Since the time Mo rallying

October 21st, 20144
HDFC
H
Bank In
nvestment Advisory Group
Equity
y Strategy No
ote
Since the time Modi government has come
e to power, w
we have seen
n the Indian equity marke
ets
rallying
g sharply on hopes of imp
proved goverrnance and sstronger policcy actions. Ho
owever, off la
ate
one thing has beco
ome very clea
ar that this go
overnment be lieves in takin
ng small but structural ste
eps
to improve the long term outlook
k of the econo
omy. Projects like “Swachh
h Bharat”, Ma
ake in India, and
Housin
ng for all are really ambitio
ous but are all about the lo
ong term visio
on of the govvernment. In tthe
near te
erm the gove
ernment is foc
cusing its ene
ergy on impro
oving the leve
el of governm
mental efficien
ncy
and fast tracking ex
xisting projectts which would lead to eco
onomic mome
entum picking
g up in the ne
ear
to med
dium term.
From a macro pers
spective, a lo
ot of positive
e events have
e happened for Indian ecconomy. Firsttly,
interna
ational Brent crude price (tthe single largest import ittem for India)) has dropped
d from $110/b
bbl
to $84/bbl. The net oil imports of $95 bn acco
ounted for 21 % of India's ttotal import b
bill and ~64% of
the tra
ade deficit in FY14.
F
This ha
as the potentia
al to substanttially reduce tthe CAD and fiscal deficit ffor
India. The
T total estimated subsid
dy bill for India in 2014-15 (as per the b
budget) was R
Rs 2.6 trillion or
2.03% of gross domestic produ
uct (GDP), with net oil sub
bsidies amou
unting to Rs 6
635 bn. As p
per
estima
Rs
ates, decline of
o $10 in oil prices
p
would positively
p
imp
pact the annu
ual subsidy bill (gross) by R
350 bn
n and ~Rs 56
60 bn of impo
ort bill. This would
w
have a meaningful positive impa
act on the fisccal
deficit situation of In
ndia and the Current
C
accou
unt deficit.
CA
AD(% to GDP)
7.0%
1200
1155
1100
1055
1000
955
900
855
800
755
700
6.0%
5.0%
4.0%
3.0%
2.0%
Q1FY15
Q4FY14
Q3FY14
Q2FY14
Q1FY14
Q4FY13
Q3FY13
Q2FY13
Q1FY13
Q4FY12
Q3FY12
Q2FY12
0.0%
Q1FY12
Oct 14
Oct‐14
Sep‐14
Aug‐14
Jul‐14
Aug‐14
Jun‐14
May‐14
May‐14
Apr‐14
M 14
Mar‐14
Mar‐14
Jan‐14
Feb‐14
1.0%
Jan‐14
($/bbL)
B
Brent Crude
Source: Bloomberg
B
Secondly, Inflation across the board
b
has started to fall in India as m
measured by CPI and WP
PI.
mber 2014 CP
PI data at 6.46%
6
YoY w
was the lowe
est since the
e measure w
was
Infact, the Septem
2
too cam
me in at a five
e year low of 2.38%. Clearrly,
compilled. Also the WPI data forr September 2014
this wo
ould have a positive bearring on the ability
a
of the R
RBI to move down the po
olicy rates pa
ath
when it so chooses
s (as the RBI comfort zone for Inflation
n stands at 6% CPI by Ja
an 2016). Oncce,
the RB
BI moves on to the easy
y money polic
cy, the posittive impact could percolatte fast into tthe
economy in terms of capex ann
nouncements and lower b orrowing cossts for corpora
ate. This wou
uld
lead im
mproved earnings and fresh economic activity
a
genera
ation and wou
uld lead to a vvirtuous cycle
e.
