SPARK RESEARCH 09 August 2016

Transcription

1 SPARK RESEARCH 09 August 2016 WHAT S INSIDE Banking Weekly Update for the week ended Aug 05, 2016 Hero Motocorp ADD (TP of Rs. 3550) Snowman Logistics (Snowman) ADD (TP of Rs. 83) Gateway Distriparks (GDPL) BUY (TP of Rs. 317) Marico REDUCE (TP of Rs. 264) DEALER S COMMENTS Both the benchmark equity indices closed in green for the third straight session tracking gains in Asian markets after a solid US jobs report. Market breadth was positive. Both BSE Mid-Cap and BSE Small-Cap index outperformed the Sensex. Barring capital goods and healthcare, all other BSE sectoral indices ended in green. Among them, oil & gas gained the most, followed by realty, power and auto. India VIX advanced 1.63% to On the NSE, 95 shares rose to fresh 52 week high while 14 fell to new 52 week low. Spark Coverage Results Calendar Companies Result date June 2016 (Spark Capital Estimates) June 2015 YoY Growth Revenues EBITDA PAT Revenues EBITDA PAT Revenues EBITDA PAT Container Corp Of India 9-Aug ,390 2,763 1,959 14,209 2,879 2, % -4.0% -5.3% Apollo Tyres Ltd 9-Aug ,513 4,850 2,393 28,454 5,025 2, % -3.5% -17.6% Prism Cement 9-Aug ,641 1, , % 58.5% NA Adani Ports and SEZ 9-Aug ,160 11,876 6,428 17,488 11,652 6, % 1.9% 0.2% Intellect Design Arena Ltd^ 9-Aug , , % NA NA Oracle Financial Services Software^ 9-Aug ,385 3,770 2,369 10,566 4,298 3, % -12.3% -28.0% Lupin Ltd 9-Aug ,433 12,998 7,996 31,502 8,166 5, % 59.2% 52.3% Mahindra & Mahindra Ltd 10-Aug ,595 14,767 9,049 94,371 13,530 8, % 9.1% 8.9% Timken India Ltd 10-Aug , , % 12.4% 5.7% Thermax Ltd 10-Aug , , % -13.4% -12.8% City Union Bank Ltd* 10-Aug ,660 2,141 1,213 2,236 1,971 1, % 8.6% 8.7% Source: Spark Research; * for Financials revenues indicate NII and EBITDA indicates PPOP; ^ EBITDA indicates EBIT VIJAYARAGHAVAN SWAMINATHAN raghavan@sparkcapital.in Find Spark Research on Bloomberg (SPAK <go>), Thomson First Call, Reuters Knowledge and Factset Page 1

2 Exchange and Currency Performance SPARK RESEARCH 09 August 2016 Developed Equity Performance (%) Chg. Chg. Currency Performance (%) from from Currency Today 1d 5d 1m 3m 6m 12m 52WH 52WL Today 1d 5d 1m 3m 6m 12m US (Dow Jones) 18, Dollar Index# UK (FTSE100) 6, Pound Japan (Nikkiei 225) 16, Yen Germany (DAX) 10, Euro BRICS Brazil (IBOV) 57, Real Russia (Micex) 1, Ruble India (Sensex) 28, Rupee China (SHCOMP) 3, Renminbi South Africa (Jalsh) 52, Rand Asian Global Indices Developed HK (H S I) 22, HK Dollar Korea (Kospi) 2, Won 1, Singapore (Straits) 2, SG Dollar Malaysia (KLCI) 1, Ringgit Indonesia (Jakarta) 5, Ind Rupiah 13, BRICS Asian Chg. from 52WH Chg. from 52WL Commodities Performance (%) Commodities Performance (%) Brent ($/bbl) Indonesian Coal ($/MT) 58.4 NA NA WTI ($/bbl) S Africa Coal ($/MT) 61.0 NA NA NA Copper ($/MT) 4, Australia Coal ($/MT) 61.8 NA NA NA Zinc ($/MT) 2, Gold Spot $/Oz 1, Aluminium ($/MT) 1, GOLD INDEX (Rs./10g) 30, Iron Ore ($/MT) Silver Spot $/Oz Lead ($/MT) 1, MCX Silver (Rs./KG) 46, Page 2

3 Rs. bn Exchange and Currency Performance SPARK RESEARCH 09 August 2016 Particulars Today 1D 1M 3M 6M 12M Liquidity (Rs. Bn) Reverse Repo Repo MSF Net liquidity (28) (48) (171) (118) (258) 5 Money Market Rates Change in BPS NSE MIBOR 6.78 (7) (55) (42) (99) (136) 1M CP (64) (95) (147) (63) 3M CP (66) (109) (189) (69) 6M CP 7.48 (1) (56) (79) (158) (69) 3M CD (23) (87) (108) 6M CD (19) (81) (101) 12M CD (25) (71) (104) Bond Market Change in BPS India 10 yr (21) (25) (66) (64) US 10 yr 1.59 (1) 23 (17) (14) (58) Spread (India 10Y-US10Y) 559 India 10YR AAA corp (35) (31) (52) (58) Spread (India 10Y-AAA10Y) 79 91D T.Bills (17) (25) (79) (91) 1Y T.Bills (11) (22) (52) (85) Call rate (45) (67) LIBOR, MIFOR Change in BPS LIBOR 0.48 (19) (49) (81) (35) (55) MIFOR 6.81 (15) (27) (57) 11 (18) OIS (0) 12 (7) 12m OIS fw d 6.50 (0) - (18) (45) (91) Market Activity FII & DII - Provisional (INR Bn) Last 5 Day FII Buy FII Sell Net DII Buy DII Sell Net 8-Aug Aug Aug Aug Aug FII DII Others Aug Aug NSE / BSE Category wise turnover Aug Aug Nifty Top 10 Deliveries Aug M avg Rank Company Delivery % 30D Del. % Price Chg 1 KOTAK MAHINDRA BANK LTD % 2 HOUSING DEVELOPMENT FINANCE % 3 TATA POWER CO LTD % 4 INDUSIND BANK LTD % 5 HINDUSTAN UNILEVER LTD % 6 HCL TECHNOLOGIES LTD % 7 POWER GRID CORP OF INDIA LTD % 8 HDFC BANK LIMITED % 9 MAHINDRA & MAHINDRA LTD % 10 LUPIN LTD % Bulk Deals (INR Mn) Date Script Client Name Type Quantity Price 8-Aug-16 INDIANB HSBC GLOBAL INVESTMENT FU NDS MAU S 42,47, Aug-16 INDIANB HSBC GLOBAL INVESTMENT FUNDS INDIA B 42,47, Aug-16 KGL ANOOP JAIN HUF B 48,00, Aug-16 KGL ANOOP MR VIMAL JAIN B 45,00, Aug-16 KGL ICICI BANK LTD.(ICICI DERIVATIVES-PARK S 283,27, Page 3

4 Spark Focus Stocks SPARK RESEARCH 09 August 2016 Top Del. % Company Price Auto, Agri & logistics Financials Cement Capital Goods IT Services Consumption Returns (%) Delivery PE for all sectors & % inc/dec Delivery EV/EBITDA (x) Volume P/ABV for banks to 30D avg % 1D 1M 3M 1Y ('000) FY17E FY18E FY17E FY18E ASHOK LEYLAND LTD (5.0) (14.9) (0.3) Buy AMARA RAJA BATTERIES LTD (1.8) (4.3) Buy GATEWAY DISTRIPARKS LTD (1.6) (13.4) (4.7) (24.3) 82.9 (0.2) Add WABCO INDIA LTD (6.6) Add CHOLAMANDALAM INVESTMENT AND (0.6) Buy CITY UNION BANK LTD (0.5) Buy DCB BANK LTD (15.5) (0.6) Sell FEDERAL BANK LTD (6.5) (0.1) Buy KARUR VYSYA BANK LTD (7.4) Buy REPCO HOME FINANCE LTD (0.6) Buy SOUTH INDIAN BANK LTD (4.4) 19.4 (7.3) (0.5) Buy DALMIA BHARAT LTD (0.9) Buy RAMCO CEMENTS LTD/THE (1.4) (0.1) Add BLUE STAR LTD (0.2) (0.5) Buy TTK PRESTIGE LTD (3.5) (0.3) Sell VA TECH WABAG LTD (0.9) 1.7 (23.6) 30.8 (0.6) Add V-GUARD INDUSTRIES LTD (0.5) Buy CYIENT LTD (1.4) (5.2) 12.0 (0.7) Add FIRSTSOURCE SOLUTIONS LTD (0.3) Buy HEXAWARE TECHNOLOGIES LTD (0.1) (1.6) 1.1 (21.4) (0.7) Sell INTELLECT DESIGN ARENA LTD (1.1) (0.5) Buy REDINGTON INDIA LTD (1.2) (1.0) 0.5 (14.4) 74.3 (0.6) Add BAJAJ CORP LTD (14.1) Buy BERGER PAINTS INDIA LTD (1.5) Add INDIAN TERRAIN FASHIONS LTD (0.3) Buy JYOTHY LABORATORIES LTD (2.7) (5.9) (6.8) (0.1) Add KEWAL KIRAN CLOTHING LTD (14.7) Add LA OPALA RG LTD (1.3) (1.4) (5.4) (0.6) Reduce RELAXO FOOTWEARS LTD (2.4) (8.1) (16.0) 7.6 (0.4) Add Page 4

