India | Strategy 16 August 2019

Quarterly Review

Q1FY20 Review
Earnings flatter to deceive Nifty 50 earnings grew by 9% in Q1FY20…

Auto, metals, materials and energy drag bottom-line PAT Inc Fin 9.0

As against our expectation for a growth in Nifty 50 net sales, EBITDA (11.1)
PAT Ex Fin
and PAT of 6.8%, 4.8% and 16.2% (please refer to Bottom-line expansion
Global Markets Research

to continue published on 9 July 2019), we ended Q1FY20 with a EBITDA (2.9)

growth of 6.5% and 9.0% in sales and PAT and a contraction in EBITDA
by 2.9%. Overall profitability was 7% below our expectations, primarily Sales 6.5
due to lower-than-expected bottom line from auto. Ex-financials, results
(15) (10) (5) 0 5 10 15
were 4% below our expectations. Key highlights of Q1FY20 are as
YoY (%)
follows:
Source: Elara Securities Research
 Major contributions to PAT growth came in from financials (lower …led by financials, healthcare and industrials
slippages & higher interest reversals), healthcare (niche product
Growth Chg
approvals in the US), industrials (higher traction in order inflows) (%)
EBITDA
Sales EBITDA PAT margin
and consumer discretionary. Auto (volume decline), telecom bps
(competitive intensity) and metals are the laggards Auto (7.4) (24.6) (84.5) (198.0)
Consumer Discr. 15.6 20.4 30.7 80.3
 ICICI Bank, SBI, Axis Bank, UltraTech Cement and Zee Entertainment Consumer Staples 6.0 10.0 12.0 121.1
were major contributors to PAT growth while Bharti Airtel, Yes Bank Energy 10.8 (9.1) (10.3) (249.7)
and Tata Motors dragged PAT growth Financials NM NM 96.7 NM
Health Care 7.6 13.6 33.1 113.6
 EBITDA margin expanded in telecom, utilities and staples while it Industrials 10.0 23.2 32.4 210.9
declined sharply in energy (lower GRM), materials (cement volume IT 11.9 6.0 4.0 (125.8)
decline), metals and auto (low volumes) Materials 36.9 17.3 (16.2) (298.1)
Metals (1.6) (19.5) (53.2) (369.8)
 Materials, consumer discretionary and IT led top line growth, while Telecom 4.4 8.3 (179.2) 124.0
auto and metals dragged. Utilities 7.2 11.4 4.4 129.2
Source: Elara Securities Research
Nifty 50 beat ratio improves from -10% to 10%
Nifty 50FY20 NER deteriorates
Among Nifty 50, 23 stocks saw an earnings beat (actual results exceed
30
estimates by >5%) while 18 saw an earnings miss. The beat ratio (net 20 20
earnings surprise divided by the total number of stocks) improved from - 10
0
(%)

0
10% to 10%, largely due to earnings beat in metals, energy and IT. (10) (16)
(20) (8) (10)
Nifty 50 net earning revision ratio (NER) negative (30) (24) (32)
(40)
QoQ, Nifty 50 NER (number of upgrades minus downgrades divided by
Q3FY18

Q4FY18

Q1FY19

Q2FY19

Q3FY19

Q4FY19

Q1FY20
total stock) deteriorated and is at -10% for FY20.

Elara view on Nifty 50 EPS for FY20E and FY21E FY20

We have downgraded Nifty 50 EPS for FY20 to 582 (4.3%) and FY21 to Source: Bloomberg Elara securities Research
701 (4.2%) from the past quarter, primarily led by auto, energy and IT. FY20 & 21 EPS cut by 4.3% and 4.2% respectively
At the current levels, our FY20 and FY21 EPS reflects 17.6% and 20.5% 670 800
780
growth over FY19 and FY20 respectively, hinging largely on earnings 650
760
expansion in banks, healthcare and industrials. 630
740
610
Among stocks, which saw consistent upward FY20 earnings revision 720
590 700
(three out of the past four quarters), were Nestle, Wipro, Dr. Reddy’s,
570 680
Bajaj Finance, Power Grid, HDFC Life and Bharti Infratel. Among stocks
Mar-19

Apr-19

May-19

Jun-19

Jul-19

Aug-19
Jan-19

Feb-19

that saw consistent downward FY20 earnings revision (in the past four
quarters) were Exide, Eicher Motors, Mahindra & Mahindra and Lupin FY20E FY21E (RHS)
etc
Source: Bloomberg, Elara securities Research

Pradeep Kumar Kesavan, CFA • pradeep.kesavan@elaracapital.com • +91 22 6164 8541

Anushka Chhajed•anushka.chhajed@elaracapital.com• +91 22 6164 8536

Elara Securities (India) Private Limited

 Q1FY20 Review

Elara view on Nifty 50 EPS for FY20E & FY21E

We have downgraded Nifty 50 EPS for FY20 to 582 (4.3%) and FY21 to 701 (4.2%) from the past quarter, primarily led
by auto, energy and IT.
At the current levels, our FY20 and FY21 EPS reflects 17.6% and 20.5% growth over FY19 and FY20 respectively,
hinging largely on earnings expansion in banks, healthcare and industrials.

Exhibit 1: FY20 & 21 EPS cut by 4.3% and 4.2% respectively Exhibit 2: Nifty 50FY20 NER deteriorates
670 800 30
780 20 20
650
760 10

(%)
630 0 0
740 (8)
610 (10) (10)
720 (16)
(20)
590 (24)
700 (30) (32)
570 680 (40)
Feb-19
Jan-19

Mar-19

Jul-19
Apr-19

May-19

Jun-19

Aug-19

Q3FY18

Q4FY18

Q1FY19

Q2FY19

Q3FY19

Q4FY19

Q1FY20
FY20E FY21E (RHS) FY20

Source: Bloomberg, Elara Securities Research Source: Bloomberg, Elara Securities Research

Among Nifty 50 stocks, Bharti Airtel, Ultratech Cement and Indusind bank had the most upward FY20 earnings
revisions while Yes Bank, Tata Motors, Tata Steel and Maruti saw the steepest downward revisions.

Exhibit3: Nifty 50 Consensus earnings revision (%)

Post results estimate change (%) Q1FY20 Actual vs Consensus FY20 FY21
Company Beat/Neutral/Miss Sales EBITDA PAT Sales EBITDA PAT
Eicher Motors (7.87) (8.22) (12.85) (13.53) (8.53) (12.97) (13.04)
Hero Motocorp 60.67 (6.69) (6.45) (8.46) (6.22) (7.25) (7.81)
M&M 140.51 (3.96) (0.73) (10.72) (4.05) 0.38 (9.56)
Tata Motors (97.36) (4.60) (10.61) (36.61) (4.57) (8.30) (17.83)
Maruti Suzuki 3.04 (6.23) (15.05) (14.75) (7.06) (11.96) (13.00)
Bajaj Auto 4.14 (1.04) (0.06) (2.91) (0.11) 2.81 (0.43)
Grasim Inds (58.59) 3.39 (6.21) (1.65) (8.92) (8.58) (0.27)
UltraTech Cem. 7.15 (0.79) 3.83 5.25 (0.61) 1.27 0.81
Asian Paints 19.16 (0.13) 5.88 1.45 (0.73) 4.66 0.34
Titan Company 0.11 (3.00) (1.83) (5.79) (3.61) (2.14) (5.72)
Zee Entertainmen 36.83 (0.30) 0.43 (0.43) (0.66) 0.24 (1.37)
Hind. Unilever 3.31 (4.55) (1.31) (3.15) (3.17) (0.03) (1.78)
ITC 9.68 (0.48) (1.19) (0.86) (0.53) (1.04) (1.25)
Reliance Inds. 8.19 (0.24) (3.20) (2.63) (0.70) (2.62) (2.55)
BPCL 28.03 (4.01) (4.24) (5.49) (4.73) (0.92) (2.12)
Britannia Ind. (12.39) (3.49) (6.11) (6.99) (4.30) (6.91) (7.28)
ONGC 0.91 0.33 0.49 (5.71) 1.51 1.12 (2.26)
IOCL 11.52 (1.80) (2.80) (3.63) (2.86) (3.47) (2.63)
Coal India 8.06 (0.82) 2.31 (0.29) (1.07) 2.47 (1.00)
Cipla 1.85 (3.18) (2.35) (4.60) (3.04) (2.87) (4.27)
Dr Reddy's Labs 39.68 (1.40) (2.04) 0.71 (1.41) (0.97) (0.26)
Sun Pharma.Inds. 39.55 0.28 (2.08) (0.37) 0.51 (1.27) (1.23)
Larsen & Toubro (5.62) (0.44) 0.76 (1.06) 0.01 0.90 (0.71)
Wipro 2.72 (2.38) (3.64) (2.35) (2.45) (3.09) (2.83)

2 Elara Securities (India) Private Limited

 Q1FY20 Review

Post results estimate change (%) Q1FY20 Actual vs Consensus FY20 FY21
Company Beat/Neutral/Miss Sales EBITDA PAT Sales EBITDA PAT
Infosys 1.66 (0.87) (0.44) (0.73) (0.50) (0.95) (0.90)
TCS 3.30 (1.85) (1.31) (1.76) (1.81) (1.07) (1.93)
HCL Technologies (6.52) (2.20) (2.36) (5.31) (1.42) (0.78) (2.16)
Tech Mahindra (5.03) (2.67) (9.14) (9.45) (3.17) (7.89) (8.83)
Adani Ports 14.46 (0.53) 0.17 0.19 (1.08) (0.31) (0.80)
UPL (64.95) (0.71) (1.96) (5.20) (0.38) (1.07) (3.65)
Hindalco Inds. (82.21) (2.53) (3.50) (6.82) (1.96) (2.48) (5.74)
Vedanta 1.31 (4.35) (6.49) (13.34) (6.24) (3.46) (6.89)
Tata Steel (54.29) (1.50) (8.49) (23.07) (0.90) (3.81) (9.81)
JSW Steel (10.63) (2.73) (6.10) (12.26) (1.41) (3.22) (7.17)

