R Model Portfolio - November 2022.pdf

1
R Model Portfolio
November 2022
Mitul Shah
Head of Research
Contact : (022) 41681371 / 9869253554
Email: mitul.shah@relianceada.com
Arafat Saiyed
Research Analyst
Contact : (022) 41681371
Email : arafat.saiyed@relianceada.com
Institutional Equity Research November 02, 2022

2
Sharp rally in Global Markets
Indian equities underperformed U.S. equities after significant outperformance seen in the past couple of months. Dow Jones made a huge comeback in Oct’22
with ~14% gain, finishing its best month since 1976 as investors bet on more traditional sectors, like banks, to play the market. The S&P and Nasdaq gained
~8% and ~4%, respectively for October. The market sentiment lifted Indian market after the September monetary policy. Since then, FII out flows subsided very
significantly with Nifty gaining 5.5% in Oct’22. On sectoral front, Nifty PSU Bank and Nifty Bank gained the most at 15.6% and 7% respectively, followed by Nifty
IT which gained 6.5%. FMCG was only sector which declined by 0.2% in Oct’22. Rate hikes continued across the globe in October, the policy rate in US is now
decadal high. The deteriorating global outlook is weighing on commodity prices, which plunged further in October. Most commodities are now trading at levels
below those prior to the Russia-Ukraine conflict. The U.S. FED hiked rates by another 75bps and indicated an aggressive stance, while India’s RBI raises rates by
50 bps in latest policy meeting and commented for positive outlook going ahead with GDP growth guidance of 7% and inflation of 6.7% in FY23.
RBI off-cycle Meet: The RBI has called an off-cycle meeting of its monetary policy committee on 3rd November. The monetary policy committee plans to discuss
the reasons for missing its core mandate and list out remedial measures in its unprecedented off-cycle meeting, and a hike in interest rates. With consumer
inflation for Sept’22 coming in at 7.4%, the rate of inflation for all three quarters, beginning Jan’22, has now breached the 6% upper limit.
Fiscal Deficit: The Centre’s fiscal deficit for 1HFY23 came in at Rs6.2 trillion, 37% of BE vs 35% last year same period. The Centre is hopeful of keeping the fiscal
deficit at 6.4% of nominal GDP in FY23. For H1, while capital expenditure outlay was strong compared to last year, net tax revenue showed a drop as % of full-year
target. Capex as percentage of BE has still not reached pre-pandemic levels, when the Centre was spending more than 50% of its capex in H1.
Core Sector Growth: Production of eight infrastructure industries that comprise the core sector recovered to grow at 7.9% in September, three-month high owing
to a favourable base and double-digit growth in output of fertilisers, cement, and electricity. The cumulative growth of the core sector in 1HFY23 is at 9.6%, lower
than the 16.9% recorded in the same period last year.
Strong GST Collection: The central government has grossed the second highest monthly GST revenue in October 2022 at Rs1,517bn, up 16.6% YoY. This is eight
months in a row, that the monthly GST revenues have crossed Rs1,400bn mark. During the month of Sept’22, 83mn e-way bills were generated, which was
reasonably higher than 77mn e-way bills generated in Aug’22.
Record UPI Transaction: The Transactions through the unified payments interface (UPI) touched a record-high of Rs12.1 trillion in October, up 8.5% MoM. In terms
of volume, UPI transactions were at an all-time high of 7,310 mn, up 7.6% MoM. On a YoY basis, UPI transaction volume registered a growth of 73%, whereas the
UPI transactions value registered a growth of 57% YoY. UPI was launched as part of the Digital India campaign. Within three years of its launch, it exceeded one
billion transactions in 2019. Since 2020, UPI transactions have gained momentum owing to the restrictions imposed by the Covid-19 pandemic.
Outperformance of Indian Currency: Indian currencies remain strong vs other markets, all currencies have depreciated against the USD. The Indian Rupee
depreciated 11.3% YTD CY22 while Dollar index has appreciated 16% over the same period. The depreciation of the rupee is less than all other currencies led by
strong macros of India. This is also evidenced in significant FPI inflows in last three months.

