India Strategy - InCred - 28 Aug

Strategy Note India │ August 26, 2023
India
India Strategy
InCred Sector rating Great start to FY24 with EPS beat, upgrades
■ 1QFY24 results kick-started the Nifty-50 EPS beat trend and helped to drive
Overweight Neutral Underweight the EPS upgrade trend as well, after almost a year of weakness.
Aluminum Auto Ancillary Agribusiness
■ Strong market rally, especially in mid/small-caps, led to a poor risk-reward
Automobile Building Materials Aviation
ratio, and resulted in more stock rating downgrades in our coverage universe.
Cement Consumer staples Chemicals
Consumer Information
■ Large-caps relatively look attractive with the Nifty-50 index’s P/E valuation &
Electricals Technology
Diagnostics India P/E premium vs. Asia peers below the mean level. Retain Overweight.
Capital Goods Pharma Metals & Mining
Defense Ports & Logistics Sustained improvement in economic activity indicators
Financial The economic data points trend highlights sustained improvement in GST collection, strong
Services credit growth, goods movement (e-way bills), electricity consumption and kharif sowing. 1Q
Infrastructure GDP growth is likely to be strong at 8%, as per the Reserve Bank of India or RBI. However,
Oil and Gas the recent spike in Consumer Price Index or CPI inflation is an area of concern, but seems
transient as core CPI is still on a declining trend. The areas of concern are the weakness
in rainfall in recent weeks, lower corporate tax collection and slowdown in exports.
Impressive Jun 2023 quarter results drive EPS upgrade

The Jun 2023 quarter witnessed an EPS growth of 42% yoy on a low base, leading to a
4% beat vs. Bloomberg consensus estimate, recording a beat for the first time in the last
one year. The 19% yoy EBITDA growth (Fig. 43) was driven by lower costs while sales rose
by just 7% yoy. Key sectors that were in the limelight were oil & gas, banking, capital goods
and automobile. However, the major sectors that lagged on the PAT front were metals and
chemicals. The EPS upgrade trend, which started in Apr 2023, gained further momentum.
Churn out high-conviction stock ideas for quick valuation catch-up

The good start in 1QFY24 order inflow for the capital goods sector, states’ capex uptick
and home loan growth reiterate our investment theme of the housing and
capex/infrastructure sectors. Festive season-led recovery aided by easing interest rates in
2HFY24F will be the key drivers to watch out for. Considering the sharp run-up in mid-caps,
we have removed KEC International and Kajaria Ceramics from our high-conviction stock
ideas list and introduced KEI Industries and Thermax. In our coverage universe, we have
seen more downgrades in recent weeks (Astral, Crompton Greaves, Cummins India,
Century Plyboard, HDFC AMC, Hindustan Unilever, Marico, Persistent Systems, SBI Life
and Sun Pharmaceutical Industries) than the upgrades.
Maintain Nifty-50 target and Overweight rating

The economic growth momentum transitioning into EPS beat and upgrades provide comfort
to our Overweight rating and the upside in our Nifty-50 target of 21,103 (Fig. 55). However,
the sharp outperformance of Nifty Mid-cap and Small-cap indices (Fig. 62) is a cause of
concern, leading to stock-specific downgrades being more where the risk-reward ratio
seems to be unfavorable. Key downside risks are rainfall distribution impacting rural
recovery, and external bond & equity market volatility.
Figure 1: Quarterly EPS beat/miss vs. Bloomberg consensus estimates

20% 15%13%
5% 13% 8%
10% 4% 1% 3% 1% 2% 4%
Analyst(s)
0%
-10% -1% -2% -4%-2%-1%-2%
-20% -10%
-30% -22% -23%
-28% -27%
-40%
-50%
Pramod AMTHE -60%
-70% -59%
T (91) 22 4161 1541
Dec'17
Sep'18
Dec'18
Sep'19
Dec'19
Sep'20
Dec'20
Sep'21
Dec'21
Sep'22
Dec'22
Mar'18
Mar'19
Mar'20
Mar'21
Mar'22
Mar'23
Jun'18
Jun'19
Jun'20
Jun'21
Jun'22
Jun'23
E pramod.amthe@incredcapital.com
Kashish THAKUR
T (91) 22 4161 1549 Nifty Earnings surprise (%)
E kashish.thakur@incredcapital.com
SOURCE: INCRED RESEARCH, COMPANY REPORTS
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India
Strategy Note │ August 26, 2023
Figure 2: Our high-conviction stock ideas

3-yr EPS
Market Market EV/EBITDA Dividend ROE
BLOOMBERG Target Up/down EPS CAGR P/E (x) P/BV (x)
Company Reco. Capital Capital Price (x) Yield (%) %
TICKER Price (%) (FY23A-
(Rsbn) (US$bn)
FY25F)
FY23A FY24F FY25F FY23A FY24F FY25F FY23A FY24F FY24F FY24F FY24F
Ashok Leyland AL IN ADD 546 6.6 186 205 10% 4.4 7.3 9.4 28% 39.5 25.5 19.9 6.5 5.8 11.7 215% 24.1
BCL Industries BCLIL IN ADD 11 0.1 461 925 101% 27.4 37.6 66.1 34% 16.8 12.3 7.0 3.9 2.4 7.7 18% 32.3
Bharat Electronics BHE IN ADD 975 11.8 133 140 5% 4.1 4.7 5.7 11% 32.4 28.6 23.6 7.2 6.3 19.9 153% 23.5
Bharat Forge BHFC IN ADD 476 5.8 1,023 1,110 9% 10.5 20.5 26.8 36% 118.0 49.9 38.2 7.1 5.2 21.8 98% 12.1
Camlin Fine Sciences CFIN IN ADD 26 0.3 154 300 95% 6.2 15.1 21.8 52% 24.6 10.2 7.1 2.5 1.9 7.3 98% 21.2
Clean Science and Technology CLEAN IN REDUCE 148 1.8 1,396 660 -53% 26.8 29.4 33.8 8% 52.2 47.6 41.4 15.5 12.8 36.2 0% 29.5
Container Corp of India CCRI IN ADD 404 4.9 663 940 42% 20.2 25.9 42.1 28% 32.9 25.6 15.8 3.5 3.2 15.1 117% 12.9
Dalmia Bharat DALBHARA IN ADD 376 4.5 2,004 2,220 11% 64.4 53.1 64.9 0% 28.3 37.7 30.9 2.4 2.3 13.1 21% 6.2
Globus Spirits GBSL IN ADD 27 0.3 922 2,929 218% 42.4 71.8 117.2 40% 21.7 12.8 7.9 3.0 2.5 7.8 47% 21.0
HDFC Bank HDFCB IN ADD 11,815 142.9 1,562 2,000 28% 79.1 80.6 104.1 10% 19.8 19.4 15.0 3.1 2.6 NA NA 16.3
Home First Finance Company HOMEFIRS IN ADD 75 0.9 849 1,050 24% 26.1 32.8 39.0 14% 32.6 25.9 21.8 4.1 3.5 NA NA 14.7
InterGlobe Aviation INDIGO IN REDUCE 948 11.5 2,458 1,600 -35% 6.5 -16.0 -9.3 -213% -34.9 -153.7 -265.0 -10.8 -10.1 17.0 0% 9.1
KEI Industries KEII IN ADD 236 2.9 2,615 2,598 -1% 53.0 66.5 78.7 14% 49.4 39.3 33.2 9.1 7.5 26.5 15% 28.0
Mahindra & Mahindra Finance MMFS IN ADD 364 4.4 294 430 46% 16.1 18.3 26.1 18% 18.3 16.1 11.3 2.1 2.0 NA NA 12.7
Maruti Suzuki MSIL IN ADD 2,871 34.7 9,506 11,061 16% 266.5 373.4 466.3 20% 35.7 25.5 20.4 4.8 4.2 15.9 110% 17.5
Reliance Industries RIL IN ADD 16,701 202.1 2,468 3,369 36% 162.2 178.7 NA NA 0.0 0.0 NA 0.0 0.0 -0.6 0% 12.4
Spandana Sphoorty Financial SPANDANA IN ADD 57 0.7 798 1,000 25% 1.7 75.5 100.5 286% 456.4 10.6 7.9 1.8 1.5 NA NA 15.5
Thermax TMX IN ADD 321 3.9 2,693 2,880 7% 40.0 55.6 NA NA 67.3 48.5 NA 7.8 7.0 8.3 171% 5.1
Torrent Pharmaceuticals TRP IN ADD 656 7.9 1,938 2,266 17% 36.8 50.7 60.9 NA 52.7 38.2 31.8 10.6 9.1 35.8 36% 15.2
UltraTech Cement UTCEM IN ADD 2,330 28.2 8,071 9,030 12% 175.4 256.7 305.3 18% 46.0 31.4 26.4 4.3 3.9 20.5 77% 25.7
SOURCE: INCRED RESEARCH, COMPANY REPORTS
2
India
Great start to FY24 with EPS beat, upgrades

Improvement in economic growth leads to positive
sentiment
The mixed trend in economic growth momentum continues, with more variables
providing growth comfort like the strength in credit growth, electricity generation,
Goods and Services Tax or GST collection and personal income-tax collection.
However, the weakness in rainfall in recent weeks, spike in retail inflation, rise in
the country’s trade deficit, weakness in corporate tax collection and hiring index
are all areas of concern. With the inflation spike expected to be transient due to
seasonal factors, the interest rate cuts around the festive season can help revive
consumer demand because the sentiment remains positive.
Figure 3: Overall loan growth is strong Figure 4: Non-food credit growth in recent months is encouraging
%
30.0 YoY credit growth- Sector-wise Non-food credit (Rs tr)
150
140
20.0
130
Rs tr
120
10.0
110
0.0 100
Nov-19
Nov-17
Nov-18
Nov-20
Nov-21
Nov-22
Mar-20
Mar-18
Mar-19
Mar-21
Mar-22
Mar-23
Jul-17
Jul-18
Jul-19
Jul-20
Jul-21
Jul-22
Jul-23
90
Dec-20
Aug-19
Dec-19
Aug-20
Aug-21
Dec-21
Aug-22
Dec-22
Apr-21
Oct-19
Apr-20
Oct-20
Oct-21
Apr-22
Oct-22
Apr-23
Feb-21
Jun-19
Feb-20
Jun-20
Jun-21
Feb-22
Jun-22
Feb-23
Jun-23
-10.0
Non-food Agriculture and allied activities
Industry Personal loans
Services Non-food credit…
SOURCE: RBI, INCRED RESEARCH SOURCE: RBI, INCRED RESEARCH
Figure 5: Car sales registrations on the growth path while the weakness in electric
vehicles or EVs and two-wheelers in recent months disappoint
4,50,000 20,00,000
4,00,000 18,00,000
3,50,000 16,00,000
14,00,000
3,00,000
(units)
(units)
12,00,000
2,50,000
10,00,000
2,00,000
8,00,000
1,50,000
6,00,000
1,00,000 4,00,000
50,000 2,00,000
0 0
Oct-19
Apr-20
Oct-20
Apr-21
Oct-21
Apr-22
Oct-22
Apr-23
Jul-21
Jul-19
Jan-20
Jul-20
Jan-21
Jan-22
Jul-22
Jan-23
Jul-23
PV - Retail EV - Retail 2W - Retail (RHS)
SOURCE: VAHAN.COM, INCRED RESEARCH, COMPANY REPORTS
3
India
Figure 6: Electricity generation witnesses seasonal weakness after touching peak

level
5,000
4,500
4,000
MU
3,500
3,000
2,500
2,000
Dec-20
Aug-19
Dec-19
Aug-20
Aug-21
Dec-21
Aug-22
Dec-22
Aug-23
Oct-19
Apr-20
Oct-20
Apr-21
Oct-21
Apr-22
Oct-22
Apr-23
Feb-20
Jun-20
Feb-21
Jun-21
Feb-22
Jun-22
Feb-23
Jun-23
Average Monthly Electricity Generation (MU)
SOURCE: POWER SYSTEM OPERATION CORPORATION LIMITED, INCRED RESEARCH
Figure 7: Sustained buoyancy in GST collection
2,000
1,800
1,600
1,400
Rs bn
1,200
1,000
800
600
400
200
0
Jul-19
Jul-20
Jul-21
Jul-22
Jul-23
Oct-19
Oct-20
Oct-21
Oct-22
Jan-19
Jan-20
Jan-21
Jan-22
Jan-23
Apr-19
Apr-20
Apr-21
Apr-22
Apr-23
GST collection (Rs bn)
NOTE: GST IS GOODS AND SERVICES TAX
SOURCE: GST COUNCIL, INCRED RESEARCH
Figure 8: Growth momentum in E-way bills

