Market snapshot Today’s top research Ideavid.investmentguruindia.com/report/2020/June/MORNING...2020/05/21 · Bank credit rose 6.52 per cent year -on year to Rs 102.52 lakh crore,

21 May 2020

Investors are advised to refer through important disclosures made at the last page of the Research Report. Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.

Research Team ([email protected])

Equities - India Close Chg .% CYTD.%

Sensex 30,819 2.1 -25.3

Nifty-50 9,067 2.1 -25.5

Nifty-M 100 12,664 1.5 -26.0

Equities-Global Close Chg .% CYTD.%

S&P 500 2,972 1.7 -8.0

Nasdaq 9,376 2.1 4.5

FTSE 100 6,067 1.1 -19.6

DAX 11,224 1.3 -15.3

Hang Seng 9,898 0.1 -11.4

Nikkei 225 20,595 0.8 -12.9

Commodities Close Chg .% CYTD.%

Brent (US$/Bbl) 35 3.7 -47.8

Gold ($/OZ) 1,748 0.2 15.2

Cu (US$/MT) 5,418 1.7 -11.9

Almn (US$/MT) 1,484 1.7 -16.7

Currency Close Chg .% CYTD.%

USD/INR 75.8 0.2 6.2

USD/EUR 1.1 0.5 -2.1

USD/JPY 107.5 -0.2 -1.0

YIELD (%) Close 1MChg CYTDchg

10 Yrs G-Sec 5.8 0.01 -0.8

10 Yrs AAA Corp 7.3 0.02 -0.4

Flows (USD b) 20-May MTD CYTD

FIIs -0.19 1.73 -4.71

DIIs 0.31 0.45 10.18

Volumes (INRb) 20-May MTD* CYTD*

Cash 486 544 470

F&O 12,208 11,759 14,113

Note: *Average

Today’s top research Idea Market snapshot

Chart of the Day: Ultratech Cement (Deleveraging to continue even in FY21)

Ultratech Cement: Deleveraging to continue even in FY21 UTCEM’s result instills confidence in its planned cost-rationalization and

deleveraging roadmap. Despite lower operating leverage (volumes down 16%

YoY), operating cost per ton increased only 1% YoY (-2% QoQ) which coupled

with better realization drove a 14% YoY (and 13% QoQ) increase in EBITDA/t

to INR1,138. Strong FCF helped the company reduce net debt sharply to

INR169b (implying 1.55x net debt/EBITDA).

We expect net debt to decline further even in FY21 as the company has

curtailed capex and seeks to reduce operating cost as well.

The valuation is also attractive at 10.9x FY22E EV/EBITDA and USD134/t of

capacity, a ~35% discount to the past five-year average and ~20% discount to

the past 10-year average. The stock is also trading 30% cheaper than peer

Shree Cement v/s the historical average of 10%. We value UTCEM at a 13x

FY22E EV/EBITDA to arrive at a target price of INR4,305. Reiterate Buy.

Cos/Sector Key Highlights

UltraTech Cement Deleveraging to continue even in FY21

Bajaj Auto Above est.; Retail trending at 25-30%; Expect recovery in 2H

Dr Reddy’s Labs Superior execution in US/EU drives earnings

L&T Infotech Healthy deal wins; Stable commentary

Jubilant FoodWorks Weak results, worsening outlook; Downgrade to Neutral

Ajanta Pharma Earnings growth led by US/Asia and better operating leverage

JSW Energy Healthy growth driven by better standalone perf

NBFC Cabinet approves recent relief measures for NBFCs/MSMEs

Expert Speak AGRO CHEMICALS: Impact to be severe if pesticides ban stands unchanged in final order

Cement volumes down 16% YoY in 4QFY20

Source: Company, MOFSL

Trend in EBITDA/t


Research covered

21 May 2020 2

Domestic airlines to resume operations in calibrated manner from all major airports from 25 May Domestic airline operations will resume from airports across all major cities in the country from 25 May, even though the existing lockdown to contain covid-19 remains in place till 31 May. "Flight operations will resume from all major Indian airports…

Bank credit grows 6.52 per cent to Rs 102.52 lakh cr; deposits up 10.64 per cent Bank credit rose 6.52 per cent year-on-year to Rs 102.52 lakh crore, while deposits grew 10.64 per cent to Rs 138.50 lakh crore in the fortnight ended May 8, according to latest RBI data. In the fortnight ended May 10, 2019, bank loans had stood at Rs 96.24 lakh crore, and deposits at Rs 125.17 lakh crore…

Cyclone Amphan batters Bengal, Odisha as 6.5 lakh evacuated An extremely severe cyclone packing winds of up to 190 kmph Wednesday rampaged through coastal Odisha and West Bengal, dumping heavy rain, swamping homes and farmland. "The forward sector of the wall cloud region is entering into land in West Bengal…

Sebi advises India Inc to make enhanced disclosures on Covid-19 biz impact The Securities and Exchange Board of India (Sebi) has advised India Inc to make enhanced disclosures on the impact of Coronavirus outbreak on their businesses, and provide both the quantitative and qualitative aspects. “Listed entities should endeavour to ensure that all investors have access to timely…

Centre sanctions Rs 46,038.70 cr as states' shares in taxes for May The finance ministry on Monday said it has sanctioned Rs 46,038.70 crore for May instalment of devolution of states' share in central taxes and duties. "These releases, similar to April releases, have been calculated based on tax receipts projected in Budget 2020-21 & not as per actuals," the ministry said in a tweet…

FM Nirmala Sitharaman to meet PSU bank chiefs on Friday, to review credit flow Finance Minister Nirmala Sitharaman will hold a review meeting with CEOs of public sector banks (PSBs) on Friday to discuss various issues, including credit offtake, as part of efforts to prop up the coronavirus-hit economy, sources said…

Bt cotton: Delhi HC dismisses Monsanto plea against CCI probe The Delhi High Court has dismissed Monsanto Mahyco Biotech’s (MMB) plea challenging the Competition Commission of India (CCI) order for an investigation into the company. The fair trade regulator had ordered a probe in 2016 for alleged abuse…

Kindly click on textbox for the detailed news link

In the news today

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https://www.livemint.com/companies/news/domestic-airlines-to-resume-operations-in-calibrated-manner-from-all-major-airports-from-25-may-11589979608487.html

https://economictimes.indiatimes.com/industry/banking/finance/banking/bank-credit-grows-6-52-per-cent-to-rs-102-52-lakh-cr-deposits-up-10-64-per-cent/articleshow/75853769.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

https://economictimes.indiatimes.com/news/politics-and-nation/cyclone-amphan-batters-bengal-odisha-as-6-5-lakh-evacuated-3-dead/articleshow/75855596.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

https://www.business-standard.com/article/markets/sebi-advises-india-inc-to-make-enhanced-disclosures-on-covid-19-biz-impact-120052000963_1.html

https://economictimes.indiatimes.com/news/economy/indicators/centre-sanctions-rs-46038-70-cr-as-states-shares-in-taxes-for-may/articleshow/75853850.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

https://economictimes.indiatimes.com/industry/banking/finance/banking/fm-nirmala-sitharaman-to-meet-psu-bank-chiefs-on-friday-to-review-credit-flow/articleshow/75855225.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

https://economictimes.indiatimes.com/news/company/corporate-trends/bt-cotton-delhi-hc-dismisses-monsanto-plea-against-cci-probe/articleshow/75853199.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

21 May 2020 3

Estimate change TP change Rating change Bloomberg UTCEM IN

Equity Shares (m) 288

M.Cap.(INRb)/(USDb) 1018.7 / 13.1

52-Week Range (INR) 4904 / 2913

1, 6, 12 Rel. Per (%) 3/10/-4

12M Avg Val (INR M) 2406

Financial Snapshot (INR bn)

Y/E MARCH 2020 2021E 2022E

Sales 421 362 447

EBITDA 94 78 103

Adj. PAT 43 27 46

EBITDA Margin (%) 22 22 23

Adj. EPS (INR) 147 93 159

EPS Gr. (%) 63 (37) 71

BV/Sh. (INR) 1,425 1,508 1,654

Ratios

Net D:E 0.4 0.3 0.2

RoE (%) 11.7 6.7 10.6

RoCE (%) 9.6 6.1 8.9

Payout (%) 8.6 8.3 6.7

Valuations

P/E (x) 24.1 38.2 22.3

P/BV (x) 2.5 2.4 2.1

EV/EBITDA(x) 12.6 14.7 10.9

EV/ton (USD) 149 142 134

Div. Yield (%) 0.3 0.4 0.4

FCF Yield (%) 7.1 4.8 5.6

Shareholding pattern (%)

As On Mar-20 Dec-19 Mar-19

Promoter 59.7 60.2 61.7

DII 14.2 13.1 7.8

FII 16.6 17.7 20.1

Others 9.5 9.1 10.4

FII Includes depository receipts

CMP: INR3,530 TP: INR4,305(+22%) Buy

Deleveraging to continue even in FY21 Focus on cash conservation and cost reduction UltraTech Cement (UTCEM)’s result instills confidence in its planned cost-

rationalization and deleveraging roadmap. Despite lower operating leverage

(volumes down 16% YoY), operating cost per ton increased only 1% YoY (-2%

QoQ) which coupled with better realization drove a 14% YoY (and 13% QoQ)

increase in EBITDA/t to INR1,138. Strong FCF helped the company reduce

net debt sharply to INR169b (implying 1.55x net debt/EBITDA).

Our FY21/FY22 estimates are broadly unchanged, and we reiterate Buy. We

expect net debt to decline further even in FY21 as the company has curtailed

capex for the year and seeks to reduce cost as well. UTCEM remains our top

pick in the sector.

Miss on realization; net debt falls further to INR169b Conso revenue / EBITDA / PBT at INR107b/INR24.4b/INR14.6b came in lower

by 13%/4%/4% YoY and by -3%/-11%/-14% against our estimate. Primarily,

the miss was on realization growth (which was up only 1% QoQ).

Volume declined 16% YoY to 21.4mt (in-line); however, the decline was

higher than peers Shree (-5%), Ambuja (-10%), and ACC (-12%), implying

market share loss.

EBITDA/t at INR1139/t (+14% YoY, +13% QoQ) was weaker than expected

due to lower realization at INR5012/t (+3% YoY, +1% QoQ) v/s our est. of

5144/t.

Cost/t stood at INR3873/t, +1% YoY/-2% QoQ (in-line). Reduction in petcoke

costs and the benefit of exemption in busy season surcharge by the Indian

Railways were offset by higher raw material cost and lower operating

leverage.

Reported PAT was higher at INR32.4b due to deferred tax reversal on the

new tax regime.

FY20 OCF has risen 50% YoY to INR89b on both stronger EBITDA (+28% YoY)

and working capital release of INR4.5b (v/s an increase of INR7b last yr).

Consol net debt accordingly fell to ~INR169b in Mar’20 from INR186b in

Dec’20 (v/s INR221b in FY19).

Net debt/EBITDA was down to 1.55x in Mar’20 from 2.83x in Mar’19.

Highlights from management commentary The focus would be on deleveraging and conserving cash, Curtailing FY21

capex to INR10b v/s INR17b in FY20.

UTCEM's capacity utilization has reached ~60%, with East at a much higher

level than West (as the COVID-19 spread is higher).

Trade sales in the volume mix are currently higher at 90% v/s 66% in

4QFY20.

Not much increase has been seen in variable costs due to COVID-19 –

logistics and raw material costs per ton are flat QoQ, while petcoke is lower;

lead distance may, however, be increased to retain customers.

