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Ambit Capital and / or its affiliates do and seek to do business including investment banking with companies covered in its research reports. As a result, investors should be aware that Ambit Capital may have a conflict of interest that could affect the objectivity of this report. Investors should not consider this report as the only factor in making their investment decision.
Please refer to the Disclaimers at the end of this Report.
AMBIT INSIGHTS 24 June 2016
DAILY
Large cap "Sells" under coverage with more than 10% downside
SELLs TP (Rs)
Down (%)
FY17 P/E
Hindalco Inds 64 48 38.1
Tata Steel 175 48 67.2
Bajaj Finance 4,171 46 29.1
MMFS 195 39 20.0
Godrej Consumer 958 38 38.9
Kotak Mahindra Bk 510 32 31.0
Cummins 559 31 28.3
SHTF 813 29 15.9
Shree Cement 10,914 24 38.2
LIC HFC 382 22 13.9
Nestle India 5,100 21 54.0
SBI 175 20 15.5
Dabur India 250 18 38.4
Punjab National Bk 82 17 5.4
L&T 1,250 17 28.1
SAIL 37 16 186.1
Exide Industries 137 16 20.5
Zee 380 15 30.9
NTPC 126 15 14.0
Interglobe Aviation 890 12 16.9
Source: Bloomberg, Ambit Capital research
Note: Large-caps have been defined as stocks with Mcap greater than US$2bn
Thematic
Strategy
Do valuations help in identifying tenbaggers?
(Click here for detailed note)
Updates
Technology
Accenture’s beat and raise quarter gives comfort
Tata Power (BUY)
Unravelling the renewables acquisition conundrum
TAKE Solutions (NOT RATED)
At an inflection point
Strategy
Ten interesting things that we read this week
Analyst Notes: Mahindra & Mahindra: Reiterate SELL Ashvin Shetty, CFA, +91 22 3043 3285
In our recent initiation “M&M: Ain’t that tempting a collection” we highlighted that M&M’s tractor business contributes only 33% to the total EBITDA. Whilst we currently build in domestic tractor industry volume growth of 15% for FY17 (low base and expectation of normal monsoon), even if FY17 tractor volume growth was to be 30% (last 10-year CAGR of 6%), we do not see more than 5% upside to our valuation. Furthermore, the core domestic UV business faces increasing competition (from MNCs with product edge and large car incumbents with distribution advantages) and regulatory headwinds (surrounding diesel vehicles). We expect 560bps market share loss in UVs over FY16-20. Lastly, capital allocation is a key risk with cash flows of the core businesses funding several mobility/non-mobility businesses (57% of FY15-end core net worth). Our SoTP valuation of Rs1,285 implies 6.9 FY18 EV/EBITDA, a justifiable 25% discount to Maruti. Source: Ambit Capital research
Please refer to our website for complete coverage universe
http://research.ambitcapital.com
Ambit Capital and / or its affiliates do and seek to do business including investment banking with companies covered in its research reports. As a result, investors should be aware that Ambit Capital may have a conflict of interest that could affect the objectivity of this report. Investors should not consider this report as the only factor in making their investment decision.
Strategy
THEMATIC June 24, 2016
Do valuations help in identifying tenbaggers? Our Tenbaggers series that has outperformed the BSE500 by 10% per annum basis since inception in January 2012 has focused on quality stocks without paying heed to valuations. Whilst the valuations of such stocks has increased over the last four years, our analysis of past portfolios reveals that in the long term, even after filtering for quality, it’s strong earnings growth that explains this outperformance rather than starting valuations. Given these results, we reiterate our 5 Jan 2016 Tenbaggers 5.0 portfolio and point to five stocks that have the highest potential for EPS growth - Marico, Berger Paints, Page Industries, TVS Motors and Supreme Industries
The greatness philosophy works Consistent improvements in corporate performance are more important than ’great leaps’—this has been the guiding philosophy of our ’greatness‘ framework, which lies at the core of our process of identifying structurally sound businesses. Not only do the great firms perform significantly better than an average firm on a variety of measures, more importantly, they show a more consistent and calibrated approach to growth over long periods. Our Tenbaggers series has relied on this approach over the last five iterations and has cumulatively delivered ~24% CAGR returns vs. BSE500 CAGR return of 14% since 19 Jan 2012.
While quality has become expensive… The lacklustre earnings and revenue growth for the Nifty clearly demonstrates the acute stress our economy has been under over the last four years. The three resets incorporated by PM Modi (see our note dated 23 Mar 2015) combined with banking sector asset quality stress have led to the investment engine of the economy came to a standstill. In such a stressed environment, investors have been parking money in high quality stocks inspite of their high valuations. As a result, the relative valuations of quality stocks has increased continuously over this period. This raises the question of “Does it still makes senses to invest in high quality stocks without paying heed to their valuations?”
… it outperforms relative ‘value’ on the back of strong earnings growth We tested the relevance of using valuations as a stock selection parameter by comparing the returns of: a) stocks that cleared our ‘greatness’ filter of 67% vs. stocks that cleared this filter plus were cheap relative to their own 5 year average valuations (on P/E, PB and EV/EBITDA); and b) our published Tenbaggers portfolios of 30 stocks vs. stocks from this list that were cheap relative to their own 5 year average valuations (on P/E, P/B and EV/EBITDA). We found that richly valued stocks continued to outperform ‘cheap’ stocks on the back of stronger earnings growth thus proving the point that over a long term it’s the fundamental performance (earnings growth in this case) and not relative valuation that drives investment returns.
Investment Implications Our analysis shows that expensive stocks continued to outperform as they delivered stronger earnings growth year on year relative to ‘cheap’ stocks. Hence, we reiterate our 5 Jan 2016 Tenbaggers 5.0 portfolio which has already delivered 4.3% return since incepetion. Specifically, we highlight five stocks from the portfolio (see right hand margin) with the potential for highest EPS growth over FY16-18 period: Marico, Berger Paints, Page Industries, TVS Motors and Supreme Industries
Ten-baggers 5.0 stocks with strongest EPS growth potential
Ticker Company Mcap (US$ mn)
FY16- FY18E EPS
CAGR*
MRCO IN Marico 4894 28%
BRGR IN Berger Paints 2989 28%
PAG IN Page Industries 2243 33%
TVSL IN TVS Motors
2,084 49%
SI IN Supreme Industries 1633 50%
Source: Ambit Capital research*Ambit estimates
Cheaper Quality stocks underperformed expensive stocks…
Source: Ambit Capital research Note: The ‘greatness’ and ‘greatness +value’ portfolios were constructed on an equal weighted basis as of 18 Jan’12 and were run without any rebalancing till 17 Jun’16
…as earnings growth was relatively lower
Source: Ambit Capital research Note: The earnings growth is for ‘greatness’ and ‘greatness +value’ portfolios constructed on 18 Jan’12
Research Analyst
Prashant Mittal, CFA +91 22 3043 3218 [email protected]
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AMBIT INSIGHTS
Ambit Capital Pvt Ltd 24 June 2016
Technology Accenture’s beat and raise quarter gives comfort Accenture’s revenue growth of 10% YoY (cc terms) is 2% ahead of consensus and its own guidance. Irrespective of macro-economic environment, demand for IT Services from future-ready vendors like Accenture remains high. Digital, cloud and security now account for 40% of Accenture’s revenues; company continues to eye emerging trends like AI, drones, IoT, etc. It intends to spend US$1bn in digital acquisitions this year. BFSI revenues grew 12% YoY (cc terms) and Europe grew 12% YoY. We remain positive on Indian IT on two counts. One, we view Accenture’s solid growth (3rd consecutive beat-and-raise quarter) despite its size (US$32bn) boosts confidence on healthy demand for IT services. Two, we maintain that as digital projects get larger, clients will refocus on costs – Indian IT’s traditional competitive advantage. HCLT (recent de-rating due to bad communication; IMS leader) and TechM (margins to improve, telecom leader) are our top picks.
Beat and raise quarter
Revenue growth of 10% YoY (cc terms) was 2% higher than guidance and consensus estimates.
Raised revenue growth guidance to 9.5-10.5% for FY16 (cc terms) vs 8-10% three months ago primarily driven by the products and health & public services segments.
Key takeaways
Digital, cloud and security businesses continue to grow rapidly and now accounts for 40% of total revenues. Digital revenue grew 30% YoY. The legacy businesses (remaining 60%) managed to report “growth” during the quarter, signalling that cannibalization from digital is not severe.
Artificial intelligence is a focus area for Accenture. It launched two new practices in the quarter, including Amelia (in partnership with IPSoft) and Accenture MyWizard.
Will hire fewer people in FY16 compared to FY15 due to: (1) automation (“still early days, but a big focus area”), (2) revenue-productivity and (3) lower attrition. Management expects that because of the first two factors headcount growth will remain lower than revenue growth.
BFSI segment grew a healthy 12% YoY in cc terms driven by banking and capital markets sub-segment. Digital and automation are key areas of spend in BFSI though this is an industry still under cost pressure, especially in Europe, due to negative interest rates and high regulatory constraints. Management expects some moderation in growth rates in future from European clients.
Communications was flat YoY due to declines in Europe and N. America. This is possibly because client’s M&A-driven spend is now starting to moderate.
Where do we go from here?
In each of the three quarters (Aug-ending) of FY16, the company increased its growth guidance starting from 5-8% cc growth at the beginning of the year to 9.5-10.5% currently. We view Accenture’s solid growth despite its large size (US$32bn) as a vote of confidence for the healthy demand environment for the IT services industry. Accenture’s management said the clients’ rotation towards digital technologies has been driving the company’ growth and this trend is expected to continue in future.