(in m)
3.5
2.92.9 2.82.92.8
3.0 2.8 2.8
2.72.72.7
2.5 2.5 2.5 2.5 2.5
2.5 2.32.3 2.4 2.3 2.5 2.4 2.4
2.3 2.2
2.0
2.1 2.12.0 2.12.1 2.0
1.9 1.9 2.0
2.0 1.81.8 1.7 1.71.71.81.81.8 1.8
1.7 1.7 1.61.6
1.4
1.5 1.3 1.3
1.0 0.8
0.5 0.3
0.0
Nov-19
Dec-19
Nov-20
Dec-20
Nov-21
Dec-21
Nov-22
Dec-22
May-19
May-20
May-21
May-22
May-23
Apr-21
Apr-19
Aug-19
Sep-19
Oct-19
Apr-20
Aug-20
Sep-20
Oct-20
Aug-21
Sep-21
Oct-21
Apr-22
Aug-22
Sep-22
Oct-22
Apr-23
Mar-22
Feb-23
Feb-20
Mar-20
Feb-21
Mar-21
Feb-22
Mar-23
Jun-19
Jul-19
Jan-20
Jun-20
Jul-20
Jan-21
Jun'21
Jul-21
Jan-22
Jun-22
Jul-22
Jan-23
Jun-23
Jul-23
Per day (in m)

SOURCE: GOODS AND SERVICES TAX NETWORK (GSTN), INCRED RESEARCH
4
India
Figure 9: Weak start to corporate tax collection is an area of concern
3MFY Income tax 3MFY Corporate tax
2500000
2000000
1500000
1000000
500000
SOURCE: CENTRE FOR MONITORING INDIAN ECONOMY (CMIE), INCRED RESEARCH
Consumer sentiment remains strong

Cumulative rainfall in India during this year’s southwest monsoon season till 18
Aug 2023 was deficient by about 6% compared to the long period average. Around
75% of the country’s area has received normal or excess rainfall. Rainfall, so far
this month, has been weak at 40% below the normal level. The monsoon has not
revived so far, as the India Meteorological Department or IMD had expected. The
IMD stated that the El Nino weather pattern has started impacting the monsoon in
India. The lack of revival of the monsoon could affect crop yields.
Sowing of kharif crops edged up over last year, as of 18 Aug 2023. Area sown
was up by 0.1% yoy. Actual area sown had fallen consecutively in 2021 and 2022.
Therefore, the marginal rise in 2023 on the low base of last year is not significant.
Moreover, the increase was not distributed evenly across crops. Foodgrain sowing
improved by almost 1% yoy, driven by the rice crop.
Rural demand sustained its sequential momentum in 1Q on the back of a good
rabi harvest and moderation in inflation. Several indicators, such as fast-moving
consumer goods (FMCG) sales up 4% yoy (as per market research firm Nielsen),
and strong 2&3-wheeler sales point towards improvement in rural demand.
After a consistent recovery for almost two years, consumer confidence for the
current period stood a shade lower than what was witnessed in the previous
survey round in May 2023; improvement in respondents’ sentiment on income and
spending was offset by somewhat higher pessimism on the general economic and
employment situation. Sentiment on current income improved further and moved
to the optimistic zone for the first time in four years; future earnings expectations
remain buoyant.
5
India
Figure 10: The improvement in Consumer Sentiment Index from its Jul 2023 low
provides comfort
100
96
92
88
84
Absolute value
80
76
72
68
64
60
56
52
48
44
40
36
30-Apr-21
01-Apr-22
25-Apr-22
20-Apr-23
15-Oct-21
10-Oct-22
17-Jun-21
19-Jan-22
12-Feb-22
08-Mar-22
12-Jun-22
14-Jan-23
07-Feb-23
03-Mar-23
27-Mar-23
07-Jun-23
08-Nov-21
02-Dec-21
26-Dec-21
11-Jul-21
06-Jul-22
30-Jul-22
01-Jul-23
25-Jul-23
24-May-21
04-Aug-21
28-Aug-21
21-Sep-21
19-May-22
23-Aug-22
16-Sep-22
03-Nov-22
27-Nov-22
21-Dec-22
14-May-23
18-Aug-23
All-India Urban Rural
SOURCE: RESERVE BANK OF INDIA (RBI), INCRED RESEARCH
Figure 11: This year’s rainfall deviation from the last five years’ average
By Jun 2 By Jun 8 By Jun 15 By Jun 22 By Jul 6 By Jul 12

By Jul 19 By Jul 26 By Aug 2 By Aug 10 By Aug 16
150%
Regionwise Departure from Long Period
100%
50%
Average
0%
-50%
-100%
East & North North West Central India South Peninsula India
East India India
SOURCE: IMD, THE CENTRE FOR MONITORING INDIAN ECONOMY OR CMIE, INCRED RESEARCH
Figure 12: Consumer perception touches a new high while Figure 13: Consumer perception on non-essential spending
spending perception keeps on declining improves sharply while the expectation marginally eases from
May 2023 level
Essential spending-Current perception Non-Essential spending-Current perception

Essential spending-One Year ahead perception Non-Essential spending-One Year ahead perception
88 15
86 10
84 5
0
82
-5
80
-10
78
-15
76
-20
74 -25
72 -30
70 -35
May-22 Jul-22 Sep-22 Nov-22 Jan-23 Mar-23 May-23 Jul-23 May-22 Jul-22 Sep-22 Nov-22 Jan-23 Mar-23 May-23 Jul-23
SOURCE: CMIE, INCRED RESEARCH, RBI. SOURCE: CMIE, INCRED RESEARCH, RBI.
6
India
Figure 14: Naukri Jobspeak Hiring Index weakens gradually
3,500
3,000
2,500
2,000
1,500
1,000
500
Sep-20
Nov-20
May-21
Sep-21
Nov-21
May-22
Sep-22
Nov-22
May-23
Jan-21
Mar-21
Jan-22
Mar-22
Jul-22
Jan-23
Mar-23
Jul-20
Jul-21
Jul-23
Naukri Jobspeak Hiring Index
SOURCE: INCRED RESEARCH, NAUKRI JOBSPEAK REPORT
Figure 15: Hiring Intent Index of Team Lease – Tier-1&3 cities ease from their peak
levels
100%
90%
80%
70%
60%
Hiring Intent (%)
50%
40%
30%
20%
10%
0%
1QFY22
4QFY23
4QFY21
2QFY22
3QFY22
4QFY22
1QFY23
2QFY23
3QFY23
1QFY24
1HFY20
2HFY20
1HFY21
Metro and Tier 1 Tier 2 Tier 3 Rural
SOURCE: TEAM LEASE, INCRED RESEARCH
GDP growth momentum provides comfort

The RBI estimates the country’s gross domestic product or GDP to have grown
by 8% in the Jun 2023 quarter. The professional forecasters have upgraded their
Jun 2023 quarter GDP growth estimate to 7.5% vs. 6.9% earlier. The RBI projects
the growth rate to moderate to 6.5% in the Sep 2023F quarter, to 6% in the Dec
2023F quarter and further down to 5.7% in the Mar 2024F quarter. It expects a
recovery in kharif sowing and rural incomes, buoyancy in services, and consumer
optimism to support household consumption growth.
The median growth projection of a survey of 40 professional forecasters carried
out by the central bank, inched up to 6.1% in Aug 2022 from 6% in Jun 2023. The
mean increased by a shade higher, to 6.2%.
7
India
Figure 16: Index of Industrial Production growth is steady Figure 17: India PMI (updated till data available)
20.0 India Mfg PMI China PMI USA PMI

65
15.0
10.0 60
5.0
55
0.0
-5.0 50
-10.0
45
-15.0
-20.0 40
Dec-22
Dec-19
Aug-20
Dec-20
Dec-21
Aug-19
Oct-19
Apr-20
Oct-20
Apr-21
Aug-21
Oct-21
Apr-22
Aug-22
Oct-22
Apr-23
Jun-21
Feb-22
Jun-19
Feb-20
Jun-20
Feb-21
Jun-22
Feb-23
Jun-23
Oct-21
Dec-19
Dec-20
Dec-21
Dec-22
Aug-19
Oct-19
Apr-20
Aug-20
Oct-20
Apr-21
Aug-21
Apr-22
Aug-22
Oct-22
Apr-23
Feb-23
Feb-20
Feb-21
Feb-22
Jun-22
Jun-19
Jun-20
Jun-21
Jun-23
IIP growth % yoy
SOURCE: NATIONAL STATISTICS OFFICE (NSO), SOURCE: IHS MARKIT,

INDEX OF INDUSTRIAL PRODUCTION (IIP), INCRED RESEARCH, PURCHASING MANAGERS' INDEX (PMI), INCRED RESEARCH
Figure 18: Bloomberg’s India GDP consensus growth estimate on the rise
FY24F FY25F
6.6
6.5
6.4 6.4
6.3
6.2
6.1 6.1
6
5.9
5.8
5.7
SOURCE: BLOOMBERG, INCRED RESEARCH
8
India
India’s trade deficit is an area of concern

Falling commodity prices continued to affect foreign trade in Jul 2023. India’s
export and import bills fell compared to a year ago. Exports contracted by 15.9%
to US$32.3bn whereas imports declined by 17% to US$52.9bn. Despite the larger
fall in imports compared to exports, the country’s trade deficit was still on the
higher side, at US$20.7bn. This is for the second time in three months that the
trade deficit topped the US$20bn mark.
Rising crude oil prices in Aug 2023, driven by supply cut, are a cause of concern.
However, they have been within the range of US$75-85/bbl as of YTDCY23. The
global economic slowdown impact can overweigh on medium-term prices vs. a
short-term spike from supply cut.
Figure 19: India’s trade deficit eases from its recent peak
50 5
45 0
Trade balance (US$bn)

40
-5
Exports (US$bn)
35
30 -10
25 -15
20 -20
15
-25
10
5 -30
0 -35
Nov-16
Nov-17
Nov-18
Nov-19
Nov-20
Nov-21
Nov-22
Mar-17
Mar-18
Mar-19
Mar-20
Mar-21
Mar-22
Mar-23
Jul-23
Jul-16
Jul-17
Jul-18
Jul-19
Jul-20
Jul-21
Jul-22
Exports USD Bn Trade Balance USD Bn
SOURCE: MINISTRY OF COMMERCE AND INDUSTRY, INCRED RESEARCH
Figure 20: INR’s performance vs. Asian peers over the last one year (against USD)
Over last one year
4% 3%
3%
2% 2%
1%
0%
-1%
-1%
-2%
-2% -2% -2%
-3%
-3%
-4%
-4%
-5%
Indian Chinese Japanese South Taiwanese Indonesian Malaysian Thai Baht
Rupee Renminbi Yen Korean Dollar Rupiah Ringgit
Won
9
Probability of recession (%)
India
-6.5
-5.5
-5
-4.5
-7
-6
38000
40000
42000
46000
48000
50000
52000
44000
Aug-22
0
10
20
30
40
50
60
70
80
90
100
Sep-22 21-Aug-22
Aug-22
05-Sep-22 US
Sep-22 Sep-22
remains stable.
Oct-22 20-Sep-22
Sep-22
Oct-22 05-Oct-22
Oct-22
20-Oct-22
10
Nov-22 Oct-22
Nov-22 04-Nov-22 Nov-22
Eurozone
Dec-22 19-Nov-22
Nov-22
Dec-22 04-Dec-22 Dec-22
Jan-23 19-Dec-22 Dec-22
UK
Jan-23 03-Jan-23 Jan-23

Feb-23 18-Jan-23 Jan-23
FY24F
Feb-23 02-Feb-23 Feb-23
Mar-23 17-Feb-23 Feb-23
Mar-23 04-Mar-23 Mar-23
Germany
Apr-23 19-Mar-23 Mar-23
FY25F
Apr-23 03-Apr-23 Apr-23
May-23
Total Forex Reserves (Rs bn)
18-Apr-23 Apr-23
May-23 03-May-23 May-23
Figure 22: Total forex reserves (US$ bn) continue their uptrend
Jun-23 May-23
18-May-23
France
Jun-23 Jun-23
02-Jun-23
Jul-23 Jun-23
17-Jun-23
Jul-23 Jul-23
02-Jul-23
Aug-23 Jul-23
17-Jul-23
Aug-23 Aug-23
01-Aug-23
Figure 23: Bloomberg consensus estimates on GoI’s fiscal deficit (as a % of GDP)
5.9
Aug-23
5.25
16-Aug-23
Figure 21: Consensus estimates on probability of a recession in developed countries
SOURCE: RBI, ACE EQUITY, INCRED RESEARCH

