market snapshot todays top research idea retail: control...
TRANSCRIPT
24 April 2020
Investors are advised to refer through important disclosures made at the last page of the Research Report. Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
Research Team ([email protected])
Equities - India Close Chg .% CYTD.%
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Nifty-50 9,314 1.4 -23.5
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USD/INR 76.1 -0.8 6.6
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YIELD (%) Close 1MChg CYTDchg
10 Yrs G-Sec 6.1 -0.17 -0.5
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Flows (USD b) 23-Apr MTD CYTD
FIIs -0.02 -0.14 -6.73
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Volumes (INRb) 23-Apr MTD* CYTD*
Cash 514 522 453
F&O 21,079 11,212 14,634
Note: *Average
Today’s top research idea Market snapshot
Chart of the Day: Retail (Control the controllable, Survival of the fittest)
Retail: Control the controllable; Survival of the fittest Expect cost of retailing to fall 15–20pp, led by cost-cutting in
marketing/advertising activity, on account of variable rental costs and savings
from closed stores.
Even rental cost is expected to see some waiver given the negotiations
underway, as per our channel checks. Hence, the cost of retailing can be
further reduced by 5–7pp, in effect reducing cash burn to 10–15% of revenue
during lockdown.
Inventory could be a key pain point once normalcy has returned as inventory
typically comprises 30–45% of retailers’ balance sheets (FY19).
The extent of the impact on each company would depend on: a) the number
of private labels and brand ownerships, b) astute inventory management,
and c) the extent of inventory holding capacity.
However, it may be wise to bet on players with sound execution capabilities
and stable balance sheets, which could take advantage once the cycle
revives. We prefer TRENT, ABFRL, and VMART.
Cos/Sector Key Highlights
Retail Control the controllable, Survival of the fittest
India Strategy Insight into market-cap changes since Feb’20 peak
Technology Could global banks’ IT spends surprise positively?
Bharti Infratel EBITDA declines 12% QoQ to INR13b on LTL – Pre-Ind-AS 116 basis
Alembic Pharma Good show in key geographies (US/India) drives earnings
Mahindra CIE Operating performance in line; India beats estimates, EU disappoints
India Life Insurance
COVID-19 derails business growth – Private players’ Individual WRP declines ~40% YoY for Mar’20 (+5% for FY20)
EcoScope Long-dated securities get RBI support via fifth ‘Operation Twist’
Expert Speak
ECONOMY: Insights from interaction with Finance Minister of Kerala
FINANCIALS: Gradual recovery in past few weeks
AVIATION: Boarding (for aviation industry) to take time
Cost of retailing (as a % of sales, FY20E)
Source: MOFSL, Company
Research covered
24 April 2020 2
Govt decides to suspend up to 1 year IBC provisions that trigger fresh insolvency proceedings: Report In a major relief for corporate borrowers hit hard by the coronavirus pandemic, the government has decided to amend the insolvency law to suspend up to one year provisions that trigger…
PM Modi, Sitharaman to meet on Friday to finalise second stimulus package Prime Minister Narendra Modi and Finance Minister Nirmala Sitharaman will again meet on Friday to finalise a second stimulus package for industry, the poor and farmers. An announcement is expected within the next 24-48 hours. Friday's meeting follows a wide range of deliberations held within the government and with eminent experts. However, there may not be a ‘big-bang’ stimulus package and the government thinking is to go for smaller, targeted announcements.…
RBI's liquidity plan for non-bank lenders falters The Reserve Bank of India's attempt to improve funding for the non-banking finance companies through the banks' channel is faltering with a special liquidity window receiving bids for just half the amount that was on offer…
Sebi eases valuation norms for debt mutual funds The Securities and Exchange Board of India (sebi) on Thursday eased the valuation policies for debt mutual funds. Under the eased norms the valuation agencies can take a call of not terming a paper as default if the delay in payment of interest or extension in maturity is due to Covid-19 related lockdown…
Centre working on scheme to reimburse pending dues to MSMEs with interest: Gadkari The Centre is working on a scheme to reimburse pending payments with interest to micro, small and medium enterprises (MSMEs), Union Minister Nitin Gadkari said on Thursday…
India Inc leans less on foreign debt as weak rupee makes servicing costlier With the rupee having shed 10 per cent against the dollar since January this year, India Inc is staring at an extra repayment burden on its overseas loans. Fund raising from abroad fell to $5 billion in the first quarter of calendar 2020 from $8.8 billion raised by Indian companies…
Housing sales fall 26% in Jan-March, new supply dips 51%: Report Real estate developers sold 26 per cent apartments less in January-March in nine cities as the slowdown and coronavirus outbreak deflated demand, said News Corp-backed PropTiger on Thursday…
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In the news today
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24 April 2020 3
Control the controllable Survival of the fittest
With the Retail sector being at the forefront in the current COVID-19 crisis, we foresee an
impact on retailers not just during the lockdown but much after, given the prolonged
weakness in spending. In this report, we discuss the potential areas of impact on retailers,
likely mitigating factors, and how to think about stocks post a 50% correction from yearly
highs.
Cost of retailing to drop, but by how much?
Most apparel retailers generate gross margins of 30–50%, implying an average cost
of retailing at 30–40%. In an ideal scenario, when sales are at a standstill, the above-
mentioned cost of retailing should ideally flow to the bottom line. However, our
channel checks and management discussion indicate half this cost, 15–20pp, could
be saved by cutting marketing/advertising activity and from variable rental cost and
savings from closed stores. Furthermore, even rental cost is expected to see some
waiver given the negotiations underway, as per our channel checks. Hence, the cost
of retailing can be further reduced by 5–7pp, in effect reducing cash burn to 10–
15% of revenue during lockdown. Grocery retailers such as DMart incur barely 6–
7% cost of retailing (GM 15% and EBITDA 8%), given their ownership model, high
throughput, and limited marketing cost. This too should reduce by 50–60% on
account of stores being closed (50%) and SG&A savings.
Prolonged recovery to delay new store openings and create labor issues Even once the prevalent lockdown is lifted, the risks of COVID-19, coupled with
weakness in spending, should extend the impact on store footfall as consumers
would curb mall visits and indulgent spending. China saw 30% of normal sales in the
first few weeks. Grocery chains such as DMart could see a lower impact, as sales
from non-essential items (~30% of revenue) are impacted due to store closures.
New store additions would also be drastically reduced as retailers may curb
expansion to ease the strain on the balance sheet and demand slackness. Mall
owners are likely to stall new projects, and vacancies may rise even with delayed
openings. Furthermore, the impact of migrant workers and low employee turnout
may hit product availability and store operations. Subsequently, we believe there
could be a potential 20–25% revenue impact, which may intensify if issues last
beyond two to three months.
Inventory management – Discount or no discount?
This could turn out to be a key pain point once normalcy returns as inventory
typically comprises 30–45% of retailers’ balance sheets (FY19). The extent of the
impact on each company would depend on: a) the number of private labels and
brand ownerships, b) astute inventory management, and c) the extent of inventory
holding capacity. Weaker retailers may endeavor to shift the pain on vendors,
Cost of retailing to drop 5–7%; rental exemption during lockdown would
be a major relief.
Inventory could turn out to be a key pain point
once normalcy returns as inventory typically
comprises 30–45% of retailers’ balance sheets
(FY19).
Sector Update | 23 April 2020
Retail
24 April 2020 4
stretching his liquidity, and thus face supply and store freshness issues. We foresee
a 5–7% potential impact, due to either sharp discounting or inventory write-downs,
as players feel the pinch of a bloated inventory cycle. However, another school of
thought is that if inventory is sold quickly, inventory would be exhausted, and
manufacturers may commence fresh production after two to three months for the
festive season only after receiving firm orders. Players such as Trent could see a
higher impact given that private labels form over 90% of its revenue. However, its
astute inventory management should help mitigate some of the impact. ABFRL has
65% private labels in Pantaloons and the Lifestyle segment’s inventory, but a high
proportion of consignment sales. It runs on a 12-season cycle with quick turnaround,
thus reducing system-wide inventory bloating. Shoppers Stop is best placed as 75%+
of its inventory is on a consignment basis. V-Mart holds complete inventory risk,
with procurement on an outright basis. On the other hand, nearly 80% of Future
Lifestyle’s business is consignment-based (sales or return), but the remaining 20%
has a stretched working capital.
Balance sheet – A recipe for smooth sailing
At a time when retailers are witnessing a severe cash crunch and inventory risks, we
would prefer to bank on companies with low leverage and strong parentage. Trent is
best placed, with INR9b cash on the books post the recent preferential issue to TATA
Sons. ABFRL’s debt of INR15b is on the higher side and hence in a precarious
situation; however, its free cash flow on a stable-state basis despite the healthy
pace of store additions leaves it in a relatively better position. V-Mart and Shoppers
Stop are cash neutral and FCF positive. What gives us confidence is that V-Mart,
since its IPO in FY13, has fueled its expansion entirely through internal sources.
Future Retail and Future Lifestyle could witness issues due to their leveraged
balance sheets and high debt at the promoter level, which could accentuate
concerns at a time when banks turn extra cautious in doling out new loans.
Valuation view: Stay with the fittest
Although the Retail sector has commanded very high multiples in the recent past, it
is likely to witness a setback due to the current crisis. Even after the sharp earnings
revision, stocks are trading at ~20x FY22EV/EBDITA, with uncertain growth in the
near term; hence, the valuation is not particularly cheap even after the recent sharp
correction. Another way to look at the stocks is that even after the washout in FY21,
things may start to look better in FY22. Still, against 20% earnings revision for FY22,
stocks have corrected 40–50%, thus the multiple has been cut by 20-25%.
Nevertheless, recovery in stocks may depend on future growth performance; so,
even if stocks may not fall further, we may see time correction. However, it may be
wise to bet on players with sound execution capabilities and stable balance sheets,
who could take advantage once the cycle revives. We prefer, TRENT, ABFRL, and
VMART. ABFRL‘s high leverage is a dampener in the current weak market, but it has
a strong parentage and remains a dominant force in the apparel market with
consistently delivering strong growth at a healthy ROCE. TRENT has best in class
execution with healthy balance sheet – INR5.5b net cash and lean working capital.
VMART is a strong force in the regional market, with deep penetration, lowest cost
of retailing garners and healthy ROCE.
Companies with strong balance sheet and cash position (D-Mart/Trent)
would tide over the crisis
24 April 2020 5
India Strategy BSE Sensex: 31,863 Nifty-50: 9,314
Insight into market-cap changes since Feb’20 peak Consumer gains at the cost of Financials
Analyzing market-cap changes: Deep diving into sectoral variances The Nifty and the broader markets have corrected significantly over the last two
months (the Nifty is down ~25% from its peak of 12,201 in Feb), in tandem with
global equity markets, due to headwinds from the COVID-19 outbreak across
multiple countries.
India’s (BSE 500) market capitalization is down 23% from the peak of INR149.5t
in Feb’20. Over the same period, the Nifty-50’s market cap is down by 23% to
INR70.6t, Nifty Mid-Cap 100’s market-cap is down by 28% to INR12.4t, and Nifty
Small-Cap 100 by 34% to INR3.4t.
We also looked at market-cap changes in a sector v/s the peak market cap to
highlight the divergence in performances in various sectors. Based on this
metric, we noted NBFCs (-41%), Real Estate (-40%), Metals (-36%), Private Banks
(-36%), Media (-36%), PSU Banks (-34%), and Automobiles (-31%) were the
laggards.
Healthcare (+5%) was the only sector to escape the fall and remain positive.
Consumer (-4%) and Telecom (-10%) outperformed this metric with <=10%
correction from the peak market caps [Exhibit 2].
Key observations on BSE-500 market-cap trends (also sector-wise):
Among the BSE 500 constituents, of the total market-cap correction of INR34.7t
(to INR114.8t currently from INR149.5t in Feb’20), four sectors – Private Banks
(20%, lost INR6.9t), NBFCs (17%, INR6t), Technology (11%, INR3.7t), and
Automobiles (8%, INR2.8t) – contributed more than half to the absolute change
in the market-cap of BSE-500 companies.
In Private Banks, of the total market-cap erosion of INR6.9t, HDFC Bank
accounted for 25%, followed by ICICI Bank (20%), Kotak Mahindra Bank (16%),
and Axis Bank (13%).
NBFCs’ market cap eroded by INR6t, led by Bajaj Finance (INR1.6t), HDFC
(INR1.3t), and Bajaj Finserv (INR0.8t).
~67% of the Technology market-cap erosion was led by three stocks: TCS (40%,
INR1.5t), Infosys (16%, INR0.6t), and HCL Tech (11%, INR0.4t).
Consumer pipped Private Banks for the leading position in market cap as it
restricted its fall to 4% or INR0.8t, against decline of 36% or INR6.9t witnessed in
Private Banks, which slipped to the fourth position.
Telecom was another sector to jump six positions, reaching the 10th position.
Metals, on another hand, slipped to the 17th position from 11th.
23 April 2020
Mkt-cap change since Feb-20 (%)
Delta market-cap (INRt) – Top four sectors contributes 56% to fall
-23 -23
-28
-34
Nif
ty-5
0
BSE
-500
Mid
cap
Smal
lcap
-6.9 -6.0
-3.7 -2.8
-2.4
Ban
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VT
NB
FCs
Tech
nolo
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Aut
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Oil
& G
as
24 April 2020 6
Key observations on Nifty: eight of Top 10 stocks are from Financials The bulk of the correction (i.e., ~58%) in the Nifty’s market capitalization to
INR70.6t, from INR91.6t since Feb’20, has been driven by HDFC Bank (8.4%),
Bajaj Finance (7.5%), TCS (7.2%), ICICI Bank (6.6%), HDFC (6.4%), SBI (5.6%),
Kotak Mahindra Bank (5.2%), Axis Bank (4.4%), Bajaj Finserv (3.8%) and Reliance
Industries (3.2%).
On the other hand, HUL, Sun Pharma, Dr Reddy’s, Nestle and Cipla were the only
stocks to escape the fall with increased market cap over the same period.
In terms of percentage decline in market cap, IndusInd Bank (-67%), Tata Motors
(-55%), Bajaj Finance (-55%), Bajaj Finserv (-51%), and Vedanta (-46%) were the
key laggards.
A rise in market cap was witnessed in Cipla (+31%), Dr Reddy’s (+27%), Sun
Pharma (+14%), Nestle (+8%), and HUL (+6%).
