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1QFY18 Results Preview
RESULTS PREVIEW July 11, 2017
Volatility and hope

GST-adoption-led volatility at a time when the Indian economy
remains weak (weak corporate capex, black money crackdown and
lack of job creation) should throw ample surprises in the 1Q/2Q
earnings seasons. Investors should focus more on outlook and value
chain disruption rather than near-term earnings. Our team remains
less sanguine about economic growth, but for many domestic
consumption sectors (Home Building, Discretionary, Auto and FMCG)
has a positive outlook for FY18 after a dismal FY17; this will be keenly
tracked. For a few larger domestic sectors like BFSI and Energy, we
have a weak outlook for FY18; similarly, for the exporters in Telecom
and Pharma. We are behind consensus in most sectors except Cement
(higher pricing) and a few names in Energy and Capital Goods. We
suggest waiting for lower valuations for investing in the market; we
continue to hold cash and remain underweight on Financials (except
plays on financialisation of savings) and IT in our G&C model portfolio.
Our FY18 Sensex EPS estimate is Rs1,626, implying 10% YoY growth (as Research Analysts
compared to the consensus EPS estimate of Rs1,670). Using a trailing
Nitin Bhasin
P/E of 19x gives us an FY18-end Sensex target of 31,000, implying flat
+91 22 3043 3241
returns at this point in FY18.
nitin.bhasin@ambit.co
TOP BUYs: IOCL, TATA Motors, Dabur, PLNG and Bharat Electronics Research Team
+91 22 3043 3000
TOP SELLs: HDFC, L&T, Kotak Mahindra, UltraTech, and Asian Paints.
ambit.research@ambit.co
TOP mid-cap BUYs: PI Industries, Aarti Industries, DB Corp, Mahindra CIE,
Trent and JSW Energy
Could outlook improve gradually after a volatile 1H?

Watch out for Outlook Recommendations
Apr-Jun FY18 vs
Positives Negatives Top BUYs Top SELLs
2017 Qtr FY17
Good demand outlook for Rupee appreciation, muted
Agri and Chemicals
agri inputs global agri demand Aarti Industries Rallis
Automobiles Operating leverage Commodity costs Tata Motors -

Aviation Strong passenger load factorr Decline in yields - Interglobe Aviation
Punjab National Bank,
Banking Treasury income Loan growth and credit cost <--> - Kotak Mahindra Bank,
Karur Vysya Bank
Building Materials Price hikes Volume Bajaj Electricals V-Guard
Capital Goods Pick-up in the execution Dearth of new BTG orders <--> Greaves Cotton KKC
Cement Realisation P&F costs Orient UltraTech
Margin expansion due to
Volume decline due to supply
Consumer/Retail moderation of input cost
chain disruption <--> - -
inflation
Consumer Discretionary Top-line growth Inventory situation Trent, PVR Jubilant, Bata
E&C/Infra Reduction in finance cost Working cap BEL NBCC, Engineers India
Recovery in EM business on Intensifying competition in US;
Healthcare
the back of stable currency de-stocking in India due to GST Torrent Pharma Cipla, Dr. Reddy
Cost pressures due to content
Media Post-demonetisaiton recovery
inflation DB Corp Hathway Cable
Metals/Mining E-auction realisations Employee costs Coal India -

NBFCs Growth, Asset quality MOFS MMFS
Demand outlook, decreasing Lower Refinery margins, LT gas
Oil and Gas
gas and crude prices contracts IOCL, PLNG GAIL, HPCL
Guidance retention, Buy back
Technology
announcement
Margin compression Infosys, TCS TechM, Wipro
Telecom Stability of revenue Continued ARPU pressures Idea Cellular

Improvement in coal
Utilities
availability
Dearth of PPAs <--> JSWE NTPC
Source: Ambit Capital research
Ambit Capital and / or its affiliates do and seek to do business including investment banking with companies covered in its research reports. As a result, investors should be aware that Ambit Capital
may have a conflict of interest that could affect the objectivity of this report. Investors should not consider this report as the only factor in making their investment decision.
Exhibit 1: Material revisions to estimates and valuations ahead of the earnings season (more than 5%)
Change in EPS estimates
New EPS estimates (%) Valuations
Company (%) Stance
FY18E FY19E FY18E FY19E New Old Change (%)
Engineers India 5.9 7.7 (18) (12) 125 120 4 SELL
BHEL 6.4 5.6 (16) (40) 116 128 (9.3) SELL
Thermax 9.6 10.9 (1) (5) 194 205 (5.6) BUY

Federal Bank 5.4 6.5 (5) (5) 66 64 3.8 SELL
South Indian Bank 3.0 3.4 (9) (7) 18 18 3.8 SELL
ICICI Bank 10.5 18.7 (7) (8) 258 258 0.0 SELL
BAF 43.3 53.0 4 4 703 651 8 SELL
MOFS 40.1 54.1 13 11 1200 1020 18 BUY
Exhibit 2: Sectoral snapshot ahead of the results

FY18 estimate revisions before
Compared to FY18 consensus Stance
results
Up Down Higher Lower BUY SELL
PI, SRF, Vinati
Vinati Organics, Aarti
Agri and Chemicals Unchanged Unchanged PI Industries Organics, Aarti Rallis India
Industries
Industries
Bajaj Auto, Hero
Hero, Maruti, Tata
Ashok Leyland, Tata MotoCorp, Maruti, M&M,
Motors, Eicher,
Automobiles Unchanged Unchanged M&M, TVS, Endurance Motors, Mahindra CIE, Eicher, TVS, Amara Raja,
Mahindra CIE,
Endurance, Suprajit Exide Industries,
Balkrishna
Balkrishna Industries
Aviation - - - Interglobe Aviation - Interglobe Aviation
ICICI Bank, Axis Bank,
Punjab National Bank,
RBL Bank, SBI, Karur
Banking - - Bank of Baroda NA Kotak Mahindra Bank,
Vysya Bank, Equitas
Karur Vysya Bank
Holdings,
Century Ply, Havells, V- Havells, V-Guard,
Building Materials - Crompton, Bajaj Pidilite, Finolex Cables Guard, Crompton, Bajaj Pidilite, Bajaj Electricals Crompton, Finolex
Electricals, Supreme Cables, Supreme
BHEL, Thermax, BHEL, Thermax, Inox
Capital Goods - Thermax, Greaves Cummins, BHEL Greaves Cotton
Cummins Wind, Cummins
UltraTech, ACC, Shree, UltraTech, ACC,
Cement - - Ambuja Dalmia, Orient
Dalmia, Orient Ambuja
GCPL, Asian Paints,
GCPL, Asian Paints,
Berger Paints, Marico,
Berger Paints, Dabur,
Consumer - - ITC ITC, USL, Dabur Nestle, Colgate,
Nestle, Britannia, GSK
Britannia, GSK
Consumer, USL, UBL
Consumer, UBL
Consumer Arvind, Page, PVR, Wonderla, ABFRL, Bata, Wonderla, ABFRL, Bata, Jubilant, Arvind,
- -
Discretionary Titan Jubilant Page, Trent, PVR Titan
LT, PWGR, NBCC, BHE, VATW, TEEC,
E&C/ Infra PWGR, SADE, LT, TEEC BHE, SADE LT, PWGR, NBCC, ENGR,
ENGR, VATW, TEEC AIAE, SADE, SIPL
Torrent Pharma, Cipla, Dr. Reddy, Ajanta Dr. Reddy, Cipla, Ajanta
Healthcare NA NA Torrent Pharma, Cadila
Cadila Pharma Pharma
DB Corp, Hathway
Hathway Cable, Zee
Media - - Dish TV Cable, Zee DB Corp, Dish TV
Entertainment
Entertainment
Metals & Mining - - Coal India Coal India
MMFS, BAF, LICHF, MMFS, BAF, LICHF, MMFS, BAF,
NBFCs - - MOFS
MOFS, CIFC CIFC, MGMA, HDFC CIFC, MGMA, HDFC
BPCL, GAIL and GSPL, HPCL, IGL, BPCL, IGL, IOCL
Oil and Gas Unchanged Unchanged GAIL, HPCL, MGL
IOCL MGL and PLNG and PLNG
Wipro, HCLT, TCS, Infosys, Wipro,
Persistent Wipro, HCLT, TechM,
Technology TechM, LTI, LTI HCLT, TechM, Mindtree, TCS, Infosys, LTI
Systems Mindtree, PSYS, eClerx
Mindtree, eClerx PSYS, eClerx
Idea Cellular, Bharti Bharti Airtel, Bharti
Telecom - - Bharti Airtel Idea Cellular
Infratel Infratel
JSWE, Tata Power,
Utilities - - Tata, Torrent NTPC, JSWE NTPC
Torrent Power
July 11, 2017 Ambit Capital Pvt. Ltd. Page 2

Exhibit 3: Sector views

Estimate revisions
Sector Views
for FY18
FY18 expected to be a good year on account of good monsoon and healthy sowing data
Agri/Chemicals Unchanged
Exports to be adversely impacted in 1H due to weaker global offtake
Rising commodity prices to impact margins on a YoY basis
Automobiles Unchanged
Modest volume recovery in FY18 as demonetisation impacts/GST uncertainties wean off
Domestic capacity addition CAGR to be strong at 17-19% over FY17-20E; with upside risks as
several foreign airlines, such as Qatar are looking to enter the Indian domestic travel market.
Aviation Unchanged
With tailwinds from declining crude prices no more available, domestic airlines will have to
sacrifice on margins to maintain utilisations.
1H will be muted/volatile in terms of volumes/margins during adoption of the GST
Building Materials Unlikely material gains over unorganised given high GST rates for most categories Downwards
Expensive valuations (20-35X FY19) across categories should recede
Muted loan growth and elevated credit costs are likely to continue in the near term
Banking Unchanged
Banks with stronger balance sheets and strong assets-side differentiation are better placed
Pick-up in BTG execution
Capital Goods Declining order book for BTG Downwards
Increase in competition in the genset industry
Overall volume growth should improve to 5-6% from 0-1% in FY17 as infra adds 1.5-2% volume
Cement growth Unchanged
Pricing discipline is likely to be maintained by large players due to slowing capacity addition
Expect Staples/Paints to report sales growth of 1.5%/10% YoY respectively
Staples to report ~3% YoY volume decline; Paints being more relisent to GST-led disruption will
Consumer report ~5% YoY volume growth Unchanged
Alcobev should report 4% YoY sales decline given adverse Supreme Court ruling on sale of
alcohol within 500m of highway
Advancement of EoSS in apparel and footwear space will result in impressive top-line growth
Consumer Discretionary Jewellery to see overwhelming growth in 1HFY18 due to more marriage dates Unchanged
Higher-than-expected GST rate will lead to amusement park industry facing some pressure
Double-digit revenue growth for mid-caps given continued accretion of order book
E&C/ Infra Unchanged
Lower interest rates and focus on balance sheet could lead to significant financial leverage
Revenue decline due to incremental competition in US base business and GST-related de-stocking
in the Indian business
Healthcare Unchanged
EBITDA margins to decline by 285bps YoY largely due to pricing pressure in US and higher R&D
spends
Slowing advertising revenue momentum for broadcasters
Media Consolidation to result in scale benefits for DTH Unchanged
Recovering advertising revenue for print media companies
With de-stocking behind us, coal offtake to witness 7% CAGR in FY17-20E vs 2% in FY17
Metals/Mining Unchanged
Recovery in e-auction realisations and coking coal price hike to drive 5% realisation growth
Stress in loan growth and asset quality to persist, but a full-fledged recovery remains elusive
NBFCs Upwards
(earlier expected to happen over FY18-19).
OMCs to be negatively impacted by inventory losses which would result in lower GRM QoQ
GAIL would witness a healthy quarter due to benefits of better LPG realisations and lower gas
Oil and Gas Unchanged
prices
CGD companies will benefit from rupee-depreciation-led gross margin expansion
In a seasonally strong quarter, expect muted growth given macro uncertainties in the USA
Technology Downwards
QoQ compression in margins should be higher than expected due to INR appreciation
Recovery in incumbents revenue as Jios discounts reduce in 2HFY18
Telecom Unchanged
Delayed consolidation among towercos and tenancy exits due to telco consolidation
Marginal uptick in power demand
Utilities Announcement of new FSAs Unchanged
Dearth of new PPAs

TOP BUY RECOMMENDATIONS

Recommendation Upside (%) Rationale/catalysts
TCS
(TCS IN) We like TCS for its focus on capital allocation and DNA of cost optimisation through pyramiding
10 Stability in the senior management created strong connect with Fortune 100 clients
CMP:Rs2,441 FY17 FCC yield of 5% and FY18E P/E of 16x (vs 21x for Accenture) make it a good value play
TP: Rs2,720
Infosys We like Infosys for its strong focus in digital, automation, next-gen technologies (viz blockchain)
(INFO IN) Marquee clients, focus on margins & capital returns to shareholders are other positives
15 FY17 FCF yield of 6% and FY18E P/E of 14x (vs 21x for Accenture) make it a good value play
CMP: Rs959
TP: Rs1,100
IOCL
Refining profits to benefit significantly from stabilisation of Paradip refinery
(IOCL IN) Healthy GRMs, improving distillate yields, and lack of any inventory losses to drive better profitability
20
CMP: Rs382 Attractive valuations of 9x FY18 EPS supported by diversified earnings from petchem and pipeline
segments
TP: Rs458
Coal India With destocking behind us, offtake growth to revive to 7% in FY18 vs 2% in FY17
(COAL IN) E-auction realisations to recover to Rs1,900/tn from the lows of Rs1,550/tn in FY17
37 CIL trades at FY18 P/E of 12x, in line with historical average, despite sharp improvement in volume
CMP: Rs251 growth trajectory
TP: Rs345
Tata Motors JLR volumes should report a healthy 10% CAGR over FY17-19 led by new launches and market-share
(TTMT IN) gains in China
16 JLR EBITDA CAGR of 22% over FY17-19 to be driven by a healthy volume growth and favourable
CMP: Rs440 currency movements
TP: Rs550 Trading at an attractive valuation of 13x normalised FY19 net earnings
Bharat Electronics
(BHE IN) Best-in-class DPSU in a high-growth segment with strong supply chain and manufacturing footprint
12 EVM orders likely to result in 20%+ revenue growth, well ahead of mid-teen Street expectations
CMP: Rs170 Valuations of 22x FY18E EPS are punchy but should sustain
TP: Rs190
Petronet LNG Expect ~8% volume growth rate at Dahej terminal over FY17-20; take or pay improves visibility of
(PLNG IN) growth
20 Kochi terminal utilisation to increase to ~40% from FY20 aided by completion of Kochi-Mangalore
CMP: Rs217 pipeline
TP: Rs260 Valuation of 13x FY19 EPS is attractive for RoE of ~25% and FCF yield crossing 6%
Idea Cellular
(IDEA IN) 15% YoY revenue growth in 2HFY18E due to reduced discounts from Jio
27 Calibrated withdrawal of weak operators from several circles resulting in 14% FY19E subscriber growth
CMP: Rs83 Valuation of 7.8x FY19E EV/EBITDA doesnt factor in synergy benefits from merger with Vodafone
TP: Rs105
Torrent Pharma Not a US generic story; early focus on branded generics provides consistent 15% revenue/profit growth
(TRP IN) Improvement in execution (MR productivity) in the Indian business would result in higher-than-IPM
22 growth
CMP: Rs1,296 Approval cycle in Brazil to improve aiding >15% revenue growth
TP: Rs1,523 As Dahej capacity utilisation improves, expect operating leverage to lead to margin expansion
Motilal Oswal
(MOFS IN) MOFSs brokerage, AMC and HFC businesses are firing all cylinders given cyclical/structural tailwinds
13 RoE is improving structurally due to capital allocation to housing finance and asset management
CMP: Rs1,100 Current valuation at 20x FY19 PE is reasonable in light of the 49% EPS CAGR
TP: Rs1,250
JSW Energy
(JSW IN) Vijayanagar is highly likely to sign a PPA with Karnataka in FY18
34 Fuel cost should reduce by 60paise over FY17-19 led by domestic coal blending.
CMP: Rs64 JSWE multiple (1x FY18 P/B) should re-rate to 1.2x (NTPCs multiple) once Vijayanagar signs a PPA
TP: Rs86
Trent
(TRENT IN) 10% SSG in Westside along with 20-store openings in FY18E
13 Reduction in losses in Star over FY18-19 to Rs602mn
CMP: Rs249 Improvement in Zaras margins over FY18/19
TP: Rs281

Recommendation Upside (%) Rationale/catalysts

Aarti Industries New product launches to accelerate growth
(ARTO IN) Second generation promoters focus to drive R&D/QSHE should result in Aarti growing faster than
24 competitors over the long term
CMP: Rs937 We expect RoCE to expand by 500bps over the next 5 years driven by utilisation of recently expanded
TP: Rs1,160 capacity; current valuation at 15.5 x FY19 EPS appears cheap compared to peers
DB Corp
(DBCL IN) Market-share gains and improving ad revenue growth (9% over FY18-19E vs 3% over FY15-17)
28 Increased shareholder payout to be Rs3.4bn in FY19E, up from Rs2bn in FY16
CMP: Rs383 Attractive valuation (15x FY19E P/E) based on 24% FY19E RoCE and 13% FY17-19E EPS CAGR
TP: Rs490
PVR
(PVRL IN) Visibility on 40-50 ready-to-open screens in FY18
12 Implementation of GST from 2QFY18
CMP: Rs 1,412 Improving share of ancillary revenues by 400bps over FY17-20E
TP: Rs1,594
Greaves Cotton
16% revenue CAGR over FY17-19 led by growth in after-market, auto engines, agri-equipment
(GRV IN) 150bps margin improvement over FY17-19 led by higher share of after-market business
19
CMP: Rs161 Valuation of 16.7x FY18E P/E is attractive given FY18E RoE/FCF yield of 24%/3.8%; 20% EPS CAGR
over FY17-19E.
TP: Rs194
Bajaj Electricals
With the stabilisation of TOC, we expect consumer revenue to grow at 9% over FY17-19 vs 11%
(BJE IN) decline in FY17
18
CMP: Rs330 TOC stabilising to aid 130bps margin expansion over FY17-FY19
The profitability in E&P business should sustain given improved processes
TP: Rs384
Orient Cement Volume growth in AP/Telangana to drive 15% volume CAGR over the next two years
(ORCMNT IN) Pricing recovery in Maharashtra and AP/Telangana to drive increase in EBITDA/tonne from
23 ~Rs350/tonne in FY17 to ~Rs700/tonne in FY18E
CMP: Rs154 At 10x FY18 EV/EBITDA, the stock trades at the lower end of the mid-cap peer range of 9-14x due to
TP: Rs190 the overhang of the Jaypee acquisition
Source: Bloomberg, Ambit Capital research

TOP SELL RECOMMENDATIONS

Recommendation Downside (%) Rationale/catalysts
Kotak Mahindra Bank
The bank is exposed to slowdown in loan growth emanating from headwinds in real estate (LAP), agri
(KMB IN) (tractor) and SME businesses.
39
CMP: Rs963 Trading at a valuation of 4.1x FY18E BVPS, along with ~14% RoE for FY17-18E, the stock is expensive
given the incremental growth and asset quality headwinds.
TP: Rs584
Wipro
(WPRO IN) Uncertainty over Obamacare to result in decline in healthcare revenue (20%) over next two years
24 Demand headwinds to result in highest impact because of higher exposure to CTB spend
CMP: Rs269 Current valuations of 14x FY19E EPS (vs 13x historical average) do not factor in such revenue decline
TP: Rs204
UltraTech UltraTech is likely to grow below the industry average to support pricing discipline by not pushing for
(UTCEM IN) market-share gains in its extant capacities
22 Consolidation of Jaypees capacities in FY18 to result in 20% EPS dilution
CMP: Rs4,097 UltraTech trades at 18x FY18 EV/EBITDA, 45% premium to its historical average and upon
TP: Rs3,170 consolidation of Jaypees assets, the stock will trade at 19x FY18 EV/EBITDA, in line with Shree Cement
GAIL
Fate of US volumes is still uncertain as we believe current spot LNG prices are well below landed costs
(GAIL IN) for the US contract volumes. This is not built into our fair value as ascertaining the exact quantum of
2
CMP Rs359 losses is difficult but every US$1/mmbtu loss implies a 20% loss in EBITDA
Valuation of 2x P/B for RoE of 10-11% factors in all the future positives
TP Rs353
Interglobe Aviation
Expect flattish yields coupled with lower utilisations to result in 8%/11% decline in EBIT/PAT respectively
(INDIGO IN) in FY18 vs FY17
30
CMP: Rs1,245 17-19% domestic capacity CAGR to keep unitary profitability under pressure over the next 2-3 years
The stock trades at FY18 EV/EBITDAR of 11x, higher than European/American peer average of 6-7x
TP: Rs870
Cipla
Ciplas concentrated bets on inhalers have not materialised due to gaps in R&D
(CIPLA IN) Late in developing complex generics and establishing front-end presence in key markets
25
CMP: Rs545 Lack of investments in long-term growth drivers and issues with top management churn
FY19E PE at 19.5x as compared to 17-18x of peers is unjustified due to inferior return ratios
TP: Rs410
Punjab National Bank
Very high quantum of bad loans at 19% would keep credit costs high.
(PNB IN) Poor capital position (tier-1 of 8.8%) limits growth opportunity to offset high credit costs.
25
CMP: Rs151 Trading at a valuation of 0.8x FY18E BVPS, along with ~5.7% RoE for FY17-18E, the stock seems to be
expensive.
TP: Rs113
M&M Finance
Improvement in growth and asset quality will be muted as full-fledged rural economy remains elusive.
(MMFS IN) 26 MMFSs RoE will be restricted to 16% in this up-cycle versus the peak of 22% in the previous up-cycles.
CMP: Rs363 Earnings disappointments (18% over FY18-19) will test premium cross-cycle valuations at ~2.7x one-
year forward P/B.
TP: Rs268
Crompton Consumer
(Crompton IN) Most exposed to EESLs pricing disruption in fans as ~60% of EBIT comes from fans
39 Diversification into small appliances and retail lighting not an easy ride
CMP: Rs225 Trading at 43x/39x FY18/FY19 P/E in line with Havells despite latter being a diversified franchise
TP: Rs138
Bata India
Low volume growth poses risk to revenue growth of 11% in FY18E
(BATA IN) Higher marketing efforts to drive higher A&P spends (by 25-50bps); higher K-scheme commissions
35
CMP: Rs572 Reversion to store expansions despite threat of e-commerce will continue to inflate fixed costs (35% of
sales); valuations remain rich at 32x FY19E EPS given the same
TP: Rs370
Jubilant FoodWorks
FY18E SSG to be capped at 5% given higher competition; gross margin to dip for higher cheese cost
(JUBI IN) Delayed ramp-up of new stores from 2.5 years to 3 years given sub-optimal operating metrics
26
CMP: Rs1,100 SSG no longer a key earnings variable as pricing correction affects gross margins; stock remains rich at
54x FY19E EPS
TP: Rs809
Rallis
Continuing weak competitive positioning given lack of a differentiated product portfolio/execution
(RALI IN) Streets optimism on Metahelix margins (inherent nature of portfolio) and potential success in agri CSM
20
CMP: Rs224 business (competing generics business/long gestation) may not play out
Continuing weak competitive positioning given lack of a differentiated product portfolio/execution
TP: Rs180

Recommendation Downside (%) Rationale/catalysts

Hathway Cable
(HATH IN) Supply chain challenges persist; broadband unlikely to be a saviour as investments intensify
23 Excessive leverage poses challenges; dilution risk imminent
CMP: Rs36 Continued downgrades; valuation of 10.4x FY18E EV/EBITDA is no discount to Dish TV
TP: Rs28

Agri/Chemicals Stock Performance

3-month
The agrochemical sectors 1QFY18 results are expected to be weak given: (i) (%) Rel to
impact on sales due to GST-driven delay in channel filling ahead of the kharif Absolute
Sensex
season and (ii) exports are adversely affected by high channel inventory. PI Inds (3.5) (9.1)
Accordingly, we expect earnings decline for PI Industries, SRF and Rallis. Aarti
SRF (6.3) (11.9)
and Vinati Organics should report healthy double-digit earnings growth.
Aarti and Vinati should continue to witness healthy growth led by a good mix Rallis India (1.5) (7.0)
of new product launches and existing products-led growth. We expect 1H to Vinati Organics 30.7 25.1
be weak for PI and SRF and expect earnings recovery to begin in 2HFY18. Aarti Inds 18.7 13.1
Ambit vs consensus: Our FY18 EPS estimates are broadly in-line with consensus for
PI and marginally ahead of consensus for Vinati and Rallis India. We are 10% ahead Jun17E Quarterly EPS
of Street on Aarti Industries.
(Rs) Ambit Consensus
Key recommendations: We expect agrochemicals exporters, especially SRF and PI, PI (Standalone) 8.6 10.2
to stage a recovery from 2HFY18 given: a) global demand for agrochemicals has
SRF (Consolidated) 22.0 23.4
started to improve; global agrochem companies have reported strong results so far; b)
inventory levels at innovators have sharply corrected and even a marginal uptick in Rallis (Consolidated) 2.7 3.2
end-demand will make innovators ramp up their own product inventories; c) global Vinati (Standalone) 8.4 8.4
M&A uncertainties are waning with improved approvals from various regulators. We Aarti (Standalone) 11.7 Na
are BUYers on both PI (TP Rs1100, 34% upside) and SRF (TP Rs1800, 17% upside).
Aarti Industries (TP Rs1160, 25% upside) is our other key idea with growth led by new
product launches. FY18E EPS
PI (Standalone) 33.4 33.6
SRF (Consolidated) 102.4 73.1
Rallis
11.0 10.7
(Consolidated)
Vinati (Standalone) 35.6 33.7
Aarti (Standalone) 50.2 45.0

Exhibit 4: Detailed Jun'17E quarterly estimates

Company Jun17E Jun16 YoY Mar17 QoQ Comments
PI Industries
Sales (Rs mn) 6,261 6,317 -1% 6,056 3%
PIs domestic sales would be impacted by the GST-led disruption for placement in
EBITDA (Rs mn) 1,575 1,656 -5% 1,537 3%
Q1 for upcoming consumption in Kharif season. We build in a 3% decline.
EBITDA margin (%) 25.2% 26.2% (105) 25.4% (21) Overall agrochem pick-up is likely to remain muted in 1HFY18 and we build in
flat growth in CSM consequently. Due to decline in sales, we expect a 5% decline
PBT (Rs mn) 1,475 1,575 -6% 1,298 14%
in EBITDA margins which will flow through to 7% decline in PAT on a YoY basis.
PAT (Rs mn) 1,180 1,269 -7% 1,351 -13%
SRF
Sales (Rs mn) 12,581 12,192 3% 13,258 -5%
Specialty chemicals growth is likely to remain muted. We expect a sales growth
EBITDA (Rs mn) 2,632 2,841 -7% 2,157 22% of 10% in chemicals primarily led by refrigerants portfolio. Packaging films will
see a volume uptick due to new capacities but decline in product prices would
EBITDA margin (%) 20.9% 23.3% (238) 16.3% 465
negate the overall sales growth. Drop in margins across three businesses on a
PBT (Rs mn) 1,692 1,943 -13% 1,644 3% YoY basis will drive 7% decline in EBITDA. We expect PAT to decline by 12% on a
YoY basis.
PAT (Rs mn) 1,262 1,442 -12% 1,299 -3%
Rallis India
Sales (Rs mn) 4,559 4,499 2% 3,481 31%
EBITDA (Rs mn) 761 752 1% 416 83% We expect 10% sales growth for Metahelix and 5% sales decline for domestic
business (due to GST impact). Margins will see a marginal moderation due to
EBITDA margin (%) 16.7% 16.9% (20) 12.0% 474
muted sales growth. Base quarter had a one-off, adjusting for which PAT should
PBT (Rs mn) 661 2,208 -70% 316 110% be flat on a YoY basis.
PAT (Rs mn) 529 1,742 -70% 312 70%
Vinati Organics
Sales (Rs mn) 1,845 1,671 10% 1,950 -5%
We expect Vinati Organics to report a healthy EBITDA growth of 16% led by: a)
EBITDA (Rs mn) 690 595 16% 606 14%
commissioning of new products, such as TB Amine and IB derivatives; b)
EBITDA margin (%) 37.4% 35.6% 181 31.1% 637 reduction in costs of power due to commissioning of captive power plant; c)
healthy growth in ATBS volumes. Healthy EBITDA would translate to 21% YoY
PBT (Rs mn) 645 541 19% 609 6%
growth in PAT due to decline in interest costs.
PAT (Rs mn) 432 357 21% 406 7%
Aarti Industries
Sales (Rs mn) 7,406 6,829 8% 8,343 -11%
We expect Aarti to see an EBITDA growth of ~14% driven by ~12% volume
EBITDA (Rs mn) 1,763 1,546 14% 1,526 16% growth on account of new products and mid single-digit growth in existing
products. We may see some inventory losses on account of decline in crude prices
EBITDA margin (%) 23.8% 22.6% 116 18.3% 552
(Benzene which is a crude derivative is a key RM for Aarti) and overall margins
PBT (Rs mn) 1,138 1,012 12% 921 24% would see an impact of rupee appreciation. Overall, PBT growth is expected to be
12% YoY due to higher interest costs.
PAT (Rs mn) 958 825 16% 743 29%
Source: Company, Ambit Capital research.