Source: Bloomberg
B
October 21st, 20144
Thirdly
y, The Indian currency has
s remained re
elatively resili ent in face off sharply app
preciating Dollar
Index. (DXY Chart and major cu
urrencies rebased) This w
was on the ba
ack of very sttrong CAD da
ata
eady inflow of funds by the
e foreigners in
n the Indian m
markets both Debt and Equ
uity.
and ste
130.0
Majoor Currencies vs USD
125.0
Russsia
(Index to 100)
120.0
115.0
110.0
Euroo
Dollar Inddex
Brazzil
105.0
100.0
Indiaa
95.0
India
Brazil
Russia
Euro
Oct‐14
Sep‐14
Sep‐14
Aug‐14
Aug‐14
Jul‐14
Jul‐14
Jul‐14
Jun 14
Jun‐14
Jun‐14
May‐14
May 14
May‐14
Apr‐14
Apr‐14
Mar‐14
Mar‐14
Feb‐14
Feb‐14
Jan‐14
Jan‐14
Jan‐14
90.0
Dollar Indexx
Source: Bloomberg
B
Hence
e if we look at both the
e Macro fund
damentals an
nd the strucctural actionss taken by tthe
govern
nment, they all
a seem to be
e pointing to a very positiive long term
m growth prosspects for Ind
dia.
Infact, recently whe
en the IMF cut
c down its global
g
growth
h forecast, it maintained its forecasts ffor
India. This shows the confidence of the larrge multilaterral agencies on the impro
oving econom
mic
fundam
mentals of the
e country.How
wever a big risk to the ab
bove growth dynamics to Indian marke
ets
does remain from any
a sharp glob
bal “risk-off” event.
e
We be
elieve that Ind
dian Equities continued to remain unde
er owned by tthe Indian invvestors at larg
ge.
It’s the
e FII’s who have
h
actually raised their stakes in the
e Indian equities over the
e past 5 years.
Howev
ver the FII inv
vestment is still
s a small percentage
p
off their overall global equitty exposure. Of
course
e, over last couple of quarters we have seen ssome investm
ments emanating from tthe
retail/d
domestic inve
estor’s side both
b
in term of inflows to
o Mutual Fun
nds and direcct ownership of
stocks. We think that the equity markets are in for a susta
ained period o
of positivity as the econom
mic
growth
h cycle in India turns upwards.
Trend in sharehold
ding pattern of CNX 200 companies
Source: Capitaline,
C
CNX 20
00 companies
In ourr view, the In
ndian equity markets con
ntinue to pro
ovide investm
ment opporttunities across
spectrrum and we think that investors
i
co
ould use the
ese opportun
nities to build their equity
portfo
olios. We thiink that marrkets could continue to
o be volatile
e in the nea
ar term as w
we
October 21st, 2014
approach the end of QE in the US and as the US looks to hike its interest rates apart from
the other geopolitical issues. However, we feel that such volatility could be used by the
investors to buy into equities with a horizon of 2-3 years. Hence we recommend our
investment strategy of 50% lumpsum and rest staggered over next 3-4 months. In this
context, we think that among the Stocks/Mutual funds which are likely to do well, could be
the following:
Recommendations:
Companies
Bank of India Ltd Bajaj Auto Ltd Bharat Heavy Electricals Ltd Cyient Ltd Entertainment Network (India) Ltd Grasim Industries Ltd Gujarat State Fertilizers & Chemicals Ltd Infosys Ltd Mahindra & Mahindra Ltd Oil and Natural Gas Corporation Ltd Sintex Industries Ltd CMP (Rs)
As on
FY14
261 2,411 228 462 458 3,317 111 3,812 1,260 419 84 5.6 21.5 15.9 19.2 26.2 34.0 12.9 20.5 20.9 13.5 7.1 Valuations (P/E)
FY15E
FY16E
6.5 19.1 15.2 14.3 20.3 45.7 8.5 18.2 19.1 10.8 6.3 5.4 15.9 9.9 12.1 17.0 39.7 7.1 15.5 16.8 9.5 5.6 We are also feeling that the below mentioned Equity mutual funds could also be looked
upon by the investors in line with their risk profile from a 2-3 year horizon:
•
•
•
Large Cap Oriented Funds
o ICICI Prudential Top 100 Fund
o Birla Sun Life Frontline Equity Fund
o HDFC Equity Fund
Flexi Cap Oriented Funds
o Franklin India High Growth Companies Fund
o Reliance Equity Opportunities Fund
Mid Cap Oriented Funds
o SBI Magnum Midcap Fund
o UTI Mid Cap Fund
October 21st, 2014
Bajaj Auto Ltd
CMP: Rs.2411
Background
Bajaj Auto Limited is a manufacturer of scooters, motorcycles and three-wheeler vehicles and
spare parts thereof. The Company operates in two segments: Automotive and Investments. The
Company’s brands include Pulsar, Avenger, Discover, Platina and Ninja. Its commercial vehicles
range include goods carriers, such as GC Max Diesel, GC Max CNG, RE600, and passenger
carriers, such as RE 2S, RE 2S CNG, RE 2S LPG, RE 4S, RE 4S CNG, RE 4SLPG, RE Diesel,
RE GDI and Mega Max. The Company’s subsidiaries include Bajaj Auto International Holdings BV
and PT. Bajaj Auto Indonesia.
