AUGUST 25, 2016
Economy News Giving a big push to the infrastructure sector in the country, the Cabinet Committee on Economic Affairs approved nine projects worth about Rs 240 bn in nine states for expansion of railway network and connectivity across the country. (ET) The Union Cabinet approved a revised Double Tax Avoidance Agreement between India and Cyprus that provides for source-based taxation of capital gains on transfer of shares instead of one based on residence. (BS) Monsanto Co has withdrawn an application seeking approval for its next generation of genetically modified cotton seeds in India, a major escalation in a long-running dispute between New Delhi and the world's biggest seed maker. (Livemint) In order to check pollution, a new policy will be framed to make scrapping of 15-year old vehicles mandatory, bringing heavy vehicles in its ambit to begin with, Union Minister Nitin Gadkari said. The Finance Ministry has suggested putting the proposed policy before a Committee of Secretaries, the Road Transport and Highways Minister said after holding a meeting with Finance Minister. (ET) Seeking to reduce carbon emissions, the government said that a new efficiency rating system for air-conditioners, based on Indian climatic conditions, will be made compulsory for all models starting January 2018. (Livemint)
Corporate News AstraZeneca Pharma India has received a notice of termination from AstraZeneca UK, conveying its decision for termination of distribution agreement for Meronem (meropenem) in India. This is as a result of a global agreement by AstraZeneca PLC to sell the development and commercialisation rights to Pfizer Inc, of its late-stage small molecule antibiotics business. (BS) Tata Global Beverages may "restructure" China operations. According to Cyrus P Mistry, Chairman of Tata Group, there are challenges in these operations. (BL) Ending a long-run dispute over its shareholding, leading commodity exchange MCX said it has entered into an agreement with stock bourse MSEI to settle their dispute over warrant cancellation out of court. (ET) Swedish home furnishing giant IKEA AB said it would continue doing business with Welspun India while it awaits the outcome of the Indian textile manufacturer's probe into its sales practices. (Reuters) State Bank of India is planning to raise capital of up to Rs 111 bn through additional Tier-I (AT-1) bonds from domestic and international investors. (BS) Lupin said its subsidiary Gavis Pharmaceuticals has received approval from the US health regulator to market generic linezolid tablets used for treating bacterial infection in the American market. According to IMS MAT June sales data, Zyvox tablets had US sales of $273.6 million. (BS) 8K Miles Software Services Ltd announced its plans to raise Rs5 bn through a mix of instruments including issue of equity shares or convertible bonds through qualified institutional placement (QIP), among others. (BL) Indo Count Retail Ventures P. Ltd (ICRVL), a subsidiary of Indo Count Industries Limited (ICIL), has announced its entry into Rs 130 bn domestic bed linen market with the launch of 'Boutique Living' range of Bed Linen products. (BL) Source: ET = Economic Times, BS = Business Standard, FE = Financial Express, BL = Business Line, ToI: Times of India, BSE = Bombay Stock Exchange
Equity % Chg 24 Aug 16
1 Day 1 Mth 3 Mths
Indian Indices SENSEX Index NIFTY Index BANKEX Index SPBSITIP Index BSETCG INDEX BSEOIL INDEX CNXMcap Index SPBSSIP Index
28,060 8,650 22,209 10,659 14,939 10,803 15,161 12,515
0.2 0.2 0.0 0.4 (0.0) 1.5 0.7 0.7
(0.1) 0.2 2.2 (0.9) (4.7) 1.9 4.1 2.3
8.4 9.0 15.1 (5.9) 12.5 18.8 16.8 14.3
World Indices Dow Jones Nasdaq FTSE NIKKEI HANGSENG
18,481 5,218 6,836 16,597 22,821
(0.4) (0.8) (0.5) 0.6 (0.8)
(0.1) 2.4 1.9 (0.4) 3.6
3.5 6.6 9.1 (1.2) 11.9
Value traded (Rs cr) 24 Aug 16
% Chg - Day
2,815 18,386 480,738
(10.3) (0.1) 6.5
Cash BSE Cash NSE Derivatives
Net inflows (Rs cr) 23 Aug 16
% Chg
MTD
YTD
6 132
(106) (32)
7,950 350
38,833 9,139
