India Strategy: All eyes on growth - Prabhudas Lilladher

India Strategy & Top Ideas
Feel good factor good - When will this lead to
corporate performance?
R Sreesankar
RSreesankar@plindia.com
+91-22-66322214
Click to edit Master title styleLilladher
Prabhudas August 2014
Prabhudas Lilladher Pvt. Ltd. and/or its associates (the 'Firm') does and/or seeks to do business with companies covered in its research reports. As a result investors should be aware that
the Firm may have a conflict of interest that could affect the objectivity of the report. Investors should consider this report as only a single factor in making their investment decision.
Please refer to important disclosures and disclaimers at the end of the report.

Lilladher
Prabhudas
Contents
8/18/2014 2
Page No.
Large Caps
Infosys 21
HDFC Bank 23
State Bank of India 25
Wipro 27
Larsen & Toubro 29
Axis Bank 32
Maruti Suzuki 34
Tech Mahindra 37
Dr.Reddy's Laboratories 39
Bank of Baroda 41
Motherson Sumi Systems 43
ACC 45
Zee Entertainment Enterprises 47
Mid-Caps
Aurobindo Pharma 50
Cummins India 52
UPL 54
Federal Bank 56
Tata Chemicals 58
The Ramco Cements 60
Dish TV India 62
P.I. Industries 64
JK Lakshmi Cement 66
KPIT Technologies 68
Page No.
All eyes on growth 3
Global growth, Key Driver 4
CAD – under control, but till when? 5
Monsoon- Delayed and Sowing gathers momentum 6
Inflation, still running ahead of comfort zone 7
Markets
Global Equity – Expectations mellowing down 8
Defensives do better in last one month- Fatigue catching up with cyclical 9
Small and mid caps underperforms 10
Global Currencies- Weak Russian Ruble 11
India: Strong FII Equity Flows continues 12
Global Agricultural Commodities 13
Global Industrial Commodities 14
Global growth – The key catalyst 15
Nifty Valuations: Historic Trends 16
Indian Market – Valuation and Strategy 17
Nifty Valuation 18
Top Pick Summary 19
(Prices as on August 18, 2014)

Lilladher
Prabhudas
All eyes on growth
• Feel good factor back, When will it turn into numbers? The feel good factor has resulted the stock indices reaching
a new high, typical of any run up in stock markets before the economic recovery is reflected in numbers. While the
feel good factor continues to remain buoyant, implementation of stalled is going to be the key. With the recent
changes in the budget and the RBI actions, infrastructure is expected to get a renewed interest.
• Automobiles, on the way up? If the automobile numbers is taken as any indication, the business activities have
improved and this should feed into the corporate performance towards Q3FY15. We expect the benefit of these to
reflect from 3QFY15 onwards.
• Is the markets running ahead of fundamentals? While the markets have been on a roll with the exception of IT,
Pharma and FMCG, automobiles have been the star performer for the last one month. We believe that automobiles
are the first to see the benefit of an improvement in the economic realties on the ground. While we continue to be
optimistic on the domestic staples, the high valuations may come as a resistance for the immediate gains. We
remain cautious on the global commodity plays like steel, aluminum and copper due to the slow down in China as
China continues to dominate the prices of global commodities.
• Remain Overweight Financials and automobiles: The worry on the financials have been the overhang of stressed
assets coupled with the huge requirement of capital for the banks to meet the Basel III norms. The recent budget
permitting banks to raise long term bonds for funding the infra projects and the RBI policies relaxing SLR
requirements have ensured availability of long dated funds at cheaper cost to infrastructure. These measures are
expected to reduce the stress on the infrastructure assets. Given this scenario, we remain with overweight position
in the financials, and automobiles while the run up and steep valuations in the capital goods space have forced us to
go to a neutral weight. We continue to like good quality infrastructure and mid cap stocks as we are likely to see an
expansion in the valuation multiples across the mid cap spectrum as well.
• Our preferred picks are HDFC Bank, SBI, Axis Bank, and among the financials, L&T among Eng& capital goods and PI
Industries and UPL among agro chemicals. We maintain our overweight sector weighting in Financials, capital goods
and engineering and automobiles, underweight in FMCG and neutral in Healthcare and IT.
8/18/2014 3

Lilladher
Prabhudas
Global growth, Key Driver
• Economic indicators: Global economy is expected to grow at a higher pace in 2014 . While the economic data in the
US is good, the economic scenario in Europe continue to be challenging. With the US growth estimated at 2.4% in
CY14 and at 3.1% in CY15 and the global growth looks optimistic .
• US Economic indicators: Job openings in the US in June increased to the highest level in last 13 years indicating a
firm US labour market for the second half of the year. The non farm payroll numbers in the US have continued to
remain positive. In the week ending August 2, 289,000 Americans filed claims for unemployment benefits, a
decrease of 14,000 from the previous week's revised level. The 4-week moving average was 293,500, the lowest
level since February 25, 2006 when it was 290,750. This indicates a strong revival in the US economy and we view
this as more favorable for the Indian IRT sector as the demand environment continues to remain firm.
• Europe and International Markets: Improved global growth estimates continue to have a bullish sentiment to the
equity markets around the world. However, the growth estimates in Europe seems to have taken a reversal with the
heightened political risks affecting the region’s economic recovery. The largest economy of the region, Germany is
facing challenges as the German investor confidence fell to their lowest since 2012, as the crisis in Ukraine and the
sluggish Euro area recovery mute the outlook for Europe’s largest economy.
• Middle East crisis and Crude oil Prices: The crisis in the Middle East had had little effect on crude prices in the
current period. With the exception of a spike to US$114, crude prices have remained steady despite the heightened
tension in the middle east. This should augur well for a country like India as the crude imports is the single most item
in the widening CAD for India.
• Emerging Markets, increasing Risk premium, Key to flows: The CBOE VIX volatility index, a measure of the cost of
equity portfolio protection, had seen an increase in on the increased tension in the Middle East. However, the same
has been within the trading range. The Indian VIX too has remained at the lower end of the range after the high
volatility saw during the election period.
8/18/2014 4

Lilladher
Prabhudas
CAD – under control, but till when?
8/18/2014 5
• CAD continues to remain under control due to the continued restrictions on gold imports and low economic growth.
We continue to believe that though CAD is under control, in the event of a stronger economic growth, we expect to
see an increase in crude oil and other non oil imports from the current levels which could pose a problem for
managing the CAD. We remain cautious on the CAD front.
External debt break-up between ST and LT
Source: RBI, PL Research * Data revised on exchange rate fluctuation
US $ m Aug'13 Sep'13 Oct'13 Nov'13 Dec'13 Jan'14 Feb'14 Mar'14 Apr'14 May'14 Jun'14 YTD YTD YoY
Exports 26,182 27,679 27,270 24,613 26,346 26,752 25,689 29,578 25,634 27,999 26,480 80,112 48,880
Imports 36,715 34,440 37,820 33,833 36,486 36,666 33,819 40,086 35,720 39,233 38,243 113,196 88,958
- Oil 15,095 13,197 15,131 12,965 13,900 13,186 13,697 15,784 12,978 14,465 13,343 40,786 28,113
- Gold 1,004 803 1,300 1,050 1,700 1,720 1,630 3,136 1,750 2,600 3,120 7,470 15,163
- Non Oil Non Gold/Silver 20,616 20,440 21,390 19,818 20,887 21,760 18,492 21,166 20,992 22,168 21,780 64,941 45,681
Trade Deficit (10,534) (6,760) (10,550) (9,220) (10,140) (9,914) (8,130) (10,507) (10,086) (11,235) (11,763) (33,084) (40,078)
Trade Deficit
Source: RBI, PL Research
3.6 2.8 4.7 4.4 17.7 19.5
28.1 45.8 43.3 52.4 64.9 78.2 98.9 98.3 95.4 92.9 89.4
97.7 96.0 100.2 108.2
116.3 119.6
144.3
178.6 181.2
208.5
241.0
267.6
301.4 304.5 307.0 333.1 351.2
0
100
200
300
400
500
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13
Jun-13
Sep-13
Dec-13
Mar-14
(US$bn)
Short Term Debt Long Term Debt

Lilladher
Prabhudas Monsoon- Delayed, and Sowing gathers
momentum
Source: IMD
Monsoon Deficiency now at 18%...down from 43% last month
8/18/2014 6
• Though the rainfall was deficient in June, rains picked up smartly
in July and the sowing has improved considerably. Overall sowing
is down by only 7-8% YoY. When compared to 9th August, 2013
sowing is more or less on similar lines.
• The sowing of cotton has seen an improvement when compared
to the last two years, as the farmers seemed to have shifted to
cotton as it requires less water.
• Monsoon deficiency is now down to 18% YoY. Rainfall
momentum has been strong in the last 20-25 days and overall
deficiency which was 43% last month is now down to 18% YoY.
North India (Punjab, Haryana, UP) and parts of Maharashtra still
remain deficient. Note that even if rains are lower, Punjab &
Haryana won’t be impacted much as they are less dependent on
monsoon.
Source: Ministry of Agriculture
Crop Acreages
Crops 8-Aug-14 2-Aug-14 YoY 16-Aug-13 9-Aug-12
Rice 267.30 238.90 11.90% 304.60 264.40
Pulses 76.10 79.50 -4.30% 93.30 74.50
Coarse cereals 140.20 163.10 -14.10% 181.50 140.90
Oilseeds 152.20 173.20 -12.10% 183.40 151.80
Sugarcane 47.20 48.50 -2.80% 48.50 52.90
Cotton 112.20 108.50 3.40% 110.90 109.20
Jute/Mesta 7.80 8.30 -6.00% 8.30 8.40
Total sown area 803.00 820.00 -2.10% 930.50 802.10

Lilladher
Prabhudas
Inflation, still running ahead of comfort zone
• CPI Inflation, though corrected at 7.96%, still
continues to remain above the comfort zone. The
same has increased in the last one month. The higher
prices of Increase in prices of cereals and vegetables
have been one of the key factor for increasing CPI.
• 10yr. G-Sec Yield trading at 8.56% off from the high
levels earlier.
• GDP growth continued to lag at 4.6% in Q4FY14 and
we expect an improvement in GDP growth to 5.4% in
FY15.
Source: Bloomberg, PL Research
CPI Inflation
GDP Growth YoY (Quarterly)
10yr. G-Sec Yield & Liquidity
8/18/2014 7
7.0
7.5
8.0
8.5
9.0
9.5
10.0
10.5
11.0
11.5
Jan-12
Feb-12
Mar-12
Apr-12
May-12
Jun-12
Jul-12
Aug-12
Sep-12
Oct-12
Nov-12
Dec-12
Jan-13
Feb-13
Mar-13
Apr-13
May-13
Jun-13
Jul-13
Aug-13
Sep-13
Oct-13
Nov-13
Dec-13
Jan-14
Feb-14
Mar-14
Apr-14
May-14
Jun-14
Jul-14
(%)
-
2.0
4.0
6.0
8.0
10.0(2,500)
(2,000)
(1,500)
(1,000)
(500)
-
500
1,000
1,500
2,000
Mar-09
Aug-09
Jan-10
Jun-10
Nov-10
Apr-11
Sep-11
Feb-12
Jul-12
Dec-12
May-13
Oct-13
Mar-14
Aug-14
Liquidity(Rs bn) 10yr. G-Sec Yield(%) (RHS)
0
2
4
6
8
10
12
Jun-05
Sep-05
Dec-05
Mar-06
Jun-06
Sep-06
Dec-06
Mar-07
Jun-07
Sep-07
Dec-07
Mar-08
Jun-08
Sep-08
Dec-08
Mar-09
Jun-09
Sep-09
Dec-09
Mar-10
Jun-10
Sep-10
Dec-10
Mar-11
Jun-11
Sep-11
Dec-11
Mar-12
Jun-12
Sep-12
Dec-12
Mar-13
Jun-13
Sep-13
Dec-13
Mar-14
Jun-14
(%)

Lilladher
Prabhudas
Global Equity – Expectations mellowing down
• MoM: Indian market continue to perform well and
has been in the positive territory in the last one
month. In the calendar YTD, most markets except
Europe and Japan have given positive returns. The
worries on the Russian – Ukraine stand off have
resulted in the sharp fall in the Russian market, while
the Japanese economic performance continues to pull
down the Japanese market.
• YoY: India still continue to be the star performer of
the year on a YoY basis, on the back of strong election
mandate and expectations of a revival in the global
economy.
Month-on-Month
Year-on-Year
Calendar Year-to-date
8/18/2014 8
8.7
6.1
2.8 2.5 2.0 1.6
(0.2) (0.5) (0.8) (1.3) (2.1)
(5.0)
(8.5)(10.0)
(8.0)
(6.0)
(4.0)
(2.0)
-
2.0
4.0
6.0
8.0
10.0
China
HongKong
Brazil
S.Korea
India
Indonesia
Japan
Australia
FTSE
S&P
USA
Germany
Russia
(%)
5.1 5.7
9.4
1.4
20.5 19.6
(7.1)
2.0
(1.7)
5.1
0.1
(3.9)
(8.8)
(15.0)
(10.0)
(5.0)
-
5.0
10.0
15.0
20.0
25.0
China
HongKong
Brazil
S.Korea
India
Indonesia
Japan
Australia
FTSE
S&P
USA
Germany
Russia
(%)
8.4
13.0 13.0
8.4
35.8
10.2 11.1
7.9
0.8
14.8
7.6
10.1
(0.7)(5.0)
-
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
China
HongKong
Brazil
S.Korea
India
Indonesia
Japan
Australia
FTSE
S&P
USA
Germany
Russia
(%)