21 May 2020

4QFY20 Results Update | Sector: Cement

UltraTech Cement

http://ftp.motilaloswal.com/emailer/Research/UTCEM-20200520-MOSL-RU-PG012.pdf

21 May 2020 4

Valuation and view UTCEM’s market mix has improved post the acquisition, with the North/Central

India regions (both have a better utilization outlook) contributing ~45% to

volumes; the share of weaker regions (South/East) has declined.

The valuation is reasonable at 10.9x FY22E EV/EBITDA and USD134/t of capacity,

a ~35% discount to the past five-year average and ~20% discount to the past 10-

year average. The stock is also trading 30% cheaper than peer Shree Cement v/s

the historical average of 10%. We value UTCEM at a 13x FY22E EV/EBITDA to

arrive at a target price of INR4,305. Reiterate Buy.

Quarterly performance (CONSOL)

(INR m)

FY19 FY20 FY19 FY20 FY20 Var.

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 4QE (%)

Net Sales 95,449 92,493 1,04,441 1,23,712 1,14,049 96,204 1,03,538 1,07,456 4,16,088 4,21,248 1,10,481 -3

YoY Change (%) 32.6 33.3 30.2 33.2 19.5 4.0 -0.9 -13.1 34.3 1.2 -10.7 23

Total Expenditure 77,562 78,281 88,496 98,317 84,551 77,024 82,476 83,056 3,42,619 3,27,106 82,977 0

EBITDA 17,887 14,212 15,945 25,395 29,499 19,180 21,062 24,401 73,469 94,142 27,504 -11 Margins (%) 18.7 15.4 15.3 20.5 25.9 19.9 20.3 22.7 17.7 22.3 24.9

Depreciation 5,477 6,240 6,381 6,365 6,884 6,684 6,730 6,724 24,507 27,022 7,073 -5 Interest 3,786 4,164 4,784 5,043 5,029 5,071 4,708 5,048 17,779 19,857 4,677 8 Other Income 793 1,428 1,124 1,331 1,342 1,475 1,682 1,979 4,634 6,478 1,360 46

PBT before EO expense 9,417 5,236 5,904 15,318 18,928 8,900 11,306 14,608 35,818 53,742 17,115 -15 Extra-Ord expense 1,139 0 0 0 0 0 1,332 -21,120 1,139 -19,788 0

PBT after EO Expense 8,278 5,236 5,904 15,318 18,928 8,900 9,973 35,728 34,679 73,530 17,115 109 Tax 2,430 1,678 1,968 4,625 6,118 3,113 2,862 3,320 10,681 15,413 5,485 Rate (%) 29.4 32.0 33.3 30.2 32.3 35.0 28.7 9.3 30.8 21.0 32.0

Reported PAT 5,848 3,558 3,936 10,693 12,810 5,787 7,112 32,408 23,998 58,117 11,630 179 Minority Interest 10 11 25 -14 1 3 8 14 37 32 -2 Adj PAT 6,663 3,569 3,961 10,679 12,811 5,790 8,069 13,265 24,823 39,935 11,628 14 YoY Change (%) -25.8 -15.8 -13.2 40.3 92.3 62.2 103.7 24.2 1.1 60.9 8.9

E: MOFSL Estimates

Per ton analysis(Rs/ton) 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE FY19 FY20E 4QE Var (%)

Volume (m ton) 19.78 18.88 21.76 25.52 21.42 18.69 20.90 21.44 86.03 82.57 21.48 0 YoY Change (%) 39.0 34.6 28.8 31.2 8.3 -1.0 -4.0 -16.0 33.2 -4.0 -15.8

Realization (incl RMC) 4,826 4,899 4,800 4,848 5,324 5,147 4,954 5,012 4,837 5,102 5,144 -3 YoY Change (%) -3.1 -1.7 -3.7 -2.7 10.3 5.1 3.2 3.4 0.9 5.5 6.1

RM Cost 806 738 818 924 754 804 856 678 812 765 850 -20 Power & Fuel 1,065 1,200 1,140 1,008 1,095 1,052 976 988 1,097 1,026 956 3 Other Expenditure 552 681 662 559 644 781 697 653 609 689 661 -1 Staff Cost 266 320 274 221 278 342 297 305 266 304 307 0 Freight & Forwarding 1,232 1,208 1,173 1,141 1,177 1,143 1,121 1,249 1,199 1,178 1,090 15 Total Expenditure 3,921 4,146 4,067 3,853 3,947 4,121 3,946 3,874 3,983 3,961 3,864 0

EBITDA 904 753 733 995 1,377 1,026 1,008 1,138 854 1,140 1,281 -11

21 May 2020 5

Estimate changes

CMP: INR 2,558 TP: INR2,643 (+3%) Neutral TP change

Rating change

Bloomberg BJAUT IN


M.Cap.(INRb)/(USDb) 740.2 / 9.6

52-Week Range (INR) 3315 / 1793

1, 6, 12 Rel. Per (%) 10/5/7


Financials & Valuations (INR b)

Y/E March FY20 FY21E FY22E

Sales 299 252 283

EBITDA 51.0 43.3 49.7

EBITDA Margin (%) 17.0 17.2 17.6

Adj. PAT 54.2 46.6 51.0

EPS (INR) 187 161 176

EPS Gr. (%) 13.3 -14.0 9.4

BV/Sh. (INR) 689 750 813

Ratios

RoE (%) 26.0 22.4 22.6

RoCE (%) 23.8 20.5 20.6

Payout (%) 77.0 56.0 58.0

Valuations

P/E (x) 13.7 15.9 14.5

P/BV (x) 3.7 3.4 3.1

Div. Yield (%) 4.7 2.9 3.3

FCF Yield (%) 5.2 6.6 6.6



Promoter 53.7 53.5 51.2

DII 8.8 10.1 7.4

FII 13.9 13.9 15.6

Others 23.6 22.5 25.8


Above est.; Retail trending at 25-30%; Expect recovery in 2H Margin resilience commendable; Volume outlook bleak Bajaj Auto’s (BJAUT) strong operating performance was driven by mix and

Fx, which supports ou/r view that the company has several levers to protect

margins. Volume recovery for both India and exports is expected in 2HFY21,

with risk of financing for India and oil prices/Fx devaluation for exports.

We downgrade our EPS for FY21/FY22E by 4% as we cut volumes but factor

in the favorable Fx. Maintain our Neutral rating.

Margins driven by mix and Fx despite operating deleverage 4QFY20 revenue/EBITDA/PAT grew -8%/2%/23% YoY to INR68.2/

INR12.5b/INR13.1b. FY20 revenue/EBITDA/PAT grew -1%/-2%/15%.

Realizations grew 10.5% YoY (8% QoQ) to INR68.7k (v/s est. INR64.7k),

driven by better mix (higher 3W, exports and premium motorcycles) and Fx.

Gross margins improved ~150bp QoQ (+340bp YoY), driven largely by mix,

higher share of premium motorcycles and favorable Fx. This led to EBITDA

margin expansion of 180bp YoY (+50bp QoQ) to 18.4% (v/s est. 17.1%).

Higher other income and lower tax boosted PAT by 23% YoY to ~INR13.1b

(v/s est. ~INR10.7b).

Highlights from management commentary Domestic 2W retails are trending at ~25% of normal retail sales as only 50-

60% dealers are currently operational and are operating at 50% of normal

sales. In exports, retails are trending at 30-35% of normal retails. 1HFY21

would be weak but management is hopeful of recovery in 2HFY21.

Domestic 2Ws: Rural and semi-urban areas should see benefit of farm

positives. Some down-trading is expected within categories rather than

across segments. However, the entry-level segment is more vulnerable due

to the adverse impact on cash-in-hand and finance availability.

Domestic 3Ws: The company expects to benefit at the expense of larger

3Ws (a weak area for BJAUT), which ferries 10-12 people. Smaller 3Ws have

limited sharing and BJAUT has 85%+ market share in this segment. Also,

post BS6, price increase in larger 3Ws is much higher than smaller 3Ws.

Financing: Management does not see major issues in 2W financing.

However, 3Ws should face challenges due to the current uncertainties.

Exports: Oil related impact in Africa is yet to be seen. Its key market of

Nigeria is witnessing double headwinds of Coronavirus and lower oil prices.

If oil prices sustain between USD30-40/bbl, it would not have any material

negative impact on demand from Africa. However, Fx devaluation could

cause unavailability of USD there. The company might plough back some Fx

benefits in select markets.

Valuation and view We downgrade our EPS for FY21/FY22E by 4% as we cut volumes but factor

in the favorable Fx. Valuations at 15.9x/14.5x FY21/22E consol. EPS is a fair

reflection of the tepid earnings growth. Maintain Neutral with TP of

INR2,643.

20 May 2020

4QFY20 Results Update | Sector: Automobile

Bajaj Auto

http://ftp.motilaloswal.com/emailer/Research/BJAUT-20200520-MOSL-RU-PG012.pdf

21 May 2020 6

Quarterly Performance (INR Million)

FY19

FY20 FY19 FY20 FY20

1Q 2Q 3Q 4Q

1Q 2Q 3Q 4Q

4QE

Net Sales 74,649 80,363 74,358 74,205

77,558 77,073 76,397 68,159 303,576 299,187 65,468 Change (%) 37.2 22.1 16.4 9.3

3.9 (4.1) 2.7 (8.1) 20.6 (1.4) (11.8)

EBITDA 13,389 14,141 12,125 12,270

11,982 12,781 13,672 12,528 51,925 50,962 11,200 EBITDA Margins (%) 17.9 17.6 16.3 16.5

15.4 16.6 17.9 18.4 17.1 17.0 17.1

Interest 3 3 36 3

5 12 5 9 45 32 3 Depreciation 700 715 634 608

601 613 617 633 2,657 2,464 687

Non-operating Income 3,469 3,104 4,135 3,680

4,413 3,934 3,662 5,327 14,389 17,336 3,809

PBT after EO 16,156 16,527 15,591 18,759

15,788 16,089 16,713 17,212 67,032 65,802 14,320 Effective Tax Rate (%) 31.0 30.3 29.3 30.4

28.7 12.8 24.5 23.9 30.3 22.5 25.3

Adj. PAT 11,152 11,525 11,019 10,671

11,257 14,024 12,616 13,103 44,366 51,000 10,701 Change (%) 17.8 3.7 15.7 (1.2)

0.9 21.7 14.5 22.8 9.9 15.0 0.3

Key Performance Indicators

Y/E March FY19

FY20 FY19 FY20 FY20

1Q 2Q 3Q 4Q

1Q 2Q 3Q 4Q

4QE

Volumes ('000 units) 1,227 1,339 1,260 1,194 1,247 1,174 1,202 992 5,020 4,615 1,012 Growth YoY (%) 38.1 25.0 25.8 14.2 1.7 -12.4 -4.6 -16.9 25.3 -8.1 -15.2

Dom. M/Cycle Mkt Sh (%) 16.3 18.6 20.3 20.0 18.3 17.9 20.1 15.1 18.7 18 Realization (INR/unit) 60,856 59,998 59,022 62,170 62,187 65,673 63,532 68,711 60,479 64,826 64,691 Growth YoY (%) -0.7 -2.3 -7.5 -4.3 2.2 9.5 7.6 10.5 -3.7 7.2 4.1

Cost Break-up RM Cost (% of sales) 70.9 72.0 72.5 71.8 71.7 70.5 69.9 68.4 71.8 70.2 69.2 Staff Cost (% of sales) 4.2 3.9 4.3 4.2 4.6 4.4 4.6 5.0 4.1 4.6 5.1 Other Cost (% of sales) 7.0 6.6 7.1 7.6 8.2 8.6 7.8 8.2 7.1 8.2 8.7

