institutional equity research strategy: covid series...

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 (III)

First ever GLOBAL shutdown: FEAR!!! And GREED (???)

INDIA | STRATEGY UPDATE

23 March 2020

We came out with a PREDICTIVE series of notes on Covid-19: (1) Manageable: Near-term; Prolonged: detrimental (20-Feb-20) (Click here). In this, we

highlighted India’s excessive dependence on China for imports and its adverse impact, on various sectors/MSME (importers + exporters) and likely payment delays (hit for the financial sector).

(2) Slowdown to aggravate: Domestic and global (12-March-20) (Click here). In this, we said equities would remain under stress and talked about fears of global recession, Indian economy/earnings hit in H1FY21, lesser impact of global monetary stimulus (as it’s an economic slowdown, not limited to financial markets like in 2008), and likely demand improvement in 2H2020. In this entire phase of correction, we didn’t turn positive on the basis of valuations turning cheap, rather highlighted that earnings will be slashed post which valuations may not look cheap. We assumed 10%/12% earnings growth in FY21/22, when consensus was in the range of 25%/16%. Consumption, financial sector, and trade to be most impacted; investment to remain weak. FY21 in India, 2020 globally – washout year.

(3) In this note, we dig into company-wise likely valuations of our coverage Universe, assuming lower earnings for FY21 (cut assumed in the range of 5%-50%). We conclude: (i) Most of the stocks 95/137 are trading at/below their median PE/PB (ii) 30/137 stocks are trading at/below all-time low valuations (Data period: 2005 – Recent) (iii) Out of current PC coverage 80/106 (data available) made their life-time lows during financial crisis (iv) Nifty, is currently trading at 11.6x 1-year forward PE vs. 15.3x median, life-time low was at 7.6x. Key names which are near low valuations are: Axis, SBI, L&T, Hero Motocorp, ITC etc.

What has changed since our last report? (1) Corona cases are surging globally. (2) Situation in India has also deteriorated from being contained a few days back. (3) City-wide shutdowns have risen across India/the globe.

While we know the future is extremely uncertain: We build following scenarios (1) Situation worsens in India and globally: Further reasonable selling in equities; Indian

GDP growth at 3.5-4.0%; global economic recession to deepen. (2) Situation gets contained in India, shutdown isn’t extended beyond 15

th April 2020: We

would be gradual buyers in equities. Indian economic impact will be limited; our FY21 GDP target – 4.5-5.0%. Q4FY20 impact will be severe.

(3) Contained in India, worsens globally: Indian equities will outperform, Indian GDP range of 4.0-4.5%, global recession.

(4) Situation contained in India and key global economies: Indian equities should outperform, we will be aggressive buyers at current levels. Manageable India economic impact; global economic slowdown will last for 3-5 months.

Basic outcome of all the above scenarios: Income losses (of varied degree) for individuals, corporates, and government. There is a demand for stimulus in India and globally – unless its substantial and timely, it may not address economic problems. Global recession – EU is hit significantly across economies, US also worst impacted; even if China stabilizes, weak global demand will continue to impact them. After financial and economic correction, there will come CREDIT crunch – most painful to address and lasts longer. Equity flows will likely be impacted in the medium-term (FII+DII), thus upside levels will be capped.

While we know discretionary consumption is hit the most currently, we would expect pent-up demand to return at a strong pace as soon as situation stabilizes and shutdown doesn’t stay for long. Private and public capex will remain hit for the whole of FY21. The fiscal situation will remain under stress for FY21, as impact on tax revenue will be long-lasting and disinvestment is at a huge risk. Unless/If the fiscal stimulus is meaningful, we would expect rural spending to come under stress. Both central and state government spending will take a hit for FY21. External trade activity will remain extremely tepid due to a global slowdown; India will benefit, if international brent prices remain around US$ 35/barrel, by way of sharply lower oil import costs.

Anjali Verma (+ 9122 6246 4115)

[email protected] Neeraj Chadawar

(+ 9122 6246 4116) [email protected]

http://backoffice.phillipcapital.in/Backoffice/Researchfiles/PC_-_Coronavirus_Impact_-_Feb_2020_20200212130332.pdf

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 (III) STRATEGY UPDATE

Sector outlook: In the current scenario, we expect pharmaceuticals to outperform (we stick with our top picks – Divis, Ipca; Add: Cipla, Cadila, Biocon). For the medium-long term, consumption should fare better, (valuations still expensive). In the table below, we have looked at valuation matrix after lowering earnings across sectors (these are likely reduction, should not be considered as analyst’s earnings estimates for FY21/22). We see most prominent cuts for metals, financials, cement, discretionary, and IT. We maintain our stance of buying only quality names as they will be able to withstand slowdown and recover sooner.

