Market Outlook- 2019

AUGUST 2, 2017
Market Strategy September 2019
MARKET OUTLOOK FOR SEPTEMBER 2019
Global markets witnessed sharp sell off during the month of August 2019 on the back of
deterioration in trade talks between the US and China and continued signs of economic
slowdown as reflected by the inversion in US bond yields. During the month, the US President
announced fresh tariffs on Chinese products. Following this, the adverse effect of retaliatory
tariffs has started to spill over to the currency markets as the Yuan depreciated past the 7 per
USD mark for the first time since the global financial crisis in 2008.
The Indian benchmark indices have outperformed the developed market indices in August but
still are seen closing modestly in the red. Indian markets were weak for most part of the month
on the back of continued slowdown in consumption. Later in the month, the government did
announce a slew of measures (removal of higher surcharge on capital gains tax for FPIs,
measures for Auto and Banks, etc.), which improved sentiment marginally and led to some
pullback. This was followed by transfer of RBI surplus funds to the government which will
provide it the much needed cushion against the slowdown in tax revenue. Noting weak earnings
growth and slowdown in economic growth, the FIIs have been net sellers during the month for
the second consecutive month. Buying by MFs however supported the market from further
decline.
Overall the results season was disappointing. In Q1FY20 earnings season, the net profits of the
Nifty-50 Index increased 1.8% yoy while EBITDA declined 3.4% yoy. Following the weak earnings
performance, we have moderated our Nifty earnings growth for FY20E to 15% as against 24%
earlier. However, we do not rule out further downgrades to earnings due to slow down in
domestic consumption and investment sectors (i.e. automobiles, capital goods, construction
materials & consumer durables) and due to global economic slowdown.
The demand situation seems to have deteriorated in Q2-FY20 as compared to Q1-FY20. The
recent floods in many states will hamper demand during the festival season. This postpones
the hope of any broad recovery on the ground to either end of Q3 or in Q4-FY20. Recapitalization
of PSU banks to the tune of Rs.700 bn will now be up fronted as compared to expectation of
end of the year. This could create room for additional lending to the tune of ~Rs.4.5 to 5 trillion.
However, in the absence of any material revival in private sector capex, any gradual recovery will
be led by consumption spending.
Before the start of the results season, Nifty-50 was trading at 18.5x Fw PE when it was closer to
11,900 levels. Post Q1-FY20 result season the Nifty-50 now trades at 17x Fw PE, which is slightly
above 10 Year average. Considering another 5% cut in FY20 earnings which is likely after Q2
earnings season the Fw PE would go up to 18x. Bond yields in the range of 6-6.5% range should
allow equity valuations to sustain at 17-18x Fw PE. Hence, we do not see any major threat of de-
rating in the Nifty-50/Indian equites from current levels. Going forward any disappointment in
market could be a function of earnings downgrades. For the Nifty-50 to rise materially from here
two things need to play out: 1) FPI flows need to resume which will hinge on global
developments and forward view of currency & 2) pick up of activity on the ground which would
ultimately reflect in monthly indicators and lead to earnings recovery.
We expect Nifty-50 to range between 10,600 & 11,600 in the near term till we get further clarity.
The consistent correction in mid-caps has reduced its Fw PE to 13.6x Vs 17x of Nifty-50 (based
on Bloomberg estimates). The Mid Cap Fw PE now trades at a 20% discount to the Nifty-50 Fw
PE. The discount is now closer to the lower end of its historic band (i.e. 10 Yr range). From a
valuations perspective we feel Mid & Small Caps are attractively priced as compared to large
caps.
Sanjeev Zarbade
Sanjeev.zarbade@kotak.com
+91 22 6218 6424

Kotak Securities – Private Client Research Please see the Disclosure/Disclaimer on the last page For Private Circulation 2
Portfolio strategy:
The sharp escalation in China-US trade tensions will likely hurt global investment sentiment and
global economic growth. This could imply lower growth for many large Indian companies having
exports to global markets. On a broader basis, our preference at this juncture is towards mid &
small caps as compared to large caps. The ongoing correction and beaten down prices of mid
& small caps offers reasonable time window to cherry pick and accumulate good quality stocks
from a 2 year perspective. Given the poor sentiment and high perceived risk towards corporate
governance issues, it is best to avoid poorly governed companies with question mark on
financials.
We mapped the quarterly revenue growth of top 200 companies, sector wise since Sep’15.
Sectors that have shown serious slowdown in the last two quarters (as compared the average
growth seen in FY17-19) are: Automobiles, Auto Ancillaries, Metals, Hotels, FMCG, Capital
Goods and Media. Sectors that have maintained or sustained growth of more than 10% in the
last two quarters are: Power, Healthcare, Retail, Paints, Consumer Discretionary, Pharma (both
generics & MNCs), Information Technology and Banks.
Key overweight sectors: Corporate Banks, Insurance, Healthcare services, Oil & Gas,
Construction, Engineering & logistics.
Key underweight sectors: Automobiles, Auto Ancillaries, Metals, FMCG, Consumer Durables &
Building Materials.
1-year performance of benchmark global indices (%)
Source: Bloomberg

-4.2%
-9.4%
-1.9%
-1.4%
-4.0%
-7.1%
-5.6%
-8.2%
-7.0%
-10.1%
-12.0% -10.0% -8.0% -6.0% -4.0% -2.0% 0.0%
Nasdaq Index
NIKKEI Index
S&P 500 Index
Dow Jones Index
MSCI World Index
DAX Index
FTSE Index
MSCI Asia Pacific
Hang Seng Index
MSCI India

Market performance – sector wise (August 2019)
Source: Bloomberg
TOP INVESTMENT IDEAS
Recommended Stocks
Company CMP* Target Price Potential Upside 52 Week H/L Market Cap
(Rs) (Rs) (%) (Rs) (Rs mn)
Century Plywood 135 170 26.1 228/112 29,949
ICICI Bank 410 515 25.7 444/295 26,38,481
Orient Cement 82 112 36.9 125/62 16,758
Petronet LNG 267 300 12.4 268/200 4,00,275
PNC Infra 179 251 40.5 219/122 45,844
Vedanta 139 200 43.7 247/125 5,17,248
Source: Kotak Institutional Equities; Kotak Securities – Private Client Research; *CMP as on 30 August 2019.

-0.4% -0.9% -1.3% -1.2%
0.7%
-3.5%
-5.3%
-8.9%
-0.6%
1.9% 2.6%
1.3%
-12.0%
-15.0%
-12.0%
-9.0%
-6.0%
-3.0%
0.0%
3.0%
6.0%

INTERNATIONAL MARKETS
Escalation of trade war not good for global economy
Marking a reversal from an agreement between US President Trump and Chinese President Xi
Jinping at their meeting in late June, both leaders have talked about fresh tariffs on goods from
each other’s country. This has escalated the trade dispute which has weighed on global markets
in a negative way.
During the month, the US President Donald Trump said the U.S. would impose an additional 10%
tariff on Chinese imports to the U.S (later put on hold). Recently, China announced plans to
impose additional duties on $75 billion worth of American goods. In response, U.S President
Donald Trump tweeted later that day that his administration would also raise tariffs on $550
billion of Chinese imports. Further, as per US media reports, President Trump also asked US
companies to reconsider their operations in China and relocated back into the US.
Effect of trade wars now spilling over to currencies
With the fresh exchanges of retaliatory tariffs, the effect has started to spill over to the currency
markets as the Yuan depreciated past the 7 per USD mark for the first time since the global
financial crisis in 2008.
In case the trade war gets further exacerbated, it is possible that with an aim to neutralise the
impact of tariffs, Beijing might be tempted to devalue its currency to offset the effect of tariffs,
in which case, there is a possibility of emerging market currencies coming under pressure, which
could panic foreign investors to sell emerging market equities in favour of a safe asset like the
USD.
U.S. – China trade war currency impact
Source: CNBC
IMF lowers global economic growth estimates
A major downside risk to the global economic outlook remains an escalation of trade and
technology tensions that can significantly disrupt global supply chains. The combined effect of
tariffs imposed last year and potential tariffs envisaged in May between the United States and
China could reduce the level of global GDP in 2020 by 0.5 percent, the IMF estimates. Other

