in this issue - kotak securities · in this issue monthly fundamental outlook monthly derivative...

Sectoral Indices

SECTOR As on 30 November - 15 30 October - 15 % change

CNX midcap 13,249 13,239 0.1%

BSE midcap 10,990 10,975 0.1%

BSE small cap 11,636 11,315 2.8%

FMCG 20,279 20,118 0.8%

Capital Goods 14,587 14,946 -2.4%

Banking 19,916 19,774 0.7%

PSU 6,882 6,777 1.5%

Oil & Gas 9,328 9,066 2.9%

Auto 18,964 18,166 4.4%

Tech 10,950 11,264 -2.8%

Healthcare 16,298 18,066 -9.8%

Metal 7,118 7,308 -2.6%

Realty 1,344 1,372 -2.0%

Change in the Global Indices

INDICES As on 30 November - 15 30 October - 15 % change

Sensex 26,146 26,657 -1.9%

Nifty 7,935 8,066 -1.6%

Dow Jones 17,720 17,664 0.3%

Nasdaq 5,109 5,054 1.1%

FTSE 6,356 6,248 1.7%

DAX 11,382 10,850 4.9%

CAC 40 index 4,958 4,898 1.2%

Hang Seng 21,996 22,640 -2.8%

China 3,445 3,383 1.9%

Japan 19,747 19,083 3.5%

Spain 10,387 10,361 0.3%

Italy 22,718 22,443 1.2%

GLOBAL & SECTORAL INDICES

)nm sR( paC tkM)sR( L/H keeW 25)sR( ecirP tekraM tnerruC6525111644 / 556964

Source: Bloomberg

Source: Bloomberg

FINANCIALS (RS MN) 2015 2016E 2017E553emocni tseretnI 415 493

Interest expense 212.5 248.9 298.6Net interest income 142 166 194

%1.71%5.61%0.91)%( htworG48emocni rehtO 97 111431tiforp ssorG 158 1836.37tiforp teN 85.2 100.9

%4.81%8.51%3.81)%( htworG3.1)%( APN ssorG 1.5 1.44.0)%( APN teN 0.5 0.4

Net interest margin (%) 3.9 3.7 3.6 Source: Company, Kotak Securities - Private Client Research1.51)%( RAC 15.1 13.70.81)%( EoR 18.2 19.37.1)%( AAoR 1.7 1.7

Dividend per share (Rs) 4.6 4.8 5.00.13)sR( SPE 35.9 42.6

Adjusted BVPS (Rs) 182.9 204.0 227.9

VALUATION PARAMETERS 2015 2016E 2017E1.51)x( E/P 13.1 11.06.2)x( VB/P 2.3 2.1

PRICE PERFORMANCE (%) 1M 3M 6M(3.9) (1.5) (16.9)

Source: Bloomberg, Company, Kotak Securities - Private Client Research Source: Company

Last report at Rs.522 on 28 October 2015AXIS BANK LTD

Target Price (Rs)685

Trend in Asset Quality

Potential Upside (%)46.1%

1 Year Performance

Share Holding Pattern (%)

Trend in earnings (Rs bn)

Promoter30.7%

FII43.8%

DII15.1%

Others10.3%

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Axis Bank Ltd Nifty

INVESTMENT ARGUMENT Top class liability franchises in the industry on back of:

Strategy to expand its network in hinterland, where competition is relativelylower.

Better customer segmentation strategy, which helps in developing customizedproducts.

Focus on transactional banking which helps in getting higher floats as well asgenerates consistent fee-based income

Consistently delivering superior NIM on back of funding advantages. It also has favorable ALM profile – 37.6% of deposits have < 1 Yr maturity, while 25.0% ofadvances would be re-priced within one year (FY15), which is likely to supportmargins in the falling interest rate environment.

Diversified fee-based income - share of fee-based income to total income has beenconsistently in the range of 35-37%, healthy in our view.

Its asset quality has been holding well contrary to street expectations. GNPA &NNPA at 1.38% and 0.48% (Q2FY16). Its PCR is also healthy at ~78% (Q2FY16).

RISKS & CONCERNS High exposure to non-operational power portfolio (~50% of assets are operating in

nature) Retail book stands at ~40% of total book, highly vulnerable to system-wide

deterioration in retail asset quality. Deregulation of interest rates on saving deposits (~28% of deposits) might increase

the funding costs and in turn impacting its NIM.