Market Valuations Correction from Consensus 12m Fwd PE since 2005 Consensus 12m Fwd PB since 2005

Index Current Value 15th Jan 2020 Latest Average Median High Low Latest Average Median High Low

Nifty Index 7763 -37% 11.6 15.2 15.3 19.7 7.6 1.6 2.5 2.5 4.1 1.4 NSE Midcap Index 11189 -37% 10.5 14.4 14.4 26.0 5.7 1.3 1.7 1.8 3.4 0.6 NSE Small Cap 3039 -42% 8.0 12.3 12.3 19.0 6.6 1.0 1.3 1.2 2.3 0.6

PC Valuation Scorecard

Sector Total Companies No of companies trading at/below Median PE/PB No of companies at/below all time low valuations:

Banks 7 7 3 NBFC 9 9 3 Automobiles 10 9 1 FMCG 11 5 3 Retail 9 5 2 Paints/Tiles 3 2 0 Con Electricals/Durable 9 4 2 Consumer- Others 2 1 0 Metals 10 5 1 Cap Goods 16 15 6 Cement 11 6 1 IT Services 9 7 2 Pharma 9 3 0 Infrastructure 8 8 5 Logistics 5 4 0 Agri Input 4 2 0 Sp Chemicals 5 3 1

Total 137 95 30

Source: Bloomberg, PhillipCapital India Research. Note: Data as of 23rd Mar 2020, 1.30 PM IST



PC Universe valuations

Correction from Revised PE

Consensus 12m Fwd PE since 2005 FY21 PE vs

Consensus 12m Fwd PB since 2005 Net Debt (mn) FCF (mn)

Company Name Sectors Mcap (Cr) CMP 15th Jan 2020 FY21 FY22 Avg Median High Low Median Latest Median High Low FY19 FY19

Maruti Suzuki Automobiles 1,31,017 4337 -42% 16.7 13.6 17.9 16.7 32.6 7.5 0% 2.4 3.0 6.4 1.2 -293 29318

Bajaj Auto Automobiles 56,401 1949 -38% 10.5 9.1 15.6 16.1 21.7 5.0 -34% 2.1 5.1 8.7 1.9 -9228 10375

Mahindra & Mahindra Automobiles 36,196 291 -49% 8.4 7.3 13.1 13.2 19.3 3.2 -36% 0.7 2.3 5.0 0.7 -11518 19934

Tata Motors Automobiles 22,768 69 -66% 4.2 2.6 19.7 9.3

2.8 -55% 0.4 1.8 5.2 0.4 612678 -30750

Hero MotoCorp Automobiles 31,938 1599 -35% 9.1 8.4 15.3 15.2 20.6 9.9 -40% 2.1 5.7 10.5 2.2 844 6744

Ashok Leyland Automobiles 10,583 36 -56% 13.7 8.0 21.1 14.1

4.4 -3% 1.2 2.3 5.7 0.7 1491 4638

Bharat Forge Automobiles 12,078 259 -51% 19.5 13.1 22.9 20.7 108.4 5.4 -6% 1.9 3.7 32.3 0.8 28482 -13194

Apollo Tyre Automobiles 4,525 79 -55% 7.9 9.0 8.8 8.2 15.1 3.6 -4% 0.4 1.2 1.9 0.5 39780 -10769

Escorts Automobiles 7,214 589 -13% 12.2 10.1 12.4 11.0 35.2 4.2 11% 1.5 1.2 3.4 0.3 566 -1383

Ceat Automobiles 2,621 648 -36% 9.0 7.8 9.1 8.8 18.3 2.2 1% 0.8 1.4 2.7 0.3 13734 -6244

Hindustan Unilever FMCG 4,14,282 1914 -5% 48.8 42.8 35.5 34.7 58.1 19.1 41% 22.7 30.6 48.2 16.6 -36880 58640

