Indian Equity Market Summary – August 2019 - Moderate

 FPI outflows continue unabated for the second month in a row – The Government in the Union
Budget proposed to increase surcharge on Individuals and trusts earning more than `2 cr. and
`5 cr. Though the Government has rolled back the surcharge on equity investments FII selling
continued unabated in August also as they pulled out `17,592 cr. during the month after
pulling out `12,419 cr. in Jul’19. FII flows for calendar year 2019 now stands at `47,311 cr.
 Rate cut, dividend and one time surplus transfer by RBI to help revive Government spending –
The RBI announced a 35bps rate cut in it’s monetary policy meet on the 7th of Aug’19 and
maintained it’s accommodative stance which indicates more rate cuts during the year. The RBI
also accepted the recommendations of the Bimal Jalan committee report and announced a
dividend of `1.23lakh cr along with a one-time surplus transfer of `52,640 cr. to the
Government. Adjusting for the interim dividend already paid to the Government in March the
RBI has transferred a total of `1.48 lakh cr. to the Government against a budgeted `90,000 cr.
for FY20. The additional transfer of `58,000 cr. would go a long way in boosting Government
spending which had been lacking for the past two quarters.
 Q1FY20 GDP number of 5.0% probably the bottom in terms of growth rate - Rate cuts and
large transfer by the RBI, Improving monsoon situation along with relief for FPI’s from
additional surcharge should help in reversing sentiments going forward. The Q1FY20 GDP
growth number at 5.0% probably marks the bottom in terms of growth rate. Hence we believe
that the worst is over and growth rates should start improving from Q2 onwards driven by
Government spending while private spending is expected to pick up from the second half of
FY20.
 Escalating US-China trade war is key risk going forward – The trade war between US and
China escalated further with the US President proposing tariffs on additional Chinese goods
worth USD 300bn which would be implemented in two steps. In the first round the US imposed
tariffs of 15% on goods worth UD 112bn from the 1st of Sep’19. Tariffs on the balance USD
188bn worth of goods will be imposed from the 15th of Dec’19. Furthermore, tariffs are to be
raised from 25% to 30% on the existing USD 250 billion worth of Chinese goods from the 1st
of Oct’19. Post the recent round of escalation in the US China trade war the US yield curve has
inverted with the US 10 year G-Sec currently trading below 1.6% as compared to the Fed target
rate of 2.0-2.25%. The inversion of the yield curve has raised concerns about possible
slowdown in the US economy down the line.

% Change for
Broad Indices 30-08-2019 % Change YTD
Month

S&P BSE Midcap 13,467 -1.3 -12.8

S&P BSE 100 11,139 -0.6 -0.2
Nifty 50 11,023 -0.9 1.5
Nifty 500 8,977 -0.8 -0.9
S&P BSE Sensex 37,332 -0.4 3.5
S&P BSE Small cap 12,534 -1.2 -14.8

Please refer to important disclosures at the end of this report 1

 % Change for
Sectoral Indices 30-08-2019 % Change YTD
Month
S&P BSE Healthcare 12,875 1.3 -7.5
S&P BSE Metal 8,524 -12.0 -28.0
S&P BSE Oil & Gas 13,163 -0.6 -4.3
S&P BSE IT 16,149 2.6 14.6
S&P BSE Auto 15,768 1.9 -24.3
S&P BSE Realty Index 2,047 -1.0 11.4
S&P BSE FMCG 11,077 0.1 -6.4
S&P BSE Bankex 30,949 -5.3 1.9
S&P BSE Power 1,887 -4.0 -5.6
S&P BSE Consumer Durable 23,420 4.8 13.2
S&P BSE Capital Goods 16,941 -3.5 -10.0
S&P BSE Finance 6,036 -2.6 1.8

Macro-economic indicators

Indicators Current Previous

Monthly Inflation 3.21% (August-19) 3.15% (July -19)
Interest rate 5.4% (Aug -19) 5.75% (June-19)
IIP 4.3% (July-19) 1.2% (June-19)
GDP 5% (Apr-Jun19)_ 5.18% (Jan-Mar 19)