significant risks include a surprise slowdown in China, the lack of a recovery in the euro area, a
no-deal Brexit, and escalation of geopolitical tensions.
Latest World Economic Growth Projections
(%) 2018 2019 2020
US 2.9 2.6 1.9
Euro Area 1.9 1.3 1.6
Germany 1.4 0.7 0.7
France 1.7 1.3 1.4
Italy 0.9 0.1 0.8
Spain 2.6 2.3 1.9
Japan 0.8 0.9 0.4
UK 1.4 1.3 1.4
Advanced Economies 2.2 1.9 1.7
China 6.6 6.2 6
India 6.8 7 7.2
Russia 2.3 1.2 1.9
Brazil 1.1 0.8 2.4
South Africa 0.8 0.7 1.1
Emerging Economies 4.5 4.1 4.7
Source: IMF
Governments are lining up stimulus packages to counter the economic slowdown
With a view to arrest the economic slowdown in their economies, the German, Chinese and even
the US government have launched or contemplating economic stimulus programmes.
China – Launched interest rate reform
Industrial output growth in China slowed markedly to 4.8% in July, which was lower than the
most bearish forecasts and the weakest pace since February 2002. Following this, the People’s
Bank of China (PBOC) designated the LPR (Loan Prime Rate) as the new lending benchmark for
new bank loans to households and businesses, replacing the central bank’s benchmark one-
year lending rate. The new mechanism would force banks to price their loans closer to market
rates (source: Bloomberg).
German stimulus likely on the way
In its latest economic release, the German economy contracted by 0.1% in the June quarter, and
its central bank said that it could shrink again in the third quarter - indicating a recession. The
main reason for this has been attributed to the continuing downturn in industry. Germany's
Finance Minister Olaf Scholz has said that Germany will utilise its fiscal strength to counter any
future economic crisis "with full force" and added that Berlin could potentially free up 50 billion
euros ($82 billion) of extra spending.
Trump may go for tax cuts if need be
Although President Trump has downplayed fears of an economic recession due to his trade
policies with China, he has said that he’s open to a range of possible actions, including a payroll
tax cut or bypassing Congress to reduce taxes by indexing capital gains. Additionally, he
repeated his demand that the Federal Reserve slash interest rates to bolster the economy.
Crude Prices also reacting to developments on trade war front
Crude Oil prices remained weak on intensifying U.S.-China trade war which impacted confidence
in the global economy. Forecasters such as the International Energy Agency have been lowering
forecasts for world oil demand. The prolonged trade spat has sparked worries about growth in
oil demand. Still, the price of Brent is up by about 13% this year, supported by supply cuts led by
the Organization of the Petroleum Exporting Countries, and export cuts affecting Iran and
Venezuela which are under U.S. sanctions. Iran said if its oil exports are cut to zero, international
waterways would not have the same security as before, cautioning Washington against raising
pressure on Tehran. Weak crude prices provide a cushion to the Indian economy which is itself
struggling from falling consumer demand and weak investment cycle.

Brent crude (US$/barrel)
Source: Bloomberg
Other developments
 Federal Reserve - The Fed chairman in his speech at the Jackson Hole conference indicated
that it had little ability to counteract the trade policies of the government, which are stoking
uncertainty and posing risks to the economic outlook. He added that ‘while monetary policy
is a powerful tool that works to support consumer spending, business investment and public
confidence, it cannot provide a settled rule book for international trade’. He however added
that the monetary policy will be aimed at sustaining economic expansion; probably implying
that the Fed is open for another rate cut. However, there was not much clarity regarding the
timing and quantum of such a move. The Fed meets next on September 17 and 18.
 Brexit - After more than three years of Brexit crisis, the United Kingdom is heading towards
a showdown with the EU as British PM Boris Johnson has vowed to leave the bloc on Oct.
31 without a deal unless it agrees to renegotiate the terms of separation. Meanwhile, Trump
has said that he would have a major trade deal with U.K. upon leaving the European Union.
 Currency movements - While the Indian macro data points (Crude, CAD, Fiscal or Inflation)
are in a reasonable shape, it is global trade war and CNY (Chinese Yuan) which is going to
determine the rupee level broadly. In addition to this, with RBI following a loose monetary
policy and easy liquidity to support growth/demand in domestic economy; it is reasonable
to say that INR could continue to weaken. In FY19, INR was making new lows between Aug’18
& Oct’18, along with the Yuan depreciation even though Indian equity market were largely
unaffected. However, post October 2018, equities also started facing the heat of INR
weakness. So last year, weakness in currency was the reason for sell off in equities from Oct
to Dec. This time the Yuan has decisively broken the 7 mark and looks weak from a technical
perspective with possible slide up to 7.5-7.6 levels. Our worry is if rupee because of trade
war, again moves to new lows, it will hurt equity markets further.
INR vs USD
Source: Bloomberg
20
50
80
110
140
62
64
66
68
70
72
74
76

DOMESTIC MARKETS
FY20 Monsoon: Cumulative rainfall has moved into surplus zone
Till August 21, cumulative rainfall was 1.7% above long-term average with the weekly rainfall
9.8% above long-term average (due to heavy rainfall across parts of western and central India).
On a cumulative basis, spatial distribution of monsoon was normal though rainfall has been
somewhat weak in parts of eastern and northern India. Out of the 36 sub-divisions across India,
till date, seven have received deficient rainfall, 20 have received normal rainfall, and nine have
received excess rainfall.
Basin-wise reservoir levels remained in significant surplus of 27% compared to long-term
average levels. Total kharif acreage was 4.2% lower than the same period last year. The recent
floods in many states could impact kharif output but help better sowing for Rabi crops.
State of domestic economic recovery
IIP growth softened
June IIP growth was at 2% as against growth of 4% in May led by sequential slowdown despite
favorable base effect. Slower manufacturing sector growth in June was led by large sectors
such as ‘coke and refined petroleum products, fabricated metal products, motor vehicles,
trailers and semi-trailers, machinery and equipment, etc. Without much scope of immediate
fiscal/monetary stimuli, we do not factor in any quick growth recovery. We have recently revised
down our FY20 GDP growth estimate to 6.3% based on the above factors (earlier at 6.8%).
With inflation softening in July, there is scope for another 25-50 bps rate cut
CPI inflation in July softened marginally to 3.15% as against 3.18% in June, helped by a
favourable base effect. CPI has remained comfortably below the RBI’s target of 4% and is likely
to remain so in the near term given the tepid growth. With inflation broadly in check, the
Monetary Policy Committee (MPC) acknowledged that addressing the weakening growth
impulses assumes the ‘highest priority’. As a result, we continue to believe that the weak
domestic and global growth impulses, benign crude price outlook and easy monetary policy by
“Developed Markets” central banks will provide space to the MPC to cut the repo rate by another
25-50 bps through the rest of FY20.
Government moves in to counter economic slowdown
Government announced fresh measures to improve market sentiments and arrest slowdown
The GoI announced a slew of measures to arrest the slowdown, which will help improve market
sentiment and demand to some extent. However, absence of fiscal sops was a bit disappointing,
but that is understandable as the government has hardly any fiscal legroom in view of weak tax
revenues. However, these are temporary relief measures, in our view. For long term boost to
economy, the government needs to follow up with structural reforms including reducing
government ownership in infrastructure creation and pricing of infrastructure benefits. There is
over-reliance on government entities for investment in infrastructure, which results in lower-
than-optimal investment rates given the government’s fiscal constraints.