ITC FMCG 1,91,959 156 -36% 12.9 11.4 23.8 24.2 33.4 11.1 -47% 2.8 6.7 11.3 2.6 -37608 70917

Nestle FMCG 1,29,311 13405 -10% 60.6 52.0 37.6 35.8 67.6 18.7 69% 45.6 22.0 55.0 14.8 -15749 15064

Dabur India FMCG 72,538 411 -16% 42.0 36.7 28.6 27.2 50.0 9.3 54% 9.7 9.4 12.9 2.6 1961 18776

Godrej Consumer Products FMCG 45,263 443 -42% 26.3 23.6 28.2 27.4 53.3 12.0 -4% 5.3 7.7 48.1 4.2 19810 10436

Britannia FMCG 53,930 2244 -28% 34.0 29.7 29.0 23.8 63.6 10.1 43% 10.2 8.5 23.5 2.5 282 2340

Marico Industries FMCG 31,403 243 -30% 28.8 25.5 28.4 25.7 47.8 13.2 12% 8.8 7.9 16.6 4.8 -2030 10370

Colgate FMCG 30,710 1129 -25% 36.5 33.4 30.7 30.4 46.5 16.4 20% 19.2 25.6 37.2 11.8 -3994 8873

Emami FMCG 7,935 175 -44% 16.3 14.8 29.1 26.2 49.6 13.3 -38% 3.3 8.6 17.8 2.7 -935 3723

Bajaj Corp FMCG 1,912 130 -45% 8.5 7.8 19.2 19.5 29.9 7.6 -56% 3.7 7.4 13.3 2.7 107 2449

Agro Tech Foods FMCG 902 370 -49% 19.6 16.8 30.3 31.2 56.5 17.0 -37% 2.0 3.7 5.0 2.3 -37 -51

Titan Company Retail 70,992 800 -33% 46.0 33.6 32.9 30.5 61.2 13.5 51% 8.6 9.0 15.6 4.2 -10947 8459

Jubilant Foodworks Retail 17,156 1300 -26% 36.8 27.9 46.4 45.4 69.5 24.5 -19% 9.2 11.3 20.4 5.5 -4891 3533

Trent Retail 14,797 416 -29% 82.9 53.4 58.0 45.1 567.9 7.8 84% 5.3 3.6 10.1 0.7 4399 -223

ABFRL Retail 12,751 165 -29% 159.0 65.9 71.3 63.8 167.5 44.2 149% 7.1 9.9 14.0 7.2 18380 1270

FLFL Retail 3,410 169 -60% 20.5 14.1 39.2 38.7 50.3 19.8 -47% 1.5 4.0 4.8 1.9 8030 -658

V-Mart Retail 2,743 1511 -11% 36.3 25.3 27.8 22.2 56.9 6.7 64% 4.8 4.1 12.2 1.2 -166 30

Shoppers Stop Retail 1,710 194 -52% 22.0 13.5 41.0 39.4 107.0 19.2 -44% 1.5 4.0 6.8 1.2 233 720

Thangamayil Retail 388 283 -27% 6.4 5.4 8.3 7.6 21.3 3.8 -16% 1.4 1.6 3.5 1.0 409 677

KDDL Retail 139 119 -64% 19.1 7.5 18.9 19.6 40.3 4.0 -3% 0.8 3.1 8.1 0.9 1121 -188

Asian Paints Paints/Tiles 1,46,839 1531 -17% 46.3 38.4 32.7 29.8 57.9 14.0 55% 11.8 10.3 16.4 4.5 1751 10499

Kajaria Ceramics Paints/Tiles 5,909 372 -32% 22.7 17.7 20.3 23.8 37.2 5.3 -5% 2.9 4.6 9.4 1.0 -1574 2308

Somany Ceramics Paints/Tiles 553 90 -61% 6.3 4.7 19.0 20.8 35.5 4.2 -70% na 3.9 6.2 0.6 5331 -1248

Havells India Con Electricals/Durable 31,303 500 -22% 38.1 29.1 23.6 17.9 49.2 3.6 112% 6.0 5.6 2392.2 0.7 -5836 13089

Voltas Con Electricals/Durable 16,624 502 -28% 27.2 21.4 20.3 20.5 36.2 4.6 33% 3.3 4.2 13.6 1.1 -65 2041

