 9,020 10,060 8,070 9,954 10,523 11,907 33,220 40,454
% Change 22.7 25.2 40.1 47.3 31.3 24.4 16.7 18.4 34.7 21.8
Domestic Formulation (INR m) 4,453 3,575 2,601 1,910 3,870 4,004 2,913 2,197 12,550 12,984
% Change 76.0 33.4 26.3 11.0 -13.1 12.0 12.0 15.0 39.4 3.5
Cost Break-up
RM Cost (% of sales) 58.0 55.9 53.1 57.9 56.2 56.0 54.0 57.0 56.2 55.9
Staff Cost (% of sales) 9.3 8.6 9.3 9.2 10.0 8.5 8.9 7.2 9.1 8.5
Other Cost (% of sales) 11.1 11.3 13.9 14.0 12.9 11.5 13.5 13.0 12.6 12.7
Gross Margins (%) 42.0 44.1 46.9 42.1 43.8 44.0 46.0 43.0 43.8 44.1
EBITDA Margins (%) 21.6 24.2 23.7 19.0 20.8 24.0 23.6 22.8 22.1 22.9
EBIT Margins (%) 17.6 20.5 19.9 15.3 16.8 20.6 19.9 18.3 18.3 19.0
3 August 2021 17
2 August 2021
Cholamandalam Inv. & Finance

TP change
Rating change
Muted disbursements; PAT beat despite elevated credit costs
 Cholamandalam Inv & Fin (CIFC) reported 1QFY22 PAT of INR3.3b (11%
beat), up 34% QoQ / down 24% YoY. This was on account of strong control
Research, Sales, Corporate Access and over opex (12% below our estimates), despite elevated credit costs (up 10%
Trading team. We request your ballot. QoQ to INR5.5b; annualized: 3.2%). NIM on AUM (calculated) stood at
7.4%, up 20bp QoQ.
 The PAT beat, however, belies the poor on-the-ground demand in 1QFY22
and gives credence to CIFC’s conservative underwriting. Disbursements
were muted (down 55% QoQ / flat YoY) across both Vehicle Finance (VF)
Bloomberg CIFC IN
Equity Shares (m) 820 and LAP. We believe the blip in disbursements in 1QFY22 is only transitory
M.Cap.(INRb)/(USDb) 431.7 / 5.8 and could be a function of the widespread lockdowns and CIFC’s core
52-Week Range (INR) 601 / 197 customer segment’s inability to make a purchase decision. Given the strong
1, 6, 12 Rel. Per (%) 2/14/119
demand improvement since the relaxation of the lockdowns and
12M Avg Val (INR M) 2333
improvement in business activity, we expect a strong pickup in
disbursements from 2QFY22.
Y/E March 2021 2022E 2023E
 Apart from mobility restrictions, part of the asset quality deterioration in
Total Income 49.4 56.0 61.5 1QFY22 could be the result of its ‘earn and pay’ CV customer’s inability to
PPP 33.6 38.2 40.9 earn in Apr/May’21 and to make repayments – leading to forward flows
PAT 15.1 17.6 24.1 into Stage2/3. Collection efficiencies improved MoM in Jul’21; we should
EPS (INR) 18.5 21.5 29.4
see a gradual improvement in asset quality over the remainder of FY22.
EPS Gr. (%) 44.0 16.5 36.7
BV (INR) 117 136 163
 CIFC weathered the pandemic well in FY21. Despite high credit costs in
Valuations 1QFY22, we expect normalization over the next two quarters – once the
NIM (%) 7.1 7.3 7.6 lockdowns are relaxed further and activity resumes at full normalcy. We
C/I ratio (%) 32.0 31.8 33.4 model an AUM CAGR of 10% over FY21–24E, with RoA/RoE of ~2.3%/17%.
RoAA (%) 2.2 2.3 3.0
The stock trades at 3.0x FY23E P/BV. We have high conviction in its ability
RoE (%) 17.1 17.0 19.7
Payout (%) 10.8 9.3 8.5
to deliver strong disbursement growth and relatively superior risk-adjusted
Valuations asset quality, with benign credit costs. We maintain a BUY rating, with
P/E (x) 28.5 24.4 17.9 unchanged TP of INR650/share (4.0x FY23E P/BV).
P/BV (x) 4.5 3.9 3.2
Div. Yield (%) 0.4 0.4 0.5 Disbursements impacted by slower activity; AUM down 3% QoQ
 Disbursements stood at INR36.4b, down 55% QoQ, due to muted business
Shareholding pattern (%) volumes across product segments. ECLGS disbursements during the quarter
As On Jun-21 Mar-21 Jun-20 were insignificant (<INR100m).
Promoter 51.6 51.6 51.7  The quarterly repayment rate declined to 8.3% (non-annualized) from its
DII 21.8 24.4 27.8 usual run-rate of 9.5–10%. This marginally mitigated the muted
FII 18.9 16.5 11.9
disbursements and led to AUM decline of 3% QoQ (up 7% YoY) to INR678b.
Others 7.7 7.5 8.7
FII Includes depository receipts  Within VF, while the AUM mix was largely stable QoQ, CIFC witnessed
reduced traction in Used CV / Refinance.
Spreads improve 20bp QoQ and remain healthy; opex controlled
 Yield on loans improved 10bp QoQ to 15.2% despite the excess liquidity on
the B/S increasing on a sequential basis.
 CIFC continues to benefit from a declining interest rate environment. Over
the past year, cost of funds (CoF) has fallen 100bp to 7.0%. Going forward,
there is limited scope for a significant reduction in CoF, in our view.
3 August 2021 18
 As a result, spreads improved 20bp QoQ / 120bp YoY to 8.2% in 1QFY22.
 Total opex was down ~28% QoQ / up 7% YoY to INR3.7b on account of strong
control over other operating expenses (up 18% YoY / down 12% QoQ).
Asset quality shows signs of stress buildup; CIFC upfronts provisions

 GS2 + GS3 deteriorated 10.7% QoQ. Restructuring under RBI OTR 2.0 stood at
INR26.8b (~4% of EAD). The asset classification benefit extended by the RBI
under “OTR 2.0” was used to the extent of 3.86%, and the remainder was
classified under Stage 3. The total restructured advances outstanding stood at
~5.4% of EAD and has been prudently classified under Stage 2. (For further
details on the restructuring, see Exhibit 1.)
 CIFC released INR4b in management overlay provisions in 1QFY22 – primarily
Stage 1 COVID provisions, where customers continued to be in Stage 1 on a
sequential basis. The company utilized this towards higher provisions (as per
regular norms) on customers moving from Stage 1/2 to Stage 3.
Key highlights from management commentary

 Disbursements in Jul'21 were higher (relative to Jul'19) across Vehicle Finance
(VF), Loans Against Property (LAP), and Housing Finance (HF).
 Management guided that it will endeavor to deliver better asset quality (lower
GS3) in Mar'22 vis-à-vis Mar'21.
 Within Stage 2, 80–85% of customers are paying their current-month dues.
Within Stage 3, ~80% customers are paying their current-month dues, with
some repossession seen as well. Customers who are not paying have committed
to start paying from next month.
Valuation and view