FII Mutual Fund
FII open interest (Rs cr)
FII FII FII FII
23 Aug 16
% Chg
28,512 75,592 64,937 6,937
2.8 3.4 2.3 (1.5)
Index Futures Index Options Stock Futures Stock Options
Advances / Declines (BSE) 24 Aug 16
A
B
T
Advances Declines Unchanged
183 113 4
662 500 37
40 33 4
Total % total 885 646 45
Commodity
56 41 3
% Chg 24 Aug 16 1 Day 1 Mth 3 Mths
Crude (US$/BBL) Gold (US$/OZ) Silver (US$/OZ)
46.8 1,327.2 18.6
0.1 (1.1) (1.9)
8.5 0.4 (5.1)
(5.5) 8.4 14.4
Debt / forex market 24 Aug 16 1 Day 1 Mth 3 Mths 10 yr G-Sec yield % Re/US$
7.1 67.1
7.1 67.1
7.2 67.4
7.5 67.8
Sensex 28700 27200 25700 24200 22700 Aug-15
Nov-15
Feb-16
M ay-16
Aug-16
MORNING INSIGHT
August 25, 2016
ANALYST MEET UPDATE
GLAXOSMITHKLINE PHARMACEUTICALS LTD
Meeta Shetty, CFA
[email protected] +91 22 6218 4425
PRICE: RS.3070
RECOMMENDATION: NOT RATED
We attended the analyst meet of Glaxo Pharma, Glaxo has been facing pressure since last two years since the implementation of NLEM policy in Sep-2013. To revive growth Glaxo has earmarked huge capex for the next three years and is also looking at launching few products from its parent Glaxo UK's patented product basket in the Indian Pharma Market. Valuations for Glaxo is far higher than the large caps in the pharma space comparatively and is expected to remain so. Below are the key takeaways from the analyst meet :
Summary table (Rs mn)
CY13 FY15*
FY16
Sales 25383 32725 27411 Growth (%) (3.2) 28.9 (16.2) EBITDA 5282 6330 4789 EBITDA margin (%) 20.6 19.2 17.3 PBT 6853 8076 5769 Net profit 4817 4764 3768 EPS(Rs) 56.9 56.2 44.5 Growth (%) (14.3) (1.1) (20.9) CEPS(Rs) 59.2 59.2 47.4 BVPS(Rs) 234.9 215.9 200.2 DPS (Rs) 50.0 62.5 50.0 ROE (%) 24.2 26.0 22.2 ROCE (%) 30.6 38.3 29.0 Net debt (20,480) (19,080) (13,461) NW Capital (Days) 20.6 14.5 24.2 P/E (x) 53.6 54.2 68.5 P/BV (x) 13.0 14.1 15.2 EV/Sales (x) 9.36 7.30 8.92 EV/EBITDA (x) 44.98 37.76 51.08 Source: Company, Kotak Securities - Private Client Research; *FY15 numbers are for 15 months
Revenue break up – FY16
Glaxo remains a market leader in the vaccines segment in India (within the private sector market). Glaxo markets ~140 drugs along with 250 SKU's in the Indian Pharma Market (IPM). Glaxo has an MR strength of ~2500 and this has been constant over the past 1-2 years. Glaxo has planned a huge capex of over Rs 10.0 bn to be spent over the next 2-3 years. The capex is mainly towards a new facility in Vemgal, Karnataka and expansion of Nashik plant. Of the total capex, ~Rs 2.2bn has already been spent in FY16, Rs 6.3bn will be spent in FY17E and the rest in FY18E. Company expects the Vemgal facility to be readied by 1QFY18 and expects it to attain higher capacity utlisation by the second year of operations. The payback period for this plant is expected to be ~5 years. Glaxo expects its current capacity of ~12 bn units (including Nashik and CMOs) to double to ~24bn unit's post this capex spend of Rs 10.0bn. The major addition will come from Vemgal plant (which has a capacity of ~9.0bn units at double shift) and rest from Nashik expansion. The total number of CMOs which currently are at 24 and will come down to 20 in next 2 years. As far as new launches are concerned, Glaxo plans to launch total 7 products over the next 3 years from its parent's portfolio (most of the drugs are under patent). The launches include 3 products in the respiratory segment, 3 vaccines, 1 diabetes and one 1 probiotic product. Glaxo is on the lookout for inorganic opportunities through in-licensing or acquisitions. The NLEM portfolio contribution as of FY16 stood at 23%. The DPCO (price cut) impact for 1QFY17 was at Rs 0.20bn and would be ~Rs 1.0bn for FY17E. Glaxo has not been impacted much due to the FDC (Fixed Dose Combination) ban as they have limited drugs in the combination category. Glaxo expects the price increases to be ~5-6% every year (companies are allowed to take a price increase of ~10% on brands every fiscal, but competitive pressures allow companies to take a nominal increase).