5 Short Covering Long Unwind 24-Jun 26-Jun 28-Jun 30-Jun 2-Jul 4-Jul 6-Jul 8-Jul 10-Jul 12-Jul 14-Jul 16-Jul 18-Jul 20-Jul 22-Jul 24-Jul 26-Jul 28-Jul 30-Jul 1-Aug 3-Aug 5-Aug 7-Aug Short Build up OI ('000)contracts Long Build up Rs. bn Technical Indicators SPARK RESEARCH 09 August 2016 Top Company Price Change OI Change Close Price (Rs. / sh) Aditya Birla Nuvo Ltd 4.1% 12.3% 1,613 Hero MotoCorp Ltd 0.4% 12.0% 3,457 Mahindra & Mahindra Ltd 0.9% 12.0% 1,498 Biocon Ltd 0.6% 10.9% 842 Oracle Financial Services Soft 0.4% 10.7% 3,685 Pow er Finance Corp Ltd 1.7% 9.5% 224 Indraprastha Gas Ltd 3.5% 9.0% 688 Colgate-Palmolive India Ltd 5.8% 9.0% 1,015 Tata Pow er Co Ltd 2.3% 8.2% 73 Hindalco Industries Ltd 3.8% 7.2% 149 Andhra Bank -5.1% 9.9% 58 Union Bank of India -6.4% 7.4% 128 IFCI Ltd -6.3% 7.2% 27 Exide Industries Ltd -0.5% 6.6% 174 Idea Cellular Ltd -2.9% 6.0% 103 ITC Ltd -1.0% 6.0% 250 Ultratech Cement Ltd -0.7% 4.1% 3,780 Tata Motors Ltd -0.3% 3.7% 515 United Spirits Ltd -0.6% 3.6% 2,238 Dabur India Ltd -1.1% 3.3% 293 Allahabad Bank -2% -7% 78 Havells India Ltd -1% -2% 404 Karnataka Bank Ltd/The -2% -1% 141 Oriental Bank of Commerce -3% -1% 119 Syndicate Bank -1% -1% 75 Hindustan Zinc Ltd 1.1% -9.2% 221 Housing Development & Infrastr 2.9% -5.2% 102 Bharat Forge Ltd 1.4% -5.1% 826 Voltas Ltd 0.8% -4.3% 352 Bata India Ltd 3.4% -3.5% Max Pain Theory (based on Index Options) Indicative Nifty closing for next Expiry Call Put Total Call Value Total Put Value Nifty Open Interest ( 000 contracts) Nifty PCR Nifty PCR Nifty PCR (30D avg) FII Open Interest Delta 8-8 Delta Delta Index Futures Stock Futures Stock Options Index Options Total (Rs. Bn) Page 5

6 Oct-13 v-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 v-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 v-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 % Spark Model Portfolio SPARK RESEARCH 09 August 2016 Company B SE 200 Weights Spark Weights Fina nc ia ls % % M cap (R s. B n) CMP 6M A T V (R s. M n) HDFC Bank Ltd 7.0% 3,164 1,250 1,734 Yes Bank Ltd 6.0% 533 1,265 3,350 Kotak Mahindra bank 5.0% 1, ,399 IndusInd Bank Ltd 5.0% 710 1,192 1,552 Federal Bank Ltd 4.0% Karur Vysya Bank 3.0% City Union Bank 3.0% Consume r 13.8 % 15.0 % Asian Paints Ltd 4.0% 1,101 1,148 1,054 Voltas Ltd 3.0% Arvind Ltd 3.0% Bata India Ltd 3.0% Wonderla Holidays 2.0% Auto 10.8 % 16.0 % Maruti Suzuki India Ltd 4.0% 1,508 4,992 3,620 Hero Motocorp Ltd 4.0% 690 3,457 1,308 Eicher motors 3.0% ,432 1,264 Exide Industries Ltd 3.0% Timken India 2.0% He a lthc a re 7.6 % 4.0 % Sun Pharma 2.0% 2, ,909 Aurobindo pharma 2.0% ,616 Informa tion Te c hnology 13.1% 2.0 % Wipro Ltd 2.0% 1, Oil & Ga s 7.8 % 4.0 % BPCL Ltd 2.0% ,508 GSPL Ltd 2.0% Infra struc ture 10.6 % % Coal India 4.0% 2, ,359 Ultratech Cement 4.0% 1,037 3, Cummins India Ltd 3.0% Sadbhav Engineering Ltd 3.0% Ramco cements 3.0% KNR constructions 2.0% VA Tech Wabag 2.0% Othe rs 2.0 % Kaveri Seed Ltd 2.0% Ca sh & Othe rs 8.5 % 3.0 % Tota l % Spark Portfolio returns vs. BSE 200 returns Spark Portfolio BSE 200 INDEX Spark Portfolio returns vs. BSE 200 returns 140.0% 129.2% 120.0% 100.0% 80.0% 63.9% 60.0% 40.0% 24.1% 20.9% 20.0% 12.6% 11.4% 10.9% 4.7% 4.4% 3.3% 0.0% 1M 3M 6M 1 yr Since Oct'13 Spark BSE 200 Page 6

7 Today s News SPARK RESEARCH 09 August 2016 Today s News Today s News Sector News Sector News Macro Rs Crore Sanctioned for 'Biogas Programme' in Consumption Britannia Industries Q1 net profit up 13%; above estimates Scheme Sanction for 1,000 MW CTU Connected Wind Power Projects in the Country Colgate-Palmolive Q1 net profit jumps 8% to Rs 126 crore Over Lakh e-returns filed as on 5th August 2016 in FY FMCG sales growth slows to 3.2% in Apr-Jun Financials 3:7 swap ratio for Max, HDFC Life merger Marico sees 10% growth in H2 on rising consumer demand Govt notifies provisions under insolvency law Dabur Red toothpaste rides herbal wave, moves to 3rd slot Bank officers union to protest against govt policies Emami gives Zandu Balm an all new avatar Differences between RBI, govt contribute to improving policies: Subbarao Britannia looking to invest around Rs. 450 crore in three greenfield plants Insurers unhappy with draft road safety Bill, seek co-payment option Turns to the rural market for a bigger bite Pharma Sun Pharma Extends Imatinib Mesylate Savings Card Program Benefits for Patients in USA Aurobindo Pharma gets USFDA nod for anti-infective injection Pfizer suspends work at Hospira India plant as FDA turns up heat Glenmark gets USFDA nod for skin treatment cream Cadila acquires skin treatment lotion Melgain from Issar Pharma Page 7

8 Today s Announcements SPARK RESEARCH 09 August 2016 Today s Announcements Update Auction of Government of India Dated Securities Update Company : HDFC Page 8

9 -8% -6% -4% -2% -2% 0% -1% 0% 2% 1% 1% 1% 1% 1% 0% 0% 1% 1% 1% 1% 4% 4% 3% 3% 3% 3% BOB AXSB CBK YES DCBB KVB SBIN KMB SIB IIB JKBK HDFCB PNB BOI FB CUBK ICICIBC CIFC SHTF SCUF MMFS SUF LICHF REPCO HDFC EQUITAS Banking Weekly Update for the week ended Aug 05, 2016 Sensex UP 0.09% ending at 28,078 wow; Bankex DOWN 0.16% to 21,644 The BSE Sensex was UP 0.09% for the week ending at 28078, an increase of 26points while the BSE Bankex was DOWN 0.16% (DOWN 35 points) over the previous week to end at The Spark NBFC Index was DOWN 1.73% to close at from the previous week's close of (Index value: 100 on 01/01/2012). Date 09 Aug, 2016 BSE SENSEX 28,078 NIFTY 8,683 BSE BANKEX 21,644 6% 4% 2% 0% -2% -4% -6% -8% -10% Key Takeaways Stock price movement (wow) The 10Y G-Sec yield was FLAT wow ending at 7.17% and the 5Y yield was UP 3bps wow ending at 7.08% Spread between 10Y and 6M G-sec yields moved UP to 51bps, with the long term 10Y yield trending higher than the 6M yield The 10Y bond yields was UP 14bps in US (1.59%), DOWN 1bps in UK (0.67%), DOWN 21bps in Brazil (4.45%) and DOWN 3bps in China (2.77%) For the fortnight ended Jul 22, credit grew 9.87% yoy while the deposits grew by 9.54% yoy. During the fortnight, banks credit off take was DOWN by Rs.258bn, while deposits were UP by Rs.26bn, with the CD ratio at 74.6% ICICIBC CDS rate was DOWN 3bps wow to 184bps while SBI CDS rate was DOWN 3bps wow to 171bps The 10Y AAA spread was DOWN 15bps to 0.78% and the 5Y AAA spread was DOWN 8bps to 0.82% Spread between overnight rate and 12M OIS rate trended higher to 2bps, suggesting that the market is expecting rates to increase by ~2bps from 6.48% in the next 12 months Call money rate was DOWN 9bps to 6.4%, from the 6.49% levels seen during the past week INR appreciated by 0.33% wow, against the USD, closing at in the spot markets, while the USD/INR forward rates were higher across tenors by ~0.1% wow Gold price was UP 1.12% wow at INR per 10gm in INR terms and DOWN in USD terms by 1.14% wow and closed at USD 1336 per troy ounce. Crude oil prices were UP in USD terms by 5.49%, closing at USD CRR % 4.00 SLR % Reverse Repo % 6.00 Repo % 6.50 MSF% 7.00 Base Rate % 9.30/9.70 Deposit Rate % 8.90/9.15 INR/ US$ WPI% 1.62 CPI% 5.77 ABHINESH VIJAYARAJ abhinesh@sparkcapital.in NISHANT RUNGTA nishant@sparkcapital.in NAVIN BABU navin@sparkcapital.in Page 9

