Investment Product: Wealth Creators

CMP
Weights (%)

10th sep-14

Target price
(June 2017)
(Rs)

Upside

Larsen & Toubro

Cummins
Finolex Cables
IRB Infra
Gateway Distripark
Selan Exploration

Theme: Play on better policy environment (Policy push)

8.00%
1585
3800
8.00%
690
1708
4.50%
230
650
4.50%
265
680
4.50%
260
745
4.50%
546
1680

140
148
183
157
187
208

ICICI Bank
State Bank of India

Theme: Early gainers of economic revival/PSU re-rating

8.00%
1570
3850
8.00%
2550
5800

145
127

PTC India Financials

Ashok Leyland
Tata Motors - DVR
Gabriel India

4.50%
8.00%
8.00%
4.50%

105
90
850
155

133
114
123
107

1550
5100
1140
150

80
96
140
188

45
42
381
75

Theme: Evergreen stocks/Other bottom up picks

Sun Pharmaceuicals
TCS
Dhanuka Agri
Network 18 Media

8.00%
8.00%
4.50%
4.50%

860
2600
475
52

Larsen & Toubro

Company
L&T

Reco price (Rs) Potential PT (Rs)

June 2017
10-09-2014
1,585

3800

Portfolio
weight
8%

Upside
140%

Theme
Policy Push

Larsen & Toubro is the largest engineering and construction company in India, having a wide presence
across segments. We believe L&T would be the largest and direct beneficiary of the expected policy
push by the government to kick-start the investment cycle. An unparallel execution track record,
diversified presence, high management quality and strong balance sheet are the key advantages L&T
enjoys over peers.

Despite a slowdown in the domestic environment, the company has exhibited impressive order inflow
with expansion of its operations to overseas markets in the recent past; currently, it has a healthy
order book (book/bill ratio at 2.6x) which could swell further once the domestic environment improves.

During the last capex cycle (FY03-07), the stock was a ten-bagger (earnings grew 5x) but it largely
remained flattish during the slowdown (FY08-14). It is much stronger now and well placed ahead of the
next capex cycle. The stock is a potential multi-bagger in our view.

An expanding geographical presence, monetisation of assets and several efforts to improve returns
ratios would be supportive for the company. L&T is one of our preferred quality cyclical plays.

Risk: A longer than expected recovery in the domestic capex cycle and execution risks, like cost and
time overruns, especially for the hydrocarbon projects

Cummins India
Company
Cummins

Reco price (Rs) Potential PT (Rs)

June 2017
10-09-2014
690

1708

Portfolio
weight
8%

Upside
148%

Theme
Policy Push

Cummins India is a dominant player in the power genset segment with superior technology and services.
An expected recovery in the industrial cycle will regenerate demand for power gensets, especially backup gensets. The other segments of the company (automotive and industrial) would also benefit from the
expected revival.

Cummins India is well equipped with the new CPCB-II norms (in effect from July 1, 2014) which would
keep it ahead of many un-organised peers and help to gain market share. The backing of an MNC parent
(Cummins Inc, USA) gives a strong brand recall and helps in sweating its assets by sourcing from it
products for the European market.

During the last up-cycle, the stock had multiplied by 5x in 5 years with high earnings growth. We believe
led by a revival in the capex cycle, the company will witness an earnings growth with volume
improvement. Hence, we expect the stock to deliver substantial returns in the next few years.
Moreover, a strong balance sheet, healthy cash flows and superior return ratios (30%) play in favour of
the stock.

Risk: Elongated delay in recovery of THE capex cycle and improving power deficit situation in the
country.

Gateway Distriparks
Company
Gateway

Reco price (Rs) Potential PT (Rs)

June 2017
10-09-2014
260

745

Portfolio
weight

Upside

4.5%

Theme

187% Policy push wealth creator

An improvement in exim trade along with a rise in port traffic at the major ports is pointing to an
improving business environment for the logistic companies. Gateway Distriparks being a major player
in the CFS and rail logistic segments is expected to witness an improvement in the volumes of its CFS
and rail divisions going ahead.

