bulls & bears - india valuations handbook - 20131101-mosl.pdf

November 2013

About the productAs the tagline suggests, BULLS & BEARS is a handbook on valuations in India. Every month it will cover: Valuations of Indian

markets vis-à-vis global markets

Current valuation of companies in various sectors

Sectors which are currently valued at premium/discount to their historical long-period averages

2

Summary Indian Equities: Sensex at all time high but still at discount to historical average

– At 21,034, the BSE Sensex PE is at 3% discount to LPA (12-month forward) and Sensex PB at 11% discount to LPA (12-month forward).

– Market cap to GDP at 59% is below the averages and closer to the lows of last decade.

Global Equities: India continues to trade at a premium– Indian equities are at a premium to most markets, however are still below its historical

average. Japan remains the only market at a premium to India. – RoEs of Indian equities are at premium to global markets, thus supporting the premium

valuations. Among BRIC countries, only Indian markets have given positive YTD returns.

Nifty: 1% away from all-time highs; Sectoral divergence clearly visible – Consumer, Healthcare, Auto and Technology have significantly outperformed Nifty; Real Estate,

Utilities and Capital Goods have massively underperformed with -50% returns.

Sector highlights: Cyclicals at discount; Consumer still at 35% premium– Sectors at attractive valuations relative to historic averages: Auto, Healthcare, Technology.– Sectors with rich valuations relative to historic averages include Consumer and Telecom.– Global cyclicals are at a huge discount to markets; Non-cyclicals are at a premium.

Sensex-30 highlights: 17 companies are at a discount to their averages– Companies with significant discount to their averages are: BHEL (-38%), NTPC (-32%), ICICI Bank

(-27%), Tata Motors (-22%), HDFC Bank (-20%). – Few companies are at huge valuation premium to their averages: ITC (+45%), HUL (+33%), Bajaj

Auto (+32%), Sun Pharma (+32% ).

Research & Database Teams ([email protected])

BULLS & BEARS | November 2013

NOTES: Prices as on 30 Oct 2013

BULL icon:Sectors trading at premium to historic averages

BEAR icon:Sectors trading at discount to historic averages

Valuations are on 12-month forward basis unless otherwise mentioned

Sector valuations are based on MOSL coverage companies

Global equities data sourced from Bloomberg. Sensex valuations based on MOSL estimates

3

Contents

Global Equities: Performance and valuation snapshot

Indian Equities: Key valuation metrics

Sensex companies valuations

Sector highlights: Overview and specific sector valuations AUTO BANKS / FINANCIALS CAPITAL GOODS CEMENT CONSUMER HEALTHCARE MEDIA METALS OIL & GAS REAL ESTATE RETAIL TECHNOLOGY TELECOM UTILITIES


Mkt Cap (USD T)

YTD Chg (%)

CY13 / FY14

CY14 / FY15

CY13 / FY14

CY14 / FY15

CY13 / FY14

CY14 / FY15

CY13 / FY14

CY14 / FY15

Japan 4.6 40 18.5 16.5 14 16 1.6 1.5 8.4 8.9

Brazil 1.1 -11 - 13.6 - -4 0.9 0.8 - 6.2

Taiwan 0.9 10 16.1 14.3 -1 1 1.7 1.7 10.8 11.6

US 21.1 24 15.9 14.4 -2 2 2.5 2.3 15.4 15.7

Indonesia 0.4 6 15.7 13.5 -3 -4 2.9 2.5 18.3 18.7

UK 3.9 15 13.6 12.4 -16 -12 1.9 1.7 13.9 13.9

MSCI EM 7.8 -1 11.7 10.3 -28 -27 1.5 1.4 13.0 13.4

Korea 1.2 3 10.5 8.9 -35 -37 1.2 1.0 11.0 11.8

China 3.3 -5 9.5 8.4 -42 -41 1.3 1.2 13.6 13.8

Russia 0.6 -4 5.0 5.2 -69 -64 0.6 0.6 12.9 11.4

India - Sensex 1.1 8 16.3 14.1 2.6 2.3 16.0 16.3

PE (x) PB (x) RoE (%)Prem / Disc to India

PE (%)

4

Global equities: India remains at a premium on valuations ….

Sensex v/s Other Markets

Indian equities are trading at 16.3x FY14E earnings; at a premium to most other EMs.

Only Japan is trading at premium to India in PE term at 14% ; rest of the markets are trading at a discount to India.

Among BRIC countries, only Indian markets have given positive YTD returns.

India’s RoE remains superior to most EMs - an important differentiator for the valuation premium.

Source: Bloomberg/MOSL


5

Global equities: …. however at discount to its long period average

Source: Bloomberg, 12 month forward valuation.


Mkt cap appreciation in 10 Year (x)

India markets at discount to its long period average; Developed economies of UK and US at premium to average

India’s contribution to World Market cap at 1.8%, marginally below its long period average

India’s market cap appreciation 4 x in last 10 years; however lagged other EMs

Developed economies trading at premium to LPA

India's Contribution to World Market cap (%)

Country Current LPA Prem/Disc (%)UK 13.6 11.3 20.1Indonesia 15.7 13.7 14.9Taiwan 16.1 14.9 8.3US 15.9 14.8 7.6MSCI EM 11.7 11.1 5.6India 14.9 15.3 -2.6Korea 10.5 10.8 -2.9Japan 18.5 22.4 -17.5Russia 5.0 6.7 -24.9China 9.5 16.6 -42.7Brazil NA 11.6

PE (x)7.4

6.4

5.1

4.0 3.83.2

2.21.6 1.6 1.4

Indo

nesi

a

Chin

a

Braz

il

Indi

a

Kore

a

Russ

ia

Taiw

an UK

US

Japa

n

0.7

3.0 3.3

1.8

0.50

1.25

2.00

2.75

3.50

Dec

-03

Jun-

04N

ov-0

4A

pr-0

5Se

p-05

Feb -

06Ju

l-06

Dec

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May

-07

Oct

-07

Mar

-08

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-08

Feb-

09Ju

l-09

Dec

-09

May

-10

Oct

-10

Mar

-11

Aug

-11

Jan-

12Ju

n-12

Nov

-12

May

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Oct

-13

India's Contribution to World Mcap (%)

Average of 2%

6

Indian Equities: Sensex at all-time high, valuations below average

BSE Sensex PE at 14.9x is at an 3% discount to averages; PB at 2.4x is at 11% discount to its averages.

Market cap to GDP at 59% is well below the averages.