POSITIVE Quick Insight Analysis Meeting Note News Impact
Research Analysts
Sagar Rastogi [email protected] Tel: +91 22 3043 3291 Kushank Poddar [email protected] Tel: +91 22 3043 3203
AMBIT INSIGHTS
Ambit Capital Pvt Ltd 24 June 2016
Currently, niche digital vendors (like Globant) and MNC vendors with consulting capabilities (like Accenture) are winning in the early leg of the digital race. But once the opportunity matures and digital projects get larger, costs will once again become important, playing into the traditional competitive advantage of Indian IT services companies. HCLT and TechM are our top picks.
HCLT: The current de-rating (13x one-year-forward EPS vs. 15x, just 4 months ago) is due to miscommunication by management – revenue growth in the last quarter was below guidance and management abruptly discontinued margin guidance. This will normalise once investors are assured about limited margin deterioration in the core business (ex-Volvo deal, we assume only 50bps deterioration YoY in margins). Our DCF-based target price implies 15x FY18E EPS. Our channel checks assure us of HCLT’s strong competitive advantage in fast-growing service lines like infrastructure management and engineering services. High exposure to these, at ~55% of revenue (vs 20%/11% for TCS/Infosys) should ensure HCLT continues to outperform peers over the next 2-3 years with respect to revenue growth. EBIT margin would also normalise as it has in the past (FY16A: 20%, FY17E: 19%, FY18E: 19.5%).
TechM: TechM is our other top pick in the technology sector because our thesis of margin expansion and telecom revenue growth acceleration is playing out, whereas consensus remains unconvinced. TechM has ample headroom to improve EBIT margin (FY14A: 19.4%, FY16A: 13.5%, FY18E: 16.5%) from automation, code reuse and restructuring of past acquisitions. Our channel checks with industry participants as well as conversations with the Chief Technology Officer of TechM give us confidence. Telecom segment should also return to growth driven by M&A-related integration spend by clients and pipeline of large deals in digital and network management services. We expect FY16-18 EPS CAGR of 14%. There is also room for re-rating of current valuations of 12x FY18E EPS – our DCF-based target price implies 15x FY18E EPS.
Exhibit 1: Accenture reported revenue growth ahead of consensus estimates and its own guidance
US$mn May-16 May-15 YoY Feb-16 QoQ Consensus est. % Diff
Revenue 8,435 7,770 8.6% 7,946 6.2% 8,291 1.7%
EBIT 1,306 1,134 15% 1,088 20% 1,310 -0.3%
EBIT margin 15.5% 14.6% 90bps 13.7% 180bps 15.8% -30bps
Adj EPS 1.4 1.2 16% 2.1 -31% 1.4 2%
Source: Company, Ambit Capital research; Note: For comparison purpose, we have excluded US$64mn pension settlement charge from the reported numbers for May-2015 quarter.
Exhibit 2: Accenture raises FY16 revenue growth guidance by 1% (mid-point)
FY16 outlook Latest Previous
Revenue Growth (cc terms) 9.5-10.5% 8-10%
cc impact -4.5% -5.0%
EBIT Margin (%) 14.6% 14.6-14.7%
Adj. EPS ($/share) 5.29 - 5.33 5.21 - 5.32
Effective tax rate (%) reiterated 22.5-23.5%
Operating Cash Flow (US$mn) reiterated
Capex ($mn) reiterated $500mn
Free Cash Flow reiterated $3.6 - $3.9bn
Source: Company, Ambit Capital research
AMBIT INSIGHTS
Ambit Capital Pvt Ltd 24 June 2016
Tata Power Unravelling the renewables acquisition conundrum We interacted with a solar industry expert to better understand the nuances of Tata Power’s acquisition of Welspun’s solar portfolio. Welspun’s average solar tariff of Rs8/unit is not aggressive given high capital cost of Rs80mn per MW. SEBs are unlikely to back down power from these plants citing higher tariff as renewables has high priority on merit order dispatch. Back down has happened in wind in Rajasthan and Maharashtra due to grid bottlenecks caused by volatile generation pattern; both states have high degree of RPO compliance. Further, most of Welspun’s solar projects are in Madhya Pradesh, Andhra, Karnataka and Tamil Nadu – all solar friendly states given 64% cumulative market share in record solar bidding of 12.7GW in FY16. EV of Rs81mn/MW quoted for Welspun’s projects is not comparable to the current replacement cost of Rs60mn/MW given higher tariff and capital cost of acquired assets. This EV (1.4x P/B) should be seen in light of attractive equity IRR of 28.3% (calculated).
Key takeaways of our call with an expert Solar PPA despite higher tariff may not face back down from SEBs: There is a general concern in the market that Welspun’s solar projects may face offtake challenges given the higher tariff of Rs8/unit vs thermal tariff range of Rs3-Rs5/unit and recent solar tariff of Rs4.34-5.0/unit. The genesis of the concern is coming from several wind projects especially in states like Rajasthan, Maharashtra and Tamil Nadu seeing back down. As per our expert, the reason for back down is not higher tariff but grid bottleneck issues given wind generation is very volatile (surges with increase in wind speed). Solar generation is not volatile given uniform radiation across India.
Welspun’s solar projects are in states which have seen lot of interest in recent bids piloted by SECI: FY16 saw record bidding of 12.7GW of solar projects piloted by Solar Energy Corporation of India (SECI). Tamil Nadu, Madhya Pradesh, Karnataka and Andhra cumulatively saw bids worth 8.1GW; implying 64% market share. Given Welspun’s solar projects are primarily located in these states it can be implied that Welspun has projects in some of India’s best solar states. Note that FY16 was an inflection year for solar given bidding of 12.7GW (vs India’s installed capacity of 3.5GW).
Exhibit 1: Tamil Nadu, Madhya Pradesh, Karnataka and Andhra cumulatively saw bids worth 8GW; implying 64% market share
State Capacity (MW) Share of total (%)
Tamil Nadu 908 7%
Madhya Pradesh 1,262 10%
Karnataka 3,040 24%
Andhra Pradesh 2,850 23%
Four states 8,060 64%
Others 4,595 36%
Total 12,655 Source: Industry, Ambit Capital research
BUY Quick Insight Analysis Meeting Note News Impact
Stock Information Bloomberg Code: TPWR IN
CMP (Rs): 73
TP (Rs): 103
Mcap (Rs bn/US$ bn): 205/2.9
3M ADV (Rs mn/US$ mn): 403/6.3
Stock Performance (%)
1M 3M 12M YTD
Absolute 3 17 (1) 8
Rel. to Sensex (4) 10 1 4
Source: Bloomberg, Ambit Capital research
Ambit Estimates (Rs bn)
FY16 FY17 FY18
Revenues 374.8 378.7 390.7
EBITDA 79.9 78.8 84.2
EPS (Rs) 4.3 5.2 8.5
Source: Bloomberg, Ambit Capital research
Research Analysts
Bhargav Buddhadev [email protected] Tel: +91 22 3043 3252
Deepesh Agarwal, CFA [email protected] Tel: +91 22 3043 3275
AMBIT INSIGHTS
Ambit Capital Pvt Ltd 24 June 2016
Exhibit 2: Tamil Nadu, Madhya Pradesh, Karnataka and Andhra account for 82% of Welspun’s total solar projects of 1GW
State Capacity (MW) Share in total (%)
Tamil Nadu 300 30%
Madhya Pradesh 150 15%
Karnataka 134 13%
Andhra Pradesh 230 23%
Four states 814 82%
Others 180 18%
Total 994 Source: Company, Ambit Capital research
Replacement cost for renewables projects vary with tariffs and capital costs: There is no thumb rule of replacement cost for renewable projects given varied tariffs for each plant and significant difference in capital cost incurred across projects given a significant correction in equipment cost. So, it will not be fair to compare Tata Power’s acquisition price of Rs81mn EV per MW for Welspun’s assets with the ongoing capex per MW of Rs60mn/MW. This is because the capital cost incurred by Welspun’s projects is Rs80mn/MW as seen in exhibit below and, hence, the average tariff is higher at Rs8/unit vs the recent solar bids of Rs4.5-5.0/unit.
AMBIT INSIGHTS
Ambit Capital Pvt Ltd 24 June 2016
Exhibit 3: Average project cost and tariff for Welspun’s solar projects are Rs80mn per MW and Rs8/unit respectively
Project Capacity (MW) Debt (Rsmn)# Project cost (Rsmn)
Rsmn /MW Tariff (Rs/unit)
Solar
Andhra Pradesh Ananthpur 5 NA NA NA 12.6
Vemulapadu & Lomada 100 5,625 7,500 75 6.0
Ananthpur 100 7,125 9,500 95 NA
Various 25 NA NA NA NA
Bihar
Banka 40 NA NA NA 15MW - 8.56; 15MW - 8.64;
10MW - 8.7 NA 4 NA NA NA Gujarat Surendranagar 30 3,488 4,650 155 Anjar, Kutch 15 NA NA NA 8.14
Various 5 552 736 147 Till Jan'24 - 15; thereafter - 5.0
Karnataka Chitradurga 100 NA NA NA 50MW - 7.01;
50MW - 7.09 Various 15 NA NA NA NA
Chitradurga 19 926 1,235 65 8.05
Maharashtra Baramati - 60% share 51 2,813 3,750 74 MERC approved
Solapur 22 1,350 1,800 82 8.56
Madhya Pradesh Mandsaur and Neemuch 125 938 12,500 100 8.05
Various 25 NA NA NA NA
Punjab
Bhatinda 32 2,019 2,692 84 20MW - 8.33; 10MW - 8.42;
2MW - 8.56 Various 6 NA NA NA NA
Rajasthan
Phalodi, Jodhpur 50 3,545 4,727 95 20 MW - Rs 7.97; 15MW - Rs 8.05; 15MW - Rs 8.14
Various 21 NA NA NA NA
Tamil Nadu Trichy 300 NA NA NA 7.01
Uttar Pradesh Various 3 NA NA NA NA
Total solar 994 55,664* 79,520* 80* 8.00
Wind Rajasthan Pratapgarh 126 6,300 8,400 67 5.93
Jaisalmer 20 1,000 1,333 67 5.64
Total Wind 146 6,813 9,733 67 5.89
Total capacity - Operational 990 - Under-construction (entirely solar) 150 Total capacity 1,140 62,477 89,253 78 7.73
Source: Industry, MNRE, Company, Ambit Capital research, Note - * as per management guidance, # original debt; NA – not available
AMBIT INSIGHTS
Ambit Capital Pvt Ltd 24 June 2016
Tata Power’s valuation for Welspun’s assets of 1.4x invested equity may be better off than building greenfield project at less than Rs5/unit tariff: Current solar tariff bids of Rs4.35-Rs4.63/unit for solar projects to be commissioned in FY17 are extremely aggressive as many of these developers have assumed reduction in panel prices and USD/INR rates to remain constant, i.e. they may not have hedged their forex exposure. Given these aggressive assumptions, it becomes very difficult for a conservative developer like Tata Power to participate in these bids. Consequently, the only option is to look at operational projects with attractive tariff and, hence, the Welspun acquisition. Whilst optically the acquisition at 1.4x invested equity looks expensive, when seen in light of equity IRR of 28.3% (assuming debt gets refinanced at 10% interest rates vs 11-12% presently) the acquisition seems to be value accretive.