COMPANY BACKGROUND Third largest private sector banks with 2743 branches and 12352 ATMs (Q2FY16).

SECTOR BACKGROUND Easing bond yield is positive for wholesale funded entities and is likely to result into

higher trading gains for banks. Return ratios to improve with improvement in asset quality as well as revival in fee-

based income. Retail segment continues to drive loan growth. Prefer private sector banks and

remain cautious on PSU banks.

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NII PAT

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14Investment Strategist December 2015

BUY


BUY


Source: Bloomberg

Source: Bloomberg

FINANCIALS (RS MN) FY15 FY16E FY17E525,51selaS 18,618 21,909

%81%02%12)%( htworG915,2ADTIBE 3,165 3,834

EBITDA margin (%) 16.2% 17.0% 17.5%897,1TBP 2,276 2,863805,1tiforp teN 1,935 2,4338.6)sR( SPE 8.7 10.9

%62%82%521)%( htworG8.8)sR( SPEC 10.7 13.2

Book value (Rs/share) 17.4 24.6 34.0Dividend per share (Rs) 1.2 1.2 1.2 Source: Company, Kotak Securities - Private Client Research

4.44)%( EOR 41.4 37.37.62)%( ECOR 29.4 30.7848,4tbed teN 4,426 3,940

Net Working Capital (Days) 140.1 147.0 147.0

VALUATION PARAMETERS FY15 FY16E FY17E3.82)x( E/P 22.1 17.60.11)x( VB/P 7.8 5.60.3)x( selaS/VE 2.5 2.17.81)x( ADTIBE/VE 14.7 12.0

PRICE PERFORMANCE (%) 1M 3M 6M4.6 30.5 (6.0)


Last report at Rs.180 on 5 November 2015CENTURY PLYBOARDS (INDIA) LTD


Revenues (Rs mn)


1 Year Performance


Revenue mix (%)

Promoter73.3%

FII10.7%

DII3.4%

Others12.5%

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Century Plyboards (India) Ltd Nifty

INVESTMENT ARGUMENT Demand environment likely to revive in medium term - We expect the

demand to recover at 10-12% every year going forward in medium to longterm.

GST implementation to be a game changer for the sector - With GST implementation, organized players would be able to tap the low costsegment captured by unorganized segment as it would bring both thesegments on a level playing field

Strong distribution network and branding to help in improving marketshare - Company has a strong dealer network of nearly 1500 dealers, 35branch offices, 6 regional distribution centres and 7 manufacturinglocations

Volume expansion and strong margin to drive PAT growth goingahead- We expect revenues and net profits to grow at a CAGR of 19% and27% respectively between FY15-FY17

Attractive valuations - We expect the stock to trade at higher multiplesgoing forward also as the company is ideally positioned to capture theupcoming demand as well as increased consumption with its leadershipposition and strong branding.

RISKS & CONCERNS Demand slowdown Forex volatility Delay in GST implementation Higher raw material prices

COMPANY BACKGROUND Century Plyboards is the largest plywood manufacturer with more than

30% share in the India's organized plywood sector with an annual capacity of 209420 CBM in plywood and 4.8 mn sheets in laminates.

SECTOR BACKGROUND Indian panel products and laminate industry is estimated at nearly Rs 285

bn - of which plywood accounts for Rs 180 bn, laminates account for Rs 66bn while rest is constituted by MDF.

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

120.0%

FY14 FY15 FY16E FY17E

Others CFS Laminate Plywood

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ROE (%) ROCE (%)


ACCUMULATE


Source: Bloomberg

Source: Bloomberg

FINANCIALS (RS MN) FY15 FY16E FY17E850,44selaS 49,800 59,1188.01)%( htworG 13.0 18.7053,7ADTIBE 8,373 10,077

EBITDA margin (%) 16.7 16.8 17.0473,9TBP 9,518 11,172459,6tiforp teN 7,519 8,8261.52)sR( SPE 27.1 31.89.51)%( htworG 8.1 17.40.82)sR( SPEC 30.0 34.91.401)erahs/sR( VB 114.9 126.8

Dividend/share (Rs) 13.0 14.0 17.0 Source: Company, Kotak Securities - Private Client Research5.52)%( EOR 24.8 26.39.32)%( ECOR 23.3 24.9997)tbed( hsac teN 1,311 1,310

NW Capital (Days) 50.8 33.9 33.7


PRICE PERFORMANCE (%) 1M 3M 6M(7.7) (6.8) 10.6


Last report at Rs.1033 on 9 November 2015CUMMINS INDIA LTD


Revenue mix (%)