12-month forward Sensex P/E (x) 12-month forward Sensex P/B (x)

12-month forward Sensex RoE (%) India’s market cap to GDP (%)


24.6

10.7

14.9

7

12

17

22

27

Oct

-03

Oct

-04

Oct

-05

Oct

-06

Oct

-07

Oct

-08

Oct

-09

Oct

-10

Oct

-11

Oct

-12

Oct

-13

10 Year Avg: 15.3x

4.2

1.6

2.4

1.2

2.1

3.0

3.9

4.8

Oct

-03

Oct

-04

Oct

-05

Oct

-06

Oct

-07

Oct

-08

Oct

-09

Oct

-10

Oct

-11

Oct

-12

Oct

-13

10 Year Avg: 2.7x

24.2

15.8

16.4

15.0

17.5

20.0

22.5

25.0

Oct

-03

Oct

-04

Oct

-05

Oct

-06

Oct

-07

Oct

-08

Oct

-09

Oct

-10

Oct

-11

Oct

-12

Oct

-13

10 Year Avg: 19.6%

23

4252

82 83

103

55

95 88

6964 59

FY03

FY04

FY05

FY06

FY07

FY08

FY09

FY10

FY11

FY12

FY13

FY14

E

Average of 69% for the period

Weight McapSector (%) (USD b) FY13 FY14E FY15E FY13 FY14E FY15E FY13 FY14E FY15E FY13 FY14E FY15EAuto 10.4 54 -5.4 13.2 19.3 15.2 13.5 11.3 3.9 3.2 2.6 25.7 23.9 23.3Banking & Financial 24.4 87 21.6 -0.3 16.0 14.1 14.2 12.2 2.3 2.0 1.8 16.1 14.1 14.8Capital Goods 5.2 20 -1.5 -30.2 -9.7 10.8 15.4 17.0 2.1 1.9 1.7 19.3 12.3 10.2Consumer 12.9 65 22.3 12.9 14.6 37.1 32.8 28.6 15.7 14.0 12.5 42.4 42.6 43.6Healthcare 5.9 33 24.0 35.0 14.8 34.9 25.9 22.5 6.5 5.6 4.6 18.7 21.7 20.3Metals 4.1 22 -7.6 2.0 8.3 7.6 7.4 6.8 0.8 0.8 0.7 11.1 10.6 10.5Oil & Gas 13.3 95 -0.9 2.7 16.2 11.8 11.5 9.9 1.6 1.5 1.3 13.9 12.9 13.6Technology 17.9 117 22.0 24.8 15.7 24.3 19.5 16.8 6.6 5.5 4.5 27.0 28.1 26.5Telecom 2.4 23 -46.6 33.2 80.5 63.1 47.3 26.2 2.9 2.5 2.3 4.5 5.2 8.6Utilties 3.4 52 7.3 4.4 10.7 11.5 11.0 9.9 2.3 2.1 1.9 19.8 18.8 18.9Sensex 100 569 5.6 9.1 15.1 17.7 16.3 14.1 2.9 2.6 2.3 16.5 16.0 16.3

PAT Growth (%) # PE (x) PB (x) ROE (%)

7

Indian Equities: Technology, Telecom, Healthcare are top performers

Healthcare, Telecom and Technology are the sectors with healthy PAT growth for FY14 in the Sensex universe.

Capital Goods is expected to continue PAT de-growth with poor investment cycle.

Metals and Auto are seeing reversal in performance with positive earnings growth in FY14.

Telecom will report the highest earnings growth over FY13-15.


83

45 36 30 24 17 15 9

-1 -7 -11-21

-31-46 -49 -51 -51

-64

Cons

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Hea

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are

Tech

nolo

gy

Cem

ent

Tele

com

Aut

o

Pvt -

Bank

s

Med

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Nift

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NBF

C

Reta

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Oil

BSE

Mid

-Cap

Capi

tal G

oods

Met

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Util

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PSU

-Ba

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Real

Est

ate

172

126 116 99

44 41 31 27 16

-1 -12-37 -39 -40 -54 -55 -67

-90

Cons

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Hea

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are

Aut

o

Tech

nolo

gy

Cem

ent

Pvt -

Bank

s

NBF

C

Reta

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Med

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Nift

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PSU

-Ba

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BSE

Mid

-Cap

Tele

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Met

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Capi

tal G

oods

Util

ities

Real

Est

ate

4935

20 157 6 6 3 2

-8 -9 -15 -16 -19 -21 -22-33 -37

Tech

nolo

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Tele

com

Hea

lth C

are

Cons

umer

Med

ia

Nift

y

Aut

o Oil

Pvt -

Bank

s

Cem

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NBF

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BSE

Mid

-Cap

Capi

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oods

Met

al

Util

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Reta

il

PSU

-Ba

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Real

Est

ate

8

Indian Equities: Huge sectoral divergence from all time high Nifty


The sectoral divergence is clearly visible on comparing the sectoral indices performance from previous Nifty highs

Nifty closed at 6252 on Oct 30, which is 1% below its previous highs of 6288 on Jan 8, 2008 and 6312 on Nov 5, 2010

Sectoral Divergence: Since Jan 2008 Sectoral Divergence: Since Nov 2010

Sectoral performance CY13 YTD (%)

The outperformers have mostly been Technology,Healthcare, Consumer. Telecom has given healthyYTD returns.

The underperformers have mostly been cyclicals -Metals, PSU Banks, Capital Goods etc.

Pvt Banks has given positive returns unlike PSU-Banks and NBFCs.

Name Sector Current 10 Yr Avg Prem/Disc (%) Current 10 Yr Avg Current 10 Yr Avg Prem/Disc (%) Current 10 Yr AvgBajaj Auto Auto 16.0 12.1 32 7 -21 5.7 5.5 3 134 103Hero MotoCorp Auto 14.5 14.3 1 -3 -7 6.1 6.7 -9 154 148M&M Auto 12.0 11.3 6 -20 -26 2.8 3.0 -8 16 12Maruti Suzuki Auto 15.8 14.8 7 6 -4 2.2 2.5 -13 -10 -8Tata Motors Auto 9.5 12.2 -22 -36 -20 2.2 2.9 -26 -10 8HDFC Financials 22.3 20.1 11 49 31 4.4 4.5 -3 83 68HDFC Bank Financials 16.6 20.9 -20 11 36 3.4 3.3 3 41 22ICICI Bank Financials 12.3 16.9 -27 -18 10 1.7 1.8 -7 -31 -34SBI Financials 7.7 8.6 -11 -49 -44 0.8 1.2 -31 -65 -55BHEL Capital Goods 10.7 17.3 -38 -28 13 1.0 4.2 -76 -59 55Larsen & Toubro Capital Goods 20.4 20.4 0 36 33 2.6 4.3 -39 7 57Hind. Unilever Consumer 35.4 26.7 33 137 74 20.9 20.4 2 764 653ITC Consumer 30.5 21.0 45 104 37 10.8 6.2 75 348 129Cipla Healthcare 19.4 20.7 -6 30 35 3.0 3.9 -24 22 43Dr Reddy’s Healthcare 23.6 39.3 -40 58 156 4.8 3.3 45 98 21Sun Pharma Healthcare 26.5 20.0 32 77 30 6.5 4.5 45 168 64Hindalco Metals 7.8 8.4 -7 -48 -45 0.9 1.7 -45 -61 -37JSPL Metals 7.9 9.5 -17 -47 -38 1.0 3.2 -69 -59 18Sesa Sterlite Metals 5.7 5.4 6 -62 -65 1.9 2.6 -27 -21 -4Tata Steel Metals 10.0 10.8 -8 -33 -30 1.3 2.4 -44 -45 -12GAIL Oil & Gas 11.7 10.5 12 -21 -32 1.6 2.1 -25 -36 -23ONGC Oil & Gas 8.6 9.1 -5 -42 -41 1.4 2.1 -34 -42 -22Reliance Inds. Oil & Gas 11.4 11.5 -1 -24 -25 1.2 1.6 -24 -48 -39Infosys Technology 16.3 19.6 -17 9 28 3.6 5.9 -38 50 116TCS Technology 20.3 18.1 12 36 18 6.9 6.3 9 184 132Wipro Technology 14.1 17.1 -18 -6 12 3.2 4.2 -24 33 55Bharti Airtel Telecom 32.1 24.2 33 115 58 2.2 3.4 -36 -11 25Coal India Utilties 9.2 12.1 -24 -38 -21 2.9 4.4 -33 22 62NTPC Utilties 11.4 16.7 -32 -24 9 1.3 2.1 -36 -44 -22Tata Power Utilties 24.5 19.3 27 64 26 1.5 2.1 -30 -38 -21Sensex 14.9 15.3 -3 2.4 2.7 -11