Exhibit 4: Recent solar bids have been very aggressive
Name Year
Capacity on
Offer (MW)
Highest Bid (Rs/KWh)
Lowest (Rs/KWh)
Bid
Weighted Avg. Price
(Rs/KWh)
Tamil Nadu Mar'13 150 14.50 5.97 8.34
Telangana May'15 500 7.45 5.00 7.16
Telangana Group 1 Oct'15 500 5.98 5.20 5.73
Telangana Group 2 Nov'15 1500 5.99 5.09 5.62
AP-500 MW Bundling scheme Nov'14 500 5.00 4.63 4.63
AP-350 MW Bundling scheme Dec'15 350 4.36 5.12 4.63
Haryana (State scheme) Dec'15 150 4.78 6.71 5.12
Rajasthan-420 MW Bundling Jan'16 420 4.63 6.46 5.00
UP-100 MW Bundling Jan'16 100 4.63 4.35 4.35
Source: MNRE, Industry, Ambit Capital research
Exhibit 5: Valuation of 1.4x invested equity looks fair given…
Particulars Rsmn
Transaction value EV A 92,490
Outstanding Debt B 55,000
Equity value C 37,490
Investments by Welspun Original investment D 89,253
Original debt E 62,477
Equity investment F 26,776
Equity valuation (x) 1.4
Source: Ambit Capital research
Exhibit 6: …equity IRR of 28.6% assuming 100% debt funding
Case 1: 100% debt funding
Case 2: 70% debt funding
Equity IRR (%) 28.6% 17.3%
NPV (Rsmn) 11,708 7,901
Value per share (Rs/share) 4.3 2.9
Source: Ambit Capital research
Valuations: Mundra and Bumi overshadow Mumbai circle and SED
Mundra and Bumi account for just 13% of our SOTP; Mumbai circle, TPDDL and Tata SED together account for 44% of SOTP (~22% of capital employed). The value-accretive businesses will consume ~60% of incremental capital deployed over FY16- FY19 whilst the balance gets consumed in other smaller assets and maintenance of Mundra. Assuming Mundra breaks even due to the compensatory tariff hike (click here for our note dated 8th April 2016), the valuation multiple for other businesses would re-rate as investor concerns over cash burn at Mundra would abate.
Though there is no clear peer for Tata Power given its presence in multiple businesses (power generation, transmission, distribution, coal mining and defence), when we compare it with utilities like CESC, KSK, RattanIndia, JSPL, Lanco, JP Power, NHPC, Adani Power, NTPC, Torrent Power and JSW Energy, we find that it trades at 8% discount to peers at 1.3x FY17 P/B.
AMBIT INSIGHTS
Ambit Capital Pvt Ltd 24 June 2016
Exhibit 7: Tata Power is trading at 8% discount to peers on FY17E P/B
Company CMP Mcap (US$mn)
P/B (x) P/E (x) RoE (%) CAGR (FY16-18) (%)
FY16 FY17 FY18 FY16 FY17 FY18 FY16 FY17 FY18 Revenue EPS
CESC 570 1,122 1.3 1.2 1.0 21.1 11.2 8.0 5.9 10.0 12.8 9.4 NA
KSK 173 1,237 NA NA NA 8.2 9.1 NA 14.3 11.4 NA NA NA
JSPL 81 1,966 1.6 1.4 1.3 10.5 9.9 9.5 15.6 14.8 13.9 3.8 (4.6)
Lanco 5 192 NA NA NA NA NA NA NA 80.6 20.4 50.6 58.9
JP Power 29 1,456 1.7 1.5 1.5 NA NA NA (18.9) 0.1 3.6 2.5 NA
NHPC 24 4,012 0.8 0.8 0.8 10.4 9.5 8.4 8.2 8.8 9.8 7.9 (10.4)
Adani Power 29 1,456 1.7 1.5 1.5 NA NA NA (18.9) 0.1 3.6 2.5 NA
JSW Energy 80 1,974 1.5 1.4 1.3 10.1 10.5 8.9 16.1 14.0 14.9 1.6 6.7
Torrent Power 173 1,230 1.1 0.9 0.9 8.9 7.1 8.9 12.0 14.3 10.2 (8.4) (17.0)
NTPC 149 18,483 1.4 1.4 1.3 12.0 14.0 11.2 12.0 9.7 11.7 14.1 3.5
Tata Power 73 2,971 1.5 1.3 1.1 17.1 14.0 8.6 16.1 9.8 13.6 2.1 41.2
Sector median 1.5 1.4 1.3 10.4 9.9 8.9 12.0 10.7 11.7 3.8 (0.6)
Divergence 3% -8% -13% 64% 41% -4% 410bps -90bps 190bps -170bps 4180bps
Source: Bloomberg, Ambit Capital research, Note: Prices as on 13 June 2016
AMBIT INSIGHTS
Ambit Capital Pvt Ltd 24 June 2016
Consolidated financials Balance Sheet
Year to March (Rs mn) FY14 FY15 FY16 FY17E FY18E
Networth 113,238 125,421 131,139 157,531 180,553
Loans 366,767 387,049 393,961 344,135 331,027
Other liabilities 120,739 56,708 120,826 101,786 87,987
Sources of funds 600,745 569,178 645,926 603,453 599,567
Net block (incl. CWIP) 467,823 483,896 507,462 470,478 462,216
Net current assets (18,159) 51,901 (15,966) (2,251) 15,924
Investments 151,081 33,381 154,430 135,226 121,427
Application of funds 600,745 569,178 645,926 603,453 599,567
Source: Company, Ambit Capital research
Income statement
Year to March (Rs mn) FY14 FY15 FY16 FY17E FY18E
Revenue 356,487 343,669 374,802 378,671 390,706
EBITDA 77,065 69,405 79,912 78,789 84,244
Depreciation 27,296 21,742 23,764 22,963 23,681
Interest expense 34,399 36,993 34,765 27,983 25,768
Other income (5,619) 3,523 790 2,612 3,649
PBT 9,751 14,193 22,172 30,455 38,444
Provision for taxation 10,084 10,749 8,693 13,705 12,687
Consolidated adj PAT (2,600) 1,034 11,539 14,138 23,022
EPS diluted (Rs) (1.1) 0.4 4.3 5.2 8.5
Source: Company, Ambit Capital research
Cash flow statement
Year to March (Rs mn) FY14 FY15 FY16E FY17E FY18E
PBT 9,751 14,837 22,172 30,455 38,444
Deprecaition + Interest 60,147 58,735 58,797 50,946 49,449
WC changes (226) (5,611) 10,854 469 3,893
Others 4,706 (1,208) (2,111) (2,612) (2,736)
Tax (9,546) (8,085) (10,450) (13,705) (12,687)
CFO 64,831 58,668 79,262 65,553 76,364
CFI (37,418) (38,749) (16,350) (17,145) (15,419)
CFF (32,654) (64,399) (102,631) (56,495) (59,173)
FCF 21,745 24,402 62,911 48,408 60,945
Source: Company, Ambit Capital research
Ratio analysis / Valuation parameters
Year to March FY14 FY15 FY16E FY17E FY18E
Revenue growth (%) 7.9 (3.6) 9.1 1.0 3.2
EBITDA margin (%) 21.6 20.2 21.3 20.8 21.6
Net margin (%) (0.7) 0.5 3.1 3.7 5.9
RoCE (%) 10.8 9.8 6.3 6.2 8.7
RoE (%) (2.3) 1.4 8.8 9.8 13.6
Net debt / Equity (x) 3.1 2.8 2.9 2.0 1.5
P/E (x) NA NA 17.1 14.0 8.6
P/B(x) 1.5 1.5 1.5 1.3 1.1
EV/EBITDA(x) 5.3 5.9 5.1 5.2 4.9
EPS diluted (Rs) (1.1) 0.4 4.3 5.2 8.5
Source: Company, Ambit Capital research
AMBIT INSIGHTS
Ambit Capital Pvt Ltd 24 June 2016
TAKE Solutions At an inflection point TAKE’s US$165mn deal win will further improve performance (net income grew 51% in FY16 along with improvement in receivables and top-client mining). Management has guided for 25% revenue CAGR (organic, USD) over the next three years along with profitability improvements (EBITDA margin guidance of 24% in FY18 vs 21% in FY16). TAKE’s competitive advantages of domain expertise, embedded IP and thought leadership are finally coming together in an attractive but difficult to break into domain (addressable market of US$27bn growing 10% CAGR). Current valuations (13x consensus FY17 earnings) are not factoring any of the above as the Street remains sceptical (poor track record until FY15) but primary and secondary checks give us confidence that it will not falter again. Could it be at an inflection point like Hexaware which, after its first large deal win in 2010, won many more large deals and posted 10x stock price returns over the next five years?