 We expect strong recovery in disbursements from 2QFY22. Also, we expect
asset quality to show gradual recovery – given the pickup in business activity
and improvement in collections in the second half of Jun’21 as well as in Jul’21.
Recovery in asset quality may be quicker if states such as Kerala, West Bengal,
and Odisha (which are still reeling under relatively stringent lockdowns) start
showing an improvement in business activity.
 Over the past year, CIFC has weathered the pandemic well. Its collection efforts
have resulted in relatively better asset quality, without any large write-offs.
While we expect a strong rebound in disbursements over the remainder of FY22,
AUM growth is likely to be in the single digits in FY22E, followed by a pickup to
13–15% over FY23–24E.
 Its strong asset quality has been CIFC’s hallmark. It has delivered benign credit
costs (sub-100bp) v/s peers such as SHTF and MMFS (200bp+). To factor in the
impact of the second COVID wave, we estimate FY22E credit costs to remain
elevated at 2.0% and expect normalization to 1.1% levels over FY23–24E.
 Our higher credit cost estimate in FY22E was mitigated by an expected
improvement in NII and other fee income, leading to only a minor change to our
estimates. We expect the company to deliver healthy RoE of 17–20% over the
next two years. The stock trades at 3.0x FY23E P/BV. We maintain our Buy rating
on the stock, with TP of INR650/share (4x FY23E BVPS).
3 August 2021 19
CIFC: Quarterly Performance (INR m)
Y/E March FY21 FY22E
FY21 FY22 1QFY22E v/s Est.
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Interest Income 20,710 23,580 24,263 23,690 23,712 23,949 24,428 25,251 92,242 97,340 23,334 2
Interest Expenses 11,307 11,852 11,404 11,197 11,038 11,149 11,483 11,745 45,759 45,415 10,805 2
Net Interest Income 9,403 11,728 12,859 12,493 12,674 12,800 12,945 13,507 46,483 51,925 12,530 1
YoY Growth (%) 14.1 35.3 38.6 37.2 34.8 9.1 0.7 8.1 31.6 11.7 33.3
Other Income 427 818 786 924 958 980 1,055 1,125 2,955 4,119 659
Total Income 9,830 12,546 13,644 13,417 13,632 13,780 14,000 14,632 49,437 56,044 13,189 3
YoY Growth (%) 4.3 23.0 26.0 32.1 38.7 9.8 2.6 9.1 21.7 13.4 34.2
Operating Expenses 3,458 3,551 3,688 5,138 3,705 4,090 4,336 5,692 15,834 17,825 4,219 -12
Operating Profit 6,372 8,996 9,956 8,279 9,927 9,690 9,663 8,939 33,603 38,219 8,969 11
YoY Growth (%) 7.5 45.5 51.3 34.8 55.8 7.7 -2.9 8.0 35.3 13.7 40.8
Provisions & Loan Losses 562 3,176 4,446 5,035 5,519 4,000 3,000 1,960 13,218 14,479 5,000 10
Profit before Tax 5,810 5,820 5,511 3,244 4,407 5,690 6,663 6,979 20,384 23,740 3,969 11
Tax Provisions 1,501 1,501 1,422 812 1,139 1,457 1,706 1,795 5,235 6,097 1,020 12
Net Profit 4,309 4,319 4,089 2,432 3,268 4,233 4,958 5,184 15,149 17,643 2,949 11
YoY Growth (%) 37.1 40.7 5.2 470.1 -24.2 -2.0 21.3 113.1 44.0 16.5 -31.6
Key Parameters (Calc., %)
Yield on loans 14.6 15.7 15.4 14.6 14.6 15.0 15.2 15.3 14.6 14.2
Cost of funds 8.0 8.0 7.4 7.1 7.0 7.0 7.2 7.3 7.7 7.1
Spread 6.7 7.8 8.0 7.5 7.7 8.0 8.0 8.0 6.9 7.1
NIM 6.6 7.8 8.2 7.7 7.8 8.0 8.1 8.2 7.1
C/I ratio 35.2 28.3 27.0 38.3 27.2 29.7 31.0 38.9 32.0 31.8
Credit cost 0.4 1.9 2.6 2.9 3.2 2.4 1.8 1.1 2.0 2.0
Tax rate 25.8 25.8 25.8 25.0 25.9 25.6 25.6 25.7 25.7 25.7
Balance Sheet Parameters
Disbursements (INR b) 36 65 79 81 36 71 86 102 260 294
Growth (%) -58.1 -12.5 6.0 42.5 1.3 9.2 8.5 25.9 -10.5 13.1
AUM (INR b) 635 672 687 700 678 676 687 715 700 715
Growth (%) 10.4 13.3 13.1 15.6 6.8 0.6 0.0 2.2 15.6 2.2
AUM mix (%)
Vehicle finance 73.7 73.3 72.6 72.0 71.4 72.0 68.8
Home Equity 20.6 20.6 21.0 21.1 21.4 21.1 22.2
Home loans & Others 5.6 6.0 6.3 6.9 7.2 6.9 9.0
Borrowings (INR b) 585 606 620 637 632 637 636 651 637 651
Growth (%) 6.2 8.4 12.9 15.9 8.0 5.2 2.4 2.2 15.9 2.2
Asset Quality Parameters
GS 3 (INR B) 20.0 19.0 24.9 27.1 45.5 27.1 41.8
GS 3 (%) 3.3 3.0 3.8 4.0 6.8 4.1 6.2
NS 3 (INR B) 11.7 10.9 14.0 15.1 29.3 15.1 29.3
NS 3 (%) 2.0 1.7 2.2 2.3 4.6 2.3 3.4
PCR (%) 41.6 43.0 43.5 44.3 35.5 44.3 45.0
Vehicle finance AUM mix
(%)
LCV 21.2 20.9 20.4 20.8 20.8
Cars & MUV 17.1 17.0 17.0 17.0 17.4
3W & SCV 6.2 6.2 5.9 5.7 5.5
Used CV 25.7 25.9 26.9 26.7 26.1
Tractor 8.7 9.2 9.6 9.8 10.4
HCV 11.9 11.1 10.1 9.7 9.4
CE 5.3 5.5 5.8 6.1 6.2
Two wheeler 3.9 4.2 4.3 4.3 4.2
E: MOFSL estimates
3 August 2021 20
2 August 2021
2QCY21 Results Update | Sector: Midcaps
Varun Beverages
TP change
Rating change
Sharp volume growth on strong recovery and lower base
Earnings above estimates
Asiamoney Brokers Poll 2021 for India  Varun Beverages (VBL) reported strong volume/revenue growth on the back
Research, Sales, Corporate Access and of demand recovery across product segments and a lower base. It reported
a stable operating performance, albeit gross margin contraction, owing to
sustainable cost optimization measures implemented last year.
 2QCY21 revenue/EBITDA/PAT came in above our estimates. We increase
our earnings estimates for CY21/CY22 by 29%/8%, on the back of (a) better
Bloomberg VBL IN realization on an improving product mix, (b) an increase in volumes on
Equity Shares (m) 433 strong demand recovery, and (c) increasing traction in newly launched
M.Cap.(INRb)/(USDb) 341.7 / 4.6 products. We maintain our Buy rating, with TP of INR920.
1, 6, 12 Rel. Per (%) 9/29/27 Sharp volume recovery, marginally offset by second wave
12M Avg Val (INR M) 346  Revenue increased 49% YoY to INR24.5b (est.: INR21.3b), primarily led by (a)
robust volume growth across segments, coupled with the lower base of the
Financials & Valuations (INR b) previous year, and (b) a 3.2% YoY increase in realization per case. Overall
Y/E Dec 2020 2021E 2022E volumes increased 45% YoY to 152m cases. Gross margins contracted 130bp
Sales 64.5 80.7 100.2
to 53.5% (est.: 52.5%) on a change in the product mix and a marginal
EBITDA 12.0 15.7 21.2
PAT 3.3 6.2 10.4 increase in raw material prices.
EBITDA (%) 18.6 19.5 21.2  EBITDA/unit-case rose 4% YoY to INR37.6/unit-case on a better product mix
EPS (INR) 7.5 14.2 23.9
v/s the same period last year. The EBITDA margin expanded 30bp YoY to
EPS Gr. (%) -30.7 89.4 68.3
BV/Sh. (INR) 81.4 93.9 115.9 23.3% (est.: 21.5%), and EBITDA stood at INR5.7b (up 51% YoY). Adj. PAT
Ratios increased 2.2x YoY to INR3b (est.: INR1.9b).
Net D/E 0.9 0.6 0.3  Subsidiary (consolidated less standalone) sales/EBITDA grew 2x/70% YoY to
RoE (%) 9.5 16.2 22.8
RoCE (%) 10.4 12.0 18.3 INR4.9b/INR1b in 2QCY21. Adj. PAT surged 3.7x YoY to INR701m.
Payout (%) 21.9 12.0 7.9  CSD volumes increased 33% YoY to 118m unit-cases. Performance was
Valuations driven by strong growth in Apr’21 (v/s the low base of the previous year)
P/E (x) 105.1 55.5 33.0
EV/EBITDA (x) 31.0 23.3 16.8
and steady recovery in Jun’21 (despite the second COVID wave and related
Div Yield (%) 0.2 0.2 0.2 lockdowns).
FCF Yield (%) 2.1 2.6 3.6  NCB volumes grew 38% YoY to 11m unit-cases, driven by the recently
launched ‘Sting’ beverage as well as Tropicana juices.
Shareholding pattern (%)  Water volumes surged 2.9x YoY to 23m unit-cases on the back of higher
Mar-21 Dec-20 Mar-20
Promoter 66.4 66.4 68.0 growth in the International segment. Water volume share jumped 750bp to
DII 5.9 5.9 6.3 15.1%.
FII 20.3 20.5 19.8
Others 7.4 7.3 5.8
Note: FII includes depository receipts  Realizations: VBL did not take any price hikes during the year. Improvement
in the product mix (higher volumes recorded in juices, ‘Sting’, and
‘Mountain Dew-Ice’) has led to an increase in realization. International
realization per unit case stood at INR180, whereas domestic realization was
recorded at INR156/unit-case.
 Working capital: Working capital days increased marginally to ~24 days (as
of Jun’21) from 20 days (as of Jun’20), primarily owing to the higher stock of
pet resin / preform inventory – to capitalize on lower pricing at the start of
the year.
3 August 2021 21
Valuation and view
 We expect robust demand going forward, driven by a) the resumption of
services, with the impact of the lockdown gradually subsiding; b) a pickup in
volumes in the southern and western regions; c) strong demand traction in
newly launched products; d) the growing penetration of refrigeration in
rural/semi-rural areas; and e) the growing discretionary spending among the
populace.
 2QCY21 revenue/EBITDA/PAT came in above our estimates. We increase our
earnings estimates for CY21/CY22 by 29%/8% – on the back of (a) better
realization on an improving product mix, (b) an increase in volumes on strong
demand recovery, and (c) growing traction in newly launched products.
 We expect a revenue/EBITDA/PAT CAGR of 25%/33%/79% over CY20–22E. We
value the stock at 35x Sep’23E EPS. Our TP of INR920 implies a 17% upside.
Maintain Buy.
Consolidated - Quarterly Earnings Model (INR m)