Relative to Sensex P/E (%) Relative to Sensex P/B (%)PE (x) PB (x)

9

Sensex: At life-time high, 17 cos trade at discount to long term averages


Current 10 Yr Avg Prem/Disc (%) Current 10 Yr Avg Current 10 Yr Avg Prem/Disc (%) Current 10 Yr AvgAuto 12.6 12.0 5.3 -16 -22 2.8 3.0 -6.3 16 11Banks - Private 13.3 15.0 -11.6 -11 -3 2.3 2.3 -1.1 -7 -16Banks - PSU 5.6 6.9 -18.3 -62 -55 0.6 1.2 -46.0 -74 -58NBFC 9.9 11.1 -10.9 -34 -30 1.4 1.6 -9.6 -41 -42Capital Goods 18.0 19.1 -5.8 20 22 2.2 4.4 -50.4 -9 58Cement 15.4 12.6 22.3 3 -17 1.9 2.4 -21.1 -23 -14Consumer 31.6 23.5 34.7 112 55 10.8 8.0 36.2 349 200Healthcare 22.7 21.9 3.4 52 46 4.7 4.2 11.0 95 60Media 20.7 21.0 -1.2 39 34 4.1 3.6 15.1 70 30Metals 8.0 8.8 -8.5 -46 -44 0.9 1.8 -49.6 -62 -35Oil & Gas 9.5 11.0 -13.6 -36 -28 1.2 1.8 -30.4 -49 -34Real Estate 16.4 17.2 -4.6 10 6 0.6 1.3 -57.0 -77 -56Retail 25.9 28.3 -8.5 73 81 5.7 4.3 33.2 135 57Technology 16.8 17.0 -1.3 12 13 4.5 5.1 -11.9 87 89Telecom 26.1 21.7 19.9 74 43 2.1 2.6 -18.5 -13 -6Util ities 10.9 14.0 -21.9 -27 -11 1.2 1.7 -28.5 -51 -38

PB (x)Sector

Relative to Sensex P/E (%)

Relative to Sensex P/B (%)

PE (x)

10

Sector highlights: Cyclicals at discount; Consumer still at 35% premium

Cyclicals are at a huge discount on P/B. PSU banks are at 46% discount to 10-yr averages, while Capital Goods and Metals areat 50% discount.

Recent outperformance of Private Banks results in valuations marginally below its average. However, PSU Banks still trade at46% discount to average.

Cement EV/EBITDA valuations inches above average despite poor 2QFY14 performance due to recovery expectations in FY15.

Autos now trades at premium to its average, driven by 2W companies and buoyant rural demand.

Telecom trades at 20% discount to EV/EBITDA average. Post passive consolidation and RPMs improving, strong growth isexpected in the sector in 2HFY14/FY15.


-16-22

-50

-25

0

25

50

Oct

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Relative to Sensex PE (%)

11

Auto: Earnings upgrade post 2Q to reflect in valuations; positive outlook for 2H

Auto sector PE trades at premium of 5%to its historical average PE. 2QFY14earnings of most companies have beenabove estimates, seen upgrades.

Hero Motocorp is at its average; earningsmomentum to continue in 2HFY14.

M&M trades at 6% premium to itsaverage; earnings growth will remainweak in 2HFY14.

Tata Motors improved performancedriven by JLR, led to improved PE of 9.5x,however, lower than its average.


12.612.0

3

10

17

24

31

Oct

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Auto Sector P/E (x) 10 Yr Avg (x)

2.83.0

1.0

2.0

3.0

4.0

5.0

Oct

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Oct

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Auto Sector P/B (x) 10 Yr Avg (x)

1611

-20

-5

10

25

40

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Relative to Sensex PB (%)

Company Current 10 Yr Avg Prem/Disc (%) Current 10 Yr Avg Current 10 Yr Avg Prem/Disc (%) Current 10 Yr AvgAshok Leyland - 15.0 - - -3 1.0 3.5 -71 -59 28Bajaj Auto 16.0 12.1 32 7 -21 5.7 5.5 3 134 103Eicher Motors 22.2 12.0 85 49 -22 4.7 2.0 134 96 -25Exide Inds. 16.4 15.8 4 10 3 2.6 3.1 -18 6 15Hero Motocorp 14.5 14.3 1 -3 -7 6.1 6.7 -9 154 148M & M 12.0 11.3 6 -20 -26 2.8 3.0 -8 16 12Maruti Suzuki 15.8 14.8 7 6 -4 2.2 2.5 -13 -10 -8Tata Motors 9.5 12.2 -22 -36 -20 2.2 2.9 -26 -10 8


Sector Performance CY13 YTD

Auto +6%

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12

Banks – Private: Recent bounce led valns back to average; Axis at 32% discount

Private banks are trading at theirhistorical average PB and at 7% discountto market PB. 2QFY14 performance wasstrong and drove earnings upgrades.

Axis Bank and Yes Bank trade at bigdiscounts of 32%/30% respectively to itsaverages (PB); IndusInd trades at hugepremium of 35% (highest in the sector).

HDFC Bank trades at its long term PEaverage (+3%)

HDFC Bank, Kotak and IndusInd Bank aretrading at premium to Sensex PB.


