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ValueGuide

September 2018

Rupee Rumbles

Intelligent Investing Regular Features Products & Services Trader’s Edge

Stock Idea Report Card PMS Technical View


Stock Updates Earnings Guide MF Picks Currencies
Viewpoints Advisory F&O Insights
Sector Updates Top Picks Performance

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CONTENTS

From the Editor’s Desk ValueGuide EQUITY


September 2018

Markets continued FUNDAMENTALS


to climb the wall of Rupee Rumbles
worries in August, with Stock Idea 08 REGULAR FEATURES
the benchmark indices Stock Update 09 Report Card 4
clocking new lifetime
highs. The Sensex Sector Update 29 Earnings Guide 43
and Nifty seemed
to have dodged all TECHNICALS DERIVATIVES
macroeconomic Nifty 32 View 33
headwinds. The Q1
GDP growth number was the icing on the cake, coming in
at 8.2%. However, this was largely because of a low base. ... ADVISORY DESK DERIVATIVES
Intelligent Investing Regular Features Products & Services
06
Trader’s Edge
MID Trades 40 Derivatives Ideas 40
Stock Idea Report Card PMS Technical View
Stock Updates Earnings Guide MF Picks Currencies

RESEARCH-BASED EQUITY PRODUCTS Viewpoints


Sector Updates
Advisory
Top Picks Performance
F&O Insights

CURRENCY
Top Picks Performance 07 FUNDAMENTALS
For Private Circulation only www.sharekhan.com
USD-INR 34 GBP-INR 34
EUR-INR 34 JPY-INR 34
TECHNICALS
PMS DESK
USD-INR 35 GBP-INR 35
ProPrime - Prime Picks 36
EUR-INR 35 JPY-INR 35
ProPrime - Diversified Equity 37
ProTech - Index Futures Fund 38 MUTUAL FUND DESK
ProTech - Trailing Stops 39 Top MF Picks (equity) 41
Top SIP Fund Picks 42

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September
June 2017 2018 3 Sharekhan ValueGuide
REPORT CARD EQUITY FUNDAMENTALS

STOCK IDEAS STANDING (AS ON SEPTEMBER 03, 2018)


CURRENT PRICE AS ON PRICE 52 WEEK ABSOLUTE PERFORMANCE RELATIVE TO SENSEX
COMPANY
RECO 03-SEPT-18 TARGET HIGH LOW 1M 3M 6M 12M 1M 3M 6M 12M
Automobiles
Apollo Tyres Buy 250 315 307 228 -14.8 -8.2 -4.7 -2.5 -15.9 -16.1 -16.1 -19.4
Ashok Leyland Buy 133 165 168 105 7.8 -11.2 -7.4 14.9 6.4 -18.9 -18.5 -5.0
Bajaj Auto Hold 2772 2905 3473 2604 3.0 -0.7 -3.9 -4.1 1.7 -9.3 -15.4 -20.7
Gabriel India Buy 141 175 223 129 -8.0 -5.9 -10.6 -23.4 -9.2 -14.0 -21.3 -36.6
Hero MotoCorp Hold 3242 3375 4025 3034 -3.2 -11.9 -10.6 -18.6 -4.5 -19.5 -21.3 -32.7
M&M Buy 948 1020 993 612 1.0 4.0 26.7 41.5 -0.4 -5.0 11.5 17.0
Maruti Suzuki Buy 8902 10500 10000 7651 -2.3 1.9 2.0 14.8 -3.6 -7.0 -10.2 -5.0
Rico Auto Industries Buy 84 101 111 64 6.1 11.7 -0.8 0.0 4.7 2.0 -12.7 -17.3
TVS Motor Buy 566 670 795 507 8.1 -0.5 -15.3 -7.7 6.7 -9.1 -25.5 -23.7
BSE Auto Index 24505 27031 23494 0.3 -0.5 -0.4 1.5 -1.0 -9.1 -12.4 -16.1
Banks & Finance
Axis Bank Hold 632 ** 671 448 10.9 20.1 21.6 26.7 9.5 9.7 7.0 4.8
Bajaj Finance Buy 2724 2725 2995 1511 1.3 29.6 66.3 51.7 0.0 18.4 46.3 25.5
Bajaj Finserv Buy 6653 7834 7200 4444 -6.3 12.7 29.1 20.6 -7.6 3.0 13.6 -0.3
Bank of Baroda Buy 152 180 207 110 -3.4 13.2 4.1 4.4 -4.7 3.4 -8.3 -13.6
Bank of India Reduce 100 85 217 76 -1.6 0.7 -15.0 -34.7 -2.9 -8.0 -25.2 -46.0
Capital First Buy 650 750 902 475 8.1 14.1 -7.3 -17.9 6.7 4.2 -18.4 -32.1
Federal Bank Buy 81 120 128 74 -10.9 -4.4 -15.3 -29.9 -12.1 -12.7 -25.4 -42.0
HDFC Buy 1945 2454 2053 1638 -2.0 5.7 9.4 10.7 -3.3 -3.5 -3.8 -8.4
HDFC Bank Buy 2075 2470 2220 1685 -3.6 -0.9 10.1 17.3 -4.8 -9.4 -3.1 -3.0
ICICI Bank Hold 334 ** 366 255 8.6 16.6 9.2 11.3 7.1 6.5 -3.9 -8.0
LIC Housing Finance Hold 520 600 685 455 -5.9 6.2 -1.3 -24.9 -7.1 -3.0 -13.1 -37.9
Max Financial Buy 448 550 653 403 -14.9 -2.8 -8.8 -26.8 -16.1 -11.2 -19.7 -39.4
PTC India Financial Services Hold 20 21 44 14 4.7 8.2 -35.0 -46.4 3.3 -1.2 -42.8 -55.7
Punjab National Bank Reduce 86 85 232 72 -5.7 0.5 -17.0 -42.1 -7.0 -8.2 -26.9 -52.1
SBI Buy 306 340 352 232 -0.9 12.5 12.5 7.2 -2.2 2.8 -1.0 -11.3
Union Bank of India Reduce 90 80 196 74 -5.8 -4.3 -17.4 -39.5 -7.0 -12.6 -27.3 -50.0
Yes Bank Buy 339 440 404 285 -7.9 2.1 10.7 -2.6 -9.1 -6.7 -2.6 -19.4
BSE Bank Index 31376 32150 26418 -0.4 5.7 11.0 12.7 -1.8 -3.4 -2.3 -6.7
Consumer goods
Britannia Buy 6566 7260 6944 4209 -3.2 6.8 26.7 45.7 -4.5 -2.4 11.5 20.5
Emami Buy 579 647 714 498 -0.8 11.5 4.1 3.0 -2.2 1.8 -8.4 -14.8
GSK Consumer Hold 7611 ** 7850 4851 7.2 13.5 9.7 38.3 5.8 3.7 -3.5 14.4
Godrej Consumer Products Buy 1434 1650 1469 888 1.3 18.5 26.1 46.2 0.0 8.3 11.0 20.9
Hindustan Unilever Buy 1699 1950 1809 1169 -8.6 3.9 24.9 35.6 -9.8 -5.1 9.9 12.2
ITC Buy 313 347 323 250 2.1 16.0 21.5 11.8 0.7 6.0 6.9 -7.6
Jyothy Laboratories Buy 212 265 249 162 -5.2 4.8 18.2 7.6 -6.5 -4.3 4.0 -11.0
Marico Buy 361 375 388 284 -0.1 7.8 14.1 13.7 -1.4 -1.5 0.4 -5.9
Zydus Wellness Buy 1752 1935 1980 863 13.7 51.2 36.4 97.4 12.2 38.1 20.0 63.2
BSE FMCG Index 12499 12850 9750 -0.4 10.0 17.8 20.7 -1.7 0.5 3.7 -0.2
IT / IT services
Firstsource Soluation Hold 76 ** 84 36 2.7 3.7 43.5 103.3 1.4 -5.2 26.3 68.2
HCL Technologies Buy 1049 1120 1108 825 12.0 22.2 16.2 26.6 10.5 11.6 2.3 4.7
Infosys# Buy 717 725 749 433 7.0 22.5 29.4 68.2 5.6 11.9 13.9 39.1
Persistent Systems Buy 837 950 890 590 -3.6 6.3 -1.7 33.2 -4.9 -2.9 -13.5 10.2
Tata Consultancy Services Buy 2053 2200 2107 1210 5.0 21.0 35.3 70.0 3.7 10.5 19.1 40.6
Wipro Hold 308 310 335 254 14.7 24.9 9.6 7.6 13.2 14.1 -3.6 -11.0
BSE IT Index 15455 15891 9882 7.5 20.2 27.2 60.4 6.1 9.8 12.0 32.6
Capital goods / Power
CESC Buy 1018 1165 1190 860 6.1 0.6 0.8 -4.8 4.7 -8.1 -11.3 -21.2
CG Power & Ind. Solutions Hold 58 70 99 47 -10.0 1.2 -29.8 -34.1 -11.2 -7.6 -38.3 -45.5
Finolex Cable Buy 552 710 758 510 -11.1 -18.8 -20.6 2.6 -12.2 -25.8 -30.1 -15.1
Greaves Cotton Hold 154 157 165 112 5.5 27.3 28.3 3.0 4.1 16.3 12.9 -14.8
Kalpataru Power Transmission Buy 366 465 536 335 -6.5 -11.9 -24.2 1.3 -7.7 -19.5 -33.3 -16.2
KEC International Buy 308 400 443 280 -7.0 -3.0 -26.5 1.0 -8.3 -11.4 -35.4 -16.5
PTC India Hold 84 95 130 68 2.9 7.2 -12.1 -26.3 1.6 -2.1 -22.7 -39.1

September 2018 4 Sharekhan ValueGuide


EQUITY FUNDAMENTALS REPORT CARD
STOCK IDEAS STANDING (AS ON SEPTEMBER 03, 2018)
CURRENT PRICE AS ON PRICE 52 WEEK ABSOLUTE PERFORMANCE RELATIVE TO SENSEX
COMPANY
RECO 03-SEPT-18 TARGET HIGH LOW 1M 3M 6M 12M 1M 3M 6M 12M
Thermax Hold 1015 1240 1375 834 -14.3 -8.4 -16.6 11.6 -15.4 -16.4 -26.6 -7.7
Triveni Turbine Hold 117 130 150 92 3.4 11.0 3.4 -7.0 2.1 1.4 -9.0 -23.1
V-Guard Industries Buy 219 245 255 177 -3.0 3.6 -12.3 7.8 -4.3 -5.4 -22.9 -10.8
Va Tech Wabag Buy 386 465 650 336 6.2 -7.9 -28.4 -36.8 4.8 -15.9 -37.0 -47.8
BSE Power Index 2115 2450 1877 4.2 3.3 -5.2 -6.4 2.8 -5.7 -16.6 -22.6
BSE Capital Goods Index 18933 20883 16779 1.7 3.0 -1.0 7.8 0.4 -5.9 -12.9 -10.9
Infrastructure / Real estate
Gayatri Projects Hold 203 221 231 153 -2.1 14.9 -2.7 18.1 -3.4 5.0 -14.4 -2.3
IRB Infra Buy 189 270 286 166 -9.0 -20.9 -18.1 -16.2 -10.2 -27.8 -28.0 -30.7
Jaiprakash Associates Hold 12 ** 27 11 -23.3 -16.7 -32.4 -52.1 -24.3 -23.9 -40.5 -60.4
Larsen & Toubro Buy 1363 1655 1470 1116 5.8 2.4 5.0 21.2 4.4 -6.5 -7.6 0.2
NBCC Buy 73 90 146 61 -11.4 -20.3 -28.9 -34.5 -12.5 -27.2 -37.5 -45.8
Sadbhav Engineering Buy 283 410 440 226 -5.2 -15.5 -31.3 -6.5 -6.4 -22.8 -39.5 -22.6
CNX Infra Index 3275 3749 3001 2.0 0.8 -5.2 -0.9 0.7 -7.9 -16.5 -18.1
BSE Real estate Index 2115 2828 1946 -1.4 -2.9 -15.3 -5.8 -2.7 -11.3 -25.5 -22.1
Oil & gas
Oil India Hold 212 225 259 199 -2.8 -4.7 -12.3 5.0 -4.1 -12.9 -22.9 -13.1
Petronet LNG Buy 242 280 276 202 3.5 10.4 1.6 7.1 2.1 0.8 -10.6 -11.4
Reliance Ind Buy 1229 1465 1329 779 4.3 30.3 33.6 51.2 2.9 19.0 17.6 25.1
Selan Exploration Technology Hold 250 250 278 174 31.6 43.3 30.2 33.5 29.9 31.0 14.6 10.5
BSE Oil and gas Index 14964 16727 13232 -3.0 3.0 -2.8 -0.9 -4.3 -5.9 -14.4 -18.1
Pharmaceuticals
Aurobindo Pharma Buy 700 725 809 527 11.8 29.8 16.0 -6.0 10.4 18.6 2.1 -22.2
Cadila Healthcare Buy 405 450 520 333 6.5 16.4 3.5 -20.5 5.1 6.3 -8.9 -34.2
Cipla Buy 649 720 678 507 1.3 19.8 12.2 16.1 0.0 9.5 -1.3 -4.0
Divi's Labs Buy 1287 1455 1328 691 6.6 24.4 27.2 79.9 5.2 13.6 12.0 48.8
Glenmark Pharmaceuticals  Hold 663 ** 686 484 12.8 26.9 22.2 12.2 11.3 15.9 7.5 -7.2
Lupin Reduce 936 ** 1090 724 1.9 19.5 15.0 -8.5 0.6 9.1 1.2 -24.3
Sun Pharmaceutical Industries Buy 656 765 674 435 13.3 40.2 21.0 35.9 11.8 28.1 6.5 12.4
Torrent Pharma Buy 1825 2000 1857 1147 7.0 24.5 27.4 42.9 5.6 13.8 12.2 18.2
BSE Health Care Index 15942 16220 12606 7.9 25.0 13.9 19.2 6.5 14.2 0.2 -1.4
Building materials
Grasim Buy 1066 1360 1300 914 2.8 1.0 -9.4 -12.0 1.4 -7.8 -20.3 -27.2
Shree Cement Hold 19047 ** 19849 14980 4.4 13.4 9.8 1.2 3.0 3.6 -3.3 -16.3
The Ramco Cements Hold 680 754 879 615 -4.5 -12.7 -11.4 -10.4 -5.8 -20.3 -22.0 -25.9
UltraTech Cement Buy 4374 4585 4600 3563 -0.2 13.4 1.8 1.8 -1.5 3.6 -10.4 -15.8
Discretionary consumption
Arvind Buy 400 500 479 358 -7.6 1.3 -3.6 -0.6 -8.8 -7.5 -15.2 -17.8
Century Plyboards (India) Buy 222 320 364 208 -11.9 -14.9 -35.9 -13.1 -13.0 -22.3 -43.6 -28.1
Info Edge (India) Hold 1661 1800 1698 950 20.4 37.3 29.8 72.2 18.8 25.4 14.2 42.4
Inox Leisure Buy 249 320 326 190 6.0 -11.9 -12.6 -3.8 4.6 -19.5 -23.1 -20.4
KKCL Hold 1498 1770 2200 1320 -3.0 -1.6 -6.4 -11.3 -4.3 -10.2 -17.6 -26.7
Orbit Exports Hold 143 177 190 107 -5.3 1.0 -11.6 1.2 -6.5 -7.7 -22.2 -16.3
Relaxo Footwear Buy 844 913 874 485 1.5 22.0 36.3 62.5 0.2 11.5 20.0 34.4
Thomas Cook India Hold 252 275 303 216 -7.1 -4.8 -4.1 0.0 -8.3 -13.0 -15.6 -17.3
Wonderla Holidays Hold 311 395 425 302 -8.6 -6.9 -17.8 -11.7 -9.8 -14.9 -27.7 -26.9
Zee Entertainment Buy 500 620 619 436 -7.3 -10.9 -12.1 -6.8 -8.6 -18.6 -22.7 -23.0
Diversified / Miscellaneous
Bajaj Holdings Buy 3039 3844 3250 2500 0.9 11.2 12.1 8.3 -0.4 1.6 -1.4 -10.4
Bharat Electronics Buy 112 145 193 90 -20.7 -16.1 -39.1 -45.3 -21.7 -23.4 -46.4 -54.7
Bharti Airtel Buy 384 480 565 331 -0.7 2.8 -11.1 -7.3 -2.0 -6.1 -21.8 -23.3
Gateway Distriparks Buy 187 220 275 160 3.1 -0.6 -9.3 -13.5 1.8 -9.2 -20.1 -28.5
PI Industries Hold 769 837 1035 700 -6.3 -4.8 -11.0 11.4 -7.6 -13.0 -21.7 -7.8
Ratnamani Metals and Tubes Buy 884 1150 1217 823 1.1 -13.5 -8.6 1.5 -0.2 -21.0 -19.6 -16.0
Supreme Industries Buy 1176 1420 1490 1057 0.9 -5.6 1.2 3.2 -0.4 -13.8 -10.9 -14.6
UPL Buy 721 735 850 537 10.1 3.0 -2.1 -13.9 8.7 -5.9 -13.8 -28.8
BSE500 Index 15738 15938 13428 0.9 7.8 7.9 13.2 -0.4 -1.6 -5.0 -6.4
CNX500 INDEX 9922 10050 8476 0.9 7.8 7.8 13.0 -0.4 -1.6 -5.1 -6.5
CNXMCAP INDEX 19867 21841 17701 0.8 6.3 0.2 4.8 -0.6 -2.9 -11.8 -13.3
# Reco price adjusted for bonus ** Price under review

September 2018 5 Sharekhan ValueGuide


From the Editor’s Desk
From the Editor’s Desk Rupee Rumbles

Markets continued to climb the wall of worries in August, with the benchmark indices clocking
new lifetime highs. The Sensex and Nifty seemed to have dodged all macroeconomic
headwinds. The Q1 GDP growth number was the icing on the cake, coming in at 8.2%. However,
this was largely because of a low base. What adds to the confidence is that global ratings
agency Moody’s also gave a thumbs-up to the economy’s growth potential.

In the past three months alone, the benchmark indices have appreciated by 9-10%. This rally,
however, has been driven by handful of stocks. In fact, three companies, Reliance Industries,
TCS and Infosys, have contributed to 50% of the Nifty’s gains in the past one year. Thankfully,
there has been some recovery in the broader market also with CNX MidCap 100’s moving up
for the second consecutive month.

The market rally has been supported by strong domestic inflows and contribution from foreign
investors now. However, foreign fund inflows tend to be quite unpredictable. Global uncertainties
could add to the volatility. Already, the protectionist policy decision taken by US government
is creating global instability. The unwinding of accommodative monetary policy stance in the
US is further fuelling volatility in the currency markets and tremors of the same are being felt in
financial markets globally.

With the improving economic data in US, the probability of the eighth rate hike by the US Federal
Reserve is pretty high at over 94% as per Bloomberg consensus data. This essentially means
that the US dollar could strengthen further against major currencies including emerging market
currencies. The Indian rupee is also affected due to fiscal slippage concerns and the regulatory
ban on buyer credit through Letter of Understanding/Comfort, given the huge irregularities
detected in some accounts earlier this year.

The emerging scenario could put brakes on the markets’ upward momentum in the near term.
More importantly for investors, the research team believes that it is time to rejig the portfolio by
adding quality companies from sectors that stand to benefit from the continued depreciation in
the rupee, by taking some profits out of the performing consumption-driven companies. Also,
investors with a longer investment horizon should look at accumulating some of the corporate-
focused bank stocks gradually by withdrawing some money out of the retail-focused private
sector banks. The asset quality cycle could be peaking out and the valuation gap between
retail and corporate banks is quite wide now, which offers an opportunity for handsome gains
for patient investors.

September 2018 6 Sharekhan ValueGuide


EQUITY FUNDAMENTALS Sharekhan Top Picks

Top Picks 31 August, 2018


Performance of Top Picks for August 2018
Markets continued to climb the wall or worries and rose to Picks Portfolio too, though the performance against the
new highs. The benchmark indices, Nifty and Sensex, have CNX Midcap 100 is quite comfortable. Thankfully, the rally
appreciated by 9-10% in the past three months. However, is getting broad-based now. The CNX Midcap 100 index
the rally has been quite narrow and driven by handful of also posted a second consecutive month of gains, rising
stocks. In fact, we observe that three companies, Reliance by close to 10% in the past two months. We expect this
Industries, TCS and Infosys, within of the Nifty index have healthy trend of a broader rally to gain further momentum
contributed to 50% of the gains in the past one year. and consequently positively affect performance in the
The lopsided rally led to minor underperformance in Top future.

Consistent outperformance (absolute returns; not annualised) (%)


(%) 1 month 3 months 6 months 1 year 3 years 5 years
Top Picks 1.3 5.3 10.0 14.3 86.4 297.0
Sensex 2.8 9.5 13.1 21.9 46.9 106.8
Nifty 2.9 8.9 11.5 18.2 47.3 112.9
CNX MIDCAP 100 5.5 5.4 1.3 9.0 52.6 202.4
As on August 31, 2018

Absolute returns (Top Picks Vs Benchmark indices) (%)


Top Picks Sensex Nifty CNX Midcap 100
YTD CY2018 5.8 13.5 11.0 -5.7
CY2017 58.0 28.0 29.0 47.3
CY2016 8.8 1.8 3.2 7.1
CY2015 13.9 -5.1 -4.1 6.5
CY2014 63.6 29.9 30.9 55.1
CY2013 12.4 8.5 6.4 -5.6
CY2012 35.1 26.2 29.0 36.0
CY2011 -20.5 -21.2 -21.7 -25.0
CY2010 16.8 11.5 12.9 11.5
CY2009 116.1 76.1 72.0 114.0
Please note the returns are based on the assumption that at the beginning of each month an equal amount was invested in each stock of the Top Picks

Constantly beating Nifty and Sensex (cumulative returns since April 2009)

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Oct-17

Mar-18

Sharekhan Sensex Nifty

September 2018 7 Sharekhan ValueGuide


STOCK IDEA EQUITY FUNDAMENTALS

Report Recommendation Reco Price Target/ Upside (%)


Date Company
Type Latest Chg Price (Rs.) Latest Chg
Aug 06, 2018 West Coast Paper Mills Ltd Viewpoint POSITIVE New Initiation 339 15-18 -

Summary
• Improved demand scenario to boost sales realisation and drive profitability.
• Despite expansion, West Coat Paper Mills is expected to be net debt free in two years, which will enhance valuations.
• Strong balance sheet with net debt to equity at 0.3x and healthy RoCE at 21% and ROE at 30% in FY2018.
• The stock to provide a potential upside of 15-18% based on 8x its FY2020E earnings of Rs. 49.9/share.

Read report - https://www.sharekhan.com/MediaGalary/Equity/West_Coast-Aug06_18.pdf

Aug 27, 2018 Deepak Nitrite Viewpoint POSITIVE New Initiation 267 22-24 -

Summary
• Greenfield expansion at Dahej, Gujarat, for manufacturing phenol (2,00,000 mtpa), acetone (1,20,000 mtpa) and cumene
(2,60,000 mtpa, feedstock for manufacturing phenol and acetone) to drive robust performance.
• Revenue/EBITDA/PAT expected to witness strong CAGR of 56% and 63% and 81%, respectively, during FY2018-FY2020E.
Operating margin and PAT margin are also expected to witness an improvement of 100 bps and 163 bps to 12.9% and 6.4%,
respectively, during the same period.
• At the CMP of Rs. 267 per share, the stock is trading at 22.8x and 14.1x its FY2019E and FY2020E its earnings of Rs. 11.7/share
and Rs. 18.9/share, respectively. We have a Positive view on the stock with a potential upside of 22-24%.