Y/E December CY20 CY21 CY20 CY21 CY21 Var.
1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QE 2QE %
Gross Sales 16,764 16,402 18,026 13,309 22,409 24,498 19,861 13,942 64,501 80,710 21,347 15
YoY Change (%) 23.3 -41.6 3.6 9.1 33.7 49.4 10.2 4.8 -9.5 25.1 30.2
Total Expenditure 14,053 12,625 14,218 11,587 18,593 18,790 15,629 11,996 52,483 65,008 16,756
EBITDA 2,712 3,777 3,808 1,722 3,816 5,708 4,231 1,947 12,019 15,702 4,591 24
Margins (%) 16.2 23.0 21.1 12.9 17.0 23.3 21.3 14.0 18.6 19.5 21.5
Depreciation 1,351 1,243 1,346 1,347 1,347 1,288 1,350 1,400 5,287 5,385 1,410
Interest 870 742 580 620 579 468 450 430 2,811 1,927 550
Other Income 253 27 35 56 57 244 37 58 370 396 28
PBT before EO expense 743 1,819 1,917 -189 1,947 4,197 2,468 175 4,290 8,787 2,659
Extra-Ord. expense 665 0 0 0 0 0 0 0 665 0 0
PBT 78 1,819 1,917 -189 1,947 4,197 2,468 175 3,625 8,787 2,659
Tax -523 389 302 -116 579 1,009 592 42 52 2,222 638
Rate (%) -670.1 21.4 15.8 61.6 29.8 24.0 24.0 24.0 1.4 25.3 24
Minority Interest & Profit/Loss of Asso. Cos. 51 22 84 125 75 106 89 137 283 407 23
Reported PAT 549 1,408 1,530 -197 1,293 3,082 1,787 -4 3,290 6,157 1,998
Adj. PAT 510 1,408 1,530 -197 1,293 3,082 1,787 -4 3,251 6,157 1,998 54
YoY Change (%) 25.5 -65.4 89.6 -66.7 153.5 118.9 16.8 -97.9 -30.7 89.4 41.9
Margins (%) 3.0 8.6 8.5 -1.5 5.8 12.6 9.0 0.0 5.0 7.6 9.4
3 August 2021 22
2 August 2021
1QFY22 Results Update | Sector: Consumer
Emami
Estimate change CMP: INR570 TP: INR660 (+16% ) Buy
TP change
Margin outlook getting better; sales recovery key to re-rating
Rating change
 Emami (HMN)’s 1QFY22 sales were in line with expectations. Domestic
Asiamoney Brokers Poll 2021 for India sales grew 5% v/s 1QFY20 levels. While Healthcare and Pain Management
Research, Sales, Corporate Access and have nearly doubled over 1QFY20 levels, the impact of the second COVID
wave led lockdown resulted in sharp decline over 1QFY20 in Navratna (in
the crucial summer season) and Male Grooming.
 The outlook for the domestic business gradually improved in Jun’21 and
Jul’21, after modest growth over a two-year period in 1QFY22. This was
Bloomberg HMN IN partly offset by slower growth in the International business (~12% of sales)
Equity Shares (m) 454 due to COVID-related lockdowns, especially in the Middle East.
M.Cap.(INRb)/(USDb) 253.3 / 3.4  Margin performance in 1QFY22 and the outlook were better than expected.
52-Week Range (INR) 579 / 235 The key to a further re-rating would depend on whether sales growth, after
1, 6, 12 Rel. Per (%) 0/13/97
a period of extremely weak performance (3.7% CAGR over FY16–20), could
revive to the double digits, followed by the mid-teen level on a sustainable
Financials & Valuations (INR b) basis. Maintain Buy.
Y/E March 2021 2022E 2023E
Sales 28.8 32.4 36.0 Better-than-expected margins lead to earnings beat
Sales Gr. (%) 8.5 12.4 11.2  Consolidated net sales grew 37.3% YoY to INR6.6b (est. INR6.4b). EBITDA /
EBITDA 8.8 9.9 11.0
PBT / adjusted PAT before amortization grew 38%/48.1%/44.4% YoY to
EBIT Margin (%) 30.7 30.4 30.6
Adj. PAT 7.2 7.6 8.4
INR1.7b/INR1.6b/INR1.4b (est. INR1.6b/INR1.4b/INR1.2b).
Adj. EPS (INR) 16.3 17.1 18.8  Domestic volumes increased 38% YoY in 1QFY22.
EPS Gr. (%) 31.1 5.5 9.7  The gross margin contracted 50bp YoY to 66%.
BV/Sh.(INR) 39.7 45.1 46.0  The EBITDA margin expanded 10bp YoY to 25.7% (est. 24.5%) on lower
Ratios employee costs as a percentage of sales (-340bp YoY), other expenses (-
RoE (%) 40.3 40.5 41.3
140bp YoY), and higher ad spends (+420bp YoY).
RoCE (%) 40.0 44.5 47.6
Payout (%) 49.2 67.1 69.1
 Absolute ad spends grew 84% YoY to INR1.1b.
Valuation  The overall domestic business grew 42% YoY, 5% v/s 1QFY20.
P/E (x) 35.1 33.2 30.3  International sales grew 17% YoY, but declined 9% v/s 1QFY20.
P/BV (x) 14.4 12.6 12.4  The Institutional business (3% of sales) grew 34% YoY, but declined 17% v/s
EV/EBITDA (x) 28.0 24.9 22.0 1QFY20.
Div. Yield (%) 1.4 2.0 2.3
 Within domestic, HMN reported YoY sales growth in all categories in
1QFY22: Healthcare (+59% YoY), BoroPlus (+96%), Navratna (+21%), Kesh
As On Jun-21 Mar-21 Jun-20
King (+53%), Pain Management (+70%), Male Grooming (+78%), and 7 Oils-
Promoter 53.9 53.9 53.4 in-One (+93%).
DII 24.5 26.4 31.4
FII 12.5 10.5 5.7
Others
 Compared with a normal 1QFY20 (unlike 1QFY21, which was affected
9.2 9.2 9.6
FII Includes depository receipts adversely by the sudden lockdowns), domestic sales growth was 5%.
Healthcare and Pain Management nearly doubled over this period, while
Navratna / Male Grooming declined 29%/47%. Both Navratna and Male
Grooming are discretionary categories. Kesh King reported ~2% growth
over 1QFY20 numbers and was affected by the slowdown in discretionary
consumption. Jul’21 numbers seem to be much stronger. HMN has gained
share from Patanjali and Indulekha over the last few months.
3 August 2021 23
 Over the last two months, the International business has, however, seen some
slowdown due to lockdowns on account of the second COVID wave. The
management is uncertain about when the International business (12% of
consolidated sales in 1QFY22) would recover.
 After a 3.5% price increase YTD and stability now emerging in material costs, the
management has stated that the company is likely to have better gross margins
v/s the earlier guidance of 66.5–67% for FY22, perhaps even reaching the same
levels as last year. However, it further hinted that higher advertising spends in
2HFY22 could check EBITDA margin expansion.
 E-commerce contributed 5% to domestic revenues from 1% a year ago. The
management stated it would be very aggressive on this front, targeting 7–7.5%
of sales over the next year.
Valuation and view

 There is no material change to our FY22/FY23E EPS forecasts.
 While it is too early to call out a structural recovery in sales, before the COVID-
led blip on discretionary consumption in 1QFY22, the company had reported
three successive quarters of two-year average sales of 7.5–10% – a level we
believe HMN can go back to 2QFY22 onwards. This is far better than the 3.7%
sales CAGR between FY16–20. If the path to sustainable and strong double-digit
sales growth continues, a further re-rating is possible.
 We maintain our Buy rating, encouraged by the following factors: a) inexpensive
valuations at 30.3x FY23E EPS, b) a sharp reduction in pledged shares (now at
30% levels), and c) potential tailwinds for HMN over the next few quarters
(~50% of HMN's domestic sales comes from rural India) – just like other peers
with higher rural salience.
 We arrive at our TP of INR660/share (valuing the company at 32x Sep’23E EPS, a
40% discount to peers).
Consol. Quarterly performance (INR m)