Source: Company
Glaxo had an outstanding cash balance of Rs 13.3bn as of FY16. Glaxo has been facing constraints from its CMO (contract manufacturers) which led to a hit of Rs 3.5bn (Rs 2.0bn - Vaccines, Rs 0.50 - Neosprin, Rs 1.0bn other Rx) on revenues in FY16 and Rs 0.55bn hit in 1QFY17. Brand Neospirin was the key product hit due to the constraints particularly in 1QFY17 (Rs 0.50bn + for FY16 and Rs 0.35bn in 1QFY17). Company expects the supplies to restore for Neosprin and hence the supply constraints in coming quarters would be ony ~Rs 0.20bn / per quarter. Due to the restoring of supplies, Company expects Neospirin to gain back its revenue run-rate of Rs 1.2bn on a yearly basis.
Kotak Securities Limited has two independent equity research groups: Institutional Equities and Private Client Group. This report has been prepared by the Private Client Group. The views and opinions expressed in this document may or may not match or may be contrary with the views, estimates, rating, target price of the Institutional Equities Research Group of Kotak Securities Limited. Kotak Securities - Private Client Research
Please see the Disclosure/Disclaimer on the last page
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2
MORNING INSIGHT
August 25, 2016
Over the past year Glaxo has been seeing a strong volume growth in few of its key products wherein Augmentin has posted over 100% growth in FY15 and 57% growth in FY16. Seretide (post price cut) has grown at 100% in FY16. Synflorix (where the price cut has been ~40%) has grown at 64%). The Rabies Vaccine has grown at 90% to ~Rs 1.20bn brand in FY16 and the base vaccine business is growing at 50%. Company is targeting an EBIDTA margin of ~20% going ahead and the key drivers would be (1) reducing impact of supply constraints (2) Gross margin improvement (3) Capital investments (4) DPCO recovery. On GST, the company indicated that the rate at which GST will be implemented is very critical for the industry. Management believes, a rate of 1315% (which is also proposed by the industry) will lead to benefits in form of speed of delivery and better working capital management but any rate over 18% will lead to lower profitability. Revenue trajectory
Margins trajectory
Source: Company, *FY15 numbers are for 15 months
Source: Company, *FY15 numbers are for 15 months
Profit trajectory
Return ratios
Source: Company, *FY15 numbers are for 15 months
Source: Company, *FY15 numbers are for 15 months
Cash rich balance sheet
Working capital cycle
Source: Company, *FY15 numbers are for 15 months
Source: Company, *FY15 numbers are for 15 months
Kotak Securities - Private Client Research
Please see the Disclosure/Disclaimer on the last page
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MORNING INSIGHT
August 25, 2016
ENGINEERS INDIA LTD (EIL)
RESULT UPDATE Ruchir Khare
[email protected] +91 22 6218 6431
PRICE: RS.252 TARGET PRICE: RS.335
RECOMMENDATION: BUY FY18E P/E: 15.8X
EIL reported Q1FY17 results, much higher than our estimate, driven by meaningful growth in the consultancy orders execution and provision write back in LSTK (Lumpsun Turnkey Projects). Order inflows improved significantly in the quarter (highest in past eight quarters) driven by domestic hydrocarbon business. Management shared encouraging outlook for the domestic business and expects significant pickup in order inflows over 9MFY17/FY18. Management revised its FY17 order flows guidance to Rs 35 Bn from Rs 20 Bn earlier. Summary table (Rs mn)
FY16 FY17E FY18E
