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ValueGuideJuly 2019

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Registered O�ce: Sharekhan Limited, 10th Floor, Beta Building, Lodha iThink Techno Campus, O�. JVLR, Opp. Kanjurmarg Railway Station, Kanjurmarg (East), Mumbai – 400042, Maharashtra. Tel: 022 - 61150000. Sharekhan Ltd.: SEBI Regn. Nos.: BSE / NSE / MSEI (CASH / F&O / CD) / MCX - Commodity: INZ000171337; DP: NSDL/CD-SL-IN-DP-365-2018; PMS: INP000005786; Mutual Fund: ARN 20669; Research Analyst: INH000006183; Compliance O¤cer: Mr. Joby John Meledan; Tel: 022-61150000; email id: [email protected]; For any queries or grievances kindly email [email protected] or contact: [email protected]: Client should read the Risk Disclosure Document issued by SEBI & relevant exchanges and the T&C on www.sharekhan.com; Investment in securities market are subject to market risks, read all the related documents carefully before investing.

CONTENTS

3July 2019 Sharekhan ValueGuide3June 2017 Sharekhan ValueGuide

disclaimer

Disclaimer: This document has been prepared by Sharekhan Ltd. (SHAREKHAN) and is intended for use only by the person or entity to which it is addressed to. This Document may contain confidential and/or privileged material and is not for any type of circulation and any review, retransmission, or any other use is strictly prohibited. This Document is subject to changes without prior notice. This document does not constitute an offer to sell or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. Though disseminated to all customers who are due to receive the same, not all customers may receive this report at the same time. SHAREKHAN will not treat recipients as customers by virtue of their receiving this report.

The information contained herein is obtained from publicly available data or other sources believed to be reliable and SHAREKHAN has not independently verified the accuracy and completeness of the said data and hence it should not be relied upon as such. While we would endeavour to update the information herein on reasonable basis, SHAREKHAN, its subsidiaries and associated compa-nies, their directors and employees (“SHAREKHAN and affiliates”) are under no obligation to update or keep the information current. Also, there may be regulatory, compliance, or other reasons that may prevent SHAREKHAN and affiliates from doing so. This document is prepared for assistance only and is not intended to be and must not alone be taken as the basis for an investment decision. Recipients of this report should also be aware that past performance is not necessarily a guide to future performance and value of investments can go down as well. The user assumes the entire risk of any use made of this information. Each recipient of this document should make such investigations as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in this document (including the merits and risks involved), and should consult its own advisors to determine the merits and risks of such an investment. The investment discussed or views expressed may not be suitable for all investors. We do not undertake to advise you as to any change of our views. Affiliates of Sharekhan may have issued other reports that are inconsistent with and reach different conclusions from the information presented in this report.

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Registered Office: Sharekhan Limited, 10th Floor, Beta Building, Lodha iThink Techno Campus, Off. JVLR, Opp. Kanjurmarg Railway Station, Kanjurmarg (East), Mumbai – 400042, Maharashtra. Tel: 022 - 61150000. Sharekhan Ltd.: SEBI Regn. Nos.: BSE / NSE / MSEI (CASH / F&O / CD) / MCX - Commodity: INZ000171337; DP: NSDL/CDSL-IN-DP-365-2018; PMS: INP000005786; Mutual Fund: ARN 20669; Research Analyst: INH000006183; For any complaints email at [email protected]. Disclaimer: Client should read the Risk Disclosure Document issued by SEBI & relevant exchanges and the T&C on www.sharekhan.com; Investment in securities market are subject to market risks, read all the related documents carefully before investing.

Though Budget 2019

failed to meet the

street expectations

on several counts –

lack of any specific

stimuli to supporting

a sluggish economy,

or tax cuts for the

From the Editor’s Desk

PMS DESK

ProPrime - Prime Picks 25

ProPrime - Diversified Equity 26

MUTUAL FUND DESK

Top MF Picks (equity) 28

Top SIP Fund Picks 30

06

EQUITY

FUNDAMENTALS

TECHNICALS DERIVATIVES

Nifty 21 View 22

ADVISORY DESK DERIVATIVES

MID Trades 27 Derivatives Ideas 27

CURRENCY

FUNDAMENTALS

USD-INR 23 GBP-INR 23

EUR-INR 23 JPY-INR 23

TECHNICALS

USD-INR 24 GBP-INR 24

EUR-INR 24 JPY-INR 24

Stock Idea 07 REGULAR FEATURES

Stock Update 08 Report Card 04

Sector Update 16 Earnings Guide 32

consumer – the government’s focus on laying a clear

roadmap for the economy is promising.

EQUITY FUNDAMENTALSREPORT CARD

4July 2019 Sharekhan ValueGuide

STOCK IDEAS STANDING (AS ON JULY 03, 2019)

COMPANYCURRENT

RECOPRICE AS ON

03-JULY-19PRICE

TARGET 52 WEEK ABSOLUTE PERFORMANCE RELATIVE TO SENSEX

HIGH LOW 1M 3M 6M 12M 1M 3M 6M 12M

Automobiles

Apollo Tyres Buy 201 230 300 174 1.1 -10.5 -14.6 -20.4 1.3 -13.6 -24.1 -29.8

Ashok Leyland Hold 90 100 137 78 -3.3 2.9 -7.1 -28.3 -3.1 -0.7 -17.4 -36.8

Bajaj Auto Hold 2898 3250 3214 2420 -3.0 1.2 5.9 -0.9 -2.8 -2.3 -5.9 -12.5

Gabriel India Hold 111 145 159 106 -18.5 -26.7 -25.4 -19.5 -18.3 -29.2 -33.7 -29.0

Hero MotoCorp Hold 2588 2800 3695 2475 -5.3 -1.2 -11.1 -22.3 -5.1 -4.6 -21.0 -31.5

M&M Buy 669 810 993 597 3.3 2.9 -7.4 -24.7 3.5 -0.7 -17.7 -33.6

Maruti Suzuki Hold 6534 7150 9929 6318 -7.2 -8.0 -9.5 -28.4 -7.0 -11.2 -19.6 -36.8

Rico Auto Industries Hold 61 70 87 56 -12.0 -5.0 -12.1 -10.2 -11.8 -8.3 -21.9 -20.8

TVS Motor Hold 435 480 605 424 -12.6 -11.4 -19.8 -25.1 -12.4 -14.5 -28.7 -33.9

BSE Auto Index 18140 25157 17442 -2.9 -5.6 -8.3 -24.4 -2.7 -8.8 -18.5 -33.2

Banks & Finance

Axis Bank Buy 806 900 828 509 -1.6 6.3 30.7 57.3 -1.4 2.6 16.2 38.8

Bajaj Finance Buy 3715 ** 3762 1912 5.7 22.8 44.9 60.4 5.9 18.5 28.8 41.5

Bajaj Finserv Hold 8430 ** 8578 4955 2.7 16.7 33.2 41.6 2.9 12.6 18.4 24.9

Bank of Baroda Buy 126 140 158 91 -2.4 -1.4 6.3 14.4 -2.2 -4.8 -5.5 1.0

Bank of India Hold 93 ** 110 73 -2.0 -6.5 -13.1 10.0 -1.8 -9.8 -22.7 -2.9

Federal Bank Buy 110 118 110 67 1.0 14.5 14.8 31.9 1.2 10.5 2.1 16.4

HDFC Buy 2277 2300 2301 1645 2.5 11.7 15.8 19.8 2.7 7.8 2.9 5.7

HDFC Bank Buy 2490 2750 2503 1884 1.9 9.4 18.0 18.8 2.1 5.6 4.9 4.8

ICICI Bank Buy 436 520 444 257 4.1 12.2 19.4 60.4 4.3 8.3 6.2 41.5

LIC Housing Finance Hold 569 ** 587 388 0.5 6.6 16.5 24.3 0.7 2.9 3.6 9.7

Max Financial Hold 420 480 534 344 -7.7 -5.5 -5.9 1.8 -7.5 -8.8 -16.4 -10.2

Punjab National Bank Buy 81 98 100 58 -0.4 -12.4 0.9 7.8 -0.2 -15.4 -10.3 -4.8

SBI Buy 366 390 373 247 4.3 14.2 23.4 42.7 4.5 10.2 9.7 25.9

Union Bank of India Reduce 84 70 100 61 8.7 -8.1 -8.0 6.4 8.9 -11.3 -18.2 -6.1

Yes Bank Hold 100 ** 404 90 -37.0 -63.6 -48.6 -70.9 -36.9 -64.9 -54.3 -74.3

BSE Bank Index 35190 35718 26992 -0.4 5.2 16.2 20.8 -0.2 1.5 3.3 6.6

Consumer goods

Britannia Buy 2795 3475 3472 2610 -4.1 -6.6 -9.0 -9.4 -3.9 -9.8 -19.1 -20.1

Emami Hold 303 393 600 246 -11.2 -25.1 -26.5 -40.6 -11.0 -27.7 -34.7 -47.5

GSK Consumer Hold 7780 7931 7948 6150 2.5 11.3 4.7 22.4 2.7 7.4 -7.0 8.0

Godrej Consumer Products Hold 673 734 979 627 -3.7 0.2 -15.5 -18.8 -3.5 -3.3 -24.9 -28.4

Hindustan Unilever Buy 1785 1990 1871 1477 -0.5 8.4 1.4 8.4 -0.3 4.6 -9.9 -4.3

ITC Buy 277 347 323 264 -0.6 -4.0 0.7 7.0 -0.4 -7.3 -10.5 -5.5

Jyothy Laboratories Hold 160 180 245 143 -5.5 -11.7 -21.0 -33.1 -5.3 -14.8 -29.8 -41.0

Marico Buy 373 425 397 283 -0.7 5.5 -0.5 10.3 -0.5 1.8 -11.5 -2.7

Zydus Wellness Hold 1364 1410 1980 1085 3.1 5.4 2.4 -0.3 3.3 1.7 -9.0 -12.0

BSE FMCG Index 11442 12850 10498 -1.0 -0.3 -0.9 3.4 -0.8 -3.8 -11.9 -8.8

IT / IT services

HCL Technologies Buy 1051 1250 1190 920 -4.2 -5.0 12.0 13.3 -4.0 -8.3 -0.4 0.0

Infosys Buy 731 840 774 597 1.2 -0.5 13.2 12.4 1.4 -4.0 0.6 -0.8

Persistent Systems Hold 616 720 915 532 4.5 0.5 8.8 -24.0 4.7 -3.0 -3.2 -32.9

Tata Consultancy Services Buy 2238 2400 2293 1784 2.7 12.2 20.7 21.9 2.9 8.3 7.3 7.6

Wipro Hold 283 305 302 195 -3.4 9.6 17.0 44.9 -3.2 5.8 4.0 27.9

BSE IT Index 15651 16301 13179 0.2 2.7 13.8 13.0 0.4 -0.9 1.2 -0.3

Capital goods / Power

CESC Buy 791 905 813 621 0.3 7.3 21.9 17.4 0.5 3.6 8.4 3.6

Finolex Cable Hold 415 515 649 356 -10.2 -10.8 -9.2 -28.4 -10.0 -13.9 -19.3 -36.8

Greaves Cotton Hold 147 155 165 111 -4.2 -0.1 28.3 13.0 -4.0 -3.6 14.0 -0.2

Kalpataru Power Transmission Buy 529 620 555 267 2.9 15.0 40.3 37.7 3.1 11.0 24.7 21.5

KEC International Buy 328 375 355 230 5.3 15.5 14.1 0.1 5.5 11.5 1.5 -11.6

PTC India Hold 67 75 94 64 -4.5 -10.8 -26.3 -3.9 -4.3 -13.9 -34.5 -15.2

Thermax Hold 1052 1075 1206 873 4.4 10.4 -6.9 3.5 4.6 6.5 -17.2 -8.7

Triveni Turbine Hold 104 115 136 94 -2.3 -7.5 -4.7 -11.4 -2.1 -10.7 -15.3 -21.8

V-Guard Industries Hold 242 255 252 159 1.5 11.3 13.8 31.3 1.7 7.4 1.1 15.9

EQUITY FUNDAMENTALS REPORT CARD


STOCK IDEAS STANDING (AS ON JULY 03, 2019)

COMPANYCURRENT

RECOPRICE AS ON

03-JULY-19PRICE

TARGET 52 WEEK ABSOLUTE PERFORMANCE RELATIVE TO SENSEX

HIGH LOW 1M 3M 6M 12M 1M 3M 6M 12M

Va Tech Wabag Hold 339 ** 413 243 0.5 8.6 27.9 -8.1 0.7 4.8 13.7 -18.9

BSE Power Index 2144 2159 1727 6.4 6.1 11.4 16.1 6.6 2.4 -1.0 2.5

BSE Capital Goods Index 20046 20387 16113 -0.2 9.5 9.2 16.3 0.0 5.7 -2.9 2.7

Infrastructure / Real estate

Gayatri Projects Hold 156 200 212 145 -16.4 -5.0 -14.7 -7.7 -16.2 -8.3 -24.1 -18.5

IRB Infra Hold 95 150 216 84 -20.8 -33.6 -39.3 -53.8 -20.6 -35.9 -46.1 -59.2

Larsen & Toubro Buy 1578 1820 1607 1183 0.1 14.8 13.2 26.4 0.3 10.8 0.7 11.5

Sadbhav Engineering Buy 244 285 316 162 -7.2 -2.7 9.7 -13.1 -7.0 -6.0 -2.4 -23.3

CNX Infra Index 3426 3453 2778 2.0 7.6 10.7 15.0 2.2 3.8 -1.6 1.4

BSE Real estate Index 2234 2277 1535 1.8 6.8 23.5 9.7 2.0 3.1 9.8 -3.2

Oil & gas

Oil India Ltd Buy 178 230 227 165 -2.4 -0.6 6.8 -10.0 -2.2 -4.0 -5.0 -20.6

Petronet LNG Buy 250 270 255 200 2.4 5.8 14.4 20.0 2.6 2.1 1.7 5.9

Reliance Ind Buy 1283 1630 1418 959 -5.0 -5.1 16.9 29.7 -4.8 -8.4 3.9 14.4

Selan Exploration Technology Hold 175 250 278 159 0.5 -6.7 -11.3 -11.2 0.7 -9.9 -21.1 -21.6

BSE Oil and gas Index 14741 15930 12040 -5.8 0.9 11.8 12.0 -5.6 -2.6 -0.6 -1.2

Pharmaceuticals

Aurobindo Pharma Hold 596 710 838 565 -7.4 -22.9 -16.5 -2.9 -7.3 -25.5 -25.8 -14.3

Cadila Healthcare Hold 237 290 433 223 -8.0 -31.3 -31.2 -39.5 -7.8 -33.6 -38.9 -46.6

Cipla Buy 553 720 678 476 -2.0 5.9 7.6 -11.9 -1.8 2.2 -4.4 -22.2

Divi's Labs Buy 1631 1850 1775 1040 2.1 -4.8 10.9 48.1 2.3 -8.1 -1.4 30.7

Glenmark Pharmaceuticals Hold 443 595 712 438 -18.6 -32.7 -33.7 -26.1 -18.4 -35.1 -41.1 -34.8

IPCA Lab Buy 959 1135 1046 590 1.6 -1.4 20.6 32.4 1.9 -4.8 7.2 16.9

Lupin Reduce 753 ** 986 697 1.9 -4.4 -9.0 -18.8 2.1 -7.7 -19.1 -28.3

Sun Pharmaceutical Industries Hold 396 460 679 345 -4.6 -15.8 -9.6 -32.1 -4.4 -18.7 -19.6 -40.1

Torrent Pharma Hold 1553 1720 1964 1405 1.0 -18.5 -14.1 9.5 1.2 -21.3 -23.7 -3.4

BSE Health Care Index 12936 16497 12448 -3.0 -10.0 -6.7 -9.5 -2.8 -13.1 -17.0 -20.1

Building materials

Grasim Buy 928 1160 1093 689 6.2 12.8 16.8 -1.9 6.4 8.9 3.8 -13.4

Shree Cement Hold 21487 22130 22400 13100 1.9 14.5 29.3 35.5 2.1 10.5 14.9 19.6

The Ramco Cements Buy 791 870 845 546 -2.5 4.8 25.6 12.7 -2.3 1.1 11.6 -0.6

UltraTech Cement Buy 4561 5000 4905 3260 -1.0 13.9 18.7 22.9 -0.8 9.9 5.5 8.4

Discretionary consumption

Arvind* Hold 67 95 155 57 -10.0 -25.0 -28.7 -50.6 -9.8 -27.6 -36.6 -56.4

Arvind Fashions Buy 683 1150 1090 591 -12.7 -31.3 - - -12.5 -33.7 - -

Century Plyboards (India) Hold 173 190 264 150 -0.2 -16.4 0.4 -30.1 0.0 -19.3 -10.7 -38.3

Info Edge (India) Hold 2274 2350 2444 1154 1.6 23.7 47.2 97.6 1.8 19.4 30.9 74.4

Inox Leisure Buy 323 390 383 188 -12.9 8.0 24.1 25.2 -12.8 4.2 10.3 10.5

Kewal Kiran Clothing Ltd Hold 1179 1415 1560 1026 -3.9 -7.2 -1.6 -11.6 -3.7 -10.5 -12.5 -21.9

Orbit Exports Hold 120 177 163 85 4.3 5.9 1.2 -12.6 4.5 2.2 -10.0 -22.9

Relaxo Footwear# Buy 466 485 499 332 9.5 9.9 23.6 32.3 9.8 6.1 9.8 16.8

Titan Company Limited Buy 1328 1375 1341 732 3.4 16.7 39.0 46.2 3.6 12.6 23.5 29.0

Wonderla Holidays Hold 276 338 376 259 -9.6 -11.7 3.9 -13.1 -9.4 -14.7 -7.6 -23.4

Zee Entertainment Hold 361 ** 554 288 3.0 -14.6 -23.2 -33.9 3.2 -17.5 -31.7 -41.7

Diversified / Miscellaneous

Bajaj Holdings Buy 3724 3924 3800 2204 5.9 11.6 25.7 27.1 6.2 7.7 11.8 12.2

Bharat Electronics Buy 113 140 124 73 0.4 16.7 26.0 11.3 0.6 12.6 12.0 -1.8

Bharti Airtel Buy 353 390 371 254 2.9 10.7 22.5 9.1 3.1 6.9 8.9 -3.7

Gateway Distriparks Hold 128 140 191 96 -13.9 0.9 7.6 -24.6 -13.7 -2.6 -4.3 -33.4

PI Industries Buy 1194 1280 1230 676 4.6 16.0 41.0 52.1 4.9 12.0 25.3 34.3

Ratnamani Metals and Tubes Buy 1006 1150 1035 736 5.7 11.5 9.5 11.2 5.9 7.6 -2.6 -1.9

Supreme Industries Limited Hold 1126 ** 1275 936 5.7 -0.3 3.4 2.6 5.9 -3.8 -8.1 -9.4

UPL# Buy 652 724 709 358 3.6 13.3 39.6 71.3 3.8 9.4 24.1 51.1

BSE500 Index 15450 15938 13287 -0.8 1.8 8.4 7.4 -0.6 -1.8 -3.6 -5.2

CNX500 Index 9757 10050 8371 -0.8 1.9 8.6 7.7 -0.6 -1.6 -3.4 -5.0

CNXMCAP Index 17820 20088 15803 -1.6 -1.4 1.5 -1.3 -1.4 -4.8 -9.7 -12.9

** Price under review * Reco price adjusted for demerger # Reco price adjusted for bonus ^ Reco price adjusted for stock split

NEW

NEW

NEW


Look beyond the Budget

Though Budget 2019 failed to meet the street expectations on several counts – lack of any

specific stimuli to supporting a sluggish economy, or tax cuts for the consumer – the government’s

focus on laying a clear roadmap for the economy is promising. Prime among these are the

commitment to make huge investments in infrastructure development, recapitalisation of

stressed PSU banks, easing liquidity stress for quality NBFCs and a firm commitment to maintain

fiscal prudence.

But clearly, it appears that Dalal Street may not want to swallow the pill that the government

prescribed - with the Sensex slumping nearly 1,200-1,500 points so far. The recent volatility

cannot be attributed just to the Union Budget alone. The global environment has also turned

uncertain with few of the large global banks raising red flags over the pressures faced by them

in particular and the slowing growth momentum of the global economy in general. The inability

of world leaders to amicably resolve trade tensions is also adding to the woes of equity markets

globally.

For now, the focus shifts to the Q1FY20 earnings season. Investors thus need to look beyond

the Budget now. Some of the key trends investors would keenly watch in Q1 results are: 1)

Continued improvement in health of corporate lending banks and further easing of asset quality

issues; 2) Signs of a pick-up in demand in the industrial sector; and lastly, the extent of weakness

in consumer demand.

The commentary from the management of some of the leading companies in the consumer

sector or consumer lending space is not very encouraging and could result in a reset of earnings

estimates for consumer sector at large. Given the lofty valuations in the consumer space, a

correction could be steep and quick in some of the quality companies.

Interestingly, the recent volatility and reset in earnings outlook of some of the evergreen

consumer stocks would bring down valuations to more reasonable level and perhaps in line

with the situation prior to the election rally during April-May this year. Also, the improving

growth outlook for companies operating in the railways, roads and water related space offers

an opportunity for the investors. Thus, we see the current phase as an opportunity for long-term

investments in quality companies at much more reasonable valuations.

After all, India is on a path to almost double its size to $5 trillion economy in the next few

years as compared to close to 70 years taken to cross the $2.5 trillion mark. The goal, though

ambitious, is achievable and can’t be done with substantial improvement in corporate earnings

and an improvement in the economic growth momentum in the country. Thus, the long term

investments need to keep the promising big picture in mind rather than get distracted by near-

term volatility.

Happy Investing!

Fro

m t

he

Ed

ito

r’s

De

skFrom the Editor’s Desk

EQUITY FUNDAMENTALS STOCK IDEA


Date Company Report TypeRecommendation Reco Price

(Rs.)