The top gainers in market-cap rankings were Cipla (moved up thirteen
positions), Sun Pharma (moved up nine positions), Dr Reddy’s (moved up seven
positions), Nestle (moved up six positions), Asian Paints (moved up five
positions), and Britannia (moved up five positions).
Top losers in market-cap rankings included IndusInd Bank (down thirteen
positions), Bajaj Finserv (down ten positions), Tata Motors (down nine
positions), Bajaj Finance (down five positions), and ONGC (down five positions).
Key observations for the last 25 years: Market cap increased ~30x India’s market cap has seen an increase of ~30x in the last 25 years; market cap
increase stood at ~38x before the recent decline.
Share of PSUs halved to 12%, v/s 24% in CY95.
There are now zero PSU companies in the Top 10, compared with five PSUs 25
years ago.
The Top 50 share, which has remained quite stable over the years, currently
contributes 62%.
10 stocks that have been a part of the Top 50 then and now are BPCL, HDFC,
HUL, IOCL, ITC, L&T, Nestle, ONGC, Reliance Industries, and SBI.
Mid-caps v/s large-caps: Presenting the divergence Market polarization is further demonstrated in the rising share of the market
cap of the Top 15 companies as a percentage of the market cap of the Top 100
companies. This ratio, at 52.8% in Apr’20, is substantially higher than its lowest
mark in the last 15 years (44.5% in Dec’17) and the same as Feb’20 levels.
At INR12.4t, the Midcap 100’s absolute market cap is down 43% from the peak
of INR21.9t in Jan’18 and the lowest in the last seven years. Nifty’s market cap
at INR70.6t is down 21% from the peak of INR90t in Dec’19. Overall, in terms of
market-cap accretion, the Midcap 100 has reported 25% decline, while the Nifty
has shown an increase of 27% since Dec’14.
Consequently, the trailing five-year CAGR returns of the Nifty 50 and Nifty
Midcap have changed course. In Mar’18, the trailing five-year CAGR returns for
Nifty Midcap were at 20% and for Nifty at 12% (i.e., returns over Mar’13–
Mar’18). This gap has now been reversed – now the trailing five year returns for
Nifty stands at 2.3% as against 0.3% for Nifty Midcap 100. [Exhibit 14].
Top 15’s contribution to Top 100’s market cap (%)
48.8
5
3.0
49
.9
47.4
50.7
48
.1 50
.6
47.8
46
.5
45
.6
44
.5
49.
2 52
.1
52.0
52
.7
53.6
52
.8
Dec
-07
Dec
-08
Dec
-09
Dec
-10
Dec
-11
Dec
-12
Dec
-13
Dec
-14
Dec
-15
Dec
-16
Dec
-17
Dec
-18
Dec
-19
Jan
-20
Feb
-20
Mar
-20
Apr
-20
Delta market-cap (INRt) – Top 10 stocks contributes 58% to fall
Exhibit data is sourced from Bloomberg, Capitaline and MOFSL database. Prices as of 22nd
April 2020; Sector classification is of BSE-500. Small-caps represent Nifty Smallcap 100, and mid-caps represent Nifty Midcap 100.
-0.7 -0.8
-0.9 -1.1 -1.2
-1.3 -1.4 -1.5
-1.6 -1.8
Rel
ian
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Baj
aj F
inse
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Axi
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ank
Kota
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ah. B
k
SBI
HD
FC
ICIC
I Ban
k
TCS
Baj
aj F
in.
HD
FC B
ank
24 April 2020 7
Could global banks’ IT spends surprise positively? What does our reading of the AR19s of global banks suggest? More than ~25% of all new products are provided through digital channels;
~33% of sales and up to ~70% of all banking transactions now happen digitally.
Banks are making significant investments in areas such as User Interface (UI) and
Artificial Intelligence (AI), which allow them to offer great personalization. Data,
analytics and automation are other areas attracting investments.
Across banks, such as Deutsche Bank (DB), while G&A spends are under
constant pressure, IT spends are either resilient or showing a robust increase.
Companies are creating a new Chief Digital Office (e.g., U.S. Bancorp) for
overseeing digital transformation and enhancing digital capabilities.
Banking firms such as Citibank and BofA have been investing in digital initiatives
to unlock efficiency improvements. Resultant cost savings are, in turn, being
used to finance incremental investments and growth-driven expenses.
Enterprises such as JPMorgan are adopting more agile ways of working,
including product- and platform-based architectures.
How are global BFSI firms fighting the COVID-19 crisis? Annual reports for 2019 (AR19s) and 1QCY20 earnings call commentaries
suggest first-order business disruption due to COVID-19 is limited to a few
aspects, such as BPO capacities.
Up to ~90% of bank employees are currently working from home.
Most of the firms acknowledged the role of technology/infrastructure
investments in enabling remote work at such a large scale and short notice.
These firms hinted their early investments in digital capabilities were helping
customers to continue remotely banking with them, even in the peak of this
crisis, as social distancing became the new norm.
Can COVID-19 negatively impact global banks’ technology spends?
While the first-order impact due to COVID-19 may be limited, side-effects (such
as interest rate cuts globally, capital market volatility, and potential
bankruptcies in debt-heavy sectors) could translate into a second-order impact.
Hence, intuitively, it appears that IT spends by banks may be impacted in the
near term, dragged down by decline in discretionary spending. Pricing pressure
on run spends and extensions on payment terms are other key concerns.
However, AR19s and 1QCY20 earnings calls paint a different picture. It is
relevant to note these firms have released their annual reports very recently.
Accordingly, the COVID-19 situation would have more or less been factored in.
Three kinds of technology investments are likely to drive positive surprise on IT
spends by global banks: (1) accelerating the ‘digital’ edge, (2) cost-cutting
through efficiency improvements, and (3) capitalizing on incremental
opportunities presented by the COVID-19 crisis.
Earnings Summary – EPS (INR)
FY21E FY22E
Cyient 32.7 40.9
HCL Tech 40.2 46.9
Hexaware 20.4 25.8
Infosys 36.8 43.1
L&T Infotech 92.5 111.4
Mindtree 37.4 50.4
Mphasis 52.1 62.0
NIIT Tech 72.2 91.3
Persistent 36.1 47.9
TCS 82.3 97.8
Tech Mahindra 47.1 59.8
Wipro 15.4 17.6
Zensar 8.8 13.1
Sector Update | 23 April 2020
Technology
24 April 2020 8
(1) Accelerating the ‘digital’ edge: Case studies of JPMorgan & DB JPMorgan’s AR19 highlights despite the COVID-19 crisis, the firm is budgeting for
a 4% YoY increase (v/s 6% in CY19) in technology spend. The report further
states that 50% of the IT spends would be dedicated to ‘new’ capabilities.
Additionally, the annual report underscores that as the company modernizes its
infrastructure and scales up its digital capabilities, it would continue to make key
investments needed to “change the bank,” while deploying resources “to run
the bank” efficiently.
We view this as the case study of a company aggressively investing even in
downturn to strengthen its competitive advantage in the digital space.
This trend is likely to be supported by the fact that the liquidity positions of
most of the large banks in the US and EU are currently in a much better shape
than during the Global Financial Crisis (GFC) of 2008–09 (Refer Exhibit-21).
The converse of this case study is that of DB. The bank’s AR19 suggests troubles
and cost pressures translated into a drop in most of the G&A expenses.
However, technology spends remained stable in CY19.
The company continued investing in core banking platforms and digital/remote
advisory tools to create a robust technology platform for future growth.
This case study emphasizes that banks are not compromising on IT spends
despite cost pressures, given it is a means to build a competitive edge.
(2) Unlocking efficiency improvements: Case studies of BofA and Citigroup
The AR19s of Bank of America and Citigroup highlight their bet on tech/digital
initiatives as a means to unlock efficiency improvements.
For instance, digital capability enhancements, greater use of automation and
implementation of agile IT solutions could help in branch network optimization.
The resultant cost savings from these measures are anticipated to further
finance incremental investment initiatives and growth-driven expenses.
Revenue headwinds posed by COVID-19 should further drive the need for such
efficiency improvements and cost savings.
Besides, firms may also show an increasing propensity to offshore IT services
work to low cost locations like India in pursuit of cost rationalization.
(3) Incremental opportunities: Case studies of U.S. Bancorp & Wells Fargo
The COVID-19 crisis is presenting incremental opportunities for IT companies
owing to the rising digital adoption among customers and employees on
account of the lockdowns, social distancing protocols, and the need to enable
Work from Home (WFH) access worldwide.
Naturally, some areas such as Infrastructure As-A-Service (IaaS), collaborative
and digital access tools are witnessing a strong surge in demand.
U.S. Bancorp highlighted that it had leveraged on agile development to
introduce digital tools/processes that would allow customers quick access to
stimulus funds distributed by the US federal government.
Furthermore, its IT teams designed and deployed a new digital forbearance tool
that witnessed >50% customer adoption within a week of launch.
24 April 2020 9
Expect near-term uncertainty; prefer TCS, INFO, HCLT, and LTI While we expect supply-side uncertainties to ease out over 1QFY21, demand,
pricing, and receivable uncertainties should continue in the near-term, given the
constantly evolving nature of the COVID-19 crisis.
Negative news flow around the sector may likely continue given the seriousness
of the COVID-19 situation in geographies such as the US, UK, EU, and India.
Despite these uncertainties, we continue to prefer TCS, Infosys, and HCLT
among the large-caps and LTI among the Tier II. This is attributable to their
historical track record of adapting to multiple business challenges / technology
change cycles.
Moreover, recent results/commentaries of TCS, Infosys, and global banks offer
us some comfort on the new business wins, ramp-ups, supply-side aspects, cost
optimization, and margin management capabilities of these companies.
24 April 2020 10
BSE SENSEX S&P CNX CMP: INR166 TP: INR189 (+14%) Neutral 31,863 9,314
Conference Call Details Date: 24th April 2020
Time: 02:30pm IST
Dial-in details:
+91-22-4444-9999
Financials & Valuations (INR b)
INR Billion FY20 FY21E FY22E
Net Sales 143.5 145.5 151.8
EBITDA 57.5 52.3 56.1
Adj. PAT 31.4 23.7 26.5
EBITDA Margin (%) 40.1 35.9 37.0
Adj. EPS (INR) 17.0 12.8 14.3
EPS Gr. (%) 25.0 -24.8 12.2
BV/Sh. (INR) 78.1 73.5 70.4
Ratios
Net D:E -0.1 -0.1 -0.2
RoE (%) 21.7 16.9 19.9
RoCE (%) 18.1 13.8 15.9
Payout (%) 102.4 136.0 121.3
Valuations
EV/EBITDA (x) 7.6 8.4 7.8
P/E (x) 14.6 19.4 17.3
P/BV (x) 3.2 3.4 3.5
Div. Yield (%) 6.0 6.0 6.0
FCF Yield (%) 7.5 7.0 8.0
EBITDA declines 12% QoQ to INR13b (14% miss) on LTL – Pre-Ind-AS 116 basis
Proforma consol revenue at INR35.6b decreased 1.2% QoQ (in-line) due to
decline in Rental and Energy revenues; Rental revenue fell 1.1% QoQ (2.5%
below estimate) to INR21.9b, and Energy revenue 1.2% QoQ to INR13.7b
(in-line).
Net tenancy adds stood at 431 (v/s 744 in 3QFY20).
Proforma consol EBITDA plunged 12.1% QoQ to INR13b (14% miss), with
16.3% QoQ decline to INR12.2b (17.5% miss) posted in Rental EBITDA.
Energy EBITDA grew threefold to INR815m, against our estimate of
INR307m. The nosedive in EBITDA was attributed to a 2.5x increase in Other
Expenses.
The EBITDA margin shrank 450bp QoQ to 36.5% (510bp miss) on decline in
Rental EBITDA; the Rental EBITDA margin contracted 980bp to 55%, while
Energy EBITDA margin expanded 430bp to 5.9%.
PBT/PAT declined 21% QoQ to INR7.9b/INR5.9b (14% miss).
Capex for 4QFY20 stood at INR5.6b (INR3.9b in 3QFY20); moreover, the
company added 1,128 towers in 4QFY20, taking the total count to 95,372.
Key operating metrics
The company added 431 consolidated co-locations (578 estimated), v/s 744
adds in 3QFY20, taking the total count to 1,74,581. The average sharing
factor stood at 1.84 (v/s 1.85 in 3QFY20).
Gross co-location adds grew to 2,498 (v/s 1,893 in 3QFY20), with exits of
2,067 (v/s 1,149 in 3QFY20). Furthermore, 3,564 co-locations exits were
reported (v/s 2,798 QoQ), for which notices were received, but actual exits
are yet to happen.
Rentals per tenant (per month) declined 2% QoQ to INR42,267.