10 Key Industry Trends 10Y G-Sec yield was FLAT & 5Y yield was UP 3bps wow 7.5% 7.17% 7.17% 7.0% 7.05% 7.08% 6.5% 8/Jul 15/Jul 22/Jul 29/Jul 5/Aug Spread between 10Y and 6M bond yields UP to 51bps 6.7% 0.8% 6.7% 6.69% 0.7% 6.7% 0.51% 0.6% 6.7% 0.5% 6.7% 0.48% 0.4% 0.3% 6.7% 6.65% 0.2% 6.6% 0.1% 6.6% 0.0% 8/Jul 15/Jul 22/Jul 29/Jul 5/Aug 10Y G-Sec Yield 5Y G-Sec Yield 6M G-Sec yield Spread between 10Y and 6M yields (RHS) Source: Bloomberg Source: Bloomberg The yield curve shifted DOWNWARDS on longer tenor bonds wow 9.0% 8.0% 7.0% 6.0% 3M 6M 1Y 2Y 3Y 5Y 6Y 7Y 8Y 9Y 10Y 11Y 12Y 13Y 14Y 28-Sep Jul Jul Aug-16 Source: Bloomberg 10Y bond yields UP in US, and DOWN in UK, China and Brazil 5.0% 4.66% 4.45% 4.5% 4.0% 3.5% 3.0% 2.80% 2.77% 2.5% 2.0% 1.45% 1.59% 1.5% 1.0% 0.69% 0.67% 0.5% 8/Jul 15/Jul 22/Jul 29/Jul 5/Aug US UK China Brazil Source: Bloomberg 10 Page 10

11 Key Industry Trends CDS rates DOWN 3bps wow for ICICI and DOWN 3bps for SBI 10Y AAA bond spread DOWN 15bps wow, 5Y spread DOWN 8bps wow % 0.92% 0.91% 0.94% /Jul 15/Jul 22/Jul 29/Jul 5/Aug 0.90% 0.87% 0.90% 0.85% 0.87% 0.82% 0.80% 0.82% 0.81% 0.75% 0.78% 0.70% 8/Jul 15/Jul 22/Jul 29/Jul 5/Aug ICICI Bank CDS (bps) SBI CDS (bps) (RHS) 10Y Corporate AAA Spreads 5Y Corporate AAA Spreads Source: Bloomberg Source: Bloomberg Oil prices UP 5.49% wow Source: Bloomberg /Jul 15/Jul 22/Jul 29/Jul 5/Aug Oil Price (Brent Crude in USD) TED spread UP at 53bps wow 0.90% 0.79% 0.76% 0.80% 0.72% 0.67% 0.69% 0.70% 0.60% 0.50% 0.40% 0.30% 0.20% 0.28% 0.29% 0.30% 0.10% 0.26% 0.26% 0.00% 8/Jul 15/Jul 22/Jul 29/Jul 5/Aug 3-month LIBOR % (RHS) 3-month US T-Bill% (RHS) Source: Bloomberg 11 Page 11

12 Key Industry Trends 1Y FW OIS and overnight rate spread increased to 2bps wow 7.0% % % (40) 8/Jul 15/Jul 22/Jul 29/Jul 5/Aug Call money rates were DOWN wow to 6.40% 6.6% 6.49% 6.5% 6.5% 6.40% 6.4% 6.36% 6.33% 6.33% 6.4% 6.3% 6.3% 6.2% 8/Jul 15/Jul 22/Jul 29/Jul 5/Aug Overnight rate 12M OIS Spread (bps) (RHS) Source: Bloomberg Source: Bloomberg Forward USD/INR rates ended higher across tenors Gold in INR terms UP 1.1% wow and DOWN 1.1% in US$ terms 32,000 1,366 31,285 1,351 1,338 30,754 31,204 30,889 30,939 1,336 1,322 1,400 1,360 1, /Jul 15/Jul 22/Jul 29/Jul 5/Aug 3M forward rate 6M forward rate 12M forward rate Source: Bloomberg 30,000 1,280 8/Jul 15/Jul 22/Jul 29/Jul 5/Aug Gold Price in Rs. per 10g. Gold Price in US$ per troy ounce (RHS) Source: Bloomberg 12 Page 12

13 P/ABV Valuation Return on Assets Vs. P/ABV dispersion SUF REPCO HDFC CIFC 3.0 KMB HDFCB IIB MMFS Private YES Banks SHTF SCUF BOB BOI DCBB PSU Banks PNB CBK SIB LICHF AXSB Coverage Uni. CUBK Old-gen Banks FB SBIN KVB ICICIBC JKBK % 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% Return on Assets % Source: Bloomberg Page 13

14 P/ABV Valuation Return on Equity Vs. P/ABV dispersion SUF CIFC HDFC KMB 3.0 MMFS IIB SHTF Private Banks HDFCB YES BOB PNB DCBB FB AXSB CUBK Coverage Uni. Old-gen Banks PSU Banks KVB ICICIBC SBIN CBK SIB JKBK LICHF % 7.0% 9.0% 11.0% 13.0% 15.0% 17.0% 19.0% 21.0% 23.0% 25.0% Return on Equity % Source: Bloomberg Page 14

15 Valuation Matrix Banks Bank Net Interest Income, Rs. bn Operating Profits, Rs. bn PAT, Rs. bn Gross NPA FY16-18E CAGR NIM FY16 FY17E FY18E FY16 FY17E FY18E FY16 FY17E FY18E FY16 FY17E FY18E NII PAT ABV FY16 FY17E FY18E AXSB % 3.4% 3.6% 14% 12% 11% 3.7% 3.7% 3.6% BOB % 10.3% 9.4% 5% NM 4% 2.0% 2.0% 2.0% BOI % 15.1% 15.7% 2% NM -9% 2.1% 2.0% 2.0% CBK % 9.8% 9.8% 15% NM 12% 1.9% 2.0% 2.3% CUBK % 2.4% 2.3% 16% 20% 15% 3.6% 3.6% 3.6% DCBB % 1.7% 1.7% 22% 9% 11% 3.8% 3.9% 3.8% FB % 2.8% 2.7% 14% 54% 9% 3.1% 3.2% 3.2% HDFCB % 1.0% 1.1% 22% 21% 17% 4.7% 4.7% 4.7% ICICIBC % 6.6% 6.9% 9% 12% 11% 3.5% 3.3% 3.3% IIB % 0.9% 0.9% 24% 27% 16% 4.0% 4.1% 4.1% JKBK % 9.0% 8.9% 11% 49% 9% 3.8% 3.8% 3.8% KMB % 2.5% 2.4% 18% 39% 13% 5.1% 4.4% 4.6% KVB % 2.1% 2.1% 10% 18% 10% 3.5% 3.6% 3.5% PNB % 12.6% 12.4% 14% NM 13% 2.6% 2.5% 2.8% SBIN % 6.3% 6.0% 17% 64% 15% 3.0% 3.1% 3.1% SIB % 3.9% 3.8% 13% 41% 15% 2.7% 2.7% 2.8% YES % 0.9% 1.0% 31% 31% 21% 3.3% 3.5% 3.6% Page 15

16 Valuation Matrix Banks Bank RoE RoA ABV/share Rs. P/ABV (x) CMP Shares M.Cap Target FY16 FY17E FY18E FY16 FY17E FY18E FY16 FY17E FY18E FY17E FY18E (Rs.) (mn) Rs. bn P/ABV(x) Price (Rs.) AXSB 16.8% 14.1% 16.2% 1.7% 1.4% 1.5% SELL BOB -14.4% 2.5% 6.4% -0.8% 0.1% 0.3% SELL BOI -22.5% -0.9% 4.5% -1.0% 0.0% 0.2% SELL CBK -10.7% 8.7% 13.0% -0.5% 0.4% 0.6% SELL CUBK 15.6% 16.4% 17.0% 1.5% 1.6% 1.6% BUY DCBB 11.9% 10.8% 11.3% 1.1% 0.9% 0.9% SELL FB 5.7% 8.9% 11.7% 0.5% 0.8% 1.0% BUY HDFCB 18.3% 19.0% 19.6% 1.9% 1.9% 1.9% BUY ICICIBC 11.6% 11.9% 11.8% 1.4% 1.4% 1.4% BUY IIB 16.6% 15.9% 17.0% 1.8% 1.9% 1.9% BUY JKBK 6.6% 9.0% 12.6% 0.5% 0.7% 0.9% BUY KMB 10.6% 12.4% 13.5% 1.4% 1.6% 1.7% BUY KVB 12.9% 14.4% 14.8% 1.0% 1.1% 1.2% BUY PNB -10.9% 4.8% 9.9% -0.6% 0.2% 0.5% SELL SBIN 7.3% 11.2% 15.7% 0.5% 0.7% 1.0% BUY SIB 9.0% 11.5% 14.5% 0.5% 0.7% 0.8% BUY YES 19.9% 21.9% 23.7% 1.7% 1.8% 1.8% BUY * ICICIBC, KMB, CBK & PNB valued on SOTP basis Page 16