Strategy
Bharti Airtel (196.42) (1.18) 11.29 112.63 (1.59) 9.46 (60.29)
Bharti Infra. 51.97 1.91 11.03 2.29 1.66 12.77 4.97
Power Grid Corpn (1.44) (0.70) (1.51) 1.25 0.56 0.68 5.56
NTPC (7.67) 3.22 0.16 0.29 0.04 0.19 0.37
GAIL (India) 0.68 (4.27) (2.11) (2.25) (3.74) (0.53) 4.25
HDFC 7.74 NM NM 1.81 NM NM (1.67)
St Bk of India (0.79) NM NM (13.23) NM NM (7.75)
Kotak Mah. Bank 4.82 NM NM 1.32 NM NM 0.47
Bajaj Fin. (8.08) NM NM 2.56 NM NM 3.58
HDFC Bank (2.23) NM NM (2.17) NM NM (2.50)
ICICI Bank (8.50) NM NM (3.87) NM NM (0.86)
IndusInd Bank 25.09 NM NM 2.34 NM NM 2.68
Axis Bank (26.14) NM NM (11.00) NM NM (4.99)
Yes Bank (28.63) NM NM (55.53) NM NM (31.82)
Bajaj Finserv 13.53 NM NM (12.21) NM NM (12.73)
Indiabulls Hous. (19.68) NM NM (6.86) NM NM (7.37)
Note: Green indicates positive Earning revision and Actual earning beat in excess of 5%; red indicates negative Earnings revision and Actual earning miss in excess
of 5%; yellow indicates marginal change stance Na Not available; Source: Company, Elara Securities Estimate

Elara Securities (India) Private Limited 3

 Q1FY20 Review

Nifty 50 Q1FY20 beat ratio improves from -10% to 10%

Among Nifty 50, 23 stocks saw an earnings beat (actual results exceed estimates by >5%) while 18 saw an earnings
miss. The beat ratio (net earnings surprise divided by the total number of stocks) improved from -10% to 10%, largely
due to earnings beat in metals, energy and IT.

Exhibit 4: Nifty 50 companies’ results: Consensus earnings surprises vs actual (total)

25 23
22
20
20 18
17
15
15 13
12 12

10 9

0
Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q1FY20
Positive surprise Negative surprise

Note: Positive surprise indicates actual earnings beating Consensus estimate in excess of 5%; Negative surprise indicates actual earnings missing consensus
estimate in excess of -5%. Source: Bloomberg Estimate, Elara Securities Research

4 Elara Securities (India) Private Limited

 Q1FY20 Review

BSE 100 – view on the broader markets

Broader earnings growth for BSE100 is led by financials, logistics and cement while major drags were from auto,
materials, energy and telecom.

Exhibit 5: BSE100 growth (YoY) snapshot

(%) Net sales EBITDA Adj. PAT EBITDA margin (bps)

Auto (3.9) (20.3) (63.0) (198)

Cement 10.5 36.0 36.3 472
Consumer Discr. 14.5 22.6 23.8 129
Consumer Staples 8.4 12.7 11.9 97
Energy 7.1 (14.0) (17.3) (250)
Health Care 15.3 37.7 23.6 401

Strategy
Industrials 4.9 6.8 2.5 25
Metals (1.2) (14.9) (36.5) (288)
Financials 16.9 4.9 85.7 (212)
Logistics 11.0 37.0 39.5 936
IT 11.4 9.4 6.7 (44)
Materials 47.1 32.3 (24.0) (192)
Telecom 4.5 8.0 (227.9) 111
Utilities 7.4 12.2 5.2 136
Total 6.6 (1.1) 2.9 (123)
Source: Capitaline, Bloomberg, Elara Securities Research Financials numbers are not comparable due to first time Ind-AS adoption

The pace of earnings surprises deteriorated marginally during the current earnings season with 25 stocks surprising the
street on the positive (vs 26 stocks in Q4FY19).

Exhibit 6: BSE100 companies’ results: Consensus earnings surprises vs actual (total)

40 37 38 38 38

35 32
30 28
26 26 25
24
25
20
15
10
5
0
Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q1FY20

Positive surprise Negative surprise

Note: Positive surprise indicates actual earnings beating Consensus estimate in excess of 5%; Negative surprise indicates actual earnings missing consensus
estimate in excess of -5%. Source: Bloomberg, Elara Securities Research

Elara Securities (India) Private Limited 5

 Q1FY20 Review

FY20 Net Earnings Revision improved QoQ from -13% to -2%

FY20 Net Earnings revision for BSE 100 improved QoQ from -13% to -2% led by net upgrades in utilities, consumer
staples and consumer discretionary.
Among stocks, which saw consistent upward FY20 earnings revision (three out of the past four quarters), were Nestle,
Wipro, Dr. Reddy’s, Bajaj Finance, Power Grid, HDFC Life and Bharti Infratel. Among stocks that saw consistent
downward FY20 earnings revision (in the past four quarters) were Exide, Eicher Motors, Mahindra & Mahindra and
Lupin etc;

Exhibit 7: BSE100 NER improves largely led by… Exhibit 8: … utilities and energy
20 FY20 40
13
10 6
0 0
(%)

(%)
(3) (2)
(10)
(19) (13) (40)
(20)
(30) (80)
(35)
(40)
Q3FY18

Q4FY18

Q1FY19

Q2FY19

Q3FY19

Q4FY19

Q1FY20

(120)
Energy Utilities Materials

FY20 NER Current quarter NER PQ

Source: Bloomberg, Elara Securities Research Source: Bloomberg, Elara Securities Research

Exhibit 9: Telecom, metals and auto saw major earnings downgrades in Q1FY20
Average Sector FY20 EPS Change (%) June-19 Mar-19 Dec-18 Sep-18
Auto (12.1) (8.9) (9.1) (6.2)
Cement 2.4 6.5 (5.0) (11.2)
Consumer Discretionary (2.1) (6.0) 2.3 (4.5)
Consumer Staples (1.7) (4.2) (1.8) (2.6)
Energy (2.8) 0.8 (0.3) (9.8)
Financials (7.0) (6.1) (0.9) (2.9)
Health Care (3.7) (7.6) (2.0) (1.3)
Industrials (3.8) (2.9) 4.8 (3.0)
Information Technology (3.1) (2.1) (0.9) 6.7
Logistics (0.2) (5.4) (3.5) 4.5
Materials (1.7) 4.3 (2.1) (2.8)
Metals (10.8) (3.6) (15.6) 0.7
Telecommunication Services (26.9) 5.8 (875.8) (10.8)
Utilities 0.2 (2.5) (5.1) 0.6
Grand Total (5.4) (4.1) (20.5) (3.3)
Source: Bloomberg, Elara Securities Research

Exhibit 10: Stocks with FY20 EPS upgrades in 3 out of 4 quarters

Name Sector Aug-18 Nov-18 Feb-19 May-19 Aug-19
Nestle India Ltd Consumer Staples 199.3 201.9 202.2 192.3 193.4
Wipro Ltd Information Technology 15.4 16.5 16.5 16.7 16.5
Dr. Reddy'S Laboratories Health Care 125.1 128.4 131.3 128.0 132.3
Bajaj Finance Ltd Financials 83.7 81.2 88.2 89.4 89.8
Power Grid Corp Of India Ltd Utilities 20.8 19.0 19.2 20.7 20.9
Hdfc Life Insurance Co Ltd Financials 7.1 7.2 7.4 7.4 7.5
Bharti Infratel Ltd Telecommunication Services 14.3 12.7 13.3 13.4 14.1
Source: Bloomberg, Elara Securities Research

6 Elara Securities (India) Private Limited

 Q1FY20 Review

Exhibit 11: Stocks with FY20 EPS downgrade in all 4 quarters

Name Sector Aug-18 Nov-18 Feb-19 May-19 Aug-19
Britannia Industries Ltd Consumer Staples 62.5 60.5 58.9 57.0 53.1
Exide Industries Ltd Auto 12.3 11.7 10.6 10.5 10.1
Cipla Ltd Health Care 28.8 24.9 23.4 23.4 22.1
Eicher Motors Ltd Auto 1,200.9 1,102.3 1,020.5 909.5 780.7
Mahindra & Mahindra Ltd Auto 56.8 56.6 52.9 49.7 44.3
Bosch Ltd Auto 657.4 656.9 623.2 584.9 524.3
Mrf Ltd Auto 3,932.0 3,759.0 3,437.6 3,098.3 3,019.0
Piramal Enterprises Ltd Health Care 162.9 134.3 127.0 121.4 103.9
Vedanta Ltd Metals 34.4 31.2 26.7 22.6 19.7
Shree Cement Ltd Cement 626.0 540.1 503.7 477.9 462.6

