institutional equity research strategy covid...

INSTITUTIONAL EQUITY RESEARCH

Page | 1 | PHILLIPCAPITAL INDIA RESEARCH Please see penultimate page for additional important disclosures. PhillipCapital (India) Private Limited. (“PHILLIPCAP”) is a foreign broker-dealer unregistered in the USA. PHILLIPCAP research is prepared by research analysts who are not registered in the USA. PHILLIPCAP research is distributed in the USA pursuant to Rule 15a-6 of the Securities Exchange Act of 1934 solely by Rosenblatt Securities Inc, an SEC registered and FINRA-member broker-dealer.

Strategy – Covid Series (IV)

30-day lockdown factored; a longer one will spell peril

INDIA | STRATEGY

7 April 2020

Continuing with our Covid impact series, here, we look at various ‘duration of lockdown’ scenarios with respect to: (1) GDP growth, (2) sector-wise earnings (3) company-wise earnings, and (4) valuations for FY21/22. We remained negative on equities since Covid erupted in China until Nifty touched 7,600 levels, where we turned buyers, assuming a 15-30 days lockdown in FY21 (discounted at this price). However, a protracted lockdown (60-90 days) will have long-lasting and severe economic and earnings repercussions not only for FY21, but also for FY22 for certain sectors. In that scenario, we expect a further equity meltdown.

Concerned by the economic impact of the lockdown, the government is likely to lift it in a staggered manner after 15

th/21

st April 2020. Sub-optimal functioning should last for about

1-2 months more; this will continue to have adverse bearing on macros and earnings. This as a base case scenario for India and the current prevailing global situation, we remain gradual-buyers on dips in equities – focusing on domestic-consumption-oriented sectors and pharma/healthcare services. Second, we maintain that 2HFY21 should fare better, which equities should begin factoring in Q1FY21. We will turn sellers if India’s shutdown extends beyond 30-40 days of FY21 or if the global situation worsens.

While we acknowledge these are extremely uncertain times, to bring sanctity to our work, we started to base our analysis on varied scenarios over the last month, and building/refining our estimates with the evolving situation. Please note estimates are based on probable scenarios and should not be read as our FY21/22 estimates. In a base case 15-30-day shutdown; neo-normalcy in 2-3 months from now: FY21/22

GDP growth at 2-3%/4-5%; Nifty EPS growth at 5%/23%; PC coverage universe earnings growth at 4%/23% and based on these earnings, Nifty at 8000; FY21/22 PE at 15.1x/12.2x.

c.60-day shutdown; neo-normalcy in 3-4 months from now: FY21/22 GDP growth at -1% to +1%/4-5%; Nifty EPS growth at -6%/31%; PC coverage universe at -9%/NA and based on these earnings estimates, Nifty at 8000; FY21/22 PE at 16.8x/12.9x.

c.90-day shutdown; neo-normalcy in 5-6 months: FY21 GDP growth at -5% to -10%; Nifty EPS growth at -17%; PC coverage universe at -23% and based on these earnings estimates, Nifty at 8000; FY21/22 PE at 19.1x/13.6x.

In each of the above scenarios, we are confident of a sharp downside risk to FY22 earnings estimates. So, if the lockdown extends beyond 30-40 days, PE for FY22 will be higher than estimated above, and make Nifty look unattractive even at FY22 levels.

Assuming +5%/+12% Nifty EPS growth for FY21/22, PE at 16x / 17x / 18x, and discounting FY22 earnings, 1-year forward Nifty should be at 9,500 / 10100 / 10,700. This is actually near the base case scenario we had stated in our strategy report on 12

th March, much

before the mayhem hit India (to read it, click here). Assuming -10%/10% Nifty EPS growth for FY21/22, PE at 12x/13x/14x, and discounting

FY22 earnings, 1-year forward Nifty would be at 6000/6500/7000. We maintain: Manufacturing in India has been weak for last few years, this shutdown will

worsen the impact in the medium-term; trade activity will remain weak due to global recession; quality government spending will remain weak for FY21 due to deterioration in tax revenue while social spend will be robust. Labour intensive and largest GDP contributor – services has been hit due to the lockdown; should partly reverse as things normalize – impact will last longer for sectors like trade and transportation, real estate, construction, financials, hotels, tourism, and personal care. Consumption and government spending will fare better, investments will lag/suffer.

Sectors likely to see tepid/negative FY21 earnings growth considering 30-day lockdown: Metals, capital goods, cement, IT services, infrastructure, real estate, agri inputs.

Sectors likely to see decent/positive FY21 earnings growth considering 30-day lockdown: FMCG, retail, paints/tiles, consumer electrical/durables, financials, pharmaceuticals, and specialty chemicals.

Anjali Verma

(+ 9122 6246 4115) [email protected]

Neeraj Chadawar (+ 9122 6246 4116) [email protected]

http://backoffice.phillipcapital.in/Backoffice/Researchfiles/PC_-_Macro_report_-_March_20_20200312141451.pdf

mailto:[email protected]

mailto:[email protected]

Page | 2 | PHILLIPCAPITAL INDIA RESEARCH

STRATEGY: COVID SERIES (IV) STRATEGY UPDATE

What are sector indices factoring? Sectors discounting 30 day lockdown: ALL. Sectors we like in this scenario are FMCG, pharma/healthcare services, agri inputs, private banks, insurance companies, telecom, and consumption discretionary space like consumer durables/electricals, retail, paints/jewellery, slelctive IT and capital goods play. Sectors partly discounting 60 day lockdown: Banks, NBFCs, energy, Infra. We expect essential segments like FMCG and Pharma/healthcare services to outperform. Sectors discounting 90 day lockdown: NONE. In this case, we expect further equity meltdown, expect FMCG and Pharma to outperform.