Table – Key Measures announced by the government to arrest the economic slowdown
Scope Key Measure Announced Impact
Tax Withdrawal of the enhanced surcharge levied on FPIs. This is expected to be positive for raising
Exemption of start-ups from ‘angel tax’ investor confidence.
Automobiles The government will now allow additional 15% This measure should help provide a fillip
depreciation on vehicles acquired from now until to the commercial Vehicle demand.
March 2020.
The government is considering a scrappage policy for This measure should add to incremental
old vehicles and lifted the ban on government demand for automobiles
departments for purchase of vehicles to replace the
old ones
Banks Decision to frontload (as against a typical infusion This should improve the liquidity in the
cycle in 4Q) its Rs700 bn PSU bank recapitalization system and spur credit growth.
to enhance credit capacity by Rs5 tn.
NBFC It aimed to provide liquidity of Rs300 bn through the This move should help the NBFC sector
NHB and set up a task force to expedite investment to meet the capital requirement in the
into the economy near term.
MSMEs It also announced measures to smoothen out the The move should help reduce the
process for GST refunds to the MSMEs, and expects working capital for MSMEs.
banks to reduce interest rate on housing and auto
loans by passing on benefits of repo rate cuts.
Source: Ministry of Finance, Kotak Private Client Research
Transfer of Rs 1.76 trillion to the government this fiscal to help meet fiscal targets
The Reserve Bank of India (RBI) will transfer Rs 1.76 trn to the government this fiscal. The
transfer includes Rs 1.23 trn of surplus for 2018-19 and Rs 526 bn of excess provisions
identified as per the revised Economic Capital Framework (ECF). The higher surplus is due to
the long-term forex swaps and the open market operations (OMO) conducted by the central
bank over the last fiscal. The additional amount of Rs 860 bn that the government will receive
this year above its budgeted Rs 900 bn as transfers from RBI could be either used to provide
fiscal stimulus to a sagging economy, reduce off-balance sheet borrowings or meet the
expected shortfall in revenue collections.
Surplus transfer to government (Rs bn)
Source: RBI

Earnings Outlook
We have downgraded Nifty earnings growth for FY20E
In the recently concluded earnings season, net profits of the Nifty-50 Index increased 1.8% yoy,
while EBITDA declined 3.4% aided by positive impact of Ind-AS 116 implementation from
1QFY20. Post the weak earnings performance in Q1FY20, we expect net profits of the Nifty-50
Index to grow 15% in FY20E, a sharp downward revision versus 24% at the beginning of the
results season. Additionally, we do not rule out further downgrades to earnings of (1) domestic
consumption and investment sectors (automobiles, capital goods, construction materials,
consumer durables) due to continued subdued demand conditions and (2) global commodity
and IT sectors due to global economic slowdown.
We expect 15% and 19% growth in net profits of Nifty-50 Index for FY20 and FY21 with financials
sector accounting for a large portion of incremental profits in both FY20 and FY21. The sharp
recovery in net profits of banks is due to expectations of decline in loan loss provisions post
peaking of NPLs in FY18-19 and creation of sufficient provisions in FY17-19.
Source: Kotak Institutional Equities
FIIs have remained net sellers for second consecutive month
Super-rich tax on FPIs and HNIs, muted results from corporates in Q1FY20, trade war,
geopolitical concerns and slowdown fears have affected investment sentiment. FIIs have
continued to be net sellers for the second consecutive month. As per Bloomberg data, foreign
portfolio investors (FPIs) pulled out a net sum of Rs 157 bn from equities during August 2019.
On the other hand, MF inflows have been steady at Rs 168 bn for the same period. Going ahead,
the flows into Indian equities would be largely driven by the growth trajectory of the Indian
economy along with policies and reform measures undertaken by the government.
FII vs MF Flows (Rs bn)
Source: Bloomberg
-10
-5
0
5
10
15
20
25
0
200
400
600
800
2015 2016 2017 2018 2019 2020E 2021E
Nifty EPS Rs Nifty EPS growth (%)
(300)
(150)
-
150
300
450 FII MF

SECTORAL VIEW
Automobiles and components.
In Automobiles, we assume (1) modest growth in volumes led by recovery in domestic volumes
in 2HFY20 due to pre-buying of vehicles before the implementation of BS-VI fuel emission norms
from April 1, 2020 (see Exhibit 26) and (2) moderate decline in gross and EBITDA margins given
higher costs related to implementation of new safety regulations (ABS/CBS applicable from
April 1, 2019 for 2-Ws and ABS applicable from July 1, 2019 for 4-Ws) and fuel emission
standards (BS-VI fuel standards applicable from April 1, 2020).
Banking
We expect a sharp surge in the profits of certain banks like Axis Bank, ICICI Bank and SBI due to
a steep decline in loan-loss provisions driven by (1) peaking of NPLs and slippages in
4QFY19/1QFY20; NPLs have declined moderately in FY19 and slippages fallen sharply over the
same period, (2) high provision coverage ratio at end- FY19, which would result in a decline in
loan-loss provisions (LLP) from FY20 and (3) possible recovery on loans already written off on
successful resolution of a few large cases in the NCLT.
The GoI announced a slew of measures to arrest the slowdown last week. For banks, this
includes early capital infusion, better rate transmission, additional support for NBFCs and
measures to improve asset quality. These measures are mildly positive but we wait to see if
these are sufficient to see a revival in credit growth.
Comparison of LPP and ROE across banks
Loan Loss Provisions to average loans (%) ROE (%)
2018 2019 2020E 2021E 2018 2019 2020E 2021E
Bank of Baroda 2.7 1.5 0.9 0.9 -6 1 12 13
PNB 6.5 6 1.4 1.1 -33 -25 10 13
SBI 3.8 2.6 1.5 1.2 -3 0 12 16
Federal Bank 0.9 0.7 0.6 0.7 8 10 12 13
Axis Bank 4 2.4 1.6 0.8 0 7 14 17
HDFC Bank 0.9 1 1.2 1.1 18 16 15 16
ICICI Bank 3 3.1 1.1 0.7 8 2 13 15
Yes Bank 0.7 2.2 1.8 1 18 7 -1 6
NBFCs
For the NBFCs, we see pressure on NIMs/RoEs in general due to (1) higher cash balance on the
balance sheet of NBFCs as they negotiate the current tight liquidity conditions, which may
persist through FY20E, (2) increased share of low-risk, low-yield retail loans (mortgage) in the
case of Housing Finance Companies (HFCs) at the expense of high-risk, high-yield developer
loans, (3) potential increase in credit costs, especially for HFCs and (4) more competition from
banks in all the lending segments.
Capital Goods and Infrastructure
In the Capital Goods sector, order inflows were moderately strong in transportation, power,
hydro-carbon and heavy engineering segments, but saw a marked slowdown in government
ordering. The slowdown in ordering also reflects the fiscal challenges of governments at various
levels and continued sluggish private investments, owing to weak demand environment. Capital
good and infrastructure stocks have seen some de-rating over the past quarter, reflecting
concerns of a weak macro environment.
Cement
We note that realizations and profitability have increased sharply over the past 5-6 months.
However, we are not sure if prices will hold up as demand conditions have worsened
significantly over the past few months and capacity utilization will remain low for the sector on
large supply-demand imbalance through FY22. We also note that cement stocks are trading at
high multiples.

Demand Supply situation in Cement Industry
All India 2018 2019 2020E 2021E 2022E
Effective Capacity (mtpa) 473 488 520 542 572
Consumption 293 333 349 371 393
Consumption growth (%) 6.5 13.7 4.8 6.3 5.9
Capacity Utilisation (%) 63 69 68 69 70
Consumer Staples
Fall in crude price augurs well for consumption; however the industry is experiencing some
inflation for agri-commodities. Prices for other commodities remained mixed. We have also
noticed increased new product launch activity centered at leveraging the fast-growing e-
commerce and modern trade channels. The sector remains expensive despite some recent
underperformance.
Information Technology
We expect net profit growth of IT stocks in the Nifty-50 Index to taper down to 3% in FY20E from
16% in FY19 as we expect (1) a more gradual depreciation in the INR versus USD in FY20E versus
the steep depreciation seen in FY19; (2) decline in margins on higher costs (higher share of on-
shoring given industry and visa issues) and (3) weaker demand from customers given worries
about general slowdown in global economic growth. FY2019 revenues were also boosted by
stronger demand from US clients who increased spending on IT following tax cuts in CY2018.
Metals and Mining
We expect the net profits of the metal stocks in the Nifty-50 Index to decline 26% in FY20 after
a 7% growth in FY19. We have cautious view on steel prices, which in turn reflects (1) weaker
global steel demand conditions and (2) normalization of iron-ore prices, which were boosted by
supply disruptions at a major supplier (Vale). We do not rule out further downside risks to global
demand in the case of current trade tensions between China and the US were to escalate into a
full-blown economic war.
Oil, gas and consumable fuels.
We expect a sharp decline in net profits of OMCs on the back of inventory losses in FY20E versus
large gains in FY2019 and (2) in ONGC on the back of weaker crude oil prices. We see significant
downside risks to refining margins due to large refining capacity additions by China, which will
result in weaker supply-demand.
Pharmaceuticals.
We expect good growth in the net profits of the pharmaceuticals sector in FY20E and FY21E on
the back of (1) pickup in new launches of generic products in the US from 2HFY19, which will
drive US generic revenues and overall, revenues and profits, and (3) steady growth in domestic
pharmaceutical revenues.