Lilladher
Prabhudas Defensives do better in last one month- Fatigue
catching up with cyclical
• MoM: Autos, IT, Healthcare and Bankex were the
biggest gainers in the last one month, while capital
goods, power and realty underperformed. A level of
fatigue is slowly getting into some of the capital
goods and cyclical on account of the strong stock
performance while the corporate performance heave
left much to be desired.
• YoY: On a YoY basis, Autos, Bankex, Metals and
Capital goods have been the best performers, while
FMCG was the biggest underperformer.
Month-on-Month
Year-on-Year
8/18/2014 9
5.3
4.4
3.4
2.7 2.4 2.3
1.0
(0.8)
(2.6)
(3.7)
(4.6)(6.0)
(4.0)
(2.0)
-
2.0
4.0
6.0
(%)
56.2
31.2
37.7
51.7
8.5
37.8
83.5
25.9
48.6 44.7
89.9
-
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
100.0
(%)
30.2
7.9
21.7
30.7
7.9
46.7
26.2
19.0
29.5
20.5
39.2
-
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
45.0
50.0
(%)

Lilladher
Prabhudas
Small and mid caps underperforms
• MoM: The huge run up in the small and mid caps in
the first seven months of the year has started getting
out of steam. The volatility in the small caps have
increased and so has been the case with many in the
cyclicals.
• YoY: The volatility in the small and mid caps have
increased and we believe many have run ahead of the
fundamentals. There is a need to exercise caution in
many of the small caps.
Month-on-Month
Year-on-Year
8/18/2014 10
2.2 2.2
2.1
1.5
-
0.5
1.0
1.5
2.0
2.5
BSE100 Index BSESMCAPIndex BSE500 Index BSEMDCAPIndex
(%)
39.0
89.2
43.0
66.6
-
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
100.0
(%)
21.7
51.2
24.0
34.4
-
10.0
20.0
30.0
40.0
50.0
60.0
(%)

Lilladher
Prabhudas
Global Currencies- Weak Russian Ruble
• MoM: Ruble has been the biggest loser during the
month as well as from Calendar year till date.
• YoY: On YoY basis, CAD affected economies like
Turkey and Indonesia continues to be the bigger
losers.
Month-on-Month
Year-on-Year
8/18/2014 11
0.8 0.5
0.2
(0.2)(0.4)(0.7)(0.8)(0.8)
(1.1)(1.4)(1.6)(1.6)(1.6)(1.9)(1.9)(2.0)
(2.5)
(4.9)
(6.0)
(5.0)
(4.0)
(3.0)
(2.0)
(1.0)
-
1.0
2.0
(%)
(1.6)(1.5)
1.9
(0.7)
2.5
1.2
4.2
3.1
1.8
3.9
(1.5)
(0.2)
(2.6)
1.4
(2.9)
1.0
3.7
(8.7)(10.0)
(8.0)
(6.0)
(4.0)
(2.0)
-
2.0
4.0
6.0
(%)
(0.5)
(7.2)
(2.6)
(0.2)
1.6
(0.4)
(11.9)
(5.1)
8.0
1.3 2.2
(10.6)
0.7
8.6
(5.8)
0.2 0.4
(8.3)
(15.0)
(10.0)
(5.0)
-
5.0
10.0
(%)

Lilladher
Prabhudas
India: Strong FII Equity Flows continues
• FIIs have continued to pump in money reflected by the strong inflows reflected in the INR116.14bn inflows in May
2014.
• DIIs have seen the selling reduce considerably.
8/18/2014 12
(200.00)
(100.00)
-
100.00
200.00
300.00
Jan-12
Feb-12
Mar-12
Apr-12
May-12
Jun-12
Jul-12
Aug-12
Sep-12
Oct-12
Nov-12
Dec-12
Jan-13
Feb-13
Mar-13
Apr-13
May-13
Jun-13
Jul-13
Aug-13
Sep-13
Oct-13
Nov-13
Dec-13
Jan-14
Feb-14
Mar-14
Apr-14
May-14
Jun-14
Jul-14
DIINet Cash Market FIINet Cash Market
CY13 - Total FII buying
Rs1,112.77bnagainst DII net
selling at Rs-734.64bn
YTD CY14
FII Rs711.34bn
DII Rs-337.98bn

Lilladher
Prabhudas
Global Agricultural Commodities
• Wheat prices increased last month due to concerns
over crops in Europe and Ukraine.
• Corn prices declined post the release of USDA world
agricultural supply and demand estimates which
projected higher ending stocks for corn, both from
higher production and yields.
• Rice prices declined due to expectations on higher
supplies
• Higher production coupled with lower consumption
have resulted into decline in palm oil prices.
Source: Bloomberg, PL Research *Price in US$
Performance of Global Agricultural Commodities
Year-on-Year Performance
Month-on-Month Performance
8/18/2014 13
60
70
80
90
100
110
120
130
140
Aug-13
Sep-13
Oct-13
Nov-13
Dec-13
Jan-14
Feb-14
Mar-14
Apr-14
May-14
Jun-14
Jul-14
Aug-14
Rice Wheat Corn Soya Plam Oil Sugar
5.2
1.0
(4.3)
(4.7) (4.9) (5.1)(6.0)
(4.0)
(2.0)
-
2.0
4.0
6.0
Wheat Soya Rice Corn Sugar Palm Oil
(%)
(17.8)
(6.6)
(17.8)
(25.2)
(7.6)
2.2
(30.0)
(25.0)
(20.0)
(15.0)
(10.0)
(5.0)
-
5.0
Wheat Soya Rice Corn Sugar Palm Oil
(%)

Lilladher
Prabhudas
Global Industrial Commodities
• Aluminium remained best performer of the month on
the back of strong demand from the US and steep
production cut, while Nickel has corrected.
• CYTD: Nickel continues to be the best performer both
from YTD and CYTD.
Month-on-Month
Year-on-Year
8/18/2014 14
5.6
2.2
0.4
(1.3) (1.8) (1.9)
(6.2)(8.0)
(6.0)
(4.0)
(2.0)
-
2.0
4.0
6.0
8.0
Aluminium Lead Zinc Brent
crude
Copper Thermal
Coal
Nickel
(%) 12.5
5.2
24.9
(3.1) (2.1)
(9.5)
29.6
(15.0)
(10.0)
(5.0)
-
5.0
10.0
15.0
20.0
25.0
30.0
35.0
crude
Copper Thermal
Coal
Nickel
(%)
15.1
2.1
10.5
(5.8) (4.9)
(18.6)
33.6
(30.0)
(20.0)
(10.0)
-
10.0
20.0
30.0
40.0
crude
Copper Thermal
Coal
Nickel
(%)

Lilladher
Prabhudas
Global growth – The key catalyst
Sources : Bloomberg
• Improved growth estimates in the US and challenging times in
the Euro area are the key. Strong job openings in the US, the
highest in the last 13 years has spelt good for the economic
environment in the second half. The US is expected to have a
GDP growth of around 2.2% for CY14.
• The Euro zone is seeing increased challenges with the German
investment confidence at their lowest levels since 2012. The geo
political concerns between Russia and Ukraine continue to create
ripples across some of the markets,
• El Niño, the weather pattern which causes floods in some parts of
the world and drought in other parts is expected to return in mid-
2014. Though initially it was envisaged to be a rare possibility,
weather forecasters are expecting that there is a 75% chance that
El Nino may return.
• The Chinese GDP growth is expected to remain subdued at 7.5%.
This has resulted in the global commodity prices remaining
subdued. The base commodities have seen a fall across the
spectrum, however, this could augur well for a low global
inflation.
• The equity markets continue to be in a bullish tone with the
Indian markets reaching an all-time high thanks to a strong
electoral mandate and the feel good factor and the business
confidence is back. The businesses have started seeing the
benefit of the improvement in confidence. However, we believe
that we may start to see the benefit only towards the end of
Q3FY15. With the global liquidity continuing to remain easy, the
flows into emerging markets may depend more on risk premia.
World Equity Indices:
8/18/2014 15
Index Country Value YTD (%) 1 Week (%) 1 Mth (%) 3 Mth (%)
Dow Jones USA 16,663 0.52 0.66 (2.56) 1.04
S&P 500 USA 1,955 5.77 1.22 (1.17) 4.11
Nasdaq USA 4,465 6.90 2.15 0.74 9.15
FTSE 100 LONDON 6,734 (0.22) 1.53 (0.22) (1.77)
DAX GERMANY 9,222 (3.45) 0.45 (5.12) (4.23)
CAC 40 FRANCE 4,220 (1.76) 0.53 (2.66) (5.30)
Nikkei JAPAN 15,323 (5.95) 1.27 0.70 8.70
TSX CANADA 15,304 12.35 0.71 0.25 5.44
MICEX RUSSIA 1,421 (5.51) 3.55 (0.09) 2.08
JSE SA 46,366 11.77 (0.02) (0.41) 5.19
SGX SA 7,874 24.91 4.04 4.62 10.54
TING TURKEY 94,059 14.08 (0.91) (7.26) 2.23
IBOV BRAZIL 56,964 10.59 2.50 (0.09) 5.54
Jakarta Comp INDONESIA 5,157 20.65 0.85 1.37 2.49
PSEI Phillipine PHILIPPINES 7,028 19.32 1.02 2.55 3.08
SE THAI 50 THAILAND 1,036 17.22 1.35 0.52 8.37
Euro Stoxx EUROZONE 3,066 (1.38) 0.61 (3.10) (3.36)
IBEX 35 SPAIN 10,325 4.11 1.29 (1.92) (1.47)
Hang Seng HONG KONG 24,955 7.08 1.26 6.40 9.87
AS30 AUSTRALIA 5,581 4.25 2.41 1.11 2.23
Shanghai CHINA 2,239 5.84 0.67 8.76 10.51
Taiwan TAIWAN 9,141 6.15 (0.34) (2.76) 2.84
Kospi KOREA 2,053 2.08 1.08 2.01 2.14
CNX Nifty INDIA 7,874 24.91 4.04 4.62 10.54
BSE Sensex INDIA 26,391 24.66 4.19 4.61 10.40
KLCI MALAYSIA 1,862 (0.28) 0.67 (0.60) (1.15)
NZX 50 NEWZEALAND 5,071 7.05 0.43 (0.74) (2.22)
MEXBOL MEXICO 44,629 4.45 1.19 0.79 6.52

Lilladher
Prabhudas
Nifty Valuations: Historic Trends
Nifty 1-year forward P/E
MSCI India Premium to MSCI Asia (Ex‐Japan)
8/18/2014 16
15.5
5.0
10.0
15.0
20.0
25.0
30.0
Aug-04
Nov-04
Feb-05
May-05
Aug-05
Nov-05
Feb-06
May-06
Aug-06
Nov-06
Feb-07
May-07
Aug-07
Nov-07
Feb-08
May-08
Aug-08
Nov-08
Feb-09
May-09
Aug-09
Nov-09
Feb-10
May-10
Aug-10
Nov-10
Feb-11
May-11
Aug-11
Nov-11
Feb-12
May-12
Aug-12
Nov-12
Feb-13
May-13
Aug-13
Nov-13
Feb-14
May-14
Aug-14
Average
14.8
20%
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
60%
Aug-04
Nov-04
Feb-05
May-05
Aug-05
Nov-05
Feb-06
May-06
Aug-06
Nov-06
Feb-07
May-07
Aug-07
Nov-07
Feb-08
May-08
Aug-08
Nov-08
Feb-09
May-09
Aug-09
Nov-09
Feb-10
May-10
Aug-10
Nov-10
Feb-11
May-11
Aug-11
Nov-11
Feb-12
May-12
Aug-12
Nov-12
Feb-13
May-13
Aug-13
Nov-13
Feb-14
May-14
Aug-14
10 year Avg.
23%

Lilladher
Prabhudas
Indian Market – Valuation and Strategy
• NIFTY valuations: We estimate the free-float EPS for NIFTY companies in FY15 and FY16 at Rs460.2 and Rs542.6 respectively,
representing a YoY growth of 16.3% and 17.9% respectively. Auto 20.1% and 15.8%, FMCG at 19.1% and 20.5%, Banking &
Financial Services at 21.6% and 24.3% is expected to lead the growth in earnings in FY15 and FY16.
• NIFTY at 7,874 is currently trading at 16.3x FY15E and 17.9x FY16E estimated free-float earnings. The last ten-year average for
NIFTY’s one-year forward PE is at 14.8x. Thus, NIFTY is currently trading at 15.5x one-year forward earnings (EPS for year-ending
March 2015 is Rs460.2) i.e. at a slight premium to its last 10-years average of one-year forward multiple.
• The chart on Page 16 indicates MSCI India’s premium to MSCI Asia (excluding Japan) over the last ten years. The average of the last
10-year’s premium is at 23% and the current premium is at 20%, indicating a that the markets valuations and outperformance
reflect the optimism seen. We expect to see a revision in earnings estimate to be effected towards the 3QFY15.
• The business confidence is back and we expect this to result in strong earnings growth going forward. Accordingly we had added,
quality cyclical companies in our top picks in our report dated 19 May 2014. The stocks have had a huge out performance and we
feel that some have already priced ahead of the fundamentals. However, we continue to believe that given the optimism in the
economy, the financials will have a good run. Given this, we recommend that we continue the overweight position in the Financial
Services, Autos and Capital goods and Engineering, while remaining Neutral in IT and remaining underweight in Healthcare and
FMCG sectors.
• We have made a few changes in our top picks. While we have removed ITC ( continued pressure from taxes on cigarettes affecting
the bottom-line) , Britannia (recent strong outperformance), ING Vysya (asset quality issues) and Engineers India (Delayed order
flow from Barmer) from the top picks, we have added Tata Chemicals, Tech Mahindra and Bank of Baroda in the top picks.
• In our report dated July 08, 2014, we had revised our trading range for the market to be between 7100-8200 levels for the next
three months and we continue to believe that the market is likely to trade in this range for the next three months as well. We
maintain our Nifty trading range at 7100-8200 levels. We believe that the effect of all the policy initiatives will start to reflect in the
corporate performance towards the end of Q2FY15 onwards and the market will start its new direction only from then on and to
anew high. We also maintain our sector weights recommended in our report dated May 19, 2014. Our view is that there is a
deluge of capital raising and this could cap the upside in the near term.
8/18/2014 17