Strategy
Tata Power Co Ltd Utilities 7.5 7.1 6.6 5.8 5.5
Tata Global Beverages Ltd Consumer Staples 10.3 9.5 8.8 8.5 8.2
Tata Motors Ltd Auto 34.2 24.6 18.3 14.5 9.4
Shriram Transport Finance Financials 132.7 126.8 125.5 121.4 120.8
Motherson Sumi Systems Ltd Auto 10.3 9.3 8.0 6.5 5.5
Lupin Ltd Health Care 39.1 38.6 34.9 29.4 27.7
Hdfc Bank Limited Financials 98.5 97.5 96.3 95.3 92.8
Maruti Suzuki India Ltd Auto 387.0 373.1 315.3 254.1 240.1
Indusind Bank Ltd Financials 97.6 92.0 90.3 85.8 84.7
Tvs Motor Co Ltd Auto 29.1 25.3 23.1 20.0 16.4
Page Industries Ltd Consumer Discretionary 513.1 477.2 464.1 413.3 386.7
Petronet Lng Ltd Energy 17.6 17.6 17.3 17.0 16.9
Glenmark Pharmaceuticals Ltd Health Care 39.1 37.8 36.5 32.9 30.2
Cadila Healthcare Ltd Health Care 21.2 20.3 19.1 17.0 15.5
Godrej Consumer Products Ltd Consumer Staples 20.0 18.9 18.0 16.5 16.1
Yes Bank Ltd Financials 30.1 25.9 24.1 10.8 4.9
Indiabulls Housing Finance L Financials 122.5 112.9 107.4 95.3 88.9
Avenue Supermarts Ltd Consumer Staples 22.4 21.3 20.4 19.2 19.1
Source: Bloomberg, Elara Securities Research

Exhibit 12: BSE100: number of companies under consensus “Buy” recommendations is flat
80 76 76
70
60
50
40
30 21 21
20
10 3 3
0
Buy Hold Sell
Q4FY19 Q1FY20

Source: Bloomberg, Elara Securities Research

Elara Securities (India) Private Limited 7

 Q1FY20 Review

FY21 Net Earnings Revision improved QoQ from -29% to -23%

Exhibit 13: Telecom, Auto and Metals saw major earnings downgrades in Q1FY20
Average Sector FY21 EPS Change (%) June-19 Mar-19 Dec-18 Sep-18
Auto (9.6) (7.6) (8.7) (4.3)
Cement (0.3) 5.5 (6.1) (4.2)
Consumer Discretionary (2.5) (5.7) 3.5 (4.5)
Consumer Staples (1.6) (4.5) (0.9) (2.3)
Energy (1.7) (0.6) (2.0) (5.8)
Financials (4.8) (4.0) (1.2) (3.3)
Health Care (3.7) (5.9) (0.5) 0.1
Industrials (4.2) 0.5 1.7 (4.0)
Information Technology (2.9) (1.7) (0.6) 8.0
Logistics 0.5 (4.4) 2.9 (3.9)
Materials (1.0) 5.7 (0.4) (2.5)
Metals (5.3) (8.7) (9.4) 1.2
Telecommunication Services (41.1) (26.6) (34.9) (33.7)
Utilities (0.4) 0.2 (7.8) (3.4)
Grand Total (4.7) (3.9) (3.2) (3.1)
Source: Bloomberg, Elara Securities Research

Exhibit 14: Stocks with FY21 EPS upgrades in 3 out of 4 quarters

Name Sector Aug-18 Nov-18 Feb-19 May-19 Aug-19
Acc Ltd Cement 73.4 73.8 75.4 74.3 83.6
Nestle India Ltd Consumer Staples 228.1 236.0 237.8 224.3 226.4
Wipro Ltd Information Technology 16.5 17.7 17.9 18.0 17.6
Dr. Reddy'S Laboratories Health Care 144.6 151.0 153.1 150.8 151.8
Bajaj Finance Ltd Financials 111.6 106.0 109.9 119.2 119.6
Divi'S Laboratories Ltd Health Care 56.8 59.4 68.9 67.2 67.4
Hdfc Life Insurance Co Ltd Financials 8.2 8.3 8.5 8.5 8.7
Source: Bloomberg, Elara Securities Research

Exhibit 15: Stocks with FY21 EPS downgrade in all 4 quarters

Name Sector Aug-18 Nov-18 Feb-19 May-19 Aug-19
Bharat Forge Ltd Auto 32.8 32.4 29.1 27.3 23.4
Britannia Industries Ltd Consumer Staples 75.7 72.4 70.6 67.6 62.8
Exide Industries Ltd Auto 13.6 13.4 12.1 11.8 11.3
Cipla Ltd Health Care 33.5 29.7 28.3 27.8 26.5
Eicher Motors Ltd Auto 1,367.6 1,234.5 1,128.9 1,004.0 870.3
Hero Motocorp Ltd Auto 218.8 213.0 203.2 183.4 174.4
Cummins India Ltd Industrials 34.7 33.9 33.2 32.2 28.6
Mahindra & Mahindra Ltd Auto 49.1 48.8 45.9 42.2 38.2
MRF Ltd Auto 4,411.0 4,029.7 3,684.9 3,323.2 3,228.8
Vedanta Ltd Metals 34.5 31.7 29.7 24.6 22.9
Tata Chemicals Ltd Materials 55.3 54.7 52.1 51.2 51.0
Tata Power Co Ltd Utilities 8.8 8.3 7.2 6.7 6.2
Tata Global Beverages Ltd Consumer Staples 11.4 10.8 10.0 9.7 9.5
Tata Motors Ltd Auto 40.9 32.4 25.2 21.2 17.8
Apollo Hospitals Enterprise Health Care 41.1 40.0 38.9 37.2 36.4
Shriram Transport Finance Financials 156.9 150.8 145.6 140.5 137.3
Motherson Sumi Systems Ltd Auto 11.9 10.5 9.4 7.9 7.1
Dabur India Ltd Consumer Staples 12.3 11.8 11.8 10.9 10.8
Jsw Steel Ltd Metals 35.9 35.2 29.9 29.0 27.1
Hdfc Bank Limited Financials 120.1 119.8 117.9 115.5 112.6
Maruti Suzuki India Ltd Auto 432.2 386.1 346.1 318.0 280.2
Indusind Bank Ltd Financials 120.4 116.9 114.4 110.0 106.7
Indian Oil Corp Ltd Energy 24.9 23.3 21.6 20.5 20.1
Bharti Airtel Ltd Telecommunication Services 14.3 5.8 1.6 0.7 0.1
Cadila Healthcare Ltd Health Care 21.9 21.7 20.8 18.5 17.2
Godrej Consumer Products Ltd Consumer Staples 23.0 21.9 20.9 19.2 18.4
Yes Bank Ltd Financials 37.2 32.8 30.2 15.7 10.7
Source: Bloomberg, Elara Securities Research

8 Elara Securities (India) Private Limited

 Q1FY20 Review

Automobiles
Top Picks Key Takeaways from Q1FY20 Outlook
Sector Positives  Out of companies under our coverage; Maruti, TVS motors, MRF,  PV is likely to decline at ~7-8% and 2W is likely to decline by 5-6% in
 In 2W, Bajaj auto reported positive volume growth while TVS motors, Apollo tyres, Motherson Sumi delivered above our estimates Q1 result FY20E.
Eicher motors and Hero Motocorp reported volume decline YoY in
 Battery firms reported mixed results, as Amara posted revenue In-line  Battery firms likely to show improvement in margins going forward
Q1FY20. In PV, Maruti Suzuki volumes declined by 18% YoY, however
Maruti Q1 results were above our and street estimates on all fronts. M&M with our estimates while margins below estimates owing to higher
led by recent fall in Lead prices.
tractors volume declined 14% YoY; while UVs volume declined by 6% YoY. than expected RMC/Sales. On the other hand, Exide reported revenue
and margin below our estimates owing to higher than expected  MHCV industry is expected to decline by ~8-10% in FY20E.
Top Buys
operating expenses  Tyre companies likely to show improvement in margins in Q2 led by
 Maruti Suzuki: Though near term growth outlook remains gloomy, we
remain positive from a medium to long term perceptive given Maruti’s  Tyre companies under our coverage, except Apollo tyres , i.e. MRF, CEAT benign RM prices.
competitive advantage over its peers like strong distribution network reported 20-30bp margin compression QoQ, which is expected to
and product portfolio. New launches and refreshes, such as S-Presso improve from current levels as RM cost is expected to be flat QoQ in Q2.
and MPV, along with festive season, BSVI pre-buying and improving
liquidity led by government measures should aid in volume growth in  For MHCV’s Q1FY20 continues to be yet another challenging quarter
2HFY20. for the industry mainly due to financing issues by NBFC’s;
downtrading post new axle norms. A high level of discounting in the
 TVS Motors: We are impressed with TVS’ market share gains in overall
2W, up 100bp YoY in YTDFY20 led by scooters, market share up industry which is as high as ~15-20% of ASP remains a key concern
270bp and Motorcycles, market share up 90bp.Exports likely to and not expected to come down anytime soon owing to increase in
continue growing at current rate for rest of the year. Management dealer inventory levels.
guided for better H2FY20 but expects overall industry to decline YoY
in H2 while it expects TVSL to outperform the industry  M&M FES EBIT margin remains resilient, up 310bp QoQ, however
auto margins disappoint, down 230bp QoQ despite of new
 Exide Inds: Exide’s revenue growth at 15% YoY in FY19 continues to launches); Management expects the tractor industry to grow at 6-8%
be strong and the benefits of stable replacement growth would aid
the company to post resilient revenue CAGR of ~7% over FY20-21E over August -March 2020 while the industry declined ~14% over
despite likely pressures in the auto OEM segment. The inverter battery April-June 2019; so, overall industry growth is likely to be flat YoY in
segment, while cyclical in nature, is expected to be partially offset by FY20
the ramp-up in solar power and motive power batteries.