What are companies factoring? For PC coverage universe:

30 day lockdown: o 62% of companies are discounting this duration of lockdown. o Banks, NBFCS, infrastructure, metals, and logistics are largely factoring. o Sectors which are yet to fully factor-in: Automobiles, capital goods, retail, consumer durables/electricals, and cement. o Others like FMCG and pharma are expectedly outperforming.

60 day lockdown: o Only 27% of the companies are discounting this duration of shutdown. o Sectors that are partly discounting: Banks, NBFCs, infrastructure, metals and logistics.

90 day lockdown: o Only 2% of the companies, all in NBFC space.

Our top picks Covid-saving portfolio: HUL, Dabur, ITC, HDFC bank, ICICI bank, ICICI Lombard, Divis, Ipca labs, Cipla, Sun Pharma, Coromandel. Long-term portfolio: 30-day discounted, longer duration will make them available at lower prices: Titan, Jubilant foodworks, Asian paints, Maruti, Orient electric, TCS, HDFC Ltd, Shriram transport, TCS, L&T, BEL, Shree cement.



NSE sectoral Index Valuation Scenarios Revised PE for Lockdown Revised EPS for Lockdown

Index Current PE 30d 60 d 90 d 12m fwd PE (since 2005) Current EPS 30d 60 d 90 d

Index Value FY21 FY22 FY21 FY22 FY21 FY22 FY21 FY22 Average Median High Low FY21 FY22 FY21 FY22 FY21 FY22 FY21 FY22

Nifty 8084 12.3 10.2 15.2 12.3 17.0 13.0 19.3 13.7 15.2 15.3 19.7 7.6 655 791 531 656 476 622 418 589 NSE Midcap 11317 10.7 9.1 13.8 10.7 15.7 10.7 18.1 10.7 14.4 14.4 26.0 5.7 1062 1246 818 1059 722 1059 627 1059 NSE smallcap 3486 8.3 6.7

12.3 12.3 19.0 6.6 421 517

NIFTY AUTO 4518 10.9 8.6 12.4 9.0 14.8 9.0 18.8 9.0 13.8 14.0 21.8 8.3 416 525 365 503 305 503 240 503 NIFTY ENERGY 10888 6.8 6.0 7.6 6.6 8.0 6.7 8.5 7.1 11.3 11.0 16.7 6.2 1611 1821 1434 1657 1354 1621 1275 1531 NIFTY FMCG 26538 26.0 23.0 29.1 24.9 29.7 24.9 30.4 24.9 27.4 27.8 38.8 15.3 1021 1154 913 1066 892 1066 872 1066 NIFTY IT 11680 12.8 11.7 14.3 12.4 14.3 12.4 14.9 12.4 16.7 16.7 25.1 7.8 913 1001 819 940 819 940 781 940 NIFTY INFRA 2280 10.1 8.7 13.5 9.6 15.6 10.2 18.4 10.9 17.6 17.9 24.1 8.7 225 263 169 236 146 223 124 210 NIFTY METAL 1523 5.2 4.5 9.6 6.0 10.0 6.0 14.5 6.0 10.0 9.3 18.8 4.9 293 340 159 253 153 253 105 253 NIFTY PHARMA 7362 16.1 14.0 18.1 15.6 19.6 15.6 21.3 15.6 20.6 20.4 31.6 11.7 459 527 407 473 376 473 346 473 NIFTY BANK 17249 1.17 1.02 1.26 1.11 1.41 1.23 1.56 1.34 1.97 1.99 2.84 0.87 14729 16875 13698 15525 12225 14007 11047 12825

Source: Bloomberg, PhillipCapital India Research. Note: Data as of 3rd April 2020, For Nifty Bank Index we have used valuation Matrix PB instead PE & BPS instead EPS. For all the indices revised EPS is just a scenario analysis, not considered as PC

estimates

Nifty EPS Scenario In the table below, we present the Nifty sectoral EPS scenarios for different lockdown duration:

Nifty and sector-wise EPS

30d Lockdown 60d Lockdown 90d Lockdown

Old Estimate Revised Estimate Revised Estimate Revised Estimate

Sector FY20 FY21 FY22 FY20 FY21 FY22 FY20 FY21 FY22 FY20 FY21 FY22

Automobile 32.1 39.1 49.1 29.2 33.5 44.3 29.2 29.8 44.3 29.2 25.6 44.3 Cement 3.6 4.8 6.0 4.7 5.4 7.4 4.7 4.7 7.4 4.7 3.4 7.4 Financial 150.2 222.5 268.8 147.7 179.5 218.4 147.7 148.1 188.7 147.7 118.3 164.9 FMCG 39.5 44.6 47.9 38.6 39.3 46.2 38.6 37.5 46.2 38.6 36.1 46.2 Industrial 31.8 33.7 37.7 28.2 20.7 31.4 28.2 17.9 31.4 28.2 14.2 31.4 IT 81.4 87.7 96.4 80.7 77.1 85.9 80.7 77.1 85.9 80.7 73.4 85.9 MetalS 37.7 40.8 46.2 34.9 24.4 36.8 34.9 18.0 36.8 34.9 14.3 36.8 Oil & Gas 90.1 114.9 132.6 87.9 92.1 113.1 87.9 87.0 110.6 87.9 81.9 104.5 Pharma/Agri 15.4 18.1 21.6 14.8 16.1 19.5 14.8 14.3 18.5 14.8 12.4 17.3 Power 31.4 34.6 37.6 32.9 32.1 35.9 32.9 30.4 35.1 32.9 28.6 33.1 Telecom/Media -2.0 10.9 15.9 5.9 11.2 16.7 5.9 10.8 16.7 5.9 10.4 16.7

Nifty EPS 511.2 651.7 760.0 505.6 531.4 655.7 505.6 475.5 621.7 505.6 418.4 588.6