Price Target/ Upside (%)

Latest Chg Latest Chg

Jun 19, 2019 JMC Projects Viewpoint POSITIVE New Initiation 124 18-20 -

Summary

• We initiate Viewpoint Coverage on JMC Projects (JMC) with a Positive view and 18-20% upside potential.

• JMC’s strong order book and execution capabilities to lead to a 16% CAGR in revenue/PAT over FY2019-FY2021E.

• JMC provides quality balance sheet due to strong operating cash flow generation, low leverage and healthy return ratios.

• Divestment of road BOT assets to deleverage the consolidated balance sheet, halting loss funding.

Read report - https://www.sharekhan.com/MediaGalary/Equity/JMC_Projects-June19_19.pdf

Jun 20, 2019 City Union Bank Viewpoint POSITIVE New Initiation 212 18-20 -

Summary

• We Initiate viewpoint coverage on City Union Bank Limited (CUB) with a Positive view with an upside potential of 18-20%.

• CUB has been a consistent performer over the years across asset cycles, staying away from riskier areas and sticking to its

strengths.

• We believe CUB is well positioned to capitalise from decreased competition in the lending market.

• CUB currently trades at ~2.5x its FY2021E book value, which considering its stable asset quality, strong execution skills and

consistent return ratios despite deep and industry wide stress seen in recent times, justify its valuation.

Read report - https://www.sharekhan.com/MediaGalary/Equity/CityUnion-June20_19.pdf

Jun 27, 2019 ICICI Lombard General Insurance Viewpoint POSITIVE New Initiation 1,121 18-20 -

Summary

• We initiate coverage on ICICI Lombard with a Positive view and envisage a 18-20%% upside potential for the stock.

• ICICI Lombard General Insurance (ILGI) is a strong player with the highest market share (among private general insurers) and

well placed to benefit from the growing General Insurance market.

• Recent regulatory changes & developments are favorable for General Insurance players in general, and augur well for ICICI

Lombard as well.

• Due to Its strong underwriting skills, effective technology leveraging and diversified channel mix, we expect it to post earnings

CAGR of 32% FY19-FY21E, making it attractive growth opportunity.

Read report - https://www.sharekhan.com/MediaGalary/Equity/ICICI_Lombard-June27_19.pdf

� Upgrade � No change � Downgrade

� Note: The arrow indicates change in call and price target, if any, vis-à-vis the previous report

Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a position in the companies mentioned in the article.

EQUITY FUNDAMENTALSStock Update



(Rs.)



Jun 03, 2019 Gayatri Projects Stock Update HOLD 184 200

Summary

• We maintain our Hold rating on the stock with a revised sum-of-the-parts (SOTP)-based PT of Rs. 200 as its EPC business,

adjusting for its BoT and power investments, is valued at a P/E of 10.5x FY2021E, which provides limited upside potential.

• In Q4FY19, GPL standalone revenue grew by 23% y-o-led by strong project execution, OPM dipped 246 bps y-o-y. Lower

interest expenses boosted net earnings by 27% y-o-y.

• Order book stays strong at 4.7x its FY2019 standalone revenue; company expects order momentum to continue and has

guided for a more than 25% revenue growth, a 30-40% rise in PAT and stable OPM for FY2020.

Read report - https://www.sharekhan.com/MediaGalary/StockIdea/Gayatri-June03_19.pdf

Jun 04, 2019 Bharti Airtel Stock Update BUY 353 390

Summary

• We maintain Buy on Bharti Airtel with a revised PT of Rs. 390, considering its resilient performance in a tough environment and

some signs of stability in India wireless business.

• Planned unlocking the value of its holdings in its subsidiaries and divestment of tower business stake would further reduce net

debt/EBITDA level to around 2.6x and provide cash flow support.

• India wireless business surprised positively during Q4FY2019, with revenue and EBITDA growth of 4%/32% q-o-q, respectively;

steep increase in ARPU to Rs. 123 (18.6% q-o-q).

• DTH business performed well despite uncertainty around new tariff order implementation; ARPU improved while other industry

players struggled during the quarter.

Read report - https://www.sharekhan.com/MediaGalary/StockIdea/BhartiAirtel-June04_19.pdf

Jun 10, 2019 Atul Limited Viewpoint POSITIVE 4,050 10-12

Summary

• We maintain our Positive view on Atul Limited (Atul) with a revised potential upside of 10-12%.

• We estimate revenue and earnings to report a CAGR of 13.5% and 16.6% over FY2019-FY2021E, respectively.

• Future growth expected to be driven by improved utilisation levels of enhanced capacities backed by a strong demand outlook

along with positive pricing tailwinds and operating leverage.

• Innovators seek a reliable partner for assured sourcing, as the situation in China has not changed much and continues to be

beneficial for other players in the South Asian region.

Read report - https://www.sharekhan.com/MediaGalary/Equity/Atul-June10_19.pdf

Jun 10, 2019 Dishman Carbogen Amcis Ltd. Viewpoint BOOK PROFIT 245 - -

Summary

• We advise booking profit in Dishman Carbogen Amcis Limited (Dishman), as our targeted return has been achieved (17% returns

within a month).

• Management is confident of reducing debt by Rs. 70 crore-100 crore in the next two years.

• The company reported strong Q4FY2019 numbers.

Read report - https://www.sharekhan.com/MediaGalary/Equity/DishmanCarbo-June10_19.pdf



EQUITY FUNDAMENTALS Stock Update



(Rs.)



Jun 11, 2019 Info Edge (India) Stock Update HOLD 2,262 2,350

Summary

• We downgrade our rating on Info Edge (India) Limited (Info Edge) to Hold with a revised PT of Rs. 2,350, given the sharp run-up

in its stock price over the past 15 days.

• Naukri’s growth momentum likely to continue, led by IT hiring, while margins will remain under pressure owing to higher spends

on promotions and technology upgradation.

• Higher revenue growth in 99acres and lower ad spends in Jeevansathi to reduce losses in the coming 2-3 years.

• Zomato is rapidly scaling up its operations in cities; currently operates in 310 cities, up from 200+/15 cities in FY2019/FY2018.

Read report - https://www.sharekhan.com/MediaGalary/StockIdea/InfoEdge-June11_19.pdf

Jun 11, 2019 Inox Leisure Stock Update BUY 329 390

Summary

• We retain our Buy rating on INOX Leisure Limited (ILL) with a revised PT of Rs 390.

• Given the higher screen openings and increasing footfalls monetisation efforts, we expect revenue and earnings CAGR to be

at 18% and 16% respectively over FY19-21E.

• We expect y-o-y growth momentum to moderate in Q1FY2020E despite Q1 being a seasonally strong quarter, owing to lower

number of quality content.

• ATP growth rate is expected to be at high single-digit in FY2020E, while the SPH growth is likely to accelerate due to the on

introduction of new menu lists and anticipated higher conversion rate.

Read report - https://www.sharekhan.com/MediaGalary/StockIdea/Inox-June11_19.pdf

Jun 12, 2019 Housing Development Finance Corporation Stock Update BUY 2,183 2,500

Summary

• Easing competitive intensity among HFCs to allow strong players like HDFC to cherry pick its way to market share gains.

• Company has a long history of strong and consistent performance (asset quality, margins, etc).

• Government to continue to focus on housing, near-term incentives/measures expected.

• We maintain our Buy rating on stock with a revised price target of Rs. 2,500.

Read report - https://www.sharekhan.com/MediaGalary/StockIdea/HDFC-June12_19.pdf

Jun 12, 2019 KEC International Stock Update BUY 323 375

Summary

• We reiterate our Buy rating on KEC; PT unchanged at Rs. 375.

• Strong order backlog and healthy order pipeline to help net earnings clock a 21% CAGR during FY2019-FY2021E.

• Company expected to increase its revenue contribution from non-T&D projects in long run. Management expects railway

tenders to be finalised in Q2FY2020, while eyeing major civil projects arising from government spends.

• T&D business to grow steadily with focus on financially healthy state electricity boards and externally-funded projects.

Geographical expansion to boost international order book.

Read report - https://www.sharekhan.com/MediaGalary/StockIdea/KECInt-June12_19.pdf




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Jun 12, 2019 Indian Hotels Company Viewpoint POSITIVE 150 20-22

Summary

• FY2020 to be another strong year for hotel industry as room demand expected to stay ahead of supply, driving up RevPAR

(revenue per available room) by 10-11%.

• Occupancy rate to improve by 100-200 bps; ARR to grow by 8-10% in FY2020.

• IHCL to launch 12 hotels under recent strategic alliance with GIC; move to not stress balance sheet.

• Company well-placed to reap benefits of industry up-cycle; we stay Positive on stock and expect a 20-22% upside.

Read report - https://www.sharekhan.com/MediaGalary/Equity/IndianHotel-June12_19.pdf

Jun 13, 2019 Bajaj Holdings & Investment Stock Update BUY 3,696 4,548

Summary

• We retain Buy recommendation on Bajaj Holdings & Investments (BHIL) with an upgraded PT of Rs 4,548 (earlier PT of Rs 3,924).

• BHIL reports healthy earnings growth for Q4FY2019 on back of double – digit earnings growth by both the associate companies.

• Stock price of associate company Bajaj Finserv (contributes about 55% of valuation of BHIL) has moved up sharply 20% in past

three months.

• BHIL has marginally increased stake in another associate company Bajaj Auto from 31.54% to 33.43% which would further boost

valuations of BHIL.

Read report - https://www.sharekhan.com/MediaGalary/StockIdea/BajajHoldings-June13_19.pdf

Jun 13, 2019 SRF Limited Viewpoint NEUTRAL 2,923 - -

Summary

• Significant run-up in recent months, limit upside downgrade to Neutral. Remain Positive on SRF Limited (SRF) and would wait

for a better entry price.

• Q1FY2020 performance likely to have an adverse bearing due to Dahej plant shutdown, however long-term outlook remains

intact.

• We expect SRF to report revenue and earnings CAGR of 15.1% and 28.5%, respectively, during FY2019-FY2021E.

• Commissioning of projects in speciality chemcials and packaging film business to fuel growth momentum and further enhance

profitability.

Read report - https://www.sharekhan.com/MediaGalary/Equity/SRF-June13_19.pdf

Jun 14, 2019 Persistent Systems Stock Update HOLD 631 720

Summary

• In the analyst meet, the recently-appointed CEO presented his observations and new initiatives.

• Simplified team structure and people augmentation to increase re-seller and IP revenue.

• High cash balance and reasonable valuation limit downside risk.

• We maintain our Hold rating on Persistent Systems with an unchanged price target of Rs. 720.

Read report - https://www.sharekhan.com/MediaGalary/StockIdea/Persistent-June14_19.pdf




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Jun 14, 2019 Indraprastha Gas Limited Viewpoint POSITIVE 335 10-12

Summary

• We stay Positive on IGL and expect a 10-12% upside, supported by volume led earnings growth.

• Pricing power led by priority in allocation of cheap domestic gas would drive volumes and sustain margin.

• Expansion in new GAs of Rewari, Karnal and Gurugram to diversify company’s volume base.

• We have marginally increased our FY20 and FY21 standalone earnings estimates to factor higher volume growth.

Read report - https://www.sharekhan.com/MediaGalary/Equity/IndraprashthaGas-June14_19.pdf

Jun 17, 2019 Larsen & Toubro Stock Update BUY 1,499 1,820

Summary

• We maintain our Buy rating on Larsen and Toubro (L&T) with a revised PT of Rs. 1,820, rolling forward our valuation multiple for

the core EPC vertical.

• Management expects strong order intake aided by government spending and international orders.

• Strong order backlog, healthy execution and stable margins to lead to a 16% CAGR in net profit over FY2019-FY2021E.

• Industry order prospects of Rs. 9 lakh crore-10 lakh crore estimated for FY2020, with L&T aiming a 20-25% share.

Read report - https://www.sharekhan.com/MediaGalary/StockIdea/LnT-June17_19.pdf

Jun 18, 2019 Coal India Ltd Viewpoint POSITIVE 260 15-17

Summary

• Coal India targets an output of 660 million tonnes in FY20 (8.7% y-o-y growth); plans 1 billion-tonne production by FY25.

• Management expects employee cost (52% of total cost) and contractual cost (18% of total cost) to remain largely flat in FY20.

• Capex plans of Rs. 10,000 crore to purchase heavy earth-moving equipments; eyes minority stake in overseas coal mines.

• We stay Positive on CIL and expect a 15-17% upside given attractive valuation, healthy dividend yield and decent earnings

growth.

Read report - https://www.sharekhan.com/MediaGalary/Equity/CoalIndia-June18_19.pdf

Jun 19, 2019 Hindustan Unilever Stock Update BUY 1,812 1,990

Summary

• HUL delivered one of the strongest performances in the FMCG space for FY2019; domestic volumes grew 10%, while OPM

inched up to 23%.

• Return ratios remain strong with RoE and RoCE of 84% and 113%, respectively, for FY2019.

• Net working capital cycle stayed negative at 119 days and HUL remains one of the cheery dividend payers with a payout of

~90%.

• We maintain a Buy rating with an unchanged PT of Rs. 1,990 as demand outlook is set to improve in H2FY2020.

Read report - https://www.sharekhan.com/MediaGalary/StockIdea/HUL-June19_19.pdf




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Jun 20, 2019 Biocon Limited Viewpoint POSITIVE 253 18-20

Summary

• We continue to maintain our Positive view on Biocon with a potential upside of 18-20%.

• Competitive landscape concerns overdone, the stock has corrected by ~30% in the past six months, giving an attractive

investment opportunity for the medium to long term.

• Approved sales of Branded Formulations India (BFI) business could be seen as a precursor to value unlocking through IPO.

• We expect Biocon to report a sales and profit CAGR of 28% and 46%, respectively, over the next two years.

Read report - https://www.sharekhan.com/MediaGalary/Equity/Biocon-June20_19.pdf

Jun 21, 2019 Insecticides (India) Limited Viewpoint POSITIVE 604 20-25

Summary

• We remain Positive on Insecticides (India) Limited (IIL) with a potential upside of 20-25%.

• We like IIL as the strategies laid out by management are playing out well.

• Delay in arrival of monsoon (10-15 days) has postponed sowing (down 10-12%), which is likely to affect Q1 performance; however,

the likely business loss is expected to be made up during Q2.

• Management reiterated its revenue growth guidance of 10% and a 150 BPS rise in margins in FY2020. IIL is likely to report

revenue and earnings CAGR of 10.0% and 14.4%, respectively over FY2019-FY2021E.

Read report - https://www.sharekhan.com/MediaGalary/Equity/Insecticides-June21_19.pdf

Jun 24, 2019 Jyothy Laboratories Stock Update HOLD 163 180

Summary

• We maintain our Hold recommendation on Jyothy Laboratories with a revised PT of Rs. 180.

• HI category will recover but at a gradual space; fabric whitener will grow in mid-single digit; other categories to grow in double

digits.

• Management expects 12-14% revenue growth with OPM at 16% due to expected recovery in H2FY2020. We have factored in

10% revenue growth and ~15% OPM for FY2020 on account of slow recovery in the HI category and higher media spends.

• Any substantial recovery in business fundamentals (likely to be in H2FY2020) will be a key re-rating trigger for the stock.

Read report - https://www.sharekhan.com/MediaGalary/StockIdea/JyothyLab-June24_19.pdf

Jun 24, 2019 TVS Motor Stock Update HOLD 449 480

Summary

• FY 2019 was another good year for TVS as it grew at more than double the industry rate, driven by new launches and expansion

in geographical reach.

• Subsidiaries turned profitable in FY2019; strong volume growth coupled with maintaining of profitability led to return ratios

being in excess of 20%.

• Management has given cautious commentary on industry demand; higher channel inventory and increase in regulatory costs

to impact volumes; competitive intensity to remain high.

• Due to persistent weakness in volumes coupled with rising cost pressures, we have cut our earnings estimates. We maintain

Hold rating with revised PT of Rs 480.

Read report - https://www.sharekhan.com/MediaGalary/StockIdea/TVS-June24_19.pdf




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Jun 24, 2019 IndusInd Bank Viewpoint POSITIVE 1,461 12-15

Summary

IndusInd Bank (IIB) and Bharat Financial Services (BHAFIN) have finalised their merger with effective date as July 4, 2019.

• As per the management, the merger will help improve margins by 30-40 bps of the merged entity.

• Also a potential capital infusion from the promoter of Rs. ~2,700 crore (due to warrant conversion) which along with merger

synergies will be positive for NIM/RoE and book value accretive.

• We maintain our Positive view on the stock and expect an upside potential of 12-15%.

Read report - https://www.sharekhan.com/MediaGalary/Equity/IndusIndBank-June24_19.pdf

Jun 25, 2019 Tata Consultancy Services Stock Update BUY 2,267 2,400

Summary

• TCS’ annual report provides insights on its differentiated strategy, superior execution and ability to stitch together the

transformational deals.

• TCS has aligned its strategy with Business 4.0 framework as most of its large clients are embracing one of the four business

behaviors.

• Cash conversion continues to be strong, with FY2019 free cash flow of Rs. 26,461 crore, represents 84% to net profits.

• Given increasing market share among large peers, we maintain Buy rating on TCS with an unchanged price target of Rs. 2,400.

Read report - https://www.sharekhan.com/MediaGalary/StockIdea/TCS-June25_19.pdf

Jun 25, 2019 Kalpataru Power Transmission Stock Update BUY 516 620

Summary

• We maintain our Buy rating on Kalpataru Power Transmission Limited (KPTL) with a revised PT of Rs. 620, increasing our

valuation multiple for the core business due to a positive business outlook.

• KPTL sees healthy visibility of order intake for FY2020E and retains its revenue and OPM guidance for FY2020E.

• Divestment of four transmission assets in this fiscal year is likely to de-leverage the balance sheet and free up equity for further

investments.

• We expect revenue/net profit to report a CAGR of 16.5%/21.7% over FY2019-FY2021E because of strong order backlog, healthy

order intake and smooth execution.

Read report - https://www.sharekhan.com/MediaGalary/StockIdea/KPTL-June25_19.pdf

Jun 26, 2019 Apollo Tyres Stock Update BUY 201 230

Summary

• The Government of India has levied a counter veiling duty (CVD) of 9.1% to 17.6% on truck and bus radial tyres imports originating

from China. The duty is levied to offset the subsidies offered by China to its exporters, which enables them to price the tyres

cheaper by ~20-25% as against Indian tyres.

• The move is unlikely to substantially benefit Indian tyre makers as CVD will be levied only in a very few instances where the rate

of subsidization exceeds the rate of dumping. In most of cases, only anti dumping duty (which is already in force) will be levied.

• Nevertheless, ATL healthy show in domestic replacement segment and ramp up in Europe would make it the fastest growing

tyre maker. Low Debt: Equity, reasonable P/E of 11xFY21earnings gives us comfort.

• We have retained our earnings estimates for FY20 and FY21. We maintain Buy recommendation on the stock with an unchanged

PT of Rs 230.

Read report - https://www.sharekhan.com/MediaGalary/StockIdea/ApolloTyres-June26_19.pdf




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Jun 26, 2019 Petronet LNG Stock Update BUY 246 270

Summary

• We maintain our Buy rating on Petronet LNG (PLNG) with unchanged PT of Rs. 270.

• Strong volume growth outlook led by expansion of Dahej capacity to 17.5 mmt and likely higher utilisation for Kochi terminal.

• Volume growth likely to be supported by strong demand appetite for low-cost LNG (reflected in 5.6% y-o-y growth in India’s

LNG imports during April-May 2019).

• PLNG may surprise with dividend payout similar to FY2019 level of 70% and, thus, could result in dividend yield of 4-5%.

Read report - https://www.sharekhan.com/MediaGalary/StockIdea/PetronetLNG-June26_19.pdf

Jun 27, 2019 UPL Stock Update BUY 943 1,086

Summary

• We maintain Buy on UPL with a PT of Rs. 1,086.

• The stock has corrected by 16% from its recent high; currently trading at 11.7x its FY2021 EPS (discount to its historical average).

• Management believes there is no meaningful impact of the concerns, as UPL Corp is expected to fulfill new resident criteria in

Mauritius; African swine fever not to have much impact as peak soyabean season is over; and ongoing U.S.-China trade war

likely to benefit as hike in tariff by U.S. makes Chinese products more costly.

• Arysta’s integration progressing well; Management maintains its revenue and cost synergies guidance.

Read report - https://www.sharekhan.com/MediaGalary/StockIdea/UPL-June27_19.pdf

Jun 28, 2019 Aurobindo Pharma Stock Update HOLD 608 710

Summary

• Warning Letter for Unit- XI likely to delay future product approvals which could impact FY2020 and FY2021 numbers..

• Downgrade to Hold with downward revised Price Target (PT) of Rs 710.

• Increased regulatory hurdles at various plants will weigh on stock until successful resolution; Increase in remediation cost will

impact margins and profitability.

• We expect the company to report sales and profit CAGR of 29% and 22%, respectively, over the next two years.

Read report - https://www.sharekhan.com/MediaGalary/StockIdea/Aurobindo-June28_19.pdf

Jun 28, 2019 Sadbhav Engineering Stock Update BUY 249 285

Summary

• Sadbhav Engineering Limited (SEL) receives CARE rating downgrade for its Rohtak-Hisar project due to delay in debt servicing.

• Diversion of traffic due to presence of alternate routes has led to lower tolling and losses in the project.

• Management is discussing the issue with NHAI and expects favourable resolution as the issue of alternate route is covered in

the concession agreement.

• We maintain our Buy rating on SEL with an unchanged price target of Rs. 285.

Read report - https://www.sharekhan.com/MediaGalary/StockIdea/SadbhavEngg-June28_19.pdf




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Jun 28, 2019 Tech Mahindra Viewpoint POSITIVE 706 13-15

Summary

• We maintain our Positive on Tech Mahindra with revised potential upside of 13-15% upside in next 12 months.