Revenue growth in Q1 for the companies under our coverage EBITDA growth in Q1 for the companies under our coverage Negative surprises increase sharply
20 40 7
10 20
0 6
0
(10) (20) 5
(20) (40)
(30) 4
(%)

(%)

(60)
(40)
(80) 3
M&M
Hero Motocorp

RK Forgings
Bajaj Auto

TVS Motors

Tata Motors

MRF
Maruti Suzuki

Eicher Motors

Motherson Sumi

Exide Industries
Apollo tyres
Ashok Leyland

CEAT
Amara Raja

Hero Motocorp
TVS Motors

Tata Motors

MRF
Maruti Suzuki
M&M

Eicher Motors

Exide Industries
Apollo tyres
Ashok Leyland

RK Forgings
Motherson Sumi
Bajaj Auto

CEAT
Amara Raja
2
1
0
Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q1FY20
YoY (%) QoQ (%) YoY (%) QoQ (%) Positive surprise Negative surprise

Source: Company, Elara Securities Research Source: Company, Elara Securities Research Source: Company, Elara Securities Research

Jay Kale, CFA | jay.kale@elaracapital.com | +91 22 6164 8507 Vijay Gyanchandani | vijay.gyanchandani@elaracapital.com | +91 22 6164 8511

9 9 Elara Securities (India) Private Limited

 Q1FY20 Review

Agrochemicals
Top Picks
Sector Positives
 Demand in Latin America region continues to be healthy and will drive growth
for companies with strong presence in this geography.
 The government has hiked the MSP for all kharif crops in 2019-20. However, the
hike has been marginal.
 Subsidized prices of sulphur-based fertilizers increased to INR 350/100 kg as
against INR 277/ kg. The subsidy for Nitrogen has been fixed at Rs 18.90 per kg,
Phosphorous at Rs 15.11 per kg, Potash at Rs 11.12 per kg and Sulphur at INR
3.56 per kg for the current fiscal
 PM-KISAN yojana was announced in the interim Budget for the year 2019-2020,
where the small and marginal landholder farmer families with cultivable land
holding upto 2 hectare across the country were assured of Rs 6000 per year.
Sector Negatives
 High channel inventory likely to have adverse effect on sales growth.
Challenging weather conditions in North America and Europe to impact the
consumption of agrochemicals in those regions.
Top Buys
 Insecticides India: Higher contribution from newly launched products,
robust launch pipeline of 10-12 innovative molecules and high level of
backward integration are key triggers.
 UPL: Combined entity is expected to benefit from complimentary portfolio
of the two entities through wider solutions and cross-selling via expanded
geographic reach. Synergy and continuous growth momentum in NAFTA
to drive growth.
 Coromandel International: Prices of raw material such as ammonia and
sulphuric acid have softened. Also, commissioning of new phosphoric
plant would propel EBITDA margin to INR 3000-3200 per tonne
Key Takeaways from Q1FY20
 Agrochemical companies under our coverage reported 5% yoy revenue
growth primarily on weak demand due to delayed monsoon.
 Domestic business disappointed mainly on account of late onset of
monsoon and lower sowing across the country. High channel inventory in
the system further dented the sales growth.
 Companies with export business witnessed a strong growth especially in
the contract manufacturing segment. Despite challenging weather
conditions in North America and Europe, companies such as PI Industries,
Rallis, Insecticides India and UPL witnessed a strong growth on the back of
newly launched products and high demand for existing products
 Raw material pressure continues to persist; however, it’s a mix bag wherein
the prices of certain techicals have reduced whereas the prices of certain
molecules continue to remain at elevated level.
 Fertiliser companies reported drop in volumes. Softening of raw material
prices has prompted price cuts which further put pressure on revenues.
However, we believe the volumes will pick up on the back of good
monsoon and lower product prices. Besides, benign RM cost and stable
NBS subsidy rate to support margins.
 Aggregate EBITDA margins for our coverage universe expanded by 37bps
YoY while EBITDA registered growth of 3.2% YoY
 Aggregate earnings in Q4FY19 declined by 2.4% YoY.
Outlook
 Narrowing of rainfall deficit in July and August shall lead to revival in crop
sowing across the country. With the sowing for the kharif season picking
up momentum, the consumption of agrochemicals is expected to improve.
 Favourable government policies to boost the farmers income like increase
in MSP, hike in budgeted subsidy of non-urea fertilizers and PM –Kisan
yojna to improve the farmer sentiment.
 Setting up of more capacities to cater to increasing demands by most of
the domestic agrochemical players along with new product launches and
healthy product portfolio shall drive the revenue growth of the
agrochemical players.
 In the exports market, normalized channel inventory, healthy demand and
favourable crop prices are key positives and will benefit export oriented
companies.
 We continue to remain positive on companies with high degree of
backward integration as it will reduce the cost pressure.

Aggregate revenues/EBITDA up 1.1%/3.2% YoY Agg. Gross margin were flat and EBITDA margin up 37bp YoY Aggregate PAT growth declined by 19% YoY

140,000 60 8,000
120,000 6,000
40

(INR mn)
100,000 4,000
(bps)

20
(INR mn)

80,000 2,000
60,000 0 0
Cropchem

Coromandel

Aggregate
CropScience

PI Industries
Insecticides

Dhanuka

UPL
Rallis India

Cropchem

Coromandel
CropScience

Insecticides

PI Industries

Dhanuka

UPL
Rallis India
Agritech

Agritech
Sharda

40,000

Sharda
India
Bayer

India
Bayer
Intl

Intl
20,000
0
Sales EBITDA
Q1FY20 Q1FY19
Q1FY19 Q1FY20 Gross Margins EBITDA Margins

Source: Company, Elara Securities Research Source: Company, Elara Securities Research Source: Company, Elara Securities Research

Pratik Tholiya | pratik.tholiya@elaracapital.com | +91 22 6164 8518 Priyanka Trivedi | priyanka.trivedi@elaracapital.com | +91 22 6164 8588

10 Elara Securities (India) Private Limited

 Q1FY20 Review

Aviation
Top Picks
Sector Positives
 Domestic passenger demand growth was negative 1% YoY in
Q1FY20, impacted by constraint in capacity due to Jet operations
being halted in April 2019, versus 15%-20% YoY during Q2FY18-
Q2FY19
 PLF of airlines have slightly come off from ~92% in Q1FY19 to 91% in
Q1FY20 as 17% capacity growth was inducted gradually during the
quarter
 The passenger yield has improved by 10-16% YoY as the airline
market witnessing consolidation on Jet operation shutdown
Top Buys
 SpiceJet: Top pick among aviation space on margin recovery from
increase in airfare and reduction in capacity by JETIN. We expect SJET
to gain a 6% market share post grounding of JETIN
 InterGlobe Aviation: Largest narrow-body aircrafts order-book of 430
fleets, of which 83 delivered and the rest by 2026, implying an
available seat kilometer(ASKM) CAGR of ~25% over FY18-21E
Key Takeaways from Q1FY20
 Cumulative PLF of domestic carriers slipped marginally at 91% vs 92%
in Q1FY19 and 90% in Q4FY19 on account of increasing capacity
higher than demand as higher airfares partially impacted demand
growth
 Crude prices were an average of USD67/bbl, up 6% QoQ. The fuel
prices were also increased by 10% during the quarter. The companies
have been able to pass on the cost increase during the quarter
 SpiceJet witnessed an increase of 58% YoY in EBITDAR. Adj. PAT at
INR 2.3bn was due to increase in passenger yield by 10% YoY to INR
4510, fall in fuel CASK by 3% YoY to INR 1.51/seat-km, non-fuel CASK
decline by 2% YoY to INR 2.59/seat-km
 InterGlobe Aviation reported EBITDAR increase of 112% YoY. Adj. PAT
at INR11.5bn was due to 16% YoY growth in passenger yield, lower
fuel cost, partially offset by flat PLF, higher non-fuel cost. .Passenger
revenue growth continued to remain strong at 26% YoY
Outlook
 India’s aviation industry is on revival path as the crude prices have
come down and are stable currently at ~USD61/bbl, partially offset by
INR weakening over the year and economy slowdown
 We analyzed the slot allotment benefit post grounding of Jet Airways
in April 2019 wherein we expect SpiceJet will increase its market
share by 6% and Indigo by 5%. Some benefit on the same will be seen
in Q2-Q3 FY20
 Significant portion of new fleet addition would be catered to short
haul international routes that would further benefit domestic market
with lower risk of surplus capacity
 Domestic market is expected to witness 10% demand CAGR during
FY19-22E due to accommodative government policy and rising
income levels
 Addition of new routes connecting international destinations would
be the growth drivers and would help support overall domestic
carriers growth in future
 Key risks to the sector are any further rise in aviation fuel cost and
devaluation of rupee

Unit revenue of SJET remains stronger than Indigo Both companies have reduced unit cost in the quarter INDIGO and SJET witnessed demand growth on Jet grounding

5.0 5 20 17.2

Domestic PAX volume (mn)

4.6 4.2 4.1
15.1
4.5 4.4 4 3.5 3.4 15
CASK (INR)
RASK (INR)

4.0 3
4.0 10
3.7
2
4.8 5.1
3.5 1 5

3.0 0 0
SpiceJet IndiGo SpiceJet IndiGo SpiceJet IndiGo

Q1FY19 Q1FY20 Q1FY19 Q1FY20 Q1FY19 Q1FY20

Source: Company, Elara Securities Research Source: Company, Elara Securities Research Source: Company, Elara Securities Research

Gagan Dixit | gagan.dixit@elaracapital.com | +91 22 6164 8504 Rachael Alva | rachael.alva@elaracapital.com | +91 22 6164 8525