Quarterly Performance
(INR m)
Y/E March FY19 FY20 FY19 FY20E 4Q
(Consolidated) 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE FY20E Var (%)
Revenue from operations 36,735 36,683 36,402 36,003 36,297 35,612 36,028 35,608 1,45,823 1,43,545 36,203 -1.6 YoY Change (%) 4.2 0.6 -0.4 -1.7 -1.2 -2.9 -1.0 -1.1 8.6 -1.6 0.6
Total Expenditure 21,539 21,819 21,361 21,092 21,298 20,817 21,264 22,628 85,811 86,032 21,143 7.0
EBITDA 15,196 14,864 15,041 14,911 14,999 14,795 14,764 12,980 60,012 57,513 15,059 -13.8 YoY Change (%) -3.5 -7.9 -5.9 -6.4 -1.3 -0.5 -1.8 -13.0 1.8 -4.2 1.0
Depreciation 5,389 5,625 5,727 5,498 5,390 5,284 4,908 5,581 22,239 21,163 6,005 -7.1 Interest -285 -442 -601 -243 -118 58 170 48 -1,571 159 170 -71.8 Other Income 609 557 460 408 651 349 336 576 2,034 1,912 332 73.6
PBT 10,701 9,881 10,375 10,064 10,378 9,802 10,022 7,927 41,021 38,103 9,217 -14.0 Tax 4,321 3,883 3,891 3,988 1,946 140 2,557 2,021 16,083 6,664 2,320 Rate (%) 40.4 39.3 37.5 39.6 18.8 1.4 25.5 25.5 39.2 17.5 25.2
Reported PAT 6,380 5,998 6,484 6,076 8,432 9,662 7,465 5,906 24,938 31,439 6,897 -14.4 Adj PAT 6,380 6,215 6,484 6,076 8,432 9,662 7,465 5,906 25,155 31,439 6,897 -14.4 YoY Change (%) -3.9 -2.7 10.8 -4.3 32.2 55.5 15.1 -2.8 -8.4 25.0 13.5
E: MOFSL Estimates
23 April 2020
Results Flash | Sector: Telecom
Bharti Infratel
RESULTS
FLASH
24 April 2020 11
Estimate change
TP change Rating change
Bloomberg ALPM IN
Equity Shares (m) 189
M.Cap.(INRb)/(USDb) 111.2 / 1.6
52-Week Range (INR) 613 / 435
1, 6, 12 Rel. Per (%) 10/2/-12
12M Avg Val (INR M) 45
Free float (%) 27.0
Financials & Valuations (INR b)
Y/E MARCH 2020 2021E 2022E
Sales 46.1 49.7 54.7
EBITDA 12.2 11.1 12.7
Adj. PAT 8.6 7.1 7.8
EBIT Margin (%) 23.1 18.2 18.9
Cons. Adj. EPS (INR) 45.9 37.9 41.4
EPS Gr. (%) 47.7 -17.4 9.2
BV/Sh. (INR) 170.8 196.7 226.0
Ratios
Net D:E 0.6 0.5 0.4
RoE (%) 30.1 21.4 20.3
RoCE (%) 19.7 13.8 14.7
Payout (%) 27.4 31.8 29.1
Valuations
P/E (x) 15.0 18.2 16.7
EV/EBITDA (x) 12.1 13.1 11.4
Div. Yield (%) 1.4 1.4 1.4
FCF Yield (%) -1.0 2.7 3.7
EV/Sales (x) 3.2 2.9 2.6
Shareholding pattern (%)
As On Mar-20 Dec-19 Mar-19
Promoter 73.0 73.0 73.0
DII 6.9 6.7 5.5
FII 8.3 9.2 9.5
Others 11.9 11.1 12.1
FII Includes depository receipts
CMP: INR699 TP: INR705 (+1%) Neutral
Good show in key geographies (US/India) drives earnings Minimal impact seen on business due to COVID-19 outbreak The domestic formulation (DF) segment of Alembic Pharma (ALPM) has
finally shown signs of revival after four quarters of muted growth. ALPM remains on track in terms of finishing its large capex project (~INR25b)
to enhance new dosage offerings and increase capacity requirements in the US Generics segment. We expect the benefit to be witnessed from FY22.
We have increased our EPS estimate by 11.4%/6.2% for FY21/22 to factor in the favorable outlook for its base portfolio and new launches in US Generics. Accordingly, we have revised our price target to INR705 (from INR642 earlier) on a 17x 12M forward earnings basis. Maintain Neutral stance on limited upside from current levels.
Formulations – Outperformer; API – Underperformer for quarter ALPM’s 4QFY20 revenues came in at INR12.1b, up 30% YoY, led by
International Formulations (+80% YoY), supported by growth in the US segment (48% of sales; +84% YoY to USD75m) and the Non-US segment (11% of sales; +63% YoY).
Growth in the DF business also picked up (13% YoY; 28% of sales), while that in the API business was dragged down to some extent (-33% YoY; 13% of sales).
The gross margin expanded 140bp YoY to 78% owing to a superior product mix. The EBITDA margin expanded 790bp YoY to 27.1% (our estimate: 25.3%), led by improved operating leverage (employee cost down -120bp YoY/other expenses down 520bp YoY as % of sales, offset by higher R&D expense of +240bp YoY). EBITDA grew 84% YoY to INR3.4b (our estimate: INR2.9b).
Consequently, Adj. PAT grew 88% YoY to INR2.3b (our estimate: INR1.8b). For FY20, revenue/EBITDA/Adj.PAT stood at INR46.1b/INR12b/INR8.3b,
largely led by strong traction in US generic. The DF business was subdued on full year basis.
Highlights from management commentary The US base business from already-approved products is likely to witness a
quarterly run rate of USD70m (v/s USD50m up to 3QFY20) going forward. ALPM is expected to launch azithromycin in the US shortly. Overall R&D expense would be in the range of ~INR7b in FY21. ALPM intends
to file 25–30 abbreviated new drug applications (ANDAs) annually for the next two to three years.
The course correction strategy would enable better growth in DF over the next two to three years.
ALPM depends on China for 15% of its overall input. Since Mar’20, normalcy has been observed in production from Chinese raw material suppliers.
Valuation and view Given the high base of the US business in FY20, we expect compounded
earnings to decline 5% over FY20–22. Moreover, we are yet to see consistency in the DF business’ performance following the implementation of this renewed strategy. Accordingly, we continue to value ALPM at 17x 12M forward earnings to arrive at a price target of INR705 (prior: INR642). Maintain Neutral on limited upside from current levels.
23 April 2020
4QFY20 Results Update | Sector: Healthcare
Alembic Pharma
24 April 2020 12
Quarterly perf. (Consol.) (INR m)
Y/E March FY19 FY20 FY19 FY20 FY20E
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 4QE vs Est
Net Sales 8,625 11,271 10,182 9,270 9,489 12,409 12,091 12,068 39,357 46,060 11,510 4.9%
YoY Change (%) 33.1 42.8 21.2 8.6 10.0 10.1 18.8 30.2 25.7 17.0 24.2
Total Expenditure 7,115 8,247 7,759 7,489 7,240 8,954 8,841 8,793 30,611 33,827 8,590
EBITDA 1,510 3,023 2,422 1,780 2,249 3,455 3,251 3,275 8,746 12,233 2,920 12.2%
YoY Change (%) 48.8 68.8 29.2 2.8 49.0 14.3 34.2 84.0 36.0 39.9 64
Depreciation 276 286 291 300 354 360 418 441 1,152 1,573 442
EBIT 1,786 3,310 2,713 2,080 2,603 3,815 3,669 3,717 9,898 13,806 3,362
YoY Change (%) 26.4 11.6 10.0 -5.1 28.3 25.6 44.0 47.4 32.2 39.5 47
Interest 16 58 60 51 50 71 74 78 184 272 77
Other Income 1 24 35 34 33 4 4 9 94 49 9
PBT before EO expense 1,219 2,703 2,108 1,464 1,878 3,029 2,763 2,765 7,503 10,437 2,411 14.7%
Extra-Ord expense 0 0.0 0.0 0 328 0.0 0.0 109 0 436 0
PBT 1,219 2,703 2,108 1,464 1,550 3,029 2,763 2,657 7,503 10,001 2,411 10.2%
Tax 315 703 400 149 360 525 486 621 1,568 1,992 434
Rate (%) 25.9 26.0 19.0 10.2 23.2 17.3 17.6 23.4 20.9 19.9 18.0
MI & P/L of Asso. Cos. -1 -1 9 75 -47 41 -65 -214 82 -285 153
Reported PAT 905 2,001 1,698 1,240 1,237 2,463 2,342 2,249 5,854 8,294 1,825 23.3%
Adj PAT 905 2,001 1,698 1,240 1,504 2,463 2,342 2,332 5,854 8,643 1,825 27.8%
YoY Change (%) 35.7 64.6 30.0 32.2 66.2 23.1 37.9 88.1 41.8 47.7 47.2
Margins (%) 10.5 17.8 16.7 13.4 15.9 19.8 19.4 19.3 14.9 18.8 15.9
Key performance indicators (Consolidated)
Y/E March FY19 FY20 FY19 FY20 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
India 3310 3850 3650 3020 3240 3910 3680 3420 13,830 14250
YoY Change (%) 40.3 0.0 4.6 (0.7) (2.1) 1.6 0.8 13.2 8.6 3.0
Exports 3,520 5,870 4,480 3,950 4,530 6,460 6,640 7,100 17,830 24,730
YoY Change (%) 24.8 124.0 44.1 12.2 28.7 10.1 48.2 79.7 47.8 38.7
APIs 1,800 1,550 2,050 2,300 1,720 2,040 1,770 1,550 7,700 7,080
YoY Change (%) 38.5 9.2 13.9 16.2 (4.4) 31.6 (13.7) (32.6) 18.3 (8.1)
Cost Break-up
RM Cost (% of Sales) 29.6 24.1 24.4 23.4 21.5 22.0 24.7 21.9 25.2 22.6 Staff Cost (% of Sales) 19.1 16.2 19.5 21.7 22.6 17.5 18.8 20.5 19.0 19.7
R&D Expenses (% of Sales) 14.1 12.9 11.0 12.9 14.8 14.0 12.1 15.3 12.7 14.0
Other Cost (% of Sales) 19.6 20.0 21.3 22.8 17.3 18.6 17.6 15.2 20.9 17.2
Gross Margins(%) 70.4 75.9 75.6 76.6 78.5 78.0 75.3 78.1 74.8 77.4
EBITDA Margins(%) 17.5 26.8 23.8 19.2 23.7 27.8 26.9 27.1 22.2 26.6
EBIT Margins(%) 20.7 29.4 26.6 22.4 27.4 30.7 30.3 30.8 25.2 30.0
24 April 2020 13
BSE SENSEX S&P CNX CMP: INR82 31,863 9,314
Conference Call Details Date: 24 April 2020
Time: 03:30 PM IST
Dial-in details:
+91 22 6280 1144 /
+91 22 7115 8045
Financials & Valuations (INR b)
INR b CY19 CY20E CY21E
Sales 79.1 71.8 79.4
EBITDA (%) 12.2 10.3 12.1
Adj. PAT 3.6 2.7 4.4
EPS (INR) 9.4 7.3 11.6
EPS Growth (%) -33.2 -22.9 59.3
BV/Share (INR) 123 130 141
Ratio
RoE (%) 8.0 5.8 8.5
RoCE (%) 6.5 4.8 7.0
Payout (%) 0.0 0.0 0.0
Valuations
P/E (x) 8.7 11.2 7.1
P/BV (x) 0.7 0.6 0.6
Div. Yield (%) 0.0 0.0 0.0
FCF Yield (%) -7.3 2.6 11.0
Operating performance in line; India beats estimates, EU disappoints 1QCY20 consol. revenues declined ~23.5% YoY to ~INR16.6b (v/s est.
~INR17b).
EBITDA declined 35.5% YoY to ~INR1.8b (in-line) due to negative operating
leverage.
Forex loss of ~INR454m (largely at Bill Forge’s Mexican operations) hurt PAT,
which declined ~86% YoY to ~INR208m (v/s est. ~INR650m).
India business performance was above est. with revenues declining just ~8%
YoY to ~INR7.8b (v/s est. ~INR7b). India PBIT margins stood at 6.8% (v/s est.
3.7%), a decline of 480bp YoY.
EU business performance was below est. with revenue declining ~34% YoY to
~INR8.8b (v/s est. ~INR10b). EU PBIT margins were 6% (v/s est. 8.2%), a
decline of ~330bp YoY.
Key highlights from the presentation:
Estimated impact of the shutdown in India since 23rd Mar’20 is ~10% of sales;
in EU, it is estimated at ~20% in Italy and 10% in Germany and Spain.
Expect Apr’20 sales to be close to zero in all regions while uncertainty should
remain for May-Jun’20. The company expects recovery potentially in 3QCY20,
though risk of recurrence of the virus exists.
It is focused on controlling capex (only urgent and important capex to be
approved), drawing down inventory, and reducing cost (incl. labor). It has
adequate liquidity and undrawn lines to sustain any further extension in the
lockdown.
Based on our current estimates, the stock trades at 11.2x/7.1x CY20E/21E
consol. EPS.
Quarterly performance (Consol.)
(INR Million) (INR m) CY19 CY20 CY19 CY20
Y/E December 1Q 2Q 3Q 4Q 1Q 1QE
Net Sales 21,744 21,420 18,685 17,229 16,627 79,078 16,983 YoY Change (%) 8.9 3.0 -5.7 -12.8 -23.5 -1.5 -21.9
EBITDA 2,825 2,616 2,092 2,143 1,822 8,319 1,813 Margins (%) 13.0 12.2 11.2 12.4 11.0 10.5 10.7
Depreciation 740 844 789 788 815 3,161 765 Interest 103 115 198 106 600 523 130 Other Income 148 78 42 63 49 331 30
PBT before EO expense 2,130 1,734 1,147 1,312 455 4,966 948 EO Exp/(Inc) 13 0 -51 84 0 46 0 PBT before EO exp 2,117 1,734 1,198 1,228 455 4,920 948
Tax Rate (%) 28.0 27.2 48.9 88.7 54.3 55.7 31.4 Adj. PAT 1,532 1,262 583 186 208 3,564 650 YoY Change (%) 16.2 -9.1 -56.1 -86.8 -86.4 -33.2 -57.5 Revenues
India 8,524 9,684 9,134 8,704 7,819 35,934 6,990
Growth (%) 3 11.5 4.9 6.0 -8 7.2 -18.0
EU 13,324 11,735 9,561 8,512 8,807 43,132 9,993
Growth (%) 13 -2.4 -17.7 -26.8 -34 -7.8 -25.0
PBIT Margins
India 11.6 8.2 7.4 6.7 6.8 8.5 3.7 EU 9.3 9.0 7.5 8.7 6.0 8.7 8.2
RESULTS
FLASH
23 April 2020 Results Flash | Sector: Automobiles
Mahindra CIE
24 April 2020 14
COVID-19 derails business growth – Private players’ Individual WRP declines ~40% YoY for Mar’20 (+5% for FY20) LIC reports 65% YoY decline in individual WRP (+8% for FY20)
Private players’ individual weighted received premium (WRP) witnessed 39.8% YoY
decline in Mar’20 (v/s +4.0% YoY in Feb’20) while industry posted a decline of 50.2%
YoY. This decline was primarily due to the outbreak of the COVID-19 pandemic, which
impacted business during the second fortnight of Mar’20 (typically the peak business
season).
During FY20, private players’ individual WRP grew 4.8% YoY while industry growth
came in slightly higher at 6.2% YoY. Amongst listed players, HDFC Life witnessed the
lowest decline of 28% YoY while Max Life logged a decline of 36% YoY. SBI Life/IPRU
Life saw a decline of 42% YoY/49% YoY.
Amongst other key players, Tata AIA, Birla Sun Life and Bajaj Allianz witnessed a YoY
decline of 36%, 38% YoY and 39%, respectively. LIC reported a decline of 64.5% YoY
(v/s decline of 7.3% YoY in Feb’20) in individual WRP. During FY20, LIC’s individual
WRP grew 8.3% YoY.