Automobiles Stock Performance

3-month
Most auto and component companies under coverage should report decent (%) Rel to
Absolute
revenue growth given PV/2W volume growth and price hikes in the last six Sensex
months. Eicher Motors (strong RE sales) and TVS Motor (healthy scooter sales, Ashok Leyland 26.9 19.7
export volumes recovery) should report highest YoY revenue growth, at 26% Bajaj Auto (4) (11.2)
and 22% respectively. Tata Motors (weak JLR and domestic CV sales) and Hero MotoCorp 16.6 9.4
Ashok Leyland (muted CV sales) should post revenue decline of 13% and 9%
Maruti Suzuki 19.3 12.1
YoY respectively. Uncertainties in RM costs remain with price hikes not likely
Mahindra and
to fully offset the same. So we factor in YoY margin decline for most stocks Mahindra
6.4 (0.8)
under coverage. On a positive note, margin should improve QoQ given price Tata Motors (6.3) (13)
hikes, operating leverage benefits and high discounts in 4QFY17 to clear BS-
Eicher Motor 8.6 1.4
III stocks. For ancillary companies, while Exide, Amara Raja and Balkrishna
should post YoY decline in margins, Suprajit, Endurance and Mahindra CIE TVS Motor 19.8 12.6
would report improvement. Positive outlook on JLR volumes/margins makes Amara Raja
(2.1) (9.3)
Batteries
Tata Motors our top pick.
Exide Industries 0.9 (6.3)
Ambit vs consensus: Our FY18 EPS estimates for most auto companies are lower Mahindra CIE 6.3 (0.9)
than/similar to consensus except for Mahindra & Mahindra, TVS Motor and Endurance
Balkrishna Ind. 21.4 14.2
Technologies.
Endurance Tech. 4.2 (3.0)
Key recommendations: Tata Motors is our Top BUY. JLR should record a volume Suprajit Engg. 32.2 25.0
CAGR of 10% over FY17-19 driven by a strong response to recent launches, healthy
product pipeline and market-share gains in China. Higher volumes coupled with
favourable currency movements (GBP depreciation against USD) would result in Jun17E Quarterly EPS
EBITDA growth of 22% over FY17-19. The stock trades at an attractive valuation of (Rs) Ambit Consensus
13x normalised FY19 net earnings. Ashok Leyland 0.50 1.12
Bajaj Auto 31.7 36.0
Hero MotoCorp 46.4 45.1
Maruti Suzuki 55.0 62.1
M&M 16.2 19.7
Tata Motors 3.57 NA
Eicher Motor 173 157
TVS Motor 3.74 3.31
Amara Raja Batteries 7.25 7.82
Exide Industries 2.31 2.54
Mahindra CIE 1.75 NA
Endurance Tech. 6.61 NA
Suprajit Engg. 2.67 NA
FY18E EPS
Ashok Leyland 4.93 4.91
Bajaj Auto 149 146
Hero MotoCorp 184 190
Maruti Suzuki 253 278
M&M 70.6 67.2
Tata Motors 27.3 37.3
Eicher Motor 772 815
TVS Motor 16.7 15.5
Amara Raja Batteries 33.3 33.4
Exide Industries 9.46 9.33
Mahindra CIE 10.5 12.0
Endurance Tech. 30.8 29.7
Suprajit Engg 10.2 10.8


Company Jun'17E Jun'16 Mar17 YoY QoQ Comments
Amara Raja
YoY growth to be largely driven by price hikes taken since 2HFY17; YoY
volume growth is expected to be impacted due to dealer-destocking prior to
Sales 14,397 13,208 13,445 9% 7%
GST implementation. QoQ growth should be led by price hikes and
seasonal factors.
EBITDA (Rsmn) 2,246 2,273 1,844 -1% 22% YoY EBITDA margin should be impacted by price hikes not fully offsetting
lead price increase. QoQ margin improvement should be driven by the full
EBITDA margin (%) 15.6% 17.2% 13.7% (161) 188 effect of price hikes and some softening in lead price.
PBT (Rsmn) 1,851 1,908 1,480 -3% 25% Net earnings performance should largely reflect the trends at the EBITDA
PAT 1,240 1,307 992 -5% 25% level.
Ashok Leyland
YoY revenue growth should be impacted by MHCV volume decline of 17%
Sales (Rsmn) 38,710 42,588 66,179 -9% -42% offset by price hikes. Revenues should decline sharply on a QoQ basis due
to 48% decline in MHCV volumes (seasonal factors and weak demand).
EBITDA (Rsmn) 3,471 4,763 7,299 -27% -52% YoY and QoQ margin decline due to higher material costs and lower
EBITDA margin (%) 9.0% 11.2% 11.0% (222) (206) volumes.
PBT (Rsmn) 2,021 3,658 5,885 -45% -66% Net earnings decline faster than EBITDA due to fixed nature of
depreciation/interest expenses. 4QFY17 tax expense was lower due to tax
PAT (Rsmn) 1,435 2,411 8,041 -40% -82% benefit from Hinduja Foundries merger.
Bajaj Auto
YoY revenue decline led by 11% decline in volumes, offset by price hikes.
Sales 54,239 57,948 47,950 -6% 13%
QoQ revenue growth led largely by volume growth.
EBITDA (Rsmn) 11,344 12,232 9,834 -7% 15%

YoY margin decline due to higher material costs. QoQ margin helped by
operating leverage benefits and discounts in 4QFY17 to clear BS-III stock.
EBITDA margin (%) 20.9% 21.1% 20.5% (19) 40
PBT (Rsmn) 12,740 13,657 11,033 -7% 15%

Net earnings performance to largely reflect the trends at the EBITDA level.
PAT 9,147 9,783 7,907 -7% 16%
Hero MotoCorp
YoY revenue growth led by 6% growth in volumes and price hikes. QoQ
Sales 80,618 73,989 69,152 9% 17%
revenue growth led by 14% volume growth
EBITDA (Rsmn) 12,965 12,301 9,576 5% 35% YoY margin decline due to higher material costs. QoQ margin helped by
EBITDA margin (%) 16.1% 16.6% 13.8% (54) 223 operating leverage benefits and discounts in 4QFY17 to clear BS-III stock.
PBT (Rsmn) 12,800 12,338 9,390 4% 36%

PAT (Rsmn) 9,279 8,832 7,178 5% 29%
Maruti Suzuki
Sales 174,487 149,273 183,334 17% -5% YoY revenue growth led by 13% growth in volumes.
EBITDA (Rsmn) 24,868 22,157 25,607 12% -3% YoY margin decline due to higher material costs and lower margin in
Gujarat plant. QoQ improvement led by one-off negative impact in 4QFY17
EBITDA margin (%) 14.3% 14.8% 14.0% (59) 28 (60bps).
PBT (Rsmn) 22,442 20,420 22,820 10% -2%
PAT 16,607 14,862 17,090 12% -3%
Tata Motors
YoY/QoQ revenue impacted by lower volumes at both JLR (down 3% YoY,
Sales 573,950 658,950 772,172 -13% -26%
26% QoQ) and standalone (down 12% YoY, 27% QoQ)
EBITDA (Rsmn) 65,771 84,185 108,464 -22% -39% Higher RM costs, lower volumes to impact EBITDA margin at both JLR
EBITDA margin (%) 11.5% 12.8% 14.0% (132) (259) (11.0%) and standalone (2.9%)
PBT (Rsmn) 17,521 28,722 52,463 -39% -67% Rising depreciation and stable interest costs amidst falling EBITDA to result
PAT 12,131 25,599 43,766 -53% -72% in a sharp decline in PBT/PAT
Eicher Motor
YoY/QoQ revenue growth driven by 25%/3% respectively growth in Royal
Sales 19,660 15,557 18,881 26% 4%
Enfield volumes
EBITDA (Rsmn) 6,238 4,702 5,848 33% 7%
EBITDA margin expansion driven by higher volumes
EBITDA margin (%) 31.7% 30.2% 31.0% 151 76
PBT (Rsmn) 6,352 4,769 5,956 33% 7%
PBT growth in line with EBITDA. PAT (post share of profit in VECV) to witness
PAT (Rsmn) (after slower growth than PBT due to lower YoY/QoQ profit at VECV
4,700 3,763 4,594 25% 2%
share of VECV)

Company Jun'17E Jun'16 Mar17 YoY QoQ Comments

TVS Motor
YoY revenue growth led by 12% growth in volumes, price hikes and
Sales 35,207 28,809 28,445 22% 24%
favourable mix (higher motorcycle, scooter share)
EBITDA (Rsmn) 2,941 2,003 1,615 47% 82%
YoY/QoQ EBITDA margin helped by strong operating leverage benefits
EBITDA margin (%) 8.4% 7.0% 5.7% 140 267
PBT (Rsmn) 2,436 1,608 1,338 52% 82%
Net earnings performance to largely reflect the trends at the EBITDA level
PAT 1,778 1,212 1,266 47% 40%
Balkrishna Ind.
YoY revenue growth led by volume growth (12%). QoQ revenue growth due
Sales 10,838 9,202 10,458 18% 4%
to price hike
EBITDA (Rsmn) 3,495 3,118 2,982 12% 17% YoY margin decline due to increase in raw material (mainly rubber) prices.
EBITDA margin (%) 32.3% 33.9% 28.5% (164) 373 QoQ margin helped by price hikes
PBT (Rsmn) 2,915 2,475 2,367 18% 23% Increase in EBITDA amidst stable depreciation expenses and falling interest
expenses to result in higher growth in PBT/PAT. QoQ PAT growth further
PAT 1,941 1,620 1,375 20% 41% helped by lower tax rate
Mahindra CIE
YoY revenue growth helped largely by consolidation of Bill Forge. QoQ
Sales 13,796 13,721 13,645 1% 1% revenue growth driven by higher volumes at standalone (M&M's tractor
volumes higher QoQ).
EBITDA (Rsmn) 1,582 1,533 1,680 3% -6% YoY EBITDA margin driven by margin expansion at European subsidiaries as
EBITDA margin (%) 11.5% 11.2% 12.3% 30 (84) transition costs related to Jeco plant diminish.
PBT (Rsmn) 899 865 996 4% -10% PBT to largely track EBITDA level performance. One-time favourable tax
PAT 662 715 731 -7% -9% impacts in YoY/QoQ base to impact net earnings trend.
Exide Industries
YoY growth largely driven by price hikes taken since 2HFY17; YoY volume
growth expected to be impacted due to dealer-destocking prior to GST
Sales 21,116 20,111 19,757 5% 7%
implementation. QoQ growth led by price hikes and seasonal factors
(higher inverter battery sales).
EBITDA (Rsmn) 3,174 3,150 2,621 1% 21% YoY EBITDA margin impacted by price hikes not fully offsetting lead price
increase. QoQ margin improvement driven by the full effect of price hikes,
EBITDA margin (%) 15.0% 15.7% 13.3% (63) 177 some softening in lead price and favourable mix (higher inventor battery
sales)
PBT (Rsmn) 2,807 2,784 2,292 1% 22%
PAT 1,965 1,961 1,651 0% 19%
M&M
YoY/QoQ revenue growth largely driven by 13%/68% growth in tractor
Sales 112,684 105,247 106,121 7% 6%
volumes offset by 4% YoY and 15% QoQ decline in auto volumes
EBITDA (Rsmn) 15,496 14,885 12,368 4% 25% YoY margin to be impacted due to higher material costs. QoQ margin to
EBITDA margin (%) 13.8% 14.1% 11.7% (39) 210 expand due to higher mix of more profitable tractors
PBT (Rsmn) 12,664 12,269 10,853 3% 17%

PBT/PAT performance to largely reflect the trends at the EBITDA level
PAT 9,250 8,706 7,800 6% 19%
Endurance Tech.
Higher YoY/QoQ volumes to drive standalone revenue growth. We expect
Sales 14,778 14,381 13,661 3% 8% European subsidiaries revenue to grow by 5% QoQ due to incremental
revenues from new machining plant.
EBITDA (Rsmn) 2,010 1,844 1,781 9% 13% EBITDA margin improvement led by higher revenues and YoY margin
EBITDA margin (%) 13.6% 12.8% 13.0% 77 56 improvement in European subsidiaries.
PBT (Rsmn) 1,314 1,166 1,216 13% 8%

PAT 930 832 865 12% 8%
Suprajit Engg.
YoY revenue growth to be led by the acquisition of Wescon; QoQ driven by
Sales 3,706 2,544 3,646 46% 2%
higher 2W sales
EBITDA (Rsmn) 620 410 653 51% -5% YoY margin driven by operating leverage benefits, improvement in Phoenix
EBITDA margin (%) 16.7% 16.1% 17.9% 62 (116) Lamps margin and Wescon consolidation
PBT (Rsmn) 527 325 559 62% -6%

PAT 375 223 398 68% -6%

Aviation Stock Performance

3-month
In Apr-May 2017, domestic industry ASK grew by 14% YoY; Indigo reported (%) Rel to
Absolute
above-industry ASK growth of 21% YoY. Despite strong capacity addition, Sensex
Indigos PLF increased to 89% in Apr-May 2017 vs 86% same period last year, Interglobe
14 7
resulting in RPK growth of 25% vs 17% for industry. Indigo should report ASK Aviation
growth of 23% YoY in 1QFY18 and average PLF of 87.5% (83.3% in 1QFY17), Jun17E Quarterly EPS
resulting in RPK growth of 29%. Strong RPK growth should be driven by
aggressive pricing. Hence, we expect yields to decline by 7% YoY for Indigo.
Interglobe
Decline in yields would be partially offset by improved utilisation, resulting in 19.0 18.3
Aviation
2% decline in RASK YoY and decrease in PBT/ASK to Rs0.34 from Rs0.46 in
1QFY17. We remain SELLers on Indigo as it factors in FY17-26E ASK CAGR of FY18E EPS
14%, stable margins of Rs0.3/ASK (in line with FY10-17 average) and (Rs) Ambit Consensus
sustained profits from sale and leaseback, leaving little upside potential. Interglobe
40.8 59.5
Ambit vs consensus: Based on limited consensus data, our 1QFY18 earnings Aviation
estimates are marginally higher than consensus. Source: Ambit Capital research

Company Jun'17E Jun'16 Mar17 YoY (%) QoQ (%) Comments
Interglobe Aviation
Sales (Rs mn) 55,090 45,789 48,482 20 14
Revenues should increase by 20% YoY on the back of 23% increase in
EBITDA (Rs mn) 9,131 8,741 4,284 4 113 ASK and 4% higher PLFs, partially offset by ~7% YoY decline in yields.
Indigo should report PBT/ASK of Rs0.34/ASK vs Rs0.46/ASK in 1QFY17
EBITDA margin (%) 16.6% 19.1% 8.8% -252 bps 774 bps
mainly due to decline in yields and higher fuel costs. Indigos
PBT (Rs mn) 9,405 7,467 6,190 26 52 EBITDA/PAT growth of 4%/16% YoY respectively should lag behind
revenue growth of 20%.
PAT (Rs mn) 6,866 5,918 4,403 16 56

Banking Stock Performance

(%) 3-month
Loan growth for the industry stayed low at ~6% YoY (end-June17). NIMs Rel to
Absolute
should largely be flat with dormant competition from PSU banks. Stressed Sensex
corporates are likely to keep NPA recognition and credit costs elevated for HDFC Bank 16 10
corporate lenders, while SFBs/MFIs recognise NPAs/credit costs due to mass ICICI Bank 15 9
defaults seen in the last three quarters. For retail-focused private sector Axis Bank (0) (6)
banks, profitability should stay stable as loan growth trends hold on to
Kotak Mahindra Bk. 10 5
market-share gains. Overall, we estimate RoA of 1.3% for private sector
banks and 0.26% for PSU banks. We expect banks credit growth to stay IndusInd Bk. 8 3
subdued at 10-11% CAGR over FY18-19E (sub-5% in FY17) vs 13% CAGR in the RBL Bank (5) (11)
last five years. We are SELLers on all banks. Corporate banks would see State Bk. of India (3) (9)
volatile earnings with RBI-driven large NPA clean-up. SFBs/MFIs are yet to Bank of Baroda (5) (10)
completely account for customer defaults and re-orient their businesses.
Punjab National Bk. (4) (9)
Retail-focused private sector banks expensive valuations leave no upside.
Bank of India 0 (5)
Ambit vs consensus
Union Bk. of India (1) (6)
Our earnings estimates for the quarter are 5-10% lower than consensus and ~11% Federal Bank 32 26
lower than consensus for FY18. The divergence is predominantly due to weaker loan
Karur Vysya Bk. 26 21
growth forecasts, higher slippage assumptions and weaker upgrades/recovery
forecasts. City Union Bank 19 13
South Indian Bk. 30 25
Exhibit 7: Roll forward leads to a minor upgrade in our target price
Equitas Holdings (4) (9)
Target Price (Rs) Old New
Ujjivan Financials (18) (24)
New Private
HDFC Bank 1,190 1,235
ICICI Bank 258 258 FY18E EPS
Axis Bank 491 491 (Rs) Ambit Consensus
Kotak Mahindra Bank 563 584
HDFC Bank 66.5 68.7
IndusInd Bank 1,175 1,219
ICICI Bank 10.5 15.7
RBL Bank 375 375
Axis Bank 23.7 26.4
PSUs
Kotak Mahindra Bk. 30.8 31.7
SBI 250 250
Bank of Baroda 181 181 IndusInd Bk. 58.9 61.5
Punjab National Bank 113 113 RBL Bank 13.3 16.6
Bank of India 63 63 State Bk. of India 16.0 18.3
Union Bank 108 108 Bank of Baroda 16.7 14.7
Old Private Punjab National Bk. 8.3 12.4
Federal Bank 64 66
Bank of India 7.4 7.2
Karur Vysya Bank 90 93
Union Bk. of India 14.5 19.2
City Union Bank 150 156
Federal Bank 5.4 6.4
South Indian Bank 17.8 18.5
Karur Vysya Bk. 8.9 10.9
Small Finance Banks
Equitas Holdings 130 135 City Union Bank 9.2 9.4
Ujjivan Financials 290 301 South Indian Bk. 3.0 2.9
Source: Ambit Capital research Equitas Holdings 5.0 5.6
Recommendations Ujjivan Financials 12.6 12.9
The consolidated net profit for private banks in our coverage universe is likely to grow
by 17% YoY, while PSU banks net profit would grow faster on a very low base (62%
QoQ). Sequentially, consolidated RoA should remain unchanged at ~0.87%. New
private sector banks are expected to deliver an average RoA of 1.3% compared with
PSU banks ~0.26%. We are SELLers on all banks as we see material downward risks
to earnings estimates from the impact of crackdown on the informal economy and
real estate weakness as the economic activity unravels in the next 6-12 months. We
see the major downside risks for Kotak Mahindra Bank (KMB IN, US$28.2bn, TP
Rs584, 39% downside) and Punjab National Bank (PNB IN, US$4.5bn, TP Rs113, 25%
downside).

Exhibit 8: Detailed Jun17E quarterly estimates

Jun'17 Jun'16 Mar'17 YoY QoQ Comment
HDFC Bank
Net Interest Income (Rs mn) 93,322 77,814 90,551 20% 3%
Operating Profit (Rs mn) 72,120 58,192 72,794 24% -1%
PAT growth to be in line with the growth in net interest
Cost to income (%) 42.8% 45.0% 41.8%
income
PBT (Rs mn) 59,250 49,525 60,176 20% -2%
PAT (Rs mn) 38,927 32,389 39,901 20% -2%
ICICI Bank
Net Interest Income (Rs mn) 57,156 51,585 59,622 11% -4%
Operating Profit (Rs mn) 57,156 52,147 51,120 10% 12%
Muted loan book growth (~7%) and elevated provisions to
Cost to income (%) 39.0% 39.3% 43.1%
limit RoA to 90bps
PBT (Rs mn) 23,535 27,002 22,138 -13% 6%
PAT (Rs mn) 17,651 22,324 20,246 -21% -13%
Axis Bank
Operating Profit (Rs mn) 42,671 44,694 43,747 -5% -2%
We expect muted loan book growth of 11% YoY; RoA of
Cost to income (%) 42.9% 38.4% 43.5%
75bps due to elevated credit costs
PBT (Rs mn) 17,526 23,522 17,935 -25% -2%
PAT (Rs mn) 11,655 15,555 12,251 -25% -5%
Kotak Mahindra Bank
Cost to income (%) 46.5% 50.4% 46.2% Loan growth to improve marginally (~15%); growth in PAT
PBT (Rs mn) 15,077 11,355 14,346 33% 5% to be in line with growth in operating income
PAT (Rs mn) - standalone 10,037 7,420 9,765 35% 3%
PAT (Rs mn) - consolidated 13,814 10,671 14,043 29% -2%
IndusInd Bank
Growth in PAT to be slightly lower than the growth in net
Cost to income (%) 47.7% 47.0% 45.4%
interest income
PBT (Rs mn) 12,194 10,033 11,421 22% 7%
PAT (Rs mn) 8,024 6,614 7,516 21% 7%
RBL Bank
Operating Profit (Rs mn) 2,610 1,845 2,818 41% -7% Strong loan book growth (~38% YoY) and NIM expansion
Cost to income (%) 54.8% 55.2% 52.1% (YoY) to boost operating income. However, elevated credit
PBT (Rs mn) 1,871 1,419 1,997 32% -6% cost will limit RoA to 1%
PAT (Rs mn) 1,263 973 1,301 30% -3%
State Bank of India*
Expect muted NIM and elevated credit cost to keep RoA at
Cost to income (%) 43.6% 48.9% 43.6%
0.42%
PBT (Rs mn) 43,721 36,408 42,864 20% 2%
PAT (Rs mn) 28,711 25,210 28,148 14% 2%
Bank of Baroda
Elevated credit cost and muted loan book to limit RoA at
Cost to income (%) 45.2% 44.6% 45.7%
0.4%
PBT (Rs mn) 8,860 6,654 3,972 33% 123%
PAT (Rs mn) 6,468 4,236 1,547 53% 318%

Jun'17 Jun'16 Mar'17 YoY QoQ Comment

Punjab National Bank
Operating Profit (Rs mn) 33,065 32,746 62,318 1% -47% Expecting loan book to grow by ~4% YoY, margin
Cost to income (%) 46.4% 45.9% 8.2% compression and elevated credit costs to lead to RoA of
PBT (Rs mn) 6,256 5,362 4,783 17% 31% 0.24%
PAT (Rs mn) 4,254 3,064 2,619 39% 62%
Bank of India
Muted loan growth (~2% YoY) and elevated provisioning
Cost to income (%) 46.8% 58.8% 40.1%
cost to limit RoA of 0.12%
PBT (Rs mn) 2,356 -11,163 -16,087 -121% -115%
PAT (Rs mn) 1,885 -7,414 -10,455 -125% -118%
Union Bank of India
Muted loan growth (~7% YoY), NIM compression and higher
Cost to income (%) 49.8% 48.3% 44.3%
provisioning cost to limit RoA of 0.17%
PBT (Rs mn) 2,962 2,721 -3,101 9% -196%
PAT (Rs mn) 1,970 1,663 1,082 18% 82%
Federal Bank
Cost to income (%) 52.6% 54.2% 51.2% Strong loan growth of 29%, along with RoA at 0.86%
PBT (Rs mn) 3,817 2,574 4,265 48% -11%
PAT (Rs mn) 2,519 1,673 2,566 51% -2%
Karur Vysya Bank
Operating Profit (Rs mn) 3,738 2,830 5,071 32% -26% We expect some recovery in margins (YoY), but muted loans
Cost to income (%) 47.8% 56.0% 37.6% growth and elevated credit costs to keep RoA at around
PBT (Rs mn) 1,947 2,161 2,896 -10% -33% ~95bps
PAT (Rs mn) 1,460 1,464 2,176 0% -33%
City Union Bank
Loan growth is likely to remain around ~11%; healthy NIM
Cost to income (%) 40.7% 39.7% 43.3%
support RoA at ~1.45%
PBT (Rs mn) 1,771 1,650 1,764 7% 0%
PAT (Rs mn) 1,293 1,235 1,289 5% 0%
South Indian Bank
Elevated cost-to-income ratio and provisions should lead to
Cost to income (%) 54.7% 52.6% 51.3%
muted RoA of 0.45%
PBT (Rs mn) 1,294 1,454 1,155 -11% 12%
PAT (Rs mn) 848 951 755 -11% 12%
Equitas Holdings
Operating Profit (Rs mn) 885 1,139 474 -22% 87%
Muted collection efficiencies for industry will challenge the
Cost to income (%) 68.6% 49.9% 80.4%
RoA of the companies
PBT (Rs mn) 470 963 109 -51% 331%
PAT (Rs mn) 301 612 69 -51% 336%
Ujjivan Financials
Operating Profit (Rs mn) 1,044 1,144 418 -9% 150%
Muted collection efficiencies for industry will challenge the
Cost to income (%) 59.1% 45.3% 76.6%
RoA of the companies
PBT (Rs mn) 580 1,081 346 -46% 68%
PAT (Rs mn) 377 714 194 -47% 95%
Source: Company, Ambit Capital research; Note: the estimates for 1QFY18 for SBI are for merged entity and is not strictly comparable with earlier numbers

Exhibit 9: Revisions ahead of earnings season

New Estimates Old Estimates Change
Comment
FY18E FY19E FY18E FY19E FY18E FY19E
ICICI Bank
Recommendation SELL SELL
TP (Rs) 258 258 0%
Net interest income (Rs mn) 228,699 259,831 226,938 257,571 1% 1%
Operating profit (Rs mn) 215,418 247,530 213,656 245,269 1% 1%
Cost to income (%) 43.6% 43.0% 43.8% 43.2% EPS has been adjusted for the recent bonus
PBT (Rs mn) 89,896 159,848 87,981 157,466 2% 2% issue.
PAT (Rs mn) 67,422 119,886 65,986 118,100 2% 2%
EPS (Rs) 10.5 18.7 11.3 20.3 -7% -8%
Federal Bank
TP (Rs) 66 64 4%
Cost to income (%) 52.4% 51.8% 53.1% 52.5% The estimates are updated for the capital raising
done by the bank. Roll forward leads to a minor
PBT (Rs mn) 16,013 19,245 14,980 18,048 7% 7% upgrade in our target price.
PAT (Rs mn) 10,568 12,702 9,887 11,911 7% 7%
EPS (Rs) 5.4 6.5 5.7 6.9 -5% -5%
South Indian Bank
TP (Rs) 18.5 17.8 4%
Cost to income (%) 50.0% 49.9% 52.8% 53.7% Factoring in the 4QFY17 results financials. Roll
forward leads to a minor upgrade in our target
PBT (Rs mn) 8,222 9,470 6,739 7,632 22% 24% price.
PAT (Rs mn) 5,377 6,192 4,406 4,991 22% 24%
EPS (Rs) 3.0 3.4 3.3 3.7 -9% -7%
Source: Company, Ambit Capital research

Building Materials Stock Performance

3-month
The hopes of demand recovery in 1Q after the not-so-good 2HFY17 (due to (%) Rel to
Absolute
demonetisation) disappeared in the wake of channel inventory liquidation in Sensex
the run-up to the GST. GST provisions, such as: (a) input tax credit being Pidilite 16.9 12.1
allowed only on 60% of the excise on presumptive basis; and (b) no input tax Century Ply 11.8 7.0
credit on inventory with age >1 years led to significant channel destocking in Havells (0.5) (6.1)
the month of June. The impact of GST transition should spread even in 2Q as
Crompton 5.4 (0.1)
the unorganised channel is stuffed with inventory and organised channel will
take at least a month to familiarise with GST. Across building material Finolex Cables (5.1) (10.6)
categories, we expect low single-digit revenue growth YoY and limited V-Guard (1.7) (7.2)
chances for most categories to gain over the unorganised given high GST rate Bajaj Electricals (4.3) (9.8)
of 28%. Further, we expect margin pressures as cost of inputs increase QoQ in Supreme Ind 13.1 7.5
a few categories, such as cables and wires. Hence, we continue to believe that
valuations are expensive; Bajaj Electricals remains our top BUY.
Jun17E Quarterly EPS
Adhesives & Construction chemicals: Support to channel is the saviour
Company Ambit Consensus
Given the slowdown in the building material industry, Pidilites growth rates had
Pidilite 5.4 5.2
tapered off over FY17 (3% YoY growth for the overall business). Though the negative
impact of demonetisation has been left far behind, the pre-GST period for the Century Ply 2.1 2.2
company could have been adversely impacted due to a lower (18%) than pre-GST tax Havells 2.2 NA
incidence of 22-23% on majority of the companys products. However, the company Crompton 1.3 NA
proactively extended a helping hand to its channel by agreeing to compensate on any Finolex Cables NA
4.2
tax losses made on the inventory purchased in the month of June.
V-Guard 0.8 NA
We expect a 6% YoY revenue growth in 1QFY18; majorly driven by the domestic Bajaj Electricals 2.4 NA
Consumer & Bazaar business, as the Industrials and International businesses
Supreme Ind 10.0 9.6
continue to struggle. Further, we are building in margin pressures due to rise in input
prices YoY (24% EBITDA margin in 1QFY18E, vs 25% in 1QFY17), which may not have
been completely passed on to the consumer given the current business environment. FY18E EPS
Three questions for the Pidilite management: Company Ambit Consensus

Pidilite 19.0 18.7
We hear Pidilite has extended support to its channel partners by agreeing to make
up for any tax loss incurred post-GST implementation on inventory purchased in Century Ply 9.4 10.5
the month of June. What sort of write-off they are provisioning for this Havells 9.2 11.5
compensation? Should one expect a one-time hit in margins in 2QFY18? Crompton 5.2 5.6
How should one think of the potential of the Dr. Fixit brand and its extensions? Finolex Cables 22.3 22.1
One notes that the waterproofing market is very small in India and can grow to be V-Guard 3.6 4.6
3-5X of its current size easily. What are the 2-3 big changes that the company Bajaj Electricals 11.1 15.4
expects in this industry and is the company driving those changes to beat the
Havells 9.2 11.5
leader, capturing more than the incremental growth?
Supreme 36.1 38.3
How severely is the slowdown in the new housing affecting construction chemicals Source: Ambit Capital research
sales?
Plyboards: The unorganised is sticky
Our channel checks suggest that even after the implementation of the GST, retailers
will continue to sell supplies of the unorganised, as they hardly make any money on
supplies from the organized players. In 1QFY18, we also heard of a few retailers
stocking supplies of the unorganised for around two-to-three months.
Channel partners further suggest that the quarter had been fairly weak for Century Ply
(as also for Greenply); April was weaker than last year, due to higher sales in March
in order to meet targets, and June was weak due to inventory liquidation. Hence, we
build in flat YoY volumes for 1QFY18; realisations however, are expected to be higher
YoY for both ply and laminates businesses due to price hikes taken in FY17.
4QFY17 EBITDA margins peaked due to: (a) higher face veneer sales; and (b) writing
back of channel incentives. We expect slightly lower margins at 16.5% in a weak
demand scenario.