3
RSec Model Portfolio underperform Nifty and BSE500
RSec Model Portfolio gained 3.2% in Oct’22 compared to 5.5% return in Nifty and 4.1% return in BSE500, thus underperforming Nifty by 230bps and BSE500 by
90bps in Oct’22. The underperformance in our model portfolio was led by recent addition of Crompton (down 12%), Varroc (down 5.8%) and IIB (down 3.6%).
However, key gainers were Axis Bank (up 23.6%), L&T (up 9.5%), Infosys (up 8.8%) and Maruti (up 7.9%). RSec Model Portfolio outperformed Nifty by a 367bps
in 3M, 609bps in 9M, 562bps in 12M and 1,648bps since inception. Notably, our strategy of being overweight on sectors considered to be the key beneficiary of
commodity softening coupled with timely exit from IT Services aided the RSec Model Portfolio to deliver a convincing outperformance in last three months.
Fundamentals Remain Intact
After withdrawing over Rs76bn in Sep’22 FIIs have slowed down the pace of selling drastically in Oct’22 close to zero (just Rs80mn outflow). FIIs were net buyers
of Rs512bn in Aug’22. The RBI is likely to opt for slower pace of hikes in forthcoming meeting. The RBI has already hiked the repo rate by 1.9% in four consecutive
actions since May this year, in response to the high inflation which has been consistently breaching upper end of RBI’s tolerance band. India’s retail inflation may
be moderating after hitting a peak recently. We expect market to remain volatile in the coming weeks. Globally, the Federal Reserve will continue raising interest
rates and hold them at a higher level until inflation is under control and at the 2% level. The 2QFY23 earning season so far witnessed healthy revenue growth but
higher inflationary pressure took toll on profitability. Inflation continues to remain sticky, both, in the domestic and the US economy. Any disappointment in earnings
or weak management commentary on demand may lead to correction given sharp outperformance of Indian equities. India is expected to maintain healthy
growth pace of ~7% GDP growth over the next few years and be among the fastest growing economies globally this decade. The global companies trying to re
structure supply chains leading to China plus one strategy which is likely to continue favouring India’s growth prospects in the coming years.
Model Portfolio Shuffled
We shuffle our Model Portfolio by replacing Maruti Suzuki with Escorts Kubota, Hero MotoCorp with CEAT on account of valuation comfort. Considering issues
related to RBI’s norms for NBFC, we exit from Cholamandalam, post its recent sharp run up and add Varun Beverages on high growth prospects. We also increase
the weight of Crompton by 200bps after sharp correction in Oct’22. We like Escorts Kubota on healthy tractor volumes in 2HFY23 amid normal monsoon, likely
healthy Rabi output, higher crop MSP and decent cash flow in hands of farmers. We expect CEAT’s revenue to grow by double-digit in FY23E, on account of the
new capacity, healthy OEM demand, revival in replacement demand and strong traction in exports. We like Varun Beverages due to product expansion, capacity
expansion, network expansion and huge potential from entry into new countries.

4
Exhibit 1: Updated R Model Portfolio – November 2022
Company M Cap* (Rs bn) Sector Price* (Rs) No. of shares Investment Value* (Rs) Weight in Portfolio* (%)
Varroc Engineering 45 Automobile 297 70 20,776 8.3
Escorts Kubota 265 Automobile 2,007 5 10,035 4.0
Ceat 62 Automobile 1,530 5 7,649 3.1
GNA Axles 14 Automobile 668 45 30,060 12.0
Apollo Tyres 183 Automobile 289 40 11,546 4.6
Ashok Leyland 439 Automobile 149 80 11,952 4.8
Axis Bank 2,653 BFSI 864 16 13,817 5.5
ICICI Bank 6,306 BFSI 905 21 18,999 7.6
State Bank of India 5,121 BFSI 574 22 12,625 5.1
IndusInd Bank 882 BFSI 1,138 14 15,935 6.4
Varun Beverages 732 FMCG 1,128 6 6,765 2.7
Larsen & Toubro 2,829 Capital Goods 2,013 6 12,080 4.8
Voltas 301 Capital Goods 910 14 12,740 5.1
Crompton Consumer 232 Capital Goods 365 39 14,233 5.7
Titan Co 2,427 Consumer 2,734 6 16,404 6.6
Infosys 6,536 IT 1,553 7 10,873 4.4
Cipla 935 Pharma 1,158 10 11,585 4.6
Bharti Airtel 4,671 Telecom 810 13 10,528 4.2
Cash (Balancing) 925 0.4
Grand Total 2,49,641 100.0

5
Exhibit 4: Changes in Holdings
Sr. No. Company Previous (No. of shares) Old Weight (%) New (No. of shares) New Weight (%)
1 Crompton Consumer 25 3.6 39 5.7
Source: RSec Research
Exhibit 2: New Inclusion into R Model Portfolio
Sr. No. Company Weight on date of Re-balancing (%)
1 Escorts Kubota 4.0
2 Ceat 3.1
3 Varun Beverages 2.7
Exhibit 3: Stock Removed from R Model Portfolio
Sr. No. Company Weight on date of Re-balancing (%)
1 Maruti Suzuki 3.8
2 Hero MotoCorp 3.3
3 Cholamandalam Investment 4.9