17 Valuation Matrix NBFCs NBFC Net Interest Income, Rs. bn Operating Profits, Rs. bn PAT, Rs. bn Gross NPA FY16-18E CAGR NIM FY16 FY17E FY18E FY16 FY17E FY18E FY16 FY17E FY18E FY16 FY17E FY18E NII PAT ABV FY16 FY17E FY18E BHARATFIN % 0.1% 0.2% 51% 46% 42% 11.5% 11.6% 11.5% CIFC % 4.3% 3.9% 21% 32% 18% 7.8% 7.8% 7.8% EQUITAS % 2.1% 2.4% 44% 34% 24% 13.2% 12.9% 11.1% HDFC % 0.8% 0.8% 11% 8% 12% 3.1% 3.0% 2.9% LICHF % 0.5% 0.6% 13% 12% 16% 2.5% 2.4% 2.4% MMFS % 11.1% 9.4% 7% 23% 4% 9.2% 8.1% 8.3% REPCO % 1.5% 1.6% 23% 26% 19% 4.4% 4.3% 4.3% SCUF % 7.0% 8.6% 13% 18% 6% 13.5% 12.8% 12.1% SHTF % 7.8% 9.3% 13% 34% 6% 7.9% 7.5% 7.3% SUF % 1.9% 1.9% 9% 7% 10% 6.4% 6.0% 6.0% UJJIVAN % 0.3% 0.5% 47% 25% 22% 12.3% 11.5% 11.0% NBFC * HDFC & SUF valued on SOTP basis RoE RoA ABV/share Rs. P/ABV (x) CMP Shares M.Cap Target FY16 FY17E FY18E FY16 FY17E FY18E FY16 FY17E FY18E FY17E FY18E (Rs.) (mn) Rs. bn P/ABV(x) BHARATFIN 24.9% 31.1% 26.8% 3.8% 4.4% 3.9% BUY CIFC 18.0% 19.2% 20.5% 2.2% 2.5% 2.6% BUY EQUITAS 13.3% 13.3% 12.3% 3.0% 2.8% 2.3% BUY HDFC 21.8% 20.8% 20.5% 2.4% 2.2% 2.1% SELL LICHF 19.6% 18.4% 18.3% 1.4% 1.3% 1.3% SELL MMFS 11.4% 11.2% 14.8% 1.7% 1.7% 2.2% SELL REPCO 17.0% 18.7% 19.1% 2.2% 2.2% 2.2% BUY SCUF 12.3% 12.5% 13.9% 2.6% 2.6% 2.7% BUY SHTF 12.2% 15.3% 17.2% 1.6% 1.9% 2.1% SELL SUF 15.2% 13.9% 14.2% 2.4% 2.2% 2.2% ADD UJJIVAN 18.3% 17.8% 14.2% 3.7% 3.5% 2.5% BUY Price (Rs.) Page 17

18 Hero Motocorp CMP Target : Target price: EPS: Rs. 3,437 Rs. 3,550 ADD How does our one year outlook change? We maintain our positive stance on HMCL driven by expectations of revival of growth in MC demand led by a favourable monsoon coupled with expectations of sustained growth in its well recent scooter launches. We reaffirm our margin expectations at ~15.5% through FY17/FY18 (reasons discussed elsewhere in the report). Expect PAT CAGR of 13% from FY16 - FY18. Assign an ADD' rating with a TP of Rs. 3,550 based on 17xFY18EPS We expect volume CAGR of ~11% from FY16 - FY18, driven by steady improvement in MC demand (expected to pick up sharply particularly from 2HFY17) and also aided by Scooters as Maestro Edge and Duet ramp up post pan-india launch. The increase in scooters capacity with Gujarat plant starting operations in 2QFY17 will further aid volume growth For domestic MC, we believe that with FY16 witnessing volume de-growth of the low base would aid in high single digit motor cycle growth for HMCL at ~9.5% for FY17. Scooters on the other hand would report healthy volume growth with the mgmt focused on increasing its market share in this segment. Expect domestic scooters volumes to grow at CAGR of 17% over FY16-FY18. In 1QFY17, GM declined ~110bps QoQ impacted by hardening RMC and adverse product mix. Other expenses declined~170bps QoQ leading to an improvement in EBITDA margins by ~75bps, which came in at 16.6% for 1QFY17. Going forward, expect margins, to be influenced by 1) cessation of tax benefits at the Haridwar plant in Mar 17 2) elevated levels of R&D compared to FY16 3) potential turning of the commodity cycle 4) continued benefits of the LEAP programme estimated at 90bps for FY17 5) lower royalty payments. Expect margins at 15.5% for FY17/FY18. Expect export volume CAGR of ~19% in FY16-18, largely back-ended due to economic instability in key target export markets. Capex in FY17 is expected at Rs.8-9bn. How does our 3 year Outlook change? We continue to expect scooters to outgrow the two-wheeler industry account for 33%+ of domestic industry by FY18. We believe HMCL is well placed to benefit from this trend given its strong product pipe line Given HMCL s dominant positioning in entry MCs, we believe the company has higher exposure in rural market driven states such as UP, Bihar, MP, Jharkhand and WB. We also believe that these states will be the drivers of MC volumes in India (through FY18), given sheer base of population and significantly lower than country average penetration levels Standalone Financial summary Year 1QFY17 Update Promoters 34.6% Institutions 56.1% Public 9.3% 1m 3m 12m HMCL 9% 20% 30% Sensex 4% 12% 0% BSE Auto 11% 19% 10% Key estimate revision (Standalone) Revenues (Rs. mn) FY17E EBITDA % Adj.PAT (Rs. mn) Adj EPS (Rs.) FY18E Old New Change Old New Change Revenue 325, , % 364, , % EBITDA 50,543 50, % 56,541 56, % Margin (%) 15.5% 15.5% 2 bps 15.5% 15.5% 0 bps PAT 35,331 36, % 40,337 40, % PAT Margin 10.9% 11.1% 25 bps 11.1% 11.0% -8 bps EPS % % All figures in Rs. mn, except EPS, which is in Rs. Bloomberg Shares o/s Market Cap 09 th Aug 2016 HMCL IN 200mn Rs.690bn 52-wk High-Low Rs. 3,556-2,257 3m Avg. Daily Vol Index Rs. 1157mn SENSEX P/E(x) EV/EBITDA (x) FY15 275, % 23, FY16 285, % 31, FY17E 324, % 36, FY18E 367, % 119, MUKESH SARAF mukesh@sparkcapital.in RAMAKRISHNAN SESHAN rseshan@sparkcapital.in Page 18

19 3QFY11 4QFY11 1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13 4QFY13 1QFY14 2QFY14 3QFY14 4QFY14 1QFY15 2QFY15 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 Hero Motocorp CMP Target Quarterly Financial Results Rs. 3,437 Rs. 3,550 ADD Standalone financial results Rs. mn\period Jun-16 Jun-15 yoy % Mar-15 qoq % Revenue 73,989 69, % 75, % Raw Material 49,654 48, % 49, % Employee cost 3,362 3, % 3, % Other cost 8,672 7, % 10, % Total Expenditure 61,688 58, % 63, % EBITDA 12,301 10, % 11, % EBITDA Margin % 16.6% 15.1% 153 bps 15.9% 74 bps Depreciation 1,152 1, % 1, % EBIT 11,148 9, % 10, % Volume estimates Volumes (Units) FY15 FY16 FY17E FY18E Domestic MC 56,79,636 56,03,136 6,142,718 6,644,938 YoY Growth 4.5% -1.3% 9.6% 8.2% Domestic Scooters 7,52,052 8,18, ,876 1,122,257 YoY Growth 8.9% 8.9% 19.2% 15.0% Export MC 1,19,881 1,32, , ,435 YoY Growth 10.3% 10.6% 22.0% 27.0% Export Scooters 79,956 77,672 71,499 91,678 YoY Growth 510.9% -2.9% -7.9% 28.2% Total Volumes 66,31,523 66,32,152 7,351,853 8,064,309 YoY Growth 6.2% 0.0% 10.9% 9.7% Source: Company, Spark Capital Other income 1,204 1, % 1, % Net Interest exp (inc) % % PBT 12,337 10, % 11, % Tax provision 3,506 2, % 3, % Tax rate % 28.4% 28.3% 15 bps 30.0% -156 bps PAT (Reported) 8,831 7, % 8, % PAT (Adjusted) 8,831 7, % 8, % Adjusted PAT Margin % 11.9% 10.8% 111 bps 11.1% 81 bps Shares Outstanding Average Realisation, RM per Vehicle and EBITDA Margin Rs. Thousands % 18% 16% 14% 12% 10% EPS (Reported) % % EPS (Adjusted) % % Realisation / Vehicle RM / Vehicle EBITDA Margin % Source: SIAM, Spark Capital Page 19