Sales 14,958 Growth (%) (12.7) EBITDA 1,600 EBITDA margin (%) 10.7 PBT 3921 Net profit 2,583 EPS (Rs) 7.7 Growth (%) (15.3) CEPS (Rs) 8.4 BV (Rs/share) 79.1 DPS (Rs) 5.0 ROE (%) 9.9 ROCE (%) 9.8 Net cash (debt) 26,238 NW Capital (Days)(131.3) EV/Sales (x) 3.9 EV/EBITDA (x) 36.7 P/E (x) 32.9 P/Cash Earnings (x) 30.0 P/BV (x) 3.2
16,386 9.5 3,605 22.0 6198 4,153 12.3 60.7 12.9 84.8 5.7 15.0 14.9 26,652 (83.9) 3.6 16.3 20.4 19.5 3.0
19,626 19.8 5,299 27.0 7885 5,362 15.9 29.1 16.5 94.1 5.7 17.8 17.6 30,393 (84.2) 3.0 11.1 15.8 15.2 2.7
Source: Company, Kotak Securities - Private Client Research
We reiterate our positive view on EIL and sharply revise our FY18 earnings estimate to factor in 1) improved order flows/execution driven by improved capex spending by domestic oil refineries and 2) improved profitability driven by higher proportion of consultancy orders. We have maintained in our earlier updates that EIL stock's rerating would track its order book growth. In the improved business environment (shared by the management and other industry players), at PER of 16.9x (FY18 core earnings; adjusted for cash) we believe that EIL stock is trading at attractive valuation. We expect EIL to significantly outperform the benchmark index in next 6-9 months; change valuation methodology (ascribe PER of 25x on FY18 core earnings, earlier valued on DCF basis) and maintain BUY rating with revised price target of Rs 335 (Rs 210 earlier) on company's stock. We expect company to report cash at Rs 28 Bn in FY18. Quarterly financials (Rs mn)
Q1FY17
Q1FY16
YoY %
Q4FY16
QoQ%
Revenues
3418
3914
(12.7)
2864
19.3
Employee expenses
1552
1550
0.2
1418
9.5
Sub-Contract Payments
349
617
(43.4)
305
14.6
Construction Material
127
1072
(88.2)
235
(46.0) 29.0
Other expenses
661
331
99.6
512
Total Expenses
2689
3569
(24.7)
2470
8.9
EBITDA
729
345
111.4
394
84.9
Other income
546
577
(5.4)
663
(17.7)
Depreciation EBIT Net Interest PBT
53
85
(37.6)
59
(10.2)
1222
837
46.0
998
22.4
0
0
1222
837
0 46.0
998
22.4
Total tax
422
301
40.3
304
38.9
PAT
800
536
49.2
694
15.2
49.2
EPS (Rs)
2.4
1.6
2.1
15.2
EBITDA (%)
21.3
8.8
13.8
55.0
Tax Rate (%)
34.6
36.0
30.5
13.5
Source: Company
Kotak Securities Limited has two independent equity research groups: Institutional Equities and Private Client Group. This report has been prepared by the Private Client Group. The views and opinions expressed in this document may or may not match or may be contrary with the views, estimates, rating, target price of the Institutional Equities Research Group of Kotak Securities Limited. Kotak Securities - Private Client Research
Please see the Disclosure/Disclaimer on the last page
For Private Circulation
4
MORNING INSIGHT
August 25, 2016
Result Highlights Revenue declined 12.7% YoY to Rs 3.4 Bn in Q1FY17 due to lower execution in LSTK segment due to depleting order backlog. Operating margin, however expanded sharply to 21.3% from 8.8% in Q1FY16 due to 1) increased proportion of PMC (Project Management Consultancy) division which attracts higher margins (PMC margins improved 300 bps YoY) and 2) provision write back in LSTK segment (trend expected to continue in 9MFY17). EBITDA increased 111.4% YoY, reported at Rs 729 mn in Q1FY17. Adjusted for provision write back (net impact Rs 95 mn), EBITDA margin would have been at 18.6%. In Q1FY17, PMC division reported 19.4% YoY increase in sales, reported at Rs 2.7 Bn. EBIT margin for the segment stood at 23.4% vis-à-vis 20.2% in Q1FY16 due to operating leverage. LSTP division revenues stood at Rs 732 mn in Q1FY17 vis-à-vis Rs 1.6 Bn in Q1FY16. LSTP division reported operating profit of Rs 271 mn vis-à-vis Rs 