Offers a compelling value proposition for life sciences Given blockbuster drug patent expirations and the rising cost and time of developing new drugs, increasing competition from generic manufacturers, and tightening regulatory environment, the life sciences industry is increasingly outsourcing across functions.
Earlier, big pharma could afford even low-end work such as statistical analysis, preparing regulatory dossiers, etc. to be performed by highly paid scientists in its research departments. They were also afraid to outsource because of concerns around execution or data security. As per Wipro, a single day’s delay in filing costs life sciences companies US$3mn/day! However, over the last few years, life sciences companies have started to outsource low-end work to vendors with proven track records, so that their scientists can focus on their core high-end work.
Further, big pharma is not investing in early-stage drugs (phase 1 or phase 2 clinical trials) which are instead being done by small teams of scientists. If successful, these drugs are in-licensed by big pharma. These research-only start-ups are not encumbered by legacy and try to outsource as much of the low-end work as possible.
Exhibit 1: The global pharma industry is outsourcing more
Source: Company; FIPCO: Fully Integrated Pharma Company, FIPNET: Fully Integrated Pharma Network
TAKE helps life sciences companies outsource clinical, regulatory and safety functions. As per the Transparency Market Research, an industry analyst firm, this is a US$27bn market growing 10% CAGR.
As per the Transparency Market Research, an industry analyst firm, TAKE addresses a US$27bn market growing 10% CAGR.
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Many of its senior employees have worked at Life Sciences firms in these functions and therefore enjoy the benefit of trust in customer relationships as well as respect for their domain expertise. Once it has entered a customer, TAKE mines the customer by expanding across drugs in the same therapeutic area and cross-selling all its services. It has a 3x3 matrix of offerings with three verticals (clinical, regulatory and safety) and three horizontals (consulting, technology, outsourcing). The exhibits below explain how it used this strategy to mine one of its largest clients.
See our note dated 28th Oct 2015 for more details.
Exhibit 2: Case study of TAKE’s mining of a top-5 global pharma client
Source: Company
Primary and secondary checks indicate strong competitive advantages TAKE’s domain expertise, use of proprietary software embedded in its services, and thought leadership are unique among peers. For instance, about a quarter of its workforce consists of employees with at least 10 years of work-experience and/or specialised qualifications such as MD or PhD. We reckon that even the large IT services companies have only 5-10% of their workforce consisting of such people. The domain expertise is also highlighted by their development of proprietary software such as PharmaReady which automates a number of tasks related to regulatory filings, e-labelling, etc. This allows them to execute tasks with a fewer number of people and at higher quality compared to peers. Finally, TAKE not only houses a top-notch consulting firm (competes with Deloitte), but also owns industry networks which are platforms for industry peers to learn best practices from each other in an open environment, provide benchmark information, discuss key issues such as recent regulatory action, etc. These provide TAKE with an edge for capturing consulting and downstream business.
The above are reflected in comments by customers (we spoke to five pharma customers including both US and Indian companies) as well as high rankings given by third-party industry research firms such as IDC.
“(On being asked if Cognizant ever pitched to them). Cognizant pitched to us once for offshoring. But we didn’t go ahead with that. In my mind, Cognizant and Navitas offer very different services. One is about offshoring, the other is not. Navitas does very specialised work really well and we were interested in outsourcing, not offshoring. They know exactly what I need and I don’t need to explain them again and again what I need.”
TAKE’s domain expertise, use of proprietary software embedded in its services and thought leadership are unique among peers.
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- VP, Global safety and risk management, US pharma company
“Our organisation had been working with TAKE Solutions on the clinical and regulatory side for over ten years and so when we wanted to implement Argus Safety (a pharmacovigilance platform owned by Oracle), TAKE was automatically considered. We needed a vendor who understood the Argus Safety system, understood the life sciences domain and would be willing to provide back-end support as we in-sourced the front-end. There were hardly 2-3 vendors in the country that qualified. We eventually chose TAKE even though it was not the lowest bidder.”
- Head, Pharmacovigilance Medical Services, Indian pharma company
“We had suffered data integrity issues in the past due to a quality management system that was paper-based. We needed a foolproof solution that would build trust with the regulator and with our customers. We finally chose TrackWise (an enterprise quality management software owned by Sparta Systems). TAKE has done a wonderful job for us. What we love about them is that they go above and beyond the call of duty when required, unlike some other vendors who only stick to the letter of the contract”
- Senior General Manager – IT Global Head, Indian pharma company
“TAKE’s top people are life sciences experts who understand technology in that context. In contrast, <vendor-name-redacted>’s top people consist of IT experts who have been trained in life sciences. This makes a big difference.”
- Senior employee in the clinical department of a US pharma company
Exhibit 3: IDC rates TAKE very highly in the area of worldwide life sciences R&D IT outsourcing and drug safety services
2011 Vendor Assessment
2013 Vendor Assessment
Source: IDC
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Current metrics do not do justice to the competitive advantages In FY16, TAKE reported EBIT margin of 14% vs 26% for TCS. TAKE has a differentiated business model with more than 50% of its employees based in high-cost locations as opposed to less than 20% for peers and a higher proportion of revenue from resale of third-party software (e.g. Oracle’s Life Sciences Data Hub) which has lower margins than pure services. Whilst the company does not report the exact proportion of revenues from re-sale of third-party software, our channel checks indicate that this should be about 10-15% vs less than 5% for the mid-sized IT services companies. Given the early stage of its evolution, TAKE is also aggressively investing in sales, marketing and product-development expenses.
TAKE’s profitability clearly has scope for improvement (as investments in sales, marketing and product development start to yield results in the form of larger, more complex deals). Management has guided to EBITDA margin of 24% in FY18 vs 21% in FY16. In fact, thanks to greater use of software (proportion of revenue from its own software is not available as the company offers bundled pricing on its software and services), TAKE has higher operating leverage than a typical mid-sized IT services company and this augurs well for its margins in the longer term. Clients in the Life Sciences industry typically have vendor-payment cycles of 90-120 days as opposed to, say, Banks & Financial Services companies that typically have a vendor-payment cycle of 60 days. As a result, TAKE’s receivables at 99 days of sales (Mar 2016) are higher than that of its mid-sized peers in the IT sector. For instance, eClerx which gets ~80% of revenue from financial services, retail, e-commerce customers has receivables of 51 days of sales. “In the US and to some extent in Europe as well, our customers, i.e. channel distributors require us to keep at least 1 year of inventory and we balance it out by having high payable days. So we typically paid our raw material suppliers (commodity chemicals) as much as 300 days after receiving an invoice. Payable days are much lower in India where drug expiry dates and inventory days are also much lower.”
- Ex-employee, Treasury department in a leading Indian pharma company The above input from a primary check also matches with reported data. Sun Pharma reported payable of 35 days of sales as of 31st Mar 2015. Given that their gross margin is ~60%, this implies 90 days of CoGS. Given that the US is only 50% of sales for it, the company is likely have a 150 day payment cycle in the US and 30 days in other markets. The company recently stepped up initiatives to lower its receivable days, which has showed through in the last few quarters (DSO down to 99 in Mar 2016 vs peak of 123 in Sept 2014). We understand that whereas earlier the salespeople were focused only on getting more revenues and getting price increases, they are now also focused on collections. Whereas its customers are unlikely to change their vendor credit period, small changes in the minutiae can make a difference. For instance, the customer might be persuaded to agree to start the day-count from the day on which the work-milestone gets completed rather than the day on which they receive the invoice from TAKE. Management has guided that it would bring it down to 90 days in the next few quarters.
TAKE has now found its feet With a strong March 2016 results, TAKE has now delivered industry-leading performance for the fifth straight quarter. In FY16, revenue and EPS grew 41% and 51% (adjusted for exceptional gain).
This comes after an uninspiring EPS CAGR of 7% over seven years after its IPO (FY08-15). Performance was poor over FY07-13 because it tried to sell only software products (unlike now when it sells services), hadn’t invested enough in sales and marketing, and focused more on the supply-chain-management segment where it
Given the early stage of its evolution, TAKE is investing more in sales, marketing and product development expenses; high receivable days is a characteristic of the life-sciences industry and not a reflection of poor positioning
In FY16, revenue and EPS grew 41% and 51% (adjusted for exceptional gain).
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didn’t have sufficient competitive advantages. Over FY13-15, the company let go of low-margin business (amounting for a third of revenues).
As discussed in our 19th November 2015 note, even star small-cap companies such as Astral Poly Technik (up 56x since IPO, 9 years ago) and TTK Prestige (up 50x over the past 10 years) took time to find their feet.
Exhibit 4: Revenue growth has turned around…
Source: Company, Ambit Capital research
Exhibit 5: ..driven by improvement in business from top 10 clients….
Source: Company, Ambit Capital research
Exhibit 6: …and strong order wins
Source: Company, Ambit Capital research
Exhibit 7: EBITDA margin has improved driven by strong growth…
Source: Company, Ambit Capital research
Exhibit 8: …and so has PAT margin
Source: Company, Ambit Capital research
Exhibit 9: Receivable days have decreased
Source: Company, Ambit Capital research
The recent large deal win signals an inflection point In the earnings call on 12th May 2016, the company announced a large deal-win which would give it US$12mn in revenue (10% of current Life-sciences revenue) in FY17 itself. This reminds us of Hexaware (see case study below) which was a 10-bagger over 2010-15 right after it won a large deal.