11 11 Elara Securities (India) Private Limited

 Q1FY20 Review

Banking
Top Picks Key Takeaways from Q1FY20 Outlook
Sector Positives:
 Private Banks posted much higher credit book expansion pace vis-à-  With the major recognition of corporate NPA, expected recoveries
 Slippages from corporate have started to decelerate while higher vis state-owned banks. Private banks’ higher retail credit composition from Insolvency and Bankruptcy Code (IBC) cases and certainty on
interest reversals aided PSB margins. continued to aid their credit growth. As a result, private banks the Central Government; we believe corporate credit is likely to gather
Sector Negatives: continue to garner credit market share from PSB. steam. However, we believe credit flow to corporate would be
restricted to better rates entities.
 The largest private sector bank has turned cautious towards unsecured  CASA growth for the overall system has been subdued given tighter
lending, citing concerns over consumption slowdown & other external liquidity and other available investment avenues with better returns.  Fresh NPL accretion in private power sector is key thing to watch out
for FY20
factors. Furthermore, unsecured lending has grown rapidly over the  A few large ticket projects are expected to be resolved via NCLT route
past few years and hence any major acceleration in slippages can lead with lesser haircut than expected, which will result in meaningful  Recovery rates in NCLT List I cases will decide the degree of provision
to rise in credit cost for banks with exposure to unsecured lending. provision write-backs and recoveries in FY20. Among NCLT accounts, write-back and interest accrual for FY20
Top Buys Essar Steel, Bhushan Power and Alok Industries are ahead in the race
for resolution in FY20.
 ICICI Bank: Higher margin and lower credit cost would add return
ratios; we expect a ROA in the range of 113-132bp over FY20-21E.
 Axis Bank: Post the recent correction, risk reward seems favorable
coupled with expectations of higher retail fees, containment in
operating cost, stable margins and low credit cost.
 City Union Bank: Higher than industry credit uptick along with stable
credit cost should aid the bank to post a ROA of 158bp in FY20E vs its
past 10-year average of 155bp.
 DCB Bank: We believe softening of interest rate and repricing of
liabilities will aid in lifting margin. We expect the bank to deliver a
ROA in a range of 94-97bp over FY20-21E.

Financials surprise increase Sector-wise bank credit growth (YoY % change) Credit deposit ratio for SCB’s (%)
12 30 79
25 78
10
20 77

(%)
8
15 76
76.3
(%)

6 10 75
4 5 74
0 73
2

Dec/18

May/19
Aug/18

Sep/18

Jan/19

Feb/19
Mar/19
Jul/18

Oct/18

Jun/19
Apr/19
Nov/18
(5)
Dec-17

Dec-18
Aug-17

Feb-18

Aug-18

Feb-19
Oct-17

Oct-18
Jun-17

Apr-18

Jun-18

Apr-19

Jun-19
0
Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q1FY20
Credit-Deposit Ratio (%) (LHS)
Positive surprise Negative surprise Services Retail Industry
Source: Bloomberg, Elara Securities Research Source: RBI, Elara Securities Research Source: RBI, Elara Securities Research

Rakesh Kumar | rakesh.kumar@elaracapital.com | +91 22 6164 8559 Chintan Shah | chintan.shah@elaracapital.com | +91 22 6164 8521

12 Elara Securities (India) Private Limited

 Q1FY20 Review

Cement
Top Picks Key Takeaways from Q1FY20 Outlook
Sector Positives  On volume front major positive surprise came in from Birla Corp  Despite weak volume in Q1FY20, we believe the cement industry
 Elara cement universe comprising of 12 cement companies which reported 4% volume growth followed by ACC which posted is well poised to report healthy demand growth of ~6% in FY20E,
registered strong volume decline of ~2% YoY during Q1FY20 as flat volumes YoY depict weak demand. led by strong traction in government-backed projects during
demand scenario in most parts of India was weak owing to the  Average realizations of our coverage universe increased by 11% YoY 2HFY20.
General elections during April-May 2019 and muted construction and 10% QoQ with JK cement reporting highest improvement of  On the cost front softening coal and petcoke prices are expected
activities on limited availability of laborers ,water shortage and lower 19% YoY followed by Shree cement of 15% YoY. to reduce cost pressure for the industry in the coming quarters.
government spending.  Average cost per tonne for Elara cement universe increased by ~4%  We expect pricing power to remain intact as incremental demand
 Despite muted volume trend cement prices were firm. All India YoY and 3% QoQ due to negative impact of operating leverage on is likely to exceed incremental supply. Therefore, we retain our
average cement prices during the quarter were up 9% QoQ and YoY account of weak volumes. positive stance on the sector and recommend stocks with a higher
with sharpest price increase in North region of 16% YoY and 13%  On the back of higher realization average EBITDA per tonne for Elara presence in the northern, central and Northeast regions, like JK
QoQ. wile southern region has seen least price increase of 5% YoY cement universe moved up by ~44% YoY and ~37% QoQ. Lakshmi Cement, Heidelberg Cement, Prism Johnson and Star
and 3% QoQ. Cement
Top Buys
 HeidelbergCement India: The central region in which the plants are
based is attractive from a long-term perceptive, as it is expected to
see the least capacity addition. As a result, company is expected to
enjoy pricing power in upcoming years
 J K Lakshmi: One of the key beneficiaries of strong pricing scenario in
its core markets, North India and Gujrat. Further, likely completion of
0.8-mn tonnes Odisha expansion and 20MW captive power plant
(CPP) augurs well for improved performance
 Star Cement: We believe Star Cement with ~23% market share along
with strong brand presence in Northeast region and increasing
exposure to eastern pockets is likely to benefit from improvement in
demand led by government backed projects.

Weak government spending impacts volumes Realizations Improves 11% YoY and 10% QoQ Margin improves on back of better pricing
20 5,300 1,400 25
5,200 1,200
15 5,100 20
1,000

(INR)
5,000
10 15

(%)
4,900 800

4,800 600 10
5
4,700 400
0 4,600 5
200
4,500
(5) 4,400 0 0
Jun'18 Sep'18 Dec'18 Mar'19 Jun'19 Jun'18 Sep'18 Dec'18 Mar'19 Jun'19 Jun'18 Sep'18 Dec'18 Mar'19 Jun'19

YoY-growth (%) Realisation per tonne (INR) EBITDA per tonne EBITDA margin

Source: Company, Elara Securities Research Source: Company, Elara Securities Research Source: Company, Elara Securities Research

Ravi Sodah| ravi.sodah@elaracapital.com | +91 22 6164 8517 Saurabh Mitra | saurabh.mitra@elaracapital.com | +91 22 6164 8546

13 13 Elara Securities (India) Private Limited

 Q1FY20 Review

Diversified financial
Top Picks
Sector takeaways
 HFC loan book growth at a 4 year low of 10% (excl DHFL) YoY for
1QFY20, with a flat disbursement growth. For AFCs, low base
aided book growth at 16% YoY for 1QFY20, as disbursement
growth was subdued at 5% YoY.
 Spread compression more visible for AFCs as assets reprice with a
lag, while HFCs been able to hold spreads due to benefit of
repricing and lower incremental cost of borrowing
 Asset quality issues now visible for wholesale lenders like PNBHF
and HDFC. With a weak monsoon, decline in rural wages and in-
turn sentiment visible in deterioration in asset quality for Asset
financers
Top Pick
Key Takeaways from 1QFY20
 PNBHF most impacted amongst HFCs with a 22% YoY decline in
disbursement, followed by HDFC and Gruh. Canfin reported
subdued but stable growth at 10% YoY
 CIFC reported a strong 1QFY20, unaffected by the slowdown
with a 22% YoY growth in disbursement vs a 3% decline for SHTF
and single digit growth for Magma and MMFS
 Strong performance on spreads for Canfin- stable for last three
quarters. Amongst AFCs, CIFC reported relatively stable spreads
 More than anticipated deterioration in asset quality was the key
negative in 1QFY20, with wholesale HFCs like PNBHF and HDFC
most impacted. Amongst AFCs, divergent trend across rural
players, with MMFS reporting 140 bps QoQ jump in ratio to 7.3%
vs a stable performance by SHTF and Magma
Outlook
 Announcement in the union budget and RBI policies are a
continued effort to restore confidence and liquidity for the no-
banks, but we await revival in demand as the same was impacted
for reasons in addition to lack of financing
 We see risks to our growth forecast as concerns remain on the
health of the real estate sector and revival in auto demand
 Asset quality stress has now started to become visible for HFCs
while for AFCs we see pressure in the near term due to uneven
distribution of monsoon and slowdown in economic activity

 CIFC A diversified product mix, national presence and strong

handle on asset quality are the key drivers for our preference
towards CIFC. While the demand scenarios remain weak, CIFC’s
ability to gain market share will aid in outperforming peers.