83 mn in Q1FY16 driven by provision write back. EIL reported provision write back of Rs 270 mn against Rs 310 mn provision made in Q4FY16. It also made fresh provision of Rs 130 mn against contractual obligation and Rs 45 mn for doubtful debt in Q1FY17. Thus net impact of provision write back has been close to Rs 95 mn in the quarter. Management stated that since most of the LSTK orders are over (or are at the verge of closure; currently EIL has two orders from ONGC and CPCL in backlog) such reversals would continue to get reported in next few quarters as well. EIL's order book is now concentrated around PMC division and LSTK revenue booking will remain small going ahead. Employee cost at Rs 1.5 Bn remained flat YoY in the quarter. Management stated that employee cost would likely remain at the current levels. Other costs including input costs are expected to come down with growing PMC volumes. Other income stood at Rs 546 mn in the quarter on back of strong balance sheet. EIL reported cash at close to Rs 26 Bn (close to Rs 79 per share) at the end of FY16. Segment Results (Rs mn)
Q1FY17
Q1FY16
YoY (%)
Q4FY16
QoQ (%)
Revenues PMC (Project management consultant)
2686
2251
19.4
2733
(1.7)
732
1655
(55.8)
1310
(44.1)
PMC (Project management consultant)
628
455
38.1
794
(20.9)
Lumpsum Turnkey Projects (LSTK)
271
83
227.7
-194
PMC (Project management consultant)
23.4
20.2
29.0
Lumpsum Turnkey Projects (LSTK)
37.0
5.0
-14.8
Lumpsum Turnkey Projects (LSTK) EBIT
Segment Margins %
Source: Company
Order inflows improved in the quarter; FY17/FY18 order inflows expected to pick up on back of tighter emission norms and brownfield expansions by OMCs EIL's order backlog grew substantially to Rs 54.6 Bn in the quarter against Rs 37.8 Bn in the end of FY16. Currently, PMC order book stands close to Rs 35.7 Bn (65% of total order book) and turnkey orders stands at Rs 18.9 Bn. Order inflows reported at Rs 20 Bn in the quarter (against Rs 4.9 Bn in Q1FY16), includes Rs 8.3 Bn and Rs 12.2 Bn of PMC and LSTK orders respectively. In FY16, order inflows stood at Rs 15.9 Bn which were primarily consultancy orders.
Kotak Securities - Private Client Research
Please see the Disclosure/Disclaimer on the last page
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MORNING INSIGHT
August 25, 2016
Management expects significant pickup in domestic order flows over FY17/FY18 and has revised order inflows guidance to Rs 35 Bn against Rs 20 Bn earlier. Order flows are likely to be driven by 1) upgradation of key refineries to BS-VI norms by the year 2020 (most of the orders already awarded/won by the company in Q1FY17), 2) large orders like Maharashtra refinery (40 mn tonnes project; value Rs 1 trillion, PMC scope could be 5-7% of total cost) to be executed by HPCl, BPCL, IOCL and HPCL Vizag refinery, 3) brownfield expansion of various refineries is likely to pick up and non-Hydrocarbons orders like Namami Ganga should also report growth. Management has also stated that most of the prospective orders would be in PMC division and execution shall pick up from Q3FY17 onwards. We concur with the management's view and note that the long term prospects of the business appears strong as strengthened financial health of OMCs (on back of low oil prices) augers well for EIL's business. Management had earlier stated that large greenfield orders van directly be assigned to EIL and not through competitive bidding. We note that this is a big positive for the company. Some of the potential orders can arise from the following Hydrocarbon expansion plans over FY17/18.
