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AMBIT INSIGHTS 3 January 2017

DAILY

Thematic

Consumer

Surviving the ‘perfect storm’

(Click here for detailed note)

Updates

Coal India (BUY)

E-auction realisations recover to 3QFY16 levels

Derivatives

Alpha This Week

An alternative take on the markets

(Click here for detailed note)

Analyst Notes: Light Electricals: Finolex and Havells to report strong 3Q results Bhargav Buddhadev, +91 22 3043 3252

Finolex and Havells should report a strong 3QFY17 relative to their electricals peers led by the cables & wires business (84%/41 % of revenue for Finolex/Havells vs 31%/NIL/NIL for V-Guard/Crompton/Bajaj). Industry volumes for cables & wires have grown by 10-15% in 3QFY17 due to strong demand from the construction sector, especially real estate. Channel participants told us that developers have expedited execution of near-completion projects anticipating a decline in real estate prices (due to demonetisation disruption) and also to avoid any hassles caused by RERA (Real estate Regulation & Development Act) which may become effective in various states in FY18. Also, electricals players have announced ~10% hike in cables & wires prices due to a strong 16% increase in copper prices since 1 November (up 17% YoY in 3QFY17). Havells is our top pick as it would be a major beneficiary of the shift in market share from unorganised to organised (now accelerated by the demonetisation) given its strong relationships with the channel. Source: Ambit Capital research

Please refer to our website for complete coverage universe

http://research.ambitcapital.com

http://research.ambitcapital.com

http://reports.ambitcapital.com/reports/Ambit_Consumer_Thematic_Survivingtheperfectstorm_03Jan2017.pdf

http://reports.ambitcapital.com/reports/Ambit_AlphaThisWeek_03Jan2017.pdf


Surviving the ‘perfect storm’

FMCG sector valuations haven’t priced in the demonetisation/GST disruption. Sales will be hit by: 1) near-term liquidity constraints, 2) stalling of wholesale channel due to cash crunch, 3) weakness in rural demand given job losses and farmer distress, 4) deferment of discretionary spend. Margins are at their peak and face risks from: 1) providing trade/vendors higher margins to offset cost of tax compliance; 2) cost of expanding direct reach; 3) unfavorable crude and INR trends; 4) limited pricing power due to weak demand. We expect earnings growth of 3%/16% vs consensus’ 7%/13% for FY17/18; past earnings multiple averages may be breached on the downside as earnings growth decelerates. HUL and ITC are our top BUYs, given: 1) deeper direct reach; 2) leading brand/product portfolios; 3) focus on staples that will help navigate demand slump, overcome wholesale disruption, and lower impact on margins. Top SELLs are GCPL and GSK.

Disruption in distribution channels to have a longer-term impact We expect near-term demand hit of 10-20% due to: 1) cash crunch and 2) stalling of channel below distributor level. However, recovery should begin by 1QFY18 but will be weak as: 1) impact on cash wealth will hurt discretionary spending (by 5-10%) and 2) job losses in the informal/construction sectors will negate Government stimulus and hurt rural demand (by 3-5%). Distribution will be disrupted until 2HFY18 due to: 1) delay in revival of wholesalers, 2) lower re-stocking by wholesalers due to capital constraints, 3) initial chaos during GST rollout. Demand creation will also be hit as companies postpone product launches and cut A&P spend. Multiple pressures on peak margins indicate sharp dip ahead Risks abound for sector margins, which spiked by 230bps in the past 5 years and are at peak levels: 1) 30-50bps hit from higher supply chain costs as companies compensate trade/vendors for higher tax compliance; 2) 10-80bps hit from rising crude and depreciating INR. Assuming the companies pass on costs to consumers is flawed in the weak demand scenario. Fall in prices of agri-commodities and cut in A&P spend are not sustainable margin drivers. Who are the winners? Just HUL and ITC for now Our framework to identify winners is: 1) deeper direct reach, 2) wide portfolio of market-leading brands, 3) sophisticated IT systems and processes, 4) skew towards staples and low ticket size. These will help companies navigate the demand slump by beating the wholesale disruption and enhancing consumer connect. Wider product portfolio and leading brands will help lower the hit to margins as also gain share as the wholesale channel favours such companies during capital constraints. HUL and ITC fit the bill; GCPL is the weakest. What will make us positive on the sector? Over the next 1-2 years, the perfect storm of weak demand, disrupted distribution, margin declines and peak valuations raise the risk of a material correction in price/valuations. The attributes of strong growth ramp, healthy financials and strong brands do remain intact for the sector. However, we would turn positive only when: 1) distribution revival and its impact are behind, 2) volume growth revives, 3) visibility on interplay of distress from job losses and support from Government stimulus improves, 4) margins stabilise at a lower level and/or 5) valuations shed their peak.