Global Indices *

Country Name of Index Closing Price 1M 3M 1YR

Brazil Bovespa 1,01,134 -0.7 4.2 31.9
Russia Micex 2,740 0.0 2.8 16.8
India Nifty 11,023 -0.9 -7.5 -5.6
China Shanghai Composite 2,886 -1.6 -0.4 -1.5
USA Dow Jones 26,406 -1.7 6.4 1.6
UK FTSE 7,207 -5.0 0.6 -3.0
Japan Nikkei 20,704 -3.8 0.5 -9.5
Germany DAX 11,939 -2.1 1.8 -3.4
France CAC 5,480 -0.7 0.2 1.4

* Please note that all closing prices are as on 30/08/2019.

Note: Rationales are provided on the comprehensive list of stocks and may include stocks which were bought earlier but
currently have a hold rating and therefore are no longer part of the current buy list. Client portfolios may differ from one
another depending on the initial investment date.

2
Aditya Birla Capital

Mkt Cap: ` 19,629cr CMP: ` 89

• Aditya Birla Capital (ABCL) is one of the most diversified financial services entities in India, operating
under a single brand, with a presence in non-bank financing, housing finance, asset management,
insurance.

• ABFL (NBFC) business contributes highest value in our SOTP valuation. It has recorded a strong CAGR
of 32% over FY14-19. Despite aggressive growth in lending and migration to 90dpd for NPA
recognition, GNPA has remained at ~1%. Banka Tie up with HDFC bank has gaining traction which is
visible in improvement in VNB margin (FY18–4.5%, FY19-9.5%) and new business premium.

• We expect financialization of savings, increasing penetration in Insurance & Mutual funds would ensure
steady growth. Further, Banca tie-up with HDFC Bank, DBS and LVB should restore insurance business.
We recommend a Buy rating on the stock.

Y/E NII PAT EPS ABV ROE P/E P/ABV

March (` cr) (` cr) (`) (`) (%) (x) (x)
FY2020E 2,368 1,281 6 49 12 15 1.8
FY2021E 3,032 1,699 8 57 14 12 1.6

Blue Star

Mkt Cap: ` 6,942cr CMP: ` 721

• BSL is one of the largest air-conditioning companies in India. With a mere 3% penetration level of ACs
vs 25% in China, the overall outlook for the room air-conditioner (RAC) market in India is favorable.

• BSL's RAC business has been outgrowing the industry by ~10% points over the last few quarters,
resulting in the company consistently increasing its market share. This has resulted in the Cooling
Products Division (CPD)'s share in overall revenues increasing from~23% in FY2010 to ~43% in
FY2019 (expected to improve further). With strong brand equity and higher share in split ACs, we expect
the CPD to continue to drive growth.

• Aided by increasing contribution from the Unitary Products, we expect the overall top-line to post
revenue CAGR of ~11% over FY2019-21E and margins to improve from 5.7% in FY2018 to 6.8% in
FY2021E.

Y/E Sales OPM PAT EPS ROE P/E P/BV EV/Sales

March (`cr) (%) (` cr) (`) (%) (x) (x) (x)
FY2020E 5,711 6.5 207 21.5 22.3 33.5 7.5 1.2
FY2021E 6,397 6.8 245 25.5 23.9 28.3 6.7 1.1

3
Siyaram Silk Mills

Mkt Cap: ` 983cr CMP: ` 210

• SSML has strong brands which cater to premium as well as popular mass segments of the market.
Further, SSML entered the ladies' salwar kameez and ethnic wear segment. Going forward, we believe
that the company would be able to leverage its brand equity and continue to post strong performance.

• The company has a nationwide network of about 1,600 dealers and business partners. It has a retail
network of 160 stores and plans to add another 300-350 stores going forward. Further, the company's
brands are sold across 3,00,000 multi brand outlets in the country.

• Going forward, we expect SSML to report a net sales CAGR of 9% to ~`2,173cr and adj.net profit
CAGR of ~13% to `130cr over FY2019-21E on back of market leadership in blended fabrics, strong
brand building, wide distribution channel, strong presence in tier II and tier III cities and emphasis on
latest designs and affordable pricing points. At the current market price, SSML trades at an inexpensive
valuation. We have a buy recommendation on the stock.