20 Hero Motocorp CMP Target Financial Summary Rs. 3,437 Rs. 3,550 ADD Abridged Financial Statements Key metrics Rs. mn FY15 FY16E FY17E FY18E FY15 FY16E FY17E FY18E Profit & Loss Growth ratios Revenues 275, , , ,584 Revenues 9.1% 3.5% 13.8% 13.2% Manufacturing & Other Expenses 240, , , ,608 EBITDA 0.1% 25.8% 13.1% 13.1% EBITDA 35,422 44,572 50,391 56,975 PAT 13.1% 32.0% 14.9% 12.0% Depreciation 5,400 4,414 4,619 5,119 Margins EBIT 30,022 40,158 45,772 51,857 EBITDA 12.8% 15.6% 15.5% 15.5% Net Interest Exp / (inc) EBIT 10.9% 14.1% 14.1% 14.1% Profit Before Tax 33,288 44,203 50,557 57,075 PAT 8.6% 11.0% 11.1% 11.0% Tax 9,432 12,702 14,366 16,552 Leverage & WC ratios Adj. Net Profit 23,856 31,501 36,191 40,523 Debt to equity (x) Balance Sheet (Rs. mn) Current ratio (x) Shareholders Equity 65,413 79,448 97, ,709 Debtor days (Sales) Loan funds Inventory days (COGS) SOURCES OF FUNDS 64,991 81,725 99, ,987 Creditor Days (COGS) Net block 29,127 37,296 41,177 44,558 Performance & turnover ratios Investments 31,541 42,664 52,664 72,664 RoACE 35.0% 39.0% 36.2% 33.3% Capital WIP 7,126 7,126 7,126 7,126 RoAE 39.3% 43.5% 41.0% 37.4% Current assets, loans & advances 36,688 36,322 42,360 46,615 Total asset turnover (x) Current liabilities & provisions 39,490 41,682 43,889 48,975 Fixed asset turnover (x) Net Current Assets (2,802) (5,360) (1,529) (2,360) Valuation metrics APPLICATION OF FUNDS 64,991 81,725 99, ,987 Current price (Rs.) 3437 Cash Flows (Rs. mn) Shares outstanding (mn) Cash flows from operations 22,500 34,662 37,091 45,500 Market capitalisation (Rs. mn) 686, , , ,369 Capex (11,557) (12,583) (8,500) (8,500) Enterprise value (Rs. mn) 656, , , ,275 Free cashflow EV/ EBIDTA (x) Cash flows from investments,121 (23,706) (18,500) (28,500) Adj. per-share earnings (Rs.) Cash flows from financing (22,305) (18,084) (18,084) (18,084) Price-earnings multiple (x) Cash and cash equivalents 1,593 1,314 1, Dividend yield (%) 1.7% 2.2% 2.2% 2.2% Page 20

21 Hero Motocorp Crystal Gazing FY11-16 CAGR % Revenue EBITDA PAT Price 8.1% % 23.1 HMCL, led by the its established brand, robust product portfolio and unparalleled distribution network, would continue to be a beneficiary of low penetration levels, expectations of strong rural spend led demand in India and lucrative export opportunities. Expect scooters to outgrow the two-wheeler industry, HMCL is well placed to benefit from this trend given its strong product pipe line Consistent, rounded revenue growth Margins could be susceptible to risk of rise commodity prices and cessation of tax benefits Revenue CAGR of 13% from FY16-FY20 Exit margins to be at 15.5% in FY20 Rs. Bn FY11 FY15 FY16 FY17E FY18E FY19E FY20E Revenue FY11 FY15 FY16 FY17E FY18E FY19E FY20E Rs. Bn EBITDA EBITDA (%) Entry = Rs. 3,437 (16.9x FY18 EPS) Cumulative Dividends of Rs. 345 TOTAL RETURN OF 42% Given HMCL s dominant positioning in entry MCs, we believe the company has higher exposure in rural market driven states such as UP, Bihar, MP, Jharkhand and WB. Expect margins to settle at a sustainable 15.5% in FY20, Multiples to sustain Expect multiples to sustain on the back of HMCL s inherently strong business profile and strong growth prospects PE range P/E Multiple FY20 EPS Target price 16x Rs.259 Rs.4,535 Trading History % of times stock traded <14x 14-15x 15-16x 16-17x 17-18x >18x 9% 24% 26% 22% 10% 9% Exit = Rs. 4,535at 17x FY20 P/E Page 21

22 Snowman Logistics (Snowman) CMP Target : Target price: EPS: Rs. 75 Rs. 83 ADD How does our one year outlook change? We maintain our positive stance on Snowman driven by its strong positioning as market leader in the temperature controlled warehousing and emphasis on consolidating its pallet capacities thereby improving yield per pallet. Captive utilisation of transportation fleet and exiting non-profitable food services business will further expand EBITDA margin offsetting the drop in revenue. We have a TP of Rs. 83 based on 17x FY18 EV/EBITDA While operating income witnessed a sharp drop of 16.1% Y-o-Y to Rs. 494mn on account of reduction in fleet size to 293 trucks and exit from food services business, we believe that focus on consolidation of existing pallet capacity will result in higher realisation per pallet at ~Rs.4,450/pallet in FY17E from Rs.4,139/pallet in FY16 supported by improved utilisation at matured warehouses (realisation of 4,836/pallet in 1QFY17). Seasonal products such as ice cream witnessed a 20% Y-o-Y drop, offset by fruits & vegetables and confectionary resulting in flat revenue and EBITDA margin drop of ~120bps yoy to 38.3% in warehousing division. Emphasis on frozen and chilled products will drive EBITDA to CAGR of 30% by FY18E. Management targets to increase mix of higher yield products coupled with higher utilisations Captive utilisation of transportation fleet to support core operations will improve its operating margins to ~18% in FY17 vis-à-vis ~16% in 1QFY17. The captive utilisation increased from 60% to 66% Y-o-Y with expectation of ~80% utilisation by FY18E. Capacity addition at Cochin (4,500 pallets) and Krishnapatnam (3,500 pallets) will increase the pallet capacity to 106,500 by FY17. Expect capex of ~Rs. 850 mn over FY17 and FY18. How does our 3 year Outlook change? We believe Snowman is well positioned to take advantage of its leadership position in a fragment temperature controlled warehousing with capacities equivalent to cumulative capacity of next nine competitors. The company s diversified customer base is present in over 10 industrial sectors tackling seasonality in demand. Furthermore, Snowman will benefit from synergies arising from GDL widening its reach to new ports and centralized monitoring. Snowman is expected to further penetrate deeper into organised cold chain sector valued at Rs.150 Bn expected to grow at a CAGR of 15%. We believe there is significant upside to RoCEs as utilisation at newer facilities improves with rollout of GST leading to increase in customers moving to hub and spoke model. Financial summary Year 1QFY17 Update Promoters 40.3 Institutions 5.7 Public 54.1 Key estimate revision Revenue (Rs. mn) 1m 3m 12m SNLL -14% 40% -32% Sensex 4% 12% 0% EBITDA (Rs. mn) FY17E EBITDA Margin PAT (Rs. mn) EPS (Rs.) FY18E Old New Change Old New Change Revenue 2,294 2, % 2,555 2, % EBITDA % % Margin (%) 29.9% 31.7% 178 bps 32.6% 34.6% 198 bps PAT % % PAT Margin 6.8% 6.9% 4 bps 9.8% 10.2% 41 bps EPS % % All figures in Rs. mn, except EPS, which is in Rs. Bloomberg 8th August, 2016 Shares o/s Market Cap SNLL IN EQUITY Rs. 13bn 52-wk High-Low Rs m Avg. Daily Vol Index Rs. 269mn BSETPSU P/E (x) EV/EBITDA (x) FY16 2, % FY17E 2, % FY18E 2, % MUKESH SARAF mukesh@sparkcapital.in KRUPASHANKAR NJ krupashankar@sparkcapital.in Page 22

23 Snowman Logistics (Snowman) CMP Target Quarterly financial results Rs. 75 Rs. 83 ADD Quarterly Financial Results Rs. mn\period Jun-16 Jun-15 yoy % Mar-16 qoq % Revenue Total Expenditure EBITDA Margin % D&A EBIT Other income Net Interest exp (inc) PBT Tax provision Tax rate % PAT (Reported) PAT (Adjusted) Margin % Shares Outstanding EPS (Reported) EPS (Adjusted) % % % % % % 29.7% 20.7% 899 bps 26.4% 328 bps % % % % % % % % % % % % 12.2% -20.8% % -81.8% 9392 bps % % % % 3.6% 9.2% -561 bps 12.6% -900 bps % % % % Revenue dropped by 16.1% YoY in 1QFY17 on account of ~42% reduction in fleet size to 293 trucks in 1QFY17 and exit from food services business Topline decline was overshadowed by EBITDA margins improvement of ~900bps YoY to 29.7% supported by healthy contribution from transportation segment offsetting ~120 bps YoY drop in warehousing EBITDA High depreciation and interest cost coupled with fall in other income led to 55% drop in PBT Increase in effective tax rate to 12.2% in 1QFY17 when compared to (20.8)% in 1QFY16 Reported PAT for the quarter came in at Rs. 18mn, a YoY drop of 67% Page 23