Three questions for the Century Ply management:

With a 28% GST rate, do you think the unorganised would continue to operate in
a parallel economy, not paying any taxes? Do you expect a small shift from the
unorganised to organised manufacturers as compared to hopes of a larger shift
earlier? Will this impact your growth guidance for the year?
When should one expect the MDF plant to run commercial production? What are
the reasons for these delays? In light of these delays, are you looking to pull back
your guidance?
What is the current situation at Myanmar and Loas with regards to face veneer
production? What sort of capacities are the plants running at? Is there any raw
material risk?
Light Electrical: GST Googly
Consequent to channel destocking, revenue growth across companies is likely to be
weak. Whilst Bajaj (consumer)/V-Guard are likely to report revenue decline of
10%/2% YoY, Havells (ex-Lloyd)/Crompton/Finolex are likely to report low single-digit
revenue growth of 5%/2%/7% respectively. Including Lloyd, Havells revenue growth is
likely to be 18%; Bajajs E&P business is likely to register a revenue growth of 46% led
by nearly doubling of opening order book.
Increase in the commodity prices (copper prices up ~16% YoY) imply margin
contraction across companies; Havells (ex-Lloyd)/Crompton/V-Guard/Finolex/Bajaj
(consumer) are likely to report EBITDA margin contraction of
60bps/150bps/310bps/180bps/280bps respectively. We expect Havells to earn 6%
EBITDA margin on Lloyds portfolio; Bajaj is likely to earn 8% EBIT margin in E&P
business.
We maintain our cautious outlook on the sector given expensive valuations of ~40x
FY18E EPS despite near-term headwinds pertaining to demand (deceleration in real
estate-led demand due to decline in new launches under RERA) and margins (limited
pricing power) given increase in commodity prices. Lastly, the thesis of accelerated
formalisation is unlikely to play out given: (a) raw materials, copper and PVC, are
bought from the scrap market by unorganised; (b) unorganised players incentive to
remain unorganised has increased given tax rate of 18% vs 18-26% earlier; and (c)
the incentive for developers to buy from unorganised players will continue given 12%
GST rate on construction property vs 28% rate on most inputs. We are SELLers on
Crompton, V-Guard, Havells and Finolex due to expensive valuations. Bajaj Electricals
is our only BUY in the sector.
Paint companies remain largely resilient to supply chain disruption
Paint companies have lower dependency on wholesale channel due to its superior
dealer network. Hence, we believe paint companies will be less disrupted due to
supply chain disruption in the run-up to the GST. We expect paint companies to report
volume growth of ~5% during the quarter. Paint companies revenue should grow by
~10% YoY due to volume growth and cumulative price hike of ~5% taken in Feb17
and May17. We expect gross margin to contract by 55bps ~YoY due to input cost
headwinds. EBITDA margin to contract further by ~100bps YoY resulting in PAT
growth of only ~5% YoY.


Company name Jun'17 Jun'16 Mar'17 YoY QoQ Comments
Pidilite
Whilst we expect international revenues and industrials revenues to
Sales (Rs mn) 16,590 15,694 12,954 6% 28% remain flat; domestic 'Consumer & Bazaar' revenues are expected
to grow at 8% YoY
EBITDA (Rs mn) 3,990 3,943 2,578 1% 55% We expect 23.0% and 17.5% EBIT margins in the Consumer &
Bazaar and Industrial segments, respectively; lower than 1QFY17 in
EBITDA margin (%) 24.0% 25.1% 19.9% -4% 21% which the company witnessed benefits of decline in raw material
(crude) prices
PBT (Rs mn) 3,925 3,887 2,520 1% 56%
No major change in depreciation and tax rates (30%)
PAT (Rs mn) 2,747 2,713 1,549 1% 77%
Century Ply
Expect flat volume growth YoY for the quarter, given: (a) excessive
channel stuffing in 4QFY17 to meet yearly targets, (b) channel
Sales (Rs mn) 4,301 4,058 4,885 6% -12% destocking in June, and (c) no revenues from the MDF plant.
Realisation for the core ply business has increased by 8% over the
year FY18
EBITDA (Rs mn) 710 661 838 7% -15% 4QFY17 EBITDA margins peaked due to: (a) higher face veneer
sales and (b) writing back of channel incentives. We expect slightly
EBITDA margin (%) 16.5% 16.3% 17.1% 1% -4% lower margins in a weak demand scenario.
PBT (Rs mn) 550 488 777 13% -29% Trickle-down impact of a slightly higher EBITDA margin;
depreciation amount has increased YoY due to commissioning of
PAT (Rs mn) 460 412 544 12% -16% the particle board plant
Supreme Ind
We expect stable realisations QoQ, however, volume growth of the
overall company to increase by 4% YoY. In the plastic pipes
Sales (Rs mn) 13,473 11,893 12,826 13% 5%
segment we expect a moderate 5% YoY volume growth, due to
persisting weakness in agri and slowdown pre-GST adoption
Margin declines expected in weak demand environment, and
EBITDA (Rs mn) 2,207 2,011 2,426 10% -9% increasing competition across key product categories -- pipes and
packaging
EBITDA margin (%) 16.4% 16.9% 18.9% -3% -13%
PBT (Rs mn) 1,752 1,550 2,006 13% -13% Operating leverage kicks in at the PBT level
PAT (Rs mn) 1,274 1,152 1,482 11% -14%
Havells
We expect organic sales growth to decelerate from 12.8% in FY17
to 4.9% YoY in 1QFY18 (ex-Lloyd revenue at Rs15.4bn) given
Sales (Rs mn) 17,304 14,668 17,102 18% 1%
channel destocking in the run-up to the GST. We expect revenue of
Rs1.9bn from Lloyd for the period 8 May'17 to 30 June.
EBITDA (Rs mn) 2,126 2,012 2,296 6% -7% Ex-Lloyd margin to decline by 60bps to 13.1% given unfavourable
EBITDA margin (%) 12.3% 13.7% 13.4% -140bps -110bps operating leverage; Lloyd to report 6% margin.
Declines led by higher interest expense and lower other income due
PBT (Rs mn) 1,933 2,022 2,337 -4% -17%
to cash outgo on the acquisition of Lloyd.
PAT (Rs mn) 1,371 1,456 1,715 -6% -20% We expect tax rate to increase from 28.0% in 1QFY17 to 29.1%
Crompton
Consumer
We expect sales growth to decelerate from 11% in FY17 to 2% led
Sales (Rs mn) 11,420 11,208 10,762 2% 6%
by channel destocking in the run-up to the GST rollout.
EBITDA (Rs mn) 1,399 1,550 1,387 -9.7% 1% Decline led by unfavourable operating leverage and ESOP cost
EBITDA margin (%) 12.3% 13.8% 12.9% -150bps -60bps provision
PBT (Rs mn) 1,276 1,377 1,273 -7% 0% Trickle-down impact of lower EBITDA partly offset by higher other
PAT (Rs mn) 855 922 886 -7% -4% income
Bajaj Electricals
Whilst consumer revenue is likely to decline by 10% YoY due to
Sales (Rs mn) 10,930 9,518 12,639 15% -14% channel destocking in the run-up to the GST implementation, E&P
revenue should grow by 46% YoY
EBITDA (Rs mn) 512 564 721 -9% -29% In consumer + lighting, EBIT margin would decline by 280bps YoY
to 1.8% due to volume decline. In EPC, EBIT margin would improve
EBITDA margin (%) 4.7% 5.9% 5.7% -120bps -100bps by 50bps to 8.0% led by higher revenue growth.
PBT (Rs mn) 368 367 585 0% -37% Interest expense should decline by 42% YoY led by decline in debt
PAT (Rs mn) 244 229 366 6% -34% Tax rate likely to decline from 37.7% in 1QFY17 to 33.9%


V-Guard
Revenue decline led by channel destocking in the run-up to the
GST. Whilst the electrical cables and wires would grow at 11% YoY
Sales (Rs mn) 5,630 5,727 6,233 -2% -10%
led by 9% higher YoY realisation, stabilisers/inverter/pumps should
decline by ~10% YoY.
EBITDA (Rs mn) 450 638 594 -29% -24% Margin decline led by unfavourable product mix and unfavourable
EBITDA margin (%) 8.0% 11.1% 9.5% -310bps -150bps operating leverage
PBT (Rs mn) 438 624 579 -30% -24% Trickle-down impact of lower EBITDA
Tax rate to decline from 31.5% in 1QFY17 to 26.0% led by higher
PAT (Rs mn) 324 428 419 -24% -23%
revenue from tax exempt Sikkim facility.
Finolex Cables
Despite ~5% decline in volume due to channel destocking in the
run-up to the GST; electrical cables and wires revenue should grow
Sales (Rs mn) 6,376 5,966 7,846 7% -19%
by 3% led by ~9% realisation growth. Communication cables
revenue should grow by 12% YoY.
EBITDA (Rs mn) 854 904 1,136 -6% -25%
Margin likely to contract led by unfavourable operating leverage.
EBITDA margin (%) 13.4% 15.2% 14.5% -180bps -110bps
PBT (Rs mn) 854 913 1,023 -6% -17%
Trickle-down impact of lower EBITDA
PAT (Rs mn) 640 672 880 -5% -27%
Paints
Asian Paints
Sales (Rs mn) 40,193 36,374 39,525 11% 2% Assuming 6% volume growth and 5% price/mix-led growth
EBITDA (Rs mn) 8,622 8,203 7,119 5% 21% Expect gross margin contraction of 60bps YoY due to input cost
inflation, EBITDA margin to contract by 110bps due to higher other
EBITDA margin (%) 21.5% 22.6% 18.0% (110) 344 expenditure
PBT (Rs mn) 8,497 8,003 6,895 6% 23%
PAT should grow by 6% due to margin contraction
PAT (Rs mn) 5,733 5,400 4,690 6% 22%
Berger Paints
EBITDA (Rs mn) 2,035 1,951 1,611 4% 26% We expect gross margin contraction of 50bps YoY due to input cost
inflation; EBITDA margin should contract by ~90bps due to higher
EBITDA margin (%) 16.5% 17.4% 14.5% (90) 207 other expenditure
PBT (Rs mn) 1,810 1,763 1,476 3% 23%
PAT (Rs mn) 1,199 1,168 1,030 3% 16%

Exhibit 11: Revisions ahead of the earnings season

Change in
New Estimates Old Estimates
Rs mn unless specified estimates Comments
Havells
TP (Rs) 429 418 2.7% Led by rollover of TP by 3 months
Revenues (Rs mn) 91,813 107,002 92,266 107,305 0% 0%
EBITDA (Rs mn) 11,322 13,556 11,368 13,552 0% 0%
EBITDA margin (%) 12.3% 12.7% 12.3% 12.6% 0bps 10bps
No change
PBT (Rs mn) 10,595 12,061 10,641 12,050 0% 0%
PAT (Rs mn) 7,510 8,547 7,542 8,540 0% 0%
EPS (Rs) 11.9 13.6 12.0 13.6 0% 0%
Bajaj Electricals
Recommendation BUY BUY
TP (Rs) 384 388 -1% Led by 3%/1% cut in FY18/FY19 EBITDA
Cut due to sales decline in 1QFY18 given
Revenues (Rs mn) 50,478 56,516 51,030 57,342 -1% -1%
channel destocking in run-up to the GST
EBITDA (Rs mn) 2,904 3,781 3,045 3,956 -5% -4%
Led by unfavourable operating leverage
EBITDA margin (%) 5.8% 6.7% 6.0% 6.9% -20bps -20bps
PBT (Rs mn) 2,323 3,374 2,398 3,392 -3% -1%
PAT (Rs mn) 1,509 2,192 1,558 2,203 -3% -1% Trickle-down impact of lower EBITDA
EPS (Rs) 15.0 21.8 15.5 21.9 -3% -1%
Finolex Cables
TP (Rs) 471 458 3% Led by rollover of TP by 3 months
Marginal upgrade led by increase in the
Revenues (Rs mn) 30,562 34,878 30,562 34,878 0% 0%
realisation
EBITDA (Rs mn) 4,057 4,525 4,057 4,525 0% 0%
No change in EBITDA margin estimate
PBT (Rs mn) 4,489 4,932 4,489 4,932 0% 0%
PAT (Rs mn) 3,417 3,734 3,417 3,734 0% 0% Trickle-down impact of higher EBITDA
EPS (Rs) 22.3 24.4 22.3 24.4 0% 0%
Crompton Consumer
Cut in FY17 revenue led by the channel
destocking in the run-up to the GST. Cut in FY19
Revenues (Rs mn) 44,398 50,381 46,032 52,043 -4% -3%
revenue led by lower base impact and increase
in the competitive intensity in the fans.
EBITDA (Rs mn) 5,491 6,616 5,767 6,848 -5% -3%
Led by unfavourable operating leverage
PBT (Rs mn) 4,998 6,218 5,231 6,493 -4% -4%
EPS (Rs) 5.3 6.6 5.6 6.9 -4% -4%
V-Guard
TP (Rs) 113 109 4% Rollover of TP by 3 months
Revenues (Rs mn) 24,684 28,634 24,684 28,634 0% 0%
EBITDA (Rs mn) 2,581 3,137 2,581 3,137 0% 0%
No change
PBT (Rs mn) 2,530 3,096 2,530 3,096 0% 0%
PAT (Rs mn) 1,872 2,285 1,872 2,285 0% 0%
EPS (Rs) 4.4 5.4 4.4 5.4 0% 0%

Capital Goods Stock Performance

3-month
(%)
Execution across sub-sectors is likely to be moderately weak. Revenues of Absolute Rel to Sensex
BHEL (pick-up in execution), Thermax (higher short cycle orders), Cummins BHEL (22.8) (28.3)
(KKC, pick-up in the industrial revenue) should grow at 10%, 6% and 9%
Thermax (6.0) (11.6)
respectively. Greaves (GRV) should report flat revenue due to decline in auto
Inox Wind (22.0) (27.6)
engine volumes. Inox should report 75% decline in revenue as execution has
virtually stopped given decline in wind tariffs. Whilst BHEL may report 320bps Cummins (5.9) (11.5)
improvement in EBITDA margin, Thermax may report flat margin. KKC/GRV Greaves Cotton (3.9) (9.5)
may report 50bps/60bps decline in margin. Inox will report EBITDA loss of
Rs584mn. We reiterate our negative outlook on the BTG sector given
June17E Quarterly EPS
structural decline in opportunity size; we are cautious on WTG and genset
sector given increase in competitive intensity. Our top BUY is GRV; our top (Rs) Ambit Consensus
SELL is KKC. BHEL 0.5 NA
Ambit vs consensus: Currently no credible consensus estimates are available for all Thermax 4.4 NA
companies under coverage. Our FY18 EPS estimates for most capital goods Inox Wind (2.9) NA
companies are higher than consensus. Cummins 6.5 NA
Key recommendations: Greaves
1.6 NA
Cotton
Cummins (KKC IN, 6M ADV US$4.5mn, SELL, TP Rs607/share, 34% Downside)
FY18E EPS
EBITDA margin may structurally decline as market shifts to medium/low KVA from
high KVA given the combination of declining power deficit and low capacity utilisation
across industries. Further, the growth in the distribution business (high-margin BHEL 6.4 8.1
business) may decelerate given the decline in engine working hours due to the low- Thermax 28.5 27.6
running hours for engines used for back-up applications. Inox Wind (2.6) NA
Cummins 28.6 42.0
Competitive intensity in gensets has been increasing, with KOEL looking at
Greaves Cotton 9.6 8.6
entering the high KVA segment (625KVA and above). Also, Sterling Wilson has
forayed into the manufacturing of gensets from 10KVA to 500KVA; hitherto it was
manufacturing larger gensets from 500KVA to 3,300KVA.
KKC trades at a punchy multiple of 32x FY18E P/E, a ~40% premium to its
historical average. KKCs P/E multiple has been re-rated by 65% since the
commissioning of Phaltan export facility in 4QFY14. However, we believe investor
excitement may plummet, as they learn that this export opportunity is only transient
due to shift in manufacturing from the UK plant to India.
Greaves Cotton (GRV IN, 6M ADV US$1.2mn, BUY, TP Rs194/share, 21%

Upside)
New areas of growth: Greaves will register revenue growth of 16% over FY17-19 vs
-1% over FY15-17 led by: (a) launch of new mini power tiller/paddy weeder; (b) multi-
brand spares business for 2W/3W/SCV (Rs35bn p.a. market).
New signups: We are positive on OEM sign-ups for Leap engine (1.5-3.5 tonne)
given it is BS-VI protected and state-of-the-art technology (designed in Germany;
known for diesel engines).
Pick-up in the industry volumes: The three-wheeler industry growth which declined
by ~3% over FY10-17 is likely to recover to 6.5% over FY17-19 led by a reduction in
interest rates (80% of vehicles are bought with loans).
Margin improvement: EBITDA margin to improve by 150bps over FY17-19 led by
increasing revenue share of the after-sales and agriculture segments, both of which
are high-margin businesses.
Valuation of 16.7x FY18E P/E is attractive given FY18E RoE/FCF yield of 24%/3.8%
and 20% EPS CAGR over FY17-19E.


Company name Jun'17E Jun'16 Mar'17 YoY QoQ Comments
BHEL
Sales (Rs mn) 61,848 56,225 96,882 10% -36% Revenue growth to be led by pick-up in execution
EBITDA (Rs mn) 2,803 711 13,249 294% -79% Margin expansion to be led by favourable operating leverage and
EBITDA margin (%) 4.5% 1.3% 13.7% 320bps -920bps lower provisioning on receivables
APBT (Rs mn) 1,755 966 9,426 82% -81%
Trickle-down impact of higher EBITDA
APAT (Rs mn) 1,176 778 8,896 51% -87%
Thermax
Revenue growth should be led by higher opening order book in
Sales (Rs mn) 8,634 8,145 13,714 6% -37%
FY18
EBITDA (Rs mn) 670 637 1,521 5% -56%
No change
EBITDA margin (%) 7.8% 7.8% 11.1% 0bps -330bps
PBT (Rs mn) 780 673 335 16% 133%
To be led by higher other income
PAT (Rs mn) 523 452 1,161 16% -55%
Inox Wind
Sales (Rs mn) 1,077 4,350 10,192 -75% -89%
EBITDA (Rs mn) (584) 433 2,191 -235% -127%
Sharp decline in revenue and profitability as the work on wind
EBITDA margin (%) -54.2% 10.0% 21.5% NA NA projects has virtually stopped from Apr'17 as the states have
stopped signing PPA under feed-in-tariff regime.
PBT (Rs mn) (742) 155 1,779 -579% -142%
PAT (Rs mn) (646) 118 1,275 -646% -151%
Cummins
We expect revenue growth of 30%/15% in industrial engines/after-
market led by increase in infra-led demand/pick-up in the
Sales (Rs mn) 13,698 12,590 11,844 9% 16% utilisations. Domestic powergen/exports should witness 7%/7%
growth. We expect NIL revenue from auto engines as highlighted
by management in 4Q conference call.
EBITDA (Rs mn) 2,164 2,063 1,700 5% 27% Led by gross margin decline due to pricing pressure in the domestic
powergen and unfavourable product mix; industrial engines is a
EBITDA margin (%) 15.8% 16.4% 14.4% -60bps 140bps low-margin business.
PBT (Rs mn) 2,445 2,252 1,954 9% 25% Higher PBT growth led by 33% higher other income
We expect tax rate to increase from 20% in 1QFY17 to 26% from
APAT (Rs mn) 1,809 1,812 1,585 0% 14% FY18 (sixth year), as Phaltan will get only 30% tax exemption vs
100% earlier.
Greaves Cotton
Revenues should increase led by 50% growth in genset volume (vs
60% in 9MFY17) and 35% YoY growth in after-market led by multi-
Sales (Rs mn) 4,050 4,051 3,866 0% 5% brand spares. However, we expect volume decline of 12%/15% in
3W/4W given double-digit decline in domestic sales/production of
Greaves OEM in Jan and Feb'17.
EBITDA (Rs mn) 613 632 552 -3% 11%
Assume margin to remain flat
EBITDA margin (%) 15.1% 15.6% 14.3% -50bps 80bps
APBT (Rs mn) 588 646 565 -9% 4% Trickle-down impact of higher EBITDA
APAT (Rs mn) 394 450 379 -13% 4% We expect tax rate to increase from 30% in 4QFY16 to 33%


New Estimates Old Estimates Change in estimates
Rs mn unless specified Comments
BHEL
TP (Rs) 116 128 -9.3% Cut led by 32%/48% cut in FY18/FY19 EBITDA
Upgrade led by our expectation of the receipt of the
Revenues (Rs mn) 333,721 329,483 321,722 319,312 4% 3% environment clearance for the Yadadri project (~18%
of the order book).
EBITDA (Rs mn) 25,878 26,069 26,920 33,193 -4% -21%
Cut in margin led by pay hikes in FY18
PBT (Rs mn) 23,241 20,374 26,871 33,128 -14% -38%
EPS (Rs) 6.4 5.6 7.6 9.3 -16% -40%
Thermax
TP (Rs) 648 629 3.0% Consequent to rollover of TP by 3 months
Revenues (Rs mn) 49,507 52,784 49,507 52,784 0% 0%
EBITDA (Rs mn) 5,446 5,806 5,446 5,806 0% 0%
EBITDA margin (%) 11% 11% 11% 11% 0bps 0bps
No Change
PBT (Rs mn) 5,061 5,621 5,061 5,621 0% 0%
PAT (Rs mn) 3,391 3,766 3,391 3,766 0% 0%
EPS (Rs) 28.5 31.6 28.5 31.6 0% 0%
Inox Wind
TP (Rs) 147 143 3% Consequent to rollover of TP by 3 months
Revenues (Rs mn) 18,451 42,496 18,451 42,496 0% 0%
EBITDA (Rs mn) 136 4,933 136 4,933 0% 0%
No Change
PBT (Rs mn) (808) 4,005 (808) 4,005 0% 0%
PAT (Rs mn) (574) 2,845 (574) 2,845 0% 0%
EPS (Rs) (2.6) 12.8 (2.6) 12.8 0% 0%
Cummins
Cut our revenue estimate led by 4% cut in FY18
Revenues (Rs mn) 57,757 67,387 59,880 68,687 -4% -2%
EBITDA
Trickle-down impact of cut in revenue and change in
EBITDA (Rs mn) 9,357 11,052 9,701 10,990 -4% 1%
EBITDA margin assumption
Marginally upgrade in FY19 estimates led by
moderation in other expenses
PBT (Rs mn) 10,725 13,484 11,403 13,309 -6% 1%
PAT (Rs mn) 7,937 9,978 8,438 9,848 -6% 1% Trickle-down impact of change in EBITDA
EPS (Rs) 28.6 36.0 30.4 35.5 -5.9% 1.3%
Greaves Cotton
TP (Rs) 194 205 -6% Led by cut in FY18/FY19 EBITDA by 1%/6%
Revenues (Rs mn) 19,726 21,944 20,155 23,144 -2% -5%
Cut led by weakness in the 3W volumes.
EBITDA (Rs mn) 3,326 3,940 3,401 4,169 -2% -6%
EBITDA margin (%) 16.9% 18.0% 16.9% 18.0% 0bps 0bps No change
PBT (Rs mn) 3,386 3,865 3,426 4,071 -1% -5%
PAT (Rs mn) 2,337 2,667 2,364 2,809 -1% -5% Trickle-down impact of cut in EBITDA
EPS (Rs) 9.6 10.9 9.7 11.5 -1% -5%

Cement Stock Performance

3-month
Channel checks suggest that the industry volume grew by 2-3%, led by (%) Rel to
Absolute
East/West India. Volumes were flattish to declining in North/South India. Sensex
Amongst our coverage, regional players, such as Shree, Dalmia and Orient, UltraTech 0 (5)
should report above-industry volume growth of 8-10% YoY. ACC, Ambuja and Ambuja 5 (1)
UltraTech should report ~3-5% volume growth. Whilst average cement prices ACC 10 4
(50kg/bag) have increased by 2-5% in North, Central and South India, prices
Dalmia Cement 19 13
in West/East regions surged by ~8-12%. Hence, pan-India realisations for
players like UltraTech should increase by ~6-7% QoQ, whereas realisations Shree Cement 3 (3)
for players with high exposure to North/South (Shree, ACC) would increase by Orient Cement 8 3
~5% QoQ. Realisations for West-focussed players, such as Ambuja/Orient
should increase by 8-10% QoQ. Average pet coke costs are likely to have
been stable over 4QFY17 and 1QFY18. ACC/Orient should report 20%+ YoY
EBITDA growth given above-industry volume/pricing growth. Ambuja and (Rs) Ambit Consensus
Shree are likely to report EBITDA decline given lower price hikes in North UltraTech 28.4 27.3
India compared to other regions. Ambuja 1.8 1.8
Ambit vs consensus ACC 18.4 12.5
Based on limited consensus data, our 1QFY18 earnings estimates are higher than Dalmia Cement 23.3 19.8
consensus for Dalmia and ACC and lower for UltraTech and Shree. Shree Cement 101.8 109.3
Orient Cement 1.9 n.a.
Recommendations
In this weak demand environment (FY18E demand growth of 5-6% at best), we expect
regional players to outperform the pan-India players (trading at 30-50% premium to FY18E EPS
regional players), as pan-India players are likely to surrender market share to chase (Rs) Ambit Consensus
pricing. Orient Cement is our top BUY idea as we expect a sharp recovery in volume UltraTech 121.4 110.4
and pricing in the existing business. However, the stock may remain under pressure Ambuja 5.8 6.2
until visibility on funding and profitability of the acquisition improves. We reiterate
SELL on both UltraTech and Shree, but prefer Shree over UltraTech as it offers ACC 51.3 43.8
superior volume as well as pricing growth. We maintain SELL on Ambuja and ACC. Dalmia Cement 86.9 73.4
Between the two, Ambuja offers superior pricing growth given its exposure to North Shree Cement 483 482
and West markets. Orient Cement 6.4 4.9

