HDFC Sec Diwali 2016 Stock Picks

Diwali Pick
21 Oct 2016
Bajaj Electricals
Page |1
21 Oct 2016
Diwali Picks
India - On the road to greatness
Team Research HDFC sec
As we step into Samvat 2073, India is breaking out of its soft ways, whether it is in geo-politics, economics or
governance. This transformation will become increasingly visible in the next few years but we are happy to note that
some changes have already taken root. Businesses will no longer live in cosy shelters created by policy, inheritance or
lack of choice for consumers. Though we may have many miles to cover but we are certainly on the path where merit
will be eventually acknowledged as a crucial component for success. Diligent and capable corporates in growth
sectors are positioned for a multi-year breakout. Investors would do well to identify them early, across sectors and
sizes.
Meanwhile, the world is in turmoil. From China to Europe and Brazil to the Middle East, every country is facing
political, demographic and financial system issues while being under the climate of a macro slowdown. To deal with
such a situation, central banks are printing large sums of money and distributing it to the public to stimulate economy,
but the results are not encouraging. Instead, falling (and indeed negative) yields on bonds are creating unsustainable
asset bubbles. Real and sustainable growth seems elusive almost everywhere, except perhaps in India today!
We are possibly the only large economy equipped with a vision and the necessary tools to improve sustainability in all
aspects: demographics, consumption, infrastructure, human development, urbanisation, energy intensity, political
evolution, governance and policy. Even with the backdrop of a volatile market, there is little doubt that foreign
investors see India favourably. India will continue to attract foreign capital inflows, trading interest, political alignment
and strategic friendship from diverse blocs of countries globally.
It is with this vision that we have handpicked investment ideas for you. Every one of these stocks is a good Indian
blend of managerial capability, strategic intent and growth opportunities. This Diwali (the festival of lights), we have
humbly put together investment ideas that you may be happy (and proud) to hold till the next one!
STOCK RECOMMENDATIONS
CMP
SEQUENTIAL TARGET PRICE
LOW RISK
Kotak Mahindra Bank
780
854
Lupin
1,505
2,050
MOIL
296
333-354
Reliance Industries
1,064
1,225
MEDIUM RISK
Bajaj Electricals
264
322-349
Bharat Electronics
1,266
1,525
Force Motors
4,390
4,952
India Cements
155
211-263
Page |2
Diwali Pick
21 Oct 2016
Bajaj Electricals
Industry
CMP
Recommendation
Add on Dips to band
Sequential Targets
Time Horizon
Household Appliances
Rs.264
Buy at CMP and add on declines
Rs. 264-238
Rs.322-349
TILL NEXT DIWALI
HDFC Scrip Code
BAJELE
BSE Code
500031
NSE Code
BajajElec
Bloomberg
BJE
CMP as on 21 Oct 16
264
Equity Capital (Rs crs)
202
Face Value (Rs)
Equity Sh. Outstanding
10.1
Market Cap (Rs crs)
2680
Book Value (Rs)

Avg. 52 Week Volumes
Bajaj Electricals is an Indian consumer electrical equipments manufacturing company based in Mumbai, Maharashtra. Its
main segments include lighting, luminaries, appliances, fans, engineering and projects. Lighting includes lamps, tubes
and luminaires while consumer durables include appliances and fans.
Engineering and projects include transmission line towers, telecommunications towers, highmast, poles and special
projects. The division has an order book of ~Rs. 2500 cr as on Sep 2016. Bajaj Electricals has a strong brand re-call
across India. This is corroborated in its sales which are spread almost equally across all geographies unlike TTK Prestige
(50-55% sales from south India), Hawkins (~60% sales from north India) and V-Guard (~65% sales from the southern
region); these are strong regional players but struggle at the national level.
After a lacklustre performance over FY12-15, Bajaj Electricals seems to be back on the growth path. Green shoots are
visible across lighting, engineering and projects (E&P) segments, which is evident from the FY16 performance.
We expect revenue CAGR of 12% over FY16-18E (growth likely to be driven across segments). A better mix and
operating leverage will aid in steady EBITDA margin expansion (50bps over FY16-18E). We forecast 41% PAT CAGR over
the same period and expect company to post ~Rs. 19 EPS for FY18E.
A well-entrenched and expanding distribution network (2,200+ distributors, 4,000+ dealers, 5lakh+ retailers) should
enable Bajaj to capitalise on demand revival and regain lost market share. Improving cash flows, core WCC, return
ratios and reducing debt/equity strengthen our view that the stock deserves higher multiples. Based upon Rs 19
earnings on FY18E; we value the stock ~18x on FY18E earnings and arrive price target of Rs. 322 and Rs. 349 over the
next 3-4 quarters.
75
388290
52 Week High
280
52 Week Low
155
Shareholding Pattern
Promoters
63.5
Institutions
15.6
Non Institutions
20.9
Total
100
Kushal Rughani
kushal.rughani@hdfcsec.com
Financial Summary (Standalone)

(Rs Cr)
Net Revenues
EBITDA
APAT
Diluted EPS (Rs)
P/E (x)
EV / EBITDA (x)
RoE (%)
FY15
4258
89
-14
-1.4
33.4
-
FY16E
4612
257
97
9.6
27.4
11
13.5
FY17E
5105
297
148
14.7
18
8.8
18.3
FY18E
5790
351
197
19.5
13.5
7.5
21.2
(Source: Company, HDFC sec)
Page |3
BAJAJ ELECTRICALS
Income Statement
Year ending March (Rs Cr)
Net Revenues
Growth (%)
EBITDA
EBITDA Margin (%)
Depreciation
Other Income (Including EO Items)
Interest
PBT
Tax (Incl Deferred)
Reported PAT
APAT Growth (%)
Adjusted EPS (Rs)
Balance Sheet
FY15
4258
5.7
89
2.1
29
24
105
-21
-7
-14
-
FY16
4612
8.3
257
5.6
26
25
101
154
57
97
9.6
FY17E
5105
10.7
297
5.8
29
32
77
223
76
147
51.4
14.7
FY18E
5790
13.4
351
6.1
34
39
61
296
101
195
32.9
19.5
FY15
-21
16
105
29
37
-7
67
60
11
16
-34
61
-105
-18
-59
-25
FY16
154
16
101
26
252
57
461
28
2
16
-78
-213
-101
-34
-348
34
FY17E
223
21
77
29
2
76
234
42
7
21
-22
-43
-77
-50
-153
59
FY18E
296
26
61
34
-114
101
151
90
26
-50
-29
-61
-70
-139
-39
Cash Flow Statement

Reported PBT
Non-operating & EO Items
Interest Expenses
Depreciation
Working Capital Change
Tax Paid
OPERATING CASH FLOW ( a )
Capex
Investments
Non-operating Income
INVESTING CASH FLOW ( b )
Debt Issuance/(Repaid)
Interest Expenses
Share Capital Issuance
Dividend
FINANCING CASH FLOW ( c )
NET CASH FLOW (a+b+c)
As at March (Rs Cr)