13.315.0

5

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19

26

33

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Private Banks P/E (x) 10 Yr Avg (x)

2.32.3

1.0

1.8

2.5

3.3

4.0

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Private Banks P/B (x) 10 Yr Avg (x)

-7-16

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8

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Company Current 10 Yr Avg Prem/Disc (%) Current 10 Yr Avg Current 10 Yr Avg Prem/Disc (%) Current 10 Yr AvgAxis Bank 9.0 12.5 -28 -39 -19 1.4 2.1 -32 -43 -24Federal Bank 8.8 7.4 19 -41 -52 0.9 0.9 2 -61 -66HDFC Bank 16.6 20.9 -20 11 36 3.4 3.3 3 41 22ICICI Bank 12.3 16.9 -27 -18 10 1.7 1.8 -7 -31 -34IndusInd Bank 16.7 17.1 -2 12 11 2.5 1.9 35 5 -30ING Vysya Bank 14.6 12.8 14 -2 -17 1.5 1.3 16 -39 -53J & K Bank 5.4 6.9 -22 -64 -55 1.0 1.0 -4 -60 -63Kotak Mah. Bank 20.6 17.2 20 38 12 2.9 2.5 14 18 -8South Ind.Bank 5.9 6.5 -9 -60 -58 0.8 0.8 -2 -66 -69Yes Bank 8.2 14.4 -43 -45 -6 1.7 2.4 -30 -30 -10



Private Banks +2%

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13

Banks – PSU: Valuation at 46% discount to avg; at decade low

PSU banks trade at 46% discount to itshistorical PB and 74% discount to marketPB.

All PSU banks, except SBI and BOB, tradeat least 50%+ discount to historicalaverage PB multiples.

Recovery in domestic economy alongwith moderation in interest rates will bekey triggers for the sector to recover fromthese low valuations.


PSU Banks -33%


5.6

6.9

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PSU Banks P/E (x) 10 Yr Avg (x)

0.6

1.2

0.3

0.8

1.3

1.8

2.3

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PSU Banks P/B (x) 10 Yr Avg (x)

-74

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Company Current 10 Yr Avg Prem/Disc (%) Current 10 Yr Avg Current 10 Yr Avg Prem/Disc (%) Current 10 Yr AvgAndhra Bank 3.1 5.7 -45 -79 -63 0.3 1.0 -69 -87 -62Bank of Baroda 6.4 6.9 -7 -57 -55 0.7 1.0 -32 -71 -61Bank of India 3.7 6.7 -45 -75 -56 0.4 1.1 -61 -83 -61Canara Bank 4.6 5.7 -19 -69 -63 0.4 1.0 -59 -83 -64Corporation Bank 3.0 6.3 -53 -80 -59 0.4 1.0 -63 -85 -63Dena Bank 2.5 5.1 -51 -83 -66 0.3 0.7 -58 -87 -73IDBI Bank 4.4 8.8 -50 -71 -43 0.4 0.9 -53 -83 -68Indian Bank 2.6 5.0 -47 -82 -67 0.3 0.9 -69 -89 -68Oriental Bank 3.8 6.5 -42 -75 -58 0.3 1.0 -67 -86 -63Punjab Natl.Bank 4.1 6.2 -34 -73 -60 0.5 1.1 -57 -80 -58St Bk of India 7.7 8.6 -11 -49 -44 0.8 1.2 -31 -65 -55Union Bank (I) 3.9 5.8 -33 -74 -63 0.4 1.0 -62 -84 -62


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14

NBFC: Significant divergence; MMFS at 43% premium, IDFC at 55% discount

NBFCs trade at a discount of 10% to itshistorical PB averages; however 41%discount to Sensex PB.

HDFC is marginally below its average PB.However, it trades at significant premiumvis-à-vis Sensex. Even on PE basis,valuations are at a premium.

MMFS is now at a significant premium toPB averages, driven by sustained stronggrowth and better asset quality.

All Infra NBFCs are at a 42-61% discountto PB averages, indicating stress on bothquality of assets and cost of liabilities.


NBFC -9%


9.911.1

0

7

14

21

28

Oct

-03

Oct

-04

Oct

-05

Oct

-06

Oct

-07

Oct

-08

Oct

-09

Oct

-10

Oct

-11

Oct

-12

Oct

-13

NBFC P/E (x) 10 Yr Avg (x)

1.41.6

0.0

1.0

2.0

3.0

4.0

Oct

-03

Oct

-04

Oct

-05

Oct

-06

Oct

-07

Oct

-08

Oct

-09

Oct

-10

Oct

- 11

Oct

-12

Oct

-13

NBFC P/B (x) 10 Yr Avg (x)

-41

-42

-75

-50

-25

0

Oct

-03

Oct

-04

Oct

-05

Oct

-06

Oct

-07

Oct

-08

Oct

-09

Oct

-10

Oct

-11

Oct

-12

Oct

-13


Company Current 10 Yr Avg Prem/Disc (%) Current 10 Yr Avg Current 10 Yr Avg Prem/Disc (%) Current 10 Yr AvgH D F C 22.3 20.1 11 49 31 4.4 4.5 -3 83 68I D F C 7.2 16.1 -55 -51 5 1.0 2.2 -55 -60 -20LIC Housing Fin. 7.6 7.3 3 -49 -52 1.3 1.4 -10 -47 -48M & M Financial 13.6 9.5 42 -9 -38 2.7 1.9 43 12 -31Power Fin.Corpn. 3.1 8.1 -62 -80 -47 0.5 1.4 -61 -77 -48Rural Elec.Corp. 3.7 6.8 -46 -75 -56 0.8 1.4 -42 -67 -50Shriram Trans. 8.1 8.2 -2 -46 -47 1.4 1.9 -25 -42 -31


2022

-30

0

30

60

90

Oct

-03

Oct

-04

Oct

-05

Oct

-06

Oct

-07

Oct

-08

Oct

-09

Oct

-10

Oct

-11

Oct

-12

Oct

-13


15

Capital Goods: Trades at 50% discount to avg; waiting for investment cycle

Capital goods sector is trading at discountof 50% to its historical PB average. Withimproved earnings performance incompanies, their PEs are at 6% discount toaverage.

BHEL is worst performer with 76% discountto historical PB followed by CromptonGreaves (61% discount to average).

L&T, backed by improved performance isnow trading at its PE average.

Havells is the most valued company with PEand PB trading above averages.