Private players’ individual WRP market share expands to ~70% for Mar’20
(57% as on FY20) Private players’ individual WRP market share expanded to ~70% in Mar’20. LIC
posted a decline of 64.5% YoY as against 50.2% YoY decline by the industry while
private players reported a lesser decline of 39.8% YoY. During FY20, SBI Life (13.3%)
remained the largest private insurer in terms of individual WRP, followed by IPRU
Life (9.0%) and HDFC Life (8.1%). On an un-weighted basis, HDFC Life was the largest
private insurer with market share of 6.7% followed by SBI Life with 6.4% share and
IPRU Life with 4.8% share.
Performance of key private players
The combined market share of listed players – SBI Life, ICICI Prudential Life, HDFC
Life and Max Life – on individual WRP basis stood at ~55.4% as on Mar’20 (62.9% in
FY20). Tata AIA, Bajaj Allianz and Birla Sun Life have further cemented their position
to rank amongst the 5-7th largest private insurers on individual WRP. Amongst key
listed players, based on individual WRP:
HDFC Life reported 28% YoY decline (+19% YoY in FY20); total un-weighted
premium declined ~19% YoY (+16.2% YoY in FY20).
SBI Life reported a decline of 42% YoY (+9% YoY in FY20); total un-weighted
premiums declined ~41.4% YoY (+20.3% YoY in FY20).
IPRU Life reported a decline of 49% YoY (-6% YoY in FY20); total un-weighted
premium declined 32.3% YoY (+20.4% YoY in FY20).
Max Life reported 36% YoY decline (+5% YoY in FY20); total un-weighted
premium declined 27.4% YoY (+8.2% YoY in FY20).
Sector Update | 24 April 2020
India Life Insurance
Individual WRP and YoY growth (%)
Individual WRP, INRm
Mar-20 YoY
growth
Grand Total 59,775 -50.2%
Total Public 17,909 -64.5%
Total Private 41,866 -39.8%
SBI Life 6,854 -42.1%
HDFC life 6,038 -27.8%
Max Life 5,510 -35.9%
ICICI Prudential 4,781 -49.0%
Tata AIA 3,298 -36.3%
Kotak Life 2,675 -38.5%
Bajaj Allianz 2,353 -39.1%
Birla Sun life 2,125 -38.3%
PNB Met Life 1,294 -51.1%
IndiaFirst Life 1,134 -7.2%
Source: Company, MOFSL
24 April 2020 15
Un-weighted new business premium and growth – sorted on FY20 basis
INR m Mar-20 YoY
growth FY20
YoY growth
FY19 YoY
growth
Grand Total 254,093 -32.2% 2,588,966 20.6% 2,147,436 10.8%
Total Public 170,666 -31.1% 1,779,771 25.2% 1,421,917 5.7%
Total Private 83,428 -34.2% 809,196 11.5% 725,520 22.3%
HDFC life 20,603 -19.3% 173,963 16.2% 149,715 32.0%
SBI Life 11,275 -41.4% 165,918 20.3% 137,920 25.9%
ICICI Prudential 9,834 -32.3% 123,482 20.4% 102,518 12.0%
Max Life 7,754 -27.4% 55,836 8.2% 51,595 18.7%
Bajaj Allianz 5,854 -50.5% 51,787 5.2% 49,229 14.7%
Kotak Life 7,447 -17.2% 51,058 28.4% 39,771 16.1%
Birla Sunlife 4,809 -33.6% 36,571 -6.6% 39,161 47.1%
Tata AIA 3,843 -35.6% 32,411 30.9% 24,759 66.3%
PNB Met Life 1,897 -48.1% 17,787 5.8% 16,818 17.9%
Source: Company, MOFSL
Individual WRP, growth and market share – sorted on FY20 basis
INR m Mar-20 YoY
growth Mkt
share FY20
YoY growth
Mkt Share
FY19 YoY
growth Mkt
share
Grand Total 59,775 -50.2% 100.0% 734,885 6.2% 100.0% 691,826 9.0% 100.0%
Total Private 41,866 -39.8% 70.0% 420,314 4.8% 57.2% 401,246 12.6% 58.0%
Total Public 17,909 -64.5% 30.0% 314,572 8.3% 42.8% 290,580 4.5% 42.0%
SBI Life 6,854 -42.1% 11.5% 97,711 9.1% 13.3% 89,547 15.0% 12.9%
ICICI Prudential 4,781 -49.0% 8.0% 66,427 -6.4% 9.0% 70,946 -4.9% 10.3%
HDFC life 6,038 -27.8% 10.1% 59,646 19.0% 8.1% 50,123 5.4% 7.2%
Max Life 5,510 -35.9% 9.2% 40,785 5.2% 5.5% 38,787 20.7% 5.6%
Tata AIA 3,298 -36.3% 5.5% 26,918 20.6% 3.7% 22,321 59.7% 3.2%
Bajaj Allianz 2,353 -39.1% 3.9% 19,268 10.6% 2.6% 17,421 24.7% 2.5%
Birla Sun life 2,125 -38.3% 3.6% 17,018 0.5% 2.3% 16,936 59.9% 2.4%
Kotak Life 2,675 -38.5% 4.5% 16,454 -1.3% 2.2% 16,678 5.9% 2.4%
PNB Met Life 1,294 -51.1% 2.2% 12,964 -5.5% 1.8% 13,715 12.3% 2.0%
Source: Company, MOFSL
Mkt share among private players on un-weighted and individual WRP — sorted on individual WRP FY20 basis
INR m Un weighted Premiums Individual WRP
(%) Mar-20 FY20 FY19 Mar-20 FY20 FY19
Grand Total 254,093 2,588,966 2,147,436 59,775 734,885 691,826
Total Private 83,428 809,196 725,520 41,866 420,314 401,246
SBI Life 13.5% 20.5% 19.0% 16.4% 23.2% 22.3%
ICICI Prudential 11.8% 15.3% 14.1% 11.4% 15.8% 17.7%
HDFC Standard 24.7% 21.5% 20.6% 14.4% 14.2% 12.5%
Max Life 9.3% 6.9% 7.1% 13.2% 9.7% 9.7%
Tata AIA 4.6% 4.0% 3.4% 7.9% 6.4% 5.6%
Bajaj Allianz 7.0% 6.4% 6.8% 5.6% 4.6% 4.3%
Birla Sun life 5.8% 4.5% 5.4% 5.1% 4.0% 4.2%
Kotak Life 8.9% 6.3% 5.5% 6.4% 3.9% 4.2%
PNB Met Life 2.3% 2.2% 2.3% 3.1% 3.1% 3.4%
Canara HSBC OBC 1.8% 1.9% 2.0% 2.3% 2.3% 2.3%
Source: Company, MOFSL
24 April 2020 16
23 April 2020
ECOSCOPE The Economy Observer
Long-dated securities get RBI support via fifth ‘Operation Twist’
RBI expected to announce more open market purchases
The Reserve Bank of India (RBI) has announced the simultaneous purchase and sale of different maturity bond papers
and sale of treasury/cash management bills respectively on 27th Apr'20. This is the fifth 'Operation Twist' announced by
the RBI and it has come after a gap of three 3 months. The previous four operations were held on 23rd Dec'19, 30th
Dec'19, 6th Jan'20 and 23rd Jan'20.
While the RBI would purchase INR100b worth of dated securities (ranging from 6-year to 10-year maturity) on 27th
Apr'20, it would sell treasury/cash management bills (with maturity of 77-days to 364-days) worth an equivalent
amount. However, the operations held in Dec'19 and Jan'20 did not involve equivalent amount of purchase buy and
sale of securities. On a net basis, the RBI actually purchased INR47b and INR60b worth of long-term securities in Dec'19
and Jan'20, respectively (Exhibit 1).
Although such operations don't inject liquidity on net basis into the system (which is probably not even required at this
stage), they would have the desired effect of flattening the yield curve, i.e. - reducing yields at the long-end with
pressure at the short-end of the yield curve. A.
Further, the government has also expanded its borrowings by INR2t in 1QFY21 via T-bills and the RBI has also increased
the Ways & Means Advances (WMA) from INR1.25t earlier to INR2t for 1HFY21. These steps effectively take care of the
higher financing requirement of the central government.
Finally, considering the surge in demand for treasury bills in the recent auctions, there is market speculation that the RBI
has already entered the secondary bond market. Sooner or later, it is believed that the RBI would start open market
purchases of government securities. Consequently, the benchmark bond yield has declined fallen during from ~6.5%
towards 6.05% during the past few trading sessions.
RBI has purchased net amount of IRN460b through OMOs in
CY20 so far
The 10-year benchmark bond yield has fallen back to ~6.1%
level in the past 10 days (%)
Source: RBI, MOFSL
500
250
47 60
400
-
120
240
360
480
600
Jun
-18
Sep
-18
Dec
-18
Mar
-19
Jun
-19
Sep
-19
Dec
-19
Mar
-20
Net purchases
(INR b) 6.78
6.51
6.61
6.42
6.04 6.09
6.50
6.06
5.8
6.1
6.4
6.7
7.0
04-D
ec
14-D
ec
24-D
ec
03-J
an
13-J
an
23-J
an
02-F
eb
12-F
eb
22-F
eb
03-M
ar
13-M
ar
23-M
ar
02-A
pr
12-A
pr
22-A
pr
10-year benchmark yield
24 April 2020 17
Insights from interaction with Finance Minister of Kerala To understand the fiscal position of Kerala in light of the COVID-19 outbreak, we interacted with
Honorable Dr. T.M. Thomas Isaac, Minister of Finance, Kerala Government. Key insights
highlighted below:
Kerala does not have any option but to borrow at high interest rate… The state governments cannot directly borrow from the RBI or from the market. Also,
currently Kerala does not have an expansionary tax collection scenario. The only solution
is for the central government to transfer additional resources to states. If that does not
happen, the states would have no other option but to borrow at high yields, even at
~12%.
…owing to expected huge gaps in receipts…
While the normal Apr’20 revenue collection estimate for Kerala was ~INR100b, the
expectation is now lower at ~INR20b (including transfer from center and own tax
collections). This means a huge gap of ~INR80b for just one month. Adding arrears of
Mar’20, the total revenue gap is likely to be ~INR100b for Apr’20 alone. While Kerala has
decided to defer salary payments, additional revenue shortages would mean curtailment
of development expenditure. This would only aggravate a situation which is already
recessionary. Therefore, the central government needs to identify additional funding
avenues for the state governments, even if it means direct monetizing of deficit by the
RBI.
…and lesser devolution of funds from the center The center has already budgeted ~INR700b lesser devolution to states in FY21 compared to what was recommended
by the Finance Commission. In light of the current scenario, there is a chance the center might end up reducing it
even more. The Kerala government had budgeted INR326.3b as transfer from the central government for FY21 (BE),
but this seems unlikely currently.
Kerala was swift in handling the Coronavirus outbreak in early stages The outbreak of ‘Nipah virus’ three years back gave the Kerala government some training in handling the current
pandemic. Therefore, the Kerala government was well prepared with all medical assistance in early-Jan’20 (the
government was aware of some students returning from Wuhan in the early week of Jan’20). Moreover, the fact
that Kerala has ‘one of the best public health systems in India’ also helped the state perform better than others in
fighting the Coronavirus. The present Kerala state government has invested ~INR40b in health infrastructure over
the last 4 years and has also created another fund of ~INR50b for health. Additionally, presence of strong
local/municipal bodies has kept matters at the ground level in check. All these positives put together made Kerala
react swiftly to the disease outbreak.
Other points of interaction Issuance of NRI bonds: There is a strict limit on the amount that states can borrow (3% of GSDP). Therefore, no
matter the name of the bond, states’ borrowings have to be within this limit.
Including tax on liquor and tobacco within the GST framework: Since these are the only revenue sources for
Kerala, the state is not in favor of these segments coming under GST.
Minimum revenue guarantee in GST: Due to various operational and non-operational issues in GST, the amount
of cess collected in the Compensation fund (from which the center had planned to compensate the states) has
fallen short. The center is yet to accept recommendations made by the states like one-time borrowing in order to
compensate the states.
23 April 2020 Economy
Expert Speak
Hon’ble Dr. T.M. Thomas
Isaac, Minister of Finance, Kerala
Government Dr. Thomas Isaac is a known politician and
renowned economist. He represents Alappuzha con
stituency in the Kerala State
Legislative Assembly. He has authored a number of
articles on economic planning and politics,
which have been published in leading
regional, national and international periodicals.
24 April 2020 18
Gradual recovery in past few weeks Rural India on better footing
To discuss the impact of Covid-19 on the payments bank business and emerging opportunities
in the digital payment landscape, we interacted with Fino Payments Bank’s (FINO) Managing
Director and CEO, Mr. Rishi Gupta.
About the company FINO deals in key financial services such as remittances, cash withdrawals, cash
management services (CMS), etc. The company boasts of 30% market share in CMS,
60% market share in micro-ATMs and 8-10% market share in IMPS transactions. It caters
largely to the low/mid-income customer segment, with 75%+ of its 0.4m touch-points in
rural areas. Its monthly transaction run-rate amounts to INR100b.
Volumes plunged sharply at the start of the lockdown, 65-70% recovery now When the lockdown hit, Fino’s key business of remittances (typically 40% of business
volume and 20% of revenue) declined to 10% of its average. However, with economic
activity picking up, volumes have improved to 35% of its average now. Likewise, in cash
withdrawals, transaction values have declined 30-40% from an average of INR3k while
IMPS transactions have declined to 10% of its average. Overall revenues have now
returned to 65-70% of pre-lockdown revenues. Mr. Gupta expects it to improve
further to 75-80% in 1-2 months and remain stable thereafter.
Rural India better placed; State-wise impact divergent Rural India is better placed compared to urban areas due to (a) higher dependence of
the population on agriculture and other essential services, and (b) government
stimulus being largely targeted at the rural population. On the other hand, urban cash
flows have been badly impacted. Interestingly, Mr. Gupta commented that post-COVID,
many migrants from urban areas are moving to rural areas and aspiring to become channel partners. Impact across
states has also been divergent with Maharashtra, Gujarat, MP and Telangana being the most impacted (business
at 30% of run-rate levels). On the other hand, Bihar, UP, Chhattisgarh, WB, Assam and Orissa are less impacted.
Witnessing partial pick-up in microfinance activities Post partial lifting of the lockdown on 20th Apr’20, MFI activities have picked up to ~5-10% of pre-COVID levels. A
further pick-up is expected post 3rd May’20. Note that MFIs use FINO’s digital platforms to take deposits, etc.