SOURCES OF FUNDS
Equity Capital
Reserves
Total Shareholders Funds
Total Debt
Net Deferred Taxes, LT Provisions, etc.
TOTAL SOURCES OF FUNDS
APPLICATION OF FUNDS
Net Block & CWIP
Investments, Goodwill and LT Advances
Total Non-current Assets
Inventories
Debtors
Other Current Assets
Cash & Equivalents
Creditors
Other Current Liabilities & Provns
Net Current Assets
TOTAL APPLICATION OF FUNDS
FY15
FY16
FY17E
FY18E
20.2
667
687
410
6.2
1103
20.2
731
752
197
6
954
20.2
830
854
154
23
1031
20.2
957
980
125
43.3
1147
280
85
422
475
1675
167
41
1175
503
677
1103
299
149
507
507
1450
158
59
1145
582
444
954
295
157
504
541
1567
177
140
1287
611
520
1031
349
144
545
602
1823
188
102
1459
655
586
1147
FY15
FY16
FY17E
FY18E
2.1
-
5.6
2.1
13.5
5.8
2.9
18.3
6.1
3.4
21.2
3.9
0.5
4.8
0.1
5
-
5
-
1.5
1.5
9.6
12.2
2.8
14.7
17.8
4.1
19.5
22.9
5.7
33
0.6
27
10.7
1.1
18
8.8
1.6
13.5
7.5
2.2
Key Ratios
Year ending March
PROFITABILITY (%)
EBITDA Margin
APAT Margin
RoE
EFFICIENCY
Fixed Asset Turnover (x)
Net D/E (x)
PER SHARE DATA (Rs)
EPS
CEPS
Dividend
VALUATION
P/E (x)
EV/EBITDA (x)
Dividend Yield (%)
Page |4
Diwali Pick
21 Oct 2016
Bharat Electronics
Industry
CMP
Recommendation
Add on Dips to band
Sequential Targets
Time Horizon
Defence
Rs.1266
Rs. 1266-1140
Rs.1525
TILL NEXT DIWALI
HDFC Scrip Code
BHAELE
BSE Code
500049
NSE Code
BEL
Bloomberg
BHE
CMP as on 21 Oct 16
1266
240
Face Value (Rs)
10
24
Market Cap (Rs crs)
30,667
Book Value (Rs)
374.4
62580
52 Week High
1417
52 Week Low
1001
Bharat Electronics which is based out of Bangalore, was established to meet the specialised electronic needs of the
Indian defence services. Over the years, the company has emerged as a market leader in the Indian defence electronics
segment. The Government of India currently holds 75% stake.
Currently, the defence sector is in the limelight due to the governments strong focus on making defence procurements
central to the Make in India campaign. The company has ~35% percent market share of Indias defence electronics
segment and is likely to be one of the biggest beneficiary of the offset clause.
The government notified increase in Foreign Direct Investment (FDI) limit to 49% through approval route in the defense
sector, aimed to cut imports by indigenizing defence production.
Outlook and view
BEL has a strong balance sheet with zero debt and cash balance of Rs. 7553 cr (~25% of market capitalization). It is also
paying dividends consistently since 1990. Accelerated order inflow and steady performance makes it a preferred
defense play.
We expect the companys revenues to increase from Rs. 8082 cr in FY16 to Rs. 9655.2 cr in FY18 on the back of strong
order inflows and execution of backlog orders over the next two years. With ~P/E 22 on FYE18 we recommend BEL buy
at CMP & add on decline of Rs.1140 with the target of Rs. 1525.
Promoters
75.0
Institutions
18.5
Non Institutions
6.5
Total
100
Nisha Sankhala
nishaben.shankhala@hdfcsec.com
Financial Summary (Consolidated)

(Rs Cr)
Net Revenues
EBITDA
APAT
Diluted EPS (Rs)
P/E (x)
EV / EBITDA (x)
RoE (%)
1QFY17
871.4
92.1
36.1
1QFY16
1099.7
141.5
76.7
YoY%
-20.8
-34.9
-52.9
FY14
FY15
FY16E
FY17E
FY18E
6517.9
1359.2
951.0
118.9
10.6
16.7
13.9
7092.6
1681.4
1196.3
49.9
25.3
13.5
15.6
7548.5
2071.1
1394.2
57.8
21.8
11.0
16.2
8175.1
2263.8
1514.4
63.3
19.9
10.0
16.0
9009.7
2511.3
1673.4
70.3
17.9
9.0
16.1
Page |5
BHARAT ELECTRONICS
Income Statement
Net Revenues
Growth (%)
EBITDA
EBITDA Margin (%)
Depreciation
Interest
PBT
Tax (Incl Deferred)
APAT
APAT Growth (%)
Adjusted EPS (Rs)
Balance Sheet
FY15
7599.4
9.3
1681.4
23.7
166.2
2.7
1512.5
316.2
1196.3
25.8
49.9
FY16
8082.0
6.4
2071.1
23.2
199.6
6.2
1865.4
471.2
1394.2
15.8
57.8
FY17E
8767.2
8.5
2263.8
9.3
228.5
8.1
2027.3
512.9
1514.4
9.2
63.3
FY18E
9655.2
10.1
2511.3
10.9
261.2
9.9
2240.2
566.8
1673.4
10.5
70.3
FY15
1,513.3
-589.6
2.7
166.2
566.4
-316.2
1,342.6
-210.5
-42.4
506.7
253.8
70.9
-2.7
2.3
-233.6
-163.0
1,433.4
6,037.9
FY16
1,857.7
-880.5
6.2
199.6
1,317.9
-471.2
2,029.6
-572.9
-300.9
533.5
-340.4
81.3
-6.2
158.7
-408.0
-174.3
1,515.0
7,552.9
FY17E
2,027.3
-592.2
8.1
228.5
-886.9
-512.9
271.8
-400.0
-400.5
592.2
-208.3
77.2
-8.1
0.0
-528.0
-458.8
-395.4
7,157.5
FY18E
2,240.2
-645.5
9.9
261.2
-1,392.5
-566.8
-93.5
-410.0
-201.7
645.5
33.8
59.2
-9.9
0.0
-672.0
-622.7
-682.4
6,475.1
Cash Flow Statement

Reported PBT
Interest Expenses
Depreciation
Tax Paid
Capex
Investments
Interest Expenses
Dividend
Closing Cash & Equivalents
As at March (Rs Cr)