THEMATIC January 03, 2017

ConsumerNEGATIVE

Key Recommendations HUL BUY

Target Price: 930 Upside 12%

Nestle SELL

Target Price: 5,800 Downside: 4%

GSK Consumer SELL


Colgate SELL

Target Price: 825 Downside: 9%

Godrej Consumer SELL


Dabur SELL


Marico SELL


Britannia SELL


ITC BUY

Target Price: 275 Upside: 14%

Asian Paints SELL


Berger Paints SELL


Coverage Map

Source: Ambit Capital Research, Note: Size of the bubble indicates sales (̀ bn) which highlights the difference in scale of HUL and ITC over others

HUL

Dabur

GCPL

Marico

Britannia

Nestle

GSK Cons

ColgateITC

Berger Paints

Asian Paints

2%

4%

6%

8%

10%

12%

14%

16%

18%

20 30 40 50

EPS

CAG

R (F

Y16-1

9E)

CMP FY18 P/E

Research Analysts

Anuj Bansal +91 22 3043 3122

[email protected]

Ritesh Vaidya, CFA +91 22 3043 3246

[email protected]

Dhiraj Mistry, CFA

+91 22 3043 3264

[email protected]

AMBIT INSIGHTS

Ambit Capital Pvt Ltd 3 January 2017

Coal India E-auction realisations recover to 3QFY16 levels Coal India reported production/offtake growth of 4%/7% after posting similar growth rates in Nov-16 and declining volumes in the three prior months (Aug-Oct). The November-December pick-up was driven by a sudden increase in power generation in the past two months. Further, CIL’s regular e-auction realisations significantly improved to 1,790/t in Oct-Nov from an average of Rs1,500/t in 2QFY17 and are now in line with 3QFY16 levels. In 3QFY17, offtake grew by 3.5% YoY vs a decline of 5% in 2QFY17; e-auction realisations are likely up ~15% QoQ. Whilst the pick-up in volumes and realisations has begun (the thesis behind our BUY stance), the key monitorable over the next 1-2 months is whether generation growth is structural or a just a bump caused by improved working capital of SEBs post the demonetisation. Valuations of 12.6x FY18E P/E (in line with historical average) seem inexpensive.

Production and offtake grew by 5-6% YoY in Dec-16

Coal India’s production/offtake grew by 4%/7% YoY in Dec 2016, maintaining the pick-up in Nov 2016 (after 3 months of decline seen in Aug-Oct16). Volume growth was driven by coal-based power generation growth of 8% in December (after 4 months of largely flat power generation trends over Jul-Oct 16). Our interaction with industry participants suggests that the sharp increase in power demand could be driven by improved working capital of SEBs as cash collections increased significantly after the demonetisation was announced on 8 Nov 2016.

Six of CIL’s seven key subsidiaries reported offtake growth; ECL, CCL and NCL reported the highest offtake growth among subsidiaries, at 20%, 14% and 13%, respectively. We highlight that offtake of 51.5mt was lower than production of 54mt, which is typical of 2H (offtake in 1H was higher than production by ~18mt).