Read report - https://www.sharekhan.com/MediaGalary/Equity/DeepakNitrite-Aug27_18.pdf

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

September 2018 8 Sharekhan ValueGuide


EQUITY FUNDAMENTALS Stock Update
Recommendation Reco Price Price Target/ Upside (%)
Date Company Report Type
Latest Chg (Rs.) Latest Chg
Aug 01, 2018 Bharat Electronics Stock Update BUY  117 145 

Summary
• BEL reported strong results as revenue, EBITDA and PAT grew by 22%, 88% and 44% y-o-y, respectively.
• Strong order book (4x FY2018 revenue) provides strong revenue and earnings visibility.
• Bharat Electronics Limited (BEL) is present in the niche segment of the entire defence industry.
• We maintain Buy with a PT of Rs. 145.

Read report - https://www.sharekhan.com/MediaGalary/Equity/BEL-Aug01_18.pdf

Aug 01, 2018 V-Guard Industries Stock Update BUY  211 245 

Summary
• V-Guard reported in-line revenue performance with 19% GST adjusted growth during Q1FY2019.
• Expansion of distribution network aided by new product introductions to drive 15% revenue growth.
• We reiterate Buy with a revised price target of Rs. 245.

Read report - https://www.sharekhan.com/MediaGalary/Equity/V-Guard-Aug01_18.pdf

Aug 01, 2018 Triveni Turbines Stock Update HOLD  119 130 

Summary
• We retain our Hold rating on the stock of Triveni Turbine (TT) with a revised PT of Rs 130.
• In Q1FY19, TT clocked robust topline growth of 41% y-o-y to Rs172 crores driven by healthy execution in export markets along
with a marginal uptick in realisations.
• We remain optimistic on the stock of TT given its margin expansion prospects, healthy return ratios, steady cash flows and
negligible debt on the balance sheet.

Read report - https://www.sharekhan.com/MediaGalary/Equity/Triveni-Aug01_18.pdf

Aug 01, 2018 Dabur India Viewpoint POSITIVE  431 15-17 

Summary
• Dabur posted strong operating numbers with consolidated revenue and PAT rising 19.6% and 24.6%, respectively in Q1FY2019.
• Domestic revenue grew 24.7%, driven by a 21% rise in volume; international revenues grew by 11.5%.
• We have upgraded earnings estimates for FY2019 and FY2020 by 2.4% and 3.1%, respectively for the second consecutive
quarter.
• Dabur remains our top pick in the FMCG space; maintain Positive view with 15-17% upside (despite 11% run-up in the stock post
strong Q1 performance).

Read report - https://www.sharekhan.com/MediaGalary/Equity/Dabur-Aug01_18.pdf

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September 2018 9 Sharekhan ValueGuide


Stock Update EQUITY FUNDAMENTALS

Recommendation Reco Price Price Target/ Upside (%)


Date Company Report Type
Latest Chg (Rs.) Latest Chg
Aug 02, 2018 Emami Stock Update BUY  566 647 

Summary
• For Q1FY2019, Emami reported revenue and PAT growth of 19% (on comparable basis) and 52.5%, respectively; the domestic
business grew by 21%, driven by 18% volume growth (on base of 18% volume decline).
• Gross margin improved by 131 bps and lower advertisement spend resulted in 523 bps improvement in OPM to 52.5%..
• Management is confident of maintaining double-digit volume growth and OPM at 28%.
• The stock is trading at a discount to the FMCG basket at 33x its FY2020E EPS. .
• We maintain our Buy rating with a revised PT of Rs. 647.

Read report - https://www.sharekhan.com/MediaGalary/Equity/Emami-Aug02_18.pdf

Aug 02, 2018 Apollo Tyres Stock Update BUY  286 315 

Summary
• Apollo Tyres Limited (ATL) reported in-line results for Q1FY2019.
• ATL to introduce truck tyres in Europe from Q2FY2019. Domestic demand environment also looks strong.
• Margins expected to expand on operating leverage and Hungary plant ramp-up.
• FY2019 to witness strong earnings growth.
• We retain our Buy rating with an unchanged PT of Rs. 315.

Read report - https://www.sharekhan.com/MediaGalary/Equity/Apollo-Aug02_18.pdf

Aug 02, 2018 The Ramco Cements Stock Update HOLD  696 754 

Summary
• The Ramco Cements (Ramco) posted 20% y-o-y decline in net profit due to unabated rise in power and freight costs despite
strong volume growth during Q1FY2019.
• We expect higher cost structure to cap margins in the near term. We factor higher volumes but lower operating profit margin
during FY2019-FY2020E.
• We maintain our Hold rating with a revised PT of Rs. 754 due to downward revision in earnings estimate.

Read report - https://www.sharekhan.com/MediaGalary/Equity/Ramco-Aug02_18.pdf

Aug 02, 2018 Gateway Distriparks Stock Update BUY  180 220 

Summary
• We upgrade our rating on Gateway Distriparks Limited (GDL) to Buy with a revised PT of Rs. 220, reversing discount on the rail
division’s valuation and factoring improvement in operational performance.
• GDL reported improved consolidated net earnings y-o-y, aided by healthy volume growth.
• GDL to increase stake in rail subsidiary to 99.8% from 50% for cash consideration of Rs. 810 crore through increased borrowings.
Cash flows sufficient to service interest.

Read report - https://www.sharekhan.com/MediaGalary/Equity/Gateway-Aug02_18.pdf

September 2018 10 Sharekhan ValueGuide


EQUITY FUNDAMENTALS Stock Update
Recommendation Reco Price Price Target/ Upside (%)
Date Company Report Type
Latest Chg (Rs.) Latest Chg
Aug 02, 2018 Oil and Natural Gas Corporation Viewpoint POSITIVE  166 25 

Summary
• ONGC’s Q1FY2019 operating profit beats estimates on higher-than-expected net oil realisation.
• Management maintained its FY2019 production guidance; does not expect subsidy burden at current oil prices.
• We expect 12% CAGR in standalone earnings over FY2018-FY2020E, led by higher oil and realisation and likely uptick in gas
production.
• We maintain our Positive view on ONGC with 25% upside potential.

Read report - https://www.sharekhan.com/MediaGalary/Equity/ONGC-Aug02_18.pdf

Aug 03, 2018 Marico Stock Update BUY  353 375 

Summary
• In Q1FY2019, consolidated revenues and PAT for Marico grew by ~20% and 10% respectively; consolidated volume growth
stood at 10.4% with domestic volumes rising 12.4%.
• Copra prices fell 6% q-o-q and the sustenance of reduction in prices would drive up margin in H2FY2019.
• Management is confident of achieving 6-8% volume growth on consolidated basis in the near term.
• We broadly stick to estimates for FY2019-20; maintain Buy with an unchanged PT of Rs. 375.

Read report - https://www.sharekhan.com/MediaGalary/Equity/Marico-Aug03_18.pdf

Aug 03, 2018 Zydus Wellness Stock Update BUY  1,503 1,700 

Summary
• Zydus Wellness maintained its strong growth momentum for the fourth consecutive quarter with 26% revenue growth on
comparable basis and PAT doubling to Rs. 15.3 crore.
• The company has a strong brand portfolio in the niche segment and, hence, we expect the strong growth momentum to sustain
in the coming quarters.
• In view of better growth prospects and decent valuations, we maintain our Buy rating on the stock with an upgraded PT of Rs.
1,700.

Read report - https://www.sharekhan.com/MediaGalary/Equity/Zydus-Aug03_18.pdf

Aug 03, 2018 Capital First Stock Update BUY  560 750 

Summary
• Capital First (CAPF) reported strong results with healthy operating performance during Q1FY2019.
• Business traction was robust, with stable asset quality.
• We maintain our Buy rating on the stock with a revised price target (PT) of Rs. 750.

Read report - https://www.sharekhan.com/MediaGalary/Equity/CapitalFirst-Aug03_18.pdf

September 2018 11 Sharekhan ValueGuide


Stock Update EQUITY FUNDAMENTALS

Recommendation Reco Price Price Target/ Upside (%)


Date Company Report Type
Latest Chg (Rs.) Latest Chg
Aug 03, 2018 KEC International Stock Update BUY  328 400 

Summary
• We maintain our Buy rating on the stock of KEC International Ltd with revised PT of Rs400 on reduced earnings.
• Despite poor T&D segment performance in Q1FY2019, the management reiterates its revenue guidance of 15%.
• The management’s confidence comes on the back of recouping of sales in T&D segment coupled with better traction from
others segments and geographies in FY2019.
• Given the healthy order backlog and its ability to ramp up the execution, we expect earnings CAGR of 18% for FY2018-FY2020E
along with strong cash flow and leaner balance sheet.

Read report - https://www.sharekhan.com/MediaGalary/Equity/KEC-Aug03_18.pdf

Aug 03, 2018 Mahindra Logistics Viewpoint POSITIVE  582 10-12 

Summary
• We maintain our Positive view on Mahindra Logistics Limited (MLL) with 10-12% upside potential, given industry-leading earnings
growth (40% CAGR over FY2018-FY2019E).
• MLL reported robust growth in its Q1FY2019 net earnings, led by sharp improvement in gross margin for the SCM segment.
• Management to focus on industry-leading revenue growth along with 50 bps per annum improvement in operating margin
during FY2019-FY2020.

Read report - https://www.sharekhan.com/MediaGalary/Equity/MahindraLogi-Aug03_18.pdf

Aug 03, 2018 BSE Ltd Viewpoint POSITIVE  823 10-12 

Summary
• We retain our positive view with a potential upside of 10-12% on the stock of BSE.
• In Q1FY19, BSE witnessed superlative growth from the new income stream of distribution of MF products.
• This compensated for the drop in transaction charges income from the equity segment.
• We estimate revenue growth of 6% during FY’19 and a stable EBITDA as new revenue streams of MF distribution and commodity
derivatives drive growth.

Read report - https://www.sharekhan.com/MediaGalary/Equity/BSE-Aug03_18.pdf

Aug 06, 2018 Divi’s Laboratories Stock Update BUY  1,194 1,455 

Summary
• Divis Laboratories reported strong growth for Q1FY2019, in-line with our estimates.
• We expect the business to improve in FY2019.
• We maintain our Buy recommendation on the stock with an upward revised price target of Rs. 1,455.

Read report - https://www.sharekhan.com/MediaGalary/Equity/Divi_Lab-Aug06_18.pdf

September 2018 12 Sharekhan ValueGuide


EQUITY FUNDAMENTALS Stock Update
Recommendation Reco Price Price Target/ Upside (%)
Date Company Report Type
Latest Chg (Rs.) Latest Chg
Aug 06, 2018 Arvind Limited Stock Update BUY  420 500 

Summary
• Q1FY2019 numbers were in line with expectations; revenue and PAT grew 10% and 17%, respectively.
• The branded and retail business continued to perform strongly for yet another quarter with ~18% growth in comparable revenue
and a ~195 bps rise in EBITDA margin.
• We broadly maintain our earnings estimates and stick to our Buy recommendation on the stock with an unchanged price target
of Rs. 500.
• Demerger into separate entities (expected in early Q2FY2019) will enhance value for shareholders in the near future.

Read report - https://www.sharekhan.com/MediaGalary/Equity/Arvind-Aug06_18.pdf

Aug 06, 2018 Relaxo Footwears Stock Update BUY  825 913 

Summary
• We maintain our Buy recommendation with a revised price target of Rs.913.
• Relaxo Footwears (Relaxo) registered strong performance in Q1FY2019, with double-digit revenue and PAT growth.
• With recent changes in GST, demand for Relaxo’s products will rise due to better product at a competitive price.
• Superior footwear portfolio, distribution expansion (through franchisee route) and strong brand presence will improve the
company’s growth prospects in the long run.

Read report - https://www.sharekhan.com/MediaGalary/Equity/Relaxo-Aug06_18.pdf

Aug 06, 2018 Firstsource Solutions Stock Update HOLD  69 75 

Summary
• We downgrade our rating on Firstsource Solutions Limited (FSL) to HOLD with a revised PT of Rs. 75, given the challenges in
the top-account.
• Constant currency (CC) revenue growth guidance cut owing to realignment activities in its top account.
• In-line revenue, while margins remained ahead of our modest estimates.

Read report - https://www.sharekhan.com/MediaGalary/Equity/FSL-Aug06_18.pdf

Aug 06, 2018 Rico Auto Industries Stock Update BUY  81 101 

Summary
• Rico Auto Industries (RAI) reported operationally in-line results for Q1FY2019.
• Order book of RAI has strengthened further, thereby providing strong growth visibility in the medium term.
• We retain our Buy recommendation on the stock with an unchanged PT of Rs. 101.

Read report - https://www.sharekhan.com/MediaGalary/Equity/RicoAuto-Aug06_18.pdf

Aug 06, 2018 Carborundum Universal Limited Viewpoint POSITIVE  364 12-15 

Summary
• Carborundum Universal Ltd. (CUMI) reported better-than-expected numbers during Q1FY2019.
• Management has given an improved outlook for all three segments, mainly driven by uptick in volumes.
• We reiterate our Positive stance on the stock. We expect 12-15% return in the next 12-15 months.

Read report - https://www.sharekhan.com/MediaGalary/Equity/Carborundum-Aug06_18.pdf

September 2018 13 Sharekhan ValueGuide


Stock Update EQUITY FUNDAMENTALS

Recommendation Reco Price Price Target/ Upside (%)


Date Company Report Type
Latest Chg (Rs.) Latest Chg
Aug 07, 2018 Mahindra & Mahindra Stock Update BUY  926 1,020 

Summary
• We retain Buy rating on the stock of Mahindra and Mahindra (M&M) with an unchanged PT of Rs 1,020. The stock remains our
preferred pick in the automotive space.
• Strong rural demand coupled with low base of the corresponding quarter led to a robust topline growth for M&M in Q1FY19.
• Both divisions of M&M viz automotive and tractors are poised to clock double digit growth for the next two years given the
robust rural demand.

Read report - https://www.sharekhan.com/MediaGalary/Equity/MnM-Aug07_18.pdf

Aug 07, 2018 TVS Motor Stock Update BUY  549 670 

Summary
• TVS Motor reported lower-than-expected operating performance for the quarter.
• We expect overall volumes to grow by robust 18% in FY2019; outpacing industry growth.
• Cost-control measures, price hikes to aid margin expansion.
• We expect earnings to report a 34% CAGR over the next two years, which makes TVSM the fastest growing 2W company.
• We retain our Buy rating on the stock with a revised PT of Rs. 670.

Read report - https://www.sharekhan.com/MediaGalary/Equity/TVS_Motors-Aug07_18.pdf

Aug 07, 2018 Max Financial Services Stock Update BUY  491 558 

Summary
• Max Financial Services (MFS) posted strong results during Q1FY2019.
• Management of MFS has taken several initiatives and is in the process of implementing them, which would help the company
to improve upon its NBAP margins.
• We believe MFS is on the right track and is effectively building an attractive franchise with a well-diversified and well-underwritten
insurance business.
• We maintain our Buy rating on the stock with a revised price target (PT) of Rs. 558.

Read report - https://www.sharekhan.com/MediaGalary/Equity/Max_Fin-Aug07_18.pdf

Aug 07, 2018 PI Industries Stock Update HOLD  766 837 

Summary
• PI Industries reported mixed set of results for Q1FY2019, as revenue grew by 9.5% y-o-y, whereas EBITDA and PAT declined by
9.4% and 18.4% y-o-y, respectively. Revenue guidance maintained at 18-20%, with slight concern on the margin front.
• Management intends to add capacities at a faster pace to meet the rising demand on improved domestic and global environment.
Moreover, it is conducting backward integration to reduce raw-material sourcing and mitigate concerns on margins.
• We maintain our Hold rating on the stock with a revised price target of Rs. 837, based on 22.5x its FY2020E revised earnings
of Rs. 37.2/share.

Read report - https://www.sharekhan.com/MediaGalary/Equity/PI_Ind-Aug07_18.pdf

September 2018 14 Sharekhan ValueGuide


EQUITY FUNDAMENTALS Stock Update
Recommendation Reco Price Price Target/ Upside (%)
Date Company Report Type
Latest Chg (Rs.) Latest Chg
Aug 07, 2018 Motherson Sumi Systems Viewpoint POSITIVE  305 16-18 

Summary
• We retain our Positive view on the stock of Motherson Sumi Systems (MSSL), despite Q1FY19 missing our estimates and expect
16-18% returns over the next 6-8 months.
• Strong orderbook provides robust growth visibilty.
• The stock has corrected by around 16% in past six months, which provides a good entry for the investors.
• MSSL is one of the quality stocks in the auto ancillary space with a proven track record to outpace the industry growth.

Read report - https://www.sharekhan.com/MediaGalary/Equity/Motherson-Aug07_18.pdf

Aug 07, 2018 Parag Milk Foods Ltd Viewpoint POSITIVE  325 22-25 

Summary
• We maintain our Positive view on the stock of Parag Milks with an upside potential of 22-25% returns.
• Taking into cognizance the higher contribution to revenues from value-added products we continue with our earnings estimates
40% CAGR over FY2018-FY2020E.
• By FY’20, the management is guiding for annual revenue growth in 18-24% range and OPM in 11-12% range.

Read report - https://www.sharekhan.com/MediaGalary/Equity/Parag_Milk-Aug07_18.pdf

Aug 08, 2018 Britannia Industries Stock Update BUY  6,299 7,260 

Summary
• Q1FY2019 revenue of Britannia grew by 14% on comparable basis due to double-digit volume growth. Operating efficiencies
led to margin expansion of 127 bps to 15.3%.
• Innovation in core categories of biscuit, bakery and dairy, distribution expansion and enhancing international presence remains
the key growth driver in the coming years. Volume growth is expected to stay at 10-12% in the near term.
• Well covered for spike in input prices, while operating efficiencies would continue to drive margins.
• We maintain our Buy rating with an upgraded PT of Rs. 7,260.

Read report - https://www.sharekhan.com/MediaGalary/Equity/Britannia-Aug08_18.pdf

Aug 08, 2018 Kalpataru Power Transmission Stock Update BUY  369 465 

Summary
• Healthy order execution across segments drove up revenue by 13% y-o-y.
• Cost and operational efficiency helped margins expand by 12 bps to 11.9%.
• As KPTL is the L1 bidder for orders worth over Rs. 2,340 crore and has an order backlog of Rs. 13,742 crore, revenue visibility
is strong for 2.3 years.
• We maintain Buy on the stock with a revised price target of Rs. 465 on a SoTP basis.

Read report - https://www.sharekhan.com/MediaGalary/Equity/Kalpataru-Aug08_18.pdf

September 2018 15 Sharekhan ValueGuide


Stock Update EQUITY FUNDAMENTALS

Recommendation Reco Price Price Target/ Upside (%)


Date Company Report Type
Latest Chg (Rs.) Latest Chg
Aug 08, 2018 Cipla Stock Update BUY  633 720 

Summary
• Management maintains double-digit growth guidance because of new product launches planned for FY2019E and FY2020E.
• No regulatory hurdles.
• We maintain our Buy rating on the stock with upward revision of the price target (PT) to Rs. 720.

Read report - https://www.sharekhan.com/MediaGalary/Equity/Cipla-Aug08_18.pdf

Aug 08, 2018 Punjab National Bank Stock Update HOLD  80 85 

Summary
• We upgrade our rating to Hold on Punjab National Bank (PNB) , with a revised price target (PT) of Rs 85.
• Steps like calibrated loan growth, improvement in asset quality to indicate improved scenario.
• Near-term overhang of elevated slippages rate, and growth / profitability challenges continue to be present.

Read report - https://www.sharekhan.com/MediaGalary/Equity/PNB-Aug08_18.pdf

Aug 08, 2018 Wonderla Holidays Stock Update HOLD  335 395 

Summary
• Wonderla Holiday Limited (WHL) registered strong operating performance with revenue growing by ~10% (on comparable basis)
and PAT growing by 27% y-o-y to Rs. 33 crore in Q1FY2019.
• Footfalls improved by 6% in Q1FY2019, driven by 22% growth in Hyderabad park and low single-digit growth in Bangalore park.
• OPM stood at 55.3% in Q1FY2019 as against 42.7% in Q1FY2018; sharp expansion can be attributed to operating efficiencies
and improving fundamentals of Hyderabad Park.
• Any significant improvement in footfalls will act as a re-rating trigger; maintain Hold with a PT of Rs. 395.

Read report - https://www.sharekhan.com/MediaGalary/Equity/Wonderla-Aug08_18.pdf

Aug 08, 2018 PTC India Stock Update HOLD  84 95 

Summary
• We maintain a Hold recommendation on the stock of PTC with an unchanged PT of Rs 95.
• Currently, the tilt of volumes towards the short term is creating margin pressure, which is expected to be rectified in the long
term as indicated by the management.
• At present, the correction in the stock provides a better opportunity to long term investor given the steady earnings, higher
dividend yields and decent return ratios being generated by PTC.

Read report - https://www.sharekhan.com/MediaGalary/Equity/PTC_India-Aug08_18.pdf

Aug 08, 2018 Birla Corporation Viewpoint POSITIVE  797 20 

Summary
• We maintain our Positive view on Birla Corp Limited (BCL) and expect 20% upside from current levels on account of attractive
valuation and strong earnings growth profile.
• BCL reported strong earnings growth aided by increased utilisation, higher other income and lower tax outgo.
• Focus to contain costs through efficiencies and better product mix; Greenfield capacity expansion of 3.9 mt to commission in
FY2022.

Read report - https://www.sharekhan.com/MediaGalary/Equity/Birla_Corp-Aug08_18.pdf

September 2018 16 Sharekhan ValueGuide


EQUITY FUNDAMENTALS Stock Update
Recommendation Reco Price Price Target/ Upside (%)
Date Company Report Type
Latest Chg (Rs.) Latest Chg
Aug 08, 2018 Prataap Snacks Viewpoint POSITIVE  1,134 16-18 

Summary
• We stay Positive on Prataap Snacks that has a potential upside of 16-18% from the current levels.
• Revenue grew strongly in double digits, largely aided by volumes; yet PAT rose just ~6% owing to margin pressure.
• Management has guided for 18-20% revenue growth; it expects operating margins to hover at 7.5-8% for FY2019.
• Prataap is an emerging player in the domestic snacking market with strong fundamentals value-for-money offerings, newer
varieties of snacks, higher capacities and a decent distribution reach.

Read report - https://www.sharekhan.com/MediaGalary/Equity/Prataap_Snacks-Aug08_18.pdf

Aug 09, 2018 GlaxoSmithKline Consumer Healthcare Stock Update HOLD  6,662 7,137 

Summary
• We maintain our stance of Hold on the stock of (GlaxoSmithKline Consumer Healthcare) GSK Consumer with revised PT of
Rs7,137.
• Lack of clarity on GSK PLC’s decision on strategic deal would act as a key overhang on the stock..
• GSK Consumer registered stellar performance in Q1FY19 with double digit volume-led growth.
• Its flagship brand Horlicks maintained its leadership position with 44% market share in HFD category.
• The management is confident of maintaining 6-8% volume growth going ahead.

Read report - https://www.sharekhan.com/MediaGalary/Equity/GSKConsumer-Aug09_18.pdf

Aug 09, 2018 Ratnamani Metals & Tubes Stock Update BUY  875 1,150 

Summary
• Ratnamani Metals & Tubes Limited (RMTL) delivered a strong set of numbers for Q1FY2019.
• Management retains its revenue (Rs. 2,100 crore – Rs. 2,200 crore) and margin (16-18%) guidance for FY2019..
• Given healthy earnings growth of 28% CAGR over FY2018-FY2020E, we believe the stock remains a good choice for investment
in the long run.
• Given strong demand environment, we maintain our Buy rating on the stock with a PT of Rs. 1,150.

Read report - https://www.sharekhan.com/MediaGalary/Equity/Ratnamani-Aug09_18.pdf

Aug 09, 2018 Gabriel India Stock Update BUY  143 175 

Summary
• Revenue grew 23% y-o-y, on a rise in OEM demand across segments and a low base of Q1FY2018; OPM expanded 20 bps to
9.5%, in-line with our estimates .
• GIL is aiming to more than double aftermarket segment revenue to Rs. 500 crore by FY2021.
• Order wins from OEMs coupled with strong growth in aftermarket space keep growth prospects bright.
• We retain our Buy recommendation on the stock with an unchanged PT of Rs. 175.