Gross Margins (%) 29.1 28.0 27.5 28.2 28.3 29.5 30.1 31.6 28.2 30 31 EBITDA Margins (%) 17.9 17.6 16.3 16.5 15.4 16.6 17.9 18.4 17.1 17.0 17.1 EBIT Margins (%) 17.0 16.7 15.5 15.7 14.7 15.8 17.1 17.5 16.2 16.2 16.1

21 May 2020 7

Estimate change

TP change Rating change

Bloomberg DRRD IN


M.Cap.(INRb)/(USDb) 649.8 / 8.1

52-Week Range (INR) 4100 / 2352

1, 6, 12 Rel. Per (%) 4/62/73



Y/E MARCH 2020 2021E 2022E

Sales 167.4 197.2 213.8

EBITDA 35.3 45.8 48.5

Adj. PAT 20.1 25.5 27.7

EBIT Margin (%) 13.7 16.0 15.9

Cons. Adj. EPS (INR) 121.3 153.9 166.6

EPS Gr. (%) 15.4 26.8 8.3

BV/Sh. (INR) 939.7 1,074.6 1,218.4

Ratios

Net D:E -0.1 -0.2 -0.4

RoE (%) 13.6 15.3 14.5

RoCE (%) 15.5 14.9 14.5

Payout (%) 16.3 14.8 14.4

Valuations

P/E (x) 32.3 25.4 23.5

EV/EBITDA (x) 17.9 13.6 12.4

Div. Yield (%) 0.4 0.5 0.5

FCF Yield (%) 5.3 2.2 3.2

EV/Sales (x) 3.8 3.1 2.8



Promoter 26.8 26.8 26.8

DII 14.4 15.1 14.5

FII 30.4 30.3 31.1

Others 28.5 27.9 27.6


CMP: INR3,911 TP: INR3,775 (-3%) Neutral

Superior execution in US/EU drives earnings Controlled opex strengthens profitability Besides new launches and market share gains posted in existing products

across key markets, Dr Reddy’s Lab (DRRD) has benefited from the pre-purchases of medicines by patients in the US market; the company is also making strides in the newer markets in Europe. This has been offset, to some extent, by price erosion in the base business.

We raise our EPS estimate by 2%/5% for FY21/FY22 to factor a healthy ANDA pipeline for the US market and a growing reach in the Europe markets. We further raise the PE multiple to 22x (from 21x earlier) to factor the resolution of compliance issues at all sites of DRRD. Accordingly, we revise our price target to INR3,775 (from INR3,490 earlier). Maintain Neutral.

Revenue growth + better margins drive earnings Revenue grew ~16% YoY to INR44.3b (our estimate: INR44.7b) in 4QFY20,

led by all businesses, except Pharma Services and Active Ingredients (PSAI). The US business (40% of sales) was up 21% YoY to INR18.1b (USD240m). The

Europe business (8% of sales) increased 80% YoY. The India business (15% of sales) was up 5% YoY to INR6.8b. Emerging Markets (18% of sales) expanded 15% YoY to INR8b, led by strong growth in the CIS segment. The PSAI segment (16% of sales) grew at a moderate rate of 6% YoY to INR7.2b.

The gross margin (GM) improved 130bp YoY to 51.5% owing to a better product mix. Cost optimization (SGA expense was down 320bp YoY, partially offset by a slight increase in R&D spend) led to ~450bp YoY expansion in the EBITDA margin to 22.1%. EBITDA was up ~47% YoY to INR9.4b (v/s est. of INR10b).

Furthermore, reported PAT was up at a higher rate of 76% YoY to INR7.6 owing to the recognition of MAT and creation of deferred tax assets. Adjusting for the same, PAT came in at INR5.7b for the quarter.

For FY20, DRRD saw 10% YoY / 21% YoY / 15.4% YoY growth in sales/EBITDA/Adj. PAT to INR167b/INR35b/INR20b, led by strong growth in Europe, an outperforming Domestic Formulation (DF) segment, and the reduced impact of price erosion in the US market.

Highlights from management commentary DRRD intends to launch 25 ANDAs in the US in FY21. DRRD guided for the gross margin to be in the range of 52–54%. Capex would be ~INR10b for FY21, with the focus being on injectables and

biosimilars.

Valuation and view We expect 17% earnings CAGR over FY20–22, led by new launches in the US,

a better reach and increasing offerings in the EU, an outperforming Domestic Formulation segment, exercises in cost control, and improving productivity.

We raise our EPS estimate by 2%/5% for FY21/FY22 and increase the PE multiple to 22x (from 21x earlier), arriving at a price target of INR3,775 (from INR3,490). We believe the sharp appreciation of ~50% witnessed over the past two months and the current valuation adequately factor earnings potential over the medium term. Hence, we maintain our Neutral stance on the stock.

20 May 2020

4QFY20 Results Update | Sector: Healthcare

Dr Reddy’s Labs

http://ftp.motilaloswal.com/emailer/Research/DRRD-20200520-MOSL-RU-PG010.pdf

21 May 2020 8

Quarterly performance – IFRS (INR m)

Y/E March FY19 FY20 FY19 FY20 Estimates

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q

4QE % Var

Sales 37,207 37,978 38,500 38,366 38,435 40,809 43,838 44,318 1,52,051 1,67,400 44,656 -0.8 YoY Change (%) 12.2 7.1 1.2 8.5 3.3 7.5 13.9 15.5 7.1 10.1 16.4

Total Expenditure 29,632 30,575 30,344 31,968 31,168 32,328 33,650 34,912 1,22,938 1,32,058 34,696

EBITDA 7,575 7,403 8,156 6,398 7,267 8,481 10,188 9,406 29,113 35,342 9,960 -5.6 YoY Change (%) 147.7 11.6 6.4 16.1 -4.1 14.6 24.9 47.0 27.2 21.4 55.7 Amortization 3,110 2,998 3,108 3,183 3,082 3,339 3,085 2,965 11,980 12,472 3,074

EBIT 4,465 4,405 5,048 3,215 4,185 5,142 7,103 6,441 17,133 22,870 6,886 YoY Change (%) 1,623.9 19.2 7.5 29.6 -6.3 16.7 40.7 100.3 53.9 33.5 114.2 Interest 0 0 0 0 0 1 2 3 1 2 3 Other Income 542 1,375 757 2,636 4,315 483 823 708 3,510 6,329 533 One-off income/(expense)

1,800 2,039 -13,200 1,800 -11,168

Profit before Tax 5,007 5,780 5,805 5,851 8,500 7,663 -5,276 7,146 22,442 18,033 7,415 -3.6 Tax 446 742 953 1,507 1,872 -3,261 423 -500 3,648 -1,466 1,332 Rate (%) 8.9 12.8 16.4 25.8 22.0 -42.6 -8.0 -7.0 16.3 -8.1 18.0

Reported PAT 4,561 5,038 4,852 4,344 6,628 10,924 -5,699 7,646 18,795 19,499 6,083 Minority Interest 0 0 0 0 0 0 0 0 0 0 0

Adjusted PAT 4,561 5,038 4,852 3,008 4,444 4,042 5,945 5,714 17,459 20,144 6,083 -6.1 YoY Change (%) 671.7 76.8 13.5 -0.5 -2.6 -19.8 22.5 90.0 62.6 15.4 102.2 Margins (%) 12.3 13.3 12.6 7.8 11.6 9.9 13.6 12.9 11.5 12.0 13.6

Key performance indicators (consolidated) Y/E March FY19 FY20 FY19 FY20

INRm 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q

North America 15,903 14,265 14,832 14,957 16,322 14,265 15,999 18,072 59,957 64,659

YoY Change (%) 6.4 (0.4) (7.7) 3.2 2.6 0.0 7.9 20.8 0.2 7.8

Europe 2,016 1,915 2,030 1,912 2,404 2,764 3,093 3,446 7,873 11,707

YoY Change (%) (2.8) (21.0) 1.2 11.7 19.2 44.3 52.4 80.2 (4.2) 48.7

India 6,074 6,864 6,741 6,505 6,960 7,511 7,636 6,839 26,179 28,946

YoY Change (%) 29.6 7.8 10.0 6.0 14.6 9.4 13.3 5.1 12.3 10.6

Russia & Others CIS 5,000 5,200 5,500 4,800 5,200 5,800 6,699 5,700 20,500 23,400

YoY Change (%) 13.6 26.8 25.0 29.7 4.0 11.5 21.8 18.8 24.2 14.1

Others 1,643 2,292 2,244 2,121 2,100 2,500 2,500 2,342 8,394 9,411

YoY Change (%) 22.0 63.0 49.6 17.8 27.8 9.1 11.4 10.4 36.4 12.1

PSAI 5,409 6,029 5,937 6,765 4,539 7,107 6,906 7,195 24,140 25,747

YoY Change (%) 16.3 6.6 9.2 8.2 (16.1) 17.9 10.0 6.4 9.8 6.7

Cost Breakup COGS (% of Sales) 44.3 45.0 46.1 49.8 48.3 48.5 45.9 48.5 46.3 47.8

SG&A (% of Sales) 24.2 24.7 23.2 24.0 23.4 21.8 21.9 20.8 24.3 21.9

R&D Expenses(% of Sales) 11.2 10.8 9.5 9.5 9.4 9.0 9.0 9.5 10.3 9.2

Gross Margins(%) 55.7 55.0 53.9 50.2 51.7 51.5 54.1 51.5 53.7 52.2

EBITDA Margins(%) 20.4 19.5 21.2 16.7 18.9 20.8 23.2 21.2 19.1 21.1

EBIT Margins(%) 12.0 11.6 13.1 8.4 10.9 12.6 16.2 14.5 11.3 13.7

21 May 2020 9

Estimate change TP change Rating change

Bloomberg LTI IN


M.Cap.(INRb)/(USDb) 310.6 / 3.8

52-Week Range (INR) 2049 / 1208

1, 6, 12 Rel. Per (%) 22/27/23



Y/E Mar 2020 2021E 2022E

Sales 108.8 118.9 137.8

EBIT Margin (%) 16.1 16.0 16.3

PAT 15.2 16.3 19.2

EPS (INR) 86.7 92.5 109.0

EPS Gr. (%) 0.4 6.7 17.8

BV/Sh. (INR) 308.1 377.2 459.1

Ratios

RoE (%) 31.1 27.3 26.3

RoCE (%) 26.9 23.9 23.2

Payout (%) 32.3 21.6 22.0

Valuations

P/E (x) 20.2 19.0 16.1

P/BV (x) 5.7 4.7 3.8

EV/EBITDA (x) 14.3 12.7 10.4

Div Yield (%) 1.6 1.1 1.4



Promoter 74.5 74.6 74.8

DII 7.2 7.2 7.1

FII 9.5 9.1 7.7

Others 8.8 9.2 10.4


CMP: INR1784 TP: INR2060 (+15%) Buy Healthy deal wins; Stable commentary Continue to expect industry leading ‘growth’; Reiterate Buy Strong exit growth in FY20 coupled with healthy deal wins reiterates our

confidence that L&T Infotech (LTI) could be one of the few outliers reporting

revenue/earnings growth in FY21. The company’s twisted seasonality (better

2H) should also help it dodge the peak COVID-19 impact (expected over 1H)

to an extent. Notwithstanding some price concessions, we expect net

margins to remain close to the lower end of the normal year guidance band

(14-15%). Top clients/BFSI performance is a key monitorable.

We keep our estimates largely unchanged and expect LTI to be a key

beneficiary of the accelerated digital adoption in the post COVID-19 world.

Reiterate Buy.

Better-than-expected and broad-based performance In 4QFY20, revenue (USD)/EBIT (INR)/PAT increased 16%/15%/13% YoY (v/s

est. 14%/10%/2% YoY). For FY20, Revenue (USD) / EBIT (INR)/PAT increased

by 13%/1%/0% YoY.