Capital Goods -16%


18.019.1

7

17

27

37

47

Oct

-03

Oct

-04

Oct

-05

Oct

-06

Oct

-07

Oct

-08

Oct

-09

Oct

-10

Oct

-11

Oct

-12

Oct

-13

Capital Goods P/E (x) 10 Yr Avg (x)

2.2

4.4

0.0

3.0

6.0

9.0

12.0

Oct

-03

Oct

-04

Oct

-05

Oct

-06

Oct

-07

Oct

-08

Oct

-09

Oct

-10

Oct

-11

Oct

-12

Oct

-13

Capital Goods P/B (x) 10 Yr Avg (x)

-9

58

-50

15

80

145

210

Oct

-03

Oct

-04

Oct

-05

Oct

-06

Oct

-07

Oct

-08

Oct

-09

Oct

-10

Oct

-11

Oct

-12

Oct

-13


Company Current 10 Yr Avg Prem/Disc (%) Current 10 Yr Avg Current 10 Yr Avg Prem/Disc (%) Current 10 Yr AvgA B B 56.1 64.9 -13 276 323 4.6 6.7 -32 91 149B H E L 10.7 17.3 -38 -28 13 1.0 4.2 -76 -59 55Crompton Greaves 14.0 19.9 -30 -6 29 1.7 4.4 -61 -30 61Cummins India 16.7 17.5 -4 12 14 4.0 4.6 -13 65 70Havells India 19.9 17.3 15 33 13 4.8 4.1 18 100 51Larsen & Toubro 20.4 20.4 0 36 33 2.6 4.3 -39 7 57Siemens 64.7 61.6 5 333 301 4.7 8.4 -43 96 208Thermax 21.5 17.8 21 44 16 3.4 4.5 -24 41 66


3-17

-75

-45

-15

15

45

Oct

-03

Oct

-04

Oct

-05

Oct

-06

Oct

-07

Oct

-08

Oct

-09

Oct

-10

Oct

-11

Oct

-12

Oct

-13


16

Cement: EV/EBITDA inches above average; outlook positive for 2H

EV/EBITDA valuations is at 3% premiumto its historical average. Recoveryexpectation in FY15 results in EV/EBITDAvaluations above average despite poor2QFY14 performance.


Cement -8%


15.412.6

3

8

13

18

23

Oct

-03

Oct

-04

Oct

-05

Oct

-06

Oct

-07

Oct

-08

Oct

-09

Oct

-10

Oct

-11

Oct

-12

Oct

-13

Cement P/E (x) 10 Yr Avg (x)

1.92.4

0.5

1.8

3.0

4.3

5.5

Oct

-03

Oct

-04

Oct

-05

Oct

-06

Oct

-07

Oct

-08

Oct

-09

Oct

-10

Oct

-11

Oct

-12

Oct

-13

Cement P/B (x) 10 Yr Avg (x)

-23-14

-50

-25

0

25

50

Oct

-03

Oct

-04

Oct

-05

Oct

-06

Oct

-07

Oct

-08

Oct

-09

Oct

-10

Oct

-11

Oct

-12

Oct

-13


7.8

7.6

3.0

5.5

8.0

10.5

13.0

Oct

-03

Oct

-04

Oct

-05

Oct

-06

Oct

-07

Oct

-08

Oct

-09

Oct

-10

Oct

-11

Oct

-12

Oct

-13

Cement EV/EBDITA (x) 10 Yr Avg (x)

Company Current 10 Yr Avg Prem/Disc (%) Current 10 Yr Avg Current 10 Yr Avg Prem/Disc (%) Current 10 Yr AvgACC 23.0 14.9 55 54 -3 3.0 2.9 4 26 8Ambuja Cem. 18.4 15.0 22 23 -2 2.7 3.0 -11 10 10Birla Corpn. 5.3 6.6 -20 -65 -57 0.6 1.7 -65 -76 -38Grasim Inds 7.9 7.4 6 -47 -52 1.1 1.5 -27 -56 -46India Cements 9.3 14.8 -37 -38 -4 0.4 1.3 -73 -85 -52JP Associates 12.6 26.9 -53 -16 75 0.7 1.9 -64 -71 -28Shree Cement 14.0 13.8 2 -6 -10 3.0 3.2 -6 25 19UltraTech Cem. 20.5 12.5 65 37 -19 2.9 2.9 -1 19 8


112

55

-10

28

66

104

142

Oct

-03

Oct

-04

Oct

-05

Oct

-06

Oct

-07

Oct

-08

Oct

-09

Oct

-10

Oct

-11

Oct

-12

Oct

-13


17

Consumer: Remains at significant premium; 2Q earnings growth moderates

Consumer sector continues to trade athigh multiples. Every company (exceptRadico Khaitan) is at a big premium;Asian Paints at 61%, ITC at 45%, Nestle at37%, HUL at 33%, etc.

The sector premium over Sensex is at ahigh. All companies trade at 100%+premium to Sensex PE except RadicoKhaitan, Marico, Pidilite and Dabur.

We expect the sector premium tocontract in FY15 with demand slowdown.


Consumer +15%


31.623.5

10

17

24

31

38

Oct

-03

Oct

-04

Oct

-05

Oct

-06

Oct

-07

Oct

-08

Oct

-09

Oct

-10

Oct

-11

Oct

-12

Oct

-13

Consumer P/E (x) 10 Yr Avg (x)

10.8

8.0

4.0

6.0

8.0

10.0

12.0

Oct

-03

Oct

-04

Oct

-05

Oct

-06

Oct

-07

Oct

-08

Oct

-09

Oct

-10

Oct

-11

Oct

-12

Oct

-13

Consumer P/B (x) 10 Yr Avg (x)

349

200

75

175

275

375

475

Oct

-03

Oct

-04

Oct

-05

Oct

-06

Oct

-07

Oct

-08

Oct

-09

Oct

-10

Oct

-11

Oct

-12

Oct

-13


Company Current 10 Yr Avg Prem/Disc (%) Current 10 Yr Avg Current 10 Yr Avg Prem/Disc (%) Current 10 Yr AvgAsian Paints 35.9 22.3 61 140 45 11.6 8.0 45 382 196Britannia Inds. 31.5 21.6 46 111 41 13.2 6.7 97 446 147Colgate-Palm. 29.8 23.9 25 100 56 24.9 22.1 13 930 716Dabur India 29.6 23.4 27 98 52 10.4 8.4 23 330 211GlaxoSmith C H L 33.9 19.4 75 127 26 10.5 5.3 97 333 96Godrej Consumer 30.6 20.9 47 105 36 7.3 15.0 -51 201 452Hind. Unilever 35.4 26.7 33 137 74 20.9 20.4 2 764 653ITC 30.5 21.0 45 104 37 10.8 6.2 75 348 129Marico 25.5 21.6 18 71 41 6.9 7.4 -7 187 174Nestle India 38.4 28.0 37 157 82 19.8 22.3 -11 720 723Pidil ite Inds. 25.7 17.8 45 72 16 6.3 4.4 42 160 63Radico Khaitan 15.1 25.5 -41 1 66 2.1 3.4 -38 -13 25United Spirits 46.2 38.6 20 209 152 3.9 3.0 29 62 13


5246

0

30

60

90

120

Oct

-03

Oct

-04

Oct

-05

Oct

-06

Oct

-07

Oct

-08

Oct

-09

Oct

-10

Oct

-11

Oct

-12

Oct

-13


18

Healthcare: Sector returns inline with earnings growth

Healthcare sector is trading at premiumof 3% to its historical averages. However,there is huge divergence with certaincompanies at significant premiums andsome at discount to their averages.

Sun Pharma, Lupin, Ipca Labs and GlaxoSmithkline Pharma trades at a premiumof 29-33% to its historical PE.