Source: Bloomberg, PhillipCapital India Research



PC Valuation Scorecard Total After revised PE/PB scenario, no of companies trading at/below long term median PE/PB for different Lockdown duration

PC Universe Sector-wise Companies 30 Days 60 Days 90 Days

Banks 7 7 4 0

NBFC 10 10 9 5

Automobiles 10 6 1 0

FMCG 11 4 3 0

Retail 9 5 1 0

Paints/Tiles 3 2 1 0

Con Electricals/Durable 9 4 1 0

Consumer- Others 2 1 1 0

Metals 10 10 7 0

Cap Goods 15 11 2 0

Cement 11 4 2 0

IT Services 9 7 2 0

Pharma 9 3 1 0

Infrastructure 8 8 5 0

Logistics 5 5 2 0

Agri Input 4 2 1 0

Real Estate 2 1 0 0

Sp Chemicals 5 3 1 0

Total 139 93 44 5

Source: Bloomberg, PhillipCapital India Research. Note: Data as of 3rd April 2020, For Banks/NBFC, we used PB instead of PE

Note for different Lockdown durations:

30 days: Revised PE/PB is compared with Long term Median PE/PB

60 days: Revised PE/PB h is compared with 30% reduced Long term Median PE/PB

90 Days: Revised PE/PB is compared with historical low PE/PB



PC Universe earnings growth In the table below, we present sector wise revised Net profit growth for PC universe under three different locakdown scenarios. (These are likely reduction, should not be considered as analyst’s earnings estimates reduction for FY21/22).

PC Universe Net profit growth yoy%

Revised growth under lockdown Rev growth under lockdown

Earlier Now Earlier 30-days 60-days 90-days Earlier 30-days

SECTORS FY20 FY20 FY21 FY21 FY21 FY21 FY22 FY22

Discretionary 3.6% -1.4% 18.3% 10% 2% -7% 19.4% 25% Automobiles -9.2% -16.8% 24.6% 18% 4% -11% 27.1% 35% FMCG 13.0% 11.9% 12.0% 4% 0% -2% 12.2% 15% Retail -5.7% -20.3% 37.9% 14% -1% -22% 24.4% 48% Paints/Tiles 28.7% 18.7% 18.4% 11% 4% -6% 20.5% 21% Con Electricals/Durable 15.1% 8.1% 19.6% 11% -1% -11% 21.4% 23% Consumer- Others 27.2% 20.5% -3.1% -10% -22% -34% 17.0% -3%

Banks 75.4% 69.6% 46.9% 19% -7% -32% 20.9% 19% NBFC 0.6% -0.5% 29.2% 18% 6% -1% 12.4% 13% Metals -40.8% -46.8% 28.6% -37% -72% Loss 14.1% 94% Cap Goods 11.2% -5.4% 11.7% -22% -42% -61% 14.7% 57% Cement 24.6% 14.6% 18.4% 3% -10% -36% 19.9% 35% IT Services 5.6% 5.6% 8.6% -3% -3% -8% 9.9% 12% Pharma 11.2% 8.4% 17.6% 13% 5% -3% 17.0% 19% Infrastructure 2.5% -3.0% 13.2% -10% -16% -28% 14.9% 35% Logistics -19.2% -25.5% 28.3% 21% 2% -23% 17.7% 11% Real Estate 17.8% 9.5% 13.0% 5% -6% -24% 5.0% 10% Agri Input 14.2% 11.0% 15.4% 1% -16% -33% 21.2% 25% Sp Chemicals 28.1% 23.3% 20.6% 11% 0% -11% 16.3% 21%

PC Universe 9.3% 4.8% 22.9% 4% -9% -23% 16.2% 23%

PC ex Metal & Cap goods 17% 14.1% 23.2% 8% -2% -15% 16.5% 19%




PC Universe valuations Revised PE for Lockdown scenario FY21 PE

For 30d

Correction from FY21 FY22 Consensus 12m Fwd PE since 2005 Consensus 12m Fwd PB since 2005 Net Debt FCF (mn)

Company Name Sectors Mcap (Cr) CMP 15th Jan 2020 30 days 60 days 90 days 30 days Average Median High Low Median Latest Median High Low (mn) FY19 FY19

Maruti Suzuki Automobiles 1,21,179 4,012 -46% 16.5 18.3 21.2 12.5 17.9 16.7 32.6 7.5 -1% 3.2 3.0 6.4 1.2 -293 29318 Bajaj Auto Automobiles 58,850 2034 -35% 11.0 12.2 13.9 9.4 15.6 16.1 21.7 5.0 -32% 5.0 5.1 8.7 1.9 -9228 10375 Mahindra & Mahindra Automobiles 34,896 281 -51% 9.3 10.8 12.6 7.1 13.1 13.2 19.3 3.2 -29% 2.4 2.3 5.0 0.6 -11518 19934 Tata Motors Automobiles 21,674 65 -67% 5.0 5.4 5.7 2.8 19.6 9.3 - 2.8 -46% 2.1 1.8 5.2 0.3 612678 -30750 Hero MotoCorp Automobiles 31,600 1582 -36% 9.8 11.7 14.9 8.8 15.3 15.2 20.6 9.3 -35% 5.7 5.7 10.5 2.1 844 6744 Ashok Leyland Automobiles 11,199 38 -54% 16.0 21.4 33.9 8.8 21.1 14.1 - 4.4 13% 2.6 2.3 5.7 0.7 1491 4638 Bharat Forge Automobiles 10,225 220 -58% 20.2 25.2 38.4 10.7 22.9 20.7 108.4 5.4 -2% 4.9 3.7 32.3 0.8 28482 -13194 Apollo Tyre Automobiles 4,488 78 -55% 9.7 12.2 18.4 9.5 8.8 8.2 15.1 3.6 17% 1.2 1.2 1.9 0.4 39780 -10769 Escorts Automobiles 7,261 592 -13% 13.2 14.7 17.9 10.1 12.4 11.0 35.2 4.2 20% 1.4 1.2 3.4 0.3 566 -1383 Ceat Automobiles 2,838 702 -31% 11.2 13.7 16.7 9.0 9.1 8.8 18.3 2.2 27% 1.4 1.4 2.7 0.3 13734 -6244