SOURCES OF FUNDS
Equity Capital
Reserves
Total Debt
Net Block & CWIP
Inventories
Debtors
Other Current Assets & ST Advances
Cash & Equivalents
Creditors
Net Current Assets
FY15
FY16
FY17E
FY18E
80.0
8036.8
8116.8
0.4
642.2
8759.4
240.0
8746.1
8986.1
0.3
698.7
9685.0
240.0
9732.4
9972.4
0.3
779.4
10752.1
240.0
10733.9
10973.9
0.3
842.2
11816.4
1213.3
506.4
1719.7
3424.2
3805.3
738.4
6037.9
1184.3
5781.9
7039.7
8759.4
1664.5
807.3
2471.8
4212.8
3740.7
546.4
7552.9
1193.6
7645.9
7213.2
9685.0
1836.0
1207.8
3043.8
4210.7
4255.5
506.5
7157.5
1427.9
6994.0
7708.3
10752.1
1984.8
1409.5
3394.3
4739.4
4813.4
469.4
6475.1
1543.4
6531.9
8422.1
11816.4
FY15
FY16
FY17E
FY18E
23.7
16.9
15.6
27.4
18.4
16.2
27.7
18.5
16.0
27.9
18.6
16.1
-0.7
-0.8
-0.7
-0.6
49.9
170.4
29.2
57.8
66.1
17.0
63.3
72.8
22.0
70.3
81.2
28.0
25.3
13.5
2.3
21.8
11.0
1.3
19.9
10.0
1.7
17.9
9.0
2.2
Key Ratios
Year ending March
PROFITABILITY (%)
EBITDA Margin
APAT Margin
RoE
EFFICIENCY
Net D/E (x)
PER SHARE DATA (Rs)
EPS
CEPS
Dividend
VALUATION
P/E (x)
EV/EBITDA (x)
Dividend Yield (%)
Page |6
Diwali Pick
21 Oct 2016
Force Motors
Industry
CMP
Recommendation
Add on Dips to band
Sequential Targets
Time Horizon
Autos
Rs.4,390
Rs. 3,865-4,040
Rs.4,952
TILL NEXT DIWALI
HDFC Scrip Code
FORMOT
BSE Code
FORCEMOT
NSE Code
Bloomberg
FML IN
CMP as on 21 Oct 16
4,390
13.20
Face Value (Rs)
10.00
1.32
Market Cap (Rs crs)
5785.60
Book Value (Rs)
1482.40
31,886.00
52 Week High (Rs)
4,525.00
52 Week Low (Rs)
2,180.00
Promoters
60.12
Institutions
5.73
Non Institutions
Total
34.15
100.00
Abhishek Jain
abhishekkumar.jain@hdfcsec.com
Sneha Prashant
sneha.prashant@hdfcsec.com
Force Motors Ltd (FML), a vertically integrated auto company with in-house expertise in design, development and
assembly of automobiles and components is poised to grow over the next few years on the back of growing prospects of
the luxury car and LCV market.
FML has a sticky relationship with global auto giants Mercedes (since 1997) and BMW for assembly and supply of
powertrain components (engines, gearbox, axles and shafts). We expect FML to enjoy significant growth in this subcontracting business with revenue CAGR of 27% over FY16-19E owing to increasing penetration of luxury cars in total PV
sales (to improve from current 1.3% to <2% by 2020).
We expect strong traction from the auto business (LCVs, SCVs, MUVs and tractors) owing to new variants from the stable
of the LCV Traveller, market share gains (70%+ share in <5 tonne LCV passenger segment) and robust revenue growth
(16% CAGR over FY16-19E). The reason for Travellers success is its versatility and a monocoque design structure
(normally in cars and SUVs) which leads to better performance, fuel efficiency and guarantees a superior and
comfortable ride.
Key highlights
In H1FY17, total auto volumes increased by 11.3% YoY to 16,550 units on the back of 11% growth in LCVs (driven by
Traveller) and strong growth in 3Ws. Given the good traction in LCV Traveller and revival in tractor demand, we
estimate 10.6% volume growth rate for FY17E (ask rate for H2FY17 is 10%).
Outlook and view: We recommend a BUY on FML with a TP of Rs. 4,952 (22x on Sept-18E). Our target multiple for FML
(at a 33% premium to its historical mean) is premised on its robust earnings outlook, margin expansion, lean balance
sheet (debt free with cash of Rs 241/share as on Mar-16) and improving return ratios as asset sweating rises with
volumes. Long-term investors could hold on to the stock with a TP of Rs 8,556 (25x on FY20E).
Financial Summary (Rs Mn)

(Rs mn)
Net Revenues
EBITDA
APAT
Diluted EPS (Rs)
P/E (x)
EV / EBITDA (x)
RoE (%)
FY15
23,637
1,470
1,013
77.3
56.8
37.4
8.0
FY16
30,601
2,744
1,796
137.1
32.0
19.9
12.8
FY17E
36,166
3,255
2,059
157.2
27.9
16.9
13.1
FY18E
43,080
4,093
2,522
192.5
22.8
13.3
14.1
Page |7
FORCE MOTORS
Income Statement
Year ending March (Rs mn)
Net Revenues
Growth (%)
EBITDA
EBITDA Margin (%)
Depreciation
Interest
PBT
Tax (Incl Deferred)
Reported PAT
EO Items
APAT
APAT Growth (%)
Adjusted EPS (Rs)
Balance Sheet
FY15
23,637
16.9
1,470
6.2
813
658
66
1,249
236
1,013
1,013
30.3
77.3
FY16
30,601
29.5
2,744
9.0
919
714
43
2,496
700
1,796
1,796
77.3
137.1
FY17E
36,166
18.2
3,255
9.0
1,052
658
2,860
801
2,059
2,059
14.7
157.2
FY18E
43,080
19.1
4,093
9.5
1,154
665
3,603
1,081
2,522
2,522
22.5
192.5
FY15
1,249
(658)
66
813
140
(36)
1,524
(1,095)
658
(437)
(97)
(66)
(55)
(217)
870
3,031
FY16
2,496
(714)
43
919
(647)
(289)
1,792
(2,126)
9
714
(1,402)
(81)
(43)
(109)
(233)
156
3,186
FY17E
2,860
(658)
1,052
(214)
(801)
2,194
(3,019)
(9)
658
(2,370)
(26)
(111)
(138)
(313)
2,873
FY18E
3,603
(665)
1,154
(615)
(1,081)
2,341
(2,445)
665
(1,780)
(136)
(136)
425
3,298
Cash Flow Statement

Reported PBT
Interest Expenses
Depreciation
Tax Paid
Capex
Investments
Interest Expenses
Dividend
EO Items, Others
As at March (Rs mn)