Y/E MARCH FY21 FY22 FY21 FY22E FY22 Var.
1Q 2Q 3Q 4Q 1Q 2QE 3QE 4QE 1QE (%)
Domestic volume growth (%) -28.0 10.0 13.0 39.0 38.0 6.0 8.0 6.0 8.5 14.5 32.0
Net Sales 4,813 7,348 9,336 7,308 6,610 7,789 10,176 7,796 28,805 32,371 6,402 3.2%
YoY change (%) -25.8 11.3 14.9 37.2 37.3 6.0 9.0 6.7 8.5 12.4 33.0
COGS 1,613 2,185 2,766 2,728 2,246 2,550 3,249 2,468 9,292 10,512 2,338
Gross Profit 3,200 5,163 6,570 4,580 4,363 5,240 6,927 5,329 19,513 21,859 4,064
Gross margin (%) 66.5 70.3 70.4 62.7 66.0 67.3 68.1 68.3 67.7 67.5 63.5
EBITDA 1,230 2,571 3,402 1,628 1,697 2,491 3,505 2,162 8,831 9,855 1,572 8.0%
Margins (%) 25.5 35.0 36.4 22.3 25.7 32.0 34.4 27.7 30.7 30.4 24.5
YoY change -8.3 33.2 28.9 65.2 38.0 -3.1 3.0 32.8 27.9 11.6 27.8
Depreciation 194 216 341 240 234 259 290 327 991 1,110 252
Interest 47 25 14 47 6 10 5 9 133 31 14
Other Income 67 79 92 465 107 107 124 132 703 469 90
PBT 1,056 2,409 3,139 1,806 1,564 2,329 3,333 1,957 8,410 9,183 1,396 12.0%
Tax 95 284 438 326 175 396 567 424 1,142 1,561 237
Rate (%) 9.0 11.8 13.9 18.0 11.2 17.0 17.0 21.7 13.6 17.0 17.0
PAT before Amortization 973 2,133 2,710 1,493 1,404 1,933 2,760 1,524 7,309 7,622 1,159 21.2%
YoY change (%) -6.4 31.6 26.3 52.4 44.4 -9.4 1.9 2.1 25.3 4.3 19.2
E: MOFSL Estimates
3 August 2021 24
2 August 2021
1QFY22 Results Update | Sector: Chemicals
Vinati Organics
Estimate change CMP: INR1,926 TP: INR2,220 (+15% ) Buy
TP change Gross margin guidance revised down; revenue potential intact
Rating change
 Vinati Organics (VO) reported mixed results, with revenue above our
Motilal Oswal values your support in the estimate (+20%), while EBITDA came in below our estimate (-8%). The gross
Asiamoney Brokers Poll 2021 for India margin shrank to 45% – the lowest since 3QFY15. The resultant EBITDA
Research, Sales, Corporate Access and
Trading team. We request your ballot. margin stood at 26.3% (v/s our est. of 34.3% and 35.4% in 4QFY21).
 Higher freight costs (by INR100m), along with an increase in Phenol and
Acrylonitrile prices, impacted margins. Freight costs were the highest for the
US and Europe – they are likely to remain at similar levels for the next few
quarters as well. VO is in talks with customers to share the cost increase.
Bloomberg VO IN  On these lines, the management has revised down its gross margin
Equity Shares (m) 103 guidance to 45–50%, with EBITDA margin normalization at 32–33% going
M.Cap.(INRb)/(USDb) 197.9 / 2.7
forward (unchanged). Higher efficiencies, led by a ramp-up, would lower
1, 6, 12 Rel. Per (%) -6/52/56 operating costs and aid EBITDA margins.
12M Avg Val (INR M) 247  Factoring in the same, we lower our FY22E/FY23E/FY24E EBITDA and EPS
by 15%/11%/5%, with the EBITDA margin at 29%/31%/32% (from
Financials & Valuations (INR bn) 36%/35%/34%). We build in margin improvement hereafter as (a) the
Y/E March FY21 FY22E FY23E pressure of commodity price inflation fades over next 2–3 quarters and (b)
Sales 9.5 15.7 19.9 Veeral Additives comes on-stream (expected in 4QFY22) – which would
EBITDA 3.5 4.5 6.2 consume 50% of Butyl Phenol internally.
PAT 2.7 3.5 4.6
 That said, gradual ramp-up in expanded capacity over the next three years
EPS (INR) 26.2 33.6 44.7
would drive huge growth for VO, with further development on the product
EPS Gr. (%) (19) 28 33
molecules currently under R&D. With new products such as AO and Butyl
BV/Sh.(INR) 150 177 213
Phenol resulting in higher import substitution, we forecast a revenue CAGR
Ratios
Net D:E (0.0) (0.1) (0.2)
of ~38% over FY21–24E (unchanged), translating to an EBITDA and EPS
RoE (%) 19.1 20.6 22.9 CAGR of 31–32% over this period. Valuing the stock at 43x Sep’23E EPS, we
RoCE (%) 18.1 19.6 22.1 arrive at TP of INR2,220. Maintain Buy.
Payout (%) 22.9 20.0 20.0
Lowest gross margin in five years
Valuations
 Revenue was higher than estimated at INR3.9b (+67% YoY).
P/E (x) 73.5 57.3 43.1
P/BV (x) 12.8 10.9 9.0
 EBITDA came in at INR1b (+4% YoY), with PAT at INR0.8b (+12% YoY).
EV/EBITDA (x) 56.1 43.2 31.5  Other income includes INR24m in interest income accrued on the loan
Div. Yield (%) 0.3 0.3 0.5 advance to Veeral Additives. Post the amalgamation, interest income on the
FCF Yield (%) 0.9 1.4 1.7 loan would be eliminated and 1QFY22 numbers will be restated accordingly.
1QFY22 segmental snapshot and FY22 guidance
 ATBS recorded the highest ever sales in 1QFY22 (up 20–25% YoY); pent-up
Promoter 74.1 74.1 74.1
demand from the Oil & Gas sector would continue this year.
DII 6.8 7.3 6.2  Butyl Phenol sales are expected at INR1.6–2b in FY22 (~INR400m done in
FII 4.4 3.5 5.1 the quarter). Current margins for Butyl Phenol are at their lowest (as phenol
Others 14.7 15.2 14.7 prices have risen, while product prices are still down – keeping margins low).
FII Includes depository receipts  IBB saw subdued demand in 1QFY22 and is expected to report single-digit
overall growth in FY22 as well.
 Isobutylene and other product demand remains strong (revenue mix in
1QFY22 – ATBS: ~50%, IBB: ~15%, and others: ~35%).
3 August 2021 25
Valuation and view – maintain Buy
 The company is in the process of amalgamating VAL with VO, which would
produce AOs from Butyl Phenol, thus resulting in further forward integration.
VO would become the largest and only doubly integrated manufacturer of AOs.
AOs are right now imported into the country, and the domestic market is seeing
huge demand for PP, LLDPE, etc. (which would grow at 8% YoY). Management
expects AOs to contribute ~25% to total sales 2–3 years down the line.
 Capex over the next three years is projected at ~INR3b. Despite the stated
capex, we expect FCF generation of ~INR10.5b over FY22–24E.
 While the massive floods in Mahad have impacted operations (the plant is
expected to be closed for 22–25 days), VO has sufficient stock available.
 The stock is trading at 43x FY23E EPS and 31x FY23E EV/EBITDA, with attractive
return ratios of 24–25% (+600bps v/s FY21). It has a fixed asset turnover of
1.3x, which is likely to double over the next three years. Maintain Buy.
Standalone - Quarterly Earnings Model (INR m)

Y/E March FY21 FY22 FY21 FY22E FY22 Var(%)
1Q 2Q 3Q 4Q 1QE 2QE 3QE 4QE 1QE
Gross Sales 2,316 2,194 2,235 2,798 3,864 3,941 4,020 3,831 9,543 15,655 3,217 20%
YoY Change (%) -21.7 -11.9 -6.3 14.0 66.8 79.6 79.9 36.9 -7.3 64.1 38.9
Gross Margins (%) 63% 60% 55% 59% 45% 47% 48% 49% 59% 47% 56%
EBITDA 972 841 721 991 1,015 1,162 1,232 1,131 3,525 4,540 1,102 -8%
Margins (%) 42.0 38.3 32.3 35.4 26.3 29.5 30.6 29.5 36.9 29.0 34.3
Depreciation 106 108 108 107 110 113 117 125 429 466 111 0%
Interest 0 0 0 1 0 1 1 1 2 2 1 -76%
Other Income 86 14 93 66 176 141 113 119 258 548 86 104%
PBT before EO expense 951 747 706 948 1,081 1,189 1,227 1,124 3,352 4,620 1,077 0%
PBT 951 747 706 948 1,081 1,189 1,227 1,124 3,352 4,620 1,077 0%
Tax 228 127 65 240 272 299 309 283 659 1,163 271 0%
Rate (%) 24.0 17.0 9.2 25.3 25.1 25.2 25.2 25.2 19.7 25.2 25.2
Reported PAT 723 620 641 709 809 889 918 841 2,693 3,457 806 0%
YoY Change (%) -12.2 -43.6 -4.0 -5.1 11.9 43.4 43.2 18.6 -19.3 28.4 11.5
Margins (%) 31.2 28.3 28.7 25.3 20.9 22.6 22.8 21.9 28.2 22.1 25.1
E: MOFSL Estimates
3 August 2021 26
RESULTS
2 August 2021
FLASH Results Flash | Sector: Oil & Gas
Castrol India
BSE SENSEX
52,951
S&P CNX
15,885
CMP: INR138 Buy
Revenue came in below estimate
Conference Call Details  Revenue was 6% lower than estimate at INR8.9b (+81% YoY, -22%
Date: 03rd Aug 2021 QoQ). Owing to the second wave of COVID, the quarter saw challenges
Time: 12:15pm IST in the form of localized lockdowns, and muted demand.
Dial-in details:
 EBITDA stood at INR2b (+107% YoY, -42% QoQ).
+91-22-6280 1164
 Raw material cost and operating expenditure were in line with our
+91-22-7115-8065
estimate. Thus, miss on revenue impacted EBITDA in absolute terms.
 PAT stood at INR1.4b (+114% YoY, -43% QoQ)
Strategic developments during the quarter

 Recently launched a new concept of Castrol Express Oil change outlets
which offer quick oil change service for consumers on-the-go.
 CSTRL further leveraged digital platforms to continue building
engagement with the biker community (for its Castrol POWER1
ULTIMATE 2W engine oils)
 CSR programs were recognized with ‘Excellence in CSR’ award by
British Business Group Delhi (BBG)
 For 1HCY21, revenue was up 72% YoY at INR20.3b, with EBITDA at

INR5.4b (doubled YoY). Similarly PAT doubled YoY to INR3.8b.
 Company declared interim dividend of INR2.5/share.
 Further details on volumes and operational parameters awaited.
Quarterly Performance (INR Million)