Hindustan Unilever FMCG 4,66,329 2154 7% 54.3 54.9 55.5 47.1 35.6 34.7 57.8 19.1 56% 31.0 29.7 48.2 16.6 -36880 58640 ITC FMCG 2,18,697 178 -27% 15.5 16.4 17.0 13.3 23.7 24.2 33.4 11.1 -36% 6.8 6.7 11.3 2.6 -37608 70917 Nestle FMCG 1,45,633 15105 2% 69.0 69.7 70.5 58.6 37.7 35.8 67.7 18.7 93% 23.9 22.1 56.4 14.8 -15749 15064 Dabur India FMCG 75,595 428 -13% 43.3 43.7 44.2 39.0 28.6 27.2 50.0 9.3 59% 9.0 9.4 12.9 2.6 1961 18776 Godrej Consumer FMCG 54,331 531 -30% 31.6 32.0 32.7 28.0 28.2 27.4 53.3 12.0 15% 10.7 7.7 48.1 4.2 19810 10436 Britannia FMCG 61,638 2563 -18% 40.6 41.5 42.5 35.4 29.0 23.8 63.6 10.1 71% 8.8 8.5 23.5 2.5 282 2340 Marico Industries FMCG 33,715 261 -24% 31.3 32.3 34.2 27.7 28.4 25.7 47.8 13.2 22% 9.3 7.9 16.6 4.8 -2030 10370 Colgate FMCG 33,995 1250 -17% 43.1 43.6 44.1 38.6 30.8 30.5 46.5 16.4 42% 24.5 25.5 37.2 11.8 -3994 8873 Emami FMCG 8,259 182 -42% 17.9 19.0 20.7 15.3 29.1 26.2 49.6 11.8 -32% 9.3 8.5 17.8 2.7 -935 3723 Bajaj Corp FMCG 1,962 133 -44% 8.9 9.2 9.5 7.9 19.2 19.5 29.9 7.2 -54% 7.7 7.3 13.3 2.7 107 2449 Agro Tech Foods FMCG 1,053 432 -40% 30.7 32.1 33.5 21.4 30.2 31.0 56.5 17.0 -1% 3.8 3.7 5.0 2.0 -37 -51

Titan Company Retail 76,598 863 -27% 54.8 60.3 69.2 40.1 32.9 30.6 61.2 13.5 79% 9.5 9.0 15.6 4.2 -10947 8459 Jubilant Foodworks Retail 17,127 1298 -26% 44.7 46.7 50.4 32.7 46.4 45.4 69.5 24.5 -2% 11.6 11.2 20.4 5.5 -4891 3533 Trent Retail 16,006 450 -23% 110.9 128.6 207.5 57.8 57.9 45.2 567.9 7.8 146% 4.0 3.6 10.1 0.7 4399 -223 ABFRL Retail 11,296 146 -37% 179.7 744.6 Loss 58.4 71.2 63.7 167.5 41.5 182% 9.9 9.9 14.0 6.3 18380 1270 FLFL Retail 2,149 107 -75% 15.0 18.5 24.8 8.9 38.8 38.6 50.3 13.5 -61% 3.9 4.0 4.8 1.0 8030 -658 V-Mart Retail 2,797 1541 -9% 32.6 49.4 65.8 25.8 27.9 22.3 56.9 6.7 46% 5.1 4.1 12.2 1.2 -166 30 Shoppers Stop Retail 1,685 191 -53% 27.4 41.2 617.6 13.4 41.0 39.4 107.0 17.1 -30% 4.1 4.0 6.8 1.2 233 720 Thangamayil Retail 310 226 -42% 6.2 6.9 8.2 4.8 8.3 7.4 21.3 3.8 -16% 1.7 1.6 3.5 1.0 409 677 KDDL Retail 135 116 -65% 12.3 18.5 Loss 7.2 18.8 19.6 40.3 3.2 -37% 3.3 3.1 8.1 0.7 1121 -188 Asian Paints Paints/Tiles 1,45,884 1521 -17% 50.8 54.6 59.8 42.2 32.8 29.9 57.9 14.0 70% 10.4 10.3 16.4 4.5 1751 10499 Kajaria Ceramics Paints/Tiles 5,730 361 -34% 21.5 21.1 26.6 17.7 20.3 23.8 37.2 5.3 -9% 4.7 4.6 9.4 1.0 -1574 2308 Somany Ceramics Paints/Tiles 566 92 -60% 6.3 6.9 7.7 4.9 18.9 20.8 35.5 4.1 -70% 3.6 3.9 6.2 0.6 5331 -1248