Exhibit 1: Subsidiary-wise production and offtake (mt)

Subsidiary Dec-16 Dec-15 YoY growth (%) 9MFY17 9MFY16 YoY growth (%)

Production

ECL 4.7 4.3 7.6% 28.6 26.1 9.5%

BCCL 3.3 3.1 6.9% 25.8 25.4 1.5%

CCL 6.7 5.9 13.9% 40.9 41.5 -1.4%

NCL 8.6 7.6 13.4% 59.2 56.5 4.9%

WCL 4.8 4.5 7.2% 26.8 30.3 -11.7%

SECL 13.7 12.9 6.7% 97.2 96.2 1.1%

MCL 12.4 13.9 -10.5% 98.9 97.4 1.5%

CIL total 54.2 52.1 4.1% 377.5 373.4 1.1%

Offtake

ECL 4.3 3.6 20.3% 31.7 27.0 17.5%

BCCL 3.3 3.0 9.9% 25.5 26.6 -4.2%

CCL 6.0 5.2 13.9% 42.1 44.3 -5.0%

NCL 8.2 7.3 12.8% 60.3 57.2 5.5%

WCL 4.0 3.9 4.1% 27.0 31.5 -14.2%

SECL 13.2 12.4 6.4% 98.9 100.9 -1.9%

MCL 12.4 12.8 -3.0% 105.4 101.6 3.8%

CIL total 51.5 48.2 6.9% 391.5 389.5 0.5%

Source: Company, Ambit Capital research

BUY

Quick Insight Analysis Meeting Note News Impact

Coal India BUY Bloomberg Code: COAL IN

CMP (Rs): 300

TP (Rs): 360

Mcap (` bn/US$ bn): 1,863/27.4

3M ADV (` mn/US$ mn): 1,075/16

Stock Performance (%)

1M 3M 12M YTD

Absolute (2) (7) (10) 0

Rel. to Sensex (3) (2) (12) 0

Source: Bloomberg, Ambit Capital research

Ambit Estimates (Rs mn)

FY16 FY17E FY18E

Revenue 780,101 786,764 884,004

EBITDA 181,972 158,170 196,495

EPS (Rs) 22.3 19.1 24.3


Research Analyst

Parita Ashar, CFA [email protected] Tel: +91 22 3043 3223

mailto:[email protected]

AMBIT INSIGHTS


Our analysis of CIL’s e-auction sales for Nov 2016 suggests the following:

Average realisation and premium of low-grade coal (G10 and weaker) improves: CIL offered low-grade coal of 5.4mt in Nov 2016, of which 43% was sold. Average e-auction realisation improved MoM to Rs1,278/t with the premium at 35% vs 31% in Oct-16 and 21-23% for the last 4 months.

Exhibit 2: Low-grade e-auction realisations and premium are improving

Source: Mjunction, Ambit Capital research

Average realisation and premium of high-grade coal (G9 and better) improve: CIL offered 1.9mt of high-grade coal in Nov 2016, of which 1mt was sold (51% of volumes offered were sold). High grade e-auction realisation improved to Rs2,996/t (31% premium to notified price vs 18% seen in Oct-16 and 11-14% seen in May-Aug16.

Exhibit 3: High-grade e-auction realisations improve MoM


Blended e-auction realisation remains flat MoM (higher premiums offset by weaker grade mmix): High-grade as well as low-grade realisations increased MoM, driving an increase in the average premium to notified prices to 33% from 17-24% over the last 5 months. However, this was offset by weaker grade mix (share of high grade coal was 30% vs 36% in Oct-16), resulting in average e-auction realisations remaining flat at Rs1,791/t.

0.4

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- 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500

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AMBIT INSIGHTS


Exhibit 4: Blended e-auction realisation has been stable MoM


Where do we go from here?

CIL’s stock price has underperformed the Sensex in the past year due to rising investor focus on near-term concerns like weak power demand growth and declining e-auction prices. In line with our expectations highlighted in our note dated Oct 20, CIL’s volumes as well as e-auction realisations have recovered from recent lows given: (a) power demand had been weak but has now recovered (down 1% YoY in 2QFY17 but up 6-9% in last two months); (b) coal stocks are at a 15-day low; and (c) e-auction realisations were closer to floor prices but have now recovered. Whilst the pick-up in volumes and realisations has begun (and is the thesis behind our BUY stance), the key thing to watch over the next 1-2 months is whether the pick-up in power generation is structural or just temporary due to improved working capital of SEBs post-demonetisation. Valuations at 12.6x FY18 P/E (in line with historical average) don’t appear expensive and, hence, we maintain our BUY stance. Key risks: Deteriorating grade mix (as seen in declining FSA realisations for the last three quarters) and weak power demand.