5 Years Indices Performance (Normalised since Sep'14)
Source: Bloomberg
One Yr Fw PE chart: Nifty-50 Vs NSE Mid Cap Index
Source: Bloomberg
NSE Mid Cap Fw PE: Discount to Nifty-50 Fw PE
Source: Bloomberg

80
100
120
140
160
180
200
Sep/14
Oct/14
Dec/14
Jan/15
Mar/15
Apr/15
Jun/15
Jul/15
Sep/15
Nov/15
Dec/15
Feb/16
Mar/16
May/16
Jun/16
Aug/16
Sep/16
Nov/16
Jan/17
Feb/17
Apr/17
May/17
Jul/17
Aug/17
Oct/17
Nov/17
Jan/18
Mar/18
Apr/18
Jun/18
Jul/18
Sep/18
Oct/18
Dec/18
Jan/19
Mar/19
May/19
Jun/19
Aug/19
Nifty-50 NSE Mid Cap NSE Small Cap
5.0
10.0
15.0
20.0
25.0
30.0
Aug/07
Jan/08
Jun/08
Nov/08
Apr/09
Sep/09
Feb/10
Jul/10
Dec/10
May/11
Oct/11
Mar/12
Aug/12
Jan/13
Jun/13
Nov/13
Apr/14
Sep/14
Feb/15
Jul/15
Dec/15
May/16
Oct/16
Mar/17
Aug/17
Jan/18
Jun/18
Nov/18
Apr/19
Sep/19
NSE Mcap Nifty 50
-40%
-20%
0%
20%
40%
60%
Aug/07
Feb/08
Aug/08
Feb/09
Aug/09
Feb/10
Aug/10
Feb/11
Aug/11
Feb/12
Aug/12
Feb/13
Aug/13
Feb/14
Aug/14
Feb/15
Aug/15
Feb/16
Aug/16
Feb/17
Aug/17
Feb/18
Aug/18
Feb/19
Aug/19
Based on
Bloomberg
consensus estimates
the one year Fw PE
of Nifty‐50 stands at
17x whereas that of
NSE Mid Cap Index
stands at 13.6x.
These valuations
will inflate as we
see further earnings
downgrades after
Q2‐FY20 results.
The NSE Mid Cap
Index has given up
all the
outperformance
over Nifty‐50 seen
during 2014 to 2017
(Both have
converged now).
The NSE Small Cap
Index is now grossly
underperforming
both Nifty‐50 & NSE
Mid Cap Index.
Based on
Bloomberg
consensus estimates
the NSE Mid Cap Fw
PE now trades at a
20% discount to the
Nifty‐50 Fw PE. The
discount is now
closer to the lower
end of its historic
band (i.e. 10 Yr
range).

MSCI India Vs MSCI EM: Premium (on Fw PE basis)
Source: Bloomberg
10%
20%
30%
40%
50%
60%
70%
80%
Based on
Bloomberg
consensus estimates
the MSCI India Index
trades at 17.2x Fw
PE as compared to
11.6x Fw PE of MSCI
Emerging Market
Index. The Premium
of MSCI India over
MSCI EM works to
48%, which is
slightly above the
10 Year median
premium of 40%.

Century Plyboards (I) Ltd.
CMP (Rs) 52 Week H/L (Rs) Mkt Cap (Rs mn)
135 228 / 112 29949
Financials (Rs mn)* FY19 FY20E FY21E
Sales 22,638 24,588 26,979
Growth (%) 15.1 8.6 9.7
EBITDA 3,004 3,609 4,048
EBITDA margin (%) 13.3 14.7 15.0
PBT 2,119 2,589 2,967
Net profit 1,580 1,832 2,101
EPS (Rs) 7.1 8.2 9.4
Growth (%) 1.2 16.0 14.7
P/E (x) 19.0 16.4 14.3
BV (Rs/share) 43.6 50.6 58.8
Dividend / share (Rs) 1.0 1.0 1.0 Source: Bloomberg
ROE (%) 17.5 17.5 17.3
ROCE (%) 17.1 18.6 18.6
Net cash (debt) (5,627) (4,912) (6,523)
Source: Company; Kotak Securities - Private Client Research *Standalone
Financials (Rs mn)* 1QFY19 1QFY20 % Chg
Revenues 5,373 5,737 6.8
EBITDA 865 926 7.0
EBITDA Margin (%) 16.1 16.1
PAT 454 481 6.1
PAT Margin (%) 8.4 8.4
EPS (Rs) 2.0 2.2 6.1
Source: Kotak Securities - Private Client Research; *Standalone Source: Bloomberg
This one pager on the company is extracted from last Kotak Securities – Private Client Research updates dated 16 August, 2019 and it does not contain events beyond that date.
Above company recommendation is of Kotak Securities – Private Client Research. Detailed rating scale and disclaimer is provided at the end of this report. It is advisable to read
the last report of Kotak Securities – Private Client Research before taking any investment decision on the above company recommendation.
Share Holding Pattern (%)
Analyst: Arun Agarwal (Email: arun.agarwal@kotak.com; Contact: +91 22 6218 6443)
Price Performance (3 Years)
Target Price (Rs)
170 26.1%
Potential Upside (%)
Promoter
72.7%
FII
8.7%
DII
6.2%
Others
12.4%
Key Highlights:
 Century plyboards is a leading player in plywood and laminate segment. In order to cater to varied customer
preferences, company has widened their product portfolio with multiple products at various price points.
 Century ply has expanded its laminate capacity and had entered into MDF and particle board. It has guided for 7- 8%
full year volume growth in the plywood segment in FY20. Management expects 15-20% revenue growth in other
businesses in FY20.
 MDF demand recovery in North India has been a positive for the company. Improved demand will support prices and
lead to higher capacity utilization and improved margins.
 Company expects to maintain more than 14% EBITDA margin in the plywood business in FY20. In laminates
business, company is guiding for 11% EBITDA margin in MDF and particle board segment, EBITDA margin guidance
stands at over 20% and 25% respectively. Company expects to maintain overall EBITDA margin at ~15%.
 Management said that they are contemplating setting up a new plant for MDF and Particle Board. Given high
capacity utilization at the existing plants, management is considering this new capex. Company has planned to set-
up this new plant in Uttar Pradesh as the management is of the view there is easy availability of plantation timber.
 While growth in plywood business is expected to stay in single digit, we expect relatively higher growth in MDF
segment. In FY19, there was surplus capacity and weak demand leading to pressure on prices in the MDF segment.
However, in FY20, the demand traction has been strong leading to price stabilization.
 Centruy Plywood reported 7% YoY revenue growth in standalone revenues in 1QFY20. Laminates, MDF and Particle
Board business witnessed strong YoY increase in revenue. At the standalone level, EBITDA margin was unchanged
at 16.1%; however the margin saw significant improvement as compared with the performance in the past three
quarters.
 We value the stock at a PE of 18x on FY21E EPS.
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Century Plyboards (I) Ltd. Nifty