24 1QFY15 2QFY15 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 1QFY15 2QFY15 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 1QFY15 2QFY15 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 Rs. (mn) Snowman Logistics (Snowman) CMP Target Segment wise financial summary Rs. 75 Rs. 83 ADD Division wise contribution Transportation Captive utilisation supporting core business % 79.8% 20.2% 20.2% 86.7% 91.3% 13.3% 8.7% 97.9% 104.6% 105.8% 2.1% -6.0% -6.9% 85.9% 15.5% 79.6% % % 90.0% 70.0% 50.0% 30.0% 10.0% -10.0% -30.0% , , , , ,190 90, , , , , , , , , ,000 Warehousing Warehousing EBITDA Contribution(%) Distribution Distribution EBITDA Contribution(%) Fleet Average Realisation (Rs. / Truck) EBITDA / Truck Product mix - a critical component to EBITDA Pallet realisation and EBITDA 100,000 80,000 60,000 4,398 4,317 4,630 4,578 4,229 4,369 4,259 3,767 4,217 6,000 4,000 40,000 20,000 1,702 1,465 1,728 1,935 1,671 1,668 1,627 1,633 1,615 2, Pallet (Utilisation) Average Realisation (Rs. / Pallet) EBITDA / Pallet Source: Company, Spark Capital Research Source: Spark Capital Research Page 24

25 Snowman Logistics (Snowman) CMP Target Financial Summary Rs. 75 Rs. 83 ADD Abridged Financial Statements Key metrics Rs. mn FY15 FY16 FY17E FY18E FY15 FY16 FY17E FY18E Profit & Loss Growth ratios Revenues 2,029 2,401 2,114 2,476 Revenues 32.3% 18.3% -12.0% 17.1% Operating expenses 1,559 1,896 1,444 1,620 EBITDA 23.7% 7.6% 32.5% 27.8% EBITDA PAT 10.0% -17.0% -29.1% 73.4% Depreciation Margins EBIT EBITDA 23.2% 21.1% 31.7% 34.6% Net Interest Exp / (inc) EBIT 11.1% 8.4% 13.1% 16.6% Profit Before Tax PAT 12.2% 8.6% 6.9% 10.2% Tax (100) (75) Leverage & WC ratios Adj. Net Profit Debt to equity (x) Balance Sheet (Rs. mn) Current ratio (x) Shareholders Equity 4,181 4,391 4,536 4,789 Debtor days (Sales) Loan funds 904 1,480 1,455 1,354 Creditor Days Sources of funds 4,776 5,462 5,580 5,732 Working Capital Days (Sales) Net block 3,366 4,417 4,798 4,705 Performance & turnover ratios Investments RoACE (%) Capital WIP RoAE (%) Current assets, loans & advances 1,583 1,116 1,095 1,360 Total asset turnover (x) Current liabilities & provisions Fixed asset turnover (x) Net Current Assets 1, ,026 Valuation metrics Application of funds 4,776 5,462 5,580 5,732 Current price (Rs.) 75 Cash Flows (Rs. mn) Shares outstanding (mn) Cash flows from operations Market capitalisation (Rs. mn) 12,526 12,557 12,557 12,557 Cash flows from investments , Enterprise value (Rs. mn) 12,592 13,826 13,742 13,461 Cash flows from financing 1, (147) (213) EV/EBIDTA (x) Capex 946 1, Adj. Per-share earnings (Rs.) Free cashflow (423) (1,136) Price-earnings multiple (x) Closing cash Dividend yield (%) Page 25

26 Snowman Logistics (Snowman) CMP Target Crystal Ball Gazing Rs. 75 Rs. 83 ADD Over FY16-20, Snowman is expected to record ~7% / Improving pallet utilization of over 85% resulting in revenue and EBITDA growth of 7% and 21% respectively Pallet Capacity ( 000 Pallet) Revenue (Rs. Mn) FY12 FY15 FY16 FY17E FY18E FY19E FY20E ,030 2,401 2,114 2,476 2,852 3,159 Entry = Rs. 75 (implied 15.7x FY18E EV/EBITDA) 23% revenue / EBITDA growth. Revenue growth is driven by increasing pallet capacity utilization and rising demand for multipurpose temperature controlled warehouses with integrated transport services. EBITDA growth is EBITDA per pallet to improve from ~Rs. 464 EBITDA/ Pallet (Rs.) FY15 FY16 FY17E FY18E FY19E FY20E Cumulative Dividends of Rs. 0 TOTAL RETURN OF 58% expected to be driven by improving yield per pallet and increasing contribution from supportive services such as transportation. Limited re-rating potential FY20 EV/EBITDA Price (Rs.) 10.8x Trading History % of times stock traded Exit at 17x implied EV/EBITDA EV /EBITD A <23x 23-26x 26x- 35x 35-38x 38x- 41x 41x- 44x 44x- 47x >47x 5% 5% 13% 17% 15% 18% 11% 16% Page 26

27 Gateway Distriparks (GDPL) CMP Target : Target price: EPS: Rs. 268 Rs. 317 BUY How does our one year outlook change? We maintain our positive stance on GDPL as we believe it is a key beneficiary of the imminent spurt in container volumes at port driven by improvement in port capacities, increasing containerization and rail infrastructure. While near term volumes are expected to be impacted by weak EXIM volumes, expect volume and profitability improvement from 2HFY17, led by expected improvement in EXIM trade, rollback in rail port congestion surcharge and commencement of operations at the Viramgam terminal. We revise our rating to BUY with a SOTP based (slide 2) TP of Rs. 317 Expect volume CAGR of ~6.3% from FY16-FY18 in standalone operations driven by low base at JNPT CFS, restart of Punjab Conware operations and Krishnapatnam CFS (to commence warehousing ops. from 2HFY17). CFS Subsidiary will benefit from commencing of operations at Chandra CFS. Expect subsidiary CFS (Vizag + Kochi + Chandra) volume CAGR of ~14.1%. Overall CFS EBITDA/TEU is expected to improve to ~Rs. 3,200 in FY18 from ~Rs. 2,900 in FY16, although it is expected to remain below FY15 (Rs. 4,200). At GRFL, continuing EXIM imbalance leads to increasing empty haulage charges (Rs. 30mn vs. Rs. 7mn yoy) and higher discounts (Rs. 88mn vs. Rs. 45mn yoy) resulting in a fall in EBITDA/TEU to Rs. 6,209 vs. Rs. 7,250 in 1QFY16. We expect improvement in EXIM activity, ramp up in Faridabad to result in ~10% volume CAGR (FY16-FY18). We believe that the Viramgam switching terminal could theoretically prove to be a significant game changer as ~65% of the total distance from JNPT to Garhi (~1,400 kms) could see double stack benefit. Apart from double stacking, Viramgam would improve efficient port evacuation as containers would be consolidated at the location. We gradually expect EBITDA/TEU to improve to Rs in FY18 (Rs. 7,350 in FY16) How does our 3 year Outlook change? We believe GDPL is well positioned to take advantage of the significant port capacity addition that is expected at JNPT/others. Port volume growth in tandem with increasing containerisation and rollout of DFC by 2019 is expected to drive significant volume. Mumbai CFS is key given its location advantage and available capacity. GDL s new CFS at Krishnapatnam and a new rail switching station at Viramgam will start significantly contributing to volumes and EBITDA in FY18 and beyond In terms of capacity, we believe GDL has developed ~55% of the available land bank across its ICDs. There is significant upside to RoCEs as volume expands in line with port capacity and commissioning of DFC Financial summary (consolidated) Year 1QFY17 Update Promoters 25.2% Institutions 65.2% Public 9.7% Key estimate revision Revenue (Rs. mn) 1m 3m 12m GDPL -13% -5% -24% Sensex 4% 12% 0% EBITDA (Rs. mn) FY17E EBITDA Margin PAT (Rs. mn) EPS (Rs.) FY18E Old New Change Old New Change Revenue 11,386 11, % 12,931 12, % EBITDA 2,675 2, % 3,444 3, % Margin (%) 23.5% 22.8% -65 bps 26.6% 25.7% -93 bps PAT 1,375 1, % 2,119 1, % PAT Margin 12.1% 11.5% -57 bps 16.4% 15.3% -112 bps EPS % % All figures in Rs. mn, except EPS, which is in Rs. Bloomberg Shares o/s Market Cap 9th Aug, 2016 GDPL IN 109mn Rs. 160bn 52-wk High-Low Rs m Avg. Daily Vol Index Rs. 41mn BSE500 P/E (x) EV/EBITDA (x) FY16 10,509 2, % 1, FY17E 11,108 2, % 1, FY18E 13,238 3, % 2, P/E and EV/EBITDA calculated after taking into account 52% stake in GRFL Business MUKESH SARAF mukesh@sparkcapital.in KRUPASHANKAR NJ krupashankar@sparkcapital.in Page 27