6
Exhibit 5: Absolute Performance of R Model Portfolio vs. NIFTY 50 (Since Oct ’14)
Exhibit 6: R Model Portfolio Out/Under Performance Relative to Nifty
Exhibit 7: R Model Portfolio vs. BSE 500 - Absolute Performance
Exhibit 8: R Model Portfolio Outperformance / Underperformance Relative to BSE 500
60
80
100
120
140
160
180
200
220
240
260
Apr-15
Jul-15
Oc
t-15
Ja
n-16
Apr-16
Jul-16
Oc
t-16
Ja
n-17
Apr-17
Jul-17
Oc
t-17
Ja
n-18
Apr-18
Jul-18
Oc
t-18
Ja
n-19
Apr-19
Jul-19
Oc
t-19
Ja
n-20
Apr-20
Jul-20
Oc
t-20
Ja
n-21
Apr-21
Jul-21
Oc
t-21
Ja
n-22
Apr-22
Jul-22
Oc
t-22
RSec Model Protfolio NIFTY
(30)
(25)
(20)
(15)
(10)
(5)
-
5
10
15
20
Apr'19
May'19
June'19
July'19
Aug'19
Sep'19
Oct'19
Nov'19
Dec'19
Jan'20
Feb'20
Mar'20
Apr'20
May'20
Jun'20
July'20
Aug'20
Sep'20
Oct'20
Nov'20
Dec'20
Jan'21
Feb'21
Mar'21
Apr'21
May'21
Jun'21
Jul'21
Aug'21
Sep'21
Oct'21
Nov'21
Dec'21
Jan'22
Feb'22
Mar'22
Apr'22
May'22
June'22
Jul'22
Aug'22
Sep'22
Oct'22
RSec Model Protfolio BSE 500
0.81.0
2.0
0.7
-0.3
1.0
-2.1
-1.3
0.5
2.2
1.7
-0.6
0.4
0.2
-0.6
-1.4
0.1
3.5
0.7
-0.4
0.0
1.7
-1.1
-1.5
1.31.3
2.9
2.1
1.2
-1.8
0.6
-1.7
0.9
-0.8
0.9
-2.3
-1.7
2.9
0.1
2.2
1.6
2.1
-0.9
-3.0
-2.0
-1.0
-
1.0
2.0
3.0
4.0
Apr'19
June'19
Aug'19
Oct'19
Dec'19
Feb'20
Apr'20
Jun'20
Aug'20
Oct'20
Dec'20
Feb'21
Apr'21
Jun'21
Aug'21
Oct'21
Dec'21
Feb'22
Apr'22
June'22
Aug'22
Oct'22
1.5
0.1
(0.1)
(1.2)
(1.7)(1.6)
0.3
3.8
2.1
(1.5)
0.3
0.6
0.1
(2.1)
1.0
4.4
(0.4)
(0.1)(0.1)
2.4
0.1
(1.4)
2.1
1.8
3.9
3.1
(1.0)
(1.5)
0.4
(0.7)
1.0
(1.2)
(0.0)
(2.1)
(0.3)
1.4
(0.2)
1.6
2.62.6
(2.3)
(3.0)
(2.0)
(1.0)
0.0
1.0
2.0
3.0
4.0
5.0
June'19
July'19
Aug'19
Sep'19
Oct'19
Nov'19
Dec'19
Jan'20
Feb'20
Mar'20
Apr'20
May'20
Jun'20
July'20
Aug'20
Sep'20
Oct'20
Nov'20
Dec'20
Jan'21
Feb'21
Mar'21
Apr'21
May'21
June'21
July'21
Aug'21
Sep'21
Oct'21
Nov'21
Dec'21
Jan'22
Feb'22
Mar'22
Apr'22
May'22
Jun'22
July'22
Aug'22
Sep'22
Oct'22
Outperformance / Underperformance relative to Nifty 50

7
(Contd.)
Stock Name Investment Arguments
Varroc
Engineering*
f Varroc is focused on investing and building capabilities to capture trends in
electronics,EVproducts,andconnected&light-weightingspace.Thecompany’s
approach in the EV 2W space is to cater to original equipment manufacturers
(OEM) while it would be selective in dealing with startups. In E2W, it has a wide
range of products, such as telematics, chargers, battery management system
(BMS), DC-DC converters, PMSM motors and motor controllers.
f Varroc has started supplying products to Bajaj Auto and it is in the midst of
discussion with other OEM too. The company is looking to grow 2x of industry,
led by a strong orderbook. In FY22, it won new business orders of Rs35bn with
~63% wins in the 2W segment.
f Order win from the EV segment was at Rs10.5bn. The company is looking at
EBITDA margin of ~10% for FY23 and targets a margin in the range of 12-13%
going forward.
f The company has a state of the are R&D facility at Pune, which would help
strong EV component development for next decade and we expect it to
capitalize on it over next 5 years.
f The stock Trades at 32.6x FY23E and 13.1x FY24E EPS.
Note: * Valuations are taken from Bloomberg estimates
Escorts
Kubota
f Normal monsoon, likely healthy Rabi output, higher crop MSP and decent cash
flow would help the tractor segment in 2HFY23E. We expect the tractor industry
to witness a new up cycle in FY24E.
f With Kubota synergy the company would have access to a huge global
network of Kubota. This would lead to more than doubling export volume over
the next 2-3 years.
f ESC’s other segments appear more promising with double digit growth on
a low base. Its railway business has already started witnessing new orders
and new tendering by governments. Its current orderbook is >Rs8.5bn as of
Jun’22 as against Rs4.4bn in 4QFY22, while increasing contribution from new
products would support operating margins of ~15% over next 1-2 years. The
company’s construction equipment business would grow by 23% CAGR with
volume improvement (18% CAGR) and ASP improvement, resulting into positive
EBIT margin.
f Moreover, its strategic alliance with Kubota further increases our confidence
on ESC’s capability and future synergy in driving its global business ahead of
competition.
f At CMP, the stock trades at 18.8x FY24E EPS.