On the other hand, Ranbaxy, Dr Reddy’sand Glenmark Pharma are trading at 25-48% discount to their historicalvaluations.


Healthcare +20%


22.721.9

14

18

22

26

30

Oct

-03

Oct

-04

Oct

-05

Oct

-06

Oct

-07

Oct

-08

Oct

-09

Oct

-10

Oct

-11

Oct

-12

Oct

-13

Healthcare P/E (x) 10 Yr Avg (x)

4.74.2

2.0

3.0

4.0

5.0

6.0

Oct

-03

Oct

-04

Oct

-05

Oct

-06

Oct

-07

Oct

-08

Oct

-09

Oct

-10

Oct

-11

Oct

-12

Oct

-13

Healthcare P/B (x) 10 Yr Avg (x)

Company Current 10 Yr Avg Prem/Disc (%) Current 10 Yr Avg Current 10 Yr Avg Prem/Disc (%) Current 10 Yr AvgBiocon 16.2 15.9 1 8 4 2.2 2.3 -7 -9 -13Cadila Health. 16.9 17.9 -6 13 17 3.5 4.3 -18 45 58Cipla 19.4 20.7 -6 30 35 3.0 3.9 -24 22 43Divi's Lab. 15.8 16.4 -4 6 7 4.0 4.5 -10 66 65Dr Reddy's Labs 23.6 39.3 -40 58 156 4.8 3.3 45 98 21Glaxosmit Pharma 31.7 24.5 29 112 60 9.2 7.4 25 282 172Glenmark Pharma. 18.9 36.7 -48 27 139 4.0 4.7 -15 64 72Ipca Labs. 16.1 12.1 33 8 -21 4.0 2.6 55 63 -6Lupin 24.0 18.0 33 61 18 5.4 4.2 29 122 53Ranbaxy Labs. 29.8 39.5 -25 99 158 3.7 5.3 -30 53 96Sanofi India 23.8 20.4 17 59 33 4.0 4.1 -2 67 52Sun Pharma.Inds. 26.5 20.0 32 77 30 6.5 4.5 45 168 64Torrent Pharma. 13.2 12.7 4 -12 -17 3.5 3.2 9 44 18


9560

-20

20

60

100

140

Oct

-03

Oct

-04

Oct

-05

Oct

-06

Oct

-07

Oct

-08

Oct

-09

Oct

-10

Oct

-11

Oct

-12

Oct

-13


39

34

-50

0

50

100

150

Oct

-03

Oct

-04

Oct

-05

Oct

-06

Oct

-07

Oct

-08

Oct

-09

Oct

-10

Oct

-11

Oct

-12

Oct

-13


19

Media: Trading at close to average driven by ZEE’s performance

Media sector trades at a marginaldiscount to its historical average PE. Thenear term performance may remainimpacted due to ad slowdown.

Zee has seen a significant performanceover the last couple of years. It continuesto trade at 22% premium to its long termaverages.

Sun TV has seen a significant contraction,driving valuations to below averages.

Print media trades at significantdiscounts of 40-65%.


20.721.0

7

17

27

37

47

Oct

-03

Oct

-04

Oct

-05

Oct

-06

Oct

-07

Oct

-08

Oct

-09

Oct

-10

Oct

-11

Oct

-12

Oct

-13

Media P/E (x) 10 Yr Avg (x)

4.1

3.6

0.0

2.0

4.0

6.0

8.0

Oct

-03

Oct

-04

Oct

-05

Oct

-06

Oct

-07

Oct

-08

Oct

-09

Oct

-10

Oct

-11

Oct

-12

Oct

-13

Media P/B (x) 10 Yr Avg (x)

70

30

-50

0

50

100

150

Oct

-03

Oct

-04

Oct

-05

Oct

-06

Oct

-07

Oct

-08

Oct

-09

Oct

-10

Oct

-11

Oct

-12

Oct

-13


Company Current 10 Yr Avg Prem/Disc (%) Current 10 Yr Avg Current 10 Yr Avg Prem/Disc (%) Current 10 Yr AvgH T Media 10.7 29.0 -63 -28 89 1.0 2.7 -65 -61 0Jagran Prakashan 12.0 20.0 -40 -19 30 2.4 4.1 -42 -1 52Sun TV Network 19.1 24.4 -22 28 59 4.9 5.9 -17 102 118Zee Entertainmen 25.5 20.9 22 71 36 5.0 3.1 64 108 14



Media +7%

-46-44

-80

-60

-40

-20

0

Oct

-03

Oct

-04

Oct

-05

Oct

-06

Oct

-07

Oct

-08

Oct

-09

Oct

-10

Oct

-11

Oct

-12

Oct

-13


20

Metals: Trades at big discount on PB averages

Metals trade at 50% discount to marketPB, with the sector PB at 0.9x.

SAIL, NALCO, NMDC and Jindal Steeltrade at +50% discount to its histroical PBaverages. SAIL trades at 0.6x PB.

JSW Steel, Hind Zinc and Sesa Sterlite arean exception with their PE at a marginalpremium.


Metals -19%


8.08.8

0

5

10

15

20

Oct

-03

Oct

-04

Oct

-05

Oct

-06

Oct

-07

Oct

-08

Oct

-09

Oct

-10

Oct

-11

Oct

-12

Oct

-13

Metals P/E (x) 10 Yr Avg (x)

0.9

1.8

0.0

1.3

2.5

3.8

5.0

Oct

-03

Oct

-04

Oct

-05

Oct

-06

Oct

-07

Oct

-08

Oct

-09

Oct

-10

Oct

-11

Oct

-12

Oct

-13

Metals P/B (x) 10 Yr Avg (x)

-62-35

-80

-55

-30

-5

20

Oct

-03

Oct

-04

Oct

-05

Oct

-06

Oct

-07

Oct

-08

Oct

-09

Oct

-10

Oct

-11

Oct

-12

Oct

-13


Company Current 10 Yr Avg Prem/Disc (%) Current 10 Yr Avg Current 10 Yr Avg Prem/Disc (%) Current 10 Yr AvgHind.Zinc 7.6 7.0 8 -49 -54 1.4 1.9 -29 -44 -30Hindalco Inds. 7.8 8.4 -7 -48 -45 0.9 1.7 -45 -61 -37Jindal Steel 7.9 9.5 -17 -47 -38 1.0 3.2 -69 -59 18JSW Steel 21.9 11.5 91 47 -25 1.2 1.2 0 -49 -54Natl. Aluminium 11.2 15.8 -29 -25 3 0.7 1.8 -59 -69 -33NMDC 8.5 15.0 -43 -43 -3 1.7 4.8 -66 -31 78S A I L 9.2 9.2 -1 -39 -40 0.6 1.7 -66 -77 -38Sesa Sterlite 5.7 5.4 6 -62 -65 1.9 2.6 -27 -21 -4Tata Steel 10.0 10.8 -8 -33 -30 1.3 2.4 -44 -45 -12


-36

-28

-45

-37

-29

-21

-13

Oct

-03

Oct

-04

Oct

-05

Oct

-06

Oct

-07

Oct

-08

Oct

-09

Oct

-10

Oct

-11

Oct

-12

Oct

-13


21

Oil & Gas: BPCL, only company to trade above average (PB)

Oil & Gas sector’s PB at 1.2x is at its all-time low valuations. PE relative to Sensexis at -36% v/s historical average of -28%,while PB relative to Sensex is at -49% v/shistorical average of -34%.