Project
Client
Scope
Estimated Consultancy Jobs Rs Bn
Bina refinery expansion
BPCL
Expansion from 6 mn MT to 7.8 mn MT
Bina refinery expansion
BPCL
9 mn MT Grassroot expansion
9 to 10
Kochi propylene derivatives
BPCL
Propylene derivatives
2.5 to 5
Bhatinda Expansion
HPCL
a) Low cost initial expansion. B) Doubling of capacity. C) Petrochemical integration.
4 to 4.5
1 to 1.25
Numaligarh Expansion
BPCL
Expansion of Vishakhapatnam refinery
HPCL
Expansion by 9 mn mt
Na
Barauni Refinery
IOC
Expansion by 6 mn MT and petrochemical integration
West Coast refinery
IOC
BPCL, HPCL, IOC
4 to 5 Na 9 to 10
Source: Company, Kotak Securities - Private Client Research
On overseas business front, EIL has moderated its positive view on Middle East and Africa orders. We believe that lower crude oil prices could lead to deferment in few overseas orders. Small/medium ticket sized orders would keep on getting awarded even at currently lower crude oil price level. Progress in Dangote refinery (contract value close to Rs 10 Bn), Nigeria has been satisfactory so far. Management has received payment of close to Rs 2 Bn from this job. Initiatives w.r.t. diversification into new areas like water management, Solar, Nuclear power and fertilizers are progressing at a reasonable pace. Management reiterated that sizable opportunities can arise in smart cities space. In Q1FY17, EIL reported entry level order of Rs 800 mn from Namami Ganga (potential size could be Rs 6 Bn). Similar orders are likely to be awarded in future as well.
Kotak Securities - Private Client Research
Please see the Disclosure/Disclaimer on the last page
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MORNING INSIGHT
August 25, 2016
List of Key Orders awarded (bagged) in Q1FY17
Source: Company
Company to maintain high growth in financials; asset light business model likely to result in value accretion We project revenue growth at 15% CAGR between FY16-18 from Rs. 14.9 Bn in FY16 to Rs. 19.6 Bn in FY18E driven mainly by improved order flows/execution in the domestic hydrocarbon business. We also expect timely execution in the international orders, especially Dangote project. We highlight that the proportion of PMC revenues is likely to increase in the overall revenue pie over FY17/18 and would lead to significant margin expansion going forward. Within the revenue streams, we expect PMC revenues to grow at 24% CAGR in the same period. We expect LSTK revenues to contract (despite winning Rs 12 Bn worth of orders in Q1FY17) as most of the orders are at the closure stage currently. Segment revenues (Rs bn)
20.00
Consultancy & Engineering
LSTP
15.00 10.00 5.00 0.00 FY14
FY15
FY16
FY17E
FY18E
Source: Company, Kotak Securities - Private Client Research
Kotak Securities - Private Client Research
Please see the Disclosure/Disclaimer on the last page
For Private Circulation
7
MORNING INSIGHT
August 25, 2016
We also believe that in FY17, operating margins will also be aided by provision write backs against closure of various LSTK projects which are currently at terminal stage. Further, we believe that most of the orders bagged recently, would start getting executed from Q4FY7 onwards. This would have an escalating effect on FY18 (and beyond) margins due to operating leverage (management guided to keep employee cost and other overheads at current levels; higher utilization rate expected drive EBITDA margin). We therefore build EBITDA margin at 21% and 27% in FY17 and FY18 respectively (significant revision in earnings; refer table below) in our projected financials. We expect PMC margins to expand to 28-30% in FY18. We expect PAT to grow at 44% CAGR between FY16-18 and core PAT at 97% CAGR (also aided by small base of FY16) in the same period. Margin trend