Polycab Con Electricals/Durable 9,644 647 -40% 13.1 10.4 16.5 15.7 21.2 12.8 -17% 2.1 2.6 4.0 2.0 -452 8245







V‐Guard Industries Con Electricals/Durable 6,903 161 -28% 30.3 24.4 25.8 24.9 49.0 7.6 22% 5.7 5.6 11.9 1.8 -746 872

Finolex Cables Con Electricals/Durable 2,861 187 -55% 8.6 7.3 11.4 11.0 22.3 5.4 -22% na 1.2 4.3 0.8 -484 436

Orient Electric Ltd Con Electricals/Durable 3,386 160 -22% 24.9 18.7 28.9 28.7 45.4 19.1 -13% 7.2 8.1 13.0 6.4 935 270

KEI Industries Con Electricals/Durable 2,071 231 -56% 6.0 4.5 14.1 13.8 21.2 6.4 -57% na 3.6 4.6 2.1 5396 2327

Bajaj Electricals Con Electricals/Durable 3,447 303 -18% 35.0 16.2 15.0 13.0 49.1 2.7 169% 2.4 3.0 6.1 0.8 15663 -8347

JC-Hitachi Con Electricals/Durable 5,739 2111 7% 41.7 32.4 33.2 35.0 57.7 5.5 19% 6.6 7.6 11.3 1.2 na na

Indo Count Industries Consumer- Others 498 25 -59% 5.5 5.0 9.7 9.6 17.9 3.8 -43% 0.4 2.3 5.6 0.5 3017 1373

Orient Paper & Industries Consumer- Others 286 13 -54% 3.9 2.6 3.2 2.0 13.3 0.2 94% 0.2 0.4 2.0 0.1 165 320

Hindustan Zinc Metals 53,767 127 -41% 10.5 8.2 9.3 9.0 26.8 3.3 17% 1.4 1.9 9.3 0.6 -169730 83190

JSW Steel Metals 33,902 140 -50% 13.1 9.7 9.5 9.6 20.0 1.9 36% 0.8 1.2 2.7 0.3 461420 82032

Vedanta Metals 23,902 64 -61% 8.9 4.2 7.6 7.1 16.7 2.9 26% 0.4 1.2 5.8 0.3 493340 66882

Tata Steel Metals 29,046 256 -49% 7.9 5.6 9.2 8.2 67.3 1.7 -4% 0.4 1.1 2.8 0.3 945555 -273268

Hindalco Metals 19,430 87 -60% 5.2 4.0 11.0 8.9 93.3 2.8 -42% 0.3 0.8 2.4 0.3 426163 41462

NMDC Metals 19,688 64 -51% 5.1 4.2 9.5 9.1 16.1 3.7 -44% 0.6 1.2 2.2 0.6 -42436 11575

Jindal Steel & power Metals 9,435 93 -49% 15.0 7.7 18.7 10.9

3.3 38% 0.3 1.3 11.3 0.2 390821 37021

SAIL Metals 9,727 24 -54% 7.8 5.2 14.8 9.6

3.5 -18% 0.2 0.8 4.3 0.3 447539 -11031

NALCO Metals 5,392 29 -40% 19.3 11.8 13.1 13.1 27.4 4.4 47% 0.5 1.2 3.4 0.5 -34296 7615

Pennar Inds. Metals 233 16 -45% 4.2 3.5 7.7 7.4 12.7 3.8 -42% 0.3 1.1 1.9 0.3 3860 37

Larsen & Toubro Cap Goods 1,00,910 719 -46% 9.9 8.0 21.5 21.9 44.4 10.4 -55% 1.3 3.0 12.5 1.5 -23927 6778

Siemens Cap Goods 36,688 1029 -32% 29.9 25.5 37.4 34.3 85.8 10.2 -13% 3.6 5.5 12.0 2.2 -36457 -1150

ABB India Cap Goods 17,376 820 -38% 40.4 32.7 37.7 36.2 78.5 11.5 12% 4.1 5.8 15.0 2.5 -14730 7692

Hindustan Aeronautics Cap Goods 16,877 505 -41% 7.3 5.4 8.2 8.2 9.9 6.3 -11% 1.1 1.6 1.9 1.2 40458 -24063

Bharat Electronics Cap Goods 15,009 62 -41% 7.6 6.4 14.6 13.9 27.0 4.9 -46% 1.4 2.4 5.0 0.9 -8507 6122