Read report - https://www.sharekhan.com/MediaGalary/Equity/Gabriel-Aug09_18.pdf

September 2018 17 Sharekhan ValueGuide


Stock Update EQUITY FUNDAMENTALS

Recommendation Reco Price Price Target/ Upside (%)


Date Company Report Type
Latest Chg (Rs.) Latest Chg
Aug 09, 2018 Thermax Stock Update HOLD  1,108 1,240 

Summary
• Thermax delivered healthy operational performance during Q1FY2019.
• Substantial improvement in order inflow in the domestic market.
• Thermax thrives to generate double-digit margins by operating leverage, value engineering and cost optimisation.
• Strong execution to drive growth despite order inflow headwinds.
• We reiterate our Hold rating on the stock with an unchanged PT of Rs. 1,240.

Read report - https://www.sharekhan.com/MediaGalary/Equity/Thermax-Aug09_18.pdf

Aug 09, 2018 Lupin Stock Update REDUCE  821 Under review 

Summary
• We continue to maintain our Reduce rating on the stock of Lupin with target price under review.
• Our skepticism is on account of the lack of clarity and uncertainty over the outcome of the USFDA warning letter at two plants.
• Any update or resolution of this warning letter is key monitorables to be watched for.
• In Q1FY19, Lupin continued to disappoint with subdued earnings on account of dismal performance across key markets like US,
ROW and Japan.

Read report - https://www.sharekhan.com/MediaGalary/Equity/Lupin-Aug09_18.pdf

Aug 09, 2018 Natco Pharma Viewpoint POSITIVE  783 15-18 

Summary
• Natco Pharma reported lower-than-expected topline performance for Q1FY2019 due to high competition in gTamiflu sales.
• Management continues to maintain its 8-10% guidance for sales and profitability for FY2019.
• We continue to remain Positive on the stock and expect 15-18% upside over the next six months.

Read report - https://www.sharekhan.com/MediaGalary/Equity/Natco-Aug09_18.pdf

Aug 09, 2018 Varun Beverages Limited Viewpoint POSITIVE  748 12-15 

Summary
• Varun Beverages Ltd (VBL) ended yet another quarter on a strong note. Q2CY2018 revenue growing by ~26% on a comparable
basis, as volumes grew ~21% and profit after tax (PAT) rose 25%.
• Strong volume growth momentum to sustain as newly-acquired territories would attain certain scale and international sales will
improve.
• Despite the stock rising by as much as 55% since we initiated the viewpoint on VBL, we expect it to rise 12-15% further in the
near term.
• We maintain our Positive view on the stock.

Read report - https://www.sharekhan.com/MediaGalary/Equity/Varun-Aug09_18.pdf

September 2018 18 Sharekhan ValueGuide


EQUITY FUNDAMENTALS Stock Update
Recommendation Reco Price Price Target/ Upside (%)
Date Company Report Type
Latest Chg (Rs.) Latest Chg
Aug 09, 2018 PNB Housing Finance Viewpoint POSITIVE  1,304 12-15 

Summary
• PNB Housing Finance (PNBHF) posted good numbers for Q1FY2019 on strong loan book growth, steady asset quality, despite
migration to IndAS accounting standards.
• Margins steady as NIMs rose 5bps to 3.21%.
• We maintain Positive view on the stock and expect a 12-15% potential upside from current levels.

Read report - https://www.sharekhan.com/MediaGalary/Equity/PNBHousing-Aug09_18.pdf

Aug 09, 2018 Bharat Forge Viewpoint POSITIVE  631 16-18 

Summary
• We retain Positive view on BFL and expect 16-18% returns over the next 8-10 months.
• Strong demand momentum to sustain on the back of improved traction in both domestic as well as exports markets. Emerging
areas of aluminum forgings and defense would further add to the growth.
• Q1FY2019 results missed estimates marginally.

Read report - https://www.sharekhan.com/MediaGalary/Equity/BharatForge-Aug09_18.pdf

Aug 09, 2018 Bharat Petroleum Corporation Viewpoint NEUTRAL  389 - 

Summary
• Better-than-expected earnings were driven by substantially higher refining and product inventory gains.
• We remain cautious on earning predictability for BPCL over FY2019E-FY2020E as the outlook for the core refining and
marketing businesses remains challenging.
• We maintain a Neutral view on BPCL.

Read report - https://www.sharekhan.com/MediaGalary/Equity/BPCL-Aug09_18.pdf

Aug 10, 2018 State Bank of India Stock Update BUY  304 340 

Summary
• SBI posted net loss, but operational performance was positive during Q1FY2019.
• Improvement in NIM, robust CASA performance and value of business were key positives.
• Asset slippages continue but have improved sequentially.
• We maintain our Buy recommendation with a revised PT of Rs. 340.

Read report - https://www.sharekhan.com/MediaGalary/Equity/SBI-Aug10_18.pdf

Aug 10, 2018 Aurobindo Pharma Stock Update BUY  610 725 

Summary
• We maintain our BUY recommendation on the stock of Aurobindo Pharma with unchanged PT of Rs 725.
• Margins are likely to witness a pick up as the pricing pressure eases in the US along with good traction in Europe and ROW
businesses.
• The key injectable units having received Establishment Inspection Report (EIR) from the USFDA and recent product approval
from these sites lifts the overhang from the stock.
• The management has planned to launch ~30-40 products in the US for FY2019.

Read report - https://www.sharekhan.com/MediaGalary/Equity/Aurobindo-Aug10_18.pdf

September 2018 19 Sharekhan ValueGuide


Stock Update EQUITY FUNDAMENTALS

Recommendation Reco Price Price Target/ Upside (%)


Date Company Report Type
Latest Chg (Rs.) Latest Chg
Aug 10, 2018 Va Tech Wabag Stock Update BUY  372 465 

Summary
• We retain our Buy rating on the stock of Va Tech Wabag (VTW) with revised PT of Rs 465, broadly stable performance in Q1 and
expected improvement in working capital cycle.
• On back of a healthy order pipeline and large order backlog, the management has reiterated its revenue guidance of Rs 4000-
4200 crore for FY2019.
• Further a margin improvement is expected driven by large ticket size orders, execution of more export orders and currency
depreciation.

Read report - https://www.sharekhan.com/MediaGalary/Equity/Va-Tech-Wabag-Aug10_18.pdf

Aug 10, 2018 Union Bank of India Stock Update REDUCE  85 80 

Summary
• Union Bank of India (UNBK) posted modest operating performance for Q1FY2019.
• UNBK witnessed below-industry average advances growth rate.
• We believe credit cost may remain at elevated levels, while asset-quality outlook remains murky with marginal upward revision
of slippage guidance.
• We maintain our Reduce rating on the stock with an unchanged PT of Rs. 80.

Read report - https://www.sharekhan.com/MediaGalary/Equity/UBI-Aug10_18.pdf

Aug 10, 2018 Skipper Stock Update BOOK OUT  120 120 -

Summary
• Skipper reported a decline in its operating profit during Q1FY2019, despite higher revenue, due to increased input cost.
• Expect a muted margin scenario in the near future for the polymer segment.
• Elongated NWC capital days led to rise in debt levels.
• Considering the challenging business environment and bleak margin scenario, we close our call and recommend Book Out on
the stock. The stock has corrected nearly ~25% post Q1FY2019 results.

Read report - https://www.sharekhan.com/MediaGalary/Equity/Skipper-Aug10_18.pdf

Aug 10, 2018 Indraprastha Gas Ltd Viewpoint POSITIVE  299 15 

Summary
• Indraprastha Gas Limited (IGL) reported lower-than-expected operating profit, led by miss in EBITDA margin, while volume
growth of 13.2% was ahead of our expectations.
• We maintain our positive stance on volume growth trajectory for IGL given regulatory support, better CNG economics with
petrol and expansion into new geographical areas. Therefore, we maintain our volume CAGR of 12% over FY2018-FY2020E.
• We maintain our Positive view on IGL and expect 15% upside from current levels.

Read report - https://www.sharekhan.com/MediaGalary/Equity/Indraprastha-Aug10_18.pdf

September 2018 20 Sharekhan ValueGuide


EQUITY FUNDAMENTALS Stock Update
Recommendation Reco Price Price Target/ Upside (%)
Date Company Report Type
Latest Chg (Rs.) Latest Chg
Aug 10, 2018 McLeod Russel India Viewpoint POSITIVE  130 20-22 

Summary
• McLeod Russel India (McLeod) reported improved Q1FY2019 standalone performance with revenue growing by 15% y-o-y and
OPM improving by 66 bps y-o-y to 7.7%. This was driven by a 7% increase in volumes and 9% increase in sales realisation.
• India business is expected to maintain its steady performance on account of higher sales realisation, while performance of
Kenyan subsidiaries will be affected by increased tea production affecting realisation.
• Focus on debt reduction augurs well from the near to medium-term perspective (managed to reduce debt by Rs. 350 crore
because of sale of non-core tea estates).
• We maintain our Positive stance with 20-22% upside.

Read report - https://www.sharekhan.com/MediaGalary/Equity/McLeod-Aug10_18.pdf

Aug 13, 2018 Cadila Healthcare Stock Update BUY  355 450 

Summary
• One-off adjustments drove up reported profit by 237.6% y-o-y .
• Robust growth in key verticals including India, the US and APIs propelled sales.
• We expect sales and profit to clock a CAGR of 15.5% and 19.5%, respectively, in the next two years.
• Maintain Buy with an unchanged PT of Rs. 450.

Read report - https://www.sharekhan.com/MediaGalary/Equity/Cadila-Aug13_18.pdf

Aug 13, 2018 CG Power & Industrial Solutions Stock Update HOLD  61 70 

Summary
• CG Power (CGP) delivered steady consolidated topline growth of 11% y-o-y in Q1FY2019, driven by the international market.
• Lower input cost led to margin expansion..
• Hungary divestment is going on time and is expected to be completed by the end of Q2FY2019.
• We reiterate our Hold rating on the stock with an unchanged PT of Rs. 70.

Read report - https://www.sharekhan.com/MediaGalary/Equity/CGPower-Aug13_18.pdf

Aug 13, 2018 Glenmark Pharmaceuticals Stock Update HOLD  583 Under Review 

Summary
• Glenmark Pharmaceuticals (Glenmark) continued to report weak numbers for Q1FY2019, with sales declining by 8.4% y-o-y and
operating profit declining by 39.9%.
• Management has given overall sales growth guidance of 10-15% for FY2019 with a caution.
• We maintain our estimates and Hold recommendation on the stock with the price target (PT) under review.

Read report - https://www.sharekhan.com/MediaGalary/Equity/Glenmark-Aug13_18.pdf

September 2018 21 Sharekhan ValueGuide


Stock Update EQUITY FUNDAMENTALS

Recommendation Reco Price Price Target/ Upside (%)


Date Company Report Type
Latest Chg (Rs.) Latest Chg
Aug 13, 2018 Indian Hotels Company Viewpoint POSITIVE  125 25-30 

Summary
• Despite a lean season for the hotel industry, IHCL posted decent performance with ~8% growth in revenue and 22% growth in
operating profit.
• The decent performance can be attributed to 8.9% growth in domestic room revenue (RevPAR was up by 9.7%) with 12.6%
growth in domestic F&B revenue during the quarter.
• With room demand likely to outpace supply, FY2019 performance is expected to be better for IHCL. Q2FY2019 will give us
some colour of how the domestic hotel industry is shaping up as bookings for the new season will start at the end of Q2.
• With the correction of 12% from the last update, the stock provides a good entry point with 25-30% upside from current levels.
We have retained our Positive stance.

Read report - https://www.sharekhan.com/MediaGalary/Equity/IndianHotel-Aug13_18.pdf

Aug 13, 2018 Sundram Fasteners Viewpoint POSITIVE  635 12-14 

Summary
• In Q1FY2019, Revenue rose 22% y-o-y to Rs. 971 crore y-o-y led by a strong OEM demand and greater share of value added
products.
• SFL is expected to post robust 22% earnings CAGR over the next two years, as outlook for demand and margins stays strong.
• We reiterate our Positive view on the stock and expect it to generate 12-14% returns over the next 6-8 months.

Read report - https://www.sharekhan.com/MediaGalary/Equity/Sundram-Aug13_18.pdf

Aug 13, 2018 KNR Constructions Limited Viewpoint POSITIVE  228 22-25 

Summary
• We reiterate positive view on the stock of KNR with 22-25% upside potential lowering our valuation multiple factoring near term
challenges in the sector in general and KNR in particular.
• For Q1FY2019, KNR Constructions Limited (KNR) reported strong operational performance, although limited by increased
depreciation and effective tax rate.
• Land acquisition delays to lead to back ended revenue from projects affecting FY2019 execution. Management remains
optimistic for FY2020.

Read report - https://www.sharekhan.com/MediaGalary/Equity/KNR-Aug13_18.pdf

Aug 13, 2018 Balkrishna Industries Viewpoint POSITIVE  1,228 18-20 

Summary
• We Reinitiate our coverage on BKT with a Positive view and expect 18-20% upside over the next six to eight months.
• BKT expects robust demand to continue, led by market share gains. Management has raised FY2019 volume guidance.
• BKT reports strong results for Q1FY2019 with numbers coming ahead of estimates.

Read report - https://www.sharekhan.com/MediaGalary/Equity/BalkrishnaInd-Aug13_18.pdf

September 2018 22 Sharekhan ValueGuide


EQUITY FUNDAMENTALS Stock Update
Recommendation Reco Price Price Target/ Upside (%)
Date Company Report Type
Latest Chg (Rs.) Latest Chg
Aug 13, 2018 West Coast Paper Mills Viewpoint POSITIVE  319 23-25 

Summary
• Q1 numbers strong as Revenue/EBITDA/PAT grow 19%/44%/57%, respectively.
• Improved demand to push up utilisation levels, boost realisations and make company more profitable.
• Despite expansion, WCPM is expected to be net debt free in two years, which is expected to enhance stock’s valuations.
• Stock offers a good entry point post recent correction, can go up as 23-25% based on 8x its FY2020E earnings of Rs. 49.9/
share..

Read report - https://www.sharekhan.com/MediaGalary/Equity/WestCoast-Aug13_18.pdf

Aug 13, 2018 Indian Oil Corporation Viewpoint NEUTRAL  161 - 

Summary
• Better-than-expected earnings were driven by substantially higher refining and product inventory gains. However, adjusting for
inventory gain, refining performance was weak with core GRM at only $3.4/bbl in Q1FY2019.
• We remain cautious on the earnings visibility for IOCL over FY2019E-FY2020E, as the outlook for the core refining and marketing
businesses remains challenging.
• We maintain a Neutral view on IOCL.

Read report - https://www.sharekhan.com/MediaGalary/Equity/IOCL-Aug13_18.pdf

Aug 14, 2018 Sun Pharmaceutical Industries Stock Update BUY  602 690 

Summary
• For Q1FY2019, Sun Pharma reported 16.4% sales growth, in-line with expectations.
• Management has maintained its low double-digit growth guidance for consolidated sales for FY2019.
• We maintain our Buy recommendation on the stock with upward revised PT of Rs. 690.

Read report - https://www.sharekhan.com/MediaGalary/Equity/SunPharma-Aug14_18.pdf

Aug 14, 2018 Grasim Industries Stock Update BUY  988 1,360 

Summary
• We maintain our Buy recommendation with a revised price target of Rs.1,360..
• Stellar operational performance in VSF and Caustic soda boosts standalone net earnings. Healthy operational performance
expected to continue.
• Capacity expansion plans in core standalone businesses on track.

Read report - https://www.sharekhan.com/MediaGalary/Equity/Grasim-Aug14_18.pdf

Aug 14, 2018 Sadbhav Engineering Stock Update BUY  270 410 

Summary
• We maintain our Buy rating on the stock of Sadbhav Engineering Ltd with a revised SOTP based price target of Rs. 410 as we
lower valuation multiple to factor in land acquisition delays.
• Sadbhav Engineering Limited (SEL) reported 14% y-o-y net earnings growth led by healthy execution (including GST), higher
other income and lower interest expense.
• Robust order book led by HAM projects expected to lead to 27% net earnings CAGR over FY2018-2020.

Read report - https://www.sharekhan.com/MediaGalary/Equity/Sadbhav-Aug14_18.pdf

September 2018 23 Sharekhan ValueGuide


Stock Update EQUITY FUNDAMENTALS

Recommendation Reco Price Price Target/ Upside (%)


Date Company Report Type
Latest Chg (Rs.) Latest Chg
Aug 14, 2018 Oil India Stock Update HOLD  208 225 

Summary
• Q1FY2019 operating performance of Oil India Limited (OIL) was above our estimates due to higher-than-expected net oil
realisation at $72/bbl. PAT was marginally ahead of estimates.
• Muted oil and gas production outlook to offset benefit of higher oil and gas realisation.
• We maintain our Hold rating on OIL with a revised price target of Rs. 225.

Read report - https://www.sharekhan.com/MediaGalary/Equity/OilIndia-Aug14_18.pdf

Aug 14, 2018 NBCC India Stock Update BUY  72 90 

Summary
• NBCC reported robust net sales growth of 29% y-o-y in Q1FY2019..
• Management has reiterated its order inflow guidance of Rs. 25,000 crore for FY2019..
• Acquisition plans are on track.
• We reiterate our Buy rating with a revised PT to Rs. 90.

Read report - https://www.sharekhan.com/MediaGalary/Equity/NBCC-Aug14_18.pdf

Aug 14, 2018 Greaves Cotton Stock Update HOLD  148 157 

Summary
• Revenue grew 13% on the low base of FY2018, yet lags our estimate of Rs. 488 crore.
• OPM shrunk 30 bps to 13.3% y-o-y, lagging our estimate of 14.7%, as raw material cost share in sales rose 50 bps .
• We expect the non-auto business of GCL to do better in FY2019, lackluster three-wheeler engine biz to drag growth.
• We retain our Hold rating on the stock with revised PT of Rs 157.

Read report - https://www.sharekhan.com/MediaGalary/Equity/GreavesCotton-Aug14_18.pdf

Aug 14, 2018 MOIL Viewpoint POSITIVE  173 20-22 

Summary
• Operating profit misses estimates due to lower-than-expected sales volume; realisation improved sharply by 25% y-o-y.
• Management has guided for strong sales volume growth of 10% in FY2019, but we conservatively model volume growth of 5%
in FY2019E and FY2020E.
• We maintain our Positive view on MOIL and expect 20-22% upside from current levels.

Read report - https://www.sharekhan.com/MediaGalary/Equity/MOIL-Aug14_18.pdf

Aug 14, 2018 Godrej Agrovet Viewpoint POSITIVE  607 20-22 

Summary
• We reiterate our Positive stance on Godrej Agrovet (GAVL) with a potential upside of 20-22% from current levels.
• GAVL is expected to deliver revenue/EBITDA/PAT CAGR of 17%/30%/42% during FY2018-FY2020. Strong volume growth in
animal feed business, margin improvement dairy business and stable business growth performance in vegetable oil and crop
protection business.
• GAVL delivered in-line Q1FY2019 results with revenue growth being led by animal feed and vegetable oil business. Overall,
margins were maintained due to improved profitability in vegetable oil and crop protection business as traditional animal feed
business witnessed contraction.

Read report - https://www.sharekhan.com/MediaGalary/Equity/GodrejAgro-Aug14_18.pdf

September 2018 24 Sharekhan ValueGuide


EQUITY FUNDAMENTALS Stock Update
Recommendation Reco Price Price Target/ Upside (%)
Date Company Report Type
Latest Chg (Rs.) Latest Chg
Aug 16, 2018 Finolex Cables Stock Update BUY  593 710 

Summary
• Finolex Cables Limited (FCL) reported 17% y-o-y growth in net sales on account of good volume growth across its major two
divisions during Q1FY2019.
• However, higher taxes led to a decline in net earnings.
• Higher utilization to drive major two segments while newer product business is expected to pick up gradually.
• We maintain our Buy rating with a revised PT of Rs. 710.

Read report - https://www.sharekhan.com/MediaGalary/Equity/Finolex-Aug16_18.pdf

Aug 16, 2018 Cox & Kings Stock Update BOOK OUT  210 210 -

Summary
• Near-term outlook of Cox & Kings Limited (CKL) remains bleak as depreciating rupee and working capital issues in the domestic
leisure travel business will continue to put stress on the balance sheet.
• In Q1FY2019, revenue grew by ~16%, driven by favourable currency movement and higher capacity addition in Meininger
business; while OPM remained flat at 47.6%.
• We advise investors to exit from CKL due to near-term stress on the balance sheet and switch to a quality hospitality play such
as Indian Hotels Company (IHCL) to accrue higher benefits from the upcycle in the domestic hotel industry.

Read report - https://www.sharekhan.com/MediaGalary/Equity/Coxkings-Aug16_18.pdf

Aug 16, 2018 Suprajit Engineering Viewpoint BOOK OUT  247 247 -

Summary
• We close our call and recommend Book Out on the stock of Suprajit Engineering Limited’s (SEL).
• The subsidiaries Phoenix and Wescon that constitute about 40% of the overall topline of SEL, continue to face headwinds and
are expected to post low single digit growth in FY2019.
• SEL Q1FY2019 topline was 11% below our estimates given the weak performance by its subsidiaries.

Read report - https://www.sharekhan.com/MediaGalary/Equity/Suprajit-Aug16_18.pdf

Aug 17, 2018 Gayatri Projects Stock Update HOLD  203 221 

Summary
• We have downgraded our rating on Gayatri Projects Limited (GPL) to Hold with a revised PT of Rs. 254, factoring lower valuations
of its listed subsidiary and revised valuation of its power investment.
• GPL posted strong operational performance with increased execution and higher margins, albeit limited by increased effective
tax rate.
• Strong order book with major road projects having over 80% land availability is expected to lead to over 25%+ revenue growth
for FY2019.

Read report - https://www.sharekhan.com/MediaGalary/Equity/Gayatri-Aug17_18.pdf

September 2018 25 Sharekhan ValueGuide


Stock Update EQUITY FUNDAMENTALS

Recommendation Reco Price Price Target/ Upside (%)


Date Company Report Type
Latest Chg (Rs.) Latest Chg
Aug 17, 2018 Thomas Cook India Stock Update HOLD  245 275 

Summary
• The travel business of Thomas Cook India Limited (TCIL) will continue to post double-digit growth, driven by strong growth in
the outbound travel segment and the domestic segment.
• The change in revenue recognition method under new accounting standards will impact operating performance of vacation
ownership (VO) business in the near term; cash flows will have limited impact.
• TCIL will focus on growing the retail segment of travel-related financial services to achieve sustained growth in the near to
medium term.
• We maintain our Hold rating on the stock with a revised PT of Rs. 275.

Read report - https://www.sharekhan.com/MediaGalary/Equity/Thomas-Aug17_18.pdf

Aug 27, 2018 LIC Housing Finance Stock Update HOLD  527 600 

Summary
• We downgrade our rating on the stock of LIC housing Finance (LICHF) to HOLD with a revised PT of 600.
• Slowing growth traction in loan book and margins under pressure. Further, competitive pressures may keep NIM range-bound.
• We remain watchful on how the asset quality and loan book traction play out in coming quarters.

Read report - https://www.sharekhan.com/MediaGalary/Equity/LIC-Aug27_18.pdf

Aug 27, 2018 Bata India Viewpoint POSITIVE  1,065 10-12 

Summary
• The stock price of Bata India (Bata) has moved up by ~30% in the past two months. We expect the strong performance to
continue due to improved earnings visibility in the near term, which provides further upside of 10-12% from current levels.
• Latest GST benefits and focus on premium products to drive revenue growth; we expect revenue CAGR of ~12% during FY2018-
FY2021E.
• Gross margin could be under pressure in the near term, but cost efficiencies at operating level will mitigate the impact.
• Strong strides continue, strategic expansion plans and new launches to drive growth in the near term.