Y/E December CY20 CY21
1Q 2Q 3Q 4Q 1Q 2QE 2QAct Var (%) YoY (%) QoQ (%)
Net Sales 6,880 4,906 8,831 9,352 11,387 9,418 8,896 -6% 81% -22%
YoY Change (%) -29.5 -52.8 4.0 -7.6 65.5 92.0 81.3
EBITDA 1,730 953 2,882 2,576 3,401 2,483 1,975 -20% 107% -42%
YoY Change (%) -38.9 -66.5 17.9 -24.5 96.6 160.5 107.2
Margins (%) 25.1 19.4 32.6 27.5 29.9 26.4 22.2
Depreciation 222 206 215 223 215 231 199 -14% -3% -7%
Interest 11 14 9 8 6 7 7 0% -50% 17%
Other Income 198 152 117 153 143 156 133 -15% -13% -7%
PBT 1,695 885 2,775 2,498 3,323 2,401 1,902 -21% 115% -43%
Rate (%) 26 26.1 26 25 26.7 25.2 26.4
Adj PAT 1,252 654 2,046 1,877 2,436 1,796 1,400 -22% 114% -43%
YoY Change (%) -32.3 -64.2 8.6 -30.8 94.6 174.6 114.1
E: MOFSL Estimates
3 August 2021 27
2 August 2021
RBL Bank
TP change
Rating change Elevated provisioning drives loss; watchful of near-
Motilal Oswal values your support in the term asset quality
Research, Sales, Corporate Access and
Credit cost to stay elevated; PCR improves sharply to ~61%
Trading team. We request your ballot.  RBL Bank (RBK) reported a weak quarter, with net loss of INR4.6b, impacted
by elevated provisions (INR14.3b) – as the bank upfronted the impact of
the second COVID wave and shored up its PCR to ~61%. Business growth
remains muted, impacted by a weak business environment. On the other
hand, margins are seeing a sequential uptick, aided by lower cost of funds,
Bloomberg RBK IN some excess liquidity deployment, and lower interest reversals v/s 4QFY21.
Equity Shares (m) 598  The bank has suggested a change in business strategy, with an increasing
M.Cap.(INRb)/(USDb) 116.4 / 1.6 focus on home loans and expansion in the Credit Cards business. On the
contrary, it would de-risk the loan book by pruning the unsecured portfolio
1, 6, 12 Rel. Per (%) -9/-26/-26
mix other than Cards/MFI.
 On the asset quality front, slippage was elevated – largely from the Retail
portfolio (Cards/MFI), while higher write-offs provided some support. Thus,
Y/E March FY21 FY22E FY23E the GNPA ratio witnessed deterioration, while NNPA improved on heavy
NII 37.9 42.6 51.9 provisioning. Total restructuring stood at 2.03% of loans. We cut our
OP 30.9 36.0 44.8 earnings estimate sharply by 72% for FY22, factoring in higher credit cost
NP 5.1 2.7 15.7 (5.3%) and subdued loan growth, while we increase our FY23 earnings
NIM (%) 4.2 4.3 4.6
estimate marginally. We expect the bank to deliver FY23E RoA/RoE of
EPS (INR) 8.5 4.4 26.3
EPS Gr. (%) -14.6 -47.8 493.9 1.3%/11.6%. Maintain Buy.
BV/Sh. (INR) 211.7 215.4 236.8 Business growth remains muted; margins expand QoQ
ABV/Sh. (INR) 197.2 198.2 220.4
Ratios
 RBK reported net loss of INR4.6b (v/s PAT estimate of INR1.05b), impacted
RoE (%) 4.4 2.1 11.6 by elevated provisions of ~INR14.3b – on higher slippage as well as higher
RoA (%) 0.5 0.3 1.3 provisioning for the Retail portfolio.
Valuations  NII declined 7% YoY (3% miss), affected by weak loan growth; however,
P/E(X) 22.9 43.9 7.4
margins expanded ~20bp QoQ to 4.36%. Other income grew 108% YoY (on
P/BV (X) 0.9 0.9 0.8
P/ABV (X) 1.0 1.0 0.9 a low base), with core fee income growth of 138% YoY to ~INR5.6b.
 Opex surged ~25% YoY (+19% QoQ) and thus the C/I ratio increased to
Shareholding pattern (%) 51.5% (v/s 45% in 4QFY21). As a result, PPoP grew 17% YoY.
As On Jun-21 Mar-21 Jun-20  The loan book declined ~4% QoQ to INR565b – the Retail portfolio declined
Promoter 0.0 0.0 0.0 7% QoQ, while the Wholesale book edged up 1% QoQ. The Retail to
DII 23.5 25.5 22.5 Wholesale mix stood at 57:43. Among the Retail segments, the MFI
FII 32.2 31.9 29.3 portfolio declined 18% QoQ and the Credit Card book 1% QoQ. The share of
Others 44.3 42.6 48.3 Credit Card and MFI stood at 32%.
FII Includes depository receipts  Deposits grew 1.8% QoQ to INR745b, led by CASA growth of ~8% QoQ.
Overall, the CASA ratio improved to 33.7% (v/s 31.8% in 4QFY21).
 On the asset quality front, slippage was elevated at INR13.4b,
predominantly from the Retail book (~97%), impacted by lower collections.
Conversely, higher write-offs (INR7.6b) provided some support. Thus, the
GNPA ratio increased 65bp QoQ to ~5%, while the NNPA ratio declined
11bp QoQ to ~2%, as bank improved its PCR sharply to ~61% (v/s 52.3% in
4QFY21). Total restructured loans stood at ~INR11.5b (2.03% of loans). RBK
carries additional COVID-related provisions of INR2.39b.
3 August 2021 28
 The slippage breakup is as follows: Credit Cards (INR5.01b), MFI (INR4.45b), and
other secured retail (INR3.46b), with the balance being Wholesale.
 The bank aims to increase PCR to ~65% by FY22.
 The bank expects the C/I ratio to remain higher over the next few quarters (up
100–200bp) as the focus would continue to be on ramping up the technology
infrastructure.
Valuation and view
RBK reported a weak quarter on higher slippage and accelerated provisions towards
the unsecured portfolio. Business growth remained muted even as margins
witnessed sequential improvement. RBL guided for a change in business strategy,
with an increasing focus on Home Loans, Credit Cards, and other secured assets. On
the contrary, it would de-risk the loan book by pruning the unsecured portfolio mix
(other than Cards/MFI business). While collection efficiency is improving, the high
mix of unsecured loans, coupled with a high BB and below book, keeps us watchful
of asset quality trends over the near term. We cut our earnings estimates sharply by
72% for FY22, factoring in higher credit costs (5.3%) and subdued loan growth. We
expect the bank to deliver FY23E RoA/RoE of 1.3%/11.6%. We value the bank at
INR235/share (1.1x FY23 ABV). Maintain Buy.
Quarterly performance (INR m)

FY21 FY22 FY21 FY22E FY22E V/s our
1Q 2Q 3Q 4Q 1Q 2QE 3QE 4QE 1QE Est
Net Interest Income 10,413 9,321 9,082 9,061 9,695 10,150 11,003 11,798 37,876 42,646 9,950 -3%
% Change (Y-o-Y) 27.4 7.3 -1.6 -11.3 -6.9 8.9 21.2 30.2 4.4 12.6 -4.4
Other Income 3,333 4,562 5,799 6,884 6,947 7,116 7,318 7,429 20,578 28,810 4,978 40%
Total Income 13,746 13,883 14,880 15,945 16,642 17,266 18,320 19,228 58,454 71,456 14,928 11%
Operating Expenses 6,849 6,685 6,832 7,179 8,567 8,658 8,953 9,233 27,546 35,412 7,263 18%
Operating Profit 6,897 7,198 8,048 8,765 8,075 8,608 9,367 9,995 30,908 36,044 7,666 5%
% Change (Y-o-Y) 14.5 13.2 12.3 16.6 17.1 19.6 16.4 14.0 12.3 16.6 11.1
Other Provisions 5,002 5,256 6,098 7,663 14,257 7,150 6,175 4,918 24,017 32,500 6,261 128%
Profit before Tax 1,896 1,942 1,951 1,103 -6,182 1,458 3,192 5,076 6,891 3,544 1,405 NM
Tax Provisions 483 500 480 349 -1,588 367 804 1,308 1,813 892 354 NM
Net Profit 1,412 1,442 1,471 754 -4,595 1,090 2,387 3,769 5,078 2,652 1,051 NM
% Change (Y-o-Y) -47.1 165.4 110.2 -34.1 -425.4 -24.4 62.3 400.1 0.4 -47.8 -25.6
Operating Parameters
Deposit (INR b) 617.4 645.1 671.8 731.2 744.7 766.3 795.6 848.2 731.2 848.2 744.8 0%
Loan (INR b) 566.8 561.6 564.4 586.2 565.3 600.3 612.0 633.1 586.2 633.1 576.3 -2%
Deposit Growth (%) 1.5 2.7 6.8 26.5 20.6 18.8 18.4 16.0 26.5 16.0 20.6 -1
Loan Growth (%) -0.3 -4.0 -5.4 1.0 -0.3 6.9 8.4 8.0 1.0 8.0 1.7 -198
Asset Quality
Gross NPA (%) 3.5 3.3 1.8 4.3 5.0 5.6 5.8 6.0 4.3 6.0 4.6 40
Net NPA (%) 1.7 1.4 0.7 2.1 2.0 2.6 2.6 2.3 2.1 2.3 2.2 -18
PCR (%) 53.2 59.4 61.7 52.3 60.9 55.0 57.0 62.5 52.3 62.5 53.5 744
E:MOFSL Estimates
3 August 2021 29
2 August 2021
1QFY22 Results Update | Sector: Capital Goods
K E C Intl.
TP change
Rating change
Commodity prices dent margin; strong order inflow outlook
 KEC International (KECI)’s 1QFY22 revenue grew 15% YoY to INR25.4b and
was 10% ahead of our expectation. Margins disappointed on account of
Research, Sales, Corporate Access and commodity price inflation and weaker execution in the SAE business in
Trading team. We request your ballot. Brazil. Thus, adj. PAT declined 35% YoY and was 36% below our
expectations. Working capital deterioration was a negative development,
while the key positive was strong order inflows of INR44b during the
quarter.
 KECI is steadily diversifying the business to avoid concentration risk from the
Bloomberg KECI IN
Power T&D business, with the Railways and Civil segments driving growth.
M.Cap.(INRb)/(USDb) 107.8 / 1.4 Ex-T&D revenue share stood at 47% in 1QFY22 and is on course to surpass
52-Week Range (INR) 486 / 267 50% by FY22-end. The company’s performance over the past few years has
1, 6, 12 Rel. Per (%) -3/-1/12 been commendable, given that not many have been able to sustain growth
12M Avg Val (INR M) 183 with a topline of over INR100b in the EPC space in India.
 The company has all the ingredients in place for growth over the next 3–5
Financials & Valuations (INR b) years. A strong promoter parentage and focus on the balance sheet should
Y/E Mar 2021 2022E 2023E
Sales 131.1 141.2 155.4
help KECI emerge stronger v/s peers post the COVID-19 crisis. Maintain Buy,
EBITDA 11.4 12.0 14.7 with TP of INR500/share (16x FY23E EPS). Key risks include rising commodity
PAT 5.5 6.0 8.0 prices and delays in new awarding.
EBITDA (%) 8.7 8.5 9.5
EPS (INR) 21.5 23.4 31.1 Commodity costs moderate margins
EPS Gr. (%) (2.3) 8.9 32.6  1QFY22 snapshot: Revenue grew 15% YoY to INR25.4b and was 10% ahead
BV/Sh. (INR) 130.7 150.9 178.7
Ratios of our estimate. EBITDA declined 18.0% YoY to INR1.6b and was 17% below
Net D/E 0.5 0.4 0.4 our estimate. The EBITDA margin came in at 6.3% v/s our expectation of
RoE (%) 16.5 15.5 17.4 8.3%, suggesting the impact of commodity price inflation. Adjusted PAT
RoCE (%) 14.2 14.2 16.0
Payout (%) 12.6 11.5 8.7 declined to INR461m and was 36% below our expectation.
Valuations  Order book/inflow update: Order inflow for 1QFY22 stood at INR44b. The
P/E (x) 19.4 17.8 13.4 order book grew 3.8% YoY to INR204b (order book to revenue ratio: 1.5x).
P/BV (x) 3.2 2.8 2.3
EV/EBITDA (x) 10.9 10.2 8.4
The company is L1 in orders worth ~INR56b.
Div Yield (%) 0.6 0.6 0.6  Net debt including acceptances increased INR6b YoY to INR39.4b,
FCF Yield (%) 7.0 4.9 1.3 suggesting deterioration in the working capital cycle. Railway payments
were a bit delayed in 1QFY22, but have started showing signs of
Shareholding pattern (%) improvement.
Promoter 51.8 51.8 51.7 Key highlights from management commentary
DII 26.5 25.6 27.8  Strong order outlook: INR700b worth of tenders are in the bid pipeline, of
FII 11.1 10.8 8.8 which INR450b is in T&D (India + International) and INR110m in Railways.
Others 10.6 11.9 11.8
 Commodity prices showing signs of stabilizing: With commodity prices
FII Includes depository receipts
stabilizing / cooling off lately, the margin situation is better compared with
the scenario in March/April. The management expects margins to rebound
over the next couple of quarters.
 The key disappointment came from the SAE business in Brazil, which led to
EBITDA loss of INR654m in the International business. It would take two
more quarters for legacy orders to be over, and margins would
subsequently rebound by 4Q.
3 August 2021 30
Valuation and view
 We cut our FY22E EPS by 8%, factoring in weaker-than-expected margins.
However, we broadly maintain our FY23/24E EPS estimates given the strong
order inflow outlook. We maintain our Buy rating, with TP of INR500/share (16x
FY23E EPS), given: a) the company’s strong execution track record, b) declining
business concentration risk due to its foray into Railways, Civil, etc., and c)
reasonable valuations.
Quarterly performance (INR m)