The improving trend in the rail freight and cold chain subsidiaries would sustain on account of the
recent efforts to control costs and improve utilisation.

We continue to have faith in the companys long-term growth story based on the expansion of each of
its three business segments, ie the CFS, rail transportation and cold storage infrastructure segments.
First, we believe the listing of SLL will unlock the inherent value and the potential of the cold chain
operations. Second, the coming on stream of the Faridabad facility and the strong operational
performance will boost the performance of the rail operations. Third, the expected turnaround in
global trade should have a positive impact on the CFS operations.

Risk: Downturn in economic activity may affect exim trade.

IRB Infrastructure Developers

Company
IRB Infra

Reco price (Rs) Potential PT (Rs)

June 2017
10-09-2014
265

680

Portfolio
weight
4.5%

Upside
157%

Theme
Policy Push

Post-general election with a stability in the government functioning, the macro environment for the
road sector players is likely to turn supportive. On the other hand, the competitive intensity has eased
out considerably with many players reeling under financial stress. IRB is a key beneficiary with strong
cash flows and relatively better balance sheet than its peers.

Apart from benefiting from the improving macro environment and renewed activity in terms of the
project awards with a better return, IRB is one of the major players to see an improvement in its order
booking over the next two years.

The revival in the construction income along with an upside from the traffic growth is likely to re-rate
the multiple given to its EPC business along with an improvement in the valuation of the BOT projects.
We expect the stock to deliver manifold returns over the next two years.

Risk: Lower economic activity in the country can lead to lower traffic which could affect the valuation
of the companys projects.

Finolex Cables
Company
Finolex

Reco price (Rs) Potential PT (Rs)

June 2017
10-09-2014
230

650

Portfolio
weight
4.5%

Upside
183%

Theme
Policy Push

Finolex Cables is a leading manufacturer of power and communication cables and will benefit from the
industrial revival cycle. The company also plans to launch new product (switchgear) in FY15 which is a
high-margin business. Its high-margin consumer business is already set to move to a new growth trajectory
with strong brand recall and increased distribution network.

Its exposure to derivative contracts in the past had adversely affected its earnings and valuation;
however, its all history now (settled in FY13). Hence, the valuation multiple may see a gradual re-rating
after the maturity of the derivative contracts and reduction in its foreign currency loan.

The new government is keen to revive the infrastructure cycle which would boost the demand for its
core products like cables. Moreover, a healthy balance sheet (net cash and investment positive),
consistently strong free cash flows and RoE in high teens make it a strong case for re-rating of the stock.

Risk: A slower than expected revival in demand and competitiveness as well as volatility in copper prices.

Selan Exploration Technology

Company
Selan

Reco price (Rs) Potential PT (Rs)

June 2017
10-09-2014
546

1680

Portfolio
weight

Upside

4.5%

208%

Theme
Policy Push

Selan Exploration has five wells in Cambay Basin with significant proven oil & gas reserves. Over FY0610 Selan ramped up its production by 4x but production has stagnated since due to policy paralysis (a
delay in approval for new drilling) in the country. However, it received approval in mid-FY2014 and the
exploration programme is on track.

During a recent interaction, the management reaffirmed the potential to increaes production volumes
manifold through the ongoing exploration programme. It has already drilled 11 wells which could
potentially increase the production by 50% over the existing annual production.

The stock had rallied by 400% in the last production ramp-up phase (FY2006-10) with significant
earnings growth and incremental improvement in the balance sheet. We expect the next phase of the
production ramp-up to start soon and the stock price should reflect the same. Apart from the expected
high earnings over the next 2-3 years, strong cash flow, healthy RoE and lean balance sheet would
continue to make it attractive.

Risk: A delay or lower than expected ramp-up in production.