8
(Contd.)
GNA Axle* f In 2QFY23 GNA reported a strong performance with revenue growth of 24%
YoY and 12% QoQ to Rs4.2bn while its PAT grew by 36% YoY and 23% QoQ to
Rs334mn. EBITDA margin stood at 14.3% (up 6bps YoY/ up 83bps QoQ).
f The company has sizable exposure to domestic tractors and overseas CV
markets, which are expected to recover gradually from this level.
f We believe NA class 8 truck production level to improve with ease in
semiconductor supply and would grow by double digit in CY23E. Domestic
M&HCV truck market is also expected to grow in double digit in FY23E on the
back of multi-year low base and economic recovery.
f Moreover, the govt. strong Infra push is likely to create sustainable demand for
tippers and trucks for construction activity going forward.
f We expect tractor industry to continue its positive momentum recorded in
1HFY23 going ahead and expect decent growth in 2HFY23, despite high base.
Industry would witness up cycle in FY24.
f We expect GNA to grow at a faster pace than the industry, given the company’s
focus on increasing business with the existing clients and the acquisition of
new clients.
f In view of better business visibility, improving economic situation, healthy
demand outlook for CV segment and higher tractor demand, GNA seems
promising.
f At CMP, the stock trades at 14x of FY24E consensus EPS.
CEAT f We expect CEAT’s revenue to grow by double-digit in FY23E, on account of
the new capacity, healthy OEM demand, revival in replacement demand and
strong traction in exports. We expect a strong volume traction in FY23-FY24
on the back of production ease for OEMs and likely revival in replacement
demand. The company has been gaining market shares recently, helping its
outperformance.
f Moreover, its improving brand equity has helped narrowing down the price
gap with market leaders in a few segments over the last 1-2 years, supporting
revenues.
f The company’s focus on channel expansion in Europe and North America
would lead to healthy exports over the next 5-10 years. Its exports are expected
to contribute ~25% to overall sales in the next 2-3 years (vs. 20% in FY22).
f Moreover, favourable currency with a higher export contribution would
improve its margins. Due to lag effect in realising softer commodity benefit,
its 1QFY23 performance was impacted, while 2QFY23 would face similar
margin pressure. However, declining commodity cost, regular price hike by
the company and better export realisation on favourable exchange rate would
aid operating margins in 2HFY23E and FY24E. We expect CEAT’s margins to
expand by 290bps to 10.5% over FY22-FY24E.
f At CMP, the stock trades at 11.9x FY24E EPS.

9
(Contd.)
Apollo Tyre f Weexpectreplacementdemandtorevivestrongly,whileeaseonsemiconductor
supply would lead to healthy OEM sales in 2HFY23.
f We expect double-digit growth in FY23E, on account of the new capacity,
healthy OEM demand, revival in replacement demand and strong traction in
exports.
f Moreover, strong traction in NA, ASEAN and Middle east would boost its exports
thereby improving its margins. Its European operation is gaining market share
steadily.
f We believe strong OEM volumes, healthy export potential and replacement
revival to improve the company’s performance going forward.
f At CMP, the stock trades at 12.6x of FY24E EPS.
Ashok
Leyland
f Ashok Leyland (AL) is the second largest manufacturer of commercial vehicles
in India, the third largest manufacturer of buses in the world and the tenth
largest manufacturer of trucks globally.
f It has strong presence in domestic market along with a footprint across 50
countries. The Company generates ~90% of the business from domestic
market. In addition to M&HCV and LCV segments, it supplies armoured
vehicles to the defence segment.
f M&HCV industry is likely to witness a strong rebound in FY23E, post recording
heavy double-digit decline for previous 2 years.
f The company currently enjoys a market share of ~40% in CNG-ICV segment. It
plans to introduce few new CNG product in FY23E which it believes would help
them to regain the lost market share partially. Also, being the biggest player in
the bus segment, the management expects the overall volume to get booster
from revival of the Bus demand.
f Moreover, its recent increasing focus on EV segment through strategic tie ups
globally would take it to new scale on EV platform. This provides huge strategic
advantage for next decade for the company.
f We believe ongoing up-cycle in FY23E-FY24E would bring back high earnings
growth and valuation expansion, which would lead to decent upside from
the current level. Moreover, likely divestment in Switch mobility would provide
additional cushion to the valuation.
f The stock trades at 49.9x FY23E and 16.5x FY24E EPS.

