Institutional Equity Research

Reco Range Stop Loss Target

Pidilite Industries 703 665 785

FMCG | April 05, 2017

Background & Business

Incorporated in 1959, Pidilite Industries (Pidilite) is a dominant player in Indias adhesives/sealants and construction chemicals industry with 1 Year Stock Price Performance
iconic brands like Fevicol, M-Seal, Fevikwik and Dr. Fixit. We believe that Pidilites core strengths continue to remain intact despite near-term 800

headwinds on volume growth front due to weak consumer demand. 750

Investment Rationale 700

ff Strong Foundation for Sustainable Growth: Owing to significant enhancement in management bandwidth to transform the Company 650

from Professionally run by Family to run by Family of Professionals, Pidilite has laid foundation for sustainable growth. 600

ff Secret Sauce of Success: Over the years, Pidilite has successfully leveraged its core strengths to drive growth. That includes an expertise 550

to identify underserved segment where consumer demand is not being fulfilled, intervention with a brand in a commoditised space to 500

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fill the demand, and significant focus on developing, nurturing as well as enhancing relationship with the chain of influencers as well as
the end-users.
Note: *CMP as on April 03, 2017
ff Top-notch Advertising Strategy to Aid Growth: Humorous advertising campaigns conceptualised by O&M have been the backbone
behind making consumers aware of brands and their benefits, which also ensured Pidilite to win several accolades.
ff Improved Traction in International Biz: Focus on emerging economies in Asia & Africa and reducing share of Brazilian business augur Key Figure
well for Pidilites international division in coming years. Market Cap ( Rsbn/US$mn ) 360/55.3
Outlook & Valuation Current Price 703
Unmatched market leadership in under-penetrated category, strong brand equity, robust pricing power and superior management bandwidth
Target Price 785
would continue to drive growth for Pidilite, going forward. We expect Pidilite to report consolidated sales of Rs57.2bn and Rs65.8bn and net
profit of Rs8.5bn and Rs10bn in FY17E and FY18E, respectively. Promoters / Public & Others 69.6/30.4
FY18E P/E (x) 36.2
Risks
Revenues CAGR (FY16-18 %) 10.7%
ff Delay in recovery in consumer demand.
PAT CAGR (FY16-18 %) 14.8%
ff Northward movement in crude oil prices.
ff High competitive intensity.
Y/E Mar (Rs mn) FY16 FY17E FY18E Key Ratios FY16 FY17E FY18E
Revenues 53,695 57,257 65,832 P/E (x) 47.8 42.3 36.2
EBITDA 11,739 12,988 15,030 P/BV (x) 13.0 10.8 9.1
Ebitda Margin % 21.9 22.7 22.8 EV/EBITDA (x) 26.0 26.9 23.1
Adj.PAT 7,555 8,501 9,952
ROE (%) 29.9 27.8 27.4
Source: Company, RSec Estimates
Research Team; Contact: (022) 33201202; Email: rsec.research@rcap.co.in
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Institutional Equity Research
Reco Range Stop Loss Target
JSW Energy 64 61 70

Power | April 05, 2017

Background & Business

JSW Energy (JSWEL) a group company of Jindal South West (JSW) Group headed by Mr. Sajjan Jindal is the first Independent Power 1 Year Stock Price Performance
Producer (IPP) in Karnataka with a capacity of 4,531MW. In May, 2008, the Company has a Joint Venture (JV) arrangement with Toshiba 90

Corporation, Japan for setting up of Turbine & Generator manufacturing facility in India. 85
80
Investment Rationale 75

ff High Exposure to Merchant Power Biz to Continue: Looking ahead, we envisage the merchant rates would harden further on the back 70
65
of lower PLF and revival of SEBs post implementation of UDAY scheme, while JSWEL continues to rely on imported coal. Further, 35% of its
60
total capacity of 4,531MW is under the merchant route, which provides higher profitability in case merchant rates hardens on expected 55
lines. 50

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ff Largely Dependent on Spot Imported Coal; Coal Prices Expected to Fall: Despite JSWEL standing lower in fuel security (due to excessive
dependence on imported coal), we believe that recent correction of 10% in coal prices following sharp rise of 40% from Jun16 will get
offset higher merchant rates. We expect the demand to revive in 1QFY18E in the South especially in Karnataka given lower demand for Note: *CMP as on April 04, 2017

past few months.

ff Expansion Plan on Track: Over the past 6 years, JSWEL has enhanced the power generation capacity from 260MW to 4,531MW. It Key Figure
operates 4,531MW (Thermal: 3,140MW & Hydel: 1,391MW) of power generation capacity with the vision to achieve 10,000MW by 2020.
Market Cap ( Rsbn/US$mn ) 105.3/16.1
We believe that securing 650MW power plant contract in Karnataka would provide a long-term cash-flow visibility with high RoE.
Current Price 64.0
Outlook & Valuation
We believe that the negatives relating to weak merchant realization have already been priced in. With sustainable core RoEs of 13-15%, we Target Price 70.0
believe that current valuation at 1.0x P/B its FY18E provides margin of safety. Promoters / Public & Others 75/25

Risks FY18E P/E (x) 9.4

ff Lower-than-expected merchant realizations. Revenues CAGR (FY16-18 %) (1.2)

ff Higher-than-expected coal prices. PAT CAGR (FY16-18 %) (6.3)

Y/E Mar (Rs mn) FY16 FY17E FY18E

Revenues 99,689 91,913 97,280
Key Ratios FY16 FY17E FY18E
EBITDA 41,446 41,137 40,246
P/E (x) 7.4 9.7 9.4
Ebitda Margin % 41.6 44.8 41.4
P/BV (x) 1.2 1.1 1.0
Adj.PAT 12,455 10,697 10,941
EV/EBITDA (x) 5.2 5.5 5.6
ROE (%) 15.5 11.9 11.1
Source: Company, RSec Estimates

Research Team; Contact: (022) 33201202; Email: rsec.research@rcap.co.in

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Institutional Equity Research

Recommendations Summary

Total Recommendations Numbers ff We do not keep open positions more than four at any point of time.