ICICI Bank
Company
ICICI Bank

Reco price (Rs) Potential PT (Rs)

June 2017
10-09-2014
1,570

3,850

Portfolio
weight
8%

Upside
145%

Theme
Early Gainers of Economic Revival

ICICI Bank is the countrys largest private sector bank with a market share of ~6% in the domestic
banking sector and assets worth Rs100bn. The bank has pan-India presence with ~4,000 branches and
significant overseas presence via subsidiaries and branches. It has successfully transitioned from a
development finance institution and made deep inroads into the retail segment both on asset and
liability fronts.

It has nurtured subsidiaries which command leadership in most segments these operate in (viz life
insurance, general insurance, capital markets etc). Going ahead, monetisation will result in substantial
value unlocking from the subsidiaries, which are grossly undervalued in the current scenario.

Going ahead, as PSU banks are likely to lose market share due to weak capital position and other
factors, ICICI Bank is set to gain market share supported by a revival in economy. While the bank has
given robust returns in the last decade (up 5.5x), it is among the biggest contenders for rerating in the
banking sector going ahead.

Risk: Any adverse regulations from RBI or delayed recovery in economy will delay the rerating
prospects.

State Bank of India

Company
SBI

Reco price (Rs) Potential PT (Rs)

June 2017
10-09-2014
2,550

5,800

Portfolio
weight
8%

Upside

Theme

127% Evergreen wealth creator

SBI is India's largest bank in terms of most comparable parameters such as assets size, branch network
(18,000) and customer base. As its tagline says, Banker to every Indian, it also corners the largest
share of government business and has overseas presence in 34 countries. With a revival in the
investment cycle and pick-up in consumption, being the largest bank it is likely to benefit
disproportionately.

SBI has a market share of ~18% and along with associate banks it commands a market share of ~25% in
the banking system. Going ahead, SBI will look to merge its associate banks which will give unmatched
hold in the domestic banking sector and boost economies of scale. In addition, the likely monetisation
of insurance and other subsidiaries will strengthen the capital position of bank.

Apart from that SBI also stands to benefit from the pending reforms in government owned banks
(autonomy, holding company structure, reduction in government stake, easing of investment norms)
which builds genuine case for expansion in valuation multiples. SBI is the best pick among the
government owned banks.

Risk: Sluggish recovery in economy could inhibit improvement in the asset quality.

PTC India Financial Services

Company
PFS

Reco price (Rs) Potential PT (Rs)

June 2017
10-09-2014
45

105

Portfolio
weight
4.5%

Upside
133%

Theme
Early gainer of Economic Revival

PFS is among the specialised lenders in power sector having a strong presence in renewable energy project
financing. As the new government is committed to increasing support to the renewable energy sector
(solar, hydro projects etc), there will be immense opportunities going ahead. PFS has diversified into other
infra related sectors like mine development, railway sidings etc which increases the scope for growth.
Given the small book size, there is fair visibility of 40-50% loan growth for next 3-4 years.

The renewable projects involve lower gestation periods and government support leading to insignificant
asset quality issues. Therefore, PFS can sustain its asset quality which already remains the best in the
system. Also, despite being a small institution it has access to diverse funding mix (ECBs, NCDs, infra bonds
etc) which will cushion the margins.

The company has equity investments (~25% of net worth) in various projects at preliminary stages which
could result in substantial value unlocking. Given the consistent increase in the balance sheet size and
uptick in return ratios, the stock will trade at higher than its historical valuation.

Risk: Delay in power sector reforms or adverse interest rate scenario could affect the earnings.

Ashok Leyland
Company
ALL

Reco price (Rs) Potential PT (Rs)

June 2017
10-09-2014
42

90

Portfolio
weight
8%

Upside
114%

Theme
Early gainer of Economic Revival

Ashok Leyland is the second largest CV manufacturer in India with a market share of 25% in the heavy
truck segment and that of 40% in the bus segment. The CV segment, which had halved over FY2012-14,
is expected to witness a sharp recovery with a pick-up in the economy.

It entered the LCV segment with the launch of Dost in JV with Nissan. Since then the JV has launched
the Partner LCV and Stile van and is expected to gain a foothold in the segment.