• Well placed to capture 5G opportunities given its strong IT and network capabilities, investments in platforms and IP.

• Expect soft Q1FY2020E given weak seasonality in Comviva and softness in manufacturing and BFSI vertical.

• Expect communication to growth at high-single digit in FY2020E, while enterprise would be at mid-single digit.

Read report - https://www.sharekhan.com/MediaGalary/Newsletter/TechM-June28_19.pdf


EQUITY FUNDAMENTALSSECTOR UPDATE


Date Sector Report TypeSector View

Latest Chg

Jun 03, 2019 Automobiles Sector Update Cautious

Summary

• Automobile sector continued to grapple with multiple headwinds in May 2019 with volumes declining across segments. Slowing

economic growth, lower industrial output and weak consumer sentiments impacted dispatches.

• PV segment was the worst hit with volumes declining ~19% marred by liquidity crunch, weak consumer sentiments, increased

cost of ownership & higher channel inventories.

• CV segment sales declined 12% for May 2019. Lower freight rates and effect of revised axle load norms leading to under

utilization of fleet impacted demand for trucks.

• The 2W volumes declined 6% attributable to cost increase and rural stress.

• Volume headwinds coupled with margin pressures due to elevated costs will impact earnings in medium term. We retain

cautious stance on automotive OEM’s.

Read report - https://www.sharekhan.com/MediaGalary/Equity/Automobile-June03_19.pdf

Jun 03, 2019 Q4FY2019 IT results review Sector Update Neutral

Summary

• Mixed quarter for revenue growth: Tier-1 IT CC revenue growth of 0.5-3.3% q-o-q (vs our estimates of 1.2-2.5%) and 6.9-15.3%

y-o-y.

• Except TCS (adjusted basis), EBIT margin of Tier-1 IT companies declined on a sequential basis owing to higher attrition,

increasing investment and transition of large deals.

• Mixed demand outlook for the BFSI vertical, though management of TCS and Infosys expects strong growth momentum in

FY2020E.

• Increasing onsite cost along with investment in business and transition cost of large deals could impact profitability in FY2020E.

• Retain Neutral stance on the IT sector; Preferred picks: Infosys, HCL Tech, Tech Mahindra, L&T Infotech, Mastek and LTTS.

Read report - https://www.sharekhan.com/MediaGalary/Equity/Q4FY2019_IT_results_review-June03_19.pdf

Jun 03, 2019 Q4FY2019 Pharma results review Sector Update Neutral

Summary

• We continue to maintain our Neutral stance on the sector and see opportunity in some select quality companies.

• Chinese API player’s constraint a multiyear growth opportunity for Indian API players to become an end-to-end solution provider.

• Valuation of pharma companies has corrected but is still expensive. Moreover, the risk of earnings downgrade still persists

given near-term challenges.

• Despite stability and visibility in numbers for the U.S. business, we feel U.S. business margins will remain under pressure going

forward.

Read report - https://www.sharekhan.com/MediaGalary/Equity/Q4FY2019_Pharma_results_review-June03_19.pdf



EQUITY FUNDAMENTALS SECTOR UPDATE



Latest Chg

Jun 04, 2019 Q4FY2019 Consumer Discretionary results review Sector Update Neutral

Summary

• Overall revenue growth for Q4FY2019 was soft at 11.6% owing to the overall slowdown in discretionary consumption

compared to 20.5% y-o-y in Q3FY2019 and 23.7% y-o-y in Q2FY2019.

• OPM remained mixed in Q4FY2019; OPM expansion was led by operating efficiencies and better revenue mix for few companies

under our coverage.

• Advent of normal monsoon and good government policies with a tax-friendly budget will improve consumer sentiments in the

quarters ahead. However, introduction of Ind AS 116 is likely to be a drag on Reported PAT and return ratios in FY2020 without

affecting the business fundamentals of the companies (more clarity would emerge in Q1FY2020).

• Preferred picks: Indian Hotels Company, Jubilant Foodworks and Titan.

Read report - https://www.sharekhan.com/MediaGalary/Equity/Q4FY2019_ConsumerDisc_results_review-June04_19.pdf

Jun 04, 2019 Q4FY2019 Capital Goods & Engineering results review Sector Update Positive

Summary

• The Sharekhan universe of capital goods companies witnessed weakening of execution with 11% y-o-y growth in revenue while

operating margins remained under pressure leading to subdued 7.5% y-o-y growth in net profit. However, heavy weights L&T

and BEL showed healthy performance.

• Order inflow remained weak in H2FY2019 due to the election period affecting government spending, slowing consumption

demand and a delayed summer. However, healthy order backlog at 2x FY2019 revenue is expected to be further boosted by

revival in government spending from H2FY2020 onwards.

• The re-election of the ruling government has envisaged hopes of Rs. 100 lakh crore investments in infrastructure over the next

five years in sectors such as Roads, Railways and Power. Private industrial capex is expected to follow suit gradually.

• We upgrade to Positive view on the sector with preference for companies like L&T, Kalpataru Power, KEC, Havells India, Polycab

and KEI.

Read report - https://www.sharekhan.com/MediaGalary/Equity/Q4FY2019_CapitalGoods_results_review-June04_19.pdf

Jun 06, 2019 Q4FY2019 Banking and NBFC results review Sector Update Positive

Summary

• Corporate-lending private banks and some PSU banks are showing improving trends in asset quality side. On the other hand,

the stress is quite visible in the NBFC space though the large NBFCs with a strong parentage continue to do well.

• Softening of yield curve and expected policy measures to ease liquidity crunch would benefit banks in general, especially

corporate-focused banks and large PSU banks.

• We are positive on retail-focused private banks (HDFC Bank, Kotak Bank, RBL) and select corporate-lending banks such as

ICICI Bank, Axis Bank and SBI. We advise caution on PSU banks at large and NFBCs barring few names like Bajaj Finance.

Read report - https://www.sharekhan.com/MediaGalary/Equity/Q4FY2019_Banking_results_review-June06_19.pdf




Latest Chg

Jun 06, 2019 Q4FY2019 Automobiles results review Sector Update Cautious

Summary

• Sharekhan’s Auto universe (ex - TAMO) topline growth moderated substantially to 5% after six consecutive quarters of a double

digit growth. The revenue growth is in line with estimates. The moderation in growth is on account of volume drop across

segments attributable to weak consumer sentiments, uncertainties ahead of general elections, financing crunch and high

channel stocks for (Passenger Vehicles and 2 wheelers).

• The auto universe’s operating margins contracted sharply by 240 bps impacted by higher raw material costs, elevated

marketing expenses and operating de-leverage. Auto universe’s PAT declined by 11% y-o-y and is broadly in-line with estimates.

• Subdued volume outlook coupled with elevated cost pressures would over weigh on the margins; auto universe’s earnings are

likely to remain under pressure over the near to medium term.

• Preferred Picks: M&M, Apollo Tyres, Exide Industries.

Read report - https://www.sharekhan.com/MediaGalary/Equity/Q4FY2019_Auto_results_review-June06_19.pdf

Jun 06, 2019 Q4FY2019 Oil & Gas results review Sector Update Positive

Summary

• During Q4FY2019, OMCs benefited from inventory gain of Rs. 3,914 crore; Core GRMs were subdued, given weakness in

middle distillate cracks. Weakness in GRM is a concern for earnings outlook.

• Earnings of upstream PSUs were impacted by higher operating expenses and a sharp rise in DD&A cost (especially for ONGC).

Exemption from bearing fuel subsidy improves earnings visibility.

• CGD companies reported mixed volume growth with double-digit growth for IGL and volume decline for Gujarat Gas. Regulatory

push would aid higher volume growth and sustain margins.

• Our preferred stocks are Reliance Industries, Gujarat Gas and Petronet LNG..

Read report -https://www.sharekhan.com/MediaGalary/Equity/Q4FY2019_Oil_Gas_results_review-June06_19.pdf

Jun 06, 2019 Q4FY2019 Infrastructure/Cement/Building material results review Sector Update Positive

Summary

• The cement sector, excluding Grasim and Ultratech saw marginal growth in net earnings on account of strong volume growth,

better realization and lower input costs during Q4FY2019. Ultratech posted a stellar quarter all around.

• The construction space showed strong execution with better margins, although it was affected by higher effective tax rate.

IRB’s performance was dented by weakest operating margins.

• The building material space felt operating margins pressure on account of a lack of demand and absence of pricing power

aided by higher input costs. Kajaria posted net profit growth led by lower leverage.

• We maintain our Positive stance on the cement and construction sector on account of significant investments envisaged in

infrastructure space over the next five years.

• Our preferred picks are Grasim, UltraTech, The Ramco Cements, JK Lakshmi Cement, KNR constructions, Ahluwalia Contracts,

Sadbhav Engineering, Ashoka Buildcon, Kajaria Ceramics.

Read report - https://www.sharekhan.com/MediaGalary/Equity/Q4FY2019_Infra_Cement_Bldg_results_review-June06_19.pdf

EQUITY FUNDAMENTALS SECTOR UPDATE



Latest Chg

Jun 07, 2019 Q4FY2019 Consumer goods and services results review Sector Update Neutral

Summary

• Slowing demand in rural markets affected revenue growth of most companies under our coverage in Q4FY2019; Revenue

growth of Sharekhan consumer goods universe moderated to 9.6% as against 12-13% in some of the earlier quarters.

• Moderating sales volume growth, higher input prices and elevated ad spends led to OPM decline for most; barring companies

such as Marico, GSK Consumer and HUL, which benefit from lower input prices and operating efficiencies.

• Sales volume to remain under pressure in the near term due to subdued demand environment. However, normal monsoon and

consumer-driven budget might revive the performance (likely in H2FY2020).

• We prefer companies having a strong product portfolio, strong market positioning and lesser dependence on rural sales such

as Britannia Industries, HUL, Marico and Varun Beverages.

Read report -https://www.sharekhan.com/MediaGalary/Equity/Q4FY2019_ConsumerGoods_results_review-June07_19.pdf

Jun 10, 2019 Q4FY2019 results review Sharekhan Special - -

Summary

• Moderation in consumption demand dented earnings growth of auto, consumer goods etc. Global cyclical, telecom and pharma

earnings continued to be weak.

• Aggregate Sensex earnings growth of 15% YoY driven by banking and financial (BFSI) sector which saw profits jumps due to

NPA peaking benefits and lower base.

• Going forward, normalisation in earnings of the BFSI sector (peaking of NPA issues), structural reforms, stable government

should help drive Sensex earnings for FY2020E by mid-to-high double digit growth.

• Retain preference for corporate banks, agri-inputs, speciality chemicals and selective ideas in infra/construction, cement and

industrials space.

Read report -https://www.sharekhan.com/MediaGalary/Equity/Q4FY19_Results_review-10_June_19.pdf

Jun 27, 2019 Cement Sector Update Positive

Summary

• We maintain our Positive view on the cement sector, believing it to be in multi-year upcycle, led by expectations of demand

pick-up, favourable pricing and easing cost environment.

• Cement production, prices and movement of key costs hint towards muted volume growth, higher realisation and better OPM

for Q1FY2020.

• Expect demand to pick up from H2FY2020, backed by kick start of government spending on infrastructure projects and

impetus on the affordable housing segment.

• We have a Buy rating on UltraTech, Grasim and Ramco Cements, while we remain Positive on JK Lakshmi Cement.

Read report -https://www.sharekhan.com/MediaGalary/Equity/Cement-June27_19.pdf





Latest Chg

Jun 27, 2019 Automobiles Sector Update Cautious

Summary

• Auto sector’s pain is expected to worsen in June 2019 with all segments (except PV) reporting deterioration as compared to

May 2019.

• 2W volumes are expected to decline steeply by 12% due to high channel inventory and entry of bikes with higher price

complying with ABS / CBS norms.

• PV volumes too are likely to drop 14% y-o-y for June 2019 marred by sluggish retails and higher channel stocks.

• Slowing economic growth and revised axle load norms are likely to result in a 15% dip in CV volumes.

• Volume headwinds are expected to continue in medium term and we expect further downgrades. We retain Cautious view on

the sector.

Read report -https://www.sharekhan.com/MediaGalary/Equity/Automobile-June27_19.pdf

EQUITY TECHNICALS TREND & VIEW


Index in corrective mode

Daily view

� The Nifty is in a correction, after rising to a high of 12103 on June 03, 2019

� The recent pullback from the low of 11625 is just a counter-trend, which is unfolding in a bearish wedge pattern

� On the way up, the index has significant resistances at 11980-12000 zone where we expect selling pressure to kick in

� Weakness in the index can creep in once the index falls below 11887 i.e. the lower end of the wedge pattern.

� We expect the index to test the gap area of 11592-11426 once the pullback is complete

� The momentum indicator on the daily chart is bullish.

� The crucial support for the index will be at 11426, whereas crucial resistance will be at 12103

� The index found support at the 20-week moving average (WMA) in May and rose sharply thereafter. However, the index has entered into a corrective mode after registering a weekly negative close on June 07, 2019

� From Elliot wave perspective, the index is in Wave (V). Within wave (V), the index completed wave (iii) and the corrective wave (iv) in progress

� The weekly momentum indicator is in the bearish mode and the negative divergence points out towards a correction in the forthcoming weeks

� Having said that, the medium-term trend shall remain bullish as long as it does not close below the weekly swing low of 11107 as multiple support levels converge at this level.

� The momentum indicator on the weekly chart is bearish

� The crucial support will be at 11426 whereas crucial resistance will be at 12200

� The Nifty’s closing in the red in June indicates a likelihood of consolidation in the short term as long as it does not break above the high of 12103

� From an Elliot wave perspective, the index is in Wave (iv) of (V). One more leg on the way up in the form of wave (v) is pending which should propel the index higher towards 12200-12450 levels in the medium to long term

� The long term uptrend in the index shall remain intact as long as it does not close below 11100. A deeper correction in the index is possible only if it closes below the crucial support level of 11107

� The momentum indicator on the monthly chart is bullish

� The crucial support will be at 11107 whereas crucial resistance will be at 12450

Weekly view

Monthly view

Trend Trend reversal Support Resistance Target

Up 11107 11107 12220 12220

Nifty Daily

15 22 30May

6 13 20 27 3June

10 17 24 1July

8 15

10900

10950

11000

11050

11100

11150

11200

11250

11300

11350

11400

11450

11500

11550

11600

11650

11700

11750

11800

11850

11900

11950

12000

12050

12100

12150

12200

12250

12300

12350

12400

10900

10950

11000

11050

11100

11150

11200

11250

11300

11350

11400

11450

11500

11550

11600

11650

11700

11750

11800

11850

11900

11950

12000

12050

12100

12150

12200

12250

12300

12350

12400

0.0%

23.6%

38.2%

50.0%

61.8%

78.6%

100.0%

-3-2-10123

-3-2-10123KST (0.55934)

Nifty weekly

Oct Nov Dec 2018 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2019 Feb Mar Apr May Jun Jul Aug Sep

9300

9400

9500

9600

9700

9800

9900

10000

10100

10200

10300

10400

10500

1060010700

1080010900

11000111001120011300114001150011600117001180011900120001210012200123001240012500

9300

9400

9500

9600

9700

9800

9900

10000

10100

10200

10300

10400

10500

1060010700

1080010900

11000111001120011300114001150011600117001180011900120001210012200123001240012500

(III)

(A)

(B)

(C)(IV)

(i)

(ii)ii

i

iii

iv

(iii)

(iv)

-5

0

5

-5

0

5KST (2.90583)

Nifty Monthly

8 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

1500

2000

2500

3000

3500

4000

4500

5000

5500

6000

6500

7000

7500

8000

8500

9000

9500

10000

10500

11000

11500

12000

12500

13000

1500

2000

2500

3000

3500

4000

4500

5000

5500

6000

6500

7000

7500

8000

8500

9000

9500

10000

10500

11000

11500

12000

12500

13000

^

` (I)

(II)

(III)

(V)

(IV)

_

^

_

a

-35-30-25-20-15-10

-505

101520253035

-35-30-25-20-15-10

-505

101520253035KST (9.13332)

EQUITY DERIVATIVESMONTHLY VIEW


Stay Cautious

Nifty started the June series on a flat note and was marked

as a consolidating series after the sharp movement seen

in the May expiry. In the June series, it traded in a narrow

range of 11700 to 12100 levels for most trading sessions. In

the June series, the Nifty ended with a series-on-series loss

of around 0.87%, while the Bank Nifty showed some profit

booking as it closed with a loss of around 0.85% series-

on-series. On the open interest front, there was not much

of activity on both the major indices. While rollover of both

Nifty and Bank Nifty was on the higher side at 80.94% and

80.35% as compared to the three-month average of 63%

and 75%, which indicates that most of the longs formed

in the May series are still standing and have got carried

forward to July series as well.

View for July series

Two major factors, which signal the future trend of the

market i.e, the put-call ratio and the volatility index have

been showing some signs of weakness. After nearly two

years, the PCR has gone below 1.00, currently at 0.90 in

the July series, which is negative for the market. Volatility,

which is at 13.80 has started showing some signs of rising.

Seeing the above data with high rollover and as the Nifty

has breached the important support of 11600, we believe

that the index could see long unwinding pressure at every

high. On the other hand, FIIs have also turned net sellers

in index futures after February 2019. All these trends signal

a negative momentum for the market and if the above

data doesn’t improve in the next few trading days, we can

expect a sharp fall in the Nifty till 11300-11400.

Rollover highlights-

• Nifty Futures started the July series with 1.92 crore

shares versus 1.92 crore shares in open interest.

• The July series started with Rs.1,09,189 crore versus Rs.

1,07,959 crore in stock futures, Rs.28,485 crore versus

Rs. 22,983 crore in Nifty futures and Rs.87,796 crore

versus Rs. 103,045 crore in index options and Rs.11,500

crore versus Rs. 12,561 crore in stock options.

• Nifty July month rollover was at 80.35% v/s 71.93%.

• Market-wide rollover was at 90.25% v/s 89.56%.

MARKET WIDE VS NIFTY ROLLOVER ACTIVITY:

OPTIONSOPEN INTEREST

(Rs. Cr)

RELIANCE 1,841.98

SBIN 1,506.04

ITC 884.62

ICICIBANK 796.16

MARUTI 674.41

Top five stock options with the highest open interest in the current series are:

FUTURESOPEN INTEREST

(Rs. Cr)

RELIANCE 5,623.85

HDFC 5,362.22

ICICIBANK 3,897.77

HDFCBANK 3,839.75

INFY 3,669.35

Top five stock futures with the highest open interest in the current series are:

Source: Sharekhan

Source: Sharekhan

80

.35

%

71.

93

%

81.

39

%

66

.73

%

60

.26

%

61.

84

%

90

.25

%

89

.56

%

87

.21%

88

.23

%

85

.72

%

87

.84

%

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

90.00%

100.00%

Jul

Jun

Ma

y

Ap

r

Ma

r

Fe

b

Nifty Market Wide

CURRENCY FUNDAMENTALS MONTHLY VIEW


Currencies: Dollar plunges on expectation of rate cut and disappointing economic data’s

Key points India CPI data showed inflation accelerated by 3.05% in May

2019 compared to 2.99% in April 2019 India’s Industrial Production rose by 3.4% in April 2019

compared to 0.4% in March 2019 US Federal Reserve kept interest rates unchanged in a range

of 2.25% to 2.50% Bank of Japan maintained deposit rates at -0.1% in its

monetary policy meeting Bank of England policymakers voted unanimously 9-0 to

keep interest rates unchanged

CURRENCY LEVELS IN JUNE (IN RS.)

Currency High Low Close % Monthly Change

USDINR 69.98 68.88 69.03 -0.96

EURINR 79.24 77.37 78.54 1.09

GBPINR 88.76 87.22 87.56 -0.11

JPYINR 65.13 63.81 63.98 -0.67

Spot INR Movement in June Spot INR Movement in June

USD-INR: CMP Rs. (68.85)Indian Rupee appreciated by 0.96% in the previous month due to a weak Dollar. However, a sharp gain was prevented on risk aversion in domestic markets and rising crude oil prices. Market sentiments were weak amid worries over trade conflict between US and China and escalating geopolitical tension between US and Iran. Additionally, India CPI data showed inflation accelerated by 3.05% in May 2019 compared to 2.99% in April 2019.

Outlook: Indian Rupee is expected to trade with a negative bias on rising Crude Oil prices and concern over global economic slowdown. Crude oil prices are rising on OPEC’s ongoing supply cut and worries over geopolitical tension between US and Iran. Market fears that rising crude oil prices will hurt Inflation and government finances. Further, traders will remain cautious ahead of India’s Union Budget and macroeconomic data. Market worries that prolonged trade tension will impact global economic growth. However, a sharp fall in Rupee may be prevented on weakness in Dollar and FII inflows into local shares. Expected trading range in near term is 68.30 – 69.50.

EUR-INR: CMP Rs. (77.70)Euro appreciated by 1.83 percent in the previous month on weak Dollar and upbeat economic data from Euro zone. Manufacturing and Services PMI data showed activity in both sectors improved. However, sharp gain was capped on dovish statements from European Central Bank officials. ECB President Draghi signaled that central bank will act if needed to support economy.

Outlook: Euro currency expected to trade with positive bias on weakness in Dollar. However, sharp gains may be capped as traders will remain cautious ahead of ECB monetary policy meeting and economic data’s from Euro Area. Additionally, worries over trade tension between US and Euro Area escalated after US added more European products in list on which he plans to levy taxes. Expected trading range in near term is 77.05– 79.30.

GBP-INR: CMP Rs. (86.63)British pound appreciated by 0.53 percent in the month of June amid weakness in Dollar and as Bank of England policy makers voted unanimously 9-0 to keep interest rates unchanged and reiterated that rates would need to increase on smooth exit from EU. However, a sharp gain was capped on worries over Brexit uncertainty. Traders are worried over possibility of no-deal Brexit after Boris Johnson won various round of votes among Conservative MP’s to replace UK Prime Minister Theresa May.