Renewed focus on digitization Post demonetization, changes implemented were largely on the payments front. However, in the current crisis,
increased digitization is happening internally (processes, means of customer interactions, etc.) Moreover,
digitization during demonetization was restricted to urban areas while in this case, it could be more rural. While the
likes of RuPay already exist in rural areas, Mr. Gupta expects deeper collaboration between banks and Fintechs.
Business Correspondent model – Variable cost model leads to quicker break-even Mr. Gupta believes that the government and the RBI have a favorable stance toward business correspondents (BC).
There are more than 800k BCs/merchant points across the country. Typically, a margin of 40-150bp is earned on a
transaction, of which 60-70% is paid to the merchant while the rest is retained by the company. Importantly, a key
mantra for success in this business, especially in rural areas, is running a variable-cost model. For example, FINO
pays INR25-30 per customer for referrals, which is much lower than the acquisition cost of banks. Hence, break-even
happens in 3-6 months on an average. In the recent past, banks have increased payouts to BCs.
23 April 2020 Financials
Expert Speak
Mr. Rishi Gupta,
Managing Director and CEO, Fino Payments Bank Ltd. Mr. Gupta is a founding
member of Fino Paytech Ltd. Prior to Fino Paytech, Mr.
Gupta worked with the International Finance
Corporation in New Delhi. He is also the founding member of the Business Correspondent Federation of India and has
served as the Chairman of its Economic Affairs Committee.
Mr. Gupta has over two decades of experience across
diverse verticals such as manufacturing, banking and international institutions. He began his career with Maruti
Udyog Ltd. and then moved to ICICI Bank before joining Fino.
24 April 2020 19
Boarding (for aviation industry) to take time Aviation industry is hit hard by global lockdowns and is struggling to keep its wings up. With
various countries now planning to come out of the lockdown, we interacted with Mr. Jitender
Bhargava, Superannuated as Executive Director of Air India, to understand the current
turbulences faced by aviation companies in light of the Coronavirus (COVID-19) pandemic. Key
highlights:
Global impact of COVID-19
Airlines have been impacted by various travel advisory bans issued globally due to the
spread of COVID-19. Due to this, world over >90% of the fleet is grounded. IATA
estimates global aviation revenue loss of ~USD315b, with ~25m likely job losses.
Globally, ~8 airline companies have declared cessation of operations (including Air
Deccan in India). The impact of COVID-19 is not comparable with SARS of 2003 (the
latter was limited only to APAC), and thus, it would be years before normalcy is
restored.
Also, work from home (WFM) and virtual connects have been a huge success currently,
minimizing the need for air travel. This would lead to a huge change in travelers’
psychology (as corporations would consider cutting air travel expenses). IATA
commissioned a survey, which suggests that ~40% travelers could delay travel by six
months, while ~69% travelers would delay flying until their personal financial situation
stabilizes. China, which resumed its services last month, saw a spurt in travelers initially
(primarily a demand from stranded migrant travelers), which later moderated.
Social distancing – key to operations resuming, but also a dampener
Aviation industry is expected to open up completely only after the virus is contained or
if there is optimism on the invention of a successful vaccine. Emirates has stated that it
is not looking to start flying before Jul’20 (an optimistic scenario). Even Australia – the least affected country by
COVID-19 – is flying at lower than 10% Passenger Load Factors (PLFs). Social gatherings would also be restricted in
terms of numbers, which is a weak sign for the sector (Tokyo Olympics has been postponed to 2021 and many
articles are suggesting that it may not be held even then).
Further, it has been proposed that the last three rows of an aircraft should be kept vacant for self-isolation while the
entire middle row should also be empty for social distancing. If such social distancing measures are implemented,
only 30-35% of an aircraft can be filled at max, which would demand even higher breakeven costs. Ryanair has
stated that it would not start flying if social distancing is implemented (with vacant middle seats). Airlines are likely
to provide masks and gloves (however, there is a huge supply constraint of the same) and sanitize planes each time
they takeoff, which would add to their operating costs. Higher breakeven would require hike in fares, thus limiting
air travel affordability. Nevertheless, screening for COVID-19 at airports would also slow air traffic further.
23 April 2020 Aviation
Expert Speak
Mr. Jitender Bhargava,
(Superannuated as Executive Director of Air India)
Mr. Jitender Bhargava, has
held various key positions
with Air India in his two-
decade long tenure, 13 years
of which were at the level of
Executive Director. Mr.
Bhargava has authored a
book, 'The Descent of Air
India', chronicling the
diminution of the national
carrier – from an iconic airline
to being virtually grounded
and needing periodic fund
infusion to remain
operational. He is also a
consultant on aviation
matters for an international
consultancy.
24 April 2020 20
India – Airlines need to be more disciplined now and must revisit their business model
Airlines in India have been adding fleet at a frantic pace to capture market share, thus, sacrificing their profitability.
India currently has a total of ~650 planes, of which ~50% are on lease. According to CAPA’s estimate, of the total
fleet, ~200 planes would be surplus capacity in the current situation. SpiceJet had utilization of >90% for the last four
years, but high capacity addition wiped off its cash reserves. Currently, barring INDIGO, no other Indian airline
carrier has enough cash reserves. Further, lease expenses are also killing the cash-strapped Indian airlines. Leasing
companies are under stress, since they have to pay their outstanding loans, thus renegotiations of lease rentals
could be tough. INDIGO and SpiceJet have placed huge orders for new aircraft, and if markets don’t revive, they
would not be able to sell seats, and the low-fare war would continue. Thus, the companies would have to revisit
their strategies now.
Indian airlines have been rushing to start their operations without any clear directive from the DGCA. International
operations are expected to be delayed by months; the resumption of even domestic operations would be quite
tough. For instance, the Mumbai – Delhi route, which has more than 100 daily flights, might not be initiated at first
as they are marked red zones, thus impacting flights on other routes as well. The Government of India (GoI) is
planning on providing possible aids (however, GoI has limited resources unlike the US) like extension of credit for
fuel expenses or airport charges, etc.
Air India Divestment likely to get postponed in the current environment
The GOI is expected to further roll forward the dates for ‘Expression of Interest’ in Air India in the current
environment. It is likely that airlines with deep pockets might participate in the bids, but with huge operational
constraints and their fleet grounded, it does not seem likely that they would be in a position to acquire Air India.
Logically, there could be two options to revive Air India – disinvestment or bringing in professional management and
thorough leadership – but, the government is only looking at disinvestment. Other airlines are adding fleet while Air
India (being cash-strapped) is seeing reduction in fleet, and thus, its market share is expected to continue sliding.
24 April 2020 21
\
SHRIRAM TRANSPORT FINANCE: PENT-UP DEMAND IN TRANSPORTATION TO START SHOWING FROM MID MAY; Umesh Revankar, MD As far as the collection is concerned, most of our branches are open now.
Company is operating as per the local government’s broad instructions. Many of
the branches are opening between 8-1pm; so collections are taking place.
As far as the new disbursement is concerned, RTOs are not open. What is most
important in business is RTOs have to be open. The transfer of ownership has to
happen, the endorsement or hypothecation has to be done on the RC book; only
then company can lend. So have a huge pipeline case pertaining to March. So
unless the RTO office starts operating and completes the transaction, will not be
able to lend. So the pipeline cases are huge and company is eagerly waiting for
RTO to start functioning.
Feel the business will resume in the fullest extent by mid May because all the
production lines, manufacturing, all of them have to restart their business and
nearly 40% of the manufacturing activity has started from 20 April. The only
thing for them is to get back the labour force and start the operation with
around 25% to 30% of the workforce minimum and that will take time.
Huge pent-up demand which will start showing from mid May and June should
be a normal month is what I feel.
In conversation
24 April 2020 22
RECENT AMENDMENTS TO FDI POLICY – A BOON OR A BANE? Much has been reported about press note 3 of 2020 issued by the Department
for Promotion of Industry and Internal Trade on April 17, over the last couple of
days. Pursuant to the press note, an entity situated in a country which shares
land border with India, or where the beneficial owner of an investment into