SOURCES OF FUNDS
Equity Capital
Reserves
Total Debt
Net Block & CWIP
Inventories
Debtors
Cash & Equivalents
Creditors
Net Current Assets
FY15
FY16
FY17E
FY18E
132
13,037
13,169
107
498
13,774
132
14,693
14,824
26
942
15,807
132
16,595
16,727
942
17,684
132
18,926
19,057
942
20,014
9,663
122
9,785
3,925
1,087
1,889
3,030
3,928
2,014
3,989
13,774
10,586
209
10,795
5,475
1,504
2,014
3,186
4,172
2,994
5,012
15,807
12,552
491
13,043
5,556
1,531
2,206
2,873
4,787
2,738
4,641
17,684
13,843
698
14,541
6,685
2,124
2,628
3,298
6,017
3,246
5,473
20,014
FY15
FY16
FY17E
FY18E
6.2
4.3
8.0
9.0
5.9
12.8
9.0
5.7
13.1
9.5
5.9
14.1
1.5
(0.2)
1.8
(0.2)
1.9
(0.2)
2.0
(0.2)
77.3
138.5
5.0
137.1
206.0
10.0
157.2
236.1
10.2
192.5
278.9
12.4
56.8
37.4
0.1
32.0
19.9
0.2
27.9
16.9
0.2
22.8
13.3
0.3
Key Ratios
Year ending March
PROFITABILITY (%)
EBITDA Margin
APAT Margin
RoE
EFFICIENCY
Net D/E (x)
PER SHARE DATA (Rs)
EPS
CEPS
Dividend
VALUATION
P/E (x)
EV/EBITDA (x)
Dividend Yield (%)
Page |8
Diwali Pick
21 Oct 2016
India Cements
Industry
CMP
Recommendation
Add on Dips to band
Sequential Targets
Time Horizon
Cement
Rs. 155
Rs. 123-134
Rs. 211.5-263
TILL NEXT DIWALI
HDFCSec Scrip Code
INDCEMEQNR
BSE Code
530005
NSE Code
INDIACEM
Bloomberg
ICEM IN
India Cements Ltd (ICL) is the largest producer of cement in South India and one of the largest cement manufacturers in
the country with a consolidated installed cement manufacturing capacity of 15.55 mtpa. About 50 percent of ICLs
cement is sold in Tamil Nadu and Kerala, 10-12 percent in Karnataka, about 13-14 percent in Maharashtra and about 1214 percent in Andhra Pradesh and the remaining is sold in Rajasthan, Gujarat, some parts of Madhya Pradesh and
Chhattisgarh
Promoters
28.63
Key highlights
India Cements was once a torch bearer of cement industry, especially in the South. However due to the distractions of
the promoters in sports and other activities, focus on the company and the group came down. The promoter over the
past 1-2 quarters has started to take corrective steps. He has started meeting the investor community, heard their
concerns and reportedly assured fast corrective actions (including bringing down debt, unwinding of investments/loans
to group companies, improving manufacturing efficiencies etc).
With an improved demand outlook, better focus and stable/better realizations, we expect profitability to mend resulting in greater capacity utilisation from present levels.
Outlook and view: We think we can take a bet on the changes promised to be implemented by the management
especially given the fact that the current valuations (EV/tonne) of the company as per FY16 consolidated results stands
at ~$70 is quite low compared to its peers. As the component of debt in the EV/tonne is high, repayment of debt aided
by the above will lead to more than proportionate increase in the equity component of EV/Ton for ICL. ICL owns 26,000
acres of land (mainly limestone mines related apart from ~250 acres that can be monetized) which means that
brownfield/greenfield expansion in cement can be made at a lower costs when acquiring fresh limestone mines is
becoming a challenge.
At the CMP of Rs. 155 Indian Cements quotes at EV/ton of $70. We think that investors could buy the stock at the CMP
and add on declines to Rs. 123-134 band (~EV/Ton of $56 & ~ 10.8x FY18E EPS) for sequential targets of Rs. 211.5
(~EV/Ton of $80 ~ 17.7x FY18E EPS) and Rs. 263 (~EV/Ton of $95 ~ 22x FY18E EPS) over 2-3 quarters. The EV/ton of its
more efficient comparable peer Ramco Cements in FY18 is expected to be $175.
Institutions
41.81
Financial Summary (Consolidated)
Non Institutions
29.56
(Rs mn)
Net Revenues
EBITDA
APAT
Diluted EPS (Rs)
P/E (x)
EV / EBITDA (x)
RoE (%)
CMP (as on 21 Oct, 16)
Rs. 155
307.2
Face Value (Rs)
10.00
Equity Sh Outstanding crs
30.72
Market Cap (Rs crs)
4761.3
Book Value (Rs)
111.7
4601724
52 Week High
Rs. 164.2
52 Week Low
Rs. 63.9
Shareholding Pattern % (June 2016)
Total
Zececa Mehta
zececa.mehta@hdfcsec.com
100.00
FY15
50,827
7,851
-33
-0.1
9.9
-0.1
FY16
48,896
8,908
1,344
4.4
35.4
8.3
3.9
FY17E
49,936
9,887
2,227
7.3
21.4
7.2
6.2
FY18E
55,481
11,374
3,664
11.9
13.0
5.9
9.4
Page |9
INDIA CEMENTS
Income Statement
Net Revenues
Growth (%)
EBITDA
EBITDA Margin (%)
Depreciation
Interest
PBT
Tax (Incl Deferred)
Reported PAT before MI
EO Items
Reported PAT after MI
APAT Growth (%)
Adjusted EPS (Rs)
Balance Sheet
FY15
50,827
0
7,851
15.4
3,029
2
4,781
44
56
-12
0
-33
-0.1
FY16
48,896
-4
8,876
18.2
2,639
0
4,208
2,029
688
1,340
0
1,344
LTP
4.4
FY17E
49,936
2
9,887
19.8
2,765
10
3,765
3,367
1,145
2,222
0
2,227
66
7.3
FY18E
55,481
11
11,374
20.5
2,788
20
3,147
5,458
1,801
3,657
0
3,664
65
11.9
FY15
44
2
4,781
3,029
-3848
55
4063
894
6
2
902
600
-4,781
0
0
-4181
784
FY16
2029
0
4208
2639
2017
688
11581
-854
26
0
-828
-3385
-4208
0
370
-7223
3530
FY17E
3367
10
3765
2765
959
1145
12011
-4202
88
10
-4104
-2416
-3765
0
462
-5719
2188
FY18E
5458
20
3147
2788
-248
1801
12966
-3579
90
20
-3469
-3676
-3147
0
555
-6268
3229
Cash Flow Statement

Reported PBT
Interest Expenses
Depreciation
Tax Paid
Capex
Investments
Interest Expenses
Dividend
As at March (Rs mn)

SOURCES OF FUNDS
Equity Capital
Reserves
Total Debt
Net Block & CWIP
Inventories
Debtors
Cash & Equivalents
Creditors
Net Current Assets
FY15
FY16
FY17E
FY18E
3,072
30,734
33,806
29,782
5,018
68,606
3,072
31,230
34,302
26,398
5,393
66,093
3,072
32,995
36,067
23,982
6,207
66,256
3,072
36,104
39,176
20,305
6,886
66,367
46,973
21,968
44,915
22,925
46,352
22,089
47,143
20,772
6,761
5,160
5,940
72
9,483
8,785
-335
68,606
6,664
5,645
5,450
362
10,127
9,742
-1,748
66,093
6,997
5,927
5,177
601
10,633
10,255
-2,186
66,256
7,696
6,639
5,695
694
11,484
10,789
-1,548
66,367
FY15
FY16
FY17E
FY18E
15.4
-0.1
-0.1
18.2
2.7
3.9
19.8
4.5
6.2
20.5
6.6
9.4
1.1
0.9
1.1
0.8
1.1
0.7
1.2
0.5
-0.1
9.8
0
4.4
13.0
1
7.3
16.3
1.3
11.9
21.0
1.5
9.8
0
35.4
8.3
0.6
21.4
7.2
0.8
13.0
5.9
1.0
Key Ratios
Year ending March
PROFITABILITY (%)
EBITDA Margin
APAT Margin
RoE
EFFICIENCY
Net D/E (x)
PER SHARE DATA (Rs)
EPS
CEPS
Dividend
VALUATION
P/E (x)
EV/EBITDA (x)
Dividend Yield (%)
P a g e | 10
Diwali Pick
21 Oct 2016
Kotak Mahindra Bank

Industry
CMP
Recommendation
Add on Dips to band
Sequential Targets
Time Horizon
Banking
Rs.780
Rs. 700-725
Rs.854
TILL NEXT DIWALI
HDFC Scrip Code
KOTMAH
BSE Code
500247
NSE Code
KOTAKBANK
Bloomberg
KMB
CMP as on 21 Oct 16
780.0
917.8
Face Value (Rs)
5.0
1835.6
Market Cap (Rs crs)
143308
Book Value (Rs)

155
Kotak Mahindra Bank encapsulates most of the virtues that should characterise a high quality Indian bank. Its core
lending business has sustainably high spreads, durable fee streams and tightly controlled asset quality on a strategically
constructed loan mix. The bank is well capitalised at 16.3% (with Tier I at 15.8%). A market leading (and synergistic)
securities and IB practice align it well with cyclical tailwinds. Asset management and insurance businesses look
surprisingly small (given the evolution in other verticals) but are now well positioned to outpace system growth.
Valuations are expectedly high at 3.9x standalone FY18E ABV, adjusted for subs at 20% holdco discount. Our SoTP of Rs
854 assigns 4.5x to standalone FY18E ABV and lower multiples of 3.5/3x to the auto-finance/LAS verticals. Maintain BUY.
To us, KMB represents a high-quality and broad-based play on Indian financial services and not just banks.
Key 1QFY17 highlights
Integration weighs on growth: Loan growth (~17% YoY) was a tad lower than estimates, attributable to business
banking (-6% QoQ). We estimate 19% loan CAGR over FY16-18E with the integration process now behind, along with
healthy Tier-I capital and CV cycle acceleration.
Healthy SA trend: CASA grew 31% YoY (37.4% of deposits +310bps YoY) led by SA growth ~34% YoY. The differential SA
rate offering will keep this accretion steadily ahead of peers.
Asset quality impeccable: Net stressed assets (restructured + NNPAs) are still at a mere 1.3%, with sharp decline in
restructured book. SMA-II increased to 39bps attributable to an e-VYSB exposure, which has since been recovered.
Outlook and view: With the e-VYSB integration nearing completion (costs and management bandwidth), and a gradual
uptick in macros, we foresee core improvement led by (1) Loan growth, (2) Improving operating leverage, and (3) LLP
reverting to normalised levels. ROAA will rise to 1.64% by FY18E (1.41% in FY16).
153,568
52 Week High
825.6
52 Week Low
586.5
Promoters
33.65
Institutions
40.75
Non Institutions
25.60
Year Ending March (Rs mn)