10
(Contd.)
Axis Bank* f Axis Bank is the third-largest private sector bank in India. The bank offers the
entire spectrum of financial services to customer segments, covering large and
mid-corporates, MSME, agriculture, and retail businesses.
f Axis Bank is looking for sustainable growth path in terms of advances growth,
led by retail, SME, and midcorporate segments in a granular manner along with
focus on mobilization of low-cost granular liability and higher spending on tech.
f In 2QFY23, Axis bank reported a net profit of Rs53bn (up 70% YoY). The strong
growth in the bottom-line was on the back of lower provisions. Provisions in the
quarter fell to Rs5.5bn, as against Rs17.4bn in 2QFY22.
f NII grew by 31% YoY to Rs79bn. NIM for the quarter stood at 3.96% (up 57bps
YoY and 36bps QoQ). During the quarter, Axis bank delivered strong earnings,
driven by a significant decline in provisions and margin expansion. Asset quality
continues to improve, aided by a moderation in slippages and healthy recoveries
and upgrades. Restructured book moderated further, while a higher provisioning
buffer provides comfort. We expect slippages to remain in control, enabling a
sustained improvement in credit costs.
f The stock trades at 1.7x FY23E and 1.5x FY24E book value.
ICICI Bank* f Better portfolio-mix in terms of retail book, which is secured (~55% mortgages)
and improved share of corporate book to A- and above rated corporate are
likely to help ICICI Bank to deliver a relatively superior asset quality.
f Apart from making additional provisioning, the bank has also maintained a
high PCR on its NPA exposure. Further, consistent improvement in credit costs
for the last couple of quarters offers comfort.
f ICICI Bank registered a strong performance with a PAT of Rs75.6bn (up 37% YoY/
up 10% QoQ) in 2QFY23. Net interest income stood at Rs147.9bn (up 27% YoY/
up 12% QoQ) in 2QFY23.
f At CMP, the stock trades at 3x FY23E and 2.5x FY24E adjusted book value.
SBI* f Despite the challenging environment, the bank continues to remain the best
bet amongst the public sector banks (PSBs) on the back of a formidable
liability franchise, well performing subsidiaries and better capital positioning.
f The management reiterated its target to deliver 15% RoE in the ensuing
period, mainly to be aided by credit growth (guidance of 10% growth in
FY22), moderation in credit cost backed by asset quality improvement and
rationalization of operating cost.
f However, its asset quality, loan loss provisioning and capital raising plans
need to be monitored in the medium term.
f At CMP, the stock trades at 1.6x FY23E and 1.4x FY24E adjusted book value.
IndusInd
Bank*
f Since management change in 2008, IndusInd bank has successfully completed
three phases of planning cycle and is currently undergoing fourth phase of
planning cycle. The market has consistently rewarded IIB for its delivery on
improvement in profitability metrics – ROA, ROE.
f The cyclical recovery is likely to continue over the next few years on a cleaner,
less concentrated balance sheet, compared to pre-Covid. Normalization of
credit cost will provide further boost to earnings.
f In 2QFY23, fresh slippages moderated to Rs15.7bn from Rs22.5b in 1QFY23, led
by lower slippages in corporate as well as consumer segments. GNPA/NNPA
ratio increased marginally by 24bp/6bp QoQ to 2.11%/0.61%. Disbursement
trends are improving in the CV/UV/Car segments, while MFI will continue to
grow at a fast pace. The management is confident of achieving the Planning
Cycle 5 loan growth led by strong momentum in all categories and end FY23
with a loan growth of 20%. , The bank maintains its guidance of credit cost in
the range of 120-150bp and C/I ratio to remain ~40-43%.
f We are positive on IndusInd Bank, given the steady improvement in its
liability profile after a deposit scare, reacceleration of credit growth, expected
improvement in return ratios and reasonable valuations.
f At CMP, the stock trades at 1.6x FY23E and 1.4x FY24E adjusted book value.