Reported growth (4.7% QoQ, CC) was stronger than our expectations (3%).

Further, growth was broad-based across geographies and verticals.

While RoW (18.1% QoQ, CC) growth was lumpy partly due to the low base,

core geographies reported healthy growth despite the COVID-19 impact.

Growth in the top-5 (-1% QoQ, CC)/Top-10 (2% QoQ, CC) accounts was weak

due to the high base in Dec’19. Overall growth during Mar’20 was driven by

(1) addition of new clients, and (2) mining/scaling up of small accounts.

Adjusted for one-time donation to PM-CARES fund, EBIT margin improved

110bp QoQ. Major drivers were INR depreciation (50bp impact) and

favorable calendar (50bp impact).

Key highlights from management commentary Even as management anticipates demand pressures, they remain optimistic

on performance given the strong order book and deal pipeline. The company

expects a revenue dip in Jun’20, in line with industry.

Management hinted toward potential announcements of deal closures in

Jun’20, despite some delays and deferrals being witnessed currently.

Across verticals, Manufacturing, Automotive and Oil & Gas would be the

most impacted, while CPG and Pharma are expected to outperform the

company’s growth in the coming quarters.

Within BFS – even as no impact is expected in the near future – rising

defaults in banks could affect performance over 2HFY21.

While pricing is expected to be largely stable, management has hinted at

near-term challenges on account of client specific concessions.

Valuation view – industry leading growth to defend rich multiples LTI’s recent client addition across buckets was the strongest and broad-

based v/s comparable prior periods. It has recently added several marquee

logos (e.g. Standard Chartered). Given its proven account mining

capabilities, this should provide good headroom for incremental growth.

Industry leading ‘growth’ plus prudent capital allocation should defend its

rich multiples. Our fair valuation is 19x 1-year forward P/E, at 15% discount

to TCS. Reiterate Buy.

20 May 2020 4QFY20 Results Update | Sector: Technology

L&T Infotech

http://ftp.motilaloswal.com/emailer/Research/LTI-20200520-MOSL-RU-PG010.pdf

21 May 2020 10

Quarterly Performance (INR m)

Y/E March FY19 FY20 FY19 FY20 Est. Var. (% / bp) 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 4QFY20

Revenue (USD m) 320 329 347 354 357 364 394 410 1,349 1,525 404 1.4

QoQ (%) 3.5 2.7 5.6 2.0 0.8 2.0 8.4 3.9 19.1 13.0 2.5 143

Revenue (INR m) 21,557 23,312 24,729 24,860 24,849 25,707 28,111 30,119 94,458 1,08,786 29,107 3.5

YoY (%) 29.0 33.2 31.3 24.2 15.3 10.3 13.7 21.2 29.3 15.2 17.1 407

GPM (%) 35.2 35.1 34.8 34.0 33.1 31.8 31.7 32.8 34.7 32.4 33.1 (34)

SGA (%) 15.7 14.6 14.2 14.8 14.7 13.7 13.0 13.6 14.8 13.7 13.7 (13)

EBITDA 4,190 4,790 5,090 4,765 4,580 4,658 5,274 5,781 18,835 20,293 5,647 2.4

EBITDA Margin (%) 19.4 20.5 20.6 19.2 18.4 18.1 18.8 19.2 19.9 18.7 19.4 (21)

EBIT Margin (%) 17.7 19.0 19.1 17.7 16.0 15.5 16.2 16.7 18.4 16.1 16.6 11

Other income 1,036 943 288 648 812 739 433 479 2,915 2,463 282 69.9

ETR (%) 25.5 25.4 25.2 24.9 25.6 23.9 24.6 22.5 25.3 24.1 24.5 Adj PAT 3,612 4,003 3,755 3,787 3,557 3,603 3,767 4,274 15,157 15,201 3,861 10.7

QoQ (%) 24.9 10.8 -6.2 0.9 -6.1 1.3 4.6 13.5 2.5 YoY (%) 35.1 46.7 32.7 30.9 -1.5 -10.0 0.3 12.9 36.3 0.3 2.0 EPS (INR) 20.6 22.6 21.6 21.6 20.3 20.5 21.6 24.3 86.4 86.7 22.2 9.6

Key Perfor. Indicators

Y/E March FY19 FY20 FY19 FY20

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q

Revenue (QoQ CC %) 5.1 3.5 6.1 1.9 1.0 2.4 8.3 4.7 21.0 14.2

Margins (%)

Gross Margin 35.2 35.1 34.8 34.0 33.1 31.8 31.7 32.8 34.7 32.4 EBIT Margin 17.7 19.0 19.1 17.7 16.0 15.5 16.2 16.7 18.4 16.1 Net Margin 16.8 17.2 15.2 15.2 14.3 14.0 13.4 14.2 16.0 14.0

Operating metrics

Headcount 25,150 26,414 27,513 28,169 29,347 30,979 31,419 31,437 28,169 31,437 Attrition (%) 15.1 15.3 16.5 17.5 18.3 18.4 17.7 16.5 17.5 16.5 Offshore rev (%) 53.2 52.4 52.2 52.2 50.5 51.4 51.0 49.1 52.5 50.5 Utilization (incl. trainees) 79.7 80.4 82.1 80.1 80.5 78.9 79.2 79.3 80.6 79.5

Key Verticals (YoY %)

BFS 42.3 33.0 26.9 10.5 -0.1 0.4 8.6 15.4 27.1 6.1 Insurance 9.0 5.5 8.4 11.4 10.8 15.7 13.1 9.3 8.6 12.2 CPG, Retail and Pharma 32.1 37.6 36.2 34.9 35.9 24.9 20.1 22.4 35.3 25.3

Key Geographies (YoY %)

North America 19.6 16.2 17.3 15.2 15.0 12.9 18.3 20.2 17.0 16.7 Europe 24.1 18.6 9.7 1.0 -0.4 6.2 6.2 6.7 12.6 4.7

21 May 2020 11

Estimate changes CMP: INR1,524 TP: INR1,405 (-8%) Downgrade to Neutral

TP change

Rating change

Bloomberg JUBI IN


M.Cap.(INRb)/(USDb) 201.2 / 2.6

52-Week Range (INR) 1973 / 1078

1, 6, 12 Rel. Per (%) 3/20/38



Y/E March 2020 2021E 2022E

Sales 39.3 25.9 41.6

Sales Gr. (%) 10.2 -34.0 60.7

EBITDA 8.8 5.1 9.4

EBITDA Margin (%) 22.3 19.6 22.5

Adj. PAT 2.8 0.8 3.4

Adj. EPS (INR) 22.5 6.1 25.6

EPS Gr. (%) -6.5 -72.8 317.1

BV/Sh.(INR) 85.0 76.1 83.0

Ratios

RoE (%) 26.5 8.1 30.8

RoCE (%) 21.1 6.7 18.9

Payout (%) 31.1 174.5 61.0

Valuation

P/E (x) 67.6 248.6 59.6

P/BV (x) 17.9 20.0 18.4

EV/EBITDA (x) 23.9 41.3 22.0



Promoter 41.9 41.9 41.9

DII 21.1 19.4 10.3

FII 31.1 32.8 39.0

Others 5.9 5.8 8.7


Weak results, worsening outlook While 4QFY20 sales were in line with expectations, EBITDA and PAT were

significantly below expectations.

Extended lockdown, the economic implications of COVID-19 on discretionary

consumption, a minimum wage increase, and 30% of sales generated from

dine-ins were major concerns that more than offset market share gains in

other restaurants and aggregators.

While the longer term earnings outlook is attractive – and JUBI, with its

delivery-focused business, has the right model among retailing peers in India –

valuations of ~60x FY22 appear daunting from a one-year investment

perspective. Downgrade to Neutral.

Sales and SSSG in-line; profitability significantly below expectation

Jubilant FoodWorks (JUBI) reported 3.8% sales growth YoY to INR9b (est.:

INR9.1b), with SSSG of -3.4% YoY (est.: -3%). Like-for-like growth (year-over-

year growth in sales of non-split restaurants opened before the previous

financial year) stood at -2.3%.

JUBI opened a total of 17 stores during the quarter: 13 for Domino’s Pizza, 2 for

Dunkin’ Donuts, and 2 for Hong’s Kitchen.

Gross margins were down 160bp YoY to 74.4%. Higher other expenses as a

percentage of sales (+200bp YoY) and staff cost as a percentage of sales

(+230bp YoY) were offset by lower rent costs as a percentage of sales (-780bp

YoY). This led to EBITDA margin expansion of 180bp to 18.9%.

EBITDA thus grew 14.8% YoY to INR1.7b (est.: INR2b).

EBITDA for 4QFY20 (without the impact of Ind-AS 116) declined 59.8% YoY to

INR593m, with the EBITDA margin at 6.6%.

Adj. PAT declined 42.9% YoY to INR452m (est.: INR646m).

The company reported an exceptional item of INR323m pertaining to a)

provision for diminution in the value of the investment of INR200m in the Sri

Lankan subsidiary and (b) COVID-19-led expenses of INR123m.

Highlights from management commentary Extended lockdown is resulting in an economic crisis.

Heightened safety protocols and social distancing measures would be the new

norm.

In addition to zero-contact deliveries, JUBI has introduced the same service for

takeaways as well. It is also planning for zero-contact dine-ins when dine-ins

are finally allowed.

Valuation and view Our upgrade to BUY on JUBI in Nov’19 has worked very well, with the company

outperforming ~20% v/s our coverage universe over this period. Its delivery-

focused model makes the company a good investment candidate in the Indian

Retail space as this enables it to circumvent the high rental and overhead

burdens faced by the industry.

20 May 2020

4QFY20 Results Update | Sector: Consumer

Jubilant FoodWorks

http://ftp.motilaloswal.com/emailer/Research/JUBI-20200520-MOSL-RU-PG012.pdf

21 May 2020 12

However, the near-term outlook is bleak due to: a) extended lockdown, b) the

economic implications of the lockdown, leading to weak macros and muted

discretionary consumption, c) minimum wage increases, and d) 30% of sales

coming from dine-ins. These factors would outweigh any market share gains due

to the shrinking of the restaurant industry. Given the safety concerns, the return

to erstwhile confidence levels even on delivery sales would be a gradual

process. We cut our FY21/FY22 EPS estimates by a steep 75%/33% due to

significant deterioration in the operating environment in the past one month,

with the macro outlook not offering any comfort either. Downgrade to Neutral.

Quarterly standalone perf.

(INR m)

Y/E March FY19 FY20 Std. Consol. FY20E Var.