Outlook: Pound is expected to trade with negative bias on worries over Brexit uncertainty and disappointing economic data’s from UK. Slowdown in Construction, Services and Manufacturing sector sparked concern over economic health of country. Further, Market will remain cautious ahead of final round of voting in the Conservative Party leadership contest. Traders are worried over outcome of voting results as it will determine under what condition UK will exit EU. Expected trading range in near term is 85.0 – 88.0

JPY-INR: CMP Rs. (63.87)The Yen appreciated by 0.41 percent in the previous month on weakness in Dollar and as Bank of Japan kept its monetary policy unchanged. Further, demand for a safe haven increased on worries over trade conflict between US and China and escalating geopolitical tension between US and Iran.

Outlook: Japanese Yen is expected to trade with positive bias on weakness in Dollar and as demand for safe haven may increase on ongoing concern over global trade war, Brexit uncertainty and geopolitical tension in Middle East. Market worries that prolonged trade tension will impact global economic growth. Expected trading range in near term is 62.70 – 64.80.

CMP as on July 04, 2019

87

87.2

87.4

87.6

87.8

88

88.2

88.4

88.6

88.8

89

77

77.5

78

78.5

79

03-

Jun-

19

05

-Jun

-19

07-

Jun-

19

09

-Jun

-19

11-J

un-1

9

13-J

un-1

9

15-J

un-1

9

17-J

un-1

9

19-J

un-1

9

21-

Jun-

19

23-

Jun-

19

25

-Jun

-19

27-

Jun-

19

EURINR GBPINR

63.5

63.7

63.9

64.1

64.3

64.5

64.7

64.9

68.5

68.7

68.9

69.1

69.3

69.5

69.7

69.9

03

-Ju

n-1

9

05

-Ju

n-1

9

07

-Ju

n-1

9

09

-Ju

n-1

9

11-J

un

-19

13-J

un

-19

15-J

un

-19

17-J

un

-19

19-J

un

-19

21-

Jun

-19

23

-Ju

n-1

9

25

-Ju

n-1

9

27

-Ju

n-1

9

USDINR JPYINR

CURRENCY TECHNICALSTREND & VIEW


USD-INR - Downward trajectory

USDINR formed a pullback in April, which continued till mid-

May. It tumbled down in the second half of May and formed

a Doji pattern on the monthly chart. Consequently, bears

took charge in June and pushed the currency pair down.

Thus, the currency pair has resumed the larger downtrend,

where the fall is unfolding in a channelised manner. On the

downside, USDINR is expected to target 61.8% retracement

mark, which is near 67.50.

EUR-INR - Fall on the cards

EURINR formed a multi-month H&S and broke out on the

downside in March. Post a brief follow through on the

downside, the currency pair bounced back to retest the

pattern neckline. It has formed a multi-week sideways

channel below the neckline and is now on the verge of a

bearish breakout. In terms of Fibonacci retracement, the

currency pair is close to the 50% retracement mark and

can slide down to test the 61.8% retracement mark.

GBP-INR - Cracking down

GBPINR had formed a bearish flag and had broken out

on the downside around mid-May. The follow through

continued on the downside in June as well. The fall is being

assisted by expansion in the daily and weekly Bollinger

Bands. The momentum indicators on various time frames

are also in line with the fall. The currency pair is expected

to target lower ends of the inner and outer channels in the

short term and medium term, respectively.

JPY-INR - Going for a dip

JPYINR witnessed a pullback in May, which continued till

mid-June. The currency pair suffered selling towards the

end of June, resulting in a Shooting Star on the monthly

chart, which is a bearish candlestick pattern. In terms of

price patterns, JPYINR seems to be forming a triangular

pattern. Thus, it is expected to tumble towards the lower

end of the triangular pattern, where there is a weekly lower

Bollinger Band as well.

Currency View Reversal Supports Resistances Target

USD-INR Down 70.65 68.35/68 69.25/69.72 67.50

GBP-INR Down 88.32 86/85.60 87.05/87.61 85.25-83

EUR-INR Down 79.26 77.33/76.76 78.41/79 74.85

JYP-INR Down 65.14 62.85/62 64.52/64.90 61.40

Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2018 Mar Apr May Jun Jul Aug Sep Nov Dec 2019 Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2020 Mar

62.0

62.5

63.0

63.5

64.0

64.5

65.0

65.5

66.0

66.5

67.0

67.5

68.0

68.5

69.0

69.5

70.0

70.5

71.0

71.5

72.0

72.5

73.0

73.5

74.0

74.5

75.0

75.576.0

0.0%

23.6%

38.2%

50.0%

61.8%

100.0%

USDINR - INDIAN RUPEE (68.9390, 69.0850, 68.7850, 68.7900, -0.15000)

-0.5

0.0

0.5MACD (-0.28862)

September October November December 2019 February March April May June July August

82.0

82.583.0

83.584.0

84.585.085.586.086.587.087.588.088.589.089.590.090.591.091.592.092.593.093.594.094.595.095.596.096.597.097.598.098.599.099.5

23.6%

38.2%

50.0%

GBPINR (86.7200, 86.7960, 86.3760, 86.4760, -0.25100)

-0.5

0.0

0.5MACD (-0.44747)

M J J A S O N D 2017 M A M J J A S O N D 2018 M A M J J A S O N D 2019 M A M J J A S O N D 2020 M A

66.567.067.568.068.569.069.570.070.571.071.572.072.573.073.574.074.575.075.576.076.577.077.578.078.579.079.580.080.581.081.582.082.583.083.584.084.585.085.586.086.587.087.588.0

78.6% 0.0%

23.6%

38.2%

50.0%

61.8%

100.0%

EURINR (78.3850, 78.4120, 77.5300, 77.5740, -0.79700)

0

KST (-0.37890)

Aug Sep Oct Nov Dec 2018 Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2019 Mar Apr May Jun Jul Aug Sep Oct Nov

55.0

55.5

56.0

56.5

57.0

57.5

58.0

58.5

59.0

59.5

60.0

60.5

61.0

61.5

62.0

62.5

63.0

63.5

64.0

64.5

65.0

65.5

66.0

66.5

67.0

67.5

0.0%

23.6%

38.2%

50.0%

61.8%

100.0%

JPYINR (63.7625, 64.0459, 63.4780, 63.7889, -0.09770)

0

5KST (1.31563)

PMS DESK PMS FUNDS


Portfolio Management ServicesWe are pleased to introduce you to Sharekhan Portfolio Management Services (PMS) in which we completely manage your investment portfolio so that you stop worrying about the market volatility and focus your energy on things that you like to do!

We have a wide range of strategies that you can choose from. Our strategies are based on fundamental research and technical analysis.

We have the following strategies on offer:

ProPrime (based on fundamental research)

n Prime Picks n Diversified Equity

ProTech (based on technical analysis)

n Index Futures Fund n Trailing Stops

Prime Picks

OVERVIEW

A multi-cap discretionary scheme that aims to outperform the Nifty and

BSE 200 indices across market cycles. The scheme would have two folios,

Quality and Alpha, with a distinct investing style to offer you the benefits of

dynamic investing as per their choice of allocation between conservative -

Quality - and aggressive - Alpha - folios or baskets or stocks.

Prime Picks Performance as on June 30, 2019

Prime Picks (In %)

Duration Prime Picks BSE 200CNX Mid Cap 100

1 Month -0.8 -1.2 -1.7

3 Months 4.3 0.4 -3.3

6 Months 5.8 5.9 -1.2

1 Year 4.9 6.9 -2.9

Top 10 stocks

Aarti Industries

Ashoka Buildcon

Bajaj Finance

Gujarat Gas

HDFC Bank

ICICI Bank

Larsen & Toubro

RBL Bank

Reliance Industries

Titan Company

INVESTMENT STRATEGY

Seeks companies with a high standard of management and corporate governance through in-depth research by experienced in-house fundamental research team

Aims to leverage on investment opportunities in structural growth sectors through Quality folio whereas the allocation to more aggressive Alpha folio would add to superior outperformance across market cycles.

Maintain judicious mix between Quality and Alpha through dynamic investment strategy and providing flexibility to investors to make changes to allocations between the two folios once every year.

PRICING

Minimum investment of Rs. 25 lakh

Charges

¾ 2% per annum; AMC fee charged every quarter

¾ 0.5% brokerage

¾ 20% profit sharing after the 18% hurdle is crossed at the end of

every fiscal

(with higher watermark basis)

FUND OBJECTIVE A good return on money through long-term investing in quality companies

*Note : Net of Quarterly AMC Fees

PMS DESKPMS FUNDS


DIVERSIFIED EQUITY

OVERVIEW

The investment product aims to outperform the benchmark indices with

relatively lower volatility in the portfolio.

Product performance as on June 30, 2019

Diversified Equity Performance

Duration DE

StrategyNifty 50 Nifty 500

1 Month -0.6 -1.1 -1.5

3 Months 0.8 1.4 -0.1

6 Months 6.4 8.5 5.3

1 Year 5.5 10.0 5.4

2 Years 7.3 11.3 7.7

3 Years 12.6 12.5 11.4

5 Years 9.7 9.1 9.4

*Note : Net of Quarterly AMC Fees

Disclaimer: Returns are based on a client’s returns since inception and may be different from those depicted in the risk

disclosure document.

Top 10 stocks DE

Axis Bank

Bajaj Finserv

Britannia Industries

HDFC Bank

Hindustan Unilever

Jubilant Foodworks

Kotak Mahindra Bank

Larsen & Toubro

Reliance Industries

Tech Mahindra

INVESTMENT STRATEGY

Disciplined investment decisions are taken in specific stocks based on

thorough fundamental research.

The product seeks to achieve the outperformance through superior

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diversified portfolio.

It is a low-risk, low-chum portfolio with bulk of investment (range of 65-75%)

in Top 100 large-cap companies and the rest invested in well researched,

quality mid-cap companies.

PRICING

Minimum investment of Rs. 25 lakh

Charges

¾ 2.5% per annum; AMC fee charged every quarter

¾ 0.5% brokerage

¾ 20% profit sharing after the 15% hurdle is crossed at the end of every

fiscal

FUND OBJECTIVE A good return on money through long-term investing in quality companies

(In %)

ADVISORY DESK MONTHLY PERFORMANCE


Advisory Products and ServicesThe Advisory Desk is a central desk consisting of a Mumbai-based expert team that runs various sample model portfolios for illustrative purposes only for clients of all profiles, be they traders or investors.

These products are different from Sharekhan research-based technical and fundamental offerings as these essentially try to capture the trading opportunities in stocks where momentum is expected before or after some event including the announcement of results or where some news/event is probable.

Advisory products are ideal for those who do not have time to either monitor the market tick by tick or shift through pages of research for data or pour over complex charts to catch a trend. However, all these products require perfect discipline and money management.

Report Card

INTRADAY CALLS

These are technical analysis calls. Calls will be generated in the cash segment and closed before the end of the trading day. These calls have pre-defined stop loss, targets. For details of the product, please write to us at [email protected].

DERIVATIVE CALLS

These calls are based on the analysis of open interest, implied volatility and put-call ratio in the derivatives market. It is a leveraged product and ideal for aggressive traders. These calls have a pre-defined stop loss, target, timeframe and quantity to be executed. For more details on this product, please write to us at [email protected].

DERIVATIVE IDEA FUTURES

Calls are in (stocks & index) futures segment, based on an analysis of open interest, implied volatility and the put-call ratio in the derivatives market. It is a leveraged product and ideal for aggressive traders. These calls have pre-defined stop loss, targets, timeframe and quantity to be executed. For more details on this product, please write to us at [email protected].

SHAREKHAN PRE-MARKET ACTION

This report gives us stocks in news, with likely the price effect which is valid for a day. The report has different sections - Stocks in News, Events, Technical View and Derivative View alongwith positive and negative bias stocks. The report is valid for a day, for more details please write to us on [email protected].

Product Intraday Calls (Cash) Derivative Calls Derivative Idea Future and Strategy

Month June 19 CY 19 June 19 CY 19 June 19 CY 19

No. of calls 31 245 92 645 12 127

Profit booked 18 143 55 370 08 71

Stop loss hit 13 133 36 269 04 56

Strike rate (%) 58 58 60 57 67 56

For Investor

Advisory Products & ServicesAdvisory Products & Services

T dInvestor

A i bl Id

Trader

Actionable IdeasMID Derivative Sharekhan

Pre Market ActionIntraday Calls

(Cash)

Stocks In Technical Derivative

Derivative Calls (Opt)

Derivative Idea (Fut+Opt)

Stocks In News

Technical view

Derivative view

For traders

ACTIONABLE IDEAS

These calls focus on generating absolute returns over a timeframe of 6-12 months and have a favourable risk-reward ratio. Stocks are closely tracked based on regular interaction with companies’ management to stay abreast of the business outlook. For details about the product, please write to us at [email protected].

http://[email protected].







MUTUAL FUNDS DESKMF PICKS


Data as on June 03, 2019

Scheme Name NAV

Absolute % (Point to Point)

Compounded Annualised % (Point to Point)

6 Months 1 yr 3 yrs 5 yrs Since Inception

Large Cap FundsReliance Large Cap Fund - Growth 37 11.4 15.0 16.8 14.2 11.6Mirae Asset Large Cap Fund - Reg - Growth 53 10.0 13.3 16.7 15.9 16.1HDFC Top 100 Fund - Growth 520 13.2 17.3 16.2 11.5 20.1ICICI Prudential Bluechip Fund - Growth 44 8.5 8.8 14.1 12.2 14.3Aditya Birla Sun Life Frontline Equity Fund - Reg - Growth 232 7.8 7.4 11.8 11.7 20.6Kotak Bluechip Fund - Reg - Growth 243 10.7 9.2 11.4 12.2 21.8SBI Bluechip Fund - Growth 41 11.3 7.4 11.3 14.0 11.2IndicesS&P BSE Sensex TRI 58,309 11.5 15.52 15.93 11.61 13.45Large & Mid Cap FundSundaram Large and Mid Cap Fund - Reg - Growth 36 8.0 7.5 16.2 14.5 10.9Principal Emerging Bluechip Fund - Growth 106 5.5 -0.8 14.9 17.4 25.1Kotak Equity Opportunities Fund - Reg - Growth 124 11.2 9.8 14.5 14.6 18.7Invesco India Growth Opportunities Fund - Growth 35 7.3 6.0 14.4 14.4 11.2DSP Equity Opportunities Fund - Reg - Growth 226 9.0 5.4 14.0 14.2 17.8IDFC Core Equity Fund - Reg - Growth 46 5.7 2.4 13.0 11.8 11.7ICICI Prudential Large & Mid Cap Fund - Growth 334 7.6 6.1 12.4 9.9 18.3SBI Large & Midcap Fund - Growth 227 7.3 7.3 12.4 14.1 14.4IndicesS&P BSE LargeMidCap TRI 5,802 9.5 10.6 14.7 12.0 13.7Mid Cap FundICICI Prudential MidCap Fund - Growth 98 4.9 -0.7 13.7 13.9 16.9DSP Midcap Fund - Reg - Growth 55 6.8 -0.1 13.2 15.7 14.6Kotak Emerging Equity Scheme - Reg - Growth 39 8.6 0.1 12.5 18.2 11.9Edelweiss Mid Cap Fund - Growth 27 7.5 -3.1 12.5 15.2 9.2Franklin India Prima Fund - Growth 976 7.4 0.3 11.6 15.9 19.7Aditya Birla Sun Life Mid Cap Fund - Growth 292 3.5 -4.4 9.7 13.6 22.4BNP Paribas Mid Cap Fund - Growth 33 8.3 0.7 9.2 13.8 9.5IndicesS&P BSE Mid Cap TRI 18,073 1.1 -2.9 11.3 13.1 14.8Small Cap FundHDFC Small Cap Fund - Growth 44 4.5 -4.0 17.7 16.7 14.2L&T Emerging Businesses Fund - Reg - Growth 24 -0.3 -9.7 17.6 17.1 19.2Axis Small Cap Fund - Reg - Growth 29 12.1 6.3 13.3 16.2 21.5Aditya Birla Sun Life Small Cap Fund - Growth 35 5.2 -12.4 9.6 14.5 11.1Kotak Small Cap Fund - Reg - Growth 73 6.7 -6.1 9.6 14.9 14.9Franklin India Smaller Companies Fund - Growth 55 7.1 -6.9 9.4 15.8 13.6IndicesS&P BSE Small Cap TRI 17,573 3.3 -11.2 11.1 10.9 9.5Focused FundSBI Focused Equity Fund - Growth 148 14.9 8.7 15.4 17.0 20.1Sundaram Select Focus - Reg - Growth 187 11.2 11.1 15.1 10.6 19.0Franklin India Focused Equity Fund - Growth 44 16.6 13.5 14.4 16.9 13.2IDFC Focused Equity Fund - Reg - Growth 38 7.3 -4.1 13.7 9.7 10.6Aditya Birla Sun Life Focused Equity Fund - Growth 62 10.8 9.8 12.5 11.6 14.3ICICI Prudential Focused Equity Fund - Ret - Growth 31 8.9 7.5 11.1 9.5 11.9IndicesS&P BSE 500 TRI 18,620 9.0 8.2 14.6 12.1 12.7Multi Cap FundsKotak Standard Multicap Fund - Reg - Growth 37 12.6 13.2 16.6 16.4 14.5HDFC Equity Fund - Growth 702 13.2 15.7 16.1 11.7 19.0Canara Robeco Equity Diversified Fund - Growth 139 10.9 11.5 15.8 11.5 18.2Principal Multi Cap Growth Fund - Growth 147 6.4 2.7 15.7 12.9 15.5Aditya Birla Sun Life Equity Fund - Growth 746 6.1 5.6 14.7 13.7 23.1

Sharekhan top mutual fund picks (equity) June 2019

MUTUAL FUNDS DESK MF PICKS


Scheme Name NAVAbsolute %

(Point to Point)Compounded Annualised %

(Point to Point)


Every individual has a different investment requirement, which depends on his financial goals and risk-taking capacities. We at Sharekhan first understand the individual’s investment objectives and risk-taking capacity, and then recommend a suitable portfolio. So, we suggest that you get in touch with our Mutual Fund Advisor before investing in the best funds.n

Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a postition in the mutual funds mentioned in the article.

Reliance Multi Cap Fund - Growth 102 9.7 13.5 14.2 12.1 17.8ICICI Prudential Multicap Fund - Growth 302 7.8 10.5 13.8 13.4 14.8SBI Magnum Multi Cap Fund - Growth 51 12.1 8.2 13.7 16.3 12.6IndicesS&P BSE 500 TRI 18,620 9.0 8.2 14.6 12.1 12.7Value & Contra FundsTata Equity P/E Fund - Reg - Growth 138 6.9 -0.4 16.2 15.0 19.2Kotak India EQ Contra Fund - Reg - Growth 54 8.6 9.1 15.8 12.5 13.0IDFC Sterling Value Fund - Reg - Growth 52 4.5 -4.7 14.9 13.9 15.8HDFC Capital Builder Value Fund - Growth 304 6.9 4.3 14.4 13.5 14.4L&T India Value Fund - Reg - Growth 37 7.4 2.7 14.0 16.0 15.0IndicesS&P BSE 500 TRI 18,620 9.0 8.2 14.6 12.1 12.7ELSSMirae Asset Tax Saver Fund - Reg - Growth 18 10.0 12.5 20.1 -- 19.2Kotak Taxsaver - Reg - Growth 46 11.7 13.6 15.0 15.1 12.0IDFC Tax Advantage (ELSS) Fund - Reg - Growth 58 8.0 1.0 14.9 14.7 18.3Axis Long Term Equity Fund - Growth 47 9.8 7.3 14.6 16.5 17.7DSP Tax Saver Fund - Growth 50 11.5 10.0 14.4 14.4 13.9Invesco India Tax Plan - Growth 52 7.0 5.2 13.4 14.9 14.3ICICI Prudential Long Term Equity Fund (Tax Saving) - Reg - Growth 390 9.7 10.4 13.2 11.8 20.3Aditya Birla Sun Life Tax Relief 96 - Growth 32 4.5 1.6 13.1 15.7 10.9IndicesNifty 500 TRI 14,767 9.2 8.4 14.6 12.0 11.7Thematic/Sector FundsICICI Prudential Banking and Financial Services Fund - Retail - Growth 70 18.4 16.4 22.7 18.3 19.7DSP Natural Resources & New Energy Fund - Reg - Gth 33 8.3 0.1 19.6 14.6 11.5Aditya Birla Sun Life Banking and Financial Services Fund - Reg - Growth 31 16.0 10.3 18.7 17.6 23.0L&T Infrastructure Fund - Reg - Growth 17 4.0 -2.6 16.8 12.5 4.4Aditya Birla Sun Life India GenNext Fund - Growth 85 7.3 7.3 14.8 17.4 16.7IndicesNifty 50 TRI 16,815 11.6 14.4 15.2 11.7 13.9Aggressive Hybrid FundPrincipal Hybrid Equity Fund - Growth 79 5.4 4.7 15.5 12.5 11.3ICICI Prudential Equity & Debt Fund - Growth 137 8.4 9.2 13.9 13.1 14.3Mirae Asset Hybrid - Equity Fund - Reg - Growth 15 8.9 12.4 13.8 -- 11.5Canara Robeco Equity Hybrid Fund - Growth 163 8.9 10.0 13.0 12.8 11.3SBI Equity Hybrid Fund - Growth 140 10.7 10.2 12.3 13.8 15.8Sundaram Equity Hybrid Fund - Reg - Growth 93 7.7 8.6 12.0 9.7 12.4HDFC Hybrid Equity Fund - Growth 55 8.7 8.1 11.0 8.3 12.9Aditya Birla Sun Life Equity Hybrid 95 Fund - Growth 768 5.5 2.5 9.3 11.4 19.5IndicesNIFTY 50 Hybrid Composite Debt 65:35 Index 10,248 9.8 13.4 12.8 10.8 14.0BNP Paribas Equity schemes

Scheme name Scheme Category

Absolute % (Point to

Point)Compounded Annualised %

(Point to Point)


BNP Paribas Multi Cap Fund - Growth Multi Cap 11.1 6.3 12.2 12.8 12.3BNP Paribas Large Cap Fund - Growth Large Cap 12.4 11.3 11.4 12.1 16.4BNP Paribas Long Term Equity Fund - Growth ELSS 11.2 7.7 10.5 12.2 10.8BNP Paribas Mid Cap Fund - Growth Mid Cap 8.3 0.7 9.2 13.8 9.5BNP Paribas Focused 25 Equity Fund - Reg - Growth Focused 10.9 2.1 -- -- -0.2BNP Paribas India Consumption Fund - Reg - Growth Thematic 11.9 -- -- -- 19.1BNP Paribas Substantial Equity Hybrid Fund - Reg - Growth Aggressive Hybrid 9.9 11.3 -- -- 9.5

MUTUAL FUNDS DESKMF PICKS


Sharekhan top sip fund picks June 2019(*invested on 1st day of every month) Data as on June 03, 2019

SIP INVST (Monthly Rs. 1,000)* 1 year 3 years 5 Year

Total amount invested 12,000 36,000 60000

Scheme Name NAVPresent Value (Rs.)