Company name Jun-17 Jun-16 Mar-17 YoY (%) QoQ (%) Comments
UltraTech
Cement dispatches (mt) 13.3 12.9 13.7 3 (3)
Realisation (Rs/tonne) 5,121 4,831 4,821 6 6 We expect volume growth of 3% YoY against
Sales (Rs mn) 68,047 62,325 65,953 9 3 flattish industry volumes reported by DIPP for
Apr-May, 2017. Realisations should grow by
EBITDA (Rs mn) 15,318 14,225 12,782 8 20 5% QoQ, mainly driven by strong price hikes
EBITDA margin (%) 22.5 22.8 19.4 (31) 313 in West, East and South India in Apr-May,
2017. Unitary EBITDA should increase to
EBITDA (Rs/tonne) 1,153 1,103 934 5 23 Rs1,153/tn, up 5% YoY, mainly driven by
PBT (Rs mn) 11,618 11,177 8,919 4 30 higher realisations.
PAT (Rs mn) 7,784 7,749 6,043 0 29

Ambuja Cement
Cement dispatches (mt) 6.0 5.8 6.0 5 0
Realisation (Rs/tonne) 4,545 4,412 4,208 3 8 Expect volumes for Ambuja to grow by 5%
Sales (Rs mn) 27,788 25,607 25,624 9 8 QoQ, mainly driven by new capacity addition
at Sankrail, West Bengal. Realisations should
EBITDA (Rs mn) 5,793 6,009 3,941 (4) 47 increase by ~8% QoQ mainly due to strong
EBITDA margin (%) 20.8 23.5 15.4 (262) 547 price hikes in West India in Apr-May, 2017.
8% realisation growth is likely to result in
EBITDA (Rs/tonne) 958 1,043 655 (8) 46 increase in EBITDA/tonne to Rs958/tonne
PBT (Rs mn) 4,693 5,465 2,913 (14) 61 from ~Rs655/tonne in 1QCY17.
PAT (Rs mn) 3,520 3,995 2,255 (12) 56

Company name Jun-17 Jun-16 Mar-17 YoY (%) QoQ (%) Comments
ACC
Cement dispatches (mn
6.4 6.1 6.6 5 (3)
tonnes)
Cement Realisation
4,563 4,267 4,265 7 7 Expect volumes for ACC to grow by 5% YoY,
(Rs/tonne)
driven by ramp-up at new capacities in East
Sales (Rs mn) 29,323 26,115 28,147 12 4 India (Jamul and Sindri). Realisations should
EBITDA (Rs mn) 5,811 4,566 4,161 27 40 rise by 7% QoQ, driven by price hikes of 5-
9% in South and East India. We expect
EBITDA margin (%) 19.8 17.5 14.8 233 503 EBITDA/tn to rise to ~Rs904/tonne vs
EBITDA (Rs/tonne) 904 746 631 21 43 Rs631/tonne in 1QCY17, mainly driven by
the strong 7% realisation growth.
PBT (Rs mn) 4,311 3,185 2,617 35 65
PAT (Rs mn) 3,448 2,378 2,115 45 63
Dalmia Cement
4.1 3.8 4.6 8 (11)
tonnes)
Cement Realisation
5,090 4,727 4,802 8 6 On a consolidated basis, we expect 8% YoY
(Rs/tonne)
volume growth driven by ramp up at
Sales (Rs mn) 20,671 17,775 21,850 16 (5) Gulbarga and strong volume growth in East
EBITDA (Rs mn) 5,759 5,084 5,517 13 4 India. Realisations for Dalmia should rise by
6% QoQ driven by strong price hikes in West,
EBITDA margin (%) 27.9 28.6 25.2 (74) 261 East and South India. EBITDA/tonne is likely
EBITDA (Rs/tonne) 1,418 1,352 1,212 5 17 to rise to ~Rs1,418/tonne, mainly due to
higher realisations.
PBT (Rs mn) 2,959 2,100 2,724 41 9
PAT (Rs mn) 2,067 940 1,841 120 12
Shree Cement
5.6 5.1 5.9 9 (6)
tonnes)
We expect Shree to report 9% YoY volume
Cement Realisation
3,959 3,907 3,771 1 5 growth, mainly due to rising share of volumes
(Rs/tonne)
in East India. We factor in 5% QoQ increase
Sales (Rs mn) 23,508 21,987 23,803 7 (1) in realisations (lower than India average of
EBITDA (Rs mn) 5,933 7,309 5,112 (19) 16 ~7%), due to price increase in North India
(5% average) and 10% in East India.
EBITDA margin (%) 25.2 33.2 21.5 (800) 376 Sequentially, higher realisations are likely to
EBITDA (Rs/tonne) 1,022 1,279 818 (20) 25 result in increase in EBITDA/tonne to
Rs1,022/tonne from ~Rs818/tonne in the
PBT (Rs mn) 3,733 6,471 3,199 (42) 17 previous quarter.
PAT (Rs mn) 3,547 5,077 3,045 (30) 16
Orient Cement
Cement dispatches (mt) 1.53 1.39 1.73 10 (11)
Cement Realisation We expect Orient to report above-industry
3,794 3,126 3,449 21 10 volume growth (10% YoY) due to ramp-up of
(Rs/tonne)
Gulbarga plant and rising volumes from
Sales (Rs mn) 5,813 4,371 5,967 33 (3)
AP/Telangana and Karnataka. Amongst our
EBITDA (Rs mn) 1,115 404 755 176 48 coverage, we expect realisation growth to be
the highest for Orient Cement, given price
EBITDA margin (%) 19.2 9.3 12.7 993 652
hikes of ~10-15% in Maharashtra and AP.
EBITDA (Rs/tonne) 728 290 437 151 67 Strong realisation growth is likely to result in
EBITDA/tonne recovering to Rs728/tonne
PBT (Rs mn) 485 (145) 148 (435) 227
from Rs437/tonne in 4QFY17.
PAT (Rs mn) 388 (76) 165 (613) 135

Consumer Discretionary Stock Performance

3-month
Jewellers should continue the stellar run that started last quarter given (%) Rel to
Absolute
favourable base and more marriage dates in 1QFY18 vs 1QFY17. Multiplex Sensex
operators will have a good quarter given overwhelming response to Bahubali Titan 10 4
2 mitigates poor performance of other releases in the quarter. Apparel Trent (7) (13)
players are expected to deliver double-digit topline growth led by pre-GST Bata India 3 (3)
sales but at the cost of gross margins. Apparel companies like Arvind and
Jubilant Foodworks 5 (0.4)
ABFRL should report flat to lower gross margins YoY due to participation in
pre-GST sale whereas Trent will sustain SSG on improving sales productivity Arvind (7) (12)
and hold gross margins as it didnt go on sale in 1Q. We expect Titan to Aditya Birla
10 4
Fashion
deliver good numbers led by an impressive Akshay Tritya performance,
Page Industries 18 12
stronger wedding season than 1QFY17 and a favourable base (excise-levy-
related strike). Bata, too, is expected to report double-digit growth due to a Wonderla Holidays (7) 12
favourable base. Wonderlas yet to mature park at Hyderabad will drive PVR (7) (12)
revenue growth but will weigh on margins.
Ambit vs consensus: Our FY18 EPS estimates are broadly at par with consensus. Jun17E Quarterly EPS
Key recommendations: We like Trent (BUY; TP Rs281; upside 13%), PVR (BUY; TP (Rs) Ambit Consensus
Rs1,594; upside 12%) and Wonderla (BUY; TP Rs498; upside 38%) given strong Titan 2.7 2.9
balance sheets and proven execution. We like ABFRL (BUY; TP Rs175; upside 0%) as Trent 0.9 NA
we expect Madura to turn the corner in FY18E as also a breakeven for Forever 21. We
Bata India 3.7 3.5
are SELLers on Jubilant (TP Rs809; downside 26%) and Bata (TP Rs370; downside
35%) given relatively weak franchise and intense competition. Jubilant Foodworks 3.7 3.8
Arvind 3.7 3.3
Aditya Birla Fashion (0.1) NA
Page Industries 80 NA
PVR 0.7 NA
Wonderla Holidays 3.9 NA
FY18E EPS
Titan 11.6 11.5
Trent 2.2 NA
Bata India 15.3 15.5
Jubilant Foodworks 14.7 17.4
Arvind 17.4 15.6
Aditya Birla Fashion 1.0 1.8
Page Industries 321.8 300.3
PVR 36.7 35.9
Wonderla Holidays 10.1 11.9


Titan Jun17E Jun16 Mar17 YoY QoQ Comments
Revenue growth led by above 35% growth YoY in jewellery
Sales (Rs mn) 35,598 28,063 34,597 27% 3% revenues due to more marriage dates in 1QFY18 and low base
(strike against levy of excise in 1QFY17)
EBITDA (Rs mn) 3,595 2,923 2,721 23% 32% EBITDA margin to contract due to higher sale of low-margin
EBITDA margin (%) 10.1% 10.4% 7.9% wedding jewellery
PBT (Rs mn) 3,396 1,739 2,664 27% 27%

PAT to expand due to no interest as compared to last year
PAT (Rs mn) 2,377 1,268 2,007 87% 18%
Trent
Sales (Rs mn) 4,711 4,009 4,541 18% 4% Revenue to grow by 18% YoY led by LTL growth of 9%
EBITDA (Rs mn) 448 355 140 26% 220%
Margin expansion of 60 bps YoY due to higher full-priced sales
EBITDA margin (%) 9.5% 8.9% 3.1%
PBT (Rs mn) 410 320 41 28% 900% PAT to expand due to margin expansion and lower interest
PAT (Rs mn) 299 233 6 28% 4883% expense
Bata India
Sales (Rs mn) 7,399 6,743 5,980 10% 24% Revenues to grow by 10% due to a favourable base
EBITDA (Rs mn) 784 821 567 -5% 44% Margin contraction due to lower gross margin given advancement
EBITDA margin (%) 10.6% 12.2% 9.5% of EoSS
PBT (Rs mn) 710 762 507 -7% 46%

PAT to remain flat due to flat interest and other income
PAT (Rs mn) 476 505 360 -6% 38%
Jubilant FoodWorks
Expect revenue growth of 10% on a favorable base led by LTL
Sales (Rs mn) 6,708 6,089 6,128 10% 9%
growth of 4%
EBITDA (Rs mn) 717 577 605 24% 19%
Margin to expand due to lower promotions
EBITDA margin (%) 10.7% 9.5% 9.9%
PBT (Rs mn) 365 282 203 29% 80%
PAT as a consequence of the above, to expand
PAT (Rs mn) 244 190 189 28% 29%
Arvind
Textile revenues expected to grow by 11% while brand revenues
Sales (Rs mn) 23,517 21,041 24,648 12% -5%
should grow by 22%
EBITDA (Rs mn) 2,680 2,444 2,306 10% 16%
Lower gross margin due to advancement of EoSS (pre-GST sale)
EBITDA margin (%) 11.4% 11.6% 9.4%
PBT (Rs mn) 1,414 1,006 1,177 41% 20%
PAT to expand due to lower interest
PAT (Rs mn) 948 709 1,006 34% -6%
Aditya Birla Fashion
Growth to be led by pre-GST sale and Forever 21 which was not
Sales (Rs mn) 16,931 14,151 16,251 20% 8%
present in base
EBITDA (Rs mn) 948 701 1,140 35% -17%
EBITDA margin to expand due to operating leverage
EBITDA margin (%) 5.6% 5.0% 7.0%
PBT (Rs mn) (57) (208) 218 NA NA
Loss to contract due to lower interest costs
PAT (Rs mn) (57) (208) 218 NA NA
Page Industries
Revenue expected to grow by 18% led by growth in womens
Sales (Rs mn) 6,927 5,724 4,995 21% 39%
category
EBITDA (Rs mn) 1,385 1,092 974 27% 42% Margin expected to expand by 90bps due to gross margin
EBITDA margin (%) 20.0% 19.1% 19.5% expansion
PBT (Rs mn) 1,330 1,053 955 26% 39%

PAT to grow due to higher other income
PAT (Rs mn) 891 679 668 31% 33%

Titan Jun17E Jun16 Mar17 YoY QoQ Comments

PVR
Revenue to grow by 12% led by exceptional performance of
Sales (Rs mn) 6,400 4,536 4,942 41% 30%
Baahubali 2
EBITDA (Rs mn) 1,202 1,167 583 3% 106% EBITDA margin to contract due to higher F&B cost and employee
EBITDA margin (%) 18.8% 25.7% 11.8% expenses
PBT (Rs mn) 537 707 60 NA 795%

PAT to contract due to lower other income and higher depreciation
PAT (Rs mn) 344 457 15 NA 2193%
Wonderla Holidays
Sales (Rs mn) 1,027 889 612 16% 68% Revenue growth to be led by price hikes taken in 4QFY17
EBITDA (Rs mn) 401 392 99 2% 305% EBITDA margin to contract due to provision for disputed tax
EBITDA margin (%) 39.0% 44.1% 16.2% liabilities and increase in other expenses
PBT (Rs mn) 326 338 44 -4% 641%

PAT to remain flat due to higher depreciation
PAT (Rs mn) 219 225 34 -3% 544%

Stock Performance
Consumer Staples 3-month
(%) Rel to
Channel checks suggest during second half of June, wholesale supply chains Absolute
Sensex
stopped/slowed operation in the run-up to the GST. We believe this Britannia 9 5
disruption is transient in nature and any impact of destocking during the
Colgate 11 6
quarter will recover in subsequent quarters. In 1QFY18, FMCG/Paints should
Dabur (0) (5)
report 1%/10% sales growth. FMCG companies should report 3.5% YoY
volume decline. Paint companies will largely remain resilient to disruption GCPL 5 1
and report 5% YoY volume growth given its lower dependency on the GSK Consumer 2 (3)
wholesale channel. Alcobev companies should report ~4% revenue decline Marico 16 11
due to Supreme Courts ban on sale of alcohol within 500m from highways.
Nestle 2 (3)
FMCG companies gross margins should expand by 10-30bps YoY. EBITDA
ITC 13 8
margins would expand further by ~40 YoY as A&P spends remain subdued.
Paint companies will record EBITDA margin contraction of ~100bps YoY due Asian Paints 8 3
to input cost headwinds. FMCG/Paints/Alcobev should report 4%/4%/13% YoY Berger Paints 5 (0)
increase in PAT. United Spirits (14) (19)
FMCG companies to report 1% sales growth; ~3% volume decline United Breweries (2) (7)
Our channel checks suggest wholesale supply chain stopped/slowed its operation in
the last 15-20 days in June. In the FMCG sector, companies with larger wholesale
dependency will underperform compared to its peers. We believe urban wholesale
channel will witness larger impact due to destocking vs rural wholesale channel. Company Ambit Consensus
However, any destocking in 1QFY18 will lead to subsequent up-stocking in the Britannia 19.7 19.6
coming quarter. During the quarter, the sector will report 3% YoY volume decline. Colgate 4.6 5.6
However, price hike by most of the companies will lead to a revenue growth of ~1%
Dabur 1.6 1.8
YoY. Gross margin should expand by 10-30bps for most of the companies (except
Marico to report 150bps contraction as its raw material index is +16% YoY). However, GCPL 8.1 6.1
the sector EBITDA margin should expand further by ~40bps YoY due to lower A&P GSK Consumer 38.6 40.3
spends (down 45bps YoY) resulting to PAT growth of 3.5% YoY. Marico 2.2 2.2
Paint companies remain largely resilient to supply chain disruption Nestle 27.8 31.5
ITC 2.1 2.4
Paint companies have lower dependency on the wholesale channel given their
superior dealer network. Hence, we believe paint companies will be less disrupted Asian Paints 6.0 6.7
due to supply chain disruption in the run-up to the GST. We expect paint companies Berger Paints 1.2 1.2
to report volume growth of ~5% during the quarter. Paint companies revenue should United Spirits 5.9 10.0
grow by ~10% YoY due to volume growth and cumulative price hike of ~5% taken in United Breweries 5.3 NA
Feb17 and May17. We expect gross margin to contract by 55bps ~YoY due to input
cost headwinds. EBITDA margin should contract further by ~100bps YoY resulting in
PAT growth of only ~5% YoY.
FY18E EPS
Alcobev companies impacted due Supreme Court ban
Alcobev companies should report a revenue decline of ~4% YoY due to Supreme Britannia 81.5 87.9
Courts ban on sale of alcohol within 500m of National and State Highways. Despite Colgate 25.1 25.3
adverse SC ruling and franchising of popular brands, we believe United Spirits will
Dabur 8.3 8.5
report a revenue decline of only ~2% YoY. This is due to improvement in system and
processes implemented over the years. Increasing contribution of Prestige and above GCPL 20.7 44.8
brands in revenue should result in operating margin expansion of ~90bps YoY. GSK Consumer 172.1 187.4
United Breweries revenue should decline by 6% YoY. United Breweries gross/EBITDA Marico 7.0 7.3
margin should contract by 50/20bps YoY due to lower operating leverage. Nestle 120.6 137.4
ITC 10.6 9.8
Asian Paints 21.4 23.6
Berger Paints 4.9 5.5
United Spirits 33.3 N/A
United Breweries 9.8 N/A
Source: Bloomberg, Ambit Capital research

Exhibit 16: FMCG/Paints companies should report 1.5%/10% YoY revenue growth; Alcobev revenue to decline by 4% YoY
YoY Change in YoY Change in A&P YoY Change in
Revenue growth (%)
Company Gross Margin spends as % of sales EBITDA Margin
1QFY18E 4QFY17 1QFY17 bps bps bps
FMCG
Britannia 5.0% 5.2% 9.4% 20 NA 50
Colgate -1.5% 2.2% 8.8% 30 20 20
Dabur -4.0% -4.7% 2.4% 10 (50) 30
GCPL 4.0% 12.1% 6.8% 20 (40) 50
GSK Consumer -1.3% 2.3% -5.2% 30 (50) 50
HUL 1.0% 6.4% 3.6% 20 (50) 50
Marico 5.0% 2.4% 0.2% (150) (100) 20
Nestle 2.0% 9.1% 16.1% 30 NA 50
ITC 3.2% 14.0% 9.8% 30 NA 60
Average 1.5% 5.4% 5.8% 4 (45) 42
Paints
Asian Paints 10.5% 7.8% 9.1% (60) NA (110)
Berger Paints 10.0% 8.2% 10.5% (50) NA (90)
Average 10.3% 8.0% 9.8% (55) NA (100)
AlcoBev
United Spirits -2.0% -0.9% 9.3% 30 NA 90
United Breweries -6.0% -8.2% 7.5% (50) NA (20)
Average -4.0% -4.6% 8.4% (10) NA 35


Particulars Jun'17E Jun'16 Mar'17 YoY QoQ Comments
Staples
Dabur
Sales growth should be impacted due to ~5% YoY volume decline
Sales (Rs mn) 18,741 19,522 19,147 -4% -2%
and continuing geo-political issue in the MENA region
EBITDA (Rs mn) 3,405 3,488 4,176 -2% -18% Gross margin should expand by 10bps given moderate input cost
inflation and lower A&P spends. Thereby leading to EBITDA margin
EBITDA margin (%) 18.2% 17.9% 21.8% 30 (364) expansion of 30bps YoY
PBT (Rs mn) 3,555 3,637 4,314 -2% -18%
PAT should decline by 2% YoY due to margin expansion
PAT (Rs mn) 2,870 2,936 3,337 -2% -14%
Marico
Assuming 8% price/mix-led growth partially offset by volume
Sales (Rs mn) 18,420 17,543 13,222 5% 39%
decline of 3% YoY
EBITDA (Rs mn) 3,963 3,740 2,595 6% 53% Expect gross margin to contract by ~150bps YoY due to copra
price inflation. Lower A&P spends will lead to EBITDA margin
EBITDA margin (%) 21.5% 21.3% 19.6% 20 189 expansion of 20bps
PBT (Rs mn) 3,981 3,751 2,493 6% 60%
PAT to grow by 6% YoY due to margin expansion
PAT (Rs mn) 2,843 2,679 1,709 6% 66%
GCPL
Assuming 4% YoY revenue growth driven by international business
Sales (Rs mn) 22,077 21,228 23,898 4% -8%
and partially offset by ~5% volume decline in domestic business
EBITDA (Rs mn) 4,062 3,800 5,507 7% -26% Gross margin should expand by 20bps due to low input cost;
EBITDA margin (%) 18.4% 17.9% 23.0% 50 (464) EBITDA margin should expand by 50bps due to lower A&P spends
PBT (Rs mn) 3,532 3,288 5,016 7% -30%
PAT should grow by 9% YoY due to margin expansion
PAT (Rs mn) 2,754 2,535 3,871 9% -29%
GSK Consumer
Sales (Rs mn) 9,318 9,439 11,019 -1% -15% Assuming 6% volume decline offset by 5% price/mix-led growth
EBITDA (Rs mn) 2,056 2,035 2,171 1% -5% Expect gross margin expansion of ~30bps YoY; lower A&P spends
EBITDA margin (%) 22.1% 21.6% 19.7% 50 236 should lead to EBITDA margin expansion of 50bps YoY
PBT (Rs mn) 2,500 2,474 2,695 1% -7% PAT should grow by 1% YoY ahead of sales due to margin
PAT (Rs mn) 1,623 1,606 1,759 1% -8% expansion
Nestle
Sales (Rs mn) 23,171 22,717 24,919 2% -7% Assuming 3% volume decline offset by 5% price/mix-led growth
EBITDA (Rs mn) 4,490 4,289 5,174 5% -13% Expect gross margin expansion of ~30bps YoY; EBITDA margin will
EBITDA margin (%) 19.4% 18.9% 20.8% 50 (138) expand by 50bps YoY due to lower A&P spends
PBT (Rs mn) 4,000 3,765 4,495 6% -11%
Expect PAT to grow by 2% YoY; in line with sales
PAT (Rs mn) 2,680 2,628 3,068 2% -13%
Colgate
Sales (Rs mn) 9,979 10,131 10,375 -1% -4% Assuming 6% volume decline offset by 5% price/mix-led growth.
EBITDA (Rs mn) 2,101 2,113 2,443 -1% -14% Expect gross margin and EBITDA margin to expand by ~30bps YoY
EBITDA margin (%) 21.1% 20.9% 23.5% 20 (249) due to lower input cost
PBT (Rs mn) 1,851 1,897 2,182 -2% -15%
PAT is expected to decline by 1%; in line with sales
PAT (Rs mn) 1,240 1,257 1,426 -1% -13%
Britannia
Sales (Rs mn) 22,478 21,408 22,444 5% 0% Assuming 1% volume growth and 4% price/mix-led growth YoY
EBITDA (Rs mn) 3,432 3,162 3,081 9% 11% Expect gross margin to expand by 20bps YoY due to moderation of
input cost; EBITDA margin should expand by ~50bps YoY due to
EBITDA margin (%) 15.3% 14.8% 13.7% 50 154 lower A&P spends
PBT (Rs mn) 3,537 3,263 3,081 8% 15%
PAT should grow by 6% due to margin expansion
PAT (Rs mn) 2,368 2,192 2,108 8% 12%

Particulars Jun'17E Jun'16 Mar'17 YoY QoQ Comments

ITC
Sales (Rs mn) 103,725 100,540 111,255 3% -7% Assuming 3% YoY revenue growth driven by cigarettes
EBITDA (Rs mn) 37,002 35,262 38,754 5% -5% Expect 60bps EBITDA margin expansion due lower A&P spends and
EBITDA margin (%) 35.7% 35.1% 34.8% 60 84 higher margin from cigarette business
PBT (Rs mn) 38,802 36,754 40,471 6% -4%
PAT (Rs mn) 25,609 23,847 26,695 7% -4%
Paints
Asian Paints
EBITDA (Rs mn) 8,622 8,203 7,119 5% 21% Expect gross margin contraction of 60bps YoY due to input cost
inflation; EBITDA margin should contract by 110bps due to higher
PBT (Rs mn) 8,497 8,003 6,895 6% 23%
PAT (Rs mn) 5,733 5,400 4,690 6% 22%
Berger Paints
EBITDA (Rs mn) 2,035 1,951 1,611 4% 26% We expect gross margin contraction of 50bps YoY due to input cost
inflation; EBITDA margin should contract by ~90 bps due to higher
PBT (Rs mn) 1,810 1,763 1,476 3% 23%
PAT (Rs mn) 1,199 1,168 1,030 3% 16%
Alco-Bev
United Spirits
Assuming volume decline of 3% due to franchising of popular
Sales (Rs mn) 19,997 20,405 20,250 -2% -1%
brands and impact of SC ban on sales of alcohol on Highways
EBITDA (Rs mn) 2,125 1,985 2,651 7% -20% Expects gross margin to expand by 30bps due to higher
contribution from Prestige and above brands; EBITDA margin
EBITDA margin (%) 10.6% 9.7% 13.1% 90 (246) should further expand by 90bps due to better operating efficiency
PBT (Rs mn) 1,095 908 1,523 21% -18%
PAT (Rs mn) 756 655 1,866 15% -54%
United Breweries
Assuming higher impact of SCs ban on sale of alcohol on
Sales (Rs mn) 14,703 15,642 11,127 -6% 32%
highways and volume decline of 8% YoY
EBITDA (Rs mn) 2,705 2,909 1,011 -7% 168% Expect gross margin contraction of 50bps due to lower operating
efficiency; EBITDA margin should contract by 20bps due to lower
EBITDA margin (%) 18.4% 18.6% 9.1% (20) 931 A&P spends
PBT (Rs mn) 2,117 2,260 76 -6% 2678%
PAT should decline by 5% due to margin contraction
PAT (Rs mn) 1,397 1,471 67 -5% 1976%

E&C/Infrastructure Stock Performance

3-month
Revenue growth in the construction sector should remain in double digits (%) Rel to
Absolute
driven by healthy order books from Government infra projects. Government Sensex
order recipients, such as PGCIL, BEL, NBCC, EIL, Sadbhav and Techno are all L&T 0.9 (4)
likely to witness a double-digit top-line growth. Even L&Ts core EPC business PowerGrid 6.4 1.6
should report a 10% growth. Order inflows too are likely to remain strong Bharat Electronics 3.9 (0.9)
and margins steady. However, key focus would be on continued balance
NBCC 19 14
sheet correction and finance costs are likely to decline across EPC companies.
AIA Engineering (9.5) (14)
It is worth noting that 1Q is typically a small contributor to the annual
performance and given limited reporting (no balance sheet), details on Engineers India 3.5 (1.3)
working capital will not be available. Sadbhav Engg (1.4) (6.2)
Key recommendations: Valuations across the space are punchy. In our recent VA Tech Wabag (3.4) (8.2)
thematic, Locked and Loaded, we highlighted that we expect valuations to sustain. Techno Electric (1.8) (6.6)
Revenue growth led by higher Government ordering has not yet fully materialised.
Bharat Electronics is our top pick since we expect the company to surprise positively on
revenue growth in FY18E. Avoid companies that have high expectations baked in, in
terms of either order inflows (Engineers India) or execution (NBCC). Company Ambit Consensus
Larsen & Toubro 7.9 NA
Power Grid Corp 4.0 NA
Bharat Electronics (0.1) NA
AIA Engineering 12.6 NA
Engineers India NA NA
Sadbhav Engineering 2.9 NA
VA Tech Wabag 13.9 NA
Techno Electric 4.5 NA
NBCC 0.6 NA
FY18E EPS
Larsen & Toubro 68 71
Power Grid Corp 17 17
Bharat Electronics 8 7
NBCC 5 5
AIA Engineering 56 52
Engineers India 7 6
Sadbhav Engineering 7 5
VA Tech Wabag 14 34
Ashoka Buildcon 5 10
Techno Electric 20 21