Key Details
52 week H/L(Rs)
Book Value (Rs) YTD
FV (Rs)
PE (TTM)
Dividend Yield (%)
2454/1796
378.02
10.0
21.5
2.07
Shareholding Pattern (%) on 30thSeptember 2014
Promoter
50.02
FII
17.69
DII
7.95
Others
24.34
Total
100.00
Valuations and Chart
150
PE
FY14
FY15E
FY16E
21.5
19.1
15.9
Sensex
140
(Index to 100)
130
Bajaj 120
110
100
90
Oct‐14
Sep‐14
Jul‐14
Aug‐14
Jun‐14
Apr‐14
May‐14
Jan‐14
Feb‐14
Mar‐14
Dec‐13
Oct‐13
Nov‐13
Sep‐13
Jul‐13
Aug‐13
Jun‐13
Apr‐13
May‐13
80
Source: Capitaline
View: Bajaj Auto’s domestic two wheeler business continued to be weak whereas exports
supported the growth in revenue for Q2FY15. Going forward, gain in domestic market share
led by newly launched Discover150cc and new upcoming launches along with strong
growth expected from export markets will be the key growth drivers for the company.
Overall for FY15, we expect volumes to improve with the uptick seen in domestic market in
last two month of the quarter but expect margins to remain muted in FY15 due to increase in
spending towards building strong brand. Key monitarable for the stock would be the rate of
improvement in market share in domestic 2W segment with the launch of new Discover
brand. We maintain our positive stance on Bajaj Auto considering its focus on exports,
strong R&D capabilities, huge cash and cash equivalent of Rs.83.13 bn and strong return
ratios with ROE of 32.1% and ROCE of 45.5% in FY14. At CMP stock is trading at PE multiple
of 19.1x of FY15E and 15.9x of FY16E. We maintain our BUY recommendation on the stock
with the target price of Rs 2734 (18x FY16E EPS of Rs 152).
October 21st, 2014
Bharat Heavy Electricals Ltd
CMP: Rs.228
Background
Bharat Heavy Electricals Limited (BHEL) is an engineering and manufacturing company. The
Company is engaged in the design, engineering, manufacture, construction, testing, commissioning
and servicing of a range of products and services for the core sectors of the economy, including
power, transmission, industry, transportation, renewable energy, oil and gas and defense. Its
segment includes Power and Industry. It is a manufacturer of Power generation equipment,
supplying a wide range of products and systems for thermal, nuclear, gas and hydro-based utility
and captive power plants. It is also a manufacturer of a range of industrial systems and products.
Products and systems supplied by the Company include captive power plants, centrifugal
compressors, drive turbines, industrial boilers and auxiliaries, waste heat recovery boilers, gas
turbines, pumps, heat exchangers, electrical machines, valves, heavy castings and forgings,
electrostatic precipitators and seamless steel tubes.