Y/E Sales OPM PAT EPS ROE P/E P/BV EV/Sales

March (` cr) (%) (` cr) (`) (%) (x) (x) (x)
FY2020E 1,975 13.2 115 24 13.4 8.6 1.1 0.7
FY2021E 2,173 13.2 130 28 13.4 7.6 1.0 0.6

Parag Milk Foods

Mkt Cap: ` 1,179cr CMP: ` 140

• Parag Milk Foods (PARAG) is one of the leading dairy products companies in India. The company has
been successful in creating strong brands like GO, Gowardhan and introducing new products like Whey
Protein. It has become the 2nd player in processed cheese (after Amul) in a short span of 10 years and
commands 33% market share.

• Value Added Products like cheese, whey protein enjoy higher gross margins of 25-45% versus 6-8%
entailed in liquid milk. VAP forms ~66% to its revenue (the highest among the listed players versus 25-
30% for others). Driven by recently launched products and higher share of VAP, its operating margins
would improve in next few years.

• We expect PARAG to report net revenue/PAT CAGR of 15%/19% respectively over FY2019-21E.

Y/E Sales OPM PAT EPS ROE P/E P/BV EV/Sales

March (` cr) (%) (` cr) (`) (%) (x) (x) (x)
FY2020E 2,396 9.3 121 14.3 14.4 9.8 2.5 0.6
FY2021E 2,763 10.5 145 17.2 14.8 8.1 2.1 0.5

4
Maruti Suzuki

Mkt Cap: ` 1,84,921cr CMP: ` 6,122

• Maruti Suzuki continues to hold ~52% market share in the passenger vehicles. The launch of exciting
models has helped the company to ride on the premiumization wave that is happening in the country. In
the last two years, company has seen improvement in the business mix with the pie of the utility vehicles.

• Well place to capture any revival in industry due to overall refreshment of portfolio (Already more than
50% of portfolio launched based on BS6 compliance like Alto, Wagon, Baleno, Dzire, Swift. Launching
new product in august which has potential to contribute Signiant on Top-line - MPV - XL6.)

Y/E Sales OPM PAT EPS ROE P/E P/BV EV/Sales

March (` cr) (%) (` cr) (`) (%) (x) (x) (x)
FY2020E 84,277 11.9 6,443 213 12.9 28.7 3.7 1.7
FY2021E 90,201 12.6 7,126 236 13.5 25.9 3.5 1.6

KEI Industries

Mkt Cap: ` 3,713cr CMP: ` 471

• KEI’s current order book (OB) stands at `4,414cr (segmental break-up: out which EPC is around
`2,210cr and balance from cables, substation & EHV). Its OB grew strongly in the last 3 years due to
strong order inflows from State Electricity Boards, Power grid, etc.

• KEI’s consistent effort to increase its retail business from 30-32% of revenue in FY19 to 40-45% of
revenue in the next 2-3 years on the back of strengthening distribution network (currently 926 which is
expect to increase ~1,500 by FY20) and higher ad spend.

• KEI’s export (FY19 – 16% of revenue) is expected to reach a level 20% in next two years with higher
order execution from current OB and participation in various international tenders. We expect a strong
~15% growth CAGR over FY2019-21E in exports. We expect KEI to report net revenue CAGR of ~18%
to ~`5,632cr and net profit CAGR of ~22% to `269cr over FY2019-21E. Hence we have a Buy rating
on the stock.

Y/E Sales OPM PAT EPS ROE P/E P/BV EV/Sales

March (` cr) (%) (` cr) (`) (%) (x) (x) (x)
FY2020E 4,897 10.5 223 29 3.7 16.3 3.4 0.8
FY2021E 5,632 10.5 269 35 21.9 13.5 2.7 0.7

5
Mahindra & Mahindra

Mkt Cap: ` 65,752cr CMP: ` 529

• Mahindra & Mahindra Ltd (M&M) is an India-based company, operating in nine segments: automotive,
farm equipment, IT services, financial services, steel trading & processing, infrastructure, hospitality,
Systech (comprising automotive components and other related products & services), and Others
(comprising logistics, after-market, two wheelers and investment).
• IMD has predicted a near normal monsoon for 2019 for the third consecutive year, which would help
the tractor sales growth. In our view, healthy growth in tractor industry would benefit M&M the most due
to strong brand recall and leadership position in farm tractor.