This is from one of its top clients and the revenue should start flowing form 1st July. It has taken over a small clinical data aggregation platform of the client and will build on that. It will offer this on a pay-per-use model and also offer analytics. For instance, it will determine, on a real-time basis, if there is some inconsistency in the data from certain clinical sites and therefore which need more scrutiny. It can also help the company make better judgments about which drugs are worth pursuing and which are not. Going forward, it also hopes to get consulting revenues related to aligning clinical/regulatory/safety processes between the large client and its acquired businesses.
Management is, therefore, hopeful of 15% revenue CAGR from just this deal every year until 2024, which implies that the total contract value of this one deal is US$165mn!
Further, the company is chasing four more large deals, each of which has a total contract value of between US$15mn-28mn.
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Management commentary indicates that the total contract value of this deal is US$165mn.
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Case study: Hexaware – a mid-sized IT services company
Over 2008-10, a new CEO prepared the company with the right mind-set to compete for large deals. It won its first large deal in the June 2010 quarter, when it won a large service contract worth US$110mn for 5 years (vs its revenue run rate of ~US$200mn then). Over the next couple of years, the company won 5 multi-year large deals which supported industry-leading revenue growth of 4.4% CQGR from Mar-10 to Mar-15. Operating leverage benefits drove EBIT margin to 16.2% (Mar-15) from 5.6% (Mar-10) and net income grew 30% CAGR over CY10-15. The stock-market rewarded the improved performance and the stock was a 10-bagger in five years.
Apart from the obvious benefits to near-term revenue growth to margin, a large deal also makes the vendor a lot more strategic to the customer, which in turn facilitates mining. Top client, top-5 clients and top-10 clients contributed 15%, 43% and 56% of sales in the Mar-15 quarter compared to 8%, 32% and 47% respectively, which shows that the top clients grew much faster than the company average.
“When you are a US$1mn (p.a.) vendor, you meet a kid in the purchasing department. But after you win a US$100mn deal, you get to the meet the CEO and you meet the CIO once a quarter. So you know what they are thinking, what is important to them and what’s not. Suddenly, you have a huge advantage over other vendors in winning more business”
- Business head of a mid-sized IT services company
Exhibit 10: Hexaware’s revenue growth accelerated post large deal wins…
Source: Company, Ambit Capital research
Exhibit 11: …which led to pick-up in margins…
Source: Company, Ambit Capital research
Exhibit 12: …and strong returns for shareholders
Source: Company, Ambit Capital research
Where do we go from here? We pointed out in our 28th October 2015 note that TAKE’s competitive strengths of deep domain expertise in the life sciences segment, its use of software products embedded in its services, and proprietary industry networks position it well in the growing life sciences segment.
As we discussed in our 19th Nov 2015 note, some of the star small-cap stocks of recent years have taken a decade or more post-IPO to find their feet (such as TTK Prestige and Astral Poly). Such companies are characterised by high promoter ownership, strong balance sheets and a focus on deepening their competitive moats. TAKE Solutions shares these characteristics with other promising small-cap names. Management has guided for 25% revenue CAGR (organic, USD) over the next three years along with profitability improvements (management expects EBITDA margin to improve to 24% in FY18 vs 21% in FY16).
Current valuations are attractive likely because investors are worried about the poor track record and have not understood its unique advantages over peers. The stock trades at 14x FY17 EPS (consensus) vs 16-17x for the better-performing mid-sized IT/BPO companies such as Mindtree, Persistent Systems and eClerx. This presents an opportunity for the discerning investor.
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Hexaware’s stock price went up 10x in the five years after it won its first large deal.
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Strategy Ten interesting things that we read this week At Ambit we spend a lot of time reading articles that are not directly relevant to Indian stocks. However, since the Indian economy is now umbilically linked to its global counterparts, the articles that we come across have relevance for Indian stocks and the Indian economy. In that context, this report contains the ten most interesting pieces that we read this week.
1) The numbers that the RBI governor did not get: 2014 and 282 [Source: Firstpost.com] (http://goo.gl/ip9TFe)
Sanjaya Baru - Director for Geo-Economics and Strategy at the International Institute of Strategic Studies says that from 1989 until 2014, New Delhi had lived in the era of coalitions. Thus after coming to power in May 2014 with an absolute majority, the BJP leader, Narendra Modi, has aimed to recover the long lost authority of the Prime Minister’s Office (PMO). He has asserted that authority through a very clear message to everyone, at home and abroad - "get used to it”.
The problem with Raghuram Rajan, according to the author, is that he came to believe his intellectual and global credentials were so impressive that he would survive the regime change without 'getting used to it'. While other institutions started falling in line, the RBI under Rajan continued to imagine it would remain an exception. Rajan seemed to imagine that he could combine the role of central bank governor with becoming a global public intellectual and media icon. At least one reason for the communication gap between RBI and PMO was the growing view among bankers, economists and the financial media that the Indian central bank had acquired a certain institutional autonomy from the central government, like some other central banks in the western world. This view has been fed by the western media, egged on by western financial institutions and investors, who have assiduously sought greater autonomy for India's market regulators from domestic politics.
This myth gained currency during the tenure of YV Reddy. However, what many have not appreciated is the fact that not only did YV Reddy belong to the hallowed IAS, but his policy credentials were burnished over the years by excellent crisis management both at North Block (the Finance Ministry) and on Mint Road (the RBI). He was also a Rayalaseema Reddy with personal friends across all political parties. More importantly, while YV Reddy crossed swords with the Finance Minister of the day, he was always deferential towards the PM. He made sure that he had an open line of communication with the PM and that there was no misunderstanding between the two. Maybe even Rajan was mindful of the PM's views on policy in its narrow economic terms, monetary and exchange rate policy, but he seemed to be unmindful of Mr Modi's larger policy thinking and goals.
From Jawaharlal Nehru to Manmohan Singh, every single prime minister has appointed his trusted man to the job. Morarji Desai appointed the highly-talented IG Patel in 1979 and when his three year term ended, Indira Gandhi replaced him in 1982 with Manmohan Singh. Rajiv replaced Manmohan Singh at the end of the latter's three year term. Modi has merely kept in step with precedent. Rajan, according to the author, seems like was not willing to come to terms with India's political economy. He believes that ‘To imagine that the central bank is independent of a nation's political economy is at best, naïve and at worst, arrogant’ and adds that the Prime Minister of India does not (and should not) decide who his central bank governor should be on the basis of an editorial view of The Economist or a Wall Street fund manager!
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2) The gig economy is neither ‘sharing’ nor ‘collaborative’ [Source: Financial Times] (http://goo.gl/x7SRf1) Text for google: Upwork and its like shape the labour market in more profound ways than the labels suggest
Sarah O'Connor aims to dispel the illusion around companies like Uber and AirBnB. According to her, most “sharing” or “collaborative economy” companies use the internet to facilitate transactions between buyers and sellers for a fee. Some facilitate the renting of assets (such as Airbnb), some the sale of labour (such as TaskRabbit and Upwork) and some a bit of both (such as Uber). She asks however what exactly is being shared here? Who is collaborating with whom? Freelancers on Upwork are no more sharing their skills with the world than we share with our employers. Airbnb hosts are not collaborating with their guests any more than Marriott International is collaborating with its customers. She believes these labels made sense when they first appeared about six years ago. Then these labels were applied to start-ups, such as SnapGoods and Share Some Sugar, that aimed to help neighbors lend things such as electric drills to each other.
She describes two reasons why this demarcation matters. First, lumping these companies together leads to fuzzy thinking about their scope and scale as well as their pros and cons. For instance, JPMorgan’s recent study of 260,000 users of online platforms found stark differences between people using capital platforms such as Airbnb and eBay and people selling their labour. The latter were poorer, more often from western states in the US and more likely to rely on the platforms to cushion dips in their incomes. There is also a difference between physical work and online work. While physical taskers in countries such as the US tend to get paid much higher because they are competing locally with people who face the same cost of living, the virtual “human cloud” platforms, in contrast, create a global marketplace where a worker in Dallas competes with one in Sofia and another in Manila. Consider this - average earnings per hour on Amazon's Mechanical Turk are below the minimum wage in the US, but 14 times the minimum wage in India.
The second reason to reject the “sharing” and “collaborative” labels is that they give the wrong impression of what these companies do. They are not exploitative masters of “digital serfs” but neither are they hands-off intermediaries between ordinary people who want to exchange goods and services. They actively shape the markets they create. Upwork, for example, recently changed the fees it charges freelancers from a flat 10 per cent to a sliding scale: freelancers will pay 20 per cent on the first $500 they bill to a client and 5 per cent on billings over $10,000. While this may encourage users to treat the site like a full-time job, which would make the business model more profitable, it is a sign of the power these platforms have to shape the behavior of their users. The platforms neither promote nor facilitate sharing and collaboration: they are a handful of companies trying to make money by creating and controlling markets for our labour or our stuff.
3) Weather tracker offers ray of sunshine for hedge funds [Source: Financial
Times] (http://goo.gl/wGy109) Text for google: Weather tracker offers ray of sunshine for hedge funds
Cumulus a London-based fund, launched in 2006 by Peter Brewer, an expert in weather derivatives has employed traders and expert meteorologists to look for discrepancies in weather predictions and find arbitrage opportunities. It returned more than 67 per cent in its first year of trading and followed that up with a gain of 68.6 per cent in 2009. It even outdid that in 2011 with returns of 99.6 per cent — astronomical even in an industry where outsized losses and gains are commonplace. Further, it has boasted no correlation to the S&P 500 index or the S&P GS Commodity index.
Despite the high returns, the fund maintains a low profile. It does not have a website and does not comment on its investment strategy. The fund’s leverage has varied, hitting a low of less than 10 per cent in April 2008 and a high of as much as 300 per cent in mid-2011. Investors however are not concerned about it as
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they believe the fund is expert at finding enough opportunities to make money in its niche area, and at building up large positions. For instance, in 2010 and 2011, they accounted for 8 per cent of all temperature futures on the Chicago Mercantile Exchange. The fund now manages about $2.3bn, and has returned about 970 per cent since its inception a decade ago.