Key Details
52 week H/L(Rs)
Book Value (Rs) YTD
FV (Rs)
PE (TTM)
Dividend Yield (%)
291/131
135.81
2.0
16.5
1.27
Shareholding Pattern (%) on 30thSeptember 2014
Promoter
63.06
FII
15.71
DII
16.91
Others
4.32
Total
100.00
Valuations and Chart
170
PE
FY15E
FY16E
15.9
15.2
9.9
(Index to 100)
FY14
Sensex
150
130
110
BHEL 90
70
Oct‐14
Sep‐14
Jul‐14
Aug‐14
Jun‐14
Apr‐14
May‐14
Jan‐14
Feb‐14
Mar‐14
Dec‐13
Oct‐13
Nov‐13
Sep‐13
Jul‐13
Aug‐13
Jun‐13
Apr‐13
May‐13
50
Source: Capitaline
View: The Company’s recent quarter’s results were weak largely on the back of weak macro
environment. However we think that with the new government focusing on removing the
impediments in the power sector (infra in general) the future could start to look up for the
sector. The company too has stated that its seeing traction at the ground levels and also in
some of its slow moving orders. With new orders to the tune of 15-17 GW expected to be
finalized in FY15 we think that BHEL, with very strong balance sheet (~Rs.110 bn cash) and
market leadership (~72% market share), is well positioned to take the benefits of the cyclical
upturn. Apart from this, the company’s constant endeavor to come up with innovative
products, lower costs and diversify its business to solar, railways and T&D space is likely to
benefit over the medium to longer term. However, given the weak quarterly results and
expectations of weak FY15, we have lowered our PE multiple for BHEL and continue to
recommend BUY on the stock with a price target of Rs 275 at 12x FY16E EPS of Rs 22.9. Key
monitorable for our earnings expectations would be improving order flows and faster
execution.
October 21st, 2014
CyientLtd.
CMP: Rs.462
Background
Cyient Limited, formerly Infotech Enterprises Limited, provides engineering solutions, including
product development and life-cycle support, process, network and content engineering to the
organizations worldwide. The Company offers a range of publication solutions, including simple
authoring and information architecture development, transforming unstructured documents to
structured documents, such as Technical documentation and online technical query support, two
dimensional (2D) and third dimensional (3D) illustration with color codes, Usage and customization
of content management system, authoring and illustration tools, Industry-certified technical
publication, and Data management. The Company’s Data Transformation and Analytics business
unit specifically targets three industries: Transport and Navigation, Energy and Natural Resources,
and Content and Geospatial Providers.
Key Details
52 week H/L(Rs)
Book Value (Rs) YTD
FV (Rs)
PE (TTM)
Dividend Yield (%)
Shareholding Pattern (%) on 30thSeptember 2014
512/218
134.7
5.0
17.4
1.08
Promoter
FII
DII
Others
Total
22.27
37.05
12.13
28.55
100.00
Valuations and Chart
300
PE
FY15E
FY16E
19.2
14.3
12.1
250
(index to 100)
FY14
Cyient
200
Sensex 150
100
Oct‐14
Sep‐14
Jul‐14
Aug‐14
Jun‐14
Apr‐14
May‐14
Jan‐14
Feb‐14
Mar‐14
Dec‐13
Oct‐13
Nov‐13
Sep‐13
Jul‐13
Aug‐13
Jun‐13
Apr‐13
May‐13
50
Source: Capitaline
View: The Company has been able to deliver strongly on the elevated expectations on the
revenue front. We think that the business growth across segments would continue to
remain steady in the medium term due to improved pipelines and higher client additions.
Also, the focus of the company to add incremental domain expertise in the DNO segment
would help the segment to see better revenues and utilizations. The company has a very
strong balance sheet with cash balance of Rs 7.18 bn at the end of the quarter, which would
help it to do more buyouts to improve either domain knowledge or to get access to more
clients. Thus, we think that the management would be able to deliver on its vision of strong
earnings growth in the medium term. We continue to be positive on the stock and maintain
a BUY on the stock with a price target of Rs 515 at 12x FY16E EPS of Rs 38.3 (adding Rs 55
of cash per share).
October 21st, 2014
Entertainment Network (India) Ltd.