Net Interest Income
PPOP
PAT
EPS (Rs)
Core ROAE (%)
Core ROAA (%)
Core Adj. BVPS (Rs)
P/E (x)
P/Adj BV (x)
Total
Darpin Shah
darpin.shah@hdfcsec.com
Parul Gulati
parul.gulati@hdfcsec.com
100.00
FY15
42,237
29,975
18,660
24.2
14.1
1.94
168
22.1
3.18
FY16
69,004
40,411
20,898
11.4
11.0
1.41
120
58.1
5.54
FY17E
86,639
57,948
32,776
17.9
12.9
1.58
136
36.0
4.75
FY18E
99,807
68,440
39,928
21.8
14.4
1.64
155
28.6
4.02
P a g e | 11
KOTAK MAHINDRA BANK

Income Statement
Balance Sheet
(Rs mn)
Interest Earned
Interest Expended
Net Interest Income
Other Income
Fee Income (CEB)
Treasury Income
Total Income
Total Operating Exp
Employee Expense
PPOP
Provisions
Prov. for NPAs
PBT
Provision for Tax
PAT
FY15
97,199
54,961
42,237
20,285
12,263
3,148
62,522
32,547
14,667
29,975
1,645
2,582
28,330
9,670
18,660
FY16
163,842
94,838
69,004
26,122
17,644
2,132
95,126
54,715
28,170
40,411
9,174
7,478
31,237
10,339
20,898
FY17E
207,534
120,895
86,639
33,426
21,583
4,250
120,065
62,117
31,295
57,948
8,734
7,734
49,213
16,437
32,776
FY18E
241,132
141,325
99,807
39,242
26,565
3,750
139,048
70,608
35,320
68,440
8,488
7,988
59,952
20,024
39,928
Valuation Ratio
EPS (Rs)
Earnings growth (%)
BVPS
Adj. BVPS (Core)
ROAA (%)
ROAE (%)
P/E (x)
P/ABV (x)
P/PPOP (x)
Dividend Yield (%)
FY15
24.2
24.2
176.0
168.1
1.94
14.1
22.1
3.18
10.0
0.1
FY16
11.4
12.0
126.4
119.5
1.41
11.0
58.1
5.54
17.7
0.1
FY17E
17.9
56.8
142.0
135.6
1.58
12.9
36.0
4.75
12.3
0.1
FY18E
21.8
21.8
160.9
154.8
1.64
13.9
28.6
4.02
10.5
0.1
Asset Quality
Gross NPLs (Rs bn)
Net NPLs (Rs bn)
Gross NPLs (%)
Net NPLs (%)
Coverage Ratio (%)
Provision/Loans (%)
FY15
12.4
6.1
1.9
0.9
50.8
0.4
FY16
28.4
12.6
2.4
1.1
55.5
0.8
FY17E
31.4
11.6
2.2
0.8
63.0
0.6
FY18E
32.6
11.1
1.9
0.7
65.9
0.5
As at March (Rs mn)

SOURCES OF FUNDS
Share Capital
Reserves
Shareholder's Funds
Savings
Current
Term Deposit
Total Deposits
Borrowings
Other Liabilities & Prov
Total Liabilities
Cash & Bank Balance
Investments
G-Secs
Advances
Fixed Assets
Other Assets
Total Assets
Profitability and Other Ratios
Yield on Advances (%)
Cost of Deposits (%)
Core Spread (%)
NIM (%)
Cost/Avg. Asset Ratio (%)
Cost-Income Ratio (Excl Treasury)
Loan Growth (%)
Deposit Growth (%)
C/D Ratio (%)
Equity/Assets (%)
Equity/Advances (%)
CASA (%)
Total Capital Adequacy Ratio (CAR)
Tier I CAR
FY15
FY16
FY17E
FY18E
3,862
9,172
9,172
9,172
137,579
230,419
259,692
295,310
141,441
239,591
268,864
304,482
140,361
294,947
405,552
539,385
131,813
232,817
256,098
281,708
476,429
858,666
993,071 1,156,923
748,603 1,386,430 1,654,721 1,978,016
121,497
209,787
230,763
253,836
48,580
86,790
95,469
105,015
1,060,121 1,922,598 2,249,817 2,641,348
62,624
108,797
134,026
155,521
286,591
512,602
581,255
668,418
228,817
407,610
471,596
553,844
661,607 1,186,653 1,410,650 1,681,313
12,067
15,516
17,068
18,774
37,232
99,067
106,818
117,322
1,060,121 1,922,635 2,249,817 2,641,348
FY15
12.5
6.8
5.6
4.7
3.4
54.8
24.8
26.7
88.4
13.3
21.4
36.4
17.2
16.2
FY16
13.5
7.4
5.8
4.4
3.7
58.8
79.4
85.2
85.6
12.5
20.2
38.1
16.3
15.2
FY17E
12.4
6.6
5.5
4.6
3.0
53.6
18.9
19.4
85.3
12.0
19.1
40.0
15.4
14.9
FY18E
12.2
6.5
5.4
4.5
2.9
52.2
19.2
19.5
85.0
11.5
18.1
41.5
14.9
14.5
P a g e | 12
Diwali Pick
21 Oct 2016
Lupin
Industry
CMP
Recommendation
Add on Dips to band
Sequential Targets
Time Horizon
Pharmaceuticals
Rs.1,505
Rs. 1,350-1,400
Rs. 2,050
TILL NEXT DIWALI
HDFC Scrip Code
LUPLTD
BSE Code
500257
NSE Code
LUPIN
Bloomberg
LPC IN
CMP as on 21 Oct 16
1,499
90.20
Face Value (Rs)

2.00
67,857.90
Book Value (Rs)
10,984.40
78,741.00
52 Week High (Rs)
2,096.30
52 Week Low (Rs)
1,294.00
Promoters
46.74
Institutions
41.85
Non Institutions
11.41
Amey Chalke
amey.chalke@hdfcsec.com
Multiple triggers in place in the US - A robust ANDA pipeline (160+), windfall profits from gGlumetza and gFortamet in
FY17, and the addition of the Gavis portfolio will drive US business at 28% CAGR over FY16-18E. We also expect LPC to
launch 40+ products in the US over FY17-18E.
India business robust and growing: Thrust on chronic therapies like Anti-diabetes, CNS, Cardiac, Derma and Respiratory
will drive 16-17% revenue CAGR over FY16-18E. Shifting product mix towards chronic drugs will also improve the
profitability of the India business.
Better profitability with sustainable cashflows - We believe margins are likely to improve from 26.4% in FY16 to 28.7%
in FY18E, led by (1) Exclusivity in key products, (2) Acquisition of the profitable Gavis portfolio, and (3) Operational
efficiency (despite investing ~US$ 750mn in R&D over FY16-18E). We also expect LPC to generate ~US$ 750mn free cash
flows over FY17-18, resulting in net debt of a mere Rs. 7.5bn in FY18 (v/s Rs. 62.8bn now).
45.10
Market Cap (Rs crs)
Total
After a 25-28% fall from its peak, we believe most of the negatives are priced in for LPC and present a great opportunity
to BUY this stock at attractive valuations (below 18x on FY18E EPS).
100.00
Key Highlights
2QFY17 expectations: Top line will grow 33%YoY and EBITDA margins will be around 28% in 2QFY17E, largely on
account of strong benefits flowing from gGlumetza and gFortamet. India business is likely to grow at 13-14%YoY, driven
by a strong season for the acute segment and growing chronic portfolio. US revenue will be down sequentially at
US$295mn (vs US$ 327mn in 1QFY17), although growth on YoY basis will be 65% approximately.
Outlook and valuation: At CMP, the stock is trading at 21.3x FY17E EPS and 17.7x FY18E EPS, a hefty 25% discount to
the trailing three-year average multiple. US FDA clearance for the Goa facility would be the key trigger in the near term.