India is situated in or is a citizen of any such country, is inter alia permitted to
invest in Indian entities only under the government approval route. Further, any
transfer of ownership of any existing or future foreign direct investment (FDI) in
an entity in India (indirectly or indirectly) resulting in the beneficial ownership
falling within the purview of the above restrictions, would require the
government’s approval. The above restrictions came into effect from April 22
(i.e. the date of notification of the amendments to the Foreign Exchange
Management (Non-debt Instruments) Rules, 2019 (“Rules")). The press note
appears to have been issued in the wake of the covid-19 pandemic and the
effect it has had on entities operating in various sectors, making them relatively
tempting targets for acquisition. The restrictions contemplated would cut across
all sectors and would be applicable to entities operating in sectors which are
otherwise permitted to receive FDI under the automatic route (such as
attractive sectors like e-commerce, services and logistics).
From the think tank
24 April 2020 23
CMP TP % Upside EPS (INR) EPS Gr. YoY (%) P/E (x) P/B (x) ROE (%)
Company Reco (INR) (INR) Downside FY19 FY20E FY21E FY19 FY20E FY21E FY20E FY21E FY20E FY21E FY20E FY21E
Automobiles
Amara Raja Buy 559 630 13 28.3 37.7 34.6 2.6 33.3 -8.3 14.8 16.1 2.5 2.3 18.1 14.8
Ashok Ley. Buy 47 61 31 6.9 1.1 0.9 16.4 -84.2 -18.0 42.9 52.3 1.6 1.6 3.8 3.1
Bajaj Auto Neutral 2432 2382 -2 165.4 178.2 167.2 9.3 7.7 -6.2 13.6 14.5 3.1 2.9 23.3 20.6
Bharat Forge Buy 257 342 33 22.2 15.2 12.8 20.3 -31.6 -15.8 16.9 20.1 2.1 2.0 12.7 10.2
Bosch Neutral 10588 10607 0 542.4 403.1 350.6 15.5 -25.7 -13.0 26.3 30.2 4.1 3.8 14.3 13.0
CEAT Buy 808 903 12 66.9 47.6 51.9 4.6 -29.0 9.1 17.0 15.6 1.1 1.1 6.8 7.0
Eicher Mot. Buy 14065 17200 22 813.9 703 680 1.8 -13.6 -3.3 20.0 20.7 3.7 3.2 19.8 16.6
Endurance Tech. Buy 583 810 39 36.2 39.7 32.7 24.5 9.8 -17.8 14.7 17.9 2.8 2.5 20.3 14.7
Escorts Neutral 752 654 -13 53.2 53.5 50.1 34.7 0.4 -6.3 14.1 15.0 2.2 1.7 16.4 13.1
Exide Ind Buy 150 177 18 9.1 9.6 9.2 10.6 5.8 -3.9 15.6 16.2 2.0 1.8 12.6 11.3
Hero Moto Neutral 1864 2072 11 169.5 154.1 126.0 -8.5 -9.1 -18.2 12.1 14.8 2.7 2.7 23.2 18.2
M&M Buy 348 519 49 42.7 33.2 33.8 4.1 -22.3 1.9 10.5 10.3 1.1 1.1 10.1 8.0
Mahindra CIE Buy 82 -100 14.1 9.4 7.3 44.7 -33.2 -22.9 8.7 11.2 0.7 0.6 8.0 5.8
Maruti Suzuki Buy 5161 6280 22 247.7 191.8 166.9 -7.1 -22.6 -13.0 26.9 30.9 3.2 3.1 11.5 9.6
Motherson Sumi Buy 74 98 33 5.1 3.7 3.1 -5.2 -27.1 -17.2 19.8 23.9 1.9 1.8 10.1 7.8
Tata Motors Buy 76 90 19 -4.4 -14.9 -23.3 -119.0 Loss Loss NM NM 0.5 0.5 -9.0 -15.4
TVS Motor Neutral 299 297 -1 14.1 12.8 11.5 1.1 -9.2 -10.1 23.3 26.0 3.8 3.5 17.2 14.0
Aggregate -31.4 -25.2 109.4 31.6 15.1 2.0 1.8 6.3 12.2
Banks - Private
AU Small Finance Buy 506 800 58 13.2 24.7 26.6 28.9 87 7.8 20.5 19.0 3.5 2.9 19.4 16.7
Axis Bank Buy 430 600 40 18.2 16.4 27.8 1,538.1 -10 69.5 26.2 15.5 1.4 1.3 5.8 8.8
Bandhan Bank Buy 201 350 74 16.4 22.3 20.1 39.1 37 -10.0 9.0 10.0 2.1 1.8 23.2 19.1
DCB Bank Neutral 87 105 20 10.5 10.9 10.3 32.0 3.7 -5.1 8.0 8.4 0.8 0.7 11.1 9.6
Equitas Hold. Buy 56 85 52 5.2 8.0 8.6 1,186.6 54.6 7.7 7.0 6.5 0.7 0.6 10.6 10.4
Federal Bank Buy 45 75 67 6.3 8.2 7.1 32.2 31.0 -13.7 5.5 6.3 0.6 0.6 11.8 9.4
HDFC Bank Buy 955 1200 26 39.6 48.0 55.2 16.9 21.2 14.9 19.9 17.3 3.1 2.7 16.4 16.5
ICICI Bank Buy 353 540 53 5.2 14.6 20.7 -52.8 178.6 41.9 24.2 17.1 2.0 1.9 8.7 11.5
IndusInd Buy 410 700 71 54.9 65.0 64.7 -8.8 18.4 -0.4 6.3 6.3 0.8 0.7 13.8 12.1
Kotak Mah. Bk Neutral 1250 1450 16 37.7 45.4 50.5 16.0 20.4 11.2 27.5 24.8 3.6 3.1 13.7 13.2
RBL Bank Buy 106 180 69 20.3 8.3 11.9 34.3 -59.1 43.6 12.8 8.9 0.5 0.5 4.6 5.5
Aggregate 33.3 21.6 26.0 16.0 12.7 2.1 1.8 12.8 14.3
Banks - PSU
BOB Buy 48 70 44 1.6 -3.3 6.6 -116.7 PL LP NM 7.3 0.3 0.3 -2.0 4.4
PNB Neutral 31 35 12 -27.1 -5.8 3.4 -46.1 Loss LP NM 9.0 0.4 0.4 -6.4 4.0
SBI Buy 187 300 61 2.6 18.7 22.2 -148.2 627 18.3 10.0 8.4 0.7 0.7 7.4 8.1
Aggregate LP 105 46 8 5.7 0.6 0.5 6.6 8.9
NBFCs
Aditya Birla Cap Buy 50 125 150 4.0 4.3 5.1 25.7 8.3 20.2 11.7 9.7 1.1 1.0 10.2 10.8
Bajaj Fin. Neutral 2175 2625 21 69.3 94.1 79.2 59.6 35.8 -15.8 23.1 27.5 3.9 3.5 21.3 13.5
Cholaman.Inv.&Fn
Buy 152 225 48 15.2 16.8 15.6 29.1 10.8 -7.1 9.0 9.7 1.5 1.3 18.9 14.1
HDFC Buy 1663 2050 23 44.4 50.4 52.5 28.7 13.6 4.2 33.0 31.7 3.3 3.1 14.2 13.1
HDFC Life Insur. Neutral 488 525 8 6.3 6.5 7.5 14.6 2.7 15.2 75.0 65.1 4.5 3.8 20.1 17.2
ICICI Pru Life Buy 361 472 31 8.0 8.0 9.0 -29.5 1.2 11.6 44.9 40.2 2.1 1.8 16.1 15.9
IIFL Wealth Mgt Buy 947 1525 61 44.2 32.2 42.8 -4.1 -27.3 33.0 29.4 22.1 2.6 2.6 9.3 11.9
L&T Fin Holdings Buy 62 75 21 11.2 11.4 10.3 74.3 2.1 -9.2 5.4 6.0 0.8 0.7 16.1 13.1
LIC Hsg Fin Buy 287 350 22 48.1 49.7 45.6 21.4 3.2 -8.3 5.8 6.3 0.8 0.7 14.6 12.0
MAS Financial Buy 630 690 10 27.8 29.9 30.8 47.1 7.6 2.8 21.0 20.4 3.5 3.1 18.1 16.2
M&M Fin. Buy 156 200 28 25.3 17.1 10.3 53.9 -32.3 -40.1 9.1 15.2 0.9 0.8 9.7 5.5
Muthoot Fin Neutral 816 765 -6 49.2 75.0 80.0 10.8 52.3 6.7 10.9 10.2 2.9 2.4 29.3 25.8
PNB Housing Neutral 215 190 -12 71.1 67.5 50.9 40.9 -5.1 -24.6 3.2 4.2 0.4 0.4 14.1 9.6
Repco Home Buy 116 150 30 37.5 48.9 44.8 16.7 30.5 -8.5 2.4 2.6 0.4 0.3 18.3 14.4
Shriram City Union
Buy 728 950 30 149.8 168.6 134.0 48.7 12.5 -20.5 4.3 5.4 0.7 0.6 16.1 11.4
Valuation snapshot
Click excel icon for detailed
valuation guide
24 April 2020 24
CMP TP % Upside EPS (INR) EPS Gr. YoY (%) P/E (x) P/B (x) ROE (%)
Company Reco (INR) (INR) Downside FY19 FY20E FY21E FY19 FY20E FY21E FY20E FY21E FY20E FY21E FY20E FY21E
Shriram Trans. Buy 641 975 52 113.0 128.9 75.0 4.2 14.1 -41.8 5.0 8.5 0.8 0.7 17.3 9.0
Aggregate 14.5 -5.6 23.0 17.3 14.1 2.1 1.9 12.0 13.3
Capital Goods
ABB Buy 902 1255 39 12.0 16.6 15.7 12.7 38.1 -5.4 54.5 57.5 5.4 5.1 10.0 8.8
Bharat Elec. Buy 76 86 13 7.9 6.5 7.2 37.7 -17.9 10.3 11.7 10.6 1.9 1.7 15.9 16.1
BHEL Neutral 21 22 3 3.5 1.9 1.9 58.9 -44.4 -1.1 11.0 11.1 0.2 0.2 2.1 2.1
Blue Star Neutral 556 515 -7 19.5 20.2 15.2 34.7 3.7 -24.4 27.6 36.5 5.7 5.3 20.5 14.6
CG Cons. Elec. Buy 228 270 19 6.0 7.5 7.7 15.5 24.9 3.6 30.6 29.5 10.0 8.4 32.8 28.3
Cummins Neutral 418 360 -14 26.1 22.9 17.3 10.8 -12.0 -24.4 18.2 24.1 2.7 2.5 14.5 10.5
Engineers India Buy 69 100 45 5.9 6.7 7.6 -8.4 14.5 12.7 10.3 9.1 2.0 1.9 17.9 19.3
Havells Neutral 530 590 11 12.7 12.3 11.0 12.9 -3.0 -10.6 43.2 48.3 7.0 6.4 16.2 13.3
K E C Intl Buy 185 255 38 18.9 23.1 24.0 6.1 22.3 3.6 8.0 7.7 1.6 1.4 20.2 17.7
L&T Buy 841 1200 43 63.5 70.4 61.6 22.8 11.0 -12.6 11.9 13.7 1.7 1.6 13.9 11.0
Siemens Neutral 1168 1450 24 25.1 30.5 29.4 27.1 21.6 -3.6 38.3 39.7 4.6 4.2 12.0 10.7
Thermax Neutral 705 865 23 27.2 24.9 29.1 32.4 -8.4 17.0 28.3 24.2 2.5 2.3 8.8 9.6
Voltas Buy 508 620 22 15.7 15.4 14.8 -9.1 -1.8 -3.7 32.9 34.2 3.8 3.5 11.5 10.3
Aggregate 4.1 -7.9 31.8 19.6 14.8 1.9 1.8 9.8 11.8
Cement
Ambuja Cem. Neutral 171 186 8 6.1 7.6 5.3 -3.2 24.1 -29.3 22.7 32.1 1.5 1.5 6.9 4.7
ACC Buy 1189 1370 15 53.5 72.3 40.6 9.9 35.1 -43.8 16.4 29.3 1.9 1.9 12.3 6.5
Birla Corp. Buy 424 770 82 33.2 61.8 51.0 53.6 86.2 -17.5 6.9 8.3 0.7 0.6 10.2 7.8
Dalmia Bhar. Buy 532 710 33 15.8 11.4 -5.5 4.3 -27.5 PL 46.5 NM 1.0 1.0 2.1 -1.0
Grasim Inds. Neutral 501 575 15 66.1 35.8 46.6 39.7 -45.8 30.0 14.0 10.7 0.8 0.8 3.2 1.4
India Cem Neutral 103 97 -6 2.3 3.6 2.1 -31.0 61.1 -41.9 28.4 48.8 0.6 0.6 2.1 1.2
J K Cements Buy 1148 1355 18 34.1 59.0 48.1 -19.8 72.8 -18.4 19.5 23.9 2.9 2.7 15.9 11.7
JK Lakshmi Ce Buy 204 305 49 6.8 22.1 12.7 -8.7 227.6 -42.4 9.2 16.0 1.4 1.3 16.0 8.3
Ramco Cem Neutral 567 570 0 21.9 23.8 17.3 -8.7 8.7 -27.4 23.9 32.9 2.7 2.5 11.9 8.0
Shree Cem Neutral 18710 19300 3 324.1 407.7 317.5 -18.2 25.8 -22.1 45.9 58.9 5.1 4.8 12.9 8.4
Ultratech Buy 3446 4160 21 90.3 132.6 117.3 1.0 46.8 -11.5 26.0 29.4 2.6 2.4 10.8 8.8
Aggregate 8.0 -15.1 51.8 27.1 17.8 1.8 1.7 6.5 9.3
Consumer
Asian Paints Sell 1820 1380 -24 23.1 29.7 27.3 9.1 29.0 -8.2 61.2 66.7 16.4 15.3 28.3 23.8
Britannia Neutral 2948 3010 2 48.1 57.4 58.0 15.1 19.3 1.0 51.3 50.8 15.5 15.2 31.3 30.2
Colgate Buy 1480 1620 9 27.4 29.1 30.7 8.8 6.3 5.3 50.8 48.3 29.1 31.3 55.9 62.4
Dabur Neutral 499 450 -10 8.5 9.0 9.5 9.5 5.6 6.2 55.6 52.3 13.8 12.8 26.4 25.4
Emami Buy 206 270 31 12.2 12.5 12.4 0.2 3.1 -0.7 16.4 16.6 4.0 4.1 25.9 24.5
Godrej Cons. Neutral 541 622 15 15.1 14.3 14.8 7.2 -5.5 3.9 38.0 36.6 7.4 7.4 19.7 20.2
GSK Cons. Neutral 10754 10874 1 216.1 277.0 290.9 29.8 28.2 5.0 38.8 37.0 9.7 8.7 26.6 24.7
HUL Buy 2316 2645 14 28.9 32.5 35.9 18.2 12.2 10.5 71.4 64.6 64.3 69.1 90.9 103.1
ITC Neutral 181 192 6 10.2 12.8 12.8 14.8 25.5 0.6 14.2 14.1 3.6 3.4 26.1 24.7
Jyothy Lab Neutral 120 122 2 5.4 4.7 4.8 10.5 -12.9 3.2 25.6 24.8 3.3 3.3 12.9 13.2
Marico Buy 302 346 15 7.2 8.0 8.0 14.3 10.4 0.5 37.9 37.7 10.5 9.3 30.7 26.1
Nestle Neutral 17412 15115 -13 178.6 206.8 226.9 27.5 15.8 9.7 84.2 76.7 86.9 81.2 71.2 109.4
Page Inds Neutral 17659 17565 -1 353.2 334.5 326.8 13.5 -5.3 -2.3 52.8 54.0 22.7 20.9 42.9 38.7
Pidilite Ind. Neutral 1540 1365 -11 18.6 25.3 23.1 -2.0 36.2 -8.5 60.9 66.6 15.4 13.5 27.8 21.6
P&G Hygiene Neutral 10782 9808 -9 129.6 132.6 141.7 12.5 2.3 6.8 81.3 76.1 33.6 29.5 44.2 41.3
Tata Consumer Buy 330 417 26 7.0 8.0 9.1 -14.6 14.2 14.1 41.3 36.2 2.7 2.2 6.8 7.9
United Brew Neutral 920 1003 9 21.3 16.3 17.4 42.8 -23.4 6.8 56.4 52.8 6.8 6.2 12.8 12.3
United Spirits Buy 529 663 25 9.3 11.4 12.0 38.1 22.9 4.5 46.2 44.3 10.1 8.2 21.9 18.6
Aggregate 17.5 3.5 13.4 40.5 35.7 11.0 10.4 27.3 29.2
Healthcare
Alembic Phar Neutral 699 705 1 31.1 45.9 37.9 42.0 47.6 -17.4 15.0 18.2 4.0 3.5 30.1 21.4