India
RBI panel unanimously decides to stop rate hikes and so

inflation spike looks transient
Consumer Price Index or CPI inflation shot up to 7.4% in Jul 2023 from 4.9% in
Jun 2023. Although inflation was widely expected to rise, the magnitude of the rise
surprised many. Inflation started rising from Jun 2023, reversing its four-month
falling trajectory. It increased from a 17-month low of 4.3% in May 2023. The
situation, however, is not as alarming as it may appear. The rise in inflation looks
more transient. It is solely driven by the rise in food prices, triggered by supply
disruption due to higher-than-expected temperatures in the country followed by
erratic rainfall.
Core inflation excludes the items sensitive to supply shock - food and fuel prices
inched down to 5% in Jul 2023 as compared to 5.2% in Jun 2023. Taking
cognizance of the recent increase in food prices and hardening of global crude oil
prices, the RBI upgraded its inflation forecast for 2QFY24F to 6.2% (from 5.2%),
3QFY24F to 5.7% (30bp higher). The forecast for 4QFY24F remains unchanged
at 5.2%. The latest projection by the RBI shows that it expects inflation to ease
gradually in the second-half of FY24F. It expects inflation to average at 5.4% in
FY24F vs. 5.1% earlier.
The RBI’s Monetary Policy Committee (MPC) unanimously decided to keep the
policy rate unchanged at 6.5% in its Aug 2023 policy. This arrests any further
increase in lending rates. Demand for bank credit accelerated by 20.4% yoy in Jul
2023. This is for the first time that credit growth topped the 20% mark in 12 years.
Figure 24: Recent spike in Consumer Price Index or CPI inflation Figure 25: Wholesale Price Index or WPI inflation rises in Jul 2023
is an area of concern
% yoy %
9.0 20.0
8.0
15.0
7.0
6.0 10.0
5.0
5.0
4.0
3.0 0.0
2.0
-5.0
1.0
0.0 -10.0
Jul-22
Jul-19
Jul-20
Jul-21
Jul-23
Jan-20
Oct-20
Jan-21
Jan-22
Jan-23
Oct-19
Oct-21
Oct-22
Apr-19
Apr-20
Apr-21
Apr-22
Apr-23
May-20
May-21
May-22
May-23
Sep-19
Nov-19
Mar-20
Sep-20
Nov-20
Mar-21
Sep-21
Nov-21
Mar-22
Sep-22
Nov-22
Mar-23
Jan-20
Jul-19
Jul-20
Jan-21
Jul-21
Jan-22
Jul-22
Jan-23
Jul-23
CPI (yoy %) Core CPI yoy %) Repo rate

WPI (yoy %)
CONSUMER PRICE INDEX (CPI)
SOURCE: RBI, CENTRAL STATISTICS OFFICE, INCRED RESEARCH SOURCE: RBI, INCRED RESEARCH
11
India
Figure 26: Bloomberg CPI inflation consensus estimates Figure 27: Bloomberg consensus estimates on WPI inflation
7 FY24F FY25F 12 FY24F FY25F
6.5 10
6 8
5.5 6
5.2
5 4 4.0
4.8
4.5 2
0.6
4 0
May-22
May-22
May-23
Oct-22
Apr-23
Apr-22
Oct-22
Apr-23
Aug-23
Aug-23
Apr-22
Aug-22
Sep-22
Oct-22
Oct-22
Nov-22
Dec-22
Apr-23
May-22
May-22
Aug-22
Aug-22
Sep-22
Nov-22
Dec-22
Dec-22
May-23
Feb-22
Mar-22
Jan-23
Feb-23
Mar-23
Mar-23
Mar-22
Jun-22
Jan-23
Jan-22
Jan-22
Jun-22
Jul-22
Jun-23
Jul-23
Jul-23
Jan-22
Jan-22
Feb-22
Mar-22
Jun-22
Feb-23
Feb-23
Mar-23
Jun-23
Jun-23
Jul-22
Jul-23
NOTE: CPI ISCONSUMER PRICE INDEX NOTE: WPI IS WHOLESALE PRICE INDEX
SOURCE: BLOOMBERG, INCRED RESEARCH SOURCE: BLOOMBERG, INCRED RESEARCH
Figure 28: Bloomberg consensus estimate expects the repo rate to be cut by 75bp in
the next one year
6.9%
6.8%
6.7%
6.6%
6.5%
Repo rate
6.4%
6.3%
6.2%
6.1%
6.0%
5.9%
5.8%
5.7%
2QFY24F
3QFY24F
4QFY24F
1QFY25F
2QFY25F
3QFY25F
4QFY25F
1QFY26F
2QFY26F
3QFY26F
Bloomberg consensus weighted average estimate for India's repo rate (%)
Figure 29: Weighted average lending rate of banks begins to ease Figure 30: Weighted average lending rate of banks stabilize
from their peak (fresh INR loans) (outstanding rupee loans)
10.5 10.5
10 10
9.5 9.5
9 9
8.5 8.5
8 8
7.5 7.5
7 7
6.5 6.5
6 6
May-20
May-21
May-22
May-23
Nov-19
May-20
Nov-20
May-21
Nov-21
May-22
Nov-22
May-23
Sep-19
Sep-20
Sep-21
Sep-22
Sep-19
Nov-19
Sep-20
Nov-20
Sep-21
Nov-21
Sep-22
Nov-22
Mar-20
Mar-21
Mar-22
Mar-23
Jul-19
Jan-20
Jul-20
Jan-21
Jul-21
Jan-22
Jul-22
Jan-23
Jul-23
Mar-20
Mar-21
Mar-22
Mar-23
Jul-19
Jan-20
Jul-20
Jan-21
Jul-21
Jan-22
Jul-22
Jan-23
Jul-23
All SCB Public Sector Banks All SCB Public Sector Banks
SOURCE: RBI, INCRED RESEARCH SOURCE: RBI, INCRED RESEARCH
12
India
Investment themes
We continue to like our housing and infrastructure capex investment themes
as a top-down approach, with order book surge and sales momentum
improvement in 1QFY24. Considering the rich valuation challenge in mid-
caps, we have changed our stock picks from the segment.
Easing interest rates and supply to drive housing demand

The new home sales recorded an 8% yoy rise in 1QFY24, as the strong growth in
large-volume towns like Mumbai and Pune helped overcome some weakness
witnessed in other towns. According to a recent CRISIL report, the momentum in
housing demand across India’s top cities is expected to continue in FY24F and
grow by 5-10% despite rising property prices, high interest rates, and a high base
effect supported by favourable demographics and urbanization. The rating agency
estimates that housing demand rose by a solid 33-38% in FY23, surpassing pre-
Covid-19 pandemic levels, albeit on a lower base. Demand for housing has been
mildly impacted by high interest rates while the fundamental factors play a major
role. When the interest levels were historically low over the last two years, the
demand for housing was subdued as the income level did not rise. Now home
prices are suppressed but affordability has improved and the accumulated
demand for real estate will start showing, irrespective of the rise in rates.
As per real estate consultancy firm Knight Frank, the residential property market
in India will exhibit a compounded annual growth rate of 9.2% during the period
2023-28F. According to industry veterans, 2023F will be a momentous year for
the industry. The industry size is expected to rise five-fold to US$1tr by 2030F
from US$200bn currently.
Figure 31: Housing loan growth improves gradually
Housing loans (Rs Bn) Growth(%)
25000 30%
25%
20000
20%
15000
15%
10000
10%
5000
5%
0 0%
SOURCE: RBI, INCRED RESEARCH, COMPANY REPORTS
13
India
Figure 32: Housing sales trend for eight prime housing markets in India saw a slight dip
QoQ
1,00,000 10,00,000
90,000 9,00,000
80,000 8,00,000
70,000 7,00,000
60,000 6,00,000
50,000 5,00,000
40,000 4,00,000
30,000 3,00,000
20,000 2,00,000
10,000 1,00,000
0 -
2QFY20
3QFY20
4QFY20
1QFY21
2QFY21
3QFY21
4QFY21
1QFY22
2QFY22
3QFY22
4QFY22
1QFY23
2QFY23
3QFY23
4QFY23
1QFY24
Housing Sales (units) Unsold Inventory (units) (RHS)
SOURCE: PROP TIGER, INCRED RESEARCH
Figure 33: Housing sales data for top eight cities in India saw a 36% rise YoY, and the
rise was led by higher sales in Pune
40,000
35,000
30,000
25,000
units
20,000
15,000
10,000
5,000
0
4QFY20
1QFY21
2QFY21
3QFY21
4QFY21
1QFY22
2QFY22
3QFY22
4QFY22
1QFY23
2QFY23
3QFY23
4QFY23
1QFY24
NCR MMR Bengaluru Pune Hyderabad Chennai Kolkata
SOURCE: ANAROCK, INCRED RESEARCH
Figure 34: Figure 35: Beneficiaries of revival in housing demand

Dividen
Bloomberg Target Market Market EV/EBIT Upside/ ROE
Company Name Reco Price EPS (Rs) P/E (x) P/BV (x) d Yield
Ticker Price Capital Capital DA (x) Downside (%)
(%)
(US$ FY24 FY25 FY24
Rs Rs (Rs bn) FY24F FY25F FY24F FY25F FY24F FY24F (%)
bn) F F F
Cera Sanitaryware CRS IN ADD 8,858 8,780 115 1.4 199.9 243.9 44.3 36.3 9.8 8.5 30.9 0.7 -1% 27.6
KEI Industries KEII IN ADD 2,580 2,598 232 2.8 66.5 78.7 38.8 32.8 9.0 7.4 26.2 0.2 1% 28.0
POLYCAB
Polycab India ADD 5,135 4,792 769 9.3 107.2 119.8 47.9 42.9 11.6 9.8 31.8 0.5 -7% 22.1
IN
UltraTech Cement UTCEM IN ADD 8,162 9,030 2,353 28.5 256.7 305.3 31.8 26.7 4.3 3.9 17.8 0.6 11% 12.9
Voltas VOLT IN ADD 836 942 276 3.3 20.5 26.2 40.9 31.9 5.1 4.6 26.4 0.7 13% 11.8
SOURCE: INCRED RESEARCH ESTIMATES, BLOOMBERG, COMPANY REPORTS
NOTE: PRICES AS ON 24TH AUG 2023
Strong order inflow from the infrastructure sector

Infrastructure goods output recorded a double-digit growth rate for the third month
in a row in Jun 2023. The output of infrastructure goods expanded by 11.3% in
Jun 2023. The continuation of such a stunning performance is due to increased
demand owing to strong capex push by the government. The robust growth in
state capex and imported capital goods help in strong growth momentum in
infrastructure/capex.
14
India
The aggregate order inflow was robust, up 46% YoY, for our capital
goods/infrastructure coverage universe, led by a 56% YoY growth in Larsen &
Toubro or L&T. All the companies under our coverage universe reported a higher
order inflow YoY. New investments announced during 1HCY23 grew 28% YoY.
We expect a new trend of private sector spending led by the energy sector’s
transition including renewables, electric vehicles, battery technology, and
hydrogen. We expect manufacturing capex led by production-linked incentive or
PLI schemes, supply chain diversification and the China+ strategy.
Figure 35: Central government’s capital expenditure to sustain its 32% CAGR over
FY21-24BE
12
10.0
10
8 7.3
5.9
6
4.3
Rs tr
4 3.1 3.4
2.5 2.8 2.6
2.0
2 1.6 1.6 1.7 1.9
1.1 1.2 0.9 1.1
0.7 0.7
0
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY21
FY22
FY23
FY24
Central capital expenditure trend
SOURCE: CMIE, INCRED RESEARCH
Figure 36: Improvement in capacity utilization (CU) and de-trended IIP (manufacturing)
SOURCE: RBI, INCRED RESEARCH
15
India
Figure 37: Corporate rating downgrades on the rise
Instruments rated by rating agencies

2.5
1.5
0.5
Jan-09
Jul-08
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15
Jan-16
Jan-17
Jan-18
Jan-19
Jan-20
Jan-21
Jan-22
Jan-23
Jul-09
Jul-10
Jul-11
Jul-12
Jul-13
Jul-14
Jul-15
Jul-16
Jul-17
Jul-18
Jul-19
Jul-20
Jul-21
Jul-22
Jul-23
Upgrade/Downgrade Ratio (RHS)
SOURCE: CMIE, INCRED RESEARCH
Figure 38: Beneficiaries of spending on infrastructure