ICICI Bank Ltd.
410 444 / 295 2638481
Net Interest Income 99,478 259,124 319,643
Non-interest Income 145,122 159,866 183,200
Total Income 244,600 418,990 502,843
Growth (%) -5.6% 71.3% 20.0%
PBT 37,769 215,587 276,679
Net profit 33,629 154,145 196,442
EPS (Rs) 4.7 23.9 30.5
BVPS 135.8 173.5 196.7
P/B (x) 3.0 2.4 2.1
Slippages (%) 2.1 1.4 1.4 Source: Bloomberg
Gross NPL (%) 7.0 5.3 4.2
Net NPL (%) 2.3 1.2 1.1
ROE (%) 3.4 13.5 15.4
RoA (%) 0.4 1.5 1.7
Source: Kotak Institutional Equities; *Consolidated
Net Interest Income 61,019 77,374 126.80
Non-Interest Income 38,518 34,254 88.93
Total Income 99,537 111,628 112.15
PBT (1,629) 27,927 NM
PAT (1,196) 19,080 NM
Slippages (%) 3.2% 1.9% -126 bps
Source: Kotak Institutional Equities; *Consolidated Source: Bloomberg
This one pager on the company is extracted from last two KIE updates dated July 28, 2019 and August 06, 2019. it does not contain events beyond that dates. We take no obligation to
update the KIE recommendations. While source of all other information is taken from Kotak Institutional Equities, the price performance and shareholding pattern chart is inputted by
Kotak PCG research team (with source as Bloomberg). It is advisable to read the full KIE report before taking any investment decision on the above company recommendation.
Analyst: MB Mahesh, CFA / Nischint Chawathe / Dipanjan Ghosh / Shrey Singh / Venkat Madasu (Email: kspcg.research@kotak.com; Contact: +91 22 6218 6427)
Target Price (Rs)
515 25.7%
FII
42.9%
DII
46.3%
Others
10.8%
Key Highlights:
 ICICI Bank reported a solid quarter with NII growth of 27% YoY led by 15% YoY loan growth and 40% YoY decline in
provisions. NPL ratios are declining without any large resolutions while slippages are now within normalized levels.
 1QFY20 saw a decline in slippages by 60 bps QoQ to 1.9% (down 130 bps YoY). This is one of the lowest levels of
slippages in the past 3 years with slippages now closer to normalized levels for the bank. We expect net NPL ratio to
reduce to ~1% by FY20 and slippages to decline to 1.5% in FY20-21E.
 Loan growth maintained steady pace of growth at 15% YoY in 1QFY20. Loans to domestic corporates were up 7% YoY
whereas international lending (mostly wholesale) was down 7.5% YoY, a trend similar to previous quarters. Retail loans
however continued to witness strong growth at 22% YoY. We build 15% loan growth CAGR over FY19-22E.
 Deposit growth was strong at 21% YoY in 1QFY20 led by sharp growth in term deposits at 34% YoY. The liability franchise
stands strong and is expected to deliver benefits on the cost of funds side.
 We forecast ~13% CAGR in CASA over FY19-22E and stable CASA ratio of ~46% by FY22E.
 Reported NIM declined by 10 bps QoQ to 3.6% but we had expected the impact to be lot more. The bank will witness NIM
expansion owing to increasing share of higher yielding unsecured loans. We forecast calculated margins to increase to
3.6% by FY21E.
 We forecast 15% growth in fee income over FY19-22E, which will drive ~15% CAGR in non-interest income over FY19-22E.
 Capital adequacy at 16.2% remains strong with tier-1 ratio at 14.6%.
 We maintain BUY rating with fair value at Rs. 515 (from Rs. 510 earlier). We value the bank at ~2X adjusted book and
~13X June 2021E EPS for RoEs that can move back to ~15% by FY20-21.
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ICICI Bank Ltd. Nifty

Orient Cement
82 125 / 62 16758
Financials (Rs mn) FY19 FY20E FY21E
Sales 25,222 28,299 31,174
Growth (%) 18.2 12.2 10.2
EBITDA 3,120 4,787 5,747
EBITDA margin (%) 12.4 16.9 18.4
PBT 748 2,471 3,337
Net profit 476 1,655 2,236
EPS (Rs) 2.3 8.1 10.9
Growth (%) N.A 252.2 34.6
P/E (x) 35.6 10.1 7.5
Net debt/equity (X) 1.2 0.9 0.9
Book value per share 51 57 66 Source: Bloomberg
Net debt/EBITDA (X) 4.0 2.2 2.0
RoAE (%) 4.6 14.9 17.8
RoACE (%) 4.9 9.6 11.5
Free cash flow 346 2,336 (348)
Financials (Rs mn) 1QFY19 1QFY20 % Chg
Revenues 6,399 6,878 7
EBITDA 854 1,496 75
EBITDA Margin (%) 13.3 21.8
PAT 160 559 249
PAT Margin (%) 2.5 8.1
EPS (Rs) 0.8 2.7 249
Source: Kotak Institutional Equities Source: Bloomberg
This one pager on the company is extracted from last KIE update dated July 29, 2019 and it does not contain events beyond that date. We take no obligation to update the KIE
recommendations. While source of all other information is taken from Kotak Institutional Equities, the price performance and shareholding pattern chart is inputted by Kotak PCG
research team (with source as Bloomberg). It is advisable to read the full KIE report before taking any investment decision on the above company recommendation.
Analyst: Sumangal Nevatia, Murtuza Arsiwalla and Prayatn Mahajan (Email: kspcg.research@kotak.com; Contact: +91 22 6218 6427)
Target Price (Rs)
112 36.9%
Promoter
37.4%
FII
7.5%
DII
27.1%
Others
28.1%
Key Highlights:
 1QFY20 earnings—margins at multi-year high but volumes hit demand slowdown. The company reported revenues of
Rs. 6.9 bn (+7% YoY, -8% QoQ), EBITDA of Rs. 1.5 bn (+75% YoY, -2% QoQ) and adjusted net income of Rs. 559 mn
(+249% YoY, -10% QoQ).
 Orient’s 1QFY20E EBITDA was largely in line with higher realization, offset by higher costs and lower volumes.
 Realization at Rs. 4,552/ton was +14% YoY and +11% QoQ led by sharp price hikes in April across India. We estimate
the regional mix of 45% in West, 40% in South and 15% in other regions. Higher-than-estimated realizations suggest
sales were higher in South than West, which witnessed better prices in 1QFY20.
 Volumes declined by 6% YoY in an industry-wide phenomenon due to elections, liquidity tightness and sharp price
hikes. Positive demand in South was more than offset by a weak West for Orient. Product Mix has kept shifting
towards OPC due to higher sales to projects and non-trade segment.
 Orient’s fuel costs increased to Rs. 1,058/ton (Rs. 996/ton in 4QFY19, Rs. 1,109/ton in 1QFY19)—this was due to
shifting in product mix towards OPC due to higher sales to projects and non-trade segment, which requires higher fuel.
We expect fuel costs to decline in 2QFY20 as pet-coke prices have remained stable in the past 2 quarters.
 Orient is awaiting EC clearance for clinker expansion at Devapur (Telangana) along with split grinding nearby. We
expect it to get approvals and start expansion in 1QFY21E.
 In the meanwhile, we expect 2-7% volume growth in FY20-21E and utilization to increase to 88% by FY21E.
 With no growth capex, net debt would reduce to Rs10.7 bn (-15% YoY) and net debt/EBITDA would reduce to 2.2X in
FY20E from 4X in FY19.
 We increase EPS by 5-1% in FY20- 21E and fair value to Rs. 112 (from Rs. 106) at 6X EV/EBITDA FY21E.
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Orient Cement Nifty