Company Jun-17 Jun-16 YoY Mar-17 QoQ Comments
Larsen & Toubro (Consolidated)
Sales (Rs mn) 238.4 218.7 9% 368.3 -35% Core infrastructure business should grow at 10%, supported by
EBITDA (Rs mn) 20.3 19.1 7% 43.4 -53% strong order book; IT and FS to grow at 8%
EBITDA margins to remain largely similar to last year with no
EBITDA margin (%) 8.5% 8.7% -20 bps 11.8% -320 bps
material change in the core margins
PBT (Rs mn) 15.2 14.1 8% 34.3 -56% PAT to grow by 21% YoY; 1QFY17 had an abnormally high tax
PAT (Rs mn) 7.4 6.1 21% 30.2 -76% incidence of 39%
Power Grid Corp (standalone)
Sales (Rs mn) 72.6 61.2 19% 67.1 8%
EBITDA (Rs mn) 63.1 54.2 17% 57.3 10%
EBITDA margin (%) 87.0% 88.6% -160 bps 85.3% 170 bps
PBT (Rs mn) 25.9 22.8 13% 24.5 6% Core RoE to remain largely similar leading to a PAT growth in
line with that of capitalisation; we have assumed Rs50bn of
PAT (Rs mn) 20.7 18.0 15% 19.4 7% capitalisation
Bharat Electronics (standalone)
Sales (Rs mn) 9.8 8.7 12% 39.9 -76% Revenue to grow by 12% YoY; growth in FY18 is likely to be
EBITDA (Rs mn) (1.2) (0.5) 151% 9.8 -112% back-ended due to EVM orders
EBITDA margin (%) -12.0% -5.4% -670 bps 24.6% -3660 bps EBITDA margin to decline due to higher employee cost
PBT (Rs mn) (0.4) 0.5 -172% 10.1 -103% provisioning resulting in employee cost rising by 30% YoY
PBT and PAT to be in negative due to abnormally high
PAT (Rs mn) (0.4) 0.4 -197% 7.9 -104%
employee cost
NBCC
Revenue growth in the core PMC business of 10% YoY; Rest of
Sales (Rs mn) 16.0 12.7 25% 23.6 -32%
the fillip provided by HSCL acquisition
EBITDA (Rs mn) 0.6 0.5 40% 2.1 -70% 40bps increase in margins mainly led by higher share of real
EBITDA margin (%) 4.0% 3.6% 40 bps 9.0% -500 bps estate revenue; partly impacted by HSCL
PBT (Rs mn) 1.0 0.7 36% 2.3 -59%
Higher EBITDA flows through to profits
PAT (Rs mn) 0.6 0.5 36% 1.7 -63%
AIA Engineering
Sales (Rs mn) 6,513 4,836 35% 6,476 1% Revenue growth of 35% to be driven by 26% volume growth;
mining volume growth of 30%; and improvement in
EBITDA (Rs mn) 1,741 1,470 18% 1,600 9% realisations by 7%.
EBITDA margin (%) 26.7% 30.4% -370 bps 24.7% 200 bps Margin should decline because of increasing raw material
PBT (Rs mn) 1,773 1,541 15% 1,625 9% costs. Overheads to remain largely steady
PAT (Rs mn) 1,187 1,090 9% 1,151 3%


Company Jun-17 Jun-16 YoY Mar-17 QoQ Comments
Engineers India (standalone)
Sales (Rs mn) 4,187 3,418 22% 4,429 -5% Strong growth in LSTK to be driven by execution of EuroVI project
EBITDA (Rs mn) 566 733 -23% 543 4% EBITDA to decline since 1QFY17 had a one-off provision write-backs;
EBITDA margin (%) 13.5% 21.4% -790 bps 12.3% 130 bps we expect a 6% EBIT margin in LSTK and 25% in PMC
PBT (Rs mn) 1,144 1,225 -7% 1,023 12%

Lower EBITDA flows through to lower profits
PAT (Rs mn) 755 803 -6% 660 14%
Sadbhav Engineering (standalone)
Sales (Rs mn) 9,500 8,070 18% 10,329 -8% Revenues to grow mainly led by high increase in EPC roads execution
EBITDA (Rs mn) 998 868 15% 1,096 -9% Margins should be flat on a YoY basis as the revenue mix is likely to
EBITDA margin (%) 10.5% 10.8% -30 bps 10.6% -10 bps remain the same.
PBT (Rs mn) 499 489 2% 716 -30% Higher interest cost squares off the benefits from the increase in
PAT (Rs mn) 499 487 2% 682 -27% revenue
VA Tech Wabag
Execution pace to remain healthy due to strong order book; growth
Sales (Rs mn) 6,673 5,803 15% 11,317 -41%
expected to accelerate through FY18E
EBITDA (Rs mn) 300 275 9% 1,317 -77%
Margin expansion will not come through in 1QFY18
EBITDA margin (%) 4.5% 4.7% -20 bps 11.6% -710 bps
PBT (Rs mn) 159 119 33% 1,108 -86%
PAT (Rs mn) 105 40 161% 781 -87%
Techno Electric (Consolidated)
EPC business to grow by 10%; wind business revenues may decline
Sales (Rs mn) 2,928 2,709 8% 3,619 -19%
due to lower output (part business was sold) and lower PLFs
EBITDA (Rs mn) 668 712 -6% 544 23% Margins should decline due to change in revenue mix; revenue from
EBITDA margin (%) 22.8% 26.3% -340 bps 15.0% 780 bps energy division to decline by 25% YoY
PBT (Rs mn) 610 569 7% 662 -8% Interest cost to reduce due to asset sales-led debt pare; tax incidence,
PAT (Rs mn) 507 484 5% 333 52% however, could be higher


Comments
Larsen & Toubro
TP (Rs) 1,400 1,400 0%
Revenues (Rs bn) 1,210 1,334 1,210 1,334 0% 0% We largely maintain our estimates
EBITDA (Rs bn) 132 145 132 145 0% 0%
EBITDA margin (%) 10.9% 10.9% 10.9% 10.9% 00 bps 00 bps
PBT (Rs bn) 112 124 112 124 0% 0%
PAT (Rs bn) 74.1 81.7 74.2 81.7 0% 0%
EPS (Rs) 67.7 76.9 68.1 77.1 -1% 0%
Power Grid Corp
TP (Rs) 215 210 2% TP increases marginally due to quarterly roll-over
Revenues (Rs bn) 292 327 293 325 0% 0%
EBITDA (Rs bn) 259 290 260 289 0% 0%
EBITDA margin (%) 88.7% 88.8% 88.9% 88.9% -20 bps -20 bps
PBT (Rs bn) 111.7 128.7 110.6 127.0 1% 1%
Marginal increase in profits due to higher
PAT (Rs bn) 88.3 101.7 87.4 100.4 1% 1%
capitalisation guidance for FY18E
EPS (Rs) 16.9 19.4 16.7 19.2 1% 1%
AIA Engineering
TP (Rs) 1,525 1,525 0%
Revenues (Rs bn) 27.3 34.1 27.3 34.1 0% 0%
EBITDA (Rs bn) 6.9 9.2 6.7 9.0 4% 2% Improvement in EBITDA margins due to fall in
EBITDA margin (%) 26.1% 27.6% 25.2% 27.0% 90 bps 60 bps ferro chrome prices.
PBT (Rs bn) 7.1 9.3 6.9 9.1 3% 2%
PAT (Rs bn) 4.9 6.4 4.7 6.3 3% 2% Upgrade in EBITDA passed to PBT and PAT
EPS (Rs) 52.0 68.4 50.2 67.0 3% 2%
Engineers India
TP (Rs) 125 120 4%
Cut to our revenue estimates mainly driven by
Revenues (Rs mn) 20,845 30,643 25,671 35,222 -19% -13% the LSTK segment; execution on Vizag unlikely to
start before 2QFY18
EBITDA (Rs mn) 3,608 5,446 4,401 5,897 -18% -8% EBITDA margins remain unchanged
EBITDA margin (%) 17% 18% 17% 17% 20 bps 100 bps
PBT (Rs mn) 5,999 7,845 7,281 8,899 -18% -12%
Lower execution pace results in lower profit
PAT (Rs mn) 3,959 5,178 4,805 5,874 -18% -12%
assumptions
EPS (Rs) 5.9 7.7 7.1 8.7 -18% -12%
Techno Electric
TP (Rs) 425 415 2%
Cut in revenue estimates led by partial sales of
Revenues (Rs mn) 14,764 18,154 15,807 19,458 -7% -7% wind business and lower assumptions for growth
in the EPC business (12% vs 20% earlier)
EBITDA (Rs mn) 3,131 3,636 3,342 3,888 -6% -6%
EBITDA margin (%) 21.2% 20.0% 21.1% 20.0% 10 bps 00 bps
PBT (Rs mn) 2,627 3,241 2,920 3,633 -10% -11%
Cut in profit estimates driven by sale of wind
PAT (Rs mn) 2,217 2,728 2,486 3,072 -11% -11% business of 33MW; core EPC earnings cut by
~4% due to lower revenue assumptions
EPS (Rs) 19.6 24.2 21.8 26.9 -10% -10%

Engineers India
We cut our core earnings estimates in Engineers India for FY18E/ FY19E by 8-19%.
The cut is especially sharp for FY18E led by sharp cuts to execution pace of projects.
We had factored in execution of the Vizag LSTK to start in 1QFY18 that is unlikely.
This has led to sharp cuts in our LSTK revenue estimates for FY18E by 20-37% for the
next two years. Margine stimates are cut for FY18E for the core PMC segment to 27%
since ramp up in PMC revenue (despite being higher than management guidance) is
lower than our initial expectations.
However, we increase our TP by 4% mainly driven by a roll-over and increasing
pipeline of orders. Cut of near term estimates doesnt threaten the earnings and
simply delays it and therefore doesnt impact our DCF driven TP materially.
Whilst we are positive on hydrocarbon capex outlook, we remain SELLers on EIL. The
current valuation of 20x FY19E core EP factors in all potential upsides from a
burgeoning Rs3tn+ refinery expansion programme including the Maharashtra
Greenfield. Even after factoring in all potential upsdides, we do not expect the
companys core profits to exceed Rs6bn by FY21E and the stock already trades at 13x
of this potential profit, a punchy valuation for a company that is prone to cyclical
downturns.
Rs mn New Estimates Old Estimates Change in Estimates
Particulars FY18E FY19E FY18E FY19E FY18E FY19E
Order book 116,151 165,290 98,032 108,613 18% 52%
YoY growth (%) 49.6% 42.3% 25.8% 10.8% 2380bps 3150bps
Consultancy segment 51,712 64,140 48,351 51,841 7% 24%
LSTK segment 64,440 101,150 49,681 56,772 NA NA
Order flow 59,377 79,782 45,803 45,803 30% 74%
YoY growth (%) 4.0% 34.4% -14.5% 0.0% 1850bps 3440bps
Consultancy Segment 25,259 30,311 22,850 22,850 11% 33%
LSTK segment 34,118 49,471 22,953 22,953 49% 116%
Revenues 20,845 30,643 25,671 35,222 -19% -13%
YoY growth (%) 41% 47% 89% 37% -4860bps 980bps
Consultancy segment 13,756 17,882 14,341 19,360 -4% -8%
YoY growth (%) 15% 30% 30% 35% -1500bps -500bps
LSTK segment 7,089 12,761 11,330 15,862 -37% -20%
YoY growth (%) 150% 80% 350% 40% -20000bps 4000bps
Employee costs 7,526 9,407 7,490 10,486 0% -10%
YoY growth (%) 0% 25% 15% 40% -1500bps -1500bps
EBITDA 3,608 5,446 4,401 5,897 -18% -8%
EBITDA margin 17.3% 17.8% 17.1% 16.7% 20bps 100bps
Net depreciation 247 278 256 286 -4% -3%
EBIT margin (%) 16.1% 16.9% 16.1% 15.9% 0bps 90bps
Consultancy Segment 26.9% 30.8% 30.5% 30.5% -360bps 20bps
LSTK segment 7.0% 7.0% 7.0% 7.0% 0bps 0bps
Other Income 2,638 2,677 3,136 3,289 -16% -19%
PBT before EO 5,999 7,845 7,281 8,899 -18% -12%
Adjusted PAT 3,959 5,178 4,805 5,874 -18% -12%
EPS (Rs.) 5.9 7.7 7.1 8.7 -18% -12%
Core EPS (Rs.) 3.3 5.1 4.1 5.5 -19% -8%

Healthcare Stock Performance

3-month
Pharmaceutical companies under our coverage should report 1% YoY revenue (%) Rel to
Absolute
growth in 1QFY18. This would be due to pressure on the US base business, no Sensex
material approvals in the US generic market and de-stocking in the Indian Dr. Reddy 1.7 (3.9)
business given GST. On the flip side, recovery in the EM business led by Lupin -20.8 (26.3)
stabilisation of currency could improve revenues/margins. Therefore, EBITDA Cadila 13.1 7.6
margins are likely to decline by 285bps YoY for our coverage universe. Cadila
Ajanta pharma -10.1 (15.6)
and Torrent Pharma had limited competition revenue in 1QFY17 which is not
the case in 1QFY18. Hence, expect Cadila/Torrent to report 275bps/850bps Torrent Pharma -10.8 (16.3)
decline in margins respectively. Key events to watch out for: 1) product Cipla -7.3 (12.8)
approvals from facilities recently inspected and cleared for Dr. Reddy; 2)
revenue/profitability from Gavis portfolio for Lupin; 3) product approvals in
the USA post clearing of Moraiya facility for Cadila; 4) growth in the Brazilian
business for Torrent; and 5) any improvement in the EM business for Ajanta. Company Ambit Consensus %
Dr. Reddy 23.2 21.8 6
Ambit vs consensus: Based on the limited consensus data for 1QFY18, our earnings
estimates are 12-35% below consensus estimates for Cadila, Cipla, Torrent Pharma Lupin 7.4 15.1 (51)
and Ajanta. For Dr. Reddy, we are 6% above consensus estimates as we expect limited Cadila 3.2 3.7 (12)
impact of GST given acute heavy portfolio and June quarter is the peak season for Torrent
8.9 12.1 (27)
acute therapies. We believe consensus estimates are not meaningful due to the low Pharma
number of estimates. Cipla 3.2 4.9 (35)
Ajanta
Key recommendations: We argue Torrent Pharma as an investment opportunity in 13.6 16.4 (17)
pharma
branded generics rather than the US generics; providing consistent
revenue/profitability growth. Early focus on building brands in India/EMs (60% of
FY18E EPS
revenues) has driven strong brand equity, imparting sustainability to Torrents
business. Whilst the US market foray is much sought after, revenue/profit CAGR of Company Ambit Consensus
13%/17% over FY17-19E would be driven by branded generics markets. With Dr. Reddy 96.0 106.6
improving Dahej capex utilisation, operating leverage should kick in as the Indrad Cadila 21.4 19.3
facility is freed for Europe/EMs; we expect 24.8% RoCE in FY19E vs 21% in FY17.
Torrent Pharma 50.7 56.5
Technology gaps will be filled inorganically; history of rational capital allocation and
Cipla 21.3 20.7
superior execution of acquired businesses (e.g. Elder) provide comfort. Earnings
momentum should drive stock price appreciation given strong branded base, Ajanta pharma 55.5 65.2
margin/RoCE expansion from price hikes in Elder portfolio and scaling the value chain Source: Ambit Capital research
in the USA. Torrent is our top pick. Risks: Low growth in Brazil; USFDA cGMP issues.


Company name Jun-17 Jun-16 Mar-17 YoY QoQ Comments
Dr. Reddy
We expect 3% QoQ decline in sales for Dr. Reddy
largely due to price erosion in base business in the
Sales (Rs mn) 34,381 32,345 35,542 6% -3%
US market and 3% YoY decline in the Indian
business due to GST
EBITDA (Rs mn) 7,907 3,979 6,303 99% 25% Margins in Q4FY17 were lower given one-offs.
EBITDA margin (%) 23.0% 12.3% 17.7% 1070bps 526bps Hence, expect margin recovery QoQ.
PBT (Rs mn) 4,807 1,707 3,189 182% 51% Dr. Reddy is likely to report PAT of Rs3.8bn in
PAT (Rs mn) 3,846 1,263 3,125 204% 23% 1QFY18
Lupin
We expect Lupin's sales to report decline QoQ
largely led by incremental competition in Glumetza
Sales (Rs mn) 40,762 43,136 41,619 -6% -2%
and 5% YoY decline the Indian business due to de-
stocking by the channel due to GST.
EBITDA (Rs mn) 7,071 13,080 7,814 -46% -10% We expect EBITDA margins to continue to decline by
140bps QoQ to 17.3% due to increase in R&D
EBITDA margin (%) 17.3% 30.3% 18.8% -1298bps -143bps spend and price pressure in the US base business.
PBT (Rs mn) 4,471 11,560 5,187 -61% -14% We expect Lupin to report PAT of Rs4.5bn (-14%
PAT (Rs mn) 3,353 8,826 3,820 -62% -15% QoQ).
Cadila
QoQ growth would be driven by the US business at
Sales (Rs mn) 25,140 22,871 24,782 10% 1% US$168mn vs US$152mn in Q4FY17 given launch
of Lialda, partially offset by base business erosion
EBITDA (Rs mn) 5,058 5,239 4,636 -3% 9% QoQ margin expansion will be driven by the US
business partially offset by lower Indian business
EBITDA margin (%) 20.1% 22.9% 18.7% -279bps 141bps and higher R&D spend
PBT (Rs mn) 4,008 4,407 4,123 -9% -3%
Cadila is likely to report PAT of Rs3.3bn in 1QFY18
PAT (Rs mn) 3,307 3,562 3,855 -7% -14%
Torrent Pharma
Revenue decline YoY will largely be driven by India
where we expect 7.5% YoY decline. US will also
Sales (Rs mn) 14,054 15,510 14,340 -9% -2%
report lower growth on QoQ basis due to no
material product approvals.
EBITDA (Rs mn) 2,740 4,370 2,950 -37% -7% Margins will decline due to de-stocking in the
Indian business, higher R&D spend and incremental
EBITDA margin (%) 19.5% 28.2% 20.6% -868bps -107bps competition in the base business.
PBT (Rs mn) 1,765 3,460 2,440 -49% -28% Torrent Pharma is likely to report PAT of Rs1.5bn in
1QFY18. Profits are not comparable YoY due to
PAT (Rs mn) 1,501 2,920 2,060 -49% -27% limited competition revenue from the USA in
1QFY17.
Cipla
We expect 5% decline in the Indian business due to
Sales (Rs mn) 37,210 35,937 35,820 4% 4% GST-related de-stocking should be offset by growth
in the USA and other EMs.
EBITDA (Rs mn) 5,954 6,110 5,062 -3% 18% QoQ margin expansion to be driven by the USA
and South Africa; control over costs including
EBITDA margin (%) 16.0% 17.0% 14.1% -100bps 187bps employee expenses and partially offset by higher
R&D spend.
PBT (Rs mn) 3,354 4,440 (1,366) -24% -346%
We estimate PAT at Rs 2.6bn in 1QFY18
PAT (Rs mn) 2,583 3,652 (618) -29% -518%
Ajanta Pharma
6% YoY growth driven by the US business and
Sales (Rs mn) 4,809 4,542 4,561 6% 5% improvement in Africa and Asia markets. Expect
Indian business to decline by 5% YoY
EBITDA (Rs mn) 1,691 1,666 1,614 2% 5% Margins will remain flat despite higher US business
(only 10% of revenues) as costs in emerging
EBITDA margin (%) 35.2% 36.7% 35.4% -151bps -23bps markets will escalate due to unfavourable currency
PBT (Rs mn) 1,507 1,580 1,440 -5% 5%
Ajanta is likely to report PAT of Rs1.2bn in 1QFY18
PAT (Rs mn) 1,206 1,196 1,140 1% 6%


Comments
Dr. Reddy
TP (Rs) 2,376 2,376 0.0%
Revenues (Rs mn) 140,808 145,460 140,808 145,460 0% 0%
EBITDA (Rs mn) 25,159 29,419 25,159 29,419 0% 0%
EBITDA margin (%) 17.9% 20.2% 17.9% 20.2%
No change in our forecasts
PBT (Rs mn) 14,652 20,427 14,652 20,427 0% 0%
PAT (Rs mn) 12,038 15,933 12,038 15,933 0% 0%
EPS (Rs) 72.5 96.0 72.5 96.0 0% 0%
Cadila
TP (Rs) 500 500 0.0%
Revenues (Rs mn) 92,193 129,507 92,193 129,507 0% 0%
EBITDA (Rs mn) 18,641 30,853 18,641 30,853 0% 0%
EBITDA margin (%) 20.2% 23.8% 20.2% 23.8%
PBT (Rs mn) 15,274 26,833 15,274 26,833 0% 0%
PAT (Rs mn) 12,640 21,908 12,640 21,908 0% 0%
EPS (Rs) 12.3 21.4 12.3 21.4 0% 0%
Torrent Pharma
TP (Rs) 1,523 1,523 0.0%
Revenues (Rs mn) 58,004 65,054 58,004 65,054 0% 0%
EBITDA (Rs mn) 13,665 14,350 13,665 14,350 0% 0%
EBITDA margin (%) 23.6% 22.1% 23.6% 22.1%
PBT (Rs mn) 10,747 10,460 10,747 10,460 0% 0%
PAT (Rs mn) 9,210 8,577 9,210 8,577 0% 0%
EPS (Rs) 54.4 50.7 54.4 50.7 0% 0%
Cipla
TP (Rs) 410 410 0.0%
Revenues (Rs mn) 145,230 177,735 145,230 177,735 0% 0%
EBITDA (Rs mn) 25,563 31,086 25,563 31,086 0% 0%
EBITDA margin (%) 17.6% 17.5% 17.6% 17.5%
PBT (Rs mn) 11,828 22,853 11,828 22,853 0% 0%
PAT (Rs mn) 9,581 17,140 9,581 17,140 0% 0%
EPS (Rs) 11.9 21.3 11.9 21.3 0% 0%
Ajanta Pharma
TP (Rs) 1,418 1,418 0.0%
Revenues (Rs mn) 19,833 21,911 19,833 21,911 0% 0%
EBITDA (Rs mn) 6,890 7,218 6,890 7,218 0% 0%
EBITDA margin (%) 34.7% 32.9% 34.7% 32.9%
PBT (Rs mn) 6,482 6,583 6,482 6,583 0% 0%
PAT (Rs mn) 5,068 4,905 5,068 4,905 0% 0%
EPS (Rs) 57.3 55.5 57.3 55.5 0% 0%

NBFCs Stock Performance

3-month
For auto and SME financers, a full-fledged recovery remains elusive even as (%) Rel to
the Street builds in the pre-demonetisation narrative of a complete recovery, Absolute
Sensex
which is reflected in our FY18 EPS (below consensus by 6-20%; highest for LIC Hou Finance 20 8
MMFS). HFCs should continue to report pressure on growth/profitability due
M & M Finance 18 11
to: (i) slowdown in growth given increasing competition from banks and
moderating growth in real estate prices; (ii) recent pricing cuts by banks on Magma Fincorp 18 5
home loans; (iii) further rise in credit cost (increasing over the past two years) Bajaj Finance 29 26
due to the rising share of riskier loans. With lofty valuations not leaving any Motilal Oswal 51 38
room for negative surprises despite structural negatives, such as increasing Chola 5 (4)
formalisation of economy (GST, demonetisation) and intensifying competition,
HDFC 14 10
we remain SELLers on the entire space. But we are positive on the theme of
increasing financialisation of savings, with MOFS being our top BUY.
Ambit versus consensus: With recovery of NBFCs impeded by standstill in economy FY18E EPS
owing to GST, growth and asset quality will be the key metrics to watch for. Whilst (Rs) Ambit Consensus
NBFCs 1QFY18 earnings should be better than that of 4QFY17, our earnings LIC Hou. Finance 42.4 45.5
estimates are significantly below consensus expectations by ~6-18%. M & M Finance 16.3 19.4
Key recommendations: SELL on all NBFCs; MOFS is our only BUY Magma Fincorp 7.9 8.5
Auto financers and SME financers: Whilst growth and asset quality trends have Bajaj Finance 43.3 44.6
stabilised for these lenders, a full-fledged recovery remains elusive. Our growth and MOFS 40.1 40.1
credit cost assumptions continue to be more conservative than the Street (which is CIFC 55.9 57.1
building in the pre-demonetisation narrative of full-fledged recovery in growth and HDFC 50.7 52.4
asset quality); reflecting in our FY18 EPS estimates being 6-18% below the Streets
(highest for MMFS). With lofty valuations not leaving any room for negative surprises
despite structural negatives, such as increasing formalisation of economy (GST,
demonetisation) and ongoing market-share loss in prime segments, we continue to be
sellers on this space. We are SELLers on all NBFC stocks in our coverage. Our high
conviction SELL is MMFS.
Housing Finance: HFC stocks have sharply re-rated over the past six months on
expectations that the Governments affordable housing measures will boost earnings
growth. But loan growth and profitability of the sector have been under pressure over
FY13-17 (both down by 5 percentage points) despite rising share of higher yielding
and riskier LAP/developer loans. Moreover, pressure on growth/profitability will persist
given: (i) slowdown in growth due to increasing competition from banks and
moderating growth in real estate prices; (ii) recent pricing cuts by banks on home
loans, which will hit NIMs in FY18-19E; (iii) further rise in credit cost (increasing over
the past two years) due to the rising share of riskier loans. Peak valuations of 5x one-
year forward PB (73% above historical average and 60-70% above NBFCs/pvt banks)
dont factor in the headwinds. Remain SELLers on HDFC Ltd and LICHF and are ~5%
below the Street on the FY18 EPS owing to lower growth and margin assumptions.
Motilal Oswal Best play on financialisation of savings: Since FY13, savings
have been gradually shifting from physical to financial assets, owing to lacklustre
returns in real estate (since FY15) and gold (since FY13), buoyant stock markets and
declining inflation. Moreover, the demonetisation has expedited the financialisation of
savings with mutual fund inflows almost doubling on a YoY basis post-
demonetisation. This will aid in rapidly scaling up of MOFSs strongly positioned AMC
(31% AUM CAGR, FY17-20E) and with strong growth of affordable housing focused
HFC (55% loan book CAGR, FY17-20E). This will drive MOFSs EPS robustly with 36%
CAGR over FY17-20E. Our SOTP valuation values the company at Rs1,250 (25x/19x
core FY19-20E EPS), which could rerate further as inflows into equities continue and
Aspire HFC scales up. Note that we have upgraded our FY18/19 PAT estimates by
13/11% and target price by 18%, post factoring in stronger-than-expected equity
inflows in the AMC business (up 50% QoQ, refer the exhibits below). MOFS is our
high conviction BUY.