Lilladher
Prabhudas
Nifty Valuation
8/18/2014 18
Note: Telecom Nos. are Bloomberg Consensus / Sector Weightages are updated as on August 18, 2014
Weight-
age (%)
FY13 FY14 FY15E FY16E
Weight-
age (%)
FY13 FY14 FY15E FY16E
Banking & Fin. 28.5% Cement 3.0%
PER (x) 17.6 17.5 14.4 11.5 PER (x) 20.4 24.1 24.3 18.9
PAT Growth (%) 15.0 0.8 21.6 24.3 PAT Growth (%) 29.2 (15.5) (0.5) 28.5
Technology 15.9% Telecom 2.0%
PER (x) 28.3 21.7 18.2 15.9 PER (x) 65.2 53.5 27.8 21.6
PAT Growth (%) 24.3 30.2 19.3 14.9 PAT Growth (%) (46.6) 21.8 92.5 28.9
Oil & Gas 11.0% Real Estate 0.3%
PER (x) 12.8 11.6 10.8 9.7 PER (x) 49.9 55.0 39.6 27.2
PAT Growth (%) 3.9 10.6 7.9 10.4 PAT Growth (%) (40.7) (9.2) 39.0 45.4
FMCG 11.0% Nifty as on Aug 18 7,874
PER (x) 44.2 38.9 32.7 27.1
PAT Growth (%) 18.5 13.5 19.1 20.5 EPS (Rs) - Free Float 355.7 395.6 460.2 542.6
Growth (%) 1.3 11.2 16.3 17.9
Auto 9.2% PER (x) 22.1 19.9 17.1 14.5
PER (x) 19.7 15.5 12.9 11.2
PAT Growth (%) (7.1) 27.0 20.1 15.8 EPS (Rs) - Free Float
Nifty Cons. 355.7 395.6 465.2 546.7
Pharma 5.5% Var. (PLe v/s Cons.) (%) - - (1.1) (0.8)
PER (x) 36.4 26.3 25.7 22.5
PAT Growth (%) 1.6 38.5 2.0 14.5
Sensex as on Aug 18 26,391
Metals 5.4%
PER (x) 14.8 14.1 12.0 10.0 EPS (Rs) - Free Float 1,126.0 1,241.6 1,459.0 1,709.0
PAT Growth (%) (2.1) 5.5 17.4 19.4 Growth (%) (1.8) 10.3 17.5 17.1
PER (x) 23.4 21.3 18.1 15.4
Eng. & Power 8.3%
PER (x) 14.5 16.7 16.1 14.3 Sensex Cons. 1,126.0 1,241.6 1,445.4 1,697.5
PAT Growth (%) 17.5 (12.9) 3.6 12.2 Var. (PLe v/s Cons.) (%) - - 0.9 0.7

Lilladher
Prabhudas
Top Pick Summary
8/18/2014 19
2015E 2016E 2015E 2016E 2015E 2016E 2015E 2016E 2015E 2016E 2015E 2016E
Large Cap
Infosys 3,560 4,040 13.5% 2,036.2 7.4 12.7 14.8 11.4 22.4 24.4 23.5 22.3 16.7 14.9 4.3 3.6
HDFC Bank 832 925 11.1% 1,996.8 21.7 17.9 24.4 23.6 23.0 21.3 2.0 2.1 18.9 15.3 4.6 3.9
State Bank of India 2,421 3,000 23.9% 1,807.8 14.0 14.9 35.1 33.6 14.3 10.1 0.7 0.8 9.7 7.3 1.2 1.1
Larsen & Toubro 1,516 1,813 19.6% 1,392.5 12.2 15.0 4.8 18.4 15.5 15.7 12.7 13.7 27.1 22.9 4.2 3.7
Wipro 548 680 24.2% 1,350.5 12.6 11.7 13.2 16.1 22.9 25.0 22.6 22.1 15.2 13.1 3.9 3.3
Axis Bank 395 440 11.5% 927.2 13.9 15.9 13.7 20.2 17.9 17.4 1.7 1.7 13.1 10.9 2.4 2.1
Maruti Suzuki 2,704 2,816 4.2% 816.7 13.3 19.4 23.1 34.2 14.4 15.7 15.1 14.9 23.8 17.8 3.9 3.3
Tech Mahindra 2,203 2,350 6.7% 517.6 16.2 13.6 7.3 17.7 28.0 42.2 26.3 24.6 15.6 13.3 5.6 4.3
Dr.Reddy's Laboratories 2,774 3,023 9.0% 471.9 10.1 8.2 1.8 12.6 21.5 27.8 16.8 17.5 20.3 18.0 5.2 4.3
Bank of Baroda 886 1,000 12.8% 381.7 21.2 15.2 15.0 24.3 15.7 13.8 0.7 0.8 7.3 5.9 1.1 1.0
Motherson Sumi Systems 351 372 5.9% 309.6 18.2 18.0 21.6 42.7 37.0 36.2 19.3 23.9 26.7 18.7 10.5 8.1
ACC 1,509 1,653 9.5% 283.6 7.0 16.7 16.8 46.4 18.0 11.9 13.5 18.5 27.0 18.4 3.6 3.5
Zee Entertainment Enterprises 280 330 17.7% 269.2 12.1 16.0 9.1 23.6 21.1 20.6 24.8 27.6 27.7 22.4 5.7 5.1
Mid Caps
Aurobindo Pharma 776 874 12.5% 226.3 46.0 14.4 34.4 12.4 33.3 43.3 24.3 23.6 12.2 10.9 6.0 4.3
Cummins India 684 745 9.0% 189.6 10.9 17.0 11.9 20.3 27.5 24.3 25.2 27.2 28.1 23.4 7.4 6.9
UPL 325 400 23.2% 139.2 12.3 12.1 14.2 18.0 21.1 21.5 15.5 16.3 11.5 9.7 2.7 2.2
Federal Bank 119 140 17.7% 101.7 8.5 16.5 12.1 20.5 14.0 12.6 1.2 1.2 10.8 9.0 1.5 1.3
Tata Chemicals 374 430 14.9% 95.3 3.5 6.1 64.1 21.9 14.3 7.5 7.8 8.8 12.9 10.6 1.7 1.6
The Ramco Cements 299 350 16.8% 71.2 17.7 18.5 205.0 73.7 18.0 4.1 7.6 11.1 23.3 13.4 2.9 2.6
Dish TV India 58 72 23.5% 62.1 10.5 14.2 NA NA NA 67.3 10.5 26.0 NA 42.6 NA NA
P.I. Industries 415 460 11.0% 56.4 19.8 22.2 29.4 30.4 30.5 30.3 35.5 36.9 23.5 18.0 8.1 6.3
JK Lakshmi Cement 277 322 16.3% 32.6 23.6 31.4 82.9 32.4 18.4 9.1 8.7 11.2 15.2 11.4 2.5 2.2
KPIT Technologies 153 200 30.4% 28.5 9.9 13.3 5.2 26.4 20.2 21.5 17.8 18.9 10.9 8.6 2.2 1.9
RoE (%)
Upside
Mcap
(Rs bn)
RoCE (%)
CMP (Rs.) TP (Rs)
Revenue Growth (%) Earnings Growth (%) PER (x) P/BV (x)

Lilladher
Prabhudas
LARGE CAP
8/18/2014 20

Lilladher
Prabhudas Infosys
CMP: Rs3,560 TP: Rs4,040 Rating: BUY MCap: Rs2,036.2bn
Margin upgrades likely, Revenue to stay put: Revenue growth of 2%
(1.5%@cc) QoQ was just short of expectation (Cons.: 2.2%, PLe: 2.5%). The
beat to the EBIT margin was ahead of expectation even after adjusting for
change in depreciation. Management continues to expect flattish margin
for FY15 (YoY). We expect cost optimization to drive earnings upside in
FY15.
Attrition high – Efforts to bear fruit with a lag: Infosys is seeing high
attrition in the 0-3yrs experience bucket in-line with our expectation (Ref:
“Attrition: HR faux-pas or Stumbling growth?”, May 23, 2014).
Management has taken efforts to curb rising attrition by taking the
following steps: 1) Improving compensation predictability i.e. returning to
regular wage cycle 2) Awarding quarterly promotion to retain talent 3) Fast
track career progression for high performers 4) Reducing variable pay for
0-3 yrs experience. We see these efforts as a move in the right direction;
however, attrition is likely to spiral down with a lag. We anticipate attrition
to spiral down in H2FY15.
Efforts to sharpen sales team: Infosys continues with their effort to
sharpen the sales team. According to the management, the count declined
due to involuntary attrition in H2FY14. The company is likely to hire 300
(172 joined) sales professionals from top 41 universities across the world.
Moreover, they have shifted 150 professionals to account management
role from production roles. We see more new strategic initiatives to
prioritize investments in “Sales & Marketing” under the new leadership of
Dr. Vishal Sikka.
Valuation & Recommendation – Retain ‘BUY’, revise TP to Rs4,040: We
expect new strategic initiatives to be announced by Infosys under the new
leadership of Dr. Vishal Sikka. However, in the near term, we see more
tailwinds for margins to be played out in FY15. We see no downside risks
to our estimates. We revise our target price to Rs4,040 (from: Rs 3,920),
17x FY16e earnings estimate.
8/18/2014 21
Key Financials (Rs m)
Y/e March FY12 FY13 FY14E FY15E FY16E
Revenue (Rs m) 337,340 403,520 501,330 538,365 606,727
Growth (%) 22.7 19.6 24.2 7.4 12.7
EBITDA (Rs m) 107,160 115,580 134,150 148,033 164,344
PAT (Rs m) 83,160 94,210 106,480 122,265 136,236
EPS (Rs) 145.4 164.7 186.2 213.7 238.2
Growth (%) 21.9 13.3 13.0 14.8 11.4
Net DPS (Rs) 40.7 54.6 54.9 64.9 69.9
Source: Company Data, PL Research
Profitability & valuation
EBITDA margin (%) 31.8 28.6 26.8 27.5 27.1
RoE (%) 27.4 25.7 24.4 23.6 22.4
RoCE (%) 27.2 25.6 24.3 23.5 22.3
EV / sales (x) 5.4 4.5 3.5 3.2 2.7
EV / EBITDA (x) 17.1 15.7 13.2 11.7 10.1
PER (x) 24.5 21.6 19.1 16.7 14.9
P / BV (x) 6.1 5.1 4.3 3.6 3.1
Net dividend yield (%) 1.1 1.5 1.5 1.8 2.0
Stock Performance
(%) 1M 6M 12M
Absolute 9.5 (3.3) 19.5
Relative to Sensex 4.9 (32.9) (16.7)

Lilladher
Prabhudas Financials
Infosys
8/18/2014 22
Income Statement (Rs m)
Net Revenue 337,340 403,520 501,330 538,365 606,727
Direct Expenses 188,710 241,510 307,670 324,928 368,905
% of Net Sales 55.9 59.9 61.4 60.4 60.8
Employee Cost - - - - -
% of Net Sales 0.0 0.0 0.0 0.0 0.0
SG&A Expenses 41,470 46,430 59,510 65,404 73,478
% of Net Sales 12.3 11.5 11.9 12.1 12.1
Other Expenses - - - - -
% of Net Sales 0.0 0.0 0.0 0.0 0.0
EBITDA 107,160 115,580 134,150 148,033 164,344
Margin (%) 31.8 28.6 26.8 27.5 27.1
Depreciation 9,370 11,290 13,740 9,762 10,864
PBIT 97,790 104,290 120,410 138,271 153,480
Interest Expenses - - - - -
PBT 116,830 127,880 147,100 168,641 186,625
Total tax 33,670 33,670 40,620 46,376 50,389
Effective Tax rate (%) 28.8 26.3 27.6 27.5 27.0
PAT 83,160 94,210 106,480 122,265 136,236
Extraordinary Gain/(Loss) - - - - -
Adjusted PAT 83,160 94,210 106,480 122,265 136,236
Balance Sheet (Rs m)
Share Capital 2,860 2,860 2,860 2,860 2,860
Reserves & Surplus 300,860 364,210 441,540 526,678 622,932
Shareholder's Fund 334,610 397,970 475,300 560,438 656,692
Preference Share Capital - - - - -
Total Debt - - - - -
Other Liabilities(net) 1,090 1,490 3,230 3,230 3,230
Deferred Tax Liability 120 1,190 640 640 640
Total Liabilities 335,820 400,650 479,170 564,308 660,562
Gross Block 90,300 106,760 134,120 156,193 181,069
Less: Depreciation 36,210 42,080 55,250 65,012 75,876
Net Block 54,090 64,680 78,870 91,181 105,193
Capital Work in Progress - - - - -
Cash & Cash Equivalent 209,680 235,710 292,210 335,124 403,612
Total Current Assets 298,690 335,740 397,480 472,036 562,062
Total Current Liabilities 47,660 62,860 91,380 93,109 100,893
Net Current Assets 251,030 272,880 306,100 378,927 461,169
Other Assets 26,930 45,700 61,490 61,490 61,490
Total Assets 335,820 400,650 479,170 564,308 660,562