Compounded annualised return (%)

Present value (Rs.)


Present value (Rs.)


Large Cap Fund

Reliance Large Cap Fund - Growth 37 13,067 19.9 43,866 14.0 82,407 13.0

ICICI Prudential Bluechip Fund - Growth 44 12,764 14.1 42,213 11.2 79,316 11.5

HDFC Top 100 Fund - Growth 520 13,238 23.2 43,885 14.0 81,913 12.8

Mirae Asset Large Cap Fund - Reg - Growth 53 12,996 18.6 43,755 13.8 84,660 14.2

Kotak Bluechip Fund - Reg - Growth 243 12,900 16.7 41,691 10.3 76,968 10.2

Aditya Birla Sun Life Frontline Equity Fund - Reg - Growth 232 12,722 13.4 40,887 8.9 76,495 10.0

SBI Bluechip Fund - Growth 41 13,019 19.0 41,512 10.0 78,053 10.8

S&P BSE Sensex TRI 58309 13,125 21.1 45,388 16.5 83,411 13.5

Large & Mid Cap Fund

Mirae Asset Emerging Bluechip Fund - Growth 55 13,111 20.8 43,605 13.5 90,335 16.9

Kotak Equity Opportunities Fund - Reg - Growth 124 13,008 18.8 41,733 10.4 79,949 11.8

Sundaram Large and Mid Cap Fund - Reg - Growth 36 12,764 14.1 42,865 12.3 82,221 12.9

Principal Emerging Bluechip Fund - Growth 106 12,399 7.3 39,735 6.9 79,571 11.6

Invesco India Growth Opportunities Fund - Growth 35 12,600 11.1 42,417 11.5 80,319 12.0

SBI Large & Midcap Fund - Growth 227 12,713 13.2 41,159 9.4 77,855 10.7

DSP Equity Opportunities Fund - Reg - Growth 226 12,757 14.0 40,550 8.3 78,803 11.2

ICICI Prudential Large & Mid Cap Fund - Growth 334 12,690 12.7 40,000 7.3 74,750 9.0

S&P BSE LargeMidCap TRI 5802 12,887 16.5 43,079 12.7 80,695 12.2

Mid Cap Fund

DSP Midcap Fund - Reg - Growth 55 12,515 9.5 39,083 5.7 77,405 10.4

Franklin India Prima Fund - Growth 976 12,525 9.6 39,405 6.3 76,793 10.1

BNP Paribas Mid Cap Fund - Growth 33 12,682 12.6 38,118 4.0 72,357 7.7

ICICI Prudential MidCap Fund - Growth 98 12,476 8.7 39,094 5.7 74,417 8.8

Kotak Emerging Equity Scheme - Reg - Growth 39 12,640 11.8 39,403 6.3 78,282 10.9

Edelweiss Mid Cap Fund - Growth 27 12,494 9.1 39,198 5.9 75,803 9.6

Aditya Birla Sun Life Mid Cap Fund - Growth 292 12,227 4.1 36,968 1.8 71,581 7.2

S&P BSE Mid Cap TRI 17550 11,613 -7.0 36,826 1.6 72,683 7.9

Small Cap Fund

HDFC Small Cap Fund - Growth 44 12,232 4.2 41,438 9.9 83,518 13.6

SBI Small Cap Fund - Growth 53 12,470 8.6 40,957 9.0 85,585 14.6

L&T Emerging Businesses Fund - Reg - Growth 24 11,804 -3.5 38,194 4.1 79,967 11.8

Kotak Small Cap Fund - Reg - Growth 73 12,409 7.5 37,274 2.4 72,560 7.8

Reliance Small Cap Fund - Growth 41 12,294 5.4 39,591 6.6 80,942 12.3

Franklin India Smaller Companies Fund - Growth 55 12,308 5.6 37,241 2.3 73,258 8.2

Aditya Birla Sun Life Small Cap Fund - Growth 35 12,097 1.8 35,854 -0.3 72,275 7.6

S&P BSE Small Cap TRI

Focused Fund

SBI Focused Equity Fund - Growth 148 13,264 23.8 44,328 14.8 84,669 14.2

Sundaram Select Focus - Reg - Growth 187 13,022 19.1 44,012 14.2 80,757 12.2

IDFC Focused Equity Fund - Reg - Growth 38 12,419 7.7 40,301 7.9 75,226 9.3

Franklin India Focused Equity Fund - Growth 44 13,425 26.9 43,023 12.6 80,976 12.3

MUTUAL FUNDS DESK MF PICKS


Aditya Birla Sun Life Focused Equity Fund - Growth 62 12,934 17.4 41,461 9.9 77,323 10.4

ICICI Prudential Focused Equity Fund - Ret - Growth 31 12,467 8.6 40,226 7.7 73,734 8.4

S&P BSE 500 TRI

Multi Cap Funds

Kotak Standard Multicap Fund - Reg - Growth 37 13,156 21.6 43,422 13.2 84,186 13.9

HDFC Equity Fund - Growth 702 13,209 22.7 43,435 13.3 81,086 12.4

Principal Multi Cap Growth Fund - Growth 147 12,566 10.4 40,861 8.9 79,093 11.3

Reliance Multi Cap Fund - Growth 102 13,072 20.0 42,825 12.2 77,705 10.6

Canara Robeco Equity Diversified Fund - Growth 139 12,972 18.1 43,638 13.6 80,325 12.0

SBI Magnum Multi Cap Fund - Growth 51 13,061 19.8 42,206 11.2 81,626 12.6

ICICI Prudential Multicap Fund - Growth 302 12,694 12.8 41,539 10.0 78,975 11.3

Aditya Birla Sun Life Equity Fund - Growth 746 12,654 12.1 40,669 8.5 79,252 11.4

S&P BSE 500 TRI

Value & Contra Funds

Kotak India EQ Contra Fund - Reg - Growth 54 12,785 14.5 43,553 13.5 81,914 12.8

IDFC Sterling Value Fund - Reg - Growth 52 12,282 5.1 39,299 6.1 76,179 9.8

Tata Equity P/E Fund - Reg - Growth 138 12,467 8.6 40,064 7.5 79,560 11.6

L&T India Value Fund - Reg - Growth 37 12,632 11.6 39,665 6.7 78,186 10.9

HDFC Capital Builder Value Fund - Growth 304 12,582 10.7 41,382 9.8 79,046 11.3

S&P BSE 500 TRI

Tax-saving funds (ELSS)

Axis Long Term Equity Fund - Growth 47 12,970 18.1 43,705 13.7 82,469 13.1

Kotak Taxsaver - Reg - Growth 46 13,165 21.8 42,499 11.7 80,559 12.1

ICICI Prudential Long Term Equity Fund (Tax Saving) - Reg - Growth

390 12,815 15.1 41,854 10.6 77,656 10.6

DSP Tax Saver Fund - Growth 50 13,050 19.6 41,653 10.2 80,386 12.0

Invesco India Tax Plan - Growth 52 12,589 10.8 41,931 10.7 79,341 11.5

L&T Tax Advantage Fund - Reg - Growth 55 12,394 7.2 39,788 7.0 76,578 10.0

Aditya Birla Sun Life Tax Relief 96 - Growth 32 12,319 5.8 40,826 8.8 78,691 11.1

IDFC Tax Advantage (ELSS) Fund - Reg - Growth 58 12,647 11.9 41,307 9.6 79,079 11.3

Nifty 500 TRI

BNP Paribas Mutual Fund Equity schemes

Scheme Name Scheme CategoryPresent Value (Rs.)


Present Value (Rs.)


Present Value (Rs.)


BNP Paribas Large Cap Fund - Growth Large Cap 13,154 21.6 42,259 11.3 76,924 10.2

BNP Paribas Long Term Equity Fund - Growth ELSS 13,055 19.7 41,148 9.4 75,011 9.1

BNP Paribas Multi Cap Fund - Growth Multi Cap 12,983 18.3 40,609 8.4 76,070 9.7

BNP Paribas Mid Cap Fund - Growth Mid Cap 12,682 12.6 38,118 4.0 72,357 7.7

BNP Paribas Focused 25 Equity Fund - Reg - Growth Focused 12,859 15.9 - - - -

BNP Paribas India Consumption Fund - Reg - Growth Thematic - - - - - -

BNP Paribas Substantial Equity Hybrid Fund - Reg - Growth Aggressive Hybrid 12,974 18.2 - - - -

SIP INVST (Monthly Rs. 1,000)* 1 year 3 years 5 Year

Total amount invested 12,000 36,000 60000

Scheme Name NAVPresent Value (Rs.)


Present value (Rs.)


Present value (Rs.)


Every individual has a different investment requirement, which depends on his financial goals and risk-taking capacities. We at Sharekhan first understand the individual’s investment objectives and risk-taking capacity, and then recommend a suitable portfolio. So, we suggest that you get in touch with our Mutual Fund Advisor before investing in the best funds.n

Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a postition in the mutual funds mentioned in the article.


EQUITY FUNDAMENTALSEARNINGS GUIDE

Sharekhan Earnings Guide Prices as on July 03, 2019

CompanyCMP (Rs)

Sales Net profit EPS (%) EPSgrowth

PE (x) RoCE (%) RoNW (%) DPSRs.

DivYld(%) FY19 FY20E FY21E FY19 FY20E FY21E FY19 FY20E FY21E FY19 FY20E FY21E FY20E FY21E FY20E FY21E

Automobiles

Apollo Tyres 201 17,548.8 19,361.3 21,260.6 879.9 879.6 1,022.3 15.4 15.4 17.9 8% 13.0 13.0 11.2 7.8 8.5 7.9 8.6 3.0 1.5

Ashok Leyland 90 29,055.0 30,071.8 31,613.9 2,040.7 1,673.9 1,686.0 7.0 5.7 5.8 -9% 12.9 15.8 15.6 21.4 19.4 17.3 15.6 2.4 2.7

Bajaj Auto 2,898 30,250.0 34,494.3 38,669.0 4,333.2 4,728.4 5,188.7 149.8 163.5 179.4 9% 19.3 17.7 16.2 27.5 27.2 19.5 19.3 60.0 2.1

Gabriel India 111 2,076.5 2,221.8 2,377.3 95.0 91.7 103.7 6.6 6.4 7.2 4% 16.7 17.3 15.3 20.0 19.7 14.0 13.6 1.4 1.3

HERO MOTOCORP 2,588 33,650.5 36,641.2 40,127.4 3,384.9 3,336.4 3,458.8 169.5 167.1 173.2 1% 15.3 15.5 14.9 32.7 31.0 22.9 21.6 87.0 3.4

M&M 669 52,848.2 56,593.5 60,253.9 5,423.9 4,678.9 4,727.9 43.6 37.6 38.0 -7% 15.3 17.8 17.6 16.6 15.6 12.6 11.8 7.5 1.1

Maruti Suzuki 6,534 86,020.3 94,132.2 1,07,202.0 7,500.6 7,598.6 8,978.4 248.3 251.5 297.2 9% 26.3 26.0 22.0 19.4 20.5 14.3 15.0 80.0 1.2

Rico Auto Industries 61 1,392.7 1,629.4 1,792.3 60.6 62.0 69.4 4.5 4.6 5.1 6% 13.6 13.3 12.0 11.5 12.0 9.9 10.5 0.8 1.2

TVS Motor 435 18,209.9 20,069.6 23,401.2 670.1 678.2 822.0 14.1 14.3 17.3 11% 30.9 30.4 25.1 21.6 23.3 18.0 19.1 2.5 0.6

Banks & Financials

Axis Bank 806 34,837.8 33,858.2 39,115.5 4,675.9 2,928.0 4,461.7 18.2 11.4 17.3 -2% 44.3 70.8 46.5 - - 4.3 6.3 0.0 0.0

Bajaj Finance 3,715 11,145.7 12,851.8 18,805.9 3,921.6 4,914.7 6,398.3 68.0 85.2 111.0 28% 54.6 43.6 33.5 - - 22.3 23.7 4.0 0.1

Bajaj Finserv 8,430 - - - - - - - - - - - - - - - - - 1.8 0.0

Bank of Baroda 126 24,774.8 27,388.1 29,721.9 433.5 4,759.1 5,780.3 1.6 17.8 21.7 265% 77.3 7.0 5.8 - - 9.6 11.5 0.0 0.0

Bank of India 93 18,789.7 20,444.1 23,720.1 (5,546.9) 1,833.4 2,678.7 -16.2 5.4 7.8 - - 17.3 11.8 - - 4.5 7.6 0.0 0.0

Federal Bank 110 5,527.4 6,241.9 7,799.8 1,243.9 1,453.5 2,142.2 6.3 7.5 11.1 33% 17.5 14.6 9.9 - - 10.5 14.2 1.0 0.9

HDFC 2,277 15,540.3 17,075.7 20,095.5 9,632.5 10,083.0 11,945.8 55.9 58.5 69.4 11% 40.7 38.9 32.8 - - 12.0 13.0 20.0 0.9

HDFC Bank 2,490 65,868.4 79,578.3 96,100.1 21,077.4 25,349.1 32,049.5 77.5 93.2 117.8 23% 32.1 26.7 21.1 - - 16.8 19.5 13.0 0.5

ICICI Bank 436 41,527.0 46,942.8 56,451.7 3,363.3 10,089.9 13,779.0 5.2 15.7 21.4 102% 83.3 27.8 20.3 - - 9.0 13.9 1.5 0.3

LIC Housing Finance 569 4,462.3 5,775.7 7,092.3 2,431.0 2,883.9 3,567.5 48.1 57.1 70.6 21% 11.8 10.0 8.0 - - 17.3 19.3 6.8 1.2

Max Financial 420 - - - - - - - - - - - - - - - - - 0.0 0.0

Punjab National Bank 81 24,533.7 27,571.4 30,014.4 (9,975.5) 3,506.5 4,221.1 -46.9 16.5 19.8 - - 4.9 4.1 - - 9.7 14.6 0.0 0.0

SBI 366 1,25,123.8 1,45,144.7 1,63,941.0 862.2 15,759.1 20,043.1 1.0 17.7 22.5 382% 379.0 20.7 16.3 - - 6.9 8.3 0.0 0.0

Union Bank of India 84 14,688.9 17,065.5 19,562.2 (2,947.5) 921.6 1,532.2 -16.7 11.7 19.4 - - 7.2 4.3 - - 3.7 6.5 0.0 0.0

Yes Bank 100 14,398.8 15,756.2 17,113.4 1,720.5 2,084.8 2,134.1 7.5 9.1 9.3 11% 13.4 11.0 10.8 - - 7.5 7.2 2.7 2.7

Consumer Goods

Britannia 2,795 11,054.7 12,395.5 13,947.3 1,154.5 1,418.9 1,701.3 48.1 59.1 70.9 21% 58.1 47.3 39.4 42.6 40.6 29.9 28.9 15.0 0.5

Emami 303 2,692.9 3,058.4 3,598.4 511.1 609.4 743.4 11.3 13.4 16.4 20% 26.8 22.6 18.5 34.0 40.5 28.3 32.1 4.0 1.3

GSK Consumer 7,780 4,832.0 5,428.8 6,064.3 885.8 993.2 1,119.8 210.6 236.1 266.2 12% 36.9 33.0 29.2 35.2 33.9 23.5 22.7 105 1.3

Godrej Consumer Products 673 10,314.3 11,424.7 13,081.8 1,478.5 1,747.2 2,084.1 14.5 17.1 20.4 19% 46.4 39.4 33.0 19.4 21.6 21.9 21.9 3.0 0.4

Hindustan Unilever 1,785 38,224.0 42,941.4 48,220.4 6,199.4 7,360.0 8,656.0 28.7 34.1 40.1 18% 62.2 52.3 44.5 113.5 102.8 84.2 75.0 22.0 1.2

ITC 277 45,784.4 51,244.2 57,776.5 12,309.9 13,773.0 15,520.7 10.1 11.3 12.7 12% 27.4 24.5 21.8 28.9 30.7 22.9 23.8 5.8 2.1

Jyothy Laboratories 160 1,813.6 1,990.2 2,242.0 197.6 218.3 246.0 5.4 5.9 6.7 11% 29.6 27.1 23.9 13.8 14.4 15.7 16.0 3.0 1.9

Marico 373 7,333.6 8,336.7 9,514.3 947.7 1,168.0 1,366.1 7.3 9.1 10.6 20% 51.1 41.0 35.2 44.7 44.6 35.4 34.2 3.8 1.0

Zydus Wellness 1,364 842.8 1,898.0 2,104.8 171.2 190.1 239.0 29.7 33.0 41.5 18% 45.9 41.3 32.9 7.3 8.1 5.5 6.6 5.0 0.4

IT / IT services

HCL Technologies 1,051 60,427.0 69,968.7 78,029.2 10,123.0 10,836.3 12,096.8 73.6 78.8 87.9 9% 14.3 13.3 12.0 27.4 27.2 24.4 24.2 8.0 0.8

Infosys 731 82,675.0 90,850.8 99,968.3 15,862.0 17,084.2 19,190.4 35.4 39.3 44.1 12% 20.6 18.6 16.6 36.3 41.8 27.2 31.3 21.5 2.9

Persistent Systems 616 3,365.9 3,624.8 3,974.7 351.7 386.2 420.2 44.4 48.8 53.1 9% 13.9 12.6 11.6 21.7 21.7 15.8 15.8 11.0 1.8

Tata Consultancy Services 2,238 1,46,463.0 1,60,187.2 1,74,720.2 31,472.0 34,263.9 37,657.3 83.1 90.4 99.4 9% 26.9 24.7 22.5 43.4 44.5 33.6 34.4 34.0 1.5

Wipro 283 58,906.0 62,936.4 68,051.7 9,011.4 10,083.7 11,175.9 14.9 16.7 18.5 11% 18.9 16.9 15.3 16.1 16.7 17.4 17.5 1.0 0.4

Cap goods / Power

CESC 791 7,754.0 8,353.0 9,048.0 937.0 1,058.0 1,164.0 70.3 79.4 87.4 12% 11.3 10.0 9.1 8.7 8.7 10.4 10.6 17.5 2.2

Finolex cable 415 3,078.0 3,399.0 3,788.0 344.0 383.0 424.0 22.5 25.0 27.7 11% 18.4 16.6 15.0 22.9 22.5 30.9 30.4 4.5 1.1

Greaves Cotton 147 2,015.3 2,216.9 2,438.5 180.5 172.1 180.4 7.5 7.5 7.8 2% 19.6 19.6 18.9 32.4 32.6 22.4 22.4 5.5 3.7

Kalpataru Power Transmission 529 7,115.0 8,378.0 9,662.0 401.0 509.0 594.0 26.0 33.2 38.7 22% 20.4 15.9 13.7 23.2 23.9 15.3 15.9 3.0 0.6

KEC International 328 11,001.0 12,946.0 15,288.0 486.0 605.0 715.0 18.9 23.5 27.8 21% 17.4 14.0 11.8 25.0 24.4 22.9 22.8 2.7 0.8

PTC India 67 13,496.0 15,346.0 16,918.0 262.0 331.0 411.0 8.9 11.2 13.9 25% 7.6 6.0 4.9 14.8 16.5 9.7 11.2 4.0 5.9


EQUITY FUNDAMENTALS EARNINGS GUIDE

CompanyCMP (Rs)

Sales Net profit EPS (%) EPSgrowth

PE (x) RoCE (%) RoNW (%) DPSRs.