BHEL Cap Goods 7,156 21 -56% 5.3 3.5 18.0 19.1 36.0 5.8 -72% 0.2 1.6 6.7 0.2 -48878 -19666

Cummins India Cap Goods 10,840 391 -33% 15.4 12.2 21.0 20.7 34.1 8.8 -26% 2.4 4.9 7.8 1.7 -6988 5629

Thermax Cap Goods 8,103 680 -37% 23.6 18.4 23.4 23.0 43.2 5.1 2% 2.2 4.0 12.0 1.6 -1833 1501

KEC International Cap Goods 4,802 187 -43% 7.1 5.4 11.6 12.1 21.4 3.6 -41% 1.3 2.0 4.5 0.5 15633 1293

Kalpataru power Cap Goods 2,924 189 -56% 4.9 3.5 12.3 11.7 26.8 3.1 -58% 0.7 1.5 5.0 0.4 32591 2003

Engineers India Cap Goods 3,333 53 -49% 7.8 6.7 16.3 15.7 32.4 6.7 -50% 1.4 3.0 9.1 1.4 -26611 5489

Bharat Dynamics Cap Goods 3,000 164 -49% 9.7 8.1 10.2 10.3 12.0 6.5 -6% 1.1 1.9 2.1 1.1 -3695 2533

Cochin Shipyard Cap Goods 3,083 234 -42% 4.9 5.8 12.7 11.2 22.7 4.5 -57% 0.7 1.4 2.4 0.7 -25949 5954

GE T&D Cap Goods 1,689 66 -58% 6.2 5.6 34.6 35.2 56.9 15.8 -82% 1.2 5.5 10.0 1.5 -6361 3224

Praj Inds. Cap Goods 870 48 -61% 16.9 10.4 16.7 16.8 33.5 5.1 1% 1.0 2.2 12.2 0.9 -880 539

VA Tech Wabag Cap Goods 501 92 -57% 4.1 2.9 15.5 14.5 30.5 4.8 -72% 0.4 2.0 4.8 0.5 4327 -651

Ultratech Cement Cement 90,124 3122 -31% 21.0 14.8 20.6 18.8 37.5 3.8 12% 2.2 3.2 7.2 0.8 194690 -25908

Shree Cement Cement 62,965 17451 -26% 34.9 27.9 22.5 16.4 49.1 3.4 113% 4.3 5.7 8.4 3.0 -27123 1914

Ambuja Cement Cement 29,249 147 -31% 17.6 14.2 18.1 17.1 32.3 6.4 2% 1.1 2.5 6.0 1.1 -66248 7109

ACC Cement 18,892 1007 -34% 15.9 13.5 18.5 17.6 36.7 6.9 -9% 1.5 2.9 7.9 1.4 -38218 6846







Dalmia Bharat Cement 7,890 409 -51% 18.8 11.3 30.7 31.4 54.4 12.7 -40% 0.7 1.5 2.1 0.8 31868 15630

JK Cement Cement 6,974 903 -31% 19.0 13.0 11.2 9.2 22.9 1.4 106% 2.0 1.1 3.7 0.2 21224 0

HeidelbergCement India Cement 3,014 133 -32% 12.9 10.8 17.2 17.2 23.2 9.6 -25% 1.9 2.6 3.5 1.4 583 2026

Star Cement Cement 2,701 66 -30% 11.3 8.6 12.8 11.9 21.2 8.7 -5% 1.3 2.2 3.6 1.3 -477 4677

JK Lakshmi Cement Cement 2,453 208 -40% 8.9 7.2 20.5 20.1 37.9 9.6 -56% 1.2 2.7 3.9 0.7 15847 1979

India Cement Cement 2,795 90 2% 20.9 13.6 12.4 11.7 30.6 3.3 79% 0.5 0.8 2.9 0.3 31815 1479

Sanghi Cement Cement 492 20 -54% 18.0 7.0 13.5 13.2 24.7 2.7 37% 0.3 1.3 2.4 0.3 7190 -2330

Tata Consultancy IT Services 6,37,361 1699 -24% 19.6 17.9 19.4 19.6 27.6 7.1 0% 6.2 6.2 11.4 2.3 -71800 295470

Infosys Technologies IT Services 2,26,679 532 -31% 13.9 12.5 18.2 17.4 28.4 10.2 -20% 2.5 4.2 10.2 2.5 -315880 150780