Lilladher
Prabhudas HDFC Bank
CMP: Rs832 TP: Rs925 Rating: BUY MCap: Rs1,996.8bn
Underlying macros remain challenging impacting financials but we see
limited risks to earnings growth as the bank sweats out its branches
further and credit costs will get cushioned by floating buffer. Improving
growth prospects with intended capital raising to strengthen balance
sheet and will improve revenue momentum, going ahead, which more
than justifies assigning historic premium multiple (3.6x Mar-16 book).
PPOP performance still better among peers: HDFCB in Q1FY15 delivered
~16% PPOP growth on sluggish other income but offset by stable margins
and lower opex growth. Fee income suffered from cut in fees-margins on
discontinued products from regulatory front or structural front but
management believes fee income should be supported from other retail
products. Opex growth at 5% YoY has been on tactical cost control and
with operating leverage from branches kicking in. PPOP performance will
be in some pressure in FY15 but will be still better among peers.
Some asset quality disappointment but not worried: On absolute basis,
slippages increased in Q1FY15 slightly contributed from Agri (some
seasonality), SME and CV/CE & other retail book. Credit costs were at 63
bps v/s 38 bps in Q4FY14 on provision to un-hedged forex exposures.
Despite drawdown of Rs750m for specific provisions, floating provisions of
Rs17.6bn provides certainty of low credit costs even in FY15/16.
Intended capital raise to strengthen B/s and improve ratios: Though
profit growth levels have moderated, RORWAs have inched to an all-time
high of +2.6% on improved operating leverage. With intended capital raise,
balance sheet will strengthen and improve RoAs further as revenue
momentum will start picking up and opex costs increase will be gradual.
Hence, higher RORWAs/ROEs will help sustain premium valuations. We
maintain ‘BUY’ with PT of Rs925/share. Risk to our call is an overhang on
FIPB approval for further FII share purchase which has been pending for
long time now.
8/18/2014 23
Y/e March FY12 FY13 FY14 FY15E FY16E
Net interest income 128,846 158,111 184,826 224,953 265,254
Growth (%) 22.2 22.7 16.9 21.7 17.9
Operating profit 93,906 114,276 143,601 180,818 218,226
PAT 51,671 64,749 84,784 105,431 130,338
EPS (Rs) 22.0 27.2 35.3 43.9 54.3
Growth (%) 30.4 23.6 29.9 24.4 23.6
Net DPS (Rs) 4.3 5.5 6.9 8.5 10.5
NIM (%) 72.9 72.3 77.7 80.4 82.3
RoAE (%) 18.7 19.6 21.3 22.2 23.0
RoAA (%) 1.7 1.8 1.9 2.0 2.1
P / BV (x) 6.5 5.5 4.6 3.9 3.2
P / ABV (x) 6.6 5.5 4.7 3.9 3.3
PE (x) 37.8 30.6 23.6 18.9 15.3
Stock Performance
(%) 1M 6M 12M
Absolute (0.0) 26.0 41.6
Relative to Sensex (4.6) (3.5) 5.3

Lilladher
HDFC Bank
8/18/2014 24
Int. Earned from Adv. 211,244 268,224 316,869 397,440 475,478
Int. Earned from Invt. 65,046 78,203 90,368 100,330 115,851
Others - - - - -
Total Interest Income 278,742 350,649 411,355 501,999 595,692
Interest expense 149,896 192,538 226,529 277,046 330,438
NII 128,846 158,111 184,826 224,953 265,254
Growth (%) 22.2 22.7 16.9 21.7 17.9
Treasury Income (1,944) 1,602 1,138 2,500 2,800
NTNII 59,780 66,924 78,059 91,281 110,480
Non Interest Income 57,836 68,526 79,196 93,781 113,280
Total Income 336,578 419,175 490,552 595,780 708,972
Growth (%) 38.7 24.5 17.0 21.5 19.0
Operating Expense 92,776 112,361 120,422 137,916 160,308
Operating Profit 93,906 114,276 143,601 180,818 218,226
Growth (%) 21.6 21.7 25.7 25.9 20.7
NPA Provisions 12,428 13,579 18,539 20,258 19,490
Investment Provisions - 522 (41) - -
Total Provisions 18,774 16,764 15,873 21,985 21,870
PBT 75,132 97,512 127,728 158,833 196,356
Tax Provisions 23,461 32,764 42,944 53,402 66,018
Effective Tax Rate (%) 31.2 33.6 33.6 33.6 33.6
PAT 51,671 64,749 84,784 105,431 130,338
Growth (%) 31.6 25.3 30.9 24.4 23.6
Par Value 2 2 2 2 3
No. of equity shares 2,347 2,379 2,399 2,399 1,599
Equity 4,693 4,759 4,798 4,798 4,798
Networth 299,244 362,141 434,786 516,307 617,087
Adj. Networth 295,720 357,452 426,586 506,177 606,799
Deposits 2,467,064 2,962,470 3,673,375 4,316,636 5,277,582
Growth (%) 18.3 20.1 24.0 17.5 22.3
Low Cost deposits 1,194,059 1,405,215 1,646,214 1,924,180 2,378,918
% of total deposits 48.4 47.4 44.8 44.6 45.1
Total Liabilities 3,379,093 4,003,320 4,915,996 5,764,739 6,941,851
Net Advances 1,954,200 2,397,206 3,030,003 3,605,703 4,398,958
Growth (%) 22.2 22.7 26.4 19.0 22.0
Investments 974,829 1,116,136 1,209,511 1,383,324 1,634,079
Total Assets 3,379,098 4,003,325 4,916,001 5,764,739 6,941,851

Lilladher
Prabhudas State Bank of India
CMP: Rs2,421 TP: 3,000 Rating: BUY MCap: Rs1,807.8bn
SBI’s asset quality has improved on some ARC sales and better
recoveries, though slippages are still high but overall stress seems to be
diminishing bringing stability to asset quality. Opex efficiencies are now
kicking in on measures of correction in overheads and also is best placed
on pension and wage provisions which will keep Opex growth lowest
among peers.
Opex efficiency supported PPOP performance: SBI’s PPOP grew ~16% YoY
in Q1FY15 on better opex efficiency as Bank made corrective adjustments
to overheads, and employee expenses remained flattish even after
providing additional pension provisions and wage hike provisions. Margins
dipped marginally by 4bps QoQ due to lower overseas margins (down
34bps QoQ) as recent bond raising was deployed in short-term yielding
loans. Management indicated improvement in international NIMs and with
lower interest reversals in FY15, indicating that maintaining margins at
current level will not be a challenge.
Asset quality – Some ARC sales but also better recovery: Slippages did
inch up to 3.2% in Q1FY15 from 2.7% seen in Q4FY14 on stress from mid-
corporate segment and Agri segment. Management has indicated overall
stress to be diminishing. ARC sales of Rs67bn were indeed large, of which,
Rs56bn were from NPAs. The Bank has also provided Rs0.9bn on
provisions shortfall on consideration of sale to ARC. The Bank restructured
loans of Rs57bn in Q1FY15.
Stabilizing asset quality and Opex efficiency leads to upgrade in rating
from ‘Accumulate’ to ‘BUY’: Asset quality has stabilized with better
recovery & upgrade trends though slippages have been high but we expect
them to move down in H2FY15. We have been maintaining our view that
SBI is best placed on provisions and less net additions to staff will keep
employee expenses under check which will result in lowest Opex growth
among peers in FY15. We have upgraded our rating from Accumulate to
‘BUY’ with TP of Rs3,000.
8/18/2014 25
Growth (%) 27.1 5.7 10.5 14.0 14.9
PAT 152,734 177,008 137,495 185,695 248,054
EPS (Rs) 227.6 258.8 184.1 248.7 332.2
Growth (%) 33.7 13.7 -28.8 35.1 33.6
Net DPS (Rs) 35.0 41.5 30.0 36.6 43.9
NIM (%) 69.4 65.9 61.2 65.2 65.6
RoAE (%) 16.1 15.3 10.1 12.0 14.3
RoAA (%) 0.9 0.9 0.6 0.7 0.8
P / BV (x) 1.5 1.3 1.2 1.1 1.0
P / ABV (x) 1.6 1.4 1.4 1.2 1.1
PE (x) 10.6 9.4 13.1 9.7 7.3
Stock Performance
(%) 1M 6M 12M
Absolute (5.5) 61.3 54.2
Relative to Sensex (10.1) 31.7 17.9

Lilladher
State Bank of India
8/18/2014 26
Int. Earned from Adv. 1,113,415 1,264,422 1,413,826 1,634,753 1,887,024
Others - - - - -
Total Interest Income 1,471,974 1,679,781 1,890,624 2,168,545 2,480,782
Interest expense 893,196 1,068,179 1,214,790 1,397,994 1,595,603
NII 578,778 611,602 675,834 770,551 885,179
Growth (%) 27.1 5.7 10.5 14.0 14.9
Treasury Income 22,394 14,162 20,904 22,500 20,000
NTNII 159,671 187,155 210,531 240,005 276,006
Total Income 1,654,039 1,881,098 2,122,060 2,431,051 2,776,789
Growth (%) 24.3 13.7 12.8 14.6 14.2
Growth (%) 22.2 0.4 2.6 21.4 15.7
NPA Provisions 155,147 159,973 199,062 225,059 210,761
Investment Provisions 8,556 (9,501) 8,763 - -
PBT 239,129 252,597 205,855 277,156 370,229
Tax Provisions 86,395 75,588 68,361 91,462 122,176
PAT 152,734 177,008 137,495 185,695 248,054
Growth (%) 41.2 15.9 (22.3) 35.1 33.6
Par Value 10 10 10 10 11
No. of equity shares 671 684 747 747 679
Equity 6,710 6,840 7,467 7,467 7,467
Networth 1,062,300 1,250,330 1,473,706 1,627,431 1,837,121
Adj. Networth 851,349 962,506 1,088,384 1,180,035 1,317,489
Deposits 14,146,894 16,274,026 18,388,524 21,498,598 25,044,894
Growth (%) 12.7 15.0 13.0 16.9 16.5
Net Advances 11,636,702 13,926,080 15,782,767 18,465,837 21,605,030
Growth (%) 15.6 19.7 13.3 17.0 17.0
Investments 4,609,491 5,193,932 5,787,931 6,372,783 7,252,612
Total Assets 18,262,305 21,289,045 23,910,725 28,198,553 32,812,368

Lilladher
Prabhudas Larsen & Toubro
CMP: Rs1,516 TP: Rs1,813 Rating: BUY MCap: Rs1,392.5bn
Guidance maintained: L&T has maintained its guidance given for the
consolidated entity at the start of the year of 15% revenue growth and
20% order inflow growth in FY15. L&T had also guided that it will maintain
margin at FY14 levels with variation of plus/minus 50-100bps. However,
currently L&T believes the variation in margins over FY14 levels could be in
the range of 100-150bps due to losses in hydrocarbon businesses.
Management expects ordering in domestic market to pick up in H2FY15.
They expect the strong momentum in inflow from export market to
continue in FY15.
Infrastructure to dominate inflows: L&T is looking at overall inflow of
~US$25bn in the current year out of prospects worth US$100bn. The
company expects ~US$11bn orders from infrastructure (US$45bn
prospects), US$5bn from Power (US$15bn prospects), US$1bn from Metal
& Mining (US$4bn prospects), US$3bn from Hydrocarbon (US$15bn
prospects) and US$5bn from Others segment.
IDPL - Fund-raising to ease burden on parent’s balance sheet: IDPL has a
current portfolio of 28 projects; with total project cost of Rs613bn. IDPL
has invested equity worth Rs70bn and has balance equity commitment of
Rs65bn for current portfolio of projects. IDPL has recently raised from
Canadian Pension Fund and from Dhamra port stake sale. The fund-raising
will help reduce burden on standalone balance sheet and help improve
RoEs.
Outlook and Valuation: The stock is trading at core PE of 16.5x FY16E
earnings. L&T continues to be the best play in the Indian infrastructure
space, given its strong business model, diverse skill sets, strong execution
capabilities and relatively healthy/large balance sheet. Maintain ‘BUY’.
8/18/2014 27
Revenue (Rs m) 531,705 516,110 565,989 634,937 730,228
Growth (%) 21.1 (2.9) 9.7 12.2 15.0
EBITDA (Rs m) 62,687 54,731 66,671 70,708 82,577
PAT (Rs m) 43,855 41,366 49,047 51,421 60,877
EPS (Rs) 48.0 45.0 53.4 56.0 66.3
Growth (%) 19.1 (6.1) 18.6 4.8 18.4
Net DPS (Rs) 10.9 12.1 14.4 15.1 17.9
EBITDA margin (%) 11.8 10.6 11.8 11.1 11.3
RoE (%) 18.6 15.3 15.7 14.6 15.5
RoCE (%) 15.1 13.1 13.6 12.7 13.7
EV / sales (x) 2.8 2.8 2.6 2.3 2.0
EV / EBITDA (x) 23.4 26.8 22.3 20.8 17.6
PER (x)* 22.7 24.2 20.4 19.5 16.5
P / BV (x) 5.5 4.8 4.2 3.7 3.3
Source: Company Data, PL Research * Core PE
Stock Performance
(%) 1M 6M 12M
Absolute (10.1) 49.0 100.1