Read report - https://www.sharekhan.com/MediaGalary/Equity/BataIndia-Aug27_18.pdf

Aug 28, 2018 Godrej Consumer Products Stock Update BUY  1,440 1,650 

Summary
• The stock price of Godrej Consumer Products Limited (GCPL) has moved up by 18% in the past two months, in line with the
strong surge in the FMCG basket.
• With the domestic business expected to deliver double-digit revenue growth and Indonesia business seeing a recovery, we
expect GCPL to deliver double-digit earnings growth in the near term.
• We maintain GCPL as one of our top picks in the basket and maintain our Buy recommendation with upgraded PT of Rs. 1,650
(rolling it over FY2020-FY2021 earnings).

Read report - https://www.sharekhan.com/MediaGalary/Equity/GCPL-Aug28_18.pdf

September 2018 26 Sharekhan ValueGuide


EQUITY FUNDAMENTALS Stock Update
Recommendation Reco Price Price Target/ Upside (%)
Date Company Report Type
Latest Chg (Rs.) Latest Chg
Aug 28, 2018 Torrent Pharmaceuticals Stock Update BUY  1,770 2,000 

Summary
• Unichem turnaround to contribute to EPS from FY2019-end.
• Torrent confident of India business clocking double-digit growth over the next two years and profitability will improve.
• Debt: equity ratio to improve from 1.5 times in FY2018 to 0.5 times by FY2021, as Unichem loan is amortised.
• We maintain Buy and raise the PT to Rs. 2,000.

Read report - https://www.sharekhan.com/MediaGalary/Equity/TorrentPharma-Aug28_18.pdf

Aug 28, 2018 Granules India Viewpoint BOOK PROFIT  114 114 -

Summary
• The stock has delivered an absolute return of 25% in a month.
• Advise investors to book profits and wait for a better point to re-enter the stock.
• Management maintains its revenue growth guidance.
• We expect sales and profit of Granules to report CAGR of 22% and 51.1%, respectively, over FY2018-FY2020E.

Read report - https://www.sharekhan.com/MediaGalary/Equity/Granules-Aug28_18.pdf

Aug 29, 2018 Reliance Industries Stock Update BUY  1,294 1,465 

Summary
• Reliance Industries Limited’s (RIL) GRM expected to get a boost from International Maritime Organisation’s mandate to reduce
sulphur content for marine fuels to 0.5% from 3.5% currently starting from 2020.
• The petrochemical segment’s earnings are expected to remain strong over FY2019E-FY2020E, led by feedstock advantage
from ethane imports and benefit from commissioning of Refinery Off Gas Cracker.
• The telecom business is likely to benefit from strong subscriber addition and revenue market share gain.
• We maintain our Buy rating on RIL with a revised price target of Rs. 1,465/share, given strong earnings growth outlook.

Read report - https://www.sharekhan.com/MediaGalary/Equity/Reliance-Aug29_18.pdf

Aug 29, 2018 Bajaj Holdings & Investment Stock Update BUY  3,080 3,844 

Summary
• BHIL reported strong earnings growth for Q1FY2019, driven by robust standalone performance and strong performance of
associate companies.
• Among associate companies, BFS reported strong results for Q1FY2019 as all businesses clocked robust operating numbers.
• Bajaj Auto numbers missed estimates, company recorded lowest margins since FY2009.
• We maintain Buy recommendation on the Bajaj Holdings and raise our price target to Rs. 3,844.

Read report - https://www.sharekhan.com/MediaGalary/Equity/BajajHoldings-Aug29_18.pdf

September 2018 27 Sharekhan ValueGuide


Stock Update EQUITY FUNDAMENTALS

Recommendation Reco Price Price Target/ Upside (%)


Date Company Report Type
Latest Chg (Rs.) Latest Chg
Aug 30, 2018 PTC India Financial Services Stock Update HOLD  19 21 

Summary
• PTC India Financial Services (PFS) posted mixed performance for Q1FY2019.
• Asset quality and operating performance remained weak.
• Steady loan book traction, healthy pick up in disbursements.
• We maintain our Hold rating on the stock with a price target (PT) of Rs. 21.

Read report - https://www.sharekhan.com/MediaGalary/Equity/PFS-Aug30_18.pdf

Aug 30, 2018 RBL Bank Viewpoint POSITIVE  627 12-15 

Summary
• The retail business of RBL Bank (RBL) progressing well, presents cross-sell opportunities and better liability mix.
• Growth in credit cards base strong, positive for fee income, credit growth.
• RBL is developing into an attractive business franchise and its rural & MFI business can be a valuable proposition.
• We maintain our Positive view on the stock with 12-15% upside potential.

Read report - https://www.sharekhan.com/MediaGalary/Equity/RBL-Aug30_18.pdf

Aug 31, 2018 Jubilant Foodworks Limited Viewpoint POSITIVE  1,549 10-12 

Summary
• Jubilant Foodworks Limited’s (JFL) outperformance continues with 90% return since re-initiation of our viewpoint and improving
discretionary environment provides scope of further upside of 10-12% from current levels.
• Enhance growth in neighbouring markets (of Bangladesh and Sri Lanka), improving Dunkin Donuts performance and expanding
reach in the domestic market remain key growth pillars in the near term.
• We expect JFL’s revenue and earnings to report a CAGR of 15.4% and 30.4% over FY2018-FY2021 (largely driven by higher
SSSG, operating efficiencies and receding losses and Dunkin Donuts), respectively.

Read report - https://www.sharekhan.com/MediaGalary/Equity/JubilantFood-Aug31_18.pdf

Aug 31, 2018 JSW Steel Viewpoint NEUTRAL  397 8-10 

Summary
• JSW Steel has given strong returns of 27% in the past two months supported by strong Q1FY19 profitability and inclusion in
Nifty 50 Index.
• Though long-term growth prospects remain robust given likely recovery in steel prices and expected capacity additions, near-
term positives seem to be priced in.
• Thus, we downgrade stock to Neutral stance (from Positive); upside limited to 8-10% given cyclical nature of business.
• Key risk to our call is a potential acquisition of distressed steel assets or higher-than-expected firmness in the steel prices.

Read report - https://www.sharekhan.com/MediaGalary/Equity/JSWSteel-Aug31_18.pdf

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

September 2018 28 Sharekhan ValueGuide


EQUITY FUNDAMENTALS SECTOR UPDATE

Sector View
Date Sector Report Type
Latest Chg
Aug 02, 2018 Automobiles Sector Update POSITIVE 

Summary
• Automobile sales for July 2018 were a mixed bag with CV and 2W reporting a double digit growth while PV growth remained
flat.
• Buoyant farm sentiments and a higher farm income drove 2W volumes upwards.
• Robust private consumption led demand and improved industrial activity lead to a double digit growth for CVs. Both MHCV and
LCV reported a double digit volume growth.
• PVs reported a flat growth for the month, primarily on account of a high base in the corresponding month of the previous year.
• Preferred Picks: Maruti Suzuki, M&M, Escorts.

Read report - https://www.sharekhan.com/MediaGalary/Equity/Emami-Aug02_18.pdf

Aug 20, 2018 Q1FY2019 IT results review Sector Update POSITIVE 

Summary
• Revenue growth remained ahead of expectations; margin headwinds largely offset by rupee tailwind and operational efficiency.
• Management of most companies indicated healthy deal wins and favourable set-ups for revival in BFSI.
• Strong deal wins along with improving demand environment in the U.S. provides ample visibility on the growth trajectory.
• Ramp-up of large deal wins along with rupee depreciation provides levels for earnings acceleration; Preferred picks are: TCS,
Infosys, HCL Tech, Tech M, PSL and LTI.

Read report - https://www.sharekhan.com/MediaGalary/Equity/IT_Q1FY2019_Review_Aug20_18.pdf

Aug 21, 2018 Q1FY2019 Pharma results review Sector Update Cautious 

Summary
• Q1FY2019 results mostly in line with expectations.
• Retain cautious stance.
• We advise selectively buying and prefer companies such as Biocon, Cipla and Sun Pharma from our coverage universe.

Read report - https://www.sharekhan.com/MediaGalary/Equity/Pharma_Q1FY2019_Review_Aug21_18.pdf

Aug 21, 2018 Q1FY2019 Oil & Gas results review Sector Update POSITIVE 

Summary
• During Q1FY2019, upstream PSUs benefited from the sharp increase in net oil realisation, partially offset by lower other income.
• Refining and marketing inventory gains lifted earnings of oil marketing companies (OMCs). However, core refining margins
disappointed with a steep discount to benchmark Singapore Complex GRM.
• Mid-stream and city gas distribution (CGD) witnessed strong volume growth, leading to double-digit earnings growth on a y-o-y
basis.
• Our preferred stocks are Reliance Industries, ONGC and Petronet LNG.

Read report - https://www.sharekhan.com/MediaGalary/Equity/Oil&Gas_Q1FY2019_Review_Aug21_18.pdf

ŠŠ Upgrade  ŠŠ No change  ŠŠ Downgrade 


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

September 2018 29 Sharekhan ValueGuide


SECTOR UPDATE EQUITY FUNDAMENTALS

Sector View
Date Sector Report Type
Latest Chg
Aug 21, 2018 Q1FY2019 Cement results review Sector Update POSITIVE 

Summary
• Strong volume growth albeit earnings affected due to flat realisation and increased opex during Q1FY2019.
• Regional players barring Birla Corporation also felt the pressure of increased opex. Southern players surprise positively on
demand growth.
• Expect higher utilisation, pricing discipline and operating efficiencies to contain opex. Infrastructure spending and good
monsoon remain key triggers.
• We maintain our Positive stance on the sector with a Buy rating on UltraTech and Grasim along with a Positive view on Birla
Corporation.

Read report - https://www.sharekhan.com/MediaGalary/Equity/Cement_Q1FY2019_Review_Aug21_18.pdf

Aug 23, 2018 Q1FY2019 Auto results review Sector Update POSITIVE 

Summary
• Q1FY2019 witnessed continuation of impressive double-digit revenue growth.
• Margin improvement trend sustains led by operating leverage, price hikes and low base in Q1FY2018; Earnings growth highest
in the past few years.
• We maintain Positive stance on the sector as upcycle provides scope for reasonable gains.
• Our preferred picks are Maruti Suzuki, M&M and Escorts.

Read report - https://www.sharekhan.com/MediaGalary/Equity/Auto_Q1FY2019_Review_Aug23_18.pdf

Aug 23, 2018 Q1FY2019 Consumer goods and services results review Sector Update POSITIVE 

Summary
• Consumer goods companies registered strong revenue performance (achieving double-digit revenue growth) on account of
low base of Q1FY2018 (led by inventory de-stocking) and revival in rural demand.
• Benign input prices, higher operating leverage and low base led to higher operating margins on a y-o-y basis.
• Revival in rural demand to result in better volume growth; increasing input prices would curtail margin expansion.
• Preferred picks: HUL, Britannia, ITC, GCPL, Dabur India and Marico.

Read report - https://www.sharekhan.com/MediaGalary/Equity/ConsumerGoods_Q1FY2019_Review_Aug23_18.pdf

Aug 23, 2018 Q1FY2019 Banking and NBFC results review Sector Update POSITIVE 

Summary
• Credit growth continues to be below par, retail loans leading skewed growth.
• Adverse interest rate movements dominate narrative.
• IND AS implementation largely net positive for NBFCs, Improved outlook for Corporate banks, PSBs.
• Positive on retail-faced banks and well-run NBFC players in the space.
• Preferred picks: HDFC Bank, RBL Bank, Bajaj Finance, Yes Bank, L&T Finance Holdings.

Read report - https://www.sharekhan.com/MediaGalary/Equity/Banking_Q1FY2019_Review_Aug23_18.pdf

September 2018 30 Sharekhan ValueGuide


EQUITY FUNDAMENTALS SECTOR UPDATE

Sector View
Date Sector Report Type
Latest Chg
Aug 23, 2018 Q1FY2019 Capital Goods & Engineering results review Sector Update Neutral 

Summary
• Overall topline for stocks in our coverage grew 18% y-o-y driven by healthy project execution.
• Most stocks in our coverage saw margins expand driven by cost-control measures.
• Focus on premiumisation, aided by sustained cost-reduction efforts, is expected to keep driving profitability.
• We continue to have a neutral view despite green shoots; invest selectively as sector macro headwinds.

Read report - https://www.sharekhan.com/MediaGalary/Equity/CapitalGoods_Q1FY2019_Review_Aug23_18.pdf

Aug 24, 2018 Q1FY2019 results review Sharekhan Special - -

Summary
• The headline aggregate Sensex earnings is flat, it is mainly due to disappointments from Corporate banks and Auto segments..
• The rest of the Sensex companies show healthy earnings growth indicating strong volume driven consumer demand.
• Time to start exploring opportunities in the industrial and quality midcap space.
• We remain constructive on consumption driven sector, Retail and IT.

Read report - https://www.sharekhan.com/MediaGalary/Equity/Q1FY19Resultsreview-24Aug_18.pdf

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

September 2018 31 Sharekhan ValueGuide


TREND & VIEW EQUITY TECHNICALS

Nifty view - Bulls take a step back


Daily view
Nifty Daily
 The Nifty rose from a low of 10558 to a high of 11760 in 3.0
2.5
KST (1.02003) 3.0
2.5

a channelised manner. 2.0


1.5
1.0
0.5
2.0
1.5
1.0
0.5
0.0 0.0

 However, the index broke the lower end of the rising -0.5
-1.0
-1.5
-0.5
-1.0
-1.5

channel and closed below it, reversing the short-term 11850

11800

11750
0.0%
11850

11800

11750

uptrend. 11700

11650

11600
11700

11650

11600

 On the way down, the index can fall to 11350-11300 in


11550 11550

11500 11500
23.6%
11450 11450

11400 11400

the near term. 11350

11300

11250
38.2%
11350

11300

11250

11200 11200

 On the way up, 11640-11760 will be crucial resistance. 11150

11100

11050
50.0%
11150

11100

11050
61.8%

 Overall, the Nifty can drop to 11300 in the short term,


11000 11000

10950 10950

10900 10900

10850 10850

as long as it is trading below the swing high of 11760. 10800

10750

10700
10800

10750

10700

10650 10650

 The momentum indicator on the daily chart is bearish. 10600

10550

10500
100.0%
10600

10550

10500

 Crucial support for the index will be at 11350 and 11300,


10450 10450

10400 10400

10350 10350

10300 10300

while crucial resistance will be at 11640 and 11760. 14 21 28 4


June
11 18 25 2
July
9 16 23 30
Augus t
6 13 20 27 3
Septem ber
10 17

Weekly view
Nifty weekly
 The index broke out from its medium-term trendline 7
6
KST (6.38448) 7
6

and is inching higher since then. 5


4
3
2
5
4
3
2
1 1

 From an Elliot wave perspective, the index is currently


0 0
-1 -1
-2 -2
-3 -3

in Wave (V). 11900


11850
11800
11750
11700
0.0%
(iii) 11900
11850
11800
11750
11700
11650 11650

 Within Wave (V), the recent high of 11760 marks the


11600 11600
11550 11550
11500 23.6% 11500
11450 11450
11400 11400

completion of wave (iii) and currently wave (iv) of (V) is


11350 11350
11300 38.2% 11300
11250 (III) 11250
11200 11200
50.0%
11150 11150

in progress.
11100 11100
11050 (i) 61.8%
11050
11000 11000
10950 10950
10900 10900
10850 10850

 The index can correct to 11300-11160, i.e. 38.2% and


10800 10800
10750 10750
10700 10700
10650 10650
10600 10600

50% retracement level of its previous rise from 10558


100.0%
10550 10550
10500
10450
(ii) 10500
10450
10400 10400
10350 10350

to 11760 in the forthcoming trading sessions.


10300 10300
10250 10250
10200 10200
10150 10150
10100 10100
10050 10050

 However, medium-term trend remains bullish and a dip


10000 10000
9950 9950
9900 (IV) 9900
9850 9850
9800 9800

towards 11300-11160 shall be considered as a buying


9750 9750
9700 9700
9650 9650
9600 9600

opportunity. On the way up, the index should inch


22 29 5 12 19 25 2 9 16 23 1 9 16 23 28 6 13 20 27 4 11 18 25 1 8 15 22 29 6 13 20 27 3 10 17 24 31 4 11 18 25 2 9 16 23 30 6 13 20
2018 February March April May June July Augus t Septem ber October Novem ber

higher towards 11840-12250, once it breaks above


11760.
 The momentum indicator on the weekly chart is bullish.
 Crucial support will be at 11300 and 11160, whereas
crucial resistance will be at 11761 and 11840.
(II)

Monthly view
Nifty Monthly
 The index broke above the high of 11171, indicating that 15
KST (14.5661)

15

wave (v) is in progress. 10

5
10

 On the monthly chart, the index is trading in a rising 0

-5
0

-5

channel. 12200
12100
12000
11900
11800
11700
12200
12100
12000
11900
11800
11700
11600 (III) 11600

 In the medium to long term, the index is expected to


11500 11500
11400 11400
11300 11300
11200 11200
11100 11100
11000 11000

rise towards 12250, i.e. upper end of the rising channel.


10900 10900
10800 10800
10700 10700
10600 10600
10500 10500
10400 10400
10300 10300
10200 10200

 The long-term uptrend remains intact as long as the


10100 10100
10000 10000
9900 9900
9800 (IV) 9800
9700 9700
9600 9600
9500
` (I) 9500

index continues to trade above 10850 .


9400 9400
9300 9300
9200 9200
9100 9100
9000 9000
8900 8900
8800 8800
8700 8700

 The momentum indicator on the monthly chart is


8600 8600
8500 8500
8400 8400
8300 8300
8200 8200
8100 8100

bullish.
8000 8000
7900 7900
7800 7800
7700
7600
(II) 7700
7600
7500 7500
7400 7400
7300 7300

 Crucial support will be at 10850, whereas crucial


7200 7200
7100 7100
7000 7000
6900 6900
6800 6800
6700 6700

a
resistance will be at 12250.
6600 6600
6500 6500
6400 6400
6300 6300
6200 6200
6100 6100

Sep Oct Nov Dec 2015 Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2016 Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2017 Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2018 Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2019

Trend Trend reversal Support Resistance Target


Up 10850 10850 12250 12250

September 2018 32 Sharekhan ValueGuide


EQUITY DERIVATIVES MONTHLY VIEW

Long unwinding on the cards

Nifty began August series on a positive note and moved Top five stock futures with the highest open interest in the current
northward making a new high everyday and registered series are:

month-on-month (m-o-m) gain of around 5%. Further in OPEN INTEREST


FUTURES
(Rs. Cr)
this series, index heavyweight, followed by selective mid-
RELIANCE 6,488.88
cap counters, showed significant amount of run up. This is HDFC 4,673.80
the second consecutive series where we have seen the HDFCBANK 3,948.20
Nifty showing m-o-m gain of around 5% i.e., in the past two INFY 3,293.07
series, Nifty has rallied more than 10%. On the open interest ICICIBANK 3,183.91
front also, Nifty saw significant amount of long build-up; and
Top five stock options with the highest open interest in the current
on the open interest front, Nifty has seen more than 50% series are:
addition and made new lifetime high at 11760 in the spot.
OPEN INTEREST
OPTIONS
Rollover in the September series was bit on the lower side (Rs. Cr)
at 68.37%, indicating many long positions have not been RELIANCE 3,540.25
carried forward to the next series. YESBANK 1,947.63
MARUTI 1,447.83
AXISBANK 1,075.48
SBIN 964.97
MARKET WIDE VS NIFTY ROLLOVER ACTIVITY:
Nifty Market Wide View for September series:
100.00%
90.00%
80.00%
On the options front, in September series, the activity is
70.00% quite scattered in both call and put options. Nifty 11000 PE
60.00%
followed by 11500 PE and 11400 PE is the highest in terms
89.36%
88.36%

50.00%
86.45%

86.71%
84.30%

84.33%
73.74%

72.32%

68.73%

40.00%
68.37%

of open interest. While on the call side, 12000 CE and 11800


64.05%

62.62%

30.00%
20.00% CE are the highest in open interest.
10.00%
0.00%
Put Call Ratio (PCR) has been trading above 1.60 in most
May

Apr
Jun
Aug
Sep

Jul

part of August series and touched its lifetime high of 1.94.


In the September series also, it started on the higher side
Rollover highlights- at 1.58, which indicates the market is in overbought zone as
PCR is constantly trading above 1.50 since the past three
• Nifty Futures began the September series with 2.42
expiries. On the other hand, the volatility index has been
crore vs. 2.17 crore shares in open interest.
continuously inching lower, currently at sub-12 levels and
• September series started with Rs. 128,029 crore vs. Nifty is starting the new series on a bulky note at around
Rs. 115,872 crore in stock futures, Rs. 28,427 crore vs. 2.42 crore shares. Hence, seeing the above data, we feel
Rs. 24,351 crore in Nifty futures, Rs. 1,29,976 crore vs. there might be a pause in the uptrend from the current
Rs. 115,438 crore in index option and Rs. 16,562 crore level. Hence, the upside is capped at 11800 levels. Going
vs. Rs. 14,61 crore in stock options. forward, since Nifty is very heavy in terms of open interest,
• Nifty September month rollover was at 68.37% vs. profit-booking in the form of long unwinding is very much
73.74%. on the cards; and Nifty could retest 11250-11300 levels in
• Market-wide rollover was 88.66% vs. 89.36%. September series.

September 2018 33 Sharekhan ValueGuide


MONTHLY VIEW CURRENCY FUNDAMENTALS

Currencies: Indian Rupee slips to new record low of 71.0 on surge in oil prices
Key points
CURRENCY LEVELS IN AUG (IN RS.)
 India Consumer Price Index (CPI) data showed that inflation eased to
4.17% in July 2018 compared to 4.92% in June 2018 Currency High Low Close % Monthly Change
 India’s industrial production advanced by 7.0% in June 2018 USDINR 71.00 68.26 71.00 3.57
compared to 3.9% in May 2018 EURINR 82.93 78.71 82.69 2.77
 India trade deficit widened to $18 billion in July 2018 compared to
GBPINR 92.42 87.82 92.24 2.22
$16.6 billion in June 2018
 India GDP data showed that the economy grew by 8.2% in Q1FY2019 JPYINR 64.10 61.15 64.01 4.01
compared to 7.7% in Q4FY2018

Spot INR Movement in August Spot INR Movement in August


USDINR JPYINR
EURINR GBPINR
71 64 82.7 92

82.2 91.5
70.5 63.5

81.7 91

70 63 90.5
81.2
90
69.5 62.5 80.7
89.5
80.2
69 62 89
79.7
88.5
68.5 61.5
79.2 88

78.7 87.5
68 61

25-Aug-18

29-Aug-18
05-Aug-18

09-Aug-18

15-Aug-18

19-Aug-18

21-Aug-18
01-Aug-18

27-Aug-18
07-Aug-18

11-Aug-18

23-Aug-18
17-Aug-18
03-Aug-18

13-Aug-18

31-Aug-18
25-Aug-18

29-Aug-18
05-Aug-18

09-Aug-18

15-Aug-18

19-Aug-18

21-Aug-18
01-Aug-18

27-Aug-18
07-Aug-18

11-Aug-18

23-Aug-18
17-Aug-18
03-Aug-18

13-Aug-18

31-Aug-18

USD-INR: CMP Rs. (71.76)


The Indian rupee depreciated by 3.57% in the previous month on account of strong dollar and escalating trade tensions between the U.S. and China
and rising geopolitical tensions between US-Turkey, US-Iran and US-Russia. Traders are worried that economic trouble in Turkey may impact other
emerging markets as well. Further, market fears that rising crude oil prices will lead to inflammatory pressure and even hurt current account deficit.
Besides this, month-end dollar demand from oil importers added downside pressure.
Outlook: Indian rupee is expected to trade with a negative bias amid strong dollar and worries over fiscal slippages. Further, forex market sentiments
will be hurt on account of rising worries over trade tensions between the U.S. and its major trading partners along with escalating geopolitical tensions.
Additionally, surge in crude oil prices will hurt rupee. As per the Real Effective Exchange Rate (REER), based on a basket of currencies of 36 trading
partners, rupee is overvalued. Traders will remain cautious ahead of economic data from India. The expected trading range in the near term is 70.90-
72.70

EUR-INR: CMP Rs. (83.10)


Euro depreciated by 0.76% in the previous month on account of strong dollar and disappointing economic data from Eurozone. Further, the euro
plunged on concerns over the potential exposure of European banks to Turkey. Additionally, markets were worried about Italy’s new populist
government’s ability to finance the big spending plan.
Outlook: Euro is expected to trade with a negative bias on strong dollar and divergence in monetary policy. Further, traders will remain cautious ahead
of European Central Bank’s (ECB) monetary policy. ECB is likely to keep its policy unchanged, but more focus will be on statements from the central
bank for any hint on future monetary stance. If ECB signals a delay in monetary tightening, then we may see a sharp downside in euro. Traders are
worried over trade tensions between the US and its major trading partners. The expected trading range in the near term is 81.15-84.0.