• We expect M&M to report healthy top-line and bottom-line growth over long period mainly due to
healthy growth in automobile segment like Utility Vehicles (on the back of new launches and facelift of
some models) and healthy growth in Tractors segment driven by strong brand recall and improvement
in rural sentiment.

Y/E Sales OPM PAT EPS ROE P/E P/BV EV/Sales

March (` cr) (%) (` cr) (`) (%) (x) (x) (x)
FY2020E 54,213 11.7 4,167 35 11.1 15.1 1.7 0.8
FY2021E 57,752 12.0 4,627 39 11.3 13.6 1.5 0.7

Shriram Transport Finance

Mkt Cap: ` 21,921cr CMP: ` 966

• SHTF's primary focus is on financing pre-owned commercial vehicles. We expect AUM to grow at CAGR
of 13% over FY2019-21E led by pick up in infra/ construction Post 2019 elections, macro revival and
Ramping up in rural distribution.

• In last three year SHTF, GNPA and credit cost has been increased primarily due to the transition of NPA
recognition from 180DPD to 90DPD (Q4FY18). Q1FY19 onwards asset quality started witnessing steady
improvement, and we expect this trend to continue.

• We expect STFC to report RoA/RoE to2.7%/17.6% in FY2021E respectively. At CMP, the stock is trading
at 1.2x FY2021E ABV and 6x FY2021E EPS, which we believe is reasonable for differentiated business
model with return ratios.

Y/E Op.Inc NIM PAT EPS ABV ROA ROE P/E P/ABV
March (` cr) (%) (` cr) (`) (`) (%) (%) (x) (x)
FY2020E 8,681 8.1 2,868 126 811.6 2.6 16.7 7.6 1.4
FY2021E 9,946 8.3 3,405 150 946.4 2.7 17.1 6.5 1.2

6
Bata India

Mkt Cap: ` 19,812cr CMP: ` 1,541

• Bata India Ltd (BIL) is the largest footwear retailer in India, offering footwear, accessories and bags
across brands like Bata, Hush Puppies, Naturalizer, Power, etc. BIL’s ~70% revenue is derived from
Men & Kids segment and balance from women’s segment. BIL has over 1,400 Bata retail stores across
India.
• Further, over the last 3 years, the company has added 135 stores (net addition). Going forward, the
company has plans to open 500 stores (already identified 435 cities) mainly in tier-II and tier-III cities
over the next 4-5 years.

• We expect BIL to report net revenue CAGR of ~16% to ~`3,309cr over FY2019-21E mainly due
increasing brand consciousness amongst Indian consumers, new product launches and focus on
women’s segment (high growth segment). Further, on the bottom-line front, we expect CAGR of ~16%
to `436cr over the same period on the back of margin improvement (increasing premium product
sales).

Y/E Sales OPM PAT EPS ROE P/E P/BV EV/Sales

March (` cr) (%) (` cr) (`) (%) (x) (x) (x)
FY2020E 3,309 27.2 374 29 18.3 52.9 9.7 5.6
FY2021E 3,805 26.0 436 34 18.0 45.5 8.2 4.8

Yes Bank

Mkt Cap: ` 15,174cr CMP: ` 60

• Appointment of Mr. Ravneet Singh Gill as new MD & CEO and NIL divergence in RBI’s AQR report has
removed some of uncertainty for the investor. However, new series of issue related to NPA has
emerged.
• In Q1FY20, Yes Bank has reported PAT of `114cr v/s loss of `1,506cr in Q4FY19. During the quarter
provision, slippages remained elevated and BB & Below advance increased by 230bps. Here on
management, the immediate priority is raising equity capital as CET 1 is near regulatory requirement.
Another important monitorable is Quick resolution/recovery from stressed advance would bring investor
confident to some extent.
• YES Bank currently trades at 0.5x its FY2021E Book Value.