Lilladher
Prabhudas
SOTP
8/18/2014 28
Fair Value (Rs) Basis
L&T Core business 1,388 21x March'16 EPS
L&T Hydrocarbon business 30 10x March '16EPS
L&T IDPL 146 2x P/B
L&T InfoTech 88 11x PE FY15E
L&T Finance Holding 87 83% stake; 20% Hold co discount on current market cap
L&T's equity investment in BTG 4 2x equity investment
Other businesses 70 Manufacturing, urban Infra,
Target price 1,813

Lilladher
Larsen & Toubro
8/18/2014 29
Net Revenue 531,705 516,110 565,989 634,937 730,228
Direct Expenses 446,836 440,658 480,088 545,960 628,468
% of Net Sales 84.0 85.4 84.8 86.0 86.1
% of Net Sales 0.0 0.0 0.0 0.0 0.0
SG&A Expenses 22,182 20,721 19,231 18,269 19,183
% of Net Sales 4.2 4.0 3.4 2.9 2.6
% of Net Sales 0.0 0.0 0.0 0.0 0.0
EBITDA 62,687 54,731 66,671 70,708 82,577
Margin (%) 11.8 10.6 11.8 11.1 11.3
Depreciation 7,014 7,277 7,924 7,644 8,135
PBIT 55,673 47,454 58,746 63,064 74,442
Interest Expenses 6,661 9,548 10,761 10,959 9,959
PBT 62,394 56,779 66,794 71,418 84,552
Total tax 18,538 15,413 17,748 19,997 23,675
PAT 44,565 43,845 54,932 51,421 60,877
Extraordinary Gain/(Loss) 710 2,479 5,885 - -
Adjusted PAT 43,855 41,366 49,047 51,421 60,877
Share Capital 1,225 1,231 1,231 1,231 1,231
Total Debt 98,958 88,342 114,589 104,589 94,590
Other Liabilities(net) - - - - -
Deferred Tax Liability 1,333 2,422 4,099 4,099 4,099
Gross Block 105,064 117,783 114,036 121,154 129,153
Net Block 76,661 82,065 75,488 74,962 74,826
Capital Work in Progress 6,975 4,911 4,119 5,000 5,001
Other Assets - - - - -
Total Assets 352,520 380,088 452,540 480,229 514,704

Lilladher
Prabhudas Wipro
CMP: Rs548 TP: Rs680 Rating: BUY MCap: Rs1,350.5bn
Largely in-line quarter: Wipro reported Q1FY15 results in line with
expectation. IT Services (USD) revenue grew by 1.2% QoQ (0.3% @cc) to
US$1,740m (PLe: US$1,746m, Cons: US$1,745m). Overall revenue declined
by 3.5% QoQ to Rs112.5bn (PLe: Rs113.9bn, Cons.: Rs113.8bn). Operating
margins eroded by 135bps to 20.4% (PLe: 20.5%, Cons: 21.2) due to wage
hike (one-month impact), RSU costs and currency appreciation. EPS
declined by 6% QoQ to Rs8.55 (PLe: Rs8.64, Cons: Rs8.72).
H2FY15 likely to be stronger compared to H1FY15: Management asserted
for stronger H2FY15 than H1FY15 on the back of large deal wins over the
last six months. Weakness in Q2FY15 guidance was attributed to ramp-
down, project closure and delay in ramp-up of the new project. Wipro has
announced ~US$2bn TCV of deal closures over the last four months. We
expect revenue growth to accelerate in Q3FY15 yielding stronger FY15 exit
rate.
Margin to track better – Tailwinds outscores headwinds: Wipro is likely to
face margin headwinds in Q2FY15 due to remainder impact of wage hike
and project ramp-up from large deals. However, the management
highlighted room for utilization improvement, non-recurral of cost
associated with RSU and retirement benefit that increased due to wage
hike in Q1FY15 as key tailwinds. We see margin tailwinds outscoring
headwinds for remainder of FY15.
Valuation & Recommendation – Retain ‘BUY’, with target price of Rs680:
We see improvement in the win rate to drive revenue momentum in
H2FY15, along with available margin levers that would accelerate earnings
momentum. We see Wipro in an early stage of re-rating cycle as visibility
for growth improves. Retain “BUY” rating, with a target price of Rs680, 16x
FY16E earnings estimate.
8/18/2014 30
Revenue (Rs m) 318,747 374,256 434,269 488,922 545,933
Growth (%) 2.6 17.4 16.0 12.6 11.7
EBITDA (Rs m) 66,713 78,181 97,101 112,036 125,903
PAT (Rs m) 52,568 61,684 78,394 88,718 103,034
EPS (Rs) 21.4 25.0 31.8 36.0 41.8
Growth (%) (1.0) 17.1 26.9 13.2 16.1
Net DPS (Rs) 7.0 6.9 9.0 9.0 9.0
EBITDA margin (%) 20.9 20.9 22.4 22.9 23.1
RoE (%) 20.0 21.7 25.0 23.5 22.9
RoCE (%) 18.2 20.5 24.2 22.6 22.1
EV / sales (x) 4.1 3.4 2.9 2.4 2.0
EV / EBITDA (x) 19.4 16.2 12.8 10.5 8.7
PER (x) 25.6 21.9 17.2 15.2 13.1
P / BV (x) 4.7 4.8 3.9 3.3 2.8
Stock Performance
(%) 1M 6M 12M
Absolute 0.1 (1.7) 20.0
Relative to Sensex (4.5) (31.3) (16.3)

Lilladher
Wipro
8/18/2014 31
Net Revenue 318,747 374,256 434,269 488,922 545,933
Direct Expenses 225,794 260,665 295,488 331,108 368,523
% of Net Sales 70.8 69.6 68.0 67.7 67.5
% of Net Sales 0.0 0.0 0.0 0.0 0.0
SG&A Expenses 26,240 35,410 41,680 45,778 51,508
% of Net Sales 8.2 9.5 9.6 9.4 9.4
% of Net Sales 0.0 0.0 0.0 0.0 0.0
EBITDA 66,713 78,181 97,101 112,036 125,903
Margin (%) 20.9 20.9 22.4 22.9 23.1
Depreciation 10,129 10,835 11,106 12,814 13,006
PBIT 56,584 67,346 85,995 99,223 112,896
Interest Expenses - - 52 - -
PBT 65,523 78,596 101,057 113,998 132,224
Total tax 12,955 16,912 22,601 25,079 29,089
PAT 52,568 61,684 78,394 88,718 103,034
Adjusted PAT 52,568 61,684 78,394 88,718 103,034
Share Capital 4,917 4,926 4,932 4,932 4,932
Total Debt 22,510 854 10,909 10,909 10,909
Gross Block 109,736 101,685 113,471 128,139 144,517
Net Block 53,529 44,589 46,763 48,617 51,988
Other Assets 105,698 89,159 105,657 105,657 105,657
Total Assets 318,316 294,990 365,848 432,473 513,414

Lilladher
Prabhudas Axis Bank
CMP: Rs395 TP: Rs440 Rating: BUY MCap: Rs927.2bn
Axis bank’s Q1FY15 performance has been in line with expectations
barring for sluggish other income which has de-grown by 5% YoY. Asset
quality showed a slight blip but was well within guidance. FY15 PPOP
growth challenges remain on fees and margins sustainability, but we
believe Axis bank’s valuations at 1.7x Mar-16 book are still favourable
considering well diversified asset book now, best-in-class liability
franchise and better underwriting standards.
Fees will be a challenge but opex growth to be only gradual: Axis bank’s
PPOP performance was almost flat on sluggish fees driven down by
slowdown in large corporate loan book resulting in lower fee growth. NII
growth of 15% YoY has been up to expectations as NIMs held up well at
~3.9% in Q1FY15. Margins sustainability now looks questionable but
management has guided NIMs to remain above 3.5%, going ahead and
expected fees recovery to only come at the end of FY15 which creates
challenge for higher PPOP growth in FY15. We expect PPOP growth of 16%
in FY15.
Asset quality – Some blips but well within guidance: Bank’s Gross
slippages and restructuring at ~Rs11bn was well within guidance (~Rs16bn
per quarter guidance which remains unchanged) leading to ~70bps of
specific credit losses. Mid corporate still remains under stress but have
been factored in the guidance. It has provided about Rs470m for un-
hedged forex exposures and SMA accounts, while it has ~Rs8.0bn of
specific provisions buffer on its books (not included in credit costs) which
provides comfort on credit losses. As highlighted from our previous
updates, we have been buoyant on Axis Bank’s asset quality and continue
to do so on better underwriting and now tilt towards secured assets..
Axis has been able to successfully diverse its business mix from ~25% to
38% retail (after reclassification of agri book) in the last two years which
has offset the corporate book slowdown. Upbeat liability franchise,
better underwriting and stable asset quality makes it our preferred
sector pick with PT of Rs2200.
8/18/2014 32
Growth (%) 22.2 20.6 23.6 13.9 15.9
PAT 42,422 51,794 62,177 70,688 85,002
EPS (Rs) 20.5 22.1 26.5 30.1 36.2
Growth (%) 24.4 7.8 19.6 13.7 20.2
Net DPS (Rs) 3.2 3.6 4.0 4.6 5.3
NIM (%) 92.7 96.2 95.9 97.6 97.6
RoAE (%) 20.3 18.5 17.4 17.2 17.9
RoAA (%) 1.6 1.7 1.7 1.7 1.7
P / BV (x) 3.6 2.8 2.4 2.1 1.8
P / ABV (x) 3.6 2.8 2.4 2.1 1.8
PE (x) 19.2 17.8 14.9 13.1 10.9
Stock Performance
(%) 1M 6M 12M
Absolute (1.1) 69.3 88.1

Lilladher
Axis Bank
8/18/2014 33
Others - - - - -
NII 80,177 96,663 119,516 136,138 157,739
Growth (%) 22.2 20.6 23.6 13.9 15.9
Treasury Income 931 5,818 3,133 6,000 6,000
NTNII 53,271 59,693 70,919 80,890 93,520
Total Income 274,149 337,337 380,464 436,995 502,159
Growth (%) 38.6 23.0 12.8 14.9 14.9
Growth (%) 15.8 25.2 23.1 16.0 15.8
NPA Provisions 10,996 14,799 17,810 27,398 27,066
Investment Provisions 581 (1,039) (1,003) - -
PBT 62,878 75,531 93,490 105,505 126,869
Tax Provisions 20,456 23,736 31,313 34,817 41,867
PAT 42,422 51,794 62,177 70,688 85,002
Growth (%) 25.2 22.1 20.0 13.7 20.2
Par Value 2 2 2 2 2
No. of equity shares 2,066 2,340 2,349 2,349 2,349
Equity 4,132 4,680 4,698 4,698 4,698
Networth 228,085 331,079 382,205 440,250 510,712
Adj. Networth 223,359 324,037 371,959 424,297 489,878
Deposits 2,201,043 2,526,136 2,809,446 3,278,077 3,951,677
Growth (%) 16.3 14.8 11.2 16.7 20.5
Low Cost deposits 914,220 1,120,998 1,264,623 1,490,321 1,814,344
Net Advances 1,697,595 1,969,660 2,300,668 2,691,781 3,230,137
Growth (%) 19.2 16.0 16.8 17.0 20.0
Investments 931,921 1,137,375 1,135,484 1,290,492 1,508,690
Total Assets 2,856,278 3,405,607 3,832,449 4,582,717 5,456,212