(Rs mn)
Net Revenues
EBITDA
APAT
Diluted EPS (Rs)
P/E (x)
EV / EBITDA (x)
RoE (%)
FY15
1,27,700
36,196
24,032
53.5
28.1
32.2
30.4
FY16E
1,42,085
37,534
22,706
50.4
29.9
12.4
22.9
FY17E
1,83,273
52,416
31,807
70.5
21.3
19.2
25.8
FY18E
2,12,869
61,093
38,307
85.0
17.7
15.1
24.9
P a g e | 13
LUPIN
Income Statement
Net Revenues
Growth (%)
EBITDA
EBITDA Margin (%)
Depreciation
Interest
PBT
Tax (Incl Deferred)
Reported PAT
EO Items
APAT
APAT Growth (%)
Adjusted EPS (Rs)
Balance Sheet
FY15
1,27,700
13.1
36,196
28.3
4,347
2,398
98
34,148
9,704
24,444
24,032
30.87
53.46
FY16
1,42,085
11.3
37,534
26.4
4,635
1,877
447
34,329
11,536
22,794
22,706
-5.52
50.39
FY17E
1,83,273
29.0
52,416
28.6
9,185
2,500
1,342
44,389
12,207
32,182
31,807
40.09
70.54
FY18E
2,12,869
16.1
61,093
28.7
10,346
3,800
1,194
53,354
14,672
38,682
38,307
20.43
84.96
FY15
34,148
(129)
98
4,347
7,364
(10,300)
35,528
(16,726)
(14,799)
131
(31,395)
(1,282)
(98)
(1,766)
(3,681)
(6,828)
(2,694)
(467)
(3,161)
FY16
34,329
(36)
447
4,635
(34,084)
(11,479)
(6,188)
(70,670)
16,509
189
(53,972)
66,483
(447)
2,343
(3,954)
64,425
4,265
(700)
3,565
FY17E
44,389
(2,561)
1,342
9,185
(1,485)
(12,207)
38,663
(23,045)
(75)
2,561
(20,558)
(1,120)
(1,342)
1
(4,748)
(7,209)
10,895
10,895
FY18E
53,354
(3,576)
1,194
10,346
(3,208)
(14,672)
43,437
(11,500)
(75)
3,576
(7,999)
(7,500)
(1,194)
(4,748)
(13,442)
21,996
21,996
Cash Flow Statement

Reported PBT
Interest Expenses
Depreciation
Tax Paid
Capex
Investments
Interest Expenses
Dividend
EO Items, Others
As at March (Rs mn)

SOURCES OF FUNDS
Equity Capital
Reserves
Total Debt
Net Block & CWIP
Inventories
Debtors
Cash & Equivalents
Creditors
Net Current Assets
FY15
FY16
FY17E
FY18E
899
87,842
88,741
4,710
1,182
97,370
901
1,08,943
1,09,844
71,193
1,239
1,86,247
902
1,36,002
1,36,904
70,073
1,239
2,12,562
902
1,69,561
1,70,463
62,573
1,239
2,38,996
33,381
35,390
68,771
25,036
26,566
5,350
4,814
19,561
13,605
28,599
97,370
91,501
34,301
1,25,801
31,787
45,498
12,106
8,379
21,919
15,406
60,446
1,86,247
1,05,239
34,544
1,39,783
34,309
43,957
10,349
19,274
21,113
13,997
72,779
2,12,562
1,06,394
34,619
1,41,013
38,221
46,798
11,410
41,270
24,267
15,449
97,983
2,38,996
FY15
FY16
FY17E
FY18E
28.3
18.8
30.4
26.4
16.0
22.9
28.6
17.4
25.8
28.7
18.0
24.9
2.8
0.0
2.5
0.6
2.5
0.4
2.5
0.1
53.5
197.4
7.0
50.4
243.8
7.5
70.5
303.6
9.0
85.0
378.1
9.0
28.1
18.7
0.5
29.9
19.7
0.5
21.3
13.9
0.6
17.7
11.5
0.6
Key Ratios
Year ending March
PROFITABILITY (%)
EBITDA Margin
APAT Margin
RoE
EFFICIENCY
Net D/E (x)
PER SHARE DATA (Rs)
EPS
CEPS
Dividend
VALUATION
P/E (x)
EV/EBITDA (x)
Dividend Yield (%)
P a g e | 14
Diwali Pick
21 Oct 2016
MOIL
Industry
CMP
Recommendation
Add on Dips to band
Sequential Targets
Time Horizon
Mining
Rs. 296
Rs. 273-280
Rs. 333-354
TILL NEXT DIWALI
HDFCSec Scrip Code
MOILLTDEQNR
BSE Code
533286
NSE Code
MOIL
Bloomberg
CMP (as on 21 Oct, 16)
Face Value (Rs)
Equity Sh Outstanding crs
Market Cap (Rs crs)
Book Value (Rs)
MOIL IN
Rs. 296
133
10.00
13.3
3936.8
205.6
126098
52 Week High
Rs. 301.0
52 Week Low
Rs. 179.5
Shareholding Pattern % (11th Oct 2016)