Bloomberg Target Market Market EV/EBITDA Dividend Upside/ ROE
Company Name Reco. Price EPS (Rs) P/E (x) P/BV (x)
Ticker Price Capital Capital (x) Yield (%) Downside (%)
Rs Rs (Rs bn) (US$ bn) FY24F FY25F FY24F FY25F FY24F FY25F FY24F FY24F (%) FY24F
Adani Ports ADSEZ IN ADD 826 823 1,781 21.6 41.0 51.0 20.1 16.2 3.9 3.3 14.0 0.1 0% 22.5
Concor CCRI IN ADD 661 940 402 4.9 25.9 42.1 25.5 15.7 3.5 3.2 15.0 1.2 42% 12.9
KEC International KECI IN ADD 649 725 167 2.0 22.8 36.1 28.4 18.0 4.4 3.9 13.8 0.8 12% 14.7
Larsen & Toubro LT IN ADD 2,718 2,865 3,814 46.2 92.5 113.5 29.4 23.9 4.3 3.8 21.7 0.8 5% 13.8
Thermax TMX IN ADD 2,738 2,880 326 3.9 55.6 65.3 49.3 41.9 8.0 7.1 36.4 0.4 5% 15.2
UltraTech Cement UTCEM IN ADD 8,162 9,030 2,353 28.5 256.7 305.3 31.8 26.7 4.3 3.9 17.8 0.6 11% 12.9
SOURCE: INCRED RESEARCH ESTIMATES, COMPANY REPORTS
Our high-conviction stocks’ performance and recent

changes
The recent performance of our high-conviction stocks, since the start of the series
in Sep 2022, is given below:
Big outperformers to Nifty: Ashok Leyland (ADD), Kajaria Ceramics (ADD),
Bharat Electronics (ADD) and Reliance Industries (ADD).
Underperformers to Nifty: Clean Science and Technology (REDUCE) and
HDFC Bank (REDUCE).
In our recent monthly review of high-conviction stocks list, we made the following
changes to the recommendations.
Addition to the list: KEI Industries (ADD) is the beneficiary of strong
public/private capex driving exponential domestic demand for cables. Thermax
(ADD) to benefit from green energy policies.
Deletion from the list: KEC International (ADD), Kajaria Ceramics (ADD) and
Sun Pharmaceutical Industries as the sharp rally in these stocks have made their
valuations stretched.
16
India
Figure 39: High-conviction stocks’ price performance since their introduction on 10 Sep 2022
12%
7.3%
8%
4.6% 4.7%
3.1% 2.6%
4% 1.9% 2.1% 2.0% 1.7%
0.7% 0.6% 1.1% 1.1% 0.9% 0.4% 0.7%
0.0%
0%
0.0%
-1.2%
-4% -2.9%
-4.8%
-8%
-12%
Indigo
BCL Industries
Home First Finance

Camlin Fine
Concor
Reliance Industry
Nifty 200
Dalmia Bharat
Globus Spirits
Torrent Pharma
Nifty 50
Bharat Electronics
Bharat Forge
HDFC Bank
Maruti Suzuki
Tata Steel
M&M Financial Services
Spandana Sphoorty
Ultratech Cement
Clean Science
Ashok Leyland
NOTE: PERFORMANCE IS BASED ON COMPOUNDED MONTHLY GROWTH RATE, FROM THE DAY THE STOCK WAS ADDED TO THE PORTFOLIO
Figure 40: High-conviction stocks’ price absolute performance since their introduction on 10 Sep 2022
40% 9/22
5/23
30% 9/22
9/23
12/22 12/22
20% 6/23 9/22 3/23 6/23
9/22 9/22 12/22 9/22
2/23 9/22
10%
8/23 8/23 7/23
12/22
0%
9/22
-10%
7/23
-20% 9/22
-30%
9/22
-40%
Spandana Sphoorty
BCL Industries
Torrent Pharma
Indigo
Camlin Fine
Concor
Reliance Industry
Nifty 200
Dalmia Bharat
Globus Spirits
Home First Finance
Sun Pharma
Nifty 50
Bharat Electronics
Bharat Forge
Maruti Suzuki
Tata Steel
Ultratech Cement
HDFC Bank
KEI International
M&M Financial Services

Clean Science
Thermax
Ashok Leyland
NOTE: (INTRODUCTION MONTH MARKED ON BAR OF THE STOCK)

17
India
1QFY24 PAT momentum and beat is impressive

Consensus EPS upgrade accelerates
1QFY24 reported PAT of Nifty-50 companies increased by 42% yoy and
normalized PAT rose 30% yoy, 4% above Bloomberg consensus estimate. The
improving PAT momentum in the last two quarters was impressive. The PAT
momentum was driven by a 19% yoy rise in EBITDA and rest from higher other
income. The EBITDA growth was mostly from lower costs while sales growth of
the Nifty Index companies was just 6.9% yoy. The strong growth was driven by
the oil & gas, financials, and automobile sectors. However, the PAT decline in
metals and chemical sectors disappoints.
In terms of PAT beat distribution, nearly 46% of Nifty-50 companies extended their
beat, similar to 4QFY23. The low base effect led to a big beat, while in terms of
the number of companies extending the beat, its similar qoq.
The Bloomberg consensus FY24-25F EPS upgrade cycle accelerated in recent
quarters to clock around 1+% upgrade. It was up by around 1% in recent weeks.
Among Nifty-50 stocks, BPCL and Tata Motors witnessed major EPS upgrade
recently.
1QFY24 witnessed a marginal revival in consumption demand, with most
consumer staples and discretionary companies showing a muted yoy trend. All
hopes are on the festive season-driven recovery in Sep-Nov 2023F. The downside
risks to consensus EPS can be from prolonged higher interest rates impacting
demand, slow rural demand recovery and general/state elections in India derailing
the capex/infrastructure spending revival.
Figure 41: Nifty-50 companies’ quarterly EPS beat/miss trend Figure 42: Nifty-50 companies’ reported EPS growth
15% 13% Rs
20%
13% 250 70%
8%
10% 4% 5% 3% 4%
1% 1% 2% 60%
0% 200 50%
-1% -2% -1%
-10% -4%-2% -2% 40%
-10%
-20% 150 30%
-30% -22% -23% 20%

-28% -27% 100 10%
-40%
0%
-50%
50 -10%
-60%
-20%
-59%
-70% 0 -30%
Dec'17
Dec'18
Dec'19
Dec'20
Dec'21
Dec'22
Jun'23
Jun'18
Sep'18
Jun'19
Sep'19
Jun'20
Sep'20
Jun'21
Sep'21
Jun'22
Sep'22
Mar'20
Mar'21
Mar'18
Mar'19
Mar'22
Mar'23
Dec'16
Dec'17
Dec'18
Dec'19
Dec'20
Dec'21
Dec'22
Jun'22
Jun'17
Jun'18
Jun'19
Jun'20
Jun'21
Jun'23
Nifty Earnings surprise (%) Nifty EPS (Rs) YoY growth (%)
SOURCE: BLOOMBERG, INCRED RESEARCH SOURCE: BLOOMBERG, INCRED RESEARCH
18
100%
0%
10%
20%
30%
50%
70%
80%
90%
40%
60%
-60%
-40%
-20%
100%
0%
20%
40%
80%
60%
4QFY18
Agri
1QFY19
2QFY19 Alcohol
3QFY19
4QFY19 Automobile & Ancillaries
1QFY20 Bank
2QFY20
3QFY20 Capital Goods
Positive
4QFY20
Chemicals
1QFY21
2QFY21 Construction Materials
In line
3QFY21
4QFY21 Consumer Durables
1QFY22 Crude Oil
2QFY22
Negative
3QFY22 Electricals
Figure 43: BSE-500 sector-wise EBITDA growth
India
4QFY22 Finance
Rs
0
1,000
1,200
1,400
200
400
600
800
1QFY23
Jun-14 2QFY23 FMCG
Sep-14 3QFY23
Dec-14 Gas Transmission
Mar-15 4QFY23
Jun-15 1QFY24 Healthcare
Sep-15

Dec-15 Hospitality
19
Mar-16
Jun-16 Inds. Gases & Fuels
Sep-16
100%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
Dec-16 Infrastructure
EBITDA growth yoy
Mar-17
Jun-17 4QFY18 Insurance
Sep-17 1QFY19
Dec-17 2QFY19 Iron & Steel
Revenue (Rs)
Mar-18 3QFY19
Jun-18 IT
Sep-18 4QFY19
Dec-18 1QFY20 Logistics
Mar-19 2QFY20
Jun-19 Media & Entertainment
3QFY20
Positive
Sep-19
Dec-19 4QFY20 Mining
Mar-20 1QFY21
Jun-20 2QFY21 Miscellaneous
In line
Sep-20 3QFY21
Dec-20 Non - Ferrous Metals
Mar-21 4QFY21
Jun-21 1QFY22 Plastic Products
YoY growth (%) - RHS

Sep-21 2QFY22
Negative
Dec-21 Power
3QFY22
Mar-22
Jun-22 4QFY22 Realty
Sep-22 1QFY23
Figure 46: Nifty-200 companies’ sales growth momentum continues to ease

Dec-22 2QFY23 Retailing
Mar-23 3QFY23
Jun-23 Telecom
4QFY23
Figure 44: Nifty-50 companies’ revenue beat/miss proportion mix Figure 45: Nifty-50 companies’ EPS beat/miss proportion mix
Textile
0%
1QFY24
10%
20%
30%
40%
-30%
-20%
-10%

SOURCE: ACE EQUITY, INCRED RESEARCH
India
Figure 47: Bloomberg Industrial Metal Index and Commodity Index ease
240
220
200
180
160
140
120
100
80
60
40
Aug-19
Sep-19
Aug-20
Sep-20
Aug-21
Sep-21
Aug-22
Sep-22
Aug-23
Dec-19
Dec-22
Oct-20
Nov-19
May-20
Nov-20
Dec-20
May-21
Nov-21
Dec-21
May-22
Nov-22
May-23
Oct-19
Apr-20
Apr-21
Oct-21
Apr-22
Oct-22
Apr-23
Jan-20
Feb-20
Mar-20
Jun-20
Jan-21
Feb-21
Mar-21
Jun-21
Jan-22
Feb-22
Mar-22
Jun-22
Jan-23
Feb-23
Mar-23
Jun-23
Jul-20
Jul-21
Jul-22
Jul-23
Bloomberg Industrial Metal Index Bloomberg Commodity Index
Figure 48: Global Commodity Index trend correction continues, except in case of the
energy sector
200
180
160
Index 2010=100
140
120
100
80
60
40
20
0
Oct-19
Apr-20
Oct-13
Apr-14
Oct-14
Apr-15
Oct-15
Apr-16
Oct-16
Apr-17
Oct-17
Apr-18
Oct-18
Apr-19
Oct-20
Apr-21
Oct-21
Apr-22
Oct-22
Apr-23
Jan-14
Jan-15
Jan-16
Jan-17
Jan-18
Jan-19
Jan-20
Jan-21
Jan-22
Jan-23
Jul-13
Jul-14
Jul-15
Jul-16
Jul-17
Jul-18
Jul-19
Jul-20
Jul-21
Jul-22
Jul-23
Energy Non-Energy Food Metals & Minerals
Figure 49: Nifty-50 EPS estimate upgrade in recent months
Nifty Index F12 Est. Nifty Index F12+1 Est. Nifty Index F12+2 Est.
1400
1300
1200
1100
1000
900
800
February March April May June July August
SOURCE: INCRED RESEARCH, BLOOMBERG
20
India
Figure 50: Nifty-200 EPS upgrade driven by automobile, oil marketing and pharmaceutical companies (from 1 Jul 2023)
%
FY24F Major EPS Up/Dowgrade from Nifty 200 (Since July'23)
100%
80%
60% 51%
40% 28% 32% 34%

15% 15% 15% 15% 16% 18% 18% 19% 20%
20%
0%
-20%
-18% -17% -16% -16% -15% -15% -15% -15%
-40% -27% -24%
-60%
-80%
-100%
Gujarat Flurochemical
DeepakNitrite
DalmiaBharat
HPCL
Indigo
FSN
TechM
UPL
AshokLeyland
Lupin
One97
LICHousing
PBFintech
AdityaBirlaFash
TataMotors
LIC
LaurusLabs
Escorts
Piramal enterprices
Biocon
ZydusLife
Zomato
Delhivery
Poonawalla
BPCL
AdaniWilmar
Figure 51: Recent Bloomberg consensus EPS trend change for Nifty-50 and Nifty-200
companies
Nifty-50 EPS Nifty-200 EPS
FY24F FY25F FY24F FY25F
15 days 1.18% 1.13% 15 days 0.86% 0.90%
30 days 1.06% 2.23% 30 days 1.37% 2.14%
60 days 1.33% 3.05% 60 days 1.90% 2.97%
120 days 0.23% 2.46% 120 days 1.67% 2.78%
21
India
Nifty valuation and outlook