1 Year Performance


Export Sales (Rs bn)

Promoter51.0%

FII17.1%

DII18.1%

Others13.8%

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Q2 FY15 Q3FY15 Q4FY15 Q1FY16 Q2FY16

Power44%

Industrial18%

Automotive6%

Distribution32%

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Cummins India Ltd Nifty

INVESTMENT ARGUMENT CIL reported YoY revenue growth in 1HFY15 on back of recovery

in key overseas markets. Company is well poised to benefit from recovery in the

infrastructure spending in the country. Commencement of mega production site at Phaltan is likely to

ease out capacity constraints and would add to cash flowgeneration in future. Company has committed a Capex of USD300 mn funded mainly through internal accruals.

We recommend 'ACCUMULATE' on company's stock with a DCFbased price target of Rs 1150.

RISKS & CONCERNS Slowdown in industrial production and core sector growth Rising interest rate scenario can put further pressure on domestic

capex cycle.

COMPANY BACKGROUND A Cummins Inc subsidiary. Significant player in domestic market Diversified across power, industrial and automotive sector.

SECTOR BACKGROUND Oil engines (backup power) sales is expected to grow with the

overall economic growth going ahead. Indian Low KVA oil engines market is highly competitive. Mid/High

KVA engines space is dominated by few players.


BUY


Source: Bloomberg

Source: Bloomberg

FINANCIALS (RS MN) FY15 FY16E FY17E194emocni tseretnI 540 610

Interest expense 300.5 324.4 363.4Net interest income 190 215 246

%4.41%0.31%6.51)%( htworG221emocni rehtO 129 146791tiforp ssorG 216 2488.111tiforp teN 123.4 143.5

%3.61%4.01%9.31)%( htworG9.3)%( APN ssorG 3.8 3.26.1)%( APN teN 1.6 1.1

Net interest margin (%) 3.4 3.4 3.4 Source: Company, Kotak Securities - Private Client Research0.71)%( RAC 17.3 16.95.41)%( EoR 14.6 15.28.1)%( AAoR 1.8 1.9

Dividend per share (Rs) 5.0 5.5 6.03.91)sR( SPE 21.3 24.7

Adjusted BVPS (Rs) 127.9 141.4 161.6

VALUATION PARAMETERS FY15 FY16E FY17E2.41)x( E/P 12.9 11.12.2)x( VB/P 1.9 1.7

PRICE PERFORMANCE (%) 1M 3M 6M(3.4) 2.0 (11.3)


Last report at Rs.277 on 2 November 2015ICICI BANK LTD


Trend in Asset Quality


1 Year Performance


Trend in earnings (Rs bn)

Promoter0.0%

FII53.9%

DII33.5%

Others12.7%

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ICICI Bank Ltd Nifty

INVESTMENT ARGUMENT We like the quality of liability franchise - CASA mix at 45.1% (Q2FY16),

one of the best in the industry. NIM has been strong on back of strong accretion to low cost deposits as

well as better ALM. Lower risk on SME portfolio (~5% of total portfolio). While retail piece has

witnessed insignificant net slippage, corporate segment continues toperform well.

RoA is likely to remain stronger at 1.8% (FY16/17), driving up the RoE to15%+ (FY17). Management focus on stable growth with improving structural profitability reinforces our existing positive outlook on the stock.

Incremental stress build-up is front-loaded and likely to be lower in FY16as compared to the same seen during FY15.

We have used SOTP method to value the stock, where standalone business comes to Rs.323 (2.0x FY17E ABV) and subsidiaries are valued at Rs.77 (holding co discount: 20%).

RISKS & CONCERNS Retail book stands at ~44% of total book, highly vulnerable to system-

wide deterioration in retail asset quality. Deregulation of interest rates on saving deposits (~32% of deposits)

might increase the funding costs and in turn impacting its NIM.

COMPANY BACKGROUND Largest private sector banks (4054 branches in Q2FY16) with 4.2%

market share in domestic loans. After conscious strategy of de-growing their B/S post Lehman collapse,

bank has started focusing on profitable growth

SECTOR BACKGROUND Easing bond yield is positive for wholesale funded entities and is likely to

result into higher trading gains for banks. Retail segment continues to drive loan growth. Prefer private sector

banks and remain cautious on PSU banks.