DivYld(%) FY19 FY20E FY21E FY19 FY20E FY21E FY19 FY20E FY21E FY19 FY20E FY21E FY20E FY21E FY20E FY21E

Thermax 1,052 5,973.2 6,136.5 6,899.7 325.4 378.3 431.2 28.9 33.6 38.3 15% 36.4 31.3 27.5 17.3 17.1 13.7 15.6 7.0 0.7

Triveni Turbine 104 840.0 940.0 1,053.5 100.2 118.3 135.4 3.1 3.7 4.2 16% 33.6 28.5 24.9 33.8 31.9 23.0 21.8 0.0 0.0

V-Guard Industries 242 2,566.4 2,936.7 3,396.4 165.5 211.6 265.6 3.9 5.0 6.2 27% 62.4 48.8 38.9 27.8 29.3 21.5 22.6 0.8 0.3

Va Tech Wabag 339 2,781.0 3,129.0 3,441.0 105.0 115.0 129.0 19.2 21.1 23.6 11% 17.7 16.1 14.4 12.2 13.5 10.2 10.4 4.0 1.2

Infra / Real Estate

Gayatri Projects 156 3,463.1 4,060.0 4,819.0 210.8 266.7 290.0 11.3 14.2 15.5 17% 13.8 10.9 10.1 18.4 19.3 17.6 15.7 0.0 0.0

IRB Infra 95 6,707.0 8,159.4 8,781.1 850.0 1,106.0 1,032.8 24.2 31.5 29.4 10% 3.9 3.0 3.2 16.0 18.1 16.3 13.4 2.5 2.6

Larsen & Toubro 1,578 1,41,007.1 1,57,927.9 1,73,720.7 8,610.4 10,262.9 11,557.2 63.4 73.2 83.9 15% 24.9 21.6 18.8 9.4 10.6 15.6 15.9 18.0 1.1

Sadbhav Engineering 244 3,549.2 4,087.9 4,763.5 186.1 208.8 259.8 10.8 12.2 15.1 18% 22.5 20.0 16.1 9.0 9.7 9.8 11.1 1.0 0.4

Oil & gas

Oil India Ltd 178 13,735.0 13,824.1 13,765.8 3,616.9 3,406.4 3,294.5 33.4 31.4 30.4 -5% 5.3 5.7 5.9 14.6 13.7 11.9 11.0 10.7 6.0

Petronet LNG 250 38,395.4 46,307.3 51,399.0 2,291.4 2,514.2 2,809.6 15.3 16.8 18.7 11% 16.3 14.9 13.3 29.9 32.2 24.5 26.2 10.0 4.0

Reliance Ind 1,283 5,67,135.0 5,90,696.3 6,33,650.7 39,837.0 48,641.2 53,995.1 67.3 82.2 91.2 16% 19.1 15.6 14.1 11.0 11.0 12.6 12.4 6.5 0.5

Selan Exploration Technology 175 93.3 - - 51.5 - - 31.5 - - - 5.6 - - - - 0.0 - 5.0 2.9

Pharmaceuticals

Aurobindo Pharma 596 19,563.6 29,004.5 32,456.3 2,513.3 3,211.9 3,762.3 42.9 54.8 64.2 22% 13.9 10.9 9.3 19.9 19.3 20.7 19.8 2.5 0.4

Cadila Healthcare 237 13,165.6 14,368.2 16,183.2 1,801.9 1,854.0 2,097.6 17.6 18.1 20.5 8% 13.5 13.1 11.6 12.1 12.6 15.8 15.7 3.5 1.5

Cipla 553 16,362.4 19,802.8 24,169.8 1,492.4 2,249.7 3,215.1 18.7 27.9 39.9 46% 29.5 19.8 13.9 15.2 19.6 13.7 16.7 3.0 0.5

Divi's Labs 1,631 4,946.3 5,836.6 7,273.8 1,352.7 1,593.2 2,011.9 51.0 60.0 75.8 22% 32.0 27.2 21.5 31.0 32.8 24.0 25.1 16.0 1.0

Glenmark Pharmaceuticals 443 9,865.5 11,239.0 13,337.1 758.6 987.0 1,289.9 26.9 35.0 45.7 30% 16.5 12.7 9.7 16.1 18.4 15.1 16.7 2.0 0.5

IPCA Lab 959 3,773.2 4,224.9 5,054.9 442.2 568.6 716.5 35.1 45.1 56.8 27% 27.4 21.3 16.9 17.7 21.9 16.7 17.7 3.0 0.3

Lupin 753 16,718.2 18,312.1 20,764.8 946.5 1,271.9 1,587.9 20.9 28.1 35.1 30% 36.0 26.8 21.4 7.1 7.8 7.2 8.2 5.0 0.7

Sun Pharmaceutical Industries 396 29,065.9 34,051.2 41,841.8 3,879.8 5,428.7 7,375.1 16.2 22.6 30.7 38% 24.5 17.5 12.9 12.5 15.4 11.7 13.9 2.8 0.7

Torrent Pharma 1,553 7,462.0 8,450.4 10,255.9 793.0 1,014.4 1,622.8 46.6 59.7 95.5 43% 33.3 26.0 16.3 15.8 20.7 19.5 25.3 4.0 0.3

Building Materials

Grasim 928 20,550.4 23,404.3 25,975.2 2,883.3 2,751.5 3,060.0 43.9 41.9 46.6 3% 21.1 22.1 19.9 5.7 5.9 6.2 6.4 7.0 0.8

Shree Cement 21,487 11,722.0 13,380.9 15,404.4 1,138.7 1,314.5 1,673.0 326.8 377.3 480.2 21% 65.7 56.9 44.7 11.4 12.8 12.9 14.6 60.0 0.3

The Ramco Cements 791 5,146.3 6,047.2 6,886.0 501.0 603.6 730.7 21.3 25.6 31.0 21% 37.2 30.9 25.5 8.9 9.8 12.8 13.8 3.0 0.4

UltraTech Cement 4,561 37,379.2 44,345.9 51,215.7 2,434.7 3,112.8 4,156.2 88.7 107.9 144.0 27% 51.5 42.3 31.7 8.1 9.5 10.4 12.6 11.5 0.3

Discretionary

Arvind* 67 7,142.2 7,608.1 8,271.5 265.8 272.3 308.3 8.9 10.5 11.9 16% 7.5 6.4 5.6 10.4 10.7 9.5 10.0 2.0 3.0

Arvind Fashions 683 4,643.9 5,098.0 5,711.3 21.5 58.7 92.5 14.8 40.5 63.8 108% 46.1 16.9 10.7 6.4 8.0 4.7 7.0 -- --

Century Plyboards (India) 173 2,280.4 2,582.4 2,902.9 166.2 176.8 211.7 7.5 7.9 9.5 13% 23.2 21.8 18.2 13.7 14.6 16.9 17.4 1.0 0.6

Info Edge (India) 2,274 1,098.3 1,304.4 1,549.8 315.1 375.0 453.2 25.8 30.8 37.2 20% 88.1 73.8 61.1 19.4 20.4 14.2 14.9 6.0 0.3

Inox Leisure 323 1,692.0 1,977.0 2,343.0 138.0 147.0 186.0 14.1 14.9 18.9 16% 22.9 21.7 17.1 19.7 21.2 13.2 14.3 0.0 0.0

Kewal Kiran Clothing Ltd 1,179 502.4 562.5 719.6 80.3 89.6 116.1 65.1 72.6 94.2 20% 18.1 16.2 12.5 17.0 18.3 19.9 21.2 34.0 2.9

Orbit Exports 120 138.6 145.5 157.1 23.5 26.8 27.9 9.1 9.5 9.9 4% 13.2 12.7 12.2 19.3 18.1 13.4 12.2 0.0 0.0

Relaxo Footwear# 466 2,292.1 2,696.9 3,197.2 175.4 221.9 285.5 7.1 8.9 11.5 27% 65.6 52.4 40.5 24.2 25.7 18.7 20.7 1.8 0.4

Titan Company Limited 1,328 19,778.5 23,434.7 27,495.0 1,516.8 1,901.3 2,296.1 17.1 21.4 25.9 23% 77.7 62.0 51.4 38.3 37.7 28.1 27.5 5.0 0.4

Wonderla Holidays 276 282.0 330.8 396.1 55.4 72.3 91.8 9.8 12.8 16.2 29% 28.2 21.6 17.0 12.2 14.8 8.6 10.3 1.8 0.7

Zee Entertainment 361 7,934.0 8,975.0 10,041.0 1,577.0 1,833.0 2,108.0 16.4 19.1 22.0 16% 22.0 18.9 16.4 25.6 28.1 19.0 20.0 3.5 1.0

Diversified / Miscellaneous

Bajaj Holdings 3,724 426.7 - - 3,048.8 - - 273.9 - - - 13.6 - - - - - - 32.5 0.9

Bharat Electronics 113 12,164.0 13,989.0 15,912.0 1,887.0 2,011.0 2,188.0 7.7 8.3 9.0 8% 14.7 13.6 12.6 20.6 20.9 15.7 15.9 1.7 1.5

Bharti Airtel 353 80,780.2 87,576.0 93,800.2 (4,743.9) (3,530.7) (770.2) -11.9 -6.9 -1.5 -64% - - - 2.1 3.4 - - 2.5 0.7

Gateway Distriparks 128 430.6 1,324.7 1,404.2 84.6 101.7 111.9 7.8 9.4 10.3 15% 16.5 13.7 12.5 10.7 11.9 7.8 9.2 7.0 5.5

PI Industries 1,194 2,841.0 3,445.0 4,134.0 410.0 537.0 705.0 29.8 39.0 51.3 31% 40.1 30.6 23.3 27.3 29.3 21.2 22.8 4.0 0.3

Ratnamani Metals and Tubes 1,006 2,755.0 3,048.0 3,400.0 253.0 276.0 303.0 54.0 59.0 64.7 9% 18.6 17.1 15.5 22.1 22.3 17.6 17.9 9.0 0.9

Supreme Industries limited 1,126 5,612.0 6,171.8 7,003.9 381.4 435.1 505.3 30.0 34.3 39.8 15% 37.5 32.8 28.3 25.2 26.0 17.9 18.3 13.0 1.2

UPL# 652 21,837.0 36,168.0 40,236.0 1,898.0 3,541.0 4,115.0 18.9 41.0 48.9 61% 34.5 15.9 13.3 13.2 14.4 22.3 22.0 5.3 0.8

Note: Grasim- Changed reporting to standalone financial numbers Arvind’s financials are derived after taking out the branded apparel, retail and engineering businessRelaxo Footwear post 1:1 bonus UPL post 1:2 bonus



Remarks

Automobiles

Apollo Tyres Apollo Tyres Limited (ATL) is the market leader in the truck and bus tyre segments in India. The company is

present in the Indian and European markets ATL is witnessing strong demand in truck replacement segment which

accounts for 70% of demand in Indian operations. Replacement growth is more than offsetting the slowdown in

OEM demand. The company has been gaining market share across segments & the management has guided

for a double-digit growth in standalone operations for FY20. ATL’s European operations are on a strong footing

to grow in healthy double digits as the company enters new geographies and penetrates deeper in to OEM

segment with new business wins. Also ramp up at Hungary plant would aid topline growth. We expect ATL’s

earnings to grow in double digits over the next 1-2 years and we retain our Buy recommendation on the stock.

Ashok Leyland Ashok Leyland Limited (ALL), the second largest CV manufacturer in India, is a pure play on CV. The government

has announced an increase in axle load carrying capacity in August 2018. As per the new norms, the maximum

permissible payload capacity of trucks has been increased by 20-25%, and this is impacting volume growth.

Liquidity situation has not normalised and continues to impact demand. Further, stress in rural areas and slowing

economic growth would continue to impact demand. We expect subdued demand in H1FY2020. A gradual

recovery is expected only in H2FY2020 on account of pre-buying ahead of BS6 emission norms. We expect the

MHCV industry’s growth to moderate sharply to low to mid-single digits as against 15% growth. ALL has gained

market share despite the exit of its CEO, who steered market share gains for the company, thus allaying fears of

competitive positioning of ALL. We have raised our estimates for FY2020 and FY2021 to factor in the traction in

exports and new product launches. We upgrade our recommendation on the stock to Hold from Reduce.

Bajaj Auto Bajaj Auto Limited (BAL) is a leading motorcycle and three-wheeler manufacturer with a significant presence in

export markets. In the domestic market, it is a leader in the premium motorcycle segment. BAL has successfully

gained market share in the domestic motorcycle segment, led by aggressive pricing. Its market share has surged

from 15.6% in FY2018 to 18.8% for FY2019. BAL is targeting further market share gains and has planned more

launches in both the entry and mid-motorcycle segment. The outlook for exports is also encouraging, led by stable

currency and rising crude prices, which has boosted demand in key export markets. We expect BAL’s topline

to report a strong 13% CAGR over the next two years. However, aggressive pricing stance and cost increases

on account of safety norms and higher discounting margins are likely to be under pressure. Consequently, we

expect earnings to grow at a slower pace of 9% as against topline growth of 13%. and we retain our Hold rating

on the stock.

Gabriel India Gabriel India Limited (GIL) is one of India’s leading manufacturers of shock absorbers and front forks manufacturer

with a diversified customer base. The outlook from auto OEMs has substantially deteriorated. Topline growth of

Gabriel is expected to moderate in FY2020, given the slowdown in the automotive OEM segment particularly

two-wheeler (2W) and passenger vehicle (PV), which contribute about 75% to the topline. Management has

indicated that it is unable to fully pass on cost increases to OEM customers in wake of weak demand environment.

Moreover, Gabriel’s product mix is expected to remain adverse with lower share of the PV segment and expect

Gabriel’s margins to drop by 60 BPS in FY2020. We retain our Hold rating on the stock.

Hero MotoCorp Hero MotoCorp Limited (Hero) is one of the largest 2W manufacturer. FY2019 ended on a weak note for the 2w

industry as well as the company. Hero’s volume growth slowed down substantially to a meager 3%. The two-

wheeler (2W) industry’s growth declined sharply in H2FY2019, as increased insurance cost, liquidity financing

crunch, slowing economic growth and distress in rural areas dented sales. Hero’s inventory levels stand at 45- 50

days and is significantly higher than the norm of 30 days. With subdued demand and inventory correction, Hero

expects the 2W industry to remain flat in H1FY2020 and expects demand to recover only in H2FY2020 and

expects mid-single digit growth for the 2W industry for FY2020. With margin pressures on account of operating

deleverage, aggressive competitive pricing and higher regulatory costs, we expect Hero’s net profit to decline by

2% in FY2020 and we retain our Hold rating on the stock.

M&M M&M is a leading manufacturer of tractors and utility vehicles (UV) in India. M&M expects FY2020 automotive

segment’s volume growth to be in double digits, led by new launches in the utility vehicle (UV) segment. The



company recently launched Marazzo and Alturas UV and received strong response. Further, the company has

launched its much-awaited compact SUV – XUV3OO, which would be in the fast-growing and larger-sized

compact UV market. M&M has significantly outpaced the utility vehicle (UV) industry. The company’s market

share in the UV segment rose by a whopping 400 BPS to 28% for Q4FY2019 as against a 24% for 9MFY2019.

M&M is looking to retain its leadership position in the UV segment, led by new launches and introduction of petrol

variants across its product portfolio ahead of BS6 emission norms. We expect the auto segment’s revenue to

report a 10% CAGR over the next two years and more than offset moderation in the tractor segment. We reiterate

our Buy recommendation on the stock.

Maruti Suzuki Maruti Suzuki India Limited (MSIL) is India’s largest passenger vehicle (PV) manufacturer. The company reported

a strong 51% market share as of FY2019. The passenger vehicle industry ended FY2019 on a weak note with

volumes growing marginally by 3%. Weak consumer sentiment driven by slowing economic growth, NBFC liquidity

crunch and increased mandatory insurance costs dampened demand. Due to uncertainty before the general

elections, Q1FY2020 volumes are also expected to remain under pressure. SIAM expects the PV industry’s

growth for FY2020 to be around 3-5% and MSIL too has cut its volume guidance to 4-8% for FY2020 as against

double-digit growth projection earlier. Further, margin pressures on account of operating deleverage and cost

increases would lead to margin contraction in FY2020. We expect Maruti to report flat earnings growth in FY2020

and retain Hold rating on the stock.

Rico Auto Rico Auto (Rico) is one of the largest producers of high-pressure non-ferrous die castings for the auto sector.

The domestic OEM segment (forming about 60% of revenue) has slowed down considerably over the past two

quarters. Slowing economic growth, NBFC crisis and increased insurance costs dented demand. Domestic

OEM challenges are expected to persist in the near term, which would impact RAI’s earnings. Moreover, pricing

pressures in wake of weak OEM demand would impact Rico’s margins. We expect Rico’s earnings to grow by

meager 2% in FY2020. RAI’s return ratios are unlikely to improve and we expect ROE to remain at 10-11%. We

retain our Hold rating on the stock.

TVS Motor TVS Motor (TVSM) is the fourth largest 2W manufacturer in the country with a strong presence in the scooter

segment. The company manufactures mopeds and motorcycles as well. Recent launches of TVSM (Apache and

Radeon in the motorcycles space and Ntorq in the scooters segment) have generated a sturdy demand. This

coupled with increasing distribution reach would enable company to outpace industry growth. However, market

share gains will come at the cost of margins. TVS is cautious in its demand commentary going into FY2020. As

per the company, higher FY2019 year-end inventory and higher product costs can impact the industry’s growth

in the initial part of FY2020. Competitive pressures including pricing discounts have become prevalent in the

industry and the same are expected to heighten until changeover to BS6 emission norms from April 1, 2020.

Overall, the company expects 6-8% growth for the domestic 2W industry in FY2020, which is similar to 5% growth

achieved in FY2019. We retain our Hold rating on the stock.

Banks & Finance

Axis Bank Axis Bank is the third-largest private sector bank, which is growing faster than the industry and has a well-

diversified loan book having strengths in both retail and corporate segments. The bank’s liability profile has

improved significantly, which would be helpful in sustaining margins at healthy levels. Of late, asset quality is

improving, which we believe is positive for its profitability and growth going forward. Business restructuring as

well as drivers such as normalisation of corporate fee income and growth coming from retail plus midmarket group

are steps in the right direction, which will augment sustainability and profitability. We expect earnings growth to

remain reasonably strong, driven by healthy operating performance. Asset-quality pressure has peaked out and

we expect long-term outlook to improve.

Bajaj Finance Bajaj Finance, owned by Bajaj Finserv, is a fast-growing, well-diversified leading NBFC in the country. The

company has its assets spread across products, viz. loans for consumer durables, two-wheelers and 3Ws, loans

to small and medium enterprises (SME), mortgage loans and commercial loans. Apart from its strong loan growth,

asset quality and provisioning performance for Bajaj Finance remain among the best in the system. Given the

strong growth rate, high margins and attractive return ratios, its premium valuations within the NBFC space are

expected to be maintained.



Bajaj Finserv Bajaj Finserv is a financial conglomerate present in the financing business (vehicle finance, consumer finance

and distribution) and is among the top players in the life insurance and general insurance segments. We expect

its subsidiary, BFL, to maintain its loan book trajectory as well as profitability and margins, which will be the key

support for present valuations of Bajaj Finserv. BAGIC is expected to continue its healthy operating metrics and

profitability going ahead, but near-term challenges are likely to keep profitably in a range. BALIC is focusing well

on strengthening its distribution channel and protection business but profitability metric will be dependent on the

pace and segment of new business growth.

Bank of Baroda Bank of Baroda has a network of over 5,500+ branches, spread across the country and abroad, along with

a diversified products and services portfolio and strong client relationships. Performance in terms of business

growth as well as profitability and asset-quality improvement is gradual but in the desired direction. Two others

PSU banks are being merged with Bank of Baroda. Notwithstanding the synergies that will accrue over a longer

period, we believe near-term challenges in terms of asset quality and integration issues of merged entity may

mute medium-term performance.

Bank of India Bank of India has a network of over 5,000+ branches, spread across the country and abroad, along with a

diversified products and services portfolio. Operating performance and earnings had eroded due to a sharp rise

in NPAs. However, going forward, credit traction is expected to start gradually as the bank exits PCA framework.

There are pockets and segments that are undergoing significant stress, which can be exacerbated by the current

economic slowdown, if it persists. Moreover, the overhang of big-ticket infrastructure and corporate loans still

exists, which is likely to keep upside limited.

Federal Bank Federal Bank is among the better-performing old private sector banks in India with a strong presence in south

India, especially Kerala. We believe the bank’s growth is in the desirable direction and the accompanying vectors

indicate sustainability and quality of the bank. Earnings and margins may continue to remain under pressure

mainly due to asset quality yet to attain its normalised credit cost run rate in the near term. Valuations seem

attractive over the medium to long term.

HDFC HDFC Limited is among the top-performing housing finance companies in the country having deep roots in

the retail segment. Despite the general slowdown in credit growth, HDFC continues to report strong growth in

advances with stable margins. Aided by a strong business franchise, best-in-class credit ratings and impeccable

asset quality, HDFC is a safe bet with a scope for steady business growth-led value creation.

HDFC Bank HDFC Bank is among the top performing banks in the country having deep roots in the retail segment. Despite the

general slowdown in credit growth, the bank continues to report strong growth in advances from retail products.

Relatively high margins (compared with its peers), strong branch network and better asset quality make HDFC

Bank a safe bet with a scope for expansion in its valuations.

ICICI Bank ICICI Bank is India’s largest private sector bank with a network of over 4,867 branches. The bank has made

inroads in to retail loans (~60% of the book) and has significantly improved its liability franchise. We believe NPA

cycle peaking and uncertainty regarding top leadership behind, along with strong capital adequacy and a wide

branch network, the bank’s business will gather pace in the long run. However, we believe normalisation in

operating expenses and abatement of slippages can be positive levers for ROE and profitability in the medium

term. The bank appears to be well positioned to benefit from reduction in competitive intensity from NBFCs

and political stability is expected to gather pace in reforms such as IBC, which will be positive for recoveries/

resolutions and credit demand revival.

LIC Housing LIC Housing Finance is one of the largest mortgage financiers in India with a market share of ~ 11%. The company

is promoted by Life Insurance Corporation of India. With over 270 branches, 1,241 direct sales agents, 6,535

home loan agents and 782 customer relationship associates, the company has one of the strongest distribution

networks to support business expansion. Though factors such as rising interest rates and a strong parent bode

well for the NBFC, we believe increasing competitive pressures may keep NIM range-bound in the near to

medium term. The overhang of rising developer book proportion, limited scope of ROA expansion, increasing

risk of delinquencies in the real estate segment and modest growth outlook indicate limited upsides for the stock

in the near term.



Max Financial Services Max Life Insurance is held by Max Financial Services and is among the leading private sector insurers and has

gained critical mass and enjoys the best operating parameters in the industry. As the insurance sector is showing

signs of stability, the company’s favourable product mix and a strong distribution channel augur well and will help

sustain healthy growth in premiums and profits.

PNB Punjab National Bank (PNB) has strong liability mixes in the banking space, with low-cost deposits constituting over

44% of its total deposits. PNB has done a significant amount of business and process enhancement/upgradation

to mitigate operational and credit risk after the fraud, yet asset-quality performance will be keenly monitored.