Reliance, ONGC and BPCL are tradingmarginally below its historical PEaverage; Petronet LNG and GAIL (India)trade at premium to their PE averages.

BPCL is the only company trading atpremium to its PB, due to a very strongvalue accretion from the E&P business.


9.511.0

5

9

13

17

21

Oct

-03

Oct

-04

Oct

-05

Oct

-06

Oct

-07

Oct

-08

Oct

-09

Oct

-10

Oct

-11

Oct

-12

Oct

-13

Oil & Gas P/E (x) 10 Yr Avg (x)

1.21.8

1.0

1.5

2.0

2.5

3.0

Oct

-03

Oct

-04

Oct

-05

Oct

-06

Oct

-07

Oct

-08

Oct

-09

Oct

-10

Oct

-11

Oct

-12

Oct

-13

Oil & Gas P/B (x) 10 Yr Avg (x)

-49

-34

-55

-45

-35

-25

-15

Oct

-03

Oct

-04

Oct

-05

Oct

-06

Oct

-07

Oct

-08

Oct

-09

Oct

-10

Oct

-11

Oct

-12

Oct

-13


Company Current 10 Yr Avg Prem/Disc (%) Current 10 Yr Avg Current 10 Yr Avg Prem/Disc (%) Current 10 Yr AvgB P C L 11.3 12.1 -7 -24 -21 1.4 1.3 5 -44 -52C P C L 3.2 5.0 -37 -79 -67 0.4 1.0 -65 -85 -62Cairn India 5.3 10.0 -47 -64 -35 1.0 1.2 -20 -60 -55GAIL (India) 11.7 10.5 12 -21 -32 1.6 2.1 -25 -36 -23Guj.St.Petronet 6.1 14.4 -58 -59 -6 0.9 2.1 -58 -64 -23H P C L 9.1 11.3 -20 -39 -26 0.5 1.0 -52 -80 -64I O C L 8.2 9.4 -13 -45 -39 0.7 1.3 -47 -71 -51Indraprastha Gas 9.2 11.6 -21 -38 -24 1.9 3.1 -37 -21 13M R P L 9.4 13.5 -30 -37 -12 1.0 2.4 -59 -60 -13O N G C 8.6 9.1 -5 -42 -41 1.4 2.1 -34 -42 -22Petronet LNG 10.9 10.1 8 -27 -34 1.7 2.8 -41 -30 5Reliance Inds. 11.4 11.5 -1 -24 -25 1.2 1.6 -24 -48 -39



Oil & Gas +3%

10

6

-100

-40

20

80

140

Oct

-03

Oct

-04

Oct

-05

Oct

-06

Oct

-07

Oct

-08

Oct

-09

Oct

-10

Oct

-11

Oct

-12

Oct

-13


22

Real Estate: Trades at 0.6x BV

Real estate trades at 77% discount tomarket PB. The sector trades at <1x PB(0.6x).

The sector has delivered negative 37%returns in YTD CY13.

Mahindra Life and Phoenix Mills trade atsub 50% discount to historical PBaverages.

DLF trades at 1.0x PB but at 60% discountto average, while Unitech trades at 0.4xPB, 86% discount to its historical average.


Real Estate -37%


16.4

17.2

0

12

24

36

48

Oct

-03

Oct

-04

Oct

-05

Oct

-06

Oct

-07

Oct

-08

Oct

-09

Oct

-10

Oct

-11

Oct

-12

Oct

-13

Real Estate P/E (x) 10 Yr Avg (x)

0.61.3

0.0

2.0

4.0

6.0

8.0

Oct

-03

Oct

-04

Oct

-05

Oct

-06

Oct

-07

Oct

-08

Oct

-09

Oct

-10

Oct

-11

Oct

-12

Oct

-13

Real Estate P/B (x) 10 Yr Avg (x)

-77-56

-100

-50

0

50

100

Oct

-03

Oct

-04

Oct

-05

Oct

-06

Oct

-07

Oct

-08

Oct

-09

Oct

-10

Oct

-11

Oct

-12

Oct

-13


Company Current 10 Yr Avg Prem/Disc (%) Current 10 Yr Avg Current 10 Yr Avg Prem/Disc (%) Current 10 Yr AvgAnant Raj Inds. 9.5 15.4 -38 -36 1 0.4 1.1 -67 -85 -60DLF 26.2 34.4 -24 76 125 1.0 2.4 -60 -61 -12H D I L 5.3 13.9 -62 -64 -9 0.2 1.1 -85 -93 -58Indbull.RealEst. 5.5 20.7 -73 -63 35 0.4 0.8 -56 -85 -69Mahindra Life. 14.4 28.8 -50 -4 88 1.2 1.7 -31 -51 -36Phoenix Mills 26.9 42.7 -37 80 178 1.8 3.1 -43 -26 16Unitech 12.4 23.3 -47 -17 52 0.4 3.1 -86 -83 13


7381

-100

0

100

200

300

Oct

-03

Oct

-04

Oct

-05

Oct

-06

Oct

-07

Oct

-08

Oct

-09

Oct

-10

Oct

-11

Oct

-12

Oct

-13


23

Retail: Titan still at a premium with headwinds

Retail sector trades at 9% discount tohistorical PE; however, on PB, it trades ata premium of 33%.

Retail has seen negative returns of 22%during CY13YTD.

The government measures on import ofgold has seen Titan Inds premium comedown to 20% to its average, while FutureRetail trades at a discount to 49% to itsaverage.


Retail -22%


25.928.3

0

17

34

51

68

Oct

-03

Oct

-04

Oct

-05

Oct

-06

Oct

-07

Oct

-08

Oct

-09

Oct

-10

Oct

-11

Oct

-12

Oct

-13

Retail P/E (x) 10 Yr Avg (x)

5.7

4.3

1.0

3.0

5.0

7.0

9.0

Oct

-03

Oct

-04

Oct

- 05

Oct

-06

Oct

-07

Oct

-08

Oct

-09

Oct

-10

Oct

-11

Oct

-12

Oct

-13

Retail P/B (x) 10 Yr Avg (x)135

57

-50

0

50

100

150

Oct

-03

Oct

-04

Oct

-05

Oct

-06

Oct

-07

Oct

-08

Oct

-09

Oct

-10

Oct

-11

Oct

-12

Oct

-13


Company Current 10 Yr Avg Prem/Disc (%) Current 10 Yr Avg Current 10 Yr Avg Prem/Disc (%) Current 10 Yr AvgFuture Retail 11.9 23.2 -49 -21 51 0.7 1.6 -54 -70 -41Titan Inds. 26.5 22.0 20 77 43 7.9 8.3 -5 226 205


1213

-40

0

40

80

120

Oct

-03

Oct

-04

Oct

-05

Oct

-06

Oct

-07

Oct

-08

Oct

-09

Oct

-10

Oct

-11

Oct

-12

Oct

-13


24

Technology: Post the strong returns, still trades at long averages; TCS at premium

Technology sector trades marginallybelow its historical average PE; however,it trades at 12% premium to market PE.