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http://reports.ambitcapital.com/reports/Ambit_CoalIndia_Itssoattractive_20Oct2016.pdf

AMBIT INSIGHTS


Balance sheet (consolidated) Year to March (Rs mn) FY15 FY16 FY17E FY18E

Net worth 403,531 338,976 380,487 478,078

Total debt 4,019 11,920 11,068 11,068

Total liabilities & provisions 415,639 446,053 462,886 484,103

Total liabilities 823,189 796,949 854,442 973,249

Total fixed assets 212,744 242,549 277,145 312,755

Investments 28,134 29,019 29,019 29,019

Net current assets (excl. cash) 5,377 17,275 -847 -9,773

Cash & bank balances 530,925 383,128 422,743 514,868

Total assets 823,189 796,949 854,442 973,249


Income statement (consolidated)

Year to March (Rs mn) FY15 FY16 FY17E FY18E

Sales 741,201 780,101 786,764 884,004

EBITDA 173,354 181,972 158,170 196,495

Total D&A 23,198 25,468 28,404 30,540

EBIT 150,156 156,504 129,766 165,954

Other income 65,706 57,062 54,338 58,067

PBT 215,789 212,512 182,245 222,162

Taxes 78,573 72,084 63,656 71,092

PAT 137,266 141,069 118,589 151,070

Source: Company, Ambit Capital research Cash flow statement (consolidated)

Year to March (Rs mn) FY15 FY16 FY17E FY18E

PBT 215,789 212,512 182,245 222,162

D&A 23,198 25,468 28,404 30,540

Others (26,987) (28,699) (35,646) (34,991)

CFO per WC changes 212,000 209,281 175,003 217,711

Changes in WC (1,166) (87,123) 18,121 8,926

Taxes paid (78,573) (72,084) (63,656) (71,092)

Net CFO 132,261 50,075 129,469 155,546

Capex (44,940) (55,274) (63,000) (66,150)

Interest and others 75,321 56,177 54,338 58,067

CFI 30,381 904 (8,662) (8,083)

Dividends (154,283) (204,221) (41,980) (53,479)

CFF (155,612) (198,777) (81,192) (55,338)

Net change in C&CE 7,030 (147,798) 39,615 92,125

Source: Company, Ambit Capital research Ratio analysis / Valuation parameters (consolidated)

Year to March FY15 FY16 FY17E FY18E

EBITDA margin (post OBR & provisions) % 23.4% 23.3% 20.1% 21.6%

Net profit margin (%) 18.5% 18.1% 15.1% 16.6%

RoE (%) 33.2% 38.0% 33.0% 35.2%

P/E (x) 14.1 13.7 16.0 12.6

P/B (x) 4.8 5.7 5.0 4.0

Dividend yield 6.8% 9.0% 1.9% 2.4%

EV/ EBITDA (x) 8.1 8.5 9.7 7.8



Alpha This Week

03 January, 2017

Derivatives

Securities featured in this note

Company Near Term

Medium term

Nifty <-> ()

ACC () ()

ITC () ()

() denotes positive view, () denotes negative view, <-> denotes no major view/ consolidation. Research Analyst

Prashant Mittal, CFA +91 22 3043 3218 [email protected]

An alternative take on the markets 17th Sept 2013 After a brief scare of breaking the support levels near 7927 early last week, the Nifty has bounced back sharply. Going forward, the index is likely to find resistance both from the intermediate highs made since Nov’16 and the trendline that has stalled the up moves of the index since Sep’16 (near levels of 8300). Further, as we’ve been highlighting, a trend reversal will only be confirmed once the momentum indicators move from a bearish to bullish pattern (see chart). Notably, a decisive break below 7927 (Jun’16 lows) is likely to take the index lower towards levels near 7400. On stocks, we continue with our longs on ITC and ACC.