Index P/E valuation near 10-year mean level provides
comfort
The Nifty-50 Index, after a strong bounce-back of 18% from its Mar 2023 low,
witnessed a healthy correction of 4% in the last one month. The earlier momentum
was aided by strong fund flows from both foreign institutional and domestic
investors. However, the sustained rally in mid-cap and small-cap stocks, indicating
substantial outperformance vs. Nifty-50 companies is an area of concern, as
Bloomberg consensus EPS upgrade for the broader Nifty-200 companies has
been lower than that of Nifty-50 companies. The highest proportion of the market
capitalization mix of top 251-500 stocks, forming 10% of total listed stock market
capitalization, is a cause of concern.
With MSCI India forward P/E valuation premium vs. Asia easing below the seven-
year mean level and forward P/E valuation below the 10-year mean level, we
remain positive on Nifty-50 outlook. We prefer large-caps over mid/small-cap
stocks.
We expect high volatility in the Nifty-50 index to continue, considering the wide
swing in macro variables globally influencing the estimates/sentiment. We
maintain our Nifty-50 Index target of 21,103, by keeping our base-case, bull-case,
and bear-case Nifty P/E targets at 20x,18x and 16x, respectively. We maintain the
probability ratios at 50% for base-case, 30% for bull-case and 20% for bear-case
scenarios.
Figure 52: Nifty-50 companies’ forward P/E valuation provides comfort
(X)
28
26
24.9x
24
22.6x
22
20 20.2x
18 17.9x
16
15.2x
14
12
10
Aug-13
Aug-14
Aug-15
Aug-16
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Aug-23
Feb-14
Feb-15
Feb-16
Feb-17
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Feb-19
Feb-20
Feb-21
Feb-22
Feb-23
Nifty 1-year forward P/E 10-year mean -1 s.d +1 s.d. -2 s.d +2 s.d.
22
India
Figure 53: Real earnings yield for Nifty-50 companies in an uncomfortable zone
Earnings Yield 10 yr Gov Bond Yield Real Earnings Yield
15%
10%
5%
0%
-5%
-10%
Aug-22
Aug-08
Aug-09
Aug-10
Aug-11
Aug-12
Aug-13
Aug-14
Aug-15
Aug-16
Aug-17
Aug-18
Aug-19
Aug-20
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Feb-20
Feb-09
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Feb-11
Feb-12
Feb-13
Feb-14
Feb-15
Feb-16
Feb-17
Feb-18
Feb-19
Feb-21
Feb-22
Feb-23
Figure 54: Market-cap distribution of stocks in top-500 stocks indicate excess fizz in
the mid-cap rally, as stocks in the basket of beyond 250 by market-cap list scale a new-
high proportion at 10.2% of total market cap
Top 101-250 251-500
20%
18%
16%
14%
12%
10%
8%
6%
4%
2%
0%
August, 2006
August, 1999
August, 2000
August, 2001
August, 2002
August, 2003
August, 2004
August, 2005
August, 2007
August, 2008
August, 2009
August, 2010
August, 2011
August, 2012
August, 2013
August, 2014
August, 2015
August, 2016
August, 2017
August, 2018
August, 2019
August, 2020
August, 2021
August, 2022
August, 2023
Figure 55: Nifty Index target and scenarios

Bull Case Base Case Bear Case
GDP growth ~7%, Brent GDP growth >6%, Brent GDP growth <6%, Brent
crude oil <US$105/bbl, crude oil <US$120/bbl, crude oil >US$125/bbl,
Economic variables for
inflation <5%, repo rate inflation <6%, repo rate inflation >7%, repo rate
FY24F
hike <50bp, above normal hike <50bp, normal hike >75bp, below normal
monsoon monsoon monsoon
Probability of event 30% 50% 20%
1-year forward EPS 1,160 1,160 1,160
Target P/E (x) 20.0 18.0 16.0
Target index 23,191 20,872 18,553
Nifty-50 now 19,750 19,750 19,750
Up/ downside 17.4% 5.7% -6.1%
Blended Index target 21,103
NOTE: FY24F EPS IS OF BLOOMBERG CONSENSUS
23
0
2
6
8
-8
-6
-4
-2
10
100
300
400
500
600
700
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900
0
Jul-18
Sep-18 Jul-18
Nov-18 Sep-18
Jan-19 Nov-18
Mar-19 Jan-19
May-19 Mar-19
Jul-19 May-19
Sep-19 Jul-19
Nov-19 Sep-19
Jan-20 Nov-19
Mar-20 Jan-20
May-20 Mar-20
Jul-20 May-20
Sep-20 Jul-20
Nov-20 Sep-20
Jan-21 Nov-20
Mar-21 Jan-21
Figure 58: Domestic funds book profit

May-21 Mar-21
Jul-21 May-21
Sep-21 Jul-21
Nov-21 Sep-21
Net DII fund flow (US$ bn)

Daily avg NSE cash (Rs bn)
Jan-22 Nov-21
Mar-22 Jan-22
India
May-22 Mar-22
Daily avg BSE cash (Rs bn) (RHS)

Jul-22 May-22
Sep-22 Jul-22
Nov-22 Sep-22
Jan-23 Nov-22
Mar-23 Jan-23
Mar-23
Figure 56: Stock market trade volume spike in recent months
May-23
Jul-23 May-23
SOURCE: BLOOMBERG, INCRED RESEARCH Jul-23
24
-8
-6
-4
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0
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-150
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Nov-18 Sep-19
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Jan-20 Sep-20
Mar-20 Nov-20
May-20
Jul-20 Jan-21
Sep-20 Mar-21
Nov-20 May-21
Jan-21 Jul-21
Mar-21
May-21 Sep-21
Jul-21 Nov-21
Sep-21 Jan-22
Net FII fund flow (US$ Bn)

Nov-21 Mar-22
Jan-22 May-22
Mar-22
Domestic Equity MF net inflow (Rs bn)
Jul-22
Figure 59: FII inflows build the growth momentum
May-22
Figure 57: Domestic mutual fund inflows inching up
Jul-22 Sep-22
Sep-22 Nov-22
Nov-22 Jan-23
Jan-23
Mar-23 Mar-23
May-23 May-23
Jul-23 Jul-23
India
Sector-wise rating and stock ideas

Despite the Nifty-50 Index consolidation witnessed in recent weeks, the
impressive outperformance by defence, capital goods, pharma and energy
sectors provide comfort. The index rally has broadened to drive the growth in
earlier laggards like FMCG and metals as well. However, the sharp
outperformance of small-cap index vs. other indices in recent weeks is an area of
concern.
Last few weeks, the companies in our coverage universe witnessed more
downgrades driven by valuation challenges, such as Astral, Crompton Greaves,
Cummins India, Century Plyboard, Orient Electric, V-Guard, Sun Pharmaceutical
Industries, Marico, Thyrocare, HDFC AMC, Persistent Systems, SBI Life, Kajaria
Ceramics, BlueDart Express and Hindustan Unilever.
We upgrade Metropolis Healthcare and Ajanta Pharma.
Figure 60: Sectoral index performance vs. Nifty-50 (YTDFY24)
50%
45% 43%
40% 38%
35%
30% 27% 28%
26%
25%
20%
20% 16%
15% 12% 13%
10% 8% 8%
5%
0%
Nifty 50 Nifty Nifty IT Nifty BSE Nifty Nifty Nifty Nifty Nifty Nifty
Auto FMCG Capital Bank Pharma Realty Metal Energy Defence
Goods
SOURCE: BLOOMBERG, INCRED RESEARCH, YTD TILL 2023
Figure 61: Our sector-wise ratings

Overweight Neutral Underweight
Aluminium Auto Ancillary Agribusiness
Automobile Building Materials Aviation
Cement Consumer staples Chemicals
Consumer Electricals Information Technology Diagnostics
Capital Goods Pharma Metals & Mining
Defence Ports & Logistics
Financial Services
Infrastructure
Oil and Gas
SOURCE: INCRED RESEARCH
25
India
Figure 62: Nifty mid-cap and Nifty small-cap indices outperform Nifty-50 from Apr 2023
(NIFTY Index) (NSEMCAP Index) (NSESMCP Index)
128
123
118
113
108
103
98
93
88
01-01-2023
08-01-2023
15-01-2023
22-01-2023
29-01-2023
05-02-2023
12-02-2023
19-02-2023
26-02-2023
05-03-2023
12-03-2023
19-03-2023
26-03-2023
02-04-2023
09-04-2023
16-04-2023
23-04-2023
30-04-2023
07-05-2023
14-05-2023
21-05-2023
28-05-2023
04-06-2023
11-06-2023
18-06-2023
25-06-2023
02-07-2023
09-07-2023
16-07-2023
23-07-2023
30-07-2023
06-08-2023
13-08-2023
20-08-2023
SOURCE: INCRED RESEARCH, BLOOMBERG
Figure 63: Non-consensus stocks with a REDUCE rating in our coverage universe
Bloomberg Target Market Market EV/EBITDA Dividend Upside/ ROE
Company Name Reco Price EPS (Rs) P/E (x) P/BV (x)
Ticker Price Capital Capital (x) Yield (%) Downside (%)
Rs Rs (Rs bn) (US$ bn) FY24F FY25F FY24F FY25F FY24F FY25F FY24F FY24F (%) FY24F
Apollo Tyres APTY IN REDUCE 393 343 249 3 23.4 24.6 16.8 16.0 1.9 1.8 6.5 1.8 -13% 11.1
Avanti Feeds AVNT IN REDUCE 422 353 57 1 22.1 NA 19.1 NA 2.8 2.5 11.2 1.0 -16% 13.8
Balrampur Chini Mills BRCM IN REDUCE 391 229 79 1 24.9 22.9 15.7 17.1 2.6 2.3 10.7 0.3 -41% 21.3
Bharat Petroleum BPCL IN REDUCE 345 375 747 9 38.1 NA 9.0 NA 1.5 1.4 7.3 5.7 9% 16.3
Clean Science and
CLEAN IN REDUCE 1,404 660 149 2 29.4 33.8 47.8 41.6 15.6 12.9 36.5 - -53% 29.5
Technology
Dhanuka Agritech DAGRI IN REDUCE 789 704 36 0.4 48.2 NA 16.4 NA 3.4 2.9 (0.8) 1.2 -11% 19.0
Eicher Motors EIM IN REDUCE 3,358 3,053 918 11.1 132.4 145.4 25.4 23.1 7.0 5.9 18.8 1.3 -9% 25.3
Finolex Industries FNXP IN REDUCE 216 177 134 1.6 7.6 9.8 15.8 22.0 2.7 2.4 16.5 1.9 -18% 14.1
Galaxy Surfactants GALSURF IN REDUCE 2,700 2,552 96 1.2 84.7 90.4 31.9 29.9 4.9 4.3 19.4 0.1 -5% 14.4
Hero MotoCorp HMCL IN REDUCE 2,952 2,419 589 7.1 194.9 221.2 15.1 13.3 3.5 3.3 9.3 4.4 -18% 22.5
InterGlobe Aviation INDIGO IN REDUCE 2,497 1,600 962 11.7 (16.0) (9.3) (156.2) (269.3) (11.0) (10.3) 17.3 - -36% 9.1
NCC NJCC IN REDUCE 154 104 96 1.2 12.2 12.7 12.6 12.1 1.6 1.4 8.0 0.4 -32% 15.7
SRF SRF IN REDUCE 2,311 1,540 684 8 54.2 63.4 42.6 36.5 6.6 5.8 24.9 0.3 -33% 14.6
Tata Motors TTMT IN REDUCE 614 401 2,241 27.1 20.2 39.4 30.5 15.6 5.2 4.6 5.7 0.7 -35% 15.9
Tata Steel TATA IN REDUCE 119 70 1,452 17.6 5.3 NA 22.6 NA 1.2 1.1 8.4 1.7 -41% 5.1
Triveni Engineering and
TRE IN REDUCE 306 191 67 0.8 18.1 19.2 16.9 16.0 2.0 2.1 12.3 0.3 -38% 16.5
Industries
VRL Logistics VRLL IN REDUCE 686 426 60 1 11.3 14.4 60.8 47.6 6.9 6.5 17.2 0.7 -38% 10.9
Figure 64: Figure 65: Our key mid-cap and small-cap stock recommendations
EV/ Dividen
Bloomberg Target Market Market Upside/ ROE
Company Name Reco. Price EPS (Rs) P/E (x) P/BV (x) EBITDA d Yield
Ticker Price Capital Capital Downside (%)
(x) (%)
(US$ FY24 FY25 FY24
Rs Rs (Rs bn) FY24F FY25F FY24F FY25F FY24F FY24F (%)
bn) F F F
Ajanta Pharma AJP IN ADD 1,767 1,729 222 2.7 60.6 69.3 29.2 25.5 6.7 5.5 20.2 0.4 -2% 20.8
Apex Frozen Foods APEX IN ADD 220 385 7 0.1 25.7 NA 8.6 NA 1.3 1.2 5.5 1.2 75% 19.6
Balkrishna Industries BIL IN REDUCE 2,380 1,790 459 5.6 65.9 80.3 36.1 29.7 6.1 5.5 21.4 0.9 -25% 15.9
Coastal Corp CTW IN ADD 298 990 4 0.0 55.3 99.0 5.4 3.0 1.5 1.2 4.7 3.3 233% 34.0
Cyient CYL IN ADD 1,547 1,681 171 2.1 66.0 76.0 23.4 20.4 4.9 4.5 13.1 2.3 9% 26.9
Endurance
ENDU IN ADD 1,626 1,647 228 2.8 50.3 62.9 32.3 25.8 5.2 4.6 17.1 0.6 1% 15.1
Technologies
Globus Spirits GBSL IN ADD 944 3,014 27 0.3 120.6 140.5 7.8 6.7 3.0 2.2 5.3 0.8 219% 32.8
Gujarat Pipavav Port GPPV IN ADD 118 148 57 0.7 8.3 10.1 14.2 11.6 2.7 2.6 7.2 5.3 26% 18.7
HEG HEG IN ADD 1,783 2,462 69 0.8 108.2 171.7 16.5 10.4 1.6 1.4 9.6 1.7 38% 9.0
Home First Finance
HOMEFIRS IN ADD 864 1,050 76 0.9 32.8 39.0 26.3 22.2 4.2 3.6 NA NA 22% 14.7
Company
KEC International KECI IN ADD 649 725 167 2.0 22.8 36.1 28.4 18.0 4.4 3.9 13.8 0.8 12% 14.7
Metropolis Healthcare METROHL IN ADD 1,325 1,553 68 0.8 32.2 39.7 41.1 33.4 6.9 6.2 20.4 0.8 17% 15.8
Meghmani Finechem MEGHFL IN ADD 888 2,151 37 0.4 107.5 NA 8.3 NA 2.8 2.1 6.0 - 142% 34.1
PI Industries PI IN REDUCE 3,691 2,417 559 6.8 85.2 96.7 43.3 38.2 7.7 6.5 28.8 0.1 -35% 16.3
Supreme Industries SI IN ADD 4,433 3,949 562 6.8 82.6 98.7 53.7 44.9 12.8 11.1 38.2 0.6 -11% 27.9
Som Distilleries &
SDB IN ADD 325 393 25 0 10.6 13.5 30.7 24.0 6.4 4.6 18.4 0.3 21% 22.8
Breweries
Zydus Lifesciences ZYDUSLIF IN REDUCE 645 585 652 8 31.4 33.4 20.6 19.3 3.7 3.3 14.2 1.1 -9% 16.9
26
India
Automobile sector
• A good 1QFY24 results season was witnessed in our coverage universe
stocks, as 88% of the stocks beat on the EBITDA front. The big beat was in
commercial vehicle or CV and tractor original equipment manufacturers or
OEMs. 2W OEMs marginally disappointed. Companies with international
exposure were impressive, except for Balkrishna Industries.
• Among OEMs, gross margin qoq improvement was seen except in the case of
two-wheeler or 2W makers. In the auto component segment, there was margin
erosion, except in the case of tyre-makers who were aided by lower input cost.
• Management commentaries on commodity cost outlook have been mixed this
time, with most of them stating that lower costs are reflected in the quarter’s
profitability while a marginal rise in cost from the lower level is seen now. The
strong ASP improvement across OEMs helped raise sales, despite volume cut
by many. The major EBITDA upgrade in our coverage universe was for Escorts
Kubota, Mahindra & Mahindra, Ashok Leyland and Bajaj Auto among OEMs.
In the auto component space, major upgrade was in the case of Apollo Tyres,
SAMIL and Bharat Forge. Only Balkrishna Industries in our coverage universe
witnessed an EBITDA cut. The higher other income trend helped amplify EPS
upgrade across our coverage universe.
• We reiterate Overweight rating on the automobile sector, as NSE Auto Index
valuation is near the 10-year mean level and EBITDA surprises flow in. We
maintain pre-results rating upgrade of SAMIL to ADD. The festive season-led
demand recovery provides hope for two-wheeler sales, where we prefer Bajaj
Auto. Maruti Suzuki, with strong new products and alternative fuel technology,
is better positioned to gain market share in the car segment. We have an ADD
rating on Mahindra & Mahindra and Ashok Leyland as these segment leaders
are gaining market share through new product launches. Our order of
preference is Bajaj Auto, Ashok Leyland, Mahindra & Mahindra and Maruti
Suzuki. The corporate governance concerns in large-cap OEMs like Hero
MotoCorp (government inquiry), Mahindra & Mahindra (RBL Bank investment)
and Maruti Suzuki (Gujarat plant valuation) are a challenge. We reiterate our
REDUCE rating on Tata Motors and TVS Motor, as global operation challenges
overrule domestic recovery benefit at their current rich valuations.
Building material and consumer electrical sectors