11
(Contd.)
Larsen &
Toubro
f Larsen & Toubro (L&T) is a proxy play of India infra story with strong expertise
and track record of delivering high-value orders. We expect the momentum
to continue over the next couple of years led by multiple high-value orders
including National Infrastructure Pipeline (NIP), Bharatmala, Sagarmala, bullet
train and metro rail projects etc.
f L&T is well-placed to benefit from several big-ticket projects, as it satisfies
all basic requirements i.e. balance-sheet size, strong track record, technical
expertise and adequate liquidity to bid for such projects.
f The management is optimistic on healthy order inflows in the next couple of
years. With strong order prospects, L&T scouts for opportunities of Rs7.6tn
during balance 9MFY23. Cash burns in Hyderabad metro project and higher
input costs are seen as the key near-term overhangs.
f For 2Q FY23, L&T reported revenue of Rs427.6bn, up 23% YoY (+19% QoQ).
EBITDA came in at Rs48.9bn, up 23% YoY, while EBITDA margin was flat YoY
to 11.5%. Adj. PAT increased by 29% YoY to Rs22.3bn. Order inflow increased
by 23% YoY to Rs519bn in 2QFY23 led by 73% YoY growth in Domestic order
inflow at Rs346bn, while International inflow decline by 22% YoY to Rs173bn
comprised 33% of the total order inflow. Order book increased by 13% YoY to
Rs3,724bn. Domestic orderbook contributes 72% of total order book.
f An expected healthy pick-up in ordering activities and a sharp improvement
in order inflow may drive the stock’s performance in the medium-to-long-
term. We believe L&T deserves a higher valuation, given the commencement
of ordering activities in large multilateral projects, uptick in investment cycle,
and healthy performance of its subsidiaries.
f The stock trades at 25x FY23E and 21x FY24E EPS.
Varun
Beverages
f Improving macros, a growing sense of normalcy across the domestic and
international markets, elevated temperature situation throughout the most
part of the year and network expansion would lead to a strong volume
growth, especially in the domestic markets. The revenue growth is expected
to be driven primarily by volume growth because of the penetration into wider
geographies, especially in Southern, Western and Eastern regions of India and
higher realization from the international markets.
f Demand trends seems to be balanced across the rural and urban regions due
to improvement in mobility and resumption of the on-the-go consumption to
the normalized level. In new acquired territories VBL had increased product
prices on selected SKUs to mitigate the impact of higher prices of PET and to
control inflationary headwinds, which were reflected in margins.
f The management guided for EBITDA margin of ~20-21% for CY22. All premium
products like Sting, Tropicana and dairy products are growing strongly. Going
forward, major growth drivers include 1) Higher rate of acceptance of the newly
launched products; 2) Huge penetration potential in new geographies for long
term; 3) Increasing demand trend for energy drinks; and 4) Continuous focus
on the distribution network. Thus, we expect VBL to clock a healthy double digit
sales volume CAGR over CY21-CY23E.
f At CMP, the stock trades at 41x FY24E EPS

12
(Contd.)
Voltas f Voltas is one of the largest players in the Air Conditioning industry and offers
a range of high-performance air conditioners to its customers. Voltas remains
the market leader in ACs, with a 950bps lead over the nearest competitor.
f Voltas continued its leadership position in the RAC category with market share
of 22.8% as of Sep’22.
f For 2QFY23, Voltas reported a revenue at Rs17.7bn, up 5% YoY (down 37%
QoQ. EBITDA decrease by 22% YoY to Rs1bn in 2QFY23, while EBITDA margin
was decline by 194bps YoY to 5.7. Adj. PAT declined by 37% YoY to Rs655mn.
Order book of projects business stood at Rs59.7bn, up 3% YoY
f We expect the growth momentum to regain, with revenue and PAT, expected
to clock 20% and 27% CAGR respectively, over FY22- FY24E, led by the
improving revenue visibility and operating efficiency. Further, its projects
business is expected to deliver a healthy growth in the next couple of years,
led by a sizeable order book of Rs58.1bn (2.4x FY22 revenue).
Crompton
Consumer
f Crompton Greaves Consumer Electricals is one of India’s leading players in
consumer electrical business. Over the past two decades, the company has
maintained its market leading position in fans, residential pumps and street
lighting segments.
f The acquisition of Butterfly, a market leader in kitchen & small appliances,
will enhance synergies over the long term and is the best fit for Crompton’s
current portfolio. Butterfly has a deeper presence in South India, with strong
R&D and an in-house manufacturing with a portfolio of 20+ products that
includes mixer grinders, table top wet grinders, pressure cookers, etc.
f Crompton is the largest player in fan and residential pumps segment with
market share of 27% and ~28%, respectively and it is placed amongst Top-3
players in lighting segment with 8% market share.
f Crompton has benefited from the market consolidation, as unorganized
players continue to face issues in terms of manufacturing capabilities since
most players outsource products or components from China.
f The company is expected to maintain a healthy growth in the next couple
of years, led by the strong brand equity, product innovation and ongoing
GTM strategy and continued investment in rural channel, online channel and
modern retail.
Titan* f Titan has emerged as leading players in the premium designer jewellery
space. Over the years it has created significant value with its large distribution
presence, strong brand, designing skills and proven execution track record.
f We believe Titan’s strong pricing power in bridal and studded jewelry is likely
to drive meaningful expansion in margin in the ensuing quarters. The Jewelry
division (ex-bullion) saw strong 3-yr revenue CAGR of 27% (vs. 18-20% CAGR
over the last three quarters). Its balance sheet remains strong, which continues
to support franchisees and vendors in these uncertain times.
f The management alluded improved footfalls to driving the strong demand
recovery across business segments.
f During 1QFY23, PAT stood at Rs7.9bn (up 149% YoY/up 62% QoQ). Jewelry
business registered an income of Rs76bn (up 208% YoY/up 24% QoQ).
Watches & Wearables business reported an income of Rs7.9bn (up 169% YoY/
up 26% QoQ), while Eyecare business reported an income of Rs1.8bn (up 173%
YoY/up 37% QoQ). Other/corporate businesses (incl. Indian dress wear and
Fragrances & Fashion accessories) reported an income of Rs810mn, a growth
of 27% YoY (down 9% QoQ).
f Titan remains one of the fastest-growing companies in the consumer space
with multiple growth levers and sectoral tailwinds.
f We continue to remain positive on the long-term structural story on account of
market share gains, strong balance sheet, franchisee based model and strong
brand.
f At CMP, the stock trades at 78x FY23E and 63.7x FY24E EPS.