GBP-INR: CMP Rs. (92.20)


The Pound Sterling depreciated by 1.25% in May amid strong dollar and on worries that U.K. might end up leaving European Union (EU) without any
deal. Further, EU’s chief negotiator, Michel Barnier, warned that he is strongly opposed to key parts of Theresa May’s Brexit plan.
Outlook: The Pound Sterling is expected to trade with a negative bias on account of strong US dollar and disappointing economic data from the U.K.
U.K. manufacturing and construction PMI data showed slow down in activity in the sectors . Further, worries over Brexit uncertainty and fear over
global trade war will hurt pound. Traders will remain cautious ahead of Bank of England’s (BOE) monetary policy meeting. BOE is likely to keep its
policy untouched, but more focus will be on statements from the central bank to get a hint on future monetary stance. The expected trading range in
the near term is 89.90-93.30.

JPY-INR: CMP Rs. (64.45)


Yen appreciated by 0.74% in the previous month as safe-haven demand increased on rising worries over trade tensions between the U.S. and China
and escalating geopolitical tensions between the US and Turkey. Further, upbeat economic data from Japan supported Yen.
Outlook: Yen is expected to trade with a negative bias on account of strong dollar and divergence in monetary policy. Traders will remain cautious
ahead of Bank of Japan’s monetary policy meeting outcome. However, sharp fall may be prevented as demand for a safe haven may improve amid
rising geopolitical tensions and worries over global trade war. The expected trading range in the near term is 62.70-65.40.
CMP as on September 05, 2018

September 2018 34 Sharekhan ValueGuide


CURRENCY TECHNICALS TREND & VIEW

USD-INR - Climbing up EUR-INR - Scaling higher


l In August, USD-INR ended in the green for the fifth consecutive l EUR-INR had formed a base near the junction of 40-week
month. exponential moving average & the weekly lower Bollinger
l In July it had witnessed a consolidation and had taken the Band.
form of a bullish flag pattern. l Thereon, a fresh move on the upside has been kicked off.
l The pattern broke out on the upside in August with a l In its current attempt, the currency pair managed to surpass
breakaway gap and the currency pair went on to achieve the 61.8% retracement mark, which it couldn’t do in April.
pattern target of 71.50.
l The pair has also crossed upper end of a medium-term rising
l The upper end of the rising channel is nearby and once that
gets taken out, the currency pair can stretch towards the channel. It is now aiming for upper end of a steeper rising
larger equality target of 74.80. channel and the 78.6% retracement. Momentum indicators for
various timeframes are in line with the bullish structure.
l The monthly momentum indicator is in sync with the rally.
KST (1.92296) KST (2.28074)
1.5 10
1.0
0.5 5
0.0
-0.5 0
-1.0
USDINR - INDIAN RUPEE (71.2800, 71.5800, 71.0900, 71.5800, +0.37000) 75.0 -5

74.5
EURINR (82.3250, 82.9540, 82.0270, 82.8970, +0.53001) 95
74.0 94
93
73.5 100.0% 92
73.0 91
90
72.5 89
88
72.0
87
78.6%
71.5 86
85
71.0
84
70.5 83
61.8% 82
70.0
81
69.5 80
50.0% 79
69.0
78
68.5 77

38.2% 76
68.0
75
67.5
74

67.0 73
23.6% 72
66.5
71
66.0 70

65.5 69
68
65.0
67
64.5 66
0.0%
64.0 65
64
63.5
63
63.0
62

Decem ber 2018 February March April May June July Augus t Septem ber October 2013 2014 2015 2016 2017 2018 2019

GBP- INR - Bulls hit back JPY-INR - Heading north


l In April, the GBP-INR, had faced resistance near the upper l Post an impulse formation on the upside, the JPY-INR pair was
channel line and had fallen towards the lower channel line. in a multi-week consolidation phase that finally broke out on
l Over there, it was consolidating till mid-July, which ultimately the upside in the last month
broke out on the downside. l In terms of Fibonacci retracement, the consolidation was
l The currency pair tumbled towards the lower end of the falling taking place near 50% retracement of the entire previous fall
channel where the bulls made a comeback in August. and the currency pair has now crossed the Golden Ratio mark
l Thereon, the currency pair started a fresh leg on the upside i.e. the 61.8% retracement mark.
and has crossed the upper channel line as well as the key l The rally has originated from the junction of 40 week
weekly moving averages. exponential moving average and the weekly lower Bollinger
l The weekly momentum indicator has started a new cycle Band; so it is likely to sustain in the higher territory.
on the upside, whereas the monthly momentum indicator is
l The short-term as well as medium-term momentum indicators
already bullish.
suggest further upside towards the 78.6% retracement mark.
KST (0.47948) MACD (0.85518)
2.0
1.5
0 1.0
0.5
0.0
-5 -0.5
-1.0
GBPINR (92.0800, 92.1310, 91.2540, 92.0090, -0.01400) 108 JPYINR (63.9064, 64.3937, 63.7502, 64.2146, +0.29670)
107 70.0
106 69.5
100.0% 69.0
105
68.5
104
0.0% 100.0%
68.0
103
67.5
102
67.0
101
66.5
100
66.0
99
78.6% 65.5
98
65.0
97
64.5
23.6% 96 64.0
61.8%
95 61.8% 63.5
94 63.0
93 62.5
50.0% 50.0% 62.0
92
38.2% 91 61.5

90 61.0
38.2% 60.5
38.2% 89
60.0
88
50.0% 59.5
87
59.0
86 23.6%
58.5
23.6% 85
58.0
84
61.8% 57.5
83 57.0
82 56.5
81 0.0% 56.0

80 55.5

79 55.0
0.0%
78.6% 54.5
78
54.0
77
M J J A S O N D 2016 M A 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 A 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

Currency View Reversal Supports Resistances Target


USD-INR Up 69.52 70.72/70 71.75/73 74.80
GBP-INR Up 90.20 91.25/90.50 92.45/94.34 95.30
EUR-INR Up 80.00 82/81 83.70/85 86.40
JYP-INR Up 62.74 63.58/63 65/66.10 65.5-67

September 2018 35 Sharekhan ValueGuide


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¾¾ 2% per annum; AMC fee charged every quarter Relaxo Footwears
¾¾ 0.5% brokerage Reliance Industries
¾¾ 20% profit sharing after the 18% hurdle is crossed at the end of every fiscal
Varun Beverages
(with higher watermark basis)

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

September 2018 36 Sharekhan ValueGuide


PMS DESK PMS FUNDS

DIVERSIFIED EQUITY
Product performance
OVERVIEW as on August 31, 2018
The investment product aims to outperform the benchmark indices with Diversified Equity Performance
relatively lower volatility in the portfolio. (abs returns)
DE Nifty
(In %) Sensex Nifty
Strategy 500
1-Month 2.5 2.8 2.9 3.5

3-Month 6.9 9.4 8.8 7.3

6-Month 10.0 13.1 11.3 7.9

1-Year 13.4 21.8 17.8 14.9


INVESTMENT STRATEGY
2-Year 36.0 35.8 32.9 33.4
 Disciplined investment decisions are taken in specific stocks based on 3-Year 58.3 47.0 46.5 49.8
thorough fundamental research.
5-Year 184.9 107.5 113.5 139.3

 The product seeks to achieve the outperformance through superior *Note : Net of Quarterly AMC Fees

selection of well researched, quality companies to build a well balanced,


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

 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.
Top 10 stocks DE
Bajaj Finserv

Britannia Industries

HDFC Bank
PRICING
IndusInd Bank
 Minimum investment of Rs. 25 lakh
Jubilant Foodworks
 Charges
Kotak Bank
¾¾ 2.5% per annum; AMC fee charged every quarter Larsen & Toubro
¾¾ 0.5% brokerage Maruti Suzuki India
¾¾ 2
 0% profit sharing after the 15% hurdle is crossed at the end of every
Reliance Industries
fiscal
TVS Motors

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

September 2018 37 Sharekhan ValueGuide


PMS FUNDS PMS DESK

PROTECH - INDEX FUTURES FUND


Product performance
OVERVIEW
as on August 31, 2018
The ProTech–Index Futures Fund PMS strategy is suitable for long-term investors NT
(In %) Sensex Nifty
who desire to profit from both bullish and bearish market conditions. The strategy Strategy
involves going long (buying) or going short (selling without holding) on Nifty futures by 1 Month -0.54 2.76 2.85
predicting the market direction based on a back-tested automated model.
3 Months -2.48 9.41 8.80

Fy 17-18 4.01 10.99 10.25


INVESTMENT STRATEGY Fy 16-17 -14.88 16.88 18.55
 The strategy has the potential to generate profits irrespective of the market
Fy 15-16 11.28 -9.36 -8.86
direction by going long or short on Nifty futures.
 An automated basic back-testing model is used to predict the market direction for Fy 14-15 -3.41 24.89 26.65
the Nifty which then decides the strategy to be deployed in terms of going long Fy 13-14 8.79 18.85 17.98
or short.
Fy 12-13 3.65 8.23 7.31
 The portfolio is not leveraged, ie its exposure never exceeds its value.
Fy 11-12 13.10 -10.50 -9.20

Fy 10-11 9.20 10.90 11.10


PRICING
Fy 09-10 14.70 80.50 73.80
 Minimum investment of Rs. 25 lakh
Since Inception* 166.43 281.71 286.57
 Charges
Best Month 28.90 28.26 28.07
¾¾ AMC fees: 0%
Worst Month -17.10 -23.89 -26.41
¾¾ Brokerage: 0.05%
Best Quarter 33.30 49.29 42.04
¾¾ Profit sharing: Flat 20% charged on a quarterly basis
Worst Quarter -17.73 -24.98 -24.53

*01-Feb-2006

Disclaimer: Returns are based on a client’s


FUND MANAGER’S VIEW returns since inception and may be different
from those depicted in the risk disclosure
document.
Even as August was a trending month, there was one false signal that occurred owing to a sell
signal based on BSE data. The signal never occurred on screen. It is unusual that the BSE released
a closing price for the index that never existed. Else, we should have closed this month in the
green. We have to wait for the next market move to earn it back.

The market appears extremely overbought, based on derivatives data and there’s a lot of
complacency in the options market. Our sense is that we are on the verge of a large expansion Investments in
in volatility that will be positive for our products, but not for everyone else in the game. Big trends Nifty Index
on both sides should unfold going forward putting an end to months where we have seen a gain
of just 2-3%.

Fund Manager: Rohit Srivastava

FUND OBJECTIVE
Absolute returns irrespective of market conditions.

September 2018 38 Sharekhan ValueGuide


PMS DESK PMS FUNDS

PROTECH - TRAILING STOPS

OVERVIEW Product performance


Our ProTech–Trailing Stops PMS strategy is ideal for Traders and Investors looking as on August 31, 2018
for Regular Income from trading and desire to make profits in both bullish and bearish TS
market conditions. It is designed to payout book profits on monthly basis.* (In %) Sensex Nifty
Strategy
It is also for those investors who are looking for better income than Fixed Income or 1 Month -4.74 2.76 2.85
Deposits. This strategy involves going long (buying) or short (selling without holding)
on stock futures. 3 Months -2.91 9.41 8.80
* Terms and conditions apply
Fy 17-18 -0.53 10.99 10.25

Fy 16-17 3.79 16.88 18.55


INVESTMENT STRATEGY Fy 15-16 -0.56 -9.36 -8.86
 This strategy spots the winning trades based on technical analysis vs time frame- Fy 14-15 -3.69 24.89 26.65
based portfolios, basically the momentum calls.
Fy 13-14 -1.06 18.85 17.98
 A risk model has been developed for stock portfolio allocation that reduces the risk
and portfolio volatility through staggered building of positions. Fy 12-13 14.89 8.23 7.31

 It is non-leveraged—the exposure will never exceed the value of the portfolio. Fy 11-12 29.00 -6.10 -4.60

Fy 10-11

PRICING Fy 09-10
 Minimum investment of Rs. 25 lakh Since Inception* 52.20 108.57 110.42

 Charges Best Month 9.96 11.25 12.43

¾¾ AMC fees: 0% Worst Month -6.49 -8.93 -9.28

Best Quarter 10.61 13.52 13.53


¾¾ Brokerage: 0.05%
Worst Quarter -8.20 -12.69 -12.47
¾¾ Profit sharing: Flat 20% charged on a quarterly basis
*09th May 2011

Disclaimer: Returns are based on a client’s


FUND MANAGER’S VIEW returns since inception and may be different
from those depicted in the risk disclosure
document.
Weakness in Mid-caps and outperformance by few stocks within the index was not a good
environment for trading. Though many stops were triggered, we are holding our own with our
trading positions awaiting the next major market move. The market appears extremely overbought,
based on derivatives data and there’s a lot of complacency in the options market. Our sense is that
Investments in
we are on the verge of a large expansion in volatility that will be positive for our products, but not
for everyone else in the game. Big trends on both sides should unfold going forward putting an Nifty Index
end to months where we have seen a gain of just 2-3%. Stock futures

Fund Manager: Rohit Srivastava

FUND OBJECTIVE
Absolute returns irrespective of market conditions.

September 2018 39 Sharekhan ValueGuide


MONTHLY PERFORMANCE ADVISORY DESK

Advisory Products and Services


The Advisory Desk is a central desk
consisting of a Mumbai-based expert Advisory Products & Services
Advisory Products & Services
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 Investor T d
Trader 
Sharekhan research-based technical
and fundamental offerings as these Portfolio Doctor
f li
essentially try to capture the trading MID Derivative  Sharekhan 
opportunities in stocks where Calls Pre Market Action
Pre Market Action
momentum is expected before
or after some event including the Stocks In News Technical view Derivative view
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.

For traders

SHAREKHAN PRE-MARKET ACTION


The Pre-market action report gives us information on stocks in the news and the likely effect on prices,
which is valid for a day. It also covers events, technical view & derivative view along with a list of stocks
for traders with positive and negative bias for traders. The report is valid for a day. For more details,
please write to us on advisory@sharekhan.com

MID DERIVATIVE CALLS


These calls are based on the analysis of open interest, implied volatility and put-call ratio in the derivative
market. It is a leveraged product and ideal for aggressive traders. These calls have pre-defined stop loss,
targets, time frame and quantity to execute. For details of the product please write to us at derivative@
sharekhan.com.

Report Card

Derivative Calls
Ticket size (Rs.) 100,000
Month August 2018 CY2018 Apr-Dec 2017
No. of calls 60 665 499
Profit booked 27 354 273
Stop loss hit 33 310 226
Strike rate (%) 45 53 55

September 2018 40 Sharekhan ValueGuide


MUTUAL FUNDS DESK MF PICKS

Sharekhan top mutual fund picks (equity) August 10, 2018


Data as on August 01, 2018
Absolute % Compounded Annualised %
Scheme Name NAV (Rs) (Point to Point) (Point to Point)
6 Months 1 yr 3 yrs 5 yrs Since Inception
Large Cap Funds
ICICI Prudential Bluechip Fund - Growth 42 -0.4 9.2 11.1 18.4 15.0
Reliance Large Cap Fund - Growth 33 -2.3 8.1 10.2 21.3 11.6
SBI Bluechip Fund - Growth 39 -0.2 6.5 10.1 20.0 11.6
Aditya Birla Sun Life Frontline Equity Fund - Reg - Growth 224 -0.9 5.5 10.0 19.0 21.6
Kotak Bluechip Fund - Reg - Growth 234 0.8 8.9 9.3 17.8 22.8
Indices
S&P BSE Sensex 37,522 4 15 10 14 16
Large & Mid Cap Fund
DSP BlackRock Equity Opportunities Fund - Reg - Growth 219 -4.3 4.9 12.3 21.0 18.5
IDFC Core Equity Fund - Reg - Growth 46 -2.7 7.1 12.2 17.2 12.5
Aditya Birla Sun Life Equity Advantage Fund - Growth 431 -1.4 2.5 11.9 24.5 18.4
SBI Large & Midcap Fund - Growth 214 -5.2 6.6 9.1 21.3 14.6
Franklin India Equity Advantage Fund - Growth 80 -2.5 5.0 7.6 19.9 16.8
Indices
S&P BSE Large MidCap 4,639 1.2 10.4 10.5 16.0 12.7
Mid Cap Fund
HDFC Mid-Cap Opportunities Fund - Growth 57 -1.9 6.2 13.7 28.5 17.1
DSP BlackRock Midcap Fund - Reg - Growth 56 -2.3 5.7 12.9 29.0 15.8
Kotak Emerging Equity Scheme - Reg - Growth 39 -3.9 5.9 12.9 30.0 12.8
Franklin India Prima Fund - Growth 972 -4.0 5.9 12.0 26.5 20.4
Aditya Birla Sun Life Mid Cap Fund - Growth 306 -6.7 0.6 10.2 25.4 24.1
Indices
S&P BSE MID CAP 16,043 -7.1 3.8 12.5 24.1 20.7
Small Cap Fund
HDFC Small Cap Fund - Growth 45 -2.6 17.4 18.2 24.7 15.6
Aditya Birla Sun Life Small Cap Fund - Growth 38 -11.2 0.6 14.7 27.9 12.8
Franklin India Smaller Companies Fund - Growth 58 -7.4 4.4 12.9 30.0 15.0
Kotak Small Cap Fund - Reg - Growth 75 -8.9 0.8 10.8 26.3 16.2
Indices
S&P BSE Small Cap 16,628 -11.2 3.4 12.0 25.9 21.5
Focused Fund
SBI Focused Equity Fund - Growth 136 -0.3 15.1 13.7 22.2 20.7
IDFC Focused Equity Fund - Reg - Growth 40 -2.4 9.0 12.8 16.5 11.8
Aditya Birla Sun Life Focused Equity Fund - Growth 59 -1.5 4.6 9.5 19.5 14.9
Indices
S&P BSE 500 15,313 -0.1 9.9 10.9 17.1 15.0
Multi Cap Funds
Kotak Standard Multicap Fund - Reg - Growth 35 1.8 8.9 13.1 22.8 15.0
Aditya Birla Sun Life Equity Fund - Growth 719 -2.7 4.5 12.6 24.3 23.9
SBI Magnum Multi Cap Fund - Growth 48 -1.7 8.5 12.1 23.1 13.0
DSP BlackRock Equity Fund - Reg - Growth 39 -1.6 8.1 10.4 20.3 12.9
Franklin India Equity Fund - Growth 594 -2.3 5.0 8.9 20.4 18.7
Indices
S&P BSE 500 15,313 -0.1 9.9 10.9 17.1 15.0
ELSS
Aditya Birla Sun Life Tax Relief 96 - Growth 32 0.4 12.6 12.9 24.2 11.9
Axis Long Term Equity Fund - Growth 45 7.0 17.0 12.9 25.3 19.2
DSP BlackRock Tax Saver Fund - Growth 47 -2.9 5.2 11.9 21.9 14.4
IDFC Tax Advantage (ELSS) Fund - Reg - Growth 57 -5.1 9.6 11.2 22.1 19.9
Franklin India Taxshield - Growth 563 -1.2 5.6 8.4 19.9 23.2
Indices
Nifty 500 9,652 -0.4 9.5 10.7 17.2 10.2
Thematic/Sector Funds
DSP BlackRock Natural Resources & New Energy Fund - Reg - Gth 33 -10.5 2.5 20.3 26.9 12.4
Aditya Birla Sun Life Banking and Financial Services Fund - Reg - Growth 30 5.4 8.5 19.2 -- 26.9
ICICI Prudential Banking and Financial Services Fund - Retail - Growth 62 -1.7 1.4 16.7 27.1 20.1
Aditya Birla Sun Life India GenNext Fund - Growth 83 2.0 10.3 13.8 22.0 17.7
L&T Infrastructure Fund - Reg - Growth 17 -8.7 7.1 13.7 28.0 5.1
Indices
Nifty 50 11,346 3.0 12.2 9.9 14.6 14.1
Aggressive Hybrid Fund
Reliance Equity Hybrid Fund - Growth 56 -1.7 5.3 10.8 19.4 13.9
ICICI Prudential Equity & Debt Fund - Growth 128 -2.7 4.8 10.6 18.8 14.6
SBI Equity Hybrid Fund - Growth 129 0.6 8.7 9.9 18.6 16.0
Aditya Birla Sun Life Equity Hybrid 95 Fund - Growth 763 -0.9 3.9 9.9 18.4 20.3
DSP BlackRock Equity & Bond Fund - Growth 150 -0.3 5.9 9.7 18.2 15.1
Indices
CRISIL Hybrid 35+65 - Aggressive Index -- 2.5 8.6 10.8 15.1 14.5
BNP Paribas Equity schemes
Scheme Absolute % (Point Compounded Annualised %
Scheme name Category to Point) (Point to Point)
6 Months 1 yr 3 yrs 5 yrs Since Inception
BNP Paribas Mid Cap Fund - Growth Mid Cap -9.5 -2.2 7.1 24.0 10.1
BNP Paribas Multi Cap Fund - Growth Multi Cap -6.3 1.4 8.2 19.4 12.7
BNP Paribas Long Term Equity Fund - Growth ELSS -3.3 2.9 6.1 18.6 11.1
BNP Paribas Large Cap Fund - Growth Large Cap -1.1 5.3 6.9 17.3 16.9
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.