FY21 FY22 FY21 FY22E MOSL Var.
Y/E March 1Q 2Q 3Q 4Q 1Q 2QE 3QE 4QE 1QE
Sales 22,068 32,577 32,892 43,605 25,400 35,183 35,524 45,138 1,31,142 1,41,244 23,171 10%
Change (%) -8.5 16.0 7.0 18.8 15.1 8.0 8.0 3.5 9.6 7.7 5.0
EBITDA 1,949 2,931 2,987 3,546 1,599 2,991 3,197 4,167 11,412 11,954 1,923 -17%
Change (%) -22.5 -0.2 -6.2 -4.4 -18.0 2.0 7.0 17.5 -7.5 4.7 -1.3
As of % Sales 8.8 9.0 9.1 8.1 6.3 8.5 9.0 9.2 8.7 8.5 8.3
Depreciation 391 374 380 380 381 390 400 409 1,525 1,581 400
Interest 663 674 658 632 649 620 600 593 2,627 2,462 600
Other Income 69 68 39 123 17 75 70 160 299 322 70
PBT 965 1,950 1,988 2,657 585 2,056 2,267 3,325 7,559 8,233 993 -41%
Tax 257 525 537 714 124 553 609 927 2,032 2,213 267
Effective Tax Rate (%) 26.6 26.9 27.0 26.9 21.2 26.9 26.9 27.9 26.9 26.9 26.9
Reported PAT 708 1,426 1,451 1,943 461 1,503 1,658 2,398 5,527 6,020 726 -36%
Change (%) -20.1 2.5 0.1 0.7 -34.8 5.4 14.3 23.4 -2.3 8.9 2.6
Recurring PAT 708 1,426 1,451 1,943 461 1,503 1,658 2,398 5,527 6,020 726 -36%
Change (%) -20.1 2.5 0.1 0.7 -34.8 5.4 14.3 23.4 -2.3 8.9 2.6
3 August 2021 31
Sector Update| 2 August 2021
Automobiles
Mahindra & Mahindra
CMP: INR758 TP: INR1068 (+41%) Buy
Stock Info Above est.; 8% volume CAGR (v/s Jul’19) to 70.2k
Bloomberg MM IN Tractors (below est.) posts 17% CAGR (v/s Jul’19); UV (above est.) posts 8%
Equity Shares (m) 1,209
sales CAGR (v/s Jul’19)
M.Cap.(INRb)/(USDb) 942.2 / 12.7
 M&M’s wholesales were above our estimates at 70.2k (v/s est 66.3k) and posted an
1, 6, 12 Rel. Per (%) -4/-14/-16
8% CAGR (v/s Jul’19) – up 37.5% YoY / -13.5% MoM.
 M&M’s Tractors biz posted (below est.) a ~17% volume CAGR (v/s Jul’19) to 27.2k
Financials Snapshot (INR b) units (v/s est. 31.8k units), +7% YoY / -44% MoM. We have factored in 8% volume
Y/E MARCH 2021 2022E 2023E growth for FY22E, implying 3% residual decline or 32k units/month.
Sales 449 554 619  UV saw an (above est) 8% volume CAGR (v/s Jul’19) to 40.4k (est 33.1k units);
EBITDA 63.5 76.0 88.3 Domestic Passenger UV posted a 15% sales CAGR (v/s Jul’19), whereas Pickup/SCV
Adj. PAT (incl posted an 8% volume CAGR. We estimate UV volumes to grow 30% in FY22E, with a
40.4 51.3 62.3
MVML)
residual growth rate of 11% or a monthly run-rate of 37.8k units.
Adj. EPS (INR) 33.8 42.9 52.1
 3W posted a 32% volume CAGR decline (v/s Jul’19) to 2.1k units (v/s est. 975 units).
EPS Gr. (%) 12.8 27.0 21.4
BV/Sh. (INR) 296 331 362
We estimate 3W volumes to grow 53% in FY22E, with a residual growth rate of 28%
Ratios or a monthly run-rate of 3.3k units.
RoE (%) 11.2 13.5 14.4  As per Mr Veejay Ram Nakra, Chief Executive Officer, Automotive Division, M&M,
RoCE (%) 2.4 12.1 13.4 “More than 90% of our dealerships and workshops are now operational across the
Payout (%) 389 18 20 country. We have seen significant increase in activity levels, enquiries and as a
Valuations result, sales across our product portfolio. While supply of semiconductors continues
P/E (x) 22.4 17.6 14.5 to be a global issue and we are doing everything to address it on priority, July has
P/BV (x) 2.6 2.3 2.1 been an exciting month for us with two new product launches. We launched the
Div. Yield (%) 1.2 1.0 1.3 Bolero Neo for the new age customer’s looking for a tough, powerful, go-anywhere
FCF Yield (incl authentic SUV. We also launched the Supro Profittruck range of SCV’s offering
7.5 5.1 6.3
MVML)
guaranteed higher mileage and payload and have on-boarded Both launches have
*incl.MVML received very positive initial response and we are confident of building on this in the
coming months.”
 Commenting on the performance, Mr Hemant Sikka, President – Farm Equipment
Sector, Mahindra & Mahindra Ltd., stated “We have sold 25769 tractors in the
domestic market during July 2021 with a growth of 5% over last year. Demand
remained buoyant in July as crop sowing operations gained traction with monsoon
picking up pace across all the regions. Easing of COVID curbs & robust farm incomes
on account of record Rabi crop procurement has bode well for the rural economy.
We continue to stay bullish on tractor demand in the coming months owing to
revival of monsoon, hike in MSP of key Kharif crops & upcoming festival season. In
the exports market, we have sold 1460 tractors with a growth of 55%.”
 The stock trades at core PE of 14.5x FY23E S/A EPS and 2.1x core P/B. Maintain Buy.
Snapshot of volumes for July’21
YoY MoM 2 Year CAGR FY22
Residual Residual
YTD
YoY (%) MoM (%) 2 yr FY22 Gr. Growth Monthly
Company Sales Jul’21 Jul’20 Jun’21 Jul’19 Monthly
chg chg CAGR(%) estimate (%) (%) Run rate
Run rate
Mahindra & Mahindra 70,212 51,080 37.5 81,186 -13.5 60,134 8.1 8,46,361 19.7 5.2 73,672 64,247
UV (incl. pick-ups) 40,407 25,470 58.6 31,867 26.8 34,373 8.4 4,25,732 30.0 11.0 37,801 30,831
LCV & M&HCV 428 125 242.4 347 23.3 1,095 -37.5 6,369 49.1 26.5 634 324
Three-Wheelers 2,148 83 2488.0 750 186.4 4,674 -32.2 31,403 53.0 28.4 3,274 1,303
Tractors 27,229 25,402 7.2 48,222 -44 19,992 16.7 3,82,858 8.0 -2.9 31,962 31,790
3 August 2021 32
TVS Motor
CMP: INR572 TP: INR625 (9%) Neutral
Stock Info
Bloomberg TVSL IN
In line with est.; wholesales flat (v/s Jul’19) at 278.9k
Equity Shares (m) 475 2W volumes flat (v/s Jul’19), while 3W posts 8% CAGR (v/s Jul’19)
M.Cap.(INRb)/(USDb) 271.7 / 3.7
52-Week Range (INR) 666 / 385  TVSL’s wholesales were flat (v/s Jul’ 19) at 278.9k units (v/s est. 292.1k units),
1, 6, 12 Rel. Per (%) -7/-14/7
+10% YoY / +11% MoM.
Financials Snapshot (INR b)  2W volumes were flat (v/s Jul’19) at 262.7k units, up 8% YoY / 10% MoM.
Y/E March 2021 2022E 2023E Domestic 2Ws posted an 8% volume CAGR decline (v/s Jul’19) to 175.2k units, -
Sales 167.5 227.9 253.9 8% YoY/ +20% MoM. 2W posted a 24% CAGR in export volumes (v/s Jul’19) to
EBITDA 14.3 22.4 27.4
87.6k units, +62% YoY / -6% MoM. We estimate 2W FY22E volumes to grow
Adj. PAT 6.1 12.0 15.6
EPS (INR) 12.9 25.2 32.9
22%.
EPS Gr. (%) -0.9 95.5 30.6  3W posted an 8% volume CAGR (v/s Jul’19) to 16.1k units (v/s est.14.4k units),
BV/Sh (INR) 87.8 108.0 135.4 +80% YoY / +17% MoM. We estimate total 3W volumes to grow 36% in FY22E.
Ratios  Overall volumes are estimated to grow ~22.5% in FY22E, implying a residual run-
RoE (%) 15.7 25.7 27.0 rate of 350.1k or ~11% residual growth.
RoCE (%) 17.8 29.5 32.1
 The stock trades at 22.7x/17.4x FY22/FY23E EPS. Maintain Neutral.
Payout (%) 27.2 17.3 16.7
Valuations
P/E (x) 44.4 22.7 17.4
P/BV (x) 6.5 5.3 4.2
Div. Yield (%) 0.6 0.8 1.0
FCF Yield (%) 7.4 1.7 5.8