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q FY19 FY20 4QE (%)

No of stores (Dominos) 1,144 1,167 1,200 1,227 1,249 1,283 1,325 1,335 1,227 1,335 1,355

SSG (%) 25.9 20.5 14.6 6.0 4.1 4.9 5.9 -3.4 16.4 3.2 -3.0

Net Sales 8,551 8,814 9,291 8,652 9,401 9,882 10,596 8,979 35,307 39,273 9,085 -1.2% YoY change (%) 26.0 21.3 16.8 10.9 9.9 12.1 14.1 3.8 18.5 11.2 5.0

Gross Profit 6,373 6,575 7,019 6,581 7,093 7,439 7,937 6,682 26,548 29,438 6,819 Gross margin (%) 74.5 74.6 75.6 76.1 75.5 75.3 74.9 74.4 75.2 75.0 75.1

EBITDA 1,421 1,475 1,706 1,476 2,191 2,350 2,536 1,695 6,078 8,756 2,004 -15.4% EBITDA growth % 78.5 44.4 24.6 15.5 54.2 59.3 48.6 14.8 36.2 44.1 35.8 Margins (%) 16.6 16.7 18.4 17.1 23.3 23.8 23.9 18.9 17.2 22.3 22.1

Depreciation 366 385 373 400 808 838 880 916 1,523 3,523 912 Interest

395 404 426 410

1,652 426

Other Income 71 108 138 151 153 172 159 204 469 696 197

PBT 1,126 1,199 1,471 1,227 1,141 1,281 1,389 573 5,024 4,277 863 -33.6% Tax 380 422 506 436 393 396 352 121 1,744 1,303 217 Rate (%) 33.7 35.2 34.4 35.5 34.4 30.9 25.4 21.1 34.7 30.5 25.2

Adjusted PAT 747 777 965 792 748 884 1,037 452 3,280 2,974 646 -30.0% YoY change (%) 213.2 60.2 46.2 16.3 0.1 13.9 7.4 -42.9 58.9 -9.3 -18.5

E: MOFSL Estimates

Interim nos. are standalone while annual nos. are on consol. basis

Key performance indicators

Y/E March FY19 FY20

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q

2Y average growth (%)

SSG 16.2 13.0 16.2 16.3 15.0 12.7 10.3 1.3

Sales 18.7 15.2 18.8 19.1 18.0 16.7 15.4 7.4

EBITDA 58.2 51.7 69.2 63.3 66.4 51.8 36.6 15.2

PAT 119.4 92.5 138.4 186.1 106.7 37.1 26.8 -13.3

% of Sales

COGS 25.5 25.4 24.4 23.9 24.5 24.7 25.1 25.6

Operating Expenses 57.9 57.9 57.2 59.0 52.2 51.5 51.0 55.5

Depreciation 4.3 4.4 4.0 4.6 8.6 8.5 8.3 10.2

YoY change (%)

COGS 35.7 19.1 12.1 3.3 5.9 9.2 17.1 10.9

Operating Expenses 12.9 16.8 16.6 13.0 -1.0 -0.2 1.7 -2.3

Other Income 138.0 197.7 312.9 18.8 113.9 59.0 15.3 34.8

EBIT 216.3 56.6 36.6 19.6 31.1 38.6 24.2 -27.7

E: MOFSL Estimates

21 May 2020 13

Estimate change

TP change Rating change

Bloomberg AJP IN


M.Cap.(INRb)/(USDb) 125.8 / 1.6

52-Week Range (INR) 1578 / 840

1, 6, 12 Rel. Per (%) 12/68/62



Y/E MARCH 2020 2021E 2022E

Sales 25.9 28.4 32.1

EBITDA 7.0 7.5 8.8

Adj. PAT 4.5 5.0 6.1

EBIT Margin (%) 23.3 22.4 24.1

Cons. Adj. EPS (INR) 51.1 56.9 69.4

EPS Gr. (%) 15.1 11.2 22.1

BV/Sh. (INR) 293.8 339.6 391.9

Ratios

Net D:E -0.1 -0.1 -0.1

RoE (%) 18.7 18.0 19.0

RoCE (%) 19.0 18.2 19.2

Payout (%) 16.3 19.5 24.7

Valuations

P/E (x) 28.5 25.6 21.0

EV/EBITDA (x) 18.2 16.8 14.1

Div. Yield (%) 0.6 0.8 1.2

FCF Yield (%) 0.5 0.7 2.3

EV/Sales (x) 4.9 4.5 3.9



Promoter 70.5 70.5 70.5

DII 11.4 12.3 10.0

FII 8.9 7.9 9.8

Others 9.2 9.3 9.7


CMP: INR1,442 TP: INR1,700 (+18%) Buy

Earnings growth led by US/Asia and better operating leverage Toward end of major capex program Ajanta Pharma (AJP) ended FY20 on a healthy note with 15% earnings

growth (v/s 12% compounded earnings decline over FY17-19), led by sales

revival in Asia, Africa and new introductions in the US market. The

company’s major capex program would conclude in FY21 and only

maintenance capex would be required FY22E onwards, indicating better free

cash flow situation for AJP.

We reduce our EPS estimate for FY21 by 6% to factor in the COVID-19 led

slowdown in the branded generics segment. Rollover to 22x (unchanged)

12M forward earnings gives us a price target of INR1,700 (from INR1,635

earlier). Maintain Buy.

Higher revenue offsets impact of lower gross margins on earnings 4QFY20 revenues at INR6.8b (v/s est. INR6.3b) grew 32% YoY, led by exports

(+43%YoY; 74% of sales). Within exports, US generic sales were up 88% YoY

(INR1.4b) and emerging markets sales grew 38% YoY (INR3b). Domestic

formulation sales grew 11% YoY to INR1.8b (~26% of sales).

Gross Margin (GM) came in at 74% and contracted 550bp YoY due to change

in the product mix. AJP had forex loss of INR150m in other expenses.

Adjusting for the same, EBITDA margin at 24.4% (v/s est. 25%) contracted

~30bp YoY due to lower Employee/Other expenses (-190bp/-340bp YoY as %

of sales). EBITDA grew 31% YoY to INR1.7b (v/s est. INR1.6b).

During the quarter, AJP had forex gain of INR400m in other income.

Adjusting for the same, PAT came in at INR1.1b (in-line), up 27% YoY.

FY20 revenue/EBITDA/Adj. PAT stood at INR25.9b/INR7b/INR4.5b, up

26%/22%/15% YoY, led by strong traction in exports (US/Asia/Africa).

Highlights from management commentary During the year, AJP launched 7 new products in the US and has guided for

~10-12 filings for FY21. It had 23 ANDAs pending approval at end-FY20.

AJP has launched ~35 products in India with ~40% being first-to-market.

AJP launched 12/15 new products in Africa/Asia market in FY20.

AJP incurred capex of INR2.5b for FY20 and has guided for capex of INR2b

for FY21 (INR750m for Guwahati Ophthalmology block and INR1.3b for

maintenance). Considering AJP is in the last phase of capex, the company

would have largely maintenance capex of INR1.2-1.3b FY22E onwards.

Valuation and view We remain positive on AJP due to strong ANDA pipeline for the US market,

new launches in the branded generics segment of Asia/Africa/India and

better operating leverage.

We expect 17% earnings CAGR over FY20-22E. The COVID led disruption

could be a dampener for earnings growth in FY21, and accordingly, we have

cut our EPS estimate for FY21 by 6%; our EPS estimate for FY22E remains

unchanged. Rolling our price target to 22x 12M forward earnings, we arrive

at price target of INR1,700. Re-iterate Buy.

20 May 2020

4QFY20 Results Update | Sector: Healthcare

Ajanta Pharma

http://ftp.motilaloswal.com/emailer/Research/AJP-20200520-MOSL-RU-PG010.pdf

21 May 2020 14

Consol. - Quarterly perf.

(INR Million)

Y/E March FY19 FY20 FY19 FY20 FY20 vs Est

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 4QE (%)

Net Sales 5,110 5,441 4,851 5,152 6,119 6,428 6,512 6,820 20,554 25,879 6,269 8.8 YoY Change (%) 8.0 0.7 -17.4 -2.9 19.8 18.1 34.2 32.4 -3.5 25.9 21.7

Total Expenditure 3,452 3,779 3,698 3,881 4,436 4,651 4,652 5,156 14,809 18,895 4,699 9.7

EBITDA 1,658 1,662 1,153 1,271 1,684 1,776 1,860 1,663 5,744 6,983 1,569 6.0 YoY Change (%) 26.9 -9.5 -41.6 -8.9 1.6 6.9 61.3 30.9 -11.8 21.6 23 Depreciation 172 175 187 188 228 233 236 260 721 957 245 6.1 EBIT 1,486 1,487 966 1,083 1,456 1,543 1,624 1,403 5,024 6,026 1,324 6 YoY Change (%) 26.8 -12.1 -47.0 -11.8 -2.0 3.8 68.0 29.5 -15.1 20.0 22 Interest 2 1 1 8 18 49 16 36 12 119 16 Other Income -2 152 44 16 76 132 146 167 211 522 101 65.4

PBT before EO expense 1,483 1,638 1,010 1,092 1,515 1,626 1,754 1,534 5,223 6,429 1,409 8.9

Extra-Ord expense 0 0 80 0 0 11 3 -225 80 -211 0

PBT 1,483 1,638 930 1,092 1,515 1,616 1,751 1,759 5,143 6,640 1,409 24.8 Tax 425 385 261 203 368 452 676 467 1,273 1,963 328 42.3 Rate (%) 28.7 23.5 28.0 18.6 24.3 28.0 38.6 26.6 24.8 29.6 23.3

MI & P/L of Asso. Cos. 0 0 0 0 0 0 0 0 0 0 0

Reported PAT 1,058 1,254 669 889 1,146 1,164 1,076 1,292 3,870 4,677 1,080 19.5 Adj PAT 1,058 1,254 727 889 1,146 1,171 1,078 1,126 3,930 4,522 1,080 4.3 YoY Change (%) 11.6 -4.9 -50.7 -5.9 8.4 -6.6 48.3 26.7 -16.1 15.1 21.5 Margins (%) 20.7 23.0 15.0 17.3 18.7 18.2 16.5 16.5 19.1 17.5 17.2

Key performance Indicators (Consolidated)

Y/E March FY19 FY20 FY19 FY20

INRm 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q

Domestic formulations 1,780 1,790 1,740 1,590 1,940 2,030 1,950 1,770 6,890 7,665

YoY Change (%) 24.5 0.6 8.7 7.4 9 13.4 12.1 11.3 9.5 11.2

Asia 1,290 1,350 1,210 1,430 1,260 1,810 1,580 2,090 5,290 6,295

YoY Change (%) 34.4 29.8 -24.8 8.3 -2.3 34.1 30.6 46.2 7.3 19

Africa 1,310 1,360 1,140 1,210 1,730 1,540 1,290 1,380 5,030 5,940

YoY Change (%) -22 -37.6 -36.7 -29.7 32.1 13.2 13.2 14 -31.8 18.1

US 610 790 660 770 1,020 1,110 1,590 1,430 2,830 5,202

YoY Change (%) 13 203.8 -7 83.3 67.2 40.5 140.9 85.7 46.6 83.8

Cost Break-up RM Cost (% of Sales) 16.5 17.6 20.2 20.5 23.3 25.9 26 26 18.7 25.3

Staff Cost (% of Sales) 20.5 19.4 23.2 20.8 19.3 18.3 18.5 19 21 18.8

R&D Expenses (% of Sales) 8 9.2 9.3 7.8 6.5 6.2 5.4 7.2 8.6 6.3

Other Cost (% of Sales) 30.6 32.4 32.8 34 29.9 28.2 27 30.6 32.4 28.9

Gross Margins(%) 83.5 82.4 79.8 79.5 76.7 74.1 74 74 81.3 74.7

EBITDA Margins(%) 32.4 30.5 23.8 24.7 27.5 27.6 28.6 24.4 27.9 27

EBIT Margins(%) 29.1 27.3 19.9 21 23.8 24 24.9 20.6 24.4 23.3

21 May 2020 15

Estimate change TP change Rating change Bloomberg JSW IN

Equity Shares (m) 1,640

M.Cap.(INRb)/(USDb) 66.8 / 0.9

52-Week Range (INR) 80 / 35

1, 6, 12 Rel. Per (%) -4/-19/-19



Y/E MARCH 2020 2021E 2022E

Sales 82.7 77.6 86.1

EBITDA 29.6 27.3 27.9

Adj. PAT 8.3 7.0 8.6

EBITDA Margin (%) 35.7 35.2 32.4

Cons. Adj. EPS (INR) 5.1 4.3 5.2

EPS Gr. (%) 20.0 -15.5 22.1

BV/Sh. (INR) 71.0 72.7 75.4

Ratios

Net D:E 0.8 0.7 0.6

RoE (%) 7.1 6.0 7.1

RoCE (%) 7.8 7.2 7.7

Payout (%) 39.3 46.5 38.1

Valuations

P/E (x) 8.0 9.5 7.8

P/BV (x) 0.6 0.6 0.5

EV/EBITDA(x) 5.6 5.5 4.8

Div. Yield (%) 2.5 6.1 6.1

FCF Yield (%) 29.4 36.6 38.1



Promoter 37.2 36.2 33.0

DII 27.8 26.7 24.9

FII 18.6 21.0 26.6

Others 16.3 16.1 15.5


CMP: INR41 TP: INR64 (+57%) Buy Healthy growth driven by better standalone perf

Kamalanga acquisition on hold; Sticking with cash in uncertain times

JSW Energy (JSWE)’s results reflected an improved performance in the S/A business YoY, aided by lower interest costs on account of debt reduction. At a consol level, EBITDA rose 21% in 4QFY20.