13
Infosys f Infosys provides business consulting, IT and outsourcing services and reported
a broad-based revenue growth across verticals and geographies. The growth
was led by India and Europe, while manufacturing and Energy, Utilities,
Resources & Services verticals outperformed.
f Management indicated ~5% de-growth QoQ in attrition rate and expects the
high attrition to moderate in 2HFY23. During 2QFY23, the company added a
net work force of ~10,032 employees.
f Large deal signings remained strong at US$2.7bn as against US$1.7bn in
1QFY23. Management’s commentary on the demand environment and deal
pipeline remained strong and guided for a 15-16% (vs. earlier 14-16%) revenue
growth in CC terms and 21-22% EBIT margin range for FY23E.
f We expect that majority of wage inflation is factored in 2QFY23, while declining
attrition rate, lower sub-contracting expenses and stable SGA expenses would
support margin expansion in 2HFY23, which would help meeting annual
margin guidance. we estimate an EBIT margin of 22.4 and 23.1% in FY23E and
FY24E respectively.
f We expect INFO to continue to gain market share in technology adoption.
f The stock trades at 25.4x FY23E and 21.8x FY24E EPS.
Cipla* f Cipla is a leading global pharmaceutical company with 1,500 plus products
across various therapeutic categories. It has presence in over 80 countries.
f Cipla has established a strong threshold for revenue and operating profitability
with core margins trending in the 21% to 22% range.
f For 1QFY23, Cipla reported a consolidated PAT of Rs6.8bn, down 4% YoY while
revenue declined by 2% YoY to Rs53.8bn
f It plans to mitigate inflationary effects in coming quarters with cost optimization,
mix management and maintaining high serviceability.
f Management expects business trajectory to improve as company continues to
build a robust pipeline of inhalers, complex injectables and peptides for longer
term.
f PAT is likely to grow at healthy 22.7% FY22-24E CAGR and EBITDA margin to
improve to 24% by FY24E. Hence, we are positive on Cipla.
f At CMP, the stock trades at 24.4x of FY24E EPS.
Bharti Airtel* f Bharti Airtel has been reporting a relatively stronger retention of its revenue
market share. It enjoys a comfortable leverage versus peers.
f In addition to the recent tariff hikes, the company could also potentially
deliver sustained growth, to be supported by continued market share gain,
upgradation to 4G and acceleration in post-paid connections.
f Further, its focus to restructure the digital and non-telecom business to
strengthen its digital portfolio for generating sustainable long-term growth
augurs well. This will also aid it to unlock the value of its digital assets.
f For 2QFY23, the company reported a net profit of Rs21bn (up 89% YoY/up
34% QoQ). Revenue from operations rose 21.9% YoY to Rs345bn in 2QFY23,
backed by strong and consistent performance delivery across the portfolio
and crossing 500 million customers globally. Average revenue per user (ARPU)
increased to Rs190 in 2QFY23 from Rs183 in 1QFY23.
f Additionally, the recent relief measures announced by the government for the
telecom sector are likely to offer further cushion to the company’s financials.
f At CMP, the stock trades at 45.7x FY23E and 28.1x FY24E EPS.