Central/State Govt
75.58
Institutions
12.67
Non Institutions
11.75
Total
Zececa Mehta
zececa.mehta@hdfcsec.com
100.00
MOIL Limited (formerly Manganese Ore India Limited) is a mini ratna state-owned manganese-ore mining company
headquartered in Nagpur, India. MOIL operates 10 mines, 6 located in Nagpur and Bhandara districts of Maharashtra and
4 in the Balaghat district of Madhya Pradesh. Of the 10, 7 are underground mines and 3 are opencast mines. MOIL is also
one of the lowest cost producers of manganese ore in the world. At present MOIL is having a total mining lease over an
area of 1613.611 hectares out of which 699.066 hectares are in Maharashtra and 914.545 hectares are in Madhya
Pradesh. It is the largest producer of manganese ore with a 50% market share in India and 5th largest globally.
Key highlights
The price of seaborne manganese ore has surged more than 60% over the past three weeks and more than 130% since
July 2016 lows to its highest level since early 2013 on rising Chinese demand for imported supply from spot market.
Imposition of MIP and recent extension of safeguard duties on HRC till March'18 would enable larger steel companies
to regain the domestic market share from imports, leading to increase in manganese ore volumes. Domestic steel
capacities of ~17mtpa by larger steel players are expected to be commissioned over FY16-FY18 driving ore demand.
MOIL is well positioned to capitalize on the increased demand with plans to double the production to 2MT by 2021 and
2.5MT by 2024-2025.
MOIL has cash and cash equivalents of Rs. 23bn (FY18E), which would constitute ~58% of its current market
capitalisation. This provides a high margin of safety. We expect the dividend yield on the stock to remain high at 2.5%
levels over FY17-18.
Given the company has recently got government approval for 76.409 ha. land in Balaghat, adjacent to the existing
mines, timely execution of the same will help the company to boost production volume.
Outlook and view: We think having regard to the favourable outlook for manganese ore, one can look to buy MOIL at
the current CMP and add on dips of Rs. 273-280 band (~4.5x FY18E EV/EBITDA) for sequential targets of Rs. 333 (7x
FY18E EV/EBITDA) and Rs. 354 (8x FY18E EV/EBITDA) for the period of 2-3 quarters.
(Rs mn)
Net Revenues
EBITDA
APAT
Diluted EPS (Rs)
P/E (x)
EV / EBITDA (x)
RoE (%)
FY15
8,601
4,159
4,280
25.5
11.6
4.2
13.2
FY16
6,368
995
1,938
11.5
28.7
17.4
5.7
FY17E
7,808
2,248
2,597
18.5
16.0
6.5
8.3
FY18E
8,549
2,956
2,865
21.5
13.8
3.8
10.0
P a g e | 15
MOIL
Income Statement
Net Revenues
Growth (%)
EBITDA
EBITDA Margin (%)
Depreciation
Interest
PBT
Tax (Incl Deferred)
Reported PAT
EO Items
APAT
APAT Growth (%)
Adjusted EPS (Rs)
Balance Sheet
FY15
8,601
-19.4
4,159
50.5
451
2,798
0
6,506
2,226
4,280
5,096
18.0
30.3
FY16
6,368
-23.6
995
15.8
525
2,232
0
2,703
973
1,730
(208)
4,280
(16.0)
25.5
FY17E
7,808
22.8
2,248
29.1
535
1,996
0
3,709
1,113
2,597
1,938
(54.7)
11.5
FY18E
8,549
9.5
2,956
34.9
632
1,770
0
4,093
1,228
2,865
2,597
34.0
18.5
FY15
6,506
(2,798)
0
451
-1,884
-2,226
49
-844
0
2,798
1,954
0
0
0
-1,714
-1,714
289
81
28,299
FY16
2,703
(2,441)
0
525
-130
-973
-316
-526
40
2,441
1,954
0
0
0
-989
-989
649
(447)
28,501
FY17E
3,709
(1,996)
0
535
528
-1,113
1,664
-1,300
0
1,996
696
0
0
-8,633
-826
-9,460
-7,100
21,401
FY18E
4,093
(1,770)
0
632
23
-1,228
1,751
-1,300
0
1,770
470
0
0
0
-784
-784
1,437
22,838
Cash Flow Statement

Reported PBT
Interest Expenses
Depreciation
Tax Paid
Capex
Investments
Interest Expenses
Dividend
EO Items, Others
As at March (Rs mn)

SOURCES OF FUNDS
Equity Capital
Reserves
Total Debt
Net Block & CWIP
Inventories
Debtors
Cash & Equivalents
Creditors
Net Current Assets
FY15
FY16
FY17E
FY18E
1,680
32,137
33,817
0
213
34,030
1,680
32,854
34,534
0
201
34,734
1,332
26,339
27,670
0
201
27,871
1,332
28,420
29,752
0
201
29,953
3,468
840
3,913
669
4,678
669
5,346
669
1,442
1,072
1,358
28,299
35
2,415
29,722
34,030
1,630
1,420
1,147
28,501
34
2,512
30,153
34,734
1,080
1,442
1,147
21,401
34
2,512
22,524
27,871
1,330
1,169
1,147
22,838
34
2,512
23,938
29,953
FY15
FY16
FY17E
FY18E
50.5
52.0
13.2
15.8
30.8
5.7
29.1
33.6
8.3
34.9
33.9
10.0
1.3
(0.87)
0.8
(0.85)
1.0
(0.80)
1.0
(0.80)
25.5
28.2
8.5
11.5
13.4
5.0
18.5
22.3
5.0
21.5
26.3
5.0
11.6
4.9
2.9
28.7
20.6
1.7
16.0
8.6
1.7
13.8
5.4
1.7
Key Ratios
Year ending March
PROFITABILITY (%)
EBITDA Margin
APAT Margin
RoE
EFFICIENCY
Net D/E (x)
PER SHARE DATA (Rs)
EPS
CEPS
Dividend
VALUATION
P/E (x)
EV/EBITDA (x)
Dividend Yield (%)
P a g e | 16
Diwali Pick
21 Oct 2016
Reliance Industries
Industry
CMP
Oil and Gas
Rs.1064
HDFC Scrip Code
RELIND
BSE Code
500325
NSE Code
RELIANCE
Bloomberg
RIL
CMP as on 3 Feb 16
1064
2948
Face Value (Rs)
10
294.8
Market Cap (Rs crs)

52 Week High
1129
52 Week Low
888
Sequential Targets
Time Horizon
Rs. 1064-1020
Rs.1225
TILL NEXT DIWALI
Outlook and view
It operates one of the largest refining capacities of 1.24 mmbbl/d at a single location and is the largest producer of
polyester fiber and yarn. Weak global macros which has led to margin decline for other global players has least
impacted RIL owing to its superior raw material sourcing and efficient operations.
Company has invested Rs. 1.5 lakh cr in telecom venture (R-Jio). It has built all-IP data network with latest 4G LTE
technology. It can be easily upgraded to support new technologies like 5G, 6G and beyond. Huge investment of this
venture is an overhang on the stock and its success will lead to re-rating of the stock. Retail business has grown by 30%
CAGR for the last five years and has become profitable now. It operates 2600 stores in 200 cities in 20 states. It is going
to expand this business to over 900 cities by next year.
Over the last couple of years it has invested 2 lakh cr in capital expenditure in core business for capacity expansions and
technology upgradation viz. expansion of Polyester business, 1.5 million tonne ethylene cracker, coke gasification plant.
These investments are expected to start yielding results in next 12 months. We recommend investors to buy the stock
at CMP and on declines with a target of Rs. 1225 in a years a time.
750
2854259
Add on Dips to band
Reliance Industries Ltd (RIL) - is India's largest private sector entity, with a turnover of over Rs. 3 lakh cr and profits more
than 30,000 cr a year. It is a backward integrated energy conglomerate in Petro-chemicals, Refining and Exploration. In
recent years it has diversified into Retail and Telecom. In terms of revenue, Refining contributes ~70%, Petrochemicals
~21%, Oil & Gas 2%, Retail 5% and the rest 2% of other businesses.
345250
Book Value (Rs)
Recommendation
Buy at CMP and add on
declines
Promoters
46.5
Institutions
34.1
Non Institutions
19.4
Total
100
Devarsh Vakil
devarsh.Vakil@hdfcsec.com

(Rs bn)
Net Revenues
EBITDA
APAT
Diluted EPS (Rs)
P/E (x)
EV / EBITDA (x)
RoE (%)
2QFY17
595.77
105.55
77.04
23.8
2QFY16
608.17
98.33
65.61
20.3
YoY%
-2
7.3
17.4
17.4
1QFY17
534.96
108.17
75.48
23.3
QoQ%
11.4
-2.4
2.1
2.1
FY15
2,331.58
401.39
274.17
84.6
12.9
8.8
12
FY16E
2,460.52
421.23
285.02
88
12.4
8.4
11.3
FY17E
2,742.69
507.36
334.2
103.1
10.5
6.9
12
FY18E
2,808.94
568.58
381.3
117.7
9.2
6.2
12.3
P a g e | 17
RELIANCE INDUSTRIES
Income Statement
Year ending March (Rs bn)
Net Revenues
Growth (%)
EBITDA
EBITDA Margin (%)
Depreciation
Interest
PBT
Tax (Incl Deferred)
Reported PAT
EO Items
APAT
APAT Growth (%)
Adjusted EPS (Rs)
Balance Sheet
FY15
3,290.76
-15.6
316.02
9.6
84.88
231.14
23.67
294.68
67.49
227.19
0
227.19
3.3
70.1
FY16
2,331.58
-29.1
401.39
17.2
95.66
305.73
24.54
357.01
82.84
274.17
0
274.17
20.7
84.6
FY17E
2,460.52
5.5
421.23
17.1
101.97
319.26
25.65
372.58
87.56
285.02
0
285.02
4
88
FY18E
2,742.69
11.5
507.36
18.5
133.5
373.87
23.62
436.86
102.66
334.2
0
334.2
17.3
103.1
Cash Flow Statement