CMP: Rs.458
Background
Entertainment Network (India) Limited is engaged in the radio broadcasting business. The
Company operates in two segments: Radio Broadcasting, which consists of the activities relating to
airtime sales and Events, which consist of activities relating to management of events, creating and
marketing media properties. The Company operates its radio broadcasting business under the
brand Radio Mirchi with a network of approximately 22 states with 32 stations. The Company is a
subsidiary of Times Infotainment Media Limited.
Key Details
52 week H/L(Rs)
Book Value (Rs) YTD
FV (Rs)
PE (TTM)
Dividend Yield (%)
Shareholding Pattern (%) on 30th September 2014
467/290
126.81
10.0
24.9
0.22
Promoter
71.15
FII
16.02
DII
2.33
Others
10.50
Total
100.00
Valuations and Chart
210
PE
FY15E
FY16E
26.2
20.3
17.0
170
(Index to 100)
FY14
ENIL
190
150
130
Sensex
110
90
70
Oct‐14
Sep‐14
Jul‐14
Aug‐14
Jun‐14
Apr‐14
May‐14
Jan‐14
Feb‐14
Mar‐14
Dec‐13
Oct‐13
Nov‐13
Sep‐13
Jul‐13
Aug‐13
Jun‐13
Apr‐13
May‐13
50
Source: Capitaline
View: The Company continued to retain its leadership across 22 of the 32 markets that it
operates and continues to remain the most profitable radio player in the country. The focus
of the management is to gradually add more non radio revenues which would help the
company scale its business in the long term. In the medium term a huge opportunity is
likely to open with the phase 3 expansion of the FM radio network in the country for which
the company has already started to prepare in term so HR and branding initiatives. We think
that the strong balance sheet, healthy return ratios, large market opportunity and the strong
management team would help the company to grow steadily over the medium to long term.
We maintain a BUY on the stock with price target of Rs 540 at 20x FY16E EPS of Rs 27.
October 21st, 2014
Grasim Industries Ltd.
CMP: Rs.3317
Background
Grasim Industries Limited is a company of Aditya Birla Group. The Company is engaged primarily
in two businesses: Viscose Staple Fibre (VSF) and in cement. It also produces caustic soda and
allied chemicals and rayon grade pulp, which are used in the manufacture of VSF. The
manufacturing plants of the Company are located in India, Middle East, Sri Lanka, Canada,
Bangladesh and China. It operates in three segments: fibre and pulp, chemicals and others. Fibre
and Pulp segment includes viscose staple fibre and rayon grade pulp. Chemicals segment includes
caustic soda and allied chemicals. Others include mainly textiles. Cement segment includes grey
cement, ready-mix concrete and white cement. Textile segment includes yarn.
Key Details
52 week H/L(Rs)
Book Value (Rs) YTD
FV (Rs)
PE (TTM)
Dividend Yield (%)
Shareholding Pattern (%) on 30thSeptember 2014
3755/2432
2348
10.0
15.6
0.63
Promoter
25.51
FII
22.77
DII
16.45
Others
35.27
Total
100.00
Valuations and Chart
150
PE
Sensex
140
FY15E
FY16E
34.0
45.7
39.7
130
(Index to 100)
FY14
120
Grasim 110
100
90
80
70
60
Oct‐14
Sep‐14
Jul‐14
Aug‐14
Jun‐14
Apr‐14
May‐14
Jan‐14
Feb‐14
Mar‐14
Dec‐13
Oct‐13
Nov‐13
Sep‐13
Jul‐13
Aug‐13
Jun‐13
Apr‐13
May‐13
50
Source: Capitaline
View: The recent quarterly numbers were not encouraging on the margin front. The
pressure on margin was also aggravated by maintenance shutdown in International JV.
Management believes the near term outlook for the VSF continues to be challenging due to
surplus capacity in China and weak outlook on the cotton prices. However, management
believes that VSF continues to hold favorable position in comparison to other fibers due to
preference for comfort fabric which will lead to increase in demand for high quality
cellulosic fibre. Also, the value accruing from Consolidated UltraTech’s Cement business
augurs well for Grasim. Hence we maintain our BUY recommendation on the stock with
revised SOTP price target of Rs.3892 which is summation of 7xFY16E for VSF business and
63% company’s stake in UltraTech Cement valued at Rs.2512/share (after providing for 30%
holding company discount).