EBITDA Rs bn (LHS)
EBITDA% (RHS)
6.00
30.00
5.00
25.00
4.00 3.00
20.00
2.00
15.00
1.00
10.00
0.00 FY14
FY15
FY16
FY17E
FY18E
Source: Company, Kotak Securities - Private Client Research
We highlight that the company has a strong debt free balance sheet with net cash amounting to nearly Rs 79 per share. Lower capex and negative working capital would boost free cash flow generation in future. Change in earning estimate
Revenue
Revised
FY17 Old
% Chg
Revised
FY18 Old
% Chg
16386
16599
-1.3
19626
19,390
1.2
EBITDA
3605
2,988
20.6
5299
4,072
30.1
EBITDA (%)
22.0
18.0
27.0
21.0
PAT
4153
3,739
11.1
5362
4,604
PAT (Core)
2277
1,863
22.2
3457
2,807
23.2
EPS
12.3
11.1
11.0
15.9
13.7
16.1
6.8
5.5
22.0
10.3
8.3
23.6
EPS (Core)
16.5
Source: Kotak Securities - Private Client Research
Increase revenue growth and operating margin estimates to factor in improved ordering/execution in domestic hydrocarbon orders in FY17/18. We build higher proportion of PMC sales over FY17/18 (against earlier assumption) which is a high margin business. Change in revenue mix would have lower impact on sales estimate but much higher impact on the EBITDA. We arrive at target price of Rs 335 (Rs 210 earlier).
Kotak Securities - Private Client Research
Please see the Disclosure/Disclaimer on the last page
For Private Circulation
8
MORNING INSIGHT
August 25, 2016
Valuation Table (Rs mn) Core PAT
3,457
PER (x)
25
Net Cash
26238
Fair valuation
112659
Fair Valuation (Target Price) (Rs)
335
Source: Kotak Securities - Private Client Research
Valuation and recommendation We have maintained in our earlier updates that EIL stock's rerating would track order book growth. In the improved business environment (shared by the management and other industry players), at PER 16.9x (FY18 core earnings; adjusted for cash) we believe that EIL stock is trading at attractive valuation. We maintain BUY on Engineers India Ltd with a price target of Rs.335
Kotak Securities - Private Client Research
We expect EIL to significantly outperformance the benchmark index in next 9-12 months; change valuation methodology (ascribe PER of 25x on FY18 core earnings, earlier valued on DCF basis) and maintain BUY rating with revised price target of Rs 335 (Rs 210 earlier) on company's stock.
Please see the Disclosure/Disclaimer on the last page
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9
MORNING INSIGHT
Bulk deals
August 25, 2016
Trade details of bulk deals Date
Scrip name
24-Aug
BRPL
24-Aug
BRPL
24-Aug
BULL
24-Aug
BULL
24-Aug
BULL
24-Aug
Name of client
Buy/ Sell
Quantity of shares
Avg. price (Rs)
Hem Sec Ltd
S
1,04,000
34.5
Hem Chand Jain
B
1,00,000
34.5
Jayesh Rawal
B
27,000
20.6
Rakesh Navinchandra Sheth
S
25,000
21.0
Piyush Shah
S
25,000
21.0
CHROMATIC
Ambe Securities Pvt Ltd
S
15,00,000
3.8
24-Aug
INDIANACRY
Dheeraj Garg
B
12,75,340
17.8
24-Aug
INTELLADV
Olumpus Trading & Advisory Llp
B
7,75,000
14.4
24-Aug
INTELLADV
Sunil Optics Pvt Ltd
S
7,75,000
14.4
24-Aug
KAPILCO
Sangam Advisors Ltd
S
5,500
145.0
24-Aug
LINKPH
Madras Parameswaran M Mahadev
B
23,674
10.6
24-Aug
LINKPH
Raj Kumar Pasricha
S
22,540
10.6
24-Aug
NTCIND
Yashaswi Dugar
S
1,20,055
53.4
24-Aug
NTCIND
Loka Properties Pvt Ltd
B
2,41,605
53.7
24-Aug
NTCIND
Moti Lal Dugar Huf
S
67,200
54.5
24-Aug
PRISMMEDI
Gurudev Arbitrators Pvt Ltd
B
10,000
25.0
24-Aug
PRISMMEDI
Prakash Bai
S
18,400
25.0
24-Aug
PURSHOTTAM
Lani Merchandise Private Ltd