Year ending March (Rs bn)
Reported PBT
Interest Expenses
Depreciation
Tax Paid
Capex
Investments
Interest Expenses
Dividend
EO Items, Others
FY15
FY16
FY17E
FY18E
294.68
-72.71
23.67
84.88
83.15
-60.82
352.85
-427.2
-93.66
-417.7
54.7
-23.67
-43.32
2.26
0.61
-64.19
-14.5
620.86
357.01
-102.99
24.54
95.66
147.89
-81.29
440.82
-213.22
-505.72
-579.1
48.12
-24.54
251.18
2.83
-46.18
-184.48
27.17
463.21
372.58
-78.97
25.65
101.97
-27.73
-87.56
305.94
-297
-218
50
-25.65
33.29
-18.67
69.24
532.45
436.86
-86.62
23.62
133.5
18.96
-102.66
423.66
-132
-45.4
-200
-23.62
68.04
-274.06
104.22
636.67
As at March (Rs bn)

SOURCES OF FUNDS
Equity Capital
Reserves
Total Debt
Net Block & CWIP
Inventories
Debtors
Cash & Equivalents
Creditors
Net Current Assets
FY15
FY16
FY17E
FY18E
32.36
2,129.40
2,161.76
976.2
140.81
3,278.77
32.4
2,369.44
2,401.84
1071.3
146.48
3,619.62
32.4
2,611.44
2,643.84
1121.3
146.48
3,911.62
32.4
2,895.20
2,927.60
921.3
146.48
3,995.38
1970.33
225.42
620.58
365.51
46.61
128.54
620.86
544.7
154.4
462.44
3,278.77
2413.44
131.82
1,126.30
280.34
34.95
127.14
463.21
545.21
412.4
-51.94
3,619.62
2608.47
131.82
1,126.30
303.35
36.88
127.14
532.45
505.59
449.2
45.03
3,911.62
2606.98
131.82
1,126.30
338.14
41.11
127.14
636.67
563.57
449.2
130.29
3,995.38
FY15
9.6
7
6.9
11
FY16
17.2
13.1
11.8
12
FY17E
17.1
13
11.6
11.3
FY18E
18.5
13.6
12.2
12
1
0.2
0.6
0.3
0.6
0.2
0.5
0.1
70.1
96.4
9.5
84.6
114.1
10.5
88
119.4
11.3
103.1
144.4
13.3
15.5
11.3
0.9
12.9
9.5
1
12.4
9.1
1
10.5
7.5
1.2
Key Ratios
Year ending March
PROFITABILITY (%)
EBITDA Margin
APAT Margin
RoE
EFFICIENCY
Net D/E (x)
PER SHARE DATA (Rs)
EPS
CEPS
Dividend
VALUATION
P/E (x)
EV/EBITDA (x)
Dividend Yield (%)
P a g e | 18
50
100
900
900
0
MOIL
Reliance Inds
350
1150
300
1050
250
950
200
850
150
750
Oct-16
1900
Oct-16
1000
Aug-16
150
Aug-16
100
Jun-16
2900
Jun-16
150
Apr-16
3900
Apr-16
1300
Feb-16
250
Dec-15
Oct-15
Oct-16
Aug-16
Jun-16
Force Motors
Feb-16
1000
Apr-16
200
Dec-15
1200
Feb-16
4900
Oct-15
1400
Oct-16
1600
Aug-16
1800
Jun-16
Lupin
Apr-16
2000
Dec-15
Bharat Electronics
Feb-16
2200
Dec-15
1400
1100
Oct-15
Oct-16
Aug-16
Jun-16
Apr-16
300
1200
Oct-15
Oct-16
Aug-16
Jun-16
Apr-16
Kotak Mahindra Bank

Feb-16
Dec-15
Bajaj Electrical
Feb-16
Dec-15
850
800
750
700
650
600
550
500
Oct-15
Oct-16
Aug-16
Jun-16
Apr-16
Feb-16
Dec-15
Oct-15
200
Oct-15
Oct-16
Aug-16
Jun-16
Apr-16
Feb-16
Dec-15
Oct-15
DIWALI PICKS
1yr share price movement

India Cement
Source: BSE
P a g e | 19
DIWALI PICKS
Disclosure
Company
Bajaj Electricals
Bharat Electronics
Force Motors
Kotak Mahindra Bank
India Cements
Lupin
MOIL
Reliance Industries
Analyst
Kushal Rughani
Nisha Sankhala
Abhishek Jain, Sneha Prashant
Darpin Shah, Parul Gulati
Zececa Mehta
Amey Chalke
Zececa Mehta
Devarsh Vakil
Team
PCG
PCG
INSTITUTION
INSTITUTION
RETAIL
INSTITUTION
RETAIL
PCG
Holding
NO
NO
NO
NO
NO
NO
NO
NO
Analysts Qualification
MBA
MBA
MBA, MBA
MBA, MBA
MMS
MBA
MMS
MBM
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Mumbai 400 042 Phone: (022) 3075 3400 Fax: (022) 2496 5066 Website: www.hdfcsec.com
P a g e | 20
P a g e | 20

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Diwali Pick

India - On the road to greatness

Team Research HDFC sec

Add on Dips to band

Buy at CMP and add on declines

TILL NEXT DIWALI

HDFC Scrip Code

Equity Capital (Rs crs)

Face Value (Rs)

Equity Sh. Outstanding

Market Cap (Rs crs)

Book Value (Rs)

Financial Summary (Standalone)

(Source: Company, HDFC sec)

Cash Flow Statement

As at March (Rs Cr)

Add on Dips to band

Buy at CMP and add on declines

TILL NEXT DIWALI

HDFC Scrip Code

Equity Capital (Rs crs)

Face Value (Rs)

Equity Sh. Outstanding

Market Cap (Rs crs)

Book Value (Rs)

Avg. 52 Week Volumes

Outlook and view

Financial Summary (Consolidated)

(Source: Company, HDFC sec)

Cash Flow Statement

As at March (Rs Cr)

Add on Dips to band

Buy at CMP and add on declines

TILL NEXT DIWALI

HDFC Scrip Code

Equity Capital (Rs crs)

Face Value (Rs)

Equity Sh. Outstanding

Market Cap (Rs crs)

Book Value (Rs)

Avg. 52 Week Volumes

52 Week High (Rs)

52 Week Low (Rs)

Financial Summary (Rs Mn)

(Source: Company, HDFC sec)

Cash Flow Statement

As at March (Rs mn)

Add on Dips to band

Buy at CMP and add on declines

TILL NEXT DIWALI

HDFCSec Scrip Code

Financial Summary (Consolidated)

CMP (as on 21 Oct, 16)

Equity Capital (Rs crs)

Face Value (Rs)

Equity Sh Outstanding crs

Market Cap (Rs crs)

Book Value (Rs)

Avg. 52 Week Volumes

Shareholding Pattern % (June 2016)

(Source: Company, HDFC sec)

Cash Flow Statement

As at March (Rs mn)

Kotak Mahindra Bank