The company is also concentrating on verticals such as exports, diesel genset and defence to de-risk its
business model. Its defence business is expected to get a leg-up due to the governments focus on
indigenous manufacture of defence products and FDI in the sector.

The companys OPM has recovered from the lows on the back of a reduction in discounts and price hikes
taken, and are expected to expand due to operating leverage. The company has raised Rs660 crore via
QIP and is in the process of selling non-core assets to pare its debts. With no significant capex planned,
we expect de-leveraging of the balance sheet and improvement in return ratios.

Risk: A slower than anticipated recovery in the economy.

Tata Motors (DVR)

Company
TAMO (DVR)

Reco price (Rs) Potential PT (Rs)

June 2017
10-09-2014
381

850

Portfolio
weight
8%

Upside
123%

Theme
Early gainer of Economic Revival

Tata Motors is the market leader in the domestic CV segment with a market share of about 60%. The
segment has been the hardest hit due to economic slowdown with volumes halving over two years. With
the expected pick-up of the economy the company would be a key beneficiary.
The company is in the process completely overhauling its loss-making PV division which will play out over
the next five years. With the pipeline of new launches, we expect the division to turn a corner and cut
down on losses.
The companys luxury vehicle manufacturing arm, Jaguar Land Rover (JLR), is riding on the success of
new volumes, impressive growth in volumes in China and a strong profitability. We expect the growth to
remain buoyant, given the product pipeline with JLR including an entry into new segments, like compact
luxury sedans, which will be a volume driver. Profitability too is expected to remain healthy going
forward.
The TAMO DVR (Differential Voting Rights) is currently trading at a discount of 30-35% to the ordinary
share. The discount has narrowed from ~50% earlier. We expect the discount to further narrow on the
back of further acceptance of the DVR shares and a possibility of listing of DVR shares outside India.
Hence we like the TAMO DVR stock.
Risk: Delay in economic revival in the country; and slowdown in demand for luxury vehicles in key
markets such as USA, Europe and China.

Gabriel India
Company
Gabriel

Reco price (Rs) Potential PT (Rs)

June 2017
10-09-2014
75

155

Portfolio
weight
4.5%

Upside

Theme

107% Early gainer of Economic Revival

Gabriel India (a leading manufacturer of shock absorbers with a strong market share) would outpace the
growth in the two-wheeler industry, given its higher revenue share with Honda Motorcycle and Scooter
India (HMSI) and TVS Motor Company, which are growing faster than the market (due to a strong
presence in the scooter segment). It also plans to invest in Gujarat for HMSIs upcoming plant.

A pick-up in the CV and PV segments (due to a revival in the industrial capex cycle), strong diversified
clientele and the companys focus on margin attractive aftermarket and export segments would further
enhance the margin profile. The company targets to increase export revenue share from 3% to 10% in
the medium term.

Constant efforts of de-leverage the balance sheet along with better capacity utilisation would lead to
strong earnings growth of 30% CAGR over FY14-19.

Risk: A delay in uptick in the PV and CV segments and any loss in revenue share from HMSI will affect the
earnings estimates negatively.

Tata Consultancy Services

Company
TCS

Reco price (Rs) Potential PT (Rs)

June 2017
10-09-2014
2600

5,100

Portfolio
weight
8%

Upside
96%

Theme
Evergreen Stocks

TCS is the most formidable player among the Indian IT incumbents and has risen to become the most
trusted bellwether Indian IT company. It is a leader in most service offerings and has further
consolidated its position as a full service player by demonstrating consistent financial and operational
performance.

It has created immense wealth since its listing in August 2004, almost going up by 12.5x since its listing.
What sets TCS apart from its peers is its management bandwidth, consistently improving business
metrics and investments in the emerging technologies in the areas of SMAC (Social, Mobile, Analytics,
Cloud; which is a massive area of growth going forward).