Y/E Op.Inc NIM PAT EPS ABV ROA ROE P/E P/ABV
March (` cr) (%) (` cr) (`) (`) (%) (%) (x) (x)
FY2020E 10,000 3 1,325 6 111 0.3 4.8 10.4 0.5
FY2021E 11,276 3 2,798 12 128 0.6 9.5 4.9 0.5

7
RBL Bank

Mkt Cap: ` 14,093cr CMP: ` 327

• RBL Bank (RBK) has grown its loan book at healthy CAGR of 53% over FY10-19. We expect it to grow at
27% over FY19-21E. With adequately diversified, well capitalised B/S, RBK is set to grab market share
from corporate lenders (esp.PSUs)

• The retail loan portfolio grew 62% YoY to `18,391Cr and now constitutes 32% of the loan book (18%
share in 4QFY17).NIM has expanded to 4.23%, up 19bps YoY, despite a challenging interest rate
scenario on the back of a changing portfolio mix and lower cost of deposits. However, the management
disclosed stressed asset worth ` 1,000Cr which will increase GNPA to 2.25%. Management is confident
that it would normalise by Q1FY21.

• RBL Bank currently trades at 1.5x its FY2021E price to book value, which we believe is reasonable for a
bank in a high growth phase with stable asset quality.

Y/E Op.Inc NIM PAT EPS ABV ROA ROE P/E P/ABV
March (` cr) (%) (` cr) (`) (`) (%) (%) (x) (x)
FY2020E 3,270 3.7 1,018 24 190 1.1 12.8 13.7 1.7
FY2021E 4,226 3.8 1,503 35 216 1.3 16.6 9.3 1.5

Safari Industries

Mkt Cap: ` 1,251cr CMP: ` 560

• Safari Industries Ltd (Safari) is the third largest branded player in the Indian luggage industry. Post the
management change in 2012, Safari has grown its revenue by 6x in the last 7 years. This has been
achieved by foraying in many new categories like back pack, school bags (via acquisition of Genius and
Genie) and improvement in distribution networks.

• Its margins have more than doubled from 4.1% in FY2014 to 9.1% in FY2019, driven by launch of new
product categories and business. We expect it to maintain 9%+ margins from FY2019 onwards led by
regular price hikes, shift towards organized player and favorable industry dynamics.

• We expect its revenue to grow by a CAGR of ~18%/23% in revenue/ earnings over FY2019-21E on the
back of growth in its recently introduced new products.

Y/E Sales OPM PAT EPS ROE P/E P/BV EV/Sales

March (` cr) (%) (` cr) (`) (%) (x) (x) (x)
FY2020E 702 11.1 33 15 14.5 37.7 7.3 1.9
FY2021E 813 11.3 41 18 15.5 30.3 6.3 1.6

8
Inox Wind

Mkt Cap: ` 730cr CMP: ` 33

• Inox Wind is India’s leading wind energy solutions provider servicing IPPs, Utilities, PSUs, Corporates
and Retail Investors.

• We expect Inox Wind to report an exponential growth in the top-line and bottom-line over FY19-20E.
The growth would be led by changing renewable energy industry dynamics in the favor of wind energy
segment viz. changes in auction regime from Feed-In-Tariff (FIT) to Reverse auction regime and
Government’s guidance for increasing wind energy capacity from ~34GW current to 140GW by 2030.

• Further, being the lowest wind turbine producer globally coupled with healthy order book of 780 MW
order along with low debt equity. During the quarter, IWL has received LOI of 501.6MW for current SEC
IV, V, VI and upcoming auction under SECI from Adani Green Energy. We believe INOX Wind is in a
sweet spot to tap the upcoming opportunity in renewable energy segments.

• Considering the above positives, we assign a multiple of 8.0X on FY21EPS to arrive at a target price of
`100 (potential upside of 44% over a period of the next 12-18 months).