Index: After a brief scare of breaking the support levels near 7927 early last week, the Nifty has bounced back sharply. Going forward, the index is likely to find resistance both from the intermediate highs made since Nov’16 and the trendline that has stalled the up move of the index since Sep’16 (near levels of 8300). Further, as we’ve been highlighting, a trend reversal will only be confirmed once the momentum indicators move from a bearish to bullish pattern (see chart). Notably, a decisive break below 7927 (Jun’16 lows) is likely to take index lower towards levels near 7400.

Stocks: We continue with our longs on ITC and ACC.

Nifty – Risks remain on the downside

Source: Metastock

Bank Nifty: The Bank Nifty has been trending downwards in a channel pattern since Sep’16. While intermittent pullbacks in the index are not ruled out given the channel support, the overall downward trend of the channel combined with bearish pattern on the RSI Index suggest the index is likely to remain weak going forward.

USD/INR: Rupee as recovered since the recent scare of breaching previous (intraday) highs near 68.9/$. However, going forward, with the dollar recovering, pressure on rupee cannot be ruled out. With the dollar index likely to touch levels close to 108, rupee is likely to re-test the highs of 68.9/$.

Institutional flows: FIIs were SELLers of Indian equities last week and sold equities worth Rs36bn. After staying buyers from March 2016 to September 2016 and buying Indian equities worth Rs522bn, FIIs have turned SELLers since October 2016 and have sold equities worth Rs371bn – with Nov’16 accounting for highest outflows since Jan’08. DIIs on the other hand have bought equities worth Rs353bn since October 2016. Overall, DIIs as a class are currently buyers of Indian equities worth Rs961bn since the General Elections in May 2014.

AMBIT INSIGHTS


Institutional Equities Team Saurabh Mukherjea, CFA CEO, Institutional Equities (022) 30433174 [email protected] Pramod Gubbi, CFA Head of Equities (022) 30433124 [email protected]

Research Analysts

Name Industry Sectors Desk-Phone E-mail

Nitin Bhasin - Head of Research E&C / Infra / Cement / Industrials (022) 30433241 [email protected] Aadesh Mehta, CFA Banking / Financial Services (022) 30433239 [email protected] Abhishek Ranganathan, CFA Retail (022) 30433085 [email protected] Anuj Bansal Mid-caps (022) 30433122 [email protected] Aditi Singh Economy / Strategy (022) 30433284 [email protected] Ashvin Shetty, CFA Automobile (022) 30433285 [email protected] Bhargav Buddhadev Power Utilities / Capital Goods (022) 30433252 [email protected] Deepesh Agarwal, CFA Power Utilities / Capital Goods (022) 30433275 [email protected] Dhiraj Mistry, CFA Consumer (022) 30433264 [email protected] Gaurav Khandelwal, CFA Automobile (022) 30433132 [email protected] Girisha Saraf Mid-caps / Small-caps (022) 30433211 [email protected] Karan Khanna, CFA Strategy (022) 30433251 [email protected] Mayank Porwal Retail (022) 30433214 [email protected] Pankaj Agarwal, CFA Banking / Financial Services (022) 30433206 [email protected] Paresh Dave, CFA Healthcare (022) 30433212 [email protected] Parita Ashar, CFA Metals & Mining / Aviation (022) 30433223 [email protected] Prashant Mittal, CFA Strategy / Derivatives (022) 30433218 [email protected] Rahil Shah Banking / Financial Services (022) 30433217 [email protected] Ravi Singh Banking / Financial Services (022) 30433181 [email protected] Ritesh Gupta, CFA Oil & Gas / Chemicals / Agri Inputs (022) 30433242 [email protected] Ritesh Vaidya, CFA Consumer (022) 30433246 [email protected] Ritika Mankar Mukherjee, CFA Economy / Strategy (022) 30433175 [email protected] Ritu Modi Automobile (022) 30433292 [email protected] Sagar Rastogi Technology (022) 30433291 [email protected] Sudheer Guntupalli Technology (022) 30433203 [email protected] Sumit Shekhar Economy / Strategy (022) 30433229 [email protected] Utsav Mehta, CFA E&C / Industrials (022) 30433209 [email protected] Vivekanand Subbaraman, CFA Media (022) 30433261 [email protected]