Petronet LNG Limited
267 268 / 200 400275
Sales 383,954 374,219 401,524
Growth (%) 25.5 (2.5) 7.3
EBITDA 34,425 45,386 49,393
EBITDA margin (%) 8.97 12.13 12.30
PBT 33,826 37,920 43,044
Net profit 22,547 25,169 28,503
Adjusted EPS (Rs) 15.0 16.8 19.0
Growth (%) 7.9 12.0 13.1
P/E (x) 17.8 15.9 14.0
Adjusted CROCI 23.3 30.4 32.3
Debt/equity (%) 16 9 7 Source: Bloomberg
Net debt/equity (10) (23) (31)
ROAE (%) 19.4 21.0 21.7
RoACE (%) 23.5 28.5 33.5
Free cash flow 19,507 26,710 26,105
Source: Kotak Institutional Equities; *Consolidated
Revenues 91,692 86,134 (6.1)
EBITDA 9,344 10,239 9.6
EBITDA Margin (%) 10.2% 11.9%
PAT 5,870 5,603 (4.5)
PAT Margin (%) 6.4% 6.5%
EPS (Rs) 3.9 3.7 (5.1)
Source: Kotak Institutional Equities; *Consolidated Source: Bloomberg
This one pager on the company is extracted from last KIE update dated August 08, 2019 and it does not contain events beyond that date. We take no obligation to update the KIE
Analyst: Tarun Lakhotia and Hemang Khanna (Email: kspcg.research@kotak.com; Contact: +91 22 6218 6427)
Target Price (Rs)
300 12.4%
Promoter
50.1%
FII
23.4%
DII
12.1%
Others
14.4%
Key Highlights:
 PLNG has set up the country's first LNG receiving and regasification terminal at Dahej and another terminal at Kochi. It
is promoted by GAIL (India) Limited, Oil & Natural Gas Corporation Limited, Indian Oil Corporation Limited and Bharat
Petroleum Corporation Limited. They hold 12.5% stake each.
 An improving outlook on LNG volumes with the commissioning of Dahej expansion and Kochi-Mangalore pipeline
keeps us constructive. Dahej’s long-term contractual commitments, pipeline connectivity, lower re-gasification tariffs
and favorable economics will hold in good stead against potential competition from upcoming LNG terminals.
 Dahej running near full utilization post completion of expansion. The expansion project to enhance re-gasification
capacity by 2.5 mtpa at Dahej terminal was commissioned on June 25, 2019.
 The management indicated that Dahej terminal is now operating near full capacity of 17.5 mtpa, including (1) 0.8-0.9
mtpa of Gorgon volumes being processed at Dahej, (2) spot LNG volumes being supplied to ONGC’s C2-C3 plant and
(3) additional capacity allocated to the current as well as new tolling customers.
 Kochi-Mangalore pipeline to commission by October 2019. PLNG indicated that Kochi-Mangalore pipeline is expected
to be commissioned by October 2019, with a few underwater sections remaining to be completed. The utilization of
terminal may increase by 25-30% in the near term, including incremental off-take from FACT, MRPL, OMPL, MCF and
other customers in the region.
 PLNG has signed MoUs with IGL and GSPL to set up 10-20 LNG dispensing stations along Delhi-Mumbai highway to
supply LNG to CVs for long-distance transport in the medium term. The company may incur capex of Rs. 1-1.2 bn on
this project.
 We reduce our EPS estimates to Rs. 16.8 (-5%) in FY20 and Rs. 19 (-4%) in FY21 updating our model for (1) non-cash
adjustments pertaining to accounting of operating lease under Ind-AS 116, (2) details in FY19 AR and (3) other minor
changes. Our DCF-based fair value remains unchanged at Rs. 300.
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Petronet LNG Limited Nifty

PNC Infratech Ltd.
179 219 / 122 45844
Sales 30,965 45,923 59,580
Growth (%) 66.8 48.3 29.7
EBITDA 4,569 7,413 8,350
EBITDA margin (%) 14.8 16.1 14.0
PBT 3,436 5,980 6,405
Adj Net profit 2,418 3,121 4,484
Growth (%) 49.5 29.1 43.7
P/E (x) 19.0 14.7 10.2
BV (Rs/share) 82.5 98.2 115.1
Dividend / share (Rs) 0.6 0.6 0.6 Source: Bloomberg
ROE (%) 12.3 13.5 16.4
ROCE (%) 16.5 22.7 21.9
Net cash (debt) (1,218) (4,274) (4,668)
Source: Company; Kotak Securities - Private Client Research *Standalone
Revenues 7,355 13,218 79.7
EBITDA 1,294 1,796 38.7
EBITDA Margin (%) 17.6% 13.6%
Adj. PAT 772 1,001 29.6
Adj. PAT Margin (%) 10.5% 7.6%
Adj. EPS (Rs) 3.0 3.9 29.6
Source: Kotak Securities - Private Client Research; *Standalone Source: Bloomberg
This one pager on the company is extracted from last Kotak Securities – Private Client Research update dated August 16, 2019 and it does not contain events beyond that date.
Above company recommendation is of Kotak Securities – Private Client Research. Detailed rating scale and disclaimer is provided at the end of this report. It is advisable to read
the last report of Kotak Securities – Private Client Research before taking any investment decision on the above company recommendation.
Analyst: Pankaj Kumar (Email: pankajr.kumar@kotak.com; Contact: +91 22 6218 6434)
Target Price (Rs)
251 40.5%
Promoter
56.1%
FII
6.3%
DII
22.7%
Others
15.0%
Key Highlights:
 PNC Infratech Ltd (PNC) is present in the business of construction and infrastructure development with expertise in
highways, bridges, flyovers, airport runways, development of industrial areas, etc.
 PNC is executing road projects on EPC contract basis and is also operating 6 BOT projects, 1 OMT project and
developing 7 HAM road projects.
 PNC has robust total order book of Rs. 119 bn (including HAM projects where appointed date not yet received) which
is 3.8x its FY19 revenue, gives strong revenue growth visibility for the next 2-3 years.
 It has 7 HAM projects of costing Rs. 88.97 bn out of which six are in construction phase while in balance one, it has
achieved financial closure and is awaiting appointed date.
 PNC has infused Rs. 2.8 bn equity in HAM projects and further requires Rs 5.5 bn of equity in 7 HAM projects in the
next 2-3 years.
 The company does not see any major problem in meeting equity commitment in HAM projects as it has strong cash
generation and has low net debt.
 PNC reported robust Q1-FY20 standalone revenue growth of 79.7% YoY driven by strong execution of its EPC and
HAM projects. The company expects strong execution to continue in Q3 and Q4 FY20 as well. But, due to heavy
monsoon, execution may slow down in Q2FY20.
 PNC has maintained guidance of over 45-50% YoY growth in FY20E with EBITDA margins of 13.5-14% based on
strong order book and execution timeline.
 The EPC business (adjusted for Rs. 41 per share value of BOT) is available at a PE of 11.3x and 7.9x based on FY20E
and FY21E EPS of Rs. 12.2 and Rs. 17.5 per share, respectively.
 We have Buy rating on the stock with SOTP based target price of Rs. 251, (EPC valued at 12x FY21E EPS & BOT/HAM
valued at 1x BV)
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PNC Infratech Ltd. Nifty