October 21st, 2014
Gujarat State Fertilizers & Chemicals Ltd
CMP: Rs.111
Background
Gujarat State Fertilizers & Chemicals Limited is an India-based company which operates in two
segments: Fertilizer Products and Industrial Products. Its fertilizer products include urea,
ammonium sulphate, di-ammonium phosphate, ammonium phosphate sulphate, nitrogen
phosphorus and potassium (NPK) and traded fertilizer products. Its Industrial Products include
caprolactam, nylon-6, nylon filament yarn, nylon chips, melamine, polymer products and traded
industrial products. It is having a soil and water testing laboratory and providing soil testing (for
macro and micro nutrient) and irrigation water testing services. One Mobile Soil Testing cum Audiovisual Van is also operated to provide soil and water testing services at the doorstep of the farmers.
Key Details
52 week H/L(Rs)
Book Value (Rs) YTD
FV (Rs)
PE (TTM)
Dividend Yield (%)
Shareholding Pattern (%) on 30thSeptember 2014
124/44
107.87
2.0
9.5
1.80
Promoter
37.84
FII
19.10
DII
15.83
Others
27.23
Total
100.00
Valuations and Chart
230
PE
GSFC
210
FY15E
FY16E
12.9
8.5
7.1
190
(Index to 100)
FY14
170
150
Sensex 130
110
90
70
Oct‐14
Sep‐14
Jul‐14
Aug‐14
Jun‐14
Apr‐14
May‐14
Jan‐14
Feb‐14
Mar‐14
Dec‐13
Oct‐13
Nov‐13
Sep‐13
Jul‐13
Aug‐13
Jun‐13
Apr‐13
May‐13
50
Source: Capitaline
View: The management indicated that DAP (Diammonium phosphate) consumption in the
domestic market is up by ~11%YoY while complex fertilizer consumption is up 25%YoY.
With increase in international DAP prices, the management expects imports to be limited
which could lead to tightening in supply in H2FY15 which would benefit domestic
manufacturers. The management indicated that any recovery in the Chinese economy is
likely to result in improvement in the Caprolactam prices. The management substantially
repaid its short-term borrowings which will lead to lower interest cost and improved
profitability. With improved outlook on the Fertilizer segment and commissioning of Nylon
and Water Soluble in H2FY15, we have revised earnings and multiple upwards for FY15E
and FY16E. At CMP, the stock trades at 8.5xFY15E EPS of Rs.13 and 7.1xFY16E EPS of
Rs.15.6. We recommend BUY on the stock with a target price of Rs.156 which is 10xFY16E.
October 21st, 2014
Infosys Limited
CMP: Rs.3812
Background
Infosys Limited (Infosys) provides business consulting, technology, engineering and outsourcing
services. Its end-to-end business solutions include consulting and systems integration comprising
consulting, enterprise solutions, systems integration and advanced technologies; business
information technology (IT) services consisting application development and maintenance,
independent validation services, infrastructure management, engineering services comprising
product engineering and life cycle solutions and business process management; products,
business platforms and solutions, including Finacle. In November 2013, the Company announced
that Infosys BPO, the business process outsourcing subsidiary announced the opening of a new
delivery center in Eindhoven, the Netherlands.