Alkem Lab Buy 2520 3135 24 63.8 92.3 109.9 8.4 44.6 19.1 27.3 22.9 4.8 4.1 18.8 19.3
Ajanta Pharma Buy 1328 1635 23 44.4 50.6 60.6 -16.1 13.9 19.7 26.2 21.9 4.5 3.9 18.4 18.9
Aurobindo Buy 629 745 18 43.2 46.3 51.0 1.1 7.3 10.0 13.6 12.3 2.2 1.9 17.9 16.7
Valuation snapshot
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valuation guide
24 April 2020 25
CMP TP % Upside EPS (INR) EPS Gr. YoY (%) P/E (x) P/B (x) ROE (%)
Company Reco (INR) (INR) Downside FY19 FY20E FY21E FY19 FY20E FY21E FY20E FY21E FY20E FY21E FY20E FY21E
Biocon Neutral 348 320 -8 6.2 7.2 9.9 99.6 16.9 36.2 48.0 35.3 6.2 5.5 13.5 16.5
Cadila Buy 332 410 24 18.3 14.6 17.6 4.3 -20.2 20.3 22.7 18.9 3.0 2.7 11.4 15.1
Cipla Neutral 587 550 -6 18.7 20.7 26.0 -3.1 10.6 25.7 28.3 22.5 2.8 2.5 9.9 11.2
Divis Lab Neutral 2422 2215 -9 50.0 51.3 65.7 55.0 2.5 28.1 47.2 36.9 8.0 6.8 18.2 20.0
Dr Reddy’s Neutral 4027 3490 -13 105.2 123.6 150.7 62.6 17.5 21.9 32.6 26.7 4.3 3.8 13.9 15.1
Glenmark Neutral 340 295 -13 25.9 23.6 26.4 -9.0 -9.0 12.2 14.4 12.9 1.5 1.4 11.3 11.4
GSK Pharma Neutral 1447 1320 -9 24.6 27.0 33.7 25.2 9.6 24.9 53.7 43.0 13.5 12.3 25.2 28.7
IPCA Labs Buy 1533 1855 21 36.3 54.5 70.7 91.3 50.2 29.6 28.1 21.7 5.2 4.3 20.1 21.8
Jubilant Life Buy 386 415 7 56.9 58.0 57.4 26.7 1.9 -1.1 6.7 6.7 1.1 0.9 17.4 14.9
Laurus Labs Buy 469 520 11 10.4 19.6 26.0 -34.5 88.5 33.1 24.0 18.0 2.8 2.5 12.5 14.7
Lupin Buy 822 940 14 23.3 23.0 34.5 -27.1 -1.5 50.3 35.8 23.8 3.6 3.3 8.6 14.4
Strides Pharma Buy 348 405 16 6.9 26.0 37.3 -39.2 279.4 43.4 13.4 9.3 1.2 1.1 8.7 12.2
Sun Pharma Buy 477 535 12 15.1 17.6 21.2 12.2 16.6 20.4 27.1 22.5 2.5 2.3 9.8 10.8
Torrent Pharma Neutral 2421 2215 -9 42.7 57.9 76.8 -7.1 35.6 32.7 41.8 31.5 7.6 6.6 19.4 22.5
Aggregate 12.2 20.7 14.3 22.9 20.0 3.2 2.8 13.9 14.1
Infrastructure
Ashoka Buildcon Buy 64 92 44 11.5 10.8 6.0 35.8 -5.7 -44.2 5.9 10.6 0.7 0.7 12.9 6.6
IRB Infra Neutral 77 80 5 24.2 19.7 7.1 1.2 -18.5 -63.9 3.9 10.8 0.4 0.4 10.5 3.6
KNR Constructions
Buy 210 270 29 17.7 15.3 15.9 -8.2 -13.7 3.6 13.7 13.2 1.8 1.6 14.1 12.8
Aggregate 11.6 9.4 0.6 0.6 5.6 6.5
Media
PVR Buy 974 1605 65 37.9 21.9 10.2 41.9 -42.2 -53.5 44.5 95.7 3.0 2.9 7.6 3.1
Sun TV Buy 373 436 17 35.4 36.6 34.9 27.6 3.5 -4.6 10.2 10.7 2.3 2.1 24.6 20.5
Zee Ent. Neutral 158 165 5 16.4 16.9 19.4 12.7 2.9 14.7 9.3 8.1 1.5 1.3 18.1 17.0
Aggregate 4.0 0.2 18.4 10.3 8.7 1.7 1.5 16.1 16.6
Metals
Hindalco Buy 111 218 96 24.7 19.2 9.8 30.9 -22.2 -49.1 5.8 11.4 0.6 0.6 10.6 5.4
Hind. Zinc Neutral 172 190 11 18.8 16.4 13.6 -10.8 -12.7 -17.2 10.4 12.6 1.8 1.8 18.7 14.4
JSPL Buy 86 188 118 3.3 -6.5 14.3 -138.7 PL LP NM 6.1 0.3 0.3 -2.0 4.4
JSW Steel Buy 160 213 33 31.8 15.7 2.7 32.4 -50.8 -83.1 10.2 60.2 1.0 1.0 10.3 1.7
Nalco Buy 34 41 22 9.2 0.3 0.3 79.9 -96.8 -9.9 114.0 126.4 0.7 0.7 0.6 0.5
NMDC Buy 77 140 82 15.6 15.6 14.2 19.2 -0.3 -8.4 4.9 5.4 0.8 0.8 17.5 14.6
SAIL Neutral 27 29 9 6.3 -0.7 -4.4 2,344.1 PL Loss NM NM 0.3 0.3 -0.7 -4.8
Vedanta Neutral 78 85 10 18.1 13.1 4.7 -11.0 -27.7 -64.2 5.9 16.5 0.5 0.5 7.7 3.0
Tata Steel Neutral 270 322 19 88.6 33.6 -16.6 27.3 -62.0 PL 8.0 NM 0.5 0.5 6.0 -3.0
Aggregate -41.9 -54.9 181.4 19.4 6.9 0.7 0.6 3.4 9.3
Oil & Gas
Aegis Logistics Buy 166 237 43 6.6 4.2 10.5 11.9 -36.6 149.6 39.4 15.8 3.8 3.2 10.0 22.1
BPCL Neutral 355 494 39 43.4 17.8 35.1 -12.9 -58.8 96.7 19.9 10.1 1.7 1.5 8.8 16.0
Castrol India Buy 125 200 60 7.2 8.4 9.6 2.4 16.8 14.6 14.9 13.0 9.0 8.1 65.3 65.7
GAIL Buy 83 140 68 14.0 10.4 9.8 38.4 -25.6 -6.3 8.0 8.5 0.8 0.8 10.6 9.5
Gujarat Gas Buy 262 340 30 6.2 17.1 12.3 46.9 173.4 -28.2 15.4 21.4 5.8 4.8 44.2 24.5
Gujarat St. Pet. Buy 193 290 50 14.1 19.6 17.1 18.9 39.3 -13.0 9.9 11.3 1.6 1.4 17.7 13.5
HPCL Buy 209 330 58 43.9 17.4 37.5 -7.3 -60.3 115.1 12.0 5.6 1.0 0.9 8.5 17.1
IOC Buy 83 169 103 18.8 3.6 13.2 -23.7 -81.0 267.3 23.2 6.3 0.7 0.6 2.9 10.3
IGL Neutral 450 515 15 11.2 17.2 16.4 19.1 53.3 -4.7 26.1 27.4 6.2 5.3 26.2 20.7
Mahanagar Gas Neutral 912 1115 22 55.3 82.4 64.3 14.3 49.0 -22.0 11.1 14.2 3.2 2.8 31.0 20.9
MRPL Neutral 32 49 53 1.9 -13.3 5.5 -84.8 PL LP NM 5.9 0.7 0.6 -24.4 10.9
Oil India Buy 86 127 48 32.0 17.5 10.4 35.6 -45.3 -40.6 4.9 8.3 0.3 0.3 7.0 4.0
ONGC Buy 67 105 56 27.1 17.1 11.3 34.4 -37.0 -33.9 3.9 6.0 0.4 0.4 9.8 6.2
PLNG Buy 223 333 49 14.4 21.0 19.1 3.7 45.8 -8.9 10.7 11.7 3.0 2.8 29.9 25.1
Reliance Ind. Buy 1372 1589 16 67.2 76.8 71.2 10.4 14.2 -7.2 17.9 19.3 1.9 1.7 11.2 9.5
Aggregate -27.4 6.7 49.0 13.6 9.1 1.3 1.1 9.2 12.5
Retail
Valuation snapshot
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valuation guide
24 April 2020 26
CMP TP % Upside EPS (INR) EPS Gr. YoY (%) P/E (x) P/B (x) ROE (%)
Company Reco (INR) (INR) Downside FY19 FY20E FY21E FY19 FY20E FY21E FY20E FY21E FY20E FY21E FY20E FY21E
Avenue Supermarts
Sell 2296 1750 -24 14.5 22.1 25.2 11.9 52.6 14.1 104.0 91.2 20.6 16.8 21.9 20.3
Aditya Birla Fashion
Buy 124 240 94 1.6 2.0 1.2 156.7 20.1 -38.7 62.7 102.3 6.6 6.2 10.6 6.3
Future Lifestyle Under Review
149 - 8.6 5.5 -1.5 30.1 -35.6 PL 26.8 NM 1.3 1.3 5.2 -1.3
Future Retail Under Review
98 - 14.6 10.7 3.7 19.1 -27.0 -65.2 9.2 26.6 0.8 0.8 10.4 2.9
Jubilant Food. Buy 1496 1715 15 24.1 24.8 24.2 62.0 2.9 -2.2 60.3 61.7 13.7 12.4 22.7 20.1
Shoppers Stop Neutral 194 240 24 7.8 -1.8 0.6 -36.3 PL LP NM 318.3 1.8 1.8 -1.7 0.6
Titan Company Neutral 912 1085 19 15.7 16.8 17.0 24.0 7.4 1.1 54.2 53.6 13.4 11.8 24.7 23.4
Trent Buy 498 575 16 2.9 2.6 2.4 11.6 -10.1 -6.7 189.5 203.2 6.1 6.0 4.3 3.2
V-Mart Retail Buy 1720 2060 20 39.5 44.0 33.5 -8.0 11.4 -23.8 39.1 51.3 6.4 5.7 17.7 11.7
Aggregate 7.2 -8.2 57.7 74.8 47.4 9.0 7.9 12.1 16.6
Technology
Cyient Neutral 215 327 52 43.4 35.8 32.7 13.4 -17.4 -8.8 6.0 6.6 0.9 0.8 14.3 12.2
HCL Tech. Buy 479 590 23 36.8 40.0 40.2 17.6 8.6 0.7 12.0 11.9 2.6 2.3 23.3 20.5
Hexaware Neutral 269 309 15 19.3 21.2 20.4 16.5 9.8 -4.0 12.7 13.2 2.9 2.6 24.8 21.0
Infosys Buy 678 775 14 37.1 39.0 36.8 3.9 5.3 -5.7 17.4 18.4 4.7 4.0 25.3 21.8
L & T Infotech Buy 1458 1783 22 86.6 84.2 92.4 30.6 -2.8 9.7 17.3 15.8 4.3 3.6 27.2 24.9
Mindtree Buy 765 827 8 44.7 37.4 37.4 55.5 -16.3 -0.2 20.4 20.5 4.0 3.8 20.2 18.9
Mphasis Neutral 694 682 -2 56.1 58.5 52.2 27.4 4.2 -10.8 11.9 13.3 2.5 2.3 21.7 18.9
NIIT Tech Neutral 1179 1095 -7 66.2 75.0 72.3 45.3 13.2 -3.5 15.7 16.3 3.2 2.8 21.3 18.3
Persistent Sys Buy 481 594 23 44.0 42.8 36.1 8.9 -2.8 -15.5 11.2 13.3 1.6 1.5 14.1 11.6
TCS Neutral 1877 1900 1 83.1 86.2 82.3 23.3 3.7 -4.5 21.8 22.8 8.2 7.0 36.4 33.1
Tech Mah Buy 523 718 37 48.2 46.3 47.1 12.8 -3.9 1.7 11.3 11.1 2.2 2.1 20.0 19.4
Wipro Neutral 181 188 4 15.3 16.6 15.4 21.6 8.5 -7.3 10.9 11.7 1.8 1.7 17.5 15.0
Zensar Tech Neutral 92 99 7 14.4 11.5 8.8 40.4 -19.7 -23.6 8.0 10.5 1.0 0.9 12.7 8.9
Aggregate 2.8 -4.4 18.3 17.3 14.6 3.9 3.4 22.3 23.3
Telecom
Bharti Airtel Buy 496 620 25 -8.7 -7.3 3.7 -350.3 Loss LP NM 132.5 3.2 3.2 -5.1 2.4
Bharti Infratel Neutral 166 189 14 13.6 17.0 12.8 -0.3 25.0 -24.7 9.8 13.0 2.1 2.1 21.7 16.9
Vodafone Idea 4 -18.5 -7.2 -5.2 93.3 Loss Loss NM NM 0.7 4.2 -53.4 -143.0
Tata Comm Neutral 372 375 1 -2.2 11.9 25.5 -288.6 LP 114.8 31.3 14.6 71.9 12.1 -1,974 142.3
Aggregate Loss Loss Loss -36 -45.2 3.2 3.5 -8.7 -7.7
Utiltites
Coal India Buy 141 202 43 28.3 23.2 18.0 47.9 -18.1 -22.6 6.1 7.8 2.7 2.4 44.5 30.3
CESC Buy 613 761 24 88.9 94.2 84.5 43.1 6.0 -10.3 6.5 7.3 0.8 0.8 13.3 10.9
JSW Energy Buy 40 65 64 4.2 4.1 3.6 40.2 -2.9 -11.7 9.6 10.9 0.5 0.5 5.6 4.8
NHPC Neutral 21 23 11 2.6 3.0 2.9 5.9 17.0 -3.9 6.9 7.2 0.6 0.6 9.6 8.8
NTPC Buy 95 148 55 11.6 13.2 14.5 30.3 13.7 10.3 7.2 6.6 0.8 0.7 11.4 11.8
Power Grid Buy 158 225 42 19.2 20.4 22.1 16.0 6.5 7.9 7.7 7.2 1.3 1.2 17.3 17.0
Torrent Power Buy 304 342 13 18.7 23.8 25.8 -4.6 27.0 8.5 12.8 11.8 1.5 1.4 12.1 12.0
Tata Power Neutral 33 58 77 2.1 3.8 4.1 -60.5 77.8 9.1 8.7 8.0 0.5 0.5 6.0 6.4
Aggregate -1.0 -3.2 25.4 7.3 5.8 1.0 1.0 14.3 16.5
Others
Brigade Enterpr. Buy 125 231 85 11.7 8.1 6.0 63.2 -31.2 -25.9 15.5 20.9 1.1 1.1 7.4 5.2
BSE Buy 370 647 75 38.1 24.9 30.4 -12.4 -34.7 22.5 14.9 12.1 0.8 0.8 5.4 6.8
Concor Buy 368 518 41 19.9 16.4 14.4 14.9 -17.7 -12.5 22.4 25.6 2.1 2.0 9.6 8.1
Coromandel Intl Buy 558 719 29 25.4 34.9 38.3 7.6 37.0 9.8 16.0 14.6 4.0 3.3 27.2 24.5
Essel Propack Buy 177 210 18 6.0 7.2 9.0 7.3 20.6 23.9 24.5 19.8 3.6 3.2 15.6 17.1
Indian Hotels Buy 79 106 35 2.4 2.6 -3.3 257.4 10.7 PL 30.2 NM 2.0 2.3 7.0 -9.1
Interglobe Neutral 932 1300 39 4.1 -5.2 -75.1 -93.0 PL Loss NM NM 5.3 7.8 -2.9 -50.7
Info Edge Neutral 2460 2400 -2 23.0 20.3 25.9 54.2 -11.5 27.5 121.2 95.0 12.0 11.2 13.9 12.3
Godrej Agrovet Buy 387 423 9 12.5 11.4 10.5 10.9 -8.7 -7.8 33.8 36.7 4.2 4.0 12.9 11.2
Kaveri Seed Buy 387 427 10 34.4 38.4 34.0 7.7 11.5 -11.4 10.1 11.4 2.6 2.5 24.3 22.5
Valuation snapshot
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valuation guide
24 April 2020 27
CMP TP % Upside EPS (INR) EPS Gr. YoY (%) P/E (x) P/B (x) ROE (%)
Company Reco (INR) (INR) Downside FY19 FY20E FY21E FY19 FY20E FY21E FY20E FY21E FY20E FY21E FY20E FY21E
Lemon Tree Hotel Buy 18 23 27 0.7 0.0 -2.0 271.9 -98.8 PL 2,205.7 NM 1.1 1.2 0.1 -12.8
MCX Buy 1060 1400 32 28.7 46.7 44.0 35.2 63.0 -5.7 22.7 24.1 3.9 3.6 18.2 15.7
Oberoi Realty Buy 354 535 51 22.5 16.0 16.2 78.1 -29.0 1.3 22.2 21.9 1.5 1.4 7.0 6.7
Phoenix Mills Buy 527 808 53 25.0 22.6 17.1 57.8 -9.3 -24.3 23.3 30.8 2.1 2.0 9.6 6.8
Quess Corp Neutral 210 410 95 17.5 17.8 21.0 -19.8 1.5 17.9 11.8 10.0 0.8 0.7 9.1 9.8
PI Inds. Buy 1513 1680 11 29.7 35.7 48.0 11.6 19.9 34.5 42.4 31.5 7.8 6.5 19.9 22.5
SRF Buy 3642 4236 16 113.7 158.0 158.7 60.0 38.9 0.4 23.0 22.9 4.3 3.7 20.4 17.3