B
50,000
6.5
24-Aug
SANGFROID
Vishnuprasad Somabhai Patel
S
26,160
1.5
24-Aug
SUPREMETEX
Ajay Gupta
S
3,64,992
8.3
24-Aug
SYSCO
Atul Bhandari
S
40,000
23.0
24-Aug
VJTFEDU
Sam Financial Services Llp
B
93,889
53.0
24-Aug
VJTFEDU
Ajay Dilkush Sarupria
S
94,000
53.0
Source: BSE
Gainers & Losers
Nifty Gainers & Losers Price (Rs)
chg (%)
Index points
Volume (mn)
Gainers Aurobindo Pharma Maruti Suzuki Tata Power
788
7.0
NA
7.4
4,949
2.4
NA
1.0
76
2.2
NA
10.4
Losers Idia Cellular Lupin Ltd Tata Motors -
98
(2.6)
NA
14.4
1,522
(2.2)
NA
1.5
323
(1.5)
NA
1.2
Source: Bloomberg
Kotak Securities - Private Client Research
Please see the Disclosure/Disclaimer on the last page
For Private Circulation
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MORNING INSIGHT
August 25, 2016
RATING SCALE Definitions of ratings BUY
–
We expect the stock to deliver more than 12% returns over the next 9 months
ACCUMULATE
–
We expect the stock to deliver 5% - 12% returns over the next 9 months
REDUCE
–
We expect the stock to deliver 0% - 5% returns over the next 9 months
SELL
–
We expect the stock to deliver negative returns over the next 9 months
NR
–
Not Rated. Kotak Securities is not assigning any rating or price target to the stock. The report has been prepared for information purposes only.
RS
–
Rating Suspended. Kotak Securities has suspended the investment rating and price target for this stock, either because there is not a sufficient fundamental basis for determining, or there are legal, regulatory or policy constraints around publishing, an investment rating or target. The previous investment rating and price target, if any, are no longer in effect for this stock and should not be relied upon.
NA
–
Not Available or Not Applicable. The information is not available for display or is not applicable
NM
–
Not Meaningful. The information is not meaningful and is therefore excluded.
NOTE
–
Our target prices are with a 9-month perspective. Returns stated in the rating scale are our internal benchmark.
Fundamental Research Team Dipen Shah IT, Economy
[email protected] +91 22 6218 5409
Ruchir Khare Capital Goods, Engineering
[email protected] +91 22 6218 6431
Meeta Shetty, CFA Pharmaceuticals
[email protected] +91 22 6218 6425
Jayesh Kumar Economy
[email protected] +91 22 6218 5373
Sanjeev Zarbade Capital Goods, Engineering
[email protected] +91 22 6218 6424
Ritwik Rai FMCG, Media
[email protected] +91 22 6218 6426
Jatin Damania Metals & Mining
[email protected] +91 22 6218 6440
K. Kathirvelu Production
[email protected] +91 22 6218 6427
Teena Virmani Construction, Cement
[email protected] +91 22 6218 6432
Sumit Pokharna Oil and Gas
[email protected] +91 22 6218 6438
Pankaj Kumar Midcap
[email protected] +91 22 6218 6434
Arun Agarwal Auto & Auto Ancillary
[email protected] +91 22 6218 6443
Amit Agarwal Logistics, Paints, Transportation
[email protected] +91 22 6218 6439
Nipun Gupta Information Technology
[email protected] +91 22 6218 6433
Technical Research Team Shrikant Chouhan
[email protected] 91 22 6218 5408
Amol Athawale
[email protected] +91 20 6620 3350
Derivatives Research Team Sahaj Agrawal
[email protected] +91 79 6607 2231
Rahul Sharma
[email protected] +91 22 6218 5498
Kotak Securities - Private Client Research
Malay Gandhi
[email protected] +91 22 6218 6420
Please see the Disclosure/Disclaimer on the last page
Prashanth Lalu
[email protected] +91 22 6218 5497
For Private Circulation
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MORNING INSIGHT
August 25, 2016
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