Lilladher
Prabhudas Maruti Suzuki
CMP: Rs2,704 TP: Rs2,816 Rating: Accumulate MCap: Rs816.7bn
Best play on Macroeconomic recovery: Given the last three years of flat
volumes in the Passenger Car segment (expected latent demand) and new
launches, we expect volumes to grow at 14.6% CAGR over FY14-FY16E
period. MSIL has gained market share to the tune of 220bps in the small
car segment, given the strong product portfolio (volumes declined by 2.7%
CAGR v/s segment volume decline of 4.8%).
Celerio seeing encouraging response: Dealers indicate that the demand is
likely to pick up post election. Including ‘Celerio’ (which has received good
response), the management indicated couple of new launches in FY15E.
Celerio is likely to deliver 5-6,000 units/month, which itself would lead to
7% growth for MSIL in FY15E, assuming other segments remain flat. As per
Sewells Group Automotive Dealer Confidence Index for the January-March
2014 quarter, overall 62% dealers surveyed expected volumes to increase
over the next six months.
EBITDA margins likely to sustain at 12%+ levels: With an uptick in
volumes and lower discounting, we expect EBITDA margins to remain
healthy at 12.5-13% levels. Management indicated that the imported
content of raw material has been brought down to ~16-17% currently
from 20% in FY13.
Our volume estimates: Given the fact that the Passenger car industry has
been flattish for the last three years, any improvement in macroeconomic
scenario could lead to recovery in sales for MSIL. Given its strong product
portfolio, we have built in 12.7% volume growth for FY15E at 1.3m units
(led by new launches) and a 16.6% YoY in FY16E (on account of strong
recovery in economy) at 1.5m units.
Earnings to grow at ~28% CAGR: Given estimated earnings CAGR of
~28.5%, the current valuations of 24.0x FY15E EPS and 18.0x FY16E EPS
seem attractive. We reiterate that MSIL is the best play on the recovery in
the macroeconomic situation. Our TP is based on 19.0x FY16E EPS (@ 20%
premium to its average multiple).
8/18/2014 34
Revenue (Rs m) 355,871 435,879 437,006 493,740 587,193
Growth (%) (2.8) 22.5 0.3 13.3 19.4
EBITDA (Rs m) 25,130 42,297 50,899 60,123 76,014
PAT (Rs m) 16,352 23,921 27,830 34,073 45,407
EPS (Rs) 56.6 79.2 92.1 112.8 150.3
Growth (%) (30.5) 39.9 16.3 22.4 33.3
Net DPS (Rs) 7.5 8.0 12.0 13.5 15.0
EBITDA margin (%) 7.1 9.7 11.6 12.2 12.9
RoE (%) 10.6 13.0 15.7 14.5 14.2
RoCE (%) 11.1 13.5 16.3 15.1 14.7
EV / sales (x) 2.2 1.9 1.9 1.7 1.4
EV / EBITDA (x) 30.6 19.5 16.3 13.8 10.8
PER (x) 47.8 34.1 29.3 24.0 18.0
P / BV (x) 5.1 4.4 3.9 3.3 2.9
Stock Performance
(%) 1M 6M 12M
Absolute 7.1 58.2 104.0
Relative to Sensex 2.5 28.7 67.8

Lilladher
Prabhudas Operating Metrics
Maruti Suzuki
8/18/2014 35
Y/e March FY10 FY11 FY12 FY13 FY14 FY15E FY16E
A2 segment volumes (nos) 633,190 808,552 709,430 673,009 678,240 779,976 889,173
A3 segment volumes (nos) 99,315 131,410 128,587 176,467 201,715 199,698 229,653
Domestic Volumes (nos) 870,790 1,132,739 1,006,316 1,051,047 1,054,072 1,185,170 1,365,346
Export Volumes (nos) 147,575 138,266 127,379 120,388 99,816 110,000 140,000
Volumes (nos) 1,018,365 1,271,005 1,133,695 1,171,435 1,153,888 1,295,170 1,505,346
Growth (%) 28.6 24.8 (10.8) 3.3 (1.5) 12.2 16.2
Av. Real. / Veh. (Rs) 290,887 288,106 313,904 367,909 380,133 379,264 388,370
Growth (%) 10.5 (1.0) 9.0 17.2 3.3 (0.2) 2.4
RM cost / veh. (Rs) 220,092 222,959 247,559 286,508 271,340 271,464 277,444
Growth (%) 7.3 1.3 11.0 15.7 (5.3) 0.0 2.2
Contr. / Veh. (Rs) 70,795 65,147 66,345 81,402 108,793 107,800 110,926
Selling expenses (Rs mn) 9,160 11,029 10,136 11,823 13,894 15,067 16,975
Selling exp. / Veh. (Rs) 8,995 8,677 8,941 10,093 12,041 11,634 11,276
Growth (%) (3.5) (3.5) 3.0 12.9 19.3 (3.4) (3.1)
Other exp. / Veh. (Rs) 26,393 30,472 36,736 42,635 51,418 50,680 50,104
Growth (%) (3.8) 15.5 20.6 16.1 20.6 (1.4) (1.1)
EBITDA / Veh. (Rs) 39,044 29,140 22,166 30,368 46,075 43,310 41,154
Growth (%) (4.4) (25.4) (23.9) 37.0 51.7 (6.0) (5.0)
Net Profit / Veh. (Rs) 24,526 18,006 14,195 19,634 28,766 27,137 25,941

Lilladher
Maruti Suzuki
8/18/2014 36
Net Revenue 355,871 435,879 437,006 493,740 587,193
Direct Expenses 280,656 325,149 313,096 351,592 417,649
% of Net Sales 78.9 74.6 71.6 71.2 71.1
Employee Cost 8,438 10,696 13,681 16,386 18,106
% of Net Sales 2.4 2.5 3.1 3.3 3.1
SG&A Expenses - - - - -
% of Net Sales 0.0 0.0 0.0 0.0 0.0
Other Expenses 41,647 57,738 59,330 65,640 75,425
% of Net Sales 11.7 13.2 13.6 13.3 12.8
EBITDA 25,130 42,297 50,899 60,123 76,014
Margin (%) 7.1 9.7 11.6 12.2 12.9
Depreciation 11,384 18,612 20,844 23,487 25,491
PBIT 13,746 23,685 30,055 36,636 50,522
Interest Expenses 552 1,898 1,759 1,610 1,650
PBT 21,203 29,910 36,585 45,359 60,890
Total tax 5,111 5,989 8,755 11,057 14,735
PAT 16,092 23,921 27,830 34,073 45,407
Extraordinary Gain/(Loss) (260) - - - -
Adjusted PAT 16,352 23,921 27,830 34,073 45,407
Share Capital 1,445 1,510 1,510 1,510 1,510
Total Debt 10,784 13,892 16,851 17,151 17,451
Other Liabilities(net) 2,648 2,364 - 16 85
Gross Block 147,347 198,007 237,429 279,433 321,887
Net Block 75,207 97,992 122,114 146,345 169,480
Net Current Assets 21,968 22,812 (2,799) (3,675) (7,153)
Total Assets 168,329 206,133 232,498 272,580 307,745

Lilladher
Prabhudas Tech Mahindra
CMP: Rs2,203 TP: Rs2,350 Rating: BUY MCap: Rs517.6bn
Revenue growth healthy, EBITDA miss due to BT adjustment: TECHM’s
Q1FY15 results were in-line with expectation. Revenue grew by 1.3% QoQ
to Rs51,215m (PLe: Rs50,907m, Cons.: Rs50,783m) and 3.7% QoQ in USD
terms to US$855m (PLe: US$852m, Cons.: $850m). EBITDA margins eroded
by 306bps QoQ to 18.1% (PLe: 19.9%, Cons: 19.8%) due to lower utilization
(50bps), currency appreciation (50bps), visa expense (100bps), and large
deal transition drag (80bps). EPS grew by 1.7% QoQ to Rs26.15 (PLe:
Rs29.03, Cons: Rs29.75) due to higher other income of Rs893m (Q4FY14: -
Rs867m).
Large deal transition – A growth in waiting: The company continues to
see margin headwinds due to large deal transition for second quarter in
succession. We expect the growth rate to improve as large Network
Services deal starts ramping-up. Moreover, the deal closure continues to
be healthy. We expect revenue momentum to accelerate during FY15 as
BASF and MES (inorganic) contribution pour-in. We expect TechM to grow
ahead of NASSCOM guidance
Margin levers – Short-term and long-term tailwinds: The company will
have near-term margin tailwinds from non-recurring visa cost, utilization
improvement and deal ramp-up. Moreover, the management is working
on improving employee pyramid (28% at 0-3yrs experience) to industry
average of ~40%. We expect both tactical and strategic margin lever to
push margin higher from Q1FY15 level. We are factoring in steady margin
improvement during FY15.
Improving cash flow: Cash flow from Operation to EBITDA ratio improved
to 68% from 59% in the previous quarter despite worsening DSO to 102
days (Q4FY14: 96 days). We expect further improvement in free cash flow
during CY14-15.
Valuation & Recommendation: We expect high-teen revenue growth in
FY15 with steady improvement in margin at constant currency during
FY15. We retain ‘BUY’ rating, with a revised TP of Rs2,350, 14x FY16e
earnings estimate.
8/18/2014 37
Revenue (Rs m) 117,024 143,320 187,132 217,359 246,826
Growth (%) 127.7 22.5 30.6 16.2 13.6
EBITDA (Rs m) 19,518 30,631 41,730 46,732 54,302
PAT (Rs m) 17,526 23,356 30,852 33,101 38,944
EPS (Rs) 137.5 181.9 131.3 140.9 165.7
Growth (%) 168.9 32.3 (27.8) 7.3 17.7
Net DPS (Rs) 4.6 12.2 10.3 11.0 13.0
EBITDA margin (%) 16.7 21.4 22.3 21.5 22.0
RoE (%) 47.4 49.3 42.2 31.0 28.0
RoCE (%) 35.9 38.0 34.8 26.3 24.6
EV / sales (x) 2.5 2.0 2.6 2.2 1.8
EV / EBITDA (x) 14.8 9.4 11.6 10.1 8.3
PER (x) 16.0 12.1 16.8 15.6 13.3
P / BV (x) 6.9 5.2 5.6 4.3 3.3
Stock Performance
(%) 1M 6M 12M
Absolute 3.8 20.9 66.3
Relative to Sensex (0.8) (8.7) 30.0

Lilladher
Tech Mahindra
8/18/2014 38
Net Revenue 117,024 143,320 187,132 217,359 246,826
Direct Expenses 75,405 90,007 117,001 134,328 153,772
% of Net Sales 64.4 62.8 62.5 61.8 62.3
% of Net Sales 0.0 0.0 0.0 0.0 0.0
SG&A Expenses 22,101 22,682 28,400 36,299 38,752
% of Net Sales 18.9 15.8 15.2 16.7 15.7
% of Net Sales 0.0 0.0 0.0 0.0 0.0
EBITDA 19,518 30,631 41,730 46,732 54,302
Margin (%) 16.7 21.4 22.3 21.5 22.0
Depreciation 3,190 3,896 5,222 5,765 6,415
PBIT 16,328 26,735 36,508 40,967 47,887
Interest Expenses 1,073 922 798 39 39
PBT 20,268 27,934 36,840 43,686 51,477
Total tax 2,289 6,479 7,524 10,922 12,869
PAT 17,526 23,356 30,852 33,101 38,944
Adjusted PAT 17,526 23,356 30,852 33,101 38,944
Share Capital 1,275 1,284 2,350 2,350 2,350
Total Debt 11,266 10,804 524 524 524
Deferred Tax Liability - - - - -
Gross Block 14,471 20,083 48,960 57,654 67,527
Net Block 6,792 9,039 20,304 23,233 26,691
Capital Work in Progress 1,671 343 2,662 2,662 2,662
Other Assets 4,415 10,308 18,764 18,764 18,764
Total Assets 56,070 68,404 109,843 139,677 174,887

Lilladher
Prabhudas Dr. Reddy’s Laboratories
CMP: Rs2,774 TP: Rs3,023 Rating: Accumulate MCap: Rs471.9bn
Dr. Reddy’s is one of the best play on global generic space: Dr. Reddy’s
has built a very strong global generic business and has emerged as one of
the leading Indian companies in the large generic markets like US, Europe
and Russia/CIS. Apart from strong formulation business, the company is
one of the largest suppliers of APIs to global generic companies. We
believe that the company will be a key beneficiary of large patent expiries
taking place in US and Europe and strong growth movement in branded
generic markets like Russia, LatAm and India.
US remains a key performance driver for the company: Dr. Reddy’s has
built a sizable US business on the back of strong product pipeline of niche
and limited competition products like Geodon, Depakote ER, Toprol XL,
Arixtra, Tacrolimus etc. The company has also developed a strong OTC
franchise in US market with revenue of US$130m (25% of US revenue). US
market remains a key revenue and profit contributor to the company in
the medium term. We expect 21% CAGR for US business over FY14E-16E.
Branded formulation continues to grow in double digits: Dr. Reddy will
continue to report strong growth in branded formulation business, going
forward, led by strong franchise in Russia/CIS markets, reviving growth in
Indian markets and ramping up revenue from its alliance with GSK for
emerging markets. Further, the launch of biologics will be a key growth
driver in emerging markets. We expect 21% and 10% revenue CAGR for
International branded formulations and India formulations over FY14E-
16E.
Outlook and Valuations: We expect earnings CAGR of 16% over FY14E-16E
led by top-line growth of 12% over the same period. All the key business
segments, excluding Europe, are likely to contribute to the performance.
Further, the company will benefit from the operating leverage, going
forward. Concerns over FY15E Revenue and PAT growth are overdone as
we expect 12% YoY earnings growth in FY15E despite a high base. The
stock currently trades at 10% discount to leading peers, which we feel is
unjustified. At the current price, the stock trades at 20.3x FY15E and 18.0x
FY16E earnings. We maintain ‘Accumulate’ with target price of Rs3,023.
8/18/2014 39
Revenue (Rs m) 96,737 116,266 133,473 146,919 158,998
Growth (%) 29.5 20.2 14.8 10.1 8.2
EBITDA (Rs m) 23,741 24,762 32,517 35,261 38,955
PAT (Rs m) 14,262 16,776 22,815 23,217 26,153
EPS (Rs) 84.1 98.8 134.1 136.5 153.8
Growth (%) 28.9 17.5 35.8 1.8 12.6
Net DPS (Rs) 13.7 15.0 15.0 15.0 0.0
EBITDA margin (%) 24.5 21.3 24.4 24.0 24.5
RoE (%) 27.6 25.7 27.8 23.1 21.5
RoCE (%) 18.6 17.3 18.2 16.8 17.5
EV / sales (x) 5.1 4.3 3.8 3.4 3.1
EV / EBITDA (x) 20.9 20.3 15.8 14.1 12.6
PER (x) 33.0 28.1 20.7 20.3 18.0
P / BV (x) 8.2 6.4 5.2 4.3 3.5
Stock Performance
(%) 1M 6M 12M
Absolute 4.6 4.6 28.1