Key Details
52 week H/L(Rs)
Book Value (Rs) YTD
FV (Rs)
PE (TTM)
Dividend Yield (%)
Shareholding Pattern (%) on 30th September 2014
3986/2894
839
5.0
19.2
1.65
Promoter
15.92
FII
42.67
DII
14.48
Others
26.93
Total
100.00
Valuations and Chart
150
PE
Sensex
140
FY15E
FY16E
20.5
18.2
15.5
130
(Index to 100)
FY14
120
Infosys
110
100
90
80
70
60
Oct‐14
Sep‐14
Jul‐14
Aug‐14
Jun‐14
Apr‐14
May‐14
Jan‐14
Feb‐14
Mar‐14
Dec‐13
Oct‐13
Nov‐13
Sep‐13
Jul‐13
Aug‐13
Jun‐13
Apr‐13
May‐13
50
Source: Capitaline
View: We think that Infosys would continue to ride on the improved macro-economic
scenario in the US and the need for improved efficiencies for European companies. The
ability of the company to ramp up its utilization and drive down costs would keep the
margins strong in the longer term. Also the new management has its sight set on more
nonlinear business model which could sustainably drive revenues and earnings in the
longer term. We believe that IT businesses would continue to deliver strong earnings
growth as they adapt to the changing paradigm in the industry and keeps innovating new
business delivery models and processes. We think that the new management has its sight
set on those goals firmly. We continue to recommend a BUY on the stock with a price target
of Rs 4432 at 16x FY16E EPS of Rs 245 added with Rs 507 of cash per share.
October 21st, 2014
Mahindra & Mahindra Ltd
CMP: Rs.1260
Background
Mahindra & Mahindra Limited is an India-based company. The Company operates in nine
segments. Automotive Segment consists of sales of automobiles, spare parts and related services.
Farm Equipment Segment consists of sales of tractors, spare parts and related services.
Information Technology (IT) Services consists of services rendered for IT and Telecom. Financial
Services consists of services relating to financing, leasing and hire purchase of automobiles and
tractors. Steel Trading and Processing consists of trading and processing of steel. Infrastructure
consists of operating of commercial complexes, project management and development. Hospitality
consists of sale of Vacation ownership. Systech consists of automotive components and other
related products and services. Others consist of Logistics, After-market, Two wheelers and
Investments.
Key Details
52 week H/L(Rs)
Book Value (Rs) YTD
FV (Rs)
PE (TTM)
Dividend Yield (%)
Shareholding Pattern (%) on 30thSeptember 2014
1421/847
287
5.0
21.4
1.10
Promoter
25.78
FII
40.21
DII
16.40
Others
17.61
Total
100.00
Valuations and Chart
190
PE
FY14
FY15E
M&M
170
FY16E
20.9
19.1
16.8
(Index to 100)
150
Sensex
130
110
90
70
Oct‐14
Sep‐14
Jul‐14
Aug‐14
Jun‐14
Apr‐14
May‐14
Jan‐14
Feb‐14
Mar‐14
Dec‐13
Oct‐13
Nov‐13
Sep‐13
Jul‐13
Aug‐13
Jun‐13
Apr‐13
May‐13
50
Source: Capitaline
View: Due to deficient monsoon management has reduced its growth expectation for tractor
industry to 5% in FY15 from earlier 8% growth. However, management expects good exit of
monsoon (positive for rabi crop) which may boost tractor sales in H2FY15. We expect
M&M’s Utility Vehicle (UV) volumes to remain subdued in near term due to continued
weakness in UV segment. However, UV volumes are expected to improve from H2FY15 on
the back of improvement in the economy and new launches in Q3FY15. The benefit of
synergies from MTBL merger has started reflecting in numbers and is expected to improve
further once the volumes starts picking up. We remain positive on the stock on the good
return ratios of over 20% and expected new launches on both product and engine side in
Q3FY15. On the back of improvement in margins during the quarter, we have revised our
expected EBITDA margin to 13.5% and 13.7% (13% and 13.5% earlier) for FY15 and FY16,
respectively and recommend a BUY on the stock with revised target price of Rs.1472 (15x
FY16E EPS of Rs.75.0 + Rs.347 as value of subsidiaries at 30% holding company discount).
October 21st, 2014
ONGC Ltd
CMP: Rs.419
Background
Oil and Natural Gas Corporation Limited (ONGC) is an India-based company. The Company is
mainly engaged in the oil exploration and production activities. The Company operates in two
segments: Offshore and Onshore. Its subsidiaries include ONGC Videsh Limited (OVL), Mangalore
Refinery & Petrochemicals Ltd., ONGC Nile Ganga BV, ONGC Narmada Limited, ONGC Amazon
Alaknanda Limited, ONGC Campos Ltda, ONGC Nile Ganga (Cyprus) Ltd. and ONGC Nile Ganga
(San Cristobal) B.V.