YoY MoM 2 Year CAGR Residual Residual FY22 YTD
YoY (%) MoM (%) 2 yr FY22 Growth Monthly Monthly
Company Sales Jul’21 Jul’20 Jun’21 Jul’19 Gr. (%) (%) Run rate Run rate
chg chg CAGR(%) estimate
TVS Motor 2,78,855 2,52,744 10.3 2,51,886 10.7 2,79,465 -0.1 37,37,691 22.5 10.6 3,50,135 2,34,153
Motorcycles 1,38,772 1,06,062 30.8 1,46,874 -5.5 1,08,210 13.2 17,99,560 34.1 12.5 1,56,937 1,36,015
Scooters 74,351 78,603 -5.4 54,595 36.2 1,05,199 -15.9 11,05,045 15.0 11.3 1,11,407 53,447
Mopeds 49,605 59,123 -16.1 36,623 35.4 52,270 -2.6 6,64,522 6.2 5.6 67,618 30,896
Three-Wheelers 16,127 8,956 80.1 13,794 16.9 13,786 8.2 1,68,564 36.4 9.9 14,172 13,796
Domestic 1,75,722 1,90,355 -7.7 1,45,640 20.7 2,09,471 -8.4 24,38,763 12.3 7.7 2,41,674 1,26,344
Exports 1,03,133 62,389 65.3 1,06,246 -2.9 69,994 21.4 12,98,927 47.7 17.8 1,08,461 1,07,810
3 August 2021 33
Ashok Leyland
CMP: INR135 TP: INR156 (+16%) Buy
Stock Info
Bloomberg AL IN
Below est.; wholesales post 11% CAGR decline (v/s Jul’19) to
Equity Shares (m) 2,927 8,650 units
M.Cap.(INRb)/(USDb) 395.6 / 5.3
M&HCV posts 25% sales CAGR decline (v/s Jul’19) and LCV posts 7% sales
1, 6, 12 Rel. Per (%) 9/-4/136
CAGR (v/s Jul’19)
Financials Snapshot (INR b)  Wholesale posted an 11% volume CAGR decline (v/s Jul’19) to 8.65k units
Y/E March 2021 2022E 2023E
(below est.), +81% YoY / +34% MoM.
Sales 153.0 254.9 322.2
EBITDA 5.4 19.7 35.1  M&HCV (below est.) posted a 25% volume CAGR decline (v/s Jul’19) to 3.8k
EBITDA (%) 3.5 7.7 10.9 units (v/s est.5k units), +124% YoY/ +38% MoM.
Adj. PAT -3.0 7.6 19.5  LCV (in-line) posted a 7% volume CAGR (v/s Jul’19) to 4.8k units (v/s est.4.6k
Adj. EPS (INR) -1.0 2.6 6.6
EPS Gr. (%) -188.0 -352.1 156.6 units), +57% YoY/ +31% MoM.
BV/Sh. (INR) 23.8 25.4 30.0  We estimate volumes to grow 61.5% in FY22E, implying residual growth of ~48%
Ratios or 17k units. LCV volumes would benefit from the launch of the Bada Dost in
Net D:E (x) 0.4 0.4 0.3
RoE (%) -4.2 10.5 24.0
more regions and other LCV launches.
ROCE (%) -0.7 8.9 18.6  The stock trades at 11x FY23E EV/EBITDA and 4.5x FY23E P/BV. Maintain Buy.
Payout (%) -58.4 38.6 30.1
Valuations
P/E (x) -131.1 52.0 20.3
P/BV (x) 5.7 5.3 4.5
EV/EBITDA (x) 79.3 20.7 11.0
Div. Yield (%) 0.4 0.7 1.5
FCF Yield (%) -1.5 6.1 7.9

YoY MoM 2 Year CAGR FY22
Residual Residual
YTD
YoY (%) MoM (%) 2 yr FY22 Gr. Growth Monthly
Company Sales Jul’21 Jul’20 Jun’21 Jul’19 Monthly
chg chg CAGR(%) estimate (%) (%) Run rate
Run rate
Ashok Leyland 8,650 4,776 81.1 6,448 34.2 10,927 -11.0 1,62,627 61.5 47.6 16,999 6,659
M&HCV 3,822 1,706 124.0 2,764 38.3 6,722 -24.6 91,711 77.0 60.6 9,855 3,218
LCV 4,828 3,070 57.3 3,684 31.1 4,205 7 70,917 45.0 32.8 7,144 3,441
3 August 2021 34
Bajaj Auto
CMP: INR3,841 TP: INR4,250 (+11%) Neutral
Stock Info
Bloomberg BJAUT IN
In-line; 2% volume CAGR decline (v/s Jul’19) to 369k units
Equity Shares (m) 289 3W posts 19% volume CAGR decline (v/s Jul’19)
M.Cap.(INRb)/(USDb) 1111.4 / 14.9  BJAUT’s wholesales posted a 2% CAGR decline (v/s Jul’19) to 369k units (v/s est 370.2k units),
52-Week Range (INR) 4361 / 2823 +44% YoY / +7% MoM.
1, 6, 12 Rel. Per (%) -9/-15/-13  The domestic biz posted a 10% volume CAGR decline (v/s Jul’19) to 167.3k units (v/s est
167.9k units), +5% YoY / +3% MoM.
Financials Snapshot (INR b)  Motorcycle posted a 1% volume CAGR (v/s Jul’19) to 330.6k units (v/s est 332.3k units), +39%
Y/E MARCH 2021 2022E 2023E YoY / +6% MoM. Domestic Motorcycles posted a 4% volume CAGR decline (v/s Jul’19) to
Sales 277 361 406
156.2k units, +2.5% YoY / flat MoM.
EBITDA 49.3 59.5 72.2
 Exports posted a 7% CAGR (v/s Jul’19) to 174.3k units, +103% YoY / +12.5% MoM.
EBITDA (%) 17.8 16.5 17.8
 We estimate motorcycle volumes to grow ~19% in FY22E, implying a monthly run-rate of
Adj. PAT 48.6 56.7 65.7
383.7k units.
EPS (INR) 168 196 227
EPS Gr. (%) -6.8 16.8 15.7
 3W posted a 19% volume CAGR decline (v/s Jul’19) to ~38.6k units, +123% YoY / +8% MoM.
BV/Sh. (INR) 871 893 915 The domestic biz posted a 43% volume CAGR decline (v/s Jul’19) to 11k units, +70% YoY /
Ratios +78% MoM. Exports posted a 5% CAGR to 27.5k units, +155% YoY / -6% MoM. We estimate
RoE (%) 21.5 22.2 25.1 3W volumes to grow ~54% in FY22E, implying residual growth of 37% or a run-rate of ~53k.
RoCE (%) 19.7 20.1 22.7  Mr Rakesh Sharma, Executive Director, Bajaj Auto, stated on CNBC, “It is a more step by step
Payout (%) 83.4 81.6 83.7 staged recovery that we are seeing and the great thing is that it is evenly spread out. The
Valuation southern part of the country is yet to catch up on the recovery and that should start in
P/E (x) 22.9 19.6 16.9 August three-wheeler business for the company stepped up in July. The retail numbers,
P/BV (x) 4.4 4.3 4.2 which were around 7000 in June went up to 12000 in July, he mentioned further, adding that
Div. Yield (%) 3.6 4.2 4.9 although it is not as widespread as motorcycles, it does give a good view of what is
FCF Yield (%) 2.6 4.6 5.4 happening on the ground. So, things are improving month on month August is where retail
starts moving up further because mini-festive occasions start to build up in Maharashtra,
southern parts etc. So, I think August will be better but I would not place my bets on sales
numbers.”
 On exports, he commented, “Most countries are striking a better balance between livelihood
and life. So, apart from Asian region, where Philippines and Cambodia are important to us
and also Nepal, these countries are weighing the performance down but other than that,
Latin America, Africa, and Middle-East have moved on and on the basis of that, we see
export outlook maintaining the same tempo. Over the next few months, if Philippines,
Cambodia start to return, it should give a boost in exports but that depends on how COVID
progresses over there.”
 The stock trades at 19.6x/16.9x FY21/22E consol. EPS. Maintain Neutral.