Vedanta Ltd.
139 247 / 125 517248
Sales 920,480 890,291 944,415
Growth (%) 0.20% -3.28% 6.08%
EBITDA 231,030 261,769 263,098
EBITDA margin (%) 25.1% 29.4% 27.9%
PBT 121,990 151,661 153,742
Net profit 57,040 84,654 91,246
Growth (%) -29.2% 49.0% 7.5%
P/E (x) 9.1 6.1 5.7
Div. Yield (%) 11.5 12.2 12.2
Net Debt / Equity 0.60 0.60 0.60 Source: Bloomberg
ROE (%) 9.1% 13.6% 14.6%
ROCE (%) 8.0% 8.8% 9.5%
Free Cash flow 97,870 106,592 95,245
Source: Kotak Institutional Equities *Consolidated
Revenues 222,060 213,740 -3.7%
EBITDA 62,840 51,980 -17.3%
EBITDA Margin (%) 28% 24% -397 bps
PAT 15,330 13,510 -11.9%
PAT Margin (%) 7% 6% 95 bps
EPS (Rs) 4.1 3.6 (0.5)
Source: Kotak Institutional Equities *Consolidated Source: Bloomberg
This one pager on the company is extracted from last KIE update dated July 27, 2019 and it does not contain events beyond that date. We take no obligation to update the KIE
Analyst: Sumangal Nevatia / Tarun Lakhotia / Prayatn Mahajan (Email: kspcg.research@kotak.com; Contact: +91 22 6218 6427)
Target Price (Rs)
200 43.7%
Promoter
52.4%
FII
16.5%
DII
19.8%
Others
11.2%
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Vedanta Ltd. Nifty
Key Highlights:
 VEDL reported 1QFY20 consolidated EBITDA of Rs. 52bn (-17% YoY, -15% QoQ) 9% below our estimate led by Zinc
International (lower volumes, higher costs) and aluminum division (higher costs). NPAT of Rs. 13.4bn declined 12% YoY
and 24% QoQ, with effective tax rate at 6.6% due to recognition of Rs. 4.2bn of deferred tax credit with respect to
Electrosteel.
 VEDL announced that it decided to unwind the structured investment of US$560mn in Volcan, the parent, made in
December 2018 ahead of the expiry in FY21E. Volcan has announced that it will call the bonds in return of the collateral
and exit Anglo Amercian. This reduces risk of future inter-company investments by VEDL. However, concerns on ~US$7bn
debt at parent entity (Vedanta Resource, Volcan) remain with high dependence on payouts by VEDL.
 Aluminium EBITDA came in at Rs. 1.8bn (-86% YoY, -55% QoQ) and EBITDA/ton stood at US$55/ton versus US$117/ton in
4QFY19 as costs remained flat however Management expects aluminum production costs to decline from (1) higher coal
security through linkage, captive mine production (2) higher captive alumina.
 Zinc International’s volume grew to 57,000 tons, up 6% QoQ but 12% lower than our estimate due to slower ramp-up at
Gamsberg and slope failure at Skorpion in May 2019. Management has lowered its guidance to 180-200 kt of production
from Skorpion and BMM mines and expects an exit run rate of production from Gamsberg 250 kt in 4QFY20.
 Oil & Gas witnessed weak volumes at 180 Kboepd (-8% YoY, -4%QoQ) while EBITDA was flat sequentially with offset from
higher crude prices. The management indicated improvement in awarding of projects in Rajasthan block and has
accordingly guided an increase in ramp-up in overall production to ~260-270 kboe/d in FY20 from 200-220 kboe/d guided
earlier.
 VEDL’s consolidated net-debt increased by Rs. 17 bn qoq to Rs. 287 bn (excluding buyer’s credit) due to capex along with
acquisition of ESL for Rs. 47 bn. The company has proffered guidance on capital expenditure for FY20 at $1.4 bn. The
capex shall be utilized primarily for expansion at oil and gas ($0.6 bn) and Zinc operations ($0.4 bn).
 We cut EBITDA estimates for FY20-21E by 5-6% mainly led by a stronger INR forecast and 4% lower LME aluminum prices.
High parent debt should keep dividend payout high and we estimate a +10% dividend yield at CMP. We cut our fair value to
Rs. 200 (Rs. 225 earlier) on lower earnings at 5.4X attributable EV/EBITDA FY21E versus stock at 4.7X and maintain BUY.

AUGUST 2, 2017
RATING SCALE (KOTAK SECURITIES – PRIVATE CLIENT RESEARCH) / KOTAK INSTITUTIONAL EQUITIES
Definitions of ratings
BUY – We expect the stock to deliver more than 15% returns over the next 12 months
ADD – We expect the stock to deliver 5% - 15% returns over the next 12 months
REDUCE – We expect the stock to deliver -5% - +5% returns over the next 12 months
SELL – We expect the stock to deliver < -5% returns over the next 12 months
NR – Not Rated. Kotak Securities is not assigning any rating or price target to the stock. The report has been prepared for
information purposes only.
SUBSCRIBE – We advise investor to subscribe to the IPO.
RS – Rating Suspended. Kotak Securities has suspended the investment rating and price target for this stock, either because there
is not a Sufficient fundamental basis for determining, or there are legal, regulatory or policy constraints around publishing,
an investment rating or target. The previous investment rating and price target, if any, are no longer in effect for this stock
and should not be relied upon.
NA – Not Available or Not Applicable. The information is not available for display or is not applicable
NM – Not Meaningful. The information is not meaningful and is therefore excluded.
NOTE – Our target prices are with a 12-month perspective. Returns stated in the rating scale are our internal benchmark.
FUNDAMENTAL RESEARCH TEAM (PRIVATE CLIENT RESEARCH)
Rusmik Oza Arun Agarwal Amit Agarwal Priyesh Babariya
Head of Research Auto & Auto Ancillary Transportation, Paints, FMCG Research Associate
rusmik.oza@kotak.com arun.agarwal@kotak.com agarwal.amit@kotak.com priyesh.babariya@kotak.com
+91 22 6218 6441 +91 22 6218 6443 +91 22 6218 6439 +91 22 6218 6433
Sanjeev Zarbade Jatin Damania Deval Shah K. Kathirvelu
Cap. Goods & Cons. Durables Metals & Mining, Midcap Research Associate Support Executive
sanjeev.zarbade@kotak.com jatin.damania@kotak.com deval.shah@kotak.com k.kathirvelu@kotak.com
+91 22 6218 6424 +91 22 6218 6440 +91 22 6218 6425 +91 22 6218 6427
Sumit Pokharna Pankaj Kumar Krishna Nain
Oil and Gas, Information Tech Midcap M&A, Corporate actions
sumit.pokharna@kotak.com pankajr.kumar@kotak.com krishna.nain@kotak.com
+91 22 6218 6438 +91 22 6218 6434 +91 22 6218 7907
TECHNICAL RESEARCH TEAM
Shrikant Chouhan Amol Athawale Faisal Shaikh, FRM, CFTe Siddhesh Jain
shrikant.chouhan@kotak.com amol.athawale@kotak.com Research Associate Research Associate
+91 22 6218 5408 +91 20 6620 3350 faisalf.shaikh@kotak.com siddhesh.jain@kotak.com
+91 22 62185499 +91 22 62185498
DERIVATIVES RESEARCH TEAM
Sahaj Agrawal Malay Gandhi Prashanth Lalu Prasenjit Biswas, CMT, CFTe
sahaj.agrawal@kotak.com malay.gandhi@kotak.com prashanth.lalu@kotak.com prasenjit.biswas@kotak.com
+91 79 6607 2231 +91 22 6218 6420 +91 22 6218 5497 +91 33 6625 9810