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ACCUMULATE


Source: Bloomberg

Source: Bloomberg

FINANCIALS (RS MN) FY15 FY16E FY17E091,335selaS 613,658 684,6814.6% htworG 15.1 11.6023,831ADTIBE 153,341 174,869

EBITDA margin % 25.9 25.0 25.5095,271TBP 186,101 214,119092,321tiforp teN 132,105 153,0959.35)sR( SPE 57.2 65.74.31% htworG 6.1 14.83.36SPEC 67.9 77.4

Book Value (Rs / Share) 239.6 261.7 286.9Dividend per Share (Rs) 85.0 40.0 45.0 Source: Company, Kotak Securities - Private Client Research

1.42% EOR 22.9 24.17.33% ECOR 32.3 33.6

Net cash (debt) 303,715 334,561 377,813Net working capital (Days) 66.5 64.5 63.4




Last report at Rs.1125 on 13 October 2015INFOSYS TECHNOLOGIES LTD


Geographical Revenue Break up (%)


1 Year Performance


Number of Employees (Nos)

Promoter15.7%

FII47.9%

DII20.6%

Others15.7%

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Infosys Technologies Nifty

INVESTMENT ARGUMENT 2QFY16 results were encouraging. The 5.9% CC growth and

$983mn TCV from large deals were the positive takeaways.

We believe that, the new strategy should allow Infosys to improvegrowth rates over the long term with sustained margins.

The long-term strategic plan reflects Infosys' focus on next-generation services and delivery models. Infosys has already madesignificant progress towards next-generation services and deliverymechanisms.

RISKS & CONCERNS A slower-than-expected recovery in major user economies may

impact our projections. A sharp appreciation of rupee beyond our assumed levels may

impact our earnings estimates for the company.

COMPANY BACKGROUND Infosys was incorporated in 1981 by 7 engineers, led by Mr.

Narayana Murthy. Infosys had been the proxy for the Indian ITsector since its inception.

The company has been an outstanding corporate citizen in terms ofcorporate governance in India. Infosys services clients in over 30countries.

SECTOR BACKGROUND IT services exports are expected to amount to nearly $110bn in

FY16. Indian companies provide services to several Fortune 500

companies. Banking & Financial services sector accounts for the largest

revenues and USA is the largest geography for the industry

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USA Europe India Others


Source: Bloomberg

Source: Bloomberg

FINANCIALS (RS MN) FY15 FY16E FY17E985,34722,93124,53selaS1.117.013.11)%( htworG145,6636,5944,4ADTIBE

EBITDA margin (%) 12.6 14.4 15.0190,6002,5989,3TBP241,4635,3617,2tiforp teN7.76.60.5)sR( SPE

Growth (%) 21.7 30.2 17.1CEPS (Rs) 6.3 7.8 9.0Book value (Rs/share) 29.7 33.3 37.9Dividend per share (Rs) 1.1 1.1 1.1 Source: Company, Kotak Securities - Private Client ResearchROE (%) 17.0 19.7 20.3ROCE (%) 16.9 19.7 20.3Net cash (debt) 2,216 2,609 2,846Net Working Capital (Days) 43.2 42.2 42.5




Average price increase for KNPL in %


1 Year Performance


Volume in million litres for KNPL

Last report at Rs.256 on 26 October 2015KANSAI NEROLAC PAINTS LTD


Promoter69.3%

FII7.5%

DII8.2%

Others15.1%

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4.24.34.44.54.64.74.84.95.05.1


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Kansai Nerolac Paints Ltd Nifty

INVESTMENT ARGUMENT KNPL is the market leader in the Industrial Paint Segment with 42%

market share, with automotive segment contributing 75% of theindustrial segment revenues.

Company which currently has 15% market share in the decorativepaint segment is also looking to expand aggressively in thesegment.

We expect revival in auto sales and capex cycle to pick up fromhere

We estimate margins of the company to improve over FY15 toFY17E by 240 bps

RISKS & CONCERNS Prolong slowdown in the automotive segment Prolong slowdown in the economy leading to weak capex cycle

impacting industrial demand Increase in competition

COMPANY BACKGROUND Kansai Nerolac Paints Ltd. (KNPL), a subsidiary of Kansai Paint,

Japan, is one of India's leading paint companies and the largest player in the industrial segment.

The company is the market leader in the automotive coatingsegment in India with a dominant market share

SECTOR BACKGROUND The paint sector is broadly divided into two areas: Decorative

segment with 80% market share and Industrial Segment with 20%market share.