HCL Technologies IT Services 1,14,245 421 -29% 10.8 10.1 14.3 14.0 22.6 4.6 -23% 2.1 3.2 4.9 1.0 -7600 52729

Wipro IT Services 99,812 175 -30% 10.5 9.6 15.5 15.0 26.8 7.0 -30% 1.7 2.9 7.7 1.5 -59062 135320

Tech Mahindra IT Services 50,203 520 -35% 11.6 10.3 13.1 13.0 35.2 2.7 -10% 1.9 2.7 14.6 0.9 -9241 25499

L&T Infotech IT Services 22,297 1280 -34% 14.7 13.0 18.1 18.2 20.5 13.5 -19% na 4.5 4.6 4.3 -4150 5339

L&T Technology Services IT Services 11,224 1074 -33% 14.0 12.0 19.7 20.0 27.9 13.2 -30% 3.2 5.2 7.1 3.5 1396 2739

Mindtree IT Services 12,312 748 -16% 17.0 14.3 14.1 13.8 27.9 5.1 22% 3.3 2.7 5.7 0.9 -2557 1171

NIIT Technologies IT Services 5,686 910 -50% 11.5 10.0 9.5 8.7 23.4 2.0 33% 2.1 1.6 4.7 0.4 -9561 4282

Sun Pharma Pharma 81,227 339 -25% 17.9 13.3 22.4 22.3 33.3 12.2 -20% 1.7 4.4 7.8 1.7 32388 -15386

Dr Reddy's Labs. Pharma 46,131 2776 -5% 23.1 18.2 20.9 19.8 46.3 10.0 16% 2.6 3.6 5.3 1.1 36153 27806

Divi's Laboratories Pharma 48,918 1843 -1% 35.6 25.6 21.4 20.6 43.2 10.1 73% 5.4 4.9 13.1 2.5 -97 3249

Cipla Pharma 31,621 392 -19% 20.1 15.3 21.6 21.2 32.6 13.7 -5% 1.7 3.2 4.7 1.7 36974 16852

Lupin Pharma 27,565 609 -19% 27.7 19.2 19.6 19.7 32.4 9.4 41% 1.9 4.5 8.2 1.9 75090 -3154

Biocon Pharma 30,750 256 -9% 27.1 20.1 22.0 18.7 64.9 7.2 45% 3.8 3.0 7.3 1.0 13658 -6132

Aurobindo Pharma Pharma 18,410 314 -35% 7.1 5.9 12.5 12.3 33.0 2.1 -43% 1.0 2.4 6.1 0.4 50096 -12979

Cadila Healthcare Pharma 29,545 289 10% 20.6 8.3 17.8 18.3 27.3 7.7 12% 2.4 4.4 7.8 1.8 72501 -40968

Ipca Laboratories Pharma 17,242 1365 9% 26.4 20.0 15.8 15.9 28.3 2.9 65% 4.0 3.1 4.5 1.0 1827 3266

Adani Ports & SEZ Infrastructure 44,495 219 -44% 8.9 8.1 21.5 19.3 89.0 9.9 -54% 1.5 3.8 12.9 1.7 212206 -22412

PNC Infratech Infrastructure 2,565 100 -48% 5.8 5.0 16.2 15.6 26.4 7.0 -63% 0.9 1.9 3.0 1.0 653 -265

NCC Infrastructure 1,232 20 -66% 2.5 2.0 15.0 15.5 33.3 2.9 -84% 0.2 1.2 4.8 0.2 16943 -4033

KNR Construction Infrastructure 2,700 192 -35% 11.6 8.9 14.0 14.3 45.5 1.9 -19% na 1.6 4.1 0.2 2511 -679

Ashoka Buildcon Infrastructure 1,319 47 -56% 3.7 3.2 31.1 23.3 241.6 3.2 -84% 1.7 1.6 7.5 0.5 7333 -6906

Sadbhav Engineering Infrastructure 617 36 -71% 6.8 5.4 18.0 16.0 41.3 3.4 -57% 0.3 2.6 8.7 0.3 15269 -353

Ahluwalia Contracts Infrastructure 1,375 205 -31% 9.8 8.3 10.4 10.6 16.5 5.8 -8% 1.4 2.2 4.2 0.9 -1480 574