Further resolution/recovery in NCLT exposures as well as other corporate/infra exposures can be positive for the

bank. Risks of chunky slippages/haircuts are present in the near term.

SBI State Bank of India (SBI) is the largest bank of India. The successful merger of associate banks and value unlocking

from the insurance business could provide further upside for the bank. While the bank is favourably placed in

terms of liability base and the operating profit is better than peers, asset quality is also improving aided by strong

resolution/recoveries. PSU bank recapitalisation by the government would benefit the bank to make up for capital

requirements and promote growth. The bank is also well placed to gain market share as well as key clients.

Union Bank of India Union Bank of India has a strong branch network and an all-India presence. The bank aspires to become the

largest retail and MSME bank. Hence, it has ramped up its manpower and infrastructure to ramp up retail and SME

lending. The bank’s asset-quality challenges have come to the fore (mainly from the corporate portfolio), whereas

weak capital position remains an area of concern.

Yes Bank Yes Bank, a new generation private bank, started its operations in November 2004. Cleaning up of books with

a view to improve book quality and business mix is positive, but recent events indicate that the twin problems

of regulatory overhang and questions on near-term capital raising have returned for the bank. However, in the

backdrop of rating downgrades as well as concerns on governance issues resurfacing, we believe raising equity

capital for the bank becomes difficult once again. We believe the outlook has deteriorated meaningfully. Hence,

investor caution is warranted.

Consumer goods

Britannia Britannia is one of the largest domestic biscuit and snacking company (gained No. 1 position in domestic biscuit

market, out beating Parle) with turnover over Rs. 10,000 crore. Under a new leadership, Britannia has been able to

leverage and monetize its strong brand and premium positioning in the biscuits and snacks segments (achieved

volume growth of 7% in Q4FY2019). The company is well placed to sustain its higher-than- industry growth rate

with an improving distribution reach, deep penetration in rural India, enhanced international business, entry into

newer categories and focus on cost efficiency.

Emami Emami is one of the largest players in the domestic FMCG market with a strong presence in underpenetrated

categories such as cooling oil, antiseptic cream, balm and men’s fairness cream. The initiatives behind key

brands (such as Kesh King and Zandu Pancharishta) have started giving positive results for the company with

brands such as Kesh King and Boro Plus range delivering double-digit revenue growth in Q4FY2019. On the

margin front, management expects OPM to sustain at ~27% due to stringent cost-saving initiatives taken by the

company. Any substantial improvement in volume growth trajectory to 7-9% from the current 2-3% in the domestic

business would act as a key re-rating trigger for the stock. In view of near-term headwinds, we maintain our Hold

recommendation on the stock.

GSK Consumer GSK Consumer Healthcare is a leading player in the malted food drinks (MFD) segment with ~70% share in

the domestic market. We expect volume growth to be in mid to high single digits in the near to medium term.

Though input prices have increased in the recent past, price hike of 2-3% in January 2019, better absorption of

overheads and cost efficiencies would lead to OPM at 22-23%. In December, GSK PLC exited from the Indian

nutrition business and sold 100% stake in GSK Consumer to HUL in an all-equity deal valued at Rs. 31,700 crore

(share exchange ratio is 4.39 shares of HUL for every share of GSK Consumer). We believe it is prudent for the

shareholders of GSK Consumer to Hold on to the stock as they will get shares of HUL at discounted rate. In

addition, business fundamentals of the company have improved, which will result in better performance in the

coming quarters. Thus, we maintain our Hold recommendation on the stock.



GCPL Godrej Consumer Products Limited (GCPL) is a major player in the personal wash, hair colour and household

insecticide market segments in India. Q4FY2019 was the eighth consecutive quarter of single-digit revenue

growth for GCPL with domestic and international business registering sub-par performance. Recovery in the

domestic HI category will take some time to come back to double-digit growth On the international front,

Indonesia and GAUM have seen recovery on sales due to improvement in Indonesia’s HI segment and re-

launch of Darling brand and scape up of Wet hair care in the East and West cluster. However, volatile currency

will continue to affect margins. The sustenance of lacklustre performance in some of the key categories in the

domestic market (including HI) remains a key concern in the near term. In view of near term headwinds, we

maintain our Hold recommendation on the stock.

HUL Hindustan Unilever Limited (HUL) is India’s largest FMCG company. HUL reported a decent operating performance

with a 7% volume growth in Q4FY2019 in the backdrop of tough demand environment. We expect volume growth

to stand at high single digits in the near term and expect it to improve gradually with the improvement in the

demand environment. This would result in 10-12% revenue growth in the coming quarters. The sharp decline in

palm oil prices (down by 20%+) along with steady volume growth would help post better operating margin in

the coming quarters. However, volatility in crude oil prices will play a key role in determining profitability in the

coming quarters. Further, the recent acquisition of GSK Consumers’ domestic health food business will scale up

HUL’s food business and will help it grow in double digits in the near to medium term. HUL remains one of our

top picks in the FMCG space.

ITC Sales volume growth for the cigarette business stood at 8-9% in Q4FY2019. Though a price hike was undertaken

in 20% of its cigarette portfolio, there will not be any significant impact on sales volume as the premium portfolio

has not seen any changes in the price and the price hike in these brands was taken with a gap. However, margins

of the cigarette business are expected to be lower due shift from long/king-size cigarettes to smaller variants.

Revenue of the non-cigarette FMCG business is expected to grow in high single digits to low double digits in the

near term as the slowdown in demand is likely to persist in the near term. However, a higher scale will support

the business’ overall margins in the medium term. We expect the company’s hotel business to also deliver

strong performance FY2020, with demand for rooms likely to exceed room supply. The paper, paperboard and

packaging (PPP) business will continue to post better profitability on account of a better revenue mix and benign

input cost. With performance of ITC expected to improve in the coming quarters, we expect the valuation gap to

reduce. We maintain our Buy recommendation on the stock.

Jyothy Labs Jyothy Laboratories Limited (JLL) is the market leader in the fabric whitener segment in India. With a strong brand

portfolio in the fabric care and dishwashing space, JLL is well poised to achieve revenue growth in mid-teens in

the near to medium term. However, the HI category will take some time to recover. The company expects OPM

to sustain at 15-16% in FY2020. However, the company has intentions of doubling its advertisement expenditure

in FY2020. Thus, we expect slight deceleration in margins in FY2020. JLL will be one of the key beneficiaries of

any uptick in rural demand from the current level due to its strong presence in the rural market. Further, focus on

debt reduction provides better earnings visibility in the near to medium term.

Marico Marico is among India’s leading FMCG companies. Core brands, Parachute and Saffola, have a strong foothold

in the market. Management expects volume growth to sustain at 5-6% in the near to medium term. The company

is going to invest in low-cost products in the VAHO segment to drive growth going ahead. Saffola edible oil has

started seeing recovery in sales volume and is expected to grow in mid-teens in the coming quarters. Probable

price cut due to sustained softening in copra prices would further improve the volume growth trajectory. Copra

prices (35-40% of Marico’s raw-material cost) are down by upwards of 30% and softening price trend would aid

margins to remain high on a y-o-y basis in the near to medium term. Marico will continue to reap the benefits of

stable demand in urban markets and improving demand in rural markets. We maintain our Buy recommendation

on the stock.

Zydus Wellness Zydus Wellness now has a product portfolio of brands such as EverYuth, Nutralite and Sugar Free along with

Glucon D and Complan post the acquisition of Heinz India. Zydus Wellness has a strong portfolio of leading

brands, which are largely placed in low-penetrated categories. In Q4FY2019, comparable revenue grew by 7%

due to slowdown in domestic consumption affecting growth of categories such as Sugarfree and scrubs during



the quarter. Most brands, including Sugar Free and Everyuth Peel Off Mask and Scrub, remained leaders in

key categories. The acquisition of Heinz would result in substantial EPS dilution for FY2020/FY2021 due to

higher interest cost and increased equity. We believe it will take 3-4 years for the company to gain the desired

benefits from the acquisition. In view of near-term headwinds of consumption slowdown and earnings dilution,

we downgrade our rating on the stock to Hold.

IT/IT services

HCL Tech HCL Technologies has a leadership position in infrastructure management services (IMS) and engineering and

research and development (ERD) space, which together account for ~60% of the company’s total revenue. HCL

Tech has guided for 14-16% constant currency (CC) revenue growth for FY2020E, which includes contribution

from acquisition of IBM’s select products effective from June 2019 and full-year revenue from other acquisitions

(Strong-Bridge Envision, H&D International group and Actian Corporation). Organic revenue contribution to

overall FY2020E revenue growth is expected to be at 7-9% (6.5% y-o-y in FY2019), though it would be mostly

back-ended. However, the company has reduced its margin guidance by 100 BPS owing to soft EBIT margin in

Q1FY2020E, transition costs of large deal ramp-ups and higher investments in digital.

Infosys Infosys is India’s premier IT and ITeS company that provides business consulting, technology, engineering and

outsourcing services. The company expects its pentagon agile digital service architecture would help to address

the client’s digital requirements. Further, management has set a three-year roadmap to achieve growth objectives.

Infosys has provided FY20E CC revenue growth guidance of 7.5%-9.5%, in-line with the growth rate of FY2019

(adjusting for the acquisition). Revenue outlook looks a bit of conservative in the backdrop of deal wins ($6.3

billion TCVs in FY2019). With healthy deal pipeline, continued strong large deal wins momentums and growth

from large accounts, we believe Infosys would deliver strong revenue growth in FY2020E.

Persistent Persistent Systems has proven expertise, strong presence in newer technologies, strength to improve its IP

base and a decent margin profile, all of which set it apart from other mid-cap IT companies. PSL is focusing on

the development of Internet of Things (IoT) products and platforms, as it sees significant traction from industrial

machinery, SmartCity, healthcare and smart agriculture verticals. However, the company has been lagging its

peers in terms of revenue growth over FY2017-2019, owing to internal challenges including high dependence

on its large account, weak client franchise, change in sales model and high reliance on IBM sales to drive its IP

revenues. The recent change in leadership team, including CEO and President technology services, may drive

growth in FY2020E, but the success is yet to reflect in numbers. The ongoing buyback programme along with

29% of market cap in cash would lend support to the stock price.

TCS Tata Consultancy Services is among the pioneers of the IT services outsourcing business in India and is the largest

IT services firm in the country. Management of TCS has alluded at continuing of growth momentum in FY2020E,

despite witnessing macro challenges in the environment, led by a strong exit rate in FY2019, acceleration in

deal wins with increasing TCVs, continued strong performance in BFSI vertical and robust pipeline of deals.

Management remains confident on demand environment and maintains its aspirational margin band of 26-28%

for FY 2020E despite lack of skilled personnel and visa challenges in the US.

Wipro Wipro is among the top five IT companies in India. Wipro’s management guided for muted revenue growth of -1%

to +1% for Q1FY2020E (excluding Workday and Cornerstone divestment impact), which is below our estimates.

Soft guidance was due to Q1 being seasonally weak for Wipro, continued softness in the manufacturing and

healthcare verticals and postponement of certain deal signings to Q1FY2020E. Management expects both

healthcare and manufacturing verticals to recover during 2HFY2020E. With inconsistent execution along with

macro uncertainties, underperformance on revenue growth among large peers will likely continue.

Capital goods/Power

CESC CESC, an RP-Sanjiv Goenka Group company, is a fully integrated power utility company. The company has stable

earnings contribution from standalone operations with regulated power generation and distribution businesses

getting assured RoE of 15.5% on generation assets and 16.5% for distribution assets. Reducing loss at Dhariwal

Infrastructure and Rajasthan distribution franchisee makes CESC an attractive investment proposition. The

demerger of non-power business to separate companies could result into re-rating of CESC.



Finolex Cables Finolex Cables, a leading manufacturer of power and communications cables, is set to benefit from an improving

demand environment in its core business of cables. The company is leveraging its brand strength to build a

high-margin consumer product business although scaling up the business would be gradual. The company faces

near-term headwinds due to delay of order finalisation in the communication cables business segment along

with delay in scaling-up the consumer durable business. We have a Hold rating on the stock due to near-term

challenges in its key business vertical.

Greaves Cotton Greaves Cotton Limited (GCL) is a mid-sized and well-diversified engineering company. Core competencies of

the company are in diesel/petrol engines, power gensets, agro engines and pump sets (engine segment). Three-

wheeler (3W) engines that fetch about 40% of revenue for GCL are predominantly diesel and are facing severe

headwinds, which would restrict growth. With increasing pollution, the government is encouraging use of CNG-

powered 3W and has recently lifted need of permits for CNG vehicles. CNG-powered 3W are fast gaining share,

primarily at the expense of the diesel three-wheeler segment. Non-auto and aftermarket business along with new

business of electric 2w and CNG engines is gaining traction. The Electric two-wheeler segment is expected to be

under stress due to stringent norms for electric scooters under the revised FAME 2 scheme and weak sentiment

in rural areas. Further the new businesses are margin dilutive and the cost of upgrading to the new BS6 emission

norms is around 10-12%. Following this we expect GCL’s margins to remain under pressure and decline 40 BPS in

FY2021. Moreover, the company has announced a buyback offer and plans to utilize its cash balance, resulting

a lower other income. We expect GCL’s earnings to remain flat over the next 2 years. However, the buyback

program would enhance the company’s ROE from 18.5% now to 22% by FY2020 and expect the program to

support the prices in the near term. We retain our Hold recommendation on the stock.

Kalpataru Kalpataru Power Transmission is a leading EPC player in the power transmission and distribution space in India.

Opportunities in this space are likely to grow significantly, thereby providing healthy growth visibility. OPM of the

standalone business is likely to remain around 11%, while OPM of JMC Projects (a subsidiary) is showing signs of

improvement. Order book remains healthy, providing two years of revenue visibility. Further, acquisition of the

Swedish EPC company, Linjemontage i Grastorp AB, bodes well for Kalpataru, providing deeper access to KPTL

in international markets. We remain Positive on the stock.

KEC KEC International is a Global Power Transmission Infrastructure EPC major. The company is present in the verticals

of power T&D, cables, railways, water, renewable (solar energy) and civil. Globally, the company has powered

infrastructure development in more than 61 countries. KEC is a leader in power transmission EPC projects and has

more than seven decades of experience. Over the years, it has grown through the organic as well as inorganic

route. Order book remains strong, providing two-year revenue visibility; and order inflow visibility remains healthy

in international T&D and railways. We retain our Positive outlook on the stock.

PTC India PTC is a pioneer in starting a power market in India and undertakes trading activities, including long-term trading

of power generated from large power projects as well as short-term trading arising as a result of supply and

demand mismatches, which inevitably arise in various regions of the country. Management anticipates volume

growth of 10%+ and volume mix of 50:50 during FY2020. Management also contemplates that it wants the

company to post earnings of Rs. 1 crore per day and is working towards this goal. The company is expected to

witness revenue and earnings CAGR of 12.0% and 25.1%, respectively, during FY2019-FY2021E. We maintain our

Hold rating on the stock.

Thermax The energy and environment businesses of Thermax are direct beneficiaries of the continuous rise in India Inc’s

capex. The company has a healthy consolidated order backlog at Rs. 5,370 crore, which is 0.9x its FY2019

consolidated revenue. Management expects weakness in domestic tendering activity to persist at least during

H1FY2019 as the new government stabilises. Overall, management would strive to maintain the same order inflow

for FY2020 as witnessed in FY2019. Consequently, consolidated revenue for FY2020 might see just lower single-

digit growth followed by higher growth during FY2021. We maintain our Hold rating on the stock.

Triveni Turbines Triveni Turbines Limited (TTL) is a market leader in 0-30 MW steam turbine segment. TTL order book remains

healthy and is witnessing steady execution for its ongoing orders. Operating margins have remained under

pressure due to increased commodity prices and impact of higher costs incurred for new product introductions..

The overall performance of GETL for the period under review has been significantly below expectations ,

especially in terms of order intake. TTL is virtually a debt-free company with limited capex requirement and an



efficient working capital cycle, reflected in healthy return ratios. Although management is confident of double-

digit revenue growth, healthy order inflow for FY2020 and margin recovery, we have conservatively built these

in our estimates Revenue and PAT are expected to report CAGR of 12% and 16%, respectively. We maintain our

Hold rating on the stock.

V-Guard V-Guard Industries is an established brand in the electrical and household goods space, particularly in South India.

Over the years, it has successfully ramped up its operations and network to become a multi-product company.

The company has a strong presence in the southern region. The company is also aggressively expanding in

non-south markets and is particularly focusing on tier-II and III cities where there is lot of pent- up demand for

its products. Management is targeting to grow its overall revenue by 15% y-o-y in FY2020 assuming the revival

of growth in stabiliser and pumps (each to grow by 10% y-o-y), UPS (up 15-18% y-o-y) and higher contribution of

new products (currently 7% of revenue). The company will aim for 10% operating margin (including other income)

considering higher share of stabiliser revenue and rationalisation of ad spends and employee costs especially in

a competitive environment and considering FY2019 performance, we maintain our Hold rating on the stock.

Va Tech Wabag VaTech Wabag is known for its innovative and successful solutions in the water engineering sector around the

globe. The company is a systems specialist and full-service provider focusing on the planning, installation and

operations of drinking and wastewater plants for local government and industry in the growth markets of Asia,

North Africa, Middle East and Central and Eastern Europe. Management has provided revenue guidance of Rs.

34 billion-37 billion and order intake of Rs. 50 billion-54 billion for FY2020. The cumulative order book stood at

Rs. 9,200 crore at the end of FY2019, including framework contracts worth Rs. 700 crore. Timely execution and

reduction in working capital a key challenge. Hence, we maintain our Hold rating on the stock.

Infrastructure/Real estate

Gayatri Projects Gayatri Projects is a Hyderabad-based infrastructure company with a strong presence in irrigation, road and

industrial construction businesses. Order book of the company stands at Rs. 16,300 crore, which is 4.7x its FY2019

standalone revenue. The company targets to grow its standalone revenue by 25%+ with stable operating margin

at 16% and net profit growth of 30-40% for FY2020 The company has completed its power portfolio and plans

to unlock value by listing on the Indian bourses. The company has the potential to transform itself into a bigger

entity.

IRB Infra IRB Infrastructure Developers is the largest toll road BOT player in India and the second largest BOT operator in

the country with all its projects being toll-based. The company has an integrated business model with an in-house

construction arm, which provides a competitive advantage in bidding for larger projects and captures the entire

value from BOT assets. Further, the company has a profitable portfolio as majority of its operational projects have

become debt-free and are present in high-growth corridors, providing it a healthy cash flow. Thus, the company is

well poised to benefit from the huge opportunity in road development projects on account of its proven execution

capabilities and scale of operations. Further, the company has a 15% stake in its InvIT fund, which allows it to

periodically transfer road assets freeing up its equity to invest in future projects. IRB is currently affected by

lower margins in the EPC business and weak sectoral outlook due to low tendering, delay in land acquisition and

achieving financial closure of projects on time. Hence, we have a Hold rating on the stock.

L&T Larsen & Toubro (L&T), being the largest engineering and construction company in India, is a direct beneficiary of

the domestic infrastructure capex cycle. The company is expected to perform well, backed by its sound execution

track record and healthy order book. Monetisation of the non-core businesses will continue for some time, leaving

scope for further value unlocking. Measures planned by the company to improve its return ratios augur well.

Hence, we remain Positive on the stock.

Sadbhav Eng SEL is engaged in 1) EPC business for transport, mining and irrigation sectors and 2) development of roads and

highways on BOT basis through SIPL. SEL has a healthy order book of Rs. 11,981 crore (3.4x its FY2019 standalone

revenue) The company has robust in-house integrated execution capabilities with qualified human resource and

owned equipment. We expect SEL to benefit from improved order execution, enhanced order inflows (particularly

from the transport segment) and resolution of working capital issues, resulting in a sturdier balance sheet. Further,

improving outlook for the Indian road sector and limited competitive intensity augur well for SEL since it is present

in both, asset creation and EPC verticals.



Oil & Gas

Oil India Oil India has several hydrocarbon discoveries across reserves in Rajasthan and the northeastern region of India.

The company holds domestic 2P (proved and probable) reserves of 79 mmt for oil and 128 mmtoe for gas.

Reserve-replacement ratio of the company is also healthy. The stock offers high dividend yield.

Petronet LNG Petronet LNG is the largest LNG re-gasifier in India with 15 mmt LNG terminal at Dahej and 5 mmt LNG terminal at

Kochi. The company’s Dahej terminal enjoys a competitive edge compared to other LNG import terminals given

its low tariff and long-term contracted volume with use or pay clause. We expect Dahej terminal to operate at

100% utilisation, given its competitive edge and resolution of pipeline connectivity issues in southern India are

expected to improve utilisation for Kochi terminal. Petronet LNG would be the key beneficiary of rising share of

LNG in India’s overall gas consumption.

Reliance Industries Reliance Industries has one of the largest and complex refining businesses in India and enjoys a substantially

higher refining margin over the benchmark Singapore Complex GRM. We expect GRM to remain healthy with

ramp-up of petcoke gasification project and implementation of IMO regulations. Petrochem margin likely to be

maintained in the medium term given feedstock advantage from ethane import project. Large investment in

Reliance Jio could add value in the long term. Deleveraging of consolidated balance sheet is a key trigger in the

near to medium term.

Selan Exploration Selan Exploration Technology is an oil E&P company with five oil fields in the oil-rich Cambay basin of Gujarat.

Initiatives to monetise oil reserves in its Bakrol and Lohar oil fields will improve production. However, challenges

related to monetisation of its large hydrocarbon reserve base and near-term production ramp-up issues are likely

to be an overhang on the stock in the near to medium term.