Sales

Name Regions Desk-Phone E-mail

Sarojini Ramachandran - Head of Sales UK +44 (0) 20 7886 2740 [email protected] Dharmen Shah India / Asia (022) 30433289 [email protected] Dipti Mehta India (022) 30433053 [email protected] Krishnan V India / Asia (022) 30433295 [email protected] Nityam Shah, CFA Europe (022) 30433259 [email protected] Punitraj Mehra, CFA India / Asia (022) 30433198 [email protected] Shaleen Silori India (022) 30433256 [email protected]

Singapore

Praveena Pattabiraman Singapore +65 6536 0481 [email protected] Shashank Abhisheik Singapore +65 6536 1935 [email protected]

USA / Canada

Ravilochan Pola – CEO Americas +1(646) 793 6001 [email protected] Hitakshi Mehra Americas +1(646) 793 6002 [email protected] Achint Bhagat, CFA Americas +1(646) 793 6752 [email protected]

Production

Sajid Merchant Production (022) 30433247 [email protected] Sharoz G Hussain Production (022) 30433183 [email protected] Jestin George Editor (022) 30433272 [email protected] Richard Mugutmal Editor (022) 30433273 [email protected] Nikhil Pillai Database (022) 30433265 [email protected]
















































AMBIT INSIGHTS


Hindustan Unilever Ltd (HUVR IN, BUY)


Asian Paints Ltd (APNT IN, SELL)


Nestle India Ltd (NEST IN, SELL)


Dabur India Ltd (DABUR IN, SELL)


Godrej Consumer Products Ltd (GCPL IN, SELL)


Colgate Palmolive (India) (CLGT IN, SELL)


0

200

400

600

800

1,000

1,200

Dec

-13

Mar

-14

Jun-

14

Sep-

14

Dec

-14

Mar

-15

Jun-

15

Sep-

15

Dec

-15

Mar

-16

Jun-

16

Sep-

16

Hindustan Unilever Ltd

0200400600800

1,0001,2001,400

Dec

-13

Mar

-14

Jun-

14

Sep-

14

Dec

-14

Mar

-15

Jun-

15

Sep-

15

Dec

-15

Mar

-16

Jun-

16

Sep-

16

Asian Paints Ltd

01,0002,0003,0004,0005,0006,0007,0008,000

Dec

-13

Mar

-14

Jun-

14

Sep-

14

Dec

-14

Mar

-15

Jun-

15

Sep-

15

Dec

-15

Mar

-16

Jun-

16

Sep-

16

Nestle India Ltd

050

100150200250300350

Dec

-13

Mar

-14

Jun-

14

Sep-

14

Dec

-14

Mar

-15

Jun-

15

Sep-

15

Dec

-15

Mar

-16

Jun-

16

Sep-

16

Dabur India Ltd

0200400600800

1,0001,2001,4001,6001,800

Dec

-13

Mar

-14

Jun-

14

Sep-

14

Dec

-14

Mar

-15

Jun-

15

Sep-

15

Dec

-15

Mar

-16

Jun-

16

Sep-

16

Godrej Consumer Products Ltd

0

200

400

600

800

1,000

1,200

Dec

-13

Mar

-14

Jun-

14

Sep-

14

Dec

-14

Mar

-15

Jun-

15

Sep-

15

Dec

-15

Mar

-16

Jun-

16

Sep-

16

Colgate-Palmolive India Ltd

AMBIT INSIGHTS


Glaxosmithkline Consumer (SKB IN, SELL)


Berger Paints India Ltd (BRGR IN, SELL)


Marico Ltd (MRCO IN, SELL)


Britannia Industries Ltd (BRIT IN, SELL)


ITC Ltd (ITC IN, BUY)


Coal India Ltd (COAL IN, BUY)