• Durables:
o Polycab, V-Guard and Finolex Cables beat earnings estimates. Havells,
Crompton Greaves Consumer, Orient Electric lagged estimates. KEI
Industries’ performance was in line with expectations.
o FMEG business remained weak while the C&W segment’s (electrical and
communication) sales saw a great momentum.
o B2C discretionary spending continued to be soft due to repeated product
price hikes and overall high inflation environment. Healthy B2B and B2G
order inflow partially offset the weak B2C trend.
o Cool weather conditions led to a meaningful divergence in regional
demand across India. North and West India saw weak sales due to
unseasonal rains while South and East India fared better. The company’s
performance reflected similar sales trends for summer-dependent
products like fans, air-conditioners and air-coolers.
o No material price hikes were taken by brands, as input prices are now
cheaper yoy. Most companies expect 2HFY24F to fare better in terms of
revenue growth as well as gross/EBITDA margins.
o The net working capital cycle remained steady while it improved for a few
companies qoq. Across our coverage universe, most companies’ balance
sheet had net cash. Crompton Greaves Consumer Electricals and V-
Guard are likely to repay their remaining acquisition debt over the next
12-18 months. All capex will be met through internal accruals for Havells,
V-Guard, Orient Electric, Polycab, KEI Industries and Finolex Cables.
27
India
o Going ahead, recovery in B2C demand, sustenance of B2B/B2G orders,

full recovery of margins back to pre-Covid levels and integration benefits
from acquisitions are key parameters to monitor.
o We upgraded Polycab to an ADD rating, given consistent outperformance
over the last four quarters. We downgraded V-Guard to a REDUCE rating,
given limited positive surprises going ahead. We downgraded Crompton
and Orient Electric to a HOLD rating. We retained our ADD rating on
Havells and KEI Industries, and REDUCE rating on Finolex Cables.
o Top picks: Havells, Polycab and KEI Industries
• Building materials:
o Supreme Industries, Astral, APL Apollo, Cera and Century Ply missed our
earnings estimates while Kajaria Ceramics outperformed. Finolex
Industries’ performance was in line with expectations.
o Plastic products, PVC pipes, steel structural pipes, medium density fibre
board or MDF within wood panels and bathware (sanitaryware and
faucets) saw a healthy demand trend. Tile demand stayed soft while it
deteriorated for plywood and laminates. Overall lower discretionary
spending impacted the demand for related products.
o Plastic pipe sales volume grew by 30-50% yoy, albeit on a low base.
Operating margin recovered yoy as the negative impact of inventory
losses reduced sharply due to lower PVC price fluctuations.
o All companies under our coverage are undergoing large capacity
expansion due to sustained and anticipated healthy demand from the
urban and rural housing segments and continued public and private
capex. APL Apollo and Century Plyboard have taken project debt.
Supreme Industries, Astral, Finolex Industries, Kajaria Ceramics and
Cera will fund their entire capex through internal accruals.
o Going ahead, sustenance of housing and infrastructure-related demand,
recovery in discretionary spending and timely completion of capex are key
parameters to monitor.
o We upgraded Cera to an ADD rating while we downgraded Astral, Kajaria
Ceramics and Century Ply to a HOLD rating. We retained our ADD rating
on Supreme Industries and APL Apollo, and REDUCE rating on Finolex
Industries.
o Top picks: Supreme Industries and APL Apollo
Banking/NBFC sectors
• 1QFY24 results review: 1QFY24 witnessed credit growth easing, which was
on expected lines amid credit saturation due to overleveraging as well as
slowing consumption demand. However, the sporadicity in retail demand is
more interesting as a few lenders are growing faster compared to others,
grabbing market share. State Bank of India, HDFC Bank & ICICI Bank have
done well on the retail lending side while Axis Bank’s struggle over retail loans
(especially mortgages) is clearly visible. Our expectation of NBFCs
outperforming banks on the growth front due to deeper market penetration and
faster turnaround time is also playing out well. Corporate credit for most lenders
was sluggish during the quarter, with no major signs of the private capex cycle
commencing. We continue to remain skeptical of corporate demand due to a
variety of borrowing instruments (apart from bank borrowings) available to
them.
• Margin pressure visible across lenders: This trend is likely to continue. Most
banks and NBFCs have reported margin compression during the quarter amid
a rise in the cost of borrowing (mainly deposits in the case of banks) as well as
higher liquidity on the balance sheet (mainly for NBFCs). SBI &
Cholamandalam Investment and Finance Corporation were the worst-hit
during the quarter whereas HDFC Bank and IndusInd Bank performed better.
We continue to believe that banks are more vulnerable on the margin front as
repricing of low-cost deposits may continue whereas with an elevated share of
28
India
variable rate lending book, which is linked to the external benchmark rates
(mainly repo), any further rise in yields is capped due to stagnant policy rates.
We expect margin compression to remain for a while but for NBFCs, repricing
the loan book at higher rates and a cap over the cost of borrowings will ensure
a better margin profile.
• Elevated opex amid higher employee attrition & branch expansion: We
have seen a sharp surge in operating expenses for most lenders, but Axis Bank
and IndusInd Bank were the worst-hit. A higher level of employee attrition is
keeping employee costs higher and geographic expansion (branch addition) is
keeping the overall operating expenses relatively elevated, resulting in
deterioration of the cost-to-income ratio. However, the phenomena will improve
over the coming quarters as the branches achieve break-even.
• Asset quality stable but we prefer to stay cautious: The asset quality trend
in 1QFY24 remained flat sequentially with a steady headline non-performing
asset or NPA ratio across banks and NBFCs. However, there has been a surge
in credit costs, visible specifically in the case of Axis Bank and SBI Cards. We
prefer to remain cautious, especially on SME/MSME loans (including loan
against property or LAP loans) in semi-urban and rural India, due to
overleveraging amid oversupply of funds.
• We prefer HDFC Bank, SBI, MMFS, Bajaj Finance and Spandana: HDFC
Bank (ADD, Rs2,000) is our preferred pick among banks due to its expanded
reach and a superior liability profile. We also like SBI (ADD, Rs800) for its
superior market penetration-led growth. Among NBFCs, we continue to like
MMFS (ADD, Rs430) and Spandana Sphoorty (ADD, Rs1,000) amid visible
turnaround and improving return ratios. We also prefer Bajaj Finance (ADD,
Rs9,000) due to its ability to manage profitable growth. We continue to like
Cholamandalam Finance (ADD, Rs1,350) due to its aggressive growth, but we
see a limited upside due to probable equity dilution risk.
Capital goods sector