YoY MoM 2 Year CAGR Residual Residual FY22 YTD
YoY (%) MoM 2 yr FY22 Growth Monthly Monthly
Company Sales Jul’21 Jul’20 Jun’21 Jul’19 Gr. (%) (%) Run rate Run rate
chg (%) chg CAGR(%) estimate
Bajaj Auto 3,69,116 2,55,832 44.3 3,46,136 6.6 3,81,530 -1.6 48,65,865 22.5 6.6 4,36,342 3,43,783
Motorcycles 3,30,569 2,38,556 38.6 3,10,578 6.4 3,22,210 1.3 42,99,738 19.2 3.5 3,83,733 3,07,469
Two-Wheelers 3,30,569 2,38,556 38.6 3,10,578 6.4 3,22,210 1.3 42,99,738 19.2 3.5 3,83,733 3,07,469
Three-Wheelers 38,547 17,276 123.1 35,558 8.4 59,320 -19.4 5,66,127 54.2 37.3 52,609 36,314
Domestic 1,67,273 1,58,976 5.2 1,61,836 3.4 2,05,470 -9.8 23,37,739 21.8 15.6 2,26,666 1,31,103
Exports 2,01,843 96,856 108.4 1,84,300 9.5 1,76,060 7.1 25,28,126 23.1 -1.7 2,09,676 2,12,680
3 August 2021 35
In conversation
HDFC: Increase in demand seen across the board; Keki Mistry,

Vice Chairman & CEO
 NIM expanded due to surplus liquidity coming down YoY; Rs. 32,000 crore of surplus
liquidity has come down to Rs. 15,225 crore YoY
 Seeing an increase in demand across the board
 Saw an impact of demand in April & May; demand started returning in June
 Disruption to business activity in second wave was lesser than last year
 Have been very proactive in provisioning
 Saw growth in both high-end and affordable housing segment
 Disbursements have picked up with the unlocking of respective lockdowns
 Business has reverted to normalised trends in June & July
 July disbursements were highest ever in a non-quarter end month
 July 2021 disbursements 68% higher against July 2020
Bajaj Auto: Sees retail sales picking up from August; Philippines,

Cambodia markets to boost markets; Rakesh Sharma, ED
 Positive demand trends should continue
 Company is seeing an improvement on a month-on-month basis
 August sales should be better than July
 Consumers have digested two price hikes as of now
UPL: Sees 8-10% revenue rise and over 15% margin growth this
year; Jaidev Shroff, Global CEO
 It has been a challenging quarter weather and cost wise
 There were weather related issues in Europe, Mexico
 Expect better than a normal year going forward
 Believe costs will stabilise or may correct in some raw materials
 See revenue growth of 8-10% and margin of above 15% going forward
 Have passed on raw materials price hikes to our customers
 Will be launching 26 products in India in next 1 year in the NPP portfolio
 NPP business should contribute 20% to overall revenue in few years from now
 Share of bio-business should go up to 10-12% initially, and later to 20%
3 August 2021 36
United Breweries: Eyeing EBITDA margin of 12.5-14%; cost
mitigating measures allaying inflationary woes; Rishi Pardal,
MD & CEO
 Seeing consumption at pre-COVID levels. Recovery stands at 66-67% currently
 In every market other than one state we saw consumption go up
 Saw some amount of inflation w.r.t raw materials. Prepared to tackle inflation with
mitigating measures
 Cost actions will get a full chance to play out once volume rise. On an end-to-end
cost management journey
 Pre-pandemic EBITDA margin was 12.5%, look to get back their first
Marico: Expect 8-10% volume growth this fiscal; 19% margins in

H2FY22; Saugata Gupta, MD & CEO
 All 3 key raw materials for company were near record high in Q1
 Copra prices have come down, expect it to be ranged
 Expect some deflation in vegetable oil price
 Expect 19% plus margin in H2FY22
 On track to grow coconut oil business at 5-7% sustainably
 Will chase scale in the foods business
 Will have new business and personal care business
 D2C brands are premiumisation will boost margin
 Food, D2C and premium hair brands will see increase contribution by 10-15%
 Have a huge opportunity to increase the addressable market for Saffola
Bandhan Bank: COVID 2nd wave impacted microcredit

borrowers in rural, semi-urban areas; Chandra Shekhar Ghosh,
MD & CEO
 Q1FY22 has been worse than 1st wave
 These are challenging times for micro credit financiers
 Saw an improvement in July collections
 Provision to remain elevated going ahead
3 August 2021 37
Shriram Transport Finance: Relooking at potential merger with
Shriram City; Umesh Revankar, MD
 Business has been sluggish in Q1FY22
 Needed to carry higher liquidity in Balance Sheet due to COVID wave
 Negative carry on margin by 25-30 bps was due to higher liquidity
 May was a total washout w.r.t collections, due to state lockdowns
 Passenger vehicle saw an impact from second wave
 Disbursements will be good in Q2FY22
 July disbursements were higher by 10-15% MoM
 Expect normalcy to come back but making profit will be challenging
 Have started re-looking into potential merger with Shriram City
Equitas SFB: Bets on 15-20% loan growth in FY22; expect Rs. 500-
600 crore potential restructuring in Q2; PN Vasudevan, MD &
CEO
 Borrowers had cash flow issues in Q1. Looking at 15-20% loan growth in FY22
 Expect another Rs. 500-600 crore of potential restructuring in Q2FY22
 Saw some repayment last year when the economy had re-opened
 Daily cases in Tamil Nadu’s 3rd wave have been lower than 2nd wave
 State Governments have reacted faster to 3rd wave than they did during the 2nd
 90% of the borrowers are first time borrowers in financial sector
Mahanagar Gas: Expect 6% volume growth over next 5 years;

Sunil Ranade, CFO
 Both domestic and industrial segments have done well
 Have surpassed pre-pandemic sales volume level
 Further easing of lockdown will increase volume further
 Too early to predict volume by the mobile re-fuelling units
 Unable to set up our pumps at some OMC stations due to paucity of space
JSW Energy: Earmarks Rs 15,700 crore in commissioning

additional capacity; Prashant Jain, Jt. MD & CEO
 Hydro generation has been lower by 15% this year due to less availability of water
 Have transformed from, a short-term to a long-term contract
 We are now completely insulated from merchant power pricing
 Have earmarked Rs. 15,700 crore in commissioning additional capacity
 Government is working on green hydrogen purchase obligation policy
3 August 2021 38
KEI Industries: Expect to hold on to current margin and
potentially improve it to 11.5%; Anil Gupta, CMD
 Intend to grow by 18-20% in FY22
 Close to 40-45% of incremental growth has come on account of price increases
 Expect to hold on to current margin and potentially improve it to 11.5%
 Exports have declined by 50% because of high base on account of one specific order
 Will be able to maintain our exports at traditional level
Nazara Technologies: Expect margin to normalise in the coming

quarters as focus to remain on growth; Nitish Mittersain,
Founder & Joint MD
 There is significant opportunity in different segments
 Delivering growth alongside profitability
 Q1 margin lifted due to lower ad spends in Kiddopia business
 Expect margin to normalise in the coming quarters
 See opportunity to scale up Kiddopia business profitability
 e-sports revenue has grown 100% YoY
 e-sports is a potentially large market, competition will help growth market grow
KEC International: Happy with 15% growth reported despite

intermittent lockdowns; Vimal Kejriwal, MD & CEO
 Happy with 15% growth despite the intermittent lockdowns
 Order book stands at Rs. 30,400 crore currently
 Performance in Brazil has been impacted
Orient Electric: Expect input price normalisation to help margin

stabilise; Rakesh Khanna, MD & CEO
 Optimistic to deliver very good results going forward
 Optimistic about margin improvement in the coming quarters
 Seeing some kind of stability in the commodity cost
 Total price increase would be in the range of 12-18% depending on products
 Exports contributes less than 10% of total revenues; looking to improve further
3 August 2021 39
Dr Lal Path Labs: Expect non-COVID business to grow 14-15% in
FY22; aims for southern, western India expansion; Om
Manchanda, MD
 Focussing on non-COVID business currently
 See normal growth trajectory in non-COVID business
 Margin numbers are definitely not sustainable; margin trajectory should come back
to normal level when COVID subsides
 Focus is on combination of both organic and inorganic growth
 Have recently launched a big reference lab in Bengaluru, looking at Mumbai market
as well
 Usage of cash on books will be towards dividends, investment into high-end
portfolio and inorganic growth options
Vinati Organics: Expect EBITDA margin at 30-35% in FY22;

Vinati Saraf Mutreja, MD
 Demand growth is good for all products. Have reported highest ever quarterly
revenue
 Freight costs have gone higher over the last 6 months. Expect EBITDA margin at 30-
35% in FY22
 Have done most of the capex in last 2 years
 Merger is pending with viral additives which will add revenue in FY23
 Company currently exports 85-90% of ATBS. Butyl phenol will add extra revenue this
year
3 August 2021 40
NOTES
3 August 2021 41
Disclosures:
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3 August 2021

Chart of the Day: India Strategy (1QFY22 interim earnings review)

Research Team (Gautam.Duggad@MotilalOswal.com)

Motilal Oswal values your support 1QFY22 interim earnings review

Key sectoral trends from 1QFY22 earnings

In-line performances; commentaries getting better

Highlights from management commentary

Valuation and view

Quarterly Performance (standalone) – INR b

Consol. Quarterly Performance (INR m)

Valuation and view

Key Performance Indicators

Cholamandalam Inv. & Finance

Asset quality shows signs of stress buildup; CIFC upfronts provisions

Key highlights from management commentary

Valuation and view

Consolidated - Quarterly Earnings Model (INR m)

Valuation and view

Consol. Quarterly performance (INR m)

Standalone - Quarterly Earnings Model (INR m)

Strategic developments during the quarter

 For 1HCY21, revenue was up 72% YoY at INR20.3b, with EBITDA at

 Company declared interim dividend of INR2.5/share.

 Further details on volumes and operational parameters awaited.

Quarterly Performance (INR Million)

Quarterly performance (INR m)

Quarterly performance (INR m)

Snapshot of volumes for July’21

Snapshot of volumes for July’21

Snapshot of volumes for July’21

HDFC: Increase in demand seen across the board; Keki Mistry,

Bajaj Auto: Sees retail sales picking up from August; Philippines,

Marico: Expect 8-10% volume growth this fiscal; 19% margins in

Bandhan Bank: COVID 2nd wave impacted microcredit

Mahanagar Gas: Expect 6% volume growth over next 5 years;

JSW Energy: Earmarks Rs 15,700 crore in commissioning

Nazara Technologies: Expect margin to normalise in the coming

KEC International: Happy with 15% growth reported despite

Orient Electric: Expect input price normalisation to help margin

Vinati Organics: Expect EBITDA margin at 30-35% in FY22;

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