Havells India Con Elec/Durable 29,507 472 -27% 35.5 39.5 44.0 28.7 23.7 17.9 49.2 3.6 98% 8.7 5.6 2392.2 0.7 -5836 13089 Voltas Con Elec/Durable 15,636 473 -32% 26.2 30.1 34.2 21.8 20.3 20.5 36.2 4.6 27% 4.4 4.1 13.6 1.1 -65 2041 Polycab Con Elec/Durable 10,964 736 -32% 14.8 16.1 17.6 12.4 16.2 15.7 21.2 9.9 -6% 2.8 2.6 4.0 1.9 -452 8245 V‐Guard Industries Con Elec/Durable 6,596 154 -31% 30.4 32.7 36.5 24.7 25.8 25.0 49.0 7.6 22% 6.1 5.6 11.9 1.8 -746 872 Finolex Cables Con Elec/Durable 3,308 216 -48% 9.7 10.8 12.2 8.8 11.4 11.0 22.3 5.0 -12% 2.2 1.2 4.3 0.8 -484 436 Orient Electric Ltd Con Elec/Durable 3,863 182 -11% 27.7 30.5 33.4 22.3 28.9 28.7 45.4 19.1 -3% 8.4 8.1 13.0 6.4 935 270 KEI Industries Con Elec/Durable 2,648 296 -44% 7.7 8.6 9.3 6.0 14.0 13.7 21.2 5.2 -44% 3.5 3.6 4.6 2.1 5396 2327 Bajaj Electricals Con Elec/Durable 3,041 267 -28% 30.2 33.1 36.3 15.0 15.0 13.0 49.1 2.7 131% 3.0 3.0 6.1 0.8 15663 -8347 JC-Hitachi Con Elec/Durable 6,008 2210 12% 46.4 55.1 66.7 38.0 33.1 35.0 55.4 5.5 32% 7.4 7.6 11.3 1.2 na na Indo Count Industries Cons. Others 486 25 -60% 3.6 4.3 5.3 4.9 9.6 9.6 17.9 3.0 -63% 2.3 2.2 5.6 0.4 3017 1373



Revised PE for Lockdown scenario FY21 PE For 30d



Orient Paper & Inds Cons. Others 317 15 -49% 4.3 4.7 5.1 3.0 3.3 2.0 13.3 0.2 110% 0.4 0.4 2.0 0.1 165 320

Hindustan Zinc Metals 68,260 162 -25% 13.0 15.2 17.2 9.6 9.3 9.0 26.8 3.3 45% 2.1 1.9 9.3 0.6 -169730 83190 JSW Steel Metals 34,010 141 -50% 20.1 39.1 127.9 11.3 9.5 9.6 20.0 1.9 109% 1.3 1.2 2.7 0.3 461420 82032 Vedanta Metals 23,344 63 -62% na na na na 7.6 7.1 16.7 2.9 na 1.6 1.2 5.8 0.3 493340 66882 Tata Steel Metals 28,814 254 -49% 18.3 Loss Loss 5.3 9.1 8.2 67.3 1.7 122% 1.2 1.1 2.8 0.3 945555 -273268 Hindalco Metals 19,946 89 -58% 7.9 12.3 80.7 4.6 11.0 8.9 93.3 2.8 -11% 0.9 0.8 2.4 0.3 426163 41462 NMDC Metals 24,265 79 -40% 6.8 7.5 10.3 5.9 9.4 9.1 16.1 3.5 -25% 1.3 1.2 2.2 0.6 -42436 11575 Jindal Steel & power Metals 6,441 63 -65% 78.9 Loss Loss 6.7 18.6 10.8 - 3.3 629% 1.9 1.3 11.3 0.2 390821 37021 SAIL Metals 8,943 22 -58% Loss Loss Loss 30.9 14.8 9.6 - 3.5 na 1.2 0.8 4.3 0.2 447539 -11031 NALCO Metals 5,252 28 -42% 22.5 26.1 31.3 9.4 13.1 13.1 27.4 4.4 72% 1.4 1.2 3.4 0.5 -34296 7615 Pennar Inds. Metals 239 16 -44% 4.2 5.1 7.2 3.7 7.7 7.4 12.7 3.8 -43% 1.1 1.1 1.9 0.2 3860 37

Larsen & Toubro Cap Goods 1,08,721 775 -41% 17.2 20.7 25.8 10.5 21.5 21.9 44.4 8.8 -21% 3.8 3.0 12.5 1.3 -23927 6778 Siemens Cap Goods 37,437 1051 -30% 48.4 67.9 113.8 33.0 37.4 34.2 85.8 10.2 41% 5.7 5.5 12.0 2.2 -36457 -1150 ABB India Cap Goods 19,795 934 -30% 76.1 145.4 na 44.6 37.7 36.2 78.5 11.5 110% 6.2 5.8 15.0 2.5 -14730 7692 Bharat Electronics Cap Goods 17,044 70 -33% 10.7 13.0 16.5 7.1 14.6 13.9 27.0 4.9 -22% 2.5 2.4 5.0 0.9 -8507 6122 BHEL Cap Goods 7,190 21 -56% 18.0 Loss Loss 7.6 17.9 19.1 36.0 5.8 -5% 2.3 1.6 6.7 0.2 -48878 -19666 Cummins India Cap Goods 8,279 299 -49% 13.5 16.8 22.2 9.8 20.9 20.6 34.1 8.8 -35% 4.9 4.8 7.8 1.7 -6988 5629 Thermax Cap Goods 8,524 715 -34% 45.7 74.7 205.5 26.0 23.4 23.0 43.2 5.1 98% 4.4 4.0 12.0 1.6 -1833 1501 KEC International Cap Goods 4,107 160 -51% 7.8 9.9 13.7 5.0 11.6 12.1 21.4 3.6 -36% 2.1 2.0 4.5 0.5 15633 1293 Kalpataru power Cap Goods 2,804 181 -58% 7.6 9.5 12.6 4.5 12.3 11.7 26.8 3.1 -35% 1.5 1.5 5.0 0.4 32591 2003 Engineers India Cap Goods 3,757 59 -43% 9.7 11.5 14.2 7.2 16.3 15.6 32.4 6.3 -38% 3.3 3.0 9.1 1.3 -26611 5489 Bharat Dynamics Cap Goods 3,371 184 -42% 11.1 12.4 14.1 9.1 11.1 10.6 14.5 7.5 4% 1.7 1.8 2.1 1.0 -3695 2533 Cochin Shipyard Cap Goods 3,169 241 -41% 6.0 6.8 7.7 5.4 12.5 11.2 22.7 4.2 -46% 1.6 1.4 2.4 0.7 -25949 5954 GE T&D Cap Goods 1,685 66 -58% Loss Loss Loss 16.4 34.5 35.3 56.9 14.3 na 5.6 5.5 10.0 1.2 -6361 3224 Praj Inds. Cap Goods 1,047 57 -53% 10.0 12.8 19.9 12.5 16.7 16.8 33.5 5.1 -41% 2.4 2.2 12.2 0.9 -880 539 VA Tech Wabag Cap Goods 412 75 -65% 6.1 8.6 14.4 3.2 15.4 14.5 30.5 3.3 -58% 2.2 2.0 4.8 0.3 4327 -651