September 2018 41 Sharekhan ValueGuide


MF PICKS MUTUAL FUNDS DESK

Sharekhan top sip fund picks August 10, 2018


(*invested on 1st day of every month) Data as on August 01, 2018
SIP INVST (Monthly Rs.1000)* 1 year 3 years 5 Year
Total amount invested 12,000 36,000 60000
Compounded Present Compounded Compounded
Present Present value
Scheme Name NAV annualised value annualised annualised
Value (Rs.) (Rs.)
return (%) (Rs.) return (%) return (%)
Large Cap Fund
Reliance Large Cap Fund - Growth 33 12,504 9.3 44,955 15.8 87,844 15.7
ICICI Prudential Bluechip Fund - Growth 42 12,539 10.0 44,899 15.7 85,849 14.8
Kotak Bluechip Fund - Reg - Growth 234 12,732 13.7 43,915 14.1 84,411 14.1
Aditya Birla Sun Life Frontline Equity Fund - Reg - Growth 224 12,437 8.1 43,632 13.6 84,589 14.2
SBI Bluechip Fund - Growth 39 12,420 7.8 43,264 13.0 86,152 14.9
S&P BSE Sensex 37522 13,279 24.3 46,137 17.8 82,945 13.3
Large & Mid Cap Fund
IDFC Core Equity Fund - Reg - Growth 46 12,313 5.8 45,056 16.0 86,508 15.1
DSP BlackRock Equity Opportunities Fund - Reg - Growth 219 12,102 1.9 44,141 14.5 89,091 16.3
Aditya Birla Sun Life Equity Advantage Fund - Growth 431 12,173 3.2 44,097 14.4 91,428 17.4
SBI Large & Midcap Fund - Growth 214 12,077 1.4 42,809 12.2 85,896 14.8
Franklin India Equity Advantage Fund - Growth 80 12,217 4.0 42,098 11.0 82,895 13.3
S&P BSE Large MidCap 4639 12,810 15.2 45,133 16.1 83,841 13.8
Mid Cap Fund
HDFC Mid-Cap Opportunities Fund - Growth 57 12,167 3.1 44,935 15.8 96,826 19.8
DSP BlackRock Midcap Fund - Reg - Growth 56 12,109 2.0 44,572 15.2 96,508 19.7
Kotak Emerging Equity Scheme - Reg - Growth 39 11,971 -0.5 44,033 14.3 98,724 20.7
Franklin India Prima Fund - Growth 972 12,073 1.3 43,608 13.6 93,732 18.5
Aditya Birla Sun Life Mid Cap Fund - Growth 306 11,703 -5.4 42,412 11.6 90,830 17.1
S&P BSE MID CAP 16,043 11,829 -3.1 43,355 13.2 89,935 16.7
Small Cap Fund
HDFC Small Cap Fund - Growth 45 12,288 5.3 49,025 22.3 1,01,256 21.7
SBI Small Cap Fund - Growth 54 11,692 -5.6 47,804 20.4 1,15,138 27.2
Reliance Small Cap Fund - Growth 42 11,686 -5.7 46,721 18.7 1,09,261 25.0
Aditya Birla Sun Life Small Cap Fund - Growth 38 11,310 -12.3 43,473 13.4 96,079 19.5
Franklin India Smaller Companies Fund - Growth 58 11,657 -6.2 42,964 12.5 96,051 19.5
S&P BSE Small Cap 16,628 11,530 -8.4 43,805 13.9 90,768 17.1
Focused Fund
IDFC Focused Equity Fund - Reg - Growth 40 12,237 4.4 47,230 19.5 87,502 15.6
SBI Focused Equity Fund - Growth 136 12,512 9.5 45,725 17.1 92,644 18.0
Aditya Birla Sun Life Focused Equity Fund - Growth 59 12,363 6.7 43,313 13.1 84,037 13.9
S&P BSE 500 15,313 12,667 12.4 45,119 16.1 84,868 14.3
Multi Cap Funds
Kotak Standard Multicap Fund - Reg - Growth 35 12,699 13.1 45,894 17.4 93,315 18.3
DSP BlackRock Equity Fund - Reg - Growth 39 12,391 7.2 44,553 15.2 87,167 15.4
SBI Magnum Multi Cap Fund - Growth 48 12,312 5.7 44,412 14.9 91,728 17.6
Aditya Birla Sun Life Equity Fund - Growth 719 12,167 3.1 44,376 14.9 90,823 17.1
Franklin India Equity Fund - Growth 594 12,334 6.2 42,692 12.0 85,522 14.6
S&P BSE 500 15,313 12,667 12.4 45,119 16.1 84,868 14.3
Tax-saving funds (ELSS)
Axis Long Term Equity Fund - Growth 45 13,096 20.7 46,965 19.1 95,875 19.4
Aditya Birla Sun Life Tax Relief 96 - Growth 32 12,504 9.3 45,968 17.5 94,422 18.8
IDFC Tax Advantage (ELSS) Fund - Reg - Growth 57 12,071 1.3 45,722 17.1 91,152 17.3
DSP BlackRock Tax Saver Fund - Growth 47 12,258 4.7 44,067 14.4 89,221 16.4
Franklin India Taxshield - Growth 563 12,332 6.1 42,473 11.7 84,620 14.2
Nifty 500 9,652 12,646 12.0 44,973 15.9 84,766 14.2
BNP Paribas Mutual Fund Equity schemes
Compounded Compounded Compounded
Scheme Present Present Present Value
Scheme Name annualised annualised annualised
Category Value (Rs.) Value (Rs.) (Rs.)
return (%) return (%) return (%)
BNP Paribas Large Cap Fund - Growth Large Cap 12,435 8.1 42,736 12.1 82,013 12.9
BNP Paribas Multi Cap Fund - Growth Multi Cap 11,823 -3.2 42,462 11.7 84,153 13.9
BNP Paribas Long Term Equity Fund - Growth ELSS 12,078 1.4 41,835 10.6 81,721 12.7
BNP Paribas Mid Cap Fund - Growth Mid Cap 11,430 -10.2 40,617 8.5 85,845 14.8

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.

September 2018 42 Sharekhan ValueGuide


EQUITY FUNDAMENTALS EARNINGS GUIDE

Sharekhan Earnings Guide Prices as on September 03, 2018


Sales Net profit EPS (%) EPS PE (x) RoCE (%) RoNW (%)
CMP DPS Div
Company growth
(Rs) FY18 FY19E FY20E FY18 FY19E FY20E FY18 FY19E FY20E FY20/FY18 FY18 FY19E FY20E FY19E FY20E FY19E FY20E Rs. Yld(%)

Automobiles

Apollo Tyres 250 14,840.5 17,231.7 20,170.2 723.9 1,009.6 1,262.1 12.7 17.6 22.1 32% 19.7 14.2 11.3 9.3 10.4 9.5 10.7 3.0 1.2

Ashok Leyland 133 26,247.9 31,311.9 34,704.3 1,574.8 2,070.4 2,287.5 5.4 7.1 7.8 20% 24.7 18.8 17.1 28.9 27.7 24.2 22.7 2.4 1.8

Bajaj Auto 2,772 25,164.9 28,808.0 32,707.2 4,100.1 4,127.9 4,667.6 141.8 142.7 161.4 7% 19.5 19.4 17.2 28.4 30.4 20.3 21.8 60.0 2.2

Gabriel India 141 1,833.1 2,217.3 2,527.7 94.2 114.6 134.0 6.6 8.0 9.3 19% 21.4 17.7 15.2 26.7 27.1 18.9 19.1 1.4 1.0

Hero MotoCorp 3,242 32,230.5 35,316.5 39,405.6 3,697.4 3,595.6 3,961.9 185.1 180.1 198.4 4% 17.5 18.0 16.3 38.1 37.4 27.1 26.6 95.0 2.9

M&M 948 47,577.4 54,246.8 61,186.5 4,189.6 4,942.4 5,665.2 33.7 39.8 45.6 16% 28.1 23.8 20.8 19.6 20.1 15.3 15.7 7.5 0.8

Maruti Suzuki 8,902 79,763.0 92,146.0 1,05,338.0 7,722.0 9,477.0 11,610.0 255.6 313.7 384.3 23% 34.8 28.4 23.2 26.3 27.4 19.5 20.1 80.0 0.9

Rico Auto Industries 84 1,209.3 1,415.3 1,735.8 65.4 72.3 97.4 4.8 5.3 7.2 22% 17.6 15.9 11.7 12.8 14.6 11.6 13.7 0.8 0.9

TVS Motor 566 15,129.7 18,611.8 22,253.8 662.6 840.7 1,181.9 13.9 17.7 24.9 34% 40.7 31.9 22.7 27.8 32.6 24.5 28.1 2.5 0.4

Banks & Financials

Axis Bank 632 29,584.8 32,830.2 36,744.3 275.7 3,095.1 4,282.8 1.1 12.1 16.7 294% 588.2 52.4 37.9 - - 4.8 6.3 0.0 0.0

Bajaj Finance 2,724 10,241.6 13,927.6 18,805.9 3,569.5 4,779.8 6,398.3 61.9 82.9 111.0 34% 44.0 32.9 24.5 - - 27.2 28.4 3.6 0.1

Bajaj Finserv 6,653 - - - - - - - - - - - - - - - - - 1.8 0.0

Bank of Baroda 152 21,788.9 24,225.0 28,590.0 (2,431.8) 2,696.6 4,790.5 -9.1 10.1 17.9 - - 15.0 8.5 - - 6.0 10.0 1.2 0.8

Bank of India 100 16,209.9 17,821.1 20,953.8 (6,044.0) 221.1 1,624.9 -22.9 1.9 13.7 - - 53.4 7.3 - - 0.7 5.0 0.0 0.0

Capital First 650 2,334.2 3,173.5 4,039.2 297.6 389.4 543.0 33.0 39.3 54.9 29% 19.7 16.5 11.8 - - 14.3 17.3 2.6 0.4

Federal Bank 81 4,875.2 5,633.0 6,899.4 879.0 1,310.9 1,812.1 5.0 6.8 9.4 37% 16.2 11.9 8.6 - - 10.3 13.0 0.8 1.0

HDFC 1,945 17,313.6 16,917.1 19,512.1 12,169.0 10,371.0 11,982.0 72.9 62.1 71.7 -1% 26.7 31.3 27.1 - - 15.5 16.1 16.5 0.8

HDFC Bank 2,075 55,315.2 65,832.5 78,663.8 17,486.7 21,007.6 25,365.0 67.4 81.0 97.7 20% 30.8 25.6 21.2 - - 18.7 19.9 13.0 0.6

ICICI Bank 334 39,442.8 46,318.0 53,932.6 7,242.1 11,537.1 14,347.1 11.3 19.8 24.6 48% 29.6 16.9 13.6 - - 11.0 12.7 0.0 0.0

LIC Housing Finance 520 3,781.2 4,229.5 4,936.5 1,989.5 2,205.5 2,563.8 39.4 43.7 50.8 14% 13.2 11.9 10.2 - - 16.2 16.5 6.8 1.3

Max Financial 448 - - - - - - - - - - - - - - - - - - -

PTC India Financial Services 20 539.9 647.7 775.2 194.6 186.1 209.7 3.0 2.9 3.3 4% 6.6 6.8 6.1 - - 7.1 7.6 1.5 7.6

Punjab National Bank 86 25,367.0 29,382.4 34,230.1 (12,283.8) 3,486.9 4,943.1 -57.7 16.4 23.2 - - 5.3 3.7 - - 9.7 13.5 1.0 1.2

SBI 306 1,14,437.9 1,24,937.1 1,47,228.6 (6,547.0) 17,871.7 23,204.9 -8.2 22.4 29.1 - - 13.7 10.5 - - 9.4 11.3 2.6 0.9

Union Bank of India 90 15,194.8 16,394.4 17,086.8 (1,112.7) 1,956.2 641.5 -16.2 28.5 8.1 - - 3.2 11.1 - - 8.2 2.5 0.0 0.0

Yes Bank 339 12,960.9 16,184.7 20,585.6 4,224.6 5,355.7 7,192.0 18.3 23.3 31.2 30% 18.5 14.6 10.9 - - 19.3 21.9 2.7 0.8

Consumer Goods

Britannia 6,566 9,914.0 11,240.7 12,766.0 1,002.2 1,251.5 1,551.3 83.5 104.3 129.2 24% 78.6 63.0 50.8 47.4 47.4 32.8 32.4 25.0 0.4

Emami 579 2,540.8 2,996.3 3,487.8 503.2 669.8 793.5 11.1 14.8 17.5 26% 52.2 39.2 33.1 37.2 45.7 32.9 37.2 7.0 1.2

GSK Consumer 7,611 4,377.1 4,830.0 5,426.5 700.1 824.8 938.1 166.5 196.1 223.0 16% 45.7 38.8 34.1 33.8 33.6 22.3 22.5 75.0 1.0

Godrej Consumer Products 1,434 9,937.0 11,462.2 13,252.1 1,493.1 1,780.6 2,151.2 21.9 26.1 31.6 20% 65.5 54.9 45.4 20.3 22.6 25.4 24.7 10.0 0.7

Hindustan Unilever 1,699 35,218.0 39,999.5 45,759.5 5,286.6 6,447.0 7,679.9 24.5 29.8 35.6 21% 69.4 57.0 47.7 104.6 90.1 76.7 65.8 20.0 1.2

ITC 313 40,627.5 45,455.7 51,495.8 10,397.5 12,562.8 14,582.8 8.5 10.3 11.9 18% 36.8 30.4 26.3 30.4 32.8 23.7 25.6 5.2 1.6

Jyothy Laboratories 212 1,763.8 2,052.3 2,319.9 149.3 227.9 267.9 4.3 6.4 7.5 32% 49.3 33.2 28.2 21.3 22.9 18.4 18.5 0.5 0.2

Marico 361 6,333.1 7,485.9 8,623.3 827.7 1,014.2 1,203.5 6.4 7.9 9.3 21% 56.4 45.7 38.8 46.2 48.2 36.7 36.4 4.3 1.2

Zydus Wellness 1,752 503.2 576.7 675.5 136.5 150.0 189.1 34.9 38.4 48.4 18% 50.2 45.6 36.2 23.6 25.4 20.0 21.2 8.0 0.5

IT / IT services

Firstsource Soluation 76 3,535.2 3,906.8 4,372.8 302.5 364.8 425.6 4.4 5.3 6.2 18% 17.2 14.3 12.3 14.4 15.1 14.4 14.5 1.5 2.0

HCL Technologies 1,049 50,570.0 58,852.8 64,887.9 8,780.0 9,635.0 10,546.8 63.1 69.2 75.8 10% 16.6 15.2 13.8 29.9 29.1 24.8 23.8 8.0 0.8

Infosys 717 70,522.0 80,324.3 88,617.2 14,597.0 16,004.9 18,390.5 33.0 36.8 42.3 13% 21.7 19.5 16.9 33.2 37.1 24.6 27.6 43.5 6.1

Persistent Systems 837 3,033.7 3,580.4 4,052.2 323.1 362.1 446.3 40.4 45.3 55.8 18% 20.7 18.5 15.0 21.7 23.8 16.3 18.1 10.0 1.2

Tata Consultancy Services 2,053 1,23,104.0 1,41,535.7 1,55,350.1 25,826.0 30,316.0 33,697.5 67.5 79.2 88.0 14% 30.4 25.9 23.3 41.8 42.2 32.5 32.8 50.0 2.4

Wipro 308 54,487.1 58,686.5 63,526.1 8,006.9 8,836.7 9,709.1 17.1 19.0 21.5 12% 18.0 16.2 14.4 14.8 15.5 16.3 16.8 1.0 0.3

Cap goods / Power

CESC 1,018 7,982.0 8,563.0 9,403.0 871.0 946.0 4,054.0 65.4 71.0 79.2 10% 15.6 14.3 12.9 5.9 6.2 6.8 7.3 12.0 1.2

CG Power & Ind. Solutions 58 6,188.6 7,070.6 7,969.0 49.2 174.2 269.5 0.8 2.8 4.3 134% 74.4 21.0 13.6 11.4 13.6 6.1 8.8 0.0 0.0

Finolex cable 552 2,815.1 3,230.8 3,694.5 358.2 404.8 456.5 23.4 26.5 29.8 13% 23.6 20.9 18.5 25.0 24.6 33.7 32.7 4.0 0.7

Greaves Cotton 154 1,792.1 1,942.2 2,088.1 154.5 172.5 182.6 6.3 7.1 7.5 9% 24.4 21.6 20.5 25.6 26.4 17.5 18.1 5.5 3.6

Kalpataru Power Transmission 366 5,741.2 6,626.8 7,640.3 322.0 390.0 437.2 21.0 25.4 28.5 17% 17.4 14.4 12.9 19.3 19.2 13.4 13.4 2.0 0.5

KEC International 308 10,058.0 11,611.3 13,318.9 460.4 552.1 641.9 17.9 21.5 25.0 18% 17.2 14.3 12.3 25.8 24.9 25.1 24.1 1.6 0.5

PTC India 84 18,189.0 20,795.0 23,544.0 231.0 254.0 290.0 7.8 8.6 9.8 12% 10.8 9.8 8.6 15.3 15.9 12.4 12.3 4.0 4.8

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EARNINGS GUIDE EQUITY FUNDAMENTALS

Sales Net profit EPS (%) EPS PE (x) RoCE (%) RoNW (%)
CMP DPS Div
Company growth
(Rs) FY18 FY19E FY20E FY18 FY19E FY20E FY18 FY19E FY20E FY20/FY18 FY18 FY19E FY20E FY19E FY20E FY19E FY20E Rs. Yld(%)

Thermax 1,015 3,867.9 4,521.2 5,221.4 261.8 322.3 369.4 22.0 27.0 31.0 19% 46.2 37.5 32.7 17.7 18.7 12.1 12.8 6.0 0.6

Triveni Turbine 117 751.1 862.0 985.0 96.0 134.0 153.0 2.9 4.1 4.6 26% 40.1 28.4 25.3 40.4 40.7 27.8 28.1 1.2 1.0

V-Guard Industries 219 2,311.8 2,669.3 3,193.8 169.1 202.2 261.6 4.0 4.7 6.1 24% 55.2 46.2 35.7 32.3 34.0 24.2 25.5 0.8 0.4

Va Tech Wabag 386 3,457.0 4,032.0 4,439.0 132.0 199.0 195.0 24.1 36.4 35.6 22% 16.0 10.6 10.8 20.6 20.4 16.4 14.2 4.0 1.0

Infra / Real Estate

Gayatri Projects 203 2,912.3 3,722.8 4,280.5 188.1 230.8 248.5 10.0 12.3 13.3 15% 20.2 16.5 15.3 17.6 17.9 17.8 15.7 0.0 0.0

IRB Infra 189 5,694.1 6,601.5 8,719.8 919.7 1,045.0 1,183.7 26.2 29.7 33.7 13% 7.2 6.4 5.6 16.2 19.7 17.0 16.7 5.0 2.6

Jaiprakash Associates 12 6,049.0 - - (263.6) - - -1.1 - - - - - - - - - - 0.0 0.0

Larsen & Toubro 1,363 1,19,683.2 1,35,378.5 1,48,772.1 7,246.9 9,124.2 10,053.3 51.7 65.1 71.7 18% 26.4 20.9 19.0 8.4 9.1 15.5 15.2 14.0 1.0

NBCC 73 5,905.0 7,686.3 11,198.7 333.6 454.0 657.0 1.9 2.5 3.6 40% 39.3 28.9 20.0 37.5 46.0 23.6 29.2 0.6 0.8

Sadbhav Engineering 283 3,505.1 4,089.2 5,384.9 220.7 259.6 356.3 12.9 15.1 20.8 27% 22.0 18.7 13.6 12.3 13.4 13.0 15.6 1.0 0.4

Oil & gas

Oil India 212 10,656.0 12,896.0 13,087.0 2,668.0 2,646.0 2,641.0 23.5 23.3 23.3 0% 9.0 9.1 9.1 11.4 11.1 9.3 9.0 15.0 7.1

Petronet LNG 242 30,599.0 37,380.0 46,504.0 2,078.0 2,196.0 2,756.0 13.9 14.6 18.4 15% 17.4 16.6 13.1 25.0 28.0 21.1 23.0 4.5 1.9

Reliance Ind 1,229 3,91,677.0 4,88,771.0 34,993.0 43,870.0 49,482.0 59.1 74.1 83.6 19% 20.8 16.6 14.7 11.7 11.5 12.7 12.6 6.0 0.5
4,53,308.0

Selan Exploration Technology 250 76.6 73.2 - 22.1 19.8 - 13.4 12.1 - - 18.6 20.6 - 8.3 - 6.8 0.0 5.0 2.0

Pharmaceuticals

Aurobindo Pharma 700 16,499.8 20,098.1 23,933.4 2,439.6 3,172.4 4,020.2 41.6 54.1 68.6 28% 16.8 12.9 10.2 23.9 26.1 24.0 24.0 2.5 0.4

Cadila Healthcare 405 11,936.5 13,556.0 15,939.0 1,775.9 1,938.1 2,538.0 17.3 18.9 24.8 20% 23.4 21.4 16.4 15.5 17.8 19.0 20.7 3.5 0.9

Cipla 649 15,219.3 17,614.9 21,314.6 1,416.6 1,973.8 2,789.8 17.6 24.5 34.7 40% 36.9 26.5 18.7 14.1 18.2 13.0 16.0 2.0 0.3

Divi's Labs 1,287 3,912.8 4,585.8 5,591.9 877.0 1,219.8 1,530.5 33.0 46.0 57.7 32% 39.0 28.0 22.3 27.6 29.4 21.3 22.6 10.0 0.8

Glenmark Pharmaceuticals  663 9,103.1 9,892.0 11,366.2 738.9 934.9 1,247.5 26.2 33.1 44.2 30% 25.3 20.0 15.0 15.1 17.9 15.5 17.3 2.0 0.3

Lupin 936 15,804.1 16,531.4 18,293.7 1,469.1 1,478.1 1,812.0 32.5 32.7 40.1 11% 28.8 28.6 23.4 9.3 10.6 8.7 9.7 7.5 0.8

Sun Pharmaceutical Industries 656 26,489.5 30,641.0 36,619.6 3,112.1 4,648.4 6,862.3 13.0 19.4 28.6 48% 50.6 33.9 22.9 12.2 15.8 11.0 14.2 3.5 0.5

Torrent Pharma 1,825 5,877.0 8,117.9 9,877.9 728.0 1,097.3 1,471.9 42.8 64.5 86.6 42% 42.6 28.3 21.1 14.3 16.3 19.3 19.9 14.0 0.8

Building Materials

Grasim 1,066 15,788.5 19,008.8 20,219.0 1,976.0 2,276.7 2,365.5 30.1 34.6 36.0 9% 35.4 30.8 29.6 4.6 4.6 4.9 4.8 6.2 0.6

Shree Cement 19,047 9,833.1 11,917.6 14,210.4 1,349.4 1,432.9 1,965.9 387.3 411.3 564.3 21% 49.2 46.3 33.8 12.7 15.1 15.1 17.9 50.0 0.3

The Ramco Cements 680 4,406.4 5,059.3 5,405.1 539.3 624.8 660.0 22.9 26.5 28.0 11% 29.7 25.6 24.3 10.8 10.7 14.5 13.6 3.0 0.4

UltraTech Cement 4,374 29,790.1 35,929.8 41,207.1 2,348.0 2,801.9 3,647.5 85.7 102.3 133.1 25% 51.0 42.8 32.9 8.4 9.9 10.3 12.1 10.5 0.2

Discretionary

Arvind 400 10,826.1 12,725.2 14,829.7 338.5 613.1 856.9 13.1 23.7 33.2 59% 30.5 16.9 12.0 9.2 11.1 15.1 18.2 2.4 0.6

Century Plyboards (India) 222 2,023.9 2,409.5 2,689.8 173.0 253.3 283.8 7.8 11.4 12.8 28% 28.6 19.5 17.4 19.2 18.7 26.7 23.9 1.0 0.4

Info Edge (India) 1,661 915.5 1,103.6 1,266.8 273.7 330.3 394.2 22.5 27.1 32.3 20% 74.0 61.3 51.4 18.3 19.2 13.8 14.4 5.5 0.3

Inox Leisure 249 1,348.0 1,633.0 1,836.0 61.0 105.0 125.0 6.6 11.5 13.7 44% 37.7 21.6 18.1 16.0 17.0 13.6 13.9 1.0 0.4

KKCL 1,498 461.9 502.0 545.5 73.2 82.8 91.6 59.4 67.2 74.3 12% 25.2 22.3 20.2 18.8 19.5 20.0 20.3 33.0 2.2

Orbit Exports 143 136.5 146.0 160.6 25.1 25.6 29.4 9.6 9.8 11.1 8% 14.9 14.6 12.9 20.4 20.2 16.6 16.3 0.0 0.0

Relaxo Footwear 844 1,964.4 2,350.8 2,797.2 161.1 206.5 261.0 13.4 17.2 21.7 27% 63.0 49.1 38.9 29.4 26.4 18.1 19.4 1.0 0.1

Thomas Cook India 252 11,248.3 6,832.8 8,488.7 305.9 177.2 238.9 8.3 4.8 6.5 -12% 30.4 52.5 38.8 3.4 4.3 2.0 2.6 0.4 0.2

Wonderla Holidays 311 270.5 308.4 364.9 38.5 59.5 65.4 6.8 10.5 11.6 31% 45.8 29.6 26.8 10.4 12.5 7.6 8.0 1.0 0.3

Zee Entertainment 500 6,686.0 7,990.0 9,130.0 1,190.0 1,662.0 1,978.0 12.4 17.3 20.6 29% 40.3 28.9 24.3 24.2 25.3 18.9 19.2 2.9 0.6

Diversified / Miscellaneous

Bajaj Holdings 3,039 964.8 - - 3,185.7 - - 286.2 - - - 10.6 - - - - - - 40.0 1.3

Bharat Electronics 112 10,401.0 12,019.0 13,794.0 1,407.0 1,486.0 1,673.0 5.8 6.1 6.9 9% 19.4 18.4 16.3 18.5 21.1 13.3 14.1 2.0 1.8

Bharti Airtel 384 83,687.9 91,240.1 1,04,499.2 1,099.0 679.4 2,570.8 2.7 1.7 6.4 53% 139.7 226.0 59.7 5.6 8.4 0.2 3.1 5.3 1.4

Gateway Distriparks 187 395.5 445.1 497.6 83.2 83.7 84.1 7.6 7.7 7.7 1% 24.4 24.2 24.1 7.4 9.3 8.5 9.2 7.0 3.8

PI Industries 769 2,277.0 2,622.0 3,092.0 367.0 439.0 512.0 26.7 31.9 37.2 18% 28.8 24.1 20.7 25.8 26.1 20.7 20.2 4.0 0.5

Ratnamani Metals and Tubes 884 1,767.0 2,171.0 2,593.0 152.0 204.0 248.0 32.5 43.7 53.1 28% 27.2 20.2 16.6 18.7 20.5 14.7 15.7 6.0 0.7

Supreme Industries 1,176 4,966.0 5,656.0 6,550.0 397.0 436.0 580.0 31.3 34.3 45.7 21% 37.6 34.3 25.7 30.9 35.2 22.0 24.6 12.0 1.0

UPL 721 17,378.0 19,596.0 22,535.0 2,148.0 2,500.0 2,882.0 42.1 49.0 56.5 16% 17.1 14.7 12.8 21.8 22.4 24.8 23.8 8.0 1.1

Note:
Crompton Greaves is in the process of selling its overseas power system business by Q4FY2016. Hence, we have not estimated the FY2017 numbers
Aurobindo Pharma post 1:1 bonus Divis Labs post 1:1 bonus Cadila Healthcare post stock split from Rs 5 to Rs 1
Godrej Consumer Products post 1:1 bonus M&M post 1:1 bonus Oil India post 1:2 bonus
Grasim- Changed reporting to standalone financial numbers Infosys post 1:1 bonus

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Remarks
Automobiles
Apollo Tyres  Apollo Tyres Limited (ATL) is the market leader in the truck and bus tyre segments with a 28% market share in
India. European operations are expected to post 33% revenue CAGR in the next two years, driven by ramp up in
the passenger car tyre capacity and commencement of truck tyre production from Hungary plant from Q2FY2019.
Further, Indian operations are on strong footing, with robust demand in the MHCV replacement segment and
passenger car and tractor segments. Moreover, the current axle overloading norms for MHCV OEMs are unlikely
to have any material impact on ATL. With ATL taking regular price hikes in the domestic business and with
Hungary plant attaining scale, we expect the topline and margins to improve in FY2019. We expect earnings to
grow by 40% in FY2019. We retain our Buy rating on the stock with an unchanged price target (PT) of Rs. 315.