S H Kelkar Buy 73 119 64 6.1 5.2 7.4 -13.4 -14.3 41.3 13.8 9.8 1.2 1.1 8.8 12.2
Tata Chemicals Buy 263 296 12 42.9 32.4 35.1 -10.8 -24.6 8.3 8.1 7.5 0.5 0.5 8.5 9.0
Team Lease Serv. Buy 1651 2300 39 57.3 50.8 47.1 33.4 -11.4 -7.4 32.5 35.1 4.5 4.0 14.9 12.1
Trident Buy 5 6 8 0.9 0.8 0.7 87.3 -11.1 -16.7 6.5 7.8 0.8 0.8 12.7 10.0
UPL Neutral 349 366 5 31.6 39.3 39.3 9.2 24.2 -0.1 8.9 8.9 1.7 1.5 19.6 17.5
Valuation snapshot
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valuation guide
24 April 2020 28
Index 1 Day (%) 1M (%) 12M (%) Index 1 Day (%) 1M (%) 12M (%)
Sensex 1.5 22.6 -17.4 Nifty 500 1.2 22.1 -20.5
Nifty-50 1.4 22.4 -19.5 Nifty Midcap 100 1.3 18.0 -27.1
Nifty Next 50 0.3 26.2 -16.2 Nifty Smallcap 100 1.7 19.7 -38.1
Nifty 100 1.2 22.9 -19.1 Nifty Midcap 150 1.1 18.7 -22.3
Nifty 200 1.2 22.4 -20.0 Nifty Smallcap 250 1.3 19.2 -33.4 Company 1 Day (%) 1M (%) 12M (%) Company 1 Day (%) 1M (%) 12M (%)
Automobiles 0.7 18.1 -37.1 Capital Goods -0.5 16.3 -36.0
Amara Raja Batt. 0.2 43.6 -17.4 ABB -0.4 3.7 -32.7
Ashok Leyland 3.9 29.7 -49.0 Bharat Elec. -0.7 28.4 -14.0
Bajaj Auto 2.1 25.5 -19.9 BHEL 0.2 5.9 -70.9
Bharat Forge -0.1 4.4 -47.3 Blue Star -1.0 9.3 -15.4
Bosch 2.0 25.4 -41.0 CG Cons. Elec. 4.1 19.8 -3.9 CEAT -1.5 27.0 -26.1 Cummins 1.7 6.5 -43.2
Eicher Motors 2.7 1.9 -30.9 Engineers India 4.0 34.1 -40.4
Endurance Tech. 2.8 -10.2 -50.1 Havells 2.5 6.3 -30.4
Escorts 0.3 36.4 0.8 K E C Intl 1.3 1.3 -36.5
Exide Inds. 1.6 12.8 -31.7 L&T -1.4 16.2 -37.6
Hero Motocorp -1.3 15.3 -29.3 Siemens 3.2 18.6 0.1
M & M 2.1 18.3 -47.7 Thermax 0.3 3.8 -28.1 Mahindra CIE 0.9 19.4 -63.7 Voltas 0.8 3.7 -18.3
Maruti Suzuki -0.4 22.5 -26.7 Cement 0.3 19.9 -28.4
Motherson Sumi 0.6 37.8 -51.0 Ambuja Cem. -3.0 17.8 -24.4
Tata Motors -0.3 8.5 -67.3 ACC -3.4 19.0 -28.3
TVS Motor Co. -1.2 -9.6 -41.8 Birla Corp. -0.2 3.0 -17.1
Banks-Private 3.2 21.6 -34.9 Dalmia Bhar. 1.1 30.2 -50.5
AU Small Fin. Bank -4.5 -13.5 -17.0 Grasim Inds. -1.8 15.5 -42.4 Axis Bank -0.3 39.4 -42.9 India Cem -0.1 16.6 1.4
Bandhan Bank 1.1 14.8 -65.1 J K Cements 0.2 25.7 33.1
DCB Bank -1.0 -3.0 -57.9 JK Lakshmi Ce 0.6 -0.1 -43.2
Equitas Holdings 19.0 46.0 -56.6 Ramco Cem 1.3 15.5 -25.3
Federal Bank 1.9 12.0 -52.8 Shree Cem -3.0 10.1 -3.3
HDFC Bank 2.8 23.9 -15.0 Ultratech 0.2 12.7 -18.0
ICICI Bank 5.0 24.3 -11.0 Consumer -1.4 24.2 -5.6 IndusInd Bank -1.3 21.9 -75.2 Asian Paints 0.4 21.5 27.2
Kotak Mah. Bank 8.6 13.6 -8.0 Britannia -0.1 38.2 -1.6
RBL Bank 1.2 -24.6 -84.2 Colgate -1.7 35.1 22.4
Banks-PSU -0.4 2.6 -58.0 Dabur -0.7 25.8 23.7
BOB 0.3 -10.2 -60.6 Emami 1.1 25.6 -47.4
PNB 0.0 -12.1 -64.3 Godrej Cons. 1.8 25.1 -19.5
SBI -1.0 2.9 -38.9 GSK Cons. 0.0 31.2 49.0 NBFCs 2.5 18.2 -20.2 HUL -3.0 23.7 33.0
Aditya Birla Cap 1.2 20.8 -49.2 ITC -0.9 17.1 -40.4
Bajaj Fin. 1.3 -3.9 -28.3 Jyothy Lab 2.6 35.0 -33.6
Cholaman.Inv.&Fn 0.8 11.3 -46.5 Marico -2.2 25.2 -16.9
HDFC 0.0 8.8 -14.1 Nestle -1.3 34.6 59.4
HDFC Life Insur. -3.1 42.5 22.6 Page Inds 1.1 5.6 -23.0
L&T Fin.Holdings 4.5 27.6 -55.5 Pidilite Ind. 0.2 20.6 27.3 LIC Hsg Fin 9.0 49.7 -42.6 P&G Hygiene 0.4 20.0 2.3
M&M Fin. 3.3 4.1 -63.3 Tata Consumer -0.1 45.6 57.4
Muthoot Fin 7.5 60.8 38.9 United Brew -0.5 14.7 -35.1
MAS Financial Serv. -2.7 19.4 5.1 United Spirits -2.2 18.0 -4.3
ICICI Pru Life -2.4 50.1 -2.0 Healthcare 0.1 46.0 0.0
IIFL Wealth Mgt 7.9 20.8 Alembic Phar 9.6 55.6 28.4
PNB Housing 3.5 24.3 -72.7 Alkem Lab -0.8 11.3 45.6 Company 1 Day (%) 1M (%) 12M (%) Ajanta Pharma 2.8 28.0 29.6
Repco Home 0.7 -15.3 -72.8 Aurobindo -2.2 113.7 -19.3
Shriram City Union -0.7 -21.4 -57.9 Biocon -3.6 36.2 13.2
Shriram Trans. 5.7 41.9 -45.0 Cadila 0.1 18.4 0.9
Note: Sectoral performance are of NSE/BSE Indices
Index and MOFSL Universe stock performance
24 April 2020 29
Company 1 Day (%) 1M (%) 12M (%) Company 1 Day (%) 1M (%) 12M (%)
Cipla -0.1 55.4 4.4 HCL Tech. 3.4 14.5 -13.2
Divis Lab 1.6 30.8 43.3 Hexaware 2.1 29.7 -21.9
Dr Reddy’s -0.7 45.6 43.0 Infosys 5.7 28.8 -6.8
Glenmark 6.9 80.9 -46.0 L&T Infotech 2.9 12.8 -13.4
GSK Pharma 0.7 29.2 12.1 Mindtree 4.6 4.4 -21.6 IPCA Labs -1.7 11.8 57.6 Mphasis 3.3 8.4 -27.9
Jubilant Life 5.0 53.0 -43.7 NIIT Tech 8.7 36.7 -9.5
Laurus Labs 0.0 46.1 20.3 Persistent Sys -0.9 2.1 -24.1
Lupin 1.9 39.0 -4.9 TCS 6.0 12.9 -13.0
Strides Pharma 4.1 26.8 -26.8 Tech Mah 0.9 6.7 -34.9
Sun Pharma 0.6 47.3 1.9 Wipro 1.4 6.3 -37.8
Torrent Pharma -1.0 34.8 33.8 Zensar Tech 2.5 31.2 -60.2 Infrastructure -0.3 24.2 -16.7 Telecom -0.7 22.3 8.2
Ashoka Buildcon 0.0 39.5 -49.8 Bharti Airtel -1.1 22.1 56.8
IRB Infra.Devl. -0.4 51.6 -41.8 Bharti Infra. -0.8 16.2 -43.6
KNR Construct. 0.6 7.5 -14.7 Idea Cellular 9.3 37.5 -74.6
Media 1.1 14.6 -50.7 Tata Comm -1.5 61.1 5.7
PVR -1.9 -19.3 -41.7 Utiltites -1.2 13.8 -26.8
Sun TV -0.6 31.4 -35.9 Coal India 0.0 10.3 -44.9 Zee Ent. 4.1 28.2 -61.5 CESC 1.4 48.5 -11.1
Metals 1.3 13.3 -44.3 JSW Energy -1.1 -8.3 -44.8
Hindalco 2.7 26.4 -44.6 NHPC Ltd -1.7 14.6 -10.5
Hind. Zinc 2.9 36.9 -37.6 NTPC -2.4 25.0 -28.8
JSPL 1.6 -2.5 -50.5 Power Grid -2.6 3.4 -18.0
JSW Steel -0.7 10.8 -44.5 Tata Power 0.6 -0.8 -52.1
Nalco 0.0 20.0 -36.7 Torrent Power 2.3 21.5 17.8 NMDC 3.2 21.9 -25.1 Others
SAIL 1.3 16.1 -51.2 Brigade Enterpr. 0.9 -0.2 -22.0
Vedanta 1.9 23.7 -55.6 BSE 1.2 30.5 -40.1
Tata Steel 0.7 -0.3 -48.4 Coromandel Intl 3.2 11.8 31.0
Oil & Gas 0.5 25.2 -23.5 Concor 0.2 23.0 -27.1
Aegis Logistics 0.2 30.6 -12.3 Essel Propack 2.5 24.7 32.8
BPCL -0.4 31.9 5.6 Godrej Agrovet 2.1 32.4 -25.9 Castrol India 6.4 33.3 -20.8 Indian Hotels 1.2 5.4 -48.2
GAIL -1.1 6.7 -50.9 Interglobe -2.9 9.7 -36.5
Gujarat Gas -2.2 28.1 65.9 Info Edge -1.4 46.3 27.9
Gujarat St. Pet. 1.9 17.5 2.3 Kaveri Seed 3.9 31.5 -14.8
HPCL -1.6 14.0 -17.5 Lemon Tree Hotel 4.0 -30.8 -75.7
IOC 0.1 2.8 -44.4 MCX 7.1 21.8 37.4
IGL 0.7 47.5 43.5 Oberoi Realty 0.3 -12.9 -32.9 Mahanagar Gas -2.0 30.4 -7.6 Phoenix Mills -3.1 -8.6 -12.2
MRPL 0.6 40.8 -54.4 PI Inds. 2.7 43.7 50.0
Oil India -0.1 17.1 -51.7 Quess Corp 1.3 -6.2 -69.2
ONGC 3.0 11.3 -59.0 SRF 5.7 35.5 48.0
PLNG 0.5 17.7 -5.0 S H Kelkar -4.4 3.1 -51.6
Reliance Ind. 0.6 55.2 0.6 Tata Chemicals 5.4 30.7 2.4
Aditya Bir. Fas. 1.6 -23.0 -41.9 Team Lease Serv. 2.1 2.3 -43.8 Retail Trident 2.6 53.5 -23.5
Avenue Super. 0.2 25.7 78.1 UPL -1.4 36.0 -44.6
Future Lifestyle 5.0 -11.7 -69.1
Future Retail 5.0 -8.0 -76.8
Jubilant Food -1.0 16.1 13.5
Shoppers St. 1.5 -2.1 -57.1
Titan Co. -4.2 14.3 -19.1 Trent 5.2 23.1 40.3
V-Mart Retail 2.7 25.6 -36.3
Technology 4.4 17.4 -18.8
Cyient 0.0 -6.8 -63.3
Index and MOFSL Universe stock performance
24 April 2020 30
Explanation of Investment Rating
Investment Rating Expected return (over 12-month)
BUY >=15%
SELL < - 10%
NEUTRAL > - 10 % to 15%
UNDER REVIEW Rating may undergo a change
NOT RATED We have forward looking estimates for the stock but we refrain from assigning recommendation
*In case the recommendation given by the Research Analyst is inconsistent with the investment rating legend for a continuous period of 30 days, the Research Analyst shall within following 30 days take appropriate measures to make the recommendation consistent with the investment rating legend.
Disclosures: The following Disclosures are being made in compliance with the SEBI Research Analyst Regulations 2014 (herein after referred to as the Regulations). Motilal Oswal Financial Services Ltd. (MOFSL) is a SEBI Registered Research Analyst having registration no. INH000000412. MOFSL, the Research Entity (RE) as defined in the Regulations, is engaged in the business of providing Stock broking services, Investment Advisory Services, Depository participant services & distribution of various financial products. MOFSL is a subsidiary company of Passionate Investment Management Pvt. Ltd.. (PIMPL). MOFSL is a listed public company, the details in respect of
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CIN No.: L67190MH2005PLC153397.Correspondence Office Address: Palm Spring Centre, 2nd Floor, Palm Court Complex, New Link Road, Malad(West), Mumbai- 400 064. Tel No: 022 7188 1000.Registration Nos.: Motilal Oswal Financial Services Limited (MOFSL)*: INZ000158836(BSE/NSE/MCX/NCDEX); CDSL and NSDL: IN-DP-16-2015; Research Analyst: INH000000412. AMFI: ARN - 146822; Investment Adviser: INA000007100; Insurance Corporate Agent: CA0579 ;PMS:INP000006712. Motilal Oswal Asset Management Company Ltd. (MOAMC): PMS (Registration No.: INP000000670); PMS and Mutual Funds are offered through MOAMC which is group company of MOFSL. Motilal Oswal Wealth Management Ltd. (MOWML): PMS (Registration No.: INP000004409)
is offered through MOWML, which is a group company of MOFSL. Motilal Oswal Financial Services Limited is a distributor of Mutual Funds, PMS, Fixed Deposit, Bond, NCDs,Insurance Products and IPOs.Real Estate is offered through Motilal Oswal Real Estate Investment Advisors II Pvt. Ltd. which is a group company of MOFSL. Private Equity is offered through Motilal Oswal Private Equity Investment Advisors Pvt. Ltd which is a group company of MOFSL. Research & Advisory services is backed by proper research. Please read the Risk Disclosure Document prescribed by the Stock Exchanges carefully before investing. There is no assurance or guarantee of the returns. Investment in securities market is subject to market risk, read all the related documents carefully before investing. Details of Compliance Officer: Name: Neeraj Agarwal, Email ID: [email protected], Contact No.:022-71881085.* MOFSL has been amalgamated with Motilal Oswal Financial Services Limited (MOFSL) w.e.f August 21, 2018 pursuant to order dated
July 30, 2018 issued by Hon'ble National Company Law Tribunal, Mumbai Ben