28 1QFY14 2QFY14 3QFY14 4QFY14 1QFY15 2QFY15 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 1QFY14 2QFY14 3QFY14 4QFY14 1QFY15 2QFY15 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 Gateway Distriparks (GDPL) CMP Target Quarterly financial results Rs. 268 Rs. 317 BUY Consolidated quarterly result summary Rs. mn\period Jun-16 Jun-15 yoy % Mar-16 qoq % Revenue 2,622 2, % 2, % Total Expenditure 2,067 1, % 2, % EBITDA % % Margin % 21.2% 26.7% -549 bps 19.4% 178 bps D&A % % EBIT % % Other income % % Net Interest exp (inc) % % PBT % % Tax provision % % Tax rate % 35.6% 59.8% -40.6% 31.3% 421 bps PAT (Reported) % % PAT (Adjusted) % % Margin % 8.6% 8.2% 39 bps 9.2% -60 bps Shares Outstanding EPS (Reported) % % EPS (Adjusted) % % SOTP FY18 EBITDA Valuation Multiple (x) Per share value (Rs.) Mumbai & Chennai CFS 1,012.5 EV/EBITDA Other CFSs EV/EBITDA GRFL (50% stake) 1,906 EV/EBITDA CFS throughput and average realisation 120, ,000 80,000 60,000 40,000 20,000 0 Source: Spark Capital Research Rail throughput and average realisation 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10, ,000 12,000 10,000 8,000 6,000 4,000 2,000 CFS Throughput (TEU) Average Realisation (Rs. / TEU) EBITDA / TEU 0 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 Snowman Based on Spark target Price of Rs Consolidated 317 Rail Throughput (TEU) Average Realisation (Rs. / TEU) EBITDA / TEU Source: Spark Capital Research Page 28

29 Gateway Distriparks (GDPL) CMP Target Segment wise financial summary Rs. 268 Rs. 317 BUY Segment Wise Estimates CFS 1QFY16 2QFY16 3QFY16 4QFY16 FY16 1QFY17 FY17E FY18E Volumes (TEUs) 93,662 95,574 86,604 85, ,207 92, , ,276 Revenue (Rs. mn) , ,424 3,964 Average Realisation (Rs / TEU.) 9,297 8,584 9,030 8,565 8,871 8,687 8,806 9,432 EBITDA (Rs. mn) , ,120 1,342 EBITDA % 35% 35% 31% 30% 33% 29% 33% 34% EBITDA / TEU (Rs.) 3,281 3,028 2,843 2,565 2,940 2,509 2,880 3,194 PAT (Rs. mn) 93,662 95,574 86,604 85, ,207 92, , ,276 GRFL Volumes (TEUs) 54,741 46,631 51,140 50, ,187 52, , ,069 Revenue (Rs. mn) 1,771 1,789 1,898 1,846 7,304 1,819 7,684 8,671 Average Realisation (Rs / TEU.) 32,356 38,365 37,122 36,418 35,948 34,965 35,565 35,528 EBITDA (Rs. mn) , ,417 1,906 EBITDA % 22% 20% 20% 19% 20% 18% 18% 22% EBITDA / TEU (Rs.) 7,249 7,840 7,464 6,901 7,352 6,209 6,559 7,808 PAT (Rs. mn) 54,741 46,631 51,140 50, ,187 52, , ,069 Page 29

30 Gateway Distriparks (GDPL) CMP Target Financial Summary Rs. 268 Rs. 317 BUY Abridged Financial Statements (consolidated) Key metrics Rs. mn FY15 FY16 FY17E FY18E FY15 FY16 FY17E FY18E Profit & Loss Growth ratios Revenues 11,122 10,509 11,108 12,636 Revenues 9.8% -5.5% 5.7% 13.7% Operating expenses 7,846 8,022 8,571 9,388 EBITDA 27.4% -24.1% 2.0% 28.0% EBITDA 3,276 2,486 2,537 3,248 PAT 38.9% -34.5% 3.4% 50.9% Depreciation Margins EBIT 2,387 1,682 1,711 2,360 EBITDA 29.5% 23.7% 22.8% 25.7% Net Interest Exp / (inc) 112 (13) EBIT 21.5% 16.0% 15.4% 18.7% Profit Before Tax 2,275 1,694 1,677 2,248 PAT 17.0% 11.8% 11.5% 15.3% Tax Leverage & WC ratios Adj. Net Profit 1,887 1,237 1,279 1,930 Debt to equity (x) Balance Sheet (Rs. mn) Current ratio (x) Shareholders Equity 9,233 9,413 9,778 10,795 Debtor days (Sales) Loan funds 1,820 2,222 2,673 2,255 Creditor Days Sources of funds 14,420 14,997 15,825 16,448 Working Capital Days (Sales) Net block 9,964 10,624 11,078 10,620 Performance & turnover ratios Investments 2,253 3,023 3,023 3,023 RoACE (%) Capital WIP RoAE (%) Current assets, loans & advances 3,077 2,606 3,027 4,224 Total asset turnover (x) Current liabilities & provisions 1,173 1,258 1,303 1,419 Fixed asset turnover (x) Net Current Assets 1,904 1,349 1,724 2,805 Valuation metrics Application of funds 14,420 14,997 15,825 16,448 Current price (Rs.) 268 Cash Flows (Rs. mn) Shares outstanding (mn) Cash flows from operations 2,375 1,951 2,138 2,920 Market capitalisation (Rs. mn) 29,139 29,139 29,139 29,139 Cash flows from investments -1,822-1,252-1, Enterprise value (Rs. mn) 30,215 31,058 31,147 29,682 Cash flows from financing (699) (696) (655) (1,603) EV/EBIDTA (x) Capex -1,061 1,167 1, Adj. Per-share earnings (Rs.) Free cashflow 3, ,490 Price-earnings multiple (x) Closing cash ,713 Dividend yield (%) Page 30

31 Gateway Distriparks Crystal Gazing FY11-16 CAGR % Revenue EBITDA PAT Price 11.9% 9.3% 5.0% 17.0% FY11 FY15 FY16 FY17E FY18E FY19E FY20E Over FY16-20, GDL is expected to clock a ~10% / 15% revenue / EBITDA growth. Volume growth is CFS volume growth of ~8%, Rail volume growth of ~10.1% resulting in revenue growth of ~10% CFS volume (TEUs) Rail Volume (TEUs) Revenue (Rs. Mn) 333, , , , , , , , , , , , , ,766 5,991 11,113 10,509 11,108 12,636 13,896 15,320 Entry = Rs. 268 (implied 12.7x EV/EBITDA) driven by increasing port capacity (JNPT, Krishnapatnam) and containerization levels (currently at ~52% vs. global average of 75-80%). Revenue growth is expected to be across the board, however EBITDA growth is expected to be driven by rail business (15.8% EBITDA CAGR) as the benefits of double stacking from the Viramgam terminal would kick in in FY18-FY20. EBITDA/TEU to improve from Rs. 2,940 to Rs. 3,372 in CFS and from ~Rs. 7,352 to ~Rs. 8,991 in Rail Limited re-rating potential Rail EBITDA/TEU (Rs.) CFS EBITDA / TEU (Rs.) FY11 FY15 FY16 FY17E FY18E FY19E FY20E 3,101 6,861 7,352 6,559 7,808 8,912 8,991 3,408 3,535 2,940 2,880 3,194 3,249 3,372 SOTP Valuation Multiple (x) Per share Net Debt value (Rs.) Mumbai + Chennai CFS P/E Other CFSs P/E GRFL (54% stake) EV/EBITDA 15 (4,860) 216 Snowman Market cap 69 Consolidated 474 Cumulative Dividends of Rs. 28 Exit at 5.5x implied EV/EBITDA TOTAL RETURN OF 87% Trading History % of times stock traded PE range <8x 8x-12x 12x-16x 16x-20x >20x 4% 49% 16% 20% 11% Page 31