Exhibit 24: Equity inflows are trending towards their all-time highs
150 Equity inflows (three-month rolling average)
100
Rs bn
50
-50
Jan-06
Jul-06
Jan-07
Jul-07
Jan-08
Jul-08
Jan-09
Jul-09
Jan-10
Jul-10
Jan-11
Jul-11
Jan-12
Jul-12
Jan-13
Jul-13
Jan-14
Jul-14
Jan-15
Jul-15
Jan-16
Jul-16
Jan-17
Jul-17
Source: AMFI, Ambit Capital research
Exhibit 25: MOFS Change in estimates

New estimates Old estimates Change in estimates
Particulars Comments
Target price (Rs) 1,200 1020 18%
Assumptions
Average Daily Volumes Our assumptions on brokerage business remain
104,248 120,927 104,248 120,927 0% 0%
(MOFS) unchanged.
Our assumptions on brokerage business remain
Broking yield (bps) 3.1 3.0 3.1 3.0 0% 0%
unchanged.
Our assumptions on brokerage business remain
Broking market share 2.1% 2.1% 2.1% 2.1% 0.00% 0.00%
unchanged.
We factor in higher AUM for AMC business in line
AMC (AUM Rs bn) 345 455 313 399 31 56 with higher-than-expected industry inflows (up 50%
QoQ versus our expectation of 5% YoY growth).
Cost to income (%, ex- Marginal improvement in cost-to-income post
61.4 60.9 62.6 61.6 -1.2 -0.7
Aspire) factoring in higher revenue growth.
Marginal upgrades to loan growth assumptions for
Aspire loan book (Rs bn) 70 109 69 107 2% 3%
Aspire due to benefits from CLSS scheme.
Output
Total revenues, ex-Aspire
17,663 21,625 17,023 20,513 4% 5% Led by higher AMC fee income.
(Rs mn)
EBITDA ex-Aspire (Rs mn) 6,822 8,465 6,370 7,876 7% 7% Operating leverage playing out
Led by scaling up of AMC business and decline in
Con. PAT ex-Aspire (Rs mn) 4,426 5,545 3,777 4,805 17% 15%
provisioning for bad loans
Aspire PAT (Rs mn) 1,349 2,243 1,311 2,181 3% 3% Led by loan growth upgrades
Con. PAT (Rs mn) 5,775 7,788 5,088 6,986 13% 11%
RoA 17.3% 22.7% 14.9% 20.4% 2.38% 2.35%
RoE 23.5% 23.2% 20.3% 20.8% 3% 2%
EPS 41.2 55.6 36.3 49.9 13% 11%

Exhibit 26: Detailed Jun17 quarterly estimates

HDFC
Moderated loan growth at 15.5% YoY and
Operating Profit (Rs mn) 23,330 29,041 30,164 -20% -23%
marginal decline in margins will drive NII growth
Operating margin (%) 97% 139% 108% of 15% YoY. However, PAT will decline by 6% YoY
due to high base of 1QFY17 (owing to gain on
PBT (Rs mn) 21,873 25,641 28,684 -15% -24%
stake sale in HDFC Ergo).
PAT 16,300 17,351 20,442 -6% -20%
LIC Housing Finance
Moderated loan growth at 15% YoY and decline
in margins due to seasonal and competitive
Operating margin (%) 90% 90% 86% factors will drive NII decline of 3% QoQ. Lower
operating and credit costs will drive PAT growth
PBT (Rs mn) 8,559 6,234 8,061 37% 6%
of 6% QoQ.
PAT 5,620 4,078 5,293 38% 6%
Bajaj Finance
35% YoY AUM growth with stable NIMs and
Operating margin (%) 66% 65% 66% operating costs should lead to 37% YoY PAT
growth.
PBT (Rs mn) 8,958 6,515 6,897 37% 30%
PAT 5,829 4,240 4,492 37% 30%
Magma Fincorp
Net Interest Income (Rs mn) 2,713 2,976 3,030 -9% -10%
Operating Profit (Rs mn) 1,314 1,532 1,677 -14% -22% Declining AUM (down 11%) should lead to
topline declining by 9% YoY. With increasing
Operating margin (%) 48% 51% 55%
operating costs (up 30bps) and credit costs (up
PBT (Rs mn) 317 654 (1,515) -52% -121% 50bps) PAT should decline by 53% YoY.
Consol. PAT 219 469 (1,140) -53% -119%
M&M Finance
Operating Profit (Rs mn) 4,314 3,587 7,252 20% -41% Moderately improving growth (14% YoY) and
margins (up 35bps) should result in 20% revenue
Operating margin (%) 53% 53% 65%
growth. With moderate decrease in credit costs
PBT (Rs mn) 1,897 1,341 3,638 41% -48% (down 13bps), PAT should grow at 34% YoY.
Consol. PAT 1,447 1,076 2,782 34% -48%
Motilal Oswal Financial Services
Total Income (Rs mn) 4,027 2,428 3,454 66% 17% We expect MOFSs total income (ex-HFC) to
increase by 17% QoQ driven by 9% QoQ growth
Operating Profit (Rs mn) 1,189 813 917 46% 30% in brokerage revenues and 20% QoQ growth in
Operating margin (%) 30% 33% 27% AMC revenues. HFC PAT should be up by 29%
QoQ. Assuming that booking of gains on
PBT (Rs mn) 1,125 856 911 31% 24% investments continues at the rate of previous
quarters, consolidated PAT should grow at 15%
Consol. PAT 991 791 862 25% 15%
QoQ.
CIFC
Moderately declining growth (15% YoY) with
marginally improving margins (up 20bps) should
Operating margin (%) 60% 60% 59% result in 18% top-line growth. With stable
operating costs and credit costs, PAT should grow
PBT (Rs mn) 2,889 2,537 3,376 14% -14%
at 17% YoY.
Standalone PAT 1,936 1,657 2,196 17% -12%

Exhibit 27: Revisions ahead of earnings season

Comments
LIC HF
TP (Rs) 481 464 4%
Net Revenues (Rsmn) 41,297 44,738 40,541 44,706 2% 0%
Operating Profit (Rsmn) 34,099 36,255 33,343 36,222 2% 0% A marginal 5bps upgrade to our FY18 margin
Operating margin (%) 83% 81% 82% 81% expectations leads to a marginal 2% upgrade in our
PBT (Rsmn) 31,919 33,424 31,163 33,391 2% 0% FY18 EPS. This with roll forwards leads to an upgrade
PAT (Rsmn) 21,386 22,394 20,879 22,372 2% 0% in our EVA-based valuation.
EPS (Rs) 42.4 44.4 41.4 44.3 2% 0%
Cholamandalam
TP (Rs) 1110 1070 4%
Net Revenues (Rsmn) 28,357 33,803 28,831 33,122 -2% 2%
Operating Profit (Rsmn) 16,920 20,643 17,394 20,156 -3% 2% Marginal upgrades to our FY18/19 credit costs
Operating margin (%) 60% 61% 60% 61% expectations (now 1%/1.2% from 1.2% earlier) lead to
PBT (Rsmn) 13,049 15,571 12,980 15,010 1% 4% upgrades in our EPS. This with roll forwards leads to an
PAT (Rsmn) 8,743 10,433 8,696 10,057 1% 4% upgrade in our EVA-based valuation.
EPS (Rs) 55.9 66.7 55.6 64.3 1% 4%
Bajaj Finance
TP (Rs) 703 651 8%
Operating Profit (Rsmn) 48,368 61,264 46,703 58,719 4% 4% Upgrades to our FY18 growth expectations (now 33%
Operating margin (%) 58% 58% 58% 58% YoY from 28% YoY earlier) lead to upgrades in our EPS
PBT (Rsmn) 35,415 43,321 33,998 41,521 4% 4% by ~4%. This with roll forwards leads to 8% upgrade in
PAT (Rsmn) 23,728 29,025 22,779 27,819 4% 4% our EVA-based valuation.
EPS (Rs) 43.3 53.0 41.6 50.8 4% 4%
Magma Fincorp
TP (Rs) 103 99 4%
Operating Profit (Rsmn) 6,487 7,396 6,487 7,396 0% 0%
Operating margin (%) 53% 57% 53% 57% Roll forwards leads to 4% upgrade in our EVA based
PBT (Rsmn) 2,909 4,810 2,909 4,810 0% 0% valuation.
PAT (Rsmn) 1,949 3,223 1,949 3,223 0% 0%
EPS (Rs) 7.9 13.3 7.9 13.3 0% 0%
M&M Finance
TP (Rs) 268 255 5%
Operating Profit (Rsmn) 23,445 27,556 23,023 26,784 2% 3% Marginal upgrades to FY18/19 NIMs (up by ~10bps)
Operating margin (%) 60% 61% 60% 60% lead to FY18/19 EPS upgrades by ~3/2%. This with roll
PBT (Rsmn) 11,817 15,106 11,395 14,796 4% 2% forwards leads to 5% upgrade in our EVA-based
PAT (Rsmn) 7,656 9,787 7,382 9,586 4% 2% valuation.
EPS (Rs) 16.3 21.0 15.9 20.6 3% 2%
HDFC
TP (Rs) 1185 1145 3%
Operating Profit (Rsmn) 114,028 120,463 114,028 120,463 0% 0%
Operating margin (%) 114% 114% 114% 114% Roll forwards lead to 4% upgrade in our EVA-based
PBT (Rsmn) 109,593 115,135 109,593 115,135 0% 0% valuation.
PAT (Rsmn) 82,558 87,239 82,558 87,239 0% 0%
EPS (Rs) 50.7 53.6 50.7 53.6 0% 0%

Media Stock Performance

3-month
The Pay TV sector is recovering post demonetisation. In June, ahead of the (%) Rel to
Absolute
implementation of the GST, FMCG companies curtailed ad spends opting Sensex
instead for on-ground promotions. This slowed the ad growth revival for DB Corp (2) (7)
broadcasters. For print media companies, this had a positive impact on Dish TV (21) (26)
advertising given the urgency of companies to destock. DTH ARPU should Hathway Cable (2) (4)
remain depressed as the demonetisation impact is yet to fully wear off. For
Zee Entertainment (7) (13)
cable MSOs, we expect continued delay in monetisation of phase-III
subscribers. Watch out for commentary on the advertising environment,
implementation of GST and judicial progress of the TRAIs tariff order on Pay Jun17E Quarterly EPS
TV. DB Corp is our top BUY in the media space given improving earnings
momentum due to advertising growth bounceback over FY17-19E. We leave
our FY18/19E estimates unchanged. DB Corp 6.3 -
Dish TV (0.3) -
Ambit vs consensus: We are aligned with the limited broker estimates available on
Hathway Cable (0.5) -
Bloomberg.
Zee Entertainment 3.6 3.8
Key recommendations: DB Corp is our top BUY. DB scores highly on our
competitive mapping framework comprising capital allocation in the print business
(choosing to build rather than acquire), return ratios, non-print business strategy, and FY18E EPS
return of cash to shareholders. The company trades at an attractive 15x FY19E P/E for (Rs) Ambit Consensus
24% FY19E RoCE and 12% FY17-19E EPS CAGR. Hathway is our Top SELL in the
DB Corp 22.9 23.2
media space given persistent supply chain challenges and hyper-competition in the
Dish TV 0.8 1.7
Pay TV space.
Hathway Cable (2.3) (0.9)
Zee Entertainment 15.2 16.0


DB Corp (Consol) Jun-17E Jun-16 Mar-17 YoY QoQ Comments
We expect 3% ad revenue growth on a high base of 20% growth. Our
Sales (Rs mn) 5,896 5,704 5,171 3% 14%
circulation revenue growth estimate is 7% YoY.
EBITDA (Rs mn) 1,915 1,812 1,122 6% 71% We expect margins to improve on account of lower newsprint cost led by
reduced consumption as the company is shifting from 44-45GSM paper to
EBITDA margin (%) 32.5 31.8 21.7 71bps 1077bps 40 GSM paper
PBT (Rs mn) 1,733 1,608 950 8% 82%
PAT improvement is in line with EBITDA growth
PAT (Rs mn) 1,156 1,038 654 11% 77%
EPS (Rs) 6.3 5.6 3.6 11% 77%
Dish TV (Consol)
We expect net subscriber addition of 0.2mn (6% YoY volume growth).
Sales (Rs mn) 7,092 7,786 7,086 -9% 0% Revenue decline YoY is on account of YoY ARPU pressure. We expect 5%
QoQ improvement in ARPU from the demonetisation lows.
EBITDA (Rs mn) 1,803 2,647 1,906 -32% -5% Margins to decline sharply owing to front-loaded costs due to renewal of
EBITDA margin (%) 25.4 34.0 26.9 -857bps -146bps long-term content deal with Star.
PBT (Rs mn) (437) 632 (291) PAT to decline sharply YoY reflecting muted revenue trends and front-
PAT (Rs mn) (293) 409 (283) loaded costs
EPS (Rs) (0.27) 0.38 (0.27)

Hathway (Standalone)
We build in 14% YoY subscription growth and 36% YoY broadband
Sales (Rs mn) 3,646 3,021 3,467 21% 5%
growth.
EBITDA (Rs mn) 833 445 745 87% 12% Our EBITDA, ex-activation, estimate is Rs607mn (up 136% YoY) led by
EBITDA margin (%) 22.8 14.7 21.5 811bps 136bps yield improvement of phase-III customers.
PBT (Rs mn) (256) (532) (144) NM NM
PAT (Rs mn) (256) (532) (155) NM NM
Zee Entertainment (Consol)
Advertising growth of 5% YoY; adjusted for sports sale domestic ad growth
Sales (Rs mn) 15,224 15,716 15,280 -3% 0% of 11% YoY. Expect subscription revenue to decline by 10% YoY due to
sports business sale in Feb'17.
EBITDA (Rs mn) 4,873 4,532 4,687 8% 4% Margin improvement driven by cost control and elimination of sports
EBITDA margin (%) 32.0 28.8 30.7 317bps 133bps business losses
PBT (Rs mn) 5,050 3,807 4,269 33% 18% Earnings could be volatile owing to fair value accounting of outstanding
PAT (Rs mn) 3,449 2,170 15,155 59% -77% preference share debt.
EPS (Rs) 3.6 2.3 15.8 59% -77%

Metals and mining Stock Performance

3-month
Coal Indias revenues should rise by ~12% YoY driven by offtake growth of (%) Rel to
Absolute
3% and 8% realisation growth. Strong realisation growth should be driven by Sensex
15% higher e-auction realisations as we expect blended e-auction Coal India (10) (17)
realisations to increase to Rs1,800/tn from Rs1,611/tonne in 4QFY17 given
higher premiums in Apr-May and improved grade mix. Moreover, we expect
5% higher FSA realisations given recent coking coal price hike. However,
increase in employee costs due to wage revisions should result in a meagre (Rs) Ambit Consensus
7-8% YoY EBITDA/PAT growth. With destocking by power plants now behind Coal India 5.35 4.66
us, CILs volume CAGR should recover to 7% over FY17-20E (vs 2% in FY17).
This coupled with recovery in e-auction realisations and coking coal price
hike is likely to drive 5% realisation growth in FY18E. Valuation of 12x FY18E FY18E EPS
P/E (in line with historical average) remains inexpensive for a 20% EPS CAGR (Rs) Ambit Consensus
and 5-6% dividend yield. Coal India 20.0 19.4
Ambit vs consensus Source: Ambit Capital research
Based on limited consensus data, our 1QFY18 earnings estimate for Coal India is
higher than consensus.
Company Jun'17E Jun'16 Mar'17 YoY (%) QoQ (%) Comments
Coal India
Sales (Rs mn) 198,674 177,961 224,239 12 (11) Coal India reported offtake of ~137mt in 1QFY18, up 3% YoY. Of
this we expect ~15% volumes to be sold in e-auction (13mt of regular
EBITDA (Rs mn) 40,251 37,483 35,608 7 13 e-auctions and another ~7mt in special auction for the power/non-
EBITDA margin (%) 20.3% 21.1% 15.9% -80 bps 438 bps power sectors). We expect blended e-auction realisations to increase
to Rs1,800/tn vs Rs1,611/tonne in 4QFY17 due to higher premiums
PBT (Rs mn) 49,551 46,293 42,784 7 16 in Apr-May and improved grade mix. Higher e-auction realisations
are likely to result in an 8% YoY increase in blended realisation. 3%
volume growth coupled with 8% realisation growth is likely to result in
PAT (Rs mn) 33,199 30,653 27,179 8 22 12% YoY revenue growth. However, higher revenues are likely to be
offset by higher employee costs (wage escalation) and hence, we
expect EBITDA/PAT to grow by 7%/8% respectively.
Note: We drop our coverage on Tata Steel, SAIL, Nalco and Hindalco.

Oil & Gas Stock Performance

3-month
Our oil & gas coverage universe should see a moderation in earnings on a (%) Rel to
sequential basis due to inventory losses for OMCs and muted uptick in gas Absolute
Sensex
volumes. Marginal uptick in gas consumption during the quarter would result BPCL (2) (7)
in flat QoQ gas transmission volumes for GAIL. However, GAIL would benefit GAIL (7) (13)
from higher petrochemical margins during the quarter. For PLNG and GSPL,
GSPL 8 3
too, we expect flat QoQ volumes. CGD volumes should continue to grow well.
We expect 5% volume growth for MGL and 10% volume growth for IGL. Lower HPCL (6) (12)
LNG prices and rupee depreciation during the quarter should benefit overall IGL 8 3
profitability. IOCL (4) (9)
PLNG and IOCL top ideas in the space MGL 10 5

PLNG 7 1
Our top picks are IOCL (TP Rs458, 20% upside) and PLNG (TP Rs260, 20% upside) due
to strong volume growth visibility, healthy RoE and inexpensive valuations.
June 17E Quaterly EPS
Ambit vs consensus
(Standalone)
Based on limited consensus data for 1QFY18, our earnings estimates are ahead of Rs Ambit Consensus
consensus for GAIL, IGL and PLNG and lower than consensus for BPCL, GSPL, IOCL
BPCL 11.0 15.9
and HPCL.
GAIL 7.1 6.9
GSPL 2.2 2.5
HPCL 7.4 12.2
IGL 12.0 11.4
IOCL 5.2 8.2
MGL 10.5 10.5
PLNG 5.3 3.5
FY18E EPS (Standalone)

Rs Ambit Consensus
IOCL 40.3 39.1
BPCL 57.7 56.7
GAIL 35.0 29.3
GSPL 10.3 11.2
HPCL 40.2 52.2
IGL 45.6 46.8
MGL 42.8 43.3
PLNG 12.3 12.4

Exhibit 30: Detailed June '17 quarterly estimates

Company June 17 June 16 YoY March 17 QoQ Comments
BPCL
Refinery and marketing throughput to grow by 2% and 1%
QoQ
Sales (Rs mn) 526,533 469,387 12% 570,365 -8%
QoQ decline in revenue because of decline in crude price and
appreciation of rupee against USD
EBITDA (Rs mn) 19,530 39,192 -50% 22,123 -12% Decline in crude prices QoQ to result in (i) USD1.2/barrel
decline in GRM because of inventory loss (ii) Rs4.1bn marketing
EBITDA margin (%) 3.7% 8.3% (464)bps 3.9% (17) bps product inventory losses
4QFY17 other income benefited from forex gains because of
appreciation of rupee against USD. Such gains are not
PBT (Rs mn) 17,271 37,415 -54% 22,033 -22% expected to recur in 1QFY18. Hence, decline in EBITDA and
lower other income QoQ to result in even further decline in
PBT
PAT (Rs mn) 14,436 26,205 -45% 18,417 -22% Lower PBT to flow through PAT
GAIL
Expect gas transmission volumes to remain flat QoQ in line
Sales (Rs mn) 130,404 101,067 22% 134,520 -3% with the gas consumption in India. QoQ revenue to be
impacted by decline in petrochemical volumes.
EBITDA (Rs mn) 16,727 15,933 5% 15,553 8% Petrochemical margins have improved significantly QoQ. This
EBITDA margin (%) 12.8% 14.9% (208) bps 11.6% 126 bps to some extent would be off-set by decline in LGP margins.
Increase in interest expense to more than offset QoQ increase
PBT (Rs mn) 13,627 16,858 -19% 16,539 -17%
in EBITDA.
Further increase in tax rate to result in PAT declining faster
PAT (Rs mn) 8,994 13,352 -33% 11,494 -22%
than the PBT.
GSPL
Expect flat volumes and only marginal increase in margins
Sales (Rs mn) 2,525 2,581 -2% 2,446 3%
QoQ.
EBITDA (Rs mn) 2,145 2,333 -8% 2,013 7%
Increase in realisations and decline in operating expenses.
EBITDA margin (%) 84.9% 90.4% (544) bps 82.3% 265 bps
PBT (Rs mn) 1,845 1,881 -2% 1,710 8% Increase in EBITDA QoQ to flow through PBT.
PAT (Rs mn) 1,254 1,213 3% 1,270 -1% Increase in tax rate to lead to decline in PAT QoQ.
HPCL
Refinery throughput to decline by 16% QoQ and marketing
volumes to increase by 6% QoQ.
Sales (Rs mn) 500,482 448,408 12% 515,248 -3%
appreciation of rupee against USD.
EBITDA (Rs mn) 17,601 36,268 -51% 38,860 -39% Decline in crude prices QoQ to result in (i) USD1.0/barrel
decline in GRM because of inventory loss (ii) Rs4.0bn marketing
EBITDA margin (%) 3.5% 8.3% (474) bps 6.6% (309) bps product inventory losses.
PBT (Rs mn) 11,351 31,518 -64% 23,890 -52% expected to recur in 1QFY18. Hence, decline in EBITDA and
lower other income QoQ to result in even further decline in
PBT.
PAT (Rs mn) 7,492 20,984 -64% 18,188 -59% Higher tax rate QoQ to result in even higher fall in PAT.
IGL
Expect 2.5% QoQ increase in volumes which translates into
Sales (Rs mn) 10,268 8,997 14% 10,019 2% 12% YoY increase in volumes. Expect marginal decline in
realisations because of appreciation of rupee against USD.
EBITDA (Rs mn) 2,648 2,596 2% 2,122 25% The domestic gas prices have not been revised during the
quarter. However, spot LNG price have decline QoQ. This
EBITDA margin (%) 25.8% 28.9% (307) bps 21.2% 461 bps would benefit companys industrial segment volumes.
PBT (Rs mn) 2,608 2,211 18% 2,075 26% Increase in EBITDA QoQ to flow through PBT.
PAT (Rs mn) 1,685 1,480 14% 1,341 26% QoQ PAT to grow in line with PAT.

Company June 17 June 16 YoY March 17 QoQ Comments

IOCL
Refinery throughput to increase by 4% QoQ and marketing
volumes to decline by 6% QoQ.
Sales (Rs mn) 885,045 860,807 3% 1,003,375 -12%
appreciation of rupee against USD.
EBITDA (Rs mn) 57,150 136,835 -58% 110,318 -48% Refinery margins to decline by USD4.0/barrel mainly because
of decline in Crude prices QoQ. Further, this would also result
EBITDA margin (%) 6.5% 15.9% (944) bps 4.4% 206 bps inRs8.4bn marketing product inventory losses.
PBT (Rs mn) 36,650 120,388 -70% 109,350 -66%
expected to recur in 1QFY18. Hence, PBT QoQ would decline
higher than EBITDA.
PAT (Rs mn) 25,289 82,690 -69% 71,077 -64% QoQ PAT to grow in line with PAT.
MGL
Expect 5% YoY increase in volumes which translates into 1%
Sales (Rs mn) 5,180 4,800 8% 5,253 -1% QoQ increase in volumes. Expect marginal decline in
realisations because of appreciation of rupee against USD.
EBITDA (Rs mn) 1,700 1,524 12% 1,631 4% The domestic gas prices have not been revised during the
quarter. However, spot LNG price have decline QoQ. This
EBITDA margin (%) 32.8% 31.7% 107 bps 31.1% 176 bps would benefit companys industrial segment which represents
~14% of total volumes.
PBT (Rs mn) 1,570 1,425 10% 1,505 4% Increase in EBITDA QoQ to flow through PBT.
PAT (Rs mn) 1,038 927 12% 995 4% QoQ PAT to grow in line with PAT.
PLNG
Expect volumes to remain largely flat QoQ, in line with the gas
Sales (Rs mn) 60,668 53,373 14% 63,651 -5% consumption in India during the quarter. Realisations are
expected to decline because of decline in LNG prices QoQ.
EBITDA (Rs mn) 6,564 6,425 2% 6,164 6%
Expect modest increase in margins.
EBITDA margin (%) 10.8% 12.0% (122) bps 9.7% 114 bps
Non-recurrence of certain one-offs in 1QFY18 other income
PBT (Rs mn) 5,704 5,556 3% 6,186 -8%
to result in lead to lower PBT QoQ.
Increase in tax rate QoQ to result in even sharper decline in
PAT (Rs mn) 3,935 3,779 4% 4,708 -16%
PAT QoQ.

Technology Stock Performance

3-month
We expect the large Indian IT companies to report subdued revenue (%) Rel to
Absolute
performance, ranging from 3.6% decline to 2.7% growth (organic CC, QoQ) in Sensex
a seasonally strong quarter. CC tailwinds (20-80bps) and inorganic TCS (4) (10)
contribution (HCLT and TechM, ~150bps) should drive USD revenue Infosys (5) (10)
performance ranging from 1.3% decline to 3.6% growth. INR appreciation, Wipro 1 (5)
wage hikes and visa costs will result in up to 130bps QoQ compression in EBIT
HCLT (2) (8)
margin. Mid-sized companies should report revenue growth of 1.0% to 4.2%
(organic CC, QoQ) and margin compression of up to 190bps. We expect TechM (14) (20)
Infosys and HCLT to retain FY18 guidance. However, (1) lack of progress on LTI 12 6
regulatory easing in US BFSI, (2) uncertainty in healthcare, (3) threat of Mindtree 21 15
protectionism and (4) the UKs Article 50 conundrum could translate into PSYS 17 12
downbeat commentary. Given these macro headwinds, we remain negative
eClerx (7) (13)
on the sector with TCS (15% upside), Infosys (16% upside) and LTI (8% upside)
being our only BUYs given high quality (TCS and Infosys) or deep discount
(LTI, 12x FY19E EPS). Jun17E Quarterly EPS
Infosys and Persistent to outperform peers on growth (Rs) Ambit Consensus
Infosys will lead the large IT space with revenue growth of 2.7% (organic cc, QoQ) vs TCS 35.5 33.7
2.5% for TCS, 2.4% for CTS and 1.5% for HCLT. Wipro and TechM will underperform Cognizant ($) 0.7 0.8
with revenue declines of 1.0% and 3.6% respectively. Among the mid-sized IT Infosys 14.9 15.8
companies, we expect Persistent to deliver growth of 4.2% vs 3.5% for Mindtree and Wipro 8.4 8.9
1.6% for LTI. We reckon cross-currency tailwind of 20-80bps across our coverage
HCLT 15.0 14.6
universe. Overall, BFSI is expected to post weak growth (1.5-2.0% QoQ) as the
regulatory easing proposed by the Trump administration hasnt yet taken off. While TechM 8.6 8.7
we expect flattish revenues from retail, healthcare revenues will decline (0-2% QoQ) Mindtree 6.5 6.3
because of uncertainty over Obamacare repeal. LTI 13.5 13.7
INR appreciation, the last nail in the coffin Persistent 8.9 9.6
eClerx 19.0 18.8
While wage hikes, visa costs and lower utilisation because of campus joinees make
1Q seasonally a soft quarter in terms of EBIT margins, INR appreciation added fuel to
the fire. In the large IT space, we factor in the highest margin hit for Wipro (130bps FY18E EPS
QoQ) followed by TCS (120bps) and Infosys (110bps). We have not considered the
(Rs) Ambit Consensu
impact of wage hikes for CTS and Infosys as media articles suggested that these
companies deferred wage hikes and promotions. Among the mid-sized Indian IT TCS 140.0 144.
companies, we expect LTI to witness the biggest hit on margins (190bps) followed by CTSH($) 2.6 3.
Persistent (150bps) and Mindtree (110bps). Infosys 64.0 67.
Most companies should retain guidance Wipro 34.0 37.

HCLT 63.0 63.
We expect Cognizant to cut its CY17 revenue growth guidance to 7-9% (from 8-10%
earlier, CC) owing to significant delays in healthcare (30% of revenue) IT spending. TechM 37.0 39.
Infosys is expected to retain its FY18 guidance of 6.5-8.5% vs 7.4% we are currently Mindtree 31.5 32.
factoring in. We expect HCLT to retain its guidance of 10.5-12.5% versus our current LTI 59.4 59.
estimate of 12.2%. Guidance of Wipro for 2Q is expected to be in the range of 0-2% Persistent 41.0 45.
(CC, QoQ) vs 1.8% we are factoring in currently. We expect all the companies in our
eClerx 82.6 90.
coverage to reiterate their margin guidance.
Key questions for managements
Thinking beyond just the numbers, the key questions for managements should be
around: (1) formal capital return policies, (2) growth outlook in US BFSI, (3) recovery
in global retail and US healthcare, (4) management preparedness to deal with macro
headwinds like US protectionism and BREXIT, (5) deal wins in digital, and (6) pricing
pressure in the industry.