Disclosure/Disclaimer – Kotak Securities Ltd
Following analysts: MB Mahesh, CFA, Nischint Chawathe, Dipanjan Ghosh, Shrey Singh, Venkat Madasu, Sumangal Nevatia, Murtuza Arsiwalla, Prayatn Mahajan, Tarun
Lakhotia and Hemang Khanna of Kotak Institutional Equities and Arun Agarwal, Pankaj Kumar of Kotak Securities – Private Client Research hereby certify that all of the
views expressed in this report accurately reflect their personal views about the subject company or companies and its or their securities. They also certify that no part of
their compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in this report.
Kotak Securities Limited established in 1994, is a subsidiary of Kotak Mahindra Bank Limited. Kotak Securities is one of India's largest brokerage and distribution house.
Kotak Securities Limited is a corporate trading and clearing member of BSE Limited (BSE), National Stock Exchange of India Limited (NSE), Metropolitan Stock Exchange
of India Limited (MSE), National Commodity and Derivatives Exchange (NCDEX) and Multi Commodity Exchange (MCX). Our businesses include stock broking, services
rendered in connection with distribution of primary market issues and financial products like mutual funds and fixed deposits, depository services and Portfolio
Management.
Kotak Securities Limited is also a depository participant with National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL). Kotak
Securities Limited is also registered with Insurance Regulatory and Development Authority as Corporate Agent for Kotak Mahindra Old Mutual Life Insurance Limited and
is also a Mutual Fund Advisor registered with Association of Mutual Funds in India (AMFI). We are registered as a Research Analyst under SEBI (Research Analyst)
Regulations, 2014.
We hereby declare that our activities were neither suspended nor we have defaulted with any stock exchange authority with whom we are registered in last five years.
However SEBI, Exchanges and Depositories have conducted the routine inspection and based on their observations have issued advise/warning/deficiency letters/ or
levied minor penalty on KSL for certain operational deviations. We have not been debarred from doing business by any Stock Exchange / SEBI or any other authorities; nor
has our certificate of registration been cancelled by SEBI at any point of time.
We offer our research services to clients as well as our prospects.
This document is not for public distribution and has been furnished to you solely for your information and must not be reproduced or redistributed to any other person.
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This material is for the personal information of the authorized recipient, and we are not soliciting any action based upon it. This report is not to be construed as an offer
to sell or the solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. It is for the general information of clients of
Kotak Securities Ltd. It does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual
clients.
We have reviewed the report, and in so far as it includes current or historical information, it is believed to be reliable though its accuracy or completeness cannot be
guaranteed. Neither Kotak Securities Limited, nor any person connected with it, accepts any liability arising from the use of this document. The recipients of this material
should rely on their own investigations and take their own professional advice. Price and value of the investments referred to in this material may go up or down. Past
performance is not a guide for future performance. Certain transactions -including those involving futures, options and other derivatives as well as non-investment grade
securities - involve substantial risk and are not suitable for all investors. Reports based on technical analysis centers on studying charts of a stock's price movement and
trading volume, as opposed to focusing on a company's fundamentals and as such, may not match with a report on a company's fundamentals.
Opinions expressed are our current opinions as of the date appearing on this material only. While we endeavor to update on a reasonable basis the information discussed
in this material, there may be regulatory, compliance or other reasons that prevent us from doing so. Prospective investors and others are cautioned that any forward-
looking statements are not predictions and may be subject to change without notice. Our proprietary trading and investment businesses may make investment decisions
that are inconsistent with the recommendations expressed herein.
Kotak Securities Limited has two independent equity research groups: Institutional Equities and Private Client Group. This report has been prepared by the Private Client
Group.
We and our affiliates/associates, officers, directors, and employees, Research Analyst(including relatives) worldwide may: (a) from time to time, have long or short
positions in, and buy or sell the securities thereof, of company (ies) mentioned herein or (b) be engaged in any other transaction involving such securities and earn
brokerage or other compensation or act as a market maker in the financial instruments of the subject company/company (ies) discussed herein or act as advisor or lender
/ borrower to such company (ies) or have other potential/material conflict of interest with respect to any recommendation and related information and opinions at the
time of publication of Research Report or at the time of public appearance. Kotak Securities Limited (KSL) may have proprietary long/short position in the above mentioned
scrip(s) and therefore may be considered as interested. The views provided herein are general in nature and does not consider risk appetite or investment objective of
particular investor; readers are requested to take independent professional advice before investing. This should not be construed as invitation or solicitation to do business
with KSL. Kotak Securities Limited is also a Portfolio Manager. Portfolio Management Team (PMS) takes its investment decisions independent of the PCG research and
accordingly PMS may have positions contrary to the PCG research recommendation. Kotak Securities Limited does not provide any promise or assurance of favourable
view for a particular industry or sector or business group in any manner. The investor is requested to take into consideration all the risk factors including their financial
condition, suitability to risk return profile and take professional advice before investing.
The analyst for this report certifies that all of the views expressed in this report accurately reflect his or her personal views about the subject company or companies and
its or their securities, and no part of his or her compensation was, is or will be, directly or indirectly related to specific recommendations or views expressed in this report.
No part of this material may be duplicated in any form and/or redistributed without Kotak Securities' prior written consent.
Details of Associates are available on www.kotak.com
1. “Note that the research analysts contributing to the research report may not be registered/qualified as research analysts with FINRA; and
2. Such research analysts may not be associated persons of Kotak Mahindra Inc and therefore, may not be subject to NASD Rule 2711 restrictions on communications
with a subject company, public appearances and trading securities held by a research analyst account
Any U.S. recipients of the research who wish to effect transactions in any security covered by the report should do so with or through Kotak Mahindra Inc. (Member
FINRA/SIPC) and (ii) any transactions in the securities covered by the research by U.S. recipients must be effected only through Kotak Mahindra Inc. (Member
FINRA/SIPC)at 369 Lexington Avenue 28th Floor NY NY 10017 USA (Tel:+1 212-600-8850).
Kotak Securities Limited and its non US affiliates may, to the extent permissible under applicable laws, have acted on or used this research to the extent that it relates to
non US issuers, prior to or immediately following its publication. This material should not be construed as an offer to sell or the solicitation of an offer to buy any security
in any jurisdiction where such an offer or solicitation would be illegal. This research report and its respective contents do not constitute an offer or invitation to purchase
or subscribe for any securities or solicitation of any investments or investment services. Accordingly, any brokerage and investment services including the products and
services described are not available to or intended for Canadian persons or US persons.”
Research Analyst has served as an officer, director or employee of subject company(ies): No
We or our associates may have received compensation from the subject company(ies) in the past 12 months.
We or our associates have managed or co-managed public offering of securities for the subject company(ies) in the past 12 months: No
We or our associates may have received compensation for investment banking or merchant banking or brokerage services from the subject company(ies) in the past 12
months. We or our associates may have received any compensation for products or services other than investment banking or merchant banking or brokerage services
from the subject company(ies) in the past 12 months. We or our associates may have received compensation or other benefits from the subject company(ies) or third
party in connection with the research report. Our associates may have financial interest in the subject company(ies).
Research Analyst or his/her relative's financial interest in the subject company(ies): No
Kotak Securities Limited has financial interest in the subject company(ies) at the end of the month immediately preceding the date of publication of Research Report: -
ICICI Bank, Petronet LNG, Vedanta – Yes
Nature of financial interest is holding of equity shares or derivatives of the subject company.
By referring to any particular sector, Kotak Securities Limited does not provide any promise or assurance of favourable view for a particular industry or sector or business
group in any manner. The investor is requested to take into consideration all the risk factors including their financial condition, suitability to risk return profile and take
professional advice before investing. Such representations are not indicative of future results.

Our associates may have actual/beneficial ownership of 1% or more securities of the subject company(ies) at the end of the month immediately preceding the date of
publication of Research Report.
Research Analyst or his/her relatives has actual/beneficial ownership of 1% or more securities of the subject company(ies) at the end of the month immediately preceding
the date of publication of Research Report: No.
Kotak Securities Limited has actual/beneficial ownership of 1% or more securities of the subject company(ies) at the end of the month immediately preceding the date
of publication of Research Report: No
Subject company(ies) may have been client during twelve months preceding the date of distribution of the research report.
"A graph of daily closing prices of securities is available at https://www.nseindia.com/ChartApp/install/charts/mainpage.jsp and
http://economictimes.indiatimes.com/markets/stocks/stock-quotes. (Choose a company from the list on the browser and select the "three years" icon in the price
chart)."
Kotak Securities Limited. Registered Office: 27 BKC, C 27, G Block, Bandra Kurla Complex, Bandra (E), Mumbai 400051. CIN: U99999MH1994PLC134051, Telephone No.:
+22 43360000, Fax No.: +22 67132430. Website: www.kotak.com/www.kotaksecurities.com. Correspondence Address: Infinity IT Park, Bldg. No 21, Opp. Film City Road,
A K Vaidya Marg, Malad (East), Mumbai 400097. Telephone No: 42856825. SEBI Registration No: INZ000200137 (Member ID: NSE-08081; BSE-673; MSE-1024; MCX-
56285; NCDEX-1262), AMFI ARN 0164, PMS INP000000258 and Research Analyst INH000000586. NSDL/CDSL: IN-DP-NSDL-23-97. Our research should not be considered
as an advertisement or advice, professional or otherwise. The investor is requested to take into consideration all the risk factors including their financial condition,
suitability to risk return profile and the like and take professional advice before investing. Investments in securities market are subject to market risks, read all the related
documents carefully before investing. Derivatives are a sophisticated investment device. The investor is requested to take into consideration all the risk factors before
actually trading in derivative contracts. Compliance Officer Details: Mr. Manoj Agarwal. Call: 022 - 4285 8484, or Email: ks.compliance@kotak.com.
In case you require any clarification or have any concern, kindly write to us at below email ids:
 Level 1: For Trading related queries, contact our customer service at 'service.securities@kotak.com' and for demat account related queries contact us at
ks.demat@kotak.com or call us on: Toll free numbers 18002099191 / 1860 266 9191
Level 2: If you do not receive a satisfactory response at Level 1 within 3 working days, you may write to us at ks.escalation@kotak.com or call us on 022-42858445
and if you feel you are still unheard, write to our customer service HOD at ks.servicehead@kotak.com or call us on 022-42858208.
Level 3: If you still have not received a satisfactory response at Level 2 within 3 working days, you may contact our Compliance Officer (Mr. Manoj Agarwal) at
ks.compliance@kotak.com or call on 91- (022) 4285 8484.
 Level 4: If you have not received a satisfactory response at Level 3 within 7 working days, you may also approach Managing Director / CEO (Mr. Jaideep Hansraj) at
ceo.ks@kotak.com or call on 91-(022) 4285 8301.

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