14
Reliance Securities Limited (RSL), the broking arm of Reliance Capital is one of the India’s leading retail broking houses. Reliance Capital is amongst India’s leading and most valuable financial services companies in the private sector. Reliance Capital
has interests in asset management and mutual funds, life and general insurance, commercial finance, equities and commodities broking, wealth management services, distribution of financial products, private equity, asset reconstruction, proprietary
investments and other activities in financial services. The list of associates of RSL is available on the website www.reliancecapital.co.in. RSL is registered as a Research Analyst under SEBI (Research Analyst) Regulations, 2014
General Disclaimers: This Research Report (hereinafter called ‘Report’) is prepared and distributed by RSL for information purposes only. The recommendations, if any, made herein are expression of views and/or opinions and should not be deemed or
construed to be neither advice for the purpose of purchase or sale of any security, derivatives or any other security through RSL nor any solicitation or offering of any investment /trading opportunity on behalf of the issuer(s) of the respective security(ies) referred
to herein. These information / opinions / views are not meant to serve as a professional investment guide for the readers. No action is solicited based upon the information provided herein. Recipients of this Report should rely on information/data arising
out of their own investigations. Readers are advised to seek independent professional advice and arrive at an informed trading/investment decision before executing any trades or making any investments. This Report has been prepared on the basis of
publicly available information, internally developed data and other sources believed by RSL to be reliable. RSL or its directors, employees, affiliates or representatives do not assume any responsibility for, or warrant the accuracy, completeness, adequacy
and reliability of such information / opinions / views. While due care has been taken to ensure that the disclosures and opinions given are fair and reasonable, none of the directors, employees, affiliates or representatives of RSL shall be liable for any direct,
indirect, special, incidental, consequential, punitive or exemplary damages, including lost profits arising in any way whatsoever from the information / opinions / views contained in this Report.
Risks: Trading and investment in securities are subject to market risks. There are no assurances or guarantees that the objectives of any of trading / investment in securities will be achieved. The trades/ investments referred to herein may not be suitable to
all categories of traders/investors. The names of securities mentioned herein do not in any manner indicate their prospects or returns. The value of securities referred to herein may be adversely affected by the performance or otherwise of the respective
issuer companies, changes in the market conditions, micro and macro factors and forces affecting capital markets like interest rate risk, credit risk, liquidity risk and reinvestment risk. Derivative products may also be affected by various risks including but
not limited to counter party risk, market risk, valuation risk, liquidity risk and other risks. Besides the price of the underlying asset, volatility, tenor and interest rates may affect the pricing of derivatives.
Disclaimers in respect of jurisdiction: The possession, circulation and/or distribution of this Report may be restricted or regulated in certain jurisdictions by appropriate laws. No action has been or will be taken by RSL in any jurisdiction (other than India),
where any action for such purpose(s) is required. Accordingly, this Report shall not be possessed, circulated and/or distributed in any such country or jurisdiction unless such action is in compliance with all applicable laws and regulations of such country or
jurisdiction. RSL requires such recipient to inform himself about and to observe any restrictions at his own expense, without any liability to RSL. Any dispute arising out of this Report shall be subject to the exclusive jurisdiction of the Courts in India.
Disclosure of Interest: The research analysts who have prepared this Report hereby certify that the views /opinions expressed in this Report are their personal independent views/opinions in respect of the securities and their respective issuers. None of RSL,
research analysts, or their relatives had any known direct /indirect material conflict of interest including any long/short position(s) in any specific security on which views/opinions have been made in this Report, during its preparation. RSL’s Associates may
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. RSL, its Associates, the research analysts, or their relatives might have financial interest in
the issuer company(ies) of the said securities. RSL or its Associates may have received a compensation from the said issuer company(ies) in last 12 months for the brokerage or non brokerage services. RSL, its Associates, the research analysts or their relatives
have not received any compensation or other benefits directly or indirectly from the said issuer company(ies) or any third party in last 12 months in any respect whatsoever for preparation of this report.
The research analysts has served as an officer, director or employee of the said issuer company(ies)?: No
RSL, its Associates, the research analysts or their relatives holds ownership of 1% or more, in respect of the said issuer company(ies).?: No
Copyright: The copyright in this Report belongs exclusively to RSL. This Report shall only be read by those persons to whom it has been delivered. No reprinting, reproduction, copying, distribution of this Report in any manner whatsoever, in whole or in part,
is permitted without the prior express written consent of RSL.
RSL’s activities were neither suspended nor have defaulted with any stock exchange with whom RSL is registered. Further, there does not exist any material adverse order/judgments/strictures assessed by any regulatory, government or public authority or
agency or any law enforcing agency in last three years. Further, there does not exist any material enquiry of whatsoever nature instituted or pending against RSL as on the date of this Report.
Important These disclaimers, risks and other disclosures must be read in conjunction with the information / opinions / views of which they form part of.
RSL CIN: U65990MH2005PLC154052. SEBI registration no. ( Stock Brokers: NSE - INB / INF / INE 231234833; BSE - INB / INF / INE 011234839, Depository Participants: CDSL IN-DP-257-2016 IN-DP-NSDL-363-2013, Research Analyst: INH000002384); AMFI ARN
No.29889.
Disclaimer:

R Model Portfolio - November 2022.pdf

More Related Content

Similar to R Model Portfolio - November 2022.pdf

Recently uploaded

R Model Portfolio - November 2022.pdf