Lilladher
Dr. Reddy’s Laboratories
8/18/2014 40
Net Revenue 96,737 116,266 133,473 146,919 158,998
Direct Expenses 26,504 35,274 31,432 38,199 41,022
% of Net Sales 27.4 30.3 23.5 26.0 25.8
Employee Cost 16,928 20,413 24,936 24,976 25,440
% of Net Sales 17.5 17.6 18.7 17.0 16.0
SG&A Expenses 29,565 35,817 44,587 48,483 53,582
% of Net Sales 30.6 30.8 33.4 33.0 33.7
% of Net Sales 0.0 0.0 0.0 0.0 0.0
EBITDA 23,741 24,762 32,517 35,261 38,955
Margin (%) 24.5 21.3 24.4 24.0 24.5
Depreciation 3,628 3,859 4,804 4,848 5,142
PBIT 18,528 19,213 25,919 27,727 30,947
Interest Expenses 1,067 1,018 24 1,046 973
PBT 18,764 20,675 27,734 29,179 32,677
Total tax 4,205 4,900 5,094 6,128 6,699
PAT 14,262 16,776 22,815 23,217 26,153
Adjusted PAT 14,262 16,776 22,815 23,217 26,153
Share Capital 848 849 851 851 851
Total Debt 33,316 37,688 49,362 32,309 29,261
Other Liabilities(net) - 20 - 20 20
Deferred Tax Liability (833) (1,669) - (3,512) (4,072)
Gross Block 46,775 51,835 59,121 64,635 70,435
Less: Depreciation - - - - -
Net Block 46,775 51,835 59,121 64,635 70,435
Capital Work in Progress 417 487 6,549 555 565
Total Assets 89,927 109,124 140,162 138,960 158,524

Lilladher
Prabhudas Bank of Baroda
CMP: Rs886 TP: Rs1,000 Rating: BUY MCap: Rs381.7bn
BOB’s Q1FY15 performance was better on NII beat, lower provisions and
investment write back (Rs3.3bn). Asset quality remained stable on better
recoveries & upgrades despite slightly higher slippages. Asset quality has
remained stable and we believe new management change would not
impact asset quality materially as underwriting remains superior
compared to peers. Valuations at 0.9x Mar-16 book are undemanding
and hence we maintain ‘BUY’ with a PT of Rs1000/share.
Core PPOP performance has been mixed but B/S growth comforting: In
Q1FY15, core PPOP performance was better with slight beat on NII as
overall margins improved by 6bps QoQ as some low-yielding bulky loans
from Q4FY14 moved out, which also makes loan growth at ~18% YoY a
little comforting. Lower other income resulted in flattish PPOP growth as
income from recovery from written-off accounts was subdued. Opex
growth was at ~12% YoY on higher employee additions. Provisions remain
adequate for BOB on mortality and wage settlement which is unlikely to
have large spikes in opex for FY15.
Stable Asset Quality on better Upgrades; enhanced provisions: Stressed
asset accretion of ~3.1% was higher than expected of ~2.2% on slightly
high slippages (2.1% slippages & 1% restructuring). Slippages of Rs20bn
were largely from mid corporate and only two a/c of Rs1bn+ from large
corporate. Asset quality held up on better upgrades in the quarter (No ARC
sale was there). Coverage ratio also improved by ~120bps in Q1FY15 as
BOB used its write-back of Rs3.3bn MTM provisions from investment
(mainly equities) for specific NPA provisions.
Superior underwriting to keep asset quality stable: BOB’s asset quality
has held up much better than peers indicating better underwriting and is
displayed in superior RORWAs of 1.35% v/s <1% for large peers. With
improving ROE profile and comfortable capital levels valuations are
undemanding at 0.9x FY16 Book. We thus maintain ‘BUY’ with PT of
Rs1000/share.
8/18/2014 41
Growth (%) 17.2 9.7 5.7 21.2 15.2
PAT 50,070 44,807 45,411 52,209 64,908
EPS (Rs) 121.4 106.0 105.4 121.2 150.7
Growth (%) 12.1 -12.7 -0.6 15.0 24.3
Net DPS (Rs) 16.5 21.5 21.5 24.7 30.7
NIM (%) 83.2 79.5 77.6 76.9 77.9
RoAE (%) 21.7 15.7 13.8 14.1 15.7
RoAA (%) 1.2 0.9 0.8 0.7 0.8
P / BV (x) 1.4 1.2 1.1 1.0 0.9
P / ABV (x) 1.4 1.3 1.2 1.0 0.9
PE (x) 7.3 8.4 8.4 7.3 5.9
Stock Performance
(%) 1M 6M 12M
Absolute 5.9 64.8 84.9

Lilladher
Bank of Baroda
8/18/2014 42
Others - - - - -
NII 103,170 113,153 119,653 145,063 167,075
Growth (%) 17.2 9.7 5.7 21.2 15.2
Treasury Income 6,075 6,165 7,440 6,000 7,000
NTNII 28,148 30,141 37,188 40,712 46,818
Total Income 330,961 388,273 434,025 503,039 589,839
Growth (%) 34.0 17.3 11.8 15.9 17.3
Growth (%) 22.9 4.9 3.2 20.1 16.7
NPA Provisions 23,134 38,432 34,702 41,059 42,509
Investment Provisions 2,363 2,255 1,986 - -
PBT 60,258 48,312 54,973 70,553 87,713
Tax Provisions 10,188 3,505 9,562 18,344 22,805
PAT 50,070 44,807 45,411 52,209 64,908
Growth (%) 18.0 (10.5) 1.3 15.0 24.3
Par Value 10 10 10 10 11
No. of equity shares 412 423 431 431 392
Equity 4,124 4,225 4,307 4,307 4,307
Networth 263,032 308,652 349,331 389,084 438,506
Adj. Networth 247,595 266,732 288,983 324,765 365,472
Deposits 3,848,711 4,738,833 5,688,944 6,729,029 8,082,663
Growth (%) 26.0 23.1 20.0 18.3 20.1
Net Advances 2,873,773 3,281,858 3,970,058 4,684,669 5,574,756
Growth (%) 25.7 14.2 21.0 18.0 19.0
Investments 832,094 1,213,937 1,161,127 1,345,482 1,578,812
Total Assets 4,461,478 5,460,312 6,584,519 7,695,867 9,148,328

Lilladher
Prabhudas Motherson Sumi Systems
CMP: Rs351 TP: Rs372 Rating: Accumulate MCap: Rs309.6bn
New orders increase visibility: MSSL has won orders to the tune of €1.8bn
at SMP and €842m at SMR. This lends visibility as this is in addition to the
~€4.3bn orders already with them. New orders would start contributing in
the next 1.5 years time frame. New capacities are being added for wiring
harnesses in Mexico, Thailand and India. In rear-view mirrors, MSSL is
expanding capacities in China to support the requirement of our existing
customers. Two plants have started operations in India and MSSL is also
adding capacities in Mexico. For Polymers, MSSL is coming up with plants
in India and China. In addition, a Greenfield plant was started in Puebla,
Mexico which replaced two existing smaller plants.
SMR’s revenues to grow at 16% CAGR in Euro terms: We estimate a
16.0% CAGR in revenues in Euro terms at SMR, given the new orders over
FY14-FY16E period. In Rupee terms, growth could be 22.0%. At the same
time, on account of increased utilization, we expect margins to improve to
11.0% by FY16E from 9.0% currently.
SMP’s revenues to grow at 17.0% CAGR in Euro terms: We estimate a
17% CAGR in revenues in Euro terms at SMP, given the new orders over
FY14-FY16E period. At the same time, on account of increased utilization
and reduction of losses in Spain, the margins are likely to increase to 9.0%
in FY16E from 5.5% currently. A 1% change in Peguform margins impacts
earnings by ~14%.
Valuations attractive; Maintain ‘Accumulate’: We expect better times
ahead for MSS, with the execution of new order book at SMR and
improvement in margins at Peguform over the next one year. At the CMP,
the stock is trading 26.7x FY15E and 18.7x FY16E earnings, which in our
view, is attractive, given the ~33.5% CAGR in earnings for FY14-FY16E. We
reiterate our ‘Accumulate’ call on the stock with a SOTP-based target price
of Rs389. We value standalone business at Rs294 based on 25x FY16E EPS
and subsidiaries/acquisitions valued at Rs95 based on 6x FY16E
EV/EBITDA.
8/18/2014 43
Revenue (Rs m) 149,076 256,170 307,210 363,022 428,195
Growth (%) 78.1 71.8 19.9 18.2 18.0
EBITDA (Rs m) 10,745 19,441 28,781 34,997 44,425
PAT (Rs m) 3,915 6,074 9,542 11,602 16,559
EPS (Rs) 6.7 6.9 10.8 13.2 18.8
Growth (%) 16.1 3.4 57.1 21.6 42.7
Net DPS (Rs) 0.9 1.3 2.5 2.8 3.0
EBITDA margin (%) 7.2 7.6 9.4 9.6 10.4
RoE (%) 22.5 29.0 36.2 34.3 37.0
RoCE (%) 8.7 10.7 18.3 19.3 23.9
EV / sales (x) 1.7 1.4 1.1 0.9 0.8
EV / EBITDA (x) 23.1 18.1 12.1 9.7 7.3
PER (x) 52.7 51.0 32.4 26.7 18.7
P / BV (x) 11.0 13.4 10.5 8.1 6.0
Stock Performance
(%) 1M 6M 12M
Absolute (6.7) 61.6 129.4

Lilladher
Motherson Sumi Systems
8/18/2014 44
Net Revenue 149,076 256,170 307,210 363,022 428,195
Direct Expenses 95,434 164,838 193,615 229,612 270,833
% of Net Sales 64.0 64.3 63.0 63.3 63.3
Employee Cost 23,170 42,827 51,065 61,023 69,261
% of Net Sales 15.5 16.7 16.6 16.8 16.2
% of Net Sales 0.0 0.0 0.0 0.0 0.0
Other Expenses 19,727 29,064 33,749 37,391 43,676
% of Net Sales 13.2 11.3 11.0 10.3 10.2
EBITDA 10,745 19,441 28,781 34,997 44,425
Margin (%) 7.2 7.6 9.4 9.6 10.4
Depreciation 3,796 7,145 8,172 9,614 10,279
PBIT 6,949 12,296 20,609 25,383 34,147
Interest Expenses 1,649 2,495 2,944 2,600 2,450
PBT 4,117 8,343 15,961 22,517 31,937
Total tax 2,153 3,835 4,995 7,881 11,178
PAT 2,597 4,446 7,650 11,136 16,559
Extraordinary Gain/(Loss) (1,318) (1,628) (1,892) (466) -
Adjusted PAT 3,915 6,074 9,542 11,602 16,559
Share Capital 587 881 881 881 881
Total Debt 46,023 49,040 48,397 40,847 39,669
Deferred Tax Liability 602 602 - - -
Gross Block 94,323 107,425 126,336 137,336 146,836
Net Block 46,922 52,770 59,189 61,575 59,797
Total Assets 70,369 76,850 85,885 89,859 98,396