Infosys is at significant discount of 38% toPB historical average due to excessundeployed cash in its balance sheet.

TCS, on the back of strong performanceover the last few years is at 12% above itsPE averages.

Tech Mahindra is at 27% discount to itshistorical PE average.


Technology +49%


16.817.0

7

12

17

22

27

Oct

-03

Oct

-04

Oct

-05

Oct

-06

Oct

-07

Oct

-08

Oct

-09

Oct

-10

Oct

-11

Oct

-12

Oct

-13

Technology P/E (x) 10 Yr Avg (x)

4.55.1

2.0

4.0

6.0

8.0

10.0

Oct

-03

Oct

-04

Oct

-05

Oct

-06

Oct

-07

Oct

-08

Oct

-09

Oct

-10

Oct

-11

Oct

-12

Oct

-13

Technology P/B (x) 10 Yr Avg (x)

87

89

0

60

120

180

240

Oct

-03

Oct

-04

Oct

-05

Oct

-06

Oct

-07

Oct

-08

Oct

-09

Oct

-10

Oct

-11

Oct

-12

Oct

-13


Company Current 10 Yr Avg Prem/Disc (%) Current 10 Yr Avg Current 10 Yr Avg Prem/Disc (%) Current 10 Yr AvgHCL Technologies 13.0 14.5 -11 -13 -5 3.6 3.0 22 50 9Infosys 16.3 19.6 -17 9 28 3.6 5.9 -38 50 116MphasiS 11.3 17.1 -34 -25 12 2.0 3.9 -49 -17 45TCS 20.3 18.1 12 36 18 6.9 6.3 9 184 132Tech Mahindra 12.2 16.7 -27 -18 9 3.2 4.5 -29 34 67Wipro 14.1 17.1 -18 -6 12 3.2 4.2 -24 33 55


7443

-100

0

100

200

300

Oct

-03

Oct

-04

Oct

-05

Oct

-06

Oct

-07

Oct

-08

Oct

-09

Oct

-10

Oct

-11

Oct

-12

Oct

-13


25

Telecom: EV/EBITDA at 20% discount; huge potential ahead

With RPMs improving and better outlookin the sector post passive consolidation,strong growth is expected in FY15.

On EV/EBITDA basis, the sector is at 20%discount to its historical average.


Telecom +35%


26.1

21.7

0

14

28

42

56

Oct

-03

Oct

-04

Oct

-05

Oct

-06

Oct

-07

Oct

-08

Oct

-09

Oct

-10

Oct

-11

Oct

-12

Oct

-13

Telecom P/E (x) 10 Yr Avg (x)

2.12.6

0.5

2.0

3.5

5.0

6.5

Oct

-03

Oct

-04

Oct

-05

Oct

-06

Oct

-07

Oct

-08

Oct

-09

Oct

-10

Oct

-11

Oct

-12

Oct

-13

Telecom P/B (x) 10 Yr Avg (x)

-13-6

-50

-10

30

70

110

Oct

-03

Oct

-04

Oct

-05

Oct

-06

Oct

-07

Oct

-08

Oct

-09

Oct

-10

Oct

-11

Oct

-12

Oct

-13


7.0

8.7

5.0

8.0

11.0

14.0

17.0

Oct

-03

Oct

-04

Oct

-05

Oct

-06

Oct

-07

Oct

-08

Oct

-09

Oct

-10

Oct

-11

Oct

-12

Oct

-13

Telecom Sector EV/EBDITA (x)

Company Current 10 Yr Avg Prem/Disc (%) Current 10 Yr Avg Current 10 Yr Avg Prem/Disc (%) Current 10 Yr AvgBharti Airtel 32.1 24.2 33 115 58 2.2 3.4 -36 -11 25Idea Cellular 21.7 24.4 -11 46 59 3.1 1.9 61 30 -28Rel. Comm. 16.9 21.8 -22 13 42 1.0 1.6 -40 -60 -41


-27

-11

-100

-50

0

50

100

Oct

-03

Oct

-04

Oct

-05

Oct

-06

Oct

-07

Oct

-08

Oct

-09

Oct

-10

Oct

-11

Oct

-12

Oct

-13


26

Utilities: De-rating continues across the sector; Big discount on P/Bs

Utilities is trading at 1.2x PB, which is29% discount to historical average PB and51% discount to market PB.

NTPC is now at over 30% discount onPE/PB basis; we expect growth to be indouble digits.

Coal India is the only stock trading atpremium to its Sensex PB at 22%.

Tata Power is the only stock which tradesat a premium to its historical average PEat 27%.


Utilities -21%


10.9

14.0

0

8

16

24

32

Oct

-03

Oct

-04

Oct

-05

Oct

-06

Oct

-07

Oct

-08

Oct

-09

Oct

-10

Oct

-11

Oct

-12

Oct

-13

Utilities P/E (x) 10 Yr Avg (x)

1.21.7

0.0

1.0

2.0

3.0

4.0

Oct

-03

Oct

-04

Oct

-05

Oct

-06

Oct

-07

Oct

-08

Oct

-09

Oct

-10

Oct

-11

Oct

-12

Oct

-13

Utilities P/B (x) 10 Yr Avg (x)

-51-38

-100

-60

-20

20

60

Oct

-03

Oct

-04

Oct

-05

Oct

-06

Oct

-07

Oct

-08

Oct

-09

Oct

-10

Oct

-11

Oct

-12

Oct

-13


Company Current 10 Yr Avg Prem/Disc (%) Current 10 Yr Avg Current 10 Yr Avg Prem/Disc (%) Current 10 Yr AvgCoal India 9.2 12.1 -24 -38 -21 2.9 4.4 -33 22 62CESC 6.2 9.0 -31 -58 -42 0.7 1.1 -38 -71 -59NTPC 11.4 16.7 -32 -24 9 1.3 2.1 -36 -44 -22Power Grid Corpn 10.5 14.4 -27 -30 -6 1.4 2.0 -30 -41 -25PTC India 8.2 18.6 -56 -45 21 0.7 1.6 -56 -71 -42Reliance Infra. 8.0 18.3 -56 -46 20 0.5 1.5 -64 -78 -46Tata Power Co. 24.5 19.3 27 64 26 1.5 2.1 -30 -38 -21


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