ITD Cementation Infrastructure 500 29 -53% 5.5 4.3 17.4 16.0 62.9 5.2 -66% 0.4 2.5 4.5 0.5 4236 -3725

Container Corp Of India Logistics 18,711 307 -45% 20.0 15.3 19.0 16.9 33.0 7.6 19% 1.5 3.0 5.0 1.4 5606 -24496

VRL Logistics Logistics 1,264 140 -49% 13.0 9.8 21.9 21.7 31.2 9.9 -40% 1.7 4.6 6.9 1.8 1431 -263

Allcargo Logistics Logistics 1,467 60 -44% 10.1 7.3 11.5 11.8 18.7 4.0 -14% 0.6 1.7 3.7 0.4 3539 641

Gateway Distriparks Logistics 859 79 -39% 15.2 9.7 14.8 14.6 26.5 4.7 4% 0.6 1.7 4.3 0.6 8078 -8676

Navkar Logistics 219 15 -57% 5.4 4.2 13.6 15.1 22.9 3.6 -64% na 1.6 2.4 0.3 4771 -1123



UPL Agri Input 20,596 270 -54% 7.5 6.0 12.1 12.5 19.4 5.1 -40% 1.1 2.3 4.6 0.9 260100 -270810

PI Industries Agri Input 14,777 1070 -27% 26.3 19.6 20.8 23.2 35.6 8.9 13% 4.6 5.1 8.4 2.2 -892 81

Coromandel Inter Agri Input 13,533 462 -19% 15.5 12.5 11.9 11.5 21.8 2.0 35% 2.7 2.6 4.6 0.8 27952 -1924

Chambal Fertiliser Agri Input 4,160 100 -42% 4.8 4.2 8.8 8.2 20.1 3.5 -41% 0.9 1.5 2.8 0.6 86497 -21924

SRF Sp Chemicals 16,410 2855 -20% 17.9 15.2 11.2 12.7 25.2 2.1 41% 2.9 2.4 4.3 0.3 35313 -4688

Aarti Industries Sp Chemicals 11,871 682 -20% 18.7 15.1 16.5 16.7 27.1 7.5 12% 3.3 3.9 6.2 1.5 15969 -924

Atul Sp Chemicals 10,753 3625 -16% 16.3 13.2 16.6 18.0 22.7 2.8 -10% 2.7 3.3 4.3 1.2 3 2388

Vinati Organics Sp Chemicals 7,308 711 -28% 10.9 8.5 15.7 15.2 34.0 4.4 -29% 4.3 3.7 7.9 1.2 -1 -138

Camlin Fine Sciences Sp Chemicals 450 37 -55% 5.2 3.7 16.6 14.0 53.1 5.8 -63% 1.0 3.2 5.2 1.1 3574 -1320

Source: Bloomberg, PhillipCapital India Research

Note: Data as of 23rd Mar 2020, 1.30 PM IST

PC valuation financials Correction from Revised PB Consensus 12m Fwd PB since 2005 FY21 PBvs

Company Name Sectors Mcap (Cr) CMP 15th Jan FY21 FY22 Average Median Low Median

HDFC Bank Banks 4,33,369 790 -38% 2.3 2.0 3.6 3.6 1.9 -38% ICICI Bank Banks 1,89,153 293 -45% 1.5 1.4 1.9 1.9 0.6 -19% Kotak Mahindra Bank Banks 2,15,478 1128 -33% 3.9 3.4 5.0 4.8 2.2 -20% State Bank of India Banks 1,66,399 186 -43% 0.7 0.7 1.5 1.4 0.7 -48% AXIS Bank Banks 94,407 334 -55% 1.0 0.9 2.2 2.2 0.9 -53% Indusind Bank Banks 23,757 342 -76% 0.6 0.5 2.7 2.7 0.5 -79% DCB Bank Banks 2,911 94 -52% 0.7 0.7 1.6 1.5 0.3 -50% HDFC Limited NBFC 2,80,474 1620 -35% 3.0 2.8 4.9 4.8 2.2 -37% Muthoot Finance NBFC 21,091 526 -31% 1.4 1.2 1.6 1.6 0.6 -13% Shriram Transport Finance NBFC 11,058 486 -56% 0.5 0.5 2.1 1.9 0.7 -72% Cholamandalam Investment and Finance NBFC 12,196 151 -55% 1.3 1.1 2.3 2.5 0.2 -48% LIC Housing Finance NBFC 9,879 196 -57% 0.5 0.4 1.7 1.8 0.5 -69% Mahindra & Mahindra Finance NBFC 9,266 150 -58% 0.7 0.7 2.3 2.3 1.1 -68% Manappuram Finance NBFC 6,984 83 -53% 1.0 0.8 1.7 1.7 0.3 -42% Shriram City Union Finance NBFC 5,861 888 -36% 0.7 0.7 2.0 2.0 0.8 -62% Magma Fincorp NBFC 512 19 -71% 0.2 0.2 1.0 1.0 0.2 -82%