But some investors worry that the fund is growing too large for its strategy. Cumulus was sold to an independent London firm City Financial in 2012, when its assets were still in the hundreds of millions of dollars. It has expanded rapidly since then, both through returns and asset-raising. Its main strategy of weather arbitrage has shifted more towards oil and gas, electricity in North America and Australasia, and agricultural products. New clients have piled in, but some who have been invested for years have questioned the shift and say it is too big to continue its profitable weather strategy alone. “It was a very intelligent strategy to start, but now it’s more of an energy fund,” said an investor.
4) Book review: Ego is the enemy- the legend of Genghis Khan [Source:
FarnamStreetBlog] (https://goo.gl/rpAcHr)
Genghis Khan is widely regarded as one of the most barbaric rulers the world has ever seen. However, as Ryan Holidays' book 'Ego is the Enemy: The legend of Genghis Khan' describes, he was much more than this. According to the book, Genghis Khan one of the greatest military minds who ever lived. He was a perpetual student, whose stunning victories were often the result of his ability to absorb the best technologies, practices, and innovations of each new culture his empire touched. He was not born a genius. Instead, his was a persistent cycle of pragmatic learning, experimental adaptation, and constant revision driven by his uniquely disciplined and focused will. He was the greatest conqueror the world ever knew because he was more open to learning than any other conqueror has ever been.
Khan’s first powerful victories came from the reorganization of his military units, splitting his soldiers into groups of ten. He stole this strategy from the neighbouring Turkic tribes. In the Tangut raids, Khan first learned the ins and outs of war against fortified cities and the strategies critical to laying siege, and quickly became an expert. Later, with help from Chinese engineers, he taught his soldiers how to build siege machines that could knock down city walls. In his campaigns against the Jurched, Khan learned the importance of winning hearts and minds. By working with the scholars and royal family of the lands he conquered, Khan was able to hold on to and manage these territories in ways that most empires could not. Afterwards, in every country or city he held, Khan would call for the smartest astrologers, scribes, doctors, thinkers, and advisers—anyone who could aid his troops and their efforts. His troops traveled with interrogators and translators for precisely this purpose.
What we see instead around us is that with accomplishment comes a growing pressure to pretend that we know more than we do. In reality understanding and mastery is a fluid, continual process. It is not enough only to be a student at the beginning. It is a position that one has to assume for life. Learn from everyone and everything. From the people you beat, and the people who beat you, from the people you dislike, even from your supposed enemies. At every step and every juncture in life, there is the opportunity to learn—and even if the lesson is purely remedial, we must not let ego block us from hearing it again.
The book also touches upon our tendency to stay in a comfort zone to ensure that we never feel stupid (and are never challenged to learn or reconsider what we know). It obscures from view various weaknesses in our understanding, until eventually it’s too late to change course. This is where the silent toll is taken. The solution is as straightforward as it is initially uncomfortable: Pick up a book on a topic you know next to nothing about. Put yourself in rooms where you’re the least knowledgeable person. Subject yourself deliberately to that uncomfortable feeling, that defensiveness that you feel when your most deeply held assumptions are challenged. Change your mind. Change your surroundings.
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5) Europe's robots to become ‘electronic persons’ under draft plan [Source: Reuters] (http://goo.gl/jK49kL)
Robots are being deployed in ever-greater numbers in factories and also taking on tasks such as personal care or surgery, raising fears over unemployment (of people), wealth inequality and alienation. And now, these robots could be classed as "electronic persons" and their owners liable to paying social security for them if the European Union adopts a draft plan to address the realities of a new industrial revolution. Their growing intelligence, pervasiveness and autonomy requires rethinking everything from taxation to legal liability, a draft European Parliament motion, dated May 31, suggests.
The draft motion called on the European Commission to consider "that at least the most sophisticated autonomous robots could be established as having the status of electronic persons with specific rights and obligations". It also suggested the creation of a register for smart autonomous robots, which would link each one to funds established to cover its legal liabilities. However according to Patrick Schwarzkopf, managing director of the Germany based VDMA's robotic and automation department, such a step would be very bureaucratic and would stunt the development of robotics.
The draft motion, drawn up by the European parliament's committee on legal affairs also said organizations should have to declare savings they made in social security contributions by using robotics instead of people, for tax purposes. All said, the motion faces an uphill battle to win backing from the various political blocks in European Parliament.
6) Exercise benefits brain, finds study on mice [Source: Business Standard] (http://goo.gl/Ij3Oub)
Researchers have long understood that exercise is able to boost brains performance by increasing the body's production of a substance called brain-derived neurotrophic factor, or BDNF, which is a protein that helps neurons to grow and remain vigorous and also strengthens the synapses that connect neurons, allowing the brain to function better. However they haven’t been able to identify what it is about exercise that prompts the brain to start pumping out additional BDNF.
To identify the reason, researchers decided to microscopically examine and reverse engineer the steps that lead to a surge in BDNF after exercise. They began by gathering healthy mice. Half of the animals were put into cages that contained running wheels. The others were housed without wheels. For a month, all of the animals were allowed to get on with their lives. Those living with wheels ran often, generally covering several miles a day, since mice like to run. The others remained sedentary. After four weeks, the scientists looked at brain tissue from the hippocampus of both groups of animals, checking for BDNF levels. As expected, the levels were much higher in the brains of the runners.
But then, to better understand why the runners had more BDNF, the researchers turned to the particular gene in the animals' DNA that is known to create BDNF. For some reason, the scientists realised, this gene was more active among the animals that exercised than those that did not. Using sophisticated testing methods, the scientists soon learned why. In both groups of animals, the BDNF gene was partially covered with clusters of a particular type of molecule that binds to the gene, though in different amounts.
In the sedentary mice, these molecules swarmed so densely over the gene that they blocked signals that tell the gene to turn on. As a result, the BDNF genes of the sedentary animals were relatively muted, pumping out little BDNF. But among the runners, the molecular blockade was much less effective. The molecules couldn't seem to cover and bind to the entire BDNF gene. So messages from the body continued to reach the gene and tell it to turn on and produce more BDNF. Most remarkably, the researchers also found a particular substance in the runners'
AMBIT INSIGHTS
Ambit Capital Pvt Ltd 24 June 2016
brains – ketones (a by-product of the breakdown of fat) - that fended off the action of these obstructionist molecules.
7) The gap between developed and developing economies is widening [Source: Swarajyamag.com] (http://goo.gl/2KGNyo)
According to the latest edition of ‘Global Economic Prospects’ published by the World Bank, the convergence of developing economies with that of the American per capita income has reversed its trend. For instance, last year, just 47 per cent of 114 developing economies tracked by the Bank were catching up with US per capita gross domestic product, below 50 per cent for the first time since 2000 and down from 83 per cent of that same sample in 2007. Also, in the five years before the 2008 financial crisis, emerging markets could have expected to take an average of 42.3 years to catch up with US per capita GDP, according to the bank’s analysis. But over the past three years, slower average growth of emerging economies has meant the number of years it would take to catch up with the US has grown to 67.7 years. For frontier markets like Nigeria, the catch up period more than doubled from 43.1 years to 109.7 years.
One of the reasons for widening inequality in the developed world was that jobs migrated to the developing world, leading to improved living standards there and hence the convergence. Additionally, the resulting surplus was siphoned off as profits by Western capitalists rather than shared with Western workers facing increased insecurity. Thus Western workers’ living standards fell. This was another cause of convergence. The question to ask however is - now that emerging economies have stopped progressing, will it lead to better times for workers in the developed world? Or, will the rise of robots replace the poor Third World workers as a threat to workers and their wages in the West? In other words, is it win-win for capital and lose-lose for labour, both in the developed world and in the developing world?
If it is a lose-lose for labour, it seems logical for the proletariat across the world to unite instead of workers in the West clamouring for closure of borders for immigrants from the developing world! The robotic revolution has thrown a spanner in the reversal of the capitalist revolution that commenced in the Eighties. If anything, technological advancements might end up further reinforcing returns to capital as it makes workers more insecure. Social stability may come under increasing strain and may not hold. That said, there might still be a convergence of sorts. That is, living standards of workers might decline everywhere – in the developed world and in the developing world.
8) China loan sharks ask for nude photos as collateral [Source: Financial Times] (http://goo.gl/L3zP5o) Text for google: China loan sharks ask for nude photos
Chinese loan sharks are demanding nude photos as collateral from female borrowers which can be used for blackmail if they fall behind on their repayments. The aggressive tactics are an example of the drastic debt recovery measures that are being employed in the slowing Chinese economy.
The democratization of finance in China via peer-to-peer lenders and the vast shadow banking system, with interest rates sometimes topping 30 per cent, have proved an inflammatory mix and fuelled a surge in souring loans. Female college students in the southern province of Guangdong were told to hand over naked photos of themselves holding their ID cards, with lenders threatening to make them public if they failed to repay their microloans, according to the Nandu Daily, the local newspaper. Blackmailing with nude photos joins a long list of threats including property destruction and bodily injury committed by loan sharks attempting to collect unpaid loans.
AMBIT INSIGHTS
Ambit Capital Pvt Ltd 24 June 2016
9) Chinese tourists search far and wide for Japan's rare whiskies [Source: Financial Times] (http://goo.gl/CgYwTP)
Text for google: Chinese tourists search far and wide for Japan’s rare whiskies
Chinese visitors to Japan have realized that the mildewed storerooms of Japan’s failing mom-and-pop liquor shops — especially in areas where the local population is mostly elderly — hide unsold whiskies accumulated years ago, when domestic Japanese economic times were better. Those whiskies command huge premiums in China’s inflated grey market.