32 Marico : Target price: EPS: CMP Rs.299 Target Rs.264 REDUCE How does our one year outlook change? Marico (MRCO) reported flat revenue growth & ~18% operating profit growth which were below our estimates. Despite a decent ~8% overall volume growth, we understand that ~18% price cut in parachute rigid packs has led to subdued revenue growth. Driven by lower copra & Light Liquid Paraffin (LLP) prices, gross margins expanded by ~772bps to ~52%. Across portfolio, MRCO is managing a fine balance between maximising volume growth, maintaining/increasing market share and protecting profitability. However, at ~41x FY18E we see limited re-rating scope in the stock and again the current peak margins offers minimal scope for earnings upgrade either. This coupled with the GST uncertainty pertaining to a chunk of the domestic portfolio we maintain our cautious stance on the stock. Maintain Reduce rating with a revised TP of Rs.264 (~36x FY18E). Having to constantly interfere with pricing to maintain market share and drive volume growth in Parachute rigid packs along with subdued prospect in Bangladesh should limit revenue growth to high single digits despite new launches in foods and Value Added Hair Oil (VAHO) categories. Subdued consumption climate should further disrupt revenue growth prospects. International revenues impacted by slowdown in Bangladesh is expected to keep overall prospects in this business subdued from a near to medium term perspective. Excluding Egypt, Middle East and rth America (MENA) revenues too under considerable geo-political threat. South East Asia prospects encouraging led by market expansion. We have factored in a possible margin expansion of ~150bps from FY16-18 as we believe that lower Copra & LLP prices in near term should continue to drive gross margins and EBITDA margins despite price cuts and higher A&P outlay. How does our 3 year Outlook change? Marico s Parachute brand has gone through several copra price cycles and has emerged stronger than ever, consolidating market share from unorganised players. Being the market leader, MRCO s dominance in the Coconut Hair Oil (CHO) category is undisputable. Impact on account of implementing the impending GST would determine long term fortunes in the category. Increasing traction in other domestic categories/brands as VAHO & Saffola to add to growth momentum. Prominence of styling gel and hair serums increasing in the youth portfolio not only augurs well from a long term perspective but also effectively complements MRCO s existing hair care offerings. TEJASH SHAH tejash@sparkcapital.in GNANASUNDARAM S gnanasundar@sparkcapital.in MADHAV PVR madhav@sparkcapital.in Financial summary Year 1QFY17 Update Promoters 59.7 Institutions 32.3 Public 8.1 Key estimate revision Sales (Rs. mn) 1m 3m 12m MRCO 14% 21% 37% Sensex 4% 10% 0% BSE FMCG 2% 13% 7% FY17E EBITDA (Rs. mn) PAT (Rs. mn) Bloomberg Shares o/s Market Cap EPS (Rs.) August 9 th, 2016 MRCO IN 1,290mn Rs. 387bn 52-wk High-Low Rs m Avg. Daily Vol Rs. 308mn Index BSE 200 FY18E Old New Change Old New Change Revenues 67,038 62,551-7% 77,299 70,986-8% EBITDA 12,257 11,600-5% 14,287 13,130-8% Margin (%) 18.3% 18.5% 26bps 18.5% 18.5% 1bps PAT 8,423 8,306-1% 9,884 9,461-4% EPS (Rs.) % % All figures in Rs. mn, except EPS, which is in Rs.; Previous estimates may not be comparable as they are not as per Ind AS PE (x) ROE (%) FY14 46,865 7,477 4, % FY15 57,330 8,701 5, % FY16 60,245 10,514 7, % FY17E 62,551 11,600 8, % FY18E 70,986 13,130 9, % Page 32

33 Marico CMP Rs.299 Target Rs.264 REDUCE Quarterly Financial Results (Consolidated) Rs. mn\period 30-Jun Jun-15 YoY Growth 31-Mar-15 QoQ Growth Revenues 17,543 17,500 0% 12,920 36% Raw materials 8,419 9,662-13% 5,993 40% Employee cost 1, % % A&P 2,091 1,710 22% 1,628 28% Other expenses 2,241 1,965 14% 2,205 2% Total Operating Cost 13,803 14,319-4% 10,776 28% EBITDA 3,740 3,181 18% 2,145 74% EBITDA margins 21.3% 18.2% 314bps 16.6% 472bps Consolidated flat revenue growth was on account of ~19% price cut in Parachute Rigid packs, overall volumes increased ~8% y- o-y, domestic operations recorded ~8% volume growth. Consolidated gross margins at ~52% expanded by ~722bps y-oy as market prices of Copra and Liquid Paraffin were down ~41%, and ~19% YoY respectively. High A&P outlay (+~22%) and other expenses (+~14% YoY) limited EBITDA margins expansion to ~314bps YoY. Operating margins were in-line with our estimates. Depreciation % % Other income % 277-1% EBIT 3,807 3,312 15% 2,111 80% Interest % 68-21% PBT 3,753 3,267 15% 2,044 84% Tax 1, % % Effective tax rate 28.6% 30.1% -148bps 33.2% -461bps PAT 2,681 2,285 17% 1,366 96% Minority Interest Reported PAT 2,679 2,285 17% 1,362 97% Adjusted PAT 2,679 2,285 17% 1,362 97% Domestic volumes in key brands Parachute (Rigid Packs), Value added hair oils and Saffola grew ~7%, ~9% and ~11% respectively. Domestic value growth in key brands Parachute (Rigid Packs), Value added hair oils and Saffola were ~(-12%), ~9% and ~11% respectively. International operations recorded ~6% growth led by ~4% constant currency growth. Constant Currency growth - MENA ~6%, South Africa ~8%, South East Asia ~15% Bangladesh ~(- 6%). The management noted that they gained market share in more than ~55% of its consolidated portfolio and maintained market share in the coconut hair oil category. Adj PAT margin 15% 13% 221bps 11% 473bps Adj EPS % % Page 33

34 Marico Financial Summary CMP Rs.299 Target Rs.264 REDUCE Abridged Financial Statements Key Metrics Rs.mn FY15 FY16 FY17E FY18E FY15 FY16 FY17E FY18E Profit & Loss Growth Ratios (%) Revenue 57,330 60,245 62,551 70,986 Revenues 22% 5% 4% 13% EBIDTA 8,701 10,514 11,600 13,130 EBIDTA 16% 21% 10% 13% Other Income ,059 1,243 PAT 18% 26% 15% 14% Depreciation ,000 1,124 Margins (%) EBIT 8,446 10,499 11,659 13,248 Gross 45.6% 48.9% 52.1% 50.7% Interest EBIDTA 15.2% 17.5% 18.5% 18.5% PBT 8,216 10,292 11,544 13,150 PAT 10.0% 12.0% 13.3% 13.3% Tax 2,368 3,054 3,232 3,682 Return Ratios (%) rmalised PAT 5,734 7,233 8,306 9,461 RoCE 29.1% 33.0% 34.9% 36.0% EPS (Rs.) RoE 36.0% 36.9% 37.3% 38.0% Balance Sheet Total Asset Turnover (x) Net Worth 18,248 20,968 23,525 26,304 Leverage Ratios (x) Loan Funds 3,342 1,532 1,328 1,128 Debt to Equity Deffered Tax Liability Current Ratio Other Long Term Liability Working Capital Ratios Sources of Funds 21,936 22,860 25,219 27,805 Debtor Days Net Block 5,898 5,826 6,026 6,101 Inventory days Intangible Assets 4,891 4,980 4,980 4,980 Creditor Days Investments 3,344 5,168 8,750 10,750 Per Share Other Long term Assets 1, Face Value Total Current Assets 15,911 17,676 16,999 18,434 Dividend (Rs.) Total Current Liabilities 9,361 11,473 11,638 12,563 Valuation Metrics Net Current Assets 6,550 6,203 5,361 5,872 Shares Outstanding (mn) 1,290 1,290 1,290 1,290 Application of Funds 21,936 22,860 25,219 27,805 Market Cap. (Rs. mn) 3,85,699 3,85,770 3,85,770 3,85,770 Cash Flow Enterprise Value (Rs. mn) 3,83,718 3,79,037 3,76,394 3,74,746 Cash Flow from Operation 6,648 8,326 8,066 8,385 EV /Sales (x) Capex 591 1,007 1,200 1,200 Price/Earnings (x) Cash Flow from Investments -1,792-2,357-3,141-1,957 Price/Book (x) Free Cash Flow 6,070 7,469 4,925 6,427 EV/EBIDTA (x) Cash Flow from Financing -6,255-5,799-6,068-6,980 FCF Yield (%) 1.6% 2.0% 1.3% 1.7% Closing Cash Balance 2,049 3,097 1,955 1,402 Dividend Yield 0.8% 1.1% 1.2% 1.4% Page 34

35 Marico Crystal Gazing CMP Rs.299 Target Rs.264 REDUCE Being the market leader, MRCO s dominance in the Coconut Hair Oil (CHO) category is indisputable. Increasing traction We believe Marico would deliver a revenue and earnings CAGR of ~14% & ~18% respectively over the next four years FY11 FY15 FY16 FY17E FY18E FY19E FY20E Revenue 31,350 57,330 60,245 62,551 70,986 80,820 92,337 EBITDA 4,181 8,701 10,514 11,600 13,130 15,011 17,336 Margins 13.3% 15.2% 17.5% 18.5% 18.5% 18.6% 18.8% PAT 2,473 5,734 7,233 8,306 9,461 10,858 12,586 EPS Entry = 41x FY18E in other domestic categories/brands as VAHO & Saffola to add to growth momentum. Revival and healthy double digit growth in youth portfolio to augur well from a Capital efficiency to remain at robust levels at par with peers in our coverage universe FY11 FY15 FY16 FY17E FY18E FY19E FY20E RoE 31.5% 36.0% 36.9% 37.3% 38.0% 39.0% 40.3% ROCE 20.5% 29.1% 33.0% 34.9% 36.0% 37.3% 38.9% Working capital days Cumulative Dividends of Rs.~19 TOTAL RETURN OF 1.35x long term perspective. If Marico continues to keep competition at bay as till now, MRCO is expected to be a good compounding play. Minimal chances of rerating with valuations currently at near peak levels PE range P/E multiple FY20E EPS Price target 36x Rs.9.8 Rs x Rs.9.8 Rs.372 Trading History % of times stock traded <20x 20x-24x 24x-28x 28x-32x 32x-36x >36x 0.1%% 24% 40% 13% 16% 7% EPS CAGR of ~18%, exit multiple of 36x FY20E Page 35