Source: Bloomberg, PhillipCapital India Research



COVID SERIES (III) STRATEGY UPDATE

Market Valuation charts Nifty current one year forward PE multiple of 11.6x is trading at 1.7 standard deviation below its long term average (15.2x). In mid Jan-2020 Nifty was trading at a premium valuation of 18.6x. On price to book Nifty is trading below two standard deviation from long term average.

NSE Midcap index is trading at 10.5x on one year forward PE while it was trading at 17.4x in Jan-2020

Source: Bloomberg, PhillipCapital India Research,


Mean

Mean + 1SD

Mean -1SD

6

8

10

12

14

16

18

20

22

Jul-05 Aug-07 Sep-09 Oct-11 Dec-13 Jan-16 Feb-18 Mar-20

12M Fwd Nifty PE

Mean

Mean + 1SD

Mean -1SD

1.2

1.7

2.2

2.7

3.2

3.7

4.2

Jul-05 Aug-07 Sep-09 Oct-11 Dec-13 Jan-16 Feb-18 Mar-20

12M Fwd Nifty PB

5

10

15

20

25

30

Feb-06 Feb-08 Feb-10 Feb-12 Feb-14 Feb-16 Mar-18 Mar-20

NSE Midcap PE

Mean

Mean + 1SD

Mean -1SD

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

Feb-06 Feb-08 Feb-10 Feb-12 Feb-14 Feb-16 Mar-18 Mar-20

12M Fwd Midcap PB

5

7

9

11

13

15

17

19

21

Nov-11 Dec-13 Jan-16 Feb-18 Mar-20

NSE Small Cap PE

Mean

Mean + 1SD

Mean -1SD

0.5

0.7

0.9

1.1

1.3

1.5

1.7

1.9

2.1

2.3

2.5


NSE Small Cap PB



Domestic cyclical sector Cyclical sector impacted the most in this recent sharp correction, most of the sectors are now trading far below its long term average on one year forward PE.



LPA

+ 1SD

-1SD

8

10

12

14

16

18

20

22

24


Autos 12m fwd PE

LPA

+ 1SD

-1SD

-1SD

0

5

10

15

20

25 Banks 12m fwd PE

LPA

+ 1SD

-1SD

0

5

10

15

20

25

Mar-09 Jun-11 Aug-13 Oct-15 Dec-17 Mar-20

PSU Banks 12m fwd PE

LPA

+ 1SD

-1SD

8

10

12

14

16

18

20

22

24

26


Infra 12m fwd PE

LPA

+ 1SD

-1SD

4

6

8

10

12

14

16

18

20


Metals 12m fwd PE

LPA

+ 1SD

-1SD

6

7

8

9

10

11

12

13

14

15

16

Jan-09 Apr-11 Jun-13 Sep-15 Dec-17 Mar-20

Energy 12m fwd PE



Cyclical Sectors

Defensive Sectors Defensive sectors are also trading one standard deviation below its long term average on one year forward PE



LPA

+ 1SD + 1SD

-1SD

4

9

14

19

24

29

34

39

Feb-11 May-13 Aug-15 Nov-17 Mar-20

Realty 12m fwd PE

LPA

+ 1SD + 1SD

-1SD

8

13

18

23

28

33

38


Media 12m fwd PE

LPA LPA

+ 1SD + 1SD

-1SD

15

20

25

30

35

40


FMCG 12m fwd PE

LPA

+ 1SD

-1SD

10

12

14

16

18

20

22

24 IT 12m fwd PE

LPA LPA

+ 1SD

-1SD

10

15

20

25

30

35 Pharma 12m fwd PE

+ 1SD



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