Ultratech Cement Cement 87,788 3042 -33% 21.8 24.9 34.8 15.2 20.6 18.8 37.5 3.8 16% 3.1 3.2 7.2 0.8 194690 -25908 Shree Cement Cement 56,949 15784 -33% 33.5 38.3 53.6 26.6 22.5 16.4 49.1 3.4 104% 5.8 5.7 8.8 3.0 -27123 1914 Ambuja Cement Cement 30,380 153 -28% 19.4 22.2 31.0 15.6 18.0 17.1 32.3 6.4 13% 2.5 2.5 6.0 1.1 -66248 7109 ACC Cement 18,076 963 -36% 16.2 18.5 25.9 13.6 18.5 17.6 36.7 6.9 -8% 3.1 2.9 7.9 1.3 -38218 6846 Dalmia Bharat Cement 8,149 422 -49% 20.6 23.5 33.0 12.3 31.2 33.1 54.4 12.6 -38% 1.5 1.5 2.1 0.7 31868 15630 JK Cement Cement 7,054 913 -31% 20.5 23.4 32.7 13.9 11.2 9.4 22.9 1.4 118% 1.6 1.1 3.7 0.2 21224 0 HeidelbergCement Cement 3,039 134 -31% 13.8 15.8 22.1 11.5 17.1 17.1 23.2 8.8 -19% 2.5 2.6 3.5 1.4 583 2026 Star Cement Cement 2,858 69 -26% 12.8 14.6 20.4 9.6 12.7 11.9 21.2 8.4 7% 2.2 2.1 3.6 1.3 -477 4677 JK Lakshmi Cement Cement 2,177 185 -46% 8.4 9.5 13.4 6.8 20.4 20.1 37.9 8.5 -58% 2.6 2.7 3.9 0.7 15847 1979 India Cement Cement 3,142 101 15% 25.0 28.6 40.0 16.1 12.5 11.7 30.6 3.3 114% 0.9 0.8 2.9 0.3 31815 1479 Sanghi Cement Cement 488 19 -54% 19.0 21.7 30.4 7.3 13.5 13.1 24.7 2.7 45% 1.3 1.3 2.4 0.3 7190 -2330

Tata Consultancy IT Services 6,20,719 1654 -26% 19.1 19.1 20.0 17.1 19.4 19.6 27.6 7.1 -3% 6.5 6.2 11.4 2.3 -71800 295470 Infosys Technologies IT Services 2,49,443 586 -24% 15.6 15.6 16.3 13.8 18.2 17.4 28.4 10.2 -10% 4.8 4.2 10.2 2.5 -315880 150780 HCL Technologies IT Services 1,10,121 406 -32% 10.3 10.3 11.2 9.7 14.2 14.0 22.6 4.6 -27% 3.2 3.2 4.9 1.0 -7600 52729 Wipro IT Services 1,02,840 180 -27% 10.7 10.7 10.9 9.6 15.5 15.0 26.8 7.0 -29% 3.4 2.9 7.7 1.5 -59062 135320 Tech Mahindra IT Services 50,309 521 -34% 12.8 12.8 13.3 10.5 13.1 13.0 35.2 2.7 -1% 3.3 2.7 14.6 0.9 -9241 25499 L&T Infotech IT Services 23,579 1354 -30% 16.8 16.8 17.5 13.7 17.8 18.1 20.5 12.9 -7% 4.5 4.5 4.6 4.3 -4150 5339 L&T Technology Ser IT Services 11,576 1108 -31% 14.7 14.7 15.4 12.5 19.6 19.9 27.9 11.7 -26% 5.2 5.2 7.1 3.0 1396 2739



Revised PE for Lockdown scenario FY21 PE For 30d



Mindtree IT Services 11,538 701 -21% 17.0 17.0 17.9 13.4 14.1 13.9 27.9 5.1 23% 2.9 2.7 5.7 0.9 -2557 1171 NIIT Technologies IT Services 6,483 1038 -43% 13.8 13.8 14.6 11.4 9.5 8.7 23.4 2.0 59% 1.9 1.6 4.7 0.4 -9561 4282

Sun Pharma Pharma 90,201 376 -16% 18.0 19.4 21.1 14.8 22.4 22.2 33.3 12.2 -19% 4.4 4.4 7.8 1.6 32388 -15386 Dr Reddy's Labs. Pharma 52,288 3147 8% 23.4 24.7 26.5 20.5 20.9 19.8 46.3 10.0 18% 3.4 3.6 5.3 1.1 36153 27806 Divi's Laboratories Pharma 50,467 1901 2% 32.8 34.7 36.3 26.1 21.4 20.6 43.2 10.1 59% 5.2 4.9 13.1 2.5 -97 3249 Cipla Pharma 36,216 449 -7% 21.3 23.6 26.1 17.7 21.6 21.2 32.6 13.7 1% 3.2 3.2 4.7 1.7 36974 16852 Lupin Pharma 29,710 656 -13% 27.3 29.2 35.8 21.4 19.6 19.7 32.4 9.4 39% 4.2 4.5 8.2 1.7 75090 -3154 Biocon Pharma 34,914 291 3% 28.1 30.1 32.7 23.4 22.1 18.7 64.9 7.2 50% 3.3 3.0 7.3 1.0 13658 -6132 Aurobindo Pharma Pharma 22,406 382 -21% 7.7 8.2 8.5 7.2 12.5 12.3 33.0 2.1 -37% 2.6 2.4 6.1 0.4 50096 -12979 Cadila Healthcare Pharma 28,112 275 5% 19.3 20.5 22.2 7.8 17.8 18.3 27.3 7.7 6% 4.3 4.4 7.8 1.8 72501 -40968 Ipca Laboratories Pharma 17,507 1386 11% 24.5 26.5 28.8 20.5 15.8 16.0 28.3 2.9 53% 3.0 3.1 4.5 1.0 1827 3266