The acquisition of Kamalanga has been put on hold given the uncertainty surrounding recovery in power demand. While we see prudence in JSWE wanting to hold on to cash in the near term, if growth opportunities do not emerge or dividend payout is not increased, concerns may arise over capital allocation. Although, the recent fall in stock price implies the stock remains attractive. Maintain Buy

Healthy growth in S/A aided by debt reduction

JSWE 4QFY20 EBITDA increased 21% YoY to INR5.8b (our est.: INR5.6b) on account of higher short-term sales and lower base of the previous year for S/A (due to the timing effect in coal prices and tariff, in our view). Short-term sales volume rose 30% YoY to 736MU. Interest cost declined 10% YoY to INR2.5b given the debt reduction. PBT came in at INR0.9b (v/s INR0.1b in 4QFY19). For FY20, EBITDA/Adj. PAT was up 4%/20% YoY at INR29.6b/8.3b respectively. FY20 PAT was aided by lower interest costs (INR1.4b decline).

Hydro generation was up 8% YoY, but EBITDA remained flat YoY due to the impact of new CERC norms. EBITDA at Barmer was up 3% YoY to INR2.4b.

Reported PAT for 4QFY20 stood at INR1.1b (4QFY19: INR0.04b), supported by lower taxes and interest costs, and was higher than our est. of INR0.2b

Net debt (incl. acceptances) reduced to INR98.5b (v/s INR113.8b in FY19). Receivables, though, have stretched to 93 days (v/s 57 days in FY19).

Management commentary: Acquisition on hold

Given the uncertain situation due to lockdown, JSWE has put the acquisition of the Kamalanga project on hold. As per mgmt., there is low visibility on whether the transaction would happen.

JSWE is re-evaluating its plans for expansion in the Thermal Generation space. The company noted it may focus more on additions within Renewables instead.

The co. is focused on improving collections during this lockdown period. JSWE noted its receivables have fallen ~15% from March levels.

Healthy cash flow generation, with large tied-up capacity; Maintain Buy

The Kamalanga acquisition has been put on hold given the uncertainty around recovery in power demand. Furthermore, there has been no progress on the Ind Barath acquisition. While we see prudence in JSWE wanting to hold on to cash, if growth opportunities do not emerge or dividend payout is not increased, concerns may arise over capital allocation. However, with the recent fall in stock prices, JSWE remains attractive (FY21: 0.6x P/BV; 9.5x P/E).

We estimate 16% decline in PAT for FY21, building in lower merchant volumes/realizations. However, strong FCF generation would continue, aided by tied-up capacities. ~80% of JSWE’s 4.4GW capacity is under long-term PPAs, which generate strong free cash flows. Furthermore, these tied-up PPAs contribute ~95% to the company’s EBITDA. Maintain Buy, with TP of INR64/sh.

20 May 2020

4QFY20 Results Update | Sector: Utilities

JSW Energy

http://ftp.motilaloswal.com/emailer/Research/JSW-20200520-MOSL-RU-PG008.pdf

21 May 2020 16

Quarterly performance (consolidated) – INR m

Y/E March FY19 FY20 FY19 FY20 FY20 vs Est

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 4QE (%)

Net Sales 23,606 24,308 24,217 19,246 24,122 21,186 19,486 17,934 91,376 82,727 18,425 -3 YoY Change (%) 5.8 18.6 21.5 8.4 2.2 -12.8 -19.5 -6.8 -4.3

Total Expenditure 15,843 15,694 16,830 14,478 16,029 11,838 13,106 12,186 62,845 53,159 12,937 -6

EBITDA 7,762 8,613 7,387 4,768 8,093 9,348 6,380 5,748 28,531 29,569 5,487 5 Margins (%) 32.9 35.4 30.5 24.8 33.5 44.1 32.7 32.1 31.2 35.7 29.8

Depreciation 2,899 2,933 2,933 2,872 2,913 2,943 2,932 2,893 11,637 11,681 2,922 -1 Interest 3,130 3,083 2,948 2,764 2,698 2,722 2,611 2,480 11,924 10,511 2,773 -11 Other Income 673 1,370 701 936 518 1,133 676 542 3,680 2,870 473 15

PBT before EO expense 2,407 3,967 2,208 68 3,000 4,816 1,513 917 8,650 10,247 266 245

Extra-Ord expense 0 0 0 0 0 0 -2,656 0 0 -2,656 0

PBT 2,407 3,967 2,208 68 3,000 4,816 4,170 917 8,650 12,904 266 245 Tax 236 1,125 638 126 883 1,338 125 26 2,124 2,372 53

Rate (%) 9.8 28.3 28.9 185.6 29.4 27.8 3.0 2.8 24.6 18.4 19.8 MI and Associates -121 -317 109 -97 -327 -51 103 -193 -426 -468 60

Reported PAT 2,292 3,160 1,461 39 2,444 3,530 3,941 1,084 6,951 10,999 152 611 Adj PAT 2,292 3,160 1,461 39 2,444 3,530 1,285 1,084 6,951 8,343 152 611 YoY Change (%) 5.5 6.4 211.8 -106.1 6.6 11.7 -12.1 2,702 40.2 20.0 294

Source: MOFSL, Company

Key performance parameters – Volume and realization

FY19

FY20 YoY QoQ

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q % %

Standalone Units MU 2,992 2,464 2,971 2,442

2,616 2,482 2,555 2,298 -5.9 -10.1

Realization INR/kWh 4.38 4.87 5.04 4.55

4.37 4.28 4.27 4.42 -2.8 3.5

Fuel cost INR/kWh 3.51 3.85 3.70 3.53

3.14 3.12 3.16 2.93 -17.1 -7.4

Other cost INR/kWh 0.27 0.33 0.29 0.44

0.29 0.37 0.29 0.45 3.6 55.9

EBITDA INR/kWh 0.61 0.69 1.05 0.58

0.94 0.80 0.83 1.04 78.8 26.5

EBITDA INR m 1,817 1,690 3,110 1,426

2,459 1,975 2,108 2,400 68.3 13.8

Barmer Units MU 1,651 1,531 1,457 1,377

1,379 1,281 1,271 1,346 -2.3 5.9


6.26 4.19 5.00 4.62 0.7 -7.7

EBITDA INR/kWh 1.61 1.46 1.85 1.70

1.82 2.14 2.17 1.80 5.8 -17.2

EBITDA INR m 2,650 2,240 2,700 2,340

2,510 2,740 2,760 2,420 3.4 -12.3

Hydro Units MU 1,443 2,675 689 397

1,868 2,926 730 429 8.1 -41.2


2.09 1.77 2.95 3.54 7.4 20.3

EBITDA INR/kWh 2.34 1.86 2.41 2.57

1.79 1.66 2.33 2.38 -7.5 2.1

EBITDA INR m 3,370 4,980 1,660 1,020

3,340 4,850 1,700 1,020 0.0 -40.0

Consolidated Realization INR/kWh 3.88 3.64 4.73 4.56

4.11 3.16 4.28 4.40 -3.5 3.0

Fuel (ex-hydro) INR/kWh 2.99 3.33 3.27 3.12

3.42 2.60 2.91 2.73 -12.3 -6.2


Key performance parameters – Generation and PLF

FY19

FY20 YoY QoQ

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q % %

Ratnagiri MU 2,032 1,559 1,969 1,793

1,954 1,781 1,753 1,705 -4.9 -2.7

Deemed PLF % 85.0 64.0 83.7 80.0

81.7 73.7 80.8 64.9 Vijaynagar MU 960 905 1,002 649

662 701 802 593 -8.6 -26.1

Deemed PLF % 55.0 52.0 57.0 37.0

38.2 40.1 45.9 31.5 Barmer MU 1,651 1,531 1,457 1,377

1,379 1,281 1,271 1,346 -2.3 5.9

Deemed PLF % 86.0 85.0 79.5 86.0

80.8 60.0 82.3 56.9 Hydro MU 1,443 2,675 689 397

1,868 2,926 730 429 8.1 -41.2

Deemed PLF % 50.7 94.0 24.2 14.0

66.3 102.7 25.6 15.1 Total

6,086 6,670 5,117 4,216

5,867 6,701 4,556 4,073 -3.4 -10.6

Source: MOFSL, Company

21 May 2020 17

Cabinet approves recent relief measures for NBFCs/MSMEs Special Liquidity Facility for NBFCs restricted to <3months – a negative surprise

The Cabinet Committee on 20th May’20 approved some of the government’s proposals

announced last week. The Special Liquidity Facility restricted to less than 90 days is a

negative surprise. The MSME guarantee scheme is to be implemented through an SPV

structure. We believe that corpus under the Partial Credit Guarantee scheme of INR100b

may not be sufficient to address the issues faced by the sector and to get risk appetite of

banks back. While all the schemes would partially address near-term liquidity challenges of

NBFCs/MSMEs, in our view, medium-term funding challenges for NBFCs still remain.

Special liquidity window for NBFCs/HFCs only for short-term borrowings

The Indian government (GoI) has set up an SPV structure to raise money from the

RBI (with GoI’s guarantee). The SPV, in turn, would invest up to INR300b in short-

term securities (residual maturity up to 3 months) of investment-grade NBFCs and

HFCs. In the fine print, restriction of the scheme only to short duration paper is a

disappointment. Recently, we have witnessed NBFCs with good parentage getting

funds at significantly lower cost in the Commercial Paper market. In our coverage

universe, all entities are well placed to take care of liability repayment (despite

factoring in high moratorium on the asset side and no moratorium benefit on the

liability side) at least from the next three months’ perspective with available liquid

assets on the balance sheet. In our view, while the GoI is seeing the current situation

as a liquidity issue (and hence, matching SLF’s tenure somewhat to the moratorium

period), the real concern – risk appetite of lenders – remains. Giving money to

NBFCs only for a shorter duration exposes lenders to rollover risk and ALM

mismatch, even for new originations.

INR3t emergency line to MSMEs available till 31st Oct’20 through SPV structure

According to this scheme, banks and NBFCs can provide an emergency credit line to

MSMEs up to 20% of their outstanding credit as at 29th Feb’20. This is subject to (a)

total indebtedness of the MSME up to INR250m, (b) INR1b or below turnover of the

MSME, and (c) MSMEs not being overdue on loans for more than 60 days. The

maximum amount that MSMEs can take under this facility is INR250m. The tenor of

the loan is 4 years with a moratorium on principal repayment in the first year.

Note that the 100% guarantee coverage will be provided by the National Credit

Guarantee Trustee Company Limited (NCGTC). The interest rate is capped at 9.25%

for banks (to be taken as working capital financing) and 14% for NBFCs (term loans).