There is a pattern, according to the accounts of five shopkeepers in Kanagawa prefecture. Chinese tourists seem to target older shops that appear to be struggling as the local population drinks less and, even when it does buy whisky, tends to go for cheaper blends. Lurking in the garages behind many of these shops are sometimes very fine Japanese single malts. The 73-year old owner of one small shop in Kanagawa prefecture describes selling his last two bottles of aged Nikka single malt to a carload of Chinese and, an hour later, hearing the screeching of brakes as a second carload of their surprisingly well-informed compatriots pulled up, asking if he really had nothing left in his storeroom.
About three years ago, say the owners of larger liquor shops, the shortages of aged Japanese whiskies began to show. The best — Suntory’s Yamazaki 18-year old single malt sherry cask being perhaps the most famous — were suddenly winning global awards and plaudits that included phrases such as “near indescribable genius”. That said though, two decades ago, when it was calculating production volumes, Suntory’s Yamazaki distillery did not know about the sheer scale of future Chinese demand. In common with everyone else, Japan’s whisky distillers did not foresee a tourism boom that has led to visitors from China increasing from 1m in 2011 to nearly 5m in 2015.
In Tokyo department stores and in the duty-free shops of Japan’s international airports, the result of that supply-demand mismatch has been spectacular: the Yamazaki 25-year single malt (notionally priced on one recently established website at about Y135,000 — or $1,268) is almost permanently sold out online and in stores. A couple of years ago, Chinese people hoping to visit Japan to find bottles of high-end Japanese whiskies for their own consumption or to sell at mark-ups between two and as much as six times the price back home, started venturing into department stores in suburban Tokyo. Meanwhile, the 'treasure hunters' delve deeper into the heartlands of rural Japan.
10) Sunspring- A sci-fi film scripted by AI [Source: Youtube]
(https://goo.gl/2PA5an)
As Artificial Intelligence (AI) continues to make inroads into tasks that have traditionally been considered safe by humans on account of the cognitive ability required, this piece highlights another milestone achieved by the technology in the creative space.
According to the description of this film on Youtube –“In the wake of Google's AI Go victory, filmmaker Oscar Sharp turned to his technologist collaborator Ross Goodwin to build a machine that could write screenplays. They created "Jetson" and fueled him with hundreds of sci-fi TV and movie scripts. Shortly thereafter, Jetson announced it wished to be addressed as Benjamin. Building a team including Thomas Middleditch, star of HBO's Silicon Valley, they gave themselves 48 hours to shoot and edit whatever Benjamin (Jetson) decided to write.” You can now watch (using the link given above) what they shot.
AMBIT INSIGHTS
Ambit Capital Pvt Ltd 24 June 2016
Institutional Equities Team Saurabh Mukherjea, CFA CEO, Institutional Equities (022) 30433174 [email protected]
Research Analysts
Name Industry Sectors Desk-Phone E-mail
Nitin Bhasin - Head of Research E&C / Infra / Cement / Industrials (022) 30433241 [email protected]
Aadesh Mehta, CFA Banking / Financial Services (022) 30433239 [email protected]
Aakash Adukia Oil & Gas / Chemicals / Agri Inputs (022) 30433273 [email protected]
Abhishek Ranganathan, CFA Retail (022) 30433085 [email protected]
Achint Bhagat, CFA Cement / Home Building (022) 30433178 [email protected]
Anuj Bansal Mid-caps (022) 30433122 [email protected] Ashvin Shetty, CFA Automobile (022) 30433285 [email protected]
Bhargav Buddhadev Power Utilities / Capital Goods (022) 30433252 [email protected]
Deepesh Agarwal, CFA Power Utilities / Capital Goods (022) 30433275 [email protected] Dhiraj Mistry, CFA Consumer (022) 30433264 [email protected]
Gaurav Khandelwal, CFA Automobile (022) 30433132 [email protected] Girisha Saraf Mid-caps / Small-caps (022) 30433211 [email protected]
Karan Khanna, CFA Strategy (022) 30433251 [email protected]
Kushank Poddar Technology (022) 30433203 [email protected] Pankaj Agarwal, CFA Banking / Financial Services (022) 30433206 [email protected]
Paresh Dave, CFA Healthcare (022) 30433212 [email protected]
Parita Ashar, CFA Metals & Mining / Aviation (022) 30433223 [email protected]
Prashant Mittal, CFA Strategy / Derivatives (022) 30433218 [email protected]
Rahil Shah Banking / Financial Services (022) 30433217 [email protected]
Rakshit Ranjan, CFA Consumer (022) 30433201 [email protected]
Ravi Singh Banking / Financial Services (022) 30433181 [email protected]
Ritesh Gupta, CFA Oil & Gas / Chemicals / Agri Inputs (022) 30433242 [email protected]
Ritesh Vaidya, CFA Consumer (022) 30433246 [email protected] Ritika Mankar Mukherjee, CFA Economy / Strategy (022) 30433175 [email protected]
Ritu Modi Automobile (022) 30433292 [email protected]
Sagar Rastogi Technology (022) 30433291 [email protected]
Sumit Shekhar Economy / Strategy (022) 30433229 [email protected]
Utsav Mehta, CFA E&C / Industrials (022) 30433209 [email protected]
Vivekanand Subbaraman, CFA Media (022) 30433261 [email protected]
Sales
Name Regions Desk-Phone E-mail
Sarojini Ramachandran - Head of Sales UK +44 (0) 20 7614 8374 [email protected]
Dharmen Shah India / Asia (022) 30433289 [email protected]
Dipti Mehta India / USA (022) 30433053 [email protected]
Hitakshi Mehra India (022) 30433204 [email protected]
Krishnan V India / Asia (022) 30433295 [email protected]
Nityam Shah, CFA USA / Europe (022) 30433259 [email protected]
Parees Purohit, CFA UK / USA (022) 30433169 [email protected]
Praveena Pattabiraman India / Asia (022) 30433268 [email protected]
Shaleen Silori India (022) 30433256 [email protected]
Singapore
Pramod Gubbi, CFA – Director Singapore +65 8606 6476 [email protected]
Shashank Abhisheik Singapore +65 6536 1935 [email protected]
USA / Canada
Ravilochan Pola - CEO Americas +1(646) 361 3107 [email protected]
Production
Sajid Merchant Production (022) 30433247 [email protected]
Sharoz G Hussain Production (022) 30433183 [email protected]
Jestin George Editor (022) 30433272 [email protected]
Nikhil Pillai Database (022) 30433265 [email protected]
AMBIT INSIGHTS
Ambit Capital Pvt Ltd 24 June 2016
HCL Technologies Ltd (HCLT IN, BUY)
Source: Bloomberg, Ambit Capital research
Tech Mahindra Ltd (TECHM IN, BUY)
Source: Bloomberg, Ambit Capital research
Tata Power (TPW IN, BUY)
Source: Bloomberg, Ambit Capital research
0
200
400
600
800
1,000
1,200
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13
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-13
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-13
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-13
Feb-
14
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-14
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14
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-14
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-14
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-14
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15
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-15
Jun-
15
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-15
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-15
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-15
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16
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-16
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HCL TECHNOLOGIES LTD
0100200300400500600700800
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13
Aug
-13
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-13
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-13
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14
Apr
-14
Jun-
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-14
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-14
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15
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-15
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15
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-15
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-15
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-15
Feb-
16
Apr
-16
Jun-
16
TECH MAHINDRA LTD
0
20
40
60
80
100
120
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13
Aug
-13
Oct
-13
Dec
-13
Feb-
14
Apr
-14
Jun-
14
Aug
-14
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-14
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-14
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15
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-15
Jun-
15
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-15
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-15
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-15
Feb-
16
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-16
Jun-
16
TATA POWER CO LTD
AMBIT INSIGHTS
Ambit Capital Pvt Ltd 24 June 2016
Take Solutions Ltd (TAKE IN, NOT RATED)
Source: Bloomberg, Ambit Capital research
HCL Technologies Ltd (HCLT IN, BUY)
Source: Bloomberg, Ambit Capital research
Tata Consultancy Svcs Ltd (TCS IN, BUY)
Source: Bloomberg, Ambit Capital research
0
50
100
150
200
250
Jun-
13
Aug
-13
Oct
-13
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-13
Feb-
14
Apr
-14
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14
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-14
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-14
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15
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-15
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15
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-15
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-15
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-15
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-16
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16
TAKE SOLUTIONS LTD
0
200
400
600
800
1,000
1,200
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13
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-13
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-13
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-13
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14
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-14
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14
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-14
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-14
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-14
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15
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-15
Jun-
15
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-15
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-15
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-15
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16
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-16
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16
HCL TECHNOLOGIES LTD
0
500
1,000
1,500
2,000
2,500
3,000
Jun-
13
Aug
-13
Oct
-13
Dec
-13
Feb-
14
Apr
-14
Jun-
14
Aug
-14
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-14
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-14
Feb-
15
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-15
Jun-
15
Aug
-15
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-15
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-15
Feb-
16
Apr
-16
Jun-
16
TATA CONSULTANCY SVCS LTD
AMBIT INSIGHTS
Ambit Capital Pvt Ltd 24 June 2016
ITC Ltd (ITC IN, BUY)
Source: Bloomberg, Ambit Capital research
Tata Motors (TTMT IN, BUY)
Source: Bloomberg, Ambit Capital research
Gujarat Pipavav Port Ltd (GPPV IN, NOT RATED)
Source: Bloomberg, Ambit Capital research
200
250
300
350
400
450
Jun-
13
Aug
-13
Oct
-13
Dec
-13
Feb-
14
Apr
-14
Jun-
14
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-14
Oct
-14
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-14
Feb-
15
Apr
-15
Jun-
15
Aug
-15
Oct
-15
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-15
Feb-
16
Apr
-16
Jun-
16
ITC LTD
0100200300400500600700
Jan-
13
Mar
-13
May
-13
Jul-
13
Sep-
13
Nov
-13
Jan-
14
Mar
-14
May
-14
Jul-
14
Sep-
14
Nov
-14
Jan-
15
Mar
-15
May
-15
Jul-
15
Sep-
15
Nov
-15
Jan-
16
TATA MOTORS LTD
0
50
100
150
200
250
300
Jun-
13
Aug
-13
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-13
Dec
-13
Feb-
14
Apr
-14
Jun-
14
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-14
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-14
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-14
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15
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-15
Jun-
15
Aug
-15
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-15
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-15
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16
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-16
Jun-
16
GUJARAT PIPAVAV PORT LTD
AMBIT INSIGHTS
Ambit Capital Pvt Ltd 24 June 2016
Glaxosmithkline Consumer (SKB IN, SELL)
Source: Bloomberg, Ambit Capital research
Persistent Systems Ltd (PSYS IN, UNDER REVIEW)