Key Details
52 week H/L(Rs)
Book Value (Rs) YTD
FV (Rs)
PE (TTM)
Dividend Yield (%)
Shareholding Pattern (%) on 30thSeptember 2014
472/263
165.40
5.0
14.36
2.27
Promoter
68.94
FII
7.17
DII
10.38
Others
13.51
Total
100.00
Valuations and Chart
170
PE
FY15E
FY16E
13.5
10.8
9.5
(Index to 100)
FY14
Sensex
150
130
ONGC
110
90
70
Oct‐14
Sep‐14
Jul‐14
Aug‐14
Jun‐14
Apr‐14
May‐14
Jan‐14
Feb‐14
Mar‐14
Dec‐13
Oct‐13
Nov‐13
Sep‐13
Jul‐13
Aug‐13
Jun‐13
Apr‐13
May‐13
50
Source: Capitaline
View: We believe that ONGC could have material positive triggers in the medium term, with
the increase in net crude realization, gas price hike, better execution and faster decision
making, leading to early monetization of resources and prospects of higher oil & gas
production over next three years. Also the ongoing diesel price hikes would lower overall
under-recoveries with ONGC share declining significantly over the next two years. The
Supreme Court decision on royalty applicability for Gujarat onshore crude remains a key
monitorable. The stock is trading at 10.8x FY15E and 9.5x FY16E earnings. We recommend
BUY on the stock with price target of Rs.480 which is 11xFY16E.
October 21st, 2014
Sintex Industries Ltd
CMP: Rs.84
Background
Sintex Industries Limited (SIL) is an India-based company which manufactures plastics and
composites. The Company operates in three business segments: Plastics, Textile and
Infrastructure. The Company’s textile segment is engaged in the manufacture of fabric and yarn.
The Company’s Plastics segment is engaged in the manufacture of water tanks, doors, windows,
prefabricated structures, sections, BT shelters and custom moulding. The Company’s infrastructure
segment is engaged in housing and engineering, procurement and construction (EPC) contract.
The Company’s subsidiaries include Sintex Holdings B.V., Bright Auto Plast Limited, Sintex Infra
Projects Limited, Sintex Wausaukee Composites Inc. and Sintex Industries UK Ltd.
Key Details
52 week H/L(Rs)
Book Value (Rs) YTD
FV (Rs)
PE (TTM)
Dividend Yield (%)
Shareholding Pattern (%) on 30thSeptember 2014
107/27
106.71
1.0
7.05
0.73
Promoter
40.56
FII
17.63
DII
4.26
Others
37.55
Total
100.00
Valuations and Chart
230
PE
Sintex
210
FY15E
FY16E
7.1
6.3
5.6
190
(Index to 100)
FY14
170
150
130
Sensex
110
90
70
50
Oct‐14
Sep‐14
Jul‐14
Aug‐14
Jun‐14
Apr‐14
May‐14
Jan‐14
Feb‐14
Mar‐14
Dec‐13
Oct‐13
Nov‐13
Sep‐13
Jul‐13
Aug‐13
Jun‐13
Apr‐13
May‐13
30
Source: Capitaline
View: We think that the company has been able to deliver strongly on its earnings for the
past 2-3 quarters and has allayed some of our fears on the topline stagnation. The company
is the largest player in the prefabricated structures in the country and would benefit
immensely from the government plans like “Swachh Bharat”, “Clean Ganga” and “Toilets
for all.” The improvement in the automobile sector in the country would also have great
impact on the company’s domestic custom molding business as the company is a supplier
to all the major passenger car manufacturers in the country. Therefore, we think that the
opportunity size is large and the company seems fully geared for taking benefit of the same.
The revenues and cash flow from the textile business remains a key monitorable in the
medium term. However we maintain our BUY on the stock with a revised price target of Rs
135 (9x FY16E fully diluted EPS of Rs 15), as we roll over our earnings to FY16.
October 21st, 2014
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