• Healthy revenue-led growth: Capital goods companies under our coverage
universe reported a healthy execution in 1QFY24, with a revenue growth of
30% YoY (21.6% ex-L&T). All the companies reported double-digit YoY
revenue growth in the range of 14% to 37%, with strong revenue growth seen
in Larsen & Toubro or L&T (34%), Cummins India (31%), KEC International
(28%), and ABB India (22 %). The EBITDA margin of our capital goods sector
coverage universe declined by 16bp YoY due to lower margin in L&T (down
87bp YoY) and Voltas (down 88bp YoY). PAT of our coverage universe
increased by ~50% YoY (down 30% QoQ).
• Management commentaries indicate margin expansion is on the cards:
Management commentaries were positive on the margin expansion front for
most companies. L&T’s margin was impacted due to legacy orders, which are
likely to get completed by 3QFY24F, and thus margin is likely to improve from
4QFY24F. KEC International expects its EBITDA margin to improve from 4.8%
in FY23 to 7% in FY24F as legacy projects of SAE Brazil have been completed
and margin recovery is likely in the standalone T&D segment in 2HFY24F.
Voltas expects margin expansion in the coming quarters led by softening
commodity prices, manufacturing efficiency and value engineering initiatives.
Thermax is likely to sustain its higher margin at 8-9% based on the current
order book. ABB India expects the PBT margin of 10%+ to sustain, given
softening commodity prices while maintaining the overall pricing level.
Cummins India has taken multiple price hikes in the last 15 months.
• Order inflow momentum continues: Aggregate order inflow was robust, up
46% YoY, led by a 56% YoY growth in L&T’s order inflow to Rs655bn while
KEC International’s inflow grew by 30% to Rs45bn, Thermax’s inflow grew by
11% YoY. All the companies under our coverage reported a higher order inflow
YoY. New investments announced during 1HCY23 grew 28% YoY. We expect
a new trend of private sector spending led by the energy sector’s transition
including renewables, electric vehicles, battery technology, and hydrogen. We
29
India
expect manufacturing capex led by production-linked incentive or PLI

schemes, supply chain diversification and the China+ strategy. Industry has
witnessed strong demand for data centres led by 5G/6G rollout and e-
commerce growth. We expect the order inflow of our coverage universe to
clock a 14% CAGR over FY23-25F.
• Maintain positive stance on the sector: We remain Overweight on the
capital goods sector, despite high valuations, factoring in the strong capex
recovery led by various schemes like NIP, Gati Shakti, and Make in India, while
the special focus on capex to provide several opportunities for companies
going ahead. We downgrade our rating on Cummins India to REDUCE (from
HOLD) on lower demand from overseas markets, muted demand in the
domestic market post pre-purchases and a rich valuation. Recent emission
norm changes suggest margin contraction and a muted volume in the coming
quarters. We reiterate our ADD rating on L&T, KEC International, Thermax,
Voltas and Siemens, with their order backlog providing revenue visibility along
with reasonable valuations. We have a HOLD rating on ABB India as the stock
has rallied sharply by ~70% YTD, leaving limited upside, despite factoring in
most positives, with an EPS CAGR of 21% over CY22-25F.
Cement sector
• In 1QFY24, our analysis of top-15 listed cement companies shows that overall
volume improvement for the industry was very strong (1Q volume grew by
~16% yoy). In our coverage universe, TRCL, JKCE, UTCEM, and SRCM
posted industry-leading growth, largely driven by ramp-up in their respective
new capacity. Industry demand prospects continue to remain positive (barring
seasonality impact so far in 2Q), considering strong traction in government
projects, primarily led by general elections in 2024. Many producers expect
double-digit demand growth for the industry in FY24F and strong growth for
themselves, though some weakness is seen during the monsoon season.
• However, unit EBITDA improvement has been subdued due to weak-to-flattish
realization and a gradual decline in power and fuel costs during the quarter.
The industry has witnessed an average only Rs55/t input cost savings on a
qoq basis in 1Q. Despite the recent uptick in pet-coke prices (US$15-20/t in
the last one month), we expect the industry to report Rs180-220/t input cost
savings in the next couple of quarters (mostly from 3QFY24F), which would aid
EBITDA/t recovery in 2HFY24F.
• Pricing: As per our channel check, dealers are surprised by price hikes, given
the subdued volume so far in 2Q; hence, we doubt the sustainability of such
price hikes. Management commentaries highlighted stable prices so far in 2Q.
However, there is a possibility that prices may increase in Sep 2023F, which
generally do, and fuel prices have seen some increase in recent days which is
exerting pressure on the producers to increase product prices.
• Capacity expansion: Most capacity expansion projects are progressing as per
schedule. During 1Q, new capacity addition announcements were made by
UTCEM and SRCM. ACEM announced the acquisition of Sanghi Cement and
its medium-term target of achieving 101mtpa capacity by FY26F, and also
reiterated its 140mtpa target for FY28F.
• Consolidation will remain high in the medium-long term. We feel the top 4-5
players will grow faster than the market at the cost of small and regional
players. We believe this trend will continue, given the ability of large players to
service the market from multiple locations, and we expect smaller incompetent
players to exit the space for some larger players. A few large players’ recent
commentaries highlighted that capital allocation and deal valuations will be key
factors that will be considered while acquiring any assets.
• With the benefit of low-cost fuel inventory and better volume, we believe the
margins will continue to improve despite muted cement prices. We retain our
Overweight stance on the sector from a medium- to long-term perspective, with
UTCEM, Adani Cement, DALBHARA and BCORP as our top stock picks.
30
India
Chemical sector
• Chemical companies disappointed in 1QFY24 as their margins were under
pressure, and the future of most Indian chemical majors will be driven by three
factors: 1) Crude oil prices, which drive the prices of most raw materials for
Indian chemical companies. 2) The global channel destocking in
agrochemicals and electric vehicle chemicals. 3) The regulatory changes
around the world, particularly for fluoropolymers and refrigerants. We don’t
believe that it’s the right time to do bottom fishing in the sector because the
bottom is still far away.
• The surge in crude oil prices will have a passing impact on naphtha. Naphtha
is the main raw material for key components such as ethylene, propylene,
benzene and multiple other petrochemicals. Ethylene spreads over naphtha
have touched a historic low, mirroring the trend in propylene, which also
witnesses a price hike due to rising cost of naphtha. A mean reversion in
propylene spreads over naphtha is on the cards which, coupled with the rise in
crude oil prices, can exert pressure on the raw material side. Currently,
chemicals are facing demand problems and raw material inflation is likely to
follow in the coming quarters.
• We like Camlin Fine Sciences in our chemical coverage universe, but we
maintain a REDUCE rating on Clean Science and Technology, Gujarat
Flourochemicals, and SRF.
Consumer staples sector

• Our FMCG pack delivered a 7.9% yoy sales growth in 1QFY24. Volume growth
improved sequentially from low single digits to mid-single digits while pricing
growth continued to taper off gradually. As per market research firm Nielsen,
industry volume growth (2%/5% for rural/overall) is on a low base (-6%/10%).
On a two-year CAGR basis, rural/overall volume was -4%/flat, respectively.
Abating inflation and a normal monsoon have kept the hopes of a rural recovery
alive. Competitive intensity from small/regional players has increased owing to
moderation of input cost pressure, especially in the mass segment, where
Hindustan Unilever registered some market share loss in mass segments of
tea and detergent bars. Pricing growth has tapered off while volume recovery
should drive growth going ahead. 2QFY24F growth is expected to be tepid,
with a recovery expected in 2HFY24F.
• Our paints coverage universe reported a 6.8% yoy sales growth in 1QFY24.
Given the fact that demand has remained healthy, paint players haven't taken
any price cuts despite stable/declining raw material prices, except recently.
Rebating intensity remained benign. Paint majors are optimistic about better
demand in 2HFY24F due to a longer festive season this year. Most players
reported healthy growth in their projects business during the quarter, as well
as in the construction chemicals/waterproofing category.
• Our FMCG pack reported an EBITDA growth of 16.4% yoy. Most key raw
materials (barring the agri basket) saw moderation in prices. We expect gains
at the gross margin level to be ploughed back into higher A&P spending going
ahead.
• Maintain Neutral stance on the FMCG sector, with our preferred picks being
Dabur India (ADD, TP: Rs600) and Jyothy Labs (ADD, TP: Rs335). In the
discretionary space, we prefer Titan Company (ADD, TP: Rs3,150) over Asian
Paints.
Defence sector
• Financial performance: Defence companies’ sales in 1QFY24 were a mixed
bag – Bharat Electronics (BEL) reported strong sales, Hindustan Aeronautics
(HAL) marginally missed our estimates, and Bharat Dynamics or BDL’s sales
declined 57% yoy and missed estimates by 63% due to continued supply chain
problems. A higher cash balance at the end of FY23 resulted in higher interest
income, which boosted PAT for all companies.
31
India
• Order book: The order book for companies continues to remain strong. BEL
has a healthy order book of Rs654bn (3.7x TTM sales). Going ahead, BEL
expects robust order booking of more than Rs200bn in FY24F. The order
backlog for BDL stands at Rs202bn (8.2x FY23 sales). HAL has an order book
of over Rs800bn (3x TTM sales) at the end of FY23, and a further order pipeline
of Rs480bn for FY24F.
• Guidance: HAL has given revenue growth guidance of 10-12% for FY24F/25F
with the EBITDA margin expected to improve by 100bp yoy. BEL projects a
topline growth of ~17% for FY24F and the EBITDA margin in the range of 23%-
24% for FY24F. BDL has given revenue growth guidance of~30% with the
EBITDA margin at 20%-23% for FY24F.
• While defence companies’ numbers are volatile on a quarterly basis, 1Q is
usually a tepid quarter for execution and order finalization for these companies.
Hence, a strong order pipeline and the government’s focus on indigenization
and export growth, in our view, bode well for defence companies.
• Our view: Post sharp run-up in the public sector defence share prices in the
last six months, we remain cautiously optimistic, retaining our Overweight
stance and maintaining ADD rating on BEL, BDL and HAL.
Diagnostics sector
• Dr. Lal Pathlabs beat our estimates while Metropolis Healthcare and Thyrocare
reported lower-than-estimated financial performance in 1QFY24.
• Non-Covid patient volume growth stayed soft while sample volume growth was
relatively higher. Post-Covid, the number of tests per patient has been rising
consistently. Realization per patient improved marginally for all diagnostic labs
under our coverage on the back of price hikes taken on a few specialized tests,
better test mix and a higher share of sale of wellness packages.
• The pace of entry of new players in the segment slowed down considerably.
Online-only labs reduced discount rates meaningfully over the past six months.
In fact, revenue from partnerships with online aggregators declined qoq for
Thyrocare, implying a material slowdown in their business run-rate.
• Large acquisitions done so far have not yielded the expected results and
integration benefits are expected to aid growth/margins over the next 12
months.
• Going ahead, recovery in patient volume back to pre-Covid levels, higher
revenue growth rate in new markets and acquired labs, M&A cost synergies
and competitive intensity are key parameters to monitor.
• We upgraded Metropolis Healthcare to an ADD rating and downgraded
Thyrocare to a HOLD. Retained our HOLD rating on Dr. Lal Pathlabs.
• Top picks: Dr. Lal Pathlabs and Metropolis Healthcare.
Infrastructure sector – ports, logistics and aviation

• Ports: Major ports (MPs) + APSEZ cargo grew 4% yoy in 1QFY24, driven by
coal (up 10% yoy). We expect a 7-8% CAGR in ports’ cargo over FY22-24F.
o Adani Ports (ADD; TP Rs823). Ex-acquisitions, we expect a 12% EBITDA
CAGR over FY20-24F. Our target price (TP) implies a 11.6x FY25F
EV/EBITDA (10% discount to 5-year avg.). APSEZ has appointed M/s.
MSKA & Associates, CA, as auditor. MSKA is an independent member
firm of BDO International, a Top-6 global audit firm. This follows the
resignation of Deloitte as auditor.
o GPPV (ADD; TP Rs148): Going ahead, connectivity to the DFC is likely to
boost Gujarat Pipavav (GPPV) in FY24F, while JNPT may be connected
in 1.5-2 years. We forecast an 18% EBITDA CAGR (FY23F-25F).
• Logistics: In 1QFY24, Indian Railways (IR) export-import (EXIM) container
cargo rose just 3.7% yoy. The weak 1QFY24 of IR and Concor was because,
in Jun 2023, rail container cargo (tkm) declined 6.5% yoy due to precautions
after the train accident in Odisha on 2 Jun 2023.
32
India
o We expect a sharp volume growth for Concor over FY23-25F, driven by

the shift in cargo from road to rail after the start of the DFC.
o Over FY20-22, BlueDart Express’ (BDE) EBITDA grew 2x, driven by low
competition in the air cargo segment (70% of revenue) as competing
airlines carrying belly cargo were hamstrung by the Covid-19 pandemic
(FY21-22). We expect BDE’s EBITDA margin to decline to 16.4% due to
intense competition in air cargo (like 3QFY23-1QFY24). We downgrade
BDE to a REDUCE rating with a TP of Rs6,100 (14x FY25F EV/EBITDA).
o We expect VRL’s GT segment’s EBITDA margin to fall from 15.6% in FY23
to 14.2% in FY25F due to commissioning of the Dedicated Freight Corridor
or DFC in FY24F-25F. We factor in a 7% goods transport volume CAGR
(FY23F-25F). We retain our REDUCE rating on VRL (TP Rs426), valuing
it at 10x FY25F EV/EBITDA.
• Aviation: Indian aviation sector’s domestic PLF dipped by 652bp MoM in Jul
2023. While Jul month comes under a lean tourist season, we feel the MoM
fall in Jul 2023 was more than the average fall over Jul 2017, 2018 and 2019
(149bp). Further, the domestic industry’s PLF in Jul 2023 was at 84.3%, lower
than the average over Jul 2017, 2018 & 2019 (85.4%). In IndiGo’s 1QFY24
con-call, management stated that the yield declined 13-19% between 1QFY24
till now and attributed it to 2Q being a seasonally weak quarter. However, over
FY18-20, in 2Q, tariff declined by just 8% qoq. We believe the sharp dip in PLF
in Jul 2023 and the decline in IndiGo’s tariff was not only due to seasonality
(Jul month comes under a lean tourist season) but it signals a rise in
competition and an end to supernormal profits after the stoppage of GoAir in
May 2023.
o We retain our REDUCE rating on IndiGo (TP Rs1,600), valuing the
business at 9.5x FY25F EV/EBITDAR. We factor in a yearly growth of 13%
in IndiGo’s ASK and RPK over FY23-25F.
Infrastructure sector - Construction