Adani Ports & SEZ Infrastructure 49,737 245 -37% 11.9 12.8 14.8 9.5 21.5 19.3 89.0 7.9 -38% 4.3 3.8 12.9 1.4 212206 -22412 PNC Infratech Infrastructure 2,343 91 -53% 6.4 6.8 7.9 4.6 16.1 15.5 26.4 5.0 -59% 1.9 1.9 3.0 0.7 653 -265 NCC Infrastructure 1,034 17 -72% 3.1 3.4 4.1 1.8 15.0 15.4 33.3 2.3 -80% 1.3 1.2 4.8 0.2 16943 -4033 KNR Construction Infrastructure 2,662 189 -36% 14.7 15.8 18.5 10.0 13.9 14.3 45.5 1.9 2% 1.6 1.6 4.1 0.2 2511 -679 Ashoka Buildcon Infrastructure 1,053 38 -65% 3.5 3.8 4.3 2.6 31.1 23.3 241.6 3.2 -85% 1.9 1.6 7.5 0.5 7333 -6906 Sadbhav Engineering Infrastructure 437 25 -80% 7.7 8.5 10.4 4.5 17.9 16.0 41.3 2.9 -52% 2.6 2.6 8.7 0.2 15269 -353 Ahluwalia Contracts Infrastructure 1,055 158 -47% 9.5 10.2 12.0 6.8 10.4 10.6 16.7 5.8 -10% 2.4 2.2 4.2 0.9 -1480 574 ITD Cementation Infrastructure 518 30 -51% 11.0 12.2 16.0 4.5 17.3 16.0 62.9 4.7 -31% 2.4 2.5 4.5 0.4 4236 -3725

Container Corp Logistics 18,553 305 -45% 16.7 19.3 24.0 15.1 19.0 16.8 33.0 7.6 -1% 2.9 2.9 5.0 1.4 5606 -24496 VRL Logistics Logistics 1,292 143 -48% 12.9 15.8 22.1 10.0 21.8 21.7 31.2 9.5 -40% 4.5 4.6 6.9 1.6 1431 -263 Allcargo Logistics Logistics 1,447 59 -45% 7.5 10.0 18.5 7.3 11.4 11.8 18.7 4.0 -36% 1.6 1.7 3.7 0.4 3539 641 Gateway Distriparks Logistics 943 87 -33% 13.4 16.7 27.2 10.7 14.8 14.6 26.5 4.7 -8% 1.9 1.7 4.3 0.6 8078 -8676 Navkar Logistics 259 17 -49% 4.9 6.4 13.2 4.9 13.5 15.1 22.9 3.6 -67% 1.5 1.6 2.4 0.3 4771 -1123

UPL Agri Input 22,773 298 -49% 9.2 11.9 17.4 7.3 12.1 12.4 19.4 5.1 -26% 2.3 2.3 4.6 0.9 260100 -270810 PI Industries Agri Input 16,266 1178 -19% 28.0 30.4 34.6 21.8 20.8 23.2 35.2 8.9 21% 4.9 5.0 8.4 2.2 -892 81 Coromandel Inter Agri Input 15,007 512 -11% 16.0 19.0 19.6 13.1 11.9 11.5 21.8 2.0 39% 2.6 2.6 4.6 0.8 27952 -1924 Chambal Fertiliser Agri Input 4,356 105 -39% 5.1 5.9 6.6 4.4 8.8 8.2 20.1 3.5 -37% 1.4 1.5 2.8 0.6 86497 -21924

SRF Sp Chemicals 15,338 2668 -25% 17.1 19.3 21.5 14.8 11.2 12.7 25.2 2.1 34% 2.1 2.4 4.3 0.3 35313 -4688 Aarti Industries Sp Chemicals 13,777 791 -7% 22.4 25.0 27.9 17.9 16.6 16.7 27.1 7.5 34% 3.8 3.9 6.2 1.5 15969 -924 Atul Sp Chemicals 11,562 3898 -10% 17.3 19.2 21.6 14.5 16.6 17.9 22.7 2.8 -4% 3.3 3.3 4.3 1.2 3 2388 Vinati Organics Sp Chemicals 7,772 756 -24% 11.4 12.6 14.1 9.1 15.7 15.3 34.0 4.4 -25% 3.8 3.7 7.9 1.2 -1 -138 Camlin Fine Sciences Sp Chemicals 502 41 -50% 6.3 7.0 7.7 4.5 16.4 13.9 53.1 5.1 -55% 2.8 3.1 5.2 1.0 3574 -1320

Phoenix Milla Real Estate 7,858 512 -40% 15.8 17.0 18.2 13.2 21.3 20.9 57.0 3.9 -24% 2.1 2.0 5.2 0.4 37891 -10367 Oberoi Realty Real Estate 11,643 320 -42% 13.8 15.3 18.8 10.6 12.2 12.1 18.4 6.6 13% 1.8 1.8 2.7 1.0 4108 -6127


Note: Data as of 3rd April 2020



PC valuation financials Revised PB for Lockdown scenario

Correction from FY21 FY22 Consensus 12m Fwd PB since 2005 FY21 PB (30D)

Company Name Sectors Mcap (Cr) CMP 15th Jan 30 days 60 days 90 days 30 days Average Median Low Vs Median