Pharmaceuticals

Aurobindo Pharma A Warning Letter has been issued to Aurobindo for its Unit-XI, an Active Pharmaceutical Ingredient (API) unit in

Srikakulam, one of the three plants that received Official Action Indicated (OAI) status in May 2019. The letter

mainly pertains to the ongoing issues regarding impurities in Sartan’s. The company proposes to enter into

dialogue with the U.S. FDA over the next 15–20 days to decide a future course of action. From Unit XI, the

company has ~28 filings that await approval, the delay of which may negatively impact performance ahead.

Moreover, the remediation and site transfer-related costs are likely to put the company’s near-term margins under

pressure. The uncertainty related to regulatory hurdles at various units will weigh on the stock (until resolved

successfully). Thus, we downgrade our recommendation to Hold with a downward revised PT of Rs. 710.

Cadila U.S. business outlook remains stable because of new product approvals and launches planned for FY2020.

Management expects ~35+ approvals and 35-40 launches in the U.S. for FY2020 (excluding approvals and

launches from Moraiya facility as it has received Form 483 in March 2019). Moreover, India business is likely

to report low double-digit growth from FY2020 despite new product launches and rationalisation of product

portfolio. We feel that although Cadila has a big ANDA pipeline and strong control on expenses, its domestic

business lacks its peers in terms of growth. Further, concentration on key markets such as U.S. and India is a risk.

In addition, regulatory hurdles at Moraiya facility continue to remain an overhang for the near term.

Cipla Management has maintained its guidance of double-digit growth across India and U.S. markets. In the Indian

market, the chronic segment is increasingly becoming the growth driver. On the U.S. front, the company is ahead

of its guidance of at least one limited competition launch and approval. In FY2020, management expects U.S.

business to report double-digit growth because of scale up in FY2019 launches coupled with new launches of

FY2020. The company expects its first inhaler launch in H2FY2020, numbers of which shall be meaningful from

FY2021. Management is confident of margin expansion in the upcoming two years on account of better product

mix and operational efficiencies. We feel unlike its larger peers, Cipla faces minimal regulatory woes and has a

better growth outlook.

Divis Labs Management has guided for sales growth of 15% in FY2020 with operating margin likely to return to 38-39%

as business normalises. However, it expects sales growth to accelerate to more than 20% once new capacities

come on stream. Management has increased its capex guidance from Rs. 1,500 crore to Rs. 1,690 crore to



address increasing opportunities in the generics and custom synthesis businesses. We expect all the capex to be

completed by FY2020. A better product mix and capacity utilisation will boost profitability (capacity enhancement

benefits to be visible from FY2021). Moreover, the company does not have any pending regulatory hurdles. Long-

term growth is likely to remain healthy, led by aggressive capacity expansion plans to monetise opportunities in

the U.S. and China.

Glenmark Pharma For FY2020, management has guided for overall 10-15% sales growth. Management is confident of double-digit

growth in the domestic as well as other key markets on account of new launches as well as key approvals. In the

U.S., the company expects competition to increase in its key product Mupirocin (from Q4FY2020 or Q1FY2021).

However, the company is confident of 100-200 BPS improvement in its operating margin from FY2020 on account

of operational efficiencies, lower staff and R&D costs (FY2019 OPM stood at 16.1%). The company does not have

any pending regulatory issues on its key facility - Goa (Goa plant has received EIR recently). However, we feel

reducing the debt significantly (in the next two years), without an out-licensing deal/asset monetising, is an uphill

task. Lack of avenues for significant debt reduction in books over the next two years and overall concerns on U.S.

business keep us skeptical on the stock’s performance.

IPCA Lab Strong growth in the domestic formulation business coupled with increased opportunities in API space and

additional business from institutional anti-malaria segment indicates a strong earnings potential over the next

2-3 years. For FY2020, management has conservatively guided for 12-14% sales growth and OPM guidance is

strong 20-23% (FY2019 OPM was at 18.3%). Improvement in OPM is likely to be on account of low remedial costs

(Rs. 10 crore-20 crore in FY2020 vs. Rs. 50 crore in FY2019), improved product mix coupled with operational

efficiencies. We feel most of the headwinds that impacted sales and profitability of the company (except for

import alert from USFDA) are behind.

Lupin Lupin’s management has guided for 20+ product launches in the U.S. for FY2020E. However, a majority of

them are yet to be approved. Management is hoping that remediation and successful resolution of four plants

(two under Warning Letter and two have Official Action Indicated - OAI status) would take place in FY2020E.

Since there are four facilities facing regulatory issues, we expect the U.S. business sales recovery to take time.

Moreover, the recent news of U.S. lawsuit case against Indian generic drug makers, an overhang of uncertainty

of the outcome of litigation, is weighing on the entire pharma sector in the near to medium term.

Sun Pharma Sun Pharma continues to invest significantly for building a specialty franchise in the U.S., which is slowly gaining

traction. The company stated that Ilumya has started gaining traction and Cequa launch is expected in the

upcoming months in the U.S. Management’s guidance for FY2020 is as follows: 1) Sales to grow at low-to-mid-

digit teens (on reported FY2019 sales number); 2) R&D to be at 8-9%; 3) Capex to be $200 million for FY2020; and

4) Tax rate to increase progressively in the upcoming years. With better product mix and cost-control measures,

management expects margin expansion over the next two years. However, the outcome of investigation related

to pricing issues taken up by DoJ (Dept. of Justice, USA) and that of SEBI investigation will continue to weigh on

the stock.

Torrent Pharma In FY2020, Torrent has decided to temporarily shut down its Bio-Pharm’s facility at Levittown, as part of its new

strategy to shift from OTC to prescription drugs, to upgrade the facility to meet GMP requirements. The combined

revenue impact of the Losartan recall and the shutdown of the Levittown facility are expected to be ~$15 million

in FY2020. In addition, USFDA had issued Form 483 with five observations to Torrent’s Dahej facility during March

11-19, 2019. The observations at Dahej facility include one repeat observation from 2017 inspection and another

on shredding of documents (as per management’s protocol). In case of escalation to Warning Letter, existing

supplies may not be impacted; however, new approvals could get delayed, which could impact future earnings.

Building materials

Grasim Grasim is better placed compared to other large players in the cement space owing to its strong balance

sheet, comfortable debt/equity ratio, attractive valuation and diversified business. Grasim is on a strong growth

trajectory, with ongoing restructuring through trimming down its loss-making businesses (fertiliser and telecom)

and expanding its profit-making divisions (viscose, chemical and cement). Better earnings growth would also

significantly improve return ratios at a consolidated level and trigger rerating of the stock.



The Ramco Cements The Ramco Cements, one of the most cost-efficient cement producers in India, will benefit from capacity addition

carried out ahead of its peers in the southern region. Ramco Cements has embarked upon capital expenditure

plan of Rs. 3,430 crore to reach cement capacity of 20 MTPA by FY2020 end. The expansion aims to strengthen

reach in Andhra Pradesh, West Bengal and North Eastern states. The company has reaped the benefits through

cost- saving measures, besides constantly reducing debt, which has led to improved profitability. In a nutshell,

better volumes, cost efficiencies and reducing leverage have yielded benefits.

Shree Cement The expansion plan of Shree Cement to reach 45 mtpa by FY2021 (currently 37.5 mtpa) and increasing

geographical footprint in the eastern and southern regions are likely to aid better volume growth going ahead.

The company’s focus to increase share of trade sales should help improve realisation. However, increased cost

structure affecting operating margins remains key risk to net earnings in the near term.

UltraTech Cement UltraTech Cement is India’s largest cement company. We expect UltraTech to report industry-leading volume

growth on account of timely capacity expansion (acquisition of Jaypee Group’s cement assets, Century’s assets

and Binani Cement’s assets) and likely revival in demand (with the start of affordable housing projects and

enhanced spending on infrastructure development).

Discretionary consumption

Arvind Arvind demerged into three separate entities of Arvind (textile business), Arvind Fashion (branded and retail

business) and Anup Engineering (engineering business) with an aim to unlock value for shareholders. Post the

demerger, Arvind becomes a textile hub present in segments such as denim, fabric, garments and advanced

material (AMD). Revenue performance was muted in FY2019 mainly on account of lower volumes in the denim

business that was affected due to inventory corrections done by some export customers. Further, margins were

flat y-o-y owing to lower sales volume in the textile business and volatile cotton prices. Denim volumes are

expected to remain under pressure for another 6-9 months, which will continue to put pressure on the textile

business. Volumes for the woven segment are expected to increase by 3-5% and the garments segment is

expected to grow in high double digits, driven by capacity enhancement. Overall, we expect revenue to grow

by 6.5% in FY2020 (the management has guided for topline growth of 7-8%). OPM would remain under stress in

H1FY2020 due to losses in new garment facilities on lower efficiencies and muted sales volumes in the textile

business. Thus, in view of near-term concerns on profitability, we maintain our Hold recommendation on the

stock.

Arvind Fashions Arvind Fashions Limited (AFL), the demerged entity of Arvind Limited, is a leading branded apparel company with

impressive brand portfolio and strong distribution reach. The shift in trade channels of power brands, closure

of non-profitable stores of Unlimited, exit from non-profitable emerging and slowdown in consumption due to

macro headwinds will take a toll on AFL’s Q1FY2020 revenue performance. In the backdrop of stable macro

environment, the performance is expected to gradually improve from Q2FY2020; and H2FY2020 is likely to be

better with the commencement of the festive season. Profitability of the emerging brands is likely to improve,

which will scale up in the brand’s revenue. We maintain our Buy recommendation on the stock.

Century Plyboards Century Plyboards is a leading player in the organised plywood industry with a market share of 25%.It also has

laminate, particle board and Medium-density fibreboard (MDF) division having a capacity of 600 cubic metre

per day. The company is currently facing operating margin pressure in its Plyboard and MDF verticals, which are

expected to cap growth in operating margin over the next 3-4 quarters. Consequently, we have a Hold rating

on the stock. However structural growth triggers in terms of GST benefits and government’s focus on affordable

housing are key positive triggers for the company.

Info Edge (India) Info Edge is India’s premier online classified company in the recruitment, matrimony, real estate, education and

related service sectors. Naukri.com is a quality play and is directly related to GDP growth and internet/mobile

penetration. Management highlighted that accelerated investments in its core businesses will continue to gain

market share along with acquiring more customers. Further, its investee companies, particularly Zomato and

PolicyBazaar, have been progressing well in their respective businesses. We continue to derive comfort on Info

Edge’s business strength, with leading market share in key businesses.



INOX Leisure Inox Leisure Limited (ILL), incorporated in 1999, is one of the largest multiplex operators in India. ILL currently

operates 143 properties (595 screens and over 1.40 lakh seats) located in 67 cities across India. ILL is the

only multiplex operator having such a diverse presence across India. The company accounts for 19% share of

multiplex screens in India and ~11% share of domestic box office collections. The company has aggressively

scaled up through organic and inorganic expansion over the past decade, growing from two properties – eight

screens – in FY2003 to 143 properties – 595 screens – at present, on an average adding eight screens every

quarter since inception. The ILL mega show is supported by improving content quality in the Indian mainstream

and regional cinema, with its movies regularly hitting the Rs. 100 crore or Rs. 200 crore box-office collection mark.

Management expects to deliver a strong performance going forward based on healthy footfalls due to property

additions coupled with passing on of reduction of GST rates and a strong content pipeline. We maintain our Buy

rating.

KKCL Kewal Kiran Clothing Limited (KKCL) is a branded apparel play with four brands in its kitty. Killer, its flagship

denim brand, has created a niche in the minds of consumers. Q4FY2019 revenue grew strongly due to volume-

driven growth during the festive season, but the dip in realisation continued. KKCL does not want to compromise

on margins and has maintained the target of achieving OPM at above 20% for FY2019. As far as volumes are

concerned, there has been a volatility seen in the past few quarters. Hence, steady volume growth in the coming

quarters will be a key thing to watch out for. Though KKCL has a strong brand portfolio and is one of the well-

managed companies with stable working capital in comparison to peers in the branded retail space, the key trigger

for the company in the near term would be consistent volume growth. We maintain our Hold recommendation on

the stock.

Orbit Exports Orbit Exports (Orbit) is a leading manufacturer and exporter of novelty fabrics, exporting its products to over

32 countries. The company is a recognised star export house and operates in the niche area of high-end fancy

fabrics, which are mainly used by designers in women’s fashion apparels. Overall, management is confident of

growing in mid-to-high teens in the short to medium term. Further, Orbit has one of the better balance sheets in

the textiles industry. We expect it to improve further in the coming years. However, in view of near-term concerns

in export markets, we maintain our Hold rating on the stock.

Relaxo Footwear Relaxo Footwear (Relaxo) is present in the fast-growing footwear category, where it caters to customers with

its four top-of- the-mind recall brands, such as Hawaii, Sparx, Flite and Schoolmate. Relaxo’s focus is on driving

sales through distribution expansion (COCO and franchisee stores) and improving the brand presence. GST

implementation has been a silver lining for the company, as it is witnessing a gradual shift of demand from the

unorganised to organised market. Input cost pressure is likely to soften going ahead, with OPM expected to stand

at 14-15%. Further, focus on strong distribution enhancement (especially in South India) and expected high growth

in premium categories (due to reduction in GST rate) make Relaxo one of our preferred picks in the discretionary

consumption space.

Titan Company Titan is India’s largest specialty retail player, operating more than 1,600 stores spread across over 2 million sq. ft. in

279 towns having businesses in jewellery, watches and eyewear. Revenue of Titan’s jewellery business reported

a CAGR of 23% over FY2016-FY2019. Sustained launch of new collection, expansion in domestic footprint, shift of

consumers to trusted brands and strong growth in diamond jewellery remain the key pillars of growth. The target

is to achieve 2.5x sales and grab market share of 10% by FY2023. Margins of the watches business improved

due to rationalisation of discounts and improved sales volume. In the eyewear business, Titan’s focus is to build a

strong customer base through a calibrated expansion plan and offer products at affordable prices. An increase in

scale of the watches and eyewear businesses along with expansion into tier II and tier III markets and continuous

shift from non-branded to branded jewellery players is expected to drive up margin going ahead. With a lean

balance sheet and strong financial background, Titan is one of the best retail plays amongst peers. Titan is well

placed to achieve double-digit revenue and earnings CAGR of 18% and 23%, respectively, during FY2018-FY2021.

Wonderla Holidays Wonderla Holidays Limited (WHL) is the largest amusement park company in India with over a decade of

successful and profitable operations. Q4FY2019 witnessed a 7% growth in the footfalls of WHL. The Kochi Park

has also started regaining momentum in the footfalls post Q2FY2019 miss due to torrential rains and floods in

Kerala We expect footfalls to recover in FY2020 gradually, which would result in double-digit revenue growth



during the year. Improvement in footfalls and higher ticketing revenue would result in better profitability and

OPM is expected to improve in the coming years. The company has acquired 61.87 acres of land for the new

amusement park project in Kelambakkam in Chennai. The project will commence post the receipt of the required

approvals from Tamil Nadu Government. The sustenance of growth in footfalls has to be keenly monitored in the

coming quarters. Hence, we maintain our Hold recommendation on the stock.

Zee Entertainment Zee Entertainment Enterprises Limited (ZEEL), part of the Essel Group, is one of India’s leading television media

and entertainment companies. The company has a bouquet of more than 40 channels across Hindi, regional,

sports and lifestyle genres. On account of the recent ongoing events, we expect the stock to languish and take

a cautious view due to: 1) lack of disclosure on promoters loans against ZEEL’s shares along with breach of

covenants and involvement of multiple stakeholders; and 2) no formal agreements with remaining lenders (4-5%

lenders) holding ZEEL’s shares pledged by promoters. Further, the overhang in the stock price could impact the

bargaining power of ZEEL’s management with the potential strategic partner. Given recent concerns, we maintain

our Hold rating on the stock. The price target is Under Review.

Diversified/Miscellaneous

Bajaj Holdings Bajaj Holdings and Investment Limited (BHIL, erstwhile Bajaj Auto) was demerged in December 2007, whereby its

manufacturing business was transferred to the new Bajaj Auto Limited (BAL) and its strategic business consisting

of the wind farm and financial services businesses was vested with Bajaj FinServ (BFS). All the businesses and

properties, assets, investments and liabilities of erstwhile Bajaj Auto, other than the manufacturing and strategic

ones, now remain with BHIL. BHIL is a primary investment company focusing on new business opportunities.

Given the strategic nature of its investments (namely BAL and BFL), we have given a holding company discount

to its equity investments. Liquid investments have been valued at cost. The PT for BFS has been revised upwards

to Rs. 6,900 (earlier PT of Rs. 6,500). Strong momentum of the lending business, normalisation of the general

insurance business profitability and life insurance business shift towards high-margin protection business is

expected to drive performance. We have retained our recommendations and PT for BAL and we retain our Buy

recommendation on BHIL.

Bharat Electronics Bharat Electronics Limited, a defence PSU, remains our preferred pick in the domestic defence sector on account

of its strong manufacturing and R&D capabilities, good cost-control measures, growing indigenisation and a

strong balance sheet with improving return ratios. Further, the company is well positioned to capture incremental

spends by the government on defence through the Make-in-India initiative. The company achieved the highest

order intake of Rs. 23,431 crore during FY2018-FY2019 (up 2.3x) and achieved turnover of Rs. 11,789 crore for

2018-2019. The company closed the year with an outstanding order book of Rs. 51,798 crore as on April 1, 2019.

Order inflow remains strong during FY2019 and augurs well for growth visibility. Given strong order book and

expectation of healthy order intake pipeline, we maintain our Buy rating on the stock.

Bharti Airtel Bharti Airtel (Bharti) is one of the leaders in the Indian mobile telephony space. The management continues to

focus sharply on increasing retail ARPUs, non-mobile services (enterprise services) and value- added services

(Airtel TV and music) to boost revenue and reduce the churn rate. Further, management indicated that it expects

moderation in capex in FY2020E after heavy investments in building a strong portfolio of sites and spectrums for

the past couple of years. Proceeds from the recently concluded rights issue would de-leverage the balance sheet

by bringing down consolidated net debt/EBITDA to 3.4x from the current level of 4.4x. We believe the planned

value unlocking of its holdings in its subsidiaries would provide further financial flexibility to reduce net debt/

EBITDA level to around 2.6x. Any positive surprise from easing competition would act as a re-rating trigger for the

stock. From a long-term perspective, explosive growth in the data segment, rapid network expansion and reach

will help Bharti emerge stronger. We have a Buy rating on the stock.

GDL With its dominant presence in container freight station (CFS), rail freight and cold chain businesses, Gateway

Distriparks Limited (GDL) has evolved as an integrated logistics player. it’s the CFS and rail verticals are facing a

tough business environment owing to intensive competition. The cold chain business has shown improvement in

operating margins and is currently under expansion. However, key positive triggers such as the dedicated freight

corridor (DFC) and improvement in export-import trade environment are still far. Hence, owing to absence of near-

term triggers, we have a Hold rating on the stock.



PI Industries Incorporated in 1947, PI Industries focuses on developing complex chemistry solutions in the agri-science space.

The company reported strong performance, with revenue, EBITDA and PAT registering robust growth of 28.7%,

27.6% and 18% y-o-y, respectively, during FY2019. The start of the multiyear upcycle in the global agrochem

market, which has been good, augurs well for the business visibility of the CSM business (expected to grow by

20%+ in the next 2-3 years). Management has guided for revenue growth of 20-22% and margin improvement

of 50-100 BPS for FY2020E. We expect the company to post a revenue and earnings CAGR of 20.6% and 31.1%

over FY2019-FY2021E, respectively. With industry-leading return ratios coupled with a healthy balance sheet and

strong earnings visibility, we expect further re-rating in the stock. We maintain our Buy rating on PI Industries.

Ratnamani Metals Ratnamani Metals and Tubes Limited (RMTL) is the largest stainless steel tube and pipe manufacturer in India.

We remain positive on RMTL, led by its strong balance sheet, ability to generate superior return ratios and

capacity expansion programmes. Further, overall capex revival in its key industries such as oil and gas coupled

with improving orders from international markets will keep order momentum strong over the next 3-4 years.

Management has provided growth guidance of 10-12% both on the revenue and PAT front for FY2020. We have

introduced FY2021 estimates and expect the company to report revenue and earnings CAGR of 11.1% and 9.4%

during FY2019-FY2021E, respectively. We believe the stock remains a good bet for investment in the long run.

Hence, we maintain our Buy rating on the stock.

Supreme Industries Supreme Industries is a leading manufacturer of plastic products with a significant presence across the piping,

packaging, industrial and consumer segments. The management has provided revenue guidance of Rs. 6,100

crore-6,250 crore, implying 9-11% y-o-y growth and expects margin to be at 13.5-15%. The management believes

margins have bottomed out after steep price correction and indicated that there would be no further price cuts

going forward. We have revised downward our earnings estimates for FY2020/FY2021E on account of weak

performance in Q4FY2019. We retain our Hold rating on the stock .

UPL UPL is better placed to benefit from a global recovery in the agri-commodity space over the next 2-3 years. Arysta’s

acquisition is expected to help UPL in strengthening its position in the global market. UPL is expected to leverage

on its manufacturing capability to enhance its margin profile, whereas Arysta is likely to leverage on its product

offerings to boost revenue growth. The stock had witnessed a sharp correction recently on certain concerns

and has been currently trading at a discount to its historical average. However, management has clarified and

believes there is no meaningful impact of the concerns, as UPL Corp is expected to fulfill new resident criteria in

Mauritius; African swine fever will not have much impact as peak soyabean season is over; and ongoing U.S.-China

trade war will likely benefit as hike in tariff by U.S. makes Chinese products more costly. Moreover, management

mentioned that Arysta’s integration is progressing well. Management maintains its revenue and cost synergies

guidance. Revenue and cost synergies of $350 million and $200 million, respectively, on account of Arysta’s

acquisition likely to accrue in a phased manner over a period of three years beginning FY2020. Management has

guided for revenue growth of 8-10% and EBITDA growth of 16-20% for FY2020E, on base revenue and EBITDA of

Rs. 32,500 crore and Rs. 6,900 crore, respectively. We maintain our Buy rating on the stock..

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