Y/E Sales OPM PAT EPS ROE P/E P/BV EV/EBITDA EV/Sales
March (` cr) (%) (` cr) (`) (%) (x) (x) (x) (x)
FY2020E 2,486 15.0 191.3 8.6 8.9 3.8 0.3 1.3 0.2
FY2021E 3,006 15.0 227.2 10.2 9.5 3.2 0.3 0.3 0.1

TV Today

Mkt Cap: ` 1,818cr CMP: ` 305

• TTNL enjoys a strong viewership ranking in the Hindi and English news channel categories. The
company’s Hindi news channel – Aaj Tak has maintained its market leadership position occupying the
No.1 rank for several consecutive years in terms of viewership.

• Its English news channel – India Today too has been continuously gaining viewership; it has now
captured the No. 4 ranking. Its other channels like Dilli Aaj Tak and Tez are also popular among
viewers.

• We believe that revenue growth should pick up gradually as the economy picks up momentum after a
sharp slowdown in 1QFY19 while reduction in radio business losses will improve the company’s margin
going ahead.

Y/E Sales OPM PAT EPS ROE P/E P/BV

March (` cr) (%) (` cr) (`) (%) (x) (x)
FY2020E 880 27.6 154 25.8 20.3 11.8 2.4
FY2021E 962 28.0 170 28.5 29.8 10.7 3.2

9
Lumax Industries

Mkt Cap: ` 1,204cr CMP: ` 1,287

• LUMAX Industries limited, (LIL) a flagship company of D.K. Jain Group with the presence in Automotive
Lighting Industry. LIL is the market leader & supplies to majority of OEM’s including MSIL, HMSI, Hero
Moto Corp, M&M, TATA Motors, Honda Cars and others.

• Share of LED lamp has improved from 8% in FY17 to 35% in Q3FY19 and the management believes
this ratio will improve further going forward. In the recent event LIL has acquired PCB business from
Lumax autotech which will help to increase margin going forward.

• Strong relationship with majority of Auto OEM, increasing sales of PV, 2W and CV and Improving
revenue mix from Halogen lamp to LED lamp leads to better revenue and realization going ahead.

• Given the near term slowdown in the sector, we have reduced our Target Price from `2,150 to `2,000
and recommend BUY on Lumax Industries.

Y/E Sales OPM PAT EPS ROE P/E P/BV EV/Sales

March (` cr) (%) (` cr) (`) (%) (x) (x) (x)
FY2020E 1,822 9.1% 80 86 16 15 2.4 0.7
FY2021E 1,968 9.1% 87 93 15 14 2.1 0.6

ICICI Bank

Mkt Cap: ` 2,64,975cr CMP: ` 410

• ICICI bank has taken a slew of steps to strengthen its balance sheet. Measures such as Incremental
lending to higher rated corporate, reducing concentration in few stressed sectors and building up the
retail loan book. The share of retail loans in overall loans increased to 61.4% (Q1FY20) from 38% in
FY12.

• ICICI bank’s slippages remained high during FY18 and hence GNPA went up to 8.8% vs. 5.8% in FY16.
We expect addition to stress assets to reduce further and credit costs to decline owing to incremental
lending to higher rated corporate and faster resolution in Accounts referred to NCLT under IBC.

• The gradual improvement in recovery of bad loans would reduce credit costs, which would help to
improve return ratio. The strength of the liability franchise, shift in loan mix towards retail assets and
better rated companies, and improvement in bad loans would be a key trigger for multiple expansion.

Y/E Op.Inc NIM PAT EPS ABV ROA ROE P/E P/ABV
March (` cr) (%) (` cr) (`) (`) (%) (%) (x) (x)
FY2020E 31,732 3.4 12,250 19 169 1.2 10.8 21.6 2.4
FY2021E 37,135 3.5 16,518 26 189 1.4 13.2 16.0 2.2

10
VIP Industries Ltd

Mkt Cap: ` 6,166cr CMP: ` 436

• VIP is the leading luggage company with a market share of over 50%. It offers travel bags and luggage
across mass to premium categories like Carlton, VIP Bags, Skybags, Aristocrat, Alfa and Capresse. We
feel that the company is going to be major beneficiary of the shift from unorganised to the organised
luggage industry which is growing at 15%+ CAGR.