Loan growth at 4 year low for HFCs Disbursements just made it in green Stress visible for wholesale HFCs

25 25 40 50 9
40 8
Loan Book Growth YoY

30 7
Disbursement Growth YoY

20 30
20 6

GNPA (%)
20 20
15 5
10 10 4
15 3
10 0
0 2
(10)
1
10 5 (10) (20) 0
4QFY17

1QFY18

2QFY18

3QFY18

4QFY18

1QFY19

2QFY19

3QFY19

4QFY19

1QFY20

4QFY17

1QFY18

2QFY18

3QFY18

4QFY18

1QFY19

2QFY19

3QFY19

4QFY19

1QFY20

CANF

REPCO

SHTF

Magma
PNBHF

MMFS

CIFC
HDFC
HFC AFC HFC AFC 4QFY19 1QFY20

Source: Company, Elara Securities Research Source: Company, Elara Securities Research Source: Company, Elara Securities Research

Ritika Dua | ritika.dua@elaracapital.com | +91 22 6164 8526 Pratik Poddar | Pratik.poddar@elaracapital.com | +91 22 6164 8506

14 Elara Securities (India) Private Limited

 Q1FY20 Review

Industrials
Top Picks
Sector Positives
 Despite elections in Q1FY20, some traction seen in order inflows from
sectors like railways, renewable and power State T&D while private capex
is muted and may continue over medium term due to delayed capex by
large industrial sectors like automobile, steel, and cement.
Top Picks
 BEML: High orderbook of INR 91bn as on March 2019 along with strong
order pipeline in metros, high speed rail and defence would lead to
earnings CAGR of 46% over FY19-22E.
 KEC International: A surge in inflows in domestic and international markets
along with railway electrification, execution and margnially uptick in
margins would help EPS CAGR of 13% CAGR over FY19-22E. Non-T&D
business revenue contribution to witness sharp rise driven by inflows and
execution.
 Crompton Greaves Consumer: A strong brand with market leadership in
fans and residential pumps, focus on premium fans, LED lighting, and
agriculture pumps, coupled with low WC cycle to deliver strong earnings
growth of 12% over FY19-22E.
Key Takeaways from Q1FY20
 Order inflows: Within our coverage universe (ex-CG Power), order inflows
fell by 17% YoY to INR 73bn in Q1FY20. The sharp decline is due to
elections in Q1FY20 which reduces the pace of government orders. Inflow
were largely in sectors such as railways, roads, renewable, power
transmission & distribution and water.
 Execution: Despite an election during Q1FY20, pick up in execution in
domestic markets has driven revenue by 15% for capital goods companies
in Q1. Exports were mixed on weak global markets while T&D companies
performed well. The consumer electrical segment witnessed subdued
revenue growth of 7% YoY owing to slowdown in real estate activities and
liquidity issues whereas seasonal products perfomed well due to good
summer season.
 Margin: Combination of better execution and lower commodity prices led
to higher EBITDA margin for engineering companies. In consumer
electrical, margins were mixed as low commodity prices and price hikes
was offset by weak demand and reduction in prices in LED lighting due to
competitive pressure which resulted in EBITDA margin to contract.
Outlook
 Railway: Pick-up in ordering activity especially for large projects (above INR
1bn) is expected to continue with focus on track addition and
electrification, increasing speed for freight and passenger trains,
modernizing through better signaling and anti-collision devices. In the
Union Budget 2019, railways capex jumps 20% to INR 1.6tn in FY20
(includes 18,000 wagons, 4,941 coaches and ~ 725 locomotives +
4,000km of track renewals and 7,000km of electrification)
 Renewable: The incremental 100GW capacity addition from renewable
power over FY19_22 would be a source of sustainable order inflow. We
see opportunities for wind turbine generators, solar invertors, generators
and other electrical balance of plant systems and commensurate addition
of T&D network.
 Transmission & Distribution: Government had earmarked a capex of INR
1tn for enhancing power transmission network in the country.
Implementation of UDAY coupled with the ongoing rollout of IPDS and
DDUGJY to augment urban and rural power network infrastructure with
new avenues of investments in GIS substations in cities, smart meters and
energy-efficient products. The Union Budget 2019 earmarked expenditure
of INR 53bn, up 33% under IPDS and INR 41bn, up 7% under DDUGJY

 Higher capex on roads, defence and housing to offer multi-year

opportunity for order inflows

Capital goods companies results were mixed bag Revenue pick up on better execution but margin compressed Pickup in order inflows across CG companies (ex- Siemens)

6 25 16 140 50%
15 120 40%
5 20
14 100 30%
(%)

(INR bn)
4 80 20%
15 13

(%)
60 10%
3 12
40 0%
10 11
2 20 -10%
10 0 -20%
1 5

Q1FY17

Q2FY17

Q3FY17

Q4FY17

Q1FY18

Q2FY18

Q3FY18

Q4FY18

Q1FY19

Q2FY19
9
0 0 8
Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q1FY20
Positive surprise Negative surprise Net sales (LHS) EBITDA margin (RHS) CG companies order inflows YoY (RHS)

Source: Bloomberg, Elara Securities Estimate Source: Cline, Elara Securities Estimate Source: Companies, Elara Securities Research

Harshit Kapadia | harshit.kapadia@elaracapital.com | +91 22 6164 8542

15 15 Elara Securities (India) Private Limited

 Q1FY20 Review

Infrastructure
Top Picks
Sector Positives
 FY20 started on a weak note with slowdown in government
spending due to prolonged elections, budget and delays in land
acquisitions by NHAI. Hopeful for a pick-up in 2HFY20 with kick-
starting of capex cycle
Top Buys - NCC, PNC Infratech, PSP Projects
 NCC: Although the company is reeling under pressure due to
order cancellations & delay in Andhra Pradesh due to political
aftermath, we believe new inflows could be key trigger &
valuations are benign. Risk – adverse outcome in arbitrations
 PNC Infratech: Having laid a foundations of growth by healthy
orderbook (3x b-t-b), capex, employee addition & increase in fund
limits, keeps PNCL well placed for growth. Risk – Project delays
 PSP Projects: Performance inline with expectations and
management is committed to growth for the next three years
with order book of INR 34bn. Net cash balance sheet & lean
working capital cycle act as a positive. Risk – Gujarat
concentration
Key Takeaways from Q1FY20
 Execution for our coverage universe declined by 21% YoY largely
led by decline in execution for KNRC and SINF due to delays in
projects. NJCC revenue dropped 7% YoY owing to project
cancellations in Andhra Pradesh and slowdown in activity due to
delayed payments from government during elections. PNCL was
an outlier which reported a strong growth of 86% YoY. We
believe execution in 2Q would remain muted due to seasonality,
floods in various parts of the country and lack of new order
inflows
 EBITDA margins remained stable on account of favorable project
mix and contribution from new projects with better margin
profile.
 Order book provides average book-to-bill visibility of 2.7 years vs
3.0 years in the previous quarter. The decline is owing to ongoing
execution and lack of new inflows
Outlook
 The Union Budget FY20 clearly shows intent towards
Infrastructure development and encouraging private sector
participation.
 Budgetary allocations remained largely unchanged from the
Interim budget. Overall there is 8% increase in allocation for
infrastructure sector with focus on Railways, Housing, Water
and Roads.
 Series of measures are proposed for Infrastructure financing
which highlights government wants to encourage more
private sector participation in nation building.
 However, we await clear roadmap in terms of targeted capital
raising and infrastructure development milestones to be
achieved in the near term

Revenue growth stands out for PNCL EBITDA margin stable Order inflows required to boost visibility

25,000 25 350 3.5

300 3.0
20,000 20
250 2.5
(%)

(INR bn)
(INR mn)

15,000 15 200 2.0

(x)
150 1.5
10
10,000 100 1.0
5 50 0.5
5,000
0 0 0.0
0 ASBL SADE KNRC NJCC PNCL PSPPL SINF ASBL SADE KNRC NJCC PNCL PSPPL
ASBL SADE KNRC NJCC PNCL PSPPL SINF
2QFY18 1QFY20 Orderbook Book-to-Bill ratio
1QFY19 1QFY20
Source: Companies, Elara Securities Research Source: Companies, Elara Securities Research
Source: Companies, Elara Securities Research

Ankita Shah | Ankita.shah@elaracapital.com | +91 22 6164 8516

16 Elara Securities (India) Private Limited

 Q1FY20 Review

IT Services
Top Picks
Sector Positives
 Positive demand environment, especially for the banking & financial
services insurance (BFSI) and retail segments. Good demand in the US
continues and India IT Services firms’ ability to participate in digital
proven by now as we’d expected.
Top Buys
 HCLT: Retained its revenue growth guidance of 14-16.0%, but
suggested organic growth is likely to be slightly higher than the
earlier guidance of 7-9%. HCLT reiterated its margin guidance of 18.5-
19.5%, a full 100bp lower YoY (similar to that of Infosys).
 Wipro: Growth has been strong in parts of the services portfolio
outside of the digital operations & platform services with data,
analytics & AI and cloud & infrastructure services growing. BFSI.
Management suggests been some delay in ramping up new projects.
TechM: Remain confident of growth driven by 5G rollout in the
communications segment. TECHM is seemingly focused on
acquisitions, such experience design firm Mad*pow.
Key Takeaways from Q1FY20 Outlook
 Revenue addition has worsen across all the large cap and mid cap  We believe we are still only in the early stages of a cyclical recovery in
firms compare to 1QFY19 except for HCLT (which added USD 86mn IT spending and we see growth for both Tier-1 and Tier-2 firms
over April-June 2019 vs addition of USD 17mn over April-June 2018) continue as Tier-1 firms start competing in more mega deals and Tier-
and Infosys (which added USD 71mn over April-June 2019 vs 2 firms increase focus and scale up their chosen verticals
addition of USD 26mn over April-June 2018), TCS (which added USD
 Engineering services firm (LTTS and Cyient) continue to have long
88mn over April-June 2019 vs addition of USD 79mn over April-June
growth ahead as off shoring in engineering services is still nascent
2018) and Mphasis in Mid cap (which added USD 5.6mn over April-
June 2019 vs USD 4.6mn over April-June 2018).  We continue to expect that recent INR depreciation gains would
be used partially by the firms to add bench and give wage hike to
 Utilization compressed across all large cap firms except Wipro IT employees offshore. Hiring has picked up significantly YoY and this
services (78.4% in Q1FY20 vs 77.7% in Q1FY19) while for mid cap
supports our thesis of firms investing in bench to cater to strong
firms utilization decline for all except LTI (80.5% in Q1FY20 vs 79.7% in
demand
Q1FY19) and NIIT Tech (80.5% in Q1FY20 vs 80.1% in Q1FY19).
Improvement led by NR depreciation with operational efficiency.
Utilization softens after peaking in last few quarters for large cap firms.
 Headcount addition is stronger across large cap and mid cap over
April –June 2019 for all firms. Attrition remains high with high sub
contracting cost.