Key revisions to estimates before results

Before the results, we revised our estimates for Cognizant, Wipro, TechM and
Persistent Systems. For details see Exhibit 2.
For Cognizant, we have increased our revenue growth estimates over CY17-19 to
reflect the incremental revenue from consolidation of TMG Health. GAAP margin
estimate for the full year is cut by 30bps to reflect the one-off severance costs related
to the voluntary separation program. With increasing evidence of weakness in
healthcare IT spend (because of uncertainty over Obamacare repeal), we have cut our
revenue/EBIT estimates for Wipro by 1-4% over FY18-20.
We have cut the revenue/EBIT estimates of TechM by 1-3% over FY18-20 to factor in
the continued weakness in the core telecom segment (46% of revenue). We have
increased our EPS estimates of Persistent Systems over FY18-20 by 1-3% to factor in
the higher growth in this quarter. Roll forward of the estimates combined with the
above changes have resulted in a 2-5% change in target prices of our coverage
universe.
Ambit vs consensus:
For FY18E EPS, we are upto 13% lower than consensus on all the companies (except
LTI) as we factor in margin hit because of headwinds from US protectionism. For LTI,
we are factoring in higher hedge income compared to consensus making our FY18
EPS estimate slightly higher than that of consensus.
Key recommendations:
Given the (1) macro-economic headwinds like US protectionism and Brexit, (2) delays
in regulatory easing in US BFSI, and (3) uncertainty over Obamacare repeal, we
remain negative on the Indian IT sector. TCS, Infosys and LTI are our only BUYs given
their high quality (TCS and Infosys) or deep discount (LTI)


Jun-17E Mar-17 QoQ Jun-16 YoY Comments
TCS
Organic constant-currency revenue growth of 2.5% QoQ (vs 3.1%
Sales (US$ mn) 4,599 4,452 3.3% 4,362 5.4% QoQ in Jun-16 quarter). Flattish revenue in retail (14% of overall
revenue) will remain a drag on the overall portfolio growth
Sales (Rs bn) 297 296 0.1% 293 1.2%
EBIT (Rs bn) 72.8 76.3 -4.6% 73.5 -1.0%
EBIT margin (%) 24.5% 25.7% -120 bps 25.1% -50 bps Key margin headwinds: (1) INR appreciation, (2) Wage revision
PBT (Rs bn) 82.5 86.2 -4.3% 83.1 -0.8%
Expect investor focus on (1) recovery in IT spend by BFSI clients, (2)
PAT (Rs bn) 62.8 66.1 -5.0% 63.2 -0.6%
recovery in retail, (3) commentary on US protectionism
CTSH
Organic constant-currency revenue growth of 2.4% QoQ at the
lower end of the company's guidance band, 2.4-3.8%. Cross-
Sales (US$ mn) 3,652 3,546 3.0% 3,370 8.4%
currency tailwind of 60bps to result in US$ revenue growth of 3%
QoQ
EBIT ($ mn) 646 570 13.3% 591 9.3%
GAAP EBIT margin in 1QCY17 was hit by (1) lower utilisation
because of addition of new hires, (2) one-off severance costs and
advisory fee. Though severance costs from voluntary separation
EBIT margin (%) 17.7% 16.1% 160 bps 17.5% 10 bps program and INR appreciation remain key margin headwinds in
2Q, we expect company to report 160bps QoQ margin expansion
driven by (1) higher utilisation, (2) deferral of wage hikes (and
promotions)
PBT ($ mn) 726 649 11.8% 595 22.0%
Expect investor focus on (1) recovery in healthcare (2) road map to
PAT ($ mn) 537 557 -3.6% 252 112.9%
improve non-GAAP EBIT margin to 22% by CY19
Infosys
Organic constant-currency revenue growth of 2.7% QoQ (vs 1.7%
Sales (US$ mn) 2,642 2,569 2.9% 2,501 5.7%
in Jun-16)
Sales (Rs bn) 170 171 -0.4% 168 1.6%
EBIT (Rs bn) 40 42 -4.9% 40 -1.0%
Key margin headwinds: (1) INR appreciation, (2) visa costs. We are
currently not factoring in incremental costs because of wage hikes
EBIT margin (%) 23.5% 24.6% -110 bps 24.1% -60 bps
as news reports suggest that wage hike is delayed to Sep-17
quarter with no wage hike arrears for the period from April-June
PBT (Rs bn) 47 50 -4.5% 48 -1.3%
Expect investor focus on (1) FY18 revenue growth and EBIT margin
PAT (Rs bn) 34 36 -6.0% 34 -0.8% guidance, (2) clarity on capital return, (3) pricing pressure in the
industry, (4) continuing senior management attrition
Wipro
IT Services
Organic constant-currency revenue decline of 1% (vs. 0% to 2%
Sales (US$ mn) 1,951 1,955 -0.2% 1,931 1.1%
decline guided by the company).
EBIT (Rs bn) 24 24 -2.3% 26 -8.1%
Consolidated
Sales (Rs bn) 132 141 -6.5% 137 -4.0%
EBIT (Rs bn) 21 23 -7.5% 23 -6.2%
Adjusted EBIT margin in 4QFY17 was 17.6%. Expect 130bps QoQ
EBIT margin (%) 16.3% 16.5% -20 bps 16.7% -40 bps compression in EBIT margin due to (1) INR appreciation and (2)
wage revision
PBT (Rs bn) 26 28 -6.5% 27 -3.0%
Expect investor focus on (1) Buy back proposal to be considered in
July, (2) revenue growth outlook in healthcare vertical (estimated to
PAT (Rs bn) 20 21 -5.2% 21 -3.3%
be ~18% of revenue) given the uncertainty over Obamacare, (3)
guidance for 2QFY18

Jun-17E Mar-17 QoQ Jun-16 YoY Comment

HCLT
Organic constant-currency revenue growth of 1.5% QoQ. Contribution
of 1.5% from incremental revenue from Geometric and IV IBM IP deal.
Sales (US$ mn) 1,882 1,817 3.6% 1,691 11.3%
Aided by cross currency tailwind of 60bps, we expect US$ revenue
growth to be 3.6%
Sales (Rs bn) 121 120 0.8% 113 7.0%
EBIT (Rs bn) 24 24 -1.3% 23 2.0%
EBIT margin (%) 19.6% 20.0% -40 bps 20.6% -100 bps Key margin headwinds: (1) INR appreciation
PBT (Rs bn) 26 26 -1.5% 26 0.1%
Expect investor focus on (1) FY18 revenue growth and EBIT margin
PAT (Rs bn) 20 23 -12.4% 20 -0.6%
guidance, (2) new IP deals with IBM, if any
TechM
Sales (US$ mn) 1,117 1,131 -1.3% 1,032 8.3% Organic constant-currency revenue should decline by 3.6% QoQ.
Sales (Rs bn) 72 75 -3.9% 69 4.1% Contribution of 1.5% from incremental revenue of CJS solutions and
cross currency tailwind of 80bps will result in 1.3% QoQ decline in US$
revenue. Seasonality at Comviva, underperformance at LCC and delays
EBIT (Rs bn) 6.3 6.2 2.4% 8.3 -23.8% in ramp up of few non-telecom projects will result in second consecutive
bad quarter for the company
Expect absence of one-offs like in 4QFY17 to result in a modest margin
EBIT margin (%) 8.7% 8.2% 50 bps 12.0% -320 bps expansion of 50bps on a QoQ basis despite headwinds from (1) INR
appreciation and (2) visa costs
PBT (Rs bn) 8.5 8.2 3.1% 10.5 -19.0%
Expect investor focus on (1) capital return policy, (2) steady state
PAT (Rs bn) 6.3 5.9 7.9% 7.5 -15.4% margins, (3) growth outlook in telecom and (4) turnaround strategy for
LCC
Mindtree
Constant-currency revenue growth of 3.5% vs. management's indication
Sales (US$ mn) 203 196 3.9% 199 2.1%
of 4-5% QoQ growth over 1HFY18
Sales (Rs mn) 13,106 13,181 -0.6% 13,276 -1.3%
EBIT (Rs mn) 1,245 1,401 -11.1% 1,483 -16.0%
Key margin headwinds: (1) INR appreciation, (2) visa costs and (3)
continued losses at Bluefin and Magnet 360
PBT (Rs mn) 1,378 1,259 9.5% 1,630 -15.5%
Expect investor focus on (1) TCV of deal wins, (2) growth outlook in key
PAT (Rs mn) 1,027 972 5.6% 1,235 -16.9%
accounts, (3) road map for margin expansion
LTI
Organic constant-currency revenue growth of 1.6% (vs. 0.3% decline in
Sales (US$ mn) 259 254 1.9% 231 12.0%
Jun-16 quarter)
Sales (Rs mn) 16,701 16,772 -0.4% 15,550 7.4%
EBIT (Rs mn) 2,441 2,773 -12.0% 2,621 -6.9%
Key margin headwinds: (1) INR appreciation, (2) visa costs and (3) lower
utilisation because of fresher hiring
PBT (Rs mn) 3,125 3,276 -4.6% 2,993 4.4%
Expect investor focus on (1) potential buy back, (2) growth outlook in
PAT (Rs mn) 2,406 2,547 -5.5% 2,359 2.0%
Indian business and (3) capability addition through M&A
Persistent
Organic constant currency revenue growth of 4.2% QoQ (services: +1%,
Sales (US$ mn) 114 109 4.5% 105 8.7% digital: +14%, alliance: +5% and accelerite: 0%) in a seasonally soft
quarter
Sales (Rs mn) 7,346 7,271 1.0% 7,018 4.7%
EBIT (Rs mn) 805 907 -11.3% 715 12.7%
EBIT margin (%) 11.0% 12.5% -150 bps 10.2% 80 bps Key margin headwinds: (1) INR appreciation, (2) visa costs
PBT (Rs mn) 1,059 1,051 0.8% 968 9.5%
Expect investor focus on (1) growth outlook in IBM alliances, (2) long-
PAT (Rs mn) 801 728 10.0% 733 9.3% term strategy for digital, (3) growth outlook in key client accounts, (4)
capital return policy of the company
eClerx
Sales (US$ mn) 49 48 1.5% 50 -3.1% Organic constant-currency revenue growth of 1% QoQ
Sales (Rs mn) 3,192 3,315 -3.7% 3,403 -6.2%
EBIT (Rs mn) 941 979 -3.9% 1,140 -17.5%
Key margin tailwinds: (1) SG&A optimisation, (2) lower depreciation to
EBIT margin (%)
30.0% 29.5% 40 bps 33.5% -350 bps more than offset impact of INR appreciation and increased focus on
(pre- hedging)
onsite hiring
PBT (Rs mn) 1,102 906 21.6% 1,240 -11.1%
Expect investor focus on (1) revenue growth and margin outlook for
PAT (Rs mn) 826 750 10.3% 959 -13.8%
FY18, (2) demand in analytics


New estimates Old estimates Change
Comments
FY18E FY19E FY20E FY18E FY19E FY20E FY18E FY19E FY20E
TCS (in Rs bn)
Target Price (Rs) 2,720 2,650 3%
USD/ INR 64.5 64.5 64.5 64.5 64.5 64.5 0% 0% 0%
Revenue (US$mn) 19,166 21,275 23,711 19,205 21,318 23,759 0% 0% 0% No significant change in our
estimates over FY18-20. Our DCF-
EBIT 320 332 346 322 333 347 -1% 0% 0%
based target price increased by 3%
EBIT margin 25.9% 24.2% 22.6% 26.0% 24.2% 22.6% -10bps 00bps 00bps as we roll forward our estimates
PAT 273 285 311 273 286 311 0% 0% 0%
EPS (Rs) 139 145 158 139 145 158 0% 0% 0%
CTSH (in US$ mn)
Target Price ($) 42 40 5%
We have increased our revenue
growth estimates over CY17-19 to
Revenue (US$mn) 14,620 15,732 17,040 14,355 15,334 16,608 2% 3% 3%
reflect the incremental revenue
from consolidation of TMG health
EBIT 17.0% 14.6% 11.3% 17.4% 14.6% 11.3% -30bps 00bps 00bps
GAAP margin estimate for the full
year is cut by 30bps to reflect the
EBIT margin 2,491 2,302 1,923 2,491 2,244 1,875 0% 3% 3%
one-off severance costs related to
voluntary separation program
PAT 2,071 1,794 1,545 2,018 1,744 1,502 3% 3% 3%
Our DCF-based target price
increases by 5% because of above
EPS ($) 3.4 3.0 2.5 3.3 2.9 2.5 3% 3% 3%
changes and roll forward of our
estimates
Infosys
USD/ INR 64.5 64.5 64.5 64.5 64.5 64.5 0% 0% 0%
No significant change in our
Revenue (US$mn) 10,898 11,874 13,006 10,925 11,907 13,042 0% 0% 0% estimates over FY18-20. Our DCF-
based target price increased by 5%
EBIT 169 168 161 171 168 162 -1% 0% 0%
as we roll forward our estimates
EBIT margin 24.1% 21.9% 19.2% 24.2% 21.9% 19.2% -10bps 00bps 00bps and change our long-term growth
assumptions
PAT 140 137 134 140 138 134 0% 0% 0%
EPS (Rs) 61 60 59 61 60 59 0% 0% 0%
Wipro
Target Price (Rs) 204 215 -5%
USD/ INR 64.5 64.5 64.5 64.5 64.5 64.5 0% 0% 0%
IT Services With increasing evidence of
weakness in healthcare IT spend
Revenue (US$mn) 7,955 8,607 9,328 8,050 8,711 9,441 -1% -1% -1% because of uncertainty over
EBIT 90 90 82 93 91 83 -4% -1% -1% Obamacare repeal, we have cut our
revenue/EBIT estimates of the
EBIT margin 17.6% 16.2% 13.7% 18.0% 16.2% 13.7% -40bps 00bps 00bps company by 1-4% over FY18-20.
Consolidated
Revenue 513 555 602 519 562 609 -1% -1% -1%
EBIT 88 87 78 89 89 79 -2% -1% -1%
EBIT margin 16.3% 15.1% 12.5% 16.4% 15.1% 12.5% -10bps 00bps 00bps decreased by 5% implying
12xFY19EPS
PAT 81 83 77 82 83 78 -1% -1% -1%
EPS (Rs) 17 17 16 17 17 16 -1% -1% -1%

New estimates Old estimates Change

Comments
FY18E FY19E FY20E FY18E FY19E FY20E FY18E FY19E FY20E
HCL Tech
Target Price (Rs) 770 770 0%
USD/ INR 64.5 64.5 64.5 64.5 64.5 64.5 0% 0% 0% We have marginally cut our
revenue estimates over FY19-20 to
Revenue (US$mn) 7,783 8,635 9,719 7,782 8,720 9,809 0% -1% -1% better reflect the slowing organic
growth of the company
EBIT 101 100 101 101 101 102 0% -1% -1%
EBIT margin 20.0% 18.0% 16.1% 20.0% 18.0% 16.1% 00bps 00bps 00bps
PAT 86 88 90 86 89 91 0% -1% -1%
EPS (Rs) 61 62 64 61 63 64 0% -1% -1% remains unchanged as we roll
forward our estimates
Tech Mahindra
Target Price (Rs) 360 375 -4%
USD/ INR 64.5 64.5 64.5 64.5 64.5 64.5 0% 0% 0% We have cut our revenue/EBIT
estimates of the company by 1-3%
Revenue (US$mn) 4,525 4,864 5,310 4,608 4,981 5,449 -2% -2% -3%
over FY18-20 to factor in the
EBIT 32 30 30 33 31 31 -2% -3% -3% continued weakness in the core
EBIT margin 10.9% 9.6% 8.9% 11.0% 9.7% 9.0% 00bps -10bps -10bps telecom segment (46% of revenue).
Our DCF-based target price is
PAT 28 26 26 28 27 27 -1% -3% -3%
reduced by 4% implying 12x FY19E
EPS (Rs) 32 29 30 32 30 31 -1% -3% -3% EPS
Mindtree (Rs mn)
We have cut our EBIT margin
USD/ INR 64.5 64.5 64.5 64.5 64.5 64.5 0% 0% 0% estimates for FY18 by 30bps to
Revenue (US$mn) 850 943 1,052 849 943 1,052 0% 0% 0% reflect the higher-than-expected
INR appreciation. Our DCF-based
EBIT 6,139 6,441 7,030 6,320 6,441 7,030 -3% 0% 0%
target price increased by 2% as we
EBIT margin 11.2% 10.6% 10.4% 11.5% 10.6% 10.4% -30bps 00bps 00bps roll forward our estimates and
PAT 4,996 5,337 5,924 5,123 5,337 5,924 -2% 0% 0% make changes to long-term growth
assumptions
EPS (Rs) 29.7 31.7 35.2 30.4 31.7 35.2 -2% 0% 0%
LTI (Rs mn)
Target Price (Rs) 860 830.0 4%
We have cut our EBIT margin
USD/ INR 64.5 64.5 64.5 64.5 64.5 64.5 0% 0% 0% estimates for FY18 by 70bps
Revenue (US$mn) 1,070 1,183 1,319 1,064 1,183 1,319 1% 0% 0% because of higher-than-expected
INR appreciation. Our DCF-based
EBIT 11,130 11,035 10,529 11,524 11,036 10,521 -3% 0% 0%
target price increased by 4% as we
EBIT margin 16.1% 14.5% 12.4% 16.8% 14.5% 12.4% -70bps 00bps 00bps roll forward our estimates and
PAT 10,138 9,988 9,598 10,288 9,989 9,592 -1% 0% 0% make changes to long-term growth
assumptions
EPS (Rs) 58.1 57.3 55.0 59.0 57.3 55.0 -1% 0% 0%
Persistent (Rs mn)
USD/ INR 64.5 64.5 64.5 64.5 64.5 64.5 0% 0% 0%
Revenue (US$mn) 480 520 556 471 511 546 2% 2% 2% We increased our EPS estimates
EBIT 3,484 3,649 3,900 3,319 3,580 3,825 5% 2% 2% over FY18-20 by 1-3% and our
EBIT margin 11.3% 10.9% 10.9% 10.9% 10.9% 10.9% 30bps 00bps 00bps target price by 2%
PAT 3,431 3,596 3,806 3,319 3,544 3,750 3% 1% 1%
EPS (Rs) 43 45 48 41 44 47 3% 1% 1%
eClerx (Rs mn)
USD/ INR 64.5 64.5 64.5 64.5 64.5 64.5 0% 0% 0%
We cut our EBIT margin estimates
Revenue (US$mn) 194 205 219 194 204 218 0% 0% 0% for FY18 by 50bps. Adjusting for the
EBIT 3,909 4,418 4,766 3,955 4,376 4,723 -1% 1% 1% roll forward of our estimates, our
EBIT margin 30.6% 32.9% 33.2% 31.1% 32.7% 33.0% -50bps 20bps 20bps target price of the company
remains unchanged.
PAT 3,266 3,676 4,049 3,295 3,646 4,017 -1% 1% 1%
EPS (Rs) 81.4 91.7 101.0 82.1 90.9 100.2 -1% 1% 1%

Telecom Stock Performance

3-month
Incumbent telcos like Airtel, Idea and Vodafone should report flat QoQ (%) Rel to
Absolute
revenue as Jio has started charging from 15 April, 2017. Revenue trends for Sensex
Idea and Airtel in 1QFY18E are likely to be similar; we expect 1% QoQ Bharti Airtel 12 6
growth. For Infratel, we expect continuation of steady rental income growth Bharti Infratel 16 11
(8% YoY, 4% QoQ) led by demand from Jio. Both Airtel and Idea will witness Idea Cellular (5) (10)
sharp EBITDA pressure due to a combination of muted revenue growth and
escalating overheads linked to data network build-up. Despite tenancy-led
revenue growth, Infratels operating margins should remain steady due to its Jun17E Quarterly EPS
rental freeze for existing tenants. We leave our estimates unchanged. We (Rs) Ambit Consensus
remain SELLers on Airtel and Infratel. Idea remains our top BUY as we
Bharti Airtel 2.2 1.0
believe Streets pessimistic estimates ignore telecom revenue recovery in
2HFY18. Bharti Infratel 4.2 3.6
Idea Cellular (2.1) (2.1)
Ambit vs consensus: Our revenue estimates are ahead of consensus. This translates
to higher EBITDA and hence EPS estimates than consensus. Our earnings estimates for
Airtel/Infratel are different from consensus owing to varied assumptions of forex FY18E EPS
fluctuations/MTM swings. (Rs) Ambit Consensus
Key recommendations: Idea Cellular is our top BUY. Its revenue should improve Bharti Airtel 7.1 7.6
sharply in 2HFY18 as Jio will gradually reduce promotions; regulatory intervention Bharti Infratel 16.3 16.3
could be a trigger. The launch of Jios VoLTE feature phone will hurt weak 2G
Idea Cellular (5.0) (6.6)
operators, hastening SIM consolidation; this will be ARPU accretive for incumbents.
TRAIs 4QFY17 print indicates massive pressures on weak operators, resulting in easy
2G customer gains for incumbents in their markets of dominance. Ideas reduced
capex over FY18 doesnt worry us; robust spectrum footprint with Vodafone will
support long-term growth.


Rs mn, unless
Jun17E Jun16 Mar17 YoY QoQ Comments
mentioned
Bharti Airtel (consol)
We expect stabilisation of wireless revenue as Jio has
Sales 221,515 255,729 219,806 -13% 1% started charging. Non-wireless businesses growth should
improve as the demonetisation effect wears off
EBITDA 78,828 95,745 79,060 -18% 0%
EBITDA margin (%) 35.6 37.4 36.0 -185bps -38bps Margin compression is a result of revenue headwinds
PBT 11,786 22,383 3,951 -47% 198%
PAT 8,661 14,620 3,734 -41% 132%
EPS (Rs) 2.16 3.66 0.93 -41% 132%
Bharti Infratel (consol)
We expect 8% YoY increase in rental income driven by
Sales 34,543 32,106 35,204 8% -2%
tenancy growth due to RJio's aggressive capex.
EBITDA 14,900 13,947 15,723 7% -5%
We expect margins to remain stable as positive impact of
EBITDA margin (%) 43.1 43.4 44.7 -31bps -153bps
tenancy-led income growth is negated by rental freeze.
PBT 11,841 9,931 10,166 19% 16%
PAT 7,697 7,562 5,966 2% 29%
EPS (Rs) 4.17 3.99 3.23 5% 29%
Idea Cellular (consol)
We build in marginal improvement in QoQ revenue trends
on account of improving operating conditions for
Sales 81,791 94,866 81,261 -14% 1%
incumbent telcos as Jio has started charging from 15 April,
2017.
EBITDA 19,489 30,742 21,965 -37% -11%
EBITDA compression is led by slow revenue growth and
EBITDA margin (%) 23.8 32.4 27.0 -858bps -320bps sharp increase in network build-out costs and
sales/advertising expenses
PBT (11,165) 3,362 (7,069) NM NM
PAT (7,258) 2,204 (3,277) NM NM
EPS (Rs) 81,791 94,866 81,261 -14% 1%

Utilities Stock Performance

3-month
Growth in power generation has improved by 4% in 1QFY18 vs 3% growth in (%) Rel to
Absolute
4QFY17 led by the low base impact from May. However, Indias thermal PLF Sensex
declined by 70bps YoY to 61.8%. Within our coverage, average PLF for NTPC -5.5 -11
NTPC/Tata/JSWE (thermal) declined by 540bps/200bps/700bps YoY. Whilst Tata Power -6.6 -12.2
JSWE will report 17% decline in PAT, NTPC (increase in regulated equity), Tata JSW Energy -3.2 -8.7
(higher profit at KPC mine), and Torrent (increase in sales in distribution Torrent Power -19.1 -24.6
circle) will report 9%/36%/1% growth in PAT. NTPC (16% downside) is our top
SELL and JSWE (34% upside) is our top BUY in the sector. We retain BUY on
Tata and Torrent. June17E Quaterly EPS
Ambit vs consensus: Currently there are no credible consensus estimates available
for NTPC, TPL, Torrent and JSWE. NTPC 3.1 NA
Tata Power 1.2 NA
Recommendations
JSW Energy 1.9 NA
NTPC (NTPC IN, 6M ADV US$12.3mn, SELL, TP Rs132/share, 16% downside) Torrent Power 1.0 NA
Expensive power from new plants: NTPCs competitive advantage as a low-cost

producer has diminished given new plants are far from mines, FSA for plants FY18E EPS
commissioned after FY09 allows the supply of domestic coal equivalent to ~70% PLF (Rs) Ambit Consensus
vs 85% PLF pre-2009. NTPC 13.8 17.1
Tata Power 9.3 6.1
Capacity addition to decelerate: We expect NTPCs new capacity addition to
JSW Energy 4.9 5.1
decelerate given India does not need additional power plants. Assuming demand
CAGR of 6.4% over FY17-32 (0.8x correlation to GDP), the decline in AT&C losses to Torrent Power 14.0 10.5
15% by FY32 and PLF rises to 85%, power capacity addition CAGR over FY16-32
should reduce to 4.2% vs 7.2% over FY01-16.
Cut in regulated RoE: We expect NTPCs regulated RoE to be cut by 250bps for
2019-24 to 13% due to: (a) 200bps fall in G-Sec yield; and (b) 50bps cut in spread
over G-Sec yield as Government wants to disincentivise fresh capacity additions.
NTPCs valuation at 1.2x FY18 P/B would de-rate as capacity addition growth would
plateau and RoE decline to 10%.
JSW Energy (JSW IN, 6M ADV US$7.5mn, BUY, TP Rs86/share, 34% upside)
Vijayanagar is highly likely to sign a PPA with Karnataka for supply from
FY19. Karnataka needs to open PPA bids as it has PPA shortfall of 1.4GW.
Vijayanagar is the best bet as it has fixed cost of 71p/unit vs Rs1.5-2.5/unit for
recently commissioned plants.
Fuel cost should reduce by 60paise led by: (i) 50% domestic coal blending;
JSWE may tie-up domestic coal under new coal linkage auction policy at Rs989/T and
(ii) decline in imported coal price in FY18E as China (48% of global
consumption) steps back on addition of new thermal capacity.
JSWE multiple (1x FY18 P/B) should re-rate once Vijayanagar signs a PPA.
Post PPA, merchant exposure would reduce to 10% from 29% currently. NTPC,
despite 11% FY18E RoE, trades at a much higher 1.2x FY18 P/B given NIL
merchant exposure.