HDFC Bank Banks 446,257 814 -37% 2.4 2.5 2.6 2.1 3.6 3.6 1.9 -34% ICICI Bank Banks 185,531 287 -46% 1.7 1.9 2.1 1.5 1.9 1.9 0.6 -8% Kotak Mahindra Bank Banks 218,184 1141 -32% 4.1 4.3 4.5 3.6 5.0 4.8 2.2 -16% State Bank of India Banks 156,627 176 -46% 0.9 1.4 2.1 0.9 1.5 1.4 0.6 -34% AXIS Bank Banks 91,819 325 -56% 1.1 1.2 1.3 1.0 2.2 2.2 0.9 -50% Indusind Bank Banks 21,722 313 -78% 0.6 0.7 0.8 0.5 2.7 2.7 0.5 -78% DCB Bank Banks 2,626 85 -56% 0.8 0.8 0.9 0.7 1.6 1.5 0.3 -48% HDFC Limited NBFC 259,729 1500 -40% 2.8 2.9 2.9 2.5 4.9 4.8 2.2 -43% Muthoot Finance NBFC 24,303 606 -20% 1.6 1.6 1.6 1.4 1.6 1.6 0.6 -3% Shriram Transport Finance NBFC 11,813 521 -53% 0.6 0.6 0.6 0.5 2.1 1.9 0.5 -70% Cholamandalam Investment and Finance NBFC 10,098 125 -62% 1.1 1.1 1.1 0.9 2.3 2.5 0.2 -57% LIC Housing Finance NBFC 11,034 219 -52% 0.6 0.6 0.7 0.5 1.7 1.8 0.5 -66% Mahindra & Mahindra Finance NBFC 8,806 143 -60% 0.7 0.7 0.7 0.6 2.3 2.3 0.7 -70% Manappuram Finance NBFC 7,808 92 -48% 1.1 1.1 1.1 0.9 1.7 1.7 0.3 -36% Shriram City Union Finance NBFC 4,871 738 -47% 0.6 0.6 0.6 0.5 2.0 2.0 0.6 -70% Magma Fincorp NBFC 455 17 -74% 0.2 0.2 0.2 0.1 1.0 1.0 0.1 -84% ICIC Lombard NBFC 47,494 1045 -23% 6.4 6.4 7.0 5.5 9.2 9.2 7.0 -31%


Note: Data as of 3rd April 2020


STRATEGY: COVID SERIES (IV)

UPDATE

Rating Methodology We rate stock on absolute return basis. Our target price for the stocks has an investment horizon of one year. We have different threshold for large market capitalisation stock and Mid/small market capitalisation stock. The categorisation of stock based on market capitalisation is as per the SEBI requirement.

Large cap stocks Rating Criteria Definition

BUY >= +10% Target price is equal to or more than 10% of current market price

NEUTRAL -10% > to < +10% Target price is less than +10% but more than -10%

SELL <= -10% Target price is less than or equal to -10%.

Mid cap and Small cap stocks Rating Criteria Definition

BUY >= +15% Target price is equal to or more than 15% of current market price

NEUTRAL -15% > to < +15% Target price is less than +15% but more than -15%

SELL <= -15% Target price is less than or equal to -15%.

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Sr. no. Particulars Yes/No



UPDATE

1 Whether compensation has been received from the company(ies) covered in the Research report in the past 12 months for investment banking transaction by PCIL

No

2 Whether Research Analyst, PCIL or its associates or relatives of the Research Analyst affiliates collectively hold more than 1% of the company(ies) covered in the Research report

No

3 Whether compensation has been received by PCIL or its associates from the company(ies) covered in the Research report No

4 PCIL or its affiliates have managed or co-managed in the previous twelve months a private or public offering of securities for the company(ies) covered in the Research report

No

5 Research Analyst, his associate, PCIL or its associates have received compensation for investment banking or merchant banking or brokerage services or for any other products or services from the company(ies) covered in the Research report, in the last twelve months

No

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Rosenblatt Securities Inc. or any affiliate has not managed or co-managed a public offering of securities for the subject company in the past 12 months, nor received compensation for investment banking services from the subject company in the past 12 months, neither does it or any affiliate expect to receive, or intends to seek compensation for investment banking services from the subject company in the next 3 months. Additional Disclosures This research report is for distribution only under such circumstances as may be permitted by applicable law. This research report has no regard to the specific investment objectives, financial situation or particular needs of any specific recipient, even if sent only to a single recipient. This research report is not guaranteed to be a complete statement or summary of any securities, markets, reports or developments referred to in this research report. Neither PHILLIPCAP nor any of its directors, officers, employees or agents shall have any liability, however arising, for any error, inaccuracy or incompleteness of fact or opinion in this research report or lack of care in this research report’s preparation or publication, or any losses or damages which may arise from the use of this research report.

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Investing in any non-U.S. securities or related financial instruments (including ADRs) discussed in this research report may present certain risks. The securities of non-U.S. issuers may not be registered with, or be subject to the regulations of, the U.S. Securities and Exchange Commission. Information on such non-U.S. securities or related financial instruments may be limited. Foreign companies may not be subject to audit and reporting standards and regulatory requirements comparable to those in effect within the United States.

The value of any investment or income from any securities or related financial instruments discussed in this research report denominated in a currency other than U.S. dollars is subject to exchange rate fluctuations that may have a positive or adverse effect on the value of or income from such securities or related financial instruments.

Past performance is not necessarily a guide to future performance and no representation or warranty, express or implied, is made by PHILLIPCAP with respect to future performance. Income from investments may fluctuate. The price or value of the investments to which this research report relates, either directly or indirectly, may fall or rise against the interest of investors. Any recommendation or opinion contained in this research report may become outdated as a consequence of changes in the environment in which the issuer of the securities under analysis operates, in addition to changes in the estimates and forecasts, assumptions and valuation methodology used herein.

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