Utilization including trainees compressed across firm except for QoQ margins compression across the firm in 1QFY20 HCLT continues to lead revenue per employee
Infosys $70,000
30 160

revenue/employee (USD)
25 150 $60,000
90 140
20
(%)

85 130 $50,000

Annualized
80 15 120
10 $40,000
(%)

75 110
70 5 100 $30,000
1QFY16
2QFY16
3QFY16
4QFY16
1QFY17
2QFY17
3QFY17
4QFY17
1QFY18
2QFY18
3QFY18
4QFY18
1QFY19
2QFY19
3QFY19
4QFY19
1QFY20
65

Apr-Jun 2016

Apr-Jun 2019
Jan-Mar 2014

Oct-Dec 2014

Jan-Mar 2017

Oct-Dec 2017
Jul-Sep 2015

Jul-Sep 2018
60
1QFY16

3QFY16

1QFY17

3QFY17

1QFY18

3QFY18

1QFY19

3QFY19

1QFY20

HCLT Infosys
TCS Wipro
HCL Tech Infosys
HCL Tech (blended) TCS CTSH IT-Svcs TechM IT-Svcs TCS Wipro-IT Services
Infosys Wipro-IT Services USD-INR avg. realization (RHS) EUR-INR avg. realization (RHS) Cognizant TechM
TechM
Note: USD-INR and EUR-INR avg. realization indexed at 48 and 67.Source: Source: Company, Bloomberg, Elara Securities Research
Source: Company, Elara Securities Research Company, Elara Securities Research

Ravi Menon | ravi.menon@elaracapital.com | +91 22 6164 8502 Ashish Agrawal | ashish.agrawal@elaracapital.com | +91 22 6164 8573

17 17 Elara Securities (India) Private Limited

 Q1FY20 Review

Logistics
Top Picks
Sector Positives
 Amongst the new government’s 100 day agenda, Ministry of
Commerce proposed to create separate department for logistics
for integrated development of the sector
 GST, E-way bill, Make in India, National waterways, development
of National Waterways and Dedicated Freight Corridor (DFC) are
steps in the right direction to reduce high logistics cost in India
(14% of GDP)
Top Buy: Container Corporation, Future Supply Chain Solutions
 CCRI: A play on increasing penetration of rail in container traffic
in India and key beneficiary of expected increase in freight
volumes post commissioning of DFC.
 FSCSL: A third party logistics (3PL) service provider with 70%
revenues from anchor customer – Future group. Strong foothold
in complex fashion & apparel segment, managing warehousing
space of 7mnsqft and expected to benefit from increase in
consumption.
Key Takeaways from Q1FY20
 CCRI – Volume growth flat YoY at 0.9mn TEU. Despite the rail
coefficient at key ports remains stable, owing to shortening of
lead distances to 777km (down 6% YoY), market share declined in
EXIM & domestic. Guidance maintained of 10-12% growth in
FY20 however we cut earnings by 9% for FY20 & 8% for FY21
 FSCSL - PAT declined by 81% YoY, due to: 1) express business
reporting lower yield & moderate demand, 2) lower realization
for recently added warehousing capacity for food grid, higher
depreciation and finance cost due to INDAS 116. We cut
earnings by 18% for FY20 and 7% for FY21
 MAHLOG – Decline in revenues on slowdown in SCM business
both in M&M and Non-M&M. In terms of sector auto down 5% &
non-auto down 1%. Added 0.4mn sqft of warehousing space,
taking the total to 15.7mn sqft. We cut earnings by 12%.
 VRLL - Volume growth of 4% but realization down 0.9%. Added
80 vehicles in GT segment in 1Q and no further additions
expected in FY20. Expect volume growth to remain muted 5-8%
& realisations weak in FY20. Cut earnings by 4% in FY20 and 3%
in FY21
Outlook
 Third Party Logistics - We expect 3PL to grow at the fastest pace
in the logistics sector as post GST, demand for integrated logistics
solution provider has increased leading to increase in customer
enquiries from corporate to outsource last mile logistics functions.
The industry is expected to growth at a CAGR of 19-21% over
FY18-21E.
 Surface Transportation – Volume growth has been muted post
demonetization and GST regime. Companies have limited power
to increase realizations due to competition from unorganized
regional players (80% of the industry). Recent decline in diesel
prices is a positive
 Rail containerization – EXIM cargo volume growth was muted at
5% in FY19. It continued to remain muted in 1QFY20. Continued
trade deficit leads to higher empty running impacting profitability
of container train operators. Commercialization of Western
Dedicated Freight Corridor is eagerly awaited to increase rail
share in freight transportation. Planned commercialization of
phase I is in March 2020.

Revenue growth stands out in FSCSL CONCOR performance Warehouse space addition by 3PL companies

18,000 35 1QFY19 1QFY20 18

15.7
16,000 30 Throughput (TEU) 16
14,000 25 EXIM 794,409 786,442 14
12,000 20 YoY Growth (%) 11.5 (1.0)
(INR mn)

(mn sqft)
10,000 12
(%)

15 Domestic 141,251 140,481

8,000 10 8.31
6,000 10 YoY Growth (%) 8.7 (0.5)
8
4,000 5 Total 935,660 926,923
0 6
2,000 YoY Growth (%) 11.0 (0.9)
0 -5 4
Realisation per TEU
CCRI FSCSL MAHLOG VRLL 2 0.65 0.42
EXIM 15,517 16,138
0
YoY Growth (%) (2.7) 4.0
FSCSL MAHLOG
Domestic 23,756 24,944
1QFY19 1QFY20 Growth (%)
YoY Growth (%) (6.8) 5.0 Addition Total warehouse space
Source: Companies, Elara Securities Research
Source: Companies, Elara Securities Research Source: Companies, Elara Securities Research

Ankita Shah | Ankita.shah@elaracapital.com | +91 22 6164 8516

18 Elara Securities (India) Private Limited


Media and Entertainment
Top Picks
Sector Views
 It was a muted growth quarter in case of TV Broadcasting
companies, which underperformed in ad revenues largely due to
led by NTO implementation coupled with macroeconomic
headwinds, leading to consumption slowdown in sectors like
auto, FMCG and BFSI, negatively affecting overall ad spend.
However the subscription revenues have comeback strongly to
offset the decline in ad revenues backed by NTO stabilization and
its benefits accruing to broadcasters.
 On the other hand, the exhibition segment remained subdued
with an ad spend shift to General Elections & ICC Cricket
WorldCup affecting ad revenues for the quarter but strong
content pipeline for H2FY20 will drive ad as well as the highly
profitable F&B segment revenues with footfall growth.
 The radio industry observed degrowth led by weak consumption
trends & macroeconomic headwinds affecting ad spends for
major sectors including Auto, FMCG & BFSI. Synergy benefits of
BigFM acquisition by Music Broadcast Ltd(MBL) will take 18-
24months to materialize which has a weak outlook for the
industry in near term.
Top Buys
 Inox Leisure: Inox will continue to outperform on metrics, such
as SPH and advertising, which will narrow its gap with PVR.
This should drive rerating of the stock in the medium term, as
SPH & ad are highly profitable.
Karan Taurani |karan.taurani@elaracapital.com | +91 22 6164 8513
19
Key Takeaways from Q1FY20
 Within the broadcasting segment, subscription revenue was
strong, given the stabilization of NTO; Zee Entertainment, and
Sun TV reported subscription revenue growth of 36.7% YoY and
28% YoY, respectively. ZEE outperformed vs Sun TV on the ad
growth front as former grew ad revenue by 3.6% YoY whereas
SunTV observed degrowth of 5.9% YoY.
 Box office collection for exhibitors grew 19% YoY (average for
PVR and Inox), largely led by a strong performance of top 5
movies including Avengers Endgame, Kabir Singh, Bharat, De De
Pyaar de & Alladin(contributing 53% of GBOC) which indicates
failure of regional & small budget movies due to ICC WorldCup &
General Elections; advertising revenue was strong as PVR and
Inox reported growth of 15% YoY(ex-SPI) and 18% YoY,
respectively, backed by few big releases & tie-up arrangements.
Inox & PVR added 21 & 22 screens respectively with a guidance
of 80 screens each in FY20.
 Radio companies reported a decline in overall revenues, primarily
led by weak consumption trends & macroeconomic headwinds in
major sectors like Auto, FMCG & BFSI negatively impacting ad
spends. ENIL outperformed MBL in terms of core radio revenues
maintaining a flat growth of 1% YoY vs decline of 8% YoY for
MBL. ENIL has continued to maintain strong EBITDA margins on
the back of its solutions business which now contributes one-
third of its overall revenues offsetting the weakness in radio
business.
Viren Deshpande | viren.deshpande@elaracapital.com | +91 22 6164 8565
Q1FY20 Review
Outlook
 TV industry ad revenue is estimated to grow 10% YoY over the
next two years whereby we expect ZEE to outperform industry
growth rates, led by its focus on the regional genre.
Subscription revenue growth is expected to comeback strongly
in H2FY20 with the stabilization of NTO and better channel
bouquets including leading channels vs the current a-la-carte
offerings avoiding the confusion between FTA and pay
channels.
 Box office collection of movies will continue to remain strong
with the movies in pipeline for FY20 including Mission Mangal
starring Akshay Kumar, Batla House starring John Abraham
expected to collect INR 1500mn & INR 700mn respectively in
Q2FY20. Success of Lion King in BO has also been a positive
surprise with collections over INR 1500mn which lays a strong
BO revenue growth potential of 15-18% YoY.
 The radio segment has not performed in line with expectations
despite election ad spend campaign, which adds to its woes.
We expect multiple headwinds in the form of weak
consumption trends, no proper listenership data, corporates
moving out to other platforms, consumer shift to digital
platforms and no immediate trigger for the industry to revive
in near term.
19 Elara Securities (India) Private Limited
 Q1FY20 Review