Guarantees to kick start credit cycle for MSME lending

Full guarantee on incremental 20% credit flow (to take care of operational expenses)

to exiting exposures with moratorium on principal should help the MSME space tide

over the liquidity issue. We are not sure about the corpus of just INR416b as against

the total guarantee amount of INR3t, and hence, we await full operational details of

the scheme from the NCGTC. In our view, two important points need to be

considered: (a) it is a big relief to genuine cases, otherwise liquidity problems could

have turned into a credit problem, and (b) for cases that are facing business risk i.e.

Sector Update | 20 May 2020

NBFC

Refer our earlier report

Circulars for reference

http://ftp.motilaloswal.com/emailer/Research/FINANCIALS-MSME_20200513-MOSL-SU-PG006.pdf

http://ftp.motilaloswal.com/emailer/Research/Special Liquidity Scheme.pdf

http://ftp.motilaloswal.com/emailer/Research/PCG Scheme.pdf

http://ftp.motilaloswal.com/emailer/Research/INR3T Emergency Credit Line.pdf

21 May 2020 18

are unviable even after providing liquidity, credit risk may get pushed to a year

down the line and would increase risk in the balance sheet. Based on existing

moratorium schemes, there was a high likelihood of MSMEs’ NPAs surging. This is

because businesses would take time to return to normalcy, especially given the

weak demand and issue of migrant workers. The scheme would definitely boost

credit flow to the MSME segment.

PCG scheme may help credit flow to lower-rated NBFCs

As the GoI’s PCG scheme on portfolio sell-downs last year received a muted

response, it has now enhanced the scheme to include lending to the NBFC sector

too. According to this scheme, PSU Banks can purchase bonds or CPs (less than 1

year maturity) of NBFCs rated AA or below and avail 20% first loss credit guarantee

on the exposure. Unlike the earlier scheme, NBFCs that are classified as SMA-1 due

to technical reasons would also be eligible under the new scheme. In addition, the

NBFC should have delivered a profit in one of the three years – FY18, FY19 or FY20

v/s the earlier condition of FY18 or FY19. This scheme is available till Mar’21 or

INR100b worth of guarantees, whichever is earlier. Most importantly, risk appetite

of lenders is still a concern as the 80% credit risk remains with lenders. Further,

INR100b is a very low number for the sector as a whole, in our view.

Valuation and view

Despite the earlier liquidity enhancing measures by the RBI, lenders were wary of

lending to the MSME/NBFC segments fearing credit risk. With full collateral-free

guarantee on loans worth INR3t (17% of outstanding loans), it would encourage

lenders (especially banks with no liability challenge) to lend to MSMEs and kick-start

the credit cycle in this segment. Our interaction with corporates suggests that the

Special Liquidity Facility extending guarantee for tenor of only less than three

months is a negative surprise. With banks starting to provide moratorium, sufficient

cash on balance sheet and the CP market opening up (good parentage companies

are borrowing at less than 5% for 90 days paper!), near-term liquidity is not an issue.

Industry was looking for some relief measures from a medium-term perspective.

Risk appetite for medium-to-long-term lending to NBFCs remains low for both

capital markets and banks due to uncertain macros and expected rise in balance

sheet stress from 2HFY21. In our coverage, MSME lenders like BAF, CIFC, MASFIN

and SCUF would benefit to some extent.

21 May 2020 19

Impact to be severe if pesticides ban stands unchanged in final order

Government of India released a proposal to ban the import, manufacturing, sale, transport, distribution, and use of 27

pesticide formulations in India; this is over and above the 18 molecules already banned. In light of the draft release, we

hosted an interaction with Mr Pramod Karlekar, Chairman & MD, Sudarshan Farm Chemicals and ex-MD, FMC India, to

understand the impact on the sector. Here are the key highlights:

Resistance from industry players likely this time due to severe impact of ban India’s Pesticides market is around INR400b, of which exports account for ~INR200b. The proposed ban would

affect INR60b worth of industry sales of material products. Thus, the government is likely to face resistance

from industry participants this time around, unlike the time that it had imposed a ban on 17 products (not

material) in 2018.

27 pesticides are currently on the proposed ban list, of the initial 66 pesticides that were being considered by

the ministry.

Revenue from mancozeb (which is on the proposed ban list) for Rallis, UPL, and Coromandel would be

~INR30b (domestic and exports).

Key manufacturers of 2,4-D (a herbicide), also on the proposed ban list, are Atul (produces 15–16kMT) and

Meghmani Organics (produces 6–8kMT).

Final order six to eight months away In the 2018 ban, a gap of four to five months was witnessed between the release of the draft and final order

(with no resistance/representation from industry players). In the current situation, the draft is already out and

the final order is expected to be out in six to eight months, after considering industry representation (as per

the expert).

Industry players to be given time to liquidate inventory post release of final order In the 2018 ban, the government had allowed the industry to manufacture from Aug’18 (when the final order

of the ban was announced) up to the end of Dec’18, post which manufacturing was banned. Additionally, two

years’ time was given to players to sell the product.

Clarity awaited on allowance of export The government is yet to clarify whether Indian players would be allowed to manufacture and export the

banned pesticides.

Other key points on ban The decision to ban these products could be revoked if farmers could substantiate that the usage of substitute

pesticides is not economically viable. (The substitutes are more expensive than the pesticides for which the

ban has been proposed.)

Implementation of ban to benefit certain MNCs As per the expert, replacing toxic pesticides may be good in the long run; however, the overall impact on

farmers’ production cost also needs to be considered.

COVID-19 impact Clearance has currently commenced at ports, and transportation is trending back to normal levels.

Labor availability is an issue for smaller agrochemical players, not for the bigger ones.

Major industry players are likely to face pressure on working capital.

20 May 2020 Agro chemicals

Expert Speak

21 May 2020 20

MARUTI SUZUKI: TO RESUME PRODUCTION WITH 50% WORKFORCE AT MANESAR PLANT; RC Bhargava, Chairman Overall, the industry could end up with 20-25 percent less sales compared to

last year.

Will resume partial operations at Manesar plant in Haryana with a 50 percent

workforce. Company is allowed to start operations with one shift now and it will

focus on a limited number of models.

The level of inquiries is quite respectable but at the moment there is a supply-

side constraint. Some models cannot be produced because those components

cannot be found. So we have to adjust the production volumes and the models

also in accordance with the supply chain.

Don’t think company can produce much more than what it is doing because in

each shift normally one works for 8 hours but because of these various

restrictions, which are there, the working hours will effectively come down to

around 6.5 hours in a shift. That itself reduces capacity.

Many of the people who were temporary workers in our Manesar plant have

gone back to their villages. I think they will come back but it is not certain when

they will be able to come back. As the vendors step up production and get back

to shift-working, many of them could have problems of labours.

Company has given cash advance against supplies to many of its vendors.

In conversation

https://www.cnbctv18.com/auto/rc-bhargava-maruti-suzuki-to-resume-production-with-50-workforce-focus-on-limited-models-5897811.htm

21 May 2020 21

FIRMS TRACK KEY SHIFTS IN CONSUMPTION HABITS IN A POST-PANDEMIC WORLD Ankur Bisen, vice president, retail and consumer products, Technopak, a

management consultancy, has been, like many others among consulting

companies, busy figuring out how life for his clients will change after covid-19,

as the Indian consumer starts behaving differently. His recent conversations

with consumer groups show that athleisure wear, or what he calls comfort

wear, will grow as work-from- home remains in vogue for a while. “Innerwear,

which is a core consumer product, will not decline, but fashionwear and office

shirts may drop." However, according to Bisen, the fall in apparel sales will be

temporary. “It’s a short-term thing because this work-from-home phenomenon

is being overplayed. Eighty-one percent of our workforce is in the informal

sector and cannot work from home. Even among the remaining 19%, there are a

number of jobs in sales and dealerships, which cannot be accomplished from

home," he said. So, in the short term, there may be a rise in demand for casual

wear, but in the long term clothing category will do well, he added. Foremost

among these are lower or no wages, salary delays and cuts, and anxiety over

retrenchment. Other triggers that will impact behaviour will be the notion of

health, especially building immunity. For businesses and the self-employed,

working capital will be critical. Social distancing will also influence behaviour

towards travel, meetings and social functions such as weddings.

THE MIGRANT CRISIS POINTS TO A NEED FOR MORE MEGACITIES As thousands of hapless workers trudge across our highways, we all feel a sense

of collective and individual guilt. The ongoing migrant crisis has seared our

conscience and shaken our smug sense of a shining India rising through the

global pandemic while all others collapse around us. That's not going to happen,

not at least till we recognize this crisis as symptomatic of how little we have

actually achieved as a nation in the last 73 years. That we are surprised by

what's happening around us is a bit thick considering that the tragedy has been

playing out in our megacities in front of our eyes. The lives of these workers in

their cramped ghettos never really interested us till they finally spilled out on

the streets, shocking our delicate sensibilities. Make no mistake. It isn’t just the

political class, both at the Centre and states—which just refused to take

responsibility for its marginalized citizens or the emasculation of the once

vibrant trade union movement in India—that is to blame for the enfolding

tragedy. We are all complicit in its making. But after all the hand-wringing and

the outpouring of outrage on social media, we need to recognize the roots of

this tragedy. One clear fault line is the concentration of our economic growth in

a handful of large cities. Six years after the Smart Cities Mission was launched in

June 2015, we still have a situation where half a dozen large metros continue to

be the drivers of our economy. This week, as thousands of people from Bihar,

Uttar Pradesh (UP) and Madhya Pradesh crowded Bandra Station in Mumbai to

go back home, the lopsided nature of our growth was evident.

From the think tank

https://www.livemint.com/opinion/columns/opinion-firms-track-key-shifts-in-consumption-habits-in-a-post-pandemic-world-11589997000304.html

https://www.livemint.com/opinion/columns/the-migrant-crisis-points-to-a-need-for-more-megacities-11589992322435.html

21 May 2020 22

Explanation of Investment Rating

Investment Rating Expected return (over 12-month)

BUY >=15%

SELL < - 10%

NEUTRAL > - 10 % to 15%

UNDER REVIEW Rating may undergo a change

NOT RATED We have forward looking estimates for the stock but we refrain from assigning recommendation

*In case the recommendation given by the Research Analyst is inconsistent with the investment rating legend for a continuous period of 30 days, the Research Analyst shall within following 30 days take appropriate measures to make the recommendation consistent with the investment rating legend.