Company name Jun'17E Jun'16 Mar'17 YoY QoQ Comments
NTPC
Led by 12% growth in average realisation due to
Sales (Rs mn) 209,842 190,629 204,167 10% 3%
increase in fuel cost and 2% YoY decline in volumes
EBITDA (Rs mn) 58,119 51,745 58,248 12% 0%
Led by growth in regulated equity
PBT (Rs mn) 33,945 30,368 30,080 12% 13%
PAT (Rs mn) 25,459 23,386 20,794 9% 22%
Tata Power
We expect revenue to grow marginally led by higher
Sales (Rs mn) 69,518 68,383 71,668 2% -3%
demand in the distribution circle
EBITDA (Rs mn) 12,759 13,634 11,635 -6% 10% Decline in EBITDA led by fixed cost under-recovery at
EBITDA margin (%) 18.4% 19.9% 16.2% -150bps 220bps Mundra due to lower availability
APBT (Rs mn) (387) 849 (775) -146% -50% Trickle-down impact of lower EBITDA
APAT after accounting for share of profits from
APAT (Rs mn) 3,146 2,322 3,253 36% -3%
Indonesian mines
JSW Energy
Led by decline in Vijayanagar/Ratnagiri sales volume by
Sales (Rs mn) 23,858 24,500 18,621 -3% 28% 4%/29% YoY in 1QFY18 due to weak demand. This is
partly offset by 14% YoY growth in hydro volumes.
EBITDA (Rs mn) 9,767 11,173 5,869 -13% 66%
Led by 31% higher fuel cost on a YoY basis
EBITDA margin (%) 40.9% 45.6% 31.5% -470bps 940bps
APBT (Rs mn) 4,075 4,899 253 -17% 1514%
Trickle-down impact of lower EBITDA
APAT (Rs mn) 3,051 3,667 237 -17% 1186%
Torrent Power
Sales (Rs mn) 26,874 25,887 24,528 4% 10%
EBITDA (Rs mn) 5,487 5,198 6,963 6% -21% Led by higher fuel cost due to generation at Sugen
PBT (Rs mn) 586 580 2,054 1% -71% Expect PAT to remain flat given delay in awarding true-
PAT (Rs mn) 469 464 1,357 1% -65% up income for FY18


New Estimates Old Estimates Change in estimates
Rsmn unless specified Comments
NTPC
Revenues (Rs mn) 950,221 1,048,228 950,221 1,048,228 0% 0%
EBITDA (Rs mn) 251,442 268,832 251,442 268,832 0% 0%
No change
PBT (Rs mn) 151,245 161,387 151,245 161,387 0% 0%
PAT (Rs mn) 113,434 121,040 113,434 121,040 0% 0%
EPS (Rs) 13.8 14.7 13.8 14.7 0% 0%
Tata Power
Revenues (Rs mn) 406,173 427,438 406,173 427,438 0% 0%
EBITDA (Rs mn) 98,810 102,031 98,810 102,031 0% 0%
No Change
PBT (Rs mn) 41,778 52,933 41,778 52,933 0% 0%
PAT (Rs mn) 25,256 32,571 25,256 32,571 0% 0%
EPS (Rs) 9.3 12.0 9.3 12.0 0% 0%
JSW Energy
TP (Rs) 86 85 1% Led by rollover of TP by 3 months.
Revenues (Rs mn) 89,488 91,433 89,488 91,433 0% 0%
EBITDA (Rs mn) 34,088 39,631 34,088 39,631 0% 0%
No change
PBT (Rs mn) 11,989 18,921 11,989 18,921 0% 0%
PAT (Rs mn) 8,032 12,677 8,032 12,677 0% 0%
EPS (Rs) 4.9 7.7 4.9 7.7 0% 0%

Exhibit 36: Ambit Coverage Valuation Summary
ADVT -
Reco Mcap CMP TP Upside EPS (`) P/E (x) P/B (x) EV/EBITDA (x) ROE (%)
Name 6m
($ mn) ($ mn) (`) (`) (%) FY17E FY18E FY19E FY18E FY19E FY18E FY19E FY18E FY19E FY18E FY19E
Automobiles
Maruti Suzuki SELL 34,820 53.6 7,435 5,000 (33) 243 253 289 29 26 5.9 5.1 18 16 20 20
Tata Motors BUY 22,122 54.8 447 550 23 19 33 41 14 11 1.6 1.4 4 3 10 11
Mahindra & Mahindra SELL 13,167 25.3 1,367 1,315 (4) 62 71 81 19 17 2.8 2.5 13 12 14 15
Bajaj Auto SELL 12,246 12.6 2,730 2,520 (8) 132 149 163 18 17 5.5 5.2 12 11 31 32
Eicher Motors* SELL 11,789 19.7 27,931 19,600 (30) 616 772 812 36 34 11.5 9.1 19 18 40 33
Hero Motocorp SELL 11,552 21.5 3,731 3,000 (20) 170 185 202 20 18 6.9 6.1 13 12 34 33
Ashok Leyland BUY 4,778 16.6 105 94 (10) 4 5 6 21 19 4.1 3.7 12 11 19 20
TVS SELL 4,194 9.6 569 335 (41) 12 17 21 34 27 9.7 7.9 22 18 31 32
Exide Industries SELL 3,021 7.1 229 219 (4) 8 9 10 24 22 3.5 3.2 15 13 22 21
Balkrishna Inds SELL 2,547 12.2 1,700 840 (51) 75 81 87 21 20 3.9 3.3 13 12 20 18
Amara Raja SELL 2,294 5.7 866 830 (4) 29 33 38 26 23 4.8 4.1 15 13 19 18
Endurance Tech. BUY 1,882 1.2 863 890 3 24 31 39 28 22 5.6 4.6 14 12 22 22
Mahindra CIE BUY 1,380 0.7 235 270 15 5 10 13 22 19 2.4 2.1 13 11 11 12
Suprajit Engg. BUY 623 0.6 306 285 (7) 8 10 13 30 24 6.4 5.3 17 14 25 26
Agri/Chemicals
PI Inds BUY 1,716 2.8 804 1,100 37 34 35 44 23 18 5.8 4.9 16 14 27 29
SRF BUY 1,376 5.2 1,546 1,800 16 86 102 130 15 12 2.6 2.3 9 8 18 20
Aarti Inds. BUY 1,195 1.1 939 1,160 24 39 50 65 19 14 4.6 3.7 11 9 28 29
Vinati Organics BUY 753 0.5 941 930 (1) 27 36 44 26 21 5.6 4.5 16 13 24 23
Rallis India SELL 735 1.4 244 180 (26) 15 11 13 22 19 3.8 3.3 15 13 18 18
Aviation
Interglobe Aviation SELL 6,946 9.0 1,239 870 (30) 46 41 58 30 21 15.1 10.4 19 14 N/A N/A
Capital Goods
BHEL SELL 5,224 16.6 138 116 (16) 2 6 6 22 25 1.0 1.0 9 9 5 4
Cummins SELL 3,922 5.0 913 607 (33) 27 29 36 32 25 6.1 5.2 27 23 20 22
Thermax SELL 1,706 1.0 923 648 (30) 22 28 32 32 29 4.0 3.6 20 19 13 13
Greaves Cotton BUY 608 1.3 161 194 21 7 10 11 17 15 3.9 3.6 12 10 24 25
Inox Wind SELL 504 1.7 146 147 0 14 (3) 13 N/A 11 1.6 1.4 318 9 (3) 13
Cement
UltraTech SELL 17,638 16.1 4,144 3,170 (24) 109 120 156 35 27 4.3 3.8 18 15 13 15
Shree Cement SELL 9,857 4.8 18,250 14,500 (21) 720 917 1,121 20 16 4.5 3.8 20 16 25 25
Ambuja Cement* SELL 7,832 10.3 254 244 (4) 5 6 8 44 33 2.3 2.2 17 14 5 7
ACC* SELL 4,740 9.3 1,628 1,340 (18) 35 52 62 32 26 3.3 3.2 16 13 11 12
Dalmia Bharat BUY 3,612 7.0 2,619 2,650 1 39 87 123 30 21 3.7 3.3 12 10 14 16
Orient Cement BUY 497 0.9 157 190 21 (1) 7 14 23 11 2.8 2.3 10 7 13 23

ADVT -
Name 6m
Consumer Goods/FMCG
ITC BUY 62,787 55.2 333 340 2 9 11 12 31 27 8.3 7.6 21 18 28 30
Godrej Consumer SELL 10,294 7.4 975 1,130 16 38 41 47 24 21 5.5 4.8 33 30 24 24
Nestle India * SELL 10,173 4.4 6,806 6,000 (12) 99 121 144 56 47 21.3 20.6 32 27 38 44
Dabur India BUY 8,298 7.7 304 330 9 7 8 10 37 31 9.6 8.4 31 26 28 29
Britannia Inds SELL 6,917 8.3 3,716 2,900 (22) 74 82 100 46 37 28.0 23.5 30 25 33 34
Marico Inds SELL 6,462 6.0 323 250 (23) 6 7 8 46 40 15.7 13.6 32 27 36 37
United Spirits BUY 5,944 22.1 2,638 2,575 (2) 22 34 49 78 54 14.8 11.6 35 28 21 24
Colgate Palmolive SELL 4,615 6.8 1,094 850 (22) 21 25 30 44 36 20.6 18.0 20 18 75 78
GSK Consumer SELL 3,569 1.4 5,473 4,950 (10) 156 232 263 24 21 6.6 5.9 21 19 30 30
United Breweries SELL 3,311 3.1 808 625 (23) 9 10 14 83 58 8.4 7.6 30 25 11 14
Hatsun Agro UR 1,504 0.2 637 UR N/A - - - - - - - - - - -
Consumer Discretionary
Titan SELL 7,388 13.8 537 442 (18) 9 12 13 46 40 10.5 9.2 31 27 24 24
Page Inds BUY 2,877 3.6 16,637 16,782 1 241 319 410 52 41 29.6 23.6 34 27 47 50
Aditya Birla Fashion BUY 2,114 1.8 177 190 7 0 1 3 176 70 12.9 10.9 30 23 8 17
Arvind SELL 1,490 10.2 372 313 (16) 10 17 21 21 18 2.1 1.9 10 9 10 12
Trent BUY 1,274 1.3 247 281 14 2 2 4 114 57 5.2 4.9 52 39 5 9
Bata India SELL 1,151 4.4 578 370 (36) 13 15 18 38 33 5.3 4.8 22 20 15 16
Jubilant Foodworks SELL 1,136 10.4 1,111 809 (27) 10 15 20 76 54 8.5 7.6 25 21 12 15
PVR BUY 1,033 5.0 1,425 1,774 24 21 37 54 39 26 6.1 5.2 16 12 16 21
Wonderla BUY 313 0.2 357 497 39 6 10 15 36 25 4.1 3.5 18 13 12 15
Eng, Construction & Infra
L&T SELL 25,068 45.2 1,732 1,400 (19) 65 68 77 25 22 3.0 2.8 19 17 12 13
Bharat Electronics BUY 5,981 13.4 173 190 10 7 8 9 23 20 4.4 3.9 17 15 20 21
NBCC SELL 2,864 5.5 205 135 (34) 4 5 7 41 28 9.6 8.2 33 22 25 32
AIA Engineering BUY 2,079 1.6 1,422 1,525 7 49 50 67 28 21 2.2 2.0 20 15 17 20
Engineers India SELL 1,638 8.6 157 120 (23) 5 7 9 22 18 3.7 3.6 17 13 17 20
Sadbhav BUY 790 0.7 297 335 13 0 7 11 45 27 3.0 2.8 9 8 7 11
Techno Electric BUY 679 0.6 383 415 8 17 22 27 18 14 3.3 2.8 13 11 20 21
Sadbhav Infra BUY 588 0.3 108 130 21 (6) (2) (0) N/A N/A 3.2 2.8 11 10 0 0
VA Tech UR 564 2.0 667 UR N/A - - - - - - - - - - -
Healthcare
Cadila Healthcare BUY 8,224 10.3 518 500 (3) 12 21 26 25 20 6.7 5.4 18 15 30 30
Lupin UR 8,052 28.0 1,150 UR N/A - - - - - - - - - - -
Dr. Reddy's Labs SELL 7,019 18.5 2,732 2,386 (13) 89 95 121 29 22 3.0 2.7 16 14 11 12
Cipla SELL 6,851 12.0 549 410 (25) 12 21 28 26 20 3.1 2.7 15 12 13 15
Torrent Pharma BUY 3,400 7.1 1,296 1,523 18 54 51 75 26 17 4.7 4.0 16 11 20 25
Ajanta Pharma SELL 2,098 4.9 1,538 1,418 (8) 57 55 73 28 21 6.9 5.5 19 15 28 29

ADVT -
Name Reco Mcap CMP TP Upside EPS (`) P/E (x) P/B (x) EV/EBITDA (x) ROE (%)
6m
Home Building
Asian Paints SELL 16,771 16.6 1,128 860 (24) 20 21 25 53 45 13.1 12.0 35 30 26 28
Pidilite BUY 6,572 5.9 827 842 2 15 19 23 44 36 10.6 9.1 29 24 26 27
Havells SELL 4,599 10.1 475 429 (10) 10 12 14 39 35 8.1 7.2 25 21 22 22
Berger Paints SELL 3,784 2.8 251 200 (20) 5 5 6 51 41 11.3 9.9 31 26 24 26
Supreme Inds SELL 2,430 1.1 1,234 1,050 (15) 35 37 43 34 29 7.8 7.0 20 17 25 26
Crompton Consumer SELL 2,180 3.9 224 138 (38) 5 5 7 42 34 19.7 16.2 27 22 53 53
V-Guard SELL 1,197 3.1 182 113 (38) 4 4 5 41 34 10.0 8.2 30 25 27 27
Finolex Cables SELL 1,166 0.7 492 471 (4) 22 22 24 22 20 3.6 3.3 18 16 17 17
Century Ply BUY 992 1.1 288 268 (7) 9 9 13 31 21 7.0 5.5 16 12 26 29
Bajaj Electricals BUY 520 2.0 331 384 16 11 15 22 22 15 3.4 2.9 13 10 16 21
Media
Zee SELL 7,531 15.0 506 425 (16) 13 15 20 33 25 7.9 6.4 22 17 23 28
Dish TV BUY 1,339 8.7 81 102 25 1 1 2 97 51 14.9 11.5 11 9 17 25
DB Corp. BUY 1,079 3.8 378 490 30 20 23 26 17 15 4.0 3.7 10 9 25 26
Hathway SELL 465 0.6 36 28 (23) (3) (2) (2) N/A N/A 4.8 6.8 9 7 (27) (34)
Metals & Mining
Coal India BUY 24,907 19.2 259 345 33 15 20 23 13 11 7.2 8.2 9 7 53 69
Oil & Gas
IOCL BUY 28,869 33.2 383 458 19 40 40 39 10 10 2.0 1.8 6 6 22 19
BPCL BUY 14,902 26.8 665 848 28 56 59 56 11 12 2.5 2.1 7 7 26 22
GAIL SELL 9,597 25.7 366 353 (4) 28 28 34 13 11 1.6 1.4 9 8 13 14
HPCL SELL 8,074 25.8 513 561 9 47 40 42 13 12 2.2 1.9 9 8 18 17
Petronet LNG BUY 5,111 20.4 220 260 18 11 12 15 18 15 3.6 3.0 11 9 22 23
Indraprastha Gas BUY 2,328 7.9 1,072 1,150 7 39 47 55 23 19 5.3 4.9 13 11 24 26
Gujarat State Petronet UR 1,499 2.0 172 UR N/A - - - - - - - - - - -
Mahanagar Gas SELL 1,498 2.5 978 860 (12) 41 45 48 22 20 4.8 4.2 13 12 24 22
Power Utilities
NTPC SELL 20,461 13.0 160 132 (18) 11 14 15 12 11 1.3 1.2 9 9 11 11
Power Grid Corporation SELL 17,143 18.1 211 210 (1) 15 17 19 13 11 2.0 1.8 9 8 17 17
Tata Power BUY 3,499 6.1 83 113 35 6 9 12 9 7 1.2 1.0 6 6 15 16
JSW Energy BUY 1,636 7.5 64 86 33 5 6 9 10 7 1.0 0.9 7 6 8 11
Torrent Power BUY 1,408 3.6 189 257 36 9 14 7 13 26 1.2 1.1 7 8 9 5

ADVT -
Name 6m
Software/Tech
TCS BUY 74,387 52.1 2,435 2,720 12 133 139 145 18 17 4.8 4.3 13 12 29 27
Cognizant SELL 39,439 4.4 67 41 (39) 3 3 3 20 23 3.4 2.9 12 13 18 14
Infosys BUY 34,083 61.1 957 1,100 15 63 61 60 16 16 3.5 3.2 12 12 21 21
Wipro SELL 20,238 13.2 268 204 (24) 17 17 17 16 16 2.5 2.5 10 10 16 16
HCL Tech SELL 18,798 23.9 850 770 (9) 60 63 46 14 18 3.1 2.8 10 14 24 22
Tech Mahindra SELL 5,809 22.4 384 360 (6) 32 32 29 12 13 1.8 1.7 8 8 16 14
L&T Infotech BUY 2,083 0.8 788 860 9 56 58 57 14 14 4.0 3.4 10 10 33 27
Mindtree SELL 1,381 4.7 530 440 (17) 25 30 32 18 17 6.4 5.9 10 9 19 18
Persistent Systems SELL 823 1.7 664 560 (16) 39 43 45 15 15 2.5 2.3 9 9 17 15
Eclerx SELL 804 0.5 1,302 1,250 (4) 86 81 92 16 14 2.9 2.4 10 9 20 17
Telecom
Bharti Airtel SELL 25,144 27.0 406 325 (20) 10 3 7 161 57 2.4 2.3 8 7 3 7
Bharti Infratel SELL 11,766 33.8 410 375 (9) 15 16 20 25 20 4.9 5.0 11 10 20 24
Idea Cellular BUY 4,875 38.2 87 105 21 (1) (5) (3) N/A N/A 1.4 1.4 8 8 (8) (4)
Banks/Financial Services
HDFC Bank SELL 66,906 56.2 1,677 1,235 (26) 57 66 78 25 21 4.2 3.6 N/A N/A 18 18
HDFC SELL 40,474 64.2 1,639 1,185 (28) 46 51 54 32 31 6.0 5.4 N/A N/A 18 17
SBI SELL 38,216 71.4 286 250 (12) 13 16 23 18 12 1.2 1.1 N/A N/A 7 9
ICICI Bank SELL 28,977 88.8 291 258 (11) 17 11 19 28 16 1.8 1.6 N/A N/A 7 11
Kotak Mahindra Bank SELL 28,565 34.5 968 584 (40) 27 31 37 31 26 4.1 3.6 N/A N/A 14 15
Axis Bank SELL 18,944 66.6 510 491 (4) 15 24 42 22 12 2.1 1.9 N/A N/A 10 16
IndusInd Bank SELL 14,479 26.2 1,560 1,219 (22) 48 57 69 27 23 4.0 3.5 N/A N/A 16 17
Bajaj Finance SELL 12,044 20.3 1,413 703 (50) 34 43 53 33 27 6.6 5.4 N/A N/A 22 22
Bank of Baroda SELL 5,952 29.0 167 181 9 6 17 24 10 7 1.0 0.9 N/A N/A 10 13
LIC HFC SELL 5,815 19.1 743 481 (35) 38 42 44 18 17 3.0 2.6 N/A N/A 19 17
Punjab National Bank SELL 5,056 27.0 153 113 (26) 6 8 13 18 12 0.8 0.7 N/A N/A 4 7
SHTF UR 3,713 12.1 1,056 UR NA - - - - - - - N/A N/A - -
Federal Bank SELL 3,446 17.9 115 66 (42) 5 5 7 21 17 1.8 1.7 N/A N/A 10 10
MMFS SELL 3,231 13.6 366 268 (27) 7 13 17 27 21 3.0 2.7 N/A N/A 11 13
RBL Bank SELL 3,110 16.2 533 375 (30) 12 13 19 40 29 3.6 3.3 N/A N/A 11 12
CIFC SELL 2,738 5.8 1,130 1,110 (2) 46 56 67 20 17 3.5 2.9 N/A N/A 19 19
Bank of India SELL 2,480 12.9 149 63 (57) (15) 7 18 20 8 0.6 0.6 N/A N/A 3 7
Motilal Oswal BUY 2,475 2.7 1,103 1,250 13 25 40 54 28 20 7.6 5.9 N/A N/A 23 23
SCUF UR 2,383 1.5 2,330 UR NA - - - - - - - N/A N/A - -
City Union Bank SELL 1,722 2.1 185 156 (16) 8 9 11 20 17 2.8 2.4 N/A N/A 15 16
Union Bank of India SELL 1,672 12.5 157 108 (31) 8 15 17 11 9 0.5 0.5 N/A N/A 5 5
Karur Vysya Bank SELL 1,345 3.1 144 93 (35) 10 9 11 16 13 1.6 1.5 N/A N/A 10 12
Equitas SELL 839 4.5 160 135 (16) 5 5 8 32 20 2.3 2.0 N/A N/A 1 2
South Indian Bank SELL 805 6.5 29 18 (36) 2 3 3 10 8 1.0 0.9 N/A N/A 11 12
Magma SELL 610 1.1 166 103 (38) 1 8 13 21 12 1.7 1.5 N/A N/A 9 13
Ujjivan Financial Services SELL 605 8.9 326 301 (8) 17 13 15 26 21 2.1 1.9 N/A N/A 2 2
Source: Bloomberg, Ambit Capital research, Note: N/A indicates Field Not Applicable, UR - Under Review *- December ending, #-June ending, All values for Cognizant are in US$

Institutional Equities Team

Saurabh Mukherjea, CFA CEO, Ambit Capital Private Limited (022) 30433174 saurabh.mukherjea@ambit.co
Pramod Gubbi, CFA Head of Equities (022) 30433124 pramod.gubbi@ambit.co
Research Analysts
Name Industry Sectors Desk-Phone E-mail
Nitin Bhasin - Head of Research E&C / Infra / Cement / Home Building (022) 30433241 nitin.bhasin@ambit.co
Aadesh Mehta, CFA Banking / Financial Services (022) 30433239 aadesh.mehta@ambit.co
Abhishek Ranganathan, CFA Retail / Consumer Discretionary (022) 30433085 abhishek.r@ambit.co
Anuj Bansal Consumer (022) 30433122 anuj.bansal@ambit.co
Aditi Singh Economy / Strategy (022) 30433284 aditi.singh@ambit.co
Ashvin Shetty, CFA Automobiles / Auto Ancillaries (022) 30433285 ashvin.shetty@ambit.co
Bhargav Buddhadev Power Utilities / Capital Goods (022) 30433252 bhargav.buddhadev@ambit.co
Deepesh Agarwal, CFA Power Utilities / Capital Goods (022) 30433275 deepesh.agarwal@ambit.co
Dhiraj Mistry, CFA Consumer (022) 30433264 dhiraj.mistry@ambit.co
Gaurav Khandelwal, CFA Automobiles / Auto Ancillaries (022) 30433132 gaurav.khandelwal@ambit.co
Girisha Saraf Home Building (022) 30433211 girisha.saraf@ambit.co
Karan Khanna, CFA Strategy (022) 30433251 karan.khanna@ambit.co
Mayank Porwal Retail / Consumer Discretionary (022) 30433214 mayank.porwal@ambit.co
Pankaj Agarwal, CFA Banking / Financial Services (022) 30433206 pankaj.agarwal@ambit.co
Paresh Dave, CFA Healthcare (022) 30433212 paresh.dave@ambit.co
Parita Ashar, CFA Cement / Metals / Aviation (022) 30433223 parita.ashar@ambit.co
Prashant Mittal, CFA Strategy / Derivatives (022) 30433218 prashant.mittal@ambit.co
Rahil Shah Banking / Financial Services (022) 30433217 rahil.shah@ambit.co
Ravi Singh Banking / Financial Services (022) 30433181 ravi.singh@ambit.co
Ritesh Gupta, CFA Oil & Gas / Chemicals / Agri Inputs (022) 30433242 ritesh.gupta@ambit.co
Ritika Mankar Mukherjee, CFA Economy / Strategy (022) 30433175 ritika.mankar@ambit.co
Sagar Rastogi Technology (022) 30433291 sagar.rastogi@ambit.co
Sudheer Guntupalli Technology (022) 30433203 sudheer.guntupalli@ambit.co
Sumit Shekhar Economy / Strategy (022) 30433229 sumit.shekhar@ambit.co
Utsav Mehta, CFA E&C / Infrastructure (022) 30433209 utsav.mehta@ambit.co
Vivekanand Subbaraman, CFA Media / Telecom (022) 30433261 vivekanand.s@ambit.co
Sales
Name Regions Desk-Phone E-mail
Sarojini Ramachandran - Head of Sales UK +44 (0) 20 7886 2740 sarojini.r@ambit.co
Dharmen Shah India / Asia (022) 30433289 dharmen.shah@ambit.co
Dipti Mehta India (022) 30433053 dipti.mehta@ambit.co
Krishnan V India / Asia (022) 30433295 krishnanv@ambit.co
Nityam Shah, CFA Europe (022) 30433259 nityam.shah@ambit.co
Punitraj Mehra, CFA India / Asia (022) 30433198 punitraj.mehra@ambit.co
Shaleen Silori India (022) 30433256 shaleen.silori@ambit.co
Singapore
Praveena Pattabiraman Singapore +65 6536 0481 praveena.pattabiraman@ambit.co
Shashank Abhisheik Singapore +65 6536 1935 shashankabhisheik@ambitpte.com
USA / Canada
Ravilochan Pola CEO Americas +1(646) 793 6001 ravi.pola@ambitamerica.co
Hitakshi Mehra Americas +1(646) 793 6002 hitakshi.mehra@ambitamerica.co
Achint Bhagat, CFA Americas +1(646) 793 6752 achint.bhagat@ambitamerica.co
Production
Sajid Merchant Production (022) 30433247 sajid.merchant@ambit.co
Sharoz G Hussain Production (022) 30433183 sharoz.hussain@ambit.co
Jestin George Editor (022) 30433272 jestin.george@ambit.co
Richard Mugutmal Editor (022) 30433273 richard.mugutmal@ambit.co
Nikhil Pillai Database (022) 30433265 nikhil.pillai@ambit.co
Click here for the Stock performance charts
January 10, 2017 Ambit Capital Pvt. Ltd. Page 68

Explanation of Investment Rating

Investment Rating Expected return (over 12-month)
BUY >10%
SELL <10%
NO STANCE We have forward looking estimates for the stock but we refrain from assigning valuation and recommendation
UNDER REVIEW We will revisit our recommendation, valuation and estimates on the stock following recent events
NOT RATED We do not have any forward looking estimates, valuation or recommendation for the stock
POSITIVE We have a positive view on the sector and most of stocks under our coverage in the sector are BUYs
NEGATIVE We have a negative view on the sector and most of stocks under our coverage in the sector are SELLs
* In case the recommendation given by the Research Analyst becomes inconsistent with the rating legend, the Research Analyst shall within 28 days of the inconsistency, take appropriate measures (like
change in stance/estimates) to make the recommendation consistent with the rating legend.
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Copyright 2017 AMBIT Capital Private Limited. All rights reserved.

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1QFY18 Results Preview

RESULTS PREVIEW July 11, 2017

Volatility and hope

Could outlook improve gradually after a volatile 1H?

Automobiles Operating leverage Commodity costs Tata Motors -

Metals/Mining E-auction realisations Employee costs Coal India -

Telecom Stability of revenue Continued ARPU pressures Idea Cellular

Source: Ambit Capital research

Thermax 9.6 10.9 (1) (5) 194 205 (5.6) BUY

Exhibit 2: Sectoral snapshot ahead of the results

July 11, 2017 Ambit Capital Pvt. Ltd. Page 2

Exhibit 3: Sector views

July 11, 2017 Ambit Capital Pvt. Ltd. Page 3

TOP BUY RECOMMENDATIONS

July 11, 2017 Ambit Capital Pvt. Ltd. Page 4

Recommendation Upside (%) Rationale/catalysts

Source: Bloomberg, Ambit Capital research

July 11, 2017 Ambit Capital Pvt. Ltd. Page 5

TOP SELL RECOMMENDATIONS

July 11, 2017 Ambit Capital Pvt. Ltd. Page 6

Recommendation Downside (%) Rationale/catalysts

July 11, 2017 Ambit Capital Pvt. Ltd. Page 7

Agri/Chemicals Stock Performance

July 11, 2017 Ambit Capital Pvt. Ltd. Page 8

Exhibit 4: Detailed Jun'17E quarterly estimates

July 11, 2017 Ambit Capital Pvt. Ltd. Page 9

Automobiles Stock Performance

July 11, 2017 Ambit Capital Pvt. Ltd. Page 10

Exhibit 5: Detailed Jun'17E quarterly estimates

EBITDA (Rsmn) 11,344 12,232 9,834 -7% 15%

PBT (Rsmn) 12,740 13,657 11,033 -7% 15%

PBT (Rsmn) 12,800 12,338 9,390 4% 36%

July 11, 2017 Ambit Capital Pvt. Ltd. Page 11

Company Jun'17E Jun'16 Mar17 YoY QoQ Comments

PBT (Rsmn) 12,664 12,269 10,853 3% 17%

PBT (Rsmn) 1,314 1,166 1,216 13% 8%

PBT (Rsmn) 527 325 559 62% -6%

July 11, 2017 Ambit Capital Pvt. Ltd. Page 12

Aviation Stock Performance

Exhibit 6: Detailed Jun'17E quarterly estimates

July 11, 2017 Ambit Capital Pvt. Ltd. Page 13

Banking Stock Performance

Recommendations Ujjivan Financials 12.6 12.9

July 11, 2017 Ambit Capital Pvt. Ltd. Page 14

Exhibit 8: Detailed Jun17E quarterly estimates

July 11, 2017 Ambit Capital Pvt. Ltd. Page 15

Jun'17 Jun'16 Mar'17 YoY QoQ Comment

July 11, 2017 Ambit Capital Pvt. Ltd. Page 16

Exhibit 9: Revisions ahead of earnings season

July 11, 2017 Ambit Capital Pvt. Ltd. Page 17

Building Materials Stock Performance

Three questions for the Pidilite management: Company Ambit Consensus

July 11, 2017 Ambit Capital Pvt. Ltd. Page 18

Three questions for the Century Ply management:

July 11, 2017 Ambit Capital Pvt. Ltd. Page 19

Exhibit 10: Detailed Jun'17E quarterly estimates

July 11, 2017 Ambit Capital Pvt. Ltd. Page 20

Company name Jun'17 Jun'16 Mar'17 YoY QoQ Comments

July 11, 2017 Ambit Capital Pvt. Ltd. Page 21

Exhibit 11: Revisions ahead of the earnings season

July 11, 2017 Ambit Capital Pvt. Ltd. Page 22

Capital Goods Stock Performance

Greaves Cotton (GRV IN, 6M ADV US$1.2mn, BUY, TP Rs194/share, 21%