Oil & Gas

Top Picks
Sector Positives
 Rising CGD companies volume from CNG and industrial PNG
 Upstream crude realization fell on decline in Brent crude but
partly offset by INR weakening
 OMCs gross marketing margin on non-sensitive products,
gasoline and diesel improve YoY
 Avg. GRM of refiners at USD2.9/bbl positively surprises (Elara:
USD1.7/bbl) on lower inventory losses
Top Buys
 Gujarat Gas: Benefit from higher gas sales volume at Morbi as
well as competitive LNG prices over FO, resulting in long-term
EBITDA/scm margin to be maintained at INR 4.5/scm
 Gujarat State Petronet: On higher tariffs, volume growth from
Gujarat Gas, expansion of Mehsana-Bhatinda & Dahej pipelines
and Chhara connectivity
Key Takeaways from Q1FY20
 Slump in cumulative YoY earnings of OMCs by 49% YoY to INR
55bn due to lower GRMs on lower product cracks, partially offset
by strong marketing segment margin and forex gain
 GRM were down YoY & QoQ, but beat industry consensus on
strong core GRM, lower inventory losses during the quarter
 Gas transmission firms reported earnings growth of 2-43% YoY
on higher gas transmission volume, higher tariff revision and LNG
imports at Hazira, while PLNG had a muted growth due to flat
YoY import volume at Dahej and impact of IND AS 116-Leases
 Among CGD, IGL and MGL reported PAT growth of 24-33% YoY
on 3-14% gas volume growth, while Gujarat Gas reported 93%
PAT increase with 43% YoY gas sales volume growth as the
volume benefit from Morbi played out during the quarter and
EBITDA/scm margin expansion by 32% YoY
Outlook
 Switch of industrial customers of CGD firms from FO to natural
gas would accelerate as FO surplus of domestic refiners (supply
less demand) is dissipating due to commencement of delayed
coker of BPCL Kochi and CPCL refineries, that would benefit CGD
firms
 OMCs would benefit from upcoming IMO convention of
restriction of high sulphur FO on shipping from Q4FY20 that
would support GRM strengthening
 Domestic gas supply growth over next 2-3 years would benefit
gas transmission firms

GRM weakens YoY, but positive surprise over consensus Domestic gas supply LNG imports increase YoY Gujarat Gas volume growth was strong on conversion of Morbi
players
12.0 80 71
10.2 10.5 68 71 69
70 10 9.2
10.0
8.3 8.1
7.5 60
8.0 7.2 7.1 8
(mmscmd)

50 6.4
(USD/bbl)

6.3

mmscmd
6.0 4.7 5.5
40 6
4.0 2.8 30
4 2.9 3.0
2.0 1.4 20
0.8
0.0 8 8
10 2
-
BPCL HPCL IOCL CPCL MRPL RIL 0
Oil India ONGC Petronet LNG 0
Q1FY19 Q1FY20 Q1FY19 Q1FY20 IGL MGL Gujarat Gas
Q1FY19 Q1FY20
Source: Company, Elara Securities Research Source: Company, Elara Securities Research
Source: Company, Elara Securities Research

Gagan Dixit | gagan.dixit@elaracapital.com | +91 22 6164 8504 Rachael Alva | rachael.alva@elaracapital.com | +91 22 6164 8525

20 Elara Securities (India) Private Limited

 Q1FY20 Review

Pharmaceuticals
Top Picks Key Takeaways from Q1FY20 Outlook
Sector Positives  The intensity of price erosion has significantly come down for  Companies expect traction in the US business to continue with
 The US business of Indian companies saw robust during the Indian Pharma companies, as many companies witnessed increase in number of approvals and market share in existing
quarter led by niche product approvals. Companies expect this improvement in their base business. products. R&D expense to increase as companies widen its focus
trend to continue in coming quarters. on specialty products.
 While majority of the coverage companies saw healthy growth in
 Few companies continued to benefit from shortage of sartans, the US business, Dr Reddy and Glenmark US business grew  Companies expect price erosion in the US market to stabilize at
which boosted their US sales. However the prices have stabilized marginally. DRRD did not see any meaningful approvals during low-to-mid single digit. However increase in competition led y
and do not expect significant advantage in going forward. the quarter and price erosion in Mupirocin drag sales for faster approvals is likely to sustain.
 We believe diversity of the business model can generate a broad Glenmark,  Although companies are optimistic about faster approvals from
range of strategic transactions, which, in turn, can create  Launches of gSensipar led to strong growth in Cipla and gRanexa US FDA, regulatory issues remain an overhang. In the last few
significant value for stakeholders for Lupin aided strong growth. Aurobindo US sales growth was months there has been an increase in number of inspection from
Top Buys led by new launches and Spectrum consolidation. the FDA along with the 483s issued by them. Industry has also
 Aurobindo Pharma: With consolidation of Apotex business  Barring Cipla, all the companies under coverage saw healthy seen increase in the number of facilities coming under the OAI
complete and Sandoz in near term, ARBPs formulation segment is growth in the domestic business. Decline in Cipla was due to due status, which may lead to delay in approvals.
expected to report strong growth. Also turnaround in EU realignment of distributors in its trade generics business and
business to double digit OPM, will improve overall operational deferral of sales in prescription business. Cadila is revamping its
performance. Synergies of Sandoz biz and guidance of 40 new domestic business (rationalized 233 SKU) due to which its
launches, we remain positive on ARBP growth story. domestic biz growth was below expectation.
 IPCA: We expect operational leverage to kick in with resumption
in broad based revenue growth (expect US) over FY18-21E. Also,
significant decline in remediation cost and pick up in supplies in
the institutional business will boost profitability.
 Torrent Pharma: TRP generates ~63% of revenue from branded
generics, which should grow at a healthy pace in the medium
term. Recovery in US sales will be gradual and hinge on faster
resolution of Indrad & Dahej facilities. Outcome of the Indrad
facility from the USFDA will be a key montiorable
 Strides: STR’s exit from the Australia business resulted in
significant deleveraging of balance sheet. The divestment would
result in an EBITDA loss; however, it would be offset by the fall in
interest cost. STR’s US business has scaled up over the past three
quarters post its transition to front-end, and given strong visibility
its other regulated markets, it should result in strong growth over
FY19-21

21 21 Elara Securities (India) Private Limited

 Q1FY20 Review

Pharmaceuticals
Top Picks Key Takeaways from Q1FY20 Outlook
Chart 1: Cost rationalization improves margins Chart 2: Domestic gas supply rising but LNG imports fell Chart 3: Domestic growth trend

100,000 21.7 23 500 10.6 9.9 15

21.4 20
20.9 10 14.6 13.4 12.9
20.8 400 2.5 15
80,000 (0.7) 5 9.7 9.3
21 .
19.5 19.2 19.7 (3.7) (4.3) 10 7.5 6.2
(USD mn)

(USD mn)
19.1 -

(YoY %)
60,000 300 (10.7)

(%)
(5) 5

(%)
19 (22.8) (13.1)
200 (10)
40,000 0
100 (15)
17 -5
20,000 (20)
0 (25) -10
0 15

Aurobindo
Healthcare

Lupin

Pharma
Glenmark
Dr Reddy's
-15

Torrent
Cipla

Pharma
Q2FY18

Q3FY18

Q4FY18

Q1FY19

Q2FY19

Q3FY19

Q4FY19

Q1FY20

Cadila

Sun

Healthcare
IPCA

Lupin

Pharma
Dr Reddy's

Glenmark

Torrent

Cipla
Pharma
Cadila
Sun
EBITDA EBITDA margins US sales QoQ growth

Source: Company, Elara Securities Research Source: Company, Elara Securities Research Source: Company, Elara Securities Research

Param Desai | param.desai@elaracapital.com | +91 22 6164 8528 Ankeet Pandya | Ankeet.pandya@elaracapital.com | +91 22 6164 8535

22 Elara Securities (India) Private Limited

 Elara Securities (India) Private Limited

Disclosures & Confidentiality for non U.S. Investors

The Note is based on our estimates and is being provided to you (herein referred to as the “Recipient”) only for information purposes. The sole purpose of this
Note is to provide preliminary information on the business activities of the company and the projected financial statements in order to assist the recipient in
understanding / evaluating the Proposal. Nothing in this document should be construed as an advice to buy or sell or solicitation to buy or sell the securities of
companies referred to in this document. Each recipient of this document should make such investigations as it deems necessary to arrive at an independent
evaluation of an investment in the securities of companies referred to in this document (including the merits and risks involved) and should consult its own
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entities may have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject
company or third party in connection with the Research Report in the past twelve months.

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 Elara Securities (India) Private Limited

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 Elara Securities (India) Private Limited

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Jay Kale, CFA Analyst Auto & Auto Ancillaries jay.kale@elaracapital.com +91 22 6164 8507
Param Desai Analyst Pharmaceuticals, Healthcare, Real Estate param.desai@elaracapital.com +91 22 6164 8528
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Ravi Sodah Analyst Cement, Building Materials ravi.sodah@elaracapital.com +91 22 6164 8517
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Chintan Shah Associate Banking & Financials chintan.shah@elaracapital.com +91 22 6164 8521
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