Disclosures: The following Disclosures are being made in compliance with the SEBI Research Analyst Regulations 2014 (herein after referred to as the Regulations). Motilal Oswal Financial Services Ltd. (MOFSL) is a SEBI Registered Research Analyst having registration no. INH000000412. MOFSL, the Research Entity (RE) as defined in the Regulations, is engaged in the business of providing Stock broking services, Investment Advisory Services, Depository participant services & distribution of various financial products. MOFSL is a subsidiary company of Passionate Investment Management Pvt. Ltd.. (PIMPL). MOFSL is a listed public company, the details in respect of which are available on www.motilaloswal.com. MOFSL (erstwhile Motilal Oswal Securities Limited - MOFSL) is registered with the Securities & Exchange Board of India (SEBI) and is a registered Trading Member with National Stock Exchange of India Ltd. (NSE) and Bombay Stock Exchange Limited (BSE), Multi Commodity Exchange of India Limited (MCX) and National Commodity & Derivatives Exchange Limited (NCDEX) for its stock broking activities & is Depository participant with Central Depository Services Limited (CDSL) National Securities Depository Limited (NSDL),NERL, COMRIS and CCRL and is member of Association of Mutual Funds of India (AMFI) for distribution of financial products and Insurance Regulatory & Development Authority of India (IRDA) as Corporate Agent for insurance products. Details of associate entities of Motilal Oswal Financial Services Limited are available on the website at http://onlinereports.motilaloswal.com/Dormant/documents/Associate%20Details.pdf Details of pending Enquiry Proceedings of Motilal Oswal Financial Services Limited are available on the website at https://galaxy.motilaloswal.com/ResearchAnalyst/PublishViewLitigation.aspx MOFSL, it’s associates, Research Analyst or their relative may have any financial interest in the subject company. MOFSL and/or its associates and/or Research Analyst may have actual/beneficial ownership of 1% or more securities in the subject company in the past 12 months. MOFSL and its associate company(ies), their directors and Research Analyst and their relatives may; (a) from time to time, have a long or short position in, act as principal in, and buy or sell the securities or derivatives thereof of companies mentioned herein. (b) be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies) or may have any other potential conflict of interests with respect to any recommendation and other related information and opinions.; however the same shall have no bearing whatsoever on the specific recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the associates of MOFSL even though there might exist an inherent conflict of interest in some of the stocks mentioned in the research report. Research Analyst may have served as director/officer, etc. in the subject company in the past 12 months. MOFSL and/or its associates may have received any compensation from the subject company in the past 12 months. In the past 12 months , MOFSL or any of its associates may have: a) managed or co-managed public offering of securities from subject company of this research report, b) received compensation for investment banking or merchant banking or brokerage services from subject company of this research report, c) received compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company of this research report. d) Subject Company may have been a client of MOFSL or its associates in the past 12 months. MOFSL and it’s associates have not received any compensation or other benefits from the subject company or third party in connection with the research report. To enhance transparency, MOFSL has incorporated a Disclosure of Interest Statement in this document. This should, however, not be treated as endorsement of the views expressed in the report. MOFSL and / or its affiliates do and seek to do business including investment banking with companies covered in its research reports. As a result, the recipients of this report should be aware that MOFSL may have a potential conflict of interest that may affect the objectivity of this report. Compensation of Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions. Above disclosures include beneficial holdings lying in demat account of MOFSL which are opened for proprietary investments only. While calculating beneficial holdings, It does not consider demat accounts which are opened in name of MOFSL for other purposes (i.e holding client securities, collaterals, error trades etc.). MOFSL also earns DP income from clients which are not considered in above disclosures. Above disclosures include beneficial holdings lying in demat account of MOFSL which are opened for proprietary investments only. While calculating beneficial holdings, It does not consider demat accounts which are opened in name of MOFSL for other purposes (i.e holding client securities, collaterals, error trades etc.). MOFSL also earns DP income from clients which are not considered in above disclosures. Terms & Conditions: This report has been prepared by MOFSL and is meant for sole use by the recipient and not for circulation. The report and information contained herein is strictly confidential and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of MOFSL. The report is based on the facts, figures and information that are considered true, correct, reliable and accurate. The intent of this report is not recommendatory in nature. The information is obtained from publicly available media or other sources believed to be reliable. Such information has not been independently verified and no guaranty, representation of warranty, express or implied, is made as to its accuracy, completeness or correctness. All such information and opinions are subject to change without notice. The report is prepared solely for informational purpose and does not constitute an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments for the clients. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. MOFSL will not treat recipients as customers by virtue of their receiving this report. Analyst Certification The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the research analyst(s) was, is, or will be directly or indirectly related to the specific recommendations and views expressed by research analyst(s) in this report.

Disclosure of Interest Statement Companies where there is interest Analyst ownership of the stock No A graph of daily closing prices of securities is available at www.nseindia.com, www.bseindia.com. Research Analyst views on Subject Company may vary based on Fundamental research and Technical Research. Proprietary trading desk of MOFSL or its associates maintains arm’s length distance with Research Team as all the activities are segregated from MOFSL research activity and therefore it can have an independent view with regards to subject company for which Research Team have expressed their views. Regional Disclosures (outside India) This report is not directed or intended for distribution to or use by any person or entity resident in a state, country or any jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject MOFSL & its group companies to registration or licensing requirements within such jurisdictions. For Hong Kong: This report is distributed in Hong Kong by Motilal Oswal capital Markets (Hong Kong) Private Limited, a licensed corporation (CE AYY-301) licensed and regulated by the Hong Kong Securities and Futures Commission (SFC) pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) “SFO”. As per SEBI (Research Analyst Regulations) 2014 Motilal Oswal Financial Services Limited(SEBI Reg No. INH000000412) has an agreement with Motilal Oswal capital Markets (Hong Kong) Private Limited for distribution of research report in Hong Kong. This report is intended for distribution only to “Professional Investors” as defined in Part I of Schedule 1 to SFO. Any investment or investment activity to which this document relates is only available to professional investor and will be engaged only with professional investors.” Nothing here is an offer or solicitation of these securities, products and services in any jurisdiction where their offer or sale is not qualified or exempt from registration. The Indian Analyst(s) who compile this report is/are not located in Hong Kong & are not conducting Research Analysis in Hong Kong. For U.S: Motilal Oswal Financial Services Limited (MOFSL) is not a registered broker - dealer under the U.S. Securities Exchange Act of 1934, as amended (the"1934 act") and under applicable state laws in the United States. In addition MOFSL is not a registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers Act" and together with the 1934 Act, the "Acts), and under applicable state laws in the United States. Accordingly, in the absence of specific exemption under the Acts, any brokerage and investment services provided by MOFSL, including the products and services described herein are not available to or intended for U.S. persons. This report is intended for distribution only to "Major Institutional Investors" as defined by Rule 15a-6(b)(4) of the Exchange Act and interpretations thereof by SEC (henceforth referred to as "major institutional investors"). This document must not be acted on or relied on by persons who are not major institutional investors. Any investment or investment activity to which this document relates is only available to major institutional investors and will be engaged in only with major institutional investors. In reliance on the exemption from registration provided by Rule 15a-6 of the U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act") and interpretations thereof by the U.S. Securities and Exchange Commission ("SEC") in order to conduct business with Institutional Investors based in the U.S., MOFSL has entered into a chaperoning agreement with a U.S. registered broker-dealer, Motilal Oswal Securities International Private Limited. ("MOSIPL"). Any business interaction pursuant to this report will have to be executed within the provisions of this chaperoning agreement. The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S. registered broker-dealer, MOSIPL, and therefore, may not be subject to NASD rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public appearances and trading securities held by a research analyst account. For Singapore: In Singapore, this report is being distributed by Motilal Oswal Capital Markets Singapore Pte Ltd (“MOCMSPL”) (Co.Reg. NO. 201129401Z) which is a holder of a capital markets services license and an exempt financial adviser in Singapore, as per the approved agreement under Paragraph 9 of Third Schedule of Securities and Futures Act (CAP 289) and Paragraph 11 of First Schedule of Financial Advisors Act (CAP 110) provided to MOCMSPL by Monetary Authority of Singapore. Persons in Singapore should contact MOCMSPL in respect of any matter arising from, or in connection with this report/publication/communication. This report is distributed solely to persons who qualify as “Institutional Investors”, of which some of whom may consist of "accredited" institutional investors as defined in section 4A(1) of the Securities and Futures Act, Chapter 289 of Singapore (“the SFA”). Accordingly, if a Singapore person is not or ceases to be such an institutional investor, such Singapore Person must immediately discontinue any use of this Report and inform MOCMSPL. Disclaimer: The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent. This report and information herein is solely for informational purpose and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances. The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. Each recipient of this document should make such investigations as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in this document (including the merits and risks involved), and should consult its own advisors to determine the merits and risks of such an investment. The investment discussed or views expressed may not be suitable for all investors. Certain transactions -including those involving futures, options, another derivative products as well as non-investment grade securities - involve substantial risk and are not suitable for all investors. No representation or warranty, express or implied, is made as to the accuracy, completeness or fairness of the information and opinions contained in this document. The Disclosures of Interest Statement incorporated in this document is provided solely to enhance the transparency and should not be treated as endorsement of the views expressed in the report. This information is subject to change without any prior notice. The Company reserves the right to make modifications and alternations to this statement as may be required from time to time without any prior approval. MOFSL, its associates, their directors and the employees may from time to time, effect or have effected an own account transaction in, or deal as principal or agent in or for the securities mentioned in this document. They may perform or seek to perform investment banking or other services for, or solicit investment banking or other business from, any company referred to in this report. Each of these entities functions as a separate, distinct and independent of each other. The recipient should take this into account before interpreting the document. This report has been prepared on the basis of information that is already available in publicly accessible media or developed through analysis of MOFSL. The views expressed are those of the analyst, and the Company may or may not subscribe to all the views expressed therein. This document is being supplied to you solely for your information and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or published, copied, in whole or in part, for any purpose. This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject MOFSL to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction. Neither the Firm, not its directors, employees, agents or representatives shall be liable for any damages whether direct or indirect, incidental, special or consequential including lost revenue or lost profits that may arise from or in connection with the use of the information. The person accessing this information specifically agrees to exempt MOFSL or any of its affiliates or employees from, any and all responsibility/liability arising from such misuse and agrees not to hold MOFSL or any of its affiliates or employees responsible for any such misuse and further agrees to hold MOFSL or any of its affiliates or employees free and harmless from all losses, costs, damages, expenses that may be suffered by the person accessing this information due to any errors and delays. Registered Office Address: Motilal Oswal Tower, Rahimtullah Sayani Road, Opposite Parel ST Depot, Prabhadevi, Mumbai-400025; Tel No.: 022 71934200/ 022-71934263; Website www.motilaloswal.com. CIN No.: L67190MH2005PLC153397.Correspondence Office Address: Palm Spring Centre, 2nd Floor, Palm Court Complex, New Link Road, Malad(West), Mumbai- 400 064. Tel No: 022 7188 1000.Registration Nos.: Motilal Oswal Financial Services Limited (MOFSL)*: INZ000158836(BSE/NSE/MCX/NCDEX); CDSL and NSDL: IN-DP-16-2015; Research Analyst: INH000000412. AMFI: ARN - 146822; Investment Adviser: INA000007100; Insurance Corporate Agent: CA0579 ;PMS:INP000006712. Motilal Oswal Asset Management Company Ltd. (MOAMC): PMS (Registration No.: INP000000670); PMS and Mutual Funds are offered through MOAMC which is group company of MOFSL. Motilal Oswal Wealth Management Ltd. (MOWML): PMS (Registration No.: INP000004409) is offered through MOWML, which is a group company of MOFSL. Motilal Oswal Financial Services Limited is a distributor of Mutual Funds, PMS, Fixed Deposit, Bond, NCDs,Insurance Products and IPOs.Real Estate is offered through Motilal Oswal Real Estate Investment Advisors II Pvt. Ltd. which is a group company of MOFSL. Private Equity is offered through Motilal Oswal Private Equity Investment Advisors Pvt. Ltd which is a group company of MOFSL. Research & Advisory services is backed by proper research. Please read the Risk Disclosure Document prescribed by the Stock Exchanges carefully before investing. There is no assurance or guarantee of the returns. Investment in securities market is subject to market risk, read all the related documents carefully before investing. Details of Compliance Officer: Name: Neeraj Agarwal, Email ID: [email protected], Contact No.:022-71881085.* MOFSL has been amalgamated with Motilal Oswal Financial Services Limited (MOFSL) w.e.f August 21, 2018 pursuant to order dated July 30, 2018 issued by Hon'ble National Company Law Tribunal, Mumbai Ben

http://www.motilaloswal.com/

http://onlinereports.motilaloswal.com/Dormant/documents/Associate%20Details.pdf

https://galaxy.motilaloswal.com/ResearchAnalyst/PublishViewLitigation.aspx

http://www.nseindia.com/

http://www.bseindia.com/

http://www.motilaloswal.com/

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