ACCUMULATE


ACCUMULATE


Source: Bloomberg

Source: Bloomberg

FINANCIALS (RS MN) FY15 FY16E FY17E799,521selaS 151,435 193,3593.31)%( htworG 21.3 27.7691,63ADTIBE 42,509 61,902

EBITDA margin (%) 28.3 27.6 31.5841,43TBP 36,983 54,836444,42tiforp teN 25,666 37,5085.35)sR(SPE 56.1 82.08.03)%(htworG 5.0 46.11.46)sR(SPEC 70.2 98.24.791)sR(SPVB 246.5 319.70.6)sR( SPD 6.0 7.5 Source: Company, Kotak Securities - Private Client Research4.03)%( EOR 25.3 29.08.43)%( ECOR 22.5 27.8855tbed teN 50,133 33,439

Net working capital(Days) 118.6 129.9 129.5




Last report at Rs.1945 on 28 October 2015

LUPIN LTD


Expect 17%/22% CAGR in Rev/PAT over FY14-17E


1 Year Performance


Expect 19% CAGR in US revneues over FY14-17E

Promoter46.6%

FII36.9%

DII6.5%

Others10.0%

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Lupin Ltd Nifty

INVESTMENT ARGUMENT Lupin has taken ~200% price increase in its largest product, generic

Fortamet (a metformin product for anti-diabetes), which will startreflecting in revenues from 3QFY16. Additionally, Lupin is set to launchgeneric Glumetza, where prices are up 800% in last few months, a limited competition opportunity, in Feb 2016. Lupin has also been seeinga surge in number of approvals from USFDA (~15 in 1HFY16 vs 11 inFY15), which will lead to further growth in US business.

Though other business remain sluggish led by currency tailwinds andseasonal impact (in domestic). We remain optimistic for 24% CAGR inrevenues/PAT over FY15-17E. We value the stock at 27x FY17E EPS ofRs 82. Recommend Buy.

RISKS & CONCERNS Lupin’s one of the plant at Mandideep, is due for an inspection from the

USFDA over the next few months (as it has not been inspected since lastthree years), any adverse compliance issues at this or any other plantremains a risk

Any price control announced by drug regulator in India is a risk.

COMPANY BACKGROUND Lupin was founded by Desh Bandhu Gupta in 1968 and it became the

first company from India to manufacture anti-TB APIs. It was also the firstcompany from India to enter the Japanese pharma market and as of datehas significant presence in oral dosages as well as injectables. LPC alsohas a significant presence in US markets ranked amongst the top 10players in prescription terms.

SECTOR BACKGROUND The Indian Pharma Market (IPM) stood at US$ 14.0 bn and is expected

to post 13-15% CAGR over the next 4-5 years. Moreover, US, is thelargest pharma market at ~US$390 bn, is expected to witness US$ 44bnworth drugs going off patent which will provide further fillip to Indiancompanies.

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Rev (Rs mn) PAT (Rs mn) EBIDTAM (RHS)


BUYNAGARJUNA CONSTRUCTION COMPANY LTD


Source: Bloomberg

Source: Bloomberg

FINANCIALS (RS MN) FY15E FY16E FY17E819,28selaS 87,064 94,029

0.80.55.53)%( htworG244,6ADTIBE 6,965 7,522

EBITDA margin (%) 7.8 8.0 8.0095,1TBP 2,443 3,670811,1tiforp teN 1,613 2,4220.2)sR( SPE 2.9 4.4

2.053.441.72)%( htworG0.4)sR( SPEC 5.0 6.5

Book value (Rs/share) 58.0 60.8 65.1Dividend per share (Rs) 0.1 0.1 0.1 Source: Company, Kotak Securities - Private Client Research

9.3)%( EOR 4.9 6.91.41)%( ECOR 12.9 13.4

Net cash (debt) (19,470) (18,908) (18,623)Net Working Capital (Days) 147.0 147.0 147.0

VALUATION PARAMETERS FY15E FY16E FY17E6.83)x( E/P 26.8 17.83.1)x( VB/P 1.3 1.28.0)x( selaS/VE 0.7 0.77.9)x( ADTIBE/VE 8.9 8.2

PRICE PERFORMANCE (%) 1M 3M 6M(1.0) 15.9 (3.1)


Last report at Rs.77 on 13 November 2015


Segmentwise Revenue Break up (%)


1 Year Performance


Order book break up (%)

Promoter20.6%

FII26.6%DII

14.5%

Others38.4%

Roads,building49%

Water and railways

21%

Irrigation4%

Electrical7%

Mining1%

Internatnal15%

Power3%

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Nagarjuna Construction Company Ltd Nifty

INVESTMENT ARGUMENT Company’s numbers for Q2FY16 were ahead of our estimates with

strong revenue growth coupled with improvement in margins. Borrowings have further come down sequentially during the quarter

post rights issue. Net profit performance was thus boosted by strong revenues and

lower than expected interest expenses. With the recent order inflows coming in at higher margins, company

expects to improve margins from current levels going forward. We maintain our estimates and recommend BUY on the stock.