• The company has reported strong growth in recent quarters driven by strong air travel growth, marriage
season and a cut in GST rate.

• We expect margins to improve gradually on the back of recent price hikes taken by the company and
general pickup in demand which has been muted in Q1FY20 on the back of slowdown post the IL&FS
crisis.

Y/E Sales OPM PAT EPS ROE P/E P/BV EV/Sales

March (` cr) (%) (` cr) (`) (%) (x) (x) (x)
FY2020E 1,785 12.6 145 11 25.0 42.4 9.2 3.1
FY2021E 1,979 16.4 153 14 22.9 40.3 7.9 2.7

TTK Prestige

Mkt Cap: ` 7,956cr CMP: ` 5,740

• TTK Prestige (TTK) is the leading brands in kitchen appliances with 40%+ market share in organized
market. It has successfully transformed from a single product company to a multi product company
offering an entire gamut of kitchen and home appliances (600+ products).

• It has also launched a economy range – ‘Judge Cookware’ to capture the untapped demand especially
at the bottom end of the pyramid. It is expecting good growth in cleaning solution.

• It expects to double its revenue in the next five years backed by revival in

Y/E Sales OPM PAT EPS ROE P/E P/BV EV/Sales

March (` cr) (%) (` cr) (`) (%) (x) (x) (x)
FY2020E 2,307 13.9 210 170 15.9 37.6 6.1 3.3
FY2021E 2,557 13.9 235 153 15.6 33.7 5.4 3.0

11
Axis Bank
Mkt Cap: ` 1,73,913cr CMP: ` 664

 Axis Bank's asset quality deteriorated in FY2017, while it peaked in Q4FY18 (GNPA-6.8%) largely owing
to legacy corporate loans (Watchlist). As of Q1FY20, 60% of the bank's stressed asset pool has been
recognised as NPAs, hence we expect the pace of incremental slippages to decline. Further, shift
towards high rated corporate (FY2016 - 62% to Q1FY20 - 83%), reduction in slippages and healthy
coverage of 61% on NPLs (if we include technical write-offs - 78%), would keep credit costs under
control.

 We believe, with new leadership, improving credit cycle and strong CASA ratio (41%), the bank would
focus more on higher rated corporate and scale up its retail assets, improve branch productivity.

 Axis Bank currently trades at 1.8x its FY2021E price to book value (after adjusting value of subsidiaries).
We expect the stock to re-rate owing to (1) new leadership, (2) limited stressed loan pool, and (3)
improvement in return ratio (ROA/ROE – 1.2%/14.2% by FY21E).

Y/E Op.Inc NIM PAT EPS ABV ROA ROE P/E P/ABV
March (` cr) (%) (` cr) (`) (`) (%) (%) (x) (x)
FY2020E 24,849 3.2 8,273 32 290 1.0 11.4 21.0 2.3
FY2021E 29,274 3.3 11,940 46 333 1.2 14.2 14.6 2.0

IDFC First Bank Ltd

Mkt Cap: ` 20,781cr CMP: ` 43

• IDFC First Bank merged entity ( IDFC Bank and Capital First (CAPF)) on day one was having loan book
of `1.03 lakh cr of which 34% is retail advance. Within 2 quarter retail mix went up 600bps to 40%.

• Combined entity would start operations with clean balance sheet, as IDFC Bank, over last three years
has clear legacy assets (stress asset) and re-orienting from wholesale bank to retail bank. We expect
combined entity to report healthy NIM as gradually cost of fund (COF) would decline owing to (1)
maturity of high cost legacy borrowing on IDFC bank book, (2) steadily COF of CAPF borrowing to
declined in-line with IDFC Bank. Further, incremental contribution from retail lending would boost yield
on advances.

• IDFC First Bank currently trades at 1.2x its FY2021E price to book value. We expect the stock to rerate
owing to (1) new leadership with efficient track record, (2) limited stressed loan pool, (3) improvement in
return ratios.