Ashok Leyland  Ashok Leyland Limited (ALL), the second largest CV manufacturer in India, is a pure play on CV. The government’s
decision to allow 20-25% hike in axle load capacity is unlikely to impact new truck demand. The MHCV industry
posted strong growth of 19% and 20%, respectively, in July and August 2018 and this is contrary to our expectations
of subdued MHCV demand in the near term. OEMs stated that clarity has emerged on the norms and new trucks
are being sold without any modification. Moreover, as per CV players, overloading was already rampant and
increased load norms merely legalise the existing practice. On account of pick-up in economic growth, increased
infrastructure investment, increased mining and improved fleet operator profitability we expect MHCV demand to
remain strong. Given the strong volume offtake and consequent margin improvement, we expect profit to grow
by 32% y-o-y in FY2019. We upgrade our recommendation to “Buy” with a revised PT of Rs 165.

Bajaj Auto  Bajaj Auto Limited (BAL) is a leading motorcycle and three-wheeler (3W) manufacturer with a significant presence
in export markets. In the domestic market, it is a leader in the premium motorcycle segment. In a surprising
change in strategy, market share gains in the domestic motorcycle space have assumed priority for BAL. The
current strategy aims at re-energising dealer network and improving dealer viability. Management is willing to
sacrifice profitability to achieve this objective. BAL gained about 850 BPS market share in the entry level space to
34% in Q1FY2019 and is aiming to reach about 50% market share in the next two years. BAL made EBIDTA level
loss in the entry segment bikes and as such increasing proportion of entry bikes would exert further pressure on
profitability. We expect margins to fall by 210 BPS to 16.9% in FY2019. We downgrade our recommendation on the
stock from Buy to Hold with a PT of Rs. 2,905.

Gabriel India  Gabriel India Limited (GIL) is one of India’s leading manufacturers of shock absorbers and front forks with a
diversified customer base. GIL is poised to outpace industry growth as it has recently won new orders from
Suzuki Motorcycles India, India Yamaha Motors and a big order from Honda Motorcycles and Scooters India
(HMSI) for the supply of front forks for its largest selling scooter (Activa). In addition, GIL has witnessed strong
recovery in the aftermarket space post demonetisation and GST-related glitches. GIL is targeting to more than
double its aftermarket revenue to Rs. 500 crore by FY2021 as against Rs. 200 crore revenue in FY2018. Further,
GIL is introducing new products and expanding its network reach in the aftermarket space, which would boost
growth. We expect GIL to post a revenue CAGR of 18% over FY2018-FY2020, which is higher than the industry’s
growth. Further, with backward integration (GIL plans to manufacture piston rods in-house) and introduction of
technologically advanced products and improving high-margin aftermarket mix, we expect margins of GIL to
improve. We retain our Buy rating on the stock with a PT of Rs. 175.

Hero MotoCorp  Hero MotoCorp Limited (HMCL) is the largest 2W manufacturer in the world. FY2018 ended on a strong note
with the 2W industry reporting 15% growth. Key growth driver was the rural segment, which as per management
grew by 2-3% higher than the urban markets. Competitive intensity in the 2W industry has intensified with most
players prioritising market share gain over profitability. One of the competitors in the entry motorcycle segment
has resorted to aggressive pricing cuts to gain market share. As the entry segment forms around 75% of overall
sales of HMCL, it is exposed to intense pricing pressures. Further, fiscal incentives at Haridwar plant have expired,
which will likely impact margins going forward. We have cut earnings estimates by 11% and 13% for FY2019 and
FY2020, respectively, and downgrade our recommendation to Hold with a revised PT of Rs. 3,375.

M&M  M&M is a leading manufacturer of tractors and utility vehicles (UV) in India. FY2019 would be the third consecutive
year of normal monsoons in India, which would be a key driver for continued strong tractor sales momentum.

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Further, higher MSPs, good crop growth, higher budgetary allocation for rural areas and farm waivers announced
in certain states would aid tractor volumes growth. Management has revised its guidance for FY2019 upwards
to 12-14% from the earlier guidance of 8-10%. We expect tractor sales to remain buoyant and expect tractor
volumes to report an 11% CAGR over the next two years. In the auto segment, lack of petrol variants and increased
competitive intensity led to market share drop for M&M. In an attempt to regain its market share, M&M is launching
two products (Marazzo –MPV to be launched in September 2018 and a compact SUV to be launched post the
festive season) in newer segments to plug portfolio gaps. Further, M&M has launched upgrades of two existing
models – the XUV5OO and TUV3OO plus during the quarter, which will boost volumes. FY2019 is likely to be
a bumper year for M&M, as both the automotive and tractor divisions would report double-digit volume growth.
M&M is the best stock in automotive segment to play the rural theme. We retain our Buy rating on the stock with
an unchanged PT of Rs. 1,020.

Maruti Suzuki  Maruti Suzuki India Limited (MSIL) is India’s largest passenger vehicle (PV) manufacturer. The company reported
a strong 50% market share as of FY2018. MSIL’s recent launches – upgraded Swift and Dzire – have received
an overwhelming response from its customers, which is reflected in waiting period of two weeks to four months.
Despite the commissioning of the first line at Gujarat plant leading to higher production, order book continued to
swell, pointing at a strong brand pull. Further, rural geographies, which account for one-third of total sales grew
strongly by 15% and would drive demand going ahead. Gujarat plant is ramping up with the second line (capacity
of 250,000 units) expected to go on stream by Q1CY2019. We expect MSIL to outgrow the PV industry, reporting
13% growth as against estimated industry growth of about 10%. The company is witnessing cost pressures and
has pointed at price hikes to mitigate cost pressures and maintain margins at current levels. We retain our Buy
rating on the stock with a PT of Rs. 10,500.

Rico Auto  Rico Auto (Rico) is one of the largest producers of high-pressure non-ferrous die castings for the auto sector..
Rico’s order book has strengthened further with Rs. 1,500 crore worth of order wins in Q1FY2019, taking the total
order book to Rs. 4,100 crore. These orders are executable over a project life of about 5-6 yearsand provides
strong growth visibility in the medium term. Moreover, the aftermarket segment is gaining traction gradually, with
revenue crossing Rs. 5 crore in Q1FY2019, and management has targeted revenue worth Rs. 30 crore from the
segment for FY2019. Rico is focusing on the improvement of employee productivity across its manufacturing
plants to enhance profitability. We expect revenue and earnings to report a 20% and 23% CAGR, respectively,
over FY2018-FY2020. We retain our Buy recommendation on the stock with an unchanged PT of Rs. 101.

TVS Motor  TVS Motor (TVSM) is the fourth largest 2W manufacturer in the country with a strong presence in the scooter
segment. Over the past couple of years, the scooter segment’s growth has surpassed that of the motorcycle
segment’s. TVSM is entering new product segments, which will enable it to maintain industry outperformance. After
reporting double-digit growth for Q1FY2019, the strong growth momentum is likely to sustain. Well-progressing
monsoon and higher MSPs are expected to boost rural demand. Moreover, recent launches/refreshes have been
well received and are gaining traction. Exports also are on a strong footing given the surge in crude prices and
increased availability of USD in key export markets. We expect overall volumes to grow by 18% in FY2019. Further
cost-control measures and price hikes would enable margin expansion. We retain our Buy rating on the stock with
a revised PT of Rs. 670.

Banks & Finance


Axis Bank  Axis Bank is the third-largest private sector bank, which continues to grow faster than the industry and has
diversified its book in favour of the retail segment (~40% of loans in the retail segment). The bank’s liability
profile has improved significantly, which would help sustain margins at healthy levels. We expect earnings growth
to remain reasonably strong, driven by healthy operating performance. Though asset quality pressures have
emerged as pain points due to exposure in the infrastructure and steel sectors, we expect the stress to persist in
the near term.

Bajaj Finance  Bajaj Finance, owned by Bajaj Finserv, is a fast-growing, well-diversified leading NBFC in the country. The company
has assets spread across products, viz. loans for consumer durables, 2Ws and 3Ws, loans to small and medium
enterprises (SME), mortgage loans and commercial loans. Apart from its strong loan growth, asset quality and
provisioning for Bajaj Finance remain among the best in the system. Given the strong growth rate, high margins
and return ratios, its premium valuations within the NBFC space are justified.

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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. Consumer finance
(Bajaj Finance) and general insurance businesses of the company continue to report a robust performance, while
the life insurance business is showing signs of an uptick, after being affected by a change in regulations.

Bank of Baroda  Bank of India has a network of over 4,800+ branches, spread across the country and abroad, along with a
diversified product and services portfolio, and steadily growing assets. Operating performance and earnings
have being steady despite significant business recalibration. Given the increase in the number of incremental
stressed loans and weaker capital position, valuations of the company may remain subdued.

Bank of India  Bank of India has a network of over 4,700+ branches, spread across the country and abroad, along with a
diversified product and services portfolio, and steadily growing assets. Operating performance and earnings
have eroded significantly due to margin deterioration and a sharp rise in NPAs. Given the rise in the number of
incremental stressed loans and weaker capital position, valuations of the company may remain subdued.

Capital First  Capital First (erstwhile Future Capital Holdings) had been acquired by global private equity firm, Warburg Pincus
(with a 36% stake). The present management has taken several initiatives to tap the high-growth retail product
segments, such as gold loans, loan against property and loan against shares. The company has a strong capital
adequacy ratio (CAR) and sound asset quality. Loan book of the company is expected to sustain 25-30% growth
over the next three years. As a result of several initiatives taken in the recent past, operating leverage will play
out and may lead to significant pick-up in profitability over the medium term.

Federal Bank  Federal Bank is among the better-performing old private sector banks in India with a strong presence in south
India, especially Kerala. Under the new management, the bank has taken several initiatives that will improve the
quality of its earnings and asset book. Asset quality has shown stress in the past few quarters. We, however,
expect a gradual improvement in NPAs and operating performance. Valuations seem attractive over the medium
to long term.

HDFC  HDFC is among the top mortgage lenders in the country providing housing loans to individuals, corporates and
developers. The company has interests in banking, asset management and insurance through its key subsidiaries.
As these subsidiaries are growing faster than HDFC, the value contributed by them would be significantly higher
going forward. Due to a dominant market share and consistent return ratios, the company should continue to
command a premium over other NBFCs.

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 4,850 branches. The bank has made
inroads in to retail loans (~45% of the book) and has significantly improved its liability franchisee. Operating
profit improved significantly, though its exposure to some troubled sectors (such as infrastructure and steel)
led to increased pressure on asset quality. However, healthy growth in operating income and proceeds from
monetisation of its stake in various subsidiaries will help the bank to deal with its NPA challenges.

LIC Housing  LIC Housing Finance is one of the largest mortgage financiers in India with a market share of 11% and loan book
of over Rs. 1,00,000 crore. The company is promoted by Life Insurance Corporation of India, which is among the
most trusted brands in the country. With over 200 branches, 1,241 direct sales agents, 6,535 home loan agents
and 782 customer relationship associates, the company has one of the strongest distribution structures in India
to support business expansion. Though levers for NIM improvement are present, which include impact of lending
rate like (~50 BPS since April 2018) and large proportion of fixed rate borrowing, providing a stable funding cost
in an increasing interest rate scenario, we believe increasing competitive pressures may keep NIM range-bound
with evenly placed probability of NIM expansion.

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Max India  Max India has demerged into three different entities, of which Max Financial Services will hold Max Life Insurance
(new Max IndiWa will hold Max Healthcare, Max Bupa Health Insurance and Antara businesses). Max Life Insurance
(held by Max Financial Services) 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 will result in 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. This helps the bank maintain one of the highest margins among PSBs. However,
with the recent fraud coming into limelight, we expect the stock to remain under pressure and earnings to be
impacted by higher provisioning.

PFS  PTC India Financial Services, owned by PTC India, is focused on providing financial solutions to projects in the
energy value chain. Given the robust lending opportunities in the renewable energy segment and the likely
reforms in the thermal power segment, loan growth is expected to remain strong over the next 2-3 years.
The proceeds from exits in investments would add to profitability. Asset quality, despite some deterioration, is
manageable.

SBI  State Bank of India (SBI) is the largest bank of India and the successful merger of the 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 has emerged as a key
pain point, which will affect earnings growth. PSU bank recapitalisation plan by the government could benefit the
bank to make up for capital requirements to promote growth.

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
low tier-1 CAR remains an area of concern.

Yes Bank  Yes Bank, a new generation private bank, started its operations in November 2004 and has emerged as one of
the top performing banks. The bank follows a unique business model based on knowledge banking, which offers
product depth and a sustainable competitive edge over established banking players. The bank is suitably poised
to ride the recovery in the economy and the retail deposit franchise is showing a sharp improvement, which will
support margins in the medium to long term.

Consumer goods
Britannia  Britannia is the second largest player in the Indian biscuit market with ~30% market share. Under a new leadership,
Britannia has been able to leverage and monetise its strong brand and premium positioning in the biscuits and
snacks segments. 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. Management is confident of double-digit growth at standalone level in the coming
quarters, driven by commissioning of new facilities and food park.

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. Kesh King is expected to post
recovery in sales growth as wholesale channels are back in trade (70% of brand sales happen through the wholesale
channel). Further, the company is banking on the healthcare segment to achieve strong growth on account of
expected recovery in Zandu Pancharishta (post the induction of Mr. Amitabh Bachchan as the brand ambassador)
and expects good acceptance towards the newly launched Zandu Diabrishta – 21 (nationally launched). We
expect domestic business volume growth to improve by 10-12% in the coming quarters. Management is confident
of the international business to achieve high-teen revenue growth on account of recovery in performance of
MENAP region and strong growth in SAARC region. The company has taken price hike of 3-4%, which will take
care of increased input prices. However, more focus is on cost efficiencies to maintain OPM at 28% in FY2019.

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GSK Consumer  GSK Consumer Healthcare is a leading player in the malted food drinks (MFD) segment with ~70% share in the
domestic market. Though management is confident of 6-8% volume growth going ahead on account of improving
consumption in rural markets, enhanced distribution reach and good acceptance of premium launches under
the Horlicks brand and lack of clarity on the parent’s decision on the deal (to have a strategic review of nutrition
products, which is likely to unfold by the end of Q3FY2019) would act as key overhang on the stock. Thus, we
maintain our Hold recommendation on the stock.

GCPL  Godrej Consumer Products Limited (GCPL) is a major player in personal wash, hair colour and household insecticide
market segments in India. The recent acquisitions, i.e. Strength of Nature, Darling Group, Tura, Megasari and Latin
American companies, have helped the company expand its geographic footprint and improve growth prospects.
The demand environment is improving with urban and rural markets growing at 13% and 17%, respectively. We
expect revenue of the international business to grow in low double digits in the coming quarters. Management
expects margin expansion to sustain on account of several cost-saving initiatives and better revenue mix in the
coming quarters. Hence, for FY2019, earnings growth will be ahead of sales growth despite higher investments
behind brand and promotional activities. GCPL has declared bonus issue at the ratio of 1:2 (one share for every
two shares held of GCPL).

HUL  Hindustan Unilever Limited (HUL) is India’s largest FMCG company. HUL has begun FY2019 on a strong footing
by registering double-digit volume growth of 12%. We expect strong volume growth momentum to sustain in
the coming quarters because of improving rural demand, sustained new product launches and premiumisation
resulting in better revenue mix. Moreover, GST-led disruption would result in a low base in the coming quarters.
Rising crude prices and a depreciating rupee against dollar would slow margin expansion in the near term.
However, focus on premiumisation and cost rationalisation would continue to give strong support to profitability
in the near to medium term. Further, the company has started taking judicious price hikes in key categories
(including home care) in the backdrop of rising input prices. In view of strong growth prospects in the near term
and key beneficiary of better rural demand, we maintain our Buy recommendation on the stock.

ITC  ITC began the current fiscal on a good note with the cigarette business regaining its positive growth in volumes
and non-cigarette FMCG business maintaining double-digit growth momentum. With no increase in tax rate on
cigarettes in the recent past, we expect sales volume to improve further in the coming quarters. We have factored
in single-digit sales volume growth for FY2019 (in view of no significant price hikes in the near term). Further,
with demand for consumer goods improving in rural India, we expect non-cigarette FMCG business to maintain
double-digit revenue growth momentum in the coming quarters. With room demand likely to exceed room supply,
we expect the hotel business to deliver strong performance in FY2019. PPP business will continue to post better
profitability on account of 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. Management is
expecting demand to pickup due to improvement in the consumption environment in rural India. The company
has maintained its focus on innovation and is enhancing its distribution. Overall, we expect 10-12% volume growth
in the near term and revenue to grow in mid-teens for FY2019. With crude prices moving up, the company has
started seeing a surge in input cost and is likely to go for price hikes (fabric care category) in the coming quarters.
Thus, OPM is expected to sustain at 15-16% in the near term.

Marico  Marico is among India’s leading FMCG companies. Core brands, Parachute and Saffola, have a strong footing in
the market. Management is confident of achieving steady 8-10% growth in volumes in the domestic business (on
a like-to-like basis). The male grooming and foods portfolios are expected to post strong growth in the coming
quarters. On the international front, Bangladesh will deliver good revenue growth as the macro environment
improves, while the MENA region will continue to grow in double digits. Falling copra prices augur well for Marico
in near to medium, as the company can focus on achieving steady sales volume growth in the coming quarters.
Thus, in view of a minimal downside risk and near-term growth prospects remaining intact, we maintain our Buy
recommendation on the stock.

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Zydus Wellness  Zydus Wellness has a small product portfolio, consisting of just three brands (Nutralite, Sugar Free and Everyuth)
that cater to a niche category. Zydus Wellness has a strong portfolio of leading brands, which are largely placed
in low penetrated categories. Hence, most brands are likely to report double-digit revenue growth in a stable
market environment. Management of Zydus Wellness is confident of maintaining the strong growth momentum
with distribution enhancement and new product launches supported by adequate media activities. We expect
volume growth to sustain in low double digits (10-12%) in FY2019. OPM stood at ~25% in FY2018 and is expected
to improve gradually to 26% in FY2020. Thus, in view of better growth prospects and decent valuations, we have
upgraded the stock to Buy from Hold earlier.

IT/IT services
Firstsource  Firstsource Solutions Limited (FSL) is a specialised BPO service provider. Management has cut down its CC
revenue growth guidance to 7-9% from 9-10% earlier on account of headwinds in top clients (realignment activities
owing to regulatory concerns). FSL demonstrated strong performance on the margin front in Q1FY2019 despite
lower revenue from its top accounts. Management has maintained its margin guidance of 14% for FY2019 given
impressive margin performance of 13.9% in Q1FY2019. We expect earnings to accelerate in FY2019/FY2020E
with improved topline growth, productivity improvement and long-term debt-free status from Q2FY2018, with 17%
earnings CAGR over FY2018-FY2020E.

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.
Management has maintained its CC revenue growth guidance (9.5-11.5% y-o-y) and EBIT margin guidance (19.5-
20.5%) for FY2019, in-line with our expectations. Management believes growth rate in H1FY2019 would be
better, led by ramp-up deals won in Q2FY2018/Q3FY2018 and shifting of customer spending for building digital
enterprise and modernisation of infrastructure. In our view, momentum in digital business along with investments
in IP products and anticipated recovery in IMS business would drive the overall organic growth rate in the coming
quarters. We remain Positive on the company in view of its recent order wins, accelerated pace of investments
in the products segment, traction for its next-gen infra offerings and earnings visibility with double-digit revenue
growth.

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.
Management has retained its positive outlook on BFSI, led by large deal wins (40% of $1.1 billion TCV from BFS)
during Q1FY2019. The financial vertical is expected to bounce back from Q2FY2019, led by recent deal wins,
healthy deal pipeline and increasing digital spending by insurance clients. Recovery in the financial segment
along with relatively reasonable valuation gives us comfort to remain Positive on Infosys.

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. The company maintains its digital business growth
outlook for FY2019 despite drop in digital revenue in Q1FY2019. The company expects that its margin would
improve by 100 BPS y-o-y on constant-currency basis in FY2019, led by rupee tailwinds. Further, investments in
sales resources in Europe have started yielding results during Q1FY2019, with incremental revenue of $6 million
from re-seller business and expect the benefits from investments in the re-seller business to continue for the next
few quarters. We continue to see PSL as a good investment bet among mid-cap IT companies, as earnings are
expected to report an 18% CAGR over FY2018-FY2020E and the stock is trading at a discount to most mid-cap IT
companies.