Going ahead, TCS is extremely well positioned to latch on to the opportunities that the market place has
to offer due to its scale while the companys full service business model will help it stand firm even
during times of turbulence. This makes it one of the safest bets in the large-cap Indian IT services space
and a must have in ones portfolio for the longer term.

Risk: A downturn in the focused markets like the USA or Europe will have an impact on the earnings; and
a significant appreciation in the rupee will affect earnings negatively.

Sun Pharmaceutical Industries

Company
Sun Pharma

Reco price (Rs) Potential PT (Rs)

Sept. 2017
10-09-2014
860

1,550

Portfolio
weight
8%

Upside

Theme

80% Evergreen wealth creator

SunPharma has emerged as the largest generic formulations companies from India. The combination of
Sun Pharma with its subsidiaries Taro, Dusa Pharma and the generic business of URL Pharma offers an
excellent business model for the US market.

The anticipated acquisition of Ranbaxy augurs well for Sun Pharma as it will help it establish a
leadership position in the key markets including India, apart from leading to synergy of $250 million in
next two years. We believe that Sun Pharma is the only group that has the capabilities to turnaround
the Ranbaxy business and create value for minority shareholders of both Sun and Ranbaxy.

With strong cash balance of Rs12,000 crore, it is well positioned to capitalise on the growth
opportunities by inorganic means.

Risk: A delay in the merger of Ranbaxy or in the resolution of USFDA issues on Ranbaxys India-based
facilities and Sun Pharmas Karkhadi facility are the key risks.

Dhanuka Agritech
Company
Dhanuka

Reco price (Rs) Potential PT (Rs)

June 2017
10-09-2014
475

1,140

Portfolio
weight
4.5%

Upside
140%

Theme
Bottom up Pick

Dhanuka Agritechs asset-light business model is one of the unique business models in Indian agro
chemicals business. The company is focusing on tie-ups with global agro-chemical majors to procure
active ingredients for manufacturing and marketing of specialty molecules. The asset-light model along
with exclusive tie-ups with MNCs has worked well for the company and resulted in high return ratios as
compared with peers. The companys marketing network is one of the best in India which penetrates
even the interiors of villages. This has given the company a distinct edge over competition.
It has a strong pipeline of new product launches over the next three years which would considerably
boost its revenues and profitability. The company is going to launch 6 exclusive new molecules in the
domestic market in the next 2 years of which two molecules have potential to become a blockbuster.
In order to produce new and exclusive products the company has started to increase the capacity by the
way of setting up a greenfield project in Rajasthan. The capacity of the project will be double the
current capacity, so after the greenfield expansion its capacity will become three times its current
capacity. Consequently, it would get opportunity to monetise 6 acres of land in Gurgaon (site of its oldest
plant).
Risk: Consumption may get affected by a decline in acreage due to lower rainfall.

Network 18 Media and Investments

Company
Network 18

Reco price (Rs) Potential PT (Rs)

June 2017
10-09-2014
52

150

Portfolio
weight
4.5%

Upside
188%

Theme
Bottom Up Pick

Network 18 Media and Investments (Network 18) is India's leading media and entertainment company
with
a
wide
range
of
interests
in
television
(TV18
Borasdcast),
Internet
(web18/Yatra.com/BookMyShow.com), films (Viacom18), e-commerce (HomeShop18), magazines, and
mobile content and allied businesses.

The company now has a very strong backing and parentage from its new cash-rich promoters, Reliance
Industries Ltd (RIL). We believe that RIL would be able to make the best use of Network18s strong
content capabilities across platforms (print, TV, mobile and Internet) by monetising the same through
its nationwide 4G launch. This, we believe, would trigger a significant amount of value unlocking of
Network18s assets, like Homeshop 18 and bookmyshow.com amongst others which have large
untapped potential.

With one of the widest ranges of offerings in the media and entertainment space along with a strong
parentage (RIL), we believe Network 18 could be the next big success story in the Indian media and
entertainment space. Additionally, the fact that consumption of media and entertainment is rapidly
moving towards digital platform could favour Network 18s business model in a big way in the longer
term.

Thank You