RISKS & CONCERNS Delays in order inflow across verticals may impact revenue growth

going forward Delays in stake sale in road/power/real estate may keep debt at

higher levels

COMPANY BACKGROUND Order book currently is diversified across roads, building, oil and gas

(49%), water and railways (21%), irrigation (4%), electrical (7%), mining (1%), international (15%), metals (nil) and power (3%).

Company had an order inflow of Rs 73 bn for FY15

SECTOR BACKGROUND Order inflow is likely to increase going forward during the fiscal due

to improvement in macro-economic climate. We expect buildings,water supply, and irrigation to continue to witness increased activitythereby leading to better order inflows.

On road side, EPC is likely to see higher interest as compared to BOT projects.

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Power Metals InternatnalMining Electrical IrrigationWater and railways Roads,building


Source: Bloomberg

Source: Bloomberg

FINANCIALS (RS MN) FY15 FY16E FY17E369,726,2selaS 2,616,720 3,091,0629.21)%( htworG -0.4 18.1783,293ADTIBE 340,640 435,722

EBITDA margin (%) 14.9 13.0 14.1620,712TBP 112,635 201,614368,931tiforp teN 80,245 148,4730.44)sR( SPE 31.3 43.7

)0.0()%( htworG (45.6) 85.01.58)sR( SPEC 71.7 102.48.471)erahs/sR( VB 209.0 250.4

-)sR(SPD 2.0 2.0 Source: Company, Kotak Securities - Private Client Research0.32)%( EOR 12.6 19.05.52)%( ECOR 15.3 21.4

Net cash (debt) (273,984) (281,155) (265,660))0.32()syaD( CWN (27.4) (29.9)


PRICE PERFORMANCE (%) 1M 3M 6M7.2 28.2 (10.9)


JLR Sales Volumes (Units)


1 Year Performance


Sales Volumes (Units)

Last report at Rs.396 on 9 November 2015TATA MOTORS LTD


Promoter41.0%

FII21.8%

DII26.8%

Others10.4%

0

200,000

400,000

600,000

800,000

1,000,000

FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15

0

100000

200000

300000

400000

500000

FY09 FY10 FY11 FY12 FY13 FY14 FY15

60

85

110

135

160

Dec

-13

Feb-

14

Apr

-14

Jun-

14

Aug

-14

Oct

-14

Dec

-14

Feb-

15

Apr

-15

Jun-

15

Aug

-15

Oct

-15

Dec

-15

Tata Motors Ltd Nifty

INVESTMENT ARGUMENT Various reasons impacted sharp drop in China wholesale volumes for

JLR, though the company has taken some steps to rectify the same. Inthe near term, the general demand sentiment for luxury cars in China isexpected to stay subdued.

On the positive side, other key markets (ex - China) have grown for JLR,thereby largely offsetting the sharp decline in China sales. In FY16, JLRis targeting multiple new launches that will serve as a base for strongvolume growth in FY17 and beyond.

JLR's EBITDA margin in FY16 is expected to stay weak on weakgeography mix (falling share of China sales), weaker product mix andlaunch of various new models.

Standalone business volumes has started to recover for the company.We expect the standalone business to continue reporting losses forsome more quarters, though the losses are expected to gradually comedown.

RISKS & CONCERNS Lower than expected volume growth at JLR Delay in recovery in domestic demand Unfavorable currency movement

COMPANY BACKGROUND Tata Motors Limited (TAMO), part of Tata Group, is India's largest

automobile company. Established in 1945, TAMO has presence in thecommercial vehicle and passenger vehicle segments. In the domesticmarket, the company is the market leader in both the LCV and M&HCV segment.

SECTOR BACKGROUND Commercial vehicle industry fortunes depend on the overall

economic development happening in the economy. In the passenger car segment, the growth opportunities are high, givenlower car penetration levels in India.


BUY

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