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. The company is on track to achieve its target of 10% y-o-y CC revenue
growth in FY2019, led by ramp-ups in large deals won in the recent couple of quarters and recovery in the
BFSI vertical. Management stated that the impact of insourcing has been stabilised. Strong deal wins during the

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quarter provide good revenue visibility in the medium term. On the margins front, management has maintained
margin band of 26-28% for FY2019E, led by revenue recovery in BFSI and retail coupled with accelerated growth
in the digital segment.

Wipro  Wipro is among the top five IT companies in India. However, in the past few years, it has been lagging industry
growth. Q2FY2019 CC revenue growth guidance (adjusting for sale of data centre business) indicates the
receding impact of the bankruptcy of two customers that became hurdles for its revenue growth in the past couple
of quarters. However, softness in the healthcare, manufacturing and utilities vertical along with restructuring
activities in India business is expected to slow down overall revenue growth of Wipro in FY2019 compared to its
large peers despite strong performance in the BFSI and consumer segments. Further, management has given an
ambitious target of $15 billion revenue and 23% margin by 2020. We see the new CEO’s, Abid Ali Neemuchwala,
target as an uphill task, looking at the current growth trajectory. We remain skeptical, as anecdotal evidence on
Wipro over the past 2-3 years does not inspire confidence.

Capital goods/Power
CESC  CESC is the power distributor in Kolkata and Howrah (backed by 1,225 MW of power generation capacity),
which is a strong cash generating business. Further, 600 MW of regulated generation capacity (to serve Kolkata
distribution) has come on stream recently in Haldia. Moreover, its 600 MW thermal power project at Chandrapur
has signed a PPA and has started operating. Losses in the retail business are coming down gradually over
the past and it is expected to breakeven soon. The BPO subsidiary, Firstsource, is performing well in-line with
expectations. However, the recent diversification into unrelated businesses such as IPL franchisee would hurt
its valuations. CESC has announced the demerger of the business into four verticals namely power distribution,
power generation, retail and IT outsourcing. The restructuring looks beneficial for minority shareholders optically.
However, we await clarity on the financials of the demerged companies.

CG Power & Ind. Solutions  Key businesses of CG Power and Industrial Solutions - industrial and power systems - are going through a rough
patch and are potential beneficiaries of the upcoming investment cycle revival. Moreover, the company is looking
to unlock value by selling its international subsidiaries.

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. The company has recently launched fans and switch gears. The company
is planning to launch water heaters soon. The addition of new products in its product portfolio could prove to be
the next growth driver. We anticipate healthy earnings growth, return ratios in high teens and superior cash flows,
which bode well for the stock. Therefore, we remain Positive on the stock.

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 the growth. We expect 3W business of GCL to report flat revenue in FY2019.
Secondly, the aftermarket segment and agri equipment segment are expected to report a sharp improvement
in growth. Moreover, GCL has forayed into higher kilovolt ampere (KVA) gensets, which would boost revenue.
Overall, we expect the non-auto segment forming about half of GCL’s revenue to grow by 16% in FY2019. GCL is
ramping up its non-auto business to reduce dependence on the automotive business. We retain our Hold rating
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 10%, while OPM of JMC Projects (a subsidiary) is showing signs of
improvement. We see some value-unlocking potential from the sale of assets or listing of new business in future.
We remain Positive on the stock.

KEC  KEC International is a Global Power Transmission Infrastructure EPC major. The company is present n the verticals
of power T&D, cables, railways, water, renewable (solar energy) and civil. Globally, the company has powered

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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. We retain our Positive outlook on the stock.

PTC India  PTC India is a leading power trading company in India with a market share of 35-40% in the short-term trading
market. Over the past few years, the company has made substantial investments in areas such as power generation
projects and power project financing, which will start contributing to its earnings. We retain our Positive stance on
expected healthy volume uptick, with an increasing share of long-term contract business.

Thermax  The energy and environment businesses of Thermax are direct beneficiaries of the continuous rise in India Inc’s
capex. Order book of Thermax Group stands around its consolidated revenue. However, the company has shown
an ability to maintain double-digit margins in a tough macroeconomic environment. We retain our Hold rating on
the stock due to its rich valuation.

Triveni Turbines  Triveni Turbines Limited (TTL) is a market leader in 0-30 MW steam turbine segment. TTL is at an inflexion point
with a strong ramp-up in the aftermarket segment and overseas business, while the domestic market is showing
distinct signs of a pickup. The company has also formed a JV with GE for steam turbines of 30-100 MW range,
which is likely to grow multi-fold in the next 4-5 years. TTL is virtually a debt-free company with a limited capex
requirement and an efficient working capital cycle, reflected in very healthy return ratios. Further, boosted by
the expected uptick in the domestic capex cycle, the company’s earnings are likely to report a 26% CAGR over
FY2018-FY2020E.

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. We remain Positive on the stock.

Va Tech Wabag  VA Tech Wabag (VTW) is one of the world’s leading companies in the water treatment field with eight decades
of plant-building experience. Given the rising scarcity of fresh water, we expect flow of huge investments in the
water segment, both globally and domestically. With rising urbanisation and industrialisation in India, we expect
substantial investments in this space. Given the large opportunity ahead and inherent strengths of VTW, such as
professional management, niche technical expertise and global presence, we remain Positive 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. ~12,900 crore, which is 4.2x TTM
revenue. Further, the company expects to sustain 30%+ topline growth over the next 3-4 years with OPM around
16%. 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.

Jaiprakash Asso  Jaiprakash Associates has been facing earnings pressure across business verticals. The company has just
concluded its cement asset sale worth Rs. 16,000 crore and transferred 1,000 acres worth Rs. 13,000 crore to an
SPV, which will reduce its debt burden. Going ahead, the company will be focusing primarily on EPC business and
balance portfolio of business verticals and would aim to reduce its debt further. The current business restructuring
has led to a cautious view on the stock.

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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.

NBCC  NBCC (India), a Navratna public sector enterprise, is notified as a Public Works Organisation (PWO), which gives
it a unique eligibility to bag orders on a nominated basis from government departments and PSUs. NBCC has
already amassed a huge order book, which gives it a strong revenue visibility for the next five years. Moreover,
future prospects look much brighter, given the opportunities from multiple areas such as redevelopment of old
government colonies in Delhi, Rajasthan and Odisha, development of government lands, Smart Cities, Housing
for All 2022 and Amrut. We remain Positive on the stock, considering the huge competitive advantage, a unique
business model, high return ratios and healthy cash flows.

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. 13,713 crore (3.8x its TTM revenue, with
presence in 11 states). 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. Rising oil price has increased concerns of subsidy
sharing although management does not except any subsidy burden at current oil price of $70-75/bbl. 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 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 above 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
and petrochem margin to be maintained in the medium term on an uptick in domestic demand. Capex in the
downstream business (incremental capacity in the petchem business and petcoke gasification in refining) would
be the key earnings driver in the coming years. Large investment in Reliance Jio could add value in the long 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  Aurobindo Pharma is set to post healthy growth on account of ramp-up in the U.S. and European markets, thanks
to a strong product pipeline built over a period and focus on niche segments such as injectibles, hormones,
penems and sterile products. The expected increase in the export-led business and a favourable tilt in revenue
mix are likely to boost margins, resulting in faster earnings growth as compared to revenue. The key injectable
units having received Establishment Inspection Report (EIR) from the USFDA and recent product approval from
these sites lift the overhang from the stock.

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Cadila  Management has guided for product approvals of 20+ ANDAs and expects to launch ~50+ products in FY2019
(~35 products have already been approved). Management has guided that launches have commenced in
Q4FY2018 and full benefit of these launches and monetisation of new approvals will likely drive U.S. growth over
FY2019E-FY2020E. In addition, India business is likely to report double-digit growth, adjusting for GST issues.
Biosimilars, specialty products and vaccines are other growth drivers over the next 2-3 years.

Cipla  Management maintains guidance of double-digit growth in the U.S. and India business despite a challenging
environment on account of new product launches planned for FY2019E and FY2020E (one niche product every
quarter). Cipla has an exhaustive pipeline of inhalers and complex generics, which has a huge market size. These
opportunities will give an escalated growth trend to the revenue of the company and will boost the topline in the
long run. Cipla has also cleared all regulatory hurdles by receiving Establishment Inspection Report (EIR) for key
plants at Goa, Indore and InvaGen.

Divis Labs  Successful resolution of the import alert and warning letter in a short span of time and successful USFDA
inspection of unit-1 without any observations have ended woes for Divis, assuring regular supplies. Hence, we
expect the business to improve in FY2019. Moreover, two blocks at unit-1 will be commercialised in H1FY2019
and the new plant at Vizag is likely to be completed in FY2019. Thus, with no more costs related to remediation,
regular supplies and capacity expansion coming on stream, we expect the performance to improve significantly.

Glenmark Pharma  Management gave overall sales growth guidance of 10-15% for FY2019 with a caution, as there is significant
pricing pressure in the U.S. base business (increased to 12% from 10-12% earlier) due to consolidation of players
and increased competition, which will continue for the next four quarters. Excluding U.S., all other business
verticals are expected to witness robust growth led by ramp up in new approvals and launches. Although there
are some significant opportunities that fall in FY2019, we feel pricing pressure in the U.S. base business and
outcome of the USFDA issued Form 483 at Pithampur and Monroe facilities will remain as key overhangs in the
near term. Amidst continuing pricing challenges in the U.S., competition in key products and flat U.S. business
growth, we feel cash flows will remain under pressure and meaningful reduction in debt will be difficult due to
increasing R&D spend. Hence, timely monetisation of key products and a big licensing deal in R&D business will
be key positive triggers to watch for.

Lupin  Management has indicated that remediation at two plants under the Warning Letter will be completed in a few
months and, thereafter, USFDA shall be invited for re-inspection. Since there are two facilities under the Warning
Letter, there is a chance that both need resolution for the letter to be lifted. We feel Lupin could face few more
tough quarters as pricing pressure is likely to continue along with risk of competition in key products such as
Minastrin, fortamet and glumetza and delay in key product approvals (25-30% of products are filed from two
facilities under the warning letter). Hence, we expect U.S. business sales recovery to take time and operating
margins for FY2019 to remain at 19-21% depending upon product approval and launch timeline.

Sun Pharma  Management has given low double-digit growth guidance for consolidated sales for FY2019. Guidance includes
assumption that Halol will be resolved in FY2019 (the company will submit final response in Q2FY2019). Moreover,
three specialty product launches, namely Yonsa (in Q1FY2019), Ilumya (in Q2FY2019) and OTX-101 (precise timeline
not disclosed), are scheduled in FY2019. Specialty products are going to be one of the key growth drivers with
India, EM and ROW businesses being the other drivers. R&D spend will be 7-8% of sales for FY2019. With better
product mix and cost-control measures, we see margin expansion scope in the next two years.

Torrent Pharma  U.S. sales growth is likely to gain momentum in FY2019 with management planning to file 15-20 ANDAs during
the year and expecting 8-10 product approvals, which it hopes to launch on time. Management expects a couple
of limited competition launches, which could contribute meaningfully. U.S. sales growth will also be supported by
ramp-up of volumes from Dahej facility. EIR for Dahej facility has been received, thereby indicating no regulatory
hurdles for the near term. Management expects the integration of domestic business with its acquired Unichem
business to be complete by the end of FY2019Debt:Equity ratio is likely to improve from 1.5x in FY2018 to 0.5x
by FY2021E (increase in debt was due to Unichem acquisition, this debt will be amortised over seven years). We
expect RoE to improve from 16.2% in FY2018 to 22.2% by FY2021E.

September 2018 54 Sharekhan ValueGuide


EQUITY FUNDAMENTALS EARNINGS GUIDE

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. The company is mulling over the expansion of its satellite
grinding capacity from 4 mtpa to 7.1 mtpa at a cost of Rs. 1,095 crore. 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 40 mtpa by FY2019 (currently 37.5 mtpa) and increasing
geographical footprint in the eastern and southern regions is likely to aid better volume growth going ahead.
Pricing discipline in the cement business should help improve realisations over FY2019 to FY2020. However,
increased cost structure (power and freight cost) affecting operating margins remain key risk to net earnings in
the near term.
UltraTech Cement  UltraTech Cement is India’s largest cement company. The capacity is expected to reach 95.4 mtpa by the end of
FY2019. We expect UltraTech to report industry-leading volume growth on account of timely capacity expansion
(acquisition of Jaypee Group’s cement assets) and likely revival in demand (with the start of affordable housing
projects and enhanced spending on infrastructure development). We expect net earnings growth during FY2019-
FY2020 to be aided by higher volume growth and improving profitability of acquired assets.

Discretionary consumption
Arvind  Arvind is one of India’s leading vertically integrated textile companies with an experience of more than eight
decades in the industry. The company has switched itself into the branded retail space by enhancing its branded
portfolio. Arvind is a licensee for marketing various marquee global brands in India such as Arrow, US Polo,
Tommy Hilfiger, and Calvin Klein. The company also operates specialty retail stores under licensee brands
such as GAP, The Children’s Place, Aeropostale and Sephora. The company is also present in the retail space
through Unlimited and The Arvind stores. Management proposes to demerge its branded, retail and engineering
businesses as both these have matured enough to enhance their growth prospects in the coming years. Moreover,
listing these businesses as separate entities will help create value for the businesses, as separate leadership and
development of best strategies for the business will enhance focus.
Century Plyboards  Century Plyboards is a leading player in the organised plywood industry with a market share of 25%. Strong
growth in the sector, Century’s premium positioning and brand equity strength and benefits from GST would
enable it to report revenue CAGR of 15.2% over FY2018-FY2020E. Earnings are likely to report a 28.1% CAGR
over FY2018-FY2020E on account of revenue growth and better absorption of fixed costs. We believe structural
growth triggers for Century Plyboards are becoming visible due to: 1) GST implementation (expected to result
in a shift of market share to organised players from unorganised players, as they lose cost advantage); 2) the
government’s relentless focus on affordable housing; and 3) scaling up of its MDF unit.
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. With mid-teen growth in billings of the recruitment business, management remains hopeful
that growth in the recruitment business may continue in the coming quarters. On the real-estate front, gradual
recovery in 99acres growth is expected on account of robust growth in 99acres billing in the last three quarters,
settling down of RERA impact, impressive billings growth in the broker segment and lower inventory in large
projects. 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. We expect steady revenue momentum in the recruitment business and continued
growth momentum in revenue of 99acres in FY2019.

September 2018 55 Sharekhan ValueGuide


EARNINGS GUIDE EQUITY FUNDAMENTALS

INOX Leisure  INOX Leisure Limited (ILL), India’s second largest multiplex operator with 128 properties and 512 screens across
64 cities (accounting for about 20% of the multiplex screens in India), is scripting a blockbustre growth story
through a mix of inorganic and organic expansion plans. 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. In regards to the allowing of outside F&B issue, management stated that the
company will take appropriate measures to counter any unfavourable event as neither any law has been passed
in the state assembly nor the High Court has given any direction in this regards. The company also stated that
in its overall F&B income, the proportion of MRP-based F&B is quite small and adheres to all laws pertaining to
selling of packaged food in its multiplexes. We continue to remain Positive on ILL from a long-term perspective,
given its pan-India growth plans, healthy balance sheet (lower financial leverage) and potential benefits from GST
rollout.

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. Q1FY2019 witnessed robust performance by the company.
However, this performance was on a softer base of Q1FY2018 (where the company had witnessed de-stocking
at distributors’ end prior to GST implementation). During Q1FY2019 as well, the company saw a dip in realisation,
which has been the trend since the past few quarters due to ongoing price discounts offered by online players and
value fashion offerings given by leading brick-and-mortar players. In the forthcoming quarters, we need to keep
a check on volume growth as the company has adopted a new strategy of concentrating on volumes by giving
some leeway to distributors in terms of payment. Management envisages maintaining its margins going ahead
on account of operating leverage. 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. Management indicated that the Latin
American business has started recovering and good performance can be expected in the coming quarters. The
Middle East business is, however, expected to remain under pressure. The high-margin Ribbons & Made-ups
business is expected to grow in strong double digits. 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. The company has emerged as
an attractive investment opportunity owing to its growing scale, strong brand positioning and healthy financial
performance. Relaxo has a superior portfolio of footwear brands and its relentless focus on driving sales through
the expansion of distribution and improving the brand presence augur well for the company to achieve good
growth in the backdrop of better demand environment. Post GST implementation, quality footwear players with
a strong brand have been able to outpace their unorganised counterparts by leveraging the scale advantage.
Under the GST regime, all footwear priced under Rs. 500 attracted 5% GST. However, with recent changes in
GST provisions, all footwear priced under Rs. 1,000 will also attract 5% GST. This would be beneficial for Relaxo
as most its sales are in this range.

Thomas Cook (I)  Thomas Cook India Limited (TCIL), owned by value investor Prem Watsa, is an integrated leisure travel and human
service management company in India. We believe travel and related business will grow in double digits with
gradual improvement in profitability in the near to medium term. Scale-up in the retail segment of the travel-
related financial services (TRFS) business will drive the overall performance of the business in the coming years.
TCIL has de-risked its business model for its vacation ownership (VO) business, with 45% of revenue coming
from selling rooms as hotel rooms. The focus is on scaling up room rental sales to mitigate the impact of slow
membership addition in the VO model. Changes in accounting standards will not have any impact on cash flows

September 2018 56 Sharekhan ValueGuide


EQUITY FUNDAMENTALS EARNINGS GUIDE

of the VO business. The company has managed to reduce substantial debt on consolidated books through stake
sale in Quess Corp and has reduced pressure on the balance sheet. With expected improvement in the working
capital, we expect cash flows to further improve in the coming years. With strategies in place, we expect FY2020
to be operationally much better for TCIL. We maintain our Hold recommendation on the stock.

Wonderla Holidays  Wonderla Holidays Limited (WHL) is the largest amusement park company in India with over a decade of
successful and profitable operations. The company owns and operates two amusement parks under the brand
name Wonderla in Kochi and Bengaluru and came up with a third park in Hyderabad in Q1FY2017. The government
has reduced GST rate on amusement parks to 18% from 28% in February 2018. WHL has passed on the benefits
to customers in the form of cut in ticket prices. With stable ticket prices, FY2019 will be much better for WHL as
footfalls are expected to come back on track. We will keenly monitor the performance of the stock in the coming
quarters. Any significant uptick in footfalls in the coming quarters will act as a key re-rating trigger for the stock.
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. ZEEL continues to outperform the broadcasting advertising market and expects
to continue the momentum with an improvement in macro economy. As demonetisation and GST are behind
now, management expects ad revenue growth to remain at around mid-teens. We expect ZEEL to outperform
the industry in ad growth and 30%+ EBITDA margin despite investments in digital, movies and music. ZEEL
consistently focuses on its five key pillars to drive its growth. We believe successful execution of this strategy will
have a material impact on sustainable growth going forward. We continue to see ZEEL as the prime beneficiary
of macro revival and digitisation.

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
of 50% to its equity investments. Liquid investments have been valued at cost. The PT for BFS has been raised to
Rs. 7,834 from Rs. 6,725 earlier, given the strong performance in Q1FY2019. The PT of BAL has been slashed from
Rs. 3,526 to Rs. 2,905 post dismal Q1FY2019 results and pressure on profitability due to aggressive pursuance
of market share. Consequently, we arrive at a PT of Rs. 3,844 for BHIL. We maintain our Buy recommendation on
the stock.

BEL  Bharat Electronics Limited, a defence PSU, still 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. With fresh order intake
of Rs. 3,583 crore and post execution during the quarter, outstanding order book stood at Rs. 41,645 crore
(export order book of $92.3 million). BEL stands to benefit as it is one of the key defence PSUs with a first-mover
advantage and is operating in a niche segment of the entire defence industry. We believe the recent correction
(26% in the past six months) of the stock offers an attractive opportunity to investors.

Bharti Airtel  Bharti Airtel (Bharti) is the leader in the Indian mobile telephony space. Management continues to focus sharply
on increasing retail ARPU, enhancing African operations, non-mobile services (enterprise services) and value-
added services (Airtel TV and music) to boost revenue and reduce churn rate. Industry consolidation (three-player
market, with the exit of smaller players) will help Airtel to maintain its leading position in revenue market share
with improving profitability. Going forward, from a long-term perspective, explosive growth in the data segment,
strong network, acquisitions (Tata Tele and Telenor) and reach will help Bharti emerge stronger. We have a Buy
rating on the stock.

September 2018 57 Sharekhan ValueGuide


EARNINGS GUIDE EQUITY FUNDAMENTALS

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. The CFS business is a cash cow, while its
investments in the rail freight and cold storage businesses have started bearing fruits. The company is one of the
largest players in the CFS business and has evolved as the largest player in the rail freight business as well as the
cold storage business. The proposed capex for all the three segments will strengthen its presence in each of the
segments and increase its pan-India presence going forward.

PI Industries  PI Industries (PI), a leading agro chemical company, has a differentiated business model focusing on the fast-
growing custom synthesis and manufacturing (CSM) business. Management expects domestic revenue to grow
on account of expected normal monsoon coupled with various government initiatives and scaling up of newly
introduced products and further launch of new products (4-5) during the next 12-15 months. In the overseas
market also, management is anticipating pickup in volumes of existing molecules and intends to commercialise
4-5 new molecules, which will drive growth there. The company has increased its spend on R&D activities during
FY2018 (2x FY2017), thereby showing confidence in its molecules under the development stage. Dependence on
China for key raw materials has been on a declining trend, as sourcing from there and managing price volatility
remain key challenges. Management has provided revenue growth guidance of 16-18% and operating margin
of 20-21% for FY2019. Management also stated that de-bottlenecking of capacities will help in achieving better
volume growth. Management continues to maintain its CSM order book, as fresh orders are being added and
revenue booking is happening simultaneously. Improved global environment in agrichem is expected to provide
a boost to CSM execution, which will help in improving export revenue. We maintain our Hold rating on the stock
with a PT of Rs. 928, based on 22.5x its FY2020E earnings of Rs. 41.3/share.

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. Given
healthy earnings CAGR of 28% over FY2018-FY2020E, we believe the stock remains a good bet for investment
in the long run. We maintain our Buy rating on the stock with a PT of Rs. 1,150.

Supreme Industries  Supreme Industries is a leading manufacturer of plastic products with a significant presence across the piping,
packaging, industrial and consumer segments. We continue to remain positive on SIL for a long-term perspective,
given the recovery in rural economy and housing sector. The company is also one of the prime beneficiaries
of the unorganised to organised shift in GST regime. Management has revised down overall volume growth
guidance for FY2019 to 10-12% y-o-y from 12-15% earlier, owing to soft demand for PVC pipes in Maharashtra and
lower margins from agri pipes. This revision in volume growth indicates that the company intends to maintain
profitability going ahead. We maintain our Buy rating on the stock and reduce the PT to Rs. 1,420, given higher
volatility in input costs.

UPL  UPL has delivered revenue growth of 11%, led by higher volumes (8% y-o-y) coupled with exchange gain of 3%
and improved blended realisation of 1% y-o-y during 1QFY2019. Latin America registered the highest revenue
growth of 17% y-o-y, whereas India contributed the highest revenue of 30% to overall revenue. Demand outlook
remains strong for India (widespread and timely rainfall in most parts) and LATAM (strong order book in Brazil and
several new registrations received from the other parts) for the near future. Net debt increased during Q1FY2019
due to higher inventory on account of good demand prospects, however the same is expected to normalise
during Q4FY2019. In addition, cash balance on books is expected to come to half post the acquisition of Arysta
in the next 12-15 months. Based on global demand outlook coupled with lower inventory in key geographies,
management is confident of achieving its earlier guidance of revenue growth of 10-12%, with EBITDA growth of
12-15% for FY2019. UPL is better placed to benefit from global recovery in the agri commodity space over the next
2-3 years. We expect the company to post a CAGR of 14% at the revenue level and 16% at EBITDA and PAT level
during FY2018-FY2020 (excluding the recently announced acquisition of Arysta, which is slated to be completed
during December 2018-January 2019). We maintain our Buy rating on the stock with a PT of Rs. 735.

September 2018 58 Sharekhan ValueGuide


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