01,0002,0003,0004,0005,0006,0007,0008,000

Dec

-13

Mar

-14

Jun-

14

Sep-

14

Dec

-14

Mar

-15

Jun-

15

Sep-

15

Dec

-15

Mar

-16

Jun-

16

Sep-

16

GlaxoSmithKline Consumer Healthcare Ltd

0

50

100

150

200

250

300

Dec

-13

Mar

-14

Jun-

14

Sep-

14

Dec

-14

Mar

-15

Jun-

15

Sep-

15

Dec

-15

Mar

-16

Jun-

16

Sep-

16

Berger Paints India Ltd

050

100150200250300350

Dec

-13

Mar

-14

Jun-

14

Sep-

14

Dec

-14

Mar

-15

Jun-

15

Sep-

15

Dec

-15

Mar

-16

Jun-

16

Sep-

16

Marico Ltd

0500

1,0001,5002,0002,5003,0003,5004,000

Dec

-13

Mar

-14

Jun-

14

Sep-

14

Dec

-14

Mar

-15

Jun-

15

Sep-

15

Dec

-15

Mar

-16

Jun-

16

Sep-

16

Britannia Industries Ltd

140160180200220240260280

Dec

-13

Mar

-14

Jun-

14

Sep-

14

Dec

-14

Mar

-15

Jun-

15

Sep-

15

Dec

-15

Mar

-16

Jun-

16

Sep-

16

ITC Ltd

0

100

200

300

400

500

Dec

-13

Mar

-14

Jun-

14

Sep-

14

Dec

-14

Mar

-15

Jun-

15

Sep-

15

Dec

-15

Mar

-16

Jun-

16

Sep-

16

Coal India Ltd

AMBIT INSIGHTS


Explanation of Investment Rating

Investment Rating Expected return (over 12-month)

BUY >10%

SELL <10%

NO STANCE We have forward looking estimates for the stock but we refrain from assigning valuation and recommendation

UNDER REVIEW We will revisit our recommendation, valuation and estimates on the stock following recent events

NOT RATED We do not have any forward looking estimates, valuation or recommendation for the stock POSITIVE We have a positive view on the sector and most of stocks under our coverage in the sector are BUYs

NEGATIVE We have a negative view on the sector and most of stocks under our coverage in the sector are SELLs

Disclaimer This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of Ambit Capital. AMBIT Capital Research is disseminated and available primarily electronically, and, in some cases, in printed form.

Additional information on recommended securities is available on request.

Disclaimer

1. AMBIT Capital Private Limited (“AMBIT Capital”) and its affiliates are a full service, integrated investment banking, investment advisory and brokerage group. AMBIT Capital is a Stock Broker, Portfolio Manager and Depository Participant registered with Securities and Exchange Board of India Limited (SEBI) and is regulated by SEBI.

2. AMBIT Capital makes best endeavours to ensure that the research analyst(s) use current, reliable, comprehensive information and obtain such information from sources which the analyst(s) believes to be reliable. However, such information has not been independently verified by AMBIT Capital and/or the analyst(s) and no representation or warranty, express or implied, is made as to the accuracy or completeness of any information obtained from third parties. The information, opinions, views expressed in this Research Report are those of the research analyst as at the date of this Research Report which are subject to change and do not represent to be an authority on the subject. AMBIT Capital may or may not subscribe to any and/ or all the views expressed herein.

3. This Research Report should be read and relied upon at the sole discretion and risk of the recipient. If you are dissatisfied with the contents of this complimentary Research Report or with the terms of this Disclaimer, your sole and exclusive remedy is to stop using this Research Report and AMBIT Capital or its affiliates shall not be responsible and/ or liable for any direct/consequential loss howsoever directly or indirectly, from any use of this Research Report.

4. If this Research Report is received by any client of AMBIT Capital or its affiliate, the relationship of AMBIT Capital/its affiliate with such client will continue to be governed by the terms and conditions in place between AMBIT Capital/ such affiliate and the client.

5. This Research Report is issued for information only and the 'Buy', 'Sell', or ‘Other Recommendation’ made in this Research Report such should not be construed as an investment advice to any recipient to acquire, subscribe, purchase, sell, dispose of, retain any securities and should not be intended or treated as a substitute for necessary review or validation or any professional advice. Recipients should consider this Research Report as only a single factor in making any investment decisions. This Research Report is not an offer to sell or the solicitation of an offer to purchase or subscribe for any investment or as an official endorsement of any investment.