Source: Bloomberg, Ambit Capital research
MRF Ltd (MRF IN, NOT RATED)
Source: Bloomberg, Ambit Capital research
01,0002,0003,0004,0005,0006,0007,0008,000
Jun-
13
Aug
-13
Oct
-13
Dec
-13
Feb-
14
Apr
-14
Jun-
14
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-14
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-14
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-14
Feb-
15
Apr
-15
Jun-
15
Aug
-15
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-15
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-15
Feb-
16
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-16
Jun-
16
GLAXOSMITHKLINE CONSUMER HEA
0
200
400
600
800
1,000
Jun-
13
Aug
-13
Oct
-13
Dec
-13
Feb-
14
Apr
-14
Jun-
14
Aug
-14
Oct
-14
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-14
Feb-
15
Apr
-15
Jun-
15
Aug
-15
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-15
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-15
Feb-
16
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-16
Jun-
16
PERSISTENT SYSTEMS LTD
0
10,000
20,000
30,000
40,000
50,000
Jun-
13
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-13
Oct
-13
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-13
Feb-
14
Apr
-14
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14
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-14
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-14
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-14
Feb-
15
Apr
-15
Jun-
15
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-15
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-15
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-15
Feb-
16
Apr
-16
Jun-
16
MRF Ltd
AMBIT INSIGHTS
Ambit Capital Pvt Ltd 24 June 2016
Finolex Cables Ltd (FNXC IN, BUY)
Source: Bloomberg, Ambit Capital research
AIA Engineering Ltd (AIAE IN, UNDER REVIEW)
Source: Bloomberg, Ambit Capital research
Mindtree Ltd (MTCL IN, SELL)
Source: Bloomberg, Ambit Capital research
050
100150200250300350
Apr
-13
Jun-
13
Aug
-13
Oct
-13
Dec
-13
Feb-
14
Apr
-14
Jun-
14
Aug
-14
Oct
-14
Dec
-14
Feb-
15
Apr
-15
Jun-
15
Aug
-15
Oct
-15
Dec
-15
Feb-
16
FINOLEX CABLES LTD
0200400600800
1,0001,2001,400
May
-13
Jul-
13
Sep-
13
Nov
-13
Jan-
14
Mar
-14
May
-14
Jul-
14
Sep-
14
Nov
-14
Jan-
15
Mar
-15
May
-15
Jul-
15
Sep-
15
Nov
-15
Jan-
16
Mar
-16
May
-16
AIA ENGINEERING LTD
0100200300400500600700800900
Jun-
13
Aug
-13
Oct
-13
Dec
-13
Feb-
14
Apr
-14
Jun-
14
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-14
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-14
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-14
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15
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-15
Jun-
15
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-15
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-15
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-15
Feb-
16
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-16
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16
MINDTREE LTD
AMBIT INSIGHTS
Ambit Capital Pvt Ltd 24 June 2016
Supreme Industries Ltd (SI IN, BUY)
Source: Bloomberg, Ambit Capital research
Lupin Ltd (LPC IN, NOT RATED)
Source: Bloomberg, Ambit Capital research
PI Industries Ltd (PI IN, BUY)
Source: Bloomberg, Ambit Capital research
0
200
400
600
800
1,000
1,200
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13
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-13
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-13
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-13
Feb-
14
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-14
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14
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-14
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-14
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-14
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15
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-15
Jun-
15
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-15
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-15
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-15
Feb-
16
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-16
Jun-
16
SUPREME INDUSTRIES LTD
0
500
1,000
1,500
2,000
2,500
Jun-
13
Aug
-13
Oct
-13
Dec
-13
Feb-
14
Apr
-14
Jun-
14
Aug
-14
Oct
-14
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-14
Feb-
15
Apr
-15
Jun-
15
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-15
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-15
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-15
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16
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-16
Jun-
16
LUPIN LTD
0100200300400500600700800
Jun-
13
Aug
-13
Oct
-13
Dec
-13
Feb-
14
Apr
-14
Jun-
14
Aug
-14
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-14
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-14
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15
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-15
Jun-
15
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-15
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-15
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-15
Feb-
16
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-16
Jun-
16
PI INDUSTRIES LTD
AMBIT INSIGHTS
Ambit Capital Pvt Ltd 24 June 2016
TVS Motor (TVSL IN, BUY)
Source: Bloomberg, Ambit Capital research
Hindustan Unilever Ltd (HUVR IN, BUY)
Source: Bloomberg, Ambit Capital research
Kajaria Ceramics Ltd (KJC IN, NOT RATED)
Source: Bloomberg, Ambit Capital research
050
100150200250300350400
Jun-
13
Aug
-13
Oct
-13
Dec
-13
Feb-
14
Apr
-14
Jun-
14
Aug
-14
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-14
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-14
Feb-
15
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-15
Jun-
15
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-15
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-15
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16
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-16
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16
TVS MOTOR CO LTD
0
200
400
600
800
1,000
1,200
Jun-
13
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-13
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-13
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-13
Feb-
14
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-14
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14
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-14
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-14
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-14
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15
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-15
Jun-
15
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-15
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-15
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-15
Feb-
16
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-16
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16
HINDUSTAN UNILEVER LTD
0200400600800
1,0001,2001,400
Jun-
13
Aug
-13
Oct
-13
Dec
-13
Feb-
14
Apr
-14
Jun-
14
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-14
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-14
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-14
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15
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-15
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15
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-15
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-15
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-15
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16
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-16
Jun-
16
KAJARIA CERAMICS LTD
AMBIT INSIGHTS
Ambit Capital Pvt Ltd 24 June 2016
Eicher Motors Ltd (EIM IN, SELL)
Source: Bloomberg, Ambit Capital research
Britannia Industries Ltd (BRIT IN, SELL)
Source: Bloomberg, Ambit Capital research
Berger Paints India Ltd (BRGR IN, BUY)
Source: Bloomberg, Ambit Capital research
0
5,000
10,000
15,000
20,000
25,000
Jun-
13
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-13
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-13
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-13
Feb-
14
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-14
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14
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-14
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-14
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-14
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15
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15
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-15
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-15
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16
EICHER MOTORS LTD
0500
1,0001,5002,0002,5003,0003,5004,000
Jun-
13
Aug
-13
Oct
-13
Dec
-13
Feb-
14
Apr
-14
Jun-
14
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-14
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-14
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-14
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15
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-15
Jun-
15
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-15
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-15
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16
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16
BRITANNIA INDUSTRIES LTD
050
100150200250300350
Jun-
13
Aug
-13
Oct
-13
Dec
-13
Feb-
14
Apr
-14
Jun-
14
Aug
-14
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-14
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-14
Feb-
15
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Jun-
15
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-15
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16
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-16
Jun-
16
BERGER PAINTS INDIA LTD
AMBIT INSIGHTS
Ambit Capital Pvt Ltd 24 June 2016
Page Industries Ltd (PAG IN, BUY)
Source: Bloomberg, Ambit Capital research
02,0004,0006,0008,000
10,00012,00014,00016,00018,000
Jun-
13
Aug
-13
Oct
-13
Dec
-13
Feb-
14
Apr
-14
Jun-
14
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-14
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-14
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-14
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15
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-15
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15
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-15
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-15
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-15
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16
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-16
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16
PAGE INDUSTRIES LTD
AMBIT INSIGHTS
Ambit Capital Pvt Ltd 24 June 2016
Explanation of Investment Rating
Investment Rating Expected return (over 12-month)
BUY >10%
SELL <10%
NO STANCE We have forward looking estimates for the stock but we refrain from assigning valuation and recommendation
UNDER REVIEW We will revisit our recommendation, valuation and estimates on the stock following recent events
NOT RATED We do not have any forward looking estimates, valuation or recommendation for the stock POSITIVE We have a positive view on the sector and most of stocks under our coverage in the sector are BUYs
NEGATIVE We have a negative view on the sector and most of stocks under our coverage in the sector are SELLs Disclaimer This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of Ambit Capital. AMBIT Capital Research is disseminated and available primarily electronically, and, in some cases, in printed form. Additional information on recommended securities is available on request. Disclaimer 1. AMBIT Capital Private Limited (“AMBIT Capital”) and its affiliates are a full service, integrated investment banking, investment advisory and brokerage group. AMBIT Capital is a Stock Broker, Portfolio
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Disclosures 26. The analyst (s) has/have not served as an officer, director or employee of the subject company. 27. There is no material disciplinary action that has been taken by any regulatory authority impacting equity research analysis activities. 28. All market data included in this report are dated as at the previous stock market closing day from the date of this report. 29. Ambit and/or its associates have financial interest/equity shareholding in Torrent Power, TCS, ITC, M&M, Tata Motors & Cummins India.
Analyst Certification Each of the analysts identified in this report certifies, with respect to the companies or securities that the individual analyses, that (1) the views expressed in this report reflect his or her personal views about all of the subject companies and securities and (2) no part of his or her compensation was, is or will be directly or indirectly dependent on the specific recommendations or views expressed in this report. © Copyright 2015 AMBIT Capital Private Limited. All rights reserved.
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