Lilladher
Prabhudas ACC
CMP: Rs1,509 TP: Rs1,653 Rating: BUY MCap: Rs283.6bn
ACC would be the biggest beneficiary of an increase in All-India cement
demand due to its Pan-India presence and have one of the cheapest
valuations compared to its peers. The recent modernization of Wadi and
Chanda and upcoming commissioning of modernized Jamul plant should
see improved efficiencies kicking in. Stock trades at EV/T of US$120
CY15E capacity, significantly lower compared to US$156 and US$160 of
UTCEM and ACEM, respectively. We maintain our BUY rating with TP of
Rs1,653 at EV/T of US$140 CY15E capacity of 34m tonnes.
Key beneficiary of recovery in South and Maharashtra: From seeing a
contraction in demand, we expect to see a strong revival in Andhra
Pradesh’s (AP’s) demand, led by an end to the political uncertainty and
bifurcation of the state. Hence, stabilization of AP, strong IT sector and
improved competitiveness of southern industries with the connectivity to
national electricity grid, would drive demand in the South. Stronger
demand in South, in turn, would keep prices in Maharashtra firm. We see
ACC as a big beneficiary of all these as they sell 40% of volumes in these
two regions.
Cost likely to reduce by Rs150/t with newer facilities: ACC replaced
outdated capacity of ~5m tonnes at Wadi (Karnataka) and Chanda
(Maharashtra) and also added 6m tonnes of new capacity at these
locations. However, due to weak market conditions in these markets, ACC
was unable to realise the benefit of lower operating costs from the new
facilities. We expect costs to be lower by Rs90/t on an aggregate level in
CY15, led by higher utilization at these units. We expect savings of
additional Rs60/t in CY16 with the upcoming modernized plant of 3.7mtpa
in Jamul. We see only an upward risk to our estimates due to cost savings,
primarily on account of increased usage of pet coke and commissioning of
captive coal mines.
8/18/2014 45
Y/e Dec CY11 CY12 CY13 CY14E CY15E
Revenue (Rs m) 100,021 111,306 109,084 116,736 136,175
Growth (%) 21.1 11.3 (2.0) 7.0 16.7
EBITDA (Rs m) 16,861 19,690 14,027 14,470 22,679
PAT (Rs m) 10,209 13,305 9,002 10,514 15,396
EPS (Rs) 54.3 70.8 47.9 55.9 81.9
Growth (%) 4.3 30.3 (32.3) 16.8 46.4
Net DPS (Rs) 28.0 30.0 30.0 24.9 40.9
EBITDA margin (%) 16.9 17.7 12.9 12.4 16.7
RoE (%) 15.4 18.5 11.9 13.1 18.0
RoCE (%) 15.2 18.7 12.2 13.5 18.5
EV / sales (x) 2.6 2.3 2.4 2.3 1.9
EV / EBITDA (x) 15.4 12.9 18.4 18.3 11.3
PER (x) 27.8 21.3 31.5 27.0 18.4
P / BV (x) 4.1 3.8 3.6 3.5 3.2
Stock Performance
(%) 1M 6M 12M
Absolute 3.2 47.9 30.2
Relative to Sensex (1.4) 18.3 (6.1)

Lilladher
ACC
8/18/2014 46
Net Revenue 100,021 111,306 109,084 116,736 136,175
Direct Expenses 37,708 41,146 42,453 44,798 49,668
% of Net Sales 37.7 37.0 38.9 38.4 36.5
Employee Cost 5,743 6,179 6,630 7,212 7,861
% of Net Sales 5.7 5.6 6.1 6.2 5.8
SG&A Expenses 19,400 22,063 22,992 25,571 29,151
% of Net Sales 19.4 19.8 21.1 21.9 21.4
Other Expenses 20,308 22,228 22,983 24,685 26,816
% of Net Sales 20.3 20.0 21.1 21.1 19.7
EBITDA 16,861 19,690 14,027 14,470 22,679
Margin (%) 16.9 17.7 12.9 12.4 16.7
Depreciation 5,100 5,689 5,838 5,939 5,988
PBIT 11,761 14,001 8,189 8,531 16,692
Interest Expenses 969 1,147 517 488 545
PBT 15,053 14,410 12,136 12,840 21,166
Total tax 2,155 3,911 1,319 3,595 5,927
PAT 13,008 10,593 10,947 9,386 15,396
Extraordinary Gain/(Loss) 520 (2,460) (223) - -
Adjusted PAT 10,209 13,305 9,002 10,514 15,396
Share Capital 1,880 1,880 1,880 1,880 1,880
Total Debt 5,107 1,631 350 - -
Other Liabilities(net) 25 26 27 29 31
Gross Block 100,322 103,994 105,867 108,976 142,867
Net Block 64,065 59,314 55,700 52,870 80,773
Capital Work in Progress 4,408 5,083 12,236 25,977 -
Total Assets 80,161 80,606 83,640 87,743 95,262

Lilladher
Prabhudas Zee Entertainment Enterprises
Paradigm shift in business model from cyclicality to annuity: Broadcasting
industry is likely to witness a paradigm shift in its business model. With the
implementation of digitization, subscription revenues will increase, while the
reliance of broadcasters on advertising will come down. Subscription revenues
for the industry are likely to increase at a CAGR of 26% from Rs69bn in CY13
to Rs220bn in CY18E. We expect Zee’s domestic subscription revenues to
increase at a CAGR of 17.7% over FY14-16E.
Digitization - Soon to become a reality: Though implementation of
digitization has encountered several hurdles leading to a considerable delay,
we believe, digitization is bound to happen sooner than later. With TRAI
upping the ante lately, gross billing has finally kicked off in Phase-I. In Phase-II,
~80-90% of seeding of set top boxes has been completed and Customer
Acquisition Form (CAF) is being collected. We assume gross billing to pick up
in H2FY15E. Delay in implementation of digitization is one of the reasons why
stock has underperformed over the last 12 months. However, strong
subscription trajectory and cash flows should result in a strong performance,
going forward.
Earnings likely to compound at a CAGR of 16%; RoE/RoCEs to inch up by
50bps/120bps by FY16E: With strong advertising growth and implementation
of digitization, we expect Zee’s top-line to increase at a CAGR of 14% over
FY14-16E. EBITDA margins are likely to increase by 180bps to 29.0% by FY16E.
PAT is likely to increase at a CAGR of 16% over FY14-16E, with EPS likely to be
Rs12.5 in FY16E. Consequently, Zee’s RoEs/ROCEs are likely to increase to
21.1%/27.6% by FY16E.
Strong FCFF generation to further strengthen b/s: Going forward, improved
profitability, coupled with limited capex, is likely to translate into strong FCFF
generation for Zee. We expect Zee to generate FCFF of Rs10.5bn/9.5bn in
FY15E/16E, translating into cumulative FCFF of Rs20bn. Debt-free status,
coupled with robust FCFF generation, would further strengthen B/S and
enable it to invest in niche content during the post-digitization era. With
strong earnings growth, debt-free b/s, limited capex, robust FCFF generation,
improvement in return ratios, we believe Zee would continue to trade at
premium valuations.
8/18/2014 47
Revenue (Rs m) 30,405 36,996 44,217 49,560 57,505
Growth (%) 1.1 21.7 19.5 12.1 16.0
EBITDA (Rs m) 7,395 9,543 12,043 13,421 16,685
PAT (Rs m) 5,891 7,196 8,921 9,727 12,018
EPS (Rs) 6.1 7.5 9.3 10.1 12.5
Growth (%) (2.7) 22.8 23.1 9.1 23.6
Net DPS (Rs) 1.5 2.0 2.0 2.4 2.7
EBITDA margin (%) 24.3 25.8 27.2 27.1 29.0
RoE (%) 18.0 19.6 20.6 19.3 21.1
RoCE (%) 21.6 24.9 26.4 24.8 27.6
EV / sales (x) 8.7 7.1 6.0 5.2 4.4
EV / EBITDA (x) 35.9 27.5 21.9 19.2 15.2
PER (x) 45.6 37.2 30.2 27.7 22.4
P / BV (x) 7.8 6.8 5.7 5.1 4.4
Stock Performance
(%) 1M 6M 12M
Absolute (4.9) 5.1 12.7

Lilladher
Zee Entertainment Enterprises
8/18/2014 48
Net Revenue 30,405 36,996 44,217 49,560 57,505
Direct Expenses 14,311 17,401 20,688 23,303 26,501
% of Net Sales 47.1 47.0 46.8 47.0 46.1
Employee Cost 2,925 3,491 3,905 4,361 5,060
% of Net Sales 9.6 9.4 8.8 8.8 8.8
% of Net Sales 0.0 0.0 0.0 0.0 0.0
Other Expenses 5,774 6,561 7,581 8,475 9,258
% of Net Sales 19.0 17.7 17.1 17.1 16.1
EBITDA 7,395 9,543 12,043 13,421 16,685
Margin (%) 24.3 25.8 27.2 27.1 29.0
Depreciation 323 399 501 760 731
PBIT 7,072 9,144 11,541 12,661 15,955
Interest Expenses 50 86 158 50 50
PBT 8,406 10,519 13,190 14,411 17,805
Total tax 2,500 3,337 4,291 4,683 5,786
PAT 5,891 7,196 8,921 9,727 12,018
Adjusted PAT 5,891 7,196 8,921 9,727 12,018
Share Capital 959 954 21,130 21,130 21,130
Total Debt 12 17 17 17 17
Other Liabilities(net) (32) 33 719 658 658
Deferred Tax Liability - - - - -
Gross Block 11,205 12,306 14,564 15,258 16,005
Net Block 9,199 9,906 11,663 11,596 11,613
Capital Work in Progress 201 69 69 69 69
Other Assets 337 288 298 298 298
Total Assets 34,335 39,166 48,115 53,875 61,650

Lilladher
Prabhudas
MID-CAP
8/18/2014 49

Lilladher
Prabhudas Aurobindo Pharma
Diversified portfolio strategy to be a winner : The strategy to leverage on
its manufacturing and strong product filings capability is likely to result in
strong earnings growth. Unlocking Injectable Portfolio with launches of
more products from Unit IV would accelerate growth and margin
expansion in US. We believe that main drivers for Aurobindo are a)
Business mix improvement with more formulation sales, b) Scaling up of
Aurolife’s control substances sales c) Scale‐up of injectable business and d)
Higher operating cash flow to reduce debt.
US remains mainstay for growth: Formulation growth will be driven by
injectables and orals. It has filed 22 products from Unit IV (NPNC
injectable/ophthalmic) and expects approval of 3-5 products to start with.
It is targeting US$25-30m sales from this unit in FY14E. The company plans
to file 100 products from this facility, addressing brand size of US$40bn
and hopes to achieve sales of US$200-300m in 3-5 years. One-off
opportunities in Cymbalta and Avelox (March 2014) would provide boost
for growth, margin and operating cash flow in FY14E-16E.
Maintainable margins revised: Management revised maintainable
operating margins to 22-24% in FY14E-16E. Core EU formulation sales of
US$100m are from six key markets – UK, Netherlands, Italy, Spain,
Germany and Portugal. It expects to turn profitable in EU in FY15E, while
FY14E is earmarked for operation break-even. The company’s EU
acquisition would include additional sales of US$430m in FY15E, while we
expect improvement in EBITDA margin in FY16E.
Strong candidate for valuation re-rating: The stock currently trades at PE
12.2x and 10.9x of FY15E and FY16E, which is at a significant (20%)
discount to mid-cap peers (average PE 14-16x for mid‐caps). Better cash
flow from launches of high margin and limited competition drugs to
further reduce capital gearing ratio and narrow valuation differential with
peers in the industry. Our SOTP valuation of Aurobindo’s set target price at
Rs874, implies 21% upside at current valuation. We maintain ‘BUY’.
8/18/2014 50
Revenue (Rs m) 46,274 58,553 80,385 117,377 134,274
Growth (%) 5.6 26.5 37.3 46.0 14.4
EBITDA (Rs m) 6,138 8,610 20,715 26,762 30,883
PAT (Rs m) 4,210 4,292 13,759 18,493 20,793
EPS (Rs) 14.5 14.7 47.2 63.4 71.3
Growth (%) (20.0) 1.9 220.3 34.4 12.4
Net DPS (Rs) 1.0 1.5 1.3 1.3 1.3
EBITDA margin (%) 13.3 14.7 25.8 22.8 23.0
RoE (%) 17.6 17.4 43.3 41.0 33.3
RoCE (%) 9.5 8.9 21.4 24.3 23.6
EV / sales (x) 5.5 4.4 3.2 2.2 1.9
EV / EBITDA (x) 41.8 30.0 12.6 9.5 8.1
PER (x) 53.7 52.7 16.4 12.2 10.9
P / BV (x) 9.7 8.7 6.0 4.3 3.1
Stock Performance
(%) 1M 6M 12M
Absolute 5.4 54.7 317.2

Lilladher
Aurobindo Pharma
8/18/2014 51
Net Revenue 46,274 58,553 80,385 117,377 134,274
Direct Expenses 30,311 35,980 42,290 61,858 71,165
% of Net Sales 65.5 61.4 52.6 52.7 53.0
Employee Cost 5,357 6,633 8,319 14,085 15,442
% of Net Sales 11.6 11.3 10.3 12.0 11.5
SG&A Expenses 4,468 7,331 9,060 14,672 16,784
% of Net Sales 9.7 12.5 11.3 12.5 12.5
% of Net Sales 0.0 0.0 0.0 0.0 0.0
EBITDA 6,138 8,610 20,715 26,762 30,883
Margin (%) 13.3 14.7 25.8 22.8 23.0
Depreciation 2,005 2,487 3,125 3,777 4,510
PBIT 4,132 6,122 17,590 22,985 26,373
Interest Expenses 1,028 1,313 1,079 779 732
PBT 3,315 5,094 17,356 22,498 25,935
Total tax (888) 827 3,635 4,050 5,187
Effective Tax rate (%) (26.8) 16.2 20.9 18.0 20.0
PAT (1,235) 2,939 11,729 18,493 20,793
Extraordinary Gain/(Loss) (5,445) (1,353) (2,031) - -
Adjusted PAT 4,210 4,292 13,759 18,493 20,793
Share Capital 291 291 292 292 292
Total Debt 31,002 34,445 36,431 28,953 26,281
Other Liabilities(net) 102 110 257 27 (18)
Deferred Tax Liability (16) 680 2,054 317 (202)
Gross Block 30,863 37,635 43,671 47,671 57,171
Net Block 21,947 26,389 29,550 29,719 34,709
Capital Work in Progress 6,454 2,185 764 2,185 2,185
Other Assets 1,082 2,615 8,075 3,431 4,094
Total Assets 54,485 61,292 76,243 81,958 98,290

India Strategy: All eyes on growth - Prabhudas Lilladher

India Strategy: All eyes on growth - Prabhudas Lilladher

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