6. This Research Report is being supplied to you solely for your information and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or published, copied in whole or in part, for any purpose. Neither this Research Report nor any copy of it may be taken or transmitted or distributed, directly or indirectly within India or into any other country including United States (to US Persons), Canada or Japan or to any resident thereof. The distribution of this Research Report in other jurisdictions may be strictly restricted and/ or prohibited by law or contract, and persons into whose possession this Research Report comes should inform themselves about such restriction and/ or prohibition, and observe any such restrictions and/ or prohibition.

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Conflict of Interests

8. In the normal course of AMBIT Capital’s business circumstances may arise that could result in the interests of AMBIT Capital conflicting with the interests of clients or one client’s interests conflicting with the interest of another client. AMBIT Capital makes best efforts to ensure that conflicts are identified and managed and that clients’ interests are protected. AMBIT Capital has policies and procedures in place to control the flow and use of non-public, price sensitive information and employees’ personal account trading. Where appropriate and reasonably achievable, AMBIT Capital segregates the activities of staff working in areas where conflicts of interest may arise. However, clients/potential clients of AMBIT Capital should be aware of these possible conflicts of interests and should make informed decisions in relation to AMBIT Capital’s services.

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and Paragraph 11 of the First Schedule to the Financial Advisors Act (CAP 110) provided to Ambit Singapore Pte. Limited by Monetary Authority of Singapore. 17. This Report is only available to persons in Singapore who are institutional investors (as defined in section 4A of the Securities and Futures Act (Cap. 289) of Singapore (the “SFA”).” Accordingly, if a

Singapore Person is not or ceases to be such an institutional investor, such Singapore Person must immediately discontinue any use of this Report and inform Ambit Singapore Pte. Limited.

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analyst’s compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed by the research analyst in this research report. This report may not be reproduced, redistributed or copied in whole or in part for any purpose.

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23. This report does not constitute an offer or solicitation to buy or sell any securities referred to herein. It should not be so construed, nor should it or any part of it form the basis of, or be relied on in connection with, any contract or commitment whatsoever. The information in this report, or on which this report is based, has been obtained from publicly available sources that Ambit believes to be reliable and accurate. However, it has not been prepared in accordance with legal requirements designed to promote the independence of investment research. It has also not been independently verified and no representation or warranty, express or implied, is made as to the accuracy or completeness of any information obtained from third parties.

24. The information or opinions are provided as at the date of this report and are subject to change without notice. The information and opinions provided in this report take no account of the investors’ individual circumstances and should not be taken as specific advice on the merits of any investment decision. Investors should consider this report as only a single factor in making any investment decisions. Further information is available upon request. No member or employee of Ambit or ACUK accepts any liability whatsoever for any direct or consequential loss howsoever arising, directly or indirectly, from any use of this report or its contents.

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AMBIT INSIGHTS


26. Ambit and its affiliates and their respective officers directors and employees may hold positions in any securities mentioned in this Report (or in any related investment) and may from time to time add to or dispose of any such securities (or investment). Ambit and ACUK may from time to time render advisory and other services to companies referred to in this Report and may receive compensation for the same.

27. Ambit and its affiliates may act as a market maker or risk arbitrator or liquidity provider or may have assumed an underwriting commitment in the securities of companies discussed in this Report (or in related investments) or may sell them or buy them from clients on a principal to principal basis or may be involved in proprietary trading and may also perform or seek to perform investment banking or underwriting services for or relating to those companies.

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Disclosures 29. The analyst (s) has/have not served as an officer, director or employee of the subject company. 30. There is no material disciplinary action that has been taken by any regulatory authority impacting equity research analysis activities. 31. All market data included in this report are dated as at the previous stock market closing day from the date of this report..

Analyst Certification Each of the analysts identified in this report certifies, with respect to the companies or securities that the individual analyses, that (1) the views expressed in this report reflect his or her personal views about all of the subject companies and securities and (2) no part of his or her compensation was, is or will be directly or indirectly dependent on the specific recommendations or views expressed in this report. © Copyright 2016 AMBIT Capital Private Limited. All rights reserved.

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