STOCKS 36 ff Assuming Rs1 lakh investment in every stock, the cumulative investment stand at Rs4 lakh.

CLOSED 32 ff Till date, our closed calls have given profit to the tune of Rs80,150 since inception.

POSITIVE 22
Amount Invested (Rs) Cumulative Profit (Rs) % Return
NEGATIVE 10
400000 80150 20.0%
OPEN 4

Strike Rate on closed calls 69%

Open Positions
Stock Symbol Sector Reco Date Reco Price CMP SL Target Remarks

PIDILITIND FMCG 5-Apr-17 703 703 665 785 BUY

JSWENERGY Power 5-Apr-17 64 64 61 70 BUY

AUROPHARMA Pharma 2-Mar-17 678 682 638 765 HOLD

NIITTECH IT 17-Feb-17 424 434 395 485 HOLD

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Institutional Equity Research

Closed Positions
Stock Symbol Sector Reco Date Reco Price Exit Price Exit Date Return % Remarks

DABUR FMCG 3-Feb-17 274 280.5 22-Mar-17 2.4% Booked Profit

NCC Construction 2-Mar-17 83 78 9-Mar-17 -6.0% Booked Loss

ABFRL Retailing 17-Feb-17 150 160 28-Feb-17 6.9% Booked Profit

HCLTECH IT 3-Feb-17 827 854 22-Feb-17 3.3% Booked Profit

INOXWIND Capital Goods 17-Jan-17 182 173 17-Feb-17 -5.2% Booked Loss

JUBLFOOD FMCG 17-Jan-17 833 866 31-Jan-17 4.0% Booked Profit

ASIANPAINT FMCG 4-Jan-17 897 958 17-Jan-17 6.8% Booked Profit

CROMPTON Capital Goods 1-Dec-16 148 156 13-Jan-17 5.5% Booked Profit

CADILAHC Pharma 4-Jan-17 355 377 6-Jan-17 6.2% Booked Profit

ASHOKLEY Auto 16-Dec-16 78 80 30-Dec-16 3.2% Booked Profit

TITAN FMCG 16-Dec-16 315 327 30-Dec-16 4.0% Booked Profit

FEDERALBANK Banking 1-Dec-16 71 65 23-Dec-16 -8.5% Booked Loss

CADILAHC Pharma 16-Nov-16 358 386 23-Nov-16 7.7% Booked Profit

TECHM IT 16-Nov-16 431 454 17-Nov-16 5.2% Booked Profit

AMBUJACEM Cement 3-Oct-16 252 238 3-Nov-16 -5.6% Booked Loss

INFY IT 17-Oct-16 1027 980 2-Nov-16 -4.6% Booked Loss

ABFRL Retailing 3-Oct-16 138 148 21-Oct-16 6.9% Booked Profit

ASHOKLEY Auto 17-Oct-16 81 85 20-Oct-16 5.1% Booked Profit

BAJAJCORP Consumer 1-Sep-16 400 406 14-Oct-16 1.4% Booked Profit

Continued...

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Institutional Equity Research

Closed Positions
Stock Symbol Sector Reco Date Reco Price Exit Price Exit Date Return % Remarks

SUNPHARMA Pharma 17-Aug-16 783 733 29-Sep-16 -6.4% Booked Loss

NAVKARCORP Logistics 16-Sep-16 200 184 29-Sep-16 -8.0% Booked Loss

AUROPHARMA Pharma 16-Sep-16 783 859 23-Sep-16 9.6% Booked Profit

INFY IT 1-Sep-16 1036 1064 19-Sep-16 2.7% Booked Profit

KEC Capital Goods 30-Jul-16 143 133 7-Sep-16 -7.0% Booked Loss

MGL Oil-Gas 17-Aug-16 537 595 23-Aug-16 10.8% Booked Profit

ABFRL Retailing 30-Jul-16 145 162 18-Aug-16 11.6% Booked Profit

PFS NBFC 2-Jul-16 39 38 16-Aug-16 -2.1% Booked Loss

UPL Agrochemicals 15-Jul-16 566 616 29-Jul-16 8.9% Booked Profit

CROMPTON Capital Goods 15-Jul-16 144 156 28-Jul-16 8.6% Booked Profit

SUNPHARMA Pharma 2-Jul-16 763 801 21-Jul-16 5.0% Booked Profit

PERSISTENT IT 21-Jun-16 696 650 18-Jul-16 -6.6% Booked Loss

NBCC Infrastructure 21-Jun-16 186 213 7-Jul-16 14.3% Booked Profit

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 Institutional Equity Research

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