• EPC sales in 1QFY24 for the companies under our coverage grew on an
average by 14% yoy. EBITDA grew 30% yoy, significantly above sales growth,
because of the rebound in Dilip Buildcon or DBL’s margin. The average order
book or OB-to-sales ratio was at 2.6x, a tad lower than that in Mar 2023 (2.8x).
Order inflow (Rs102bn) in 1QFY24 was lower than the run-rate in FY23
(Rs590bn). When compared to the Mar 2023 OB-to-sales ratio, the latest OB-
to-sales ratio is lower for PNC Infratech & KNR Constructions and similar for
NCC, DBL & IRB Infrastructure. Among peers, NCC has the highest OB-to-
sales ratio while IRB Infrastructure and KNR Constructions’ OB-to-sales ratios
are low.
o We have a REDUCE rating on NCC and KNR Constructions, valuing their
EPC business at 6x/7x FY25F EV/EBITDA, respectively. We have a HOLD
rating on PNC Infratech, valuing its EPC business at 6x EV/EBITDA, and
on IRB InvIT too. We have an ADD rating on Dilip Buildcon, valuing its
EPC business at 5x FY25F EV/EBITDA, and on IRB Infrastructure as well
valuing its EPC business at 4x FY25F EV/EBITDA.
Information technology sector

• As highlighted in our report dated 26 Jun 2023, 1QFY24 revenue performance
of companies under our coverage was impacted by weakness in key verticals
such as financial services (FSI), retail & hi-tech as well as a delay in ramp-up
and ramp-down of projects and, in turn, increasing the ask rate to achieve
FY24F committed growth. This, coupled with the macroeconomic uncertainty,
led Infosys to revise its FY24F constant currency or CC revenue guidance
lower to 1%-3.5% vs. 4%-7% earlier while Wipro’s guidance (-2% to +1% qoq)
continues to be weak. HCL Technologies retained its 6%-8% CC growth
guidance, but the ask rate is steep. Across Tier-2 companies, Persistent
Systems (PSYS), Coforge, & Birlasoft’s performances were better, soft in the
case of LTIMindtree and weak for Mphasis, LTTS and Cyient. While
33
India
forecasting demand is tough, the conclusion of delayed deals in Europe and a

better ramp-up of the existing order book could surprise FY24F revenue
positively.
• Uncertainty could continue impacting order book conversion: The
macroeconomic uncertainty continues to impact ramp-up of deals and pipeline
conversion. Total contract value or TCV of new deal wins declined by 39.4%
qoq and 55.2% yoy for Tech Mahindra, HCL Technologies’ new deal win TCV
fell for the third consecutive quarter and the total TCV of Wipro declined for the
second consecutive quarter. Infosys’ TCV (up 9.5% qoq and 35.3% yoy) and
Tata Consultancy Services or TCS’ TCV (up 2% qoq and 24.4% yoy) bookings
were aided by large deals. Among mid-tier companies, deal wins for Mphasis
and Coforge were aided by large deals while Persistent Systems and
Birlasoft’s bookings were weak. The management commentary suggests a
delay in decision-making, moderation in discretionary projects impacting
bookings while, we believe, a rising mix of vendor consolidation and cost take-
out deals could exert pressure on margins in the near term. Longer-than-usual
deal cycles in Europe and persistent softness in North America could pose a
risk to revenue recovery assumptions.
• Near-term margins could remain volatile: The EBIT margin performance of
Tier-I companies was generally below estimates while for Tier-II companies it
was better led by easing attrition rate and moderation in sub-contractor
expenses, even as the impact from revenue softness and company-specific
one-offs were key offsets. Wage hike could be a key headwind in 2QFY24F for
most companies, although the quantum could be significantly lower than in the
prior years. Though complex deal structuring and upfront investments to
support large deals are key headwinds, moderating sub-contractor and
backfilling cost, better deployability of freshers and right-sizing of the employee
pyramid are key margin tailwinds. We continue to prefer margin expansion
stories, given the limited visibility on revenue growth.
• Remain selective as performance divergence continues to broaden: We
continue to remain selective and prefer structural stories, given that
performance divergence across our coverage universe is broadening. Though
the shift in the CY23F IT spending landscape, from growth to cost take-out,
favours the scale of operations of Tier-I companies in a market with rising
competitive intensity, select Tier-II companies continue to defend their wallet
share better. Finally, although the entry valuations for our Tier-II coverage
universe are rich (~24x FY25F consensus EPS vs. ~19x FY25F for Tier-I’s),
we would like to highlight that broadening performance divergence in the
backdrop of waning sectoral tailwinds of CY20-22 suggest that select Tier-II
companies may continue to attract a scarcity premium.
Oil and Gas sector

• 1QFY24 has been positive for the city gas distribution or CGD segment as we
have seen margin recovery followed by lower APM pricing, Stagnant Chinese
demand, reduced European gas consumption, and upcoming new liquefaction
capacities have all played a role in a balanced LNG market with price
correction. The Indian government’s emphasis on higher APM allocation for
Indian CGD companies may lead the country to purchase urea instead of using
natural gas for making urea. In our view, CGD players can enjoy the margins.
Lower LNG prices indicate volume growth and an uptrend in gross profit/scm.
Growth trajectory is promising for Indian CGD players, paving the way for a
rise in their earnings.
• We have upgraded our ratings on Gujarat Gas (ADD; TP: Rs679) Indraprastha
Gas (ADD; TP: Rs463) & Mahanagar Gas (ADD; TP: Rs1,252). In the O&G
space, Reliance Industries and Indraprastha Gas are our top picks.
• Downside risk could arise from a weak ceramic sector outlook, or a sustained
discount in propane/LPG prices vs. natural gas prices leading to increased
pricing competition from alternative fuels in the industrial and commercial
segments.
34
India
Pharma sector
• Strong 1QFY24 performance: The quarterly earnings were a litmus test for
the sector, especially after the sharp outperformance since the start of this
financial year. To this end, most companies fared better than expectations, with
nearly 55% of our coverage universe posting a strong beat, surprising
positively both on the US market growth and margins, and another 20%
reporting an in-line set of numbers. The commentary was upbeat as well, with
most companies giving guidance of a stable-to-improving US business
trajectory and expecting the margins to sustain/improve. India business
performance was relatively mixed - larger names like Sun Pharma and Alkem
Laboratories showed weak growth, while others outperformed. API companies
disappointed on the earnings front (Divi’s Laboratories, Laurus Labs) but gave
guidance of an improvement going ahead.
• US market outlook remains strong: Most companies alluded to a stable
pricing environment in the US market, with selective opportunities from product
shortage and lesser erosion in the base business. Aurobindo Phama gave
guidance of US$500m+ revenue in Eugia (vs. US$411m in FY23) while Zydus
Lifesciences gave guidance of a double-digit growth in US revenue despite
assuming competition in gAsacol HD. gRevlimid remains an important driver
of US growth, and while 1Q contribution was much higher than expectations
(specifically for Dr. Reddy’s Laboratories, Sun Pharma and Zydus
Lifesciences), the product is likely to be erratic in terms of contribution going
ahead.
• Sanguine margin outlook in the medium term: On an average, gross margin
improved by 260bp QoQ for the sector and the EBITDA margin improved by
297bp QoQ in 1Q. Softening raw material prices, depletion of high-cost raw
material inventory, higher gRevlimid sales, reduction in logistic costs and
operating leverage played out in favour. Aurobindo Pharma (from 17% to 18%+
and 20%+ including gRevlimid from Oct 2023F) and Zydus Lifesciences (150-
200bp margin expansion vs. 50-100bp earlier) upgraded their FY24F margin
guidance. Post 1Q earnings, investor confidence in Ajanta Pharma’s margin
guidance of 25%+ was also high.
• Remain selective: In our last report, we had highlighted margin expansion to
continue driving the sector’s outperformance, and 1Q earnings/outlook largely
validates that. However, after the sharp run-up and thus high valuations, we
prefer to remain selective. Aurobindo Pharma, Torrent Pharma and Ajanta
Pharma are our top stock picks.
35
India
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Strategy Note India │ August 26, 2023

Impressive Jun 2023 quarter results drive EPS upgrade

Churn out high-conviction stock ideas for quick valuation catch-up

Maintain Nifty-50 target and Overweight rating

Figure 1: Quarterly EPS beat/miss vs. Bloomberg consensus estimates

Figure 2: Our high-conviction stock ideas

Great start to FY24 with EPS beat, upgrades

SOURCE: RBI, INCRED RESEARCH SOURCE: RBI, INCRED RESEARCH

PV - Retail EV - Retail 2W - Retail (RHS)

SOURCE: VAHAN.COM, INCRED RESEARCH, COMPANY REPORTS

Figure 6: Electricity generation witnesses seasonal weakness after touching peak

SOURCE: POWER SYSTEM OPERATION CORPORATION LIMITED, INCRED RESEARCH

Figure 7: Sustained buoyancy in GST collection

Figure 8: Growth momentum in E-way bills

Per day (in m)

Figure 9: Weak start to corporate tax collection is an area of concern

3MFY Income tax 3MFY Corporate tax

SOURCE: CENTRE FOR MONITORING INDIAN ECONOMY (CMIE), INCRED RESEARCH

Consumer sentiment remains strong

SOURCE: RESERVE BANK OF INDIA (RBI), INCRED RESEARCH

By Jun 2 By Jun 8 By Jun 15 By Jun 22 By Jul 6 By Jul 12

Essential spending-Current perception Non-Essential spending-Current perception

Figure 14: Naukri Jobspeak Hiring Index weakens gradually

SOURCE: INCRED RESEARCH, NAUKRI JOBSPEAK REPORT

Metro and Tier 1 Tier 2 Tier 3 Rural

SOURCE: TEAM LEASE, INCRED RESEARCH

GDP growth momentum provides comfort

20.0 India Mfg PMI China PMI USA PMI

SOURCE: NATIONAL STATISTICS OFFICE (NSO), SOURCE: IHS MARKIT,

SOURCE: BLOOMBERG, INCRED RESEARCH

India’s trade deficit is an area of concern

Trade balance (US$bn)

SOURCE: MINISTRY OF COMMERCE AND INDUSTRY, INCRED RESEARCH

Over last one year

SOURCE: BLOOMBERG, INCRED RESEARCH

Jan-23 03-Jan-23 Jan-23

Apr-23 19-Mar-23 Mar-23

SOURCE: RBI, ACE EQUITY, INCRED RESEARCH

SOURCE: BLOOMBERG, INCRED RESEARCH

RBI panel unanimously decides to stop rate hikes and so

CPI (yoy %) Core CPI yoy %) Repo rate

7 FY24F FY25F 12 FY24F FY25F

SOURCE: RBI, INCRED RESEARCH SOURCE: RBI, INCRED RESEARCH

Easing interest rates and supply to drive housing demand

Housing loans (Rs Bn) Growth(%)

SOURCE: RBI, INCRED RESEARCH, COMPANY REPORTS

SOURCE: PROP TIGER, INCRED RESEARCH

Figure 34: Figure 35: Beneficiaries of revival in housing demand

Strong order inflow from the infrastructure sector

SOURCE: RBI, INCRED RESEARCH

Figure 37: Corporate rating downgrades on the rise

Instruments rated by rating agencies

SOURCE: CMIE, INCRED RESEARCH

Figure 38: Beneficiaries of spending on infrastructure

Our high-conviction stocks’ performance and recent

Home First Finance

Home First Finance

M&M Financial Services

NOTE: (INTRODUCTION MONTH MARKED ON BAR OF THE STOCK)

1QFY24 PAT momentum and beat is impressive

-30% -22% -23% 20%

SOURCE: BLOOMBERG, INCRED RESEARCH SOURCE: BLOOMBERG, INCRED RESEARCH

SOURCE: BLOOMBERG, INCRED RESEARCH