Y/E Op.Inc NIM PAT EPS ABV ROA ROE P/E P/ABV
March (` cr) (%) (` cr) (`) (`) (%) (%) (x) (x)
FY2020E 5,269 3.5 -367 -0.77 36 -0.2 - - 1.2
FY2021E 6,151 3.9 731 1.53 37 0.4 4.0 28.1 1.2

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Inox Leisure Ltd

Mkt Cap: ` 2,893cr CMP: ` 281

• Inox Leisure is the second largest multiplex company in India after PVR and operates 550+ screens
across India. We expect the company to keep adding 60-80 screens each year over the next few years.

• Multiplex screens are gaining ground in India at the expense of single screens. Multiplexes accounted
for around 26% of screens in India in FY18, which is expected to grow to 40% by FY23.

• Promoters increased their stake by 3.2% to 51.9% via preferential allotment in Q3FY19 which will
reduce debt and strengthen balance sheet.

• We are positive on the prospects of the company given increasing market share of multiplexes and
increasing appetite for Hollywood and smaller budget movies which is expected to reduce volatility in
earnings due to lower dependency on big Bollywood movies.

Y/E Sales OPM PAT EPS ROE P/E P/BV EV/SALES

March (`cr) (%) (` cr) (`) (%) (x) (x) (x)
FY2020E 1,980 17.1 147 14.2 13.2 19.8 2.6 1.5
FY2021E 2,243 17.1 167 16.3 13.1 17.2 2.3 1.3

State Bank of India Ltd

Mkt Cap: ` 2,44,267cr CMP: ` 274

 In FY2017, the asset quality of State Bank of India’s (SBI) had deteriorated, in-line with other corporate
banks, however it peaked in Q1FY2018 (GNPA -10%) and gradually declined to 7.5% in Q1FY2020.
Provisions for few large corporate accounts have already been provided (NCLT list 1&2 Provision
coverage >90%). SBI’s present PCR stands at 60% and if we include technical write-offs than it comes at
79%.

 We expect operating profitability to improve led by the improvement in margins and cost control
measure. The events that will help SBI to strengthen its balance sheet are (1) listing of Credit Card
business and General Insurance business, and (2) recovery from 3 accounts under NCLT (expected
recovery of `16,000Cr). We believe that going forward the bank’s stressed loans will gradually decline
and quick resolution under IBC would aid in improving return ratios.

 At the current market price, the bank’s core banking business (after adjusting the value of subsidiaries)
is trading at 0.7x FY2021E ABV. According to us, the current valuation is inexpensive considering
healthy coverage ratios and the strength of liability franchise (CASA – 43.6%) coupled with strong
performance of subsidiaries.

Y/E Op.Inc NIM PAT EPS ABV ROA ROE P/E P/ABV
March (` cr) (%) (` cr) (`) (`) (%) (%) (x) (x)
FY2020E 97,462 3 17,552 20 253 0 8 14 1.1
FY2021E 1,11,429 3 27,574 31 282 1 11 9 1.0

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Platinum Portfolio List:

Mkt Cap in Cr Hold/Buy

Stock Name Sector on 30.08.19
Maruti Suzuki Auto 1,84,921 Buy
Shriram Trans. BFSI 21,921 Buy
RBL Bank BFSI 14,093 Buy
KEI Inds. Capital Goods 3,713 Buy
Blue Star Consumer Electronics 6,942 Buy
ICICI Bank BFSI 2,64,975 Buy
V I P Inds. Other Apparels & Accessories 6,166 Buy
Axis Bank BFSI 1,73,913 Buy
IDFC First Bank BFSI 20,781 Buy
Inox Leisure Entertainment 2,893 Buy
St Bk of India BFSI 2,44,267 Buy
TTK Prestige Houseware 7,956 Hold
Safari Inds. Apparels & Accessories 1,251 Hold
Lumax Inds. Auto 1,204 Hold
Aditya Birla Cap BFSI 19,629 Hold
Yes Bank BFSI 15,174 Hold
T.V. Today Netw. Media 1,818 Hold
Siyaram Silk Textile 983 Hold
Inox Wind Utilities 730 Hold
Parag Milk Foods Packaged Foods 1,179 Hold
M&M Auto 65,752 Hold
Bata India Footwear 19,812 Hold

14
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